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 570-322-1111 e-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