CB Financial Services, Inc. Announces 2015 Results

CARMICHAELS, Pa., Jan. 29, 2016 (GLOBE NEWSWIRE) -- CB Financial Services, Inc. (“CB” or the “Company”) (NASDAQ:CBFV), the holding company of Community Bank (the “Bank”), today announced net income increased $4.1 million, or 96.2%, to $8.4 million, for the year ended December 31, 2015 compared to $4.3 million for the year ended December 31, 2014. Earnings per share (basic and diluted) increased $0.44, or 26.9%, to $2.07 for the year ended December 31, 2015 compared to $1.63 for the year ended December 31, 2014. The annual results were largely impacted by the merger of FedFirst Financial Corporation, the Monessen, Pennsylvania based holding company for First Federal Savings Bank, with CB effective on October 31, 2014, as well as by $2.0 million of merger-related expenses incurred in the prior period only. Earnings per share did not increase in proportion to the net income percentage increase due to the issuance of common stock as part of the merger.

Net income increased $22,000, or 1.3%, to $1.8 million for the three months ended December 31, 2015 compared to $1.7 million for the three months ended December 31, 2014. Earnings per share (basic and diluted) decreased $0.07, or 13.7%, to $0.43 for the three months ended December 31, 2015 compared to $0.50 for the three months ended December 31, 2014. The quarterly results were largely impacted by a $1.0 million provision for loan losses recognized in the current period offset by $946,000 of merger-related expenses and an $840,000 pre-tax gain on sale of an other real estate owned property recognized in the prior period.

“We are pleased to report on our 2015 year-end and fourth quarter results. CB had a wonderful year,” said Barron P. McCune, Jr., Vice Chairman, President and Chief Executive Officer. “This is the first full year of operations after the acquisition of FedFirst Financial on October 31, 2014. The acquisition has proved to be an excellent boost for CB, allowing us to earn 1.01% on average assets and 9.89% on average equity, while increasing our efficiency and productivity. This performance enabled us to increase our earnings per share from $1.63 to $2.07, an increase of 27%, and also to increase our quarterly dividend from $0.21 to $0.22, an increase of nearly 5%.

Our financial results reflect certain notable events. In the second quarter of 2015, we sold $38.2 million in residential mortgages that had been originated at FedFirst Financial before the acquisition. With the sale proceeds, we were able to pay down short term debt. This transaction improved our interest rate risk and liquidity profiles, but had the effect of shrinking the balance sheet. We were pleased to be able to replace these sold mortgage loans with solid increases in our commercial and consumer loan portfolios. Also, due to the Pennsylvania budget impasse, many of our customers, particularly school districts and municipalities, did not receive their regular funding during 2015, temporarily depressing deposits. These funds were released early in 2016.

In comparing the fourth quarters of 2014 and 2015, we had a large gain on sale of a bank-owned property in the fourth quarter of 2014. In the fourth quarter of 2015, we recorded a provision to our loan loss reserve to bolster the loan loss reserve in light of a softening local economy and a recent increase in the balances of nonperforming loans. With this increase, and based on our current assessment, we expect our loan loss reserve to be well-positioned as we go forward.

We are grateful that the Bank had such an excellent 2015, with robust loan production, improved efficiency, and strong profit.  We look forward to the future with confidence and excitement.”

STATEMENT OF INCOME REVIEW

Fourth Quarter Results

Net Interest Income.  Net interest income increased $786,000, or 12.3%, to $7.2 million for the three months ended December 31, 2015 compared to $6.4 million for the three months ended December 31, 2014.

Interest and dividend income increased $832,000, or 11.8%, to $7.9 million for the three months ended December 31, 2015 compared to $7.0 million for the three months ended December 31, 2014. Interest income on loans increased $858,000 due to an increase in average loans outstanding of $80.2 million primarily due to the merger. Despite a decrease of $5.2 million in the average balance, interest income on taxable securities increased $26,000 due to an increase of 31 basis points in yield from new purchases or from higher yields on the remaining securities in the portfolio. Interest income on securities exempt from federal tax decreased $38,000 due to deploying proceeds from security calls and maturities into loans and for merger-related funding purposes in the prior period. There was a decrease of $2.6 million in the average balance on securities exempt from federal tax and a decrease of 30 basis points in yield as a result of purchasing securities with lower prevailing yields. 

Interest expense increased $46,000, or 7.4%, to $666,000 for the three months ended December 31, 2015 compared to $620,000 for the three months ended December 31, 2014. Interest expense on other borrowed funds increased $31,000 primarily due to an increase in long-term borrowings resulting from the Bank laddering a series of FHLB borrowings in 2015 to mitigate the Company’s interest rate risk in the event of rising interest rates. Interest expense on deposits increased $21,000 due to an increase in average interest-bearing deposits of $44.8 million primarily due to the merger. Despite the increase in average balances and the Bank holding rates constant throughout 2015, the average cost of interest-bearing deposits decreased 3 basis points, primarily related to the repricing of maturing certificates of deposit to lower rates.

Provision for Loan Losses.  The provision for loan losses was $1.0 million for the three months ended December 31, 2015. There was no provision for loan losses for the three months ended December 31, 2014. Net charge-offs for the three months ended December 31, 2015 were $428,000, which included a $291,000 charge-off on a commercial real estate loan in the oil and gas industry, compared to $142,000 for the three months ended December 31, 2014. Management analyzes the loan portfolio on a quarterly basis to determine the adequacy of the allowance for loan losses and the need for additional provisions for loan losses and determined the current quarter provision was necessary due to quarterly charge-offs, commercial and indirect auto loan growth and an increase in substandard loans.

Noninterest Income.  Noninterest income increased $593,000 to $2.1 million for the three months ended December 31, 2015 compared to $1.5 million for the three months ended December 31, 2014 primarily due to a $438,000 increase in insurance commissions from the acquisition of Exchange Underwriters as part of the merger. The increase in insurance commissions included $225,000 of contingency fees in the current period, which are commissions that are contingent upon several factors including, but not limited to, eligible written premiums, earned premiums, incurred losses and stop loss charges. Service fees on deposit accounts increased $162,000 primarily due to a first-year incentive for a check card brand change and an increase in check card fees from deposit accounts acquired in the merger recognized in the current period. Other miscellaneous income increased $38,000 primarily due to a decline in amortization on mortgage servicing rights related to loans sold to the FHLB as part of the Mortgage Partnership Finance (“MPF®”) program. The MPF® program enables member financial institutions to offer competitive interest rates for fixed-rate mortgage loans without assuming any of the interest rate risk associated with a long-term asset. Net gains on the sales of loans decreased $70,000 primarily due a decrease in the number of loans originated and subsequently sold to the FHLB as part of the MPF® program.

Noninterest Expense.  Noninterest expense increased $527,000, or 10.0%, to $5.8 million for the three months ended December 31, 2015 compared to $5.3 million for the three months ended December 31, 2014. Salaries and employee benefits increased $289,000 primarily due to additional employees as a result of the merger as well as normal salary increases. Occupancy and equipment increased $107,000 and $86,000, respectively, primarily due to the acquisition of branches in the merger and increased costs associated with the prior year upgrade of the data processing system to accommodate additional account activity. PA shares tax, which is calculated based on the Bank’s stockholders’ equity, increased $80,000 due to an increase in stockholders’ equity from of the merger. Amortization of core deposit intangible increased $45,000 due to amortization of the core deposit intangible from the merger. Other noninterest expense increased $144,000 primarily due to an increase in various miscellaneous expenses due to the merger, such as telephone, postage, director fees, and business travel, as well as increased insurance costs and debit card fraud losses. Merger-related expenses decreased $946,000 due to merger-related expenses incurred in the prior period only. Other real estate owned expense increased $766,000 primarily due to an $840,000 pre-tax gain on sale of an other real estate owned commercial property in the prior period. Advertising decreased $48,000 related to the termination of a cooperative marketing agreement at Exchange Underwriters.

Income Tax Expense.  Income taxes decreased $200,000 to $675,000 for the three months ended December 31, 2015 compared to $875,000 for the three months ended December 31, 2014. The effective tax rate for the three months ended December 31, 2015 was 27.8% compared to 33.5% for the three months ended December 31, 2014. The decrease in income taxes and effective tax rate was due to the nondeductibility of certain merger-related expenses in the prior period, a decrease of $178,000 in net income before income tax expense and a decrease in tax-exempt income.

Annual Results

Net Interest Income.  Net interest income increased $10.3 million, or 54.7%, to $29.2 million for the year ended December 31, 2015 compared to $18.9 million for the year ended December 31, 2014.

Interest and dividend income increased $11.1 million, or 53.1%, to $31.9 million for the year ended December 31, 2015 compared to $20.8 million for the year ended December 31, 2014. Interest income on loans increased $11.0 million due to an increase in average loans outstanding of $238.1 million primarily due to the merger. Other interest and dividend income increased $158,000 primarily due to an increase in FHLB stock dividends which included the payment of a special dividend in the first quarter of 2015 of $56,000. As a result of an increase in borrowings compared to the prior period, the Bank was required to hold additional FHLB stock. Despite a decrease of $10.4 million in the average balance, interest income on taxable securities increased $97,000 due to an increase of 40 basis points in yield from new purchases or from higher yields on the remaining securities in the portfolio. Interest income on securities exempt from federal tax decreased $211,000 due to deploying proceeds from security calls and maturities into loans and for merger-related funding purposes in the prior period. There was a decrease of $5.3 million in the average balance on securities exempt from federal tax and a decrease of 23 basis points in yield as a result of purchasing securities with lower prevailing yields.

Interest expense increased $755,000, or 38.5%, to $2.7 million for the year ended December 31, 2015 compared to $2.0 million for the year ended December 31, 2014. Interest expense on deposits increased $568,000 due to an increase in average interest-bearing deposits of $145.8 million primarily due to the merger. Despite the increase in average balances, the average cost of interest-bearing deposits decreased 2 basis points, primarily related to the repricing of maturing certificates of deposit to lower rates. Interest expense on other borrowed funds and short-term borrowings increased $163,000 and $24,000, respectively, primarily due to an increase in average borrowings of $25.2 million. The Bank laddered a series of long-term FHLB borrowings in 2015 to mitigate the Company’s interest rate risk in the event of rising interest rates.

Provision for Loan Losses.  The provision for loan losses was $2.0 million for the year ended December 31, 2015. There was no provision for loan losses in the year ended December 31, 2014. Net charge-offs for the year ended December 31, 2015 were $710,000, which included a $291,000 charge-off on a commercial real estate loan in the oil and gas industry,  compared to net charge-offs of $187,000 for the year ended December 31, 2014. Management analyzes the loan portfolio on a quarterly basis to determine the adequacy of the allowance for loan losses and the need for additional provisions for loan losses and determined the current provision was necessary due to current period charge-offs, commercial and indirect auto loan growth, and an increase in substandard loans.

Noninterest Income.  Noninterest income increased $3.8 million, or 98.9%, to $7.6 million for the year ended December 31, 2015 compared to $3.8 million for the year ended December 31, 2014 primarily due to a $3.1 million increase in insurance commissions from the acquisition of Exchange Underwriters as part of the merger. Included in insurance commissions are $565,000 of contingency fees. Service fees on deposit accounts increased $458,000 primarily due to check card fees from deposit accounts acquired in the merger and a first-year incentive for a check card brand change. Income from bank owned life insurance increased $201,000 due to the acquisition of policies in the merger. Other miscellaneous income increased $85,000 primarily due to a decline in amortization on mortgage servicing rights related to loans sold to the FHLB as part of the MPF® program. Net gains on sale of loans decreased $94,000 primarily due to losses on the sales of $38.2 million of residential loans that were acquired in the merger.

Noninterest Expense.  Noninterest expense increased $6.1 million, or 36.5%, to $22.9 million for the year ended December 31, 2015 compared to $16.8 million for the year ended December 31, 2014. Salaries and employee benefits increased $4.1 million primarily due to additional employees as a result of the merger as well as normal salary increases. Occupancy and equipment increased $559,000 and $499,000, respectively, primarily due to the acquisition of branches in the merger and increased costs associated with the prior year upgrade of the data processing system to accommodate additional account activity. Amortization of core deposit intangible increased $446,000 due to amortization of the core deposit intangible from the merger. Advertising increased $363,000 related to a cooperative marketing agreement at Exchange Underwriters and advertising initiatives to promote the merger. The cooperative marketing agreement was terminated in the fourth quarter of 2015. Other real estate owned income was $196,000 in the current period compared to $548,000 in the prior period resulting in an increase of $352,000 in expense due to a decrease in gains recognized on the sale of properties in the current period. The prior period included an $840,000 pre-tax gain on sale of an other real estate owned commercial property. PA shares tax, which is calculated based on the Bank’s stockholders’ equity, increased $322,000 due to an increase in stockholders’ equity from the merger. Contracted services increased $176,000 primarily due to increases in data processing expenses and fees associated with becoming a publicly traded company. Bankcard processing expense increased $136,000 due to the increase in the number of accounts from the merger. The FDIC assessment increased $51,000 due to the increase in deposits from the merger. Other noninterest expense increased $1.0 million primarily due to an increase in various miscellaneous expenses due to the merger, such as telephone, postage, director fees, and business travel as well as increased insurance costs and debit card fraud losses. Merger expenses decreased $2.0 million due to merger-related expenses incurred in the prior period only.

Income Tax Expense.  Income taxes increased $1.8 million to $3.4 million for the year ended December 31, 2015 compared to $1.6 million for the year ended December 31, 2014. The effective tax rate for the year ended December 31, 2015 was 29.0% compared to 27.3% for the year ended December 31, 2014. The increase in income taxes and effective tax rate was due to an increase of $6.0 million in net income before income tax expense and a decrease in tax-exempt income.

STATEMENT OF FINANCIAL CONDITION REVIEW

Assets.  Total assets decreased $15.6 million, or 1.8%, to $830.7 million at December 31, 2015 compared to $846.3 million at December 31, 2014.

Investment securities classified as available-for-sale decreased $9.6 million, or 9.1%, to $95.9 million at December 31, 2015 compared to $105.4 million at December 31, 2014. This decrease was primarily the result of calls and maturities of U.S. government agencies and obligations of states and political subdivisions that were utilized to pay down short-term borrowings and fund loans and were partially reinvested in U.S. government agencies and obligations of states and political subdivisions.

Loans, net, decreased $3.6 million, or 0.5%, to $676.9 million at December 31, 2015 compared to $680.5 million at December 31, 2014 primarily due to $38.2 million of residential loan sales in the second quarter and $11.2 million of net paydowns on residential loans partially offset by increases of $26.5 million in consumer loans (mainly indirect auto loans) and $20.2 million in commercial real estate loans. The loan sales were primarily comprised of 30-year fixed rate mortgage loans that were acquired in the merger and were secured by properties located outside the Bank’s normal lending area within the five counties it conducts business. The Company utilized the proceeds from the loan sales to payoff $14.0 million of borrowings in the third quarter and to fund commercial loan originations, which have shorter interest rate repricing durations than mortgage loans.

Liabilities.  Total liabilities decreased $20.6 million, or 2.7%, to $743.8 million at December 31, 2015 compared to $764.4 million at December 31, 2014.

Total deposits decreased $18.2 million, or 2.6%, to $679.3 million at December 31, 2015 compared to $697.5 million at December 31, 2014. There were decreases of $26.5 million in money market accounts, $5.9 million in time deposits, and $2.3 million in demand deposits, partially offset by increases of $12.8 million in brokered deposits and $3.1 million in savings accounts. The decrease in deposit balances is partly attributable to a decline in school district deposits as a result of the Pennsylvania state budget impasse as well as a decline in oil and gas industry-related deposits. Brokered deposits increased primarily due to the Bank participating in a reciprocal deposit network, which allows participating institutions to both send and receive identical amounts simultaneously and provides increased FDIC insurance coverage on customer deposit amounts greater than $250,000. The reciprocal deposit network does not share the same characteristics of traditional brokered deposits because they are based on actual customer relationships. Due to the low interest rate environment, the Bank has been selective on offering promotional interest rates and has concentrated its efforts on increasing noninterest-bearing accounts by building strong customer relationships.

Short-term borrowings decreased $14.2 million, or 30.5%, to $32.4 million at December 31, 2015 compared to $46.7 million at December 31, 2014. Conversely, other borrowed funds increased $12.9 million, or 85.0%, to $28.0 million at December 31, 2015 compared to $15.1 million at December 31, 2014. At December 31, 2015, short-term borrowings were comprised of $23.1 million of securities sold under agreements to repurchase compared to $20.9 million at December 31, 2014. The increase is related to business deposit customers whose funds, above designated target balances, are transferred into an overnight interest-earning investment account by purchasing securities from the Bank’s investment portfolio under an agreement to repurchase. Short-term Federal Home Loan Bank borrowings decreased to $9.4 million at December 31, 2015 compared to $25.8 million at December 31, 2014. In the first quarter, a portion of FHLB short-term borrowings were replaced with $15.0 million in long-term borrowings with laddered maturities designed to mitigate the Company’s interest rate risk in the event of rising interest rates. Funds generated from loan sales in the second and third quarters and security maturities and calls were utilized to payoff FHLB short-term borrowings and $15.0 million of long-term FHLB borrowings in the third quarter. Due to a decline in school district deposits in the third and fourth quarter and loan growth, the Bank borrowed $9.4 million short-term and laddered an additional $13.0 million of long-term, fixed-rate FHLB borrowings. As a result of current year activity, the weighted average interest rate on long-term borrowings decreased from 3.78% to 1.80%.

Stockholders’ Equity.  Stockholders’ equity increased $5.0 million, or 6.1%, to $86.9 million at December 31, 2015 compared to $81.9 million at December 31, 2014. During the period, net income was $8.4 million and the Company paid $3.5 million in dividends to stockholders.

About CB Financial Services, Inc

CB Financial Services, Inc. is the bank holding company for Community Bank, a Pennsylvania-chartered commercial bank. Community Bank operates 16 offices in Greene, Allegheny, Washington, Fayette, and Westmoreland Counties in southwestern Pennsylvania. Community Bank offers a broad array of retail and commercial lending and deposit services and provides commercial and personal insurance brokerage services through Exchange Underwriters, Inc., its wholly owned subsidiary. Financial highlights of the Company are attached.

For more information about CB and Community Bank, visit our website at www.communitybank.tv.

Statements contained in this news release that are not historical facts may constitute forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995 and such forward-looking statements are subject to significant risks and uncertainties. The Company intends such forward-looking statements to be covered by the safe harbor provisions contained in the Act. The Company’s ability to predict results or the actual effect of future plans or strategies is inherently uncertain.  Factors which could have a material adverse effect on the operations and future prospects of the Company and its subsidiaries include, but are not limited to, changes in market interest rates, general economic conditions, changes in federal and state regulation, actions by our competitors, loan delinquency rates, our ability to control costs and expenses, and other factors that may be described in the Company’s periodic reports as filed with the Securities and Exchange Commission. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. The Company assumes no obligation to update any forward-looking statements except as may be required by applicable law or regulation.

SELECTED FINANCIAL INFORMATION
		(Unaudited)
(Dollars in thousands, except share and per share data)		December 31,				December 31,
Selected Financial Condition Data:			2015				2014
Assets		$	830,677			$	846,314
Cash and Cash Equivalents			11,340				11,751
Securities Available-for-Sale			95,863				105,449
Loans
Real Estate:
Residential			273,227				323,280
Commercial			203,020				182,858
Construction			21,213				22,197
Commercial and Industrial			77,147				76,601
Consumer			104,155				77,611
Other			4,592				3,099
Total Loans			683,354				685,646
Allowance for Loan Losses			6,490				5,195
Loans, Net		$	676,864			$	680,451
Goodwill and Core Deposit Intangible			9,306				10,520
Deposits			679,299				697,494
Borrowings			60,448				61,820
Stockholders' Equity			86,896				81,912
		(Unaudited)								(Unaudited)
		Three Months Ended								Year Ended
		December 31,								December 31,
Selected Operations Data:			2015				2014				2015				2014
Interest and Dividend Income		$	7,857			$	7,025			$	31,917			$	20,841
Interest Expense			666				620				2,715				1,960
Net Interest Income			7,191				6,405				29,202				18,881
Provision for Loan Losses			1,030				-				2,005				-
Net Interest Income After Provision for Loan Losses			6,161				6,405				27,197				18,881
Noninterest Income:
Service Fees on Deposit Accounts			752				590				2,586				2,128
Insurance Commissions			896				458				3,536				466
Other Commissions			135				106				514				397
Net Gains on Sales of Loans			110				180				358				452
Net Gains on Sales of Investments			-				25				-				60
Income from Bank-Owned Life Insurance			120				99				474				273
Other			45				7				127				42
Total noninterest income			2,058				1,465				7,595				3,818
Noninterest Expense:
Salaries and Employee Benefits			3,027				2,738				12,493				8,380
Occupancy			451				344				1,777				1,218
Equipment			430				344				1,645				1,146
FDIC Assessment			90				124				463				412
PA Shares Tax			166				86				679				357
Contracted Services			199				187				639				463
Legal and Professional Fees			136				120				495				426
Advertising			151				199				830				467
Bankcard Processing Expense			113				103				456				320
Other Real Estate Owned Expense (Income)			14				(752	)			(196	)			(548	)
Amortization of Core Deposit Intangible			134				89				535				89
Merger-Related			-				946				-				1,979
Other			876				732				3,113				2,089
Total noninterest expense			5,787				5,260				22,929				16,798
Income Before Income Taxes			2,432				2,610				11,863				5,901
Income Taxes			675				875				3,443				1,609
Net Income		$	1,757			$	1,735			$	8,420			$	4,292
Dividends Per Share		$	0.22			$	0.21			$	0.85			$	0.84
Earnings Per Share - Basic			0.43				0.50				2.07				1.63
Earnings Per Share - Diluted			0.43				0.50				2.07				1.63
Weighted Average Shares Outstanding - Basic			4,073,020				3,491,234				4,071,855				2,633,871
Weighted Average Shares Outstanding - Diluted			4,073,020				3,491,234				4,071,855				2,635,090
		(Unaudited)								(Unaudited)
		Three Months Ended								Year Ended
		December 31,								December 31,
Selected Financial Ratios(1):			2015				2014				2015				2014
Return on Average Assets			0.84		%		0.91		%		1.01		%		0.72		%
Return on Average Equity			8.00				10.32				9.89				8.60
Average Interest-Earning Assets to Average Interest-Bearing Liabilities			134.94				134.74				134.26				137.33
Average Equity to Average Assets			10.54				8.80				10.17				8.34
Net Interest Rate Spread			3.65				3.54				3.69				3.34
Net Interest Margin			3.77				3.65				3.82				3.47
Net Charge-Offs to Average Loans			0.26				0.10				0.11				0.04
		(Unaudited)
		December 31,				December 31,
			2015				2014
Allowance For Loan Losses to Total Loans (2)			0.95		%		0.76		%
Allowance For Loan Losses to Nonperforming Loans (2)			60.69				73.92
Nonperforming Loans to Total Loans			1.56				1.03
Nonperforming Assets to Total Assets			1.32				0.86
Common Equity Tier 1 Capital (to Risk Weighted Assets) (3)			12.83				N/A
Tier 1 Capital (to Risk Weighted Assets) (3)			12.83				11.63
Total Capital (to Risk Weighted Assets) (3)			13.89				12.50
Tier 1 Leverage (to Adjusted Total Assets) (3)			9.60				9.33
Common Equity Tier 1 Capital (to Risk Weighted Assets) (4)			13.11				N/A
Tier 1 Capital (to Risk Weighted Assets) (4)			13.11				11.82
Total Capital (to Risk Weighted Assets) (4)			14.17				13.06
Tier 1 Leverage (to Adjusted Total Assets) (4)			9.78				9.48
Book Value Per Share		$	21.29			$	20.12
Outstanding Shares			4,081,017				4,071,462
(1) Interim period ratios are calculated on an annualized basis.
(2) Loans acquired in connection with the merger with FedFirst Financial Corporation were recorded at their estimated fair value at the acquisition date
and did not include a carryover of the pre-merger allowance for loan losses.
(3) Capital ratios are for Community Bank only.
(4) Capital ratios are for CB Financial Services, Inc.
Note:
Certain items previously reported may have been reclassified to conform with the current reporting period’s format.

  

AVERAGE BALANCES AND YIELDS
The following tables present information regarding average balances of assets and liabilities, the total dollar amounts of interest income and dividends from average interest-earning assets, the total dollar amounts of interest expense on average interest-bearing liabilities, and the resulting average yields and costs. Average balances are derived from daily balances over the periods indicated. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. Tax-equivalent yield adjustments have been made for tax exempt loan and securities income utilizing a marginal federal tax rate of 34%. As such, amounts will not agree to income as reported in the consolidated financial statements. Average balances for loans are net of the allowance for loan losses, but include nonaccrual loans. The yields and costs for the periods indicated are derived by dividing income or expense by the average balances of assets or liabilities, respectively, for the periods presented and are expressed in annualized rates.
				(Dollars in thousands)
				Three Months Ended December 31,
				2015											2014
								Interest											Interest
				Average				and				Yield/			Average				and				Yield/
				Balance				Dividends				Cost (4)			Balance				Dividends				Cost (4)
Assets:
Interest-Earning Assets:
	Loans, Net			$	669,166			$	7,333			4.35	%		$	588,930			$	6,470			4.36	%
	Investment Securities
		Taxable			57,251				255			1.78				62,438				229			1.47
		Exempt From Federal Tax			40,927				398			3.89				43,533				456			4.19
	Other Interest-Earning Assets				5,685				29			2.02				19,212				43			0.89
		Total Interest-Earning Assets			773,029				8,015			4.11				714,113				7,198			4.00
Noninterest-Earning Assets					53,893											44,458
		Total Assets		$	826,922										$	758,571
Liabilities and
	Stockholders' equity:
Interest-Bearing Liabilities:
	Interest-Bearing Demand Deposits			$	111,705				45			0.16	%		$	93,686				42			0.18	%
	Savings				121,634				56			0.18				110,555				50			0.18
	Money Market				142,129				87			0.24				144,806				87			0.24
	Time Deposits				148,361				386			1.03				129,957				374			1.14
		Total Interest-Bearing Deposits			523,829				574			0.43				479,004				553			0.46
	Borrowings				49,022				92			0.74				50,997				67			0.52
		Total Interest-Bearing Liabilities			572,851				666			0.46				530,001				620			0.46
Noninterest-Bearing Demand Deposits					162,089											158,045
Other Liabilities					4,819											3,793
		Total Liabilities			739,759											691,839
Stockholders' Equity					87,163											66,732
		Total Liabilities and
			Stockholders' Equity	$	826,922										$	758,571
Net Interest Income								$	7,349										$	6,578
Net Interest Rate Spread (1)												3.65	%										3.54	%
Net Interest-Earning Assets (2)				$	200,178										$	184,112
Net Interest Margin (3)												3.77											3.65
Return on Average Assets												0.84											0.91
Return on Average Equity												8.00											10.32
Average Equity to Average Assets												10.54											8.80
Average Interest-Earning Assets to
	Average Interest-Bearing Liabilities											134.94											134.74
(1) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the
		weighted average cost of interest-bearing liabilities.
(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average total interest-earning assets.
(4) Annualized.
				(Dollars in thousands)
				Year Ended December 31,
				2015											2014
								Interest											Interest
				Average				and				Yield/			Average				and				Yield/
				Balance				Dividends				Cost			Balance				Dividends				Cost
Assets:
Interest-Earning Assets:
	Loans, Net			$	671,776			$	29,668			4.42	%		$	433,668			$	18,589			4.29	%
	Investment Securities
		Taxable			57,082				959			1.68				67,512				862			1.28
		Exempt From Federal Tax			41,892				1,661			3.96				47,184				1,978			4.19
	Other Interest-Earning Assets				11,318				281			2.48				16,637				138			0.83
		Total Interest-Earning Assets			782,068				32,569			4.16				565,001				21,567			3.82
Noninterest-Earning Assets					55,300											33,520
		Total Assets		$	837,368										$	598,521
Liabilities and
	Stockholders' equity:
Interest-Bearing Liabilities:
	Interest-Bearing Demand Deposits			$	104,202				165			0.16	%		$	77,715				147			0.19	%
	Savings				122,652				222			0.18				94,856				175			0.18
	Money Market				151,338				355			0.23				115,585				303			0.26
	Time Deposits				151,730				1,601			1.06				95,920				1,150			1.20
		Total Interest-Bearing Deposits			529,922				2,343			0.44				384,076				1,775			0.46
	Borrowings				52,588				372			0.71				27,340				185			0.68
		Total Interest-Bearing Liabilities			582,510				2,715			0.47				411,416				1,960			0.48
Noninterest-Bearing Demand Deposits					164,015											133,887
Other Liabilities					5,681											3,302
		Total Liabilities			752,206											548,605
Stockholders' Equity					85,162											49,916
		Total Liabilities and
			Stockholders' Equity	$	837,368										$	598,521
Net Interest Income								$	29,854										$	19,607
Net Interest Rate Spread (1)												3.69	%										3.34	%
Net Interest-Earning Assets (2)				$	199,558										$	153,585
Net Interest Margin (3)												3.82											3.47
Return on Average Assets												1.01											0.72
Return on Average Equity												9.89											8.60
Average Equity to Average Assets												10.17											8.34
Average Interest-Earning Assets to
	Average Interest-Bearing Liabilities											134.26											137.33
(1) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the
		weighted average cost of interest-bearing liabilities.
(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average total interest-earning assets.

Contact: 
                    Barron P. McCune, Jr.
                    Vice Chairman, President and Chief Executive Officer
                    Phone: (724) 225-2400
                    Fax: (724) 225-4903