FILE NAME:SEC10Q
FORM 10-Q QUARTERLY REPORT
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 10
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1995 Commission file number
0-17077
PENNS WOODS BANCORP, INC.
Incorporated in Pennsylvania 23-2226454
Main Office 115 South Main Street
Jersey Shore, Pennsylvania 17740
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 of 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that Registrant was required to file
such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [xxx] NO [ ]
On June 30, 1995 there were 844,612 shares of the Registrant's
common stock outstanding.
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<CAPTION>
PENNS WOODS BANCORP, INC.
CONSOLIDATED BALANCE SHEET
AT DATES INDICATED
June 30, December 31,
1995 1994
<S> <C> <C>
ASSETS:
Cash and due from banks $11,698,288 $12,025,441
-------------- --------------
Investment securities available-for-sale 49,439,773 60,067,442
-------------- --------------
Investment Securities held-to-maturity 3,665,875 6,757,987
-------------- --------------
Federal funds sold 8,090,000 0
-------------- --------------
Loans, net of unearned discount 154,926,272 151,491,899
-------------- --------------
Allowance for loan losses (2,329,079) (2,126,502)
-------------- --------------
Loans, net 152,597,193 149,365,397
-------------- --------------
Bank premises and equipment 3,944,802 4,068,923
Foreclosed assets held for sale 213,847 414,572
Accrued interest receivable 1,569,035 1,501,658
Other assets 1,403,850 1,436,388
-------------- --------------
TOTAL ASSETS $232,622,663 $235,637,808
============== ==============
LIABILITIES:
Demand Deposits $26,805,977 $22,812,653
Interest-bearing demand deposits 37,983,090 40,564,653
Savings deposits 47,321,880 49,963,037
Time deposits 87,676,006 77,461,433
-------------- --------------
Total deposits $199,786,953 $190,801,776
Federal funds purchased $0 $7,170,000
Securities sold under repurchase agreements 3,732,917 5,016,567
Accrued interest payable 786,526 610,911
Long-term Borrowings 0 7,000,000
Other liabilities 1,848,755 1,199,385
-------------- --------------
Total liabilities $206,155,151 $211,798,639
SHAREHOLDERS' EQUITY
Common stock, par value $10 per share,
10,000,000 shares authorized;
844,612 shares issued and outstanding
at June 30, 1995 and 1,000,000
shares authorized; 839,206 issued and
outstanding at June 30, 1994 $8,446,120 $8,437,310
Additional paid-in capital 4,397,220 4,368,147
Retained earnings 12,817,328 11,659,705
Net unrealized gain (loss) on securities
available for sale 806,844 (625,993)
-------------- --------------
Total shareholders' equity $26,467,512 $23,839,169
-------------- --------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $232,622,663 $235,637,808
============== ==============
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<CAPTION>
PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIODS INDICATED
SIX MONTHS SIX MONTHS QUARTER QUARTER
ENDED ENDED ENDED ENDED
June 30, 1995 June 30, 1994 June 30, 1995 June 30, 1994
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $7,207,776 $6,121,941 $3,654,450 $3,135,652
Interest and dividends on investments:
Taxable interest 1,139,152 1,049,140 $516,320 $529,060
Nontaxable interest 562,189 602,455 $277,362 $275,158
Dividends 199,457 197,869 $110,012 $92,937
Total Interest and dividends
on investments 1,900,798 1,849,464 $903,694 $897,155
Interest on Federal funds sold 66,362 12,858 $66,245 $9,710
Total interest income 9,174,936 7,984,263 $4,624,389 $4,042,517
INTEREST EXPENSE:
Interest on deposits 3,485,010 2,972,169 $1,813,702 $1,510,818
Interest on Federal funds purchased 65,265 81,465 $10,102 $23,949
Interest on securities sold under
repurchase agreements 84,848 51,657 $41,291 $23,948
Interest on other borrowings 195,668 217,449 $85,033 $118,848
Total interest expense 3,830,791 3,322,740 $1,950,128 $1,677,563
Net interest income 5,344,145 4,661,523 $2,674,261 $2,364,954
Provision for loan losses 200,010 302,010 $100,005 $150,005
Net interest income after provision for
loan losses 5,144,135 4,359,513 $2,574,256 $2,214,949
OTHER OPERATING INCOME:
Service charges 357,120 329,200 $185,398 $172,448
Securities gains 565,652 954,106 $282,786 $329,091
Other income 131,491 97,832 $66,002 $52,722
Total other operating income 1,054,263 1,381,138 $534,186 $554,261
OTHER OPERATING EXPENSES:
Salaries and employee benefits 2,258,365 1,641,732 $1,280,608 $841,404
Occupancy expense, net 245,437 296,297 $109,685 $138,802
Furniture and equipment expense 367,032 205,693 $220,571 $103,829
Other expenses 1,351,008 1,031,376 $603,429 $516,220
Total other operating expenses 4,221,842 3,175,098 $2,214,293 $1,600,255
INCOME BEFORE TAXES 1,976,556 2,565,553 $894,149 $1,168,955
INCOME TAX PROVISION 343,064 664,161 $53,991 $314,386
NET INCOME $1,633,492 $1,901,392 $840,158 $854,569
EARNINGS PER SHARE 1.93 2.27 0.99 1.02
TOTAL SHARES OUTSTANDING 844,612 839,026 844,612 839,026
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<CAPTION>
PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1995
UNREALIZED
APPRECIATION
ADDITIONAL (DEPRECIATION) ON TOTAL
COMMON PAID-IN RETAINED SECURITIES SHAREHOLDERS'
STOCK CAPITAL EARNINGS AVAILABLE-FOR-SALE EQUITY
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994
As previously reported $7,416,200 $4,394,542 $9,905,264 ($497,615) $21,218,391
Adjustments in connection
with pooling of interest 1,021,110 (26,395) 1,754,441 (128,378) 2,620,778
Balance, December 31, 1994
As restated $8,437,310 $4,368,147 $11,659,705 ($625,993) $23,839,169
Net income for the six months ended
June 30, 1995 1,633,492 1,633,492
Dividends declared and paid (475,869) (475,869)
Net change in unrealized gain on
marketable equity securities 1,432,837 1,432,837
Stock options exercised 8,810 29,073 37,883
Balance, June 30, 1995 $8,446,120 $4,397,220 $12,817,328 $806,844 $26,467,512
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CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE QUARTERS ENDED JUNE 30, 1995 AND JUNE 30, 1994
JUNE 30 JUNE 30
1995 1994
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $1,633,492 $1,901,392
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 170,811 135,656
Provision for loan losses 302,000 302,010
Amortization of investment security premiums 23,225 34,476
Accretion of investment security discounts (52,360) (32,748)
Securities losses(gains) (565,652) (954,106)
Salary expense recognized in relation to exercise
of stock options 37,883 0
Increase in all other assets (402,068) (839,055)
Increase in all other liabilities 824,985 391,009
------------- -------------
Net cash provided by operating activities 1,972,316 938,634
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities available-for-sale (19,074,901) (30,418,385)
Proceeds from sale of securities available-for-sale 31,705,476 33,443,399
Purchase of securities held-to-maturity (50,000) 0
Proceeds from calls and maturities of
securities held-to-maturity 3,817,458 0
Net increase in loans (3,533,796) (6,676,929)
Decrease in foreclosed assets 200,725 219,028
Acquisition of bank premises and equipment (330,089) (201,193)
------------- -------------
Net cash provided by (used in) investing activities 12,734,873 (3,634,080)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in interest-bearing deposits 4,991,853 8,130,992
Net increase (decrease) in noninterest-bearing deposits 3,993,324 2,130,304
Net decrease in sec. sold under repurch. agree. (1,283,650) (811,400)
Decrease in other borrowed funds (7,170,000) (3,848,800)
Increase in long-term borrowings 0 1,175,000
Repayment of long-term borrowings (7,000,000) 0
Dividends paid (475,869) (415,307)
Net cash provided by (used in) financing activities (6,944,342) 6,360,789
NET INCREASE IN CASH AND CASH EQUIVALENTS 7,762,847 3,665,343
CASH AND CASH EQUIVALENTS, BEGINNING 12,025,441 12,980,957
------------- -------------
CASH AND CASH EQUIVALENTS, ENDING $19,788,288 $16,646,300
============= =============
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<CAPTION>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS INDICATED
PENNS WOODS LOCK HAVEN CONSOLIDATED
SAVINGS BANK
SIX MONTHS SIX MONTHS ADJUSTMENTS SIX MONTHS
ENDED ENDED ENDED
June 30, 1994 June 30, 1994 N/A June 30, 1994
-------------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $4,953,336 $1,168,605 $6,121,941
-------------- -------------- ----------- --------------
Interest and dividends on investments:
Taxable interest 807,518 241,622 1,049,140
Nontaxable interest 602,455 0 602,455
Dividends 190,160 7,709 197,869
-------------- -------------- ----------- --------------
Total Interest and dividends
on investments 1,600,133 249,331 1,849,464
Interest on Federal funds sold 12,858 0 12,858
-------------- -------------- ----------- --------------
Total interest income 6,566,327 1,417,936 7,984,263
-------------- -------------- ----------- --------------
INTEREST EXPENSE:
Interest on deposits 2,392,461 579,708 2,972,169
Interest on Federal funds purchased 81,465 0 81,465
Interest on securities sold under
repurchase agreements 51,657 0 51,657
Interest on other borrowings 214,936 2,513 217,449
-------------- -------------- ----------- --------------
Total interest expense 2,740,519 582,221 3,322,740
-------------- -------------- ----------- --------------
Net interest expense 3,825,808 835,715 4,661,523
Provision for loan losses 300,010 2,000 302,010
-------------- -------------- ----------- --------------
Net interest income after provision for 3,525,798 833,715 4,359,513
loan losses -------------- -------------- ----------- --------------
OTHER OPERATING INCOME:
Service charges 298,152 31,048 329,200
Securities gains 947,200 6,906 954,106
Other income 89,150 8,682 97,832
-------------- -------------- ----------- --------------
Total other operating income 1,334,502 46,636 1,381,138
-------------- -------------- ----------- --------------
OTHER OPERATING EXPENSES:
Salaries and employee benefits 1,381,881 259,851 1,641,732
Occupancy expense, net 219,510 76,787 296,297
Furniture and equipment expense 152,163 53,530 205,693
Other expenses 851,631 179,745 1,031,376
-------------- -------------- ----------- --------------
Total other operating expenses 2,605,185 569,913 3,175,098
INCOME BEFORE TAXES 2,255,115 310,438 2,565,553
INCOME TAX PROVISION 547,751 116,410 664,161
-------------- -------------- ----------- --------------
NET INCOME $1,707,364 $194,028 1,901,392
============== ============== =========== ==============
EARNINGS PER SHARE $2.30 $1.94 $2.26
============== ============== =========== ==============
TOTAL SHARES OUTSTANDING 741,620 99,926 841,546
============== ============== =========== ==============
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<CAPTION>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS INDICATED
PENNS WOODS LOCK HAVEN CONSOLIDATED
SAVINGS BANK
THREE MONTHS THREE MONTHS ADJUSTMENTS THREE MONTHS
ENDED ENDED ENDED
June 30, 1994 June 30, 1994 N/A June 30, 1994
-------------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $2,556,710 $578,942 $3,135,652
-------------- -------------- ----------- --------------
Interest and dividends on investments:
Taxable interest 398,931 130,129 529,060
Nontaxable interest 275,158 0 275,158
Dividends 89,121 3,816 92,937
-------------- -------------- ----------- --------------
Total Interest and dividends
on investments 763,210 133,945 897,155
Interest on Federal funds sold 9,710 0 9,710
-------------- -------------- ----------- --------------
Total interest income 3,329,630 712,887 4,042,517
-------------- -------------- ----------- --------------
INTEREST EXPENSE:
Interest on deposits 1,217,534 293,284 1,510,818
Interest on Federal funds purchased 23,949 0 23,949
Interest on securities sold under
repurchase agreements 23,948 0 23,948
Interest on other borrowings 116,335 2,513 118,848
-------------- -------------- ----------- --------------
Total interest expense 1,381,766 295,797 1,677,563
-------------- -------------- ----------- --------------
Net interest expense 1,947,864 417,090 2,364,954
Provision for loan losses 150,005 0 150,005
-------------- -------------- ----------- --------------
Net interest income after provision for 1,797,859 417,090 2,214,949
loan losses -------------- -------------- ----------- --------------
OTHER OPERATING INCOME:
Service charges 155,907 16,541 172,448
Securities gains 322,185 6,906 329,091
Other income 51,974 748 52,722
-------------- -------------- ----------- --------------
Total other operating income 530,066 24,195 554,261
-------------- -------------- ----------- --------------
OTHER OPERATING EXPENSES:
Salaries and employee benefits 707,254 134,150 841,404
Occupancy expense, net 103,766 35,036 138,802
Furniture and equipment expense 77,668 26,161 103,829
Other expenses 422,353 93,867 516,220
-------------- -------------- ----------- --------------
Total other operating expenses 1,311,041 289,214 1,600,255
INCOME BEFORE TAXES 1,016,884 152,071 1,168,955
INCOME TAX PROVISION 259,349 55,037 314,386
-------------- -------------- ----------- --------------
NET INCOME $757,535 $97,034 854,569
============== ============== =========== ==============
EARNINGS PER SHARE $1.02 $0.97 $1.02
============== ============== =========== ==============
TOTAL SHARES OUTSTANDING 741,620 99,926 841,546
============== ============== =========== ==============
</TABLE>
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<CAPTION>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODS INDICATED
PENNS WOODS LOCK HAVEN CONSOLIDATED
SAVINGS BANK
THREE MONTHS THREE MONTHS ADJUSTMENTS THREE MONTHS
ENDED ENDED ENDED
March 31, 1995 March 31, 1995 N/A March 31, 1995
-------------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $2,977,999 $575,327 $3,553,326
-------------- -------------- ----------- --------------
Interest and dividends on investments:
Taxable interest 496,676 126,156 622,832
Nontaxable interest 284,827 0 284,827
Dividends 86,363 4,082 89,445
-------------- -------------- ----------- --------------
Total Interest and dividends
on investments 866,866 130,238 997,104
Interest on Federal funds sold 117 0 117
-------------- -------------- ----------- --------------
Total interest income 3,844,982 705,565 4,550,547
-------------- -------------- ----------- --------------
INTEREST EXPENSE:
Interest on deposits 1,382,948 288,360 1,671,308
Interest on Federal funds purchased 55,163 0 55,163
Interest on securities sold under
repurchase agreements 43,557 0 43,557
Interest on other borrowings 110,635 0 110,635
-------------- -------------- ----------- --------------
Total interest expense 1,592,303 288,360 1,880,663
-------------- -------------- ----------- --------------
Net interest expense 2,252,679 417,205 2,669,884
Provision for loan losses 100,005 0 100,005
-------------- -------------- ----------- --------------
Net interest income after provision for 2,152,674 417,205 2,569,879
loan losses -------------- -------------- ----------- --------------
OTHER OPERATING INCOME:
Service charges 156,913 14,809 171,722
Securities gains 282,866 0 282,866
Other income 62,517 2,972 65,489
-------------- -------------- ----------- --------------
Total other operating income 502,296 17,781 520,077
-------------- -------------- ----------- --------------
OTHER OPERATING EXPENSES:
Salaries and employee benefits 793,361 184,396 977,757
Occupancy expense, net 99,330 36,422 135,752
Furniture and equipment expense 103,288 43,178 146,461
Other expenses 653,229 94,350 747,579
-------------- -------------- ----------- --------------
Total other operating expenses 1,649,203 358,346 2,007,549
INCOME BEFORE TAXES 1,005,767 76,640 1,082,407
INCOME TAX PROVISION 260,073 29,000 289,073
-------------- -------------- ----------- --------------
NET INCOME $745,694 $47,640 $793,334
============== ============== =========== ==============
EARNINGS PER SHARE $1.01 $0.45 $0.94
============== ============== =========== ==============
TOTAL SHARES OUTSTANDING 741,620 105,492 847,112
============== ============== =========== ==============
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PENNS WOODS BANCORP, INC.
AND SUBSIDIARIES
PART I FINANCIAL STATEMENTS:
The interim financial statements are unaudited but, in the
opinion of management, reflect all adjustments necessary for
the fair presentation of results for such periods. The
results of operations for any interim period are not
necessarily indicative of results for the full year. These
financial statements should be read in conjunction with
financial statements and notes thereto contained in the
Company's annual report for the year ended December 31,
1995.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
EARNINGS SUMMARY
Merger Activity
On September 15, 1994 Penns Woods Bancorp, Inc.
executed an Agreement and Plan of Merger to acquire
Lock Haven Savings Bank in a business combination.
On April 7, 1995 (the "Effective Date") Penns Woods
Bancorp, Inc. ("Penns Woods") completed the merger of
Lock Haven Savings Bank, a Pennsylvania-chartered
savings bank, with and into Jersey Shore State Bank, a
wholly-owned subsidiary of Penns Woods. On the
Effective Date, Lock Haven merged with, into and under
the charter of Jersey Shore, with Jersey Shore
surviving the merger, the separate existence of Lock
Haven ceased, and all property, rights, powers, duties,
obligations and liabilities of Lock Haven were
automatically transferred to Jersey Shore.
On the Effective Date each outstanding share of Lock
Haven common stock was automatically converted into one
share of Penns Woods common stock. A total of 102,992
shares of Penns Woods common stock were issued in the
merger (2,500 share of Lock Haven common stock held by
Penns Woods were cancelled in connection with the
completion of the merger).
The merger was treated as a pooling of interest for
financial accounting purposes and constitutes a tax
free reorganization for federal income tax purposes.
The financial information of Penns Woods at and for the
six month period ended June 30, 1995 reflect the
combined business and operations of Penns Woods and
Lock Haven.
Interest Income
For the six months ended June 30, 1995, total interest
income increased by $1,190,673 or 14.91% compared to the
same period in 1994. This increase is due to a $1,085,835
increase in interest and fees on loans, an increase in total
interest and dividends on investments of $51,334 and an
$53,504 increase in income in federal funds sold.
The increase in interest and fees on loans of $1,085,835 was
primarily due to a 1.75% increase in the prime lending rate
as well as an increase in loan volume during this period of
$10,440,618. The increase in interest on federal funds sold
of $53,504 was due to an increase in the amount of funds
sold. Interest and dividends on investments increased
primarily due to an increase in taxable interest of $90,012
and a decrease in nontaxable interest on investments of
$40,266. In addition, there was a slight increase in
dividend income of $1,588 due to an increase of holdings in
the equity portfolio.
Interest Expense
For the six months ended June 30, 1995, total interest
expense increased $508,051 or 15.29% over the same period in
1994. This increase is primarily the result of an increase
in the amount of interest paid on deposits due to increases
in the rates paid on such deposits. Another contributing
factor to the increase in interest paid on interest bearing
deposits was the increase in volume of such deposits of
$4,879,013.
Provision for Loan Losses
The provision for losses for the six months ended June 30,
1995 decreased $102,000 from the corresponding period in
1994. This decrease reflects a decline in anticipated
losses on small business loans for the first six months of
1995 and the fiscal year.
As of the second quarter of 1995 recoveries exceeded charge
offs by $3,000 compared to the second quarter of 1994 when
charge offs exceeded recoveries by $268,000. Provisions to
date total $200,010 as compared to provisions through
June 30, 1994 of $302,010.
Senior Management utilizes several different methods to
determine the adequacy of the loan loss allowance and to
establish quarterly provisions. Among these methods is the
analysis of the most recent five year average loss history,
the coverage of non-performing loans provided by the
allowance, an estimate of potential loss in homogeneous
pools of loans and the internal credit rating assigned to
watch and problem loans.
In addition to the preceding senior management also reviews
macro portfolio risks such as the absence of concentrations,
absence of foreign credit exposure and growth objectives in
further tuning the allowance and provisions.
The ratio of non-accruing loans and those accruing but
delinquent more than 90 days (collectively called "non-
performing" loans) to the allowance for loan losses stood at
.82 times at June 30, 1995 an improvement over the .73 times
at December 31, 1994. Based upon this analysis as well as
the others noted above, senior management has concluded that
the allowance for loan losses is adequate.
Other Operating Income
Other operating income for the six months ended June 30,
1995 decreased $326,875 or 24% over the same time period in
1994. This decrease is due to the net effect of an increase
in service charges collected of $27,920, a decrease in
securities gains realized of $388,454, and an increase in
other income of $33,659.
The increase in service charges was a result of an increase
in service charges collected on deposit accounts, and a gain
taken on the sale of a foreclosed asset during the second
quarter was the contributing factor to the increase in other
income. The primary decrease in other operating income was
due to the decline in securities gains recognized of
$388,454. Realized gains were on partial sales of equity
securities that have been in the portfolio long-term that
had reached what management had determined to be their
maximum potential.
Other Operating Expense
For the six months ended June 30, 1995 total operating
expenses increased $1,046,744 or 32.97% over the same period
in 1994. Expenses included under this heading are such
items as: advertising, postage, maintenance, FDIC, SAIF and
other insurance, Pennsylvania State shares tax, legal and
professional fees, telephone, printing and supplies and
other general and administrative expenses. Increases in
other expenses totalled $319,632. This increase can be
attributed to expenses related to the acquisition of Lock
Haven Savings Bank and are non-recurring.
In addition, employee salaries and benefits increased
$616,633 because of the need to hire additional employees
and to raise salary levels to keep pace with inflation.
Occupancy expense decreased $50,860. Furniture and
equipment expense increased $161,339 resulting from the
lease of a new computer system.
Provision for Income Taxes
Provision for income taxes for the six months ended June 30,
1995 resulted in an effective income tax rate of 17.35%
compared to 25.89% for the corresponding period in 1994.
The slight decrease noted is primarily a result of a
decrease in security gains for the June 30, 1995 period
compared to June 30, 1994 as well as an increase in taxable
interest on investments for the same periods.
ASSET/LIABILITY MANAGEMENT
Assets
At June 30, 1995, cash, federal funds sold, and investment
securities totalled $72,893,936, or a net decrease of $5,596,934
over the corresponding balance at December 31, 1994. Investment
securities and cash decreased $13,719,781 and $327,153,
respectively, while federal funds sold increased $8,090,000.
During this period, net loans increased by $3,231,796 to
$152,597,193.
The investment securities decline is temporary due to the
maturity of certain securities during the first quarter of 1995.
In addition, subsequent to the acquisition of Lock Haven Savings
Bank, management reviewed the acquired portfolio and made the
decision to diversify the investments. The intention is to
strengthen and improve the future long-term yield on the
portfolio.
Management evaluates credit risk, anticipated economic conditions
and other relevant factors impacting the quality of the loan
portfolio in order to establish an adequate loan-loss allowance.
An internal credit review committee monitors loans in accordance
with Federal supervisory standards. Furthermore, results of
examination and appraisal of the coverage of the loan-loss
allowance by the committee, Federal regulators and independent
accountants are frequently reviewed by management.
Accordingly, on a quarterly basis, management determines an
appropriate provision for possible loan losses from earnings in
order to maintain allowance coverage relative to potential
losses.
The allowance for loan losses totalled $2,329,079 at June 30,
1995, an increase of $202,577 over the balance at December 31,
1994. For the six months ended June 30, 1995, the provision for
loan losses totalled $200,010. As a percent of loans, the
allowance for loan losses at June 30, 1995 totalled 1.50% versus
1.59% at December 31, 1994.
Loans accounted for on a non-accrual basis totalled $2,052,000
and $2,223,000 at June 30, 1995 and December 31, 1994
respectively.
Accruing loans, contractually delinquent 90 days or more were
$777,000 at June 30, 1995 and $672,000 at December 31, 1994.
These loans are predominately secured by first lien mortgages on
residential real estate where appraisal values mitigate any
potential loss of interest and principal. The ratio of non-
accruing loans and those accruing but delinquent more than
90 days to the allowance for loan losses stood at .82 times at
June 30, 1995 and .73 times at December 31, 1994. Presently the
portfolio has no loans that meet the definition of "trouble debt
restructurings" under FAS 15.
A watch list of potential problem loans is maintained and updated
quarterly by an internal credit review committee. At this time
only one credit of substance in the amount of $299,000 has the
potential to become more than 90 days delinquent.
The Bank has not had nor presently has any foreign outstandings.
In addition, no known concentrations of credit presently exist.
At June 30, 1995 the balance of other real estate was $213,847
compared to $414,572 at December 31, 1994. During the first
quarter of 1995, two properties were transferred into the account
and subsequently sold during the first quarter of 1995. In
addition one property that was on the books at December 31, 1994
was sold during the second quarter of 1995.
Deposits
At June 30, 1995, total deposits amounted to $199,786,953
representing an increase of $8,985,177 or a 4.71% increase over
total deposits at December 31, 1994.
Other Liabilities
At June 30, 1995, other liabilities totalled $1,848,755 or a
$649,370 increase over the balance at December 31, 1994. This
increase is primarily due to a deferred tax liability on the
unrealized gain in the investment portfolio.
Capital
The adequacy of the Company's capital is reviewed on an ongoing
basis with reference to the size, composition and quality of the
Company's resources and regulatory guidelines. Management seeks
to maintain a level of capital sufficient to support existing
assets and anticipated asset growth, maintain favorable access to
capital markets and preserve high quality credit ratings. The
capital requirements of the Pennsylvania Department of Banking
are 6%. The capital requirements of the Federal Deposit
Insurance Corporation are:
1. Regulatory capital to total assets 6%.
2. Primary capital to total assets 5-1/2%.
At June 30, 1995, regulatory capital to total assets was 11.38%
compared to 10.11% at December 31, 1994. Primary capital to
total assets at June 30, 1995 was 12.38% compared to 11.01% at
December 31, 1994.
The Federal Reserve Board, the FDIC and the OCC have issued
certain risk-based capital guidelines, which supplement existing
capital requirements. The guidelines require all United States
banks and bank holding companies to maintain a minimum risk-based
capital ratio of 8.00% (of which at least 4.00% must be in the
form of common stockholders' equity). Assets are assigned to
five risk categories, with higher levels of capital being
required for the categories perceived as representing greater
risk. The required capital will represent equity and (to the
extent permitted) nonequity capital as a percentage of total
risk-weighted assets. The risk-based capital rules are designed
to make regulatory capital requirements more sensitive to
differences in risk profiles among banks and bank holding
companies and to minimize disincentives for holding liquid
assets.
Capital is being maintained in compliance with the new risk-based
capital guidelines. The Company's Tier 1 Capital to total risk
weighted assets ratio is 15.62% and the total capital ratio to
total risk weighted assets ratio is 17.04%.
Liquidity and Interest Rate Sensitivity
The asset/liability committee addresses the liquidity needs of
the Bank to see that sufficient funds are available to meet
credit demands and deposit withdrawals as well as to the
placement of available funds in the investment portfolio. In
assessing liquidity requirements, equal consideration is given to
the current position as well as the future outlook.
The following liquidity measures are monitored and kept within
the limits cited.
1. Net Loans to Total Assets, less than 70%
2. Net Loans to Total Deposits, less than 80%
3. Net Loans to Core Deposits, less than 85%
4. Investments to Total Assets, less than 40%
5. Investments to Total Deposits, less than 50%
6. Net Primary Liquid Assets to Total Assets, greater than
10%
7. Net Primary Liquid Assets to Total Liabilities, greater
than 10%
8. Total Liquid Assets to Total Assets, greater than 25%
9. Total Liquid Assets to Total Liabilities, greater than
25%
The Bank has maintained a liquidity level at or above the
guidelines of the F.D.I.C. and the Pennsylvania Department of
Banking. The Bank has available to it Federal Funds lines of
credit totalling $25,630,000 from correspondent banks should the
need for short-term funds arise.
The following table sets forth the Bank's interest rate
sensitivity as of June 30, 1995:
<TABLE>
<CAPTION>
AFTER ONE AFTER FIVE AFTER
WITHIN BUT WITHIN BUT WITHIN TEN
ONE YEARFIVE YEARS TEN YEARS YEARS
<S> <C> <C> <C> <C>
Earning Assets(1)(2) $85,594 $ 31,412 $44,012 $45,646
Interest-bearing
liabilities(3) 79,313 61,204 666 85
_______ ________ _______ _______
Gap:
By period 6,281 (29,792) 43,346 45,561
By cumulative $ 6,281 $(23,511) $19,835 $65,396
_______ ________ _______ _______
Earning assets:
Investments(1) $25,661 $ 5,405 $18,935 $ 1,737
Loans(2) 59,933 26,007 25,077 43,909
Interest-bearing
liabilities(3)
Interest-bearing
deposits $79,313 $ 61,204 $ 666 $ 85
Long-term
borrowings 0 0 0 0
<FN>
(1) Investment balances include annual repayment
assumptions of 6%. Mortgage backed securities and
certain other securities include repayment assumptions
based on the terms of the securities.
(2) Loan balances include annual repayment assumptions
based on the projected cash flow from the loan
portfolio. The cash flow projections are based on the
terms of the credit facilities. No assumptions are
made regarding prepayment of loans. Loans are
presented net of deferred loan fees and include loans
held for resale and allowance for loan losses.
(3) The Corporation considers one-half of its regular
saving deposits to be stable core deposits, and
accordingly has classified 50% of such deposits in the
"Within One Year category" and 50% in the "After One
but Within Five years" category. All other interest-
bearing demand deposits are classified in the "Within
One Year" category and time deposits are categorized
according to scheduled maturity.
</TABLE>
In reference to the attached financial statements, all
adjustments are of a normal recurring nature pursuant to Rule 10-
01 (b) (8) of Regulation SX.<PAGE>
Part II. OTHER INFORMATION
Item 4. Submission of matters to vote of security holders.
The 1995 Annual Meeting of Shareholders (the "Meeting")
of the Company was held on June 27, 1995. Notice of
the Meeting was mailed to shareholders on or about
May 5, 1995, together with proxy solicitation materials
prepared in accordance with Section 14(a) of the
Securities Exchange Act of 1934, as amended, and the
regulations promulgated thereunder.
The Meeting was held for the following purposes:
1. to elect four (4) Class 1 Directors, to serve for
a three-year term that will expire in 1998, and
until their successors are elected and qualified
(Matter No. 1);
2. to vote on a proposed amendment to the Articles of
Incorporation, of the Corporation, to increase the
number of authorized shares from one million
(1,000,000) to ten million (10,000,000) shares
(Matter No. 2);
3. to ratify the appointment by the Corporation's
Board of Directors of Parente, Randolph, Orlando,
Carey & Associates of Williamsport, Pennsylvania,
Certified Public Accountants, as the independent
auditors for the Corporation for the year ending
December 31, 1995; (Matter No. 3); and
4. to transact such other business as may properly
come before the Annual Meeting, and any
adjournment or postponement thereof (Matter
No. 4).
There was no solicitation in opposition to the nominees
of the Board of Directors for election to the Board of
Directors. All nominees of the Board of Directors were
elected. The number of votes cast for or withheld, as
well as the number of abstentions and broker nonvotes
for each of the nominees for election to the Board of
Directors were as follows:
Abstentions
and Broker
Nominee For Withheld Nonvotes
- ------- ------- -------- -----------
Allan W. Lugg 638,633 - -
R. Edward Nestlerode 631,055 - -
Howard M. Thompson 636,839 - -
William F. Williams, Jr. 636,769 - -
Matter Nos. 2 and 3 were approved by shareholders at the Meeting.
The votes cast on each of these Matters were as follows:
For Against Abstain
------- ------- -------
Matter No. 2 609,154 19,225 10,496
Matter No. 3 634,468 2,700 1,707
No other matters were brought before the Meeting.
Item 6. Exhibits and reports on Form 8-K.
a. Exhibits:
(2) Plan of acquisition (incorporated herein by
reference to Form S-4, Registration Statement,
filed on December 9, 1994).<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
PENNS WOODS BANCORP, INC.
(Registrant)
Date: August 8, 1995 /s/ Theodore H. Reich
Theodore H. Reich, President
Date: August 8, 1995 /s/ Sonya E. Hartranft
Sonya E. Hartranft, Controller
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START) JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 9,851
<INT-BEARING-DEPOSITS> 1,847
<FED-FUNDS-SOLD> 8,090
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 49,440
<INVESTMENTS-CARRYING> 3,666
<INVESTMENTS-MARKET> 0
<LOANS> 154,926
<ALLOWANCE> 2,329
<TOTAL-ASSETS> 232,623
<DEPOSITS> 199,787
<SHORT-TERM> 4,519
<LIABILITIES-OTHER> 0
<LONG-TERM> 1,849
<COMMON> 8,446
0
0
<OTHER-SE> 18,022
<TOTAL-LIABILITIES-AND-EQUITY> 232,623
<INTEREST-LOAN> 7,208
<INTEREST-INVEST> 1,901
<INTEREST-OTHER> 66
<INTEREST-TOTAL> 9,175
<INTEREST-DEPOSIT> 3,485
<INTEREST-EXPENSE> 346
<INTEREST-INCOME-NET> 5,344
<LOAN-LOSSES> 200
<SECURITIES-GAINS> 566
<EXPENSE-OTHER> 4,222
<INCOME-PRETAX> 1,976
<INCOME-PRE-EXTRAORDINARY> 1,976
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,633
<EPS-PRIMARY> 1.93
<EPS-DILUTED> 0
<YIELD-ACTUAL> 0
<LOANS-NON> 2,052
<LOANS-PAST> 777
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,995
<CHARGE-OFFS> 128
<RECOVERIES> 131
<ALLOWANCE-CLOSE> 2,329
<ALLOWANCE-DOMESTIC> 2,329
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
