Citizens & Northern(US:CZNC)2025-07-24 20:09Condensed Consolidated Financial Statements This section presents the company's consolidated earnings and balance sheet data, highlighting key financial performance and position changes over recent periods Condensed, Consolidated Earnings Information The company reported a slight increase in net income for Q2 2025 compared to Q2 2024, while net income for the six months ended June 30, 2025, showed an 8.68% increase year-over-year. Net interest income grew, but was partially offset by a significant increase in the provision for credit losses | Metric | 2nd Quarter 2025 ($, Thousands) | 2nd Quarter 2024 ($, Thousands) | $ Incr. (Decr.) | % Incr. (Decr.) | | :----------------------------------- | :------------------------------ | :------------------------------ | :-------------- | :-------------- | | Net Interest Income | 21,142 | 19,445 | 1,697 | 8.73 % | | Provision for Credit Losses | 2,354 | 565 | 1,789 | 316.64 % | | Net Income | 6,117 | 6,113 | 4 | 0.07 % | | Net Income Attributable to Common Shares | 6,068 | 6,066 | 2 | 0.03 % | | Net Income - Basic and Diluted (Per Share) | 0.40 | 0.40 | 0.00 | 0.00 % | | Dividends Per Share | 0.28 | 0.28 | 0.00 | 0.00 % | | Metric | Six Months Ended June 30, 2025 ($, Thousands) | Six Months Ended June 30, 2024 ($, Thousands) | $ Incr. (Decr.) | % Incr. (Decr.) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------- | :-------------- | | Net Interest Income | 41,117 | 38,486 | 2,631 | 6.84 % | | Provision for Credit Losses | 2,590 | 1,519 | 1,071 | 70.51 % | | Net Income | 12,410 | 11,419 | 991 | 8.68 % | | Net Income Attributable to Common Shares | 12,310 | 11,333 | 977 | 8.62 % | | Net Income - Basic and Diluted (Per Share) | 0.80 | 0.74 | 0.06 | 8.11 % | | Dividends Per Share | 0.56 | 0.56 | 0.00 | 0.00 % | Condensed, Consolidated Balance Sheet Data Total assets increased modestly by 0.68% year-over-year, driven primarily by growth in loans and deposits. Borrowed funds decreased significantly, while stockholders' equity saw a healthy increase | Metric | June 30, 2025 ($, Thousands) | June 30, 2024 ($, Thousands) | $ Incr. (Decr.) | % Incr. (Decr.) | | :----------------------------------- | :--------------------------- | :--------------------------- | :-------------- | :-------------- | | TOTAL ASSETS | 2,610,875 | 2,593,122 | 17,753 | 0.68 % | | Loans, Net | 1,897,559 | 1,872,825 | 24,734 | 1.32 % | | Deposits | 2,109,776 | 2,059,309 | 50,467 | 2.45 % | | Borrowed Funds | 144,427 | 202,523 | (58,096) | (28.69)% | | TOTAL LIABILITIES | 2,324,518 | 2,329,901 | (5,383) | (0.23)% | | TOTAL STOCKHOLDERS' EQUITY | 286,357 | 263,221 | 23,136 | 8.79 % | | Net Unrealized Losses on Available-for-sale Debt Securities | (31,017) | (41,710) | 10,693 | (25.64)% | Financial Highlights and Key Ratios This section provides an overview of the company's key financial performance metrics, balance sheet highlights, and critical safety and soundness ratios Earnings Performance Net income for the three months ended June 30, 2025, remained stable, while the six-month period saw an 8.68% increase. Return on average assets and equity showed mixed trends, with a slight decline for the quarter but an improvement for the six-month period | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Increase (Decrease) | | :----------------------------------- | :------------------------------- | :------------------------------- | :-------------------- | | Net Income ($, Thousands) | 6,117 | 6,113 | 0.07 % | | Return on Average Assets (Annualized) | 0.94 % | 0.96 % | (2.08)% | | Return on Average Equity (Annualized) | 8.66 % | 9.46 % | (8.46)% | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Increase (Decrease) | | :----------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Net Income ($, Thousands) | 12,410 | 11,419 | 8.68 % | | Return on Average Assets (Annualized) | 0.96 % | 0.90 % | 6.67 % | | Return on Average Equity (Annualized) | 8.85 % | 8.79 % | 0.68 % | Pre-Tax, Pre-Provision Net Revenue (PPNR) (Non-GAAP) Pre-Tax, Pre-Provision Net Revenue (PPNR) showed strong growth for both the three-month and six-month periods, indicating improved underlying operational performance before credit loss provisions and taxes | Metric | Three Months Ended June 30, 2025 ($, Thousands) | Three Months Ended June 30, 2024 ($, Thousands) | % Increase (Decrease) | | :----------------------------------- | :-------------------------------------------- | :-------------------------------------------- | :-------------------- | | PPNR | 10,273 | 8,246 | 24.58 % | | PPNR (Annualized) as a % of Average Assets | 1.59 % | 1.29 % | 23.26 % | | PPNR (Annualized) as a % of Average Equity | 14.54 % | 12.76 % | 13.95 % | | Metric | Six Months Ended June 30, 2025 ($, Thousands) | Six Months Ended June 30, 2024 ($, Thousands) | % Increase (Decrease) | | :----------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | | PPNR | 18,424 | 15,853 | 16.22 % | | PPNR (Annualized) as a % of Average Assets | 1.43 % | 1.25 % | 14.40 % | | PPNR (Annualized) as a % of Average Equity | 13.14 % | 12.20 % | 7.70 % | Balance Sheet Highlights The balance sheet showed modest growth in total assets, loans, and deposits. The allowance for credit losses increased, reflecting a more conservative approach to potential loan defaults | Metric | June 30, 2025 | June 30, 2024 | % Increase (Decrease) | | :----------------------------------- | :--------------------------- | :--------------------------- | :-------------------- | | Total Assets ($, Thousands) | 2,610,875 | 2,593,122 | 0.68 % | | Available-for-Sale Debt Securities ($, Thousands) | 406,052 | 401,145 | 1.22 % | | Loans, Net ($, Thousands) | 1,897,559 | 1,872,825 | 1.32 % | | Allowance for Credit Losses on Loans (%) | 21,699 | 20,382 | 6.46 % | | Deposits ($, Thousands) | 2,109,776 | 2,059,309 | 2.45 % | Stockholders' Value (Per Common Share) Key per-share metrics showed positive trends, with basic and diluted net income per share increasing by 8.11% and common book value growing by 7.83%. Tangible common book value also saw a significant increase | Metric | June 30, 2025 | June 30, 2024 | % Increase (Decrease) | | :----------------------------------- | :------------ | :------------ | :-------------------- | | Net Income - Basic and Diluted ($) | $ 0.80 | $ 0.74 | 8.11 % | | Dividends ($) | $ 0.56 | $ 0.56 | 0.00 % | | Common Book Value ($) | $ 18.46 | $ 17.12 | 7.83 % | | Tangible Common Book Value (Non-GAAP) ($) | $ 14.95 | $ 13.56 | 10.25 % | | Market Value (Last Trade) ($) | $ 18.94 | $ 17.89 | 5.87 % | | Common Shares Outstanding, End of Period (Shares) | 15,514,943 | 15,375,982 | 0.90 % | Safety and Soundness Ratios Capital ratios improved across the board, indicating enhanced safety and soundness. However, nonperforming assets as a percentage of total assets increased, suggesting a slight deterioration in asset quality | Metric | June 30, 2025 | June 30, 2024 | % Increase (Decrease) | | :----------------------------------- | :------------ | :------------ | :-------------------- | | Tangible Common Equity / Tangible Assets (%) | 9.07 % | 8.21 % | 10.48 % | | Nonperforming Assets / Total Assets (%) | 0.98 % | 0.76 % | 28.95 % | | Allowance for Credit Losses / Total Loans (%) | 1.13 % | 1.08 % | 4.63 % | | Total Risk Based Capital Ratio (%) | 15.98 % | 15.50 % | 3.10 % | | Tier 1 Risk Based Capital Ratio (%) | 13.54 % | 13.10 % | 3.36 % | | Common Equity Tier 1 Risk Based Capital Ratio (%) | 13.54 % | 13.10 % | 3.36 % | | Leverage Ratio (%) | 10.22 % | 9.85 % | 3.76 % | Efficiency Ratio (Non-GAAP) The efficiency ratio improved by 4.00% for the six months ended June 30, 2025, indicating better cost management relative to revenue generation | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Increase (Decrease) | | :----------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | | Efficiency Ratio (%) | 67.51 % | 70.32 % | (4.00)% | Quarterly Financial Performance This section details the company's financial performance and position on a quarterly basis, showing trends in income, expenses, assets, and liabilities Quarterly Condensed, Consolidated Income Statement Information Net income showed some quarterly fluctuations, with Q2 2025 being stable compared to Q2 2024 but lower than Q1 2025 and Q4 2024. The provision for credit losses significantly increased in Q2 2025 | Metric ($, Thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :----------------------------------- | :------------ | :------------- | :---------------- | :----------------- | :------------ | | Interest and dividend income | 32,454 | 31,709 | 33,329 | 33,087 | 31,326 | | Interest expense | 11,312 | 11,734 | 12,856 | 12,931 | 11,881 | | Net interest income | 21,142 | 19,975 | 20,473 | 20,156 | 19,445 | | Provision (credit) for credit losses | 2,354 | 236 | (531) | 1,207 | 565 | | Noninterest income | 8,142 | 7,008 | 7,547 | 7,133 | 7,854 | | Noninterest expense | 19,398 | 19,043 | 18,430 | 18,269 | 19,255 | | Net income | 6,117 | 6,293 | 8,174 | 6,365 | 6,113 | | Basic and diluted earnings per common share | 0.40 | 0.41 | 0.53 | 0.41 | 0.40 | Quarterly Condensed, Consolidated Balance Sheet Information Total assets remained relatively stable across the quarters. Deposits showed a gradual increase, while borrowed funds consistently decreased. Stockholders' equity demonstrated a steady upward trend | Metric ($, Thousands) | June 30, 2025 | March 31, 2025 | Dec. 31, 2024 | Sept. 30, 2024 | June 30, 2024 | | :----------------------------------- | :------------ | :------------- | :------------ | :------------- | :------------ | | TOTAL ASSETS | 2,610,875 | 2,609,228 | 2,610,653 | 2,670,822 | 2,593,122 | | Loans, Net | 1,897,559 | 1,878,260 | 1,875,813 | 1,872,322 | 1,872,825 | | Deposits | 2,109,776 | 2,102,141 | 2,093,909 | 2,135,879 | 2,059,309 | | Borrowed Funds | 144,427 | 154,994 | 167,939 | 186,043 | 202,523 | | TOTAL LIABILITIES | 2,324,518 | 2,327,397 | 2,335,369 | 2,393,517 | 2,329,901 | | TOTAL STOCKHOLDERS' EQUITY | 286,357 | 281,831 | 275,284 | 277,305 | 263,221 | | Brokered Deposits (Included in Total Deposits) | 5,005 | 22,022 | 24,021 | 45,051 | 59,501 | Asset Portfolio and Quality This section analyzes the composition and quality of the company's asset portfolio, including debt securities, loan types, and credit loss provisions Available-for-Sale Debt Securities The fair value of available-for-sale debt securities remained relatively stable across the quarters, with a slight increase from June 30, 2024, to June 30, 2025. Unrealized losses on these securities decreased significantly over the year | Metric ($, Thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | June 30, 2024 | | :----------------------------------- | :------------ | :------------- | :---------------- | :------------ | | Total Available-for-Sale Debt Securities (Amortized Cost) | 445,817 | 450,837 | 449,923 | 453,944 | | Total Available-for-Sale Debt Securities (Fair Value) | 406,052 | 408,463 | 402,380 | 401,145 | Summary of Loans by Type The loan portfolio showed a slight increase in total gross loans year-over-year. Commercial real estate (non-owner occupied) and consumer loans experienced growth, while residential mortgage loans saw a decrease | Loan Type ($, Thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | June 30, 2024 | | :----------------------------------- | :------------ | :------------- | :---------------- | :------------ | | Commercial real estate - non-owner occupied | 757,961 | 733,704 | 739,565 | 723,964 | | Commercial real estate - owner occupied | 261,157 | 260,248 | 261,071 | 267,169 | | All other commercial loans | 430,499 | 436,179 | 423,277 | 431,106 | | Residential mortgage loans | 398,496 | 402,248 | 408,009 | 409,824 | | Consumer loans | 71,145 | 66,053 | 63,926 | 61,144 | | Total Gross Loans | 1,919,258 | 1,898,432 | 1,895,848 | 1,893,207 | | Less: allowance for credit losses on loans | (21,699) | (20,172) | (20,035) | (20,382) | | Loans, net | 1,897,559 | 1,878,260 | 1,875,813 | 1,872,825 | Non-Owner Occupied Commercial Real Estate Within non-owner occupied commercial real estate, office and retail sectors represent the largest portions of the portfolio, with office loans accounting for 24.2% of this category and 6.1% of total loans | Loan Type ($, Thousands) | June 30, 2025 ($, Thousands) | % of Non-owner Occupied CRE | % of Total Loans | | :----------------------------------- | :------------ | :-------------------------- | :--------------- | | Office | 118,007 | 24.2 % | 6.1 % | | Retail | 89,485 | 18.3 % | 4.7 % | | Industrial | 83,334 | 17.1 % | 4.3 % | | Hotels | 69,163 | 14.2 % | 3.6 % | | Mixed Use | 60,177 | 12.3 % | 3.1 % | | Other | 67,984 | 13.9 % | 3.5 % | | Total Non-owner Occupied CRE Loans | 488,150 | | | Past Due Loans and Nonperforming Assets Nonperforming assets and loans have shown an increasing trend over the past year, with nonperforming assets as a percentage of total assets rising from 0.76% to 0.98% | Metric ($, Thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | June 30, 2024 | | :----------------------------------- | :------------ | :------------- | :---------------- | :------------ | | Total nonaccrual loans | 25,190 | 24,106 | 23,842 | 19,579 | | Total nonperforming loans | 25,276 | 24,130 | 23,961 | 19,599 | | Total nonperforming assets | 25,678 | 24,329 | 24,142 | 19,780 | | Total nonperforming loans as a % of total loans | 1.32 % | 1.27 % | 1.26 % | 1.04 % | | Total nonperforming assets as a % of assets | 0.98 % | 0.93 % | 0.92 % | 0.76 % | | Allowance for credit losses as a % of total loans | 1.13 % | 1.06 % | 1.06 % | 1.08 % | Analysis of the Allowance for Credit Losses on Loans The allowance for credit losses on loans increased to $21.7 million by June 30, 2025, driven by a higher provision for credit losses, despite an increase in net charge-offs | Metric ($, Thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Balance, beginning of period | 20,172 | 20,023 | 20,035 | 19,208 | | Net charge-offs | (548) | (207) | (639) | (352) | | Provision for credit losses on loans | 2,075 | 566 | 2,303 | 1,526 | | Balance, end of period | 21,699 | 20,382 | 21,699 | 20,382 | | Net charge-offs as a % of average gross loans (annualized) | 0.12 % | 0.04 % | 0.07 % | 0.04 % | Analysis of the Provision for Credit Losses The total provision for credit losses significantly increased for both the three-month and six-month periods ending June 30, 2025, primarily due to higher provisions for loans receivable | Metric ($, Thousands) | 3 Months Ended June 30, 2025 ($, Thousands) | 3 Months Ended June 30, 2024 ($, Thousands) | 6 Months Ended June 30, 2025 ($, Thousands) | 6 Months Ended June 30, 2024 ($, Thousands) | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Loans receivable | 2,075 | 566 | 2,303 | 1,526 | | Off-balance sheet exposures | 279 | (1) | 287 | (7) | | Total provision for credit losses | 2,354 | 565 | 2,590 | 1,519 | Interest Income and Expense Analysis This section provides a detailed analysis of the company's interest income and expenses, including net interest income and profitability metrics Comparison of Interest Income and Expense Total interest income increased for both the three-month and six-month periods, primarily driven by higher interest from loans receivable. Total interest expense decreased for the three-month period but remained stable for the six-month period, leading to an increase in net interest income | Metric ($, Thousands) | 3 Months Ended June 30, 2025 ($, Thousands) | 3 Months Ended June 30, 2024 ($, Thousands) | 6 Months Ended June 30, 2025 ($, Thousands) | 6 Months Ended June 30, 2024 ($, Thousands) | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Interest Income | 32,674 | 31,528 | 64,594 | 62,059 | | Total Interest Expense | 11,312 | 11,881 | 23,046 | 23,176 | | Net Interest Income (GAAP) | 21,142 | 19,445 | 41,117 | 38,486 | | Net Interest Income (Fully Taxable-Equivalent Basis) | 21,362 | 19,647 | 41,548 | 38,883 | Analysis of Average Daily Balances and Rates Average earning assets increased, primarily due to growth in loans receivable. The interest rate spread and net interest income to earning assets both improved for the three-month and six-month periods, indicating better profitability from interest-earning activities | Metric | 3 Months Ended 6/30/2025 | 3 Months Ended 6/30/2024 | 6 Months Ended 6/30/2025 | 6 Months Ended 6/30/2024 | | :----------------------------------- | :----------------------- | :----------------------- | :----------------------- | :----------------------- | | Total Earning Assets ($, Thousands) | 2,432,500 | 2,385,593 | 2,426,188 | 2,370,098 | | Total Interest-bearing Liabilities ($, Thousands) | 1,782,056 | 1,765,318 | 1,785,073 | 1,756,208 | | Interest Rate Spread (%) | 2.84 % | 2.61 % | 2.77 % | 2.62 % | | Net Interest Income/Earning Assets (%) | 3.52 % | 3.31 % | 3.45 % | 3.30 % | | Cost of Interest-bearing deposits (%) | 2.34 % | 2.46 % | 2.40 % | 2.41 % | | Cost of Total borrowed funds (%) | 4.27 % | 4.25 % | 4.27 % | 4.26 % | Noninterest Income and Expense Analysis This section examines the company's noninterest income and expense components, highlighting trends in operational revenue and costs Comparison of Noninterest Income Total noninterest income increased for both the three-month and six-month periods, primarily driven by growth in 'Other noninterest income' and interchange revenue from debit card transactions | Metric ($, Thousands) | 3 Months Ended June 30, 2025 ($, Thousands) | 3 Months Ended June 30, 2024 ($, Thousands) | 6 Months Ended June 30, 2025 ($, Thousands) | 6 Months Ended June 30, 2024 ($, Thousands) | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total noninterest income | 8,142 | 7,854 | 15,150 | 14,529 | | Trust revenue | 1,967 | 2,014 | 4,069 | 3,911 | | Brokerage and insurance revenue | 554 | 527 | 1,052 | 1,066 | | Service charges on deposit accounts | 1,422 | 1,472 | 2,862 | 2,790 | | Interchange revenue from debit card transactions | 1,218 | 1,089 | 2,254 | 2,102 | | Net gains from sales of loans | 312 | 235 | 517 | 426 | | Other noninterest income | 2,030 | 1,943 | 3,162 | 2,960 | Comparison of Noninterest Expense Total noninterest expense remained relatively stable for the three-month period and saw a modest increase for the six-month period. Salaries and employee benefits continued to be the largest component, while merger-related expenses were incurred in Q2 2025 | Metric ($, Thousands) | 3 Months Ended June 30, 2025 ($, Thousands) | 3 Months Ended June 30, 2024 ($, Thousands) | 6 Months Ended June 30, 2025 ($, Thousands) | 6 Months Ended June 30, 2024 ($, Thousands) | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total noninterest expense | 19,398 | 19,255 | 38,441 | 37,559 | | Salaries and employee benefits | 11,067 | 11,023 | 22,826 | 22,585 | | Net occupancy and equipment expense | 1,403 | 1,333 | 2,862 | 2,783 | | Data processing and telecommunications expenses | 1,981 | 2,003 | 4,052 | 3,995 | | Other noninterest expense | 3,401 | 3,437 | 5,755 | 5,299 | | Merger-related expenses | 167 | 0 | 167 | 0 | Liquidity Information This section details the company's liquidity position, including available credit facilities and the coverage of uninsured deposits Available Credit Facilities and Uninsured Deposits The company maintains substantial available credit facilities, totaling over $1 billion, providing robust liquidity. While uninsured deposits increased, highly liquid available funding significantly exceeded uninsured and uncollateralized deposits, indicating a strong liquidity position | Metric ($, Thousands) | June 30, 2025 | March 31, 2025 | June 30, 2024 | | :----------------------------------- | :------------ | :------------- | :------------ | | Total credit facilities | 1,038,164 | 1,041,401 | 1,037,459 | | Total Deposits - C&N Bank | 2,127,673 | 2,120,521 | 2,074,806 | | Estimated Total Uninsured Deposits | 649,184 | 621,542 | 605,765 | | Uninsured and Uncollateralized Deposits | 515,563 | 483,364 | 447,497 | | Uninsured and Uncollateralized Deposits as a % of Total Deposits | 24.2 % | 22.8 % | 21.6 % | | Highly Liquid Available Funding | 1,140,248 | 1,135,357 | 1,051,981 | | Highly Liquid Available Funding as a % of Uninsured Deposits | 175.6 % | 182.7 % | 173.7 % | | Highly Liquid Available Funding as a % of Uninsured and Uncollateralized Deposits | 221.2 % | 234.9 % | 235.1 % |