In several places net interest income is calculated on a fully tax-equivalent basis. Specifically included in interest income was tax-exempt interest income from certain investment securities and loans. An amount equal to the tax benefit derived from this tax-exempt income has been added back to the interest income total, which adjustments increased net interest income accordingly. Management believes the disclosure of tax-equivalent net interest income information improves the clarity of financial analysis, and is particularly useful to investors in understanding and evaluating the changes and trends in the Company’s results of operations. Other financial institutions commonly present net interest income on a tax-equivalent basis. This adjustment is considered helpful in the comparison of one financial institution’s net interest income to that of another institution, as each will have a different proportion of tax-exempt interest from its earning assets. Moreover, net interest income is a component of a second financial measure commonly used by financial institutions, net interest margin, which is the ratio of net interest income to average earning assets. For purposes of this measure as well, other financial institutions generally use tax-equivalent net interest income to provide a better basis of comparison from institution to institution. The Company follows these practices.

The following table provides a reconciliation of tax-equivalent financial information to the Company’s consolidated financial statements, which have been prepared in accordance with GAAP. A 35.0% tax rate was used in both 2012 and 2011.
         
  For the years ended   For the quarters ended
In thousands of dollars   12/31/2012   12/31/2011   12/31/2012   12/31/2011
Net interest income as presented $38,887   $40,993 $9,493   $10,040
Effect of tax-exempt income   3,128   2,710   809   732
Net interest income, tax equivalent   $42,015   $43,703   $10,302   $10,772
 

The Company presents its efficiency ratio using non-GAAP information. The GAAP-based efficiency ratio is noninterest expenses divided by net interest income plus noninterest income from the Consolidated Statements of Income. The non-GAAP efficiency ratio excludes securities losses and other-than-temporary impairment charges from noninterest expenses, excludes securities gains from noninterest income, and adds the tax-equivalent adjustment to net interest income. The following table provides a reconciliation of between the GAAP and non-GAAP efficiency ratio:
         
  For the years ended   For the quarters ended
In thousands of dollars   12/31/2012     12/31/2011     12/31/2012     12/31/2011  
Non-interest expense, as presented $26,022   $26,038 $6,519   $6,368
Net securities losses   -     -     -     -  
Adjusted non-interest expense   26,022     26,038     6,519     6,368  
Net interest income, as presented 38,887 40,993 9,493 10,040
Effect of tax-exempt income 3,128 2,710 809 732
Non-interest income, as presented 11,271 11,750 2,715 5,159
Effect of non-interest tax-exempt income 177 182 40 42
Net securities gains   (1,968 )   (3,293 )   (1 )   (3,056 )
Adjusted net interest income plus non-interest income   $51,495     $52,342     $13,056     $12,917  
Non-GAAP efficiency ratio   50.53 %   49.75 %   49.93 %   49.30 %
GAAP efficiency ratio   51.88 %   49.37 %   53.40 %   41.90 %
 

The Company presents certain information based upon average tangible common equity instead of total average shareholders’ equity. The difference between these two measures is the Company’s preferred stock and intangible assets, specifically goodwill from prior acquisitions. Management, banking regulators and many stock analysts use the tangible common equity ratio and the tangible book value per common share in conjunction with more traditional bank capital ratios to compare the capital adequacy of banking organizations with significant amounts of goodwill or other intangible assets, typically stemming from the use of the purchase accounting method in accounting for mergers and acquisitions. The following table provides a reconciliation of average tangible common equity to the Company’s consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles:
         
  For the years ended   For the quarters ended
In thousands of dollars   12/31/2012     12/31/2011     12/31/2012     12/31/2011  
Average shareholders’ equity as presented $155,822   $153,327 $158,402   $151,473
Less preferred stock (12,341 ) (24,705 ) (12,378 ) (12,279 )
Less intangible assets   (27,684 )   (27,684 )   (27,684 )   (27,684 )
Tangible average shareholders' equity   $115,797     $100,938     $118,340     $111,510  
 

Forward-Looking and Cautionary Statements

Except for the historical information and discussions contained herein, statements contained in this release may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks, uncertainties and other factors that could cause actual results and events to differ materially, as discussed in the Company’s filings with the Securities and Exchange Commission.

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