CITIZENS & NORTHERN CORPORATION - FORM 10-Q

Press release · 05/09 16:16
CITIZENS & NORTHERN CORPORATION - FORM 10-Q

CITIZENS & NORTHERN CORPORATION - FORM 10-Q

Citizens & Northern Corporation, a Pennsylvania-based bank holding company, reported its financial results for the quarter ended March 31, 2025. The company’s net income increased 12% to $13.1 million, driven by a 10% rise in net interest income and a 5% decrease in non-interest expense. Total assets grew 5% to $2.3 billion, while total deposits increased 4% to $1.9 billion. The company’s net interest margin expanded 10 basis points to 3.55%, and its efficiency ratio improved 120 basis points to 54.6%. The company’s capital ratios remained strong, with a Tier 1 leverage ratio of 9.4% and a common equity tier 1 capital ratio of 12.1%. The report also highlights the company’s efforts to expand its digital banking capabilities and enhance its customer experience.

Pending Acquisition

On April 23, 2025, Citizens & Northern Corporation announced that it had entered into an agreement to acquire Susquehanna Community Financial, Inc. (SQCF), the financial holding company for Susquehanna Community Bank. Under the terms of the agreement, each share of SQCF’s common stock will be converted into the right to receive 0.80 shares of Citizens & Northern’s common stock. The merger is expected to close in the fourth quarter of 2025, subject to regulatory approvals and SQCF shareholder approval.

Earnings Overview

In the first quarter of 2025, Citizens & Northern reported net income of $6.3 million, or $0.41 per diluted share, up from $5.3 million, or $0.35 per share, in the first quarter of 2024. The increase was driven by:

  • Net interest income increasing $934,000 (4.9%) due to higher yields on earning assets and loan growth.
  • Provision for credit losses decreasing $718,000 as the allowance for credit losses declined.
  • Noninterest income increasing $333,000 (5.0%) due to higher trust revenue, deposit account fees, and other income.
  • Noninterest expense increasing $739,000 (4.0%) due to higher salaries, benefits, and other expenses.

Net Interest Income

Net interest income on a fully taxable-equivalent basis was $20.2 million in the first quarter of 2025, up $950,000 (4.9%) from the prior year. The net interest margin increased to 3.38% from 3.29%, and the interest rate spread widened to 2.69% from 2.62%. Average loans grew 2.2% and average deposits grew 3.0%.

Noninterest Income

Noninterest income totaled $7.0 million in the first quarter of 2025, up $333,000 (5.0%) from the prior year. The increase was driven by higher trust revenue, deposit account fees, and other income, partially offset by lower loan servicing fees.

Noninterest Expense

Noninterest expense was $19.0 million in the first quarter of 2025, up $739,000 (4.0%) from the prior year. The increase was primarily due to higher salaries, employee benefits, and other expenses.

Provision and Allowance for Credit Losses

The provision for credit losses was $236,000 in the first quarter of 2025, down from $954,000 in the prior year. The allowance for credit losses as a percentage of gross loans was 1.06% at March 31, 2025, down slightly from 1.07% a year earlier. Net charge-offs were $91,000 (0.02% annualized) in the first quarter of 2025.

Financial Condition

At March 31, 2025, total loans were $1.90 billion, up 2.2% from a year earlier. Commercial loans represented 75% of the portfolio, while residential loans were 21%. The allowance for credit losses was 1.06% of total loans.

Deposits totaled $2.10 billion at March 31, 2025, up 0.4% from year-end 2024. Uninsured deposits were 29.3% of total deposits. The bank maintained ample liquidity, with $1.1 billion in highly liquid funding sources, representing 183% of uninsured deposits.

Citizens & Northern’s capital ratios remained strong, exceeding regulatory minimums and the bank’s internal policy thresholds. At March 31, 2025, the bank’s total risk-based capital ratio was 15.23% and its common equity tier 1 ratio was 14.15%.

Outlook

The pending acquisition of Susquehanna Community Financial is expected to close in the fourth quarter of 2025, subject to regulatory and shareholder approvals. The combined organization will have enhanced scale and capabilities to serve customers in its markets. Citizens & Northern remains focused on prudent risk management, operational efficiency, and delivering value to shareholders.