Penns Woods Bancorp, Inc. Reports First Quarter 2023 Earnings


WILLIAMSPORT, Pa., April 28, 2023 (GLOBE NEWSWIRE) -- Penns Woods Bancorp, Inc. (NASDAQ: PWOD)

Penns Woods Bancorp, Inc. achieved net income of $4.7 million for the three months ended March 31, 2023, resulting in basic earnings per share of $0.66 and diluted earnings per share of $0.64.

Highlights

  • Net income, as reported under GAAP, for the three months ended March 31, 2023 was $4.7 million, compared to $3.4 million for the same period of 2022. Results for the three months ended March 31, 2023 compared to 2022 were impacted by a decrease in after-tax securities losses of $16,000 (from a loss of $48,000 to a loss of $32,000) for the period. In addition, bank-owned life insurance income increased due to a gain on death benefit of $380,000 during the three months ended March 31, 2023, while an after-tax loss of $201,000 related to a branch closure negatively impacted the three months ended March 31, 2022.
  • The provision for credit losses decreased $79,000 for the three months ended March 31, 2023 to a provision of $71,000 compared to a provision of $150,000 for the 2022 period. The decrease in the provision for credit losses was primarily due to improving loan portfolio credit metrics and a minimal level of net loan charge-offs.
  • Basic earnings per share for the three months ended March 31, 2023 was $0.66 and diluted earnings per share was $0.64. Basic and diluted earnings per share for the three months ended March 31, 2022 were $0.49.
  • Annualized return on average assets was 0.92% for three months ended March 31, 2023, compared to 0.72% for the corresponding period of 2022.
  • Annualized return on average equity was 11.12% for the three months ended March 31, 2023, compared to 8.17% for the corresponding period of 2022.

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 $4.7 million for the three months ended March 31, 2023 compared to $3.5 million for the same period of 2022. Core earnings per share for the three months ended March 31, 2023 was $0.66 basic and $0.64 diluted, compared to $0.50 basic and diluted core earnings per share for the same period of 2022. Annualized core return on average assets and core return on average equity were 0.93% and 11.19% for the three months ended March 31, 2023, compared to 0.73% and 8.28% for the corresponding period of 2022. 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, 2023 was 3.10%, compared to 2.93% for the corresponding period of 2022. The increase in the net interest margin for the three month period was driven by an increase in earning asset yield of 105 basis points ("bps") as the yield on earning assets increased throughout 2022 and during 2023 due to the rate increases enacted by the Federal Open Market Committee ("FOMC"). The three month period ended March 31, 2023 was impacted by an increase of 93 bps in the yield earned on the securities portfolio as legacy securities matured with the funds reinvested at higher rates. The FOMC rate increases during 2022 and 2023 contributed to the rate paid on interest-bearing deposits increasing 97 bps for the three months ended March 31, 2023 compared to the corresponding period of 2022. Short-term borrowings increased in volume and rate paid as this funding source was utilized to provide funding for the growth in the loan portfolio resulting in an increase of $1.4 million in expense for the three months ended March 31, 2023 compared to the same period of 2022.

Assets

Total assets increased to $2.1 billion at March 31, 2023, an increase of $148.3 million compared to March 31, 2022. Cash and cash equivalents decreased $177.2 million as interest-bearing accounts in other financial institutions decreased $133.1 million and fed funds sold decreased $50.0 million as excess liquidity was primarily utilized to fund the growth in the loan portfolio. Net loans increased $296.3 million to $1.7 billion at March 31, 2023 compared to March 31, 2022, as an emphasis was placed on commercial loan growth coupled with a significant increase in indirect auto lending. The investment portfolio increased $26.3 million from March 31, 2022 to March 31, 2023 as a portion of the excess cash liquidity was invested primarily into short and medium-term municipal bonds with a maturity of 10 years or less.

Non-performing Loans

The ratio of non-performing loans to total loans ratio decreased to 0.28% at March 31, 2023 from 0.38% at March 31, 2022, as non-performing loans decreased to $4.8 million at March 31, 2023 from $5.3 million at March 31, 2022. 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 been classified as impaired and have a specific allocation recorded within the allowance for loan losses. Net loan charge-offs of $123,000 for the three months ended March 31, 2023 impacted the allowance for loan losses, which was 0.69% of total loans at March 31, 2023 compared to 1.00% at March 31, 2022 (prior to the adoption of CECL).

Deposits

Deposits increased $26.4 million to $1.6 billion at March 31, 2023 compared to March 31, 2022. Noninterest-bearing deposits decreased $11.8 million to $502.4 million at March 31, 2023 compared to March 31, 2022. Core deposits declined slightly as deposits shifted from core deposit accounts into time deposits as market rates increased due to the FOMC rate increases and increased competition for deposits. Core deposit gathering efforts remained focused on increasing the utilization of electronic (internet and mobile) deposit banking among our customers. Utilization of internet and mobile banking has increased due to these efforts coupled with a change in consumer behavior over the past several years. Interest-bearing deposits increased $38.2 million from March 31, 2022 to March 31, 2023 primarily due to increased utilization of brokered deposits of $28.9 million as this funding source was utilized to supplement the funding of the loan portfolio growth, while reducing the need to draw upon available borrowing lines. A campaign to attract time deposits with a maturity of ten to twenty-four months was started during the latter part of 2022 and has continued during the first three months of 2023.

Shareholders’ Equity

Shareholders’ equity increased $5.5 million to $174.0 million at March 31, 2023 compared to March 31, 2022. Accumulated other comprehensive loss of $12.0 million at March 31, 2023 increased from a loss of $6.5 million at March 31, 2022 as a result of a $7.9 million net unrealized loss on available for sale securities at March 31, 2023 compared to an unrealized loss of $3.1 million at March 31, 2022 coupled with an increase in loss of $638,000 in the defined benefit plan obligation. The current level of shareholders’ equity equates to a book value per share of $24.64 at March 31, 2023 compared to $23.81 at March 31, 2022, and an equity to asset ratio of 8.42% at March 31, 2023 and 8.79% at March 31, 2022. Dividends declared for the three months ended March 31, 2023 and 2022 were $0.32 per share.

Penns Woods Bancorp, Inc. is the parent company of Jersey Shore State Bank, which operates sixteen branch offices providing financial services in Lycoming, Clinton, Centre, Montour, Union, and Blair Counties, and Luzerne Bank, which operates eight branch offices providing financial services in Luzerne County, and United Insurance Solutions, LLC, which offers insurance products. Investment and insurance products are offered through Jersey Shore State Bank’s subsidiary, The M Group, Inc. D/B/A The Comprehensive Financial Group.

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; 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, 2022.

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
 570-322-1111e-mail: pwod@pwod.com


PENNS WOODS BANCORP, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)

  March 31,
(In Thousands, Except Share and Per Share Data)  2023   2022  % Change
ASSETS:       
Noninterest-bearing balances $31,701  $25,717  23.27%
Interest-bearing balances in other financial institutions  9,945   143,086  (93.05)%
Federal funds sold     50,000  (100.00)%
Total cash and cash equivalents  41,646   218,803  (80.97)%
        
Investment debt securities, available for sale, at fair value  197,190   175,674  12.25%
Investment equity securities, at fair value  1,163   1,229  (5.37)%
Restricted investment in bank stock, at fair value  18,656   13,795  35.24%
Loans held for sale  1,705   1,360  25.37%
Loans  1,700,023   1,405,966  20.91%
Allowance for loan losses  (11,734)  (14,023) (16.32)%
Loans, net  1,688,289   1,391,943  21.29%
Premises and equipment, net  31,602   33,259  (4.98)%
Accrued interest receivable  9,357   8,129  15.11%
Bank-owned life insurance  33,359   33,953  (1.75)%
Investment in limited partnerships  8,529   4,600  85.41%
Goodwill  16,450   17,104  (3.82)%
Intangibles  292   437  (33.18)%
Operating lease right of use asset  2,635   2,795  (5.72)%
Deferred tax asset  5,741   4,569  25.65%
Other assets  8,529   9,159  (6.88)%
TOTAL ASSETS $2,065,143  $1,916,809  7.74%
        
LIABILITIES:       
Interest-bearing deposits $1,136,483  $1,098,265  3.48%
Noninterest-bearing deposits  502,352   514,130  (2.29)%
Total deposits  1,638,835   1,612,395  1.64%
        
Short-term borrowings  97,102   6,634  1,363.70%
Long-term borrowings  132,738   112,918  17.55%
Accrued interest payable  1,172   471  148.83%
Operating lease liability  2,690   2,847  (5.51)%
Other liabilities  18,636   13,117  42.08%
TOTAL LIABILITIES  1,891,173   1,748,382  8.17%
        
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; 7,570,086 and 7,554,567 shares issued; 7,059,861 and 7,074,342 shares outstanding  42,057   41,969  0.21%
Additional paid-in capital  54,572   54,191  0.70%
Retained earnings  102,194   90,928  12.39%
Accumulated other comprehensive loss:       
Net unrealized loss on available for sale securities  (7,928)  (3,074) (157.91)%
Defined benefit plan  (4,110)  (3,472) (18.38)%
Treasury stock at cost, 510,225 and 480,225  (12,815)  (12,115) 5.78%
TOTAL SHAREHOLDERS' EQUITY  173,970   168,427  3.29%
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $2,065,143  $1,916,809  7.74%


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

  Three Months Ended March 31,
(In Thousands, Except Share and Per Share Data)  2023   2022  % Change
INTEREST AND DIVIDEND INCOME:      
Loans including fees $18,005  $13,038  38.10%
Investment securities:      
Taxable  1,218   737  65.26%
Tax-exempt  178   164  8.54%
Dividend and other interest income  463   336  37.80%
TOTAL INTEREST AND DIVIDEND INCOME  19,864   14,275  39.15%
       
INTEREST EXPENSE:      
Deposits  3,372   788  327.92%
Short-term borrowings  1,440   1  n/m 
Long-term borrowings  754   633  19.12%
TOTAL INTEREST EXPENSE  5,566   1,422  291.42%
       
NET INTEREST INCOME  14,298   12,853  11.24%
       
PROVISION FOR CREDIT LOSSES  71   150  (52.67)%
       
NET INTEREST INCOME AFTER (RECOVERY) PROVISION FOR CREDIT LOSSES  14,227   12,703  12.00%
       
NON-INTEREST INCOME:      
Service charges  496   495  0.20%
Debt securities losses, available for sale  (61)  (2) (2,950.00)%
Net equity securities gains (losses}  21   (59) 135.59%
Bank-owned life insurance  556   170  227.06%
Gain on sale of loans  231   345  (33.04)%
Insurance commissions  165   170  (2.94)%
Brokerage commissions  165   200  (17.50)%
Loan broker income  170   541  (68.58)%
Debit card income  335   345  (2.90)%
Other  179   207  (13.53)%
TOTAL NON-INTEREST INCOME  2,257   2,412  (6.43)%
       
NON-INTEREST EXPENSE:      
Salaries and employee benefits  6,176   6,264  (1.40)%
Occupancy  866   910  (4.84)%
Furniture and equipment  846   892  (5.16)%
Software amortization  183   253  (27.67)%
Pennsylvania shares tax  248   389  (36.25)%
Professional fees  688   538  27.88%
Federal Deposit Insurance Corporation deposit insurance  245   202  21.29%
Marketing  155   64  142.19%
Intangible amortization  35   43  (18.60)%
Other  1,456   1,452  0.28%
TOTAL NON-INTEREST EXPENSE  10,898   11,007  (0.99)%
INCOME BEFORE INCOME TAX PROVISION  5,586   4,108  35.98%
INCOME TAX PROVISION  928   676  37.28%
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS' $4,658  $3,432  35.72%
EARNINGS PER SHARE - BASIC $0.66  $0.49  34.69%
EARNINGS PER SHARE - DILUTED $0.64  $0.49  30.61%
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC  7,058,397   7,072,575  (0.20)%
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED  7,334,197   7,072,575  3.70%


PENNS WOODS BANCORP, INC.
AVERAGE BALANCES AND INTEREST RATES
(UNAUDITED)

  Three Months Ended
  March 31, 2023 March 31, 2022
(Dollars in Thousands) Average
Balance (1)
 Interest Average
Rate
 Average
Balance (1)
 Interest Average
Rate
ASSETS:            
Tax-exempt loans (3) $64,703  $448  2.81% $47,974  $308  2.60%
All other loans  1,601,105   17,651  4.47%  1,351,414   12,795  3.84%
Total loans (2)  1,665,808   18,099  4.41%  1,399,388   13,103  3.80%
             
Federal funds sold       n/a   50,000   93  0.75%
             
Taxable securities  181,421   1,579  3.53%  144,438   920  2.58%
Tax-exempt securities (3)  33,565   225  2.72%  40,981   208  2.06%
Total securities  214,986   1,804  3.40%  185,419   1,128  2.47%
             
Interest-bearing deposits  7,031   102  5.88%  157,541   60  0.15%
             
Total interest-earning assets  1,887,825   20,005  4.30%  1,792,348   14,384  3.25%
             
Other assets  135,276       127,421     
             
TOTAL ASSETS $2,023,101      $1,919,769     
             
LIABILITIES AND SHAREHOLDERS’ EQUITY:            
Savings $243,302   120  0.20% $240,953   22  0.04%
Super Now deposits  366,424   939  1.04%  370,895   195  0.21%
Money market deposits  289,734   1,280  1.79%  298,820   186  0.25%
Time deposits  188,476   1,033  2.22%  190,819   385  0.82%
Total interest-bearing deposits  1,087,936   3,372  1.26%  1,101,487   788  0.29%
             
Short-term borrowings  121,754   1,440  4.80%  5,194   1  0.08%
Long-term borrowings  119,267   754  2.56%  115,267   633  2.23%
Total borrowings  241,021   2,194  3.69%  120,461   634  2.13%
             
Total interest-bearing liabilities  1,328,957   5,566  1.70%  1,221,948   1,422  0.47%
             
Demand deposits  498,180       506,348     
Other liabilities  28,367       23,357     
Shareholders’ equity  167,597       168,116     
             
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY $2,023,101      $1,919,769     
Interest rate spread (3)     2.60%     2.78%
Net interest income/margin (3)   $14,439  3.10%   $12,962  2.93%

1. Information on this table has been calculated using average daily balance sheets to obtain average balances.
2. Non-accrual loans have been included with loans for the purpose of analyzing net interest earnings.
3. Income and rates on 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 tax rate of 21%.


  Three Months Ended March 31,
   2023   2022 
Total interest income $19,864  $14,275 
Total interest expense  5,566   1,422 
Net interest income  14,298   12,853 
Tax equivalent adjustment  141   109 
Net interest income (fully taxable equivalent) (non-GAAP) $14,439  $12,962 


(Dollars in Thousands, Except Share and Per Share Data, Unaudited) Quarter Ended
  3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022
Operating Data          
Net income $4,658  $4,509  $5,250  $4,231  $3,432 
Net interest income  14,298   15,548   15,532   13,847   12,853 
Provision for credit losses  71   575   855   330   150 
Net security losses  (40)  (39)  (211)  (54)  (61)
Non-interest income, excluding net security losses  2,297   2,120   2,294   2,191   2,473 
Non-interest expense  10,898   11,251   10,320   10,420   11,007 
           
Performance Statistics          
Net interest margin  3.10%  3.42%  3.47%  3.12%  2.93%
Annualized return on average assets  0.92%  0.92%  1.09%  0.88%  0.72%
Annualized return on average equity  11.12%  10.92%  12.61%  10.15%  8.17%
Annualized net loan charge-offs (recoveries) to average loans  0.03%  0.04%  0.01%  (0.01)%  0.09%
Net charge-offs (recoveries)  123   149   37   (40)  303 
Efficiency ratio  65.46%  59.79%  57.70%  64.72%  71.53%
           
Per Share Data          
Basic earnings per share $0.66  $0.64  $0.74  $0.60  $0.49 
Diluted earnings per share  0.64   0.64   0.74   0.60   0.49 
Dividend declared per share  0.32   0.32   0.32   0.32   0.32 
Book value  24.64   23.76   23.32   23.56   23.81 
Common stock price:          
High  27.77   26.89   24.29   24.35   24.67 
Low  21.90   23.15   22.02   22.34   23.64 
Close  23.10   26.62   22.91   23.09   24.43 
Weighted average common shares:          
Basic  7,058   7,055   7,051   7,059   7,073 
Fully Diluted  7,334   7,055   7,051   7,059   7,073 
End-of-period common shares:          
Issued  7,570   7,567   7,563   7,559   7,555 
Treasury  (510)  (510)  (510)  (510)  (480)


(Dollars in Thousands, Except Share and Per Share Data, Unaudited) Quarter Ended
  3/31/2023 12/31/2022 9/30/2022 6/30/2022 3/31/2022
Financial Condition Data:          
General          
Total assets $2,065,143  $2,000,080  $1,905,116  $1,891,806  $1,916,809 
Loans, net  1,688,289   1,624,094   1,545,489   1,474,739   1,391,943 
Goodwill  16,450   16,450   17,104   17,104   17,104 
Intangibles  292   327   361   396   437 
Total deposits  1,638,835   1,556,460   1,590,415   1,589,579   1,612,395 
Noninterest-bearing  502,352   519,063   537,403   524,288   514,130 
Savings  239,526   247,952   249,532   249,057   245,661 
NOW  363,548   372,574   392,140   353,102   379,838 
Money Market  300,273   270,589   268,532   309,453   299,166 
Time Deposits  191,203   137,949   137,348   145,714   160,592 
Brokered Deposits  41,933   8,333   5,460   7,965   13,008 
Total interest-bearing deposits  1,136,483   1,037,397   1,053,012   1,065,291   1,098,265 
           
Core deposits*  1,405,699   1,410,178   1,447,607   1,435,900   1,438,795 
Shareholders’ equity  173,970   167,665   164,489   166,054   168,427 
           
Asset Quality          
Non-performing loans $4,766  $4,890  $5,743  $5,100  $5,281 
Non-performing loans to total assets  0.23%  0.24%  0.30%  0.27%  0.28%
Allowance for loan losses  11,734   15,637   15,211   14,393   14,023 
Allowance for loan losses to total loans  0.69%  0.95%  0.97%  0.97%  1.00%
Allowance for loan losses to non-performing loans  246.20%  319.78%  264.86%  282.22%  265.54%
Non-performing loans to total loans  0.28%  0.30%  0.37%  0.34%  0.38%
           
Capitalization          
Shareholders’ equity to total assets  8.42%  8.40%  8.63%  8.78%  8.79%

* Core deposits are defined as total deposits less time deposits.


Reconciliation of GAAP and Non-GAAP Financial Measures
(UNAUDITED)

  Three Months Ended March 31,
(Dollars in Thousands, Except Per Share Data)  2023   2022 
GAAP net income $4,658  $3,432 
Net securities losses, net of tax  32   48 
Non-GAAP core earnings $4,690  $3,480 
     
  Three Months Ended March 31,
   2023   2022 
Return on average assets (ROA)  0.92%  0.72%
Net securities losses, net of tax  0.01%  0.01%
Non-GAAP core ROA  0.93%  0.73%
     
  Three Months Ended March 31,
   2023   2022 
Return on average equity (ROE)  11.12%  8.17%
Net securities losses, net of tax  0.07%  0.11%
Non-GAAP core ROE  11.19%  8.28%
     
  Three Months Ended March 31,
   2023   2022 
Basic earnings per share (EPS) $0.66  $0.49 
Net securities losses, net of tax     0.01 
Non-GAAP basic core EPS $0.66  $0.50 
   
  Three Months Ended March 31,
   2023   2022 
Diluted EPS $0.64  $0.49 
Net securities losses, net of tax     0.01 
Non-GAAP diluted core EPS $0.64  $0.50