See Non-Interest Income below for
mortgage business segment discussion.
Interest Income, Interest Expense, and Net Interest Income
Interest income increased to $7,596,000 and $22,220,000 for the three and nine months ended September 30, 2019 from $6,980,000 and
$19,860,000 for the same periods in 2018, increases of 8.83% and 11.88%, respectively. Interest income increased because of increased balances in the loan portfolio and an increase in loan yields. The average rate received on loans increased from
4.83% and 4.72% to 5.00% and 4.99% for the three and nine months ended September 30, 2019 from the comparable period in 2018. The rate on total average earning assets increased for the three and nine months ended September 30, 2019 as
compared to the three and nine months ended September 30, 2018 primarily because an increase in the rates paid by borrowers on loans.
Interest expense increased to $1,431,000 and $3,773,000 for the three and nine months ended September 30, 2019 from $990,000 and
$2,736,000 for the same periods in 2018, increases of 44.55% and 37.90%, respectively. The increase in interest expense resulted primarily from increases in both the rates paid on and balances of deposits. The Banks average rate paid on
interest bearing deposits was 0.99% and 0.90% during the three and nine months ended September 30, 2019 as compared to 0.73% and 0.71% for the same periods in 2018.
The fundamental source of the Banks net revenue is net interest income, which is determined by the difference between (i) interest
and dividend income on interest earning assets, which consist primarily of loans, investment securities and other investments, and (ii) interest expense on interest-bearing liabilities, which consist principally of deposits and other
borrowings. Net interest income for the three and nine months ended September 30, 2019 was $6,165,000 and $18,447,000 as compared to $5,990,000 and $17,124,000 for the same periods in 2018, increases of 2.92% and 7.73%. The increases in net
interest income for the three and nine months ended September 30, 2019 as compared with the comparable period in 2018 primarily is attributable to the increase in interest income resulting from increased loan balances. The net interest margin
was 3.75% and 3.83% for the three and nine months ended September 30, 2019 as compared with 3.80% and 3.73% for the same periods in 2018.
Financials net interest margin analysis and average balance sheets are shown in Schedule I below.
Non-Interest Income
Non-interest income is comprised primarily of fees and charges on transactional deposit accounts, gains
on sales of mortgage loans held for sale, commissions on sales of investments, fees generated from treasury management services, and the Banks ownership interest in a title insurance agency. Non-interest
income increased to $2,161,000 and $5,039,000 for the three and nine months ended September 30, 2019 from $1,319,000 and $3,946,000 for the three and nine months ended September 30, 2018.
These increases for the three and nine months ended September 30, 2019 as compared to the same period last year were due primarily due to
an increase in gains on sales of loans held for sale from $767,000 and $2,260,000 for the three and nine months ended September 30, 2018 to $1,337,000 and $3,103,000 for the same periods ended September 30, 2019. In addition, gains on
sales of available-for-sale securities increased from $0 for both the three and nine-month periods ended September 30, 2018 to $291,000 for the same periods in
2019.
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