Company Overview and History
Penns Woods Bancorp, Inc. (PWOD) has a rich history as a community-focused financial institution, serving customers in North Central and Northeastern Pennsylvania for over eight decades. Established in 1934 as Jersey Shore State Bank, the company has weathered economic fluctuations, industry consolidation, and technological disruptions, emerging as a resilient player in the regional banking landscape.
The company's evolution began in 1983 when it was incorporated as a bank holding company, Penns Woods Bancorp, Inc. Since then, the corporation has expanded its operations and diversified its service offerings. Jersey Shore State Bank (JSSB) became a wholly-owned subsidiary of the corporation upon its formation. In October 2000, JSSB acquired The M Group, Inc. DBA The Comprehensive Financial Group, which operates as a subsidiary of JSSB and offers insurance and securities brokerage services. The 2013 acquisition of Luzerne Bank further expanded the organization's footprint, with Luzerne operating as a subsidiary of the corporation.
In addition to its banking subsidiaries, Penns Woods Bancorp has three other wholly-owned subsidiaries: Woods Real Estate Development Company, Inc., Woods Investment Company, Inc., and United Insurance Solutions, LLC (UIS). The corporation became the sole owner of UIS in 2021, which offers property and casualty and auto insurance products within the corporation's market footprint. This diversification of services has allowed Penns Woods Bancorp to expand its revenue streams beyond traditional banking activities.
The corporation's primary business has consisted of managing and supervising its banking subsidiaries, with its principal source of income being dividends paid by the Banks and Woods Investment Company, Inc. The Banks are engaged in commercial and retail banking, offering services such as accepting time, savings, and demand deposits, funding commercial, consumer, and mortgage loans, and providing safe deposit services.
Today, Penns Woods Bancorp operates a network of 24 full-service branches, providing commercial and retail banking, mortgage services, and financial advisory solutions to its customers.
Financials
Penns Woods Bancorp's financial performance has been marked by consistent profitability, with the company reporting net income of $17.7 million for the 12 months ended December 31, 2024, translating to basic and diluted earnings per share of $2.35. This represents a year-over-year increase of 6.6% compared to the $16.6 million in net income reported for the same period in 2023.
The company's revenue streams have demonstrated resilience, with total revenue reaching $109.7 million in 2024, up from $63.3 million in 2023. This revenue growth has been fueled by a combination of factors, including an increase in net interest income, which rose by $3.9 million or 7.1% year-over-year, as well as a $1.2 million or 14.5% increase in non-interest income.
Penns Woods Bancorp's balance sheet remains strong, with total assets of $2.23 billion as of December 31, 2024, up from $2.20 billion at the end of 2023. The company's loan portfolio has also experienced steady growth, reaching $1.88 billion in 2024, a 2.0% increase from the previous year's level of $1.84 billion.
In the most recent quarter (Q4 2024), Penns Woods Bancorp reported revenue of $17.48 million and net income of $4.80 million. This represents a significant year-over-year growth, with revenue increasing by 3.06% and net income surging by 114.86% compared to Q4 2023. These increases were primarily attributed to growth in the loan portfolio and stabilization of the cost of funds.
Liquidity
The company's capital position remains robust, with a common equity tier 1 capital ratio of 10.43% and a total risk-based capital ratio of 11.09% as of December 31, 2024, well above the regulatory minimums required to be considered "well-capitalized." This solid capital base provides Penns Woods Bancorp with the financial flexibility to navigate potential economic headwinds and pursue strategic growth opportunities.
Penns Woods Bancorp maintains a strong liquidity position, with a debt-to-equity ratio of 1.62x and cash and cash equivalents of $28.97 million. The company has significant borrowing capacity, including $559.18 million available from its Federal Home Loan Bank (FHLB) credit line and an additional $90 million in correspondent bank lines. The current ratio and quick ratio both stand at 2.97, indicating a healthy short-term liquidity position.
Business Segments and Operations
Penns Woods Bancorp operates through two reportable segments: Jersey Shore State Bank and Luzerne Bank. Both segments offer similar commercial and consumer banking services to customers within their respective geographic regions in Pennsylvania.
In the commercial banking services segment, the Banks offer a range of lending and cash management products to corporations and other business clients. This includes commercial, financial, and agricultural loans, as well as commercial real estate and construction loans. As of December 31, 2024, the commercial, financial, and agricultural loan portfolio totaled $212.12 million, representing 11.30% of the total loan portfolio. The commercial real estate loan portfolio was $536.02 million, or 28.56% of total loans, while construction loans made up $43.13 million, or 2.30% of the portfolio.
On the consumer banking side, the Banks offer various loan products including residential mortgages, home equity loans and lines of credit, automobile financing, and other consumer installment loans. The residential real estate loan portfolio was the largest segment at $830.41 million, or 44.24% of total loans as of the end of 2024. Consumer automobile loans totaled $244.59 million, or 13.03% of the portfolio.
To fund its lending activities, the Banks maintain a diverse deposit base. As of December 31, 2024, total deposits were $1.71 billion, with noninterest-bearing deposits making up $456.94 million, or 26.77% of total deposits, and interest-bearing deposits totaling $1.25 billion. The Banks also utilize short-term and long-term borrowings, primarily from the Federal Home Loan Bank, to supplement their deposit funding. Total borrowings were $296.79 million at the end of 2024, including $42.20 million in short-term debt and $254.59 million in long-term debt.
Challenges and Future Outlook
Penns Woods Bancorp's performance has not been without its challenges. The company experienced a 4.5% year-over-year increase in non-interest expense, driven by higher salaries and employee benefits, as well as increased occupancy and equipment costs. Additionally, the company recognized $735,000 in merger-related expenses during the fourth quarter of 2024 in connection with its announced acquisition by Northwest Bancshares, Inc.
Looking ahead, the pending acquisition by Northwest Bancshares represents a significant milestone for Penns Woods Bancorp. The all-stock transaction, valued at approximately $270.4 million, is expected to strengthen the combined organization's presence in North Central and Northeastern Pennsylvania, creating a banking powerhouse with over $17 billion in total assets.
The banking industry has seen moderate growth in the 3-5% CAGR range in recent years, driven by factors like loan growth, rising interest rates, and improving economic conditions. Penns Woods Bancorp's focus on its core Pennsylvania markets positions it well to capitalize on these trends, although it may face challenges in expanding beyond its current geographic footprint.
Despite the challenges presented by the evolving banking landscape, Penns Woods Bancorp has demonstrated its ability to adapt and thrive. The company's consistent financial performance, robust capital position, and strategic growth initiatives have positioned it well to navigate the future. As Penns Woods Bancorp embarks on the next chapter of its journey under the stewardship of Northwest Bancshares, investors can take comfort in the company's proven track record of resilience and its commitment to serving the needs of its local communities.