Citizens & Northern(US:CZNC)2024-08-07 14:47Net Income and Earnings - Second quarter 2024 net income was $6,113,000, or $0.40 per diluted share, compared to $6,043,000, or $0.39 per diluted share, in the second quarter 2023[110] - Net income for the six months ended June 30, 2024 was $11,419,000, or $0.74 per diluted share, compared to $12,296,000, or $0.80 per diluted share, for the same period in 2023[114] Net Interest Income and Margin - Net interest income for Q2 2024 was $19,445,000, a decrease of $917,000 from Q2 2023, with a net interest margin of 3.31%, down from 3.53% in Q2 2023[110] - Net interest income for the six months ended June 30, 2024 was $38,486,000, a decrease of $2,657,000 from the same period in 2023, with a net interest margin of 3.30%, down from 3.62%[114] - Fully taxable equivalent net interest income decreased by $954,000 (4.6%) to $19,647,000 in Q2 2024 compared to $20,601,000 in Q2 2023[128] - Fully taxable equivalent net interest income decreased by $2,768,000 (6.6%) to $38,883,000 in 2024 compared to 2023, driven by a $10,169,000 increase in interest expense and a $7,401,000 increase in interest income[135] - Net Interest Margin decreased to 3.30% in 2024 from 3.62% in 2023, while the Interest Rate Spread decreased to 2.62% from 3.14%[135] - Net Interest Income/Earning Assets decreased to 3.31% in Q2 2024 from 3.53% in Q2 2023[145] - Interest Rate Spread decreased to 2.61% in Q2 2024 from 2.98% in Q2 2023[145] - Net interest income for the six months ended June 30, 2024 decreased by $2.768 million compared to the same period in 2023, driven by a $1.236 million increase in volume and a $4.004 million decrease in rate changes[147] Provision for Credit Losses - Provision for credit losses in Q2 2024 was $565,000, a decrease of $247,000 compared to $812,000 in Q2 2023, with the allowance for credit losses at 1.08% of gross loans receivable[110] - Provision for credit losses for the six months ended June 30, 2024 was $1,519,000, an increase of $1,059,000 from the same period in 2023, with net charge-offs totaling $352,000, or 0.04% of average loans receivable[115] - Provision for credit losses was $565,000 for Q2 2024, a decrease of $247,000 compared to $812,000 in Q2 2023[172] - Allowance for credit losses (ACL) as a percentage of gross loans receivable increased to 1.08% at June 30, 2024 from 1.04% at December 31, 2023[172] - ACL on individually evaluated loans increased to $1,230,000 at June 30, 2024 from $743,000 at December 31, 2023, primarily due to two borrowers[173] - ACL on collectively evaluated commercial loans increased by $1,225,000, while ACL on residential mortgage loans decreased by $652,000 from December 31, 2023 to June 30, 2024[174] - The allowance for credit losses on loans increased to $20.382 million at the end of June 2024, up from $19.056 million at the end of June 2023[178] - The total allowance for credit losses on loans was $20.382 million at June 30, 2024, with commercial real estate - nonowner occupied loans accounting for $11.684 million[179] Noninterest Income - Noninterest income in Q2 2024 increased by $1,220,000 to $7,854,000, driven by higher trust revenue, brokerage and insurance revenue, and net gains from loan sales[112] - Noninterest income for the six months ended June 30, 2024 increased by $2,279,000 to $14,529,000, driven by higher earnings from life insurance, trust revenue, and brokerage and insurance revenue[115] - Trust revenue increased by $210,000 (11.6%) to $2,014,000 in Q2 2024 compared to $1,804,000 in Q2 2023[121] - Brokerage and insurance revenue grew by $162,000 (44.4%) to $527,000 in Q2 2024 from $365,000 in Q2 2023[121] - Net gains from sales of loans surged by $96,000 (69.1%) to $235,000 in Q2 2024 compared to $139,000 in Q2 2023[121] - Total noninterest income rose by $1,220,000 (18.4%) to $7,854,000 in Q2 2024 from $6,634,000 in Q2 2023[121] Noninterest Expense - Noninterest expense in Q2 2024 increased by $533,000 to $19,255,000, with salaries and employee benefits expense rising by $246,000, or 2.3%[112] - Noninterest expense for the six months ended June 30, 2024 decreased by $250,000 to $37,559,000, with a reduction in legal fees and professional fees contributing to the decrease[116] Interest Income and Expense - Interest income increased by $3,278,000 (11.6%) to $31,528,000 in Q2 2024 from $28,250,000 in Q2 2023[129] - Interest expense on deposits increased by $4,215,000 to $11,881,000 in Q2 2024 from $7,649,000 in Q2 2023[133] - Interest expense on long-term borrowings increased by $799,000 to $1,855,000 in Q2 2024 from $1,056,000 in Q2 2023[134] - Interest income from loans receivable increased by $7,387,000 in 2024, with the average yield on loans rising to 5.97% from 5.53% in 2023[136] - Interest expense on deposits increased by $9,876,000 in 2024, with the average rate on interest-bearing deposits rising to 2.41% from 1.20% in 2023[140] - Interest expense on long-term borrowings (FHLB advances) increased by $1,574,000 to $3,311,000 in 2024, with the average balance rising to $159,063,000 from $95,899,000 in 2023[141] - Total interest income for the six months ended June 30, 2024 increased by $7.401 million, with a $2.778 million increase in volume and a $4.623 million increase in rate changes[147] - Total interest-bearing deposits increased by $9.876 million for the six months ended June 30, 2024, with a $1.649 million increase in volume and an $8.227 million increase in rate changes[147] Loans and Deposits - Average outstanding loans receivable grew by $95,535,000 (5.3%) to $1,883,386,000 in Q2 2024 from $1,787,851,000 in Q2 2023[129] - Average total deposits rose by $68,115,000 (3.5%) to $2,016,520,000 in Q2 2024 from $1,948,405,000 in Q2 2023[133] - Average outstanding loans receivable increased by $114,288,000 (6.5%) to $1,871,316,000 in 2024, driven by growth in commercial real estate and other commercial loans[136] - Average total deposits increased by $69,086,000 (3.6%) to $2,008,899,000 in 2024, with brokered deposits averaging $76,315,000 at a 5.21% interest rate[140] - Loans receivable grew to $1,883,386K in Q2 2024, up from $1,787,851K in Q2 2023, with a rate of return increasing from 5.62% to 6.03%[145] - Interest-bearing deposits rose to $1,522,598K in Q2 2024, with a cost of funds increasing to 2.46% from 1.45% in Q2 2023[145] - Total Interest-bearing Liabilities increased to $1,765,318K in Q2 2024, with a cost of funds rising to 2.71% from 1.86% in Q2 2023[145] - Taxable loans receivable reached $1,792,556K in Q2 2024, up from $1,697,740K in Q2 2023, with a rate of return increasing from 5.76% to 6.17%[145] - Time deposits grew to $457,885K in Q2 2024, with a cost of funds increasing to 3.96% from 2.58% in Q2 2023[145] - Total Assets increased to $2,547,632K in Q2 2024 from $2,466,317K in Q2 2023[145] - Total loans increased to $1,893.2 million at June 30, 2024, up from $1,848.1 million at June 30, 2023, and $1,740.0 million at December 31, 2023[169] - Deposits increased by $44.503 million (2.2%) to $2.059 billion at June 30, 2024, compared to December 31, 2023[187] - Estimated uninsured deposits totaled $605.8 million (29.2% of total deposits) at June 30, 2024, compared to $592.2 million (29.2%) at December 31, 2023[188] Credit Quality and Nonperforming Assets - Total nonperforming assets were $19.8 million at June 30, 2024, up from $18.8 million at December 31, 2023, representing 0.76% of total assets[175] - Net charge-offs in the first six months of 2024 totaled $352,000, or 0.02% of average outstanding loans, which is low by historical standards[175] - Nonaccrual loans increased by $4.4 million from December 31, 2023, while loans past due 90 days or more still accruing decreased by $3.2 million[175] - The company continues to closely monitor commercial loan relationships for credit losses and will adjust estimates of loss and nonaccrual status as appropriate[177] - Net charge-offs as a percentage of average loans decreased to 0.02% in June 2024 from 0.01% in June 2023[178] - Total nonperforming loans as a percentage of loans increased to 1.04% at June 30, 2024, compared to 0.99% at December 31, 2023[182] Tax and Deferred Tax Assets - The income tax provision for the six months ended June 30, 2024 was $2.518 million, $310,000 lower than the same period in 2023, due to lower pre-tax income[148] - The effective tax rate for the six months ended June 30, 2024 was 18.1%, compared to 18.7% for the same period in 2023[148] - The net deferred tax asset at June 30, 2024 was $18.375 million, an increase from $17.441 million at December 31, 2023[149] - Unrealized holding losses on securities contributed $11.089 million to deferred tax assets at June 30, 2024, up from $10.335 million at December 31, 2023[149] - Total deferred tax liabilities decreased to $2.650 million at June 30, 2024 from $2.784 million at December 31, 2023[149] - Management believes the net deferred tax asset of $18.375 million at June 30, 2024 is fully realizable, but any future adjustments could negatively impact earnings[150] Securities and Investments - The fair value of available-for-sale securities was $401.145 million at June 30, 2024, representing an 11.6% decrease from the amortized cost basis of $453.944 million[154] - The market yield on the 5-year U.S. Treasury Note increased to 4.33% at June 30, 2024, up from 3.84% at December 31, 2023[154] - Interest income from available-for-sale debt securities decreased by $321,000 in 2024, with the average balance declining to $459,070,000 from $531,981,000 in 2023[139] - Interest income from interest-bearing due from banks increased by $312,000 to $899,000 in 2024, with the average balance rising to $37,932,000 from $30,744,000 in 2023[137] Loan Portfolio Composition - Commercial loans represented 75% of the loan portfolio at June 30, 2024, while residential loans accounted for 22%[159] - Non-owner occupied commercial real estate loans for office space utilization totaled $96.642 million, or 5.1% of gross loans receivable at June 30, 2024[160] - Participation loans outstanding decreased to $36.383 million at June 30, 2024 from $38.652 million at December 31, 2023[161] - Commitments to extend credit decreased to $387.563 million at June 30, 2024 from $395.997 million at December 31, 2023[162] - Standby letters of credit increased to $57.532 million at June 30, 2024 from $19.158 million at December 31, 2023[162] - The allowance for off-balance sheet credit exposures was $683,000 at June 30, 2024, down from $690,000 at December 31, 2023[164] - Outstanding balances of loans sold and serviced through the MPF Xtra and Original programs totaled $321.136 million at June 30, 2024[167] - The total outstanding balance of repurchased loans due to noncompliance was $1.428 million at June 30, 2024, down from $1.457 million at December 31, 2023[166] - Non-owner occupied commercial real estate loans totaled $489.5 million at June 30, 2024, representing 20.2% of non-owner occupied CRE and 5.2% of total loans[170] Liquidity and Funding - The Corporation's outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh totaled $223.853 million at June 30, 2024[185] - The Corporation's highly liquid sources of available funds totaled $1.1 billion at June 30, 2024, covering 173.7% of uninsured deposits and 235.1% of total uninsured and uncollateralized deposits[189]