EXHIBIT 99.1 - PRESS RELEASE	FOR IMMEDIATE RELEASE
First South Bancorp, Inc.	For more information contact:
January 26, 2017	Bruce Elder (CEO)	(252) 940-4936
	Scott McLean (CFO)	(252) 940-5016
	Website: www.firstsouthnc.com

 

First South Bancorp, Inc. Reports Increased December 31, 2016 Quarterly

and Year-End Operating Results

 

Washington, North Carolina - First South Bancorp, Inc. (NASDAQ: FSBK) (the “Company”), the parent holding company of First South Bank (the “Bank”), reports its unaudited financial results for the quarter and year ended December 31, 2016.

 

The Company’s diluted earnings per common share (EPS) for the fourth quarter of 2016 increased 31.3% to $0.21 per share from $0.16 per share for the fourth quarter of 2015. Diluted EPS for the full fiscal year of 2016 increased 49.0% to $0.73 per common share from $0.49 per common share for fiscal year 2015. The Company continues to generate solid core revenue and net interest income from strong loan and deposit growth, while maintaining excellent credit quality and enhancing its capital position.

 

The Company’s net income increased to $2.0 million, or 27.2%, in the fourth quarter of 2016 from, $1.6 million for the fourth quarter of 2015. Net income for fiscal year 2016 increased to $7.0 million, or 48.6%, from $4.7 million for fiscal year 2015.

 

“The Company continues to deliver quality core financial results, showcasing the execution of our strategic plan and our ability to consistently generate earnings through sustainable revenue growth in commercial, consumer and mortgage banking services,” Chief Executive Officer Bruce Elder said. “We are also pleased that the depth of new and existing customer relationships has resulted in robust deposit growth, which continues to support very healthy loan growth. Our capital levels and capital creation through retained earnings supports continued organic balance sheet growth.”

 

FOURTH QUARTER 2016 HIGHLIGHTS

·

Strong earnings performance with net income of $2.0 million, diluted EPS of $0.21 per share, return on average assets (ROA) of 0.80%, return on average equity (ROE) of 8.94% and return on average tangible common equity (ROTCE) (a non-GAAP measure) of 9.82%.

·

Loans and leases held for investment (HFI) grew $18.2 million during the quarter, to $700.6 million, representing an annualized growth rate of 10.7%.

·

Deposits grew $10.8 million during the quarter to $870.6 million, or an annualized growth rate of 5.0%.

 

FISCAL YEAR 2016 HIGHLIGHTS

·

Strong earnings performance with net income of $7.0 million, diluted EPS of $0.73 per share, ROA of 0.72%, ROE of 8.02% and ROTCE of 8.86%.

·

Strategic execution as evidenced by highest annual diluted EPS since 2008.

·

Grew total assets $44.4 million, or 4.7%, during 2016.

·

Continued to maintain a strong capital position.

·

Loans and leases HFI grew $93.6 million or 15.4% during 2016.

·

Total deposits grew $59.3 million, or 7.3%, during 2016.

·

Total non-interest bearing deposits grew 16.1% to $196.9 million.

·

Net interest income grew by $3.21 million, or 10.9%, to $32.6 million.

·

Net interest margin increased to 3.71% for fiscal year 2016.

·

Non-interest income was $14.2, million which represents 30.3% of total revenues.

·

Non-performing assets to total assets declined to 0.63% from 1.00% at the previous year-end.

·

Completed the purchase of mortgage servicing rights for 452 high-quality Freddie Mac and Fannie Mae loans with an unpaid principal balance of $84.6 million at settlement.

·

Increased quarterly dividend payment rate to $0.03 per share, a 20% increase.

·

Expanded Small Business Administration loan sales and servicing.

·

Consolidated three branches into nearby locations with the goal of positively impacting efficiency.

 

 

Important disclosures about and reconciliations of non-GAAP measures, including ROTCE, to the corresponding GAAP measures, are provided below and attached to this press release.

 

The Company’s strong loan and deposit growth continues to support revenue increases, allowing for net interest margin expansion despite the prevailing low interest rate environment. As a result, our net interest income (NII) grew to $8.4 million in the fourth quarter of 2016, from $7.7 million in the comparative 2015 fourth quarter. NII for fiscal year 2016 grew to $32.6 million, increasing 10.9% from the $29.4 million of NII generated for fiscal year 2015.

 

Total non-interest income was $3.4 million, or 28.6% of total revenue (net interest income plus noninterest income) in the fourth quarter of 2016, compared to $3.7 million, or 32.6%, in the comparative 2015 fourth quarter. Total non-interest income for fiscal year 2016 was $14.2 million, or 30.3% of total revenue, compared to $14.3 million, or 32.7% for fiscal year 2015. The decline in non-interest income is attributable to a decline in non-core gains on sales of investment securities. The Bank had no gains from investment securities sales for the 2016 fourth quarter, compared to $463,000 for the prior year quarter. Gains realized from the sale of investment securities for fiscal years 2016 and 2015 were $467,000 and $1.4 million, respectively. We have sold investment securities primarily to fund the growth in our loan and leases HFI.

 

The Company’s efficiency ratio for the fourth quarter of 2016 improved to 74.16%, from 81.41% in the comparative fourth quarter of 2015. The efficiency ratio for fiscal year 2016 improved to 76.51%, from 84.53% for fiscal year 2015. Non-interest expenses in the fourth quarter of 2016 declined to $8.8 million, from $9.1 million in the comparative fourth quarter of 2015. Total non-interest expenses for fiscal year 2016 declined to $35.9 million, from $36.4 million for fiscal year 2015.

 

Income tax expense was $775,000 for the 2016 fourth quarter, compared to $484,000 for the 2015 fourth quarter. The effective income tax rates were 28.00% and 23.60% for these reporting periods, respectively. For fiscal year 2016, income tax expense was $3.0 million versus $1.8 million for fiscal year 2015. The effective income tax rates were 29.84% and 28.18% for fiscal years 2016 and 2015, respectively.

 

BALANCE SHEET GROWTH

Loans and leases HFI totaled $700.6 million at December 31, 2016, increasing $93.6 million, or 15.4%, over the $607.0 million held at December 31, 2015. Loans held for sale totaled $5.1 million at December 31, 2016, growing 29.3% from the $3.9 million held at the end of fiscal year 2015. Investment securities and interest-bearing deposits at other banks declined to $216.4 million at December 31, 2016, compared to $267.4 million at year end 2015, resulting primarily from sales of investment securities to fund growth in our loans and leases HFI portfolio.

 

Deposits totaled $870.6 million at December 31, 2016, increasing $59.3 million, or 7.3%, from $811.3 million at December 31, 2015. Non-maturity deposits (personal and business checking, money market, and savings accounts) grew by $62.8 million, or 11.4%, to $614.1 million at December 31, 2016, from $551.3 million at December 31, 2015. Certificates of deposit (CDs) declined to $256.6 million at December 31, 2016, from $260.0 million at December 31, 2015. CDs represented 29.5% and 32.1% of total deposits at December 31, 2016, and December 31, 2015, respectively.

 

ASSET QUALITY

Solid asset quality metrics in the fourth quarter of 2016 continue to reflect the Company’s disciplined credit culture.

 

Non-performing assets (NPAs) declined to $6.3 million at December 31, 2016, or 0.63% of total assets, from $9.4 million, or 1.00% of total assets, at December 31, 2015. NPAs at December 31, 2016 included $3.2 million of other real estate owned (OREO), which declined by $2.9 million, or 47.3%, from $6.1 million at December 31, 2015. Nonaccrual loans and leases were $3.1 million at December 31, 2016, or 0.44% of loans and leases HFI, compared to $3.2 million, or 0.53%, at December 31, 2015.

 

 

The provision for credit losses in the 2016 fourth quarter declined to $200,000, from $325,000 for the 2015 fourth quarter. The provision for credit losses increased to $970,000 in fiscal year 2016, from $800,000 in fiscal year 2015. The allowance for loan losses represented 1.24% of loans and leases HFI at December 31, 2016, compared to 1.30% at December 31, 2015.

 

REGULATORY CAPITAL STRENGTH

As of December 31, 2016, reported regulatory capital ratios at the Bank were 13.01% for total risk-based capital, 11.80% for tier 1 risk-based capital, 11.80% for common equity tier 1 risk-based capital and 8.89% for tier 1 leverage, compared to 13.29% for total risk-based capital, 12.06% for tier 1 risk-based capital, 12.06% for common equity tier 1 risk-based capital and 8.67% for tier 1 leverage at December 31, 2015.

 

CORPORATE AND INVESTOR INFORMATION

First South Bank has been serving the citizens of eastern and central North Carolina since 1902 and offers a variety of financial products and services to business and individual customers. The Bank operates through its main office headquartered in Washington, North Carolina, and has 30 full-service branch offices located throughout eastern and central North Carolina.

 

The Bank also provides a full menu of leasing services through its wholly-owned subsidiary, First South Leasing, LLC. In addition, under its First South Wealth Management division, the Bank makes securities brokerage services available through an affiliation with an independent broker/dealer.

 

Additional investor information for the Company and the Bank may be accessed on our website at www.firstsouthnc.com.

 

The Company’s common stock symbol as traded on the NASDAQ Global Select Market is “FSBK”.

 

FORWARD-LOOKING STATEMENTS

Statements contained in this release, which are not historical facts, are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated due to a number of factors which include the effects of future economic conditions, governmental fiscal and monetary policies, legislative and regulatory changes, the risks of changes in interest rates, the effects of competition, and including without limitation to other factors that could cause actual results to differ materially as discussed in documents filed by the Company with the Securities and Exchange Commission from time to time. The Company assumes no obligation and does not intend to update these forward-looking statements, except as required by law.

 

NON-GAAP FINANCIAL MEASURES

This press release and the Supplemental Financial Data contain financial information determined by methods other than in accordance with generally accepted accounting principles (GAAP) in the United States. Management uses these "non-GAAP" measures in their analysis of the Company's performance. Management believes that these non-GAAP financial measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods as well as demonstrating the effects of significant gains and charges. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies. Reconciliations of non-GAAP disclosures are provided within the accompanying tables to this press release.

 

(More)

(NASDAQ: FSBK)

 

 

First South Bancorp, Inc. and Subsidiary

Consolidated Statements of Financial Condition

 

		December 31,				December 31,
		2016				2015
		(unaudited)				(*)
Assets
Cash and due from banks		$	22,854,712			$	19,425,747
Interest-bearing deposits with banks			23,320,968				18,565,521
Investment securities available for sale, at fair value			192,606,119				248,294,725
Investment securities held to maturity			509,617				508,456
Mortgage loans held for sale			5,098,518				3,943,798
Loans and leases held for investment			700,642,291				607,014,247
Allowance for loan and lease losses			(8,673,172	)			(7,866,523	)
Net loans and leases held for investment			691,969,119				599,147,724
Premises and equipment, net			11,291,596				13,664,937
Assets held for sale			192,720				-
Other real estate owned			3,229,423				6,125,054
Federal Home Loan Bank stock, at cost			1,573,700				2,369,300
Accrued interest receivable			3,525,684				2,874,506
Goodwill			4,218,576				4,218,576
Mortgage servicing rights			2,148,905				1,265,589
Identifiable intangible assets			1,611,187				1,895,514
Bank-owned life insurance			18,080,183				15,635,140
Prepaid expenses and other assets			8,470,887				8,348,385
Total assets		$	990,701,914			$	946,282,972
Liabilities and Stockholders' Equity
Deposits:
Non-interest bearing demand		$	196,917,165			$	169,545,849
Interest bearing demand			272,098,903				246,376,521
Savings			145,031,981				135,369,668
Large denomination certificates of deposit			122,819,510				116,299,196
Other time			133,732,804				143,730,993
Total deposits			870,600,363				811,322,227
Borrowed money			17,000,000				37,000,000
Junior subordinated debentures			10,310,000				10,310,000
Other liabilities			5,607,832				5,479,971
Total liabilities			903,518,195				864,112,198
Common stock, $.01 par value, 25,000,000 shares authorized; 9,494,935 and 9,489,222 shares outstanding, respectively			94,949				94,892
Additional paid-in capital			36,018,743				35,936,911
Retained earnings			49,560,595				43,691,073
Accumulated other comprehensive income			1,509,432				2,447,898
Total stockholders' equity			87,183,719				82,170,774
Total liabilities and stockholders' equity		$	990,701,914			$	946,282,972

 

(*) Derived from audited consolidated financial statements

 

  

First South Bancorp, Inc. and Subsidiary

Consolidated Statements of Operations

 

		Three Months Ended								Year Ended
		December 31,								December 31,
		2016				2015				2016				2015
		(unaudited)				(unaudited)				(unaudited)				(*)
Interest income:
Interest and fees on loans		$	7,999,279			$	7,005,095			$	30,748,105			$	25,839,566
Interest on investments and deposits			1,336,777				1,563,857				5,468,110				6,611,037
Total interest income			9,336,056				8,568,952				36,216,215				32,450,603
Interest expense:
Interest on deposits			734,276				637,680				2,829,085				2,367,750
Interest on borrowings			59,852				63,272				247,536				124,865
Interest on junior subordinated notes			125,631				140,039				534,258				561,694
Total interest expense			919,759				840,991				3,610,879				3,054,309
Net interest income			8,416,297				7,727,961				32,605,336				29,396,294
Provision for credit losses			200,000				325,000				970,000				800,000
Net interest income after provision for credit losses			8,216,297				7,402,961				31,635,336				28,596,294
Non-interest income:
Deposit fees and service charges			1,841,351				2,004,933				7,587,686				8,072,893
Loan fees and charges			102,765				89,286				370,977				268,482
Mortgage loan servicing fees			386,283				283,070				1,237,054				1,090,196
Gain on sale and other fees on mortgage loans			537,507				536,536				2,332,524				2,022,813
Gain on sale of other real estate, net			80,548				30,537				131,481				40,351
Gain on sale of investment securities			0				463,203				467,470				1,417,716
Other income			423,886				328,129				2,060,312				1,385,524
Total non-interest income			3,372,340				3,735,694				14,187,504				14,297,975
Non-interest expense:
Compensation and fringe benefits			4,863,584				4,902,583				19,819,368				19,377,688
Federal deposit insurance premiums			152,523				164,324				631,799				609,406
Premises and equipment			1,363,551				1,355,384				5,467,277				5,331,960
Marketing			133,700				221,831				702,257				820,308
Data processing			786,096				778,070				3,089,513				3,583,170
Amortization of intangible assets			168,920				128,447				570,902				515,044
Other real estate owned expense			127,521				168,849				553,143				631,675
Other			1,223,301				1,367,195				5,066,180				5,504,476
Total non-interest expense			8,819,196				9,086,683				35,900,439				36,373,727
Income before income tax expense			2,769,441				2,051,972				9,922,401				6,520,542
Income tax expense			775,298				484,346				2,961,139				1,837,329
NET INCOME		$	1,994,143			$	1,567,626			$	6,961,262			$	4,683,213
Per share data:
Basic earnings per share		$	0.21			$	0.17			$	0.73			$	0.49
Diluted earnings per share		$	0.21			$	0.16			$	0.73			$	0.49
Dividends per share		$	0.030			$	0.025			$	0.115			$	0.10
Average basic shares outstanding			9,494,935				9,489,222				9,493,700				9,521,392
Average diluted shares outstanding			9,529,753				9,513,916				9,522,765				9,542,401

 

(*) Derived from audited consolidated financial statements

 

 

First South Bancorp, Inc.

Supplemental Financial Data (Unaudited)

 

		Quarter to Date																				Year to Date
		12/31/2016				9/30/2016				6/30/2016				3/31/2016				12/31/2015				12/31/2016				12/31/2015
		(dollars in thousands except per share data)
Consolidated balance sheet data:
Total assets		$	990,702			$	985,795			$	961,479			$	940,108			$	946,283			$	990,702			$	946,283
Loans held for sale:		$	5,099			$	7,313			$	5,252			$	2,490			$	3,944			$	5,099			$	3,944
Loans and leases held for investment (HFI):
Mortgage		$	74,905			$	74,710			$	73,100			$	73,412			$	71,866			$	74,905			$	71,866
Commercial			535,047				518,265				510,678				482,779				454,877				535,047				454,877
Consumer			69,454				69,039				66,138				64,521				63,036				69,454				63,036
Leases			21,236				20,452				18,927				18,333				17,235				21,236				17,235
Total loans and leases HFI			700,642				682,466				668,843				639,045				607,014				700,642				607,014
Allowance for loan and lease losses			(8,673	)			(8,498	)			(8,338	)			(8,135	)			(7,867	)			(8,673	)			(7,867	)
Net loans and leases HFI		$	691,969			$	673,968			$	660,505			$	630,910			$	599,147			$	691,969			$	599,147
Cash & interest bearing deposits		$	46,176			$	57,209			$	40,734			$	36,115			$	37,991			$	46,176			$	37,991
Investment securities			193,116				193,765				200,364				213,520				248,803				193,116				248,803
Bank-owned life insurance			18,080				17,937				17,795				17,653				15,635				18,080				15,635
Premises and equipment			11,292				11,609				11,671				12,144				13,665				11,292				13,665
Goodwill			4,219				4,219				4,219				4,219				4,219				4,219				4,219
Mortgage servicing rights			2,149				2,091				1,273				1,247				1,266				2,149				1,266
Identifiable intangible assets			1,611				1,682				1,753				1,824				1,896				1,611				1,896
Deposits:
Non-interest checking		$	196,917			$	189,873			$	177,281			$	164,244			$	169,546			$	196,917			$	169,546
Interest checking			189,401				176,034				170,153				171,323				173,934				189,401				173,934
Money market			82,698				88,081				72,054				73,000				72,442				82,698				72,442
Savings			145,032				141,701				142,151				146,255				135,370				145,032				135,370
Certificates			256,552				264,142				263,823				263,845				260,030				256,552				260,030
Total deposits		$	870,600			$	859,831			$	825,462			$	818,667			$	811,322			$	870,600			$	811,322
Borrowings		$	17,000			$	20,000			$	32,500			$	21,500			$	37,000			$	17,000			$	37,000
Junior subordinated debentures			10,310				10,310				10,310				10,310				10,310				10,310				10,310
Stockholders' equity			87,184				88,294				87,327				84,179				82,171				87,184				82,171
Consolidated earnings summary:
Interest income		$	9,336			$	9,210			$	8,998			$	8,672			$	8,569			$	36,216			$	32,450
Interest expense			920				911				898				882				841				3,611				3,054
Net interest income			8,416				8,299				8,100				7,790				7,728				32,605				29,396
Provision for credit losses			200				220				325				225				325				970				800
Noninterest income			3,372				3,691				3,548				3,576				3,736				14,187				14,298
Noninterest expense			8,819				8,929				9,046				9,106				9,087				35,900				36,374
Income before taxes			2,769				2,841				2,277				2,035				2,052				9,922				6,520
Income tax expense			775				947				665				574				484				2,961				1,837
Net income		$	1,994			$	1,894			$	1,612			$	1,461			$	1,568			$	6,961			$	4,683
Per Share Data:
Basic earnings per share		$	0.21			$	0.20			$	0.17			$	0.15			$	0.17			$	0.73			$	0.49
Diluted earnings per share		$	0.21			$	0.20			$	0.17			$	0.15			$	0.16			$	0.73			$	0.49
Dividends per share		$	0.03			$	0.03			$	0.03			$	0.025			$	0.025			$	0.115			$	0.10
Book value per share		$	9.18			$	9.30			$	9.20			$	8.87			$	8.66			$	9.18			$	8.66
Shares outstanding			9,494,935				9,494,935				9,493,776				9,493,776				9,489,222				9,494,935				9,489,222
Average basic shares			9,494,935				9,494,861				9,493,776				9,491,201				9,489,222				9,493,700				9,521,392
Average diluted shares			9,529,753				9,525,302				9,519,565				9,514,797				9,513,916				9,522,765				9,542,401
Performance ratios (tax equivalent):
Yield on average earning assets			4.07	%			4.13	%			4.17	%			4.07	%			4.03	%			4.11	%			4.01	%
Cost of interest bearing liabilities			0.52	%			0.52	%			0.52	%			0.52	%			0.49	%			0.52	%			0.47	%
Net interest spread			3.55	%			3.61	%			3.64	%			3.55	%			3.54	%			3.59	%			3.54	%
Net interest margin			3.68	%			3.73	%			3.76	%			3.66	%			3.64	%			3.71	%			3.64	%
Average earning assets to total average assets			92.92	%			92.42	%			92.38	%			92.20	%			92.19	%			92.49	%			91.63	%
Return on average assets (annualized)			0.80	%			0.78	%			0.68	%			0.63	%			0.67	%			0.72	%			0.52	%
Return on average equity (annualized)			8.94	%			8.52	%			7.55	%			6.97	%			7.52	%			8.02	%			5.72	%
Efficiency ratio			74.16	%			73.84	%			77.59	%			80.74	%			81.41	%			76.51	%			84.53	%
Average assets		$	992,192			$	968,729			$	947,761			$	938,702			$	930,978			$	961,856			$	897,795
Average earning assets		$	921,984			$	895,290			$	875,529			$	865,463			$	858,243			$	889,574			$	822,641
Average equity		$	88,694			$	88,481			$	85,927			$	84,265			$	82,712			$	86,844			$	81,893
Equity/Assets			8.80	%			8.96	%			9.08	%			8.95	%			8.68	%			8.80	%			8.68	%

 

 

First South Bancorp, Inc.

Supplemental Financial Data (Unaudited)

 

		Quarter to Date																				Year to Date
		12/31/2016				9/30/2016				6/30/2016				3/31/2016				12/31/2015				12/31/2016				12/31/2015
		(dollars in thousands except per share data)
Asset quality data and ratios:
Nonaccrual loans and leases:
Non-TDR nonaccrual loans and leases
Earning		$	410			$	569			$	555			$	945			$	985			$	410			$	985
Non-Earning			1,257				1,289				1,075				895				710				1,257				710
Total Non-TDR nonaccrual loans and leases		$	1,667			$	1,858			$	1,630			$	1,840			$	1,695			$	1,667			$	1,695
TDR nonaccrual loans and leases
Current TDRs		$	422			$	792			$	706			$	847			$	1,343			$	422			$	1,343
Past Due TDRs			962				248				250				154				159				962				159
Total TDR nonaccrual loans and leases		$	1,384			$	1,040			$	956			$	1,001			$	1,502			$	1,384			$	1,502
Total nonaccrual loans and leases		$	3,051			$	2,898			$	2,586			$	2,841			$	3,197			$	3,051			$	3,197
Loans and leases >90 days past due, still accruing			0				0				218				153				115				0				115
Other real estate owned			3,229				4,810				5,541				5,956				6,125				3,229				6,125
Total nonperforming assets		$	6,280			$	7,708			$	8,345			$	8,950			$	9,437			$	6,280			$	9,437
Allowance for loan and lease losses to loans and leases HFI			1.24	%			1.25	%			1.25	%			1.27	%			1.30	%			1.24	%			1.30	%
Net charge-offs (recoveries)		$	25			$	60			$	122			$	(44	)		$	28			$	163			$	425
Net charge-offs (recoveries) to total loans and leases			0.00	%			0.01	%			0.02	%			-0.01	%			0.00	%			0.02	%			0.07	%
Total nonaccrual loans and leases to total loans and leases HFI			0.44	%			0.42	%			0.39	%			0.44	%			0.53	%			0.44	%			0.53	%
Total nonperforming assets to total assets			0.63	%			0.78	%			0.87	%			0.95	%			1.00	%			0.63	%			1.00	%
Total loans and leases to total deposits			81.06	%			80.22	%			81.66	%			78.36	%			75.30	%			81.06	%			75.30	%
Total loans and leases to total assets			71.24	%			69.97	%			70.11	%			68.24	%			64.56	%			71.24	%			64.56	%
Loans serviced for others		$	371,956			$	370,606			$	292,222			$	293,548			$	297,494			$	371,956			$	297,494
Reconciliation of Non-GAAP Measures:
Pre-tax pre-provision operating earnings (non-GAAP):
Income before taxes (GAAP)		$	2,769			$	2,841			$	2,277			$	2,035			$	2,052			$	9,922			$	6,520
Provision for credit losses			200				220				325				225				325				970				800
Pre-tax pre-provision net income			2,969				3,061				2,602				2,260				2,377				10,892				7,320
Securities (gains) losses, net			0				0				(184	)			(284	)			(463	)			(467	)			(1,418	)
OREO valuations			140				0				103				7				100				250				195
OREO (gains) losses, (net)			(80	)			(77	)			14				12				(30	)			(131	)			(40	)
Pre-tax pre-provision operating earnings (non-GAAP)		$	3,029			$	2,984			$	2,535			$	1,995			$	1,984			$	10,544			$	6,057
Total core non-interest income (non-GAAP):
Non-interest income (GAAP)		$	3,372			$	3,691			$	3,548			$	3,576			$	3,736			$	14,187			$	14,298
Securities (gains) losses, net			0				0				(184	)			(284	)			(463	)			(467	)			(1,418	)
OREO (gains) losses, (net)			(80	)			(77	)			14				12				(30	)			(131	)			(40	)
Total core non-interest income (non-GAAP)		$	3,292			$	3,614			$	3,378			$	3,304			$	3,243			$	13,589			$	12,840
Tangible equity (non-GAAP):
Total equity (GAAP)		$	87,184			$	88,294			$	87,327			$	84,179			$	82,171			$	87,184			$	82,171
Intangible assets (a)			5,830				5,901				5,972				6,043				6,115				5,830				6,115
Tangible equity (non-GAAP)		$	81,354			$	82,393			$	81,355			$	78,136			$	76,056			$	81,354			$	76,056
Tangible Equity/Assets (non-GAAP)			8.21	%			8.36	%			8.46	%			8.31	%			8.04	%			8.21	%			8.04	%
Tangible book value per share (non-GAAP)		$	8.57			$	8.68			$	8.57			$	8.23			$	8.02			$	8.57			$	8.02
Return on average tangible common equity (non-GAAP):
Net income (GAAP)		$	1,994			$	1,894			$	1,612			$	1,461			$	1,568			$	6,961			$	4,683
Amortization of intangibles, net of tax			51				47				50				51				55				199				206
Tangible net income available to shareholders (non-GAAP)		$	2,045			$	1,941			$	1,662			$	1,512			$	1,623			$	7,160			$	4,889
Average equity			88,694				88,481				85,927				84,265				82,712				86,844				81,893
Average intangible assets (a)			5,876				5,946				6,018				6,088				6,161				5,982				6,268
Average tangible common equity (non-GAAP)		$	82,818			$	82,535			$	79,909			$	78,177			$	76,551			$	80,862			$	75,625
Return on average tangible common equity (non-GAAP)			9.82	%			9.36	%			8.37	%			7.78	%			8.43	%			8.86	%			6.47	%

  

(a) Excludes mortgage servicing rights

 

  

Average Balances – Yield/Cost Analysis		Three Months Ended December 31,
		2016												2015
		Average Balance				Interest				Average Yield Cost				Average Balance				Interest				Average Yield Cost
		(Dollars in thousands)
Interest earning assets:
Loans receivable		$	691,790			$	7,999				4.54	%		$	591,941			$	7,005				4.65	%
Investments and deposits			230,194				1,337				2.64	(1)			266,311				1,564				2.63	(1)
Total earning assets			921,984				9,336				4.07	(1)			858,252				8,569				4.03	(1)
Nonearning assets			70,208												72,730
Total assets		$	992,192											$	930,982
Interest bearing liabilities:
Deposits		$	671,964				734				0.43			$	634,028				638				0.40
Borrowings			20,598				60				1.16				31,234				63				0.81
Junior subordinated debentures			10,310				126				4.77				10,310				140				5.32
Total interest bearing liabilities			702,872				920				0.52				675,572				841				0.49
Noninterest bearing demand deposits			193,627				-				-				167,063				-				-
Total sources of funds			896,499				920				0.41				842,635				841				0.39
Other liabilities			6,999												5,635
Stockholders’ equity			88,694												82,712
Total liabilities and equity		$	992,192											$	930,982
Net interest income						$	8,416											$	7,728
Interest rate spread (1)(2)											3.55	%											3.54	%
Net interest margin (1)(3)											3.68	%											3.64	%
Ratio of earning assets to interest bearing liabilities											131.17	%											127.04	%

 

		Twelve Months Ended December 31,
		2016												2015
		Average Balance				Interest				Average Yield Cost				Average Balance				Interest				Average Yield Cost
		(Dollars in thousands)
Interest earning assets:
Loans receivable		$	663,963			$	30,748				4.58	%		$	538,286			$	25,840				4.75	%
Investments and deposits			225,611				5,468				2.75	(1)			284,355				6,611				2.61	(1)
Total earning assets			889,574				36,216				4.11	(1)			822,641				32,451				4.01	(1)
Nonearning assets			72,282												75,154
Total assets		$	961,856											$	897,795
Interest bearing liabilities:
Deposits		$	657,838				2,829				0.43			$	627,052				2,368				0.38
Borrowings			23,484				248				1.05				15,761				125				0.78
Junior subordinated debentures			10,310				534				5.10				10,310				562				5.37
Total interest bearing liabilities			691,632				3,611				0.52				653,123				3,055				0.47
Noninterest bearing demand deposits			177,035				-				-				157,953				-				-
Total sources of funds			868,667				3,611				0.41				811,076				3,055				0.38
Other liabilities			6,345												4,826
Stockholders’ equity			86,844												81,893
Total liabilities and equity		$	961,856											$	897,795
Net interest income						$	32,605											$	29,396
Interest rate spread (1)(2)											3.59	%											3.54	%
Net interest margin (1)(3)											3.71	%											3.64	%
Ratio of earning assets to interest bearing liabilities											128.62	%											125.95	%

 

(1)     Shown as a tax-adjusted yield.

(2)     Represents the difference between the average yield on earning assets and the average cost of funds.

(3)     Represents net interest income divided by average earning assets.