Overview of Financial Performance

Community Bank Corporation reported solid financial results for the year ended December 31, 2024. Total assets increased 1.8% to $1.48 billion, driven by growth in the securities portfolio. Net income was $12.6 million, down from $19.4 million in 2023 due to a one-time gain on the sale of the insurance brokerage subsidiary in the prior year.

The company’s net interest income increased 3.4% to $46.1 million, as higher yields on interest-earning assets offset rising funding costs. Net interest margin declined slightly to 3.19% from 3.28% in 2023. Noninterest income decreased 77.1% to $5.5 million, primarily due to the absence of the insurance brokerage gain recorded in 2023. Noninterest expense declined 8.1% to $35.6 million, reflecting lower personnel and amortization costs.

Revenue and Profit Trends

Net interest income, which is the difference between interest earned on loans and investments and interest paid on deposits and borrowings, is the company’s primary revenue source. Net interest income grew $1.5 million, or 3.4%, in 2024 compared to 2023. This was driven by a 69 basis point increase in the yield on interest-earning assets, which offset a 86 basis point rise in the cost of interest-bearing liabilities.

The net interest margin, which measures net interest income as a percentage of average earning assets, decreased to 3.19% in 2024 from 3.28% in 2023. This decline was due to the faster repricing of interest-bearing liabilities compared to interest-earning assets in the rising rate environment.

Noninterest income, which includes service fees, commissions, and gains on asset sales, decreased $18.5 million, or 77.1%, in 2024. This was primarily due to the absence of the $24.6 million pre-tax gain on the sale of the insurance brokerage subsidiary recorded in 2023. Excluding this one-time gain, noninterest income would have increased $5.9 million, or 107.3%, driven by higher gains on securities sales and other income.

Noninterest expense decreased $3.1 million, or 8.1%, in 2024. This was mainly due to lower personnel costs, as the company no longer had expenses related to the insurance brokerage, as well as a decline in amortization of intangible assets. These decreases were partially offset by higher contracted services and data processing expenses.

Overall, the company’s net income declined $6.8 million, or 35.0%, to $12.6 million in 2024. This was primarily attributable to the absence of the insurance brokerage gain in the prior year, which more than offset the improvements in net interest income and noninterest expense.

Strengths and Weaknesses

A key strength of Community Bank Corporation is its strong capital position. The bank’s common equity tier 1 capital ratio was 14.78% at the end of 2024, well above the 6.5% level required to be considered “well capitalized” by regulators. This provides the bank with the flexibility to support asset growth and withstand potential future credit losses.

Another strength is the company’s diversified loan portfolio, with commercial real estate, residential mortgages, and consumer loans each comprising a significant portion. This diversification helps mitigate concentration risk. The bank’s nonperforming assets ratio of 0.12% at the end of 2024 is also quite low, indicating strong asset quality.

A potential weakness is the company’s reliance on net interest income, which accounted for 89.4% of total revenue in 2024. This exposes the bank to interest rate risk, as evidenced by the decline in net interest margin in the rising rate environment. The company’s sensitivity analysis shows net interest income could decline by up to 7.8% in a severe interest rate shock scenario.

Additionally, the company’s noninterest income is heavily dependent on one-time gains, such as the insurance brokerage sale in 2023. Excluding these gains, the bank’s noninterest income growth has been modest, suggesting a need to diversify revenue streams.

Outlook and Conclusion

Looking ahead, the company’s performance will likely continue to be influenced by the interest rate environment and its ability to manage net interest margin compression. Loan growth and credit quality will also be key drivers of future profitability.

To enhance its long-term prospects, Community Bank Corporation may need to focus on growing noninterest income through expanded fee-based services and reducing its reliance on net interest income. Prudent expense management will also be important, as will maintaining the bank’s strong capital position to support future growth.

Overall, Community Bank Corporation delivered solid results in 2024, though its profitability was impacted by the absence of the one-time insurance brokerage gain. The company’s diversified balance sheet, strong capital levels, and experienced management team position it well to navigate the challenges of the current operating environment.