Civista Bancshares (CIVB) 8-K Civista Bancshares, Inc. Announces Record 2019 Earnings

Exhibit 99.1

Civista Bancshares, Inc. Announces Record 2019 Earnings

Sandusky, Ohio, February 7, 2020 /PRNewswire/– Civista Bancshares, Inc. (NASDAQ:CIVB) (“Civista”) reported net income available to common shareholders of $7.7 million, or $0.47 per diluted share, for the fourth quarter of 2019, compared to $7.4 million, or $0.45 per diluted share, for the fourth quarter of 2018.

For the year ended December 31, 2019, Civista reported net income available to common shareholders of $33.2 million, or $2.01 per diluted share, compared to $13.2 million, or $1.02 per diluted share, in 2018. This represents the highest annual net income and diluted earnings per share in Civista’s history.

“I am very proud of the results that our team put together for 2019 for our customers and our shareholders. In addition to record earnings, we increased loans 9.4%, deposits 6.3% and our overall asset growth was 8.0% all while maintaining very strong asset quality. During the fourth quarter, we opened a full-service branch in Beachwood, Ohio which is on the east-side of Cleveland. We have had a very successful loan production office in the area for a few years. This full-service office will allow us to serve all of the needs of our current and prospective customers in the Cleveland area. Finally, the measure that means a lot to our investors, the total return on our stock, for 2019 was 43%.” said Dennis G. Shaffer, President and CEO of Civista.

Adjusted Earnings

Financial results for the fourth quarter and year ended December 31, 2018 included $782 thousand and $12.7 million respectively, in acquisition and integration expenses, as well as a loss on sale of securities of $413 thousand. Excluding these items, adjusted earnings were $8.1 million, or $0.49 diluted earnings per share, for the fourth quarter of 2018 and $24.7 million, or $1.85 diluted earnings per share, for the year ended December 31, 2018.

A reconciliation of adjusted earnings to net income according to accounting principles generally accepted in the United States (“GAAP”) is provided in the financial tables at the end of this press release.

Results of Operations:

Net interest income increased $477 thousand, or 2.3%, for the fourth quarter of 2019 and $19.0 million, or 28.7%, for the year ended December 31, compared to the same periods of 2018.

Interest income increased $814 thousand, or 3.4%, for the fourth quarter of 2019 and $24.4 million or 33.1% for the year ended December 31. The increase in interest income included accretion income of $619 thousand and $2.5 million for the fourth quarter and year ended December 31, 2019. The accretion included in interest income for the fourth quarter and year ended December 31, 2018 was $806 thousand. Interest income further increased for both periods due to an increase in average earning assets. Whileyear-to-date yields increased, the fourth quarter yields decreased 18 basis points across all asset categories.

Interest expense increased $337 thousand, or 11.4 %, for the fourth quarter of 2019 and $5.4 million, or 71.1%, for the year ended December 31, compared to 2018. The increase in interest expense for both periods is due to an increase in average balances and an increase in the cost of interest-bearing liabilities.

The net interest margin for the fourth quarter of 2019 decreased 20 basis points to 4.18% compared to 4.38% for the same period a year ago. The net interest margin for the year ended 2019 increased 10 basis points to 4.31% compared to 4.21% for 2018.

The 2019 net interest margin included accretion income of 14 basis points and 15 basis points for the fourth quarter and year to date, respectively. The 2018 net interest margin included accretion income of 22 basis points and 6 basis points for the fourth quarter and year to date, respectively.

Mr. Shaffer continued, “The interest rate environment was very interesting in 2019. After a rate increase in December of 2018, we experienced three rate decreases in 2019. With the volatility in rates we experienced, I am pleased with where we have ended 2019.”

Average Balance Analysis

(Unaudited - Dollars in thousands)

	Three Months Ended December 31,
	2019										2018
	Average							Yield/			Average							Yield/
Assets:	balance				Interest			rate *			balance				Interest			rate *
Interest-earning assets:
Loans **		$	1,676,769			$	21,577		5.11	%		$	1,532,012			$	20,580		5.33	%
Taxable securities			190,898				1,429		3.05	%			205,200				1,702		3.27	%
Non-taxable securities			181,741				1,439		4.27	%			147,212				1,304		4.44	%
Interest-bearing deposits in other banks			20,767				76		1.45	%			23,542				121		2.04	%
Total interest-earning assets		$	2,070,175				24,521		4.82	%		$	1,907,966				23,707		5.00	%
Noninterest-earning assets:
Cash and due from financial institutions			29,473										27,187
Premises and equipment, net			22,248										22,635
Accrued interest receivable			7,559										7,189
Intangible assets			85,388										85,895
Other assets			25,829										22,903
Bank owned life insurance			44,841										42,818
Less allowance for loan losses			(14,245	)									(13,459	)
Total Assets		$	2,271,268									$	2,103,134
Liabilities and Shareholders Equity:
Interest-bearing liabilities:
Demand and savings		$	890,825			$	712		0.32	%		$	854,303			$	623		0.29	%
Time			269,674				1,382		2.03	%			266,573				1,075		1.60	%
FHLB advances			205,040				871		1.69	%			153,920				911		2.35	%
Federal funds purchased			543				1		0.73	%			462				3		2.58	%
Subordinated debentures			29,427				329		4.44	%			29,427				345		4.65	%
Repurchase Agreements			17,898				4		0.09	%			20,193				5		0.10	%
Total interest-bearing liabilities		$	1,413,407				3,299		0.93	%		$	1,324,878				2,962		0.89	%
Noninterest-bearing deposits			500,953										470,645
Other liabilities			27,274										17,515
Shareholders’ Equity			329,634										290,096
Total Liabilities and Shareholders’ Equity		$	2,271,268									$	2,103,134
Net interest income and interest rate spread						$	21,222		3.89	%						$	20,745		4.11	%
Net interest margin									4.18	%									4.38	%

* - Average yields are presented on a tax equivalent basis. The tax equivalent effect associated with loans and investments, included in the yields above, was $386 thousand and 350 thousand for the periods ended December 31, 2019 and 2018, respectively. See reconciliation ofnon-GAAP measures at the end of this press release.

** - Average balance includes nonaccrual loans

Average Balance Analysis

(Unaudited - Dollars in thousands)

	Twelve Months Ended December 31,
	2019										2018
	Average							Yield/			Average							Yield/
Assets:	balance				Interest			rate *			balance				Interest			rate *
Interest-earning assets:
Loans **		$	1,612,975			$	84,972		5.27	%		$	1,274,779			$	64,196		5.04	%
Taxable securities			200,074				6,584		3.35	%			159,451				4,770		2.97	%
Non-taxable securities			172,812				5,647		4.36	%			114,547				3,976		4.43	%
Interest-bearing deposits in other banks			38,359				851		2.22	%			45,766				735		1.61	%
Total interest-earning assets		$	2,024,220				98,054		4.95	%		$	1,594,543				73,677		4.69	%
Noninterest-earning assets:
Cash and due from financial institutions			47,472										43,247
Premises and equipment, net			21,946										19,045
Accrued interest receivable			7,088										5,514
Intangible assets			85,744										45,524
Other assets			24,273										17,678
Bank owned life insurance			44,352										30,483
Less allowance for loan losses			(13,984	)									(13,211	)
Total Assets		$	2,241,111									$	1,742,823
Liabilities and Shareholders Equity:
Interest-bearing liabilities:
Demand and savings		$	869,340			$	2,871		0.33	%		$	685,497			$	1,442		0.21	%
Time			269,823				5,186		1.92	%			189,600				2,316		1.22	%
FHLB			161,047				3,452		2.14	%			119,753				2,471		2.06	%
Federal funds purchased			137				3		2.19	%			116				3		2.59	%
Subordinated debentures			29,427				1,423		4.84	%			29,427				1,320		4.49	%
Repurchase Agreements			18,321				19		0.10	%			18,456				18		0.10	%
Total interest-bearing liabilities		$	1,348,095				12,954		0.96	%		$	1,042,849				7,570		0.73	%
Noninterest-bearing deposits			550,638										466,763
Other liabilities			24,072										15,840
Shareholders’ Equity			318,306										217,371
Total Liabilities and Shareholders’ Equity		$	2,241,111									$	1,742,823
Net interest income and interest rate spread						$	85,100		3.99	%						$	66,107		3.96	%
Net interest margin									4.31	%									4.21	%

* - Average yields are presented on a tax equivalent basis. The tax equivalent effect associated with loans and investments, included in the yields above, was $1.52 million and $1.06 million for the periods ended December 31, 2019 and 2018, respectively. See reconciliation ofnon-GAAP measures at the end of this press release.

** - Average balance includes nonaccrual loans

Provision for loan losses was $885 thousand for the fourth-quarter and $1.0 million for the year ended December 31, 2019, compared to $390 thousand for the fourth quarter and $780 thousand for the year ended December 31, 2018, respectively. The increase in provision for loan losses is due to an increase in loan volume.

Mr. Shaffer continued, “While we had net recoveries for the year, the success we have had in growing loans required us to provide for loan losses even during a period of strong asset quality.”

Noninterest income totaled $5.6 million, an increase of $789 thousand, or 16.3%, for the fourth quarter of 2019 compared to the prior year’s fourth quarter. Noninterest income for the year of 2019 totaled $22.4 million, an increase of $4.3 million, or 23.8%, compared to 2018.

Noninterest income
(unaudited - dollars in thousands)	Three months ended December 31,
	2019			2018				$  change				% change
Service charges		$	1,662		$	1,496			$	166			11.1	%
Net gain on sale of securities			55			(103	)			158			153.4	%
Net gain on sale of loans			1,006			386				620			160.6	%
ATM/Interchange fees			1,185			1,030				155			15.0	%
Wealth management fees			937			1,108				(171	)		-15.4	%
Bank owned life insurance			254			286				(32	)		-11.2	%
Other			528			635				(107	)		-16.9	%
Total noninterest income		$	5,627		$	4,838			$	789			16.3	%
Noninterest income
(unaudited - dollars in thousands)	Twelve months ended December 31,
	2019			2018				$  change				% change
Service charges		$	6,395		$	5,208			$	1,187			22.8	%
Net gain (loss) on sale of securities			153			(387	)			540			139.5	%
Net gain on sale of loans			2,707			1,621				1,086			67.0	%
ATM/Interchange fees			4,056			2,794				1,262			45.2	%
Wealth management fees			3,670			3,669				1			0.0	%
Bank owned life insurance			1,007			718				289			40.3	%
Tax refund processing fees			2,750			2,750				-			0.0	%
Other			1,705			1,758				(53	)		-3.0	%
Total noninterest income		$	22,443		$	18,131			$	4,312			23.8	%

The increases in service charge fee income and ATM/Interchange fees income for both the fourth quarter and year, and bank owned life insurance for the year, are primarily attributable to the Company’s acquisition of UCB during the third quarter of 2018. Bank owned life insurance declined in the fourth quarter of 2019 as a result of lower yield on the portfolio compared to 2018.

The net gain on sale of securities was affected by a loss of $392 thousand in 2018, which was part of a restructuring of securities after the UCB acquisition.

The net gain on sale of loans increased due to strong mortgage activity. During the fourth-quarter of 2019, Civista sold $45.2 million of mortgages compared to $21.4 million in 2018.Year-to-date mortgage loans sold totaled $125.8 million in 2019 compared to $79.5 million in 2018. The decrease in wealth management fees for the fourth quarter is primarily due to a $245 thousand accrual adjustment made in 2018 to adopt the revenue recognition standard.

Noninterest expense totaled $17.1 million for the fourth quarter of 2019, an increase of $737 thousand, or 4.5%, compared to 2018. Noninterest expense for the year of 2019 totaled $66.9 million, an increase of $268 thousand, or 0.4%, compared to 2018.

Noninterest expense
(unaudited - dollars in thousands)	Three months ended December 31,
	2019			2018			$ change				% change
Compensation expense		$	10,097		$	9,668		$	429			4.4	%
Net occupancy and equipment			1,671			1,573			98			6.2	%
Contracted data processing			530			904			(374	)		-41.4	%
Taxes and assessments			286			487			(201	)		-41.3	%
Professional services			693			816			(123	)		-15.1	%
Amortization of intangible assets			235			281			(46	)		-16.4	%
Marketing			300			194			106			54.6	%
Other			3,316			2,468			848			34.4	%
Total noninterest expense		$	17,128		$	16,391		$	737			4.5	%
Noninterest expense
(unaudited - dollars in thousands)	Twelve months ended December 31,
	2019			2018			$ change				% change
Compensation expense		$	39,156		$	37,299		$	1,857			5.0	%
Net occupancy and equipment			6,081			5,017			1,064			21.2	%
Contracted data processing			1,831			7,140			(5,309	)		-74.4	%
Taxes and assessments			1,981			1,906			75			3.9	%
Professional services			2,844			4,229			(1,385	)		-32.8	%
Amortization of intangible assets			945			366			579			158.2	%
Marketing			1,411			1,182			229			19.4	%
Other			12,698			9,540			3,158			33.1	%
Total noninterest expense		$	66,947		$	66,679		$	268			0.4	%

After adjusting the fourth quarter andyear-to-date periods of 2018, which included $172 thousand and $5.2 million of acquisition expenses, compensation expense increased $601 thousand and $7.1 million for the three and twelve-month periods ending December 31, 2019, respectively. The increase is due to an increase in full time equivalent (FTE) employees and annual pay increases. FTE employees increased 75 to 445 FTE compared to the same period of 2018, as a result of the UCB acquisition.

The increase in net occupancy and equipment expense is primarily due to the addition of eight branches from acquisition of UCB as well as the opening of our Beachwood branch at the end of October. The decreases in contracted data processing expenses are primarily due to $260 thousand for fourth quarter and $5.5 million foryear-to-date 2018 for data processing conversion expenses of UCB. The decreases in professional services is primarily due to the 2018 three and twelve-month periods include $139 thousand and $1.6 million of legal and consulting expenses related to the UCB acquisition, respectively.

The efficiency ratio was 61.4% for the twelve months ended December 31, 2019 compared to 78.2% for the twelve months ended December 31, 2018. Excluding the merger related expenses, the efficiency ratio would have been 62.9% for the twelve months ended December 31, 2018. See thenon-GAAP reconciliation at the end of this document.

Civista’s effective income tax rate for the fourth quarter andyear-to-date period ended December 31, 2019 was 11.3% and 14.4%, respectively, compared to 14.0% and 15.3% in 2018.

Balance Sheet

Total assets increased $170.6 million, or 8.0%, from December 31, 2018 to December 31, 2019, primarily due to loan growth.

End of period loan balances

(dollars in thousands)

	December 31,			December 31,
	2019			2018			$  Change				% Change
Commercial and Agriculture		$	203,110		$	177,101		$	26,009			14.7	%
Commercial Real Estate:
Owner Occupied			245,606			210,121			35,485			16.9	%
Non-owner Occupied			592,222			523,598			68,624			13.1	%
Residential Real Estate			463,032			457,850			5,182			1.1	%
Real Estate Construction			155,825			135,195			20,630			15.3	%
Farm Real Estate			34,114			38,513			(4,399	)		-11.4	%
Consumer and Other			15,061			19,563			(4,502	)		-23.0	%
Total Loans		$	1,708,970		$	1,561,941		$	147,029			9.4	%

Loan growth during 2019 totaled $147.0 million, led by increases of $104.1 million in Commercial Real Estate, $20.6 million in Real Estate Construction and $26.0 million in Commercial and Agriculture. Growth has been consistent across the entire footprint, with amplified growth in the Cleveland, Columbus and Cincinnati MSAs.

Mr. Shaffer continued, “We ended 2019 with the largest loan portfolio ever for Civista. The year ended with a tremendous amount of momentum as loan growth in the fourth quarter was $60.3 million, or 14.5%, annualized. In addition, we had a record year in residential mortgage loan production, originating $194.4 million of loans, of which $126.7 million were sold or held for sale.”

Total deposits increased $98.9 million, or 6.3%, from December 31, 2018 to December 31, 2019.

End of period deposit balances

(dollars in thousands)

	December 31, 2019			December 31, 2018			$ Change				% Change
Noninterest-bearing demand		$	512,553		$	468,083		$	44,470			9.5	%
Interest-bearing demand			301,674			261,996			39,678			15.1	%
Savings and money market			588,697			582,128			6,569			1.1	%
Time deposits			275,840			262,686			13,154			5.0	%
Brokered deposits			-			5,000			(5,000	)		-100.0	%
Total Deposits		$	1,678,764		$	1,579,893		$	98,871			6.3	%

The increase in noninterest-bearing demand is primarily due to an increase in business deposits of $49.6 million. Interest-bearing demand deposits increased primarily due to an increase in public fund accounts of $23.9 million.

Federal Home Loan Bank advances at December 31, 2019 increased $32.9 million, or 17.0%, to $226.5 million from December 31, 2018 to help fund loan growth.

Total shareholders’ equity increased $31.2 million, or 10.4%, from December 31, 2018 to December 31, 2019. Retained earnings increased $26.7 million. Approximately $9.0 million of preferred stock was converted to 1.2 million shares of common stock during 2019. Approximately $400 thousand of preferred stock was redeemed on December 20, 2019. As of December 31, 2019, all of the preferred shares have been converted to common shares, or were redeemed.

Mr. Shaffer continued, “In October we announced the upcoming redemption of the convertible preferred shares that were issued in 2013. As the shares were heavily in the money, the majority of the holders converted their shares prior to redemption.”

Stock Repurchase Program

During 2019, Civista repurchased 188,200 shares for $3.9 million, which equates to a weighted average price of $20.77 per share. A new share repurchase plan was approved in December 2019, authorizing the repurchase of up to 672,000 shares of outstanding common shares, all of which were available for purchase at December 31, 2019.

Asset Quality

The Company recorded net recoveries of $53 thousand for the twelve months of 2019 compared to net charge-offs of $235 thousand for the same period of 2018.

Allowance for Loan Losses (dollars in thousands)
	December 31, 2019				December 31, 2018
Beginning of period		$	13,679			$	13,134
Charge-offs			(776	)			(903	)
Recoveries			829				668
Provision			1,035				780
End of period		$	14,767			$	13,679

The allowance for loan losses to loans was 0.86% and 0.88% for 2019 and 2018, respectively. Thenon-performing assets to assets ratio decreased to 0.39% from 0.46% in 2018. The allowance for loan losses tonon-performing loans increased to 161.95% from 137.87% in 2018.

Non-performing assets at December 31, 2019 were $9.1 million, an 8.1% decrease from December 31, 2018.

Non-performing Assets (dollars in thousands)	December 31,			December 31,
	2019			2018
Non-accrual loans		$	6,115		$	6,898
Restructured loans			3,004			3,024
Totalnon-performing loans			9,119			9,922
Other Real Estate Owned			-			-
Totalnon-performing assets		$	9,119		$	9,922

Conference Call and Webcast

Civista Bancshares, Inc. will also host a conference call to discuss the Company’s financial results for the fourth quarter of 2019 at 1:00 p.m. ET on Friday, February 7, 2020. Interested parties can access the live webcast of the conference call through the Investor Relations section of the Company’s website, www.civb.com. Participants can also listen to the conference call by dialing855-238-2712 and ask to be joined into the Civista Bancshares, Inc. Fourth Quarter 2019 Earnings call. Please log in or dial in at least 10 minutes prior to the start time to ensure a connection.

An archive of the webcast will be available for one year on the Investor Relations section of the Company’s website (www.civb.com).

Non-GAAP Financial Measures

Some of the financial measures included in this press release are not measures of financial performance recognized in accordance with GAAP. Thesenon-GAAP financial measures include “Adjusted Earnings,” and “Adjusted Efficiency Ratio.” The Company believes thesenon-GAAP financial measures provide both management and investors a more complete understanding of the Company’s profitability. Thesenon-GAAP financial measures are supplemental and are not a substitute for any analysis based on GAAP financial measures. Not all companies use the same calculation of these measures; therefore, this presentation may not be comparable to other similarly titled measures as presented by other companies.

Forward Looking Statements

This press release may contain forward-looking statements regarding the financial performance, business prospects, growth and operating strategies of Civista. For these statements, Civista claims the protections of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Statements in this press release should be considered in conjunction with the other information available about Civista, including the information in the filings we make with the Securities and Exchange Commission. Forward-looking statements provide current expectations or forecasts of future events and are not guarantees of future performance. The forward-looking statements are based on management’s expectations and are subject to a number of risks and uncertainties. We have tried, wherever possible, to identify such statements by using words such as “anticipate,” “estimate,” “project,” “intend,” “plan,” “believe,” “will” and similar expressions in connection with any discussion of future operating or financial performance. Although management believes that the expectations reflected in such forward-looking statements are reasonable, actual results may differ materially from those expressed or implied in such statements. Risks and uncertainties that could cause actual results to differ materially include risk factors relating to the banking industry and the other factors detailed from time to time in Civista’ reports filed with the Securities and Exchange Commission, including those described in “Item 1A Risk Factors” of Part I of Civista’s Annual Report on Form10-K for the fiscal year ended December 31, 2018. Undue reliance should not be placed on the forward-looking statements, which speak only as of the date hereof. Civista does not undertake, and specifically disclaims any obligation, to update any forward-looking statement to reflect the events or circumstances after the date on which the forward-looking statement is made, or reflect the occurrence of unanticipated events, except to the extent required by law.

Civista Bancshares, Inc. is a $2.3 billion financial holding company headquartered in Sandusky, Ohio. The Company’s banking subsidiary, Civista Bank, operates 37 locations in Northern, Central and Southwestern Ohio, Southeastern Indiana and Northern Kentucky. Civista Bancshares, Inc. may be accessed at www.civb.com. The Company’s common shares are traded on the NASDAQ Capital Market under the symbol “CIVB”.

For additional information, contact:

Dennis G. Shaffer

President and CEO

Civista Bancshares, Inc.

888-645-4121

Civista Bancshares, Inc.

Financial Highlights

(dollars in thousands, except share amounts)

Consolidated Condensed Statement of Operations

	Three Months Ended				Twelve Months Ended
	December 31,				December 31,
	(unaudited)				(unaudited)
	2019		2018		2019		2018
Interest and dividend income	$	24,521	$	23,707	$	98,054	$	73,677
Interest expense		3,299		2,962		12,954		7,570
Net interest income		21,222		20,745		85,100		66,107
Provision for loan losses		885		390		1,035		780
Net interest income after provision		20,337		20,355		84,065		65,327
Noninterest income		5,627		4,838		22,443		18,131
Noninterest expense		17,128		16,391		66,947		66,679
Income before taxes		8,836		8,802		39,561		16,779
Income tax expense		995		1,233		5,683		2,640
Net income		7,841		7,569		33,878		14,139
Preferred stock dividends		157		165		647		959
Net income available to common shareholders	$	7,684	$	7,404	$	33,231	$	13,180
Dividends per common share	$	0.11	$	0.09	$	0.42	$	0.32
Earnings per common share,
basic	$	0.49	$	0.48	$	2.12	$	1.10
diluted	$	0.47	$	0.45	$	2.01	$	1.02
Average shares outstanding,
basic		15,796,713		15,521,404		15,652,881		11,971,786
diluted		16,734,391		16,898,186		16,851,740		13,855,707
Selected financial ratios:
Return on average assets		1.37%		1.43%		1.51%		0.81%
Return on average equity		9.44%		10.35%		10.64%		6.50%
Dividend payout ratio		22.16%		18.46%		19.41%		27.10%
Net interest margin (tax equivalent)		4.18%		4.38%		4.31%		4.21%

Selected Balance Sheet Items

	December 31, 2019		December 31, 2018
	(unaudited)		(unaudited)
Cash and due from financial institutions	$	48,535	$	42,779
Investment securities		359,690		347,364
Loans held for sale		2,285		1,391
Loans		1,708,970		1,561,941
Less allowance for loan losses		14,767		13,679
Net loans		1,694,203		1,548,262
Other securities		20,280		21,021
Premises and equipment, net		22,871		22,021
Goodwill and other intangibles		85,156		86,203
Bank owned life insurance		44,999		43,037
Other assets		31,538		26,876
Total assets	$	2,309,557	$	2,138,954
Total deposits	$	1,678,764	$	1,579,893
Federal Home Loan Bank advances		226,500		193,600
Securities sold under agreements to repurchase		18,674		22,199
Subordinated debentures		29,427		29,427
Accrued expenses and other liabilities		26,066		14,937
Total shareholders’ equity		330,126		298,898
Total liabilities and shareholders’ equity	$	2,309,557	$	2,138,954
Shares outstanding at period end		16,687,542		15,603,499
Book value per share	$	19.78	$	18.56
Equity to asset ratio		14.29%		13.97%
Selected asset quality ratios:
Allowance for loan losses to total loans		0.86%		0.88%
Non-performing assets to total assets		0.39%		0.46%
Allowance for loan losses tonon-performing loans		161.95%		137.87%
Non-performing asset analysis
Nonaccrual loans	$	6,115	$	6,898
Troubled debt restructurings		3,004		3,024
Other real estate owned		-		-
Total	$	9,119	$	9,922

Supplemental Financial Information

(Unaudited - Dollars in thousands except share data)

End of Period Balances	December 31, 2019				September 30, 2019				June 30, 2019				March 31, 2019				December 31, 2018
Assets
Cash and due from banks		$	48,535			$	62,219			$	49,839			$	164,094			$	42,779
Investment securities			359,690				356,439				360,512				351,006				347,364
Loans held for sale			2,285				8,983				2,563				1,444				1,391
Loans			1,708,970				1,648,640				1,598,770				1,573,193				1,561,941
Allowance for loan losses			(14,767	)			(14,144	)			(13,786	)			(13,822	)			(13,679	)
Net Loans			1,694,203				1,634,496				1,584,984				1,559,371				1,548,262
Other securities			20,280				20,280				20,280				20,280				21,021
Premises and equipment, net			22,871				22,201				21,720				21,772				22,021
Goodwill and other intangibles			85,156				85,461				85,706				85,955				86,203
Bank owned life insurance			44,999				44,745				44,491				44,239				43,037
Other assets			31,538				34,241				32,900				29,541				26,876
Total Assets		$	2,309,557			$	2,269,065			$	2,202,995			$	2,277,702			$	2,138,954
Liabilities
Total deposits		$	1,678,764			$	1,632,621			$	1,632,720			$	1,765,801			$	1,579,893
Federal Home Loan Bank advances			226,500				236,100				176,300				127,100				193,600
Securities sold under agreement to repurchase			18,674				15,088				15,554				21,970				22,199
Subordinated debentures			29,427				29,427				29,427				29,427				29,427
Accrued expenses and other liabilities			26,066				26,566				24,782				21,347				14,937
Total liabilities			1,979,431				1,939,802				1,878,783				1,965,645				1,840,056
Shareholders’ Equity
Preferred shares, Series B			-				9,158				9,364				9,364				9,364
Common shares			276,422				267,559				267,275				266,990				266,901
Accumulated earnings			67,974				62,023				56,199				49,421				41,320
Treasury shares			(21,144	)			(21,144	)			(17,235	)			(17,235	)			(17,235	)
Accumulated other comprehensive income(loss)			6,874				11,667				8,609				3,517				(1,452	)
Total shareholders’ equity			330,126				329,263				324,212				312,057				298,898
Total Liabilities and Shareholders’ Equity		$	2,309,557			$	2,269,065			$	2,202,995			$	2,277,702			$	2,138,954
Quarterly Average Balances
Assets:
Earning assets		$	2,070,175			$	2,021,780			$	1,986,841			$	2,017,523			$	1,907,966
Securities			372,639				379,525				373,999				365,219				352,412
Loans			1,676,769				1,626,010				1,583,533				1,564,208				1,532,012
Liabilities and Shareholders’ Equity
Total deposits		$	1,661,452			$	1,622,527			$	1,670,247			$	1,807,102			$	1,591,521
Interest-bearing deposits			1,160,499				1,139,632				1,129,964				1,126,173				1,120,876
Other interest-bearing liabilities			252,908				246,235				186,140				148,891				204,002
Total shareholders’ equity			329,634				326,103				315,438				301,656				290,096

Supplemental Financial Information

(Unaudited - Dollars in thousands except share data)

	Three Months Ended
Income statement	December 31, 2019				September 30, 2019				June 30, 2019				March 31, 2019				December 31, 2018
Total interest and dividend income		$	24,521			$	24,023			$	24,926			$	24,584			$	23,707
Total interest expense			3,299				3,605				3,184				2,865				2,962
Net interest income			21,222				20,418				21,742				21,719				20,745
Provision for loan losses			885				150				-				-				390
Noninterest income			5,627				5,429				5,104				6,284				4,838
Noninterest expense			17,128				16,731				16,639				16,449				16,391
Income before taxes			8,836				8,966				10,207				11,554				8,802
Income tax expense			995				1,258				1,546				1,885				1,233
Net income			7,841				7,708				8,661				9,669				7,569
Preferred stock dividends			157				162				164				164				165
Net income available to common shareholders		$	7,684			$	7,546			$	8,497			$	9,505			$	7,404
Common shares dividend paid		$	1,702			$	1,722			$	1,719			$	1,404			$	1,386
Per share data
Basic earnings per common share		$	0.49			$	0.48			$	0.54			$	0.61			$	0.48
Diluted earnings per common share			0.47				0.46				0.51				0.57				0.45
Dividends per common share			0.11				0.11				0.11				0.09				0.09
Average common shares outstanding - basic			15,796,713				15,577,371				15,628,537				15,607,655				15,521,404
Average common shares outstanding - diluted			16,734,391				16,849,887				16,922,712				16,901,830				16,898,186
Asset quality
Allowance for loan losses, beginning of period		$	14,144			$	13,786			$	13,822			$	13,679			$	13,331
Charge-offs			(345	)			(36	)			(156	)			(239	)			(119	)
Recoveries			83				244				120				382				77
Provision			885				150				-				-				390
Allowance for loan losses, end of period		$	14,767			$	14,144			$	13,786			$	13,822			$	13,679
Ratios
Allowance to total loans			0.86%				0.86%				0.86%				0.88%				0.88%
Allowance to nonperforming assets			161.95%				149.91%				164.69%				150.60%				137.87%
Allowance to nonperforming loans			161.95%				149.91%				164.69%				150.60%				137.87%
Nonperforming assets
Nonperforming loans		$	9,119			$	9,435			$	8,371			$	9,178			$	9,922
Other real estate owned			-				-				-				-				-
Total nonperforming assets		$	9,119			$	9,435			$	8,371			$	9,178			$	9,922
Capital and liquidity
Tier 1 leverage ratio			12.35%				12.37%				12.44%				11.64%				12.22%
Tier 1 risk-based capital ratio			15.26%				15.50%				15.94%				15.64%				15.30%
Total risk-based capital ratio			16.10%				16.32%				16.78%				16.48%				16.15%
Tangible common equity ratio(1)			11.08%				10.81%				10.89%				9.96%				9.98%

(1) See reconciliation of GAAP measures at the end of this press release.

Reconciliation ofNon-GAAP Financial Measures

(Unaudited - Dollars in thousands except share data)

	Three Months Ended		Three Months Ended			Twelve Months Ended		Twelve Months Ended
Adjusted earnings	December 31, 2019		December 31, 2018			December 31, 2019		December 31, 2018
Income before taxes (GAAP)		8,836		8,802			39,561		16,779
Gain (loss) on sale of investment securities		15		(27	)		32		(413	)
Acquisition and integration expenses		-		782			-		12,735
Adjusted earnings, pretax(Non-GAAP)		8,821		9,611			39,529		29,927
Income tax expense		995		1,233			5,683		2,640
Income tax expense adjustment		3		150			7		1,678
Adjusted net income(Non-GAAP)		7,823		8,228			33,839		25,609
Preferred stock dividends		157		165			647		959
Adjusted net income available to common shareholders(Non-GAAP)	$	7,666	$	8,063		$	33,192	$	24,650
Adjusted earnings per common share - basic	$	0.49	$	0.52		$	2.12	$	2.06
Adjusted earnings per common share - diluted		0.47		0.49			2.01		1.85
Average common shares outstanding - basic		15,796,713		15,521,404			15,652,881		11,971,786
Average common shares outstanding - diluted		16,734,391		16,898,186			16,849,740		13,855,707
Adjusted return on average assets		1.37%		1.55%			1.51%		1.47%
Adjusted return on average equity		9.42%		11.25%			10.63%		11.78%
Adjusted Efficiency ratio

	Three Months Ended		Three Months Ended			Twelve Months Ended		Twelve Months Ended
	December 31, 2019		December 31, 2018			December 31, 2019		December 31, 2018
Noninterest expense (GAAP)		17,128		16,391			66,947		66,679
Acquisition and integration expense		-		(782	)		-		(12,735	)
Adjusted noninterest expense(Non-GAAP)		17,128		15,609			66,947		53,944
Net interest income (GAAP)		21,222		20,745			85,100		66,107
Effect oftax-exempt income		386		350			1,516		1,062
Adjusted tax equivalent net interest income(Non-GAAP)		21,608		21,095			86,616		67,169
Noninterest Income - GAAP		5,627		4,838			22,443		18,131
Gain (loss) on sales of investment securities, net		15		(27	)		32		(413	)
AdjustedNon-interest Income(Non-GAAP)		5,612		4,865			22,411		18,544
Adjusted total revenue(Non-GAAP)		27,220		25,960			109,027		85,713
Adjusted Efficiency ratio(Non-GAAP)		62.9%		60.1%			61.4%		62.9%