Noninterest Income

Noninterest income for the fourth quarter of 2012 increased by $27.9 million, or 29%, to $125.2 million compared to the third quarter of 2012. This increase was caused by a $19.4 million improvement in net loan servicing income as well as a $6.3 million increase in loan origination revenue. Gain on sale of loans was flat compared to the third quarter at $85.7 million. Adjusted for the MSR valuation allowance in the third quarter 2012, noninterest income increased by $9.6 million, or 8% during the quarter.

For 2012, noninterest income increased by $136.7 million, or 59%, to $369.8 million. The increase was driven by a $234.4 million, or 235%, increase in origination revenues and gain on sale of loans, offset by a $79.6 million decrease in loan servicing income resulting from elevated MSR amortization and a $24.1 million increase to the MSR valuation allowance.

Noninterest Expense

Noninterest expense for the fourth quarter of 2012 increased by $33.0 million, or 18%, to $217.0 million from $184.0 million in the third quarter. Salaries, commissions and employee benefits increased by $18.1 million, or 21%, with approximately $5 million attributed to the employees hired as a result of the BPL transaction and more than $6 million attributed to hiring activity and investments in retail mortgage lending. Approximately 10% of our noninterest expense is variable and tied to mortgage origination levels.

We continued to invest in our retail lending expansion during the fourth quarter, adding approximately 150 FTEs. For the year, we have added approximately 440 FTEs in our retail channel and opened 58 lending offices. Noninterest expense directly related to our retail expansion was $22.4 million for the fourth quarter, compared to $14.6 million in the third quarter and was $49.5 million for the full year 2012.

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