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Penns Woods Bancorp, Inc. Reports Third Quarter 2017 Earnings

WILLIAMSPORT, Pa., Oct. 20, 2017 (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 $9,057,000 for the nine months ended September 30, 2017 resulting in basic and dilutive earnings per share of $1.92.

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, was $3,087,000 for the three months ended September 30, 2017 compared to $2,887,000 for the same period of 2016. Operating earnings increased to $8,737,000 for the nine months ended September 30, 2017 compared to $8,719,000 for the same period of 2016. Impacting the level of operating earnings were several factors including the continued shift of earning assets from the investment portfolio to the loan portfolio as the balance sheet is actively managed to reduce market risk and interest rate risk in a rising rate environment. In addition, the effective tax rate has increased due to the conclusion of the ten year tax credit generation period of several low income elderly housing projects in our market footprint in which the company participates.

  • Operating earnings per share for the three months ended September 30, 2017 were $0.66 for both basic and dilutive, an increase from $0.61 for basic and dilutive for the same period of 2016. Operating earnings per share for the nine months ended September 30, 2017 were $1.85 basic and dilutive compared to $1.84 basic and dilutive for the same period of 2016.

  • Return on average assets was 0.93% for the three months ended September 30, 2017 compared to 0.91% for the corresponding period of 2016. Return on average assets was 0.87% for the nine months ended September 30, 2017 compared to 0.95% for the corresponding period of 2016.

  • Return on average equity was 9.43% for the three months ended September 30, 2017 compared to 8.69% for the corresponding period of 2016. Return on average equity was 8.69% for the nine months ended September 30, 2017 compared to 9.14% for the corresponding period of 2016.

“The third quarter of 2017 had several highlights that show our commitment to the future. Luzerne Bank opened an office in Conyngham and Jersey Shore State Bank continued the construction of a branch in the Muncy/Hughesville area. In addition the indirect auto lending portfolio is increasing in size with the portfolio approaching $60 million. While we have focused on the building of branches and the indirect auto portfolio, we have not lost sight of the funding side of balance sheet. Total deposits have increased six percent year over year as we remain focused on building relationships. The combination of these items has led to an increasing level of core earnings year over year and quarter over quarter,” 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, 2017 was $3,284,000 and $9,057,000 compared to $3,059,000 and $9,529,000 for the same period of 2016. Results for the three and nine months ended September 30, 2017 compared to 2016 were impacted by an increase in after-tax securities gains of $25,000 (from a gain of $172,000 to a gain of $197,000) for the three month periods and a decrease in after-tax securities gains of $490,000 (from a gain of $810,000 to a gain of $320,000) for the nine month periods. Basic and dilutive earnings per share for the three and nine months ended September 30, 2017 were $0.70 and $1.92 compared to $0.65 and $2.01 for the corresponding period of 2016. Return on average assets and return on average equity were 0.93% and 9.43% for the three months ended September 30, 2017 compared to 0.91% and 8.69% for the corresponding period of 2016. Return on average assets and return on average equity were 0.87% and 8.69% for the nine months ended September 30, 2017 compared to 0.95% and 9.14% for the corresponding period of 2016.

Net Interest Margin

The net interest margin for the three and nine months ended September 30, 2017 was 3.57% and 3.47% compared to 3.37% and 3.45% for the corresponding period of 2016. The increase in the net interest margin for the nine month period was limited by a decreasing yield on the investment portfolio due to the continued lower than historical rate environment that limits the yield that we can acquire into the portfolio and our strategic decision to continue repositioning the portfolio through active management in anticipation of a steadily rising rate environment. The impact of the declining investment portfolio yield and decreasing investment portfolio balance was offset by an 11.24% growth in gross loans from September 30, 2016 to September 30, 2017. The loan growth was primarily 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 81.94% of total deposits at September 30, 2017 and 79.60% at September 30, 2016.

Assets

Total assets increased $82,785,000 to $1,430,197,000 at September 30, 2017 compared to September 30, 2016. Net loans increased $120,019,000 to $1,176,781,000 at September 30, 2017 compared to September 30, 2016 primarily due to campaigns related to increasing home equity product market share during 2016 and 2017 and the introduction of indirect auto lending during the third quarter of 2016. The investment portfolio decreased $8,534,000 from September 30, 2016 to September 30, 2017 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 shortening 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 ratio of non-performing loans to total loans ratio decreased to 0.69% at September 30, 2017 from September 30, 2016 as non-performing loans have decreased to $8,235,000 at September 30, 2017 from $11,530,000 at September 30, 2016. The level of non-performing loans decreased as a large non-performing loan was paid-off during the three months ended September 30, 2017. The majority of non-performing loans are centered on 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 $568,000 for the nine months ended September 30, 2017 minimally impacted the allowance for loan losses which was 1.09% of total loans at September 30, 2017. The majority of the loans charged-off had a specific allowance within the allowance for loan losses.

Deposits

Deposits increased $65,699,000 to $1,153,996,000 at September 30, 2017 compared to September 30, 2016. Core deposits (total deposits excluding time deposits) increased $79,213,000 due to our commitment to building complete banking relationships with our customers. Noninterest-bearing deposits increased $15,231,000 to $310,830,000 at September 30, 2017 compared to September 30, 2016. 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 continues to move forward as part of the strategy to build balance sheet protection in a rising rate environment.

Shareholders’ Equity

Shareholders’ equity decreased $266,000 to $139,669,000 at September 30, 2017 compared to September 30, 2016. The change in accumulated other comprehensive loss from $2,491,000 at September 30, 2016 to $4,130,000 at September 30, 2017 is a result of a decrease in unrealized gains on available for sale securities from an unrealized gain of $1,489,000 at September 30, 2016 to an unrealized gain of $73,000 at September 30, 2017. The amount of accumulated other comprehensive loss at September 30, 2017 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 an increase in the net loss of $223,000 to $4,203,000 at September 30, 2017. The current level of shareholders’ equity equates to a book value per share of $29.79 at September 30, 2017 compared to $29.56 at September 30, 2016 and an equity to asset ratio of 9.77% at September 30, 2017 compared to 10.39% at September 30, 2016. Excluding goodwill and intangibles, book value per share was $25.81 at September 30, 2017 compared to $25.55 at September 30, 2016. Dividends declared for the nine months ended September 30, 2017 and 2016 were $1.41 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 nine 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. These certain 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, 2016.

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
110 Reynolds Street
Williamsport, PA 17702
570-322-1111e-mail: pwod@pwod.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) 2017 2016 % Change
ASSETS
Noninterest-bearing balances $22,042 $23,487 (6.15)%
Interest-bearing balances in other financial institutions 5,705 36,694 (84.45)%
Total cash and cash equivalents 27,747 60,181 (53.89)%
Investment securities, available for sale, at fair value 132,313 141,057 (6.20)%
Investment securities, trading 210 100.00%
Loans held for sale 1,734 2,160 (19.72)%
Loans 1,189,714 1,069,480 11.24%
Allowance for loan losses (12,933) (12,718) 1.69%
Loans, net 1,176,781 1,056,762 11.36%
Premises and equipment, net 25,895 22,985 12.66%
Accrued interest receivable 4,289 3,800 12.87%
Bank-owned life insurance 27,827 27,176 2.40%
Goodwill 17,104 17,104 %
Intangibles 1,543 1,889 (18.32)%
Deferred tax asset 7,984 7,404 7.83%
Other assets 6,770 6,894 (1.80)%
TOTAL ASSETS $1,430,197 $1,347,412 6.14%
LIABILITIES
Interest-bearing deposits $843,166 $792,698 6.37%
Noninterest-bearing deposits 310,830 295,599 5.15%
Total deposits 1,153,996 1,088,297 6.04%
Short-term borrowings 41,596 11,579 259.24%
Long-term borrowings 80,998 91,025 (11.02)%
Accrued interest payable 483 481 0.42%
Other liabilities 13,455 16,095 (16.40)%
TOTAL LIABILITIES 1,290,528 1,207,477 6.88%
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; 5,008,720 and 5,006,601 shares issued 41,739 41,721 0.04%
Additional paid-in capital 50,142 50,050 0.18%
Retained earnings 64,033 60,889 5.16%
Accumulated other comprehensive loss:
Net unrealized gain on available for sale securities 73 1,489 (95.10)%
Defined benefit plan (4,203) (3,980) (5.60)%
Treasury stock at cost, 320,150 and 272,452 shares (12,115) (10,234) 18.38%
TOTAL SHAREHOLDERS’ EQUITY 139,669 139,935 (0.19)%
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $1,430,197 $1,347,412 6.14%


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) 2017 2016 % Change 2017 2016 % Change
INTEREST AND DIVIDEND INCOME:
Loans including fees $11,906 $10,541 12.95% $33,642 $31,362 7.27%
Investment securities:
Taxable 553 601 (7.99)% 1,665 1,825 (8.77)%
Tax-exempt 319 329 (3.04)% 940 1,203 (21.86)%
Dividend and other interest income 170 189 (10.05)% 592 666 (11.11)%
TOTAL INTEREST AND DIVIDEND INCOME 12,948 11,660 11.05% 36,839 35,056 5.09%
INTEREST EXPENSE:
Deposits 1,058 909 16.39% 2,968 2,624 13.11%
Short-term borrowings 31 7 342.86% 39 41 (4.88)%
Long-term borrowings 407 497 (18.11)% 1,220 1,481 (17.62)%
TOTAL INTEREST EXPENSE 1,496 1,413 5.87% 4,227 4,146 1.95%
NET INTEREST INCOME 11,452 10,247 11.76% 32,612 30,910 5.51%
PROVISION FOR LOAN LOSSES 60 258 (76.74)% 605 866 (30.14)%
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 11,392 9,989 14.05% 32,007 30,044 6.53%
NON-INTEREST INCOME:
Service charges 550 585 (5.98)% 1,637 1,678 (2.44)%
Securities gains, available for sale 302 253 19.37% 487 1,174 (58.52)%
Securities (losses) gains, trading (4) 8 (150.00)% (2) 54 (103.70)%
Bank-owned life insurance 166 172 (3.49)% 499 516 (3.29)%
Gain on sale of loans 455 658 (30.85)% 1,316 1,691 (22.18)%
Insurance commissions 109 198 (44.95)% 399 604 (33.94)%
Brokerage commissions 352 290 21.38% 1,044 817 27.78%
Debit card income 514 690 (25.51)% 1,450 1,413 2.62%
Other 296 228 29.82% 1,325 1,310 1.15%
TOTAL NON-INTEREST INCOME 2,740 3,082 (11.10)% 8,155 9,257 (11.90)%
NON-INTEREST EXPENSE:
Salaries and employee benefits 4,738 4,507 5.13% 14,116 13,433 5.08%
Occupancy 603 544 10.85% 1,855 1,630 13.80%
Furniture and equipment 816 662 23.26% 2,129 2,042 4.26%
Software Amortization 235 580 (59.48)% 750 950 (21.05)%
Pennsylvania shares tax 228 220 3.64% 696 698 (0.29)%
Professional Fees 560 502 11.55% 1,816 1,512 20.11%
Federal Deposit Insurance Corporation deposit insurance 194 202 (3.96)% 514 670 (23.28)%
Debit Card Expense 168 246 (31.71)% 478 456 4.82%
Marketing 315 173 82.08% 690 568 21.48%
Intangible amortization 81 90 (10.00)% 257 276 (6.88)%
Other 1,628 1,013 60.71% 4,313 4,230 1.96%
TOTAL NON-INTEREST EXPENSE 9,566 8,739 9.46% 27,614 26,465 4.34%
INCOME BEFORE INCOME TAX PROVISION 4,566 4,332 5.40% 12,548 12,836 (2.24)%
INCOME TAX PROVISION 1,282 1,273 0.71% 3,491 3,307 5.56%
NET INCOME $3,284 $3,059 7.36% $9,057 $9,529 (4.95)%
EARNINGS PER SHARE - BASIC AND DILUTED $0.70 $0.65 7.69% $1.92 $2.01 (4.48)%
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED 4,688,222 4,733,800 (0.96)% 4,711,282 4,735,844 (0.52)%
DIVIDENDS DECLARED PER SHARE $0.47 $0.47 % $1.41 $1.41 %


PENNS WOODS BANCORP, INC.
AVERAGE BALANCES AND INTEREST RATES
Three Months Ended
September 30, 2017 September 30, 2016
(Dollars in Thousands) Average
Balance
Interest Average
Rate
Average
Balance
Interest Average
Rate
ASSETS:
Tax-exempt loans $53,850 $494 3.64% $45,715 $452 3.93%
All other loans 1,105,615 11,580 4.16% 1,011,393 10,243 4.03%
Total loans 1,159,465 12,074 4.13% 1,057,108 10,695 4.02%
Taxable securities 83,106 674 3.24% 93,893 725 3.09%
Tax-exempt securities 53,320 483 3.62% 49,231 498 4.05%
Total securities 136,426 1,157 3.39% 143,124 1,223 3.42%
Interest-bearing deposits 14,085 49 1.38% 48,125 65 0.54%
Total interest-earning assets 1,309,976 13,280 4.02% 1,248,357 11,983 3.82%
Other assets 101,035 101,312
TOTAL ASSETS $1,411,011 $1,349,669
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Savings $157,341 15 0.04% $151,464 15 0.04%
Super Now deposits 203,531 140 0.27% 184,440 107 0.23%
Money market deposits 284,155 267 0.37% 245,643 170 0.28%
Time deposits 206,563 636 1.22% 223,082 617 1.10%
Total interest-bearing deposits 851,590 1,058 0.49% 804,629 909 0.45%
Short-term borrowings 19,127 31 0.64% 15,748 7 0.18%
Long-term borrowings 81,107 407 1.96% 91,025 497 2.14%
Total borrowings 100,234 438 1.71% 106,773 504 1.85%
Total interest-bearing liabilities 951,824 1,496 0.62% 911,402 1,413 0.61%
Demand deposits 304,244 281,586
Other liabilities 15,708 15,916
Shareholders’ equity 139,235 140,765
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $1,411,011 $1,349,669
Interest rate spread 3.40% 3.21%
Net interest income/margin $11,784 3.57% $10,570 3.37%


Three Months Ended September 30,
2017 2016
Total interest income $12,948 $11,660
Total interest expense 1,496 1,413
Net interest income 11,452 10,247
Tax equivalent adjustment 332 323
Net interest income (fully taxable equivalent) $11,784 $10,570


Nine Months Ended
September 30, 2017 September 30, 2016
(Dollars in Thousands) Average
Balance
Interest Average
Rate
Average
Balance
Interest Average
Rate
ASSETS:
Tax-exempt loans $46,752 $1,315 3.76% $49,204 $1,432 3.89%
All other loans 1,081,148 32,774 4.05% 999,685 30,417 4.06%
Total loans 1,127,900 34,089 4.04% 1,048,889 31,849 4.06%
Taxable securities 85,417 2,039 3.18% 95,652 2,344 3.27%
Tax-exempt securities 50,972 1,424 3.72% 56,291 1,823 4.32%
Total securities 136,389 3,463 3.39% 151,943 4,167 3.66%
Interest-bearing deposits 27,901 218 1.04% 38,411 147 0.51%
Total interest-earning assets 1,292,190 37,770 3.91% 1,239,243 36,163 3.90%
Other assets 102,181 99,295
TOTAL ASSETS $1,394,371 $1,338,538
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Savings $157,396 45 0.04% $151,158 43 0.04%
Super Now deposits 198,560 377 0.25% 190,190 356 0.25%
Money market deposits 278,436 713 0.34% 234,918 471 0.27%
Time deposits 207,331 1,833 1.18% 221,676 1,754 1.06%
Total interest-bearing deposits 841,723 2,968 0.47% 797,942 2,624 0.44%
Short-term borrowings 13,714 39 0.26% 20,273 41 0.27%
Long-term borrowings 79,881 1,220 2.01% 91,025 1,481 2.14%
Total borrowings 93,595 1,259 1.76% 111,298 1,522 1.80%
Total interest-bearing liabilities 935,318 4,227 0.60% 909,240 4,146 0.61%
Demand deposits 301,567 274,488
Other liabilities 18,455 15,775
Shareholders’ equity 139,031 139,035
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $1,394,371 $1,338,538
Interest rate spread 3.31% 3.29%
Net interest income/margin $33,543 3.47% $32,017 3.45%


Nine Months Ended September 30,
2017 2016
Total interest income $36,839 $35,056
Total interest expense 4,227 4,146
Net interest income 32,612 30,910
Tax equivalent adjustment 931 1,107
Net interest income (fully taxable equivalent) $33,543 $32,017


(Dollars in Thousands, Except Per Share Data) Quarter Ended
9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Operating Data
Net income $3,284 $3,086 $2,686 $2,948 $3,059
Net interest income 11,452 10,824 10,336 10,337 10,247
Provision for loan losses 60 215 330 330 258
Net security gains (losses) 298 (12) 199 441 261
Non-interest income, excluding net security gains 2,442 2,775 2,452 2,415 2,821
Non-interest expense 9,566 9,063 8,985 8,625 8,739
Performance Statistics
Net interest margin 3.57% 3.44% 3.40% 3.38% 3.37%
Annualized return on average assets 0.93% 0.88% 0.79% 0.87% 0.91%
Annualized return on average equity 9.43% 8.79% 7.69% 8.43% 8.69%
Annualized net loan charge-offs (recoveries) to average loans 0.08% % 0.12% 0.06% 0.02%
Net charge-offs 236 11 321 152 57
Efficiency ratio 68.3% 65.9% 69.6% 66.9% 66.2%
Per Share Data
Basic earnings per share $0.70 $0.65 $0.57 $0.62 $0.65
Diluted earnings per share 0.70 0.65 0.56 0.62 0.65
Dividend declared per share 0.47 0.47 0.47 0.47 0.47
Book value 29.79 29.53 29.38 29.20 29.56
Common stock price:
High 46.47 43.60 49.45 52.03 44.75
Low 41.08 38.17 43.28 41.00 40.34
Close 46.47 41.18 43.45 50.50 44.46
Weighted average common shares:
Basic 4,688 4,711 4,735 4,734 4,734
Fully Diluted 4,688 4,711 4,761 4,734 4,734
End-of-period common shares:
Issued 5,009 5,008 5,008 5,007 5,007
Treasury 320 320 272 272 272


(Dollars in Thousands, Except Per Share Data) Quarter Ended
9/30/2017 6/30/2017 3/31/2017 12/31/2016 9/30/2016
Financial Condition Data:
General
Total assets $1,430,197 $1,395,364 $1,400,708 $1,348,590 $1,347,412
Loans, net 1,176,781 1,125,976 1,098,195 1,080,785 1,056,762
Goodwill 17,104 17,104 17,104 17,104 17,104
Intangibles 1,543 1,623 1,709 1,799 1,889
Total deposits 1,153,996 1,151,110 1,160,664 1,095,214 1,088,297
Noninterest-bearing 310,830 300,054 312,392 303,277 295,599
Savings 156,437 158,101 159,652 153,788 150,822
NOW 203,744 199,917 205,011 174,653 175,767
Money Market 274,528 287,140 278,443 245,121 244,138
Time Deposits 208,457 205,898 205,166 218,375 221,971
Total interest-bearing deposits 843,166 851,056 848,272 791,937 792,698
Core deposits* 945,539 945,212 955,498 876,839 866,326
Shareholders’ equity 139,669 138,440 139,113 138,249 139,935
Asset Quality
Non-performing loans $8,235 $12,537 $10,870 $11,626 $11,530
Non-performing loans to total assets 0.58% 0.90% 0.78% 0.86% 0.86%
Allowance for loan losses 12,933 13,109 12,905 12,896 12,718
Allowance for loan losses to total loans 1.09% 1.15% 1.16% 1.18% 1.19%
Allowance for loan losses to non-performing loans 157.05% 104.56% 118.72% 110.92% 110.30%
Non-performing loans to total loans 0.69% 1.10% 0.98% 1.06% 1.08%
Capitalization
Shareholders’ equity to total assets 9.77% 9.92% 9.93% 10.25% 10.39%
* 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) 2017 2016 2017 2016
GAAP net income $3,284 $3,059 $9,057 $9,529
Less: net securities gains, net of tax 197 172 320 810
Non-GAAP operating earnings $3,087 $2,887 $8,737 $8,719
Three Months Ended
September 30,
Nine Months Ended
September 30,
2017 2016 2017 2016
Return on average assets (ROA) 0.93% 0.91% 0.87% 0.95%
Less: net securities gains, net of tax 0.05% 0.05% 0.03% 0.08%
Non-GAAP operating ROA 0.88% 0.86% 0.84% 0.87%
Three Months Ended
September 30,
Nine Months Ended
September 30,
2017 2016 2017 2016
Return on average equity (ROE) 9.43% 8.69% 8.69% 9.14%
Less: net securities gains, net of tax 0.56% 0.49% 0.31% 0.78%
Non-GAAP operating ROE 8.87% 8.20% 8.38% 8.36%
Three Months Ended
September 30,
Nine Months Ended
September 30,
2017 2016 2017 2016
Basic earnings per share (EPS) $0.70 $0.65 $1.92 $2.01
Less: net securities gains, net of tax 0.04 0.04 0.07 0.17
Non-GAAP basic operating EPS $0.66 $0.61 $1.85 $1.84
Three Months Ended
September 30,
Nine Months Ended
September 30,
2017 2016 2017 2016
Dilutive EPS $0.70 $0.65 $1.92 $2.01
Less: net securities gains, net of tax 0.04 0.04 0.07 0.17
Non-GAAP dilutive operating EPS $0.66 $0.61 $1.85 $1.84

Source:Penns Woods Bancorp, Inc.