Penns Woods Bancorp, Inc. Reports Fourth Quarter 2020 Earnings

Williamsport, PA — January 29, 2021 - Penns Woods Bancorp, Inc. (NASDAQ: PWOD)
 
Penns Woods Bancorp, Inc. achieved net income of $15.2 million for the twelve months ended December 31, 2020, resulting in basic and diluted earnings per share of $2.16.
 
Highlights
 
  • Net income, as reported under GAAP, for the three and twelve months ended December 31, 2020 was $3.9 million and $15.2 million,respectively compared to $2.8 million and $15.7 million for the same periods of 2019. Results for the three and twelve months ended December 31, 2020 compared to 2019 were impacted by a decrease in after-tax securities gains of $91,000 (from a gain of $386,000 to a gain of $295,000) for the three month period and an increase in securities gains of $679,000 (from a gain of $591,000 to a gain of $1,270,000) for the twelve month period.Impacting the three and twelve months ended December 31, 2019 was a write down of assets held for sale and a loss on sale of premises and equipment that totaled $949,000.
  • Gain on sale of loans increased $719,000 and $2.4 million, respectfully, for the three and twelve months ended December 31, 2020, to $1.2 million and $4.1 million, respectively, compared to $508,000 and $1.8 million for the 2019 periods.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 $1.1 million and $110,000, respectfully, for the three and twelve months ended December 31, 2020, to $585,000 and $2.6 million, respectively, compared to $1.7 million and $2.7 million for the 2019 periods.The higher provision during the 2019 periods was primarily due to a commercial loan relationship that had become non-performing during the fourth quarter of 2019.The provision during 2020 remained elevated due to the economic uncertainty caused by the COVID-19 pandemic.
  • Basic and diluted earnings per share for the three and twelve months ended December 31, 2020 were $0.55 and $2.16, respectively. Basic earnings per share for the three and twelve months ended December 31, 2019 were $0.40 and $2.23, respectively, with diluted earnings per share of $0.39 and $2.20, respectively.
  • Return on average assets was 0.85% for the three months ended December 31, 2020, compared to 0.68% for the corresponding period of 2019. Return on average assets was 0.85% for the twelve months ended December 31, 2020, compared to 0.94% for the corresponding period of 2019.
  • Return on average equity was 9.55% for the three months ended December 31, 2020, compared to 7.22% for the corresponding period of 2019. Return on average equity was 9.66% for the twelve months ended December 31, 2020, compared to 10.54% for the corresponding period of 2019.
 
COVID-19 Activity
 
  • Approximately one third of employees working remotely.
  • As of December 31, 2020, loan modification/deferral program in place to defer payments up to 180 days for principal and/or interest with only $8.7 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 December 31, 2020 total $11.2 million.
 
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 $3.6 million for the three months ended December 31, 2020 compared to $2.4 million for the same period of 2019.  Core earnings were $13.9 million for the twelve months ended December 31, 2020, compared to $15.1 million for the same period of 2019. Core earnings per share for the three months ended December 31, 2020 were $0.51 basic and diluted, compared to $0.35 basic and $0.33 diluted core earnings per share for the same period of 2019. Core earnings per share for the twelve months ended December 31, 2020 were $1.98 basic and diluted, compared to $2.14 basic and $2.12 diluted for the same period of 2019. Core return on average assets and core return on average equity were 0.79% and 8.83% for the three months ended December 31, 2020, compared to 0.59% and 6.23% for the corresponding period of 2019. Core return on average assets and core return on average equity were 0.78% and 8.85% for the twelve months ended December 31, 2020 compared to 0.90% and 10.14% for the corresponding period of 2019. 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 and twelve months ended December 31, 2020 was 2.81% and 2.94%, compared to 3.22% and 3.31% for the corresponding periods of 2019. The decrease in the net interest margin was driven by a decrease in the yield of the loan portfolio of 28 and 16 basis points ("bps"), while the investment portfolio yield declined 80 and 65 bps, respectively, for the three and twelve month periods 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 liabilities decreased over the three and twelve months ended December 31, 2020 and these rate decreases have partially offset the decline in earning asset yield.
 
Assets
 
Total assets increased $169.3 million to $1.8 billion at December 31, 2020 compared to December 31, 2019.  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 $13.1 million to $1.3 billion at December 31, 2020 compared to December 31, 2019, 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.  The investment portfolio increased $15.5 million from December 31, 2019 to December 31, 2020 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 0.77% at December 31, 2020 from 0.92% at December 31, 2019 as non-performing loans have decreased to $10.3 million at December 31, 2020 from $12.4 million at December 31, 2019 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 $211,000 and $716,000 for the three and twelve months ended December 31, 2020 impacted the allowance for loan losses, which was 1.03% of total loans at December 31, 2020 compared to 0.88% at December 31, 2019.
 
Deposits
 
Deposits increased $170.4 million to $1.5 billion at December 31, 2020 compared to December 31, 2019.  Noninterest-bearing deposits increased $114.6 million to $449.4 million at December 31, 2020 compared to December 31, 2019.  Driving deposit growth was the receipt of PPP funding by commercial customers, stimulus funding by retail customers, and customers becoming more risk adverse and seeking safety in a bank deposit. Emphasis during 2020 has been 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 $9.2 million to $164.1 million at December 31, 2020 compared to December 31, 2019. The change in accumulated other comprehensive loss from $2.8 million at December 31, 2019 to $882,000 at December 31, 2020 is a result of an increase in unrealized gains on available for sale securities (from an unrealized gain of $2.5 million at December 31, 2019 to an unrealized gain of $4.7 million at December 31, 2020). The amount of accumulated other comprehensive loss at December 31, 2020 was also impacted by the change in net excess of the projected benefit obligation over the fair value of the plan assets of the defined benefit pension plan, resulting in an increase in the net loss of $364,000. The current level of shareholders’ equity equates to a book value per share of $23.27 at December 31, 2020 compared to $22.01 at December 31, 2019, and an equity to asset ratio of 8.95% at December 31, 2020 compared to 9.31% at December 31, 2019. Dividends declared for the twelve months ended December 31, 2020 and 2019 were $1.28 per share and $1.26 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, and Union Counties, and Luzerne Bank, which operates nine 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, 2019.
 
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
 
THIS INFORMATION IS SUBJECT TO YEAR-END AUDIT ADJUSTMENT