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Financial report summary
?Management Discussion
- Overview. Net income was $6.0 million for the year ended December 31, 2019, an increase of $9 thousand, or 0.2% as compared to December, 2018. Earnings were lessened by merger-related expenses. For the year ended December 31, 2019, compared to 2018, net interest income plus non-interest income increased $2.9 million, offset by an increase in non-interest expenses of $2.6 million and an increase in the provision for loan losses of $330 thousand. The tax provision decreased $74 thousand.
- Net Interest Income. Net interest income for the year ended December 31, 2019 totaled $27.1 million compared to $24.7 million for the year ended December 31, 2018, an increase of $2.4 million, or 9.5%. The increase in net interest income was primarily due to greater interest and dividend income, which increased by $6.7 million, or 19.8%, to $40.3 million for 2019 from $33.6 million for 2018. The average balance of interest-earning assets increased 12.4%, with an average rate earned on these assets of 4.41% for 2019.Interest income from loans and loans held for sale increased $6.6 million, or 21.4%, due to a 14.6% increase in the average balance of loans and loans held for sale and an increase of 26 basis points in the average rate earned on loans and loans held for sale. Most of the remaining increase was from higher balances in short-term investments combined with the rise in short-term interest rates.
- Interest expense increased $4.3 million, or 48.2%, during this period due to an increase in deposit balances and rates paid on interest-bearing deposits and short- and long-term borrowings. The average rates paid on deposits increased by 43 basis points in 2019 primarily due to a shift in the mix of deposits to higher cost term certificates and money market accounts. Rates paid on money market accounts increased 62 basis points during the period while rates paid on term certificates increased 49 basis points. Average balances of interest-bearing deposits increased $80.9 million or 15.1% in 2019. We experienced an increase in the average balance of money market accounts of 65.7% for the year ended December 31, 2019, as compared to the prior year, while the average balance of savings accounts decreased 18.4% during that period. Balances in lower cost NOW checking accounts and interest free checking accounts increased 8.9% during 2019 and helped to mitigate the interest expense increase.