CITIZENS & NORTHERN CORP 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA CONSOLIDATED BALANCE SHEETS ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, (In Thousands, Except Share and Per Share Data) ​ 2023 ​ 2022 ASSETS ​ ​ Cash and due from banks: ​ ​ Noninterest-bearing ​ $ 24,855 ​ $ 25,811 Interest-bearing ​ 32,023 ​ 29,237 Total cash and due from banks ​ 56,878 ​ 55,048 Available-for-sale debt securities, at fair value ​ 415,755 ​ 498,033 ​ ​ ​ ​ ​ ​ ​ Loans receivable ​ 1,848,139 ​ 1,740,040 Allowance for credit losses ​ ( 19,208 ) ​ ( 16,615 ) Loans, net ​ 1,828,931 ​ 1,723,425 ​ ​ ​ ​ ​ ​ ​ Bank-owned life insurance ​ 63,674 ​ 31,214 Accrued interest receivable ​ 9,140 ​ 8,653 Bank premises and equipment, net ​ 21,632 ​ 21,574 Foreclosed assets held for sale ​ 478 ​ 275 Deferred tax asset, net ​ 17,441 ​ 20,884 Goodwill ​ 52,505 ​ 52,505 Core deposit intangibles, net ​ 2,469 ​ 2,877 Other assets ​ 46,681 ​ 39,819 TOTAL ASSETS ​ $ 2,515,584 ​ $ 2,454,307 ​ ​ ​ ​ ​ ​ ​ LIABILITIES ​ ​ ​ ​ Deposits: ​ ​ ​ ​ Noninterest-bearing ​ $ 490,554 ​ $ 563,843 Interest-bearing ​ 1,524,252 ​ 1,433,750 Total deposits ​ 2,014,806 ​ 1,997,593 Short-term borrowings ​ 33,874 ​ 80,062 Long-term borrowings - FHLB advances ​ 138,337 ​ 62,347 Senior notes, net ​ ​ 14,831 ​ ​ 14,765 Subordinated debt, net ​ 24,717 ​ 24,607 Accrued interest and other liabilities ​ 26,638 ​ 25,608 TOTAL LIABILITIES ​ 2,253,203 ​ 2,204,982 ​ ​ ​ ​ ​ ​ ​ 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 15,295,135 at December 31, 2023; ​ ​ ​ ​ issued 16,030,172 and outstanding 15,518,819 at December 31, 2022 ​ 16,030 ​ 16,030 Paid-in capital ​ 144,388 ​ 143,950 Retained earnings ​ 157,028 ​ 151,743 Treasury stock, at cost; 735,037 shares at December 31, 2023 and 511,353 ​ ​ ​ ​ shares at December 31, 2022 ​ ( 16,628 ) ​ ( 12,520 ) Accumulated other comprehensive loss ​ ( 38,437 ) ​ ( 49,878 ) TOTAL STOCKHOLDERS' EQUITY ​ 262,381 ​ 249,325 TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ​ $ 2,515,584 ​ $ 2,454,307 ​ The accompanying notes are an integral part of the consolidated financial statements. ​ 42 Table of Contents Consolidated Statements of Income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands, Except Per Share Data) ​ 2023 ​ 2022 ​ 2021 INTEREST INCOME ​ ​ ​ ​ ​ Interest and fees on loans: ​ ​ ​ ​ ​ Taxable ​ $ 98,854 ​ $ 78,599 ​ $ 74,549 Tax-exempt ​ 2,225 ​ 1,965 ​ 1,770 Income from available-for-sale debt securities: ​ ​ ​ ​ ​ ​ Taxable ​ 8,555 ​ 8,360 ​ 5,114 Tax-exempt ​ 2,427 ​ 3,001 ​ 2,684 Other interest and dividend income ​ 1,443 ​ 722 ​ 384 Total interest and dividend income ​ 113,504 ​ 92,647 ​ 84,501 INTEREST EXPENSE ​ ​ ​ Interest on deposits ​ 24,233 ​ 6,638 ​ 4,538 Interest on short-term borrowings ​ 3,240 ​ 429 ​ 23 Interest on long-term borrowings - FHLB advances ​ 4,230 ​ 896 ​ 399 Interest on senior notes, net ​ ​ 479 ​ ​ 477 ​ ​ 293 Interest on subordinated debt, net ​ ​ 922 ​ ​ 1,079 ​ ​ 1,309 Total interest expense ​ 33,104 ​ 9,519 ​ 6,562 Net interest income ​ 80,400 ​ 83,128 ​ 77,939 Provision for credit losses ​ 186 ​ 7,255 ​ 3,661 Net interest income after provision for credit losses ​ 80,214 ​ 75,873 ​ 74,278 NONINTEREST INCOME ​ ​ ​ Trust revenue ​ 7,413 ​ 6,994 ​ 7,234 Brokerage and insurance revenue ​ 1,675 ​ 2,291 ​ 1,860 Service charges on deposit accounts ​ 5,567 ​ 5,019 ​ 4,633 Interchange revenue from debit card transactions ​ 4,160 ​ 4,148 ​ 3,855 Net gains from sale of loans ​ 723 ​ 757 ​ 3,428 Loan servicing fees, net ​ 602 ​ 960 ​ 694 Increase in cash surrender value of life insurance ​ 2,703 ​ 545 ​ 573 Other noninterest income ​ 4,610 ​ 3,698 ​ 3,580 Realized (losses) gains on available-for-sale debt securities, net ​ ​ ( 3,036 ) ​ ​ 20 ​ ​ 24 Total noninterest income ​ 24,417 ​ 24,432 ​ 25,881 NONINTEREST EXPENSE ​ ​ ​ Salaries and employee benefits ​ ​ 44,195 ​ ​ 41,833 ​ ​ 37,603 Net occupancy and equipment expense ​ ​ 5,357 ​ ​ 5,533 ​ ​ 4,984 Data processing and telecommunications expense ​ ​ 7,582 ​ ​ 6,806 ​ ​ 5,903 Automated teller machine and interchange expense ​ 1,682 ​ 1,601 ​ 1,433 Pennsylvania shares tax ​ 1,602 ​ 1,956 ​ 1,951 Professional fees ​ 2,497 ​ 2,005 ​ 2,243 Other noninterest expense ​ 11,233 ​ 8,221 ​ 8,355 Total noninterest expense ​ 74,148 ​ 67,955 ​ 62,472 Income before income tax provision ​ 30,483 ​ 32,350 ​ 37,687 Income tax provision ​ 6,335 ​ 5,732 ​ 7,133 NET INCOME ​ $ 24,148 ​ $ 26,618 ​ $ 30,554 EARNINGS PER COMMON SHARE - BASIC ​ $ 1.57 ​ $ 1.71 ​ $ 1.92 EARNINGS PER COMMON SHARE - DILUTED ​ $ 1.57 ​ $ 1.71 ​ $ 1.92 ​ The accompanying notes are an integral part of consolidated financial statements. ​ 43 Table of Contents Consolidated Statements of Comprehensive Income (Loss) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, (In Thousands) ​ 2023 ​ 2022 2021 Net income ​ $ 24,148 ​ $ 26,618 ​ $ 30,554 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Available-for-sale debt securities: ​ ​ ​ ​ ​ ​ Unrealized holding gains (losses) on available-for-sale debt securities ​ ​ 11,512 ​ ​ ( 69,828 ) ​ ​ ( 8,669 ) Reclassification adjustment for losses (gains) realized in income ​ ​ 3,036 ​ ​ ( 20 ) ​ ​ ( 24 ) Other comprehensive income (loss) on available-for-sale debt securities ​ ​ 14,548 ​ ​ ( 69,848 ) ​ ​ ( 8,693 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Unfunded pension and postretirement obligations: ​ ​ ​ ​ ​ ​ Changes from plan amendments and actuarial gains and losses ​ ( 9 ) ​ 389 ​ 140 Amortization of prior service cost and net actuarial loss included in net periodic benefit cost ​ ( 56 ) ​ ( 42 ) ​ ( 17 ) Other comprehensive (loss) income on pension and postretirement obligations ​ ( 65 ) ​ 347 ​ 123 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss) before income tax ​ 14,483 ​ ( 69,501 ) ​ ( 8,570 ) Income tax related to other comprehensive (income) loss ​ ( 3,042 ) ​ 14,597 ​ 1,801 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net other comprehensive income (loss) ​ 11,441 ​ ( 54,904 ) ​ ( 6,769 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Comprehensive income (loss) ​ $ 35,589 ​ $ ( 28,286 ) ​ $ 23,785 ​ The accompanying notes are an integral part of the consolidated financial statements. ​ 44 Table of Contents Consolidated Statements of Changes in Stockholders’ Equity (In Thousands Except Share and Per Share Data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other ​ ​ ​ ​ ​ ​ ​ ​ Common ​ Treasury ​ Common ​ Paid-in ​ Retained ​ Comprehensive ​ Treasury ​ ​ ​ ​ ​ Shares ​ Shares ​ Stock ​ Capital ​ Earnings ​ Income (Loss) ​ Stock ​ Total Balance, January 1, 2021 15,982,815 70,831 ​ $ 15,983 ​ $ 143,644 ​ $ 129,703 ​ $ 11,795 ​ $ ( 1,369 ) ​ $ 299,756 Net income ​ ​ ​ ​ ​ 30,554 ​ ​ ​ 30,554 Other comprehensive loss, net ​ ​ ​ ​ ​ ​ ( 6,769 ) ​ ​ ( 6,769 ) Cash dividends declared on common stock, $ 1.11 per share ​ ​ ​ ​ ​ ( 17,645 ) ​ ​ ​ ( 17,645 ) Shares issued for dividend reinvestment plan 36,368 ( 31,877 ) ​ 36 ​ 845 ​ ​ ​ 788 ​ 1,669 Shares issued from treasury and redeemed related to exercise of stock options ​ ( 13,169 ) ​ ​ ​ ( 33 ) ​ ​ ​ 245 ​ 212 Restricted stock granted 10,989 ( 67,402 ) ​ 11 ​ ( 1,319 ) ​ ​ ​ 1,308 ​ 0 Forfeiture of restricted stock ​ 5,290 ​ ​ ​ 102 ​ ​ ​ ( 102 ) ​ 0 Stock-based compensation expense ​ ​ ​ ​ 1,214 ​ ​ ​ ​ ​ 1,214 Purchase of restricted stock for tax withholding ​ 8,350 ​ ​ ​ ​ ​ ​ ( 174 ) ​ ( 174 ) Treasury stock purchases ​ 299,059 ​ ​ ​ ​ ​ ​ ​ ​ ( 7,412 ) ​ ( 7,412 ) Balance, December 31, 2021 16,030,172 271,082 ​ ​ 16,030 ​ ​ 144,453 ​ ​ 142,612 ​ ​ 5,026 ​ ​ ( 6,716 ) ​ ​ 301,405 Net income ​ ​ ​ ​ ​ 26,618 ​ ​ ​ 26,618 Other comprehensive loss, net ​ ​ ​ ​ ​ ​ ( 54,904 ) ​ ​ ( 54,904 ) Cash dividends declared on common stock, $ 1.12 per share ​ ​ ​ ​ ​ ( 17,487 ) ​ ​ ​ ( 17,487 ) Shares issued for dividend reinvestment plan ​ ( 65,470 ) ​ ​ ​ 8 ​ ​ ​ 1,614 ​ 1,622 Shares issued from treasury and redeemed related to exercise of stock options ​ ( 9,178 ) ​ ​ ​ ( 67 ) ​ ​ ​ 227 ​ 160 Restricted stock granted ​ ( 78,243 ) ​ ​ ​ ( 1,932 ) ​ ​ ​ 1,932 ​ 0 Forfeiture of restricted stock ​ 10,782 ​ ​ ​ 228 ​ ​ ​ ( 228 ) ​ 0 Stock-based compensation expense ​ ​ ​ ​ 1,260 ​ ​ ​ ​ ​ 1,260 Purchase of restricted stock for tax withholding ​ 6,964 ​ ​ ​ ​ ​ ​ ( 175 ) ​ ( 175 ) Treasury stock purchases ​ 375,416 ​ ​ ​ ​ ​ ​ ​ ​ ( 9,174 ) ​ ( 9,174 ) 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 ​ ​ ​ ​ ​ 24,148 ​ ​ ​ 24,148 Other comprehensive income, net ​ ​ ​ ​ ​ ​ 11,441 ​ ​ 11,441 Cash dividends declared on common stock, $ 1.12 per share ​ ​ ​ ​ ​ ( 17,211 ) ​ ​ ​ ( 17,211 ) Shares issued for dividend reinvestment plan ​ ( 81,930 ) ​ ​ ​ ( 246 ) ​ ​ ​ 1,888 ​ 1,642 Shares issued from treasury and redeemed related to exercise of stock options ​ ( 612 ) ​ ​ ​ ( 30 ) ​ ​ ​ 30 ​ 0 Restricted stock granted ​ ( 53,788 ) ​ ​ ​ ( 1,314 ) ​ ​ ​ 1,314 ​ 0 Forfeiture of restricted stock ​ 25,261 ​ ​ ​ 556 ​ ​ ​ ( 556 ) ​ 0 Stock-based compensation expense ​ ​ ​ ​ 1,472 ​ ​ ​ ​ ​ 1,472 Purchase of restricted stock for tax withholding ​ 9,453 ​ ​ ​ ​ ​ ​ ( 219 ) ​ ( 219 ) Treasury stock purchases ​ 325,300 ​ ​ ​ ​ ​ ​ ​ ​ ( 6,565 ) ​ ( 6,565 ) Balance, December 31, 2023 16,030,172 735,037 ​ $ 16,030 ​ $ 144,388 ​ $ 157,028 ​ $ ( 38,437 ) ​ $ ( 16,628 ) ​ $ 262,381 ​ The accompanying notes are an integral part of the consolidated financial statements. ​ 45 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, (In Thousands) 2023 ​ 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​ ​ ​ Net income ​ $ 24,148 ​ $ 26,618 ​ $ 30,554 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ Provision for credit losses ​ 186 ​ 7,255 ​ 3,661 Realized losses (gains) on available-for-sale debt securities, net ​ 3,036 ​ ( 20 ) ​ ( 24 ) Net amortization of securities ​ ​ 2,062 ​ ​ 2,760 ​ ​ 2,204 Increase in cash surrender value of life insurance ​ ( 2,703 ) ​ ( 545 ) ​ ( 573 ) Depreciation and amortization of bank premises and equipment ​ 2,151 ​ 2,389 ​ 2,130 Net accretion of purchase accounting adjustments ​ ( 288 ) ​ ( 1,181 ) ​ ( 2,124 ) Stock-based compensation ​ 1,472 ​ 1,260 ​ 1,214 Deferred income taxes ​ 836 ​ ( 400 ) ​ ( 1,381 ) Decrease (increase) in fair value of servicing rights ​ 200 ​ ( 126 ) ​ 68 Gains on sales of loans, net ​ ( 723 ) ​ ( 757 ) ​ ( 3,428 ) Origination of loans held for sale ​ ( 24,630 ) ​ ( 26,231 ) ​ ( 105,523 ) Proceeds from sales of loans held for sale ​ 25,106 ​ 27,636 ​ 107,797 (Increase) decrease in accrued interest receivable and other assets ​ ( 1,400 ) ​ ( 3,532 ) ​ 186 Increase (decrease) in accrued interest payable and other liabilities ​ 4,161 ​ ( 589 ) ​ 210 Other ​ ( 66 ) ​ 62 ​ ( 127 ) Net Cash Provided by Operating Activities ​ 33,548 ​ 34,599 ​ 34,844 CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ ​ ​ ​ ​ Purchase of certificates of deposit ​ ​ 0 ​ ​ ( 250 ) ​ ​ ( 4,500 ) Proceeds from maturities of certificates of deposit ​ 3,250 ​ 2,000 ​ 1,240 Proceeds from sales of available-for-sale debt securities ​ 60,819 ​ 4,100 ​ 2,027 Proceeds from calls and maturities of available-for-sale debt securities ​ 52,323 ​ 58,673 ​ 61,684 Purchase of available-for-sale debt securities ​ ( 23,414 ) ​ ( 113,715 ) ​ ( 243,925 ) Redemption of Federal Home Loan Bank of Pittsburgh stock ​ 22,634 ​ 11,604 ​ 2,517 Purchase of Federal Home Loan Bank of Pittsburgh stock ​ ( 23,680 ) ​ ( 16,459 ) ​ ( 2,110 ) Purchase of Federal Reserve Bank stock ​ ​ ( 6,252 ) ​ ​ 0 ​ ​ 0 Net (increase) decrease in loans ​ ( 107,356 ) ​ ( 178,203 ) ​ 78,746 Purchase of bank-owned life insurance ​ ​ ( 30,000 ) ​ ​ 0 ​ ​ 0 Proceeds from bank-owned life insurance ​ 363 ​ 0 ​ 287 Proceeds from sales of premises and equipment ​ ​ 0 ​ ​ 0 ​ ​ 627 Purchase of premises and equipment ​ ( 2,265 ) ​ ( 3,288 ) ​ ( 1,864 ) Proceeds from sale of foreclosed assets ​ 267 ​ 647 ​ 1,148 Other ​ 109 ​ 203 ​ 228 Net Cash Used in Investing Activities ​ ( 53,202 ) ​ ( 234,688 ) ​ ( 103,895 ) CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ ​ ​ ​ Net increase in deposits ​ 17,234 ​ 72,689 ​ 105,381 Net (decrease) increase in short-term borrowings ​ ( 46,188 ) ​ 78,259 ​ ( 18,154 ) Proceeds from long-term borrowings - FHLB advances ​ ​ 85,436 ​ ​ 50,000 ​ ​ 0 Repayments of long-term borrowings - FHLB advances ​ ( 9,395 ) ​ ( 15,455 ) ​ ( 26,095 ) Proceeds from issuance of senior notes, net of issuance costs ​ ​ 0 ​ ​ 0 ​ ​ 14,663 Proceeds from issuance of subordinated debt, net of issuance costs ​ ​ 0 ​ ​ 0 ​ ​ 24,437 Redemption of subordinated debt ​ ​ 0 ​ ​ ( 8,500 ) ​ ​ ( 8,000 ) Sale of treasury stock ​ 0 ​ 160 ​ 212 Purchases of treasury stock ​ ( 6,784 ) ​ ( 9,349 ) ​ ( 7,586 ) Common dividends paid ​ ( 15,569 ) ​ ( 15,865 ) ​ ( 15,976 ) Net Cash Provided by Financing Activities ​ 24,734 ​ 151,939 ​ 68,882 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ​ 5,080 ​ ( 48,150 ) ​ ( 169 ) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ​ 47,698 ​ 95,848 ​ 96,017 CASH AND CASH EQUIVALENTS, END OF PERIOD ​ $ 52,778 ​ $ 47,698 ​ $ 95,848 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: ​ ​ ​ (Decrease) increase in accrued purchase of available-for-sale debt securities ​ $ ( 2,000 ) ​ $ 2,000 ​ $ ( 994 ) Assets acquired through foreclosure of real estate loans ​ $ 423 ​ $ 51 ​ $ 394 Leased assets obtained in exchange for new operating lease liabilities ​ $ 0 ​ $ 904 ​ $ 739 Interest paid ​ $ 31,936 ​ $ 9,497 ​ $ 8,174 Income taxes paid ​ $ 6,383 ​ $ 5,561 ​ $ 10,098 ​ The accompanying notes are an integral part of the consolidated financial statements. ​ 46 Table of Contents NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF CONSOLIDATION – 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”), as well as 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. NATURE OF OPERATIONS – The Corporation’s principal office is located in Wellsboro, Pennsylvania. The Corporation’s operations are conducted in the Northern tier/Northcentral region of Pennsylvania and Southern tier of New York, Southeastern Pennsylvania (offices in Bucks and Chester Counties) and Southcentral Pennsylvania (offices in York and Lancaster counties). The Corporation provides banking and related services to individual and corporate customers. Lending products include commercial, mortgage and consumer loans, as well as specialized instruments such as commercial letters-of-credit. Deposit products include various types of checking accounts, passbook and statement savings, money market accounts, interest checking accounts, Individual Retirement Accounts and certificates of deposit. The Corporation provides wealth management services through its trust department, including administration of trusts and estates, retirement plans, and other employee benefit plans, and investment management services. The Corporation offers a variety of personal and commercial insurance products through C&N Financial Services, LLC. C&N Financial Services, LLC also offers mutual funds, annuities, educational savings accounts and other investment products through registered agents. Management has determined that the Corporation has one reportable segment, “Community Banking.” All of the Corporation’s activities are interrelated, and each activity is dependent and assessed based on how each of the activities of the Corporation supports the others. The Corporation is subject to competition from other financial institutions. It is also subject to regulation by certain federal and state agencies and undergoes periodic examination by those regulatory authorities. USE OF ESTIMATES – The financial information is presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In preparing financial statements, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements. In addition, these estimates and assumptions affect revenues and expenses in the financial statements and as such, actual results could differ from those estimates. Material estimates that are particularly susceptible to change include: (1) the allowance for credit losses and (2) fair values of available-for-sale debt securities based on estimates from independent valuation services or from brokers. INVESTMENT SECURITIES – Investment securities are accounted for as follows: Available-for-sale debt securities – includes debt securities not classified as held-to-maturity or trading. Such securities are reported at fair value, with unrealized gains and losses excluded from earnings and reported separately through accumulated other comprehensive income (loss), net of tax. Premiums on non-amortizing available-for-sale debt securities are amortized using the level yield method to the earliest call date, while discounts on non-amortizing securities are amortized to the maturity date. Premiums and discounts on amortizing securities (mortgage-backed securities) are amortized using the level yield method over the remaining contractual life of the securities, adjusted for actual prepayments. Realized gains and losses on sales of available-for-sale securities are computed on the basis of specific identification of the adjusted cost of each security. Securities within the available-for-sale portfolio may be used as part of the Corporation’s asset and liability management strategy and may be sold in response to changes in interest rate risk, prepayment risk or other factors. Allowance for Credit Losses- Available-for-Sale Debt Securities – For available-for-sale debt securities, management evaluates all investments in an unrealized loss position on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. If the Corporation has the intent to sell the security or it is more likely than not that the Corporation will be required to sell 47 Table of Contents the security, the security is written down to fair value and the entire loss is recorded in earnings. If either of the above criteria is not met, the Corporation evaluates whether the decline in fair value is the result of credit losses or other factors. The Corporation has elected the practical expedient of zero credit loss estimates for securities issued or guaranteed by U.S. Government entities or agencies. In making the credit loss assessment of securities not issued or guaranteed by U.S. Government entities or agencies, the Corporation may consider various factors including the extent to which fair value is less than amortized cost, performance on any underlying collateral, downgrades in the ratings of the security by a rating agency, the failure of the issuer to make scheduled interest or principal payments and adverse conditions specifically related to the security. If the assessment indicates that a credit loss exists, the present value of cash flows expected to be collected are compared to the amortized cost basis of the security and any excess is recorded as an allowance for credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any amount of unrealized loss that has not been recorded through an allowance for credit loss is recognized in other comprehensive income (loss). Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance for credit losses when management believes an available-for-sale debt security is confirmed to be uncollectible or when either of the criteria regarding intent or requirement to sell is met. At December 31, 2023, there was no allowance for credit losses related to the available-for-sale portfolio. Accrued interest receivable on available-for-sale debt securities totaled $ 2,018,000 at December 31, 2023 and was excluded from the estimate of credit losses. Marketable equity security – The marketable equity security is carried at fair value with unrealized gains and losses included in other noninterest income in the consolidated statements of income. Restricted equity securities – Restricted equity securities consist primarily of Federal Home Loan Bank of Pittsburgh and Federal Reserve Bank of Philadelphia stock, and are carried at cost and evaluated for impairment. Holdings of restricted equity securities are included in other assets in the consolidated balance sheets, and dividends received on restricted securities are included in other income in the consolidated statements of income. DERIVATIVES – 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 banking customers were executed to enable the commercial banking customers to effectively exchange 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. Changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. Interest differentials paid or received under the swap agreements are reflected as adjustments to interest and fees on loans. The fair value of interest rate derivatives is included in the balance of other assets and other liabilities in the consolidated balance sheets. 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.” The fair value of the RPA In is included in accrued interest and other liabilities in the consolidated balance sheets. 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 fair value of the RPA Out is included in other assets in the consolidated balance sheets. Fees paid and received associated with RPAs, as well as changes in fair value of the related derivatives, are included in other noninterest income in the consolidated statements of income. LOANS HELD FOR SALE – Mortgage loans held for sale are reported at the lower of cost or fair value, determined in the aggregate. 48 Table of Contents LOANS RECEIVABLE – Loans originated by the Corporation which management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at unpaid principal balances, less the allowance for credit losses and net deferred loan fees. Interest income is accrued on the unpaid principal balance. Loan origination and commitment fees, as well as certain direct origination costs, are deferred and amortized as a yield adjustment over the lives of the related loans using the interest method. Loans are placed on nonaccrual status for all classes of loans when, in the opinion of management, collection of interest is doubtful. Any unpaid interest previously accrued on those loans is reversed from income. Interest payments received on loans for which the risk of loss is greater than remote are applied as a reduction of the loan principal balance. Interest income on other nonaccrual loans is recognized only to the extent of interest payments received. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months ) and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The past due status of loans receivable is determined based on contractual due dates for loan payments. Also, the amortization of deferred loan fees is discontinued when a loan is placed on nonaccrual status. PURCHASED LOANS – The Corporation purchased loans in business combinations, some of which had, at the acquisition dates, shown evidence of credit deterioration since origination. The purchased loans that showed evidence of credit impairment were designated as the purchased credit impaired (“PCI”) loans and were recorded at fair value, with no carryover of the allowance for loan losses. On January 1, 2023, the Corporation adopted Accounting Standard Update (ASU) 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASC 326) which replaced the prior accounting for PCI loans and required credit deteriorated (“PCD”) loans receive an initial allowance at the acquisition date that represents an adjustment to the amortized cost basis of the loan, with no impact to earnings. In accordance with ASC 326, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adaption. On January 1, 2023, the amortized cost basis of PCD assets was adjusted to establish the allowance for credit losses. Essentially all of the PCD loans were reported as nonaccrual loans at January 1, 2023 and December 31, 2023. ALLOWANCE FOR CREDIT LOSSES ON LOANS – As mentioned above, on January 1, 2023, the Corporation adopted 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. Effective January 1, 2023, the Corporation adopted ASC 326 using the modified retrospective approach for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for reporting periods beginning after December 31, 2022 are presented under CECL while prior period amounts continue to be reported in accordance with previously applicable accounting standards (“Incurred Loss”). The allowance for credit losses is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. The allowance for credit losses represents management’s estimate of lifetime credit losses inherent in loans as of the balance sheet date. The allowance for credit losses is estimated by management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. ​ Accrued interest receivable on loans totaled $ 7,099,000 at December 31, 2023 and was excluded from the estimate of credit losses. ​ The allowance for credit losses (“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). ​ ​ Evaluation of Expected Losses on Individual Loans ​ Loans evaluated on an individual basis are identified based on a detailed assessment of certain larger loan relationships, and their related credit risk ratings, by a management committee referred to as the Watch List Committee. The allowance is determined on an individual basis using the present value of expected cash flows or, for collateral-dependent loans, the fair value of the collateral as of the reporting date, less estimated selling costs, as applicable. If the fair value of the collateral is less than the amortized cost basis of the loan, the 49 Table of Contents Corporation will charge off the difference between the fair value of the collateral, less costs to sell at the reporting date and the amortized cost basis of the loan. ​ The scope of loans reviewed individually for credit loss each quarter includes all commercial loan relationships greater than $ 200,000 and any residential mortgage or consumer loans of $ 400,000 or more for which there is at least one extension of credit graded Special Mention, Substandard or Doubtful. Additionally, all PCD loans are evaluated individually for credit loss. ​ Collective Evaluation of Expected Losses – Pool Basis ​ The Corporation measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. The Corporation has identified the following portfolio segments and calculates the allowance for credit losses for each using the weighted-average remaining maturity (“WARM”) method: ​ ​ Commercial real estate - nonowner occupied, further broken down into the following classes: Non-owner occupied Multi-family (5 or more) residential 1-4 Family - commercial purpose Commercial real estate - owner occupied All other commercial loans, further broken down into the following classes: Commercial and industrial Commercial lines of credit Political subdivisions Commercial construction and land Other commercial loans Residential mortgage loans, further broken down into the following classes: 1-4 Family – residential 1-4 Family residential construction Consumer loans, further broken down into the following classes: Consumer lines of credit (including HELOCs) All other consumer ​ In determining the pools for collective evaluation, management uses a combination of loan purpose, collateral and payment type (for example, lines of credit vs. amortizing). The pools identified are similar to the loan classes used in the Corporation’s financial reporting for several years, with several exceptions including the following which are of the most significance: ​ ● Commercial real estate secured loans are broken out between non-owner occupied and owner-occupied ● Loans secured by 1-4 family residential mortgages are broken out between consumer-purpose and commercial-purpose ● Commercial lines of credit are broken out as an individual category ​ Each of these changes was made to better sort loans into pools with similar risk and cash flow characteristics. ​ Estimation Method - WARM (Weighted-Average Remaining Maturity Method) ​ In applying the WARM method, for each pool identified above, the Corporation determines the annual net charge-offs as a percentage of average total loan balances (net charge-off percentage). For each loan pool, the average annualized net charge-off percentage is multiplied by the estimated weighted-average remaining average life of the loans to calculate the loss rate. ​ The calculation of the estimated weighted-average remaining life of each loan pool is based on instrument-level data, with contractual principal payments adjusted for the estimated impact of prepayments. Commercial lines of credit and other revolving credit facilities are generally assumed to be repaid after 1 year. The estimated weighted-average remaining life of the entire portfolio was calculated to be 4.48 years at December 31, 2023 and 4.36 years at January 1, 2023. ​ 50 Table of Contents Qualitative Factors ​ The allowance for credit losses calculation includes subjective adjustments for qualitative risk factors that are deemed likely to cause estimated credit losses to differ from historical experience. These qualitative adjustments generally increase allowance levels and include adjustments for factors deemed relevant, including: the nature and volume of portfolio changes, including loan portfolio growth; concentrations of credit based on loan type (such as non-owner occupied commercial real estate) or industry; the volume and severity of past due, nonaccrual or adversely classified loans; trends in real estate or other collateral values; lending policies and procedures, including changes in underwriting and collections practices; credit review function; lending, credit and other relevant management experience and risk tolerance; external factors and economic conditions not already captured. ​ Economic Forecast ​ ASC 326 requires management to consider forward-looking information that is both reasonable and supportable and relevant to the collectability of cash flows. Reasonable and supportable forecasts may extend over the entire contractual term of a financial asset or a period shorter than the contractual term. In that regard, management has selected a forecast period of 2 years , which is shorter than the estimated weighted-average remaining life of the loan portfolio. ​ The Corporation calculates an additional expected credit loss based on establishing a correlation between past loss experience and an economic statistic. This additional credit loss is added to the allowance calculation, conceptually for the first 2 years of the weighted-average remaining life of the portfolio after which time the credit loss for each pool is determined based on the WARM historical loss rate as adjusted for qualitative factors. ​ ALLOWANCE FOR CREDIT LOSSES ON OFF-BALANCE SHEET EXPOSURES Financial instruments include off-balance sheet credit instruments, such as commitments to make loans, commercial letters of credit and credit enhancement obligations related to residential mortgage loans sold with recourse. The Corporation’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded. The Corporation records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for unfunded commitments in the Corporation’s statements of income. The allowance for credit losses on off-balance sheet credit exposures is estimated by loan segment at each balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur as well as any third-party guarantees. The allowance for off-balance sheet exposures is included in accrued interest and other liabilities in the Corporation’s consolidated balance sheets and the related credit expense is recorded in the provision for credit losses in the consolidated statements of income. BANK PREMISES AND EQUIPMENT – Bank premises and equipment are stated at cost less accumulated depreciation and amortization. Repair and maintenance expenditures which extend the useful lives of assets are capitalized, and other repair and maintenance expenditures are expensed as incurred. Depreciation and amortization expense is computed using the straight-line method. IMPAIRMENT OF LONG-LIVED ASSETS – The Corporation reviews long-lived assets, such as premises and equipment and intangibles, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. These changes in circumstances may include a significant decrease in the market value of an asset or the manner in which an asset is used. If there is an indication the carrying value of an asset may not be recoverable, future undiscounted cash flows expected to result from use of the asset are estimated. If the sum of the expected cash flows is less than the carrying value of the asset, a loss is recognized for the difference between the carrying value and fair market value of the asset. FORECLOSED ASSETS HELD FOR SALE – Foreclosed assets held for sale consist of real estate acquired by foreclosure and are initially recorded at fair value, less estimated selling costs, establishing a new cost basis. GOODWILL – Goodwill represents the excess of the cost of acquisitions over the fair value of the net assets acquired. Goodwill is tested at least annually at December 31 for impairment, or more often if events or circumstances indicate there may be impairment. The 51 Table of Contents Corporation has the option of performing a qualitative assessment to determine whether any further quantitative testing for impairment is necessary. The option of whether or not to perform a qualitative assessment is made annually. CORE DEPOSIT INTANGIBLES – Amortization of core deposit intangibles is calculated using an accelerated method. In determining amortization using the accelerated method for any given period, the amount of expected cash flows for that period that were used in determining the acquisition-date fair value is divided by the total amount of expected cash flows over the life of the asset. That percentage is multiplied by the initial carrying amount of the asset to arrive at amortization expense for that period. If the Corporation’s cash flow patterns differ significantly from the initial estimates, the amortization schedule would be adjusted prospectively. SERVICING RIGHTS – The estimated fair value of servicing rights related to mortgage loans sold and serviced by the Corporation is recorded as an asset upon the sale of such loans. The valuation of servicing rights is adjusted quarterly, with changes in fair value included in loan servicing fees, net, in the consolidated statements of income. Significant inputs to the valuation include expected net servicing income to be received, the expected life of the underlying loans and the discount rate. The servicing rights asset is included in other assets in the consolidated balance sheets. INCOME TAXES – Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases given the provisions of the enacted tax laws. Deferred tax assets are reduced, if necessary, by the amount of such benefits that are not expected to be realized based upon available evidence. Tax benefits from investments in limited partnerships that have qualified for federal low-income tax credits are recognized as a reduction in the provision for income tax over the term of the investment using the effective yield method. The Corporation includes income tax penalties in the provision for income tax. The Corporation has no accrued interest related to unrecognized tax benefits. STOCK-BASED COMPENSATION –Stock-based compensation is accounted for under the fair value method as required by U.S. GAAP. The fair value of restricted stock is based on the current market price on the date of grant. The expense associated with stock-based compensation is recognized over the vesting period of each individual arrangement. TREASURY STOCK – Common stock held in treasury is accounted for using the cost method, which treats stock held in treasury as a reduction to total stockholders’ equity. The shares may be purchased in the open market or in privately negotiated transactions from time to time depending upon market conditions and other factors . OFF-BALANCE SHEET FINANCIAL INSTRUMENTS – In the ordinary course of business, the Corporation has entered into off-balance sheet financial instruments consisting of commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable. CASH FLOWS – The Corporation utilizes the net reporting of cash receipts and cash payments for certain deposit and lending activities. Cash equivalents include federal funds sold and all cash and amounts due from depository institutions and interest-bearing deposits in other banks with original maturities of three months or less. REVENUE RECOGNITION – The Corporation generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in the determination of the amount and timing of revenue from contracts with customers. Additional disclosures related to the Corporation’s largest sources of noninterest income within the consolidated statements of income from contracts with customers that are subject to ASC Topic 606 are as follows: Trust and financial management revenue – C&N Bank’s trust department provides a wide range of financial services, including wealth management services for individuals, businesses and retirement funds, administration of 401(k) and other retirement plans, retirement planning, estate planning and estate settlement services. Trust clients are located primarily within the Corporation’s geographic markets. Assets held in a fiduciary capacity by C&N Bank are not the Corporation’s assets and are therefore not included in the consolidated balance sheets. The fair value of trust assets under management was approximately $ 1,188,082,000 at December 31, 52 Table of Contents 2023 and $ 1,063,615,000 at December 31, 2022. Trust revenue is included within noninterest income in the consolidated statements of income. Trust revenue is recorded on a cash basis, which is not materially different from the accrual basis. The majority (approximately 81 %, based on annual 2023 results) of trust revenue is earned and collected monthly, with the amount determined based on a percentage of the fair value of the trust assets under management. Wealth management fees are contractually agreed with each customer, and fee levels vary based mainly on the size of assets under management. The services provided under such a contract represent a single performance obligation under ASC 606 because it embodies a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. None of the contracts with trust customers provide for incentive-based fees. In addition to wealth management fees, trust revenue includes fees for provision of services, including employee benefit plan administration, tax return preparation and estate planning and settlement. Fees for such services are billed based on contractual arrangements or established fee schedules and are typically billed upon completion of providing such services. The costs of acquiring trust customers are incremental and recognized within noninterest expense in the consolidated statements of income. Service charges on deposit accounts – Deposits are included as liabilities in the consolidated balance sheets. Service charges on deposit accounts include: overdraft fees, which are charged when customers overdraw their accounts beyond available funds; automated teller machine (ATM) fees charged for withdrawals by deposit customers from other financial institutions’ ATMs; and a variety of other monthly or transactional fees for services provided to retail and business customers, mainly associated with checking accounts. All deposit liabilities are considered to have one-day terms and therefore related fees are recognized in income at the time when the services are provided to the customers. Incremental costs of obtaining deposit contracts are not significant and are recognized as expense when incurred within noninterest expense in the consolidated statements of income. Interchange revenue from debit card transactions – The Corporation issues debit cards to consumer and business customers with checking, savings or money market deposit accounts. Debit card and ATM transactions are processed via electronic systems that involve several parties. The Corporation’s debit card and ATM transaction processing is executed via contractual arrangements with payment processing networks, a processor and a settlement bank. As described above, all deposit liabilities are considered to have one-day terms and therefore interchange revenue from customers’ use of their debit cards to initiate transactions are recognized in income at the time when the services are provided and related fees received in the Corporation’s deposit account with the settlement bank. Incremental costs associated with ATM and interchange processing are recognized as expense when incurred within noninterest expense in the consolidated statements of income. ​ 2. 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 financial statements issued in the foreseeable future. Recent Accounting Pronouncements – Adopted As described in Note 1, on January 1, 2023, the Corporation adopted ASC 326. This standard replaced the incurred loss methodology for measuring credit losses on financial instruments with an expected loss methodology that is referred to as the CECL methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset and generally applies to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, and some off-balance sheet credit exposures such as unfunded commitments to extend credit. Financial assets measured at amortized cost are presented at the net amount expected to be collected by using an allowance for credit losses. In addition, CECL made changes to the accounting for available for sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available for sale debt securities if management does not intend to sell and does not believe that it is more likely than not, they will be required to sell. The Corporation adopted ASC 326 using the prospective transition approach for debt securities for which other-than-temporary impairment had been recognized prior to January 1, 2023. As of December 31, 2022, the Company did not have any other-than-temporarily impaired investment securities. Therefore, upon adoption of ASC 326, the Company determined that an allowance for credit losses on available-for-sale debt securities was not necessary. 53 Table of Contents Effective January 1, 2023, the Corporation adopted ASC 326 using the modified retrospective approach for all financial assets measured at amortized cost and off-balance sheet credit exposures. Results for reporting periods beginning after December 31, 2022 are presented under CECL while prior period amounts continue to be reported using the Incurred Loss methodology. The following table illustrates the impact 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 ) ​ ASU 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. This update reduces the complexity of accounting for Troubled Debt Restructurings (“TDRs”) by eliminating certain accounting guidance, enhancing disclosures and improving the consistency of vintage disclosures. The Corporation adopted ASU 2022-02 on January 1, 2023. Changes in disclosure requirements in accordance with ASU 2022-02 are reflected in Note 7. The adoption of ASU 2022-02 did not have a material impact on the consolidated financial statements. Recent 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 for annual periods beginning after December 15, 2024. T he 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 related disclosures related to income taxes. ​ ​ ​ 54 Table of Contents 3. 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) Years Ended ​ ​ December 31, ​ December 31, ​ December 31, ​ 2023 ​ 2022 2021 Basic ​ ​ ​ ​ Net income ​ $ 24,148 ​ $ 26,618 ​ $ 30,554 Less: Dividends and undistributed earnings allocated to participating securities ​ ( 186 ) ​ ( 237 ) ​ ( 241 ) Net income attributable to common shares ​ $ 23,962 ​ $ 26,381 ​ $ 30,313 Basic weighted-average common shares outstanding ​ 15,241,859 ​ 15,455,432 ​ 15,765,639 Basic earnings per common share (a) ​ $ 1.57 ​ $ 1.71 ​ $ 1.92 Diluted ​ ​ ​ Net income attributable to common shares ​ $ 23,962 ​ $ 26,381 ​ $ 30,313 Basic weighted-average common shares outstanding ​ 15,241,859 ​ 15,455,432 ​ 15,765,639 Dilutive effect of potential common stock arising from stock options ​ 0 ​ 3,099 ​ 6,316 Diluted weighted-average common shares outstanding ​ 15,241,859 ​ 15,458,531 ​ 15,771,955 Diluted earnings per common share (a) ​ $ 1.57 ​ $ 1.71 ​ $ 1.92 Weighted-average nonvested restricted shares outstanding ​ 118,122 ​ 138,617 ​ 125,539 (a) Basic and diluted earnings per share under the two-class method are determined on net income reported on the income statement less earnings allocated to nonvested restricted shares with nonforfeitable dividends (participating securities). Anti-dilutive stock options are excluded from net income per share calculations. There were no anti-dilutive instruments in 2022 or 2021. Weighted-average common shares available from anti-dilutive instruments totaled 8,963 shares in 2023. ​ 55 Table of Contents 4. COMPREHENSIVE INCOME (LOSS) Comprehensive income (loss) 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 2023 ​ ​ ​ Available-for-sale debt securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding gains on available-for-sale debt securities ​ $ 11,512 ​ $ ( 2,418 ) ​ $ 9,094 Reclassification adjustment for losses realized in income ​ ​ 3,036 ​ ​ ( 638 ) ​ ​ 2,398 Other comprehensive income from available-for-sale debt securities ​ ​ 14,548 ​ ​ ( 3,056 ) ​ ​ 11,492 Unfunded pension and postretirement obligations: ​ ​ ​ Changes from plan amendments and actuarial gains and losses ​ ​ ( 9 ) ​ ​ 2 ​ ​ ( 7 ) Amortization of prior service cost and net actuarial loss included in net periodic benefit cost ​ ( 56 ) ​ 12 ​ ( 44 ) Other comprehensive loss on unfunded retirement obligations ​ ​ ( 65 ) ​ ​ 14 ​ ​ ( 51 ) Total other comprehensive income ​ $ 14,483 ​ $ ( 3,042 ) ​ $ 11,441 2022 ​ ​ ​ Available-for-sale debt securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses on available-for-sale debt securities ​ $ ( 69,828 ) ​ $ 14,665 ​ $ ( 55,163 ) Reclassification adjustment for (gains) realized in income ​ ​ ( 20 ) ​ ​ 4 ​ ​ ( 16 ) Other comprehensive loss from available-for-sale debt securities ​ ​ ( 69,848 ) ​ ​ 14,669 ​ ​ ( 55,179 ) Unfunded pension and postretirement obligations: ​ ​ ​ Changes from plan amendments and actuarial gains and losses ​ ​ 389 ​ ​ ( 81 ) ​ ​ 308 Amortization of prior service cost and net actuarial loss included in net periodic benefit cost ​ ( 42 ) ​ 9 ​ ( 33 ) Other comprehensive income on unfunded retirement obligations ​ ​ 347 ​ ​ ( 72 ) ​ ​ 275 Total other comprehensive loss ​ $ ( 69,501 ) ​ $ 14,597 ​ $ ( 54,904 ) 2021 ​ ​ ​ Available-for-sale debt securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ Unrealized holding losses on available-for-sale debt securities ​ $ ( 8,669 ) ​ $ 1,821 ​ $ ( 6,848 ) Reclassification adjustment for (gains) realized in income ​ ​ ( 24 ) ​ ​ 5 ​ ​ ( 19 ) Other comprehensive loss from available-for-sale debt securities ​ ​ ( 8,693 ) ​ ​ 1,826 ​ ​ ( 6,867 ) Unfunded pension and postretirement obligations: ​ ​ ​ Changes from plan amendments and actuarial gains and losses ​ ​ 140 ​ ​ ( 29 ) ​ ​ 111 Amortization of prior service cost and net actuarial loss included in net periodic benefit cost ​ ( 17 ) ​ 4 ​ ( 13 ) Other comprehensive income on unfunded retirement obligations ​ ​ 123 ​ ​ ( 25 ) ​ ​ 98 Total other comprehensive loss ​ $ ( 8,570 ) ​ $ 1,801 ​ $ ( 6,769 ) ​ Items reclassified out of each component of accumulated other comprehensive (loss) income are as follows: ​ ​ ​ ​ ​ ​ Affected Line Item in the Description Consolidated Statements of Income Reclassification adjustment for losses (gains) realized in income (before-tax) ​ Realized (losses) gains on available-for-sale debt securities, net Amortization of prior service cost and net actuarial loss included in net periodic benefit cost (before-tax) Other noninterest expense Income tax effect ​ Income tax provision ​ 56 Table of Contents Changes in the components of accumulated other comprehensive (loss) income, included in stockholders’ equity, are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ ​ ​ ​ Accumulated ​ ​ Unrealized ​ Unfunded ​ Other ​ (Losses) Gains Retirement Comprehensive ​ on Securities Obligations (Loss) Income 2023 ​ ​ ​ Balance, beginning of period ​ $ ( 50,370 ) ​ $ 492 ​ $ ( 49,878 ) Other comprehensive income (loss) during year ended December 31, 2023 ​ 11,492 ​ ( 51 ) ​ 11,441 Balance, end of period ​ $ ( 38,878 ) ​ $ 441 ​ $ ( 38,437 ) 2022 ​ ​ ​ Balance, beginning of period ​ $ 4,809 ​ $ 217 ​ $ 5,026 Other comprehensive (loss) income during year ended December 31, 2022 ​ ( 55,179 ) ​ 275 ​ ( 54,904 ) Balance, end of period ​ $ ( 50,370 ) ​ $ 492 ​ $ ( 49,878 ) 2021 ​ ​ ​ Balance, beginning of period ​ $ 11,676 ​ $ 119 ​ $ 11,795 Other comprehensive (loss) income during year ended December 31, 2021 ​ ( 6,867 ) ​ 98 ​ ( 6,769 ) Balance, end of period ​ $ 4,809 ​ $ 217 ​ $ 5,026 ​ ​ ​ 5. CASH AND DUE FROM BANKS Cash and due from banks at December 31, 2023 and 2022 include the following: ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) December 31, December 31, ​ ​ 2023 ​ 2022 Cash and cash equivalents ​ $ 52,778 ​ $ 47,698 Certificates of deposit ​ 4,100 ​ 7,350 Total cash and due from banks ​ $ 56,878 ​ $ 55,048 ​ 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. The Corporation has not experienced any losses in such accounts. ​ ​ 57 Table of Contents 6. SECURITIES Amortized cost and fair value of available-for-sale debt securities at December 31, 2023 and 2022 are summarized as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) December 31, 2022 ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ ​ ​ ​ ​ ​ Unrealized ​ Unrealized ​ ​ ​ ​ Amortized Holding Holding Fair ​ Cost Gains Losses Value ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Obligations of the U.S. Treasury ​ $ 35,166 ​ $ 0 ​ $ ( 3,330 ) ​ $ 31,836 Obligations of U.S. Government agencies ​ ​ 25,938 ​ ​ 0 ​ ​ ( 2,508 ) ​ ​ 23,430 Bank holding company debt securities ​ ​ 28,945 ​ ​ 0 ​ ​ ( 3,559 ) ​ ​ 25,386 Obligations of states and political subdivisions: ​ ​ ​ ​ ​ ​ ​ Tax-exempt ​ 146,149 ​ 319 ​ ( 13,845 ) ​ 132,623 Taxable ​ 68,488 ​ 0 ​ ( 11,676 ) ​ 56,812 Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies: ​ ​ ​ ​ Residential pass-through securities ​ 112,782 ​ 0 ​ ( 12,841 ) ​ 99,941 Residential collateralized mortgage obligations ​ 44,868 ​ 0 ​ ( 4,572 ) ​ 40,296 Commercial mortgage-backed securities ​ 91,388 ​ 0 ​ ( 11,702 ) ​ 79,686 Private label commercial mortgage-backed securities ​ ​ 8,070 ​ ​ 2 ​ ​ ( 49 ) ​ ​ 8,023 Total available-for-sale debt securities ​ $ 561,794 ​ $ 321 ​ $ ( 64,082 ) ​ $ 498,033 ​ 58 Table of Contents The following table presents gross unrealized losses and fair value of available-for-sale debt securities aggregated by length of time that individual securities have been in a continuous unrealized loss position at December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 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 ​ $ 20,192 ​ $ ( 1,939 ) ​ $ 11,644 ​ $ ( 1,391 ) ​ $ 31,836 ​ $ ( 3,330 ) Obligations of U.S. Government agencies ​ ​ 8,509 ​ ​ ( 430 ) ​ ​ 12,921 ​ ​ ( 2,078 ) ​ ​ 21,430 ​ ​ ( 2,508 ) Bank holding company debt securities ​ ​ 14,248 ​ ​ ( 1,697 ) ​ ​ 11,138 ​ ​ ( 1,862 ) ​ ​ 25,386 ​ ​ ( 3,559 ) Obligations of states and political subdivisions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tax-exempt ​ ​ 106,204 ​ ​ ( 11,023 ) ​ ​ 15,153 ​ ​ ( 2,822 ) ​ ​ 121,357 ​ ​ ( 13,845 ) Taxable ​ 28,901 ​ ( 4,739 ) ​ 27,761 ​ ( 6,937 ) ​ 56,662 ​ ( 11,676 ) Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies: ​ ​ ​ ​ ​ ​ ​ Residential pass-through securities ​ ​ 45,410 ​ ​ ( 4,226 ) ​ ​ 54,531 ​ ​ ( 8,615 ) ​ ​ 99,941 ​ ​ ( 12,841 ) Residential collateralized mortgage obligations ​ 28,670 ​ ( 2,042 ) ​ 11,626 ​ ( 2,530 ) ​ 40,296 ​ ( 4,572 ) Commercial mortgage-backed securities ​ 40,408 ​ ( 2,585 ) ​ 39,278 ​ ( 9,117 ) ​ 79,686 ​ ( 11,702 ) Private label commercial mortgage-backed securities ​ ​ 4,762 ​ ​ ( 49 ) ​ ​ 0 ​ ​ 0 ​ ​ 4,762 ​ ​ ( 49 ) Total ​ $ 297,304 ​ $ ( 28,730 ) ​ $ 184,052 ​ $ ( 35,352 ) ​ $ 481,356 ​ $ ( 64,082 ) ​ Gross realized gains and losses from available-for-sale securities and the related income tax provision were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ 2023 ​ 2022 ​ 2021 Gross realized gains from sales ​ $ 89 ​ $ 48 ​ $ 27 Gross realized losses from sales ​ ( 3,125 ) ​ ( 28 ) ​ ( 3 ) Net realized (losses) gains ​ $ ( 3,036 ) ​ $ 20 ​ $ 24 Income tax provision related to net realized (losses) gains ​ $ ( 638 ) ​ $ 4 ​ $ 5 ​ 59 Table of Contents The amortized cost and fair value of available-for-sale debt securities by contractual maturity are shown in the following table as of December 31, 2023. 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) ​ December 31, 2023 ​ ​ Amortized ​ Fair ​ Cost Value Due in one year or less ​ $ 13,200 ​ $ 12,937 Due from one year through five years ​ 27,951 ​ 26,299 Due from five years through ten years ​ 77,246 ​ 67,709 Due after ten years ​ 106,183 ​ 92,101 Sub-total ​ 224,580 ​ 199,046 Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies: ​ ​ Residential pass-through securities ​ 105,549 ​ 95,405 Residential collateralized mortgage obligations ​ 50,212 ​ 46,462 Commercial mortgage-backed securities ​ 76,412 ​ 66,682 Private label commercial mortgage-backed securities ​ ​ 8,215 ​ ​ 8,160 Total ​ $ 464,968 ​ $ 415,755 ​ The Corporation’s mortgage-backed securities 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 $ 232,437,000 at December 31, 2023 and $ 277,302,000 at December 31, 2022 were pledged as collateral for public deposits, trusts and certain other deposits, as provided by law, totaling $ 136,494,000 at December 31, 2023 and $ 196,760,000 at December 31, 2022. See Note 11 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 December 31, 2023 and 2022 is provided below. Debt Securities As reflected in the table above, gross unrealized holding losses on available-for-sale debt securities totaled $ 49,564,000 at December 31, 2023 and $ 64,082,000 at December 31, 2022. At December 31, 2023, 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 significant increases in market interest rates that occurred in 2022 and 2023. At December 31, 2023 and December 31, 2022, 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 December 31, 2023 and 2022, 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 ACL required on available-for-sale debt securities in an unrealized loss position at December 31, 2023 and 2022. 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 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 $ 15,214,000 at December 31, 2023 and 60 Table of Contents $ 14,168,000 at December 31, 2022. The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at December 31, 2023 and 2022. 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 $ 6,252,000 at December 31, 2023. The Corporation’s marketable equity security, with a carrying value of $ 871,000 at December 31, 2023 and $ 859,000 at December 31, 2022 consisted exclusively of one mutual fund. There was an unrealized loss of $ 129,000 on the mutual fund at December 31, 2023 and $ 141,000 at December 31, 2022. 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 $ 12,000 in 2023, a loss of $ 112,000 in 2022 and a loss of $ 29,000 in 2021. There were no sales of equity securities in 2023, 2022 and 2021. ​ ​ 7. LOANS AND ALLOWANCE FOR CREDIT LOSSES Loans receivable at December 31, 2023 and 2022 are summarized as follows: ​ Summary of Loans by Type (In Thousands) ​ ​ ​ ​ ​ ​ ​ ​ December 31, December 31, ​ 2023 ​ 2022 Commercial real estate - non-owner occupied ​ $ 737,342 ​ $ 675,597 Commercial real estate - owner occupied ​ ​ 237,246 ​ ​ 205,910 All other commercial loans ​ ​ 399,693 ​ ​ 410,077 Residential mortgage loans ​ ​ 413,714 ​ ​ 393,582 Consumer loans ​ ​ 60,144 ​ ​ 54,874 Total ​ ​ 1,848,139 ​ ​ 1,740,040 Less: allowance for credit losses on loans ​ ​ ( 19,208 ) ​ ​ ( 16,615 ) Loans, net ​ $ 1,828,931 ​ $ 1,723,425 ​ (1) Total loans at December 31, 2022 include purchased credit impaired loans of $ 1,027,000 . ​ In the table above, outstanding loan balances are presented net of deferred loan origination fees of $ 4,459,000 at December 31, 2023 and $ 4,725,000 at December 31, 2022. 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. Acquired loans were initially recorded at fair value, with adjustments made to gross amortized cost based on movements in interest rates (market rate adjustment) and based on credit fair value adjustments on non-impaired loans and impaired loans. Subsequently, the Corporation has recognized amortization and accretion of a portion of the market rate adjustments and credit adjustments on performing loans. For the year ended December 31, 2023 and 2022, adjustments to the initial market rate and credit fair value adjustments of performing loans were recognized as follows: ​ 61 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ Year Ended ​ ​ December 31, ​ December 31, ​ ​ 2023 ​ 2022 Market Rate Adjustment ​ ​ Adjustments to gross amortized cost of loans at beginning of period ​ $ ( 916 ) ​ $ ( 637 ) Amortization recognized in interest income ​ ​ ( 54 ) ​ ​ ( 279 ) Adjustments to gross amortized cost of loans at end of period ​ $ ( 970 ) ​ $ ( 916 ) Credit Adjustment on Non-impaired Loans ​ ​ ​ ​ ​ ​ Adjustments to gross amortized cost of loans at beginning of period ​ $ ( 1,840 ) ​ $ ( 3,335 ) Accretion recognized in interest income ​ 677 ​ 1,495 Adjustments to gross amortized cost of loans at end of period ​ $ ( 1,163 ) ​ $ ( 1,840 ) ​ The following table presents an analysis of past due loans as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (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 following table presents an analysis of past due loans as of December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ As of December 31, 2022 ​ ​ Past Due ​ Past Due ​ ​ ​ ​ ​ ​ ​ ​ ​ 30-89 ​ 90+ ​ Nonaccrual ​ Current ​ Total ​ ​ Days ​ Days ​ Loans ​ Loans ​ Loans Commercial real estate - non-owner occupied ​ $ 644 ​ $ 947 ​ $ 6,350 ​ $ 667,656 ​ $ 675,597 Commercial real estate - owner occupied ​ 723 ​ 141 ​ 19 ​ 204,099 ​ 204,982 All other commercial loans ​ ​ 537 ​ ​ 151 ​ ​ 11,528 ​ ​ 397,762 ​ ​ 409,978 Residential mortgage loans ​ ​ 4,540 ​ ​ 866 ​ ​ 3,974 ​ ​ 384,202 ​ ​ 393,582 Consumer loans ​ ​ 635 ​ ​ 132 ​ ​ 187 ​ ​ 53,920 ​ ​ 54,874 Purchased credit impaired ​ 0 ​ 0 ​ 1,027 ​ 0 ​ 1,027 Total ​ $ 7,079 ​ $ 2,237 ​ $ 23,085 ​ $ 1,707,639 ​ $ 1,740,040 ​ ​ 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” column in the table that follows. ​ 62 Table of Contents The following table presents the recorded investment in loans by credit quality indicators by year of origination as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ Term Loans by Year of Origination ​ ​ ​ ​ ​ ​ ​ ​ 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 63 Table of Contents ​ The following table presents the recorded investment in loans by credit quality indicators as of December 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Special ​ ​ ​ ​ ​ ​ (In Thousands) ​ Pass ​ Mention ​ Substandard ​ Doubtful ​ Total Commercial real estate - non-owner occupied ​ $ 654,430 ​ $ 9,486 ​ $ 11,681 ​ $ 0 ​ $ 675,597 Commercial real estate - owner occupied ​ 202,702 ​ 1,909 ​ 371 ​ 0 ​ 204,982 All other commercial loans ​ ​ 383,846 ​ ​ 2,516 ​ ​ 23,616 ​ ​ 0 ​ ​ 409,978 Residential mortgage loans ​ ​ 387,944 ​ ​ 0 ​ ​ 5,638 ​ ​ 0 ​ ​ 393,582 Consumer loans ​ ​ 54,353 ​ ​ 0 ​ ​ 521 ​ ​ 0 ​ ​ 54,874 Purchased credit impaired ​ 0 ​ 0 ​ 1,027 ​ 0 ​ 1,027 Total ​ $ 1,683,275 ​ $ 13,911 ​ $ 42,854 ​ $ 0 ​ $ 1,740,040 ​ The following table is a summary of the Corporation’s nonaccrual loans by major categories for the periods indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ December 31, 2022 ​ ​ Nonaccrual Loans with ​ Nonaccrual Loans ​ Total Nonaccrual ​ ​ (In Thousands) ​ No Allowance ​ with an Allowance ​ Loans ​ Nonaccrual Loans Commercial real estate - non-owner occupied ​ $ 1,111 ​ $ 7,301 ​ $ 8,412 ​ $ 6,350 Commercial real estate - owner occupied ​ 1,281 ​ 294 ​ 1,575 ​ 19 All other commercial loans ​ ​ 1,132 ​ ​ 191 ​ ​ 1,323 ​ ​ 11,528 Residential mortgage loans ​ ​ 3,627 ​ ​ 0 ​ ​ 3,627 ​ ​ 3,974 Consumer loans ​ 240 ​ 0 ​ 240 ​ 187 Purchased credit impaired ​ 0 ​ 0 ​ 0 ​ 1,027 Total ​ $ 7,391 ​ $ 7,786 ​ $ 15,177 ​ $ 23,085 ​ The Corporation recognized $ 932,000 of interest income on nonaccrual loans during the year ended December 31, 2023. The following table presents the accrued interest receivable written off by reversing interest income during the year ended December 31, 2023: ​ ​ ​ ​ ​ ​ ​ Year Ended (In Thousands) ​ December 31, 2023 Commercial real estate - non-owner occupied ​ $ 48 Residential mortgage loans ​ ​ 28 Consumer loans ​ 3 Total ​ $ 79 ​ 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 are typically secured by business assets including inventory, equipment and receivables. ● Residential mortgage loans are typically secured by first mortgages, and in some cases could be secured by a second mortgage. 64 Table of Contents ● 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 ​ ​ Amortized ​ ​ (In Thousands) ​ Cost ​ Allowance Commercial real estate - non-owner occupied ​ $ 8,412 ​ $ 648 Commercial real estate - owner occupied ​ 1,575 ​ 5 All other commercial loans ​ ​ 1,277 ​ ​ 90 Total ​ $ 11,264 ​ $ 743 ​ The following table summarizes the activity related to the ACL for the year ended December 31, 2023 under the CECL methodology. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ) ​ ​ ( 311 ) ​ ​ 0 ​ ​ ( 356 ) Recoveries ​ 0 ​ ​ 0 ​ ​ 44 ​ ​ 11 ​ ​ 37 ​ ​ 0 ​ ​ 92 (Credit) provision for credit losses on loans 1,942 ​ 167 ​ ( 1,168 ) ​ ( 621 ) ​ 433 ​ 0 ​ 753 Balance, December 31, 2023 $ 12,010 ​ $ 2,116 ​ $ 2,918 ​ $ 1,764 ​ $ 400 ​ $ 0 ​ $ 19,208 ​ Prior to the adoption of ASC 326 on January 1, 2023, the Corporation calculated the allowance for loan losses under the incurred loss methodology. The following tables are disclosed related to the allowance for loan losses in prior period. ​ 65 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 Loans: ​ Allowance for Loan Losses: (In Thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually ​ Collectively ​ ​ ​ ​ Individually ​ Collectively ​ ​ ​ Evaluated Evaluated Totals Evaluated Evaluated Totals Commercial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial loans secured by real estate ​ $ 7,154 ​ $ 675,095 ​ $ 682,249 ​ $ 427 ​ $ 6,647 ​ $ 7,074 Commercial and industrial ​ 11,223 ​ 167,048 ​ 178,271 ​ 26 ​ 2,883 ​ 2,909 Paycheck Protection Program - 1st Draw ​ 0 ​ 5 ​ 5 ​ 0 ​ 0 ​ 0 Paycheck Protection Program - 2nd Draw ​ ​ 0 ​ ​ 163 ​ ​ 163 ​ ​ 0 ​ ​ 0 ​ ​ 0 Political subdivisions ​ 0 ​ 90,719 ​ 90,719 ​ 0 ​ 0 ​ 0 Commercial construction and land ​ 244 ​ 73,719 ​ 73,963 ​ 0 ​ 647 ​ 647 Loans secured by farmland ​ 76 ​ 12,874 ​ 12,950 ​ 0 ​ 112 ​ 112 Multi-family (5 or more) residential ​ 0 ​ 55,886 ​ 55,886 ​ 0 ​ 411 ​ 411 Agricultural loans ​ 57 ​ 2,378 ​ 2,435 ​ 0 ​ 21 ​ 21 Other commercial loans ​ 0 ​ 14,857 ​ 14,857 ​ 0 ​ 124 ​ 124 Total commercial ​ 18,754 ​ 1,092,744 ​ 1,111,498 ​ 453 ​ 10,845 ​ 11,298 Residential mortgage: ​ ​ ​ ​ ​ ​ Residential mortgage loans - first liens ​ ​ 506 ​ ​ 509,276 ​ ​ 509,782 ​ ​ 0 ​ ​ 3,413 ​ ​ 3,413 Residential mortgage loans - junior liens ​ 30 ​ 24,919 ​ 24,949 ​ 0 ​ 167 ​ 167 Home equity lines of credit ​ 68 ​ 43,730 ​ 43,798 ​ 0 ​ 282 ​ 282 1-4 Family residential construction ​ 0 ​ 30,577 ​ 30,577 ​ 0 ​ 211 ​ 211 Total residential mortgage ​ 604 ​ 608,502 ​ 609,106 ​ 0 ​ 4,073 ​ 4,073 Consumer ​ 0 ​ 19,436 ​ 19,436 ​ 0 ​ 244 ​ 244 Unallocated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1,000 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 19,358 ​ $ 1,720,682 ​ $ 1,740,040 ​ $ 453 ​ $ 15,162 ​ $ 16,615 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Prior to the adoption of ASU 2016-13, loans were classified as impaired when, based on current information and events, it was probable that the Corporation would be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment included payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experienced insignificant payment delays and payment shortfalls generally were not classified as impaired. Management determined the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of shortfall in relation to the principal and interest owed. Impairment was measured on a loan-by-loan basis for commercial loans by the fair value of the collateral (if the loan is collateral dependent), by future cash flows discounted at the loan’s effective rate or by the loan’s observable market price. ​ The scope of loans reviewed individually each quarter to determine if they were impaired included all commercial loan relationships greater than $ 200,000 and any residential mortgage or consumer loans of $ 400,000 or more for which there was at least one extension of credit graded Special Mention, Substandard or Doubtful. All loans classified as troubled debt restructurings and all commercial loan relationships less than $ 200,000 or other loan relationships less than $ 400,000 in the aggregate, but with an estimated loss of $ 100,000 or more, were individually evaluated for impairment. ​ ​ 66 Table of Contents ​ Summary information related to impaired loans at December 31, 2022 is provided in the table immediately below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ December 31, 2022 ​ ​ Unpaid ​ ​ ​ ​ ​ ​ ​ ​ Principal ​ Recorded ​ Related ​ Balance Investment Allowance With no related allowance recorded: ​ ​ ​ Commercial loans secured by real estate ​ $ 8,563 ​ $ 3,754 ​ $ 0 Commercial and industrial ​ 12,926 ​ 11,163 ​ 0 Residential mortgage loans - first liens ​ ​ 506 ​ ​ 506 ​ ​ 0 Residential mortgage loans - junior liens ​ 68 ​ 30 ​ 0 Home equity lines of credit ​ ​ 68 ​ 68 ​ 0 Loans secured by farmland ​ 76 ​ 76 ​ 0 Agricultural loans ​ ​ 57 ​ ​ 57 ​ ​ 0 Construction and other land loans ​ ​ 244 ​ ​ 244 ​ ​ 0 Multi-family (5 or more) residential ​ ​ 0 ​ ​ 0 ​ ​ 0 Total with no related allowance recorded ​ 22,508 ​ 15,898 ​ 0 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ With a related allowance recorded: ​ ​ ​ ​ ​ ​ Commercial loans secured by real estate ​ ​ 3,400 ​ ​ 3,400 ​ ​ 427 Commercial and industrial ​ 60 ​ 60 ​ 26 Total with a related allowance recorded ​ 3,460 ​ 3,460 ​ 453 Total ​ $ 25,968 ​ $ 19,358 ​ $ 453 ​ The average balance of impaired loans and interest income recognized on these impaired loans is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ ​ ​ ​ ​ ​ Average Investment in ​ Interest Income Recognized on ​ ​ Impaired Loans ​ Impaired Loans on a Cash Basis ​ ​ Year Ended December 31, ​ Year Ended December 31, ​ ​ 2022 ​ 2021 ​ 2022 2021 Commercial: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Commercial loans secured by real estate ​ $ 9,757 ​ $ 11,617 ​ $ 657 ​ $ 557 Commercial and industrial ​ ​ 2,078 ​ ​ 2,636 ​ 210 ​ 34 Commercial construction and land ​ ​ 72 ​ ​ 48 ​ 3 ​ 3 Loans secured by farmland ​ ​ 80 ​ ​ 84 ​ 0 ​ 1 Multi-family (5 or more) residential ​ ​ 197 ​ ​ 1,583 ​ ​ 1,156 ​ ​ 133 Agricultural loans ​ ​ 60 ​ ​ 67 ​ 4 ​ 4 Other commercial loans ​ ​ 0 ​ ​ 0 ​ ​ 0 ​ ​ 0 Total commercial ​ ​ 12,244 ​ ​ 16,035 ​ 2,030 ​ 732 Residential mortgage: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Residential mortgage loans - first lien ​ ​ 575 ​ ​ 1,647 ​ ​ 24 ​ ​ 78 Residential mortgage loans - junior lien ​ ​ 33 ​ ​ 361 ​ 7 ​ 11 Home equity lines of credit ​ ​ 43 ​ ​ 0 ​ 4 ​ 0 Total residential mortgage ​ ​ 651 ​ ​ 2,008 ​ 35 ​ 89 Total ​ $ 12,895 ​ $ 18,043 ​ $ 2,065 ​ $ 821 ​ The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. ​ 67 Table of Contents Because the effect of most modifications made to borrowers experiencing financial difficulty, such as extensions of terms, insignificant payment delays and interest rate reductions, 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. ​ Occasionally, the Corporation modifies loans by providing principal forgiveness on certain of its real estate loans. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses. ​ ​ Modifications Made to Borrowers Experiencing Financial Difficulty ​ In 2023, there were two loan modifications made to borrowers experiencing financial difficulty at the time of modification, described in the following table: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in Thousands) ​ Term Extension ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortized Cost ​ % of Total ​ ​ ​ ​ Basis ​ Loan Type Financial Effect ​ Commercial Real Estate - Non-owner Occupied: ​ ​ Non-owner occupied $ 3,907 ​ ​ 0.53 % Extended the maturity of one loan for 6 months and another loan for 12 months . ​ ​ 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. At December 31, 2023, the amortized cost basis of the loan included in the table above where the maturity was extended for 6 months was $ 1,381,000 , with a specific allowance of $ 38,000 and the contractual payments on the loan were 117 days past due. At December 31, 2023, the amortized cost basis of the loan where the maturity was extended for 12 months was $ 2,526,000 with a specific allowance of $ 486,000 and the contractual payments were current. There were no commitments to lend additional funds to these two borrowers. ​ 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 consolidated balance sheets) is as follows: ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ December 31, December 31, ​ ​ 2023 ​ 2022 Foreclosed residential real estate ​ $ 47 ​ $ 256 ​ 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) ​ December 31, December 31, ​ ​ 2023 ​ 2022 Residential real estate in process of foreclosure ​ $ 1,227 ​ $ 1,229 ​ ​ 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). Additional information related to commitments to extend credit and standby letter of credits is provided in Note 15. 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 68 Table of Contents $ 690,000 at December 31, 2023 and $ 425,000 at December 31, 2022, is included in accrued interest and other liabilities on the consolidated balance sheets. ​ The following table presents the balance and activity in the allowance for credit losses for off-balance sheet exposures for the year ended December 31, 2023. ​ ​ ​ ​ ​ ​ ​ Year Ended (In Thousands) ​ December 31, 2023 Beginning Balance ​ $ 425 Adjustment to allowance for off-balance sheet exposures for adoption of ASU 2016-13 ​ ​ 793 Recoveries ​ ​ 39 Credit for unfunded commitments ​ ​ ( 567 ) Balance, December 31, 2023 ​ $ 690 ​ ​ ​ 8. BANK PREMISES AND EQUIPMENT ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ December 31, ​ ​ 2023 ​ 2022 Land ​ $ 3,573 ​ $ 3,623 Buildings and improvements ​ ​ 32,582 ​ ​ 32,332 Furniture and equipment ​ ​ 14,618 ​ ​ 14,886 Construction in progress ​ ​ 614 ​ ​ 1,532 Total ​ ​ 51,387 ​ ​ 52,373 Less: accumulated depreciation ​ ​ ( 29,755 ) ​ ​ ( 30,799 ) Net ​ $ 21,632 ​ $ 21,574 ​ Depreciation and amortization expense is included in the following line items of the consolidated statements of income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ 2023 ​ 2022 ​ 2021 Net occupancy and equipment expense ​ $ 1,915 ​ $ 2,049 ​ $ 1,723 Data processing and telecommunications expense ​ ​ 236 ​ ​ 340 ​ ​ 407 Total ​ $ 2,151 ​ $ 2,389 ​ $ 2,130 ​ ​ 9. GOODWILL AND OTHER INTANGIBLE ASSETS, NET Goodwill represents the excess of the cost of acquisitions over the fair value of the net assets acquired. There were no changes in the carrying amount of goodwill in 2023 and 2022. The balance in goodwill was $ 52,505,000 at December 31, 2023 and 2022. The Corporation did not complete any acquisitions in 2023 or 2022. In testing goodwill for impairment at December 31, 2023, the Corporation by-passed performing a qualitative assessment and performed a quantitative assessment based on comparison of the Corporation’s market capitalization to its stockholders’ equity, resulting in the determination that the fair value of its reporting unit, its community banking operation, exceeded it’s carrying amount. Accordingly, there was no goodwill impairment at December 31, 2023. 69 Table of Contents There were no goodwill impairment charges recorded in the years ended December 31, 2023, 2022 and 2021. ​ Information related to the core deposit intangibles is as follows: ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ December 31, ​ 2023 ​ ​ 2022 Gross amount ​ $ 6,639 ​ $ 6,639 Accumulated amortization ​ ( 4,170 ) ​ ​ ( 3,762 ) Net ​ $ 2,469 ​ $ 2,877 ​ Amortization expense related to core deposit intangibles is included in other noninterest expense in the consolidated statements of income, as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ Year Ended December 31, ​ ​ 2023 ​ 2022 ​ ​ 2021 Amortization expense ​ $ 408 ​ $ 439 ​ $ 535 ​ The amount of amortization expense to be recognized in each of the ensuing five years is as follows: ​ ​ ​ ​ ​ (In Thousands) ​ 2024 ​ $ 390 2025 ​ 424 2026 ​ 396 2027 ​ 361 2028 ​ 304 ​ ​ 10. DEPOSITS At December 31, 2023 the scheduled maturities of time deposits are as follows: ​ ​ ​ ​ ​ (In Thousands) ​ ​ ​ 2024 ​ $ 290,068 2025 ​ ​ 84,413 2026 ​ ​ 36,610 2027 ​ ​ 6,817 2028 ​ ​ 6,541 Total ​ $ 424,449 ​ Time deposits of more than $250,000 totaled $ 134,085,000 at December 31, 2023 and $ 85,640,000 at December 31, 2022. As of December 31, 2023, the remaining maturities or time to next re-pricing of time deposits more than $250,000 was as follows: ​ ​ ​ ​ ​ (In Thousands) ​ ​ ​ Three months or less ​ $ 47,773 Over 3 months through 12 months ​ ​ 45,663 Over 1 year through 3 years ​ ​ 40,104 Over 3 years ​ ​ 545 Total ​ $ 134,085 ​ ​ 70 Table of Contents 11. BORROWED FUNDS SHORT-TERM BORROWINGS Short-term borrowings (initial maturity within one year) include the following: ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ December 31, December 31, ​ ​ 2023 ​ 2022 FHLB-Pittsburgh borrowings ​ $ 31,500 ​ $ 77,000 Customer repurchase agreements ​ 2,374 ​ 3,062 Total short-term borrowings ​ $ 33,874 ​ $ 80,062 ​ The weighted average interest rate on total short-term borrowings outstanding was 5.23 % at December 31, 2023 and 4.28 % at December 31, 2022. The maximum amount of total short-term borrowings outstanding at any month-end was $ 120,290,000 in 2023, $ 90,042,000 in 2022 and $ 17,353,000 in 2021. The Corporation had available credit with other correspondent banks totaling $ 75,000,000 at December 31, 2023 and $ 95,000,000 at December 31, 2022. These lines of credit are primarily unsecured. No amounts were outstanding at December 31, 2023 or 2022. The Corporation has a line of credit with the Federal Reserve Bank of Philadelphia’s Discount Window. At December 31, 2023, the Corporation had available credit in the amount of $ 19,982,000 on this line with no outstanding advances. At December 31, 2022, the Corporation had available credit in the amount of $ 23,107,000 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 $ 20,829,000 at December 31, 2023 and $ 24,113,000 at December 31, 2022. 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 December 31, 2023 and 2022. The carrying value of the underlying securities was $ 2,400,000 at December 31, 2023 and $ 3,080,000 at December 31, 2022. The FHLB-Pittsburgh loan facility is collateralized by qualifying loans secured by real estate with a book value totaling $ 1,323,008,000 at December 31, 2023 and $ 1,209,179,000 at December 31, 2022. 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) were $ 15,214,000 at December 31, 2023 and $ 14,168,000 at December 31, 2022. The Corporation’s total credit facility with FHLB-Pittsburgh was $ 926,845,000 at December 31, 2023, including an unused (available) amount of $ 737,824,000 . At December 31, 2022, the Corporation’s total credit facility with FHLB-Pittsburgh was $ 839,378,000 , including an unused (available) amount of $ 689,279,000 . At December 31, 2023, the 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 %. At December 31, 2022, the overnight borrowing from FHLB-Pittsburgh was $ 77,000,000 at an interest rate of 4.45 % with no other short-term advances. LONG-TERM BORROWINGS – FHLB ADVANCES Long-term borrowings from FHLB-Pittsburgh are as follows: ​ ​ ​ ​ ​ ​ ​ ​ 71 Table of Contents ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ December 31, December 31, ​ ​ 2023 ​ 2022 Loans matured in 2023 ​ $ 0 ​ $ 9,303 Loans maturing in 2024 with a weighted-average rate of 3.09 % ​ ​ 32,161 ​ ​ 29,813 Loans maturing in 2025 with a weighted-average rate of 4.30 % ​ ​ 44,627 ​ ​ 23,231 Loans maturing in 2026 with a weighted-average rate of 4.51 % ​ ​ 35,518 ​ ​ 0 Loans maturing in 2027 with a weighted-average rate of 4.00 % ​ ​ 24,031 ​ ​ 0 Loan maturing in 2028 with a rate of 3.72 % ​ ​ 2,000 ​ ​ 0 Total long-term FHLB-Pittsburgh borrowings ​ $ 138,337 ​ $ 62,347 ​ Note: Weighted-average rates are presented as of December 31, 2023. 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 $ 66,000 in 2023, $ 64,000 in 2022 and $ 38,000 in 2021 was included in interest expense in the consolidated statements of income. At December 31, 2023 and December 31, 2022, outstanding Senior Notes are as follows: ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) December 31, December 31, ​ ​ 2023 ​ 2022 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 ​ $ 14,831 ​ $ 14,765 Total carrying value ​ $ 14,831 ​ $ 14,765 ​ 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 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 $ 110,000 in 2023, $ 106,000 in 2022, and $ 63,000 in 2021 was included in interest expense in the consolidated statements of income. 72 Table of Contents At December 31, 2023 and 2022, outstanding subordinated debt agreements are as follows: ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) December 31, December 31, ​ ​ 2023 ​ 2022 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 ​ $ 24,717 ​ $ 24,607 Total carrying value ​ $ 24,717 ​ $ 24,607 ​ ​ 12. EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS DEFINED BENEFIT PLANS The Corporation sponsors a defined benefit health care plan that provides postretirement medical benefits and life insurance to employees who meet certain age and length of service requirements. Full-time employees no longer accrue service time toward the Corporation-subsidized portion of the medical benefits. The plan contains a cost-sharing feature which causes participants to pay for all future increases in costs related to benefit coverage. Accordingly, actuarial assumptions related to health care cost trend rates do not significantly affect the liability balance at December 31, 2023 and 2022 and are not expected to significantly affect the Corporation’s future expenses. The Corporation uses a December 31 measurement date for the postretirement plan. In an acquisition in 2007, the Corporation assumed the Citizens Trust Company Retirement Plan, a defined benefit pension plan. This plan covers certain employees who were employed by Citizens Trust Company on December 31, 2002, when the plan was amended to discontinue admittance of any future participant and to freeze benefit accruals. Information related to the Citizens Trust Company Retirement Plan has been included in the tables that follow. The Corporation uses a December 31 measurement date for this plan. The following table shows the funded status of the defined benefit plans: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pension Postretirement (In Thousands) 2023 ​ 2022 2023 ​ 2022 CHANGE IN BENEFIT OBLIGATION: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Benefit obligation at beginning of year ​ $ 946 ​ $ 1,128 ​ $ 935 ​ $ 1,297 Service cost ​ 0 ​ 0 ​ 54 ​ 63 Interest cost ​ 31 ​ 22 ​ 48 ​ 34 Plan participants' contributions ​ 0 ​ 0 ​ 129 ​ 137 Actuarial loss (gain) ​ 63 ​ ( 199 ) ​ 37 ​ ( 394 ) Benefits paid ​ ​ ( 5 ) ​ ​ ( 5 ) ​ ​ ( 190 ) ​ ​ ( 202 ) Settlement of plan obligation ​ ( 139 ) ​ 0 ​ 0 ​ 0 Benefit obligation at end of year ​ $ 896 ​ $ 946 ​ $ 1,013 ​ $ 935 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CHANGE IN PLAN ASSETS: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value of plan assets at beginning of year ​ $ 1,001 ​ $ 1,175 ​ $ 0 ​ $ 0 Actual return on plan assets ​ 89 ​ ( 169 ) ​ 0 ​ 0 Employer contribution ​ 0 ​ 0 ​ 61 ​ 65 Plan participants' contributions ​ 0 ​ 0 ​ 129 ​ 137 Benefits paid ​ ​ ( 5 ) ​ ​ ( 5 ) ​ ​ ( 190 ) ​ ​ ( 202 ) Settlement of plan obligation ​ ( 139 ) ​ 0 ​ 0 ​ 0 Fair value of plan assets at end of year ​ $ 946 ​ $ 1,001 ​ $ 0 ​ $ 0 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Funded status at end of year ​ $ 50 ​ $ 55 ​ $ ( 1,013 ) ​ $ ( 935 ) ​ At December 31, 2023 and 2022, the following pension plan and postretirement plan asset and liability amounts were recognized in the consolidated balance sheets: ​ 73 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pension ​ Postretirement (In Thousands) 2023 2022 2023 2022 Other assets ​ $ 50 ​ $ 55 ​ $ 0 ​ $ 0 Accrued interest and other liabilities ​ ​ 0 ​ ​ 0 ​ ​ 1,013 ​ ​ 935 ​ At December 31, 2023 and 2022, the following items included in accumulated other comprehensive loss had not been recognized as components of expense: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pension ​ Postretirement (In Thousands) 2023 ​ 2022 2023 ​ 2022 Prior service cost ​ $ 0 ​ $ 0 ​ $ ( 124 ) ​ $ ( 155 ) Net actuarial loss (gain) ​ 139 ​ ​ 179 ​ ( 573 ) ​ ​ ( 646 ) Total ​ $ 139 ​ $ 179 ​ $ ( 697 ) ​ $ ( 801 ) ​ For the defined benefit pension plan, amortization of the net actuarial loss is expected to be $ 6,000 in 2024. For the postretirement plan, effective in January 2024, adjustments to the plan resulted in an increase of $ 413,000 in unrecognized prior service cost. In 2024, the estimated reduction in expense related to prior service cost is $ 481,000 , including a curtailment of $ 469,000 related to the plan adjustments. Also in 2024 for the postretirement plan, the net actuarial gain to be amortized as a reduction in expense is $ 77,000 . The accumulated benefit obligation for the defined benefit pension plan was $ 896,000 at December 31, 2023 and $ 946,000 at December 31, 2022. The components of net periodic benefit costs from defined benefit plans are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pension ​ Postretirement (In Thousands) 2023 ​ 2022 2021 2023 ​ 2022 2021 Service cost ​ $ 0 ​ $ 0 ​ $ 0 ​ $ 54 ​ $ 63 ​ $ 63 Interest cost ​ 31 ​ ​ 22 ​ ​ 20 ​ 48 ​ ​ 34 ​ ​ 33 Expected return on plan assets ​ ( 18 ) ​ ​ ( 35 ) ​ ​ ( 30 ) ​ 0 ​ ​ 0 ​ ​ 0 Amortization of prior service cost ​ 0 ​ ​ 0 ​ ​ 0 ​ ( 31 ) ​ ​ ( 31 ) ​ ​ ( 31 ) Recognized net actuarial loss (gain) ​ 11 ​ ​ 8 ​ ​ 19 ​ ( 36 ) ​ ​ ( 19 ) ​ ​ ( 5 ) Settlement of plan obligation ​ ​ 21 ​ ​ 0 ​ ​ 0 ​ ​ 0 ​ ​ 0 ​ ​ 0 Total net periodic benefit cost ​ $ 45 ​ $ ( 5 ) ​ $ 9 ​ $ 35 ​ $ 47 ​ $ 60 ​ The weighted-average assumptions used to determine net periodic benefit cost are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pension ​ Postretirement ​ 2023 2022 2021 2023 2022 2021 Discount rate 5.05 % 2.60 % 2.30 % 3.00 % 3.00 % 2.50 % Expected return on plan assets 4.22 % 5.00 % 4.81 % N/A N/A N/A ​ Rate of compensation increase N/A N/A N/A N/A N/A N/A ​ ​ The weighted-average assumptions used to determine benefit obligations as of December 31, 2023 and 2022 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pension Postretirement ​ ​ 2023 2022 2023 2022 ​ Discount rate 4.80 % 5.05 % 5.00 % 5.25 % Rate of compensation increase N/A N/A N/A N/A ​ ​ 74 Table of Contents Estimated future benefit payments, including only estimated employer contributions for the postretirement plan, which reflect expected future service, are as follows: ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) Pension Postretirement 2024 ​ $ 570 ​ $ 74 2025 ​ 8 ​ 85 2026 ​ 14 ​ 98 2027 ​ 8 ​ 88 2028 ​ 260 ​ 97 2029-2033 ​ 36 ​ 493 ​ No estimated minimum contribution to the defined benefit pension plan is required in 2024, though the Corporation may make discretionary contributions. The expected return on pension plan assets is a significant assumption used in the calculation of net periodic benefit cost. This assumption reflects the average long-term rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the projected benefit obligation. The fair values of pension plan assets at December 31, 2023 and 2022 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 Mutual funds invested principally in: ​ ​ ​ ​ Cash and cash equivalents 54 % 3 % Debt securities 18 % 39 % Equity securities 24 % 50 % Alternative funds 4 % 8 % Total 100 % 100 % ​ C&N Bank’s Wealth Management Department manages the investment of the pension plan assets. The Plan’s securities include mutual funds invested principally in cash and cash equivalents, debt securities, a diversified mix of large, mid- and small-capitalization U.S. stocks, foreign stocks and alternative asset classes such as real estate, commodities, and inflation-protected securities. The fair values of plan assets are determined based on Level 1 inputs (as described in Note 20). The Plan’s assets do not include any shares of the Corporation’s common stock. PROFIT SHARING AND DEFERRED COMPENSATION PLANS The Corporation has a profit sharing plan that incorporates the deferred salary savings provisions of Section 401(k) of the Internal Revenue Code. The Corporation’s matching contributions to the Plan depend upon the tax deferred contributions of employees. The Corporation’s total basic and matching contributions were $ 1,419,000 in 2023, $ 1,415,000 in 2022 and $ 1,299,000 in 2021. The Corporation has an Employee Stock Ownership Plan (ESOP). Contributions to the ESOP are discretionary, and the ESOP uses funds contributed to purchase Corporation stock for the accounts of ESOP participants. These purchases are made in the market (not directly from the Corporation), and employees are not permitted to purchase Corporation stock under the ESOP. The ESOP includes a diversification feature, which allows participants, upon reaching age 55 and 10 years of service (as defined), to sell up to 50 % of their Corporation shares over a period of 6 years . As of December 31, 2023 and 2022, there were no shares allocated for repurchase by the ESOP. Dividends paid on shares held by the ESOP are charged to retained earnings. All Corporation shares owned through the ESOP are included in the calculation of weighted-average shares outstanding for purposes of calculating earnings per share – basic and diluted. The ESOP held 579,567 shares of Corporation stock at December 31, 2023, 564,353 shares at December 31, 2022 and 513,494 shares at December 31, 2021, all of which had been allocated to Plan participants. The Corporation’s contributions to the ESOP totaled $ 1,244,000 in 2023, $ 1,170,000 in 2022 and $ 1,040,000 in 2021. 75 Table of Contents The Corporation has a nonqualified supplemental deferred compensation arrangement with its key officers. Charges to operating expense for officers’ supplemental deferred compensation were $ 489,000 in 2023, $ 391,000 in 2022 and $ 301,000 in 2021. In connection with an acquisition, the Corporation assumed an obligation to provide a supplemental retirement benefit to a former executive. Under the terms of the agreement, the executive or his heirs will receive monthly payments totaling $ 1 million over a 10-year period starting in October 2025. The Corporation recorded expense of $ 13,000 in 2023, $ 14,000 in 2022 and $ 13,000 in 2021, which is included in pensions and other employee benefits in the consolidated statements of income, representing the effective interest cost on the obligation. The discount rate used to measure the liability is 1.5 %. The balance of the liability, which is included in accrued interest and other liabilities in the consolidated balance sheets, is $ 905,000 at December 31, 2023 and $ 892,000 at December 31, 2022. The Corporation also has a nonqualified deferred compensation plan that allows selected officers the option to defer receipt of cash compensation, including base salary and any cash bonuses or other cash incentives. This nonqualified deferred compensation plan does not provide for Corporation contributions. STOCK-BASED COMPENSATION PLANS At the Annual Meeting of Shareholders on April 20, 2023, the Citizens & Northern Corporation 2023 Equity Incentive Plan (“2023 Equity Incentive Plan”) was approved. A total of 500,000 shares of common stock may be issued under the 2023 Equity Incentive Plan. Awards may be made to participating employees and independent directors under the 2023 Equity Incentive Plan in the form of qualified options (“Incentive Stock Options,” as defined in the Internal Revenue Code), nonqualified options, restricted stock units or restricted stock, any or all of which can be granted with performance-based vesting conditions. As of December 31, 2023, no awards had been granted under this plan. Outstanding restricted stock awards granted prior to adoption of the 2023 Equity Incentive Plan, including awards made in 2023, are governed under the 1995 Stock Incentive Plan and the Independent Directors Stock Incentive Plan. The restricted stock awards in 2023 under the 1995 Stock Incentive Plan and the Independent Directors Stock Incentive Plan are the final awards under these plans. ​ Total stock-based compensation expense is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) 2023 ​ 2022 2021 Restricted stock ​ $ 1,472 ​ $ 1,260 ​ $ 1,214 Stock options ​ 0 ​ ​ 0 ​ ​ 0 Total ​ $ 1,472 ​ $ 1,260 ​ $ 1,214 ​ The following summarizes non-vested restricted stock activity for the year ended December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ Number ​ Grant Date ​ of Shares Fair Value Outstanding, December 31, 2022 135,220 ​ $ 23.23 Granted 53,788 ​ $ 23.35 Vested ( 53,738 ) ​ $ 23.46 Forfeited ( 25,261 ) ​ $ 22.11 Outstanding, December 31, 2023 110,009 ​ $ 23.44 ​ Compensation cost related to restricted stock is recognized based on the market price of the stock at the grant date over the vesting period, adjusted for estimated and actual forfeitures. As of December 31, 2023, there was $ 1,262,000 total unrecognized compensation cost related to restricted stock, which is expected to be recognized over a weighted average period of 1.3 years. 76 Table of Contents In 2023 and 2022, the Corporation awarded shares of restricted stock under the Stock Incentive Plan, as follows: ​ ​ ​ ​ ​ ​ ​ 2023 2022 Time-based awards to independent directors ​ 11,000 ​ 9,588 Time-based awards to employees 31,684 51,638 Performance-based awards to employees 11,104 17,017 Total 53,788 78,243 ​ Time-based restricted stock awards granted to independent (non-employee) directors in 2023 and 2022 vest over one-year terms. Time-based restricted stock awards granted to employees in 2023 and 2022 vest ratably over three-year terms, subject to continued employment and satisfactory job performance. Performance-based restricted stock awards granted in 2023 and 2022 vest ratably over three-year terms, with vesting contingent upon meeting conditions based on the Corporation’s earnings as specified in the agreements. ​ There were no stock options granted in 2023, 2022, or 2021. A summary of stock option activity is presented below. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 2022 ​ 2021 ​ ​ ​ ​ Weighted ​ ​ ​ Weighted ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ Average ​ ​ ​ ​ Exercise ​ ​ ​ Exercise ​ ​ ​ Exercise ​ Shares Price Shares Price ​ Shares Price Outstanding, beginning of year 10,564 ​ $ 20.45 24,218 ​ $ 20.01 57,111 ​ $ 18.92 Granted 0 ​ ​ 0 ​ ​ 0 ​ ​ Exercised ( 8,288 ) ​ $ 20.45 ( 13,654 ) ​ $ 19.67 ( 22,429 ) ​ $ 18.96 Forfeited ( 1,630 ) ​ $ 20.45 0 ​ ​ ​ ( 3,156 ) ​ $ 19.20 Expired 0 ​ ​ ​ 0 ​ ​ ​ ( 7,308 ) ​ $ 15.06 Outstanding, end of year 646 ​ $ 20.45 10,564 ​ $ 20.45 24,218 ​ $ 20.01 Options exercisable at year-end 646 ​ $ 20.45 10,564 ​ $ 20.45 24,218 ​ $ 20.01 Weighted-average fair value of options forfeited ​ ​ $ 5.50 ​ ​ ​ N/A ​ ​ $ 4.59 ​ The 646 shares of outstanding stock options at December 31, 2023 expired on January 3, 2024. The aggregate intrinsic value of stock options outstanding was $ 1,000 at December 31, 2023. The total intrinsic value of options exercised was $ 14,000 in 2023, $ 76,000 in 2022 and $ 97,000 in 2021. In January 2024, the Corporation granted 53,514 shares of time-based restricted stock awards under the 2023 Equity Incentive Plan. Of the 53,514 restricted shares, 43,514 vest ratably over three years while 10,000 issued to independent directors’ vest over one year . In February 2024, the Corporation granted 19,346 shares of performance-based restricted stock awards. These performance-based restricted stock awards vest ratably over three years , with vesting contingent upon meeting earnings-related conditions specified in agreements. Total estimated stock-based compensation expense for 2024 is $ 1,500,000 . The restricted stock awards made in January and February 2024 are not included in the tables above. ​ 77 Table of Contents 13. INCOME TAXES The net deferred tax asset at December 31, 2023 and 2022 represents the following temporary difference components: ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, (In Thousands) 2023 2022 Deferred tax assets: ​ ​ ​ ​ ​ ​ Unrealized holding losses on securities ​ $ 10,335 ​ $ 13,391 Allowance for credit losses on loans ​ ​ 4,230 ​ ​ 3,648 Purchase accounting adjustments on loans ​ 470 ​ 938 Deferred compensation ​ 1,352 ​ 1,149 Operating leases liability ​ 787 ​ 907 Deferred loan origination fees ​ 731 ​ 779 Net operating loss carryforward ​ ​ 541 ​ ​ 659 Accrued incentive compensation ​ ​ 463 ​ ​ 354 Other deferred tax assets ​ 1,316 ​ 1,115 Total deferred tax assets ​ 20,225 ​ 22,940 ​ ​ ​ ​ ​ ​ ​ Deferred tax liabilities: ​ ​ BOLI surrender ​ ​ 950 ​ ​ 0 Defined benefit plans - ASC 835 ​ 119 ​ 129 Bank premises and equipment ​ 291 ​ 298 Core deposit intangibles ​ 544 ​ 633 Right-of-use assets from operating leases ​ ​ 787 ​ ​ 907 Other deferred tax liabilities ​ 93 ​ 89 Total deferred tax liabilities ​ 2,784 ​ 2,056 Deferred tax asset, net ​ $ 17,441 ​ $ 20,884 ​ The provision for income taxes includes the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) 2023 ​ 2022 2021 Currently payable ​ $ 5,499 ​ $ 5,998 ​ $ 8,386 Tax expense resulting from allocations of certain tax benefits to equity or as a reduction in other assets ​ 0 ​ ​ 134 ​ ​ 128 Deferred ​ 836 ​ ​ ( 400 ) ​ ​ ( 1,381 ) Total provision ​ $ 6,335 ​ $ 5,732 ​ $ 7,133 ​ A reconciliation of income tax at the statutory rate to the Corporation’s effective rate is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ 2021 (Dollars In Thousands) Amount % ​ Amount % Amount % Expected provision ​ $ 6,401 21.0 ​ $ 6,794 21.0 ​ $ 7,914 21.0 Tax-exempt interest income ​ ( 964 ) ( 3.2 ) ​ ( 1,029 ) ( 3.2 ) ​ ( 921 ) ( 2.4 ) Increase in cash surrender value and other income from life insurance, net ​ ( 586 ) ( 1.9 ) ​ ( 103 ) ( 0.3 ) ​ ( 118 ) ( 0.3 ) ESOP dividends ​ ( 143 ) ( 0.5 ) ​ ( 130 ) ( 0.4 ) ​ ( 120 ) ( 0.3 ) Initiated surrender of bank-owned life insurance ​ ​ 950 ​ 3.1 ​ ​ 0 ​ 0.0 ​ ​ 0 ​ 0.0 State income tax, net of Federal benefit ​ 329 1.1 ​ 296 0.9 ​ 375 1.0 Nondeductible interest expense ​ 283 0.9 ​ 87 ​ 0.3 ​ ​ 52 ​ 0.1 Other, net ​ 65 0.3 ​ ( 183 ) ( 0.6 ) ​ ( 49 ) ( 0.1 ) Effective income tax provision ​ $ 6,335 20.8 ​ $ 5,732 17.7 ​ $ 7,133 18.9 ​ 78 Table of Contents The Corporation has a net operating loss (“NOL”) available to be carried forward against future federal taxable income. Availability of the NOL does not expire; however, the amount that may be offset against taxable income is limited to approximately $ 563,000 per year and further limited annually to no more than 80 % of taxable income without regard to the NOL. At December 31, 2023, the unused amount of the NOL is $ 2.6 million. The Corporation has no unrecognized tax benefits, nor pending examination issues related to tax positions taken in preparation of its income tax returns. With limited exceptions, the Corporation is no longer subject to examination by the Internal Revenue Service for years prior to 2020. ​ 14. RELATED PARTY TRANSACTIONS Loans to executive officers, directors of the Corporation and its subsidiaries and any associates of the foregoing persons are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning New ​ Other Ending (In Thousands) Balance Loans Repayments Changes Balance 11 directors, 11 executive officers 2023 ​ $ 14,504 ​ $ 549 ​ $ ( 823 ) ​ $ ( 255 ) ​ $ 13,975 13 directors, 9 executive officers 2022 ​ $ 13,911 ​ $ 1,949 ​ $ ( 1,886 ) ​ $ 530 ​ $ 14,504 13 directors, 9 executive officers 2021 ​ $ 18,445 ​ $ 1,249 ​ $ ( 6,034 ) ​ $ 251 ​ $ 13,911 ​ In the table above, other changes represent net changes in the balance of existing lines of credit and transfers in and out of the related party category. Deposits from related parties held by the Corporation amounted to $ 9,014,000 at December 31, 2023 and $ 10,882,000 at December 31, 2022. ​ 15. OFF-BALANCE SHEET RISK 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. These instruments involve, to varying degrees, elements of credit, interest rate or liquidity risk in excess of the amount recognized in the consolidated balance sheets. The contract amounts of these instruments express the extent of involvement the Corporation has in particular classes of financial instruments. The Corporation’s exposure to credit loss from nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual amount of these instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Financial instruments whose contract amounts represent credit risk at December 31, 2023 and 2022 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) 2023 2022 Commitments to extend credit ​ $ 395,997 ​ $ 433,725 Standby letters of credit ​ 19,158 ​ 15,822 ​ Commitments to extend credit are legally binding agreements to lend to customers. Commitments generally have fixed expiration dates or other termination clauses and may require payment of fees. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future liquidity requirements. The Corporation evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation, for extensions of credit is based on management’s credit assessment of the counterparty. Standby letters of credit are conditional commitments issued by the Corporation guaranteeing performance by a customer to a third party. Those guarantees are issued primarily to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending 79 Table of Contents loan facilities to customers. Some of the standby letters of credit are collateralized by real estate or other assets, and others are unsecured. The extent to which proceeds from liquidation of collateral would be expected to cover the maximum potential amount of future payments related to standby letters of credit is not estimable. Standby letters of credit as of December 31, 2023 expire as follows: ​ ​ ​ ​ ​ Year of Expiration (In Thousands) 2024 ​ $ 18,694 2025 ​ 411 2026 ​ ​ 25 2027 ​ ​ 0 2028 ​ ​ 28 Total ​ $ 19,158 ​ Information related to the allowance for credit losses on off-balance sheet exposures is provided in Note 7. ​ ​ 16. OPERATING LEASE COMMITMENTS AND CONTINGENCIES Operating Lease Commitments Operating leases in which the Corporation is the lessee are recorded as operating lease Right of Use ("ROU") assets and operating lease liabilities, included in other assets and other liabilities, respectively, on the consolidated balance sheets. The Corporation does not currently have any finance leases. Operating lease ROU assets represent the right to use an underlying asset during the lease term and operating lease liabilities represent the obligation to make lease payments arising from the lease. The Corporation leases certain branch locations, office space and equipment. All leases are classified as operating leases. Operating lease expense, which is comprised of amortization of the ROU assets and the implicit interest accreted on the operating lease liability, is recognized on a straight line basis over the remaining lease term of the operating lease. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term. Certain leases include options to renew, with renewal terms that can extend the lease term from one to eight years that are reasonably certain of being exercised. The discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate which corresponded with the remaining lease term as of January 1, 2019 for leases that existed at adoption of ASU 2017-02 and as of the lease commencement date for leases subsequently entered into after January 1, 2019. At December 31, 2023, discount rates ranged from 0.84 % to 4.16 % with a weighted-average discount rate of 1.96 %. At December 31, 2023, the weighted-average remaining lease term was 4.6 years. At December 31, 2022, the weighted-average discount rate was 1.98 % and the weighted-average remaining lease term was 5.1 years. At December 31, 2023, right-of-use assets of $ 3,570,000 were included in other assets , and the related lease liabilities totaling the same amount were included in accrued interest and other liabilities, in the consolidated balance sheets. At December 31, 2022, right of use assets and the related liabilities totaled $ 4,133,000 . ​ ​ ​ ​ ​ ​ ​ ​ ​ 80 Table of Contents In 2023, 2022 and 2021, operating lease expenses are included in the following line item of the consolidated statements of income: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) 2023 ​ 2022 2021 Net occupancy and equipment expense ​ $ 644 ​ $ 599 ​ $ 492 Total ​ $ 644 ​ $ 599 ​ $ 492 ​ A maturity analysis of the Corporation’s lease liabilities at December 31, 2023 is as follows: ​ (In Thousands) Lease Payments Due ​ ​ ​ ​ ​ 2024 $ 623 2025 ​ 593 2026 ​ 533 2027 ​ 509 2028 ​ 419 Thereafter ​ 1,147 Total lease payments ​ 3,824 Discount on cash flows ​ ( 254 ) Total lease liabilities ​ $ 3,570 ​ Litigation 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. ​ ​ 17. REGULATORY MATTERS In August 2018, the Federal Reserve Board issued an interim final rule that expanded applicability of the Board’s small bank holding company policy statement. The interim final rule raised the policy statement’s asset threshold from $1 billion to $3 billion in total consolidated assets for a bank holding company or savings and loan holding company that: (1) is not engaged in significant nonbanking activities; (2) does not conduct significant off-balance sheet activities; and (3) does not have a material amount of debt or equity securities, other than trust-preferred securities, outstanding. The interim final rule provides that, if warranted for supervisory purposes, the Federal Reserve may exclude a company from the threshold increase. Management believes the Corporation meets the conditions of the Federal Reserve’s small bank holding company policy statement and is therefore excluded from consolidated capital requirements at December 31, 2023; however, C&N Bank remains subject to regulatory capital requirements administered by the federal banking agencies. Details concerning capital ratios at December 31, 2023 and 2022 are presented below. Management believes, as of December 31, 2023, that C&N Bank meets all capital adequacy requirements to which it is subject and maintains a capital conservation buffer (described in more detail below) that allows the Bank to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. Further, as reflected in the table below, the Corporation’s and C&N Bank’s capital ratios at December 31, 2023 and 2022 exceed the Corporation’s Board policy threshold levels. ​ 81 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Minimum To Be Well ​ ​ ​ ​ ​ ​ ​ Minimum ​ Minimum To Maintain ​ Capitalized Under ​ Minimum To Meet ​ ​ ​ ​ ​ Capital ​ Capital Conservation ​ Prompt Corrective ​ the Corporation's ​ ​ Actual ​ Requirement Buffer at Reporting Date ​ Action Provisions ​ Policy Thresholds ​ (Dollars In Thousands) ​ Amount Ratio Amount Ratio Amount Ratio Amount Ratio Amount Ratio ​ December 31, 2023: ​ ​ ​ Total capital to risk-weighted assets: ​ ​ ​ Consolidated ​ $ 290,425 15.67 % N/A N/A N/A N/A N/A N/A ​ $ 203,809 ³11 % C&N Bank ​ 275,307 14.89 % 147,925 ³8 % 194,151 ³10.5 % 184,906 ³10 % 203,396 ³11 % Tier 1 capital to risk-weighted assets: ​ ​ ​ ​ ​ ​ ​ ​ Consolidated ​ 245,810 13.27 % N/A N/A N/A N/A N/A N/A ​ 166,753 ³9 % C&N Bank ​ 255,409 13.81 % 110,943 ³6 % 157,170 ³8.5 % 147,925 ³8 % 166,415 ³9 % Common equity tier 1 capital to risk-weighted assets: ​ ​ ​ Consolidated ​ 245,810 13.27 % N/A N/A N/A N/A N/A N/A ​ 138,961 ³7.5 % C&N Bank ​ 255,409 13.81 % 83,208 ³4.5 % 129,434 ³7.0 % 120,189 ³6.5 % 138,679 ³7.5 % Tier 1 capital to average assets: ​ ​ ​ ​ ​ ​ ​ Consolidated ​ 245,810 9.87 % N/A N/A N/A N/A N/A N/A ​ 199,151 ³8 % C&N Bank ​ 255,409 10.32 % 99,010 ³4 % N/A N/A 123,762 ³5 % 198,020 ³8 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022: ​ ​ ​ Total capital to risk-weighted assets: ​ ​ ​ Consolidated ​ $ 285,397 15.72 % N/A N/A N/A N/A N/A N/A ​ $ 190,590 ³10.5 % C&N Bank ​ 265,784 14.68 % 144,873 ³8 % 190,145 ³10.5 % 181,091 ³10 % 190,145 ³10.5 % Tier 1 capital to risk-weighted assets: ​ ​ ​ ​ ​ ​ ​ ​ Consolidated ​ 243,750 13.43 % N/A N/A N/A N/A N/A N/A ​ 154,287 ³8.5 % C&N Bank ​ 248,744 13.74 % 108,654 ³6 % 153,927 ³8.5 % 144,873 ³8 % 153,927 ³8.5 % Common equity tier 1 capital to risk-weighted assets: ​ ​ ​ Consolidated ​ 243,750 13.43 % N/A N/A N/A N/A N/A N/A ​ 127,060 ³7 % C&N Bank ​ 248,744 13.74 % 81,491 ³4.5 % 126,764 ³7.0 % 117,709 ³6.5 % 126,764 ³7 % Tier 1 capital to average assets: ​ ​ ​ ​ ​ ​ ​ Consolidated ​ 243,750 10.11 % N/A N/A N/A N/A N/A N/A ​ 192,941 ³8 % C&N Bank ​ 248,744 10.38 % 95,826 ³4 % N/A N/A 119,783 ³5 % 191,652 ³8 % ​ Federal regulatory authorities impose a capital rule providing that, to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization subject to the rule must hold a capital conservation buffer composed of common equity tier 1 capital above its minimum risk-based capital requirements. The buffer is measured relative to risk-weighted assets. At December 31, 2023, the minimum risk-based capital ratios, and the capital ratios including the capital conservation buffer, are as follows: ​ ​ ​ ​ ​ Minimum common equity tier 1 capital ratio 4.5 % Minimum common equity tier 1 capital ratio plus capital conservation buffer 7.0 % Minimum tier 1 capital ratio 6.0 % Minimum tier 1 capital ratio plus capital conservation buffer 8.5 % Minimum total capital ratio 8.0 % Minimum total capital ratio plus capital conservation buffer 10.5 % ​ A banking organization with a buffer greater than 2.5 % over the minimum risk-based capital ratios would not be subject to additional limits on dividend payments or discretionary bonus payments; however, a banking organization with a buffer less than 2.5 % would be subject to increasingly stringent limitations as the buffer approaches zero. Also, a banking organization is prohibited from making dividend payments or discretionary bonus payments if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5 % as of the beginning of that quarter. Eligible net income is defined as net income for the four calendar 82 Table of Contents quarters preceding the current calendar quarter, net of any distributions and associated tax effects not already reflected in net income. A summary of payout restrictions based on the capital conservation buffer is as follows: ​ ​ ​ ​ ​ Capital Conservation Buffer Maximum Payout (as a % of risk-weighted assets) ​ (as a % of eligible retained income) Greater than 2.5 % No payout limitation applies ≤ 2.5 % and > 1.875 % ​ 60 % ≤ 1.875 % and > 1.25 % ​ 40 % ≤ 1.25 % and > 0.625 % ​ 20 % ≤ 0.625 % ​ 0 % ​ At December 31, 2023, C&N Bank’s Capital Conservation Buffer, determined based on the minimum total capital ratio, was 6.89 %. Banking regulators limit the amount of dividends that may be paid by C&N Bank to the Corporation. Retained earnings against which dividends may be paid without prior approval of the banking regulators amounted to approximately $ 101,550,000 at December 31, 2023, subject to the minimum capital ratio requirements noted above. Restrictions imposed by federal law prohibit the Corporation from borrowing from C&N Bank unless the loans are secured in specific amounts. Such secured loans to the Corporation are generally limited to 10 % of C&N Bank’s tangible stockholder’s equity (excluding accumulated other comprehensive loss) or $ 25,277,000 at December 31, 2023. ​ 18. PARENT COMPANY ONLY The following is condensed financial information for Citizens & Northern Corporation: ​ ​ ​ ​ ​ ​ ​ ​ CONDENSED BALANCE SHEET Dec. 31, Dec. 31, (In Thousands) ​ 2023 ​ 2022 ASSETS ​ ​ Cash ​ $ 14,822 ​ $ 17,867 Investment in subsidiaries: ​ ​ Citizens & Northern Bank ​ 272,286 ​ 254,809 Citizens & Northern Investment Corporation ​ 11,087 ​ 12,453 Bucktail Life Insurance Company ​ 3,733 ​ 3,637 Other assets ​ 200 ​ 33 TOTAL ASSETS ​ $ 302,128 ​ $ 288,799 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND STOCKHOLDERS' EQUITY ​ ​ Senior notes, net ​ $ 14,831 ​ $ 14,765 Subordinated debt, net ​ 24,717 ​ 24,607 Other liabilities ​ 199 ​ 102 Stockholders' equity ​ 262,381 ​ 249,325 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ​ $ 302,128 ​ $ 288,799 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CONDENSED INCOME STATEMENT ​ ​ ​ ​ ​ ​ (In Thousands) 2023 ​ 2022 2021 Dividends from Citizens & Northern Bank ​ $ 19,405 ​ $ 19,483 ​ $ 20,200 Dividends from Citizens & Northern Investment Corporation ​ ​ 1,800 ​ ​ 0 ​ ​ 0 Expenses ​ ( 2,003 ) ​ ( 1,695 ) ​ ( 1,691 ) Income before equity in undistributed income of subsidiaries ​ 19,202 ​ 17,788 ​ 18,509 Equity in undistributed income of subsidiaries ​ 4,946 ​ 8,830 ​ 12,045 NET INCOME ​ $ 24,148 ​ $ 26,618 ​ $ 30,554 ​ ​ 83 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CONDENSED STATEMENT OF CASH FLOWS ​ ​ ​ ​ ​ (In Thousands) 2023 ​ 2022 2021 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 24,148 ​ $ 26,618 ​ $ 30,554 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ Accretion of purchase accounting adjustment ​ ​ 0 ​ ​ ( 14 ) ​ ​ ( 43 ) Amortization of debt issuance costs ​ 176 ​ 170 ​ 101 Equity in undistributed income of subsidiaries ​ ( 4,946 ) ​ ( 8,830 ) ​ ( 12,045 ) Increase in other assets ​ ( 167 ) ​ 0 ​ ( 29 ) Increase (decrease) in other liabilities ​ 97 ​ ( 41 ) ​ ( 16 ) Net Cash Provided by Operating Activities ​ 19,308 ​ 17,903 ​ 18,522 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ Proceeds from issuance of senior notes and subordinated debt ​ 0 ​ 0 ​ 39,100 Repayment of subordinated debt ​ 0 ​ ( 8,500 ) ​ ( 8,000 ) Proceeds from sale of treasury stock ​ 0 ​ 160 ​ 212 Purchase of treasury stock ​ ( 6,784 ) ​ ( 9,349 ) ​ ( 7,586 ) Dividends paid ​ ( 15,569 ) ​ ( 15,865 ) ​ ( 15,976 ) Net Cash (Used in) Provided by Financing Activities ​ ( 22,353 ) ​ ( 33,554 ) ​ 7,750 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ​ ( 3,045 ) ​ ( 15,651 ) ​ 26,272 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR ​ 17,867 ​ 33,518 ​ 7,246 CASH AND CASH EQUIVALENTS, END OF YEAR ​ $ 14,822 ​ $ 17,867 ​ $ 33,518 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION, ​ ​ ​ Interest paid ​ $ 1,234 ​ $ 1,433 ​ $ 1,567 ​ ​ ​ ​ ​ ​ ​ ​ 84 Table of Contents 19. 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 $ 150,028,000 at December 31, 2023 and $ 155,214,000 at December 31, 2022. There were no interest rate swaps originated in 2023 and one interest rate swap originated with a notional amount of $ 24,000,000 in 2022. There were no gross amounts of interest rate swap-related assets and liabilities not offset in the consolidated balance sheets at December 31, 2023. The net impact of interest rate swaps on interest income on loans was an increase of $ 1,796,000 in 2023, compared to reductions of $ 342,000 in 2022 and $ 1,347,000 in 2021. In 2022, there was fee income on the interest swap originated of $ 290,000 included in other noninterest income in the consolidated statements of income. 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 an increase in other noninterest income of $ 18,000 in 2023 and a decrease in other noninterest income of $ 14,000 in 2022. The Corporation did not enter into any RPAs prior to 2022. 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 December 31, 2023 and 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) At December 31, 2023 ​ At December 31, 2022 ​ 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 $ 75,014 ​ $ 2,783 ​ $ 75,014 ​ $ 2,783 ​ $ 77,607 ​ $ 3,638 ​ $ 77,607 ​ $ 3,638 RPA Out ​ 7,082 ​ ​ 11 ​ ​ 0 ​ ​ 0 ​ ​ 7,200 ​ ​ 0 ​ ​ 0 ​ ​ 0 RPA In ​ 0 ​ ​ 0 ​ ​ 10,000 ​ ​ 13 ​ ​ 0 ​ ​ 0 ​ ​ 10,000 ​ ​ 19 ​ (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 $ 1,360,000 in interest-bearing cash pledged as collateral against the Corporation’s liability related to the interest rate swaps at December 31, 2023. ​ 85 Table of Contents 20. FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS The Corporation measures certain assets at fair value. Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. FASB ASC 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. 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 through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets, quoted market prices in markets that are not active for identical or similar assets 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 becoming active or inactive, changes in the availability of quoted prices, or changes in the availability of other market data. At December 31, 2023 and 2022, assets measured at fair value and the valuation methods used are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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: ​ ​ ​ ​ Loans individually evaluated for credit loss, net ​ $ 0 ​ $ 0 ​ $ 7,786 ​ $ 7,786 Foreclosed assets held for sale ​ 0 ​ 0 ​ 478 ​ 478 Total nonrecurring fair value measurements, assets ​ $ 0 ​ $ 0 ​ $ 8,264 ​ $ 8,264 86 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ 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 ​ $ 31,836 ​ $ 0 ​ $ 0 ​ $ 31,836 Obligations of U.S. Government agencies ​ ​ 0 ​ ​ 23,430 ​ ​ 0 ​ ​ 23,430 Bank holding company debt securities ​ ​ 0 ​ ​ 25,386 ​ ​ 0 ​ ​ 25,386 Obligations of states and political subdivisions: ​ ​ ​ ​ ​ ​ Tax-exempt ​ 0 ​ 132,623 ​ 0 ​ 132,623 Taxable ​ 0 ​ 56,812 ​ 0 ​ 56,812 Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies: ​ ​ ​ ​ Residential pass-through securities ​ 0 ​ 99,941 ​ 0 ​ 99,941 Residential collateralized mortgage obligations ​ 0 ​ 40,296 ​ 0 ​ 40,296 Commercial mortgage-backed securities ​ 0 ​ 79,686 ​ 0 ​ 79,686 Private label commercial mortgage-backed securities ​ 0 ​ 8,023 ​ 0 ​ 8,023 Total available-for-sale debt securities ​ 31,836 ​ 466,197 ​ 0 ​ 498,033 Marketable equity security ​ 859 ​ 0 ​ 0 ​ 859 Servicing rights ​ 0 ​ 0 ​ 2,653 ​ 2,653 Interest rate swap agreements, assets ​ ​ 0 ​ ​ 3,638 ​ ​ 0 ​ ​ 3,638 Total recurring fair value measurements, assets ​ $ 32,695 ​ $ 469,835 ​ $ 2,653 ​ $ 505,183 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Recurring fair value measurements, liabilities, ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ RPA In ​ $ 0 ​ $ 19 ​ $ 0 ​ $ 19 Interest rate swap agreements, liabilities ​ ​ 0 ​ ​ 3,638 ​ ​ 0 ​ ​ 3,638 Total recurring fair value measurements, liabilities ​ $ 0 ​ $ 3,657 ​ $ 0 ​ $ 3,657 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonrecurring fair value measurements, assets: ​ ​ ​ ​ Impaired loans, net ​ $ 0 ​ $ 0 ​ $ 3,007 ​ $ 3,007 Foreclosed assets held for sale ​ 0 ​ 0 ​ 275 ​ 275 Total nonrecurring fair value measurements, assets ​ $ 0 ​ $ 0 ​ $ 3,282 ​ $ 3,282 ​ ​ 87 Table of Contents 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. The following table shows quantitative information regarding significant techniques and inputs used at December 31, 2023 and 2022 for servicing rights assets measured using unobservable inputs (Level 3 methodologies) on a recurring basis: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 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 ​ ​ ​ ​ ​ Servicing fees ​ ​ 0.25 % of loan balances ​ ​ ​ ​ ​ ​ ​ ​ ​ 4.00 % of payments are late ​ ​ ​ ​ ​ ​ ​ ​ ​ 5.00 % late fees assessed ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 1.94 ​ Miscellaneous fees per account per month ​ ​ ​ ​ ​ Servicing costs ​ $ 6.00 ​ Monthly servicing cost per account ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 24.00 ​ Additional monthly servicing cost per loan on loans more than 30 days delinquent ​ ​ ​ ​ ​ ​ ​ ​ ​ 1.50 % of loans more than 30 days delinquent ​ ​ ​ ​ ​ ​ ​ ​ 3.00 % annual increase in servicing costs ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value at ​ ​ ​ 12/31/2022 ​ Valuation ​ Unobservable ​ ​ ​ ​ Method or Value As of Asset ​ (In Thousands) ​ Technique ​ Input(s) ​ ​ ​ ​ 12/31/2022 Servicing rights ​ $ 2,653 Discounted cash flow Discount rate ​ 13.00 % Rate used through modeling period ​ ​ ​ ​ ​ Loan prepayment speeds ​ ​ 133.00 % Weighted-average PSA ​ ​ ​ ​ ​ Servicing fees ​ ​ 0.25 % of loan balances ​ ​ ​ ​ ​ ​ ​ ​ ​ 4.00 % of payments are late ​ ​ ​ ​ ​ ​ ​ ​ ​ 5.00 % late fees assessed ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 1.94 ​ Miscellaneous fees per account per month ​ ​ ​ ​ ​ Servicing costs ​ $ 6.00 ​ Monthly servicing cost per account ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 24.00 ​ Additional monthly servicing cost per loan on loans more than 30 days delinquent ​ ​ ​ ​ ​ ​ ​ ​ ​ 1.50 % of loans more than 30 days delinquent ​ ​ ​ ​ ​ ​ ​ ​ 3.00 % annual increase in servicing costs ​ ​ 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. Following is a reconciliation of activity for Level 3 assets (servicing rights) measured at fair value on a recurring basis: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ Years Ended December 31, ​ 2023 ​ 2022 2021 Servicing rights balance, beginning of period ​ $ 2,653 ​ $ 2,329 ​ $ 1,689 Originations of servicing rights ​ 206 ​ 198 ​ 708 Unrealized (loss) gain included in earnings ​ ( 200 ) ​ 126 ​ ( 68 ) Servicing rights balance, end of period ​ $ 2,659 ​ $ 2,653 ​ $ 2,329 ​ 88 Table of Contents 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. At December 31, 2023 and 2022, quantitative information regarding significant techniques and inputs used for nonrecurring fair value measurements using unobservable inputs (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 ​ 12/31/2023 ​ 12/31/2023 ​ 12/31/2023 ​ Technique ​ Inputs ​ 12/31/2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loans individually evaluated for credit loss: ​ ​ ​ ​ ​ Commercial real estate - nonowner 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 ​ 0 %- 93 % ( 57 ) % 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 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars In Thousands) ​ ​ ​ ​ Range (Weighted ​ ​ ​ ​ Valuation ​ ​ ​ ​ ​ Average) ​ ​ Balance at ​ Allowance at ​ Fair Value at ​ Valuation ​ Unobservable ​ Discount at Asset ​ 12/31/2022 ​ 12/31/2022 ​ 12/31/2022 ​ Technique ​ Inputs ​ 12/31/2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Impaired loans: ​ ​ ​ ​ ​ Commercial: ​ ​ ​ ​ ​ ​ ​ ​ Commercial loans secured by real estate ​ $ 3,400 ​ $ 427 ​ $ 2,973 Sales comparison Discount to appraised value ​ 25 % ( 25 ) % Commercial and industrial ​ ​ 60 ​ ​ 26 ​ ​ 34 ​ Liquidation of assets ​ Discount to appraised value ​ 33 % ( 33 ) % Total impaired loans ​ $ 3,460 ​ $ 453 ​ $ 3,007 ​ ​ Foreclosed assets held for sale - real estate: ​ ​ ​ ​ ​ ​ Commercial real estate ​ $ 275 ​ $ 0 ​ $ 275 Sales comparison Discount to appraised value ​ 50 % ( 50 ) % Total foreclosed assets held for sale ​ $ 275 ​ $ 0 ​ $ 275 ​ ​ ​ ​ 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. 89 Table of Contents 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 ​ December 31, 2023 ​ December 31, 2022 ​ ​ Hierarchy ​ Carrying ​ Fair ​ Carrying ​ Fair ​ Level Amount Value Amount Value Financial assets: ​ ​ ​ ​ Cash and cash equivalents Level 1 ​ $ 52,778 ​ $ 52,778 ​ $ 47,698 ​ $ 47,698 Certificates of deposit Level 2 ​ 4,100 ​ 3,859 ​ 7,350 ​ 6,956 Restricted equity securities (included in other assets) Level 2 ​ 21,716 ​ 21,716 ​ 14,418 ​ 14,418 Loans, net Level 3 ​ 1,828,931 ​ 1,750,336 ​ 1,723,425 ​ 1,674,002 Accrued interest receivable Level 2 ​ 9,140 ​ 9,140 ​ 8,653 ​ 8,653 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial liabilities: ​ ​ ​ ​ Deposits with no stated maturity Level 2 ​ 1,590,357 ​ 1,590,357 ​ 1,702,404 ​ 1,702,404 Time deposits Level 2 ​ 424,449 ​ 423,643 ​ 295,189 ​ 293,814 Short-term borrowings Level 2 ​ 33,874 ​ 33,874 ​ 80,062 ​ 80,062 Long-term borrowings Level 2 ​ 138,337 ​ 137,775 ​ 62,347 ​ 60,944 Senior debt ​ Level 2 ​ ​ 14,831 ​ ​ 12,706 ​ ​ 14,765 ​ ​ 9,712 Subordinated debt ​ Level 2 ​ ​ 24,717 ​ ​ 22,750 ​ ​ 24,607 ​ ​ 16,186 Accrued interest payable Level 2 ​ 1,525 ​ 1,525 ​ 461 ​ 461 ​ ​ ​ 90 Table of Contents Report of Independent R egistered Public Accounting Firm Stockholders and Board of Directors of Citizens & Northern Corporation Opinions on the Financial Statements and Internal Control over Financial Reporting We have audited the accompanying consolidated balance sheets of Citizens & Northern Corporation and subsidiaries (the "Corporation") as of December 31, 2023 and 2022, and the related consolidated statements of income, comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2023, and the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Corporation’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). ​ In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Corporation as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by COSO. ​ Change in Accounting Principle ​ As described in Notes 1 and 2 to the consolidated financial statements, the Corporation has changed its method of accounting for the recognition and measurement of the allowance for credit losses effective January 1, 2023 due to the adoption of ASC 326, Financial Instruments – Credit Losses. ​ Basis for Opinions ​ The Corporation’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Corporation's consolidated financial statements and an opinion on the Corporation’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. ​ We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud and whether effective internal control over financial reporting was maintained in all material respects. ​ Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. ​ Definition and Limitations of Internal Control Over Financial Reporting ​ A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the 91 Table of Contents maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements. ​ Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. ​ Critical Audit Matter ​ The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates. ​ Allowance for Credit Losses – Qualitative Factors ​ Critical Audit Matter Description ​ As disclosed in Note 1 and Note 7 to the Corporation’s consolidated financial statements, the allowance for credit losses as calculated under the current expected credit loss (CECL) methodology consists of two primary components: (1) an allowance established on loans with similar risk characteristics collectively evaluated for credit losses (collective basis), and (2) an allowance established on loans which do not share similar risk characteristics with any loan segment and which are individually evaluated for credit losses (individually evaluated). ​ The allowance for loans evaluated on a collective basis is comprised of the following components: (1) an allowance determined by the weighted-average remaining maturity method (WARM), (2) qualitative factors and (3) an economic forecast calculated using third party economic data. The allowance determined by the WARM method represents a calculated average annual net loss rate applied over the remaining life of the loans. The qualitative factors are applied to each loan pool evaluated on a collective basis and represent management’s adjustments for changes not reflected in historical loss rates or other quantitative components. Qualitative factors can include adjustments related to 1) the nature and volume of portfolio changes, including loan growth, 2) concentrations of credit based on loan type or industry, 3) the volume and severity of past due, nonaccrual or adversely classified loans, 4) trends in real estate or collateral values, 5) lending policies and procedures, 6) credit review function, 7) lending, credit and other relevant management experience and risk tolerance and 8) external factors and economic conditions not already captured. The qualitative factor component requires significant estimates and subjective assumptions which require a high degree of judgment relating to how those assumptions impact the estimated credit losses for the remaining average life of the loan portfolio. Changes in these assumptions could have a material effect on the Corporation’s financial results. ​ We identified auditing the qualitative factor component of the allowance for credit losses on loans evaluated on a collective basis as a critical audit matter as auditing the underlying qualitative factors requires significant auditor judgment as amounts determined by management involve a high degree of subjectivity. ​ ​ How We Addressed the Matter in Our Audit ​ The primary procedures we performed to address this critical audit matter included, among others: ​ ● Obtaining an understanding, evaluating the design, and testing the operating effectiveness of the Corporation’s internal controls over the allowance for credit losses process, including controls addressing: 92 Table of Contents ​ ● Management’s review of qualitative factors ● Review of the relevance and reliability of data used to determine the estimates ● Information technology general controls and applications ​ ● Substantively testing management’s process including evaluating their judgments and assumptions for developing the allowance for credit losses on loans on a collective basis. This included: ​ ● Evaluating the appropriateness of the Corporation’s methodology and accounting policies involved in the application of its CECL methodology ● Evaluating the reasonableness of management’s judgments related to qualitative factor adjustments to determine if they are calculated in accordance with management’s policies and consistently applied ● Testing the completeness, accuracy, relevance and reliability of the underlying data used to estimate the qualitative factors ● Testing the mathematical accuracy of the calculation, including the qualitative factor component ​ ​ /s/ Baker Tilly US, LLP ​ We have served as the Corporation’s auditor since 1979. Pittsburgh, Pennsylvania March 11, 202 4 ​ ​ ​ 93 Table of Contents ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None ​