Third Quarter Report September 30, 2018

Third Quarter Report September 30, 2018

Dear Shareholders:

Net income for the quarter ended September 30, 2018 totaled $521,000, or $1.01 per share, which represented a $153,000 increase compared with net income of $368,000 and earnings per share of $0.71 for the quarter ended September 30, 2017. The increase in earnings primarily resulted from gains in market value of equity securities and net interest income.  Year-to-date net income totaled $1,185,000 compared with $1,073,000 reported for the first three quarters of 2017.

The Company recorded a $190,000 increase in market value of equity securities held in its investment securities portfolio during the third quarter. This significant change compared with the first half of the year reflected rising equity market values.  Despite associated volatility in earnings, core net interest income and noninterest income sources are complemented with a small diversified equity securities portfolio.

Net interest income increased $44,000 compared with third quarter 2017 due to a $206,000 increase in loan interest income, which was offset by a $96,000 decrease in investment securities interest income and a $102,000 increase in interest expense from higher wholesale funding rates. Third quarter loan production totaled $6.1 million and continued strong growth this year with portfolio balances now exceeding $111 million, or 90% of retail deposits.  Also during the third quarter, sales of $5.1 million of lower yielding investment securities reduced wholesale funding levels and projected costs in the current rising interest rate environment.

A dividend of $0.50 per share for the third quarter was paid October 1. Please do not hesitate to contact me if you would like additional information or have any questions.

Sincerely,

Nelson L. Person
President & CEO