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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. (NASDAQ: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  

 

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