WILLIAMSPORT, Pa., April 18, 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 $2,686,000 for the three months ended March 31, 2017 resulting in basic and dilutive earnings per share of $0.57 and $0.56 respectively.

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 $2,555,000 for the three months ended March 31, 2017 compared to $2,764,000 for the same period of 2016. The decline was attributable to 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 March 31, 2017 were $0.54 for both basic and dilutive, a decrease from $0.58 for basic and dilutive for the same period of 2016.
  • Return on average assets was 0.79% for the three months ended March 31, 2017 compared to 0.94% for the corresponding period of 2016.
  • Return on average equity was 7.69% for the three months ended March 31, 2017 compared to 8.95% for the corresponding period of 2016.

"The focus during the first quarter of 2017 can be summed up in a single word, future.  The earning asset portfolio continued to add high quality assets while shifting revenue generation from the investment portfolio to loan portfolio.  The indirect auto lending program that started in 2016 in a limited market area has been a success and will be expanded to the entire market area during the second quarter.  While the balance sheet was preparing for the future, so was the branch network.  Numerous maintenance projects to allow for a more efficient customer experience have been completed or are in process, including a complete remodel of the Williamsport lobby and customer service areas.  Site preparation was started on two branch sites and two other sites are in the design phase.  Preparing the organization for the future, whether in the form of new product implementation, infrastructure additions and improvements, or the addition of team members does cause a short-term drag on earnings.  However, our outlook is not focused solely on tomorrow but rather building towards the long-term success of the company," 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 months ended March 31, 2017 was $2,686,000 compared to $3,078,000 for the same period of 2016. Results for the three months ended March 31, 2017 compared to 2016 were impacted by a decrease in after-tax securities gains of $183,000 (from a gain of $314,000 to a gain of $131,000) for the three month periods. Basic and dilutive earnings per share for the three months ended March 31, 2017 were $0.57 and $0.56 compared to $0.65 basic and dilutive for the corresponding period of 2016.  Return on average assets and return on average equity were 0.79% and 7.69% for the three months ended March 31, 2017 compared to 0.94% and 8.95% for the corresponding period of 2016.

Net Interest Margin

The net interest margin for the three months ended March 31, 2017 was 3.40% compared to 3.57% for the corresponding period of 2016.  The decline in the net interest margin was driven 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 partially offset by a 6.71% growth in gross loans from March 31, 2016 to March 31, 2017.  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 82.32% of total deposits at March 31, 2017 and 79.22% at March 31, 2016. 

Assets

Total assets increased $82,571,000 to $1,400,708,000 at March 31, 2017 compared to March 31, 2016.  Net loans increased $69,325,000 to $1,098,195,000 at March 31, 2017 compared to March 31, 2016 primarily due to campaigns related to increasing home equity product market share during 2016 and 2017, growth in the commercial loan portfolio, and the introduction of indirect auto lending during the third quarter of 2016.  The investment portfolio decreased $16,859,000 from March 31, 2016 to March 31, 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 non-performing loans to total loans ratio decreased to 0.98% at March 31, 2017 from 1.12% at March 31, 2016 as non-performing loans have decreased to $10,870,000 at March 31, 2017 from $11,648,000 at March 31, 2016. 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 $321,000 for the three months ended March 31, 2017 minimally impacted the allowance for loan losses which was 1.16% of total loans at March 31, 2017.  The majority of the loans charged-off had a specific allowance within the allowance for loan losses.

Deposits

Deposits increased $101,083,000 to $1,160,664,000 at March 31, 2017 compared to March 31, 2016.  Core deposits (total deposits excluding time deposits) increased $116,092,000 due to our commitment to building complete banking relationships with our customers.  Noninterest-bearing deposits increased $43,030,000 to $312,392,000 at March 31, 2017 compared to March 31, 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 increased $1,450,000 to $139,113,000 at March 31, 2017 compared to March 31, 2016.  The change in accumulated other comprehensive loss from $2,708,000 at March 31, 2016 to $4,544,000 at March 31, 2017 is a result of an increase in unrealized losses on available for sale securities from an unrealized gain of $1,324,000 at March 31, 2016 to an unrealized loss of $281,000 at March 31, 2017.  The amount of accumulated other comprehensive loss at March 31, 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 $231,000 to $4,263,000 at March 31, 2017.  The current level of shareholders' equity equates to a book value per share of $29.38 at March 31, 2017 compared to $29.09 at March 31, 2016 and an equity to asset ratio of 9.93% at March 31, 2017 compared to 10.44% at March 31, 2016.  Excluding goodwill and intangibles, book value per share was $25.41 at March 31, 2017 compared to $25.03 at March 31, 2016.  Dividends declared for the three months ended March 31, 2017 and 2016 were $0.47 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, 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.

THIS INFORMATION IS SUBJECT TO YEAR-END AUDIT ADJUSTMENT
 
PENNS WOODS BANCORP, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
 
    March 31,
(In Thousands, Except Share Data)   2017   2016   % Change
ASSETS            
Noninterest-bearing balances   $ 22,494     $ 22,371     0.55 %
Interest-bearing balances in other financial institutions   53,166     24,754     114.78 %
Total cash and cash equivalents   75,660     47,125     60.55 %
               
Investment securities, available for sale, at fair value   136,910     153,709     (10.93 )%
Investment securities, trading       60     (100.00 )%
Loans held for sale   1,221     514     137.55 %
Loans   1,111,100     1,041,252     6.71 %
Allowance for loan losses   (12,905 )   (12,382 )   4.22 %
Loans, net   1,098,195     1,028,870     6.74 %
Premises and equipment, net   24,431     22,158     10.26 %
Accrued interest receivable   3,945     3,878     1.73 %
Bank-owned life insurance   27,521     26,867     2.43 %
Investment in limited partnerships   540     746     (27.61 )%
Goodwill   17,104     17,104     %
Intangibles   1,709     2,078     (17.76 )%
Deferred tax asset   8,039     8,426     (4.59 )%
Other assets   5,433     6,602     (17.71 )%
TOTAL ASSETS   $ 1,400,708     $ 1,318,137     6.26 %
               
LIABILITIES              
Interest-bearing deposits   $ 848,272     $ 790,219     7.35 %
Noninterest-bearing deposits   312,392     269,362     15.97 %
Total deposits   1,160,664     1,059,581     9.54 %
               
Short-term borrowings   8,589     15,874     (45.89 )%
Long-term borrowings   75,998     91,025     (16.51 )%
Accrued interest payable   387     439     (11.85 )%
Other liabilities   15,957     13,555     17.72 %
TOTAL LIABILITIES   1,261,595     1,180,474     6.87 %
               
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; 5,007,569 and 5,005,534 shares issued   41,729     41,713     0.04 %
Additional paid-in capital   50,091     50,004     0.17 %
Retained earnings   62,071     58,888     5.41 %
Accumulated other comprehensive loss:              
Net unrealized (loss) gain on available for sale securities   (281 )   1,324     (121.22 )%
Defined benefit plan   (4,263 )   (4,032 )   (5.73 )%
Treasury stock at cost, 272,452 and 272,452 shares   (10,234 )   (10,234 )   %
TOTAL SHAREHOLDERS' EQUITY   139,113     137,663     1.05 %
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 1,400,708     $ 1,318,137     6.26 %
                       

PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
 
    Three Months Ended March 31,
(In Thousands, Except Per Share Data)   2017   2016   % Change
INTEREST AND DIVIDEND INCOME:            
Loans including fees   $ 10,627     $ 10,355     2.63 %
Investment securities:              
Taxable   542     622     (12.86 )%
Tax-exempt   298     475     (37.26 )%
Dividend and other interest income   215     274     (21.53 )%
TOTAL INTEREST AND DIVIDEND INCOME   11,682     11,726     (0.38 )%
               
INTEREST EXPENSE:              
Deposits   902     834     8.15 %
Short-term borrowings   4     26     (84.62 )%
Long-term borrowings   440     492     (10.57 )%
TOTAL INTEREST EXPENSE   1,346     1,352     (0.44 )%
               
NET INTEREST INCOME   10,336     10,374     (0.37 )%
               
PROVISION FOR LOAN LOSSES   330     350     (5.71 )%
               
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES   10,006     10,024     (0.18 )%
               
NON-INTEREST INCOME:              
Service charges   528     532     (0.75 )%
Securities gains, available for sale   197     435     (54.71 )%
Securities gains, trading   2     40     (95.00 )%
Bank-owned life insurance   172     184     (6.52 )%
Gain on sale of loans   358     467     (23.34 )%
Insurance commissions   191     206     (7.28 )%
Brokerage commissions   331     255     29.80 %
Other   872     878     (0.68 )%
TOTAL NON-INTEREST INCOME   2,651     2,997     (11.54 )%
               
NON-INTEREST EXPENSE:              
Salaries and employee benefits   4,770     4,580     4.15 %
Occupancy   638     541     17.93 %
Furniture and equipment   649     701     (7.42 )%
Pennsylvania shares tax   238     258     (7.75 )%
Amortization of investments in limited partnerships   46     152     (69.74 )%
Federal Deposit Insurance Corporation deposit insurance   170     232     (26.72 )%
Marketing   171     210     (18.57 )%
Intangible amortization   90     87     3.45 %
Other   2,213     2,300     (3.78 )%
TOTAL NON-INTEREST EXPENSE   8,985     9,061     (0.84 )%
INCOME BEFORE INCOME TAX PROVISION   3,672     3,960     (7.27 )%
INCOME TAX PROVISION   986     882     11.79 %
NET INCOME   $ 2,686     $ 3,078     (12.74 )%
               
EARNINGS PER SHARE - BASIC   $ 0.57     $ 0.65     (12.31 )%
EARNINGS PER SHARE - DILUTED   $ 0.56     $ 0.65     (13.85 )%
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC   4,734,805     4,740,503     (0.12 )%
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED   4,761,305     4,740,503     0.44 %
DIVIDENDS DECLARED PER SHARE   $ 0.47     $ 0.47     %
                       

PENNS WOODS BANCORP, INC.
AVERAGE BALANCES AND INTEREST RATES
 
    Three Months Ended
    March 31, 2017   March 31, 2016
(Dollars in Thousands)   Average Balance   Interest   Average Rate   Average Balance   Interest   Average Rate
ASSETS:                        
Tax-exempt loans   $ 42,232     $ 417     4.00 %   $ 54,014     $ 535     3.98 %
All other loans   1,057,495     10,352     3.97 %   988,632     10,002     4.07 %
Total loans   1,099,727     10,769     3.97 %   1,042,646     10,537     4.06 %
                                     
Taxable securities   89,317     685     3.07 %   99,032     885     3.57 %
Tax-exempt securities   46,673     452     3.87 %   63,373     720     4.54 %
Total securities   135,990     1,137     3.34 %   162,405     1,605     3.95 %
                                     
Interest-bearing deposits   33,167     72     0.88 %   12,693     11     0.35 %
                                     
Total interest-earning assets   1,268,884     11,978     3.82 %   1,217,744     12,153     4.01 %
                         
Other assets   99,537             96,462          
                         
TOTAL ASSETS   $ 1,368,421             $ 1,314,206          
                         
LIABILITIES AND SHAREHOLDERS' EQUITY:                        
Savings   $ 156,423     15     0.04 %   $ 148,856     14     0.04 %
Super Now deposits   189,299     106     0.23 %   188,147     125     0.27 %
Money market deposits   262,883     191     0.29 %   219,240     139     0.25 %
Time deposits   210,052     590     1.14 %   220,554     556     1.01 %
Total interest-bearing deposits   818,657     902     0.45 %   776,797     834     0.43 %
                             
Short-term borrowings   11,349     4     0.14 %   28,410     26     0.36 %
Long-term borrowings   82,554     440     2.13 %   91,025     492     2.14 %
Total borrowings   93,903     444     1.89 %   119,435     518     1.72 %
                             
Total interest-bearing liabilities   912,560     1,346     0.60 %   896,232     1,352     0.60 %
                             
Demand deposits   300,102               265,053            
Other liabilities   16,074               15,406            
Shareholders' equity   139,685               137,515            
                             
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $ 1,368,421               $ 1,314,206            
Interest rate spread           3.22 %           3.41 %
Net interest income/margin       $ 10,632     3.40 %       $ 10,801     3.57 %
                                     

    Three Months Ended March 31,
    2017   2016
Total interest income   $ 11,682     $ 11,726  
Total interest expense   1,346     1,352  
Net interest income   10,336     10,374  
Tax equivalent adjustment   296     427  
Net interest income (fully taxable equivalent)   $ 10,632     $ 10,801  
                 

(Dollars in Thousands, Except Per Share Data)   Quarter Ended
    3/31/2017   12/31/2016   9/30/2016   6/30/2016   3/31/2016
Operating Data                    
Net income   $ 2,686     $ 2,948     $ 3,059     $ 3,390     $ 3,078  
Net interest income   10,336     10,337     10,247     10,288     10,374  
Provision for loan losses   330     330     258     258     350  
Net security gains   199     441     261     492     475  
Non-interest income, excluding net security gains   2,452     2,415     2,821     2,686     2,522  
Non-interest expense   8,985     8,625     8,739     8,666     9,061  
                     
Performance Statistics                    
Net interest margin   3.40 %   3.38 %   3.37 %   3.42 %   3.57 %
Annualized return on average assets   0.79 %   0.87 %   0.91 %   1.00 %   0.94 %
Annualized return on average equity   7.69 %   8.43 %   8.69 %   9.77 %   8.95 %
Annualized net loan charge-offs (recoveries) to average loans   0.12 %   0.06 %   0.02 %   0.05 %   %
Net charge-offs (recoveries)   321     152     57     123     12  
Efficiency ratio   69.6 %   66.9 %   66.2 %   66.0 %   69.6 %
                     
Per Share Data                    
Basic earnings per share   $ 0.57     $ 0.62     $ 0.65     $ 0.72     $ 0.65  
Diluted earnings per share   0.56     0.62     0.65     0.72     0.65  
Dividend declared per share   0.47     0.47     0.47     0.47     0.47  
Book value   29.38     29.20     29.56     29.45     29.09  
Common stock price:                    
High   49.45     52.03     44.75     44.70     41.32  
Low   43.28     41.00     40.34     37.82     36.73  
Close   43.45     50.50     44.46     41.99     38.54  
Weighted average common shares:                    
Basic   4,735     4,734     4,734     4,733     4,741  
Fully Diluted   4,761     4,734     4,734     4,733     4,741  
End-of-period common shares:                    
Issued   5,008     5,007     5,007     5,006     5,006  
Treasury   272     272     272     272     272  

(Dollars in Thousands, Except Per Share Data)   Quarter Ended
    3/31/2017   12/31/2016   9/30/2016   6/30/2016   3/31/2016
Financial Condition Data:                    
General                    
Total assets   $ 1,400,708     $ 1,348,590     $ 1,347,412     $ 1,346,482     $ 1,318,137  
Loans, net   1,098,195     1,080,785     1,056,762     1,041,602     1,028,870  
Goodwill   17,104     17,104     17,104     17,104     17,104  
Intangibles   1,709     1,799     1,889     1,979     2,078  
Total deposits   1,160,664     1,095,214     1,088,297     1,084,867     1,059,581  
Noninterest-bearing   312,392     303,277     295,599     274,002     269,362  
                     
Savings   159,652     153,788     150,822     152,540     153,217  
NOW   205,011     174,653     175,767     190,890     190,168  
Money Market   278,443     245,121     244,138     246,712     226,659  
Time Deposits   205,166     218,375     221,971     220,723     220,175  
Total interest-bearing deposits   848,272     791,937     792,698     810,865     790,219  
                     
Core deposits*   955,498     876,839     866,326     864,145     839,406  
Shareholders' equity   139,113     138,249     139,935     139,394     137,663  
                     
Asset Quality                    
Non-performing loans   $ 10,870     $ 11,626     $ 11,530     $ 11,626     $ 11,648  
Non-performing loans to total assets   0.78 %   0.86 %   0.86 %   0.86 %   0.88 %
Allowance for loan losses   12,905     12,896     12,718     12,517     12,382  
Allowance for loan losses to total loans   1.16 %   1.18 %   1.19 %   1.19 %   1.19 %
Allowance for loan losses to non-performing loans   118.72 %   110.92 %   110.30 %   107.66 %   106.30 %
Non-performing loans to total loans   0.98 %   1.06 %   1.08 %   1.10 %   1.12 %
                                         
Capitalization                                        
Shareholders' equity to total assets   9.93 %   10.25 %   10.39 %   10.35 %   10.44 %

* Core deposits are defined as total deposits less time deposits
 
Reconciliation of GAAP and Non-GAAP Financial Measures
 
    Three Months Ended March 31,
(Dollars in Thousands, Except Per Share Data)   2017   2016
GAAP net income   $ 2,686     $ 3,078  
Less: net securities gains, net of tax   131     314  
Non-GAAP operating earnings   $ 2,555     $ 2,764  
         
    Three Months Ended March 31,
    2017   2016
Return on average assets (ROA)   0.79 %   0.94 %
Less: net securities gains, net of tax   0.04 %   0.10 %
Non-GAAP operating ROA   0.75 %   0.84 %
         
    Three Months Ended March 31,
    2017   2016
Return on average equity (ROE)   7.69 %   8.95 %
Less: net securities gains, net of tax   0.37 %   0.91 %
Non-GAAP operating ROE   7.32 %   8.04 %
         
    Three Months Ended March 31,
    2017   2016
Basic earnings per share (EPS)   $ 0.57     $ 0.65  
Less: net securities gains, net of tax   0.03     0.07  
Non-GAAP basic operating EPS   $ 0.54     $ 0.58  
     
    Three Months Ended March 31,
    2017   2016
Dilutive EPS   $ 0.56     $ 0.65  
Less: net securities gains, net of tax   0.02     0.07  
Non-GAAP dilutive operating EPS   $ 0.54     $ 0.58  
                 

 
Contact:Richard A. Grafmyre, President and Chief Executive Officer300 Market StreetWilliamsport, PA 17701570-322-1111	e-mail: pwod@pwod.com