What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-11-06 compared with 2024-08-07 · 238 added, 187 removed, 853 unchanged (33% of the section changed)

2 unchanged sentences

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

September 30,

(In Thousands, Except Share and Per Share Data)

29 unchanged sentences

authorized 30,000,000 shares;

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

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

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

2 unchanged sentences

Treasury stock, at cost;

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

616,040 shares at September 30, 2024 and 735,037

shares at December 31, 2023

7 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In Thousands, Except Per Share Data)

12 unchanged sentences

Net interest income

Provision for credit losses

Net interest income after provision for credit losses

Provision (credit) for credit losses

Net interest income after provision (credit) for credit losses

NONINTEREST INCOME

7 unchanged sentences

Other noninterest income

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

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

Total noninterest income

17 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(In Thousands)

Available-for-sale debt securities:

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

Reclassification adjustment for losses (gains) realized in income

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

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

Reclassification adjustment for gains realized in income

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

Unfunded pension and postretirement obligations:

2 unchanged sentences

Other comprehensive loss on pension and postretirement obligations

Other comprehensive (loss) income before income tax

Income tax related to other comprehensive loss (income)

Net other comprehensive (loss) income

Comprehensive income

Other comprehensive income (loss) before income tax

Income tax related to other comprehensive (income) loss

Net other comprehensive income (loss)

Comprehensive income (loss)

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

2 unchanged sentences

(In Thousands) (Unaudited)

Six Months Ended

Nine Months Ended

September 30,

(In Thousands)

1 unchanged sentence

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

Provision for credit losses

Provision (credit) for credit losses

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

21 unchanged sentences

Net increase in loans

Proceeds from bank-owned life insurance

Purchase of premises and equipment

9 unchanged sentences

Net Cash Provided by Financing Activities

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

1 unchanged sentence

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Decrease in accrued purchase of available-for-sale debt securities

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

Assets acquired through foreclosure of real estate loans

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

Leased assets obtained in exchange for new operating lease liabilities

6 unchanged sentences

Comprehensive

Three Months Ended June 30, 2024

Balance, March 31, 2024

Other comprehensive loss, net

Three Months Ended September 30, 2024

Balance, June 30, 2024

Other comprehensive income, net

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

Shares issued for dividend reinvestment plan

Forfeiture of restricted stock

Restricted stock granted

Stock-based compensation expense

Treasury stock purchases

Balance, September 30, 2024

Three Months Ended September 30, 2023

Balance, June 30, 2023

Three Months Ended June 30, 2023

Balance, March 31, 2023

Other comprehensive loss, net

3 unchanged sentences

Stock-based compensation expense

Purchase of restricted stock for tax withholding

Treasury stock purchases

Balance, June 30, 2023

Balance, September 30, 2023

Comprehensive

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Balance, December 31, 2023

Other comprehensive loss, net

Other comprehensive income, net

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

5 unchanged sentences

Treasury stock purchases

Balance, June 30, 2024

Six Months Ended June 30, 2023

Balance, September 30, 2024

Nine Months Ended September 30, 2023

Balance, December 31, 2022

Adoption of ASU 2016-13 (CECL)

Other comprehensive income, net

Other comprehensive loss, net

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

5 unchanged sentences

Treasury stock purchases

Balance, June 30, 2023

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

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

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

1 unchanged sentence

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.

This section provides a summary description of recent ASUs that have significant implications (elected or required) within the consolidated financial statements, or that management expects may have a significant impact on consolidated financial statements issued in the foreseeable future.

CECL ADOPTION

12 unchanged sentences

Retained earnings

Recent Issued but Not Yet Effective Accounting Pronouncements

Recently Issued but Not Yet Effective Accounting Pronouncements

In December 2023 , the FASB issued ASU 2023-09, Income Taxes (Topic 740):

14 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

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 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.

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

The weighted-average number of anti-dilutive instruments outstanding was 8,934 in the three-month period ended September 30, 2023 and 0 in the nine-month period ended September 30, 2023.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

3 unchanged sentences

(In Thousands)

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

Available-for-sale debt securities:

Unrealized holding losses on available-for-sale debt securities

Unrealized holding gains on available-for-sale debt securities

Reclassification adjustment for (gains) realized in income

Other comprehensive loss from available-for-sale debt securities

Other comprehensive income from available-for-sale debt securities

Unfunded pension and postretirement obligations:

1 unchanged sentence

Other comprehensive loss on unfunded retirement obligations

Total other comprehensive loss

Total other comprehensive income

(In Thousands)

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Available-for-sale debt securities:

Unrealized holding losses on available-for-sale debt securities

Reclassification adjustment for losses realized in income

Reclassification adjustment for (gains) realized in income

Other comprehensive loss from available-for-sale debt securities

4 unchanged sentences

(In Thousands)

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Available-for-sale debt securities:

Unrealized holding losses on available-for-sale debt securities

Unrealized holding gains on available-for-sale debt securities

Reclassification adjustment for (gains) realized in income

Other comprehensive loss from available-for-sale debt securities

Other comprehensive income from available-for-sale debt securities

Unfunded pension and postretirement obligations:

2 unchanged sentences

Other comprehensive loss on unfunded retirement obligations

Total other comprehensive loss

Total other comprehensive income

(In Thousands)

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Available-for-sale debt securities:

Unrealized holding gains on available-for-sale debt securities

Unrealized holding losses on available-for-sale debt securities

Reclassification adjustment for (gains) realized in income

Other comprehensive income from available-for-sale debt securities

Other comprehensive loss from available-for-sale debt securities

Unfunded pension and postretirement obligations:

1 unchanged sentence

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

Other comprehensive income on unfunded retirement obligations

Total other comprehensive income

Other comprehensive loss on unfunded retirement obligations

Total other comprehensive loss

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

2 unchanged sentences

Consolidated Statements of Income

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

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

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

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

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

7 unchanged sentences

(Loss) Income

Three Months Ended June 30, 2024

Three Months Ended September 30, 2024

Balance, beginning of period

Other comprehensive loss during three months ended June 30, 2024

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

Balance, end of period

Three Months Ended June 30, 2023

Three Months Ended September 30, 2023

Balance, beginning of period

Other comprehensive loss during three months ended June 30, 2023

Other comprehensive loss during three months ended September 30, 2023

Balance, end of period

3 unchanged sentences

(Loss) Income

Six Months Ended June 30, 2024

Nine Months Ended September 30, 2024

Balance, beginning of period

Other comprehensive loss during six months ended June 30, 2024

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

Balance, end of period

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Balance, beginning of period

Other comprehensive income during six months ended June 30, 2023

Other comprehensive loss during nine months ended September 30, 2023

Balance, end of period

CASH AND DUE FROM BANKS

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

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

(In Thousands)

September 30,

Cash and cash equivalents

6 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 June 30, 2024 and December 31, 2023 are summarized as follows:

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

(In Thousands)

June 30, 2024

September 30, 2024

Obligations of the U.S.

24 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 June 30, 2024 and December 31, 2023 for which an allowance for credit losses has not been recorded:

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

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

June 30, 2024

September 30, 2024

Less Than 12 Months

11 unchanged sentences

Commercial mortgage-backed securities

Private label commercial mortgage-backed securities

December 31, 2023

16 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Gross realized gains from sales

2 unchanged sentences

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.

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

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

(In Thousands)

June 30, 2024

September 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.

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.

Investment securities carried at $ 220,482,000 at September 30, 2024 and $ 232,437,000 at December 31, 2023 were pledged as collateral for public deposits, trusts and certain other deposits as provided by law.

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

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

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

Debt Securities

As reflected in the table above, gross unrealized holding losses on available-for-sale debt securities totaled $ 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 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.

As reflected in the table above, gross unrealized holding losses on available-for-sale debt securities totaled $ 39,850,000 at September 30, 2024 and $ 49,564,000 at December 31, 2023.

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

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

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

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

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

Equity Securities

4 unchanged sentences

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.

C&N Bank’s investment in FHLB-Pittsburgh stock, included in other assets in the consolidated balance sheets, was $ 15,971,000 at September 30, 2024 and $ 15,214,000 at December 31, 2023.

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

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

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 $ 6,276,000 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.

C&N Bank’s investment in Federal Reserve Bank stock, included in other assets in the consolidated balance sheets, was $ 6,288,000 at September 30, 2024 and $ 6,252,000 at December 31, 2023.

The Corporation has a marketable equity security included in other assets in the consolidated balance sheets with a carrying value of $ 889,000 at September 30, 2024 and $ 871,000 December 31, 2023, consisting exclusively of one mutual fund.

There was an unrealized loss on the mutual fund of $ 111,000 at September 30, 2024 and $ 129,000 at December 31, 2023.

Changes in the unrealized gains or losses on this security, which are included in other noninterest income in the consolidated statements of income, were a gain of $ 31,000 in the third quarter 2024, a loss of $ 27,000 in the third quarter 2023, a gain of $ 18,000 in the nine-month period ended September 30, 2024 and a loss of $ 27,000 in the nine-month period ended September 30, 2023.

LOANS AND ALLOWANCE FOR CREDIT LOSSES

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

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

Summary of Loans by Type

(In Thousands)

September 30,

Commercial real estate - non-owner occupied

4 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 $ 4,475,000 at June 30, 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 $ 4,309,000 at September 30, 2024 and $ 4,459,000 at December 31, 2023.

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

2 unchanged sentences

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

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

(In Thousands)

As of June 30, 2024

As of September 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 June 30, 2024:

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

(In Thousands)

20 unchanged sentences

Year-to-date gross charge-offs

Special Mention

Year-to-date gross charge-offs

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

22 unchanged sentences

Year-to-date gross charge-offs

Special Mention

Year-to-date gross charge-offs

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

June 30, 2024

September 30, 2024

Nonaccrual Loans with

19 unchanged sentences

Consumer loans

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:

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

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

Three Months Ended

Six Months Ended

Nine Months Ended

(In Thousands)

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

Commercial real estate - non-owner occupied

16 unchanged sentences

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:

June 30, 2024

September 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 and six months ended June 30, 2024 and 2023.

Allowance for Credit Losses

The allowance for credit losses (“ACL”) on loans represents management’s estimate of lifetime credit losses inherent in loans as of the balance sheet date.

The ACL on loans includes two primary components:

(i) an allowance established on loans which share similar risk characteristics which are collectively evaluated for credit losses, and (ii) an allowance established on loans which do not share similar risk characteristics with any loan segment and which are individually evaluated for credit losses.

Management determines the ACL on loans that are collectively evaluated by considering the following:

(a) the weighted-average remaining maturity (WARM) method is used to estimate credit losses, based on the Corporation’s historical loss experience, for pools of loans with similar risk and cash flow characteristics;

(b) subjective adjustments are made, generally increasing the ACL, for qualitative risk factors that are deemed likely to cause estimated credit losses to differ from historical experience;

and (c) an additional adjustment to expected credit losses is made, based on an economic forecast, and applied for the first 2 years of the weighted-average remaining life of the portfolio.

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

real estate -

1 unchanged sentence

(In Thousands)

Balance, March 31, 2024

Provision (credit) for credit losses on loans

Balance, June 30, 2024

Provision (credit) for credit losses on loans

Balance, September 30, 2024

real estate -

3 unchanged sentences

Provision (credit) for credit losses on loans

Balance, June 30, 2024

Balance, September 30, 2024

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

real estate -

1 unchanged sentence

(In Thousands)

Balance, March 31, 2023

Provision (credit) for credit losses on loans

Balance, June 30, 2023

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Provision (credit) for credit losses on loans

Balance, September 30, 2023

real estate -

4 unchanged sentences

Provision (credit) for credit losses on loans

Balance, June 30, 2023

Balance, September 30, 2023

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

The ACL on loans collectively evaluated was $ 20,269,000 at September 30, 2024, $ 19,152,000 at June 30, 2024 and $ 18,465,000 at December 31, 2023.

The increase in the ACL at September 30, 2024 as compared to June 30, 2024 included an increase related to the economic forecast, an increase in the WARM method estimate based on the Corporation’s net charge-off experience and a net increase related to changes in qualitative adjustments.

The increase in the ACL at September 30, 2024 as compared to December 31, 2023 included a net increase related to changes in qualitative adjustments and the net impact of an increase in loans receivable, partially offset by a decrease in the WARM method estimate.

Modifications Made to Borrowers Experiencing Financial Difficulty

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 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 June 30, 2024 that were modified in the past twelve months:

During the three and nine months ended September 30, 2024 and September 30, 2023, the Corporation made no modifications to borrowers experiencing financial difficulty.

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

(In Thousands)

Payment Status (Amortized Costs Basis)

June 30, 2024

Payment Status (Amortized Cost Basis)

September 30, 2024

90+ Days Past Due

1 unchanged sentence

Non-owner occupied

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 loan that was current at September 30, 2024 matured October 5, 2024, and the Corporation and borrower are engaged in negotiations regarding an extension of the loan term.

The Corporation received principal payments totaling $ 40,000 during the nine months ended September 30, 2024 and recorded a partial charge-off of $ 640,000 on this loan in the third quarter 2024.

There was no specific allowance

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

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

The Corporation received payments totaling $ 24,000 during the nine months September 30, 2024, all of which were applied to principal.

There was a specific allowance on this loan of $ 14,000 at September 30, 2024 and $ 38,000 at June 30, 2024 and December 31, 2023.

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

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

(In Thousands)

September 30,

Foreclosed residential real estate

1 unchanged sentence

(In Thousands)

September 30,

Residential real estate in process of foreclosure

1 unchanged sentence

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

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

September 30,

(In Thousands)

5 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 $ 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:

The allowance for credit losses for off-balance sheet exposures of $ 593,000 at September 30, 2024 and $ 690,000 at December 31, 2023, is included in accrued interest and other liabilities on the unaudited consolidated balance sheets.

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

Three Months Ended

Nine Months Ended

(In Thousands)

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

Beginning Balance

1 unchanged sentence

Credit for unfunded commitments

Ending Balance, June 30

Ending Balance, September 30

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

GOODWILL AND OTHER INTANGIBLE ASSETS

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

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

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

Information related to core deposit intangibles is as follows:

(In Thousands)

September 30,

Accumulated amortization

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Amortization expense

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

BORROWED FUNDS

2 unchanged sentences

(In Thousands)

September 30,

FHLB-Pittsburgh borrowings

1 unchanged sentence

Total short-term borrowings

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 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 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 $ 19,718,000 at June 30, 2024 and $ 20,829,000 at December 31, 2023.

At September 30, 2024, short-term borrowings included short-term advances maturing in the third and fourth quarters of 2024 totaling $ 10,000,000 with a weighted average interest rate of 5.29 %.

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

The Corporation engages in repurchase agreements with certain commercial customers.

These agreements provide that the Corporation sells specified investment securities to the customers on an overnight basis and repurchases them on the following business day.

The weighted average rate paid by the Corporation on customer repurchase agreements was 0.10 % at 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.

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

The carrying value of the underlying securities was $ 1,440,000 at September 30, 2024 and $ 2,400,000 at December 31, 2023.

The FHLB-Pittsburgh loan facility is collateralized by qualifying loans secured by real estate with a book value totaling $ 1,337,673,000 at September 30, 2024 and $ 1,323,008,000 at December 31, 2023.

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

The carrying values of the Corporation’s holdings of FHLB-Pittsburgh stock (included in other assets in the consolidated balance sheets) were $ 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 .

The carrying values of the Corporation’s holdings of FHLB-Pittsburgh stock (included in other assets in the consolidated balance sheets) were $ 15,971,000 at September 30, 2024 and $ 15,214,000 at December 31, 2023.

The Corporation’s total credit facility with FHLB-Pittsburgh was $ 945,142,000 at September 30, 2024, including an unused (available) amount of $ 737,284,000 .

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

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 %.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

These lines of credit are primarily unsecured.

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

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

At September 30, 2024, the Corporation had available credit in the amount of $ 18,602,000 on this line with no outstanding advances.

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

As collateral for this line, the Corporation has pledged available-for-sale securities with a carrying value of $ 19,387,000 at September 30, 2024 and $ 20,829,000 at December 31, 2023.

LONG-TERM BORROWINGS – FHLB ADVANCES

1 unchanged sentence

(In Thousands)

September 30,

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

5 unchanged sentences

Total long-term FHLB-Pittsburgh borrowings

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

Weighted-average rates are presented as of September 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").

4 unchanged sentences

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 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:

Amortization of debt issuance costs associated with the Senior Notes totaling $ 17,000 in the third quarter 2024 and $ 51,000 for the nine-month period ended September 30, 2024, and $ 16,000 in the third quarter 2023 and $ 49,000 for the nine-month period ended September 30, 2023, was included in interest expense in the unaudited consolidated statements of income.

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

(In Thousands)

September 30,

Senior Notes with an aggregate par value of $ 15,000,000 ;

6 unchanged sentences

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.

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

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

redeem the Subordinated Notes at any time in whole upon certain other events.

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

3 unchanged sentences

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 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:

Amortization of debt issuance costs associated with the Subordinated Notes totaling $ 29,000 in the third quarter 2024 and $ 85,000 for the nine-month period ended September 30, 2024, and $ 27,000 in the third quarter 2023 and $ 79,000 for the nine-month period ended September 30, 2023, was included in interest expense in the unaudited consolidated statements of income.

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

(In Thousands)

September 30,

Agreements with a par value of $ 25,000,000 ;

4 unchanged sentences

The Corporation has a stock incentive plan for selected officers and the independent directors.

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 .

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:

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

During the three-month period ended September 30, 2024, there was a time-based award of 20,000 shares of restricted stock to the President and Chief Executive Officer pursuant to an amended and restated Employment Agreement with a vesting date of April 30, 2027.

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

(Dollars in Thousands)

Six Months Ended June 30, 2024 awards:

Nine Months Ended September 30, 2024 awards:

Time-based awards to independent directors

2 unchanged sentences

Compensation cost related to restricted stock is recognized based on the fair value of the stock at the grant date over the vesting period, adjusted for estimated and actual forfeitures.

Total 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 $ 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.

Total stock-based compensation expense attributable to restricted stock awards amounted to $ 383,000 in the third quarter 2024 and $ 320,000 in the third quarter 2023.

Total stock-based compensation expense attributable to restricted stock awards amounted to $ 1,099,000 in the nine-month period ended September 30, 2024 and $ 1,015,000 in the nine-month period ended September 30, 2023.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

CONTINGENCIES

7 unchanged sentences

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.

Plaintiffs have filed an application for certification of the suit as a class action.

The court has stayed the motions to dismiss pending consideration of the class action certification application.

Discovery as to the class action qualification is underway, with depositions of the named plaintiffs scheduled.

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

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

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

Accordingly, no liability has been recorded for this litigation matter in the accompanying consolidated financial statements.

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

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Other Matters

10 unchanged sentences

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 $ 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 aggregate notional amount of interest rate swaps was $ 143,070,000 at September 30, 2024 and $ 150,028,000 at December 31, 2023.

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

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

The Corporation has entered into an RPA with another institution as a means to assume a portion of the credit risk associated with a loan structure which includes a derivative instrument, in exchange for fee income commensurate with the risk assumed.

This type of derivative is referred to as an “RPA In.” In addition, in an effort to reduce the credit risk associated with an interest rate swap agreement with a borrower for whom the Corporation has provided a loan structured with a derivative, the Corporation purchased an RPA from an institution participating in the facility in exchange for a fee commensurate with the risk shared.

This type of derivative is referred to as an “RPA Out.” The net impact on the consolidated statements of income from RPAs was 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:

This type of derivative is referred to as an “RPA Out.” The net impact on the consolidated statements of income from RPAs was a decrease in other noninterest income of $ 1,000 in the third quarter 2024 and an increase of $ 1,000 in the nine-month period ended September 30, 2024 as compared to an increase of $ 1,000 in the third quarter 2023 and $ 19,000 in the nine months ended September 30, 2023.

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

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

(In Thousands)

At June 30, 2024

At September 30, 2024

At December 31, 2023

6 unchanged sentences

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

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The Corporation’s agreements with its derivative counterparties provide that if the Corporation defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Corporation could also be declared in default on its derivative obligations.

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

There was interest-bearing cash pledged as collateral against the Corporation’s liability related to the interest rate swaps of $ 1,140,000 at June 30, 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 $ 1,350,000 at September 30, 2024 and $ 1,360,000 at December 31, 2023.

FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS

14 unchanged sentences

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

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

September 30, 2024

Quoted Prices

68 unchanged sentences

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 assets measured on a recurring basis using unobservable inputs (Level 3 methodologies) are as follows:

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

Fair Value at

22 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2024

June 30, 2023

June 30, 2024

June 30, 2023

Nine Months Ended

September 30, 2024

September 30, 2023

September 30, 2024

September 30, 2023

Servicing rights balance, beginning of period

8 unchanged sentences

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:

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

(Dollars In Thousands)

2 unchanged sentences

Loans individually evaluated for credit loss:

Commercial real estate - nonowner occupied

Commercial real estate - non-owner occupied

Sales comparison

Discount to appraised value

25 %- 30 % ( 27 )

Commercial real estate - owner occupied

1 unchanged sentence

Discount to appraised value

All other commercial loans

Sales comparison

Discount to appraised value

0 %- 85 % ( 16 )

Total loans individually evaluated for credit loss

12 unchanged sentences

Loans individually evaluated for credit loss:

Commercial real estate - nonowner occupied

Commercial real estate - non-owner occupied

Sales comparison

28 unchanged sentences

(In Thousands)

June 30, 2024

September 30, 2024

December 31, 2023

13 unchanged sentences

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