Second Quarter Report June 30, 2017

Second Quarter Report June 30, 2017

Dear Shareholders:

Net income for the quarter ended June 30, 2017 totaled $379,000 or $0.73 per share. This represents an increase of $45,000, or 13.5%, compared with net income of $334,000 and earnings per share of $0.69 for the quarter ended June 30, 2016.  The increase in earnings is primarily the result of a $66,000 increase in net interest income generated by a significantly higher level of loan interest income along with a $61,000 increase in noninterest income.

Loan originations continue to support the growth in net interest income. Loan balances increased 4.1% during the recent quarter and exceed $92 million.  This represents an 11.2% increase since the end of last year.  For the second quarter, new loan production totaled $10.7 million with $8.4 million in commercial loans and leases and $1.8 million in residential mortgage and home equity loans.  Loan interest income and fees increased $222,000 over the second quarter of 2016 and was offset by a $119,000 decrease in interest earned on investment securities.  Repositioning $9.7 million of investment securities generated an additional $104,000 of gains during the second quarter of 2017 while providing liquidity to reduce wholesale funding and removing lower yielding assets from the balance sheet.

Net income year to date totaled $705,000 compared with $628,000 reported at mid-year 2016. Earnings per share also increased from $1.29 to $1.35 between the two six-month periods. A $0.49 dividend per share was paid for the first and second quarters of 2017.

The company expects to continue its strategy of reallocating investment securities into higher yielding loans in order to increase net interest income and earnings per share while maintaining its well capitalized financial position. The Board of Directors is appreciative of our shareholders for their on-going support and loyalty.  Please contact me if you would like any additional information or have any questions.

Sincerely,

Nelson L. Person
President & CEO