Third Quarter Report September 30, 2017

Third Quarter Report September 30th 2017

Dear Shareholders:

For the three months ended September 30, 2017, the Company reported net income of $368,000, or $0.70 per share, compared with $381,000, or $0.73 per share, for the third quarter of 2016. The modest decrease in net income compared with the prior year period is primarily the result of a $75,000 increase in net interest income offset by an $88,000 increase in noninterest expense. Loan interest income and fees increased $184,000 over the third quarter of 2016 and were offset by an $86,000 decrease in interest earned on investment securities.

The sustained level of loan originations has continued to support growth of net interest income during the year. During the third quarter, new loan production totaled $7.1 million with $4.6 million in commercial loans and leases and $2.1 million in residential mortgage and home equity loans increasing outstanding balances to $95.6 million compared with $79.9 million at September 30, 2016. This represents a 20% increase of the loan portfolio during the previous twelve months.

Net income year to date totaled nearly $1.1 million, an increase of $64,000, or 6.4%, compared with the same period in 2016. Earnings per share also increased from $2.03 to $2.06 between the two nine-month periods. A $0.49 dividend per share was paid for the third quarter of 2017 on October 2nd.

The Company expects to continue its strategy of originating loans in order to increase net interest income and earnings per share while maintaining its well capitalized financial position. The next annual meeting of shareholders is scheduled for April 10, 2018. The Board of Directors is appreciative of our shareholders for their ongoing support and loyalty. Please contact me if you would like additional information or have any questions.

Sincerely,

Nelson L. Person

President & CEO