PENNS WOODS BANCORP INC - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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8-K - 8-K - PENNS WOODS BANCORP INC	q42014-8xk.htm

Exhibit 99.1

Press Release — For Immediate Release

January 26, 2015

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

Williamsport, PA — January 26, 2015 - Penns Woods Bancorp, Inc. (NASDAQ: PWOD)

Penns Woods Bancorp, Inc. continued its solid earnings and growth achieving net income of $14,608,000 for the twelve months ended December 31, 2014 resulting in basic and dilutive earnings per share of $3.03.

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, decreased to $2,560,000 for the three months ended December 31, 2014 compared to $3,389,000 for the same period of 2013. Net income from core operations decreased to $12,114,000 for the twelve months ended December 31, 2014 compared to $12,489,000 for the same period of 2013. Impacting the three and twelve month periods was an increase in the provision for loan losses of $1,005,000 and $575,000, respectively due to the level of charge-offs and the downgrading of several commercial loans.


•	Operating earnings per share for the three months ended December 31, 2014 were $0.53 basic and dilutive compared to $0.70 basic and dilutive for the same period of 2013. Operating earnings per share for the twelve months ended December 31, 2014 were $2.52 basic and dilutive compared to $2.83 basic and dilutive for the same period 2013.


•	Return on average assets was 0.93% for the three months ended December 31, 2014 compared to 1.16% for the corresponding period of 2013. Return on average assets was 1.19% for the twelve months ended December 31, 2014 compared to 1.32% for the corresponding period of 2013.


•	Return on average equity was 8.33% for the three months ended December 31, 2014 compared to 10.99% for the corresponding period of 2013. Return on average equity was 10.79% for the twelve months ended December 31, 2014 compared to 12.36% for the corresponding period of 2013.

“The twelve months ended December 31, 2014 have been an exciting and challenging time for the Penns Woods family. We have experienced a record level of net income, while undertaking several projects that will prepare us for the future; upgrading software systems, opening a branch in Loyalsock, and beginning the process of building a branch in Lewisburg. While these projects were progressing, we were also in the midst of shifting the earning asset portfolio from investments to loans. 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, but this action did negatively impact net interest income and the net interest margin. We also have been working through several impaired credits in the loan portfolio which resulted in $2,415,000 in charge-offs and an increase in the provision for loan losses during 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 twelve months ended December 31, 2014 was $2,883,000 and $14,608,000 compared to $3,495,000 and $14,084,000 for the same periods of 2013. Results for the three and twelve months ended December 31, 2014 compared to 2013 were impacted by an increase in after-tax securities gains of $217,000 (from a gain of $106,000 to a gain of $323,000) for the three month periods and an increase of $725,000 (from a gain of $1,595,000 to a gain of $2,320,000) for the twelve 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 twelve months ended December 31, 2014 were $0.60 and $3.03 compared to $0.73 and $3.19 for the corresponding periods of 2013. Return on average assets and return on average equity were 0.93% and 8.33% for the three months ended December 31, 2014 compared to 1.16% and 10.99% for the corresponding period of 2013. Return on average assets and return on average equity were 1.19% and 10.79% for the twelve months ended December 31, 2014 compared to 1.32% and 12.36% for the corresponding period of 2013.

Net Interest Margin

The net interest margin for the three and twelve months ended December 31, 2014 was 3.73% and 3.81% compared to 3.98% and 4.13% for the corresponding periods of 2013. The net interest margin has decreased for the comparable three and twelve months ended, while net interest income on a fully taxable equivalent basis has decreased $347,000 for the three months ended December 31, 2014 and increased $2,098,000 for the twelve months ended December 31, 2014 compared to the corresponding periods of 2013. Driving this increase is the growth in the loan and deposit portfolios for the twelve months ended December 31, 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 77.96% of total deposits at December 31, 2014 compared to 75.83% at December 31, 2013. The continued growth in core deposits has led to the total cost of deposits decreasing to 40 basis points ("bp") for the twelve months ended December 31, 2014 from 48 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 twelve months ended December 31, 2014 from 69 bp for the corresponding period of 2013.

“Consistent with industry trends and a reflection of our balance sheet management the net interest margin continues to decrease each quarter by several basis points resulting in the net interest margin for the year ended December 2014 being 3.81% versus 4.13% for the previous year. The continued low interest rate environment has resulted in declining asset yields due to legacy assets being replaced at lower yields. To offset the negative impact of declining yields on net interest income, we have focused on increasing the earning asset portfolio 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. The investment portfolio is being actively managed in order to reduce interest rate and market risk. The principal action being undertaken is 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. Proceeds generated from the strategic selling of bonds are being deployed primarily into loans with limited reinvestment into intermediate term corporate bonds and short and intermediate term municipal bonds. These actions do negatively impact current earnings, but the actions play 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 $33,016,000 to $1,245,011,000 at December 31, 2014 compared to December 31, 2013. Net loans increased $96,800,000 to $905,000,000 at December 31, 2014 compared to December 31, 2013 primarily due to campaigns related to increasing home equity product market share during 2013 and 2014 and growth in the commercial portfolio. The investment portfolio decreased $56,399,000 from December 31, 2013 to December 31, 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 1.34% at December 31, 2014 from 1.18% at December 31, 2013. The increase in non-performing loans to $12,248,000 at December 31, 2014 from $9,678,000 at December 31, 2013 is primarily the result of certain commercial 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 $2,415,000 for the twelve months ended December 31, 2014 negatively impacted the allowance for loan losses which was 1.16% of total loans at December 31, 2014. The majority of the loans charged-off had a specific allowance within the allowance for loan losses.

Deposits

Deposits increased $8,417,000 to $981,419,000 at December 31, 2014 compared to December 31, 2013. Core deposits (total deposits excluding time deposits) increased $27,381,000, while higher cost time deposits decreased $18,964,000 due to our commitment to building complete banking relationships with our customers. Noninterest-bearing deposits increased $26,001,000 to $243,378,000 at December 31, 2014 compared to December 31, 2013. Driving this growth is our commitment to easy-to-use products, community involvement, and emphasis on customer service.

Shareholders’ Equity

Shareholders’ equity increased $8,152,000 to $135,967,000 at December 31, 2014 compared to December 31, 2013. The decrease in accumulated other comprehensive loss of $3,227,000 to $1,667,000 at December 31, 2014 from $4,894,000 at December 31, 2013 is primarily a result of an increase in unrealized gains on available for sale securities from an unrealized loss of $2,169,000 at December 31, 2013 to an unrealized gain of $2,930,000 at December 31, 2014. The amount of accumulated other comprehensive loss at December 31, 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 an increase in the net loss of $1,872,000 to $4,597,000 at December 31, 2014. The current level of shareholders’ equity equates to a book value per share of $28.30 at December 31, 2014 compared to $26.52 at December 31, 2013 and an equity to asset ratio of 10.92% at December 31, 2014 compared to 10.55% at December 31, 2013. Excluding goodwill and intangibles, book value per share was $24.44 at December 31, 2014 compared to $22.60 at December 31, 2013. Dividends declared for the three and twelve months ended December 31, 2014 were $0.47 and $1.88 per share compared to $0.47 and $2.13 for the three and twelve months ended December 31, 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.



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

THIS INFORMATION IS SUBJECT TO YEAR-END AUDIT ADJUSTMENT

PENNS WOODS BANCORP, INC.

CONSOLIDATED BALANCE SHEET

(UNAUDITED)



	December 31,
(In Thousands, Except Share Data)	2014			2013			% Change
ASSETS
Noninterest-bearing balances	$	19,403		$	23,723		(18.21	)%
Interest-bearing balances in other financial institutions	505			770			(34.42	)%
Federal funds sold	—			113			n/a
Total cash and cash equivalents	19,908			24,606			(19.09	)%

Investment securities, available for sale, at fair value	232,213			288,612			(19.54	)%
Loans held for sale	550			1,626			(66.17	)%
Loans	915,579			818,344			11.88	%
Allowance for loan losses	(10,579		)	(10,144		)	4.29	%
Loans, net	905,000			808,200			11.98	%
Premises and equipment, net	21,109			20,184			4.58	%
Accrued interest receivable	3,912			4,696			(16.70	)%
Bank-owned life insurance	25,959			25,410			2.16	%
Investment in limited partnerships	1,560			2,221			(29.76	)%
Goodwill	17,104			17,104			—	%
Intangibles	1,456			1,801			(19.16	)%
Deferred tax asset	8,101			9,889			(18.08	)%
Other assets	8,139			7,646			6.45	%
TOTAL ASSETS	$	1,245,011		$	1,211,995		2.72	%

LIABILITIES
Interest-bearing deposits	$	738,041		$	755,625		(2.33	)%
Noninterest-bearing deposits	243,378			217,377			11.96	%
Total deposits	981,419			973,002			0.87	%

Short-term borrowings	40,818			26,716			52.78	%
Long-term borrowings	71,176			71,202			(0.04	)%
Accrued interest payable	381			405			(5.93	)%
Other liabilities	15,250			12,855			18.63	%
TOTAL LIABILITIES	1,109,044			1,084,180			2.29	%

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; 5,002,649 and 4,999,929 shares issued	41,688			41,665			0.06	%
Additional paid-in capital	49,896			49,800			0.19	%
Retained earnings	53,107			47,554			11.68	%
Accumulated other comprehensive loss:
Net unrealized gain (loss) on available for sale securities	2,930			(2,169		)	235.09	%
Defined benefit plan	(4,597		)	(2,725		)	(68.70	)%
Treasury stock at cost, 197,834 and 180,596 shares	(7,057		)	(6,310		)	11.84	%
TOTAL SHAREHOLDERS’ EQUITY	135,967			127,815			6.38	%
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,245,011		$	1,211,995		2.72	%

PENNS WOODS BANCORP, INC.

CONSOLIDATED STATEMENT OF INCOME

(UNAUDITED)



	Three Months Ended December 31,						Twelve Months Ended December 31,
(In Thousands, Except Per Share Data)	2014		2013		% Change		2014		2013		% Change
INTEREST AND DIVIDEND INCOME:
Loans including fees	$	9,472	$	9,097	4.12	%	$	36,495	$	32,353	12.80	%
Investment securities:
Taxable	1,049		1,514		(30.71	)%	5,111		6,034		(15.30	)%
Tax-exempt	793		1,049		(24.40	)%	3,453		4,602		(24.97	)%
Dividend and other interest income	146		102		43.14	%	547		310		76.45	%
TOTAL INTEREST AND DIVIDEND INCOME	11,460		11,762		(2.57	)%	45,606		43,299		5.33	%

INTEREST EXPENSE:
Deposits	748		815		(8.22	)%	2,995		3,221		(7.02	)%
Short-term borrowings	22		18		22.22	%	54		81		(33.33	)%
Long-term borrowings	482		482		—	%	1,913		1,962		(2.50	)%
TOTAL INTEREST EXPENSE	1,252		1,315		(4.79	)%	4,962		5,264		(5.74	)%

NET INTEREST INCOME	10,208		10,447		(2.29	)%	40,644		38,035		6.86	%

PROVISION FOR LOAN LOSSES	1,605		600		167.50	%	2,850		2,275		25.27	%

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	8,603		9,847		(12.63	)%	37,794		35,760		5.69	%

NON-INTEREST INCOME:
Service charges	597		656		(8.99	)%	2,419		2,307		4.85	%
Securities gains, net	490		160		206.25	%	3,515		2,417		45.43	%
Bank-owned life insurance	187		196		(4.59	)%	923		677		36.34	%
Gain on sale of loans	490		234		109.40	%	1,803		1,438		25.38	%
Insurance commissions	231		287		(19.51	)%	1,146		1,084		5.72	%
Brokerage commissions	273		221		23.53	%	1,077		1,018		5.80	%
Other	1,176		1,178		(0.17	)%	3,625		3,101		16.90	%
TOTAL NON-INTEREST INCOME	3,444		2,932		17.46	%	14,508		12,042		20.48	%

NON-INTEREST EXPENSE:
Salaries and employee benefits	4,477		4,390		1.98	%	17,273		15,415		12.05	%
Occupancy	572		603		(5.14	)%	2,301		1,905		20.79	%
Furniture and equipment	626		573		9.25	%	2,536		1,815		39.72	%
Pennsylvania shares tax	169		247		(31.58	)%	907		864		4.98	%
Amortization of investments in limited partnerships	165		165		—	%	661		661		—	%
Federal Deposit Insurance Corporation deposit insurance	174		173		0.58	%	746		594		25.59	%
Marketing	152		146		4.11	%	532		517		2.90	%
Intangible amortization	83		91		(8.79	)%	345		213		61.97	%
Other	2,094		2,088		0.29	%	8,589		8,283		3.69	%
TOTAL NON-INTEREST EXPENSE	8,512		8,476		0.42	%	33,890		30,267		11.97	%

INCOME BEFORE INCOME TAX PROVISION	3,535		4,303		(17.85	)%	18,412		17,535		5.00	%
INCOME TAX PROVISION	652		808		(19.31	)%	3,804		3,451		10.23	%
NET INCOME	$	2,883	$	3,495	(17.51	)%	$	14,608	$	14,084	3.72	%

EARNINGS PER SHARE - BASIC AND DILUTED	$	0.60	$	0.73	(17.81	)%	$	3.03	$	3.19	(5.02	)%

WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED	4,804,600		4,819,048		(0.30	)%	4,816,149		4,410,626		9.19	%

DIVIDENDS DECLARED PER SHARE	$	0.47	$	0.47	—	%	$	1.88	$	2.13	(11.74	)%

PENNS WOODS BANCORP, INC.

AVERAGE BALANCES AND INTEREST RATES



	Three Months Ended
	December 31, 2014						December 31, 2013
(Dollars in Thousands)	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
ASSETS:
Tax-exempt loans	$	33,700	$	366	4.30	%	$	25,849	$	297	4.56	%
All other loans	873,090		9,230		4.19	%	786,740		8,901		4.49	%
Total loans	906,790		9,596		4.20	%	812,589		9,198		4.49	%

Federal funds sold	—		—		—	%	444		—		—	%

Taxable securities	142,639		1,191		3.34	%	181,709		1,612		3.55	%
Tax-exempt securities	89,301		1,202		5.38	%	107,494		1,589		5.91	%
Total securities	231,940		2,393		4.13	%	289,203		3,201		4.43	%

Interest-bearing deposits	5,232		4		0.30	%	4,922		4		0.32	%

Total interest-earning assets	1,143,962		11,993		4.17	%	1,107,158		12,403		4.45	%

Other assets	96,111						96,201

TOTAL ASSETS	$	1,240,073					$	1,203,359

LIABILITIES AND SHAREHOLDERS’ EQUITY:
Savings	$	139,145	14		0.04	%	$	138,553	44		0.13	%
Super Now deposits	181,588		134		0.29	%	165,735		166		0.40	%
Money market deposits	209,235		144		0.27	%	208,591		140		0.27	%
Time deposits	217,371		456		0.83	%	235,718		465		0.78	%
Total interest-bearing deposits	747,339		748		0.40	%	748,597		815		0.43	%

Short-term borrowings	32,468		22		0.27	%	25,385		18		0.33	%
Long-term borrowings	71,177		482		2.65	%	70,755		482		2.67	%
Total borrowings	103,645		504		1.90	%	96,140		500		2.05	%

Total interest-bearing liabilities	850,984		1,252		0.58	%	844,737		1,315		0.62	%

Demand deposits	237,026						213,368
Other liabilities	13,672						18,070
Shareholders’ equity	138,391						127,184

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,240,073					$	1,203,359
Interest rate spread					3.59	%					3.83	%
Net interest income/margin			$	10,741	3.73	%			$	11,088	3.98	%



	Three Months Ended December 31,
	2014		2013
Total interest income	$	11,460	$	11,762
Total interest expense	1,252		1,315
Net interest income	10,208		10,447
Tax equivalent adjustment	533		641
Net interest income (fully taxable equivalent)	$	10,741	$	11,088



	Twelve Months Ended
	December 31, 2014						December 31, 2013
(Dollars in Thousands)	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
ASSETS:
Tax-exempt loans	$	29,461	$	1,295	4.40	%	$	24,934	$	1,056	4.24	%
All other loans	828,796		35,640		4.30	%	662,394		31,656		4.78	%
Total loans	858,257		36,935		4.30	%	687,328		32,712		4.76	%

Federal funds sold	170		—		—	%	226		—		—	%

Taxable securities	161,889		5,626		3.48	%	176,674		6,326		3.58	%
Tax-exempt securities	94,688		5,232		5.53	%	116,697		6,973		5.98	%
Total securities	256,577		10,858		4.23	%	293,371		13,299		4.53	%

Interest-bearing deposits	9,318		32		0.34	%	6,946		18		0.26	%

Total interest-earning assets	1,124,322		47,825		4.25	%	987,871		46,029		4.66	%

Other assets	100,983						76,593

TOTAL ASSETS	$	1,225,305					$	1,064,464
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Savings	$	140,575	81		0.06	%	$	118,125	140		0.12	%
Super Now deposits	182,229		583		0.32	%	154,131		687		0.45	%
Money market deposits	210,066		561		0.27	%	183,460		548		0.30	%
Time deposits	223,537		1,770		0.79	%	209,517		1,846		0.88	%
Total interest-bearing deposits	756,407		2,995		0.40	%	665,233		3,221		0.48	%

Short-term borrowings	22,342		54		0.24	%	22,281		81		0.38	%
Long-term borrowings	71,195		1,913		2.65	%	72,140		1,962		2.68	%
Total borrowings	93,537		1,967		2.07	%	94,421		2,043		2.14	%

Total interest-bearing liabilities	849,944		4,962		0.58	%	759,654		5,264		0.69	%

Demand deposits	225,981						174,909
Other liabilities	13,933						15,962
Shareholders’ equity	135,447						113,939
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	1,225,305					$	1,064,464
Interest rate spread					3.67	%					3.97	%
Net interest income/margin			$	42,863	3.81	%			$	40,765	4.13	%



	Twelve Months Ended December 31,
	2014		2013
Total interest income	$	45,606	$	43,299
Total interest expense	4,962		5,264
Net interest income	40,644		38,035
Tax equivalent adjustment	2,219		2,730
Net interest income (fully taxable equivalent)	$	42,863	$	40,765



(Dollars in Thousands, Except Per Share Data)	Quarter Ended
	12/31/2014			9/30/2014			6/30/2014			3/31/2014			12/31/2013
Operating Data
Net income	$	2,883		$	4,793		$	3,463		$	3,469		$	3,495
Net interest income	10,208			10,218			10,131			10,087			10,447
Provision for loan losses	1,605			460			300			485			600
Net security gains	490			2,145			487			393			160
Non-interest income, ex. net security gains	2,954			2,779			2,442			2,818			2,772
Non-interest expense	8,512			8,313			8,422			8,643			8,476

Performance Statistics
Net interest margin	3.73		%	3.78		%	3.83		%	3.96		%	3.98		%
Annualized return on average assets	0.93		%	1.56		%	1.13		%	1.15		%	1.16		%
Annualized return on average equity	8.33		%	13.95		%	10.29		%	10.58		%	10.99		%
Annualized net loan charge-offs to average loans	0.12		%	0.01		%	—		%	1.06		%	0.04		%
Net charge-offs	276			21			9			2,109			87
Efficiency ratio	64.0		%	63.3		%	66.3		%	66.3		%	63.4		%

Per Share Data
Basic earnings per share	$	0.60		$	0.99		$	0.72		$	0.72		$	0.73
Diluted earnings per share	0.60			0.99			0.72			0.72			0.73
Dividend declared per share	0.47			0.47			0.47			0.47			0.47
Book value	28.30			28.49			28.17			27.45			26.52
Common stock price:
High	49.26			48.79			48.37			50.95			53.99
Low	42.18			42.25			43.21			43.19			47.03
Close	49.26			42.25			47.10			48.78			51.00
Weighted average common shares:
Basic	4,805			4,820			4,820			4,820			4,819
Fully Diluted	4,805			4,820			4,820			4,820			4,819
End-of-period common shares:
Issued	5,003			5,002			5,001			5,001			5,000
Treasury	198			192			181			181			181



	Quarter Ended
(Dollars in Thousands, Except Per Share Data)	12/31/2014			9/30/2014			6/30/2014			3/31/2014			12/31/2013
Financial Condition Data:
General
Total assets	$	1,245,011		$	1,227,122		$	1,222,847		$	1,217,137		$	1,211,995
Loans, net	905,000			881,477			847,521			812,091			808,200
Goodwill	17,104			17,104			17,104			17,104			17,104
Intangibles	1,456			1,538			1,621			1,709			1,801
Total deposits	981,419			989,128			981,826			983,026			973,002
Noninterest-bearing	243,378			232,588			228,758			218,740			217,377

Savings	139,278			141,170			141,362			142,030			138,621
NOW	177,970			183,056			176,066			191,191			177,996
Money Market	204,535			213,725			212,782			202,893			203,786
Time Deposits	216,258			218,589			222,858			228,172			235,222
Total interest-bearing deposits	738,041			756,540			753,068			764,286			755,625

Core deposits*	765,161			770,539			758,968			754,854			737,780
Shareholders’ equity	135,967			137,004			135,802			132,305			127,815

Asset Quality
Non-performing assets	$	12,248		$	12,294		$	11,979		$	10,614		$	9,678
Non-performing assets to total assets	0.98		%	1.00		%	0.98		%	0.87		%	0.80		%
Allowance for loan losses	10,579			9,250			8,811			8,520			10,144
Allowance for loan losses to total loans	1.16		%	1.04		%	1.03		%	1.04		%	1.24		%
Allowance for loan losses to non-performing loans	86.37		%	75.24		%	73.55		%	80.27		%	104.82		%
Non-performing loans to total loans	1.34		%	1.38		%	1.40		%	1.29		%	1.18		%

Capitalization
Shareholders’ equity to total assets	10.92		%	11.16		%	11.11		%	10.87		%	10.55		%

* Core deposits are defined as total deposits less time deposits

Reconciliation of GAAP and Non-GAAP Financial Measures



	Three Months Ended December 31,						Twelve Months Ended December 31,
(Dollars in Thousands, Except Per Share Data)	2014			2013			2014			2013
GAAP net income	$	2,883		$	3,495		$	14,608		$	14,084
Less: net securities and bank-owned life insurance gains, net of tax	323			106			2,494			1,595
Non-GAAP operating earnings	$	2,560		$	3,389		$	12,114		$	12,489

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2014			2013			2014			2013
Return on average assets (ROA)	0.93		%	1.16		%	1.19		%	1.32		%
Less: net securities and bank-owned life insurance gains, net of tax	0.10		%	0.03		%	0.20		%	0.15		%
Non-GAAP operating ROA	0.83		%	1.13		%	0.99		%	1.17		%

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2014			2013			2014			2013
Return on average equity (ROE)	8.33		%	10.99		%	10.79		%	12.36		%
Less: net securities and bank-owned life insurance gains, net of tax	0.93		%	0.33		%	1.85		%	1.40		%
Non-GAAP operating ROE	7.40		%	10.66		%	8.94		%	10.96		%

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2014			2013			2014			2013
Basic earnings per share (EPS)	$	0.60		$	0.73		$	3.03		$	3.19
Less: net securities and bank-owned life insurance gains, net of tax	0.07			0.03			0.51			0.36
Non-GAAP basic operating EPS	$	0.53		$	0.70		$	2.52		$	2.83

	Three Months Ended December 31,						Twelve Months Ended December 31,
	2014			2013			2014			2013
Dilutive EPS	$	0.60		$	0.73		$	3.03		$	3.19
Less: net securities and bank-owned life insurance gains, net of tax	0.07			0.03			0.51			0.36
Non-GAAP dilutive operating EPS	$	0.53		$	0.70		$	2.52		$	2.83

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PENNS WOODS BANCORP INC Reports