2000 versus 1999. Net interest margin increased 20 basis points in 2000 to 4.64%. The principal factor contributing to the increase was higher yielding earning assets partially offset by higher cost of funds resulting in slightly higher interest rate spreads.

Net interest income was $150.5 million in 2000 compared to $123.0 million in 1999, an increase of $27.5 million or 22%. Growth in average earning assets was $472.7 million or 17% while yields increased 77 basis points to 8.39%. Yields increased throughout 2000 as the Bank’s prime lending rate increased. The yield on earning assets during the fourth quarter was the highest for the year, resulting in increased yields on a weighted average basis.

Net interest margin risk is typically related to a narrowing of the prime rate and cost of funds. The Company reduced this risk with a modestly asset sensitive balance sheet during 2000. On February 4, 2000 the Federal Reserve increased the federal funds rate and discount rate by 25 basis points. This was followed by two additional increases on March 23, 2000 and May 17, 2000 of 25 and 50 basis points, respectively. Due to the Bank’s asset sensitivity, the net interest margin gradually increased during the second half of the year. This resulted in net interest margins of 4.64% and 4.44% and net interest spreads of 3.45% and 3.44% for 2000 and 1999, respectively.

The increase in net interest income was due primarily to a $472.7 million or 17% increase in average earning assets. Average loans grew $518.5 million or 29% during 2000 while average securities decreased $45.1 million or 5% during the same period. The yield earned on average loans outstanding increased 71 basis points to 9.25% in 2000. Overall, the yield earned on average earning assets increased 77 basis points to 8.39% in 2000 compared to a 76 basis point increase in the rate paid on average interest-bearing liabilities.

1999 versus 1998. Net interest income totaled $123.0 million in 1999 compared to $105.6 million in 1998, an increase of $17.4 million or 16%. This resulted in net interest margins of 4.44% and 4.38% and net interest spreads of 3.44% and 3.28% for 1999 and 1998, respectively.

The increase in net interest income was due primarily to a $360.7 million or 15% increase in average interest-earning assets. Average loans grew $352.8 million or 25% during 1999 while average securities grew $110.1 million or 13% during the same period. The increase in net interest income caused by this increase in average interest-earning assets was partially offset by an increase in average interest-bearing liabilities of $297.9 million or 16%. The yield earned on average interest-earning assets decreased eight basis points to 7.62% in 1999 compared to an overall decrease in the yield earned on average interest-bearing liabilities of 24 basis points to 4.18% for the period.