Williamsport, PA — October 25, 2023 - Penns Woods Bancorp, Inc. (NASDAQ: PWOD)
Penns Woods Bancorp, Inc. achieved net income of $11.1 million for the nine months ended September 30, 2023, resulting in basic and diluted earnings per share of $1.56 and $1.53.
Highlights
- Net income, as reported under GAAP, for the three and nine months ended September 30, 2023 was $2.2 million and $11.1 million, compared to $5.3 million and $12.9 million for the same periods of 2022. Results for the three and nine months ended September 30, 2023 compared to 2022 were impacted by a decrease in net interest income of $2.2 million and $1.2 million as interest expense increased significantly due to the velocity and magnitude of the rate increases enacted by the Federal Open Market Committee ("FOMC"). In addition, results were impacted by a decrease in after-tax securities losses of $77,000 (from a loss of $167,000 to a loss of $90,000) for the three month period and a decrease in after-tax securities losses of $106,000 (from a loss of $258,000 to a loss of $152,000) for the nine month period. Bank-owned life insurance income increased due to a gain on death benefit of $380,000 during the nine months ended September 30, 2023, while an after-tax loss of $201,000 related to a branch closure negatively impacted the nine months ended September 30, 2022.
- The provision for credit losses increased $537,000 for the three months ended September 30, 2023 and decreased $1.1 million for the nine months ended September 30, 2023 due to a provision of $1.4 million and $263,000, respectively, for the 2023 periods compared to a provision of $835,000 and $1.3 million for the 2022 periods. The decrease for the nine month periods was due primarily to a recovery on a commercial loan during the second quarter of 2023. The increase in the provision for credit losses for the 2023 three month period was due primarily to loan portfolio growth as loan portfolio credit metrics continue to improve and loan net charge-offs remain at a low level.
- Basic earnings per share for the three and nine months ended September 30, 2023 were $0.31 and $1.56, while the diluted earnings per share were $0.31 and $1.53 for the periods. Basic and diluted earnings per share for the three and nine months ended September 30, 2022 were $0.74 and $1.83.
- Annualized return on average assets was 41% for three months ended September 30, 2023, compared to 1.09% for the corresponding period of 2022. Annualized return on average assets was 0.70% for the nine months ended September 30, 2023, compared to 0.89% for the corresponding period of 2022.
- Annualized return on average equity was 06% for the three months ended September 30, 2023, compared to 12.61% for the corresponding period of 2022. Annualized return on average equity was 8.58% for the nine months ended September 30, 2023, compared to 10.48% for the corresponding period of 2022.
Net Income
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 $2.3 million and $11.2 million for the three and nine months ended September 30, 2023 compared to $5.4 million and $13.2 million for the same periods of 2022. Basic core earnings per share for the three and nine months ended September 30, 2023 was $0.33 and $1.59, while the diluted core earnings per share was $0.32 and $1.55, compared to $0.77 and $1.87 basic and diluted core earnings per share for the same periods of 2022. Annualized core return on average assets and core return on average equity were 0.43% and 5.26% for the three months ended September 30, 2023, compared to 1.12% and 13.02% for the corresponding periods of 2022. Core return on average assets and core return on average equity were 0.71% and 8.69% for the nine months ended September 30, 2023 compared to 0.91% and 10.69% for the corresponding periods 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 and nine months ended September 30, 2023 was 2.65% and 2.82%, compared to 3.47% and 3.17% for the corresponding periods of 2022. The decrease in the net interest margin for the three and nine month periods was driven by an increase in the rate paid on interest-bearing liabilities of 239 and 189 basis points ("bps"), respectively. The FOMC rate increases during 2022 and 2023 contributed to the increases in rate paid on interest-bearing liabilities as the rate paid on short-term borrowings increased 429 bps and 467 bps for the three and nine month periods ended September 30, 2023 compared to the same periods 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 $2.4 million and $6.1 million in expense for the three and nine month periods ended September 30, 2023 compared to the same periods of 2022. The rate paid on interest-bearing deposits increased 207 and 154 bps for the three and nine month periods ended September 30, 2023 compared to the corresponding periods of 2022 due to the FOMC rate actions and an increase in competition for 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, 2023 compared to the same periods of 2022 increased 328 bps and 259 bps, respectively, as deposit gathering campaigns initiated in the latter part of 2022 continued throughout 2023. In addition, brokered deposits have been utilized to assist with the funding of the loan portfolio growth and contributed to the increase in time deposit funding costs. Partially offsetting the increase in funding cost was an increase in the yield on interest-earning assets and growth in the average balance of the earning asset portfolio compared to the same periods in 2022. The average loan portfolio balance increased $276.8 million and $278.2 million for the three and nine month periods, respectively, as the average yield on the portfolio increased 87 and 76 bps for the same periods. The three and nine month periods ended September 30, 2023 were impacted by an increase of 113 and 101 bps in the yield earned on the securities portfolio as legacy securities matured with the funds reinvested at higher rates.
Assets
Total assets increased to $2.2 billion at September 30, 2023, an increase of $271.4 million compared to September 30, 2022. Net loans increased $260.1 million to $1.8 billion at September 30, 2023 compared to September 30, 2022, as an emphasis was placed on commercial loan growth coupled with growth in indirect auto lending. The investment portfolio increased $7.2 million from September 30, 2022 to September 30, 2023 as restricted investment in bank stock increased $10.8 million resulting from the requirement to hold additional stock in the Federal Home Loan Bank of Pittsburgh ("FHLB") due to an increase in the level of borrowings from the FHLB. The increase in total borrowings of $277.7 million to $411.4 million at September 30, 2023 was utilized to provide funding for the growth in the loan portfolio.
Non-performing Loans
The ratio of non-performing loans to total loans ratio decreased to 0.20% at September 30, 2023 from 0.37% at September 30, 2022, as non-performing loans decreased to $3.7 million at September 30, 2023 from $5.7 million at September 30, 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 individually evaluated loans that have a specific allocation recorded within the allowance for credit losses. Net loan recoveries of $316,000 for the nine months ended September 30, 2023 impacted the allowance for credit losses, which was 0.71% of total loans at September 30, 2023 compared to 0.97% at September 30, 2022 (prior to the adoption of CECL).
Deposits
Deposits decreased $23.1 million to $1.6 billion at September 30, 2023 compared to September 30, 2022. Noninterest-bearing deposits decreased $65.9 million to $471.5 million at September 30, 2023 compared to September 30, 2022. Core deposits declined as deposits migrated 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 by our customers. Interest-bearing deposits increased $42.7 million from September 30, 2022 to September 30, 2023 primarily due to increased utilization of brokered deposits of $101.2 million 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 during the first nine months of 2023 with current efforts centered on five to twelve months.
Shareholders’ Equity
Shareholders’ equity increased $10.1 million to $174.5 million at September 30, 2023 compared to September 30, 2022. During the three months ended September 30, 2023 the Company sold 34,411 shares of common stock, for net proceeds of $752,000, in a registered at-the-market offering. An additional 8,349 shares for net proceeds of $200,000 were issued as part of the Dividend Reinvestment Plan during the three months ended September 30, 2023. Accumulated other comprehensive loss of $14.9 million at September 30, 2023 increased from a loss of $14.6 million at September 30, 2022 as a result of a $10.9 million net unrealized loss on available for sale securities at September 30, 2023 compared to an unrealized loss of $11.1 million at September 30, 2022 coupled with an increase in loss of $607,000 in the defined benefit plan obligation. The current level of shareholders’ equity equates to a book value per share of $24.55 at September 30, 2023 compared to $23.32 at September 30, 2022, and an equity to asset ratio of 8.02% at September 30, 2023 and 8.63% at September 30, 2022. Dividends declared for the nine months ended September 30, 2023 and 2022 were $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, 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.
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Richard A. Grafmyre, Chief Executive Officer |
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110 Reynolds Street |
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Williamsport, PA 17702 |
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570-322-1111 |
e-mail: pwod@pwod.com |