Scott Kingsley – Executive Vice President & Chief Financial Officer
Thank you, Mark, and good morning everyone. As Mark mentioned, the fourth quarter of 2014 was a very strong operating quarter for us, but the year over year operating improvement trends consistent with those generated in the first three quarters of the year. As a reminder, for comparative purposes, our acquisition of eight former Bank of America branches in Northeast Pennsylvania was completed in mid-December 2013.
I’ll first discuss some balance sheet items. Average earning assets of $6.69 billion for the fourth quarter were up less than one half of 1% from the third quarter of 2014, and were up 1.6% from the fourth quarter of 2013. However, all of the growth in earning assets was loans, a very positive mixed development, meaning that average loans grew organically $154 million or 3.8%.
Average deposits were up 5.0% from the fourth quarter of last year, principally from the branch acquisition completed last December. The multiyear trends away from timed deposits and into core checking, savings and money market accounts, continued in 2014, resulting in a further decline in overall funding costs.
Outstandings in our business lending portfolio were almost 1% higher than the end of the third quarter a positive trend in year of modest net growth, but consistent with our market demand characteristics. Asset quality results in this portfolio continue to be stable and favorable to peers with 2014 net charge-offs of under 10 basis points of average loans.
Our total consumer real estate portfolios of $1.96 billion comprised of $1.61 billion of consumer mortgages, and $342 million of home equity instruments, were also up almost 1% on a linked quarter basis. We continue to retain in portfolio most of our short and mid-duration mortgage production, while selling secondary eligible 30 year instruments. Asset quality results continue to be very favorable in these portfolios, with total net charge-offs in 2014 of just 8 basis points of average loans.
Our consumer indirect portfolio of $834 million was down $8 million from the end of the third quarter in line with seasonal demand characteristics. Despite improving new car sales, used car valuations where the largest majority of our lending is concentrated, continued to be stable and favorable. 2014 net charge-offs in this portfolio were 38 basis points of average loans, although we consider it very productive. With our continued bias toward A&B paper grades and very competitive market conditions in this asset class, yields have continued to trend lower over the last several quarters. We have continued to report very favorable net charge-off results with 2014 results at just 0.15% of total loans being of stellar performance.
Non-performing loans comprised of both legacy and acquired loans, ended the fourth quarter at $23.8 million or 0.56% of total loans. Our reserves for loan losses represent 1.14% of our legacy loans and 1.07% of total outstandings and based on the trailing four quarter’s results, represent over seven years of annualized net charge-offs. As of December 31st, our investment portfolio stood at $2.51 billion and was comprised of $277 million of U.S. agency and agency backed mortgage obligations or 11% of the total, $672 million of municipal bonds or 27%, and $1.5 billion of U.S. treasury securities or 60% of the total. The remaining 2% was incorporate debt securities. The portfolio contains net unrealized gains of $75 million as of year end.
