Williamsport, PA — January 30, 2023 - Penns Woods Bancorp, Inc. (NASDAQ: PWOD)
Penns Woods Bancorp, Inc. achieved net income of $17.4 million for the twelve months ended December 31, 2022, resulting in basic and diluted earnings per share of $2.47.
Highlights
- Net income, as reported under GAAP, for the three and twelve months ended December 31, 2022 was $4.5 million and $17.4 million, respectively, compared to $4.9 million and $16.0 million for the same periods of 2021. Results for the three and twelve months ended December 31, 2022 compared to 2021 were impacted by an increase in after-tax securities losses of $315,000 (from a gain of $284,000 to a loss of $31,000) for the three month period and an increase in after-tax securities losses of $809,000 (from a gain of $521,000 to a loss of $288,000) for the twelve month period. Three and twelve month results for the periods ended December 31, 2022 were impacted by a goodwill impairment charge of $653,000 (after-tax $516,000) related to the wealth management unit (The M Group) as a decline in stock market valuations during 2022 resulted in a decreased level of net income for this entity. Results for the twelve months ended December 31, 2022 were impacted by additional compensation expense of $183,000 (after-tax $145,000) associated with the voluntary cash settlement of 346,725 outstanding stock options. In addition, an after-tax loss of $201,000 related to a branch closure negatively impacted results for the twelve months ended December 31, 2022.
- The provision for loan losses increased $875,000 for the three months and $1.3 million for the twelve months ended December 31, 2022 to $575,000 and $1.9 million, respectively, compared to ($300,000) and $640,000 for the 2021 periods. The increases in the provision for loan losses were primarily due to the significant growth in the loan portfolio.
- Basic and diluted earnings per share for the three and twelve months ended December 31, 2022 were $0.64 and $2.47. Basic and diluted earnings per share for the three and twelve months ended December 31, 2021 were $0.69 and $2.27.
- Annualized return on average assets was 92% for three months ended December 31, 2022, compared to 1.02% for the corresponding period of 2021. Return on average assets was 0.90% for the twelve months ended December 31, 2022, compared to 0.85% for the corresponding period of 2021.
- Annualized return on average equity was 92% for the three months ended December 31, 2022, compared to 11.59% for the corresponding period of 2021. Return on average equity was 10.73% for the twelve months ended December 31, 2022, compared to 9.93% for the corresponding period of 2021.
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 and goodwill impairment, was $5.1 million for the three months ended December 31, 2022 compared to $4.6 million for the same period of 2021. Core earnings were $18.2 million for the twelve months ended December 31, 2022, compared to $15.5 million for the same period of 2021. Core earnings per share for the three months ended December 31, 2022 were $0.71 basic and diluted, compared to $0.65 basic and diluted core earnings per share for the same period of 2021. Core earnings per share for the twelve months ended December 31, 2022 were $2.58 basic and diluted, compared to $2.20 basic and diluted for the same period of 2021. Annualized core return on average assets and core return on average equity were 1.04% and 12.25% for the three months ended December 31, 2022, compared to 0.96% and 10.92% for the corresponding period of 2021. Core return on average assets and core return on average equity were 0.94% and 11.22% for the twelve months ended December 31, 2022 compared to 0.82% and 9.61% for the corresponding period of 2021. Core earnings for the twelve months ended December 31, 2022 were impacted negatively by an after-tax compensation expense of $145,000 relating to the voluntary cash settlement of 346,725 stock options along with an after-tax loss of $201,000 relating to a branch closure. 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, 2022 was 3.42% and 3.24%, compared to 2.90% and 2.85% for the corresponding periods of 2021. The increase in the net interest margin for the three and twelve month periods was driven by an increase in earning asset yield of 79 and 28 basis points ("bps") as the yield on earning assets increased during 2022 due to the rate increases enacted by the Federal Open Market Committee ("FOMC"). The three and twelve month periods ended December 31 2022 were impacted by an increase of 58 and 8 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 the utilization of excess on balance sheet liquidity during the first nine months of 2022 caused the rate paid on interest-bearing deposits to increase 19 and decrease 17 bps for the three months and twelve months ended December 31, 2022, respectively, compared to the comparable periods of 2021. The excess on balance sheet liquidity allowed deposit rates to be held at historically low levels for the majority of 2022 with rate increases occurring primarily during the fourth quarter of 2022.
Assets
Total assets increased $55.4 million to $2.0 billion at December 31, 2022 compared to December 31, 2021. Cash and cash equivalents decreased $223.5 million as interest-bearing accounts in other financial institutions decreased $181.7 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 $246.1 million to $1.6 billion at December 31, 2022 compared to December 31, 2021, as an emphasis was placed on commercial loan growth coupled with a significant increase in indirect auto lending. The investment portfolio increased $31.8 million from December 31, 2021 to December 31, 2022 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 0.30% at December 31, 2022 from 0.45% at December 31, 2021, as non-performing loans decreased to $4.9 million at December 31, 2022 from $6.3 million at December 31, 2021. 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 $449,000 for the twelve months ended December 31, 2022 impacted the allowance for loan losses, which was 0.95% of total loans at December 31, 2022 compared to 1.02% at December 31, 2021.
Deposits
Deposits decreased $64.9 million to $1.6 billion at December 31, 2022 compared to December 31, 2021. Noninterest-bearing deposits increased $24.7 million to $519.1 million at December 31, 2022 compared to December 31, 2021. Driving core deposit gathering efforts was the continued emphasis 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. Interest-bearing deposits decreased $89.6 million primarily due to a reduction in the Money Market Account portfolio coupled with the maturity of higher cost time deposits. A campaign to attract time deposits with a maturity of ten to twenty-four months was started during the latter part of 2022.
Shareholders’ Equity
Shareholders’ equity decreased $4.6 million to $167.7 million at December 31, 2022 compared to December 31, 2021. Accumulated other comprehensive loss of $14.0 million at December 31, 2022 increased from a loss of $1.1 million at December 31, 2021 as a result of a $9.8 million net unrealized loss on available for sale securities at December 31, 2022 (compared to an unrealized gain of $2.4 million at December 31, 2021) coupled with a increase in loss of $654,000 in the defined benefit plan obligation. The current level of shareholders’ equity equates to a book value per share of $23.76 at December 31, 2022 compared to $24.37 at December 31, 2021, and an equity to asset ratio of 8.40% at December 31, 2022 and 8.88% at December 31, 2021. Dividends declared for the twelve months ended December 31, 2022 and 2021 were $1.28 per share.
Penns Woods Bancorp, Inc. is the parent company of Jersey Shore State Bank, which operates seventeen 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, 2021.
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.
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Richard A. Grafmyre, Chief Executive Officer |
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110 Reynolds Street |
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Williamsport, PA 17702 |
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570-322-1111 |
e-mail: pwod@pwod.com |