EX-99.1 2 ex991-3q18.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1
image0a07.jpg

Press Release — For Immediate Release
October 19, 2018

Penns Woods Bancorp, Inc. Reports Third Quarter 2018 Earnings

Williamsport, PA — October 19, 2018 - Penns Woods Bancorp, Inc. (NASDAQ: PWOD)

Penns Woods Bancorp, Inc., supported by loan and deposit growth, achieved net income of $10.5 million for the nine months ended September 30, 2018, resulting in basic and diluted earnings per share of $2.24.

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 or losses, was $9.1 million for the three months ended September 30, 2018 compared to $8.9 million for the same period of 2017. Operating earnings increased to $10.5 million for the nine months ended September 30, 2018, compared to $8.7 million for the same period of 2017. Impacting the level of operating earnings were several factors, including the continued shift in composition of the earning asset 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 for the three months ended September 30, 2018 was $0.82 for basic and diluted earnings per share, an increase from $0.66 for basic and diluted earnings per share for the same period of 2017. Operating earnings for the nine months ended September 30, 2018 was $2.24 basic and diluted earnings per share compared to $1.85 basic and diluted earnings per share for the same period of 2017.

Return on average assets was 0.96% for the three months ended September 30, 2018, compared to 0.93% for the corresponding period of 2017. Return on average assets was 0.91% for the nine months ended September 30, 2018, compared to 0.87% for the corresponding period of 2017.

Return on average equity was 10.94% for the three months ended September 30, 2018, compared to 9.43% for the corresponding period of 2017. Return on average equity was 10.19% for the nine months ended September 30, 2018, compared to 8.69% 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 and nine months ended September 30, 2018 was $3.8 million and $10.5 million, compared to $3.3 million and $9.1 million for the same period of 2017. Results for the three and nine months ended September 30, 2018 compared to 2017 were impacted by a decrease in after-tax securities gains of $216,000 (from a gain of $197,000 to a loss of $19,000) for the three month periods and a decrease in after-tax securities gains of $359,000 (from a gain of $320,000 to a loss of $39,000) for the nine 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 18.30% and 17.17% for the three and nine month periods ended September 30, 2018 compared to 28.08% and 27.82% for the prior year periods. Earnings per share for the three and nine months ended September 30, 2018 was $0.82 and $2.24 basic and diluted, an increase from the 2017 basic and diluted earnings per share of $0.70 and $1.92. Return on average assets and return on average equity were 0.96% and 10.94% for the three months ended September 30, 2018, compared to

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0.93% and 9.43% for the corresponding periods of 2017. Return on average assets and return on average equity were 0.91% and 10.19% for the nine months ended September 30, 2018 compared to 0.87% and 8.69% for the corresponding periods of 2017.

Net Interest Margin

The net interest margin for the three and nine months ended September 30, 2018 was 3.30% and 3.31%, compared to 3.57% and 3.47% 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 41 basis points ("bps") for the three month period and 31 bps for the nine month period primarily from an increase in the rate paid on time deposits as the average maturity of such liabilities lengthened. The impact of the increased cost of funds was limited by an increase in the yield on earning assets of 6 bps and 8 bps for the three and nine month periods. The increase in the yield on earning assets was driven by an increase in the loan portfolio yield in conjunction with an increase in the average loan portfolio of $193.9 million and $177.8 million respectively. The loan growth was primarily funded by an increase in average borrowings of $134.4 million and $103.8 million for the three and nine month periods along with growth in average total deposits of $45.6 million and $44.1 million respectively. Core deposits represent a lower cost funding source than time deposits and comprise 77.63% of total deposits at September 30, 2018 and 81.94% at September 30, 2017

Assets

Total assets increased $240.2 million to $1.7 billion at September 30, 2018 compared to September 30, 2017.  Net loans increased $179.0 million to $1.4 billion at September 30, 2018 compared to September 30, 2017, primarily due to campaigns related to increasing home equity product market share and indirect auto lending.  The investment portfolio increased $16.2 million from September 30, 2017 to September 30, 2018 due to an increase in the taxable municipal and restricted bank stock portfolios.

Non-performing Loans

The ratio of non-performing loans to total loans ratio decreased to 0.64% at September 30, 2018 from 0.69% September 30, 2017 as non-performing loans have increased to $8.8 million at September 30, 2018 from $8.3 million at 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 $490,000 for the nine months ended September 30, 2018 minimally impacted the allowance for loan losses, which was 0.97% of total loans at September 30, 2018. The majority of the loans charged-off had a specific allowance within the allowance for loan losses.

Deposits

Deposits increased $56.5 million to $1.2 billion at September 30, 2018 compared to September 30, 2017. Noninterest-bearing deposits increased $2.3 million to $313.1 million at September 30, 2018 compared to September 30, 2017. Driving deposit 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 average maturity of the time deposit portfolio continues to move forward as part of the strategy to build balance sheet protection in a rising interest rate environment.

Shareholders’ Equity

Shareholders’ equity increased $870,000 to $140.5 million at September 30, 2018 compared to September 30, 2017. The change in accumulated other comprehensive loss from $4.1 million at September 30, 2017 to $7.5 million at September 30, 2018 is a result of an increase in unrealized losses on available for sale securities (from an unrealized gain of $73,000 at September 30, 2017 to an unrealized loss of $2.7 million at September 30, 2018). The amount of accumulated other comprehensive loss at September 30, 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 $617,000, 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 $29.96 at September 30, 2018 compared to $29.79 at September 30, 2017 and an equity to asset ratio of 8.41% at September 30, 2018, compared to 9.77% at September 30, 2017.  Excluding goodwill and intangibles, book value per share was $26.05 at September 30, 2018, compared to $25.81 at September 30, 2017.  Dividends declared for the nine months ended September 30, 2018 and 2017 were $1.41 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.

2




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; 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 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

3



PENNS WOODS BANCORP, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
 
 
 
September 30,
(In Thousands, Except Share Data)
 
2018
 
2017
 
% Change
ASSETS:
 
 

 
 

 
 

Noninterest-bearing balances
 
$
33,675

 
$
22,042

 
52.78
 %
Interest-bearing balances in other financial institutions
 
38,672

 
5,705

 
577.86
 %
Total cash and cash equivalents
 
72,347

 
27,747

 
160.74
 %
 
 
 
 
 
 
 
Investment debt securities, available for sale, at fair value
 
128,905

 
118,829

 
8.48
 %
Investment equity securities, at fair value
 
1,902

 
2,485

 
(23.46
)%
Investment securities, trading
 
45

 
210

 
(78.57
)%
Restricted investment in bank stock, at fair value
 
17,834

 
10,999

 
62.14
 %
Loans held for sale
 
3,727

 
1,734

 
114.94
 %
Loans
 
1,369,105

 
1,189,714

 
15.08
 %
Allowance for loan losses
 
(13,343
)
 
(12,933
)
 
3.17
 %
Loans, net
 
1,355,762

 
1,176,781

 
15.21
 %
Premises and equipment, net
 
27,361

 
25,895

 
5.66
 %
Accrued interest receivable
 
5,353

 
4,289

 
24.81
 %
Bank-owned life insurance
 
28,472

 
27,827

 
2.32
 %
Goodwill
 
17,104

 
17,104

 
 %
Intangibles
 
1,233

 
1,543

 
(20.09
)%
Deferred tax asset
 
5,310

 
7,984

 
(33.49
)%
Other assets
 
4,993

 
6,770

 
(26.25
)%
TOTAL ASSETS
 
$
1,670,348

 
$
1,430,197

 
16.79
 %
 
 
 
 
 
 
 
LIABILITIES:
 
 

 
 

 
 

Interest-bearing deposits
 
$
897,366

 
$
843,166

 
6.43
 %
Noninterest-bearing deposits
 
313,111

 
310,830

 
0.73
 %
Total deposits
 
1,210,477

 
1,153,996

 
4.89
 %
 
 
 
 
 
 
 
Short-term borrowings
 
164,465

 
41,596

 
295.39
 %
Long-term borrowings
 
138,970

 
80,998

 
71.57
 %
Accrued interest payable
 
1,051

 
483

 
117.60
 %
Other liabilities
 
14,846

 
13,455

 
10.34
 %
TOTAL LIABILITIES
 
1,529,809

 
1,290,528

 
18.54
 %
 
 
 
 
 
 
 
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; 5,011,063 and 5,008,720 shares issued; 4,690,913 and 4,688,570 outstanding
 
41,757

 
41,739

 
0.04
 %
Additional paid-in capital
 
50,577

 
50,142

 
0.87
 %
Retained earnings
 
67,802

 
64,033

 
5.89
 %
Accumulated other comprehensive loss:
 
 

 
 
 
 

Net unrealized (loss) gain on available for sale securities
 
(2,663
)
 
73

 
(3,747.95
)%
Defined benefit plan
 
(4,820
)
 
(4,203
)
 
(14.68
)%
Treasury stock at cost, 320,150
 
(12,115
)
 
(12,115
)
 
 %
TOTAL PENNS WOODS BANCORP, INC. SHAREHOLDERS' EQUITY
 
140,538

 
139,669

 
0.62
 %
Non-controlling interest
 
1

 

 
100.00
 %
TOTAL SHAREHOLDERS' EQUITY
 
140,539

 
139,669

 
0.62
 %
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 
$
1,670,348

 
$
1,430,197

 
16.79
 %

4



PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(In Thousands, Except Per Share Data)
 
2018
 
2017
 
% Change
 
2018
 
2017
 
% Change
INTEREST AND DIVIDEND INCOME:
 
 

 
 

 
 

 
 

 
 

 
 

Loans including fees
 
$
13,982

 
$
11,906

 
17.44
 %
 
$
39,172

 
$
33,642

 
16.44
 %
Investment securities:
 
 

 
 

 
 

 
 
 
 

 
 

Taxable
 
713

 
553

 
28.93
 %
 
1,898

 
1,665

 
13.99
 %
Tax-exempt
 
207

 
319

 
(35.11
)%
 
678

 
940

 
(27.87
)%
Dividend and other interest income
 
296

 
170

 
74.12
 %
 
762

 
592

 
28.72
 %
TOTAL INTEREST AND DIVIDEND INCOME
 
15,198

 
12,948

 
17.38
 %
 
42,510

 
36,839

 
15.39
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
INTEREST EXPENSE:
 
 

 
 

 
 

 
 

 
 

 
 

Deposits
 
1,659

 
1,058

 
56.81
 %
 
4,371

 
2,968

 
47.27
 %
Short-term borrowings
 
528

 
31

 
1,603.23
 %
 
1,004

 
39

 
2,474.36
 %
Long-term borrowings
 
756

 
407

 
85.75
 %
 
2,024

 
1,220

 
65.90
 %
TOTAL INTEREST EXPENSE
 
2,943

 
1,496

 
96.72
 %
 
7,399

 
4,227

 
75.04
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
NET INTEREST INCOME
 
12,255

 
11,452

 
7.01
 %
 
35,111

 
32,612

 
7.66
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
PROVISION FOR LOAN LOSSES
 
480

 
60

 
700.00
 %
 
975

 
605

 
61.16
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES
 
11,775

 
11,392

 
3.36
 %
 
34,136

 
32,007

 
6.65
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
NON-INTEREST INCOME:
 
 

 
 

 
 

 
 

 
 

 
 

Service charges
 
645

 
550

 
17.27
 %
 
1,788

 
1,637

 
9.22
 %
Debt securities (losses) gains, available for sale
 
(22
)
 
302

 
(107.28
)%
 
(17
)
 
487

 
(103.49
)%
Equity securities losses
 
(16
)
 

 
(100.00
)%
 
(44
)
 

 
(100.00
)%
Securities gains (losses), trading
 
14

 
(4
)
 
(100.00
)%
 
12

 
(2
)
 
(700.00
)%
Bank-owned life insurance
 
165

 
166

 
(0.60
)%
 
496

 
499

 
(0.60
)%
Gain on sale of loans
 
398

 
455

 
(12.53
)%
 
1,053

 
1,316

 
(19.98
)%
Insurance commissions
 
85

 
109

 
(22.02
)%
 
266

 
399

 
(33.33
)%
Brokerage commissions
 
340

 
352

 
(3.41
)%
 
1,013

 
1,044

 
(2.97
)%
Debit card income
 
359

 
514

 
(30.16
)%
 
1,065

 
1,450

 
(26.55
)%
Other
 
621

 
296

 
109.80
 %
 
1,400

 
1,325

 
5.66
 %
TOTAL NON-INTEREST INCOME
 
2,589

 
2,740

 
(5.51
)%
 
7,032

 
8,155

 
(13.77
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
NON-INTEREST EXPENSE:
 
 

 
 

 
 

 
 

 
 

 
 

Salaries and employee benefits
 
5,420

 
4,738

 
14.39
 %
 
15,387

 
14,116

 
9.00
 %
Occupancy
 
640

 
603

 
6.14
 %
 
2,080

 
1,855

 
12.13
 %
Furniture and equipment
 
780

 
816

 
(4.41
)%
 
2,328

 
2,129

 
9.35
 %
Software Amortization
 
208

 
235

 
(11.49
)%
 
504

 
750

 
(32.80
)%
Pennsylvania shares tax
 
278

 
228

 
21.93
 %
 
833

 
696

 
19.68
 %
Professional Fees
 
459

 
560

 
(18.04
)%
 
1,674

 
1,816

 
(7.82
)%
Federal Deposit Insurance Corporation deposit insurance
 
237

 
194

 
22.16
 %
 
639

 
514

 
24.32
 %
Marketing
 
245

 
315

 
(22.22
)%
 
764

 
690

 
10.72
 %
Intangible amortization
 
71

 
81

 
(12.35
)%
 
229

 
256

 
(10.55
)%
Other
 
1,343

 
1,796

 
(25.22
)%
 
4,037

 
4,792

 
(15.76
)%
TOTAL NON-INTEREST EXPENSE
 
9,681

 
9,566

 
1.20
 %
 
28,475

 
27,614

 
3.12
 %
INCOME BEFORE INCOME TAX PROVISION
 
4,683

 
4,566

 
2.56
 %
 
12,693

 
12,548

 
1.16
 %
INCOME TAX PROVISION
 
857

 
1,282

 
(33.15
)%
 
2,179

 
3,491

 
(37.58
)%
NET INCOME
 
$
3,826

 
$
3,284

 
16.50
 %
 
$
10,514

 
$
9,057

 
16.09
 %
Earnings attributable to noncontrolling interest
 

 

 
 %
 
(1
)
 

 
 %
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS'
 
$
3,826

 
$
3,284

 
16.50
 %
 
$
10,515

 
$
9,057

 
16.10
 %
EARNINGS PER SHARE - BASIC
 
$
0.82

 
$
0.70

 
17.14
 %
 
$
2.24

 
$
1.92

 
16.67
 %
EARNINGS PER SHARE - DILUTED
 
$
0.82

 
$
0.70

 
17.14
 %
 
$
2.24

 
$
1.92

 
16.67
 %
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC
 
4,690,560

 
4,688,222

 
0.05
 %
 
4,689,960

 
4,711,282

 
(0.45
)%
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED
 
4,690,560

 
4,688,222

 
0.05
 %
 
4,689,960

 
4,711,282

 
(0.45
)%
DIVIDENDS DECLARED PER SHARE
 
$
0.47

 
$
0.47

 
 %
 
$
1.41

 
$
1.41

 
 %

5



PENNS WOODS BANCORP, INC.
AVERAGE BALANCES AND INTEREST RATES 
 
 
Three Months Ended
 
 
September 30, 2018
 
September 30, 2017
(Dollars in Thousands)
 
Average 
Balance
 
Interest
 
Average 
Rate
 
Average 
Balance
 
Interest
 
Average 
Rate
ASSETS:
 
 

 
 

 
 

 
 

 
 

 
 

Tax-exempt loans
 
$
75,182

 
$
559

 
2.95
%
 
$
53,850

 
$
494

 
3.64
%
All other loans
 
1,278,149

 
13,541

 
4.20
%
 
1,105,615

 
11,580

 
4.16
%
Total loans
 
1,353,331

 
14,100

 
4.13
%
 
1,159,465

 
12,074

 
4.13
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Taxable securities
 
104,321

 
991

 
3.80
%
 
83,106

 
674

 
3.24
%
Tax-exempt securities
 
34,444

 
262

 
3.04
%
 
53,320

 
483

 
3.62
%
Total securities
 
138,765

 
1,253

 
3.61
%
 
136,426

 
1,157

 
3.39
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits
 
3,403

 
18

 
2.10
%
 
14,085

 
49

 
1.38
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Total interest-earning assets
 
1,495,499

 
15,371

 
4.08
%
 
1,309,976

 
13,280

 
4.02
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Other assets
 
99,132

 
 
 
 
 
101,035

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL ASSETS
 
$
1,594,631

 
 

 
 

 
$
1,411,011

 
 

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY:
 
 

 
 

 
 

 
 

 
 

 
 

Savings
 
$
166,181

 
17

 
0.04
%
 
$
157,341

 
15

 
0.04
%
Super Now deposits
 
225,677

 
264

 
0.46
%
 
203,531

 
140

 
0.27
%
Money market deposits
 
241,977

 
314

 
0.51
%
 
284,155

 
267

 
0.37
%
Time deposits
 
263,399

 
1,064

 
1.60
%
 
206,563

 
636

 
1.22
%
Total interest-bearing deposits
 
897,234

 
1,659

 
0.73
%
 
851,590

 
1,058

 
0.49
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term borrowings
 
99,867

 
528

 
2.07
%
 
19,127

 
31

 
0.64
%
Long-term borrowings
 
134,731

 
756

 
2.19
%
 
81,107

 
407

 
1.96
%
Total borrowings
 
234,598

 
1,284

 
2.14
%
 
100,234

 
438

 
1.71
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Total interest-bearing liabilities
 
1,131,832

 
2,943

 
1.03
%
 
951,824

 
1,496

 
0.62
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Demand deposits
 
305,707

 
 
 
 
 
304,244

 
 

 
 
Other liabilities
 
17,156

 
 
 
 
 
15,708

 
 

 
 
Shareholders’ equity
 
139,936

 
 
 
 
 
139,235

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 
$
1,594,631

 
 

 
 
 
$
1,411,011

 
 

 
 
Interest rate spread
 
 

 
 

 
3.05
%
 
 

 
 

 
3.40
%
Net interest income/margin
 
 

 
$
12,428

 
3.30
%
 
 

 
$
11,784

 
3.57
%
 
 
 
Three Months Ended September 30,
 
 
2018
 
2017
Total interest income
 
$
15,198

 
$
12,948

Total interest expense
 
2,943

 
1,496

Net interest income
 
12,255

 
11,452

Tax equivalent adjustment
 
173

 
332

Net interest income (fully taxable equivalent)
 
$
12,428

 
$
11,784







6



PENNS WOODS BANCORP, INC.
AVERAGE BALANCES AND INTEREST RATES 
 
 
Nine Months Ended
 
 
September 30, 2018
 
September 30, 2017
(Dollars in Thousands)
 
Average 
Balance
 
Interest
 
Average 
Rate
 
Average 
Balance
 
Interest
 
Average 
Rate
ASSETS:
 
 

 
 

 
 

 
 

 
 

 
 

Tax-exempt loans
 
$
75,389

 
$
1,689

 
2.99
%
 
$
46,752

 
$
1,315

 
3.76
%
All other loans
 
1,230,313

 
37,838

 
4.11
%
 
1,081,148

 
32,774

 
4.05
%
Total loans
 
1,305,702

 
39,527

 
4.05
%
 
1,127,900

 
34,089

 
4.04
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Taxable securities
 
93,944

 
2,621

 
3.72
%
 
85,417

 
2,039

 
3.18
%
Tax-exempt securities
 
38,940

 
858

 
2.94
%
 
50,972

 
1,424

 
3.72
%
Total securities
 
132,884

 
3,479

 
3.49
%
 
136,389

 
3,463

 
3.39
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing deposits
 
2,872

 
39

 
1.82
%
 
27,901

 
218

 
1.04
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Total interest-earning assets
 
1,441,458

 
43,045

 
3.99
%
 
1,292,190

 
37,770

 
3.91
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Other assets
 
97,930

 
 

 
 
 
102,181

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL ASSETS
 
$
1,539,388

 
 

 
 
 
$
1,394,371

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
LIABILITIES AND SHAREHOLDERS’ EQUITY:
 
 

 
 

 
 
 
 

 
 

 
 
Savings
 
$
164,828

 
49

 
0.04
%
 
$
157,396

 
45

 
0.04
%
Super Now deposits
 
229,159

 
713

 
0.42
%
 
198,560

 
377

 
0.25
%
Money market deposits
 
240,751

 
814

 
0.45
%
 
278,436

 
713

 
0.34
%
Time deposits
 
251,071

 
2,795

 
1.49
%
 
207,331

 
1,833

 
1.18
%
Total interest-bearing deposits
 
885,809

 
4,371

 
0.66
%
 
841,723

 
2,968

 
0.47
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Short-term borrowings
 
72,873

 
1,004

 
1.82
%
 
13,714

 
39

 
0.26
%
Long-term borrowings
 
124,483

 
2,024

 
2.14
%
 
79,881

 
1,220

 
2.01
%
Total borrowings
 
197,356

 
3,028

 
2.02
%
 
93,595

 
1,259

 
1.76
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Total interest-bearing liabilities
 
1,083,165

 
7,399

 
0.91
%
 
935,318

 
4,227

 
0.60
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Demand deposits
 
300,604

 
 

 
 
 
301,567

 
 

 
 
Other liabilities
 
18,070

 
 

 
 
 
18,455

 
 

 
 
Shareholders’ equity
 
137,549

 
 

 
 
 
139,031

 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
 
$
1,539,388

 
 

 
 
 
$
1,394,371

 
 

 
 
Interest rate spread
 
 

 
 

 
3.08
%
 
 

 
 

 
3.31
%
Net interest income/margin
 
 

 
$
35,646

 
3.31
%
 
 

 
$
33,543

 
3.47
%

 
 
Nine Months Ended September 30,
 
 
2018
 
2017
Total interest income
 
$
42,510

 
$
36,839

Total interest expense
 
7,399

 
4,227

Net interest income
 
35,111

 
32,612

Tax equivalent adjustment
 
535

 
931

Net interest income (fully taxable equivalent)
 
$
35,646

 
$
33,543


7



(Dollars in Thousands, Except Per Share Data)
 
Quarter Ended
 
 
9/30/2018
 
6/30/2018
 
3/31/2018
 
12/31/2017
 
9/30/2017
Operating Data
 
 

 
 

 
 

 
 

 
 

Net income
 
$
3,826

 
$
3,480

 
$
3,208

 
$
716

 
$
3,284

Net interest income
 
12,255

 
11,703

 
11,153

 
11,468

 
11,452

Provision for loan losses
 
480

 
335

 
160

 
125

 
60

Net security (losses) gains
 
(24
)
 
15

 
(40
)
 
107

 
298

Non-interest income, ex. net security (losses) gains
 
2,613

 
2,347

 
2,368

 
2,482

 
2,442

Non-interest expense
 
9,681

 
9,517

 
9,524

 
9,248

 
9,566

 
 
 
 
 
 
 
 
 
 
 
Performance Statistics
 
 

 
 

 
 

 
 

 
 

Net interest margin
 
3.30
%
 
3.32
%
 
3.31
%
 
3.48
%
 
3.57
%
Annualized return on average assets
 
0.96
%
 
0.91
%
 
0.86
%
 
0.20
%
 
0.93
%
Annualized return on average equity
 
10.94
%
 
10.07
%
 
9.18
%
 
2.00
%
 
9.43
%
Annualized net loan charge-offs to average loans
 
0.05
%
 
0.04
%
 
0.06
%
 
0.07
%
 
0.08
%
Net charge-offs
 
171

 
137

 
182

 
200

 
236

Efficiency ratio
 
64.6
%
 
67.2
%
 
69.8
%
 
65.7
%
 
68.3
%
 
 
 
 
 
 
 
 
 
 
 
Per Share Data
 
 

 
 

 
 

 
 

 
 

Basic earnings per share
 
$
0.82

 
$
0.74

 
$
0.68

 
$
0.16

 
$
0.70

Diluted earnings per share
 
0.82

 
0.74

 
0.68

 
0.15

 
0.70

Dividend declared per share
 
0.47

 
0.47

 
0.47

 
0.47

 
0.47

Book value
 
29.96

 
29.66

 
29.45

 
29.47

 
29.79

Common stock price:
 
 

 
 

 
 

 
 

 
 

High
 
46.27

 
46.92

 
45.56

 
49.79

 
46.47

Low
 
43.22

 
41.29

 
39.61

 
45.65

 
41.08

Close
 
43.45

 
44.78

 
42.31

 
46.58

 
46.47

Weighted average common shares:
 
 

 
 

 
 

 
 

 
 

Basic
 
4,691

 
4,690

 
4,689

 
4,689

 
4,688

Fully Diluted
 
4,691

 
4,703

 
4,689

 
4,782

 
4,688

End-of-period common shares:
 
 

 
 

 
 

 
 

 
 

Issued
 
5,011

 
5,011

 
5,010

 
5,009

 
5,009

Treasury
 
320

 
320

 
320

 
320

 
320


8



(Dollars in Thousands, Except Per Share Data)
 
Quarter Ended
 
 
9/30/2018
 
6/30/2018
 
3/31/2018
 
12/31/2017
 
9/30/2017
Financial Condition Data:
 
 

 
 

 
 

 
 

 
 

General
 
 

 
 

 
 

 
 

 
 

Total assets
 
$
1,670,348

 
$
1,603,273

 
$
1,526,745

 
$
1,474,492

 
$
1,430,197

Loans, net
 
1,355,762

 
1,318,039

 
1,267,912

 
1,232,268

 
1,176,781

Goodwill
 
17,104

 
17,104

 
17,104

 
17,104

 
17,104

Intangibles
 
1,233

 
1,304

 
1,382

 
1,462

 
1,543

Total deposits
 
1,210,477

 
1,191,019

 
1,192,454

 
1,146,320

 
1,153,996

Noninterest-bearing
 
313,111

 
311,194

 
304,261

 
303,316

 
310,830

Savings
 
164,449

 
166,183

 
166,243

 
160,698

 
156,437

NOW
 
223,963

 
216,109

 
240,259

 
215,021

 
203,744

Money Market
 
238,131

 
245,081

 
235,381

 
237,818

 
274,528

Time Deposits
 
270,823

 
252,452

 
246,310

 
229,467

 
208,457

Total interest-bearing deposits
 
897,366

 
879,825

 
888,193

 
843,004

 
843,166

 
 
 
 
 
 
 
 
 
 
 
Core deposits*
 
939,654

 
938,567

 
946,144

 
916,853

 
945,539

Shareholders’ equity
 
140,538

 
139,134

 
138,192

 
138,192

 
139,669

 
 
 
 
 
 
 
 
 
 
 
Asset Quality
 
 

 
 

 
 

 
 

 
 

Non-performing loans
 
$
8,820

 
$
7,132

 
$
7,641

 
$
7,268

 
$
8,317

Non-performing loans to total assets
 
0.53
%
 
0.44
%
 
0.50
%
 
0.49
%
 
0.58
%
Allowance for loan losses
 
13,343

 
13,034

 
12,836

 
12,858

 
12,933

Allowance for loan losses to total loans
 
0.97
%
 
0.98
%
 
1.00
%
 
1.03
%
 
1.09
%
Allowance for loan losses to non-performing loans
 
151.28
%
 
182.75
%
 
167.99
%
 
176.91
%
 
155.50
%
Non-performing loans to total loans
 
0.64
%
 
0.54
%
 
0.60
%
 
0.58
%
 
0.69
%
 
 
 
 
 
 
 
 
 
 
 
Capitalization
 
 

 
 

 
 

 
 

 
 

Shareholders’ equity to total assets
 
8.41
%
 
8.68
%
 
9.05
%
 
9.37
%
 
9.77
%

* Core deposits are defined as total deposits less time deposits

9



Reconciliation of GAAP and Non-GAAP Financial Measures
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
(Dollars in Thousands, Except Per Share Data)
 
2018
 
2017
 
2018
 
2017
GAAP net income
 
$
9,057

 
$
9,057

 
$
9,057

 
$
9,057

Less: net securities (losses) gains, net of tax
 
(19
)
 
197

 
(39
)
 
320

Non-GAAP operating earnings
 
$
9,076

 
$
8,860

 
$
9,096

 
$
8,737

 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2018
 
2017
 
2018
 
2017
Return on average assets (ROA)
 
0.96
 %
 
0.93
%
 
0.91
 %
 
0.87
%
Less: net securities (losses) gains, net of tax
 
 %
 
0.05
%
 
 %
 
0.03
%
Non-GAAP operating ROA
 
0.96
 %
 
0.88
%
 
0.91
 %
 
0.84
%
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2018
 
2017
 
2018
 
2017
Return on average equity (ROE)
 
10.94
 %
 
9.43
%
 
10.19
 %
 
8.69
%
Less: net securities (losses) gains, net of tax
 
(0.05
)%
 
0.56
%
 
(0.04
)%
 
0.31
%
Non-GAAP operating ROE
 
10.99
 %
 
8.87
%
 
10.23
 %
 
8.38
%
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2018
 
2017
 
2018
 
2017
Basic earnings per share (EPS)
 
$
0.82

 
$
0.70

 
$
2.24

 
$
1.92

Less: net securities (losses) gains, net of tax
 

 
0.04

 

 
0.07

Non-GAAP basic operating EPS
 
$
0.82

 
$
0.66

 
$
2.24

 
$
1.85

 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
 
2018
 
2017
 
2018
 
2017
Diluted EPS
 
$
0.82

 
$
0.70

 
$
2.24

 
$
1.92

Less: net securities (losses) gains, net of tax
 

 
0.04

 

 
0.07

Non-GAAP diluted operating EPS
 
$
0.82

 
$
0.66

 
$
2.24

 
$
1.85



10