Market Overview

Penns Woods Bancorp, Inc. Reports First Quarter 2018 Earnings


WILLIAMSPORT, Pa., April 19, 2018 (GLOBE NEWSWIRE) -- Penns Woods Bancorp, Inc. (NASDAQ:PWOD)

Penns Woods Bancorp, Inc., supported by loan and deposit growth, achieved net income of $3.2 million, for the three months ended March 31, 2018 resulting in basic and dilutive earnings per share of $0.68.


  • Net income from core operations ("operating earnings"), which is a non-generally accepted accounting principles (GAAP) measure of net income excluding net securities gains or losses, was $3.2 million for the three months ended March 31, 2018 compared to $2.6 million for the same period of 2017.  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 decreased due to the "Tax Cuts and Jobs Act," which reduced the corporate tax rate to 21% effective January 1, 2018.
  • Operating earnings per share for the three months ended March 31, 2018 was $0.69 for basic and dilutive, an increase from $0.54 for basic and dilutive for the same period of 2017.
  • Return on average assets was 0.86% for the three months ended March 31, 2018 compared to 0.79% for the corresponding period of 2017.
  • Return on average equity was 9.18% for the three months ended March 31, 2018 compared to 7.69% for the corresponding period of 2017.

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, 2018 was $3.2 million compared to $2.7 million for the same period of 2017.  Results for the three months ended March 31, 2018 compared to 2017 were impacted by an increase in after-tax securities losses of $163,000 (from a gain of $131,000 to a loss of $32,000) for the three month periods.  The impact of the Tax Cuts and Jobs Act was the primary driver for the decrease in the Company's effective tax rate to 15.5% for the three month period ended March 31, 2018 compared to 26.9% for the prior year period.  Earnings per share for the three months ended March 31, 2018 was $0.68 basic and diluted, a change from the 2017 basic and diluted earnings per share of $0.57 basic and $0.56 diluted.  Return on average assets and return on average equity were 0.86% and 9.18% for the three months ended March 31, 2018 compared to 0.79% and 7.69% for the corresponding period of 2017.

Net Interest Margin

The net interest margin for the three months ended March 31, 2018 was 3.31% compared to 3.40% for the corresponding period of 2017.  The decrease in the net interest margin was driven by an increase in the cost of interest-bearing liabilities of 19 basis points ("bps").  The impact of the increased cost of funds was limited by an increase in the yield on earning assets of 8 bps coupled with an increase in the average loan portfolio of $161.8 million.  The loan growth was primarily funded by an increase in average borrowings of $82.4 million and growth in average total deposits of $37.2 million.  Core deposits represent a lower cost funding source than time deposits and comprise 79.34% of total deposits at March 31, 2018 and 82.32% at March 31, 2017. 


Total assets increased $126.0 million to $1.5 billion at March 31, 2018 compared to March 31, 2017.  Net loans increased $169.7 million to $1.3 billion at March 31, 2018 compared to March 31, 2017, primarily due to campaigns related to increasing home equity product market share during 2018 and indirect auto lending.  The investment portfolio decreased $6.8 million from March 31, 2017 to March 31, 2018 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 0.60% at March 31, 2018 from 0.98% March 31, 2017 as non-performing loans have decreased to $7.6 million at March 31, 2018 from $10.9 million at March 31, 2017. The level of non-performing loans decreased primarily as a result of a large non-performing loan being paid off during the quarter ended September 30, 2017.  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 $182,000 for the three months ended March 31, 2018 minimally impacted the allowance for loan losses which was 1.00% of total loans at March 31, 2018.  The majority of the loans charged-off had a specific allowance within the allowance for loan losses.


Deposits increased $31.8 million to $1.2 billion at March 31, 2018 compared to March 31, 2017. Noninterest-bearing deposits decreased slightly to $304.3 million at March 31, 2018 compared to March 31, 2017.  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 $1.0 million to $138.1 million at March 31, 2018 compared to March 31, 2017. The change in accumulated other comprehensive loss from $4.5 million at March 31, 2017 to $5.6 million at March 31, 2018 is a result of an increase in unrealized losses on available for sale securities (from an unrealized loss of $281,000 at March 31, 2017 to an unrealized loss of $666,000 at March 31, 2018). The amount of accumulated other comprehensive loss at March 31, 2018 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 $623,000, mainly due to the change in the corporate tax rate from 2017 to 2018. The current level of shareholders' equity equates to a book value per share of $29.45 at March 31, 2018 compared to $29.38 at March 31, 2017 and an equity to asset ratio of 9.05% at March 31, 2018 compared to 9.93% at March 31, 2017.  Excluding goodwill and intangibles, book value per share was $25.51 at March 31, 2018 compared to $25.41 at March 31, 2017.  Dividends declared for the three months ended March 31, 2018 and 2017 were $0.47 per share.

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. 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, 2017.

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

Richard A. Grafmyre, Chief Executive Officer
110 Reynolds Street
Williamsport, PA 17702



    March 31,
(In Thousands, Except Share Data)   2018   2017   % Change
Noninterest-bearing balances   $ 18,940     $ 22,494     (15.80 )%
Interest-bearing balances in other financial institutions    18,452     53,166     (65.29 )%
Total cash and cash equivalents    37,392     75,660     (50.58 )%
Investment debt securities, available for sale, at fair value   116,444     123,456     (5.68 )%
Investment equity securities, at fair value    2,482     2,455     1.10 %
Investment securities, trading   159         100.00 %
Restricted investment in bank stock, at fair value    13,483     10,999     22.58 %
Loans held for sale    748     1,221     (38.74 )%
Loans    1,280,748     1,111,100     15.27 %
Allowance for loan losses    (12,836 )   (12,905 )   (0.53 )%
Loans, net    1,267,912     1,098,195     15.45 %
Premises and equipment, net   27,587     24,431     12.92 %
Accrued interest receivable    4,456     3,945     12.95 %
Bank-owned life insurance    28,169     27,521     2.35 %
Goodwill    17,104     17,104     %
Intangibles   1,382     1,709     (19.13 )%
Deferred tax asset   4,721     8,039     (41.27 )%
Other assets    4,706     5,973     (21.21 )%
TOTAL ASSETS    $ 1,526,745     $ 1,400,708     9.00 %
Interest-bearing deposits    $ 888,193     $ 848,272     4.71 %
Noninterest-bearing deposits    304,261     312,392     (2.60 )%
Total deposits    1,192,454     1,160,664     2.74 %
Short-term borrowings   59,305     8,589     590.48 %
Long-term borrowings   123,970     75,998     63.12 %
Accrued interest payable    793     387     104.91 %
Other liabilities   
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