This was our first in-person event in well over a year. It was important for us to honor these Associates in-person to fully capture our appreciation and admiration for their work. It was just as important to promote a safe environment by social distancing and limiting attendance to Senior Management and the 2019 and 2020 awardees only.
The prestigious awards presentation included high-quality video production and event design reflective of our Associates reaching a pinnacle of career achievement.
As Farmers continues to grow and expand, it’s important to recognize the top performers who have helped contribute to our growth in their respective roles throughout the bank. It’s a pleasure for myself and the rest of the Senior Management team to celebrate their achievements.
Net Income and Asset Quality
I’m especially pleased that I’m reporting another record quarter in the midst of the COVID-19 pandemic. The year has started off strong and, for the first quarter, earnings increased 68% to a first quarter record of $14.6 million, or $0.51 per diluted share. Record quarterly earnings are especially encouraging as we continue to report a strong level of asset quality.
Strong capital levels and outstanding asset quality provided us with the flexibility to continue supporting our customers throughout the pandemic. Our commitment to small business remains steadfast as we develop programs to help businesses navigate through this uncertain time. With that said, we focus on risk management and leverage the benefits of our diversified loan portfolio as we navigate the COVID-19 crisis. Charge-offs as a percent of our average net loans outstanding at March 31, 2021 were only 0.02%, compared to 0.13% at March 31, 2020.
Fee Income
I wanted to take a minute and touch on the integral role of fee income in revenue generation. Farmers’ diversification to fee-based businesses has really allowed us to survive and thrive during times of traditional compressed margins. Our diverse consumer and business banking services and wealth management platform allows us to provide our communities with a portfolio of financial products and services. During the first quarter, we continued to experience the benefits of our diversified banking approach, with fee income contributing to 27% of our first quarter revenue.
As the Federal Funds target rate remains at 0.00% – 0.25%, our diversified business model also helps us offset pressure that the low-rate environment has on our net interest margin by supporting additional sources of noninterest income. For the quarter, noninterest income increased 34.5% to $10.6 million. This growth was primarily due to gains on the sales of mortgage loans, which increased by $1.8 million, or 133.2% over the prior year period. Other top performers were trust fees, security gains, insurance agency commissions, and debit card interchange fees – all increasing and generating fee income during the quarter.
