Penns Woods Bancorp, Inc. Reports Fourth Quarter and Year Ended 2022 Earnings

Penns Woods Bancorp, Inc. Reports Fourth Quarter and Year Ended 2022 Earnings

GlobeNewswire

Published

WILLIAMSPORT, Pa., Jan. 30, 2023 (GLOBE NEWSWIRE) -- Penns Woods Bancorp, Inc. (NASDAQ: PWOD)Penns Woods Bancorp, Inc. achieved net income of $17.4 million for the twelve months ended December 31, 2022, resulting in basic and diluted earnings per share of $2.47.

*Highlights*

· Net income, as reported under GAAP, for the three and twelve months ended December 31, 2022 was $4.5 million and $17.4 million, respectively, compared to $4.9 million and $16.0 million for the same periods of 2021. Results for the three and twelve months ended December 31, 2022 compared to 2021 were impacted by an increase in after-tax securities losses of $315,000 (from a gain of $284,000 to a loss of $31,000) for the three month period and an increase in after-tax securities losses of $809,000 (from a gain of $521,000 to a loss of $288,000) for the twelve month period. Three and twelve month results for the periods ended December 31, 2022 were impacted by a goodwill impairment charge of $653,000 (after-tax $516,000) related to the wealth management unit (The M Group) as a decline in stock market valuations during 2022 resulted in a decreased level of net income for this entity. Results for the twelve months ended December 31, 2022 were impacted by additional compensation expense of $183,000 (after-tax $145,000) associated with the voluntary cash settlement of 346,725 outstanding stock options. In addition, an after-tax loss of $201,000 related to a branch closure negatively impacted results for the twelve months ended December 31, 2022.

· The provision for loan losses increased $875,000 for the three months and $1.3 million for the twelve months ended December 31, 2022 to $575,000 and $1.9 million, respectively, compared to ($300,000) and $640,000 for the 2021 periods. The increases in the provision for loan losses were primarily due to the significant growth in the loan portfolio.

· Basic and diluted earnings per share for the three and twelve months ended December 31, 2022 were $0.64 and $2.47. Basic and diluted earnings per share for the three and twelve months ended December 31, 2021 were $0.69 and $2.27.

· Annualized return on average assets was 0.92% for three months ended December 31, 2022, compared to 1.02% for the corresponding period of 2021. Return on average assets was 0.90% for the twelve months ended December 31, 2022, compared to 0.85% for the corresponding period of 2021.

· Annualized return on average equity was 10.92% for the three months ended December 31, 2022, compared to 11.59% for the corresponding period of 2021. Return on average equity was 10.73% for the twelve months ended December 31, 2022, compared to 9.93% for the corresponding period of 2021.*Net Income*

Net income from core operations (“core earnings”), which is a non-generally accepted accounting principles (GAAP) measure of net income excluding net securities gains or losses and goodwill impairment, was $5.1 million for the three months ended December 31, 2022 compared to $4.6 million for the same period of 2021. Core earnings were $18.2 million for the twelve months ended December 31, 2022, compared to $15.5 million for the same period of 2021. Core earnings per share for the three months ended December 31, 2022 were $0.71 basic and diluted, compared to $0.65 basic and diluted core earnings per share for the same period of 2021. Core earnings per share for the twelve months ended December 31, 2022 were $2.58 basic and diluted, compared to $2.20 basic and diluted for the same period of 2021. Annualized core return on average assets and core return on average equity were 1.04% and 12.25% for the three months ended December 31, 2022, compared to 0.96% and 10.92% for the corresponding period of 2021. Core return on average assets and core return on average equity were 0.94% and 11.22% for the twelve months ended December 31, 2022 compared to 0.82% and 9.61% for the corresponding period of 2021. Core earnings for the twelve months ended December 31, 2022 were impacted negatively by an after-tax compensation expense of $145,000 relating to the voluntary cash settlement of 346,725 stock options along with an after-tax loss of $201,000 relating to a branch closure. A reconciliation of the non-GAAP financial measures of core earnings, core return on assets, core return on equity, and core earnings per share described in this press release to the comparable GAAP financial measures is included at the end of this press release.

*Net Interest Margin*

The net interest margin for the three and twelve months ended December 31, 2022 was 3.42% and 3.24%, compared to 2.90% and 2.85% for the corresponding periods of 2021. The increase in the net interest margin for the three and twelve month periods was driven by an increase in earning asset yield of 79 and 28 basis points ("bps") as the yield on earning assets increased during 2022 due to the rate increases enacted by the Federal Open Market Committee ("FOMC"). The three and twelve month periods ended December 31, 2022 were impacted by an increase of 58 and 8 bps in the yield earned on the securities portfolio as legacy securities matured with the funds reinvested at higher rates. The FOMC rate increases during 2022 and the utilization of excess on balance sheet liquidity during the first nine months of 2022 caused the rate paid on interest-bearing deposits to increase 19 and decrease 17 bps for the three months and twelve months ended December 31, 2022, respectively, compared to the comparable periods of 2021. The excess on balance sheet liquidity allowed deposit rates to be held at historically low levels for the majority of 2022 with rate increases occurring primarily during the fourth quarter of 2022.

*Assets*

Total assets increased $55.4 million to $2.0 billion at December 31, 2022 compared to December 31, 2021.  Cash and cash equivalents decreased $223.5 million as interest-bearing accounts in other financial institutions decreased $181.7 million and fed funds sold decreased $50.0 million as excess liquidity was primarily utilized to fund the growth in the loan portfolio. Net loans increased $246.1 million to $1.6 billion at December 31, 2022 compared to December 31, 2021, as an emphasis was placed on commercial loan growth coupled with a significant increase in indirect auto lending. The investment portfolio increased $31.8 million from December 31, 2021 to December 31, 2022 as a portion of the excess cash liquidity was invested primarily into short and medium-term municipal bonds with a maturity of 10 years or less.

*Non-performing Loans*

The ratio of non-performing loans to total loans ratio decreased to 0.30% at December 31, 2022 from 0.45% at December 31, 2021, as non-performing loans decreased to $4.9 million at December 31, 2022 from $6.3 million at December 31, 2021. 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 $449,000 for the twelve months ended December 31, 2022 impacted the allowance for loan losses, which was 0.95% of total loans at December 31, 2022 compared to 1.02% at December 31, 2021.

*Deposits*

Deposits decreased $64.9 million to $1.6 billion at December 31, 2022 compared to December 31, 2021. Noninterest-bearing deposits increased $24.7 million to $519.1 million at December 31, 2022 compared to December 31, 2021.  Driving core deposit gathering efforts was the continued emphasis on increasing the utilization of electronic (internet and mobile) deposit banking among our customers. Utilization of internet and mobile banking has increased since the start of 2020 due to these efforts coupled with a change in consumer behavior due to the business and travel restrictions caused by the COVID-19 pandemic. Interest-bearing deposits decreased $89.6 million primarily due to a reduction in the Money Market Account portfolio coupled with the maturity of higher cost time deposits. A campaign to attract time deposits with a maturity of ten to twenty-four months was started during the latter part of 2022.

*Shareholders’ Equity*

Shareholders’ equity decreased $4.6 million to $167.7 million at December 31, 2022 compared to December 31, 2021.  Accumulated other comprehensive loss of $14.0 million at December 31, 2022 increased from a loss of $1.1 million at December 31, 2021 as a result of a $9.8 million net unrealized loss on available for sale securities at December 31, 2022 (compared to an unrealized gain of $2.4 million at December 31, 2021) coupled with a increase in loss of $654,000 in the defined benefit plan obligation. The current level of shareholders’ equity equates to a book value per share of $23.76 at December 31, 2022 compared to $24.37 at December 31, 2021, and an equity to asset ratio of 8.40% at December 31, 2022 and 8.88% at December 31, 2021. Dividends declared for the twelve months ended December 31, 2022 and 2021 were $1.28 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, Union, and Blair Counties, and Luzerne Bank, which operates eight branch offices providing financial services in Luzerne County, and United Insurance Solutions, LLC, which offers insurance products.  Investment and insurance products are offered through Jersey Shore State 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 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; (v) the effects of health emergencies, including the spread of infectious diseases or pandemics; or (vi) 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, 2021.

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

*PENNS WOODS BANCORP, INC.*
*CONSOLIDATED BALANCE SHEET*
*(UNAUDITED)*
  *December 31,*
*(In Thousands, Except Share and Per Share Data)*   *2022*
  *2021*
  *% Change*
ASSETS:            
Noninterest-bearing balances   $ 27,390     $ 19,233     42.41 %
Interest-bearing balances in other financial institutions     12,943       194,629     (93.35 )%
Federal funds sold     —       50,000     (100.00 )%
Total cash and cash equivalents     40,333       263,862     (84.71 )%            
Investment debt securities, available for sale, at fair value     193,673       166,410     16.38 %
Investment equity securities, at fair value     1,142       1,288     (11.34 )%
Restricted investment in bank stock, at fair value     19,171       14,531     31.93 %
Loans held for sale     3,298       3,725     (11.46 )%
Loans     1,639,731       1,392,147     17.78 %
Allowance for loan losses     (15,637 )     (14,176 )   10.31 %
Loans, net     1,624,094       1,377,971     17.86 %
Premises and equipment, net     31,844       34,025     (6.41 )%
Accrued interest receivable     9,481       8,048     17.81 %
Bank-owned life insurance     34,452       33,768     2.03 %
Investment in limited partnerships     4,783       4,607     3.82 %
Goodwill     16,450       17,104     (3.82 )%
Intangibles     327       480     (31.88 )%
Operating lease right of use asset     2,651       2,851     (7.02 )%
Deferred tax asset     6,868       2,946     133.13 %
Other assets     7,640       9,193     (16.89 )%
TOTAL ASSETS   $ 1,996,207     $ 1,940,809     2.85 %            
LIABILITIES:            
Interest-bearing deposits   $ 1,037,397     $ 1,126,955     (7.95 )%
Noninterest-bearing deposits     519,063       494,360     5.00 %
Total deposits     1,556,460       1,621,315     (4.00 )%            
Short-term borrowings     153,349       5,747     2,568.33 %
Long-term borrowings     102,783       125,963     (18.40 )%
Accrued interest payable     603       651     (7.37 )%
Operating lease liability     2,708       2,898     (6.56 )%
Other liabilities     12,639       11,961     5.67 %
TOTAL LIABILITIES     1,828,542       1,768,535     3.39 %            
SHAREHOLDERS’ EQUITY:            
Preferred stock, no par value, 3,000,000 shares authorized; no shares issued     —       —     n/a  
Common stock, par value $5.55, 22,500,000 shares authorized; 7,566,810 and 7,550,272 shares issued; 7,056,585 and 7,070,047 shares outstanding     42,039       41,945     0.22 %
Additional paid-in capital     54,252       53,795     0.85 %
Retained earnings     98,147       89,761     9.34 %
Accumulated other comprehensive (loss) gain:            
Net unrealized (loss) gain on available for sale securities     (9,819 )     2,373     (513.78 )%
Defined benefit plan     (4,139 )     (3,485 )   (18.77 )%
Treasury stock at cost, 510,225 and 480,225     (12,815 )     (12,115 )   5.78 %
TOTAL SHAREHOLDERS' EQUITY     167,665       172,274     (2.68 )%
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   $ 1,996,207     $ 1,940,809     2.85 %
  
*PENNS WOODS BANCORP, INC.*
*CONSOLIDATED STATEMENT OF INCOME*
*(UNAUDITED)*
  *Three Months Ended December 31,*   *Twelve Months Ended December 31,*
*(In Thousands, Except Share and Per Share Data)*   *2022*
  *2021*
  *% Change*   *2022*
  *2021*
  *% Change*
INTEREST AND DIVIDEND INCOME:                        
Loans including fees   $ 16,973     $ 13,406     26.61 %   $ 58,682     $ 53,232     10.24 %
Investment securities:                        
Taxable     1,084       790     37.22 %     3,634       3,281     10.76 %
Tax-exempt     229       160     43.13 %     823       655     25.65 %
Dividend and other interest income     319       343     (7.00 )%     1,789       1,246     43.58 %
TOTAL INTEREST AND DIVIDEND INCOME     18,605       14,699     26.57 %     64,928       58,414     11.15 %                        
INTEREST EXPENSE:                        
Deposits     1,499       1,064     40.88 %     3,690       5,545     (33.45 )%
Short-term borrowings     978       2     n/m       1,007       9     n/m  
Long-term borrowings     580       712     (18.54 )%     2,451       3,142     (21.99 )%
TOTAL INTEREST EXPENSE     3,057       1,778     71.93 %     7,148       8,696     (17.80 )%                        
NET INTEREST INCOME     15,548       12,921     20.33 %     57,780       49,718     16.22 %                        
PROVISION (RECOVERY) FOR LOAN LOSSES     575       (300 )   291.67 %     1,910       640     198.44 %                        
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES     14,973       13,221     13.25 %     55,870       49,078     13.84 %                        
NON-INTEREST INCOME:                        
Service charges     540       485     11.34 %     2,103       1,703     23.49 %
Debt securities (losses) gains, available for sale     (51 )     376     (113.56 )%     (219 )     699     (131.33 )%
Net equity securities gains (losses}     12       (16 )   175.00 %     (146 )     (40 )   (265.00 )%
Bank-owned life insurance     163       302     (46.03 )%     664       916     (27.51 )%
Gain on sale of loans     226       440     (48.64 )% .   1,131       2,474     (54.28 )%
Insurance commissions     105       117     (10.26 )%     491       553     (11.21 )%
Brokerage commissions     120       188     (36.17 )%     620       851     (27.14 )%
Loan broker income     324       715     (54.69 )%     1,674       2,164     (22.64 )%
Debit card income     384       345     11.30 %     1,464       1,511     (3.11 )%
Other     258       243     6.17 %     931       838     11.10 %
TOTAL NON-INTEREST INCOME     2,081       3,195     (34.87 )%     8,713       11,669     (25.33 )%                        
NON-INTEREST EXPENSE:                        
Salaries and employee benefits     5,846       5,907     (1.03 )%     24,267       23,014     5.44 %
Occupancy     700       771     (9.21 )%     3,080       3,209     (4.02 )%
Furniture and equipment     834       859     (2.91 )%     3,288       3,522     (6.64 )%
Software amortization     180       236     (23.73 )%     840       868     (3.23 )%
Pennsylvania shares tax     333       253     31.62 %     1,452       1,350     7.56 %
Professional fees     688       550     25.09 %     2,434       2,432     0.08 %
Federal Deposit Insurance Corporation deposit insurance     248       258     (3.88 )%     938       963     (2.60 )%
Marketing     255       111     129.73 %     690       545     26.61 %
Intangible amortization     35       44     (20.45 )%     154       191     (19.37 )%
Goodwill impairment     653       —     n/a       653       —     n/a  
Other     1,479       1,270     16.46 %     5,202       4,811     8.13 %
TOTAL NON-INTEREST EXPENSE     11,251       10,259     9.67 %     42,998       40,905     5.12 %
INCOME BEFORE INCOME TAX PROVISION     5,803       6,157     (5.75 )%     21,585       19,842     8.78 %
INCOME TAX PROVISION     1,294       1,278     1.25 %     4,163       3,794     9.73 %
NET INCOME   $ 4,509     $ 4,879     (7.58 )%   $ 17,422     $ 16,048     8.56 %
Earnings attributable to noncontrolling interest     —       —     — %     —       15     (100.00 )%
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS'   $ 4,509     $ 4,879     (7.58 )%   $ 17,422     $ 16,033     8.66 %
EARNINGS PER SHARE - BASIC   $ 0.64     $ 0.69     (7.25 )%   $ 2.47     $ 2.27     8.81 %
EARNINGS PER SHARE - DILUTED   $ 0.64     $ 0.69     (7.25 )%   $ 2.47     $ 2.27     8.81 %
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC     7,055,181       7,068,327     (0.19 )%     7,059,437       7,061,818     (0.03 )%
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED     7,055,181       7,068,327     (0.19 )%     7,059,437       7,061,818     (0.03 )%

*PENNS WOODS BANCORP, INC.*
*AVERAGE BALANCES AND INTEREST RATES *
*(UNAUDITED)*
  *Three Months Ended*   *December 31, 2022*   *December 31, 2021*
*(Dollars in Thousands)*   *Average 
**Balance**(1)*   *Interest*   *Average 
**Rate*   *Average 
**Balance**(1)*   *Interest*   *Average 
**Rate*
ASSETS:                        
Tax-exempt loans (3)   $ 61,756   $ 408   2.62 %   $ 46,583   $ 317   2.70 %
All other loans     1,546,338     16,651   4.27 %     1,320,972     13,156   3.95 %
Total loans (2)     1,608,094     17,059   4.21 %     1,367,555     13,473   3.91 %                        
Federal funds sold     —     —   — %     47,391     85   0.71 %                        
Taxable securities     167,405     1,329   3.22 %     148,434     978   2.67 %
Tax-exempt securities (3)     41,167     290   2.86 %     38,043     202   2.15 %
Total securities     208,572     1,619   3.15 %     186,477     1,180   2.57 %                        
Interest-bearing deposits     5,797     74   5.06 %     184,591     70   0.15 %                        
Total interest-earning assets     1,822,463     18,752   4.09 %     1,786,014     14,808   3.30 %                        
Other assets     128,084             130,859                                
TOTAL ASSETS   $ 1,950,547           $ 1,916,873                                
LIABILITIES AND SHAREHOLDERS’ EQUITY:                        
Savings   $ 249,793     66   0.10 %   $ 233,791     22   0.04 %
Super Now deposits     385,060     623   0.64 %     345,653     206   0.24 %
Money market deposits     268,519     509   0.75 %     301,651     211   0.28 %
Time deposits     144,491     301   0.83 %     218,260     625   1.14 %
Total interest-bearing deposits     1,047,863     1,499   0.57 %     1,099,355     1,064   0.38 %                        
Short-term borrowings     97,585     978   3.98 %     7,255     2   0.11 %
Long-term borrowings     102,814     580   2.24 %     125,991     712   2.25 %
Total borrowings     200,399     1,558   3.09 %     133,246     714   2.13 %                        
Total interest-bearing liabilities     1,248,262     3,057   0.97 %     1,232,601     1,778   0.57 %                        
Demand deposits     517,977             496,478        
Other liabilities     19,151             19,463        
Shareholders’ equity     165,157             168,331                                
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   $ 1,950,547           $ 1,916,873        
Interest rate spread (3)           3.12 %           2.73 %
Net interest income/margin (3)       $ 15,695   3.42 %       $ 13,030   2.90 %

1. Information on this table has been calculated using average daily balance sheets to obtain average balances.
2. Non-accrual loans have been included with loans for the purpose of analyzing net interest earnings.
3. Income and rates on fully taxable equivalent basis include an adjustment for the difference between annual income from tax-exempt obligations and the taxable equivalent of such income at the standard tax rate of 21%
*Three Months Ended December 31,* *2022*   *2021*
Total interest income $ 18,605   $ 14,699
Total interest expense   3,057     1,778
Net interest income (GAAP)   15,548     12,921
Tax equivalent adjustment   147     109
Net interest income (fully taxable equivalent) (non-GAAP) $ 15,695   $ 13,030

*PENNS WOODS BANCORP, INC.*
*AVERAGE BALANCES AND INTEREST RATES *
*(UNAUDITED)*
  *Twelve Months Ended*   *December 31, 2022*   *December 31, 2021*
*(Dollars in Thousands)*   *Average 
**Balance**(1)*   *Interest*   *Average 
**Rate*   *Average 
**Balance**(1)*   *Interest*   *Average 
**Rate*
ASSETS:                        
Tax-exempt loans (3)   $ 55,364   $ 1,441   2.60 %   $ 46,312   $ 1,308   2.82 %
All other loans     1,439,550     57,544   4.00 %     1,299,321     52,199   4.02 %
Total loans (2)     1,494,914     58,985   3.95 %     1,345,633     53,507   3.98 %                        
Federal funds sold     32,863     465   1.41 %     28,395     202   0.71 %                        
Taxable securities     156,584     4,455   2.88 %     148,066     4,083   2.80 %
Tax-exempt securities (3)     44,301     1,042   2.38 %     36,993     829   2.27 %
Total securities     200,885     5,497   2.77 %     185,059     4,912   2.69 %                        
Interest-bearing deposits     74,401     503   0.68 %     201,273     242   0.12 %                        
Total interest-earning assets     1,803,063     65,450   3.63 %     1,760,360     58,863   3.35 %                        
Other assets     128,213             129,582                                
TOTAL ASSETS   $ 1,931,276           $ 1,889,942                                
LIABILITIES AND SHAREHOLDERS’ EQUITY:                        
Savings   $ 247,003     138   0.06 %   $ 225,637     116   0.05 %
Super Now deposits     387,370     1,344   0.35 %     307,446     900   0.29 %
Money market deposits     289,820     1,105   0.38 %     305,883     972   0.32 %
Time deposits     161,982     1,103   0.68 %     244,341     3,557   1.46 %
Total interest-bearing deposits     1,086,175     3,690   0.34 %     1,083,307     5,545   0.51 %                        
Short-term borrowings     29,315     1,007   3.44 %     7,178     9   0.13 %
Long-term borrowings     110,027     2,451   2.23 %     135,474     3,142   2.32 %
Total borrowings     139,342     3,458   2.48 %     142,652     3,151   2.21 %                        
Total interest-bearing liabilities     1,225,517     7,148   0.58 %     1,225,959     8,696   0.71 %                        
Demand deposits     519,189             478,984        
Other liabilities     24,182             23,568        
Shareholders’ equity     162,388             161,431                                
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY   $ 1,931,276           $ 1,889,942        
Interest rate spread (3)           3.05 %           2.64 %
Net interest income/margin (3)       $ 58,302   3.24 %       $ 50,167   2.85 %

1. Information on this table has been calculated using average daily balance sheets to obtain average balances.
2. Non-accrual loans have been included with loans for the purpose of analyzing net interest earnings.
3. Income and rates on fully taxable equivalent basis include an adjustment for the difference between annual income from tax-exempt obligations and the taxable equivalent of such income at the standard tax rate of 21%
*Twelve Months Ended December 31,* *2022*   *2021*
Total interest income $ 64,928   $ 58,414
Total interest expense   7,148     8,696
Net interest income   57,780     49,718
Tax equivalent adjustment   522     449
Net interest income (fully taxable equivalent) (non-GAAP) $ 58,302   $ 50,167

*(Dollars in Thousands, Except Share and Per Share Data, Unaudited)*   *Quarter Ended*   *12/31/2022*   *9/30/2022*   *6/30/2022*   *3/31/2022*   *12/31/2021*
*Operating Data*                    
Net income   $ 4,509     $ 5,250     $ 4,231     $ 3,432     $ 4,879  
Net interest income     15,548       15,532       13,847       12,853       12,921  
Provision (credit) for loan losses     575       855       330       150       (300 )
Net security (losses) gains     (39 )     (211 )     (54 )     (61 )     360  
Non-interest income, excluding net security (losses) gains     2,120       2,294       2,191       2,473       2,835  
Non-interest expense     11,251       10,320       10,420       11,007       10,259                      
*Performance Statistics*                    
Net interest margin     3.42 %     3.47 %     3.12 %     2.93 %     2.90 %
Annualized return on average assets     0.92 %     1.09 %     0.88 %     0.72 %     1.02 %
Annualized return on average equity     10.92 %     12.61 %     10.15 %     8.17 %     11.59 %
Annualized net loan charge-offs (recoveries) to average loans     0.04 %     0.01 %     (0.01 )%     0.09 %     0.02 %
Net charge-offs (recoveries)     149       37       (40 )     303       81  
Efficiency ratio     59.79 %     57.70 %     64.72 %     71.53 %     64.83 %                    
*Per Share Data*                    
Basic earnings per share   $ 0.64     $ 0.74     $ 0.60     $ 0.49     $ 0.69  
Diluted earnings per share     0.64       0.74       0.60       0.49       0.69  
Dividend declared per share     0.32       0.32       0.32       0.32       0.32  
Book value     23.76       23.32       23.56       23.81       24.37  
Common stock price:                    
High     26.89       24.29       24.35       24.67       24.65  
Low     23.15       22.02       22.34       23.64       23.50  
Close     26.62       22.91       23.09       24.43       23.65  
Weighted average common shares:                    
Basic     7,055       7,051       7,059       7,073       7,068  
Fully Diluted     7,055       7,051       7,059       7,073       7,068  
End-of-period common shares:                    
Issued     7,567       7,563       7,559       7,555       7,550  
Treasury     (510 )     (510 )     (510 )     (480 )     (480 )

*(Dollars in Thousands, Except Share and Per Share Data, Unaudited)*   *Quarter Ended*   *12/31/2022*   *9/30/2022*   *6/30/2022*   *3/31/2022*   *12/31/2021*
*Financial Condition Data:*                    
*General*                    
Total assets   $ 1,996,207     $ 1,905,116     $ 1,891,806     $ 1,916,809     $ 1,940,809  
Loans, net     1,624,094       1,545,489       1,474,739       1,391,943       1,377,971  
Goodwill     16,450       17,104       17,104       17,104       17,104  
Intangibles     327       361       396       437       480  
Total deposits     1,556,460       1,590,415       1,589,579       1,612,395       1,621,315  
Noninterest-bearing     519,063       537,403       524,288       514,130       494,360  
Savings     247,952       249,532       249,057       245,661       236,312  
NOW     372,574       392,140       353,102       379,838       366,399  
Money Market     270,589       268,532       309,453       299,166       318,877  
Time Deposits     146,282       142,808       153,679       173,600       205,367  
Total interest-bearing deposits     1,037,397       1,053,012       1,065,291       1,098,265       1,126,955                      
Core deposits*     1,410,178       1,447,607       1,435,900       1,438,795       1,415,948  
Shareholders’ equity     167,665       164,489       166,054       168,427       172,274                      
*Asset Quality*                    
Non-performing loans   $ 4,890     $ 5,743     $ 5,100     $ 5,281     $ 6,250  
Non-performing loans to total assets     0.24 %     0.30 %     0.27 %     0.28 %     0.32 %
Allowance for loan losses     15,637       15,211       14,393       14,023       14,176  
Allowance for loan losses to total loans     0.95 %     0.97 %     0.97 %     1.00 %     1.02 %
Allowance for loan losses to non-performing loans     319.78 %     264.86 %     282.22 %     265.54 %     226.82 %
Non-performing loans to total loans     0.30 %     0.37 %     0.34 %     0.38 %     0.45 %                    
*Capitalization*                    
Shareholders’ equity to total assets     8.40 %     8.63 %     8.78 %     8.79 %     8.88 %

* Core deposits are defined as total deposits less time deposits

*Reconciliation of GAAP and Non-GAAP Financial Measures*
*(UNAUDITED)*
  *Three Months Ended December 31,*   *Twelve Months Ended December 31,*
*(Dollars in Thousands, Except Per Share Data)*   *2022*
  *2021*
  *2022*
  *2021*

GAAP net income   $ 4,509     $ 4,879     $ 17,422     $ 16,033  
Net securities losses (gains), net of tax     31       (284 )     288       (521 )
Goodwill impairment     516       —       516       —  
Non-GAAP core earnings   $ 5,056     $ 4,595     $ 18,226     $ 15,512                     *Three Months Ended December 31,*   *Twelve Months Ended December 31,*   *2022*
  *2021*
  *2022*
  *2021*

Return on average assets (ROA)     0.92 %     1.02 %     0.90 %     0.85 %
Net securities losses (gains), net of tax     0.01 %     (0.06 )%     0.01 %     (0.03 )%
Goodwill impairment     0.11 %     — %     0.03 %     — %
Non-GAAP core ROA     1.04 %     0.96 %     0.94 %     0.82 %                   *Three Months Ended December 31,*   *Twelve Months Ended December 31,*   *2022*
  *2021*
  *2022*
  *2021*

Return on average equity (ROE)     10.92 %     11.59 %     10.73 %     9.93 %
Net securities losses (gains), net of tax     0.08 %     (0.67 )%     0.17 %     (0.32 )%
Goodwill impairment     1.25 %     — %     0.32 %     — %
Non-GAAP core ROE     12.25 %     10.92 %     11.22 %     9.61 %                   *Three Months Ended December 31,*   *Twelve Months Ended December 31,*   *2022*
  *2021*
  *2022*
  *2021*

Basic earnings per share (EPS)   $ 0.64     $ 0.69     $ 2.47     $ 2.27  
Net securities losses (gains), net of tax     —       (0.04 )     0.04       (0.07 )
Goodwill impairment     0.07       —       0.07       —  
Non-GAAP basic core EPS   $ 0.71     $ 0.65     $ 2.58     $ 2.20             *Three Months Ended December 31,*   *Twelve Months Ended December 31,*   *2022*
  *2021*
  *2022*
  *2021*

Diluted EPS   $ 0.64     $ 0.69     $ 2.47     $ 2.27  
Net securities losses (gains), net of tax     —       (0.04 )     0.04       (0.07 )
Goodwill impairment     0.07       —       0.07       —  
Non-GAAP diluted core EPS   $ 0.71     $ 0.65     $ 2.58     $ 2.20  

Full Article