Citizens & Northern(US:CZNC)2022-05-05 16:00Financial Performance - Q1 2022 net income was $6,895,000, or $0.44 per diluted share, down from $8,787,000, or $0.55 per diluted share in Q1 2021, representing a decrease of 21.5%[130] - Noninterest income decreased by $959,000 in Q1 2022, with notable declines in tax credit income and net gains from sales of loans, partially offset by increases in service charges and trust revenue[134][136] - Noninterest expense increased by $1,177,000 in Q1 2022, driven by higher salaries and employee benefits, which rose by $1,712,000 due to merit-based increases and expansion efforts[136] - The income tax provision for Q1 2022 was $1,483,000, or 17.7% of pre-tax income, down from $2,110,000, or 19.4% of pre-tax income in Q1 2021[141] - Total noninterest expense rose to $16,886,000, an increase of $1,177,000, or 7.5%, from the first quarter of 2021[172] Interest Income and Expense - Net interest income for Q1 2022 was $20,332,000, an increase of $249,000 (1.2%) compared to Q1 2021, with a net interest margin of 3.86%, down from 4.00% in Q1 2021[130][148] - Interest income totaled $22,075,000 in 2022, an increase of $48,000 from 2021[150] - Interest expense decreased by $230,000 to $1,441,000 in 2022 from $1,671,000 in 2021[157] - The average yield on earning assets decreased to 4.13% in Q1 2022, down 0.20% from Q1 2021, while the average rate on interest-bearing liabilities was 0.40%, a decrease of 0.07%[148] - Net interest income increased by $278,000 to $20,634,000 in 2022 from $20,356,000 in 2021[165] Loans and Deposits - Average total deposits increased by $100.6 million (5.5%) in Q1 2022, while average outstanding loans decreased by $86.7 million, including a reduction in average PPP loans of $119.7 million[130] - Average outstanding loans receivable decreased by $86,725,000 (5.3%) to $1,547,861,000 in 2022 from $1,634,586,000 in 2021[152] - Total loans receivable stood at $1,538,190,000, a slight decrease from $1,564,849,000 in the previous year[215] - Total commercial loans amounted to $960,143,000 as of March 31, 2022, compared to $978,371,000 in the previous year[195] - The total outstanding balance of loans repurchased due to noncompliance was $1,557,000 as of March 31, 2022, slightly down from $1,571,000 at December 31, 2021[190] Loan Loss Provisions - The provision for loan losses was $891,000 in Q1 2022, significantly higher than $259,000 in Q1 2021, reflecting an increase in the collectively determined portion of the allowance[131][141] - The allowance for loan losses increased to $14,271,000 at March 31, 2022, from $13,537,000 at the end of the previous year[213] - Total provision for loan losses increased to $891,000 for the three months ended March 31, 2022, compared to $259,000 for the same period in 2021[212] - The allowance for loan losses as a percentage of total loans was 0.93% as of March 31, 2022, compared to 0.87% in the previous year, reflecting an increase in the reserve[215] - The provision for loan losses for the commercial segment was $779,000 for the three months ended March 31, 2022, compared to $242,000 for the same period in 2021[201] Capital and Liquidity - As of March 31, 2022, C&N Bank's total capital to risk-weighted assets ratio was 16.26%, exceeding the minimum requirement of 8%[227] - The Corporation's Tier 1 capital to risk-weighted assets ratio was 15.29% as of March 31, 2022, above the minimum requirement of 6%[227] - The common equity tier 1 capital to risk-weighted assets ratio for C&N Bank was 15.29% at March 31, 2022, surpassing the minimum requirement of 4.5%[227] - The Corporation's liquidity position is considered adequate to meet both short-term and long-term funding obligations[222] - The Corporation's cash position was bolstered by growth in deposits and loan repayments, outpacing loan originations and other cash uses[217] Market Conditions and Economic Indicators - The annual inflation rate for the 12-month period ended March 31, 2022, was 8.5%, the highest increase since 1981[232] - The Federal Reserve raised the fed funds target rate to 0.50% in March 2022, indicating ongoing increases are anticipated[234] - The market yield on 5-Year U.S. Treasury Obligations was 2.42% as of March 31, 2022, compared to 1.26% at December 31, 2021, indicating a significant increase in interest rates[181] - The Corporation's accumulated other comprehensive loss related to available-for-sale debt securities was $20,492,000 as of March 31, 2022, compared to a gain of $4,809,000 at December 31, 2021[231] - The minimum total capital ratio requirement is 8%, with a conservation buffer requirement of 10.5%[230] Stock and Shareholder Returns - The Corporation repurchased 129,867 shares of common stock for a total cost of $3,227,000 in Q1 2022, with a cumulative repurchase of 428,926 shares costing $10,639,000[227] - Future dividend payments and stock repurchases will depend on maintaining a strong financial condition and regulatory requirements[228]