Citizens & Northern(US:CZNC)2024-03-10 16:00Loan Portfolio and Credit Quality - 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[28]. - The Corporation's commercial real estate loans are subject to increased scrutiny from banking regulators, which may lead to higher costs or restrictions on lending activities[29]. - The Corporation's loan portfolio is primarily concentrated in specific geographic regions, making it vulnerable to local economic conditions[33]. - Total loans outstanding at December 31, 2023, were $1,848,139,000, reflecting an increase of $108,099,000 (6.2%) from the previous year[145]. - Commercial loans represented 75% of the loan portfolio as of December 31, 2023, while residential loans accounted for 22%[143]. - The Corporation's commercial loans increased by $82,697,000 (6.4%), driven by growth in non-owner occupied commercial real estate loans of $61,745,000[145]. - Total residential mortgage loans rose by $20,132,000 (5.1%) as of December 31, 2023[145]. - Non-owner occupied commercial real estate loans reached $499,104,000, accounting for 27.0% of total loans in 2023, compared to 26.1% in 2022[151]. - The total commercial real estate - owner occupied loans increased to $237,246,000, representing 12.8% of total loans in 2023[151]. - Multi-family residential loans grew to $64,076,000, accounting for 3.5% of total loans, up from 3.2% in 2022[151]. - The provision for credit losses for 2023 was $186,000, a significant decrease of $7,069,000 from $7,255,000 in 2022[156]. - Total nonperforming assets decreased to $18.8 million in 2023, down from $25.6 million in 2022, resulting in a nonperforming assets ratio of 0.75%[157]. - Net charge-offs for 2023 were $264,000, or 0.01% of average outstanding loans, indicating low charge-off rates historically[158]. - Total nonperforming loans decreased to $18,367,000 in 2023 from $25,322,000 in 2022, with nonperforming loans as a percentage of total loans at 0.99% compared to 1.46% in 2022[166]. - The allowance for credit losses (ACL) as a percentage of gross loans receivable was 1.04% at December 31, 2023, compared to 1.08% at January 1, 2023[156]. - The allowance for credit losses on loans increased to $19,208,000 as of December 31, 2023, up from $16,615,000 in 2022, reflecting a provision for credit losses of $753,000 in 2023 compared to $7,255,000 in 2022[162]. Financial Condition and Market Risks - The Federal Reserve raised the Federal Funds rate to a range of 5.25% to 5.50% at December 31, 2023, which could have a material adverse effect on the Corporation's financial condition[32]. - The Corporation's risk management policies may not prevent unexpected losses that could materially affect its financial condition, results of operations, or liquidity[27]. - Cybersecurity risks pose a significant threat, as breaches could lead to reputational harm and financial loss[39]. - The Corporation's liquidity position may be adversely affected by disruptions in financial market conditions or operational problems[45]. - The Corporation's liquidity position is supported by overnight borrowing facilities with correspondent banks and a line of credit with the Federal Reserve Bank[170][171]. - The carrying value of available-for-sale debt securities was $256,058,000 as of December 31, 2023, providing a potential source of liquidity for the Corporation[173]. - The fair value of available-for-sale debt securities portfolio was $415.8 million, or 10.6% less than the amortized cost basis[47]. - The Corporation's trust revenue is influenced by the value of underlying investment portfolios, which can be negatively impacted by market fluctuations[48]. Deposits and Funding - Total deposits reached $2,014,806,000 as of December 31, 2023, a slight increase of $17,213,000 (0.9%) from $1,997,593,000 in 2022, although adjusted total deposits excluding brokered deposits decreased by $26,173,000 (1.3%)[174]. - Brokered deposits increased to $64,369,000 in 2023, up $43,386,000 from the previous year, indicating a shift towards short-term certificates of deposit[174]. - The Corporation's outstanding credit facilities totaled $1,021,827,000 as of December 31, 2023, an increase from $957,485,000 in 2022, with significant borrowings from the Federal Home Loan Bank of Pittsburgh[172]. - Highly liquid available funding sources amounted to $1.1 billion at December 31, 2023, which is 183.9% of uninsured deposits and 246.8% of total uninsured and uncollateralized deposits[176]. - As of December 31, 2023, estimated uninsured deposits totaled $592.2 million, representing 29.2% of total deposits, down from 34.2% ($689.4 million) at December 31, 2022[175]. - Total uninsured and uncollateralized deposits were 21.7% of total deposits at December 31, 2023, a decrease from 24.0% at December 31, 2022[177]. Capital and Stockholder Equity - C&N Bank's capital conservation buffer was 6.89% as of December 31, 2023, exceeding the minimum requirements[181]. - The Corporation's total stockholders' equity was impacted by unrealized losses on available-for-sale debt securities, with accumulated other comprehensive loss at $38.9 million as of December 31, 2023, down from $50.4 million in 2022[183]. - Management expects C&N Bank to maintain capital levels exceeding regulatory standards for well-capitalized institutions for the next 12 months[178]. - Future dividend payments and stock repurchases will depend on the Corporation's financial condition and regulatory requirements[179]. - The minimum common equity tier 1 capital ratio is set at 4.5%, with a capital conservation buffer requirement of 2.5% for unrestricted dividend payments[180]. - A new treasury stock repurchase program was announced on September 25, 2023, allowing for the repurchase of up to 750,000 shares, approximately 5% of outstanding shares[182].