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Citizens & Northern Corp Reports Operating Results (10-Q)

November 07, 2011 | About:
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10qk

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Citizens & Northern Corp (CZNC) filed Quarterly Report for the period ended 2011-09-30.

Citizens & Northern Corp has a market cap of $203.58 million; its shares were traded at around $16.75 with a P/E ratio of 11.8 and P/S ratio of 2.68. The dividend yield of Citizens & Northern Corp stocks is 3.82%.

Highlight of Business Operations:

Third quarter 2011 net income available to common shareholders was $5,989,000, or 5.1% higher than second quarter 2011 net income. Net income per basic and diluted common share was $0.49 in the third quarter 2011, as compared to $0.47 in the second quarter 2011 and 44.1% higher than basic and diluted earnings per share of $0.34 in the third quarter 2010. Year-to-date net income for the first nine months of 2011 was $17,227,000, or $1.42 per share, up 35.2% on a per-share basis from the first nine months of 2010.

Noninterest revenue was $3,999,000 in the third quarter 2011, up from $3,673,000 in the second quarter 2011 and $3,562,000 in the third quarter 2010. In the third quarter 2011, noninterest revenue included net gains from sales of premises and equipment of $324,000, including a gain of $329,000 from sale of the banking facility at 130 Court Street, Williamsport, PA. The Corporation has entered into a leasing arrangement to continue to utilize a portion of the facility and continues to provide retail, trust and commercial banking services at the location. The Corporation expects to realize a reduction in annual expense of approximately $150,000 (pre-tax) as a result of the new arrangement. For the nine months ended September 30, 2011, noninterest revenue totaled $10,227,000, down from $10,370,000 in the first nine months of 2010. Total noninterest revenue included net gains from sales of premises and equipment of $324,000 in 2011 and $445,000 in 2010. Also, in the first quarter 2011 the Corporation recorded an impairment loss of $948,000 related to an investment in a real estate limited partnership. Excluding gains from sales of premises and equipment and the impairment loss, noninterest revenue for the first nine months of 2011 totaled $10,851,000, or 9.3% higher than the corresponding 2010 amount. In the first nine months of 2011, revenues have increased significantly over the corresponding period of 2010 from brokerage services, interchange fees on debit card transactions, origination and sale of mortgage loans, service charges on deposit accounts and other operating income.

For the nine-month periods, fully taxable equivalent net interest income was $37,735,000 in 2011, $3,762,000 (11.1%) higher than in 2010. As shown in Table IV, net changes in volume had the effect of increasing net interest income $2,809,000 in 2011 compared to 2010, and interest rate changes had the effect of increasing net interest income $953,000. The most significant components of the volume change in net interest income in 2011 were a decrease in interest expense of $1,390,000 attributable to a reduction in the balance of long-term borrowed funds and an increase in interest income of $1,248,000 attributable to growth in the balance of available-for-sale securities. The most significant components of the rate change in net interest income in 2011 were a decrease in interest expense of $2,188,000 due to lower rates paid on interest-bearing deposits and a decrease in interest income of $920,000 attributable to lower rates earned on available-for-sale securities. As presented in Table III, the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) was 3.91% in 2011, as compared to 3.47% in 2010.

As described in the Earnings Overview section of Management s Discussion and Analysis, in the third quarter 2011, the Corporation realized net gains from sales of premises and equipment totaling $324,000, including a gain of $329,000 from sale of the Court Street, Williamsport, PA location. The Corporation has entered into a leasing arrangement to continue to utilize a portion of the facility. The leaseback is for use of approximately 18% of the total building space, for a period of two years with monthly rent of approximately $8,000 per month, plus allocable utilities, property taxes and other building-related expenses identified in the lease. The lease provides the Corporation with an option to renew for an additional two years, for monthly rent of approximately $9,000 per month, plus allocable building-related expenses. The Corporation s continuing interest in the property is limited to its role as lessee, and the Corporation did not provide financing to the buyer. The Corporation has accounted for the leaseback as an operating lease. In the nine months ended September 30, 2010, net gains from sales of premises and equipment totaled $445,000, including a first quarter gain of $448,000 from the sale of a parcel adjacent to the Court Street, Williamsport location.

Total noninterest income, excluding securities gains, amounted to $3,999,000 in the third quarter 2011, which was $437,000 (12.3%) higher than in the third quarter 2010. As described above, third quarter 2011 results included net gains from sales of premises and equipment of $324,000, mainly from sale of the Court Street, Williamsport location under a sale-leaseback transaction. As reflected in Table V, other significant increases were from: (1) brokerage revenue, which was up $97,000, or 95.1%; (2) service charges on deposit accounts, which were up $64,000 or 5.5%; (3) interchange revenues, which increased $63,000, or 14.8%; and other operating income, which was up $52,000, or 26.8%. Trust and financial management revenue was $91,000, or 10.4%, lower in the third quarter 2011 as compared to the third quarter 2010. In the third quarter 2010, trust revenues included fees associated with several large estates, with no comparable transactions in the third quarter 2011.

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