The company's net income available to common shareholders was $4.1 million, or $0.37 per basic share, for the quarter ended September 30, 2017, compared to $3.4 million, or $0.38 per basic share, for the quarter ended September 30, 2016. The growth in net income was primarily attributable to growth in net interest income, before the provision for loan losses, of $1.4 million and an increase in noninterest income of $300,000.
Returns on average assets and average equity for the third quarter were 0.87% and 7.99%, respectively, compared to 0.75% and 9.20%, respectively, for the same period during 2016. The company's earnings per share and return on average equity were impacted by the issuance of 2,300,000 shares of common stock in the company's initial public offering, which closed in May 2017.
Net interest income for the third quarter of 2017 and 2016 was $15.1 million and $13.7 million, respectively, an increase of 10.5%. Net interest margin for the third quarter of 2017 and 2016 was 3.38% and 3.26%, respectively. Net interest income and net interest margin, on a taxable equivalent basis, was $15.5 million and 3.55%, respectively, for the third quarter of 2017.
The provision for loan losses was $800,000 in the third quarter of 2017, compared with $800,000 in the second quarter of 2017 and $840,000 in the third quarter of 2016. The provision for loan losses in the third quarter of 2017 remained consistent with the prior year’s quarter despite loan portfolio growth of 6.35% from September 30, 2016, primarily because a large specific reserve was calculated in the third quarter of 2016 that resulted in a higher provision at that time. The level of provision during the third quarter of 2017 is primarily attributable to specific reserves calculated for certain impaired loans and a slight increase in general reserves due to minor increases in some qualitative factors. Nonperforming assets as a percentage of total loans were 0.78% at September 30, 2017, compared to 0.71% at June 30, 2017, and 0.94% at September 30, 2016.
Noninterest income increased 8.8% in the third quarter of 2017 to $3.7 million, compared to $3.4 million in the same quarter a year ago. Merchant and debit card fees increased 12.8% to $778,000, compared to $690,000 in the same quarter last year due to continued growth in net new accounts and debit cards. Gain on sales of loans increased 21.2%, from $486,000 during the third quarter of 2016 to $589,000 in the third quarter of 2017. Other categories of noninterest income increased with the continued growth of the bank.
Noninterest expense for the third quarter of 2017 totaled $12.2 million, compared to $11.5 million for the third quarter of 2016, an increase of 6.0%. The increase in noninterest expense in the third quarter of 2017 was primarily driven by a $359,000 increase in salary and employee benefit expense when compared to the same quarter a year ago, a $218,000 increase in occupancy expenses and a $211,000 increase in legal and professional fees. The increase was partially offset by decreases in FDIC insurance expense of $138,000 and other non-interest expenses of $168,000. The company's efficiency ratio in the third quarter of 2017 was 64.70%, compared to 67.51% in the same quarter last year.
For the nine months ended September 30, 2017, net income increased 36.1% to $11.6 million from $8.5 million for the same period a year ago. Basic earnings per share rose to $1.17 for the nine months ended September 30, 2017 from $0.95 during the same period last year. Net interest income increased 10.9% to $44.1 million for the nine months ended September 30, 2017 from $39.8 million during the same period a year ago. The provision for loan losses totaled $2.3 million, compared to $3.2 million for the nine months ended September 30, 2016. Noninterest income was $10.5 million for the nine months ended September 30, 2017, compared to $9.6 million a year ago. Noninterest expense was $36.1 million for the nine months ended September 30, 2017, compared to $34.3 million during the same period last year.
As of September 30, 2017, consolidated assets for the company totaled $1.9 billion, compared to $1.8 billion at December 31, 2016 and $1.8 billion at September 30, 2016. Loans totaled $1.3 billion at quarter end, compared to loans of $1.2 billion at December 31, 2016, and $1.2 billion at September 30, 2016. Deposits totaled $1.6 billion at September 30, 2017, compared to $1.6 billion at December 31, 2016, and $1.5 billion at September 30, 2016. Shareholders' equity rose to $207.3 million as of September 30, 2017, compared to $141.9 million at December 31, 2016, and $148.0 million at September 30, 2016, primarily as a result of operating earnings and the proceeds of the Company's initial public offering.
The company’s Chairman and Chief Executive Officer, Ty Abston, said, "We are pleased with our third quarter and year-to-date results. During the third quarter, we also announced our expansion into the growth markets of Austin and Ft. Worth, Texas. We are very pleased with the initial reception we’ve received in these new markets and feel they will be accretive to Guaranty’s future growth prospects."
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