10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

ýQuarterly Report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 for the Quarterly Period Ended March 31, 2005,

oTransition report pursuant to Section 13 or 15 (d) of the Exchange Act for the Transition Period from                                         to                                        .

No. 0-17077

(Commission File Number)

PENNS WOODS BANCORP, INC.

(Exact name of Registrant as specified in its charter)

PENNSYLVANIA	23-2226454
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
300 Market Street, Williamsport, Pennsylvania	17701
(Address of principal executive offices)	(Zip Code)
(570) 322-1111
Registrant’s telephone number, including area code

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES  ý          NO  o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12 b-2 of the Exchange Act)

YES  ý          NO  o

On April 25, 2005 there were 3,321,869 of the Registrant’s common stock outstanding.

PENNS WOODS BANCORP, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

Part I Financial Information
Item I Financial Information
	Consolidated Balance Sheet (unaudited) as of March 31, 2005 and December 31, 2004
	Consolidated Statement of Income (unaudited) for the Three Months ended March 31, 2005 and 2004
	Consolidated Statement of Comprehensive Income (unaudited) For the Three Months ended March 31, 2005 and 2004
	Consolidated Statement of Changes in Shareholders’ Equity (unaudited) for the Three Months ended March 31, 2005 and 2004
	Consolidated Statement of Cash Flows (unaudited) for the Three Months ended March 31, 2005 and 2004
	Notes to Consolidated Financial Statements (unaudited)
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II Other Information
Item 1. Legal Proceedings
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits
Signatures
Exhibit Index and Exhibits

2

PENNS WOODS BANCORP, INC.

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

(In Thousands, Except Share Data)	March 31, 2005			December 31, 2004
ASSETS:
Cash and noninterest-bearing balances in other financial institutions	$	17,314		$	12,602
Interest-bearing deposits in other financial institutions	30			24
Total cash and cash equivalents	17,344			12,626
Investment securities, available for sale, at fair value	178,071			184,163
Investment securities held to maturity (fair value of $307 and $561)	309			558
Loans held for sale	2,575			4,624
Loans, net of unearned discount of $1,060 and $1,096	323,140			324,505
Allowance for loan and lease losses	(3,399		)	(3,338		)
Loans, net	319,741			321,167
Premises and equipment, net	5,588			4,882
Accrued interest receivable	2,208			2,246
Bank-owned life insurance	11,070			10,976
Goodwill	3,032			3,032
Other assets	4,055			2,429
TOTAL ASSETS	$	543,993		$	546,703
LIABILITIES:
Interest-bearing deposits	$	281,593		$	282,786
Noninterest-bearing deposits	72,708			74,050
Total deposits	354,301			356,836
Short-term borrowings	37,262			36,475
Long-term borrowings, Federal Home Loan Bank	74,478			75,878
Accrued interest payable	862			850
Other liabilities	5,179			3,499
TOTAL LIABILITIES	472,082			473,538
SHAREHOLDERS’ EQUITY:
Common stock par value $10.00, 10,000,000 shares authorized; 3,332,179 and 3,331,837 shares issued	33,322			33,318
Additional paid-in capital	17,707			17,700
Retained earnings	19,481			18,262
Accumulated other comprehensive gain	1,847			4,331
Less: Treasury stock at cost, 10,310 shares	(446		)	(446		)
TOTAL SHAREHOLDERS’ EQUITY	71,911			73,165
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	543,993		$	546,703

See accompanying notes to the unaudited consolidated financial statements.

3

PENNS WOODS BANCORP, INC.

CONSOLIDATED STATEMENT OF INCOME

(UNAUDITED)

	Three Months Ended March 31,
(In Thousands, Except Per Share Data)	2005		2004
INTEREST AND DIVIDEND INCOME:
Loans including fees	$	5,500	$	4,891
Investment securities:
Taxable	1,264		1,803
Tax-exempt	589		391
Dividend	298		242
TOTAL INTEREST AND DIVIDEND INCOME	7,651		7,327
INTEREST EXPENSE:
Deposits	1,194		1,135
Short-term borrowings	202		137
Long-term borrowings	853		852
TOTAL INTEREST EXPENSE	2,249		2,124
NET INTEREST INCOME	5,402		5,203
PROVISION FOR LOAN LOSSES	180		75
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	5,222		5,128
NON-INTEREST INCOME:
Service charges	455		476
Securities gains, net	611		545
Bank-owned life insurance	94		90
Insurance commissions	643		614
Other income	314		312
TOTAL NON-INTEREST INCOME	2,117		2,037
NON-INTEREST EXPENSES:
Salaries and employee benefits	2,020		1,979
Occupancy expense, net	291		243
Furniture and equipment expense	221		265
Advertising expense	94		94
Pennsylvania shares tax expense	139		116
Other operating expenses	856		776
TOTAL NON-INTEREST EXPENSES	3,621		3,473
INCOME BEFORE INCOME TAX PROVISION	3,718		3,692
INCOME TAX PROVISION	1,003		1,019
NET INCOME	$	2,715	$	2,673
EARNINGS PER SHARE - BASIC	$	0.82	$	0.80
EARNINGS PER SHARE - DILUTED	$	0.82	$	0.80
DIVIDENDS PER SHARE	$	0.45	$	0.35
WEIGHTED AVERAGE SHARES OUTSTANDING-BASIC	3,311,272		3,321,853
WEIGHTED AVERAGE SHARES OUTSTANDING-DILUTED	3,313,422		3,325,395

See accompanying notes to the unaudited consolidated financial statements.

4

PENNS WOODS BANCORP, INC.

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(UNAUDITED)

(In Thousands Except Per Share Data)	COMMON STOCK			ADDITIONAL PAID-IN CAPITAL		RETAINED EARNINGS			ACCUMULATED OTHER COMPREHENSIVE INCOME			TREASURY STOCK			TOTAL SHAREHOLDERS’ EQUITY
	SHARES	AMOUNT
Balance, December 31, 2004	3,331,837	$	33,318	$	17,700	$	18,262		$	4,331		$	(446	)	$	73,165
Net income						2,715									2,715
Dividends declared, $0.45						(1,496		)							(1,496		)
Net change in unrealized gain on investments available for sale, net of tax benefit of $1,280									(2,484		)				(2,484		)
Stock options exercised	342	4		7											11
Balance, March 31, 2005	3,332,179	$	33,322	$	17,707	$	19,481		$	1,847		$	(446	)	$	71,911

5

PENNS WOODS BANCORP, INC.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(UNAUDITED)

	Three Months Ended March 31,
(In Thousands)	2005			2004
Net Income	$	2,715		$	2,673
Other comprehensive income:
Unrealized gains (losses) on available for sale securities	(3,155		)	737
Less: Reclassification adjustment for gain included in net income	611			545
Other comprehensive income (loss) before tax	(3,766		)	192
Income tax expense (benefit) related to other comprehensive income (loss)	(1,280		)	65
Other comprehensive income (loss), net of tax	(2,486		)	127
Comprehensive income	$	229		$	2,800

See accompanying notes to the unaudited consolidated financial statements.

6

PENNS WOODS BANCORP, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

	Three Months Ended March 31,
(In Thousands)	2005			2004
OPERATING ACTIVITIES:
Net Income	$	2,715		$	2,673
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation	143			158
Provision for loan losses	180			75
Accretion and amortization of investment security discounts and premiums	(105		)	3
Securities gains, net	(611		)	(545		)
Originations of loans held for sale	(4,838		)	(2,056		)
Proceeds of loans held for sale	6,887			3,165
Earnings on bank-owned life insurance	(94		)	(90		)
Other, net	1,010			1,572
Net cash provided by operating activities	5,287			4,955
INVESTING ACTIVITIES:
Investment securities available for sale:
Proceeds from sales	63,594			35,792
Proceeds from calls and maturities	3,517			5,364
Purchases	(64,153		)	(36,890		)
Investment securities held to maturity:
Proceeds from calls and maturities	249			1
Purchases	—			(14		)
Net decrease (increase) in loans	1,169			(2,804		)
Acquisition of bank premises and equipment	(849		)	(108		)
Proceeds from the sale of foreclosed assets	28			134
Proceeds from redemption of regulatory stock	1,286			1,718
Purchases of regulatory stock	(777		)	(1,252		)
Net cash provided by investing activities	4,064			1,941
FINANCING ACTIVITIES:
Net (decrease) increase in interest-bearing deposits	(1,193		)	9,073
Net decrease in noninterest-bearing deposits	(1,342		)	(1,154		)
Proceeds of long-term borrowings	—			5,000
Repayment of long-term borrowings	(1,400		)	—
Net increase (decrease) in short-term borrowings	787			(16,671		)
Dividends paid	(1,496		)	(1,163		)
Stock options exercised	11			31
Purchase of treasury stock	—			(130		)
Net cash provided used in financing activities	(4,633		)	(5,014		)
NET INCREASE IN CASH AND CASH EQUIVALENTS	4,718			1,882
CASH AND CASH EQUIVALENTS, BEGINNING	12,626			10,230
CASH AND CASH EQUIVALENTS, ENDING	$	17,344		$	12,112
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid	$	2,237		$	2,131
Transfer of loans to foreclosed assets	$	77		$	39

See accompanying notes to the unaudited consolidated financial statements.

7

PENNS WOODS BANCORP, INC. AND SUBSIDIARIES

NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1.  Basis of Presentation

The consolidated financial statements include the accounts of Penns Woods Bancorp, Inc. (the “Company”) and its wholly-owned subsidiaries Woods Investment Company, Inc., Woods Real Estate Development Company, Inc., and Jersey Shore State Bank (the “Bank”) and its wholly-owned subsidiary The M Group, Inc. D/B/A The Comprehensive Financial Group (“The M Group”).  All significant inter-company balances and transactions have been eliminated in the consolidation.

The interim financial statements are unaudited but, in the opinion of management, reflect all adjustments necessary for the fair presentation of results for such periods.  All of those adjustments are of a normal, recurring nature.  The results of operations for any interim period are not necessarily indicative of results for the full year.  These financial statements should be read in conjunction with financial statements and notes thereto contained in the Company’s annual report for the year ended December 31, 2004.

Recent Accounting Pronouncements

In April, the Securities and Exchange Commission adopted a new rule that amends the compliance dates for Financial Accounting Standards Board’s (“FASB”) Statement of Financial Accounting Standards No. 123 (revised 2004), Share-Based Payment (FAS No. 123R).  The Statement requires that compensation cost relating to share-based payment transactions be recognized in financial statements and that this cost be measured based on the fair value of the equity or liability instruments issued.  FAS No. 123 (Revised 2004) covers a wide range of share-based compensation arrangements including share options, restricted share plans, performance-based awards, share appreciation rights, and employee share purchase plans. The Company will adopt FAS No. 123 (Revised 2004) on January 1, 2006 and is currently evaluating the impact the adoption of the standard will have on the Company’s results of operations.

In December 2004, FASB issued FAS No. 153, “Exchanges of Nonmonetary Assets - An Amendment of APB Opinion No. 29”. The guidance in APB Opinion No. 29, “Accounting for Nonmonetary Transactions”, is based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. FAS No. 153 amends Opinion No. 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of FAS No. 153 are effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. Early application is permitted and companies must apply

8

the standard prospectively. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

NOTE 2. Per Share Data

The following table sets forth the composition of the weighted average common shares (denominator) used in the basic and dilutive per share computation.  There are no convertible securities which would affect the numerator in calculating basic and diluted earnings per share, therefore, net income as presented on the consolidated statement of income will be used as the numerator.

	Three Months Ended March 31,
	2005		2004
Weighted average common shares outstanding	3,321,582		3,327,315
Average treasury stock shares	(10,310	)	(5,462	)
Weighted average common shares and common stock equivalents used to calculate basic earnings per share	3,311,272		3,321,853
Additional common stock equivalents (stock options) used to calculate diluted earnings per share	2,150		3,542
Weighted average common shares and common stock equivalents used to calculate diluted earnings per share	3,313,422		3,325,395

Options to purchase 8,410 shares of common stock at the price of $48.35 were outstanding during the three months ended March 31, 2005 and 10,890 shares of common stock at the price of $48.35 were outstanding for the three months ended March 31, 2004, but were not included in the computation of diluted earnings per share as they were anti-dilutive due to the strike price being greater than the market price as of the end of the quarter.

Note 3.  Net Periodic Benefit Cost-Defined Benefit Plans

For a detailed disclosure on the Company’s pension and employee benefits plans, please refer to Note 11 of the Company’s Consolidated Financial Statements included in the 2004 Annual Report on Form 10-K.

9

The following sets forth the components of net periodic benefit cost of the domestic non-contributory defined benefit plans for the three months ended March 31, 2005 and 2004,  respectively.

	2005			2004
Service cost	$	127		$	113
Interest cost	112			106
Expected return on plan assets	(95		)	(84		)
Amortization of transition obligation	(1		)	(1		)
Amortization of prior service cost	6			6
Amortization of net (gain) loss	16			14
Net periodic cost	$	165		$	154

Employer Contributions

The Company previously disclosed in its consolidated financial statements included in the 2004 Annual Report on Form 10-K that it expected to contribute $575,000 to its defined benefit plan in 2005.  As of March 31, 2005, contributions of $206,000 have been made.  The Company presently anticipates contributing an additional $369,000 to fund its pension plan in 2005 for a total of $575,000.

Note 4.  Off Balance Sheet Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments include commitments to extend credit and standby letters of credit.  These instruments involve, to varying degrees, elements of credit, interest rate or liquidity risk in excess of the amount recognized in the consolidated balance sheet.  The contract amounts of these instruments express the extent of involvement the Company has in particular classes of financial instruments.

The Company’s exposure to credit loss from nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual amount of these instruments.  The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

The Company may require collateral or other security to support financial instruments with off-balance sheet credit risk.

10

Financial instruments whose contract amounts represent credit risk are as follows:

	March 31,
	2005		2004
Commitments to extend credit	$	41,361	$	48,822
Standby letters of credit	1,705		816

Note 5.  Reclassification of Comparative Amounts

Certain comparative amounts for the prior periods have been reclassified to conform to current period presentations. Such reclassifications had no effect on net income or shareholders’ equity.

CAUTIONARY STATEMENT FOR PURPOSES OF THE PRIVATE

SECURITIES LITIGATION REFORM ACT OF 1995

This Report contains certain “forward-looking statements” including statements concerning plans, objectives, future events or performance and assumptions and other statements which are other than statements of historical fact.  The Company wishes to caution readers that the following important factors, among others, may have affected and could in the future affect the Company’s actual results and could cause the Company’s 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, which the Company must comply, 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.

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ITEM 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operation

EARNINGS SUMMARY

Comparison of the Three Months Ended March 31, 2005 and 2004

Summary Results

Net income for the three months ended March 31, 2005 was $2,715,000 compared to $2,673,000 for the same period of 2004.  Basic and diluted earnings per share for the three months ended March 31, 2005 were $0.82 as compared to $0.80 for the three months ended March 31, 2004.  Return on average assets and return on average equity were 2.01% and 14.56% for the three months ended March 31, 2005 as compared to 2.04% and 14.99% for the corresponding period of 2004.  Net income from core operations for the three months ended March 31, 2005, excluding after-tax securities gains of $403,000, remained stable at $2,312,000. (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 significant gains or losses that are unusual in nature.  Because certain of these items and their impact on the Company’s performance are difficult to predict, management believes the 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.)

Interest Income

During the first quarter of 2005, interest and dividend income was $7,651,000, an increase of $324,000 over the same quarter in 2004.  The increase in total interest income was primarily the result of a change in the mix of earning assets from March 31, 2004 to March 31,2005.  Over this time frame cash flows from the investment portfolio have been reinvested into the higher yielding loan portfolio, principally commercial products.  The shift in earning assets increased loan interest and fee income by $609,000 while decreasing interest and dividend income on investment securities by $285,000.  The decrease in taxable investment security interest income was also the effect of a portfolio reallocation from the taxable investment portfolio to tax-free municipal bonds.  This shift within the investment securities portfolio was undertaken to ladder cash flows, maintain the interest margin, and to invest at the community level.  The increase in dividends received is the result of an increase in the level of dividends from the Federal Home Loan Bank of Pittsburgh coupled with an emphasis on purchasing stocks consistently having an above average dividend yield.

Interest income composition for the three months ended March 31, 2005 and 2004 is as follows:

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	For The Three Months Ended
	March 31, 2005				March 31, 2004				Change
(In Thousands)	Amount		% Total		Amount		% Total		Amount			% Total
Loans including fees	$	5,500	71.9	%	$	4,891	66.8	%	$	609		12.5	%
Investment securities:
Taxable	1,264		16.5		1,803		24.6		(539		)	(29.9	)
Tax-exempt	589		7.7		391		5.3		198			50.6
Dividend	298		3.9		242		3.3		56			23.1
Total interest income	$	7,651	100.0	%	$	7,327	100.0	%	$	324		4.4	%

Interest Expense

Interest expense during the first quarter of 2005 increased $125,000 to $2,249,000 from $2,124,000 for the first quarter of 2004.  The increased expense associated with deposits is the result of both rate and volume increases from the first quarter of 2004 to the corresponding period of 2005.  During this time frame an emphasis was placed on building and retaining strong customer relationships by providing needed deposit products at a competitive rate.  This emphasis along with the current rising rate environment led to both the rate and volume increases that occurred from period to period.  Short-term borrowing costs also increased do to the 175 basis point increase in the Fed Funds rate over the past year.  This increase affected the rate paid on FHLB overnight borrowings, FHLB short-term borrowings, and the rate paid to cash management customers.  Long-term FHLB borrowing expense remained constant as there were no new long-term borrowings and a maturity of $1,400,000 at a rate of 2.02% at the end of the quarter.

Interest expense composition for the three months ended March 31, 2005 and 2004 is as follows:

	For The Three Months Ended
	March 31, 2005				March 31, 2004				Change
(In Thousands)	Amount		% Total		Amount		% Total		Amount		% Total
Deposits	$	1,194	53.1	%	$	1,135	53.4	%	$	59	5.2	%
Short-term borrowings	202		9.0		137		6.5		65		47.4
Long-term borrowings	853		37.9		852		40.1		1		0.1
Total interest expense	$	2,249	100.0	%	$	2,124	100.0	%	$	125	5.9	%

Net Interest Margin

The net interest margin (NIM) for the three months ended March 31, 2005 was 4.58% as compared to 4.48% for the corresponding period of 2004.  The increase in the NIM was the result of the yield on earning assets increasing 14 basis points (bp) to 6.39% for the three months ended March 31, 2005 as compared to 2004 offset by a 9 bp increase in interest bearing liabilities over the same period.  The increase in the yield on earning assets is attributable to a change in the mix of earning assets.  Over the time periods being compared, total average loans increased $47,759,000, while the lower yielding investment securities portfolio average balance decreased $31,228,000.  In addition, within the investment portfolio, average tax-exempt investment securities accounted for 27.3% of the portfolio for the three months ended March 31, 2005 as compared to 14.9% during the comparable period of 2004.  The NIM impact of the earning asset mix improvements and volume increase in total loans were reduced by rate increases on interest bearing liabilities.  The rates paid on deposit accounts remained relatively constant at 1.72% as

13

compared to 1.68% for the 2004 period.  Short-term borrowings, the majority of which is Federal Home Loan Bank (FHLB) advances, incurred a rate increase of 83 bp to 2.25% for the three months ended March 31, 2005.  The increase in the FHLB rate can be associated with the increase in prime rate from 4.00% during the three months ended March 31, 2004 to 5.75% at March 31, 2005.

Following is a schedule of average balances and associated yields for the three month periods ended March 31, 2005 and 2004:

AVERAGE BALANCES AND INTEREST RATES

	3/31/2005						3/31/2004
Tax-exempt loans(4)	$	1,421	$	21	6.05	%	$	1,446	$	21	5.95	%
All other loans	325,426		5,486		6.84	%	277,642		4,877		7.12	%
Total loans(1),(3)	326,847		5,507		6.83	%	279,088		4,898		7.12	%
US Treasury	101,738		1,235		4.86	%	150,007		1,768		4.71	%
State & Political(4)	48,279		892		7.39	%	30,910		592		7.67	%
Other	26,546		326		4.91	%	26,874		276		4.11	%
Total securities	176,563		2,453		5.56	%	207,791		2,636		5.08	%
Total interest-earning assets	503,410		7,961		6.39	%	486,879		7,535		6.25	%
Other assets	37,715						37,540
Total assets	$	541,125					$	524,419
Savings	$	66,930	131		0.79	%	$	68,108	140		0.83	%
Super Now deposits	53,505		107		0.81	%	42,867		54		0.51	%
Money market deposits	32,560		91		1.13	%	35,439		97		1.11	%
Time deposits	128,968		865		2.72	%	127,957		844		2.68	%
Total Deposits	281,963		1,194		1.72	%	274,371		1,135		1.68	%
Short-term borrowings	36,398		202		2.25	%	39,050		137		1.42	%
Other borrowings	75,754		853		4.57	%	74,449		852		4.64	%
Total interest bearing liabilities	394,115		$	2,249	2.31	%	387,870		$	2,124	2.22	%
Demand deposits	68,205						60,165
Other liabilities	4,200						5,050
Shareholders’ equity	74,605						71,334
	$	541,125					$	524,419
Interest rate spread					4.07	%					4.03	%
Net interest income/margin			$	5,712	4.57	%			$	5,411	4.48	%

(1).Information on this table has been calculated using average daily balance sheets to obtain average balances.

(2).Nonaccrual loans have been included with loans for the purpose of analyzing net interest earnings.

(3).Income and rates on a fully taxable equivalent basis include an adjustment for the difference between annual income from tax-exempt obligations and the taxable equivalent of such income at the standard 34% tax rate.

The following table presents the adjustment to convert net interest income to net interest income on a fully taxable equivalent basis for the periods ended March 31, 2005 and 2004.

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	For the Three Months Ended March 31,
	2005		2004
Total interest income	$	7,651	$	7,327
Total interest expense	2,249		2,124
Net interest income	$	5,402	$	5,203
Tax equivalent adjustment	310		208
Net interest income (fully taxable equivalent)	$	5,712	$	5,411

The following table sets forth the respective impact that both volume and rate changes have had on net interest income and the net interest margin for the three month periods ended March 31, 2005 and 2004:

	For the Three Months Ended March 31,
	2005 vs 2004 Increase (Decrease) Due to
(In Thousands)	Volume			Rate			Net
Interest income:
Loans	$	810		$	(201	)	$	609
Taxable investment securities	(588		)	105			(483		)
Tax-exempt investment securities	322			(22		)	300
Total interest-earning assets	544			(118		)	426
Interest expenses:
Savings deposits	(2		)	(7		)	(9		)
Super Now deposits	8			45			53
Money Market deposits	(8		)	2			(6		)
Time deposits	7			14			21
Short-term borrowings	(10		)	75			65
Long-term borrowings	15			(14		)	1
Total interest-bearing liabilities	10			115			125
Change in net interest income	$	534		$	(233	)	$	301

Provision for Loan Losses

The provision for loan losses is based upon management’s quarterly review of the loan portfolio.  The purpose of the review is to assess loan quality, identify impaired loans, analyze delinquencies, ascertain loan growth, evaluate potential charge-offs and recoveries, and assess general economic conditions in the markets served.  An external independent loan review is also

15

performed annually for the Bank.  Management remains committed to an aggressive program of problem loan identification and resolution.

The allowance is calculated by applying loss factors to outstanding loans by type, excluding loans for which a specific allowance has been determined.  Loss factors are based on management’s consideration of the nature of the portfolio segments, changes in mix and volume of the loan portfolio, and historical loan loss experience.  In addition, management considers industry standards and trends with respect to nonperforming loans and its knowledge and experience with specific lending segments.

Although management believes it uses the best information available to make such determinations and that the allowance for loan losses is adequate at March 31, 2005, future adjustments could be necessary if circumstances or economic conditions differ substantially from the assumptions used in making the initial determinations.  A downturn in the local economy, employment and delays in receiving financial information from borrowers could result in increased levels of nonperforming assets and charge-offs, increased loan loss provisions and reductions in income.  Additionally, as an integral part of the examination process, bank regulatory agencies periodically review the Bank’s loan loss allowance.  The banking agencies could require the recognition of additions to the loan loss allowance based on their judgment of information available to them at the time of their examination.

While determining the appropriate allowance level management has attributed the allowance for loan losses to various portfolio segments; however, the allowance is available for the entire portfolio as needed.

The allowance for loan losses increased from $3,338,000 at December 31, 2004 to $3,399,000 at March 31, 2005.  At March 31, 2005, the allowance for loan losses was 1.04% of total loans compared to 1.01% of total loans at December 31, 2004.  Management’s conclusion is that the allowance for loan losses is adequate to provide for probable losses inherent in its loan portfolio as of the balance sheet date.

The provision for loan losses totaled $180,000 for the three months ended March 31, 2005 as compared to $75,000 the same period in 2004.  The increase of $105,000 was the result of gross loan growth of $45,711,000, primarily in the commercial category, from March 2004 to March 2005.

An overall decrease of $382,000 was experienced in non-performing loans from December 31, 2004 to $1,343,000 on March 31, 2005 as a result of a 41% decrease of non-performing loans secured by 1-4 family residential properties.

Based upon this analysis, as well as the others noted above, senior management has concluded that the allowance for loan losses remains at a level adequate to provide for probable losses inherent in its loan portfolio.

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Non-interest Income

Total non-interest income for the quarter ended March 31, 2005 compared to the same period in 2004 increased $80,000.  Excluding net security gains, the increase from period to period was $14,000.  Insurance commissions increased as the Comprehensive Financial Group (d/b/a M Group) continued to gather new and build upon current relationships.  In addition, The M Group continues to add sales representatives to better cover and expand their foot print.  The decrease in service charge on deposit accounts is primarily the result of a decrease in insufficient fund charges.

Non-interest income composition for the three months ended March 31, 2005 and 2004 is as follows:

	For The Three Months Ended
	March 31, 2005				March 31, 2004				Change
(In Thousands)	Amount		% Total		Amount		% Total		Amount			% Total
Service charge on deposit accounts	$	455	21.5	%	$	476	23.4	%	$	(21	)	(4.4	)%
Net security gains	611		28.9		545		26.8		66			12.1
Bank owned life insurance	94		4.4		90		4.4		4			4.4
Insurance commissions	643		30.4		614		30.1		29			4.7
Other income	314		14.8		312		15.3		2			0.6
Total non-interest income	$	2,117	100.0	%	$	2,037	100.0	%	$	80		3.9	%

Non-interest Expenses

Total non-interest expenses increased $148,000 from the quarter ended March 31, 2004 as compared to the same period of 2005.  The increase in salaries and employee benefits was attributable to standard cost of living salary increases for employees.  Occupancy expenses increased do to increased utility costs, property taxes, and depreciation.  Other expenses increased primarily do to normal increases in business expenses and nonrecurring consultant fees related to employee recruitment. The decrease in furniture and equipment expenses was the result of decreased depreciation.

Non-interest expense composition for the three months ended March 31, 2005 and 2004 is as follows:

	For The Three Months Ended
	March 31, 2005				March 31, 2004				Change
(In Thousands)	Amount		% Total		Amount		% Total		Amount			% Total
Salaries and employee benefits	$	2,020	55.9	%	$	1,979	57.1	%	$	41		2.1	%
Occupancy expense, net	291		8.0		243		7.0		48			19.8
Furniture and equipment expenses	221		6.1		265		7.6		(44		)	(16.6	)
Advertising expense	94		2.6		94		2.7		—			—
Pennsylvania shares tax	139		3.8		116		3.3		23			19.8
Other expense	856		23.6		776		22.3		80			10.3
Total non-interest expense	$	3,621	100.0	%	$	3,473	100.0	%	$	148		4.3	%

Provision for Income Taxes

Income taxes decreased $16,000 for the quarter ended March 31, 2005 compared to the same period of 2004.  The effective tax rates for the quarter ended March 31, 2005 and 2004 were

17

27.0% and 27.6%, respectively.  This decreasing effective tax rate is consistent with management’s repositioning of the investment portfolio from taxable investment securities to tax-exempt investment securities.

ASSET/LIABILITY MANAGEMENT

Cash

Cash and due from other financial institutions increased $4,718,000 from $12,626,000 at December 31, 2004.  The increase was the result of an increase in the cash letter (items in process of clearing between the bank and other financial institutions).

Loans

Total gross loans decreased $1,365,000 to $323,140,000 at March 31, 2005 from December 31, 2004.  The decrease is the result of residential and commercial real estate mortgages each declining approximately $2,000,000 and an increase of real estate construction loans of $2,522,000.

The allocation of the loan portfolio, by category, as of March 31, 2005 and December 31, 2004 are presented below:

(In Thousands)	March 31 2005		December 31 2004
Commercial and agricultural	$	30,154	$	30,103
Real estate mortgage:
Residential	145,479		147,461
Commercial	121,721		123,757
Construction	10,887		8,365
Installment loans to individuals	15,959		15,915
Subtotal	324,200		325,601
Less: Net deferred loan fees	1,060		1,096
Gross loans	$	323,140	$	324,505

Investments

Total investment securities decreased $6,341,000 as the principal cash flows from the portfolio at the end of March 2005 were not immediately reinvested as investment alternatives for the current rising rate environment were discussed.  Since December 31, 2004, tax-exempt bond holdings have increased as the portfolio is managed to maintain tax equivalent yield and liquidity, reduce

18

the overall corporate effective tax rate, and to invest in communities across the Commonwealth of Pennsylvania and the country.

During the three months ended March 31, 2005, $611,000 in net security gains were recognized from the $6,563,000 in net unrealized gains at December 31, 2004 for the entire investment portfolio.  The bond portfolio incurred a net realized loss of $7,000 as the portfolio was shifted slightly in light of the current rising rate environment.  The equity portfolio had recognized gains of $618,000 during the three months ended March 31, 2005.  The gains were the result of management’s intention to diversify, increase dividend yield, or to reduce ownership in companies that management felt had reached their full potential.

The amortized cost of investment securities and their approximate fair values are as follows:

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	March 31, 2005
(In Thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for Sale (AFS)
U.S. Government and agency securities	$	96,971	$	85	$	(2,036	)	$	95,020
State and political securities	52,452		1,163		(347		)	53,268
Other debt securities	1,302		22		(52		)	1,272
Total debt securities	150,725		1,270		(2,435		)	149,560
Equity securities	24,547		4,244		(280		)	28,511
Total Investment Securities AFS	$	175,272	$	5,514	$	(2,715	)	$	178,071
Held to Maturity (HTM)
U.S. Government and agency securities	$	31	$	—	$	—		$	31
Other debt securities	278		—		(2		)	276
Total Investment Securities HTM	$	309	$	—	$	(2	)	$	307

	December 31, 2004
(In Thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Available for Sale (AFS)
U.S. Government and agency securities	$	104,248	$	207	$	(430	)	$	104,025
State and political securities	46,829		766		(527		)	47,068
Other debt securities	1,302		47		(7		)	1,342
Total debt securities	152,379		1,020		(964		)	152,435
Equity securities	25,221		6,579		(72		)	31,728
Total Investment Securities AFS	$	177,600	$	7,599	$	(1,036	)	$	184,163
Held to Maturity (HTM)
U.S. Government and agency securities	$	32	$	—	$	—		$	32
State and political securities	248		3		—			251
Other debt securities	278		—		—			278
Total Investment Securities HTM	$	558	$	3	$	—		$	561

Deposits

At March 31, 2005, total deposits were $354,301,000, a decrease of $2,535,000 from December 31, 2004.  Non time deposits decreased $6,499,000 from December 31, 2004 with half of the decrease occurring in the NOW account category.  The increase in time deposits of $3,964,000 is the result of an emphasis to obtain fixed rate customer funding, with a maturity of two to four years, ahead of future rate increases.

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Deposit balances and their changes for the periods being discussed follow:

	March 31, 2005				December 31, 2004				Change
(In Thousands)	Amount		% Total		Amount		% Total		Amount			% Total
Demand deposits	$	72,708	20.5	%	$	74,050	20.8	%	$	(1,342	)	(1.8	)%
NOW Accounts	51,831		14.6		55,211		15.5		(3,380		)	(6.1	)
Insured MMDA	31,310		8.8		32,377		9.1		(1,067		)	(3.3	)
Savings deposits	69,097		19.5		69,807		19.6		(710		)	(1.0	)
Time deposits	129,355		36.6		125,391		35.0		3,964			3.2
Total deposits	$	354,301	100.0	%	$	356,836	100.0	%	$	(2,535	)	(0.7	)%

Borrowed Funds

Total borrowed funds decreased slightly to $111,740,000 at March 31, 2005 as compared to December 31, 2004.  The decrease of $613,000 was the result of long term borrowings decreasing $1,400,000, due to maturity, offset by an increase in short-term FHLB borrowings.   Short-term borrowings are being utilized to supplement deposits in the day to day funding of the loan portfolio and normal operations.

(In Thousands)	March 31 2005		December 31 2004
Short-term borrowings:
FHLB repurchase agreements	$	23,740	$	22,630
Securities sold under agreement to repurchase	13,522		13,845
Total short-term borrowings	37,262		36,475
Long-term borrowings, FHLB	74,478		75,878
Total borrowed funds	$	111,740	$	112,353

Capital

The adequacy of the Company’s capital is reviewed on an ongoing basis with reference to the size, composition and quality of the Company’s resources and regulatory guidelines.  Management seeks to maintain a level of capital sufficient to support existing assets and anticipated asset growth, maintain favorable access to capital markets and preserve high quality credit ratings.

Bank holding companies are required to comply with the Federal Reserve Board’s risk-based capital guidelines.  The risk-based capital rules are designed to make regulatory capital requirements more sensitive to differences in risk profiles among banks and bank holding companies and to minimize disincentives for holding liquid assets.  Specifically, each is required to maintain certain minimum dollar amounts and ratios of Total risk-based, Tier I risk-based and Tier I leverage capital requirements. In addition to the capital requirements, the Federal Deposit Insurance Corporation Improvements Act (FDICIA) established five capital categories ranging from “well capitalized” to “critically undercapitalized.” To be classified as “well capitalized”,

21

Total risk-based, Tier I risked-based and Tier I leverage capital ratios must be at least 10%, 6%, and 5%, respectively.

Capital ratios as of March 31, 2005 and 2004 were as follows:

	2005				2004
(In Thousands)	Amount		Ratio		Amount		Ratio
Total Capital
(to Risk-weighted Assets)
Actual	$	72,991	22.0	%	$	68,069	23.3	%
For Capital Adequacy Purposes	26,523		8.0		23,385		8.0
To Be Well Capitalized	33,154		10.0		29,232		10.0
Tier I Capital
(to Risk-weighted Assets)
Actual	$	67,809	20.5	%	$	61,981	21.2	%
For Capital Adequacy Purposes	13,261		4.0		11,693		4.0
To Be Well Capitalized	19,892		6.0		17,539		6.0
Tier I Capital
(to Average Assets)
Actual	$	67,809	12.8	%	$	61,981	12.1	%
For Capital Adequacy Purposes	21,231		4.0		20,482		4.0
To Be Well Capitalized	26,538		5.0		27,153		5.0

Liquidity and Interest Rate Sensitivity

The asset/liability committee addresses the liquidity needs of the Bank to see that sufficient funds are available to meet credit demands and deposit withdrawals as well as to the placement of available funds in the investment portfolio.  In assessing liquidity requirements, equal consideration is given to the current position as well as the future outlook.

The following liquidity measures are monitored and kept within the limits cited.

1.  Net Loans to Total Assets,  70% maximum

2.  Net Loans to Total Deposits, 92.5% maximum

3.  Net Loans to Core Deposits, 100% maximum

4.  Investments to Total Assets, 40% maximum

5.  Investments to Total Deposits, 50% maximum

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6.  Total Liquid Assets to Total Assets, 25% minimum

7.  Total Liquid Assets to Total Liabilities, 25% minimum

8.Net Core Funding Dependence, 35% maximum

Fundamental objectives of the Company’s asset/liability management process are to maintain adequate liquidity while minimizing interest rate risk.  The maintenance of adequate liquidity provides the Company with the ability to meet its financial obligations to depositors, loan customers and shareholders.  Additionally, it provides funds for normal operating expenditures and business opportunities as they arise.  The objective of interest rate sensitivity management is to increase net interest income by managing interest sensitive assets and liabilities in such a way that they can be repriced in response to changes in market interest rates.

The Bank, like other financial institutions, must have sufficient funds available to meet its liquidity needs for deposit withdrawals, loan commitments, and expenses.   In order to control cash flow, the Bank estimates future flows of cash from deposits, loan payments, and investment security payments.  The primary sources of funds are deposits, principal and interest payments on loans and investment securities, as well as Federal Home Loan Bank borrowings.  Funds generated are used principally to fund loans and purchase investment securities.  Management believes the Company has adequate resources to meet its normal funding requirements.

Management monitors the Company’s liquidity on both a long and short-term basis, thereby providing management necessary information to react to current balance sheet trends.  Cash flow needs are assessed and sources of funds are determined.  Funding strategies consider both customer needs and economical cost.  Both short and long-term funding needs are addressed by maturities and sales of available for sale investment securities, loan repayments and maturities, and liquidating money market investments such as federal funds sold.  The use of these resources, in conjunction with access to credit provides core ingredients to satisfy depositor, borrower, and creditor needs.

Management monitors and determines the desirable level of liquidity.  Consideration is given to loan demand, investment opportunities, deposit pricing and growth potential as well as the current cost of borrowing funds.  The Company has a current borrowing capacity at the Federal Home Loan Bank of $237,657,000.  In addition to this credit arrangement, the Company has additional lines of credit with correspondent banks of $10,500,000. Management believes that it has sufficient liquidity to satisfy estimated short-term and long-term funding needs.  Federal Home Loan Bank advances totaled $98,218,000 as of March 31, 2005.

Interest rate sensitivity, which is closely related to liquidity management, is a function of the repricing characteristics of the Company’s portfolio of assets and liabilities.  Asset/liability management strives to match maturities and rates between loan and investment security assets with the deposit liabilities and borrowings that fund them.  Successful asset/liability management results in a balance sheet structure which can cope effectively with market rate fluctuations. The matching process is affected by segmenting both assets and liabilities into future time periods

23

(usually 12 months, or less) based upon when repricing can be effected.  Repriceable assets are subtracted from repriceable liabilities, for a specific time period to determine the “gap”, or difference. Once known, the gap is managed based on predictions about future market interest rates.  Intentional mismatching, or gapping, can enhance net interest income if market rates move as predicted.  However, if market rates behave in a manner contrary to predictions, net interest income will suffer.  Gaps, therefore, contain an element of risk and must be prudently managed.  In addition to gap management, the Company has an asset/liability management policy which incorporates a market value at risk calculation which is used to determine the effects of interest rate movements on shareholders’ equity and a simulation analysis to monitor the effects of interest rate changes on the Company’s balance sheets.

There have been no substantial changes in the Company’s GAP analyses or simulation analyses compared to the information provided in the Company’s Form 10-K for the period ended December 31, 2004.

Generally, management believes the Company is well positioned to respond expeditiously when the market interest rate outlook changes.

Inflation

The asset and liability structure of a financial institution is primarily monetary in nature.  Therefore, interest rates rather than inflation have a more significant impact on the Company’s performance.  Interest rates are not always affected in the same direction or magnitude as prices of other goods and services, but are reflective of fiscal policy initiatives or economic factors which are not measured by a price index.

In reference to the attached financial statements, all adjustments are of a normal recurring nature pursuant to Rule 10-01 (b) (8) of Regulation S-X.

Item 3.  Quantitative and Qualitative Disclosure About Market Risk

Market risk for the Company is comprised primarily from interest rate risk exposure and liquidity risk.  Interest rate risk and liquidity risk management is performed at the Bank level as well as the Company level.  The Company’s interest rate sensitivity is monitored by management through selected interest rate risk measures produced by an independent third party.  There have been no substantial changes in the Company’s GAP analyses or simulation analyses compared to the information provided in the Company’s SEC 10-K for the period ended December 31, 2004.  Additional information and details are provided in the Liquidity and Interest Rate Sensitivity section of Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Generally, management believes the Company is well positioned to respond in a timely manner when the market interest rate outlook changes.

24

Item 4.  Controls and Procedures

An analysis was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Principal Accounting Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s Chief Executive Officer and Principal Accounting Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2005. There has been no change in the Company’s internal control over financial reporting that occurred during the quarter ended March 31, 2005, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

Part II.  OTHER INFORMATION

Item 1.  Legal Proceedings

None.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

The Company announced a repurchase program on August 10, 2000 which was approved by the Board of Directors on August 8, 2000 for the repurchase of 171,600 shares which will expire on August 8, 2005.  There were no repurchases of the Company’s common stock during the quarter ended March 31, 2005.

Item 3.  Defaults Upon Senior Securities

None

Item 4.  Submission of Matters to a Vote of Security Holders

None

Item 5.  Other Information

None

Item 6.  Exhibits

(3) (i)	Articles of Incorporation of the Registrant, as presently in effect (incorporated by reference to Exhibit 3.1 of the Registrant’s Registration Statement on Form S-4, No. 333-65821).
(3) (ii)	Bylaws of the Registrant as presently in effect (incorporated by reference to Exhibit 3.2 of the Registrant’s Registration Statement on Form S-4, No. 333-65821).
(31) (i)	Rule 13a-14(a) Certification of Chief Executive Officer
(31) (ii)	Rule 13a-14(a) Certification of Principal Accounting Officer
(32) (i)	Certification of Chief Executive Officer Section 1350
(32) (ii)	Certification of Principal Accounting Officer Section 1350

25

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PENNS WOODS BANCORP, INC.
(Registrant)
Date: May 10, 2005	/s/ Ronald A. Walko
	Ronald A. Walko, President and Chief Executive Officer
Date: May 10, 2005	/s/ Brian L. Knepp
	Brian L. Knepp, Vice President of Finance

26

EXHIBIT INDEX

Exhibit 31(i)	Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Executive Officer
Exhibit 31(ii)	Rule 13a-14(a)/Rule 15d-14(a) Certification of Principal Accounting Officer
Exhibit 32(i)	Section 1350 Certification of Chief Executive Officer
Exhibit 32(ii)	Section 1350 Certification of Principal Accounting Officer

27

EX-31.I

Exhibit 31(i)

Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Executive Officer

I, Ronald A. Walko, Chief Executive Officer of Penns Woods Bancorp, Inc. (the “Company”), certify that:

1.I have reviewed this quarterly report on Form 10-Q of the Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), and internal control over financial reporting(as defined in Exchange Act Rules 13a-15(f) and 15d(f) for the Company and have:

(a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of the financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s first fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting;

5.The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of Company’s Board of Directors:

(a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

(b)any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

6.The Company’s other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 10, 2005	/s/ Ronald A. Walko
	Chief Executive Officer

EX-31.II

Exhibit 31(ii)

Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Executive Officer

I, Brian L. Knepp, Principal Accounting Officer of Penns Woods Bancorp, Inc. (the “Company”), certify that:

1.I have reviewed this quarterly report on Form 10-Q of the Company;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e), and internal control over financial reporting(as defined in Exchange Act Rules 13a-15(f) and 15d(f) for the Company and have:

a.designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of the financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c.evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s first fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting;

5.The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of Company’s Board of Directors:

a.all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and

b.any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting.

6.The Company’s other certifying officer and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 10, 2005	/s/ Brian L. Knepp
	Principle Accounting Officer

EX-32.I

Exhibit 32(i)

CERTIFICATION SECTION 1350

In connection with the Quarterly Report of Penns Woods Bancorp, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ronald A. Walko, Chief Executive Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Ronald A. Walko

Ronald A. Walko

Chief Executive Officer

May 10, 2005

EX-32.II

Exhibit 32(ii)

CERTIFICATION SECTION 1350

In connection with the Quarterly Report of Penns Woods Bancorp, Inc. (the “Company”) on Form 10-Q for the period ending March 31, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Brian L. Knepp, Vice President of Finance, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Brian L. Knepp

Brian L. Knepp

Vice President of Finance and Principal Accounting Officer

May 10, 2005