Penns Woods Bancorp (PWOD) 8-K Penns Woods Bancorp, Inc. Reports First Quarter 2012 Operating Earnings

Exhibit 99.1

Press Release – For Immediate Release

April 18, 2012

Penns Woods Bancorp, Inc. Reports First Quarter 2012 Operating Earnings

Williamsport, PA — April 18, 2012 - Penns Woods Bancorp, Inc. (NASDAQ:PWOD)

Highlights

·Net income from core operations (“operating earnings”), which is a non-GAAP measure of net income excluding net securities gains and losses and bank owned life insurance gains of death benefit, increased to $3,191,000 for the three months ended March 31, 2012 compared to $2,770,000 for the same period of 2011.

·Operating earnings per share for the three months ended March 31, 2012 were $0.83 basic and dilutive compared to $0.72 basic and dilutive for the same period of 2011, an increase of 15.3%.

·Return on average assets was 1.91% for the three months ended March 31, 2012 compared to 1.65% for the corresponding period of 2011.

·Return on average equity was 17.39% for the three months ended March 31, 2012 compared to 16.62% for the corresponding period of 2011.

“Our focus on building core deposits, loan growth, and managing credit risk is being rewarded through increases in net income and related return metrics of earnings per share, return on equity, and return on assets.  While we have successfully been negotiating the challenges presented by the economy and credit cycle, we must and will remain focused on the challenges that lie ahead,” said Richard A. Grafmyre, CFP®, President and CEO.

A reconciliation of the non-GAAP financial measures of operating earnings, operating return on assets, operating return on equity, and operating earnings per share, described in the highlights, to the comparable GAAP financial measures is included at the end of this press release.

Net Income

Net income, as reported under GAAP, for the three months ended March 31, 2012 was $3,689,000 compared to $2,853,000 for the same period of 2011.  Results for the three months ended March 31, 2012 compared to 2011 were impacted by an increase in after-tax securities gains of $306,000 (from a gain of $83,000 to a gain of $389,000).  In addition, a gain of $109,000 on death benefit related to bank owned life insurance was recorded during the three months ended March 31, 2012.  Basic and dilutive earnings per share for the three months ended March 31, 2012 were $0.96 compared to $0.74 for the corresponding period of 2011.  Return on average assets and return on average equity were 1.91% and 17.39% for the three months ended March 31, 2012 compared to 1.65% and 16.62% for the corresponding period of 2011.

Net Interest Margin

The net interest margin for the three months ended March 31, 2012 was 4.72% compared to 4.89% for the corresponding period of 2011.  While the net interest margin has decreased year over year, net interest income on a fully taxable equivalent basis has increased $743,000 to $8,498,000 for the three months ended March 31, 2012 compared to the corresponding period of 2011.  Driving this increase is the continued emphasis on core deposit growth.  These deposits represent a lower cost funding source than time deposits and comprise 71.5% of total deposits at March 31, 2012 compared to 64.9% at March 31, 2011.  The average rate paid on total interest-bearing deposits decreased 33 basis points (bp) for the three months ended March 31, 2012 compared to the same period of 2011.  The decrease was led by the rate paid on time deposits decreasing 37 bp for the three

months ended March 31, 2012 compared to the same period of 2011.  The duration of the time deposit portfolio, which was shortened over the past several years, is now being slowly lengthened due to the apparent bottoming or near bottoming of deposit rates.  FHLB long-term borrowings have been reduced by $10,500,000 since March 31, 2011 as borrowings carrying an average rate of 4.60% matured during the three months ended December 31, 2011.

“The current interest rate environment provides challenges to the net interest margin.  We have been able to reduce the rates being paid on interest-bearing liabilities; however, earning asset yields have also been decreasing.  Over the past few years we have been shortening the bond portfolio duration by utilizing shorter term corporate and agency bonds to offset the relatively longer duration of municipal bonds in the portfolio.  While this action has limited current earnings due to the low rates on the short end of the interest rate curve, it also limits interest rate risk and will provide cash flow over the next few years as we anticipate a period of increasing rates.  Downward pressure on the yield on earning assets is occurring due to the inability to add new loans and investments to the balance sheet at comparable rates to the current portfolios.  Our focus on increasing core deposits has resulted in a decrease in the overall cost of interest-bearing liabilities which has limited the negative effects of a declining yield on earning assets,” commented President Grafmyre.

Assets

Total assets increased $99,777,000 to $793,114,000 at March 31, 2012 compared to March 31, 2011.  Net loans increased 7.5% to $435,832,000 at March 31, 2012 compared to March 31, 2011 as the economic environment has in general provided fewer loan opportunities over the past year.  Housing, transportation, and all other facets related to the Marcellus Shale natural gas exploration are creating loan opportunities and we are aggressively attempting to attract those loans that meet or exceed our credit standards.  During 2011 and 2012 successful loan campaigns were undertaken to build home equity loans and lines of credit.  The investment portfolio increased $63,903,000 from March 31, 2011 to March 31, 2012 due to a combination of market value increases and the purchase of short maturity bonds that have been utilized to reduce the portfolio duration and to provide current cash flow.

Non-performing Loans

Our non-performing loans to total loans ratio has decreased to 2.55% at March 31, 2012 from 3.13% at March 31, 2011.  The decrease in non-performing loans is primarily the result of a decrease in commercial loan delinquencies due to a partial charge-off during the second quarter of 2011.  The majority of non-performing loans are centered on several loans that either are in a secured position and have sureties with a strong underlying financial position or have a specific allocation for any impairment recorded within the allowance for loan losses.  Net loan charge-offs of $9,000 for the three months ended March 31, 2012 represented 0.01% of average loans for the three months ended March 31, 2012.  The allowance for loan losses was increased to 1.75% of total loans at March 31, 2012 from 1.61% at March 31, 2011 due to the general economic uncertainty that persists.

Deposits

Deposits have grown 17.6%, or $92,825,000, to $621,542,000 at March 31, 2012 compared to March 31, 2011, with core deposits (total deposits excluding time deposits) increasing $101,018,000, while higher cost time deposits decreased $8,193,000.  Noninterest-bearing deposits have increased 22.0% to $116,271,000 at March 31, 2012 compared to March 31, 2011.  Also playing a significant role in increasing core deposits was money market and NOW accounts with growth rates of 31.2% and 53.9%, respectively.  Driving this growth is our commitment to easy-to-use products, community involvement, and emphasis on customer service.  We have also successfully implemented a targeted marketing campaign aimed at further strengthening our customer relationships, while also expanding our market penetration.

Shareholders’ Equity

Shareholders’ equity increased $16,281,000 to $85,279,000 at March 31, 2012 compared to March 31, 2011.  The accumulated other comprehensive gain of $1,699,000 at March 31, 2012 is a result of an increase in unrealized gains on available for sale securities from an unrealized loss of $6,005,000 at March 31, 2011 to an unrealized gain of $5,832,000 at March 31, 2012.  However, the amount of accumulated other comprehensive gain at March 31, 2012 was also impacted by the change in net excess of the projected benefit obligation over the market value of the plan assets of the defined benefit pension plan resulting in an increase in the net loss of $1,720,000.  The current level of shareholders’ equity equates to a book value per share of $22.22 at March 31, 2012 compared to $17.99 at March 31, 2011 and an equity to asset ratio of 10.75% at March 31, 2012 compared to 9.95% at March 31, 2011.  Excluding accumulated other comprehensive gain/loss, book value per share was $21.78 at March 31, 2012 compared to $20.18 at March 31, 2011.  Dividends paid to shareholders were $0.47 for the three months ended March 31, 2012 compared to $0.46 for the three months ended March 31, 2011.

Penns Woods Bancorp, Inc. is the parent company of Jersey Shore State Bank, which operates thirteen branch offices providing financial services in Lycoming, Clinton, Centre, and Montour Counties.  Investment and insurance products are offered through the bank’s subsidiary, The M Group, Inc. D/B/A The Comprehensive Financial Group.

NOTE:  This press release contains financial information determined by methods other than in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”).  Management uses the non-GAAP measure of net income from core operations in its analysis of the company’s performance. This measure, as used by the Company, adjusts net income determined in accordance with GAAP to exclude the effects of special items, including significant gains or losses that are unusual in nature such as net securities gains and losses. Because certain of these items and their impact on the Company’s performance are difficult to predict, management believes presentation of financial measures excluding the impact of such items provides useful supplemental information in evaluating the operating results of the Company’s core businesses. These disclosures should not be viewed as a substitute for net income determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP performance measures that may be presented by other companies.

This press release may contain certain “forward-looking statements” including statements concerning plans, objectives, future events or performance and assumptions and other statements, which are statements other than statements of historical fact.  The Company cautions readers that the following important factors, among others, may have affected and could in the future affect actual results and could cause actual results for subsequent periods to differ materially from those expressed in any forward-looking statement made by or on behalf of the Company herein:  (i) the effect of changes in laws and regulations, including federal and state banking laws and regulations, and the associated costs of compliance with such laws and regulations either currently or in the future as applicable; (ii) the effect of changes in accounting policies and practices, as may be adopted by the regulatory agencies as well as by the Financial Accounting Standards Board, or of changes in the Company’s organization, compensation and benefit plans; (iii) the effect on the Company’s competitive position within its market area of the increasing consolidation within the banking and financial services industries, including the increased competition from larger regional and out-of-state banking organizations as well as non-bank providers of various financial services; (iv) the effect of changes in interest rates; and (v) the effect of changes in the business cycle and downturns in the local, regional or national economies.  For a list of other factors which could affect the Company’s results, see the Company’s filings with the Securities and Exchange Commission, including “Item 1A.  Risk Factors,” set forth in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

You should not place undue reliance on any forward-looking statements.  These statements speak only as of the date of this press release, even if subsequently made available by the Company on its website or otherwise.  The Company undertakes no obligation to update or revise these statements to reflect events or circumstances occurring after the date of this press release.

Previous press releases and additional information can be obtained from the Company’s website at www.jssb.com.

Contact:	Richard A. Grafmyre, President and Chief Executive Officer
	300 Market Street
	Williamsport, PA 17701
	570-322-1111	e-mail: jssb@jssb.com

THIS INFORMATION IS SUBJECT TO YEAR-END AUDIT ADJUSTMENT

PENNS WOODS BANCORP, INC.

CONSOLIDATED BALANCE SHEET

(UNAUDITED)

	March 31,
(In Thousands, Except Share Data)	2012			2011			% Change
ASSETS
Noninterest-bearing balances	$	16,272		$	10,950		48.6	%
Interest-bearing deposits in other financial institutions	7,159			554			1192.2	%
Total cash and cash equivalents	23,431			11,504			103.7	%
Investment securities, available for sale, at fair value	284,778			220,877			28.9	%
Investment securities held to maturity (fair value of $55 and $53)	55			53			3.8	%
Loans held for sale	2,065			4,818			-57.1	%
Loans	443,577			412,093			7.6	%
Less: Allowance for loan losses	7,745			6,640			16.6	%
Loans, net	435,832			405,453			7.5	%
Premises and equipment, net	8,283			7,634			8.5	%
Accrued interest receivable	4,100			3,638			12.7	%
Bank-owned life insurance	15,973			15,640			2.1	%
Investment in limited partnerships	3,379			4,040			-16.4	%
Goodwill	3,032			3,032			0.0	%
Deferred tax asset	6,416			11,554			-44.5	%
Other assets	5,770			5,094			13.3	%
TOTAL ASSETS	$	793,114		$	693,337		14.4	%
LIABILITIES
Interest-bearing deposits	$	505,271		$	433,439		16.6	%
Noninterest-bearing deposits	116,271			95,278			22.0	%
Total deposits	621,542			528,717			17.6	%
Short-term borrowings	14,768			15,636			-5.6	%
Long-term borrowings, Federal Home Loan Bank (FHLB)	61,278			71,778			-14.6	%
Accrued interest payable	506			694			-27.1	%
Other liabilities	9,741			7,514			29.6	%
TOTAL LIABILITIES	707,835			624,339			13.4	%
SHAREHOLDERS’ EQUITY
Common stock, par value $8.33, 10,000,000 shares authorized; 4,018,068 and 4,016,233 shares issued	33,484			33,468			0.0	%
Additional paid-in capital	18,127			18,078			0.3	%
Retained earnings	38,279			32,180			19.0	%
Accumulated other comprehensive gain (loss):
Net unrealized gain (loss) on available for sale securities	5,832			(6,005		)	197.1	%
Defined benefit plan	(4,133		)	(2,413		)	-71.3	%
Less: Treasury stock at cost, 180,596 shares	(6,310		)	(6,310		)	0.0	%
TOTAL SHAREHOLDERS’ EQUITY	85,279			68,998			23.6	%
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	793,114		$	693,337		14.4	%

PENNS WOODS BANCORP, INC.

CONSOLIDATED STATEMENT OF INCOME

(UNAUDITED)

	Three Months Ended
	March 31,
(In Thousands, Except Per Share Data)	2012		2011		% Change
INTEREST AND DIVIDEND INCOME:
Loans including fees	$	6,314	$	6,288	0.4	%
Investment securities:
Taxable	1,474		1,375		7.2	%
Tax-exempt	1,405		1,267		10.9	%
Dividend and other interest income	92		52		76.9	%
TOTAL INTEREST AND DIVIDEND INCOME	9,285		8,982		3.4	%
INTEREST EXPENSE:
Deposits	961		1,194		-19.5	%
Short-term borrowings	34		57		-40.4	%
Long-term borrowings, FHLB	620		734		-15.5	%
TOTAL INTEREST EXPENSE	1,615		1,985		-18.6	%
NET INTEREST INCOME	7,670		6,997		9.6	%
PROVISION FOR LOAN LOSSES	600		600		0.0	%
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES	7,070		6,397		10.5	%
NON-INTEREST INCOME:
Service charges	447		503		-11.1	%
Securities gains, net	589		125		371.2	%
Bank-owned life insurance	268		174		54.0	%
Gain on sale of loans	183		249		-26.5	%
Insurance commissions	442		209		111.5	%
Brokerage commissions	212		274		-22.6	%
Other	622		411		51.3	%
TOTAL NON-INTEREST INCOME	2,763		1,945		42.1	%
NON-INTEREST EXPENSE:
Salaries and employee benefits	3,017		2,632		14.6	%
Occupancy, net	328		348		-5.7	%
Furniture and equipment	346		308		12.3	%
Pennsylvania shares tax	169		172		-1.7	%
Amortization of investments in limited partnerships	165		166		-0.6	%
FDIC deposit insurance	123		187		-34.2	%
Other	1,316		1,175		12.0	%
TOTAL NON-INTEREST EXPENSE	5,464		4,988		9.5	%
INCOME BEFORE INCOME TAX PROVISION	4,369		3,354		30.3	%
INCOME TAX PROVISION	680		501		35.7	%
NET INCOME	$	3,689	$	2,853	29.3	%
EARNINGS PER SHARE - BASIC	$	0.96	$	0.74	29.7	%
EARNINGS PER SHARE - DILUTED	$	0.96	$	0.74	29.7	%
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC	3,837,204		3,835,295		0.0	%
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED	3,837,204		3,835,295		0.0	%
DIVIDENDS PER SHARE	$	0.47	$	0.46	2.2	%

PENNS WOODS BANCORP, INC.

AVERAGE BALANCES AND INTEREST RATES

	For the Three Months Ended
	March 31, 2012						March 31, 2011
(Dollars in Thousands)	Average Balance		Interest		Average Rate		Average Balance		Interest		Average Rate
ASSETS:
Tax-exempt loans	$	21,591	$	309	5.76	%	$	20,377	$	308	6.13	%
All other loans	422,098		6,110		5.82	%	399,599		6,085		6.18	%
Total loans	443,689		6,419		5.82	%	419,976		6,393		6.17	%
Taxable securities	147,200		1,566		4.26	%	114,740		1,427		4.97	%
Tax-exempt securities	130,590		2,128		6.52	%	103,108		1,920		7.45	%
Total securities	277,790		3,694		5.32	%	217,848		3,347		6.15	%
Interest-bearing deposits	2,037		—		0.00	%	2,002		—		0.00	%
Total interest-earning assets	723,516		10,113		5.61	%	639,826		9,740		6.14	%
Other assets	50,914						53,883
TOTAL ASSETS	$	774,430					$	693,709
LIABILITIES AND SHAREHOLDERS’ EQUITY:
Savings	$	73,628	11		0.06	%	$	66,510	35		0.21	%
Super Now deposits	108,369		142		0.53	%	69,177		83		0.49	%
Money market deposits	127,387		205		0.65	%	109,196		265		0.98	%
Time deposits	177,083		603		1.37	%	188,561		811		1.74	%
Total interest-bearing deposits	486,467		961		0.79	%	433,444		1,194		1.12	%
Short-term borrowings	22,058		34		0.62	%	19,207		57		1.20	%
Long-term borrowings, FHLB	61,278		620		4.00	%	71,778		734		4.09	%
Total borrowings	83,336		654		3.11	%	90,985		791		3.48	%
Total interest-bearing liabilities	569,803		1,615		1.13	%	524,429		1,985		1.53	%
Demand deposits	108,081						91,473
Other liabilities	11,669						9,155
Shareholders’ equity	84,877						68,652
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	774,430					$	693,709
Interest rate spread					4.48	%					4.61	%
Net interest income/margin			$	8,498	4.72	%			$	7,755	4.89	%

	For the Three Months Ended
	March 31,
	2012		2011
Total interest income	$	9,285	$	8,982
Total interest expense	1,615		1,985
Net interest income	7,670		6,997
Tax equivalent adjustment	828		758
Net interest income (fully taxable equivalent)	$	8,498	$	7,755

	Quarter Ended
(Dollars in Thousands, Except Per Share Data)	3/31/2012			12/31/2011			9/30/2011			6/30/2011			3/31/2011
Operating Data
Net income	$	3,689		$	3,395		$	3,150		$	2,964		$	2,853
Net interest income	7,670			7,595			7,210			6,918			6,997
Provision for loan losses	600			900			600			600			600
Net security gains	589			479			8			9			125
Non-interest income, ex. net security gains	2,174			1,932			1,982			1,864			1,820
Non-interest expense	5,464			5,152			4,968			4,856			4,988
Performance Statistics
Net interest margin	4.72		%	4.78		%	4.55		%	4.58		%	4.86		%
Annualized return on average assets	1.91		%	1.80		%	1.67		%	1.64		%	1.65		%
Annualized return on average equity	17.39		%	17.00		%	16.49		%	16.29		%	16.62		%
Annualized net loan charge-offs to avg loans	0.01		%	0.09		%	0.01		%	1.41		%	0.00		%
Net charge-offs (recoveries)	9			101			8			1,477			(5		)
Efficiency ratio	55.5		%	54.1		%	54.1		%	55.3		%	56.6		%
Per Share Data
Basic earnings per share	$	0.96		$	0.88		$	0.82		$	0.78		$	0.74
Diluted earnings per share	0.96			0.88			0.82			0.78			0.74
Dividend declared per share	0.47			0.46			0.46			0.46			0.46
Book value	22.22			20.97			20.48			19.27			17.99
Common stock price:
High	41.67			39.30			36.56			39.30			40.08
Low	36.20			32.01			31.07			33.33			35.46
Close	40.88			38.78			32.75			34.36			38.93
Weighted average common shares:
Basic	3,837			3,837			3,836			3,836			3,835
Fully Diluted	3,837			3,837			3,836			3,836			3,835
End-of-period common shares:
Issued	4,018			4,018			4,017			4,017			4,016
Treasury	181			181			181			181			181

	Quarter Ended
(Dollars in Thousands, Except Per Share Data)	3/31/2012			12/31/2011			9/30/2011			6/30/2011			3/31/2011
Financial Condition Data:
General
Total assets	$	793,114		$	763,953		$	752,650		$	744,986		$	693,337
Loans, net	435,832			428,805			422,989			413,397			405,453
Intangibles	3,032			3,032			3,032			3,032			3,032
Total deposits	621,542			581,664			575,300			569,833			528,717
Noninterest-bearing	116,271			111,354			104,783			100,104			95,278
Savings	77,253			71,646			73,376			71,923			69,095
NOW	108,904			101,808			103,264			91,285			70,763
Money Market	141,830			124,335			122,896			129,004			108,104
Time Deposits	177,284			172,521			170,981			177,517			185,477
Total interest-bearing deposits	505,271			470,310			470,517			469,729			433,439
Core deposits*	444,258			409,143			404,319			392,316			343,240
Shareholders’ equity	85,279			80,460			78,572			73,906			68,998
Asset Quality
Non-performing assets	$	11,308		$	12,009		$	14,344		$	10,911		$	12,900
Non-performing assets to total assets	1.43		%	1.57		%	1.91		%	1.46		%	1.86		%
Allowance for loan losses	7,745			7,154			6,355			5,764			6,640
Allowance for loan losses to total loans	1.75		%	1.64		%	1.48		%	1.38		%	1.61		%
Allowance for loan losses to non-performing loans	68.49		%	59.57		%	44.30		%	52.83		%	51.47		%
Non-performing loans to total loans	2.55		%	2.75		%	3.34		%	2.60		%	3.13		%
Capitalization
Shareholders’ equity to total assets	10.75		%	10.53		%	10.44		%	9.92		%	9.95		%

* Core deposits are defined as total deposits less time deposits

Reconciliation of GAAP and non-GAAP Financial Measures

	Three Months Ended
	March 31,
(Dollars in Thousands, Except Per Share Data)	2012			2011
GAAP net income	$	3,689		$	2,853
Less: net securities and bank-owned life insurance gains, net of tax	498			83
Non-GAAP operating earnings	$	3,191		$	2,770
	Three Months Ended
	March 31,
	2012			2011
Return on average assets (ROA)	1.91		%	1.65		%
Less: net securities and bank-owned life insurance gains, net of tax	0.26		%	0.05		%
Non-GAAP operating ROA	1.65		%	1.60		%
	Three Months Ended
	March 31,
	2012			2011
Return on average equity (ROE)	17.39		%	16.62		%
Less: net securities and bank-owned life insurance gains, net of tax	2.35		%	0.48		%
Non-GAAP operating ROE	15.04		%	16.14		%
	Three Months Ended
	March 31,
	2012			2011
Basic earnings per share (EPS)	$	0.96		$	0.74
Less: net securities and bank-owned life insurance gains, net of tax	0.13			0.02
Non-GAAP basic operating EPS	$	0.83		$	0.72
	Three Months Ended
	March 31,
	2012			2011
Dilutive EPS	$	0.96		$	0.74
Less: net securities and bank-owned life insurance gains, net of tax	0.13			0.02
Non-GAAP dilutive operating EPS	$	0.83		$	0.72