PWOD Penns Woods Bancorp Inc

Penns Woods Bancorp, Inc. (NASDAQ: PWOD)

Penns Woods Bancorp, Inc., supported by loan and deposit growth, achieved net income of $8.2 million for the six months ended June 30, 2019, resulting in basic and diluted earnings per share of $1.75.

Highlights

• Net income, as reported under GAAP, for the three and six months ended June 30, 2019 was $4.2 million and $8.2 million, compared to $3.5 million and  $6.7 million for the same periods of 2018.  Results for the three and six months ended June 30, 2019 compared to 2018 were impacted by an increase in after-tax securities gains of $6,000 (from a gain of $12,000 to a gain of $18,000) for the three month periods and $90,000 (from a loss of $20,000 to a gain of $70,000) for the six month periods.
• Basic and diluted earnings per share for the three and six months ended June 30, 2019 was $0.91 and $1.75, respectively, an increase in basic and diluted earnings per share of $0.17 and $0.32 as compared to the three and six months ended June 30, 2018.
• Return on average assets was 1.02% for the three months ended June 30, 2019, compared to 0.91% for the corresponding period of 2018. Return on average assets was 0.99% for the six months ended June 30, 2019, compared to 0.89% for the corresponding period of 2018.
• Return on average equity was 11.42% for the three months ended June 30, 2019, compared to 10.07% for the corresponding period of 2018. Return on average equity was 11.27% for the six months ended June 30, 2019, compared to 9.68% for the corresponding period of 2018.

Net Income

Net income from core operations (“core earnings”), which is a non-generally accepted accounting principles (GAAP) measure of net income excluding net securities gains or losses, was $4.2 million for the three months ended June 30, 2019 compared to $3.5 million for the same period of 2018. Core earnings increased to $8.2 million for the six months ended June 30, 2019, compared to $6.7 million for the same period of 2018. Core earnings per share for the three months ended June 30, 2019 was $0.90 basic and diluted, an increase from $0.74 basic and diluted core earnings per share for the same period of 2018. core earnings per share for the six months ended June 30, 2019 was $1.73 basic and diluted, compared to $1.43 basic and diluted for the same period of 2018. Core return on average assets and core return on average equity were 1.01% and 11.37% for the three months ended June 30, 2019, compared to 0.90% and 10.04% for the corresponding period of 2018.  Core return on average assets and core return on average equity were 0.98% and 11.18% for the six months ended June 30, 2019 compared to 0.89% and 9.71% for the corresponding period of 2018. A reconciliation of the non-GAAP financial measures of core earnings, core return on assets, core return on equity, and core earnings per share described in this press release to the comparable GAAP financial measures is included at the end of this press release.

Net Interest Margin

The net interest margin for the three and six months ended June 30, 2019 was 3.39% and 3.37%, compared to 3.32% and 3.31% for the corresponding periods of 2018. The increase in the net interest margin was driven by an increase in the yield on earning assets of 40 and 44 basis points ("bps") for the three and six month periods. The impact of the increase in yield on earning assets was limited by the increase in rate paid on interest-bearing liabilities of 42 bps and 45 bps for the three and six month periods. The increase in the yield on earning assets was driven by an increase in the loan portfolio yield in conjunction with an increase in the average loan portfolio of $83.4 million and $103.5 million, respectively. The loan growth for the three and six month periods was primarily funded by an increase in average total deposits of $119.2 million and $108.0 million, respectively.

Assets

Total assets increased $108.2 million to $1.7 billion at June 30, 2019 compared to June 30, 2018.  Net loans increased $47.2 million to $1.4 billion at June 30, 2019 compared to June 30, 2018, primarily due to campaigns related to increasing home equity product market share and indirect auto lending. The investment portfolio increased $24.4 million from June 30, 2018 to June 30, 2019 due to increases in the taxable municipal portfolio.

Non-performing Loans

The ratio of non-performing loans to total loans ratio increased to 1.12% at June 30, 2019 from 0.54% at June 30, 2018 as non-performing loans have increased to $15.4 million at June 30, 2019 from $7.1 million at June 30, 2018 primarily due to a commercial loan relationship that became non-performing during the fourth quarter of 2018. The majority of non-performing loans involve 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 $106,000 and $511,000 for the three and  six months ended June 30, 2019 minimally impacted the allowance for loan losses, which was 1.02% of total loans at June 30, 2019. The majority of the loans charged-off had a specific allowance within the allowance for loan losses.

Deposits

Deposits increased $136.1 million to $1.3 billion at June 30, 2019 compared to June 30, 2018.  Noninterest-bearing deposits increased $11.6 million to $322.8 million at June 30, 2019 compared to June 30, 2018.  Driving deposit growth is our commitment to easy-to-use products, community involvement, and emphasis on customer service.  Deposit gathering efforts have centered on core deposits as building customer relationships remains the focus.  The time deposit portfolio has increased as time deposits have been used as a customer attraction tool.  This has led to the average maturity of the time deposit portfolio being lengthened.

Shareholders’ Equity

Shareholders’ equity increased $12.4 million to $151.5 million at June 30, 2019 compared to June 30, 2018. The change in accumulated other comprehensive loss from $6.9 million at June 30, 2018 to $2.8 million at June 30, 2019 is a result of an increase in unrealized gains on available for sale securities (from an unrealized loss of $2.1 million at June 30, 2018 to an unrealized gain of $2.4 million at June 30, 2019). The amount of accumulated other comprehensive loss at June 30, 2019 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 an increase in the net loss of $349,000. The current level of shareholders’ equity equates to a book value per share of $32.30 at June 30, 2019 compared to $29.66 at June 30, 2018, and an equity to asset ratio of 8.85% at June 30, 2019 compared to 8.68% at June 30, 2018. Dividends declared for the six months ended June 30, 2019 and 2018 were $0.94 per share.

Penns Woods Bancorp, Inc. is the parent company of Jersey Shore State Bank, which operates seventeen branch offices providing financial services in Lycoming, Clinton, Centre, Montour, and Union Counties, and Luzerne Bank, which operates nine 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.  Insurance products are offered through United Insurance Solutions, LLC, a joint venture that is a subsidiary of the holding company.

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 these certain 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, 2018.

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, Chief Executive Officer
		110 Reynolds Street
		Williamsport, PA 17702
		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)		2019				2018				% Change
ASSETS:
Noninterest-bearing balances		$	21,102			$	26,134			(19.25	)%
Interest-bearing balances in other financial institutions		58,423				29,873				95.57	%
Total cash and cash equivalents		79,525				56,007				41.99	%
Investment debt securities, available for sale, at fair value		145,689				118,876				22.56	%
Investment equity securities, at fair value		1,841				2,438				(24.49	)%
Investment securities, trading		44				243				(81.89	)%
Restricted investment in bank stock, at fair value		15,087				16,716				(9.75	)%
Loans held for sale		2,880				2,118				35.98	%
Loans		1,379,285				1,331,073				3.62	%
Allowance for loan losses		(14,001		)		(13,034		)		7.42	%
Loans, net		1,365,284				1,318,039				3.58	%
Premises and equipment, net		33,573				27,385				22.60	%
Accrued interest receivable		5,708				4,618				23.60	%
Bank-owned life insurance		28,955				28,315				2.26	%
Goodwill		17,104				17,104				—	%
Intangibles		1,022				1,304				(21.63	)%
Operating lease right of use asset		4,239				—				n/a
Deferred tax asset		3,712				4,941				(24.87	)%
Other assets		6,837				5,169				32.27	%
TOTAL ASSETS		$	1,711,500			$	1,603,273			6.75	%
LIABILITIES:
Interest-bearing deposits		$	1,004,331			$	879,825			14.15	%
Noninterest-bearing deposits		322,755				311,194				3.72	%
Total deposits		1,327,086				1,191,019				11.42	%
Short-term borrowings		59,453				134,637				(55.84	)%
Long-term borrowings		154,597				123,970				24.71	%
Accrued interest payable		1,482				896				65.40	%
Operating lease liability		4,241				—				n/a
Other liabilities		13,100				13,616				(3.79	)%
TOTAL LIABILITIES		1,559,959				1,464,138				6.54	%
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; 5,012,898 and 5,010,535 shares issued; 4,692,748 and 4,690,385 outstanding		41,773				41,753				0.05	%
Additional paid-in capital		51,087				50,225				1.72	%
Retained earnings		73,565				66,181				11.16	%
Accumulated other comprehensive loss:
Net unrealized gain (loss) on available for sale securities		2,419				(2,057		)		217.60	%
Defined benefit plan		(5,202		)		(4,853		)		(7.19	)%
Treasury stock at cost, 320,150		(12,115		)		(12,115		)		—	%
TOTAL PENNS WOODS BANCORP, INC. SHAREHOLDERS' EQUITY		151,527				139,134				8.91	%
Non-controlling interest		14				1				1,300.00	%
TOTAL SHAREHOLDERS' EQUITY		151,541				139,135				8.92	%
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	1,711,500			$	1,603,273			6.75	%

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)		2019				2018				% Change			2019				2018				% Change
INTEREST AND DIVIDEND INCOME:
Loans including fees.		$	15,300			$	12,997			17.72	%		$	30,169			$	25,190			19.77	%
Investment securities:
Taxable		967				639				51.33	%		1,901				1,185				60.42	%
Tax-exempt		179				230				(22.17	)%		353				471				(25.05	)%
Dividend and other interest income		395				245				61.22	%		852				466				82.83	%
TOTAL INTEREST AND DIVIDEND INCOME		16,841				14,111				19.35	%		33,275				27,312				21.83	%
INTEREST EXPENSE:
Deposits		2,871				1,490				92.68	%		5,171				2,712				90.67	%
Short-term borrowings		178				252				(29.37	)%		783				476				64.50	%
Long-term borrowings		879				666				31.98	%		1,730				1,268				36.44	%
TOTAL INTEREST EXPENSE		3,928				2,408				63.12	%		7,684				4,456				72.44	%
NET INTEREST INCOME		12,913				11,703				10.34	%		25,591				22,856				11.97	%
PROVISION FOR LOAN LOSSES		315				335				(5.97	)%		675				495				36.36	%
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES		12,598				11,368				10.82	%		24,916				22,361				11.43	%
NON-INTEREST INCOME:
Service charges		592				592				—	%		1,154				1,143				0.96	%
Debt securities (losses) gains, available for sale		(2		)		14				(114.29	)%		11				5				120.00	%
Equity securities gains (losses)		22				6				266.67	%		65				(28		)		332.14	%
Securities gains (losses), trading		3				(5		)		160.00	%		13				(2		)		750.00	%
Bank-owned life insurance		123				158				(22.15	)%		291				331				(12.08	)%
Gain on sale of loans		347				400				(13.25	)%		663				655				1.22	%
Insurance commissions		119				64				85.94	%		253				181				39.78	%
Brokerage commissions		356				330				7.88	%		679				673				0.89	%
Debit card income		389				373				4.29	%		699				706				(0.99	)%
Other		520				430				20.93	%		895				779				14.89	%
TOTAL NON-INTEREST INCOME		2,469				2,362				4.53	%		4,723				4,443				6.30	%
NON-INTEREST EXPENSE:
Salaries and employee benefits		5,523				4,919				12.28	%		11,024				9,967				10.60	%
Occupancy		668				699				(4.43	)%		1,447				1,440				0.49	%
Furniture and equipment		784				801				(2.12	)%		1,536				1,548				(0.78	)%
Software amortization		188				231				(18.61	)%		395				296				33.45	%
Pennsylvania shares tax		285				278				2.52	%		578				555				4.14	%
Professional Fees		727				649				12.02	%		1,249				1,215				2.80	%
Federal Deposit Insurance Corporation deposit insurance		236				200				18.00	%		504				402				25.37	%
Marketing		33				268				(87.69	)%		135				519				(73.99	)%
Intangible amortization		69				78				(11.54	)%		140				158				(11.39	)%
Other		1,546				1,394				10.90	%		2,865				2,694				6.35	%
TOTAL NON-INTEREST EXPENSE		10,059				9,517				5.70	%		19,873				18,794				5.74	%
INCOME BEFORE INCOME TAX PROVISION		5,008				4,213				18.87	%		9,766				8,010				21.92	%
INCOME TAX PROVISION		759				733				3.55	%		1,571				1,322				18.84	%
NET INCOME		$	4,249			$	3,480			22.10	%		$	8,195			$	6,688			22.53	%
Earnings attributable to noncontrolling interest		4				—				n/a			6				(1		)		700.00	%
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS'		$	4,245			$	3,480			21.98	%		$	8,189			$	6,689			22.42	%
EARNINGS PER SHARE - BASIC		$	0.91			$	0.74			22.97	%		$	1.75			$	1.43			22.38	%
EARNINGS PER SHARE - DILUTED		$	0.91			$	0.74			22.97	%		$	1.75			$	1.43			22.38	%
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC		4,692,335				4,689,932				0.05	%		4,692,045				4,689,656				0.05	%
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED		4,692,335				4,703,339				(0.23	)%		4,692,045				4,689,656				0.05	%
DIVIDENDS DECLARED PER SHARE		$	0.47			$	0.47			—	%		$	0.47			$	0.47			—	%

		Three Months Ended
		June 30, 2019											June 30, 2018
(Dollars in Thousands)		AverageBalance				Interest				AverageRate			AverageBalance				Interest				AverageRate
ASSETS:
Tax-exempt loans		$	71,193			$	548			3.09	%		$	75,859			$	563			2.98	%
All other loans		1,313,388				14,867				4.54	%		1,225,343				12,552				4.11	%
Total loans		1,384,581				15,415				4.47	%		1,301,202				13,115				4.04	%
Taxable securities		130,802				1,300				4.03	%		93,024				871				3.75	%
Tax-exempt securities		27,971				227				3.29	%		40,300				291				2.89	%
Total securities		158,773				1,527				3.90	%		133,324				1,162				3.49	%
Interest-bearing deposits		10,431				62				2.38	%		3,034				13				1.72	%
Total interest-earning assets		1,553,785				17,004				4.39	%		1,437,560				14,290				3.99	%
Other assets		113,443											97,034
TOTAL ASSETS		$	1,667,228										$	1,534,594
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Savings		$	170,142			51				0.12	%		$	165,231			16				0.04	%
Super Now deposits		246,454				453				0.74	%		234,731				242				0.41	%
Money market deposits		249,169				596				0.96	%		243,771				290				0.48	%
Time deposits		335,721				1,771				2.12	%		253,398				942				1.49	%
Total interest-bearing deposits		1,001,486				2,871				1.15	%		897,131				1,490				0.67	%
Short-term borrowings		32,086				178				2.23	%		56,530				252				1.76	%
Long-term borrowings		147,571				879				2.24	%		123,970				666				2.12	%
Total borrowings		179,657				1,057				2.23	%		180,500				918				2.01	%
Total interest-bearing liabilities		1,181,143				3,928				1.31	%		1,077,631				2,408				0.89	%
Demand deposits		317,623											302,742
Other liabilities		19,747											16,024
Shareholders’ equity		148,715											138,197
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	1,667,228										$	1,534,594
Interest rate spread										3.08	%										3.10	%
Net interest income/margin						$	13,076			3.39	%						$	11,882			3.32	%

		Three Months Ended June 30,
		2019				2018
Total interest income		$	16,841			$	14,111
Total interest expense		3,928				2,408
Net interest income		12,913				11,703
Tax equivalent adjustment		163				179
Net interest income (fully taxable equivalent)		$	13,076			$	11,882

PENNS WOODS BANCORP, INC.AVERAGE BALANCES AND INTEREST RATES

		Six Months Ended
		June 30, 2019											June 30, 2018
(Dollars in Thousands)		AverageBalance				Interest				AverageRate			AverageBalance				Interest				AverageRate
ASSETS:
Tax-exempt loans		$	71,874			$	1,087			3.05	%		$	75,548			$	1,130			3.02	%
All other loans		1,313,121				29,310				4.50	%		1,205,945				24,297				4.06	%
Total loans		1,384,995				30,397				4.43	%		1,281,493				25,427				4.00	%
Taxable securities		128,431				2,650				4.18	%		88,670				1,630				3.68	%
Tax-exempt securities		27,344				447				3.31	%		41,225				596				2.89	%
Total securities		155,775				3,097				4.03	%		129,895				2,226				3.43	%
Interest-bearing deposits		8,493				103				2.45	%		2,603				21				1.63	%
Total interest-earning assets		1,549,263				33,597				4.38	%		1,413,991				27,674				3.94	%
Other assets		112,806											97,318
TOTAL ASSETS		$	1,662,069										$	1,511,309
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Savings		$	168,543			81				0.10	%		$	164,140			32				0.04	%
Super Now deposits		239,022				832				0.70	%		230,930				449				0.39	%
Money market deposits		245,307				1,068				0.88	%		240,127				500				0.42	%
Time deposits		317,782				3,190				2.02	%		244,805				1,731				1.43	%
Total interest-bearing deposits		970,654				5,171				1.07	%		880,002				2,712				0.62	%
Short-term borrowings		63,881				783				2.47	%		59,152				476				1.60	%
Long-term borrowings		145,890				1,730				2.24	%		119,274				1,268				2.11	%
Total borrowings		209,771				2,513				2.31	%		178,426				1,744				1.94	%
Total interest-bearing liabilities		1,180,425				7,684				1.29	%		1,058,428				4,456				0.84	%
Demand deposits		315,380											298,011
Other liabilities		20,953											16,645
Shareholders’ equity		145,311											138,225
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY		$	1,662,069										$	1,511,309
Interest rate spread										3.09	%										3.00	%
Net interest income/margin						$	25,913			3.37	%						$	23,218			3.31	%

		Six Months Ended June 30,
		2019				2018
Total interest income		$	33,275			$	27,312
Total interest expense		7,684				4,456
Net interest income		25,591				22,856
Tax equivalent adjustment		322				362
Net interest income (fully taxable equivalent)		$	25,913			$	23,218

(Dollars in Thousands, Except Per Share Data)		Quarter Ended
		6/30/2019				3/31/2019				12/31/2018				9/30/2018				6/30/2018
Operating Data
Net income		$	4,245			$	3,944			$	4,189			$	3,826			$	3,480
Net interest income		12,913				12,678				12,699				12,255				11,703
Provision for loan losses		315				360				760				480				335
Net security gains (losses)		23				66				(165		)		(24		)		15
Non-interest income, ex. net security gains (losses)		2,446				2,188				2,594				2,613				2,347
Non-interest expense		10,059				9,814				9,532				9,681				9,517
Performance Statistics
Net interest margin		3.39		%		3.37		%		3.33		%		3.30		%		3.32		%
Annualized return on average assets		1.02		%		0.95		%		1.02		%		0.96		%		0.91		%
Annualized return on average equity		11.42		%		10.93		%		11.77		%		10.94		%		10.07		%
Annualized net loan charge-offs to average loans		0.03		%		0.12		%		0.08		%		0.05		%		0.04		%
Net charge-offs		106				405				266				171				137
Efficiency ratio		65.0		%		65.5		%		61.9		%		64.6		%		67.2		%
Per Share Data
Basic earnings per share		$	0.91			$	0.84			$	0.89			$	0.82			$	0.74
Diluted earnings per share		0.91				0.84				0.89				0.82				0.74
Dividend declared per share		0.47				0.47				0.47				0.47				0.47
Book value		32.30				31.33				30.59				29.96				29.66
Common stock price:
High		45.25				44.50				44.18				46.27				46.92
Low		39.04				34.84				38.66				43.22				41.29
Close		45.25				41.10				40.24				43.45				44.78
Weighted average common shares:
Basic		4,692				4,692				4,691				4,691				4,690
Fully Diluted		4,692				4,692				4,691				4,691				4,703
End-of-period common shares:
Issued		5,012				5,012				5,012				5,011				5,011
Treasury		320				320				320				320				320

(Dollars in Thousands, Except Per Share Data)		Quarter Ended
		6/30/2019				3/31/2019				12/31/2018				9/30/2018				6/30/2018
Financial Condition Data:
General
Total assets		$	1,711,500			$	1,704,708			$	1,684,771			$	1,670,348			$	1,603,273
Loans, net		1,365,284				1,370,678				1,370,920				1,355,762				1,318,039
Goodwill		17,104				17,104				17,104				17,104				17,104
Intangibles		1,022				1,091				1,162				1,233				1,304
Total deposits		1,327,086				1,309,061				1,219,903				1,210,477				1,191,019
Noninterest-bearing		322,755				321,657				320,814				313,111				311,194
Savings		171,992				170,005				166,063				164,449				166,183
NOW		238,410				253,475				207,819				223,963				216,109
Money Market		238,352				244,753				238,596				238,131				245,081
Time Deposits		355,577				319,171				286,611				270,823				252,452
Total interest-bearing deposits		1,004,331				987,404				899,089				897,366				879,825
Core deposits*		971,509				989,890				933,292				939,654				938,567
Shareholders’ equity		151,527				147,026				143,536				140,538				139,134
Asset Quality
Non-performing loans		$	15,386			$	15,794			$	16,572			$	8,739			$	7,132
Non-performing loans to total assets		0.90		%		0.93		%		0.98		%		0.52		%		0.44		%
Allowance for loan losses		14,001				13,792				13,837				13,343				13,034
Allowance for loan losses to total loans		1.02		%		1.00		%		1.00		%		0.97		%		0.98		%
Allowance for loan losses to non-performing loans		91.00		%		87.32		%		83.50		%		152.68		%		182.75		%
Non-performing loans to total loans		1.12		%		1.14		%		1.20		%		0.64		%		0.54		%
Capitalization
Shareholders’ equity to total assets		8.85		%		8.62		%		8.52		%		8.41		%		8.68		%

* 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)		2019				2018				2019				2018
GAAP net income		$	4,245			$	3,480			$	8,189			$	6,689
Less: net securities gains (losses), net of tax		18				12				70				(20		)
Non-GAAP core earnings		$	4,227			$	3,468			$	8,119			$	6,709
		Three Months Ended June 30,								Six Months Ended June 30,
		2019				2018				2019				2018
Return on average assets (ROA)		1.02		%		0.91		%		0.99		%		0.89		%
Less: net securities gains (losses), net of tax		0.01		%		0.01		%		0.01		%		—		%
Non-GAAP core ROA		1.01		%		0.90		%		0.98		%		0.89		%
		Three Months Ended June 30,								Six Months Ended June 30,
		2019				2018				2019				2018
Return on average equity (ROE)		11.42		%		10.07		%		11.27		%		9.68		%
Less: net securities gains (losses), net of tax		0.05		%		0.03		%		0.09		%		(0.03		)%
Non-GAAP core ROE		11.37		%		10.04		%		11.18		%		9.71		%
		Three Months Ended June 30,								Six Months Ended June 30,
		2019				2018				2019				2018
Basic earnings per share (EPS)		$	0.91			$	0.74			$	1.75			$	1.43
Less: net securities gains (losses), net of tax		0.01				—				0.02				—
Non-GAAP basic core EPS		$	0.90			$	0.74			$	1.73			$	1.43
		Three Months Ended June 30,								Six Months Ended June 30,
		2019				2018				2019				2018
Diluted EPS		$	0.91			$	0.74			$	1.75			$	1.43
Less: net securities gains (losses), net of tax		0.01				—				0.02				—
Non-GAAP diluted core EPS		$	0.90			$	0.74			$	1.73			$	1.43