Penns Woods Bancorp, Inc. Announces Third Quarter 2024 Earnings

Williamsport, PA - October 24, 2024 - Penns Woods Bancorp, Inc. (NASDAQ: PWOD)

Penns Woods Bancorp, Inc. achieved net income of $14.0 million for the nine months ended September 30, 2024, resulting in basic and diluted earnings per share of $1.86.

Highlights

• Net income, as reported under generally accepted accounting principles (GAAP), for the three and nine months ended September 30, 2024 was $4.8 million and $14.0 million, respectively, compared to $2.2 million and $11.1 million for the same periods of 2023. Results for the three and nine months ended September 30, 2024 compared to 2023 were impacted by an increase in net interest income of $1.7 million and $2.3 million, respectively, as the cost of funds has stabilized. The disposal of assets related to two former branch properties resulted in a one time after-tax loss of $261,000 for the nine month period ended September 30, 2024.
• The allowance for credit losses was impacted for the three and nine months ended September 30, 2024 by a provision for credit losses of $740,000 and a negative provision of $299,000, respectively, compared to provisions for credit losses of $1.4 million and $263,000 for the 2023 periods. The recognition of a negative provision for credit losses for the nine months ended September 30, 2024 is due primarily to recoveries during the second quarter of 2024 on a commercial loan. In addition, a minimal level of loan charge-offs of $312,000 contributed to the recognition of the negative provision for credit losses for the nine months ended September 30, 2024.
• Basic and diluted earnings per share for the three and nine months ended September 30, 2024 were $0.64 and $1.86, respectively, compared to basic and diluted earnings per share of $0.31 and $1.56 basic and $1.53 diluted for the three and nine month periods ended September 30, 2023.
• Annualized return on average assets was 86% for the three months ended September 30, 2024, compared to 0.41% for the corresponding period of 2023. Annualized return on average assets was 0.84% for the nine months ended September 30, 2024, compared to 0.70% for the corresponding period of 2023.
• Annualized return on average equity was 60% for the three months ended September 30, 2024, compared to 5.06% for the corresponding period of 2023. Annualized return on average equity was 9.74% for the nine months ended September 30, 2024, compared to 8.58% for the corresponding period of 2023.

Net Income

Net income from core operations ("core earnings"), which is a non-GAAP measure of net income excluding net securities gains or losses, was $4.8 million and $14.0 million, respectively, for the three and nine months ended September 30, 2024 compared to $2.3 million and $11.2 million for the same periods of 2023. Basic and diluted core earnings per share (non-GAAP) for the three and nine months ended September 30, 2024 were $0.63 and $1.86, respectively, while basic and diluted core earnings per share for the three month period of 2023 were $0.32 and for the nine month period of 2023 were $1.58 basic and $1.55 diluted. Annualized core return on average assets and core return on average equity (non-GAAP) were 0.85% and 9.54%, respectively, for the three months ended September 30, 2024, compared to 0.42% and 5.20% for the corresponding period of 2023. Annualized core return on average assets and core return on average equity (non-GAAP) were 0.84% and 9.75%, respectively, for the nine months ended September 30, 2024, compared to 0.71% and 8.67% for the corresponding period of 2023. A reconciliation of the non-GAAP financial measures of core earnings, core return on assets, core return on equity, core earnings per share and tangible book value per share to the comparable GAAP financial measures is included at the end of this press release.

Net Interest Margin

The net interest margin for the three and nine months ended September 30, 2024 was 2.88% and 2.79% respectively, compared to 2.65% and 2.82% for the corresponding periods of 2023. The increase in the net interest margin for the three month period was driven by an increase in the rate paid on interest-earning assets of 64 basis points ("bps"), while the decrease in the net interest margin for the nine month period was driven by a 96 bps increase in the rate paid on interest-bearing liabilities. The overall increase in interest rates over the periods resulted in increases to both the yield on the earnings asset portfolio and the rate paid on interest bearing liabilities. Driving the increase in the yield and interest income on the earning assets portfolio was the repricing of legacy assets coupled with portfolio growth. The average loan portfolio balance increased $76.0 million and $127.0 million, respectively, for the three and nine month periods ended September 30, 2024 compared to the same periods of 2023 as the average yield on the portfolio increased 65 bps and 72 bps, resulting in an increase in taxable equivalent interest income of $3.9 million and $14.5 million, for the periods. The three and nine month periods ended September 30, 2024 were impacted by an increase of 55 bps and 70 bps in the yield earned on the securities portfolio as legacy securities matured with the funds reinvested at higher rates, which resulted in an increase in taxable equivalent interest income of $343,000 and $1.2 million, respectively. Short-term borrowings decreased in volume, which offset the impact of an increase in rate paid, resulting in a decrease of $1.5 million and $2.1 million in expense for the three and nine month periods ended September 30, 2024 compared to the same periods of 2023. The rate paid on interest-bearing deposits increased 76 bps and 116 bps, respectively, or $3.1 million and $11.8 million in expense, for the three and nine month periods ended September 30, 2024 compared to the corresponding periods of 2023 due to the rate environment, an increase in competition for deposits, and a migration of deposit balances from core deposits to higher rate time deposits. The rates paid on time deposits significantly contributed to the increase in funding costs as rates paid for the three and nine month periods ended September 30, 2024 compared to the same periods of 2023 increased 70 bps and 114 bps, respectively, or $2.2 million and $8.2 million in expense, as deposit gathering campaigns continued to focus on time deposits with a maturity of five months. In addition, brokered deposits have been utilized to assist with funding the loan portfolio growth and contributed to the increase in time deposit funding costs, while lowering the reliance on higher cost short-term borrowings.

Assets

Total assets increased to $2.3 billion at September 30, 2024, an increase of $82.8 million compared to September 30, 2023. Net loans increased $58.0 million to $1.9 billion at September 30, 2024 compared to September 30, 2023, as continued emphasis was placed on commercial loan growth and indirect auto lending. The investment portfolio increased $8.8 million from September 30, 2023 to September 30, 2024. Investment debt securities increased $12.8 million from September 30, 2023 to September 30, 2024 as fixed rate instruments with maturities of approximately ten years were added to the portfolio to lock in yields.

Non-performing Loans

The ratio of non-performing loans to total loans ratio increased to 0.42% at September 30, 2024 from 0.20% at September 30, 2023, as non-performing loans increased to $7.9 million at September 30, 2024 from $3.7 million at September 30, 2023. The majority of non-performing loans involve loans that are either in a secured position and have sureties with a strong underlying financial position or have been classified as individually evaluated loans that have a specific allocation recorded within the allowance for credit losses. Net loan charge offs of $328,000 and $312,000 for the three and nine months ended September 30, 2024, respectively, impacted the allowance for credit losses, which was 0.62% of total loans at September 30, 2024 compared to 0.71% at September 30, 2023. Exposure to non-owner occupied office space is minimal at $13.9 million at September 30, 2024 with none of these loans being delinquent.

Deposits

Deposits increased $133.1 million to $1.7 billion at September 30, 2024 compared to September 30, 2023. Noninterest-bearing deposits decreased $18.6 million to $452.9 million at September 30, 2024 compared to September 30, 2023. Core deposits declined $6.6 million as deposits migrated from core deposit accounts into time deposits as market rates and competition for deposits increased. Core deposit gathering efforts remained focused on increasing the utilization of electronic (internet and mobile) deposit banking by our customers. Core deposits have remained stable at $1.2 billion over the past five quarters. Interest-bearing deposits increased $151.6 million from September 30, 2023 to September 30, 2024 due to growth in the time deposit portfolio of $78.7 million as customers sought a higher rate of interest. Brokered deposit balances increased $61.0 million to $167.7 million at September 30, 2024 as this funding source was utilized to supplement funding loan portfolio growth, while reducing the need to draw upon available borrowing lines. A campaign to attract time deposits with a maturity of five to twenty-four months commenced during the latter part of 2022 and has continued throughout 2023 and 2024 with current efforts centered on five months.

Shareholders' Equity

Shareholders' equity increased $29.2 million to $203.7 million at September 30, 2024 compared to September 30, 2023 due in part to a registered at-the-market offering that generated $7.5 million in capital during the fourth quarter of 2023. During the three and nine months ended September 30, 2024 there were no shares issued as part of the registered at-the-market offering. A total of 9,074 and 31,050 shares for net proceeds of $205,000 and $632,000 were issued as part of the Dividend Reinvestment Plan during the three and nine months ended September 30 2024. Accumulated other comprehensive loss of $5.3 million at September 30, 2024 decreased from a loss of $14.9 million at September 30, 2023 as a result of a decrease in net unrealized loss on available for sale securities to $2.6 million at September 30, 2024 from a net unrealized loss of $10.9 million at September 30, 2023, coupled with a decrease in loss of $1.3 million in the defined benefit plan obligation. The current level of shareholders' equity equates to a book value per share of $26.96 at September 30, 2024 compared to $24.55 at September 30, 2023, and an equity to asset ratio of 9.02% at September 30, 2024 and 8.02% at September 30, 2023. Tangible book value per share (a non-GAAP measure) increased to $24.77 at September 30, 2024 compared to $22.20 at September 30, 2023. Dividends declared for the three and nine months ended September 30, 2024 and 2023 were $0.32 and $0.96 per share.

Penns Woods Bancorp, Inc. is the parent company of Jersey Shore State Bank, which operates sixteen branch offices providing financial services in Lycoming, Clinton, Centre, Montour, Union, and Blair Counties, and Luzerne Bank, which operates eight branch offices providing financial services in Luzerne County, and United Insurance Solutions, LLC, which offers insurance products. Investment and insurance products are offered through Jersey Shore State 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 these certain 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; (v) the effects of health emergencies, including the spread of infectious diseases or pandemics; or (vi) 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, 2023.

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.pwod.com.

Contact:	Richard A. Grafmyre, Chief Executive Officer
	110 Reynolds Street
	Williamsport, PA 17702
	570-322-1111	e-mail: [email protected]

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