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Penns Woods Bancorp, Inc. Reports Second Quarter 2016 Earnings

WILLIAMSPORT, Pa., July 21, 2016 (GLOBE NEWSWIRE) -- Penns Woods Bancorp, Inc. (NASDAQ:PWOD)

Penns Woods Bancorp, Inc. continued its solid earnings, supported by loan and deposit growth, achieving net income of $6,468,000 for the six months ended June 30, 2016 resulting in basic and dilutive earnings per share of $1.37.

Highlights

  • Net income from core operations (“operating earnings”), which is a non-generally accepted accounting principles (GAAP) measure of net income excluding net securities gains, remained flat at $3,065,000 for the three months ended June 30, 2016 compared to $3,088,000 for the same period of 2015. Operating earnings decreased to $5,830,000 for the six months ended June 30, 2016 compared to $6,007,000 for the same period of 2015. The 2015 six month period included non-recurring gains on the sale of other real estate owned of $222,000 above the 2016 level. In addition, the investment portfolio has declined $67,802,000 from June 30, 2015 to June 30, 2016 as part of our strategy to position the balance sheet for a rising rate environment.
  • Operating earnings per share for the three months ended June 30, 2016 and 2015 were $0.65 for both basic and dilutive. Operating earnings per share for the six months ended June 30, 2016 were $1.23 basic and dilutive compared to $1.25 basic and dilutive for the same period of 2015.
  • Return on average assets was 1.00% for the three months ended June 30, 2016 compared to 1.07% for the corresponding period of 2015. Return on average assets was 0.97% for the six months ended June 30, 2016 compared to 1.07% for the corresponding period of 2015.
  • Return on average equity was 9.77% for the three months ended June 30, 2016 compared to 10.05% for the corresponding period of 2015. Return on average equity was 9.36% for the six months ended June 30, 2016 compared to 9.90% for the corresponding period of 2015.

“The first six months of 2016 have seen the continuation of our strategy to more conservatively manage the balance sheet by reducing interest rate and market risk. Our employees have been successful in building the loan portfolio primarily through growth in variable rate home equity products. In addition the commercial loan portfolio continues to perform well. Funding the growth was achieved through a reduction in the investment portfolio combined with deposit gathering efforts. The loan and deposit growth is the result of relationship building,” 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 six months ended June 30, 2016 was $3,390,000 and $6,468,000 compared to $3,433,000 and $6,788,000 for the same period of 2015. Results for the three and six months ended June 30, 2016 compared to 2015 were impacted by a decrease in after-tax securities gains of $20,000 (from a gain of $345,000 to a gain of $325,000) for the three month periods and a decrease in after-tax securities gains of $143,000 (from a gain of $781,000 to a gain of $638,000) for the six month periods. Basic and dilutive earnings per share for the three and six months ended June 30, 2016 were $0.72 and $1.37 compared to $0.72 and $1.42 for the corresponding periods of 2015. Return on average assets and return on average equity were 1.00% and 9.77% for the three months ended June 30, 2016 compared to 1.07% and 10.05% for the corresponding period of 2015. Return on average assets and return on average equity were 0.97% and 9.36% for the six months ended June 30, 2016 compared to 1.07% and 9.90% for the corresponding period of 2015.

Net Interest Margin

The net interest margin for the three and six months ended June 30, 2016 was 3.42% and 3.49% compared to 3.64% and 3.66% for the corresponding periods of 2015. The decline in the net interest margin was driven by a decreasing yield on the loan and investment portfolios due to the continued low rate environment and our strategic decision to continue repositioning the earning asset portfolio in anticipation of a rising rate environment. The impact of the declining earning asset yield and decreasing investment portfolio balance was partially offset by a 7.80% growth in gross loans from June 30, 2015 to June 30, 2016 resulting in net interest income increasing slightly compared to the comparable six month period of 2015. The loan growth was funded by an increase in core deposits and a decrease in the investment portfolio. Core deposits represent a lower cost funding source than time deposits and comprise 79.65% of total deposits at June 30, 2016 and 78.16% at June 30, 2015.

“The net interest margin continues to come under downward pressure from both external and internal factors. The continued low interest rate environment is limiting the yield on earning assets that we can acquire into our loan and investment portfolios. At the same time, our strategic decision to reduce our interest rate and market risk in a rising rate environment by reducing the duration and size of the investment portfolio through active management has resulted in a declining investment portfolio yield. The combination of these factors has resulted in new earning assets being added to the balance sheet at rates lower than the legacy assets they replace. While the yield on earning assets is declining, the rate paid on interest bearing liabilities has become stagnant as liability rates are at or near their apparent bottom,” commented President Grafmyre.

Assets

Total assets increased $54,670,000 to $1,346,482,000 at June 30, 2016 compared to June 30, 2015. Net loans increased $74,989,000 to $1,041,602,000 at June 30, 2016 compared to June 30, 2015 primarily due to campaigns related to increasing home equity product market share during 2015 and 2016, and growth in the commercial loan portfolio. The investment portfolio decreased $67,802,000 from June 30, 2015 to June 30, 2016 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 1.10% at June 30, 2016 from 0.99% at June 30, 2015. This change was primarily the result of a large commercial real estate loan that was placed on non-accrual status causing non-performing loans to increase to $11,626,000 at June 30, 2016 from $9,689,000 at June 30, 2015. 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 $135,000 for the six months ended June 30, 2016 minimally impacted the allowance for loan losses which was 1.19% of total loans at June 30, 2016. The majority of the loans charged-off had a specific allowance within the allowance for loan losses.

Deposits

Deposits increased $77,399,000 to $1,084,867,000 at June 30, 2016 compared to June 30, 2015. Core deposits (total deposits excluding time deposits) increased $76,724,000 due to our commitment to building complete banking relationships with our customers. Noninterest-bearing deposits increased $29,500,000 to $274,002,000 at June 30, 2016 compared to June 30, 2015. Driving this growth is our commitment to easy-to-use products, community involvement, and emphasis on customer service. While deposit gathering efforts have centered on core deposits, the lengthening of the time deposit portfolio is in process as part of the strategy to build balance sheet protection in a rising rate environment.

Shareholders’ Equity

Shareholders’ equity increased $4,396,000 to $139,394,000 at June 30, 2016 compared to June 30, 2015. Since June 30, 2015 treasury stock purchases of $1,374,000 for 33,974 shares were completed as part of the stock repurchase plan. The change in accumulated other comprehensive loss from $3,170,000 at June 30, 2015 to $2,168,000 at June 30, 2016 is a result of an increase in unrealized gains on available for sale securities from an unrealized gain of $1,374,000 at June 30, 2015 to an unrealized gain of $1,838,000 at June 30, 2016. The amount of accumulated other comprehensive loss at June 30, 2016 was also impacted by the change in net excess of the projected benefit obligation over the fair value of the plan assets of the defined benefit pension plan resulting in a decrease in the net loss of $538,000 to $4,006,000 at June 30, 2016. The current level of shareholders’ equity equates to a book value per share of $29.45 at June 30, 2016 compared to $28.33 at June 30, 2015 and an equity to asset ratio of 10.35% at June 30, 2016 compared to 10.45% at June 30, 2015. Excluding goodwill and intangibles, book value per share was $25.42 at June 30, 2016 compared to $24.47 at June 30, 2015. Dividends declared for each of the three and six months ended June 30, 2016 and 2015 were $0.47 and $0.94 per share.

Penns Woods Bancorp, Inc. is the parent company of Jersey Shore State Bank, which operates fifteen branch offices providing financial services in Lycoming, Clinton, Centre, Montour, and Union 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, 2015.

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

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

Contact:Richard A. Grafmyre, President and Chief Executive Officer
300 Market Street
Williamsport, PA 17701
570-322-1111e-mail: pwod@pwod.com



THIS INFORMATION IS SUBJECT TO YEAR-END AUDIT ADJUSTMENT

PENNS WOODS BANCORP, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
June 30,
(In Thousands, Except Share Data) 2016 2015 % Change
ASSETS
Noninterest-bearing balances $24,088 $20,428 17.92%
Interest-bearing balances in other financial institutions 45,387 1,441 3,049.69%
Total cash and cash equivalents 69,475 21,869 217.69%
Investment securities, available for sale, at fair value 146,667 214,312 (31.56)%
Investment securities, trading 157 (100.00)%
Loans held for sale 1,349 2,107 (35.98)%
Loans 1,054,119 977,878 7.80%
Allowance for loan losses (12,517) (11,265) 11.11%
Loans, net 1,041,602 966,613 7.76%
Premises and equipment, net 22,304 20,816 7.15%
Accrued interest receivable 3,490 3,706 (5.83)%
Bank-owned life insurance 27,016 26,327 2.62%
Investment in limited partnerships 704 1,229 (42.72)%
Goodwill 17,104 17,104 %
Intangibles 1,979 1,294 52.94%
Deferred tax asset 7,400 8,772 (15.64)%
Other assets 7,392 7,506 (1.52)%
TOTAL ASSETS $1,346,482 $1,291,812 4.23%
LIABILITIES
Interest-bearing deposits $810,865 $762,966 6.28%
Noninterest-bearing deposits 274,002 244,502 12.07%
Total deposits 1,084,867 1,007,468 7.68%
Short-term borrowings 17,440 59,026 (70.45)%
Long-term borrowings 91,025 75,426 20.68%
Accrued interest payable 456 410 11.22%
Other liabilities 13,300 14,484 (8.17)%
TOTAL LIABILITIES 1,207,088 1,156,814 4.35%
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; 5,006,036 and 5,003,169 shares issued 41,717 41,698 0.05%
Additional paid-in capital 50,025 49,933 0.18%
Retained earnings 60,054 55,397 8.41%
Accumulated other comprehensive loss:
Net unrealized gain on available for sale securities 1,838 1,374 33.77%
Defined benefit plan (4,006) (4,544) 11.84%
Treasury stock at cost, 272,452 and 238,478 shares (10,234) (8,860) 15.51%
TOTAL SHAREHOLDERS’ EQUITY 139,394 134,998 3.26%
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $1,346,482 $1,291,812 4.23%


PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30,
(In Thousands, Except Per Share Data) 2016 2015 % Change 2016 2015 % Change
INTEREST AND DIVIDEND INCOME:
Loans including fees $10,466 $9,752 7.32% $20,821 $19,075 9.15%
Investment securities:
Taxable 601 885 (32.09)% 1,223 1,899 (35.60)%
Tax-exempt 398 744 (46.51)% 874 1,511 (42.16)%
Dividend and other interest income 204 148 37.84% 477 441 8.16%
TOTAL INTEREST AND DIVIDEND INCOME 11,669 11,529 1.21% 23,395 22,926 2.05%
INTEREST EXPENSE:
Deposits 881 785 12.23% 1,716 1,528 12.30%
Short-term borrowings 8 28 (71.43)% 34 47 (27.66)%
Long-term borrowings 492 494 (0.40)% 983 1,018 (3.44)%
TOTAL INTEREST EXPENSE 1,381 1,307 5.66% 2,733 2,593 5.40%
NET INTEREST INCOME 10,288 10,222 0.65% 20,662 20,333 1.62%
PROVISION FOR LOAN LOSSES 258 600 (57.00)% 608 1,300 (53.23)%
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 10,030 9,622 4.24% 20,054 19,033 5.36%
NON-INTEREST INCOME:
Service charges 561 598 (6.19)% 1,093 1,151 (5.04)%
Securities gains, available for sale 486 526 (7.60)% 921 1,187 (22.41)%
Securities gains (losses), trading 6 (4) 250.00% 46 (4) 1,250%
Bank-owned life insurance 161 171 (5.85)% 345 359 (3.90)%
Gain on sale of loans 566 482 17.43% 1,033 781 32.27%
Insurance commissions 200 204 (1.96)% 405 438 (7.53)%
Brokerage commissions 272 294 (7.48)% 527 539 (2.23)%
Other 926 786 17.81% 1,805 1,866 (3.27)%
TOTAL NON-INTEREST INCOME 3,178 3,057 3.96% 6,175 6,317 (2.25)%
NON-INTEREST EXPENSE:
Salaries and employee benefits 4,346 4,301 1.05% 8,926 8,771 1.77%
Occupancy 545 564 (3.37)% 1,086 1,192 (8.89)%
Furniture and equipment 679 643 5.60% 1,380 1,238 11.47%
Pennsylvania shares tax 220 243 (9.47)% 478 467 2.36%
Amortization of investments in limited partnerships 68 166 (59.04)% 220 331 (33.53)%
Federal Deposit Insurance Corporation deposit insurance 236 230 2.61% 468 445 5.17%
Marketing 185 145 27.59% 395 274 44.16%
Intangible amortization 100 80 25.00% 187 162 15.43%
Other 2,287 2,049 11.62% 4,587 4,009 14.42%
TOTAL NON-INTEREST EXPENSE 8,666 8,421 2.91% 17,727 16,889 4.96%
INCOME BEFORE INCOME TAX PROVISION 4,542 4,258 6.67% 8,502 8,461 0.48%
INCOME TAX PROVISION 1,152 825 39.64% 2,034 1,673 21.58%
NET INCOME $3,390 $3,433 (1.25)% $6,468 $6,788 (4.71)%
EARNINGS PER SHARE - BASIC AND DILUTED $0.72 $0.72 % $1.37 $1.42 (3.52)%
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED 4,733,251 4,779,687 (0.97)% 4,736,878 4,790,536 (1.12)%
DIVIDENDS DECLARED PER SHARE $0.47 $0.47 % $0.94 $0.94 %


PENNS WOODS BANCORP, INC.
AVERAGE BALANCES AND INTEREST RATES
Three Months Ended
June 30, 2016 June 30, 2015
(Dollars in Thousands) Average
Balance
Interest Average
Rate
Average
Balance
Interest Average
Rate
ASSETS:
Tax-exempt loans $46,281 $445 3.87% $39,977 $388 3.89%
All other loans 1,000,541 10,172 4.09% 921,769 9,496 4.13%
Total loans 1,046,822 10,617 4.08% 961,746 9,884 4.12%
Federal funds sold % %
Taxable securities 94,049 734 3.12% 130,730 1,030 3.15%
Tax-exempt securities 56,348 603 4.28% 87,509 1,127 5.15%
Total securities 150,397 1,337 3.56% 218,239 2,157 3.95%
Interest-bearing deposits 54,309 71 0.53% 3,781 3 0.32%
Total interest-earning assets 1,251,528 12,025 3.86% 1,183,766 12,044 4.08%
Other assets 100,241 98,039
TOTAL ASSETS $1,351,769 $1,281,805
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Savings $153,151 14 0.04% $143,305 14 0.04%
Super Now deposits 198,048 125 0.25% 187,828 124 0.26%
Money market deposits 239,754 161 0.27% 209,624 143 0.27%
Time deposits 221,376 581 1.06% 220,851 504 0.92%
Total interest-bearing deposits 812,329 881 0.44% 761,608 785 0.41%
Short-term borrowings 16,710 8 0.19% 39,166 28 0.28%
Long-term borrowings 91,025 492 2.14% 81,924 494 2.39%
Total borrowings 107,735 500 1.84% 121,090 522 1.71%
Total interest-bearing liabilities 920,064 1,381 0.60% 882,698 1,307 0.59%
Demand deposits 276,748 244,205
Other liabilities 16,151 18,231
Shareholders’ equity 138,806 136,671
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $1,351,769 $1,281,805
Interest rate spread 3.26% 3.49%
Net interest income/margin $10,644 3.42% $10,737 3.64%


Three Months Ended June 30,
2016 2015
Total interest income $11,669 $11,529
Total interest expense 1,381 1,307
Net interest income 10,288 10,222
Tax equivalent adjustment 356 515
Net interest income (fully taxable equivalent) $10,644 $10,737


Six Months Ended
June 30, 2016 June 30, 2015
(Dollars in Thousands) Average
Balance
Interest Average
Rate
Average
Balance
Interest Average
Rate
ASSETS:
Tax-exempt loans $50,700 $980 3.89% $38,303 $771 4.06%
All other loans 994,034 20,174 4.08% 906,693 18,566 4.13%
Total loans 1,044,734 21,154 4.07% 944,996 19,337 4.13%
Taxable securities 96,541 1,618 3.35% 137,041 2,333 3.40%
Tax-exempt securities 59,860 1,324 4.42% 87,667 2,289 5.22%
Total securities 156,401 2,942 3.76% 224,708 4,622 4.11%
Interest-bearing deposits 33,501 82 0.49% 5,152 7 0.27%
Total interest-earning assets 1,234,636 24,178 3.94% 1,174,856 23,966 4.11%
Other assets 98,276 97,043
TOTAL ASSETS $1,332,912 $1,271,899
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Savings $151,004 29 0.04% $142,537 29 0.04%
Super Now deposits 193,098 249 0.26% 189,125 253 0.27%
Money market deposits 229,497 301 0.26% 207,446 279 0.27%
Time deposits 220,965 1,137 1.03% 218,824 967 0.89%
Total interest-bearing deposits 794,564 1,716 0.43% 757,932 1,528 0.41%
Short-term borrowings 22,560 34 0.30% 33,728 47 0.28%
Long-term borrowings 91,025 983 2.14% 82,961 1,018 2.44%
Total borrowings 113,585 1,017 1.77% 116,689 1,065 1.82%
Total interest-bearing liabilities 908,149 2,733 0.60% 874,621 2,593 0.59%
Demand deposits 270,900 242,488
Other liabilities 15,703 17,687
Shareholders’ equity 138,160 137,103
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $1,332,912 $1,271,899
Interest rate spread 3.34% 3.52%
Net interest income/margin $21,445 3.49% $21,373 3.66%


Six Months Ended June 30,
2016 2015
Total interest income $23,395 $22,926
Total interest expense 2,733 2,593
Net interest income 20,662 20,333
Tax equivalent adjustment 783 1,040
Net interest income (fully taxable equivalent) $21,445 $21,373


(Dollars in Thousands, Except Per Share Data) Quarter Ended
6/30/2016 3/31/2016 12/31/2015 9/302015 6/30/2015
Operating Data
Net income $3,390 $3,078 $3,746 $3,364 $3,433
Net interest income 10,288 10,374 10,338 10,234 10,222
Provision for loan losses 258 350 480 520 600
Net security gains 492 475 894 493 522
Non-interest income, excluding net security gains 2,686 2,522 2,417 2,644 2,535
Non-interest expense 8,666 9,061 8,317 8,530 8,421
Performance Statistics
Net interest margin 3.42% 3.57% 3.55% 3.55% 3.64%
Annualized return on average assets 1.00% 0.94% 1.15% 1.04% 1.07%
Annualized return on average equity 9.77% 8.95% 10.73% 9.89% 10.05%
Annualized net loan charge-offs (recoveries) to average loans 0.05% % (0.03)% 0.12% 0.07%
Net charge-offs (recoveries) 123 12 (75) 296 161
Efficiency ratio 66.0% 69.6% 64.6% 65.7% 65.3%
Per Share Data
Basic earnings per share $0.72 $0.65 $0.79 $0.71 $0.72
Diluted earnings per share 0.72 0.65 0.79 0.71 0.72
Dividend declared per share 0.47 0.47 0.47 0.47 0.47
Book value 29.45 29.09 28.71 28.54 28.33
Common stock price:
High 44.70 41.32 45.28 44.56 48.28
Low 37.82 36.73 40.47 40.41 41.84
Close 41.99 38.54 42.46 40.92 44.09
Weighted average common shares:
Basic 4,733 4,741 4,747 4,762 4,780
Fully Diluted 4,733 4,741 4,747 4,762 4,780
End-of-period common shares:
Issued 5,006 5,006 5,005 5,004 5,004
Treasury 272 272 258 254 238


(Dollars in Thousands, Except Per Share Data) Quarter Ended
6/30/2016 3/31/2016 12/31/2015 9/30/2015 6/30/2015
Financial Condition Data:
General
Total assets $1,346,482 $1,318,137 $1,320,057 $1,299,292 $1,291,812
Loans, net 1,041,602 1,028,870 1,033,163 990,164 966,613
Goodwill 17,104 17,104 17,104 17,104 17,104
Intangibles 1,979 2,078 1,240 1,316 1,294
Total deposits 1,084,867 1,059,581 1,031,880 1,004,801 1,007,468
Noninterest-bearing 274,002 269,362 280,083 247,848 244,502
Savings 152,540 153,217 144,561 143,224 143,415
NOW 190,890 190,168 176,078 188,444 188,092
Money Market 246,712 226,659 209,782 204,475 211,412
Time Deposits 220,723 220,175 221,376 220,810 220,047
Total interest-bearing deposits 810,865 790,219 751,797 756,953 762,966
Core deposits* 864,145 839,406 810,504 783,991 787,421
Shareholders’ equity 139,394 137,663 136,279 135,577 134,998
Asset Quality
Non-performing loans $11,626 $11,648 $9,446 $8,608 $9,689
Non-performing loans to total assets 0.86% 0.88% 0.72% 0.66% 0.75%
Allowance for loan losses 12,517 12,382 12,044 11,489 11,265
Allowance for loan losses to total loans 1.19% 1.19% 1.15% 1.15% 1.15%
Allowance for loan losses to non-performing loans 107.66% 106.30% 127.50% 133.47% 116.27%
Non-performing loans to total loans 1.10% 1.12% 0.90% 0.86% 0.99%
Capitalization
Shareholders’ equity to total assets 10.35% 10.44% 10.32% 10.43% 10.45%

* Core deposits are defined as total deposits less time deposits

Reconciliation of GAAP and Non-GAAP Financial Measures
Three Months Ended
June 30,
Six Months Ended
June 30,
(Dollars in Thousands, Except Per Share Data) 2016 2015 2016 2015
GAAP net income $3,390 $3,433 $6,468 $6,788
Less: net securities gains, net of tax 325 345 638 781
Non-GAAP operating earnings $3,065 $3,088 $5,830 $6,007
Three Months Ended
June 30,
Six Months Ended
June 30,
2016 2015 2016 2015
Return on average assets (ROA) 1.00% 1.07% 0.97% 1.07%
Less: net securities gains, net of tax 0.09% 0.11% 0.10% 0.13%
Non-GAAP operating ROA 0.91% 0.96% 0.87% 0.94%
Three Months Ended
June 30,
Six Months Ended
June 30,
2016 2015 2016 2015
Return on average equity (ROE) 9.77% 10.05% 9.36% 9.90%
Less: net securities gains, net of tax 0.94% 1.01% 0.92% 1.14%
Non-GAAP operating ROE 8.83% 9.04% 8.44% 8.76%
Three Months Ended
June 30,
Six Months Ended
June 30,
2016 2015 2016 2015
Basic earnings per share (EPS) $0.72 $0.72 $1.37 $1.42
Less: net securities gains, net of tax 0.07 0.07 0.14 0.17
Non-GAAP basic operating EPS $0.65 $0.65 $1.23 $1.25
Three Months Ended
June 30,
Six Months Ended
June 30,
2016 2015 2016 2015
Dilutive EPS $0.72 $0.72 $1.37 $1.42
Less: net securities gains, net of tax 0.07 0.07 0.14 0.17
Non-GAAP dilutive operating EPS $0.65 $0.65 $1.23 $1.25


Source:Penns Woods Bancorp, Inc.