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What changed in CITIZENS & NORTHERN CORP's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CITIZENS & NORTHERN CORP's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+254 added−259 removedSource: 10-K (2024-03-11) vs 10-K (2023-03-16)

Top changes in CITIZENS & NORTHERN CORP's 2023 10-K

254 paragraphs added · 259 removed · 141 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

17 edited+1 added−1 removed16 unchanged
Biggest changeCovenant was the parent company of Covenant Bank, a commercial bank which operated a community bank office in Bucks County, Pennsylvania and another in Chester County, Pennsylvania. The Covenant acquisition followed the 2019 acquisition of Monument Bancorp, Inc. (“Monument”), a commercial bank with offices in Bucks County.
Biggest changeIn 2019 and 2020, the Corporation has expanded into Southeastern Pennsylvania by acquisitions and Southcentral Pennsylvania by opening new branches. The Corporation acquired Covenant Financial, Inc. (“Covenant”), effective July 1, 2020. Covenant was the parent company of Covenant Bank, a commercial bank which operated a community bank office in Bucks County, Pennsylvania and another in Chester County, Pennsylvania.
At December 31, 2022, the Bank had 29 branch offices, including 22 in the Northern tier/Northcentral region of Pennsylvania, 1 in the Southern tier of New York State, 4 in Southeastern Pennsylvania (3 in Bucks County and 1 in Chester County) and 2 in Southcentral Pennsylvania (York and Lancaster).
At December 31, 2023, the Bank had 29 branch offices, including 22 in the Northern tier/Northcentral region of Pennsylvania, 1 in the Southern tier of New York State, 4 in Southeastern Pennsylvania (3 in Bucks County and 1 in Chester County) and 2 in Southcentral Pennsylvania (York and Lancaster).
CNFS, a wholly-owned subsidiary of the Bank, is a licensed insurance agency that provides insurance products to individuals and businesses and through its broker-dealer division, offers mutual funds, annuities, educational savings accounts and other investment products through registered agents. CNFS’s operations are not significant in relation to the total operations of the Corporation.
CNFS, a wholly-owned subsidiary of the Bank, is a licensed insurance agency that provides insurance products to individuals and businesses and through a broker-dealer arrangement, offers mutual funds, annuities, educational savings accounts and other investment products through registered agents. CNFS’s operations are not significant in relation to the total operations of the Corporation.
The Corporation is under the direct supervision of the Federal Reserve and must comply with the reporting requirements of the Federal Bank Holding Company Act. ● C&N Bank is a state-chartered, nonmember bank, supervised by the Federal Deposit Insurance Corporation (FDIC) and the Pennsylvania Department of Banking and Securities. ● The Pennsylvania Department of Insurance regulates CNFS’s insurance activities.
The Corporation is under the direct supervision of the Federal Reserve and must comply with the reporting requirements of the Federal Bank Holding Company Act. ● C&N Bank is a state-chartered, Federal Reserve member bank, supervised by the Federal Reserve Bank of Philadelphia and the Pennsylvania Department of Banking and Securities. ● The Pennsylvania Department of Insurance regulates CNFS’s insurance activities.
Mainly as a result of the acquisitions and subsequent growth in the newer markets, the Corporation’s consolidated total assets at December 31, 2022 of $2.5 billion were up 90% from the corresponding total at December 31, 2018.
Mainly as a result of the acquisitions and subsequent growth in the newer markets, the Corporation’s consolidated total assets at December 31, 2023 of $2.5 billion were up 52% from the corresponding total at December 31, 2019.
Similarly, gross loans of $1.7 billion at December 31, 2022 were up 110% from December 31, 2018 and total deposits of $2.0 billion were up 93% from December 31, 2018. C&N Bank is a Pennsylvania banking institution that was formed by the consolidation of Northern National Bank of Wellsboro and Citizens National Bank of Towanda in 1971.
Similarly, gross loans of $1.8 billion at December 31, 2023 were up 56% from December 31, 2019 and total deposits of $2.0 billion were up 61% from December 31, 2019. C&N Bank is a Pennsylvania banking institution that was formed by the consolidation of Northern National Bank of Wellsboro and Citizens National Bank of Towanda in 1971.
Most activities of the Corporation and its subsidiaries are regulated by federal or state agencies. The primary regulatory relationships are described as follows: ● The Corporation is a bank holding company formed under the provisions of Section 3 of the Federal Reserve Act.
The primary regulatory relationships are described as follows: ● The Corporation is a bank holding company formed under the provisions of Section 3 of the Federal Reserve Act.
Copies of these reports will be furnished as soon as reasonably possible after they are filed electronically with the Securities and Exchange Commission.
Copies of these reports will be furnished as soon as reasonably possible after they are filed electronically with the Securities and Exchange Commission. The information is also available through the Corporation’s web site at www.cnbankpa.com.
The Bank is generally competitive with all financial institutions in our service areas with respect to interest rates paid on time and savings deposits, service charges on deposit accounts and interest rates charged on loans.
C&N Bank competes with insurance companies, investment counseling firms, mutual funds and other business firms and individuals for trust, investment management, brokerage and insurance services. The Bank is generally competitive with all financial institutions in our service areas with respect to interest rates paid on time and savings deposits, service charges on deposit accounts and interest rates charged on loans.
Northern Tier Holding LLC, acquires, holds and disposes of real property acquired by the Bank. C&N Bank is the sole member of Northern Tier Holding LLC. All phases of the Bank’s business are competitive. The Bank competes with online financial institutions, local commercial banks headquartered in our market areas and other commercial banks with branches in our market area.
Northern Tier Holding LLC, acquires, holds and disposes of real property acquired by the Bank through foreclosure procedures. C&N Bank is the sole member of Northern Tier Holding LLC. All phases of the Bank’s business are competitive.
In Southcentral Pennsylvania, in 2021, the Corporation converted the lending office in York, Pennsylvania to a full-service branch and established a new branch in Lancaster, Pennsylvania.
The Covenant acquisition followed the 2019 acquisition of Monument Bancorp, Inc. (“Monument”), a commercial bank with offices in Bucks County. In Southcentral Pennsylvania, in 2021, the Corporation converted the lending office in York, Pennsylvania to a full-service branch and established a new branch in Lancaster, Pennsylvania.
The Corporation’s key human capital management objectives are to attract and retain diverse raw and seasoned talent that fits our values and culture. Our talent strategy focuses on acquiring new employees through branding and outreach programs, developing employees though a robust onboarding program, ongoing training, and performance management, and retaining employees through recognition, engagement, and an attractive total rewards package.
Our talent strategy focuses on acquiring new employees through branding and outreach programs, developing employees though a robust onboarding program, ongoing training, and performance management, and retaining employees through recognition, engagement, and an attractive total rewards package. At December 31, 2023, the Corporation had 404 full-time equivalent employees.
Many of the online financial institutions and some of the banks that have branches in our market areas are larger in overall size. With respect to lending activities and attracting deposits, the Bank also competes with savings banks, savings and loan associations, insurance companies, regulated small loan companies and credit unions.
The Bank competes with online financial institutions, local commercial banks headquartered in our market areas and other commercial banks with branches in our market area. Many of the online financial institutions and some of the banks that have branches in our market areas are larger in overall size.
The information is also available through the Corporation’s web site at www.cnbankpa.com Human Capital ​ The Corporation’s Board of Directors and executive leadership team have established the following mission, vision and values: Mission : Creating value through lifelong relationships with our customers, teammates, shareholders and communities.
Human Capital ​ The Corporation’s Board of Directors and executive leadership team have established the following mission, vision and values: Mission : Creating value through lifelong relationships with our customers, teammates, shareholders and communities. Vision : Every customer says “C&N is the ONLY bank I need.” Values : Teamwork, Respect, Responsibility and Accountability, Excellence, Integrity, Client Focus, Have Fun.
The Bank serves a diverse customer base and is not economically dependent on any small group of customers or on any individual industry. 3 Table of Contents At December 31, 2022, C&N Bank had total assets of $2,439,371,000, total deposits of $2,016,666,000 and net loans outstanding of $1,723,425,000.
The Bank serves a diverse customer base and is not economically dependent on any small group of customers or on any individual industry.
Also, the Bank competes with mutual funds, exchange-traded funds and other investment vehicles for deposits. C&N Bank competes with insurance companies, investment counseling firms, mutual funds and other business firms and individuals for trust, investment management, brokerage and insurance services.
With respect to lending activities and attracting deposits, the Bank also competes with savings banks, savings and loan associations, insurance companies, regulated small loan companies and credit unions. Also, the Bank competes with mutual funds, exchange-traded funds and other investment vehicles for deposits.
Vision : Every customer says “C&N is the ONLY bank I need.” Values : Teamwork, Respect, Responsibility and Accountability, Excellence, Integrity, Client Focus, Have Fun. We recognize that our ability to create value on a consistent basis is highly dependent upon the effectiveness of our team.
We recognize that our ability to create value on a consistent basis is highly dependent upon the effectiveness of our team. The Corporation’s key human capital management objectives are to attract and retain diverse raw and seasoned talent that fits our values and culture.
Removed
Prior to 2019, substantially all of the Corporation’s operations were conducted in its legacy markets in the Northern tier/Northcentral region of Pennsylvania and Southern tier of New York. Subsequently, the Corporation has expanded into Southeastern Pennsylvania by acquisitions and Southcentral Pennsylvania by opening new branches. The Corporation acquired Covenant Financial, Inc. (“Covenant”), effective July 1, 2020.
Added
At December 31, 2023, C&N Bank had total assets of $2,501,822,000, total deposits of $2,030,909,000 and net loans outstanding of $1,828,931,000. 3 Table of Contents Most activities of the Corporation and its subsidiaries are regulated by federal or state agencies.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe Corporation’s assets are predominantly long-term, fixed-rate loans and debt securities. Funding for these assets comes principally from deposits with no stated maturities, term deposits and borrowed funds. Accordingly, there is an inherent risk of lower future earnings or decline in fair value of the Corporation’s financial instruments when interest rates change.
Biggest changeInterest Rate Risk - Business risk arising from changes in interest rates is an inherent factor in operating a banking organization. The Corporation’s assets are predominantly long-term, fixed-rate loans and debt securities. Funding for these assets comes principally from deposits with no stated maturities, term deposits and borrowed funds.
Although the Corporation seeks to effectively manage risks, and maintains a level of equity that exceeds the banking regulatory agencies’ thresholds for being considered “well capitalized” (see Note 18 to the consolidated financial statements), management cannot predict the future and cannot eliminate the possibility of credit, operational or other losses. Accordingly, actual results may differ materially from management’s expectations.
Although the Corporation seeks to effectively manage risks, and maintains a level of equity that exceeds the banking regulatory agencies’ thresholds for being considered “well capitalized” (see Note 17 to the consolidated financial statements), management cannot predict the future and cannot eliminate the possibility of credit, operational or other losses. Accordingly, actual results may differ materially from management’s expectations.
A breach of any kind could compromise systems and the information stored there could be accessed, damaged or disclosed. A breach in security could result in legal claims, regulatory penalties, disruption in operations, and damage to the Corporation’s reputation, which could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity.
A breach of any kind could compromise systems and the information stored there could be accessed, damaged, locked up, or disclosed. A breach in security could result in legal claims, regulatory penalties, disruption in operations, and damage to the Corporation’s reputation, which could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity.
Inability to Attract and Develop Qualified Personnel – The Corporation believes that our future success will depend in large part on our ability to attract, develop and retain highly qualified management, lending, financial, technological, marketing, sales, and support personnel. Competition for qualified personnel is intense and we cannot ensure success in attracting or retaining qualified personnel.
Inability to Attract and Develop Qualified Personnel – The future success of the Corporation will depend in large part on our ability to attract, develop and retain highly qualified management, lending, financial, technological, marketing, sales, and support personnel. Competition for qualified personnel is intense and we cannot ensure success in attracting or retaining qualified personnel.
In such events, the Corporation’s cost of funds may increase, thereby reducing net interest income, or the Corporation may need to sell a portion of its securities and/or loan portfolio, which, depending upon market conditions, could necessitate realizing a loss.
In such events, the Corporation’s cost of funds may increase, thereby reducing net interest 8 Table of Contents income, or the Corporation may need to sell a portion of its securities and/or loan portfolio, which, depending upon market conditions, could necessitate realizing a loss.
Such a situation may arise due to circumstances that are outside the Corporation’s control, such as general market disruptions or operational problems affecting the Corporation or third parties. The Corporation’s efforts to monitor and manage liquidity risk may not be successful or sufficient to deal with dramatic or 7 Table of Contents unanticipated reductions in available liquidity.
Such a situation may arise due to circumstances that are outside the Corporation’s control, such as general market disruptions or operational problems affecting the Corporation or third parties. The Corporation’s efforts to monitor and manage liquidity risk may not be successful or sufficient to deal with dramatic or unanticipated reductions in available liquidity.
On an 6 Table of Contents on-going basis the Corporation assesses its cyber security procedures and controls and performs network penetration tests on at least an annual basis. All employees receive monthly information security awareness training.
On an on-going basis the Corporation assesses its cyber security procedures and controls and performs network penetration tests on at least an annual basis. All employees receive monthly information security awareness training.
As of December 31, 2022, the total outstanding balance of residential mortgage loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $1,515,000.
As of December 31, 2023, the total outstanding balance of residential mortgage loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $1,335,000.
At December 31, 2022, the total outstanding balance of residential mortgages sold and serviced through the two programs amounted to $325,677,000.
At December 31, 2023, the total outstanding balance of residential mortgages sold and serviced through the two programs amounted to $323,298,000.
Declines in the values of the Corporation’s securities holdings, combined with adverse changes in the expected cash flows from these investments, would negatively impact their value for liquidity management purposes and could result in other-than-temporary impairment charges.
Declines in the values of the Corporation’s securities holdings, combined with adverse changes in the expected cash flows from these investments, would negatively impact their value for liquidity management purposes and could result in the recording of an allowance for credit losses.
At December 31, 2022, the fair value of the Corporation’s available-for-sale debt securities portfolio was $63.8 million, or 11.3%, less than the amortized cost basis.
At December 31, 2023, the fair value of the Corporation’s available-for-sale debt securities portfolio was $415.8 million, or 10.6% less than the amortized cost basis.
For additional information regarding debt securities, see the “Securities” section of Management’s Discussion and Analysis and Note 7 to the consolidated financial statements. The Corporation’s trust revenue is determined, in part, from the value of the underlying investment portfolios.
Further increases in interest rates would cause the fair value of the available-for-sale debt securities portfolio to decrease further. For additional information regarding debt securities, see the “Securities” section of Management’s Discussion and Analysis and Note 6 to the consolidated financial statements. The Corporation’s trust revenue is determined, in part, from the value of the underlying investment portfolios.
Significant fluctuations in interest rates, including fluctuations in interest rates triggered by the Federal Reserve’s actions, could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity.
The Federal Reserve’s rate increases, along with an accompanying tightening of the money supply, have been conducted in an effort to contain inflation. Significant fluctuations in interest rates, including fluctuations in interest rates triggered by the Federal Reserve’s actions, could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity.
Furthermore, developments increasing the nature or level of competition could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity.
Moreover, costs associated with implementing technology-driven products or other services, or technology-related or other developments increasing the nature or level of competition, could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity.
With respect to secured loans, the collateral securing the repayment of these loans may be insufficient to cover the obligations owed under such loans.
With respect to secured loans, the collateral securing the repayment of these loans may be insufficient to cover the obligations owed under such loans. A significant portion of such collateral is real estate located in the Corporation's core banking markets.
Collateral values may be adversely affected by changes in economic, environmental and other conditions, including declines in the value of real estate, changes in interest rates, changes in monetary and fiscal policies of the federal government, wide-spread disease, terrorist activity, environmental contamination and other external events. 5 Table of Contents In addition, collateral appraisals that are out of date or that do not meet industry recognized standards may create the impression that a loan is adequately collateralized when it is not.
Collateral values may be adversely affected by changes in economic, environmental and other conditions, including declines in the value of real estate, changes in interest rates, changes in monetary and fiscal policies of the federal government, wide-spread disease, terrorist activity, environmental contamination and other external events.
Moreover, the Federal Reserve lowered the Federal Funds rate in 2020 and maintained a rate of 0% to 0.25% throughout 2021 while injecting massive amounts of liquidity into the nation’s monetary system.
Accordingly, there is an inherent risk of lower future earnings or decline in fair value of the Corporation’s financial instruments when interest rates change. Moreover, the Federal Reserve lowered the Federal Funds rate in 2020 and maintained a rate of 0% to 0.25% throughout 2021 while injecting massive amounts of liquidity into the nation’s monetary system.
The unrealized decrease in fair value was consistent with the significant increases in market interest rates that occurred in 2022, and there were no credit-related declines in fair value and no other-than-temporary losses recorded at December 31, 2022. Further increases in interest rates would cause the fair value of the available-for-sale debt securities portfolio to decrease further.
The unrealized decrease in fair value was consistent with the increases in market interest rates that occurred subsequent to the purchases of the securities, and no allowance for credit losses was required on available-for-sale debt securities in an unrealized loss position at December 31, 2023.
If the volume of such forced repurchases of loans were to increase significantly, or if the Corporation were to be dropped from the programs, it could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity. ​ Coronavirus Outbreak – The COVID-19 pandemic has caused significant disruptions in the international and U.S. economies as well as the Corporation’s local economy.
If the volume of such forced repurchases of loans were to increase significantly, or if the Corporation were to be dropped from the programs, it could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity. ITEM 1B . UNRESOLVED STAFF COMMENTS Not applicable. ​
Significant new laws or changes in, or repeals of, existing laws could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity.
Significant new laws or changes in, or repeals of, existing laws could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity. For example, the regulatory authorities may take actions that could result in decreases in service charge revenue from deposit accounts, including overdraft privilege and other fees.
Such risk management and accounting policies and procedures, however, may not prevent unexpected losses that could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity. Interest Rate Risk - Business risk arising from changes in interest rates is an inherent factor in operating a banking organization.
Such risk management and accounting policies and procedures, however, may not prevent unexpected losses that could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity. ​ A significant portion of the Corporation's loan portfolio consists of commercial real estate loans, including owner occupied properties, non-owner-occupied properties, and other commercial properties.
In 2022, the Federal Reserve changed course, raising the Federal Funds rate several times to a range of 4.25% to 4.50% at December 31, 2022 and then to 4.50% to 4.75% on February 1, 2023. The Federal Reserve’s rate increases, along with an accompanying tightening of the money supply, have been conducted in an effort to contain inflation.
In 2022, the Federal Reserve changed course, raising the Federal Funds rate several times to a range of 4.25% to 4.50% at December 31, 2022. Furthermore, in 2023, the Federal Reserve raised 6 Table of Contents the rate several times to a range of 5.25% to 5.50% at December 31, 2023.
Removed
Also, as discussed further in the “Provision and Allowance for Loan Losses” section of Management’s Discussion and Analysis, the Corporation attempts to estimate the amount of losses that may be inherent in the portfolio through a quarterly evaluation process that includes several members of management and that addresses specifically identified problem loans, as well as other quantitative data and qualitative factors.
Added
Risks Related to Banking Industry Turmoil – The Corporation is exposed to the risk that when a bank or other financial institution experiences financial difficulties, there could be an adverse “contagion” impact on other banking institutions.
Removed
Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the coronavirus outbreak, and there is no guarantee that the Corporation’s efforts to address any adverse impacts of the coronavirus will be effective.
Added
The failures of Silicon Valley Bank in California, Signature Bank in New York and First Republic Bank in California during the first and second quarters of 2023 caused an element of panic and uncertainty in the investor community and among bank customers generally, including, specifically, deposit customers.
Removed
The extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of new variants of the coronavirus and actions taken to contain the coronavirus or its impact.
Added
While the Corporation does not believe that the circumstances of these three failures are necessarily indicators of broader issues for concern with all other banks or with the banking system itself, the failures have reduced customer confidence and are 5 Table of Contents likely to affect sources of funding and liquidity, increase regulatory requirements and costs, adversely affect financial markets and/or have negative reputational ramifications for institutions in the banking industry, including, possibly, the Corporation.
Removed
The effect of COVID-19 and related events, including those described above and those not yet known or knowable, could have a negative effect on the Corporation’s business prospects, financial condition and results of operations, as a result of quarantines; market volatility; market downturns; changes in consumer behavior; business closures; deterioration in the credit quality of borrowers or the inability of borrowers to satisfy their obligations (and any related forbearances or restructurings that may be implemented); changes in the value of collateral securing outstanding loans; changes in the value of the investment securities portfolio; effects on key employees, including operational management personnel and those charged with preparing, monitoring and evaluating the Corporation’s financial reporting and internal controls; and declines in the demand for loans and other banking services and products.
Added
The Corporation will continue to closely monitor the ongoing events and volatility in the financial services industry, together with any responsive measures taken by the banking regulators to mitigate or manage the turmoil.
Added
A decline in local economic conditions may have a greater effect on the Corporation’s earnings and capital than on the earnings and capital of other financial institutions whose real estate loan portfolios are more geographically diverse.
Added
In addition, collateral appraisals that are out of date or that do not meet industry recognized standards may create the impression that a loan is adequately collateralized when it is not.
Added
Also, as discussed further in the “Provision and Allowance for Credit Losses” section of Management’s Discussion and Analysis, the Corporation uses an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology.
Added
CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts.
Added
These types of loans are generally viewed as having more risk of default than residential real estate loans and depend on cash flows from the owner’s business or the property’s tenants to service the debt.
Added
The borrower’s cash flows may be affected significantly by general economic conditions, a downturn in the local economy or in occupancy rates in the market where the property is located, any of which could increase the likelihood of default.
Added
Commercial real estate loans also typically have larger loan balances, and, therefore, the deterioration of one or a few of these loans could cause a significant increase in the percentage of the Corporation's non-performing loans.
Added
An increase in non-performing loans could result in a loss of earnings from these loans, an increase in the provision for credit losses for loans, and an increase in charge-offs, all of which could have a material adverse effect on the Corporation's business, financial condition, and results of operations.
Added
The banking regulatory agencies have recently expressed concerns about weaknesses in the current commercial real estate market.
Added
Banking regulators generally give commercial real estate lending greater scrutiny and may require banks with higher levels of commercial real estate loans to implement enhanced risk management practices, including stricter underwriting, internal controls, risk management policies, more granular reporting, and portfolio stress testing, as well as possibly higher levels of allowances for losses and capital levels as a result of commercial real estate lending growth and exposures.
Added
If the Corporation's banking regulators determine that our commercial real estate lending activities are particularly risky and are subject to such heightened scrutiny, the Corporation may incur significant additional costs or be required to restrict certain of our commercial real estate lending activities.
Added
Furthermore, failures in the Corporation's risk management policies, procedures and controls could adversely affect our ability to manage this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which could have a material adverse effect on the Corporation's business, financial condition, and results of operations.
Added
Additionally, the financial services industry is undergoing rapid technological change with frequent introductions of new technology-driven products and services, including those related to artificial intelligence, to technologies that automate functions previously performed manually, facilitate the ability of customers to engage in financial transactions and otherwise enhance the customer experience.
Added
Many of these initiatives take a significant amount of time to develop and implement, are tied to critical systems, and require substantial financial, human, and other resources. The investments by larger competitors in these initiatives may be more substantial than those of the Corporation, which may cause the Corporation to lose market share.
Added
Although the Corporation, in making such investments, takes steps to mitigate the risks and uncertainties associated with these initiatives, they are not always implemented on time, within budget, or without negative financial, operational, or customer impact and do not always perform as the Corporation or its customers expect.
Added
Financial services institutions and companies engaged in data processing have reported breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to sensitive information, destroy data, steal financial assets, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, cyber-attacks and other means.
Added
Denial of service attacks have been launched against a number of large financial services institutions. The Corporation may be subject to similar attacks in the future. Hacking and identity theft risks could 7 Table of Contents cause serious reputational harm and financial loss to the Corporation.
Added
Cyber threats are rapidly evolving and the Corporation may not be able to anticipate or prevent all such attacks. Advancements in the use of artificial intelligence could lead to attacks by exploiting vulnerabilities to manipulate model outputs or bypass security controls.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changePROPERTIES A summary of the Corporation’s operating properties is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Number ​ Number of ​ Number of ​ ​ of ​ Owned ​ Leased ​ ​ Locations ​ Properties ​ Properties 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 ​ ​
Biggest changePROPERTIES A summary of the Corporation’s operating properties is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Number ​ Number of ​ Number of ​ ​ of ​ Owned ​ Leased ​ ​ Locations ​ Properties ​ Properties Branches ​ 29 ​ 23 ​ 6 Limited Purpose Office-Lending ​ 1 ​ 1 ​ 0 Administrative/Multi-purpose ​ 2 ​ 1 ​ 1 Ancillary Facilities ​ 2 ​ 1 ​ 1 Total ​ 34 ​ 26 ​ 8 ​ 10 Table of Contents ​

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThis meets Securities & Exchange Commission requirements for showing dividend reinvestment share performance over a five-year period and measures the return to an investor for placing $100.00 into a group of bank stocks and reinvesting any and all dividends into the purchase of more of the same stock for which dividends were paid. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending 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 ​ Legacy Peer Group includes all publicly traded SEC filing Commercial Banks & Thrifts within NJ, NY, OH, PA, MD, and WV with assets between 0.5 times and 2.0 times CZNC as of 9/30/2022. 11 Table of Contents EQUITY COMPENSATION PLAN INFORMATION The following table sets forth information concerning the Stock Incentive Plan and Independent Directors Stock Incentive Plan, both of which have been approved by the Corporation’s shareholders.
Biggest changeThis meets Securities & Exchange Commission requirements for showing dividend reinvestment share performance over a five-year period and measures the return to an investor for placing $100.00 into a group of bank stocks and reinvesting any and all dividends into the purchase of more of the same stock for which dividends were paid. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Period Ending Index 12/31/18 12/31/19 12/31/20 12/31/21 12/31/22 12/31/23 Citizens & Northern Corporation 100.00 111.83 83.01 114.60 105.03 108.92 Russell 2000 Index 100.00 125.49 150.50 172.75 137.40 160.60 Peer Group (NASDAQ Bank Index) 100.00 124.38 115.04 164.41 137.65 132.92 ​ 12 Table of Contents EQUITY COMPENSATION PLAN INFORMATION The following table sets forth information concerning the Citizens & Northern 2023 Equity Stock Incentive Plan which was approved by the Corporation’s shareholders in April 2023.
The figures shown in the table below are as of December 31, 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ Number of ​ Weighted- ​ Securities ​ ​ Securities to be ​ average ​ Remaining ​ ​ Issued Upon ​ Exercise ​ for Future ​ ​ Exercise of ​ Price of ​ Issuance Under ​ ​ Outstanding ​ Outstanding ​ Equity Compen- ​ Options Options sation Plans Equity compensation plans approved by shareholders 10,564 ​ $ 20.45 139,648 ​ ​ ​ ​ ​ ​ ​ ​ Equity compensation plans not approved by shareholders 0 ​ N/A 0 ​ More details related to the Corporation’s equity compensation plans are provided in Notes 1 and 13 to the consolidated financial statements. ​ ITEM 6.
The figures shown in the table below are as of December 31, 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ ​ Number of ​ Weighted- ​ Securities ​ ​ Securities to be ​ average ​ Remaining ​ ​ Issued Upon ​ Exercise ​ for Future ​ ​ Exercise of ​ Price of ​ Issuance Under ​ ​ Outstanding ​ Outstanding ​ Equity Compen- ​ Options Options sation Plans Equity compensation plans approved by shareholders 646 ​ $ 20.45 500,000 ​ ​ ​ ​ ​ ​ ​ ​ Equity compensation plans not approved by shareholders 0 ​ N/A 0 ​ More details related to the Corporation’s equity compensation plans are provided in Notes 1 and 12 to the consolidated financial statements. ​ ITEM 6.
The following table sets forth a summary of purchases by the Corporation, in the open market, of its equity securities during the fourth quarter 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Maximum ​ ​ ​ ​ ​ ​ ​ Shares ​ Number of ​ ​ ​ ​ ​ ​ ​ Purchased ​ Shares that May ​ ​ ​ ​ ​ ​ ​ as Part of ​ Yet ​ ​ ​ ​ ​ ​ ​ Publicly ​ be Purchased ​ ​ Total Number ​ Average ​ Announced ​ Under ​ ​ of Shares ​ Price Paid ​ Plans ​ the Plans or Period ​ Purchased ​ per Share ​ or Programs ​ Programs October 1 - 31, 2022 0 ​ $ N/A 674,700 325,300 November 1 - 30, 2022 0 ​ $ N/A 674,700 325,300 December 1 - 31, 2022 0 ​ $ N/A 674,700 325,300 ​ ​ 10 Table of Contents PERFORMANCE GRAPH Set forth below is a chart comparing the Corporation’s cumulative return to stockholders against the cumulative return of the Russell 2000 Index and the Corporation’s peer group indices (the NASDAQ Bank Index and a Legacy Peer Group Index of similar banking organizations selected by the Corporation) for the five-year period commencing December 31, 2017 and ended December 31, 2022.
The following table sets forth a summary of purchases by the Corporation, in the open market, of its equity securities during the fourth quarter 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number of Maximum ​ ​ ​ ​ ​ ​ ​ Shares ​ Number of ​ ​ ​ ​ ​ ​ ​ Purchased ​ Shares that May ​ ​ ​ ​ ​ ​ ​ as Part of ​ Yet ​ ​ ​ ​ ​ ​ ​ Publicly ​ be Purchased ​ ​ Total Number ​ Average ​ Announced ​ Under ​ ​ of Shares ​ Price Paid ​ Plans ​ the Plans or Period ​ Purchased ​ per Share ​ or Programs ​ Programs October 1 - 31, 2023 0 ​ $ N/A 0 750,000 November 1 - 30, 2023 0 ​ $ N/A 0 750,000 December 1 - 31, 2023 0 ​ $ N/A 0 750,000 ​ 11 Table of Contents PERFORMANCE GRAPH Set forth below is a chart comparing the Corporation’s cumulative return to stockholders against the cumulative return of the Russell 2000 Index and the Corporation’s peer group index (the NASDAQ Bank Index) for the five-year period commencing December 31, 2018 and ended December 31, 2023.
As permitted by securities laws and other legal requirements and subject to market conditions and other factors, purchases may be made from time to time in the open market at prevailing prices, or through privately negotiated transactions.
Through December 31, 2023, no shares were repurchased under the new program. As permitted by securities laws and other legal requirements and subject to market conditions and other factors, purchases may be made from time to time in the open market at prevailing prices, or through privately negotiated transactions.
Also, the Corporation and C&N Bank are subject to restrictions on the amount of dividends that may be paid without approval of banking regulatory authorities. These restrictions are described in Note 18 to the consolidated financial statements. Effective February 18, 2021, the Corporation amended its treasury stock repurchase program.
Also, the Corporation and C&N Bank are subject to restrictions on the amount of dividends that may be paid without approval of banking regulatory authorities. These restrictions are described in Note 17 to the consolidated financial statements. On September 25, 2023, the Corporation announced a new treasury stock repurchase program.
Consistent with the previously approved program, the Board of Directors' February 18, 2021 approval provides that: (1) the treasury stock repurchase program, as amended to increase the repurchase authorization to 1,000,000 shares, shall be effective when publicly announced and shall continue thereafter until suspended or terminated by the Board of Directors, in its sole discretion; and (2) all shares of common stock repurchased pursuant to the program shall be held as treasury shares and be available for use and reissuance for purposes as and when determined by the Board of Directors including, without limitation, pursuant to the Corporation’s Dividend Reinvestment and Stock Purchase Plan and its equity compensation program.
All shares of common stock repurchased pursuant to the new program shall be held as treasury shares and be available for use and reissuance for purposes as and when determined by the Board of Directors including, without limitation, pursuant to the Corporation’s Dividend Reinvestment and Stock Purchase Plans and its equity compensation program.
Under the amended program, the Corporation is authorized to repurchase up to 1,000,000 shares of the Corporation’s common stock, or 6.25% of the Corporation’s issued 9 Table of Contents and outstanding shares at February 18, 2021.
Under the newly approved program, the Corporation is authorized to repurchase up to 750,000 shares of the Corporation’s common stock, or slightly less than 5% of the Corporation’s issued and outstanding shares at August 4, 2023.
Removed
As of December 31, 2022, there were 2,086 shareholders of record of the Corporation’s common stock.
Added
As of December 31, 2023, there were 2,036 shareholders of record of the Corporation’s common stock. While the Corporation has a history of paying cash dividends, future dividend payments will depend upon maintenance of a strong financial condition, future earnings and capital and regulatory requirements.
Removed
The following table sets forth the high and low sales prices of the common stock and dividends declared per quarter during 2022 and 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 ​ ​ ​ ​ ​ ​ ​ ​ Dividend ​ ​ ​ ​ ​ ​ ​ Dividend ​ ​ ​ ​ ​ ​ ​ ​ Declared ​ ​ ​ ​ ​ ​ ​ Declared ​ ​ ​ ​ ​ ​ ​ ​ per ​ ​ ​ ​ ​ ​ ​ per ​ High Low Quarter High Low 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 ​ Future dividend payments will depend upon maintenance of a strong financial condition, future earnings and capital and regulatory requirements.
Added
The new program was effective when publicly announced and will continue thereafter until suspended or terminated by the Board of Directors, in its sole discretion.
Removed
As of December 31, 2022, 674,700 shares have been repurchased for a total cost of $16,587,000, at an average price of $24.58 per share under the repurchase program.
Added
The 646 shares issuable pursuant to stock options at December 31, 2023 were issued under a previous plan and expired in January 2024.
Removed
The NASDAQ Bank Index has been selected to replace the existing Peer Group Index of similar-size banking organizations selected by the Corporation in this Annual Report on Form 10-K. Management believes the NASDAQ Bank Index is a more stable peer group that will not require changes in composition from year-to-year as the Corporation’s size and complexity of operations changes.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

88 edited+81 added−105 removed43 unchanged
Biggest changeTABLE IX - ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars In Thousands) ​ Years Ended December 31, ​ ​ 2022 2021 2020 2019 2018 Balance, beginning of year ​ $ 13,537 ​ $ 11,385 ​ $ 9,836 ​ $ 9,309 ​ $ 8,856 ​ Charge-offs: ​ ​ ​ ​ ​ ​ Commercial ​ (4,092) ​ (1,464) ​ (2,343) ​ (6) ​ (165) ​ Residential mortgage ​ 0 ​ (11) ​ 0 ​ (190) ​ (158) ​ Consumer ​ (153) ​ (100) ​ (122) ​ (183) ​ (174) ​ Total charge-offs ​ (4,245) ​ (1,575) ​ (2,465) ​ (379) ​ (497) ​ Recoveries: ​ ​ ​ ​ ​ ​ Commercial ​ 0 ​ 22 ​ 16 ​ 6 ​ 317 ​ Residential mortgage ​ 19 ​ 6 ​ 44 ​ 12 ​ 8 ​ Consumer ​ 49 ​ 38 ​ 41 ​ 39 ​ 41 ​ Total recoveries ​ 68 ​ 66 ​ 101 ​ 57 ​ 366 ​ Net charge-offs ​ (4,177) ​ (1,509) ​ (2,364) ​ (322) ​ (131) ​ Provision for loan losses ​ 7,255 ​ 3,661 ​ 3,913 ​ 849 ​ 584 ​ Balance, end of period ​ $ 16,615 ​ $ 13,537 ​ $ 11,385 ​ $ 9,836 ​ $ 9,309 ​ Net charge-offs as a % of average loans ​ 0.26 % 0.09 % 0.16 % 0.03 % 0.02 % ​ TABLE X - COMPONENTS OF THE ALLOWANCE FOR LOAN LOSSES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) As of December 31, ​ 2022 2021 2020 2019 2018 ASC 310 - Impaired loans - individually evaluated $ 453 ​ $ 740 ​ $ 925 ​ $ 1,051 ​ $ 1,605 ASC 450 - Collectively evaluated: ​ ​ ​ ​ Commercial 10,845 ​ 7,553 ​ 5,545 ​ 3,913 ​ 3,102 Residential mortgage 4,073 ​ 4,338 ​ 4,091 ​ 4,006 ​ 3,870 Consumer 244 ​ 235 ​ 239 ​ 281 ​ 233 Unallocated 1,000 ​ 671 ​ 585 ​ 585 ​ 499 Total Allowance $ 16,615 ​ $ 13,537 ​ $ 11,385 ​ $ 9,836 ​ $ 9,309 ​ ​ 34 Table of Contents TABLE XI - PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS AND TROUBLED DEBT RESTRUCTURINGS (TDRs) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars In Thousands) As of December 31, ​ 2022 2021 2020 2019 2018 Impaired loans with a valuation allowance $ 3,460 ​ $ 6,540 ​ $ 8,082 ​ $ 3,375 ​ $ 4,851 ​ Impaired loans without a valuation allowance 14,871 ​ 2,636 ​ 2,895 ​ 1,670 ​ 4,923 ​ Purchased credit impaired loans ​ 1,027 ​ ​ 6,558 ​ ​ 6,841 ​ ​ 441 ​ ​ 0 ​ Total impaired loans $ 19,358 ​ $ 15,734 ​ $ 17,818 ​ $ 5,486 ​ $ 9,774 ​ Total loans past due 30-89 days and still accruing $ 7,079 ​ $ 5,106 ​ $ 5,918 ​ $ 8,889 ​ $ 7,142 ​ Nonperforming assets: ​ ​ ​ ​ ​ Purchased credit impaired loans $ 1,027 ​ $ 6,558 ​ $ 6,841 ​ $ 441 ​ $ 0 ​ Other nonaccrual loans ​ 22,058 ​ ​ 12,441 ​ ​ 14,575 ​ ​ 8,777 ​ ​ 13,113 ​ Total nonaccrual loans ​ 23,085 ​ ​ 18,999 ​ ​ 21,416 ​ ​ 9,218 ​ ​ 13,113 ​ Total loans past due 90 days or more and still accruing 2,237 ​ 2,219 ​ 1,975 ​ 1,207 ​ 2,906 ​ Total nonperforming loans 25,322 ​ 21,218 ​ 23,391 ​ 10,425 ​ 16,019 ​ Foreclosed assets held for sale (real estate) 275 ​ 684 ​ 1,338 ​ 2,886 ​ 1,703 ​ Total nonperforming assets $ 25,597 ​ $ 21,902 ​ $ 24,729 ​ $ 13,311 ​ $ 17,722 ​ Loans subject to troubled debt restructurings (TDRs): ​ ​ ​ ​ ​ Performing $ 571 ​ $ 288 ​ $ 166 ​ $ 889 ​ $ 655 ​ Nonperforming 3,856 ​ 5,517 ​ 7,285 ​ 1,737 ​ 2,884 ​ Total TDRs $ 4,427 ​ $ 5,805 ​ $ 7,451 ​ $ 2,626 ​ $ 3,539 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total nonperforming loans as a % of loans 1.46 % 1.36 % 1.42 % 0.88 % 1.94 % Total nonperforming assets as a % of assets 1.04 % 0.94 % 1.10 % 0.80 % 1.37 % Allowance for loan losses as a % of total loans 0.95 % 0.87 % 0.69 % 0.83 % 1.12 % Credit adjustment on purchased non-impaired loans and allowance for loan losses as a % of total loans and the credit adjustment (a) ​ 1.06 % ​ 1.08 % ​ 1.05 % ​ 0.93 % ​ 1.12 % Allowance for loan losses as a % of nonperforming loans 65.61 % 63.80 % 48.67 % 94.35 % 58.11 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (a) Credit adjustment on purchased non-impaired loans at end of period $ 1,840 ​ $ 3,335 ​ $ 5,979 ​ $ 1,216 ​ $ 0 ​ Allowance for loan losses ​ 16,615 ​ ​ 13,537 ​ ​ 11,385 ​ ​ 9,836 ​ ​ 9,309 ​ Total credit adjustment on purchased non-impaired loans at end of period and allowance for loan losses (1) $ 18,455 ​ $ 16,872 ​ $ 17,364 ​ $ 11,052 ​ $ 9,309 ​ Total loans receivable $ 1,740,040 ​ $ 1,564,849 ​ $ 1,644,209 ​ $ 1,182,222 ​ $ 827,563 ​ Credit adjustment on purchased non-impaired loans at end of period ​ 1,840 ​ ​ 3,335 ​ ​ 5,979 ​ ​ 1,216 ​ ​ 0 ​ Total (2) $ 1,741,880 ​ $ 1,568,184 ​ $ 1,650,188 ​ $ 1,183,438 ​ $ 827,563 ​ Credit adjustment on purchased non-impaired loans and allowance for loan losses as a % of total loans and the credit adjustment (1)/(2) ​ 1.06 % ​ 1.08 % ​ 1.05 % ​ 0.93 % ​ 1.12 % ​ ​ ​ 35 Table of Contents TABLE XII – FIVE-YEAR HISTORY OF LOAN LOSSES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars In Thousands) 2022 2021 2020 2019 2018 Average Average gross loans ​ $ 1,628,094 ​ $ 1,596,756 ​ $ 1,445,098 ​ $ 1,057,559 ​ $ 822,346 ​ $ 1,309,971 ​ Year-end gross loans ​ 1,740,040 ​ 1,564,849 ​ 1,644,209 ​ 1,182,222 ​ 827,563 ​ $ 1,391,777 ​ Year-end allowance for loan losses ​ 16,615 ​ 13,537 ​ 11,385 ​ 9,836 ​ 9,309 ​ $ 12,136 ​ Year-end nonaccrual loans ​ 23,085 ​ 18,999 ​ 21,416 ​ 9,218 ​ 13,113 ​ $ 17,166 ​ Year-end loans 90 days or more past due and still accruing ​ 2,237 ​ 2,219 ​ 1,975 ​ 1,207 ​ 2,906 ​ 2,109 ​ Net charge-offs ​ 4,177 ​ 1,509 ​ 2,364 ​ 322 ​ 131 ​ 1,701 ​ Provision for loan losses ​ 7,255 ​ 3,661 ​ 3,913 ​ 849 ​ 584 ​ 3,252 ​ Earnings coverage of charge-offs ​ 8 x 26 x 10 x 76 x 210 x 17 x Allowance coverage of charge-offs ​ 4 x 9 x 5 x 31 x 71 x 7 x Net charge-offs as a % of provision for loan losses ​ 57.57 % 41.22 % 60.41 % 37.93 % 22.43 % 52.31 % Net charge-offs as a % of average gross loans ​ 0.26 % 0.09 % 0.16 % 0.03 % 0.02 % 0.13 % Income before income taxes on a fully taxable equivalent basis ​ 33,576 ​ 38,822 ​ 24,192 ​ 24,453 ​ 27,564 ​ 29,721 ​ ​ CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS The Corporation’s significant fixed and determinable contractual obligations as of December 31, 2022 include repayment obligations related to time deposits and borrowed funds.
Biggest changeTables IX through XII present historical data related to loans and the allowance for credit losses. . ​ 32 Table of Contents ​ TABLE IX - ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES ON LOANS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars In Thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Years Ended December 31, ​ 2023 2022 2021 2020 2019 Balance, beginning of year $ 16,615 ​ $ 13,537 ​ $ 11,385 ​ $ 9,836 ​ $ 9,309 ​ Adoption of ASU 2016-13 (CECL) 2,104 ​ 0 ​ 0 ​ 0 ​ 0 ​ Charge-offs (356) ​ (4,245) ​ (1,575) ​ (2,465) ​ (379) ​ Recoveries 92 ​ 68 ​ 66 ​ 101 ​ 57 ​ Net charge-offs (264) ​ (4,177) ​ (1,509) ​ (2,364) ​ (322) ​ Provision for credit losses 753 ​ 7,255 ​ 3,661 ​ 3,913 ​ 849 ​ Balance, end of year $ 19,208 ​ $ 16,615 ​ $ 13,537 ​ $ 11,385 ​ $ 9,836 ​ Net charge-offs as a % of average loans 0.01 % 0.26 % 0.09 % 0.16 % 0.03 % ​ ​ TABLE X - COMPONENTS OF THE ALLOWANCE FOR CREDIT LOSSES ​ UPON ADOPTION OF CECL ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ December 31, ​ January 1, ​ ​ 2023 ​ 2023 Loans individually evaluated ​ $ 743 ​ $ 751 Loans collectively evaluated: ​ ​ ​ ​ ​ ​ Commercial real estate - nonowner occupied ​ ​ 10,379 ​ ​ 9,641 Commercial real estate - owner occupied ​ ​ 2,111 ​ ​ 1,765 All other commercial loans ​ ​ 3,811 ​ ​ 3,914 Residential mortgage ​ ​ 1,764 ​ ​ 2,407 Consumer ​ ​ 400 ​ ​ 241 Total Allowance ​ $ 19,208 ​ $ 18,719 ​ PRIOR TO CECL ADOPTION ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ As of December 31, ​ 2022 2021 2020 2019 ASC 310 - Impaired loans - individually evaluated ​ $ 453 ​ $ 740 ​ $ 925 ​ $ 1,051 ASC 450 - Collectively evaluated: ​ ​ ​ ​ Commercial ​ 10,845 ​ 7,553 ​ 5,545 ​ 3,913 Residential mortgage ​ 4,073 ​ 4,338 ​ 4,091 ​ 4,006 Consumer ​ 244 ​ 235 ​ 239 ​ 281 Unallocated ​ 1,000 ​ 671 ​ 585 ​ 585 Total Allowance ​ $ 16,615 ​ $ 13,537 ​ $ 11,385 ​ $ 9,836 ​ ​ 33 Table of Contents TABLE XI - PAST DUE AND NONPERFORMING ASSETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars In Thousands) As of December 31, ​ 2023 2022 2021 2020 2019 Loans individually evaluated with a valuation allowance $ 7,786 ​ $ 3,460 ​ $ 6,540 ​ $ 8,082 ​ $ 3,375 ​ Loans individually evaluated without a valuation allowance 3,478 ​ 14,871 ​ 2,636 ​ 2,895 ​ 1,670 ​ Purchased credit impaired loans ​ 0 ​ ​ 1,027 ​ ​ 6,558 ​ ​ 6,841 ​ ​ 441 ​ Total individually evaluated loans $ 11,264 ​ $ 19,358 ​ $ 15,734 ​ $ 17,818 ​ $ 5,486 ​ Total loans past due 30-89 days and still accruing $ 9,275 ​ $ 7,079 ​ $ 5,106 ​ $ 5,918 ​ $ 8,889 ​ Nonperforming assets: ​ ​ ​ ​ ​ Purchased credit impaired loans $ 0 ​ $ 1,027 ​ $ 6,558 ​ $ 6,841 ​ $ 441 ​ Other nonaccrual loans ​ 15,177 ​ ​ 22,058 ​ ​ 12,441 ​ ​ 14,575 ​ ​ 8,777 ​ Total nonaccrual loans ​ 15,177 ​ ​ 23,085 ​ ​ 18,999 ​ ​ 21,416 ​ ​ 9,218 ​ Total loans past due 90 days or more and still accruing 3,190 ​ 2,237 ​ 2,219 ​ 1,975 ​ 1,207 ​ Total nonperforming loans 18,367 ​ 25,322 ​ 21,218 ​ 23,391 ​ 10,425 ​ Foreclosed assets held for sale (real estate) 478 ​ 275 ​ 684 ​ 1,338 ​ 2,886 ​ Total nonperforming assets $ 18,845 ​ $ 25,597 ​ $ 21,902 ​ $ 24,729 ​ $ 13,311 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total nonperforming loans as a % of loans 0.99 % 1.46 % 1.36 % 1.42 % 0.88 % Total nonperforming assets as a % of assets 0.75 % 1.04 % 0.94 % 1.10 % 0.80 % Allowance for credit losses as a % of total loans 1.04 % 0.95 % 0.87 % 0.69 % 0.83 % ​ ​ ​ 34 Table of Contents TABLE XII – FIVE-YEAR HISTORY OF LOAN LOSSES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars In Thousands) 2023 2022 2021 2020 2019 Average Average gross loans ​ $ 1,792,149 ​ $ 1,628,094 ​ $ 1,596,756 ​ $ 1,445,098 ​ $ 1,057,559 ​ $ 1,503,931 ​ Year-end gross loans ​ 1,848,139 ​ 1,740,040 ​ 1,564,849 ​ 1,644,209 ​ 1,182,222 ​ $ 1,595,892 ​ Year-end allowance for credit losses on loans ​ 19,208 ​ 16,615 ​ 13,537 ​ 11,385 ​ 9,836 ​ $ 14,116 ​ Year-end nonaccrual loans ​ 15,177 ​ 23,085 ​ 18,999 ​ 21,416 ​ 9,218 ​ $ 17,579 ​ Year-end loans 90 days or more past due and still accruing ​ 3,190 ​ 2,237 ​ 2,219 ​ 1,975 ​ 1,207 ​ 2,166 ​ Net charge-offs ​ 264 ​ 4,177 ​ 1,509 ​ 2,364 ​ 322 ​ 1,727 ​ Provision for credit losses on loans ​ 753 ​ 7,255 ​ 3,661 ​ 3,913 ​ 849 ​ 3,286 ​ Earnings coverage of charge-offs ​ 119 x 8 x 26 x 10 x 76 x 18 x Allowance coverage of charge-offs ​ 73 x 4 x 9 x 5 x 31 x 8 x Net charge-offs as a % of provision for credit losses on loans ​ 35.06 % 57.57 % 41.22 % 60.41 % 37.93 % 52.31 % Net charge-offs as a % of average gross loans ​ 0.01 % 0.26 % 0.09 % 0.16 % 0.03 % 0.11 % Income before income taxes on a fully taxable equivalent basis ​ 31,402 ​ 33,576 ​ 38,822 ​ 24,192 ​ 24,453 ​ 30,489 ​ ​ CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS The Corporation’s significant fixed and determinable contractual obligations as of December 31, 2023 include repayment obligations related to time deposits and borrowed funds.
Key objectives include supporting liquidity needs, maximizing return on earning assets within reasonable risk parameters and providing a means to hedge the Corporation’s overall asset-sensitive interest rate risk exposure, while maintaining high credit quality. Table VI shows the composition of the available-for-sale debt securities portfolio at December 31, 2022, 2021 and 2020.
Key objectives include supporting liquidity needs, maximizing return on earning assets within reasonable risk parameters and providing a means to hedge the Corporation’s overall asset-sensitive interest rate risk exposure, while maintaining high credit quality. Table VI shows the composition of the available-for-sale debt securities portfolio at December 31, 2023, 2022 and 2021.
There are no significant concerns that have arisen related to the Corporation’s off-balance sheet loan commitments or outstanding letters of credit at December 31, 2022, and management does not expect the amount of purchases of bank premises and equipment to have a material, detrimental effect on the Corporation’s financial condition in 2023.
There are no significant concerns that have arisen related to the Corporation’s off-balance sheet loan commitments or outstanding letters of credit at December 31, 2023, and management does not expect the amount of purchases of bank premises and equipment to have a material, detrimental effect on the Corporation’s financial condition in 2024.
Management believes, as of December 31, 2022, that C&N Bank meets all capital adequacy requirements to which it is subject and maintains a capital conservation buffer (described in more detail below) that allows the Bank to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers.
Management believes, as of December 31, 2023, that C&N Bank meets all capital adequacy requirements to which it is subject and maintains a capital conservation buffer (described in more detail below) that allows the Bank to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers.
The lower effective income tax rate in 2022 as compared to 2021 includes the impact of higher tax-exempt interest as a percentage of pre-tax income, a larger permanent difference (deduction) related to restricted stock compensation and the benefit of a $340,000 reduction in expense from the reversal of tax penalties being non-deductible.
The lower effective tax rate in 2022 includes the impact of higher tax-exempt interest as a percentage of pre-tax income, a larger permanent difference (deduction) related to restricted stock compensation and the benefit of a $340,000 reduction in expense from the reversal of tax penalties being non-deductible.
Through December 31, 2022, the Corporation’s activity under the MPF Direct Program has been minimal. For loan sales originated under the MPF programs, the Corporation provides customary representations and warranties to investors that specify, among other things, that the loans have been underwritten to the standards established by the investor.
Through December 31, 2023, the Corporation’s activity under the MPF Direct Program has been minimal. For loan sales originated under the MPF programs, the Corporation provides customary representations and warranties to investors that specify, among other things, that the loans have been underwritten to the standards established by the investor.
Further, the fair value of servicing rights increased $126,000 in 2022 as compared to a decrease of $68,000 in 2021 mainly due to changes in assumptions related to prepayments of mortgage loans. ​ Ø Other noninterest income of $3,699,000 increased $119,000, including increases in income from interest rate swap fees on commercial loans of $268,000, credit card interchange income of $107,000 and dividend income from Federal Home Loan 13 Table of Contents Bank stock of $83,000.
Further, the fair value of servicing rights increased $126,000 in 2022 as compared to a decrease of $68,000 in 2021 mainly due to changes in assumptions related to prepayments of mortgage loans. ​ Ø Other noninterest income of $3,699,000 increased $119,000, including increases in income from interest rate swap fees on commercial loans of $268,000, credit card interchange income of $107,000 and dividend income from Federal Home Loan Bank stock of $83,000.
Tables I, II and III include information regarding the Corporation’s net interest income in 2022, 2021 and 2020. In each of these tables, the amounts of interest income earned on tax-exempt securities and loans have been adjusted to a fully taxable-equivalent basis.
Tables I, II and III include information regarding the Corporation’s net interest income in 2023, 2022 and 2021. In each of these tables, the amounts of interest income earned on tax-exempt securities and loans have been adjusted to a fully taxable-equivalent basis.
Management believes the recorded net deferred tax asset at December 31, 2022 is fully realizable; however, if management determines the Corporation will be unable to realize all or part of the net deferred tax asset, the Corporation would adjust the deferred tax asset, which would negatively impact earnings.
Management believes the recorded net deferred tax asset at December 31, 2023 is fully realizable; however, if management determines the Corporation will be unable to realize all or part of the net deferred tax asset, the Corporation would adjust the deferred tax asset, which would negatively impact earnings.
Additional information related to income taxes is presented in Note 14 to the consolidated financial statements. SECURITIES Management continually evaluates several objectives in determining the size, securities mix and other characteristics of the available-for-sale debt securities (investment) portfolio.
Additional information related to income taxes is presented in Note 13 to the consolidated financial statements. SECURITIES Management continually evaluates several objectives in determining the size, securities mix and other characteristics of the available-for-sale debt securities (investment) portfolio.
In addition, the Corporation and C&N Bank are subject to restrictions on the amount of dividends that may be paid without approval of banking regulatory authorities. These restrictions are described in Note 18 to the consolidated financial statements.
In addition, the Corporation and C&N Bank are subject to restrictions on the amount of dividends that may be paid without approval of banking regulatory authorities. These restrictions are described in Note 17 to the consolidated financial statements.
The composition of the available-for-sale debt securities portfolio at December 31, 2022, December 31, 2021 and December 31, 2020 is as follows: TABLE VI - INVESTMENT SECURITIES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ ​ Amortized ​ Fair ​ Amortized ​ Fair ​ Amortized ​ Fair (In Thousands) Cost Value ​ Cost Value Cost Value ​ AVAILABLE-FOR-SALE DEBT SECURITIES: ​ ​ ​ ​ ​ ​ ​ ​ Obligations of the U.S.
The composition of the available-for-sale debt securities portfolio at December 31, 2023, December 31, 2022 and December 31, 2021 is as follows: TABLE VI - INVESTMENT SECURITIES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 2023 ​ 2022 ​ 2021 ​ ​ Amortized ​ Fair ​ Amortized ​ Fair ​ Amortized ​ Fair (In Thousands) Cost Value ​ Cost Value Cost Value ​ AVAILABLE-FOR-SALE DEBT SECURITIES: ​ ​ ​ ​ ​ ​ ​ ​ Obligations of the U.S.
Significant variances included the following: Ø Salaries and employee benefits of $41,833,000 increased $4,230,000, including an increase in base salaries expense of $3.8 million reflecting merit-based salary increases and an increase in number of personnel related to expansion of the Southcentral PA market with the opening of an office in Lancaster.
Significant variances included the following: 16 Table of Contents Ø Salaries and employee benefits of $41,833,000 increased $4,230,000, including an increase in base salaries expense of $3.8 million reflecting merit-based salary increases and an increase in number of personnel related to expansion of the Southcentral PA market with the opening of an office in Lancaster.
Income from purchase accounting-related adjustments in 2022 had a positive effect on net interest income of $1,621,000, including an increase in income on loans of $1,216,000 and a net reduction in interest expense on time deposits and borrowed funds totaling $405,000. The positive impact of purchase accounting-related adjustments to the net interest margin was 0.07% in 2022.
Income from purchase accounting-related adjustments in 2022 had a positive effect on net interest income of $1,621,000, including an increase in income on loans of $1,216,000 and a net reduction in interest expense on time deposits and borrowed funds totaling $405,000. 19 Table of Contents The positive impact of purchase accounting-related adjustments to the net interest margin was 0.07% in 2022.
GAAP as compared to net interest income as adjusted to a fully taxable-equivalent basis. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ Year Ended ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ Increase/(Decrease) ​ ​ 2022 2021 ​ 2020 ​ 2022/2021 2021/2020 Net Interest Income Under U.S.
GAAP as compared to net interest income as adjusted to a fully taxable-equivalent basis. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ Year Ended ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ Increase/(Decrease) ​ ​ 2023 2022 ​ 2021 ​ 2023/2022 2022/2021 Net Interest Income Under U.S.
Based on the fairly limited volume of required repurchases to date, no allowance has been established for representation and warranty exposures as of December 31, 2022 and December 31, 2021.
Based on the fairly limited volume of required repurchases to date, no allowance has been established for representation and warranty exposures as of December 31, 2023 and December 31, 2022.
A summary of payout restrictions based on the capital conservation buffer is as follows: ​ ​ ​ ​ ​ Capital Conservation Buffer Maximum Payout (as a % of risk-weighted assets) ​ (as a % of eligible retained income) Greater than 2.5% ​ No payout limitation applies ​ ≤2.5% and >1.875% ​ 60 % ≤1.875% and >1.25% ​ 40 % ≤1.25% and >0.625% ​ 20 % ≤0.625% ​ 0 % ​ At December 31, 2022, C&N Bank’s Capital Conservation Buffer (determined based on the minimum total capital ratio) was 6.68%.
A summary of payout restrictions based on the capital conservation buffer is as follows: ​ ​ ​ ​ ​ Capital Conservation Buffer Maximum Payout (as a % of risk-weighted assets) ​ (as a % of eligible retained income) Greater than 2.5% ​ No payout limitation applies ​ ≤2.5% and >1.875% ​ 60 % ≤1.875% and >1.25% ​ 40 % ≤1.25% and >0.625% ​ 20 % ≤0.625% ​ 0 % ​ At December 31, 2023, C&N Bank’s Capital Conservation Buffer (determined based on the minimum total capital ratio) was 6.89%.
At December 31, 2022, the minimum risk-based capital ratios, and the capital ratios including the capital conservation buffer, are as follows: ​ ​ ​ ​ ​ Minimum common equity tier 1 capital ratio 4.5 % Minimum common equity tier 1 capital ratio plus capital conservation buffer 7.0 % Minimum tier 1 capital ratio 6.0 % Minimum tier 1 capital ratio plus capital conservation buffer 8.5 % Minimum total capital ratio 8.0 % Minimum total capital ratio plus capital conservation buffer 10.5 % ​ A banking organization with a buffer greater than 2.5% over the minimum risk-based capital ratios would not be subject to additional limits on dividend payments or discretionary bonus payments; however, a banking organization with a buffer less than 2.5% would be subject to increasingly stringent limitations as the buffer approaches zero.
At December 31, 2023, the minimum risk-based capital ratios, and the capital ratios including the capital conservation buffer, are as follows: ​ ​ ​ ​ ​ Minimum common equity tier 1 capital ratio 4.5 % Minimum common equity tier 1 capital ratio plus capital conservation buffer 7.0 % Minimum tier 1 capital ratio 6.0 % Minimum tier 1 capital ratio plus capital conservation buffer 8.5 % Minimum total capital ratio 8.0 % Minimum total capital ratio plus capital conservation buffer 10.5 % 37 Table of Contents ​ A banking organization with a buffer greater than 2.5% over the minimum risk-based capital ratios would not be subject to additional limits on dividend payments or discretionary bonus payments; however, a banking organization with a buffer less than 2.5% would be subject to increasingly stringent limitations as the buffer approaches zero.
Further, the Corporation’s and C&N Bank’s capital ratios at December 31, 2022 and December 31, 2021 exceed the Corporation’s Board policy threshold levels.
Further, the Corporation’s and C&N Bank’s capital ratios at December 31, 2023 and December 31, 2022 exceed the Corporation’s Board policy threshold levels.
Information related to maturities of time deposits is provided in Note 11 to the consolidated financial statements. Information related to maturities of borrowed funds is provided in Note 12 to the consolidated financial statements. The Corporation’s operating lease commitments with terms of one year or less and other commitments at December 31, 2022 are immaterial.
Information related to maturities of time deposits is provided in Note 10 to the consolidated financial statements. Information related to maturities of borrowed funds is provided in Note 11 to the consolidated financial statements. The Corporation’s operating lease commitments with terms of one year or less and other commitments at December 31, 2023 are immaterial.
The Corporation may be required to repurchase a loan and reimburse a portion of fees received or reimburse the investor for a credit loss incurred on a loan, if it is determined that the representations and warranties have not been met. At December 31, 2022, outstanding balances of such loans sold totaled $325,677,000.
The Corporation may be required to repurchase a loan and reimburse a portion of fees received or reimburse the investor for a credit loss incurred on a loan, if it is determined that the representations and warranties have not been met. At December 31, 2023, outstanding balances of such loans sold totaled $323,298,000.
Information concerning operating lease commitments with terms greater than one year is provided in Note 17 to the consolidated financial statements. The Corporation’s significant off-balance sheet arrangements include commitments to extend credit and standby letters of credit. Off-balance sheet arrangements are described in Note 16 to the consolidated financial statements.
Information concerning operating lease commitments with terms greater than one year is provided in Note 15 to the consolidated financial statements. The Corporation’s significant off-balance sheet arrangements include commitments to extend credit and standby letters of credit.
The balance in accumulated other comprehensive loss related to unrealized losses on available-for-sale debt securities, net of deferred income tax, amounted to $50,370,000 at December 31, 2022 as compared to the balance in accumulated other comprehensive income related to unrealized gains on available-for-sale debt securities, net of deferred income tax of $4,809,000 at December 31, 2021 and $11,676,000 at December 31, 2020.
The balance in accumulated other comprehensive loss related to unrealized losses on available-for-sale debt securities, net of deferred income tax, amounted to $38,878,000 at December 31, 2023 and $50,370,000 at December 31, 2022 as compared to the balance in accumulated other comprehensive income related to unrealized gains on available-for-sale debt securities, net of deferred income tax of $ 4,809,000 at December 31, 2021.
Significant changes in the average balances of the Corporation’s earning assets and interest-bearing liabilities are described in the Net Interest Income section of Management’s Discussion and Analysis. Other significant balance sheet items, including securities, the allowance for loan losses and stockholders’ equity, are discussed in separate sections of Management’s Discussion and Analysis.
Significant changes in the average balances of the Corporation’s earning 28 Table of Contents assets and interest-bearing liabilities are described in the Net Interest Income section of Management’s Discussion and Analysis. Other significant balance sheet items, including securities, the allowance for credit losses for loans and stockholders’ equity, are discussed in separate sections of Management’s Discussion and Analysis.
At December 31, 2022, the largest categories of securities held as a percentage of total amortized cost, were as follows: (1) tax-exempt and taxable municipal bonds, 38.2%; (2) residential mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, including pass-through securities and collateralized mortgage obligations, 28.1%; and (3) commercial mortgage-backed securities issued or guaranteed by U.S.
At December 31, 2023, the largest categories of securities held as a percentage of total amortized cost, were as follows: (1) tax-exempt and taxable municipal bonds, 37.0%; (2) residential mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, including pass-through securities and collateralized mortgage obligations, 33.5%; and (3) commercial mortgage-backed securities issued or guaranteed by U.S.
STOCKHOLDERS’ EQUITY AND CAPITAL ADEQUACY Details concerning capital ratios at December 31, 2022 and December 31, 2021 are presented in Note 18 to the consolidated financial statements.
STOCKHOLDERS’ EQUITY AND CAPITAL ADEQUACY Details concerning capital ratios at December 31, 2023 and December 31, 2022 are presented in Note 17 to the consolidated financial statements.
(2) Fees on loans are included with interest on loans and amounted to $2,958,000 in 2022, $7,958,000 in 2021 and $4,314,000 in 2020. (3) The table that follows is a reconciliation of net interest income under U.S.
(2) Fees on loans are included with interest on loans and amounted to $1,856,000 in 2023, $2,958,000 in 2022 and $7,958,000 in 2021. (3) The table that follows is a reconciliation of net interest income under U.S.
The average balance of interest-bearing due from banks fell to 2.3% of average earning assets in 2022 from 7.3% in 2021 as excess funds were invested in securities and loans. Within this category, the largest asset balance in 2022 and 2021 has been interest-bearing deposits held with the Federal Reserve.
The average balance of interest-bearing due from banks fell to 1.4% of average earning assets in 2023 from 2.3% in 2022 as excess funds were invested primarily in loans. Within this category, the largest asset balance in 2023 and 2022 has been interest-bearing deposits held with the Federal Reserve.
The higher effective income tax rate in 2021 as compared to 2020 resulted mainly from a reduction in the proportion of tax-exempt interest income to total pre-tax income. The Corporation recognizes deferred tax assets and liabilities based on differences between the financial statement carrying amounts and the tax basis of assets and liabilities.
The lower effective income tax rate in 2022 as compared to 2021 resulted mainly from an increase in the proportion of tax-exempt interest income to total pre-tax income. The Corporation recognizes deferred tax assets and liabilities based on differences between the financial statement carrying amounts and the tax basis of assets and liabilities.
Yields on tax-exempt securities are presented on a fully taxable-equivalent basis. For callable securities, yields on securities purchased at a discount are based on yield-to-maturity, while yields on securities purchased at a premium are based on yield to the first call date. Yields on mortgage-backed securities are estimated and include the effects of prepayment assumptions.
For callable securities, yields on securities purchased at a discount are based on yield-to-maturity, while yields on securities purchased at a premium are based on yield to the first call date. Yields on mortgage-backed securities are estimated and include the effects of prepayment assumptions.
Table VII shows the composition of the loan portfolio at year-end from 2018 through 2022. The significant loan growth in 2019 and 2020 reflects the impact of acquisitions.
Table VII shows the composition of the loan portfolio at year-end from 2019 through 2023. The significant loan growth in 2019 and 2020 reflects the impact of acquisitions located in Southeastern Pennsylvania.
The average yield on interest-bearing due from banks was 1.25% in 2022 and 0.20% in 2021. The average balance of interest-bearing due from banks was $51,407,000 in 2022 as compared to $156,152,000 in 2021.
Income from interest-bearing due from banks totaled $645,000 in 2022, an increase of $327,000 from the total for 2021. The average yield on interest-bearing due from banks was 1.25% in 2022 and 0.20% in 2021. The average balance of interest-bearing due from banks was $51,407,000 in 2022 as compared to $156,152,000 in 2021.
At December 31, 2021, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of long-term borrowings of $27,727,000 and letters of credit totaling $5,584,000. Additionally, the Corporation uses “RepoSweep” arrangements to borrow funds from commercial banking customers on an overnight basis.
At December 31, 2022, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of overnight borrowing of $77,000,000, long-term borrowings of $62,272,000 and letters of credit totaling $10,827,000. Additionally, the Corporation uses “RepoSweep” arrangements to borrow funds from commercial banking customers on an overnight basis.
Interest expense on short-term borrowings in 2022 was $429,000 as compared to $23,000 in 2021. The average balance of short-term borrowings increased to $21,766,000 in 2022 from $6,269,000 in 2021. The average rate on short-term borrowings was 1.97% in 2022 compared to 0.37% in 2021.
The average balance of short-term borrowings increased to $21,766,000 in 2022 from $6,269,000 in 2021. The average rate on short-term borrowings was 1.97% in 2022 compared to 0.37% in 2021. Interest expense on long-term borrowings (FHLB advances) increased $497,000 to $896,000 in 2022 from $399,000 in 2021.
The average rate on long-term borrowings was 2.23% in 2022 compared to 0.91% in 2021. Interest expense on senior notes issued in May 2021 totaled $477,000 in 2022 as compared to $293,000 in 2021. The average balance of the senior notes increased to $14,733,000 in 2022 from $9,129,000 in 2021.
The average balance of long-term borrowings was $40,194,000 in 2022, down from an average balance of $44,026,000 in 2021. The average rate on long-term borrowings was 2.23% in 2022 compared to 0.91% in 2021. Interest expense on senior notes issued in May 2021 totaled $477,000 in 2022 as compared to $293,000 in 2021.
Treasury ​ $ 35,166 ​ $ 31,836 ​ $ 25,058 ​ $ 24,912 ​ $ 12,184 ​ $ 12,182 ​ Obligations of U.S.
Treasury ​ $ 12,325 ​ $ 11,290 ​ $ 35,166 ​ $ 31,836 ​ $ 25,058 ​ $ 24,912 ​ Obligations of U.S.
CRITICAL ACCOUNTING POLICIES The presentation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect many of the reported amounts and disclosures. Actual results could differ from these estimates.
More detailed information concerning the Corporation’s earnings results are provided in other sections of Management’s Discussion and Analysis. CRITICAL ACCOUNTING POLICIES The presentation of consolidated financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect many of the reported amounts and disclosures. Actual results could differ from these estimates.
Interest expense on long-term borrowings (FHLB advances) increased $497,000 to $896,000 in 2022 from $399,000 in 2021. The average balance of long-term borrowings was $40,194,000 in 2022, down from an average balance of $44,026,000 in 2021. Borrowings are classified as long-term within the Tables based on their term at origination or assumption in business combinations.
Interest expense on long-term borrowings (FHLB advances) increased $3,334,000 to $4,230,000 in 2023 from $896,000 in 2022. The average balance of long-term borrowings was $110,943,000 in 2023, up from an average balance of $40,194,000 in 2022. Borrowings are classified as long-term within the Tables based on their term at origination or assumption in business combinations.
Government, particularly related to changes in interest rates ● changes in general economic conditions ● the Corporation’s credit standards and its on-going credit assessment processes might not protect it from significant credit losses ● legislative or regulatory changes ● downturn in demand for loan, deposit and other financial services in the Corporation’s market area ● increased competition from other banks and non-bank providers of financial services ● technological changes and increased technology-related costs ● information security breach or other technology difficulties or failures ● changes in accounting principles, or the application of generally accepted accounting principles ● failure to achieve merger-related synergies and difficulties in integrating the business and operations of acquired institutions ● the effect of the novel coronavirus (COVID-19) and related events These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. ​ 12 Table of Contents EARNINGS OVERVIEW 2022 vs. 2021 Net income for the year ended December 31, 2022 was $26,618,000, or $1.71 per diluted share as compared to 2021 net income of $30,554,000 or $1.92 per share.
Government, particularly related to changes in interest rates ● changes in general economic conditions ● recent adverse developments in the banking industry highlighted by high-profile bank failures and the potential impact of such developments on customer confidence, sources of liquidity and capital funding, and regulatory responses to these developments ● the Corporation’s credit standards and its on-going credit assessment processes might not protect it from significant credit losses ● legislative or regulatory changes ● downturn in demand for loan, deposit and other financial services in the Corporation’s market area ● increased competition from other banks and non-bank providers of financial services ● technological changes and increased technology-related costs ● information security breach or other technology difficulties or failures ● changes in accounting principles, or the application of generally accepted accounting principles ● failure to achieve merger-related synergies and difficulties in integrating the business and operations of acquired institutions ● fraud and cyber malfunction risks as usage of artificial intelligence continues to expand ​ These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. ​ 13 Table of Contents EARNINGS OVERVIEW 2023 vs. 2022 Net income for the year ended December 31, 2023 was $24,148,000, or $1.57 per diluted share, as compared to $26,618,000, or $1.71 per diluted share, for the year ended December 31, 2022.
Management believes the allowance for loan losses is adequate and reasonable. Notes 1 and 8 to the consolidated financial statements provide an overview of the process management uses for evaluating and determining the allowance for loan losses, and additional discussion of the allowance for loan losses is provided in a separate section later in Management’s Discussion and Analysis.
Notes 1 and 7 to the consolidated financial statements provide an overview of the process management uses for determining the ACL, and additional discussion of the ACL is provided in a separate section of Management’s Discussion and Analysis.
GAAP ​ $ 83,128 ​ $ 77,939 ​ $ 67,565 ​ $ 5,189 ​ $ 10,374 Add: fully taxable-equivalent interest income adjustment from tax-exempt securities ​ ​ 720 ​ ​ 673 ​ ​ 525 ​ ​ 47 ​ ​ 148 Add: fully taxable-equivalent interest income adjustment from tax-exempt loans ​ ​ 506 ​ ​ 462 ​ ​ 455 ​ ​ 44 ​ ​ 7 Net Interest Income as adjusted to a fully taxable-equivalent basis ​ $ 84,354 ​ $ 79,074 ​ $ 68,545 ​ $ 5,280 ​ $ 10,529 22 Table of Contents TABLE II - ANALYSIS OF AVERAGE DAILY BALANCES AND RATES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars In Thousands) Year ​ ​ ​ ​ Year ​ ​ ​ ​ Year ​ ​ ​ ​ ​ Ended ​ Rate of ​ ​ Ended ​ Rate of ​ ​ Ended ​ Rate of ​ ​ 12/31/2022 ​ Return/ ​ ​ 12/31/2021 ​ Return/ ​ ​ 12/31/2020 ​ Return/ ​ ​ Average ​ Cost of ​ Average ​ Cost of ​ Average ​ Cost of ​ ​ Balance Funds% ​ Balance Funds% ​ Balance Funds% ​ EARNING ASSETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing due from banks $ 51,407 ​ ​ 1.25 % ​ $ 156,152 ​ ​ 0.20 % ​ $ 80,587 ​ ​ 0.31 % Available-for-sale debt securities, at amortized cost: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable 410,033 ​ 2.04 % ​ 262,880 ​ 1.95 % ​ 238,407 ​ 2.32 % Tax-exempt 148,344 ​ 2.51 % ​ 127,283 ​ 2.64 % ​ 90,038 ​ 2.96 % Total available-for-sale debt securities 558,377 ​ 2.16 % ​ 390,163 ​ 2.17 % ​ 328,445 ​ 2.50 % Loans receivable: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable 1,533,417 ​ 5.06 % ​ 1,426,150 ​ 4.77 % ​ 1,285,383 ​ 5.01 % Paycheck Protection Program - 1st Draw ​ 447 ​ ​ 12.08 % ​ ​ 44,735 ​ ​ 7.77 % ​ ​ 98,466 ​ ​ 2.97 % Paycheck Protection Program - 2nd Draw ​ 7,959 ​ ​ 11.36 % ​ ​ 52,917 ​ ​ 5.77 % ​ ​ 0 ​ ​ 0.00 % Tax-exempt 86,271 ​ 2.86 % ​ 72,954 ​ 3.06 % ​ 61,249 ​ 3.63 % Total loans receivable 1,628,094 ​ 4.98 % ​ 1,596,756 ​ 4.81 % ​ 1,445,098 ​ 4.82 % Other earning assets 2,321 ​ 3.32 % ​ 2,404 ​ 2.75 % ​ 2,357 ​ 3.39 % Total Earning Assets 2,240,199 ​ 4.19 % ​ 2,145,475 ​ 3.99 % ​ 1,856,487 ​ 4.21 % Cash 22,685 ​ ​ ​ 24,132 ​ ​ ​ 25,439 ​ ​ Unrealized (loss) gain on securities (38,784) ​ ​ ​ 10,676 ​ ​ ​ 12,487 ​ ​ Allowance for loan losses (14,962) ​ ​ ​ (12,354) ​ ​ ​ (11,018) ​ ​ Bank-owned life insurance ​ 30,925 ​ ​ ​ ​ ​ ​ 30,373 ​ ​ ​ ​ ​ ​ 24,415 ​ ​ ​ ​ Bank premises and equipment 21,559 ​ ​ ​ ​ 20,814 ​ ​ ​ ​ 19,826 ​ ​ ​ Intangible assets 55,599 ​ ​ ​ ​ 56,086 ​ ​ ​ ​ 43,330 ​ ​ ​ Other assets 55,567 ​ ​ ​ ​ 44,032 ​ ​ ​ ​ 38,859 ​ ​ ​ Total Assets $ 2,372,788 ​ ​ ​ ​ ​ $ 2,319,234 ​ ​ ​ ​ ​ $ 2,009,825 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ INTEREST-BEARING LIABILITIES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest checking $ 443,107 ​ ​ 0.41 % ​ $ 399,130 ​ ​ 0.22 % ​ $ 310,782 ​ ​ 0.31 % Money market ​ 443,084 ​ ​ 0.47 % ​ ​ 433,508 ​ ​ 0.27 % ​ ​ 298,736 ​ ​ 0.39 % Savings ​ 257,156 ​ ​ 0.10 % ​ ​ 228,411 ​ ​ 0.10 % ​ ​ 189,316 ​ ​ 0.12 % Time deposits ​ 285,264 ​ ​ 0.86 % ​ ​ 327,816 ​ ​ 0.69 % ​ ​ 397,974 ​ ​ 1.23 % Total interest-bearing deposits 1,428,611 ​ 0.46 % ​ 1,388,865 ​ 0.33 % ​ 1,196,808 ​ 0.60 % Borrowed funds: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Short-term 21,766 ​ 1.97 % ​ 6,269 ​ 0.37 % ​ 34,212 ​ 1.07 % Long-term - FHLB advances 40,194 ​ 2.23 % ​ 44,026 ​ 0.91 % ​ 83,500 ​ 1.55 % Senior notes, net ​ 14,733 ​ 3.24 % ​ ​ 9,129 ​ 3.21 % ​ 0 ​ ​ 0.00 % Subordinated debt, net 27,116 ​ 3.98 % ​ 27,399 ​ 4.78 % ​ 11,553 ​ 6.11 % Total borrowed funds 103,809 ​ 2.78 % ​ 86,823 ​ 2.33 % ​ 129,265 ​ 1.83 % Total Interest-bearing Liabilities. 1,532,420 ​ 0.62 % ​ 1,475,688 ​ 0.44 % ​ 1,326,073 ​ 0.72 % Demand deposits ​ 551,801 ​ ​ ​ ​ ​ ​ 516,535 ​ ​ ​ ​ ​ ​ 389,601 ​ ​ ​ ​ Other liabilities ​ 23,474 ​ ​ ​ ​ ​ ​ 25,785 ​ ​ ​ ​ ​ ​ 20,800 ​ ​ ​ ​ Total Liabilities ​ 2,107,695 ​ ​ ​ ​ ​ ​ 2,018,008 ​ ​ ​ ​ ​ ​ 1,736,474 ​ ​ ​ ​ Stockholders' equity, excluding accumulated other comprehensive (loss) income ​ 295,447 ​ ​ ​ ​ ​ ​ 292,683 ​ ​ ​ ​ ​ ​ 263,253 ​ ​ ​ ​ Accumulated other comprehensive (loss) income ​ (30,354) ​ ​ ​ ​ ​ ​ 8,543 ​ ​ ​ ​ ​ ​ 10,098 ​ ​ ​ ​ Total Stockholders' Equity ​ 265,093 ​ ​ ​ ​ ​ ​ 301,226 ​ ​ ​ ​ ​ ​ 273,351 ​ ​ ​ ​ Total Liabilities and Stockholders' Equity $ 2,372,788 ​ ​ ​ ​ ​ $ 2,319,234 ​ ​ ​ ​ ​ $ 2,009,825 ​ ​ ​ ​ Interest Rate Spread ​ ​ ​ ​ 3.57 % ​ ​ ​ ​ ​ 3.55 % ​ ​ ​ ​ ​ 3.49 % Net Interest Income/Earning Assets ​ ​ ​ ​ 3.77 % ​ ​ ​ ​ ​ 3.69 % ​ ​ ​ ​ ​ 3.69 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Deposits (Interest-bearing and Demand) $ 1,980,412 ​ ​ ​ ​ ​ $ 1,905,400 ​ ​ ​ ​ ​ $ 1,586,409 ​ ​ ​ ​ (1) Rates of return on tax-exempt securities and loans are presented on a fully taxable-equivalent basis, using the Corporation’s marginal federal income tax rate of 21%.
GAAP ​ $ 80,400 ​ $ 83,128 ​ $ 77,939 ​ $ (2,728) ​ $ 5,189 Add: fully taxable-equivalent interest income adjustment from tax-exempt securities ​ ​ 388 ​ ​ 720 ​ ​ 673 ​ ​ (332) ​ ​ 47 Add: fully taxable-equivalent interest income adjustment from tax-exempt loans ​ ​ 531 ​ ​ 506 ​ ​ 462 ​ ​ 25 ​ ​ 44 Net Interest Income as adjusted to a fully taxable-equivalent basis ​ $ 81,319 ​ $ 84,354 ​ $ 79,074 ​ $ (3,035) ​ $ 5,280 22 Table of Contents TABLE II - ANALYSIS OF AVERAGE DAILY BALANCES AND RATES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars In Thousands) Year ​ ​ ​ ​ Year ​ ​ ​ ​ Year ​ ​ ​ ​ ​ Ended ​ Rate of ​ ​ Ended ​ Rate of ​ ​ Ended ​ Rate of ​ ​ 12/31/2023 ​ Return/ ​ ​ 12/31/2022 ​ Return/ ​ ​ 12/31/2021 ​ Return/ ​ ​ Average ​ Cost of ​ Average ​ Cost of ​ Average ​ Cost of ​ ​ Balance Funds% ​ Balance Funds% ​ Balance Funds% ​ EARNING ASSETS ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing due from banks $ 32,709 ​ ​ 4.22 % ​ $ 51,407 ​ ​ 1.25 % ​ $ 156,152 ​ ​ 0.20 % Available-for-sale debt securities, at amortized cost: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable 389,456 ​ 2.20 % ​ 410,033 ​ 2.04 % ​ 262,880 ​ 1.95 % Tax-exempt 125,920 ​ 2.24 % ​ 148,344 ​ 2.51 % ​ 127,283 ​ 2.64 % Total available-for-sale debt securities 515,376 ​ 2.21 % ​ 558,377 ​ 2.16 % ​ 390,163 ​ 2.17 % Loans receivable: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable 1,703,697 ​ 5.80 % ​ 1,533,417 ​ 5.06 % ​ 1,426,150 ​ 4.77 % Paycheck Protection Program ​ 142 ​ ​ 7.75 % ​ ​ 8,406 ​ ​ 11.40 % ​ ​ 97,652 ​ ​ 6.69 % Tax-exempt 88,310 ​ 3.12 % ​ 86,271 ​ 2.86 % ​ 72,954 ​ 3.06 % Total loans receivable 1,792,149 ​ 5.67 % ​ 1,628,094 ​ 4.98 % ​ 1,596,756 ​ 4.81 % Other earning assets 1,383 ​ 4.63 % ​ 2,321 ​ 3.32 % ​ 2,404 ​ 2.75 % Total Earning Assets 2,341,617 ​ 4.89 % ​ 2,240,199 ​ 4.19 % ​ 2,145,475 ​ 3.99 % Cash 22,108 ​ ​ ​ 22,685 ​ ​ ​ 24,132 ​ ​ Unrealized (loss) gain on securities (63,118) ​ ​ ​ (38,784) ​ ​ ​ 10,676 ​ ​ Allowance for credit losses (18,498) ​ ​ ​ (14,962) ​ ​ ​ (12,354) ​ ​ Bank-owned life insurance ​ 31,808 ​ ​ ​ ​ ​ ​ 30,925 ​ ​ ​ ​ ​ ​ 30,373 ​ ​ ​ ​ Bank premises and equipment 21,330 ​ ​ ​ ​ 21,559 ​ ​ ​ ​ 20,814 ​ ​ ​ Intangible assets 55,176 ​ ​ ​ ​ 55,599 ​ ​ ​ ​ 56,086 ​ ​ ​ Other assets 72,433 ​ ​ ​ ​ 55,567 ​ ​ ​ ​ 44,032 ​ ​ ​ Total Assets $ 2,462,856 ​ ​ ​ ​ ​ $ 2,372,788 ​ ​ ​ ​ ​ $ 2,319,234 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ INTEREST-BEARING LIABILITIES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest checking $ 488,761 ​ ​ 1.57 % ​ $ 443,107 ​ ​ 0.41 % ​ $ 399,130 ​ ​ 0.22 % Money market ​ 347,130 ​ ​ 1.64 % ​ ​ 443,084 ​ ​ 0.47 % ​ ​ 433,508 ​ ​ 0.27 % Savings ​ 238,760 ​ ​ 0.10 % ​ ​ 257,156 ​ ​ 0.10 % ​ ​ 228,411 ​ ​ 0.10 % Time deposits ​ 381,488 ​ ​ 2.79 % ​ ​ 285,264 ​ ​ 0.86 % ​ ​ 327,816 ​ ​ 0.69 % Total interest-bearing deposits 1,456,139 ​ 1.66 % ​ 1,428,611 ​ 0.46 % ​ 1,388,865 ​ 0.33 % Borrowed funds: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Short-term 62,926 ​ 5.15 % ​ 21,766 ​ 1.97 % ​ 6,269 ​ 0.37 % Long-term - FHLB advances 110,943 ​ 3.81 % ​ 40,194 ​ 2.23 % ​ 44,026 ​ 0.91 % Senior notes, net ​ 14,798 ​ 3.24 % ​ ​ 14,733 ​ 3.24 % ​ ​ 9,129 ​ 3.21 % Subordinated debt, net 24,662 ​ 3.74 % ​ 27,116 ​ 3.98 % ​ 27,399 ​ 4.78 % Total borrowed funds 213,329 ​ 4.16 % ​ 103,809 ​ 2.78 % ​ 86,823 ​ 2.33 % Total Interest-bearing Liabilities. 1,669,468 ​ 1.98 % ​ 1,532,420 ​ 0.62 % ​ 1,475,688 ​ 0.44 % Demand deposits ​ 515,787 ​ ​ ​ ​ ​ ​ 551,801 ​ ​ ​ ​ ​ ​ 516,535 ​ ​ ​ ​ Other liabilities ​ 29,107 ​ ​ ​ ​ ​ ​ 23,474 ​ ​ ​ ​ ​ ​ 25,785 ​ ​ ​ ​ Total Liabilities ​ 2,214,362 ​ ​ ​ ​ ​ ​ 2,107,695 ​ ​ ​ ​ ​ ​ 2,018,008 ​ ​ ​ ​ Stockholders' equity, excluding accumulated other comprehensive (loss) income ​ 297,894 ​ ​ ​ ​ ​ ​ 295,447 ​ ​ ​ ​ ​ ​ 292,683 ​ ​ ​ ​ Accumulated other comprehensive (loss) income ​ (49,400) ​ ​ ​ ​ ​ ​ (30,354) ​ ​ ​ ​ ​ ​ 8,543 ​ ​ ​ ​ Total Stockholders' Equity ​ 248,494 ​ ​ ​ ​ ​ ​ 265,093 ​ ​ ​ ​ ​ ​ 301,226 ​ ​ ​ ​ Total Liabilities and Stockholders' Equity $ 2,462,856 ​ ​ ​ ​ ​ $ 2,372,788 ​ ​ ​ ​ ​ $ 2,319,234 ​ ​ ​ ​ Interest Rate Spread ​ ​ ​ ​ 2.91 % ​ ​ ​ ​ ​ 3.57 % ​ ​ ​ ​ ​ 3.55 % Net Interest Income/Earning Assets ​ ​ ​ ​ 3.47 % ​ ​ ​ ​ ​ 3.77 % ​ ​ ​ ​ ​ 3.69 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Deposits (Interest-bearing and Demand) $ 1,971,926 ​ ​ ​ ​ ​ $ 1,980,412 ​ ​ ​ ​ ​ $ 1,905,400 ​ ​ ​ ​ (1) Rates of return on tax-exempt securities and loans are presented on a fully taxable-equivalent basis, using the Corporation’s marginal federal income tax rate of 21%.
The average rate on senior notes was 3.24% in 2022 and 3.21% in 2021. Interest expense on subordinated debt decreased $230,000 to $1,079,000 in 2022 from $1,309,000 in 2021. The average balance of subordinated debt decreased slightly to $27,116,000 in 2022 from $27,399,000 in 2021.
The average balance of the senior notes increased to $14,733,000 in 2022 from $9,129,000 in 2021. The average rate on senior notes was 3.24% in 2022 and 3.21% in 2021. 20 Table of Contents Interest expense on subordinated debt decreased $230,000 to $1,079,000 in 2022 from $1,309,000 in 2021.
Treasury Obligations (a) ​ ​ ​ ​ ​ 3.99 % ​ ​ ​ ​ 1.26 % ​ ​ ​ ​ 0.36 % ​ (a) Source: Treasury.gov (Daily Treasury Par Yield Curve Rates) As reflected in the table above, the fair value of available-for-sale securities as of December 31, 2022 was lower than the amortized cost basis by $63,761,000, or 11.3%.
Treasury Obligations (a) ​ ​ ​ ​ ​ 3.84 % ​ ​ ​ ​ 3.99 % ​ ​ ​ ​ 1.26 % ​ (a) Source: Treasury.gov (Daily Treasury Par Yield Curve Rates) As reflected in the table above, the fair value of available-for-sale securities was lower than the amortized cost basis by $49,213,000, or 10.6% at December 31, 2023 and $63,761,000 or 11.3% at December 31, 2022 while the aggregate unrealized gain position was $6,087,000 (1.2%) at December 31, 2021.
Government agencies ​ ​ 25,938 ​ ​ 23,430 ​ ​ 23,936 ​ ​ 24,091 ​ ​ 25,349 ​ ​ 26,344 ​ Bank holding company debt securities ​ ​ 28,945 ​ ​ 25,386 ​ ​ 18,000 ​ ​ 17,987 ​ ​ 0 ​ ​ 0 ​ Obligations of states and political subdivisions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tax-exempt ​ 146,149 ​ 132,623 ​ 143,427 ​ 148,028 ​ 116,427 ​ 122,401 ​ Taxable ​ 68,488 ​ 56,812 ​ 72,182 ​ 72,765 ​ 45,230 ​ 47,452 ​ Mortgage-backed securities issued or guaranteed by U.S.
Government agencies ​ ​ 11,119 ​ ​ 9,946 ​ ​ 25,938 ​ ​ 23,430 ​ ​ 23,936 ​ ​ 24,091 ​ Bank holding company debt securities ​ ​ 28,952 ​ ​ 23,500 ​ ​ 28,945 ​ ​ 25,386 ​ ​ 18,000 ​ ​ 17,987 ​ Obligations of states and political subdivisions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Tax-exempt ​ 113,464 ​ 104,199 ​ 146,149 ​ 132,623 ​ 143,427 ​ 148,028 ​ Taxable ​ 58,720 ​ 50,111 ​ 68,488 ​ 56,812 ​ 72,182 ​ 72,765 ​ Mortgage-backed securities issued or guaranteed by U.S.
(2) The change in interest due to both volume and rates has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. ​ ​ 24 Table of Contents NONINTEREST INCOME TABLE IV - COMPARISON OF NONINTEREST INCOME ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in Thousands) ​ Year Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ $ ​ % ​ 2022 ​ 2021 ​ Change ​ Change Trust revenue ​ $ 6,994 ​ $ 7,234 ​ $ (240) ​ (3.3) % Brokerage and insurance revenue ​ 2,291 ​ ​ 1,860 ​ ​ 431 ​ 23.2 % Service charges on deposit accounts ​ 5,019 ​ ​ 4,633 ​ ​ 386 ​ 8.3 % Interchange revenue from debit card transactions ​ 4,148 ​ ​ 3,855 ​ ​ 293 ​ 7.6 % Net gains from sales of loans ​ 757 ​ ​ 3,428 ​ ​ (2,671) ​ (77.9) % Loan servicing fees, net ​ 960 ​ ​ 694 ​ ​ 266 ​ 38.3 % Increase in cash surrender value of life insurance ​ 545 ​ ​ 573 ​ ​ (28) ​ (4.9) % Other noninterest income ​ 3,698 ​ ​ 3,580 ​ ​ 118 ​ 3.3 % Realized gains on available-for-sale debt securities, net ​ ​ 20 ​ ​ 24 ​ ​ (4) ​ (16.7) % Total noninterest income ​ $ 24,432 ​ $ 25,881 ​ $ (1,449) ​ (5.6) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in Thousands) ​ Year Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ $ ​ % ​ 2021 ​ 2020 ​ Change ​ Change Trust revenue ​ $ 7,234 ​ $ 6,321 ​ $ 913 ​ 14.4 % Brokerage and insurance revenue ​ 1,860 ​ ​ 1,486 ​ ​ 374 ​ 25.2 % Service charges on deposit accounts ​ 4,633 ​ ​ 4,231 ​ ​ 402 ​ 9.5 % Interchange revenue from debit card transactions ​ 3,855 ​ ​ 3,094 ​ ​ 761 ​ 24.6 % Net gains from sales of loans ​ 3,428 ​ ​ 5,403 ​ ​ (1,975) ​ (36.6) % Loan servicing fees, net ​ 694 ​ ​ (61) ​ ​ 755 ​ N/M ​ Increase in cash surrender value of life insurance ​ 573 ​ ​ 515 ​ ​ 58 ​ 11.3 % Other noninterest income ​ 3,580 ​ ​ 3,355 ​ ​ 225 ​ 6.7 % Realized gains on available-for-sale debt securities, net ​ ​ 24 ​ ​ 169 ​ ​ (145) ​ (85.8) % Total noninterest income ​ $ 25,881 ​ $ 24,513 ​ $ 1,368 ​ 5.6 % ​ NONINTEREST EXPENSE TABLE V - COMPARISON OF NONINTEREST EXPENSE ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in Thousands) ​ Year Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ $ ​ % ​ ​ 2022 ​ 2021 ​ Change ​ Change Salaries and employee benefits $ 41,833 $ 37,603 $ 4,230 11.2 % Net occupancy and equipment expense ​ 5,533 ​ 4,984 ​ 549 11.0 % Data processing and telecommunications expense ​ 6,806 ​ 5,903 ​ 903 15.3 % Automated teller machine and interchange expense ​ 1,601 ​ 1,433 ​ 168 11.7 % Pennsylvania shares tax ​ 1,956 ​ 1,951 ​ 5 0.3 % Professional fees ​ 2,005 ​ 2,243 ​ (238) (10.6) % Other noninterest expense ​ 8,221 ​ 8,355 ​ (134) (1.6) % Total noninterest expense ​ $ 67,955 ​ $ 62,472 ​ $ 5,483 8.8 % ​ ​ 25 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in Thousands) ​ Year Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ $ ​ % ​ ​ 2021 ​ 2020 ​ Change ​ Change Salaries and employee benefits $ 37,603 $ 33,062 $ 4,541 13.7 % Net occupancy and equipment expense ​ 4,984 ​ 4,461 ​ 523 11.7 % Data processing and telecommunications expense ​ 5,903 ​ 5,316 ​ 587 11.0 % Automated teller machine and interchange expense ​ 1,433 ​ 1,231 ​ 202 16.4 % Pennsylvania shares tax ​ 1,951 ​ 1,689 ​ 262 15.5 % Professional fees ​ 2,243 ​ 1,692 ​ 551 32.6 % Other noninterest expense ​ 8,355 ​ 8,158 ​ 197 2.4 % Total noninterest expense, excluding merger-related expenses and loss on prepayment of borrowings ​ ​ 62,472 ​ ​ 55,609 ​ ​ 6,863 12.3 % Merger-related expenses ​ ​ 0 ​ ​ 7,708 ​ ​ (7,708) ​ (100.0) % Loss on prepayment of borrowings ​ ​ 0 ​ ​ 1,636 ​ ​ (1,636) ​ (100.0) % Total noninterest expense ​ $ 62,472 ​ $ 64,953 ​ $ (2,481) (3.8) % ​ Additional detailed information concerning fluctuations in the Corporation’s earnings results and other financial information are provided in other sections of Management’s Discussion and Analysis.
(2) The change in interest due to both volume and rates has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each. ​ ​ 24 Table of Contents NONINTEREST INCOME TABLE IV - COMPARISON OF NONINTEREST INCOME ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in Thousands) ​ Year Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ $ ​ % ​ 2023 ​ 2022 ​ Change ​ Change Trust revenue ​ $ 7,413 ​ $ 6,994 ​ $ 419 ​ 6.0 % Brokerage and insurance revenue ​ 1,675 ​ ​ 2,291 ​ ​ (616) ​ (26.9) % Service charges on deposit accounts ​ 5,567 ​ ​ 5,019 ​ ​ 548 ​ 10.9 % Interchange revenue from debit card transactions ​ 4,160 ​ ​ 4,148 ​ ​ 12 ​ 0.3 % Net gains from sales of loans ​ 723 ​ ​ 757 ​ ​ (34) ​ (4.5) % Loan servicing fees, net ​ 602 ​ ​ 960 ​ ​ (358) ​ (37.3) % Increase in cash surrender value of life insurance ​ 2,703 ​ ​ 545 ​ ​ 2,158 ​ 396.0 % Other noninterest income ​ 4,610 ​ ​ 3,698 ​ ​ 912 ​ 24.7 % Realized (losses) gains on available-for-sale debt securities, net ​ ​ (3,036) ​ ​ 20 ​ ​ (3,056) ​ N/M % Total noninterest income ​ $ 24,417 ​ $ 24,432 ​ $ (15) ​ (0.1) % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in Thousands) ​ Year Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ $ ​ % ​ 2022 ​ 2021 ​ Change ​ Change Trust revenue ​ $ 6,994 ​ $ 7,234 ​ $ (240) ​ (3.3) % Brokerage and insurance revenue ​ 2,291 ​ ​ 1,860 ​ ​ 431 ​ 23.2 % Service charges on deposit accounts ​ 5,019 ​ ​ 4,633 ​ ​ 386 ​ 8.3 % Interchange revenue from debit card transactions ​ 4,148 ​ ​ 3,855 ​ ​ 293 ​ 7.6 % Net gains from sales of loans ​ 757 ​ ​ 3,428 ​ ​ (2,671) ​ (77.9) % Loan servicing fees, net ​ 960 ​ ​ 694 ​ ​ 266 ​ 38.3 ​ Increase in cash surrender value of life insurance ​ 545 ​ ​ 573 ​ ​ (28) ​ (4.9) % Other noninterest income ​ 3,698 ​ ​ 3,580 ​ ​ 118 ​ 3.3 % Realized gains on available-for-sale debt securities, net ​ ​ 20 ​ ​ 24 ​ ​ (4) ​ (16.7) % Total noninterest income ​ $ 24,432 ​ $ 25,881 ​ $ (1,449) ​ (5.6) % ​ NONINTEREST EXPENSE TABLE V - COMPARISON OF NONINTEREST EXPENSE ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in Thousands) ​ Year Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ $ ​ % ​ ​ 2023 ​ 2022 ​ Change ​ Change Salaries and employee benefits $ 44,195 $ 41,833 $ 2,362 5.6 % Net occupancy and equipment expense ​ 5,357 ​ 5,533 ​ (176) (3.2) % Data processing and telecommunications expense ​ 7,582 ​ 6,806 ​ 776 11.4 % Automated teller machine and interchange expense ​ 1,682 ​ 1,601 ​ 81 5.1 % Pennsylvania shares tax ​ 1,602 ​ 1,956 ​ (354) (18.1) % Professional fees ​ 2,497 ​ 2,005 ​ 492 24.5 % Other noninterest expense ​ 11,233 ​ 8,221 ​ 3,012 36.6 % Total noninterest expense ​ $ 74,148 ​ $ 67,955 ​ $ 6,193 9.1 % ​ ​ 25 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (Dollars in Thousands) ​ Year Ended ​ ​ ​ ​ ​ ​ ​ December 31, ​ $ ​ % ​ ​ 2022 ​ 2021 ​ Change ​ Change Salaries and employee benefits $ 41,833 $ 37,603 $ 4,230 11.2 % Net occupancy and equipment expense ​ 5,533 ​ 4,984 ​ 549 11.0 % Data processing and telecommunications expense ​ 6,806 ​ 5,903 ​ 903 15.3 % Automated teller machine and interchange expense ​ 1,601 ​ 1,433 ​ 168 11.7 % Pennsylvania shares tax ​ 1,956 ​ 1,951 ​ 5 0.3 % Professional fees ​ 2,005 ​ 2,243 ​ (238) (10.6) % Other noninterest expense ​ 8,221 ​ 8,355 ​ (134) (1.6) % Total noninterest expense ​ $ 67,955 ​ $ 62,472 ​ $ 5,483 8.8 % ​ Additional detailed information concerning fluctuations in the Corporation’s earnings results and other financial information are provided in other sections of Management’s Discussion and Analysis.
Government agencies or sponsored agencies: ​ ​ ​ ​ ​ ​ ​ Residential pass-through securities ​ 112,782 ​ 99,941 ​ 98,048 ​ 98,181 ​ 36,853 ​ 38,176 ​ Residential collateralized mortgage obligations ​ 44,868 ​ 40,296 ​ 44,015 ​ 44,247 ​ 56,048 ​ 57,467 ​ Commercial mortgage-backed securities ​ 91,388 ​ 79,686 ​ 86,926 ​ 87,468 ​ 42,461 ​ 45,310 ​ Private label commercial mortgage-backed securities ​ 8,070 ​ 8,023 ​ 0 ​ 0 ​ 0 ​ 0 ​ Total Available-for-Sale Debt Securities ​ $ 561,794 ​ $ 498,033 ​ $ 511,592 ​ $ 517,679 ​ $ 334,552 ​ $ 349,332 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Aggregate Unrealized (Loss) Gain ​ ​ ​ ​ $ (63,761) ​ ​ ​ ​ $ 6,087 ​ ​ ​ ​ $ 14,780 ​ Aggregate Unrealized (Loss) Gain as a % of Amortized Cost ​ ​ ​ ​ ​ (11.3) % ​ ​ ​ ​ 1.2 % ​ ​ ​ ​ 4.4 % Market Yield on 5-Year U.S.
Government agencies or sponsored agencies: ​ ​ ​ ​ ​ ​ ​ Residential pass-through securities ​ 105,549 ​ 95,405 ​ 112,782 ​ 99,941 ​ 98,048 ​ 98,181 ​ Residential collateralized mortgage obligations ​ 50,212 ​ 46,462 ​ 44,868 ​ 40,296 ​ 44,015 ​ 44,247 ​ Commercial mortgage-backed securities ​ 76,412 ​ 66,682 ​ 91,388 ​ 79,686 ​ 86,926 ​ 87,468 ​ Private label commercial mortgage-backed securities ​ 8,215 ​ 8,160 ​ 8,070 ​ 8,023 ​ 0 ​ 0 ​ Total Available-for-Sale Debt Securities ​ $ 464,968 ​ $ 415,755 ​ $ 561,794 ​ $ 498,033 ​ $ 511,592 ​ $ 517,679 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Aggregate Unrealized (Loss) Gain ​ ​ ​ ​ $ (49,213) ​ ​ ​ ​ $ (63,761) ​ ​ ​ ​ $ 6,087 ​ Aggregate Unrealized (Loss) Gain as a % of Amortized Cost ​ ​ ​ ​ ​ (10.6) % ​ ​ ​ ​ (11.3) % ​ ​ ​ ​ 1.2 % Market Yield on 5-Year U.S.
Management believes it has been conservative in its decisions concerning identification of impaired loans, estimates of loss, and nonaccrual status; however, the actual losses realized from these relationships could vary materially from the allowances calculated as of December 31, 2022. Tables IX through XII present historical data related to loans and the allowance for loan losses.
Management believes it has been conservative in its decisions concerning identification of loans requiring individual evaluation for credit loss, estimates of loss, and nonaccrual status; however, the actual losses realized from these relationships could vary materially from the allowances calculated as of December 31, 2023.
If required to raise cash in an emergency situation, the Corporation could sell available-for-sale debt securities to meet its obligations. At December 31, 2022, the carrying value of available-for-sale debt securities in excess of amounts required to meet pledging or repurchase agreement obligations was $272,475,000. Management believes the Corporation is well-positioned to meet its short-term and long-term obligations.
If required to raise cash in an emergency situation, the Corporation could utilize available-for-sale debt securities as collateral for borrowings or sell securities to meet its obligations. At December 31, 2023, the carrying value of available-for-sale debt securities in excess of amounts required to meet pledging or repurchase agreement obligations was $256,058,000.
As presented in Table II, the Net Interest Margin was 3.69% in 2021, unchanged from 2020, and the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) increased to 3.55% in 2021 from 3.49% in 2020.
As presented in Table II, the Net Interest Margin was 3.47% in 2023, as compared to 3.77% in 2022, and the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) decreased to 2.91% in 2023 from 3.57% in 2022.
Leveraged participation loans totaled $2,370,000 at December 31, 2022 and $7,469,000 at December 31, 2021. The Corporation originates and sells residential mortgage loans to the secondary market through the MPF Xtra program administered by the Federal Home Loan Banks of Pittsburgh and Chicago.
Total participation loans outstanding amounted to $38,652,000 at December 31, 2023, down from $44,723,000 at December 31, 2022. The Corporation originates and sells residential mortgage loans to the secondary market through the MPF Xtra program administered by the Federal Home Loan Banks of Pittsburgh and Chicago.
At December 31, 2022, the net deferred tax asset was $20,884,000, up from the balance at December 31, 2021 of $5,887,000. The most significant change in temporary difference components was an increase of $14,669,000 in the net deferred tax asset related to the unrealized loss on available-for-sale debt securities resulting from increases in interest rates.
At December 31, 2023, the net deferred tax asset was $17,441,000, down from the balance at December 31, 2022 of $20,884,000. The most significant change in temporary difference components was a decrease of $3,056,000 in the net deferred tax asset related to the unrealized loss on available-for-sale debt securities, consistent with a decrease in interest rates.
The total amortized cost of available-for-sale debt securities increased $50,202,000 to $561,794,000 at December 31, 2022 from $511,592,000 at December 31, 2021. The increase in 2022 followed an increase of $177,040,000 at December 31, 2021 as compared to December 31, 26 Table of Contents 2020.
The total amortized cost of available-for-sale debt securities decreased $96,826,000 to $464,968,000 at December 31, 2023 from $561,794,000 at December 31, 2022. The decrease in 2023 followed an increase of $50,202,000 at December 31, 2022 as compared to December 31, 2021.
The increase in the amortized cost basis of the securities portfolio resulted from management’s decision to invest excess funds available from the growth in deposits and net loan repayments throughout most of 2020, 2021 and the first quarter 2022.
In 2022, the increase in the amortized cost basis of the securities portfolio resulted from management’s decision to invest excess funds available mainly due to growth in deposits.
The average rate on subordinated debt decreased to 4.78% in 2021 from 6.11% in 2020. ​ 21 Table of Contents TABLE I - ANALYSIS OF INTEREST INCOME AND EXPENSE ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ Increase/(Decrease) (In Thousands) 2022 2021 ​ 2020 ​ 2022/2021 2021/2020 INTEREST INCOME ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing due from banks ​ $ 645 ​ $ 318 ​ $ 251 ​ $ 327 ​ $ 67 Available-for-sale debt securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ 8,360 ​ 5,114 ​ 5,534 ​ 3,246 ​ (420) Tax-exempt ​ 3,721 ​ 3,357 ​ 2,669 ​ 364 ​ 688 Total available-for-sale debt securities ​ 12,081 ​ 8,471 ​ 8,203 ​ 3,610 ​ 268 Loans receivable: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ 77,641 ​ 68,019 ​ 64,460 ​ 9,622 ​ 3,559 Paycheck Protection Program - 1st Draw ​ ​ 54 ​ ​ 3,476 ​ ​ 2,924 ​ ​ (3,422) ​ ​ 552 Paycheck Protection Program - 2nd Draw ​ ​ 904 ​ ​ 3,054 ​ ​ 0 ​ ​ (2,150) ​ ​ 3,054 Tax-exempt ​ 2,471 ​ 2,232 ​ 2,222 ​ 239 ​ 10 Total loans receivable ​ 81,070 ​ 76,781 ​ 69,606 ​ 4,289 ​ 7,175 Other earning assets ​ 77 ​ 66 ​ 80 ​ 11 ​ (14) Total Interest Income ​ 93,873 ​ 85,636 ​ 78,140 ​ 8,237 ​ 7,496 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ INTEREST EXPENSE ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest checking ​ 1,833 ​ 897 ​ 948 ​ 936 ​ (51) Money market ​ 2,088 ​ 1,156 ​ 1,172 ​ 932 ​ (16) Savings ​ 257 ​ 231 ​ 230 ​ 26 ​ 1 Time deposits ​ 2,460 ​ 2,254 ​ 4,881 ​ 206 ​ (2,627) Total interest-bearing deposits ​ 6,638 ​ 4,538 ​ 7,231 ​ 2,100 ​ (2,693) Borrowed funds: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Short-term ​ 429 ​ 23 ​ 367 ​ 406 ​ (344) Long-term - FHLB advances ​ 896 ​ 399 ​ 1,291 ​ 497 ​ (892) Senior notes, net ​ ​ 477 ​ ​ 293 ​ ​ 0 ​ ​ 184 ​ ​ 293 Subordinated debt, net ​ 1,079 ​ 1,309 ​ 706 ​ (230) ​ 603 Total borrowed funds ​ 2,881 ​ 2,024 ​ 2,364 ​ 857 ​ (340) Total Interest Expense ​ 9,519 ​ 6,562 ​ 9,595 ​ 2,957 ​ (3,033) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Interest Income ​ $ 84,354 ​ $ 79,074 ​ $ 68,545 ​ $ 5,280 ​ $ 10,529 ​ (1) Interest income from tax-exempt securities and loans has been adjusted to a fully taxable-equivalent basis (a non-GAAP measure), using the Corporation’s marginal federal income tax rate of 21%.
The average rate on subordinated debt decreased to 3.98% in 2022 from 4.78% in 2021 including the net impact of a new issue of subordinated debt of $24,437,000, net, at an effective rate of 3.74% in May 2021 and the redemption of subordinated notes totaling $8,000,000 in the second quarter 2021 and $8,500,000 in the second quarter 2002. ​ 21 Table of Contents TABLE I - ANALYSIS OF INTEREST INCOME AND EXPENSE ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ Increase/(Decrease) (In Thousands) 2023 2022 ​ 2021 ​ 2023/2022 2022/2021 INTEREST INCOME ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing due from banks ​ $ 1,379 ​ $ 645 ​ $ 318 ​ $ 734 ​ $ 327 Available-for-sale debt securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ 8,555 ​ 8,360 ​ 5,114 ​ 195 ​ 3,246 Tax-exempt ​ 2,815 ​ 3,721 ​ 3,357 ​ (906) ​ 364 Total available-for-sale debt securities ​ 11,370 ​ 12,081 ​ 8,471 ​ (711) ​ 3,610 Loans receivable: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ 98,843 ​ 77,641 ​ 68,019 ​ 21,202 ​ 9,622 Paycheck Protection Program ​ ​ 11 ​ ​ 54 ​ ​ 3,476 ​ ​ (43) ​ ​ (3,422) Tax-exempt ​ 2,756 ​ 2,471 ​ 2,232 ​ 285 ​ 239 Total loans receivable ​ 101,610 ​ 81,070 ​ 76,781 ​ 20,540 ​ 4,289 Other earning assets ​ 64 ​ 77 ​ 66 ​ (13) ​ 11 Total Interest Income ​ 114,423 ​ 93,873 ​ 85,636 ​ 20,550 ​ 8,237 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ INTEREST EXPENSE ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing deposits: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest checking ​ 7,668 ​ 1,833 ​ 897 ​ 5,835 ​ 936 Money market ​ 5,686 ​ 2,088 ​ 1,156 ​ 3,598 ​ 932 Savings ​ 243 ​ 257 ​ 231 ​ (14) ​ 26 Time deposits ​ 10,636 ​ 2,460 ​ 2,254 ​ 8,176 ​ 206 Total interest-bearing deposits ​ 24,233 ​ 6,638 ​ 4,538 ​ 17,595 ​ 2,100 Borrowed funds: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Short-term ​ 3,240 ​ 429 ​ 23 ​ 2,811 ​ 406 Long-term - FHLB advances ​ 4,230 ​ 896 ​ 399 ​ 3,334 ​ 497 Senior notes, net ​ ​ 479 ​ ​ 477 ​ ​ 293 ​ ​ 2 ​ ​ 184 Subordinated debt, net ​ 922 ​ 1,079 ​ 1,309 ​ (157) ​ (230) Total borrowed funds ​ 8,871 ​ 2,881 ​ 2,024 ​ 5,990 ​ 857 Total Interest Expense ​ 33,104 ​ 9,519 ​ 6,562 ​ 23,585 ​ 2,957 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Interest Income ​ $ 81,319 ​ $ 84,354 ​ $ 79,074 ​ $ (3,035) ​ $ 5,280 ​ (1) Interest income from tax-exempt securities and loans has been adjusted to a fully taxable-equivalent basis (a non-GAAP measure), using the Corporation’s marginal federal income tax rate of 21%.
Over the period 2018-2022, each period includes a few large commercial relationships that have required significant monitoring and workout efforts. As a result, a limited number of relationships may significantly impact the total amount of allowance required on impaired loans, and may significantly impact the provision for loan losses and the amount of total charge-offs reported in any one period.
As a result, a limited number of relationships may significantly impact the total amount of allowance required on individual loans and may significantly impact the provision for credit losses and the amount of total charge-offs reported in any one period.
INTEREST EXPENSE AND INTEREST-BEARING LIABILITIES Interest expense increased $2,957,000, or 45.1%, to $9,519,000 in 2022 from $6,562,000 in 2021. Interest expense on deposits increased $2,100,000. Table II shows the average rate on interest-bearing deposits increased to 0.46% in 2022 from 0.33% in 2021 reflecting the impact of increases in market rates in 2022.
Table II shows the average rate on interest-bearing deposits increased to 0.46% in 2022 from 0.33% in 2021 reflecting the impact of increases in market rates in 2022. Average total deposits (interest-bearing and noninterest-bearing) increased $75,012,000 (3.9%) to $1,980,412,000 in 2022 from $1,905,400 in 2021.
An adequate liquidity position permits the Corporation to pay creditors, compensate for unforeseen deposit fluctuations and fund unexpected loan demand. At December 31, 2022, the Corporation maintained overnight interest-bearing deposits with the Federal Reserve Bank of Philadelphia and other correspondent banks totaling $21,887,000. The Corporation maintains overnight borrowing facilities with several correspondent banks that provide a source of day-to-day liquidity.
LIQUIDITY Liquidity is the ability to quickly raise cash at a reasonable cost. An adequate liquidity position permits the Corporation to pay creditors, compensate for unforeseen deposit fluctuations and fund unexpected loan demand. The Corporation maintains overnight borrowing facilities with several correspondent banks that provide a source of day-to-day liquidity.
Average total deposits (interest-bearing and noninterest-bearing) increased $75,012,000 (3.9%) to $1,980,412,000 in 2022 from $1,905,400 in 2021. Average time deposits decreased $42,552,000, while the average total balance of other categories increased $117,564,000, or 7.5%. The increase in average deposits includes the impact of growth in commercial deposits, reflecting higher average balances maintained and new business.
Average time deposits decreased $42,552,000, while the average total balance of other categories increased $117,564,000, or 7.5%. The increase in average deposits included the impact of growth in commercial deposits, reflecting higher average balances maintained and new business. Interest expense on short-term borrowings in 2022 was $429,000 as compared to $23,000 in 2021.
Government agencies or sponsored agencies: ​ ​ ​ ​ ​ ​ ​ Residential pass-through securities ​ ​ ​ ​ ​ ​ ​ ​ 112,782 1.89 % Residential collateralized mortgage obligations ​ ​ ​ ​ ​ ​ ​ ​ 44,868 2.18 % Commercial mortgage-backed securities ​ ​ ​ ​ ​ ​ ​ ​ 91,388 2.09 % Private label commercial mortgage-backed securities ​ ​ ​ ​ ​ ​ ​ ​ 8,070 5.51 % Total ​ ​ ​ ​ ​ ​ ​ ​ $ 561,794 2.17 % ​ The Corporation’s mortgage-backed securities and collateralized mortgage obligations have stated maturities that may differ from actual maturities due to borrowers’ ability to prepay obligations.
Government agencies or sponsored agencies: ​ ​ ​ ​ ​ ​ ​ Residential pass-through securities ​ ​ ​ ​ ​ ​ ​ ​ 105,549 2.18 % Residential collateralized mortgage obligations ​ ​ ​ ​ ​ ​ ​ ​ 50,212 2.91 % Commercial mortgage-backed securities ​ ​ ​ ​ ​ ​ ​ ​ 76,412 2.03 % Private label commercial mortgage-backed securities ​ ​ ​ ​ ​ ​ ​ ​ 8,215 5.49 % Total ​ ​ ​ ​ ​ ​ ​ ​ $ 464,968 2.42 % ​ The Corporation’s mortgage-backed securities and collateralized mortgage obligations have stated maturities that may differ from actual maturities due to borrowers’ ability to prepay obligations.
Interest income was $7,496,000 higher in 2021 as compared to 2020; interest expense was lower by $3,033,000 in comparing the same periods.
Interest income was $8,237,000 higher in 2022 as compared to 2021; interest expense was higher by $2,957,000 in comparing the same periods.
(2) Nonaccrual loans have been included with loans for the purpose of analyzing net interest earnings. ​ ​ 23 Table of Contents TABLE III - ANALYSIS OF VOLUME AND RATE CHANGES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) Year Ended 12/31/2022 vs. 12/31/2021 . ​ Year Ended 12/31/2021 vs. 12/31/2020 ​ Change in ​ Change in ​ Total ​ Change in ​ Change in ​ Total ​ Volume Rate Change ​ Volume Rate Change EARNING ASSETS ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing due from banks ​ $ (339) ​ $ 666 ​ $ 327 ​ ​ $ 176 ​ $ (109) ​ $ 67 Available-for-sale debt securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ 2,989 ​ 257 ​ 3,246 ​ ​ 532 ​ (952) ​ (420) Tax-exempt ​ 534 ​ (170) ​ 364 ​ ​ 1,008 ​ (320) ​ 688 Total available-for-sale debt securities ​ 3,523 ​ 87 ​ 3,610 ​ ​ 1,540 ​ (1,272) ​ 268 Loans receivable: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ 5,289 ​ 4,333 ​ 9,622 ​ ​ 6,821 ​ (3,262) ​ 3,559 Paycheck Protection Program - 1st Draw ​ ​ (4,664) ​ ​ 1,242 ​ ​ (3,422) ​ ​ ​ (2,247) ​ ​ 2,799 ​ ​ 552 Paycheck Protection Program - 2nd Draw ​ ​ (3,769) ​ ​ 1,619 ​ ​ (2,150) ​ ​ ​ 3,054 ​ ​ 0 ​ ​ 3,054 Tax-exempt ​ 388 ​ (149) ​ 239 ​ ​ 388 ​ (378) ​ 10 Total loans receivable ​ (2,756) ​ 7,045 ​ 4,289 ​ ​ 8,016 ​ (841) ​ 7,175 Other earning assets ​ (2) ​ 13 ​ 11 ​ ​ 2 ​ (16) ​ (14) Total Interest Income ​ 426 ​ 7,811 ​ 8,237 ​ ​ 9,734 ​ (2,238) ​ 7,496 ​ ​ ​ ​ ​ ​ ​ ​ INTEREST-BEARING LIABILITIES ​ ​ ​ ​ ​ ​ ​ Interest-bearing deposits: ​ ​ ​ ​ ​ ​ ​ Interest checking ​ 109 ​ 827 ​ 936 ​ ​ 233 ​ (284) ​ (51) Money market ​ 27 ​ 905 ​ 932 ​ ​ 430 ​ (446) ​ (16) Savings ​ 29 ​ (3) ​ 26 ​ ​ 43 ​ (42) ​ 1 Time deposits ​ (318) ​ 524 ​ 206 ​ ​ (752) ​ (1,875) ​ (2,627) Total interest-bearing deposits ​ (153) ​ 2,253 ​ 2,100 ​ ​ (46) ​ (2,647) ​ (2,693) Borrowed funds: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Short-term ​ 146 ​ 260 ​ 406 ​ ​ (191) ​ (153) ​ (344) Long-term - FHLB advances ​ (38) ​ 535 ​ 497 ​ ​ (476) ​ (416) ​ (892) Senior notes, net ​ ​ 181 ​ ​ 3 ​ ​ 184 ​ ​ ​ 293 ​ ​ 0 ​ ​ 293 Subordinated debt, net ​ (14) ​ (216) ​ (230) ​ ​ 786 ​ (183) ​ 603 Total borrowed funds ​ 275 ​ 582 ​ 857 ​ ​ 412 ​ (752) ​ (340) Total Interest Expense ​ 122 ​ 2,835 ​ 2,957 ​ ​ 366 ​ (3,399) ​ (3,033) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Interest Income ​ $ 304 ​ $ 4,976 ​ $ 5,280 ​ ​ $ 9,368 ​ $ 1,161 ​ $ 10,529 (1) Changes in income on tax-exempt securities and loans are presented on a fully taxable-equivalent basis, using the Corporation’s marginal federal income tax rate of 21%.
(2) Nonaccrual loans have been included with loans for the purpose of analyzing net interest earnings. ​ ​ ​ 23 Table of Contents TABLE III - ANALYSIS OF VOLUME AND RATE CHANGES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) Year Ended 12/31/2023 vs. 12/31/2022 . ​ Year Ended 12/31/2022 vs. 12/31/2021 ​ Change in ​ Change in ​ Total ​ Change in ​ Change in ​ Total ​ Volume Rate Change ​ Volume Rate Change EARNING ASSETS ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing due from banks ​ $ (309) ​ $ 1,043 ​ $ 734 ​ ​ $ (339) ​ $ 666 ​ $ 327 Available-for-sale debt securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ (433) ​ 628 ​ 195 ​ ​ 2,989 ​ 257 ​ 3,246 Tax-exempt ​ (527) ​ (379) ​ (906) ​ ​ 534 ​ (170) ​ 364 Total available-for-sale debt securities ​ (960) ​ 249 ​ (711) ​ ​ 3,523 ​ 87 ​ 3,610 Loans receivable: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Taxable ​ 9,165 ​ ​ 12,037 ​ 21,202 ​ ​ 5,289 ​ 4,333 ​ 9,622 Paycheck Protection Program ​ ​ (714) ​ ​ (233) ​ ​ (947) ​ ​ ​ (4,664) ​ ​ 1,242 ​ ​ (3,422) Tax-exempt ​ 59 ​ 226 ​ 285 ​ ​ 388 ​ (149) ​ 239 Total loans receivable ​ 8,510 ​ 12,030 ​ 20,540 ​ ​ (2,756) ​ 7,045 ​ 4,289 Other earning assets ​ (37) ​ ​ 24 ​ (13) ​ ​ (2) ​ 13 ​ 11 Total Interest Income ​ 7,204 ​ 13,346 ​ 20,550 ​ ​ 426 ​ 7,811 ​ 8,237 ​ ​ ​ ​ ​ ​ ​ ​ INTEREST-BEARING LIABILITIES ​ ​ ​ ​ ​ ​ ​ Interest-bearing deposits: ​ ​ ​ ​ ​ ​ ​ Interest checking ​ 208 ​ 5,627 ​ 5,835 ​ ​ 109 ​ 827 ​ 936 Money market ​ (542) ​ 4,140 ​ 3,598 ​ ​ 27 ​ 905 ​ 932 Savings ​ (14) ​ 0 ​ (14) ​ ​ 29 ​ (3) ​ 26 Time deposits ​ 1,073 ​ 7,103 ​ 8,176 ​ ​ (318) ​ 524 ​ 206 Total interest-bearing deposits ​ 725 ​ 16,870 ​ 17,595 ​ ​ (153) ​ 2,253 ​ 2,100 Borrowed funds: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Short-term ​ 1,517 ​ 1,294 ​ 2,811 ​ ​ 146 ​ 260 ​ 406 Long-term - FHLB advances ​ 2,375 ​ 959 ​ 3,334 ​ ​ (38) ​ 535 ​ 497 Senior notes, net ​ ​ 2 ​ ​ 0 ​ ​ 2 ​ ​ ​ 181 ​ ​ 3 ​ ​ 184 Subordinated debt, net ​ (94) ​ (63) ​ (157) ​ ​ (14) ​ (216) ​ (230) Total borrowed funds ​ 3,800 ​ 2,190 ​ 5,990 ​ ​ 275 ​ 582 ​ 857 Total Interest Expense ​ 4,525 ​ 19,060 ​ 23,585 ​ ​ 122 ​ 2,835 ​ 2,957 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net Interest Income ​ $ 2,679 ​ $ (5,714) ​ $ (3,035) ​ ​ $ 304 ​ $ 4,976 ​ $ 5,280 (1) Changes in income on tax-exempt securities and loans are presented on a fully taxable-equivalent basis, using the Corporation’s marginal federal income tax rate of 21%.
Income from purchase accounting adjustments in 2021 had a positive effect on net interest income in 2021 of $2,659,000, including an increase in income on loans of $1,289,000 and net reductions in interest expense on time deposits and borrowed funds totaling $1,370,000. In comparison, the net positive impact on net interest income of purchase accounting adjustments was $3,272,000 in 2020.
Income from purchase accounting-related adjustments in 2023 had a positive effect on net interest income of $697,000, including an increase in income on loans of $623,000 and a net reduction in interest expense on time deposits and borrowed funds totaling $74,000. The positive impact of purchase accounting-related adjustments to the net interest margin was 0.03% in 2023.
In 2022, the provision includes the impact of partial charge-offs totaling $3,942,000 on a commercial real estate secured participation loan to a borrower in the health care industry.
Average total deposits increased $75.0 million (3.9%) in 2022 as compared to 2021. ● The provision for loan losses of $7,255,000 for 2022 was higher than the 2021 provision by $3,594,000. In 2022, the provision includes the impact of partial charge-offs totaling $3,942,000 on a commercial real estate secured participation loan to a borrower in the health care industry.
Additional information regarding the potential impact of interest rate changes on all of the Corporation’s financial instruments is provided in Item 7A, Quantitative and Qualitative Disclosures about Market Risk. 27 Table of Contents The following table presents the contractual maturities and the weighted-average yields (calculated based on amortized cost) of investment securities as of December 31, 2022.
Additional information regarding the potential impact of interest rate changes on all of the Corporation’s financial instruments is provided in Item 7A, Quantitative and Qualitative Disclosures about Market Risk.
The difference between amortized cost and fair value of available-for-sale debt securities, net of deferred income tax, is included in accumulated other comprehensive (loss) income within stockholders’ equity. Accumulated other comprehensive (loss) income is excluded from the Bank’s and Corporation’s regulatory capital ratios.
Through December 31, 2023, no shares were repurchased under the new program. The Corporation’s total stockholders’ equity is affected by fluctuations in the fair values of available-for-sale debt securities. The difference between amortized cost and fair value of available-for-sale debt securities, net of deferred income tax, is included in accumulated other comprehensive loss within stockholders’ equity.
Further, although the Corporation is no longer subject to the specific consolidated capital requirements described herein, the Corporation’s ability to pay dividends, repurchase stock or engage in other activities may be limited by the Federal Reserve if the Corporation fails to hold sufficient capital commensurate with its overall risk profile. 37 Table of Contents To avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization subject to the rule must hold a capital conservation buffer composed of common equity tier 1 capital above its minimum risk-based capital requirements.
Further, although the Corporation is no longer subject to the specific consolidated capital requirements described herein, the Corporation’s ability to pay dividends, repurchase stock or engage in other activities may be limited by the Federal Reserve if the Corporation fails to hold sufficient capital commensurate with its overall risk profile.
INCOME TAXES The effective income tax rate was 17.7% of pre-tax income in 2022, down from 18.9% in 2021 and up from 17.2% in 2020. The Corporation’s effective tax rates differed from the federal statutory rate of 21% mainly because of the effects of tax-exempt interest income.
INCOME TAXES The effective income tax rate was 20.8% of pre-tax income in 2023, up from 17.7% in 2022 and 18.9% in 2021.
The securities section of Management’s Discussion and Analysis and Note 7 to the consolidated financial statements provide additional information concerning management’s evaluation of available-for-sale debt securities for other-than-temporary impairment at December 31, 2022. 38 Table of Contents ​
The securities section of Management’s Discussion and Analysis and Note 6 to the consolidated financial statements provide additional information concerning information management considered in evaluating debt and equity securities for credit losses at December 31, 2023. ​
Allowance for Loan Losses – A material estimate that is particularly susceptible to significant change is the determination of the allowance for loan losses. The Corporation maintains an allowance for loan losses that represents management’s estimate of the losses inherent in the loan portfolio as of the balance sheet date and recorded as a reduction of the investment in loans.
Allowance for Credit Losses on Loans – A material estimate that is particularly susceptible to significant change is the determination of the allowance for credit losses (ACL) on loans. The Corporation maintains an ACL on loans which represents management’s estimate of expected net charge-offs over the life of the loans.
The average rate on subordinated debt decreased to 3.98% in 2022 from 4.78% in 2021 including the net impact of a new issue of subordinated debt of $24,437,000, net, at an effective rate of 3.74% in May 2021 and the redemption of subordinated notes totaling $8,000,000 in the second quarter 2021 and $8,500,000 in the second quarter 2022. 2021 vs. 2020 Fully taxable equivalent net interest income was $79,074,000 in 2021, $10,529,000 (15.4%) higher than in 2020.
The average balance of subordinated debt decreased to $24,662,000 in 2023 from $27,116,000 in 2022 and the average rate on subordinated debt decreased to 3.74% in 2023 from 3.98% in 2022 reflecting the repayment of subordinated debt assumed in an acquisition of $8,500,000 in the second quarter 2022. 2022 vs. 2021 Fully taxable equivalent net interest income was $84,354,000 in 2022, $5,280,000 (6.7%) higher than in 2021.
In comparison, the aggregate unrealized gain position was $6,087,000 (1.2%) at December 31, 2021 and $14,780,000 (4.4%) at December 31, 2020. The unrealized decrease in fair value of the portfolio in 2022 and in 2021 resulted from an increase in interest rates. As shown above, the market yield on the 5-year U.S.
The volatility in the fair value of the portfolio, including the significant reduction in fair value, resulted from changes in interest rates. As shown above, the market yield on the 5-year U.S. Treasury Note was 0.15% lower at December 31, 2023 in comparison to December 31, 2022, and 2.58% higher than at December 31, 2021.
The Corporation’s outstanding, available, and total credit facilities at December 31, 2022 and 2021 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding ​ Available ​ Total Credit (In Thousands) December 31, December 31, December 31, December 31, December 31, December 31, ​ ​ 2022 ​ 2021 ​ 2022 ​ 2021 ​ 2022 ​ 2021 Federal Home Loan Bank of Pittsburgh ​ $ 150,099 ​ $ 33,311 ​ $ 689,279 ​ $ 723,557 ​ $ 839,378 ​ $ 756,868 Federal Reserve Bank Discount Window ​ 0 ​ 0 ​ 23,107 ​ 13,642 ​ 23,107 ​ 13,642 Other correspondent banks ​ 0 ​ 0 ​ 95,000 ​ 45,000 ​ 95,000 ​ 45,000 Total credit facilities ​ $ 150,099 ​ $ 33,311 ​ $ 807,386 ​ $ 782,199 ​ $ 957,485 ​ $ 815,510 ​ At December 31, 2022, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of overnight borrowing of $77,000,000, long-term borrowings of $62,272,000 and letters of credit totaling $10,827,000.
As collateral for the line, the Corporation has pledged available-for-sale securities with a carrying value of $20,829,000 at December 31, 2023. 35 Table of Contents The Corporation’s outstanding, available, and total credit facilities at December 31, 2023 and 2022 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Outstanding ​ Available ​ Total Credit (In Thousands) December 31, December 31, December 31, December 31, December 31, December 31, ​ ​ 2023 ​ 2022 ​ 2023 ​ 2022 ​ 2023 ​ 2022 Federal Home Loan Bank of Pittsburgh ​ $ 189,021 ​ $ 150,099 ​ $ 737,824 ​ $ 689,279 ​ $ 926,845 ​ $ 839,378 Federal Reserve Bank Discount Window ​ 0 ​ 0 ​ 19,982 ​ 23,107 ​ 19,982 ​ 23,107 Other correspondent banks ​ 0 ​ 0 ​ 75,000 ​ 95,000 ​ 75,000 ​ 95,000 Total credit facilities ​ $ 189,021 ​ $ 150,099 ​ $ 832,806 ​ $ 807,386 ​ $ 1,021,827 ​ $ 957,485 ​ At December 31, 2023, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of overnight and short-term borrowings of $31,500,000, long-term borrowings with par values totaling $138,313,000 and letters of credit totaling $19,208,000.
Excluding PPP loans and income from excess repayments on purchased credit impaired loans, the adjusted yield on loans was 4.83% in 2022, up from the similarly adjusted yield of 4.67% in 2021. Income from interest-bearing due from banks totaled $645,000 in 2022, an increase of $327,000 from the total for 2021.
The comparatively high yield on PPP loans provided a benefit to the margin in both periods though the higher volume resulted in a larger benefit in 2021. Excluding PPP loans and income from excess repayments on purchased credit impaired loans, the adjusted yield on loans was 4.83% in 2022, up from the similarly adjusted yield of 4.67% in 2021.
Participation loans are included in the “Commercial and industrial”, “Commercial loans secured by real estate”, “Political subdivisions” and “Other commercial” classes in the loan tables presented in this Form 10-K. Total participation loans outstanding amounted to $44,723,000 at December 31, 2022, down from $54,372,000 at December 31, 2021.
Although not the lead bank, the Corporation conducts detailed underwriting and monitoring of participation loan opportunities. Participation loans are included in the “Commercial and industrial”, “Commercial loans secured by real estate”, “Political subdivisions” and “Other commercial” classes in the loan tables presented in this Form 10-K.
At December 31, 2022, the total outstanding balance of loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $1,515,000, and the corresponding total outstanding balance of repurchased loans at December 31, 2021 was $1,571,000.
At December 31, 2023, the total outstanding balance of loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $1,335,000 compared to $1,515,000 at December 31, 2022. 29 Table of Contents At December 31, 2023, outstanding balances of loans sold and serviced through the MPF Xtra and Original programs totaled $323,298,000, including loans sold through the MPF Xtra program of $150,015,000 and loans sold through the Original program of $173,283,000.
The discussion that follows is based on amounts in the tables. 2022 vs. 2021 Fully taxable equivalent net interest income was $84,354,000 in 2022, $5,280,000 (6.7%) higher than in 2021. Interest income was $8,237,000 higher in 2022 as compared to 2021; interest expense was higher by $2,957,000 in comparing the same periods.
The discussion that follows is based on amounts in the tables. 2023 vs. 2022 Fully taxable equivalent net interest income was $81,319,000 in 2023, $3,035,000 (3.6%) lower than in 2022.
The net positive impact to the net interest margin from purchase accounting adjustments was 0.13% in 2021 and 0.18% in 2020. 19 Table of Contents INTEREST INCOME AND EARNING ASSETS Interest income totaled $85,636,000 in 2021, an increase of 9.6% from 2020. Interest and fees on loans receivable increased $7,175,000, or 10.3%, to $76,781,000 in 2021 from $69,606,000 in 2020.
In comparison, the net positive impact of purchase accounting-related adjustments was $1,621,000, with a positive impact on the net interest margin of 0.07% in 2022. INTEREST INCOME AND EARNING ASSETS Interest income totaled $114,423,000 in 2023, an increase of $20,550,000, or 21.9%, from 2022. Interest and fees from loans receivable increased $20,540,000 in 2023 as compared to 2022.
Accretion and amortization of purchase accounting adjustments had a net positive impact on net interest income of $1,621,000 in 2022 as compared to a net positive impact of $2,659,000 in 2021. Average outstanding loans increased $31.3 million, despite a reduction in average PPP loans of $89.2 million.
Average outstanding loans increased $31.3 million, despite a reduction in average PPP loans of $89.2 million. Average loans, excluding PPP loans, were up $120.6 million (8.0%) in 2022 as compared to 2021.
Management reviewed the Corporation’s holdings as of December 31, 2022 and concluded there were no credit-related declines in fair value and that the unrealized losses on all of the securities in an unrealized loss position are considered temporary.
Further, management reviewed the Corporation’s holdings as of December 31, 2023 and concluded there were no credit-related declines in fair value. Additional information related to the types of securities held at December 31, 2023, other than securities issued or guaranteed by U.S.
Total nonperforming loans as a percentage of outstanding loans was 1.46% at December 31, 2022, up from 1.36% at December 31, 2021, and nonperforming assets as a percentage of total assets was 1.04% at December 31, 2022, up from 0.94% at December 31, 2021.
Table XI shows that total nonperforming assets as a percentage of total assets was 0.75% at December 31, 2023, down from 1.04% at December 31, 2022 and lower than that at year-end 2019 through 2021. Total nonperforming assets were $18.8 million at December 31, 2023, down from $25.6 million at December 31, 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeConversely, in the downward rate shock scenarios, the magnitude of the negative impact to the value of nonmaturity deposits would exceed the amount of appreciation in the value of securities and loans. ​ TABLE XIII – THE EFFECT OF HYPOTHETICAL CHANGES IN INTEREST RATES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 Data ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ Period Ending December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basis Point ​ ​ Interest ​ ​ Interest ​ ​ Net Interest ​ NII ​ ​ NII ​ Change in Rates ​ ​ Income ​ ​ Expense ​ ​ Income (NII) ​ % Change ​ ​ Risk Limit ​ +400 ​ $ 131,145 ​ $ 34,767 ​ $ 96,378 ​ 8.9 % ​ 25.0 % +300 ​ ​ 125,127 ​ ​ 30,816 ​ ​ 94,311 ​ 6.6 % ​ 20.0 % +200 ​ ​ 119,561 ​ ​ 26,864 ​ ​ 92,697 ​ 4.8 % ​ 15.0 % +100 ​ ​ 113,703 ​ ​ 22,912 ​ ​ 90,791 ​ 2.6 % ​ 10.0 % 0 ​ ​ 107,451 ​ ​ 18,961 ​ ​ 88,490 ​ 0.0 % ​ 0.0 % -100 ​ ​ 101,048 ​ ​ 15,516 ​ ​ 85,532 ​ (3.3) % ​ 10.0 % -200 ​ ​ 94,854 ​ ​ 13,240 ​ ​ 81,614 ​ (7.8) % ​ 15.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Economic Value of Equity at December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Present ​ ​ Present ​ ​ Present ​ ​ ​ ​ ​ ​ Basis Point ​ ​ Value ​ ​ Value ​ ​ Value ​ ​ ​ ​ ​ ​ Change in Rates ​ ​ Equity ​ ​ % 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 % ​ ​ ​ ​ ​ ​ ​ 40 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 Data ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ Period Ending December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basis Point ​ ​ Interest ​ ​ Interest ​ ​ Net Interest ​ NII ​ ​ NII ​ Change in Rates ​ ​ Income ​ ​ Expense ​ ​ Income (NII) ​ % Change ​ ​ Risk Limit ​ +400 ​ $ 98,839 ​ $ 18,142 ​ $ 80,697 ​ 19.1 % ​ 25.0 % +300 ​ ​ 92,438 ​ ​ 15,061 ​ ​ 77,377 ​ 14.2 % ​ 20.0 % +200 ​ ​ 86,112 ​ ​ 11,981 ​ ​ 74,131 ​ 9.4 % ​ 15.0 % +100 ​ ​ 79,740 ​ ​ 8,900 ​ ​ 70,840 ​ 4.5 % ​ 10.0 % 0 ​ ​ 73,536 ​ ​ 5,760 ​ ​ 67,776 ​ 0.0 % ​ 0.0 % -100 ​ ​ 70,118 ​ ​ 4,820 ​ ​ 65,298 ​ (3.7) % ​ 10.0 % -200 ​ ​ 68,824 ​ ​ 4,503 ​ ​ 64,321 ​ (5.1) % ​ 15.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Economic Value of Equity at December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Present ​ ​ Present ​ ​ Present ​ ​ ​ ​ ​ ​ Basis Point ​ ​ Value ​ ​ Value ​ ​ Value ​ ​ ​ ​ ​ ​ Change in Rates ​ ​ Equity ​ ​ % Change ​ ​ Risk Limit ​ ​ ​ ​ ​ ​ +400 ​ $ 471,951 ​ ​ 14.1 % ​ 50.0 % ​ ​ ​ ​ ​ +300 ​ ​ 459,810 ​ ​ 11.1 % ​ 45.0 % ​ ​ ​ ​ ​ +200 ​ ​ 447,354 ​ ​ 8.1 % ​ 35.0 % ​ ​ ​ ​ ​ +100 ​ ​ 431,856 ​ ​ 4.4 % ​ 25.0 % ​ ​ ​ ​ ​ 0 ​ ​ 413,767 ​ ​ 0.0 % ​ 0.0 % ​ ​ ​ ​ ​ -100 ​ ​ 388,721 ​ ​ (6.1) % ​ 25.0 % ​ ​ ​ ​ ​ -200 ​ ​ 365,331 ​ ​ (11.7) % ​ 35.0 % ​ ​ ​ ​ ​ ​ ​ ​ 41 Table of Contents
Biggest changeIn contrast, most of the Corporation’s other financial instruments, including loans receivable (held for investment), deposits and borrowed funds are carried on the balance sheet at historical cost without adjustment for the impact of changes in interest rates. . ​ ​ ​ ​ ​ ​ ​ 39 Table of Contents ​ TABLE XIII – THE EFFECT OF HYPOTHETICAL CHANGES IN INTEREST RATES ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2023 Data ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ Period Ending December 31, 2024 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basis Point ​ ​ Interest ​ ​ Interest ​ ​ Net Interest ​ NII ​ ​ NII ​ Change in Rates ​ ​ Income ​ ​ Expense ​ ​ Income (NII) ​ % Change ​ ​ Risk Limit ​ +400 ​ $ 148,407 ​ $ 81,707 ​ $ 66,700 ​ (21.5) % ​ 25.0 % +300 ​ ​ 143,333 ​ ​ 70,165 ​ ​ 73,168 ​ (13.9) % ​ 20.0 % +200 ​ ​ 138,291 ​ ​ 59,859 ​ ​ 78,432 ​ (7.7) % ​ 15.0 % +100 ​ ​ 133,224 ​ ​ 50,797 ​ ​ 82,427 ​ (3.0) % ​ 10.0 % 0 ​ ​ 127,920 ​ ​ 42,979 ​ ​ 84,941 ​ 0.0 % ​ 0.0 % -100 ​ ​ 122,446 ​ ​ 37,701 ​ ​ 84,745 ​ (0.2) % ​ 10.0 % -200 ​ ​ 116,922 ​ ​ 32,462 ​ ​ 84,460 ​ (0.6) % ​ 15.0 % -300 ​ ​ 110,919 ​ ​ 27,710 ​ ​ 83,209 ​ (2.0) % ​ 20.0 % -400 ​ ​ 104,495 ​ ​ 23,067 ​ ​ 81,428 ​ (4.1) % ​ 25.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Economic Value of Equity at December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Present ​ ​ Present ​ ​ Present ​ ​ ​ ​ ​ ​ Basis Point ​ ​ Value ​ ​ Value ​ ​ Value ​ ​ ​ ​ ​ ​ Change in Rates ​ ​ Equity ​ ​ % Change ​ ​ Risk Limit ​ ​ ​ ​ ​ ​ +400 ​ $ 330,130 ​ ​ (21.2) % ​ 50.0 % ​ ​ ​ ​ ​ +300 ​ ​ 359,302 ​ ​ (14.3) % ​ 45.0 % ​ ​ ​ ​ ​ +200 ​ ​ 385,045 ​ ​ (8.1) % ​ 35.0 % ​ ​ ​ ​ ​ +100 ​ ​ 405,178 ​ ​ (3.3) % ​ 25.0 % ​ ​ ​ ​ ​ 0 ​ ​ 419,199 ​ ​ 0.0 % ​ 0.0 % ​ ​ ​ ​ ​ -100 ​ ​ 406,957 ​ ​ (2.9) % ​ 25.0 % ​ ​ ​ ​ ​ -200 ​ ​ 406,145 ​ ​ (3.1) % ​ 35.0 % ​ ​ ​ ​ ​ -300 ​ ​ 385,859 ​ ​ (8.0) % ​ 45.0 % ​ ​ ​ ​ ​ -400 ​ ​ 363,763 ​ ​ (13.2) % ​ 50.0 % ​ ​ ​ ​ ​ ​ ​ 40 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 Data ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In Thousands) ​ Period Ending December 31, 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basis Point ​ ​ Interest ​ ​ Interest ​ ​ Net Interest ​ NII ​ ​ NII ​ Change in Rates ​ ​ Income ​ ​ Expense ​ ​ Income (NII) ​ % Change ​ ​ Risk Limit ​ +400 ​ $ 131,145 ​ $ 34,767 ​ $ 96,378 ​ 8.9 % ​ 25.0 % +300 ​ ​ 125,127 ​ ​ 30,816 ​ ​ 94,311 ​ 6.6 % ​ 20.0 % +200 ​ ​ 119,561 ​ ​ 26,864 ​ ​ 92,697 ​ 4.8 % ​ 15.0 % +100 ​ ​ 113,703 ​ ​ 22,912 ​ ​ 90,791 ​ 2.6 % ​ 10.0 % 0 ​ ​ 107,451 ​ ​ 18,961 ​ ​ 88,490 ​ 0.0 % ​ 0.0 % -100 ​ ​ 101,048 ​ ​ 15,516 ​ ​ 85,532 ​ (3.3) % ​ 10.0 % -200 ​ ​ 94,854 ​ ​ 13,240 ​ ​ 81,614 ​ (7.8) % ​ 15.0 % -300 ​ ​ 89,405 ​ ​ 11,325 ​ ​ 78,080 ​ (11.8) % ​ 20.0 % -400 ​ ​ 85,076 ​ ​ 9,439 ​ ​ 75,637 ​ (14.5) % ​ 25.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Economic Value of Equity at December 31, 2022 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Present ​ ​ Present ​ ​ Present ​ ​ ​ ​ ​ ​ Basis Point ​ ​ Value ​ ​ Value ​ ​ Value ​ ​ ​ ​ ​ ​ Change in Rates ​ ​ Equity ​ ​ % 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 % ​ ​ ​ ​ ​ -300 ​ ​ 445,129 ​ ​ (10.4) % ​ 45.0 % ​ ​ ​ ​ ​ -400 ​ ​ 417,505 ​ ​ (15.9) % ​ 50.0 % ​ ​ ​ ​ ​ ​ ​ ​ 41 Table of Contents
The policy limits acceptable fluctuations in net interest income from the baseline (flat rates) one-year scenario and variances in the economic value of equity from the baseline values based on current rates. ​ Table XIII, which follows this discussion, is based on the results of calculations performed using the simulation model as of December 31, 2022 and December 31, 2021.
The policy limits acceptable fluctuations in net interest income from the baseline (flat rates) one-year scenario and variances in the economic value of equity from the baseline values based on current rates. ​ Table XIII, which follows this discussion, is based on the results of calculations performed using the simulation model as of December 31, 2023 and 2022.
The Corporation’s major category of market risk, interest rate risk, is discussed in the following section. INTEREST RATE RISK The Corporation uses a simulation model to calculate the potential effects of interest rate fluctuations on net interest income and the economic value of equity.
The Corporation’s major category of market risk, interest rate risk, is discussed in the following section. 38 Table of Contents INTEREST RATE RISK The Corporation uses a simulation model to calculate the potential effects of interest rate fluctuations on net interest income and the economic value of equity.
The table also shows that as of the respective dates, the changes in net interest income and changes in economic value were within the policy limits in all scenarios. ​ Under U.S. generally accepted accounting principles, available-for-sale debt securities are carried at fair value as of each balance sheet date.
The Table also shows that as of the respective dates, despite the impact of the modeling changes and changes in deposit mix, the changes in net interest income and changes in economic value were within the policy limits in all scenarios. ​ Under U.S. generally accepted accounting principles, available-for-sale debt securities are carried at fair value as of each balance sheet date.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ​ MARKET RISK Market risk is the risk of loss arising from adverse changes in market rates and prices of the Corporation’s financial instruments.
ITEM 7A. QUANTITA TIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ​ MARKET RISK Market risk is the risk of loss arising from adverse changes in market rates and prices of the Corporation’s financial instruments.
The difference between amortized cost and fair value of available-for-sale debt securities, net of deferred income tax, is included in accumulated other comprehensive income (loss) within stockholders’ equity. Increases in interest rates have caused the fair value of the Corporation’s available-for-sale debt securities to decrease, resulting in an accumulated other comprehensive loss of $50.4 million at December 31, 2022.
The difference between amortized cost and fair value of available-for-sale debt securities, net of deferred income tax, is included in accumulated other comprehensive income (loss) within stockholders’ equity. Increases in interest rates have caused the fair value of the Corporation’s available-for-sale debt securities to decrease, resulting in an accumulated other comprehensive loss of $38.9 million at December 31, 2023.
Removed
The table shows the Corporation’s net interest income profile is asset-sensitive, meaning net interest income increases in the upward rate scenarios and decreases in the downward rate scenarios.
Added
In the analysis based on December 31, 2023 data, the amounts of net interest income decrease, as compared to the amounts based on current interest rates, in both the upward and downward rate scenarios. Further, the economic value of equity is modeled to decrease in both the rising and falling rate scenarios.
Removed
In contrast, most of the Corporation’s other financial instruments, including loans receivable (held for investment), deposits and borrowed funds are carried on the balance sheet at historical cost without adjustment for the impact of changes in interest rates. ​ As noted above, for purposes of calculations based on the simulation model, the discounted present values of all of the Corporation’s financial instruments are estimated for each interest rate shock scenario.
Added
The results based on December 31, 2023 data as presented in Table XIII are significantly different from the results based on the modeling performed using December 31, 2022 data which showed the net interest income profile to be asset-sensitive.
Removed
As shown in Table XIII, the results of the simulation model indicate the economic value of equity would increase by 1.1% or less in all upward rate shock scenarios except for the +200 basis point scenario for which it would decrease by 0.1%. The economic value of equity would decrease in the downward rate shock scenarios.
Added
In the analysis based on December 31, 2023 data, management assumed that, in rising rate scenarios, the average rate to be paid on interest checking, savings and money market accounts would increase by a higher percentage of the baseline scenario as compared to the assumptions used in the December 31, 2022 analysis.
Removed
In 39 Table of Contents the upward rate shock scenarios, although the value of securities and fixed rate loans would decline, the magnitude of the projected economic benefit from changes in the value of deposits would approximately offset the negative impact related to securities and loans.
Added
This change reflects management’s assessment that, in light of significant increases in short-term interest rates that have occurred over the course of 2022 and 2023, the Corporation’s deposit rates would increase to a greater extent if such scenarios would occur.
Added
The change in results also reflects changes in deposit mix, as the carrying amount of total deposits without stated maturities was $112.0 million lower at December 31, 2023 as compared to December 31, 2022, while time deposits were higher by $129.3 million.
Added
Further, results in the downward rate scenarios reflect limitations on the benefit of falling rates on some deposit types due to a 0% assumed floor.

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