Penns Woods Bancorp(PWOD) - 2025 Q1 - Quarterly Report

Financial Performance - Net income for Q1 2025 was $7,367,000, a 93.5% increase from $3,808,000 in Q1 2024[85] - Basic and diluted earnings per share for Q1 2025 were $0.97 and $0.95, respectively, compared to $0.51 in Q1 2024[87] - Annualized return on average assets increased to 1.31% in Q1 2025 from 0.69% in Q1 2024[87] - Non-GAAP core earnings for Q1 2025 were $8,061,000, up from $3,834,000 in Q1 2024, representing a 109.5% increase[87] Interest Income and Expenses - The net interest margin improved to 3.13% in Q1 2025, compared to 2.69% in Q1 2024, driven by a 38 basis points increase in rates[95] - Interest and dividend income rose by $2,148,000, or 8.19%, to $28,378,000 in Q1 2025 from $26,230,000 in Q1 2024[92] - Total interest income for the three months ended March 31, 2025, was $28,378,000, an increase from $26,230,000 in 2024, representing a growth of 8.2%[98] - Net interest income on a fully taxable equivalent basis for Q1 2025 was $16,273,000, compared to $13,869,000 in Q1 2024, reflecting a year-over-year increase of 17.3%[98] - Total interest expense decreased by $246,000, or 1.97%, to $12,238,000 in Q1 2025 from $12,484,000 in Q1 2024[93] Credit Losses and Nonperforming Loans - The allowance for credit losses showed a negative provision of $2,969,000 in Q1 2025, compared to a provision of $138,000 in Q1 2024[85] - The allowance for credit losses decreased from $11,848,000 at December 31, 2024, to $9,990,000 at March 31, 2025, due to a negative provision for credit losses of $2,969,000[104] - Nonperforming loans increased to $9,987,000 at March 31, 2025, up from $8,904,000 at December 31, 2024, resulting in a nonperforming loans to total loans ratio of 0.53%[106] - The net loan recoveries for the three months ended March 31, 2025, were $957,000, impacting the allowance for credit losses[106] Non-Interest Income and Expenses - Total non-interest income for Q1 2025 was $2,568,000, an increase of $106,000 or 4.31% compared to the same period in 2024[109] - Total non-interest expense increased by $971,000 for the three months ended March 31, 2025, primarily due to higher salaries and employee benefits[111] - Non-interest expenses for the three months ended March 31, 2025, totaled $12,594,000, an increase of 8.35% compared to $11,623,000 for the same period in 2024[113] - Salaries and employee benefits accounted for 51.48% of total non-interest expenses in Q1 2025, slightly down from 55.25% in Q1 2024[113] - Gain on sale of loans increased by 33.77% to $408,000 in Q1 2025 compared to $305,000 in Q1 2024[110] Capital and Liquidity - As of March 31, 2025, the Company and both Banks were classified as "well capitalized" under regulatory standards, with Common Equity Tier I Capital ratio at 10.588%[135] - The Company's Total Capital ratio was 11.139% as of March 31, 2025, exceeding the minimum requirement of 10.000% to be considered well capitalized[135] - Jersey Shore State Bank's Common Equity Tier I Capital ratio was 10.328% as of March 31, 2025, above the required minimum of 6.500%[136] - Luzerne Bank's Total Capital ratio was 11.137% as of March 31, 2025, surpassing the minimum requirement of 10.000%[136] - The Company maintained a capital conservation buffer of 2.5% above the regulatory minimum capital requirements for CET1, Tier 1, and Total Capital ratios[133] - The net loans to total deposits ratio was 109% as of March 31, 2025, indicating a need for careful liquidity management[138] - The Company has strategically taken an asset-sensitive gap position to enhance net interest income in response to market interest rate changes[144] - The Company’s liquidity management includes monitoring cash flow needs and maintaining adequate resources to meet funding requirements[141] Market Risk and Interest Rate Sensitivity - Market risk is primarily composed of interest rate risk exposure and liquidity risk, monitored through independent third-party measures[152] - Management believes that movements in interest rates have a greater impact on financial condition than inflation changes[151] - The percent change in net interest income from the static scenario varies from -5.18% to +1.88% depending on the interest rate shift[148] - The company is well positioned to respond quickly to changes in market interest rate outlook[153] - The company’s ability to match interest sensitivity of assets and liabilities may minimize performance impacts from interest rate changes[151] Tax and Cash Management - The effective tax rate increased to 18.89% for Q1 2025, up from 14.37% in Q1 2024, due to higher taxable income from increased net interest income[114] - Cash and cash equivalents increased by $8,473,000 to $37,445,000 as of March 31, 2025, compared to $28,972,000 at December 31, 2024[115] Investment Portfolio - The fair value of the investment debt securities portfolio decreased by $8,821,000 since December 31, 2024, while the amortized cost decreased by $11,106,000[119] Borrowing Capacity - The Company has a total current maximum borrowing capacity at the FHLB of $847,542,000, with FHLB borrowings totaling $288,546,000 as of March 31, 2025[142]