What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-07 compared with 2024-05-07 · 230 added, 163 removed, 810 unchanged (33% of the section changed)

33 unchanged sentences

authorized 30,000,000 shares;

issued 16,030,172 and outstanding 15,378,065 at March 31, 2024;

issued 16,030,172 and outstanding 15,375,982 at June 30, 2024;

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

2 unchanged sentences

Treasury stock, at cost;

652,107 shares at March 31, 2024 and 735,037

654,190 shares at June 30, 2024 and 735,037

shares at December 31, 2023

7 unchanged sentences

Three Months Ended

Six Months Ended

(In Thousands, Except Per Share Data)

12 unchanged sentences

Net interest income

Provision (credit) for credit losses

Net interest income after provision (credit) for credit losses

Provision for credit losses

Net interest income after provision for credit losses

NONINTEREST INCOME

7 unchanged sentences

Other noninterest income

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

Realized (losses) gains on available-for-sale debt securities, net

Total noninterest income

17 unchanged sentences

Three Months Ended

Six Months Ended

(In Thousands)

1 unchanged sentence

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

Reclassification adjustment for gains realized in income

Reclassification adjustment for losses (gains) realized in income

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

11 unchanged sentences

(In Thousands) (Unaudited)

Three Months Ended

Six Months Ended

(In Thousands)

1 unchanged sentence

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

Provision (credit) for credit losses

Provision for credit losses

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

5 unchanged sentences

Deferred income taxes

(Increase) decrease in fair value of servicing rights

Gains on sales of loans, net

Decrease in fair value of servicing rights

Net gains from sale of loans

Origination of loans held for sale

1 unchanged sentence

Increase in accrued interest receivable and other assets

(Decrease) increase in accrued interest payable and other liabilities

Increase in accrued interest payable and other liabilities

Net Cash Provided by Operating Activities

10 unchanged sentences

Proceeds from sale of foreclosed assets

Net Cash (Used in) Provided by Investing Activities

Net Cash Used in Investing Activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Net decrease in deposits

Net increase in short-term borrowings

Net increase in deposits

Net decrease in short-term borrowings

Proceeds from long-term borrowings - FHLB advances

2 unchanged sentences

Common dividends paid

Net Cash Provided by (Used in) Financing Activities

DECREASE IN CASH AND CASH EQUIVALENTS

Net Cash Provided by Financing Activities

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

4 unchanged sentences

Increase in other assets from surrender of bank-owned life insurance

Leased assets obtained in exchange for new operating lease liabilities

Interest paid

5 unchanged sentences

Comprehensive

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Balance, March 31, 2024

Other comprehensive loss, net

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

Shares issued for dividend reinvestment plan

Forfeiture of restricted stock

Stock-based compensation expense

Treasury stock purchases

Balance, June 30, 2024

Three Months Ended June 30, 2023

Balance, March 31, 2023

Other comprehensive loss, net

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

Shares issued for dividend reinvestment plan

Forfeiture of restricted stock

Stock-based compensation expense

Treasury stock purchases

Balance, June 30, 2023

Comprehensive

Six Months Ended June 30, 2024

Balance, December 31, 2023

6 unchanged sentences

Purchase of restricted stock for tax withholding

Balance, March 31, 2024

Three Months Ended March 31, 2023

Treasury stock purchases

Balance, June 30, 2024

Six Months Ended June 30, 2023

Balance, December 31, 2022

8 unchanged sentences

Treasury stock purchases

Balance, March 31, 2023

Balance, June 30, 2023

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

10 unchanged sentences

GAAP”) for a complete set of financial statements.

Operating results reported for the three-month period ended March 31, 2024 might not be indicative of the results for the year ending December 31, 2024.

Operating results reported for the six-month period ended June 30, 2024 might not be indicative of the results for the year ending December 31, 2024.

The Corporation evaluates subsequent events through the date of filing with the Securities and Exchange Commission.

33 unchanged sentences

Three Months Ended

Six Months Ended

Dividends and undistributed earnings allocated to participating securities

10 unchanged sentences

Anti-dilutive stock options are excluded from earnings per share calculations.

There were no anti-dilutive instruments outstanding in the three-month periods ended March 31, 2024 and 2023.

There were no anti-dilutive instruments outstanding in the three-month and six-month periods ended June 30, 2024.

The weighted-average number of anti-dilutive instruments outstanding was 8,988 in the three-month period ended June 30, 2023 and 0 in the six-month period ended June 30, 2023.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

3 unchanged sentences

(In Thousands)

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Available-for-sale debt securities:

3 unchanged sentences

Unfunded pension and postretirement obligations:

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

Other comprehensive loss on unfunded retirement obligations

Total other comprehensive loss

(In Thousands)

Three Months Ended June 30, 2023

Available-for-sale debt securities:

Unrealized holding losses on available-for-sale debt securities

Reclassification adjustment for losses realized in income

Other comprehensive loss from available-for-sale debt securities

Unfunded pension and postretirement obligations:

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

Other comprehensive loss on unfunded retirement obligations

Total other comprehensive loss

(In Thousands)

Six Months Ended June 30, 2024

Available-for-sale debt securities:

Unrealized holding losses on available-for-sale debt securities

Reclassification adjustment for (gains) realized in income

Other comprehensive loss from available-for-sale debt securities

Unfunded pension and postretirement obligations:

Changes from plan amendments and actuarial gains and losses

3 unchanged sentences

(In Thousands)

Three Months Ended March 31, 2023

Six Months Ended June 30, 2023

Available-for-sale debt securities:

5 unchanged sentences

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

Other comprehensive loss on unfunded retirement obligations

Other comprehensive income on unfunded retirement obligations

Total other comprehensive income

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

1 unchanged sentence

Consolidated Statements of Income

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

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

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

Realized (losses) gains on available-for-sale debt securities, net

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

2 unchanged sentences

Income tax provision

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

3 unchanged sentences

(Loss) Income

Three Months Ended March 31, 2024

Three Months Ended June 30, 2024

Balance, beginning of period

Other comprehensive loss during three months ended March 31, 2024

Other comprehensive loss during three months ended June 30, 2024

Balance, end of period

Three Months Ended March 31, 2023

Three Months Ended June 30, 2023

Balance, beginning of period

Other comprehensive income during three months ended March 31, 2023

Other comprehensive loss during three months ended June 30, 2023

Balance, end of period

(In Thousands)

Comprehensive

on Securities

(Loss) Income

Six Months Ended June 30, 2024

Balance, beginning of period

Other comprehensive loss during six months ended June 30, 2024

Balance, end of period

Six Months Ended June 30, 2023

Balance, beginning of period

Other comprehensive income during six months ended June 30, 2023

Balance, end of period

CASH AND DUE FROM BANKS

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

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

(In Thousands)

2 unchanged sentences

Total cash and due from banks

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Certificates of deposit are issues by U.S.

2 unchanged sentences

The Corporation maintains cash and cash equivalents with certain financial institutions in excess of the FDIC insurance limit.

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

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

(In Thousands)

March 31, 2024

June 30, 2024

Obligations of the U.S.

10 unchanged sentences

Total available-for-sale debt securities

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

(In Thousands)

12 unchanged sentences

Total available-for-sale debt securities

The following table presents gross unrealized losses and fair value of available-for-sale debt securities with unrealized loss positions aggregated by length of time that individual securities have been in a continuous unrealized loss position at March 31, 2024 and December 31, 2023:

March 31, 2024

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

June 30, 2024

Less Than 12 Months

12 unchanged sentences

Private label commercial mortgage-backed securities

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

December 31, 2023

16 unchanged sentences

Three Months Ended

Six Months Ended

Gross realized gains from sales

Gross realized losses from sales

Net realized gains

The amortized cost and fair value of available-for-sale debt securities by contractual maturity are shown in the following table as of March 31, 2024.

Net realized (losses) gains

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The amortized cost and fair value of available-for-sale debt securities by contractual maturity are shown in the following table as of June 30, 2024.

Actual maturities may differ from contractual maturities because counterparties may have the right to call or prepay obligations with or without call or prepayment penalties.

(In Thousands)

March 31, 2024

June 30, 2024

Due in one year or less

11 unchanged sentences

In the table above, mortgage-backed securities and collateralized mortgage obligations are shown in one period.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Investment securities carried at $ 183,661,000 at March 31, 2024 and $ 232,437,000 at December 31, 2023 were pledged as collateral for public deposits, trusts and certain other deposits as provided by law.

See Note 8 for information concerning securities pledged to secure borrowing arrangements and Note 11 for information related to securities pledged against interest rate swap obligations.

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

Investment securities carried at $ 178,513,000 at June 30, 2024 and $ 232,437,000 at December 31, 2023 were pledged as collateral for public deposits, trusts and certain other deposits as provided by law.

See Note 8 for information concerning securities pledged to secure borrowing arrangements.

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

Debt Securities

As reflected in the table above, gross unrealized holding losses on available-for-sale debt securities totaled $ 52,272,000 at March 31, 2024 and $ 49,564,000 at December 31, 2023.

At March 31, 2024, the Corporation does not have the intent to sell, nor is it more likely than not it will be required to sell, these securities before it is able to recover the amortized cost basis.

As reflected in the table above, gross unrealized holding losses on available-for-sale debt securities totaled $ 53,046,000 at June 30, 2024 and $ 49,564,000 at December 31, 2023.

At June 30, 2024, the Corporation does not have the intent to sell, nor is it more likely than not it will be required to sell, these securities before it is able to recover the amortized cost basis.

The unrealized holding losses were consistent with significant increases in market interest rates that have occurred subsequent to the purchase of most of the securities.

At March 31, 2024 and December 31, 2023, management performed an assessment for possible credit losses of the Corporation’s debt securities on an issue-by-issue basis, relying on information obtained from various sources, including publicly available financial data, ratings by external agencies, brokers and other sources.

At March 31, 2024 and December 31, 2023, all of the Corporation’s holdings of bank holding company debt securities, obligations of states and political subdivisions and private label commercial mortgage-backed securities were investment grade and there have been no payment defaults.

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

At June 30, 2024 and December 31, 2023, management performed an assessment for possible credit losses of the Corporation’s debt securities on an issue-by-issue basis, relying on information obtained from various sources, including publicly available financial data, ratings by external agencies, brokers and other sources.

At June 30, 2024 and December 31, 2023, all of the Corporation’s holdings of bank holding company debt securities, obligations of states and political subdivisions and private label commercial mortgage-backed securities were investment grade and there have been no payment defaults.

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

Equity Securities

1 unchanged sentence

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 $ 16,266,000 at March 31, 2024 and $ 15,214,000 at December 31, 2023.

The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at March 31, 2024 and December 31, 2023.

There is no active market for

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

FHLB-Pittsburgh stock, and it must ordinarily be redeemed by FHLB-Pittsburgh in order to be liquidated.

C&N Bank’s investment in FHLB-Pittsburgh stock, included in other assets in the consolidated balance sheets, was $ 16,464,000 at June 30, 2024 and $ 15,214,000 at December 31, 2023.

The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at June 30, 2024 and December 31, 2023.

In making this determination, management concluded that recovery of total outstanding par value, which equals the carrying value, is expected.

3 unchanged sentences

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 $ 6,266,000 at March 31, 2024 and $ 6,252,000 at December 31, 2023.

The Corporation has a marketable equity security included in other assets in the consolidated balance sheets with a carrying value of $ 862,000 at March 31, 2024 and $ 871,000 December 31, 2023, consisting exclusively of one mutual fund.

There was an unrealized loss on the mutual fund of $ 138,000 at March 31, 2024 and $ 129,000 at December 31, 2023.

Changes in the unrealized gains or losses on this security, which are included in other noninterest income in the consolidated statements of income, were a loss of $ 9,000 in the first quarter 2024 compared to a gain of $ 14,000 in the first quarter 2023.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

C&N Bank’s investment in Federal Reserve Bank stock, included in other assets in the consolidated balance sheets, was $ 6,276,000 at June 30, 2024 and $ 6,252,000 at December 31, 2023.

The Corporation has a marketable equity security included in other assets in the consolidated balance sheets with a carrying value of $ 858,000 at June 30, 2024 and $ 871,000 December 31, 2023, consisting exclusively of one mutual fund.

There was an unrealized loss on the mutual fund of $ 142,000 at June 30, 2024 and $ 129,000 at December 31, 2023.

Changes in the unrealized gains or losses on this security, which are included in other noninterest income in the consolidated statements of income, were a loss of $ 9,000 in the second quarter 2024, a loss of $ 14,000 in the second quarter 2023, a loss of $ 13,000 in the six-month period ended June 30, 2024 and no net gain or loss in the six-month period ended June 30, 2023.

LOANS AND ALLOWANCE FOR CREDIT LOSSES

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

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

Summary of Loans by Type

6 unchanged sentences

allowance for credit losses on loans

In the table above, outstanding loan balances are presented net of deferred loan origination fees, net, of $ 4,482,000 at March 31, 2024 and $ 4,459,000 at December 31, 2023.

In the table above, outstanding loan balances are presented net of deferred loan origination fees, net, of $ 4,475,000 at June 30, 2024 and $ 4,459,000 at December 31, 2023.

The Corporation grants loans to individuals as well as commercial and tax-exempt entities.

1 unchanged sentence

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 three-month periods ended March 31, 2024 and 2023, adjustments to the initial market rate and credit fair value adjustments of performing loans were recognized as follows:

(In Thousands)

Three Months Ended

Market Rate Adjustment

Adjustments to gross amortized cost of loans at beginning of period

Accretion (amortization) recognized in interest income

Adjustments to gross amortized cost of loans at end of period

Credit Adjustment on Non-impaired Loans

Adjustments to gross amortized cost of loans at beginning of period

Accretion recognized in interest income

Adjustments to gross amortized cost of loans at end of period

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

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

(In Thousands)

As of March 31, 2024

As of June 30, 2024

Commercial real estate - non-owner occupied

18 unchanged sentences

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The following table presents the recorded investment in loans by credit quality indicators by year of origination as of March 31, 2024:

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

(In Thousands)

46 unchanged sentences

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

March 31, 2024

June 30, 2024

Nonaccrual Loans with

19 unchanged sentences

Consumer loans

The Corporation recognized interest income on nonaccrual loans of $ 231,000 in the three months ended March 31, 2024 and $ 231,000 in the three months ended March 31, 2023.

The following table represents the accrued interest receivable written off by reversing interest income during the three-month periods ended March 31,2024 and 2023:

The Corporation recognized interest income on nonaccrual loans of $ 285,000 and $ 516,000 in the three and six months ended June 30, 2024 and $ 196,000 and $ 427,000 in the three and six months ended June 30, 2023.

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

Three Months Ended

Six Months Ended

(In Thousands)

March 31, 2024

March 31, 2023

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Commercial real estate - non-owner occupied

Commercial real estate - owner occupied

All other commercial loans

10 unchanged sentences

● Residential mortgage loans are typically secured by first mortgages, and in some cases could be secured by a second mortgage.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

● Consumer loans are generally secured by automobiles, motorcycles, recreational vehicles and other personal property.

Some consumer loans are unsecured and have no underlying collateral.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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:

March 31, 2024

June 30, 2024

December 31, 2023

3 unchanged sentences

All other commercial loans

The following table summarizes the activity related to the allowance for credit losses for the three-month periods ended March 31, 2024 and 2023.

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

real estate -

1 unchanged sentence

(In Thousands)

Balance, March 31, 2024

Provision (credit) for credit losses on loans

Balance, June 30, 2024

real estate -

(In Thousands)

Balance, December 31, 2023

Provision (credit) for credit losses on loans

Balance, June 30, 2024

real estate -

(In Thousands)

Balance, March 31, 2023

Provision (credit) for credit losses on loans

Balance, June 30, 2023

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

real estate -

3 unchanged sentences

Adoption of ASU 2016-13 (CECL)

(Credit) provision for credit losses on loans

Balance, March 31, 2023

Provision (credit) for credit losses on loans

Balance, June 30, 2023

Modifications Made to Borrowers Experiencing Financial Difficulty

1 unchanged sentence

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification.

During the three months ended March 31, 2024 and March 31, 2023, the Corporation had no modifications to borrowers experiencing financial difficulty.

During the three and six months ended June 30, 2024 and June 30, 2023, the Corporation had no modifications to borrowers experiencing financial difficulty.

The Corporation closely monitors the performance of the loans modified to borrowers experiencing financial difficultly to understand the effectiveness of its modification efforts.

The following table depicts the performance of two loans which were in non-accrual status at March 31, 2024 that were modified in the past twelve months:

The following table depicts the performance of two loans which were in non-accrual status at June 30, 2024 that were modified in the past twelve months:

(In Thousands)

Payment Status (Amortized Costs Basis)

March 31, 2024

June 30, 2024

90+ Days Past Due

1 unchanged sentence

Non-owner occupied

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The loan that was past due more than 90 days in the table above was in default with its modified terms at March 31, 2024.

At March 31, 2024 and December 31, 2023, the Corporation had no commitments to lend any additional funds on modified loans.

Except as described above, at March 31, 2024 and March 31, 2023, the Corporation had no loans that defaulted during the period and had been modified preceding the payment default when the borrower was experiencing financial difficulty at the time of modification.

The loan that was past due more than 90 days in the table above was in default with its modified terms at June 30, 2024.

At June 30, 2024 and December 31, 2023, the Corporation had no commitments to lend any additional funds on modified loans.

Except as described above, at June 30, 2024 and June 30, 2023, the Corporation had no loans that defaulted during the period and had been modified preceding the payment default when the borrower was experiencing financial difficulty at the time of modification.

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

4 unchanged sentences

Residential real estate in process of foreclosure

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its customers.

These financial instruments include commitments to extend credit and standby letters of credit.

The contract amounts of these financial instruments at June 30, 2024 and December 31, 2023 are as follows:

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

(In Thousands)

Commitments to extend credit

Standby letters of credit

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.

2 unchanged sentences

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 $ 684,000 at March 31, 2024 and $ 690,000 at December 31, 2023, is included in accrued interest and other liabilities on the unaudited consolidated balance sheets.

The following table presents the balance and activity in the allowance for credit losses for off-balance sheet exposures for the three-months period ended March 31 2024 and 2023:

The allowance for credit losses for off-balance sheet exposures of $ 683,000 at June 30, 2024 and $ 690,000 at December 31, 2023, is included in accrued interest and other liabilities on the unaudited consolidated balance sheets.

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

(In Thousands)

March 31, 2024

March 31, 2023

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Beginning Balance

1 unchanged sentence

Credit for unfunded commitments

Ending Balance, March 31

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Ending Balance, June 30

GOODWILL AND OTHER INTANGIBLE ASSETS

Goodwill represents the excess of the cost of acquisitions over the fair value of the net assets acquired.

At March 31, 2024 and December 31, 2023, the net carrying value of goodwill was $ 52,505,000 .

At June 30, 2024 and December 31, 2023, the net carrying value of goodwill was $ 52,505,000 .

Information related to core deposit intangibles is as follows:

4 unchanged sentences

Three Months Ended

Six Months Ended

Amortization expense

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

BORROWED FUNDS

5 unchanged sentences

Total short-term borrowings

The Corporation had available credit with other correspondent banks totaling $ 75,000,000 at March 31, 2024 and December 31, 2023.

The Corporation had available credit with other correspondent banks totaling $ 75,000,000 at June 30, 2024 and December 31, 2023.

These lines of credit are primarily unsecured.

No amounts were outstanding at March 31, 2024 or December 31, 2023.

No amounts were outstanding at June 30, 2024 or December 31, 2023.

The Corporation has a line of credit with the Federal Reserve Bank of Philadelphia’s Discount Window.

At March 31, 2024, the Corporation had available credit in the amount of $ 19,063,000 on this line with no outstanding advances.

At June 30, 2024, the Corporation had available credit in the amount of $ 18,884,000 on this line with no outstanding advances.

At December 31, 2023, the Corporation had available credit in the amount of $ 19,982,000 on this line with no outstanding advances.

As collateral for this line, the Corporation has pledged available-for-sale securities with a carrying value of $ 20,237,000 at March 31, 2024 and $ 20,829,000 at December 31, 2023.

As collateral for this line, the Corporation has pledged available-for-sale securities with a carrying value of $ 19,718,000 at June 30, 2024 and $ 20,829,000 at December 31, 2023.

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 March 31, 2024 and December 31, 2023.

The carrying value of the underlying securities was $ 1,820,000 at March 31, 2024 and $ 2,400,000 at December 31, 2023.

The FHLB-Pittsburgh loan facility is collateralized by qualifying loans secured by real estate with a book value totaling $ 1,345,241,000 at March 31, 2024 and $ 1,323,008,000 at December 31, 2023.

The weighted average rate paid by the Corporation on customer repurchase agreements was 0.10 % at June 30, 2024 and December 31, 2023.

The carrying value of the underlying securities was $ 1,880,000 at June 30, 2024 and $ 2,400,000 at December 31, 2023.

The FHLB-Pittsburgh loan facility is collateralized by qualifying loans secured by real estate with a book value totaling $ 1,347,570,000 at June 30, 2024 and $ 1,323,008,000 at December 31, 2023.

Also, the FHLB-Pittsburgh loan facility requires the Corporation to invest in established amounts of FHLB-Pittsburgh stock.

The carrying values of the Corporation’s holdings of FHLB-Pittsburgh stock (included in other assets in the consolidated balance sheets) were $ 16,266,000 at March 31, 2024 and $ 15,214,000 at December 31, 2023.

The Corporation’s total credit facility with FHLB-Pittsburgh was $ 927,950,000 at March 31, 2024, including an unused (available)

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

amount of $ 712,932,000 .

The carrying values of the Corporation’s holdings of FHLB-Pittsburgh stock (included in other assets in the consolidated balance sheets) were $ 16,464,000 at June 30, 2024 and $ 15,214,000 at December 31, 2023.

The Corporation’s total credit facility with FHLB-Pittsburgh was $ 943,575,000 at June 30, 2024, including an unused (available) amount of $ 719,722,000 .

At December 31, 2023, the Corporation’s total credit facility with FHLB-Pittsburgh was $ 926,845,000 , including an unused (available) amount of $ 737,824,000 .

At March 31, 2024, short-term borrowings included an overnight borrowing from FHLB-Pittsburgh of $ 7,000,000 at an interest rate of 5.67 %, a $ 25,000,000 advance that matured on April 1, 2024 at an interest rate of 5.63 % and other short-term advances maturing in the third and fourth quarters of 2024 totaling $ 15,000,000 with a weighted average interest rate of 5.32 %.

At June 30, 2024, short-term borrowings included short-term advances maturing in the third and fourth quarters of 2024 totaling $ 15,000,000 with a weighted average interest rate of 5.32 %.

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

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

LONG-TERM BORROWINGS – FHLB ADVANCES

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

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

Total long-term FHLB-Pittsburgh borrowings

Weighted-average rates are presented as of March 31, 2024.

Weighted-average rates are presented as of June 30, 2024.

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").

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Debt issuance costs are amortized over the term of the Senior Notes as an adjustment of the effective interest rate.

Amortization of debt issuance costs associated with the Senior Notes totaling $ 17,000 in the first quarter 2024 and $ 16,000 in the first quarter 2023 was included in interest expense in the unaudited consolidated statements of income.

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

Amortization of debt issuance costs associated with the Senior Notes totaling $ 17,000 in the second quarter 2024 and $ 34,000 for the six-month ended June 30, 2024, and $ 17,000 in the second quarter 2023 and $ 33,000 for the six-month ended June 30, 2023, was included in interest expense in the unaudited consolidated statements of income.

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

(In Thousands)

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Any redemption of the Subordinated Notes will be subject to prior regulatory approval to the extent required.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The Subordinated Notes are not subject to redemption at the option of the holders.

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The Subordinated Notes are intended to qualify as Tier 2 capital for regulatory capital purposes.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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 $ 28,000 in the first quarter 2024 and $ 27,000 in the first quarter 2023, was included in interest expense in the unaudited consolidated statements of income.

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

Amortization of debt issuance costs associated with the Subordinated Notes totaling $ 28,000 in the second quarter 2024 and $ 56,000 for the six-month period ended June 30, 2024, and $ 27,000 in the second quarter 2023 and $ 54,000 for the six-month period ended June 30, 2023, was included in interest expense in the unaudited consolidated statements of income.

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

(In Thousands)

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The first quarter 2024 awards to employees vest ratably over three years , and the 2024 restricted stock awards for the independent directors vest over one year .

Following is a summary of restricted stock awards granted in the three-month period ended March 31, 2024:

There were no restricted stock awards granted in the three-month period ended June 30, 2024.

Following is a summary of restricted stock awards granted in the six-month period ended June 30, 2024:

(Dollars in Thousands)

1st quarter 2024 awards:

Six Months Ended June 30, 2024 awards:

Time-based awards to independent directors

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Total annual stock-based compensation for the year ending December 31, 2024 is estimated to total $ 1,433,000 .

Total stock-based compensation expense attributable to restricted stock awards amounted to $ 326,000 in the first quarter 2024 and $ 377,000 in the first quarter 2023.

Total stock-based compensation expense attributable to restricted stock awards amounted to $ 390,000 in the second quarter 2024 and $ 318,000 in the second quarter 2023.

Total stock-based compensation expense attributable to restricted stock awards amounted to $ 716,000 in the six-month period ended June 30, 2024 and $ 695,000 in the six-month period ended June 30, 2023.

CONTINGENCIES

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Plaintiffs have asserted claims against C&N Bank and the other bank for aiding and abetting alleged violations of the Texas Securities Act, and additional claims against the legal and accounting professionals for statutory fraud, common law fraud, negligent misrepresentation, and knowing participation in breach of fiduciary duty.

C&N Bank has not yet responded to the complaint.

C&N Bank has filed motions to dismiss the case for wont of personal jurisdiction and failure to state a claim.

The Plaintiffs have responded to those motions.

The motions are pending.

C&N Bank believes that it has substantial defenses, and it intends to defend itself against the plaintiffs’ allegations.

The Corporation does not

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

believe at this time that a loss is probable in this matter, nor can a range of possible losses be determined.

Based on the information available to the Corporation, the Corporation does not believe at this time that a loss is probable in this matter, nor can a range of possible losses be determined.

Accordingly, no accrual or range of loss has been included in the accompanying financial statements.

The Corporation’s estimate may change from time to time, and actual losses could vary.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Other Matters

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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 $ 148,838,000 at March 31, 2024 and $ 150,028,000 at December 31, 2023.

There were no interest rate swaps originated in the periods ended March 31, 2024, and 2023.

There were no gross amounts of interest rate swap-related assets and liabilities not offset in the consolidated balance sheets at March 31, 2024.

The net impact on the consolidated statements of income from interest rate swaps was an increase in interest income on loans of $ 498,000 in the first quarter 2024 and $ 345,000 in the first quarter 2023.

The aggregate notional amount of interest rate swaps was $ 147,650,000 at June 30, 2024 and $ 150,028,000 at December 31, 2023.

There were no interest rate swaps originated in the six-month periods ended June 30, 2024, and 2023.

There were no gross amounts of interest rate swap-related assets and liabilities not offset in the consolidated balance sheets at June 30, 2024.

The net impact on the consolidated statements of income from interest rate swaps was an increase in interest income on loans of $ 493,000 in the second quarter 2024 and $ 991,000 in the six-month period ended June 30, 2024 as compared to $ 439,000 in the second quarter 2023 and $ 784,000 in the six-months ended June 30, 2023.

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.

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 March 31, 2024 and December 31, 2023:

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 $ 1,000 in the second quarter 2024 and $ 2,000 in the six-month period ended June 30, 2024 as compared to $ 2,000 in the second quarter 2023 and $ 18,000 in the six months ended June 30, 2023.

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

(In Thousands)

At March 31, 2024

At June 30, 2024

At December 31, 2023

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Further, if the Corporation were to fail to maintain its status as a well or adequately capitalized institution, then the counterparties could terminate the derivative positions and the Corporation would be required to settle its obligations under the agreements.

There was interest-bearing cash pledged as collateral against the Corporation’s liability related to the interest rate swaps of $ 1,140,000 at March 31, 2024 and $ 1,360,000 at December 31, 2023.

There was interest-bearing cash pledged as collateral against the Corporation’s liability related to the interest rate swaps of $ 1,140,000 at June 30, 2024 and $ 1,360,000 at December 31, 2023.

FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

March 31, 2024

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

June 30, 2024

Quoted Prices

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Total nonrecurring fair value measurements, assets

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

Available-for-sale debt securities - Level 2 debt securities are valued by a third-party pricing service.

The pricing service uses pricing models that vary based on asset class and incorporate available market information, including quoted prices of investment securities with similar characteristics.

Because many fixed income securities do not trade on a daily basis, pricing models use available information, as applicable, through processes such as benchmark yield curves, benchmarking of like securities, sector groupings and matrix pricing.

Derivative instruments - Interest rate SWAP agreements, RPA Out and RPA In - The fair value of derivatives are based on valuation models using observable market data as of the measurement date, valued by a third-party pricing service using quantitative models that utilize multiple market inputs.

The inputs include prices and indices to generate continuous yield or pricing curves, estimates of current and potential future credit exposure and calculated discounted cash flow factors to value the position.

The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services.

Management’s evaluation and selection of valuation techniques and the unobservable inputs used in determining the fair values of assets valued using Level 3 methodologies include sensitive assumptions.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

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

Fair Value at

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Weighted-average PSA

Servicing fees

of loan balances

of payments are late

late fees assessed

Miscellaneous fees per account per month

Servicing costs

Monthly servicing cost per account

Additional monthly servicing cost per loan on loans more than 30 days delinquent

of loans more than 30 days delinquent

annual increase in servicing costs

Fair Value at

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Weighted-average PSA

Servicing fees

of loan balances

of payments are late

late fees assessed

Miscellaneous fees per account per month

Servicing costs

Monthly servicing cost per account

Additional monthly servicing cost per loan on loans more than 30 days delinquent

of loans more than 30 days delinquent

annual increase in servicing costs

The fair value of servicing rights is affected by expected future interest rates.

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Three Months Ended

March 31, 2024

March 31, 2023

Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Servicing rights balance, beginning of period

Originations of servicing rights

Unrealized gain (loss) included in earnings

Unrealized loss included in earnings

Servicing rights balance, end of period

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Loans are individually evaluated for credit loss when they do not share similar risk characteristics as similar loans within its loan pool.

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The discounts also include estimated costs to sell the property.

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

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

(Dollars In Thousands)

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(In Thousands)

March 31, 2024

June 30, 2024

December 31, 2023

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements