The indirect lending business had a great Q2 with outstandings up 8% over Q1.
Deposit service fees continue to rebound from the pandemic impact and were up 18% from the depressed Q2 of 2020.
Our financial services businesses were the star performers of the quarter with combined revenues up 14% and pre-tax earnings of 25% over 2020.
As we announced last week, our Board has approved a $0.01 per quarter increase in our dividend, which marks the 29th consecutive year of dividend increases and we think a validation of our disciplined and diversified business model.
As Mark noted, the second quarter earnings results were solid with fully diluted GAAP and operating earnings per share of $0.88.
The GAAP earnings results were $0.22 per share or 33.3% higher than the second quarter of 2020 GAAP earnings results, and $0.12 per share or 15.8% better on an operating basis.
Comparatively the company recorded GAAP earnings and operating earnings per share of $0.97 in the linked first quarter of 2021.
The company reported total revenues of $151.6 million in the second quarter of 2021 a $6.7 million or 4.6% increase over the prior year's second quarter revenues of $144.9 million.
The increase in total revenues between the periods was driven by a $5.3 million or 13.7% increase in financial services business revenues and a $1.2 million or 8.6% increase in banking-related non-interest revenues.
Net interest income of $92.1 million was up $0.2 million or 0.2% over the second quarter 2020 results.
Total revenues were down $0.9 million or 0.6% from the linked quarter first quarter driven by a $1.9 million decrease in net interest income, offset in part by higher non-interest revenues.
The company's tax equivalent net interest margin for the second quarter of 2021 was 2.79%.
This compares to 3.03% in the first quarter of 2021 and 3.37% one year prior.
The tax equivalent yield on earning assets was 2.89% in the second quarter of 2021 as compared to 3.15% in the linked first quarter and 3.56% one year prior.
During the second quarter, the company recognized $3.9 million of PPP-related interest income, including $2.9 million of net deferred loan fees.
This compares to $6.9 million of PPP-related interest income recognized in the first quarter, including $5.9 million of net deferred loan fees.
The company's total cost of deposits remained low, averaging 10 basis points during the second quarter of 2021.
Employee benefit services revenues were up $3.4 million or 14.2% over the prior year's second quarter, driven by increases in employee benefit trust and custodial fees.
Wealth management revenues were also up $1.9 million or 29.2%, driven by a higher investment management advisory and trust services revenues.
The increase in banking-related non-interest revenues was driven by a $2.3 million or 17.6% increase in deposit service and other banking fees, offset in part by a $1 million decrease in mortgage banking income.
During the second quarter of 2021, the company reported a net benefit in the provision for credit losses of $4.3 million.
This compares to a $9.8 million provision for credit losses reported in the second quarter of 2020, $3.2 million of which was due to the acquisition of Steuben Trust Corporation with the remaining $6.6 million largely driven by pandemic-related factors.
During the second quarter of 2021, the company reported 3 basis points of net loan recoveries and the post-vaccine economic outlook remain positive.
In addition, at the end of the second quarter, there were only 12 borrowers representing $2.4 million in loans outstanding and that remained in the pandemic-related forbearance.
This compares to 47 borrowers in pandemic-related forbearance representing $75.6 million at the end of the first quarter, and 3,700 borrowers with approximately $700 million of loans outstanding one year earlier.
The company recorded $93.5 million in total operating expenses in the second quarter of 2021 as compared to $87.5 million in the second quarter of 2020, excluding $3.4 million of acquisition-related expenses.
The $6 million or 6.9% increase in operating expenses was attributable to a $3.2 million or 5.8% increase in salaries and employee benefits, a $1.9 million or 17.8% increase in data processing and communications expenses, and a $0.7 million or 7.7% increase in other expenses and a $0.5 million or 5.3% increase in occupancy and equipment expense, offset, in part, by a $0.3 million or 7.9% decrease in the amortization of intangible assets.
In comparison, the company recorded $93.2 million of total operating expenses in the first quarter of 2021, $0.3 million or 0.3% lower than the second quarter 2021 total operating expenses.
The effective tax rate for the second quarter of 2021 was 23.1%, up from 20.3% in the second quarter of 2020.
The company closed the second quarter of 2021 with total assets of $14.8 billion.
This was up $181.1 million or 1.2% from the end of the linked first quarter and up $1.36 billion or 10.1% from a year earlier.
Average interest earning assets for the second quarter of 2021 of $13.37 billion were up $680.6 million or 5.4% from the linked first quarter of 2021, and up $2.27 billion, or 20.4% from one year prior.
The very large increases in total assets and average interest earning assets over the prior 12 months was driven by the second quarter 2020 acquisition of Steuben and margin flows of government stimulus-related deposit funding PPP originations.
The company's ending loan balances of $7.24 billion were down $124.2 million or 1.7% from the end of the first quarter.
Excluding the net decrease in PPP loans of $126.1 million and the seasonal decrease in municipal loans totaling $41.2 million, ending loans increased $43.1 million or 0.6%.
As of June 30, 2021, the company's business lending portfolio included 317 first draw PPP loans with a total balance of $72.5 million and 2,254 second draw PPP loans with a total balance $212.3 million.
The company expects to recognize, through interest income, the majority of its remaining first draw net deferred PPP fees totaling $0.9 million during the third quarter of 2021 and the majority of its second draw net deferred PPP fees totaling $9.2 million over the next few quarters.
On a linked quarter basis, the average book value of the investment securities portfolio increased $290.2 million or 7.9% from $3.67 billion during the first quarter to $3.96 billion during the second quarter.
During the second quarter, the company's average cash equivalents of $2.07 billion represented approximately 16% of the company's average earning assets.
This compares to $1.67 billion in average cash equivalents during the first quarter of 2021 and $823 million in the second quarter of 2020.
The $408 million or 24.5% increase in average cash equivalents during the quarter was driven by the continued inflow of federal stimulus funds and the origination of second draw PPP loans and first draw PPP loan forgiveness.
The company's net tangible equity to net tangible assets ratio was 9.02% at June 30, 2021.
This was down from 10.08% a year earlier, but up 8.48% at the end of the first quarter.
The company's Tier 1 leverage ratio was 9.36% at June 30, 2021, which is nearly 2 times the well-capitalized regulatory standard of 5%.
Borrowing availability at the Federal Reserve Bank, borrowing capacity at the Federal Home Loan Bank and unpledged available-for-sale investment securities portfolio provides the company with over $6.1 billion of immediately available sources of liquidity.
At June 30, 2021, the company's allowance for credit losses totaled $51.8 million or 0.71% of of loans outstanding.
This compares to $55.1 million or 0.75% of total loans outstanding at the end of the first quarter of 2021 and $64.4 million or 0.86% of total loans outstanding at June 30, 2020.
Non-performing loans decreased in the second quarter to $70.2 million or 0.97% of loans outstanding, down from $75.5 million or 1.02% of loans outstanding at the end of the linked first quarter of 2021, but up from $26.8 million or 0.36% of loans outstanding at the end of the second quarter of 2020 due primarily to the reclassification of certain hotel loans under extended forbearance from accrual to non-accrual status between the periods.
The specifically identified reserves held against the company's non-performing loans totaled only $2.8 million at June 30, 2021.
Loans 30 to 89 days delinquent totaled 0.25% of loans outstanding at June 30, 2021.
This compares to 0.37% one year prior and 0.27% at the end of the linked first quarter.

Summary:
As Mark noted, the second quarter earnings results were solid with fully diluted GAAP and operating earnings per share of $0.88.
The company reported total revenues of $151.6 million in the second quarter of 2021 a $6.7 million or 4.6% increase over the prior year's second quarter revenues of $144.9 million.
Net interest income of $92.1 million was up $0.2 million or 0.2% over the second quarter 2020 results.