GLENS FALLS, NY, Oct. 20, 2014 /PRNewswire/ — Arrow Financial Corporation (NasdaqGS® – AROW) announced operating results for the three- and nine-month periods ended September 30, 2014. Net income for the third quarter of 2014 was $6.15 million, an increase of $524 thousand, or 9.3%, from net income of $5.62 million for the third quarter of 2013. Diluted earnings per share (EPS) for the quarter was $0.49, an 8.9% increase from the comparable 2013 quarter, when diluted EPS was $0.45. Return on average assets for the 2014 third quarter was 1.13%, and return on average equity for the 2014 third quarter was 12.22%. Net income for the first nine months of 2014 was $17.0 million, an increase of $980 thousand, or 6.1%, from net income of $16.0 million for the first nine months of 2013. Diluted EPS for the nine-month period was $1.35, a 5.5% increase from the comparable 2013 period, when diluted EPS was $1.28.
Arrow President and CEO
Thomas J. Murphy stated, Arrow delivered another quarter of solid performance, with increased net income, earnings per share and net interest margin. We posted record highs for total loans outstanding and total stockholders equity. In addition, our income from our trust division and commission income from insurance agency operations continues to grow, and we maintained excellent asset quality and strong capital ratios.
Also in the third quarter, the Company was named to the Sandler ONeill Sm-All Stars Class of 2014 based on financial performance, and our lead subsidiary, Glens Falls National Bank and Trust Company, launched a fully redesigned website that enhances its online delivery of information and services.
The following list expands on our third-quarter results:
Net Interest Income and Margin:In the third quarter of 2014, on a tax-equivalent basis, our net interest income increased $1.2 million, or 8.7%, compared to the third quarter of 2013, while our tax-equivalent net interest margin increased by 15 basis points from 3.06% in the third quarter of 2013 to 3.21% for the third quarter of 2014. The increase in net interest margin reflected an increase in the yield on investments and a decrease in our cost of deposits offset, in part, by a decrease in the yield on our loan portfolio.
Trust Assets and Related Noninterest Income:Assets under trust administration and investment management at September 30, 2014, were $1.2 billion, an increase of $88.8 million, or 8.0%, from the September 30, 2013, balance of $1.111 billion. The growth in asset balances was generally attributable to a significant rise in the equity markets between the periods and the addition of new accounts. Income from fiduciary activities increased by $620 thousand, or 12.4%, from $5.0 million for the first nine months of 2013, to $5.6 million for the first nine months of 2014.
Loan Growth:For the first nine months of 2014, our loan balances increased by $115.0 million, or 9.1%, with increases in all three of our major segments: residential real estate, commercial and commercial real estate, and consumer automobile.
Our residential real estate loan portfolio grew by $56.2 million, or 12.2%, during the first nine months of 2014. We originated approximately $98 million of residential real estate loans, an increase of 1.3% from approximately $97 million of residential real estate loans originated in the comparable period for 2013. Included in these amounts is an increase of $13.6 million, or 13.4%, in our home equity loan balances, a program we have been promoting in 2014. Our gain on the sale of residential real estate loans for the first nine months of 2014 was significantly less than our gain for the first nine months of 2013, primarily because, in the first two quarters of 2013, we were still selling a high percentage of our originations into the secondary market.
Our commercial and commercial real estate loan portfolio grew by $33.6 million, or 8.3%, during the first nine months of 2014. Even with a very competitive environment for commercial loans, we experienced steady growth over the past nine months.
We also experienced growth from our indirect automobile lending program. We have advanced $166.0 million in new and used automobile loans in the first nine months of 2014, increasing our outstanding balances by $25.3 million, or 6.4%, for the first nine months of 2014.
Asset Quality and Loan Loss Provision:Asset quality remained strong at September 30, 2014, as measured by our low level of nonperforming assets and the low level of net charge-offs. Nonperforming assets of $8.4 million at September 30, 2014, represented only 0.38% of period-end assets, an increase of one basis point from our 0.37% ratio as of December 31, 2013. Net loan losses for the third quarter of 2014, expressed as an annualized percentage of average loans outstanding, were just .05% and only .06% for the nine-month period ended September 30, 2014. All of our asset quality ratios continue to be significantly better than recently reported industry-wide averages.
Our allowance for loan losses was $15.3 million at September 30, 2014, which represented 1.11% of loans outstanding, six basis points below our ratio one year earlier and three basis points below our ratio at December 31, 2013. Our provision for loan losses for the third quarter of 2014 was $444 thousand, primarily reflecting the strong growth in our outstanding loan balances.
Cash and Stock Dividends: We distributed a cash dividend of $.245 per share to stockholders in the third quarter of 2014. The cash dividend was 2% higher than the cash dividend paid in the third quarter of 2013, adjusting both for our 2% stock dividend in September 2014.
Insurance Agency Operations: Insurance commission income rose slightly from $2.4 million for the third quarter of 2013 to $2.5 million for the third quarter of 2014, an increase of $47 thousand, or 2.0%. This improvement was primarily attributable to an increase in new business.