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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934
April 20, 2023
Date of Report (Date of earliest event reported)
Citizens & Northern Corporation
(Exact name of registrant as specified in its charter)
Pennsylvania |
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0-16084 |
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23-2451943 |
(State or other jurisdiction |
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(Commission |
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(IRS Employer |
of incorporation) |
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File Number) |
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Ident. No.) |
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90-92 Main Street, Wellsboro, Pennsylvania |
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16901 |
(Address of principal executive offices) |
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(Zip Code) |
(570) 724-3411
Registrant’s telephone number, including area code
N/A
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol |
Name of each exchange on which |
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Common Stock, par value $1.00 per share |
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CZNC |
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Nasdaq Capital Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
ITEM 2.02. Results of Operations and Financial Condition
Citizens & Northern Corporation (the “Company”) announced unaudited, consolidated financial results for the three-month period ended March 31, 2023. On April 20, 2023, the Company issued a press release titled “C&N Declares Dividend and Announces First Quarter 2023 Unaudited Financial Results,” a copy of which is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. Supplemental, unaudited financial information is furnished as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.
ITEM 9.01. Financial Statements and Exhibits
(a) Not applicable.
(b) Not applicable.
(c) Not applicable.
(d) Exhibits.
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Exhibit 99.2: Supplemental, unaudited financial information. |
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Exhibit 104: Cover Page Interactive Data File (embedded in the cover page formatted in Inline XBRL) |
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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CITIZENS & NORTHERN CORPORATION |
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Dated: April 20, 2023 |
By: |
/s/ Mark A. Hughes |
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Mark A. Hughes |
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Treasurer and Chief Financial Officer |
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Exhibit 99.1
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Contact: Charity Frantz |
April 20, 2023 |
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570-724-0225 |
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charityf@cnbankpa.com |
C&N DECLARES DIVIDEND AND ANNOUNCES FIRST QUARTER 2023 UNAUDITED FINANCIAL RESULTS
FOR IMMEDIATE RELEASE:
Wellsboro, PA – Citizens & Northern Corporation (“C&N”) (NASDAQ: CZNC) announced its most recent dividend declaration and its unaudited, consolidated financial results for the three-month period ended March 31, 2023. C&N’s principal activity is community banking, and the largest subsidiary is Citizens & Northern Bank (the “Bank”).
First Quarter 2023 Highlights:
| ● | Net income of $6,253,000, or $0.40 diluted earnings per share. |
| ● | Total loans receivable increased $5.1 million, or 1.2% (annualized), at March 31, 2023 from December 31, 2022, and average loans receivable grew 6.3% (annualized) during the first quarter 2023 from the fourth quarter 2022. |
| ● | Total nonperforming loans of $14.1 million (0.81% of total loans) at March 31, 2023, down from $25.3 million (1.46% of total loans) at December 31, 2022. Total nonperforming assets was 0.60% of total assets at March 31, 2023, down from 1.04% at December 31, 2022. |
| ● | Total deposits were lower by $81.6 million at March 31, 2023 from December 31, 2022. Total average deposits of $1.9 billion for the first quarter 2023 were down from $2.0 billion for the fourth quarter 2022 and stable with $1.9 billion for the first quarter 2022. |
| ● | At March 31, 2023, estimated uninsured deposits totaled 31.7% of the Bank’s total deposits, including deposits collateralized by securities of 9.8% of the Bank’s total deposits. |
Dividend Declared and Unaudited Financial Information
On April 20, 2023, C&N’s Board of Directors declared a regular quarterly cash dividend of $0.28 per share. The dividend is payable on May 12, 2023 to shareholders of record as of May 1, 2023.
Highlights related to C&N’s first quarter unaudited U.S. GAAP earnings results as compared to the fourth quarter 2022 and first quarter of 2022 are presented below.
First Quarter 2023 as Compared to Fourth Quarter 2022
Net income was $6,253,000, or $0.40 per diluted share, for the first quarter 2023 as compared to $7,779,000, or $0.50 per diluted share, in the fourth quarter 2022.
| ● | Net interest income totaled $20,781,000 in the first quarter 2023, down $1,511,000 from the fourth quarter 2022. The net interest margin was 3.71% in the first quarter 2023, down from 3.89% in the fourth quarter 2022. The net interest spread decreased 0.32%, as the average rate on interest-bearing liabilities increased 0.47%, while the average yield on earning assets increased 0.15%. Sources of funds included an increase in average borrowed funds of $95,230,000 and a reduction in average available-for-sale debt securities (at amortized cost) of $20,502,000, while reductions in funds included the net impact of an increase in average loans outstanding of $26,673,000 (1.6% or 6.3% annualized) and a decrease in average deposits of $96,020,000. The reduction in average deposits resulted from several factors, including: the impact of customer funds transferred to higher-yielding investment alternatives; a $23,908,000 reduction in average noninterest-bearing demand deposits, almost exclusively related to business accounts; and seasonal reductions in municipal deposits. |
1
| ● | Effective January 1, 2023, C&N adopted Accounting Standards Update (ASU) 2016-13, Financial Instruments-Credit Losses (Topic 326), as modified by subsequent ASUs, that required change in accounting for credit losses on loans receivable from an incurred loss methodology to an expected credit loss methodology commonly referred to as “CECL.” Effective January 1, 2023, C&N recorded adjustments resulting from adopting CECL which increased the allowance for credit losses on loans $2,104,000, increased the allowance for credit losses on off-balance sheet exposures $793,000, increased loans receivable $806,000, and decreased retained earnings (stockholders’ equity) $1,652,000. The credit for credit losses (reduction in expense) was $352,000 in the first quarter 2023 as compared to the fourth quarter 2022 provision for loan losses of $2,262,000. The credit for credit losses in the first quarter 2023 resulted mainly from a reduction in the allowance related to the commercial segment of the portfolio. |
| ● | Noninterest income of $5,609,000 in the first quarter 2023 decreased $501,000 from the fourth quarter 2022 amount. Significant variances included the following: |
| Ø | Other noninterest income of $771,000 decreased $262,000 from the fourth quarter 2022, including income from interest rate swap fees on commercial loans decreasing $260,000. |
| Ø | Interchange revenue from debit card transactions of $1,007,000 decreased $91,000 from the fourth quarter 2022, reflecting decreases in transaction volume. |
| Ø | Loan servicing fees, net of $122,000 decreased $81,000, as the fair value of servicing rights decreased $83,000 in the first quarter 2023 as compared to a decrease of $2,000 in the fourth quarter 2022. |
| Ø | Brokerage and insurance revenue of $430,000 decreased $77,000 from the fourth quarter 2022, due to lower volume of new transactions. |
| Ø | Service charges on deposit accounts of $1,290,000 decreased $67,000 from the fourth quarter 2022 reflecting a customary seasonal reduction in transaction volume in the first quarter of the year. |
| Ø | Net gains from sale of loans of $74,000 increased $50,000 from the fourth quarter 2022, reflecting growth in volume of residential mortgage loans sold. |
| ● | Noninterest expense of $19,087,000 in the first quarter 2023 increased $2,500,000 from the fourth quarter 2022 amount. Significant variances included the following: |
| Ø | Salaries and employee benefits expense of $11,427,000 increased $1,292,000 from the fourth quarter 2022, including an increase in stock-based and incentive compensation expense of $1,031,000, as the fourth quarter 2022 amount was reduced based on an updated assessment of C&N’s earnings performance to that of a defined peer group. Expenses related to payroll taxes and employee benefit expenses increased $370,000, reflecting the normal pattern of such costs being highest in the beginning of the calendar year. Health care expense decreased $111,000 due to lower claims on C&N’s partially self-insured plan. |
| Ø | Other noninterest expense of $2,507,000 increased $596,000 from the fourth quarter 2022. Within this category, significant variances included the following: |
| ◾ | Other operational losses totaled $206,000 in the first quarter 2023 as compared to a credit of $64,000 (reduction in expense) in the fourth quarter 2022 resulting in an increase in expense of $270,000. In the fourth quarter 2022, there was a reduction in expense of $206,000 resulting from abatement of Trust Department tax compliance penalties for which expense was recorded in 2020 and a favorable outcome on appeal of a Trust Department state tax reporting matter for which expense was also recorded in 2020. |
2
| ◾ | In the fourth quarter 2022 there was a gain of $117,000 on other real estate properties with no comparable amount in the first quarter 2023. |
| ◾ | In the fourth quarter 2022 there was a reduction in expense related to credit losses on off balance sheet exposures related to residential mortgage loans sold of $75,000 with no comparable amount reflected in other noninterest expense in the first quarter 2023. |
| Ø | Professional fees of $937,000 increased $422,000, including $389,000 of conversion costs related to a change in C&N’s Wealth Management platform for providing brokerage and investment advisory services. |
| Ø | Data processing and telecommunications of $1,936,000 increased $192,000 from the fourth quarter 2022, including the impact of increases in software licensing and maintenance costs as well as costs related to enhancements of data management capabilities. |
| ● | The income tax provision was $1,409,000, or 18.4% of pre-tax income for the first quarter 2023, down from $1,773,000, or 18.6% of pre-tax income for the fourth quarter 2022. The decrease in income tax provision reflected the decrease in pre-tax income of $1,890,000 for the quarter. |
First Quarter 2023 as Compared to First Quarter 2022
First quarter 2023 net income was $6,253,000, or $0.40 per diluted share, as compared to $6,895,000, or $0.44 per diluted share, in the first quarter 2022. Significant variances were as follows:
| ● | First quarter 2023 net interest income of $20,781,000 was $449,000 higher than the first quarter 2022 total. The increase in net interest income was mainly driven by loan growth, as average earning assets increased $131,608,000, including an increase in average loans of $178,002,000, or 11.5%, while average interest-bearing due from banks decreased $52,478,000. Average total deposits of $1,931,126,000 were flat in the first quarter 2023 as compared to the first quarter 2022 while average borrowed funds increased $136,303,000. The net interest margin was 3.71% in the first quarter 2023, down from 3.86% in the first quarter 2022. The interest rate spread decreased 0.43%, as the average rate on interest-bearing liabilities increased 0.96%, while the average yield on earning assets increased 0.53%. Contributing to the comparatively lower margin and spread, total interest and fees on loans in the first quarter 2022 included $1,398,000 from repayments received on purchased credit impaired loans in excess of previous carrying amounts with no comparable amount in the first quarter 2023. |
| ● | The credit for credit losses (reduction in expense) was $352,000 in the first quarter 2023 as compared to the first quarter 2022 provision for loan losses of $891,000. The credit for credit losses in the first quarter 2023 resulted mainly from a reduction in the allowance related to the commercial segment of the portfolio. Within the net credit for credit losses on loans in the first quarter 2023, the provision related to specific loans was $205,000, including net charge-offs of $61,000 and an increase in specific allowances on loans of $144,000. In comparison, the first quarter 2022 provision included a net charge of $147,000 related to specific loans (net charge-offs of $157,000 offset by a net decrease in specific allowances on loans of $10,000). |
3
| ● | Noninterest income of $5,609,000 in the first quarter 2023 decreased $212,000 from the first quarter 2022 amount. Significant variances included the following: |
| Ø | Net gains from sale of loans of $74,000 decreased $308,000 from the first quarter 2022, reflecting a reduction in volume of residential mortgage loans sold. |
| Ø | Brokerage and insurance revenue of $430,000 decreased $92,000 from the first quarter 2022, due to lower volume of new transactions. |
| Ø | Loan servicing fees, net of $122,000 decreased $88,000, as the fair value of servicing rights decreased $83,000 in the first quarter 2023 as compared to an increase of $2,000 in the first quarter 2022. |
| Ø | Other noninterest income of $771,000 increased $183,000 from the first quarter 2022, including dividends on FHLB-Pittsburgh stock totaling $217,000, an increase of $100,000 from the first quarter 2022, and a gain on sale of premises and equipment of $68,000 with no comparable amount in the first quarter 2022. |
| ● | Noninterest expense of $19,087,000 in the first quarter 2023 increased $2,201,000 from the first quarter 2022 amount. Significant variances included the following: |
| Ø | Salaries and employee benefits expense of $11,427,000 increased $820,000 from the first quarter 2022, including an increase in base salaries expense of $597,000. In total, the number of full-time equivalent employees (FTEs) increased by 10 (2.5%) to 412 in the first quarter 2023 as compared to the first quarter 2022. Total cash and stock-based compensation expense increased $167,000 and health care expense increased $102,000 due to higher claims on C&N’s partially self-insured plan. |
| Ø | Other noninterest expense of $2,507,000 increased $623,000 from the first quarter 2022. Within this category, significant variances included the following: |
| ◾ | In the first quarter 2022 the allowance for SBA claim adjustments decreased, reflecting more favorable claim results than previously estimated, resulting in a reduction in expense of $242,000 with no comparable amount in the first quarter 2023. |
| ◾ | Other operational losses totaled $206,000, an increase of $82,000. |
| ◾ | Net collection expense totaled $44,000 in the first quarter 2023, an increase of $85,000 over net recoveries of $41,000 in the first quarter 2022. |
| ◾ | Advertising expense totaled $213,000 in the first quarter 2023, an increase of $77,000 reflecting expenses related to C&N’s social media strategy and brand monitoring analysis. |
| Ø | Professional fees of $937,000 increased $448,000, including $389,000 of conversion costs related to a change in C&N’s Wealth Management platform for providing brokerage and investment advisory services. |
| Ø | Data processing and telecommunications of $1,936,000 increased $313,000 from the first quarter 2022, including the impact of increases in software licensing and maintenance costs as well as costs related to enhancements of data management capabilities. |
| ● | The income tax provision was $1,409,000, or 18.4% of pre-tax income for the first quarter 2023, as compared to $1,483,000, or 17.7% of pre-tax income for the fourth quarter 2022. The decrease in income tax provision reflected the decrease in pre-tax income of $716,000. |
4
Other Information:
Changes in other unaudited financial information are as follows:
| ● | Total assets amounted to $2,429,872,000 at March 31, 2023, down from $2,454,307,000 at December 31, 2022 and up from $2,330,371,000 at March 31, 2022. |
| ● | Cash & due from banks totaled $52,212,000 at March 31, 2023, down from $55,048,000 at December 31, 2022 and $114,346,000 at March 31, 2022. The decrease in cash reflects the deployment of otherwise excess cash primarily to loans to enhance net interest income. |
| ● | The amortized cost of available-for-sale debt securities decreased to $527,589,000 at March 31, 2023 from $561,794,000 at December 31, 2022 and $558,853,000 at March 31, 2022. The fair value of available-for-sale debt securities at March 31, 2023 was lower than amortized cost basis by $54,775,000, or 10.4%. In comparison, the aggregate unrealized loss position was $63,761,000 (11.3%) at December 31, 2022 and $25,939,000 (4.6%) at March 31, 2022. The unrealized decrease in fair value of the portfolio has resulted from an increase in interest rates. Management reviewed the available-for-sale debt securities as of March 31, 2023 and concluded there were no credit-related declines in fair value and that the unrealized losses on all of the securities in an unrealized loss position are considered temporary. |
| ● | Gross loans receivable totaled $1,745,139,000 at March 31, 2023, an increase of $5,099,000 (0.3%) from total loans at December 31, 2022 and an increase of $206,949,000 (13.5%) from total loans at March 31, 2022. In comparing outstanding balances at March 31, 2023 and 2022, total commercial loans were up $147.1 million (12.9%), reflecting growth in commercial real estate – nonowner occupied loans of $96,080,000, all other commercial loans of $33,453,000 and commercial real estate – owner occupied loans of $17,557,000. Total residential mortgage loans were up $55,828,000 (16.1%) and total consumer loans increased $4,031,000 (8.0%). The outstanding balance of residential mortgage loans originated and serviced by C&N that have been sold to third parties was $321.3 million at March 31, 2023, down $17.2 million (5.1%) from March 31, 2022. |
| ● | Total nonperforming assets as a percentage of total assets was 0.60% at March 31, 2023, down from 1.04% at December 31, 2022 and 0.81% at March 31, 2022. Total nonperforming assets were $14.6 million at March 31, 2023, down from $25.6 million at December 31, 2022 and $18.9 million at March 31, 2022. Similarly, total impaired loans decreased to $9.3 million at March 31, 2023 from $19.4 million at December 31, 2022 and $12.0 million at March 31, 2022. The net decrease in impaired loans and nonperforming assets at March 31, 2023 compared to December 31, 2022 included the impact of a $10.0 million payoff in the first quarter 2023 on a commercial loan relationship that was classified as impaired and nonaccrual at December 31, 2022. The reduction also included a paydown of $2,180,000 in the first quarter 2023 on a commercial loan for which partial charge-offs totaling $3,942,000 were recorded in 2022. The remaining carrying value of this loan was $474,000 at March 31, 2023. These reductions were partially offset by the addition to impaired and nonaccrual of a commercial loan relationship totaling $1,931,000 at March 31, 2023. Based on an estimate of the liquidation value of the real estate collateralizing the relationship, an allowance of $182,000 was recorded at March 31, 2023. |
| ● | The allowance for credit losses on loans was $18.3 million at March 31, 2023, or 1.05% of total loans as compared to an allowance for loan losses of $16.6 million or 0.95% of total loans at December 31, 2022 and $14.3 million or 0.93% of total loans at March 31, 2022. The increase in the allowance for credit losses at March 31, 2023 includes the impact of the adoption of CECL on January 1, 2023. |
5
| ● | Deposits totaled $1,916,040,000 at March 31, 2023, down $81,553,000 (4.1%) from $1,997,593,000 at December 31, 2022 and down 2.3% from $1,960,952,000 at March 31, 2022. The reduction in total deposits included a reduction in the estimated amount of deposits in excess of FDIC insurance levels (uninsured deposit balances) of $75.6 million as compared to December 31, 2022. The net reduction in deposits resulted from several factors, including the impact of customer funds transferred to higher-yielding investment alternatives and seasonal reductions in municipal deposits. At March 31, 2023, C&N’s estimated uninsured deposits totaled $613.9 million, or 31.7% of the Bank’s total deposits, down from $689.4 million or 34.2% of the Bank’s total deposits at December 31, 2022. Included in uninsured deposits are deposits collateralized by securities (almost exclusively municipal deposits) totaling $189.2 million, or 9.8% of the Bank’s total deposits at March 31, 2023. |
| ● | C&N maintained highly liquid sources of available funds totaling $1.043 billion at March 31, 2023, including unused borrowing capacity with the Federal Home Loan Bank of Pittsburgh of $655.6 million, unused availability on the Federal Reserve Bank of Philadelphia’s discount window of $22.3 million, available federal funds lines with other banks of $95 million and available-for-sale debt securities with a fair value in excess of collateral obligations of $269.8 million. Available funding from these sources exceeded the amount of uninsured deposits noted above by 69.9% at March 31, 2023. |
| ● | The outstanding balance of borrowed funds, including Federal Home Loan Bank advances, repurchase agreements, senior notes and subordinated debt, totaled $231,512,000 at March 31, 2023, up from $181,781,000 at December 31, 2022 and $70,686,000 at March 31, 2022. Overnight Federal Home Loan Bank borrowings increased to $91,000,000 at March 31, 2023 from $77,000,000 at December 31, 2022 and $0 at March 31, 2022. |
| ● | Total stockholders’ equity was $255,568,000 at March 31, 2023, up from $249,325,000 at December 31, 2022 and down from $276,208,000 at March 31, 2022. Within stockholders’ equity, the portion of accumulated other comprehensive loss related to available-for-sale debt securities was $43,271,000 at March 31, 2023, $50,370,000 at December 31, 2022 and $20,492,000 at March 31, 2022. The volatility in stockholders’ equity related to accumulated other comprehensive loss from available-for-sale debt securities has been caused by significant fluctuations in interest rates including overall significant increases in rates as compared to market rates when most of C&N’s securities were purchased. Accumulated other comprehensive loss is excluded from C&N’s regulatory capital ratios. As noted above, effective January 1, 2023, C&N adopted a required change in accounting for credit losses (CECL). The effect of implementing CECL was recorded through a cumulative-effect adjustment to reduce stockholders’ equity by $1,652,000. |
| ● | In February 2021, C&N amended its existing treasury stock repurchase program. Under the amended program, C&N is authorized to repurchase up to 1,000,000 shares of the Corporation’s common stock, or 6.25% of the Corporation’s issued and outstanding shares at February 18, 2021. For the three months ended March 31, 2023, 77,430 shares were repurchased for a total cost of $1,662,000, at an average price of $21.47 per share. Cumulatively through March 31, 2023, 752,130 shares have been repurchased for a total cost of $18,249,000, at an average price of $24.26 per share. |
| ● | Citizens & Northern Bank is subject to various regulatory capital requirements. At March 31, 2023, Citizens & Northern Bank maintains regulatory capital ratios that exceed all capital adequacy requirements. Management expects the Bank to remain well-capitalized for the foreseeable future. |
| ● | Trust assets under management by C&N’s Wealth Management Group amounted to $1,127,439,000 at March 31, 2023, up 6.0% from $1,063,615,000 at December 31, 2022 and down 5.4% from $1,191,595,000 at March 31, 2022. Fluctuations in values of assets under management reflect the impact of market volatility. |
6
| ● | Under U.S. GAAP, interest income on tax-exempt securities and loans are reported at their nominal amounts, with the tax benefit accounted for as a reduction in the income tax provision. The Corporation presents certain analyses and ratios with net interest income determined on a fully taxable-equivalent basis, which are non-GAAP financial measures as presented. The Corporation believes presentation of net interest income on a fully taxable-equivalent basis provides investors with meaningful information for purposes of comparing the returns on tax-exempt securities and loans with returns on taxable securities and loans. The excess of net interest income on a fully taxable-equivalent basis over the amounts reported under U.S. GAAP were $269,000, $303,000, and $302,000 for the first quarter 2023, fourth quarter 2022 and first quarter 2022, respectively. The excess of net interest income on a fully taxable-equivalent basis over the amounts reported under U.S. GAAP was $1,226,000 for year ended December 31, 2022 and $1,135,000 for year ended December 31, 2021. |
Citizens & Northern Corporation is the bank holding company for Citizens & Northern Bank, headquartered in Wellsboro, Pennsylvania which operates 29 banking offices located in Bradford, Bucks, Cameron, Chester, Lycoming, McKean, Potter, Sullivan, Tioga, York and Lancaster Counties in Pennsylvania and Steuben County in New York, as well as a loan production office in Elmira, New York. Citizens & Northern Corporation trades on NASDAQ under the symbol “CZNC.” For more information about Citizens & Northern Bank and Citizens & Northern Corporation, visit www.cnbankpa.com.
Safe Harbor Statement: Except for historical information contained herein, the matters discussed in this release are forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation, the following: changes in monetary and fiscal policies of the Federal Reserve Board and the U.S. Government, particularly related to changes in interest rates; changes in general economic conditions; C&N’s credit standards and its on-going credit assessment processes might not protect it from significant credit losses; the effect of the novel coronavirus (COVID-19) and related events; legislative or regulatory changes; downturn in demand for loan, deposit and other financial services in C&N’s market area; increased competition from other banks and non-bank providers of financial services; technological changes and increased technology-related costs; information security breach or other technology difficulties or failures; changes in accounting principles, or the application of generally accepted accounting principles; and failure to achieve merger-related synergies and difficulties in integrating the business and operations of acquired institutions. Citizens & Northern disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.
7
EXHIBIT 99.2 – Supplemental, Unaudited Financial Information
CONDENSED, CONSOLIDATED EARNINGS INFORMATION
(Dollars In Thousands, Except Per Share Data)
(Unaudited)
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1ST |
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1ST |
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QUARTER |
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QUARTER |
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2023 |
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2022 |
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(Current) |
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(Prior Year) |
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$ Incr. (Decr.) |
|
% Incr. (Decr.) |
|
|||
Interest and Dividend Income |
|
$ |
26,139 |
|
$ |
21,773 |
|
$ |
4,366 |
|
20.05 |
% |
Interest Expense |
|
|
5,358 |
|
|
1,441 |
|
|
3,917 |
|
271.83 |
% |
Net Interest Income |
|
|
20,781 |
|
|
20,332 |
|
|
449 |
|
2.21 |
% |
(Credit) Provision for Credit Losses |
|
|
(352) |
|
|
891 |
|
|
(1,243) |
|
(139.51) |
% |
Net Interest Income After (Credit) Provision for Credit Losses |
|
|
21,133 |
|
|
19,441 |
|
|
1,692 |
|
8.70 |
% |
Noninterest Income |
|
|
5,609 |
|
|
5,821 |
|
|
(212) |
|
(3.64) |
% |
Net Gains on Available-for-sale Debt Securities |
|
|
7 |
|
|
2 |
|
|
5 |
|
250.00 |
% |
Noninterest Expense |
|
|
19,087 |
|
|
16,886 |
|
|
2,201 |
|
13.03 |
% |
Income Before Income Tax Provision |
|
|
7,662 |
|
|
8,378 |
|
|
(716) |
|
(8.55) |
% |
Income Tax Provision |
|
|
1,409 |
|
|
1,483 |
|
|
(74) |
|
(4.99) |
% |
Net Income |
|
$ |
6,253 |
|
$ |
6,895 |
|
$ |
(642) |
|
(9.31) |
% |
Net Income Attributable to Common Shares (1) |
|
$ |
6,201 |
|
$ |
6,835 |
|
$ |
(634) |
|
(9.28) |
% |
PER COMMON SHARE DATA: |
|
|
|
|
|
|
|
|
|
|
|
|
Net Income - Basic |
|
$ |
0.40 |
|
$ |
0.44 |
|
$ |
(0.04) |
|
(9.09) |
% |
Net Income - Diluted |
|
$ |
0.40 |
|
$ |
0.44 |
|
$ |
(0.04) |
|
(9.09) |
% |
Dividends Per Share |
|
$ |
0.28 |
|
$ |
0.28 |
|
$ |
0.00 |
|
0.00 |
% |
Number of Shares Used in Computation - Basic |
|
|
15,409,680 |
|
|
15,645,474 |
|
|
|
|
|
|
Number of Shares Used in Computation - Diluted |
|
|
15,410,617 |
|
|
15,649,175 |
|
|
|
|
|
|
(1) |
Basic and diluted net income per common share are determined based on net income less earnings allocated to nonvested restricted shares with nonforfeitable dividends. |
1
CONDENSED, CONSOLIDATED BALANCE SHEET DATA
(Dollars In Thousands)
(Unaudited)
|
|
March 31, |
|
March 31, |
|
|
|
|||||
|
|
2023 |
|
2022 |
|
$ Incr. (Decr.) |
|
% Incr. (Decr.) |
|
|||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Cash & Due from Banks |
|
$ |
52,212 |
|
$ |
114,346 |
|
$ |
(62,134) |
|
(54.34) |
% |
Available-for-sale Debt Securities |
|
|
472,814 |
|
|
532,913 |
|
|
(60,099) |
|
(11.28) |
% |
Loans, Net |
|
|
1,726,793 |
|
|
1,523,919 |
|
|
202,874 |
|
13.31 |
% |
Bank-Owned Life Insurance |
|
|
31,352 |
|
|
30,805 |
|
|
547 |
|
1.78 |
% |
Bank Premises and Equipment, Net |
|
|
21,277 |
|
|
21,169 |
|
|
108 |
|
0.51 |
% |
Deferred Tax Asset, Net |
|
|
18,914 |
|
|
11,818 |
|
|
7,096 |
|
60.04 |
% |
Intangible Assets |
|
|
55,280 |
|
|
55,711 |
|
|
(431) |
|
(0.77) |
% |
Other Assets |
|
|
51,230 |
|
|
39,690 |
|
|
11,540 |
|
29.08 |
% |
TOTAL ASSETS |
|
$ |
2,429,872 |
|
$ |
2,330,371 |
|
$ |
99,501 |
|
4.27 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
$ |
1,916,040 |
|
$ |
1,960,952 |
|
$ |
(44,912) |
|
(2.29) |
% |
Borrowed Funds - Federal Home Loan Bank and Repurchase Agreements |
|
|
192,097 |
|
|
22,938 |
|
|
169,159 |
|
737.46 |
% |
Senior Notes, Net |
|
|
14,781 |
|
|
14,717 |
|
|
64 |
|
0.43 |
% |
Subordinated Debt, Net |
|
|
24,634 |
|
|
33,031 |
|
|
(8,397) |
|
(25.42) |
% |
Other Liabilities |
|
|
26,752 |
|
|
22,525 |
|
|
4,227 |
|
18.77 |
% |
TOTAL LIABILITIES |
|
|
2,174,304 |
|
|
2,054,163 |
|
|
120,141 |
|
5.85 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
Common Stockholders' Equity, Excluding Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Loss |
|
|
298,365 |
|
|
296,386 |
|
|
1,979 |
|
0.67 |
% |
Accumulated Other Comprehensive (Loss) Income: |
|
|
|
|
|
|
|
|
|
|
|
|
Net Unrealized Losses on Available-for-sale Debt Securities |
|
|
(43,271) |
|
|
(20,492) |
|
|
(22,779) |
|
111.16 |
% |
Defined Benefit Plans |
|
|
474 |
|
|
314 |
|
|
160 |
|
50.96 |
% |
TOTAL STOCKHOLDERS' EQUITY |
|
|
255,568 |
|
|
276,208 |
|
|
(20,640) |
|
(7.47) |
% |
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY |
|
$ |
2,429,872 |
|
$ |
2,330,371 |
|
$ |
99,501 |
|
4.27 |
% |
2
CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS
(Dollars In Thousands, Except Per Share Data)
(Unaudited)
|
|
AS OF OR FOR THE |
|
|
|
||||
|
|
THREE MONTHS ENDED |
|
% |
|
||||
|
|
March 31, |
|
INCREASE |
|
||||
|
|
2023 |
|
2022 |
|
(DECREASE) |
|
||
EARNINGS PERFORMANCE |
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
6,253 |
|
$ |
6,895 |
|
(9.31) |
% |
Return on Average Assets (Annualized) |
|
|
1.03 |
% |
|
1.19 |
% |
(13.45) |
% |
Return on Average Equity (Annualized) |
|
|
9.90 |
% |
|
9.37 |
% |
5.66 |
% |
|
|
|
|
|
|
|
|
|
|
BALANCE SHEET HIGHLIGHTS |
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
2,429,872 |
|
$ |
2,330,371 |
|
4.27 |
% |
Available-for-Sale Debt Securities |
|
|
472,814 |
|
|
532,913 |
|
(11.28) |
% |
Loans, Net |
|
|
1,726,793 |
|
|
1,523,919 |
|
13.31 |
% |
Allowance for Credit Losses: |
|
|
|
|
|
|
|
|
|
Allowance for Credit Losses on Loans |
|
|
18,346 |
|
|
14,271 |
|
28.55 |
% |
Allowance for Credit Losses on Off-Balance Sheet Exposures |
|
|
1,178 |
|
|
660 |
|
78.48 |
% |
Deposits |
|
|
1,916,040 |
|
|
1,960,952 |
|
(2.29) |
% |
|
|
|
|
|
|
|
|
|
|
OFF-BALANCE SHEET |
|
|
|
|
|
|
|
|
|
Outstanding Balance of Mortgage Loans Sold with Servicing Retained |
|
$ |
321,326 |
|
$ |
338,482 |
|
(5.07) |
% |
Trust Assets Under Management |
|
|
1,127,439 |
|
|
1,191,595 |
|
(5.38) |
% |
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' VALUE (PER COMMON SHARE) |
|
|
|
|
|
|
|
|
|
Net Income - Basic |
|
$ |
0.40 |
|
$ |
0.44 |
|
(9.09) |
% |
Net Income - Diluted |
|
$ |
0.40 |
|
$ |
0.44 |
|
(9.09) |
% |
Dividends |
|
$ |
0.28 |
|
$ |
0.28 |
|
0.00 |
% |
Common Book Value |
|
$ |
16.50 |
|
$ |
17.57 |
|
(6.09) |
% |
Tangible Common Book Value (a) |
|
$ |
12.93 |
|
$ |
14.03 |
|
(7.84) |
% |
Market Value (Last Trade) |
|
$ |
21.38 |
|
$ |
24.38 |
|
(12.31) |
% |
Market Value / Common Book Value |
|
|
129.58 |
% |
|
138.76 |
% |
(6.62) |
% |
Market Value / Tangible Common Book Value |
|
|
165.35 |
% |
|
173.77 |
% |
(4.85) |
% |
Price Earnings Multiple (Annualized) |
|
|
13.36 |
|
|
13.85 |
|
(3.54) |
% |
Dividend Yield (Annualized) |
|
|
5.24 |
% |
|
4.59 |
% |
14.16 |
% |
Common Shares Outstanding, End of Period |
|
|
15,485,035 |
|
|
15,718,723 |
|
(1.49) |
% |
3
CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS (Continued)
(Dollars In Thousands, Except Per Share Data)
(Unaudited)
|
|
AS OF OR FOR THE |
|
|
|
||||
|
|
THREE MONTHS ENDED |
|
% |
|
||||
|
|
March 31, |
|
INCREASE |
|
||||
|
|
2023 |
|
2022 |
|
(DECREASE) |
|
||
SAFETY AND SOUNDNESS |
|
|
|
|
|
|
|
|
|
Tangible Common Equity / Tangible Assets (a) |
|
|
8.43 |
% |
|
9.69 |
% |
(13.00) |
% |
Nonperforming Assets / Total Assets |
|
|
0.60 |
% |
|
0.81 |
% |
(25.93) |
% |
Allowance for Credit Losses / Total Loans |
|
|
1.05 |
% |
|
0.93 |
% |
12.90 |
% |
Total Risk Based Capital Ratio (b) |
|
|
15.93 |
% |
|
18.23 |
% |
(12.62) |
% |
Tier 1 Risk Based Capital Ratio (b) |
|
|
13.48 |
% |
|
15.20 |
% |
(11.32) |
% |
Common Equity Tier 1 Risk Based Capital Ratio (b) |
|
|
13.48 |
% |
|
15.20 |
% |
(11.32) |
% |
Leverage Ratio (b) |
|
|
10.08 |
% |
|
10.59 |
% |
(4.82) |
% |
|
|
|
|
|
|
|
|
|
|
AVERAGE BALANCES |
|
|
|
|
|
|
|
|
|
Average Assets |
|
$ |
2,420,819 |
|
$ |
2,325,486 |
|
4.10 |
% |
Average Equity |
|
$ |
252,638 |
|
$ |
294,254 |
|
(14.14) |
% |
|
|
|
|
|
|
|
|
|
|
EFFICIENCY RATIO (c) |
|
|
|
|
|
|
|
|
|
Net Interest Income on a Fully Taxable-Equivalent |
|
|
|
|
|
|
|
|
|
Basis (c) |
|
$ |
21,050 |
|
$ |
20,634 |
|
2.02 |
% |
Noninterest Income |
|
|
5,609 |
|
|
5,821 |
|
(3.64) |
% |
Total (1) |
|
$ |
26,659 |
|
$ |
26,455 |
|
0.77 |
% |
Noninterest Expense (2) |
|
$ |
19,087 |
|
$ |
16,886 |
|
13.03 |
% |
Efficiency Ratio = (2)/(1) |
|
|
71.60 |
% |
|
63.83 |
% |
12.17 |
% |
(a)Tangible common book value per share and tangible common equity as a percentage of tangible assets are non-U.S. GAAP ratios. Management believes this non-GAAP information is helpful in evaluating the strength of the Corporation's capital and in providing an alternative, conservative valuation of the Corporation's net worth. The ratios shown above are based on the following calculations of tangible assets and tangible common equity:
Total Assets |
|
$ |
2,429,872 |
|
$ |
2,330,371 |
|
|
|
Less: Intangible Assets, Primarily Goodwill |
|
|
(55,280) |
|
|
(55,711) |
|
|
|
Tangible Assets |
|
$ |
2,374,592 |
|
$ |
2,274,660 |
|
|
|
Total Stockholders' Equity |
|
$ |
255,568 |
|
$ |
276,208 |
|
|
|
Less: Intangible Assets, Primarily Goodwill |
|
|
(55,280) |
|
|
(55,711) |
|
|
|
Tangible Common Equity (3) |
|
$ |
200,288 |
|
$ |
220,497 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares Outstanding, End of Period (4) |
|
|
15,485,035 |
|
|
15,718,723 |
|
|
|
Tangible Common Book Value per Share = (3)/(4) |
|
$ |
12.93 |
|
$ |
14.03 |
|
|
|
(b)Capital ratios for the most recent period are estimated.
(c)The efficiency ratio is a non-GAAP ratio that is calculated as shown above. For purposes of calculating the efficiency ratio, net interest income on a fully taxable-equivalent basis includes amounts of interest income on tax-exempt securities and loans that have been increased to a fully taxable-equivalent basis, using the Corporation's marginal federal income tax rate of 21%. A reconciliation of net interest income under U.S. GAAP as compared to net interest income as adjusted to a fully taxable-equivalent basis is provided in Exhibit 99.2 under the table “COMPARISON OF INTEREST INCOME AND EXPENSE”.
4
QUARTERLY CONDENSED, CONSOLIDATED
INCOME STATEMENT INFORMATION
(Dollars In Thousands, Except Per Share Data)
(Unaudited)
|
|
For the Three Months Ended : |
|||||||||||||
|
|
March 31, |
|
December 31, |
|
September 30, |
|
June 30, |
|
March 31, |
|||||
|
|
2023 |
|
2022 |
|
2022 |
|
2022 |
|
2022 |
|||||
Interest income |
|
$ |
26,139 |
|
$ |
25,855 |
|
$ |
23,710 |
|
$ |
21,309 |
|
$ |
21,773 |
Interest expense |
|
|
5,358 |
|
|
3,563 |
|
|
2,831 |
|
|
1,684 |
|
|
1,441 |
Net interest income |
|
|
20,781 |
|
|
22,292 |
|
|
20,879 |
|
|
19,625 |
|
|
20,332 |
(Credit) provision for credit losses |
|
|
(352) |
|
|
2,262 |
|
|
3,794 |
|
|
308 |
|
|
891 |
Net interest income after (credit) provision for credit losses |
|
|
21,133 |
|
|
20,030 |
|
|
17,085 |
|
|
19,317 |
|
|
19,441 |
Noninterest income |
|
|
5,609 |
|
|
6,110 |
|
|
5,651 |
|
|
6,830 |
|
|
5,821 |
Net gains (losses) on securities |
|
|
7 |
|
|
(1) |
|
|
20 |
|
|
(1) |
|
|
2 |
Noninterest expense |
|
|
19,087 |
|
|
16,587 |
|
|
17,443 |
|
|
17,039 |
|
|
16,886 |
Income before income tax provision |
|
|
7,662 |
|
|
9,552 |
|
|
5,313 |
|
|
9,107 |
|
|
8,378 |
Income tax provision |
|
|
1,409 |
|
|
1,773 |
|
|
858 |
|
|
1,618 |
|
|
1,483 |
Net income |
|
$ |
6,253 |
|
$ |
7,779 |
|
$ |
4,455 |
|
$ |
7,489 |
|
$ |
6,895 |
Net income attributable to common shares |
|
$ |
6,201 |
|
$ |
7,711 |
|
$ |
4,416 |
|
$ |
7,419 |
|
$ |
6,835 |
Basic earnings per common share |
|
$ |
0.40 |
|
$ |
0.50 |
|
$ |
0.29 |
|
$ |
0.48 |
|
$ |
0.44 |
Diluted earnings per common share |
|
$ |
0.40 |
|
$ |
0.50 |
|
$ |
0.29 |
|
$ |
0.48 |
|
$ |
0.44 |
5
QUARTERLY CONDENSED, CONSOLIDATED
BALANCE SHEET INFORMATION
(In Thousands) (Unaudited)
|
|
As of: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mar. 31, |
|
Dec. 31, |
|
Sep. 30, |
|
Jun. 30, |
|
Mar. 31, |
|||||
|
|
2023 |
|
2022 |
|
2022 |
|
2022 |
|
2022 |
|||||
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash & Due from Banks |
|
$ |
52,212 |
|
$ |
55,048 |
|
$ |
64,044 |
|
$ |
69,187 |
|
$ |
114,346 |
Available-for-Sale Debt Securities |
|
|
472,814 |
|
|
498,033 |
|
|
487,980 |
|
|
526,837 |
|
|
532,913 |
Loans, Net |
|
|
1,726,793 |
|
|
1,723,425 |
|
|
1,674,076 |
|
|
1,643,057 |
|
|
1,523,919 |
Bank-Owned Life Insurance |
|
|
31,352 |
|
|
31,214 |
|
|
31,075 |
|
|
30,941 |
|
|
30,805 |
Bank Premises and Equipment, Net |
|
|
21,277 |
|
|
21,574 |
|
|
21,881 |
|
|
21,829 |
|
|
21,169 |
Deferred Tax Asset, Net |
|
|
18,914 |
|
|
20,884 |
|
|
22,327 |
|
|
16,331 |
|
|
11,818 |
Intangible Assets |
|
|
55,280 |
|
|
55,382 |
|
|
55,492 |
|
|
55,602 |
|
|
55,711 |
Other Assets |
|
|
51,230 |
|
|
48,747 |
|
|
43,305 |
|
|
46,934 |
|
|
39,690 |
TOTAL ASSETS |
|
$ |
2,429,872 |
|
$ |
2,454,307 |
|
$ |
2,400,180 |
|
$ |
2,410,718 |
|
$ |
2,330,371 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deposits |
|
$ |
1,916,040 |
|
$ |
1,997,593 |
|
$ |
2,039,595 |
|
$ |
1,964,270 |
|
$ |
1,960,952 |
Borrowed Funds - Federal Home Loan Bank and Repurchase Agreements |
|
|
192,097 |
|
|
142,409 |
|
|
57,920 |
|
|
126,833 |
|
|
22,938 |
Senior Notes, Net |
|
|
14,781 |
|
|
14,765 |
|
|
14,749 |
|
|
14,733 |
|
|
14,717 |
Subordinated Debt, Net |
|
|
24,634 |
|
|
24,607 |
|
|
24,580 |
|
|
24,553 |
|
|
33,031 |
Other Liabilities |
|
|
26,752 |
|
|
25,608 |
|
|
24,547 |
|
|
21,710 |
|
|
22,525 |
TOTAL LIABILITIES |
|
|
2,174,304 |
|
|
2,204,982 |
|
|
2,161,391 |
|
|
2,152,099 |
|
|
2,054,163 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Stockholders' Equity, Excluding Accumulated Other Comprehensive Loss |
|
|
298,365 |
|
|
299,203 |
|
|
295,258 |
|
|
294,621 |
|
|
296,386 |
Accumulated Other Comprehensive Loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Unrealized (Losses) Gains on Available-for-sale Securities |
|
|
(43,271) |
|
|
(50,370) |
|
|
(56,766) |
|
|
(36,307) |
|
|
(20,492) |
Defined Benefit Plans |
|
|
474 |
|
|
492 |
|
|
297 |
|
|
305 |
|
|
314 |
TOTAL STOCKHOLDERS' EQUITY |
|
|
255,568 |
|
|
249,325 |
|
|
238,789 |
|
|
258,619 |
|
|
276,208 |
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY |
|
$ |
2,429,872 |
|
$ |
2,454,307 |
|
$ |
2,400,180 |
|
$ |
2,410,718 |
|
$ |
2,330,371 |
6
AVAILABLE-FOR-SALE DEBT SECURITIES
(In Thousands)
|
|
March 31, 2023 |
|
December 31, 2022 |
|
March 31, 2022 |
||||||||||||
|
|
Amortized |
|
Fair |
|
Amortized |
|
Fair |
|
Amortized |
|
Fair |
||||||
|
|
Cost |
|
Value |
|
Cost |
|
Value |
|
Cost |
|
Value |
||||||
Obligations of the U.S. Treasury |
|
$ |
33,924 |
|
$ |
31,163 |
|
$ |
35,166 |
|
$ |
31,836 |
|
$ |
38,152 |
|
$ |
36,494 |
Obligations of U.S. Government agencies |
|
|
25,479 |
|
|
23,348 |
|
|
25,938 |
|
|
23,430 |
|
|
24,455 |
|
|
23,408 |
Bank holding company debt securities |
|
|
28,947 |
|
|
24,723 |
|
|
28,945 |
|
|
25,386 |
|
|
24,942 |
|
|
24,043 |
Obligations of states and political subdivisions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Tax-exempt |
|
|
128,285 |
|
|
117,812 |
|
|
146,149 |
|
|
132,623 |
|
|
149,140 |
|
|
143,633 |
Taxable |
|
|
67,076 |
|
|
57,572 |
|
|
68,488 |
|
|
56,812 |
|
|
73,732 |
|
|
69,629 |
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential pass-through securities |
|
|
109,028 |
|
|
97,807 |
|
|
112,782 |
|
|
99,941 |
|
|
112,122 |
|
|
106,568 |
Residential collateralized mortgage obligations |
|
|
42,296 |
|
|
38,117 |
|
|
44,868 |
|
|
40,296 |
|
|
45,628 |
|
|
43,868 |
Commercial mortgage-backed securities |
|
|
84,449 |
|
|
74,195 |
|
|
91,388 |
|
|
79,686 |
|
|
90,682 |
|
|
85,270 |
Private label commercial mortgage-backed securities |
|
|
8,105 |
|
|
8,077 |
|
|
8,070 |
|
|
8,023 |
|
|
0 |
|
|
0 |
Total Available-for-Sale Debt Securities |
|
$ |
527,589 |
|
$ |
472,814 |
|
$ |
561,794 |
|
$ |
498,033 |
|
$ |
558,853 |
|
$ |
532,913 |
SUMMARY OF LOANS BY TYPE
(Excludes Loans Held for Sale)
(In Thousands)
|
|
March 31, |
|
December 31, |
|
March 31, |
|||
|
|
2023 |
|
2022 |
|
2022 |
|||
Commercial real estate - nonowner occupied |
|
|
|
|
|
|
|
|
|
Nonowner occupied |
|
$ |
457,814 |
|
$ |
454,386 |
|
$ |
364,491 |
Multi-family (5 or more) residential |
|
|
58,111 |
|
|
55,406 |
|
|
52,240 |
1-4 Family - commercial purpose |
|
|
166,773 |
|
|
165,805 |
|
|
169,887 |
Total commercial real estate - nonowner occupied |
|
|
682,698 |
|
|
675,597 |
|
|
586,618 |
Commercial real estate - owner occupied |
|
|
221,766 |
|
|
205,910 |
|
|
204,209 |
All other commercial loans: |
|
|
|
|
|
|
|
|
|
Commercial and industrial |
|
|
83,420 |
|
|
95,368 |
|
|
109,576 |
Commercial lines of credit |
|
|
119,109 |
|
|
141,444 |
|
|
102,458 |
Political subdivisions |
|
|
85,555 |
|
|
86,663 |
|
|
75,895 |
Commercial construction and land |
|
|
70,612 |
|
|
60,892 |
|
|
36,204 |
Other commercial loans |
|
|
26,106 |
|
|
25,710 |
|
|
27,216 |
Total all other commercial loans |
|
|
384,802 |
|
|
410,077 |
|
|
351,349 |
Residential mortgage loans: |
|
|
|
|
|
|
|
|
|
1-4 Family - residential |
|
|
372,241 |
|
|
363,005 |
|
|
328,947 |
1-4 Family residential construction |
|
|
29,479 |
|
|
30,577 |
|
|
16,945 |
Total residential mortgage |
|
|
401,720 |
|
|
393,582 |
|
|
345,892 |
Consumer loans: |
|
|
|
|
|
|
|
|
|
Consumer lines of credit (including HELCs) |
|
|
35,245 |
|
|
36,650 |
|
|
33,979 |
All other consumer |
|
|
18,908 |
|
|
18,224 |
|
|
16,143 |
Total consumer |
|
|
54,153 |
|
|
54,874 |
|
|
50,122 |
Total |
|
|
1,745,139 |
|
|
1,740,040 |
|
|
1,538,190 |
Less: allowance for credit losses on loans |
|
|
(18,346) |
|
|
(16,615) |
|
|
(14,271) |
Loans, net |
|
$ |
1,726,793 |
|
$ |
1,723,425 |
|
$ |
1,523,919 |
7
ADJUSTMENTS TO GROSS AMORTIZED COST OF LOANS
(In Thousands)
|
|
Three Months Ended |
|||||||
|
|
March 31, |
|
December 31, |
|
March 31, |
|||
|
|
2023 |
|
2022 |
|
2022 |
|||
Market Rate Adjustment |
|
|
|
|
|
|
|
|
|
Adjustments to gross amortized cost of loans at beginning of period |
|
$ |
(916) |
|
$ |
(861) |
|
$ |
(637) |
Amortization recognized in interest income |
|
|
(52) |
|
|
(55) |
|
|
(248) |
Adjustments to gross amortized cost of loans at end of period |
|
$ |
(968) |
|
$ |
(916) |
|
$ |
(885) |
Credit Adjustment on Non-impaired Loans |
|
|
|
|
|
|
|
|
|
Adjustments to gross amortized cost of loans at beginning of period |
|
$ |
(1,840) |
|
$ |
(2,095) |
|
$ |
(3,335) |
Accretion recognized in interest income |
|
|
198 |
|
|
255 |
|
|
553 |
Adjustments to gross amortized cost of loans at end of period |
|
$ |
(1,642) |
|
$ |
(1,840) |
|
$ |
(2,782) |
PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS
(Dollars In Thousands)
|
|
March 31, |
|
December 31, |
|
March 31, |
|
|||
|
|
2023 |
|
2022 |
|
2022 |
|
|||
Impaired loans with a valuation allowance |
|
$ |
5,802 |
|
$ |
3,460 |
|
$ |
6,528 |
|
Impaired loans without a valuation allowance |
|
|
3,507 |
|
|
14,871 |
|
|
1,494 |
|
Purchased credit impaired loans |
|
|
0 |
|
|
1,027 |
|
|
3,983 |
|
Total impaired loans |
|
$ |
9,309 |
|
$ |
19,358 |
|
$ |
12,005 |
|
|
|
|
|
|
|
|
|
|
|
|
Total loans past due 30-89 days and still accruing |
|
$ |
5,493 |
|
$ |
7,079 |
|
$ |
3,868 |
|
|
|
|
|
|
|
|
|
|
|
|
Nonperforming assets: |
|
|
|
|
|
|
|
|
|
|
Purchased credit impaired loans |
|
$ |
0 |
|
$ |
1,027 |
|
$ |
3,983 |
|
Other nonaccrual loans |
|
|
12,876 |
|
|
22,058 |
|
|
10,962 |
|
Total nonaccrual loans |
|
|
12,876 |
|
|
23,085 |
|
|
14,945 |
|
Total loans past due 90 days or more and still accruing |
|
|
1,216 |
|
|
2,237 |
|
|
3,429 |
|
Total nonperforming loans |
|
|
14,092 |
|
|
25,322 |
|
|
18,374 |
|
Foreclosed assets held for sale (real estate) |
|
|
459 |
|
|
275 |
|
|
531 |
|
Total nonperforming assets |
|
$ |
14,551 |
|
$ |
25,597 |
|
$ |
18,905 |
|
|
|
|
|
|
|
|
|
|
|
|
Total nonperforming loans as a % of total loans |
|
|
0.81 |
% |
|
1.46 |
% |
|
1.19 |
% |
Total nonperforming assets as a % of assets |
|
|
0.60 |
% |
|
1.04 |
% |
|
0.81 |
% |
Allowance for credit losses as a % of total loans |
|
|
1.05 |
% |
|
0.95 |
% |
|
0.93 |
% |
8
IMPACT OF ASU 2016-13 (CECL)
(In Thousands)
|
|
As Reported |
|
|
|
|
|||
|
|
Under |
|
Pre-ASC 326 |
|
Impact of |
|||
|
|
ASC 326 |
|
Adoption |
|
ASC 326 |
|||
|
|
January 1, 2023 |
|
December 31, 2022 |
|
Adoption |
|||
Loans receivable |
|
$ |
1,740,846 |
|
$ |
1,740,040 |
|
$ |
806 |
Allowance for credit losses on loans |
|
|
18,719 |
|
|
16,615 |
|
|
2,104 |
Allowance for credit losses on off-balance sheet exposures |
|
|
1,218 |
|
|
425 |
|
|
793 |
ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES ON LOANS
(In Thousands)
|
|
3 Months |
|
3 Months |
|
3 Months |
|
Year |
||||
|
|
Ended |
|
Ended |
|
Ended |
|
Ended |
||||
|
|
March 31, |
|
December 31, |
|
March 31, |
|
December 31, |
||||
|
|
2023 |
|
2022 |
|
2022 |
|
2022 |
||||
Balance, beginning of period |
|
$ |
16,615 |
|
$ |
16,170 |
|
$ |
13,537 |
|
$ |
13,537 |
Adoption of ASU 2016-13 (CECL) |
|
|
2,104 |
|
|
0 |
|
|
0 |
|
|
0 |
Charge-offs |
|
|
(67) |
|
|
(1,828) |
|
|
(180) |
|
|
(4,245) |
Recoveries |
|
|
6 |
|
|
11 |
|
|
23 |
|
|
68 |
Net charge-offs |
|
|
(61) |
|
|
(1,817) |
|
|
(157) |
|
|
(4,177) |
(Credit) provision for credit losses |
|
|
(312) |
|
|
2,262 |
|
|
891 |
|
|
7,255 |
Balance, end of period |
|
$ |
18,346 |
|
$ |
16,615 |
|
$ |
14,271 |
|
$ |
16,615 |
ANALYSIS OF THE PROVISION FOR CREDIT LOSSES
(In Thousands)
|
|
3 Months |
|
|
|
Ended |
|
|
|
March 31, |
|
|
|
2023 |
|
(Credit) provision for credit losses: |
|
|
|
Loans receivable |
|
$ |
(312) |
Off-balance sheet exposures (1) |
|
|
(40) |
Total (credit) provision for credit losses |
|
$ |
(352) |
(1) The (credit) provision for credit losses on off-balance sheet exposures prior to January 1, 2023 was included in other noninterest expense in the consolidated statements of income.
9
COMPARISON OF INTEREST INCOME AND EXPENSE
(In Thousands)
|
|
Three Months Ended |
|||||||
|
|
March 31, |
|
December 31, |
|
March 31, |
|||
|
|
2023 |
|
2022 |
|
2022 |
|||
INTEREST INCOME |
|
|
|
|
|
|
|
|
|
Interest-bearing due from banks |
|
$ |
278 |
|
$ |
310 |
|
$ |
67 |
Available-for-sale debt securities: |
|
|
|
|
|
|
|
|
|
Taxable |
|
|
2,211 |
|
|
2,217 |
|
|
1,969 |
Tax-exempt |
|
|
767 |
|
|
910 |
|
|
905 |
Total available-for-sale debt securities |
|
|
2,978 |
|
|
3,127 |
|
|
2,874 |
Loans receivable: |
|
|
|
|
|
|
|
|
|
Taxable |
|
|
22,428 |
|
|
21,979 |
|
|
17,974 |
Paycheck Protection Program |
|
|
3 |
|
|
59 |
|
|
575 |
Tax-exempt |
|
|
713 |
|
|
675 |
|
|
573 |
Total loans receivable |
|
|
23,144 |
|
|
22,713 |
|
|
19,122 |
Other earning assets |
|
|
8 |
|
|
8 |
|
|
12 |
Total Interest Income |
|
|
26,408 |
|
|
26,158 |
|
|
22,075 |
|
|
|
|
|
|
|
|
|
|
INTEREST EXPENSE |
|
|
|
|
|
|
|
|
|
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
Interest checking |
|
|
987 |
|
|
844 |
|
|
194 |
Money market |
|
|
873 |
|
|
818 |
|
|
262 |
Savings |
|
|
63 |
|
|
66 |
|
|
61 |
Time deposits |
|
|
1,307 |
|
|
898 |
|
|
393 |
Total interest-bearing deposits |
|
|
3,230 |
|
|
2,626 |
|
|
910 |
Borrowed funds: |
|
|
|
|
|
|
|
|
|
Short-term |
|
|
1,097 |
|
|
127 |
|
|
1 |
Long-term - FHLB advances |
|
|
681 |
|
|
460 |
|
|
49 |
Senior notes, net |
|
|
120 |
|
|
120 |
|
|
118 |
Subordinated debt, net |
|
|
230 |
|
|
230 |
|
|
363 |
Total borrowed funds |
|
|
2,128 |
|
|
937 |
|
|
531 |
Total Interest Expense |
|
|
5,358 |
|
|
3,563 |
|
|
1,441 |
|
|
|
|
|
|
|
|
|
|
Net Interest Income |
|
$ |
21,050 |
|
$ |
22,595 |
|
$ |
20,634 |
Note: Interest income from tax-exempt securities and loans has been adjusted to a fully taxable-equivalent basis, using the Corporation’s marginal federal income tax rate of 21%. The following table is a reconciliation of net interest income under U.S. GAAP as compared to net interest income as adjusted to a fully taxable-equivalent basis.
(In Thousands) |
|
Three Months Ended |
|||||||
|
|
March 31, |
|
December 31, |
|
March 31, |
|||
|
|
2023 |
|
2022 |
|
2022 |
|||
Net Interest Income Under U.S. GAAP |
|
$ |
20,781 |
|
$ |
22,292 |
|
$ |
20,332 |
Add: fully taxable-equivalent interest income adjustment from tax-exempt securities |
|
|
127 |
|
|
167 |
|
|
183 |
Add: fully taxable-equivalent interest income adjustment from tax-exempt loans |
|
|
142 |
|
|
136 |
|
|
119 |
Net Interest Income as adjusted to a fully taxable-equivalent basis |
|
$ |
21,050 |
|
$ |
22,595 |
|
$ |
20,634 |
10
ANALYSIS OF AVERAGE DAILY BALANCES AND RATES
(Dollars in Thousands)
|
|
3 Months |
|
|
|
3 Months |
|
|
|
3 Months |
|
|
|
|||
|
|
Ended |
|
Rate of |
|
Ended |
|
Rate of |
|
Ended |
|
Rate of |
|
|||
|
|
3/31/2023 |
|
Return/ |
|
12/31/2022 |
|
Return/ |
|
3/31/2022 |
|
Return/ |
|
|||
|
|
Average |
|
Cost of |
|
Average |
|
Cost of |
|
Average |
|
Cost of |
|
|||
|
|
Balance |
|
Funds % |
|
Balance |
|
Funds % |
|
Balance |
|
Funds % |
|
|||
EARNING ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing due from banks |
|
$ |
31,637 |
|
3.56 |
% |
$ |
40,288 |
|
3.05 |
% |
$ |
84,115 |
|
0.32 |
% |
Available-for-sale debt securities, at amortized cost: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
|
410,110 |
|
2.19 |
% |
|
415,538 |
|
2.12 |
% |
|
390,301 |
|
2.05 |
% |
Tax-exempt |
|
|
131,392 |
|
2.37 |
% |
|
146,466 |
|
2.46 |
% |
|
144,334 |
|
2.54 |
% |
Total available-for-sale debt securities |
|
|
541,502 |
|
2.23 |
% |
|
562,004 |
|
2.21 |
% |
|
534,635 |
|
2.18 |
% |
Loans receivable: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable |
|
|
1,633,850 |
|
5.57 |
% |
|
1,609,563 |
|
5.42 |
% |
|
1,445,353 |
|
5.04 |
% |
Paycheck Protection Program |
|
|
162 |
|
7.51 |
% |
|
1,044 |
|
22.42 |
% |
|
18,849 |
|
12.37 |
% |
Tax-exempt |
|
|
91,851 |
|
3.15 |
% |
|
88,583 |
|
3.02 |
% |
|
83,659 |
|
2.78 |
% |
Total loans receivable |
|
|
1,725,863 |
|
5.44 |
% |
|
1,699,190 |
|
5.30 |
% |
|
1,547,861 |
|
5.01 |
% |
Other earning assets |
|
|
1,200 |
|
2.70 |
% |
|
1,048 |
|
3.03 |
% |
|
1,983 |
|
2.45 |
% |
Total Earning Assets |
|
|
2,300,202 |
|
4.66 |
% |
|
2,302,530 |
|
4.51 |
% |
|
2,168,594 |
|
4.13 |
% |
Cash |
|
|
22,276 |
|
|
|
|
23,154 |
|
|
|
|
20,703 |
|
|
|
Unrealized loss on securities |
|
|
(60,055) |
|
|
|
|
(70,583) |
|
|
|
|
(2,508) |
|
|
|
Allowance for credit losses |
|
|
(17,053) |
|
|
|
|
(16,612) |
|
|
|
|
(13,783) |
|
|
|
Bank-owned life insurance |
|
|
31,267 |
|
|
|
|
31,127 |
|
|
|
|
30,720 |
|
|
|
Bank premises and equipment |
|
|
21,518 |
|
|
|
|
21,752 |
|
|
|
|
21,043 |
|
|
|
Intangible assets |
|
|
55,331 |
|
|
|
|
55,433 |
|
|
|
|
55,765 |
|
|
|
Other assets |
|
|
67,333 |
|
|
|
|
64,341 |
|
|
|
|
44,952 |
|
|
|
Total Assets |
|
$ |
2,420,819 |
|
|
|
$ |
2,411,142 |
|
|
|
$ |
2,325,486 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
INTEREST-BEARING LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest checking |
|
$ |
457,277 |
|
0.88 |
% |
$ |
478,012 |
|
0.70 |
% |
$ |
419,130 |
|
0.19 |
% |
Money market |
|
|
364,646 |
|
0.97 |
% |
|
427,378 |
|
0.76 |
% |
|
456,904 |
|
0.23 |
% |
Savings |
|
|
257,047 |
|
0.10 |
% |
|
262,269 |
|
0.10 |
% |
|
249,165 |
|
0.10 |
% |
Time deposits |
|
|
312,497 |
|
1.70 |
% |
|
295,920 |
|
1.20 |
% |
|
277,405 |
|
0.57 |
% |
Total interest-bearing deposits |
|
|
1,391,467 |
|
0.94 |
% |
|
1,463,579 |
|
0.71 |
% |
|
1,402,604 |
|
0.26 |
% |
Borrowed funds: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term |
|
|
91,767 |
|
4.85 |
% |
|
14,229 |
|
3.54 |
% |
|
1,746 |
|
0.23 |
% |
Long-term - FHLB advances |
|
|
80,648 |
|
3.42 |
% |
|
62,998 |
|
2.90 |
% |
|
26,102 |
|
0.76 |
% |
Senior notes, net |
|
|
14,773 |
|
3.29 |
% |
|
14,757 |
|
3.23 |
% |
|
14,709 |
|
3.25 |
% |
Subordinated debt, net |
|
|
24,620 |
|
3.79 |
% |
|
24,594 |
|
3.71 |
% |
|
32,948 |
|
4.47 |
% |
Total borrowed funds |
|
|
211,808 |
|
4.07 |
% |
|
116,578 |
|
3.19 |
% |
|
75,505 |
|
2.85 |
% |
Total Interest-bearing Liabilities |
|
|
1,603,275 |
|
1.36 |
% |
|
1,580,157 |
|
0.89 |
% |
|
1,478,109 |
|
0.40 |
% |
Demand deposits |
|
|
539,659 |
|
|
|
|
563,567 |
|
|
|
|
529,077 |
|
|
|
Other liabilities |
|
|
25,247 |
|
|
|
|
26,171 |
|
|
|
|
24,046 |
|
|
|
Total Liabilities |
|
|
2,168,181 |
|
|
|
|
2,169,895 |
|
|
|
|
2,031,232 |
|
|
|
Stockholders' equity, excluding accumulated other comprehensive loss |
|
|
299,599 |
|
|
|
|
296,717 |
|
|
|
|
295,996 |
|
|
|
Accumulated other comprehensive loss |
|
|
(46,961) |
|
|
|
|
(55,470) |
|
|
|
|
(1,742) |
|
|
|
Total Stockholders' Equity |
|
|
252,638 |
|
|
|
|
241,247 |
|
|
|
|
294,254 |
|
|
|
Total Liabilities and Stockholders' Equity |
|
$ |
2,420,819 |
|
|
|
$ |
2,411,142 |
|
|
|
$ |
2,325,486 |
|
|
|
Interest Rate Spread |
|
|
|
|
3.30 |
% |
|
|
|
3.62 |
% |
|
|
|
3.73 |
% |
Net Interest Income/Earning Assets |
|
|
|
|
3.71 |
% |
|
|
|
3.89 |
% |
|
|
|
3.86 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Deposits (Interest-bearing and Demand) |
|
$ |
1,931,126 |
|
|
|
$ |
2,027,146 |
|
|
|
$ |
1,931,681 |
|
|
|
(1)Annualized rates of return on tax-exempt securities and loans are presented on a fully taxable-equivalent basis, using the Corporation’s marginal federal income tax rate of 21%.
(2) |
Nonaccrual loans have been included with loans for the purpose of analyzing net interest earnings. |
(3) |
Rates of return on earning assets and costs of funds have been presented on an annualized basis. |
11
COMPARISON OF NONINTEREST INCOME
(In Thousands)
|
|
Three Months Ended |
|||||||
|
|
March 31, |
|
December 31, |
|
March 31, |
|||
|
|
2023 |
|
2022 |
|
2022 |
|||
Trust revenue |
|
$ |
1,777 |
|
$ |
1,749 |
|
$ |
1,786 |
Brokerage and insurance revenue |
|
|
430 |
|
|
507 |
|
|
522 |
Service charges on deposit accounts |
|
|
1,290 |
|
|
1,357 |
|
|
1,235 |
Interchange revenue from debit card transactions |
|
|
1,007 |
|
|
1,098 |
|
|
963 |
Net gains from sales of loans |
|
|
74 |
|
|
24 |
|
|
382 |
Loan servicing fees, net |
|
|
122 |
|
|
203 |
|
|
210 |
Increase in cash surrender value of life insurance |
|
|
138 |
|
|
140 |
|
|
135 |
Other noninterest income |
|
|
771 |
|
|
1,032 |
|
|
588 |
Total noninterest income, excluding realized gains |
|
$ |
5,609 |
|
$ |
6,110 |
|
$ |
5,821 |
COMPARISON OF NONINTEREST EXPENSE
(In Thousands)
|
|
Three Months Ended |
|||||||
|
|
March 31, |
|
December 31, |
|
March 31, |
|||
|
|
2023 |
|
2022 |
|
2022 |
|||
Salaries and employee benefits |
|
$ |
11,427 |
|
$ |
10,135 |
|
$ |
10,607 |
Net occupancy and equipment expense |
|
|
1,402 |
|
|
1,316 |
|
|
1,411 |
Data processing and telecommunications expenses |
|
|
1,936 |
|
|
1,744 |
|
|
1,623 |
Automated teller machine and interchange expense |
|
|
475 |
|
|
473 |
|
|
384 |
Pennsylvania shares tax |
|
|
403 |
|
|
493 |
|
|
488 |
Professional fees |
|
|
937 |
|
|
515 |
|
|
489 |
Other noninterest expense |
|
|
2,507 |
|
|
1,911 |
|
|
1,884 |
Total noninterest expense |
|
$ |
19,087 |
|
$ |
16,587 |
|
$ |
16,886 |
12