Penns Woods Bancorp, Inc. Reports Second Quarter 2018 Earnings

| Source: Penns Woods Bancorp, Inc. Penns Woods Bancorp, Inc.

WILLIAMSPORT, Pa., July 20, 2018 (GLOBE NEWSWIRE) -- Penns Woods Bancorp, Inc. (NASDAQ:PWOD)

Penns Woods Bancorp, Inc., supported by loan and deposit growth, achieved net income of $6.7 million, for the six months ended June 30, 2018 resulting in basic and dilutive earnings per share of $1.43.

Highlights

  • Net income from core operations (“operating earnings”), which is a non-generally accepted accounting principles (GAAP) measure of net income excluding net securities gains or losses, was $3.5 million for the three months ended June 30, 2018 compared to $3.1 million for the same period of 2017. Operating earnings increased to $6.7 million for the six months ended June 30, 2018 compared to $5.6 million for the same period of 2017. Impacting the level of operating earnings were several factors including the continued shift of earning assets from the investment portfolio to the loan 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.

  • Operating earnings per share for the three months ended June 30, 2018 was $0.74 for basic and dilutive, an increase from $0.66 for basic and dilutive for the same period of 2017. Operating earnings per share for the six month ended June 30, 2018 were $1.43 basic and dilutive compared to $1.20 basic and dilutive for the same period of 2017.

  • Return on average assets was 0.91% for the three months ended June 30, 2018 compared to 0.88% for the corresponding period of 2017. Return on average assets was 0.89% for the six months ended June 30, 2018 compared to 0.83% for the corresponding period of 2017.

  • Return on average equity was 10.07% for the three months ended June 30, 2018 compared to 8.79% for the corresponding period of 2017. Return on average equity was 9.68% for the six months ended June 30, 2018 compared to 8.24% 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, as reported under GAAP, for the three and six months ended June 30, 2018 was $3.5 million and $6.7 million compared to $3.1 million and $5.8 million for the same period of 2017. Results for the three and six months ended June 30, 2018 compared to 2017 were impacted by an increase in after-tax securities gains of $20,000 (from a loss of $8,000 to a gain of $12,000) for the three month periods and a decrease in after-tax securities gains of $143,000 (from a gain of $123,000 to a loss of $20,000) for the six month periods. The impact of the Tax Cuts and Jobs Act was the primary driver for the decrease in the Company's effective tax rate to 17.40% and 16.50% for the three and six month periods ended June 30, 2018 compared to 28.38% and 27.68% for the prior year periods. Earnings per share for the three and six months ended June 30, 2018 was $0.74 and $1.43 basic and diluted, an increase from the 2017 basic and diluted earnings per share of $0.65 and $1.22. Return on average assets and return on average equity were 0.91% and 10.07% for the three months ended June 30, 2018 compared to 0.88% and 8.79% for the corresponding periods of 2017. Return on average assets and return on average equity were 0.89% and 9.68% for the six months ended June 30, 2018 compared to 0.83% and 8.24% for the corresponding periods of 2017.

Net Interest Margin

The net interest margin for the three and six months ended June 30, 2018 was 3.32% and 3.31% compared to 3.44% and 3.42% 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 30 basis points ("bps") for the three month period and 25 bps for the six month period primarily from an increase in the rate paid on time deposits as the liabilities are lengthened. The impact of the increased cost of funds was limited by an increase in the yield on earning assets of 12 bps and 9 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 $177.4 million and $169.6 million respectively. The loan growth was primarily funded by an increase in average borrowings of $93.9 million and $88.2 million for the three and six month periods along with growth in average total deposits of $45.0 million and $41.1 million respectively. Core deposits represent a lower cost funding source than time deposits and comprise 78.80% of total deposits at June 30, 2018 and 82.11% at June 30, 2017.

Assets

Total assets increased $207.9 million to $1.6 billion at June 30, 2018 compared to June 30, 2017. Net loans increased $192.1 million to $1.3 billion at June 30, 2018 compared to June 30, 2017, primarily due to campaigns related to increasing home equity product market share and indirect auto lending. The investment portfolio decreased $7.9 million from June 30, 2017 to June 30, 2018 due to our strategy to reduce the investment portfolio duration through the selective selling of bonds as opportunities develop. The combination of loan portfolio growth and a decrease in the size of the investment portfolio has resulted in shortening the overall earning asset portfolio duration consistent with a strategy to reduce the interest rate and market risk exposure to a rising rate environment.

Non-performing Loans

The ratio of non-performing loans to total loans ratio decreased to 0.51% at June 30, 2018 from 1.10% June 30, 2017 as non-performing loans have decreased to $6.8 million at June 30, 2018 from $12.5 million at June 30, 2017. The level of non-performing loans decreased primarily as a result of a large non-performing loan being paid off during the quarter ended September 30, 2017. 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 $319,000 for the six months ended June 30, 2018 minimally impacted the allowance for loan losses which was 0.98% of total loans at June 30, 2018. The majority of the loans charged-off had a specific allowance within the allowance for loan losses.

Deposits

Deposits increased $39.9 million to $1.2 billion at June 30, 2018 compared to June 30, 2017. Noninterest-bearing deposits increased to $311.2 million at June 30, 2018 compared to June 30, 2017. Driving this growth is our commitment to easy-to-use products, community involvement, and emphasis on customer service. While deposit gathering efforts have centered on core deposits, the lengthening of the time deposit portfolio continues to move forward as part of the strategy to build balance sheet protection in a rising rate environment.

Shareholders’ Equity

Shareholders’ equity increased $695,000 to $139.1 million at June 30, 2018 compared to June 30, 2017. The change in accumulated other comprehensive loss from $4.2 million at June 30, 2017 to $6.9 million at June 30, 2018 is a result of an increase in unrealized losses on available for sale securities (from an unrealized loss of $16,000 at June 30, 2017 to an unrealized loss of $2,057,000 at June 30, 2018). The amount of accumulated other comprehensive loss at June 30, 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 $620,000, 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 $29.66 at June 30, 2018 compared to $29.53 at June 30, 2017 and an equity to asset ratio of 8.68% at June 30, 2018 compared to 9.92% at June 30, 2017. Excluding goodwill and intangibles, book value per share was $25.74 at June 30, 2018 compared to $25.54 at June 30, 2017. Dividends declared for the six months ended June 30, 2018 and 2017 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. 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
 570-322-1111e-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) 2018 2017 % Change
ASSETS:      
Noninterest-bearing balances  $26,134  $26,223  (0.34)%
Interest-bearing balances in other financial institutions  29,873  11,979  149.38%
Total cash and cash equivalents  56,007  38,202  46.61%
       
Investment debt securities, available for sale, at fair value  118,876  126,749  (6.21)%
Investment equity securities, at fair value  2,438  2,474  (1.46)%
Investment securities, trading  243  213  14.08%
Restricted investment in bank stock, at fair value  16,716  9,281  80.11%
Loans held for sale  2,118  1,683  25.85%
Loans  1,331,073  1,139,085  16.85%
Allowance for loan losses  (13,034) (13,109) (0.57)%
Loans, net  1,318,039  1,125,976  17.06%
Premises and equipment, net  27,385  25,497  7.40%
Accrued interest receivable  4,618  3,641  26.83%
Bank-owned life insurance  28,315  27,670  2.33%
Goodwill  17,104  17,104  —%
Intangibles  1,304  1,623  (19.65)%
Deferred tax asset 4,941  8,139  (39.29)%
Other assets  5,169  7,112  (27.32)%
TOTAL ASSETS  $1,603,273  $1,395,364  14.90%
       
LIABILITIES:      
Interest-bearing deposits  $879,825  $851,056  3.38%
Noninterest-bearing deposits  311,194  300,054  3.71%
Total deposits  1,191,019  1,151,110  3.47%
       
Short-term borrowings  134,637  15,737  755.54%
Long-term borrowings  123,970  75,998  63.12%
Accrued interest payable  896  414  116.43%
Other liabilities  13,616  13,665  (0.36)%
TOTAL LIABILITIES  1,464,138  1,256,924  16.49%
       
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; 5,010,535 and 5,008,192 shares issued  41,753  41,735  0.04%
Additional paid-in capital 50,225  50,117  0.22%
Retained earnings  66,181  62,952  5.13%
Accumulated other comprehensive loss:      
Net unrealized loss on available for sale securities  (2,057) (16) 12,756.25%
Defined benefit plan  (4,853) (4,233) (14.65)%
Treasury stock at cost, 320,150  (12,115) (12,115) —%
TOTAL PENNS WOODS BANCORP, INC. SHAREHOLDERS' EQUITY 139,134  138,440  0.50%
Non-controlling interest  1  —  100.00%
TOTAL SHAREHOLDERS' EQUITY  139,135  138,440  0.50%
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY  $1,603,273  $1,395,364  14.90%


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) 2018 2017 % Change 2018 2017 % Change
INTEREST AND DIVIDEND INCOME:            
Loans including fees  $12,997  $11,109  17.00% $25,190  $21,736  15.89%
Investment securities:            
Taxable  639  570  12.11% 1,185  1,112  6.56%
Tax-exempt  230  323  (28.79)% 471  621  (24.15)%
Dividend and other interest income  245  207  18.36% 466  422  10.43%
TOTAL INTEREST AND DIVIDEND INCOME  14,111  12,209  15.58% 27,312  23,891  14.32%
INTEREST EXPENSE:            
Deposits  1,490  1,008  47.82% 2,712  1,910  41.99%
Short-term borrowings  252  4  6,200.00% 476  8  5,850.00%
Long-term borrowings  666  373  78.55% 1,268  813  55.97%
TOTAL INTEREST EXPENSE 2,408  1,385  73.86% 4,456  2,731  63.16%
NET INTEREST INCOME  11,703  10,824  8.12% 22,856  21,160  8.02%
PROVISION FOR LOAN LOSSES  335  215  55.81% 495  545  (9.17)%
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES  11,368  10,609  7.15% 22,361  20,615  8.47%
NON-INTEREST INCOME:            
Service charges  592  559  5.90% 1,143  1,087  5.15%
Debt securities gains (losses), available for sale  14  (12) 216.67% 5  185  (97.30)%
Equity securities gains (losses) 6  —  100.00% (28) —  (100.00)%
Securities (losses) gains, trading  (5) —  (100.00)% (2) 2  (200.00)%
Bank-owned life insurance  158  161  (1.86)% 331  333  (0.60)%
Gain on sale of loans  400  503  (20.48)% 655  861  (23.93)%
Insurance commissions  64  99  (35.35)% 181  290  (37.59)%
Brokerage commissions  330  361  (8.59)% 673  692  (2.75)%
Debit card income  373  501  (25.55)% 706  935  (24.49)%
Other  430  591  (27.24)% 779  1,029  (24.30)%
TOTAL NON-INTEREST INCOME  2,362  2,763  (14.51)% 4,443  5,414  (17.93)%
NON-INTEREST EXPENSE:            
Salaries and employee benefits 4,919  4,608  6.75% 9,967  9,378  6.28%
Occupancy  699  614  13.84% 1,440  1,252  15.02%
Furniture and equipment  801  664  20.63% 1,548  1,313  17.90%
Software Amortization  231  242  (4.55)% 296  515  (42.52)%
Pennsylvania shares tax  278  230  20.87% 555  468  18.59%
Professional Fees  649  550  18.00% 1,215  987  23.10%
Federal Deposit Insurance Corporation deposit insurance  200  150  33.33% 402  320  25.63%
Marketing  268  204  31.37% 519  375  38.40%
Intangible amortization  78  86  (9.30)% 158  176  (10.23)%
Other  1,394  1,715  (18.72)% 2,694  3,264  (17.46)%
TOTAL NON-INTEREST EXPENSE  9,517  9,063  5.01% 18,794  18,048  4.13%
INCOME BEFORE INCOME TAX PROVISION  4,213  4,309  (2.23)% 8,010  7,981  0.36%
INCOME TAX PROVISION  733  1,223  (40.07)% 1,322  2,209  (40.15)%
NET INCOME  $3,480  $3,086  12.77% $6,688  $5,772  15.87%
Earnings attributable to noncontrolling interest  —  —  —% (1) —  —%
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS' $3,480  $3,086  12.77% $6,689  $5,772  15.89%
EARNINGS PER SHARE - BASIC  $0.74  $0.65  13.85% $1.43  $1.22  17.21%
EARNINGS PER SHARE - DILUTED  $0.74  $0.65  13.85% $1.43  $1.22  17.21%
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC  4,689,932  4,711,332  (0.45)% 4,689,656  4,723,003  (0.71)%
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED  4,703,339  4,711,332  (0.17)% 4,689,656  4,723,003  (0.71)%
DIVIDENDS DECLARED PER SHARE  $0.47  $0.47  —% $0.94  $0.94  —%


PENNS WOODS BANCORP, INC.
AVERAGE BALANCES AND INTEREST RATES

  Three Months Ended
  June 30, 2018 June 30, 2017
(Dollars in Thousands) Average
Balance		 Interest Average
Rate		 Average
Balance		 Interest Average
Rate
ASSETS:            
Tax-exempt loans  $75,859  $563  2.98% $41,685  $405  3.89%
All other loans  1,225,343  12,552  4.11% 1,082,165  10,842  4.02%
Total loans  1,301,202  13,115  4.04% 1,123,850  11,247  4.01%
Taxable securities  93,024  871  3.75% 83,895  680  3.24%
Tax-exempt securities  40,300  291  2.89% 52,850  489  3.70%
Total securities  133,324  1,162  3.49% 136,745  1,169  3.42%
Interest-bearing deposits  3,034  13  1.72% 36,662  96  1.05%
Total interest-earning assets  1,437,560  14,290  3.99% 1,297,257  12,512  3.87%
Other assets  97,034      100,356     
TOTAL ASSETS  $1,534,594      $1,397,613     
             
LIABILITIES AND SHAREHOLDERS’ EQUITY:            
Savings  $165,231  16  0.04% $158,413  15  0.04%
Super Now deposits  234,731  242  0.41% 202,692  131  0.26%
Money market deposits  243,771  290  0.48% 288,035  255  0.36%
Time deposits  253,398  942  1.49% 205,418  607  1.19%
Total interest-bearing deposits  897,131  1,490  0.67% 854,558  1,008  0.47%
Short-term borrowings  56,530  252  1.76% 10,579  4  0.15%
Long-term borrowings  123,970  666  2.12% 75,998  373  1.95%
Total borrowings 180,500  918  2.01% 86,577  377  1.73%
Total interest-bearing liabilities  1,077,631  2,408  0.89% 941,135  1,385  0.59%
Demand deposits 302,742      300,311     
Other liabilities  16,024      15,801     
Shareholders’ equity  138,197      140,366     
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $1,534,594      $1,397,613     
Interest rate spread      3.10%     3.28%
Net interest income/margin    $11,882  3.32%   $11,127  3.44%


  Three Months Ended June 30,
  2018 2017
Total interest income  $14,111  $12,209 
Total interest expense  2,408  1,385 
Net interest income  11,703  10,824 
Tax equivalent adjustment  179  303 
Net interest income (fully taxable equivalent)  $11,882  $11,127 


PENNS WOODS BANCORP, INC.
AVERAGE BALANCES AND INTEREST RATES

  Six Months Ended
  June 30, 2018 June 30, 2017
(Dollars in Thousands) Average
Balance		 Interest Average
Rate		 Average
Balance		 Interest Average
Rate
ASSETS:            
Tax-exempt loans  $75,548  $1,130  3.02% $41,959  $821  3.95%
All other loans  1,205,945  24,297  4.06% 1,069,896  21,194  3.99%
Total loans  1,281,493  25,427  4.00% 1,111,855  22,015  3.99%
Taxable securities  88,670  1,630  3.68% 86,591  1,365  3.15%
Tax-exempt securities  41,225  596  2.89% 49,779  941  3.78%
Total securities  129,895  2,226  3.43% 136,370  2,306  3.38%
Interest-bearing deposits  2,603  21  1.63% 34,924  169  0.98%
Total interest-earning assets  1,413,991  27,674  3.94% 1,283,149  24,490  3.85%
Other assets  97,318      99,934     
TOTAL ASSETS  $1,511,309      $1,383,083     
             
LIABILITIES AND SHAREHOLDERS’ EQUITY:            
Savings  $164,140  32  0.04% $157,423  30  0.04%
Super Now deposits  230,930  449  0.39% 196,032  237  0.24%
Money market deposits  240,127  500  0.42% 275,529  446  0.33%
Time deposits  244,805  1,731  1.43% 207,722  1,197  1.16%
Total interest-bearing deposits  880,002  2,712  0.62% 836,706  1,910  0.46%
Short-term borrowings  59,152  476  1.60% 10,962  8  0.15%
Long-term borrowings  119,274  1,268  2.11% 79,258  813  2.04%
Total borrowings 178,426  1,744  1.94% 90,220  821  1.81%
Total interest-bearing liabilities  1,058,428  4,456  0.84% 926,926  2,731  0.59%
Demand deposits 298,011      300,207     
Other liabilities  16,645      15,770     
Shareholders’ equity  138,225      140,180     
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $1,511,309      $1,383,083     
Interest rate spread      3.10%     3.26%
Net interest income/margin    $23,218  3.31%   $21,759  3.42%


  Six Months Ended June 30,
  2018 2017
Total interest income  $27,312  $23,891 
Total interest expense  4,456  2,731 
Net interest income  22,856  21,160 
Tax equivalent adjustment  362  599 
Net interest income (fully taxable equivalent)  $23,218  $21,759 


(Dollars in Thousands, Except Per Share Data) Quarter Ended
  6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017
Operating Data          
Net income  $3,480  $3,208  $716  $3,284  $3,086 
Net interest income  11,703  11,153  11,468  11,452  10,824 
Provision for loan losses  335  160  125  60  215 
Net security gains (losses) 15  (40) 107  298  (12)
Non-interest income, ex. net security gains (losses)  2,347  2,368  2,482  2,442  2,775 
Non-interest expense  9,517  9,524  9,248  9,566  9,063 
Performance Statistics          
Net interest margin  3.32% 3.31% 3.48% 3.57% 3.44%
Annualized return on average assets  0.91% 0.86% 0.20% 0.93% 0.88%
Annualized return on average equity  10.07% 9.18% 2.00% 9.43% 8.79%
Annualized net loan charge-offs to average loans  0.04% 0.06% 0.07% 0.08% —%
Net charge-offs  137  182  200  236  11 
Efficiency ratio  67.2% 69.8% 65.7% 68.3% 65.9%
Per Share Data          
Basic earnings per share  $0.74  $0.68  $0.16  $0.70  $0.65 
Diluted earnings per share 0.74  0.68  0.15  0.70  0.65 
Dividend declared per share  0.47  0.47  0.47  0.47  0.47 
Book value  29.66  29.45  29.47  29.79  29.53 
Common stock price:          
High  46.92  45.56  49.79  46.47  43.60 
Low  41.29  39.61  45.65  41.08  38.17 
Close  44.78  42.31  46.58  46.47  41.18 
Weighted average common shares:          
Basic  4,690  4,689  4,689  4,688  4,711 
Fully Diluted  4,703  4,689  4,782  4,688  4,711 
End-of-period common shares:          
Issued  5,011  5,010  5,009  5,009  5,008 
Treasury 320  320  320  320  320 


(Dollars in Thousands, Except Per Share Data) Quarter Ended
  6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017
Financial Condition Data:          
General          
Total assets  $1,603,273  $1,526,745  $1,474,492  $1,430,197  $1,395,364 
Loans, net  1,318,039  1,267,912  1,232,268  1,176,781  1,125,976 
Goodwill  17,104  17,104  17,104  17,104  17,104 
Intangibles  1,304  1,382  1,462  1,543  1,623 
Total deposits  1,191,019  1,192,454  1,146,320  1,153,996  1,151,110 
Noninterest-bearing  311,194  304,261  303,316  310,830  300,054 
Savings  166,183  166,243  160,698  156,437  158,101 
NOW  216,109  240,259  215,021  203,744  199,917 
Money Market  245,081  235,381  237,818  274,528  287,140 
Time Deposits  252,452  246,310  229,467  208,457  205,898 
Total interest-bearing deposits  879,825  888,193  843,004  843,166  851,056 
Core deposits*  938,567  946,144  916,853  945,539  945,212 
Shareholders’ equity  139,134  138,192  138,192  139,669  138,440 
           
Asset Quality          
Non-performing loans  $6,818  $7,641  $7,268  $8,317  $12,498 
Non-performing loans to total assets  0.43% 0.50% 0.49% 0.58% 0.90%
Allowance for loan losses  13,034  12,836  12,858  12,933  13,109 
Allowance for loan losses to total loans  0.98% 1.00% 1.03% 1.09% 1.15%
Allowance for loan losses to non-performing loans  191.17% 167.99% 176.91% 157.05% 104.56%
Non-performing loans to total loans  0.51% 0.60% 0.58% 0.69% 1.10%
           
Capitalization          
Shareholders’ equity to total assets  8.68% 9.05% 9.37% 9.77% 9.92%

* 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) 2018  2017
  2018
 2017
GAAP net income  $3,480  $3,086  $6,689  $5,772 
Less: net securities gains (losses), net of tax  12   (8)  (20) 123 
Non-GAAP operating earnings  $3,468  $3,094  $6,709  $5,649 
         
  Three Months Ended
June 30,		 Six Months Ended
June 30,
  2018  2017
  2018
 2017
Return on average assets (ROA)  0.91%  0.88%  0.89% 0.83%
Less: net securities gains (losses), net of tax  0.01%  —%  —% 0.01%
Non-GAAP operating ROA  0.90%  0.88%  0.89% 0.82%
         
  Three Months Ended
June 30,		 Six Months Ended
June 30,
  2018  2017
  2018
 2017
Return on average equity (ROE)  10.07%  8.79%  9.68% 8.24%
Less: net securities gains (losses), net of tax  0.03%  (0.03)%  (0.03)% 0.18%
Non-GAAP operating ROE  10.04%  8.82%  9.71% 8.06%
         
  Three Months Ended
June 30,		 Six Months Ended
June 30,
  2018  2017
  2018
 2017
Basic earnings per share (EPS)  $0.74  $0.65  $1.43  $1.22 
Less: net securities gains (losses), net of tax  —   (0.01)  —  0.02 
Non-GAAP basic operating EPS  $0.74  $0.66  $1.43  $1.20 
     
  Three Months Ended
June 30,		 Six Months Ended
June 30,
  2018  2017
  2018
 2017
Dilutive EPS  $0.74  $0.65  $1.43  $1.22 
Less: net securities gains (losses), net of tax  —   (0.01)  —  0.02 
Non-GAAP dilutive operating EPS  $0.74  $0.66  $1.43  $1.20