First Quarter Report March 31, 2017

First Quarter Report March 31, 2017

Dear Shareholders:

Net income for the quarter ended March 31, 2017 totaled $326,000, or $0.63 per share.  This represents an increase of $32,000, or 11%, compared with net income of $294,000 and earnings per share of $0.61 for the quarter ended March 31, 2016.  Earnings grew primarily due to a $140,000 increase in net interest income.  For the first quarter of 2017, loan interest income and fees increased $264,000 compared with the first quarter of 2016, which was offset by a $102,000 decrease in interest from investment securities.

Loan balances increased 7% during the most recent quarter and represent continuation of lending growth evident since 2015.  New loan production totaled $8.7 million with $5.8 million in commercial loans and leases and $2.7 million in residential mortgage and home equity loans.  The bank’s loan portfolio continues to be a more significant income generator with the ongoing reallocation of investment securities into higher yielding loans.

Modest deposit growth and higher levels of short-term borrowings were affected by higher interest rates increasing interest expense $20,000 over the same period last year.  Noninterest income decreased $14,000 primarily due to fewer security sale gains.  Noninterest expense increased $51,000 due to personnel costs and other overhead expenses.

Earnings growth helps to increase dividends and maintain the company’s well capitalized status.  I enjoyed meeting with shareholders who attended our recent annual meeting.  We were saddened to learn of the recent passing of Director Emeritus Leland A. Bittinger, who served on our Board of Directors for 21 years from 1986 to 2007.  Please do not hesitate to contact me if you would like further information or have any questions regarding your investment in our company.

Sincerely,

Nelson L. Person
President & CEO