FIRST KEYSTONE : MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
The purpose of Management's Discussion and Analysis ofFirst Keystone Corporation , a bank holding company (the "Corporation"), and its wholly owned subsidiary,First Keystone Community Bank (the "Bank"), is to assist the reader in reviewing the financial information presented and should be read in conjunction with the consolidated financial statements and other financial data contained herein. Refer to Forward-Looking Statements on page 1 for detailed information. 24 Table of Contents RESULTS OF OPERATIONS
Year Ended
Net income increased to$11,837,000 for the year endedDecember 31, 2020 , as compared to$10,227,000 for the prior year, an increase of 15.7%. Earnings per share, both basic and diluted, for 2020 was$2.03 as compared to$1.77 in 2019, an increase of 14.7%. Dividends per share for 2020 and 2019 were$1.08 . The Corporation's return on average assets was 1.09% in 2020 and 1.02% in 2019. Return on average equity increased to 8.61% in 2020 from 8.17% in 2019. Total interest income in 2020 amounted to$39,567,000 , an increase of$1,040,000 or 2.7% from 2019. The increase in interest income reflects$610,000 in servicing fees earned from the SBA related to the origination of PPP loans throughout 2020. Total interest expense of$6,360,000 decreased$3,883,000 or 37.9% from 2019. The majority of this decrease related to a decrease in interest paid on deposits and short-term borrowings in 2020. Net interest income, as indicated below in Table 1, increased by$4,923,000 or 17.4% to$33,207,000 for the year endedDecember 31, 2020 . The Corporation's net interest income on a fully tax equivalent basis increased by$4,761,000 , or 15.8% to$34,866,000 in 2020 as compared to$30,105,000 in 2019.
Table 1 – Reconciliation of Taxable Equivalent Net Interest Income
(Dollars in thousands) 2020/2019 Increase/(Decrease) 2020 Amount % 2019 Interest Income$ 39,567 $ 1,040 2.7$ 38,527 Interest Expense 6,360 (3,883) (37.9) 10,243 Net Interest Income 33,207 4,923 17.4 28,284 Tax Equivalent Adjustment 1,659 (162)
(8.9) 1,821
Net Interest Income (fully tax equivalent)
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Table 2 – Average Balances, Rates and Interest Income and Expense
(Dollars in thousands) 2020 2019 Average Yield/ Average Yield/ Balance Interest Rate Balance Interest Rate Interest Earning Assets: Loans: Commercial, net1,2,4$ 97,418 $ 3,096 3.18 %$ 90,706 $ 3,707 4.09 % Real Estate1,2 581,404 26,590 4.57 % 525,169 24,727 4.71 % Consumer, net1,4 5,310 440 8.30 % 5,723 497 8.68 % Fees on Loans - 1,554 - % - 782 - % Total Loans5 684,132 31,680 4.63 % 621,598 29,713 4.78 % Securities: Taxable 205,236 4,792 2.33 % 192,044 5,338 2.78 % Tax-Exempt1,3 103,696 4,528 4.37 % 108,464 4,763 4.39 %
Total Investment Securities 308,932 9,320 3.02 % 300,508 10,101 3.36...
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