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Penns Woods Bancorp, Inc. Reports First Quarter 2020 Earnings

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WILLIAMSPORT, Pa., April 23, 2020 (GLOBE NEWSWIRE) -- Penns Woods Bancorp, Inc. (PWOD)

Penns Woods Bancorp, Inc. achieved net income of $3.1 million for the three months ended March 31, 2020, resulting in basic and diluted earnings per share of $0.44 and $0.43, respectively.

Highlights

  • Net income, as reported under GAAP, for the three months ended March 31, 2020 was $3.1 million, compared to $3.9 million for the same period of 2019. Results for the three months ended March 31, 2020 compared to 2019 were impacted by an decrease in after-tax securities gains of $30,000 (from a gain of $52,000 to a gain of $22,000) for the three month period.

  • The provision for loan losses increased $390,000 to $750,000 for the three months ended March 31, 2020 compared to $360,000 for the 2019 period. The increase is the result of the economic uncertainty caused by the COVID-19 pandemic.

  • Basic and diluted earnings per share for the three months ended March 31, 2020 were $0.44 and $0.43, respectively, compared to basic and diluted earnings per share of $0.56 for the three months ended March 31, 2019.

  • Return on average assets was 0.74% for the three months ended March 31, 2020, compared to 0.95% for the corresponding period of 2019.

  • Return on average equity was 7.83% for the three months ended March 31, 2020, compared to 10.93% for the corresponding period of 2019.

COVID-19 Activity

  • Approximately one third of employees working remotely.

  • Loan modification/deferral program in place to defer payments up to 90 days for principal and/or interest with approximately 500 loans affected by this program.

  • All COVID-19 related loan deferrals meet the requirements to not be considered a troubled debt restructuring.

  • Participated in the Paycheck Protection Program by primarily utilizing third parties to service and place the loans.

  • Significantly reduced deposit rates during the latter half of March 2020.

  • Increased the provision for loan losses due to the economic uncertainty caused by the COVID-19 pandemic.

  • Net interest margin compression expected to continue as the rate environment remains below historical levels.

Net Income

Net income from core operations (“core earnings”), which is a non-generally accepted accounting principles (GAAP) measure of net income excluding net securities gains or losses, was $3.1 million for the three months ended March 31, 2020 compared to $3.9 million for the same period of 2019. Core earnings per share for the three months ended March 31, 2020 were $0.44 basic and $0.43 diluted, compared to $0.55 basic and diluted core earnings per share for the same period of 2019. Core return on average assets and core return on average equity were 0.73% and 7.77% for the three months ended March 31, 2020, compared to 0.94% and 10.79% for the corresponding period of 2019. A reconciliation of the non-GAAP financial measures of core earnings, core return on assets, core return on equity, and core earnings per share described in this press release to the comparable GAAP financial measures is included at the end of this press release.

Net Interest Margin

The net interest margin for the three months ended March 31, 2020 was 3.19%, compared to 3.37% for the corresponding period of 2019. The decrease in the net interest margin was driven by an increase in the rate paid on interest-bearing liabilities of 12 basis points ("bps") for the three month periods. The increase was driven by an increase in the rate paid on time deposits as time deposits were utilized as an attraction tool and to manage the duration of the interest-bearing liabilities portfolio. Net interest margin was further compressed due to a decrease in yield of 12 bps on interest earning assets. The average balance of the investment portfolio increased by $13.8 million for the three month periods, while the yield on the portfolio decreased by 55 bps.

Assets

Total assets decreased $16.2 million to $1.7 billion at March 31, 2020 compared to March 31, 2019. Net loans decreased $33.8 million to $1.3 billion at March 31, 2020 compared to March 31, 2019, as an increase in the indirect auto lending portfolio was offset by decreases in the municipal and commercial loan portfolios. The investment portfolio increased $13.2 million from March 31, 2019 to March 31, 2020 due to increases in the corporate and taxable municipal portfolios.

Non-performing Loans

The ratio of non-performing loans to total loans ratio decreased to 0.84% at March 31, 2020 from 1.14% at March 31, 2019 as non-performing loans have decreased to $11.3 million at March 31, 2020 from $15.8 million at March 31, 2019 primarily due to a commercial loan relationship that was partially charged-off during the fourth quarter of 2019. The majority of non-performing loans involve 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 $144,000 for the three months ended March 31, 2020 impacted the allowance for loan losses, which was 0.93% of total loans at March 31, 2020 compared to 1.00% at March 31, 2019.

Deposits

Deposits increased $17.7 million to $1.3 billion at March 31, 2020 compared to March 31, 2019. Noninterest-bearing deposits increased $11.1 million to $332.8 million at March 31, 2020 compared to March 31, 2019. Driving deposit growth is our commitment to easy-to-use products, community involvement, and emphasis on customer service. Deposit gathering efforts have centered on core deposits as building customer relationships remains the focus. The time deposit portfolio has increased as time deposits have been used as a customer attraction tool.

Shareholders’ Equity

Shareholders’ equity increased $9.5 million to $156.6 million at March 31, 2020 compared to March 31, 2019. The change in accumulated other comprehensive loss from $5.0 million at March 31, 2019 to $2.2 million at March 31, 2020 is a result of an increase in unrealized gains on available for sale securities (from an unrealized gain of $197,000 at March 31, 2019 to an unrealized gain of $3.0 million at March 31, 2020). The amount of accumulated other comprehensive loss at March 31, 2020 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 $40,000. The current level of shareholders’ equity equates to a book value per share of $22.23 at March 31, 2020 compared to $20.89 at March 31, 2019, and an equity to asset ratio of 9.27% at March 31, 2020 compared to 8.62% at March 31, 2019. Dividends declared for the three months ended March 31, 2020 and 2019 were $0.32 per share and $0.31 per share, respectively.

Penns Woods Bancorp, Inc. is the parent company of Jersey Shore State Bank, which operates seventeen 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. Insurance products are offered through United Insurance Solutions, LLC, a joint venture that is a subsidiary of the holding company.

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 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; (v) the effects of health emergencies, including the spread of infectious diseases or pandemics; (vi) the effects of health emergencies, including the spread of infectious diseases; or (vi) 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, 2019.

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, Chief Executive Officer

110 Reynolds Street

Williamsport, PA 17702

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)

March 31,

(In Thousands, Except Share Data)

2020

2019

% Change

ASSETS:

Noninterest-bearing balances

$

29,572

$

31,211

(5.25

)%

Interest-bearing balances in other financial institutions

48,189

42,385

13.69

%

Total cash and cash equivalents

77,761

73,596

5.66

%

Investment debt securities, available for sale, at fair value

155,522

141,762

9.71

%

Investment equity securities, at fair value

1,281

1,819

(29.58

)%

Investment securities, trading

37

42

(11.90

)%

Restricted investment in bank stock, at fair value

14,611

15,725

(7.08

)%

Loans held for sale

4,294

1,787

140.29

%

Loans

1,349,400

1,384,470

(2.53

)%

Allowance for loan losses

(12,500

)

(13,792

)

(9.37

)%

Loans, net

1,336,900

1,370,678

(2.46

)%

Premises and equipment, net

33,170

33,270

(0.30

)%

Accrued interest receivable

5,307

5,542

(4.24

)%

Bank-owned life insurance

29,228

28,812

1.44

%

Goodwill

17,104

17,104

%

Intangibles

836

1,091

(23.37

)%

Operating lease right of use asset

3,278

4,239

(22.67

)%

Deferred tax asset

3,281

4,241

(22.64

)%

Other assets

5,898

5,000

17.96

%

TOTAL ASSETS

$

1,688,508

$

1,704,708

(0.95

)%

LIABILITIES:

Interest-bearing deposits

$

993,975

$

987,404

0.67

%

Noninterest-bearing deposits

332,759

321,657

3.45

%

Total deposits

1,326,734

1,309,061

1.35

%

Short-term borrowings

17,741

84,499

(79.00

)%

Long-term borrowings

171,903

144,631

18.86

%

Accrued interest payable

1,635

1,278

27.93

%

Operating lease liability

3,299

4,241

(22.21

)%

Other liabilities

10,608

13,962

(24.02

)%

TOTAL LIABILITIES

1,531,920

1,557,672

(1.65

)%

SHAREHOLDERS’ EQUITY:

Preferred stock, no par value, 3,000,000 shares authorized; no shares issued

n/a

Common stock, par value $5.55, 22,500,000 shares authorized; 7,521,491 and 7,518,410 shares issued; 7,041,266 and 7,038,185 shares outstanding

41,786

41,767

0.05

%

Additional paid-in capital

51,701

50,890

1.59

%

Retained earnings

77,403

71,526

8.22

%

Accumulated other comprehensive loss:

Net unrealized gain on available for sale securities

2,986

197

1,415.74

%

Defined benefit plan

(5,199

)

(5,239

)

0.76

%

Treasury stock at cost, 480,225

(12,115

)

(12,115

)

%

TOTAL PENNS WOODS BANCORP, INC. SHAREHOLDERS' EQUITY

156,562

147,026

6.49

%

Non-controlling interest

26

10

160.00

%

TOTAL SHAREHOLDERS' EQUITY

156,588

147,036

6.50

%

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

1,688,508

$

1,704,708

(0.95

)%


PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)

Three Months Ended March 31,

(In Thousands, Except Per Share Data)

2020

2019

% Change

INTEREST AND DIVIDEND INCOME:

Loans including fees

$

14,657

$

14,869

(1.43

)%

Investment securities:

Taxable

1,010

934

8.14

%

Tax-exempt

145

174

(16.67

)%

Dividend and other interest income

349

457

(23.63

)%

TOTAL INTEREST AND DIVIDEND INCOME

16,161

16,434

(1.66

)%

INTEREST EXPENSE:

Deposits

3,035

2,300

31.96

%

Short-term borrowings

22

605

(96.36

)%

Long-term borrowings

943

851

10.81

%

TOTAL INTEREST EXPENSE

4,000

3,756

6.50

%

NET INTEREST INCOME

12,161

12,678

(4.08

)%

PROVISION FOR LOAN LOSSES

750

360

108.33

%

NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES

11,411

12,318

(7.36

)%

NON-INTEREST INCOME:

Service charges

549

562

(2.31

)%

Debt securities gains, available for sale

21

13

61.54

%

Equity securities gains

20

43

(53.49

)%

Securities (losses) gains, trading

(13

)

10

(230.00

)%

Bank-owned life insurance

192

168

14.29

%

Gain on sale of loans

444

316

40.51

%

Insurance commissions

127

134

(5.22

)%

Brokerage commissions

369

323

14.24

%

Debit card income

274

310

(11.61

)%

Other

454

375

21.07

%

TOTAL NON-INTEREST INCOME

2,437

2,254

8.12

%

NON-INTEREST EXPENSE:

Salaries and employee benefits

5,667

5,501

3.02

%

Occupancy

702

779

(9.88

)%

Furniture and equipment

860

752

14.36

%

Software amortization

250

207

20.77

%

Pennsylvania shares tax

285

293

(2.73

)%

Professional fees

622

522

19.16

%

Federal Deposit Insurance Corporation deposit insurance

194

268

(27.61

)%

Marketing

53

102

(48.04

)%

Intangible amortization

62

71

(12.68

)%

Other

1,415

1,319

7.28

%

TOTAL NON-INTEREST EXPENSE

10,110

9,814

3.02

%

INCOME BEFORE INCOME TAX PROVISION

3,738

4,758

(21.44

)%

INCOME TAX PROVISION

661

812

(18.60

)%

NET INCOME

$

3,077

$

3,946

(22.02

)%

Earnings attributable to noncontrolling interest

4

2

100.00

%

NET INCOME AVAILABLE TO COMMON SHAREHOLDERS

$

3,073

$

3,944

(22.08

)%

EARNINGS PER SHARE - BASIC

$

0.44

$

0.56

(21.43

)%

EARNINGS PER SHARE - DILUTED

$

0.43

$

0.56

(23.21

)%

WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC

7,040,740

7,037,628

0.04

%

WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED

7,102,990

7,037,628

0.93

%

DIVIDENDS DECLARED PER SHARE

$

0.32

$

0.31

3.23

%


PENNS WOODS BANCORP, INC.
AVERAGE BALANCES AND INTEREST RATES

Three Months Ended

March 31, 2020

March 31, 2019

(Dollars in Thousands)

Average
Balance

Interest

Average
Rate

Average
Balance

Interest

Average
Rate

ASSETS:

Tax-exempt loans

$

52,979

$

404

3.07

%

$

72,714

$

539

3.01

%

All other loans

1,303,838

14,338

4.42

%

1,311,315

14,443

4.47

%

Total loans

1,356,817

14,742

4.37

%

1,384,029

14,982

4.39

%

Taxable securities

142,788

1,273

3.63

%

126,033

1,350

4.28

%

Tax-exempt securities

23,773

184

3.15

%

26,711

220

3.29

%

Total securities

166,561

1,457

3.56

%

152,744

1,570

4.11

%

Interest-bearing deposits

26,716

86

1.29

%

6,534

41

2.54

%

Total interest-earning assets

1,550,094

16,285

4.23

%

1,543,307

16,593

4.35

%

Other assets

112,219

111,600

TOTAL ASSETS

$

1,662,313

$

1,654,907

LIABILITIES AND SHAREHOLDERS’ EQUITY:

Savings

$

177,840

91

0.21

%

$

166,927

30

0.07

%

Super Now deposits

219,826

424

0.78

%

231,508

379

0.66

%

Money market deposits

210,708

477

0.91

%

241,402

472

0.79

%

Time deposits

379,259

2,043

2.17

%

299,644

1,419

1.92

%

Total interest-bearing deposits

987,633

3,035

1.24

%

939,481

2,300

0.99

%

Short-term borrowings

10,847

22

0.85

%

96,029

605

2.56

%

Long-term borrowings

159,920

943

2.37

%

144,191

851

2.23

%

Total borrowings

170,767

965

2.28

%

240,220

1,456

2.36

%

Total interest-bearing liabilities

1,158,400

4,000

1.39

%

1,179,701

3,756

1.27

%

Demand deposits

326,817

313,112

Other liabilities

19,991

17,776

Shareholders’ equity

157,105

144,318

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

$

1,662,313

$

1,654,907

Interest rate spread

2.84

%

3.08

%

Net interest income/margin

$

12,285

3.19

%

$

12,837

3.37

%


Three Months Ended March 31,

2020

2019

Total interest income

$

16,161

$

16,434

Total interest expense

4,000

3,756

Net interest income

12,161

12,678

Tax equivalent adjustment

124

159

Net interest income (fully taxable equivalent)

$

12,285

$

12,837


(Dollars in Thousands, Except Per Share Data)

Quarter Ended

3/31/2020

12/31/2019

9/30/2019

6/30/2019

3/31/2019

Operating Data

Net income

$

3,073

$

2,833

$

4,650

$

4,245

$

3,944

Net interest income

12,161

12,321

12,903

12,913

12,678

Provision for loan losses

750

1,700

360

315

360

Net security gains

28

489

170

23

66

Non-interest income, excluding net security gains

2,409

2,418

2,652

2,446

2,188

Non-interest expense

10,110

10,294

9,541

10,059

9,814

Performance Statistics

Net interest margin

3.19

%

3.22

%

3.32

%

3.39

%

3.37

%

Annualized return on average assets

0.74

%

0.68

%

1.10

%

1.02

%

0.95

%

Annualized return on average equity

7.83

%

7.22

%

12.18

%

11.42

%

10.93

%

Annualized net loan charge-offs to average loans

0.04

%

1.19

%

0.03

%

0.03

%

0.12

%

Net charge-offs

144

4,055

112

106

405

Efficiency ratio

68.96

%

69.42

%

60.98

%

65.04

%

65.50

%

Per Share Data

Basic earnings per share

$

0.44

$

0.40

$

0.66

$

0.61

$

0.56

Diluted earnings per share

0.43

0.39

0.66

0.61

0.56

Dividend declared per share

0.32

0.32

0.31

0.31

0.31

Book value

22.23

22.01

22.03

21.53

20.89

Common stock price:

High

35.36

35.58

30.93

30.17

29.67

Low

19.05

29.68

26.87

26.03

23.23

Close

24.30

35.58

30.83

30.17

27.40

Weighted average common shares:

Basic

7,041

7,040

7,037

7,038

7,038

Fully Diluted

7,103

7,338

7,037

7,038

7,038

End-of-period common shares:

Issued

7,521

7,521

7,518

7,518

7,518

Treasury

480

480

480

480

480


(Dollars in Thousands, Except Per Share Data)

Quarter Ended

3/31/2020

12/31/2019

9/30/2019

6/30/2019

3/31/2019

Financial Condition Data:

General

Total assets

$

1,688,508

$

1,665,323

$

1,673,095

$

1,711,500

$

1,704,708

Loans, net

1,336,900

1,343,650

1,350,735

1,365,284

1,370,678

Goodwill

17,104

17,104

17,104

17,104

17,104

Intangibles

836

898

960

1,022

1,091

Total deposits

1,326,734

1,324,005

1,332,407

1,327,086

1,309,061

Noninterest-bearing

332,759

334,746

327,329

322,755

321,657

Savings

183,929

176,732

171,370

171,992

170,005

NOW

229,919

218,605

219,466

238,410

253,475

Money Market

204,832

216,038

239,926

238,352

244,753

Time Deposits

375,295

377,884

374,316

355,577

319,171

Total interest-bearing deposits

993,975

989,259

1,005,078

1,004,331

987,404

Core deposits*

951,439

946,121

958,091

971,509

989,890

Shareholders’ equity

156,562

154,960

155,061

151,527

147,026

Asset Quality

Non-performing loans

$

11,300

$

12,758

$

17,208

$

15,383

$

15,794

Non-performing loans to total assets

0.67

%

0.77

%

1.03

%

0.90

%

0.93

%

Allowance for loan losses

12,500

11,894

14,249

14,001

13,792

Allowance for loan losses to total loans

0.93

%

0.88

%

1.04

%

1.02

%

1.00

%

Allowance for loan losses to non-performing loans

110.62

%

93.23

%

82.80

%

91.02

%

87.32

%

Non-performing loans to total loans

0.84

%

0.94

%

1.26

%

1.12

%

1.14

%

Capitalization

Shareholders’ equity to total assets

9.27

%

9.31

%

9.27

%

8.85

%

8.62

%

* 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)

2020

2019

GAAP net income

$

3,073

$

3,944

Less: net securities gains, net of tax

22

52

Non-GAAP core earnings

$

3,051

$

3,892

Three Months Ended March 31,

2020

2019

Return on average assets (ROA)

0.74

%

0.95

%

Less: net securities gains, net of tax

0.01

%

0.01

%

Non-GAAP core ROA

0.73

%

0.94

%

Three Months Ended March 31,

2020

2019

Return on average equity (ROE)

7.83

%

10.93

%

Less: net securities gains, net of tax

0.06

%

0.14

%

Non-GAAP core ROE

7.77

%

10.79

%

Three Months Ended March 31,

2020

2019

Basic earnings per share (EPS)

$

0.44

$

0.56

Less: net securities gains, net of tax

0.01

Non-GAAP basic core EPS

$

0.44

$

0.55

Three Months Ended March 31,

2020

2019

Diluted EPS

$

0.43

$

0.56

Less: net securities gains, net of tax

0.01

Non-GAAP diluted core EPS

$

0.43

$

0.55