PWOD Penns Woods Bancorp Inc

Penns Woods Bancorp, Inc. (NASDAQ:PWOD) today reported that net income from core operations (�operating earnings�), which excludes net securities gains, increased to $2,106,000 for the three months ended March 31, 2008 compared to $2,066,000 for the same period of 2007. Operating earnings per share for the three months ended March 31, 2008 increased to $0.54 basic and dilutive as compared to $0.53 basic and dilutive for the three months ended March 31, 2007. Continued strong credit quality, solid noninterest income of 17.2% of core revenue (interest income and noninterest income excluding net securities gains), a reduction in tax expense due to a shift in the investment portfolio to tax-exempt bonds, and additional bank-owned life insurance revenue positively impacted operating earnings for the three months ended March 31, 2008. Net income, as reported under U.S. generally accepted accounting principles, for the three months ended March 31, 2008 was $2,131,000 as compared to $2,281,000 for the same period of 2007. Comparable results were impacted by a decrease in after-tax net securities gains of $190,000 (from $215,000 to $25,000) from 2007 to 2008 for the three month period being compared. Basic and dilutive earnings per share for the three months ended March 31, 2008 were $0.55 compared to $0.59 for the three months ended March 31, 2007. Return on average assets and return on average equity were 1.36% and 12.01% for the three months ended March 31, 2008 as compared to 1.56% and 12.13% for the corresponding period of 2007. The net interest margin for the three months ended March 31, 2008 was 3.87% as compared to 3.95% for the corresponding period of 2007. The minimal decrease in the net interest margin was due to the investment portfolio growth that occurred during the third quarter of 2007. Despite this growth being accretive to earnings, return on average assets, and return of average equity, it lowered the net interest margin due to the spread between the yield on assets purchased and the associated funding cost being less than historical levels. Countering the lower margin investment portfolio growth was a decrease of 150 bp in the cost of short-term borrowings and a decrease of 14 bp in the rate paid on time deposits for the three months ended March 31, 2008 as compared to the same period of 2007. The decrease in cost of time deposits and short-term borrowings was prompted by the Federal Open Market Committee rate decreases during 2007 and into 2008 and our strategic decision to shorten the life of the time deposit portfolio which has and will be causing an increased repricing frequency for the majority of the time deposit portfolio. �The turbulence in the financial sector felt during the fourth quarter of 2007 has extended into the first quarter of 2008, as financial stocks continue to be battered due to the uncertain economic outlook and additional financial sector asset write downs related to the sub prime loan situation. As we have noted in previous communications, we have not participated in subprime lending or the purchase of investment securities with subprime loans as underlying collateral. We continue to maintain sound loan and bond portfolios while, as is our culture, stressing quality over growth and yield,� commented Ronald A. Walko, President and Chief Executive Officer of Penns Woods Bancorp, Inc. �Our commitment to sound lending practices and credit standards has produced a nonperforming loans to total loans ratio of 0.40%, and annualized net loan charge-offs to average loans of only 0.04% for the three month period ended March 31, 2008. In addition, the allowance for loan losses to loans remains sound at 1.16%,� added Mr. Walko. Total assets increased $44,425,000 to $631,016,000 at March 31, 2008 compared to March 31, 2007. Net loans remained stable at $353,455,000 over the time frame as the softening economy has led to fewer opportunities to portfolio loans that meet our credit quality standards. The growth in the investment portfolio of $23,709,000 from March 31, 2007 to March 31, 2008 was driven by a strategic initiative to increase net interest income by purchasing fixed rate instruments in anticipation of the decreasing rate environment continuing into 2008. In addition, the characteristics of the instruments purchased complement the existing portfolio and serve as a means to reduce the level of prepayment risk in the portfolio. Deposits have increased $11,276,000 to $396,125,000 at March 31, 2008 as compared to March 31, 2007 with core deposits increasing approximately $3,000,000. Brokered time deposits over the same time frame were reduced by $8,816,000 to $6,120,000 as an influx of market area customer time deposits replaced this alternative source of funding. �Deposit growth has been driven by the excellent customer service provided by our employees, which has led to referrals in the business communities that we serve. Our tradition of providing straight forward, easy to understand, no strings attached deposit products is allowing our deposit base to grow,� commented Mr. Walko. Shareholders� equity decreased $5,028,000 to $69,154,000 at March 31, 2008 as accumulated comprehensive income decreased $5,648,000, and $748,000 in treasury stock was strategically purchased as part of the previously announced stock buyback plan, while net income outpaced dividends paid. The decrease in accumulated comprehensive income is a result of a decline in the market value of certain securities held in the investment portfolio at March 31, 2008 compared to March 31, 2007, and 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 $17.86 at March 31, 2008 compared to $19.06 at March 31, 2007 and an equity to asset ratio of 10.96% at March 31, 2008. Book value per share, excluding accumulated comprehensive income, was $19.08 at March 31, 2008 compared to $18.83 at March 31, 2007. During the three months ended March 31, 2008 cash dividends of $0.46 per share were paid to shareholders compared to $0.44 for the three months ended March 31, 2007. �We remain committed to providing a healthy dividend yield in excess of four percent and conducting stock repurchases on the open market. The current dividend yield in excess of 5.5%, coupled with the purchase of 22,797 shares on the open market since March 31, 2007 illustrates our commitment to building shareholder value. The strength of our core 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 $29.66 and $33.47 during the three months ended March 31, 2008. 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, � 2008 � � 2007 � % Change � � ASSETS Noninterest-bearing balances $ 16,440 $ 13,237 24.2 % Interest-bearing deposits in other financial institutions � 12 � � 18 � -33.3 % Total cash and cash equivalents 16,452 13,255 24.1 % � Investment securities, available for sale, at fair value 207,777 184,063 12.9 % Investment securities held to maturity (fair value of $281 and $287) 279 284 -1.8 % Loans held for sale 3,254 2,996 8.6 % Loans 357,609 357,574 0.0 % Less: Allowance for loan losses � 4,154 � � 4,201 � -1.1 % Loans, net 353,455 353,373 0.0 % Premises and equipment, net 7,381 6,742 9.5 % Accrued interest receivable 3,122 2,832 10.2 % Bank-owned life insurance 13,209 11,786 12.1 % Investment in limited partnerships 5,261 4,808 9.4 % Goodwill 3,032 3,032 0.0 % Other assets � 17,794 � � 3,420 � 420.3 % TOTAL ASSETS $ 631,016 � $ 586,591 � 7.6 % � LIABILITIES Interest-bearing deposits $ 324,463 $ 313,921 3.4 % Noninterest-bearing deposits � 71,662 � � 70,928 � 1.0 % Total deposits 396,125 384,849 2.9 % � Short-term borrowings 61,766 41,173 50.0 % Long-term borrowings, Federal Home Loan Bank (FHLB) 96,778 81,378 18.9 % Accrued interest payable 1,626 1,372 18.5 % Other liabilities � 5,567 � � 3,637 � 53.1 % TOTAL LIABILITIES � 561,862 � � 512,409 � 9.7 % � SHAREHOLDERS' EQUITY Common stock, par value $8.33, 10,000,000 shares authorized; 4,007,652 and 4,004,516 shares issued 33,397 33,371 0.1 % Additional paid-in capital 17,904 17,832 0.4 % Retained earnings 27,620 26,350 4.8 % Accumulated other comprehensive income (loss): Net unrealized (loss) gain on available for sale securities (3,366 ) 1,486 -326.5 % Defined benefit plan (1,375 ) (579 ) 137.5 % Less: Treasury stock at cost, 135,599 and 112,802 shares � (5,026 ) � (4,278 ) 17.5 % TOTAL SHAREHOLDERS' EQUITY � 69,154 � � 74,182 � -6.8 % TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 631,016 � $ 586,591 � 7.6 % PENNS WOODS BANCORP, INC. CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) � � � � (In Thousands, Except Per Share Data) Three Months Ended March 31, � 2008 � 2007 % Change � � INTEREST AND DIVIDEND INCOME: Loans including fees $ 6,380 $ 6,423 -0.7 % Investment Securities: Taxable 1,190 823 44.6 % Tax-exempt 1,226 1,111 10.4 % Dividend and other interest income � 252 � 322 -21.7 % TOTAL INTEREST AND DIVIDEND INCOME � 9,048 � 8,679 4.3 % � INTEREST EXPENSE: Deposits 2,541 2,512 1.2 % Short-term borrowings 429 505 -15.0 % Long-term borrowings, FHLB � 1,197 � 922 29.8 % TOTAL INTEREST EXPENSE � 4,167 � 3,939 5.8 % � NET INTEREST INCOME 4,881 4,740 3.0 % � PROVISION FOR LOAN LOSSES � 60 � 40 50.0 % � NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES � 4,821 � 4,700 2.6 % � NON-INTEREST INCOME: Deposit service charges 570 541 5.4 % Securities gains, net 38 326 -88.3 % Bank-owned life insurance 155 115 34.8 % Gain on sale of loans 152 138 10.1 % Insurance commissions 580 438 32.4 % Other � 419 � 416 0.7 % TOTAL NON-INTEREST INCOME � 1,914 � 1,974 -3.0 % � NON-INTEREST EXPENSE: Salaries and employee benefits 2,451 2,281 7.5 % Occupancy, net 338 331 2.1 % Furniture and equipment 285 286 -0.3 % Pennsylvania shares tax 105 161 -34.8 % Other � 1,266 � 1,069 18.4 % TOTAL NON-INTEREST EXPENSE � 4,445 � 4,128 7.7 % � INCOME BEFORE INCOME TAX PROVISION 2,290 2,546 -10.1 % INCOME TAX PROVISION � 159 � 265 -40.0 % NET INCOME $ 2,131 $ 2,281 -6.6 % � EARNINGS PER SHARE - BASIC $ 0.55 $ 0.59 -6.8 % � EARNINGS PER SHARE - DILUTED $ 0.55 $ 0.59 -6.8 % � WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC � 3,874,741 � 3,897,480 -0.6 % � WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED � 3,874,931 � 3,897,818 -0.6 % � DIVIDENDS PER SHARE $ 0.46 $ 0.44 4.5 % PENNS WOODS BANCORP, INC. AVERAGE BALANCES AND INTEREST RATES � � � � � � For the Three Months Ended March 31, 2008 March 31, 2007 Average � Average Average � Average Balance Interest Rate Balance Interest Rate ASSETS: Tax-exempt loans $ 8,013 $ 126 6.32 % $ 8,266 $ 127 6.23 % All other loans � 354,715 � 6,297 � 7.14 % � 352,599 � 6,339 7.29 % Total loans � 362,728 � 6,423 � 7.12 % � 360,865 � 6,466 7.27 % � Taxable securities 100,730 1,442 5.73 % 82,572 1,144 5.54 % Tax-exempt securities � 114,590 � 1,857 � 6.48 % � 102,786 � 1,683 6.55 % Total securities � 215,320 � 3,299 � 6.13 % � 185,358 � 2,827 6.10 % � Interest bearing deposits � 38 � - � 0.00 % � 21 � 1 19.31 % � Total interest-earning assets 578,086 � 9,722 � 6.75 % 546,244 � 9,294 6.87 % � Other assets � 48,692 � 39,842 � TOTAL ASSETS $ 626,778 $ 586,086 � LIABILITIES AND SHAREHOLDERS' EQUITY: Savings $ 58,561 109 0.75 % $ 58,997 105 0.72 % Super Now deposits 46,367 155 1.34 % 44,847 149 1.35 % Money Market deposits 23,324 127 2.18 % 23,562 125 2.15 % Time deposits � 190,927 � 2,150 � 4.52 % � 185,761 � 2,133 4.66 % Total Deposits � 319,179 � 2,541 � 3.20 % � 313,167 � 2,512 3.25 % � Short-term borrowings 51,113 429 3.34 % 42,283 505 4.84 % Long-term borrowings � 105,534 � 1,197 � 4.49 % � 80,722 � 922 4.63 % Total borrowings � 156,647 � 1,626 � 4.11 % � 123,005 � 1,427 4.70 % � Total interest-bearing liabilities 475,826 � 4,167 � 3.50 % 436,172 � 3,939 3.66 % � Demand deposits 70,243 68,222 Other liabilities 9,726 6,459 Shareholders' equity � 70,983 � 75,233 � TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 626,778 $ 586,086 Interest rate spread � 3.25 % 3.21 % Net interest income/margin $ 5,555 � 3.87 % $ 5,355 3.95 % � � For the Three Months Ended March 31, � 2008 2007 � Total interest income $ 9,048 $ 8,679 Total interest expense � 4,167 � 3,939 � � Net interest income 4,881 4,740 Tax equivalent adjustment � 674 � 615 � � Net interest income (fully taxable equivalent) $ 5,555 $ 5,355 � � � Quarter Ended (Dollars in Thousands, Except Per Share Data) 3/31/2008 � 12/31/2007 � 9/30/2007 � 6/30/2007 � 3/31/2007 � � � � Operating Data � Net income $ 2,131 � � $ 1,939 � � $ 2,322 � � $ 2,335 � � $ 2,281 � Net interest income � 4,881 � � � 5,103 � � � 4,865 � � � 4,794 � � � 4,740 � Provision for loan losses � 60 � � � 90 � � � 10 � � � 10 � � � 40 � Net security gains (losses) � 38 � � � (673 ) � � - � � � 293 � � � 326 � Non-interest income, ex. net security gains (losses) � 1,876 � � � 1,985 � � � 2,006 � � � 1,893 � � � 1,648 � Non-interest expense � 4,445 � � � 4,418 � � � 4,430 � � � 4,340 � � � 4,128 � � Performance Statistics � Net interest margin � 3.87 % � � 3.93 % � � 3.98 % � � 3.95 % � � 3.95 % Annualized return on average assets � 1.36 % � � 1.25 % � � 1.57 % � � 1.58 % � � 1.56 % Annualized return on average equity � 12.01 % � � 10.68 % � � 13.21 % � � 12.57 % � � 12.13 % Annualized net loan charge-offs to avg loans � 0.04 % � � 0.06 % � � 0.09 % � � 0.05 % � � 0.03 % Net charge-offs � 36 � � � 52 � � � 80 � � � 49 � � � 24 � Efficiency ratio � 65.8 � � � 62.3 � � � 64.5 � � � 64.9 � � � 64.6 � � Per Share Data � Basic earnings per share $ 0.55 � � $ 0.50 � � $ 0.60 � � $ 0.60 � � $ 0.59 � Diluted earnings per share � 0.55 � � � 0.50 � � � 0.60 � � � 0.60 � � � 0.59 � Dividend declared per share � 0.46 � � � 0.46 � � � 0.45 � � � 0.44 � � � 0.44 � Book value � 17.86 � � � 18.21 � � � 18.46 � � � 17.93 � � � 19.06 � Common stock price: High � 33.47 � � � 32.50 � � � 35.00 � � � 35.00 � � � 37.75 � Low � 29.66 � � � 30.33 � � � 30.80 � � � 33.86 � � � 35.00 � Close � 33.15 � � � 32.50 � � � 31.99 � � � 34.24 � � � 35.50 � Weighted average common shares: Basic � 3,875 � � � 3,878 � � � 3,881 � � � 3,889 � � � 3,897 � Fully Diluted � 3,875 � � � 3,878 � � � 3,882 � � � 3,889 � � � 3,898 � End-of-period common shares: Issued � 4,008 � � � 4,007 � � � 4,006 � � � 4,005 � � � 4,005 � Treasury � 136 � � � 131 � � � 129 � � � 118 � � � 113 � � � � Quarter Ended (Dollars in Thousands, Except Per Share Data) 3/31/2008 � 12/31/2007 � 9/30/2007 � 6/30/2007 � 3/31/2007 � � � � Financial Condition Data: General Total assets $ 631,016 � � $ 628,138 � � $ 613,329 � � $ 586,572 � � $ 586,591 � Loans, net � 353,455 � � � 356,348 � � � 353,623 � � � 352,013 � � � 353,373 � Intangibles � 3,032 � � � 3,032 � � � 3,032 � � � 3,032 � � � 3,032 � Total deposits � 396,125 � � � 389,022 � � � 404,854 � � � 405,903 � � � 384,849 � Noninterest-bearing � 71,662 � � � 74,671 � � � 72,990 � � � 70,000 � � � 70,928 � � Savings � 59,985 � � � 56,757 � � � 59,883 � � � 59,798 � � � 60,496 � NOW � 50,193 � � � 50,883 � � � 47,129 � � � 48,555 � � � 48,427 � Money Market � 25,110 � � � 21,029 � � � 22,295 � � � 23,422 � � � 24,124 � Time Deposits � 189,175 � � � 185,682 � � � 202,557 � � � 204,128 � � � 180,874 � Total interest-bearing deposits � 324,463 � � � 314,351 � � � 331,864 � � � 335,903 � � � 313,921 � � Core deposits* � 206,950 � � � 203,340 � � � 202,297 � � � 201,775 � � � 203,975 � Shareholders' equity � 69,154 � � � 70,559 � � � 71,552 � � � 69,720 � � � 74,182 � � Asset Quality � Non-performing assets $ 1,427 � � $ 1,320 � � $ 1,013 � � $ 1,098 � � $ 1,019 � Non-performing assets to total assets � 0.23 % � � 0.21 % � � 0.17 % � � 0.19 % � � 0.17 % Allowance for loan losses � 4,154 � � � 4,130 � � � 4,092 � � � 4,162 � � � 4,201 � Allowance for loan losses to total loans � 1.16 % � � 1.15 % � � 1.14 % � � 1.17 % � � 1.17 % Allowance for loan losses to non-performing loans � 291.10 % � � 312.88 % � � 403.95 % � � 379.05 % � � 412.27 % Non-performing loans to total loans � 0.40 % � � 0.37 % � � 0.28 % � � 0.31 % � � 0.28 % � Capitalization � Shareholders' equity to total assets � 10.96 % � � 11.23 % � � 11.67 % � � 11.89 % � � 12.65 % � * Core deposits are defined as total deposits less time deposits �