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CITIZENS & NORTHERN CORP (CZNC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 diluted EPS was $0.40, flat year over year and down a penny sequentially; EPS missed S&P Global consensus by $0.07 as elevated provision for credit losses and higher donations expense offset stronger net interest income . EPS consensus: $0.47*.
  • Net interest margin expanded to 3.52% (from 3.38% in Q1 and 3.31% YoY) on lower funding costs and modest earning asset yield improvement; net interest income rose 8.7% YoY to $21.1M .
  • Deposits rose to $2.110B (+$7.6M QoQ) despite a $17.0M decline in brokered deposits; highly liquid available funding covered 175.6% of uninsured deposits, underscoring balance sheet resilience .
  • Credit costs increased: provision for credit losses was $2.354M vs $236K in Q1, driven by qualitative factor updates and the economic forecast; nonperforming assets rose to 0.98% of total assets .
  • Strategic catalyst: pending acquisition of Susquehanna Community Financial remains on track for Q4 2025 close; management projects ~17% EPS accretion in 2026 and ~30% cost saves on SQCF’s base, though CET1 could dip to ~11.5% at close before rebuilding .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin expanded to 3.52% (vs. 3.38% in Q1 and 3.31% YoY); spread improved 15 bps QoQ on lower liability costs, boosting net interest income by $1.17M QoQ and $1.70M YoY .
  • Core funding improved: total deposits increased $7.6M QoQ with brokered deposits down $17.0M; uninsured deposits coverage by highly liquid funding stood at 175.6% (and 221.2% vs uninsured/uncollateralized) .
  • Strategic M&A: “This combination continues our strategic efforts to enter attractive markets through acquisition…a great fit” — CEO J. Bradley Scovill on SQCF deal benefits (scale, diversification, resiliency) .

What Went Wrong

  • Provision for credit losses rose sharply to $2.354M (vs. $236K in Q1 and $565K YoY) due to increases in ACL from qualitative factors and the economic forecast; net charge-offs increased to $548K (0.12% annualized) .
  • Nonperforming assets increased to $25.7M (0.98% of assets) from $24.3M (0.93%) in Q1 and $19.8M (0.76%) YoY; nonperforming loans reached 1.32% of total loans .
  • Operating expenses edged higher QoQ (+$355K), including a $939K spike in donations expense tied to PA EITC tax-credit programs and $167K merger-related costs; lower trust revenue also weighed sequentially .

Financial Results

Headline Trend vs Prior Two Quarters (S&P “Revenue” and EPS)

MetricQ4 2024Q1 2025Q2 2025
Diluted EPS ($)$0.53 $0.41 $0.40
Revenue (S&P, $USD Millions)*$28.55$26.75$26.93

Values retrieved from S&P Global.*

Detailed Quarterly Comparison vs Prior Year and Prior Quarter

MetricQ2 2024Q1 2025Q2 2025
Diluted EPS ($)$0.40 $0.41 $0.40
Net Interest Income ($USD Millions)$19.45 $19.98 $21.14
Noninterest Income ($USD Millions)$7.85 $7.01 $8.14
Net Interest Margin (%)3.31% 3.38% 3.52%
Provision for Credit Losses ($USD Millions)$0.57 $0.24 $2.35
Revenue (S&P, $USD Millions)*$26.73$26.75$26.93
EPS Consensus (S&P, $)*/Actual$0.37/$0.40$0.44/$0.41$0.47/$0.40

Values retrieved from S&P Global.*

Highlights:

  • EPS missed consensus in Q2 (actual $0.40 vs $0.47; bold miss) and Q1 (actual $0.41 vs $0.44; slight miss); Q2 2024 was a beat (actual $0.40 vs $0.37) . EPS consensus values from S&P Global.*

Segment/Mix Snapshot (Loans by Type)

Loan Type ($USD Millions)Q1 2025Q2 2025
CRE – Non-owner occupied$733.70 $757.96
CRE – Owner occupied$260.25 $261.16
Commercial & Industrial$96.23 $97.63
Commercial Lines of Credit$128.29 $124.52
Political Subdivisions$94.05 $83.81
Commercial Construction & Land$96.18 $99.51
Residential Mortgage (Total)$402.25 $398.50
Consumer (Total)$66.05 $71.15
Total Gross Loans$1,898.43 $1,919.26

KPIs and Balance Sheet

KPIQ2 2024Q1 2025Q2 2025
Total Deposits ($USD Millions)$2,059.31 $2,102.14 $2,109.78
Brokered Deposits ($USD Millions)$59.50 $22.02 $5.01
Estimated Uninsured Deposits (%)21.6% 22.8% 24.2%
Highly Liquid Funding / Uninsured Deposits (%)173.7% 182.7% 175.6%
Nonperforming Assets / Total Assets (%)0.76% 0.93% 0.98%
ACL / Total Loans (%)1.08% 1.06% 1.13%
Net Charge-offs (annualized, %)0.04% 0.02% 0.12%
Trust AUM ($USD Millions)1,284.67 1,336.74 1,380.55
Total Assets ($USD Millions)2,593.12 2,609.23 2,610.88

Non-GAAP:

  • Fully taxable-equivalent net interest income uplift was $220K in Q2 (vs $211K in Q1, $202K YoY) .
  • Efficiency ratio for 1H25 was 67.51% (ex-merger costs) vs 70.32% in 1H24, indicating improved operating efficiency .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Quarterly DividendQ3 2025 pay date$0.28/share $0.28/share payable Aug 15, 2025; record Aug 4, 2025 Maintained
SQCF Merger Close TimingQ4 2025Announced Apr 23, 2025; close targeted Q4 2025 Close expected Q4 2025; subject to approvals Maintained
SQCF EPS AccretionFY 2026N/A~17% EPS accretion expected in 2026 New
SQCF Cost SavesFY 2026N/A~30% of SQCF operating base; 100% recognized in 2026 New
CET1 Ratio (Pro forma at close)CloseCET1 13.6% at 1Q25 CET1 ~11.5% at close, rebuild thereafter Lower

Earnings Call Themes & Trends

Note: A Q2 2025 earnings call transcript was not available in our document set.

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
Net Interest Margin3.30%; slight QoQ improvement; liability costs down 3.38%; margin improved vs Q4 3.52%; spread +15 bps QoQ on lower liability rates Improving
Credit ProvisioningCredit (–$0.53M) on ACL model inputs Provision $0.24M; qualitative factors increase Provision $2.35M; qualitative and economic forecast impacts; NCOs rose Tightening / Higher credit costs
Deposits & LiquidityDeposits fell QoQ; uninsured 22.3%; coverage 170.7% Deposits up QoQ; uninsured 29.3%; coverage 182.7% Deposits up QoQ; brokered down; coverage 175.6% Stable/Resilient funding
Office CRE Exposure$102.8M (5.4% loans); one partial charge-off $108.6M (5.7% loans); 2 nonaccrual loans, no IAs $118.0M (6.1% loans); 2 nonaccrual, no IAs Slightly higher exposure
Technology/Data Processing CostsElevated in Q4 2024 Higher tech infrastructure and software costs No notable incremental disclosure beyond cost mix; overall noninterest expense +$355K QoQ Mixed

Management Commentary

  • “This combination continues our strategic efforts to enter attractive markets through acquisition and leverages the strengths of two reputable community banks…We believe this is a great fit…” — J. Bradley Scovill, President & CEO, on the SQCF merger .
  • “This transaction is very positive for our shareholders…to create greater value…partner with a significant and growing bank like C&N that will provide our customers access to a diversified product set and expanded banking capabilities.” — David S. Runk, CEO of SQCF .
  • Q2 operational notes: provision increase reflected qualitative factors and macro forecast changes; donations under PA EITC drove other income and expense volatility (tax credits of $829K, donations expense +$939K) .

Q&A Highlights

  • Not available: No Q2 2025 earnings call transcript found in our document set.

Estimates Context

  • EPS: Q2 2025 actual $0.40 vs consensus $0.47 (miss); Q1 2025 actual $0.41 vs $0.44 (miss); Q2 2024 actual $0.40 vs $0.37 (beat). Drivers of the miss were higher provision for credit losses and donations-related expense timing despite stronger NIM . EPS consensus values from S&P Global.*
  • Revenue (S&P definition): Q2 2025 actual $26.93M vs consensus $27.70M (miss); Q1 2025 actual $26.75M vs $27.70M (miss). Note: S&P revenue definition may differ from GAAP net interest income + noninterest income presented in company materials.*
MetricQ2 2024Q1 2025Q2 2025
EPS Actual ($)$0.40 $0.41 $0.40
EPS Consensus ($)*$0.37$0.44$0.47
Revenue Actual (S&P, $MM)*$26.73$26.75$26.93
Revenue Consensus (S&P, $MM)*N/A$27.70$27.70

Values retrieved from S&P Global.*

Where estimates may adjust:

  • Expect analysts to revisit credit cost assumptions (ACL build, NCOs) and noninterest expense trajectory (donations cadence, merger-related costs) given Q2 variance vs consensus .

Key Takeaways for Investors

  • Watch credit cost trajectory: Q2’s ACL build and higher NCOs signal a tighter credit stance; sustainability of higher provisions will be key for EPS sensitivity in 2H25 .
  • NIM momentum is constructive: liability cost tailwinds and earning asset yields expanded margin; if maintained, this underpins core pre-provision earnings power .
  • Funding mix improving: deposits up with sharp brokered reduction; robust liquidity coverage reduces funding risk, supportive in a volatile rate backdrop .
  • M&A creates scale and diversification: track regulatory milestones for SQCF; the ~17% 2026 EPS accretion and ~30% cost saves are attractive, balanced against temporary CET1 dilution to ~11.5% at close .
  • Office CRE monitoring: exposure rose modestly to 6.1% of loans; nonaccruals remain limited, but macro office risk warrants continued vigilance .
  • Near-term trading lens: EPS miss driven by provisions and donations expense timing; focus on upcoming quarters for normalization of noninterest expense and credit costs .
  • Medium-term thesis: If NIM holds and SQCF integration delivers guided synergies, ROE/efficiency can improve despite near-term capital dilution; watch estimate revisions as analysts incorporate credit costs and M&A .