Comparison of the Three Months Ended June 30, 2020 and 2019
Operations Overview:
Net income for the second quarter of 2020 was $1,605,000, a decrease of $240,000 when compared to the second quarter of 2019. Basic and diluted earnings per share were $0.32 and $0.31, respectively, in the second quarter of 2020 compared to basic and diluted earnings per share of $0.36 in the second quarter of 2019.
Annualized return on average equity for the three months ended June 30, 2020 was 8.40%, compared to the return on average equity of 10.63% for the same period in 2019. For the three months ended June 30, annualized return on average assets was 0.88% in 2020, compared to 1.16% in 2019.
Presented below are selected key ratios for the two periods:
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Three Months Ended
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June 30,
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2020
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2019
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Return on average assets (annualized)
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0.88
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%
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1.16
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%
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Return on average equity (annualized)
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8.40
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%
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10.63
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%
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Average equity to average assets
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10.44
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%
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10.92
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%
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Non-interest income, excluding gain/loss on sales and calls of securities and change in value of equity securities, as a percentage of average assets (annualized)
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0.54
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%
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0.76
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%
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Non-interest expense as a percentage of average assets (annualized)
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2.63
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%
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3.33
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%
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The discussion that follows further explains changes in the components of net income when comparing the second quarter of 2020 with the second quarter of 2019.
Net Interest Income:
Net interest income was $5,118,000 during the three months ended June 30, 2020 compared to $5,552,000 during the three months ended June 30, 2019. Total interest income decreased by $624,000 during the second quarter of 2020 compared to the same period in 2019, partially offset by a decline of $190,000 in total interest expense.
Overall, average earning assets increased 15.4%, while average interest bearing liabilities increased 11.1%. Net interest margin, on a fully tax equivalent basis, decreased from 3.87% during the three months ended June 30, 2019 to 3.08% during the three months ended June 30, 2020.
Average loan balances increased by $4,595,000, while interest on loans declined by $830,000 during for the second quarter of 2020 compared to the same period in 2019. The decline in the yield on loans decreased interest income by $919,000, while the increase in the average volume of loans outstanding increased interest income by $89,000.
The average balance of, and interest earned on, investment securities increased $85,521,000 and $325,000, respectively, in the second quarter of 2020 compared to the second quarter of 2019. The increase in average balance on investment securities during the period increased interest income by $542,000, while the decline in yield on investment securities decreased interest income by $217,000.
Average earning assets increased $89,801,000, to $673,291,000, mainly due to a 55.5% increase in average investment securities. The yield on earning assets declined to 3.62% during the three months ended June 30, 2020 from 4.60% during the same period in 2019. The average balance of interest bearing liabilities increased over the period by $48,228,000 compared to the same 2019 period. In addition, the cost to fund interest bearing assets with interest bearing liabilities