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Penns Woods Bancorp, Inc. Reports Third Quarter 2014 Operating Earnings

WILLIAMSPORT, Pa, Oct. 20, 2014 (GLOBE NEWSWIRE) -- Penns Woods Bancorp, Inc. (Nasdaq:PWOD)

Penns Woods Bancorp, Inc. continued its solid earnings and growth during the recently completed third quarter of 2014, achieving net income of $11,725,000 for the nine months ended September 30, 2014 resulting in basic and dilutive earnings per share of $2.43.

Highlights

  • Year over year comparisons are impacted by the acquisition of Luzerne National Bank Corporation ("Luzerne") that was effective June 1, 2013 and resulted in increases in net loans of $254,057,000; investments of $21,140,000; deposits of $279,867,000; and assets of $329,209,000 at the time of acquisition.
  • Net income from core operations ("operating earnings"), which is a non-GAAP measure of net income excluding net securities gains and bank owned life insurance gains on death benefits, increased to $3,377,000 for the three months ended September 30, 2014 compared to $3,248,000 for the same period of 2013. Net income from core operations increased to $9,554,000 for the nine months ended September 30, 2014 compared to $9,099,000 for the same period of 2013.
  • Operating earnings per share for the three months ended September 30, 2014 were $0.70 basic and dilutive compared to $0.67 basic and dilutive for the same period of 2013. Operating earnings per share for the nine months ended September 30, 2014 were $1.98 basic and dilutive compared to $2.13 basic and dilutive for the same period 2013.
  • Return on average assets was 1.56% for the three months ended September 30, 2014 compared to 1.08% for the corresponding period of 2013. Return on average assets was 1.28% for the nine months ended September 30, 2014 compared to 1.39% for the corresponding period of 2013.
  • Return on average equity was 13.95% for the three months ended September 30, 2014 compared to 10.39% for the corresponding period of 2013. Return on average equity was 11.63% for the nine months ended September 30, 2014 compared to 12.90% for the corresponding period of 2013.

"The first nine months of 2014 have been an exciting time for the Penns Woods family. We have experienced a record level of net income, while upgrading software systems, opening a branch in Loyalsock, and beginning the process of building a branch in Lewisburg. In addition, the earning asset portfolio has undergone a shift from investments to loans. Since December 2013 net loans have increased approximately $73 million while the investment portfolio has decreased approximately $55 million. This strategic action was taken as we focused on shortening the earning asset portfolio per our strategy to reduce interest rate and market price risk. We also have been working through several impaired credits in the loan portfolio which has resulted in $2,139,000 in charge-offs during the first nine months of 2014," said Richard A. Grafmyre, CFP®, President and CEO.

A reconciliation of the non-GAAP financial measures of operating earnings, operating return on assets, operating return on equity, and operating earnings per share, described in the highlights, to the comparable GAAP financial measures is included at the end of this press release.

Net Income

Net income, as reported under GAAP, for the three and nine months ended September 30, 2014 was $4,793,000 and $11,725,000 compared to $3,246,000 and $10,589,000 for the same periods of 2013. Results for the three and nine months ended September 30, 2014 compared to 2013 were impacted by an increase in after-tax securities gains of $1,418,000 (from a loss of $2,000 to a gain of $1,416,000) for the three month periods and an increase of $507,000 (from a gain of $1,490,000 to a gain of $1,997,000) for the nine month periods. In addition, a gain of $174,000 on death benefits related to bank owned life insurance was recorded during the first quarter of 2014. Basic and dilutive earnings per share for the three and nine months ended September 30, 2014 were $0.99 and $2.43 compared to $0.67 and $2.48 for the corresponding periods of 2013. Return on average assets and return on average equity were 1.56% and 13.95% for the three months ended September 30, 2014 compared to 1.08% and 10.39% for the corresponding period of 2013. Return on average assets and return on average equity were 1.28% and 11.63% for the nine months ended September 30, 2014 compared to 1.39% and 12.90% for the corresponding period of 2013.

Net Interest Margin

The net interest margin for the three and nine months ended September 30, 2014 was 3.78% and 3.84% compared to 4.07% and 4.19% for the corresponding periods of 2013. The net interest margin has decreased for the comparable three and nine month periods, while net interest income on a fully taxable equivalent basis has decreased $533,000 for the three months ended September 30, 2014 and increased $2,445,000 for the nine months ended September 30, 2014 compared to the corresponding periods of 2013. Driving this increase is the growth in the loan and deposit portfolios for the nine months ended September 30, 2014 compared to the corresponding period for 2013, primarily due to growth in home equity products and the continued emphasis on core deposit growth. The primary funding for the loan growth was an increase in core deposits. These deposits represent a lower cost funding source than time deposits and comprise 77.90% of total deposits at September 30, 2014 compared to 75.55% at September 30, 2013. The continued growth in core deposits has led to the total cost of deposits decreasing to 40 basis points ("bp") for the nine months ended September 30, 2014 from 50 bp for the corresponding period of 2013. The rate paid on borrowings decreased slightly due to the impact of maturities and the entering into a capital lease agreement. The changes in the composition of the deposit and borrowing portfolios has led to the total cost of interest bearing funding decreasing to 58 bp for the nine months ended September 30, 2014 from 72 bp for the corresponding period of 2013.

"The net interest margin continues to decrease each quarter by several basis points with the net interest margin for the third quarter being 3.78% versus 3.83% for the previous quarter. The low interest rate environment has resulted in declining asset yields due to legacy assets being replaced at lower yields. To offset the impact of declining yields, we have focused on increasing earning assets by adding quality short and intermediate term loans such as home equity loans, even though these new earning assets are at lower yields than legacy assets. Active management of the investment portfolio in order to reduce interest rate and market risk is being undertaken primarily through the sale of long-term municipal bonds that have a maturity date of 2025 or later and securities with a call date within the next five years. The proceeds generated from the strategic selling of bonds is being deployed primarily into loans with limited reinvestment into intermediate term corporate bonds and short and intermediate term municipal bonds. Selling a portion of the long-term bond portfolio does negatively impact current earnings, but this action plays a key role in our long-term asset liability management strategy as the balance sheet is shortened to better prepare for a rising rate environment. The funding side of the balance sheet remains focused on increasing lower cost core deposits as there is limited opportunity to reduce funding costs," commented President Grafmyre.

Assets

Total assets increased $23,032,000 to $1,227,122,000 at September 30, 2014 compared to September 30, 2013. Net loans increased $84,944,000 to $881,477,000 at September 30, 2014 compared to September 30, 2013 due primarily to campaigns related to increasing home equity product market share during 2013 and 2014 and growth in the commercial portfolio. The investment portfolio decreased $51,749,000 from September 30, 2013 to September 30, 2014 due to our strategy to reduce the investment portfolio duration through the selective selling of bonds as opportunities develop. The combination of loan portfolio growth and a decrease in the size of the investment portfolio has resulted in a shortening of the overall earning asset portfolio duration consistent with a strategy to reduce the interest rate and market risk exposure to a rising rate environment.

Non-performing Loans

The non-performing loans to total loans ratio increased to 1.38% at September 30, 2014 from 0.75% at September 30, 2013. The increase in non-performing loans to $12,294,000 at September 30, 2014 from $6,064,000 at September 30, 2013 is primarily the result of certain commercial real estate backed loans becoming non-performing. The majority of non-performing loans are centered on several loans that are either in a secured position and have sureties with a strong underlying financial position or have a specific allocation for any impairment recorded within the allowance for loan losses. Net loan charge-offs of $2,139,000 for the nine months ended September 30, 2014 negatively impacted the allowance for loan losses which was 1.04% of total loans at September 30, 2014. The majority of the loans charged-off had a specific allowance within the allowance for loan losses.

Deposits

Deposits increased $13,607,000 to $989,128,000 at September 30, 2014 compared to September 30, 2013. Core deposits (total deposits excluding time deposits) increased $33,529,000, while higher cost time deposits decreased $19,922,000 due to our commitment to building complete banking relationships with our customers. Noninterest-bearing deposits increased $17,214,000 to $232,588,000 at September 30, 2014 compared to September 30, 2013. Driving this growth is our commitment to easy-to-use products, community involvement, and emphasis on customer service.

Shareholders' Equity

Shareholders' equity increased $11,152,000 to $137,004,000 at September 30, 2014 compared to September 30, 2013. The accumulated other comprehensive loss of $211,000 at September 30, 2014 from a loss of $5,606,000 at September 30, 2013 is primarily a result of an increase in unrealized gains on available for sale securities from an unrealized loss of $799,000 at September 30, 2013 to an unrealized gain of $2,514,000 at September 30, 2014. The amount of accumulated other comprehensive gain at September 30, 2014 was also impacted by the change in net excess of the projected benefit obligation over the market value of the plan assets of the defined benefit pension plan resulting in a decrease in the net loss of $2,082,000 to $2,725,000 at September 30, 2014. The current level of shareholders' equity equates to a book value per share of $28.49 at September 30, 2014 compared to $26.12 at September 30, 2013 and an equity to asset ratio of 11.16% at September 30, 2014 compared to 10.45% at September 30, 2013. Excluding goodwill and intangibles, book value per share was $24.61 at September 30, 2014 compared to $22.18 at September 30, 2013. Dividends declared for the three and nine months ended September 30, 2014 were $0.47 and $1.41 per share compared to $0.47 and $1.66 for the three and nine months ended September 30, 2013.

Penns Woods Bancorp, Inc. is the parent company of Jersey Shore State Bank, which operates fourteen branch offices providing financial services in Lycoming, Clinton, Centre, and Montour Counties, and Luzerne Bank, which operates eight branch offices providing financial services in Luzerne County. Investment and insurance products are offered through Jersey Shore State Bank's subsidiary, The M Group, Inc. D/B/A The Comprehensive Financial Group.

NOTE: This press release contains financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles ("GAAP"). Management uses the non-GAAP measure of net income from core operations in its analysis of the company's performance. This measure, as used by the Company, adjusts net income determined in accordance with GAAP to exclude the effects of special items, including significant gains or losses that are unusual in nature such as net securities gains and losses. Because certain of these items and their impact on the Company's performance are difficult to predict, management believes presentation of financial measures excluding the impact of such items provides useful supplemental information in evaluating the operating results of the Company's core businesses. These disclosures should not be viewed as a substitute for net income determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

This press release may contain certain "forward-looking statements" including statements concerning plans, objectives, future events or performance and assumptions and other statements, which are statements other than statements of historical fact. The Company cautions readers that the following important factors, among others, may have affected and could in the future affect actual results and could cause actual results for subsequent periods to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company herein: (i) the effect of changes in laws and regulations, including federal and state banking laws and regulations, and the associated costs of compliance with such laws and regulations either currently or in the future as applicable; (ii) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies as well as by the Financial Accounting Standards Board, or of changes in the Company's organization, compensation and benefit plans; (iii) the effect on the Company's competitive position within its market area of the increasing consolidation within the banking and financial services industries, including the increased competition from larger regional and out-of-state banking organizations as well as non-bank providers of various financial services; (iv) the effect of changes in interest rates; and (v) the effect of changes in the business cycle and downturns in the local, regional or national economies. For a list of other factors which could affect the Company's results, see the Company's filings with the Securities and Exchange Commission, including "Item 1A. Risk Factors," set forth in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

You should not place undue reliance on any forward-looking statements. These statements speak only as of the date of this press release, even if subsequently made available by the Company on its website or otherwise. The Company undertakes no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this press release.

Previous press releases and additional information can be obtained from the Company's website at www.jssb.com.

THIS INFORMATION IS SUBJECT TO YEAR-END AUDIT ADJUSTMENT

PENNS WOODS BANCORP, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
September 30,
(In Thousands, Except Share Data) 2014 2013 % Change
ASSETS
Noninterest-bearing balances $ 19,556 $ 23,073 (15.24)%
Interest-bearing deposits in other financial institutions 5,686 9,776 (41.84)%
Federal funds sold 195 n/a
Total cash and cash equivalents 25,242 33,044 (23.61)%
Investment securities, available for sale, at fair value 233,634 285,383 (18.13)%
Loans held for sale 1,602 1,588 0.88%
Loans 890,727 806,163 10.49%
Allowance for loan losses (9,250) (9,630) (3.95)%
Loans, net 881,477 796,533 10.66%
Premises and equipment, net 21,509 18,352 17.20%
Accrued interest receivable 4,298 4,639 (7.35)%
Bank-owned life insurance 25,781 25,216 2.24%
Investment in limited partnerships 1,725 2,387 (27.73)%
Goodwill 17,104 17,104 —%
Intangibles 1,538 1,892 (18.71)%
Deferred tax asset 7,036 10,389 (32.27)%
Other assets 6,176 7,563 (18.34)%
TOTAL ASSETS $ 1,227,122 $ 1,204,090 1.91%
LIABILITIES
Interest-bearing deposits $ 756,540 $ 760,147 (0.47)%
Noninterest-bearing deposits 232,588 215,374 7.99%
Total deposits 989,128 975,521 1.39%
Short-term borrowings 17,213 15,060 14.30%
Long-term borrowings 71,202 70,750 0.64%
Accrued interest payable 411 435 (5.52)%
Other liabilities 12,164 16,472 (26.15)%
TOTAL LIABILITIES 1,090,118 1,078,238 1.10%
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 3,000,000 shares authorized; no shares issued n/a
Common stock, par value $8.33, 15,000,000 shares authorized; 5,001,972 and 4,999,483 shares issued 41,682 41,662 0.05%
Additional paid-in capital 49,871 49,782 0.18%
Retained earnings 52,482 46,324 13.29%
Accumulated other comprehensive loss:
Net unrealized gain (loss) on available for sale securities 2,514 (799) 414.64%
Defined benefit plan (2,725) (4,807) 43.31%
Treasury stock at cost, 192,340 and 180,596 shares (6,820) (6,310) (8.08)%
TOTAL SHAREHOLDERS' EQUITY 137,004 125,852 8.86%
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,227,122 $ 1,204,090 1.91%
PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
Three Months Ended September 30, Nine Months Ended September 30,
(In Thousands, Except Per Share Data) 2014 2013 % Change 2014 2013 % Change
INTEREST AND DIVIDEND INCOME:
Loans including fees $ 9,298 $ 9,211 0.94% $ 27,023 $ 23,256 16.20%
Investment securities:
Taxable 1,198 1,570 (23.69)% 4,062 4,520 (10.13)%
Tax-exempt 837 1,124 (25.53)% 2,660 3,553 (25.13)%
Dividend and other interest income 127 74 71.62% 401 208 92.79%
TOTAL INTEREST AND DIVIDEND INCOME 11,460 11,979 (4.33)% 34,146 31,537 8.27%
INTEREST EXPENSE:
Deposits 748 855 (12.51)% 2,247 2,406 (6.61)%
Short-term borrowings 5 16 (68.75)% 32 63 (49.21)%
Long-term borrowings 489 479 2.09% 1,431 1,480 (3.31)%
TOTAL INTEREST EXPENSE 1,242 1,350 (8.00)% 3,710 3,949 (6.05)%
NET INTEREST INCOME 10,218 10,629 (3.87)% 30,436 27,588 10.32%
PROVISION FOR LOAN LOSSES 460 600 (23.33)% 1,245 1,675 (25.67)%
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 9,758 10,029 (2.70)% 29,191 25,913 12.65%
NON-INTEREST INCOME:
Service charges 620 671 (7.60)% 1,822 1,651 10.36%
Securities gains (losses), net 2,145 (3) 71,600.00% 3,025 2,257 34.03%
Bank-owned life insurance 185 199 (7.04)% 736 481 53.01%
Gain on sale of loans 602 551 9.26% 1,313 1,204 9.05%
Insurance commissions 212 286 (25.87)% 915 797 14.81%
Brokerage commissions 282 250 12.80% 804 797 0.88%
Other 878 888 (1.13)% 2,449 1,923 27.35%
TOTAL NON-INTEREST INCOME 4,924 2,842 73.26% 11,064 9,110 21.45%
NON-INTEREST EXPENSE:
Salaries and employee benefits 4,126 4,515 (8.62)% 12,796 11,025 16.06%
Occupancy 547 554 (1.26)% 1,729 1,302 32.80%
Furniture and equipment 591 422 40.05% 1,910 1,242 53.78%
Pennsylvania shares tax 232 225 3.11% 738 617 19.61%
Amortization of investments in limited partnerships 165 165 —% 496 496 —%
Federal Deposit Insurance Corporation deposit insurance 193 173 11.56% 572 421 35.87%
Marketing 144 156 (7.69)% 380 371 2.43%
Intangible amortization 82 91 (9.89)% 262 122 114.75%
Other 2,233 2,674 (16.49)% 6,495 6,195 4.84%
TOTAL NON-INTEREST EXPENSE 8,313 8,975 (7.38)% 25,378 21,791 16.46%
INCOME BEFORE INCOME TAX PROVISION 6,369 3,896 63.48% 14,877 13,232 12.43%
INCOME TAX PROVISION 1,576 650 142.46% 3,152 2,643 19.26%
NET INCOME $ 4,793 $ 3,246 47.66% $ 11,725 $ 10,589 10.73%
EARNINGS PER SHARE - BASIC AND DILUTED $ 0.99 $ 0.67 47.76% $ 2.43 $ 2.48 (2.02)%
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED 4,820,346 4,818,494 0.04% 4,820,041 4,272,989 12.80%
DIVIDENDS DECLARED PER SHARE $ 0.47 $ 0.47 —% $ 1.41 $ 1.66 (15.06)%
PENNS WOODS BANCORP, INC.
AVERAGE BALANCES AND INTEREST RATES
Three Months Ended
September 30, 2014 September 30, 2013
Average Average Average Average
(Dollars in Thousands) Balance Interest Rate Balance Interest Rate
ASSETS:
Tax-exempt loans $ 30,567 $ 337 4.38% $ 22,688 $ 263 4.60%
All other loans 844,062 9,076 4.27% 774,355 9,037 4.63%
Total loans 874,629 9,413 4.27% 797,043 9,300 4.63%
Federal funds sold —% 355 —%
Taxable securities 153,280 1,319 3.44% 184,325 1,637 3.55%
Tax-exempt securities 93,825 1,268 5.41% 112,432 1,703 6.06%
Total securities 247,105 2,587 4.19% 296,757 3,340 4.50%
Interest-bearing deposits 11,140 6 0.21% 10,783 7 0.26%
Total interest-earning assets 1,132,874 12,006 4.21% 1,104,938 12,647 4.55%
Other assets 97,596 94,928
TOTAL ASSETS $ 1,230,470 $ 1,199,866
LIABILITIES AND SHAREHOLDERS' EQUITY:
Savings $ 141,558 16 0.04% $ 141,526 44 0.12%
Super Now deposits 181,011 142 0.31% 163,422 177 0.43%
Money market deposits 212,377 145 0.27% 207,684 144 0.28%
Time deposits 219,257 445 0.81% 238,551 490 0.81%
Total interest-bearing deposits 754,203 748 0.39% 751,183 855 0.45%
Short-term borrowings 21,250 12 0.22% 20,568 16 0.31%
Long-term borrowings 71,202 482 2.65% 70,750 479 2.65%
Total borrowings 92,452 494 2.09% 91,318 495 2.12%
Total interest-bearing liabilities 846,655 1,242 0.58% 842,501 1,350 0.63%
Demand deposits 233,415 214,897
Other liabilities 12,926 17,513
Shareholders' equity 137,474 124,955
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,230,470 $ 1,199,866
Interest rate spread 3.63% 3.92%
Net interest income/margin $ 10,764 3.78% $ 11,297 4.07%
Three Months Ended September 30,
2014 2013
Total interest income $ 11,460 $ 11,979
Total interest expense 1,242 1,350
Net interest income 10,218 10,629
Tax equivalent adjustment 546 668
Net interest income (fully taxable equivalent) $ 10,764 $ 11,297
Nine Months Ended
September 30, 2014 September 30, 2013
Average Average Average Average
(Dollars in Thousands) Balance Interest Rate Balance Interest Rate
ASSETS:
Tax-exempt loans $ 28,042 $ 929 4.43% $ 22,069 $ 761 4.61%
All other loans 813,859 26,410 4.34% 623,047 22,754 4.88%
Total loans 841,901 27,339 4.34% 645,116 23,515 4.87%
Federal funds sold 228 —% 152 —%
Taxable securities 168,376 4,435 3.51% 174,977 4,714 3.59%
Tax-exempt securities 96,503 4,030 5.57% 119,799 5,383 5.99%
Total securities 264,879 8,465 4.26% 294,776 10,097 4.57%
Interest-bearing deposits 11,364 28 0.33% 7,628 14 0.25%
Total interest-earning assets 1,118,372 35,832 4.28% 947,672 33,626 4.74%
Other assets 102,001 69,942
TOTAL ASSETS $ 1,220,373 $ 1,017,614
LIABILITIES AND SHAREHOLDERS' EQUITY:
Savings $ 141,057 67 0.06% $ 111,242 96 0.12%
Super Now deposits 182,445 449 0.33% 150,220 521 0.46%
Money market deposits 210,346 417 0.27% 174,991 408 0.31%
Time deposits 225,615 1,314 0.78% 200,688 1,381 0.92%
Total interest-bearing deposits 759,463 2,247 0.40% 637,141 2,406 0.50%
Short-term borrowings 18,929 32 0.23% 21,235 63 0.40%
Long-term borrowings 71,202 1,431 2.65% 72,607 1,480 2.69%
Total borrowings 90,131 1,463 2.14% 93,842 1,543 2.17%
Total interest-bearing liabilities 849,594 3,710 0.58% 730,983 3,949 0.72%
Demand deposits 222,259 161,948
Other liabilities 14,065 15,208
Shareholders' equity 134,455 109,475
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,220,373 $ 1,017,614
Interest rate spread 3.70% 4.02%
Net interest income/margin $ 32,122 3.84% $ 29,677 4.19%
Nine Months Ended September 30,
2014 2013
Total interest income $ 34,146 $ 31,537
Total interest expense 3,710 3,949
Net interest income 30,436 27,588
Tax equivalent adjustment 1,686 2,089
Net interest income (fully taxable equivalent) $ 32,122 $ 29,677
(Dollars in Thousands, Except Per Share Data) Quarter Ended
9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
Operating Data
Net income $ 4,793 $ 3,463 $ 3,469 $ 3,495 $ 3,246
Net interest income 10,218 10,131 10,087 10,447 10,629
Provision for loan losses 460 300 485 600 600
Net security gains (losses) 2,145 487 393 160 (3)
Non-interest income, ex. net security gains 2,779 2,442 2,818 2,772 2,845
Non-interest expense 8,313 8,422 8,643 8,476 8,975
Performance Statistics
Net interest margin 3.78% 3.83% 3.96% 3.98% 4.07%
Annualized return on average assets 1.56% 1.13% 1.15% 1.16% 1.08%
Annualized return on average equity 13.95% 10.29% 10.58% 10.99% 10.39%
Annualized net loan charge-offs to average loans 0.01% —% 1.06% 0.04% 0.19%
Net charge-offs 21 9 2,109 87 374
Efficiency ratio 63.3% 66.3% 66.3% 63.4% 65.9%
Per Share Data
Basic earnings per share $ 0.99 $ 0.72 $ 0.72 $ 0.73 $ 0.67
Diluted earnings per share 0.99 0.72 0.72 0.73 0.67
Dividend declared per share 0.47 0.47 0.47 0.47 0.47
Book value 28.49 28.17 27.45 26.52 26.12
Common stock price:
High 48.79 48.37 50.95 53.99 49.89
Low 42.25 43.21 43.19 47.03 42.76
Close 42.25 47.10 48.78 51.00 49.82
Weighted average common shares:
Basic 4,820 4,820 4,820 4,819 4,818
Fully Diluted 4,820 4,820 4,820 4,819 4,818
End-of-period common shares:
Issued 5,002 5,001 5,001 5,000 4,999
Treasury 192 181 181 181 181
Quarter Ended
(Dollars in Thousands, Except Per Share Data) 9/30/2014 6/30/2014 3/31/2014 12/31/2013 9/30/2013
Financial Condition Data:
General
Total assets $ 1,227,122 $ 1,222,847 $ 1,217,137 $ 1,211,995 $ 1,204,090
Loans, net 881,477 847,521 812,091 808,200 796,533
Goodwill 17,104 17,104 17,104 17,104 17,104
Intangibles 1,538 1,621 1,709 1,801 1,892
Total deposits 989,128 981,826 983,026 973,002 975,521
Noninterest-bearing 232,588 228,758 218,740 217,377 215,374
Savings 141,170 141,362 142,030 138,621 142,193
NOW 183,056 176,066 191,191 177,996 169,974
Money Market 213,725 212,782 202,893 203,786 209,469
Time Deposits 218,589 222,858 228,172 235,222 238,511
Total interest-bearing deposits 756,540 753,068 764,286 755,625 760,147
Core deposits* 770,539 758,968 754,854 737,780 737,010
Shareholders' equity 137,004 135,802 132,305 127,815 125,852
Asset Quality
Non-performing assets $ 12,294 $ 11,979 $ 10,614 $ 9,678 $ 6,064
Non-performing assets to total assets 1.00% 0.98% 0.87% 0.80% 0.50%
Allowance for loan losses 9,250 8,811 8,520 10,144 9,630
Allowance for loan losses to total loans 1.04% 1.03% 1.04% 1.24% 1.19%
Allowance for loan losses to non-performing loans 75.24% 73.55% 80.27% 104.82% 158.81%
Non-performing loans to total loans 1.38% 1.40% 1.29% 1.18% 0.75%
Capitalization
Shareholders' equity to total assets 11.16% 11.11% 10.87% 10.55% 10.45%
* Core deposits are defined as total deposits less time deposits
Reconciliation of GAAP and Non-GAAP Financial Measures
Three Months Ended September 30, Nine Months Ended September 30,
(Dollars in Thousands, Except Per Share Data) 2014 2013 2014 2013
GAAP net income $ 4,793 $ 3,246 $ 11,725 $ 10,589
Less: net securities and bank-owned life insurance gains (losses), net of tax 1,416 (2) 2,171 1,490
Non-GAAP operating earnings $ 3,377 $ 3,248 $ 9,554 $ 9,099
Three Months Ended September 30, Nine Months Ended September 30,
2014 2013 2014 2013
Return on average assets (ROA) 1.56% 1.08% 1.28% 1.39%
Less: net securities and bank-owned life insurance gains (losses), net of tax 0.46% —% 0.24% 0.20%
Non-GAAP operating ROA 1.10% 1.08% 1.04% 1.19%
Three Months Ended September 30, Nine Months Ended September 30,
2014 2013 2014 2013
Return on average equity (ROE) 13.95% 10.39% 11.63% 12.90%
Less: net securities and bank-owned life insurance gains (losses), net of tax 4.12% (0.01)% 2.16% 1.82%
Non-GAAP operating ROE 9.83% 10.40% 9.47% 11.08%
Three Months Ended September 30, Nine Months Ended September 30,
2014 2013 2014 2013
Basic earnings per share (EPS) $ 0.99 $ 0.67 $ 2.43 $ 2.48
Less: net securities and bank-owned life insurance gains (losses), net of tax 0.29 0.45 0.35
Non-GAAP basic operating EPS $ 0.70 $ 0.67 $ 1.98 $ 2.13
Three Months Ended September 30, Nine Months Ended September 30,
2014 2013 2014 2013
Dilutive EPS $ 0.99 $ 0.67 $ 2.43 $ 2.48
Less: net securities and bank-owned life insurance gains (losses), net of tax 0.29 0.45 0.35
Non-GAAP dilutive operating EPS $ 0.70 $ 0.67 $ 1.98 $ 2.13

CONTACT: Richard A. Grafmyre, President and Chief Executive Officer 300 Market Street Williamsport, PA 17701 570-322-1111 e-mail: pwod@pwod.comSource:Penns Woods Bancorp, Inc.