secQ698
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 , 1998 Commission file number
0-17077
PENNS WOODS BANCORP, INC.
Incorporated in Pennsylvania
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 or
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 [ X ] NO[ ]
On June 30, 1998 there were 2,569,558 shares of the
Registrant's common stock outstanding.
PART I FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PENNS WOODS BANCORP, INC.
CONSOLIDATED BALANCE SHEET
AT DATES INDICATED
June 30, December 31,
1998 1997
--------------------------------
(IN THOUSANDS)
<S> <C>
ASSETS:
Cash and due from banks $8,546 $12,557
Investment securities available-for-s 93,452 75,400
Investment securities held-to-maturit 3,055 3,234
Loans, net of unearned discount 194,883 187,567
Allowance for loan and lease losses (2,436) (2,414)
Loans, net 192,447 185,153
Bank premises and equipment, net 3,834 3,835
Foreclosed assets held for sale 0 35
Accrued interest receivable 1,751 1,708
Other assets 4,169 2,066
--------------------------------
TOTAL ASSETS $307,254 $283,988
================================
LIABILITIES:
Demand Deposits $34,609 $35,811
Interest-bearing demand deposits 38,329 38,499
Savings deposits 44,715 43,399
Time deposits 104,806 102,827
--------------------------------
Total deposits $222,459 $220,536
Federal funds purchased 2,610 6,980
Securities sold under repurchase agre 10,954 8,580
Accrued interest payable 965 907
Other Liabilities 4,944 4,011
Long-term borrowings 20,000 0
Total liabilities --------------------------------
$261,932 $241,014
--------------------------------
SHAREHOLDERS' EQUITY:
Common stock, par value $10 per share,
10,000,000 shares authorize $25,696 $12,828
Stock dividend distributable 0 12,828
Additional paid-in capital 4,707 4,712
Retained earnings 8,859 6,621
Accumulated other comprehensive income 6,060 5,985
--------------------------------
Total shareholders' equity $45,322 $42,974
--------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $307,254 $283,988
================================
</TABLE>
PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIODS INDICATED
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS QUARTER QUARTER
ENDED ENDED ENDED ENDED
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
----------------------------------------------------------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C>
INTEREST INCOME:
Interest and fees on loans $8,795 $7,684 $4,493 $3,865
Interest and dividends on investments----------------------------------------------------------------
Taxable interest 1,368 1,408 723 684
Nontaxable interest 456 748 242 311
Dividends 338 253 144 122
----------------------------------------------------------------
Total interest and dividends
on investments 2,162 2,409 1,109 1,117
Interest on Federal funds s 0 52 0 52
----------------------------------------------------------------
Total interest income 10,957 10,145 5,602 5,034
----------------------------------------------------------------
INTEREST EXPENSE:
Interest on deposits 3,953 3,826 1,993 1,941
Interest on Federal funds purchased 96 100 41 1
Interest on securities sold under
repurchase agreements 247 225 129 127
Interest on other borrowings 156 0 156 0
----------------------------------------------------------------
Total interest expense 4,452 4,151 2,319 2,069
----------------------------------------------------------------
Net interest income 6,505 5,994 3,283 2,965
Provision for loan losses 150 120 75 60
----------------------------------------------------------------
Net interest income after provision for
loan losses 6,355 5,874 3,208 2,905
----------------------------------------------------------------
OTHER OPERATING INCOME:
Service charges 514 415 259 214
Securities gains 843 2,325 234 1,149
Other income 109 152 36 77
----------------------------------------------------------------
Total other operating incom 1,466 2,892 529 1,440
----------------------------------------------------------------
OTHER OPERATING EXPENSES:
Salaries and employee benefits 1,968 1,896 997 948
Occupancy expense, net 260 243 127 122
Furniture and equipment expense 298 342 140 193
Other expenses 1,105 1,044 544 486
----------------------------------------------------------------
Total other operating expen 3,631 3,525 1,808 1,749
----------------------------------------------------------------
INCOME BEFORE TAXES 4,190 5,241 1,929 2,596
INCOME TAX PROVISION 1,028 1,402 439 703
----------------------------------------------------------------
NET INCOME $3,162 $3,839 $1,490 $1,893
================================================================
EARNINGS PER SHARE - BASIC AND DILUTED 1.23 1.50 0.65 0.76
================================================================
WEIGHTED AVERAGE SHARES OUTSTANDING 2,566,381 2,554,999 2,566,381 2,554,999
================================================================
</TABLE>
PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIODS INDICATED
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1998 1997
--------------------------------
(IN THOUSANDS)
<S> <C>
NET INCOME $3,162 $3,839
--------------------------------
OTHER COMPREHENSIVE INCOME,
Unrealized gains on securities:
Gains arising during the quarter 918 2,906
Reclassification adjustment for gains included in (843) (2,325)
--------------------------------
OTHER COMPREHENSIVE INCOME, BEFORE TAX 75 581
INCOME TAX EXPENSE RELATED TO OTHER COMPREHENSIVE
INCOME 26 198
--------------------------------
OTHER COMPREHENSIVE INCOME, NET OF TAX 49 383
--------------------------------
COMPREHENSIVE INCOME $3,211 $4,222
================================
<FN>
PENNS WOODS BANCORP, INC.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE QUARTERS ENDING JUNE 30, 1998 AND JUNE 30, 1997
Note :
During the first quarter of 1998, Penns Woods Bancorp, Inc. adopted FASB
Statement no. 130, Reporting Comprehensive Income. Statement no. 130
requires the reporting of comprehensive income in addition to net income
from operations. Comprehensive income is a more inclusive financial
reporting methodology that includes disclosure of certain financial
information that historically has not been recognized in the calculation of
net income.
At quarterend June 30, 1998 and June 30, 1997, securities classified as
available-for-sale were held, which had unrealized gains
of $75,000 and $581,000 before tax, respectively. The tax
expense for each period was $26,000 and $198,000, resepctively,
resulting in other comprehensive income of $49,000 for the quarter
ended June 30, 1998 and $383,000 for the quarter ended June 30, 1997.
</FN>
</TABLE>
PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
UNREALIZED
APPREC.
COMMON STOCK ADDITIONAL (DEPREC.) ON TOTAL
STOCK DIVIDEND PAID-IN RETAINED SECURITIES SHAREHOLDERS'
SHARES AMOUNT DISTRIBUTABLE CAPITAL EARNINGS AVAIL.-FOR-SALE EQUITY
------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, December 31, 1997 1,282,779 $12,828 $12,828 $4,712 $6,621 $5,985 $42,974
Net income for the six months
ended June 30, 1998 3,162 3,162
Stock split effected in the form
of a 100% stock dividend 1,282,779 12,828 (12,828) 0
Dividends declared, $0.36 (924) (924)
Net change in unrealized
appreciation (depreciation) 75 75
Stock options exercised 4,000 40 (5) 35
------------------------------------------------------------------------------------------
Balance, June 30, 1998 2,569,558 $25,696 $0 $4,707 $8,859 $6,060 $45,322
==========================================================================================
</TABLE>
PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE QUARTERS ENDED JUNE 30, 1998 AND JUNE 30, 1997
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1998 1997
--------------------------------
(IN THOUSANDS)
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $3,162 $3,839
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 175 268
Provision for loan losses 150 120
Amortization of investment security premiums 30 11
Accretion of investment security discounts (43) (65)
Securities gains, net (843) (2,325)
Gain on sale of foreclosed assets (12) (27)
Increase in all other assets (2,153) (1,792)
Increase in all other liabilities 955 1,296
--------------------------------
Net cash provided by operating activit 1,421 1,325
--------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities available-for-sale (31,480) (31,962)
Proceeds from sale of securities available-for-sale 12,167 48,180
Proceeds from the sale of foreclosed assets 47 150
Purchase of securities held-to-maturity (224) 0
Proceeds from calls and maturities of securities held 2,398 28
Proceeds from calls and maturities of securities avai 235 738
Net increase in loans (7,444) (6,016)
Acquisition of bank premises and equipment (174) (237)
Acquisition of foreclosed assets 0 (107)
--------------------------------
Net cash (used in) provided by invest (24,475) 10,774
--------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in interest-bearing deposits 3,124 6,043
Net (decrease) increase in noninterest-bearing depos (1,202) 2,704
Net increase in sec. sold under repurch. agree. 2,375 2,572
(Decrease) in other borrowed funds (4,370) (14,491)
Net increase in long-term borrowings 20,000 0
Dividends paid (924) (703)
Stock options exercised 40 40
--------------------------------
Net cash (used in) provided by financi 19,043 (3,835)
--------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,011) 8,264
CASH AND CASH EQUIVALENTS, BEGINNING 12,557 8,014
--------------------------------
CASH AND CASH EQUIVALENTS, ENDING $8,546 $16,278
================================
</TABLE>
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, 1997.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
EARNINGS SUMMARY
Interest Income
For the six months ended June 30, 1998,
total interest income increased by $812,000
or 8.00% compared to the same period in 1997.
This increase is due to an increase of $1,111,000
in interest and fees on loans, a decrease in
total interest and dividends on investments of
$247,000 and a decrease in interest on
Federal funds sold of $52,000.
The increase in interest and fees on
loans of $812,000 was primarily due to
an increase in the loan volume during the first
six months, ended June 30, 1998 of $7,316,000,
and also due to loan fees and late charges collected.
Interest and dividends on investments
decreased due to the net effect of a $40,000
decrease in taxable interest, a $292,000 decrease
in nontaxable interest and an increase in
dividend income of $85,000.
Interest Expense
For the six months ended June 30, 1998
total interest expense increased $301,000 or
7.25% over the same period in 1997. The
increase in interest expense can be attributed
to the interest paid on time deposits, due to the
increase in volume of such deposits and
an increase in the amount of interest paid on
securities sold under repurchase
agreements due to the increase in volume
of these accounts. In addition, interest
expense on other borrowings increased due
to two, $10,000,000 advances from the
Federal Home Loan Bank of Pittsburgh
("FHLB").
Provision for Loan Losses
The provision for losses for the six
months ended June 30, 1998 increased
$30,000 from the corresponding period in
1997. This increase reflects an anticipated
rise in consumer loan losses throughout the
remainder of the year.
As of the second quarter of 1998, charge offs
exceeded recoveries by $128,000 compared to
the second quarter of 1997 when charge offs
exceeded recoveries by $24,000. Provisions
to date total $150,000 as compared to
provisions through June 30, 1997 of
$120,000.
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 fine
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 .53 times at June 30, 1998 a
decrease in coverage from the .40 times at
December 31, 1997. The increase in
non-performing loans occurred mainly in the
mortgage loan portfolio. 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, 1998 decreased $1,426,000.
This decrease is due to the net effect of an
increase in service charges collected of
$99,000, a decrease in securities gains
realized of $1,482,000 and a slight decrease in
other income of $43,000.
The increase in service charges was
a result of an increase in service charges
collected on deposit accounts.
The overall decrease in other operating
income was primarily due to
the $1,482,000 decrease in securities gains
recognized. Realized gains were on sales
of bonds that were sold in effort to better
match the Bank's rate-sensitive assets and
rate-sensitive liabilities given the current
economic conditions. In addition, gains
were realized 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, 1998
total other operating expenses increased $106,000
over the same period in 1997.
Employee salaries and benefits
increased $72,000 as a result of increases in
salary levels and the hiring of additional employees.
Occupancy expense increased $17,000 and
furniture and equipment expense decreased
$44,000. The increase in occupancy
expense can be partially attributed to the
opening of the Bank's Mortgage/Loan Center
that was opened in State College, Pennsylvania
on July 7, 1997. In addition, there was an
increase in the amount of maintenance and
repairs expense incurred during the first six
months of 1998 compared to the same
period in 1997.
The $44,000 decrease in furniture and
equipment expense can be attributed mainly
to a decrease in depreciation expense.
Expenses included under the other expenses
heading are such items as: advertising, postage,
maintenance, FDIC, other insurance,
Pennsylvania State shares tax,
legal and professional fees, telephone,
printing and supplies and other general and
administrative expenses. An overall increase
in other expenses totalled $61,000.
Provision for Income Taxes
Provision for income taxes for the six
months ended June 30, 1998 resulted in an
effective income tax rate of 24.53%
compared to 26.75% for the corresponding
period in 1997. The decrease noted is
primarily a result of the decrease in the amount
of security gains included in taxable income.
ASSET/LIABILITY MANAGEMENT
Assets
At June 30, 1998, cash, federal funds sold,
and investment securities totalled
$105,053,000, or a net increase of $13,862,000
over the corresponding balance at December
31, 1997. Investment securities increased
$17,873,000 while cash decreased $4,011,000.
During this period, net loans
increased by $7,294,000 to $192,447,000.
The increase in investment securities from
December 31, 1997 to June 30, 1998 is
primarily due to the purchases of Government
securities and obligations of states and
political subdivisions which were funded by
long-term advances from FHLB.
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
In addition, management frequently reviews and
utilizes the results of examinations and reports
provided by the committee, regulators, and
independent loan review consultants, on the
adequacy of the loan loss allowance.
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
$2,436,000 at June 30, 1998, an increase of
$22,000 over the balance at December 31,
1997. For the six months ended June 30, 1998,
the provision for loan losses totalled
$150,000. As a percent of loans, the
allowance for loan losses at June 30, 1998
totalled 1.25% versus 1.29% at December 31,
1997.
Loans accounted for on a non-accrual basis
totalled $593,000 and $552,000 at June
30, 1998 and December 31, 1997 respectively.
Accruing loans, contractually delinquent 90
days or more were $710,000 at June 30, 1998
and $409,000 at December 31, 1997.
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 .53
times at June 30, 1998 and .40 times at
December 31, 1997. 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 there are no credits of substance that
have 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, 1998 the balance of other real
estate was $0 compared to $35,000 at
December 31, 1997. The property that was
being held in the account on December 31,
1997 was sold in February, 1998.
Deposits
At June 30, 1998 total deposits amounted to
$222,459,000 representing an increase of
$1,923,000, or .87%, from total deposits
at December 31, 1997.
Other Liabilities
At June 30, 1998, other liabilities
totalled $4,944,000 or a $933,000 increase
over the balance at December 31, 1997. This
increase is primarily due to an increase in
accrued taxes and accrued expenses.
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, 1998, regulatory capital to
total assets was 14.75% compared to 15.13%
at December 31, 1997. Primary capital to
total assets at June 30, 1998 was 15.54%
compared to 15.98% at December 31, 1997.
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 risk-based capital guidelines.
The Company's Tier 1 Capital to total risk
weighted assets ratio is 20.55% and the
total capital ratio to total risk weighted
assets ratio is 21.80%.
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, 70% maximum
2. Net Loans to Total Deposits, 85% maximum
3. Net Loans to Core Deposits, 90% maximum
4. Investments to Total Assets, 40% maximum
5. Investments to Total Deposits, 50% maximum
6. Total Liquid Assets to Total Assets, 25% minimum
7. Total Liquid Assets to Total Liabilities, 25% minimum
8. Net Core Funding Dependence, 15% maximum
The Bank has maintained a liquidity level at or above the
guidelines of the FDIC and the Pennsylvania Department
of Banking. The Bank has available to it Federal Funds
lines of credit totalling $8,000,000 from correspondent banks.
In addition, the Bank has an agreement with the Federal
Home Loan Bank of Pittsburgh that enables the Bank
to receive advances up to $82,264,000 for terms of 1
to 120 days under the Federal Home Loan Bank's
"Repo Plus" credit program.
All of the funding mentioned is available to the Bank,
should the need for short-term funds arise.
The following table sets forth the Bank's interest rate
sensitivity as of June 30, 1998:
<TABLE>
<CAPTION>
AFTER ONE AFTER TWO AFTER
WITHIN BUT WITHIN BUT WITHIN FIVE
ONE YEAR TWO YEARS FIVE YEARS YEARS
<S> <C> <C> <C> <C>
Earning assets: (1) (2)
Investment securities (1) $10,744 $13,657 $28,446 $34,503
Loans (2) 74,271 24,353 78,421 17,836
-------------------------------------------------------------
Total earning assets 85,015 38,010 106,867 52,339
Deposits (3) 98,934 24,311 49,924 14,681
Borrowings 9,040 0 24,524 0
-------------------------------------------------------------
Total interest bearing
liabilities 107,974 24,311 74,448 14,681
Net non-interest bearing
funding (4) 10,776 8,168 19,810 22,063
-------------------------------------------------------------
Total net funding sources 118,750 32,479 94,258 36,744
Excess assets (liabilities) (33,735) 5,531 12,609 15,595
Cumulative excess
assets (liabilities) (33,735) (28,204) (15,595) 0
<FN>
(1) Investment balances reflect estimated prepayments
on mortgage-backed securities.
(2) Loan balances include annual repayment assumptions
based on projected cash flow from the loan portfolio.
The cash flow projections are based on the terms of
the credit facilities and estimated prepayments on
fixed rate mortgage loans. Loans include loans held
for resale.
(3) Adjustments to the interest sensitivity of Savings,
NOW and MMDA account balances reflect managerial
assumptions based on historical experience,
expected behavior in future rate environments and
the Bank's positioning for these products.
(4) Net non-interest bearing funds is the sum of non-interest
bearing liabilities and shareholders' equity minus
non-interest earning assets and reflect managerial
assumptions as to the appropriate investment
maturities for these sources.
In this analysis the company examines the result of a 100 and 200
basis point change in market interest rates and the effect on net
interest income. It is assumed that the change is instantaneous and
that all rates move in a parallel manner. In addition, it is assumed
that rates on core deposit products such as NOW's, savings accounts,
and the MMDA accounts will be adjusted by 50% of the assumed
rate change. Assumptions are also made concerning prepayment
speeds on mortgage loans and mortgage securities. The results of
this rate shock are a useful tool to assist the Company in assessing
interest rate risk inherent in its balance sheet. Below are the results
of this rate shock analysis as of June 30, 1998.
Net Interest Income
Change in Rates Change (After tax)
-200 $411
-100 $232
+100 ($274)
+200 ($556)
The model utilized to create the report presented above makes
various estimates at each level of interest rate change regarding
cash flow from principal repayment on loans and
mortgage-backed securities and or call activity on investment
securities. Actual results could differ significantly from these
estimates which would result in significant differences in the
calculated projected change. In addition, the limits stated above
do not necessarily represent the level of change under which
management would undertake specific measure to realign its
portfolio in order to reduce the projected level of change.
Generally, management believes the Company is well positioned
to respond expeditiously when the market interest rate outlook
changes.
</FN>
</TABLE>
Inflation
The asset and liability structure of a financial insitution is
primarily monetary in nature, therefore, interest rates rather than
inflation have a more significant impact on the Corporation's
performance. Interest rates are not always affected in the same
direction or magnitude as prices of other goods and services, but
are reflective of fiscal policy initiatives or economic factors
which are not measured by a price index.
Year 2000 Compliance; Management Information Systems
The Bank utilizes software and related computer technologies
essential to its operations that will be effected by the Year 2000
issue. In 1997, the Bank established a year 2000 compliance
committee to address the risks of the critical internal bank systems,
as well as external systems provided by third parties. A
comprehensive plan was developed detailing the sequence of
events and actions to be taken as the Year 2000 approaches. The
year 2000 compliance expense and related potential effect on the
Company's earnings cannot be determined by management at the
present time.
CAUTIONARY STATEMENT FOR PURPOSES OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995
This Report contains certain "forward-looking statements" including
statements concerning plans, objectives, future events or performance
and assumptions and other statements which are other than
statements of historical fact. Penns Woods Bancorp, Inc. and its
subsidiaries (the "Company") wishes to caution readers that the
following important factors, among others, may have affected and
could in the future affect the Company's actual results and could
cause the Company's actual results for subsequent periods to
differ materially from those expressed in any forward-looking
statement made by or on behalf of the Company herin: (i) the effect
of changes in laws and regulations, including federal and state
banking laws and regulations, which the Company must comply,
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 nonbank 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.
In reference to the attached financial statements, all
adjustments are of a normal recurring nature pursuant
to Rule 10-01 (b) (8) of Regulation S-X.
Part II. OTHER INFORMATION
Item 5. Other Information.
On July 7, 1997, Jersey Shore State Bank opened a Mortgage/Loan
Center in State College, Pennsylvania. Loan applications, including
secondary mortgage applications will be accepted at this Loan
Center.
Item 6. Exhibits and reports on Form 8-K.
a. Exhibits:
Number Description
- --------------------------
(11) Statement Regarding Computation of Per Share Earnings
(27) Financial Data Schedule
b. RepNo reports on Form 8-K were filed in the second quarter of 1998.
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 14, 1998
--------------------------------
Theodore H. Reich, President
Date: August 14, 1998
--------------------------------
Sonya E. Hartranft, Secretary
Description
- --------------------------
(11) Statement Regarding Computation of Per Share Earnings
(27) Financial Data Schedule
EXHIBIT 11
<TABLE>
STATEMENT OF COMPUTATION OF EARNING PER SHARE
FOR THE PERIOD ENDED 6/30/98
LESS FRACTION
SHARES FRACTIONAL OF WEIGHTED
DATE OUTSTANDING RESTATEMENT SHARES YEAR SHARES
- ---------------------------------------------------------------------------------------
<S> <C>
1/01/98-1/14 1,282,779 2 - 14/181 198,441.0
1/15/98-2/25 2,565,598 - - 42/181 595,332.1
2/26/98-6/03 2,565,958 - - 98/181 1,389,303.2
6/04/98-6/30 2,569,558 - - 27/181 383,304.2
WEIGHTED SHARES OUTSTANDING 6/30/98 2,566,381
================
<S> <C> <C>
NET INCOME 6/30/98 $3,161,920
WEIGHTED SHARES OUTSTANDING 6/30/98 2,566,381
EARNINGS PER SHARE 6/30/98 - BASIC $1.23
================
NET INCOME 6/30/98 $3,161,920
WEIGHTED SHARES OUTSTANDING 6/30/98 2,566,381
DILUTIVE EFFECT OF STOCK OPTIONS 6/30/9 12,222
2,578,603
EARNINGS PER SHARE 6/30/98 - DILUTED $1.23
================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 8546
<INT-BEARING-DEPOSITS> 187850
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 93452
<INVESTMENTS-CARRYING> 3055
<INVESTMENTS-MARKET> 0
<LOANS> 194883
<ALLOWANCE> 2436
<TOTAL-ASSETS> 307254
<DEPOSITS> 222459
<SHORT-TERM> 13564
<LIABILITIES-OTHER> 5909
<LONG-TERM> 20000
0
0
<COMMON> 25696
<OTHER-SE> 19626
<TOTAL-LIABILITIES-AND-EQUITY> 45322
<INTEREST-LOAN> 8795
<INTEREST-INVEST> 2162
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 10957
<INTEREST-DEPOSIT> 3953
<INTEREST-EXPENSE> 499
<INTEREST-INCOME-NET> 6505
<LOAN-LOSSES> 150
<SECURITIES-GAINS> 843
<EXPENSE-OTHER> 3631
<INCOME-PRETAX> 4190
<INCOME-PRE-EXTRAORDINARY> 4190
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3162
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.23
<YIELD-ACTUAL> 0
<LOANS-NON> 593
<LOANS-PAST> 710
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 2414
<CHARGE-OFFS> 163
<RECOVERIES> 35
<ALLOWANCE-CLOSE> 2436
<ALLOWANCE-DOMESTIC> 2436
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
