Penns Woods Bancorp, Inc. Reports Second Quarter 2012 Operating Earnings

Penns Woods Bancorp, Inc. (NASDAQ:PWOD)

Highlights
  • Net income from core operations (“operating earnings”), which is a non-GAAP measure of net income excluding net securities gains and losses and bank owned life insurance gains on death benefit, increased to $3,286,000 and $6,477,000 for the three and six months ended June 30, 2012 compared to $2,958,000 and $5,729,000 for the same period of 2011.
  • Operating earnings per share for the three and six months ended June 30, 2012 were $0.86 and $1.69 basic and dilutive compared to $0.77 and $1.49 basic and dilutive for the same period of 2011, an increase of 11.7% and 13.4%.
  • Return on average assets was 1.67% and 1.78% for the three and six months ended June 30, 2012 compared to 1.64% for the three and six month periods of 2011.
  • Return on average equity was 15.48% and 16.42% for the three and six months ended June 30, 2012 compared to 16.29% and 16.45% for the corresponding period of 2011.

“The effort of all employees to focus on relationships has resulted in continued growth of loans and deposits. These efforts have resulted in significant growth in home equity loans, while core deposits have increased substantially and have been utilized to fund the loan growth. The growth in loans and deposits is the cornerstone of the strong financial metrics of net income, earnings per share, return on equity, and return on assets that are being reported,” 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, 2012 was $3,398,000 and $7,087,000 compared to $2,964,000 and $5,817,000 for the same period of 2011. Results for the three and six months ended June 30, 2012 compared to 2011 were impacted by an increase in after-tax securities gains of $106,000 (from a gain of $6,000 to a gain of $112,000) for the three month periods and an increase in after-tax securities gains of $413,000 (from a gain of $88,000 to a gain of $501,000) for the six month periods. In addition, a gain of $109,000 on death benefit related to bank owned life insurance was recorded during the six months ended June 30, 2012. Basic and dilutive earnings per share for the three and six months ended June 30, 2012 were $0.89 and $1.85 compared to $0.78 and $1.52 for the corresponding periods of 2011. Return on average assets and return on average equity were 1.67% and 15.48% for the three months ended June 30, 2012 compared to 1.64% and 16.29% for the corresponding period of 2011. Earnings for the six months ended June 30, 2012 correlate to a return on average assets and a return on average equity of 1.78% and 16.42% compared to 1.64% and 16.45% for the six month 2011 period.

Net Interest Margin

The net interest margin for the three and six months ended June 30, 2012 was 4.47% and 4.59% compared to 4.58% and 4.73% for the corresponding period of 2011. While the net interest margin has decreased year over year, net interest income on a fully taxable equivalent basis has increased $1,578,000 to $17,010,000 for the six months ended June 30, 2012 compared to the corresponding period of 2011. Driving this increase is the continued emphasis on core deposit growth. These deposits represent a lower cost funding source than time deposits and comprise 72.9% of total deposits at June 30, 2012 compared to 68.8% at June 30, 2011. The average rate paid on total interest-bearing deposits decreased 32 and 33 basis points (bp) for the three and six months ended June 30, 2012 compared to the same period of 2011. The decrease was led by the rate paid on time deposits decreasing 35 and 36 bp for the three and six months ended June 30, 2012 compared to the same period of 2011. The duration of the time deposit portfolio, which was shortened over the past several years, is now being slowly lengthened due to the apparent bottoming or near bottoming of deposit rates. FHLB long-term borrowings have been reduced by $10,500,000 since June 30, 2011 as borrowings in that amount carrying an average rate of 4.60% matured during the three months ended December 31, 2011.

“Maintaining the net interest margin in the current interest rate environment will be challenging. We have been able to reduce the rates paid on interest-bearing liabilities; however, earning asset yields have also been decreasing. Earning asset yields are expected to decrease over the near term as loan yields have been decreasing due to the interest rate environment, while at the same time the duration of the bond portfolio has been shortened by utilizing shorter term corporate and agency bonds to offset the relatively longer duration of municipal bonds in the portfolio. The shortening of the earning asset portfolio may limit current earnings due to the low rates on the short end of the interest rate curve, but it also limits interest rate risk and will provide cash flow over the next few years as we anticipate a period of increasing rates. The negative effect of the declining yield on earning assets is being limited due to the increase in core deposits. We expect the overall cost of interest-bearing liabilities to decline through the second half of the year as time deposits reprice and FHLB borrowings mature during the fourth quarter of 2012,” commented President Grafmyre.

Assets

Total assets increased $73,447,000 to $818,433,000 at June 30, 2012 compared to June 30, 2011. Net loans increased 10.8% to $457,904,000 at June 30, 2012 compared to June 30, 2011 as the economic environment has in general provided fewer loan opportunities over the past year. Housing, transportation, and all other facets related to the Marcellus Shale natural gas exploration are creating loan opportunities and we are aggressively attempting to attract those loans that meet or exceed our credit standards. During 2012 a successful loan campaign was undertaken to build home equity loans and lines of credit. The campaign resulted in loan growth of approximately $15,000,000. The investment portfolio increased $49,204,000 from June 30, 2011 to June 30, 2012 due to a combination of market value increases and the purchase of short maturity bonds that have been utilized to reduce the portfolio duration and to provide current cash flow.

Non-performing Loans

Our non-performing loans to total loans ratio has decreased to 1.87% at June 30, 2012 from 2.60% at June 30, 2011. The decrease in non-performing loans is primarily the result of a decrease in commercial loan delinquencies due to several partial charge-offs and the receipt of collateral in lieu of payment with the collateral now carried as other real estate owned. 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 $907,000 for the three months ended June 30, 2012 represented 0.79% of average loans for the three months ended June 30, 2012. The allowance for loan losses was increased to 1.60% of total loans at June 30, 2012 from 1.38% at June 30, 2011 due to the general economic uncertainty that persists.

Deposits

Deposits have grown 12.5%, or $71,334,000, to $641,167,000 at June 30, 2012 compared to June 30, 2011, with core deposits (total deposits excluding time deposits) increasing $75,011,000, while higher cost time deposits decreased $3,677,000. Noninterest-bearing deposits have increased 17.6% to $117,762,000 at June 30, 2012 compared to June 30, 2011. Also playing a significant role in increasing core deposits were money market and NOW accounts with growth rates of 17.9% and 27.0%, respectively. Driving this growth is our commitment to easy-to-use products, community involvement, and emphasis on customer service. We have also successfully implemented a targeted marketing campaign aimed at further strengthening our customer relationships, while also expanding our market penetration. In addition our newest branch, Danville, opened in January 2012 and has gathered approximately $20 million in deposits during the first six months of its operation.

Shareholders’ Equity

Shareholders’ equity increased $14,205,000 to $88,111,000 at June 30, 2012 compared to June 30, 2011. The accumulated other comprehensive gain of $2,925,000 at June 30, 2012 is a result of an increase in unrealized gains on available for sale securities from an unrealized loss of $2,312,000 at June 30, 2011 to an unrealized gain of $7,058,000 at June 30, 2012. However, the amount of accumulated other comprehensive gain at June 30, 2012 was also impacted by the change in net excess of the projected benefit obligation over the market value of the plan assets of the defined benefit pension plan resulting in an increase in the net loss of $1,720,000. The current level of shareholders’ equity equates to a book value per share of $22.96 at June 30, 2012 compared to $19.27 at June 30, 2011 and an equity to asset ratio of 10.77% at June 30, 2012 compared to 9.92% at June 30, 2011. Excluding accumulated other comprehensive gain/loss, book value per share was $22.20 at June 30, 2012 compared to $20.50 at June 30, 2011. Dividends per share paid to shareholders were $0.47 and $0.94 for the three and six months ended June 30, 2012 compared to $0.46 and $0.92 for the three and six months ended June 30, 2011.

Penns Woods Bancorp, Inc. is the parent company of Jersey Shore State Bank, which operates thirteen branch offices providing financial services in Lycoming, Clinton, Centre, and Montour Counties. Investment and insurance products are offered through the 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, 2011.

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.jssb.com.

THIS INFORMATION IS SUBJECT TO YEAR-END AUDIT ADJUSTMENT
     
PENNS WOODS BANCORP, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
 
(In Thousands, Except Share Data) June 30,
2012 2011 % Change
 
ASSETS
Noninterest-bearing balances $ 16,052 $ 9,765 64.4 %
Interest-bearing deposits in other financial institutions   21     20,904   -99.9 %
Total cash and cash equivalents 16,073 30,669 -47.6 %
 
Investment securities, available for sale, at fair value 295,121 245,863 20.0 %
Investment securities held to maturity (fair value of $0 and $54) - 54 -100.0 %
Loans held for sale 3,496 6,393 -45.3 %
Loans 465,342 419,161 11.0 %
Less: Allowance for loan losses   7,438     5,764   29.0 %
Loans, net 457,904 413,397 10.8 %
Premises and equipment, net 8,229 7,520 9.4 %
Accrued interest receivable 4,071 3,803 7.0 %
Bank-owned life insurance 16,101 15,776 2.1 %
Investment in limited partnerships 3,213 3,875 -17.1 %
Goodwill 3,032 3,032 0.0 %
Deferred tax asset 5,960 9,638 -38.2 %
Other assets   5,233     4,966   5.4 %
TOTAL ASSETS $ 818,433   $ 744,986   9.9 %
 
LIABILITIES
Interest-bearing deposits $ 523,405 $ 469,729 11.4 %
Noninterest-bearing deposits   117,762     100,104   17.6 %
Total deposits 641,167 569,833 12.5 %
 
Short-term borrowings 17,855 17,007 5.0 %
Long-term borrowings, Federal Home Loan Bank (FHLB) 61,278 71,778 -14.6 %
Accrued interest payable 490 676 -27.5 %
Other liabilities   9,532     11,786   -19.1 %
TOTAL LIABILITIES   730,322     671,080   8.8 %
 
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 3,000,000 shares authorized; no shares issued - - 0.0 %

Common stock, par value $8.33, 15,000,000 shares authorized; 4,018,386 and 4,016,686 shares issued
33,486 33,472 0.0 %
Additional paid-in capital 18,136 18,090 0.3 %
Retained earnings 39,874 33,379 19.5 %
Accumulated other comprehensive gain (loss):
Net unrealized gain (loss) on available for sale securities 7,058 (2,312 ) 405.3 %
Defined benefit plan (4,133 ) (2,413 ) -71.3 %
Less: Treasury stock at cost, 180,596 shares   (6,310 )   (6,310 ) 0.0 %
TOTAL SHAREHOLDERS' EQUITY   88,111     73,906   19.2 %
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 818,433   $ 744,986   9.9 %
 
           
PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
 
 
(In Thousands, Except Per Share Data) Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 % Change   2012 2011 % Change
INTEREST AND DIVIDEND INCOME:
Loans including fees $ 6,294 $ 6,144 2.4 % $ 12,608 $ 12,432 1.4 %
Investment securities:
Taxable 1,517 1,411 7.5 % 2,991 2,786 7.4 %
Tax-exempt 1,383 1,272 8.7 % 2,788 2,539 9.8 %
Dividend and other interest income   86   57 50.9 %   178   109 63.3 %
TOTAL INTEREST AND DIVIDEND INCOME   9,280   8,884 4.5 %   18,565   17,866 3.9 %
 
INTEREST EXPENSE:
Deposits 934 1,182 -21.0 % 1,895 2,376 -20.2 %
Short-term borrowings 28 42 -33.3 % 62 99 -37.4 %
Long-term borrowings, FHLB   620   742 -16.4 %   1,240   1,476 -16.0 %
TOTAL INTEREST EXPENSE   1,582   1,966 -19.5 %   3,197   3,951 -19.1 %
 
NET INTEREST INCOME 7,698 6,918 11.3 % 15,368 13,915 10.4 %
 
PROVISION FOR LOAN LOSSES   600   600 0.0 %   1,200   1,200 0.0 %
 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES   7,098   6,318 12.3 %   14,168   12,715 11.4 %
 
NON-INTEREST INCOME:
Service charges 458 527 -13.1 % 905 1,030 -12.1 %
Securities gains, net 170 9 1788.9 % 759 134 466.4 %
Bank-owned life insurance 133 139 -4.3 % 401 313 28.1 %
Gain on sale of loans 343 242 41.7 % 526 491 7.1 %
Insurance commissions 316 180 75.6 % 758 389 94.9 %
Brokerage commissions 247 281 -12.1 % 459 555 -17.3 %
Other   614   495 24.0 %   1,236   906 36.4 %
TOTAL NON-INTEREST INCOME   2,281   1,873 21.8 %   5,044   3,818 32.1 %
 
NON-INTEREST EXPENSE:
Salaries and employee benefits 2,850 2,475 15.2 % 5,867 5,107 14.9 %
Occupancy, net 318 301 5.6 % 646 649 -0.5 %
Furniture and equipment 357 349 2.3 % 703 657 7.0 %
Pennsylvania shares tax 167 172 -2.9 % 336 344 -2.3 %
Amortization of investments in limited partnerships 166 165 0.6 % 331 331 0.0 %
FDIC deposit insurance 115 186 -38.2 % 238 373 -36.2 %
Other   1,370   1,208 13.4 %   2,686   2,383 12.7 %
TOTAL NON-INTEREST EXPENSE   5,343   4,856 10.0 %   10,807   9,844 9.8 %
 
INCOME BEFORE INCOME TAX PROVISION 4,036 3,335 21.0 % 8,405 6,689 25.7 %
INCOME TAX PROVISION   638   371 72.0 %   1,318   872 51.1 %
NET INCOME $ 3,398 $ 2,964 14.6 % $ 7,087 $ 5,817 21.8 %
 
EARNINGS PER SHARE - BASIC $ 0.89 $ 0.78 14.1 % $ 1.85 $ 1.52 21.7 %
 
EARNINGS PER SHARE - DILUTED $ 0.89 $ 0.78 14.1 % $ 1.85 $ 1.52 21.7 %
 
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC   3,837,579   3,835,785 0.0 %   3,837,391   3,835,542 0.0 %
 
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED   3,837,579   3,835,785 0.0 %   3,837,391   3,835,542 0.0 %
 
DIVIDENDS PER SHARE $ 0.47 $ 0.46 2.2 % $ 0.94 $ 0.92 2.2 %
 
           
PENNS WOODS BANCORP, INC.
AVERAGE BALANCES AND INTEREST RATES
 
For the Three Months Ended
(Dollars in Thousands) June 30, 2012 June 30, 2011
Average Balance Interest Average Rate Average Balance Interest Average Rate
ASSETS:
Tax-exempt loans $ 21,621 $ 298 5.54 % $ 20,369 $ 306 6.03 %
All other loans   435,918   6,097   5.63 %   400,072   5,942 5.96 %
Total loans   457,539   6,395   5.62 %   420,441   6,248 5.96 %
 
Taxable securities 163,294 1,601 3.92 % 126,139 1,467 4.65 %
Tax-exempt securities   130,313   2,095   6.43 %   107,469   1,927 7.17 %
Total securities   293,607   3,696   5.04 %   233,608   3,394 5.81 %
 
Interest-bearing deposits   13,285   2   0.06 %   17,860   1 0.02 %
 
Total interest-earning assets 764,431   10,093   5.30 % 671,909   9,643 5.75 %
 
Other assets   50,251   53,037
 
TOTAL ASSETS $ 814,682 $ 724,946
 
LIABILITIES AND SHAREHOLDERS' EQUITY:
Savings $ 79,465 16 0.08 % $ 70,698 34 0.19 %
Super Now deposits 120,066 153 0.51 % 82,483 107 0.52 %
Money market deposits 152,858 202 0.53 % 123,116 291 0.95 %
Time deposits   172,431   563   1.31 %   181,250   750 1.66 %
Total interest-bearing deposits   524,820   934   0.72 %   457,547   1,182 1.04 %
 
Short-term borrowings 17,222 28 0.65 % 14,623 42 1.15 %
Long-term borrowings, FHLB   61,278   620   4.00 %   71,778   742 4.09 %
Total borrowings   78,500   648   3.27 %   86,401   784 3.59 %
 
Total interest-bearing liabilities 603,320   1,582   1.05 % 543,948   1,966 1.44 %
 
Demand deposits 112,683 98,371
Other liabilities 10,889 9,832
Shareholders' equity   87,790   72,795
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 814,682 $ 724,946
Interest rate spread   4.25 % 4.31 %
Net interest income/margin $ 8,511   4.47 % $ 7,677 4.58 %
 
 
For the Three Months Ended
June 30,
2012 2011
Total interest income $ 9,280 $ 8,884
Total interest expense   1,582   1,966  
 
Net interest income 7,698 6,918
Tax equivalent adjustment   813   759  
 
Net interest income (fully taxable equivalent) $ 8,511 $ 7,677  
 
           
PENNS WOODS BANCORP, INC.
AVERAGE BALANCES AND INTEREST RATES
 
For the Six Months Ended
(Dollars in Thousands) June 30, 2012 June 30, 2011
Average Balance Interest Average Rate   Average Balance Interest Average Rate
ASSETS:
Tax-exempt loans $ 21,574 $ 607 5.66 % $ 20,370 $ 614 6.08 %
All other loans   429,040   12,207   5.72 %   399,839   12,027 6.07 %
Total loans   450,614   12,814   5.72 %   420,209   12,641 6.07 %
 
Taxable securities 155,247 3,167 4.08 % 120,471 2,893 4.80 %
Tax-exempt securities   130,452   4,224   6.48 %   105,301   3,847 7.31 %
Total securities   285,699   7,391   5.17 %   225,772   6,740 5.97 %
 
Interest-bearing deposits   7,660   2   0.05 %   9,975   2 0.04 %
 
Total interest-earning assets 743,973   20,207   5.45 % 655,956   19,383 5.94 %
 
Other assets   50,517   53,464
 
TOTAL ASSETS $ 794,490 $ 709,420
 
LIABILITIES AND SHAREHOLDERS' EQUITY:
Savings $ 76,546 27 0.07 % $ 68,616 70 0.21 %
Super Now deposits 114,218 295 0.52 % 75,867 190 0.51 %
Money market deposits 140,122 407 0.58 % 116,194 555 0.96 %
Time deposits   174,754   1,166   1.34 %   184,885   1,561 1.70 %
Total interest-bearing deposits   505,640   1,895   0.75 %   445,562   2,376 1.08 %
 
Short-term borrowings 19,640 62 0.63 % 16,902 99 1.18 %
Long-term borrowings, FHLB   61,278   1,240   4.00 %   71,778   1,476 4.09 %
Total borrowings   80,918   1,302   3.18 %   88,680   1,575 3.54 %
 
Total interest-bearing liabilities 586,558   3,197   1.09 % 534,242   3,951 1.48 %
 
Demand deposits 110,382 94,941
Other liabilities 11,216 9,502
Shareholders' equity   86,334   70,735
 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 794,490 $ 709,420
Interest rate spread   4.36 % 4.46 %
Net interest income/margin $ 17,010   4.59 % $ 15,432 4.73 %
 
 
For the Six Months Ended
June 30,
  2012   2011  
Total interest income $ 18,565 $ 17,866
Total interest expense   3,197   3,951  
 
Net interest income 15,368 13,915
Tax equivalent adjustment   1,642   1,517  
 
Net interest income (fully taxable equivalent) $ 17,010 $ 15,432  
 
       
Quarter Ended
 
(Dollars in Thousands, Except Per Share Data)  

6/30/2012
   

3/31/2012
   

12/31/2011
   

9/30/2011
   

6/30/2011
                           
Operating Data                            
                           
Net income $ 3,398   $ 3,689   $ 3,395   $ 3,150   $ 2,964
Net interest income   7,698     7,670     7,595     7,210     6,918
Provision for loan losses   600     600     900     600     600
Net security gains   170     589     479     8     9
Non-interest income, ex. net security gains   2,111     2,174     1,932     1,982     1,864
Non-interest expense   5,343     5,464     5,152     4,968     4,856
                           
Performance Statistics                            
                           
Net interest margin   4.47%     4.72%     4.78%     4.55%     4.58%
Annualized return on average assets   1.67%     1.91%     1.80%     1.67%     1.64%
Annualized return on average equity   15.48%     17.39%     17.00%     16.49%     16.29%
Annualized net loan charge-offs to avg loans   0.79%     0.01%     0.09%     0.01%     1.41%
Net charge-offs   907     9     101     8     1,477
Efficiency ratio   54.5%     55.5%     54.1%     54.1%     55.3%
                           
Per Share Data                            
                           
Basic earnings per share $ 0.89   $ 0.96   $ 0.88   $ 0.82   $ 0.78
Diluted earnings per share   0.89     0.96     0.88     0.82     0.78
Dividend declared per share   0.47     0.47     0.46     0.46     0.46
Book value   22.96     22.22     20.97     20.48     19.27
Common stock price:                            
High   39.90     41.67     39.30     36.56     39.30
Low   36.72     36.20     32.01     31.07     33.33
Close   39.81     40.88     38.78     32.75     34.36
Weighted average common shares:                            
Basic   3,838     3,837     3,837     3,836     3,836
Fully Diluted   3,838     3,837     3,837     3,836     3,836
End-of-period common shares:                            
Issued   4,018     4,018     4,018     4,017     4,017
Treasury   181     181     181     181     181
 
       
Quarter Ended
 
(Dollars in Thousands, Except Per Share Data)

6/30/2012
 

3/31/2012
 

12/31/2011
 

9/30/2011
 

6/30/2011
                           
Financial Condition Data:                            
General                            
Total assets $ 818,433   $ 793,114   $ 763,953   $ 752,650   $ 744,986
Loans, net   457,904     435,832     428,805     422,989     413,397
Intangibles   3,032     3,032     3,032     3,032     3,032
Total deposits   641,167     621,542     581,664     575,300     569,833
Noninterest-bearing   117,762     116,271     111,354     104,783     100,104
                           
Savings   81,479     77,253     71,646     73,376     71,923
NOW   115,972     108,904     101,808     103,264     91,285
Money Market   152,114     141,830     124,335     122,896     129,004
Time Deposits   173,840     177,284     172,521     170,981     177,517
Total interest-bearing deposits   523,405     505,271     470,310     470,517     469,729
                           
Core deposits*   467,327     444,258     409,143     404,319     392,316
Shareholders' equity   88,111     85,279     80,460     78,572     73,906
                           
Asset Quality                            
                           
Non-performing assets $ 8,725   $ 11,308   $ 12,009   $ 14,344   $ 10,911
Non-performing assets to total assets   1.07%     1.43%     1.57%     1.91%     1.46%
Allowance for loan losses   7,438     7,745     7,154     6,355     5,764
Allowance for loan losses to total loans   1.60%     1.75%     1.64%     1.48%     1.38%

Allowance for loan losses to non-performing loans
  85.25%     68.49%     59.57%     44.30%     52.83%
Non-performing loans to total loans   1.87%     2.55%     2.75%     3.34%     2.60%
                           
Capitalization                            
                           
Shareholders' equity to total assets   10.77%     10.75%     10.53%     10.44%     9.92%
 
* Core deposits are defined as total deposits less time deposits
 
       
Reconciliation of GAAP and Non-GAAP Financial Measures
 
(Dollars in Thousands, Except Per Share Data) Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 2012 2011
GAAP net income $ 3,398 $ 2,964 $ 7,087 $ 5,817
Less: net securities and bank-owned life insurance gains, net of tax   112     6     610     88  
Non-GAAP operating earnings $ 3,286   $ 2,958   $ 6,477   $ 5,729  
 
Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 2012 2011
Return on average assets (ROA) 1.67 % 1.64 % 1.78 % 1.64 %
Less: net securities and bank-owned life insurance gains, net of tax   0.06 %   0.01 %   0.15 %   0.02 %
Non-GAAP operating ROA   1.61 %   1.63 %   1.63 %   1.62 %
 
Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 2012 2011
Return on average equity (ROE) 15.48 % 16.29 % 16.42 % 16.45 %
Less: net securities and bank-owned life insurance gains, net of tax   0.51 %   0.04 %   1.42 %   0.25 %
Non-GAAP operating ROE   14.97 %   16.25 %   15.00 %   16.20 %
 
Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 2012 2011
Basic earnings per share (EPS) $ 0.89 $ 0.78 $ 1.85 $ 1.52
Less: net securities and bank-owned life insurance gains, net of tax   0.03     0.01     0.16     0.03  
Non-GAAP basic operating EPS $ 0.86   $ 0.77   $ 1.69   $ 1.49  
 
Three Months Ended Six Months Ended
June 30, June 30,
2012 2011 2012 2011
Dilutive EPS $ 0.89 $ 0.78 $ 1.85 $ 1.52
Less: net securities and bank-owned life insurance gains, net of tax   0.03     0.01     0.16     0.03  
Non-GAAP dilutive operating EPS $ 0.86   $ 0.77   $ 1.69   $ 1.49  
 

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