EXHIBIT 99.2
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December 31, 2021 | QUARTERLY REPORT |
Dear Shareholder:
C&N delivered a strong fourth quarter performance and record net income for 2021 of $30.6 million. These results were supported by our relationship-based business model and recent acquisitions, as well as the government’s response to COVID-19 and subsequent economic rebound. The C&N Team was steadfast in its focus on our mission of “Creating Value Through Lifelong Relationships” during 2021, producing great results in a unique environment. The last three months of 2021 remained volatile as the world continued to debate and react to the pandemic and its impact on the economy, public policy, and our culture. Real GDP is estimated to have increased by 6%, fueled by robust consumer spending. While this is good news, there are persistent supply chain, workforce, and inflation pressures affecting many individuals and businesses. Cumulatively, these pressures have driven a modest increase in intermediate and long-term interest rates and more certainty that the Fed will act to raise short-term rates early in 2022. Progress regarding COVID-19 that was evident early in the fourth quarter slipped a bit with the rapid spread of the Omicron variant beginning in December, creating renewed uncertainty about the course of the pandemic and public policy reaction.
Through all these challenges, C&N’s team members have been fully engaged to provide support, counsel, and solutions to the needs of our customers and communities. This consistency has positioned C&N as a dependable partner, resource, and trusted advisor for all that we serve, and underpins the persistency of our earnings and overall financial strength. Themes for the quarter also remained consistent with prior periods as lending activity in all segments was solid, PPP forgiveness advanced, the wealth management business continued to grow, and the improved base of core deposits was sustained. C&N’s excellent risk profile also carried on as credit metrics improved, and liquidity and capital levels remained outstanding.
Earnings for the fourth quarter of 2021 were $7.3 million, or $.46 per share compared to $6.8 million, or $.43 per share during the fourth quarter of 2020. After adjusting for merger-related expenses and loss on prepayment of borrowings, net income for the fourth quarter of 2020 was $8.2 million, or $.52 per share. Net interest income for the fourth quarter of $19.72 million was $39,000 lower than 2020 as average loans outstanding declined by $115.2 million, including a reduction in average PPP loans of $112.5 million, while average total deposits increased $87.6 million. The net interest margin was 3.65% for the quarter compared to 3.76% a year earlier. The ongoing low interest rate environment, and higher than normal average balance of lower-yielding deposits with the Federal Reserve and other banks, continue to put pressure on the net interest margin.
The provision for loan losses was $1,128,000 in the fourth quarter compared to $620,000 in the fourth quarter of 2020. In each of these quarters, the provision was impacted by increases in the collectively determined portion of the allowance due to loan growth, other than PPP. C&N’s credit metrics improved during 2021 as reflected in past due, non-performing loans, and troubled debt restructuring (TDR) balances. As of December 31, 2021, no loans remain in deferral status to support clients impacted by COVID-19.
Noninterest income for the fourth quarter of 2021 was $6.4 million, a decrease of $149,000 from the fourth quarter 2020 total. Increased revenue from wealth management, deposit service charges and interchange fees were more than offset by a reduction in net gains from sale of loans due to lower volumes.
Noninterest expenses of $16.0 million increased $243,000 during the fourth quarter 2021 compared to the fourth quarter 2020 total, excluding merger-related costs and loss on prepayment of borrowings. Information technology-related expenses and professional fees were the primary drivers of expense growth, while salaries and employee benefits costs declined as the costs of incentive compensation plans were adjusted at year-end.
