10-Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to _________________________.

Commission file number: 000-16084

CITIZENS & NORTHERN CORPORATION

(Exact name of Registrant as specified in its charter)

PENNSYLVANIA	23-2451943
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

90-92 MAIN STREET, WELLSBORO, PA 16901

(Address of principal executive offices) (Zip code)

570-724-3411

(Registrant's telephone number including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated filer,” accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨ Accelerated filer x Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.

Common Stock ($1.00 par value) 12,086,511 Shares Outstanding on October 31, 2016

CITIZENS & NORTHERN CORPORATION

Index

Part I.  Financial Information
Item 1.  Financial Statements
Consolidated Balance Sheets (Unaudited) – September 30, 2016 and December 31, 2015	Page   3
Consolidated Statements of Income (Unaudited) – Three-month and Nine-month Periods Ended September 30, 2016 and 2015	Page   4
Consolidated Statements of Comprehensive Income (Unaudited) - Three-month and Nine-month Periods Ended September 30, 2016 and 2015	Page   5
Consolidated Statements of Cash Flows (Unaudited) – Nine Months Ended September 30, 2016 and 2015	Page   6
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) - Nine Months Ended September 30, 2016 and 2015	Page   7
Notes to Unaudited Consolidated Financial Statements	Pages 8 – 39
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations	Pages 40 – 60
Item 3.  Quantitative and Qualitative Disclosures About Market Risk	Pages 61 – 63
Item 4.  Controls and Procedures	Page  63
Part II.  Other Information	Pages 64 – 65
Signatures	Page  66
Exhibit 31.1.  Rule 13a-14(a)/15d-14(a) Certification - Chief Executive Officer
Exhibit 31.2.  Rule 13a-14(a)/15d-14(a) Certification - Chief Financial Officer
Exhibit 32.  Section 1350 Certifications

2

ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data) (Unaudited)	September 30,			December 31,
	2016			2015
ASSETS
Cash and due from banks:
Noninterest-bearing	$	20,482		$	14,710
Interest-bearing		13,588			21,351
Total cash and due from banks		34,070			36,061
Available-for-sale securities, at fair value		409,800			420,290
Loans held for sale		621			280
Loans receivable		742,338			704,880
Allowance for loan losses		(8,421	)		(7,889	)
Loans, net		733,917			696,991
Bank-owned life insurance		19,608			20,764
Accrued interest receivable		3,871			3,768
Bank premises and equipment, net		15,406			15,406
Foreclosed assets held for sale		2,321			1,260
Deferred tax asset, net		1,544			3,115
Intangible asset - Core deposit intangibles		21			30
Intangible asset - Goodwill		11,942			11,942
Other assets		12,212			13,510
TOTAL ASSETS	$	1,245,333		$	1,223,417
LIABILITIES
Deposits:
Noninterest-bearing	$	220,973		$	211,041
Interest-bearing		770,907			724,574
Total deposits		991,880			935,615
Short-term borrowings		14,590			53,496
Long-term borrowings		38,538			38,767
Accrued interest and other liabilities		9,722			8,052
TOTAL LIABILITIES		1,054,730			1,035,930
STOCKHOLDERS' EQUITY
Preferred stock, $1,000 par value; authorized 30,000 shares; $1,000 liquidation preference per share; no shares issued at September 30, 2016 and December 31, 2015		0			0
Common stock, par value $1.00 per share; authorized 20,000,000 shares in 2016 and 2015; issued 12,655,171 at September 30, 2016 and December 31, 2015; outstanding 12,087,223 at September 30, 2016 and 12,180,623 December 31, 2015		12,655			12,655
Paid-in capital		71,616			71,654
Retained earnings		111,664			109,454
Treasury stock, at cost; 567,948 shares at September 30, 2016 and 474,548 shares at December 31, 2015		(10,762	)		(8,804	)
Sub-total		185,173			184,959
Accumulated other comprehensive income:
Unrealized gain on available-for-sale securities		5,388			2,493
Defined benefit plans gain		42			35
Total accumulated other comprehensive income		5,430			2,528
TOTAL STOCKHOLDERS' EQUITY		190,603			187,487
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	1,245,333		$	1,223,417

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3

Consolidated Statements of Income	3 Months Ended						9 Months Ended
(In Thousands Except Per Share Data) (Unaudited)	Sept. 30,			Sept. 30,			Sept. 30,			Sept. 30,
	2016			2015			2016			2015
INTEREST INCOME
Interest and fees on loans	$	8,347		$	7,851		$	24,407		$	23,313
Interest on balances with depository institutions		29			22			89			73
Interest on loans to political subdivisions		457			470			1,357			1,210
Interest on mortgages held for sale		7			5			21			10
Income from available-for-sale securities:
Taxable		1,429			1,758			4,474			5,666
Tax-exempt		835			949			2,578			2,978
Dividends		27			79			66			233
Total interest and dividend income		11,131			11,134			32,992			33,483
INTEREST EXPENSE
Interest on deposits		549			487			1,550			1,452
Interest on short-term borrowings		30			9			133			15
Interest on long-term borrowings		365			630			1,090			2,048
Total interest expense		944			1,126			2,773			3,515
Net interest income		10,187			10,008			30,219			29,968
Provision for loan losses		538			302			1,224			526
Net interest income after provision for loan losses		9,649			9,706			28,995			29,442
OTHER INCOME
Service charges on deposit accounts		1,221			1,302			3,523			3,629
Service charges and fees		118			137			335			373
Trust and financial management revenue		1,172			1,123			3,567			3,478
Brokerage revenue		216			215			569			640
Insurance commissions, fees and premiums		26			24			74			87
Interchange revenue from debit card transactions		481			482			1,431			1,456
Net gains from sale of loans		236			243			699			573
(Decrease) increase in fair value of servicing rights		(68	)		13			(247	)		(137	)
Increase in cash surrender value of life insurance		97			95			286			294
Net (loss) from premises and equipment		0			(1	)		0			(1	)
Other operating income		385			328			1,243			1,087
Sub-total		3,884			3,961			11,480			11,479
Realized gains on available-for-sale securities, net		584			79			1,089			1,085
Total other income		4,468			4,040			12,569			12,564
OTHER EXPENSES
Salaries and wages		3,901			3,744			11,701			10,834
Pensions and other employee benefits		1,060			1,016			3,499			3,336
Occupancy expense, net		601			623			1,770			1,985
Furniture and equipment expense		435			477			1,301			1,398
FDIC Assessments		151			155			448			454
Pennsylvania shares tax		287			311			932			946
Professional fees		245			141			816			437
Automated teller machine and interchange expense		291			234			807			735
Software subscriptions		237			209			729			617
Loss on prepayment of debt		0			0			0			910
Other operating expense		1,371			1,207			4,183			3,872
Total other expenses		8,579			8,117			26,186			25,524
Income before income tax provision		5,538			5,629			15,378			16,482
Income tax provision		1,451			1,395			3,847			4,076
NET INCOME	$	4,087		$	4,234		$	11,531		$	12,406
NET INCOME PER SHARE - BASIC	$	0.34		$	0.35		$	0.95		$	1.02
NET INCOME PER SHARE - DILUTED	$	0.34		$	0.35		$	0.95		$	1.01

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4

Consolidated Statements of Comprehensive Income	3 Months Ended						9 Months Ended
(In Thousands)  (Unaudited)	Sept. 30,						Sept. 30,
	2016			2015			2016			2015
Net income	$	4,087		$	4,234		$	11,531		$	12,406
Unrealized (losses) gains on available-for-sale securities:
Unrealized holding (losses) gains on available-for-sale securities		(1,661	)		3,216			5,544			2,369
Reclassification adjustment for gains realized in income		(584	)		(79	)		(1,089	)		(1,085	)
Other comprehensive (losses) gain on available-for-sale securities		(2,245	)		3,137			4,455			1,284
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in accumulated other comprehensive gain (loss)		0			0			26			(100	)
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		(5	)		(3	)		(15	)		(11	)
Other comprehensive (loss) gain  on unfunded retirement obligations		(5	)		(3	)		11			(111	)
Other comprehensive (loss) income before income tax		(2,250	)		3,134			4,466			1,173
Income tax related to other comprehensive income (loss)		786			(1,098	)		(1,564	)		(411	)
Net other comprehensive (loss) income		(1,464	)		2,036			2,902			762
Comprehensive income	$	2,623		$	6,270		$	14,433		$	13,168

The accompanying notes are an integral part of these unaudited consolidated financial statements.

5

CONSOLIDATED STATEMENTS OF CASH FLOWS	9 Months Ended
(In Thousands) (Unaudited)	Sept. 30,			Sept.  30,
	2016			2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	11,531		$	12,406
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		1,224			526
Realized gains on available-for-sale securities, net		(1,089	)		(1,085	)
Loss on prepayment of debt		0			910
Realized loss (gain) on foreclosed assets		86			(37	)
Loss on disposition of premises and equipment		0			1
Depreciation expense		1,188			1,442
Accretion and amortization on securities, net		1,065			1,204
Accretion and amortization on loans and deposits, net		(11	)		(16	)
Decrease in fair value of servicing rights		247			137
Increase in cash surrender value of life insurance		(286	)		(294	)
Stock-based compensation and other expense		484			459
Amortization of core deposit intangibles		9			16
Deferred income taxes		7			495
Gains on sales of loans, net		(699	)		(573	)
Origination of loans for sale		(19,366	)		(16,613	)
Proceeds from sales of loans		19,565			16,975
Increase in accrued interest receivable and other assets		(305	)		(2,030	)
Increase in accrued interest payable and other liabilities		187			1,333
Net Cash Provided by Operating Activities		13,837			15,256
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of certificates of deposit		1,060			0
Purchase of certificates of deposit		(2,280	)		0
Proceeds from sales of available-for-sale securities		21,573			25,972
Proceeds from calls and maturities of available-for-sale securities		54,472			65,261
Purchase of available-for-sale securities		(59,582	)		(35,200	)
Redemption of Federal Home Loan Bank of Pittsburgh stock		3,661			3,791
Purchase of Federal Home Loan Bank of Pittsburgh stock		(2,364	)		(4,674	)
Net increase in loans		(39,647	)		(52,273	)
Proceeds from bank owned life insurance		1,442			1,442
Purchase of premises and equipment		(1,188	)		(733	)
Return of principal on limited liability entity investments		115			133
Proceeds from sale of foreclosed assets		361			2,386
Net Cash (Used in) Provided by Investing Activities		(22,377	)		6,105
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits		56,265			(6,877	)
Net (decrease) increase in short-term borrowings		(38,906	)		4,707
Repayments of long-term borrowings		(229	)		(11,128	)
Purchase of treasury stock		(3,723	)		(3,944	)
Sale of treasury stock		126			379
Tax benefit from compensation plans		129			117
Common dividends paid		(8,333	)		(8,441	)
Net Cash Provided by (Used in) Financing Activities		5,329			(25,187	)
DECREASE IN CASH AND CASH EQUIVALENTS		(3,211	)		(3,826	)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		33,313			31,619
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	30,102		$	27,793
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Accrued purchase of available-for-sale securities	$	1,494		$	0
Assets acquired through foreclosure of real estate loans	$	1,508		$	2,523
Interest paid	$	2,764		$	3,525
Income taxes paid	$	3,185		$	3,295

The accompanying notes are an integral part of these unaudited consolidated financial statements.

6

Consolidated Statements of Changes in Stockholders' Equity

(In Thousands Except Share and Per Share Data)

(Unaudited)

														Accumulated
														Other
	Common		Treasury			Common		Paid-in			Retained			Comprehensive		Treasury
	Shares		Shares			Stock		Capital			Earnings			Income		Stock			Total
Nine Months Ended September 30, 2016
Balance, December 31, 2015		12,655,171		474,548		$	12,655	$	71,654		$	109,454		$	2,528	$	(8,804	)	$	187,487
Net income												11,531								11,531
Other comprehensive income, net															2,902					2,902
Cash dividends declared on common stock, $0.78 per share												(9,435	)							(9,435	)
Shares issued for dividend reinvestment plan				(53,596	)				90								1,012			1,102
Treasury stock purchased				187,300													(3,723	)		(3,723	)
Shares issued from treasury for exercise of stock options				(7,371	)				(13	)							139			126
Restricted stock granted				(35,427	)				(658	)							658			0
Forfeiture of restricted stock				2,719					48								(48	)		0
Stock-based compensation expense									480											480
Other stock-based expense				(225	)												4			4
Tax effect of stock option exercises									(2	)										(2	)
Tax benefit from dividends on restricted stock									17											17
Tax benefit from employee benefit plan												114								114
Balance, September 30, 2016		12,655,171		567,948		$	12,655	$	71,616		$	111,664		$	5,430	$	(10,762	)	$	190,603
Nine Months Ended September 30, 2015
Balance, December 31, 2014		12,655,171		375,191		$	12,655	$	71,541		$	105,550		$	5,360	$	(6,744	)	$	188,362
Net income												12,406								12,406
Other comprehensive income, net															762					762
Cash dividends declared on common stock, $0.78 per share												(9,543	)							(9,543	)
Shares issued for dividend reinvestment plan				(55,795	)				56								1,046			1,102
Treasury stock purchased				203,100													(3,944	)		(3,944	)
Shares issued from treasury for exercise of stock options				(22,335	)				(26	)							405			379
Restricted stock granted				(34,800	)				(627	)							627			0
Forfeiture of restricted stock				2,777					47								(47	)		0
Stock-based compensation expense									459											459
Tax effect of stock option exercises									(6	)										(6	)
Tax benefit from dividends on restricted stock									16											16
Tax benefit from employee benefit plan												107								107
Balance, September 30, 2015		12,655,171		468,138		$	12,655	$	71,460		$	108,520		$	6,122	$	(8,657	)	$	190,100

The accompanying notes are an integral part of these unaudited consolidated financial statements.

7

Notes to Unaudited Consolidated Financial Statements

1. BASIS OF INTERIM PRESENTATION

The consolidated financial information included herein, with the exception of the consolidated balance sheet dated December 31, 2015, is unaudited. Such information reflects all adjustments (consisting solely of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations, comprehensive income, cash flows and changes in stockholders’ equity for the interim periods; however, the information does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for a complete set of financial statements. Certain 2015 information has been reclassified for consistency with the 2016 presentation.

Operating results reported for the three-month and nine-month periods ended September 30, 2016 might not be indicative of the results for the year ending December 31, 2016. The Corporation evaluates subsequent events through the date of filing with the Securities and Exchange Commission.

2. PER SHARE DATA

Net income per share is based on the weighted-average number of shares of common stock outstanding. The following data show the amounts used in computing basic and diluted net income per share. As shown in the table that follows, diluted earnings per share is computed using weighted average common shares outstanding, plus weighted-average common shares available from the exercise of all dilutive stock options, less the number of shares that could be repurchased with the proceeds of stock option exercises based on the average share price of the Corporation's common stock during the period.

			Weighted-
			Average			Earnings
	Net		Common			Per
	Income		Shares			Share
Nine Months Ended September 30, 2016
Earnings per share – basic	$	11,531,000		12,098,554		$	0.95
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				219,679
Hypothetical share repurchase at $20.48				(195,659	)
Earnings per share – diluted	$	11,531,000		12,122,574		$	0.95
Nine Months Ended September 30, 2015
Earnings per share – basic	$	12,406,000		12,222,557		$	1.02
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				213,511
Hypothetical share repurchase at $19.94				(192,322	)
Earnings per share – diluted	$	12,406,000		12,243,746		$	1.01

8

			Weighted-
			Average			Earnings
	Net		Common			Per
	Income		Shares			Share
Three Months Ended September 30, 2016
Earnings per share – basic	$	4,087,000		12,078,397		$	0.34
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				215,154
Hypothetical share repurchase at $21.20				(185,355	)
Earnings per share – diluted	$	4,087,000		12,108,196		$	0.34
Three Months Ended September 30, 2015
Earnings per share – basic	$	4,234,000		12,200,129		$	0.35
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				204,449
Hypothetical share repurchase at $19.90				(184,248	)
Earnings per share – diluted	$	4,234,000		12,220,330		$	0.35

Stock options that were anti-dilutive were excluded from net income per share calculations. Weighted-average common shares available from anti-dilutive instruments totaled 39,054 shares in the nine-month period ended September 30, 2016, 66,351 shares in the nine-month period ended September 30, 2015, 22,715 shares in the third quarter 2016 and 47,974 shares in the third quarter 2015.

3. COMPREHENSIVE INCOME

Comprehensive income is the total of (1) net income, and (2) all other changes in equity from non-stockholder sources, which are referred to as other comprehensive income. The components of other comprehensive income, and the related tax effects, are as follows:

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
Nine Months Ended September 30, 2016
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	5,544		$	(1,941	)	$	3,603
Reclassification adjustment for (gains) realized in income		(1,089	)		381			(708	)
Other comprehensive income on available-for-sale securities		4,455			(1,560	)		2,895
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		26			(9	)		17
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		(15	)		5			(10	)
Other comprehensive income on unfunded retirement obligations		11			(4	)		7
Total other comprehensive income	$	4,466		$	(1,564	)	$	2,902

9

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
Nine Months Ended September 30, 2015
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	2,369		$	(829	)	$	1,540
Reclassification adjustment for (gains) realized in income		(1,085	)		380			(705	)
Other comprehensive income on available-for-sale securities		1,284			(449	)		835
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		(100	)		35			(65	)
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		(11	)		3			(8	)
Other comprehensive loss on unfunded retirement obligations		(111	)		38			(73	)
Total other comprehensive income	$	1,173		$	(411	)	$	762

(In Thousands)	Before-Tax			Income Tax		Net-of-Tax
	Amount			Effect		Amount
Three Months Ended September 30, 2016
Unrealized losses on available-for-sale securities:
Unrealized holding losses on available-for-sale securities	$	(1,661	)	$	580	$	(1,081	)
Reclassification adjustment for (gains) realized in income		(584	)		204		(380	)
Other comprehensive loss on available-for-sale securities		(2,245	)		784		(1,461	)
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		0			0		0
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		(5	)		2		(3	)
Other comprehensive loss on unfunded retirement obligations		(5	)		2		(3	)
Total other comprehensive loss	$	(2,250	)	$	786	$	(1,464	)

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
Three Months Ended September 30, 2015
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	3,216		$	(1,126	)	$	2,090
Reclassification adjustment for (gains) realized in income		(79	)		28			(51	)
Other comprehensive loss on available-for-sale securities		3,137			(1,098	)		2,039
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		0			0			0
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		(3	)		0			(3	)
Other comprehensive loss on unfunded retirement obligations		(3	)		0			(3	)
Total other comprehensive income	$	3,134		$	(1,098	)	$	2,036

10

Changes in the components of accumulated other comprehensive income are as follows and are presented net of tax:

(In Thousands)	Unrealized			Unfunded			Accumulated
	Holding Gains			Pension and			Other
	(Losses)			Postretirement			Comprehensive
	on Securities			Obligations			Income
Nine Months Ended September 30, 2016
Balance, beginning of period	$	2,493		$	35		$	2,528
Other comprehensive income before reclassifications		3,603			17			3,620
Amounts reclassified from accumulated other comprehensive income		(708	)		(10	)		(718	)
Other comprehensive income		2,895			7			2,902
Balance, end of period	$	5,388		$	42		$	5,430
Nine Months Ended September 30, 2015
Balance, beginning of period	$	5,281		$	79		$	5,360
Other comprehensive income before reclassifications		1,540			(65	)		1,475
Amounts reclassified from accumulated other comprehensive income		(705	)		(8	)		(713	)
Other comprehensive income		835			(73	)		762
Balance, end of period	$	6,116		$	6		$	6,122
Three Months Ended September 30, 2016
Balance, beginning of period	$	6,849		$	45		$	6,894
Other comprehensive loss before reclassifications		(1,081	)		0			(1,081	)
Amounts reclassified from accumulated other comprehensive income		(380	)		(3	)		(383	)
Other comprehensive loss		(1,461	)		(3	)		(1,464	)
Balance, end of period	$	5,388		$	42		$	5,430
Three Months Ended September 30, 2015
Balance, beginning of period	$	4,077		$	9		$	4,086
Other comprehensive income before reclassifications		2,090			0			2,090
Amounts reclassified from accumulated other comprehensive income		(51	)		(3	)		(54	)
Other comprehensive income		2,039			(3	)		2,036
Balance, end of period	$	6,116		$	6		$	6,122

11

Items reclassified out of each component of other comprehensive income are as follows:

For the Nine Months Ended September 30, 2016
(In Thousands)
	Reclassified from
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Consolidated
Comprehensive Income Components	Comprehensive Income			Statements of Income
Unrealized gains and losses on available-for-sale				Realized gains on available-for-sale
securities	$	(1,089	)	securities, net
		381		Income tax provision
		(708	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(23	)	Pensions and other employee benefits
Actuarial loss		8		Pensions and other employee benefits
		(15	)	Total before tax
		5		Income tax provision
		(10	)	Net of tax
Total reclassifications for the period	$	(718	)

For the Nine Months Ended September 30, 2015
(In Thousands)
	Reclassified from
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Consolidated
Comprehensive Income Components	Comprehensive Income			Statements of Income
Unrealized gains and losses on available-for-sale				Realized gains on available-for-sale
securities	$	(1,085	)	securities, net
		380		Income tax provision
		(705	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(22	)	Pensions and other employee benefits
Actuarial loss		11		Pensions and other employee benefits
		(11	)	Total before tax
		3		Income tax provision
		(8	)	Net of tax
Total reclassifications for the period	$	(713	)

For the Three Months Ended September 30, 2016
(In Thousands)
	Reclassified from
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Consolidated
Comprehensive Income Components	Comprehensive Income			Statements of Income
Unrealized gains and losses on available-for-sale				Realized gains on available-for-sale
securities	$	(584	)	securities, net
		204		Income tax provision
		(380	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(8	)	Pensions and other employee benefits
Actuarial loss		3		Pensions and other employee benefits
		(5	)	Total before tax
		2		Income tax provision
		(3	)	Net of tax
Total reclassifications for the period	$	(383	)

12

For the Three Months Ended September 30, 2015
(In Thousands)
	Reclassified from
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Consolidated
Comprehensive Income Components	Comprehensive Income			Statements of Income
Unrealized gains and losses on available-for-sale				Realized gains on available-for-sale
securities	$	(79	)	securities, net
		28		Income tax provision
		(51	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(7	)	Pensions and other employee benefits
Actuarial loss		4		Pensions and other employee benefits
		(3	)	Total before tax
		0		Income tax provision
		(3	)	Net of tax
Total reclassifications for the period	$	(54	)

4. CASH AND DUE FROM BANKS

Cash and due from banks at September 30, 2016 and December 31, 2015 include the following:

(In thousands)	Sept. 30,		Dec. 31,
	2016		2015
Cash and cash equivalents	$	30,102	$	33,313
Certificates of deposit		3,968		2,748
Total cash and due from banks	$	34,070	$	36,061

Certificates of deposit are issues by U.S. banks with original maturities greater than three months. Each certificate of deposit is fully FDIC-insured. The Corporation maintains cash and cash equivalents with certain financial institutions in excess of the FDIC insurance limit.

The Corporation is required to maintain reserves against deposit liabilities in the form of cash and balances with the Federal Reserve Bank of Philadelphia. The reserves are based on deposit levels, account activity, and other services provided by the Federal Reserve Bank. Required reserves were $13,141,000 at September 30, 2016 and $15,327,000 at December 31, 2015.

5. FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS

The Corporation measures certain assets at fair value. Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. FASB Accounting Standards Codification (ASC) topic 820, “Fair Value Measurements and Disclosures” establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs used in determining valuations into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:

Level 1 – Fair value is based on unadjusted quoted prices in active markets that are accessible to the Corporation for identical assets. These generally provide the most reliable evidence and are used to measure fair value whenever available.

Level 2 – Fair value is based on significant inputs, other than Level 1 inputs, that are observable either directly or indirectly for substantially the full term of the asset through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets, quoted market prices in markets that are not active for identical or similar assets and other observable inputs.

13

Level 3 – Fair value is based on significant unobservable inputs. Examples of valuation methodologies that would result in Level 3 classification include option pricing models, discounted cash flows and other similar techniques.

The Corporation monitors and evaluates available data relating to fair value measurements on an ongoing basis and recognizes transfers among the levels of the fair value hierarchy as of the date of an event or change in circumstances that affects the valuation method chosen. Examples of such changes may include the market for a particular asset becoming active or inactive, changes in the availability of quoted prices, or changes in the availability of other market data.

At September 30, 2016 and December 31, 2015, assets measured at fair value and the valuation methods used are as follows:

			September 30, 2016
	Quoted Prices		Other
	in Active		Observable		Unobservable			Total
	Markets		Inputs		Inputs			Fair
(In Thousands)	(Level 1)		(Level 2)		(Level 3)			Value
Recurring fair value measurements
AVAILABLE-FOR-SALE SECURITIES:
Obligations of U.S. Government agencies	$	0	$	9,747	$	0		$	9,747
Obligations of states and political subdivisions:
Tax-exempt		0		121,283		0			121,283
Taxable		0		33,672		0			33,672
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		62,187		0			62,187
Residential collateralized mortgage obligations		0		165,719		0			165,719
Commercial mortgage-backed securities		0		16,112		0			16,112
Total debt securities		0		408,720		0			408,720
Marketable equity securities		1,080		0		0			1,080
Total available-for-sale securities		1,080		408,720		0			409,800
Servicing rights		0		0		1,208			1,208
Total recurring fair value measurements	$	1,080	$	408,720	$	1,208		$	411,008
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	3,621		$	3,621
Valuation allowance		0		0		(685	)		(685	)
Impaired loans, net		0		0		2,936			2,936
Foreclosed assets held for sale		0		0		2,321			2,321
Total nonrecurring fair value measurements	$	0	$	0	$	5,257		$	5,257

14

			December 31, 2015
	Quoted Prices		Other
	in Active		Observable		Unobservable			Total
	Markets		Inputs		Inputs			Fair
(In Thousands)	(Level 1)		(Level 2)		(Level 3)			Value
Recurring fair value measurements
AVAILABLE-FOR-SALE SECURITIES:
Obligations of U.S. Government agencies	$	0	$	10,483	$	0		$	10,483
Obligations of states and political subdivisions:
Tax-exempt		0		107,757		0			107,757
Taxable		0		34,597		0			34,597
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		73,343		0			73,343
Residential collateralized mortgage obligations		0		191,715		0			191,715
Collateralized debt obligations		0		9		0			9
Total debt securities		0		417,904		0			417,904
Marketable equity securities		2,386		0		0			2,386
Total available-for-sale securities		2,386		417,904		0			420,290
Servicing rights		0		0		1,296			1,296
Total recurring fair value measurements	$	2,386	$	417,904	$	1,296		$	421,586
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	1,933		$	1,933
Valuation allowance		0		0		(820	)		(820	)
Impaired loans, net		0		0		1,113			1,113
Foreclosed assets held for sale		0		0		1,260			1,260
Total nonrecurring fair value measurements	$	0	$	0	$	2,373		$	2,373

Management’s evaluation and selection of valuation techniques and the unobservable inputs used in determining the fair values of assets valued using Level 3 methodologies include sensitive assumptions. Other market participants might use substantially different assumptions, which could result in calculations of fair values that would be substantially different than the amount calculated by management.

At September 30, 2016 and December 31, 2015, quantitative information regarding significant techniques and inputs used for assets measured on a recurring basis using unobservable inputs (Level 3 methodologies) are as follows:

	Fair Value at
	9/30/16		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	9/30/16
Servicing rights	$	1,208	Discounted cash flow	Discount rate		10.00	%	Rate used through modeling period
				Loan prepayment speeds		194.00	%	Weighted-average PSA
				Servicing fees		0.25	%	of loan balances
						4.00	%	of payments are late
						5.00	%	late fees assessed
					$	1.94		Miscellaneous fees per account per month
				Servicing costs	$	6.00		Monthly servicing cost per account
					$	24.00		Additional monthly servicing cost per loan on loans more than 30 days delinquent
						1.50	%	of loans more than 30 days delinquent
						3.00	%	annual increase in servicing costs

15

	Fair Value at
	12/31/15		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	12/31/15
Servicing rights	$	1,296	Discounted cash flow	Discount rate		10.00	%	Rate used through modeling period
				Loan prepayment speeds		146.00	%	Weighted-average PSA
				Servicing fees		0.25	%	of loan balances
						4.00	%	of payments are late
						5.00	%	late fees assessed
					$	1.94		Miscellaneous fees per account per month
				Servicing costs	$	6.00		Monthly servicing cost per account
					$	24.00		Additional monthly servicing cost per loan on loans more than 30 days delinquent
						1.50	%	of loans more than 30 days delinquent
						3.00	%	annual increase in servicing costs

The fair value of servicing rights is affected by expected future interest rates. Increases (decreases) in future expected interest rates tend to increase (decrease) the fair value of the Corporation’s servicing rights because of changes in expected prepayment behavior by the borrowers on the underlying loans.

Following is a reconciliation of activity for Level 3 assets measured at fair value on a recurring basis:

(In Thousands)	Three Months Ended					Nine Months Ended
	Sept. 30, 2016			Sept. 30, 2015		Sept. 30, 2016			Sept. 30, 2015
Servicing rights balance, beginning of period	$	1,224		$	1,209	$	1,296		$	1,281
Issuances of servicing rights		52			57		159			135
Unrealized (losses) gains included in earnings		(68	)		13		(247	)		(137	)
Servicing rights balance, end of period	$	1,208		$	1,279	$	1,208		$	1,279

Loans are classified as impaired when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Foreclosed assets held for sale consist of real estate acquired by foreclosure. For impaired commercial loans secured by real estate and foreclosed assets held for sale, estimated fair values are determined primarily using values from third-party appraisals. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.

At September 30, 2016 and December 31, 2015, quantitative information regarding significant techniques and inputs used for nonrecurring fair value measurements using unobservable inputs (Level 3 methodologies) are as follows:

(In Thousands, Except									Value at
Percentages)			Valuation						9/30/16
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	(Weighted
Asset	9/30/16		9/30/16		9/30/16		Technique	Inputs	Average)
Impaired loans:
Residential mortgage loans - first liens	$	0	$	0	$	0	Sales comparison	Discount to appraised value		0	%
Commercial:
Commercial loans secured by real estate		2,794		528		2,266	Sales comparison	Discount to appraised value		7	%
Commercial and industrial		321		106		215	Sales comparison	Discount to appraised value		35	%
Commercial construction and land		0		0		0	Sales comparison	Discount to appraised value		0	%
Loans secured by farmland		506		51		455	Sales comparison	Discount to appraised value		55	%
Multi-family (5 or more) residential		0		0		0	Sales comparison	Discount to appraised value		0	%
Total impaired loans	$	3,621	$	685	$	2,936
Foreclosed assets held for sale - real estate:
Residential (1-4 family)	$	1,195	$	0	$	1,195	Sales comparison	Discount to appraised value		39	%
Land		696		0		696	Sales comparison	Discount to appraised value		29	%
Commercial real estate		430		0		430	Sales comparison	Discount to appraised value		50	%
Total foreclosed assets held for sale	$	2,321	$	0	$	2,321

16

(In Thousands, Except									Value at
Percentages)			Valuation						12/31/15
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	(Weighted
Asset	12/31/15		12/31/15		12/31/15		Technique	Inputs	Average)
Impaired loans:
Residential mortgage loans - first liens	$	42	$	1	$	41	Sales comparison	Discount to appraised value		31	%
Commercial:
Commercial loans secured by real estate		317		97		220	Sales comparison	Discount to appraised value		46	%
Commercial and industrial		75		75		0	Sales comparison	Discount to appraised value		31	%
Commercial construction and land		0		0		0	Sales comparison	Discount to appraised value		0	%
Loans secured by farmland		512		52		460	Sales comparison	Discount to appraised value		49	%
Multi-family (5 or more) residential		987		595		392	Sales comparison	Discount to appraised value		41	%
Total impaired loans	$	1,933	$	820	$	1,113
Foreclosed assets held for sale - real estate:
Residential (1-4 family)	$	556	$	0	$	556	Sales comparison	Discount to appraised value		32	%
Land		704		0		704	Sales comparison	Discount to appraised value		29	%
Total foreclosed assets held for sale	$	1,260	$	0	$	1,260

Certain of the Corporation’s financial instruments are not measured at fair value in the consolidated financial statements. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Certain financial instruments and all nonfinancial instruments are excluded from disclosure requirements. Therefore, the aggregate fair value amounts presented may not represent the underlying fair value of the Corporation.

The Corporation used the following methods and assumptions in estimating fair value disclosures for financial instruments:

CASH AND CASH EQUIVALENTS - The carrying amounts of cash and short-term instruments approximate fair values.

CERTIFICATES OF DEPOSIT - Fair values for certificates of deposit, included in cash and due from banks in the consolidated balance sheet, are based on quoted market prices for certificates of similar remaining maturities.

SECURITIES - Fair values for securities, excluding restricted equity securities, are based on quoted market prices or other methods as described above. The carrying value of restricted equity securities approximates fair value based on applicable redemption provisions.

LOANS HELD FOR SALE - Fair values of loans held for sale are determined based on applicable sale prices available under the Federal Home Loan Banks’ MPF Xtra and MPF Original programs.

LOANS - Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, commercial real estate, residential mortgage and other consumer. Each loan category is further segmented into fixed and adjustable rate interest terms and by performing and nonperforming categories. The fair value of performing loans is calculated by discounting contractual cash flows, adjusted for estimated prepayments based on historical experience, using estimated market discount rates that reflect the credit and interest rate risk inherent in the loans. Fair value of nonperforming loans is based on recent appraisals or estimates prepared by the Corporation’s lending officers.

SERVICING RIGHTS - The fair value of servicing rights, included in other assets in the consolidated balance sheet, is determined through a discounted cash flow valuation. Significant inputs include expected net servicing income, the discount rate and the expected prepayment speeds of the underlying loans.

17

DEPOSITS - The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, savings, money market and interest checking accounts, is (by definition) equal to the amount payable on demand at September 30, 2016 and December 31, 2015. The fair value of time deposits, such as certificates of deposit and Individual Retirement Accounts, is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. The fair value estimates of deposits do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market, commonly referred to as the core deposit intangible.

BORROWED FUNDS - The fair value of borrowings is estimated using discounted cash flow analyses based on rates currently available to the Corporation for similar types of borrowing arrangements.

ACCRUED INTEREST - The carrying amounts of accrued interest receivable and payable approximate fair values.

OFF-BALANCE SHEET COMMITMENTS - The Corporation has commitments to extend credit and has issued standby letters of credit. Standby letters of credit are conditional guarantees of performance by a customer to a third party. Estimates of the fair value of these off-balance sheet items were not made because of the short-term nature of these arrangements and the credit standing of the counterparties.

The estimated fair values, and related carrying amounts, of the Corporation’s financial instruments are as follows:

(In Thousands)	Valuation	Sept. 30, 2016				December 31, 2015
	Method(s)	Carrying		Fair		Carrying		Fair
	Used	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	30,102	$	30,102	$	33,313	$	33,313
Certificates of deposit	Level 2		3,968		3,982		2,748		2,752
Available-for-sale securities	See Above		409,800		409,800		420,290		420,290
Restricted equity securities (included in Other Assets)	Level 2		3,360		3,360		4,657		4,657
Loans held for sale	Level 2		621		621		280		280
Loans, net	Level 3		733,917		737,353		696,991		685,552
Accrued interest receivable	Level 2		3,871		3,871		3,768		3,768
Servicing rights	Level 3		1,208		1,208		1,296		1,296
Financial liabilities:
Deposits with no stated maturity	Level 2		769,734		769,734		713,931		713,931
Time deposits	Level 2		222,146		222,881		221,684		221,891
Short-term borrowings	Level 2		14,590		14,497		53,496		53,398
Long-term borrowings	Level 2		38,538		39,807		38,767		40,166
Accrued interest payable	Level 2		79		79		70		70

18

6. SECURITIES

Amortized cost and fair value of available-for-sale securities at September 30, 2016 and December 31, 2015 are summarized as follows:

			September 30, 2016
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	9,667	$	80	$	0		$	9,747
Obligations of states and political subdivisions:
Tax-exempt		116,797		4,565		(79	)		121,283
Taxable		32,764		908		0			33,672
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		60,966		1,221		0			62,187
Residential collateralized mortgage obligations		164,508		1,517		(306	)		165,719
Commercial mortgage-backed securities		16,056		69		(13	)		16,112
Total debt securities		400,758		8,360		(398	)		408,720
Marketable equity securities		752		328		0			1,080
Total	$	401,510	$	8,688	$	(398	)	$	409,800

			December 31, 2015
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	10,663	$	12	$	(192	)	$	10,483
Obligations of states and political subdivisions:
Tax-exempt		103,414		4,365		(22	)		107,757
Taxable		34,317		381		(101	)		34,597
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		73,227		486		(370	)		73,343
Residential collateralized mortgage obligations		193,145		623		(2,053	)		191,715
Collateralized debt obligations:		9		0		0			9
Total debt securities		414,775		5,867		(2,738	)		417,904
Marketable equity securities		1,680		706		0			2,386
Total	$	416,455	$	6,573	$	(2,738	)	$	420,290

19

The following table presents gross unrealized losses and fair value of available-for-sale securities with unrealized loss positions that are not deemed to be other-than-temporarily impaired, aggregated by length of time that individual securities have been in a continuous unrealized loss position at September 30, 2016 and December 31, 2015:

September 30, 2016	Less Than 12 Months					12 Months or More					Total
(In Thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Obligations of states and political subdivisions,
Tax-exempt	$	15,448	$	(64	)	$	1,001	$	(15	)	$	16,449	$	(79	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential collateralized mortgage obligations		19,303		(38	)		24,426		(268	)		43,729		(306	)
Commercial mortgage-backed securities		4,989		(13	)		0		0			4,989		(13	)
Total temporarily impaired available-for-sale securities	$	39,740	$	(115	)	$	25,427	$	(283	)	$	65,167	$	(398	)

December 31, 2015	Less Than 12 Months					12 Months or More					Total
(In Thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Obligations of U.S. Government agencies	$	0	$	0		$	7,850	$	(192	)	$	7,850	$	(192	)
Obligations of states and political subdivisions:
Tax-exempt		5,200		(19	)		216		(3	)		5,416		(22	)
Taxable		10,605		(60	)		2,910		(41	)		13,515		(101	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored Agencies:
Residential pass-through securities		38,764		(295	)		3,503		(75	)		42,267		(370	)
Residential collateralized mortgage obligations		88,355		(648	)		49,273		(1,405	)		137,628		(2,053	)
Total temporarily impaired available-for-sale securities	$	142,924	$	(1,022	)	$	63,752	$	(1,716	)	$	206,676	$	(2,738	)

Gross realized gains and losses from available-for-sale securities were as follows:

(In Thousands)	3 Months Ended					9 Months Ended
	Sept. 30,		Sept. 30,			Sept. 30,			Sept. 30,
	2016		2015			2016			2015
Gross realized gains from sales	$	584	$	156		$	1,090		$	1,162
Gross realized losses from sales		0		(77	)		(1	)		(77	)
Net realized gains	$	584	$	79		$	1,089		$	1,085

20

The amortized cost and fair value of available-for-sale debt securities by contractual maturity are shown in the following table as of September 30, 2016. Actual maturities may differ from contractual maturities because counterparties may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Fair
(In Thousands)	Cost		Value
Due in one year or less	$	16,631	$	16,837
Due from one year through five years		71,211		73,423
Due from five years through ten years		47,463		49,076
Due after ten years		23,923		25,366
Sub-total		159,228		164,702
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		60,966		62,187
Residential collateralized mortgage obligations		164,508		165,719
Commercial mortgage-backed securities		16,056		16,112
Total	$	400,758	$	408,720

The Corporation’s mortgage-backed securities have stated maturities that may differ from actual maturities due to borrowers’ ability to prepay obligations. Cash flows from such investments are dependent upon the performance of the underlying mortgage loans and are generally influenced by the level of interest rates. In the table above, mortgage-backed securities and collateralized mortgage obligations are shown in one period.

Investment securities carried at $221,427,000 at September 30, 2016 and $228,616,000 at December 31, 2015 were pledged as collateral for public deposits, trusts and certain other deposits as provided by law. See Note 8 for information concerning securities pledged to secure borrowing arrangements.

Management evaluates securities for other-than-temporary impairment (OTTI) at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) whether the Corporation intends to sell the security or more likely than not will be required to sell the security before its anticipated recovery.

A summary of information management considered in evaluating debt and equity securities for OTTI at September 30, 2016 is provided below.

Debt Securities

At September 30, 2016, management performed an assessment for possible OTTI of the Corporation’s debt securities on an issue-by-issue basis, relying on information obtained from various sources, including publicly available financial data, ratings by external agencies, brokers and other sources. The extent of individual analysis applied to each security depended on the size of the Corporation’s investment, as well as management’s perception of the credit risk associated with each security. Based on the results of the assessment, management believes impairment of debt securities at September 30, 2016 to be temporary.

Equity Securities

The Corporation’s marketable equity securities at September 30, 2016 and December 31, 2015 consisted exclusively of stocks of banking companies. At September 30, 2016, the Corporation held no stocks with an unrealized loss.

The Corporation realized gains from sales of bank stocks totaling $560,000 in the three-month period ended September 30, 2016 and $837,000 during the first nine months of 2016. There were no realized gains or losses on bank stocks in the three-month period ended September 30, 2015, while realized gains from sales of bank stocks totaled $476,000 in the nine-month period ended September 30, 2015.

21

C&N Bank is a member of the Federal Home Loan Bank of Pittsburgh (FHLB-Pittsburgh), which is one of 11 regional Federal Home Loan Banks. As a member, C&N Bank is required to purchase and maintain stock in FHLB-Pittsburgh. There is no active market for FHLB-Pittsburgh stock, and it must ordinarily be redeemed by FHLB-Pittsburgh in order to be liquidated. C&N Bank’s investment in FHLB-Pittsburgh stock, included in Other Assets in the consolidated balance sheet, was $3,230,000 at September 30, 2016 and $4,527,000 at December 31, 2015. The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at September 30, 2016 and December 31, 2015. In making this determination, management concluded that recovery of total outstanding par value, which equals the carrying value, is expected. The decision was based on review of financial information that FHLB-Pittsburgh has made publicly available.

7. LOANS

The loans receivable portfolio is segmented into residential mortgage, commercial and consumer loans. Loans outstanding at September 30, 2016 and December 31, 2015 are summarized by segment, and by classes within each segment, as follows:

Summary of Loans by Type
(In Thousands)	Sept. 30,			Dec. 31,
	2016			2015
Residential mortgage:
Residential mortgage loans - first liens	$	325,533		$	304,783
Residential mortgage loans - junior liens		22,794			21,146
Home equity lines of credit		38,623			39,040
1-4 Family residential construction		23,310			21,121
Total residential mortgage		410,260			386,090
Commercial:
Commercial loans secured by real estate		149,938			154,779
Commercial and industrial		86,969			75,196
Political subdivisions		38,653			40,007
Commercial construction and land		12,809			5,122
Loans secured by farmland		6,900			7,019
Multi-family (5 or more) residential		8,133			9,188
Agricultural loans		4,313			4,671
Other commercial loans		11,557			12,152
Total commercial		319,272			308,134
Consumer		12,806			10,656
Total		742,338			704,880
Less: allowance for loan losses		(8,421	)		(7,889	)
Loans, net	$	733,917		$	696,991

The Corporation grants loans to individuals as well as commercial and tax-exempt entities. Commercial, residential and personal loans are made to customers geographically concentrated in the Pennsylvania and New York counties that comprise the market serviced by Citizens & Northern Bank. Although the Corporation has a diversified loan portfolio, a significant portion of its debtors’ ability to honor their contracts is dependent on the local economic conditions within the region. There is no concentration of loans to borrowers engaged in similar businesses or activities that exceed 10% of total loans at either September 30, 2016 or December 31, 2015.

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. The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Corporation’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available. In the process of evaluating the loan portfolio, management also considers the Corporation’s exposure to losses from unfunded loan commitments. As of September 30, 2016 and December 31, 2015, management determined that no allowance for credit losses related to unfunded loan commitments was required.

22

Transactions within the allowance for loan losses, summarized by segment and class, for the three-month and nine-month periods ended September 30, 2016 and 2015 were as follows:

Three Months Ended September 30, 2016	June 30,										Sept. 30,
(In Thousands)	2016 Balance		Charge-offs			Recoveries		Provision (Credit)			2016 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,830	$	(31	)	$	2	$	155		$	2,956
Residential mortgage loans - junior liens		239		0			0		9			248
Home equity lines of credit		359		0			0		0			359
1-4 Family residential construction		222		0			0		14			236
Total residential mortgage		3,650		(31	)		2		178			3,799
Commercial:
Commercial loans secured by real estate		2,083		0			0		304			2,387
Commercial and industrial		1,038		(2	)		1		1			1,038
Commercial construction and land		105		0			0		41			146
Loans secured by farmland		103		0			0		3			106
Multi-family (5 or more) residential		248		0			0		(5	)		243
Agricultural loans		47		0			0		(4	)		43
Other commercial loans		119		0			0		(3	)		116
Total commercial		3,743		(2	)		1		337			4,079
Consumer		138		(28	)		12		23			145
Unallocated		398		0			0		0			398
Total Allowance for Loan Losses	$	7,929	$	(61	)	$	15	$	538		$	8,421

Three Months Ended September 30, 2015	June 30,										Sept. 30,
(In Thousands)	2015 Balance		Charge-offs			Recoveries		Provision (Credit)			2015 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,775	$	(12	)	$	0	$	(112	)	$	2,651
Residential mortgage loans - junior liens		210		(42	)		0		45			213
Home equity lines of credit		344		0			0		(5	)		339
1-4 Family residential construction		257		0			0		55			312
Total residential mortgage		3,586		(54	)		0		(17	)		3,515
Commercial:
Commercial loans secured by real estate		1,692		0			0		39			1,731
Commercial and industrial		800		0			1		127			928
Commercial construction and land		296		(115	)		0		(74	)		107
Loans secured by farmland		155		0			0		(45	)		110
Multi-family (5 or more) residential		80		0			0		231			311
Agricultural loans		40		0			0		3			43
Other commercial loans		120		0			0		1			121
Total commercial		3,183		(115	)		1		282			3,351
Consumer		135		(28	)		10		6			123
Unallocated		396		0			0		31			427
Total Allowance for Loan Losses	$	7,300	$	(197	)	$	11	$	302		$	7,416

23

Nine Months Ended September 30, 2016	Dec. 31,										Sept. 30,
(In Thousands)	2015 Balance		Charge-offs			Recoveries		Provision (Credit)			2016 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,645	$	(73	)	$	2	$	382		$	2,956
Residential mortgage loans - junior liens		219		0			0		29			248
Home equity lines of credit		347		0			0		12			359
1-4 Family residential construction		207		0			0		29			236
Total residential mortgage		3,418		(73	)		2		452			3,799
Commercial:
Commercial loans secured by real estate		1,939		0			2		446			2,387
Commercial and industrial		981		(2	)		2		57			1,038
Commercial construction and land		58		0			0		88			146
Loans secured by farmland		106		0			0		0			106
Multi-family (5 or more) residential		675		(595	)		0		163			243
Agricultural loans		45		0			0		(2	)		43
Other commercial loans		118		0			0		(2	)		116
Total commercial		3,922		(597	)		4		750			4,079
Consumer		122		(67	)		39		51			145
Unallocated		427		0			0		(29	)		398
Total Allowance for Loan Losses	$	7,889	$	(737	)	$	45	$	1,224		$	8,421

Nine Months Ended September 30, 2015	Dec. 31,										Sept. 30,
(In Thousands)	2014 Balance		Charge-offs			Recoveries		Provision (Credit)			2015 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,941	$	(149	)	$	1	$	(142	)	$	2,651
Residential mortgage loans - junior liens		176		(42	)		0		79			213
Home equity lines of credit		322		0			0		17			339
1-4 Family residential construction		214		0			0		98			312
Total residential mortgage		3,653		(191	)		1		52			3,515
Commercial:
Commercial loans secured by real estate		1,758		(115	)		0		88			1,731
Commercial and industrial		688		(10	)		5		245			928
Commercial construction and land		283		(115	)		0		(61	)		107
Loans secured by farmland		165		0			0		(55	)		110
Multi-family (5 or more) residential		87		0			0		224			311
Agricultural loans		31		0			0		12			43
Other commercial loans		131		0			0		(10	)		121
Total commercial		3,143		(240	)		5		443			3,351
Consumer		145		(65	)		44		(1	)		123
Unallocated		395		0			0		32			427
Total Allowance for Loan Losses	$	7,336	$	(496	)	$	50	$	526		$	7,416

24

In the evaluation of the loan portfolio, management determines two major components for the allowance for loan losses – (1) a specific component based on an assessment of certain larger relationships, mainly commercial purpose loans, on a loan-by-loan basis; and (2) a general component for the remainder of the portfolio based on a collective evaluation of pools of loans with similar risk characteristics. The general component is assigned to each pool of loans based on both historical net charge-off experience, and an evaluation of certain qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the above methodologies for estimating specific and general losses in the portfolio.

In determining the larger loan relationships for detailed assessment under the specific allowance component, the Corporation uses an internal risk rating system. Under the risk rating system, the Corporation classifies problem or potential problem loans as “Special Mention,” “Substandard,” or “Doubtful” on the basis of currently existing facts, conditions and values. Substandard loans include those characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Loans that do not currently expose the Corporation to sufficient risk to warrant classification as Substandard or Doubtful, but possess weaknesses that deserve management’s close attention, are deemed to be Special Mention. Risk ratings are updated any time that conditions or the situation warrants. Loans not classified are included in the “Pass” column in the table below.

The following tables summarize the aggregate credit quality classification of outstanding loans by risk rating as of September 30, 2016 and December 31, 2015:

September 30, 2016
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	315,849	$	331	$	9,292	$	61	$	325,533
Residential mortgage loans - junior liens		22,376		145		273		0		22,794
Home equity lines of credit		37,925		124		574		0		38,623
1-4 Family residential construction		23,310		0		0		0		23,310
Total residential mortgage		399,460		600		10,139		61		410,260
Commercial:
Commercial loans secured by real estate		133,140		3,087		13,711		0		149,938
Commercial and Industrial		82,076		4,196		686		11		86,969
Political subdivisions		38,653		0		0		0		38,653
Commercial construction and land		12,707		66		36		0		12,809
Loans secured by farmland		5,243		168		1,472		17		6,900
Multi-family (5 or more) residential		7,505		0		628		0		8,133
Agricultural loans		3,503		0		810		0		4,313
Other commercial loans		11,482		0		75		0		11,557
Total commercial		294,309		7,517		17,418		28		319,272
Consumer		12,651		0		155		0		12,806
Totals	$	706,420	$	8,117	$	27,712	$	89	$	742,338

25

December 31, 2015
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	295,302	$	407	$	9,007	$	67	$	304,783
Residential mortgage loans - junior liens		20,558		185		403		0		21,146
Home equity lines of credit		38,071		543		426		0		39,040
1-4 Family residential construction		21,104		17		0		0		21,121
Total residential mortgage		375,035		1,152		9,836		67		386,090
Commercial:
Commercial loans secured by real estate		140,381		5,862		8,536		0		154,779
Commercial and Industrial		71,225		2,106		1,737		128		75,196
Political subdivisions		40,007		0		0		0		40,007
Commercial construction and land		4,957		60		105		0		5,122
Loans secured by farmland		5,084		483		1,432		20		7,019
Multi-family (5 or more) residential		7,943		0		1,245		0		9,188
Agricultural loans		4,655		0		16		0		4,671
Other commercial loans		12,073		0		79		0		12,152
Total commercial		286,325		8,511		13,150		148		308,134
Consumer		10,490		21		145		0		10,656
Totals	$	671,850	$	9,684	$	23,131	$	215	$	704,880

The general component of the allowance for loan losses covers pools of loans including commercial loans not considered individually impaired, as well as smaller balance homogeneous classes of loans, such as residential real estate, home equity lines of credit and other consumer loans. Accordingly, the Corporation generally does not separately identify individual consumer and residential loans for impairment disclosures, unless such loans are subject to a restructuring agreement. The pools of loans are evaluated for loss exposure based upon three-year average historical net charge-off rates for each loan class, adjusted for qualitative factors. Qualitative risk factors (described in the following paragraph) are evaluated for the impact on each of the three segments (residential mortgage, commercial and consumer) within the loan portfolio. Each qualitative factor is assigned a value to reflect improving, stable or declining conditions based on management’s judgment using relevant information available at the time of the evaluation. The adjustment for qualitative factors is applied as an increase or decrease to the three-year average net charge-off rate to each loan class within each segment.

The qualitative factors used in the general component calculations are designed to address credit risk characteristics associated with each segment. The Corporation’s credit risk associated with all of the segments is significantly impacted by these factors, which include economic conditions within its market area, the Corporation’s lending policies, changes or trends in the portfolio, risk profile, competition, regulatory requirements and other factors. Further, the residential mortgage segment is significantly affected by the values of residential real estate that provide collateral for the loans. The majority of the Corporation’s commercial segment loans (approximately 56% at September 30, 2016) is secured by real estate, and accordingly, the Corporation’s risk for the commercial segment is significantly affected by commercial real estate values. The consumer segment includes a wide mix of loans for different purposes, primarily secured loans, including loans secured by motor vehicles, manufactured housing and other types of collateral.

Loans are classified as impaired, when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial loans, by the fair value of the collateral (if the loan is collateral dependent), by future cash flows discounted at the loan’s effective rate or by the loan’s observable market price.

26

The scope of loans evaluated individually for impairment include all loan relationships greater than $200,000 for which there is at least one extension of credit graded Special Mention, Substandard or Doubtful. Also, all loans classified as troubled debt restructurings (discussed in more detail below) and all loan relationships less than $200,000 in the aggregate, but with an estimated loss of $100,000 or more, are individually evaluated for impairment. Loans that are individually evaluated for impairment, but which are not determined to be impaired, are combined with all remaining loans that are not reviewed on a specific basis, and such loans are included within larger pools of loans based on similar risk and loss characteristics for purposes of determining the general component of the allowance. The loans that have been individually evaluated, but which have not been determined to be impaired, are included in the “Collectively Evaluated” column in the tables summarizing the allowance and associated loan balances as of September 30, 2016 and December 31, 2015.

The following tables present a summary of loan balances and the related allowance for loan losses summarized by portfolio segment and class for each impairment method used as of September 30, 2016 and December 31, 2015:

September 30, 2016	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	734	$	324,799	$	325,533	$	0	$	2,956	$	2,956
Residential mortgage loans - junior liens		70		22,724		22,794		0		248		248
Home equity lines of credit		0		38,623		38,623		0		359		359
1-4 Family residential construction		0		23,310		23,310		0		236		236
Total residential mortgage		804		409,456		410,260		0		3,799		3,799
Commercial:
Commercial loans secured by real estate		8,088		141,850		149,938		528		1,859		2,387
Commercial and industrial		439		86,530		86,969		106		932		1,038
Political subdivisions		0		38,653		38,653		0		0		0
Commercial construction and land		0		12,809		12,809		0		146		146
Loans secured by farmland		1,399		5,501		6,900		51		55		106
Multi-family (5 or more) residential		392		7,741		8,133		0		243		243
Agricultural loans		13		4,300		4,313		0		43		43
Other commercial loans		0		11,557		11,557		0		116		116
Total commercial		10,331		308,941		319,272		685		3,394		4,079
Consumer		0		12,806		12,806		0		145		145
Unallocated												398
Total	$	11,135	$	731,203	$	742,338	$	685	$	7,338	$	8,421

27

December 31, 2015	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	884	$	303,899	$	304,783	$	1	$	2,644	$	2,645
Residential mortgage loans - junior liens		74		21,072		21,146		0		219		219
Home equity lines of credit		0		39,040		39,040		0		347		347
1-4 Family residential construction		0		21,121		21,121		0		207		207
Total residential mortgage		958		385,132		386,090		1		3,417		3,418
Commercial:
Commercial loans secured by real estate		6,262		148,517		154,779		97		1,842		1,939
Commercial and industrial		324		74,872		75,196		75		906		981
Political subdivisions		0		40,007		40,007		0		0		0
Commercial construction and land		0		5,122		5,122		0		58		58
Loans secured by farmland		1,427		5,592		7,019		52		54		106
Multi-family (5 or more) residential		987		8,201		9,188		595		80		675
Agricultural loans		16		4,655		4,671		0		45		45
Other commercial loans		0		12,152		12,152		0		118		118
Total commercial		9,016		299,118		308,134		819		3,103		3,922
Consumer		0		10,656		10,656		0		122		122
Unallocated												427
Total	$	9,974	$	694,906	$	704,880	$	820	$	6,642	$	7,889

Summary information related to impaired loans at September 30, 2016 and December 31, 2015 is as follows:

(In Thousands)	September 30, 2016						December 31, 2015
	Unpaid						Unpaid
	Principal		Recorded		Related		Principal		Recorded		Related
	Balance		Investment		Allowance		Balance		Investment		Allowance
With no related allowance recorded:
Residential mortgage loans - first liens	$	764	$	734	$	0	$	842	$	842	$	0
Residential mortgage loans - junior liens		70		70		0		74		74		0
Commercial loans secured by real estate		7,003		5,294		0		7,580		5,945		0
Commercial and industrial		118		118		0		249		249		0
Loans secured by farmland		893		893		0		915		915		0
Multi-family (5 or more) residential		987		392		0		0		0		0
Agricultural loans		13		13		0		16		16		0
Total with no related allowance recorded		9,848		7,514		0		9,676		8,041		0
With a related allowance recorded:
Residential mortgage loans - first liens		0		0		0		42		42		1
Commercial loans secured by real estate		2,794		2,794		528		317		317		97
Commercial and industrial		321		321		106		75		75		75
Loans secured by farmland		506		506		51		512		512		52
Multi-family (5 or more) residential		0		0		0		987		987		595
Consumer		0		0		0		0		0		0
Total with a related allowance recorded		3,621		3,621		685		1,933		1,933		820
Total	$	13,469	$	11,135	$	685	$	11,609	$	9,974	$	820

28

The average balance of impaired loans and interest income recognized on impaired loans is as follows:

									Interest Income Recognized on
	Average Investment in Impaired Loans								Impaired Loans on a Cash Basis
(In Thousands)	3 Months Ended				9 Months Ended				3 Months Ended				9 Months Ended
	Sept. 30,				Sept. 30,				Sept. 30,				Sept. 30,
	2016		2015		2016		2015		2016		2015		2016		2015
Residential mortgage:
Residential mortgage loans - first lien	$	789	$	1,990	$	818	$	2,534	$	11	$	9	$	33	$	67
Residential mortgage loans - junior lien		72		67		72		62		0		1		2		3
Total residential mortgage		861		2,057		890		2,596		11		10		35		70
Commercial:
Commercial loans secured by real estate		7,022		6,327		6,524		6,382		83		90		274		293
Commercial and industrial		577		421		619		467		7		4		17		16
Commercial construction and land		0		42		0		50		0		0		0		0
Loans secured by farmland		1,408		1,466		1,413		1,467		13		26		51		78
Multi-family (5 or more) residential		492		741		541		741		0		0		0		0
Agricultural loans		13		21		14		22		0		1		1		3
Total commercial		9,512		9,018		9,111		9,129		103		121		343		390
Consumer		17		0		16		0		0		0		0		0
Total	$	10,390	$	11,075	$	10,017	$	11,725	$	114	$	131	$	378	$	460

Loans are placed on nonaccrual status for all classes of loans when, in the opinion of management, collection of interest is doubtful. Any unpaid interest previously accrued on those loans is reversed from income. Interest income is not recognized on specific impaired loans unless the likelihood of further loss is remote. Interest payments received on loans for which the risk of further loss is greater than remote are applied as a reduction of the loan principal balance. Interest income on other nonaccrual loans, including impaired loans, is recognized only to the extent of interest payments received. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The past due status of all classes of loans receivable is determined based on contractual due dates for loan payments. Also, the amortization of deferred loan fees is discontinued when a loan is placed on nonaccrual status.

The breakdown by portfolio segment and class of nonaccrual loans and loans past due ninety days or more and still accruing is as follows:

(In Thousands)	September 30, 2016				December 31, 2015
	Past Due				Past Due
	90+ Days and				90+ Days and
	Accruing		Nonaccrual		Accruing		Nonaccrual
Residential mortgage:
Residential mortgage loans - first liens	$	4,016	$	2,537	$	2,381	$	3,044
Residential mortgage loans - junior liens		58		0		79		0
Home equity lines of credit		106		11		130		0
Total residential mortgage		4,180		2,548		2,590		3,044
Commercial:
Commercial loans secured by real estate		2,795		7,898		503		5,730
Commercial and industrial		313		193		65		313
Loans secured by farmland		219		1,399		0		1,427
Multi-family (5 or more) residential		0		392		0		987
Agricultural loans		16		13		0		16
Total commercial		3,343		9,895		568		8,473
Consumer		16		38		71		0
Totals	$	7,539	$	12,481	$	3,229	$	11,517

29

The amounts shown in the table immediately above include loans classified as troubled debt restructurings (described in more detail below), if such loans are past due ninety days or more or nonaccrual.

The table below presents a summary of the contractual aging of loans as of September 30, 2016 and December 31, 2015:

	As of September 30, 2016								As of December 31, 2015
	Current &								Current &
(In Thousands)	Past Due		Past Due		Past Due				Past Due		Past Due		Past Due
	Less than		30-89		90+				Less than		30-89		90+
	30 Days		Days		Days		Total		30 Days		Days		Days		Total
Residential mortgage:
Residential mortgage loans - first liens	$	316,869	$	3,058	$	5,606	$	325,533	$	294,703	$	6,156	$	3,924	$	304,783
Residential mortgage loans - junior liens		22,544		192		58		22,794		20,816		251		79		21,146
Home equity lines of credit		38,143		374		106		38,623		38,581		329		130		39,040
1-4 Family residential construction		23,079		231		0		23,310		21,121		0		0		21,121
Total residential mortgage		400,635		3,855		5,770		410,260		375,221		6,736		4,133		386,090
Commercial:
Commercial loans secured by real estate		146,888		107		2,943		149,938		153,427		108		1,244		154,779
Commercial and industrial		86,637		8		324		86,969		75,002		118		76		75,196
Political subdivisions		38,653		0		0		38,653		40,007		0		0		40,007
Commercial construction and land		12,801		8		0		12,809		5,018		104		0		5,122
Loans secured by farmland		5,807		62		1,031		6,900		5,970		223		826		7,019
Multi-family (5 or more) residential		7,657		84		392		8,133		8,201		0		987		9,188
Agricultural loans		4,156		128		29		4,313		4,642		13		16		4,671
Other commercial loans		11,557		0		0		11,557		12,152		0		0		12,152
Total commercial		314,156		397		4,719		319,272		304,419		566		3,149		308,134
Consumer		12,544		208		54		12,806		10,537		48		71		10,656
Totals	$	727,335	$	4,460	$	10,543	$	742,338	$	690,177	$	7,350	$	7,353	$	704,880

Nonaccrual loans are included in the contractual aging in the immediately preceding table. A summary of the contractual aging of nonaccrual loans at September 30, 2016 and December 31, 2015 is as follows:

	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Total
September 30, 2016 Nonaccrual Totals	$	9,057	$	420	$	3,004	$	12,481
December 31, 2015 Nonaccrual Totals	$	7,100	$	293	$	4,124	$	11,517

Loans whose terms are modified are classified as Troubled Debt Restructurings (TDRs) if the Corporation grants such borrowers concessions, and it is deemed that those borrowers are experiencing financial difficulty. Loans classified as TDRs are designated as impaired. The outstanding balance of loans subject to TDRs, as well as contractual aging information at September 30, 2016 and December 31, 2015 is as follows:

	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Nonaccrual		Total
September 30, 2016 Totals	$	889	$	57	$	0	$	5,032	$	5,978
December 31, 2015 Totals	$	1,186	$	0	$	81	$	5,097	$	6,364

30

The TDR that occurred during the three-month period ended September 30, 2016 is as follows:

Three Months Ended September 30, 2016			Pre-		Post-
(Balances in Thousands)			Modification		Modification
	Number		Outstanding		Outstanding
	of		Recorded		Recorded
	Contracts		Investment		Investment
Consumer		1	$	25	$	25

There were no TDRs that occurred during the three-month period ended September 30, 2015.

The TDR in the three-month period ended September 30, 2016 represented a new, unsecured loan contract for $25,000. The new loan contract was entered into pursuant to a settlement agreement with a borrower for whom the Corporation accepted a short fall from the sale of residential real estate as payment in full on a mortgage loan. At September 30, 2016, there was no allowance for loan losses related to this TDR and there were no changes to the allowance for loan losses related to this TDR in the third quarter 2016.

TDRs that occurred during the nine-month periods ended September 30, 2016 and 2015 were as follows:

Nine Months Ended September 30, 2016			Pre-		Post-
(Balances in Thousands)			Modification		Modification
	Number		Outstanding		Outstanding
	of		Recorded		Recorded
		Contracts		Investment		Investment
Residential mortgage,
Residential mortgage loans - first liens		1	$	102	$	102
Commercial,
Commercial and Industrial		1		5		5
Consumer		1		25		25

Nine Months Ended September 30, 2015			Pre-		Post-
(Balances in Thousands)			Modification		Modification
	Number		Outstanding		Outstanding
	of		Recorded		Recorded
		Contracts		Investment		Investment
Residential mortgage:
Residential mortgage loans - first liens		1	$	56	$	56
Residential mortgage loans - junior liens		1		32		32
Consumer		1		30		30

The TDRs in the nine-month period ended September 30, 2016 included an extension of a final maturity date and a lowered interest rate on one contract on a residential mortgage – first lien, an extension of a final maturity date on a commercial and industrial loan, and establishment of an unsecured consumer loan contract pursuant to a settlement agreement with a borrower for whom the Corporation accepted a short fall from the sale of residential real estate as payment in full on a mortgage loan. In the third quarter 2016, a partial charge-off of $31,000 was recorded on the residential mortgage –first lien. At September 30, 2016, there was no allowance for loan losses related to these TDRs, and except for the partial charge-off on the residential mortgage – first lien, no changes in the allowance for loan losses that resulted from these TDRs in the nine-month period ended September 30, 2016.

The TDRs in the nine-month period ended September 30, 2015 included an extended maturity date and a reduction in interest rate on a residential mortgage – first lien, a lowered interest rate and reduced payment amount on a residential mortgage – junior lien and a lowered interest rate and reduced payment amount on the consumer loan. There was no allowance for loan losses on these loans at September 30, 2015, and there was no change in the allowance for loan losses that resulted from these TDRs.

There were no defaults on loans for which modification considered to be TDRs were entered into within the previous 12 months in the three-month period ended September 30, 2016.

31

In the three-month period ended September 30, 2015, defaults on loans for which modifications considered to be TDRs were entered into within the previous 12 months were as follows:

	Number
	of		Recorded
	Contracts		Investment
Three Months Ended September 30, 2015
(Balances in Thousands)
Residential mortgage,
Residential mortgage loans - first liens		1	$	32

In the three-month period ended September 30, 2015, the event of default in the table listed above resulted from a borrower’s failure to make regular payments after reduced payment amount period of six months ended on a first lien residential mortgage. There was no allowance for loan losses recorded on this loan at September 30, 2015.

In the nine-month periods ended September 30, 2016 and 2015, defaults on loans for which modifications considered to be TDRs were entered into within the previous 12 months were as follows:

	Number
	of		Recorded
	Contracts		Investment
Nine Months Ended September 30, 2016
(Balances in Thousands)
Residential mortgage:
Residential mortgage loans - first liens		1	$	242
Residential mortgage loans - junior liens		1		30
Commercial,
Commercial and industrial		1		5
Consumer		1		28

	Number
	of		Recorded
	Contracts		Investment
Nine Months Ended September 30, 2015
(Balances in Thousands)
Residential mortgage,
Residential mortgage loans - first liens		2	$	65
Commercial,
Commercial construction and land		1		25

In the nine-month period ended September 30, 2016, the events of default in the table listed above resulted from the borrowers’ failure to make timely payments under the following circumstances: (1) for the customer relationship in the Residential first lien mortgage class, payment was missed after the monthly payment amount was reduced for six months; (2) for the customer relationships in the Residential junior lien mortgage class and the consumer class, timely payments were missed after interest rates and payment amounts were reduced on both loans; and (3) for the Commercial and industrial loan, the borrower failed to pay off the loan at the extended maturity date. There was no allowance for loan losses recorded on these loans at September 30, 2016.

In the nine-month period ended September 30, 2015, the events of default in the table listed above resulted from the borrowers’ failure to make timely payments under the following circumstances: (1) for one customer relationship included in the Residential first lien mortgage class, payment was missed after the interest rate and monthly payment amount had been reduced; (2) for the other customer relationship included in the Residential first lien class, monthly payments were missed after reducing the monthly payments to interest only payments; and (3) for the Commercial construction and land loan, monthly payments were missed after extending the term of maturity. There were no allowances for loan losses recorded on these loans at September 30, 2015.

32

The carrying amount of foreclosed residential real estate properties held as a result of obtaining physical possession (included in Foreclosed assets held for sale in the unaudited Consolidated Balance Sheet) is as follows:

(In Thousands)	Sept. 30,		Dec. 31,
	2016		2015
Foreclosed residential real estate	$	1,195	$	555

The recorded investment of consumer mortgage loans secured by residential real properties for which formal foreclosure proceedings were in process is as follows:

(In Thousands)	Sept. 30,		Dec. 31,
	2016		2015
Residential real estate in process of foreclosure	$	1,991	$	1,173

8. BORROWED FUNDS

Short-term borrowings include the following:

(In Thousands)	Sept. 30,		Dec. 31,
	2016		2015
FHLB-Pittsburgh borrowings	$	8,270	$	48,581
Customer repurchase agreements		6,320		4,915
Total short-term borrowings	$	14,590	$	53,496

Short-term borrowings from FHLB-Pittsburgh are as follows:

(In Thousands)	Sept. 30,		Dec. 31
	2016		2015
Overnight borrowing	$	2,000	$	23,500
Other short-term advances		6,270		25,081
Total short-term FHLB-Pittsburgh borrowings	$	8,270	$	48,581

The FHLB-Pittsburgh loan facilities are collateralized by qualifying loans secured by real estate with a book value totaling $460,590,000 at September 30, 2016 and $450,883,000 at December 31, 2015. Also, the FHLB-Pittsburgh loan facilities require the Corporation to invest in established amounts of FHLB-Pittsburgh stock. The carrying values of the Corporation’s holdings of FHLB-Pittsburgh stock (included in Other Assets) were $3,230,000 at September 30, 2016 and $4,527,000 at December 31, 2015.

At September 30, 2016, short-term borrowings from the FHLB-Pittsburgh include 3 advances of approximately $2,090,000 each, maturing monthly throughout the remainder of the year ending December 31, 2016, with a weighted average interest rate of 1.03% and rates ranging from 1.006% to 1.052%. In the first nine months of 2016, the Corporation repaid nine advances of approximately $2,090,000 each, with a weighted average rate of 0.80%.

The Corporation engages in repurchase agreements with certain commercial customers. These agreements provide that the Corporation sells specified investment securities to the customers on an overnight basis and repurchases them on the following business day. The weighted average interest rate paid by the Corporation on customer repurchase agreements was 0.10% at September 30, 2016 and December 31, 2015. The carrying value of the underlying securities was $16,472,000 at September 30, 2016 and $12,613,000 at December 31, 2015.

Long-term borrowings are as follows:

(In Thousands)	Sept. 30,		Dec. 31,
	2016		2015
FHLB-Pittsburgh borrowings	$	11,538	$	11,767
Repurchase agreement		27,000		27,000
Total long-term borrowings	$	38,538	$	38,767

33

Long-term borrowings from FHLB-Pittsburgh are as follows:

(In Thousands)	Sept. 30,		Dec. 31,
	2016		2015
Loan maturing in 2016 with a rate of 6.86%	$	18	$	57
Loan maturing in 2017 with a rate of 6.83%		6		10
Loan maturing in 2017 with a rate of 3.81%		10,000		10,000
Loan maturing in 2020 with a rate of 4.79%		691		821
Loan maturing in 2025 with a rate of 4.91%		823		879
Total long-term FHLB-Pittsburgh borrowings	$	11,538	$	11,767

The repurchase agreement included in long-term borrowings has an interest rate of 3.595% and an effective maturity date in December 2017.

The “Repurchase Date,” as defined in the Master Repurchase Agreement between the Corporation and the broker-dealer, occurs quarterly on or about the 20^th of each March, June, September and December until the “Final Repurchase Date” (as defined) on December 20, 2017. The Corporation pays interest, and the borrowing is putable by the issuer, on each Repurchase Date. The Final Repurchase Date is the effective maturity date of the borrowing.

Securities sold under repurchase agreements were delivered to the broker-dealer who is the counter-party to the transactions. The broker-dealer may have sold, loaned or otherwise disposed of such securities to other parties in the normal course of their operations, and has agreed to resell to the Corporation substantially identical securities at the maturities of the agreements. The Master Repurchase Agreement provides that the Agreement constitutes a “netting contract,” as defined; however, the Corporation and the broker-dealer have no other obligations to one another and accordingly, no netting has occurred.

The carrying value of the underlying securities was $34,130,000 at September30, 2016 and $33,780,000 at December 31, 2015, detailed in the following table:

(In Thousands)	Sept. 30,		Dec. 31,
	2016		2015
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities	$	19,444	$	15,772
Residential collateralized mortgage obligations		14,686		18,008
Total	$	34,130	$	33,780

Two of the more significant risks associated with the repurchase agreement with the broker-dealer are as follows:

· The borrowings are putable at quarterly intervals by the issuer. Accordingly, if interest rates were to rise to a sufficient level, the issuer would be expected to require the Corporation to pay off the borrowing. In this circumstance, the Corporation would be required to obtain a new borrowing at a higher interest rate than the existing repurchase agreement or utilize cash from other sources to pay off the borrowing. If sales of available-for-sale securities were used to generate cash to pay off the borrowing, the value of such securities would be expected to have fallen, which could result in the Corporation recognizing a loss.

· As principal pay-downs of mortgage backed securities and CMOs occur, the Corporation must have available, unencumbered assets or purchase a sufficient amount of assets with credit quality suitable to the broker-dealer to replace the amounts being paid off. Since pre-payments of mortgages typically increase as interest rates fall, the Corporation may be required to purchase additional assets at times when market rates are lower than the rates paid on the borrowing.

The Corporation manages these risks by maintaining sufficient available assets of acceptable credit quality, as well as maintaining other borrowing facilities, to meet ongoing collateral maintenance requirements or pay off the borrowing if required. In particular, the Corporation had unused borrowing capacity available from the FHLB-Pittsburgh of $315,685,000 at September 30, 2016.

34

9. DEFINED BENEFIT PLANS

The Corporation sponsors a defined benefit health care plan that provides postretirement medical benefits and life insurance to employees who meet certain age and length of service requirements. Full-time employees no longer accrue service time toward the Corporation-subsidized portion of the medical benefits. This plan contains a cost-sharing feature, which causes participants to pay for all future increases in costs related to benefit coverage. Accordingly, actuarial assumptions related to health care cost trend rates do not significantly affect the liability balance at September 30, 2016 and December 31, 2015, and are not expected to significantly affect the Corporation's future expenses. The Corporation uses a December 31 measurement date for the postretirement plan.

In an acquisition in 2007, the Corporation assumed the Citizens Trust Company Retirement Plan, a defined benefit pension plan. This plan covers certain employees who were employed by Citizens Trust Company on December 31, 2002, when the plan was amended to discontinue admittance of any future participant and to freeze benefit accruals. Information related to the Citizens Trust Company Retirement Plan has been included in the tables that follow. The Corporation uses a December 31 measurement date for this plan.

The components of net periodic benefit costs from these defined benefit plans are as follows:

Defined Benefit Plans
(In Thousands)	Pension						Postretirement
	Nine Months Ended						Nine Months Ended
	Sept. 30,						Sept. 30,
	2016			2015			2016			2015
Service cost	$	0		$	0		$	27		$	29
Interest cost		20			27			47			42
Expected return on plan assets		(20	)		(34	)		0			0
Amortization of prior service cost		0			0			(23	)		(22	)
Recognized net actuarial loss		8			11			0			0
Net periodic benefit cost	$	8		$	4		$	51		$	49

Defined Benefit Plans
(In Thousands)	Pension						Postretirement
	Three Months Ended						Three Months Ended
	Sept. 30,						Sept. 30,
	2016			2015			2016			2015
Service cost	$	0		$	0		$	9		$	10
Interest cost		7			9			16			14
Expected return on plan assets		(7	)		(11	)		0			0
Amortization of prior service cost		0			0			(8	)		(7	)
Recognized net actuarial loss		3			4			0			0
Net periodic benefit cost	$	3		$	2		$	17		$	17

In the first nine months of 2016, the Corporation funded postretirement contributions totaling $44,000, with estimated annual postretirement contributions of $68,000 expected in 2016 for the full year. Based upon the related actuarial reports, no defined benefit pension contributions are required in 2016, though the Corporation may make discretionary contributions.

10. STOCK-BASED COMPENSATION PLANS

The Corporation has a Stock Incentive Plan for a selected group of officers and an Independent Directors Stock Incentive Plan. In the three-month periods ended March 31, 2016 and 2015, the Corporation issued restricted stock under each of the Plans.

In the first quarter 2016, the Corporation awarded a total of 34,199 shares of restricted stock under the Stock Incentive and Independent Directors Stock Incentive Plans. Restricted stock awards in the first quarter 2016 included the following: (1) a total of 17,289 shares to employees, vesting over a three-year term, with vesting contingent upon the Corporation meeting an annual return on average equity (“ROAE”) performance ratio, as defined; (2) a total of 10,304 shares to employees, vesting over a three-year term, with vesting dependent on satisfactory performance; and (3) a total of 6,606 shares under the Independent Directors Incentive Plan, vesting over a term of one year.

In the second quarter 2016, the Corporation awarded a total of 1,228 shares of restricted stock under the Independent Directors Stock Incentive Plan. The restricted stock was awarded to two new directors, with each award vesting over a term of one year.

35

In the first quarter 2015, a total of 34,800 shares of restricted stock were awarded under the Plans. Restricted stock awards in 2015 included the following: (1) a total of 20,298 shares to employees, vesting over a four-year term, with vesting contingent upon the Corporation meeting an annual ROAE performance ratio, as defined; (2) a total of 2,198 shares to employees, vesting over a four-year term, with vesting dependent on satisfactory performance; (3) an award to the Chief Executive Officer of 5,174 shares, vesting over a three-year term, with vesting dependent on satisfactory performance; and (4) a total of 7,130 shares under the Independent Directors Incentive Plan, vesting over a term of one year.

Compensation cost related to restricted stock is recognized based on the market price of the stock at the grant date over the vesting period. Management has estimated restricted stock expense in the first nine months of 2016 based on an assumption that the ROAE target for 2016 will be met.

Total stock-based compensation expense is as follows:

(In Thousands)	3 Months Ended				9 Months Ended
	Sept. 30,		Sept. 30,		Sept. 30,		Sept. 30,
	2016		2015		2016		2015
Restricted stock	$	155	$	152	$	480	$	459

11. INCOME TAXES

The net deferred tax asset at September 30, 2016 and December 31, 2015 represents the following temporary difference components:

	September 30,		December 31,
(In Thousands)	2016		2015
Deferred tax assets:
Net realized losses on securities		36	$	69
Allowance for loan losses		2,980		2,761
Other deferred tax assets		2,517		2,634
Total deferred tax assets		5,533		5,464
Deferred tax liabilities:
Unrealized holding gains on securities		2,902		1,342
Defined benefit plans - ASC 835		23		19
Bank premises and equipment		952		869
Core deposit intangibles		7		11
Other deferred tax liabilities		105		108
Total deferred tax liabilities		3,989		2,349
Deferred tax asset, net	$	1,544	$	3,115

The provision for income tax for the three-month and nine- month periods ended September 30, 2016 and 2015 is based on the Corporation’s estimate of the effective tax rate expected to be applicable for the full year. The effective tax rates for the Corporation are as follows:

	3 Months Ended						9 Months Ended
(In thousands)	September 30,						September 30,
	2016			2015			2016			2015
Income before income tax provision	$	5,538		$	5,629		$	15,378		$	16,482
Income tax provision		1,451			1,395			3,847			4,076
Effective tax rate		26.20	%		24.78	%		25.02	%		24.73	%

The effective tax rate for each period presented differs from the statutory rate of 35% principally because of the effects of tax-exempt interest income.

36

The Corporation has investments in three limited partnerships that manage affordable housing projects that have qualified for the federal low-income housing tax credit. The Corporation’s expected return from these investments is based on the receipt of tax credits and tax benefits from deductions of operating losses. The Corporation uses the effective yield method to account for these investments, with the benefits recognized as a reduction of the provision for income taxes. For two of the three limited partnership investments, the tax credits have been received in full in prior years, and the Corporation has fully realized the benefits of the credits and amortized its initial investments in the partnerships. The most recent affordable housing project was completed in 2013, and the Corporation received tax credits in 2013, 2014 and 2015 and expects to continue to receive tax credits annually through 2022. The carrying amount of the Corporation’s investment is $737,000 at September 30, 2016 and $812,000 at December 31, 2015 (included in Other Assets in the consolidated balance sheets). For the year ending December 31, 2016, the estimated amount of tax credits and other tax benefits to be received is $158,000 and the estimated amount to be recognized as a reduction of the provision for income taxes is $76,000. For the year ended December 31, 2015, tax credits and other tax benefits totaled $158,000 and the amount recognized as a reduction of the provision for income taxes for 2015 was $80,000. The total reduction in the provision for income taxes resulting from this investment is $19,000 in the third quarter 2016, and $57,000 for the nine months ended September 30, 2016, and $22,000 in the third quarter 2015, and $62,000 for the nine months ended September 30, 2015.

The Corporation has no unrecognized tax benefits, nor pending examination issues related to tax positions taken in preparation of its income tax returns. With limited exceptions, the Corporation is no longer subject to examination by the Internal Revenue Service for years prior to 2013.

12. CONTINGENCIES

In the normal course of business, the Corporation may be subject to pending and threatened lawsuits in which claims for monetary damages could be asserted. In management’s opinion, the Corporation’s financial position and results of operations would not be materially affected by the outcome of such pending legal proceedings.

13. RECENT ACCOUNTING PRONOUNCEMENTS

The FASB issues Accounting Standards Updates (ASUs) to the FASB ASC. This section provides a summary description of recent ASUs that have significant implications (elected or required) within the consolidated financial statements, or that management expects may have a significant impact on financial statements issued in the near future.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides a principles-based framework for revenue recognition that supersedes virtually all previously issued revenue recognition guidance under U.S. GAAP. Additionally, the ASU requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. The core principle of the five-step revenue recognition framework is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In April 2016, the FASB issued ASU 2016-10, which provides clarifying information related to identifying performance obligations and licensing. In May 2016, the FASB issued ASU 2016-12, which provides clarifying guidance in a few narrow areas and adds some practical expedients to the guidance. In August 2015 the FASB issued ASU 2015-14, which deferred the effective date of the revenue recognition standard by a year, making it applicable for the Corporation in the first quarter 2018 and for the annual period ending December 31, 2018. The amendments should be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the amendments recognized at the date of initial application. The Corporation is in the process of evaluating the potential impact of adopting the amendments, including determining which transition method to apply.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Liabilities. This makes significant changes in U.S. GAAP related to certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The changes provided for in this Update that are applicable to the Corporation are as follows: (1) require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; however, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer; (2) for equity investments without readily determinable fair values, require a qualitative assessment to identify impairment, and if a qualitative assessment indicates that impairment exists, requiring an entity to measure the investment at fair value; (3) eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (4) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (5) require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments (at September 30, 2016 and December 31, 2015, the Corporation has no liabilities for which the fair value measurement option has been elected); (6) require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (7) clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The amendments in this Update will become effective for the Corporation for annual and interim periods beginning in the first quarter 2018. With limited exceptions, early adoption of the amendments in this Update is not permitted. Amendments are to be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values should be applied prospectively.

37

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. Specifically, a lessee should recognize on the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee would be permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and liabilities. Topic 842 would not significantly change the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee from current U.S. GAAP; however, the principal change from current GAAP is that lease assets and liabilities arising from operating leases would be recognized on the balance sheet. Topic 842 provides several other changes or clarifications to existing GAAP, and will require qualitative disclosures, along with quantitative disclosures, so that financial statement users can understand more about the nature of an entity’s leasing activities. In transition, Topic 842 provides that lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, including optional practical expedients. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees will be required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. Topic 842 will become effective for the Corporation for annual and interim periods beginning in the first quarter 2019.

In March 2016, the FASB issued ASU No. 2016-07, Investments – Equity Method and Joint Ventures. This ASU eliminates the requirement that when an investment qualifies for the equity method as a result of an increase in the level of ownership interest or influence, an investor must adjust the investment, results of operations and retained earnings retroactively as if the equity method had been in effect during all previous periods the investment had been held. The ASU requires the equity method investor to add the cost of acquiring an additional interest in the investee to the basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for the equity method. The ASU further requires that an entity that has an available-for-sale equity security that becomes qualified for the equity method recognize through earnings the unrealized gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. The amendments in this Update are effective for the Corporation for annual and interim periods beginning in the first quarter 2017, with earlier application permitted. The amendments should be applied prospectively upon their effective date.

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation. This ASU changes several aspects of accounting for share-based payment transactions, and includes some changes that apply only to nonpublic companies. This Update includes amendments that currently apply, or may apply in the future, to the Corporation related to the following: (1) accounting for the difference between the deduction for tax purposes and the amount of compensation cost recognized for financial reporting purposes; (2) classification of excess tax benefits on the statement of cash flows; (3) accounting for forfeitures; (4) accounting for awards partially settled in cash in excess of the employer’s minimum statutory tax withholding requirements; and (5) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. The amendments in this Update are effective for the Corporation for annual and interim periods beginning in the first quarter 2017, with earlier adoption permitted. The ASU provides separate transition provisions for each of the amendments. The Corporation is in the process of evaluating the potential impact of adopting the amendments.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326). This ASU will result in significant changes in the Corporation’s accounting for credit losses related to loans receivable and investment securities. A summary of significant provisions of this ASU is as follows:

· The ASU requires that a financial asset (or a group of financial assets) measured at amortized cost basis be presented, net of a valuation allowance for credit losses, at an amount expected to be collected on the financial asset(s), and that the income statement include the measurement of credit losses for newly recognized financial assets as well as changes in expected losses on previously recognized financial assets. The provisions of this ASU require measurement of expected credit losses based on relevant information including past events, historical experience, current conditions, and reasonable and supportive forecasts that affect the collectability of the asset. The provisions of this ASU differ from current U.S. GAAP in that current U.S. GAAP generally delays recognition of the full amount of credit losses until the loss is probable of occurring.

38

· The amendments in the Update retain many of the disclosure requirements related to credit quality in current U.S. GAAP, updated to reflect the change from an incurred loss methodology to an expected credit loss methodology. In addition, the Update requires that disclosure of credit quality indicators in relation to the amortized cost of financing receivables, a current requirement, be further disaggregated by year of origination.

· This ASU requires that credit losses on available-for-sale debt securities be presented as an allowance rather than as a write-down, and limits the amount of the allowance for credit losses to the amount by which the fair value is below amortized cost. For purchased available-for-sale securities with a more-than-insignificant amount of credit deterioration since origination, the ASU requires an allowance be determined in a manner similar to other available-for-sale debt securities; however, the initial allowance would be added to the purchase price, with only subsequent changes in the allowance recorded in credit loss expense, and interest income recognized at the effective rate excluding the discount embedded in the purchase price related to estimated credit losses at acquisition.

· This ASU will be effective for the Corporation for interim and annual periods beginning in the first quarter of 2020. Earlier adoption is permitted beginning in the first quarter of 2019. The entity will record the effect of implementing this ASU through a cumulative-effect adjustment through retained earnings as of the beginning of the reporting period in which Topic 326 is effective. The Corporation is in the early stages of evaluating the potential impact of adopting this amendment.

In June 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) –Classification of Certain Cash Receipts and Cash Payments. This Update provides clarification regarding eight specific cash flow issues with the objective of reducing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. For the Corporation, the amendments in this Update are effective beginning in the first quarter 2018. The amendments in this Update should be applied using a retroactive transition method to each period presented. The Corporation anticipates there will be no adjustments to the Consolidated Statements of Cash Flows, as previously reported, as a result of the clarifications provided in the Update.

39

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements in this section and elsewhere in this quarterly report on Form 10-Q are forward-looking statements. Citizens & Northern Corporation and its wholly-owned subsidiaries (collectively, the Corporation) intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995. Forward-looking statements, which are not historical facts, are based on certain assumptions and describe future plans, business objectives and expectations, and are generally identifiable by the use of words such as, "should", “likely”, "expect", “plan”, "anticipate", “target”, “forecast”, and “goal”. These forward-looking statements are subject to risks and uncertainties that are difficult to predict, may be beyond management’s control and could cause results to differ materially from those expressed or implied by such forward-looking statements. Factors which could have a material, adverse impact on the operations and future prospects of the Corporation include, but are not limited to, the following:

· changes in monetary and fiscal policies of the Federal Reserve Board and the U. S. Government, particularly related to changes in interest rates

· changes in general economic conditions

· 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

· changes in accounting principles, or the application of generally accepted accounting principles.

These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

EARNINGS OVERVIEW

Third quarter 2016 net income was $0.34 per basic and diluted share, as compared to $0.32 in the second quarter 2016 and $0.35 in the third quarter 2015. For the nine months ended September 30, 2016, net income per basic and diluted share was $0.95 as compared to $1.02 per basic and $1.01 per diluted share for the first nine months of 2015. The return on average assets for the first nine months of 2016 was 1.25%, and the return on average equity was 8.16%.

Some of the more significant fluctuations in revenues and expenses between the three-month period ended September 30, 2016 and the corresponding period in 2015 were as follows:

· Net interest income increased $179,000 (1.8%), in the third quarter 2016 as compared to the third quarter 2015. The net interest margin for the third quarter 2016 was 0.08% higher than in the third quarter 2015 due to a lower cost of borrowed funds and a more favorable mix of earning assets. The average balance of total borrowed funds was $57,226,000 at an average interest rate of 2.75% in the third quarter 2016, down from average borrowings of $75,848,000 at an average interest rate of 3.34% in the third quarter 2015. The reduction in amount and average rate on borrowed funds reflects the impact of prepayments in the second and fourth quarters of 2015 of a long-term borrowing with an interest rate of 4.265%. Average total loans outstanding were higher by $59.3 million (8.8%) in the third quarter 2016 as compared to the third quarter 2015, while average total available-for-sale securities were lower by $68.7 million. Average total deposits were $6.0 million (0.6%) higher in the third quarter 2016 as compared to the third quarter 2015.

· The third quarter 2016 provision for loan losses was $236,000 higher than the comparative third quarter 2015 amount. The higher provision in the third quarter 2016 included the impact of an increase in specific allowances on impaired loans to $685,000 at September 30, 2016 from $253,000 at June 30, 2016, including the effect of recording an allowance of $528,000 in the third quarter 2016 related to one real estate secured commercial loan relationship with total loans outstanding of $3,347,000 at September 30, 2016.

· Noninterest revenue in the third quarter 2016 fell $77,000 (1.9%) from the third quarter 2015 amount. Service charges on deposit accounts were $81,000 (6.2%) lower, reflecting a reduced volume of consumer overdrafts, and the fair value of mortgage servicing rights decreased $68,000 in the third quarter 2016 compared to an increase in fair value of $13,000 in the third quarter 2015. Trust and Financial Management revenue increased $49,000 (4.4%) in the third quarter 2016 as compared to the third quarter 2015. Other operating income was $58,000 higher in the third quarter 2016 as compared to the third quarter 2015, including an increase of $15,000 in dividend income from Federal Home Loan Bank of Pittsburgh stock.

40

· Realized gains from securities totaled $584,000 in the third quarter 2016, including gains of $560,000 from sales of bank stocks. In comparison, realized gains from securities totaled $79,000 in the third quarter 2015. At September 30, 2016, the Corporation had one remaining bank stock investment, with an amortized cost basis of $752,000 and a fair value of $1,080,000. In October 2016, the Corporation sold the stock for a realized gain (pre-tax) of $288,000.

· Noninterest expenses in the third quarter 2016 exceeded the third quarter 2015 amount by $462,000 (5.7%). Salaries and wages expense increased $157,000 (4.2%), reflecting an increase in number of employees, including new positions established for lending, lending support, information technology, training, human resources and marketing functions. Professional fees expense increased $104,000 in the third quarter 2016 over the third quarter 2015 amount, including increases related to employee sales and service training, information technology, marketing and outsourced commercial loan credit review. Other operating expense increased $164,000 (13.6%) in the third quarter 2016 over the third quarter 2015, including increases in education and training-related expense of $29,000, net collection-related expenses of $29,000 and expenses related to other real estate properties of $27,000. Also, other operating expense in the third quarter 2015 was reduced by a refund of $69,000 from recovery of previously-paid sales tax, with no corresponding recovery in the third quarter 2016.

· The third quarter 2016 provision for income tax of $1,451,000, or 26.2% of pre-tax income, was $56,000 higher than the third quarter 2015 tax provision of $1,395,000, or 24.8% of pre-tax income. The higher effective tax in the third quarter 2016 included the effects of a reduction in tax-exempt interest income of $127,000. The reduction in tax-exempt interest income resulted from pay-offs received on municipal bonds purchased several years ago when market interest yields were higher. Also, the provision for state income tax was $39,000 higher, primarily as a result of a catch-up adjustment to increase New York State taxes for the effect of changes in the tax methodology that first became effective in 2015.

Some of the more significant fluctuations in revenues and expenses between the nine-month period ended September 30, 2016 and the corresponding period in 2015 were as follows:

· Net interest income was $251,000 (0.8%) higher than the comparable total for the first nine months of 2015. The net interest margin of 3.77% was 0.08% higher than the margin for the first nine months of 2015, reflecting a lower cost of borrowed funds resulting from prepayment in 2015 of a long-term borrowing and a more favorable mix of earning assets. The average balance of total borrowed funds was $64,476,000 at an average interest rate of 2.53% for the first nine months of 2016, down from average borrowings of $77,749,000 at an average interest rate of 3.55% in the first nine months of 2015. Average total loans outstanding were higher by $68.9 million (10.7%) in the first nine months of 2016 as compared to the first nine months of 2015, while average total available-for-sale securities were lower by $87.6 million. The average balance of earning assets was $20.6 million lower in the nine-month period ended September 30, 2016 as compared to the first nine months of 2015, reflecting a reduction in funding available for investment, including a decrease in average total deposits of $9.3 million (1.0%).

· The provision for loan losses for the nine months ended September 30, 2016 totaled $1,224,000, an increase of $698,000 over the corresponding amount for the first nine months of 2015. In 2016, the provision included an increase of $418,000 as compared to the first nine months of 2015 from changes in specific allowances on loans individually identified as impaired, adjusted for the impact of net charge-offs. The provision in 2016 also included the impact of increasing the allowance for loan losses for the effects of loan growth and slight increases in net charge-off experience and qualitative factors used in determining the collectively evaluated portion of the allowance. In comparison, the provision in 2015 also reflected the effects of loan growth, but the qualitative factors used in determining a portion of the collectively determined allowance for loan losses were slightly decreased during the period.

· Total noninterest revenue for the nine months ended September 30, 2016 was virtually unchanged from the corresponding amount for the first nine months of 2015. Within noninterest income, the categories with the largest increases included: (1) other operating income, which increased $157,000, mainly due to an increase in revenue from redemption of tax credits; (2) net gains from sales of loans, which increased $126,000 (22.0%), reflecting higher volume of sales; and (3) Trust and Financial Management revenue, which increased $89,000 (2.6%). The categories with the largest decreases within noninterest revenue included: (1) decrease in fair value of mortgage servicing rights of $247,000 in the first nine months of 2016 as compared to a decrease in fair value of $137,000 in the first nine months of 2015; (2) decrease in service charges on deposit accounts of $106,000 (2.9%), reflecting a reduction in consumer overdraft volume; and (3) reduction in brokerage revenue of $71,000, as the volume of sales of annuities declined.

41

· In the first nine months of 2016, realized gains from securities totaled $1,089,000, including gains from sales of bank stocks of $837,000. In the first nine months of 2015, the Corporation generated gains from sales of securities totaling $1,085,000, including gains from sales of bank stocks of $476,000, and also incurred a loss from prepayment of a borrowing of $910,000. In the second quarter 2015, the Corporation prepaid principal of $10 million on a long-term borrowing (repurchase agreement) with an interest rate of 4.265%.

· Noninterest expenses, excluding loss on prepayment of borrowings, in the first nine months of 2016 exceeded the amount for the first nine months of 2015 by $1,572,000 (6.4%). Salaries and wages expense increased $867,000 (8.0%). As described above, several new positions were established in the latter portion of 2015 and early 2016. Professional fees expense increased $379,000, including increases related to employee sales and service training, information technology, marketing and outsourced commercial loan credit review. Other operating expense increased $311,000 (8.0%), including increases in donations and public relations-related expenses of $90,000, education and training-related expenses of $86,000 and other real estate expenses of $48,000. Also, other operating expense was reduced in 2015 by $69,000 as a result of a recovery of sales tax previously paid. Within other operating expense, net collections-related expense was $59,000 lower in the first nine months of 2016 as compared to the corresponding period in 2015.

· The provision for income tax totaled $3,847,000 for the nine months ended September 30, 2016, down $229,000 from the amount for the first nine months of 2015. The lower tax provision in 2016 resulted from lower pre-tax income; however, the provision increased as a percentage of pre-tax income to 25.02% in 2016 from 24.73% in 2015. The higher effective tax rate included the impact of a $253,000 reduction in tax-exempt interest income and an increase in the provision for state income tax of $30,000 that resulted mainly from a catch-up adjustment to increase New York State taxes for the effect of changes in the tax methodology that first became effective in 2015.

More 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.

TABLE I - QUARTERLY FINANCIAL DATA

(In Thousands) (Unaudited)

	For the Three Months Ended:
	Sept. 30,		June 30,		Mar. 31,		Dec. 31,		Sept. 30,		June 30,		Mar. 31,
	2016		2016		2016		2015		2015		2015		2015
Interest income	$	11,131	$	10,924	$	10,937	$	11,036	$	11,134	$	11,186	$	11,163
Interest expense		944		925		904		1,087		1,126		1,176		1,213
Net interest income		10,187		9,999		10,033		9,949		10,008		10,010		9,950
Provision for loan losses		538		318		368		319		302		221		3
Net interest income after provision for loan losses		9,649		9,681		9,665		9,630		9,706		9,789		9,947
Other income		3,884		3,906		3,690		3,999		3,961		3,962		3,556
Net gains on available-for-sale securities		584		122		383		1,776		79		932		74
Loss on prepayment of borrowings		0		0		0		1,663		0		910		0
Other expenses		8,579		8,535		9,072		8,416		8,117		7,964		8,533
Income before income tax provision		5,538		5,174		4,666		5,326		5,629		5,809		5,044
Income tax provision		1,451		1,303		1,093		1,261		1,395		1,452		1,229
Net income	$	4,087	$	3,871	$	3,573	$	4,065	$	4,234	$	4,357	$	3,815
Net income per share – basic	$	0.34	$	0.32	$	0.29	$	0.33	$	0.35	$	0.36	$	0.31
Net income per share – diluted	$	0.34	$	0.32	$	0.29	$	0.33	$	0.35	$	0.36	$	0.31

CRITICAL ACCOUNTING POLICIES

The presentation of 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.

A material estimate that is particularly susceptible to significant change is the determination of the allowance for loan losses. Management believes the allowance for loan losses is adequate and reasonable. Analytical information related to the Corporation’s aggregate loans and the related allowance for loan losses is summarized by loan segment and classes of loans in Note 7 to the unaudited consolidated financial statements. Additional discussion of the Corporation’s allowance for loan losses is provided in a separate section later in Management’s Discussion and Analysis. Given the very subjective nature of identifying and valuing loan losses, it is likely that well-informed individuals could make materially different assumptions, and could, therefore calculate a materially different allowance value. While management uses available information to recognize losses on loans, changes in economic conditions may necessitate revisions in future years. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Corporation’s allowance for loan losses. Such agencies may require the Corporation to recognize adjustments to the allowance based on their judgments of information available to them at the time of their examination.

42

Another material estimate is the calculation of fair values of the Corporation’s debt securities. For most of the Corporation’s debt securities, the Corporation receives estimated fair values of debt securities from an independent valuation service, or from brokers. In developing fair values, the valuation service and the brokers use estimates of cash flows, based on historical performance of similar instruments in similar interest rate environments. Based on experience, management is aware that estimated fair values of debt securities tend to vary among brokers and other valuation services.

As described in Note 6 to the unaudited consolidated financial statements, management evaluates securities for other-than-temporary impairment (OTTI). In making that evaluation, consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) whether the Corporation intends to sell the security or more likely than not will be required to sell the security before its anticipated recovery. Management’s assessments of the likelihood and potential for recovery in value of securities are subjective and based on sensitive assumptions.

NET INTEREST INCOME

The Corporation’s primary source of operating income is net interest income, which is equal to the difference between the amounts of interest income and interest expense. Tables II, III and IV include information regarding the Corporation’s net interest income for the three-month and nine-month periods ended September 30, 2016 and September 30, 2015. 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. Accordingly, the net interest income amounts reflected in these tables exceed the amounts presented in the consolidated financial statements. The discussion that follows is based on amounts in the related Tables.

Nine-Month Periods Ended September 30, 2016 and 2015

For the nine-month periods, fully taxable equivalent net interest income was $32,297,000 in 2016, $125,000 (0.4%) higher than in 2015. Interest income was $617,000 lower in 2016 as compared to 2015; however, interest expense was lower by $742,000 in comparing the same periods. As presented in Table III, the Net Interest Margin was 3.77% in 2016 as compared to 3.69% in 2015, and the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) was 3.64% in 2016 as compared to 3.54% in 2015.

INTEREST INCOME AND EARNING ASSETS

Interest income totaled $35,070,000 in 2016, a decrease of 1.7% from 2015. Interest and fees on loans receivable increased $1,320,000, or 5.2%. The average balance of gross loans receivable increased $68,937,000, or 10.7%, to $715,575,000 in 2016 from $646,638,000 in 2015. The Corporation experienced significant growth in both commercial and mortgage loans outstanding. Growth in commercial loans included an increase of approximately $23.3 million in the average outstanding balance of participation loans in the first nine months of 2016 as compared to the first nine months of 2015. The Corporation’s average rate of return on loans receivable declined to 4.94% in 2016 from 5.20% in 2015 as average interest rates on new loans are lower, reflecting recent market conditions.

As indicated in Table III, average available-for-sale securities (at amortized cost) totaled $407,347,000 in 2016, a decrease of $87,574,000 (17.7%) from 2015. The net decrease in the Corporation’s available-for-sale securities portfolio consisted of decreases in all categories of securities with the exception of commercial mortgage-backed securities. The Corporation’s yield on securities was slightly lower in 2016 than in 2015, primarily because of lower market interest rates. The average rate of return on available-for-sale securities was 2.78% in 2016 and 2.82% in 2015.

INTEREST EXPENSE AND INTEREST-BEARING LIABILITIES

Interest expense fell $742,000, or 21.1%, to $2,773,000 in 2016 from $3,515,000 in 2015. Table III shows that the overall cost of funds on interest-bearing liabilities fell to 0.45% in 2016 from 0.56% in 2015.

Total average deposits (interest-bearing and noninterest-bearing) decreased 1.0%, to $965,584,000 in 2016 from $974,873,000 in 2015. Decreases in the average balances of Individual Retirement Accounts, certificates of deposit and demand deposits were partially offset by increases in savings, interest checking and money market accounts.

43

Total average borrowed funds decreased $13,273,000 to $64,476,000 in 2016 from $77,749,000 in 2015. The average rate on borrowed funds was 2.53% in 2016 compared to 3.55% in 2015, reflecting a $29,684,000 reduction in the average balance of higher-rate, long-term borrowings resulting from prepayment in the second and fourth quarters of 2015 of a long-term repurchase agreement borrowing with an interest rate of 4.265%. The average balance of short-term borrowings increased $16,411,000 in 2016 over 2015, as average overnight borrowings were higher in 2016 and the Corporation funded the pay-off of the long-term repurchase agreement with a series of short-term advances from the FHLB-Pittsburgh.

Three-Month Periods Ended September 30, 2016 and 2015

For the three-month periods, fully taxable equivalent net interest income was $10,869,000 in 2016, which was $114,000 (1.1%) higher than in 2015. Interest income was $68,000 lower in 2016 as compared to 2015, while interest expense was lower by $182,000 in comparing the same periods. As presented in Table III, the Net Interest Margin was 3.74% in 2016 as compared to 3.66% in 2015, and the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) was 3.61% in 2016 as compared to 3.51% in 2015.

Interest income totaled $11,813,000 in 2016, a decrease of $68,000 (0.6%) from 2015. Interest and fees from loans receivable increased $476,000, or 5.6%, in 2016 as compared to 2015, while income from available-for-sale securities decreased $553,000 (16.8%). As indicated in Table III, for the three-month periods, the average balance of gross loans receivable increased 8.8% to $733,016,000 in 2016 from $673,735,000 in 2015. The average rate of return on loans was 4.91% in 2016, down from 5.05% in 2015. Total average available-for-sale securities (at amortized cost) in 2016 decreased

to $404,526,000 from $473,216,000 in 2015. The average rate of return on available-for-sale securities was 2.69% for 2016, down from 2.75% in 2015.

For the three-month periods, interest expense fell $182,000, or 16.2%, to $944,000 in 2016 from $1,126,000 in 2015. Total average deposits (interest-bearing and noninterest-bearing) amounted to $983,353,000 in the third quarter 2016, an increase of $6,036,000 (0.6%) from the third quarter 2015 total. Total average borrowed funds decreased to $57,226,000 in the third quarter 2016 from $75,848,000 in the third quarter 2015, while the average rate on borrowed funds fell to 2.75% in the third quarter 2016 from 3.34% in the third quarter 2015. The net change in average borrowed funds included an increase of $5,683,000 in short-term borrowings and a decrease of $24,305,000 in long-term borrowings. In total, the average interest rate on interest-bearing liabilities was 0.46% in the third quarter 2016 as compared to 0.53% in the third quarter 2015. The reduction in average rate on interest-bearing liabilities in 2016 was mainly caused by the pay-off (prepayment) of the higher-cost borrowing in 2015, as described above.

44

TABLE II - ANALYSIS OF INTEREST INCOME AND EXPENSE

	Three Months Ended							Nine Months Ended
	Sept. 30,				Increase/			Sept. 30,				Increase/
(In Thousands)	2016		2015		(Decrease)			2016		2015		(Decrease)
INTEREST INCOME
Available-for-sale securities:
Taxable	$	1,456	$	1,837	$	(381	)	$	4,540	$	5,899	$	(1,359	)
Tax-exempt		1,277		1,449		(172	)		3,941		4,546		(605	)
Total available-for-sale securities		2,733		3,286		(553	)		8,481		10,445		(1,964	)
Interest-bearing due from banks		29		22		7			89		73		16
Loans held for sale		7		5		2			21		10		11
Loans receivable:
Taxable		8,347		7,851		496			24,407		23,313		1,094
Tax-exempt		697		717		(20	)		2,072		1,846		226
Total loans receivable		9,044		8,568		476			26,479		25,159		1,320
Total Interest Income		11,813		11,881		(68	)		35,070		35,687		(617	)
INTEREST EXPENSE
Interest-bearing deposits:
Interest checking		78		53		25			210		162		48
Money market		89		77		12			254		222		32
Savings		34		32		2			99		96		3
Certificates of deposit		238		211		27			660		631		29
Individual Retirement Accounts		109		113		(4	)		326		340		(14	)
Other time deposits		1		1		0			1		1		0
Total interest-bearing deposits		549		487		62			1,550		1,452		98
Borrowed funds:
Short-term		30		9		21			133		15		118
Long-term		365		630		(265	)		1,090		2,048		(958	)
Total borrowed funds		395		639		(244	)		1,223		2,063		(840	)
Total Interest Expense		944		1,126		(182	)		2,773		3,515		(742	)
Net Interest Income	$	10,869	$	10,755	$	114		$	32,297	$	32,172	$	125

Note: Interest income from tax-exempt securities and loans has been adjusted to a fully tax-equivalent basis, using the Corporation’s marginal federal income tax rate of 35%.

45

TABLE III - ANALYSIS OF AVERAGE DAILY BALANCES AND RATES

(Dollars in Thousands)

	3 Months						3 Months						9 Months						9 Months
	Ended			Rate of			Ended			Rate of			Ended			Rate of			Ended			Rate of
	9/30/2016			Return/			9/30/2015			Return/			9/30/2016			Return/			9/30/2015			Return/
	Average			Cost of			Average			Cost of			Average			Cost of			Average			Cost of
	Balance			Funds %			Balance			Funds %			Balance			Funds %			Balance			Funds %
EARNING ASSETS
Available-for-sale securities, at amortized cost:
Taxable	$	291,847			1.98	%	$	361,481			2.02	%	$	298,421			2.03	%	$	379,666			2.08	%
Tax-exempt		112,679			4.51	%		111,735			5.14	%		108,926			4.83	%		115,255			5.27	%
Total available-for-sale securities		404,526			2.69	%		473,216			2.75	%		407,347			2.78	%		494,921			2.82	%
Interest-bearing due from banks		17,138			0.67	%		19,774			0.44	%		20,566			0.58	%		22,886			0.43	%
Loans held for sale		556			5.01	%		245			8.10	%		516			5.44	%		160			8.36	%
Loans receivable:
Taxable		671,408			4.95	%		610,516			5.10	%		654,256			4.98	%		595,170			5.24	%
Tax-exempt		61,608			4.50	%		63,219			4.50	%		61,319			4.51	%		51,468			4.80	%
Total loans receivable		733,016			4.91	%		673,735			5.05	%		715,575			4.94	%		646,638			5.20	%
Total Earning Assets		1,155,236			4.07	%		1,166,970			4.04	%		1,144,004			4.09	%		1,164,605			4.10	%
Cash		17,523						16,961						16,548						16,723
Unrealized gain/loss on securities		9,654						7,015						8,154						9,287
Allowance for loan losses		(8,050	)					(7,376	)					(7,913	)					(7,331	)
Bank premises and equipment		15,379						15,808						15,409						16,050
Intangible Asset - Core Deposit Intangible		24						38						26						44
Intangible Asset - Goodwill		11,942						11,942						11,942						11,942
Other assets		38,225						38,294						38,563						37,836
Total Assets	$	1,239,933					$	1,249,652					$	1,226,733					$	1,249,156
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking	$	200,789			0.15	%	$	197,189			0.11	%	$	197,628			0.14	%	$	196,109			0.11	%
Money market		205,158			0.17	%		202,106			0.15	%		199,211			0.17	%		197,852			0.15	%
Savings		133,269			0.10	%		128,939			0.10	%		131,880			0.10	%		128,561			0.10	%
Certificates of deposit		123,475			0.77	%		125,886			0.66	%		118,256			0.75	%		123,523			0.68	%
Individual Retirement Accounts		103,259			0.42	%		109,661			0.41	%		104,280			0.42	%		111,729			0.41	%
Other time deposits		1,523			0.26	%		1,514			0.26	%		1,157			0.12	%		1,150			0.12	%
Total interest-bearing deposits		767,473			0.28	%		765,295			0.25	%		752,412			0.28	%		758,924			0.26	%
Borrowed funds:
Short-term		18,655			0.64	%		12,972			0.28	%		25,828			0.69	%		9,417			0.21	%
Long-term		38,571			3.76	%		62,876			3.98	%		38,648			3.77	%		68,332			4.01	%
Total borrowed funds		57,226			2.75	%		75,848			3.34	%		64,476			2.53	%		77,749			3.55	%
Total Interest-bearing Liabilities		824,699			0.46	%		841,143			0.53	%		816,888			0.45	%		836,673			0.56	%
Demand deposits		215,880						212,022						213,172						215,949
Other liabilities		9,057						8,803						8,249						8,229
Total Liabilities		1,049,636						1,061,968						1,038,309						1,060,851
Stockholders' equity, excluding other comprehensive income/loss		183,966						183,116						183,078						182,252
Other comprehensive income/loss		6,331						4,568						5,346						6,053
Total Stockholders' Equity		190,297						187,684						188,424						188,305
Total Liabilities and Stockholders' Equity	$	1,239,933					$	1,249,652					$	1,226,733					$	1,249,156
Interest Rate Spread					3.61	%					3.51	%					3.64	%					3.54	%
Net Interest Income/Earning Assets					3.74	%					3.66	%					3.77	%					3.69	%
Total Deposits (Interest-bearing and Demand)	$	983,353					$	977,317					$	965,584					$	974,873

(1) Annualized 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 35%.

(2) Nonaccrual loans have been included with loans for the purpose of analyzing net interest earnings.

(3) Rates of return on earning assets and costs of funds are presented on an annualized basis.

46

TABLE IV - ANALYSIS OF VOLUME AND RATE CHANGES

(In Thousands)	3 Months Ended 9/30/16 vs. 9/30/15									9 Months Ended 9/30/16 vs. 9/30/15
	Change in			Change in			Total			Change in			Change in			Total
	Volume			Rate			Change			Volume			Rate			Change
EARNING ASSETS
Available-for-sale securities:
Taxable	$	(351	)	$	(30	)	$	(381	)	$	(1,234	)	$	(125	)	$	1,359	)
Tax-exempt		11			(183	)		(172	)		(240	)		(365	)		(605	)
Total available-for-sale securities		(340	)		(213	)		(553	)		(1,474	)		(490	)		(1,964	)
Interest-bearing due from banks		(3	)		10			7			(8	)		24			16
Loans held for sale		3			(1	)		2			15			(4	)		11
Loans receivable:
Taxable		748			(252	)		496			2,256			(1,162	)		1,094
Tax-exempt		(24	)		4			(20	)		339			(113	)		226
Total loans receivable		724			(248	)		476			2,595			(1,275	)		1,320
Total Interest Income		384			(452	)		(68	)		1,128			(1,745	)		(617	)
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking		1			24			25			1			47			48
Money market		2			10			12			2			30			32
Savings		1			1			2			2			1			3
Certificates of deposit		(5	)		32			27			(28	)		57			29
Individual Retirement Accounts		(7	)		3			(4	)		(23	)		9			(14	)
Other time deposits		0			0			0			0			0			0
Total interest-bearing deposits		(8	)		70			62			(46	)		144			98
Borrowed funds:
Short-term		9			12			21			52			66			118
Long-term		(233	)		(32	)		(265	)		(842	)		(116	)		(958	)
Total borrowed funds		(224	)		(20	)		(244	)		(790	)		(50	)		(840	)
Total Interest Expense		(232	)		50			(182	)		(836	)		94			(742	)
Net Interest Income	$	616		$	(502	)	$	114		$	1,964		($	1,839	)	$	125

(1) Changes in income on tax-exempt securities and loans are presented on a fully tax-equivalent basis, using the Corporation’s marginal federal income tax rate of 35%.

(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 amount of the change in each.

47

TABLE V - COMPARISON OF NONINTEREST INCOME

(In Thousands)

	9 Months Ended
	September 30,						$			%
	2016			2015			Change			Change
Service charges on deposit accounts	$	3,523		$	3,629		$	(106	)		(2.9	)
Service charges and fees		335			373			(38	)		(10.2	)
Trust and financial management revenue		3,567			3,478			89			2.6
Brokerage revenue		569			640			(71	)		(11.1	)
Insurance commissions, fees and premiums		74			87			(13	)		(14.9	)
Interchange revenue from debit card transactions		1,431			1,456			(25	)		(1.7	)
Net gains from sales of loans		699			573			126			22.0
Decrease in fair value of servicing rights		(247	)		(137	)		(110	)		80.3
Increase in cash surrender value of life insurance		286			294			(8	)		(2.7	)
Other operating income		1,243			1,086			157			14.5
Total other operating income before realized gains on available-for-sale securities, net	$	11,480		$	11,479		$	1			0.0

Table V excludes realized gains on available-for-sale securities, which are discussed in the “Earnings Overview” section of Management’s Discussion and Analysis. Total noninterest income shown in Table V was virtually unchanged in the first nine months of 2016 as compared to the first nine months of 2015. The most significant variances include the following:

· Other operating income increased $157,000, reflecting an increase of $91,000 in revenue from the redemption of tax credits. Also, other income associated with lending programs increased by a total of $59,000, including increases in fees associated with providing credit enhancement for the Mortgage Partnership Finance (MPF) Original Program, providing access to certain U.S. Government programs and from the Corporation’s participation in a title insurance entity on a co-operative basis with other banks.

· Net gains on the sale of loans increased $126,000 (22.0%). The Corporation originates and sells some of its residential mortgage production under the MPF Original and Xtra Programs, administered by the Federal Home Loan Banks of Chicago and Pittsburgh. The 2016 increase in net gains from sales reflects the effects of a higher volume of residential mortgage sales, along with a higher margin on loans sold. For the first nine months of 2016, the amount of residential mortgage loans originated for the purpose of sale totaled $19.4 million, an increase of 16.6% over the first nine months of 2015, and total cash proceeds from residential mortgage loans sold in the first nine months of 2016 amounted to $19.6 million, an increase of 15.3% over the amount for the first nine months of 2015.

· Trust and Financial Management revenue increased $89,000 (2.6%), reflecting an increase in the balance of Trust assets under management. Trust assets under management amounted to $867,852,000 at September 30, 2016, an increase of 6.5% over the total at December 31, 2015 and 9.8% over the corresponding total at September 30, 2015. Increases in Trust assets under management have resulted from an overall valuation increase in the U.S. stock market, along with growth from new business.

· The fair value of mortgage servicing rights decreased $247,000 in the first nine months of 2016, primarily from changes in prepayment assumptions driven by market expectations of lower interest rates. In comparison, the fair value of mortgage servicing rights decreased $137,000 in the first nine months of 2015.

· Service charges on deposit accounts decreased $106,000 (2.9%), mainly as a result of a reduction in consumer overdraft volume.

· Brokerage revenue declined $71,000, as the volume of sales of annuities declined.

48

TABLE VI - COMPARISON OF NONINTEREST INCOME

(In Thousands)

	3 Months Ended
	September 30,					$			%
	2016			2015		Change			Change
Service charges on deposit accounts	$	1,221		$	1,302	$	(81	)		(6.2	)
Service charges and fees		118			137		(19	)		(13.9	)
Trust and financial management revenue		1,172			1,123		49			4.4
Brokerage revenue		216			215		1			0.5
Insurance commissions, fees and premiums		26			24		2			8.3
Interchange revenue from debit card transactions		481			482		(1	)		(0.2	)
Net gains from sales of loans		236			243		(7	)		(2.9	)
(Decrease) increase in fair value of servicing rights		(68	)		13		(81	)		(623.1	)
Increase in cash surrender value of life insurance		97			95		2			2.1
Other operating income		385			327		58			17.7
Total other operating income before realized gains on available-for-sale securities, net	$	3,884		$	3,961	$	(77	)		(1.9	)

Table VI excludes realized gains on available-for-sale securities, which are discussed in the “Earnings Overview” section of Management’s Discussion and Analysis. Total noninterest income shown in Table VI decreased $77,000, or 1.9%, in the three months ended September 30, 2016 as compared to the three months ended September 30, 2015. The most significant variances include the following:

· Service charges on deposit accounts decreased $81,000, or 6.2%, primarily as a result of a lower volume of consumer overdrafts.

· The fair value of mortgage servicing rights decreased $68,000 in the third quarter 2016, primarily from changes in prepayment assumptions driven by market expectations of lower interest rates. In comparison, the fair value of mortgage servicing rights increased $13,000 in the third quarter 2015.

· Other operating income increased $58,000 in 2016, with increases in several categories, most significantly dividends received on Federal Home Loan Bank of Pittsburgh stock.

· Trust and financial management revenue increased $49,000 (4.4%) in the third quarter 2016 as compared to the third quarter 2015, reflecting growth in the amount of Trust assets under management and including an increase in revenue from retirement plan services of $16,000.

TABLE VII - COMPARISON OF NONINTEREST EXPENSE

(In Thousands)

	9 Months Ended
	September 30,				$			%
	2016		2015		Change			Change
Salaries and wages	$	11,701	$	10,834	$	867			8.0
Pensions and other employee benefits		3,499		3,336		163			4.9
Occupancy expense, net		1,770		1,985		(215	)		(10.8	)
Furniture and equipment expense		1,301		1,398		(97	)		(6.9	)
FDIC Assessments		448		454		(6	)		(1.3	)
Pennsylvania shares tax		932		946		(14	)		(1.5	)
Professional fees		816		437		379			86.7
Automated teller machine and interchange expense		807		735		72			9.8
Software subscriptions		729		617		112			18.2
Loss on prepayment of borrowings		0		910		(910	)		(100.0	)
Other operating expense		4,183		3,872		311			8.0
Total Other Expense	$	26,186	$	25,524	$	662			2.6

49

As shown in Table VII, total noninterest expense increased $662,000 or 2.6% in the first nine months of 2016 as compared to the first nine months of 2015. Excluding the $910,000 loss on prepayment of debt in 2015, total noninterest expense increased $1,572,000, or 6.4%. Other significant variances include the following:

· Salaries and wages expense increased $867,000 (8.0%), reflecting an increase in number of employees. The average number of full-time equivalent employees was 287 in 2016, up from 278 in 2015, including new positions established for lending, lending support, information technology, training and marketing functions.

· Professional fees expense increased $379,000 (86.7%) in the first nine months 2016 over the first nine months of 2015 amount, including increases related to employee sales and service training, information technology, marketing and outsourced commercial loan credit review.

· Other operating expense increased $311,000 (8.0%) in the first nine months of 2016 over the first nine months of 2015, including an increase in charitable donations of $90,000, an $86,000 increase in education and training related expenses and a $48,000 increase in other real estate expenses. Also, other operating expense was reduced in 2015 by $69,000 as a result of a recovery of sales tax previously paid. Within other operating expense, net collections-related expense was $59,000 lower in the first nine months of 2016 as compared to the corresponding period in 2015.

· Pensions and other employee benefits increased $163,000 (4.9%) in the first nine months of 2016 over the first nine months of 2015 as a result of increased healthcare claims on the Corporation’s partially self-insured plan as well as increases in other benefits attributable to having more personnel.

· Software subscriptions and updates increased $112,000 (18.2%) in the first nine months of 2016 over the first nine months 2015 as a result of enhancements and new applications initiated in 2015 and continuing into 2016.

· Occupancy expense in the first nine months of 2016 was $215,000 (10.8%) lower than the total for the first nine months of 2015, primarily as a result of lower depreciation expense and lower winter-related expenses such as snow removal and fuel costs.

TABLE VIII - COMPARISON OF NONINTEREST EXPENSE

(In Thousands)

	3 Months Ended
	September 30,				$			%
	2016		2015		Change			Change
Salaries and wages	$	3,901	$	3,744	$	157			4.2
Pensions and other employee benefits		1,060		1,016		44			4.3
Occupancy expense, net		601		623		(22	)		(3.5	)
Furniture and equipment expense		435		477		(42	)		(8.8	)
FDIC Assessments		151		155		(4	)		(2.6	)
Pennsylvania shares tax		287		311		(24	)		(7.7	)
Professional fees		245		141		104			73.8
Automated teller machine and interchange expense		291		234		57			24.4
Software subscriptions		237		209		28			13.4
Other operating expense		1,371		1,207		164			13.6
Total Other Expense	$	8,579	$	8,117	$	462			5.7

As shown in Table VIII, total noninterest expense increased $462,000, or 5.7%, in the three months ended September 30, 2016 as compared to the same period of 2015. Significant variances include the following:

· Salaries and wages expense increased $157,000 (4.2%), reflecting an increase in number of employees. The average number of full-time equivalent employees was 288 in the third quarter 2016, up from 279 in the third quarter 2015, including new positions established for lending, lending support, information technology, training, human resources and marketing functions.

50

· Professional fees expense increased $104,000 (73.8%) in the three months ended September 30, 2016 over the same period in 2015, including increases related to employee sales and service training, information technology, marketing and outsourced commercial loan credit review.

· Other operating expense increased $164,000 (13.6%) in the three months ended September 30, 2016 over the same period in 2015, including increases in education and training-related expense of $29,000, net collection-related expenses of $29,000 and expenses related to other real estate properties of $27,000. Also, other operating expense in the third quarter 2015 was reduced by a refund of $69,000 from recovery of previously-paid sales tax, with no corresponding recovery in the third quarter 2016.

FINANCIAL CONDITION

Gross loans outstanding (excluding mortgage loans held for sale) were $742,338,000 at September 30, 2016, up 5.3% from $704,880,000 at December 31, 2015 and up 9.2% from $679,865,000 at September 30, 2015. The total outstanding balances of residential mortgage segment loans at September 30, 2016 increased $24,170,000 (6.3%) as compared to December 31, 2015 and $29,345,000 (7.7%) as compared to September 30, 2015. The total outstanding balances of commercial segment loans at September 30, 2016 increased $11,138,000 (3.6%) as compared to December 31, 2015 and $30,482,000 (10.6%) as compared to September 30, 2015.

The increases in loans outstanding in the latter half of 2015 and first nine months of 2016 included increases in commercial participation loans. Participation loans represent portions of larger commercial transactions for which other institutions are the “lead banks”. 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” and “Political subdivisions” classes in the loan tables presented in this Form 10-Q. Total participation loans outstanding amounted to $48,670,000 at September 30, 2016, up from $44,456,000 at December 31, 2015 and $32,332,000 at September 30, 2015. At September 30, 2016, the balance of participation loans outstanding includes a total of $34,564,000 to businesses located outside of the Corporation’s market area, including $11,996,000 from participations in loans originated through the Corporation’s membership in a network that originates loans throughout the U.S. The Corporation’s participation loans originated through the network consist of loans to businesses that are larger than the Corporation’s typical commercial customer base. The loans originated through the network are considered “leveraged loans,” meaning the businesses typically have minimal tangible book equity and the extent of collateral available is limited, though the businesses have demonstrated strong cash flow performance in their recent histories. At September 30, 2016, total leveraged participation loans, including loans originated through the network and a loan originated through another lead institution, totaled $14,688,000.

Other 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 the allowance for loan losses and stockholders’ equity, are discussed in separate sections of Management’s Discussion and Analysis.

Management does not expect capital expenditures to have a material, detrimental effect on the Corporation’s financial condition in 2016.

Since 2009, the Corporation has originated and sold residential mortgage loans to the secondary market through the MPF Xtra program administered by the Federal Home Loan Banks of Pittsburgh and Chicago. Residential mortgages originated and sold through the MPF Xtra program consist primarily of conforming, prime loans sold to the Federal National Mortgage Association (Fannie Mae), a government agency. In 2014, the Corporation began to originate and sell residential mortgage loans to the secondary market through the MPF Original program, which is also administered by the Federal Home Loan Banks of Pittsburgh and Chicago. Residential mortgages originated and sold through the MPF Original program consist primarily of conforming, prime loans sold to the Federal Home Loan Bank of Pittsburgh. For loans sold under the Original program, the Corporation provides a credit enhancement whereby the Corporation would assume credit losses in excess of a defined First Loss Account (“FLA”) balance, up to specified amounts. The FLA is funded by the Federal Home Loan Bank of Pittsburgh based on a percentage of the outstanding balance of loans sold. At September 30, 2016, the Corporation has recorded an allowance in the amount of $169,000 for credit losses on loans sold under the MPF Original Program which is included in “Accrued interest and other liabilities” in the accompanying balance sheet. There was no allowance recorded at December 31, 2015. The Corporation does not provide a credit enhancement for loans sold through the Xtra program.

51

For loan sales originated under the MPF Xtra and Original 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. 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. Such repurchases or reimbursements generally result from an underwriting or documentation deficiency. At September 30, 2016, the total outstanding balance of loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $1,866,000, and the corresponding total outstanding balance repurchased at December 31, 2015 was $1,968,000.

At September 30, 2016, outstanding balances of loans sold and serviced through the two programs totaled $157,845,000, including loans sold through the MPF Xtra program of $117,738,000 and loans sold through the Original program of $40,107,000. At December 31, 2015, outstanding balances of loans sold and serviced through the two programs totaled $152,448,000, including loans sold through the MPF Xtra program of $125,571,000 and loans sold through the Original Program of $26,877,000. Based on the fairly limited volume of required repurchases to date, no allowance had been established for representation and warranty exposures as of September 30, 2016 and December 31, 2015.

PROVISION AND 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 is recorded as a reduction of the investment in loans. Note 7 to the unaudited consolidated financial statements provides an overview of the process management uses for evaluating and determining the allowance for loan losses.

While management uses available information to recognize losses on loans, changes in economic conditions may necessitate revisions in future years. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Corporation’s allowance for loan losses. Such agencies may require the Corporation to recognize adjustments to the allowance based on their judgments of information available to them at the time of their examination.

The allowance for loan losses was $8,421,000 at September 30, 2016, up from $7,889,000 at December 31, 2015. Table X shows the collectively determined component of the allowance for residential mortgages was $382,000 higher at September 30, 2016 than at December 31, 2015, reflecting growth in outstanding loans and the use of slightly higher qualitative factors to estimate the required allowance. Also, the collectively determined component of the allowance for commercial loans was $291,000 higher at September 30, 2016 than at December 31, 2015, reflecting the effects of growth in outstanding loans and increases in the average net charge-offs experience and qualitative factors used to estimate the required allowance.

The provision (credit) for loan losses by segment in the three-month and nine-month period ended September 30, 2016 and 2015 is as follows:

(In Thousands)	3 Months Ended					9 Months Ended
	Sept. 30,		Sept. 30,			Sept. 30,			Sept. 30,
	2016		2015			2016			2015
Residential mortgage	$	178	$	(17	)	$	452		$	52
Commercial		337		282			750			443
Consumer		23		6			51			(1	)
Unallocated		0		31			(29	)		32
Total	$	538	$	302		$	1,224		$	526

As shown in the table above, the provision for loan losses for the third quarter 2016 exceeded the third quarter 2015 amount by $236,000, with the largest increases in the residential mortgage and commercial segments. In the third quarter 2016, the provision related to residential mortgage loans included an increase of $142,000 in the qualitative factors component of the collectively determined allowance. In comparison, the net credit related to the residential mortgage segment in the third quarter 2015 included an increase related to qualitative factors of $55,000, but also included a credit of $78,000 related to the change in total specific allowances on impaired loans, as adjusted for net charge-offs during the period. For the commercial segment, the third quarter 2016 provision included $433,000 from the increase in total specific allowances on impaired loans, as adjusted for net charge-offs, and $26,000 from an increase in the allowance related to qualitative factors, reduced $122,000 by improvement in the net charge-offs experience component of the collectively determined allowance. In comparison, the main components of the commercial provision in the third quarter 2015 included an increase in the collectively determined portion of the allowance based on qualitative factors of $141,000 and a net increase in specific allowances on impaired loans of $108,000.

52

The provision for loan losses for the nine months ended September 30, 2016 totaled $1,224,000, an increase of $698,000 over the corresponding amount for the first nine months of 2015. In the first nine months of 2016, the provision related to the residential mortgage segment increased $400,000, and the provision related to the commercial segment increased $307,000. For the nine-month period ended September 30, 2016, the provision related to residential mortgage loans included an increase of $70,000 related to the change in total specific allowances on impaired loans, as adjusted for net charge-offs during the period, while the net provision for the first nine months of 2015 included a credit of $164,000 attributable to a net reduction in specific allowances on impaired residential mortgage loans. Also, the provision related to residential mortgage loans in the first nine months of 2016 included an increase of $367,000 in the qualitative factors component of the allowance as compared to an increase of $127,000 in the qualitative factors component in the first nine months of 2015. For the commercial segment, the provision for the first nine months of 2016 included $459,000 from the increase in total specific allowances on impaired loans, as compared to a net increase of $282,000 in specific allowances on impaired loans in the first nine months of 2015. Also, the provision related to the commercial segment for the first nine months of 2016 included $194,000 from an increase in the qualitative factors component of the collectively determined portion of the allowance as compared to a corresponding $80,000 increase in the first nine months of 2015.

Table XI presents information related to past due and impaired loans, and loans that have been modified under terms that are considered troubled debt restructurings (TDRs). Total nonperforming loans as a percentage of outstanding loans was 2.70% at September 30, 2016, up from 2.09% at December 31, 2015, and nonperforming assets as a percentage of total assets was 1.79% at September 30, 2016, up from 1.31% at December 31, 2015. Table XI presents data at September 30, 2016 and at the end of each of the years ended December 31, 2011 through 2015. For the range of dates presented in Table XI, total nonperforming loans as a percentage of loans has ranged from a low of 1.19% at December 31, 2011 to a high of 2.80% at December 31, 2013, and total nonperforming assets as a percentage of assets has ranged from a low of 0.73% at December 31, 2011 to a high of 1.79% at September 30, 2016.

Total impaired loans of $11,135,000 at September 30, 2016, are up $1,161,000 from the corresponding amount at December 31, 2015 of $9,974,000, including an increase in impaired loans with a valuation allowance of $1,688,000. In the third quarter 2016, the Corporation recorded an allowance of $528,000 related to one real estate secured commercial loan relationship with total loans outstanding of $3,347,000, including one loan with an outstanding balance of $2,695,000 that was classified as impaired with a valuation allowance at September 30, 2016.

Total nonperforming assets of $22,341,000 at September 30, 2016 are up $6,335,000 from the corresponding amount at December 31, 2015, including increases in nonaccrual loans, loans past due 90 days or more and still accruing interest and foreclosed (real estate) assets held for sale, summarized as follows:

· Total nonaccrual loans at September 30, 2016 of $12,481,000 was $964,000 higher than the corresponding December 31, 2015 total, including the effect of classifying the real estate secured commercial loan noted above with an outstanding balance at September 30, 2016 of $2,695,000 as nonaccrual in the third quarter 2016.

· Total loans past due 90 days or more and still accruing interest amounted to $7,539,000 at September 30, 2016, an increase of $4,310,000 from $3,229,000 at December 31, 2015. The increase in 2016 in the balance of loans past due 90 days or more and still accruing interest included a commercial loan with a balance of $2,697,000 at September 30, 2016 that was deemed by management to be well secured and in the process of collection. At September 30, 2016, in addition to this commercial loan, total residential mortgage loans that were more than 90 days past due but deemed to be well secured and in the process of collection amounted to $4,016,000, up from $2,381,000 at December 31, 2015. The Corporation reviews the status of loans past due 90 days or more each quarter to determine if it is appropriate to continue to accrue interest, and has determined the loans included in this category are well secured and that ultimate collection of all principal and interest is probable.

· Foreclosed assets held for sale consisted of real estate, and totaled $2,321,000 at September 30, 2016, an increase of $1,061,000 from $1,260,000 at December 31, 2015. At September 30, 2016, the Corporation held 22 such properties for sale, with total carrying values of $1,195,000 related to residential real estate, $696,000 of land and $430,000 related to commercial real estate. At December 31, 2016, the Corporation held 12 such properties for sale, with total carrying values of $556,000 related to residential real estate and $704,000 of land. The Corporation evaluates the carrying values of foreclosed assets each quarter based on the most recent market activity or appraisals for each property.

53

The outstanding balances of impaired loans without a valuation allowance, nonaccrual loans and nonperforming TDRs at September 30, 2016, include an outstanding balance of $4,836,000 from loans to one commercial entity. In 2014, the Corporation entered into a forbearance agreement with this commercial borrower which included a reduction in monthly payment amounts over a fifteen-month period. At the end of the fifteen-month period, the monthly payment amounts would revert to the original amounts, unless the forbearance agreement was extended or the payment requirements otherwise modified. The forbearance agreement has been extended for two additional twelve-month periods, most recently in July 2016. The Corporation recorded a charge-off of $1,486,000 in the second quarter 2014 as a result of these modifications, as the payment amounts based on the forbearance agreement are not sufficient to fully amortize the contractual amount of principal outstanding on the loans. The borrower has made all required payments on the loans in accordance with the terms of the forbearance agreement, as extended.

Each period presented in Table XI 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 amount of total charge-offs reported in any one period.

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 September 30, 2016. Management continues to closely monitor its commercial loan relationships for possible credit losses, and will adjust its estimates of loss and decisions concerning nonaccrual status, if appropriate.

Tables IX through XII present historical data related to loans and the allowance for loan losses.

TABLE IX - ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES

(In Thousands)

	9 Months Ended
	Sept. 30,			Sept. 30,			Years Ended December 31,
	2016			2015			2015			2014			2013			2012			2011
Balance, beginning of year	$	7,889		$	7,336		$	7,336		$	8,663		$	6,857		$	7,705		$	9,107
Charge-offs:
Residential mortgage		(73	)		(191	)		(217	)		(327	)		(95	)		(552	)		(100	)
Commercial		(597	)		(240	)		(251	)		(1,715	)		(459	)		(498	)		(1,189	)
Consumer		(67	)		(65	)		(94	)		(97	)		(117	)		(171	)		(157	)
Total charge-offs		(737	)		(496	)		(562	)		(2,139	)		(671	)		(1,221	)		(1,446	)
Recoveries:
Residential mortgage		2			1			1			25			24			18			3
Commercial		4			5			214			264			348			8			255
Consumer		39			44			55			47			58			59			71
Total recoveries		45			50			270			336			430			85			329
Net charge-offs		(692	)		(446	)		(292	)		(1,803	)		(241	)		(1,136	)		(1,117	)
Provision (credit) for loan losses		1,224			526			845			476			2,047			288			(285	)
Balance, end of period	$	8,421		$	7,416		$	7,889		$	7,336		$	8,663		$	6,857		$	7,705
Net charge-offs as a % of average loans		0.10	%		0.07	%		0.04	%		0.29	%		0.04	%		0.16	%		0.16	%

TABLE X - COMPONENTS OF THE ALLOWANCE FOR LOAN LOSSES

(In Thousands)

	Sept. 30,		As of December 31,
	2016		2015		2014		2013		2012		2011
ASC 310 - Impaired loans	$	685	$	820	$	769	$	2,333	$	623	$	1,126
ASC 450 - Collective segments:
Commercial		3,394		3,103		2,732		2,583		2,594		2,811
Residential mortgage		3,799		3,417		3,295		3,156		3,011		3,130
Consumer		145		122		145		193		188		204
Unallocated		398		427		395		398		441		434
Total Allowance	$	8,421	$	7,889	$	7,336	$	8,663	$	6,857	$	7,705

The above allocation is based on estimates and subjective judgments and is not necessarily indicative of the specific amounts or loan categories in which losses may occur.

54

TABLE XI - PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS

AND TROUBLED DEBT RESTRUCTURINGS (TDRs)

(In Thousands)

	As of
	Sept. 30,			As of December 31,
	2016			2015			2014			2013			2012			2011
Impaired loans with a valuation allowance	$	3,621		$	1,933		$	3,241		$	9,889		$	2,710		$	3,433
Impaired loans without a valuation allowance		7,514			8,041			9,075			6,432			4,719			4,431
Total impaired loans	$	11,135		$	9,974		$	12,316		$	16,321		$	7,429		$	7,864
Total loans past due 30-89 days and still accruing	$	4,040		$	7,057		$	7,121		$	8,305		$	7,756		$	7,898
Nonperforming assets:
Total nonaccrual loans	$	12,481		$	11,517		$	12,610		$	14,934		$	7,353		$	7,197
Total loans past due 90 days or more and still accruing		7,539			3,229			2,843			3,131			2,311			1,267
Total nonperforming loans		20,020			14,746			15,453			18,065			9,664			8,464
Foreclosed assets held for sale (real estate)		2,321			1,260			1,189			892			879			1,235
Total nonperforming assets	$	22,341		$	16,006		$	16,642		$	18,957		$	10,543		$	9,699
Loans subject to troubled debt restructurings (TDRs):
Performing	$	946		$	1,186		$	1,807		$	3,267		$	906		$	1,064
Nonperforming		5,032			5,178			5,388			908			1,155			2,413
Total TDRs	$	5,978		$	6,364		$	7,195		$	4,175		$	2,061		$	3,477
Total nonperforming loans as a % of loans		2.70	%		2.09	%		2.45	%		2.80	%		1.41	%		1.19	%
Total nonperforming assets as a % of assets		1.79	%		1.31	%		1.34	%		1.53	%		0.82	%		0.73	%
Allowance for loan losses as a % of total loans		1.13	%		1.12	%		1.16	%		1.34	%		1.00	%		1.09	%
Allowance for loan losses as a % of nonperforming loans		42.06	%		53.50	%		47.47	%		47.95	%		70.95	%		91.03	%

TABLE XII - SUMMARY OF LOANS BY TYPE

Summary of Loans by Type

(In Thousands)

	Sept. 30,			As of December 31,
	2016			2015			2014			2013			2012			2011
Residential mortgage:
Residential mortgage loans - first liens	$	325,533		$	304,783		$	291,882		$	299,831		$	311,627		$	331,015
Residential mortgage loans - junior liens		22,794			21,146			21,166			23,040			26,748			28,851
Home equity lines of credit		38,623			39,040			36,629			34,530			33,017			30,037
1-4 Family residential construction		23,310			21,121			16,739			13,909			12,842			9,959
Total residential mortgage		410,260			386,090			366,416			371,310			384,234			399,862
Commercial:
Commercial loans secured by real estate		149,938			154,779			145,878			147,215			158,413			156,388
Commercial and industrial		86,969			75,196			50,157			42,387			48,442			57,191
Political subdivisions		38,653			40,007			17,534			16,291			31,789			37,620
Commercial construction and land		12,809			5,122			6,938			17,003			28,200			23,518
Loans secured by farmland		6,900			7,019			7,916			10,468			11,403			10,949
Multi-family (5 or more) residential		8,133			9,188			8,917			10,985			6,745			6,583
Agricultural loans		4,313			4,671			3,221			3,251			3,053			2,987
Other commercial loans		11,557			12,152			13,334			14,631			362			552
Total commercial		319,272			308,134			253,895			262,231			288,407			295,788
Consumer		12,806			10,656			10,234			10,762			11,269			12,665
Total		742,338			704,880			630,545			644,303			683,910			708,315
Less: allowance for loan losses		(8,421	)		(7,889	)		(7,336	)		(8,663	)		(6,857	)		(7,705	)
Loans, net	$	733,917		$	696,991		$	623,209		$	635,640		$	677,053		$	700,610

55

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. At September 30, 2016, the Corporation maintained overnight interest-bearing deposits with the Federal Reserve Bank of Philadelphia and other correspondent banks totaling $9,620,000.

The Corporation maintains overnight borrowing facilities with several correspondent banks that provide a source of day-to-day liquidity. Also, the Corporation maintains borrowing facilities with the Federal Home Loan Bank of Pittsburgh, secured by various mortgage loans.

The Corporation has a line of credit with the Federal Reserve Bank of Philadelphia’s Discount Window. Management intends to use this line of credit as a contingency funding source. As collateral for the line, the Corporation has pledged available-for-sale securities with a carrying value of $18,899,000 at September 30, 2016.

The Corporation’s outstanding, available, and total credit facilities at September 30, 2016 and December 31, 2015 are as follows:

	Outstanding				Available				Total Credit
(In Thousands)	Sept. 30,		Dec. 31,		Sept. 30,		Dec. 31,		Sept. 30,		Dec. 31,
	2016		2015		2016		2015		2016		2015
Federal Home Loan Bank of Pittsburgh	$	19,808	$	60,348	$	315,685	$	262,361	$	335,493	$	322,709
Federal Reserve Bank Discount Window		0		0		16,802		19,606		16,802		19,606
Other correspondent banks		0		0		45,000		45,000		45,000		45,000
Total credit facilities	$	19,808	$	60,348	$	377,487	$	326,967	$	397,295	$	387,315

At September 30, 2016, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of overnight borrowings of $2,000,000, short-term borrowings of $6,270,000, and long-term borrowings with a total amount of $11,538,000. At December 31, 2015, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of overnight borrowings of $23,500,000, short-term borrowings of $25,081,000, and long-term borrowings with a total amount of $11,767,000. Additional information regarding borrowed funds is included in Note 8 of the unaudited consolidated financial statements.

Additionally, the Corporation uses repurchase agreements placed with brokers to borrow funds secured by investment assets and “RepoSweep” arrangements to borrow funds from commercial banking customers on an overnight basis. If required to raise cash in an emergency situation, the Corporation could sell available-for-sale securities to meet its obligations. At September 30, 2016, the carrying value of available-for-sale securities in excess of amounts required to meet pledging or repurchase agreement obligations was $193,452,000.

Management believes the Corporation is well-positioned to meet its short-term and long-term obligations.

56

STOCKHOLDERS’ EQUITY AND CAPITAL ADEQUACY

The Corporation and C&N Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Details concerning capital ratios at September 30, 2016 and December 31, 2015 are presented below. Management believes, as of September 30, 2016 and December 31, 2015, that the Corporation and C&N Bank meet all capital adequacy requirements to which they are subject and maintain capital conservation buffers (described in more detail in the “New Capital Rule” section below) that allow the Corporation and C&N Bank to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. Further, as reflected in the table below, the Corporation’s and C&N Bank’s capital ratios at September 30, 2016 and December 31, 2015 exceed the Corporation’s policy threshold levels.

(Dollars in Thousands)																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
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
September 30, 2016:
Total capital to risk-weighted assets:
Consolidated	$	181,961		23.56	%	$	61,784		³8	%	$	66,611		³8.625	%	$	77,230		³10	%	$	81,091		³10.5	%
C&N Bank		161,486		21.04	%		61,411		³8	%		66,209		³8.625	%		76,764		³10	%		80,602		³10.5	%
Tier 1 capital to risk-weighted assets:
Consolidated		173,223		22.43	%		30,892		³6	%		51,165		³6.625	%		61,784		³8	%		65,645		³8.5	%
C&N Bank		152,896		19.92	%		30,706		³6	%		50,856		³6.625	%		61,411		³8	%		65,249		³8.5	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		173,223		22.43	%		30,892		³4.5	%		39,580		³5.125	%		50,199		³6.5	%		54,061		³7	%
C&N Bank		152,896		19.92	%		30,706		³4.5	%		39,341		³5.125	%		49,897		³6.5	%		53,735		³7	%
Tier 1 capital to average assets:
Consolidated		173,223		14.17	%		48,885		³4	%		N/A		N/A			61,107		³5	%		61,107		³5	%
C&N Bank		152,896		12.66	%		48,321		³4	%		N/A		N/A			60,401		³5	%		60,401		³5	%
December 31, 2015:
Total capital to risk-weighted assets:
Consolidated	$	181,216		24.40	%	$	59,424		³8	%		N/A		N/A		$	74,281		³10	%	$	77,995		³10.5	%
C&N Bank		161,187		21.83	%		59,058		³8	%		N/A		N/A			73,823		³10	%		77,514		³10.5	%
Tier 1 capital to risk-weighted assets:
Consolidated		173,009		23.29	%		29,712		³6	%		N/A		N/A			59,424		³8	%		63,139		³8.5	%
C&N Bank		153,298		20.77	%		29,529		³6	%		N/A		N/A			59,058		³8	%		62,749		³8.5	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		173,009		23.29	%		29,712		³4.5	%		N/A		N/A			48,282		³6.5	%		51,996		³7	%
C&N Bank		153,298		20.77	%		29,529		³4.5	%		N/A		N/A			47,985		³6.5	%		51,676		³7	%
Tier 1 capital to average assets:
Consolidated		173,009		14.31	%		48,355		³4	%		N/A		N/A			60,444		³5	%		60,444		³5	%
C&N Bank		153,298		12.81	%		47,861		³4	%		N/A		N/A			59,826		³5	%		59,826		³5	%

Management expects the Corporation and C&N Bank to maintain capital levels that exceed the regulatory standards for well-capitalized institutions and the applicable capital conservation buffers for the next 12 months and for the foreseeable future.

Future dividend payments will depend upon maintenance of a strong financial condition, future earnings and capital and regulatory requirements. As described in more detail in the section below titled “New Capital Rule," 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.

57

NEW CAPITAL RULE

In July 2013, the federal regulatory authorities issued a new capital rule based, in part, on revisions developed by the Basel Committee on Banking Supervision to the Basel capital framework (Basel III). The Corporation and C&N Bank became subject to the new rule effective January 1, 2015. Generally, the new rule implemented higher minimum capital requirements, revised the definition of regulatory capital components and related calculations, added a new common equity tier 1 capital ratio, implemented a new capital conservation buffer, increased the risk weighting for past due loans and provided a transition period for several aspects of the new rule.

The current (new) capital rule provides that, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization 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. Phase-in of the capital conservation buffer requirements began January 1, 2016. The transition schedule for new ratios, including the capital conservation buffer, is as follows:

	As of January 1:
	2015			2016			2017			2018			2019
Minimum common equity tier 1 capital ratio		4.5	%		4.5	%		4.5	%		4.5	%		4.5	%
Common equity tier 1 capital conservation buffer		N/A			0.625	%		1.25	%		1.875	%		2.5	%
Minimum common equity tier 1 capital ratio plus capital conservation buffer		4.5	%		5.125	%		5.75	%		6.375	%		7.0	%
Phase-in of most deductions from common equity tier 1 capital		40	%		60	%		80	%		100	%		100	%
Minimum tier 1 capital ratio		6.0	%		6.0	%		6.0	%		6.0	%		6.0	%
Minimum tier 1 capital ratio plus capital conservation buffer		N/A			6.625	%		7.25	%		7.875	%		8.5	%
Minimum total capital ratio		8.0	%		8.0	%		8.0	%		8.0	%		8.0	%
Minimum total capital ratio plus capital conservation buffer		N/A			8.625	%		9.25	%		9.875	%		10.5	%

As fully phased in, a banking organization with a buffer greater than 2.5% 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. The new rule also prohibits a banking organization 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 September 30, 2016, the Corporation’s Capital Conservation Buffer, determined based on the minimum total capital ratio, was 15.56%. C&N Bank’s Capital Conservation Buffer (also determined based on the minimum total capital ratio) was 13.04%.

58

The Corporation’s total stockholders’ equity is affected by fluctuations in the fair values of available-for-sale securities. The difference between amortized cost and fair value of available-for-sale securities, net of deferred income tax, is included in Accumulated Other Comprehensive Income within stockholders’ equity. The balance in Accumulated Other Comprehensive Income related to unrealized gains on available-for-sale securities, net of deferred income tax, amounted to $5,388,000 at September 30, 2016 and $2,493,000 at December 31, 2015. Changes in accumulated other comprehensive income are excluded from earnings and directly increase or decrease stockholders’ equity. If available-for-sale securities

are deemed to be other-than-temporarily impaired, unrealized losses are recorded as a charge against earnings, and amortized cost for the affected securities is reduced. Note 6 to the unaudited consolidated financial statements provides additional information concerning management’s evaluation of available-for-sale securities for other-than-temporary impairment at September 30, 2016.

Stockholders’ equity is also affected by the underfunded or overfunded status of defined benefit pension and postretirement plans. The balance in Accumulated Other Comprehensive Income related to defined benefit plans, net of deferred income tax, was $42,000 at September 30, 2016 and $35,000 at December 31, 2015.

COMPREHENSIVE INCOME

Comprehensive Income is the total of (1) net income, and (2) all other changes in equity from non-stockholder sources, which are referred to as Other Comprehensive Income. Changes in the components of Accumulated Other Comprehensive Income (Loss) are included in Other Comprehensive Income, and for the Corporation, consist of changes in unrealized gains or losses on available-for-sale securities and changes in underfunded or overfunded defined benefit plans. Fluctuations in interest rates significantly affect fair values of available-for-sale securities, and accordingly have an effect on Other Comprehensive Income (Loss) in each period.

Comprehensive Income totaled $2,623,000 for the three months ended September 30, 2016 as compared to $6,270,000 in the third quarter 2015. For the three months ended September 30, 2016, Comprehensive Income included: (1) Net Income of $4,087,000, which was $147,000 lower than in the third quarter 2015; (2) Other Comprehensive Loss from a decrease in net unrealized gains on available-for-sale securities of ($1,461,000) as compared to Other Comprehensive Income of $2,039,000 from an increase in net unrealized gains on available-for-sale securities in the third quarter 2015; and (3) Other Comprehensive Loss from defined benefit plans of ($3,000) for the third quarters of 2016 and 2015.

Comprehensive Income totaled $14,433,000 for the nine months ended September 30, 2016 as compared to $13,168,000 for the nine months ended September 30, 2015. In the nine months ended September 30, 2016, Comprehensive Income included: (1) Net Income of $11,531,000, which was $875,000 lower than in the first nine months of 2015; (2) Other Comprehensive Income from an increase in net unrealized gains on available-for-sale securities of $2,895,000 as compared to Other Comprehensive Income of $835,000 in the first nine months of 2015; and (3) Other Comprehensive Income from defined benefit plans of $7,000 as compared to Other Comprehensive Loss of ($73,000) in the first nine months of 2015.

INCOME TAXES

The provision for income tax for interim periods is based on the Corporation’s estimate of the effective tax rate expected to be applicable for the full year. The Corporation’s effective tax rates differ from the statutory rate of 35% principally because of the effects of tax-exempt interest income.

The third quarter 2016 provision for income tax of $1,451,000, or 26.20% of pre-tax income, was $56,000 higher than the third quarter 2015 tax provision of $1,395,000, or 24.78% of pre-tax income. The higher effective tax in the third quarter 2016 included the effects of a reduction in tax-exempt interest income of $127,000. The reduction in tax-exempt interest income resulted from pay-offs received on municipal bonds purchased several years ago when market interest yields were higher. Also, the provision for state income tax was $39,000 higher, primarily as a result of a catch-up adjustment to increase New York State taxes for the effect of changes in the tax methodology that first became effective in 2015.

The provision for income tax totaled $3,847,000 for the nine months ended September 30, 2016, down $229,000 from the amount for the first nine months of 2015. The lower tax provision in 2016 resulted from lower pre-tax income; however, the provision increased as a percentage of pre-tax income to 25.02% in 2016 from 24.73% in 2015. The higher effective tax rate included the impact of a $253,000 reduction in tax-exempt interest income and an increase in the provision for state income tax of $30,000 that resulted mainly from a catch-up adjustment to increase the state tax provision for New York State.

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. At September 30, 2016, the net deferred tax asset was $1,544,000, down from $3,115,000 at December 31, 2015. The most significant change in temporary difference components was an increase of $1,560,000 in the deferred tax liability associated with unrealized gains on available-for-sale securities.

59

The Corporation regularly reviews deferred tax assets for recoverability based on history of earnings, expectations for future earnings and expected timing of reversals of temporary differences. Realization of deferred tax assets ultimately depends on the existence of sufficient taxable income, including taxable income in prior carryback years, as well as future taxable income. Management believes the recorded net deferred tax asset at September 30, 2016 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 11 to the unaudited, consolidated financial statements.

INFLATION

The Corporation is significantly affected by the Federal Reserve Board’s efforts to control inflation through changes in short-term interest rates. Beginning in September 2007, in response to concerns about weakness in the U.S. economy, the Federal Reserve lowered the fed funds target rate numerous times; in December 2008, it established a target range of 0% to 0.25%, which it maintained through mid-December 2015. On December 16, 2015, the Federal Reserve raised their target for the federal funds rate to 0.25% to 0.50%. This decision was based on data available that suggested economic activity had been expanding at a moderate pace. This included an increase in household spending, business fixed investments increasing, and an improvement in labor market conditions. Also, throughout this period, the Federal Reserve has injected massive amounts of liquidity into the nation’s monetary system through a variety of programs. The Federal Reserve has purchased large amounts of securities in an effort to keep interest rates low and stimulate economic growth. Beginning in late 2013, the Federal Reserve began reducing the amount of securities purchased under its asset purchase program and then ended the program in October 2014, though still reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and continued to roll over maturing Treasury securities at auction. The Federal Reserve maintained their commitment to this policy in their September 21, 2016 statement and anticipates doing so until normalization of the level of the federal funds rate is well under way.

Despite the current low short-term rate environment, inflation statistics indicate that the overall rate of inflation is unlikely to significantly affect the Corporation’s operations within the near future. Although management cannot predict future changes in the rates of inflation, management monitors the impact of economic trends, including any indicators of inflationary pressures, in managing interest rate and other financial risks.

60

ITEM 3. 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. In addition to the effects of interest rates, the market prices of the Corporation’s debt securities within the available-for-sale securities portfolio are affected by fluctuations in the risk premiums (amounts of spread over risk-free rates) demanded by investors. Management attempts to limit the risk that economic conditions would force the Corporation to sell securities for realized losses by maintaining a strong capital position (discussed in the “Stockholders’ Equity and Capital Adequacy” section of Management’s Discussion and Analysis) and ample sources of liquidity (discussed in the “Liquidity” section of Management’s Discussion and Analysis).

The Corporation’s two major categories of market risk are interest rate risk and equity securities risk, which are discussed in the following sections.

INTEREST RATE RISK

Business risk arising from changes in interest rates is an inherent factor in operating a bank. The Corporation’s assets are predominantly long-term, fixed-rate loans and debt securities. Funding for these assets comes principally from shorter-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.

The Corporation uses a simulation model to calculate the potential effects of interest rate fluctuations on net interest income and the market value of portfolio equity. For purposes of these calculations, the market value of portfolio equity includes the fair values of financial instruments, such as securities, loans, deposits and borrowed funds, and the book values of nonfinancial assets and liabilities, such as premises and equipment and accrued expenses. The model measures and projects the amount of potential changes in net interest income, and calculates the discounted present value of anticipated cash flows of financial instruments, assuming an immediate increase or decrease in interest rates. Management ordinarily runs a variety of scenarios within a range of plus or minus 100-400 basis points of current rates.

The model makes estimates, at each level of interest rate change, regarding cash flows from principal repayments on loans and mortgage-backed securities and call activity on other investment securities. Actual results could vary significantly from these estimates, which could result in significant differences in the calculations of projected changes in net interest income and market value of portfolio equity. Also, the model does not make estimates related to changes in the composition of the deposit portfolio that could occur due to rate competition, and the table does not necessarily reflect changes that management would make to realign the portfolio as a result of changes in interest rates.

The Corporation’s Board of Directors has established policy guidelines for acceptable levels of interest rate risk, based on an immediate increase or decrease in interest rates. The policy limits acceptable fluctuations in net interest income from the baseline (flat rates) one-year scenario and variances in the market value of portfolio 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 July 31, 2016 and December 31, 2015. The table shows that as of the respective dates, the changes in net interest income and changes in market value were within the policy limits in all scenarios.

61

TABLE XIII - THE EFFECT OF HYPOTHETICAL CHANGES IN INTEREST RATES

July 31, 2016 Data
(In Thousands)		Period Ending July 31, 2017
Basis Point		Interest		Interest		Net Interest		NII			NII
Change in Rates		Income		Expense		Income (NII)		% Change			Risk Limit
	+400	$	52,459	$	22,058	$	30,401		-19.3	%		25.0	%
	+300		49,766		17,276		32,490		-13.7	%		20.0	%
	+200		47,042		12,576		34,466		-8.5	%		15.0	%
	+100		44,249		8,131		36,118		-4.1	%		10.0	%
	0		41,379		3,717		37,662		0.0	%		0.0	%
	-100		38,822		3,228		35,594		-5.5	%		10.0	%
	-200		37,849		3,194		34,655		-8.0	%		15.0	%
	-300		37,408		3,194		34,214		-9.2	%		20.0	%
	-400		37,272		3,194		34,078		-9.5	%		25.0	%

		Market Value of Portfolio Equity at July 31, 2016
		Present		Present			Present
Basis Point		Value		Value			Value
Change in Rates		Equity		% Change			Risk Limit
	+400	$	171,023		-23.2	%		50.0	%
	+300		182,116		-18.2	%		45.0	%
	+200		195,320		-12.3	%		35.0	%
	+100		208,307		-6.4	%		25.0	%
	0		222,627		0.0	%		0.0	%
	-100		220,366		-1.0	%		25.0	%
	-200		236,569		6.3	%		35.0	%
	-300		273,916		23.0	%		45.0	%
	-400		305,754		37.3	%		50.0	%

December 31, 2015 Data
(In Thousands)				Period Ending December 31, 2016
Basis Point		Interest		Interest		Net Interest		NII			NII
Change in Rates		Income		Expense		Income (NII)		% Change			Risk Limit
	+400	$	52,181	$	21,985	$	30,196		-20.8	%		25.0	%
	+300		49,687		17,282		32,405		-15.0	%		20.0	%
	+200		47,136		12,659		34,477		-9.6	%		15.0	%
	+100		44,546		8,109		36,437		-4.4	%		10.0	%
	0		41,835		3,715		38,120		0.0	%		0.0	%
	-100		39,116		3,171		35,945		-5.7	%		10.0	%
	-200		37,417		3,168		34,249		-10.2	%		15.0	%
	-300		36,838		3,168		33,670		-11.7	%		20.0	%
	-400		36,689		3,168		33,521		-12.1	%		25.0	%

		Market Value of Portfolio Equity at December 31, 2015
		Present		Present			Present
Basis Point		Value		Value			Value
Change in Rates		Equity		% Change			Risk Limit
	+400	$	167,741		-24.4	%		50.0	%
	+300		179,772		-18.9	%		45.0	%
	+200		193,823		-12.6	%		35.0	%
	+100		207,803		-6.3	%		25.0	%
	0		221,750		0.0	%		0.0	%
	-100		223,517		0.8	%		25.0	%
	-200		225,185		1.5	%		35.0	%
	-300		250,353		12.9	%		45.0	%
	-400		286,210		29.1	%		50.0	%

62

EQUITY SECURITIES RISK

The Corporation’s equity securities portfolio consists of investments in stocks of banks and bank holding companies. Investments in bank stocks are subject to risk factors that affect the banking industry in general, including credit risk, competition from non-bank entities, interest rate risk and other factors, which could result in a decline in market prices. Also, losses could occur in individual stocks held by the Corporation because of specific circumstances related to each bank.

Equity securities held as of September 30, 2016 and December 31, 2015 are presented in Table XIV. Table XIV presents quantitative data concerning the effects of a decline in fair value of the Corporation’s equity securities of 10% or 20%. The data in Table XIV does not reflect the effects of any appreciation in value that may occur, nor does it present the Corporation’s maximum exposure to loss on equity securities, which would be 100% of their fair value as of September 30, 2016.

TABLE XIV - EQUITY SECURITIES RISK

(In Thousands)

	Sept. 30,			Dec. 31,
	2016			2015
Cost	$	752		$	1,680
Fair Value		1,080			2,386
Hypothetical 10% Decline In Market Value		(108	)		(239	)
Hypothetical 20% Decline In Market Value		(216	)		(477	)

ITEM 4. CONTROLS AND PROCEDURES

The Corporation’s management, under the supervision of and with the participation of the Corporation’s Chief Executive Officer and Chief Financial Officer, has carried out an evaluation of the design and effectiveness of the Corporation’s disclosure controls and procedures as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Corporation’s disclosure controls and procedures are effective to ensure that all material information required to be disclosed in reports the Corporation files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.

There were no significant changes in the Corporation’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or that are reasonably likely to affect, our internal control over financial reporting.

63

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

The Corporation and C&N Bank are involved in various legal proceedings incidental to their business. Management believes the aggregate liability, if any, resulting from such pending and threatened legal proceedings will not have a material, adverse effect on the Corporation’s financial condition or results of operations.

Item 1A. Risk Factors

There have been no material changes from the risk factors previously disclosed in Item 1A of the Corporation’s Form 10-K filed February 18, 2016.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

The following table sets forth a summary of the purchases by the Corporation, on the open market, of its equity securities during the third quarter 2016:

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs
July 1 - 31, 2016		0	$	0		0		600,000
August 1 - 31, 2016		0	$	0		0		600,000
September 1 - 30, 2016		0	$	0		0		600,000

Note to Table: Effective April 21, 2016, the Corporation’s Board of Directors approved a new treasury stock repurchase program. Under the newly approved stock repurchase program, the Corporation is authorized to repurchase up to 600,000 shares of the Corporation's common stock or slightly less than 5% of the Corporation's issued and outstanding shares at April 19, 2016. The Board of Directors’ April 21, 2016 authorization provides that: (1) the new treasury stock repurchase program 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 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 Plan and its equity compensation program. To date, no purchases have been made under this repurchase program.

Item 3. Defaults Upon Senior Securities

None

Item 4. Mine Safety Disclosures

Not applicable

Item 5. Other Information

None

64

Item 6. Exhibits

2. Plan of acquisition, reorganization, arrangement, liquidation or succession	Not applicable
3. (i) Articles of Incorporation	Incorporated by reference to Exhibit 3.1 of the Corporation's Form 8-K filed September 21, 2009
3. (ii) By-laws	Incorporated by reference to Exhibit 3.1 of the Corporation's Form 8-K filed April 19, 2013
4. Instruments defining the rights of Security holders, including indentures	Not applicable
10. Material contracts	Not applicable
11. Statement re: computation of per share earnings	Information concerning the computation of earnings per share is provided in Note 2 to the unaudited consolidated financial statements, which is included in Part I, Item 1 of Form 10-Q
15. Letter re: unaudited interim information	Not applicable
18. Letter re: change in accounting principles	Not applicable
19. Report furnished to security holders	Not applicable
22. Published report regarding matters submitted to vote of security holders	Not applicable
23. Consents of experts and counsel	Not applicable
24. Power of attorney	Not applicable
31. Rule 13a-14(a)/15d-14(a) certifications:
31.1 Certification of Chief Executive Officer	Filed herewith
31.2 Certification of Chief Financial Officer	Filed herewith
32. Section 1350 certifications	Filed herewith
99. Additional exhibits	Not applicable
100. XBRL-related documents	Not applicable
101. Interactive data file	Filed herewith

65

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CITIZENS & NORTHERN CORPORATION
November 3, 2016	By:	/s/ J. Bradley Scovill
Date		President and Chief Executive Officer
November 3, 2016	By:	/s/ Mark A. Hughes
Date		Treasurer and Chief Financial Officer

66

EX-31.1

Exhibit 31.1

CERTIFICATION

I, J. Bradley Scovill, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Citizens & Northern Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 3, 2016	By:	/s/ J. Bradley Scovill
Date		President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Mark A. Hughes, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Citizens & Northern Corporation;

2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

November 3, 2016	By:	/s/ Mark A. Hughes
Date		Treasurer and Chief Financial Officer

EX-32

Exhibit 32

SECTION 1350 CERTIFICATIONS

In connection with the Quarterly Report of Citizens & Northern Corporation (the “Corporation”) on Form 10-Q for the quarterly period ended September 30, 2016, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to each of the undersigned’s best knowledge and belief:

(a) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and

(b) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

November 3, 2016	By:	/s/ J. Bradley Scovill
Date		President and Chief Executive Officer
November 3, 2016	By:	/s/ Mark A. Hughes
Date		Treasurer and Chief Financial Officer

These certifications accompany this report on Form 10-Q pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by such Act, be deemed filed by the Corporation for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such certifications will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent that the Corporation specifically incorporates them by reference.

A signed original of this written statement required by Section 906 has been provided to the Corporation and will be retained by the Corporation and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Document And Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Oct. 31, 2016
Document Information [Line Items]
Entity Registrant Name	CITIZENS & NORTHERN CORP
Entity Central Index Key	0000810958
Trading Symbol	cznc
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		12,086,511
Document Type	10-Q
Document Period End Date	Sep. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
ASSETS
Noninterest-bearing	$ 20,482,000	$ 14,710,000
Interest-bearing	13,588,000	21,351,000
Total cash and due from banks	34,070,000	36,061,000
Available-for-sale securities, at fair value	409,800,000	420,290,000
Loans held for sale	621,000	280,000
Loans receivable	742,338,000	704,880,000
Allowance for loan losses	(8,421,000)	(7,889,000)
Loans, net	733,917,000	696,991,000
Bank-owned life insurance	19,608,000	20,764,000
Accrued interest receivable	3,871,000	3,768,000
Bank premises and equipment, net	15,406,000	15,406,000
Foreclosed assets held for sale	2,321,000	1,260,000
Deferred tax asset, net	1,544,000	3,115,000
Intangible asset - Core deposit intangibles	21,000	30,000
Intangible asset - Goodwill	11,942,000	11,942,000
Other assets	12,212,000	13,510,000
TOTAL ASSETS	1,245,333,000	1,223,417,000
LIABILITIES
Noninterest-bearing	220,973,000	211,041,000
Interest-bearing	770,907,000	724,574,000
Total deposits	991,880,000	935,615,000
Short-term borrowings	14,590,000	53,496,000
Long-term borrowings	38,538,000	38,767,000
Accrued interest and other liabilities	9,722,000	8,052,000
TOTAL LIABILITIES	1,054,730,000	1,035,930,000
STOCKHOLDERS' EQUITY
Preferred stock, $1,000 par value; authorized 30,000 shares; $1,000 liquidation preference per share; no shares issued at September 30, 2016 and December 31, 2015	0	0
Common stock, par value $1.00 per share; authorized 20,000,000 shares in 2016 and 2015; issued 12,655,171 at September 30, 2016 and December 31, 2015; outstanding 12,087,223 at September 30, 2016 and 12,180,623 December 31, 2015	12,655,000	12,655,000
Paid-in capital	71,616,000	71,654,000
Retained earnings	111,664,000	109,454,000
Treasury stock, at cost; 567,948 shares at September 30, 2016 and 474,548 shares at December 31, 2015	(10,762,000)	(8,804,000)
Sub-total	185,173,000	184,959,000
Accumulated other comprehensive income:
Unrealized gain on available-for-sale securities	5,388,000	2,493,000
Defined benefit plans gain	42,000	35,000
Total accumulated other comprehensive income	5,430,000	2,528,000
TOTAL STOCKHOLDERS' EQUITY	190,603,000	187,487,000
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$ 1,245,333,000	$ 1,223,417,000

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Preferred stock, par value (in dollars per share)	$ 1,000	$ 1,000
Preferred stock, authorized shares (in shares)	30,000	30,000
Preferred stock, liquidation preference per share (in dollars per share)	$ 1,000	$ 1,000
Preferred stock, shares issued	$ 0	$ 0
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, authorized shares (in shares)	20,000,000	20,000,000
Common stock, issued shares (in shares)	12,655,171	12,655,171
Common stock, shares outstanding (in shares)	12,087,223	12,180,623
Treasury stock, shares (in shares)	567,948	474,548

XML

Consolidated Statements of Income (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Interest and fees on loans	$ 8,347,000	$ 7,851,000	$ 24,407,000	$ 23,313,000
Interest on balances with depository institutions	29,000	22,000	89,000	73,000
Interest on loans to political subdivisions	457,000	470,000	1,357,000	1,210,000
Interest on mortgages held for sale	7,000	5,000	21,000	10,000
Income from available-for-sale securities:
Taxable	1,429,000	1,758,000	4,474,000	5,666,000
Tax-exempt	835,000	949,000	2,578,000	2,978,000
Dividends	27,000	79,000	66,000	233,000
Total interest and dividend income	11,131,000	11,134,000	32,992,000	33,483,000
INTEREST EXPENSE
Interest on deposits	549,000	487,000	1,550,000	1,452,000
Interest on short-term borrowings	30,000	9,000	133,000	15,000
Interest on long-term borrowings	365,000	630,000	1,090,000	2,048,000
Total interest expense	944,000	1,126,000	2,773,000	3,515,000
Net interest income	10,187,000	10,008,000	30,219,000	29,968,000
Provision for loan losses	538,000	302,000	1,224,000	526,000
Net interest income after provision for loan losses	9,649,000	9,706,000	28,995,000	29,442,000
OTHER INCOME
Service charges on deposit accounts	1,221,000	1,302,000	3,523,000	3,629,000
Service charges and fees	118,000	137,000	335,000	373,000
Trust and financial management revenue	1,172,000	1,123,000	3,567,000	3,478,000
Brokerage revenue	216,000	215,000	569,000	640,000
Insurance commissions, fees and premiums	26,000	24,000	74,000	87,000
Interchange revenue from debit card transactions	481,000	482,000	1,431,000	1,456,000
Net gains from sale of loans	236,000	243,000	699,000	573,000
(Decrease) increase in fair value of servicing rights	(68,000)	13,000	(247,000)	(137,000)
Increase in cash surrender value of life insurance	97,000	95,000	286,000	294,000
Net (loss) from premises and equipment	0	(1,000)	0	(1,000)
Other operating income	385,000	328,000	1,243,000	1,087,000
Sub-total	3,884,000	3,961,000	11,480,000	11,479,000
Realized gains on available-for-sale securities, net	584,000	79,000	1,089,000	1,085,000
Total other income	4,468,000	4,040,000	12,569,000	12,564,000
OTHER EXPENSES
Salaries and wages	3,901,000	3,744,000	11,701,000	10,834,000
Pensions and other employee benefits	1,060,000	1,016,000	3,499,000	3,336,000
Occupancy expense, net	601,000	623,000	1,770,000	1,985,000
Furniture and equipment expense	435,000	477,000	1,301,000	1,398,000
FDIC Assessments	151,000	155,000	448,000	454,000
Pennsylvania shares tax	287,000	311,000	932,000	946,000
Professional fees	245,000	141,000	816,000	437,000
Automated teller machine and interchange expense	291,000	234,000	807,000	735,000
Software subscriptions	237,000	209,000	729,000	617,000
Loss on prepayment of debt	0	0	0	910,000
Other operating expense	1,371,000	1,207,000	4,183,000	3,872,000
Total other expenses	8,579,000	8,117,000	26,186,000	25,524,000
Income before income tax provision	5,538,000	5,629,000	15,378,000	16,482,000
Income tax provision	1,451,000	1,395,000	3,847,000	4,076,000
NET INCOME	$ 4,087,000	$ 4,234,000	$ 11,531,000	$ 12,406,000
NET INCOME PER SHARE - BASIC (in dollars per share)	$ 0.34	$ 0.35	$ 0.95	$ 1.02
NET INCOME PER SHARE - DILUTED (in dollars per share)	$ 0.34	$ 0.35	$ 0.95	$ 1.01

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Net income	$ 4,087,000	$ 4,234,000	$ 11,531,000	$ 12,406,000
Unrealized (losses) gains on available-for-sale securities:
Unrealized holding (losses) gains on available-for-sale securities	(1,661,000)	3,216,000	5,544,000	2,369,000
Reclassification adjustment for gains realized in income	(584,000)	(79,000)	(1,089,000)	(1,085,000)
Other comprehensive (losses) gain on available-for-sale securities	(2,245,000)	3,137,000	4,455,000	1,284,000
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in accumulated other comprehensive gain (loss)	0	0	26,000	(100,000)
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost	(5,000)	(3,000)	(15,000)	(11,000)
Other comprehensive (loss) gain on unfunded retirement obligations	(5,000)	(3,000)	11,000	(111,000)
Other comprehensive (loss) income before income tax	(2,250,000)	3,134,000	4,466,000	1,173,000
Income tax related to other comprehensive income (loss)	786,000	(1,098,000)	(1,564,000)	(411,000)
Net other comprehensive (loss) income	(1,464,000)	2,036,000	2,902,000	762,000
Comprehensive income	$ 2,623,000	$ 6,270,000	$ 14,433,000	$ 13,168,000

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 11,531,000	$ 12,406,000
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	1,224,000	526,000
Realized gains on available-for-sale securities, net	(1,089,000)	(1,085,000)
Loss on prepayment of debt	0	910,000
Realized loss (gain) on foreclosed assets	86,000	(37,000)
Loss on disposition of premises and equipment	0	1,000
Depreciation expense	1,188,000	1,442,000
Accretion and amortization on securities, net	1,065,000	1,204,000
Accretion and amortization on loans and deposits, net	(11,000)	(16,000)
Decrease in fair value of servicing rights	247,000	137,000
Increase in cash surrender value of life insurance	(286,000)	(294,000)
Stock-based compensation and other expense	484,000	459,000
Amortization of core deposit intangibles	9,000	16,000
Deferred income taxes	7,000	495,000
Gains on sales of loans, net	(699,000)	(573,000)
Origination of loans for sale	(19,366,000)	(16,613,000)
Proceeds from sales of loans	19,565,000	16,975,000
Increase in accrued interest receivable and other assets	(305,000)	(2,030,000)
Increase in accrued interest payable and other liabilities	187,000	1,333,000
Net Cash Provided by Operating Activities	13,837,000	15,256,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of certificates of deposit	1,060,000	0
Purchase of certificates of deposit	(2,280,000)	0
Proceeds from sales of available-for-sale securities	21,573,000	25,972,000
Proceeds from calls and maturities of available-for-sale securities	54,472,000	65,261,000
Purchase of available-for-sale securities	(59,582,000)	(35,200,000)
Redemption of Federal Home Loan Bank of Pittsburgh stock	3,661,000	3,791,000
Purchase of Federal Home Loan Bank of Pittsburgh stock	(2,364,000)	(4,674,000)
Net increase in loans	(39,647,000)	(52,273,000)
Proceeds from bank owned life insurance	1,442,000	1,442,000
Purchase of premises and equipment	(1,188,000)	(733,000)
Return of principal on limited liability entity investments	115,000	133,000
Proceeds from sale of foreclosed assets	361,000	2,386,000
Net Cash (Used in) Provided by Investing Activities	(22,377,000)	6,105,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits	56,265,000	(6,877,000)
Net (decrease) increase in short-term borrowings	(38,906,000)	4,707,000
Repayments of long-term borrowings	(229,000)	(11,128,000)
Purchase of treasury stock	(3,723,000)	(3,944,000)
Sale of treasury stock	126,000	379,000
Tax benefit from compensation plans	129,000	117,000
Common dividends paid	(8,333,000)	(8,441,000)
Net Cash Provided by (Used in) Financing Activities	5,329,000	(25,187,000)
DECREASE IN CASH AND CASH EQUIVALENTS	(3,211,000)	(3,826,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	33,313,000	31,619,000
CASH AND CASH EQUIVALENTS, END OF PERIOD	30,102,000	27,793,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Accrued purchase of available-for-sale securities	1,494,000	0
Assets acquired through foreclosure of real estate loans	1,508,000	2,523,000
Interest paid	2,764,000	3,525,000
Income taxes paid	$ 3,185,000	$ 3,295,000

XML

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($)	Common Stock [Member]	Treasury Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	AOCI Attributable to Parent [Member]	Total
Balance (in shares) at Dec. 31, 2014	12,655,171	375,191
Balance at Dec. 31, 2014	$ 12,655,000	$ (6,744,000)	$ 71,541,000	$ 105,550,000	$ 5,360,000	$ 188,362,000
Net income				12,406,000		12,406,000
Other comprehensive income, net					762,000	762,000
Cash dividends declared on common stock, $0.78 per share				(9,543,000)		(9,543,000)
Shares issued for dividend reinvestment plan (in shares)		55,795
Shares issued for dividend reinvestment plan		$ 1,046,000	56,000			1,102,000
Treasury stock purchased (in shares)		203,100
Treasury stock purchased		$ (3,944,000)				(3,944,000)
Shares issued from treasury for exercise of stock options (in shares)		(22,335)
Shares issued from treasury for exercise of stock options		$ 405,000	(26,000)			379,000
Restricted stock granted (in shares)		34,800
Restricted stock granted		$ 627,000	(627,000)			0
Forfeiture of restricted stock (in shares)		2,777
Forfeiture of restricted stock		$ (47,000)	47,000			0
Stock-based compensation expense			459,000			459,000
Tax effect of stock option exercises			(6,000)			(6,000)
Tax benefit from dividends on restricted stock			16,000			16,000
Tax benefit from employee benefit plan				107,000		107,000
Balance (in shares) at Sep. 30, 2015	12,655,171	468,138
Balance at Sep. 30, 2015	$ 12,655,000	$ (8,657,000)	71,460,000	108,520,000	6,122,000	190,100,000
Shares issued for dividend reinvestment plan (in shares)		(55,795)
Balance (in shares) at Dec. 31, 2015	12,655,171	474,548
Balance at Dec. 31, 2015	$ 12,655,000	$ (8,804,000)	71,654,000	109,454,000	2,528,000	187,487,000
Net income				11,531,000		11,531,000
Other comprehensive income, net					2,902,000	2,902,000
Cash dividends declared on common stock, $0.78 per share				(9,435,000)		(9,435,000)
Shares issued for dividend reinvestment plan (in shares)		53,596
Shares issued for dividend reinvestment plan		$ 1,012,000	90,000			1,102,000
Treasury stock purchased (in shares)		187,300
Treasury stock purchased		$ (3,723,000)				(3,723,000)
Shares issued from treasury for exercise of stock options (in shares)		(7,371)
Shares issued from treasury for exercise of stock options		$ 139,000	(13,000)			126,000
Restricted stock granted (in shares)		35,427
Restricted stock granted		$ 658,000	(658,000)			0
Forfeiture of restricted stock (in shares)		2,719
Forfeiture of restricted stock		$ (48,000)	48,000			0
Stock-based compensation expense			480,000			480,000
Other stock-based expense (in shares)		(225)
Other stock-based expense		$ 4,000				4,000
Tax effect of stock option exercises			(2,000)			(2,000)
Tax benefit from dividends on restricted stock			17,000			17,000
Tax benefit from employee benefit plan				114,000		114,000
Balance (in shares) at Sep. 30, 2016	12,655,171	567,948
Balance at Sep. 30, 2016	$ 12,655,000	$ (10,762,000)	$ 71,616,000	$ 111,664,000	$ 5,430,000	$ 190,603,000
Shares issued for dividend reinvestment plan (in shares)		(53,596)

XML

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parentheticals) - $ / shares	9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015
Retained Earnings [Member]
Common stock, dividends, per share (in dollars per share)	$ 0.78	$ 0.78

XML

Note 1 - Basis of Interim Presentation

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Basis of Accounting [Text Block]

1. BASIS OF INTERIM PRESENTATION

The consolidated financial information included herein, with the exception of the consolidated balance sheet dated December 31, 2015, is unaudited. Such information reflects all adjustments (consisting solely of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations, comprehensive income, cash flows and changes in stockholders’ equity for the interim periods; however, the information does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for a complete set of financial statements. Certain 2015 information has been reclassified for consistency with the 2016 presentation.

Operating results reported for the three-month and nine-month periods ended September 30, 2016 might not be indicative of the results for the year ending December 31, 2016. The Corporation evaluates subsequent events through the date of filing with the Securities and Exchange Commission.

XML

Note 2 - Per Share Data

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Earnings Per Share [Text Block]

2. PER SHARE DATA

Net income per share is based on the weighted-average number of shares of common stock outstanding. The following data show the amounts used in computing basic and diluted net income per share. As shown in the table that follows, diluted earnings per share is computed using weighted average common shares outstanding, plus weighted-average common shares available from the exercise of all dilutive stock options, less the number of shares that could be repurchased with the proceeds of stock option exercises based on the average share price of the Corporation's common stock during the period.

			Weighted-
			Average			Earnings
	Net		Common			Per
	Income		Shares			Share
Nine Months Ended September 30, 2016
Earnings per share – basic	$	11,531,000		12,098,554		$	0.95
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				219,679
Hypothetical share repurchase at $20.48				(195,659	)
Earnings per share – diluted	$	11,531,000		12,122,574		$	0.95
Nine Months Ended September 30, 2015
Earnings per share – basic	$	12,406,000		12,222,557		$	1.02
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				213,511
Hypothetical share repurchase at $19.94				(192,322	)
Earnings per share – diluted	$	12,406,000		12,243,746		$	1.01

			Weighted-
			Average			Earnings
	Net		Common			Per
	Income		Shares			Share
Three Months Ended September 30, 2016
Earnings per share – basic	$	4,087,000		12,078,397		$	0.34
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				215,154
Hypothetical share repurchase at $21.20				(185,355	)
Earnings per share – diluted	$	4,087,000		12,108,196		$	0.34
Three Months Ended September 30, 2015
Earnings per share – basic	$	4,234,000		12,200,129		$	0.35
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				204,449
Hypothetical share repurchase at $19.90				(184,248	)
Earnings per share – diluted	$	4,234,000		12,220,330		$	0.35

Stock options that were anti-dilutive were excluded from net income per share calculations. Weighted-average common shares available from anti-dilutive instruments totaled 39,054 shares in the nine-month period ended September 30, 2016, 66,351 shares in the nine-month period ended September 30, 2015, 22,715 shares in the third quarter 2016 and 47,974 shares in the third quarter 2015.

XML

Note 3 - Comprehensive Income

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

3. COMPREHENSIVE INCOME

Comprehensive income is the total of (1) net income, and (2) all other changes in equity from non-stockholder sources, which are referred to as other comprehensive income. The components of other comprehensive income, and the related tax effects, are as follows:

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
Nine Months Ended September 30, 2016
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	5,544		$	(1,941	)	$	3,603
Reclassification adjustment for (gains) realized in income		(1,089	)		381			(708	)
Other comprehensive income on available-for-sale securities		4,455			(1,560	)		2,895
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		26			(9	)		17
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		(15	)		5			(10	)
Other comprehensive income on unfunded retirement obligations		11			(4	)		7
Total other comprehensive income	$	4,466		$	(1,564	)	$	2,902

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
Nine Months Ended September 30, 2015
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	2,369		$	(829	)	$	1,540
Reclassification adjustment for (gains) realized in income		(1,085	)		380			(705	)
Other comprehensive income on available-for-sale securities		1,284			(449	)		835
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		(100	)		35			(65	)
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		(11	)		3			(8	)
Other comprehensive loss on unfunded retirement obligations		(111	)		38			(73	)
Total other comprehensive income	$	1,173		$	(411	)	$	762

(In Thousands)	Before-Tax			Income Tax		Net-of-Tax
	Amount			Effect		Amount
Three Months Ended September 30, 2016
Unrealized losses on available-for-sale securities:
Unrealized holding losses on available-for-sale securities	$	(1,661	)	$	580	$	(1,081	)
Reclassification adjustment for (gains) realized in income		(584	)		204		(380	)
Other comprehensive loss on available-for-sale securities		(2,245	)		784		(1,461	)
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		0			0		0
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		(5	)		2		(3	)
Other comprehensive loss on unfunded retirement obligations		(5	)		2		(3	)
Total other comprehensive loss	$	(2,250	)	$	786	$	(1,464	)

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
Three Months Ended September 30, 2015
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	3,216		$	(1,126	)	$	2,090
Reclassification adjustment for (gains) realized in income		(79	)		28			(51	)
Other comprehensive loss on available-for-sale securities		3,137			(1,098	)		2,039
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		0			0			0
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		(3	)		0			(3	)
Other comprehensive loss on unfunded retirement obligations		(3	)		0			(3	)
Total other comprehensive income	$	3,134		$	(1,098	)	$	2,036

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

 

Changes in the components of accumulated other comprehensive income are as follows and are presented net of tax:

(In Thousands)	Unrealized			Unfunded			Accumulated
	Holding Gains			Pension and			Other
	(Losses)			Postretirement			Comprehensive
	on Securities			Obligations			Income
Nine Months Ended September 30, 2016
Balance, beginning of period	$	2,493		$	35		$	2,528
Other comprehensive income before reclassifications		3,603			17			3,620
Amounts reclassified from accumulated other comprehensive income		(708	)		(10	)		(718	)
Other comprehensive income		2,895			7			2,902
Balance, end of period	$	5,388		$	42		$	5,430
Nine Months Ended September 30, 2015
Balance, beginning of period	$	5,281		$	79		$	5,360
Other comprehensive income before reclassifications		1,540			(65	)		1,475
Amounts reclassified from accumulated other comprehensive income		(705	)		(8	)		(713	)
Other comprehensive income		835			(73	)		762
Balance, end of period	$	6,116		$	6		$	6,122
Three Months Ended September 30, 2016
Balance, beginning of period	$	6,849		$	45		$	6,894
Other comprehensive loss before reclassifications		(1,081	)		0			(1,081	)
Amounts reclassified from accumulated other comprehensive income		(380	)		(3	)		(383	)
Other comprehensive loss		(1,461	)		(3	)		(1,464	)
Balance, end of period	$	5,388		$	42		$	5,430
Three Months Ended September 30, 2015
Balance, beginning of period	$	4,077		$	9		$	4,086
Other comprehensive income before reclassifications		2,090			0			2,090
Amounts reclassified from accumulated other comprehensive income		(51	)		(3	)		(54	)
Other comprehensive income		2,039			(3	)		2,036
Balance, end of period	$	6,116		$	6		$	6,122

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

 

Items reclassified out of each component of other comprehensive income are as follows:

For the Nine Months Ended September 30, 2016

(In Thousands)

	Reclassified from
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Consolidated
Comprehensive Income Components	Comprehensive Income			Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(1,089	)	Realized gains on available-for-sale securities, net
		381		Income tax provision
		(708	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(23	)	Pensions and other employee benefits
Actuarial loss		8		Pensions and other employee benefits
		(15	)	Total before tax
		5		Income tax provision
		(10	)	Net of tax
Total reclassifications for the period	$	(718	)

For the Nine Months Ended September 30, 2015

(In Thousands)

	Reclassified from
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Consolidated
Comprehensive Income Components	Comprehensive Income			Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(1,085	)	Realized gains on available-for-sale securities, net
		380		Income tax provision
		(705	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(22	)	Pensions and other employee benefits
Actuarial loss		11		Pensions and other employee benefits
		(11	)	Total before tax
		3		Income tax provision
		(8	)	Net of tax
Total reclassifications for the period	$	(713	)

For the Three Months Ended September 30, 2016

(In Thousands)

	Reclassified from
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Consolidated
Comprehensive Income Components	Comprehensive Income			Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(584	)	Realized gains on available-for-sale securities, net
		204		Income tax provision
		(380	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(8	)	Pensions and other employee benefits
Actuarial loss		3		Pensions and other employee benefits
		(5	)	Total before tax
		2		Income tax provision
		(3	)	Net of tax
Total reclassifications for the period	$	(383	)

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

 

For the Three Months Ended September 30, 2015

(In Thousands)

	Reclassified from
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Consolidated
Comprehensive Income Components	Comprehensive Income			Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(79	)	Realized gains on available-for-sale securities, net
		28		Income tax provision
		(51	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(7	)	Pensions and other employee benefits
Actuarial loss		4		Pensions and other employee benefits
		(3	)	Total before tax
		0		Income tax provision
		(3	)	Net of tax
Total reclassifications for the period	$	(54	)

XML

Note 4 - Cash and Due from Banks

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Cash and Cash Equivalents Disclosure [Text Block]

4. CASH AND DUE FROM BANKS

Cash and due from banks at September 30, 2016 and December 31, 2015 include the following:

(In thousands)	Sept. 30,		Dec. 31,
	2016		2015
Cash and cash equivalents	$	30,102	$	33,313
Certificates of deposit		3,968		2,748
Total cash and due from banks	$	34,070	$	36,061

Certificates of deposit are issues by U.S. banks with original maturities greater than three months. Each certificate of deposit is fully FDIC-insured. The Corporation maintains cash and cash equivalents with certain financial institutions in excess of the FDIC insurance limit.

The Corporation is required to maintain reserves against deposit liabilities in the form of cash and balances with the Federal Reserve Bank of Philadelphia. The reserves are based on deposit levels, account activity, and other services provided by the Federal Reserve Bank. Required reserves were $13,141,000 at September 30, 2016 and $15,327,000 at December 31, 2015.

XML

Note 5 - Fair Value Measurements and Fair Values of Financial Instruments

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Fair Value Disclosures [Text Block]

5.

FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS

The Corporation measures certain assets at fair value. Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. FASB Accounting Standards Codification (ASC) topic 820, “Fair Value Measurements and Disclosures” establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs used in determining valuations into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:

Level 1 – Fair value is based on unadjusted quoted prices in active markets that are accessible to the Corporation for identical assets. These generally provide the most reliable evidence and are used to measure fair value whenever available.

Level 2 – Fair value is based on significant inputs, other than Level 1 inputs, that are observable either directly or indirectly for substantially the full term of the asset through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets, quoted market prices in markets that are not active for identical or similar assets and other observable inputs.

Level 3 – Fair value is based on significant unobservable inputs. Examples of valuation methodologies that would result in Level 3 classification include option pricing models, discounted cash flows and other similar techniques.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

 

The Corporation monitors and evaluates available data relating to fair value measurements on an ongoing basis and recognizes transfers among the levels of the fair value hierarchy as of the date of an event or change in circumstances that affects the valuation method chosen. Examples of such changes may include the market for a particular asset becoming active or inactive, changes in the availability of quoted prices, or changes in the availability of other market data.

At September 30, 2016 and December 31, 2015, assets measured at fair value and the valuation methods used are as follows:

			September 30, 2016
	Quoted Prices		Other
	in Active		Observable		Unobservable			Total
	Markets		Inputs		Inputs			Fair
(In Thousands)	(Level 1)		(Level 2)		(Level 3)			Value
Recurring fair value measurements
AVAILABLE-FOR-SALE SECURITIES:
Obligations of U.S. Government agencies	$	0	$	9,747	$	0		$	9,747
Obligations of states and political subdivisions:
Tax-exempt		0		121,283		0			121,283
Taxable		0		33,672		0			33,672
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		62,187		0			62,187
Residential collateralized mortgage obligations		0		165,719		0			165,719
Commercial mortgage-backed securities		0		16,112		0			16,112
Total debt securities		0		408,720		0			408,720
Marketable equity securities		1,080		0		0			1,080
Total available-for-sale securities		1,080		408,720		0			409,800
Servicing rights		0		0		1,208			1,208
Total recurring fair value measurements	$	1,080	$	408,720	$	1,208		$	411,008
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	3,621		$	3,621
Valuation allowance		0		0		(685	)		(685	)
Impaired loans, net		0		0		2,936			2,936
Foreclosed assets held for sale		0		0		2,321			2,321
Total nonrecurring fair value measurements	$	0	$	0	$	5,257		$	5,257

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

 

			December 31, 2015
	Quoted Prices		Other
	in Active		Observable		Unobservable			Total
	Markets		Inputs		Inputs			Fair
(In Thousands)	(Level 1)		(Level 2)		(Level 3)			Value
Recurring fair value measurements
AVAILABLE-FOR-SALE SECURITIES:
Obligations of U.S. Government agencies	$	0	$	10,483	$	0		$	10,483
Obligations of states and political subdivisions:
Tax-exempt		0		107,757		0			107,757
Taxable		0		34,597		0			34,597
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		73,343		0			73343
Residential collateralized mortgage obligations		0		191,715		0			191,715
Collateralized debt obligations		0		9		0			9
Total debt securities		0		417,904		0			417,904
Marketable equity securities		2,386		0		0			2,386
Total available-for-sale securities		2,386		417,904		0			420,290
Servicing rights		0		0		1,296			1,296
Total recurring fair value measurements	$	2,386	$	417,904	$	1,296		$	421,586
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	1,933		$	1,933
Valuation allowance		0		0		(820	)		(820	)
Impaired loans, net		0		0		1,113			1,113
Foreclosed assets held for sale		0		0		1,260			1,260
Total nonrecurring fair value measurements	$	0	$	0	$	2,373		$	2,373

Management’s evaluation and selection of valuation techniques and the unobservable inputs used in determining the fair values of assets valued using Level 3 methodologies include sensitive assumptions. Other market participants might use substantially different assumptions, which could result in calculations of fair values that would be substantially different than the amount calculated by management.

At September 30, 2016 and December 31, 2015, quantitative information regarding significant techniques and inputs used for assets measured on a recurring basis using unobservable inputs (Level 3 methodologies) are as follows:

	Fair Value at
	9/30/16		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	9 /30/16
Servicing rights	$	1,208	Discounted cash flow	Discount rate		10.00	%	Rate used through modeling period
				Loan prepayment speeds		194.00	%	Weighted-average PSA
				Servicing fees		0.25	%	of loan balances
						4.00	%	of payments are late
						5.00	%	late fees assessed
					$	1.94		Miscellaneous fees per account per month
				Servicing costs	$	6.00		Monthly servicing cost per account
					$	24.00		Additional monthly servicing cost per loan on loans more than 30 days delinquent
						1.50	%	of loans more than 30 days delinquent
						3.00	%	annual increase in servicing costs

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

 

	Fair Value at
	12/31/15		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	12/31/15
Servicing rights	$	1,296	Discounted cash flow	Discount rate		10.00	%	Rate used through modeling period
				Loan prepayment speeds		146.00	%	Weighted-average PSA
				Servicing fees		0.25	%	of loan balances
						4.00	%	of payments are late
						5.00	%	late fees assessed
					$	1.94		Miscellaneous fees per account per month
				Servicing costs	$	6.00		Monthly servicing cost per account
					$	24.00		Additional monthly servicing cost per loan on loans more than 30 days delinquent
						1.50	%	of loans more than 30 days delinquent
						3.00	%	annual increase in servicing costs

The fair value of servicing rights is affected by expected future interest rates. Increases (decreases) in future expected interest rates tend to increase (decrease) the fair value of the Corporation’s servicing rights because of changes in expected prepayment behavior by the borrowers on the underlying loans.

Following is a reconciliation of activity for Level 3 assets measured at fair value on a recurring basis:

(In Thousands)	Three Months Ended					Nine Months Ended
	Sept. 30, 2016			Sept. 30, 2015		Sept. 30, 2016			Sept. 30, 2015
Servicing rights balance, beginning of period	$	1,224		$	1,209	$	1,296		$	1,281
Issuances of servicing rights		52			57		159			135
Unrealized (losses) gains included in earnings		(68	)		13		(247	)		(137	)
Servicing rights balance, end of period	$	1,208		$	1,279	$	1,208		$	1,279

Loans are classified as impaired when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Foreclosed assets held for sale consist of real estate acquired by foreclosure. For impaired commercial loans secured by real estate and foreclosed assets held for sale, estimated fair values are determined primarily using values from third-party appraisals. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.

At September 30, 2016 and December 31, 2015, quantitative information regarding significant techniques and inputs used for nonrecurring fair value measurements using unobservable inputs (Level 3 methodologies) are as follows:

(In Thousands, Except									Value at
Percentages)			Valuation						9/30/16
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	(Weighted
Asset	9/30/16		9/30/16		9/30/16		Technique	Inputs	Average)
Impaired loans:
Residential mortgage loans -
first liens	$	0	$	0	$	0	Sales comparison	Discount to appraised value		0	%
Commercial:
Commercial loans secured by real estate		2,794		528		2,266	Sales comparison	Discount to appraised value		7	%
Commercial and industrial		321		106		215	Sales comparison	Discount to appraised value		35	%
Commercial construction and land		0		0		0	Sales comparison	Discount to appraised value		0	%
Loans secured by farmland		506		51		455	Sales comparison	Discount to appraised value		55	%
Multi-family (5 or more) residential		0		0		0	Sales comparison	Discount to appraised value		0	%
Total impaired loans	$	3,621	$	685	$	2,936
Foreclosed assets held for sale -
real estate:
Residential (1-4 family)	$	1,195	$	0	$	1,195	Sales comparison	Discount to appraised value		39	%
Land		696		0		696	Sales comparison	Discount to appraised value		29	%
Commercial real estate		430		0		430	Sales comparison	Discount to appraised value		50	%
Total foreclosed assets held for sale	$	2,321	$	0	$	2,321

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

(In Thousands, Except									Value at
Percentages)			Valuation						12/31/15
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	(Weighted
Asset	12/31/15		12/31/15		12/31/15		Technique	Inputs	Average)
Impaired loans:
Residential mortgage loans -
first liens	$	42	$	1	$	41	Sales comparison	Discount to appraised value		31	%
Commercial:
Commercial loans secured by real estate		317		97		220	Sales comparison	Discount to appraised value		46	%
Commercial and industrial		75		75		0	Sales comparison	Discount to appraised value		31	%
Commercial construction and land		0		0		0	Sales comparison	Discount to appraised value		0	%
Loans secured by farmland		512		52		460	Sales comparison	Discount to appraised value		49	%
Multi-family (5 or more) residential		987		595		392	Sales comparison	Discount to appraised value		41	%
Total impaired loans	$	1,933	$	820	$	1,113
Foreclosed assets held for sale -
real estate:
Residential (1-4 family)	$	556	$	0	$	556	Sales comparison	Discount to appraised value		32	%
Land		704		0		704	Sales comparison	Discount to appraised value		29	%
Total foreclosed assets held for sale	$	1,260	$	0	$	1,260

Certain of the Corporation’s financial instruments are not measured at fair value in the consolidated financial statements. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Certain financial instruments and all nonfinancial instruments are excluded from disclosure requirements. Therefore, the aggregate fair value amounts presented may not represent the underlying fair value of the Corporation.

The Corporation used the following methods and assumptions in estimating fair value disclosures for financial instruments:

CASH AND CASH EQUIVALENTS -

The carrying amounts of cash and short-term instruments approximate fair values.

CERTIFICATES OF DEPOSIT -

Fair values for certificates of deposit, included in cash and due from banks in the consolidated balance sheet, are based on quoted market prices for certificates of similar remaining maturities.

SECURITIES -

Fair values for securities, excluding restricted equity securities, are based on quoted market prices or other methods as described above. The carrying value of restricted equity securities approximates fair value based on applicable redemption provisions.

LOANS HELD FOR SALE -

Fair values of loans held for sale are determined based on applicable sale prices available under the Federal Home Loan Banks’ MPF Xtra and MPF Original programs.

LOANS -

Fair values are estimated for portfolios of loans with similar financial characteristics. Loans are segregated by type such as commercial, commercial real estate, residential mortgage and other consumer. Each loan category is further segmented into fixed and adjustable rate interest terms and by performing and nonperforming categories. The fair value of performing loans is calculated by discounting contractual cash flows, adjusted for estimated prepayments based on historical experience, using estimated market discount rates that reflect the credit and interest rate risk inherent in the loans. Fair value of nonperforming loans is based on recent appraisals or estimates prepared by the Corporation’s lending officers.

SERVICING RIGHTS -

The fair value of servicing rights, included in other assets in the consolidated balance sheet, is determined through a discounted cash flow valuation. Significant inputs include expected net servicing income, the discount rate and the expected prepayment speeds of the underlying loans.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

 

DEPOSITS -

The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, savings, money market and interest checking accounts, is (by definition) equal to the amount payable on demand at September 30, 2016 and December 31, 2015. The fair value of time deposits, such as certificates of deposit and Individual Retirement Accounts, is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. The fair value estimates of deposits do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market, commonly referred to as the core deposit intangible.

BORROWED FUNDS -

The fair value of borrowings is estimated using discounted cash flow analyses based on rates currently available to the Corporation for similar types of borrowing arrangements.

ACCRUED INTEREST -

The carrying amounts of accrued interest receivable and payable approximate fair values.

OFF-BALANCE SHEET COMMITMENTS -

The Corporation has commitments to extend credit and has issued standby letters of credit. Standby letters of credit are conditional guarantees of performance by a customer to a third party. Estimates of the fair value of these off-balance sheet items were not made because of the short-term nature of these arrangements and the credit standing of the counterparties.

The estimated fair values, and related carrying amounts, of the Corporation’s financial instruments are as follows:

(In Thousands)	Valuation	Sept. 30, 2016				December 31, 2015
	Method(s)	Carrying		Fair		Carrying		Fair
	Used	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	30,102	$	30,102	$	33,313	$	33,313
Certificates of deposit	Level 2		3,968		3,982		2,748		2,752
Available-for-sale securities	See Above		409,800		409,800		420,290		420,290
Restricted equity securities (included in Other Assets)	Level 2		3,360		3,360		4,657		4,657
Loans held for sale	Level 2		621		621		280		280
Loans, net	Level 3		733,917		737,353		696,991		685,552
Accrued interest receivable	Level 2		3,871		3,871		3,768		3,768
Servicing rights	Level 3		1,208		1,208		1,296		1,296
Financial liabilities:
Deposits with no stated maturity	Level 2		769,734		769,734		713,931		713,931
Time deposits	Level 2		222,146		222,881		221,684		221,891
Short-term borrowings	Level 2		14,590		14,497		53,496		53,398
Long-term borrowings	Level 2		38,538		39,807		38,767		40,166
Accrued interest payable	Level 2		79		79		70		70

XML

Note 6 - Securities

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Investments in Debt and Marketable Equity Securities (and Certain Trading Assets) Disclosure [Text Block]

6. SECURITIES

Amortized cost and fair value of available-for-sale securities at September 30, 2016 and December 31, 2015 are summarized as follows:

			September 30, 2016
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	9,667	$	80	$	0		$	9,747
Obligations of states and political subdivisions:
Tax-exempt		116,797		4,565		(79	)		121,283
Taxable		32,764		908		0			33,672
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		60,966		1,221		0			62,187
Residential collateralized mortgage obligations		164,508		1,517		(306	)		165,719
Commercial mortgage-backed securities		16,056		69		(13	)		16,112
Total debt securities		400,758		8,360		(398	)		408,720
Marketable equity securities		752		328		0			1,080
Total	$	401,510	$	8,688	$	(398	)	$	409,800

			December 31, 2015
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	10,663	$	12	$	(192	)	$	10,483
Obligations of states and political subdivisions:
Tax-exempt		103,414		4,365		(22	)		107,757
Taxable		34,317		381		(101	)		34,597
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		73,227		486		(370	)		73,343
Residential collateralized mortgage obligations		193,145		623		(2,053	)		191,715
Collateralized debt obligations:		9		0		0			9
Total debt securities		414,775		5,867		(2,738	)		417,904
Marketable equity securities		1,680		706		0			2,386
Total	$	416,455	$	6,573	$	(2,738	)	$	420,290

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

 

The following table presents gross unrealized losses and fair value of available-for-sale securities with unrealized loss positions that are not deemed to be other-than-temporarily impaired, aggregated by length of time that individual securities have been in a continuous unrealized loss position at September 30, 2016 and December 31, 2015:

September 30, 2016	Less Than 12 Months					12 Months or More					Total
(In Thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Obligations of states and political subdivisions,
Tax-exempt	$	15,448	$	(64	)	$	1,001	$	(15	)	$	16,449	$	(79	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential collateralized mortgage obligations		19,303		(38	)		24,426		(268	)		43,729		(306	)
Commercial mortgage-backed securities		4,989		(13	)		0		0			4,989		(13	)
Total temporarily impaired available-for-sale securities	$	39,740	$	(115	)	$	25,427	$	(283	)	$	65,167	$	(398	)

December 31, 2015	Less Than 12 Months					12 Months or More					Total
(In Thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Obligations of U.S. Government agencies	$	0	$	0		$	7,850	$	(192	)	$	7,850	$	(192	)
Obligations of states and political subdivisions:
Tax-exempt		5,200		(19	)		216		(3	)		5,416		(22	)
Taxable		10,605		(60	)		2,910		(41	)		13,515		(101	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored Agencies:
Residential pass-through securities		38,764		(295	)		3,503		(75	)		42,267		(370	)
Residential collateralized mortgage obligations		88,355		(648	)		49,273		(1,405	)		137,628		(2,053	)
Total temporarily impaired available-for-sale securities	$	142,924	$	(1,022	)	$	63,752	$	(1,716	)	$	206,676	$	(2,738	)

Gross realized gains and losses from available-for-sale securities were as follows:

(In Thousands)	3 Months Ended					9 Months Ended
	Sept. 30,		Sept. 30,			Sept. 30,			Sept. 30,
	2016		2015			2016			2015
Gross realized gains from sales	$	584	$	156		$	1,090		$	1,162
Gross realized losses from sales		0		(77	)		(1	)		(77	)
Net realized gains	$	584	$	79		$	1,089		$	1,085

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

 

The amortized cost and fair value of available-for-sale debt securities by contractual maturity are shown in the following table as of September 30, 2016. Actual maturities may differ from contractual maturities because counterparties may have the right to call or prepay obligations with or without call or prepayment penalties.

	Amortized		Fair
(In Thousands)	Cost		Value
Due in one year or less	$	16,631	$	16,837
Due from one year through five years		71,211		73,423
Due from five years through ten years		47,463		49,076
Due after ten years		23,923		25,366
Sub-total		159,228		164,702
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		60,966		62,187
Residential collateralized mortgage obligations		164,508		165,719
Commercial mortgage-backed securities		16,056		16,112
Total	$	400,758	$	408,720

The Corporation’s mortgage-backed securities have stated maturities that may differ from actual maturities due to borrowers’ ability to prepay obligations. Cash flows from such investments are dependent upon the performance of the underlying mortgage loans and are generally influenced by the level of interest rates. In the table above, mortgage-backed securities and collateralized mortgage obligations are shown in one period.

Investment securities carried at $221,427,000 at September 30, 2016 and $228,616,000 at December 31, 2015 were pledged as collateral for public deposits, trusts and certain other deposits as provided by law. See Note 8 for information concerning securities pledged to secure borrowing arrangements.

Management evaluates securities for other-than-temporary impairment (OTTI) at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) whether the Corporation intends to sell the security or more likely than not will be required to sell the security before its anticipated recovery.

A summary of information management considered in evaluating debt and equity securities for OTTI at September 30, 2016 is provided below.

Debt Securities

At September 30, 2016, management performed an assessment for possible OTTI of the Corporation’s debt securities on an issue-by-issue basis, relying on information obtained from various sources, including publicly available financial data, ratings by external agencies, brokers and other sources. The extent of individual analysis applied to each security depended on the size of the Corporation’s investment, as well as management’s perception of the credit risk associated with each security. Based on the results of the assessment, management believes impairment of debt securities at September 30, 2016 to be temporary.

Equity Securities

The Corporation’s marketable equity securities at September 30, 2016 and December 31, 2015 consisted exclusively of stocks of banking companies. At September 30, 2016, the Corporation held no stocks with an unrealized loss.

The Corporation realized gains from sales of bank stocks totaling $560,000 in the three-month period ended September 30, 2016 and $837,000 during the first nine months of 2016. There were no realized gains or losses on bank stocks in the three-month period ended September 30, 2015, while realized gains from sales of bank stocks totaled $476,000 in the nine-month period ended September 30, 2015.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

 

C&N Bank is a member of the Federal Home Loan Bank of Pittsburgh (FHLB-Pittsburgh), which is one of 11 regional Federal Home Loan Banks. As a member, C&N Bank is required to purchase and maintain stock in FHLB-Pittsburgh. There is no active market for FHLB-Pittsburgh stock, and it must ordinarily be redeemed by FHLB-Pittsburgh in order to be liquidated. C&N Bank’s investment in FHLB-Pittsburgh stock, included in Other Assets in the consolidated balance sheet, was $3,230,000 at September 30, 2016 and $4,527,000 at December 31, 2015. The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at September 30, 2016 and December 31, 2015. In making this determination, management concluded that recovery of total outstanding par value, which equals the carrying value, is expected. The decision was based on review of financial information that FHLB-Pittsburgh has made publicly available.

XML

Note 7 - Loans

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

7. LOANS

The loans receivable portfolio is segmented into residential mortgage, commercial and consumer loans. Loans outstanding at September 30, 2016 and December 31, 2015 are summarized by segment, and by classes within each segment, as follows:

Summary of Loans by Type
(In Thousands)	Sept. 30,			Dec. 31,
	2016			2015
Residential mortgage:
Residential mortgage loans - first liens	$	325,533		$	304,783
Residential mortgage loans - junior liens		22,794			21,146
Home equity lines of credit		38,623			39,040
1-4 Family residential construction		23,310			21,121
Total residential mortgage		410,260			386,090
Commercial:
Commercial loans secured by real estate		149,938			154,779
Commercial and industrial		86,969			75,196
Political subdivisions		38,653			40,007
Commercial construction and land		12,809			5,122
Loans secured by farmland		6,900			7,019
Multi-family (5 or more) residential		8,133			9,188
Agricultural loans		4,313			4,671
Other commercial loans		11,557			12,152
Total commercial		319,272			308,134
Consumer		12,806			10,656
Total		742,338			704,880
Less: allowance for loan losses		(8,421	)		(7,889	)
Loans, net	$	733,917		$	696,991

The Corporation grants loans to individuals as well as commercial and tax-exempt entities. Commercial, residential and personal loans are made to customers geographically concentrated in the Pennsylvania and New York counties that comprise the market serviced by Citizens & Northern Bank. Although the Corporation has a diversified loan portfolio, a significant portion of its debtors’ ability to honor their contracts is dependent on the local economic conditions within the region. There is no concentration of loans to borrowers engaged in similar businesses or activities that exceed 10% of total loans at either September 30, 2016 or December 31, 2015.

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. The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Corporation’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available. In the process of evaluating the loan portfolio, management also considers the Corporation’s exposure to losses from unfunded loan commitments. As of September 30, 2016 and December 31, 2015, management determined that no allowance for credit losses related to unfunded loan commitments was required.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

 

Transactions within the allowance for loan losses, summarized by segment and class, for the three-month and nine-month periods ended September 30, 2016 and 2015 were as follows:

Three Months Ended September 30, 2016	June 30,										Sept. 30,
(In Thousands)	2016 Balance		Charge-offs			Recoveries		Provision (Credit)			2016 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,830	$	(31	)	$	2	$	155		$	2,956
Residential mortgage loans - junior liens		239		0			0		9			248
Home equity lines of credit		359		0			0		0			359
1-4 Family residential construction		222		0			0		14			236
Total residential mortgage		3,650		(31	)		2		178			3,799
Commercial:
Commercial loans secured by real estate		2,083		0			0		304			2,387
Commercial and industrial		1,038		(2	)		1		1			1,038
Commercial construction and land		105		0			0		41			146
Loans secured by farmland		103		0			0		3			106
Multi-family (5 or more) residential		248		0			0		(5	)		243
Agricultural loans		47		0			0		(4	)		43
Other commercial loans		119		0			0		(3	)		116
Total commercial		3,743		(2	)		1		337			4,079
Consumer		138		(28	)		12		23			145
Unallocated		398		0			0		0			398
Total Allowance for Loan Losses	$	7,929	$	(61	)	$	15	$	538		$	8,421

Three Months Ended September 30, 2015	June 30,										Sept. 30,
(In Thousands)	2015 Balance		Charge-offs			Recoveries		Provision (Credit)			2015 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,775	$	(12	)	$	0	$	(112	)	$	2,651
Residential mortgage loans - junior liens		210		(42	)		0		45			213
Home equity lines of credit		344		0			0		(5	)		339
1-4 Family residential construction		257		0			0		55			312
Total residential mortgage		3,586		(54	)		0		(17	)		3,515
Commercial:
Commercial loans secured by real estate		1,692		0			0		39			1,731
Commercial and industrial		800		0			1		127			928
Commercial construction and land		296		(115	)		0		(74	)		107
Loans secured by farmland		155		0			0		(45	)		110
Multi-family (5 or more) residential		80		0			0		231			311
Agricultural loans		40		0			0		3			43
Other commercial loans		120		0			0		1			121
Total commercial		3,183		(115	)		1		282			3,351
Consumer		135		(28	)		10		6			123
Unallocated		396		0			0		31			427
Total Allowance for Loan Losses	$	7,300	$	(197	)	$	11	$	302		$	7,416

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Nine Months Ended September 30, 2016	Dec. 31,										Sept. 30,
(In Thousands)	2015 Balance		Charge-offs			Recoveries		Provision (Credit)			2016 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,645	$	(73	)	$	2	$	382		$	2,956
Residential mortgage loans - junior liens		219		0			0		29			248
Home equity lines of credit		347		0			0		12			359
1-4 Family residential construction		207		0			0		29			236
Total residential mortgage		3,418		(73	)		2		452			3,799
Commercial:
Commercial loans secured by real estate		1,939		0			2		446			2,387
Commercial and industrial		981		(2	)		2		57			1,038
Commercial construction and land		58		0			0		88			146
Loans secured by farmland		106		0			0		0			106
Multi-family (5 or more) residential		675		(595	)		0		163			243
Agricultural loans		45		0			0		(2	)		43
Other commercial loans		118		0			0		(2	)		116
Total commercial		3,922		(597	)		4		750			4,079
Consumer		122		(67	)		39		51			145
Unallocated		427		0			0		(29	)		398
Total Allowance for Loan Losses	$	7,889	$	(737	)	$	45	$	1,224		$	8,421

Nine Months Ended September 30, 2015	Dec. 31,										Sept. 30,
(In Thousands)	2014 Balance		Charge-offs			Recoveries		Provision (Credit)			2015 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,941	$	(149	)	$	1	$	(142	)	$	2,651
Residential mortgage loans - junior liens		176		(42	)		0		79			213
Home equity lines of credit		322		0			0		17			339
1-4 Family residential construction		214		0			0		98			312
Total residential mortgage		3,653		(191	)		1		52			3,515
Commercial:
Commercial loans secured by real estate		1,758		(115	)		0		88			1,731
Commercial and industrial		688		(10	)		5		245			928
Commercial construction and land		283		(115	)		0		(61	)		107
Loans secured by farmland		165		0			0		(55	)		110
Multi-family (5 or more) residential		87		0			0		224			311
Agricultural loans		31		0			0		12			43
Other commercial loans		131		0			0		(10	)		121
Total commercial		3,143		(240	)		5		443			3,351
Consumer		145		(65	)		44		(1	)		123
Unallocated		395		0			0		32			427
Total Allowance for Loan Losses	$	7,336	$	(496	)	$	50	$	526		$	7,416

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

In the evaluation of the loan portfolio, management determines two major components for the allowance for loan losses – (1) a specific component based on an assessment of certain larger relationships, mainly commercial purpose loans, on a loan-by-loan basis; and (2) a general component for the remainder of the portfolio based on a collective evaluation of pools of loans with similar risk characteristics. The general component is assigned to each pool of loans based on both historical net charge-off experience, and an evaluation of certain qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the above methodologies for estimating specific and general losses in the portfolio.

In determining the larger loan relationships for detailed assessment under the specific allowance component, the Corporation uses an internal risk rating system. Under the risk rating system, the Corporation classifies problem or potential problem loans as “Special Mention,” “Substandard,” or “Doubtful” on the basis of currently existing facts, conditions and values. Substandard loans include those characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Loans that do not currently expose the Corporation to sufficient risk to warrant classification as Substandard or Doubtful, but possess weaknesses that deserve management’s close attention, are deemed to be Special Mention. Risk ratings are updated any time that conditions or the situation warrants. Loans not classified are included in the “Pass” column in the table below.

The following tables summarize the aggregate credit quality classification of outstanding loans by risk rating as of September 30, 2016 and December 31, 2015:

September 30, 2016
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	315,849	$	331	$	9,292	$	61	$	325,533
Residential mortgage loans - junior liens		22,376		145		273		0		22,794
Home equity lines of credit		37,925		124		574		0		38,623
1-4 Family residential construction		23,310		0		0		0		23,310
Total residential mortgage		399,460		600		10,139		61		410,260
Commercial:
Commercial loans secured by real estate		133,140		3,087		13,711		0		149,938
Commercial and Industrial		82,076		4,196		686		11		86,969
Political subdivisions		38,653		0		0		0		38,653
Commercial construction and land		12,707		66		36		0		12,809
Loans secured by farmland		5,243		168		1,472		17		6,900
Multi-family (5 or more) residential		7,505		0		628		0		8,133
Agricultural loans		3,503		0		810		0		4,313
Other commercial loans		11,482		0		75		0		11,557
Total commercial		294,309		7,517		17,418		28		319,272
Consumer		12,651		0		155		0		12,806
Totals	$	706,420	$	8,117	$	27,712	$	89	$	742,338

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

 

December 31, 2015
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	295,302	$	407	$	9,007	$	67	$	304,783
Residential mortgage loans - junior liens		20,558		185		403		0		21,146
Home equity lines of credit		38,071		543		426		0		39,040
1-4 Family residential construction		21,104		17		0		0		21,121
Total residential mortgage		375,035		1,152		9,836		67		386,090
Commercial:
Commercial loans secured by real estate		140,381		5,862		8,536		0		154,779
Commercial and Industrial		71,225		2,106		1,737		128		75,196
Political subdivisions		40,007		0		0		0		40,007
Commercial construction and land		4,957		60		105		0		5,122
Loans secured by farmland		5,084		483		1,432		20		7,019
Multi-family (5 or more) residential		7,943		0		1,245		0		9,188
Agricultural loans		4,655		0		16		0		4,671
Other commercial loans		12,073		0		79		0		12,152
Total commercial		286,325		8,511		13,150		148		308,134
Consumer		10,490		21		145		0		10,656
Totals	$	671,850	$	9,684	$	23,131	$	215	$	704,880

The general component of the allowance for loan losses covers pools of loans including commercial loans not considered individually impaired, as well as smaller balance homogeneous classes of loans, such as residential real estate, home equity lines of credit and other consumer loans. Accordingly, the Corporation generally does not separately identify individual consumer and residential loans for impairment disclosures, unless such loans are subject to a restructuring agreement. The pools of loans are evaluated for loss exposure based upon three-year average historical net charge-off rates for each loan class, adjusted for qualitative factors. Qualitative risk factors (described in the following paragraph) are evaluated for the impact on each of the three segments (residential mortgage, commercial and consumer) within the loan portfolio. Each qualitative factor is assigned a value to reflect improving, stable or declining conditions based on management’s judgment using relevant information available at the time of the evaluation. The adjustment for qualitative factors is applied as an increase or decrease to the three-year average net charge-off rate to each loan class within each segment.

The qualitative factors used in the general component calculations are designed to address credit risk characteristics associated with each segment. The Corporation’s credit risk associated with all of the segments is significantly impacted by these factors, which include economic conditions within its market area, the Corporation’s lending policies, changes or trends in the portfolio, risk profile, competition, regulatory requirements and other factors. Further, the residential mortgage segment is significantly affected by the values of residential real estate that provide collateral for the loans. The majority of the Corporation’s commercial segment loans (approximately 56% at September 30, 2016) is secured by real estate, and accordingly, the Corporation’s risk for the commercial segment is significantly affected by commercial real estate values. The consumer segment includes a wide mix of loans for different purposes, primarily secured loans, including loans secured by motor vehicles, manufactured housing and other types of collateral.

Loans are classified as impaired, when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial loans, by the fair value of the collateral (if the loan is collateral dependent), by future cash flows discounted at the loan’s effective rate or by the loan’s observable market price.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

 

The scope of loans evaluated individually for impairment include all loan relationships greater than $200,000 for which there is at least one extension of credit graded Special Mention, Substandard or Doubtful. Also, all loans classified as troubled debt restructurings (discussed in more detail below) and all loan relationships less than $200,000 in the aggregate, but with an estimated loss of $100,000 or more, are individually evaluated for impairment. Loans that are individually evaluated for impairment, but which are not determined to be impaired, are combined with all remaining loans that are not reviewed on a specific basis, and such loans are included within larger pools of loans based on similar risk and loss characteristics for purposes of determining the general component of the allowance. The loans that have been individually evaluated, but which have not been determined to be impaired, are included in the “Collectively Evaluated” column in the tables summarizing the allowance and associated loan balances as of September 30, 2016 and December 31, 2015.

The following tables present a summary of loan balances and the related allowance for loan losses summarized by portfolio segment and class for each impairment method used as of September 30, 2016 and December 31, 2015:

September 30, 2016	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	734	$	324,799	$	325,533	$	0	$	2,956	$	2,956
Residential mortgage loans - junior liens		70		22,724		22,794		0		248		248
Home equity lines of credit		0		38,623		38,623		0		359		359
1-4 Family residential construction		0		23,310		23,310		0		236		236
Total residential mortgage		804		409,456		410,260		0		3,799		3,799
Commercial:
Commercial loans secured by real estate		8,088		141,850		149,938		528		1,859		2,387
Commercial and industrial		439		86,530		86,969		106		932		1,038
Political subdivisions		0		38,653		38,653		0		0		0
Commercial construction and land		0		12,809		12,809		0		146		146
Loans secured by farmland		1,399		5,501		6,900		51		55		106
Multi-family (5 or more) residential		392		7,741		8,133		0		243		243
Agricultural loans		13		4,300		4,313		0		43		43
Other commercial loans		0		11,557		11,557		0		116		116
Total commercial		10,331		308,941		319,272		685		3,394		4,079
Consumer		0		12,806		12,806		0		145		145
Unallocated												398
Total	$	11,135	$	731,203	$	742,338	$	685	$	7,338	$	8,421

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

December 31, 2015	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	884	$	303,899	$	304,783	$	1	$	2,644	$	2,645
Residential mortgage loans - junior liens		74		21,072		21,146		0		219		219
Home equity lines of credit		0		39,040		39,040		0		347		347
1-4 Family residential construction		0		21,121		21,121		0		207		207
Total residential mortgage		958		385,132		386,090		1		3,417		3,418
Commercial:
Commercial loans secured by real estate		6,262		148,517		154,779		97		1,842		1,939
Commercial and industrial		324		74,872		75,196		75		906		981
Political subdivisions		0		40,007		40,007		0		0		0
Commercial construction and land		0		5,122		5,122		0		58		58
Loans secured by farmland		1,427		5,592		7,019		52		54		106
Multi-family (5 or more) residential		987		8,201		9,188		595		80		675
Agricultural loans		16		4,655		4,671		0		45		45
Other commercial loans		0		12,152		12,152		0		118		118
Total commercial		9,016		299,118		308,134		819		3,103		3,922
Consumer		0		10,656		10,656		0		122		122
Unallocated												427
Total	$	9,974	$	694,906	$	704,880	$	820	$	6,642	$	7,889

Summary information related to impaired loans at September 30, 2016 and December 31, 2015 is as follows:

(In Thousands)	September 30, 2016						December 31, 2015
	Unpaid						Unpaid
	Principal		Recorded		Related		Principal		Recorded		Related
	Balance		Investment		Allowance		Balance		Investment		Allowance
With no related allowance recorded:
Residential mortgage loans - first liens	$	764	$	734	$	0	$	842	$	842	$	0
Residential mortgage loans - junior liens		70		70		0		74		74		0
Commercial loans secured by real estate		7,003		5,294		0		7,580		5,945		0
Commercial and industrial		118		118		0		249		249		0
Loans secured by farmland		893		893		0		915		915		0
Multi-family (5 or more) residential		987		392		0		0		0		0
Agricultural loans		13		13		0		16		16		0
Total with no related allowance recorded		9,848		7,514		0		9,676		8,041		0
With a related allowance recorded:
Residential mortgage loans - first liens		0		0		0		42		42		1
Commercial loans secured by real estate		2,794		2,794		528		317		317		97
Commercial and industrial		321		321		106		75		75		75
Loans secured by farmland		506		506		51		512		512		52
Multi-family (5 or more) residential		0		0		0		987		987		595
Consumer		0		0		0		0		0		0
Total with a related allowance recorded		3,621		3,621		685		1,933		1,933		820
Total	$	13,469	$	11,135	$	685	$	11,609	$	9,974	$	820

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The average balance of impaired loans and interest income recognized on impaired loans is as follows:

									Interest Income Recognized on
	Average Investment in Impaired Loans								Impaired Loans on a Cash Basis
(In Thousands)	3 Months Ended				9 Months Ended				3 Months Ended				9 Months Ended
	Sept. 30,				Sept. 30,				Sept. 30,				Sept. 30,
	2016		2015		2016		2015		2016		2015		2016		2015
Residential mortgage:
Residential mortgage loans - first lien	$	789	$	1,990	$	818	$	2,534	$	11	$	9	$	33	$	67
Residential mortgage loans - junior lien		72		67		72		62		0		1		2		3
Total residential mortgage		861		2,057		890		2,596		11		10		35		70
Commercial:
Commercial loans secured by real estate		7,022		6,327		6,524		6,382		83		90		274		293
Commercial and industrial		577		421		619		467		7		4		17		16
Commercial construction and land		0		42		0		50		0		0		0		0
Loans secured by farmland		1,408		1,466		1,413		1,467		13		26		51		78
Multi-family (5 or more) residential		492		741		541		741		0		0		0		0
Agricultural loans		13		21		14		22		0		1		1		3
Total commercial		9,512		9,018		9,111		9,129		103		121		343		390
Consumer		17		0		16		0		0		0		0		0
Total	$	10,390	$	11,075	$	10,017	$	11,725	$	114	$	131	$	378	$	460

Loans are placed on nonaccrual status for all classes of loans when, in the opinion of management, collection of interest is doubtful. Any unpaid interest previously accrued on those loans is reversed from income. Interest income is not recognized on specific impaired loans unless the likelihood of further loss is remote. Interest payments received on loans for which the risk of further loss is greater than remote are applied as a reduction of the loan principal balance. Interest income on other nonaccrual loans, including impaired loans, is recognized only to the extent of interest payments received. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The past due status of all classes of loans receivable is determined based on contractual due dates for loan payments. Also, the amortization of deferred loan fees is discontinued when a loan is placed on nonaccrual status.

The breakdown by portfolio segment and class of nonaccrual loans and loans past due ninety days or more and still accruing is as follows:

(In Thousands)	September 30, 2016				December 31, 2015
	Past Due				Past Due
	90+ Days and				90+ Days and
	Accruing		Nonaccrual		Accruing		Nonaccrual
Residential mortgage:
Residential mortgage loans - first liens	$	4,016	$	2,537	$	2,381	$	3,044
Residential mortgage loans - junior liens		58		0		79		0
Home equity lines of credit		106		11		130		0
Total residential mortgage		4,180		2,548		2,590		3,044
Commercial:
Commercial loans secured by real estate		2,795		7,898		503		5,730
Commercial and industrial		313		193		65		313
Loans secured by farmland		219		1,399		0		1,427
Multi-family (5 or more) residential		0		392		0		987
Agricultural loans		16		13		0		16
Total commercial		3,343		9,895		568		8,473
Consumer		16		38		71		0
Totals	$	7,539	$	12,481	$	3,229	$	11,517

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

 

The amounts shown in the table immediately above include loans classified as troubled debt restructurings (described in more detail below), if such loans are past due ninety days or more or nonaccrual.

The table below presents a summary of the contractual aging of loans as of September 30, 2016 and December 31, 2015:

	As of September 30, 2016								As of December 31, 2015
	Current &								Current &
(In Thousands)	Past Due		Past Due		Past Due				Past Due		Past Due		Past Due
	Less than		30-89		90+				Less than		30-89		90+
	30 Days		Days		Days		Total		30 Days		Days		Days		Total
Residential mortgage:
Residential mortgage loans - first liens	$	316,869	$	3,058	$	5,606	$	325,533	$	294,703	$	6,156	$	3,924	$	304,783
Residential mortgage loans - junior liens		22,544		192		58		22,794		20,816		251		79		21,146
Home equity lines of credit		38,143		374		106		38,623		38,581		329		130		39,040
1-4 Family residential construction		23,079		231		0		23,310		21,121		0		0		21,121
Total residential mortgage		400,635		3,855		5,770		410,260		375,221		6,736		4,133		386,090
Commercial:
Commercial loans secured by real estate		146,888		107		2,943		149,938		153,427		108		1,244		154,779
Commercial and industrial		86,637		8		324		86,969		75,002		118		76		75,196
Political subdivisions		38,653		0		0		38,653		40,007		0		0		40,007
Commercial construction and land		12,801		8		0		12,809		5,018		104		0		5,122
Loans secured by farmland		5,807		62		1,031		6,900		5,970		223		826		7,019
Multi-family (5 or more) residential		7,657		84		392		8,133		8,201		0		987		9,188
Agricultural loans		4,156		128		29		4,313		4,642		13		16		4,671
Other commercial loans		11,557		0		0		11,557		12,152		0		0		12,152
Total commercial		314,156		397		4,719		319,272		304,419		566		3,149		308,134
Consumer		12,544		208		54		12,806		10,537		48		71		10,656
Totals	$	727,335	$	4,460	$	10,543	$	742,338	$	690,177	$	7,350	$	7,353	$	704,880

Nonaccrual loans are included in the contractual aging in the immediately preceding table. A summary of the contractual aging of nonaccrual loans at September 30, 2016 and December 31, 2015 is as follows:

	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than			30-89	90+
	30 Days		Days		Days		Total
September 30, 2016 Nonaccrual Totals	$	9,057	$	420	$	3,004	$	12,481
December 31, 2015 Nonaccrual Totals	$	7,100	$	293	$	4,124	$	11,517

Loans whose terms are modified are classified as Troubled Debt Restructurings (TDRs) if the Corporation grants such borrowers concessions, and it is deemed that those borrowers are experiencing financial difficulty. Loans classified as TDRs are designated as impaired. The outstanding balance of loans subject to TDRs, as well as contractual aging information at September 30, 2016 and December 31, 2015 is as follows:

	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Nonaccrual		Total
September 30, 2016 Totals	$	889	$	57	$	0	$	5,032	$	5,978
December 31, 2015 Totals	$	1,186	$	0	$	81	$	5,097	$	6,364

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

 

The TDR that occurred during the three-month period ended September 30, 2016 is as follows:

Three Months Ended September 30, 2016			Pre-		Post-
(Balances in Thousands)			Modification		Modification
	Number		Outstanding		Outstanding
	of		Recorded		Recorded
	Contracts		Investment		Investment
Consumer		1	$	25	$	25

There were no TDRs that occurred during the three-month period ended September 30, 2015.

The TDR in the three-month period ended September 30, 2016 represented a new, unsecured loan contract for $25,000. The new loan contract was entered into pursuant to a settlement agreement with a borrower for whom the Corporation accepted a short fall from the sale of residential real estate as payment in full on a mortgage loan. At September 30, 2016, there was no allowance for loan losses related to this TDR and there were no changes to the allowance for loan losses related to this TDR in the third quarter 2016.

TDRs that occurred during the nine-month periods ended September 30, 2016 and 2015 were as follows:

Nine Months Ended September 30, 2016			Pre-		Post-
(Balances in Thousands)			Modification		Modification
	Number		Outstanding		Outstanding
	of		Recorded		Recorded
	Contracts		Investment		Investment
Residential mortgage,
Residential mortgage loans - first liens		1	$	102	$	102
Commercial,
Commercial and Industrial		1		5		5
Consumer		1		25		25

Nine Months Ended September 30, 2015			Pre-		Post-
(Balances in Thousands)			Modification		Modification
	Number		Outstanding		Outstanding
	of		Recorded		Recorded
	Contracts		Investment		Investment
Residential mortgage:
Residential mortgage loans - first liens		1	$	56	$	56
Residential mortgage loans - junior liens		1		32		32
Consumer		1		30		30

The TDRs in the nine-month period ended September 30, 2016 included an extension of a final maturity date and a lowered interest rate on one contract on a residential mortgage – first lien, an extension of a final maturity date on a commercial and industrial loan, and establishment of an unsecured consumer loan contract pursuant to a settlement agreement with a borrower for whom the Corporation accepted a short fall from the sale of residential real estate as payment in full on a mortgage loan. In the third quarter 2016, a partial charge-off of $31,000 was recorded on the residential mortgage –first lien. At September 30, 2016, there was no allowance for loan losses related to these TDRs, and except for the partial charge-off on the residential mortgage – first lien, no changes in the allowance for loan losses that resulted from these TDRs in the nine-month period ended September 30, 2016.

The TDRs in the nine-month period ended September 30, 2015 included an extended maturity date and a reduction in interest rate on a residential mortgage – first lien, a lowered interest rate and reduced payment amount on a residential mortgage – junior lien and a lowered interest rate and reduced payment amount on the consumer loan. There was no allowance for loan losses on these loans at September 30, 2015, and there was no change in the allowance for loan losses that resulted from these TDRs.

There were no defaults on loans for which modification considered to be TDRs were entered into within the previous 12 months in the three-month period ended September 30, 2016.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

In the three-month period ended September 30, 2015, defaults on loans for which modifications considered to be TDRs were entered into within the previous 12 months were as follows:

	Number
	of		Recorded
	Contracts		Investment
Three Months Ended September 30, 2015
(Balances in Thousands)
Residential mortgage,
Residential mortgage loans - first liens		1	$	32

In the three-month period ended September 30, 2015, the event of default in the table listed above resulted from a borrower’s failure to make regular payments after reduced payment amount period of six months ended on a first lien residential mortgage. There was no allowance for loan losses recorded on this loan at September 30, 2015.

In the nine-month periods ended September 30, 2016 and 2015, defaults on loans for which modifications considered to be TDRs were entered into within the previous 12 months were as follows:

	Number
	of		Recorded
	Contracts		Investment
Nine Months Ended September 30, 2016
(Balances in Thousands)
Residential mortgage:
Residential mortgage loans - first liens		1	$	242
Residential mortgage loans - junior liens		1		30
Commercial,
Commercial and industrial		1		5
Consumer		1		28

	Number
	of		Recorded
	Contracts		Investment
Nine Months Ended September 30, 2015
(Balances in Thousands)
Residential mortgage,
Residential mortgage loans - first liens		2	$	65
Commercial,
Commercial construction and land		1		25

In the nine-month period ended September 30, 2016, the events of default in the table listed above resulted from the borrowers’ failure to make timely payments under the following circumstances: (1) for the customer relationship in the Residential first lien mortgage class, payment was missed after the monthly payment amount was reduced for six months; (2) for the customer relationships in the Residential junior lien mortgage class and the consumer class, timely payments were missed after interest rates and payment amounts were reduced on both loans; and (3) for the Commercial and industrial loan, the borrower failed to pay off the loan at the extended maturity date. There was no allowance for loan losses recorded on these loans at September 30, 2016.

In the nine-month period ended September 30, 2015, the events of default in the table listed above resulted from the borrowers’ failure to make timely payments under the following circumstances: (1) for one customer relationship included in the Residential first lien mortgage class, payment was missed after the interest rate and monthly payment amount had been reduced; (2) for the other customer relationship included in the Residential first lien class, monthly payments were missed after reducing the monthly payments to interest only payments; and (3) for the Commercial construction and land loan, monthly payments were missed after extending the term of maturity. There were no allowances for loan losses recorded on these loans at September 30, 2015.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

 

The carrying amount of foreclosed residential real estate properties held as a result of obtaining physical possession (included in Foreclosed assets held for sale in the unaudited Consolidated Balance Sheet) is as follows:

(In Thousands)	Sept. 30,		Dec. 31,
	2016		2015
Foreclosed residential real estate	$	1,195	$	555

The recorded investment of consumer mortgage loans secured by residential real properties for which formal foreclosure proceedings were in process is as follows:

(In Thousands)	Sept. 30,		Dec. 31,
	2016		2015
Residential real estate in process of foreclosure	$	1,991	$	1,173

XML

Note 8 - Borrowed Funds

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Debt Disclosure [Text Block]

8. BORROWED FUNDS

Short-term borrowings include the following:

(In Thousands)	Sept. 30,		Dec. 31,
	2016		2015
FHLB-Pittsburgh borrowings	$	8,270	$	48,581
Customer repurchase agreements		6,320		4,915
Total short-term borrowings	$	14,590	$	53,496

Short-term borrowings from FHLB-Pittsburgh are as follows:

(In Thousands)	Sept. 30,		Dec. 31
	2016		2015
Overnight borrowing	$	2,000	$	23,500
Other short-term advances		6,270		25,081
Total short-term FHLB-Pittsburgh borrowings	$	8,270	$	48,581

The FHLB-Pittsburgh loan facilities are collateralized by qualifying loans secured by real estate with a book value totaling $460,590,000 at September 30, 2016 and $450,883,000 at December 31, 2015. Also, the FHLB-Pittsburgh loan facilities require the Corporation to invest in established amounts of FHLB-Pittsburgh stock. The carrying values of the Corporation’s holdings of FHLB-Pittsburgh stock (included in Other Assets) were $3,230,000 at September 30, 2016 and $4,527,000 at December 31, 2015.

At September 30, 2016, short-term borrowings from the FHLB-Pittsburgh include 3 advances of approximately $2,090,000 each, maturing monthly throughout the remainder of the year ending December 31, 2016, with a weighted average interest rate of 1.03% and rates ranging from 1.006% to 1.052%. In the first nine months of 2016, the Corporation repaid nine advances of approximately $2,090,000 each, with a weighted average rate of 0.80%.

The Corporation engages in repurchase agreements with certain commercial customers. These agreements provide that the Corporation sells specified investment securities to the customers on an overnight basis and repurchases them on the following business day. The weighted average interest rate paid by the Corporation on customer repurchase agreements was 0.10% at September 30, 2016 and December 31, 2015. The carrying value of the underlying securities was $16,472,000 at September 30, 2016 and $12,613,000 at December 31, 2015.

Long-term borrowings are as follows:

(In Thousands)	Sept. 30,		Dec. 31,
	2016		2015
FHLB-Pittsburgh borrowings	$	11,538	$	11,767
Repurchase agreement		27,000		27,000
Total long-term borrowings	$	38,538	$	38,767

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

 

Long-term borrowings from FHLB-Pittsburgh are as follows:

(In Thousands)	Sept. 30,		Dec. 31,
	2016		2015
Loan maturing in 2016 with a rate of 6.86%	$	18	$	57
Loan maturing in 2017 with a rate of 6.83%		6		10
Loan maturing in 2017 with a rate of 3.81%		10,000		10,000
Loan maturing in 2020 with a rate of 4.79%		691		821
Loan maturing in 2025 with a rate of 4.91%		823		879
Total long-term FHLB-Pittsburgh borrowings	$	11,538	$	11,767

The repurchase agreement included in long-term borrowings has an interest rate of 3.595% and an effective maturity date in December 2017.

The “Repurchase Date,” as defined in the Master Repurchase Agreement between the Corporation and the broker-dealer, occurs quarterly on or about the 20

th

of each March, June, September and December until the “Final Repurchase Date” (as defined) on December 20, 2017. The Corporation pays interest, and the borrowing is putable by the issuer, on each Repurchase Date. The Final Repurchase Date is the effective maturity date of the borrowing.

Securities sold under repurchase agreements were delivered to the broker-dealer who is the counter-party to the transactions. The broker-dealer may have sold, loaned or otherwise disposed of such securities to other parties in the normal course of their operations, and has agreed to resell to the Corporation substantially identical securities at the maturities of the agreements. The Master Repurchase Agreement provides that the Agreement constitutes a “netting contract,” as defined; however, the Corporation and the broker-dealer have no other obligations to one another and accordingly, no netting has occurred.

The carrying value of the underlying securities was $34,130,000 at September 30, 2016 and $33,780,000 at December 31, 2015, detailed in the following table:

(In Thousands)	Sept. 30,		Dec. 31,
	2016		2015
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities	$	19,444	$	15,772
Residential collateralized mortgage obligations		14,686		18,008
Total	$	34,130	$	33,780

Two of the more significant risks associated with the repurchase agreement with the broker-dealer are as follows:

● The borrowings are putable at quarterly intervals by the issuer. Accordingly, if interest rates were to rise to a sufficient level, the issuer would be expected to require the Corporation to pay off the borrowing. In this circumstance, the Corporation would be required to obtain a new borrowing at a higher interest rate than the existing repurchase agreement or utilize cash from other sources to pay off the borrowing. If sales of available-for-sale securities were used to generate cash to pay off the borrowing, the value of such securities would be expected to have fallen, which could result in the Corporation recognizing a loss.

● As principal pay-downs of mortgage backed securities and CMOs occur, the Corporation must have available, unencumbered assets or purchase a sufficient amount of assets with credit quality suitable to the broker-dealer to replace the amounts being paid off. Since pre-payments of mortgages typically increase as interest rates fall, the Corporation may be required to purchase additional assets at times when market rates are lower than the rates paid on the borrowing.

The Corporation manages these risks by maintaining sufficient available assets of acceptable credit quality, as well as maintaining other borrowing facilities, to meet ongoing collateral maintenance requirements or pay off the borrowing if required. In particular, the Corporation had unused borrowing capacity available from the FHLB-Pittsburgh of $315,685,000 at September 30, 2016.

XML

Note 9 - Defined Benefit Plans

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

9. DEFINED BENEFIT PLANS

The Corporation sponsors a defined benefit health care plan that provides postretirement medical benefits and life insurance to employees who meet certain age and length of service requirements. Full-time employees no longer accrue service time toward the Corporation-subsidized portion of the medical benefits. This plan contains a cost-sharing feature, which causes participants to pay for all future increases in costs related to benefit coverage. Accordingly, actuarial assumptions related to health care cost trend rates do not significantly affect the liability balance at September 30, 2016 and December 31, 2015, and are not expected to significantly affect the Corporation's future expenses. The Corporation uses a December 31 measurement date for the postretirement plan.

In an acquisition in 2007, the Corporation assumed the Citizens Trust Company Retirement Plan, a defined benefit pension plan. This plan covers certain employees who were employed by Citizens Trust Company on December 31, 2002, when the plan was amended to discontinue admittance of any future participant and to freeze benefit accruals. Information related to the Citizens Trust Company Retirement Plan has been included in the tables that follow. The Corporation uses a December 31 measurement date for this plan.

The components of net periodic benefit costs from these defined benefit plans are as follows:

Defined Benefit Plans
(In Thousands)	Pension						Postretirement
	Nine Months Ended						Nine Months Ended
	Sept. 30,						Sept. 30,
	2016			2015			2016			2015
Service cost	$	0		$	0		$	27		$	29
Interest cost		20			27			47			42
Expected return on plan assets		(20	)		(34	)		0			0
Amortization of prior service cost		0			0			(23	)		(22	)
Recognized net actuarial loss		8			11			0			0
Net periodic benefit cost	$	8		$	4		$	51		$	49

Defined Benefit Plans
(In Thousands)	Pension						Postretirement
	Three Months Ended						Three Months Ended
	Sept. 30,						Sept. 30,
	2016			2015			2016			2015
Service cost	$	0		$	0		$	9		$	10
Interest cost		7			9			16			14
Expected return on plan assets		(7	)		(11	)		0			0
Amortization of prior service cost		0			0			(8	)		(7	)
Recognized net actuarial loss		3			4			0			0
Net periodic benefit cost	$	3		$	2		$	17		$	17

In the first nine months of 2016, the Corporation funded postretirement contributions totaling $44,000, with estimated annual postretirement contributions of $68,000 expected in 2016 for the full year. Based upon the related actuarial reports, no defined benefit pension contributions are required in 2016, though the Corporation may make discretionary contributions.

XML

Note 10 - Stock-based Compensation Plans

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

10. STOCK-BASED COMPENSATION PLANS

The Corporation has a Stock Incentive Plan for a selected group of officers and an Independent Directors Stock Incentive Plan. In the three-month periods ended March 31, 2016 and 2015, the Corporation issued restricted stock under each of the Plans.

In the first quarter 2016, the Corporation awarded a total of 34,199 shares of restricted stock under the Stock Incentive and Independent Directors Stock Incentive Plans. Restricted stock awards in the first quarter 2016 included the following: (1) a total of 17,289 shares to employees, vesting over a three-year term, with vesting contingent upon the Corporation meeting an annual return on average equity (“ROAE”) performance ratio, as defined; (2) a total of 10,304 shares to employees, vesting over a three-year term, with vesting dependent on satisfactory performance; and (3) a total of 6,606 shares under the Independent Directors Incentive Plan, vesting over a term of one year.

In the second quarter 2016, the Corporation awarded a total of 1,228 shares of restricted stock under the Independent Directors Stock Incentive Plan. The restricted stock was awarded to two new directors, with each award vesting over a term of one year.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

 

In the first quarter 2015, a total of 34,800 shares of restricted stock were awarded under the Plans. Restricted stock awards in 2015 included the following: (1) a total of 20,298 shares to employees, vesting over a four-year term, with vesting contingent upon the Corporation meeting an annual ROAE performance ratio, as defined; (2) a total of 2,198 shares to employees, vesting over a four-year term, with vesting dependent on satisfactory performance; (3) an award to the Chief Executive Officer of 5,174 shares, vesting over a three-year term, with vesting dependent on satisfactory performance; and (4) a total of 7,130 shares under the Independent Directors Incentive Plan, vesting over a term of one year.

Compensation cost related to restricted stock is recognized based on the market price of the stock at the grant date over the vesting period. Management has estimated restricted stock expense in the first nine months of 2016 based on an assumption that the ROAE target for 2016 will be met.

Total stock-based compensation expense is as follows:

(In Thousands)	3 Months Ended				9 Months Ended
	Sept. 30,		Sept. 30,		Sept. 30,		Sept. 30,
	2016		2015		2016		2015
Restricted stock	$	155	$	152	$	480	$	459

XML

Note 11 - Income Taxes

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

11. INCOME TAXES

The net deferred tax asset at September 30, 2016 and December 31, 2015 represents the following temporary difference components:

	September 30,		December 31,
(In Thousands)	2016		2015
Deferred tax assets:
Net realized losses on securities		36	$	69
Allowance for loan losses		2,980		2,761
Other deferred tax assets		2,517		2,634
Total deferred tax assets		5,533		5,464
Deferred tax liabilities:
Unrealized holding gains on securities		2,902		1,342
Defined benefit plans - ASC 835		23		19
Bank premises and equipment		952		869
Core deposit intangibles		7		11
Other deferred tax liabilities		105		108
Total deferred tax liabilities		3,989		2,349
Deferred tax asset, net	$	1,544	$	3,115

The provision for income tax for the three-month and nine- month periods ended September 30, 2016 and 2015 is based on the Corporation’s estimate of the effective tax rate expected to be applicable for the full year. The effective tax rates for the Corporation are as follows:

	3 Months Ended						9 Months Ended
(In thousands)	September 30,						September 30,
	2016			2015			2016			2015
Income before income tax provision	$	5,538		$	5,629		$	15,378		$	16,482
Income tax provision		1,451			1,395			3,847			4,076
Effective tax rate		26.20	%		24.78	%		25.02	%		24.73	%

The effective tax rate for each period presented differs from the statutory rate of 35% principally because of the effects of tax-exempt interest income.

The Corporation has investments in three limited partnerships that manage affordable housing projects that have qualified for the federal low-income housing tax credit. The Corporation’s expected return from these investments is based on the receipt of tax credits and tax benefits from deductions of operating losses. The Corporation uses the effective yield method to account for these investments, with the benefits recognized as a reduction of the provision for income taxes. For two of the three limited partnership investments, the tax credits have been received in full in prior years, and the Corporation has fully realized the benefits of the credits and amortized its initial investments in the partnerships. The most recent affordable housing project was completed in 2013, and the Corporation received tax credits in 2013, 2014 and 2015 and expects to continue to receive tax credits annually through 2022. The carrying amount of the Corporation’s investment is $737,000 at September 30, 2016 and $812,000 at December 31, 2015 (included in Other Assets in the consolidated balance sheets). For the year ending December 31, 2016, the estimated amount of tax credits and other tax benefits to be received is $158,000 and the estimated amount to be recognized as a reduction of the provision for income taxes is $76,000. For the year ended December 31, 2015, tax credits and other tax benefits totaled $158,000 and the amount recognized as a reduction of the provision for income taxes for 2015 was $80,000. The total reduction in the provision for income taxes resulting from this investment is $19,000 in the third quarter 2016, and $57,000 for the nine months ended September 30, 2016, and $22,000 in the third quarter 2015, and $62,000 for the nine months ended September 30, 2015.

The Corporation has no unrecognized tax benefits, nor pending examination issues related to tax positions taken in preparation of its income tax returns. With limited exceptions, the Corporation is no longer subject to examination by the Internal Revenue Service for years prior to 2013.

XML

Note 12 - Contingencies

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

12.

CONTINGENCIES

In the normal course of business, the Corporation may be subject to pending and threatened lawsuits in which claims for monetary damages could be asserted. In management’s opinion, the Corporation’s financial position and results of operations would not be materially affected by the outcome of such pending legal proceedings.

XML

Note 13 - Recent Accounting Pronouncements

9 Months Ended

Sep. 30, 2016

Notes to Financial Statements

Accounting Changes and Error Corrections [Text Block]

13. RECENT ACCOUNTING PRONOUNCEMENTS

The FASB issues Accounting Standards Updates (ASUs) to the FASB ASC. This section provides a summary description of recent ASUs that have significant implications (elected or required) within the consolidated financial statements, or that management expects may have a significant impact on financial statements issued in the near future.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides a principles-based framework for revenue recognition that supersedes virtually all previously issued revenue recognition guidance under U.S. GAAP. Additionally, the ASU requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. The core principle of the five-step revenue recognition framework is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In April 2016, the FASB issued ASU 2016-10, which provides clarifying information related to identifying performance obligations and licensing. In May 2016, the FASB issued ASU 2016-12, which provides clarifying guidance in a few narrow areas and adds some practical expedients to the guidance. In August 2015 the FASB issued ASU 2015-14, which deferred the effective date of the revenue recognition standard by a year, making it applicable for the Corporation in the first quarter 2018 and for the annual period ending December 31, 2018. The amendments should be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the amendments recognized at the date of initial application. The Corporation is in the process of evaluating the potential impact of adopting the amendments, including determining which transition method to apply.

In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Liabilities. This makes significant changes in U.S. GAAP related to certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The changes provided for in this Update that are applicable to the Corporation are as follows: (1) require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; however, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer; (2) for equity investments without readily determinable fair values, require a qualitative assessment to identify impairment, and if a qualitative assessment indicates that impairment exists, requiring an entity to measure the investment at fair value; (3) eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet; (4) require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; (5) require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments (at September 30, 2016 and December 31, 2015, the Corporation has no liabilities for which the fair value measurement option has been elected); (6) require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and (7) clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The amendments in this Update will become effective for the Corporation for annual and interim periods beginning in the first quarter 2018. With limited exceptions, early adoption of the amendments in this Update is not permitted. Amendments are to be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values should be applied prospectively.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. Specifically, a lessee should recognize on the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of 12 months or less, a lessee would be permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and liabilities. Topic 842 would not significantly change the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee from current U.S. GAAP; however, the principal change from current GAAP is that lease assets and liabilities arising from operating leases would be recognized on the balance sheet. Topic 842 provides several other changes or clarifications to existing GAAP, and will require qualitative disclosures, along with quantitative disclosures, so that financial statement users can understand more about the nature of an entity’s leasing activities. In transition, Topic 842 provides that lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, including optional practical expedients. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees will be required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. Topic 842 will become effective for the Corporation for annual and interim periods beginning in the first quarter 2019.

In March 2016, the FASB issued ASU No. 2016-07, Investments – Equity Method and Joint Ventures. This ASU eliminates the requirement that when an investment qualifies for the equity method as a result of an increase in the level of ownership interest or influence, an investor must adjust the investment, results of operations and retained earnings retroactively as if the equity method had been in effect during all previous periods the investment had been held. The ASU requires the equity method investor to add the cost of acquiring an additional interest in the investee to the basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for the equity method. The ASU further requires that an entity that has an available-for-sale equity security that becomes qualified for the equity method recognize through earnings the unrealized gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. The amendments in this Update are effective for the Corporation for annual and interim periods beginning in the first quarter 2017, with earlier application permitted. The amendments should be applied prospectively upon their effective date.

In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation. This ASU changes several aspects of accounting for share-based payment transactions, and includes some changes that apply only to nonpublic companies. This Update includes amendments that currently apply, or may apply in the future, to the Corporation related to the following: (1) accounting for the difference between the deduction for tax purposes and the amount of compensation cost recognized for financial reporting purposes; (2) classification of excess tax benefits on the statement of cash flows; (3) accounting for forfeitures; (4) accounting for awards partially settled in cash in excess of the employer’s minimum statutory tax withholding requirements; and (5) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. The amendments in this Update are effective for the Corporation for annual and interim periods beginning in the first quarter 2017, with earlier adoption permitted. The ASU provides separate transition provisions for each of the amendments. The Corporation is in the process of evaluating the potential impact of adopting the amendments.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326). This ASU will result in significant changes in the Corporation’s accounting for credit losses related to loans receivable and investment securities. A summary of significant provisions of this ASU is as follows:

● The ASU requires that a financial asset (or a group of financial assets) measured at amortized cost basis be presented, net of a valuation allowance for credit losses, at an amount expected to be collected on the financial asset(s), and that the income statement include the measurement of credit losses for newly recognized financial assets as well as changes in expected losses on previously recognized financial assets. The provisions of this ASU require measurement of expected credit losses based on relevant information including past events, historical experience, current conditions, and reasonable and supportive forecasts that affect the collectability of the asset. The provisions of this ASU differ from current U.S. GAAP in that current U.S. GAAP generally delays recognition of the full amount of credit losses until the loss is probable of occurring.

● The amendments in the Update retain many of the disclosure requirements related to credit quality in current U.S. GAAP, updated to reflect the change from an incurred loss methodology to an expected credit loss methodology. In addition, the Update requires that disclosure of credit quality indicators in relation to the amortized cost of financing receivables, a current requirement, be further disaggregated by year of origination.

● This ASU requires that credit losses on available-for-sale debt securities be presented as an allowance rather than as a write-down, and limits the amount of the allowance for credit losses to the amount by which the fair value is below amortized cost. For purchased available-for-sale securities with a more-than-insignificant amount of credit deterioration since origination, the ASU requires an allowance be determined in a manner similar to other available-for-sale debt securities; however, the initial allowance would be added to the purchase price, with only subsequent changes in the allowance recorded in credit loss expense, and interest income recognized at the effective rate excluding the discount embedded in the purchase price related to estimated credit losses at acquisition.

● This ASU will be effective for the Corporation for interim and annual periods beginning in the first quarter of 2020. Earlier adoption is permitted beginning in the first quarter of 2019. The entity will record the effect of implementing this ASU through a cumulative-effect adjustment through retained earnings as of the beginning of the reporting period in which Topic 326 is effective. The Corporation is in the early stages of evaluating the potential impact of adopting this amendment.

In June 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) –Classification of Certain Cash Receipts and Cash Payments. This Update provides clarification regarding eight specific cash flow issues with the objective of reducing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. For the Corporation, the amendments in this Update are effective beginning in the first quarter 2018. The amendments in this Update should be applied using a retroactive transition method to each period presented. The Corporation anticipates there will be no adjustments to the Consolidated Statements of Cash Flows, as previously reported, as a result of the clarifications provided in the Update.

XML

Note 2 - Per Share Data (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

			Weighted-
			Average			Earnings
	Net		Common			Per
	Income		Shares			Share
Nine Months Ended September 30, 2016
Earnings per share – basic	$	11,531,000		12,098,554		$	0.95
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				219,679
Hypothetical share repurchase at $20.48				(195,659	)
Earnings per share – diluted	$	11,531,000		12,122,574		$	0.95
Nine Months Ended September 30, 2015
Earnings per share – basic	$	12,406,000		12,222,557		$	1.02
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				213,511
Hypothetical share repurchase at $19.94				(192,322	)
Earnings per share – diluted	$	12,406,000		12,243,746		$	1.01

			Weighted-
			Average			Earnings
	Net		Common			Per
	Income		Shares			Share
Three Months Ended September 30, 2016
Earnings per share – basic	$	4,087,000		12,078,397		$	0.34
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				215,154
Hypothetical share repurchase at $21.20				(185,355	)
Earnings per share – diluted	$	4,087,000		12,108,196		$	0.34
Three Months Ended September 30, 2015
Earnings per share – basic	$	4,234,000		12,200,129		$	0.35
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				204,449
Hypothetical share repurchase at $19.90				(184,248	)
Earnings per share – diluted	$	4,234,000		12,220,330		$	0.35

XML

Note 3 - Comprehensive Income (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Comprehensive Income (Loss) [Table Text Block]

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
Nine Months Ended September 30, 2016
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	5,544		$	(1,941	)	$	3,603
Reclassification adjustment for (gains) realized in income		(1,089	)		381			(708	)
Other comprehensive income on available-for-sale securities		4,455			(1,560	)		2,895
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		26			(9	)		17
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		(15	)		5			(10	)
Other comprehensive income on unfunded retirement obligations		11			(4	)		7
Total other comprehensive income	$	4,466		$	(1,564	)	$	2,902

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
Nine Months Ended September 30, 2015
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	2,369		$	(829	)	$	1,540
Reclassification adjustment for (gains) realized in income		(1,085	)		380			(705	)
Other comprehensive income on available-for-sale securities		1,284			(449	)		835
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		(100	)		35			(65	)
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		(11	)		3			(8	)
Other comprehensive loss on unfunded retirement obligations		(111	)		38			(73	)
Total other comprehensive income	$	1,173		$	(411	)	$	762

(In Thousands)	Before-Tax			Income Tax		Net-of-Tax
	Amount			Effect		Amount
Three Months Ended September 30, 2016
Unrealized losses on available-for-sale securities:
Unrealized holding losses on available-for-sale securities	$	(1,661	)	$	580	$	(1,081	)
Reclassification adjustment for (gains) realized in income		(584	)		204		(380	)
Other comprehensive loss on available-for-sale securities		(2,245	)		784		(1,461	)
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		0			0		0
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		(5	)		2		(3	)
Other comprehensive loss on unfunded retirement obligations		(5	)		2		(3	)
Total other comprehensive loss	$	(2,250	)	$	786	$	(1,464	)

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
Three Months Ended September 30, 2015
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	3,216		$	(1,126	)	$	2,090
Reclassification adjustment for (gains) realized in income		(79	)		28			(51	)
Other comprehensive loss on available-for-sale securities		3,137			(1,098	)		2,039
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		0			0			0
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost		(3	)		0			(3	)
Other comprehensive loss on unfunded retirement obligations		(3	)		0			(3	)
Total other comprehensive income	$	3,134		$	(1,098	)	$	2,036

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

(In Thousands)	Unrealized			Unfunded			Accumulated
	Holding Gains			Pension and			Other
	(Losses)			Postretirement			Comprehensive
	on Securities			Obligations			Income
Nine Months Ended September 30, 2016
Balance, beginning of period	$	2,493		$	35		$	2,528
Other comprehensive income before reclassifications		3,603			17			3,620
Amounts reclassified from accumulated other comprehensive income		(708	)		(10	)		(718	)
Other comprehensive income		2,895			7			2,902
Balance, end of period	$	5,388		$	42		$	5,430
Nine Months Ended September 30, 2015
Balance, beginning of period	$	5,281		$	79		$	5,360
Other comprehensive income before reclassifications		1,540			(65	)		1,475
Amounts reclassified from accumulated other comprehensive income		(705	)		(8	)		(713	)
Other comprehensive income		835			(73	)		762
Balance, end of period	$	6,116		$	6		$	6,122
Three Months Ended September 30, 2016
Balance, beginning of period	$	6,849		$	45		$	6,894
Other comprehensive loss before reclassifications		(1,081	)		0			(1,081	)
Amounts reclassified from accumulated other comprehensive income		(380	)		(3	)		(383	)
Other comprehensive loss		(1,461	)		(3	)		(1,464	)
Balance, end of period	$	5,388		$	42		$	5,430
Three Months Ended September 30, 2015
Balance, beginning of period	$	4,077		$	9		$	4,086
Other comprehensive income before reclassifications		2,090			0			2,090
Amounts reclassified from accumulated other comprehensive income		(51	)		(3	)		(54	)
Other comprehensive income		2,039			(3	)		2,036
Balance, end of period	$	6,116		$	6		$	6,122

Reclassification out of Accumulated Other Comprehensive Income [Table Text Block]

	Reclassified from
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Consolidated
Comprehensive Income Components	Comprehensive Income			Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(1,089	)	Realized gains on available-for-sale securities, net
		381		Income tax provision
		(708	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(23	)	Pensions and other employee benefits
Actuarial loss		8		Pensions and other employee benefits
		(15	)	Total before tax
		5		Income tax provision
		(10	)	Net of tax
Total reclassifications for the period	$	(718	)

	Reclassified from
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Consolidated
Comprehensive Income Components	Comprehensive Income			Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(1,085	)	Realized gains on available-for-sale securities, net
		380		Income tax provision
		(705	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(22	)	Pensions and other employee benefits
Actuarial loss		11		Pensions and other employee benefits
		(11	)	Total before tax
		3		Income tax provision
		(8	)	Net of tax
Total reclassifications for the period	$	(713	)

	Reclassified from
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Consolidated
Comprehensive Income Components	Comprehensive Income			Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(584	)	Realized gains on available-for-sale securities, net
		204		Income tax provision
		(380	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(8	)	Pensions and other employee benefits
Actuarial loss		3		Pensions and other employee benefits
		(5	)	Total before tax
		2		Income tax provision
		(3	)	Net of tax
Total reclassifications for the period	$	(383	)

	Reclassified from
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Consolidated
Comprehensive Income Components	Comprehensive Income			Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(79	)	Realized gains on available-for-sale securities, net
		28		Income tax provision
		(51	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(7	)	Pensions and other employee benefits
Actuarial loss		4		Pensions and other employee benefits
		(3	)	Total before tax
		0		Income tax provision
		(3	)	Net of tax
Total reclassifications for the period	$	(54	)

XML

Note 4 - Cash and Due from Banks (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Schedule of Cash and Cash Equivalents [Table Text Block]

(In thousands)	Sept. 30,		Dec. 31,
	2016		2015
Cash and cash equivalents	$	30,102	$	33,313
Certificates of deposit		3,968		2,748
Total cash and due from banks	$	34,070	$	36,061

XML

Note 5 - Fair Value Measurements and Fair Values of Financial Instruments (Tables)

9 Months Ended

Sep. 30, 2016

Fair Value, Measurements, Nonrecurring [Member]

Notes Tables

Fair Value Inputs, Assets, Quantitative Information [Table Text Block]

(In Thousands, Except									Value at
Percentages)			Valuation						9/30/16
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	(Weighted
Asset	9/30/16		9/30/16		9/30/16		Technique	Inputs	Average)
Impaired loans:
Residential mortgage loans -
first liens	$	0	$	0	$	0	Sales comparison	Discount to appraised value		0	%
Commercial:
Commercial loans secured by real estate		2,794		528		2,266	Sales comparison	Discount to appraised value		7	%
Commercial and industrial		321		106		215	Sales comparison	Discount to appraised value		35	%
Commercial construction and land		0		0		0	Sales comparison	Discount to appraised value		0	%
Loans secured by farmland		506		51		455	Sales comparison	Discount to appraised value		55	%
Multi-family (5 or more) residential		0		0		0	Sales comparison	Discount to appraised value		0	%
Total impaired loans	$	3,621	$	685	$	2,936
Foreclosed assets held for sale -
real estate:
Residential (1-4 family)	$	1,195	$	0	$	1,195	Sales comparison	Discount to appraised value		39	%
Land		696		0		696	Sales comparison	Discount to appraised value		29	%
Commercial real estate		430		0		430	Sales comparison	Discount to appraised value		50	%
Total foreclosed assets held for sale	$	2,321	$	0	$	2,321

(In Thousands, Except									Value at
Percentages)			Valuation						12/31/15
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	(Weighted
Asset	12/31/15		12/31/15		12/31/15		Technique	Inputs	Average)
Impaired loans:
Residential mortgage loans -
first liens	$	42	$	1	$	41	Sales comparison	Discount to appraised value		31	%
Commercial:
Commercial loans secured by real estate		317		97		220	Sales comparison	Discount to appraised value		46	%
Commercial and industrial		75		75		0	Sales comparison	Discount to appraised value		31	%
Commercial construction and land		0		0		0	Sales comparison	Discount to appraised value		0	%
Loans secured by farmland		512		52		460	Sales comparison	Discount to appraised value		49	%
Multi-family (5 or more) residential		987		595		392	Sales comparison	Discount to appraised value		41	%
Total impaired loans	$	1,933	$	820	$	1,113
Foreclosed assets held for sale -
real estate:
Residential (1-4 family)	$	556	$	0	$	556	Sales comparison	Discount to appraised value		32	%
Land		704		0		704	Sales comparison	Discount to appraised value		29	%
Total foreclosed assets held for sale	$	1,260	$	0	$	1,260

Fair Value, Measurements, Recurring [Member]

Notes Tables

Fair Value Inputs, Assets, Quantitative Information [Table Text Block]

	Fair Value at
	9/30/16		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	9 /30/16
Servicing rights	$	1,208	Discounted cash flow	Discount rate		10.00	%	Rate used through modeling period
				Loan prepayment speeds		194.00	%	Weighted-average PSA
				Servicing fees		0.25	%	of loan balances
						4.00	%	of payments are late
						5.00	%	late fees assessed
					$	1.94		Miscellaneous fees per account per month
				Servicing costs	$	6.00		Monthly servicing cost per account
					$	24.00		Additional monthly servicing cost per loan on loans more than 30 days delinquent
						1.50	%	of loans more than 30 days delinquent
						3.00	%	annual increase in servicing costs

	Fair Value at
	12/31/15		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	12/31/15
Servicing rights	$	1,296	Discounted cash flow	Discount rate		10.00	%	Rate used through modeling period
				Loan prepayment speeds		146.00	%	Weighted-average PSA
				Servicing fees		0.25	%	of loan balances
						4.00	%	of payments are late
						5.00	%	late fees assessed
					$	1.94		Miscellaneous fees per account per month
				Servicing costs	$	6.00		Monthly servicing cost per account
					$	24.00		Additional monthly servicing cost per loan on loans more than 30 days delinquent
						1.50	%	of loans more than 30 days delinquent
						3.00	%	annual increase in servicing costs

Fair Value, by Balance Sheet Grouping [Table Text Block]

			September 30, 2016
	Quoted Prices		Other
	in Active		Observable		Unobservable			Total
	Markets		Inputs		Inputs			Fair
(In Thousands)	(Level 1)		(Level 2)		(Level 3)			Value
Recurring fair value measurements
AVAILABLE-FOR-SALE SECURITIES:
Obligations of U.S. Government agencies	$	0	$	9,747	$	0		$	9,747
Obligations of states and political subdivisions:
Tax-exempt		0		121,283		0			121,283
Taxable		0		33,672		0			33,672
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		62,187		0			62,187
Residential collateralized mortgage obligations		0		165,719		0			165,719
Commercial mortgage-backed securities		0		16,112		0			16,112
Total debt securities		0		408,720		0			408,720
Marketable equity securities		1,080		0		0			1,080
Total available-for-sale securities		1,080		408,720		0			409,800
Servicing rights		0		0		1,208			1,208
Total recurring fair value measurements	$	1,080	$	408,720	$	1,208		$	411,008
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	3,621		$	3,621
Valuation allowance		0		0		(685	)		(685	)
Impaired loans, net		0		0		2,936			2,936
Foreclosed assets held for sale		0		0		2,321			2,321
Total nonrecurring fair value measurements	$	0	$	0	$	5,257		$	5,257

			December 31, 2015
	Quoted Prices		Other
	in Active		Observable		Unobservable			Total
	Markets		Inputs		Inputs			Fair
(In Thousands)	(Level 1)		(Level 2)		(Level 3)			Value
Recurring fair value measurements
AVAILABLE-FOR-SALE SECURITIES:
Obligations of U.S. Government agencies	$	0	$	10,483	$	0		$	10,483
Obligations of states and political subdivisions:
Tax-exempt		0		107,757		0			107,757
Taxable		0		34,597		0			34,597
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		73,343		0			73343
Residential collateralized mortgage obligations		0		191,715		0			191,715
Collateralized debt obligations		0		9		0			9
Total debt securities		0		417,904		0			417,904
Marketable equity securities		2,386		0		0			2,386
Total available-for-sale securities		2,386		417,904		0			420,290
Servicing rights		0		0		1,296			1,296
Total recurring fair value measurements	$	2,386	$	417,904	$	1,296		$	421,586
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	1,933		$	1,933
Valuation allowance		0		0		(820	)		(820	)
Impaired loans, net		0		0		1,113			1,113
Foreclosed assets held for sale		0		0		1,260			1,260
Total nonrecurring fair value measurements	$	0	$	0	$	2,373		$	2,373

Fair Value, Assets Measured on Recurring Basis, Unobservable Input Reconciliation [Table Text Block]

(In Thousands)	Three Months Ended					Nine Months Ended
	Sept. 30, 2016			Sept. 30, 2015		Sept. 30, 2016			Sept. 30, 2015
Servicing rights balance, beginning of period	$	1,224		$	1,209	$	1,296		$	1,281
Issuances of servicing rights		52			57		159			135
Unrealized (losses) gains included in earnings		(68	)		13		(247	)		(137	)
Servicing rights balance, end of period	$	1,208		$	1,279	$	1,208		$	1,279

Fair Value Measurements, Recurring and Nonrecurring [Table Text Block]

(In Thousands)	Valuation	Sept. 30, 2016				December 31, 2015
	Method(s)	Carrying		Fair		Carrying		Fair
	Used	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	30,102	$	30,102	$	33,313	$	33,313
Certificates of deposit	Level 2		3,968		3,982		2,748		2,752
Available-for-sale securities	See Above		409,800		409,800		420,290		420,290
Restricted equity securities (included in Other Assets)	Level 2		3,360		3,360		4,657		4,657
Loans held for sale	Level 2		621		621		280		280
Loans, net	Level 3		733,917		737,353		696,991		685,552
Accrued interest receivable	Level 2		3,871		3,871		3,768		3,768
Servicing rights	Level 3		1,208		1,208		1,296		1,296
Financial liabilities:
Deposits with no stated maturity	Level 2		769,734		769,734		713,931		713,931
Time deposits	Level 2		222,146		222,881		221,684		221,891
Short-term borrowings	Level 2		14,590		14,497		53,496		53,398
Long-term borrowings	Level 2		38,538		39,807		38,767		40,166
Accrued interest payable	Level 2		79		79		70		70

XML

Note 6 - Securities (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Available-for-sale Securities [Table Text Block]

			September 30, 2016
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	9,667	$	80	$	0		$	9,747
Obligations of states and political subdivisions:
Tax-exempt		116,797		4,565		(79	)		121,283
Taxable		32,764		908		0			33,672
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		60,966		1,221		0			62,187
Residential collateralized mortgage obligations		164,508		1,517		(306	)		165,719
Commercial mortgage-backed securities		16,056		69		(13	)		16,112
Total debt securities		400,758		8,360		(398	)		408,720
Marketable equity securities		752		328		0			1,080
Total	$	401,510	$	8,688	$	(398	)	$	409,800

			December 31, 2015
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	10,663	$	12	$	(192	)	$	10,483
Obligations of states and political subdivisions:
Tax-exempt		103,414		4,365		(22	)		107,757
Taxable		34,317		381		(101	)		34,597
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		73,227		486		(370	)		73,343
Residential collateralized mortgage obligations		193,145		623		(2,053	)		191,715
Collateralized debt obligations:		9		0		0			9
Total debt securities		414,775		5,867		(2,738	)		417,904
Marketable equity securities		1,680		706		0			2,386
Total	$	416,455	$	6,573	$	(2,738	)	$	420,290

Schedule of Unrealized Loss on Investments [Table Text Block]

September 30, 2016	Less Than 12 Months					12 Months or More					Total
(In Thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Obligations of states and political subdivisions,
Tax-exempt	$	15,448	$	(64	)	$	1,001	$	(15	)	$	16,449	$	(79	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential collateralized mortgage obligations		19,303		(38	)		24,426		(268	)		43,729		(306	)
Commercial mortgage-backed securities		4,989		(13	)		0		0			4,989		(13	)
Total temporarily impaired available-for-sale securities	$	39,740	$	(115	)	$	25,427	$	(283	)	$	65,167	$	(398	)

December 31, 2015	Less Than 12 Months					12 Months or More					Total
(In Thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Obligations of U.S. Government agencies	$	0	$	0		$	7,850	$	(192	)	$	7,850	$	(192	)
Obligations of states and political subdivisions:
Tax-exempt		5,200		(19	)		216		(3	)		5,416		(22	)
Taxable		10,605		(60	)		2,910		(41	)		13,515		(101	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored Agencies:
Residential pass-through securities		38,764		(295	)		3,503		(75	)		42,267		(370	)
Residential collateralized mortgage obligations		88,355		(648	)		49,273		(1,405	)		137,628		(2,053	)
Total temporarily impaired available-for-sale securities	$	142,924	$	(1,022	)	$	63,752	$	(1,716	)	$	206,676	$	(2,738	)

Realized Gain (Loss) on Investments [Table Text Block]

(In Thousands)	3 Months Ended					9 Months Ended
	Sept. 30,		Sept. 30,			Sept. 30,			Sept. 30,
	2016		2015			2016			2015
Gross realized gains from sales	$	584	$	156		$	1,090		$	1,162
Gross realized losses from sales		0		(77	)		(1	)		(77	)
Net realized gains	$	584	$	79		$	1,089		$	1,085

Investments Classified by Contractual Maturity Date [Table Text Block]

	Amortized		Fair
(In Thousands)	Cost		Value
Due in one year or less	$	16,631	$	16,837
Due from one year through five years		71,211		73,423
Due from five years through ten years		47,463		49,076
Due after ten years		23,923		25,366
Sub-total		159,228		164,702
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		60,966		62,187
Residential collateralized mortgage obligations		164,508		165,719
Commercial mortgage-backed securities		16,056		16,112
Total	$	400,758	$	408,720

XML

Note 7 - Loans (Tables)

9 Months Ended

Sep. 30, 2016

Troubled Debt Restructuring [Member]

Notes Tables

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

Three Months Ended September 30, 2016			Pre-		Post-
(Balances in Thousands)			Modification		Modification
	Number		Outstanding		Outstanding
	of		Recorded		Recorded
	Contracts		Investment		Investment
Consumer		1	$	25	$	25

Nine Months Ended September 30, 2016			Pre-		Post-
(Balances in Thousands)			Modification		Modification
	Number		Outstanding		Outstanding
	of		Recorded		Recorded
	Contracts		Investment		Investment
Residential mortgage,
Residential mortgage loans - first liens		1	$	102	$	102
Commercial,
Commercial and Industrial		1		5		5
Consumer		1		25		25

Nine Months Ended September 30, 2015			Pre-		Post-
(Balances in Thousands)			Modification		Modification
	Number		Outstanding		Outstanding
	of		Recorded		Recorded
	Contracts		Investment		Investment
Residential mortgage:
Residential mortgage loans - first liens		1	$	56	$	56
Residential mortgage loans - junior liens		1		32		32
Consumer		1		30		30

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

Summary of Loans by Type
(In Thousands)	Sept. 30,			Dec. 31,
	2016			2015
Residential mortgage:
Residential mortgage loans - first liens	$	325,533		$	304,783
Residential mortgage loans - junior liens		22,794			21,146
Home equity lines of credit		38,623			39,040
1-4 Family residential construction		23,310			21,121
Total residential mortgage		410,260			386,090
Commercial:
Commercial loans secured by real estate		149,938			154,779
Commercial and industrial		86,969			75,196
Political subdivisions		38,653			40,007
Commercial construction and land		12,809			5,122
Loans secured by farmland		6,900			7,019
Multi-family (5 or more) residential		8,133			9,188
Agricultural loans		4,313			4,671
Other commercial loans		11,557			12,152
Total commercial		319,272			308,134
Consumer		12,806			10,656
Total		742,338			704,880
Less: allowance for loan losses		(8,421	)		(7,889	)
Loans, net	$	733,917		$	696,991

Allowance for Credit Losses on Financing Receivables [Table Text Block]

Three Months Ended September 30, 2016	June 30,										Sept. 30,
(In Thousands)	2016 Balance		Charge-offs			Recoveries		Provision (Credit)			2016 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,830	$	(31	)	$	2	$	155		$	2,956
Residential mortgage loans - junior liens		239		0			0		9			248
Home equity lines of credit		359		0			0		0			359
1-4 Family residential construction		222		0			0		14			236
Total residential mortgage		3,650		(31	)		2		178			3,799
Commercial:
Commercial loans secured by real estate		2,083		0			0		304			2,387
Commercial and industrial		1,038		(2	)		1		1			1,038
Commercial construction and land		105		0			0		41			146
Loans secured by farmland		103		0			0		3			106
Multi-family (5 or more) residential		248		0			0		(5	)		243
Agricultural loans		47		0			0		(4	)		43
Other commercial loans		119		0			0		(3	)		116
Total commercial		3,743		(2	)		1		337			4,079
Consumer		138		(28	)		12		23			145
Unallocated		398		0			0		0			398
Total Allowance for Loan Losses	$	7,929	$	(61	)	$	15	$	538		$	8,421

Three Months Ended September 30, 2015	June 30,										Sept. 30,
(In Thousands)	2015 Balance		Charge-offs			Recoveries		Provision (Credit)			2015 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,775	$	(12	)	$	0	$	(112	)	$	2,651
Residential mortgage loans - junior liens		210		(42	)		0		45			213
Home equity lines of credit		344		0			0		(5	)		339
1-4 Family residential construction		257		0			0		55			312
Total residential mortgage		3,586		(54	)		0		(17	)		3,515
Commercial:
Commercial loans secured by real estate		1,692		0			0		39			1,731
Commercial and industrial		800		0			1		127			928
Commercial construction and land		296		(115	)		0		(74	)		107
Loans secured by farmland		155		0			0		(45	)		110
Multi-family (5 or more) residential		80		0			0		231			311
Agricultural loans		40		0			0		3			43
Other commercial loans		120		0			0		1			121
Total commercial		3,183		(115	)		1		282			3,351
Consumer		135		(28	)		10		6			123
Unallocated		396		0			0		31			427
Total Allowance for Loan Losses	$	7,300	$	(197	)	$	11	$	302		$	7,416

Nine Months Ended September 30, 2016	Dec. 31,										Sept. 30,
(In Thousands)	2015 Balance		Charge-offs			Recoveries		Provision (Credit)			2016 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,645	$	(73	)	$	2	$	382		$	2,956
Residential mortgage loans - junior liens		219		0			0		29			248
Home equity lines of credit		347		0			0		12			359
1-4 Family residential construction		207		0			0		29			236
Total residential mortgage		3,418		(73	)		2		452			3,799
Commercial:
Commercial loans secured by real estate		1,939		0			2		446			2,387
Commercial and industrial		981		(2	)		2		57			1,038
Commercial construction and land		58		0			0		88			146
Loans secured by farmland		106		0			0		0			106
Multi-family (5 or more) residential		675		(595	)		0		163			243
Agricultural loans		45		0			0		(2	)		43
Other commercial loans		118		0			0		(2	)		116
Total commercial		3,922		(597	)		4		750			4,079
Consumer		122		(67	)		39		51			145
Unallocated		427		0			0		(29	)		398
Total Allowance for Loan Losses	$	7,889	$	(737	)	$	45	$	1,224		$	8,421

Nine Months Ended September 30, 2015	Dec. 31,										Sept. 30,
(In Thousands)	2014 Balance		Charge-offs			Recoveries		Provision (Credit)			2015 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,941	$	(149	)	$	1	$	(142	)	$	2,651
Residential mortgage loans - junior liens		176		(42	)		0		79			213
Home equity lines of credit		322		0			0		17			339
1-4 Family residential construction		214		0			0		98			312
Total residential mortgage		3,653		(191	)		1		52			3,515
Commercial:
Commercial loans secured by real estate		1,758		(115	)		0		88			1,731
Commercial and industrial		688		(10	)		5		245			928
Commercial construction and land		283		(115	)		0		(61	)		107
Loans secured by farmland		165		0			0		(55	)		110
Multi-family (5 or more) residential		87		0			0		224			311
Agricultural loans		31		0			0		12			43
Other commercial loans		131		0			0		(10	)		121
Total commercial		3,143		(240	)		5		443			3,351
Consumer		145		(65	)		44		(1	)		123
Unallocated		395		0			0		32			427
Total Allowance for Loan Losses	$	7,336	$	(496	)	$	50	$	526		$	7,416

Financing Receivable Credit Quality Indicators [Table Text Block]

September 30, 2016
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	315,849	$	331	$	9,292	$	61	$	325,533
Residential mortgage loans - junior liens		22,376		145		273		0		22,794
Home equity lines of credit		37,925		124		574		0		38,623
1-4 Family residential construction		23,310		0		0		0		23,310
Total residential mortgage		399,460		600		10,139		61		410,260
Commercial:
Commercial loans secured by real estate		133,140		3,087		13,711		0		149,938
Commercial and Industrial		82,076		4,196		686		11		86,969
Political subdivisions		38,653		0		0		0		38,653
Commercial construction and land		12,707		66		36		0		12,809
Loans secured by farmland		5,243		168		1,472		17		6,900
Multi-family (5 or more) residential		7,505		0		628		0		8,133
Agricultural loans		3,503		0		810		0		4,313
Other commercial loans		11,482		0		75		0		11,557
Total commercial		294,309		7,517		17,418		28		319,272
Consumer		12,651		0		155		0		12,806
Totals	$	706,420	$	8,117	$	27,712	$	89	$	742,338

December 31, 2015
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	295,302	$	407	$	9,007	$	67	$	304,783
Residential mortgage loans - junior liens		20,558		185		403		0		21,146
Home equity lines of credit		38,071		543		426		0		39,040
1-4 Family residential construction		21,104		17		0		0		21,121
Total residential mortgage		375,035		1,152		9,836		67		386,090
Commercial:
Commercial loans secured by real estate		140,381		5,862		8,536		0		154,779
Commercial and Industrial		71,225		2,106		1,737		128		75,196
Political subdivisions		40,007		0		0		0		40,007
Commercial construction and land		4,957		60		105		0		5,122
Loans secured by farmland		5,084		483		1,432		20		7,019
Multi-family (5 or more) residential		7,943		0		1,245		0		9,188
Agricultural loans		4,655		0		16		0		4,671
Other commercial loans		12,073		0		79		0		12,152
Total commercial		286,325		8,511		13,150		148		308,134
Consumer		10,490		21		145		0		10,656
Totals	$	671,850	$	9,684	$	23,131	$	215	$	704,880

Impaired Financing Receivable by Portfolio Segment [Table Text Block]

September 30, 2016	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	734	$	324,799	$	325,533	$	0	$	2,956	$	2,956
Residential mortgage loans - junior liens		70		22,724		22,794		0		248		248
Home equity lines of credit		0		38,623		38,623		0		359		359
1-4 Family residential construction		0		23,310		23,310		0		236		236
Total residential mortgage		804		409,456		410,260		0		3,799		3,799
Commercial:
Commercial loans secured by real estate		8,088		141,850		149,938		528		1,859		2,387
Commercial and industrial		439		86,530		86,969		106		932		1,038
Political subdivisions		0		38,653		38,653		0		0		0
Commercial construction and land		0		12,809		12,809		0		146		146
Loans secured by farmland		1,399		5,501		6,900		51		55		106
Multi-family (5 or more) residential		392		7,741		8,133		0		243		243
Agricultural loans		13		4,300		4,313		0		43		43
Other commercial loans		0		11,557		11,557		0		116		116
Total commercial		10,331		308,941		319,272		685		3,394		4,079
Consumer		0		12,806		12,806		0		145		145
Unallocated												398
Total	$	11,135	$	731,203	$	742,338	$	685	$	7,338	$	8,421

December 31, 2015	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	884	$	303,899	$	304,783	$	1	$	2,644	$	2,645
Residential mortgage loans - junior liens		74		21,072		21,146		0		219		219
Home equity lines of credit		0		39,040		39,040		0		347		347
1-4 Family residential construction		0		21,121		21,121		0		207		207
Total residential mortgage		958		385,132		386,090		1		3,417		3,418
Commercial:
Commercial loans secured by real estate		6,262		148,517		154,779		97		1,842		1,939
Commercial and industrial		324		74,872		75,196		75		906		981
Political subdivisions		0		40,007		40,007		0		0		0
Commercial construction and land		0		5,122		5,122		0		58		58
Loans secured by farmland		1,427		5,592		7,019		52		54		106
Multi-family (5 or more) residential		987		8,201		9,188		595		80		675
Agricultural loans		16		4,655		4,671		0		45		45
Other commercial loans		0		12,152		12,152		0		118		118
Total commercial		9,016		299,118		308,134		819		3,103		3,922
Consumer		0		10,656		10,656		0		122		122
Unallocated												427
Total	$	9,974	$	694,906	$	704,880	$	820	$	6,642	$	7,889

Impaired Financing Receivables [Table Text Block]

(In Thousands)	September 30, 2016						December 31, 2015
	Unpaid						Unpaid
	Principal		Recorded		Related		Principal		Recorded		Related
	Balance		Investment		Allowance		Balance		Investment		Allowance
With no related allowance recorded:
Residential mortgage loans - first liens	$	764	$	734	$	0	$	842	$	842	$	0
Residential mortgage loans - junior liens		70		70		0		74		74		0
Commercial loans secured by real estate		7,003		5,294		0		7,580		5,945		0
Commercial and industrial		118		118		0		249		249		0
Loans secured by farmland		893		893		0		915		915		0
Multi-family (5 or more) residential		987		392		0		0		0		0
Agricultural loans		13		13		0		16		16		0
Total with no related allowance recorded		9,848		7,514		0		9,676		8,041		0
With a related allowance recorded:
Residential mortgage loans - first liens		0		0		0		42		42		1
Commercial loans secured by real estate		2,794		2,794		528		317		317		97
Commercial and industrial		321		321		106		75		75		75
Loans secured by farmland		506		506		51		512		512		52
Multi-family (5 or more) residential		0		0		0		987		987		595
Consumer		0		0		0		0		0		0
Total with a related allowance recorded		3,621		3,621		685		1,933		1,933		820
Total	$	13,469	$	11,135	$	685	$	11,609	$	9,974	$	820

Schedule Of Additional Information On Impaired Loans [Table Text Block]

									Interest Income Recognized on
	Average Investment in Impaired Loans								Impaired Loans on a Cash Basis
(In Thousands)	3 Months Ended				9 Months Ended				3 Months Ended				9 Months Ended
	Sept. 30,				Sept. 30,				Sept. 30,				Sept. 30,
	2016		2015		2016		2015		2016		2015		2016		2015
Residential mortgage:
Residential mortgage loans - first lien	$	789	$	1,990	$	818	$	2,534	$	11	$	9	$	33	$	67
Residential mortgage loans - junior lien		72		67		72		62		0		1		2		3
Total residential mortgage		861		2,057		890		2,596		11		10		35		70
Commercial:
Commercial loans secured by real estate		7,022		6,327		6,524		6,382		83		90		274		293
Commercial and industrial		577		421		619		467		7		4		17		16
Commercial construction and land		0		42		0		50		0		0		0		0
Loans secured by farmland		1,408		1,466		1,413		1,467		13		26		51		78
Multi-family (5 or more) residential		492		741		541		741		0		0		0		0
Agricultural loans		13		21		14		22		0		1		1		3
Total commercial		9,512		9,018		9,111		9,129		103		121		343		390
Consumer		17		0		16		0		0		0		0		0
Total	$	10,390	$	11,075	$	10,017	$	11,725	$	114	$	131	$	378	$	460

Schedule of Financing Receivables, Non Accrual Status [Table Text Block]

(In Thousands)	September 30, 2016				December 31, 2015
	Past Due				Past Due
	90+ Days and				90+ Days and
	Accruing		Nonaccrual		Accruing		Nonaccrual
Residential mortgage:
Residential mortgage loans - first liens	$	4,016	$	2,537	$	2,381	$	3,044
Residential mortgage loans - junior liens		58		0		79		0
Home equity lines of credit		106		11		130		0
Total residential mortgage		4,180		2,548		2,590		3,044
Commercial:
Commercial loans secured by real estate		2,795		7,898		503		5,730
Commercial and industrial		313		193		65		313
Loans secured by farmland		219		1,399		0		1,427
Multi-family (5 or more) residential		0		392		0		987
Agricultural loans		16		13		0		16
Total commercial		3,343		9,895		568		8,473
Consumer		16		38		71		0
Totals	$	7,539	$	12,481	$	3,229	$	11,517

Past Due Financing Receivables [Table Text Block]

	As of September 30, 2016								As of December 31, 2015
	Current &								Current &
(In Thousands)	Past Due		Past Due		Past Due				Past Due		Past Due		Past Due
	Less than		30-89		90+				Less than		30-89		90+
	30 Days		Days		Days		Total		30 Days		Days		Days		Total
Residential mortgage:
Residential mortgage loans - first liens	$	316,869	$	3,058	$	5,606	$	325,533	$	294,703	$	6,156	$	3,924	$	304,783
Residential mortgage loans - junior liens		22,544		192		58		22,794		20,816		251		79		21,146
Home equity lines of credit		38,143		374		106		38,623		38,581		329		130		39,040
1-4 Family residential construction		23,079		231		0		23,310		21,121		0		0		21,121
Total residential mortgage		400,635		3,855		5,770		410,260		375,221		6,736		4,133		386,090
Commercial:
Commercial loans secured by real estate		146,888		107		2,943		149,938		153,427		108		1,244		154,779
Commercial and industrial		86,637		8		324		86,969		75,002		118		76		75,196
Political subdivisions		38,653		0		0		38,653		40,007		0		0		40,007
Commercial construction and land		12,801		8		0		12,809		5,018		104		0		5,122
Loans secured by farmland		5,807		62		1,031		6,900		5,970		223		826		7,019
Multi-family (5 or more) residential		7,657		84		392		8,133		8,201		0		987		9,188
Agricultural loans		4,156		128		29		4,313		4,642		13		16		4,671
Other commercial loans		11,557		0		0		11,557		12,152		0		0		12,152
Total commercial		314,156		397		4,719		319,272		304,419		566		3,149		308,134
Consumer		12,544		208		54		12,806		10,537		48		71		10,656
Totals	$	727,335	$	4,460	$	10,543	$	742,338	$	690,177	$	7,350	$	7,353	$	704,880

Contractual Aging of Nonaccrual Loans [Table Text Block]

	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than			30-89	90+
	30 Days		Days		Days		Total
September 30, 2016 Nonaccrual Totals	$	9,057	$	420	$	3,004	$	12,481
December 31, 2015 Nonaccrual Totals	$	7,100	$	293	$	4,124	$	11,517

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Nonaccrual		Total
September 30, 2016 Totals	$	889	$	57	$	0	$	5,032	$	5,978
December 31, 2015 Totals	$	1,186	$	0	$	81	$	5,097	$	6,364

Schedule of Troubled Debt Restructurings With Subsequent Default [Table Text Block]

	Number
	of		Recorded
	Contracts		Investment
Three Months Ended September 30, 2015
(Balances in Thousands)
Residential mortgage,
Residential mortgage loans - first liens		1	$	32

	Number
	of		Recorded
	Contracts		Investment
Nine Months Ended September 30, 2016
(Balances in Thousands)
Residential mortgage:
Residential mortgage loans - first liens		1	$	242
Residential mortgage loans - junior liens		1		30
Commercial,
Commercial and industrial		1		5
Consumer		1		28

	Number
	of		Recorded
	Contracts		Investment
Nine Months Ended September 30, 2015
(Balances in Thousands)
Residential mortgage,
Residential mortgage loans - first liens		2	$	65
Commercial,
Commercial construction and land		1		25

Schedule of Real Estate Acquired Through Foreclosure [Table Text Block]

(In Thousands)	Sept. 30,		Dec. 31,
	2016		2015
Foreclosed residential real estate	$	1,195	$	555

Schedule of Mortgage Loans in Process of Foreclosure [Table Text Block]

(In Thousands)	Sept. 30,		Dec. 31,
	2016		2015
Residential real estate in process of foreclosure	$	1,991	$	1,173

XML

Note 8 - Borrowed Funds (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Schedule of Short-term Debt [Table Text Block]

(In Thousands)	Sept. 30,		Dec. 31,
	2016		2015
FHLB-Pittsburgh borrowings	$	8,270	$	48,581
Customer repurchase agreements		6,320		4,915
Total short-term borrowings	$	14,590	$	53,496

(In Thousands)	Sept. 30,		Dec. 31
	2016		2015
Overnight borrowing	$	2,000	$	23,500
Other short-term advances		6,270		25,081
Total short-term FHLB-Pittsburgh borrowings	$	8,270	$	48,581

Schedule of Long-term Debt Instruments [Table Text Block]

(In Thousands)	Sept. 30,		Dec. 31,
	2016		2015
FHLB-Pittsburgh borrowings	$	11,538	$	11,767
Repurchase agreement		27,000		27,000
Total long-term borrowings	$	38,538	$	38,767

Schedule of Maturities of Long-term Debt [Table Text Block]

(In Thousands)	Sept. 30,		Dec. 31,
	2016		2015
Loan maturing in 2016 with a rate of 6.86%	$	18	$	57
Loan maturing in 2017 with a rate of 6.83%		6		10
Loan maturing in 2017 with a rate of 3.81%		10,000		10,000
Loan maturing in 2020 with a rate of 4.79%		691		821
Loan maturing in 2025 with a rate of 4.91%		823		879
Total long-term FHLB-Pittsburgh borrowings	$	11,538	$	11,767

Schedule of Underlying Assets of Repurchase Agreements when Amount of Repurchase Agreements Exceeds 10 Percent of Assets [Table Text Block]

(In Thousands)	Sept. 30,		Dec. 31,
	2016		2015
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities	$	19,444	$	15,772
Residential collateralized mortgage obligations		14,686		18,008
Total	$	34,130	$	33,780

XML

Note 9 - Defined Benefit Plans (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Schedule of Defined Benefit Plans Disclosures [Table Text Block]

Defined Benefit Plans
(In Thousands)	Pension						Postretirement
	Nine Months Ended						Nine Months Ended
	Sept. 30,						Sept. 30,
	2016			2015			2016			2015
Service cost	$	0		$	0		$	27		$	29
Interest cost		20			27			47			42
Expected return on plan assets		(20	)		(34	)		0			0
Amortization of prior service cost		0			0			(23	)		(22	)
Recognized net actuarial loss		8			11			0			0
Net periodic benefit cost	$	8		$	4		$	51		$	49

Defined Benefit Plans
(In Thousands)	Pension						Postretirement
	Three Months Ended						Three Months Ended
	Sept. 30,						Sept. 30,
	2016			2015			2016			2015
Service cost	$	0		$	0		$	9		$	10
Interest cost		7			9			16			14
Expected return on plan assets		(7	)		(11	)		0			0
Amortization of prior service cost		0			0			(8	)		(7	)
Recognized net actuarial loss		3			4			0			0
Net periodic benefit cost	$	3		$	2		$	17		$	17

XML

Note 10 - Stock-based Compensation Plans (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Schedule of Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Table Text Block]

(In Thousands)	3 Months Ended				9 Months Ended
	Sept. 30,		Sept. 30,		Sept. 30,		Sept. 30,
	2016		2015		2016		2015
Restricted stock	$	155	$	152	$	480	$	459

XML

Note 11 - Income Taxes (Tables)

9 Months Ended

Sep. 30, 2016

Notes Tables

Schedule of Deferred Tax Assets and Liabilities [Table Text Block]

	September 30,		December 31,
(In Thousands)	2016		2015
Deferred tax assets:
Net realized losses on securities		36	$	69
Allowance for loan losses		2,980		2,761
Other deferred tax assets		2,517		2,634
Total deferred tax assets		5,533		5,464
Deferred tax liabilities:
Unrealized holding gains on securities		2,902		1,342
Defined benefit plans - ASC 835		23		19
Bank premises and equipment		952		869
Core deposit intangibles		7		11
Other deferred tax liabilities		105		108
Total deferred tax liabilities		3,989		2,349
Deferred tax asset, net	$	1,544	$	3,115

Schedule of Effective Income Tax Rate Reconciliation [Table Text Block]

	3 Months Ended						9 Months Ended
(In thousands)	September 30,						September 30,
	2016			2015			2016			2015
Income before income tax provision	$	5,538		$	5,629		$	15,378		$	16,482
Income tax provision		1,451			1,395			3,847			4,076
Effective tax rate		26.20	%		24.78	%		25.02	%		24.73	%

XML

Note 2 - Per Share Data (Details Textual) - shares	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	22,715	47,974	39,054	66,351

XML

Note 2 - Per Share Data - Net Income Per Share (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Net income	$ 4,087,000	$ 4,234,000	$ 11,531,000	$ 12,406,000
Earnings per share – basic (in shares)	12,078,397	12,200,129	12,098,554	12,222,557
Earnings per share – basic (in dollars per share)	$ 0.34	$ 0.35	$ 0.95	$ 1.02
Exercise of outstanding stock options (in shares)	215,154	204,449	219,679	213,511
Hypothetical share repurchase at $20.48 (in shares)	(185,355)	184,248	(195,659)	(192,322)
Earnings per share – diluted (in shares)	12,108,196	12,220,330	12,122,574	12,243,746
Earnings per share – diluted (in dollars per share)	$ 0.34	$ 0.35	$ 0.95	$ 1.01
Hypothetical share repurchase at $19.90 (in shares)	185,355	(184,248)	195,659	192,322

XML

Note 2 - Per Share Data - Net Income Per Share (Details) (Parentheticals) - $ / shares	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Hypothetical share repurchase price (in dollars per share)	$ 21.20	$ 19.90	$ 20.48	$ 19.94

XML

Note 3 - Comprehensive Income - Components of Other Comprehensive Income (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Unrealized holding gains (losses) on available-for-sale securities, before tax amount	$ (1,661,000)	$ 3,216,000	$ 5,544,000	$ 2,369,000
Unrealized holding gains (losses) on available-for-sale securities, income tax effect	580,000	1,126,000	(1,941,000)	(829,000)
Unrealized holding gains (losses) on available-for-sale securities, net of tax amount	(1,081,000)	2,090,000	3,603,000	1,540,000
Reclassification adjustment for (gains) realized in income, before tax amount	(584,000)	(79,000)	(1,089,000)	(1,085,000)
Reclassification adjustment for (gains) realized in income, income tax effect	204,000	28,000	381,000	380,000
Reclassification adjustment for (gains) realized in income, net of tax amount	(380,000)	(51,000)	(708,000)	(705,000)
Other comprehensive gain on available-for-sale securities, before tax amount	(2,245,000)	3,137,000	4,455,000	1,284,000
Other comprehensive gain on available-for-sale securities, income tax effect	784,000	(1,098,000)	(1,560,000)	(449,000)
Other comprehensive gain on available-for-sale securities, net of tax amount	(1,461,000)	2,039,000	2,895,000	835,000
Changes from plan amendments and actuarial gains and losses included in other comprehensive income, before tax amount	0	0	26,000	(100,000)
Changes from plan amendments and actuarial gains and losses included in other comprehensive income, income tax effect	0	0	(9,000)	35,000
Changes from plan amendments and actuarial gains and losses included in other comprehensive income, net of tax amount	0	0	17,000	(65,000)
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost, before tax amount	(5,000)	(3,000)	(15,000)	(11,000)
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost, income tax effect	2,000	0	5,000	3,000
Amortization of net transition obligation, prior service cost and net actuarial loss included in net periodic benefit cost, net of tax amount	(3,000)	(3,000)	(10,000)	(8,000)
Other comprehensive (income) loss on unfunded retirement obligations	(5,000)	(3,000)	11,000	(111,000)
Other comprehensive income on unfunded retirement obligations	2,000	0	(4,000)	38,000
Other comprehensive income on unfunded retirement obligations	(3,000)	(3,000)	7,000	(73,000)
Total other comprehensive gain, before tax amount	2,250,000	3,134,000	4,466,000	1,173,000
Total other comprehensive gain, income tax effect	786,000	(1,098,000)	(1,564,000)	(411,000)
Net other comprehensive income (loss)	(1,464,000)	2,036,000	2,902,000	762,000
Total other comprehensive loss	(2,250,000)	(3,134,000)	(4,466,000)	(1,173,000)
Unrealized holding gains on available-for-sale securities	$ (580,000)	$ (1,126,000)	$ 1,941,000	$ 829,000

XML

Note 3 - Comprehensive Income - Changes in the Components of Accumulated Other Comprehensive Income (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Balance, beginning of period	$ 6,849,000	$ 4,077,000	$ 2,493,000	$ 5,281,000
Other comprehensive income before reclassifications	(1,081,000)	2,090,000	3,603,000	1,540,000
Amounts reclassified from accumulated other comprehensive income	(380,000)	(51,000)	(708,000)	(705,000)
Net other comprehensive (loss) income	(1,461,000)	2,039,000	2,895,000	835,000
Balance, end of period	5,388,000	6,116,000	5,388,000	6,116,000
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Balance, beginning of period	45,000	9,000	35,000	79,000
Other comprehensive income before reclassifications	0	0	17,000	(65,000)
Amounts reclassified from accumulated other comprehensive income	(3,000)	(3,000)	(10,000)	(8,000)
Net other comprehensive (loss) income	(3,000)	(3,000)	7,000	(73,000)
Balance, end of period	42,000	6,000	42,000	6,000
AOCI Attributable to Parent [Member]
Balance, beginning of period	6,894,000	4,086,000	2,528,000	5,360,000
Other comprehensive income before reclassifications	(1,081,000)	2,090,000	3,620,000	1,475,000
Amounts reclassified from accumulated other comprehensive income	(383,000)	(54,000)	(718,000)	(713,000)
Net other comprehensive (loss) income	(1,464,000)	2,036,000	2,902,000	762,000
Balance, end of period	5,430,000	6,122,000	5,430,000	6,122,000
Balance, beginning of period			2,528,000
Net other comprehensive (loss) income	(1,464,000)	$ 2,036,000	2,902,000	$ 762,000
Balance, end of period	$ 5,430,000		$ 5,430,000

XML

Note 3 - Comprehensive Income - Amounts Reclassified Out of Each Component of OCI (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Unrealized gains and losses on available-for-sale securities	$ (584,000)	$ (79,000)	$ (1,089,000)	$ (1,085,000)
Income tax provision	204,000	28,000	381,000	380,000
Net income	(380,000)	(51,000)	(708,000)	(705,000)
Income tax position	(204,000)	(28,000)	(381,000)	(380,000)
Net income	380,000	51,000	708,000	705,000
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Income tax provision	(2,000)	0	(5,000)	(3,000)
Net income	(3,000)	(3,000)	(10,000)	(8,000)
Prior service cost	(8,000)	(7,000)	(23,000)	(22,000)
Actuarial loss	3,000	4,000	8,000	11,000
Total before tax	(5,000)	(3,000)	(15,000)	(11,000)
Income tax position	2,000	0	5,000	3,000
Net income	3,000	3,000	10,000	8,000
Reclassification out of Accumulated Other Comprehensive Income [Member]
Net income	383,000	54,000	718,000	713,000
Net income	(383,000)	(54,000)	(718,000)	(713,000)
Unrealized gains and losses on available-for-sale securities	(584,000)	(79,000)	(1,089,000)	(1,085,000)
Income tax provision	1,451,000	1,395,000	3,847,000	4,076,000
Net income	(4,087,000)	(4,234,000)	(11,531,000)	(12,406,000)
Total before tax	(5,538,000)	(5,629,000)	(15,378,000)	(16,482,000)
Income tax position	(1,451,000)	(1,395,000)	(3,847,000)	(4,076,000)
Net income	$ 4,087,000	$ 4,234,000	$ 11,531,000	$ 12,406,000

XML

Note 4 - Cash and Due from Banks (Details Textual) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Restricted Cash and Cash Equivalents, Current	$ 13,141,000	$ 15,327,000

XML

Note 4 - Cash and Due from Banks - Cash and Due From Banks (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Cash and cash equivalents	$ 30,102,000	$ 33,313,000
Certificates of deposit	3,968,000	2,748,000
Total cash and due from banks	$ 34,070,000	$ 36,061,000

XML

Note 5 - Fair Value Measurements and Fair Values of Financial Instruments - Assets Measured at Fair Value (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	$ 0	$ 0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Tax Exempt [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Taxable [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Residential Pass-Through Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Residential Collateralized Mortgage Obligations [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Commercial Mortgage Backed Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Collateralized Debt Obligations [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities		0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Debt Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	1,080,000	2,386,000
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	1,080,000	2,386,000
Servicing rights	0	0
Total recurring fair value measurements	1,080,000	2,386,000
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	0	0
Valuation allowance	0	0
Impaired loans, net	0	0
Foreclosed assets held for sale	0	0
Total nonrecurring fair value measurements	0	0
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	9,747,000	10,483,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Tax Exempt [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	121,283,000	107,757,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Taxable [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	33,672,000	34,597,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Residential Pass-Through Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	62,187,000	73,343,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Residential Collateralized Mortgage Obligations [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	165,719,000	191,715,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Commercial Mortgage Backed Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	16,112,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Collateralized Debt Obligations [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities		9,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Debt Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	408,720,000	417,904,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	0	0
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	408,720,000	417,904,000
Servicing rights	0	0
Total recurring fair value measurements	408,720,000	417,904,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	0	0
Valuation allowance	0	0
Impaired loans, net	0	0
Foreclosed assets held for sale	0	0
Total nonrecurring fair value measurements	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Tax Exempt [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Taxable [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Residential Pass-Through Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Residential Collateralized Mortgage Obligations [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Commercial Mortgage Backed Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Collateralized Debt Obligations [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities		0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Debt Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	0	0
Servicing rights	1,208,000	1,296,000
Total recurring fair value measurements	1,208,000	1,296,000
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	3,621,000	1,933,000
Valuation allowance	(685,000)	(820,000)
Impaired loans, net	2,936,000	1,113,000
Foreclosed assets held for sale	2,321,000	1,260,000
Total nonrecurring fair value measurements	5,257,000	2,373,000
Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member] | Estimate of Fair Value Measurement [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	9,747,000	10,483,000
Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Tax Exempt [Member] | Estimate of Fair Value Measurement [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	121,283,000	107,757,000
Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Taxable [Member] | Estimate of Fair Value Measurement [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	33,672,000	34,597,000
Fair Value, Measurements, Recurring [Member] | Residential Pass-Through Securities [Member] | Estimate of Fair Value Measurement [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	62,187,000	73,343,000
Fair Value, Measurements, Recurring [Member] | Residential Collateralized Mortgage Obligations [Member] | Estimate of Fair Value Measurement [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	165,719,000	191,715,000
Fair Value, Measurements, Recurring [Member] | Commercial Mortgage Backed Securities [Member] | Estimate of Fair Value Measurement [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	16,112,000
Fair Value, Measurements, Recurring [Member] | Collateralized Debt Obligations [Member] | Estimate of Fair Value Measurement [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities		9,000
Fair Value, Measurements, Recurring [Member] | Debt Securities [Member] | Estimate of Fair Value Measurement [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	408,720,000	417,904,000
Fair Value, Measurements, Recurring [Member] | Equity Securities [Member] | Estimate of Fair Value Measurement [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	1,080,000	2,386,000
Fair Value, Measurements, Recurring [Member] | Estimate of Fair Value Measurement [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	409,800,000	420,290,000
Servicing rights	1,208,000	1,296,000
Total recurring fair value measurements	411,008,000	421,586,000
Fair Value, Measurements, Nonrecurring [Member] | Estimate of Fair Value Measurement [Member]
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	3,621,000	1,933,000
Valuation allowance	(685,000)	(820,000)
Impaired loans, net	2,936,000	1,113,000
Foreclosed assets held for sale	2,321,000	1,260,000
Total nonrecurring fair value measurements	5,257,000	2,373,000
US Government Agencies Debt Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	9,747,000	10,483,000
Obligations of States and Political Subdivisions Tax Exempt [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	121,283,000	107,757,000
Obligations of States and Political Subdivisions Taxable [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	33,672,000	34,597,000
Residential Pass-Through Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	62,187,000	73,343,000
Residential Collateralized Mortgage Obligations [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	165,719,000	191,715,000
Commercial Mortgage Backed Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	16,112,000
Collateralized Debt Obligations [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities		9,000
Debt Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	408,720,000	417,904,000
Equity Securities [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	1,080,000	2,386,000
Estimate of Fair Value Measurement [Member]
AVAILABLE-FOR-SALE SECURITIES:
Available-for-sale securities	409,800,000	420,290,000
Available-for-sale securities	409,800,000	420,290,000
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	3,621,000	1,933,000
Valuation allowance	(685,000)	(820,000)
Impaired loans, net	$ 3,621,000	$ 1,933,000

XML

Note 5 - Fair Value Measurements and Fair Values of Financial Instruments - Valuation Techniques and the Unobservable Inputs Used in Determining Fair Value- Recurring Basis (Details) - Servicing Rights Assets [Member] - Income Approach Valuation Technique [Member] - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Fair value	$ 1,208,000	$ 1,296,000
Discount rate	10.00%	10.00%
Weighted-average PSA	194.00%	146.00%
Servicing fees of loan balances	0.25%	0.25%
Servicing fees of payments are late	4.00%	4.00%
Late fees assessed	5.00%	5.00%
Miscellaneous fees per account per month	$ 1,940	$ 1,940
Monthly servicing cost per account	6,000	6,000
Additional monthly servicing cost per loan on loans more than 30 days delinquent	$ 24,000	$ 24,000
Servicing costs of loans more than 30 days delinquent	1.50%	1.50%
Annual increase in servicing costs	3.00%	3.00%

XML

Note 5 - Fair Value Measurements and Fair Values of Financial Instruments - Reconciliation of Activity for Level 3 Assets Measured at Fair Value on a Recurring Basis (Details) - Servicing Rights Assets [Member] - Fair Value, Inputs, Level 3 [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Servicing rights balance, beginning of period	$ 1,224	$ 1,209	$ 1,296	$ 1,281
Issuances of servicing rights	52	57	159	135
Unrealized (losses) gains included in earnings	(68)	13	(247)	(137)
Servicing rights balance, end of period	$ 1,208	$ 1,279	$ 1,208	$ 1,279

XML

Note 5 - Fair Value Measurements and Fair Values of Financial Instruments - Valuation Techniques and the Unobservable Inputs Used in Determining Fair Value- Nonrecurring Basis (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Impaired Loans [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Recorded investment - with allowance		$ 31,000
Discount rate	0.00%
Impaired loans		31,000
Impaired Loans [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Market Approach Valuation Technique [Member]
Recorded investment - with allowance	$ 0	42,000
Valuation allowance	0	1,000
Fair value	0
Impaired loans	$ 0	$ 42,000
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	7.00%	46.00%
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Market Approach Valuation Technique [Member]
Recorded investment - with allowance	$ 2,794,000	$ 317,000
Valuation allowance	528,000	97,000
Fair value	2,266,000	220,000
Impaired loans	$ 2,794,000	$ 317,000
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	35.00%	31.00%
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Market Approach Valuation Technique [Member]
Recorded investment - with allowance	$ 321,000	$ 75,000
Valuation allowance	106,000	75,000
Fair value	215,000	0
Impaired loans	$ 321,000	$ 75,000
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Commercial Construction and Land [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	0.00%	0.00%
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Commercial Construction and Land [Member] | Market Approach Valuation Technique [Member]
Recorded investment - with allowance	$ 0	$ 0
Valuation allowance	0	0
Fair value	0	0
Impaired loans	$ 0	$ 0
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	55.00%	49.00%
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Market Approach Valuation Technique [Member]
Recorded investment - with allowance	$ 506,000	$ 512,000
Valuation allowance	51,000	52,000
Fair value	455,000	460,000
Impaired loans	$ 506,000	$ 512,000
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	0.00%	41.00%
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member] | Market Approach Valuation Technique [Member]
Recorded investment - with allowance	$ 0	$ 987,000
Valuation allowance	0	595,000
Fair value	0	392,000
Impaired loans	0	987,000
Impaired Loans [Member]
Recorded investment - with allowance	3,621,000	1,933,000
Valuation allowance	685,000	820,000
Fair value	2,936,000	1,113,000
Impaired loans	$ 3,621,000	1,933,000
Foreclosed Assets Held For Sale [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Market Approach Valuation Technique [Member]
Fair value		$ 41,000
Foreclosed Assets Held For Sale [Member] | Residential Portfolio Segment [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	39.00%	32.00%
Foreclosed Assets Held For Sale [Member] | Residential Portfolio Segment [Member] | Market Approach Valuation Technique [Member]
Fair value	$ 1,195,000	$ 556,000
Foreclosed residential real estate	1,195,000	556,000
Valuation allowance	0	0
Foreclosed assets held for sale	$ 1,195,000	$ 556,000
Foreclosed Assets Held For Sale [Member] | Land Receivable [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	29.00%	29.00%
Foreclosed Assets Held For Sale [Member] | Land Receivable [Member] | Market Approach Valuation Technique [Member]
Fair value	$ 696,000	$ 704,000
Foreclosed residential real estate	696,000	704,000
Valuation allowance	0	0
Foreclosed assets held for sale	$ 696,000	704,000
Foreclosed Assets Held For Sale [Member] | Commercial Real Estate Receivables [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	50.00%
Foreclosed Assets Held For Sale [Member] | Commercial Real Estate Receivables [Member] | Market Approach Valuation Technique [Member]
Fair value	$ 430,000
Foreclosed residential real estate	430,000
Valuation allowance	0
Foreclosed assets held for sale	430,000
Foreclosed Assets Held For Sale [Member]
Fair value	2,321,000	1,260,000
Foreclosed residential real estate	2,321,000	1,260,000
Valuation allowance	0	0
Foreclosed assets held for sale	2,321,000	1,260,000
Residential Portfolio Segment [Member]
Foreclosed residential real estate	1,195,000	555,000
Foreclosed assets held for sale	1,195,000	555,000
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Recorded investment - with allowance	2,794,000	317,000
Valuation allowance	528,000	97,000
Impaired loans	2,794,000	317,000
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Recorded investment - with allowance	321,000	75,000
Valuation allowance	106,000	75,000
Impaired loans	321,000	75,000
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Recorded investment - with allowance	506,000	512,000
Valuation allowance	51,000	52,000
Impaired loans	506,000	512,000
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Recorded investment - with allowance	0	987,000
Valuation allowance	0	595,000
Impaired loans	0	987,000
Recorded investment - with allowance	3,621,000	1,933,000
Valuation allowance	685,000	820,000
Impaired loans	$ 3,621,000	$ 1,933,000

XML

Note 5 - Fair Value Measurements and Fair Values of Financial Instruments - Estimated Fair Values, and Related Carrying Amounts, of the Financial Instruments (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015	Sep. 30, 2015	Dec. 31, 2014
Reported Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Financial assets:
Cash and cash equivalents	$ 30,102,000	$ 33,313,000
Reported Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Financial assets:
Certificates of deposit	3,968,000	2,748,000
Restricted equity securities (included in Other Assets)	3,360,000	4,657,000
Loans held for sale	621,000	280,000
Accrued interest receivable	3,871,000	3,768,000
Financial liabilities:
Deposits with no stated maturity	769,734,000	713,931,000
Time deposits	222,146,000	221,684,000
Short-term borrowings	14,590,000	53,496,000
Long-term borrowings	38,538,000	38,767,000
Accrued interest payable	79,000	70,000
Reported Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Financial assets:
Loans, net	733,917,000	696,991,000
Servicing rights	1,208,000	1,296,000
Reported Value Measurement [Member]
Financial assets:
Available-for-sale securities	409,800,000	420,290,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Financial assets:
Cash and cash equivalents	30,102,000	33,313,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Financial assets:
Certificates of deposit	3,982,000	2,752,000
Restricted equity securities (included in Other Assets)	3,360,000	4,657,000
Loans held for sale	621,000	280,000
Accrued interest receivable	3,871,000	3,768,000
Financial liabilities:
Deposits with no stated maturity	769,734,000	713,931,000
Time deposits	222,881,000	221,891,000
Short-term borrowings	14,497,000	53,398,000
Long-term borrowings	39,807,000	40,166,000
Accrued interest payable	79,000	70,000
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Financial assets:
Loans, net	737,353,000	685,552,000
Servicing rights	1,208,000	1,296,000
Estimate of Fair Value Measurement [Member]
Financial assets:
Available-for-sale securities	409,800,000	420,290,000
Cash and cash equivalents	30,102,000	33,313,000	$ 27,793,000	$ 31,619,000
Certificates of deposit	3,968,000	2,748,000
Available-for-sale securities	409,800,000	420,290,000
Loans held for sale	621,000	280,000
Loans, net	733,917,000	696,991,000
Accrued interest receivable	3,871,000	3,768,000
Financial liabilities:
Short-term borrowings	14,590,000	53,496,000
Long-term borrowings	$ 38,538,000	$ 38,767,000

XML

Note 6 - Securities (Details Textual) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Bank Stocks [Member]
Available-for-sale Securities, Gross Realized Gains	$ 560,000	$ 0	$ 837,000	$ 476,000
FHLB Stock [Member] | Federal Home Loan Bank of Pittsburgh [Member]
Other than Temporary Impairment Losses, Investments			0		$ 0
Federal Home Loan Bank of Pittsburgh [Member] | Other Assets [Member]
Federal Home Loan Bank Stock	3,230,000		3,230,000		4,527,000
Available-for-sale Securities, Gross Realized Gains	584,000	$ 156,000	1,090,000	$ 1,162,000
Available-for-sale Equity Securities, Accumulated Gross Unrealized Loss, before Tax	0		0
Available-for-sale Securities Pledged as Collateral	$ 221,427,000		$ 221,427,000		$ 228,616,000

XML

Note 6 - Securities - Available-for-sale Securities (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
US Government Agencies Debt Securities [Member]
Available-for-sale securities, amortized cost	$ 9,667,000	$ 10,663,000
Available-for-sale securities, gross unrealized holding gains	80,000	12,000
Available-for-sale securities, gross unrealized holding losses	0	(192,000)
Available-for-sale securities	9,747,000	10,483,000
Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities, amortized cost	116,797,000	103,414,000
Available-for-sale securities, gross unrealized holding gains	4,565,000	4,365,000
Available-for-sale securities, gross unrealized holding losses	(79,000)	(22,000)
Available-for-sale securities	121,283,000	107,757,000
Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities, amortized cost	32,764,000	34,317,000
Available-for-sale securities, gross unrealized holding gains	908,000	381,000
Available-for-sale securities, gross unrealized holding losses	0	(101,000)
Available-for-sale securities	33,672,000	34,597,000
Residential Pass-Through Securities [Member]
Available-for-sale securities, amortized cost	60,966,000	73,227,000
Available-for-sale securities, gross unrealized holding gains	1,221,000	486,000
Available-for-sale securities, gross unrealized holding losses	0	(370,000)
Available-for-sale securities	62,187,000	73,343,000
Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities, amortized cost	164,508,000	193,145,000
Available-for-sale securities, gross unrealized holding gains	1,517,000	623,000
Available-for-sale securities, gross unrealized holding losses	(306,000)	(2,053,000)
Available-for-sale securities	165,719,000	191,715,000
Commercial Mortgage Backed Securities [Member]
Available-for-sale securities, amortized cost	16,056,000
Available-for-sale securities, gross unrealized holding gains	69,000
Available-for-sale securities, gross unrealized holding losses	(13,000)
Available-for-sale securities	16,112,000
Collateralized Debt Obligations [Member]
Available-for-sale securities, amortized cost		9,000
Available-for-sale securities, gross unrealized holding gains		0
Available-for-sale securities, gross unrealized holding losses		0
Available-for-sale securities		9,000
Debt Securities [Member]
Available-for-sale securities, amortized cost	400,758,000	414,775,000
Available-for-sale securities, gross unrealized holding gains	8,360,000	5,867,000
Available-for-sale securities, gross unrealized holding losses	(398,000)	(2,738,000)
Available-for-sale securities	408,720,000	417,904,000
Equity Securities [Member]
Available-for-sale securities, amortized cost	752,000	1,680,000
Available-for-sale securities, gross unrealized holding gains	328,000	706,000
Available-for-sale securities, gross unrealized holding losses	0	0
Available-for-sale securities	1,080,000	2,386,000
Available-for-sale securities, amortized cost	401,510,000	416,455,000
Available-for-sale securities, gross unrealized holding gains	8,688,000	6,573,000
Available-for-sale securities, gross unrealized holding losses	(398,000)	(2,738,000)
Available-for-sale securities	$ 409,800,000	$ 420,290,000

XML

Note 6 - Securities - Available-for-sale Securities With Unrealized Loss Positions (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
US Government Agencies Debt Securities [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value		$ 0
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses		0
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value		7,850,000
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses		(192,000)
Available-for-sale securities with unrealized loss positions, fair value		7,850,000
Available-for-sale securities, with unrealized loss positions, unrealized losses		(192,000)
Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	$ 15,448,000	5,200,000
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(64,000)	(19,000)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	1,001,000	216,000
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(15,000)	(3,000)
Available-for-sale securities with unrealized loss positions, fair value	16,449,000	5,416,000
Available-for-sale securities, with unrealized loss positions, unrealized losses	(79,000)	(22,000)
Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	19,303,000	88,355,000
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(38,000)	(648,000)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	24,426,000	49,273,000
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(268,000)	(1,405,000)
Available-for-sale securities with unrealized loss positions, fair value	43,729,000	137,628,000
Available-for-sale securities, with unrealized loss positions, unrealized losses	(306,000)	(2,053,000)
Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value		10,605,000
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses		(60,000)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value		2,910,000
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses		(41,000)
Available-for-sale securities with unrealized loss positions, fair value		13,515,000
Available-for-sale securities, with unrealized loss positions, unrealized losses		(101,000)
Commercial Mortgage Backed Securities [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	4,989,000
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(13,000)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	0
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	0
Available-for-sale securities with unrealized loss positions, fair value	4,989,000
Available-for-sale securities, with unrealized loss positions, unrealized losses	(13,000)
Residential Pass-Through Securities [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value		38,764,000
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses		(295,000)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value		3,503,000
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses		(75,000)
Available-for-sale securities with unrealized loss positions, fair value		42,267,000
Available-for-sale securities, with unrealized loss positions, unrealized losses		(370,000)
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	39,740,000	142,924,000
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(115,000)	(1,022,000)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	25,427,000	63,752,000
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(283,000)	(1,716,000)
Available-for-sale securities with unrealized loss positions, fair value	65,167,000	206,676,000
Available-for-sale securities, with unrealized loss positions, unrealized losses	$ (398,000)	$ (2,738,000)

XML

Note 6 - Securities - Gross Realized Gains and Losses from Available-for-sale Securities (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Available-for-sale Securities, Gross Realized Gains	$ 584,000	$ 156,000	$ 1,090,000	$ 1,162,000
Gross realized losses from sales	0	(77,000)	(1,000)	(77,000)
Net realized gains	$ 584,000	$ 79,000	$ 1,089,000	$ 1,085,000

XML

Note 6 - Securities - Available-for-sale Debt Securities by Contractual Maturity (Details) $ in Thousands	Sep. 30, 2016 USD ($)
Residential Pass-Through Securities [Member]
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, amortized cost	$ 60,966
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, fair value	62,187
Residential Collateralized Mortgage Obligations [Member]
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, amortized cost	164,508
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, fair value	165,719
Commercial Mortgage-backed Securities [Member]
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, amortized cost	16,056
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, fair value	16,112
Due in one year or less	16,631
Due in one year or less	16,837
Due from one year through five years	71,211
Due from one year through five years	73,423
Due from five years through ten years	47,463
Due from five years through ten years	49,076
Due after ten years	23,923
Due after ten years	25,366
Sub-total	159,228
Sub-total	164,702
Total	400,758
Total	$ 408,720

XML

Note 7 - Loans (Details Textual)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)	Jun. 30, 2016 USD ($)	Jun. 30, 2015 USD ($)	Dec. 31, 2014 USD ($)
Loans Receivable 1 [Member] | Credit Availability Concentration Risk [Member]
Concentration Risk, Percentage			0.00%		0.00%
Unfunded Loan Commitment [Member]
Financing Receivable, Allowance for Credit Losses	$ 0		$ 0		$ 0
Commercial and Industrial [Member] | Commercial Portfolio Segment [Member] | Contractual Interest Rate Reduction [Member]
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down	31,000
Allowance for Credit Losses, Change in Method of Calculating Impairment	0		0
Allowance for Loan and Lease Losses, Period Increase (Decrease)			0
Commercial and Industrial [Member] | Commercial Portfolio Segment [Member] | Extended Maturity [Member]
Allowance for Loan and Lease Losses, Period Increase (Decrease)			0
Commercial and Industrial [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses	1,038,000	$ 928,000	$ 1,038,000	$ 928,000	981,000	$ 1,038,000	$ 800,000	$ 688,000
Financing Receivable, Modifications, Number of Contracts			1
Financing Receivable, Modifications, Subsequent Default, Number of Contracts			1
Real Estate Loan [Member] | Commercial Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses	2,387,000	1,731,000	$ 2,387,000	1,731,000	1,939,000	2,083,000	1,692,000	1,758,000
Real Estate Loan [Member] | Residential Portfolio Segment [Member] | Senior Lien [Member]
Financing Receivable, Allowance for Credit Losses	$ 2,956,000	2,651,000	$ 2,956,000	$ 2,651,000	2,645,000	2,830,000	2,775,000	2,941,000
Financing Receivable, Modifications, Number of Contracts			1	1
Allowance for Credit Losses, Change in Method of Calculating Impairment		0		$ 0
Allowance for Loan and Lease Losses, Period Increase (Decrease)				$ 0
Financing Receivable, Modifications, Subsequent Default, Number of Contracts	1		1	2
Commercial Loan [Member]
Loans Receivable Secured by Real Estate Percentage	56.00%		56.00%
Minimum [Member]
Financing Receivable Individually Evaluated for Impairment Threshold With Extension of Credit	$ 200,000		$ 200,000
Financing Receivable Individually Evaluated for Impairment Estimated Loss Trigger	100,000		100,000
Maximum [Member]
Financing Receivable Individually Evaluated for Impairment Threshold With Estimated Loss	200,000		200,000
Consumer Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses	$ 145,000	123,000	145,000	$ 123,000	122,000	138,000	135,000	145,000
Financing Receivable, Modifications, Number of Contracts	1			1
Financing Receivable, Modifications, Recorded Investment	$ 25,000		$ 25,000
Financing Receivable, Modifications, Subsequent Default, Number of Contracts			1
Commercial Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses	4,079,000	3,351,000	$ 4,079,000	$ 3,351,000	3,922,000	3,743,000	3,183,000	3,143,000
Financing Receivable, Modifications, Number of Contracts			1
Residential Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses	3,799,000	3,515,000	$ 3,799,000	3,515,000	3,418,000	3,650,000	3,586,000	3,653,000
Financing Receivable, Allowance for Credit Losses	8,421,000	$ 7,416,000	8,421,000	7,416,000	$ 7,889,000	$ 7,929,000	$ 7,300,000	$ 7,336,000
Financing Receivable, Modifications, Number of Contracts		0
Allowance for Credit Losses, Change in Method of Calculating Impairment	$ 0	$ 0	$ 0	$ 0
Financing Receivable, Modifications, Subsequent Default, Number of Contracts	0

XML

Note 7 - Loans - Loans Receivable (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	$ 325,533,000	$ 304,783,000
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	22,794,000	21,146,000
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	38,623,000	39,040,000
Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	23,310,000	21,121,000
Residential Portfolio Segment [Member]
Loans receivable	410,260,000	386,090,000
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	149,938,000	154,779,000
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	12,809,000	5,122,000
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	86,969,000	75,196,000
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	38,653,000	40,007,000
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	6,900,000	7,019,000
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	8,133,000	9,188,000
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	4,313,000	4,671,000
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	11,557,000	12,152,000
Commercial Portfolio Segment [Member]
Loans receivable	319,272,000	308,134,000
Consumer Portfolio Segment [Member]
Loans receivable	12,806,000	10,656,000
Loans receivable	742,338,000	704,880,000
Less: allowance for loan losses	(8,421,000)	(7,889,000)
Loans, net	$ 733,917,000	$ 696,991,000

XML

Note 7 - Loans - Allowance for Loan Losses (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Allowance for loan losses	$ 2,830,000	$ 2,775,000	$ 2,645,000	$ 2,941,000
Allowance for loan losses, charge-offs	(31,000)	(12,000)	(73,000)	(149,000)
Allowance for loan losses, recoveries	2,000	0	2,000	1,000
Allowance for loan losses, provision	155,000	(112,000)	382,000	(142,000)
Allowance for loan losses	2,956,000	2,651,000	2,956,000	2,651,000
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Allowance for loan losses	239,000	210,000	219,000	176,000
Allowance for loan losses, charge-offs	0	(42,000)	0	(42,000)
Allowance for loan losses, recoveries	0	0	0	0
Allowance for loan losses, provision	9,000	45,000	29,000	79,000
Allowance for loan losses	248,000	213,000	248,000	213,000
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Allowance for loan losses	359,000	344,000	347,000	322,000
Allowance for loan losses, charge-offs	0	0	0	0
Allowance for loan losses, recoveries	0	0	0	0
Allowance for loan losses, provision	0	(5,000)	12,000	17,000
Allowance for loan losses	359,000	339,000	359,000	339,000
Residential Portfolio Segment [Member] | Construction Loans [Member]
Allowance for loan losses	222,000	257,000	207,000	214,000
Allowance for loan losses, charge-offs	0	0	0	0
Allowance for loan losses, recoveries	0	0	0	0
Allowance for loan losses, provision	14,000	55,000	29,000	98,000
Allowance for loan losses	236,000	312,000	236,000	312,000
Residential Portfolio Segment [Member]
Allowance for loan losses	3,650,000	3,586,000	3,418,000	3,653,000
Allowance for loan losses, charge-offs	(31,000)	(54,000)	(73,000)	(191,000)
Allowance for loan losses, recoveries	2,000	0	2,000	1,000
Allowance for loan losses, provision	178,000	(17,000)	452,000	52,000
Allowance for loan losses	3,799,000	3,515,000	3,799,000	3,515,000
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Allowance for loan losses	2,083,000	1,692,000	1,939,000	1,758,000
Allowance for loan losses, charge-offs	0	0	0	(115,000)
Allowance for loan losses, recoveries	0	0	2,000	0
Allowance for loan losses, provision	304,000	39,000	446,000	88,000
Allowance for loan losses	2,387,000	1,731,000	2,387,000	1,731,000
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Allowance for loan losses	105,000	296,000	58,000	283,000
Allowance for loan losses, charge-offs	0	(115,000)	0	(115,000)
Allowance for loan losses, recoveries	0	0	0	0
Allowance for loan losses, provision	41,000	(74,000)	88,000	(61,000)
Allowance for loan losses	146,000	107,000	146,000	107,000
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Allowance for loan losses	1,038,000	800,000	981,000	688,000
Allowance for loan losses, charge-offs	(2,000)	0	(2,000)	(10,000)
Allowance for loan losses, recoveries	1,000	1,000	2,000	5,000
Allowance for loan losses, provision	1,000	127,000	57,000	245,000
Allowance for loan losses	1,038,000	928,000	1,038,000	928,000
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Allowance for loan losses	103,000	155,000	106,000	165,000
Allowance for loan losses, charge-offs	0	0	0	0
Allowance for loan losses, recoveries	0	0	0	0
Allowance for loan losses, provision	3,000	(45,000)	0	(55,000)
Allowance for loan losses	106,000	110,000	106,000	110,000
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Allowance for loan losses	248,000	80,000	675,000	87,000
Allowance for loan losses, charge-offs	0	0	(595,000)	0
Allowance for loan losses, recoveries	0	0	0	0
Allowance for loan losses, provision	(5,000)	231,000	163,000	224,000
Allowance for loan losses	243,000	311,000	243,000	311,000
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Allowance for loan losses	47,000	40,000	45,000	31,000
Allowance for loan losses, charge-offs	0	0	0	0
Allowance for loan losses, recoveries	0	0	0	0
Allowance for loan losses, provision	(4,000)	3,000	(2,000)	12,000
Allowance for loan losses	43,000	43,000	43,000	43,000
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Allowance for loan losses	119,000	120,000	118,000	131,000
Allowance for loan losses, charge-offs	0	0	0	0
Allowance for loan losses, recoveries	0	0	0	0
Allowance for loan losses, provision	(3,000)	1,000	(2,000)	(10,000)
Allowance for loan losses	116,000	121,000	116,000	121,000
Commercial Portfolio Segment [Member]
Allowance for loan losses	3,743,000	3,183,000	3,922,000	3,143,000
Allowance for loan losses, charge-offs	(2,000)	(115,000)	(597,000)	(240,000)
Allowance for loan losses, recoveries	1,000	1,000	4,000	5,000
Allowance for loan losses, provision	337,000	282,000	750,000	443,000
Allowance for loan losses	4,079,000	3,351,000	4,079,000	3,351,000
Consumer Portfolio Segment [Member]
Allowance for loan losses	138,000	135,000	122,000	145,000
Allowance for loan losses, charge-offs	(28,000)	(28,000)	(67,000)	(65,000)
Allowance for loan losses, recoveries	12,000	10,000	39,000	44,000
Allowance for loan losses, provision	23,000	6,000	51,000	(1,000)
Allowance for loan losses	145,000	123,000	145,000	123,000
Unallocated Financing Receivables [Member]
Allowance for loan losses	398,000	396,000	427,000	395,000
Allowance for loan losses, charge-offs	0	0	0	0
Allowance for loan losses, recoveries	0	0	0	0
Allowance for loan losses, provision	0	31,000	(29,000)	32,000
Allowance for loan losses	398,000	427,000	398,000	427,000
Allowance for loan losses	7,929,000	7,300,000	7,889,000	7,336,000
Allowance for loan losses, charge-offs	(61,000)	(197,000)	(737,000)	(496,000)
Allowance for loan losses, recoveries	15,000	11,000	45,000	50,000
Allowance for loan losses, provision	538,000	302,000	1,224,000	526,000
Allowance for loan losses	$ 8,421,000	$ 7,416,000	$ 8,421,000	$ 7,416,000

XML

Note 7 - Loans - Outstanding Loans by Risk Rating (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Pass [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	$ 315,849,000	$ 295,302,000
Pass [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	22,376,000	20,558,000
Pass [Member] | Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	37,925,000	38,071,000
Pass [Member] | Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	23,310,000	21,104,000
Pass [Member] | Residential Portfolio Segment [Member]
Loans receivable	399,460,000	375,035,000
Pass [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	133,140,000	140,381,000
Pass [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	12,707,000	4,957,000
Pass [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	82,076,000	71,225,000
Pass [Member] | Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	38,653,000	40,007,000
Pass [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	5,243,000	5,084,000
Pass [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	7,505,000	7,943,000
Pass [Member] | Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	3,503,000	4,655,000
Pass [Member] | Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	11,482,000	12,073,000
Pass [Member] | Commercial Portfolio Segment [Member]
Loans receivable	294,309,000	286,325,000
Pass [Member] | Consumer Portfolio Segment [Member]
Loans receivable	12,651,000	10,490,000
Pass [Member]
Loans receivable	706,420,000	671,850,000
Special Mention [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	331,000	407,000
Special Mention [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	145,000	185,000
Special Mention [Member] | Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	124,000	543,000
Special Mention [Member] | Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	0	17,000
Special Mention [Member] | Residential Portfolio Segment [Member]
Loans receivable	600,000	1,152,000
Special Mention [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	3,087,000	5,862,000
Special Mention [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	66,000	60,000
Special Mention [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	4,196,000	2,106,000
Special Mention [Member] | Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	0	0
Special Mention [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	168,000	483,000
Special Mention [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	0	0
Special Mention [Member] | Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	0	0
Special Mention [Member] | Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	0	0
Special Mention [Member] | Commercial Portfolio Segment [Member]
Loans receivable	7,517,000	8,511,000
Special Mention [Member] | Consumer Portfolio Segment [Member]
Loans receivable	0	21,000
Special Mention [Member]
Loans receivable	8,117,000	9,684,000
Substandard [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	9,292,000	9,007,000
Substandard [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	273,000	403,000
Substandard [Member] | Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	574,000	426,000
Substandard [Member] | Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	0	0
Substandard [Member] | Residential Portfolio Segment [Member]
Loans receivable	10,139,000	9,836,000
Substandard [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	13,711,000	8,536,000
Substandard [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	36,000	105,000
Substandard [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	686,000	1,737,000
Substandard [Member] | Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	0	0
Substandard [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	1,472,000	1,432,000
Substandard [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	628,000	1,245,000
Substandard [Member] | Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	810,000	16,000
Substandard [Member] | Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	75,000	79,000
Substandard [Member] | Commercial Portfolio Segment [Member]
Loans receivable	17,418,000	13,150,000
Substandard [Member] | Consumer Portfolio Segment [Member]
Loans receivable	155,000	145,000
Substandard [Member]
Loans receivable	27,712,000	23,131,000
Doubtful [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	61,000	67,000
Doubtful [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	0	0
Doubtful [Member] | Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	0	0
Doubtful [Member] | Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	0	0
Doubtful [Member] | Residential Portfolio Segment [Member]
Loans receivable	61,000	67,000
Doubtful [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	11,000	128,000
Doubtful [Member] | Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	17,000	20,000
Doubtful [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member]
Loans receivable	28,000	148,000
Doubtful [Member] | Consumer Portfolio Segment [Member]
Loans receivable	0	0
Doubtful [Member]
Loans receivable	89,000	215,000
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	325,533,000	304,783,000
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	22,794,000	21,146,000
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	38,623,000	39,040,000
Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	23,310,000	21,121,000
Residential Portfolio Segment [Member]
Loans receivable	410,260,000	386,090,000
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	149,938,000	154,779,000
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	12,809,000	5,122,000
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	86,969,000	75,196,000
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	38,653,000	40,007,000
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	6,900,000	7,019,000
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	8,133,000	9,188,000
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	4,313,000	4,671,000
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	11,557,000	12,152,000
Commercial Portfolio Segment [Member]
Loans receivable	319,272,000	308,134,000
Consumer Portfolio Segment [Member]
Loans receivable	12,806,000	10,656,000
Loans receivable	$ 742,338,000	$ 704,880,000

XML

Note 7 - Loans - Loan Balances and Allowance for Loan Losses for Each Impairment Method (Details) - USD ($)	Sep. 30, 2016	Jun. 30, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Dec. 31, 2014
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable: individually evaluated	$ 734,000		$ 884,000
Loans receivable: collectively evaluated	324,799,000		303,899,000
Loans receivable	325,533,000		304,783,000
Allowance for loan losses: individually evaluated	0		1,000
Allowance for loan losses: collectively evaluated	2,956,000		2,644,000
Allowance for loan losses	2,956,000	$ 2,830,000	2,645,000	$ 2,651,000	$ 2,775,000	$ 2,941,000
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable: individually evaluated	70,000		74,000
Loans receivable: collectively evaluated	22,724,000		21,072,000
Loans receivable	22,794,000		21,146,000
Allowance for loan losses: individually evaluated	0		0
Allowance for loan losses: collectively evaluated	248,000		219,000
Allowance for loan losses	248,000	239,000	219,000	213,000	210,000	176,000
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable: individually evaluated	0		0
Loans receivable: collectively evaluated	38,623,000		39,040,000
Loans receivable	38,623,000		39,040,000
Allowance for loan losses: individually evaluated	0		0
Allowance for loan losses: collectively evaluated	359,000		347,000
Allowance for loan losses	359,000	359,000	347,000	339,000	344,000	322,000
Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable: individually evaluated	0		0
Loans receivable: collectively evaluated	23,310,000		21,121,000
Loans receivable	23,310,000		21,121,000
Allowance for loan losses: individually evaluated	0		0
Allowance for loan losses: collectively evaluated	236,000		207,000
Allowance for loan losses	236,000	222,000	207,000	312,000	257,000	214,000
Residential Portfolio Segment [Member]
Loans receivable: individually evaluated	804,000		958,000
Loans receivable: collectively evaluated	409,456,000		385,132,000
Loans receivable	410,260,000		386,090,000
Allowance for loan losses: individually evaluated	0		1,000
Allowance for loan losses: collectively evaluated	3,799,000		3,417,000
Allowance for loan losses	3,799,000	3,650,000	3,418,000	3,515,000	3,586,000	3,653,000
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable: individually evaluated	8,088,000		6,262,000
Loans receivable: collectively evaluated	141,850,000		148,517,000
Loans receivable	149,938,000		154,779,000
Allowance for loan losses: individually evaluated	528,000		97,000
Allowance for loan losses: collectively evaluated	1,859,000		1,842,000
Allowance for loan losses	2,387,000	2,083,000	1,939,000	1,731,000	1,692,000	1,758,000
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable: individually evaluated	0		0
Loans receivable: collectively evaluated	12,809,000		5,122,000
Loans receivable	12,809,000		5,122,000
Allowance for loan losses: individually evaluated	0		0
Allowance for loan losses: collectively evaluated	146,000		58,000
Allowance for loan losses	146,000	105,000	58,000	107,000	296,000	283,000
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable: individually evaluated	439,000		324,000
Loans receivable: collectively evaluated	86,530,000		74,872,000
Loans receivable	86,969,000		75,196,000
Allowance for loan losses: individually evaluated	106,000		75,000
Allowance for loan losses: collectively evaluated	932,000		906,000
Allowance for loan losses	1,038,000	1,038,000	981,000	928,000	800,000	688,000
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable: individually evaluated	0		0
Loans receivable: collectively evaluated	38,653,000		40,007,000
Loans receivable	38,653,000		40,007,000
Allowance for loan losses: individually evaluated	0		0
Allowance for loan losses: collectively evaluated	0		0
Allowance for loan losses	0		0
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable: individually evaluated	1,399,000		1,427,000
Loans receivable: collectively evaluated	5,501,000		5,592,000
Loans receivable	6,900,000		7,019,000
Allowance for loan losses: individually evaluated	51,000		52,000
Allowance for loan losses: collectively evaluated	55,000		54,000
Allowance for loan losses	106,000	103,000	106,000	110,000	155,000	165,000
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable: individually evaluated	392,000		987,000
Loans receivable: collectively evaluated	7,741,000		8,201,000
Loans receivable	8,133,000		9,188,000
Allowance for loan losses: individually evaluated	0		595,000
Allowance for loan losses: collectively evaluated	243,000		80,000
Allowance for loan losses	243,000	248,000	675,000	311,000	80,000	87,000
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable: individually evaluated	13,000		16,000
Loans receivable: collectively evaluated	4,300,000		4,655,000
Loans receivable	4,313,000		4,671,000
Allowance for loan losses: individually evaluated	0		0
Allowance for loan losses: collectively evaluated	43,000		45,000
Allowance for loan losses	43,000	47,000	45,000	43,000	40,000	31,000
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable: individually evaluated	0		0
Loans receivable: collectively evaluated	11,557,000		12,152,000
Loans receivable	11,557,000		12,152,000
Allowance for loan losses: individually evaluated	0		0
Allowance for loan losses: collectively evaluated	116,000		118,000
Allowance for loan losses	116,000	119,000	118,000	121,000	120,000	131,000
Commercial Portfolio Segment [Member]
Loans receivable: individually evaluated	10,331,000		9,016,000
Loans receivable: collectively evaluated	308,941,000		299,118,000
Loans receivable	319,272,000		308,134,000
Allowance for loan losses: individually evaluated	685,000		819,000
Allowance for loan losses: collectively evaluated	3,394,000		3,103,000
Allowance for loan losses	4,079,000	3,743,000	3,922,000	3,351,000	3,183,000	3,143,000
Consumer Portfolio Segment [Member]
Loans receivable: individually evaluated	0		0
Loans receivable: collectively evaluated	12,806,000		10,656,000
Loans receivable	12,806,000		10,656,000
Allowance for loan losses: individually evaluated	0		0
Allowance for loan losses: collectively evaluated	145,000		122,000
Allowance for loan losses	145,000	138,000	122,000	123,000	135,000	145,000
Unallocated Financing Receivables [Member]
Allowance for loan losses	398,000	398,000	427,000	427,000	396,000	395,000
Loans receivable: individually evaluated	11,135,000		9,974,000
Loans receivable: collectively evaluated	731,203,000		694,906,000
Loans receivable	742,338,000		704,880,000
Allowance for loan losses: individually evaluated	685,000		820,000
Allowance for loan losses: collectively evaluated	7,338,000		6,642,000
Allowance for loan losses	$ 8,421,000	$ 7,929,000	$ 7,889,000	$ 7,416,000	$ 7,300,000	$ 7,336,000

XML

Note 7 - Loans - Impaired Loans (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Unpaid principal - with no allowance	$ 764,000	$ 842,000
Recorded investment - with no allowance	734,000	842,000
Unpaid principal - with allowance	0	42,000
Recorded investment - with allowance	0	42,000
Related allowance - with allowance	0	1,000
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Unpaid principal - with no allowance	70,000	74,000
Recorded investment - with no allowance	70,000	74,000
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Unpaid principal - with no allowance	7,003,000	7,580,000
Recorded investment - with no allowance	5,294,000	5,945,000
Unpaid principal - with allowance	2,794,000	317,000
Recorded investment - with allowance	2,794,000	317,000
Related allowance - with allowance	528,000	97,000
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Unpaid principal - with no allowance	118,000	249,000
Recorded investment - with no allowance	118,000	249,000
Unpaid principal - with allowance	321,000	75,000
Recorded investment - with allowance	321,000	75,000
Related allowance - with allowance	106,000	75,000
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Unpaid principal - with no allowance	893,000	915,000
Recorded investment - with no allowance	893,000	915,000
Unpaid principal - with allowance	506,000	512,000
Recorded investment - with allowance	506,000	512,000
Related allowance - with allowance	51,000	52,000
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Unpaid principal - with no allowance	987,000	0
Recorded investment - with no allowance	392,000	0
Unpaid principal - with allowance	0	987,000
Recorded investment - with allowance	0	987,000
Related allowance - with allowance	0	595,000
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Unpaid principal - with no allowance	13,000	16,000
Recorded investment - with no allowance	13,000	16,000
Consumer Portfolio Segment [Member]
Unpaid principal - with allowance	0	0
Recorded investment - with allowance	0	0
Related allowance - with allowance	0	0
Unpaid principal - with no allowance	9,848,000	9,676,000
Recorded investment - with no allowance	7,514,000	8,041,000
Unpaid principal - with allowance	3,621,000	1,933,000
Recorded investment - with allowance	3,621,000	1,933,000
Related allowance - with allowance	685,000	820,000
Total	13,469,000	11,609,000
Total	$ 11,135,000	$ 9,974,000

XML

Note 7 - Loans - Average Balance of Impaired Loans and Income Recognized on Impaired Loans (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Average investment in impaired loans	$ 789,000	$ 1,990,000	$ 818,000	$ 2,534,000
Interest income recognized on impaired loans on a cash basis	11,000	9,000	33,000	67,000
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Average investment in impaired loans	72,000	67,000	72,000	62,000
Interest income recognized on impaired loans on a cash basis	0	1,000	2,000	3,000
Residential Portfolio Segment [Member]
Average investment in impaired loans	861,000	2,057,000	890,000	2,596,000
Interest income recognized on impaired loans on a cash basis	11,000	10,000	35,000	70,000
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Average investment in impaired loans	7,022,000	6,327,000	6,524,000	6,382,000
Interest income recognized on impaired loans on a cash basis	83,000	90,000	274,000	293,000
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Average investment in impaired loans	577,000	421,000	619,000	467,000
Interest income recognized on impaired loans on a cash basis	7,000	4,000	17,000	16,000
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Average investment in impaired loans	0	42,000	0	50,000
Interest income recognized on impaired loans on a cash basis	0	0	0	0
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Average investment in impaired loans	1,408,000	1,466,000	1,413,000	1,467,000
Interest income recognized on impaired loans on a cash basis	13,000	26,000	51,000	78,000
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Average investment in impaired loans	492,000	741,000	541,000	741,000
Interest income recognized on impaired loans on a cash basis	0	0	0	0
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Average investment in impaired loans	13,000	21,000	14,000	22,000
Interest income recognized on impaired loans on a cash basis	0	1,000	1,000	3,000
Commercial Portfolio Segment [Member]
Average investment in impaired loans	9,512,000	9,018,000	9,111,000	9,129,000
Interest income recognized on impaired loans on a cash basis	103,000	121,000	343,000	390,000
Consumer Portfolio Segment [Member]
Average investment in impaired loans	17,000	0	16,000	0
Interest income recognized on impaired loans on a cash basis	0	0	0	0
Average investment in impaired loans	10,390,000	11,075,000	10,017,000	11,725,000
Interest income recognized on impaired loans on a cash basis	$ 114,000	$ 131,000	$ 378,000	$ 460,000

XML

Note 7 - Loans - Nonaccrual Loans and Loans Past Due Ninety Days or More and Still Accruing (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans past due 90+ days and accruing	$ 4,016,000	$ 2,381,000
Nonaccrual loans	2,537,000	3,044,000
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans past due 90+ days and accruing	58,000	79,000
Nonaccrual loans	0	0
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans past due 90+ days and accruing	106,000	130,000
Nonaccrual loans	11,000	0
Residential Portfolio Segment [Member]
Loans past due 90+ days and accruing	4,180,000	2,590,000
Nonaccrual loans	2,548,000	3,044,000
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans past due 90+ days and accruing	2,795,000	503,000
Nonaccrual loans	7,898,000	5,730,000
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans past due 90+ days and accruing	313,000	65,000
Nonaccrual loans	193,000	313,000
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans past due 90+ days and accruing	219,000	0
Nonaccrual loans	1,399,000	1,427,000
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans past due 90+ days and accruing	0	0
Nonaccrual loans	392,000	987,000
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans past due 90+ days and accruing	16,000	0
Nonaccrual loans	13,000	16,000
Commercial Portfolio Segment [Member]
Loans past due 90+ days and accruing	3,343,000	568,000
Nonaccrual loans	9,895,000	8,473,000
Consumer Portfolio Segment [Member]
Loans past due 90+ days and accruing	16,000	71,000
Nonaccrual loans	38,000	0
Loans past due 90+ days and accruing	7,539,000	3,229,000
Nonaccrual loans	$ 12,481,000	$ 11,517,000

XML

Note 7 - Loans - Contractual Aging of Loans (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Troubled debt restructurings, current and past due	$ 316,869,000	$ 294,703,000
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, current and past due	3,058,000	6,156,000
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, current and past due	5,606,000	3,924,000
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	325,533,000	304,783,000
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Troubled debt restructurings, current and past due	22,544,000	20,816,000
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, current and past due	192,000	251,000
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, current and past due	58,000	79,000
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	22,794,000	21,146,000
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Troubled debt restructurings, current and past due	38,143,000	38,581,000
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, current and past due	374,000	329,000
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, current and past due	106,000	130,000
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	38,623,000	39,040,000
Residential Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Troubled debt restructurings, current and past due	23,079,000	21,121,000
Residential Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, current and past due	231,000	0
Residential Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, current and past due	0	0
Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	23,310,000	21,121,000
Residential Portfolio Segment [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Troubled debt restructurings, current and past due	400,635,000	375,221,000
Residential Portfolio Segment [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, current and past due	3,855,000	6,736,000
Residential Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, current and past due	5,770,000	4,133,000
Residential Portfolio Segment [Member]
Loans receivable	410,260,000	386,090,000
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Troubled debt restructurings, current and past due	146,888,000	153,427,000
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, current and past due	107,000	108,000
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, current and past due	2,943,000	1,244,000
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	149,938,000	154,779,000
Commercial Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Troubled debt restructurings, current and past due	12,801,000	5,018,000
Commercial Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, current and past due	8,000	104,000
Commercial Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, current and past due	0	0
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	12,809,000	5,122,000
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Troubled debt restructurings, current and past due	86,637,000	75,002,000
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, current and past due	8,000	118,000
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, current and past due	324,000	76,000
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	86,969,000	75,196,000
Commercial Portfolio Segment [Member] | Political Subdivisions [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Troubled debt restructurings, current and past due	38,653,000	40,007,000
Commercial Portfolio Segment [Member] | Political Subdivisions [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, current and past due	0	0
Commercial Portfolio Segment [Member] | Political Subdivisions [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, current and past due	0	0
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	38,653,000	40,007,000
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Troubled debt restructurings, current and past due	5,807,000	5,970,000
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, current and past due	62,000	223,000
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, current and past due	1,031,000	826,000
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	6,900,000	7,019,000
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Troubled debt restructurings, current and past due	7,657,000	8,201,000
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, current and past due	84,000	0
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, current and past due	392,000	987,000
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	8,133,000	9,188,000
Commercial Portfolio Segment [Member] | Agricultural Loans [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Troubled debt restructurings, current and past due	4,156,000	4,642,000
Commercial Portfolio Segment [Member] | Agricultural Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, current and past due	128,000	13,000
Commercial Portfolio Segment [Member] | Agricultural Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, current and past due	29,000	16,000
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	4,313,000	4,671,000
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Troubled debt restructurings, current and past due	11,557,000	12,152,000
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, current and past due	0	0
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, current and past due	0	0
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	11,557,000	12,152,000
Commercial Portfolio Segment [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Troubled debt restructurings, current and past due	314,156,000	304,419,000
Commercial Portfolio Segment [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, current and past due	397,000	566,000
Commercial Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, current and past due	4,719,000	3,149,000
Commercial Portfolio Segment [Member]
Loans receivable	319,272,000	308,134,000
Consumer Portfolio Segment [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Troubled debt restructurings, current and past due	12,544,000	10,537,000
Consumer Portfolio Segment [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, current and past due	208,000	48,000
Consumer Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, current and past due	54,000	71,000
Consumer Portfolio Segment [Member]
Loans receivable	12,806,000	10,656,000
Financing Receivables, 1 to 29 Days Past Due [Member]
Troubled debt restructurings, current and past due	727,335,000	690,177,000
Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, current and past due	4,460,000	7,350,000
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, current and past due	10,543,000	7,353,000
Loans receivable	$ 742,338,000	$ 704,880,000

XML

Note 7 - Loans - Contractual Aging of Nonaccrual Loans (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Non accrual Loans [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Loans current and past due	$ 9,057,000	$ 7,100,000
Non accrual Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans current and past due	420,000	293,000
Non accrual Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans current and past due	3,004,000	4,124,000
Non accrual Loans [Member]
Loans current and past due	12,481,000	11,517,000
Loans current and past due	$ 12,481,000	$ 11,517,000

XML

Note 7 - Loans - Aging of Troubled Debt Restructings (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Troubled Debt Restructuring [Member] | Financing Receivables, 1 to 29 Days Past Due [Member]
Troubled debt restructurings, current and past due	$ 889,000	$ 1,186,000
Troubled Debt Restructuring [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, current and past due	57,000	0
Troubled Debt Restructuring [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, current and past due	0	81,000
Troubled Debt Restructuring [Member]
Troubled debt restructurings, current and past due	5,978,000	6,364,000
Loans current and past due	5,032,000	5,097,000
Financing Receivables, 1 to 29 Days Past Due [Member]
Troubled debt restructurings, current and past due	727,335,000	690,177,000
Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, current and past due	4,460,000	7,350,000
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, current and past due	10,543,000	7,353,000
Loans current and past due	$ 12,481,000	$ 11,517,000

XML

Note 7 - Loans - Troubled Debt Restructurings (Details) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2015	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)
Consumer Portfolio Segment [Member]
Troubled debt restructurings, number of contracts	1			1
Troubled debt restructurings, pre-modification outstanding recorded investment	$ 25			$ 30
Troubled debt restructurings, post-modification outstanding recorded investment	$ 25			$ 30
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Troubled debt restructurings, number of contracts			1	1
Troubled debt restructurings, pre-modification outstanding recorded investment			$ 102	$ 56
Troubled debt restructurings, post-modification outstanding recorded investment			$ 102	$ 56
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Troubled debt restructurings, number of contracts				1
Troubled debt restructurings, pre-modification outstanding recorded investment				$ 32
Troubled debt restructurings, post-modification outstanding recorded investment				$ 32
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Troubled debt restructurings, number of contracts			1
Troubled debt restructurings, pre-modification outstanding recorded investment			$ 5
Troubled debt restructurings, post-modification outstanding recorded investment			$ 5
Commercial Portfolio Segment [Member]
Troubled debt restructurings, number of contracts			1
Troubled debt restructurings, pre-modification outstanding recorded investment			$ 25
Troubled debt restructurings, post-modification outstanding recorded investment			$ 25
Troubled debt restructurings, number of contracts		0

XML

Note 7 - Loans - Defaults on Loans with Previous Modifications (Details) $ in Thousands	3 Months Ended	9 Months Ended
	Sep. 30, 2016 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Troubled debt restructuring defaults, number of contracts	1	1	2
Troubled debt restructuring defaults, recorded investment	$ 32	$ 242	$ 65
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Troubled debt restructuring defaults, number of contracts		1
Troubled debt restructuring defaults, recorded investment		$ 30
Commercial Portfolio Segment [Member] | Commercial Construction and Land [Member]
Troubled debt restructuring defaults, number of contracts			1
Troubled debt restructuring defaults, recorded investment			$ 25
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Troubled debt restructuring defaults, number of contracts		1
Troubled debt restructuring defaults, recorded investment		$ 5
Consumer Portfolio Segment [Member]
Troubled debt restructuring defaults, number of contracts		1
Troubled debt restructuring defaults, recorded investment		$ 28
Troubled debt restructuring defaults, number of contracts	0

XML

Note 7 - Loans - Foreclosed Residential Real Estate (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Residential Portfolio Segment [Member]
Foreclosed residential real estate	$ 1,195	$ 555

XML

Note 7 - Loans - Mortgage Loans in Process of Foreclosure (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Residential Portfolio Segment [Member]
Residential real estate in process of foreclosure	$ 1,991	$ 1,173

XML

Note 8 - Borrowed Funds (Details Textual) - USD ($)	9 Months Ended
	Sep. 30, 2016	Dec. 31, 2015
Securities Sold under Agreements to Repurchase [Member]
Debt, Weighted Average Interest Rate	0.10%	0.10%
Federal Home Loan Bank Advances [Member] | Federal Home Loan Bank of Pittsburgh [Member] | Minimum [Member]
Debt Instrument, Interest Rate, Stated Percentage	1.006%
Federal Home Loan Bank Advances [Member] | Federal Home Loan Bank of Pittsburgh [Member] | Maximum [Member]
Debt Instrument, Interest Rate, Stated Percentage	1.052%
Federal Home Loan Bank Advances [Member] | Federal Home Loan Bank of Pittsburgh [Member]
Short-term Borrowing, Amount of Each Borrowing	$ 2,090,000
Short-term Debt, Weighted Average Interest Rate	1.03%
Repayments of Short-term Borrowing, Amount of Each Borrowing	$ 2,090,000
Repayment of Short-term Debt, Weighted Average Interest Rate	0.80%
Federal Home Loan Bank of Pittsburgh [Member] | Other Assets [Member]
Federal Home Loan Bank Stock	$ 3,230,000	$ 4,527,000
Federal Home Loan Bank of Pittsburgh [Member]
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged	460,590,000	450,883,000
Line of Credit Facility, Remaining Borrowing Capacity	$ 315,685,000
Repurchase Agreement Maturing in 2017 with a Rate of 3.595% [Member]
Debt Instrument, Interest Rate, Stated Percentage	3.595%
Carrying Value of Securities Sold under Repurchase Agreements and Deposits Received for Securities Loaned	$ 16,472,000	12,613,000
Securities Sold under Agreements to Repurchase, Asset	$ 34,130,000	$ 33,780,000

XML

Note 8 - Borrowed Funds - Short-term Borrowings (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Advances [Member]
Short-term borrowings	$ 8,270,000	$ 48,581,000
Federal Home Loan Bank of Pittsburgh [Member] | Overnight Borrowing [Member]
Short-term borrowings	2,000,000	23,500,000
Federal Home Loan Bank of Pittsburgh [Member] | Other Short-term Debt [Member]
Short-term borrowings	6,270,000	25,081,000
Federal Home Loan Bank of Pittsburgh [Member]
Short-term borrowings	8,270,000	48,581,000
Securities Sold under Agreements to Repurchase [Member]
Short-term borrowings	6,320,000	4,915,000
Short-term borrowings	$ 14,590,000	$ 53,496,000

XML

Note 8 - Borrowed Funds - Long-term Borrowings (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Federal Home Loan Bank Advances [Member]
Long-term borrowings	$ 11,538,000	$ 11,767,000
Repurchase Agreements [Member]
Long-term borrowings	27,000,000	27,000,000
Long-term borrowings	$ 38,538,000	$ 38,767,000

XML

Note 8 - Borrowed Funds - Long-term Borrowing Maturities (Details) - Federal Home Loan Bank of Pittsburgh [Member] - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Federal Home Loan Bank Borrowings Loan Maturing in 2016 with Rate of 686 [Member]
Long-term borrowings from FHLB- Pittsburgh	$ 18	$ 57
Federal Home Loan Bank Borrowings Loan Maturing in 2017 With Rate of 683 [Member]
Long-term borrowings from FHLB- Pittsburgh	6	10
Federal Home Loan Bank Borrowings Loan Maturing in 2017 with Rate of 381 [Member]
Long-term borrowings from FHLB- Pittsburgh	10,000	10,000
Federal Home Loan Bank Borrowings Loan Maturing in 2020 with Rate of 479 [Member]
Long-term borrowings from FHLB- Pittsburgh	691	821
Federal Home Loan Bank Borrowings Loan Maturing in 2025 with Rate of 491 [Member]
Long-term borrowings from FHLB- Pittsburgh	823	879
Long-term borrowings from FHLB- Pittsburgh	$ 11,538	$ 11,767

XML

Note 8 - Borrowed Funds - Long-term Borrowing Maturities (Details) (Parentheticals) - Federal Home Loan Bank of Pittsburgh [Member]	Sep. 30, 2016 Rate	Dec. 31, 2015 Rate
Federal Home Loan Bank Borrowings Loan Maturing in 2016 with Rate of 686 [Member]
Rate	6.86%	6.86%
Federal Home Loan Bank Borrowings Loan Maturing in 2017 With Rate of 683 [Member]
Rate	6.83%	6.83%
Federal Home Loan Bank Borrowings Loan Maturing in 2017 with Rate of 381 [Member]
Rate	3.81%	3.81%
Federal Home Loan Bank Borrowings Loan Maturing in 2020 with Rate of 479 [Member]
Rate	4.79%	4.79%
Federal Home Loan Bank Borrowings Loan Maturing in 2025 with Rate of 491 [Member]
Rate	4.91%	4.91%

XML

Note 8 - Borrowed Funds - Underlying Securities (Details) - USD ($)	Sep. 30, 2016	Dec. 31, 2015
Residential Pass-Through Securities [Member]
Securities Sold under Agreements to Repurchase, Asset	$ 19,444,000	$ 15,772,000
Collateralized Mortgage Obligations [Member]
Securities Sold under Agreements to Repurchase, Asset	14,686,000	18,008,000
Securities Sold under Agreements to Repurchase, Asset	$ 34,130,000	$ 33,780,000

XML

Note 9 - Defined Benefit Plans (Details Textual) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2016	Dec. 31, 2016
Scenario, Forecast [Member]
Pension and Other Postretirement Benefit Contributions		$ 68,000
Defined Benefit Plan Required Contributions in Current Fiscal Year	$ 0
Pension and Other Postretirement Benefit Contributions	$ 44,000

XML

Note 9 - Defined Benefit Plans - Net Periodic Benefit Costs (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Pension Plan [Member]
Service cost	$ 0	$ 0	$ 0	$ 0
Interest cost	7,000	9,000	20,000	27,000
Expected return on plan assets	(7,000)	(11,000)	(20,000)	(34,000)
Amortization of prior service cost	0	0	0	0
Recognized net actuarial loss	3,000	4,000	8,000	11,000
Net periodic benefit cost	3,000	2,000	8,000	4,000
Other Postretirement Benefit Plan [Member]
Service cost	9,000	10,000	27,000	29,000
Interest cost	16,000	14,000	47,000	42,000
Expected return on plan assets	0	0	0	0
Amortization of prior service cost	(8,000)	(7,000)	(23,000)	(22,000)
Recognized net actuarial loss	0	0	0	0
Net periodic benefit cost	$ 17,000	$ 17,000	$ 51,000	$ 49,000

XML

Note 10 - Stock-based Compensation Plans (Details Textual) - Restricted Stock [Member] - shares	3 Months Ended
	Jun. 30, 2016	Mar. 31, 2016	Mar. 31, 2015
Stock Incentive Plan and Independent Directors Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		34,199	34,800
Stock Incentive Plan [Member] | Vesting Contingent upon Corporation Meeting ROAE Performance Ratio [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		17,289	20,298
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		3 years	4 years
Stock Incentive Plan [Member] | Vesting Dependent on Satisfactory Performance [Member] | Chief Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period			5,174
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period			3 years
Stock Incentive Plan [Member] | Vesting Dependent on Satisfactory Performance [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		10,304	2,198
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		3 years	4 years
Independent Directors Stock Incentive Plan [Member] | Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	1,228
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year
Independent Directors Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period		6,606	7,130
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period		1 year	1 year

XML

Note 10 - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Restricted Stock [Member]
Restricted stock	$ 155	$ 152	$ 480	$ 459

XML

Note 11 - Income Taxes (Details Textual) - USD ($)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2016	Dec. 31, 2015
Other Assets [Member]
Amortization Method Qualified Affordable Housing Project Investments	$ 737,000		$ 737,000			$ 812,000
Scenario, Forecast [Member]
Income Tax Credits and Adjustments					$ 158,000
Increase (Decrease) in Income Taxes					$ (76,000)
Unrecognized Tax Benefits	0		$ 0
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent			35.00%
Income Tax Credits and Adjustments						158,000
Increase (Decrease) in Income Taxes	$ (19,000)	$ (22,000)	$ (57,000)	$ (62,000)		$ (80,000)

XML

Note 11 - Income Taxes - Net Deferred Tax Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Deferred tax assets:
Net realized losses on securities	$ 36	$ 69
Allowance for loan losses	2,980	2,761
Other deferred tax assets	2,517	2,634
Total deferred tax assets	5,533	5,464
Deferred tax liabilities:
Unrealized holding gains on securities	2,902	1,342
Defined benefit plans - ASC 835	23	19
Bank premises and equipment	952	869
Core deposit intangibles	7	11
Other deferred tax liabilities	105	108
Total deferred tax liabilities	3,989	2,349
Deferred tax asset, net	$ 1,544	$ 3,115

XML

Note 11 - Income Taxes - Reconciliation of Income Tax (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Income before income tax provision	$ 5,538,000	$ 5,629,000	$ 15,378,000	$ 16,482,000
Income tax provision	$ 1,451,000	$ 1,395,000	$ 3,847,000	$ 4,076,000
Effective tax rate	26.20%	24.78%	25.02%	24.73%