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Citizens & Northern(CZNC) - 2024 Q2 - Quarterly Report
CZNCCitizens & Northern(CZNC)2024-08-07 14:47

Net Income and Earnings - Second quarter 2024 net income was 6,113,000,or6,113,000, or 0.40 per diluted share, compared to 6,043,000,or6,043,000, 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,or11,419,000, or 0.74 per diluted share, compared to 12,296,000,or12,296,000, 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,adecreaseof19,445,000, 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,adecreaseof38,486,000, 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(4.6954,000 (4.6%) to 19,647,000 in Q2 2024 compared to 20,601,000inQ22023[128]−Fullytaxableequivalentnetinterestincomedecreasedby20,601,000 in Q2 2023[128] - Fully taxable equivalent net interest income decreased by 2,768,000 (6.6%) to 38,883,000in2024comparedto2023,drivenbya38,883,000 in 2024 compared to 2023, driven by a 10,169,000 increase in interest expense and a 7,401,000increaseininterestincome[135]−NetInterestMargindecreasedto3.307,401,000 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 1.236millionincreaseinvolumeanda1.236 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,adecreaseof565,000, a decrease of 247,000 compared to 812,000inQ22023,withtheallowanceforcreditlossesat1.08812,000 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 1,059,000fromthesameperiodin2023,withnetcharge−offstotaling1,059,000 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 565,000forQ22024,adecreaseof565,000 for Q2 2024, a decrease of 247,000 compared to 812,000inQ22023[172]−Allowanceforcreditlosses(ACL)asapercentageofgrossloansreceivableincreasedto1.08812,000 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 743,000atDecember31,2023,primarilyduetotwoborrowers[173]−ACLoncollectivelyevaluatedcommercialloansincreasedby743,000 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 652,000fromDecember31,2023toJune30,2024[174]−Theallowanceforcreditlossesonloansincreasedto652,000 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 19.056millionattheendofJune2023[178]−Thetotalallowanceforcreditlossesonloanswas19.056 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 11.684million[179]NoninterestIncome−NoninterestincomeinQ22024increasedby11.684 million[179] Noninterest Income - Noninterest income in Q2 2024 increased by 1,220,000 to 7,854,000,drivenbyhighertrustrevenue,brokerageandinsurancerevenue,andnetgainsfromloansales[112]−NoninterestincomeforthesixmonthsendedJune30,2024increasedby7,854,000, 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,drivenbyhigherearningsfromlifeinsurance,trustrevenue,andbrokerageandinsurancerevenue[115]−Trustrevenueincreasedby14,529,000, driven by higher earnings from life insurance, trust revenue, and brokerage and insurance revenue[115] - Trust revenue increased by 210,000 (11.6%) to 2,014,000inQ22024comparedto2,014,000 in Q2 2024 compared to 1,804,000 in Q2 2023[121] - Brokerage and insurance revenue grew by 162,000(44.4162,000 (44.4%) to 527,000 in Q2 2024 from 365,000inQ22023[121]−Netgainsfromsalesofloanssurgedby365,000 in Q2 2023[121] - Net gains from sales of loans surged by 96,000 (69.1%) to 235,000inQ22024comparedto235,000 in Q2 2024 compared to 139,000 in Q2 2023[121] - Total noninterest income rose by 1,220,000(18.41,220,000 (18.4%) to 7,854,000 in Q2 2024 from 6,634,000inQ22023[121]NoninterestExpense−NoninterestexpenseinQ22024increasedby6,634,000 in Q2 2023[121] Noninterest Expense - Noninterest expense in Q2 2024 increased by 533,000 to 19,255,000,withsalariesandemployeebenefitsexpenserisingby19,255,000, 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 250,000to250,000 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(11.63,278,000 (11.6%) to 31,528,000 in Q2 2024 from 28,250,000inQ22023[129]−Interestexpenseondepositsincreasedby28,250,000 in Q2 2023[129] - Interest expense on deposits increased by 4,215,000 to 11,881,000inQ22024from11,881,000 in Q2 2024 from 7,649,000 in Q2 2023[133] - Interest expense on long-term borrowings increased by 799,000to799,000 to 1,855,000 in Q2 2024 from 1,056,000inQ22023[134]−Interestincomefromloansreceivableincreasedby1,056,000 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 9,876,000in2024,withtheaveragerateoninterest−bearingdepositsrisingto2.419,876,000 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 3,311,000in2024,withtheaveragebalancerisingto3,311,000 in 2024, with the average balance rising to 159,063,000 from 95,899,000in2023[141]−TotalinterestincomeforthesixmonthsendedJune30,2024increasedby95,899,000 in 2023[141] - Total interest income for the six months ended June 30, 2024 increased by 7.401 million, with a 2.778millionincreaseinvolumeanda2.778 million increase in volume and a 4.623 million increase in rate changes[147] - Total interest-bearing deposits increased by 9.876millionforthesixmonthsendedJune30,2024,witha9.876 million for the six months ended June 30, 2024, with a 1.649 million increase in volume and an 8.227millionincreaseinratechanges[147]LoansandDeposits−Averageoutstandingloansreceivablegrewby8.227 million increase in rate changes[147] Loans and Deposits - Average outstanding loans receivable grew by 95,535,000 (5.3%) to 1,883,386,000inQ22024from1,883,386,000 in Q2 2024 from 1,787,851,000 in Q2 2023[129] - Average total deposits rose by 68,115,000(3.568,115,000 (3.5%) to 2,016,520,000 in Q2 2024 from 1,948,405,000inQ22023[133]−Averageoutstandingloansreceivableincreasedby1,948,405,000 in Q2 2023[133] - Average outstanding loans receivable increased by 114,288,000 (6.5%) to 1,871,316,000in2024,drivenbygrowthincommercialrealestateandothercommercialloans[136]−Averagetotaldepositsincreasedby1,871,316,000 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 2,008,899,000in2024,withbrokereddepositsaveraging2,008,899,000 in 2024, with brokered deposits averaging 76,315,000 at a 5.21% interest rate[140] - Loans receivable grew to 1,883,386KinQ22024,upfrom1,883,386K 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 1,522,598KinQ22024,withacostoffundsincreasingto2.461,522,598K 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 1,792,556KinQ22024,upfrom1,792,556K 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 457,885KinQ22024,withacostoffundsincreasingto3.96457,885K 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 2,466,317KinQ22023[145]−Totalloansincreasedto2,466,317K in Q2 2023[145] - Total loans increased to 1,893.2 million at June 30, 2024, up from 1,848.1millionatJune30,2023,and1,848.1 million at June 30, 2023, and 1,740.0 million at December 31, 2023[169] - Deposits increased by 44.503million(2.244.503 million (2.2%) to 2.059 billion at June 30, 2024, compared to December 31, 2023[187] - Estimated uninsured deposits totaled 605.8million(29.2605.8 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 19.8millionatJune30,2024,upfrom19.8 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,or0.02352,000, 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 3.2million[175]−Thecompanycontinuestocloselymonitorcommercialloanrelationshipsforcreditlossesandwilladjustestimatesoflossandnonaccrualstatusasappropriate[177]−Netcharge−offsasapercentageofaverageloansdecreasedto0.023.2 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, 310,000lowerthanthesameperiodin2023,duetolowerpre−taxincome[148]−TheeffectivetaxrateforthesixmonthsendedJune30,2024was18.1310,000 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 17.441millionatDecember31,2023[149]−Unrealizedholdinglossesonsecuritiescontributed17.441 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 10.335millionatDecember31,2023[149]−Totaldeferredtaxliabilitiesdecreasedto10.335 million at December 31, 2023[149] - Total deferred tax liabilities decreased to 2.650 million at June 30, 2024 from 2.784millionatDecember31,2023[149]−Managementbelievesthenetdeferredtaxassetof2.784 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 401.145millionatJune30,2024,representingan11.6401.145 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 321,000in2024,withtheaveragebalancedecliningto321,000 in 2024, with the average balance declining to 459,070,000 from 531,981,000in2023[139]−Interestincomefrominterest−bearingduefrombanksincreasedby531,981,000 in 2023[139] - Interest income from interest-bearing due from banks increased by 312,000 to 899,000in2024,withtheaveragebalancerisingto899,000 in 2024, with the average balance rising to 37,932,000 from 30,744,000in2023[137]LoanPortfolioComposition−Commercialloansrepresented7530,744,000 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 36.383millionatJune30,2024from36.383 million at June 30, 2024 from 38.652 million at December 31, 2023[161] - Commitments to extend credit decreased to 387.563millionatJune30,2024from387.563 million at June 30, 2024 from 395.997 million at December 31, 2023[162] - Standby letters of credit increased to 57.532millionatJune30,2024from57.532 million at June 30, 2024 from 19.158 million at December 31, 2023[162] - The allowance for off-balance sheet credit exposures was 683,000atJune30,2024,downfrom683,000 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 321.136millionatJune30,2024[167]−Thetotaloutstandingbalanceofrepurchasedloansduetononcompliancewas321.136 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 1.457millionatDecember31,2023[166]−Non−owneroccupiedcommercialrealestateloanstotaled1.457 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 223.853millionatJune30,2024[185]−TheCorporation′shighlyliquidsourcesofavailablefundstotaled223.853 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]