PENNS WOODS BANCORP INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - 8-K - PENNS WOODS BANCORP INC	a20184q18-8xk.htm

Exhibit 99.1

Press Release — For Immediate Release

January 28, 2019

Penns Woods Bancorp, Inc. Reports Fourth Quarter 2018 Earnings

Williamsport, PA — January 28, 2019 - Penns Woods Bancorp, Inc. (NASDAQ: PWOD)

Penns Woods Bancorp, Inc., supported by loan and deposit growth, achieved net income of $14.7 million for the twelve months ended December 31, 2018, resulting in basic and diluted earnings per share of $3.14.

Highlights

•

Net income, as reported under GAAP, for the three and twelve months ended December 31, 2018 was $4.2 million and $14.7 million, compared to $0.7 million and $9.8 million for the same period of 2017. Results for the three and twelve months ended December 31, 2018 compared to 2017 were impacted by a decrease in after-tax securities gains of $201,000 (from a gain of $71,000 to a loss of $130,000) for the three month periods and a decrease in after-tax securities gains of $560,000 (from a gain of $391,000 to a loss of $169,000) for the twelve month periods. Impacting the level of operating earnings were several factors, including the continued shift in composition of the earning asset portfolio as the balance sheet is actively managed to reduce market risk and interest rate risk in a rising rate environment. In addition, the effective tax rate has decreased due to the "Tax Cuts and Jobs Act," which reduced the corporate tax rate to 21% effective January 1, 2018.


•	Basic and diluted earnings per share for the three and twelve months ended December 31, 2018 were $0.89 and $3.14, respectively, an increase from basic earnings per share of $0.16 and diluted earnings per share of $0.15 for the three months ended December 31, 2017 and basic and diluted earnings per share of $2.08 for the twelve months ended December 31, 2017.


•	Return on average assets was 1.02% for the three months ended December 31, 2018, compared to 0.20% for the corresponding period of 2017. Return on average assets was 0.94% for the twelve months ended December 31, 2018, compared to 0.69% for the corresponding period of 2017.


•	Return on average equity was 11.77% for the three months ended December 31, 2018, compared to 2.00% for the corresponding period of 2017. Return on average equity was 10.72% for the twelve months ended December 31, 2018, compared to 6.91% for the corresponding period of 2017.

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 from core operations (“adjusted earnings”), which is a non-generally accepted accounting principles (GAAP) measure of net income excluding net securities gains or losses, was $4.3 million for the three months ended December 31, 2018 compared to $3.4 million for the same period of 2017. Operating earnings increased to $14.9 million for the twelve months ended December 31, 2018, compared to $12.1 million for the same period of 2017. The impact of the Tax Cuts and Jobs Act was the primary driver for the decrease in the Company's effective tax rate to 13.23% and 16.08% for the three and twelve month periods ended December 31, 2018 compared to 84.71% and 43.29% for the prior year periods (the passage of the "Tax Cuts and Jobs Act" in 2017 caused a revaluation of our net deferred tax assets resulting in a write-down of $2.7 million during the fourth quarter of 2017). Operating earnings per share for the three months ended December 31, 2018 was $0.92 basic and diluted, an increase from $0.72 basic and $0.71 diluted operating earnings per share for the same period of 2017. Operating earnings per share for the twelve months ended

December 31, 2018 was $3.17 basic and diluted, compared to $2.57 basic and diluted for the same period of 2017. Operating return on average assets and operating return on average equity were 1.05% and 12.12% for the three months ended December 31, 2018, compared to 0.93% and 9.45% for the corresponding periods of 2017. Operating return on average assets and operating return on average equity were 0.95% and 10.84% for the twelve months ended December 31, 2018 compared to 0.86% and 8.57% for the corresponding periods of 2017.

Net Interest Margin

The net interest margin for the three and twelve months ended December 31, 2018 was 3.33% and 3.31%, compared to 3.48% and 3.47% for the corresponding period of 2017. The decrease in the net interest margin was driven by an increase in the cost of interest-bearing liabilities of 53 basis points ("bps") for the three month period and 37 bps for the twelve month period primarily from an increase in the rate paid on time deposits as the average maturity of such liabilities lengthened. The impact of the increased cost of funds was limited by an increase in the yield on earning assets of 27 bps and 14 bps for the three and twelve 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 $170.6 million and $176.0 million, respectively. The loan growth was primarily funded by an increase in average borrowings of $122.5 million and $108.5 million for the three and twelve month periods along with growth in average total deposits of $62.7 million and $48.1 million, respectively for the same periods.

Assets

Total assets increased $210.3 million to $1.7 billion at December 31, 2018 compared to December 31, 2017. Net loans increased $137.2 million to $1.4 billion at December 31, 2018 compared to December 31, 2017, primarily due to campaigns related to increasing home equity product market share and indirect auto lending. The investment portfolio increased $30.3 million from December 31, 2017 to December 31, 2018 due to an increase in the taxable municipal and restricted bank stock portfolios.

Non-performing Loans

The ratio of non-performing loans to total loans ratio increased to 1.20% at December 31, 2018 from 0.58% at December 31, 2017 as non-performing loans have increased to $16.6 million at December 31, 2018 from $7.3 million at December 31, 2017 primarily due to a commercial loan relationship that became non-performing during the last three months 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 $756,000 for the twelve months ended December 31, 2018 minimally impacted the allowance for loan losses, which was 1.00% of total loans at December 31, 2018. The majority of the loans charged-off had a specific allowance within the allowance for loan losses.

Deposits

Deposits increased $73.6 million to $1.2 billion at December 31, 2018 compared to December 31, 2017. Noninterest-bearing deposits increased $17.5 million to $320.8 million at December 31, 2018 compared to December 31, 2017. Driving deposit 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 average maturity of the time deposit portfolio continues to move forward as part of the strategy to build balance sheet protection in a rising interest rate environment.

Shareholders’ Equity

Shareholders’ equity increased $5.3 million to $143.5 million at December 31, 2018 compared to December 31, 2017. The change in accumulated other comprehensive loss from $5.0 million at December 31, 2017 to $6.6 million at December 31, 2018 is a result of an increase in unrealized losses on available for sale securities (from an unrealized gain of $54,000 at December 31, 2017 to an unrealized loss of $1.4 million at December 31, 2018). The amount of accumulated other comprehensive loss at December 31, 2018 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 $356,000, mainly due to the change in the corporate tax rate from 2017 to 2018. The current level of shareholders’ equity equates to a book value per share of $30.59 at December 31, 2018 compared to $29.47 at December 31, 2017 and an equity to asset ratio of 8.52% at December 31, 2018, compared to 9.37% at December 31, 2017. Excluding goodwill and intangibles, book value per share was $26.70 at December 31, 2018, compared to $25.51 at December 31, 2017. Dividends declared for the twelve months ended December 31, 2018 and 2017 were $1.88 per share.

During the first quarter of 2019, the Company expects to offer approximately $10.0 million of a new series of non-cumulative, non-convertible preferred stock to a limited number of accredited investors in a private placement transaction. The preferred stock would be structured to qualify as Tier 1 capital for bank regulatory purposes. The proceeds of the offering would be used for general

corporate purposes, including funding organic growth. There can be no assurance that the offering will be completed during the first quarter of 2019 or otherwise. Any shares of preferred stock offered and sold will not be registered under the Securities Act of 1933 and may not be offered or sold absent registration or an applicable exemption from registration requirements.

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 ten 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, 2017.

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)



	December 31,
(In Thousands, Except Share Data)	2018			2017			% Change
ASSETS:
Noninterest-bearing balances	$	24,325		$	25,692		(5.32	)%
Interest-bearing balances in other financial institutions	42,417			1,551			2,634.82	%
Total cash and cash equivalents	66,742			27,243			144.99	%

Investment debt securities, available for sale, at fair value	134,285			108,627			23.62	%
Investment equity securities, at fair value	1,776			2,516			(29.41	)%
Investment securities, trading	36			190			(81.05	)%
Restricted investment in bank stock, at fair value	18,862			13,332			41.48	%
Loans held for sale	2,929			1,196			144.90	%
Loans	1,384,757			1,246,614			11.08	%
Allowance for loan losses	(13,837		)	(12,858		)	7.61	%
Loans, net	1,370,920			1,233,756			11.12	%
Premises and equipment, net	27,580			27,386			0.71	%
Accrued interest receivable	5,334			4,321			23.44	%
Bank-owned life insurance	28,627			27,982			2.31	%
Goodwill	17,104			17,104			—	%
Intangibles	1,162			1,462			(20.52	)%
Deferred tax asset	5,154			4,388			17.46	%
Other assets	4,260			4,989			(14.61	)%
TOTAL ASSETS	$	1,684,771		$	1,474,492		14.26	%

LIABILITIES:
Interest-bearing deposits	$	899,089		$	843,004		6.65	%
Noninterest-bearing deposits	320,814			303,316			5.77	%
Total deposits	1,219,903			1,146,320			6.42	%

Short-term borrowings	167,865			100,748			66.62	%
Long-term borrowings	138,942			70,970			95.78	%
Accrued interest payable	1,150			502			129.08	%
Other liabilities	13,367			17,758			(24.73	)%
TOTAL LIABILITIES	1,541,227			1,336,298			15.34	%

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; 5,011,698 and 5,009,339 shares issued; 4,691,548 and 4,689,189 outstanding	41,763			41,744			0.05	%
Additional paid-in capital	50,737			50,173			1.12	%
Retained earnings	69,787			63,364			10.14	%
Accumulated other comprehensive loss:
Net unrealized loss on available for sale securities	(1,360		)	(54		)	(2,418.52	)%
Defined benefit plan	(5,276		)	(4,920		)	(7.24	)%
Treasury stock at cost, 320,150	(12,115		)	(12,115		)	—	%
TOTAL PENNS WOODS BANCORP, INC. SHAREHOLDERS' EQUITY	143,536			138,192			3.87	%
Non-controlling interest	8			2			300.00	%
TOTAL SHAREHOLDERS' EQUITY	143,544			138,194			3.87	%
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,684,771		$	1,474,492		14.26	%

PENNS WOODS BANCORP, INC.

CONSOLIDATED STATEMENT OF INCOME

(UNAUDITED)



	Three Months Ended December 31,								Twelve Months Ended December 31,
(In Thousands, Except Per Share Data)	2018			2017			% Change		2018			2017			% Change
INTEREST AND DIVIDEND INCOME:
Loans including fees	$	14,828		$	12,191		21.63	%	$	54,000		$	45,833		17.82	%
Investment securities:
Taxable	886			517			71.37	%	2,784			2,182			27.59	%
Tax-exempt	182			278			(34.53	)%	860			1,218			(29.39	)%
Dividend and other interest income	340			152			123.68	%	1,102			744			48.12	%
TOTAL INTEREST AND DIVIDEND INCOME	16,236			13,138			23.58	%	58,746			49,977			17.55	%

INTEREST EXPENSE:
Deposits	1,999			1,115			79.28	%	6,370			4,083			56.01	%
Short-term borrowings	753			195			286.15	%	1,757			234			650.85	%
Long-term borrowings	785			360			118.06	%	2,809			1,580			77.78	%
TOTAL INTEREST EXPENSE	3,537			1,670			111.80	%	10,936			5,897			85.45	%

NET INTEREST INCOME	12,699			11,468			10.73	%	47,810			44,080			8.46	%

PROVISION FOR LOAN LOSSES	760			125			508.00	%	1,735			730			137.67	%

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	11,939			11,343			5.25	%	46,075			43,350			6.29	%

NON-INTEREST INCOME:
Service charges	672			585			14.87	%	2,460			2,222			10.71	%
Debt securities (losses) gains, available for sale	(30		)	113			(126.55	)%	(47		)	600			(107.83	)%
Equity securities losses	(126		)	—			n/a		(170		)	—			n/a
Securities (losses) gains, trading	(9		)	(6		)	(50.00	)%	3			(8		)	(137.50	)%
Bank-owned life insurance	166			167			(0.60	)%	662			666			(0.60	)%
Gain on sale of loans	465			358			29.89	%	1,518			1,674			(9.32	)%
Insurance commissions	99			97			2.06	%	365			496			(26.41	)%
Brokerage commissions	323			334			(3.29	)%	1,336			1,378			(3.05	)%
Debit card income	469			510			(8.04	)%	1,534			1,960			(21.73	)%
Other	400			431			(7.19	)%	1,800			1,756			2.51	%
TOTAL NON-INTEREST INCOME	2,429			2,589			(6.18	)%	9,461			10,744			(11.94	)%

NON-INTEREST EXPENSE:
Salaries and employee benefits	5,696			4,883			16.65	%	21,083			18,999			10.97	%
Occupancy	622			592			5.07	%	2,702			2,447			10.42	%
Furniture and equipment	764			786			(2.80	)%	3,092			2,915			6.07	%
Software Amortization	208			224			(7.14	)%	712			974			(26.90	)%
Pennsylvania shares tax	275			229			20.09	%	1,108			925			19.78	%
Professional Fees	432			537			(19.55	)%	2,106			2,353			(10.50	)%
Federal Deposit Insurance Corporation deposit insurance	251			155			61.94	%	890			669			33.03	%
Marketing	3			268			(98.88	)%	767			958			(19.94	)%
Intangible amortization	71			81			(12.35	)%	300			337			(10.98	)%
Other	1,210			1,493			(18.96	)%	5,247			6,285			(16.52	)%
TOTAL NON-INTEREST EXPENSE	9,532			9,248			3.07	%	38,007			36,862			3.11	%
INCOME BEFORE INCOME TAX PROVISION	4,836			4,684			3.25	%	17,529			17,232			1.72	%
INCOME TAX PROVISION	640			3,968			(83.87	)%	2,819			7,459			(62.21	)%
NET INCOME	$	4,196		$	716		486.03	%	$	14,710		$	9,773		50.52	%
Earnings attributable to noncontrolling interest	7			—			—	%	6			—			—	%
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS'	$	4,189		$	716		485.06	%	$	14,704		$	9,773		50.46	%
EARNINGS PER SHARE - BASIC	$	0.89		$	0.16		456.25	%	$	3.14		$	2.08		50.96	%
EARNINGS PER SHARE - DILUTED	$	0.89		$	0.15		493.33	%	$	3.14		$	2.08		50.96	%
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC	4,691,125			4,688,744			0.05	%	4,690,254			4,705,602			(0.33	)%
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED	4,691,125			4,782,244			(1.91	)%	4,690,254			4,705,602			(0.33	)%
DIVIDENDS DECLARED PER SHARE	$	0.47		$	0.47		—	%	$	1.88		$	1.88		—	%

PENNS WOODS BANCORP, INC.

AVERAGE BALANCES AND INTEREST RATES



	Three Months Ended
	December 31, 2018						December 31, 2017
(Dollars in Thousands)	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
ASSETS:
Tax-exempt loans	$	73,726	$	553	2.98	%	$	62,012	$	609	3.90	%
All other loans	1,310,303		14,391		4.36	%	1,151,374		11,789		4.06	%
Total loans	1,384,029		14,944		4.28	%	1,213,386		12,398		4.05	%

Taxable securities	121,598		1,207		3.97	%	80,109		650		3.25	%
Tax-exempt securities	28,382		231		3.26	%	47,788		421		3.52	%
Total securities	149,980		1,438		3.84	%	127,897		1,071		3.35	%

Interest-bearing deposits	3,399		19		2.22	%	6,318		19		1.19	%

Total interest-earning assets	1,537,408		16,401		4.24	%	1,347,601		13,488		3.97	%

Other assets	97,798						101,907

TOTAL ASSETS	$	1,635,206					$	1,449,508

LIABILITIES AND SHAREHOLDERS’ EQUITY:
Savings	$	164,891	26		0.06	%	$	159,204	17		0.04	%
Super Now deposits	216,170		320		0.59	%	206,005		151		0.29	%
Money market deposits	239,919		400		0.66	%	263,003		236		0.36	%
Time deposits	283,663		1,253		1.75	%	220,331		711		1.28	%
Total interest-bearing deposits	904,643		1,999		0.88	%	848,543		1,115		0.52	%

Short-term borrowings	121,327		753		2.43	%	62,394		195		1.23	%
Long-term borrowings	138,942		785		2.21	%	75,373		360		1.87	%
Total borrowings	260,269		1,538		2.31	%	137,767		555		1.58	%

Total interest-bearing liabilities	1,164,912		3,537		1.20	%	986,310		1,670		0.67	%

Demand deposits	312,511						305,867
Other liabilities	15,448						14,258
Shareholders’ equity	142,335						143,073

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,635,206					$	1,449,508
Interest rate spread					3.04	%					3.30	%
Net interest income/margin			$	12,864	3.33	%			$	11,818	3.48	%



	Three Months Ended December 31,
	2018		2017
Total interest income	$	16,236	$	13,138
Total interest expense	3,537		1,670
Net interest income	12,699		11,468
Tax equivalent adjustment	165		350
Net interest income (fully taxable equivalent)	$	12,864	$	11,818

PENNS WOODS BANCORP, INC.

AVERAGE BALANCES AND INTEREST RATES



	Twelve Months Ended
	December 31, 2018						December 31, 2017
(Dollars in Thousands)	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
ASSETS:
Tax-exempt loans	$	74,923	$	2,242	2.99	%	$	49,982	$	1,924	3.85	%
All other loans	1,250,521		52,229		4.18	%	1,099,465		44,563		4.05	%
Total loans	1,325,444		54,471		4.11	%	1,149,447		46,487		4.04	%

Taxable securities	100,915		3,828		3.79	%	84,079		2,689		3.20	%
Tax-exempt securities	36,279		1,089		3.00	%	50,169		1,845		3.68	%
Total securities	137,194		4,917		3.58	%	134,248		4,534		3.38	%

Interest-bearing deposits	3,005		58		1.93	%	22,461		237		1.06	%

Total interest-earning assets	1,465,643		59,446		4.06	%	1,306,156		51,258		3.92	%

Other assets	97,577						100,481

TOTAL ASSETS	$	1,563,220					$	1,406,637

LIABILITIES AND SHAREHOLDERS’ EQUITY:
Savings	$	164,844	75		0.05	%	$	157,851	62		0.04	%
Super Now deposits	225,885		1,033		0.46	%	200,436		528		0.26	%
Money market deposits	240,541		1,214		0.50	%	274,546		949		0.35	%
Time deposits	259,286		4,048		1.56	%	210,608		2,544		1.21	%
Total interest-bearing deposits	890,556		6,370		0.72	%	843,441		4,083		0.48	%

Short-term borrowings	85,086		1,757		2.04	%	25,984		234		0.89	%
Long-term borrowings	128,127		2,809		2.16	%	78,745		1,580		1.98	%
Total borrowings	213,213		4,566		2.11	%	104,729		1,814		1.71	%

Total interest-bearing liabilities	1,103,769		10,936		0.99	%	948,170		5,897		0.62	%

Demand deposits	303,606						302,651
Other liabilities	18,742						14,398
Shareholders’ equity	137,103						141,418

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,563,220					$	1,406,637
Interest rate spread					3.07	%					3.30	%
Net interest income/margin			$	48,510	3.31	%			$	45,361	3.47	%



	Twelve Months Ended December 31,
	2018		2017
Total interest income	$	58,746	$	49,977
Total interest expense	10,936		5,897
Net interest income	47,810		44,080
Tax equivalent adjustment	700		1,281
Net interest income (fully taxable equivalent)	$	48,510	$	45,361



(Dollars in Thousands, Except Per Share Data)	Quarter Ended
	12/31/2018			9/30/2018			6/30/2018			3/31/2018			12/31/2017
Operating Data
Net income	$	4,189		$	3,826		$	3,480		$	3,208		$	716
Net interest income	12,699			12,255			11,703			11,153			11,468
Provision for loan losses	760			480			335			160			125
Net security (losses) gains	(165		)	(24		)	15			(40		)	107
Non-interest income, ex. net security (losses) gains	2,594			2,613			2,347			2,368			2,482
Non-interest expense	9,532			9,681			9,517			9,524			9,248

Performance Statistics
Net interest margin	3.33		%	3.30		%	3.32		%	3.31		%	3.48		%
Annualized return on average assets	1.02		%	0.96		%	0.91		%	0.86		%	0.20		%
Annualized return on average equity	11.77		%	10.94		%	10.07		%	9.18		%	2.00		%
Annualized net loan charge-offs to average loans	0.08		%	0.05		%	0.04		%	0.06		%	0.07		%
Net charge-offs	266			171			137			182			200
Efficiency ratio	61.9		%	64.6		%	67.2		%	69.8		%	65.7		%

Per Share Data
Basic earnings per share	$	0.89		$	0.82		$	0.74		$	0.68		$	0.16
Diluted earnings per share	0.89			0.82			0.74			0.68			0.15
Dividend declared per share	0.47			0.47			0.47			0.47			0.47
Book value	30.59			29.96			29.66			29.45			29.47
Common stock price:
High	44.18			46.27			46.92			45.56			49.79
Low	38.66			43.22			41.29			39.61			45.65
Close	40.24			43.45			44.78			42.31			46.58
Weighted average common shares:
Basic	4,691			4,691			4,690			4,689			4,689
Fully Diluted	4,691			4,691			4,703			4,689			4,782
End-of-period common shares:
Issued	5,012			5,011			5,011			5,010			5,009
Treasury	320			320			320			320			320



(Dollars in Thousands, Except Per Share Data)	Quarter Ended
	12/31/2018			9/30/2018			6/30/2018			3/31/2018			12/31/2017
Financial Condition Data:
General
Total assets	$	1,684,771		$	1,670,348		$	1,603,273		$	1,526,745		$	1,474,492
Loans, net	1,370,920			1,355,762			1,318,039			1,267,912			1,233,756
Goodwill	17,104			17,104			17,104			17,104			17,104
Intangibles	1,162			1,233			1,304			1,382			1,462
Total deposits	1,219,903			1,210,477			1,191,019			1,192,454			1,146,320
Noninterest-bearing	320,814			313,111			311,194			304,261			303,316
Savings	166,063			164,449			166,183			166,243			160,698
NOW	207,819			223,963			216,109			240,259			215,021
Money Market	238,596			238,131			245,081			235,381			237,818
Time Deposits	286,611			270,823			252,452			246,310			229,467
Total interest-bearing deposits	899,089			897,366			879,825			888,193			843,004

Core deposits*	933,292			939,654			938,567			946,144			916,853
Shareholders’ equity	143,536			140,538			139,134			138,192			138,192

Asset Quality
Non-performing loans	$	16,572		$	8,739		$	7,132		$	7,641		$	7,268
Non-performing loans to total assets	0.98		%	0.52		%	0.44		%	0.50		%	0.49		%
Allowance for loan losses	13,837			13,343			13,034			12,836			12,858
Allowance for loan losses to total loans	1.00		%	0.97		%	0.98		%	1.00		%	1.03		%
Allowance for loan losses to non-performing loans	83.50		%	152.68		%	182.75		%	167.99		%	176.91		%
Non-performing loans to total loans	1.20		%	0.64		%	0.54		%	0.60		%	0.58		%

Capitalization
Shareholders’ equity to total assets	8.52		%	8.41		%	8.68		%	9.05		%	9.37		%

* Core deposits are defined as total deposits less time deposits

Reconciliation of GAAP and Non-GAAP Financial Measures



	Three Months Ended December 31,						Twelve Months Ended December 31,
(Dollars in Thousands, Except Per Share Data)	2018			2017			2018			2017
GAAP net income	$	4,189		$	716		$	14,704		$	9,773
Less: net securities (losses) gains, net of tax	(130		)	71			(169		)	391
Add: Effect of deferred tax asset revaluation	—			2,734			—			2,734
Non-GAAP operating earnings	$	4,319		$	3,379		$	14,873		$	12,116

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2018			2017			2018			2017
Return on average assets (ROA)	1.02		%	0.20		%	0.94		%	0.69		%
Less: net securities (losses) gains, net of tax	(0.03		)%	0.02		%	(0.01		)%	0.02		%
Add: Effect of deferred tax asset revaluation	—		%	0.75		%	—		%	0.19		%
Non-GAAP operating ROA	1.05		%	0.93		%	0.95		%	0.86		%

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2018			2017			2018			2017
Return on average equity (ROE)	11.77		%	2.00		%	10.72		%	6.91		%
Less: net securities (losses) gains, net of tax	(0.35		)%	0.20		%	(0.12		)%	0.27		%
Add: Effect of deferred tax asset revaluation	—		%	7.65		%	—		%	1.93		%
Non-GAAP operating ROE	12.12		%	9.45		%	10.84		%	8.57		%

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2018			2017			2018			2017
Basic earnings per share (EPS)	$	0.89		$	0.16		$	3.14		$	2.08
Less: net securities (losses) gains, net of tax	(0.03		)	0.02			(0.03		)	0.09
Add: Effect of deferred tax asset revaluation	—			0.58			—			0.58
Non-GAAP basic operating EPS	$	0.92		$	0.72		$	3.17		$	2.57

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2018			2017			2018			2017
Diluted EPS	$	0.89		$	0.15		$	3.14		$	2.08
Less: net securities (losses) gains, net of tax	(0.03		)	0.02			(0.03		)	0.09
Add: Effect of deferred tax asset revaluation	—			0.58			—			0.58
Non-GAAP diluted operating EPS	$	0.92		$	0.71		$	3.17		$	2.57

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