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April 18, 2017

Penns Woods Bancorp, Inc. Reports First Quarter 2017 Earnings

Williamsport, PA — April 18, 2017 - Penns Woods Bancorp, Inc. (NASDAQ: PWOD)

Penns Woods Bancorp, Inc. continued its solid earnings, supported by loan and deposit growth, 
achieving net income of $2,686,000 for the three months ended March 31, 2017 resulting in basic and dilutive earnings per share of $0.57 and $0.56 respectively.



•  Net income from core operations (“operating earnings”), which is a non-generally accepted accounting principles (GAAP) measure of net income excluding net securities gains, was $2,555,000 for the three months ended March 31, 2017 compared to $2,764,000 for the same period of 2016. The decline was attributable to several factors including the continued shift of earning assets from the investment portfolio to the loan portfolio as the balance sheet is actively managed to reduce market risk and interest rate risk in a rising rate environment. In addition, the effective tax rate has increased due to the conclusion of the ten year tax credit generation period of several low income elderly housing projects in our market footprint in which the company participates.

• Operating earnings per share for the three months ended March 31, 2017 were $0.54 for both basic 
and dilutive, a decrease from $0.58 for basic and dilutive for the same period of 2016.

• Return on average assets was 0.79% for the three months ended March 31, 2017 compared to 0.94% 
for the corresponding period of 2016.

• Return on average equity was 7.69% for the three months ended March 31, 2017 compared to 8.95% 
for the corresponding period of 2016.

“The focus during the first quarter of 2017 can be summed up in a single word, future. The earning asset portfolio continued to add high quality assets while shifting revenue generation from the investment portfolio to loan portfolio. The indirect auto lending program that started in 2016 in a limited market area has been a success and will be expanded to the entire market area during the second quarter. While the balance sheet was preparing for the future, so was the branch network. Numerous maintenance projects to allow for a more efficient customer experience have been completed or are in process, including a complete remodel of the Williamsport lobby and customer service areas. Site preparation was started on two branch sites and two other sites are in the design phase. Preparing the organization for the future, whether in the form of new product implementation, infrastructure additions and improvements, or the addition of team members does cause a short-term drag on earnings. However, our outlook is not focused solely on tomorrow but rather building towards the long-term success of the company,” said Richard A. Grafmyre, CFP®, President and CEO.

Net Income

Net income, as reported under GAAP, for the three months ended March 31, 2017 was $2,686,000 compared to $3,078,000 for the same period of 2016. Results for the three months ended March 31, 2017 compared to 2016 were impacted by a decrease in after-tax securities gains of $183,000 (from a gain of $314,000 to a gain of $131,000) for the three month periods. Basic and dilutive earnings per share for the three months ended March 31, 2017 were $0.57 and $0.56 compared to $0.65 basic and dilutive for the corresponding period of 2016. Return on average assets and return on average equity were 0.79% and 7.69% for the three months ended March 31, 2017 compared to 0.94% and 8.95% for the corresponding period of 2016.

Net Interest Margin

The net interest margin for the three months ended March 31, 2017 was 3.40% compared to 3.57% for the corresponding period of 2016. The decline in the net interest margin was driven by a decreasing yield on the investment portfolio due to the continued lower than historical rate environment that limits the yield that we can acquire into the portfolio and our strategic decision to continue re-positioning the portfolio through active management in anticipation of a steadily rising rate environment. The impact of the declining investment portfolio yield and decreasing investment portfolio balance was partially offset by a 6.71% growth in gross loans from March 31, 2016 to March 31, 2017. The loan growth was funded by an increase in core deposits and a decrease in the investment portfolio. Core deposits represent a lower cost funding source than time deposits and comprise 82.32% of total deposits at March 31, 2017 and 79.22% at March 31, 2016.


Total assets increased $82,571,000 to $1,400,708,000 at March 31, 2017 compared to March 31, 2016. Net loans increased $69,325,000 to $1,098,195,000 at March 31, 2017 compared to March 31, 2016 primarily due to campaigns related to increasing home equity product market share during 2016 and 2017, growth in the commercial loan portfolio, and the introduction of indirect auto lending during the third quarter of 2016. The investment portfolio decreased $16,859,000 from March 31, 2016 to March 31, 2017 due to our strategy to reduce the investment portfolio duration through the selective selling of bonds as opportunities develop. The combination of loan portfolio growth and a decrease in the size of the investment portfolio has resulted in shortening the overall earning asset portfolio duration consistent with a strategy to reduce the interest rate and market risk exposure to a rising rate environment.

Non-performing Loans

The non-performing loans to total loans ratio decreased to 0.98% at March 31, 2017 from 1.12% at March 31, 2016 as non- performing loans have decreased to $10,870,000 at March 31, 2017 from $11,648,000 at March 31, 2016. The majority of non- performing loans are centered on 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 $321,000 for the three months ended March 31, 2017 minimally impacted the allowance for loan losses which was 1.16% of total loans at March 31, 2017. The majority of the loans charged-off had a specific allowance within the allowance for loan losses.


Deposits increased $101,083,000 to $1,160,664,000 at March 31, 2017 compared to March 31, 2016. Core deposits (total deposits excluding time deposits) increased $116,092,000 due to our commitment to building complete banking relationships with our customers. Noninterest-bearing deposits increased $43,030,000 to $312,392,000 at March 31, 2017 compared to March 31, 2016. Driving this growth is our commitment to easy-to-use products, community involvement, and emphasis on customer service. While deposit gathering efforts have centered on core deposits, the lengthening of the time deposit portfolio continues to move forward as part of the strategy to build balance sheet protection in a rising rate environment.

Shareholders’ Equity

Shareholders’ equity increased $1,450,000 to $139,113,000 at March 31, 2017 compared to March 31, 2016. The change in accumulated other comprehensive loss from $2,708,000 at March 31, 2016 to $4,544,000 at March 31, 2017 is a result of an increase in unrealized losses on available for sale securities from an unrealized gain of $1,324,000 at March 31, 2016 to an unrealized loss of $281,000 at March 31, 2017. The amount of accumulated other comprehensive loss at March 31, 2017 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 $231,000 to $4,263,000 at March 31, 2017. The current level of shareholders’ equity equates to a book value per share of $29.38 at March 31, 2017 compared to $29.09 at March 31, 2016 and an equity to asset ratio of 9.93% at March 31, 2017 compared to 10.44% at March 31, 2016. Excluding goodwill and intangibles, book value per share was $25.41 at March 31, 2017 compared to $25.03 at March 31, 2016. Dividends declared for the three months ended March 31, 2017 and 2016 were $0.47 per share.

Penns Woods Bancorp, Inc. is the parent company of Jersey Shore State Bank, which operates fifteen branch offices providing financial services in Lycoming, Clinton, Centre, Montour, and Union 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.

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, 2016.

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

Richard A. Grafmyre, President and Chief Executive Officer
300 Market Street, Williamsport, PA 17701
e-mail: [email protected]