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Penns Woods Bancorp
PWOD
#8474
Rank
$0.22 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$30.00
Share price
0.00%
Change (1 day)
4.86%
Change (1 year)
๐Ÿฆ Banks๐Ÿ’ณ Financial services
Categories
  1. Penns Woods Bancorp
  2. Quarterly Reports (10-Q)
  3. Submitted on 2024-11-14

Penns Woods Bancorp - 10-Q quarterly report FY


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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 10-Q

☑Quarterly Report pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934

for the Quarterly Period Ended September 30, 2024. 
☐Transition report pursuant to Section 13 or 15 (d) of the Exchange Act

For the Transition Period from                    to                   .

No. 0-17077
(Commission File Number)

PENNS WOODS BANCORP INC.
(Exact name of Registrant as specified in its charter) 
Pennsylvania300 Market Street, P.O. Box 96723-2226454
(State or other jurisdiction ofWilliamsport(I.R.S. Employer Identification No.)
incorporation or organization)Pennsylvania17703-0967
(Address of principal executive offices)(Zip Code)

(570) 322-1111
Registrant’s telephone number, including area code


Securities registered pursuant to Section 12(b) of the Exchange Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, $5.55 par valuePWODThe Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ NO ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒ NO ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.  See the definition of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.  (Check one):
 
Large accelerated filer☐Accelerated filer☐
  Non-accelerated filer☒   Smaller reporting company☒
Emerging growth company☐

If an emerging growth company, indicate by check mark if registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☒
On November 1, 2024 there were 7,544,531 shares of the Registrant’s common stock outstanding.


PENNS WOODS BANCORP, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

  Page
  Number
 
   
3
   
3
  
4
  
5
  
6
 
8
  
9
   
29
   
45
   
45
   
 
   
46
   
46
   
46
   
46
   
46
   
46
   
47
   
48
2

Part I.  FINANCIAL INFORMATION
Item 1.  Financial Statements
PENNS WOODS BANCORP, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)

September 30,December 31,
(In Thousands, Except Share And Per Share Data)20242023
ASSETS: 
Noninterest-bearing balances$28,805 $28,969 
Interest-bearing balances in other financial institutions10,889 8,493 
Total cash and cash equivalents39,694 37,462 
Investment debt securities, available for sale, at fair value197,466 190,945 
Investment equity securities, at fair value1,145 1,122 
Restricted investment in bank stock21,227 24,323 
Loans held for sale8,967 3,993 
Loans1,875,174 1,839,764 
Allowance for credit losses(11,588)(11,446)
Loans, net1,863,586 1,828,318 
Premises and equipment, net27,975 30,250 
Accrued interest receivable11,433 11,044 
Bank-owned life insurance45,378 33,867 
Investment in limited partnerships6,966 7,815 
Goodwill16,450 16,450 
Intangibles133 210 
Operating lease right-of-use asset2,861 2,512 
Deferred tax asset3,034 4,655 
Other assets12,935 11,843 
TOTAL ASSETS$2,259,250 $2,204,809 
LIABILITIES:  
Interest-bearing deposits$1,247,399 $1,118,320 
Noninterest-bearing deposits452,922 471,173 
Total deposits1,700,321 1,589,493 
Short-term borrowings78,305 145,926 
Long-term borrowings252,508 252,598 
Accrued interest payable5,509 3,814 
Operating lease liability2,936 2,570 
Other liabilities15,977 18,852 
TOTAL LIABILITIES2,055,556 2,013,253 
SHAREHOLDERS’ EQUITY:  
Preferred stock, no par value, 3,000,000 shares authorized; no shares issued
— — 
Common stock, par value $5.55, 22,500,000 shares authorized; 8,064,713 and 8,019,219 shares issued; 7,554,488 and 7,508,994 outstanding
44,802 44,550 
Additional paid-in capital62,989 61,733 
Retained earnings114,008 107,238 
Accumulated other comprehensive loss:  
Net unrealized loss on available for sale securities(2,571)(6,396)
Defined benefit plan(2,719)(2,754)
Treasury stock at cost, 510,225 shares
(12,815)(12,815)
TOTAL SHAREHOLDERS' EQUITY203,694 191,556 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$2,259,250 $2,204,809 

See accompanying notes to the unaudited consolidated financial statements.
3

PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
Three Months Ended September 30,Nine Months Ended September 30,
(In Thousands, Except Share And Per Share Data)2024202320242023
INTEREST AND DIVIDEND INCOME:    
Loans, including fees$25,632 $21,720 $74,021 $59,571 
Investment securities:    
Taxable1,874 1,365 5,213 3,870 
Tax-exempt61 114 233 410 
Dividend and other interest income621 722 1,980 1,827 
TOTAL INTEREST AND DIVIDEND INCOME28,188 23,921 81,447 65,678 
INTEREST EXPENSE:    
Deposits9,599 6,463 26,439 14,686 
Short-term borrowings932 2,412 4,024 6,084 
Long-term borrowings2,601 1,714 7,667 3,892 
TOTAL INTEREST EXPENSE13,132 10,589 38,130 24,662 
NET INTEREST INCOME15,056 13,332 43,317 41,016 
PROVISION (RECOVERY) FOR CREDIT LOSSES740 1,372 (299)263 
NET INTEREST INCOME AFTER PROVISION (RECOVERY) FOR CREDIT LOSSES14,316 11,960 43,616 40,753 
NON-INTEREST INCOME:    
Service charges537 545 1,551 1,557 
Net debt securities losses, available for sale(5)(45)(40)(125)
Net equity securities gains (losses)41 (36)24 (35)
Bank-owned life insurance206 170 856 892 
Gain on sale of loans416 257 1,021 732 
Insurance commissions145 136 425 416 
Brokerage commissions164 142 521 448 
Loan broker commissions351 241 841 728 
Debit card income355 320 1,052 995 
Other211 145 657 546 
TOTAL NON-INTEREST INCOME2,421 1,875 6,908 6,154 
NON-INTEREST EXPENSE:    
Salaries and employee benefits6,402 6,290 19,224 18,778 
Occupancy731 784 2,394 2,422 
Furniture and equipment731 867 2,436 2,503 
Software amortization245 237 657 593 
Pennsylvania shares tax351 280 1,022 807 
Professional fees530 719 1,654 2,313 
Federal Deposit Insurance Corporation deposit insurance399 425 1,179 1,122 
Marketing60 167 209 594 
Intangible amortization26 25 77 92 
Loss on sale of premise and equipment— — 330 — 
Other1,409 1,378 4,322 4,275 
TOTAL NON-INTEREST EXPENSE10,884 11,172 33,504 33,499 
INCOME BEFORE INCOME TAX PROVISION5,853 2,663 17,020 13,408 
INCOME TAX PROVISION1,052 439 3,022 2,355 
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS'$4,801 $2,224 $13,998 $11,053 
EARNINGS PER SHARE - BASIC$0.64 $0.31 $1.86 $1.56 
EARNINGS PER SHARE - DILUTED$0.64 $0.31 $1.86 $1.53 
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 7,544,344 7,072,440 7,528,758 7,064,336 
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED7,544,344 7,228,940 7,528,758 7,220,836 
See accompanying notes to the unaudited consolidated financial statements.
4



PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
 
 Three Months Ended September 30,Nine Months Ended September 30,
(In Thousands)2024202320242023
Net Income$4,801 $2,224 $13,998 $11,053 
Other comprehensive income (loss):    
Net unrealized gain (loss) on available for sale securities4,751 (1,480)4,802 (1,476)
Tax effect(998)311 (1,009)310 
Net realized loss on available for sale securities included in net income5 45 40 125 
Tax effect(1)(9)(8)(26)
   Amortization of unrecognized pension loss15 37 46 111 
        Tax effect(4)(8)(11)(23)
Total other comprehensive income (loss)3,768 (1,104)3,860 (979)
Comprehensive income$8,569 $1,120 $17,858 $10,074 
 
See accompanying notes to the unaudited consolidated financial statements.

5


PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(UNAUDITED)


 Three months ended:
COMMON STOCKADDITIONAL
PAID-IN CAPITAL		RETAINED EARNINGSACCUMULATED OTHER
COMPREHENSIVE LOSS 		TREASURY STOCKTOTAL
SHAREHOLDERS’ EQUITY
(In Thousands, Except Share And Per Share Data)SHARESAMOUNT
Balance, June 30, 20248,051,699 $44,730 $62,608 $111,622 $(9,058)$(12,815)$197,087 
Net income4,801 4,801 
Other comprehensive income3,768 3,768 
Stock-based compensation 158 158 
Dividends declared ($0.32 per share)
(2,415)(2,415)
Common shares issued for employee stock purchase plan1,425 9 23 32 
Common shares issued for director compensation plan2,515 13 45 58 
Dividend reinvestment plan9,074 50 155 205 
Balance, September 30, 20248,064,713 $44,802 $62,989 $114,008 $(5,290)$(12,815)$203,694 

COMMON STOCKADDITIONAL
PAID-IN CAPITAL		RETAINED EARNINGSACCUMULATED OTHER
COMPREHENSIVE LOSS 		TREASURY STOCKTOTAL
SHAREHOLDERS’ EQUITY
(In Thousands, Except Share And Per Share Data)SHARESAMOUNT
Balance, June 30, 20237,573,713 $42,077 $54,869 $104,104 $(13,833)$(12,815)$174,402 
Net income2,224 2,224 
Other comprehensive loss(1,104)(1,104)
Stock-based compensation229 229 
Dividends declared ($0.32 per share)
(2,261)(2,261)
Common shares issued for employee stock purchase plan1,436 8 26 34 
Common shares issued for director compensation plan2,341 13 50 63 
Registered at-the-market shares issuance, net proceeds34,411 191 562 753 
Dividend reinvestment plan8,349 46154200 
Balance, September 30, 20237,620,250 $42,335 $55,890 $104,067 $(14,937)$(12,815)$174,540 

See accompanying notes to the unaudited consolidated financial statements.




6



PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(UNAUDITED)
Nine months ended:
COMMON STOCKADDITIONAL
PAID-IN CAPITAL		RETAINED EARNINGSACCUMULATED OTHER
COMPREHENSIVE LOSS		TREASURY STOCKTOTAL
SHAREHOLDERS’ EQUITY
(In Thousands, Except Share And Per Share Data)SHARESAMOUNT
Balance, December 31, 20238,019,219 $44,550 $61,733 $107,238 $(9,150)$(12,815)$191,556 
Net income   13,998   13,998 
Other comprehensive income    3,860  3,860 
Stock-based compensation 585 585 
Dividends declared ($0.96 per share)
   (7,228)  (7,228)
Common shares issued for employee stock purchase plan5,472 31 77    108 
Director Compensation Plan8,972 49 134183 
Dividend reinvestment plan31,050 172 460632 
Balance, September 30, 20248,064,713 $44,802 $62,989 $114,008 $(5,290)$(12,815)$203,694 


COMMON STOCKADDITIONAL
PAID-IN CAPITAL		RETAINED EARNINGSACCUMULATED OTHER
COMPREHENSIVE LOSS 		TREASURY STOCKTOTAL
SHAREHOLDERS’ EQUITY
(In Thousands, Except Share And Per Share Data)SHARESAMOUNT
Balance, December 31, 20227,566,810 $42,039 $54,252 $98,147 $(13,958)$(12,815)$167,665 
Cumulative effect of adoption of ASU 2016-131,647 1,647 
Net income   11,053   11,053 
Other comprehensive loss  (979) (979)
Stock-based compensation715 715 
Dividends declared ($0.96 per share)
   (6,780)  (6,780)
Common shares issued for employee stock purchase plan3,120 17 56    73 
Common shares issued for director compensation plan7,560 42 151 193 
Registered at-the-market shares issuance, net proceeds34,411 191562753 
Dividend reinvestment plan8,349 46154200 
Balance, September 30, 20237,620,250 $42,335 $55,890 $104,067 $(14,937)$(12,815)$174,540 


See accompanying notes to the unaudited consolidated financial statements.
7

PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED) 
Nine Months Ended September 30,
(In Thousands)20242023
OPERATING ACTIVITIES:  
Net Income$13,998 $11,053 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization2,960 2,469 
Loss on disposal of premises and equipment339 — 
Amortization of intangible assets77 92 
(Recovery) provision of credit losses(299)263 
Stock based compensation585 715 
Accretion and amortization of investment security discounts and premiums(72)361 
Net debt securities losses, available for sale40 125 
Originations of loans held for sale(44,740)(27,183)
Proceeds of loans held for sale40,787 27,130 
Gain on sale of loans(1,021)(732)
Net equity securities (gains) losses(24)35 
Earnings on bank-owned life insurance(856)(892)
Decrease in deferred tax asset604 191 
Gain on lease abandonment(127)— 
Other, net(4,007)570 
Net cash provided by operating activities8,244 14,197 
INVESTING ACTIVITIES:  
Proceeds from sales of available for sale securities9,775 24,701 
Proceeds from calls and maturities of available for sale securities29,502 18,824 
Proceeds from sales of equity securities— 35 
Purchases of available for sale securities(40,924)(36,356)
Net increase in loans(34,515)(181,784)
Acquisition of premises and equipment(952)(396)
Proceeds from the sale of premises and equipment741 — 
Proceeds from the sale of foreclosed assets323 — 
Purchase of bank-owned life insurance(12,147)(7)
Proceeds from bank-owned life insurance death benefit1,492 1,656 
Proceeds from redemption of regulatory stock30,545 32,292 
Purchases of regulatory stock(27,449)(38,410)
Net cash used for investing activities(43,609)(179,445)
FINANCING ACTIVITIES:  
Net increase in interest-bearing deposits129,079 58,363 
Net decrease in noninterest-bearing deposits(18,251)(47,556)
Proceeds from long-term borrowings35,826 140,000 
Repayment of long-term borrowings(35,000)(25,000)
Net (decrease) increase in short-term borrowings(67,621)40,397 
Finance lease principal payments(131)(138)
Dividends paid(7,228)(6,780)
Issuance of common stock923 1,219 
Net cash provided by financing activities37,597 160,505 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS2,232 (4,743)
CASH AND CASH EQUIVALENTS, BEGINNING37,462 40,333 
CASH AND CASH EQUIVALENTS, ENDING$39,694 $35,590 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:  
Interest paid$36,435 $22,549 
Income taxes paid2,133 2,950 
Non-cash investing and financing activities:
Finance right of use asset abandonment658 — 
Finance lease abandonment785 — 
Transfer of loans to foreclosed real estate— 770 
See accompanying notes to the unaudited consolidated financial statements.
8

PENNS WOODS BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
 

Note 1.  Basis of Presentation
 
The consolidated financial statements include the accounts of Penns Woods Bancorp, Inc. (the “Company”) and its wholly-owned subsidiaries: Woods Investment Company, Inc., Woods Real Estate Development Company, Inc., United Insurance Solutions, LLC., Luzerne Bank, and Jersey Shore State Bank (Jersey Shore State Bank and Luzerne Bank are referred to together as the “Banks”) and Jersey Shore State Bank’s wholly-owned subsidiary, The M Group, Inc. D/B/A The Comprehensive Financial Group (“The M Group”).  All significant inter-company balances and transactions have been eliminated in the consolidation.

The interim financial statements are unaudited, but in the opinion of management reflect all adjustments necessary for the fair presentation of results for such periods.  The results of operations for any interim period are not necessarily indicative of results for the full year.  These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

In reference to the attached financial statements, all adjustments are of a normal recurring nature pursuant to Rule 10-01(b) (8) of Regulation S-X.


Note 2.  Accumulated Other Comprehensive Loss

The changes in accumulated other comprehensive loss by component shown net of tax and parenthesis indicating debits, as of September 30, 2024 and 2023 were as follows:
Three Months Ended September 30, 2024Three Months Ended September 30, 2023
(In Thousands)Net Unrealized (Loss) Gain on Available
for Sale Securities		Defined
Benefit 
Plan		TotalNet Unrealized (Loss) Gain on Available
for Sale Securities		Defined
Benefit 
Plan		Total
Beginning balance$(6,328)$(2,730)$(9,058)$(9,753)$(4,080)$(13,833)
Other comprehensive income (loss) before reclassifications3,753 — 3,753 (1,169)— (1,169)
Amounts reclassified from accumulated other comprehensive loss4 11 15 36 29 65 
Net current-period other comprehensive income (loss)3,757 11 3,768 (1,133)29 (1,104)
Ending balance$(2,571)$(2,719)$(5,290)$(10,886)$(4,051)$(14,937)
 Nine Months Ended September 30, 2024Nine Months Ended September 30, 2023
(In Thousands)Net Unrealized (Loss) Gain on Available
for Sale Securities		Defined
Benefit 
Plan		TotalNet Unrealized Gain (Loss) on Available
for Sale Securities		Defined
Benefit 
Plan		Total
Beginning balance$(6,396)$(2,754)$(9,150)$(9,819)$(4,139)$(13,958)
Other comprehensive income (loss) before reclassifications3,793 — 3,793 (1,166)— (1,166)
Amounts reclassified from accumulated other comprehensive loss32 35 67 99 88 187 
Net current-period other comprehensive income (loss)3,825 35 3,860 (1,067)88 (979)
Ending balance$(2,571)$(2,719)$(5,290)$(10,886)$(4,051)$(14,937)
9

The reclassifications out of accumulated other comprehensive loss shown, net of tax and parenthesis indicating debits to net income, as of September 30, 2024 and 2023 were as follows:
Details about Accumulated Other Comprehensive Loss ComponentsAmount Reclassified from Accumulated Other Comprehensive LossAffected Line Item
 in the Consolidated 
Statement of Income
Three Months Ended September 30, 2024Three Months Ended September 30, 2023
Net unrealized loss on available for sale securities$(5)$(45)Net debt securities losses, available for sale
Income tax effect1 9 Income tax provision
Total reclassifications for the period$(4)$(36)
Net unrecognized pension costs$(15)$(37)Other non-interest expense
Income tax effect4 8 Income tax provision
Total reclassifications for the period$(11)$(29)

Details about Accumulated Other Comprehensive Loss ComponentsAmount Reclassified from Accumulated Other Comprehensive LossAffected Line Item
 in the Consolidated 
Statement of Income
Nine months ended September 30, 2024Nine months ended September 30, 2023
Net unrealized losses on available for sale securities$(40)$(125)Net debt securities losses, available for sale
Income tax effect8 26 Income tax provision
Total reclassifications for the period$(32)$(99)
Net unrecognized pension costs$(46)$(111)Other non-interest expense
Income tax effect11 23 Income tax provision
Total reclassifications for the period$(35)$(88)


Note 3.  Recent Accounting Pronouncements

In June 2022, the FASB issued ASU 2022-03, Fair Value Measurement (Topic 820) – Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions. This amendment clarifies the guidance in Topic 820, Fair Value Measurement, when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security. It also introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value in accordance with Topic 820. The amendments are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted. The amendments will be applied prospectively, with any adjustments from the adoption of the amendments recognized in earnings and disclosed on the date of adoption. This Update did not have a significant impact on the Company’s financial statements.

In March 2023, the FASB issued ASU 2023-02, Investments – Equity Method and Joint Ventures (Topic 323): Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method. ASU 2023-02 permits reporting entities to elect to account for their tax equity investments, regardless of the tax credit program from which the income tax credits are received, using the proportional amortization method if certain conditions are met. ASU 2023-02 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2023. This Update did not have a significant impact on the Company’s financial statements.

In October 2023, the FASB issued ASU 2023-06, Disclosure Improvement: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, which incorporates several SEC disclosure requirements into US GAAP and adds interim and annual disclosure requirements to a variety of topics in the Accounting Standards Codification, including those focusing on accounting changes, earnings per share, debt and repurchase agreements. For entities subject to the SEC disclosure requirements and those “required to file or furnish financial statements with or to the SEC in preparation for the sale of or for purposes of issuing securities that are not subject to contractual restrictions on transfer,” the US GAAP requirements will be effective when the removal of the related SEC rule is effective. Early adoption is not permitted for these entities. For all other entities, the effective date will be two years later, and early adoption is permitted. That is, financial statements issued after the effective date of each amendment are required to include on a prospective basis the related disclosure incorporated into US GAAP by this ASU. However, if the SEC does not act to remove its related requirements by June 30, 2027, any related FASB amendments will be removed from the Codification and will not be effective for any entities.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities to disclose information about their reportable segments’ significant expenses on an
10

interim and annual basis. This ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. Public entities are required to adopt the changes retrospectively, recasting each prior-period disclosure for which a comparative income statement is presented in the period of adoption. This Update is not expected to have a significant impact on the Company’s financial statements.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which provides for improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This guidance is effective for public business entities for annual periods beginning after December 15, 2024. This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2024, the FASB issued ASU 2024-01, Compensation – Stock Compensation (Topic 718), amended the guidance in ASC 718 to add an example showing how to apply the scope guidance to determine whether profits interest and similar awards should be accounted for as share-based payment arrangements. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. For all other entities, it is effective for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

In March 2024, the FASB issued ASU 2024-02, Codification Improvements—Amendments to Remove References to the Concepts Statements. This ASU removes various references to the FASB’s Concepts Statements from the FASB’s Accounting Standards Codification. The FASB does not expect these updates to have a significant effect on current accounting practice. That is because in most cases the amendments to the Codification remove references to Concept Statements that are extraneous and not required to understand or apply the guidance. However, the FASB has provided transition guidance if applying the updated guidance results in accounting changes for some entities. The amendments in ASU 2024-02 are effective for public business entities for fiscal years beginning after December 15, 2024. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2025. This Update is not expected to have a significant impact on the Company’s financial statements.


Note 4. Per Share Data

There are no convertible securities which would affect the denominator in calculating basic and dilutive earnings per share. There were a total of 1,094,000 stock options, with an average exercise price of $25.13, outstanding on September 30, 2024. These options were excluded, on a weighted average basis, in the computation of diluted earnings per share for the period due to the average market price of common shares of $20.52 for the period being less than the strike price. There were a total of 1,000,000 stock options, with an average exercise price of $25.55, outstanding on September 30, 2023. A portion of these options were included, on a weighted average basis, in the computation of diluted earnings per share for the period due to the average market price of common shares of $25.08 for the periods being greater than the strike price.

 Three Months Ended September 30,Nine Months Ended September 30,
 2024202320242023
Weighted average common shares issued8,054,569 7,582,665 8,038,983 7,574,561 
Weighted average treasury stock shares(510,225)(510,225)(510,225)(510,225)
Weighted average common shares outstanding - basic7,544,344 7,072,440 7,528,758 7,064,336 
Dilutive effect of outstanding stock options— 156,500 — 156,500 
Weighted average common shares outstanding - basic and diluted7,544,344 7,228,940 7,528,758 7,220,836 
 












11






Note 5. Investment Securities
 
The amortized cost, gross unrealized gains and losses, and fair values of our investment securities portfolio at September 30, 2024 and December 31, 2023 are as follows, no allowance for credit losses required on any category on investments for either period presented:
 September 30, 2024
  GrossGross 
 AmortizedUnrealizedUnrealizedFair
(In Thousands)CostGainsLossesValue
Available for sale (AFS):    
U.S. Government and agency securities$2,000 $9 $(17)$1,992 
Mortgage-backed securities37,905 625 (153)38,377 
State and political securities108,459 488 (2,797)106,150 
Other debt securities52,356 310 (1,719)50,947 
Total debt securities$200,720 $1,432 $(4,686)$197,466 
Investment equity securities:
Equity securities$1,300 $— $(155)$1,145 
 December 31, 2023
  GrossGross 
 AmortizedUnrealizedUnrealizedFair
(In Thousands)CostGainsLossesValue
Available for sale (AFS):    
U.S. Government and agency securities$4,000 $3 $(60)$3,943 
Mortgage-backed securities15,457 120 (222)15,355 
State and political securities120,740 162 (5,287)115,615 
Other debt securities58,844 97 (2,909)56,032 
Total debt securities$199,041 $382 $(8,478)$190,945 
Investment equity securities:
Equity securities$1,300 $— $(178)$1,122 

The following tables show the Company’s gross unrealized losses and fair value, aggregated by investment category and length of time, that the individual debt securities have been in a continuous unrealized loss position, at September 30, 2024 and December 31, 2023.
12

 September 30, 2024
 Less than Twelve MonthsTwelve Months or GreaterTotal
  Gross Gross Gross
 FairUnrealizedFairUnrealizedFairUnrealized
(In Thousands)ValueLossesValueLossesValueLosses
Available for sale (AFS):
U.S. Government and agency securities$— $— $983 $(17)$983 $(17)
Mortgage-backed securities7,610 (26)901 (127)8,511 (153)
State and political securities5,228 (48)78,414 (2,749)83,642 (2,797)
Other debt securities7,689 (142)26,491 (1,577)34,180 (1,719)
Total debt securities$20,527 $(216)$106,789 $(4,470)$127,316 $(4,686)
 December 31, 2023
 Less than Twelve MonthsTwelve Months or GreaterTotal
  Gross Gross Gross
 FairUnrealizedFairUnrealizedFairUnrealized
(In Thousands)ValueLossesValueLossesValueLosses
Available for sale (AFS):
U.S. Government and agency securities$— $— $2,940 $(60)$2,940 $(60)
Mortgage-backed securities7,559 (78)984 (144)8,543 (222)
State and political securities6,051 (128)99,405 (5,159)105,456 (5,287)
Other debt securities12,976 (218)35,449 (2,691)48,425 (2,909)
Total debt securities$26,586 $(424)$138,778 $(8,054)$165,364 $(8,478)
 
At September 30, 2024, there were a total of 22 securities in a continuous unrealized loss position for less than twelve months and 143 individual securities that were in a continuous unrealized loss position for twelve months or greater. No credit losses occurred for the period ended September 30, 2024.

The Company reviews its position quarterly and has determined that, at September 30, 2024, the declines outlined in the above table represent temporary non-credit declines and the Company does not intend to sell, and does not believe it will be required to sell, these securities before recovery of their cost basis, which may be at maturity.  The Company has concluded that the unrealized losses disclosed above are not credit-related but are the result of interest rate changes, sector credit ratings changes, or company-specific ratings changes that are not expected to result in the non-collection of principal and interest during the period.

The amortized cost and fair value of debt securities at September 30, 2024, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities since borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
(In Thousands)Amortized CostFair Value
Due in one year or less$24,566 $24,290 
Due after one year to five years71,959 70,340 
Due after five years to ten years79,142 77,509 
Due after ten years25,053 25,327 
Total$200,720 $197,466 

Total gross proceeds from sales of debt securities available for sale for the nine months ended September 30, 2024 was $9,775,000, compared to $24,701,000 for the corresponding 2023 period.

13

The following table represents gross realized gains and losses from the sales of debt securities available for sale:
 Three Months Ended September 30,Nine Months Ended September 30,
(In Thousands)2024202320242023
Available for sale (AFS):
Gross realized gains:    
State and political securities$53 $1 $53 $146 
Other debt securities49 — 49 — 
Total gross realized gains$102 $1 $102 $146 
Gross realized losses:    
State and political securities$(8)$(46)$(43)$(271)
Other debt securities(99)— (99)— 
Total gross realized losses$(107)$(46)$(142)$(271)

Investment securities with a carrying value of approximately $115,569,000 and $107,800,000 at September 30, 2024 and December 31, 2023, respectively, were pledged to secure certain deposits, repurchase agreements, and for other purposes as required by law.

At September 30, 2024 and December 31, 2023, we had $1,145,000 and $1,122,000, respectively, in equity securities recorded at fair value. The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three and nine months ended September 30, 2024 and 2023:
Three Months Ended September 30,Nine Months Ended September 30,
(In Thousands)2024202320242023
Net gains (losses) recognized in equity securities during the period$41 $(37)$24 $(36)
Less: Net losses realized on the sale of equity securities during the period— (1)— (1)
Unrealized gains (losses) recognized in equity securities held at reporting date$41 $(36)$24 $(35)


Note 6. Loans

Management segments the Banks' loan portfolio to a level that enables risk and performance monitoring according to similar risk characteristics.  Loans are segmented based on the underlying collateral characteristics.  Categories include commercial, financial, and agricultural, real estate, and installment loans.  Real estate loans are further segmented into three categories: residential, commercial, and construction, while installment loans are classified as either consumer automobile loans or other installment loans.

The following table presents the related aging categories of loans, by class, as of September 30, 2024 and December 31, 2023:
14

 September 30, 2024
 Past Due
 30 To 89Past Due 90
(In Thousands)DaysDays Or MoreCurrentTotal
Commercial, financial, and agricultural$823 $3 $215,488 $216,314 
Real estate mortgage: 
Residential6,288 3,157 814,000 823,445 
Commercial2,600 1,579 536,271 540,450 
Construction— — 41,322 41,322 
Consumer automobile loans3,208 284 239,194 242,686 
Other consumer installment loans195 28 9,945 10,168 
 $13,114 $5,051 $1,856,220 1,874,385 
Net deferred loan fees and discounts 789 
Allowance for credit losses (11,588)
Loans, net $1,863,586 
 December 31, 2023
 Past Due  
 30 To 89Past Due 90 
(In Thousands)DaysDays Or MoreCurrentTotal
Commercial, financial, and agricultural$749 $587 $212,130 $213,466 
Real estate mortgage:    
Residential10,158 1,970 786,373 798,501 
Commercial1,466 273 529,862 531,601 
Construction812 — 39,577 40,389 
Consumer automobile loans2,748 307 241,343 244,398 
Other consumer installment loans620 11 9,730 10,361 
 $16,553 $3,148 $1,819,015 1,838,716 
Net deferred loan fees and discounts  1,048 
Allowance for loan losses  (11,446)
Loans, net  $1,828,318 

As of September 30, 2024, loans that were ninety days past due or greater and still accruing totaled $3,530,000, compared to a total of $2,150,000 at December 31, 2023.

The Allowance for Credit Losses ("ACL") related to loans consists of loans evaluated collectively and individually for expected credit losses. The ACL related to loans represents an estimate of expected credit losses over the expected life of the loans as of the balance sheet date and is recorded as a reduction to net loans. The ACL for off balance sheet credit exposure includes estimated losses on unfunded loan commitments, letters of credit and other off balance sheet credit exposures and is recorded in other liabilities. The total ACL is increased by charges to expense, through the provision for credit losses, and decreased by charge-offs, net of recoveries.

The following table presents the components of the ACL as of September 30, 2024 and December 31, 2023:
(In Thousands)September 30, 2024December 31, 2023
ACL - loans$11,588 $11,446 
ACL - off balance sheet credit exposure347 1,342 
Total ACL$11,935 $12,788 
 
Non-Accrual Loans
15

 September 30, 2024December 31, 2023
(In Thousands)With a Related ACLWithout a Related ACLTotalWith a Related ACLWithout a Related ACLTotal
Commercial, financial, and agricultural$— $534 $534 $— $504 $504 
Real estate mortgage:
Residential— 221 221 21 259 280 
Commercial2,071 1,582 3,653 — 214 214 
Construction— — — — — — 
Consumer automobile— 2 2 — — — 
Other consumer installment loans— — — — — — 
$2,071 $2,339 $4,410 $21 $977 $998 

Total interest income recorded on non-accrual loans at September 30, 2024 totaled $65,000 for the three month period and $159,000 for the nine month period ended.


The following table presents outstanding loan balances of collateral-dependent loans by class as of September 30, 2024 and December 31, 2023:
September 30, 2024
(In Thousands)Real estateOtherTotal
Real estate mortgage:
Residential$1,438 $— $1,438 
Commercial3,542 — 3,542 
Total$4,980 $— $4,980 
December 31, 2023
(In Thousands)Real estateOtherTotal
Real estate mortgage:
Residential$1,533 $— $1,533 
Commercial88 — 88 
Total$1,621 $— $1,621 

Loan Modifications

On January 1, 2023, the Company adopted ASU 2022-02. Loan modifications to borrowers experiencing financial difficulty reported below do not include modifications with insignificant payment delays. ASU 2022-02 lists the following factors when considering if the loan modification has insignificant payment delays: (1) the amount of the restructured payments subject to the delay is insignificant relative to the unpaid principal or collateral value of the debt and will result in an insignificant shortfall in the contractual amount due, and (2) the delay in timing of the restructured payment period is insignificant relative to the frequency of payments due under the debt, the debt’s original contractual maturity or the debt’s original expected duration.

The ACL incorporates an estimate of lifetime expected credit losses and is recorded upon asset origination or acquisition. The starting point for the estimate of the ACL is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a probability of default/loss given default model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.

Loans considered modifications to borrowers experiencing financial difficulty amounted to $4,822,000 and $5,019,000 as of September 30, 2024 and December 31, 2023, respectively.
16


The amount of foreclosed residential real estate held at September 30, 2024 and December 31, 2023, totaled $1,323,000 and $700,000, respectively. Consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process at September 30, 2024 and December 31, 2023, totaled $1,732,000 and $601,000, respectively.

Internal Credit Ratings

Management uses a ten point internal credit rating system to monitor the credit quality of the overall loan portfolio. The first six categories are considered not criticized, and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. The special mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a substandard classification. Loans in the substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due are evaluated for substandard classification.  Loans in the doubtful category exhibit the same weaknesses found in the substandard loans; however, the weaknesses are more pronounced.  Such loans are static and collection in full is improbable.  However, these loans are not yet rated as loss because certain events may occur which would salvage the debt.  Loans classified as loss are considered uncollectible and charge-off is imminent.

To help ensure that credit ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Banks have a structured loan rating process with several layers of internal and external oversight.  Generally, consumer and residential mortgage loans are included in the pass category unless a specific action, such as bankruptcy, repossession, or death occurs to raise awareness of a possible credit event.  An external semi-annual loan review of large commercial relationships is performed, as well as a sample of smaller transactions. The 2024 loan review will evaluate 55% of the Banks' average outstanding commercial portfolio which can consist of outstanding loans, commercial real estate mortgages and outstanding commitments. Detailed reviews, including plans for resolution, are performed on loans classified as substandard, doubtful, or loss on a quarterly basis.

































17

The following table presents the credit quality categories identified above as of September 30, 2024 and December 31, 2023:
September 30, 2024
(In Thousands)20242023202220212020PriorRevolving LoansRevolving Loans Converted to TermTotal
Commercial, financial, and agricultural
Pass$26,484 $26,289 $43,557 $31,884 $30,227 $27,249 $28,455 $147 $214,292 
Special Mention— — 127 24 15 — — — 166 
Substandard or Lower— — — — — 666 524 666 1,856 
$26,484 $26,289 $43,684 $31,908 $30,242 $27,915 $28,979 $813 $216,314 
 
Current period gross write offs$— $40 $71 $— $— $65 $— $— $176 
Real estate mortgage:
Residential
Pass$84,598 $119,262 $125,925 $80,236 $46,184 $151,729 $60,067 $152,011 $820,012 
Special Mention— 334 516 — — 92 — — 942 
Substandard or Lower— — 310 268 — 1,857 — 56 2,491 
$84,598 $119,596 $126,751 $80,504 $46,184 $153,678 $60,067 $152,067 $823,445 
Current period gross write offs$— $22 $— $— $— $4 $— $— $26 
Commercial
Pass$31,564 $62,757 $104,479 $119,309 $46,110 $154,392 $11,867 $722 $531,200 
Special Mention— 181 149 2,366 — 1,799 — — 4,495 
Substandard or Lower— — — 876 — 3,879 — — 4,755 
$31,564 $62,938 $104,628 $122,551 $46,110 $160,070 $11,867 $722 $540,450 
Current period gross write offs$— $— $— $— $— $3 $— $— $3 
Construction
Pass$11,127 $14,815 $8,166 $1,331 $1,202 $4,321 $279 $— $41,241 
Special Mention— — — — — — — — — 
Substandard or Lower— — — — — 81 — — 81
$11,127 $14,815 $8,166 $1,331 $1,202 $4,402 $279 $— $41,322 
Current period gross write offs$— $— $— $— $— $— $— $— $— 
Consumer Automobile
Pass$58,512 $97,432 $59,196 $13,379 $9,324 $4,843 $— $— $242,686 
Special Mention— — — — — — — — — 
Substandard or Lower— — — — — — — — — 
$58,512 $97,432 $59,196 $13,379 $9,324 $4,843 $— $— $242,686 
Current period gross write offs$24 $352 $259 $98 $63 $33 $— $— $829 
Installment loans to individuals
Pass$2,435 $2,088 $1,426 $880 $405 $2,902 $— $32 $10,168 
Special Mention— — — — — — — — — 
Substandard or Lower— — — — — — — — — 
$2,435 $2,088 $1,426 $880 $405 $2,902 $— $32 $10,168 
Current period gross write offs$90 $59 $28 $8 $4 $36 $— $— $225 


18


December 31, 2023
(In Thousands)20232022202120202019PriorRevolving LoansRevolving Loans Converted to TermTotal
Commercial, financial, and agricultural
Pass$31,190 $49,615 $35,901 $31,980 $3,123 $29,502 $29,397 $101 $210,809 
Special Mention— 183 37 19 — 138 223 — 600 
Substandard or Lower— — — 85 — 742 487 743 2,057 
$31,190 $49,798 $35,938 $32,084 $3,123 $30,382 $30,107 $844 $213,466 
Current period gross write offs$— $41 $— $— $— $— $— $— $41 
Real estate mortgage:
Residential
Pass$135,939 $134,077 $88,844 $51,378 $33,914 $148,802 $56,519 $146,055 $795,528 
Special Mention— 844 273 — — — — — 1,117 
Substandard or Lower— — — — — 1,790 — 66 1,856 
$135,939 $134,921 $89,117 $51,378 $33,914 $150,592 $56,519 $146,121 $798,501 
Current period gross write offs$— $— $— $— $— $9 $73 $— $82 
Commercial
Pass$55,664 $107,638 $128,094 $49,603 $24,104 $144,377 $12,338 $821 $522,639 
Special Mention— 153 2,990 — — 1,891 — — 5,034 
Substandard or Lower— — — — 59 3,869 — — 3,928 
$55,664 $107,791 $131,084 $49,603 $24,163 $150,137 $12,338 $821 $531,601 
Current period gross write offs$59 $— $— $— $— $3 $— $— $62 
Construction
Pass$25,494 $6,837 $1,742 $1,302 $392 $4,272 $261 $— $40,300 
Special Mention— — — — — — — — — 
Substandard or Lower— — — — — 89 — — 89
$25,494 $6,837 $1,742 $1,302 $392 $4,361 $261 $— $40,389 
Current period gross write offs$— $— $— $— $— $— $— $— $— 
Consumer Automobile
Pass$119,922 $78,443 $19,567 $15,348 $7,305 $3,813 $— $— $244,398 
Special Mention— — — — — — — — — 
Substandard or Lower— — — — — — — — — 
$119,922 $78,443 $19,567 $15,348 $7,305 $3,813 $— $— $244,398 
Current period gross write offs$30 $320 $178 $113 $8 $17 $— $— $666 
Installment loans to individuals
Pass$2,952 $2,188 $1,177 $524 $407 $3,071 $— $42 $10,361 
Special Mention— — — — — — — — — 
Substandard or Lower— — — — — — — — — 
$2,952 $2,188 $1,177 $524 $407 $3,071 $— $42 $10,361 
Current period gross write offs$232 $47 $23 $8 $12 $34 $13 $11 $380 

19

Allowance for Credit Losses

Maintaining an appropriate Allowance for Credit Losses ("ACL") is dependent on various factors, including the ability to identify potential problem loans in a timely manner. For commercial construction, residential construction, commercial and industrial, and commercial real estate, an internal credit rating process is used. Management believes that internal credit ratings are the most relevant credit quality indicator for these types of loans. The migration of loans through the various internal credit rating categories is a significant component of the ACL methodology for these loans, which bases the probability of default on this migration. Assigning credit ratings involves judgment. The Company's loan review process provide a separate assessment of credit rating accuracy. Credit ratings may be changed based on the ongoing monitoring procedures performed by loan officers or credit administration staff or if specific loan review assessments identify a deterioration or an improvement in the loans.

Management considers the performance of the loan portfolio and its impact on the ACL. The Company does not assign internal Credit ratings to smaller balance, homogeneous loans, such as home equity, residential mortgage, and consumer automobile loans. For these loans, the most relevant credit quality indicator is delinquency status and management evaluates credit quality based on the aging status of the loan.

Historical loss trends are used in the estimation of losses in the current portfolio.  These historical loss amounts are modified by other qualitative factors.  A historical charge-off factor is calculated utilizing the charge-off and recovery data over the past ten years.  Management has identified a number of additional qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience.  The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory, and governmental sources are: national and local economic trends and conditions; trends in volumes and terms of loans; effects of changes in lending policies; experience, ability, and depth of lending staff; value of underlying collateral; and concentrations of credit from a loan type, industry and/or geographic standpoint.

Management reviews the loan portfolio on a quarterly basis in order to make appropriate and timely adjustments to the ACL.  When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ACL.

Activity in the allowance is presented for the three and nine months ended September 30, 2024 and 2023:

 Three Months Ended September 30, 2024
 Commercial, Financial, and AgriculturalReal Estate MortgagesConsumer automobileOther consumer installment  
(In Thousands)ResidentialCommercialConstructionUnallocatedTotals
Beginning Balance$1,434 $828 $5,403 $11 $2,933 $625 $— $11,234 
Charge-offs(44)(22)(1)— (366)(67)— (500)
Recoveries110 3 — — 38 21 — 172 
Provision681 29 (449)(3)394 30 — 682 
Ending Balance$2,181 $838 $4,953 $8 $2,999 $609 $— $11,588 
 Three Months Ended September 30, 2023
 Commercial, Financial, and AgriculturalReal Estate MortgagesConsumer automobileOther consumer installment  
(In Thousands)ResidentialCommercialConstructionUnallocatedTotals
Beginning Balance$3,019 $1,078 $4,191 $178 $2,446 $680 $— $11,592 
Charge-offs— — — — (130)(86)— (216)
Recoveries106 22 1 — 27 27 — 183 
Provision788 68 131 20 241 83 — 1,331 
Ending Balance$3,913 $1,168 $4,323 $198 $2,584 $704 $— $12,890 
20

 
21

tNine Months Ended September 30, 2024
 Commercial, Financial, and AgriculturalReal Estate MortgagesConsumer automobileOther consumer installment  
(In Thousands)ResidentialCommercialConstructionUnallocatedTotals
Beginning Balance$3,379 $1,200 $3,352 $145 $2,668 $702 $— $11,446 
Charge-offs(176)(26)(3)— (829)(225)— (1,259)
Recoveries687 31 2 — 158 69 — 947 
Provision(1,709)(367)1,602 (137)1,002 63 — 454 
Ending Balance$2,181 $838 $4,953 $8 $2,999 $609 $— $11,588 
 Nine Months Ended September 30, 2023
 Commercial, Financial, and AgriculturalReal Estate MortgagesConsumer automobileOther consumer installment  
(In Thousands)ResidentialCommercialConstructionUnallocatedTotals
Beginning Balance$1,914 $5,061 $6,110 $188 $1,617 $109 $638 $15,637 
Impact of adopting ASC 3262,656 (3,893)(2,660)(96)240 602 (638)(3,789)
Charge-offs— (81)(62)— (507)(283)— (933)
Recoveries1,067 25 26 — 66 65 — 1,249 
Provision(1,724)56 909 106 1,168 211 — 726 
Ending Balance$3,913 $1,168 $4,323 $198 $2,584 $704 $— $12,890 

The shift in allocation and the changes in the provision for credit losses are primarily due to changes in the credit metrics within the loan portfolio coupled with qualitative metric changes. The fluctuation in provision for consumer automobile loans was driven by the level of net charge-offs and economic outlook. The provision for residential real estate decreased due to the level of charge-offs/recoveries, strong credit metrics, and economic outlook. The level of provision for commercial, financial, and agricultural was primarily the result of net recoveries for the nine month period which influenced the default assumptions in the model. The provision for commercial real estate increased for the nine month period due to a loan relationship being moved to nonaccrual and being measured individually for impairment. The provision for real estate construction for the nine month period decreased due to a decrease in historical loss rates over the ten year look back period.

The shift in allocation for the 2023 periods were due to the changes in the provision for credit losses primarily due to changes in the credit metrics within the loan portfolio coupled with the adoption of CECL on January 1, 2023. The decrease in provision for consumer automobile loans for the three month period was driven by increased net recoveries that offset the impact of increased loan volume, while the increase in provision for the nine month period ended September 30, 2023 was driven by loan volume coupled with increased net charge-offs. The increase in provision for commercial, financial, and agricultural for the three month period was primarily the result of loan volume, while the decrease in provision for the nine month period ended September 30, 2023 was the result of improving credit metrics coupled with a large recovery during the three month period ended June 30, 2023 which effected the historical loss rate calculations. The provision for commercial real estate remained steady for the three month period and increased for the nine month period ended September 30, 2023 primarily due to growth within this segment of the loan portfolio.

The Company makes commercial, industrial, residential, and installment loans to customers primarily throughout north-east and central Pennsylvania. Although the Company has a diversified loan portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent on the economic conditions within this region.

The Company has a concentration of the following to gross loans at September 30, 2024 and 2023: 
 September 30,
 20242023
Owners of residential rental properties19.69 %18.99 %
Owners of commercial rental properties14.73 %14.62 %
Exposure to non-owner occupied office space at September 30, 2024 and December 31, 2023 was $13,890,000 and $19,783,000, respectively, with none of these loans being delinquent.


22











Note 7. Net Periodic Benefit Cost-Defined Benefit Plans

For a detailed disclosure on the Company’s pension and employee benefits plans, please refer to Note 13 of the Company’s Consolidated Financial Statements included in the Annual Report on Form 10-K for the year ended December 31, 2023.

The following sets forth the components of the net periodic expense/(gain) of the domestic non-contributory defined benefit plan for the three and nine months ended September 30, 2024 and 2023, respectively:
Three Months Ended September 30,Nine Months Ended September 30,
(In Thousands)2024202320242023
Interest cost$193 $198 $579 $594 
Expected return on plan assets(365)(326)(1,095)(978)
Amortization of net loss15 37 46 111 
Net periodic benefit$(157)$(91)$(470)$(273)

Employer Contributions

The Company previously disclosed in its consolidated financial statements, included in the Annual Report on Form 10-K for the year ended December 31, 2023, that it does not expect to contribute to its defined benefit plan in 2024.  As of September 30, 2024, there were no contributions made to the pension plan.

Note 8. Stock Purchase Plans

The Company maintains an Employee Stock Purchase Plan (“Plan”).  The Plan is intended to encourage employee participation in the ownership and economic progress of the Company.  The Plan allows for up to 1,500,000 shares to be purchased by employees.  The purchase price of the shares is 95% of market value with an employee eligible to purchase up to the lesser of 15% of base compensation or $25,000 in market value annually.  During the nine months ended September 30, 2024 and 2023, there were 5,472 and 3,120 shares issued under the Plan, respectively, for total proceeds of $108,000 and $73,000.

The Company maintains the 2020 Non-Employee Director Compensation Plan ("Director Plan"). Under this Director Plan, non-employee directors who have not attained specified stock ownership levels are required to receive a portion of their annual compensation in the form of common stock (currently 50% of total annual compensation), with the ability to elect to receive up to 100% of annual compensation in the form of common stock by making a written election prior to the calendar year to which the compensation relates. The Director Plan allows for up to 100,000 shares to be issued. As of September 30, 2024, the Company has issued a total of 54,120 shares of common stock to non-employee directors under the Director Plan in lieu of otherwise payable cash compensation with 8,972 and 7,560 shares issued, respectively, with an associated expense of $183,000 and $193,000 during the nine months ended September 30, 2024 and 2023.


Note 9. Off-Balance Sheet Risk

The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.  These financial instruments are primarily comprised of commitments to extend credit, standby letters of credit, and credit exposure from the sale of assets with recourse.  These instruments involve, to varying degrees, elements of credit, interest rate, or liquidity risk in excess of the amount recognized in the Consolidated Balance
23

Sheet.  The contract amounts of these instruments express the extent of involvement the Company has in particular classes of financial instruments.

The Company’s exposure to credit loss from nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual amount of these instruments.  The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.  The Company may require collateral or other security to support financial instruments with off-balance sheet credit risk.






Financial instruments whose contract amounts represent credit risk are as follows at September 30, 2024 and December 31, 2023:
(In Thousands)September 30, 2024December 31, 2023
Commitments to extend credit$869,761 $855,171 
Funded commitments to extend credit477,748 469,684 
Remaining unfunded commitments to extend credit392,013 385,487 
Standby letters of credit12,983 13,969 
Credit exposure from the sale of assets with recourse7,169 6,995 
Total unfunded credit exposure$412,165 $406,451 
Allowance for credit losses$347 $1,342 
Commitment to extend credit funded rate54.9 %54.9 %
Historic commitment to extend credit funded rate53.0 %51.6 %

The Company previously reported commitments to extend credit at December 31, 2023 of $161,037,000 which primarily related to commercial relationships. The amounts shown above for September 30, 2024 include all loan categories, including retail and commercial loan relationships, and the December 31, 2023 amounts were revised to reflect comparable presentation.

Commitments to extend credit are legally binding agreements to lend to customers.  Commitments generally have fixed expiration dates or other termination clauses and may require payment of fees.  Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future liquidity requirements.  The Company evaluates each customer’s credit worthiness on a case-by-case basis.  The amount of collateral obtained, if deemed necessary by the Company, on an extension of credit is based on management’s credit assessment of the counterparty.

Standby letters of credit represent conditional commitments issued by the Company to guarantee the performance of a customer to a third party.  These instruments are issued primarily to support bid or performance related contracts.  The coverage period for these instruments is typically a one year period with an annual renewal option subject to prior approval by management.  Fees earned from the issuance of these letters are recognized upon expiration of the coverage period.  For secured letters of credit, the collateral is typically Bank deposit instruments or customer business assets.

Note 10. Fair Value Measurements

The following disclosures show the hierarchical disclosure framework associated with the level of pricing observations utilized in measuring assets and liabilities at fair value.
Level I: Quoted prices are available in active markets for identical assets or liabilities as of the reported date.
   
Level II: Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date. The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that are fair valued using other financial instruments, the parameters of which can be directly observed.
   
Level III: Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and are measured using management’s best estimate of fair value, where the inputs into the determination of fair value require significant management judgment or estimation.
24


This hierarchy requires the use of observable market data when available.

The following table presents the assets reported on the Consolidated Balance Sheet at their fair value on a recurring basis as of September 30, 2024 and December 31, 2023, by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
 September 30, 2024
(In Thousands)Level ILevel IILevel IIITotal
Assets measured on a recurring basis:    
Investment securities, available for sale:    
U.S. Government and agency securities$— $1,992 $— $1,992 
Mortgage-backed securities— 38,377 — 38,377 
State and political securities— 106,150 — 106,150 
Other debt securities— 50,947 — 50,947 
Investment equity securities:
  Equity securities1,145 — — 1,145 

 December 31, 2023
(In Thousands)Level ILevel IILevel IIITotal
Assets measured on a recurring basis:    
Investment securities, available for sale:    
U.S. Government and agency securities$— $3,943 $— $3,943 
Mortgage-backed securities— 15,335 — 15,335 
State and political securities— 115,615 — 115,615 
Other debt securities— 56,032 — 56,032 
Investment equity securities:
  Equity securities1,122 — — 1,122 

The following table presents the assets reported on the Consolidated Balance Sheet at their fair value on a non-recurring basis as of September 30, 2024 and December 31, 2023, by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. 
 September 30, 2024
(In Thousands)Level ILevel IILevel IIITotal
Assets measured on a non-recurring basis:    
Collateral dependent loans$— $— $4,536 $4,536 
Other real estate owned— — 83 83 
 December 31, 2023
(In Thousands)Level ILevel IILevel IIITotal
Assets measured on a non-recurring basis:    
Collateral dependent loans$— $— $1,621 $1,621 
Other real estate owned— — 853 853 

The following tables present a listing of significant unobservable inputs used in the fair value measurement process for items valued utilizing level III techniques as of September 30, 2024 and December 31, 2023: 
25

 September 30, 2024
 Quantitative Information About Level III Fair Value Measurements
(In Thousands)Fair ValueValuation Technique(s)Unobservable InputsRangeWeighted Average
Collateral dependent loans$4,536 
Appraisal of collateral (1)
Appraisal of collateral (1)
(5)% to (24)%
(11)%
Other real estate owned$83 
Appraisal of collateral (1)
Appraisal of collateral (1)
(20)%(20)%
(1) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.
 December 31, 2023
 Quantitative Information About Level III Fair Value Measurements
(In Thousands)Fair ValueValuation Technique(s)Unobservable InputsRangeWeighted Average
Collateral dependent loans$1,621 
Appraisal of collateral (1)
Appraisal of collateral (1)
(15)% to (24)%
(31)%
Other real estate owned$853 
Appraisal of collateral (1)
Appraisal of collateral (1)
(20)%(20)%
(1) Appraisals may be adjusted by management for qualitative factors such as economic conditions and estimated liquidation expenses.

The significant unobservable input used in the fair value measurement of the Company’s impaired loans using the appraisal of collateral valuation technique include appraisal adjustments, which are adjustments to appraisals by management for qualitative factors such as economic conditions and estimated liquidation expenses.  The significant unobservable input used in the fair value measurement of the Company’s other real estate owned are the same inputs used to value impaired loans using the appraisal of collateral valuation technique. 

Note 11. Fair Value of Financial Instruments

The Company is required to disclose fair values for its financial instruments.  Fair values are made at a specific point in time, based on relevant market information and information about the financial instrument.  These estimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financial instrument.  Also, it is the Company’s general practice and intention to hold most of its financial instruments to maturity and not to engage in trading or sales activities.  Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors.  These fair values are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision.  Changes in assumptions can significantly affect the fair values.

Fair values have been determined by the Company using historical data and an estimation methodology suitable for each category of financial instruments. The Company’s fair values are set forth below for the Company’s other financial instruments.

As certain assets and liabilities, such as deferred tax assets, premises and equipment, and many other operational elements of the Company, are not considered financial instruments but have value, this fair value of financial instruments would not represent the full market value of the Company.

The fair values of the Company’s financial instruments not recorded at fair value on a recurring or nonrecurring basis are as follows at September 30, 2024 and December 31, 2023:
 CarryingFairFair Value Measurements at September 30, 2024
(In Thousands)ValueValueLevel ILevel IILevel III
Financial assets:     
Loans held for sale (1)$8,967 $8,967 $8,967 $— $— 
Loans, net1,863,586 1,863,079 — — 1,863,079 
Financial liabilities:     
Time deposits & brokered deposits495,946 497,620 — — 497,620 
Short-term borrowings 78,305 78,305 78,305 — — 
Long-term borrowings252,508 250,145 — — 250,145 
26

(1) The financial instrument is carried at cost the lower of cost or fair value at, September 30, 2024 which is not significantly different than the fair value of the instruments
 CarryingFairFair Value Measurements at December 31, 2023
(In Thousands)ValueValueLevel ILevel IILevel III
Financial assets:     
Loans held for sale (1)$3,993 $3,993 $3,993 $— $— 
Loans, net1,828,318 1,806,044 — — 1,806,044 
Financial liabilities:     
Time deposits & brokered deposits384,792 382,139 — — 382,139 
Short-term borrowings145,926 145,926 145,926 — — 
Long-term borrowings252,598 251,570 — — 251,570 
(1) The financial instrument is carried at cost the lower of cost or fair value at, December 31, 2023 which is not significantly different than the fair value of the instruments
The methods and assumptions used by the Company in estimating fair values of financial instruments is in accordance with ASC Topic 825, Financial Instruments, as amended by ASU 2016-01 which requires public entities to use exit pricing in the calculation of the above tables.

Note 12. Stock Options

In 2020, the Company adopted the 2020 Equity Incentive Plan which replaced the 2014 Equity Incentive Plan that did not have any remaining shares available for issuance. The plans are designed to help the Company attract, retain, and motivate employees and non-employee directors. Incentive stock options, non-qualified stock options, restricted stock, restricted stock units, and other equity-based awards may be granted as part of the plan.

As of January 1, 2024, the Company had a total of 1,000,000 stock options outstanding. During the nine months ended September 30, 2024, the Company issued 97,000 stock options with a strike price of $20.85 to a group of employees. The options granted in 2024 all expire ten years from the grant date. Of the 97,000 grants awarded in 2024, 64,700 of the options vest in three years while the 32,300 remaining options vest in five years.

Stock options outstanding as of September 30, 2024 are presented below:

Stock Options Granted
DateSharesForfeitedCash SettlementOutstandingStrike PriceVesting PeriodExpiration
January 17, 202464,700 — — 64,700 $20.85 3 years10 years
January 17, 202432,300 — — 32,300 20.85 5 years10 years
January 20, 202359,500 — — 59,500 27.77 3 years10 years
January 20, 202329,500 — — 29,500 27.77 5 years10 years
January 18, 2022156,000 — — 156,000 24.10 3 years10 years
January 18, 202278,000 — — 78,000 24.10 5 years10 years
April 9, 2021156,500 — — 156,500 24.23 3 years10 years
April 9, 202178,000 — — 78,000 24.23 5 years10 years
March 11, 2020119,300 — — 119,300 25.34 3 years10 years
March 11, 2020119,200 — — 119,200 25.34 5 years10 years
March 15, 2019120,900 (21,300)— 99,600 28.01 3 years10 years
March 15, 2019119,100 (20,700)— 98,400 28.01 5 years10 years
August 27, 201558,125 (26,250)(28,875)3,000 28.02 5 years10 years
1,191,125 (68,250)(28,875)1,094,000 $25.13 



27




A summary of stock option activity for the nine months ended September 30, 2024 is presented below:
September 30, 2024
SharesWeighted Average Exercise Price
Outstanding, beginning of year1,000,000 $25.55 
Granted97,000 20.85 
Forfeited(3,000)28.01 
Expired— — 
Outstanding, end of period1,094,000 $25.13 
Exercisable, end of period476,800 $26.10 

The estimated fair value of options, including the effect of estimated forfeitures, is recognized as expense on a straight line basis over the options’ vesting periods while ensuring that the cumulative amount of compensation cost recognized at least equals the value of the vested portion of the award at that date.

The fair value of stock options is estimated using the Black-Scholes option pricing model. The following is a summary of the assumptions used in this model for stock options granted for the nine months ended September 30, 2024:

Nine months ended September 30, 2024
Risk-free interest rate3.87 %
Expected volatility32 %
Expected Annual dividend$1.28 
Expected life6.83 years
Weighted average grant date fair value per option$3.73 

Compensation expense for stock options is recognized using the fair value when the stock options are granted and is amortized over the options' vesting period. Compensation expense related to stock options was $158,000 and $585,000 for the three and nine months ended September 30, 2024, respectively, compared to $229,000 and $715,000 for the same periods of 2023. As of September 30, 2024, a total of 476,800 stock options were exercisable and the weighted average years to expiration of these options was 5.35 years.

Note 13.  Reclassification of Comparative Amounts

Certain comparative amounts for the prior period have been reclassified to conform to current period presentations. Such reclassifications had no effect on net income or shareholders’ equity.
28

CAUTIONARY STATEMENT FOR PURPOSES OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This Report contains certain “forward-looking statements” including statements concerning plans, objectives, future events or performance and assumptions and other statements which are 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 the Company’s actual results and could cause the Company’s 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, with which the Company must comply, 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 external events, including natural disasters, national or global health emergencies, and events of armed conflict in other countries; or (vi) the effect of changes in the business cycle and downturns in the local, regional or national economies, including the effects of inflation,; and (vii) the Risk Factors identified in Item 1A of the Company's Annual Report on Form 10-K for the year ended December 31, 2023 and in other filings made by the Company under the Securities Exchange Act of 1934.

You should not put undue reliance on any forward-looking statements.  These statements speak only as of the date of this Quarterly Report on Form 10-Q, 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 Quarterly Report on Form 10-Q.

29


Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

EARNINGS SUMMARY

Comparison of the Three and Nine Months Ended September 30, 2024 and 2023

Summary Results

Net income for the three and nine months ended September 30, 2024 was $4,801,000 and $13,998,000, respectively, compared to $2,224,000 and $11,053,000 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 $1,724,000 and $2,301,000, 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 $1,372,000 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 net 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 0.86% 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 9.60% 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.

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 by excluding significant gains or losses that are unusual in nature.  Because certain of these items and their impact on the Company’s performance are difficult to predict, management believes the 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.  For purposes of this Quarterly Report on Form 10-Q, net income from core operations means net income adjusted to exclude after-tax net securities gains or losses. 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.

Reconciliation of GAAP and Non-GAAP Financial Measures
(Dollars in Thousands, Except Per Share Data)Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
GAAP net income$4,801 $2,224 $13,998 $11,053 
Net securities (gains) losses, net of tax(28)64 13 126 
Non-GAAP core earnings$4,773 $2,288 $14,011 $11,179 
Three Months Ended September 30,Nine Months Ended September 30,
 2024202320242023
GAAP Return on average assets (ROA)0.86 %0.41 %0.84 %0.70 %
Net securities (gains) losses, net of tax(0.01)%0.01 %— %0.01 %
Non-GAAP core ROA0.85 %0.42 %0.84 %0.71 %
30

Three Months Ended September 30,Nine Months Ended September 30,
 2024202320242023
GAAP Return on average equity (ROE)9.60 %5.06 %9.74 %8.58 %
Net securities (gains) losses, net of tax(0.06)%0.14 %0.01 %0.09 %
Non-GAAP core ROE.9.54 %5.20 %9.75 %8.67 %
Three Months Ended September 30,Nine Months Ended September 30,
 2024202320242023
GAAP Basic earnings per share (EPS)$0.64 $0.31 $1.86 $1.56 
Net securities (gains) losses, net of tax(0.01)0.01 — 0.02 
Non-GAAP core operating EPS$0.63 $0.32 $1.86 $1.58 
Three Months Ended September 30,Nine Months Ended September 30,
 2024202320242023
GAAP Diluted EPS$0.64 $0.31 $1.86 $1.53 
Net securities (gains) losses, net of tax(0.01)0.01 — 0.02 
Non-GAAP diluted core EPS$0.63 $0.32 $1.86 $1.55 
 
Interest and Dividend Income

Interest and dividend income for the three and nine months ended September 30, 2024 increased $4,267,000 and $15,769,000, respectively, compared to the same periods of 2023. The increase in loan portfolio income was due to an increase in the average loan portfolio balance coupled with an increase in average rate earned on the portfolio as legacy loans matured and were replaced with loans at current higher rates and variable rate loans reset to higher rates.  Investment securities income has been impacted primarily by an increase in the average rate earned on the portfolio as lower yielding legacy investments matured. The fluctuation in dividend and other interest income is due primarily to dividends received on FHLB restricted stock.

Interest and dividend income composition for the three and nine months ended September 30, 2024 and 2023 was as follows:
 Three Months Ended
 September 30, 2024September 30, 2023Change
(In Thousands)Amount% TotalAmount% TotalAmount%
Loans including fees$25,632 90.93 %$21,720 90.80 %$3,912 18.01 %
Investment securities:      
Taxable1,874 6.65 1,365 5.71 509 37.29 
Tax-exempt61 0.22 114 0.48 (53)(46.49)
Dividend and other interest income621 2.20 722 3.01 (101)(13.99)
Total interest and dividend income$28,188 100.00 %$23,921 100.00 %$4,267 17.84 %
 Nine Months Ended
 September 30, 2024September 30, 2023Change
(In Thousands)Amount% TotalAmount% TotalAmount%
Loans including fees$74,021 90.88 %$59,571 90.70 %$14,450 24.26 %
Investment securities:    
Taxable5,213 6.40 3,870 5.89 1,343 34.70 
Tax-exempt233 0.29 410 0.62 (177)(43.17)
Dividend and other interest income1,980 2.43 1,827 2.79 153 8.37 
Total interest and dividend income$81,447 100.00 %$65,678 100.00 %$15,769 24.01 %
31

Interest Expense

Interest expense for the three and nine months ended September 30, 2024 increased $2,543,000 and $13,468,000, respectively, compared to the same periods of 2023. Interest-bearing deposit interest expense increased significantly due a time deposit gathering campaign that generated funding for the increase in the loan portfolio. In addition, competition for deposits along with the impact of the rate environment contributed to the increase in deposit interest expense. Brokered deposits have also been utilized as a funding source to supplement in-market deposit gathering efforts and to reduce the utilization of short-term borrowings. Long-term borrowing interest expense increased as borrowings were utilized to fund a portion of the growth in the loan portfolio.

Interest expense composition for the three and nine months ended September 30, 2024 and 2023 was as follows:
 Three Months Ended
 September 30, 2024September 30, 2023Change
(In Thousands)Amount% TotalAmount% TotalAmount%
Deposits$9,599 73.10 %$6,463 61.04 %$3,136 48.52 %
Short-term borrowings932 7.10 2,412 22.78 (1,480)(61.36)
Long-term borrowings2,601 19.80 1,714 16.18 887 51.75 
Total interest expense$13,132 100.00 %$10,589 100.00 %$2,543 24.02 %
 Nine Months Ended
 September 30, 2024September 30, 2023Change
(In Thousands)Amount% TotalAmount% TotalAmount%
Deposits$26,439 69.34 %$14,686 59.55 %$11,753 80.03 %
Short-term borrowings4,024 10.55 6,084 24.67 (2,060)(33.86)
Long-term borrowings7,667 20.11 3,892 15.78 3,775 96.99 
Total interest expense$38,130 100.00 %$24,662 100.00 %$13,468 54.61 %

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 $76,016,000 and $127,005,000, 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 $3,927,000 and $14,475,000, 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 $1,240,000, respectively. Short-term borrowings decreased in volume, which offset the impact of an increase in rate paid, resulting in a decrease of $1,480,000 and $2,060,000 in expense for the three and nine month periods ended September 30, 2024, respectively, compared to the same periods of 2023. The rate paid on interest-bearing deposits increased 76 bps and 116 bps, respectively, or $3,136,000 and $11,753,000 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 $2,157,000 and $8,194,000 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.


32

The following is a schedule of average balances and associated yields for the three and nine months ended September 30, 2024 and 2023:
 AVERAGE BALANCES AND INTEREST RATES
 Three Months Ended September 30, 2024Three Months Ended September 30, 2023
(In Thousands)Average Balance (1)InterestAverage RateAverage Balance (1)InterestAverage Rate
Assets:      
Tax-exempt loans (3)
$69,831 $534 3.04 %$68,243 $462 2.69 %
All other loans1,805,097 25,210 5.56 %1,730,669 21,355 4.90 %
Total loans (2)
1,874,928 25,744 5.46 %1,798,912 21,817 4.81 %
Taxable securities207,888 2,355 4.61 %193,019 1,945 4.09 %
Tax-exempt securities (3)
11,475 77 2.73 %20,777 144 2.81 %
Total securities219,363 2,432 4.51 %213,796 2,089 3.96 %
Interest-bearing balances in other financial institutions10,167 140 5.48 %11,868 142 4.75 %
Total interest-earning assets2,104,458 28,316 5.36 %2,024,576 24,048 4.72 %
Other assets132,244   131,451   
Total assets$2,236,702   $2,156,027   
Liabilities and shareholders’ equity:      
Savings$214,050 282 0.52 %$225,357 181 0.32 %
Super Now deposits220,825 1,133 2.04 %244,387 1,174 1.91 %
Money market deposits320,908 2,781 3.45 %294,006 1,862 2.51 %
Time deposits482,335 5,403 4.46 %342,450 3,246 3.76 %
Total interest-bearing deposits1,238,118 9,599 3.08 %1,106,200 6,463 2.32 %
Short-term borrowings66,795 932 5.54 %173,364 2,412 5.52 %
Long-term borrowings250,938 2,601 4.12 %204,901 1,714 3.32 %
Total borrowings317,733 3,533 4.42 %378,265 4,126 4.33 %
Total interest-bearing liabilities1,555,851 13,132 3.35 %1,484,465 10,589 2.83 %
Demand deposits453,169   471,494   
Other liabilities27,558   24,193   
Shareholders’ equity200,124   175,875   
Total liabilities and shareholders’ equity$2,236,702   $2,156,027   
Interest rate spread (3)
  2.01 %  1.89 %
Net interest income/margin (3)
 $15,184 2.88 % $13,459 2.65 %
1.    Information on this table has been calculated using average daily balance sheets to obtain average balances.
2.    Non-accrual loans have been included with loans for the purpose of analyzing net interest earnings.
3.    Income and rates on fully taxable equivalent basis include an adjustment for the difference between annual income from tax-exempt obligations and             
the taxable equivalent of such income at the standard tax rate of 21% and are reconciled to the equivalent GAAP measure below the tables.












33

 AVERAGE BALANCES AND INTEREST RATES
 Nine Months Ended September 30, 2024Nine Months Ended September 30, 2023
(In Thousands)Average Balance (1)InterestAverage RateAverage Balance (1)InterestAverage Rate
Assets:      
Tax-exempt loans (3)$69,455 $1,490 2.87 %$66,372 $1,371 2.76 %
All other loans1,792,518 72,844 5.43 %1,668,596 58,488 4.69 %
Total loans (2)1,861,973 74,334 5.33 %1,734,968 59,859 4.61 %
Taxable securities203,964 6,795 4.45 %188,477 5,331 3.78 %
Tax-exempt securities (3)
13,625 295 2.89 %25,837 519 2.69 %
Total securities217,589 7,090 4.35 %214,314 5,850 3.65 %
Interest-bearing balances in other financial institutions10,382 398 5.12 %10,619 366 4.61 %
Total interest-earning assets2,089,944 81,822 5.24 %1,959,901 66,075 4.41 %
Other assets131,000   132,133   
Total assets$2,220,944  $2,092,034   
Liabilities and shareholders’ equity:    
Savings$217,056 811 0.50 %$233,784 456 0.26 %
Super Now deposits218,307 3,303 2.02 %293,636 3,026 1.38 %
Money market deposits308,027 7,734 3.35 %292,490 4,807 2.20 %
Time deposits446,158 14,591 4.37 %264,855 6,397 3.23 %
Total interest-bearing deposits1,189,548 26,439 2.97 %1,084,765 14,686 1.81 %
Short-term borrowings96,669 4,024 5.60 %155,136 6,084 5.26 %
Long-term borrowings256,960 7,667 3.99 %169,276 3,892 3.07 %
Total borrowings353,629 11,691 4.43 %324,412 9,976 4.12 %
Total interest-bearing liabilities1,543,177 38,130 3.30 %1,409,177 24,662 2.34 %
Demand deposits454,967   484,662   
Other liabilities31,133   26,334   
Shareholders’ equity191,667   171,861   
Total liabilities and shareholders’ equity$2,220,944   $2,092,034   
Interest rate spread (3)
  1.94 %  2.07 %
Net interest income/margin (3)
 $43,692 2.79 % $41,413 2.82 %

1.    Information on this table has been calculated using average daily balance sheets to obtain average balances.
2.    Non-accrual loans have been included with loans for the purpose of analyzing net interest earnings.
3.    Income and rates on fully taxable equivalent basis include an adjustment for the difference between annual income from tax-exempt obligations and
the taxable equivalent of such income at the standard tax rate of 21% and are reconciled to the equivalent GAAP measure below the tables.

The following table presents the adjustment to convert net interest income to net interest income on a fully taxable equivalent basis for the three and nine months ended September 30, 2024 and 2023:
Three Months Ended September 30,Nine Months Ended September 30,
(In Thousands)2024202320242023
Total interest income$28,188 $23,921 $81,447 $65,678 
Total interest expense13,132 10,589 38,130 24,662 
Net interest income (GAAP)15,056 13,332 43,317 41,016 
Tax equivalent adjustment128 127 375 397 
Net interest income (fully taxable equivalent) (NON-GAAP)$15,184 $13,459 $43,692 $41,413 
 
34

The following table sets forth the respective impact that both volume and rate changes have had on net interest income on a fully taxable equivalent basis for the three and nine months ended September 30, 2024 and 2023:
 Three Months Ended September 30,Nine months ended September 30,
 2024 vs. 20232024 vs. 2023
 Increase (Decrease) Due toIncrease (Decrease) Due to
(In Thousands)VolumeRateNetVolumeRateNet
Interest income:      
Tax-exempt loans$11 $61 $72 $64 $55 $119 
All other loans933 2,922 3,855 4,595 9,761 14,356 
Taxable investment securities155 255 410 463 1,001 1,464 
Tax-exempt investment securities(63)(4)(67)(238)14 (224)
Interest bearing deposits(22)20 (2)(5)37 32 
Total interest-earning assets1,014 3,254 4,268 4,879 10,868 15,747 
Interest expense:      
Savings deposits(9)110 101 (15)370 355 
Super Now deposits(117)76 (41)(565)842 277 
Money market deposits181 738 919 271 2,656 2,927 
Time deposits1,482 675 2,157 5,407 2,787 8,194 
Short-term borrowings(1,489)9 (1,480)(2,205)145 (2,060)
Long-term borrowings428 459 887 2,392 1,383 3,775 
Total interest-bearing liabilities476 2,067 2,543 5,285 8,183 13,468 
Change in net interest income$538 $1,187 $1,725 $(406)$2,685 $2,279 

Provision for Credit Losses

The provision for credit losses is based upon management’s quarterly review of the loan portfolio.  The purpose of the review is to assess loan quality, identify impaired loans, analyze delinquencies, ascertain loan growth, evaluate potential charge-offs and recoveries, and assess general economic conditions in the markets served.  An external independent loan review is also performed annually for the Banks.  Management remains committed to an aggressive program of problem loan identification and resolution.

The allowance for credit losses is determined by applying loss factors to outstanding loans by type.  A historical charge-off factor is calculated utilizing the charge-off and recovery data over the past ten years. Management has identified a number of additional qualitative factors which it uses to supplement the historical charge-off factor because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from historical loss experience.

Although management believes it uses the best information available to make such determinations and that the allowance for credit losses is adequate at September 30, 2024, future adjustments could be necessary if circumstances or economic conditions differ substantially from the assumptions used in making the initial determinations.  A downturn in the local economy, increased unemployment, and delays in receiving financial information from borrowers could result in increased levels of nonperforming assets, charge-offs, loan loss provisions, and reductions in income.  Additionally, as an integral part of the examination process, bank regulatory agencies periodically review the Banks' loan loss allowance.  The banking agencies could require the recognition of additions to the loan loss allowance based on their judgment of information available to them at the time of their examination.

When determining the appropriate allowance level, management has attributed the allowance for credit losses to various portfolio segments; however, the allowance is available for the entire portfolio as needed.

The allowance for credit losses increased from $11,446,000 at December 31, 2023 to $11,588,000 at September 30, 2024. The slight increase in allowance was due primarily to loan portfolio growth, net charge-offs of $312,000 for the nine months ended September 30, 2024, and the impact of a loan relationship that was moved to nonaccrual status and is being measured individually for impairment. At September 30, 2024 and December 31, 2023, the allowance for credit losses to total loans was 0.62% and 0.62%, respectively.

35

The three and nine months ended September 30, 2024 had a provision for credit losses of $740,000 and a negative provision of $299,000, respectively, compared to provisions for credit losses of $1,372,000 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 which impacted the expected default assumption for that segment. 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.

Nonperforming loans increased to $7,940,000 at September 30, 2024 from $3,148,000 at December 31, 2023. The majority of nonperforming loans involve loans that are either in a secured position and have sureties with a strong underlying financial position or have been individually evaluated for impairment and have a specific allocation recorded within the allowance for credit losses. The ratio of nonperforming loans to total loans ratio increased to 0.42% at September 30, 2024 from 0.17% at December 31, 2023 and 0.20% at September 30, 2023. Net loan charge-offs of $312,000 for the nine months ended September 30, 2024 impacted the allowance for credit losses, which was 0.62% of total loans at both September 30, 2024 and December 31, 2023 compared to 0.71% at September 30, 2023.

The following is a table showing total nonperforming loans as of:
 Total Nonperforming Loans
(In Thousands)90 Days Past DueNon-accrualTotal
September 30, 2024$3,530 $4,410 $7,940 
June 30, 20242,257 4,527 6,784 
March 31, 20243,449 4,509 7,958 
December 31, 20232,150 998 3,148 
September 30, 20231,678 2,005 3,683 

Additional allowance for credit losses and net (charge-offs) recoveries information is presented by loan portfolio segment in the tables below.
September 30, 2024
Amount of Allowance for Credit Losses AllocatedTotal loansAllowance for Credit Losses to Total Loans RatioNet (Charge-Offs) RecoveriesAverage LoansRatio of Net (Charge-Offs) Recoveries to Average Loans
(In Thousands)
Commercial, financial, and agricultural$2,181$216,314 1.01 %$511 $216,704 0.31 %
Real estate mortgage:
Residential838823,445 0.10 %5 811,891 — %
Commercial4,953540,450 0.92 %(1)537,333 — %
Construction841,322 0.02 %— 40,379 — %
Consumer automobiles2,999242,686 1.24 %(671)245,626 (0.36)%
Other consumer installment loans60910,168 5.99 %(156)10,040 (2.07)%
$11,588$1,874,385 0.62 %$(312)$1,861,973 (0.02)%
Total non-accrual loans outstanding$4,410
Non-accrual loans to total loans outstanding0.24 %
Allowance for credit losses to non-accrual loans262.77 %
36

December 31, 2023
Amount of Allowance for Loan Losses AllocatedTotal loansAllowance for Loan Losses to Total Loans RatioNet (Charge-Offs) RecoveriesAverage LoansRatio of Net (Charge-Offs) Recoveries to Average Loans
(In Thousands)
Commercial, financial, and agricultural$3,379$213,466 1.58 %$1,497 $204,817 0.73 %
Real estate mortgage:
Residential1,200798,501 0.15 %(53)751,379 (0.01)%
Commercial3,352531,601 0.63 %(36)516,248 (0.01)%
Construction14540,389 0.36 %— 48,786 — %
Consumer automobiles2,668244,398 1.09 %(587)227,017 (0.26)%
Other consumer installment loans70210,361 6.78 %(296)10,358 (2.86)%
$11,446$1,838,716 0.62 %$525 $1,758,605 0.03 %
Total non-accrual loans outstanding$998
Non-accrual loans to total loans outstanding0.05 %
Allowance for loan losses to non-accrual loans1146.89 %

Non-interest Income

Total non-interest income for the three and nine months ended September 30, 2024 compared to the same periods in 2023 increased $546,000 and $754,000, respectively. Excluding net securities losses, non-interest income for the three and nine months ended September 30, 2024 increased $429,000 and increased $610,000 compared to the same periods in 2023. Gain on sale of loans and loan broker commissions increased for the three and nine month periods as the volume of loan sales has increased due to an uptick in mortgage activity. The changes in bank-owned life insurance revenue for the three and nine month periods was primarily due to difference in gain on death benefits. Other income primarily increased for the nine month period due to the recognition of a gain on extinguishment of debt.

Non-interest income composition for the three and nine months ended September 30, 2024 and 2023 was as follows:
 Three Months Ended
 September 30, 2024September 30, 2023Change
(In Thousands)Amount% TotalAmount% TotalAmount%
Service charges$537 22.18 %$545 29.07 %$(8)(1.47)%
Net debt securities losses, available for sale(5)(0.21)(45)(2.40)40 88.89 
Net equity securities gains (losses)41 1.70 (36)(1.92)77 213.89 
Bank-owned life insurance206 8.51 170 9.07 36 21.18 
Gain on sale of loans416 17.18 257 13.71 159 61.87 
Insurance commissions145 5.99 136 7.25 9 6.62 
Brokerage commissions164 6.77 142 7.57 22 15.49 
Loan broker commissions351 14.50 241 12.85 110 45.64 
Debit card income355 14.66 320 17.07 35 10.94 
Other211 8.72 145 7.73 66 45.52 
Total non-interest income$2,421 100.00 %$1,875 100.00 %$546 29.12 %

37

 Nine Months Ended
 September 30, 2024September 30, 2023Change
(In Thousands)Amount% TotalAmount% TotalAmount%
Service charges$1,551 22.45 %$1,557 25.30 %$(6)(0.39)%
Net debt securities losses, available for sale(40)(0.58)(125)(2.03)85 68.00 
Net equity securities gains (losses)24 0.35 (35)(0.57)59 168.57 
Bank-owned life insurance856 12.39 892 14.49 (36)(4.04)
Gain on sale of loans1,021 14.78 732 11.89 289 39.48 
Insurance commissions425 6.15 416 6.76 9 2.16 
Brokerage commissions521 7.54 448 7.28 73 16.29 
Loan broker commissions841 12.17 728 11.83 113 15.52 
Debit card income1,052 15.23 995 16.17 57 5.73 
Other657 9.52 546 8.88 111 20.33 
Total non-interest income$6,908 100.00 %$6,154 100.00 %$754 12.25 %
Non-interest Expense

Total non-interest expense decreased $288,000 and increased $5,000 for the three and nine months ended September 30, 2024 compared to the same periods of 2023. The increase in salaries and employee benefits is attributable to routine annual wage increases and an increase in health insurance costs. Furniture and equipment expenses in addition to occupancy expenses have been impacted by expected changes in maintenance, utilities, and depreciation with the three and nine month periods decreasing due to the disposal of a former branch location and a relocation of a second location during the first quarter of 2024. Software amortization increased due to increased software licensing costs and investment in additional automated systems. Marketing costs decreased as print advertising has been limited while emphasis has been placed on social media marketing efforts. Pennsylvania shares tax increased as the taxable base increased. Professional fees decreased primarily due to a decrease in legal fees. FDIC insurance expense fluctuated due to changes in the assessment rate and base. The nine months ended September 30, 2024 had a loss on sale of premise and equipment related to the exit of two branch location leases.

Non-interest expense composition for the three and nine months ended September 30, 2024 and 2023 was as follows:
 Three Months Ended
 September 30, 2024September 30, 2023Change
(In Thousands)Amount% TotalAmount% TotalAmount%
Salaries and employee benefits$6,402 58.82 %$6,290 56.30 %$112 1.78 %
Occupancy731 6.72 784 7.02 (53)(6.76)
Furniture and equipment731 6.72 867 7.76 (136)(15.69)
Software amortization245 2.25 237 2.12 8 3.38 
Pennsylvania shares tax351 3.22 280 2.51 71 25.36 
Professional fees530 4.87 719 6.44 (189)(26.29)
Federal Deposit Insurance Corporation deposit insurance399 3.67 425 3.80 (26)(6.12)
Marketing60 0.55 167 1.49 (107)(64.07)
Intangible amortization26 0.24 25 0.22 1 4.00 
Loss on sale of premise and equipment— — — — — n/a
Other1,409 12.94 1,378 12.34 31 2.25 
Total non-interest expense$10,884 100.00 %$11,172 100.00 %$(288)(2.58)%

38

 Nine Months Ended
 September 30, 2024September 30, 2023Change
(In Thousands)Amount% TotalAmount% TotalAmount%
Salaries and employee benefits$19,224 57.38 %$18,778 56.06 %$446 2.38 %
Occupancy2,394 7.15 2,422 7.23 (28)(1.16)
Furniture and equipment2,436 7.27 2,503 7.47 (67)(2.68)
Software amortization657 1.96 593 1.77 64 10.79 
Pennsylvania shares tax1,022 3.05 807 2.41 215 26.64 
Professional fees1,654 4.94 2,313 6.90 (659)(28.49)
Federal Deposit Insurance Corporation deposit insurance1,179 3.52 1,122 3.35 57 5.08 
Marketing209 0.62 594 1.77 (385)(64.81)
Intangible amortization77 0.23 92 0.27 (15)(16.30)
Loss on sale of premise and equipment330 0.98 — — 330 n/a
Other4,322 12.90 4,275 12.77 47 1.10 
Total non-interest expense$33,504 100.00 %$33,499 100.00 %$5 0.01 %

Provision for Income Taxes

Income taxes increased $613,000 and $667,000 for the three and nine months ended September 30, 2024 compared to the same periods of 2023. The effective tax rate for the three and nine months ended September 30, 2024 was 17.97% and 17.76% compared to 16.49% and 17.56% for the same periods of 2023. The Company currently is in a deferred tax asset position. A valuation allowance was established on the $1,810,000 of capital loss carryforwards as of December 31, 2022, which remained unchanged during the third quarter of 2024.

ASSET/LIABILITY MANAGEMENT

Cash and Cash Equivalents

Cash and cash equivalents increased $2,232,000 from $37,462,000 at December 31, 2023 to $39,694,000 at September 30, 2024, primarily as a result of the following activity during the nine months ended September 30, 2024.

Loans Held for Sale

Activity regarding loans held for sale resulted in sales proceeds, less $1,021,000 in realized gains, being less than loan originations by $4,974,000 for the nine months ended September 30, 2024.

Loans

Gross loans increased $35,410,000 since December 31, 2023 due primarily to an increase in both residential and commercial real estate mortgage categories.

39

The allocation of the loan portfolio, by category, as of September 30, 2024 and December 31, 2023 is presented below:
 September 30, 2024December 31, 2023Change
(In Thousands)Amount% TotalAmount% TotalAmount%
Commercial, financial, and agricultural$216,314 11.54 %$213,466 11.60 %$2,848 1.33 %
Real estate mortgage:      
Residential823,445 43.91 798,501 43.40 24,944 3.12 %
Commercial540,450 28.82 531,601 28.90 8,849 1.66 %
Construction41,322 2.20 40,389 2.20 933 2.31 %
Consumer automobile loans242,686 12.94 244,398 13.28 (1,712)(0.70)%
Other consumer installment loans10,168 0.54 10,361 0.56 (193)(1.86)%
Net deferred loan fees and discounts789 0.05 1,048 0.06 (259)(24.71)%
Gross loans$1,875,174 100.00 %$1,839,764 100.00 %$35,410 1.92 %
 
Investments

The fair value of the investment debt securities portfolio at September 30, 2024 increased $6,521,000 since December 31, 2023, while the amortized cost of the portfolio increased $1,679,000.  The increase in the investment portfolio amortized value occurred within the mortgage-backed segment of the portfolio as principal cash flow from other portfolio segments was reinvested into mortgage-backed securities to provide future cash flow. The portfolio continues to be actively managed in order to reduce interest rate and market risk. The unrealized losses within the debt securities portfolio are the result of market activity, not credit issues/ratings, as approximately 79.13% of the debt securities portfolio on an amortized cost basis is currently rated A or higher by either S&P or Moody’s.

The Company considers various factors, which include examples from applicable accounting guidance, when analyzing the available for sale portfolio for possible other than temporary impairment.  The Company primarily considers the following factors in its analysis: severity of the fair value being less than carrying value; reduction of dividend paid (equities); continued payment of dividend/interest, credit rating, and financial condition of an issuer; intent and ability to hold until anticipated recovery (which may be maturity); and general outlook for the economy, specific industry, and entity in question.

The bond portion of the portfolio review is conducted with emphases on several factors.  Continued payment of principal and interest is given primary importance with credit rating and financial condition of the issuer following as the next most important.  Credit ratings were reviewed with the ratings of the bonds being satisfactory.  Bonds that were not currently rated were discussed with a third party and/or underwent an internal financial review. Each bond is reviewed to determine whether it is a general obligation bond, which is backed by the credit and taxing power of the issuing jurisdiction, or a revenue bond, which is only payable from specified revenues.  Based on the review undertaken by the Company, the Company determined that the decline in value of the various bond holdings were temporary and were the result of the general market downturns and interest rate/yield curve changes, not credit issues.  The fact that almost all of such bonds are general obligation bonds further solidified the Company’s determination that the decline in the value of these bond holdings is temporary.

The fair value of the equity portfolio continues to fluctuate as the economic and political environment continues to impact stock pricing. The amortized cost of the available for sale equity securities portfolio has remained flat at $1,300,000 for September 30, 2024 and December 31, 2023 while the fair value increased $24,000 over the same time period.

The distribution of credit ratings by amortized cost and fair values for the debt security portfolio at September 30, 2024 follows:
 A- to AAAB- to BBB+C- to CCC+Not RatedTotal
(In Thousands)Amortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair ValueAmortized CostFair Value
Available for sale (AFS):        
U.S. Government and agency securities$2,000$1,992$—$—$—$—$—$—$2,000$1,992
Mortgage-backed securities 6237,90538,377——————37,90538,377
State and political securities107,004104,696————1,4551,454108,459106,150
Other debt securities11,92611,2438,7408,640——31,69031,06452,35650,947
Total debt securities AFS$158,835$156,308$8,740$8,640$—$—$33,145$32,518$200,720$197,466
40

 
Financing Activities

Deposits

Total deposits increased $110,828,000 from December 31, 2023 to September 30, 2024. Time deposits increased $68,227,000 over this period to a total of $328,294,000 as deposit gathering efforts focused on time deposits as customers sought a higher return on their deposit balances. Brokered deposits increased by $42,927,000 as usage provided an alternative to FHLB borrowings and supplemented funding for loan portfolio growth. Core deposits (deposits less time deposits) remained stable as growth in money market deposits offset the flow of deposit balances from noninterest-bearing and lower rate products into higher rate time deposit accounts. Money market deposits increased primarily as customers moved deposit balances into this deposit product from noninterest-bearing and lower rate products in addition to increased balances from commercial customers. Emphasis has been on increasing the utilization of electronic (internet and mobile) deposit banking among our customers. Utilization of internet and mobile banking products has increased due to these efforts coupled with a change in consumer behavior over the past several years.

Deposit balances and their changes for the periods being discussed follow:
 September 30, 2024December 31, 2023Change
(In Thousands)Amount% TotalAmount% TotalAmount%
Demand deposits$452,922 26.64 %$471,173 29.64 %$(18,251)(3.87)%
NOW accounts218,279 12.84 219,287 13.80 (1,008)(0.46)
Money market deposits321,614 18.91 214,888 13.52 106,726 49.67 
Savings deposits211,560 12.44 299,353 18.83 (87,793)(29.33)
Time deposits328,294 19.31 260,067 16.36 68,227 26.23 
Brokered deposits167,652 9.86 124,725 7.85 42,927 34.42 
 Total deposits$1,700,321 100.00 %$1,589,493 100.00 %$110,828 6.97 %

As of September 30, 2024 and December 31, 2023 the Company had $451,304,000 and $436,074,000, respectively, in uninsured deposits. Included in the total uninsured deposits is a concentration of public funds which were collateralized by the Banks in the amount of $92,597,000 and $77,687,000 at September 30, 2024 and December 31, 2023, respectively. Total uninsured deposits less collateralized public funds was $358,707,000 at September 30, 2024 and $358,387,000 at December 31, 2023.

Borrowed Funds

Total borrowed funds decreased 16.99%, or $67,711,000, to $330,813,000 at September 30, 2024 compared to $398,524,000 at December 31, 2023. Long term borrowings remained constant as matured borrowings were replaced with fixed rate borrowings in order to lock in interest rates and to provide matched funding for segments of the loan portfolio. Short term FHLB borrowings were utilized to provide short term funding for the loan portfolio growth and decreased as deposit growth lessened the need for short term borrowings. Securities sold under agreements to repurchase have decreased as customers balances have decreased.

 September 30, 2024December 31, 2023Change
(In Thousands)Amount% TotalAmount% TotalAmount%
Short-term borrowings:      
FHLB repurchase agreements$65,427 19.78 %$92,295 23.16 %$(26,868)(29.11)
Short-term FHLB borrowings10,000 3.02 50,000 12.55 (40,000)(80.00)
Securities sold under agreement to repurchase2,878 0.87 3,631 0.91 (753)(20.74)
Total short-term borrowings78,305 23.67 145,926 36.62 (67,621)(46.34)
Long-term borrowings:
Long-term FHLB borrowings245,826 74.31 245,000 61.48 826 0.34 
Long-term finance lease6,682 2.02 7,598 1.91 (916)(12.06)
Total long-term borrowings252,508 76.33 252,598 63.39 (90)(0.04)
Total borrowed funds$330,813 100.00 %$398,524 100.00 %$(67,711)(16.99)%
41


Short-Term Borrowings

The following table provides further information in regards to secured borrowings that have been accounted for as repurchase agreements.
Remaining Contractual Maturity Overnight and Continuous
(In Thousands)September 30, 2024December 31, 2023
Investment debt securities pledged, fair value$5,824 $7,976 
Repurchase agreements2,878 3,631 

Capital

Federal regulations require the Company and the Banks to maintain minimum amounts of capital.  Specifically, each is required to maintain certain minimum dollar amounts and ratios of Common Equity Tier 1, Total, and Tier 1 capital to risk-weighted assets and of Tier 1 capital to average total assets.

In addition to the capital requirements, the Federal Deposit Insurance Corporation Improvement Act (“FDICIA”) established five capital categories ranging from “well capitalized” to “critically undercapitalized.”  Should any institution fail to meet the requirements to be considered “adequately capitalized,” it would become subject to a series of increasingly restrictive regulatory actions.

As of September 30, 2024 and December 31, 2023 the FDIC categorized the Banks as well capitalized under the regulatory framework for prompt corrective action.  To be classified as a well capitalized financial institution, common equity tier I risk-based, tier I risked-based, total risk-based, and tier I leverage capital ratios must be at least 6.5%, 8%, 10%, and 5%, respectively.

We expect to continue to emphasize growth in our commercial and consumer loan portfolios, and additional regulatory capital generated through retained earnings and other sources will be necessary to support any such continued growth. At September 30, 2024, each of the Banks was “well capitalized” as defined by applicable bank regulatory standards. Applicable regulatory capital requirements also require each Bank to maintain a “capital conservation buffer,” consisting solely of tier 1 common equity, of 2.5% above the regulatory minimum capital requirements for each of the tier 1 common equity (“CET1”), tier 1 (“Tier 1”), and total capital (“Total Capital”) ratios. As a result of the capital conservation buffer requirements, if a bank does not maintain CET1, Tier 1 and Total Capital ratios of at least 7%, 8.5%, and 10.5%, respectively, determined as of the end of each calendar quarter, the bank’s ability to make certain discretionary payments, including discretionary dividend payments, are subject to a maximum payout ratio limitation unless the FDIC approves the distribution or payment. At September 30, 2024, each of Banks exceeded the capital conservation buffer requirements for applicable capital ratios.

Capital ratios for the Company and each Bank (using the definitions from the prompt corrective action rules) are presented in the following tables, which shows that the Company and both Banks met all regulatory capital requirements.

















42

The Company's capital ratios as of September 30, 2024 and December 31, 2023 were as follows:
 September 30, 2024December 31, 2023
(In Thousands)AmountRatioAmountRatio
Common Equity Tier I Capital (to Risk-weighted Assets)    
Actual$192,900 10.232 %$184,546 10.098 %
For Capital Adequacy Purposes84,837 4.500 82,240 4.500 
Minimum To Maintain Capital Conservation Buffer At Reporting Date131,968 7.000 127,929 7.000 
To Be Well Capitalized122,542 6.500 118,791 6.500 
Total Capital (to Risk-weighted Assets)   
Actual$205,107 10.880 %$197,334 10.798 %
For Capital Adequacy Purposes150,814 8.000 146,200 8.000 
Minimum To Maintain Capital Conservation Buffer At Reporting Date197,943 10.500 191,888 10.500 
To Be Well Capitalized188,517 10.000 182,751 10.000 
Tier I Capital (to Risk-weighted Assets)   
Actual$192,900 10.232 %$184,546 10.098 %
For Capital Adequacy Purposes113,116 6.000 109,653 6.000 
Minimum To Maintain Capital Conservation Buffer At Reporting Date160,247 8.500 155,342 8.500 
To Be Well Capitalized150,821 8.000 146,204 8.000 
Tier I Capital (to Average Assets)   
Actual$192,900 8.725 %$184,546 8.597 %
For Capital Adequacy Purposes88,436 4.000 85,865 4.000 
To Be Well Capitalized110,544 5.000 107,332 5.000 
 
Jersey Shore State Bank's capital ratios as of September 30, 2024 and December 31, 2023 were as follows:
 September 30, 2024December 31, 2023
(In Thousands)AmountRatioAmountRatio
Common Equity Tier I Capital (to Risk-weighted Assets)    
Actual$136,193 10.027 %$131,356 9.890 %
For Capital Adequacy Purposes61,122 4.500 59,768 4.500 
Minimum To Maintain Capital Conservation Buffer At Reporting Date95,078 7.000 92,972 7.000 
To Be Well Capitalized88,287 6.500 86,331 6.500 
Total Capital (to Risk-weighted Assets)   
Actual$146,062 10.754 %$142,134 10.701 %
For Capital Adequacy Purposes108,657 8.000 106,258 8.000 
Minimum To Maintain Capital Conservation Buffer At Reporting Date142,612 10.500 139,464 10.500 
To Be Well Capitalized135,821 10.000 132,823 10.000 
Tier I Capital (to Risk-weighted Assets)- - 
Actual$136,193 10.027 %$131,356 9.890 %
For Capital Adequacy Purposes81,496 6.000 79,690 6.000 
Minimum To Maintain Capital Conservation Buffer At Reporting Date115,452 8.500 112,894 8.500 
To Be Well Capitalized108,661 8.000 106,254 8.000 
Tier I Capital (to Average Assets)   
Actual$136,193 8.515 %$131,356 8.344 %
For Capital Adequacy Purposes63,978 4.000 62,970 4.000 
To Be Well Capitalized79,972 5.000 78,713 5.000 





43

Luzerne Bank's capital ratios as of September 30, 2024 and December 31, 2023 were as follows:
 September 30, 2024December 31, 2023
(In Thousands)AmountRatioAmountRatio
Common Equity Tier I Capital (to Risk-weighted Assets)    
Actual$55,141 10.464 %$51,974 10.288 %
For Capital Adequacy Purposes23,713 4.500 22,734 4.500 
Minimum To Maintain Capital Conservation Buffer At Reporting Date36,887 7.000 35,363 7.000 
To Be Well Capitalized34,252 6.500 32,837 6.500 
Total Capital (to Risk-weighted Assets)   
Actual$57,479 10.907 %$53,984 10.686 %
For Capital Adequacy Purposes42,159 8.000 40,415 8.000 
Minimum To Maintain Capital Conservation Buffer At Reporting Date55,334 10.500 53,044 10.500 
To Be Well Capitalized52,699 10.000 50,518 10.000 
Tier I Capital (to Risk-weighted Assets)   
Actual$55,141 10.464 %$51,974 10.288 %
For Capital Adequacy Purposes31,618 6.000 30,311 6.000 
Minimum To Maintain Capital Conservation Buffer At Reporting Date44,792 8.500 42,941 8.500 
To Be Well Capitalized42,157 8.000 40,415 8.000 
Tier I Capital (to Average Assets)   
Actual$55,141 7.947 %$51,974 8.316 %
For Capital Adequacy Purposes27,754 4.000 25,000 4.000 
To Be Well Capitalized34,693 5.000 31,249 5.000 

During the nine months ended September 30, 2024, the Company had an active registered at-the-market offering pursuant to the terms of an equity distribution agreement, dated September 13, 2023 (the “Distribution Agreement”), between D.A. Davidson & Co. (the “Distribution Agent”) and the Company. Under the terms of the Distribution Agreement, the Company will pay the Distribution Agent a fee in the amount of 2.75% of the gross proceeds from the sale of such shares. The Company did not sell any shares under the Distribution Agreement during the nine months ended September 30, 2024.

Liquidity; Interest Rate Sensitivity and Market Risk

The asset/liability committee addresses the liquidity needs of the Company to ensure that sufficient funds are available to meet credit demands and deposit withdrawals as well as to the placement of available funds in the investment portfolio.  In assessing liquidity requirements, equal consideration is given to the current position as well as the future outlook.

The following liquidity measures are monitored for compliance and were within the limits cited, with the exception of net loans to total deposits that was 110%, at September 30, 2024:

1.            Net Loans to Total Assets, 85% maximum
2.              Net Loans to Total Deposits, 100% maximum
3.              Cumulative 90 day Maturity GAP %, +/- 15% maximum
4.              Cumulative 1 Year Maturity GAP %, +/- 20% maximum

Fundamental objectives of the Company’s asset/liability management process are to maintain adequate liquidity while minimizing interest rate risk. The maintenance of adequate liquidity provides the Company with the ability to meet its financial obligations to depositors, loan customers, and shareholders. Additionally, it provides funds for normal operating expenditures and business opportunities as they arise.  The objective of interest rate sensitivity management is to increase net interest income by managing interest sensitive assets and liabilities in such a way that they can be repriced in response to changes in market interest rates.

The Banks, like other financial institutions, must have sufficient funds available to meet liquidity needs for deposit withdrawals, loan commitments and originations, and expenses. In order to control cash flow, the Banks estimate future cash flows from deposits, loan payments, and investment security payments. The primary sources of funds are deposits, principal and interest
44

payments on loans and investment securities, FHLB borrowings, and brokered deposits. Management believes the Banks have adequate resources to meet their normal funding requirements.

Management monitors the Company’s liquidity on both a long and short-term basis, thereby providing management necessary information to react to current balance sheet trends. Cash flow needs are assessed and sources of funds are determined. Funding strategies consider both customer needs and economical cost. Both short and long-term funding needs are addressed by maturities and sales of available for sale and trading investment securities, loan repayments and maturities, and liquidating money market investments such as federal funds sold. The use of these resources, in conjunction with access to credit, provides core funding to satisfy depositor, borrower, and creditor needs.

Management monitors and determines the desirable level of liquidity. Consideration is given to loan demand, investment opportunities, deposit pricing and growth potential, as well as the current cost of borrowing funds. The Company has a total current maximum borrowing capacity at the FHLB of $841,054,000. In addition to this credit arrangement, the Company has additional lines of credit with correspondent banks of $90,000,000. Management believes it has sufficient liquidity to satisfy estimated short-term and long-term funding needs. FHLB borrowings totaled $321,253,000 as of September 30, 2024.

Interest rate sensitivity, which is closely related to liquidity management, is a function of the repricing characteristics of the Company’s portfolio of assets and liabilities. Asset/liability management strives to match maturities and rates between loan and investment security assets with the deposit liabilities and borrowings that fund them. Successful asset/liability management results in a balance sheet structure which can cope effectively with market rate fluctuations. The matching process segments both assets and liabilities into future time periods (usually 12 months, or less) based upon when repricing can be effected. Repriceable assets are subtracted from repriceable liabilities for a specific time period to determine the “gap”, or difference. Once known, the gap is managed based on predictions about future market interest rates. Intentional mismatching, or gapping, can enhance net interest income if market rates move as predicted.  However, if market rates behave in a manner contrary to predictions, net interest income will suffer. Gaps, therefore, contain an element of risk and must be prudently managed. In addition to gap management, the Company has an asset/liability management policy which incorporates a market value at risk calculation which is used to determine the effects of interest rate movements on shareholders’ equity and a simulation analysis to monitor the effects of interest rate changes on the Company’s consolidated balance sheet.

The Company currently maintains a gap position of being asset sensitive.  The Company has strategically taken this position as it has previously decreased the duration of the earning asset portfolio by adding quality short and intermediate term loans such as home equity loans.  The Company has added certain longer-term earning assets due to the significant increase in interest rates. Lengthening of the liability portfolio, primarily time deposits, previously was undertaken to build protection during the current rate environment and has now shifted to a time deposit gathering campaign with an emphasis on five month maturities.

A market value at risk calculation is utilized to monitor the effects of interest rate changes on the Company’s balance sheet and more specifically shareholders’ equity.  The Company does not manage the balance sheet structure in order to maintain compliance with this calculation.  The calculation serves as a guideline with greater emphasis placed on interest rate sensitivity.  Changes to calculation results from period to period are reviewed as changes in results could be a signal of future events.  As of the most recent analysis, the results of the market value at risk calculation were within established guidelines due to the strategic direction being taken.

Interest Rate Sensitivity

In this analysis the Company examines the result of a 100, 200, 300, and 400 basis point change in market interest rates and the effect on net interest income. It is assumed that the change is instantaneous and that all rates move in a parallel manner.  Assumptions are also made concerning prepayment speeds on mortgage loans and mortgage securities.

The following is a rate shock forecast for the twelve month period ending September 30, 2025 assuming a static balance sheet as of September 30, 2024.
 Parallel Rate Shock in Basis Points
(In Thousands)-300-200-100Static+100+200+300+400
Net interest income$59,906 $61,399 $62,878 $64,267 $65,525 $66,726 $67,546 $67,640 
Change from static(4,361)(2,868)(1,389)— 1,258 2,459 3,279 3,373 
Percent change from static-6.79 %-4.46 %-2.16 %— 1.96 %3.83 %5.10 %5.25 %

45

The model utilized to create the report presented above makes various estimates at each level of interest rate change regarding cash flow from principal repayment on loans and mortgage-backed securities and/or call activity on investment securities.  Actual results could differ significantly from these estimates which would result in significant differences in the calculated projected change.  In addition, the limits stated above do not necessarily represent the level of change under which management would undertake specific measures to realign its portfolio in order to reduce the projected level of change.  Generally, management believes the Company is well positioned to respond expeditiously when the market interest rate outlook changes.

Inflation

Substantially all of the Company's assets and liabilities relate to banking activities and are monetary. The consolidated financial statements and related financial data are presented following GAAP. GAAP currently requires the Company to measure the financial position and results of operations in terms of historical dollars, except for securities available for sale, individually evaluated loans, and other real estate loans that are measured at fair value. Changes in the value of money due to rising inflation can cause purchasing power loss.

Management's opinion is that movements in interest rates affect the financial condition and results of operations to a greater degree than changes in the rate of inflation. It should be noted that interest rates and inflation do affect each other but do not always move in correlation with each other. The Company's ability to match the interest sensitivity of its financial assets to the interest sensitivity of its liabilities in its asset/liability management may tend to minimize the effect of changes in interest rates on the Company's performance.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Market risk for the Company is comprised primarily of interest rate risk exposure and liquidity risk.  Interest rate risk and liquidity risk management is performed at both the level of the Company and the Banks.  The Company’s interest rate sensitivity is monitored by management through selected interest rate risk measures produced by an independent third party.  There have been no substantial changes in the Company’s gap analysis or simulation analysis compared to the information provided in the Annual Report on Form 10-K for the period ended December 31, 2023.  Additional information and details are provided in the “Liquidity, Interest Rate Sensitivity, and Market Risk” section of “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of that document.

Generally, management believes the Company is well positioned to respond in a timely manner when the market interest rate outlook changes.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An analysis was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of September 30, 2024.

Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal control over financial reporting that occurred during the quarter ended September 30, 2024 that materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
46

Part II.  OTHER INFORMATION
Item 1.                           Legal Proceedings

None.

Item 1A.  Risk Factors

Certain risk factors are set forth in Part I, Item 1A, “Risk Factors,” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as supplemented as follows:

If we are unable to raise additional capital or generate earnings at current levels, our growth may be constrained and certain distributions, including discretionary dividend payments, by our subsidiary Banks to the holding company may be restricted.

We expect to continue to emphasize growth in our commercial and consumer loan portfolios, and additional regulatory capital generated through retained earnings and other sources will be necessary to support any such continued growth. At September 30, 2024, each of Jersey Shore State Bank and Luzerne Bank were “well capitalized” as defined by applicable bank regulatory standards. Applicable regulatory capital requirements also require each Bank to maintain a “capital conservation buffer,” consisting solely of tier 1 common equity, of 2.5% above the regulatory minimum capital requirements for each of the tier 1 common equity (“CET1”), tier 1 (“Tier 1”), and total capital (“Total Capital”) ratios. As a result of the capital conservation buffer requirements, if a bank does not maintain CET1, Tier 1 and Total Capital ratios of at least 7%, 8.5%, and 10.5%, respectively, determined as of the end of each calendar quarter, the bank’s ability to make certain discretionary payments, including discretionary dividend payments, are subject to a maximum payout ratio limitation unless the FDIC approves the distribution or payment. At September 30, 2024, each of the Banks exceeded the capital conservation buffer requirements for the applicable capital ratios. If, however, we are unable to generate retained earnings or raise capital in amounts necessary to avoid limitations on discretionary dividend payments by the Banks, our continued growth could be adversely affected.


Item 2.                           Unregistered Sales of Equity Securities and Use of Proceeds

The following table provides certain information with respect to the Company's repurchase of common stock during the quarter ended September 30, 2024.
PeriodTotal
Number of
Shares (or
Units) Purchased		Average
Price Paid
per Share
(or Units) Purchased		Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced Plans or Programs		Maximum Number (or
Approximate Dollar Value)
of Shares (or Units) that
May Yet Be Purchased Under the Plans or Programs
Month #1 (July 1 - July 31, 2024)— $— — 376,000 
Month #2 (August 1 - August 31, 2024)— — — 376,000 
Month #3 (September 1 - September 30, 2024)— — — 376,000 

Item 3.                           Defaults Upon Senior Securities
None
Item 4.                           Mine Safety Disclosures
Not applicable.
Item 5.                           Other Information
(c) Securities Trading Plans of Directors and Executive Officers

During the three months ended September 30, 2024, none of our directors or executive officers adopted or terminated any contract, instruction or written plan for the purchase or sale of the Company's securities that was intended to satisfy the affirmation defense conditions of Rule 10b5-1(c) or any "non-Rule 10b5-1 trading arrangement" as defined in Item 408 of SEC Regulation S-K.
47
Table of Contents

Item 6.                           Exhibits
 
 Articles of Incorporation of the Registrant (incorporated by reference to Exhibit 3(i) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2022).
 Bylaws of the Registrant (incorporated by reference to Exhibit 3(ii) of the Registrant's Annual Report on Form 10-K for the year ended December 31, 2020).
 Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Executive Officer.
 Rule 13a-14(a)/Rule 15d-14(a) Certification of Chief Financial Officer.
 Section 1350 Certification of Chief Executive Officer.
 Section 1350 Certification of Chief Financial Officer.
101 Interactive data file containing the following financial statements formatted in XBRL (Extensible Business Reporting Language): (i) the Consolidated Balance Sheet at September 30, 2024 and December 31, 2023; (ii) the Consolidated Statement of Income for the three and nine months ended September 30, 2024 and 2023; (iii) Consolidated Statement of Comprehensive Income for the three and nine months ended September 30, 2024 and 2023; (iv) the Consolidated Statement of Shareholders’ Equity for the three and nine months ended September 30, 2024 and 2023; (v) the Consolidated Statement of Cash Flows for the nine months ended September 30, 2024 and 2023 and (vi) the Notes to Consolidated Financial Statements. As provided in Rule 406T of Regulation S-T, this interactive data file shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, and shall not be deemed “filed” or part of any registration statement or prospectus for purposes of Section 11 or 12 under the Securities Act of 1933, or otherwise subject to liability under those sections.
104Cover page interactive data file (formatted as inline XBRL and contained in Exhibit 101).
48
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 PENNS WOODS BANCORP, INC.
 (Registrant)
  
Date:    November 14, 2024/s/ Richard A. Grafmyre
 Richard A. Grafmyre, Chief Executive Officer
 (Principal Executive Officer)
  
  
Date:November 14, 2024/s/ Brian L. Knepp
 Brian L. Knepp, President and Chief Financial Officer
 (Principal Financial Officer and Principal Accounting
 Officer)

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