First Quarter Report March 31, 2018

First Quarter Report March 31, 2018

Dear Shareholders:

Net income for the quarter ended March 31, 2018 totaled $273,000, or $0.52 per share. This represents a decrease of $53,000 compared with net income of $326,000, and earnings per share of $0.63 for the quarter ended March 31, 2017.  The decrease in earnings primarily resulted from lower noninterest income due to a new financial accounting standard, which requires changes in fair value (i.e. unrealized gains or losses) of equity securities to be reported in the Company’s statement of income.

A recent decrease in fair value of holding company equity securities, which complement the Bank’s core net interest income sources, reduced first quarter earnings by $78,000, net of income tax benefits, due to recent market volatility. Conversely, an increase in fair value (i.e. unrealized gains) would raise earnings per the new financial accounting standard.  Therefore, greater volatility in future reported earnings is anticipated.

First quarter net interest income growth of $14,000 resulted from a $149,000 increase in interest and fees on loans, which was offset by a $93,000 decrease in interest from investment securities and a $34,000 increase in interest expense. Lending continued to be a more significant income generator with an ongoing trend of reallocating investment securities into loans.

For the first quarter, loan balances increased 6% and exceeded $103 million, or 63% of assets. New production totaled $9.0 million with $5.4 million in commercial loans and $3.6 million in residential and consumer loans.  The Company has increased its loan portfolio significantly in recent years while maintaining strong credit quality.

A dividend payment of $0.50 per share for the first quarter was paid April 2. As always, I enjoyed meeting with shareholders who attended the recent annual meeting.  Please do not hesitate to contact me if you would like additional information or have any questions.

Sincerely,

Nelson L. Person
President & CEO