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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 March 31, 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 filerAccelerated 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 May 1, 2024 there were 7,529,549 shares of the Registrant’s common stock outstanding.


PENNS WOODS BANCORP, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

  Page
  Number
 
   
   
  
  
  
 
  
   
   
   
   
 
   
   
   
   
   
   
   
   
2

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

March 31,December 31,
(In Thousands, Except Share And Per Share Data)20242023
ASSETS: 
Noninterest-bearing balances$23,488 $28,969 
Interest-bearing balances in other financial institutions9,055 8,493 
Total cash and cash equivalents32,543 37,462 
Investment debt securities, available for sale, at fair value187,245 190,945 
Investment equity securities, at fair value1,112 1,122 
Restricted investment in bank stock23,420 24,323 
Loans held for sale3,360 3,993 
Loans1,855,347 1,839,764 
Allowance for credit losses(11,542)(11,446)
Loans, net1,843,805 1,828,318 
Premises and equipment, net28,970 30,250 
Accrued interest receivable11,344 11,044 
Bank-owned life insurance32,853 33,867 
Investment in limited partnerships7,515 7,815 
Goodwill16,450 16,450 
Intangibles184 210 
Operating lease right-of-use asset2,922 2,512 
Deferred tax asset4,546 4,655 
Other assets13,847 11,843 
TOTAL ASSETS$2,210,116 $2,204,809 
LIABILITIES:  
Interest-bearing deposits$1,147,111 $1,118,320 
Noninterest-bearing deposits471,451 471,173 
Total deposits1,618,562 1,589,493 
Short-term borrowings111,208 145,926 
Long-term borrowings261,770 252,598 
Accrued interest payable4,174 3,814 
Operating lease liability2,987 2,570 
Other liabilities17,898 18,852 
TOTAL LIABILITIES2,016,599 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; 8,035,597 and 8,019,219 shares issued; 7,525,372 and 7,508,994 outstanding
44,641 44,550 
Additional paid-in capital62,215 61,733 
Retained earnings108,642 107,238 
Accumulated other comprehensive loss:  
Net unrealized loss on available for sale securities(6,425)(6,396)
Defined benefit plan(2,741)(2,754)
Treasury stock at cost, 510,225 shares
(12,815)(12,815)
TOTAL SHAREHOLDERS' EQUITY193,517 191,556 
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY$2,210,116 $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 March 31,
(In Thousands, Except Share And Per Share Data)20242023
INTEREST AND DIVIDEND INCOME:  
Loans, including fees$23,860 $18,005 
Investment securities:  
Taxable1,594 1,218 
Tax-exempt97 178 
Dividend and other interest income679 463 
TOTAL INTEREST AND DIVIDEND INCOME26,230 19,864 
INTEREST EXPENSE:  
Deposits7,963 3,372 
Short-term borrowings2,005 1,440 
Long-term borrowings2,516 754 
TOTAL INTEREST EXPENSE12,484 5,566 
NET INTEREST INCOME13,746 14,298 
PROVISION FOR CREDIT LOSSES138 71 
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES13,608 14,227 
NON-INTEREST INCOME:  
Service charges515 496 
Net debt securities losses, available for sale(23)(61)
Net equity securities (losses) gains(10)21 
Bank-owned life insurance463 556 
Gain on sale of loans305 231 
Insurance commissions153 165 
Brokerage commissions186 165 
Loan broker commissions222 170 
Debit card income329 335 
Other322 179 
TOTAL NON-INTEREST INCOME2,462 2,257 
NON-INTEREST EXPENSE:  
Salaries and employee benefits6,422 6,176 
Occupancy905 866 
Furniture and equipment939 846 
Software amortization190 183 
Pennsylvania shares tax320 248 
Professional fees552 688 
Federal Deposit Insurance Corporation deposit insurance359 245 
Marketing71 155 
Intangible amortization26 35 
Loss on sale of premise and equipment330  
Other1,509 1,456 
TOTAL NON-INTEREST EXPENSE11,623 10,898 
INCOME BEFORE INCOME TAX PROVISION4,447 5,586 
INCOME TAX PROVISION639 928 
NET INCOME AVAILABLE TO COMMON SHAREHOLDERS'$3,808 $4,658 
EARNINGS PER SHARE - BASIC$0.51 $0.66 
EARNINGS PER SHARE - DILUTED$0.51 $0.64 
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 7,512,520 7,058,397 
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED7,512,520 7,334,197 
See accompanying notes to the unaudited consolidated financial statements.
4



PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(UNAUDITED)
 
 Three Months Ended March 31,
(In Thousands)20242023
Net Income$3,808 $4,658 
Other comprehensive (loss) income:  
Net unrealized (loss) gain on available for sale securities(59)2,333 
Tax effect12 (490)
Net realized loss on available for sale securities included in net income23 61 
Tax effect(5)(13)
   Amortization of unrecognized pension loss16 37 
        Tax effect(3)(8)
Total other comprehensive (loss) income(16)1,920 
Comprehensive income$3,792 $6,578 
 
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, December 31, 20238,019,219 $44,550 $61,733 $107,238 $(9,150)$(12,815)$191,556 
Net income3,808 3,808 
Other comprehensive loss(16)(16)
Stock-based compensation 273 273 
Dividends declared ($0.32 per share)
(2,404)(2,404)
Common shares issued for employee stock purchase plan2,550 15 35 50 
Common shares issued for director compensation plan2,888 16 46 62 
Dividend reinvestment plan10,940 60 128 188 
Balance, March 31, 20248,035,597 $44,641 $62,215 $108,642 $(9,166)$(12,815)$193,517 

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 income4,658 4,658 
Other comprehensive income1,920 1,920 
Stock-based compensation253 253 
Dividends declared ($0.32 per share)
(2,258)(2,258)
Common shares issued for employee stock purchase plan854 5 16 21 
Common shares issued for director compensation plan2,422 13 51 64 
Balance, March 31, 20237,570,086 $42,057 $54,572 $102,194 $(12,038)$(12,815)$173,970 



See accompanying notes to the unaudited consolidated financial statements.
6

PENNS WOODS BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED) 
Three Months Ended March 31,
(In Thousands)20242023
OPERATING ACTIVITIES:  
Net Income$3,808 $4,658 
Adjustments to reconcile net income to net cash provided by operating activities:  
Depreciation and amortization1,031 807 
Loss on sale of premises and equipment330  
Amortization of intangible assets26 35 
Provision for credit losses138 71 
Stock based compensation273 253 
Accretion and amortization of investment security discounts and premiums13 162 
Net debt securities losses, available for sale23 61 
Originations of loans held for sale(10,413)(6,187)
Proceeds of loans held for sale11,351 8,011 
Gain on sale of loans(305)(231)
Net equity securities losses (gains)10 (21)
Earnings on bank-owned life insurance(463)(556)
Decrease in deferred tax asset117 624 
Gain on lease abandonment(127) 
Other, net(3,544)3,419 
Net cash provided by operating activities2,268 11,106 
INVESTING ACTIVITIES:  
Proceeds from sales of available for sale securities995 12,913 
Proceeds from calls and maturities of available for sale securities10,740 2,120 
Purchases of available for sale securities(8,108)(16,379)
Net increase in loans(15,149)(64,266)
Acquisition of premises and equipment(249)(255)
Purchase of bank-owned life insurance(6)(6)
Proceeds from bank-owned life insurance death benefit1,483 1,655 
Proceeds from redemption of regulatory stock12,867 6,749 
Purchases of regulatory stock(11,964)(6,234)
Net cash used for investing activities(9,391)(63,703)
FINANCING ACTIVITIES:  
Net increase in interest-bearing deposits28,791 99,086 
Net increase (decrease) in noninterest-bearing deposits278 (16,711)
Proceeds from long-term borrowings20,000 35,000 
Repayment of long-term borrowings(10,000)(5,000)
Net decrease in short-term borrowings(34,718)(56,247)
Finance lease principal payments(43)(45)
Dividends paid(2,404)(2,258)
Issuance of common stock300 85 
Net cash provided by financing activities2,204 53,910 
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS(4,919)1,313 
CASH AND CASH EQUIVALENTS, BEGINNING37,462 40,333 
CASH AND CASH EQUIVALENTS, ENDING$32,543 $41,646 
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:  
Interest paid$12,124 $4,997 
Income taxes paid4 7 
Non-cash investing and financing activities:
Finance right of use asset abandonment658  
See accompanying notes to the unaudited consolidated financial statements.
7

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 March 31, 2024 and 2023 were as follows:
Three Months Ended March 31, 2024Three Months Ended March 31, 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$(6,396)$(2,754)$(9,150)$(9,819)$(4,139)$(13,958)
Other comprehensive (loss) income before reclassifications(47) (47)1,843  1,843 
Amounts reclassified from accumulated other comprehensive gain18 13 31 48 29 77 
Net current-period other comprehensive (loss) income(29)13 (16)1,891 29 1,920 
Ending balance$(6,425)$(2,741)$(9,166)$(7,928)$(4,110)$(12,038)
The reclassifications out of accumulated other comprehensive loss shown, net of tax and parenthesis indicating debits to net income, as of March 31, 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 March 31, 2024Three Months Ended March 31, 2023
Net unrealized loss on available for sale securities$(23)$(61)Net debt securities losses, available for sale
Income tax effect5 13 Income tax provision
Total reclassifications for the period$(18)$(48)
Net unrecognized pension costs$(16)$(37)Other non-interest expense
Income tax effect3 8 Income tax provision
Total reclassifications for the period$(13)$(29)


8

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 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 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.



















9

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 1,097,000 stock options, with an average exercise price of $25.13, outstanding on March 31, 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 $20.20 for the period being less than the strike price. 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 $25.96 for the quarter being greater than the strike price for the period ending March 31, 2023.
 Three Months Ended March 31,
 20242023
Weighted average common shares issued8,022,745 7,568,622 
Weighted average treasury stock shares(510,225)(510,225)
Weighted average common shares outstanding - basic7,512,520 7,058,397 
Dilutive effect of outstanding stock options 275,800 
Weighted average common shares outstanding - diluted7,512,520 7,334,197 
 
Note 5. Investment Securities
 
The amortized cost, gross unrealized gains and losses, and fair values of our investment securities portfolio at March 31, 2024 and December 31, 2023 are as follows:
 March 31, 2024
  GrossGross 
 AmortizedUnrealizedUnrealizedFair
(In Thousands)CostGainsLossesValue
Available for sale (AFS):    
U.S. Government and agency securities$4,000 $ $(67)$3,933 
Mortgage-backed securities19,829 73 (279)19,623 
State and political securities114,357 92 (5,369)109,080 
Other debt securities57,191 142 (2,724)54,609 
Total debt securities$195,377 $307 $(8,439)$187,245 
Investment equity securities:
Equity securities$1,300 $ $(188)$1,112 
 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 


10

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 March 31, 2024 and December 31, 2023.
 March 31, 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$991 $(10)$2,942 $(57)$3,933 $(67)
Mortgage-backed securities8,162 (37)5,972 (242)14,134 (279)
State and political securities5,339 (100)94,889 (5,269)100,228 (5,369)
Other debt securities6,987 (155)36,227 (2,569)43,214 (2,724)
Total debt securities$21,479 $(302)$140,030 $(8,137)$161,509 $(8,439)
 December 31, 2023
 Less than Twelve MonthsTwelve Months or GreaterTotal
  Gross Gross Gross
 FairUnrealizedFairUnrealizedFairUnrealized
(In Thousands)ValueLossesValueLossesValueLosses
Available for sale (AFS):
U.S. Government and agency securities$ $ $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 March 31, 2024, there were a total of 27 securities in a continuous unrealized loss position for less than twelve months and 178 individual securities that were in a continuous unrealized loss position for twelve months or greater. No credit losses occurred for the period ended March 31, 2024.

The Company reviews its position quarterly and has determined that, at March 31, 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 March 31, 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$29,902 $29,386 
Due after one year to five years77,552 73,861 
Due after five years to ten years76,068 72,296 
Due after ten years11,855 11,702 
Total$195,377 $187,245 

Total gross proceeds from sales of debt securities available for sale for the three months ended March 31, 2024 was $995,000, compared to $12,913,000 for the corresponding 2023 period.

11

The following table represents gross realized gains and losses from the sales of debt securities available for sale:
 Three Months Ended March 31,
(In Thousands)20242023
Available for sale (AFS):
Gross realized gains:  
State and political securities$ $54 
Gross realized losses:  
State and political securities$(23)$(115)

Investment securities with a carrying value of approximately $103,071,000 and $107,800,000 at March 31, 2024 and December 31, 2023, respectively, were pledged to secure certain deposits, repurchase agreements, and for other purposes as required by law.


At March 31, 2024 and December 31, 2023, we had $1,112,000 and $1,122,000, respectively, in equity securities recorded at fair value. The following is a summary of unrealized and realized gains and losses recognized in net income on equity securities during the three months ended March 31, 2024 and 2023:
Three Months Ended March 31,
(In Thousands)20242023
Net (losses) gains recognized in equity securities during the period$(10)$21 
Less: Net (loss) gain realized on the sale of equity securities during the period  
Unrealized (losses) gains recognized in equity securities held at reporting date$(10)$21 


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 March 31, 2024 and December 31, 2023:
 March 31, 2024
 Past Due
 30 To 89Past Due 90
(In Thousands)DaysDays Or MoreCurrentTotal
Commercial, financial, and agricultural$314 $145 $221,116 $221,575 
Real estate mortgage: 
Residential7,865 2,987 793,555 804,407 
Commercial1,761 1,739 530,128 533,628 
Construction14  38,099 38,113 
Consumer automobile loans2,255 155 243,898 246,308 
Other consumer installment loans221 5 10,094 10,320 
 $12,430 $5,031 $1,836,890 1,854,351 
Net deferred loan fees and discounts 996 
Allowance for credit losses (11,542)
Loans, net $1,843,805 
12

 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 

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 March 31, 2024 and December 31, 2023:
March 31,December 31,
(In Thousands)20242023
ACL - loans$11,542 $11,446 
ACL - off balance sheet credit exposure902 1,342 
Total ACL$12,444 $12,788 
 
Non-Accrual Loans
 March 31, 2024December 31, 2023
(In Thousands)With a Related ACLWithout a Related ACLTotalWith a Related ACLWithout a Related ACLTotal
Commercial, financial, and agricultural$ $500 $500 $ $504 $504 
Real estate mortgage:
Residential 241 241 21 259 280 
Commercial2,139 1,629 3,768  214 214 
Construction      
Consumer automobile      
Other consumer installment loans      
$2,139 $2,370 $4,509 $21 $977 $998 

Total interest income recorded on non-accrual loans at March 31, 2024 totaled $45,000.



13

The following table presents outstanding loan balances of collateral-dependent loans by class as of March 31, 2024 and December 31, 2023:
March 31, 2024
(In Thousands)Real estateUnsecured*Total
Real estate mortgage:
Residential$1,481 $ $1,481 
Commercial3,648  3,648 
Total$5,129 $ $5,129 
December 31, 2023
(In Thousands)Real estateUnsecured*Total
Real estate mortgage:
Residential$1,533 $ $1,533 
Commercial88  88 
Total$1,621 $ $1,621 
* Loan considered unsecured due to lien position on property
Loan Modifications

On January 1, 2023, the Corporation 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 Corporation 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 amounted to $4,951,000 and $5,019,000 as of March 31, 2024 and December 31, 2023, respectively.

The amount of foreclosed residential real estate held at March 31, 2024 and December 31, 2023, totaled $445,000 and $700,000, respectively. Consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process at March 31, 2024 and December 31, 2023, totaled $1,004,000 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
14

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.























































15

The following table presents the credit quality categories identified above as of March 31, 2024 and December 31, 2023:
March 31, 2024
(In Thousands)20242023202220212020PriorRevolving LoansRevolving Loans Converted to TermTotal
Commercial, financial, and agricultural
Pass$8,108 $29,936 $48,504 $34,350 $31,511 $31,719 $34,598 $82 $218,808 
Special Mention 450 164 33 18  159  824 
Substandard or Lower     729 485 729 1,943 
$8,108 $30,386 $48,668 $34,383 $31,529 $32,448 $35,242 $811 $221,575 
 
Current period gross write offs$ $40 $50 $ $ $ $ $ $90 
Real estate mortgage:
Residential
Pass$23,086 $131,074 $133,995 $86,303 $49,751 $171,414 $57,262 $148,132 $801,017 
Special Mention 339 524   95   958 
Substandard or Lower  314 271  1,784  63 2,432 
$23,086 $131,413 $134,833 $86,574 $49,751 $173,293 $57,262 $148,195 $804,407 
Current period gross write offs$ $ $ $ $ $4 $ $ $4 
Commercial
Pass$7,471 $61,609 $106,296 $124,866 $48,867 $162,909 $11,331 $859 $524,208 
Special Mention 188