To Our Shareholders
For the first quarter, we have disclosed three quarters of Consolidated Statement of Income for the periods of March 2018, 2017 and 2016. Disclosure of the information for three quarters was chosen versus two quarters to provide some historical trends. First quarter 2017 earnings included a fairly large tax exempt gain of $245,000 for a Bank Owned Life Insurance Policy. Therefore, as you review our income statement, look at 2017 and 2016 when comparing to the current quarter (2018). As a Shareholder, you will also see the positive impact of the new tax legislation on our business. Our new 2018 effective tax rate is 21% as compared to 33% for the prior years.
Earnings for the first quarter were $501,642, representing 61 cents per share. Return on Assets and Return on Equity was 1.23% and 10.39% respectively. Signs of a successful bank are having constant Return on Assets exceeding 1.0% combined with a constant Return on Equity exceeding 10%.
Asset quality continues to be our primary focus. Loans past due 90 days or more were $167,502 (three loans) or .12% to Total Loans Outstanding. Loans past due 60-89 days were $49,572 (one loan) or .03% to Total Loans Outstanding. These ratios are exceptional when compared to other banks. Our Allowance for Loan Losses was $1,740,798 or 1.20% to Total Loans Outstanding. The Allowance for Loan Losses represents ten times our Non-Performing Loans (loans past due over 90 days). We currently have $103,660 classified as Other Real Estate Owned (OREO). For the quarter, loan recoveries exceeded loans charged off. As a result of these ratios, we chose not to set aside a provision for loan loss for this quarter.
Non-interest expense for the quarter was $910,909 (58.8% efficiency ratio) representing our abilities to continue to find methods to control our operating expenses. Our efficiency ratio continues to compare very favorably to other banks. Expenses for the quarter was also less than last year’s quarter and is on budget for 2018.
Net interest income was $1,411,120, showing an improvement over March 2017 and 2016. Loans Outstanding closed the quarter at $145,211,803. Loan volume is critical to the continued improvement of Net Interest Income and with the control of Non-Interest Expense should result in continued improvement in our net income. Comparing our Net Interest Margins (3.59%) for the quarter, demonstrates our ability to manage interest rate risk being that the Federal Reserve has increased the prime rate six times since December 2015, which has had an impact on our cost of deposits and FHLB Advances.
Shareholders’ equity closed the quarter with $19,682,516, generating a book value of $24.10 per share on 816,818 shares outstanding. Our market value per share at the close of the quarter was $29.95.
In summary, another successful quarter and on budget!!
We continue to stay focused on our Community (market that we serve), Shareholder Values (ownership) and Staff. Each group has different agendas, but the ultimate goal of all is a Safe, Sound, and Well Managed Bank.
Thank you for your investment in Home City Financial Corporation. As Shareholders, should you want to share your thoughts, my Email address is disclosed under “Shareholder Information”. I always enjoy hearing from our Shareholders.
As a reminder, please return your Proxy votes for the Annual Meeting scheduled April 25, 2018. Your Proxy is important!!!!
J. William Stapleton, President & CEO