Citizens & Northern(CZNC) - 2022 Q4 - Annual Report

Part I Business Overview Citizens & Northern Corporation, a bank holding company, focuses on community banking, expanding geographically and growing assets to $2.5 billion by 2022 - Citizens & Northern Corporation is a holding company primarily engaged in community banking through its subsidiary, C&N Bank, and other wholly-owned subsidiaries[10] - The Corporation has pursued a growth strategy, expanding its geographic footprint in Pennsylvania and New York through acquisitions and new branch openings[11][12] Consolidated Financial Growth | Metric | December 31, 2018 | December 31, 2022 | Growth | | :-------------------------- | :------------------ | :------------------ | :----- | | Consolidated Total Assets | N/A | $2.5 billion | 90% | | Gross Loans | N/A | $1.7 billion | 110% | | Total Deposits | N/A | $2.0 billion | 93% | - C&N Bank offers a wide range of banking, wealth management, and insurance services for personal and commercial customers[13] - Human capital management focuses on attracting and retaining diverse talent through comprehensive strategies including competitive compensation and training[19] Risk Factors The Corporation faces various risks inherent to the banking industry, including acquisition, credit, interest rate, geographic, cybersecurity, and regulatory risks - Risks related to acquisition activity include potential exposure to unknown liabilities, asset quality issues, integration difficulties, and dilution of tangible book value[25] - Credit risk from lending activities arises from potential borrower defaults and insufficient collateral values, influenced by economic conditions[26][27] - Interest rate risk is inherent, with significant fluctuations (e.g., Federal Reserve rate increases) potentially impacting financial condition and liquidity[28][29][30] - Limited geographic diversification in Pennsylvania and New York means local economic downturns could adversely affect loan portfolio quality and demand[31] - Cybersecurity risks and technology dependence expose the Corporation to potential attacks, leading to data compromise, legal claims, and reputational damage[34][38] - Extensive government regulation and monetary policy, particularly from the Federal Reserve, significantly affect interest rates and credit conditions, potentially impacting the Corporation[39] - The fair value of available-for-sale debt securities and wealth management revenues are sensitive to securities market fluctuations, which could lead to value declines or impairment charges[47][48][49] Unresolved Staff Comments This item indicates that there are no unresolved comments from the SEC staff regarding the Corporation's filings - Not applicable, indicating no unresolved staff comments[54] Properties The Corporation operates 36 properties, including 29 branches, 1 limited purpose lending office, and 2 administrative/multi-purpose facilities, with most being owned Property Locations | Property Type | Total Locations | Owned | Leased | | :-------------------------- | :-------------- | :---- | :----- | | Branches | 29 | 23 | 6 | | Branches closed in 2022 | 2 | 2 | 0 | | Limited Purpose Office-Lending | 1 | 1 | 0 | | Administrative/Multi-purpose | 2 | 1 | 1 | | Ancillary Facilities | 2 | 1 | 1 | | Total | 36 | 28 | 8 | Legal Proceedings The Corporation and its Bank subsidiary are involved in various legal proceedings incidental to their business, with management believing no material adverse effect will result - The Corporation and the Bank are involved in various legal proceedings incidental to their business[56] - Management believes the aggregate liability, if any, from such proceedings will not have a material adverse effect on the Corporation's financial condition or results of operations[56] Mine Safety Disclosure This item is not applicable to the Corporation - Not applicable[57] Part II Market for Common Equity and Stockholder Matters The Corporation's common stock trades on NASDAQ under CZNC, with 2,086 shareholders and quarterly dividends of $0.28 per share in 2022, alongside a treasury stock repurchase program - The Corporation's stock is listed on the NASDAQ Capital Market with the trading symbol CZNC, with 2,086 shareholders of record as of December 31, 2022[58] Quarterly Common Stock Sales Prices and Dividends Declared | | 2022 | | | 2021 | | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | | High | Low | Dividend Declared per Quarter | High | Low | Dividend Declared per Quarter | | First quarter | $27.50 | $23.82 | $0.28 | $24.99 | $18.98 | $0.27 | | Second quarter | 25.20 | 23.21 | 0.28 | 25.69 | 23.00 | 0.28 | | Third quarter | 25.77 | 23.29 | 0.28 | 25.97 | 23.73 | 0.28 | | Fourth quarter | 25.20 | 22.67 | 0.28 | 27.99 | 24.52 | 0.28 | - Under the amended treasury stock repurchase program, 674,700 shares were repurchased for $16,587,000 at an average price of $24.58 per share by December 31, 2022[61][63] Cumulative Return to Stockholders (December 31, 2017 = 100.00) | Index | 12/31/17 | 12/31/18 | 12/31/19 | 12/31/20 | 12/31/21 | 12/31/22 | | :------------------------------ | :------- | :------- | :------- | :------- | :------- | :------- | | Citizens & Northern Corporation | 100.00 | 114.94 | 128.54 | 95.41 | 131.72 | 120.72 | | Russell 2000 Index | 100.00 | 88.99 | 111.70 | 134.00 | 153.85 | 122.41 | | Peer Group (NASDAQ Bank Index) | 100.00 | 83.83 | 104.26 | 96.44 | 137.82 | 115.38 | | Legacy Peer Group | 100.00 | 91.23 | 108.46 | 87.78 | 118.96 | 118.90 | Reserved This item is reserved and contains no content - Item 6 is reserved[72] Management's Discussion and Analysis This section analyzes the Corporation's financial performance and condition, covering earnings, net interest income, noninterest income and expense, critical accounting policies, and acquisition impacts - The section contains forward-looking statements subject to risks and uncertainties, including changes in monetary and fiscal policies, economic conditions, and regulatory changes[72][73] Earnings Overview Net income for 2022 decreased to $26.6 million ($1.71 diluted EPS) from $30.6 million in 2021, primarily due to higher loan loss provisions and reduced loan sale gains Net Income and Diluted Earnings Per Share | Year | Net Income (in thousands) | Diluted EPS | | :--- | :------------------------ | :---------- | | 2022 | $26,618 | $1.71 | | 2021 | $30,554 | $1.92 | | 2020 | $19,222 | $1.30 | - In 2022, net interest income increased by $5.189 million, but was offset by a $3.594 million higher provision for loan losses and a $1.449 million decrease in noninterest income[74] - Noninterest expense increased by $5.483 million (8.8%) in 2022, primarily due to a $4.230 million increase in salaries and employee benefits[78] - For 2021, net interest income was up $10.374 million (15.4%) over 2020, mainly due to the Covenant acquisition and PPP loan program income, with noninterest income increasing $1.513 million (6.2%)[82] Adjusted Earnings (Non-U.S. GAAP) for 2020 | Metric | Year Ended December 31, 2020 (in thousands) | | :------------------------------------ | :------------------------------------------ | | Earnings Under U.S. GAAP | $19,222 | | Add: Merger-Related Expenses | $6,134 | | Add: Loss on Prepayment of Borrowings | $1,292 | | Adjusted Earnings (Non-U.S. GAAP) | $26,648 | Acquisition of Covenant Financial, Inc. The Corporation acquired Covenant Financial, Inc. on July 1, 2020, for $63.3 million, recording $24.1 million in goodwill and significantly increasing acquired loans and assumed deposits - The Corporation acquired Covenant Financial, Inc. on July 1, 2020, for a total purchase consideration of $63.3 million (common stock $41.6 million, cash $21.7 million)[88] - In connection with the acquisition, the Corporation recorded $24.1 million in goodwill and a $3.1 million core deposit intangible asset[89] - Assets acquired included loans valued at $464.2 million, cash of $97.8 million, and deposits of $481.8 million were assumed[89] - Merger-related expenses totaled $7.708 million in 2020, with no such expenses in 2021 and 2022[77][302] Critical Accounting Policies The Corporation's financial statements rely on material estimates for the allowance for loan losses and fair value of available-for-sale debt securities, with CECL adoption expected to increase the allowance in 2023 - The presentation of consolidated financial statements requires management to make material estimates and assumptions, particularly for the allowance for loan losses and the fair values of available-for-sale debt securities[90][91][96] - Effective January 1, 2023, the Corporation is adopting CECL, changing from an incurred loss to an expected credit loss methodology[92][95] - Management estimates CECL adoption will result in a $1.0 million to $3.0 million reduction in retained earnings (net of tax) and a $2.0 million to $4.0 million increase in the allowance for credit losses over the December 31, 2022 balance[182][183] Net Interest Income Net interest income increased in 2022 due to rising interest rates and earning asset growth, despite decreased PPP loan income, while 2021 saw significant growth from acquisitions and PPP loans Fully Taxable Equivalent Net Interest Income and Net Interest Margin | Year | Net Interest Income (in thousands) | Net Interest Margin | | :--- | :--------------------------------- | :------------------ | | 2022 | $84,354 | 3.77% | | 2021 | $79,074 | 3.69% | | 2020 | $68,545 | 3.69% | - In 2022, fully taxable equivalent net interest income increased by $5.280 million (6.7%) over 2021, driven by an $8.237 million (9.6%) rise in interest income and a $2.957 million (45.1%) increase in interest expense[98][100][106][126] - The average yield on earning assets increased 0.20% to 4.19% in 2022, with rising interest rates having a positive impact of $4.976 million on net interest income[98][128][130] - Interest and fees from PPP loans decreased by $5.572 million to $958,000 in 2022, while average outstanding loans (excluding PPP) increased by $120.6 million (8.0%)[101][102] - In 2021, fully taxable equivalent net interest income increased by $10.529 million (15.4%) over 2020, primarily due to the Covenant acquisition and PPP loan program income[112][114][119][126] Noninterest Income Noninterest income decreased by 5.6% in 2022 due to reduced loan sale gains, partially offset by increases in brokerage, insurance, service charges, and debit card revenue, while 2021 saw a 6.2% increase Total Noninterest Income | Year | Amount (in thousands) | Change YoY (in thousands) | Change YoY (%) | | :--- | :-------------------- | :------------------------ | :------------- | | 2022 | $24,432 | $(1,449) | (5.6)% | | 2021 | $25,881 | $1,368 | 5.6% | | 2020 | $24,513 | N/A | N/A | - In 2022, net gains from sales of loans decreased by $2.671 million (77.9%), reflecting reduced residential mortgage loan sales volume, and trust revenue also decreased by $240,000 (3.3%)[74][132] - Offsetting decreases in 2022, brokerage and insurance revenue increased by $431,000 (23.2%), service charges on deposit accounts increased by $386,000 (8.3%), and interchange revenue from debit card transactions increased by $293,000 (7.6%)[74][132] - In 2021, noninterest income increased by $1.513 million (6.2%) over 2020, driven by increases in trust revenue ($913,000), debit card interchange revenue ($761,000), and loan servicing fees ($755,000)[82][132] Noninterest Expense Total noninterest expense increased by 8.8% in 2022, primarily due to higher salaries, employee benefits, data processing, and net occupancy costs, following a 12.3% increase in 2021 Total Noninterest Expense | Year | Amount (in thousands) | Change YoY (in thousands) | Change YoY (%) | | :--- | :-------------------- | :------------------------ | :------------- | | 2022 | $67,955 | $5,483 | 8.8% | | 2021 | $62,472 | $6,863 | 12.3% | | 2020 (excl. merger-related) | $55,609 | N/A | N/A | - In 2022, salaries and employee benefits increased by $4.230 million (11.2%), data processing and telecommunications increased by $903,000 (15.3%), and net occupancy and equipment expense increased by $549,000 (11.0%)[78][133] - In 2021, salaries and employee benefits increased by $4.541 million (13.7%) over 2020, reflecting full-year inclusion of former Covenant operations and growth-related personnel[86][134] Income Taxes The effective income tax rate decreased to 17.7% in 2022 from 18.9% in 2021, primarily due to higher tax-exempt interest and restricted stock compensation, while the net deferred tax asset significantly increased due to unrealized losses on securities Effective Income Tax Rate | Year | Effective Tax Rate | | :--- | :----------------- | | 2022 | 17.7% | | 2021 | 18.9% | | 2020 | 17.2% | - The lower effective tax rate in 2022 (17.7%) compared to 2021 (18.9%) was due to higher tax-exempt interest, a larger permanent difference from restricted stock compensation, and a $340,000 reduction in expense from tax penalty reversals[78][135] - The net deferred tax asset increased significantly to $20.884 million at December 31, 2022, from $5.887 million in 2021, primarily due to a $14.669 million increase related to unrealized losses on available-for-sale debt securities[136] Securities The available-for-sale debt securities portfolio grew in amortized cost in 2022, but its fair value significantly decreased by $63.761 million (11.3%) due to rising interest rates, though management deemed these losses temporary and not credit-related - Management's objectives for the available-for-sale debt securities portfolio include supporting liquidity, maximizing return within risk parameters, hedging interest rate risk, and maintaining high credit quality[140] Available-for-Sale Debt Securities (Amortized Cost and Unrealized (Loss) Gain) | Year | Amortized Cost (in thousands) | Aggregate Unrealized (Loss) Gain (in thousands) | % of Amortized Cost | | :--- | :---------------------------- | :---------------------------------------------- | :------------------ | | 2022 | $561,794 | $(63,761) | (11.3)% | | 2021 | $511,592 | $6,087 | 1.2% | | 2020 | $334,552 | $14,780 | 4.4% | - The significant increase in aggregate unrealized losses in 2022 was consistent with the substantial increase in market interest rates, with the market yield on the 5-year U.S. Treasury Note rising by 2.73%[144] - Management concluded there were no credit-related declines in fair value at December 31, 2022, and all unrealized losses are considered temporary[145] - At December 31, 2022, the largest categories of securities were tax-exempt and taxable municipal bonds (38.2%), residential mortgage-backed securities (28.1%), and commercial mortgage-backed securities (16.3%)[143] Financial Condition The loan portfolio experienced robust growth in 2022, with commercial loans up 13.6% and residential mortgage loans up 7.0%, while the Corporation also manages contingent liabilities from sold mortgage loans and SBA guarantees - Loan growth was robust in 2022, with commercial loans up $133.127 million (13.6%) and residential mortgage loans up $39.760 million (7.0%) from year-end 2021[150] - At December 31, 2022, commercial loans represented approximately 64% of the portfolio, while residential mortgage loans totaled 35%[150] Five-year Summary of Loans by Type (in thousands) | Loan Type | 2022 | 2021 | 2020 | 2019 | 2018 | | :-------------------------------- | :--------- | :--------- | :--------- | :--------- | :--------- | | Commercial | $1,111,498 | $978,371 | $1,007,751 | $578,901 | $353,627 | | Residential mortgage | $609,106 | $569,346 | $620,172 | $586,580 | $456,806 | | Consumer | $19,436 | $17,132 | $16,286 | $16,741 | $17,130 | | Total Gross Loans | $1,740,040 | $1,564,849 | $1,644,209 | $1,182,222 | $827,563 | - The Corporation originates and sells residential mortgage loans through MPF programs, providing customary representations and warranties, with $325.677 million outstanding at December 31, 2022[153][154][155] - For loans sold under the MPF Original program, the Corporation provides a credit enhancement with a maximum obligation of $6.392 million and a related allowance for credit losses of $425,000 at December 31, 2022[156] - The Corporation's total exposure related to SBA guarantees on purchased loans was $4.847 million at December 31, 2022, with an allowance for SBA claim adjustments of $90,000[159] Provision and Allowance for Loan Losses The allowance for loan losses increased to $16.615 million in 2022 due to a higher provision, driven by partial charge-offs and loan growth, despite improving credit quality, with CECL adoption expected to further increase the allowance Allowance for Loan Losses (in thousands) | Year | Balance, End of Period | | :--- | :--------------------- | | 2022 | $16,615 | | 2021 | $13,537 | | 2020 | $11,385 | Provision for Loan Losses (in thousands) | Year | Total Provision | | :--- | :-------------- | | 2022 | $7,255 | | 2021 | $3,661 | | 2020 | $3,913 | - The 2022 provision includes $3.942 million in partial charge-offs on a commercial real estate loan and $3.974 million attributable to increases in loan volume[170][172] Net Charge-offs as a % of Average Loans | Year | Rate | | :--- | :----- | | 2022 | 0.26% | | 2021 | 0.09% | | 2020 | 0.16% | Nonperforming Loans and Assets (in thousands) | Metric | Dec 31, 2022 | Dec 31, 2021 | | :-------------------------- | :----------- | :----------- | | Total Impaired Loans | $19,358 | $15,734 | | Total Nonaccrual Loans | $23,085 | $18,999 | | Total Nonperforming Loans | $25,322 | $21,218 | | Total Nonperforming Assets | $25,597 | $21,902 | - Total nonperforming loans as a percentage of outstanding loans increased to 1.46% at December 31, 2022, from 1.36% in 2021[176][187] - The adoption of CECL on January 1, 2023, is estimated to increase the allowance for credit losses by $2.0 million to $4.0 million[183] Contractual Obligations and Off-Balance Sheet Arrangements The Corporation's significant contractual obligations include time deposits and borrowed funds, while off-balance sheet arrangements consist of credit commitments, standby letters of credit, and contingent liabilities from sold mortgage loans and SBA guarantees - Significant contractual obligations include repayment obligations related to time deposits and borrowed funds[191] Off-Balance Sheet Financial Instruments (in thousands) | Instrument | December 31, 2022 | December 31, 2021 | | :-------------------------- | :------------------ | :------------------ | | Commitments to extend credit | $433,725 | $366,076 | | Standby letters of credit | $15,822 | $10,079 | - The Corporation provides customary representations and warranties for residential mortgage loans sold, with $325.677 million outstanding at December 31, 2022, potentially requiring repurchases or reimbursements[192] - For loans sold under the MPF Original program, the Corporation provides a credit enhancement with a maximum obligation of $6.392 million and a related allowance for credit losses of $425,000 at December 31, 2022[193] - Total exposure to SBA guarantees on purchased loans was $4.847 million at December 31, 2022, with a recorded claims adjustment allowance of $90,000[194] Liquidity The Corporation maintains a strong liquidity position through overnight interest-bearing deposits, borrowing facilities with correspondent banks and the FHLB, and a line of credit with the Federal Reserve's Discount Window, with total credit facilities significantly increasing in 2022 - At December 31, 2022, the Corporation maintained $21.887 million in overnight interest-bearing deposits with the Federal Reserve Bank of Philadelphia and other correspondent banks[196] - The Corporation maintains overnight borrowing facilities with correspondent banks, borrowing facilities with the FHLB-Pittsburgh, and a line of credit with the Federal Reserve Bank's Discount Window[197][198] Outstanding, Available, and Total Credit Facilities (in thousands) | Source | Dec 31, 2022 Outstanding | Dec 31, 2022 Available | Dec 31, 2022 Total Credit | Dec 31, 2021 Outstanding | Dec 31, 2021 Available | Dec 31, 2021 Total Credit | | :-------------------------------- | :----------------------- | :--------------------- | :----------------------- | :----------------------- | :--------------------- | :----------------------- | | Federal Home Loan Bank of Pittsburgh | $150,099 | $689,279 | $839,378 | $33,311 | $723,557 | $756,868 | | Federal Reserve Bank Discount Window | 0 | $23,107 | $23,107 | 0 | $13,642 | $13,642 | | Other correspondent banks | 0 | $95,000 | $95,000 | 0 | $45,000 | $45,000 | | Total credit facilities | $150,099 | $807,386 | $957,485 | $33,311 | $782,199 | $815,510 | - At December 31, 2022, the carrying value of available-for-sale debt securities in excess of pledging obligations was $272.475 million, providing additional liquidity[200] Stockholders' Equity and Capital Adequacy The Corporation and C&N Bank maintain capital ratios exceeding regulatory "well capitalized" thresholds, despite stockholders' equity being significantly impacted by a $49.878 million accumulated other comprehensive loss in 2022 due to unrealized losses on securities - C&N Bank meets all capital adequacy requirements and maintains capital ratios exceeding regulatory standards for "well capitalized" institutions and Board policy thresholds[202][420] - At December 31, 2022, C&N Bank's Capital Conservation Buffer was 6.68%, well above the 2.5% threshold to avoid distribution limitations[204][422] - Stockholders' equity was impacted by an accumulated other comprehensive loss of $49.878 million at December 31, 2022, primarily due to unrealized losses on available-for-sale debt securities from increased interest rates[207][225] - The adoption of CECL on January 1, 2023, is estimated to result in a $1.0 million to $3.0 million reduction in retained earnings (net of tax) and a $2.0 million to $4.0 million increase in the allowance for credit losses[205] - Retained earnings against which C&N Bank may pay dividends without prior regulatory approval amounted to approximately $96.803 million at December 31, 2022[423] Market Risk Disclosures The Corporation's primary market risk is interest rate risk, managed using a simulation model to assess potential effects on net interest income (NII) and economic value of equity (EVE), with projected changes remaining within policy limits - The Corporation's major category of market risk is interest rate risk, managed using a simulation model to calculate potential effects on net interest income (NII) and economic value of equity (EVE)[209][210] - As of December 31, 2022, the Corporation's NII profile is asset-sensitive, meaning net interest income increases in upward rate scenarios and decreases in downward rate scenarios[213] Projected Net Interest Income Changes (December 31, 2022 Data, 1-year horizon) | Basis Point Change in Rates | Net Interest Income (NII) (in thousands) | NII % Change | NII Risk Limit | | :-------------------------- | :--------------------------------------- | :----------- | :------------- | | +400 | $96,378 | 8.9% | 25.0% | | +300 | $94,311 | 6.6% | 20.0% | | +200 | $92,697 | 4.8% | 15.0% | | +100 | $90,791 | 2.6% | 10.0% | | 0 | $88,490 | 0.0% | 0.0% | | -100 | $85,532 | (3.3)% | 10.0% | | -200 | $81,614 | (7.8)% | 15.0% | Projected Economic Value of Equity Changes (December 31, 2022 Data) | Basis Point Change in Rates | Present Value Equity (in thousands) | % Change | Risk Limit | | :-------------------------- | :---------------------------------- | :------- | :--------- | | +400 | $498,368 | 0.3% | 50.0% | | +300 | $496,186 | (0.1)% | 45.0% | | +200 | $501,422 | 1.0% | 35.0% | | +100 | $501,991 | 1.1% | 25.0% | | 0 | $496,650 | 0.0% | 0.0% | | -100 | $485,332 | (2.3)% | 25.0% | | -200 | $468,195 | (5.7)% | 35.0% | - The projected changes in net interest income and economic value of equity were within the Board of Directors' established policy limits in all scenarios[213] Financial Statements and Supplementary Data This section presents the Corporation's audited consolidated financial statements, including balance sheets, income statements, comprehensive income, changes in stockholders' equity, and cash flows for 2020-2022, along with extensive explanatory notes Consolidated Balance Sheets (in thousands) | Metric | December 31, 2022 | December 31, 2021 | | :-------------------------- | :------------------ | :------------------ | | Total Assets | $2,454,307 | $2,327,648 | | Total Liabilities | $2,204,982 | $2,026,243 | | Total Stockholders' Equity | $249,325 | $301,405 | Consolidated Statements of Income (in thousands) | Metric | 2022 | 2021 | 2020 | | :---------------------------------- | :------- | :------- | :------- | | Total Interest and Dividend Income | $92,647 | $84,501 | $77,160 | | Total Interest Expense | $9,519 | $6,562 | $9,595 | | Net Interest Income | $83,128 | $77,939 | $67,565 | | Provision for Loan Losses | $7,255 | $3,661 | $3,913 | | Total Noninterest Income | $24,432 | $25,881 | $24,513 | | Total Noninterest Expense | $67,955 | $62,472 | $64,953 | | Income before Income Tax Provision | $32,350 | $37,687 | $23,212 | | Income Tax Provision | $5,732 | $7,133 | $3,990 | | NET INCOME | $26,618 | $30,554 | $19,222 | | Basic EPS | $1.71 | $1.92 | $1.30 | | Diluted EPS | $1.71 | $1.92 | $1.30 | Consolidated Statements of Comprehensive (Loss) Income (in thousands) | Metric | 2022 | 2021 | 2020 | | :---------------------------------- | :--------- | :--------- | :--------- | | Net income | $26,618 | $30,554 | $19,222 | | Net other comprehensive (loss) income | $(54,904) | $(6,769) | $8,104 | | Comprehensive (loss) income | $(28,286) | $23,785 | $27,326 | Consolidated Statements of Cash Flows (in thousands) | Metric | 2022 | 2021 | 2020 | | :---------------------------------- | :--------- | :--------- | :--------- | | Net Cash Provided by Operating Activities | $34,599 | $34,844 | $24,784 | | Net Cash (Used in) Provided by Investing Activities | $(234,688) | $(103,895) | $96,580 | | Net Cash Provided by (Used in) Financing Activities | $151,939 | $68,882 | $(56,469) | | (Decrease) Increase in Cash and Cash Equivalents | $(48,150) | $(169) | $64,895 | | Cash and Cash Equivalents, End of Year | $47,698 | $95,848 | $96,017 | Changes in Accountants and Disclosures This item states that there were no changes in or disagreements with accountants on accounting and financial disclosure during the reported period - There were no changes in and disagreements with accountants on accounting and financial disclosure[464] Controls and Procedures Management concluded that disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2022, an assessment concurred by the independent auditor - The Corporation's disclosure controls and procedures were evaluated and concluded to be effective as of December 31, 2022[464] - Management assessed the effectiveness of the Corporation's internal control over financial reporting as of December 31, 2022, based on the COSO framework (2013), and concluded it was effective[468] - There were no changes in the Corporation's internal control over financial reporting during the quarter ended December 31, 2022, that materially affected or are reasonably likely to materially affect it[467] - Baker Tilly US, LLP, the independent registered public accounting firm, issued an audit report concurring with management's assessment of the effectiveness of internal control over financial reporting[469] Other Information This item confirms that no information required to be disclosed in a Form 8-K during the fourth quarter of 2022 was not disclosed - No information required to be disclosed in a Form 8-K during the fourth quarter 2022 was not disclosed[472] Part III Directors, Executive Officers and Corporate Governance Information concerning directors, executive officers, and corporate governance is incorporated by reference from the Corporation's proxy statement, which also details the Board's adopted Code of Ethics - Information concerning Directors, Executive Officers, and Corporate Governance is incorporated by reference from the Corporation's proxy statement dated March 10, 2023[474] - The Corporation's Board of Directors has adopted a Code of Ethics for employees, officers, and directors, available on the Corporation's website[475] Executive Compensation Information concerning executive compensation is incorporated by reference from the Corporation's proxy statement dated March 10, 2023 - Information concerning executive compensation is incorporated by reference to disclosure under the captions "Compensation Discussion and Analysis" and "Executive Compensation Tables" of the Corporation's proxy statement dated March 10, 2023[475] Security Ownership and Related Stockholder Matters Information regarding security ownership of certain beneficial owners and management is incorporated by reference from the Corporation's proxy statement, with equity compensation plan details from Item 5 of this Form 10-K - Information concerning security ownership of certain beneficial owners and management is incorporated by reference from the Corporation's proxy statement dated March 10, 2023[476] - Equity Compensation Plan Information is incorporated by reference from Item 5 of this Form 10-K[477] Related Transactions and Director Independence Information concerning loans and deposit balances with directors and executive officers is provided in Note 15 to the Consolidated Financial Statements, with additional details on director independence incorporated by reference from the proxy statement - Information concerning loans and deposit balances with Directors and Executive Officers is provided in Note 15 to the Consolidated Financial Statements[478] - Additional information, including director independence, is incorporated by reference from the Corporation's proxy statement dated March 10, 2023[478] Principal Accountant Fees and Services Information regarding fees paid to the independent auditor, Baker Tilly US, LLP, and the audit committee's pre-approval policies is incorporated by reference from the Corporation's proxy statement dated March 10, 2023 - Information concerning services provided by the Corporation's independent auditor Baker Tilly US, LLP, the audit committee's pre-approval policies, and fees paid is incorporated by reference from the Corporation's proxy statement dated March 10, 2023[479] Part IV Exhibits and Financial Statement Schedules This section lists all exhibits and financial statement schedules filed as part of the 10-K report, including the Independent Registered Public Accounting Firm's Report, consolidated financial statements, and various legal and corporate documents - The section includes the Report of Independent Registered Public Accounting Firm and the consolidated financial statements: Balance Sheets, Statements of Income, Statements of Comprehensive (Loss) Income, Statements of Changes in Stockholders' Equity, and Statements of Cash Flows, along with their accompanying notes[481] - Other exhibits include the Agreement and Plan of Merger, Articles of Incorporation, By-laws, Indentures for Senior and Subordinated Notes, various material contracts, and certifications (CEO, CFO)[481][482][483][484][486][487][488][489][490][491][492][494] Signatures This section contains the signatures of the Corporation's President and Chief Executive Officer, Treasurer and Principal Accounting Officer, and the Board of Directors, certifying the report pursuant to the Securities Exchange Act of 1934 - The report is signed by J. Bradley Scovill (President and Chief Executive Officer) and Mark A. Hughes (Treasurer and Principal Accounting Officer) on March 16, 2023[495] - The Board of Directors also signed the report on March 16, 2023[496]