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非業主住宅和自有住宅成員之外的商業貸款，不包括購買信用受損成員US-GAAP：未過期金融資產會員2023-12-310000810958us-gaap:住宅投資組合細分成員us-gaap:次標準會員2023-12-310000810958us-gaap:住宅投資組合細分成員美國通用會計準則：特別提及成員2023-12-310000810958us-gaap:住宅投資組合細分成員過渡成員2023-12-310000810958美國通用會計準則：消費者投資組合部分成員us-gaap:次標準會員2023-12-310000810958美國通用會計準則：消費者投資組合部分成員美國通用會計準則：特別提及成員2023-12-310000810958美國通用會計準則：消費者投資組合部分成員過渡成員2023-12-310000810958美國通用會計準則：消費者投資組合部分成員存疑會計政策成員2023-12-310000810958美元指數：商業投資組合部分成員cznc : Commercial Real Estate Loans Owner Occupied Excluding Purchased Credit Impaired Member2023-12-310000810958美元指數：商業投資組合部分成員cznc：除購買信用受損成員外的業主佔用和非業主佔用的商業貸款2023-12-310000810958cznc：住宅組合部分新會員US-GAAP：未過期金融資產會員2023-12-310000810958cznc：消費組合部分新會員US-GAAP：未過期金融資產會員2023-12-310000810958us-gaap:次標準會員2023-12-310000810958美國通用會計準則：特別提及成員2023-12-310000810958過渡成員2023-12-310000810958US-GAAP：未過期金融資產會員2023-12-310000810958存疑會計政策成員2023-12-310000810958us-gaap:住宅投資組合細分成員存疑會計政策成員2023-01-012023-12-310000810958美元指數：商業投資組合部分成員cznc : Commercial Real Estate Loans Owner Occupied Member2023-01-012023-12-310000810958美元指數：商業投資組合部分成員cznc：非業主佔用的商業地產貸款會員2023-01-012023-12-310000810958美元指數：商業投資組合部分成員cznc：非業主佔用和業主佔用之外的商業貸款會員2023-01-012023-12-310000810958us-gaap:住宅投資組合細分成員2023-01-012023-12-310000810958美國通用會計準則：消費者投資組合部分成員2023-01-012023-12-3100008109582023-01-012023-12-310000810958美元指數：商業投資組合部分成員cznc：非業主佔用的商業地產貸款會員us-gaap:過期超過90天的融資應收款項成員2024-09-300000810958美元指數：商業投資組合部分成員cznc：商業房地產貸款非所有者佔用成員US-GAAP：未過期金融資產會員2024-09-300000810958cznc：住宅投資組合新成員2024-09-300000810958cznc：消費者投資組合新成員2024-09-300000810958美元指數：商業投資組合部分成員cznc：商業房地產貸款非所有者佔用成員us-gaap:過期超過90天的融資應收款項成員2024-06-300000810958美元指數：商業投資組合部分成員cznc：商業房地產貸款非業主佔用會員US-GAAP：未過期金融資產會員2024-06-300000810958美元指數：商業投資組合部分成員cznc：商業房地產貸款業主佔用會員2024-06-300000810958美元指數：商業投資組合部分成員cznc：商業房地產貸款非業主佔用會員2024-06-300000810958美元指數：商業投資組合部分成員cznc：非業主佔用和業主佔用會員之外的商業貸款2024-06-300000810958cznc：住宅投資組合新會員2024-06-300000810958cznc：消費者投資組合新會員2024-06-300000810958美元指數：商業投資組合部分成員cznc：商業房地產貸款非業主佔用會員US-GAAP：未過期金融資產會員2023-12-310000810958cznc：住宅投資組合新會員2023-12-310000810958cznc：消費者投資組合新會員2023-12-310000810958srt：採納調整的累積效應期成員美元指數：商業投資組合部分成員cznc：商業房地產貸款自用會員2023-09-300000810958srt：採納調整的累積效應期成員美元指數：商業投資組合部分成員cznc：商業房地產貸款非自用會員2023-09-300000810958srt：採納調整的累積效應期成員美元指數：商業投資組合部分成員cznc：非擁有者佔用和業主佔用成員之外的商業貸款2023-09-300000810958美元指數：商業投資組合部分成員cznc：商業房地產貸款業主佔用成員2023-09-300000810958美元指數：商業投資組合部分成員cznc：商業房地產貸款非業主佔用成員2023-09-300000810958美元指數：商業投資組合部分成員cznc：非擁有者佔用和業主佔用成員之外的商業貸款2023-09-300000810958srt：採納調整的累積效應期成員未分配融資應收款成員2023-09-300000810958srt：採納調整的累積效應期成員cznc：住宅投資組合部門新成員2023-09-300000810958srt：採納調整的累積效應期成員cznc：消費者投資組合部門新成員2023-09-300000810958未分配融資應收款成員2023-09-300000810958srt：採納調整的累積效應期成員2023-09-300000810958cznc：住宅投資組合部門新成員2023-09-300000810958消費者投資組合領域新會員2023-09-300000810958美元指數：商業投資組合部分成員商業地產貸款自住會員2023-06-300000810958美元指數：商業投資組合部分成員商業地產貸款非自住會員2023-06-300000810958美元指數：商業投資組合部分成員商業貸款除非自住和自住以外的其他會員2023-06-300000810958住宅投資組合領域新會員2023-06-300000810958cznc: 消費者貸款組新成員2023-06-300000810958美元指數：商業投資組合部分成員cznc: 商業房地產貸款自用成員2022-12-310000810958美元指數：商業投資組合部分成員cznc: 商業房地產貸款非自用成員2022-12-310000810958美元指數：商業投資組合部分成員cznc: 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目錄

​

​

Graphic

美國

證券交易委員會

華盛頓特區20549

表格 10-Q

(標記一個)

⌧ 根據1934年證券交易所法案第13或15(d)條的季報告

截至2024年6月30日季度結束 September 30, 2024

或

◻ ​

為過渡期從_______________至_________________________。

委員會文件號碼： 000-16084

CITIZENS & NORTHERN CORPORATION

（依照公司章程規定指定的登記證券名稱）

​

​

​

​

賓夕法尼亞

    

23-2451943

(依據所在地或其他管轄區)

​

(國稅局雇主識別號碼)

的註冊地或組織地點)

​

識別號碼)

​

90-92號主街, 威爾斯堡, 賓夕法尼亞州 16901

（主要行政辦公室地址）（郵政編碼）

570-724-3411

(註冊人的電話號碼，包括區號)

根據法案第12(b)條註冊的證券：

​

​

​

​

​

​

每個班級的標題

    

交易符號

    

註冊的每個交易所的名稱

普通股票面值為1.00美元

​

CZNC

​

納斯達克 資本市場

​

請檢查標記，確認註冊商是否(1)在過去的12個月內(或更短的期限，註冊商在該期限內需要提交此類報告)提交了證券交易法1934年第13條或15(d)條要求提交的所有報告；並且(2)過去90天一直受到此類報告的要求。 是 ⌧ 沒有 ◻

請以勾選標記表示該登記者是否在過去12個月內（或登記者被要求遞交此類文件的更短期間內）根據Regulation S-t第405條的規定，電子遞交了應遞交的每個互動數據文件。

是 ⌧ 否 ◻

請以勾選標記表示登記者是否為大型加速遞交人，加速遞交人，非加速遞交人，較小的報告公司或新興增長公司。 請參見《交易法》第120億2條中對“大型加速遞交人”，“加速遞交人”，“較小的報告公司”和“新興增長公司”定義的規定。

大型快速進入文件 ◻ 加速歸檔人 ⌧ 非加速檔案 ◻ 較小報告公司 ☐ 新興成長公司 ◻

如果一家新興成長型企業，請勾選“是”表示註冊人選擇不使用根據證券交易所法第13(a)條所提供的任何新的或修改後的財務會計準則的延長過渡期來遵守。 ◻

在Check Mark中指示註冊公司是否為空殼公司（根據交易所法規第120億2條的定義）。

是的 ☐ 無 ⌧

請指示在最近切實可行的日期，申報人各類普通股的股份總數。

​

普通股票（面值1.00美元）

15,414,132 截至2024年10月31日的流通股數

​

​

​

​

​

​

目錄

CITIZENS & NORTHERN CORPORATION – 報表10-Q

CITIZENS & NORTHERN CORPORATION

指數

​

​

第一部分。基本財務資訊

 

 

 

項目1.基本報表

 

 

合併資產負債表（未經審核）- 2024年9月30日和2023年12月31日

第3頁

 

 

合併損益表（未經審核）- 截至2024年9月30日和2023年的三個月和九個月期間

第4頁

​

合併綜合損益表（未經審核）- 截至2024年9月30日和2023年的三個月和九個月期間

第5頁

 

 

合併現金流量表（未經審核）- Nine截至2024年和2023年9月30日的-個月期間

第6頁

 

 

股東權益變動綜合報表（未經審核）-截至2024年和2023年9月30日的三個月和九個月期間

第7頁

 

 

附註未經審核的合併基本報表

第8至32頁

 

 

項目 2. 管理層對財務狀況和業績的討論與分析

頁碼 33 - 55

 

 

項目3.有關市場風險的定量和質量披露

頁碼 56 - 58

​

​

第四項。控制與程序。

頁碼 58

 

 

第二部分。其他資訊

第58至60頁

 

 

簽名

第61頁

​

​

​

2

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share and Per Share Data) (Unaudited)

​

​

​

​

​

​

​

​

    

September 30, 

    

December 31, 

(In Thousands, Except Share and Per Share Data)

​

2024

​

2023

ASSETS

 

​

  

 

​

  

Cash and due from banks:

 

​

  

 

​

  

Noninterest-bearing

​

$

25,707

​

$

24,855

Interest-bearing

​

 

158,506

​

 

32,023

Total cash and due from banks

​

 

184,213

​

 

56,878

Available-for-sale debt securities, at fair value

​

 

408,422

​

 

415,755

​

​

​

​

​

​

​

Loans receivable

​

 

1,892,764

​

 

1,848,139

Allowance for credit losses

​

 

(20,442)

​

 

(19,208)

Loans, net

​

 

1,872,322

​

 

1,828,931

​

​

​

​

​

​

​

Bank-owned life insurance

​

 

50,757

​

 

63,674

Accrued interest receivable

​

 

9,419

​

 

9,140

Bank premises and equipment, net

​

 

21,537

​

 

21,632

Foreclosed assets held for sale

​

 

181

​

 

478

Deferred tax asset, net

​

 

17,047

​

 

17,441

Goodwill

​

 

52,505

​

 

52,505

Core deposit intangibles, net

​

 

2,177

​

 

2,469

Other assets

​

 

52,242

​

 

46,681

TOTAL ASSETS

​

$

2,670,822

​

$

2,515,584

​

​

​

​

​

​

​

LIABILITIES

​

 

​

​

 

​

Deposits:

​

 

​

​

 

​

Noninterest-bearing

​

$

513,067

​

$

490,554

Interest-bearing

​

 

1,622,812

​

 

1,524,252

Total deposits

​

 

2,135,879

​

 

2,014,806

Short-term borrowings

​

 

11,426

​

 

33,874

Long-term borrowings - FHLB advances

​

 

174,617

​

 

138,337

Senior notes, net

​

​

14,882

​

​

14,831

Subordinated debt, net

​

 

24,802

​

 

24,717

Accrued interest and other liabilities

​

 

31,911

​

 

26,638

TOTAL LIABILITIES

​

 

2,393,517

​

 

2,253,203

​

​

​

​

​

​

​

STOCKHOLDERS' EQUITY

​

 

​

​

 

​

Preferred stock, $1,000 par value; authorized 30,000 shares; $1,000 liquidation

​

 

​

​

 

​

preference per share; no shares issued

​

 

0

​

 

0

Common stock, par value $1.00 per share; authorized 30,000,000 shares;

​

 

​

​

 

​

issued 16,030,172 and outstanding 15,414,132 at September 30, 2024;

​

 

​

​

 

​

issued 16,030,172 and outstanding 15,295,135 at December 31, 2023

​

 

16,030

​

 

16,030

Paid-in capital

​

 

143,206

​

 

144,388

Retained earnings

​

 

161,920

​

 

157,028

Treasury stock, at cost; 616,040 shares at September 30, 2024 and 735,037

​

 

​

​

 

​

shares at December 31, 2023

​

 

(13,787)

​

 

(16,628)

Accumulated other comprehensive loss

​

 

(30,064)

​

 

(38,437)

TOTAL STOCKHOLDERS' EQUITY

​

 

277,305

​

 

262,381

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY

​

$

2,670,822

​

$

2,515,584

​

The accompanying notes are an integral part of these unaudited consolidated financial statements.

​

3

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Consolidated Statements of Income

(In Thousands Except Per Share Data) (Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Three Months Ended

​

Nine Months Ended

​

​

September 30, 

​

September 30, 

​

September 30, 

​

September 30, 

(In Thousands, Except Per Share Data)

​

2024

​

2023

​

2024

​

2023

INTEREST INCOME

 

​

  

 

​

  

​

​

  

 

​

  

Interest and fees on loans:

 

​

  

 

​

  

​

​

  

 

​

  

Taxable

​

$

28,099

​

$

25,529

​

$

82,292

​

$

72,322

Tax-exempt

​

 

610

​

 

552

​

 

1,749

​

 

1,687

Income from available-for-sale debt securities:

​

 

​

​

 

​

​

 

​

​

 

​

Taxable

​

 

2,136

​

 

2,077

​

 

6,409

​

 

6,440

Tax-exempt

​

 

572

​

 

597

​

 

1,685

​

 

1,847

Other interest and dividend income

​

 

1,670

​

 

363

​

 

2,614

​

 

972

Total interest and dividend income

​

 

33,087

​

 

29,118

​

 

94,749

​

 

83,268

INTEREST EXPENSE

​

 

  

​

 

​

​

 

  

​

 

​

Interest on deposits

​

 

10,412

​

 

7,264

​

 

28,617

​

 

15,593

Interest on short-term borrowings

​

 

184

​

 

677

​

 

1,141

​

 

2,918

Interest on long-term borrowings - FHLB advances

​

 

1,983

​

 

1,164

​

 

5,294

​

 

2,901

Interest on senior notes, net

​

 

120

​

​

120

​

​

360

​

​

359

Interest on subordinated debt, net

​

 

232

​

 

230

​

 

695

​

 

691

Total interest expense

​

 

12,931

​

 

9,455

​

 

36,107

​

 

22,462

Net interest income

​

 

20,156

​

 

19,663

​

 

58,642

​

 

60,806

Provision (credit) for credit losses

​

 

1,207

​

 

(1,225)

​

 

2,726

​

 

(765)

Net interest income after provision (credit) for credit losses

​

 

18,949

​

 

20,888

​

 

55,916

​

 

61,571

NONINTEREST INCOME

​

 

  

​

 

  

​

 

  

​

 

  

Trust revenue

​

 

1,946

​

 

1,919

​

 

5,857

​

 

5,500

Brokerage and insurance revenue

​

 

523

​

 

394

​

 

1,589

​

 

1,189

Service charges on deposit accounts

​

 

1,546

​

 

1,443

​

 

4,336

​

 

4,121

Interchange revenue from debit card transactions

​

 

1,103

​

 

1,098

​

 

3,205

​

 

3,115

Net gains from sale of loans

​

 

360

​

 

237

​

 

786

​

 

450

Loan servicing fees, net

​

 

74

​

 

154

​

 

434

​

 

466

Increase in cash surrender value of life insurance

​

 

458

​

 

160

​

 

1,372

​

 

450

Other noninterest income

​

 

1,123

​

 

1,084

​

 

4,083

​

 

3,442

Realized gains on available-for-sale debt securities, net

​

​

0

​

​

0

​

​

0

​

​

6

Total noninterest income

​

 

7,133

​

 

6,489

​

 

21,662

​

 

18,739

NONINTEREST EXPENSE

​

 

​

​

 

​

​

 

  

​

 

  

Salaries and employee benefits

​

​

10,875

​

​

10,878

​

​

33,460

​

​

33,082

Net occupancy and equipment expense

​

​

1,377

​

​

1,268

​

​

4,160

​

​

3,993

Data processing and telecommunications expense

​

​

1,882

​

​

1,823

​

​

5,877

​

​

5,659

Automated teller machine and interchange expense

​

 

510

​

 

504

​

 

1,470

​

 

1,374

Pennsylvania shares tax

​

 

433

​

 

403

​

 

1,300

​

 

1,210

Professional fees

​

 

555

​

 

487

​

 

1,625

​

 

1,988

Other noninterest expense

​

 

2,637

​

 

2,577

​

 

7,936

​

 

8,443

Total noninterest expense

​

 

18,269

​

 

17,940

​

 

55,828

​

 

55,749

Income before income tax provision

​

 

7,813

​

 

9,437

​

 

21,750

​

 

24,561

Income tax provision

​

 

1,448

​

 

1,846

​

 

3,966

​

 

4,674

NET INCOME

​

$

6,365

​

$

7,591

​

$

17,784

​

$

19,887

EARNINGS PER COMMON SHARE - BASIC

​

$

0.41

​

$

0.50

​

$

1.16

​

$

1.29

EARNINGS PER COMMON SHARE - DILUTED

​

$

0.41

​

$

0.50

​

$

1.16

​

$

1.29

​

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

Consolidated Statements of Comprehensive Income

(In Thousands) (Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Three Months Ended

​

Nine Months Ended

​

​

September 30, 

​

September 30, 

​

September 30, 

​

September 30, 

(In Thousands)

​

2024

    

2023

​

2024

    

2023

Net income

​

$

6,365

​

$

7,591

​

$

17,784

​

$

19,887

​

​

​

​

​

​

​

​

​

​

​

​

​

Available-for-sale debt securities:

​

​

​

​

​

​

​

​

​

​

​

​

Unrealized holding gains (losses) on available-for-sale debt securities

​

​

13,829

​

​

(14,865)

​

​

10,243

​

​

(12,535)

Reclassification adjustment for gains realized in income

​

​

0

​

​

0

​

​

0

​

​

(6)

Other comprehensive income (loss) on available-for-sale debt securities

​

​

13,829

​

​

(14,865)

​

​

10,243

​

​

(12,541)

​

​

​

​

​

​

​

​

​

​

​

​

​

Unfunded pension and postretirement obligations:

​

 

​

​

 

​

​

 

​

​

 

​

Changes from plan amendments and actuarial gains and losses

​

 

0

​

 

0

​

 

394

​

 

(8)

Amortization of prior service cost and net actuarial loss and curtailment gain included in net periodic benefit cost

​

 

(22)

​

 

(14)

​

 

(532)

​

 

(42)

Other comprehensive loss on pension and postretirement obligations

​

 

(22)

​

 

(14)

​

 

(138)

​

 

(50)

​

​

​

​

​

​

​

​

​

​

​

​

​

Other comprehensive income (loss) before income tax

​

 

13,807

​

 

(14,879)

​

 

10,105

​

 

(12,591)

Income tax related to other comprehensive (income) loss

​

 

(2,510)

​

 

3,126

​

 

(1,732)

​

 

2,643

​

​

​

​

​

​

​

​

​

​

​

​

​

Net other comprehensive income (loss)

​

 

11,297

​

 

(11,753)

​

 

8,373

​

 

(9,948)

​

​

​

​

​

​

​

​

​

​

​

​

​

Comprehensive income (loss)

​

$

17,662

​

$

(4,162)

​

$

26,157

​

$

9,939

​

The accompanying notes are an integral part of these unaudited consolidated financial statements.

​

5

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands) (Unaudited)

​

​

​

​

​

​

​

​

​

    

Nine Months Ended

 

​

​

September 30, 

​

September 30, 

 

(In Thousands)

2024

    

2023

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

​

  

 

​

  

​

Net income

​

$

17,784

​

$

19,887

​

Adjustments to reconcile net income to net cash provided by operating activities:

​

 

​

​

 

​

​

Provision (credit) for credit losses

​

 

2,726

​

 

(765)

​

Realized gains on available-for-sale debt securities, net

​

 

0

​

 

(6)

​

Net amortization of securities

​

​

1,269

​

​

1,556

​

Increase in cash surrender value of life insurance

​

 

(1,372)

​

 

(450)

​

Depreciation and amortization of bank premises and equipment

​

 

1,632

​

 

1,633

​

Net accretion of purchase accounting adjustments

​

 

(197)

​

 

(198)

​

Stock-based compensation

​

 

1,099

​

 

1,015

​

Deferred income taxes

​

 

(1,338)

​

 

235

​

Decrease in fair value of servicing rights

​

 

172

​

 

136

​

Net gains from sale of loans

​

 

(786)

​

 

(450)

​

Origination of loans held for sale

​

 

(27,070)

​

 

(14,568)

​

Proceeds from sales of loans held for sale

​

 

24,773

​

 

14,341

​

Increase in accrued interest receivable and other assets

​

 

(3,196)

​

 

(1,175)

​

Increase in accrued interest payable and other liabilities

​

 

5,340

​

 

4,588

​

Other

​

 

124

​

 

22

​

Net Cash Provided by Operating Activities

​

 

20,960

​

 

25,801

​

CASH FLOWS FROM INVESTING ACTIVITIES:

​

 

​

​

 

  

​

Proceeds from maturities of certificates of deposit

​

 

1,250

​

 

3,000

​

Proceeds from sales of available-for-sale debt securities

​

 

0

​

 

18,357

​

Proceeds from calls and maturities of available-for-sale debt securities

​

 

28,734

​

 

44,208

​

Purchase of available-for-sale debt securities

​

 

(11,516)

​

 

(8,215)

​

Redemption of Federal Home Loan Bank of Pittsburgh stock

​

 

5,991

​

 

19,503

​

Purchase of Federal Home Loan Bank of Pittsburgh stock

​

 

(6,748)

​

 

(19,905)

​

Purchase of Federal Reserve Bank stock

​

​

(36)

​

​

(6,243)

​

Net increase in loans

​

 

(45,752)

​

 

(89,998)

​

Proceeds from bank-owned life insurance

​

 

14,289

​

 

147

​

Purchase of premises and equipment

​

 

(1,554)

​

 

(1,381)

​

Proceeds from sale of foreclosed assets

​

 

293

​

 

62

​

Other

​

 

33

​

 

109

​

Net Cash Used in Investing Activities

​

 

(15,016)

​

 

(40,356)

​

CASH FLOWS FROM FINANCING ACTIVITIES:

​

 

​

​

 

  

​

Net increase in deposits

​

 

121,077

​

 

27,425

​

Net decrease in short-term borrowings

​

 

(22,448)

​

 

(56,809)

​

Proceeds from long-term borrowings - FHLB advances

​

​

59,386

​

​

70,049

​

Repayments of long-term borrowings - FHLB advances

​

 

(23,083)

​

 

(7,078)

​

Purchases of treasury stock

​

 

(655)

​

 

(6,719)

​

Common dividends paid

​

 

(11,636)

​

 

(11,703)

​

Net Cash Provided by Financing Activities

​

 

122,641

​

 

15,165

​

INCREASE IN CASH AND CASH EQUIVALENTS

​

 

128,585

​

 

610

​

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

​

 

52,778

​

 

47,698

​

CASH AND CASH EQUIVALENTS, END OF PERIOD

​

$

181,363

​

$

48,308

​

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

​

 

​

​

 

​

​

Increase (decrease) in accrued purchase of available-for-sale debt securities

​

$

911

​

$

(454)

​

Assets acquired through foreclosure of real estate loans

​

$

0

​

$

390

​

Leased assets obtained in exchange for new operating lease liabilities

​

$

187

​

​

0

​

Interest paid

​

$

35,134

​

$

21,392

​

Income taxes paid

​

$

4,839

​

$

4,667

​

​

The accompanying notes are an integral part of these unaudited consolidated financial statements.

​

6

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Consolidated Statements of Changes in Stockholders’ Equity

(In Thousands, Except Share and Per Share Data) (Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

​

​

​

​

​

​

​

​

​

​

​

​

​

Accumulated

​

​

​

​

​

​

​

 

​

​

​

​

​

​

​

​

​

​

​

​

​

Other

​

​

​

​

​

​

​

 

Common

 

Treasury

 

Common

 

Paid-in

 

Retained

 

Comprehensive

 

Treasury

​

​

​

Three Months Ended September 30, 2024

 

Shares

 

Shares

 

Stock

 

Capital

 

Earnings

 

Loss

 

Stock

 

Total

Balance, June 30, 2024

 

16,030,172

 

654,190

​

$

16,030

​

$

143,352

​

$

159,859

​

$

(41,361)

​

$

(14,659)

​

$

263,221

Net income

 

​

 

​

​

​

​

​

​

​

​

​

6,365

​

​

​

​

​

​

​

 

6,365

Other comprehensive income, net

 

​

 

​

​

​

​

​

​

​

​

​

​

​

​

11,297

​

​

​

​

 

11,297

Cash dividends declared on common stock, $.28 per share

 

​

 

​

​

​

​

​

​

​

​

​

(4,304)

​

​

​

​

​

​

​

 

(4,304)

Shares issued for dividend reinvestment plan

 

​

 

(21,688)

​

​

​

​

​

(81)

​

​

​

​

​

​

​

​

484

​

 

403

Restricted stock granted

 

​

 

(20,000)

​

​

​

​

​

(448)

​

​

​

​

​

​

​

​

448

​

 

0

Stock-based compensation expense

 

​

 

​

​

​

​

​

​

383

​

​

​

​

​

​

​

​

​

​

 

383

Treasury stock purchases

​

​

​

3,538

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(60)

​

​

(60)

Balance, September 30, 2024

 

16,030,172

 

616,040

​

$

16,030

​

$

143,206

​

$

161,920

​

$

(30,064)

​

$

(13,787)

​

$

277,305

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended September 30, 2023

 

  

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

Balance, June 30, 2023

 

16,030,172

 

762,076

​

$

16,030

​

$

143,661

​

$

153,725

​

$

(48,073)

​

$

(17,226)

​

$

248,117

Net income

 

​

 

​

​

 

​

​

 

​

​

 

7,591

​

 

​

​

 

​

​

 

7,591

Other comprehensive loss, net

 

​

 

​

​

 

​

​

 

​

​

 

​

​

 

(11,753)

​

 

​

​

 

(11,753)

Cash dividends declared on common stock, $.28 per share

 

​

 

​

​

 

​

​

 

​

​

 

(4,272)

​

 

​

​

 

​

​

 

(4,272)

Shares issued for dividend reinvestment plan

 

​

 

(20,184)

​

 

​

​

 

(36)

​

 

​

​

 

​

​

 

457

​

 

421

Forfeiture of restricted stock

 

​

 

1,073

​

 

​

​

 

27

​

 

​

​

 

​

​

 

(27)

​

 

0

Stock-based compensation expense

 

​

 

​

​

 

​

​

 

320

​

 

​

​

 

​

​

 

​

​

 

320

Purchase of restricted stock for tax withholding

​

​

​

838

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(16)

​

​

(16)

Treasury stock purchases

​

​

​

10,683

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(203)

​

​

(203)

Balance, September 30, 2023

 

16,030,172

 

754,486

​

$

16,030

​

$

143,972

​

$

157,044

​

$

(59,826)

​

$

(17,015)

​

$

240,205

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

    

​

    

​

​

    

​

​

    

​

​

    

Accumulated

    

​

​

    

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Other

​

​

​

​

​

​

​

​

Common

​

Treasury

​

Common

​

Paid-in

​

Retained

​

Comprehensive

​

Treasury

​

​

​

Nine Months Ended September 30, 2024

​

Shares

​

Shares

​

Stock

​

Capital

​

Earnings

​

Loss

​

Stock

​

Total

Balance, December 31, 2023

 

16,030,172

 

735,037

​

$

16,030

​

$

144,388

​

$

157,028

​

$

(38,437)

​

$

(16,628)

​

$

262,381

Net income

 

​

 

​

​

​

​

​

​

​

​

​

17,784

​

​

​

​

​

​

​

​

17,784

Other comprehensive income, net

 

​

 

​

​

​

​

​

​

​

​

​

​

​

​

8,373

​

​

​

​

​

8,373

Cash dividends declared on common stock, $.84 per share

 

​

 

​

​

​

​

​

​

​

​

​

(12,892)

​

​

​

​

​

​

​

​

(12,892)

Shares issued for dividend reinvestment plan

 

​

 

(64,476)

​

​

​

​

​

(237)

​

​

​

​

​

​

​

​

1,452

​

​

1,215

Restricted stock granted

 

​

 

(92,860)

​

​

​

​

​

(2,094)

​

​

​

​

​

​

​

​

2,094

​

​

0

Forfeiture of restricted stock

 

​

 

2,076

​

​

​

​

​

50

​

​

​

​

​

​

​

​

(50)

​

​

0

Stock-based compensation expense

 

​

 

​

​

​

​

​

​

1,099

​

​

​

​

​

​

​

​

​

​

​

1,099

Purchase of restricted stock for tax withholding

 

​

 

10,229

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(212)

​

​

(212)

Treasury stock purchases

​

​

​

26,034

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(443)

​

​

(443)

Balance, September 30, 2024

 

16,030,172

 

616,040

​

$

16,030

​

$

143,206

​

$

161,920

​

$

(30,064)

​

$

(13,787)

​

$

277,305

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Nine Months Ended September 30, 2023

 

  

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

Balance, December 31, 2022

 

16,030,172

 

511,353

​

$

16,030

​

$

143,950

​

$

151,743

​

$

(49,878)

​

$

(12,520)

​

$

249,325

Adoption of ASU 2016-13 (CECL)

​

​

​

​

​

​

​

​

​

​

​

​

(1,652)

​

​

​

​

​

​

​

​

(1,652)

Net income

 

​

 

​

​

 

  

​

 

  

​

 

19,887

​

 

  

​

 

  

​

 

19,887

Other comprehensive loss, net

 

​

 

​

​

 

  

​

 

  

​

 

​

​

 

(9,948)

​

 

  

​

 

(9,948)

Cash dividends declared on common stock, $.84 per share

 

​

 

​

​

 

  

​

 

  

​

 

(12,934)

​

 

  

​

 

  

​

 

(12,934)

Shares issued for dividend reinvestment plan

 

​

 

(60,871)

​

 

​

​

 

(182)

​

 

  

​

 

  

​

 

1,413

​

 

1,231

Restricted stock granted

 

​

 

(53,788)

​

 

​

​

 

(1,314)

​

 

  

​

 

  

​

 

1,314

​

 

0

Forfeiture of restricted stock

 

​

 

23,039

​

 

​

​

 

503

​

 

  

​

 

  

​

 

(503)

​

 

0

Stock-based compensation expense

 

​

 

​

​

 

  

​

 

1,015

​

 

  

​

 

  

​

 

  

​

 

1,015

Purchase of restricted stock for tax withholding

 

​

 

9,453

​

 

​

​

 

  

​

 

  

​

 

  

​

 

(219)

​

 

(219)

Treasury stock purchases

 

​

​

325,300

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(6,500)

​

 

(6,500)

Balance, September 30, 2023

 

16,030,172

 

754,486

​

$

16,030

​

$

143,972

​

$

157,044

​

$

(59,826)

​

$

(17,015)

​

$

240,205

​

The accompanying notes are an integral part of these unaudited consolidated financial statements.

​

​

7

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Notes to Unaudited Consolidated Financial Statements

1. BASIS OF INTERIM PRESENTATION AND STATUS OF RECENT ACCOUNTING PRONOUNCEMENTS

The consolidated financial statements include the accounts of Citizens & Northern Corporation and its subsidiaries, Citizens & Northern Bank (“C&N Bank”), Bucktail Life Insurance Company and Citizens & Northern Investment Corporation (collectively, “Corporation”). The consolidated financial statements also include C&N Bank’s wholly-owned subsidiaries, C&N Financial Services, LLC and Northern Tier Holding LLC. C&N Bank is the sole member of C&N Financial Services, LLC and Northern Tier Holding LLC. All material intercompany balances and transactions have been eliminated in consolidation.

The consolidated financial information included herein, except the consolidated balance sheet dated December 31, 2023, is unaudited. Such information reflects all adjustments (consisting solely of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations, comprehensive income, cash flows and changes in stockholders’ equity for the interim periods; however, the information does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for a complete set of financial statements.

Operating results reported for the nine-month period ended September 30, 2024 might not be indicative of the results for the year ending December 31, 2024. The Corporation evaluates subsequent events through the date of filing with the Securities and Exchange Commission.

RECENT ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) issues Accounting Standard Updates (ASUs) to communicate changes to the FASB Accounting Standard Codification (ASC). This section provides a summary description of recent ASUs that have significant implications (elected or required) within the consolidated financial statements, or that management expects may have a significant impact on consolidated financial statements issued in the foreseeable future.

CECL ADOPTION

On January 1, 2023, the Corporation adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASC 326). This standard replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The Corporation adopted ASC 326 using the modified retrospective approach for all financial assets measured at amortized cost and off-balance sheet credit exposures. The following table illustrates the impact on the allowance for credit losses from the adoption of ASC 326:

​

​

​

​

​

​

​

​

​

​

​

​

    

As Reported

    

​

    

​

​

​

Under

​

Pre-ASC 326

​

Impact of

​

​

ASC 326

​

Adoption

​

ASC 326

(In Thousands)

​

January 1, 2023

​

December 31, 2022

​

Adoption

Loans receivable

​

$

1,740,846

​

$

1,740,040

​

$

806

Allowance for credit losses on loans

​

​

18,719

​

​

16,615

​

​

2,104

Allowance for credit losses on off-balance sheet exposures (included in accrued interest and other liabilities)

​

 

1,218

​

 

425

​

 

793

Deferred tax asset, net

​

 

21,323

​

 

20,884

​

 

439

Retained earnings

​

 

150,091

​

 

151,743

​

 

(1,652)

​

Recently Issued but Not Yet Effective Accounting Pronouncements

In December 2023, the FASB issued ASU  2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures which improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction.  ASU No. 2023-09 is effective for public business entities

8

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

for annual periods beginning after December 15, 2024.  The ASU may be adopted on a prospective or retrospective basis and early adoption is permitted. The Corporation is currently evaluating the impact the new guidance will have on disclosures related to income taxes.

2. PER SHARE DATA

Basic earnings per common share are calculated using the two-class method to determine income attributable to common shareholders. Unvested restricted stock awards that contain nonforfeitable rights to dividends are considered participating securities under the two-class method. Distributed dividends and an allocation of undistributed net income to participating securities reduce the amount of income attributable to common shareholders. Income attributable to common shareholders is then divided by weighted-average common shares outstanding for the period to determine basic earnings per common share.

Diluted earnings per common share are calculated under the more dilutive of either the treasury method or the two-class method. Diluted earnings per common share is computed using weighted-average common shares outstanding, plus weighted-average common shares available from the exercise of all dilutive stock options, less the number of shares that could be repurchased with the proceeds of stock option exercises based on the average share price of the Corporation’s common stock during the period.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands, Except Share and Per Share Data)

​

Three Months Ended

    

Nine Months Ended

​

​

September 30, 

​

September 30, 

​

September 30, 

​

September 30, 

​

    

2024

    

2023

    

2024

    

2023

Basic

​

​

  

 

​

  

 

​

  

 

​

  

Net income

​

$

6,365

​

$

7,591

​

$

17,784

​

$

19,887

Less: Dividends and undistributed earnings allocated to participating securities

​

 

(54)

​

 

(57)

​

 

(140)

​

 

(156)

Net income attributable to common shares

​

$

6,311

​

$

7,534

​

$

17,644

​

$

19,731

Basic weighted-average common shares outstanding

​

 

15,267,120

​

 

15,154,797

​

 

15,254,124

​

 

15,264,391

Basic earnings per common share (a)

​

$

0.41

​

$

0.50

​

$

1.16

​

$

1.29

Diluted

​

 

  

​

 

  

​

 

  

​

 

  

Net income attributable to common shares

​

$

6,311

​

$

7,534

​

$

17,644

​

$

19,731

Basic weighted-average common shares outstanding

​

 

15,267,120

​

 

15,154,797

​

 

15,254,124

​

 

15,264,391

Dilutive effect of potential common stock arising from stock options

​

 

0

​

 

0

​

 

0

​

 

4

Diluted weighted-average common shares outstanding

​

 

15,267,120

​

 

15,154,797

​

 

15,254,124

​

 

15,264,395

Diluted earnings per common share (a)

​

$

0.41

​

$

0.50

​

$

1.16

​

$

1.29

Weighted-average nonvested restricted shares outstanding

​

 

131,302

​

 

113,328

​

 

121,035

​

 

120,632

(a)Basic and diluted earnings per share under the two-class method are determined on net income reported on the consolidated statements of income, less earnings allocated to non-vested restricted shares with nonforfeitable dividends (participating securities).

Anti-dilutive stock options are excluded from earnings per share calculations. There were no anti-dilutive instruments outstanding in the three-month and nine-month periods ended September 30, 2024. The weighted-average number of anti-dilutive instruments outstanding was 8,934 in the three-month period ended September 30, 2023 and 0 in the nine-month period ended September 30, 2023.

​

9

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

3. COMPREHENSIVE INCOME

Comprehensive income is the total of (1) net income, and (2) all other changes in equity from non-stockholder sources, which are referred to as other comprehensive income (loss). The components of other comprehensive income (loss), and the related tax effects, are as follows:

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

    

Before-Tax

    

Income Tax

    

Net-of-Tax

​

​

Amount

​

Effect

​

Amount

Three Months Ended September 30, 2024

 

​

  

 

​

  

 

​

  

Available-for-sale debt securities:

​

​

​

​

​

​

​

​

​

Unrealized holding gains on available-for-sale debt securities

​

$

13,829

​

$

(2,515)

​

$

11,314

Reclassification adjustment for (gains) realized in income

​

​

0

​

​

0

​

​

0

Other comprehensive income from available-for-sale debt securities

​

​

13,829

​

​

(2,515)

​

​

11,314

Unfunded pension and postretirement obligations:

​

 

  

​

 

  

​

 

  

Amortization of prior service cost and net actuarial loss included in net periodic benefit cost

​

 

(22)

​

 

5

​

 

(17)

Other comprehensive loss on unfunded retirement obligations

​

​

(22)

​

​

5

​

​

(17)

Total other comprehensive income

​

$

13,807

​

$

(2,510)

​

$

11,297

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

    

Before-Tax

    

Income Tax

    

Net-of-Tax

​

​

Amount

​

Effect

​

Amount

Three Months Ended September 30, 2023

 

​

  

 

​

  

 

​

  

Available-for-sale debt securities:

​

​

​

​

​

​

​

​

​

Unrealized holding losses on available-for-sale debt securities

​

$

(14,865)

​

$

3,123

​

$

(11,742)

Reclassification adjustment for (gains) realized in income

​

​

0

​

​

0

​

​

0

Other comprehensive loss from available-for-sale debt securities

​

​

(14,865)

​

​

3,123

​

​

(11,742)

Unfunded pension and postretirement obligations:

​

 

  

​

 

  

​

 

  

Amortization of prior service cost and net actuarial loss included in net periodic benefit cost

​

 

(14)

​

 

3

​

 

(11)

Other comprehensive loss on unfunded retirement obligations

​

​

(14)

​

​

3

​

​

(11)

Total other comprehensive loss

​

$

(14,879)

​

$

3,126

​

$

(11,753)

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

    

Before-Tax

    

Income Tax

    

Net-of-Tax

​

​

Amount

​

Effect

​

Amount

Nine Months Ended September 30, 2024

 

​

  

 

​

  

 

​

  

Available-for-sale debt securities:

​

​

​

​

​

​

​

​

​

Unrealized holding gains on available-for-sale debt securities

​

$

10,243

​

​

(1,761)

​

$

8,482

Reclassification adjustment for (gains) realized in income

​

​

0

​

​

0

​

​

0

Other comprehensive income from available-for-sale debt securities

​

​

10,243

​

​

(1,761)

​

​

8,482

Unfunded pension and postretirement obligations:

​

 

  

​

 

  

​

 

  

Changes from plan amendments and actuarial gains and losses

​

​

394

​

​

(83)

​

​

311

Amortization of prior service cost and net actuarial loss and curtailment gain included in net periodic benefit cost

​

 

(532)

​

​

112

​

 

(420)

Other comprehensive loss on unfunded retirement obligations

​

​

(138)

​

​

29

​

​

(109)

Total other comprehensive income

​

$

10,105

​

$

(1,732)

​

$

8,373

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

    

Before-Tax

    

Income Tax

    

Net-of-Tax

​

​

Amount

​

Effect

​

Amount

Nine Months Ended September 30, 2023

 

​

  

 

​

  

 

​

  

Available-for-sale debt securities:

​

​

​

​

​

​

​

​

​

Unrealized holding losses on available-for-sale debt securities

​

$

(12,535)

​

$

2,632

​

$

(9,903)

Reclassification adjustment for (gains) realized in income

​

​

(6)

​

​

1

​

​

(5)

Other comprehensive loss from available-for-sale debt securities

​

​

(12,541)

​

​

2,633

​

​

(9,908)

Unfunded pension and postretirement obligations:

​

 

  

​

 

  

​

 

  

Changes from plan amendments and actuarial gains and losses

​

​

(8)

​

​

1

​

​

(7)

Amortization of prior service cost and net actuarial loss included in net periodic benefit cost

​

 

(42)

​

 

9

​

 

(33)

Other comprehensive loss on unfunded retirement obligations

​

​

(50)

​

​

10

​

​

(40)

Total other comprehensive loss

​

$

(12,591)

​

$

2,643

​

$

(9,948)

​

10

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The amounts shown in the table immediately above are included in the following line items in the consolidated statements of income:

​

​

​

​

​

​

Affected Line Item in the

Description

 

Consolidated Statements of Income

Reclassification adjustment for (gains) realized in income (before-tax)

​

Realized gains on available-for-sale debt securities, net

Amortization of prior service cost and net actuarial loss and curtailment gain included in net periodic benefit cost (before-tax)

 

Other noninterest expense

Income tax effect

​

Income tax provision

​

Changes in the components of accumulated other comprehensive (loss) income are as follows and are presented net of tax:

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

    

Unrealized

    

​

    

Accumulated

​

​

(Losses)

​

Unfunded

​

Other

​

 

Gains

 

Retirement

 

Comprehensive

​

 

on Securities

 

Obligations

 

(Loss) Income

Three Months Ended September 30, 2024

 

​

  

 

​

  

 

​

  

Balance, beginning of period

​

$

(41,710)

​

$

349

​

$

(41,361)

Other comprehensive income (loss) during three months ended September 30, 2024

​

 

11,314

​

​

(17)

​

 

11,297

Balance, end of period

​

$

(30,396)

​

$

332

​

$

(30,064)

​

​

​

​

​

​

​

​

​

​

Three Months Ended September 30, 2023

​

 

  

​

 

  

​

 

  

Balance, beginning of period

​

$

(48,536)

​

$

463

​

$

(48,073)

Other comprehensive loss during three months ended September 30, 2023

​

 

(11,742)

​

 

(11)

​

 

(11,753)

Balance, end of period

​

$

(60,278)

​

$

452

​

$

(59,826)

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

    

Unrealized

    

​

    

Accumulated

​

​

(Losses)

​

Unfunded

​

Other

​

 

Gains

 

Retirement

 

Comprehensive

​

 

on Securities

 

Obligations

 

(Loss) Income

Nine Months Ended September 30, 2024

 

​

  

 

​

  

 

​

  

Balance, beginning of period

​

$

(38,878)

​

$

441

​

$

(38,437)

Other comprehensive income (loss) during nine months ended September 30, 2024

​

 

8,482

​

​

(109)

​

 

8,373

Balance, end of period

​

$

(30,396)

​

$

332

​

$

(30,064)

​

​

​

​

​

​

​

​

​

​

Nine Months Ended September 30, 2023

​

 

  

​

 

  

​

 

  

Balance, beginning of period

​

$

(50,370)

​

$

492

​

$

(49,878)

Other comprehensive loss during nine months ended September 30, 2023

​

 

(9,908)

​

 

(40)

​

 

(9,948)

Balance, end of period

​

$

(60,278)

​

$

452

​

$

(59,826)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

4. CASH AND DUE FROM BANKS

Cash and due from banks at September 30, 2024 and December 31, 2023 include the following:

​

​

​

​

​

​

​

​

(In Thousands)

    

September 30, 

    

December 31, 

​

​

2024

​

2023

Cash and cash equivalents

​

$

181,363

​

$

52,778

Certificates of deposit

​

 

2,850

​

 

4,100

Total cash and due from banks

​

$

184,213

​

$

56,878

​

11

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Certificates of deposit are issues by U.S. banks with original maturities greater than three months. Each certificate of deposit is fully FDIC-insured. The Corporation maintains cash and cash equivalents with certain financial institutions in excess of the FDIC insurance limit.

5. SECURITIES

Amortized cost and fair value of available-for-sale debt securities at September 30, 2024 and December 31, 2023 are summarized as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

    

September 30, 2024

​

​

​

​

​

Gross

​

Gross

​

​

​

​

​

​

​

​

Unrealized

​

Unrealized

​

​

​

​

 

Amortized

 

Holding

 

Holding

 

Fair

​

    

Cost

    

Gains

    

Losses

    

Value

​

​

​

​

​

​

​

​

​

​

​

​

​

Obligations of the U.S. Treasury

​

$

8,072

​

$

0

​

$

(751)

​

$

7,321

Obligations of U.S. Government agencies

​

​

10,271

​

​

0

​

​

(895)

​

​

9,376

Bank holding company debt securities

​

​

28,956

​

​

0

​

​

(5,007)

​

​

23,949

Obligations of states and political subdivisions:

​

 

​

​

 

​

​

 

​

​

 

  

Tax-exempt

​

 

113,093

​

​

342

​

 

(8,499)

​

 

104,936

Taxable

​

 

55,182

​

 

0

​

 

(6,748)

​

 

48,434

Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:

​

 

​

​

 

​

​

 

​

​

 

  

Residential pass-through securities

​

 

101,545

​

 

248

​

 

(7,740)

​

 

94,053

Residential collateralized mortgage obligations

​

 

48,251

​

 

233

​

 

(2,883)

​

 

45,601

Commercial mortgage-backed securities

​

 

73,695

​

 

22

​

 

(7,327)

​

 

66,390

Private label commercial mortgage-backed securities

​

​

8,327

​

 

35

​

 

0

​

 

8,362

Total available-for-sale debt securities

​

$

447,392

​

$

880

​

$

(39,850)

​

$

408,422

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

    

December 31, 2023

​

​

​

​

​

Gross

​

Gross

​

​

​

​

​

​

​

​

Unrealized

​

Unrealized

​

​

​

​

 

Amortized

 

Holding

 

Holding

 

Fair

​

    

Cost

    

Gains

    

Losses

    

Value

​

​

​

​

​

​

​

​

​

​

​

​

​

Obligations of the U.S. Treasury

​

$

12,325

​

$

0

​

$

(1,035)

​

$

11,290

Obligations of U.S. Government agencies

​

​

11,119

​

​

0

​

​

(1,173)

​

​

9,946

Bank holding company debt securities

​

​

28,952

​

​

0

​

​

(5,452)

​

​

23,500

Obligations of states and political subdivisions:

​

 

​

​

 

​

​

 

​

​

 

  

Tax-exempt

​

 

113,464

​

​

311

​

 

(9,576)

​

 

104,199

Taxable

​

 

58,720

​

 

0

​

 

(8,609)

​

 

50,111

Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:

​

 

​

​

 

  

​

 

​

​

 

  

Residential pass-through securities

​

 

105,549

​

 

40

​

 

(10,184)

​

 

95,405

Residential collateralized mortgage obligations

​

 

50,212

​

 

0

​

 

(3,750)

​

 

46,462

Commercial mortgage-backed securities

​

 

76,412

​

 

0

​

 

(9,730)

​

 

66,682

Private label commercial mortgage-backed securities

​

​

8,215

​

 

0

​

 

(55)

​

 

8,160

Total available-for-sale debt securities

​

$

464,968

​

$

351

​

$

(49,564)

​

$

415,755

​

The following table presents gross unrealized losses and fair value of available-for-sale debt securities with unrealized loss positions aggregated by length of time that individual securities have been in a continuous unrealized loss position at September 30, 2024 and December 31, 2023 for which an allowance for credit losses has not been recorded:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

12

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

September 30, 2024

    

Less Than 12 Months

    

12 Months or More

    

Total

(In Thousands)

​

Fair

​

Unrealized

​

Fair

​

Unrealized

​

Fair

​

Unrealized

​

 

Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

Obligations of the U.S. Treasury

​

$

0

​

$

0

​

$

7,321

​

​

(751)

​

$

7,321

​

$

(751)

Obligations of U.S. Government agencies

​

​

0

​

​

0

​

​

9,376

​

​

(895)

​

​

9,376

​

​

(895)

Bank holding company debt securities

​

​

0

​

​

0

​

​

23,949

​

​

(5,007)

​

​

23,949

​

​

(5,007)

Obligations of states and political subdivisions:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Tax-exempt

​

​

499

​

​

(1)

​

​

96,678

​

​

(8,498)

​

​

97,177

​

​

(8,499)

Taxable

​

 

0

​

​

0

​

​

45,475

​

​

(6,748)

​

​

45,475

​

​

(6,748)

Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:

​

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Residential pass-through securities

​

​

0

​

​

0

​

​

74,328

​

​

(7,740)

​

​

74,328

​

​

(7,740)

Residential collateralized mortgage obligations

​

 

0

​

​

0

​

​

29,050

​

​

(2,883)

​

​

29,050

​

​

(2,883)

Commercial mortgage-backed securities

​

 

0

​

​

0

​

​

64,018

​

​

(7,327)

​

​

64,018

​

​

(7,327)

Total

​

$

499

​

$

(1)

​

$

350,195

​

$

(39,849)

​

$

350,694

​

$

(39,850)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023

    

Less Than 12 Months

    

12 Months or More

    

Total

(In Thousands)

​

Fair

​

Unrealized

​

Fair

​

Unrealized

​

Fair

​

Unrealized

​

 

Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

Obligations of the U.S. Treasury

​

$

0

​

$

0

​

$

11,290

​

$

(1,035)

​

$

11,290

​

$

(1,035)

Obligations of U.S. Government agencies

​

​

1,595

​

​

(9)

​

​

8,351

​

​

(1,164)

​

​

9,946

​

​

(1,173)

Bank holding company debt securities

​

​

0

​

​

0

​

​

23,500

​

​

(5,452)

​

​

23,500

​

​

(5,452)

Obligations of states and political subdivisions:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Tax-exempt

​

​

3,257

​

​

(24)

​

​

96,758

​

​

(9,552)

​

​

100,015

​

​

(9,576)

Taxable

​

 

0

​

​

0

​

 

49,961

​

​

(8,609)

​

 

49,961

​

 

(8,609)

Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:

​

 

​

​

​

​

​

 

​

​

​

​

​

 

  

​

 

  

Residential pass-through securities

​

​

3,334

​

​

(27)

​

​

84,297

​

​

(10,157)

​

​

87,631

​

​

(10,184)

Residential collateralized mortgage obligations

​

 

3,588

​

​

(2)

​

 

32,808

​

​

(3,748)

​

 

36,396

​

 

(3,750)

Commercial mortgage-backed securities

​

 

2,327

​

​

(16)

​

 

64,355

​

​

(9,714)

​

 

66,682

​

 

(9,730)

Private label commercial mortgage-backed securities

​

​

8,160

​

​

(55)

​

​

0

​

​

0

​

​

8,160

​

​

(55)

Total

​

$

22,261

​

$

(133)

​

$

371,320

​

$

(49,431)

​

$

393,581

​

$

(49,564)

​

Gross realized gains and losses from available-for-sale debt securities were as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

Three Months Ended

​

Nine Months Ended

​

​

​

September 30, 

​

September 30, 

​

September 30, 

​

September 30, 

​

​

    

2024

    

2023

    

2024

    

2023

    

Gross realized gains from sales

​

$

0

​

$

0

​

$

0

​

$

89

​

Gross realized losses from sales

​

 

0

​

 

0

​

 

0

​

 

(83)

​

Net realized (losses) gains

​

$

0

​

$

0

​

$

0

​

$

6

​

​

13

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The amortized cost and fair value of available-for-sale debt securities by contractual maturity are shown in the following table as of September 30, 2024. Actual maturities may differ from contractual maturities because counterparties may have the right to call or prepay obligations with or without call or prepayment penalties.

​

​

​

​

​

​

​

​

(In Thousands)

​

September 30, 2024

​

​

Amortized

​

Fair

​

    

Cost

    

Value

Due in one year or less

​

$

9,459

​

$

9,408

Due from one year through five years

​

 

30,098

​

 

28,615

Due from five years through ten years

​

 

78,690

​

 

70,407

Due after ten years

​

 

97,327

​

 

85,586

Sub-total

​

 

215,574

​

 

194,016

Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:

​

 

  

​

 

​

Residential pass-through securities

​

 

101,545

​

 

94,053

Residential collateralized mortgage obligations

​

 

48,251

​

 

45,601

Commercial mortgage-backed securities

​

 

73,695

​

 

66,390

Private label commercial mortgage-backed securities

​

​

8,327

​

​

8,362

Total

​

$

447,392

​

$

408,422

​

The Corporation’s mortgage-backed securities and collateralized mortgage obligations have stated maturities that may differ from actual maturities due to borrowers’ ability to prepay obligations. Cash flows from such investments are dependent upon the performance of the underlying mortgage loans and are generally influenced by the level of interest rates. In the table above, mortgage-backed securities and collateralized mortgage obligations are shown in one period.

Investment securities carried at $220,482,000 at September 30, 2024 and $232,437,000 at December 31, 2023 were pledged as collateral for public deposits, trusts and certain other deposits as provided by law. See Note 8 for information concerning securities pledged to secure borrowing arrangements.

A summary of information management considered in evaluating debt and equity securities for credit losses at September 30, 2024 and December 31, 2023 is provided below.

Debt Securities

As reflected in the table above, gross unrealized holding losses on available-for-sale debt securities totaled $39,850,000 at September 30, 2024 and $49,564,000 at December 31, 2023. At September 30, 2024, the Corporation does not have the intent to sell, nor is it more likely than not it will be required to sell, these securities before it is able to recover the amortized cost basis. The unrealized holding losses were consistent with increases in market interest rates that have occurred subsequent to the purchase of most of the securities.

At September 30, 2024 and December 31, 2023, management performed an assessment for possible credit losses of the Corporation’s debt securities on an issue-by-issue basis, relying on information obtained from various sources, including publicly available financial data, ratings by external agencies, brokers and other sources. At September 30, 2024 and December 31, 2023, all of the Corporation’s holdings of bank holding company debt securities, obligations of states and political subdivisions and private label commercial mortgage-backed securities were investment grade and there have been no payment defaults.

Based on the results of the assessment, there was no allowance for credit losses (“ACL”) required on available-for-sale debt securities in an unrealized loss position at September 30, 2024 and December 31, 2023.

Equity Securities

C&N Bank is a member of the Federal Home Loan Bank of Pittsburgh (FHLB-Pittsburgh), which is one of 11 regional Federal Home Loan Banks. As a member, C&N Bank is required to purchase and maintain stock in FHLB-Pittsburgh. There is no active market for

14

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

FHLB-Pittsburgh stock, and it must ordinarily be redeemed by FHLB-Pittsburgh in order to be liquidated. C&N Bank’s investment in FHLB-Pittsburgh stock, included in other assets in the consolidated balance sheets, was $15,971,000 at September 30, 2024 and $15,214,000 at December 31, 2023. The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at September 30, 2024 and December 31, 2023. In making this determination, management concluded that recovery of total outstanding par value, which equals the carrying value, is expected. The decision was based on review of financial information that FHLB-Pittsburgh has made publicly available.

In July 2023, C&N Bank became a member of the Federal Reserve System.  As a member, C&N Bank is required to purchase and maintain stock in the Federal Reserve Bank of Philadelphia. There is no active market for Federal Reserve Bank stock, and it must ordinarily be redeemed by the Federal Reserve Bank of Philadelphia in order to be liquidated. C&N Bank’s investment in Federal Reserve Bank stock, included in other assets in the consolidated balance sheets, was $6,288,000 at September 30, 2024 and $6,252,000 at December 31, 2023.

The Corporation has a marketable equity security included in other assets in the consolidated balance sheets with a carrying value of $889,000 at September 30, 2024 and $871,000 December 31, 2023, consisting exclusively of one mutual fund. There was an unrealized loss on the mutual fund of $111,000 at September 30, 2024 and $129,000 at December 31, 2023. Changes in the unrealized gains or losses on this security, which are included in other noninterest income in the consolidated statements of income, were a gain of $31,000 in the third quarter 2024, a loss of $27,000 in the third quarter 2023, a gain of $18,000 in the nine-month period ended September 30, 2024 and a loss of $27,000 in the nine-month period ended September 30, 2023.

​

6. LOANS AND ALLOWANCE FOR CREDIT LOSSES

Loans receivable at September 30, 2024 and December 31, 2023 are summarized as follows:

Summary of Loans by Type

(In Thousands)

​

​

​

​

​

​

​

​

​

 

September 30, 

    

December 31, 

​

 

2024

​

2023

Commercial real estate - non-owner occupied

​

$

721,103

​

$

737,342

Commercial real estate - owner occupied

​

​

266,477

​

​

237,246

All other commercial loans

​

​

431,985

​

​

399,693

Residential mortgage loans

​

​

407,429

​

​

413,714

Consumer loans

​

​

65,770

​

​

60,144

Total

​

​

1,892,764

​

​

1,848,139

Less: allowance for credit losses on loans

​

​

(20,442)

​

​

(19,208)

Loans, net

​

$

1,872,322

​

$

1,828,931

​

In the table above, outstanding loan balances are presented net of deferred loan origination fees, net, of $4,309,000 at September 30, 2024 and $4,459,000 at December 31, 2023.

The Corporation grants loans to individuals as well as commercial and tax-exempt entities. Commercial, residential and personal loans are made to customers geographically concentrated in Northcentral Pennsylvania, the Southern tier of New York State, Southeastern Pennsylvania and Southcentral Pennsylvania. Although the Corporation has a diversified loan portfolio, a significant portion of its debtors’ ability to honor their contracts is dependent on the local economic conditions within the region.

15

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The following tables presents an analysis of past due loans as of September 30, 2024 and December 31, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

As of September 30, 2024

​

​

Past Due

​

Past Due

​

​

​

​

​

​

​

​

​

30-89

​

90+

​

Nonaccrual

​

Current

​

Total

​

​

Days

​

Days

​

Loans

​

Loans

​

Loans

Commercial real estate - non-owner occupied

​

$

7,867

​

$

0

​

$

7,799

​

$

705,437

​

$

721,103

Commercial real estate - owner occupied

​

 

467

​

 

0

​

 

1,741

​

 

264,269

​

 

266,477

All other commercial loans

​

​

4,999

​

​

0

​

​

10,151

​

​

416,835

​

​

431,985

Residential mortgage loans

​

​

2,284

​

​

0

​

​

4,325

​

​

400,820

​

​

407,429

Consumer loans

​

 

289

​

 

56

​

 

385

​

 

65,040

​

 

65,770

Total

​

$

15,906

​

$

56

​

$

24,401

​

$

1,852,401

​

$

1,892,764

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

As of December 31, 2023

​

​

Past Due

​

Past Due

​

​

​

​

​

​

​

​

​

30-89

​

90+

​

Nonaccrual

​

Current

​

Total

​

​

Days

​

Days

​

Loans

​

Loans

​

Loans

Commercial real estate - non-owner occupied

​

$

2,215

​

$

126

​

$

8,412

​

$

726,589

​

$

737,342

Commercial real estate - owner occupied

​

 

849

​

 

0

​

 

1,575

​

 

234,822

​

 

237,246

All other commercial loans

​

​

229

​

​

2,593

​

​

1,323

​

​

395,548

​

​

399,693

Residential mortgage loans

​

​

5,365

​

​

326

​

​

3,627

​

​

404,396

​

​

413,714

Consumer loans

​

​

617

​

 

145

​

 

240

​

 

59,142

​

 

60,144

Total

​

$

9,275

​

$

3,190

​

$

15,177

​

$

1,820,497

​

$

1,848,139

​

The Corporation uses an internal risk rating system. Under the risk rating system, the Corporation classifies problem or potential problem loans as “Special Mention,” “Substandard,” or “Doubtful” on the basis of currently existing facts, conditions and values. Loans that do not currently expose the Corporation to sufficient risk to warrant classification as Substandard or Doubtful, but possess weaknesses that deserve management’s close attention, are deemed to be Special Mention. Substandard loans include those characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Risk ratings are updated any time that conditions or the situation warrants. Loans not classified are included in the “Pass” rows in the table that follows.

​

16

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The following table presents the recorded investment in loans by credit quality indicators by year of origination as of September 30, 2024:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

Term Loans by Year of Origination

​

​

​

​

​

​

​

​

2024

​

2023

​

2022

​

2021

​

2020

​

Prior

​

Revolving

​

Total

Commercial real estate - non-owner occupied

​

 

​

​

 

​

​

 

​

​

 

​

​

 

  

​

 

  

​

 

  

​

 

  

Pass

​

$

29,241

​

$

98,545

​

$

158,232

​

$

78,742

​

$

53,094

​

$

256,743

​

$

0

​

$

674,597

Special Mention

​

 

0

​

 

0

​

 

26,222

​

 

2,359

​

 

0

​

 

6,468

​

 

0

​

 

35,049

Substandard

​

​

119

​

​

0

​

​

63

​

​

0

​

​

0

​

​

11,275

​

​

0

​

​

11,457

Doubtful

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

Total commercial real estate - non-owner occupied

​

$

29,360

​

$

98,545

​

$

184,517

​

$

81,101

​

$

53,094

​

$

274,486

​

$

0

​

$

721,103

Year-to-date gross charge-offs

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

​

$

757

​

$

0

​

$

757

Commercial real estate - owner occupied

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

Pass

​

$

23,389

​

$

33,835

​

$

52,785

​

$

50,098

​

$

11,856

​

$

82,977

​

$

0

​

$

254,940

Special Mention

​

​

0

​

 

0

​

 

0

​

 

0

​

 

0

​

 

0

​

 

0

​

 

0

Substandard

​

​

0

​

​

5,172

​

​

733

​

​

2,417

​

​

0

​

​

3,215

​

​

0

​

​

11,537

Doubtful

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

Total commercial real estate - owner occupied

​

$

23,389

​

$

39,007

​

$

53,518

​

$

52,515

​

$

11,856

​

$

86,192

​

$

0

​

$

266,477

Year-to-date gross charge-offs

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

All other commercial loans

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

Pass

​

$

56,294

​

$

71,062

​

$

61,114

​

$

46,638

​

$

23,682

​

$

27,489

​

$

118,178

​

$

404,457

Special Mention

​

 

555

​

 

0

​

 

6,348

​

 

0

​

 

23

​

 

8

​

 

962

​

 

7,896

Substandard

​

​

44

​

​

0

​

​

3,546

​

​

5,229

​

​

302

​

​

1,240

​

​

9,271

​

​

19,632

Doubtful

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

Total all other commercial loans

​

$

56,893

​

$

71,062

​

$

71,008

​

$

51,867

​

$

24,007

​

$

28,737

​

$

128,411

​

$

431,985

Year-to-date gross charge-offs

​

$

0

​

$

0

​

$

427

​

$

60

​

$

21

​

$

122

​

$

0

​

$

630

Residential mortgage loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

28,053

​

$

52,234

​

$

81,960

​

$

51,686

​

$

36,947

​

$

151,334

​

$

0

​

$

402,214

Special Mention

​

 

0

​

 

0

​

 

0

​

 

0

​

 

0

​

 

0

​

 

0

​

 

0

Substandard

​

​

0

​

​

35

​

​

31

​

​

0

​

​

245

​

​

4,904

​

​

0

​

​

5,215

Doubtful

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

Total residential mortgage loans

​

$

28,053

​

$

52,269

​

$

81,991

​

$

51,686

​

$

37,192

​

$

156,238

​

$

0

​

$

407,429

Year-to-date gross charge-offs

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

Consumer loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

7,897

​

$

3,941

​

$

3,267

​

$

1,184

​

$

674

​

$

752

​

$

47,547

​

$

65,262

Special Mention

​

 

0

​

 

0

​

 

0

​

 

0

​

 

0

​

 

0

​

 

0

​

 

0

Substandard

​

​

0

​

​

2

​

​

0

​

​

0

​

​

0

​

​

55

​

​

451

​

​

508

Doubtful

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

Total consumer loans

​

$

7,897

​

$

3,943

​

$

3,267

​

$

1,184

​

$

674

​

$

807

​

$

47,998

​

$

65,770

Year-to-date gross charge-offs

​

$

0

​

$

67

​

$

130

​

$

7

​

$

8

​

$

1

​

$

84

​

$

297

Total Loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

144,874

​

$

259,617

​

$

357,358

​

$

228,348

​

$

126,253

​

$

519,295

​

$

165,725

​

$

1,801,470

Special Mention

​

 

555

​

 

0

​

 

32,570

​

 

2,359

​

 

23

​

 

6,476

​

 

962

​

 

42,945

Substandard

​

​

163

​

​

5,209

​

​

4,373

​

​

7,646

​

​

547

​

​

20,689

​

​

9,722

​

​

48,349

Doubtful

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

Total

​

$

145,592

​

$

264,826

​

$

394,301

​

$

238,353

​

$

126,823

​

$

546,460

​

$

176,409

​

$

1,892,764

Year-to-date gross charge-offs

​

$

0

​

$

67

​

$

557

​

$

67

​

$

29

​

$

880

​

​

84

​

$

1,684

​

17

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The following table presents the recorded investment in loans by credit quality indicators by year of origination as of December 31, 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Term Loans by Year of Origination

​

​

​

​

​

​

(In Thousands)

​

2023

​

2022

​

2021

​

2020

​

2019

​

Prior

​

Revolving

​

Total

Commercial real estate - non-owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

96,615

​

$

167,484

​

$

89,582

​

$

55,390

​

$

80,020

​

$

207,017

​

 

0

​

 

696,108

Special Mention

​

​

0

​

​

20,072

​

​

2,446

​

​

0

​

​

116

​

​

6,188

​

​

0

​

​

28,822

Substandard

​

​

0

​

​

0

​

​

0

​

​

18

​

​

566

​

​

11,828

​

​

0

​

​

12,412

Doubtful

​

​

0

 

​

0

 

​

0

 

​

0

 

​

0

 

​

0

 

​

0

 

​

0

Total commercial real estate - non-owner occupied

​

$

96,615

​

$

187,556

​

$

92,028

​

$

55,408

​

$

80,702

​

$

225,033

​

$

0

​

$

737,342

Year-to-date gross charge-offs

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

Commercial real estate - owner occupied

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

33,761

​

$

37,429

​

$

52,090

​

$

12,858

​

$

17,505

​

$

71,775

​

$

0

​

$

225,418

Special Mention

​

​

104

​

​

746

​

​

0

​

​

0

​

​

0

​

​

166

​

​

0

​

​

1,016

Substandard

 

​

5,200

 

​

0

 

​

2,567

 

​

0

 

​

0

 

​

3,045

 

​

0

 

​

10,812

Doubtful

​

​

0

 

​

0

 

​

0

 

​

0

 

​

0

 

​

0

 

​

0

 

​

0

Total commercial real estate - owner occupied

​

$

39,065

​

$

38,175

​

$

54,657

​

$

12,858

​

$

17,505

​

$

74,986

​

$

0

​

$

237,246

Year-to-date gross charge-offs

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

All other commercial loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

58,393

​

$

90,560

​

$

51,813

​

$

27,718

​

$

16,421

​

$

24,326

​

$

107,234

​

$

376,465

Special Mention

​

​

0

​

​

2,690

​

​

5,043

​

​

8

​

​

0

​

​

794

​

​

301

​

​

8,836

Substandard

​

​

0

 

​

1,267

 

​

1,250

 

​

453

 

​

679

 

​

1,085

 

​

9,658

 

​

14,392

Doubtful

​

​

0

 

​

0

 

​

0

 

​

0

 

​

0

 

​

0

 

​

0

 

​

0

Total all other commercial loans

​

$

58,393

​

$

94,517

​

$

58,106

​

$

28,179

​

$

17,100

​

$

26,205

​

$

117,193

​

$

399,693

Year-to-date gross charge-offs

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

​

$

12

​

$

12

Residential mortgage loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

57,300

​

$

87,519

​

$

56,183

​

$

39,411

​

$

32,401

​

$

135,546

​

$

0

​

$

408,360

Special Mention

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

Substandard

​

​

0

 

​

0

 

​

0

 

​

285

 

​

369

 

​

4,700

 

​

0

 

​

5,354

Doubtful

​

​

0

 

​

0

 

​

0

 

​

0

 

​

0

 

​

0

 

​

0

 

​

0

Total residential mortgage loans

​

$

57,300

​

$

87,519

​

$

56,183

​

$

39,696

​

$

32,770

​

$

140,246

​

$

0

​

$

413,714

Year-to-date gross charge-offs

​

$

0

​

$

0

​

$

0

​

$

0

​

$

0

​

$

33

​

$

0

​

$

33

Consumer loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

6,020

​

$

4,664

​

$

1,944

​

$

1,205

​

$

175

​

$

913

​

$

44,312

​

$

59,233

Special Mention

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

Substandard

​

​

0

 

​

0

 

​

5

 

​

11

 

​

1

 

​

58

 

​

836

 

​

911

Doubtful

​

​

0

 

​

0

 

​

0

 

​

0

 

​

0

 

​

0

 

​

0

 

​

0

Total consumer loans

​

$

6,020

​

$

4,664

​

$

1,949

​

$

1,216

​

$

176

​

$

971

​

$

45,148

​

$

60,144

Year-to-date gross charge-offs

​

$

0

​

$

149

​

$

0

​

$

18

​

$

3

​

$

3

​

$

138

​

$

311

Total Loans

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Pass

​

$

252,089

​

$

387,656

​

$

251,612

​

$

136,582

​

$

146,522

​

$

439,577

​

$

151,546

​

$

1,765,584

Special Mention

​

 

104

​

 

23,508

​

 

7,489

​

 

8

​

 

116

​

 

7,148

​

 

301

​

 

38,674

Substandard

​

​

5,200

​

​

1,267

​

​

3,822

​

​

767

​

​

1,615

​

​

20,716

​

​

10,494

​

​

43,881

Doubtful

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

Total

​

$

257,393

​

$

412,431

​

$

262,923

​

$

137,357

​

$

148,253

​

$

467,441

​

$

162,341

​

$

1,848,139

Year-to-date gross charge-offs

​

$

0

​

$

149

​

$

0

​

$

18

​

$

3

​

$

36

​

​

150

​

$

356

​

18

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The following tables are a summary of the Corporation’s nonaccrual loans by major categories for the periods indicated.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2024

​

​

​

Nonaccrual Loans with

​

Nonaccrual Loans

​

Total Nonaccrual

​

(In Thousands)

​

No Allowance

​

with an Allowance

​

Loans

​

Commercial real estate - non-owner occupied

​

$

6,442

​

$

1,357

​

$

7,799

​

Commercial real estate - owner occupied

​

 

1,476

​

 

265

​

 

1,741

​

All other commercial loans

​

​

10,151

​

​

0

​

​

10,151

​

Residential mortgage loans

​

​

4,325

​

​

0

​

​

4,325

​

Consumer loans

​

 

385

​

 

0

​

 

385

​

Total

​

$

22,779

​

$

1,622

​

$

24,401

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023

    

​

    

Nonaccrual Loans with

​

Nonaccrual Loans

​

Total Nonaccrual

    

(In Thousands)

 

No Allowance

​

with an Allowance

​

Loans

​

Commercial real estate - non-owner occupied

​

$

1,111

​

$

7,301

​

$

8,412

​

Commercial real estate - owner occupied

​

 

1,281

​

 

294

​

 

1,575

​

All other commercial loans

​

​

1,132

​

​

191

​

​

1,323

​

Residential mortgage loans

​

​

3,627

​

​

0

​

​

3,627

​

Consumer loans

​

 

240

​

 

0

​

 

240

​

Total

​

$

7,391

​

$

7,786

​

$

15,177

​

​

The Corporation recognized interest income on nonaccrual loans of $234,000 and $750,000 in the three and nine months ended September 30, 2024 and $317,000 and $744,000 in the three and nine months ended September 30, 2023.

The following table represents the accrued interest receivable written off by reversing interest income during the three-month and nine-month periods ended September 30, 2024 and 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Three Months Ended

​

Nine Months Ended

​

Nine Months Ended

(In Thousands)

​

September 30, 2024

​

September 30, 2023

​

September 30, 2024

​

September 30, 2023

Commercial real estate - non-owner occupied

​

$

0

​

$

22

​

$

19

​

$

48

Commercial real estate - owner occupied

​

 

0

​

 

0

​

 

10

​

 

0

All other commercial loans

​

​

79

​

​

0

​

​

197

​

​

0

Residential mortgage loans

​

​

6

​

​

11

​

​

24

​

​

17

Consumer loans

​

 

4

​

 

0

​

 

8

​

 

2

Total

​

$

89

​

$

33

​

$

258

​

$

67

​

The Corporation has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans:

●Commercial real estate loans can be secured by either owner occupied commercial real estate or non-owner occupied investment commercial real estate. Typically, owner occupied commercial real estate loans are secured by office buildings, warehouses, manufacturing facilities and other commercial and industrial properties occupied by operating companies. Non-owner occupied commercial real estate loans are generally secured by office buildings and complexes, retail facilities, multifamily complexes, land under development, industrial properties, as well as other commercial or industrial real estate.
●All other commercial loans include loans typically secured by business assets including inventory, equipment and receivables. Also within this category, commercial construction and land loans and some commercial lines of credit are secured by real estate.
●Residential mortgage loans are typically secured by first mortgages, and in some cases could be secured by a second mortgage.

19

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

●Consumer loans are generally secured by automobiles, motorcycles, recreational vehicles and other personal property. Some consumer loans are unsecured and have no underlying collateral.

The following table details the amortized cost of collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related allowance for credit losses on loans allocated to these loans:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2024

​

December 31, 2023

​

​

Amortized

​

​

​

Amortized

​

​

(In Thousands)

​

Cost

​

Allowance

​

Cost

​

Allowance

Commercial real estate - non-owner occupied

​

$

7,799

​

$

14

​

$

8,412

​

$

648

Commercial real estate - owner occupied

​

 

1,741

​

 

159

​

 

1,575

​

 

5

All other commercial loans

​

​

10,151

​

​

0

​

​

1,277

​

​

90

Total

​

$

19,691

​

$

173

​

$

11,264

​

$

743

​

Allowance for Credit Losses

The allowance for credit losses (“ACL”) on loans represents management’s estimate of lifetime credit losses inherent in loans as of the balance sheet date. The ACL on loans includes two primary components: (i) an allowance established on loans which share similar risk characteristics which are collectively evaluated for credit losses, and (ii) an allowance established on loans which do not share similar risk characteristics with any loan segment and which are individually evaluated for credit losses.

Management determines the ACL on loans that are collectively evaluated by considering the following: (a) the weighted-average remaining maturity (WARM) method is used to estimate credit losses, based on the Corporation’s historical loss experience, for pools of loans with similar risk and cash flow characteristics; (b) subjective adjustments are made, generally increasing the ACL, for qualitative risk factors that are deemed likely to cause estimated credit losses to differ from historical experience; and (c) an additional adjustment to expected credit losses is made, based on an economic forecast, and applied for the first 2 years of the weighted-average remaining life of the portfolio.

The following table summarizes the activity related to the allowance for credit losses for the three and nine months ended September 30, 2024 and 2023.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

​

Commercial

​

All

​

​

​

​

​

​

​

​

​

real estate -

​

real estate -

​

other

​

Residential

​

​

​

​

​

​

nonowner

​

owner

​

commercial

​

mortgage

​

Consumer

​

​

​

(In Thousands)

occupied

​

occupied

​

loans

​

loans

​

loans

​

Total

Balance, June 30, 2024

$

12,177

​

$

2,901

​

$

3,678

​

$

1,112

​

$

514

​

$

20,382

Charge-offs

​

(640)

​

​

0

​

​

(570)

​

​

0

​

​

(58)

​

​

(1,268)

Recoveries

​

0

​

​

0

​

​

5

​

​

1

​

​

25

​

​

31

Provision (credit) for credit losses on loans

 

381

​

 

(28)

​

 

311

​

 

647

​

 

(14)

​

 

1,297

Balance, September 30, 2024

$

11,918

​

$

2,873

​

$

3,424

​

$

1,760

​

$

467

​

$

20,442

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

​

Commercial

​

All

​

​

​

​

​

​

​

​

​

real estate -

​

real estate -

​

other

​

Residential

​

​

​

​

​

​

nonowner

​

owner

​

commercial

​

mortgage

​

Consumer

​

​

​

(In Thousands)

occupied

​

occupied

​

loans

​

loans

​

loans

​

Total

Balance, December 31, 2023

$

12,010

​

$

2,116

​

$

2,918

​

$

1,764

​

$

400

​

$

19,208

Charge-offs

​

(757)

​

​

0

​

​

(630)

​

​

0

​

​

(297)

​

​

(1,684)

Recoveries

​

0

​

​

0

​

​

40

​

​

4

​

​

51

​

​

95

Provision (credit) for credit losses on loans

 

665

​

​

757

​

​

1,096

​

​

(8)

​

​

313

​

 

2,823

Balance, September 30, 2024

$

11,918

​

$

2,873

​

$

3,424

​

$

1,760

​

$

467

​

$

20,442

​

​

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

​

Commercial

​

All

​

​

​

​

​

​

​

​

​

real estate -

​

real estate -

​

other

​

Residential

​

​

​

​

​

​

nonowner

​

owner

​

commercial

​

mortgage

​

Consumer

​

​

​

(In Thousands)

occupied

​

occupied

​

loans

​

loans

​

loans

​

Total

Balance, June 30, 2023

$

10,603

​

$

2,025

​

$

3,686

​

$

2,464

​

$

278

​

$

19,056

Charge-offs

​

0

​

​

0

​

​

(7)

​

​

0

​

​

(91)

​

​

(98)

Recoveries

​

0

​

​

0

​

​

34

​

​

8

​

​

18

​

​

60

Provision (credit) for credit losses on loans

 

(268)

​

 

(161)

​

 

(161)

​

 

(479)

​

 

136

​

 

(933)

Balance, September 30, 2023

$

10,335

​

$

1,864

​

$

3,552

​

$

1,993

​

$

341

​

$

18,085

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial

​

Commercial

​

All

​

​

​

​

​

​

​

​

​

​

​

​

real estate -

​

real estate -

​

other

​

Residential

​

​

​

​

​

​

​

​

nonowner

​

owner

​

commercial

​

mortgage

​

Consumer

​

​

​

​

​

(In Thousands)

occupied

​

occupied

​

loans

​

loans

​

loans

​

Unallocated

​

Total

Balance, December 31, 2022

$

6,305

​

$

1,942

​

$

4,142

​

$

2,751

​

$

475

​

$

1,000

​

$

16,615

Adoption of ASU 2016-13 (CECL)

​

3,763

​

​

7

​

​

(88)

​

​

(344)

​

​

(234)

​

​

(1,000)

​

​

2,104

Charge-offs

​

0

​

​

0

​

​

(12)

​

​

(33)

​

​

(254)

​

​

0

​

​

(299)

Recoveries

​

0

​

​

0

​

​

34

​

​

10

​

​

30

​

​

0

​

​

74

Provision (credit) for credit losses on loans

 

267

​

​

(85)

​

​

(524)

​

​

(391)

​

​

324

​

​

0

​

 

(409)

Balance, September 30, 2023

$

10,335

​

$

1,864

​

$

3,552

​

$

1,993

​

$

341

​

$

0

​

$

18,085

​

The ACL on loans individually evaluated decreased to $173,000 at September 30, 2024 from $1,230,000 at June 30, 2024 and $743,000 at December 31, 2023, primarily from partial charge-offs on three loans with individual ACLs at June 30, 2024, including two loans with individual ACLs at December 31, 2023.

​

The ACL on loans collectively evaluated was $20,269,000 at September 30, 2024, $19,152,000 at June 30, 2024 and $18,465,000 at December 31, 2023. The increase in the ACL at September 30, 2024 as compared to June 30, 2024 included an increase related to the economic forecast, an increase in the WARM method estimate based on the Corporation’s net charge-off experience and a net increase related to changes in qualitative adjustments. The increase in the ACL at September 30, 2024 as compared to December 31, 2023 included a net increase related to changes in qualitative adjustments and the net impact of an increase in loans receivable, partially offset by a decrease in the WARM method estimate.

​

Modifications Made to Borrowers Experiencing Financial Difficulty

​

The Corporation closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. During the three and nine months ended September 30, 2024 and September 30, 2023, the Corporation made no modifications to borrowers experiencing financial difficulty.

​

The following table depicts the performance of two loans which were in nonaccrual status at September 30, 2024 that were modified in the fourth quarter 2023:

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

Payment Status (Amortized Cost Basis)

September 30, 2024

    

Current

    

90+ Days Past Due

    

Total

Commercial real estate - non-owner occupied:

​

 

  

​

 

  

​

 

  

Non-owner occupied

​

$

1,846

​

$

1,357

​

$

3,203

​

The loan that was current at September 30, 2024 matured October 5, 2024, and the Corporation and borrower are engaged in negotiations regarding an extension of the loan term. The Corporation  received principal payments totaling $40,000 during the nine months ended September 30, 2024 and recorded a partial charge-off of $640,000 on this loan in the third quarter 2024. There was no specific allowance

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

on this loan at September 30, 2024, while the specific allowance on the loan was $455,000 at June 30, 2024 and $486,000 at December 30, 2023.

The loan that was past due more than 90 days in the table above was in default with its modified terms at September 30, 2024. The Corporation received payments totaling $24,000 during the nine months September 30, 2024, all of which were applied to principal. There was a specific allowance on this loan of $14,000 at September 30, 2024 and $38,000 at June 30, 2024 and December 31, 2023.

Except as described above, at September 30, 2024 and December 31, 2023, the Corporation had no commitments to lend any additional funds on modified loans and during the three month and nine month periods ended September 30, 2024 and September 30, 2023, the Corporation had no loans that defaulted during the period and had been modified preceding the payment default when the borrower was experiencing financial difficulty at the time of modification.

The carrying amount of foreclosed residential real estate properties held as a result of obtaining physical possession (included in foreclosed assets held for sale in the unaudited consolidated balance sheets) is as follows:

​

​

​

​

​

​

​

​

(In Thousands)

​

September 30, 

    

December 31,

​

​

2024

​

2023

Foreclosed residential real estate

​

$

25

​

$

47

​

The recorded investment of consumer mortgage loans secured by residential real properties for which formal foreclosure proceedings were in process is as follows:

​

​

​

​

​

​

​

​

(In Thousands)

​

September 30, 

    

December 31,

​

​

2024

​

2023

Residential real estate in process of foreclosure

​

$

616

​

$

1,227

​

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. The contract amounts of these financial instruments at September 30, 2024 and December 31, 2023 are as follows:

​

​

​

​

​

​

​

​

​

​

September 30,

​

December 31,

(In Thousands)

    

2024

    

2023

Commitments to extend credit

​

$

378,535

​

$

395,997

Standby letters of credit

​

 

64,938

​

 

19,158

​

The Corporation maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, commercial letters of credit and credit enhancement obligations related to residential mortgage loans sold with recourse, when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable (i.e. commitment cannot be canceled at any time). The allowance for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated lives. The allowance for credit losses for off-balance sheet exposures of $593,000 at September 30, 2024 and $690,000 at December 31, 2023, is included in accrued interest and other liabilities on the unaudited consolidated balance sheets.

​

The following table presents the balance and activity in the allowance for credit losses for off-balance sheet exposures for the three and nine months ended September 30, 2024 and 2023:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

​

Nine Months Ended

(In Thousands)

​

September 30, 2024

​

September 30, 2023

​

September 30, 2024

​

September 30, 2023

Beginning Balance

​

$

683

​

$

1,154

​

$

690

​

$

425

Adjustment to allowance for off-balance sheet exposures for adoption of ASU 2016-13

​

​

0

​

​

0

​

​

0

​

​

793

Recoveries

​

​

0

​

​

38

​

​

0

​

​

38

Credit for unfunded commitments

​

​

(90)

​

​

(292)

​

​

(97)

​

​

(356)

Ending Balance, September 30

​

$

593

​

$

900

​

$

593

​

$

900

​

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

​

​

7. GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill represents the excess of the cost of acquisitions over the fair value of the net assets acquired. At September 30, 2024 and December 31, 2023, the net carrying value of goodwill was $52,505,000.

​

Information related to core deposit intangibles is as follows:

​

​

​

​

​

​

​

​

​

(In Thousands)

    

September 30, 

    

December 31, 

 

​

​

2024

​

2023

 

Gross amount

​

$

6,639

​

$

6,639

​

Accumulated amortization

​

 

(4,462)

​

 

(4,170)

​

Net

​

$

2,177

​

$

2,469

​

​

Amortization expense related to core deposit intangibles is included in other noninterest expense in the consolidated statements of income, as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

Three Months Ended

​

Nine Months Ended

​

​

September 30, 

​

September 30, 

​

September 30, 

​

September 30, 

​

    

2024

    

2023

    

2024

    

2023

Amortization expense

​

$

97

    

$

102

    

$

292

    

$

306

​

​

​

8. BORROWED FUNDS

​

SHORT-TERM BORROWINGS

Short-term borrowings (initial maturity within one year) include the following:

​

​

​

​

​

​

​

​

(In Thousands)

​

September 30, 

    

December 31,

​

​

2024

​

2023

FHLB-Pittsburgh borrowings

​

$

10,000

​

$

31,500

Customer repurchase agreements

​

 

1,426

​

 

2,374

Total short-term borrowings

​

$

11,426

​

$

33,874

​

At September 30, 2024, short-term borrowings included short-term advances maturing in the third and fourth quarters of 2024 totaling $10,000,000 with a weighted average interest rate of 5.29%. At December 31, 2023, short-term borrowings included an overnight borrowing from FHLB-Pittsburgh of $6,500,000 at an interest rate of 5.68% and short-term advances maturing in the first quarter 2024 totaling $25,000,000 with a weighted average interest rate of 5.60%.

The Corporation engages in repurchase agreements with certain commercial customers. These agreements provide that the Corporation sells specified investment securities to the customers on an overnight basis and repurchases them on the following business day. The weighted average rate paid by the Corporation on customer repurchase agreements was 0.10% at September 30, 2024 and December 31, 2023. The carrying value of the underlying securities was $1,440,000 at September 30, 2024 and $2,400,000 at December 31, 2023.

The FHLB-Pittsburgh loan facility is collateralized by qualifying loans secured by real estate with a book value totaling $1,337,673,000 at September 30, 2024 and $1,323,008,000 at December 31, 2023. Also, the FHLB-Pittsburgh loan facility requires the Corporation to invest in established amounts of FHLB-Pittsburgh stock. The carrying values of the Corporation’s holdings of FHLB-Pittsburgh stock (included in other assets in the consolidated balance sheets) were $15,971,000 at September 30, 2024 and $15,214,000 at December 31, 2023. The Corporation’s total credit facility with FHLB-Pittsburgh was $945,142,000 at September 30, 2024, including an unused (available) amount of $737,284,000. At December 31, 2023, the Corporation’s total credit facility with FHLB-Pittsburgh was $926,845,000, including an unused (available) amount of $737,824,000.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The Corporation had available credit with other correspondent banks totaling $75,000,000 at September 30, 2024 and December 31, 2023. These lines of credit are primarily unsecured. No amounts were outstanding at September 30, 2024 or December 31, 2023.

The Corporation has a line of credit with the Federal Reserve Bank of Philadelphia’s Discount Window. At September 30, 2024, the Corporation had available credit in the amount of $18,602,000 on this line with no outstanding advances. At December 31, 2023, the Corporation had available credit in the amount of $19,982,000 on this line with no outstanding advances. As collateral for this line, the Corporation has pledged available-for-sale securities with a carrying value of $19,387,000 at September 30, 2024 and $20,829,000 at December 31, 2023.

LONG-TERM BORROWINGS – FHLB ADVANCES

Long-term borrowings from FHLB-Pittsburgh are as follows:

​

​

​

​

​

​

​

​

(In Thousands)

​

September 30, 

    

December 31, 

​

​

2024

​

2023

Loans maturing in 2024 with a weighted-average rate of 3.90%

​

​

9,138

​

​

32,161

Loans maturing in 2025 with a weighted-average rate of 4.30%

​

​

44,544

​

​

44,627

Loans maturing in 2026 with a weighted-average rate of 4.61%

​

​

48,018

​

​

35,518

Loans maturing in 2027 with a weighted-average rate of 4.24%

​

​

34,571

​

​

24,031

Loans maturing in 2028 with a weighted-average rate of 4.30%

​

​

26,027

​

​

2,000

Loans maturing in 2029 with a weighted-average rate of 4.42%

​

​

12,319

​

​

0

Total long-term FHLB-Pittsburgh borrowings

​

$

174,617

​

$

138,337

​

Note: Weighted-average rates are presented as of September 30, 2024.

SENIOR NOTES

In 2021, the Corporation issued and sold $15.0 million in aggregate principal amount of 2.75% Fixed Rate Senior Unsecured Notes due 2026 (the "Senior Notes"). The Senior Notes mature on June 1, 2026 and bear interest at a fixed annual rate of 2.75%. The Corporation is not entitled to redeem the Senior Notes, in whole or in part, at any time prior to maturity and the Senior Notes are not subject to redemption by the holders. The Senior Notes are unsecured and unsubordinated obligations of the Corporation only and are not obligations of, and are not guaranteed by, any subsidiary of the Corporation.

The Senior Notes were recorded, net of debt issuance costs of $337,000, at an initial carrying amount of $14,663,000. Debt issuance costs are amortized over the term of the Senior Notes as an adjustment of the effective interest rate. Amortization of debt issuance costs associated with the Senior Notes totaling $17,000 in the third quarter 2024 and $51,000 for the nine-month  period ended September 30, 2024, and $16,000 in the third quarter 2023 and $49,000 for the nine-month period ended September 30, 2023, was included in interest expense in the unaudited consolidated statements of income.

At September 30, 2024 and December 31, 2023, outstanding Senior Notes are as follows:

​

​

​

​

​

​

​

​

(In Thousands)

    

September 30, 

    

December 31, 

​

​

2024

​

2023

Senior Notes with an aggregate par value of $15,000,000; bearing interest at 2.75% with an effective interest rate of 3.23%; maturing in June 2026

​

$

14,882

​

$

14,831

Total carrying value

​

$

14,882

​

$

14,831

​

SUBORDINATED DEBT

In 2021, the Corporation issued and sold $25.0 million in aggregate principal amount of 3.25% Fixed-to-Floating Rate Subordinated Notes due 2031 (the "Subordinated Notes"). The Subordinated Notes mature on June 1, 2031 and bear interest at a fixed annual rate of 3.25%, to June 1, 2026. From June 1, 2026 to maturity or early redemption, the interest rate will reset quarterly to an interest rate per annum equal to the three-month Secured Overnight Financing Rate provided by the Federal Reserve Bank of New York plus 259 basis points. The Corporation is entitled to redeem the Subordinated Notes, in whole or in part, at any time on or after June 1, 2026, and to

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

redeem the Subordinated Notes at any time in whole upon certain other events. Any redemption of the Subordinated Notes will be subject to prior regulatory approval to the extent required.

The Subordinated Notes are not subject to redemption at the option of the holders. The Subordinated Notes are unsecured, subordinated obligations of the Corporation only and are not obligations of, and are not guaranteed by, any subsidiary of the Corporation. The Subordinated Notes rank junior in right to payment to the Corporation's current and future senior indebtedness, including the Senior Notes (described above). The Subordinated Notes are intended to qualify as Tier 2 capital for regulatory capital purposes.

The Subordinated Notes were recorded, net of debt issuance costs of $563,000, at an initial carrying amount of $24,437,000. Debt issuance costs are amortized through June 1, 2026 as an adjustment of the effective interest rate. Amortization of debt issuance costs associated with the Subordinated Notes totaling $29,000 in the third quarter 2024 and $85,000 for the nine-month period ended September 30, 2024, and $27,000 in the third quarter 2023 and $79,000 for the nine-month period ended September 30, 2023, was included in interest expense in the unaudited consolidated statements of income.

At September 30, 2024 and December 31, 2023, the carrying amounts of subordinated debt agreements are as follows:

​

​

​

​

​

​

​

​

(In Thousands)

    

September 30, 

    

December 31, 

​

​

2024

​

2023

Agreements with a par value of $25,000,000; bearing interest at 3.25% with an effective interest rate of 3.74%; maturing in June 2031 and redeemable at par in June 2026

​

$

24,802

​

$

24,717

Total carrying value

​

$

24,802

​

$

24,717

​

​

9. STOCK-BASED COMPENSATION PLANS

The Corporation has a stock incentive plan for selected officers and the independent directors. The first quarter 2024 restricted stock awards to employees vest ratably over three years, and the 2024 restricted stock awards for the independent directors vest over one year. During the three-month period ended September 30, 2024, there was a time-based award of 20,000 shares of restricted stock to the President and Chief Executive Officer pursuant to an amended and restated Employment Agreement with a vesting date of April 30, 2027. Following is a summary of restricted stock awards granted in the nine-month period ended September 30, 2024:

​

​

​

​

​

​

​

(Dollars in Thousands)

    

​

    

Aggregate

​

​

​

​

Grant

​

​

​

​

Date

​

​

Number of

​

Fair

​

​

Shares

​

Value

Nine Months Ended September 30, 2024 awards:

​

​

​

​

​

Time-based awards to independent directors

​

10,000

​

$

214

Time-based awards to employees

​

63,514

​

​

1,336

Performance-based awards to employees

​

19,346

​

​

371

Total

​

92,860

​

$

1,921

​

Compensation cost related to restricted stock is recognized based on the fair value of the stock at the grant date over the vesting period, adjusted for estimated and actual forfeitures. Total stock-based compensation expense attributable to restricted stock awards amounted to $383,000 in the third quarter 2024 and $320,000 in the third quarter 2023. Total stock-based compensation expense attributable to restricted stock awards amounted to $1,099,000 in the nine-month period ended September 30, 2024 and $1,015,000 in the nine-month period ended September 30, 2023.

​

​

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

10. CONTINGENCIES

Class Action Litigation

On March 27, 2024, a putative class action lawsuit was filed in the US District Court for the Western District of Texas by investors in a purported Ponzi scheme operated by two individuals, one of whom maintained accounts at C&N Bank. The plaintiffs have sued C&N Bank, along with another bank, and additional law firm and accounting firm defendants. The case is styled Goldovsky, et al. v. Rausch, et al. Plaintiffs have asserted claims against C&N Bank and the other bank for aiding and abetting alleged violations of the Texas Securities Act, and additional claims against the legal and accounting professionals for statutory fraud, common law fraud, negligent misrepresentation, and knowing participation in breach of fiduciary duty.  C&N Bank has filed motions to dismiss the case for wont of personal jurisdiction and failure to state a claim. The Plaintiffs have responded to those motions. Plaintiffs have filed an application for certification of the suit as a class action. The court has stayed the motions to dismiss pending consideration of the class action certification application. Discovery as to the class action qualification is underway, with depositions of the named plaintiffs scheduled. C&N Bank believes that it has substantial defenses against the action, and it intends to defend itself against the plaintiffs’ allegations. Based on the information available to the Corporation, the Corporation does not believe at this time that a loss is probable in this matter, nor can a range of possible losses be determined. Accordingly, no liability has been recorded for this litigation matter in the accompanying consolidated financial statements. The Corporation’s estimate may change from time to time, and actual losses could vary.

Other Matters

In the normal course of business, the Corporation is subject to pending and threatened litigation in which claims for monetary damages are asserted. In management’s opinion, the Corporation’s financial position and results of operations would not be materially affected by the outcome of these legal proceedings.

11. DERIVATIVE FINANCIAL INSTRUMENTS

The Corporation is a party to derivative financial instruments. These financial instruments consist of interest rate swap agreements and risk participation agreements (RPAs) which contain master netting and collateral provisions designed to protect the party at risk.

Interest rate swaps with commercial loan banking customers were executed to facilitate their respective risk management strategies. Under the terms of these arrangements, the commercial banking customers effectively exchanged their floating interest rate exposures on loans into fixed interest rate exposures. Those interest rate swaps have been simultaneously economically hedged by offsetting interest rate swaps with a third party, such that the Corporation has effectively exchanged its fixed interest rate exposures for floating rate exposures. These derivatives are not designated as hedges and are not speculative. Rather, these derivatives result from a service provided to certain customers. As the interest rate swaps associated with this program do not meet the hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.

The aggregate notional amount of interest rate swaps was $143,070,000 at September 30, 2024 and $150,028,000 at December 31, 2023. There were no interest rate swaps originated in the nine-month periods ended September 30, 2024, and 2023. There were no gross amounts of interest rate swap-related assets and liabilities not offset in the consolidated balance sheets at September 30, 2024.

The Corporation has entered into an RPA with another institution as a means to assume a portion of the credit risk associated with a loan structure which includes a derivative instrument, in exchange for fee income commensurate with the risk assumed.  This type of derivative is referred to as an “RPA In.” In addition, in an effort to reduce the credit risk associated with an interest rate swap agreement with a borrower for whom the Corporation has provided a loan structured with a derivative, the Corporation purchased an RPA from an institution participating in the facility in exchange for a fee commensurate with the risk shared. This type of derivative is referred to as an “RPA Out.”  The net impact on the consolidated statements of income from RPAs was a decrease in other noninterest income of $1,000 in the third quarter 2024 and an increase of $1,000 in the nine-month period ended September 30, 2024 as compared to an increase of $1,000 in the third quarter 2023 and $19,000 in the nine months ended September 30, 2023.

The table below presents the fair value of the Corporation’s derivative financial instruments as well as their classification on the consolidated balance sheets at September 30, 2024 and December 31, 2023:

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

At September 30, 2024

​

At December 31, 2023

​

Asset Derivatives

​

Liability Derivatives

​

Asset Derivatives

​

Liability Derivatives

​

Notional

​

Fair

​

Notional

​

Fair

​

Notional

​

Fair

​

Notional

​

Fair

​

Amount

​

Value (1)

​

Amount

​

Value (2)

​

Amount

​

Value (1)

​

Amount

​

Value (2)

Interest rate swap agreements

$

71,535

​

$

1,991

​

$

71,535

​

$

1,991

​

$

75,014

​

$

2,783

​

$

75,014

​

$

2,783

RPA Out

​

6,988

​

​

8

​

​

0

​

​

0

​

​

7,082

​

​

11

​

​

0

​

​

0

RPA In

​

0

​

​

0

​

​

9,958

​

​

9

​

​

0

​

​

0

​

​

10,000

​

​

13

​

(1)Included in other assets in the consolidated balance sheets.
(2)Included in accrued interest and other liabilities in the consolidated balance sheets.

The Corporation’s agreements with its derivative counterparties provide that if the Corporation defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Corporation could also be declared in default on its derivative obligations. Further, if the Corporation were to fail to maintain its status as a well or adequately capitalized institution, then the counterparties could terminate the derivative positions and the Corporation would be required to settle its obligations under the agreements. There was interest-bearing cash pledged as collateral against the Corporation’s liability related to the interest rate swaps of $1,350,000 at September 30, 2024 and $1,360,000 at December 31, 2023.

12. FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS

The Corporation measures certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB Topic 820, “Fair Value Measurements and Disclosures” establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs used in determining valuations into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:

Level 1 – Fair value is based on unadjusted quoted prices in active markets that are accessible to the Corporation for identical assets or liabilities. These generally provide the most reliable evidence and are used to measure fair value whenever available.

Level 2 – Fair value is based on significant inputs, other than Level 1 inputs, that are observable either directly or indirectly for substantially the full term of the asset or liability through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets or liabilities, quoted market prices in markets that are not active for identical or similar assets or liabilities and other observable inputs.

Level 3 – Fair value is based on significant unobservable inputs. Examples of valuation methodologies that would result in Level 3 classification include option pricing models, discounted cash flows and other similar techniques.

The Corporation monitors and evaluates available data relating to fair value measurements on an ongoing basis and recognizes transfers among the levels of the fair value hierarchy as of the date of an event or change in circumstances that affects the valuation method chosen. Examples of such changes may include the market for a particular asset or liability becoming active or inactive, changes in the availability of quoted prices, or changes in the availability of other market data.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

At September 30, 2024 and December 31, 2023, assets and liabilities measured at fair value and the valuation methods used are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2024

​

​

Quoted Prices

​

Other Observable

​

Unobservable

​

​

​

​

in Active Markets

​

Inputs

​

Inputs

​

Total

(In Thousands)

​

(Level 1)

​

(Level 2)

​

(Level 3)

​

Fair Value

Recurring fair value measurements, assets:

 

​

  

 

​

  

 

​

  

 

​

  

AVAILABLE-FOR-SALE DEBT SECURITIES:

 

​

  

 

​

  

 

​

  

 

​

  

Obligations of the U.S. Treasury

​

$

7,321

​

$

0

​

$

0

​

$

7,321

Obligations of U.S. Government agencies

​

​

0

​

​

9,376

​

​

0

​

​

9,376

Bank holding company debt securities

​

​

0

​

​

23,949

​

​

0

​

​

23,949

Obligations of states and political subdivisions:

​

 

  

​

 

​

​

 

  

​

 

​

Tax-exempt

​

 

0

​

 

104,936

​

 

0

​

 

104,936

Taxable

​

 

0

​

 

48,434

​

 

0

​

 

48,434

Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:

​

 

  

​

 

​

​

 

  

​

 

  

Residential pass-through securities

​

 

0

​

 

94,053

​

 

0

​

 

94,053

Residential collateralized mortgage obligations

​

 

0

​

 

45,601

​

 

0

​

 

45,601

Commercial mortgage-backed securities

​

 

0

​

 

66,390

​

 

0

​

 

66,390

Private label commercial mortgage-backed securities

​

 

0

​

 

8,362

​

 

0

​

 

8,362

Total available-for-sale debt securities

​

 

7,321

​

 

401,101

​

 

0

​

 

408,422

Marketable equity security

​

 

889

​

 

0

​

 

0

​

 

889

Servicing rights

​

 

0

​

 

0

​

 

2,682

​

 

2,682

RPA Out

​

​

0

​

​

8

​

​

0

​

​

8

Interest rate swap agreements, assets

​

​

0

​

​

1,991

​

​

0

​

​

1,991

Total recurring fair value measurements, assets

​

$

8,210

​

$

403,100

​

$

2,682

​

$

413,992

​

​

​

​

​

​

​

​

​

​

​

​

​

Recurring fair value measurements, liabilities:

​

​

​

​

​

​

​

​

​

​

​

​

RPA In

​

$

0

​

$

9

​

$

0

​

$

9

Interest rate swap agreements, liabilities

​

​

0

​

​

1,991

​

​

0

​

​

1,991

Total recurring fair value measurements, liabilities

​

$

0

​

$

2,000

​

$

0

​

$

2,000

​

​

​

​

​

​

​

​

​

​

​

​

​

Nonrecurring fair value measurements, assets:

​

 

  

​

 

  

​

 

  

​

 

  

Loans individually evaluated for credit loss, net

​

$

0

​

$

0

​

$

1,449

​

$

1,449

Foreclosed assets held for sale

​

 

0

​

 

0

​

 

181

​

 

181

Total nonrecurring fair value measurements, assets

​

$

0

​

$

0

​

$

1,630

​

$

1,630

​

28

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2023

​

​

Quoted Prices

​

Other Observable

​

Unobservable

​

​

​

​

in Active Markets

​

Inputs

​

Inputs

​

Total

(In Thousands)

​

(Level 1)

​

(Level 2)

​

(Level 3)

​

Fair Value

Recurring fair value measurements, assets:

 

​

  

 

​

  

 

​

  

 

​

  

AVAILABLE-FOR-SALE DEBT SECURITIES:

 

​

  

 

​

  

 

​

  

 

​

  

Obligations of the U.S. Treasury

​

$

11,290

​

$

0

​

$

0

​

$

11,290

Obligations of U.S. Government agencies

​

​

0

​

​

9,946

​

​

0

​

​

9,946

Bank holding company debt securities

​

​

0

​

​

23,500

​

​

0

​

​

23,500

Obligations of states and political subdivisions:

​

 

  

​

 

​

​

 

  

​

 

​

Tax-exempt

​

 

0

​

 

104,199

​

 

0

​

 

104,199

Taxable

​

 

0

​

 

50,111

​

 

0

​

 

50,111

Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:

​

 

  

​

 

  

​

 

  

​

 

  

Residential pass-through securities

​

 

0

​

 

95,405

​

 

0

​

 

95,405

Residential collateralized mortgage obligations

​

 

0

​

 

46,462

​

 

0

​

 

46,462

Commercial mortgage-backed securities

​

 

0

​

 

66,682

​

 

0

​

 

66,682

Private label commercial mortgage-backed securities

​

 

0

​

 

8,160

​

 

0

​

 

8,160

Total available-for-sale debt securities

​

 

11,290

​

 

404,465

​

 

0

​

 

415,755

Marketable equity security

​

 

871

​

 

0

​

 

0

​

 

871

Servicing rights

​

 

0

​

 

0

​

 

2,659

​

 

2,659

RPA Out

​

​

0

​

​

11

​

​

0

​

​

11

Interest rate swap agreements, assets

​

​

0

​

​

2,783

​

​

0

​

​

2,783

Total recurring fair value measurements, assets

​

$

12,161

​

$

407,259

​

$

2,659

​

$

422,079

​

​

​

​

​

​

​

​

​

​

​

​

​

Recurring fair value measurements, liabilities,

​

​

​

​

​

​

​

​

​

​

​

​

RPA In

​

$

0

​

$

13

​

$

0

​

$

13

Interest rate swap agreements, liabilities

​

​

0

​

​

2,783

​

​

0

​

​

2,783

Total recurring fair value measurements, liabilities

​

$

0

​

$

2,796

​

$

0

​

$

2,796

​

​

​

​

​

​

​

​

​

​

​

​

​

Nonrecurring fair value measurements, assets:

​

 

  

​

 

  

​

 

  

​

 

  

Impaired loans, net

​

$

0

​

$

0

​

$

7,043

​

$

7,043

Foreclosed assets held for sale

​

 

0

​

 

0

​

 

478

​

 

478

Total nonrecurring fair value measurements, assets

​

$

0

​

$

0

​

$

7,521

​

$

7,521

​

Level 2 valuation techniques used to measure fair value for the financial instruments in the preceding tables are as follows:

​

Available-for-sale debt securities - Level 2 debt securities are valued by a third-party pricing service. The pricing service uses pricing models that vary based on asset class and incorporate available market information, including quoted prices of investment securities with similar characteristics. Because many fixed income securities do not trade on a daily basis, pricing models use available information, as applicable, through processes such as benchmark yield curves, benchmarking of like securities, sector groupings and matrix pricing.

​

Derivative instruments - Interest rate SWAP agreements, RPA Out and RPA In- The fair value of derivatives are based on valuation models using observable market data as of the measurement date, valued by a third-party pricing service using quantitative models that utilize multiple market inputs. The inputs include prices and indices to generate continuous yield or pricing curves, estimates of current and potential future credit exposure and calculated discounted cash flow factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services.

Management’s evaluation and selection of valuation techniques and the unobservable inputs used in determining the fair values of assets valued using Level 3 methodologies include sensitive assumptions. Other market participants might use substantially different assumptions, which could result in calculations of fair values that would be substantially different than the amount calculated by management.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

At September 30, 2024 and December 31, 2023, quantitative information regarding valuation techniques and the significant unobservable inputs used for assets measured on a recurring basis using unobservable inputs (Level 3 methodologies) are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Fair Value at

    

  

    

  

    

​

  

    

  

​

​

9/30/2024

​

Valuation

​

Unobservable

​

​

​

​

Method or Value As of

Asset

​

(In Thousands)

​

Technique

​

Input(s)

​

​

​

​

9/30/2024

Servicing rights

​

$

2,682

 

Discounted cash flow

 

Discount rate

 

​

13.00

%  

Rate used through modeling period

​

​

 

​

 

​

​

Loan prepayment speeds

​

​

122.00

%  

Weighted-average PSA

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Fair Value at

    

  

    

  

    

​

  

    

  

​

​

12/31/2023

​

Valuation

​

Unobservable

​

​

​

​

Method or Value As of

Asset

​

(In Thousands)

​

Technique

​

Input(s)

​

​

​

​

12/31/2023

Servicing rights

​

$

2,659

 

Discounted cash flow

 

Discount rate

 

​

13.00

%  

Rate used through modeling period

​

​

 

​

 

​

​

Loan prepayment speeds

​

​

131.00

%  

Weighted-average PSA

​

The fair value of servicing rights is affected by expected future interest rates. Increases (decreases) in future expected interest rates tend to increase (decrease) the fair value of the Corporation’s servicing rights because of changes in expected prepayment behavior by the borrowers on the underlying loans. Unrealized gains (losses) in fair value of servicing rights are included in Loan servicing fees, net, in the unaudited consolidated statements of income.

Following is a reconciliation of activity for Level 3 assets measured at fair value on a recurring basis:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

Three Months Ended

​

Nine Months Ended

​

​

    

September 30, 2024

    

September 30, 2023

    

September 30, 2024

    

September 30, 2023

    

Servicing rights balance, beginning of period

​

$

2,720

​

$

2,607

​

$

2,659

​

$

2,653

​

Originations of servicing rights

​

 

91

​

 

64

​

 

195

​

 

113

​

Unrealized loss included in earnings

​

 

(129)

​

 

(41)

​

 

(172)

​

 

(136)

​

Servicing rights balance, end of period

​

$

2,682

​

$

2,630

​

$

2,682

​

$

2,630

​

​

Loans are individually evaluated for credit loss when they do not share similar risk characteristics as similar loans within its loan pool. Foreclosed assets held for sale consist of real estate acquired by foreclosure. For individually evaluated loans secured by real estate and foreclosed assets held for sale, estimated fair values are determined primarily using values from third-party appraisals. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.

30

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

At September 30, 2024 and December 31, 2023, quantitative information regarding valuation techniques and the significant unobservable inputs used for nonrecurring fair value measurements using Level 3 methodologies are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars In Thousands)

    

​

​

    

  

​

    

  

​

    

  

    

  

    

Range (Weighted

 

​

​

​

​

​

Valuation

​

  

​

​

  

​

  

​

Average)

 

​

​

Balance at

​

Allowance at

​

Fair Value at

​

Valuation

​

Unobservable

​

Discount at

 

Asset

​

9/30/2024

​

9/30/2024

​

9/30/2024

​

Technique

​

Inputs

​

9/30/2024

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans individually evaluated for credit loss:

 

​

  

 

​

  

 

​

  

 

  

 

  

​

  

​

Commercial real estate - non-owner occupied

​

$

1,357

​

$

14

​

$

1,343

 

Sales comparison

 

Discount to appraised value

​

30% (30)

% 

Commercial real estate - owner occupied

​

​

265

​

​

159

​

​

106

​

Sales comparison & SBA guaranty

​

Discount to appraised value

​

97% (97)

%

Total loans individually evaluated for credit loss

​

$

1,622

​

$

173

​

$

1,449

 

  

 

  

​

​

​

Foreclosed assets held for sale - real estate:

​

 

​

​

 

  

​

 

  

 

  

 

  

​

​

​

Residential (1-4 family)

​

$

25

​

$

0

​

$

25

 

Sales comparison

 

Discount to appraised value

​

62% (62)

%

Commercial real estate

​

​

156

​

​

0

​

​

156

​

Sales comparison

​

Discount to appraised value

​

18%-77% (34)

%

Total foreclosed assets held for sale

​

$

181

​

$

0

​

$

181

 

  

 

  

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars In Thousands)

    

​

​

    

  

​

    

  

​

    

  

    

  

    

Range (Weighted

 

​

​

​

​

​

Valuation

​

  

​

​

  

​

  

​

Average)

 

​

​

Balance at

​

Allowance at

​

Fair Value at

​

Valuation

​

Unobservable

​

Discount at

 

Asset

​

12/31/2023

​

12/31/2023

​

12/31/2023

​

Technique

​

Inputs

​

12/31/2023

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Loans individually evaluated for credit loss:

 

​

  

 

​

  

 

​

  

 

  

 

  

​

  

​

Commercial real estate - non-owner occupied

​

$

7,301

​

$

648

​

$

6,653

 

Sales comparison

 

Discount to appraised value

​

22%-30% (25)

% 

Commercial real estate - owner occupied

​

​

294

​

​

5

​

​

289

​

Sales comparison & SBA guaranty

​

Discount to appraised value

​

93% (93)

%

All other commercial loans

​

​

191

​

​

90

​

​

101

​

Liquidation & SBA guaranty

​

Discount to appraised value

​

0%-76% (17)

%

Total loans individually evaluated for credit loss

​

$

7,786

​

$

743

​

$

7,043

 

  

 

  

​

  

​

Foreclosed assets held for sale - real estate:

​

 

​

​

 

  

​

 

  

 

  

 

  

​

  

​

Residential (1-4 family)

​

$

47

​

$

0

​

$

47

 

Sales comparison

 

Discount to appraised value

​

20%-62% (50)

%

Commercial real estate

​

​

431

​

​

0

​

​

431

​

Sales comparison

​

Discount to appraised value

​

18%-50% (45)

%

Total foreclosed assets held for sale

​

$

478

​

$

0

​

$

478

 

  

 

  

​

​

​

​

Certain of the Corporation’s financial instruments are not measured at fair value in the consolidated financial statements. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Certain financial instruments and all nonfinancial instruments are excluded from disclosure requirements. Therefore, the aggregate fair value amounts presented may not represent the underlying fair value of the Corporation.

31

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The estimated fair values, and related carrying amounts, of the Corporation’s financial instruments that are not recorded at fair value are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

Fair Value

​

September 30, 2024

​

December 31, 2023

​

​

Hierarchy

​

Carrying

​

Fair

​

Carrying

​

Fair

​

    

Level

    

Amount

    

Value

    

Amount

    

Value

Financial assets:

 

  

 

​

  

 

​

  

 

​

  

 

​

  

Cash and cash equivalents

 

Level 1

​

$

181,363

​

$

181,363

​

$

52,778

​

$

52,778

Certificates of deposit

 

Level 2

​

 

2,750

​

 

2,746

​

 

4,100

​

 

3,859

Restricted equity securities (included in other assets)

 

Level 2

​

 

22,509

​

 

N/A

​

 

21,716

​

 

N/A

Loans, net

 

Level 3

​

 

1,872,322

​

 

1,794,754

​

 

1,828,931

​

 

1,750,336

Accrued interest receivable

 

Level 2

​

 

9,419

​

 

9,419

​

 

9,140

​

 

9,140

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Financial liabilities:

 

  

​

 

​

​

 

​

​

 

  

​

 

  

Deposits with no stated maturity

 

Level 2

​

 

1,643,861

​

 

1,643,861

​

 

1,590,357

​

 

1,590,357

Time deposits

 

Level 2

​

 

492,018

​

​

493,398

​

 

424,449

​

 

423,643

Short-term borrowings

 

Level 2

​

 

11,426

​

​

11,426

​

 

33,874

​

 

33,874

Long-term borrowings

 

Level 2

​

 

174,617

​

​

177,338

​

 

138,337

​

 

137,775

Senior debt

​

Level 2

​

​

14,882

​

​

13,581

​

​

14,831

​

​

12,706

Subordinated debt

​

Level 2

​

​

24,802

​

​

19,602

​

​

24,717

​

​

22,750

Accrued interest payable

 

Level 2

​

 

2,390

​

 

2,390

​

 

1,525

​

 

1,525

​

​

​

​

​

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements in this section and elsewhere in this quarterly report on Form 10-Q are forward-looking statements. Citizens & Northern Corporation and its wholly-owned subsidiaries (collectively, the Corporation) intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995. Forward-looking statements, which are not historical facts, are based on certain assumptions and describe future plans, business objectives and expectations, and are generally identifiable by the use of words such as, "should", “likely”, "expect", “plan”, "anticipate", “target”, “forecast”, and “goal”. These forward-looking statements are subject to risks and uncertainties that are difficult to predict, may be beyond management’s control and could cause results to differ materially from those expressed or implied by such forward-looking statements. Factors which could have a material, adverse impact on the operations and future prospects of the Corporation include, but are not limited to, the following:

●changes in monetary and fiscal policies of the Federal Reserve Board and the U.S. Government, particularly related to changes in interest rates
●changes in general economic conditions
●adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, sources of liquidity and capital funding, and regulatory responses to these developments
●the Corporation’s credit standards and its on-going credit assessment processes might not protect it from significant credit losses
●current, pending or future legislation or regulation that could have a negative effect on the Corporation’s revenue and businesses, including rules and regulations relating to capital and liquidity requirements, bank products and financial services, and the Corporation’s ability to address, and the expense related to complying, with those requirements
●downturn in demand for loan, deposit and other financial services in the Corporation’s market area
●increased competition from other banks and non-bank providers of financial services
●technological changes and increased technology-related costs
●information security breach or other technology difficulties or failures
●changes in accounting principles, or the application of generally accepted accounting principles
●failure to achieve merger-related synergies and difficulties in integrating the business and operations of acquired institutions
●fraud and cyber malfunction risks as usage of artificial intelligence continues to expand

​

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

EARNINGS OVERVIEW

Third Quarter 2024 as Compared to Third Quarter 2023

Third quarter 2024 net income was $6,365,000, or $0.41 per diluted share, as compared to $7,591,000, or $0.50 per diluted share, in the third quarter 2023. Significant variances were as follows:

​

●Net interest income of $20,156,000 in the third quarter 2024 was $493,000 higher than in the third quarter 2023. Average earning assets were $106,852,000 higher in the third quarter 2024 as compared to the third quarter 2023. Average total deposits increased $94,562,000 in the third quarter 2024 over the third quarter 2023. The net interest margin was 3.29% in the third quarter 2024, down from 3.35% in the third quarter 2023. The interest rate spread decreased 0.18%, as the average rate on interest-bearing liabilities increased 0.62%, while the average yield on earning assets increased 0.44%.  

​

●For the quarter ended September 30, 2024, there was a provision for credit losses of $1,207,000, an increase of $2,432,000 in expense compared to a credit for credit losses (reduction in expense) of $1,225,000 in the third quarter 2023. The allowance for credit losses (“ACL”) as a percentage of gross loans receivable was 1.08% at September 30, 2024 as compared to 0.99% at September 30, 2023.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

●Noninterest income of $7,133,000 in the third quarter 2024 increased $644,000 from the third quarter 2023 amount. Significant variances included the following:

​

ØEarnings from the increase in cash surrender value of life insurance of $458,000 increased $298,000 from the third quarter 2023 as the average balance of Bank-Owned Life Insurance increased to $50,470,000 in the third quarter 2024 from $31,559,000 in the third quarter 2023.

​

ØBrokerage and insurance revenue of $523,000 increased $129,000 due to an increase in sales volume.

​

ØNet gains from sale of loans of $360,000 increased $123,000 from the third quarter 2023, reflecting an increase in volume of residential mortgage loans sold.

​

ØService charges on deposit accounts increased $103,000 from the third quarter 2024 reflecting an increase in volume of fees.

​

●Noninterest expense of $18,269,000 in the third quarter 2024 increased $329,000 (1.8%) from the third quarter 2023 including increases of $109,000 in net occupancy and equipment expense, $68,000 in professional fees, $60,000 in other expenses and $59,000 in data processing and telecommunications expenses.

​

●The income tax provision of $1,448,000, or 18.5% of pre-tax income, for the third quarter 2024 decreased $398,000 from $1,846,000 or 19.6% of pre-tax income, for the third quarter 2023 consistent with the decrease in pre-tax income.

​

​

Nine Months Ended September 30, 2024 as Compared to Nine Months Ended September 30, 2023

​

Net income for the nine-month period ended September 30, 2024 was $17,784,000, or $1.16 per diluted share, as compared to $19,887,000, or $1.29 per diluted share, for the first nine months of 2023. Significant variances were as follows:

​

●Net interest income totaled $58,642,000 in the nine months ended September 30, 2024, a decrease of $2,164,000 from the total for the first nine months of 2023. The net interest margin was 3.30% for the first nine months of 2024, down from 3.53% in the corresponding period of 2023. The interest rate spread decreased 0.39%, as the average rate on interest-bearing liabilities was higher by 0.89% while the average yield on earning assets increased 0.50%. Average total earning assets increased $68,438,000. Average total loans increased $99,838,000 (5.6%) and average total deposits increased $77,578,000 (4.0%).

​

●For the nine months ended September 30, 2024, the provision for credit losses was $2,726,000, compared to a credit for credit losses (reduction in expense) of $765,000 in the first nine months of 2023 resulting in an increase of $3,491,000. For the nine months ended September 30, 2024, the provision related to loans receivable included the impact of increases in the ACL from an increase in qualitative adjustments related to changes in external indexes and an increase in past due and nonaccrual loans as well as net charge-offs in excess of specific allowances at December 31, 2023. The credit related to loans receivable for the nine months ended September 30, 2023 was mainly attributable to qualitative adjustments in concentrations of credit based on loan type, lending policies and procedures and changes in external indexes, as well as a reduction in the Corporation’s average net charge-off experience, used in the calculation of the ACL. In the first nine months of 2024, the ACL increased $1,234,000 to 1.08% of loans receivable at September 30, 2024 as compared to 1.04% at December 31, 2023. For the nine months ended September 30, 2024, net charge-offs totaled $1,589,000, or 0.08% of average loans receivable as compared to $225,000 or 0.02% annualized for the first nine months of 2023.

​

●Noninterest income totaled $21,662,000 in the first nine months of 2024, up $2,923,000 from the total for the first nine months of 2023. Significant variances included the following:

​

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

ØEarnings from the increase in cash surrender value of life insurance of $1,372,000 increased $922,000 as the average balance of Bank-Owned Life Insurance increased to $51,647,000 in the nine months ended September 30, 2024 from $31,413,000 in the first nine months of 2023.

​

ØOther noninterest income of $4,083,000 increased $641,000 as dividends on FHLB-Pittsburgh and Federal Reserve stock totaled $1,292,000, an increase of $400,000, and income from tax credits related to donations increased $120,000.

​

ØBrokerage and insurance revenue of $1,589,000 increased $400,000 due to an increase in sales volume.

​

ØTrust revenue of $5,857,000 increased $357,000, consistent with appreciation in the trading prices of many U.S. equity securities and includes revenue from new business.

​

ØNet gains from sale of loans of $786,000 increased $336,000, reflecting an increase in volume of residential mortgage loans sold.

​

ØService charges on deposit accounts of $4,336,000 increased $215,000 reflecting an increase in volume of fees.

​

●Noninterest expense totaled $55,828,000 for the first nine months of 2024, a decrease of $79,000 from the total for the first nine months of 2023. Significant variances included the following:  

​

ØOther noninterest expense of $7,936,000 decreased $507,000. Within this category, significant variances included the following:
◾For the first nine months of 2024, there was a reduction in expense of $513,000 related to the defined benefit postretirement medical benefit plan, including a curtailment of $469,000 related to plan adjustments in the first quarter 2024. In comparison, in the first nine months of 2023, there was a reduction in expense associated with the postretirement plan of $15,000.
◾Legal fees totaled $491,000 in the first nine months of 2024, a decrease of $209,000, mainly due to lower fees incurred related to non-litigation-related corporate matters.
ØProfessional fees of $1,625,000 decreased $363,000 as 2023 included $389,000 of conversion costs related to a change in Wealth Management platform for providing brokerage and investment advisory services.

​

ØSalaries and employee benefits expense of $33,460,000 increased $378,000, including an increase in base salaries expense of $690,000, or 3.1% and an increase of $451,000 in cash and stock-based incentive compensation, while estimated contributions to the Employee Stock Ownership Plan and Supplemental Executive Retirement Plan decreased $638,000 and health insurance expense decreased $344,000.

​

●The income tax provision of $3,966,000, or 18.2% of pre-tax income, for the nine months ended September 30, 2024 decreased $708,000 from $4,674,000, or 19.0% of pre-tax income, for nine months ended September 30, 2023. The decrease in income tax provision in 2024 reflected the decrease in pre-tax income of $2,811,000.

​

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE I – QUARTERLY FINANCIAL DATA

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars In Thousands,

​

For the Three Months Ended :

Except Per Share Data)

​

September 30, 

​

June 30, 

​

March 31, 

​

December 31, 

​

September 30, 

(Unaudited)

    

2024

​

2024

​

2024

    

2023

​

2023

Interest income

​

$

33,087

​

$

31,326

​

$

30,336

​

$

30,236

​

$

29,118

Interest expense

​

 

12,931

​

 

11,881

​

 

11,295

​

 

10,642

​

 

9,455

Net interest income

​

 

20,156

​

 

19,445

​

 

19,041

​

 

19,594

​

 

19,663

Provision (credit) for credit losses

​

 

1,207

​

 

565

​

 

954

​

 

951

​

 

(1,225)

Net interest income after provision (credit) for credit losses

​

 

18,949

​

 

18,880

​

 

18,087

​

 

18,643

​

 

20,888

Noninterest income

​

 

7,133

​

 

7,854

​

 

6,675

​

 

5,678

​

 

6,489

Noninterest expense

​

 

18,269

​

 

19,255

​

 

18,304

​

 

18,399

​

 

17,940

Income before income tax provision

​

 

7,813

​

 

7,479

​

 

6,458

​

 

5,922

​

 

9,437

Income tax provision

​

 

1,448

​

 

1,366

​

 

1,152

​

 

1,661

​

 

1,846

Net income

​

$

6,365

​

$

6,113

​

$

5,306

​

$

4,261

​

$

7,591

Net income attributable to common shares

​

$

6,311

​

$

6,066

​

$

5,267

​

$

4,231

​

$

7,534

Basic earnings per common share

​

$

0.41

​

$

0.40

​

$

0.35

​

$

0.28

​

$

0.50

Diluted earnings per common share

​

$

0.41

​

$

0.40

​

$

0.35

​

$

0.28

​

$

0.50

​

NONINTEREST INCOME

TABLE II – COMPARISON OF NONINTEREST INCOME

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in Thousands)

​

Three Months Ended

​

​

​

​

​

 

​

​

​

September 30, 

​

​

$

​

%

 

​

​

    

2024

​

2023

    

​

Change

​

Change

 

    

Trust revenue

​

$

1,946

​

$

1,919

​

$

27

​

1.4

%

​

Brokerage and insurance revenue

​

 

523

​

​

394

​

​

129

​

32.7

%

​

Service charges on deposit accounts

​

 

1,546

​

​

1,443

​

​

103

​

7.1

%

​

Interchange revenue from debit card transactions

​

 

1,103

​

​

1,098

​

​

5

​

0.5

%

​

Net gains from sales of loans

​

 

360

​

​

237

​

​

123

​

51.9

%

​

Loan servicing fees, net

​

 

74

​

​

154

​

​

(80)

​

(51.9)

%

​

Increase in cash surrender value of life insurance

​

 

458

​

​

160

​

​

298

​

186.3

%

​

Other noninterest income

​

 

1,123

​

​

1,084

​

​

39

​

3.6

%

​

Total noninterest income

​

$

7,133

​

$

6,489

​

$

644

​

9.9

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in Thousands)

​

Nine Months Ended

​

​

​

​

​

 

​

​

​

September 30, 

​

​

$

​

%

 

​

​

    

2024

​

2023

    

​

Change

​

Change

 

    

Trust revenue

​

$

5,857

​

$

5,500

​

$

357

​

6.5

%

​

Brokerage and insurance revenue

​

 

1,589

​

​

1,189

​

​

400

​

33.6

%

​

Service charges on deposit accounts

​

 

4,336

​

​

4,121

​

​

215

​

5.2

%

​

Interchange revenue from debit card transactions

​

 

3,205

​

​

3,115

​

​

90

​

2.9

%

​

Net gains from sales of loans

​

 

786

​

​

450

​

​

336

​

74.7

%

​

Loan servicing fees, net

​

 

434

​

​

466

​

​

(32)

​

(6.9)

%

​

Increase in cash surrender value of life insurance

​

 

1,372

​

​

450

​

​

922

​

204.9

%

​

Other noninterest income

​

 

4,083

​

​

3,442

​

​

641

​

18.6

%

​

Realized gains on available-for-sale debt securities, net

​

​

0

​

​

6

​

​

(6)

​

(100.0)

%

​

Total noninterest income

​

$

21,662

​

$

18,739

​

$

2,923

​

15.6

%

​

​

​

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

NONINTEREST EXPENSE

TABLE III - COMPARISON OF NONINTEREST EXPENSE

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in Thousands)

​

 Three Months Ended 

​

​

​

​

​

 

​

​

September 30, 

​

 $ 

​

 % 

 

​

 

2024

 

2023

 

 Change 

 

 Change 

​

Salaries and employee benefits

    

$

10,875

    

$

10,878

    

$

(3)

    

0.0

%

Net occupancy and equipment expense

​

 

1,377

​

 

1,268

​

 

109

 

8.6

%

Data processing and telecommunications expense

​

 

1,882

​

 

1,823

​

 

59

 

3.2

%

Automated teller machine and interchange expense

​

 

510

​

 

504

​

 

6

 

1.2

%

Pennsylvania shares tax

​

 

433

​

 

403

​

 

30

 

7.4

%

Professional fees

​

 

555

​

 

487

​

 

68

 

14.0

%

Other noninterest expense

​

​

2,637

​

​

2,577

​

​

60

​

2.3

%

Total noninterest expense

​

$

18,269

​

$

17,940

​

$

329

 

1.8

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in Thousands)

​

Nine Months Ended

​

​

​

​

​

 

​

​

September 30, 

​

 $ 

​

 % 

 

​

 

2024

 

2023

 

 Change 

 

 Change 

​

Salaries and employee benefits

    

$

33,460

    

$

33,082

    

$

378

    

1.1

%

Net occupancy and equipment expense

​

 

4,160

​

 

3,993

​

 

167

 

4.2

%

Data processing and telecommunications expense

​

 

5,877

​

 

5,659

​

 

218

 

3.9

%

Automated teller machine and interchange expense

​

 

1,470

​

 

1,374

​

 

96

 

7.0

%

Pennsylvania shares tax

​

 

1,300

​

 

1,210

​

 

90

 

7.4

%

Professional fees

​

 

1,625

​

 

1,988

​

 

(363)

 

(18.3)

%

Other noninterest expense

​

​

7,936

​

​

8,443

​

​

(507)

​

(6.0)

%

Total noninterest expense

​

$

55,828

​

$

55,749

​

$

79

 

0.1

%

​

Additional detailed information concerning fluctuations in the Corporation’s earnings results and other financial information are provided in other sections of Management’s Discussion and Analysis.

CRITICAL ACCOUNTING POLICIES

The presentation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect many of the reported amounts and disclosures. Actual results could differ from these estimates.

Allowance for Credit Losses on Loans – A material estimate that is particularly susceptible to significant change is the determination of the allowance for credit losses (ACL) on loans. The Corporation maintains an ACL on loans which represents management’s estimate of expected net charge-offs over the life of the loans. The ACL includes two primary components: (i) an allowance established on loans which share similar risk characteristics collectively evaluated for credit losses (collective basis), and (ii) an allowance established on loans which do not share similar risk characteristics with any loan segment and which are individually evaluated for credit losses (individual basis). Management considers the determination of the ACL on loans to be critical because it requires significant judgment regarding estimates of expected credit losses based on the Corporation’s historical loss experience, current conditions and economic forecasts. Management’s evaluation is based upon a continuous review of the Corporation’s loans, with consideration given to evaluations resulting from examinations performed by regulatory authorities. Note 6 to the unaudited consolidated financial statements provides an overview of the process management uses for determining the ACL, and additional discussion of the ACL is provided in a separate section of Management’s Discussion and Analysis.

The ACL may increase or decrease due to changes in economic conditions affecting borrowers and macroeconomic variables, including new information regarding existing problem loans, identification of additional problem loans, changes in the fair value of underlying

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

collateral, unforeseen events such as natural disasters and pandemics, and other factors. Because current economic conditions and forecasts can change and future events are inherently difficult to predict, the anticipated amount of estimated credit losses on loans, and therefore the appropriateness of the ACL, could change significantly.

Fair Value of Available-For-Sale Debt Securities – Another material estimate is the calculation of fair values of the Corporation’s debt securities. For most of the Corporation’s debt securities, the Corporation receives estimated fair values of debt securities from an independent valuation service, or from brokers. In developing fair values, the valuation service and the brokers use estimates of cash flows, based on historical performance of similar instruments in similar interest rate environments. Based on experience, management is aware that estimated fair values of debt securities tend to vary among brokers and other valuation services.

NET INTEREST INCOME

The Corporation’s primary source of operating income is net interest income, which is equal to the difference between the amounts of interest income and interest expense. Tables IV, V and VI include information regarding the Corporation’s net interest income for the three-month and nine-month periods ended September 30, 2024 and 2023. In each of these tables, the amounts of interest income earned on tax-exempt securities and loans have been adjusted to a fully taxable-equivalent basis. Management believes presentation of net interest income on a fully taxable-equivalent basis, which is a non-GAAP financial measure, provides investors with meaningful information for purposes of comparing returns on tax-exempt securities and loans with returns on taxable securities and loans. Accordingly, the amount of net interest income on a fully taxable-equivalent basis reflected in these tables exceed the net interest income amounts presented in the consolidated financial statements. The discussion that follows is based on amounts in the related tables.

Three-Month Periods Ended September 30, 2024 and 2023

For the three-month periods, fully taxable equivalent net interest income (a non-GAAP measure) of $20,361,000 in 2024 was $486,000 (2.4%) higher than in 2023 as average earning assets were $106,852,000 higher in the third quarter 2024 as compared to the third quarter 2023. Average total deposits increased $94,562,000 in the third quarter 2024 over the third quarter 2023. As presented in Table VI, the net impact of changes in volume of earning assets and interest-bearing liabilities increased net interest income in the third quarter 2024 as compared to third quarter 2023 by $613,000, while the net impact of changes in interest rates (primarily increases) decreased net interest income by $127,000. As presented in Table V, the Net Interest Margin was 3.29% in the third quarter 2024 as compared to 3.35% in the third quarter 2023, and the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) decreased to 2.55% in 2024 from 2.73% in 2023. The average yield on earning assets of 5.38% was 0.44% higher in 2024 as compared to 2023, and the average rate on interest-bearing liabilities of 2.83% in 2024 was 0.62% higher.

INTEREST INCOME AND EARNING ASSETS

Interest income totaled $33,292,000 in 2024, an increase of $3,962,000, or 13.5% from 2023.

Interest and fees from loans receivable increased $2,639,000 in 2024 as compared to 2023. The fully taxable equivalent yield on loans in 2024 increased to 6.08% from 5.72% in 2023, reflecting the effects of rising interest rates on the loan portfolio. Average outstanding loans receivable increased $71,472,000 (3.9%) to $1,888,470,000 in 2024 from $1,816,998,000 in 2023. The increase in average loans receivable includes the impact of growth in commercial real estate and other commercial loans.

Income from interest-bearing due from banks totaled $1,622,000 in 2024, an increase of $1,277,000 from the total for 2023.  Within this category, the largest asset balance in 2024 and 2023 has been interest-bearing deposits held with the Federal Reserve. The average yield on interest-bearing due from banks was 5.38% in 2024, up from 4.31% in 2023. The average balance of interest-bearing due from banks was $119,885,000 in 2024, up $88,156,000 from $31,729,000 in 2023. The increase in interest-bearing due from banks included the net impact of  the increase in average total deposits of $94,562,000, a reduction in average available-for-sale debt securities (amortized cost) of $54,384,000 and an increase in average borrowed funds of $27,739,000, partially offset by the increase in the average loans receivable of $71,472,000 and the net use of cash that contributed to an increase in average  Bank-Owned Life Insurance of $18,911,000.  

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Interest income from available-for-sale debt securities, on a fully taxable-equivalent basis, totaled $2,774,000 in 2024, up $16,000 from 2023, as the average yield on available-for-sale debt securities was 2.45% in 2024, up from 2.17% in 2023. The average balance (at amortized cost) of available-for-sale debt securities decreased $54,384,000.

INTEREST EXPENSE AND INTEREST-BEARING LIABILITIES

Interest expense increased $3,476,000 to $12,931,000 in 2024 from $9,455,000 in 2023.

Interest expense on deposits increased $3,148,000, as the average rate on interest-bearing deposits increased to 2.62% in 2024 from 1.93% in 2023. Average total deposits (interest-bearing and noninterest-bearing) amounted to $2,084,654,000 for the third quarter 2024, up $94,562,000 (4.8%) from the third quarter 2023. Within average total deposits, average brokered deposits (primarily time and money market) were $58,782,000 with an average interest rate of 5.28% in the third quarter 2024, as compared to $60,829,000 with an average interest rate of 4.98% in the third quarter 2023. At September 30, 2024, total brokered deposits were $45,051,000. The deposit mix has changed as businesses and consumers have become more interest-rate sensitive in light of higher market rates.  In comparing the third quarter 2024 to the third quarter 2023, average time deposits increased $79,272,000, average interest checking deposits increased $31,214,000 and average total money market accounts increased $15,689,000 while average savings deposits decreased $33,928,000.

Interest expense on short-term borrowings decreased $493,000 to $184,000 in 2024 from $677,000 in 2023. The average balance of short-term borrowings decreased to $15,038,000 in 2024 from $49,157,000 in 2023. The average rate on short-term borrowings was 4.87% in 2024 compared to 5.46% in 2023.

Interest expense on long-term borrowings (FHLB advances) increased $819,000 to $1,983,000 in 2024 from $1,164,000 in 2023. The average balance of long-term borrowings was $181,075,000 in 2024, up from an average balance of $119,395,000 in 2023. Over the last several months of 2023 and the first nine months of 2024, the Corporation entered into FHLB advances maturing mainly in 2025 to 2029, effectively using the proceeds to reduce higher rate short-term borrowings and increase cash held with the Federal Reserve. Borrowings are classified as long-term within the Tables based on their term at origination or assumption in business combinations. The average rate on long-term borrowings was 4.36% in 2024 compared to 3.87% in 2023.

Nine-Month Periods Ended September 30, 2024 and 2023

For the nine-month periods, fully taxable equivalent net interest income (a non-GAAP measure) was $59,244,000 in 2024, which was $2,282,000 (3.7%) lower than in 2023. The decrease in net interest income reflected an increase in interest expense of $13,645,000 and an increase in interest income of $11,363,000. As presented in Table VI, the net impact of changes in volume of earning assets and interest-bearing liabilities increased net interest income for the nine months ended September 30, 2024 over the nine months ended September 30, 2023 by $1,849,000, while the net impact of changes in interest rates (primarily increases) decreased net interest income by $4,131,000. As presented in Table V, the Net Interest Margin was 3.30% in the first nine months of 2024 as compared to 3.53% in the first nine months of 2023, and the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) decreased to 2.60% in 2024 from 2.99% in 2023. The average yield on earning assets of 5.31% was 0.50% higher in 2024 as compared to 2023, while the average rate on interest-bearing liabilities of 2.71% in 2024 was 0.89% higher.

INTEREST INCOME AND EARNING ASSETS

Interest income totaled $95,351,000 in 2024, an increase of $11,363,000 from 2023.

Interest and fees from loans receivable increased $10,026,000 in 2024 as compared to 2023. In the nine-month period ended September 30, 2024, the fully taxable equivalent yield on loans was 6.01%, up from 5.60% in the first nine months of 2023, reflecting the effects of primarily rising interest rates on new loan originations and floating-rate loans. Average outstanding loans receivable increased $99,838,000 (5.6%) to $1,877,076,000 in 2024 from $1,777,238,000 in 2023. As noted above, the Corporation has experienced growth in commercial real estate and other commercial loans in 2023 and in the first nine months of 2024.

Income from interest-bearing due from banks totaled $2,521,000 in 2024, an increase of $1,589,000 from 2023. Within this category, the largest asset balance in 2024 and 2023 has been interest-bearing deposits held with the Federal Reserve. The average yield on

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

interest-bearing due from banks was 5.15% in 2024, up from 4.01% in 2023. The average balance of interest-bearing due from banks was $65,449,000 in 2024, up from $31,076,000 in 2023. Similar to the third quarter 2024 to third quarter 2023 comparison, the net increase in average interest-bearing due from banks for the first nine months of 2024 as compared to 2023 reflected net sources of cash from deposit growth, a reduction in average available-for-sale debt securities and an increase in borrowed funds, partially offset by net uses of cash for loan growth and an increase in Bank-Owned Life Insurance.

Interest income from available-for-sale debt securities decreased $305,000 in 2024 from 2023. The average balance of available-for-sale debt securities (at amortized cost) decreased to $455,944,000 in 2024 from $522,600,000 in 2023. The average yield on available-for-sale debt securities increased to 2.43% for 2024 from 2.20% in 2023.

INTEREST EXPENSE AND INTEREST-BEARING LIABILITIES

For the nine-month periods, interest expense increased $13,645,000 to $36,107,000 in 2024 from $22,462,000 in 2023.

Interest expense on deposits increased $13,024,000, as the average rate on interest-bearing deposits increased to 2.48% in 2024 from 1.45% in 2023. Average total deposits (interest-bearing and noninterest-bearing) amounted to $2,034,335,000 for the first nine months of 2024, up $77,578,000 (4.0%) from the first nine months of 2023. Within average total deposits, average brokered deposits (primarily time and money market) were $70,428,000 with an average interest rate of 5.24% in 2024, up from $40,910,000 with an average interest rate of 4.56% in 2023. Average time deposits increased $92,488,000 and average interest checking deposits increased $47,428,000, while the average balance of savings accounts decreased $39,139,000 and average noninterest-bearing demand deposits decreased $31,814,000.

Interest expense on borrowed funds increased $621,000 in 2024 as compared to 2023. Interest expense on short-term borrowings of $1,141,000 in 2024 was down from $2,918,000 in 2023 as the average balance of short-term borrowings decreased to $29,086,000 in 2024 from $75,978,000 in 2023. The average rate on short-term borrowings was 5.24% in 2024 compared to 5.13% in 2023. Interest expense on long-term borrowings (FHLB advances) increased $2,393,000 to $5,294,000 in 2024 from $2,901,000 in 2023. The average balance of long-term borrowings was $166,454,000 in 2024, up from an average balance of $103,817,000 in 2023. Borrowings are classified as long-term within the Tables based on their term at origination or assumption in business combinations. The average rate on long-term borrowings was 4.25% in 2024 compared to 3.74% in 2023.

More information regarding borrowed funds is provided in Note 8 to the unaudited consolidated financial statements.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE IV - ANALYSIS OF INTEREST INCOME AND EXPENSE

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

​

​

​

​

Nine Months Ended

​

​

​

​

​

​

September 30, 

​

Increase/

.

​

September 30, 

​

Increase/

​

(In Thousands)

    

2024

    

2023

    

(Decrease)

​

    

2024

    

2023

    

(Decrease)

    

INTEREST INCOME

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest-bearing due from banks

​

$

1,622

​

$

345

​

$

1,277

​

​

$

2,521

​

$

932

​

$

1,589

​

Available-for-sale debt securities:

​

 

​

​

 

​

​

 

​

​

​

 

​

​

 

​

​

 

​

​

Taxable

​

 

2,136

​

 

2,077

​

 

59

​

​

 

6,409

​

 

6,440

​

 

(31)

​

Tax-exempt

​

 

638

​

 

681

​

 

(43)

​

​

 

1,887

​

 

2,161

​

 

(274)

​

Total available-for-sale debt securities

​

 

2,774

​

 

2,758

​

 

16

​

​

 

8,296

​

 

8,601

​

 

(305)

​

Loans receivable:

​

 

​

​

 

​

​

 

​

​

​

 

​

​

 

​

​

 

​

​

Taxable

​

 

28,099

​

 

25,529

​

 

2,570

​

​

 

82,292

​

 

72,322

​

 

9,970

​

Tax-exempt

​

 

749

​

 

680

​

 

69

​

​

 

2,149

​

 

2,093

​

 

56

​

Total loans receivable

​

 

28,848

​

 

26,209

​

 

2,639

​

​

 

84,441

​

 

74,415

​

 

10,026

​

Other earning assets

​

 

48

​

 

18

​

 

30

​

​

 

93

​

 

40

​

 

53

​

Total Interest Income

​

 

33,292

​

 

29,330

​

 

3,962

​

​

 

95,351

​

 

83,988

​

 

11,363

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

INTEREST EXPENSE

​

 

​

​

 

​

​

 

​

​

​

 

​

​

 

​

​

 

​

​

Interest-bearing deposits:

​

 

​

​

 

​

​