Citizens & Northern(CZNC) - 2025 Q3 - Quarterly Report

Financial Performance - Net income for Q3 2025 was $6,551,000, or $0.42 per diluted share, compared to $6,365,000, or $0.41 per diluted share in Q3 2024, reflecting a 2.9% increase in net income year-over-year [132]. - Net income for the three months ended September 30, 2025, was $6,551,000, up from $6,365,000 in the same period of 2024 [140]. - For the nine months ended September 30, 2025, net income was $18,961,000, or $1.22 per diluted share, compared to $17,784,000, or $1.16 per diluted share for the same period in 2024 [134]. Interest Income and Expenses - Net interest income for Q3 2025 was $22,263,000, an increase of $2,107,000 from Q3 2024, with a net interest margin rising to 3.62% from 3.29% [133]. - Interest income totaled $33,868,000 in 2025, an increase of $576,000 (1.7%) from 2024 [149]. - Interest expense decreased by $1,544,000 to $11,387,000 in 2025 from $12,931,000 in 2024, with interest expense on deposits decreasing by $956,000 [154]. - The average yield on earning assets was 5.40% in 2025, which is 0.09% higher than in 2024, while the average rate on interest-bearing liabilities decreased to 2.57% [157]. Credit Losses and Allowances - The provision for credit losses was $2,163,000 in Q3 2025, up from $1,207,000 in Q3 2024, with net charge-offs totaling $94,000, or 0.02% of average loans receivable [133]. - The allowance for credit losses as a percentage of gross loans receivable increased to 1.21% at September 30, 2025, up from 1.08% at September 30, 2024 [133]. - The allowance for credit losses (ACL) was $23,474,000, representing 1.21% of gross loans receivable as of September 30, 2025, up from 1.06% at December 31, 2024 [198]. - Provision for credit losses for the three months ended September 30, 2025, was $2,163,000, an increase of 79.5% from $1,207,000 in the same period of 2024 [198]. Deposits and Assets - Average total deposits increased by $41,554,000 in Q3 2025, despite a decrease in average brokered deposits of $53,846,000 [133]. - Total deposits reached $2,165,735,000 at September 30, 2025, reflecting a growth of $71,826,000 or 3.4% from $2,093,909,000 at December 31, 2024 [218]. - Total assets of Susquehanna at the time of merger were reported at $587 million, including gross loans of $400 million and total deposits of $501 million [130]. Merger and Related Expenses - The total purchase consideration for the merger with Susquehanna was valued at approximately $44.6 million based on the stock price on October 1, 2025 [130]. - Management estimates total pre-tax merger-related expenses associated with the Susquehanna transaction will be approximately $7.5 million, primarily incurred in Q4 2025 [131]. Nonperforming Assets - Total nonperforming assets increased to $27,189,000, up from $24,142,000 at December 31, 2024, reflecting a rise of 12.6% [203]. - Nonperforming loans totaled $26,787,000 as of September 30, 2025, compared to $23,961,000 at December 31, 2024, indicating an increase of 11.5% [211]. Capital Ratios and Stockholder Equity - Total stockholders' equity increased to $287,860,000 as of September 30, 2025, from $268,387,000 in 2024 [168]. - The Corporation's capital ratios as of September 30, 2025, exceeded the Board policy threshold levels, indicating strong capital adequacy [225]. - As of September 30, 2025, the consolidated total capital to risk-weighted assets ratio is 16.01%, exceeding the minimum requirement of 11% [226]. Interest Rate Risk Management - The Corporation's interest rate risk management includes simulations for potential changes in net interest income and economic value of equity [235]. - The modeling results indicate that net interest income and economic value of equity are projected to decrease under both rising and falling interest rate scenarios [239]. - A hypothetical increase of 400 basis points in interest rates would result in a net interest income of $78,241, reflecting a decrease of 16.4% [242]. Future Outlook - Future dividend payments and stock repurchases will depend on maintaining a strong financial condition and regulatory requirements [230]. - The economic value of equity at September 30, 2025, is estimated at $493,628,000, reflecting an 11.7% decrease with a +400 basis point change in interest rates [244].