Citizens & Northern Corporation (NASDAQ:CZNC) is a regional bank that has demonstrated remarkable resilience in the face of challenging economic conditions. With a strong presence in Northcentral Pennsylvania, the Southern tier of New York State, Southeastern Pennsylvania, and Southcentral Pennsylvania, CZNC has carved out a niche for itself as a trusted financial institution serving the needs of its local communities.

Financials

In the latest fiscal year, CZNC reported an annual net income of $24,148,000 and annual revenue of $137,921,000. The company's annual operating cash flow stood at $33,072,000, while its annual free cash flow reached $807,000. These figures underscore the bank's ability to generate consistent and stable financial performance, even in the midst of economic headwinds.

Looking at the quarterly data, CZNC reported net income of $5,306,000 and revenue of $30,336,000 in the first quarter of 2024. The company's operating cash flow for the quarter was $5,729,000, while its free cash flow stood at -$18,623,000. These numbers demonstrate the bank's continued ability to generate strong financial results, even as it navigates the challenges posed by the current economic environment.

Business Overview

One of the key strengths of CZNC is its diversified loan portfolio, which includes commercial real estate, commercial and industrial loans, residential mortgages, and consumer loans. As of March 31, 2024, the bank's total loans receivable stood at $1,872,449,000, with a net loans balance of $1,852,426,000 after the allowance for credit losses of $20,023,000.

The company's commercial real estate portfolio, which accounts for a significant portion of its loan book, is well-diversified across various property types, including non-owner occupied, owner-occupied, and other commercial real estate loans. As of March 31, 2024, the non-owner occupied commercial real estate loans totaled $739,829,000, or 39.5% of the total loan portfolio, with the largest concentrations in the industrial (23.1%), retail (18.5%), and office (18.5%) sectors.

CZNC's residential mortgage loan portfolio, which makes up 21.9% of the total loan book, has also demonstrated resilience, with a nonaccrual loan rate of just 0.96% as of March 31, 2024. The bank's consumer loan portfolio, which accounts for 3.2% of total loans, has also remained stable, with a nonaccrual loan rate of 0.53% as of the same date.

Asset Quality

The bank's asset quality metrics have remained strong, with a nonperforming asset ratio of 0.78% as of March 31, 2024, up from 0.75% at the end of 2023. The allowance for credit losses, which stood at $20,023,000 or 1.07% of total loans as of March 31, 2024, provides a solid cushion against potential credit losses.

Funding and Deposits

CZNC's funding profile is also well-diversified, with a loan-to-deposit ratio of 92.8% as of March 31, 2024. The bank's deposit base is primarily composed of interest-bearing deposits (75.3%) and noninterest-bearing deposits (24.7%), providing a stable source of funding for its lending activities.

Liquidity

In terms of liquidity, CZNC maintains a strong position, with cash and due from banks totaling $46,448,000 as of March 31, 2024. The bank also has access to additional liquidity sources, including a $927,950,000 credit facility with the Federal Home Loan Bank of Pittsburgh, of which $712,932,000 was available as of the same date. This ample liquidity position allows CZNC to meet its short-term and long-term funding obligations with ease.

Capital Ratios

The bank's capital ratios also remain robust, with a total risk-based capital ratio of 14.77% and a Tier 1 risk-based capital ratio of 13.67% as of March 31, 2024, well above the regulatory minimum requirements. This strong capitalization provides CZNC with the flexibility to support its growth initiatives and withstand potential economic downturns.

Outlook

Looking ahead, CZNC's management has provided guidance for the upcoming quarter, indicating that they expect to maintain their strong financial performance. The bank's focus on prudent risk management, diversified revenue streams, and a commitment to serving its local communities have been the key drivers of its success, and these strategies are expected to continue to serve the company well in the future.

Conclusion

In conclusion, Citizens & Northern Corporation is a well-positioned regional bank that has demonstrated its ability to navigate challenging economic conditions. With a diversified loan portfolio, strong asset quality, ample liquidity, and robust capital ratios, CZNC is poised to continue delivering value to its shareholders and supporting the growth and development of the communities it serves.