PENNS WOODS BANCORP INC - FORM 8-K - EX-99.1 - April 21, 2021

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Exhibit 99.1
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Press Release — For Immediate Release
April 21, 2021

Penns Woods Bancorp, Inc. Reports First Quarter 2021 Earnings

Williamsport, PA — April 21, 2021 - Penns Woods Bancorp, Inc. (NASDAQ: PWOD)

Penns Woods Bancorp, Inc. achieved net income of $3.4 million for the three months ended March 31, 2021, resulting in basic and diluted earnings per share of $0.49.

Highlights

•Net income, as reported under GAAP, for the three months ended March 31, 2021 was $3.4 million compared to $3.1 million for the same period of 2020. Results for the three months ended March 31, 2021 compared to 2020 were impacted by an increase in after-tax securities gains of $72,000 (from a gain of $22,000 to a gain of $94,000) for the three month period.

•Gain on sale of loans increased $464,000 for the three months ended March 31, 2021, to $908,000, compared to $444,000 for the 2020 period. The increase is the result of a significant increase in the number of consumers who are refinancing their mortgage due to the current low interest rate environment.

•The provision for loan losses decreased $235,000 for the three months ended March 31, 2021, to $515,000, compared to $750,000 for the 2020 period. The provision for loan losses was elevated in 2020 due primarily to the uncertainty caused by the COVID-19 pandemic.

•Basic and diluted earnings per share for the three months ended March 31, 2021 was $0.49. Basic earnings per share for the three months ended March 31, 2020 was $0.44 with diluted earnings per share of $0.43.

•Return on average assets was 0.75% for the three months ended March 31, 2021, compared to 0.74% for the corresponding period of 2020.

•Return on average equity was 8.59% for the three months ended March 31, 2021, compared to 7.83% for the corresponding period of 2020.

COVID-19 Activity

•Approximately one third of employees working remotely.

•As of March 31, 2021, loan modification/deferral program in place to defer payments up to 180 days for principal and/or interest with only $12.3 million in loan principal remaining in deferral.

•All COVID-19 related loan deferrals meet the requirements to not be considered a troubled debt restructuring.

•Participated in the Paycheck Protection Program ("PPP") by primarily utilizing third parties to service and place the loans.

•Significantly reduced deposit rates during the latter half of March 2020 continuing through December 2020.

•Total paycheck protection program loans originated to be held on balance sheet at March 31, 2021 total $19.8 million.

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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 $3.3 million for the three months ended March 31, 2021 compared to $3.1 million for the same period of 2020. Core earnings per share for the three months ended March 31, 2021 were $0.47 basic and diluted, compared to $0.44 basic and $0.43 diluted core earnings per share for the same period of 2020. Core return on average assets and core return on average equity were 0.73% and 8.35% for the three months ended March 31, 2021, compared to 0.73% and 7.77% for the corresponding period of 2020. 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, 2021 was 2.88%, compared to and 3.19% for the corresponding period of 2020. The decrease in the net interest margin was driven by a decrease in the yield of the loan portfolio of 31 basis points ("bps"), while the investment portfolio yield declined 77 bps, respectively, during the current low interest rate environment. Further compressing the net interest margin was the significant increase of interest-bearing deposits. These deposits carry a current yield of a few basis points as commercial customers have received PPP funding and retail customers have received stimulus funding. Rates paid on interest-bearing deposit liabilities decreased 60 bps as rates paid were decreased significantly during 2020 due to the economic impact of COVID-19 prolonging the low interest rate environment. These deposit rate decreases have partially offset the decline in earning asset yield.

Assets

Total assets increased $207.7 million to $1.9 billion at March 31, 2021 compared to March 31, 2020.  Cash and cash equivalents increased significantly due to deposit growth resulting from the various economic recovery programs instituted at the state and federal levels that impacted both commercial and retail customers, coupled with customers becoming more risk adverse and seeking safety in a bank deposit. Net loans decreased $15.2 million to $1.3 billion at March 31, 2021 compared to March 31, 2020, as the COVID-19 business and travel restrictions curtailed various lending activities such as indirect auto, home equity, and commercial. Lending activity began to rebound as business and travel restrictions were lessened during the second half of 2020 and continues to rebound in 2021. The investment portfolio increased $11.8 million from March 31, 2020 to March 31, 2021 as a portion of the excess cash liquidity was invested into short-term municipal bonds.

Non-performing Loans

The ratio of non-performing loans to total loans ratio decreased to 0.69% at March 31, 2021 from 0.84% at March 31, 2020 as non-performing loans have decreased to $9.3 million at March 31, 2021 from $11.3 million at March 31, 2020 primarily due to a commercial loan relationship that was paid-off during the fourth quarter of 2020. 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 a specific allocation for any impairment recorded within the allowance for loan losses. Net loan charge-offs of $116,000 for the three months ended March 31, 2021 impacted the allowance for loan losses, which was 1.06% of total loans at March 31, 2021 compared to 0.93% at March 31, 2020

Deposits

Deposits increased $237.6 million to $1.6 billion at March 31, 2021 compared to March 31, 2020. Noninterest-bearing deposits increased $146.2 million to $478.9 million at March 31, 2021 compared to March 31, 2020.  Driving deposit growth was the receipt of PPP funding by commercial customers, stimulus funding by retail customers, and customers becoming more risk averse and seeking safety in a bank deposit. Emphasis remains on increasing the utilization of electronic (internet and mobile) deposit banking among our customers. Utilization of internet and mobile banking has increased since the start of 2020 due to these efforts coupled with a change in consumer behavior due to the business and travel restrictions caused by the COVID-19 pandemic.

Shareholders’ Equity

Shareholders’ equity increased $7.5 million to $164.1 million at March 31, 2021 compared to March 31, 2020.  Accumulated other comprehensive loss of $2.5 million at March 31, 2021 increased from a loss of $2.2 million at March 31, 2020 primarily as a result of a change in the net excess of the projected benefit obligations under the defined benefit plan over the fair value of the plan’s assets, resulting in an increase in the net loss of $361,000, offset by an increase in unrealized gains on available for sale
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securities (from an unrealized gain of $3.0 million at March 31, 2020 to an unrealized gain of $3.1 million at March 31, 2021). The current level of shareholders’ equity equates to a book value per share of $23.25 at March 31, 2021 compared to $22.23 at March 31, 2020, and an equity to asset ratio of 8.65% at March 31, 2021 compared to 9.27% at March 31, 2020. Dividends declared for the three months ended March 31, 2021 and 2020 were $0.32 per share, respectively.

Penns Woods Bancorp, Inc. is the parent company of Jersey Shore State Bank, which operates eighteen 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.  Investment and insurance products are offered through Jersey Shore State Bank’s subsidiary, The M Group, Inc. D/B/A The Comprehensive Financial Group. Insurance products are offered through United Insurance Solutions, LLC, a joint venture that is a subsidiary of the holding company.

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, 2020.

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
THIS INFORMATION IS SUBJECT TO YEAR-END AUDIT ADJUSTMENT
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PENNS WOODS BANCORP, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
 
 March 31,
(In Thousands, Except Share Data)20212020% Change
ASSETS:   
Noninterest-bearing balances$28,539 $29,572 (3.49)%
Interest-bearing balances in other financial institutions249,149 48,189 417.02 %
Total cash and cash equivalents277,688 77,761 257.10 %
Investment debt securities, available for sale, at fair value166,895 155,522 7.31 %
Investment equity securities, at fair value1,265 1,281 (1.25)%
Investment securities, trading44 37 18.92 %
Restricted investment in bank stock, at fair value 15,032 14,611 2.88 %
Loans held for sale2,568 4,294 (40.20)%
Loans1,335,899 1,349,400 (1.00)%
Allowance for loan losses(14,202)(12,500)13.62 %
Loans, net1,321,697 1,336,900 (1.14)%
Premises and equipment, net34,910 33,170 5.25 %
Accrued interest receivable8,583 5,307 61.73 %
Bank-owned life insurance33,839 29,228 15.78 %
Goodwill17,104 17,104 — %
Intangibles618 836 (26.08)%
Operating lease right of use asset3,088 3,278 (5.80)%
Deferred tax asset3,717 3,281 13.29 %
Other assets9,144 5,898 55.04 %
TOTAL ASSETS$1,896,192 $1,688,508 12.30 %
LIABILITIES:   
Interest-bearing deposits$1,085,448 $993,975 9.20 %
Noninterest-bearing deposits478,916 332,759 43.92 %
Total deposits1,564,364 1,326,734 17.91 %
Short-term borrowings6,650 17,741 (62.52)%
Long-term borrowings141,094 171,903 (17.92)%
Accrued interest payable988 1,635 (39.57)%
Operating lease liability3,130 3,299 (5.12)%
Other liabilities15,903 10,608 49.92 %
TOTAL LIABILITIES1,732,129 1,531,920 13.07 %
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; 7,537,242 and 7,521,491 shares issued; 7,057,017 and 7,041,266 shares outstanding41,873 41,786 0.21 %
Additional paid-in capital52,818 51,701 2.16 %
Retained earnings83,948 77,403 8.46 %
Accumulated other comprehensive (loss) gain:  
Net unrealized gain on available for sale securities3,095 2,986 3.65 %
Defined benefit plan(5,560)(5,199)(6.94)%
Treasury stock at cost, 480,225 (12,115)(12,115)— %
TOTAL PENNS WOODS BANCORP, INC. SHAREHOLDERS' EQUITY164,059 156,562 4.79 %
Non-controlling interest4 26 (84.62)%
TOTAL SHAREHOLDERS' EQUITY164,063 156,588 4.77 %
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$1,896,192 $1,688,508 12.30 %
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PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
Three Months Ended March 31,
(In Thousands, Except Per Share Data)20212020% Change
INTEREST AND DIVIDEND INCOME:   
Loans including fees$13,345 $14,657 (8.95)%
Investment securities:  
Taxable819 1,010 (18.91)%
Tax-exempt171 145 17.93 %
Dividend and other interest income260 349 (25.50)%
TOTAL INTEREST AND DIVIDEND INCOME14,595 16,161 (9.69)%
INTEREST EXPENSE:   
Deposits1,684 3,035 (44.51)%
Short-term borrowings2 22 (90.91)%
Long-term borrowings839 943 (11.03)%
TOTAL INTEREST EXPENSE2,525 4,000 (36.88)%
NET INTEREST INCOME12,070 12,161 (0.75)%
PROVISION FOR LOAN LOSSES515 750 (31.33)%
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES11,555 11,411 1.26 %
NON-INTEREST INCOME:   
Service charges383 549 (30.24)%
Debt securities gains, available for sale138 21 557.14 %
Equity securities (losses) gains(23)20 (215.00)%
Securities gains (losses), trading4 (14)128.57 %
Bank-owned life insurance173 192 (9.90)%
Gain on sale of loans908 444 104.50 %
Insurance commissions157 127 23.62 %
Brokerage commissions219 369 (40.65)%
Debit card income380 274 38.69 %
Other275 455 (39.56)%
TOTAL NON-INTEREST INCOME2,614 2,437 7.26 %
NON-INTEREST EXPENSE:   
Salaries and employee benefits5,598 5,667 (1.22)%
Occupancy976 702 39.03 %
Furniture and equipment809 860 (5.93)%
Software amortization198 250 (20.80)%
Pennsylvania shares tax352 285 23.51 %
Professional fees583 622 (6.27)%
Federal Deposit Insurance Corporation deposit insurance221 194 13.92 %
Marketing63 53 18.87 %
Intangible amortization53 62 (14.52)%
Other1,098 1,415 (22.40)%
TOTAL NON-INTEREST EXPENSE9,951 10,110 (1.57)%
INCOME BEFORE INCOME TAX PROVISION4,218 3,738 12.84 %
INCOME TAX PROVISION771 661 16.64 %
NET INCOME$3,447 $3,077 12.02 %
Earnings attributable to noncontrolling interest6 4 50.00 %
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS'$3,441 $3,073 11.98 %
EARNINGS PER SHARE - BASIC $0.49 $0.44 11.36 %
EARNINGS PER SHARE - DILUTED$0.49 $0.43 13.95 %
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC7,055,116 7,040,740 0.20 %
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED7,055,116 7,102,990 (0.67)%
DIVIDENDS DECLARED PER SHARE$0.32 $0.32 — %

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PENNS WOODS BANCORP, INC.
AVERAGE BALANCES AND INTEREST RATES 
Three Months Ended
 March 31, 2021March 31, 2020
(Dollars in Thousands)Average 
Balance		InterestAverage 
Rate		Average 
Balance		InterestAverage 
Rate
ASSETS:      
Tax-exempt loans$45,534 $349 3.11 %$52,979 $404 3.07 %
All other loans1,293,395 13,069 4.10 %1,303,838 14,338 4.42 %
Total loans1,338,929 13,418 4.06 %1,356,817 14,742 4.37 %
Taxable securities145,047 1,033 2.89 %142,788 1,273 3.63 %
Tax-exempt securities36,369 216 2.41 %23,773 184 3.15 %
Total securities181,416 1,249 2.79 %166,561 1,457 3.56 %
Interest-bearing deposits195,995 46 0.10 %26,716 86 1.29 %
Total interest-earning assets1,716,340 14,713 3.48 %1,550,094 16,285 4.23 %
Other assets124,074  112,219  
TOTAL ASSETS$1,840,414  $1,662,313  
LIABILITIES AND SHAREHOLDERS’ EQUITY:    
Savings$214,636 44 0.08 %$177,840 91 0.21 %
Super Now deposits289,236 267 0.37 %219,826 424 0.78 %
Money market deposits306,000 267 0.35 %210,708 477 0.91 %
Time deposits254,460 1,106 1.76 %379,259 2,043 2.17 %
Total interest-bearing deposits1,064,332 1,684 0.64 %987,633 3,035 1.24 %
Short-term borrowings5,680 2 0.14 %10,847 22 0.85 %
Long-term borrowings141,483 839 2.40 %159,920 943 2.37 %
Total borrowings147,163 841 2.32 %170,767 965 2.28 %
Total interest-bearing liabilities1,211,495 2,525 0.85 %1,158,400 4,000 1.39 %
Demand deposits445,759  326,817  
Other liabilities22,872  19,991  
Shareholders’ equity160,288  157,105  
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$1,840,414  $1,662,313  
Interest rate spread  2.63 %  2.84 %
Net interest income/margin $12,188 2.88 % $12,285 3.19 %
Three Months Ended March 31,
 20212020
Total interest income$14,595 $16,161 
Total interest expense2,525 4,000 
Net interest income12,070 12,161 
Tax equivalent adjustment118 124 
Net interest income (fully taxable equivalent)$12,188 $12,285 
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(Dollars in Thousands, Except Per Share Data)Quarter Ended
3/31/202112/31/20209/30/20206/30/20203/31/2020
Operating Data 
Net income$3,441 $3,901 $4,472 $3,760 $3,073 
Net interest income12,070 11,967 11,845 12,250 12,161 
Provision for loan losses515 585 645 645 750 
Net security gains119 374 1,011 196 27 
Non-interest income, excluding net security gains2,495 2,701 3,024 2,423 2,409 
Non-interest expense9,951 9,640 9,707 9,611 10,110 
Performance Statistics 
Net interest margin2.88 %2.81 %2.76 %3.01 %3.19 %
Annualized return on average assets0.75 %0.85 %0.97 %0.85 %0.74 %
Annualized return on average equity8.59 %9.55 %11.05 %9.60 %7.83 %
Annualized net loan charge-offs to average loans
0.04 %0.06 %0.06 %0.05 %0.04 %
Net charge-offs116 211 193 168 144 
Efficiency ratio67.96 %65.36 %64.89 %65.10 %68.96 %
Per Share Data 
Basic earnings per share$0.49 $0.55 $0.63 $0.53 $0.44 
Diluted earnings per share0.49 0.55 0.63 0.53 0.43 
Dividend declared per share0.32 0.32 0.32 0.32 0.32 
Book value23.25 23.27 23.05 22.66 22.23 
Common stock price: 
High27.78 27.30 22.83 27.75 35.36 
Low20.55 19.61 19.61 20.01 19.05 
Close24.09 26.01 19.85 22.71 24.30 
Weighted average common shares: 
Basic7,055 7,050 7,045 7,042 7,041 
Fully Diluted7,055 7,050 7,045 7,042 7,103 
End-of-period common shares:
Issued7,537 7,533 7,528 7,523 7,521 
Treasury480 480 480 480 480 
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(Dollars in Thousands, Except Per Share Data)Quarter Ended
3/31/202112/31/20209/30/20206/30/20203/31/2020
Financial Condition Data:     
General     
Total assets$1,896,192 $1,834,643 $1,840,779 $1,838,364 $1,688,508 
Loans, net1,321,697 1,330,524 1,335,711 1,336,370 1,336,900 
Goodwill17,104 17,104 17,104 17,104 17,104 
Intangibles618 671 724 777 836 
Total deposits1,564,364 1,494,443 1,491,810 1,474,305 1,326,734 
Noninterest-bearing478,916 449,357 434,248 418,324 332,759 
Savings224,890 209,924 202,781 195,964 183,929 
NOW290,355 287,775 268,463 268,348 229,919 
Money Market324,207 283,742 274,480 247,753 204,832 
Time Deposits245,996 263,645 311,838 343,915 375,295 
Total interest-bearing deposits1,085,448 1,045,086 1,057,562 1,055,980 993,975 
Core deposits*1,318,368 1,230,798 1,179,972 1,130,389 951,439 
Shareholders’ equity164,059 164,142 162,422 159,578 156,562 
Asset Quality 
Non-performing loans$9,272 $10,334 $10,553 $11,097 $11,300 
Non-performing loans to total assets0.49 %0.56 %0.57 %0.60 %0.67 %
Allowance for loan losses14,202 13,803 13,429 12,977 12,500 
Allowance for loan losses to total loans1.06 %1.03 %1.00 %0.96 %0.93 %
Allowance for loan losses to non-performing loans
153.17 %133.57 %127.25 %116.94 %110.62 %
Non-performing loans to total loans0.69 %0.77 %0.78 %0.82 %0.84 %
Capitalization 
Shareholders’ equity to total assets8.65 %8.95 %8.82 %8.68 %9.27 %

* Core deposits are defined as total deposits less time deposits
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Reconciliation of GAAP and Non-GAAP Financial Measures
Three Months Ended March 31,
(Dollars in Thousands, Except Per Share Data)20212020
GAAP net income$3,441$3,073
Less: net securities gains, net of tax9422
Non-GAAP core earnings$3,347$3,051
 Three Months Ended March 31,
 20212020
Return on average assets (ROA)0.75 %0.74 %
Less: net securities gains, net of tax0.02 %0.01 %
Non-GAAP core ROA0.73 %0.73 %
 Three Months Ended March 31,
 20212020
Return on average equity (ROE)8.59 %7.83 %
Less: net securities gains, net of tax0.24 %0.06 %
Non-GAAP core ROE8.35 %7.77 %
 Three Months Ended March 31,
 20212020
Basic earnings per share (EPS)$0.49 $0.44 
Less: net securities gains, net of tax0.02 — 
Non-GAAP basic core EPS$0.47 $0.44 
 Three Months Ended March 31,
 20212020
Diluted EPS$0.49 $0.43 
Less: net securities gains, net of tax0.02 — 
Non-GAAP diluted core EPS$0.47 $0.43 


COVID-19 Loan Deferrals as of March 31, 2021
(In Thousands)Amount
Commercial, financial, and agricultural$1,710 
Real estate mortgage:
Residential2,177 
Commercial8,307 
Consumer automobile loans96 
Other consumer installment loans55 
Total loan deferrals $12,345 

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