Penns Woods Bancorp, Inc. (NASDAQ:PWOD)
Highlights
- Net income from core operations
(“operating earnings”), which is a non-GAAP measure of net income
excluding net securities gains and losses and bank owned life
insurance gains of death benefit, increased to $3,191,000 for the
three months ended March 31, 2012 compared to $2,770,000 for the
same period of 2011.
- Operating earnings per share for the
three months ended March 31, 2012 were $0.83 basic and dilutive
compared to $0.72 basic and dilutive for the same period of 2011,
an increase of 15.3%.
- Return on average assets was 1.91% for
the three months ended March 31, 2012 compared to 1.65% for the
corresponding period of 2011.
- Return on average equity was 17.39% for
the three months ended March 31, 2012 compared to 16.62% for the
corresponding period of 2011.
“Our focus on building core deposits, loan growth, and managing
credit risk is being rewarded through increases in net income and
related return metrics of earnings per share, return on equity, and
return on assets. While we have successfully been negotiating the
challenges presented by the economy and credit cycle, we must and
will remain focused on the challenges that lie ahead,” said Richard
A. Grafmyre, CFP®, President and CEO.
A reconciliation of the non-GAAP financial measures of operating
earnings, operating return on assets, operating return on equity,
and operating earnings per share, described in the highlights, to
the comparable GAAP financial measures is included at the end of
this press release.
Net Income
Net income, as reported under GAAP, for the three months ended
March 31, 2012 was $3,689,000 compared to $2,853,000 for the same
period of 2011. Results for the three months ended March 31, 2012
compared to 2011 were impacted by an increase in after-tax
securities gains of $306,000 (from a gain of $83,000 to a gain of
$389,000). In addition, a gain of $109,000 on death benefit related
to bank owned life insurance was recorded during the three months
ended March 31, 2012. Basic and dilutive earnings per share for the
three months ended March 31, 2012 were $0.96 compared to $0.74 for
the corresponding period of 2011. Return on average assets and
return on average equity were 1.91% and 17.39% for the three months
ended March 31, 2012 compared to 1.65% and 16.62% for the
corresponding period of 2011.
Net Interest Margin
The net interest margin for the three months ended March 31,
2012 was 4.72% compared to 4.89% for the corresponding period of
2011. While the net interest margin has decreased year over year,
net interest income on a fully taxable equivalent basis has
increased $743,000 to $8,498,000 for the three months ended March
31, 2012 compared to the corresponding period of 2011. Driving this
increase is the continued emphasis on core deposit growth. These
deposits represent a lower cost funding source than time deposits
and comprise 71.5% of total deposits at March 31, 2012 compared to
64.9% at March 31, 2011. The average rate paid on total
interest-bearing deposits decreased 33 basis points (bp) for the
three months ended March 31, 2012 compared to the same period of
2011. The decrease was led by the rate paid on time deposits
decreasing 37 bp for the three months ended March 31, 2012 compared
to the same period of 2011. The duration of the time deposit
portfolio, which was shortened over the past several years, is now
being slowly lengthened due to the apparent bottoming or near
bottoming of deposit rates. FHLB long-term borrowings have been
reduced by $10,500,000 since March 31, 2011 as borrowings carrying
an average rate of 4.60% matured during the three months ended
December 31, 2011.
“The current interest rate environment provides challenges to
the net interest margin. We have been able to reduce the rates
being paid on interest-bearing liabilities; however, earning asset
yields have also been decreasing. Over the past few years we have
been shortening the bond portfolio duration by utilizing shorter
term corporate and agency bonds to offset the relatively longer
duration of municipal bonds in the portfolio. While this action has
limited current earnings due to the low rates on the short end of
the interest rate curve, it also limits interest rate risk and will
provide cash flow over the next few years as we anticipate a period
of increasing rates. Downward pressure on the yield on earning
assets is occurring due to the inability to add new loans and
investments to the balance sheet at comparable rates to the current
portfolios. Our focus on increasing core deposits has resulted in a
decrease in the overall cost of interest-bearing liabilities which
has limited the negative effects of a declining yield on earning
assets,” commented President Grafmyre.
Assets
Total assets increased $99,777,000 to $793,114,000 at March 31,
2012 compared to March 31, 2011. Net loans increased 7.5% to
$435,832,000 at March 31, 2012 compared to March 31, 2011 as the
economic environment has in general provided fewer loan
opportunities over the past year. Housing, transportation, and all
other facets related to the Marcellus Shale natural gas exploration
are creating loan opportunities and we are aggressively attempting
to attract those loans that meet or exceed our credit standards.
During 2011 and 2012 successful loan campaigns were undertaken to
build home equity loans and lines of credit. The investment
portfolio increased $63,903,000 from March 31, 2011 to March 31,
2012 due to a combination of market value increases and the
purchase of short maturity bonds that have been utilized to reduce
the portfolio duration and to provide current cash flow.
Non-performing Loans
Our non-performing loans to total loans ratio has decreased to
2.55% at March 31, 2012 from 3.13% at March 31, 2011. The decrease
in non-performing loans is primarily the result of a decrease in
commercial loan delinquencies due to a partial charge-off during
the second quarter of 2011. The majority of non-performing loans
are centered on several loans that either are in a secured position
and have sureties with a strong underlying financial position or
have a specific allocation for any impairment recorded within the
allowance for loan losses. Net loan charge-offs of $9,000 for the
three months ended March 31, 2012 represented 0.01% of average
loans for the three months ended March 31, 2012. The allowance for
loan losses was increased to 1.75% of total loans at March 31, 2012
from 1.61% at March 31, 2011 due to the general economic
uncertainty that persists.
Deposits
Deposits have grown 17.6%, or $92,825,000, to $621,542,000 at
March 31, 2012 compared to March 31, 2011, with core deposits
(total deposits excluding time deposits) increasing $101,018,000,
while higher cost time deposits decreased $8,193,000.
Noninterest-bearing deposits have increased 22.0% to $116,271,000
at March 31, 2012 compared to March 31, 2011. Also playing a
significant role in increasing core deposits was money market and
NOW accounts with growth rates of 31.2% and 53.9%, respectively.
Driving this growth is our commitment to easy-to-use products,
community involvement, and emphasis on customer service. We have
also successfully implemented a targeted marketing campaign aimed
at further strengthening our customer relationships, while also
expanding our market penetration.
Shareholders’ Equity
Shareholders’ equity increased $16,281,000 to $85,279,000 at
March 31, 2012 compared to March 31, 2011. The accumulated other
comprehensive gain of $1,699,000 at March 31, 2012 is a result of
an increase in unrealized gains on available for sale securities
from an unrealized loss of $6,005,000 at March 31, 2011 to an
unrealized gain of $5,832,000 at March 31, 2012. However, the
amount of accumulated other comprehensive gain at March 31, 2012
was also impacted by the change in net excess of the projected
benefit obligation over the market value of the plan assets of the
defined benefit pension plan resulting in an increase in the net
loss of $1,720,000. The current level of shareholders’ equity
equates to a book value per share of $22.22 at March 31, 2012
compared to $17.99 at March 31, 2011 and an equity to asset ratio
of 10.75% at March 31, 2012 compared to 9.95% at March 31, 2011.
Excluding accumulated other comprehensive gain/loss, book value per
share was $21.78 at March 31, 2012 compared to $20.18 at March 31,
2011. Dividends paid to shareholders were $0.47 for the three
months ended March 31, 2012 compared to $0.46 for the three months
ended March 31, 2011.
Penns Woods Bancorp, Inc. is the parent company of Jersey Shore
State Bank, which operates thirteen branch offices providing
financial services in Lycoming, Clinton, Centre, and Montour
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 such as net securities gains and losses.
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. 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, 2011.
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.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, 2012 2011 % Change ASSETS
Noninterest-bearing balances $ 16,272 $ 10,950 48.6 %
Interest-bearing deposits in other financial institutions
7,159 554 1192.2 % Total cash and cash
equivalents 23,431 11,504 103.7 % Investment securities,
available for sale, at fair value 284,778 220,877 28.9 % Investment
securities held to maturity (fair value of $55 and $53) 55 53 3.8 %
Loans held for sale 2,065 4,818 -57.1 % Loans 443,577 412,093 7.6 %
Less: Allowance for loan losses 7,745 6,640
16.6 % Loans, net 435,832 405,453 7.5 % Premises and
equipment, net 8,283 7,634 8.5 % Accrued interest receivable 4,100
3,638 12.7 % Bank-owned life insurance 15,973 15,640 2.1 %
Investment in limited partnerships 3,379 4,040 -16.4 % Goodwill
3,032 3,032 0.0 % Deferred tax asset 6,416 11,554 -44.5 % Other
assets 5,770 5,094 13.3 % TOTAL ASSETS
$ 793,114 $ 693,337 14.4 % LIABILITIES
Interest-bearing deposits $ 505,271 $ 433,439 16.6 %
Noninterest-bearing deposits 116,271 95,278
22.0 % Total deposits 621,542 528,717 17.6 %
Short-term borrowings 14,768 15,636 -5.6 % Long-term borrowings,
Federal Home Loan Bank (FHLB) 61,278 71,778 -14.6 % Accrued
interest payable 506 694 -27.1 % Other liabilities 9,741
7,514 29.6 % TOTAL LIABILITIES 707,835
624,339 13.4 % SHAREHOLDERS' EQUITY
Common stock, par value $8.33, 10,000,000
shares authorized; 4,018,068 and 4,016,233 shares issued
33,484 33,468 0.0 % Additional paid-in capital 18,127 18,078 0.3 %
Retained earnings 38,279 32,180 19.0 % Accumulated other
comprehensive gain (loss): Net unrealized gain (loss) on available
for sale securities 5,832 (6,005 ) 197.1 % Defined benefit plan
(4,133 ) (2,413 ) -71.3 % Less: Treasury stock at cost, 180,596
shares (6,310 ) (6,310 ) 0.0 % TOTAL SHAREHOLDERS'
EQUITY 85,279 68,998 23.6 % TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY $ 793,114 $ 693,337
14.4 %
PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
(In Thousands, Except Per Share Data) Three
Months Ended March 31, 2012 2011 % Change INTEREST AND
DIVIDEND INCOME: Loans including fees $ 6,314 $ 6,288 0.4 %
Investment securities: Taxable 1,474 1,375 7.2 % Tax-exempt 1,405
1,267 10.9 % Dividend and other interest income 92 52
76.9 % TOTAL INTEREST AND DIVIDEND INCOME 9,285 8,982
3.4 % INTEREST EXPENSE: Deposits 961 1,194 -19.5 %
Short-term borrowings 34 57 -40.4 % Long-term borrowings, FHLB
620 734 -15.5 % TOTAL INTEREST EXPENSE 1,615
1,985 -18.6 % NET INTEREST INCOME 7,670 6,997 9.6 %
PROVISION FOR LOAN LOSSES 600 600 0.0 %
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 7,070
6,397 10.5 % NON-INTEREST INCOME: Service charges 447
503 -11.1 % Securities gains, net 589 125 371.2 % Bank-owned life
insurance 268 174 54.0 % Gain on sale of loans 183 249 -26.5 %
Insurance commissions 442 209 111.5 % Brokerage commissions 212 274
-22.6 % Other 622 411 51.3 % TOTAL NON-INTEREST
INCOME 2,763 1,945 42.1 % NON-INTEREST
EXPENSE: Salaries and employee benefits 3,017 2,632 14.6 %
Occupancy, net 328 348 -5.7 % Furniture and equipment 346 308 12.3
% Pennsylvania shares tax 169 172 -1.7 % Amortization of
investments in limited partnerships 165 166 -0.6 % FDIC deposit
insurance 123 187 -34.2 % Other 1,316 1,175 12.0 %
TOTAL NON-INTEREST EXPENSE 5,464 4,988 9.5 %
INCOME BEFORE INCOME TAX PROVISION 4,369 3,354 30.3 % INCOME TAX
PROVISION 680 501 35.7 % NET INCOME $ 3,689 $ 2,853
29.3 % EARNINGS PER SHARE - BASIC $ 0.96 $ 0.74 29.7 %
EARNINGS PER SHARE - DILUTED $ 0.96 $ 0.74 29.7 %
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 3,837,204
3,835,295 0.0 % WEIGHTED AVERAGE SHARES OUTSTANDING -
DILUTED 3,837,204 3,835,295 0.0 % DIVIDENDS
PER SHARE $ 0.47 $ 0.46 2.2 %
PENNS WOODS BANCORP,
INC. AVERAGE BALANCES AND INTEREST RATES For the
Three Months Ended (Dollars in Thousands) March 31, 2012
March 31, 2011 Average Balance Interest Average Rate
Average Balance Interest Average Rate ASSETS:
Tax-exempt loans $ 21,591 $ 309 5.76 % $ 20,377 $ 308 6.13 % All
other loans 422,098 6,110 5.82 %
399,599 6,085 6.18 % Total loans 443,689 6,419
5.82 % 419,976 6,393 6.17 % Taxable
securities 147,200 1,566 4.26 % 114,740 1,427 4.97 % Tax-exempt
securities 130,590 2,128 6.52 % 103,108
1,920 7.45 % Total securities 277,790 3,694
5.32 % 217,848 3,347 6.15 %
Interest-bearing deposits 2,037 - 0.00 %
2,002 - 0.00 % Total interest-earning assets
723,516 10,113 5.61 % 639,826 9,740 6.14 %
Other assets 50,914 53,883 TOTAL ASSETS
$ 774,430 $ 693,709 LIABILITIES AND SHAREHOLDERS' EQUITY:
Savings $ 73,628 11 0.06 % $ 66,510 35 0.21 % Super Now deposits
108,369 142 0.53 % 69,177 83 0.49 % Money market deposits 127,387
205 0.65 % 109,196 265 0.98 % Time deposits 177,083
603 1.37 % 188,561 811 1.74 % Total
interest-bearing deposits 486,467 961 0.79 %
433,444 1,194 1.12 % Short-term borrowings
22,058 34 0.62 % 19,207 57 1.20 % Long-term borrowings, FHLB
61,278 620 4.00 % 71,778 734 4.09 %
Total borrowings 83,336 654 3.11 %
90,985 791 3.48 % Total interest-bearing liabilities
569,803 1,615 1.13 % 524,429 1,985 1.53 %
Demand deposits 108,081 91,473 Other liabilities 11,669
9,155 Shareholders' equity 84,877 68,652 TOTAL
LIABILITIES AND SHAREHOLDERS' EQUITY $ 774,430 $ 693,709 Interest
rate spread 4.48 % 4.61 % Net interest income/margin $ 8,498
4.72 % $ 7,755 4.89 % For the Three Months
Ended March 31, 2012 2011 Total interest income $
9,285 $ 8,982 Total interest expense 1,615 1,985
Net interest income 7,670 6,997 Tax equivalent
adjustment 828 758 Net interest income
(fully taxable equivalent) $ 8,498 $ 7,755
Quarter Ended
(Dollars in Thousands, Except Per Share
Data)
3/31/2012
12/31/2011
9/30/2011
6/30/2011
3/31/2011
Operating Data
Net income $ 3,689 $ 3,395
$ 3,150 $ 2,964
$ 2,853 Net interest income
7,670 7,595
7,210 6,918
6,997 Provision for loan losses 600
900 600
600 600 Net
security gains 589 479
8 9
125 Non-interest income, ex. net
security gains 2,174
1,932 1,982
1,864 1,820 Non-interest expense
5,464 5,152
4,968 4,856
4,988
Performance Statistics
Net interest margin 4.72 %
4.78 % 4.55 %
4.58 % 4.86 % Annualized return on
average assets 1.91 % 1.80 %
1.67 % 1.64 %
1.65 % Annualized return on average equity
17.39 % 17.00 %
16.49 % 16.29 % 16.62 %
Annualized net loan charge-offs to avg loans 0.01 %
0.09 % 0.01 %
1.41 % 0.00 % Net charge-offs
(recoveries) 9 101
8 1,477
(5 ) Efficiency ratio 55.5 %
54.1 % 54.1 %
55.3 % 56.6 %
Per
Share Data
Basic earnings per share $ 0.96
$ 0.88 $ 0.82
$ 0.78 $ 0.74 Diluted
earnings per share 0.96
0.88 0.82
0.78 0.74 Dividend declared per
share 0.47 0.46
0.46 0.46
0.46 Book value 22.22
20.97 20.48
19.27 17.99
Common stock price:
High 41.67
39.30 36.56
39.30 40.08
Low 36.20 32.01
31.07 33.33
35.46 Close 40.88
38.78 32.75
34.36 38.93
Weighted average common shares:
Basic 3,837
3,837 3,836
3,836 3,835
Fully Diluted 3,837 3,837
3,836 3,836
3,835 End-of-period common
shares:
Issued 4,018
4,018 4,017
4,017 4,016 Treasury
181 181
181 181
181
Quarter Ended (Dollars in
Thousands, Except Per Share Data)
3/31/2012
12/31/2011
9/30/2011
6/30/2011
3/31/2011
Financial Condition Data:
General
Total assets $ 793,114
$ 763,953 $ 752,650
$ 744,986 $ 693,337
Loans, net 435,832
428,805 422,989
413,397 405,453
Intangibles 3,032 3,032
3,032 3,032
3,032 Total deposits
621,542 581,664
575,300 569,833
528,717 Noninterest-bearing
116,271 111,354
104,783 100,104
95,278
Savings
77,253 71,646
73,376 71,923
69,095 NOW 108,904
101,808 103,264
91,285 70,763
Money Market 141,830
124,335 122,896
129,004 108,104
Time Deposits 177,284
172,521 170,981
177,517 185,477 Total
interest-bearing deposits 505,271
470,310 470,517
469,729 433,439
Core deposits* 444,258
409,143 404,319
392,316 343,240
Shareholders' equity 85,279
80,460 78,572
73,906 68,998
Asset Quality
Non-performing
assets $ 11,308 $ 12,009
$ 14,344 $ 10,911 $
12,900 Non-performing assets to total assets
1.43 % 1.57 % 1.91
% 1.46 % 1.86 % Allowance
for loan losses 7,745
7,154 6,355
5,764 6,640 Allowance for loan
losses to total loans 1.75 %
1.64 % 1.48 % 1.38 %
1.61 %
Allowance for loan losses to
non-performing loans
68.49 % 59.57 %
44.30 % 52.83 %
51.47 % Non-performing loans to total loans 2.55 %
2.75 % 3.34 %
2.60 % 3.13 %
Capitalization
Shareholders' equity to total
assets 10.75 % 10.53 %
10.44 % 9.92 %
9.95 % * Core deposits are defined as total deposits
less time deposits
Reconciliation of GAAP and
non-GAAP Financial Measures (Dollars in
Thousands, Except Per Share Data) Three Months Ended March 31, 2012
2011 GAAP net income $ 3,689 $ 2,853 Less: net securities and
bank-owned life insurance gains, net of tax 498
83 Non-GAAP operating earnings $ 3,191 $ 2,770
Three Months Ended March 31, 2012 2011 Return on
average assets (ROA) 1.91 % 1.65 % Less: net securities and
bank-owned life insurance gains, net of tax 0.26 %
0.05 % Non-GAAP operating ROA 1.65 % 1.60 %
Three Months Ended March 31, 2012 2011 Return on average equity
(ROE) 17.39 % 16.62 % Less: net securities and bank-owned life
insurance gains, net of tax 2.35 % 0.48 % Non-GAAP
operating ROE 15.04 % 16.14 % Three Months
Ended March 31, 2012 2011 Basic earnings per share (EPS) $ 0.96 $
0.74 Less: net securities and bank-owned life insurance gains, net
of tax 0.13 0.02 Non-GAAP basic
operating EPS $ 0.83 $ 0.72 Three Months Ended
March 31, 2012 2011 Dilutive EPS $ 0.96 $ 0.74 Less: net securities
and bank-owned life insurance gains, net of tax 0.13
0.02 Non-GAAP dilutive operating EPS $ 0.83 $
0.72
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