Second Quarter Report June 30, 2016

Second Quarter Report June 30, 2016

Dear Shareholders:

For the three months ended June 30, 2016, the Company recorded net income of $334,000, or $0.68 per share, compared with $350,000, or $0.69 per share, for the second quarter 2015. The change in net income is primarily attributable to an increase of $74,000 in total interest income offset by lower noninterest income of $27,000, a $39,000 increase in noninterest expense and an $8,000 increase in the provision for loan losses.

Net interest income increased $64,000 over the same period primarily due to a $177,000 increase in interest earned on loans offset by a $103,000 decrease in interest and dividends on investment securities. During the first half of 2016, total loans increased 17% and continues the growth trend of last year. New originations of $15.0 million in commercial mortgage loans and leases and $4.4 million in residential mortgage loans represent a noteworthy start for 2016.  The loan portfolio is becoming a more significant generator of earnings with reallocation of investment securities into higher yielding loans gaining significant traction.

Year-to-date net income totals $628,000, or $1.29 per share, compared with $671,000, or $1.33 per share, reported for the first half of 2015. Net interest income increased $104,000 as a result of loan portfolio growth. Noninterest income decreased $77,000 due to decreases in service charge income and nonrecurring fees from Trust department executorships.  Noninterest expense also increased $65,000 compared with the prior year period.

Stockholders’ equity increased $2.4 million to $20.8 million from the prior year end. This change is the result of retained earnings, higher investment security values and the sale of treasury stock. Growth in stockholders’ equity provides a stronger base of support as the company continues to expand its lending activities.

Our Board of Directors is thankful to our shareholders for their ongoing support and loyalty. Please call me if you would like further information or if you have any questions.


Nelson L. Person
President & CEO