Williamsport, PA — April 28, 2023 - Penns Woods Bancorp, Inc. (NASDAQ: PWOD)
Penns Woods Bancorp, Inc. achieved net income of $4.7 million for the three months ended March 31, 2023, resulting in basic earnings per share of $0.66 and diluted earnings per share of $0.64.
- Net income, as reported under GAAP, for the three months ended March 31, 2023 was $4.7 million, compared to $3.4 million for the same period of 2022. Results for the three months ended March 31, 2023 compared to 2022 were impacted by a decrease in after-tax securities losses of $16,000 (from a loss of $48,000 to a loss of $32,000) for the period. In addition, bank-owned life insurance income increased due to a gain on death benefit of $380,000 during the three months ended March 31, 2023, while an after-tax loss of $201,000 related to a branch closure negatively impacted the three months ended March 31, 2022.
- The provision for credit losses decreased $79,000 for the three months ended March 31, 2023 to a provision of $71,000 compared to a provision of $150,000 for the 2022 period. The decrease in the provision for credit losses was primarily due to improving loan portfolio credit metrics and a minimal level of net loan charge-offs.
- Basic earnings per share for the three months ended March 31, 2023 was $0.66 and diluted earnings per share was $0.64. Basic and diluted earnings per share for the three months ended March 31, 2022 were $0.49.
- Annualized return on average assets was 92% for three months ended March 31, 2023, compared to 0.72% for the corresponding period of 2022.
- Annualized return on average equity was 12% for the three months ended March 31, 2023, compared to 8.17% for the corresponding period of 2022.
Net income from core operations (“core earnings”), which is a non-generally accepted accounting principles (GAAP) measure of net income excluding net securities gains or losses, was $4.7 million for the three months ended March 31, 2023 compared to $3.5 million for the same period of 2022. Core earnings per share for the three months ended March 31, 2023 was $0.66 basic and $0.64 diluted, compared to $0.50 basic and diluted core earnings per share for the same period of 2022. Annualized core return on average assets and core return on average equity were 0.93% and 11.19% for the three months ended March 31, 2023, compared to 0.73% and 8.28% for the corresponding period of 2022. A reconciliation of the non-GAAP financial measures of core earnings, core return on assets, core return on equity, and core earnings per share described in this press release 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 months ended March 31, 2023 was 3.10%, compared to 2.93% for the corresponding period of 2022. The increase in the net interest margin for the three month period was driven by an increase in earning asset yield of 105 basis points ("bps") as the yield on earning assets increased throughout 2022 and during 2023 due to the rate increases enacted by the Federal Open Market Committee ("FOMC"). The three month period ended March 31, 2023 was impacted by an increase of 93 bps in the yield earned on the securities portfolio as legacy securities matured with the funds reinvested at higher rates. The FOMC rate increases during 2022 and 2023 contributed to the rate paid on interest-bearing deposits increasing 97 bps for the three months ended March 31, 2023 compared to the corresponding period of 2022. Short-term borrowings increased in volume and rate paid as this funding source was utilized to provide funding for the growth in the loan portfolio resulting in an increase of $1.4 million in expense for the three months ended March 31, 2023 compared to the same period of 2022.
Total assets increased to $2.1 billion at March 31, 2023, an increase of $148.3 million compared to March 31, 2022. Cash and cash equivalents decreased $177.2 million as interest-bearing accounts in other financial institutions decreased $133.1 million and fed funds sold decreased $50.0 million as excess liquidity was primarily utilized to fund the growth in the loan portfolio. Net loans increased $296.3 million to $1.7 billion at March 31, 2023 compared to March 31, 2022, as an emphasis was placed on commercial loan growth coupled with a significant increase in indirect auto lending. The investment portfolio increased $26.3 million from March 31, 2022 to March 31, 2023 as a portion of the excess cash liquidity was invested primarily into short and medium-term municipal bonds with a maturity of 10 years or less.
The ratio of non-performing loans to total loans ratio decreased to 0.28% at March 31, 2023 from 0.38% at March 31, 2022, as non-performing loans decreased to $4.8 million at March 31, 2023 from $5.3 million at March 31, 2022. 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 impaired and have a specific allocation recorded within the allowance for loan losses. Net loan charge-offs of $123,000 for the three months ended March 31, 2023 impacted the allowance for loan losses, which was 0.69% of total loans at March 31, 2023 compared to 1.00% at March 31, 2022 (prior to the adoption of CECL).
Deposits increased $26.4 million to $1.6 billion at March 31, 2023 compared to March 31, 2022. Noninterest-bearing deposits decreased $11.8 million to $502.4 million at March 31, 2023 compared to March 31, 2022. Core deposits declined slightly as deposits shifted from core deposit accounts into time deposits as market rates increased due to the FOMC rate increases and increased competition for deposits. Core deposit gathering efforts remained focused on increasing the utilization of electronic (internet and mobile) deposit banking among our customers. Utilization of internet and mobile banking has increased due to these efforts coupled with a change in consumer behavior over the past several years. Interest-bearing deposits increased $38.2 million from March 31, 2022 to March 31, 2023 primarily due to increased utilization of brokered deposits of $28.9 million as this funding source was utilized to supplement the funding of the loan portfolio growth, while reducing the need to draw upon available borrowing lines. A campaign to attract time deposits with a maturity of ten to twenty-four months was started during the latter part of 2022 and has continued during the first three months of 2023.
Shareholders’ equity increased $5.5 million to $174.0 million at March 31, 2023 compared to March 31, 2022. Accumulated other comprehensive loss of $12.0 million at March 31, 2023 increased from a loss of $6.5 million at March 31, 2022 as a result of a $7.9 million net unrealized loss on available for sale securities at March 31, 2023 compared to an unrealized loss of $3.1 million at March 31, 2022 coupled with an increase in loss of $638,000 in the defined benefit plan obligation. The current level of shareholders’ equity equates to a book value per share of $24.64 at March 31, 2023 compared to $23.81 at March 31, 2022, and an equity to asset ratio of 8.42% at March 31, 2023 and 8.79% at March 31, 2022. Dividends declared for the three months ended March 31, 2023 and 2022 were $0.32 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, 2022.
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.
Richard A. Grafmyre, Chief Executive Officer
110 Reynolds Street
Williamsport, PA 17702