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8-K - FORM 8-K - PENSECO FINANCIAL SERVICES CORP | d8k.htm |
Exhibit 99.1
NEWS RELEASE
CONTACT: | Patrick Scanlon, Senior Vice President, Finance Division Head | |
Penseco Financial Services Corporation | ||
(570) 346-7741 | ||
FOR RELEASE: | 12:00 P.M. Eastern Time: August 1, 2011 |
Penseco Financial Services Corporation Reports Earnings as of June 30, 2011
SCRANTON, PA, August 1, 2011 Penseco Financial Services Corporation (OTC Bulletin Board: PFNS) (the Company), the Scranton, Pennsylvania based financial holding company of Penn Security Bank & Trust Company, reported net income for the three months ended June 30, 2011 of $2,606,000 or $0.80 per weighted average share compared with $3,016,000 or $0.92 per weighted average share from the year ago period, a decrease of $410,000 or 13.6%. Pre-provision net interest income decreased $296,000 or 3.6%. Net interest income, after provision for loan and lease losses, decreased $658,000 or 8.5% during the 2011 period, due to a decrease in total interest income of $471,000 or 4.5% coupled with a $362,000 increase in the provision for loan and lease losses, partially offset by reduced interest expense of $175,000 or 8.3% from lower funding costs. The decrease in total interest income was primarily attributable to investment and loan cash flows being reinvested at historically low yields. Non-interest income increased $182,000 or 6.3% largely due to net gains on the sale of other real estate owned property. Non-interest expenses increased $64,000 or 0.9%.
The Company reported net income for the six months ended June 30, 2011 of $5,375,000 or $1.64 per weighted average share compared with $5,997,000 or $1.83 per weighted average share from the year ago period, a decrease of $622,000 or 10.4%. Pre-provision net interest income decreased $604,000 or 3.6%. Net interest income, after provision for loan and lease losses, decreased $1,007,000 or 6.3% during the 2011 period, due to a decrease in total interest income of $988,000 or 4.7% and a $403,000 increase in the provision for loan and lease losses, partially offset by reduced interest expense of $384,000 or 9.1% from lower funding costs. The decrease in total interest income was primarily attributable to investment and loan cash flows being reinvested at historically low yields. Non-interest income increased $775,000 or 13.9% primarily as a result of the reversal of a contingent liability recorded in connection with the 2009 Old Forge Bank acquisition and net gains on the sale of other real estate owned property. Non-interest expenses increased $477,000 or 3.4%.
Net income from core operations, which excludes the reversal of a contingent liability recorded in connection with the 2009 Old Forge Bank acquisition, decreased $952,000 for the six months ended June 30, 2011 to $5,045,000 compared to $5,997,000 for the same period in 2010. Net income from core operations is a non-GAAP measure of net income. A reconciliation of the net income from core operations and disclosure of the non-GAAP return on assets, return on equity and dividend payout ratio derived from that measure are described in the non-GAAP reconciliation included in this press release.
Non-Interest Income
Total non-interest income increased $182,000 or 6.3%, to $3,055,000 for the three months ended June 30, 2011, compared with $2,873,000 for the same period in 2010. Trust department income increased $48,000 or 14.2% due to an increase in the market value of trust assets and new business. Service charges on deposit accounts decreased $44,000 or 7.8%, primarily due to decreased overdraft activity. Merchant transaction income increased $56,000 or 6.4%, due primarily to the increased volume of merchant transactions and new business. Brokerage fee income decreased $15,000 or 16.3%, mostly due to a lower volume of investor activity. Other fee income increased $18,000 or 4.4%. Other operating income increased $143,000 largely due to net gains on the sale of other real estate owned property. Net realized gains (losses) on securities decreased $19,000, as a result of investment securities being sold and called.
Total non-interest income increased $775,000 or 13.9% to $6,359,000 for the six months ended June 30, 2011, compared with $5,584,000 for the same period in 2010. Trust department income increased $66,000 or 9.2% due to an increase in the market value of trust assets and new business. Service charges on deposit accounts decreased $104,000 or
9.5%, primarily due to decreased overdraft activity. Merchant transaction income increased $104,000 or 5.0%, due to the increased volume of merchant transactions primarily from new business. Brokerage fee income decreased $29,000 or 17.9% mostly due to a lower volume of investor activity. Other fee income increased $46,000 or 6.0% mainly from increased debit card discounts related to the increased number of accounts. Other operating income increased $712,000 largely due to the reversal of a contingent liability of $500,000 recorded in connection with the 2009 Old Forge Bank acquisition and net gains of $245,000 on the sale of other real estate owned property.
Non-Interest Expenses
Total non-interest expenses increased $64,000 or 0.9%, to $6,869,000 for the three months ended June 30, 2011 compared with $6,805,000 for the same period in 2010. Salaries and employee benefits expense increased $154,000 or 5.0%, due primarily to merit-based increases in salaries for existing personnel and increased staffing for loan production and monitoring asset quality. Merchant transaction expenses increased $27,000 or 4.2% due to the increased volume of merchant transactions. FDIC insurance assessments decreased $190,000 or 51.4%, resulting from recently passed banking legislation. Other operating expenses increased $102,000 or 5.6% due to increased general operating expenses.
Total non-interest expenses increased $477,000 or 3.4% to $14,319,000 for the six months ended June 30, 2011 compared with $13,842,000 for the same period of 2010. Salaries and employee benefits expense increased $506,000 or 8.1%, due primarily to merit-based increases for salaries of existing personnel and increased staffing for loan production and monitoring asset quality. Expense of premises and fixed assets increased $42,000 or 2.4% largely due to increased occupancy expenses and additional depreciation from branch renovations. Merchant transaction expenses increased $49,000 or 3.4% due to the increased volume of merchant transactions. FDIC insurance assessments decreased $214,000 or 33.6%, resulting from recently passed banking legislation.
Asset Quality
The Company maintains an allowance for loan and lease losses, which reflects managements analysis of probable loan losses, as determined in accordance with the Companys allowance for loan and lease losses methodology. The ratio of the allowance for loan and lease losses to total loans was 1.08% and 1.07% as of June 30, 2011 and 2010, respectively.
Non-accrual loans equaled $5,747,000, or 0.93%, of loans at June 30, 2011, an increase of $1,713,000, or 42.5%, from $4,034,000, at December 31, 2010. There were no commitments to lend additional funds to borrowers whose loans are in non-accrual status.
Net loan charge-offs amounted to $988,000, or 0.16%, of average outstanding loans for the six months ended June 30, 2011, compared to $537,000, or 0.09%, of average loans outstanding for the six months ended June 30, 2010.
As of June 30, 2011, the Company had total impaired loans of $5,747,000. Management has determined $959,000 of the current reserve be specifically allocated to these impaired loans at June 30, 2011.
The Company continues to proactively evaluate probable loan losses and address delinquent loans by, among other things, obtaining current appraisals of collateral, increasing communication with clients and placing loans on non-accrual status when collection is in doubt and moving expeditiously in foreclosure actions.
Subsequent to June 30, 2011, approximately $1.2 million of non-accrual loans have been transferred to other real estate owned.
Income Tax Expense
Applicable income taxes decreased $130,000 or 15.5% and $87,000 or 5.3% due to lower taxable income for the three months and six months ended June 30, 2011, respectively.
PENSECO FINANCIAL SERVICES CORPORATION
FINANCIAL HIGHLIGHTS
(unaudited)
(in thousands, except per share amounts based on weighted average shares outstanding in each period)
June 30, 2011 |
June 30, 2010 |
Inc / (Dec) $ |
% Change |
|||||||||||||
Three Months Ended | ||||||||||||||||
PERFORMANCE RATIOS |
||||||||||||||||
Return on Average Assets |
1.13 | % | 1.37 | % | -17.52 | % | ||||||||||
Return on Average Equity |
8.38 | % | 10.00 | % | -16.20 | % | ||||||||||
Net Interest Margin (1) |
3.77 | % | 4.14 | % | -8.94 | % | ||||||||||
Efficiency Ratio (2) |
61.32 | % | 60.04 | % | 2.13 | % | ||||||||||
Six Months Ended | ||||||||||||||||
PERFORMANCE RATIOS |
||||||||||||||||
Return on Average Assets |
1.17 | % | 1.36 | % | -13.97 | % | ||||||||||
Return on Average Equity |
8.67 | % | 10.02 | % | -13.47 | % | ||||||||||
Net Interest Margin (1) |
3.82 | % | 4.16 | % | -8.17 | % | ||||||||||
Efficiency Ratio (2) |
62.86 | % | 61.13 | % | 2.83 | % | ||||||||||
STOCKHOLDERS VALUE |
||||||||||||||||
Net Income |
$ | 5,375 | $ | 5,997 | $ | (622 | ) | -10.37 | % | |||||||
Earnings per share |
1.64 | 1.83 | (0.19 | ) | -10.38 | % | ||||||||||
Dividends Per Share |
0.84 | 0.84 | | | ||||||||||||
Book Value Per Share |
38.44 | 36.97 | 1.47 | 3.98 | % | |||||||||||
Market Value Per Share |
38.20 | 32.53 | 5.67 | 17.43 | % | |||||||||||
Market Value/Book Value |
99.38 | % | 87.99 | % | 12.94 | % | ||||||||||
Price Earnings Multiple |
11.65 | x | 8.89 | x | 31.05 | % | ||||||||||
Dividend Payout Ratio |
51.22 | % | 45.90 | % | 11.59 | % | ||||||||||
Dividend Yield |
4.40 | % | 5.16 | % | -14.73 | % | ||||||||||
SAFETY AND SOUNDNESS |
||||||||||||||||
Stockholders Equity/Assets |
13.49 | % | 13.73 | % | -1.75 | % | ||||||||||
Total Capital/Risk Weighted Assets |
16.78 | % | 16.58 | % | 1.21 | % | ||||||||||
Tier 1 Capital/Risk Weighted Assets |
15.64 | % | 15.46 | % | 1.16 | % | ||||||||||
Tier 1 Capital/Average Assets |
10.67 | % | 10.53 | % | 1.33 | % | ||||||||||
Non-performing Assets/Total Assets |
0.63 | % | 0.46 | % | 36.96 | % | ||||||||||
Non-performing loans to period end loans |
0.93 | % | 0.46 | % | 102.17 | % | ||||||||||
Allowance for loan and lease losses to period end loans |
1.08 | % | 1.07 | % | 0.93 | % | ||||||||||
BALANCE SHEET HIGHLIGHTS |
||||||||||||||||
Total Assets |
$ | 933,269 | $ | 882,384 | $ | 50,885 | 5.77 | % | ||||||||
Total Investments |
183,841 | 188,402 | (4,561 | ) | -2.42 | % | ||||||||||
Net Loans |
612,093 | 603,236 | 8,857 | 1.47 | % | |||||||||||
Allowance for Loan and Lease Losses |
6,711 | 6,500 | 211 | 3.25 | % | |||||||||||
Total Deposits |
716,855 | 654,268 | 62,587 | 9.57 | % | |||||||||||
Stockholders Equity |
125,943 | 121,108 | 4,835 | 3.99 | % |
(1) | The net interest margin is equal to tax equivalent net interest income divided by average interest earning assets. In order to make pre-tax income on tax-exempt investments comparable to taxable investments, a tax equivalent adjustment is made to interest income. This adjustment increased interest income by $441 and $563 for the three months ended June 30, 2011 and 2010, respectively and by $888 and $1,150 for the six months ended June 30, 2011 and 2010, respectively. The Company believes that the tax equivalent presentation is consistent with industry practice. Although the Company believes that these financial measures enhance investors understanding of our business and performance, these measures should not be considered an alternative to GAAP. |
(2) | The efficiency ratio is equal to non-interest expenses, excluding amortization of core deposit intangible expense, divided by the sum of net interest income and non-interest income. Amortization of core deposit intangible expense is included in other operating expenses, and was $74 and $83 for the three months ended June 30, 2011 and 2010, respectively and $157 and $175 for the six months ended June 30, 2011 and 2010, respectively. |
PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except per share amounts)
June 30, 2011 |
June 30, 2010 |
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ASSETS |
||||||||
Cash and due from banks |
$ | 15,608 | $ | 11,316 | ||||
Interest bearing balances with banks |
25,880 | 2,197 | ||||||
Federal funds sold |
20,000 | | ||||||
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Cash and Cash Equivalents |
61,488 | 13,513 | ||||||
Investment securities: |
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Available-for-sale, at fair value |
148,904 | 147,362 | ||||||
Held-to-maturity (fair value of $36,237 and $43,371, respectively) |
34,937 | 41,040 | ||||||
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Total Investment Securities |
183,841 | 188,402 | ||||||
Loans, net of unearned income |
618,804 | 609,736 | ||||||
Less: Allowance for loan and lease losses |
6,711 | 6,500 | ||||||
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Loans, Net |
612,093 | 603,236 | ||||||
Bank premises and equipment |
13,283 | 13,033 | ||||||
Other real estate owned |
169 | 1,269 | ||||||
Accrued interest receivable |
3,402 | 3,951 | ||||||
Goodwill |
26,398 | 26,398 | ||||||
Bank owned life insurance |
15,625 | 14,644 | ||||||
Federal Home Loan Bank stock |
5,489 | 6,402 | ||||||
Other assets |
11,481 | 11,536 | ||||||
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Total Assets |
$ | 933,269 | $ | 882,384 | ||||
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LIABILITIES |
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Deposits: |
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Non-interest bearing |
$ | 118,053 | $ | 108,202 | ||||
Interest bearing |
598,802 | 546,066 | ||||||
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Total Deposits |
716,855 | 654,268 | ||||||
Other borrowed funds: |
||||||||
Securities sold under agreements to repurchase |
22,165 | 18,435 | ||||||
Short-term borrowings |
407 | 13,311 | ||||||
Long-term borrowings |
62,567 | 67,525 | ||||||
Accrued interest payable |
1,016 | 1,196 | ||||||
Other liabilities |
4,316 | 6,541 | ||||||
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Total Liabilities |
807,326 | 761,276 | ||||||
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STOCKHOLDERS EQUITY |
||||||||
Common stock; $ .01 par value, 15,000,000 shares authorized, 3,276,079 shares issued and outstanding |
33 | 33 | ||||||
Surplus |
48,865 | 48,865 | ||||||
Retained earnings |
76,927 | 71,330 | ||||||
Accumulated other comprehensive income |
118 | 880 | ||||||
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|
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Total Stockholders Equity |
125,943 | 121,108 | ||||||
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|
|
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Total Liabilities and Stockholders Equity |
$ | 933,269 | $ | 882,384 | ||||
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|
PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands, except per share amounts)
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
INTEREST INCOME |
||||||||||||||||
Interest and fees on loans |
$ | 8,328 | $ | 8,608 | $ | 16,670 | $ | 17,294 | ||||||||
Interest and dividends on investments: |
||||||||||||||||
U.S. Treasury securities and U.S. Agency obligations |
745 | 704 | 1,560 | 1,423 | ||||||||||||
States & political subdivisions |
857 | 1,094 | 1,724 | 2,233 | ||||||||||||
Other securities |
15 | 12 | 29 | 23 | ||||||||||||
Interest on Federal funds sold |
| | | | ||||||||||||
Interest on balances with banks |
4 | 2 | 6 | 4 | ||||||||||||
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|||||||||
Total Interest Income |
9,949 | 10,420 | 19,989 | 20,977 | ||||||||||||
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INTEREST EXPENSE |
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Interest on time deposits of $100,000 or more |
363 | 532 | 733 | 965 | ||||||||||||
Interest on other deposits |
955 | 886 | 1,847 | 1,860 | ||||||||||||
Interest on other borrowed funds |
604 | 679 | 1,239 | 1,378 | ||||||||||||
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Total Interest Expense |
1,922 | 2,097 | 3,819 | 4,203 | ||||||||||||
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Net Interest Income |
8,027 | 8,323 | 16,170 | 16,774 | ||||||||||||
Provision for loan and lease losses |
899 | 537 | 1,268 | 865 | ||||||||||||
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Net Interest Income After Provision for Loan and Lease Losses |
7,128 | 7,786 | 14,902 | 15,909 | ||||||||||||
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NON-INTEREST INCOME |
||||||||||||||||
Trust department income |
385 | 337 | 783 | 717 | ||||||||||||
Service charges on deposit accounts |
519 | 563 | 991 | 1,095 | ||||||||||||
Merchant transaction income |
931 | 875 | 2,173 | 2,069 | ||||||||||||
Brokerage fee income |
77 | 92 | 133 | 162 | ||||||||||||
Other fee income |
431 | 413 | 809 | 763 | ||||||||||||
Bank-owned life insurance income |
125 | 130 | 245 | 252 | ||||||||||||
Other operating income |
315 | 172 | 945 | 233 | ||||||||||||
Realized gains (losses) on securities, net |
272 | 291 | 280 | 293 | ||||||||||||
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Total Non-Interest Income |
3,055 | 2,873 | 6,359 | 5,584 | ||||||||||||
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NON-INTEREST EXPENSES |
||||||||||||||||
Salaries and employee benefits |
3,246 | 3,092 | 6,771 | 6,265 | ||||||||||||
Expense of premises and fixed assets |
806 | 835 | 1,827 | 1,785 | ||||||||||||
Merchant transaction expenses |
666 | 639 | 1,499 | 1,450 | ||||||||||||
FDIC insurance assessments |
180 | 370 | 422 | 636 | ||||||||||||
Other operating expenses |
1,971 | 1,869 | 3,800 | 3,706 | ||||||||||||
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Total Non-Interest Expenses |
6,869 | 6,805 | 14,319 | 13,842 | ||||||||||||
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Income before income taxes |
3,314 | 3,854 | 6,942 | 7,651 | ||||||||||||
Applicable income taxes |
708 | 838 | 1,567 | 1,654 | ||||||||||||
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Net Income |
$ | 2,606 | $ | 3,016 | $ | 5,375 | $ | 5,997 | ||||||||
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Weighted average shares outstanding |
3,276,079 | 3,276,079 | 3,276,079 | 2,994,059 | ||||||||||||
Earnings per Common Share |
$ | 0.80 | $ | 0.92 | $ | 1.64 | $ | 1.83 | ||||||||
Cash Dividends Declared Per Common Share |
$ | 0.42 | $ | 0.42 | $ | 0.84 | $ | 0.84 |
PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
THREE MONTHS ENDED JUNE 30, 2011 AND 2010
(unaudited)
(in thousands, except per share amounts)
Common Stock |
Surplus | Retained Earnings |
Accumulated Other Comprehensive Income |
Total Stockholders Equity |
||||||||||||||||
Balance, March 31, 2010 |
$ | 33 | $ | 48,865 | $ | 69,691 | $ | 503 | $ | 119,092 | ||||||||||
Comprehensive income: |
||||||||||||||||||||
Net income |
| | 3,016 | | 3,016 | |||||||||||||||
Other comprehensive income, net of tax |
||||||||||||||||||||
Unrealized gains on securities, net of reclassification adjustment |
| | | 377 | 377 | |||||||||||||||
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Other comprehensive income |
377 | 377 | ||||||||||||||||||
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Comprehensive income |
3,393 | |||||||||||||||||||
Cash dividends declared ($0.42 per share) |
| | (1,377 | ) | | (1,377 | ) | |||||||||||||
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Balance, June 30, 2010 |
$ | 33 | $ | 48,865 | $ | 71,330 | $ | 880 | $ | 121,108 | ||||||||||
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Balance, March 31, 2011 |
$ | 33 | $ | 48,865 | $ | 75,697 | $ | (1,320 | ) | $ | 123,275 | |||||||||
Comprehensive income: |
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Net income |
| | 2,606 | | 2,606 | |||||||||||||||
Other comprehensive income, net of tax |
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Unrealized gains on securities, net of reclassification adjustment |
| | | 1,438 | 1,438 | |||||||||||||||
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Other comprehensive income |
1,438 | 1,438 | ||||||||||||||||||
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Comprehensive income |
4,044 | |||||||||||||||||||
Cash dividends declared ($0.42 per share) |
| | (1,376 | ) | | (1,376 | ) | |||||||||||||
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Balance, June 30, 2011 |
$ | 33 | $ | 48,865 | $ | 76,927 | $ | 118 | $ | 125,943 | ||||||||||
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PENSECO FINANCIAL SERVICES CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
SIX MONTHS ENDED JUNE 30, 2011 AND 2010
(unaudited)
(in thousands, except per share amounts)
Common Stock |
Surplus | Retained Earnings |
Accumulated Other Comprehensive Income |
Total Stockholders Equity |
||||||||||||||||
Balance, December 31, 2009 |
$ | 33 | $ | 48,865 | $ | 68,086 | $ | 413 | $ | 117,397 | ||||||||||
Comprehensive income: |
||||||||||||||||||||
Net income |
| | 5,997 | | 5,997 | |||||||||||||||
Other comprehensive income, net of tax |
||||||||||||||||||||
Unrealized gains on securities, net of reclassification adjustment |
| | | 467 | 467 | |||||||||||||||
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Other comprehensive income |
467 | 467 | ||||||||||||||||||
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Comprehensive income |
6,464 | |||||||||||||||||||
Cash dividends declared ($0.84 per share) |
| | (2,753 | ) | | (2,753 | ) | |||||||||||||
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Balance, June 30, 2010 |
$ | 33 | $ | 48,865 | $ | 71,330 | $ | 880 | $ | 121,108 | ||||||||||
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Balance, December 31, 2010 |
$ | 33 | $ | 48,865 | $ | 74,304 | $ | (1,280 | ) | $ | 121,922 | |||||||||
Comprehensive income: |
||||||||||||||||||||
Net income |
| | 5,375 | | 5,375 | |||||||||||||||
Other comprehensive income, net of tax |
||||||||||||||||||||
Unrealized gains on securities, net of reclassification adjustment |
| | | 1,398 | 1,398 | |||||||||||||||
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Other comprehensive income |
1,398 | 1,398 | ||||||||||||||||||
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Comprehensive income |
6,773 | |||||||||||||||||||
Cash dividends declared ($0.84 per share) |
| | (2,752 | ) | | (2,752 | ) | |||||||||||||
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Balance, June 30, 2011 |
$ | 33 | $ | 48,865 | $ | 76,927 | $ | 118 | $ | 125,943 | ||||||||||
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About Penseco Financial Services Corporation
Penseco Financial Services Corporation, through its subsidiary Penn Security Bank & Trust Company, operates twelve offices in Lackawanna, Luzerne, Wayne and Monroe counties. The Companys stock is quoted on the OTC Bulletin Board, under the symbol, PFNS.
Safe Harbor Forward-Looking Statements
This press release, as well as other written communications made from time to time by the Company and its subsidiaries and oral communications made from time to time by management of the Company, may contain statements relating to the future results of the Company (including certain projections and business trends) that are considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995 (the PSLRA). Such forward-looking statements may be identified by the use of such words as believe, expect, anticipate, should, planned, estimated, intend and potential. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the PSLRA.
The Company cautions you that a number of important factors could cause actual results to differ materially from those currently anticipated in any forward-looking statement. Such factors include, but are not limited to: prevailing economic and political conditions, particularly in our market area; credit risk associated with our lending activities; changes in interest rates, loan demand, real estate values and competition; changes in accounting principles, policies, and guidelines; changes in any applicable law, rule, regulation or practice with respect to tax or legal issues; and other economic, competitive, governmental, regulatory and technological factors affecting the Companys operations, pricing, products and services and other factors that may be described in the Companys Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission from time to time. The forward-looking statements are made as of the date of this release, and, except as may be required by applicable law or regulation, the Company assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements.
Non-GAAP Financial Measures
Core Earnings Calculation
Certain financial measures reported in this press release exclude the effect of the reversal of a contingent liability recorded in the acquisition of Old Forge Bank on April 1, 2009. Management of the Company believes that investors understanding of the Companys performance is enhanced by disclosing these non-GAAP financial measures as a reasonable basis for comparison of the Companys ongoing results of operations. These non-GAAP measures should not be considered a substitute for GAAP-basis measures and results. Our non-GAAP measures may not be comparable to non-GAAP measures of other companies. The non-GAAP reconciliation provides a disclosure of these non-GAAP financial measures to the most closely analogous measure determined in accordance with GAAP.
The following table presents the reconciliation of non-GAAP financial measures to reported GAAP financial measures.
Three Months Ended June 30, |
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2011 | 2010 | Change | ||||||||||
Net interest income after provision for loan and lease losses |
$ | 7,128 | $ | 7,786 | $ | (658 | ) | |||||
Non-interest income |
3,055 | 2,873 | 182 | |||||||||
Non-interest expense |
(6,869 | ) | (6,805 | ) | (64 | ) | ||||||
Income tax (provision) benefit |
(708 | ) | (838 | ) | 130 | |||||||
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Net income |
2,606 | 3,016 | (410 | ) | ||||||||
Adjustments |
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Non-interest income |
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Reversal of a contingent liability recorded in the Merger |
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Total adjustments pre-tax |
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Income tax provision (benefit) |
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After tax adjustments to GAAP |
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Adjusted net income from core operations |
$ | 2,606 | $ | 3,016 | $ | (410 | ) | |||||
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Adjusted Return on Average Assets |
1.13 | % | 1.37 | % | ||||||||
Adjusted Return on Average Equity |
8.38 | % | 10.00 | % | ||||||||
Adjusted Dividend Payout Ratio |
52.50 | % | 45.65 | % |
Return on average equity (ROE) and return on average assets (ROA) for the three months ended June 30, 2011 was 8.38% and 1.13%, respectively. ROE was 10.00% and ROA was 1.37% for the same period last year. The dividend payout ratio was 52.50% for the three months ended June 30, 2011 and 45.65% for the same period last year.
Six Months Ended June 30, |
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2011 | 2010 | Change | ||||||||||
Net interest income after provision for loan and lease losses |
$ | 14,902 | $ | 15,909 | $ | (1,007 | ) | |||||
Non-interest income |
6,359 | 5,584 | 775 | |||||||||
Non-interest expense |
(14,319 | ) | (13,842 | ) | (477 | ) | ||||||
Income tax benefit (provision) |
(1,567 | ) | (1,654 | ) | 87 | |||||||
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Net income |
5,375 | 5,997 | (622 | ) | ||||||||
Adjustments |
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Non-interest income |
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Reversal of a contingent liability recorded in the Merger |
(500 | ) | | (500 | ) | |||||||
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Total adjustments pre-tax |
(500 | ) | | (500 | ) | |||||||
Income tax provision (benefit) |
170 | | 170 | |||||||||
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After tax adjustments to GAAP |
(330 | ) | | (330 | ) | |||||||
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Adjusted net income from core operations |
$ | 5,045 | $ | 5,997 | $ | (952 | ) | |||||
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Adjusted Return on Average Assets |
1.10 | % | 1.36 | % | ||||||||
Adjusted Return on Average Equity |
8.14 | % | 10.02 | % | ||||||||
Adjusted Dividend Payout Ratio |
54.55 | % | 45.90 | % |
Return on average equity (ROE) and return on average assets (ROA) for the six months ended June 30, 2011 was 8.67% (8.14% excluding the reversal of a contingent liability) and 1.17% (1.10% excluding the reversal of a contingent liability), respectively. ROE was 10.02% and ROA was 1.36% for the same period last year. The dividend payout ratio was 51.22% (54.55% excluding the reversal of a contingent liability) for the six months ended June 30, 2011 and 45.90% for the same period last year.
Management believes that tangible assets, tangible equity, and the related ratios of tangible equity to tangible assets, tangible book value per share, and market value to tangible book value, are useful to investors in evaluating the Companys results of operations and financial condition. Our intangible assets, namely goodwill and the core deposit intangible, are the result of our accounting for the Old Forge Bank merger, and we would not be able to sell those assets separately from all other assets of the business. Tangible equity and tangible book value per share are used generally as conservative measures of net worth, approximating liquidation value.
The following table presents a reconciliation of tangible assets / tangible equity.
June 30, 2011 | June 30, 2010 | |||||||||||||||
Tangible Assets | ||||||||||||||||
Total Assets |
$ | 933,269 | $ | 882,384 | ||||||||||||
Less: |
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Goodwill |
26,398 | 26,398 | ||||||||||||||
Core Deposit Intangible |
1,253 | 1,576 | ||||||||||||||
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27,651 | 27,974 | |||||||||||||||
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Tangible Assets |
$ | 905,618 | $ | 854,410 | ||||||||||||
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Tangible Equity | ||||||||||||||||
Total Equity |
$ | 125,943 | $ | 121,108 | ||||||||||||
Less: |
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Goodwill |
26,398 | 26,398 | ||||||||||||||
Core Deposit Intangible |
1,253 | 1,576 | ||||||||||||||
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27,651 | 27,974 | |||||||||||||||
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Tangible Equity |
$ | 98,292 | $ | 93,134 | ||||||||||||
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Tangible Equity / Tangible Assets |
10.85 | % | 10.90 | % | ||||||||||||
Tangible Book Value Per Share |
$ | 30.00 | $ | 28.43 | ||||||||||||
Market Value / Tangible Book Value |
127.33 | % | 114.42 | % |