Citizens & Northern(CZNC) - 2024 Q4 - Annual Report

Loan Portfolio and Credit Risk - A significant portion of the Corporation's loan portfolio consists of commercial real estate loans, which are generally viewed as having more risk of default compared to residential real estate loans[27]. - The Corporation's loan portfolio is primarily concentrated in the Northern tier/Northcentral regions of Pennsylvania, Southern tier of New York, and Southeastern and Southcentral Pennsylvania, making it vulnerable to local economic conditions[32]. - The Corporation has adopted the current expected credit loss (CECL) methodology for estimating credit losses, which may not prevent unexpected losses[26]. - The total outstanding balance of loans the Corporation has repurchased due to noncompliance was $2,671,000 as of December 31, 2024[141]. - The total provision for credit losses included$ 2,430,000 related to loans receivable and a credit of $235,000 for off-balance sheet exposures[147]. - The ACL on collectively evaluated commercial loans increased by$ 1,746,000, reflecting changes in external indexes and an increase in past due loans[149]. - Total nonperforming assets increased to $24.1 million as of December 31, 2024, up from$ 18.8 million in 2023, representing a rise of 28%[151]. - Nonperforming loans as a percentage of total loans was 1.26% at December 31, 2024, compared to 0.99% in 2023[158]. - The provision for credit losses on loans increased to $2.430 million in 2024 from$ 0.753 million in 2023, marking a growth of 223%[159]. Financial Performance and Assets - Total loans outstanding at December 31, 2024 were $1,895,848,000, an increase of$ 47,709,000 (2.6%) from December 31, 2023[136]. - Total gross loans increased to $1,895,848,000 in 2024, up from$ 1,848,139,000 in 2023, representing a growth of 2.6%[144]. - The Corporation's total commercial loans increased by $49,632,000 (3.6%) year-over-year, driven by growth in owner-occupied commercial real estate loans[137]. - Commercial loans represented 75% of the loan portfolio at year-end 2024, while residential loans accounted for 22%[135]. - Residential mortgage loans amounted to$ 408,009,000, representing 21.5% of total loans in 2024[144]. - The Corporation's mortgage-backed securities portfolio had a total balance of $449,923,000 with a weighted-average yield of 2.63%[133]. - The fair value of available-for-sale debt securities in excess of pledging obligations was$ 236,945,000 at December 31, 2024[169]. - As of December 31, 2024, the fair value of the Corporation's available-for-sale debt securities portfolio was $402.4 million, representing a decrease of 10.6% from the amortized cost basis[48]. Regulatory and Economic Environment - The Federal Reserve raised the Federal Funds rate to a range of 5.25% to 5.50% at December 31, 2023, after maintaining a rate of 0% to 0.25% throughout 2021[30]. - Regulatory changes and increased scrutiny on commercial real estate lending could lead to higher costs and restrictions on lending activities[28]. - The Corporation's financial condition could be adversely affected by significant fluctuations in interest rates and the interconnectedness of financial institutions[31][46]. Deposits and Funding - Total deposits reached$ 2,093,909,000 at December 31, 2024, an increase of $79,103,000 (3.9%) from$ 2,014,806,000 at December 31, 2023[170]. - Estimated uninsured deposits amounted to $632.8 million, or 30.0% of total deposits, up from$ 592.2 million, or 29.2% at December 31, 2023[171]. - Highly liquid available funding totaled $1.1 billion at December 31, 2024, representing 170.7% of uninsured deposits and 229.4% of total uninsured and uncollateralized deposits[172]. - The Corporation's total credit facilities amounted to$ 1,031,784,000 at December 31, 2024, an increase from $1,021,827,000 at December 31, 2023[168]. Personnel and Cybersecurity - The Corporation's ability to attract and retain qualified personnel is critical for its future success, with intense competition for talent in the financial services industry[34]. - Cybersecurity risks are a significant concern, as the Corporation collects and stores sensitive data, making it vulnerable to potential breaches and attacks[35]. Shareholder and Capital Management - During the year ended December 31, 2024, the Corporation repurchased 26,034 shares for a total cost of$ 443,000, at an average price of $17.02 per share[179]. - C&N Bank's Capital Conservation Buffer was 7.19% at December 31, 2024, exceeding the minimum requirement of 2.5%[177].