secQ398 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 March 31, 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 March 31, 1998 there were 2,565,958 shares of the Registrant's common stock outstanding. PART I FINANCIAL STATEMENTS <TABLE> <CAPTION> PENNS WOODS BANCORP, INC. CONSOLIDATED BALANCE SHEET AT DATES INDICATED March 31, December 31, 1998 1997 -------------------------------- (IN THOUSANDS) <S> <C> <C> ASSETS: Cash and due from banks $8,937 $12,557 Securities available-for-sale 74,648 75,400 Securities held-to-maturity 3,440 3,234 Loans, net of unearned discount 190,679 187,567 Allowance for loan losses (2,418) (2,414) Loans, net 188,261 185,153 Bank premises and equipment, net 3,683 3,835 Foreclosed assets held for sale 0 35 Accrued interest receivable 1,549 1,708 Other assets 2,747 2,066 -------------------------------- TOTAL ASSETS $283,265 $283,988 ================================ LIABILITIES: Demand Deposits $33,064 $35,811 Interest-bearing demand deposits 39,241 38,499 Savings deposits 44,488 43,399 Time deposits 103,695 102,827 -------------------------------- Total deposits $220,488 $220,536 Federal funds purchased 1,800 6,980 Securities sold under repurchase agr 10,821 8,580 Accrued interest payable 799 907 Other Liabilities 4,631 4,011 Total liabilities -------------------------------- $238,539 $241,014 -------------------------------- SHAREHOLDERS' EQUITY: Common stock, par value $10 per share, 10,000,000 shares authorized $25,660 $12,828 Stock dividend distributable 0 12,828 Additional paid-in capital 4,720 4,712 Retained earnings 7,832 6,621 Accumulated other comprehensive income 6,514 5,985 -------------------------------- $44,726 $42,974 Total shareholders' equity-------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $283,265 $283,988 ================================ </TABLE> PENNS WOODS BANCORP, INC. CONSOLIDATED STATEMENT OF INCOME FOR THE PERIODS INDICATED <TABLE> <CAPTION> THREE MONTHS THREE MONTHS QUARTER QUARTER ENDED ENDED ENDED ENDED March 31, 1998 March 31, 1997 March 31, 1998 March 31, 1997 ---------------------------------------------------------------- (IN THOUSANDS EXCEPT PER SHARE DATA) <S> <C> INTEREST INCOME: Interest and fees on loans $4,302 $3,819 $4,302 $3,819 Interest and dividends on investment---------------------------------------------------------------- Taxable interest 645 724 645 724 Nontaxable interest 214 437 214 437 Dividends 194 131 194 131 ---------------------------------------------------------------- Total interest and dividends on investments 1,053 1,292 1,053 1,292 ---------------------------------------------------------------- Total interest income 5,355 5,111 5,355 5,111 ---------------------------------------------------------------- INTEREST EXPENSE: Interest on deposits 1,960 1,885 1,960 1,885 Interest on Federal funds purchased 55 99 55 99 Interest on securities sold under repurchase agreements 118 98 118 98 Interest on other borrowings 0 0 0 0 ---------------------------------------------------------------- Total interest expense 2,133 2,082 2,133 2,082 ---------------------------------------------------------------- Net interest income 3,222 3,029 3,222 3,029 Provision for loan losses 75 60 75 60 ---------------------------------------------------------------- Net interest income after provision for loan losses 3,147 2,969 3,147 2,969 ---------------------------------------------------------------- OTHER OPERATING INCOME: Service charges 255 201 255 201 Securities gains 609 1,176 609 1,176 Other income 73 75 73 75 ---------------------------------------------------------------- Total other operating income 937 1,452 937 1,452 ---------------------------------------------------------------- OTHER OPERATING EXPENSES: Salaries and employee benefits 971 948 971 948 Occupancy expense, net 133 121 133 121 Furniture and equipment expense 158 149 158 149 Other expenses 561 558 561 558 ---------------------------------------------------------------- Total other operating expenses 1,823 1,776 1,823 1,776 ---------------------------------------------------------------- INCOME BEFORE TAXES 2,261 2,645 2,261 2,645 INCOME TAX PROVISION 589 699 589 699 ---------------------------------------------------------------- NET INCOME $1,672 $1,946 $1,672 $1,946 ================================================================ EARNINGS PER SHARE - BASIC AND DILUTED 0.65 0.76 0.65 0.76 ================================================================ WEIGHTED AVERAGE SHARES OUTSTANDING 2,565,728 2,554,596 2,565,728 2,554,596 ================================================================ </TABLE> PENNS WOODS BANCORP, INC. CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIODS INDICATED <TABLE> <CAPTION> MARCH 31, MARCH 31, 1998 1997 -------------------------------- (IN THOUSANDS) <S> <C> NET INCOME $1,672 $1,946 -------------------------------- OTHER COMPREHENSIVE INCOME (LOSS), Unrealized gains on securities: Gains (losses) arising during the quarter 1,138 602 Reclassification adjustment for gains included in net income (609) (1,176) -------------------------------- OTHER COMPREHENSIVE INCOME (LOSS), BEFORE TAX 529 (574) INCOME TAX EXPENSE RELATED TO OTHER COMPREHENSIVE INCOME (LOSS) 180 (195) -------------------------------- OTHER COMPREHENSIVE INCOME (LOSS), NET OF TAX 349 (379) -------------------------------- COMPREHENSIVE INCOME $2,021 $1,567 ================================ <FN> PENNS WOODS BANCORP, INC. NOTES TO THE FINANCIAL STATEMENTS FOR THE QUARTERS ENDING MARCH 31, 1998 AND MARCH 31, 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 March 31, 1998 and March 31, 1997, securities classified as available-for-sale were held, which had unrealized gains/(losses) of $529,000 and ($574,000) before tax, respectively. The tax (expense)/ benefit for each period was ($180,000) and $195,000, resepctively, resulting in other comprehensive income/loss of $349,000 for the quarter ended March 31, 1998 and ($379,000) for the quarter ended March 31, 1997. </FN> </TABLE> PENNS WOODS BANCORP, INC. CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 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> <C> <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 three months ended March 31, 1998 1,672 1,672 Stock split effected in the form of a 100% stock dividend 1,282,779 12,828 (12,828) Dividends declared, $0.18 (461) (461) Net change in unrealized appreciation (depreciation) 529 529 Stock options exercised 400 4 8 12 --------------------------------------------------------------------------------------------------- Balance, March 31, 1998 2,565,958 $25,660 $0 $4,720 $7,832 $6,514 $44,726 =================================================================================================== </TABLE> PENNS WOODS BANCORP, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE QUARTERS ENDED MARCH 31, 1998 AND MARCH 31, 1997 <TABLE> <CAPTION> MARCH 31, MARCH 31, 1998 1997 -------------------------------- (IN THOUSANDS) <S> <C> <C> CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $1,672 $1,946 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 94 99 Provision for loan losses 75 60 Amortization of investment security premiums 14 6 Accretion of investment security discounts (23) (39) Securities gains, net (609) (1,176) Gain on sale of foreclosed assets (12) (26) Decrease in all other assets (518) (73) Increase in all other liabilities 239 612 -------------------------------- Net cash provided by operating activies 932 1,409 -------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of securities available-for-sale (4,884) (14,877) Proceeds from sale of securities available-for-sale 5,060 14,384 Proceeds from the sale of foreclosed assets 47 53 Purchase of securities held-to-maturity (224) 0 Proceeds from calls and maturities of securities hel 1,013 26 Proceeds from calls and maturities of securities ava 1,000 0 Net increase in loans (3,183) (845) Acquisition of bank premises and equipment 57 (99) -------------------------------- Net cash (used in) provided by investing activities (1,114) (1,358) -------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in interest-bearing deposits 2,698 7,344 Net (decrease) increase in noninterest-bearing deposits (2,747) 1,650 Net increase in sec. sold under repurch. agree. 2,242 6,153 (Decrease) in other borrowed funds (5,180) (14,490) Dividends paid (462) (319) Stock options exercised 11 0 -------------------------------- Net cash (used in) provided by financing activities (3,438) 338 -------------------------------- NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (3,620) 389 CASH AND CASH EQUIVALENTS, BEGINNING 12,557 8,014 -------------------------------- CASH AND CASH EQUIVALENTS, ENDING $8,937 $8,403 ================================ </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 three months ended March 31, 1998, total interest income increased by $244,000 or 4.77% compared to the same period in 1997. This increase is due to an increase of $483,000 in interest and fees on loans and a decrease in total interest and dividends on investments of $239,000. The increase in interest and fees on loans of $244,000 was primarily due to an increase in the loan volume during the first three months, ended March 31, 1998 of $3,112,000, and also due to loan fees and late charges collected. Interest and dividends on investments decreased due to the net effect of a $79,000 decrease in taxable interest, a $223,000 decrease in nontaxable interest and an increase in dividend income of $63,000. Interest Expense For the three months ended March 31, 1998 total interest expense increased $51,000 or 2.45% 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. In addition, there was an increase in the amount of interest paid on securities sold under repurchase agreements due to the increase in volume of these accounts. Provision for Loan Losses The provision for losses for the three months ended March 31, 1998 increased $15,000 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 first quarter of 1998, charge offs exceeded recoveries by $70,000 compared to the first quarter of 1997 when recoveries exceeded charge offs by $6,000. Provisions to date total $75,000 as compared to provisions through March 31, 1997 of $60,000. 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 .41 times at March 31, 1998 a slight decrease in coverage from the .40 times at December 31, 1997. The increase in non-performing loans occurred mainly in the commercial 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 three months ended March 31, 1998 decreased $515,000. This decrease is due to the net effect of an increase in service charges collected of $54,000, a decrease in securities gains realized of $567,000 and a slight decrease in other income of $2,000. 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 decrease in securities gains recognized of $567,000. 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 three months ended March 31, 1998 total other operating expenses increased $47,000 over the same period in 1997. Employee salaries and benefits increased $23,000 as a result of increases in salary levels and the hiring of additional employees. Occupancy expense increased $12,000 and furniture and equipment expense increased $9,000. 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 an repairs expense incurred during the first quarter of 1998 compared to the first quarter of 1997. The $9,000 increase in furniture and equipment expense can be attributed mainly to an increase in lease expense associated with the upgrading of the Bank's computer system. 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 totalled $3,000. Provision for Income Taxes Provision for income taxes for the three months ended March 31, 1998 resulted in an effective income tax rate of 26.05% compared to 26.43% 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 March 31, 1998, cash, federal funds sold, and investment securities totalled $87,025,000, or a net decrease of $4,166,000 over the corresponding balance at December 31, 1997. Investment securities and cash decreased by $546,000 and $3,620,000, respectively. During this period, net loans increased by $3,108,000 to $188,261,000. The decrease in investment securities from December 31, 1997 to March 31, 1998 can be attributed to the net effect of various purchases and sales of investments during the first three months with the main transactions being in equity 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. The allowance for loan losses totalled $2,418,000 at March 31, 1998, a slight increase of $4,000 over the balance at December 31, 1997. For the three months ended March 31, 1998, the provision for loan losses totalled $75,000. As a percent of loans, the allowance for loan losses at March 31, 1998 totalled 1.27% versus 1.29% at December 31, 1997. Loans accounted for on a non-accrual basis totalled $650,000 and $552,000 at March 31, 1998 and December 31, 1997 respectively. Accruing loans, contractually delinquent 90 days or more were $335,000 at March 31, 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 .41 times at March 31, 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 March 31, 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 March 31, 1998 total deposits amounted to $220,488,000 representing a decrease of $48,000 or a .02% decrease from total deposits at December 31, 1997. Other Liabilities At March 31, 1998, other liabilities totalled $4,631,000 or a $620,000 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 March 31, 1998, regulatory capital to total assets was 15.79% compared to 15.13% at December 31, 1997. Primary capital to total assets at March 31, 1998 was 16.64% 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 21.11% and the total capital ratio to total risk weighted assets ratio is 22.36%. 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. Volatility Liability Dependence Ratio, 10% 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 $86,732,000 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 March 31, 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) $ 10,664 $11,417 $25,439 $20,822 Loans (2) 74,901 24,119 74,100 17,562 ------------------------------------------------------------ Total earning assets 85,565 35,536 99,539 38,384 Deposits (3) 96,526 23,791 53,468 13,638 Borrowings 7,504 250 4,867 0 ------------------------------------------------------------ Total interest bearing liabilities 104,030 24,041 58,335 13,638 Net non-interest bearing funding (4) 10,262 7,838 19,149 21,731 ------------------------------------------------------------ Total net funding sources 114,292 31,879 77,484 35,369 Excess assets (liabilities) (28,727) 3,657 22,055 3,015 Cumulative excess assets (liabilities) (28,727) (25,070) (3,015) 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 March 31, 1998. Net Interest Income Change in Rates Change (After tax) -200 $338 -100 $187 +100 ($215) +200 ($436) 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 Standars 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. Reports: No reports on Form 8-K were filed in the first 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: May 15, 1998 ---------------------------------- Ronald A. Walko, Sr. Vice President Date: May 15, 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 3/31/98 LESS FRACTION SHARES FRACTIONAL OF WEIGHTED DATE OUTSTANDING RESTATEMENT SHARES YEAR SHARES - -------------------------------------------------------------------------------------- <S> <C> 1/01/98-1/14 1,282,779 2 - 14/90 399,087 1/15/98-2/25 2,565,598 - - 42/90 1,197,279 2/26/98-3/31 2,565,958 - - 34/90 969,362 WEIGHTED SHARES OUTSTANDING 3/31/98 2,565,728 ================ <S> <C> <C> NET INCOME 3/31/98 $1,672,000 WEIGHTED SHARES OUTSTANDING 3/31/98 2,565,728 EARNINGS PER SHARE 3/31/98 - BASIC $0.65 ================ NET INCOME 3/31/98 $1,672,000 WEIGHTED SHARES OUTSTANDING 3/31/98 2,565,728 DILUTIVE EFFECT OF STOCK OPTIONS 3/31/ 14,813 2,580,541 EARNINGS PER SHARE 3/31/98 - DILUTED $0.65 ================ </TABLE>