PWOD Penns Woods Bancorp Inc

Penns Woods Bancorp, Inc. (NASDAQ:PWOD) today reported net income for the three months ended March 31, 2007 of $2,281,000 compared to $2,455,000 for the same period of 2006. Basic and dilutive earnings per share for the three months ended March 31, 2007 were $0.59 as compared to $0.62 basic and dilutive for the three months ended March 31, 2006. Return on average assets and return on average equity were 1.56% and 12.13% for the three months ended March 31, 2007 as compared to 1.72% and 13.24% for the corresponding period of 2006. Net income from core operations (�operating earnings�), which excludes net security gains, amounted to $2,066,000 for the three months ended March 31, 2007 as compared to operating earnings of $2,086,000 for the same period of 2006. Operating earnings provided $0.53 per share basic and dilutive for each of the three month periods ended March 31, 2007 and 2006, respectively. Comparatively, earnings in 2007 have been impacted by a decline in the net interest margin, increased operating costs due in part to the opening of our Montoursville branch in August 2006, and by operational growth that occurred through out 2006. The net interest margin for the three months ended March 31, 2007 was 3.95% compared to 4.08% for the corresponding period of 2006. The decrease in the net interest margin was due to the cost of interest bearing liabilities increasing at approximately one and a half times the rate of the increase in the yield on earning assets. The increase in the cost of interest bearing liabilities was driven primarily by the Federal Open Market Committee rate increases during 2006 totaling 100 basis points (�bp�), which led to the cost of time deposits and short-term borrowings increasing 98 bp and 84 bp, respectively, for the three months ended March 31, 2007 as compared to the same period of 2006. �2007 is emerging as another challenging year due to the continued flat to inverted yield curve, continued margin compression, and increased competition ranging from banks to brokerage houses. As is our philosophy, we will tackle each challenge head on while following the Penns Woods way of doing business, great customer service and continued strong credit quality. Customer service will be improved during the month of May at our Main Street, Jersey Shore branch as the drive-thru is expanded, retooled, and a drive-up ATM is added to the site. Our strategic decision to not compromise our credit standards in order to increase loans outstanding has led to nonperforming loans to total loans of 0.28% at March 31, 2007 and net loan charge-offs to average loans of 0.03% for the three month period. Due to the low level of nonperforming loans and charge-offs we were able to reduce our provision for loan losses to $40,000 for the three months ended March 31, 2007 as compared to $198,000 for the same period of 2006. We have also utilized short-term certificates of deposit and brokered deposits to provide the funding necessary to reduce the amount of short-term borrowings on the balance sheet. In addition we continue to utilize our asset liability tools to maintain and enhance the yield on earning assets and to limit the effect of rate pressures on the cost of interest-bearing liabilities. This has led to a small realignment in the investment portfolio, replacement of long-term borrowings during the first quarter, and the acquisition of approximately $20 million in local government entity funds during the month of April. In addition, the time deposits acquired during 2006 as part of the Montoursville branch grand opening and the Atherton Street, State College, branch one year anniversary are now beginning to mature and we expect them to roll to a lower interest rate,� commented Ronald A. Walko, President and Chief Executive Officer of Penns Woods Bancorp, Inc. Total assets increased $7,194,000 to $586,591,000 at March 31, 2007 as compared to March 31, 2006. Continued emphasis on originating quality loans has led to net growth in the loan portfolio of $11,195,000, or 3.3%, since March 31, 2006. The majority of the loan growth has occurred in the commercial real estate portion of the portfolio. The available for sale investment portfolio was strategically reduced $3,362,000 as the cash flow from the portfolio assisted in meeting the funding needs of new higher yielding commercial loans. Total deposits increased 4.8% to $384,849,000 at March 31, 2007 as compared to March 31, 2006, as relationship based deposit products introduced in 2006 gained footing, short-term certificates of deposit were gathered, and brokered deposits were utilized. The funding generated by the deposit gathering initiatives were utilized to assist in funding the loan portfolio and resulted in total borrowings decreasing $9,721,000 from March 31, 2006 to March 31, 2007. Shareholders� equity increased $367,000 to $74,182,000 at March 31, 2007 as net income outpaced dividends paid, accumulated comprehensive income decreased $359,000, and $1,977,000 in treasury stock was strategically purchased as part of the previously announced stock buyback plan. The decrease in accumulated comprehensive income is the result of an increase in market value, or net unrealized gains, of the investment portfolio at March 31, 2007 as compared to March 31, 2006, offset by the net excess of the projected benefit obligation over the market value of the plan assets of the defined benefit pension plan. The current level of shareholders� equity equates to a book value per share of $19.06 at March 31, 2007 as compared to $18.73 at March 31, 2006 and equity to asset ratio of 12.65% at March 31, 2007. During the three months ended March 31, 2007 cash dividends of $0.44 per share were paid to shareholders. The dividends represented a 5% increase or $0.02 per share over the dividends paid during the comparable period of 2006. �We remain committed to building shareholder value by providing a healthy dividend yield in excess of four percent and by conducting stock repurchases on the open market. The dividend paid during 2007 not only represented a 5% increase over 2006, but also met our continued objective to provide a cash dividend resulting in a return exceeding four percent. During the first three months of 2007 we purchased 10,030 shares on the open market as part of our stock repurchase program. The strength of our earnings has allowed us to continue and maintain these programs,� commented Mr. Walko. The range of closing prices for Penns Woods Bancorp, Inc. stock was between $35.00 and $37.75 during the three months ended March 31, 2007. Penns Woods Bancorp, Inc. is the parent company of Jersey Shore State Bank, which operates thirteen branch offices providing financial services in Lycoming, Clinton, and Centre Counties. Investment and insurance products are offered through the 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. Because certain of these 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. Previous press releases and additional information can be obtained from the Company�s website at www.jssb.com. THIS INFORMATION IS SUBJECT TO YEAR-END AUDIT ADJUSTMENT PENNS WOODS BANCORP, INC. CONSOLIDATED BALANCE SHEET (UNAUDITED) � (In Thousands, Except Share Data) March 31, 2007� 2006� % Change� � ASSETS Noninterest-bearing balances $ 13,237� $ 14,858� -10.9% Interest-bearing deposits in other financial institutions 18� 24� -25.0% Total cash and cash equivalents 13,255� 14,882� -10.9% � Investment securities, available for sale, at fair value 184,063� 187,425� -1.8% Investment securities held to maturity (fair value of $287 and $284) 284� 280� 1.4% Loans held for sale 2,996� 2,925� 2.4% Loans 357,574� 346,012� 3.3% Less: Allowance for loan losses 4,201� 3,834� 9.6% Loans, net 353,373� 342,178� 3.3% Premises and equipment, net 6,742� 6,531� 3.2% Accrued interest receivable 2,832� 2,610� 8.5% Bank-owned life insurance 11,786� 10,806� 9.1% Investment in limited partnerships 4,808� 4,960� -3.1% Goodwill 3,032� 3,032� 0.0% Other assets 3,420� 3,768� -9.2% TOTAL ASSETS $ 586,591� $ 579,397� 1.2% � LIABILITIES Interest-bearing deposits $ 313,921� $ 293,317� 7.0% Noninterest-bearing deposits 70,928� 74,035� -4.2% Total deposits 384,849� 367,352� 4.8% � Short-term borrowings 41,173� 49,394� -16.6% Long-term borrowings, Federal Home Loan Bank (FHLB) 81,378� 82,878� -1.8% Accrued interest payable 1,372� 1,096� 25.2% Other liabilities 3,637� 4,862� -25.2% TOTAL LIABILITIES 512,409� 505,582� 1.4% � SHAREHOLDERS' EQUITY Common stock, par value $8.33, 10,000,000 shares authorized; 4,004,516 and 4,002,159 shares issued 33,371� 33,351� 0.1% Additional paid-in capital 17,832� 17,772� 0.3% Retained earnings 26,350� 23,727� 11.1% Accumulated other comprehensive income (loss): Net unrealized gain on available-for-sale securities 1,486� 1,266� 17.4% Defined benefit plan (579) -� n/a� Less: Treasury stock at cost, 112,802 and 60,372 shares (4,278) (2,301) 85.9% TOTAL SHAREHOLDERS' EQUITY 74,182� 73,815� 0.5% TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 586,591� $ 579,397� 1.2% PENNS WOODS BANCORP, INC. CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) � � (In Thousands, Except Per Share Data) Three Months Ended March 31, 2007� 2006� % Change� � INTEREST AND DIVIDEND INCOME: Loans including fees $ 6,423� $ 5,809� 10.6% Investment Securities: Taxable 823� 923� -10.8% Tax-exempt 1,111� 989� 12.3% Dividend and other interest income 322� 301� 7.0% TOTAL INTEREST AND DIVIDEND INCOME 8,679� 8,022� 8.2% � INTEREST EXPENSE: Deposits 2,512� 1,837� 36.7% Short-term borrowings 505� 406� 24.4% Long-term borrowings, FHLB 922� 946� -2.5% TOTAL INTEREST EXPENSE 3,939� 3,189� 23.5% � NET INTEREST INCOME 4,740� 4,833� -1.9% � PROVISION FOR LOAN LOSSES 40� 198� -79.8% � NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 4,700� 4,635� 1.4% � NON-INTEREST INCOME: Deposit service charges 541� 590� -8.3% Securities gains, net 326� 559� -41.7% Bank-owned life insurance 115� 88� 30.7% Gain on sale of loans 138� 150� -8.0% Insurance commissions 438� 560� -21.8% Other 416� 390� 6.7% TOTAL NON-INTEREST INCOME 1,974� 2,337� -15.5% � NON-INTEREST EXPENSE: Salaries and employee benefits 2,281� 2,232� 2.2% Occupancy, net 331� 243� 36.2% Furniture and equipment 286� 297� -3.7% Pennsylvania shares tax 161� 145� 11.0% Other 1,069� 1,034� 3.4% TOTAL NON-INTEREST EXPENSE 4,128� 3,951� 4.5% � INCOME BEFORE INCOME TAX PROVISION 2,546� 3,021� -15.7% INCOME TAX PROVISION 265� 566� -53.2% NET INCOME $ 2,281� $ 2,455� -7.1% � EARNINGS PER SHARE - BASIC $ 0.59� $ 0.62� -4.8% � EARNINGS PER SHARE - DILUTED $ 0.59� $ 0.62� -4.8% � WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 3,897,480� 3,961,287� -1.6% � WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 3,897,818� 3,961,772� -1.6% � DIVIDENDS PER SHARE $ 0.44� $ 0.42� 4.8% PENNS WOODS BANCORP, INC. AVERAGE BALANCES AND INTEREST RATES � For the Three Months Ended March 31, 2007 March 31, 2006 Average Balance Interest Average Rate Average Balance Interest Average Rate ASSETS: Tax-exempt loans $ 8,266� $ 127� 6.23% $ 8,163� $ 127� 6.31% All other loans 352,599� 6,339� 7.29% 334,985� 5,725� 6.93% Total loans 360,865� 6,466� 7.27% 343,148� 5,852� 6.92% � Taxable securities 82,572� 1,144� 5.54% 97,648� 1,223� 5.01% Tax-exempt securities 102,786� 1,683� 6.55% 91,150� 1,498� 6.58% Total securities 185,358� 2,827� 6.10% 188,798� 2,721� 5.77% � Interest bearing deposits 21� 1� 19.31% 12� 1� 33.80% � Total interest-earning assets 546,244� 9,294� 6.87% 531,958� 8,574� 6.51% � Other assets 39,842� 37,564� � TOTAL ASSETS $ 586,086� $ 569,522� � LIABILITIES AND SHAREHOLDERS' EQUITY: Savings $ 58,997� 105� 0.72% $ 62,715� 120� 0.78% Super Now deposits 44,847� 149� 1.35% 48,163� 150� 1.26% Money Market deposits 23,562� 125� 2.15% 25,124� 115� 1.86% Time deposits 185,761� 2,133� 4.66% 159,994� 1,452� 3.68% Total Deposits 313,167� 2,512� 3.25% 295,996� 1,837� 2.52% � Short-term borrowings 42,283� 505� 4.84% 41,152� 406� 4.00% Long-term borrowings 80,722� 922� 4.63% 84,336� 946� 4.55% Total borrowings 123,005� 1,427� 4.70% 125,488� 1,352� 4.37% � Total interest-bearing liabilities 436,172� 3,939� 3.66% 421,484� 3,189� 3.07% � Demand deposits 68,222� 68,447� Other liabilities 6,459� 5,416� Shareholders' equity 75,233� 74,175� � TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 586,086� $ 569,522� Interest rate spread 3.21% 3.44% Net interest income/margin $ 5,355� 3.95% $ 5,385� 4.08% � � For the Three Months Ended March 31, � � 2007� 2006� � Total interest income $ 8,679� $ 8,022� Total interest expense 3,939� 3,189� � Net interest income 4,740� 4,833� Tax equivalent adjustment 615� 552� � Net interest income (fully taxable equivalent) $ 5,355� $ 5,385� Quarter Ended � (Dollars in Thousands, Except Per Share Data) � 3/31/2007� 12/31/2006� 9/30/2006� 6/30/2006� 3/31/2006� Operating Data � Net income $ 2,281� $ 2,294� $ 2,464� $ 2,434� $ 2,455� Net interest income � 4,740� 4,944� 4,840� 4,926� 4,833� Provision for loan losses � 40� 150� 89� 198� 198� Net security gains � 326� 294� 561� 265� 559� Non-interest income, excluding net security gains � 1,648� 1,795� 1,826� 1,951� 1,778� Non-interest expense � 4,128� 4,186� 4,114� 4,078� 3,951� � Performance Statistics � Net interest margin � 3.95% 3.97% 4.00% 4.12% 4.08% Annualized return on average assets � 1.56% 1.56% 1.70% 1.70% 1.72% Annualized return on average equity � 12.13% 12.18% 13.41% 13.34% 13.24% Annualized net loan charge-offs to avg loans � 0.03% 0.01% 0.04% 0.04% 0.05% Net charge-offs (recoveries) � 24� 10� 39� 37� 43� Efficiency ratio � 64.6� 62.1� 61.7� 59.3� 59.8� � Per Share Data � Basic earnings per share $ 0.59� $ 0.59� $ 0.62� $ 0.62� $ 0.62� Diluted earnings per share � 0.59� 0.59� 0.62� 0.62� 0.62� Dividend declared per share � 0.44� 0.44� 0.44� 0.43� 0.42� Book value � 19.06� 19.12� 19.08� 18.22� 18.73� Common stock price: High � 37.75� 38.59� 38.48� 39.50� 38.75� Low � 35.00� 36.20� 37.02� 36.50� 37.75� Close � 35.50� 37.80� 38.20� 38.48� 37.95� Weighted average common shares: Basic � 3,897� 3,909� 3,927� 3,939� 3,961� Fully Diluted � 3,898� 3,910� 3,928� 3,940� 3,962� End-of-period common shares: Issued � 4,005� 4,004� 4,002� 4,002� 4,002� Treasury � 113� 103� 86� 70� 60� Quarter Ended � (Dollars in Thousands, Except Per Share Data) � 3/31/2007� 12/31/2006� 9/30/2006� 6/30/2006� 3/31/2006� Financial Condition Data: General Total assets $ 586,591� $ 592,285� $ 586,752� $ 576,305� $ 579,397� Loans, net � 353,373� 356,199� 352,511� 342,574� 342,178� Intangibles � 3,032� 3,032� 3,032� 3,032� 3,032� Total deposits � 384,849� 395,191� 401,722� 376,603� 367,352� Noninterest-bearing � 70,928� 73,160� 69,412� 73,969� 74,035� � Savings � 60,496� 59,289� 61,977� 63,739� 64,260� NOW � 48,427� 46,156� 46,508� 48,739� 50,957� Money Market � 24,124� 23,137� 22,120� 23,712� 24,658� Time Deposits � 180,874� 193,449� 201,705� 166,444� 153,442� Total interest-bearing deposits � 313,921� 322,031� 332,310� 302,634� 293,317� � Core deposits* � 203,975� 201,742� 200,017� 210,159� 213,910� Shareholders' equity � 74,182� 74,594� 74,725� 71,632� 73,815� � Asset Quality � Non-performing assets $ 1,019� $ 489� $ 771� $ 983� $ 766� Non-performing assets to total assets � 0.17% 0.08% 0.13% 0.17% 0.13% Allowance for loan losses � 4,201� 4,185� 4,045� 3,995� 3,834� Allowance for loan losses to total loans � 1.17% 1.16% 1.13% 1.15% 1.11% Allowance for loan losses to non-performing loans � 412.27% 855.83% 524.64% 406.41% 500.52% Non-performing loans to total loans � 0.28% 0.14% 0.22% 0.28% 0.22% � Capitalization � Shareholders' equity to total assets � 12.65% 12.59% 12.74% 12.43% 12.74% * Core deposits are defined as total deposits less time deposits