Excluding the impact of purchase accounting, net interest margin (contractual net interest margin) was 3.48% for the second quarter of 2012, compared to 3.64% for the first quarter of 2012 and 3.54% for the second quarter a year ago. (1)

The decrease in the contractual net interest margin compared to the prior quarter is due to declines in contractual loan yields due to lower interest rates, higher average cash balances, and higher average long-term borrowings from the FHLB.

Noninterest income

Noninterest income for the second quarter of 2012 was $36.6 million, compared to $32.6 million for the first quarter of 2012 and $27.2 million for the second quarter a year ago. The increase compared to last year’s second quarter was primarily due to increases in investment advisory, brokerage and trust fees, gain on sale of loans and income from investments in life insurance, partially offset by a decline in net loan servicing fees.

Noninterest expense

Noninterest expense for the second quarter of 2012 was $171.6 million, compared to $164.8 million for the first quarter of 2012 and $138.8 million for the second quarter a year ago, a 24% increase year over year. Noninterest expense has grown primarily due to an increase in personnel to support loan, deposit and wealth management growth, increased occupancy costs as the Bank added both office space and deposit offices and invested in technology.

Efficiency ratio

The Bank’s efficiency ratio was 52.4% for the second quarter of 2012, compared to 52.5% for the first quarter of 2012 and 48.9% for the second quarter a year ago. For the six months ended June 30, 2012 and 2011, the efficiency ratio was 52.5% and 48.1%, respectively.

Excluding the impact of purchase accounting, the Bank’s efficiency ratio was 60.5% for the second quarter of 2012, compared to 59.6% for the first quarter of 2012 and 59.1% for the second quarter a year ago. For the six months ended June 30, 2012 and 2011, the efficiency ratio was 60.1% and 58.9%, respectively. (1)

Income tax rate declines

The Bank provides for income taxes based on an estimate of earnings and tax preference items for each calendar year. The Bank’s effective tax rate for the six months ended June 30, 2012 was 30.5% and represents the current estimated tax rate for the full year 2012. As a result, the effective tax rate for the second quarter of 2012 decreased to 30.0%, compared to 31.0% for the prior quarter. This decrease in the effective tax rate results from a higher level of tax-exempt securities, bank-owned life insurance, tax credit investments and tax-advantaged loans.

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