Penns Woods Bancorp, Inc. (NASDAQ:PWOD) today reported that net income from core operations (“operating earnings”), which is a non-GAAP measure of net income excluding net securities gains and losses, increased to $2,770,000 for the three months ended March 31, 2011 compared to $2,450,000 for the same period of 2010. Operating earnings per share for the three months ended March 31, 2011 were $0.72 basic and dilutive compared to $0.64 basic and dilutive for the same period of 2010 or an increase of 12.5%. Operating earnings for the three months ended March 31, 2011 were positively impacted by continued emphasis on core deposit growth, an increasing net interest margin, and expense control. A reconciliation of the non-GAAP financial measures of operating earnings, operating return on assets, operating return on equity, and operating earnings per share described in this paragraph to the comparable GAAP financial measures is included at the end of this press release. Net income, as reported under U.S. generally accepted accounting principles, for the three months ended March 31, 2011 was $2,853,000 compared to $2,448,000 for the same period of 2010. Results for the three month period ended March 31, 2011 compared to 2010 were impacted by an increase in after-tax securities gains of $85,000 (from a loss of $2,000 to a gain of $83,000). Basic and dilutive earnings per share for the three months ended March 31, 2011 were $0.74 compared to $0.64 for the corresponding period of 2010. Return on average assets and return on average equity were 1.65% and 16.62% for the three months ended March 31, 2011 compared to 1.42% and 14.31% for the corresponding period of 2010. The net interest margin for the three months ended March 31, 2011 was 4.89% compared to 4.49% for the corresponding period of 2010. Contributing to the increased net interest margin is the significant growth in lower cost core deposits, which has led to the average rate paid on interest bearing liabilities decreasing 50 basis points (bp) for the three months ended March 31, 2011 compared to the same period of 2010. In addition, the average rate paid on time deposits decreased 58 bp for the three months ended March 31, 2011 compared to the same period of 2010. The liability rate decreases are primarily the result of Federal Open Market Committee (FOMC) actions to maintain low interest rates in addition to lower cost core deposit growth to 64.9% of total deposits at March 31, 2011 compared to 58.4% at March 31, 2010. The duration of the time deposit portfolio, which was shortened over the past several years, is now being lengthened due to the apparent bottoming or near bottoming of deposit rates. FHLB long-term borrowings have been reduced by $15,000,000 since March 31, 2010 with cash on hand being utilized to pay off the borrowings. An additional $10,500,000 of FHLB long-term borrowings at an average rate of 4.60% will be maturing during the latter part of 2011. “We continue to manage the balance sheet to not only generate current returns, but to also prepare for a period of increasing interest rates. Quality loans that possess a fair risk/return trade-off and complement the overall earning asset portfolio are being added to the portfolio. The investment portfolio duration is being shortened with purchased bonds primarily having a final maturity of less than seven years. On the liability side of the balance sheet we have been able to reduce borrowings due to continued growth in the deposit portfolio. We have also taken actions to begin lengthening the time deposit portfolio with emphasis on time deposit maturities of greater than two years,” commented Richard A. Grafmyre, President and Chief Executive Officer of Penns Woods Bancorp, Inc.