REGULATORY MATTERS

12 Months Ended

Dec. 31, 2024

REGULATORY MATTERS

REGULATORY MATTERS

17. REGULATORY MATTERS

In August 2018, the Federal Reserve Board issued an interim final rule that expanded applicability of the Board’s small bank holding company policy statement. The interim final rule raised the policy statement’s asset threshold from $1 billion to $3 billion in total consolidated assets for a bank holding company or savings and loan holding company that: (1) is not engaged in significant nonbanking activities; (2) does not conduct significant off-balance sheet activities; and (3) does not have a material amount of debt or equity securities, other than trust-preferred securities, outstanding. The interim final rule provides that, if warranted for supervisory purposes, the Federal Reserve may exclude a company from the threshold increase. Management believes the Corporation meets the conditions of the Federal Reserve’s small bank holding company policy statement and is therefore excluded from consolidated capital requirements at December 31, 2024; however, C&N Bank remains subject to regulatory capital requirements administered by the federal banking agencies.

Details concerning capital ratios at December 31, 2024 and 2023 are presented below. Management believes, as of December 31, 2024, 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 net unrealized loss on available-for-sale debt securities is not included in computing regulatory capital. For comparison purposes, the Corporation’s capital ratios are presented along with those of C&N Bank in the table below. Further, as reflected in the table below, the Corporation’s and C&N Bank’s capital ratios at December 31, 2024 and 2023 exceed the Corporation’s Board policy threshold levels.

											Minimum To Be Well
					Minimum			Minimum To Maintain			Capitalized Under			Minimum To Meet
					Capital			Capital Conservation			Prompt Corrective			the Corporation's
	Actual				Requirement			Buffer at Reporting Date			Action Provisions			Policy Thresholds
(Dollars In Thousands)		Amount	Ratio		Amount	Ratio		Amount	Ratio		Amount	Ratio		Amount		Ratio
December 31, 2024:
Total capital to risk-weighted assets:
Consolidated	$	302,783	15.95	%	N/A	N/A		N/A	N/A		N/A	N/A		$	208,779	³11	%
C&N Bank		287,721	15.19	%	151,567	³8	%	198,832	³10.5	%	189,459	³10	%		208,405	³11	%
Tier 1 capital to risk-weighted assets:
Consolidated		257,462	13.56	%	N/A	N/A		N/A	N/A		N/A	N/A			170,819	³9	%
C&N Bank		267,231	14.10	%	113,675	³6	%	161,040	³8.5	%	151,567	³8	%		170,513	³9	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		257,462	13.56	%	N/A	N/A		N/A	N/A		N/A	N/A			142,349	³7.5	%
C&N Bank		267,231	14.10	%	85,256	³4.5	%	132,621	³7.0	%	123,148	³6.5	%		142,094	³7.5	%
Tier 1 capital to average assets:
Consolidated		257,462	9.80	%	N/A	N/A		N/A	N/A		N/A	N/A			210,160	³8	%
C&N Bank		267,231	10.23	%	104,514	³4	%	N/A	N/A		130,642	³5	%		209,027	³8	%
December 31, 2023:
Total capital to risk-weighted assets:
Consolidated	$	290,425	15.67	%	N/A	N/A		N/A	N/A		N/A	N/A		$	203,809	³11	%
C&N Bank		275,307	14.89	%	147,925	³8	%	194,151	³10.5	%	184,906	³10	%		203,396	³11	%
Tier 1 capital to risk-weighted assets:
Consolidated		245,810	13.27	%	N/A	N/A		N/A	N/A		N/A	N/A			166,753	³9	%
C&N Bank		255,409	13.81	%	110,943	³6	%	157,170	³8.5	%	147,925	³8	%		166,415	³9	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		245,810	13.27	%	N/A	N/A		N/A	N/A		N/A	N/A			138,961	³7.5	%
C&N Bank		255,409	13.81	%	83,208	³4.5	%	129,434	³7.0	%	120,189	³6.5	%		138,679	³7.5	%
Tier 1 capital to average assets:
Consolidated		245,810	9.87	%	N/A	N/A		N/A	N/A		N/A	N/A			199,151	³8	%
C&N Bank		255,409	10.32	%	99,010	³4	%	N/A	N/A		123,762	³5	%		198,020	³8	%

Federal regulatory authorities impose a capital rule providing that, 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. The buffer is measured relative to risk-weighted assets. At December 31, 2024, 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. Also, a banking organization is prohibited from making dividend payments or discretionary bonus payments if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5% as of the beginning of that quarter. Eligible net income is defined as net income for the four calendar quarters preceding the current calendar quarter, net of any distributions and associated tax effects not already reflected in net income. 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, 2024, C&N Bank’s Capital Conservation Buffer, determined based on the minimum total capital ratio, was 7.19%.

Banking regulators limit the amount of dividends that may be paid by C&N Bank to the Corporation. Retained earnings against which dividends may be paid without prior approval of the banking regulators amounted to approximately $111,443,000 at December 31, 2024, subject to the minimum capital ratio requirements noted above.

Restrictions imposed by federal law prohibit the Corporation from borrowing from C&N Bank unless the loans are secured in specific amounts. Such secured loans to the Corporation are generally limited to 10% of C&N Bank’s tangible stockholder’s equity (excluding accumulated other comprehensive loss) or $26,443,000 at December 31, 2024.