PWOD Penns Woods Bancorp Inc

Penns Woods Bancorp, Inc. (NASDAQ:PWOD)

Penns Woods Bancorp, Inc. continued its solid earnings, supported by loan and deposit growth, achieving net income of $6,468,000 for the six months ended June 30, 2016 resulting in basic and dilutive earnings per share of $1.37.

Highlights

• Net income from core operations (“operating earnings”), which is a non-generally accepted accounting principles (GAAP) measure of net income excluding net securities gains, remained flat at $3,065,000 for the three months ended June 30, 2016 compared to $3,088,000 for the same period of 2015. Operating earnings decreased to $5,830,000 for the six months ended June 30, 2016 compared to $6,007,000 for the same period of 2015.  The 2015 six month period included non-recurring gains on the sale of other real estate owned of $222,000 above the 2016 level. In addition, the investment portfolio has declined $67,802,000 from June 30, 2015 to June 30, 2016 as part of our strategy to position the balance sheet for a rising rate environment.
• Operating earnings per share for the three months ended June 30, 2016 and 2015 were $0.65 for both basic and dilutive.  Operating earnings per share for the six months ended June 30, 2016 were $1.23 basic and dilutive compared to $1.25 basic and dilutive for the same period of 2015.
• Return on average assets was 1.00% for the three months ended June 30, 2016 compared to 1.07% for the corresponding period of 2015.  Return on average assets was 0.97% for the six months ended June 30, 2016 compared to 1.07% for the corresponding period of 2015.
• Return on average equity was 9.77% for the three months ended June 30, 2016 compared to 10.05% for the corresponding period of 2015.  Return on average equity was 9.36% for the six months ended June 30, 2016 compared to 9.90% for the corresponding period of 2015.

“The first six months of 2016 have seen the continuation of our strategy to more conservatively manage the balance sheet by reducing interest rate and market risk.  Our employees have been successful in building the loan portfolio primarily through growth in variable rate home equity products.  In addition the commercial loan portfolio continues to perform well.  Funding the growth was achieved through a reduction in the investment portfolio combined with deposit gathering efforts.  The loan and deposit growth is the result of relationship building,” said Richard A. Grafmyre, CFP®, President and CEO.

A reconciliation of the non-GAAP financial measures of operating earnings, operating return on assets, operating return on equity, and operating earnings per share, described in the highlights, to the comparable GAAP financial measures is included at the end of this press release.

Net Income

Net income, as reported under GAAP, for the three and six months ended June 30, 2016 was $3,390,000 and $6,468,000 compared to $3,433,000 and $6,788,000 for the same period of 2015. Results for the three and six months ended June 30, 2016 compared to 2015 were impacted by a decrease in after-tax securities gains of $20,000 (from a gain of $345,000 to a gain of $325,000) for the three month periods and a decrease in after-tax securities gains of $143,000 (from a gain of $781,000 to a gain of $638,000) for the six month periods. Basic and dilutive earnings per share for the three and six months ended June 30, 2016 were $0.72 and $1.37 compared to $0.72 and $1.42 for the corresponding periods of 2015.  Return on average assets and return on average equity were 1.00% and 9.77% for the three months ended June 30, 2016 compared to 1.07% and 10.05% for the corresponding period of 2015. Return on average assets and return on average equity were 0.97% and 9.36% for the six months ended June 30, 2016 compared to 1.07% and 9.90% for the corresponding period of 2015.

Net Interest Margin

The net interest margin for the three and six months ended June 30, 2016 was 3.42% and 3.49% compared to 3.64% and 3.66% for the corresponding periods of 2015.  The decline in the net interest margin was driven by a decreasing yield on the loan and investment portfolios due to the continued low rate environment and our strategic decision to continue repositioning the earning asset portfolio in anticipation of a rising rate environment.  The impact of the declining earning asset yield and decreasing investment portfolio balance was partially offset by a 7.80% growth in gross loans from June 30, 2015 to June 30, 2016 resulting in net interest income increasing slightly compared to the comparable six month period of 2015. The loan growth was funded by an increase in core deposits and a decrease in the investment portfolio.  Core deposits represent a lower cost funding source than time deposits and comprise 79.65% of total deposits at June 30, 2016 and 78.16% at June 30, 2015. 

“The net interest margin continues to come under downward pressure from both external and internal factors.  The continued low interest rate environment is limiting the yield on earning assets that we can acquire into our loan and investment portfolios.  At the same time, our strategic decision to reduce our interest rate and market risk in a rising rate environment by reducing the duration and size of the investment portfolio through active management has resulted in a declining investment portfolio yield.  The combination of these factors has resulted in new earning assets being added to the balance sheet at rates lower than the legacy assets they replace. While the yield on earning assets is declining, the rate paid on interest bearing liabilities has become stagnant as liability rates are at or near their apparent bottom,” commented President Grafmyre.

Assets

Total assets increased $54,670,000 to $1,346,482,000 at June 30, 2016 compared to June 30, 2015.  Net loans increased $74,989,000 to $1,041,602,000 at June 30, 2016 compared to June 30, 2015 primarily due to campaigns related to increasing home equity product market share during 2015 and 2016, and growth in the commercial loan portfolio.  The investment portfolio decreased $67,802,000 from June 30, 2015 to June 30, 2016 due to our strategy to reduce the investment portfolio duration through the selective selling of bonds as opportunities develop.  The combination of loan portfolio growth and a decrease in the size of the investment portfolio has resulted in a shortening of the overall earning asset portfolio duration consistent with a strategy to reduce the interest rate and market risk exposure to a rising rate environment.

Non-performing Loans

The non-performing loans to total loans ratio increased to 1.10% at June 30, 2016 from 0.99% at June 30, 2015. This change was primarily the result of a large commercial real estate loan that was placed on non-accrual status causing non-performing loans to increase to $11,626,000 at June 30, 2016 from $9,689,000 at June 30, 2015. The majority of non-performing loans are centered on several loans that are either in a secured position and have sureties with a strong underlying financial position or have a specific allocation for any impairment recorded within the allowance for loan losses.  Net loan charge-offs of $135,000 for the six months ended June 30, 2016 minimally impacted the allowance for loan losses which was 1.19% of total loans at June 30, 2016.  The majority of the loans charged-off had a specific allowance within the allowance for loan losses.

Deposits

Deposits increased $77,399,000 to $1,084,867,000 at June 30, 2016 compared to June 30, 2015.  Core deposits (total deposits excluding time deposits) increased $76,724,000 due to our commitment to building complete banking relationships with our customers.  Noninterest-bearing deposits increased $29,500,000 to $274,002,000 at June 30, 2016 compared to June 30, 2015.  Driving this growth is our commitment to easy-to-use products, community involvement, and emphasis on customer service.  While deposit gathering efforts have centered on core deposits, the lengthening of the time deposit portfolio is in process as part of the strategy to build balance sheet protection in a rising rate environment.

Shareholders’ Equity

Shareholders’ equity increased $4,396,000 to $139,394,000 at June 30, 2016 compared to June 30, 2015.  Since June 30, 2015 treasury stock purchases of $1,374,000 for 33,974 shares were completed as part of the stock repurchase plan.  The change in accumulated other comprehensive loss from $3,170,000 at June 30, 2015 to $2,168,000 at June 30, 2016 is a result of an increase in unrealized gains on available for sale securities from an unrealized gain of $1,374,000 at June 30, 2015 to an unrealized gain of $1,838,000 at June 30, 2016.  The amount of accumulated other comprehensive loss at June 30, 2016 was also impacted by the change in net excess of the projected benefit obligation over the fair value of the plan assets of the defined benefit pension plan resulting in a decrease in the net loss of $538,000 to $4,006,000 at June 30, 2016.  The current level of shareholders’ equity equates to a book value per share of $29.45 at June 30, 2016 compared to $28.33 at June 30, 2015 and an equity to asset ratio of 10.35% at June 30, 2016 compared to 10.45% at June 30, 2015.  Excluding goodwill and intangibles, book value per share was $25.42 at June 30, 2016 compared to $24.47 at June 30, 2015.  Dividends declared for each of the three and six months ended June 30, 2016 and 2015 were $0.47 and $0.94 per share.

Penns Woods Bancorp, Inc. is the parent company of Jersey Shore State Bank, which operates fifteen branch offices providing financial services in Lycoming, Clinton, Centre, Montour, and Union Counties, and Luzerne Bank, which operates eight branch offices providing financial services in Luzerne County.  Investment and insurance products are offered through Jersey Shore State Bank’s subsidiary, The M Group, Inc. D/B/A The Comprehensive Financial Group.

NOTE: This press release contains financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).  Management uses the non-GAAP measure of net income from core operations in its analysis of the company’s performance. This measure, as used by the Company, adjusts net income determined in accordance with GAAP to exclude the effects of special items, including significant gains or losses that are unusual in nature such as net securities gains and losses. Because certain of these items and their impact on the Company’s performance are difficult to predict, management believes presentation of financial measures excluding the impact of such items provides useful supplemental information in evaluating the operating results of the Company’s core businesses. These disclosures should not be viewed as a substitute for net income determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

This press release may contain certain “forward-looking statements” including statements concerning plans, objectives, future events or performance and assumptions and other statements, which are statements other than statements of historical fact.  The Company cautions readers that the following important factors, among others, may have affected and could in the future affect actual results and could cause actual results for subsequent periods to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company herein: (i) the effect of changes in laws and regulations, including federal and state banking laws and regulations, and the associated costs of compliance with such laws and regulations either currently or in the future as applicable; (ii) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies as well as by the Financial Accounting Standards Board, or of changes in the Company’s organization, compensation and benefit plans; (iii) the effect on the Company’s competitive position within its market area of the increasing consolidation within the banking and financial services industries, including the increased competition from larger regional and out-of-state banking organizations as well as non-bank providers of various financial services; (iv) the effect of changes in interest rates; and (v) the effect of changes in the business cycle and downturns in the local, regional or national economies.  For a list of other factors which could affect the Company’s results, see the Company’s filings with the Securities and Exchange Commission, including “Item 1A.  Risk Factors,” set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

You should not place undue reliance on any forward-looking statements.  These statements speak only as of the date of this press release, even if subsequently made available by the Company on its website or otherwise.  The Company undertakes no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this press release.

Previous press releases and additional information can be obtained from the Company’s website at www.pwod.com.

Contact:	Richard A. Grafmyre, President and Chief Executive Officer
	300 Market Street
	Williamsport, PA 17701
	570-322-1111	e-mail: pwod@pwod.com

THIS INFORMATION IS SUBJECT TO YEAR-END AUDIT ADJUSTMENT

PENNS WOODS BANCORP, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
		June 30,
(In Thousands, Except Share Data)		2016				2015				% Change
ASSETS
Noninterest-bearing balances		$	24,088			$	20,428			17.92	%
Interest-bearing balances in other financial institutions		45,387				1,441				3,049.69	%
Total cash and cash equivalents		69,475				21,869				217.69	%
Investment securities, available for sale, at fair value		146,667				214,312				(31.56	)%
Investment securities, trading		—				157				(100.00	)%
Loans held for sale		1,349				2,107				(35.98	)%
Loans		1,054,119				977,878				7.80	%
Allowance for loan losses		(12,517		)		(11,265		)		11.11	%
Loans, net		1,041,602				966,613				7.76	%
Premises and equipment, net		22,304				20,816				7.15	%
Accrued interest receivable		3,490				3,706				(5.83	)%
Bank-owned life insurance		27,016				26,327				2.62	%
Investment in limited partnerships		704				1,229				(42.72	)%
Goodwill		17,104				17,104				—	%
Intangibles		1,979				1,294				52.94	%
Deferred tax asset		7,400				8,772				(15.64	)%
Other assets		7,392				7,506				(1.52	)%
TOTAL ASSETS		$	1,346,482			$	1,291,812			4.23	%
LIABILITIES
Interest-bearing deposits		$	810,865			$	762,966			6.28	%
Noninterest-bearing deposits		274,002				244,502				12.07	%
Total deposits		1,084,867				1,007,468				7.68	%
Short-term borrowings		17,440				59,026				(70.45	)%
Long-term borrowings		91,025				75,426				20.68	%
Accrued interest payable		456				410				11.22	%
Other liabilities		13,300				14,484				(8.17	)%
TOTAL LIABILITIES		1,207,088				1,156,814				4.35	%
SHAREHOLDERS’ EQUITY
Preferred stock, no par value, 3,000,000 shares authorized; no shares issued		—				—				n/a
Common stock, par value $8.33, 15,000,000 shares authorized; 5,006,036 and 5,003,169 shares issued		41,717				41,698				0.05	%
Additional paid-in capital		50,025				49,933				0.18	%
Retained earnings		60,054				55,397				8.41	%
Accumulated other comprehensive loss:
Net unrealized gain on available for sale securities		1,838				1,374				33.77	%
Defined benefit plan		(4,006		)		(4,544		)		11.84	%
Treasury stock at cost, 272,452 and 238,478 shares		(10,234		)		(8,860		)		15.51	%
TOTAL SHAREHOLDERS’ EQUITY		139,394				134,998				3.26	%
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	1,346,482			$	1,291,812			4.23	%

PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
		Three Months Ended June 30,											Six Months Ended June 30,
(In Thousands, Except Per Share Data)		2016				2015				% Change			2016				2015				% Change
INTEREST AND DIVIDEND INCOME:
Loans including fees		$	10,466			$	9,752			7.32	%		$	20,821			$	19,075			9.15	%
Investment securities:
Taxable		601				885				(32.09	)%		1,223				1,899				(35.60	)%
Tax-exempt		398				744				(46.51	)%		874				1,511				(42.16	)%
Dividend and other interest income		204				148				37.84	%		477				441				8.16	%
TOTAL INTEREST AND DIVIDEND INCOME		11,669				11,529				1.21	%		23,395				22,926				2.05	%
INTEREST EXPENSE:
Deposits		881				785				12.23	%		1,716				1,528				12.30	%
Short-term borrowings		8				28				(71.43	)%		34				47				(27.66	)%
Long-term borrowings		492				494				(0.40	)%		983				1,018				(3.44	)%
TOTAL INTEREST EXPENSE		1,381				1,307				5.66	%		2,733				2,593				5.40	%
NET INTEREST INCOME		10,288				10,222				0.65	%		20,662				20,333				1.62	%
PROVISION FOR LOAN LOSSES		258				600				(57.00	)%		608				1,300				(53.23	)%
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		10,030				9,622				4.24	%		20,054				19,033				5.36	%
NON-INTEREST INCOME:
Service charges		561				598				(6.19	)%		1,093				1,151				(5.04	)%
Securities gains, available for sale		486				526				(7.60	)%		921				1,187				(22.41	)%
Securities gains (losses), trading		6				(4		)		250.00	%		46				(4		)		1,250	%
Bank-owned life insurance		161				171				(5.85	)%		345				359				(3.90	)%
Gain on sale of loans		566				482				17.43	%		1,033				781				32.27	%
Insurance commissions		200				204				(1.96	)%		405				438				(7.53	)%
Brokerage commissions		272				294				(7.48	)%		527				539				(2.23	)%
Other		926				786				17.81	%		1,805				1,866				(3.27	)%
TOTAL NON-INTEREST INCOME		3,178				3,057				3.96	%		6,175				6,317				(2.25	)%
NON-INTEREST EXPENSE:
Salaries and employee benefits		4,346				4,301				1.05	%		8,926				8,771				1.77	%
Occupancy		545				564				(3.37	)%		1,086				1,192				(8.89	)%
Furniture and equipment		679				643				5.60	%		1,380				1,238				11.47	%
Pennsylvania shares tax		220				243				(9.47	)%		478				467				2.36	%
Amortization of investments in limited partnerships		68				166				(59.04	)%		220				331				(33.53	)%
Federal Deposit Insurance Corporation deposit insurance		236				230				2.61	%		468				445				5.17	%
Marketing		185				145				27.59	%		395				274				44.16	%
Intangible amortization		100				80				25.00	%		187				162				15.43	%
Other		2,287				2,049				11.62	%		4,587				4,009				14.42	%
TOTAL NON-INTEREST EXPENSE		8,666				8,421				2.91	%		17,727				16,889				4.96	%
INCOME BEFORE INCOME TAX PROVISION		4,542				4,258				6.67	%		8,502				8,461				0.48	%
INCOME TAX PROVISION		1,152				825				39.64	%		2,034				1,673				21.58	%
NET INCOME		$	3,390			$	3,433			(1.25	)%		$	6,468			$	6,788			(4.71	)%
EARNINGS PER SHARE - BASIC AND DILUTED		$	0.72			$	0.72			—	%		$	1.37			$	1.42			(3.52	)%
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED		4,733,251				4,779,687				(0.97	)%		4,736,878				4,790,536				(1.12	)%
DIVIDENDS DECLARED PER SHARE		$	0.47			$	0.47			—	%		$	0.94			$	0.94			—	%

PENNS WOODS BANCORP, INC.
AVERAGE BALANCES AND INTEREST RATES
		Three Months Ended
		June 30, 2016											June 30, 2015
(Dollars in Thousands)		AverageBalance				Interest				AverageRate			AverageBalance				Interest				AverageRate
ASSETS:
Tax-exempt loans		$	46,281			$	445			3.87	%		$	39,977			$	388			3.89	%
All other loans		1,000,541				10,172				4.09	%		921,769				9,496				4.13	%
Total loans		1,046,822				10,617				4.08	%		961,746				9,884				4.12	%
Federal funds sold		—				—				—	%		—				—				—	%
Taxable securities		94,049				734				3.12	%		130,730				1,030				3.15	%
Tax-exempt securities		56,348				603				4.28	%		87,509				1,127				5.15	%
Total securities		150,397				1,337				3.56	%		218,239				2,157				3.95	%
Interest-bearing deposits		54,309				71				0.53	%		3,781				3				0.32	%
Total interest-earning assets		1,251,528				12,025				3.86	%		1,183,766				12,044				4.08	%
Other assets		100,241											98,039
TOTAL ASSETS		$	1,351,769										$	1,281,805
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Savings		$	153,151			14				0.04	%		$	143,305			14				0.04	%
Super Now deposits		198,048				125				0.25	%		187,828				124				0.26	%
Money market deposits		239,754				161				0.27	%		209,624				143				0.27	%
Time deposits		221,376				581				1.06	%		220,851				504				0.92	%
Total interest-bearing deposits		812,329				881				0.44	%		761,608				785				0.41	%
Short-term borrowings		16,710				8				0.19	%		39,166				28				0.28	%
Long-term borrowings		91,025				492				2.14	%		81,924				494				2.39	%
Total borrowings		107,735				500				1.84	%		121,090				522				1.71	%
Total interest-bearing liabilities		920,064				1,381				0.60	%		882,698				1,307				0.59	%
Demand deposits		276,748											244,205
Other liabilities		16,151											18,231
Shareholders’ equity		138,806											136,671
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	1,351,769										$	1,281,805
Interest rate spread										3.26	%										3.49	%
Net interest income/margin						$	10,644			3.42	%						$	10,737			3.64	%

		Three Months Ended June 30,
		2016				2015
Total interest income		$	11,669			$	11,529
Total interest expense		1,381				1,307
Net interest income		10,288				10,222
Tax equivalent adjustment		356				515
Net interest income (fully taxable equivalent)		$	10,644			$	10,737

		Six Months Ended
		June 30, 2016											June 30, 2015
(Dollars in Thousands)		AverageBalance				Interest				AverageRate			AverageBalance				Interest				AverageRate
ASSETS:
Tax-exempt loans		$	50,700			$	980			3.89	%		$	38,303			$	771			4.06	%
All other loans		994,034				20,174				4.08	%		906,693				18,566				4.13	%
Total loans		1,044,734				21,154				4.07	%		944,996				19,337				4.13	%
Taxable securities		96,541				1,618				3.35	%		137,041				2,333				3.40	%
Tax-exempt securities		59,860				1,324				4.42	%		87,667				2,289				5.22	%
Total securities		156,401				2,942				3.76	%		224,708				4,622				4.11	%
Interest-bearing deposits		33,501				82				0.49	%		5,152				7				0.27	%
Total interest-earning assets		1,234,636				24,178				3.94	%		1,174,856				23,966				4.11	%
Other assets		98,276											97,043
TOTAL ASSETS		$	1,332,912										$	1,271,899
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Savings		$	151,004			29				0.04	%		$	142,537			29				0.04	%
Super Now deposits		193,098				249				0.26	%		189,125				253				0.27	%
Money market deposits		229,497				301				0.26	%		207,446				279				0.27	%
Time deposits		220,965				1,137				1.03	%		218,824				967				0.89	%
Total interest-bearing deposits		794,564				1,716				0.43	%		757,932				1,528				0.41	%
Short-term borrowings		22,560				34				0.30	%		33,728				47				0.28	%
Long-term borrowings		91,025				983				2.14	%		82,961				1,018				2.44	%
Total borrowings		113,585				1,017				1.77	%		116,689				1,065				1.82	%
Total interest-bearing liabilities		908,149				2,733				0.60	%		874,621				2,593				0.59	%
Demand deposits		270,900											242,488
Other liabilities		15,703											17,687
Shareholders’ equity		138,160											137,103
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	1,332,912										$	1,271,899
Interest rate spread										3.34	%										3.52	%
Net interest income/margin						$	21,445			3.49	%						$	21,373			3.66	%

		Six Months Ended June 30,
		2016				2015
Total interest income		$	23,395			$	22,926
Total interest expense		2,733				2,593
Net interest income		20,662				20,333
Tax equivalent adjustment		783				1,040
Net interest income (fully taxable equivalent)		$	21,445			$	21,373

(Dollars in Thousands, Except Per Share Data)		Quarter Ended
		6/30/2016				3/31/2016				12/31/2015				9/302015				6/30/2015
Operating Data
Net income		$	3,390			$	3,078			$	3,746			$	3,364			$	3,433
Net interest income		10,288				10,374				10,338				10,234				10,222
Provision for loan losses		258				350				480				520				600
Net security gains		492				475				894				493				522
Non-interest income, excluding net security gains		2,686				2,522				2,417				2,644				2,535
Non-interest expense		8,666				9,061				8,317				8,530				8,421
Performance Statistics
Net interest margin		3.42		%		3.57		%		3.55		%		3.55		%		3.64		%
Annualized return on average assets		1.00		%		0.94		%		1.15		%		1.04		%		1.07		%
Annualized return on average equity		9.77		%		8.95		%		10.73		%		9.89		%		10.05		%
Annualized net loan charge-offs (recoveries) to average loans		0.05		%		—		%		(0.03		)%		0.12		%		0.07		%
Net charge-offs (recoveries)		123				12				(75		)		296				161
Efficiency ratio		66.0		%		69.6		%		64.6		%		65.7		%		65.3		%
Per Share Data
Basic earnings per share		$	0.72			$	0.65			$	0.79			$	0.71			$	0.72
Diluted earnings per share		0.72				0.65				0.79				0.71				0.72
Dividend declared per share		0.47				0.47				0.47				0.47				0.47
Book value		29.45				29.09				28.71				28.54				28.33
Common stock price:
High		44.70				41.32				45.28				44.56				48.28
Low		37.82				36.73				40.47				40.41				41.84
Close		41.99				38.54				42.46				40.92				44.09
Weighted average common shares:
Basic		4,733				4,741				4,747				4,762				4,780
Fully Diluted		4,733				4,741				4,747				4,762				4,780
End-of-period common shares:
Issued		5,006				5,006				5,005				5,004				5,004
Treasury		272				272				258				254				238

(Dollars in Thousands, Except Per Share Data)		Quarter Ended
		6/30/2016				3/31/2016				12/31/2015				9/30/2015				6/30/2015
Financial Condition Data:
General
Total assets		$	1,346,482			$	1,318,137			$	1,320,057			$	1,299,292			$	1,291,812
Loans, net		1,041,602				1,028,870				1,033,163				990,164				966,613
Goodwill		17,104				17,104				17,104				17,104				17,104
Intangibles		1,979				2,078				1,240				1,316				1,294
Total deposits		1,084,867				1,059,581				1,031,880				1,004,801				1,007,468
Noninterest-bearing		274,002				269,362				280,083				247,848				244,502
Savings		152,540				153,217				144,561				143,224				143,415
NOW		190,890				190,168				176,078				188,444				188,092
Money Market		246,712				226,659				209,782				204,475				211,412
Time Deposits		220,723				220,175				221,376				220,810				220,047
Total interest-bearing deposits		810,865				790,219				751,797				756,953				762,966
Core deposits*		864,145				839,406				810,504				783,991				787,421
Shareholders’ equity		139,394				137,663				136,279				135,577				134,998
Asset Quality
Non-performing loans		$	11,626			$	11,648			$	9,446			$	8,608			$	9,689
Non-performing loans to total assets		0.86		%		0.88		%		0.72		%		0.66		%		0.75		%
Allowance for loan losses		12,517				12,382				12,044				11,489				11,265
Allowance for loan losses to total loans		1.19		%		1.19		%		1.15		%		1.15		%		1.15		%
Allowance for loan losses to non-performing loans		107.66		%		106.30		%		127.50		%		133.47		%		116.27		%
Non-performing loans to total loans		1.10		%		1.12		%		0.90		%		0.86		%		0.99		%
Capitalization
Shareholders’ equity to total assets		10.35		%		10.44		%		10.32		%		10.43		%		10.45		%

* Core deposits are defined as total deposits less time deposits

Reconciliation of GAAP and Non-GAAP Financial Measures
		Three Months Ended June 30,								Six Months Ended June 30,
(Dollars in Thousands, Except Per Share Data)		2016				2015				2016				2015
GAAP net income		$	3,390			$	3,433			$	6,468			$	6,788
Less: net securities gains, net of tax		325				345				638				781
Non-GAAP operating earnings		$	3,065			$	3,088			$	5,830			$	6,007
		Three Months Ended June 30,								Six Months Ended June 30,
		2016				2015				2016				2015
Return on average assets (ROA)		1.00		%		1.07		%		0.97		%		1.07		%
Less: net securities gains, net of tax		0.09		%		0.11		%		0.10		%		0.13		%
Non-GAAP operating ROA		0.91		%		0.96		%		0.87		%		0.94		%
		Three Months Ended June 30,								Six Months Ended June 30,
		2016				2015				2016				2015
Return on average equity (ROE)		9.77		%		10.05		%		9.36		%		9.90		%
Less: net securities gains, net of tax		0.94		%		1.01		%		0.92		%		1.14		%
Non-GAAP operating ROE		8.83		%		9.04		%		8.44		%		8.76		%
		Three Months Ended June 30,								Six Months Ended June 30,
		2016				2015				2016				2015
Basic earnings per share (EPS)		$	0.72			$	0.72			$	1.37			$	1.42
Less: net securities gains, net of tax		0.07				0.07				0.14				0.17
Non-GAAP basic operating EPS		$	0.65			$	0.65			$	1.23			$	1.25
		Three Months Ended June 30,								Six Months Ended June 30,
		2016				2015				2016				2015
Dilutive EPS		$	0.72			$	0.72			$	1.37			$	1.42
Less: net securities gains, net of tax		0.07				0.07				0.14				0.17
Non-GAAP dilutive operating EPS		$	0.65			$	0.65			$	1.23			$	1.25