Interest Expense. Interest expense increased $167,000, or 7.9%, to $2.3 million for the year ended December 31, 2022 from $2.1 million for the year ended December 31, 2021 due primarily to an increase in the average balance of interest-bearing liabilities of $18.3 million, or 7.2%, from $253.7 million for the year ended December 31, 2021 to $272.0 million for the year ended December 31, 2022.
Interest expense on deposit accounts increased $6,000, or 0.4%, for the year ended December 31, 2022, due primarily to an increase in average deposit account balances of $14.4 million, or 6.4%, from $224.3 million for the year ended December 31, 2021 to $238.7 million for the year ended December 31, 2022. This was partially offset by a decrease in average yield of four basis points, or 5.7%, from 0.66% for the year ended December 31, 2021 to 0.63% for the year ended December 31, 2022. The decrease in yield is primarily due to lower deposit costs during the first three quarters of the year.
Interest expense on Federal Home Loan Bank (FHLB) advances increased $162,000, or 26.3%, to $777,000 for the year ended December 31, 2022 from $615,000 for the year ended December 31, 2021, primarily due to the increase in average balances of FHLB advances of $3.7 million, or 12.7%, to $32.8 million for the year ended December 31, 2022 from $29.1 million for the year ended December 31, 2021 and an increase in average yield of 25 basis points, or 11.9%, from 2.12% for the year ended December 31, 2021 to 2.37% for the year ended December 31, 2022.
Net Interest Income. Net interest income increased $1.9 million, or 22.6%, to $10.3 million for the year ended December 31, 2022 from $8.4 million for the year ended December 31, 2021, primarily due to an increase of $19.9 million, or 31.4%, in average balance of net interest earning assets from $63.3 million for the year ended December 31, 2021 to $83.2 million for the year ended December 31, 2022. The net interest rate spread increased 21 basis points, or 8.4%, from 2.49% for the year ended December 31, 2021 to 2.70% for the year ended December 31, 2022. Net interest margin increased 24 basis points, or 9.0%, to 2.89% for the year ended December 31, 2022 from 2.66% for the year ended December 31, 2021.
Provision for Loan and Lease Losses. Based on management’s analysis of the adequacy of the allowance for loan and lease losses, the provision for loan and lease losses increased $158,000, or 316.0%, from $50,000 for the year ended December 31, 2021 to $208,000 for the year ended December 31, 2022. The allowance for loan and lease losses was $1.8 million at December 31, 2022 compared to $1.6 million at December 31, 2021. The increase in the provision was primarily due to an increase in net loans and leases of $31.0 million, or 14.1%, and an increase in net loan chargeoffs of $9,000 to a total of $16,000 for the year ended December 31, 2022 and an increase in losses related to overdrawn deposit accounts of $15,000 to a total of $30,000 for the year ended December 31, 2022. The loan portfolio was also diversified during the year ended December 31, 2022 with increases in loan types requiring a slightly higher allowance.
Noninterest Income. Noninterest income increased $151,000, or 8.8%, to $1.9 million for the year ended December 31, 2022 from $1.7 million for the year ended December 31, 2021, primarily the result of increased service charges on deposits of $88,000, or 15.2%, from $578,000 for the year ended December 31, 2021 to $666,000 for the year ended December 31, 2022 primarily resulting from increases in nonsufficient funds and overdraft fees resulting primarily from increases in the number of checking accounts. Other service charges and fees increased by $44,000 primarily from an increase of $12,000 in ATM fees and $15,000 in loan fees generated through secondary market wholesale lending. There were a three items exclusive to the year ended December 31, 2022 including a gain of $42,000 on the sale of bank property classified as foreclosed assets and a $6,000 gain on the sale of a fixed asset, partially offset by a $29,000 loss on securities sold in 2022.
Noninterest Expense. Noninterest expense increased $292,000, or 3.1%, to $9.8 million for the year ended December 31, 2022 from $9.5 million for the year ended December 31, 2021 primarily due to the increase in salary and employee benefits, data processing, and director fees, partially offset by decreases in contract services and other expenses.