As displayed in Table 9, net charge-offs during the first quarter of 2021 were $0.4 million, $1.2 million lower than the first quarter of 2020. The consumer indirect, consumer direct, consumer mortgage and business lending portfolios experienced lower net charge-offs during the first quarter of 2021, as compared to the first quarter of 2020, while the home equity portfolio experienced slightly higher net charge-offs than the prior period. The net charge-off ratio (net charge-offs as a percentage of average loans outstanding) for the first quarter of 2021 was 0.02%, seven basis points lower than the first quarter of 2020. Net charge-off ratios for the first quarter of 2021 for the consumer indirect, consumer direct, consumer mortgage and business lending portfolios were below the Company’s average for the trailing eight quarters, while the net charge-off ratios for the home equity portfolio was above the Company’s average for the trailing eight quarters. The Company believes the very low amount of net charge-offs recorded in the first quarter is reflective of the extraordinary Federal and State Government financial support provided to consumers throughout the COVID-19 pandemic along with financial support provided to businesses in the form of PPP loans and forbearance programs.
The Company recorded a $5.7 million net benefit in the provision for credit losses in the first quarter, including a $0.3 million reversal of credit loss expense related to off-balance sheet credit exposures. The first quarter provision for credit losses was $11.3 million lower than the equivalent prior year period’s provision for credit losses of $5.6 million. The allowance for credit losses of $55.1 million as of March 31, 2021 decreased $0.6 million from the level one year ago. During the first quarter of 2020, economic forecasts distinctly and profoundly changed from stable at the beginning of the quarter to severely adverse at the end of the quarter due to the onset of the COVID-19 pandemic resulting in a significant increase in expected life of loan losses. Conversely, during the first quarter of 2021, economic forecasts improved significantly driving expected life of loan losses down, resulting in the recording of a net benefit in the provision for credit losses and an allowance for credit losses to total loans ratio of 0.75% at March 31, 2021, six basis points lower than the level at March 31, 2020 and seven basis points lower than the level at December 31, 2020. In addition, the Company recorded only 0.07% of net charge-offs in 2020, which lowered average annual historic losses and, in turn, future loan loss projections. The Company does not anticipate recording similarly large net benefits in the provision for credit losses in future periods.
Refer to Note E: Loans of the notes to the consolidated financial statements for a discussion of management’s methodology used to estimate the allowance for credit losses.
As of March 31, 2021, the purchase discount related to the $1.28 billion of remaining non-purchased credit deteriorated loan balances acquired from Steuben Trust Company in 2020, the National Union Bank of Kinderhook in 2019, Merchants Bank in 2017, Oneida Savings Bank in 2015, HSBC Bank USA, N.A. in 2012, First Niagara Bank, N.A. in 2012, and Wilber National Bank in 2011 was approximately $10.9 million, or 0.85% of that portfolio.
Deposits
As shown in Table 10, average deposits of $11.55 billion in the first quarter were $2.50 billion, or 27.6%, higher than the first quarter of 2020, primarily due to large inflows of government stimulus-related deposit funding and the Steuben acquisition in the second quarter of 2020. The Company acquired $516.3 million of deposits from the Steuben acquisition, including $96.5 million of time deposits and $419.8 million of non-time deposits. Total average deposit balances increased $343.2 million, or 3.1%, from the fourth quarter of last year, due to continued net inflows of deposits. The mix of average deposit balances changed as the weighting of non-time deposits (noninterest checking, interest checking, savings and money markets) has increased slightly from the prior year levels. Conversely, the proportion of time deposits decreased over the past 12 months. The quarterly average cost of deposits was 0.11% for the first quarter of 2021, compared to 0.25% in the first quarter of 2020, reflective of the decrease in the average interest rate on interest bearing deposits due to declines in market rates and the impact of aforementioned change in deposit mix. The Company continues to focus on growing its core deposit relationships through its proactive marketing efforts, competitive product offerings and high quality customer service.
Average nonpublic fund deposits for the first quarter of 2021 increased $262.9 million, or 2.7%, versus the fourth quarter of 2020 and increased $2.15 billion, or 26.9%, versus the year-earlier period. Average public fund deposits for the first quarter increased $80.2 million, or 6.0%, from the fourth quarter of 2020 due to seasonal taxing receipt timing and increased $346.4 million, or 32.5%, from the first quarter of 2020. Public fund deposits as a percentage of total deposits increased from 11.8% in the first quarter of 2020 to 12.2% in the first quarter of 2021.