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, 2000 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, 2000 were were 3,125,384 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,
2000 1999
--------------------------------
(IN THOUSANDS)
<S> <C>
ASSETS:
Cash and due from banks $17,215 $12,474
Investment securities available for sale 104,662 113,305
Investment securities held to maturity 3,240 3,014
Loans, net of unearned discount 241,579 233,823
Allowance for loan and lease losses (2,893) (2,823)
Loans, net 238,686 231,000
Bank premises and equipment, net 4,784 4,888
Accrued interest receivable 2,166 2,283
Other assets 8,283 6,778
--------------------------------
TOTAL ASSETS $379,036 $373,742
================================
LIABILITIES:
Demand deposits $46,885 $43,045
Interest-bearing demand deposits 46,348 44,671
Savings deposits 46,044 46,282
Time deposits 131,747 121,575
--------------------------------
Total deposits $271,024 $255,573
Short-term borrowings 31,064 41,641
Other borrowings 27,278 27,278
Accrued interest payable 1,298 1,123
Other liabilities 2,361 2,042
--------------------------------
Total liabilities $333,025 $327,657
--------------------------------
SHAREHOLDERS' EQUITY:
Common stock, par value $10; 10,000,000 shares
authorized and 3,130,344 and 3,128,332
shares issued $31,303 $31,283
Additional paid-in capital 18,204 18,165
Retained earnings 1,546 (166)
Accumulated other comprehensive loss (4,772) (2,927)
Less: Treasury stock at cost, 4,960 and 4,960 (270) (270)
--------------------------------
Total shareholders' equity $46,011 $46,085
--------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $379,036 $373,742
================================
</TABLE>
CONSOLIDATED STATEMENT OF INCOME
FOR THE PERIODS INDICATED
<TABLE>
<CAPTION>
SIX MONTHS SIX MONTHS QUARTER QUARTER
ENDED ENDED ENDED ENDED
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
-----------------------------------------------------------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $10,394 $9,717 $5,255 $4,891
Interest and dividends on investments: -----------------------------------------------------------------
Taxable interest 2,011 1,700 1,019 873
Nontaxable interest 916 786 454 410
Dividends 443 379 217 194
-----------------------------------------------------------------
Total interest and dividends
on investments 3,370 2,865 1,690 1,477
-----------------------------------------------------------------
Total interest income 13,764 12,582 6,945 6,368
-----------------------------------------------------------------
INTEREST EXPENSE:
Interest on deposits 4,286 3,974 2,177 1,954
Interest on short-term borrowings 922 351 480 197
Interest on other borrowings 761 735 381 385
-----------------------------------------------------------------
Total interest expense 5,969 5,060 3,038 2,536
-----------------------------------------------------------------
Net interest income 7,795 7,522 3,907 3,832
Provision for loan losses 130 130 52 52
-----------------------------------------------------------------
Net interest income after provision for
loan losses 7,665 7,392 3,855 3,780
-----------------------------------------------------------------
OTHER OPERATING INCOME:
Service charges 768 642 394 332
Securities gains 252 280 91 95
Other income 121 131 83 64
Total other operating income 1,141 1,053 568 491
----------------------------------------------------------------
OTHER OPERATING EXPENSES:
Salaries and employee benefits 2,429 2,301 1,214 1,163
Occupancy expense, net 393 314 188 156
Furniture and equipment expense 409 297 203 134
Other expenses 1,542 1,576 797 767
-----------------------------------------------------------------
Total other operating expenses 4,773 4,488 2,402 2,220
-----------------------------------------------------------------
INCOME BEFORE TAXES 4,033 3,957 2,021 2,051
INCOME TAX PROVISION 883 885 417 454
-----------------------------------------------------------------
NET INCOME $3,150 $3,072 $1,604 $1,597
=================================================================
EARNINGS PER SHARE - BASIC $1.01 $0.98 $0.52 $0.51
=================================================================
EARNINGS PER SHARE - DILUTED $1.01 $0.98 $0.52 $0.51
=================================================================
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 3,125,040 3,120,973 3,125,040 3,120,973
=================================================================
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 3,125,040 3,131,082 3,125,040 3,131,082
=================================================================
**Weighted average shares used for computation of net income per share reflect
the issuance of a 10% stock dividend on June 8, 1999.
</TABLE>
PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30,2000
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ACCUMULATED
COMMON ADDITIONAL OTHER TOTAL
STOCK PAID-IN RETAINED COMPREHENSIVE TREASURY SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS LOSS STOCK EQUITY
--------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 3,128,332 $31,283 $18,165 ($166) ($2,927) ($270) $46,085
Net income for the six months
ended June 30, 2000 3,150 3,150
Dividends declared, $0.46 (1,438) (1,438)
Stock options exercised 2,012 20 39 59
Net change in unrealized loss on
investments available for sale ( 1,845) (1,845)
----------------------------------------------------------------------------------------
Balance, June 30, 2000 3,130,344 $31,303 $18,204 $1,546 ($4,772) ($270) $46,011
========================================================================================
</TABLE>
PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE QUARTERS ENDED JUNE 30, 2000 AND JUNE 30, 1999
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
---------------------------------
(IN THOUSANDS)
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $3,150 $3,072
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 198 210
Provision for loan losses 130 130
Accretion and amortization of investment security discounts
and premiums (252) (23)
Securities gains, net (243) (280)
Loss (Gain) on sale of foreclosed assets 25 (3)
Increase in all other assets (425) (1,263)
Increase all other liabilities 496 1,376
---------------------------------
Net cash provided by operating activities 3,079 3,219
---------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of securities available for sale (23,921) (40,283)
Proceeds from sales of securities available for sale 26,806 25,513
Proceeds from calls and maturities of securities available fo 3,505 0
Purchase of securities held to maturity (273) (25)
Proceeds from calls and maturities of securities held to matu - 2,073
Net increase in loans (7,816) (6,075)
Proceeds from the sale of foreclosed assets 97 43
Acquisition of bank premises and equipment (94) (374)
Acquisition of foreclosed assets (130) (34)
---------------------------------
Net cash (used in) provided by investing act (1,826) (19,162)
---------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in interest-bearing deposits 11,611 3,637
Net increase (decrease) in noninterest-bearing deposits 3,840 (2,390)
Net increase (decrease) in short-term borrowings (10,577) 8,691
Proceeds from long-term borrowings - 5,005
Dividends paid (1,438) (1,211)
Stock options exercised 52 12
---------------------------------
Net cash provided by financing activities 3,488 13,744
---------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 4,741 (2,199)
CASH AND CASH EQUIVALENTS, BEGINNING 12,474 12,297
---------------------------------
CASH AND CASH EQUIVALENTS, ENDING $17,215 $10,098
=================================
</TABLE>
[FN]
PENNS WOODS BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. Basis of Presentation
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. All of those adjustments are
of a normal, recurring nature. 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, 1999.
NOTE 2. Comprehensive Income
The components of other comprehensive income
and related tax effects are as follows:
<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
---------------------------------
(IN THOUSANDS)
<S> <C>
Change in net unrealized (loss) on securities available for sale,
net of tax benefit of $865 for 2000 and $1,405 for 1999 (1,679) (2,728)
---------------------------------
Less: Reclassification adjustment for realized gains included
in net income, net of taxes of $86 for 2000 an 166 184
Net unrealized losses net of tax ($1,845) ($2,912)
=================================
</FN>
</TABLE>
EARNINGS SUMMARY
Comparison of the Six Months Ended June 30, 2000 and 1999
Interest Income
For the six months ended June 30, 2000,
total interest income increased by $1,182,000 or
9.39% compared to the same period in 1999.
This increase is due to an increase of $677,000 in
interest and fees on loans and an increase in
total interest and dividends on investments of
$505,000.
The increase in interest and fees on loans of
$677,000 was primarily due to the effect of the 100
basis point increase in prime rate during the first six
months as well the $7,756,000 increase in gross
loans from December 31, 1999 to June 30, 2000.
Interest and dividends on investments increased due
to the net effect of a $317,000 increase in taxable
interest due to the increase in holdings of U.S.
Government agencies and taxable municipal securities
during the first six months of 2000 compared to the
same period in 1999; a $124,000 increase in nontaxable
interest related to the higher volume of municipal
securities held during the first half of 2000 compared to
the first half of 1999; and an increase in dividend income
on equity securities of $64,000.
Interest Expense
For the six months ended June 30, 2000
total interest expense increased $909,000 or
17.96% over the same period in 1999. The overall
increase in interest expense is the result of an
$312,000 increase in interest paid on deposits, mainly
due to volume; a $578,000 increase in interest
expense paid on short-term borrowings, significantly
due to the increase of overnight FHLB borrowings
during the first six months of 2000 compared to the first
six months of 1999; and an increase of $26,000 in
interest paid on other borrowings, due to the net
effect of a $5,000,000 FHLB loan that was taken out
in late February, 1999 and a $500,000 FHLB loan
that was paid off during the fourth quarter of 1999.
Provision for Loan Losses
The provision for loan losses totaled $130,000
for the six months ended June 30, 2000. The
provision for the same period in 1999 also totaled
$130,000.
As of the second quarter of 2000, charge offs
exceeded recoveries by $60,000 compared to
the second quarter of 1999 when charge offs
exceeded recoveries by $39,000.
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 .36 times at June 30, 2000 a
decrease in coverage from the .19 times at
December 31, 1999. The overall increase in
non-performing loans totaled $518,000. Non-
performing loans secured by real estate and
non-performing commercial and agriculatural loans
accounted for $356,000 and $174,000, respectively of
the overall increase whereas non-performing
installment loans declined $12,000. 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, 2000 increased $88,000.
This increase is due to the net effect of an
increase in service charges collected of
$126,000, a decrease in securities gains
realized of $28,000 and a decrease in
other income of $10,000.
Volume as well as fee increases for overdraft and
stop payment services, effective December 1, 1999,
effected the amount of service charges on deposit
accounts. In addition, there was an increase in
charges collected during the first half of 2000 when
compared to the first half of 1999 due to a
service charge relating to ATM usage that was put
into effect in late March, 1999.
Security gains have remained relatively comparable
with the six-month period in 1999. The increases in
interest rates have provided an opportunity for
management to better match investments with rate
sensitive liabilities. To continue this strategy,
during the third quarter of 2000 management plans to
sell "available for sale" GNMA securities and reinvest in
more favorable tax-exempt municipal securities,
therefore increasing overall net interest income on
investments. In addition, gains will continue to be
realized on sales of equity securities that have been
in the portfolio long-term and have reached what
management determines to be their maximum potential.
Other Operating Expense
For the six months ended June 30, 2000
total other operating expenses increased $285,000
over the same period in 1999.
Employee salaries and benefits
increased $128,000 as a result of normal increases in
salary levels.
Occupancy expense increased $79,000 and
furniture and equipment expense increased
$112,000. The increase in occupancy
expense can be attributed to an increases
in rental and depreciation expenses related to
the opening of the full-service branch office in
Zion, Pennsylvania, on May 8, 1999 in addition to
an overall increase in maintenance and repairs
expense.
The $112,000 increase in furniture and
equipment expense can be attributed mainly
to the implementation of Internet and Telephone
Banking. General maintenance and depreciation
expenses also contributed to the increase.
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 decrease
in other expenses totaled $34,000. This
decrease can be largely attributed to approximately
$116,000 of non-recurring expenses related to the
acquisition of the First National Bank of Spring Mills
that were incurred during the first quarter of 1999,
coupled with increases in other operating expenses
during the first half of 2000.
Provision for Income Taxes
Provision for income taxes for the six
months ended June 30, 2000 resulted in an
effective income tax rate of 21.89%
compared to 22.37% for the corresponding
period in 1999. The decrease noted is
due to an increase in non-taxable income for the
period.
Comparison of the Three Months Ended June 30, 2000 and 1999
During the second quarter of 2000 interest income
earned was $6,945,000 an increase of $577,000 or
9.06% over the same quarter in 1999.
Interest income on loans accounted for $364,000 or
7.44% of the total increase in interest income. Gross
loans increased $7,042,000 from March 31, 2000 to
June 30, 2000 and the average rate on loans increased
by .24%. In comparison, during the same period in
1999, gross loans increased $5,112,000 and the
average rate increased .09%. The higher volume
increase coupled with the increase in the average rate
on loans caused by the increases in the prime rate
explain the overall increase.
The remaining $213,000 increase occurred in interest
and dividends on investments. Taxable interest
increased $146,000, non-taxable interest increased
$44,000 and dividends increased $23,000 due to the
same reasons noted for the six-month comparison.
Interest expense during the second quarter of 2000
increased by $502,000 or 19.79% over interest expense
incurred during the second quarter of 1999.
Interest bearing deposits grew $2,496,000 and the
average rate increased from 3.88% to 3.99% from
March 31, 2000 to June 30, 2000. During this same
period in 1999, interest bearing deposits grew
$1,850,000 and the average rate decreased from
3.79% to 3.67%. Special time deposit products offered
during the recent rising interest rate environment
attracted such deposits and time deposits that matured
during the 2000 period were replaced with higher costing
deposits, thereby increasing the average rate paid.
Interest expense on short-term borrowings increased
by $283,000 and interest expense on other borrowings
decreased slightly by $4,000. A higher level of over-
night funds were borrowed throughout the 2000 period
at a higher average rate and an increase in higher
costing, average repurchase agreements were held,
therefore, increasing interest expense. The constant
balance of other borrowings left interest expese on
such borrowings virtually unchanged.
Total other operating income increased $77,000 or
15.68% to $568,000 during the three-month period
in 2000 compared to $491,000 in 1999. Service
charges and other income increased $62,000 and
$19,000, respectively,while securities gains decreased
by $4,000. The volume and fee increases discussed
in the six-month comparison account for the increase
in service charges. Increases in other income occurred
due to the sale of property that was being held in
other real estate and a one-time fee received for
switching processing companies for current MC & Visa
merchants. These increases were offset by a decline
in commissions on life and accident and health
insurance on installment loans due to the difference
in the volume of such loans during this time period,
with the overall effect on other income being a net
increase of $19,000.
The slight decline in securitiy gains is discussed in
the six-month comparison.
Total other operating expenses increased $182,000
or 8.20%.
Salaries and employee benefits increased $51,000
due to normal increases in salary levels and
premium increases in health insurance benefits.
Occupancy expense increased during the second
quarter of 2000 when compared to the second
quarter of 1999 by $32,000 mainly due to interior
painting of the Williamsport branch office.
Furniture and equipment expense increased $69,000
or 51.49%. The increase is mainly attributable to
depreciation expense related to telephone and
Internet banking which were implemented at the
beginning of April, 2000. General maintenance and
repairs on equipment also contributed to the
increase in expense.
Other operating expenses increased during the
three-month period in 2000 when compared to the
same period in 1999 by $30,000. This increase
was derived mainly from an increase in outside
professional fees specifically related to the hiring of
of an outside auditing firm for performing internal
audits and the hiring of an outside transfer agent to
handle Penns Woods Bancorp, Inc. stock and dividend
transactions.
Income taxes decreased $37,000 or 8.15% due to the
increased income on tax-exempt municipal securities.
ASSET/LIABILITY MANAGEMENT
Assets
At June 30, 2000, cash and investment securities
totaled $125,117,000 or a net decrease of $3,676,000
over the corresponding balance at December 31, 1999.
Investment securities decreased $8,417,000 while
cash increased $4,741,000. During this period, net
loans increased by $7,686,000 to $238,686,000.
The decrease in investment securities is primarily
due to the change in the net unrealized loss from
$4,435,000 at December 31, 1999 to $7,230,000 at
June 30, 2000. Also contributing to the decrease were
sales of available for sale U.S. Government agencies
and maturities of U.S. Treasury securities.
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.
Management has reviewed the loan portfolio
for credit risk related to the Year 2000 compliance
and found no material effect to the allowance.
The allowance for loan losses totaled
$2,893,000 at June 30, 2000, an increase of
$70,000 over the balance at December 31,
1999. For the six months ended
June 30, 2000, the provision for loan
losses totaled $130,000. As a percent of loans,
the allowance for loan losses totaled 1.20% at
June 30, 2000 and 1.21% at December 31, 1999.
Loans accounted for on a non-accrual basis
totaled $848,000 and $284,000 at June 30, 2000 and
December 31, 1999 respectively.
Accruing loans, contractually delinquent 90
days or more were $195,000 at June 30, 2000
and $241,000 at December 31, 1999.
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 .36
times at June 30, 2000 and .19 times at
December 31, 1999. 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, 2000 the balance of other real
estate was $75,000 compared to $67,000 at
December 31, 1999. The two properties totaling
$67,000 that were held in other real estate at
December 31, 1999 were sold, three properties totaling
$106,302 were placed into other real estate, one of which
was subsequently sold during this six month period.
Deposits
At June 30, 2000 total deposits amounted to
$271,024,000 representing an increase of
$15,451,000, or 6.05%, from total deposits
at December 31, 1999. Non-interest and interest-
bearing demand deposits grew $3,840,000 and
$1,677,000, respectively. Savings deposits changed
slightly, decreasing $238,000. Time deposits increased
$10,172,000 due to successful marketing strategies
as well as efforts to strategically manage the Bank's
asset and liability position during the rising interest
rate environment.
Other Liabilities
At June 30, 2000, other liabilities
totaled $3,131,000 or a $1,089,000 increase
over the balance at December 31, 1999. 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%.
Regulatory capital to total assets was 12.11% for
June 30, 2000 and December 31, 1999.
Primary capital to total assets at June 30, 2000
was 12.88% compared to 13.09% at
December 31, 1999.
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 20.12% and the
total capital ratio to total risk weighted
assets ratio is 21.30%.
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, 92.5% maximum
3. Net Loans to Core Deposits, 100% 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 $87,240,000 through
the Federal Home Loan Bank's "Open Repo Plus", revolving
line of credit program, with commitment up to one year.
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, 2000:
<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) $ 8,436 $10,393 $22,996 $73,332
Loans (2) 83,374 31,867 102,769 23,568
------------------------------------------------------------------
Total earning assets 91,810 42,260 125,765 96,900
Deposits (3) 118,216 37,362 53,103 15,446
Borrowings 31,067 0 27,278 0
------------------------------------------------------------------
Total interest bearing liabili 149,283 37,362 80,381 15,446
Net non-interest bearing
funding (4) 12,773 9,803 24,061 27,626
------------------------------------------------------------------
Total net funding sources 162,056 47,165 104,442 43,072
Excess assets (liabilities) (70,246) ( 4,905) 21,323 53,828
Cumulative excess
assets (liabilities) (70,246) (75,151) 53,828 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, 2000:
Net Interest Income
Change in Rates Change (After tax)
-200 745
-100 426
+100 447
+200 897
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.
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 1. Legal Proceedings.
None
Item 2. Changes in Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
The annual meeting of shareholders of Penns Woods
Bancorp, Inc. took place on April 26, 2000. The following
three (3) matters were voted upon:
1. Election of the four (4) persons listed in Class (2) Directors
of the Proxy Statement dated March 24, 2000 whose terms
expire in 2003.
Class 2 Directors:
Phillip H. Bower
James M. Furey, II
James E. Plummer
Theodore H. Reich
2. To ratify the appointment by the Corporation's Board
of Directors of S. R. Snodgrass of Wexford, Pennsylvania,
Certified Public Accountants as the indpendent auditors for
the year ending December 31, 2000.
3. To transact such other business as may properly come
before the Annual Meeting, and any adjournment or post-
ponement thereof.
The following table presents the results of the vote tabulation:
<TABLE>
Issue Description For Withhold
---------------------------------------------------------------------------
<S> <C> <C> <C>
1. Election of Direcotrs for a Three Year Term
Phillip H. Bower 2,503,951 8,205
James M. Furey, I 2,503,951 8,205
James E. Plummer 2,503,951 8,205
Theodore H. Reich 2,501,063 11,093
Issue Description For Against Withhold
-------------------------------------------------------------------------------------------
2. Ratification of S.R. Snodgrass, Certified Public Accountants as
independent auditors
2,502,336 4,562 5,258
3. No other business was brought before the meeting.
Item 5. Other Information
None
Item 6. Exhibits and reports on Form 8-K.
Number Description
------------------------------
(27) Financial Data Schedule
(99) Independent Accountants' Report
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, 2000 /s/ Ronald A. Walko
----------------
Ronald A. Walko, Executive Vice President
and Chief Executive Officer
Date: August 14, 2000 /s/ Sonya E. Scott
----------------
Sonya E. Scott, Secretary
</TABLE>
