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 March 31, 2017

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) 12,159,607 Shares Outstanding on May 1, 2017

CITIZENS & NORTHERN CORPORATION

Index

Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) – March 31, 2017 and December 31, 2016	Page 3
Consolidated Statements of Income (Unaudited) – Three-month  Periods Ended March 31, 2017 and 2016	Page 4
Consolidated Statements of Comprehensive Income (Unaudited) - Three-month Periods Ended March 31, 2017 and 2016	Page 5
Consolidated Statements of Cash Flows (Unaudited) – Three Months Ended March 31, 2017 and 2016	Page 6
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) - Three Months Ended March 31, 2017 and 2016	Page 7
Notes to Unaudited Consolidated Financial Statements	Pages 8 – 34
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	Pages 35 – 51
Item 3. Quantitative and Qualitative Disclosures About Market Risk	Pages 51 – 53
Item 4. Controls and Procedures	Page 54
Part II. Other Information	Pages 55 – 56
Signatures	Page 57
Exhibit 31.1. Rule 13a-14(a)/15d-14(a) Certification - Chief Executive Officer	Page 58
Exhibit 31.2. Rule 13a-14(a)/15d-14(a) Certification - Chief Financial Officer	Page 59
Exhibit 32. Section 1350 Certifications	Page 60

2

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share and Per Share Data) (Unaudited)

	March 31,			December 31,
	2017			2016
ASSETS
Cash and due from banks:
Noninterest-bearing	$	18,489		$	17,551
Interest-bearing		14,054			14,558
Total cash and due from banks		32,543			32,109
Available-for-sale securities, at fair value		376,919			395,077
Loans held for sale		163			142
Loans receivable		762,021			751,835
Allowance for loan losses		(8,744	)		(8,473	)
Loans, net		753,277			743,362
Bank-owned life insurance		19,794			19,704
Accrued interest receivable		3,804			3,963
Bank premises and equipment, net		15,738			15,397
Foreclosed assets held for sale		1,878			2,180
Deferred tax asset, net		4,616			5,117
Intangible assets - Goodwill and core deposit intangibles		11,958			11,959
Other assets		13,234			13,282
TOTAL ASSETS	$	1,233,924		$	1,242,292
LIABILITIES
Deposits:
Noninterest-bearing	$	234,980		$	224,175
Interest-bearing		745,271			759,668
Total deposits		980,251			983,843
Short-term borrowings		20,744			26,175
Long-term borrowings		38,388			38,454
Accrued interest and other liabilities		7,191			7,812
TOTAL LIABILITIES		1,046,574			1,056,284
STOCKHOLDERS' EQUITY
Preferred stock, $1,000 par value; authorized 30,000 shares; $1,000 liquidation preference per share; no shares issued		0			0
Common stock, par value $1.00 per share; authorized 20,000,000 shares; issued 12,655,171; outstanding 12,159,607 at March 31, 2017 and 12,113,228 December 31, 2016		12,655			12,655
Paid-in capital		71,454			71,730
Retained earnings		113,106			112,790
Treasury stock, at cost; 495,564 shares at March 31, 2017 and 541,943 shares at December 31, 2016		(9,390	)		(10,269	)
Accumulated other comprehensive loss		(475	)		(898	)
TOTAL STOCKHOLDERS' EQUITY		187,350			186,008
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	1,233,924		$	1,242,292

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

3

Consolidated Statements of Income

(In Thousands Except Per Share Data) (Unaudited)

	3 Months Ended
	March 31,		March 31,
	2017		2016
INTEREST INCOME
Interest and fees on loans:
Taxable	$	8,374	$	7,974
Tax-exempt		450		448
Interest on mortgages held for sale		4		6
Interest on balances with depository institutions		32		24
Income from available-for-sale securities:
Taxable		1,403		1,555
Tax-exempt		844		896
Dividends		5		34
Total interest and dividend income		11,112		10,937
INTEREST EXPENSE
Interest on deposits		521		479
Interest on short-term borrowings		77		62
Interest on long-term borrowings		355		363
Total interest expense		953		904
Net interest income		10,159		10,033
Provision for loan losses		452		368
Net interest income after provision for loan losses		9,707		9,665
OTHER INCOME
Service charges on deposit accounts		1,084		1,138
Service charges and fees		97		94
Trust and financial management revenue		1,180		1,144
Brokerage revenue		156		173
Insurance commissions, fees and premiums		41		21
Interchange revenue from debit card transactions		520		463
Net gains from sale of loans		166		168
Loan servicing fees, net		72		22
Increase in cash surrender value of life insurance		90		96
Other operating income		458		371
Sub-total		3,864		3,690
Realized gains on available-for-sale securities, net		145		383
Total other income		4,009		4,073
OTHER EXPENSES
Salaries and wages		3,868		3,887
Pensions and other employee benefits		1,530		1,437
Occupancy expense, net		578		609
Furniture and equipment expense		453		427
FDIC Assessments		94		142
Pennsylvania shares tax		336		322
Professional fees		227		289
Automated teller machine and interchange expense		294		249
Software subscriptions		280		241
Other operating expense		1,638		1,469
Total other expenses		9,298		9,072
Income before income tax provision		4,418		4,666
Income tax provision		984		1,093
NET INCOME	$	3,434	$	3,573
EARNINGS PER COMMON SHARE - BASIC	$	0.28	$	0.29
EARNINGS PER COMMON SHARE - DILUTED	$	0.28	$	0.29

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

4

Consolidated Statements of Comprehensive Income

(In Thousands) (Unaudited)

	Three Months Ended
	March 31,			March 31,
	2017			2016
Net income	$	3,434		$	3,573
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities		636			4,774
Reclassification adjustment for gains realized in income		(145	)		(383	)
Other comprehensive gain on available-for-sale securities		491			4,391
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in accumulated other comprehensive gain		166			26
Amortization of net transition obligation, prior service cost and net actuarial (gain) loss included in net periodic benefit cost		(6	)		(5	)
Other comprehensive gain on unfunded retirement obligations		160			21
Other comprehensive income before income tax		651			4,412
Income tax related to other comprehensive income		(228	)		(1,544	)
Net other comprehensive income		423			2,868
Comprehensive income	$	3,857		$	6,441

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

5

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands) (Unaudited)

	3 Months Ended
	March 31,			March 31,
	2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	3,434		$	3,573
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		452			368
Realized gains on available-for-sale securities, net		(145	)		(383	)
Depreciation expense		404			408
Accretion and amortization on securities, net		314			297
Increase in cash surrender value of life insurance		(90	)		(96	)
Stock-based compensation and other expense		168			162
Deferred income taxes		273			622
Decrease in fair value of servicing rights		30			71
Gains on sales of loans, net		(166	)		(168	)
Origination of loans for sale		(5,558	)		(4,975	)
Proceeds from sales of loans		5,657			4,861
Increase in accrued interest receivable and other assets		(171	)		(759	)
Decrease in accrued interest payable and other liabilities		(461	)		(289	)
Other		34			45
Net Cash Provided by Operating Activities		4,175			3,737
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of certificates of deposit		100			100
Purchase of certificates of deposit		(100	)		(100	)
Proceeds from sales of available-for-sale securities		13,856			8,695
Proceeds from calls and maturities of available-for-sale securities		12,771			17,318
Purchase of available-for-sale securities		(8,147	)		(14,852	)
Redemption of Federal Home Loan Bank of Pittsburgh stock		2,491			2,297
Purchase of Federal Home Loan Bank of Pittsburgh stock		(2,130	)		(901	)
Net (increase) decrease in loans		(10,580	)		2,313
Purchase of premises and equipment		(745	)		(378	)
Proceeds from sale of foreclosed assets		469			0
Other		46			49
Net Cash Provided by Investing Activities		8,031			14,541
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits		(3,592	)		20,233
Net decrease in short-term borrowings		(5,431	)		(27,544	)
Repayments of long-term borrowings		(66	)		(75	)
Purchase of treasury stock		0			(3,070	)
Sale of treasury stock		53			34
Tax benefit from compensation plans		0			45
Common dividends paid		(2,736	)		(2,789	)
Net Cash Used in Financing Activities		(11,772	)		(13,166	)
INCREASE IN CASH AND CASH EQUIVALENTS		434			5,112
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		28,621			33,313
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	29,055		$	38,425
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Assets acquired through foreclosure of real estate loans	$	216		$	370
Accrued redemption of bank-owned life insurance policy	$	0		$	1,442
Interest paid	$	951		$	905
Income taxes paid	$	200		$	225

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			(Loss) Income			Stock			Total
Three Months Ended March 31, 2017
Balance, December 31, 2016		12,655,171		541,943		$	12,655	$	71,730		$	112,790		$	(898	)	$	(10,269	)	$	186,008
Net income												3,434									3,434
Other comprehensive income, net															423						423
Cash dividends declared on common stock, $0.26 per share												(3,118	)								(3,118	)
Shares issued for dividend reinvestment plan				(15,831	)				82									300			382
Shares issued from treasury and redeemed related to exercise of stock options				(2,804	)				1									52			53
Restricted stock granted				(30,782	)				(583	)								583			0
Forfeiture of restricted stock				3,038					56									(56	)		0
Stock-based compensation expense									168												168
Balance, March 31, 2017		12,655,171		495,564		$	12,655	$	71,454		$	113,106		$	(475	)	$	(9,390	)	$	187,350
Three Months Ended March 31, 2016
Balance, December 31, 2015		12,655,171		474,548		$	12,655	$	71,654		$	109,454		$	2,528		$	(8,804	)	$	187,487
Net income												3,573									3,573
Other comprehensive income, net															2,868						2,868
Cash dividends declared on common stock, $0.26 per share												(3,165	)								(3,165	)
Shares issued for dividend reinvestment plan				(18,777	)				24									352			376
Treasury stock purchased				154,350														(3,070	)		(3,070	)
Shares issued from treasury and redeemed related to exercise of stock options				(2,090	)				(4	)								38			34
Restricted stock granted				(34,199	)				(635	)								635			0
Forfeiture of restricted stock				309					5									(5	)		0
Stock-based compensation expense									162												162
Tax benefit from dividends on restricted stock									6												6
Tax benefit from compensation plans												39									39
Balance, March 31, 2016		12,655,171		574,141		$	12,655	$	71,212		$	109,901		$	5,396		$	(10,854	)	$	188,310

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, 2016, 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 2016 information has been reclassified for consistency with the 2017 presentation.

Operating results reported for the three-month period ended March 31, 2017 might not be indicative of the results for the year ending December 31, 2017. The Corporation evaluates subsequent events through the date of filing with the Securities and Exchange Commission.

2. PER SHARE DATA

Basic earnings per common share are calculated using the two-class method to determine income attributable to common shareholders. Unvested restricted stock awards that contain nonforfeitable rights to dividends are considered participating securities under the two-class method. Distributed dividends and an allocation of undistributed net income to participating securities reduce the amount of income attributable to common shareholders. Income attributable to common shareholders is then divided by weighted-average common shares outstanding for the period to determine basic earnings per common share.

Diluted earnings per common share are calculated under the more dilutive of either the treasury method or the two-class method. Diluted earnings per common 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.

	3 Months Ended
	March 31,			March 31,
	2017			2016
Basic
Net income	$	3,434,000		$	3,573,000
Less: Dividends and undistributed earnings allocated to participating securities		(18,000	)		(20,000	)
Net income attributable to common shares	$	3,416,000		$	3,553,000
Basic weighted-average common shares outstanding		12,085,729			12,087,290
Basic earnings per common share (a)	$	0.28		$	0.29
Diluted
Net income attributable to common shares	$	3,416,000		$	3,553,000
Basic weighted-average common shares outstanding		12,085,729			12,087,290
Dilutive effect of potential common stock arising from stock options		45,681			20,770
Diluted weighted-average common shares outstanding		12,131,410			12,108,060
Diluted earnings per common share (a)	$	0.28		$	0.29

(a) Basic and diluted earnings per share under the two-class method are determined on net income reported on the income statement less earnings allocated to nonvested restricted shares with nonforfeitable dividends (participating securities).

The weighted-average number of nonvested restricted shares outstanding was 65,208 shares in the three-month period ended March 31, 2017 and 67,818 shares in the three-month period ended March 31, 2016.

8

Stock options that were anti-dilutive were excluded from net income per share calculations. There were no anti-dilutive shares in the first quarter 2017. Weighted-average common shares available from anti-dilutive instruments totaled 47,309 shares in the first quarter 2016.

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
Three Months Ended March 31, 2017
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	636		$	(223	)	$	413
Reclassification adjustment for (gains) realized in income		(145	)		51			(94	)
Other comprehensive income on available-for-sale securities		491			(172	)		319
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		166			(58	)		108
Amortization of net transition obligation, prior service cost and net actuarial gain included in net periodic benefit cost		(6	)		2			(4	)
Other comprehensive income on unfunded retirement obligations		160			(56	)		104
Total other comprehensive income	$	651		$	(228	)	$	423

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
Three Months Ended March 31, 2016
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	4,774		$	(1,671	)	$	3,103
Reclassification adjustment for (gains) realized in income		(383	)		134			(249	)
Other comprehensive income on available-for-sale securities		4,391			(1,537	)		2,854
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		(5	)		2			(3	)
Other comprehensive income on unfunded retirement obligations		21			(7	)		14
Total other comprehensive income	$	4,412		$	(1,544	)	$	2,868

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

(In Thousands)	Unrealized					Accumulated
	Holding Gains			Unfunded		Other
	(Losses)			Retirement		Comprehensive
	on Securities			Obligations		Loss
Three Months Ended March 31, 2017
Balance, beginning of period	$	(949	)	$	51	$	(898	)
Change during three months ended March 31, 2017		319			104		423
Balance, end of period	$	(630	)	$	155	$	(475	)

9

(In Thousands)	Unrealized				Accumulated
	Holding Gains		Unfunded		Other
	(Losses)		Retirement		Comprehensive
	on Securities		Obligations		Income
Three Months Ended March 31, 2016
Balance, beginning of period	$	2,493	$	35	$	2,528
Change during three months ended March 31, 2016		2,854		14		2,868
Balance, end of period	$	5,347	$	49	$	5,396

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

For the Three Months Ended March 31, 2017
(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	$	(145	)	Realized gains on available-for-sale securities, net
		51		Income tax provision
		(94	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(8	)	Pensions and other employee benefits
Actuarial loss		2		Pensions and other employee benefits
		(6	)	Total before tax
		2		Income tax provision
		(4	)	Net of tax
Total reclassifications for the period	$	(98	)

For the Three Months Ended March 31, 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	$	(383	)	Realized gains on available-for-sale securities, net
		134		Income tax provision
		(249	)	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	$	(252	)

10

4. CASH AND DUE FROM BANKS

Cash and due from banks at March 31, 2017 and December 31, 2016 include the following:

(In thousands)	March 31,		Dec. 31,
	2017		2016
Cash and cash equivalents	$	29,055	$	28,621
Certificates of deposit		3,488		3,488
Total cash and due from banks	$	32,543	$	32,109

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 $15,491,000 at March 31, 2017 and $16,654,000 at December 31, 2016.

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.

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.

11

At March 31, 2017 and December 31, 2016, assets measured at fair value and the valuation methods used are as follows:

			March 31, 2017
	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	$	9,568	$	0		$	9,568
Obligations of states and political subdivisions:
Tax-exempt		0		118,710		0			118,710
Taxable		0		28,805		0			28,805
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		49,359		0			49,359
Residential collateralized mortgage obligations		0		135,681		0			135,681
Commercial mortgage-backed securities		0		33,825		0			33,825
Total debt securities		0		375,948		0			375,948
Marketable equity securities		971		0		0			971
Total available-for-sale securities		971		375,948		0			376,919
Servicing rights		0		0		1,278			1,278
Total recurring fair value measurements	$	971	$	375,948	$	1,278		$	378,197
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	3,319		$	3,319
Valuation allowance		0		0		(881	)		(881	)
Impaired loans, net		0		0		2,438			2,438
Foreclosed assets held for sale		0		0		1,878			1,878
Total nonrecurring fair value measurements	$	0	$	0	$	4,316		$	4,316

12

			December 31, 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	$	9,541	$	0		$	9,541
Obligations of states and political subdivisions:
Tax-exempt		0		119,037		0			119,037
Taxable		0		30,297		0			30,297
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		58,404		0			58,404
Residential collateralized mortgage obligations		0		146,608		0			146,608
Commercial mortgage-Backed securities		0		30,219		0			30,219
Total debt securities		0		394,106		0			394,106
Marketable equity securities		971		0		0			971
Total available-for-sale securities		971		394,106		0			395,077
Servicing rights		0		0		1,262			1,262
Total recurring fair value measurements	$	971	$	394,106	$	1,262		$	396,339
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	3,372		$	3,372
Valuation allowance		0		0		(674	)		(674	)
Impaired loans, net		0		0		2,698			2,698
Foreclosed assets held for sale		0		0		2,180			2,180
Total nonrecurring fair value measurements	$	0	$	0	$	4,878		$	4,878

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 March 31, 2017 and December 31, 2016, 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
	3/31/17		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	3/31/17
Servicing rights	$	1,278	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		132.00	%	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

13

	Fair Value at
	12/31/16		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	12/31/16
Servicing rights	$	1,262	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		138.00	%	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. Unrealized gains (losses) in fair value of servicing rights are included in Loan servicing fees, net, in the unaudited consolidated statements of income.

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

(In Thousands)	Three Months Ended
	March 31			March 31,
	2017			2016
Servicing rights balance, beginning of period	$	1,262		$	1,296
Capitalization of servicing rights		46			36
Unrealized (losses) included in earnings		(30	)		(71	)
Servicing rights balance, end of period	$	1,278		$	1,261

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.

14

At March 31, 2017 and December 31, 2016, quantitative information regarding significant techniques and inputs used for nonrecurring fair value measurements using unobservable inputs (Level 3 methodologies) are as follows:

									Weighted-
									Average
(In Thousands, Except									Discount at
Percentages)			Valuation						3/31/17
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable
Asset	3/31/17		3/31/17		3/31/17		Technique	Inputs
Impaired loans:
Commercial:
Commercial loans secured by real estate	$	2,740	$	753	$	1,987	Sales comparison	Discount to appraised value		16	%
Commercial and industrial		77		77		0	Sales comparison	Discount to appraised value		100	%
Loans secured by farmland		502		51		451	Sales comparison	Discount to appraised value		55	%
Total impaired loans	$	3,319	$	881	$	2,438
Foreclosed assets held for sale -
real estate:
Residential (1-4 family)	$	800	$	0	$	800	Sales comparison	Discount to appraised value		44	%
Land		650		0		650	Sales comparison	Discount to appraised value		33	%
Commercial real estate		428		0		428	Sales comparison	Discount to appraised value		50	%
Total foreclosed assets held for sale	$	1,878	$	0	$	1,878

									Weighted-
									Average
(In Thousands, Except									Discount at
Percentages)			Valuation						12/31/16
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable
Asset	12/31/16		12/31/16		12/31/16		Technique	Inputs
Impaired loans:
Commercial:
Commercial loans secured by real estate	$	2,773	$	528	$	2,245	Sales comparison	Discount to appraised value		7	%
Commercial and industrial		95		95		0	Sales comparison	Discount to appraised value		100	%
Loans secured by farmland		504		51		453	Sales comparison	Discount to appraised value		55	%
Total impaired loans	$	3,372	$	674	$	2,698
Foreclosed assets held for sale - real estate:
Residential (1-4 family)	$	1,102	$	0	$	1,102	Sales comparison	Discount to appraised value		35	%
Land		650		0		650	Sales comparison	Discount to appraised value		33	%
Commercial real estate		428		0		428	Sales comparison	Discount to appraised value		50	%
Total foreclosed assets held for sale	$	2,180	$	0	$	2,180

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.

15

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.

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 March 31, 2017 and December 31, 2016. 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	March 31, 2017				December 31, 2016
	Method(s)	Carrying		Fair		Carrying		Fair
	Used	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	29,055	$	29,055	$	28,621	$	28,621
Certificates of deposit	Level 2		3,488		3,483		3,488		3,481
Available-for-sale securities	See Above		376,919		376,919		395,077		395,077
Restricted equity securities (included in Other Assets)	Level 2		4,065		4,065		4,426		4,426
Loans held for sale	Level 1		163		163		142		142
Loans, net	Level 3		753,277		736,876		743,362		725,787
Accrued interest receivable	Level 2		3,804		3,804		3,963		3,963
Servicing rights	Level 3		1,278		1,278		1,262		1,262
Financial liabilities:
Deposits with no stated maturity	Level 2		764,048		764,048		771,625		771,625
Time deposits	Level 2		216,203		216,378		212,218		212,274
Short-term borrowings	Level 2		20,744		20,612		26,175		26,024
Long-term borrowings	Level 2		38,388		38,960		38,454		39,062
Accrued interest payable	Level 2		67		67		65		65

16

6. SECURITIES

Amortized cost and fair value of available-for-sale securities at March 31, 2017 and December 31, 2016 are summarized as follows:

			March 31, 2017
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	9,674	$	3	$	(109	)	$	9,568
Obligations of states and political subdivisions:
Tax-exempt		117,272		2,756		(1,318	)		118,710
Taxable		28,559		310		(64	)		28,805
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		49,896		117		(654	)		49,359
Residential collateralized mortgage obligations		137,077		372		(1,768	)		135,681
Commercial mortgage-backed securities		34,411		7		(593	)		33,825
Total debt securities		376,889		3,565		(4,506	)		375,948
Marketable equity securities		1,000		0		(29	)		971
Total	$	377,889	$	3,565	$	(4,535	)	$	376,919

			December 31, 2016
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	9,671	$	5	$	(135	)	$	9,541
Obligations of states and political subdivisions:
Tax-exempt		118,140		2,592		(1,695	)		119,037
Taxable		30,073		303		(79	)		30,297
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		58,922		306		(824	)		58,404
Residential collateralized mortgage obligations		147,915		408		(1,715	)		146,608
Commercial mortgage-backed securities		30,817		0		(598	)		30,219
Total debt securities		395,538		3,614		(5,046	)		394,106
Marketable equity securities		1,000		0		(29	)		971
Total	$	396,538	$	3,614	$	(5,075	)	$	395,077

17

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 March 31, 2017 and December 31, 2016:

March 31, 2017	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	$	7,922	$	(109	)	$	0	$	0		$	7,922	$	(109	)
Obligations of states and political subdivisions:
Tax-exempt		36,264		(1,253	)		2,697		(65	)		38,961		(1,318	)
Taxable		8,212		(64	)		0		0			8,212		(64	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		37,612		(654	)		0		0			37,612		(654	)
Residential collateralized mortgage obligations		80,476		(1,159	)		15,140		(609	)		95,616		(1,768	)
Commercial mortgage-backed securities		29,840		(593	)		0		0			29,840		(593	)
Total debt securities		200,326		(3,832	)		17,837		(674	)		218,163		(4,506	)
Marketable equity securities		1,000		(29	)		0		0			1,000		(29	)
Total temporarily impaired available-for-sale securities	$	201,326	$	(3,861	)	$	17,837	$	(674	)	$	219,163	$	(4,535	)

December 31, 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 U.S. Government agencies	$	7,899	$	(135	)	$	0	$	0		$	7,899	$	(135	)
Obligations of states and political subdivisions:
Tax-exempt		54,479		(1,676	)		1,278		(19	)		55,757		(1,695	)
Taxable		9,594		(79	)		0		0			9,594		(79	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		48,674		(824	)		0		0			48,674		(824	)
Residential collateralized mortgage obligations		85,198		(1,124	)		16,073		(591	)		101,271		(1,715	)
Commercial mortgage-backed securities		30,219		(598	)		0		0			30,219		(598	)
Total debt securities		236,063		(4,436	)		17,351		(610	)		253,414		(5,046	)
Marketable equity securities		1,000		(29	)		0		0			1,000		(29	)
Total temporarily impaired available-for-sale securities	$	237,063	$	(4,465	)	$	17,351	$	(610	)	$	254,414	$	(5,075	)

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

(In Thousands)	3 Months Ended
	March 31,			March 31,
	2017			2016
Gross realized gains from sales	$	161		$	383
Gross realized losses from sales		(16	)		0
Net realized gains	$	145		$	383

18

The amortized cost and fair value of available-for-sale debt securities by contractual maturity are shown in the following table as of March 31, 2017. 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	$	18,630	$	18,730
Due from one year through five years		72,025		73,398
Due from five years through ten years		40,291		39,963
Due after ten years		24,559		24,992
Sub-total		155,505		157,083
Mortgage-backed securities issued or guaranteed  by U.S. Government agencies or sponsored  agencies:
Residential pass-through securities		49,896		49,359
Residential collateralized mortgage obligations		137,077		135,681
Commercial mortgage-backed securities		34,411		33,825
Total	$	376,889	$	375,948

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 $220,272,000 at March 31, 2017 and $230,803,000 at December 31, 2016 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 other-than-temporary impairment (“OTTI”) at March 31, 2017 is provided below.

Debt Securities

At March 31, 2017, 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 March 31, 2017 to be temporary.

Equity Securities

The Corporation’s marketable equity securities at March 31, 2017 and December 31, 2016 consisted exclusively of one mutual fund. At March 31, 2017 and December 31, 2016, the mutual fund held by the Corporation had an unrealized loss of $29,000 for which management determined an OTTI charge was not required.

The Corporation had no realized gains or losses from the sale of equity securities in the first quarter of 2017. In the first quarter 2016, the Corporation had realized gains of $249,000 from the sale of bank stocks.

19

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 $3,935,000 at March 31, 2017 and $4,296,000 at December 31, 2016. The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at March 31, 2017 and December 31, 2016. 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 March 31, 2017 and December 31, 2016 are summarized by segment, and by classes within each segment, as follows:

Summary of Loans by Type
(In Thousands)	March 31,			Dec. 31,
	2017			2016
Residential mortgage:
Residential mortgage loans - first liens	$	340,431		$	334,102
Residential mortgage loans - junior liens		23,717			23,706
Home equity lines of credit		36,810			38,057
1-4 Family residential construction		24,041			24,908
Total residential mortgage		424,999			420,773
Commercial:
Commercial loans secured by real estate		153,385			150,468
Commercial and industrial		79,493			83,854
Political subdivisions		44,625			38,068
Commercial construction and land		15,252			14,287
Loans secured by farmland		7,497			7,294
Multi-family (5 or more) residential		7,622			7,896
Agricultural loans		3,992			3,998
Other commercial loans		11,131			11,475
Total commercial		322,997			317,340
Consumer		14,025			13,722
Total		762,021			751,835
Less: allowance for loan losses		(8,744	)		(8,473	)
Loans, net	$	753,277		$	743,362

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 March 31, 2017 or December 31, 2016.

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 March 31, 2017 and December 31, 2016, management determined that no allowance for credit losses related to unfunded loan commitments was required.

20

Transactions within the allowance for loan losses, summarized by segment and class, for the three-month periods ended March 31, 2017 and 2016 were as follows:

Three Months Ended March 31, 2017	Dec. 31,										March 31,
(In Thousands)	2016 Balance		Charge-offs			Recoveries		Provision (Credit)			2017  Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	3,033	$	(63	)	$	2	$	153		$	3,125
Residential mortgage loans - junior liens		258		0			1		(3	)		256
Home equity lines of credit		350		0			0		(12	)		338
1-4 Family residential construction		249		0			0		(9	)		240
Total residential mortgage		3,890		(63	)		3		129			3,959
Commercial:
Commercial loans secured by real estate		2,380		(96	)		0		401			2,685
Commercial and industrial		999		0			1		(94	)		906
Commercial construction and land		162		0			0		7			169
Loans secured by farmland		110		0			0		1			111
Multi-family (5 or more) residential		241		0			0		(5	)		236
Agricultural loans		40		0			0		(1	)		39
Other commercial loans		115		0			0		(6	)		109
Total commercial		4,047		(96	)		1		303			4,255
Consumer		138		(41	)		15		20			132
Unallocated		398		0			0		0			398
Total Allowance for Loan Losses	$	8,473	$	(200	)	$	19	$	452		$	8,744

Three Months Ended March 31, 2016	Dec. 31,										March 31,
(In Thousands)	2015 Balance		Charge-offs			Recoveries		Provision (Credit)			2016 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,645	$	0		$	0	$	77		$	2,722
Residential mortgage loans - junior liens		219		0			0		9			228
Home equity lines of credit		347		0			0		4			351
1-4 Family residential construction		207		0			0		(7	)		200
Total residential mortgage		3,418		0			0		83			3,501
Commercial:
Commercial loans secured by real estate		1,939		0			1		87			2,027
Commercial and industrial		981		0			1		(6	)		976
Commercial construction and land		58		0			0		26			84
Loans secured by farmland		106		0			0		2			108
Multi-family (5 or more) residential		675		(595	)		0		176			256
Agricultural loans		45		0			0		(1	)		44
Other commercial loans		118		0			0		(6	)		112
Total commercial		3,922		(595	)		2		278			3,607
Consumer		122		(18	)		15		7			126
Unallocated		427		0			0		0			427
Total Allowance for Loan Losses	$	7,889	$	(613	)	$	17	$	368		$	7,661

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.

21

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 March 31, 2017 and December 31, 2016:

March 31, 2017
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	330,808	$	293	$	9,274	$	56	$	340,431
Residential mortgage loans - junior liens		23,318		142		257		0		23,717
Home equity lines of credit		36,150		63		597		0		36,810
1-4 Family residential construction		23,954		0		87		0		24,041
Total residential mortgage		414,230		498		10,215		56		424,999
Commercial:
Commercial loans secured by real estate		142,711		2,721		7,953		0		153,385
Commercial and Industrial		73,006		5,046		1,430		11		79,493
Political subdivisions		44,625		0		0		0		44,625
Commercial construction and land		15,112		60		80		0		15,252
Loans secured by farmland		5,482		601		1,399		15		7,497
Multi-family (5 or more) residential		7,013		0		609		0		7,622
Agricultural loans		3,138		84		770		0		3,992
Other commercial loans		11,057		0		74		0		11,131
Total commercial		302,144		8,512		12,315		26		322,997
Consumer		13,812		7		206		0		14,025
Totals	$	730,186	$	9,017	$	22,736	$	82	$	762,021

22

December 31, 2016
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	324,377	$	408	$	9,258	$	59	$	334,102
Residential mortgage loans - junior liens		23,274		132		300		0		23,706
Home equity lines of credit		37,360		123		574		0		38,057
1-4 Family residential construction		24,820		0		88		0		24,908
Total residential mortgage		409,831		663		10,220		59		420,773
Commercial:
Commercial loans secured by real estate		139,358		3,092		8,018		0		150,468
Commercial and Industrial		79,202		4,180		461		11		83,854
Political subdivisions		38,068		0		0		0		38,068
Commercial construction and land		14,136		70		81		0		14,287
Loans secured by farmland		5,745		129		1,404		16		7,294
Multi-family (5 or more) residential		7,277		0		619		0		7,896
Agricultural loans		3,208		0		790		0		3,998
Other commercial loans		11,401		0		74		0		11,475
Total commercial		298,395		7,471		11,447		27		317,340
Consumer		13,546		0		176		0		13,722
Totals	$	721,772	$	8,134	$	21,843	$	86	$	751,835

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 57% at March 31, 2017) 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.

23

 The scope of loans reviewed individually each quarter to determine if they are impaired include all loan relationships greater than $200,000 for which there is at least one extension of credit graded Special Mention, Substandard or Doubtful. Loans that are individually reviewed, but which are determined to not 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 reviewed, but which have been determined to not be impaired, are included in the “Collectively Evaluated” column in the table summarizing the allowance and associated loan balances as of March 31, 2017 and December 31, 2016. 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.

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 March 31, 2017 and December 31, 2016:

March 31, 2017	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	743	$	339,688	$	340,431	$	0	$	3,125	$	3,125
Residential mortgage loans - junior liens		66		23,651		23,717		0		256		256
Home equity lines of credit		0		36,810		36,810		0		338		338
1-4 Family residential construction		0		24,041		24,041		0		240		240
Total residential mortgage		809		424,190		424,999		0		3,959		3,959
Commercial:
Commercial loans secured by real estate		5,915		147,470		153,385		753		1,932		2,685
Commercial and industrial		162		79,331		79,493		77		829		906
Political subdivisions		0		44,625		44,625		0		0		0
Commercial construction and land		0		15,252		15,252		0		169		169
Loans secured by farmland		1,387		6,110		7,497		51		60		111
Multi-family (5 or more) residential		392		7,230		7,622		0		236		236
Agricultural loans		12		3,980		3,992		0		39		39
Other commercial loans		0		11,131		11,131		0		109		109
Total commercial		7,868		315,129		322,997		881		3,374		4,255
Consumer		22		14,003		14,025		0		132		132
Unallocated												398
Total	$	8,699	$	753,322	$	762,021	$	881	$	7,465	$	8,744

24

December 31, 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	$	753	$	333,349	$	334,102	$	0	$	3,033	$	3,033
Residential mortgage loans - junior liens		68		23,638		23,706		0		258		258
Home equity lines of credit		0		38,057		38,057		0		350		350
1-4 Family residential construction		0		24,908		24,908		0		249		249
Total residential mortgage		821		419,952		420,773		0		3,890		3,890
Commercial:
Commercial loans secured by real estate		8,005		142,463		150,468		528		1,852		2,380
Commercial and industrial		212		83,642		83,854		95		904		999
Political subdivisions		0		38,068		38,068		0		0		0
Commercial construction and land		0		14,287		14,287		0		162		162
Loans secured by farmland		1,394		5,900		7,294		51		59		110
Multi-family (5 or more) residential		392		7,504		7,896		0		241		241
Agricultural loans		13		3,985		3,998		0		40		40
Other commercial loans		0		11,475		11,475		0		115		115
Total commercial		10,016		307,324		317,340		674		3,373		4,047
Consumer		23		13,699		13,722		0		138		138
Unallocated												398
Total	$	10,860	$	740,975	$	751,835	$	674	$	7,401	$	8,473

Summary information related to impaired loans at March 31, 2017 and December 31, 2016 is as follows:

(In Thousands)	March 31, 2017						December 31, 2016
	Unpaid						Unpaid
	Principal		Recorded		Related		Principal		Recorded		Related
	Balance		Investment		Allowance		Balance		Investment		Allowance
With no related allowance recorded:
Residential mortgage loans - first liens	$	773	$	743	$	0	$	783	$	753	$	0
Residential mortgage loans - junior liens		66		66		0		68		68		0
Commercial loans secured by real estate		3,175		3,175		0		6,975		5,232		0
Commercial and industrial		85		85		0		117		117		0
Loans secured by farmland		885		885		0		890		890		0
Multi-family (5 or more) residential		987		392		0		987		392		0
Agricultural loans		12		12		0		13		13		0
Consumer		22		22		0		23		23		0
Total with no related allowance recorded		6,005		5,380		0		9,856		7,488		0
With a related allowance recorded:
Commercial loans secured by real estate		2,740		2,740		753		2,773		2,773		528
Commercial and industrial		77		77		77		95		95		95
Loans secured by farmland		502		502		51		504		504		51
Total with a related allowance recorded		3,319		3,319		881		3,372		3,372		674
Total	$	9,324	$	8,699	$	881	$	13,228	$	10,860	$	674

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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				3 Months Ended
	March 31,				March 31,
	2017		2016		2017		2016
Residential mortgage:
Residential mortgage loans - first lien	$	748	$	861	$	9	$	10
Residential mortgage loans - junior lien		67		73		1		1
Total residential mortgage		815		934		10		11
Commercial:
Commercial loans secured by real estate		6,889		6,160		56		110
Commercial and industrial		247		568		3		3
Loans secured by farmland		1,390		1,423		8		21
Multi-family (5 or more) residential		392		690		0		0
Agricultural loans		12		15		1		1
Total commercial		8,930		8,856		68		135
Consumer		33		12		0		0
Total	$	9,778	$	9,802	$	78	$	146

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)	March 31, 2017				December 31, 2016
	Past Due				Past Due
	90+ Days and				90+ Days and
	Accruing		Nonaccrual		Accruing		Nonaccrual
Residential mortgage:
Residential mortgage loans - first liens	$	1,979	$	3,478	$	3,022	$	3,770
Residential mortgage loans - junior liens		40		0		114		0
Home equity lines of credit		158		11		320		11
Total residential mortgage		2,177		3,489		3,456		3,781
Commercial:
Commercial loans secured by real estate		96		5,713		2,774		3,080
Commercial and industrial		218		160		286		119
Loans secured by farmland		216		1,326		219		1,331
Multi-family (5 or more) residential		0		392		0		392
Agricultural loans		0		12		0		13
Total commercial		530		7,603		3,279		4,935
Consumer		7		139		103		20
Totals	$	2,714	$	11,231	$	6,838	$	8,736

26

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 March 31, 2017 and December 31, 2016:

	As of March 31, 2017								As of December 31, 2016
	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	$	330,781	$	6,044	$	3,606	$	340,431	$	321,670	$	6,695	$	5,737	$	334,102
Residential mortgage loans - junior liens		23,593		84		40		23,717		23,268		324		114		23,706
Home equity lines of credit		36,427		225		158		36,810		37,603		134		320		38,057
1-4 Family residential construction		23,543		498		0		24,041		24,567		341		0		24,908
Total residential mortgage		414,344		6,851		3,804		424,999		407,108		7,494		6,171		420,773
Commercial:
Commercial loans secured by real estate		150,231		240		2,914		153,385		147,464		82		2,922		150,468
Commercial and industrial		79,202		13		278		79,493		83,364		185		305		83,854
Political subdivisions		44,625		0		0		44,625		38,068		0		0		38,068
Commercial construction and land		15,154		98		0		15,252		14,199		88		0		14,287
Loans secured by farmland		6,334		138		1,025		7,497		6,181		83		1,030		7,294
Multi-family (5 or more) residential		7,230		0		392		7,622		7,439		65		392		7,896
Agricultural loans		3,979		1		12		3,992		3,981		4		13		3,998
Other commercial loans		11,131		0		0		11,131		11,475		0		0		11,475
Total commercial		317,886		490		4,621		322,997		312,171		507		4,662		317,340
Consumer		13,857		72		96		14,025		13,446		153		123		13,722
Totals	$	746,087	$	7,413	$	8,521	$	762,021	$	732,725	$	8,154	$	10,956	$	751,835

Nonaccrual loans are included in the contractual aging in the immediately preceding table. A summary of the contractual aging of nonaccrual loans at March 31, 2017 and December 31, 2016 is as follows:

	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Total
March 31, 2017 Nonaccrual Totals	$	4,487	$	937	$	5,807	$	11,231
December 31, 2016 Nonaccrual Totals	$	4,199	$	419	$	4,118	$	8,736

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 March 31, 2017 and December 31, 2016 is as follows:

	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Nonaccrual		Total
March 31, 2017 Totals	$	701	$	51	$	242	$	2,841	$	3,835
December 31, 2016 Totals	$	5,453	$	350	$	0	$	2,874	$	8,677

At March 31, 2017 and December 31, 2016, there were no commitments to loan additional funds to borrowers whose loans have been classified as TDRs.

27

TDRs that occurred during the three-month period ended March 31, 2017 and 2016 are as follows:

(Balances in Thousands)
	March 31, 2017				March 31, 2016
			Post-				Post-
	Number		Modification		Number		Modification
	of		Recorded		of		Recorded
	Loans		Investment		Loans		Investment
Commercial and industrial,
Extended maturity		0	$	0		1	$	5
Total		0	$	0		1	$	5

In the three-month period ended March 31 2017 and 2016, defaults on loans for which modifications considered to be TDRs were entered into within the previous 12 months are summarized as follows:

(Balances in Thousands)
	March 31, 2017				March 31, 2016
	Number				Number
	of		Recorded		of		Recorded
	Loans		Investment		Loans		Investment
Residential mortgage - first liens		2	$	293		1	$	31
Residential mortgage - junior liens		1		28		0		0
Commercial and industrial		0		0		1		5
Consumer		1		26		0		0
Total		4	$	347		2	$	36

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)	March 31,		Dec. 31,
	2017		2016
Foreclosed residential real estate	$	800	$	1,102

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)	March 31,		Dec. 31,
	2017		2016
Residential real estate in process of foreclosure	$	2,544	$	2,738

8. BORROWED FUNDS

Short-term borrowings include the following:

(In Thousands)	March 31,		Dec. 31,
	2017		2016
FHLB-Pittsburgh borrowings	$	14,500	$	21,000
Customer repurchase agreements		6,244		5,175
Total short-term borrowings	$	20,744	$	26,175

The FHLB-Pittsburgh loan facilities are collateralized by qualifying loans secured by real estate with a book value totaling $483,045,000 at March 31, 2017 and $471,454,000 at December 31, 2016. 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 $3,935,000 at March 31, 2017 and $4,296,000 at December 31, 2016.

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At March 31, 2017, the short-term borrowing from FHLB-Pittsburgh of $14,500,000 was an overnight borrowing with an interest rate of 0.99%. At December 31, 2016, the short-term borrowing from FHLB-Pittsburgh of $21,000,000 was an overnight borrowing with an interest rate of 0.74%.

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 March 31, 2017 and December 31, 2016.

Long-term borrowings are as follows:

(In Thousands)	March 31,		Dec. 31,
	2017		2016
FHLB-Pittsburgh borrowings	$	11,388	$	11,454
Repurchase agreement		27,000		27,000
Total long-term borrowings	$	38,388	$	38,454

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

(In Thousands)	March 31,		Dec. 31,
	2017		2016
Loan maturing in June 2017 with a rate of 6.83%	$	2	$	4
Loan maturing in September 2017 with a rate of 3.81%		10,000		10,000
Loan maturing in April 2020 with a rate of 4.79%		601		646
Loan maturing in June 2025 with a rate of 4.91%		785		804
Total long-term FHLB-Pittsburgh borrowings	$	11,388	$	11,454

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 $34,675,000 at March 31, 2017 and $31,494,000 at December 31, 2016, detailed in the following table:

(In Thousands)	March 31,		Dec. 31,
	2017		2016
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities	$	15,268	$	18,181
Residential collateralized mortgage obligations		19,407		13,313
Total	$	34,675	$	31,494

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.

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· 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 $320,661,000 at March 31, 2017.

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. The 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 March 31, 2017 and December 31, 2016, 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
	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2017			2016			2017			2016
Service cost	$	0		$	0		$	9		$	9
Interest cost		6			7			14			16
Expected return on plan assets		(8	)		(7	)		0			0
Amortization of prior service cost		0			0			(8	)		(8	)
Recognized net actuarial loss		2			3			0			0
Net periodic benefit cost	$	0		$	3		$	15		$	17

In the first three months of 2017, the Corporation funded postretirement contributions totaling $12,000, with estimated annual postretirement contributions of $62,000 expected in 2017 for the full year. Based upon preliminary actuarial information, no defined benefit pension contributions are required in 2017, 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 first quarter 2017, the Corporation awarded 22,312 shares of restricted stock under the Stock Incentive Plan and 8,470 shares of restricted stock under the Independent Directors Stock Incentive Plan. The 2017 restricted stock awards under the Stock Incentive Plan vest ratably over three years, and vesting for one-half of the 14,897 restricted shares awarded to Executive Officers depends on the Corporation meeting a return on average equity (“ROAE”) target each year. The 2017 restricted stock issued under the Independent Directors Stock Incentive Plan vests over 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 three months of 2017 based on an assumption that the ROAE target for awards to Executive Officers in 2016 and 2017 will not be met, resulting in forfeiture of the restricted stock.

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Total annual stock-based compensation for the year ending December 31, 2017 is estimated to total $652,000. If the ROAE targets for awards to Executive Officers in 2016 and 2017 are met or exceeded, total annual stock-based compensation would increase by approximately $123,000. Total stock-based compensation expense attributable to restricted stock awards amounted to $168,000 in the first quarter of 2017 and $162,000 in the first quarter 2016.

11. INCOME TAXES

The net deferred tax asset at March 31, 2017 and December 31, 2016 represents the following temporary difference components:

	March 31,		December 31,
(In Thousands)	2017		2016
Deferred tax assets:
Unrealized holding losses on securities	$	340	$	512
Allowance for loan losses		3,094		2,998
Other deferred tax assets		2,309		2,658
Total deferred tax assets		5,743		6,168
Deferred tax liabilities:
Defined benefit plans - ASC 835		83		27
Bank premises and equipment		933		913
Core deposit intangibles		6		6
Other deferred tax liabilities		105		105
Total deferred tax liabilities		1,127		1,051
Deferred tax asset, net	$	4,616	$	5,117

The provision for income tax for the three-month periods ended March 31, 2017 and 2016 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:

	Three Months Ended
(Dollars In thousands)	March 31,
	2017			2016
Income before income tax provision	$	4,418		$	4,666
Income tax provision		984			1,093
Effective tax rate		22.27	%		23.42	%

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 through 2016 and expects to continue to receive tax credits annually through 2022. The carrying amount of the Corporation’s investment is $687,000 at March 31, 2017 and $713,000 at December 31, 2016 (included in Other Assets in the consolidated balance sheets). For the year ending December 31, 2017, the estimated amount of tax credits and other tax benefits to be received is $157,000 and the estimated amount to be recognized as a reduction of the provision for income taxes is $73,000. The total reduction in the provision for income taxes resulting from this investment is $18,000 in the first quarter 2017 and $19,000 in the first quarter 2016.

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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. Additional ASUs related to revenue recognition include the following:

· 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.

· 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 and in December 2016, the FASB issued ASU 2016-20, which provide clarifying guidance in a few narrow areas and adds some practical expedients to the guidance.

· In February 2017, the FASB issued ASU 2017-05, which provides guidance on the accounting for gains and losses on the derecognition of nonfinancial assets.

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. Initial adoption of this ASU is not expected to have a significant impact on the Corporation, as recognition of interest income and the larger sources of noninterest income in the Corporation’s current business model would not be impacted by the ASU.

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 March 31, 2017 and December 31, 2016, 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. Initial adoption of this ASU is not expected to have a significant impact on the Corporation’s financial position; however, the method for determining the fair value of loans and other financial instruments for disclosure purposes will be affected.

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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. The Corporation is in the early stages of evaluating the potential impact of adopting this amendment.

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. The amendments should be applied prospectively upon their effective date. Initial adoption of this ASU in 2017 did not have a significant impact on the Corporation.

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. Initial adoption of this ASU in 2017 did not have a significant impact on the Corporation.

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.

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· 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.

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) to simplify the accounting for goodwill impairment. This guidance, among other things, removes step 2 of the goodwill impairment test thus eliminating the need to determine the fair value of individual assets and liabilities of the reporting unit. Upon adoption of this ASU, goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This may result in more or less impairment being recognized than under current guidance. This Update will become effective for the Corporation’s annual and interim goodwill impairment tests beginning in the first quarter of 2020.

In March 2017, the FASB issued ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20). This Update will shorten the amortization period for certain callable debt securities held at a premium. Under current U.S. GAAP, entities generally amortize the premium over the contractual life of the instrument. Discounts will continue to be amortized to maturity. The amendments in this Update are effective for the Corporation for annual and interim periods beginning in the first quarter 2019. An entity should apply the amendments in this Update through a cumulative-effect adjustment directly to retained earnings as of the beginning of the year of adoption. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Corporation does not expect adoption of the amendments to have a significant impact on its financial position, and is in the process of evaluating whether to early adopt the amendments.

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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

Earnings per basic and diluted common share were $0.28 in the first quarter 2017, as compared to $0.35 per share in the fourth quarter 2016 and $0.29 per share in the first quarter 2016. The annualized return on average assets for the first quarter 2017 was 1.11%, and the annualized return on average equity was 7.38%. Earnings for the first quarter 2017 included an estimated $0.01 per common share after-tax benefit from realized gains on available-for-sale securities, as compared to an estimated $0.02 per share after-tax benefit from securities gains in the first quarter 2016. Highlights related to the Corporation’s earnings results for the comparative periods are presented below.

Some of the more significant fluctuations in revenues and expenses between the three-month period ended March 31, 2017 and the corresponding period in 2016 were as follows:

· Net interest income increased $126,000 (1.3%), in the first quarter 2017 as compared to the first quarter 2016. The net interest margin was 3.78% for the first quarter 2017 as compared to 3.81% for the first quarter 2016. Average total loans outstanding were higher by $57.7 million (8.2%) in the first quarter 2017 as compared to the first quarter 2016, while average total available-for-sale securities were lower by $22.4 million. Average total deposits were $22.6 million (2.4%) higher in the first quarter 2017 as compared to the first quarter 2016.

· The first quarter 2017 provision for loan losses was $84,000 higher than the first quarter 2016 amount. The $452,000 provision in the first quarter 2017 included $388,000 related to the change in total specific allowances on impaired loans, as adjusted for net charge-offs during the period and a $64,000 increase in the collectively determined allowance for loan losses, mainly due to loan growth. In the first quarter 2016, the $368,000 provision included $82,000 related to the change in total specific allowances on impaired loans, as adjusted for net charge-offs during the period and a $286,000 increase in the collectively determined allowance for loan losses. The increase in the collectively determined allowance in the first quarter 2016 included the effects of loan growth, increased qualitative factors associated with residential mortgage loans and an increased net charge-off experience factor for commercial loans.

· Noninterest revenue increased $174,000 (4.7%) in the first quarter 2017 over the first quarter 2016 amount. Other operating income increased $87,000, including an increase of $50,000 in revenue from tax credits. Interchange revenue from debit card transactions increased $57,000 (12.3%), reflecting benefits from a consulting project in 2016 that identified opportunities for improvements in card-related volumes and processing. Loan servicing fees, net, increased $50,000, as the fair value of mortgage servicing rights decreased by $30,000 in the first quarter 2017 as compared to a reduction of $71,000 in the first quarter 2016. Trust and Financial Management Group revenue increased $36,000 (3.1%), in part due to market valuation increases. Service charges on deposit accounts decreased $54,000 (4.7%), as revenue from consumer overdrafts declined due to lower volume.

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· Realized gains on available-for-sale securities totaled $145,000 in the first quarter 2017, down from $383,000 in the first quarter 2016.

· Total noninterest expenses increased $226,000 (2.5%) in the first quarter 2017 over the first quarter 2016 amount. Other operating expense increased $169,000, including increases of $89,000 in loan collection expenses and $42,000 in losses and expenses associated with other real estate. Pensions and other employee benefits expense increased $93,000, including the effect of higher health care expenses on C&N’s partially self-insured plan. Automated teller machine and interchange expense increased $45,000, including costs associated with issuing new debit cards with EMV functionality. Software subscriptions increased $39,000, including costs associated with new applications as well as annual licensing increases. Professional fees expense decreased $62,000, including a reduction in information technology and sales and service -related consulting. FDIC assessments expense decreased $48,000, reflecting a lower assessment level.

· The first quarter 2017 provision for income tax of $984,000, or 22.3% of pre-tax earnings, was $109,000 lower than the first quarter 2016 tax provision of $1,093,000, or 23.4% of pre-tax income. The lower effective tax in the first quarter 2017 resulted primarily from lower pre-tax earnings.

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
(Dollars In Thousands) (Unaudited)	For the Three Months Ended:
	Mar. 31,		Dec. 31,			Sept. 30,		June 30,		Mar. 31,
	2017		2016			2016		2016		2016
Interest income	$	11,112	$	11,106		$	11,131	$	10,924	$	10,937
Interest expense		953		920			944		925		904
Net interest income		10,159		10,186			10,187		9,999		10,033
Provision (credit) for loan losses		452		(3	)		538		318		368
Net interest income after provision (credit) for loan losses		9,707		10,189			9,649		9,681		9,665
Other income		3,864		4,031			3,884		3,906		3,690
Net gains on available-for-sale securities		145		69			584		122		383
Other expenses		9,298		8,558			8,579		8,535		9,072
Income before income tax provision		4,418		5,731			5,538		5,174		4,666
Income tax provision		984		1,500			1,451		1,303		1,093
Net income	$	3,434	$	4,231		$	4,087	$	3,871	$	3,573
Net income attributable to common shares	$	3,416	$	4,209		$	4,065	$	3,850	$	3,553
Net income per share – basic	$	0.28	$	0.35		$	0.34	$	0.32	$	0.29
Net income per share – diluted	$	0.28	$	0.35		$	0.34	$	0.32	$	0.29

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.

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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 periods ended March 31, 2017 and March 31, 2016. 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.

For the three-month periods, fully taxable equivalent net interest income was $10,841,000 in 2017, $97,000 (0.9%) higher than in 2016. Interest income was $146,000 higher in 2017 as compared to 2016, while interest expense was higher by $49,000 in comparing the same periods. As presented in Table III, the Net Interest Margin was 3.78% in 2017 as compared to 3.81% in 2016, 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 2017 as compared to 3.68% in 2016.

INTEREST INCOME AND EARNING ASSETS

Interest income totaled $11,794,000 in 2017, an increase of 1.3% from 2016. Interest and fees on loans receivable increased $403,000, or 4.7%, while income from available-for-sale securities decreased $263,000 (8.9%). As discussed in more detail in the “Financial Condition” section of Management’s Discussion and Analysis, the average balance of gross loans receivable increased 8.2% to $759,378,000 in 2017 from $701,636,000 in 2016. The Corporation’s average rate of return on loans receivable declined to 4.84% in 2017 from 4.96% in 2016 as rates on new loans have decreased.

As indicated in Table III, average available-for-sale securities (at amortized cost) totaled $388,879,000 in 2017, a decrease of $22,407,000 (5.4%) from 2016. The net decrease in the Corporation’s available-for-sale securities portfolio consisted of decreases in taxable securities including collateralized-mortgage obligations and taxable municipal bonds partially offset by an increase in commercial mortgage-back securities. The average rate of return on available-for-sale securities decreased to 2.81% in 2017 from 2.89% in 2016. The decrease in yield of available-for-sale securities resulted from higher yielding tax-exempt municipal bonds maturing or having call options exercised. In particular, in the first quarter 2016, the Corporation recognized accretion (interest) income on an accelerated basis on three tax-exempt securities that were called during the quarter, with the call dates occurring later in the year. The fully taxable equivalent benefit of the accelerated accretion was $51,000, which increased the Margin and Spread by 0.02% each over the levels that would have been reported in the first quarter 2016 in the absence of the accelerated recognition.

INTEREST EXPENSE AND INTEREST-BEARING LIABILITIES

Interest expense increased $49,000, or 5.4%, to $953,000 in 2017 from $904,000 in 2016. As presented in Table III, the overall cost of funds on interest-bearing liabilities increased to 0.47% in 2017 from 0.45% in 2016.

Interest expense on deposits increased $42,000 in 2017 over 2016. The average rate on interest-bearing deposits increased 0.02%, including increases of 0.08% on certificates of deposit, 0.04% on interest checking and 0.02% on Individual Retirement Accounts. Total average deposits (interest-bearing and noninterest-bearing) increased 2.4%, to $967,223,000 in 2017 from $944,599,000 in 2016. Increases in the average balances of noninterest-bearing demand deposits, savings and interest checking accounts were partially offset by a decrease in the average balance of Individual Retirement Accounts.

37

Interest expense on total borrowed funds increased $7,000 in 2017 as compared to 2016. The average balance of total borrowed funds increased to $79,805,000 in the first quarter 2017 from $74,408,000 in the first quarter 2016, while the average rate on total borrowed funds was 2.20% in 2017, down from 2.30% in 2016.

The average balance of short-term borrowings increased to $41,386,000 in the first quarter 2017 from $35,683,000 in 2016, and the average rate on short-term borrowings increased to 0.75% in 2017 from 0.70% in 2016. The higher average balance of short-term (mainly overnight) borrowings in the first quarter 2017 resulted, in part, from a reduction in average deposits of $17,708,000 as compared to average deposits of $984,931,000 in the fourth quarter 2016 (not shown in Table III). The reduction in average deposits in the first quarter 2017 as compared to the fourth quarter 2016 was caused by a reduction in average deposit balances of municipal customers, mainly due to typical seasonal factors.

The average balance of long-term borrowings was $38,419,000 in the first quarter 2017, at an average rate of 3.75%, down slightly from an average balance of $38,725,000 at an average rate of 3.77% in the first quarter 2016. Borrowings are classified as long-term within the Tables based on their term at origination; however, within this category, borrowings with a total balance of $37,002,000 at March 31, 2017 mature within the year ending December 31, 2017. The two largest borrowings within the long-term category that mature in 2017 include a $10 million advance from FHLB-Pittsburgh with a 3.81% interest rate that matures in September and a $27 million repurchase agreement with a rate of 3.595% and an effective maturity in December 2017.

TABLE II - ANALYSIS OF INTEREST INCOME AND EXPENSE

	Three Months Ended
	March 31,				Increase/
(In Thousands)	2017		2016		(Decrease)
INTEREST INCOME
Available-for-sale securities:
Taxable	$	1,408	$	1,589	($	181	)
Tax-exempt		1,288		1,370		(82	)
Total available-for-sale securities		2,696		2,959		(263	)
Interest-bearing due from banks		32		24		8
Loans held for sale		4		6		(2	)
Loans receivable:
Taxable		8,374		7,974		400
Tax-exempt		688		685		3
Total loans receivable		9,062		8,659		403
Total Interest Income		11,794		11,648		146
INTEREST EXPENSE
Interest-bearing deposits:
Interest checking		77		58		19
Money market		81		79		2
Savings		34		32		2
Certificates of deposit		224		202		22
Individual Retirement Accounts		105		108		(3	)
Total interest-bearing deposits		521		479		42
Borrowed funds:
Short-term		77		62		15
Long-term		355		363		(8	)
Total borrowed funds		432		425		7
Total Interest Expense		953		904		49
Net Interest Income	$	10,841	$	10,744	$	97

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%.

38

TABLE III - ANALYSIS OF AVERAGE DAILY BALANCES AND RATES

(Dollars in Thousands)

	3 Months						3 Months
	Ended			Rate of			Ended			Rate of
	3/31/2017			Return/			3/31/2016			Return/
	Average			Cost of			Average			Cost of
	Balance			Funds %			Balance			Funds %
EARNING ASSETS
Available-for-sale securities, at amortized cost:
Taxable	$	271,251			2.11	%	$	305,880			2.09	%
Tax-exempt		117,628			4.44	%		105,406			5.23	%
Total available-for-sale securities		388,879			2.81	%		411,286			2.89	%
Interest-bearing due from banks		14,923			0.87	%		20,348			0.47	%
Loans held for sale		201			8.07	%		452			5.34	%
Loans receivable:
Taxable		698,042			4.87	%		640,959			5.00	%
Tax-exempt		61,336			4.55	%		60,677			4.54	%
Total loans receivable		759,378			4.84	%		701,636			4.96	%
Total Earning Assets		1,163,381			4.11	%		1,133,722			4.13	%
Cash		16,013						15,588
Unrealized gain/loss on securities		(958	)					7,055
Allowance for loan losses		(8,593	)					(7,932	)
Bank premises and equipment		15,712						15,458
Intangible assets		11,959						11,971
Other assets		43,878						38,530
Total Assets	$	1,241,392					$	1,214,392
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking	$	201,120			0.16	%	$	195,142			0.12	%
Money market		191,103			0.17	%		191,514			0.17	%
Savings		138,805			0.10	%		130,003			0.10	%
Certificates of deposit		113,636			0.80	%		113,411			0.72	%
Individual Retirement Accounts		99,028			0.43	%		105,562			0.41	%
Other time deposits		791			0.00	%		804			0.00	%
Total interest-bearing deposits		744,483			0.28	%		736,436			0.26	%
Borrowed funds:
Short-term		41,386			0.75	%		35,683			0.70	%
Long-term		38,419			3.75	%		38,725			3.77	%
Total borrowed funds		79,805			2.20	%		74,408			2.30	%
Total Interest-bearing Liabilities		824,288			0.47	%		810,844			0.45	%
Demand deposits		222,740						208,163
Other liabilities		8,162						7,378
Total Liabilities		1,055,190						1,026,385
Stockholders' equity, excluding other comprehensive income/loss		186,689						183,376
Accumulated other comprehensive income/loss		(487	)					4,631
Total Stockholders' Equity		186,202						188,007
Total Liabilities and Stockholders' Equity	$	1,241,392					$	1,214,392
Interest Rate Spread					3.64	%					3.68	%
Net Interest Income/Earning Assets					3.78	%					3.81	%
Total Deposits (Interest-bearing  and Demand)	$	967,223					$	944,599

(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.

39

TABLE IV - ANALYSIS OF VOLUME AND RATE CHANGES

(In Thousands)	3 Months Ended 3/31/17 vs. 3/31/16
	Change in			Change in			Total
	Volume			Rate			Change
EARNING ASSETS
Available-for-sale securities:
Taxable	$	(192	)	$	11		$	(181	)
Tax-exempt		142			(224	)		(82	)
Total available-for-sale securities		(50	)		(213	)		(263	)
Interest-bearing due from banks		(7	)		15			8
Loans held for sale		(4	)		2			(2	)
Loans receivable:
Taxable		639			(239	)		400
Tax-exempt		3			0			3
Total loans receivable		642			(239	)		403
Total Interest Income		581			(435	)		146
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking		2			17			19
Money market		0			2			2
Savings		2			0			2
Certificates of deposit		0			22			22
Individual Retirement Accounts		(8	)		5			(3	)
Total interest-bearing deposits		(4	)		46			42
Borrowed funds:
Short-term		10			5			15
Long-term		(5	)		(3	)		(8	)
Total borrowed funds		5			2			7
Total Interest Expense		1			48			49
Net Interest Income	$	580		$	(483	)	$	97

(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.

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TABLE V - COMPARISON OF NONINTEREST INCOME
(Dollars In Thousands)
	3 Months Ended
	March 31,				$			%
	2017		2016		Change			Change
Service charges on deposit accounts	$	1,084	$	1,138	($	54	)		(4.7	)
Service charges and fees		97		94		3			3.2
Trust and financial management revenue		1,180		1,144		36			3.1
Brokerage revenue		156		173		(17	)		(9.8	)
Insurance commissions, fees and premiums		41		21		20			95.2
Interchange revenue from debit card transactions		520		463		57			12.3
Net gains from sales of loans		166		168		(2	)		(1.2	)
Loan servicing fees, net		72		22		50			227.3
Increase in cash surrender value of life insurance		90		96		(6	)		(6.3	)
Other operating income		458		371		87			23.5
Total other operating income before realized gains on available-for-sale securities, net	$	3,864	$	3,690	$	174			4.7

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 increased $174,000 (4.7%) in the first three months of 2017 over the first three months of 2016 amount. The most significant variances include the following:

· Other operating income increased $87,000, including an increase of $50,000 in revenue from tax credits.

· Interchange revenue from debit card transactions increased $57,000 (12.3%), reflecting benefits from a consulting project in 2016 that identified opportunities for improvements in card-related volumes and processing.

· Loan servicing fees, net, increased $50,000. This category includes fees received from servicing residential mortgage loans that have been originated and sold, adjusted for changes in the fair value of servicing rights. The fair value of mortgage servicing rights decreased by $30,000 in the first quarter 2017 as compared to a reduction of $71,000 in the first quarter 2016.

· Trust and Financial Management Group revenue increased $36,000 (3.1%), in part due to market valuation increases.

· Service charges on deposit accounts decreased $54,000 (4.7%), as revenue from consumer overdrafts declined due to lower volume.

TABLE VI - COMPARISON OF NONINTEREST EXPENSE
(Dollars In Thousands)
	3 Months Ended
	March 31,				$			%
	2017		2016		Change			Change
Salaries and wages	$	3,868	$	3,887	($	19	)		(0.5	)
Pensions and other employee benefits		1,530		1,437		93			6.5
Occupancy expense, net		578		609		(31	)		(5.1	)
Furniture and equipment expense		453		427		26			6.1
FDIC Assessments		94		142		(48	)		(33.8	)
Pennsylvania shares tax		336		322		14			4.3
Professional fees		227		289		(62	)		(21.5	)
Automated teller machine and interchange expense		294		249		45			18.1
Software subscriptions		280		241		39			16.2
Other operating expense		1,638		1,469		169			11.5
Total Other Expense	$	9,298	$	9,072	$	226			2.5

41

As shown in Table VI, total noninterest expense increased $226,000 (2.5%) in the first three months of 2017 as compared to the first three months of 2016. The most significant variances include the following:

· Other operating expense increased $169,000, including increases of $89,000 in loan collection expenses and $42,000 in losses and expenses associated with other real estate (OREO). These increases in expenses include payments of real estate taxes on certain delinquent loans that were made in order to support the Corporation’s lien positions, along with other loan workout-related expenses and expenses associated with maintaining OREO properties.

· Pensions and other employee benefits expense increased $93,000, including the effect of higher health care expenses on the Corporation’s partially self-insured plan. Also, Savings & Retirement Plan (401(k)) and ESOP expenses (which have been accounted for on a cash basis that does not vary materially from accrual basis) were higher as a result of one more payroll being processed in the first quarter 2017 as compared to the first quarter 2016.

· Automated teller machine and interchange expense increased $45,000, including costs associated with issuing new debit cards with EMV functionality.

· Software subscriptions increased $39,000, including costs associated with new applications as well as annual licensing increases.

· Professional fees expense decreased $62,000, including a reduction in information technology and sales and service -related consulting.

· FDIC assessments expense decreased $48,000, reflecting a lower assessment level.

FINANCIAL CONDITION

This section includes information regarding the Corporation’s lending activities or other significant changes or exposures that are not otherwise addressed in Management’s Discussion and Analysis. 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. There are no significant concerns that have arisen related to the Corporation’s off-balance sheet loan commitments or outstanding standby letters credit at March 31, 2017, and management does not expect capital expenditures to have a material, detrimental effect on the Corporation’s financial condition in 2017.

Gross loans outstanding (excluding mortgage loans held for sale) were $762,021,000 at March 31, 2017, up 1.4% from $751,835,000 at December 31, 2016. Total outstanding mortgages and other consumer real estate loans were $4,226,000 (1.0%) higher at March 31, 2017 as compared to December 31, 2016; and total outstanding commercial loans were higher by $5,657,000 (1.8%) at March 31, 2017 as compared to December 31, 2016. Average loans outstanding in the first quarter 2017 of $759,378,000 were $57,742,000 (8.2%) higher than the corresponding total in the first quarter 2016. The increase in loans outstanding over the last three quarters of 2016 and first quarter 2017 have included significant increases in mortgages and other consumer real estate loans as well as commercial loans.

While the Corporation’s lending activities are primarily concentrated in its market area, a portion of the Corporation’s commercial loan segment consists of 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 $43,586,000 at March 31, 2017, down from $47,508,000 at December 31, 2016. At March 31, 2017, the balance of participation loans outstanding includes a total of $31,674,000 to businesses located outside of the Corporation’s market area, including $10,527,000 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 at the time of origination the businesses have demonstrated strong cash flow performance in their recent histories. Total leveraged participation loans, including loans originated through the network and two loans originated through another lead institution (one of which was paid off in the first quarter 2017), totaled $12,185,000 at March 31, 2017 and $15,207,000 at December 31, 2016.

42

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 quasi-government entity. 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 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 March 31, 2017, the total outstanding balance of loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $1,839,000, and the corresponding total outstanding balance repurchased at December 31, 2016 was $1,852,000.

At March 31, 2017, outstanding balances of loans sold and serviced through the two programs totaled $164,291,000, including loans sold through the MPF Xtra program of $114,989,000 and loans sold through the Original program of $49,302,000. At December 31, 2016, outstanding balances of loans sold and serviced through the two programs totaled $163,296,000, including loans sold through the MPF Xtra program of $116,978,000 and loans sold through the Original program of $46,318,000. Based on the fairly limited volume of required repurchases to date, no allowance has been established for representation and warranty exposures as of March 31, 2017 and December 31, 2016.

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 March 31, 2017, the Corporation has recorded an allowance in the amount of $212,000 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. The corresponding recorded allowance at December 31, 2016 was $196,000. The Corporation does not provide a credit enhancement for loans sold through the Xtra program.

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 $8,744,000 at March 31, 2017, up from $8,473,000 at December 31, 2016. Table VIII shows total specific allowances on impaired loans increased $207,000 to $881,000 at March 31, 2017 from $674,000 at December 31, 2016. The net increase in specific allowances in the first quarter 2017 included an increase of $225,000 in the allowance related to one real estate secured commercial loan relationship. At March 31, 2017, total loans outstanding associated with this relationship amounted to $3,278,000, and the related allowance was $753,000.

43

The provision for loan losses by segment in the three-month period ended March 31, 2017 and 2016 is as follows:

(In Thousands)	3 Months Ended
	March 31,		March 31,
	2017		2016
Residential mortgage	$	129	$	83
Commercial		303		278
Consumer		20		7
Total	$	452	$	368

As shown in the table above, the provision for loan losses in the first three months of 2017 was $84,000 higher than the amount in the first three months of 2016, including an increase for the residential mortgage segment of $46,000, an increase for the commercial segment of $25,000 and an increase for the consumer segment of $13,000.

The provision for the residential mortgage segment in the first quarter 2017 included the effect of net charge-offs of $60,000 related to smaller loans for which specific allowances had not been established at the end of 2016. In comparison, there were no charge-offs or recoveries on residential mortgage loans in the first quarter 2016.

The provision for the commercial segment in the first quarter 2017 included $302,000 related to the change in total specific allowances on impaired loans, as adjusted for net charge-offs during the period and an increase of $1,000 in the collectively determined allowance for loan losses. The increase in specific allowances on commercial loans in the first quarter 2017 included the $225,000 increase related to one commercial relationship, as mentioned above. In the first quarter 2016, the provision for the commercial segment included $77,000 related to the change in total specific allowances on impaired loans, as adjusted for net charge-offs during the period and an increase of $201,000 in the collectively determined allowance for loan losses. The first quarter 2016 increase in the collectively determined allowance on commercial loans included the effect of an increased net charge-off experience factor.

Table IX 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 1.83% at March 31, 2017, down from 2.07% at December 31, 2016, and nonperforming assets as a percentage of total assets was 1.28% at March 31, 2017, down from 1.43% at December 31, 2016. Table IX presents data at March 31, 2017 and at the end of each of the years ended December 31, 2012 through 2016. For the range of dates presented in Table XI, total nonperforming loans as a percentage of loans has ranged from a low of 1.41% at December 31, 2012 to a high of 2.80% at December 31, 2013, and total nonperforming assets as a percentage of assets have ranged from a low of 0.82% at December 31, 2012 to a high of 1.53% at December 31, 2013.

The balance of loans subject to troubled debt restructurings (TDRs) was $3,835,000 at March 31, 2017, which was $4,842,000 lower than the corresponding total at December 31, 2016, mainly due to removal of one commercial relationship from TDR status. At March 31, 2017, the outstanding contractual balances of loans to this borrower total $6,507,000, and the recorded investments total $4,757,000. In 2014, the Corporation entered into a forbearance agreement with this commercial borrower which was 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 the payment amounts based on the forbearance agreement were not sufficient to fully amortize the contractual amount of principal outstanding on the loans. In December 2016, the Corporation and the borrower entered into a modification agreement, terminating the forbearance agreement and establishing loan terms with essentially the same interest rate and monthly payment amounts as had been in effect under the forbearance agreement. The interest rates provided for in the modification agreement were equal to or greater than rates the Corporation would be willing to accept for loans with comparable terms to borrowers with a comparable risk profile at the time of the modification. The borrower has made all required payments on the loans in accordance with the terms of the forbearance agreement, as extended, and the modification agreement. Accordingly, the loans were restored to full accrual status at December 31, 2016 and are no longer included in the amounts reported as TDRs at March 31, 2017.

Total impaired loans of $8,699,000 at March 31, 2017 are down $2,161,000 from the corresponding amount at December 31, 2016 of $10,860,000, including a decrease in impaired loans without a valuation allowance of $2,108,000. This net decrease in impaired loans is the result of: (1) removal from impairment status of the loans with the modification agreement noted in the previous paragraph, partially offset by (2) the addition of one commercial loan secured by real estate with an outstanding balance of approximately $2.7 million at March 31, 2017. This commercial loan was reviewed in the first quarter 2017 to determine if a specific allowance for loan losses would be required, and it was determined that no allowance was required at March 31, 2017 based on the estimated net realizable value of the related collateral.

44

Total nonperforming assets of $15,823,000 at March 31, 2017 are $1,931,000 lower than the corresponding amount at December 31, 2016, summarized as follows:

· Total nonaccrual loans at March 31, 2017 of $11,231,000 was $2,495,000 higher than the corresponding December 31, 2016 total, including the effect of classifying as nonaccrual the real estate secured commercial loan with a balance of approximately $2.7 million noted above.

· Total loans past due 90 days or more and still accruing interest amounted to $2,714,000 at March 31, 2017, a decrease of $4,124,000 from the total at December 31, 2016. The decrease in 2017 in the balance of loans past due 90 days or more and still accruing interest included the effects of moving the previously noted commercial loan with a balance of $2.7 million to nonaccrual status at March 31, 2017. The reduction in loans past due 90 days or more also included a reduction in residential mortgage loans in that aging category. 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 $1,878,000 at March 31, 2017, a decrease of $302,000 from $2,180,000 at December 31, 2016. At March 31, 2017, the Corporation held 18 such properties for sale, with total carrying values of $800,000 related to residential real estate, $650,000 of land and $428,000 related to commercial real estate. At December 31, 2016, the Corporation held 19 such properties for sale, with total carrying values of $1,102,000 related to residential real estate, $650,000 of land and $428,000 related to commercial real estate. The Corporation evaluates the carrying values of foreclosed assets each quarter based on the most recent market activity or appraisals for each property.

Over the period 2012-2016 and the first quarter 2017, each period includes a few large commercial relationships that have required significant monitoring and workout efforts. As a result, a limited number of relationships may significantly impact the total amount of allowance required on impaired loans, and may significantly impact the 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 March 31, 2017. 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 VII through X present historical data related to loans and the allowance for loan losses.

TABLE VII - ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES
(Dollars In Thousands)
	March 31,			March 31,			Years Ended December 31,
	2017			2016			2016			2015			2014			2013			2012
Balance, beginning of year	$	8,473		$	7,889		$	7,889		$	7,336		$	8,663		$	6,857		$	7,705
Charge-offs:
Residential mortgage		(63	)		0			(73	)		(217	)		(327	)		(95	)		(552	)
Commercial		(96	)		(595	)		(597	)		(251	)		(1,715	)		(459	)		(498	)
Consumer		(41	)		(18	)		(87	)		(94	)		(97	)		(117	)		(171	)
Total charge-offs		(200	)		(613	)		(757	)		(562	)		(2,139	)		(671	)		(1,221	)
Recoveries:
Residential mortgage		3			0			3			1			25			24			18
Commercial		1			2			35			214			264			348			8
Consumer		15			15			82			55			47			58			59
Total recoveries		19			17			120			270			336			430			85
Net charge-offs		(181	)		(596	)		(637	)		(292	)		(1,803	)		(241	)		(1,136	)
Provision for loan losses		452			368			1,221			845			476			2,047			288
Balance, end of period	$	8,744		$	7,661		$	8,473		$	7,889		$	7,336		$	8,663		$	6,857
Net charge-offs as a % of average loans		0.02	%		0.08	%		0.09	%		0.04	%		0.29	%		0.04	%		0.16	%

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TABLE VIII - COMPONENTS OF THE ALLOWANCE FOR LOAN LOSSES
(In Thousands)
	March 31,		As of December 31,
	2017		2016		2015		2014		2013		2012
ASC 310 - Impaired loans	$	881	$	674	$	820	$	769	$	2,333	$	623
ASC 450 - Collective segments:
Commercial		3,374		3,373		3,103		2,732		2,583		2,594
Residential mortgage		3,959		3,890		3,417		3,295		3,156		3,011
Consumer		132		138		122		145		193		188
Unallocated		398		398		427		395		398		441
Total Allowance	$	8,744	$	8,473	$	7,889	$	7,336	$	8,663	$	6,857

TABLE IX  - PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS
AND TROUBLED DEBT RESTRUCTURINGS (TDRs)
(Dollars In Thousands)	As of
	March 31,			As of December 31,
	2017			2016			2015			2014			2013			2012
Impaired loans with a valuation allowance	$	3,319		$	3,372		$	1,933		$	3,241		$	9,889		$	2,710
Impaired loans without a valuation allowance		5,380			7,488			8,041			9,075			6,432			4,719
Total impaired loans	$	8,699		$	10,860		$	9,974		$	12,316		$	16,321		$	7,429
Total loans past due 30-89 days and still accruing	$	6,476		$	7,735		$	7,057		$	7,121		$	8,305		$	7,756
Nonperforming assets:
Total nonaccrual loans	$	11,231		$	8,736		$	11,517		$	12,610		$	14,934		$	7,353
Total loans past due 90 days or more and still accruing		2,714			6,838			3,229			2,843			3,131			2,311
Total nonperforming loans		13,945			15,574			14,746			15,453			18,065			9,664
Foreclosed assets held for sale (real estate)		1,878			2,180			1,260			1,189			892			879
Total nonperforming assets	$	15,823		$	17,754		$	16,006		$	16,642		$	18,957		$	10,543
Loans subject to troubled debt restructurings (TDRs):
Performing	$	752		$	5,803		$	1,186		$	1,807		$	3,267		$	906
Nonperforming		3,083			2,874			5,178			5,388			908			1,155
Total TDRs	$	3,835		$	8,677		$	6,364		$	7,195		$	4,175		$	2,061
Total nonperforming loans as a % of total loans		1.83	%		2.07	%		2.09	%		2.45	%		2.80	%		1.41	%
Total nonperforming assets as a % of total assets		1.28	%		1.43	%		1.31	%		1.34	%		1.53	%		0.82	%
Allowance for loan losses as a % of total loans		1.15	%		1.13	%		1.12	%		1.16	%		1.34	%		1.00	%
Allowance for loan losses as a % of nonperforming loans		62.70	%		54.40	%		53.50	%		47.47	%		47.95	%		70.95	%

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TABLE X - SUMMARY OF LOANS BY TYPE
Summary of Loans by Type
(In Thousands)	March 31,			As of December 31,
	2017			2016			2015			2014			2013			2012
Residential mortgage:
Residential mortgage loans - first liens	$	340,431		$	334,102		$	304,783		$	291,882		$	299,831		$	311,627
Residential mortgage loans - junior liens		23,717			23,706			21,146			21,166			23,040			26,748
Home equity lines of credit		36,810			38,057			39,040			36,629			34,530			33,017
1-4 Family residential construction		24,041			24,908			21,121			16,739			13,909			12,842
Total residential mortgage		424,999			420,773			386,090			366,416			371,310			384,234
Commercial:
Commercial loans secured by real estate		153,385			150,468			154,779			145,878			147,215			158,413
Commercial and industrial		79,493			83,854			75,196			50,157			42,387			48,442
Political subdivisions		44,625			38,068			40,007			17,534			16,291			31,789
Commercial construction and land		15,252			14,287			5,122			6,938			17,003			28,200
Loans secured by farmland		7,497			7,294			7,019			7,916			10,468			11,403
Multi-family (5 or more) residential		7,622			7,896			9,188			8,917			10,985			6,745
Agricultural loans		3,992			3,998			4,671			3,221			3,251			3,053
Other commercial loans		11,131			11,475			12,152			13,334			14,631			362
Total commercial		322,997			317,340			308,134			253,895			262,231			288,407
Consumer		14,025			13,722			10,656			10,234			10,762			11,269
Total		762,021			751,835			704,880			630,545			644,303			683,910
Less: allowance for loan losses		(8,744	)		(8,473	)		(7,889	)		(7,336	)		(8,663	)		(6,857	)
Loans, net	$	753,277		$	743,362		$	696,991		$	623,209		$	635,640		$	677,053

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 March 31, 2017, the Corporation maintained overnight interest-bearing deposits with the Federal Reserve Bank of Philadelphia and other correspondent banks totaling $10,566,000.

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 $17,681,000 at March 31, 2017.

The Corporation’s outstanding, available, and total credit facilities at March 31, 2017 and December 31, 2016 are as follows:

	Outstanding				Available				Total Credit
(In Thousands)	Mar. 31,		Dec. 31,		Mar. 31,		Dec. 31,		Mar. 31,		Dec. 31,
	2017		2016		2017		2016		2017		2016
Federal Home Loan Bank of Pittsburgh	$	25,888	$	32,454	$	320,661	$	306,767	$	346,549	$	339,221
Federal Reserve Bank Discount Window		0		0		17,277		15,636		17,277		15,636
Other correspondent banks		0		0		45,000		45,000		45,000		45,000
Total credit facilities	$	25,888	$	32,454	$	382,938	$	367,403	$	408,826	$	399,857

At March 31, 2017, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of overnight borrowings of $14,500,000 and long-term borrowings with a total amount of $11,388,000. At December 31, 2016, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of overnight borrowings of $21,000,000 and long-term borrowings with a total amount of $11,454,000. Additional information regarding borrowed funds is included in Note 8 of the unaudited consolidated financial statements.

47

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 March 31, 2017, the carrying value of available-for-sale securities in excess of amounts required to meet pledging or repurchase agreement obligations was $197,596,000.

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

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 March 31, 2017 and December 31, 2016 are presented below. Management believes, as of March 31, 2017 and December 31, 2016, 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 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 March 31, 2017 and December 31, 2016 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
March 31, 2017:
Total capital to risk-weighted assets:
Consolidated	$	184,802		23.72	%	$	62,337		³8%	$	72,078		³9.25%	$	77,922		³10%	$	81,818		³10.5%
C&N Bank		163,625		21.12	%		61,981		³8%		71,666		³9.25%		77,476		³10%		81,350		³10.5%
Tier 1 capital to risk-weighted assets:
Consolidated		175,846		22.57	%		46,753		³6%		56,493		³7.25%		62,337		³8%		66,233		³8.5%
C&N Bank		154,669		19.96	%		46,486		³6%		56,170		³7.25%		61,981		³8%		65,855		³8.5%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		175,846		22.57	%		35,065		³4.5%		44,805		³5.75%		50,649		³6.5%		54,545		³7%
C&N Bank		154,669		19.96	%		34,864		³4.5%		44,549		³5.75%		50,360		³6.5%		54,233		³7%
Tier 1 capital to average assets:
Consolidated		175,846		14.29	%		49,217		³4%		N/A		N/A		61,522		³5%		61,522		³5%
C&N Bank		154,669		12.72	%		48,625		³4%		N/A		N/A		60,781		³5%		60,781		³5%
December 31, 2016:
Total capital to risk-weighted assets:
Consolidated	$	183,597		23.60	%	$	62,245		³8%	$	67,108		³8.625%	$	77,806		³10%	$	81,697		³10.5%
C&N Bank		162,705		21.03	%		61,894		³8%		66,730		³8.625%		77,368		³10%		81,236		³10.5%
Tier 1 capital to risk-weighted assets:
Consolidated		174,928		22.48	%		46,684		³6%		51,547		³6.625%		62,245		³8%		66,135		³8.5%
C&N Bank		154,036		19.91	%		46,421		³6%		51,256		³6.625%		61,894		³8%		65,762		³8.5%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		174,928		22.48	%		35,013		³4.5%		39,876		³5.125%		50,574		³6.5%		54,464		³7%
C&N Bank		154,036		19.91	%		34,815		³4.5%		39,651		³5.125%		50,289		³6.5%		54,157		³7%
Tier 1 capital to average assets:
Consolidated		174,928		14.27	%		49,026		³4%		N/A		N/A		61,282		³5%		61,282		³5%
C&N Bank		154,036		12.73	%		48,404		³4%		N/A		N/A		60,506		³5%		60,506		³5%

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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 below, 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.

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. 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	%

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At March 31, 2017, the Corporation’s Capital Conservation Buffer, determined based on the minimum total capital ratio, was 15.72%. C&N Bank’s Capital Conservation Buffer (also determined based on the minimum total capital ratio) was 13.12%.

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 (Loss) within stockholders’ equity. The balance in Accumulated Other Comprehensive Loss related to unrealized losses on available-for-sale securities, net of deferred income tax, amounted to ($630,000) at March 31, 2017 and ($949,000) at December 31, 2016. Changes in accumulated other comprehensive income (loss) 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 March 31, 2017.

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 $155,000 at March 31, 2017 and $51,000 at December 31, 2016.

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 $3,857,000 in the first quarter 2017 as compared to $6,441,000 in the first quarter 2016. For the three months ended March 31, 2017, Comprehensive Income included: (1) Net Income of $3,434,000, which was $139,000 lower than in the first quarter 2016; (2) Other Comprehensive Income from net unrealized gains on available-for-sale securities of $319,000 as compared to Other Comprehensive Gain of $2,854,000 from net unrealized gains on available-for-sale securities in the first quarter 2016; and (3) Other Comprehensive Gain from defined benefit plans of $104,000 in the first quarter 2017 as compared to Other Comprehensive Gain of $14,000 from defined benefit plans in the first quarter 2016.

INCOME TAXES

The income tax provision in 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 first quarter 2017 income tax provision of $984,000, or 22.3% of pre-tax earnings, was $109,000 lower than the first quarter 2016 tax provision of $1,093,000, or 23.4% of pre-tax income. The lower effective tax in the first quarter 2017 resulted primarily from lower pre-tax earnings.

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 March 31, 2017 the net deferred tax asset was $4,616,000, down from $5,117,000 at December 31, 2016. The most significant changes in temporary difference components were decreases of $272,000 in the deferred tax asset associated with the first quarter 2017 payment of incentive compensation that had been accrued in 2016 (included in “Other deferred tax assets” in the table provided in Note 11 to the unaudited consolidated financial statements) and a $172,000 decrease in the deferred tax asset related to unrealized holding losses on available-for-sale securities.

The Corporation uses currently enacted tax rates to value deferred tax assets and liabilities. The Trump Administration and the U.S. Congress are in the process of evaluating possible tax changes which may include a reduction in U.S. corporate income tax rates. If corporate tax rates were reduced, management expects the Corporation would record an initial charge against earnings to lower the carrying amount of the net deferred tax asset, and then would record a lower tax provision going forward on an ongoing basis.

50

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. Further, as discussed above, realization of deferred tax assets would be impacted if income tax rates are lowered from currently enacted levels.

Management believes the recorded net deferred tax asset at March 31, 2017 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. Since September 2007, the Federal Reserve has maintained the fed funds target rate at extremely low levels by historical standards. Further, throughout the period of low interest rates, the Federal Reserve has injected massive amounts of liquidity into the nation’s monetary system through a variety of programs. Since late 2015, the Federal Reserve has begun to move its fed funds target rate higher, in an effort to re-establish a more normalized level by historical standards, with 0.25% increases in December 2015 and 2016, and again in March 2017. Inflation has remained subdued, measured for most of 2016 and early 2017 at levels below the Federal Open Market Committee’s 2% longer run objective, though there have been some reports of wage pressure as the U.S. employment picture has gradually improved over the past several years.

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.

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 major category of market risk, interest rate risk, is discussed in the following section.

INTEREST RATE RISK

Business risk arising from changes in interest rates is an inherent factor in operating a bank. A significant portion of the Corporation’s assets are 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.

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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 XI, which follows this discussion, is based on the results of calculations performed using the simulation model as of January 31, 2017 and December 31, 2016. 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.

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TABLE XI - THE EFFECT OF HYPOTHETICAL CHANGES IN INTEREST RATES

January 31, 2017 Data
(Dollars In Thousands)	Period Ending January 31, 2018
Basis Point	Interest		Interest		Net Interest		NII			NII
Change in Rates	Income		Expense		Income (NII)		% Change			Risk Limit
+400	$	54,200	$	23,264	$	30,936		-21.0	%		25.0	%
+300		51,472		18,324		33,148		-15.4	%		20.0	%
+200		48,716		13,415		35,301		-9.9	%		15.0	%
+100		45,899		8,556		37,343		-4.7	%		10.0	%
0		43,048		3,870		39,178		0.0	%		0.0	%
-100		40,468		2,889		37,579		-4.1	%		10.0	%
-200		38,707		2,834		35,873		-8.4	%		15.0	%
-300		38,103		2,813		35,290		-9.9	%		20.0	%
-400		37,940		2,813		35,127		-10.3	%		25.0	%

	Market Value of Portfolio Equity at January 31, 2017
	Present		Present			Present
Basis Point	Value		Value			Value
Change in Rates	Equity		% Change			Risk Limit
+400	$	164,862		-25.5	%		50.0	%
+300		177,031		-20.0	%		45.0	%
+200		191,085		-13.6	%		35.0	%
+100		205,712		-7.0	%		25.0	%
0		221,203		0.0	%		0.0	%
-100		226,187		2.3	%		25.0	%
-200		229,663		3.8	%		35.0	%
-300		253,876		14.8	%		45.0	%
-400		292,762		32.3	%		50.0	%

December 31, 2016 Data
(In Thousands)			Period Ending December 31, 2017
Basis Point	Interest		Interest		Net Interest		NII			NII
Change in Rates	Income		Expense		Income (NII)		% Change			Risk Limit
+400	$	53,712	$	22,315	$	31,397		-20.5	%		25.0	%
+300		51,128		17,545		33,583		-15.0	%		20.0	%
+200		48,500		12,809		35,691		-9.6	%		15.0	%
+100		45,845		8,102		37,743		-4.4	%		10.0	%
0		43,132		3,643		39,489		0.0	%		0.0	%
-100		40,581		2,978		37,603		-4.8	%		10.0	%
-200		38,881		2,949		35,932		-9.0	%		15.0	%
-300		38,269		2,936		35,333		-10.5	%		20.0	%
-400		38,104		2,936		35,168		-10.9	%		25.0	%

	Market Value of Portfolio Equity at December 31, 2016
	Present		Present			Present
Basis Point	Value		Value			Value
Change in Rates	Equity		% Change			Risk Limit
+400	$	168,600		-24.6	%		50.0	%
+300		180,500		-19.3	%		45.0	%
+200		194,471		-13.1	%		35.0	%
+100		208,830		-6.7	%		25.0	%
0		223,744		0.0	%		0.0	%
-100		227,806		1.8	%		25.0	%
-200		229,602		2.6	%		35.0	%
-300		252,118		12.7	%		45.0	%
-400		290,792		30.0	%		50.0	%

53

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.

54

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 16, 2017.

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 first quarter 2017:

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
January 1 - 31, 2017		0	$	0		0		600,000
February 1 - 28, 2017		0	$	0		0		600,000
March 1 - 31, 2017		0	$	0		0		600,000

Note to Table: Effective April 21, 2016, the Corporation’s Board of Directors approved a treasury stock repurchase program. Under this 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

55

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

56

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
May 4, 2017	By:	/s/ J. Bradley Scovill
Date		President and Chief Executive Officer
May 4, 2017	By:	/s/ Mark A. Hughes
Date		Treasurer and Chief Financial Officer

57

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.

May 4, 2017	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.

May 4, 2017	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 March 31, 2017, 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.

May 4, 2017	By:	/s/ J. Bradley Scovill
Date		President and Chief Executive Officer
May 4, 2017	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	3 Months Ended
	Mar. 31, 2017	May 01, 2017
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)		12,159,607
Document Type	10-Q
Document Period End Date	Mar. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
ASSETS
Noninterest-bearing	$ 18,489	$ 17,551
Interest-bearing	14,054	14,558
Total cash and due from banks	32,543	32,109
Available-for-sale securities, at fair value	376,919	395,077
Loans held for sale	163	142
Loans receivable	762,021	751,835
Allowance for loan losses	(8,744)	(8,473)
Loans, net	753,277	743,362
Bank-owned life insurance	19,794	19,704
Accrued interest receivable	3,804	3,963
Bank premises and equipment, net	15,738	15,397
Foreclosed assets held for sale	1,878	2,180
Deferred tax asset, net	4,616	5,117
Intangible assets - Goodwill and core deposit intangibles	11,958	11,959
Other assets	13,234	13,282
TOTAL ASSETS	1,233,924	1,242,292
LIABILITIES
Noninterest-bearing	234,980	224,175
Interest-bearing	745,271	759,668
Total deposits	980,251	983,843
Short-term borrowings	20,744	26,175
Long-term borrowings	38,388	38,454
Accrued interest and other liabilities	7,191	7,812
TOTAL LIABILITIES	1,046,574	1,056,284
STOCKHOLDERS' EQUITY
Preferred stock, $1,000 par value; authorized 30,000 shares; $1,000 liquidation preference per share; no shares issued	0	0
Common stock, par value $1.00 per share; authorized 20,000,000 shares; issued 12,655,171; outstanding 12,159,607 at March 31, 2017 and 12,113,228 December 31, 2016	12,655	12,655
Paid-in capital	71,454	71,730
Retained earnings	113,106	112,790
Treasury stock, at cost; 495,564 shares at March 31, 2017 and 541,943 shares at December 31, 2016	(9,390)	(10,269)
Accumulated other comprehensive loss	(475)	(898)
TOTAL STOCKHOLDERS' EQUITY	187,350	186,008
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$ 1,233,924	$ 1,242,292

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
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, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares issued (in shares)	12,655,171	12,655,171
Common stock, shares outstanding (in shares)	12,159,607	12,113,228
Treasury stock, shares (in shares)	495,564	541,943

XML

Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
Interest and fees on loans:
Taxable		$ 8,374	$ 7,974
Tax-exempt		450	448
Interest on mortgages held for sale		4	6
Interest on balances with depository institutions		32	24
Income from available-for-sale securities:
Taxable		1,403	1,555
Tax-exempt		844	896
Dividends		5	34
Total interest and dividend income		11,112	10,937
INTEREST EXPENSE
Interest on deposits		521	479
Interest on short-term borrowings		77	62
Interest on long-term borrowings		355	363
Total interest expense		953	904
Net interest income		10,159	10,033
Provision for loan losses		452	368
Net interest income after provision for loan losses		9,707	9,665
OTHER INCOME
Service charges on deposit accounts		1,084	1,138
Service charges and fees		97	94
Trust and financial management revenue		1,180	1,144
Brokerage revenue		156	173
Insurance commissions, fees and premiums		41	21
Interchange revenue from debit card transactions		520	463
Net gains from sale of loans		166	168
Loan servicing fees, net		72	22
Increase in cash surrender value of life insurance		90	96
Other operating income		458	371
Sub-total		3,864	3,690
Realized gains on available-for-sale securities, net		145	383
Total other income		4,009	4,073
OTHER EXPENSES
Salaries and wages		3,868	3,887
Pensions and other employee benefits		1,530	1,437
Occupancy expense, net		578	609
Furniture and equipment expense		453	427
FDIC Assessments		94	142
Pennsylvania shares tax		336	322
Professional fees		227	289
Automated teller machine and interchange expense		294	249
Software subscriptions		280	241
Other operating expense		1,638	1,469
Total other expenses		9,298	9,072
Income before income tax provision		4,418	4,666
Income tax provision		984	1,093
NET INCOME		$ 3,434	$ 3,573
EARNINGS PER COMMON SHARE - BASIC (in dollars per share)	[1]	$ 0.28	$ 0.29
EARNINGS PER COMMON SHARE - DILUTED (in dollars per share)	[1]	$ 0.28	$ 0.29

[1] Basic and diluted earnings per share under the two-class method are determined on net income reported on the income statement less earnings allocated to nonvested restricted shares with nonforfeitable dividends (participating securities). The weighted-average number of nonvested restricted shares outstanding was 65,208 shares in the three-month period ended March 31, 2017 and 67,818 shares in the three-month period ended March 31, 2016.

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Net income	$ 3,434	$ 3,573
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	636	4,774
Reclassification adjustment for gains realized in income	(145)	(383)
Other comprehensive gain on available-for-sale securities	491	4,391
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in accumulated other comprehensive gain	166	26
Amortization of net transition obligation, prior service cost and net actuarial (gain) loss included in net periodic benefit cost	(6)	(5)
Other comprehensive gain on unfunded retirement obligations	160	21
Other comprehensive income before income tax	(651)	(4,412)
Income tax related to other comprehensive income	(228)	(1,544)
Net other comprehensive income	423	2,868
Comprehensive income	$ 3,857	$ 6,441

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 3,434	$ 3,573
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	452	368
Realized gains on available-for-sale securities, net	(145)	(383)
Depreciation expense	404	408
Accretion and amortization on securities, net	314	297
Increase in cash surrender value of life insurance	(90)	(96)
Stock-based compensation and other expense	168	162
Deferred income taxes	273	622
Decrease in fair value of servicing rights	30	71
Gains on sales of loans, net	(166)	(168)
Origination of loans for sale	(5,558)	(4,975)
Proceeds from sales of loans	5,657	4,861
Increase in accrued interest receivable and other assets	(171)	(759)
Decrease in accrued interest payable and other liabilities	(461)	(289)
Other	34	45
Net Cash Provided by Operating Activities	4,175	3,737
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of certificates of deposit	100	100
Purchase of certificates of deposit	(100)	(100)
Proceeds from sales of available-for-sale securities	13,856	8,695
Proceeds from calls and maturities of available-for-sale securities	12,771	17,318
Purchase of available-for-sale securities	(8,147)	(14,852)
Redemption of Federal Home Loan Bank of Pittsburgh stock	2,491	2,297
Purchase of Federal Home Loan Bank of Pittsburgh stock	(2,130)	(901)
Net (increase) decrease in loans	(10,580)	2,313
Purchase of premises and equipment	(745)	(378)
Proceeds from sale of foreclosed assets	469	0
Other	46	49
Net Cash Provided by Investing Activities	8,031	14,541
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits	(3,592)	20,233
Net decrease in short-term borrowings	(5,431)	(27,544)
Repayments of long-term borrowings	(66)	(75)
Purchase of treasury stock	0	(3,070)
Sale of treasury stock	53	34
Tax benefit from compensation plans	0	45
Common dividends paid	(2,736)	(2,789)
Net Cash Used in Financing Activities	(11,772)	(13,166)
INCREASE IN CASH AND CASH EQUIVALENTS	434	5,112
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	28,621	33,313
CASH AND CASH EQUIVALENTS, END OF PERIOD	29,055	38,425
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Assets acquired through foreclosure of real estate loans	216	370
Accrued redemption of bank-owned life insurance policy	0	1,442
Interest paid	951	905
Income taxes paid	$ 200	$ 225

XML

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) - USD ($) $ in Thousands	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, 2015	12,655,171	474,548
Balance at Dec. 31, 2015	$ 12,655	$ (8,804)	$ 71,654	$ 109,454	$ 2,528	$ 187,487
Net income				3,573		3,573
Total other comprehensive income					2,868	2,868
Cash dividends declared on common stock, $0.26 per share				(3,165)		(3,165)
Shares issued for dividend reinvestment plan (in shares)		(18,777)
Shares issued for dividend reinvestment plan		$ 352	24			376
Treasury stock purchased (in shares)		154,350
Treasury stock purchased		$ (3,070)				(3,070)
Shares issued from treasury and redeemed related to exercise of stock options (in shares)		(2,090)
Shares issued from treasury and redeemed related to exercise of stock options		$ 38	(4)			34
Restricted stock granted (in shares)		(34,199)
Restricted stock granted		$ 635	(635)			0
Forfeiture of restricted stock (in shares)		309
Forfeiture of restricted stock		$ (5)	5			0
Stock-based compensation expense			162			162
Tax benefit from dividends on restricted stock			6			6
Tax benefit from compensation plans				39		39
Balance (in shares) at Mar. 31, 2016	12,655,171	574,141
Balance at Mar. 31, 2016	$ 12,655	$ (10,854)	71,212	109,901	5,396	188,310
Balance (in shares) at Dec. 31, 2016	12,655,171	541,943
Balance at Dec. 31, 2016	$ 12,655	$ (10,269)	71,730	112,790	(898)	186,008
Net income				3,434		3,434
Total other comprehensive income					423	423
Cash dividends declared on common stock, $0.26 per share				(3,118)		(3,118)
Shares issued for dividend reinvestment plan (in shares)		(15,831)
Shares issued for dividend reinvestment plan		$ 300	82			382
Shares issued from treasury and redeemed related to exercise of stock options (in shares)		(2,804)
Shares issued from treasury and redeemed related to exercise of stock options		$ 52	1			53
Restricted stock granted (in shares)		(30,782)
Restricted stock granted		$ 583	(583)			0
Forfeiture of restricted stock (in shares)		3,038
Forfeiture of restricted stock		$ (56)	56			0
Stock-based compensation expense			168			168
Balance (in shares) at Mar. 31, 2017	12,655,171	495,564
Balance at Mar. 31, 2017	$ 12,655	$ (9,390)	$ 71,454	$ 113,106	$ (475)	$ 187,350

XML

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parentheticals) - $ / shares	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Retained Earnings [Member]
Common stock, dividends, per share (in dollars per share)	$ 0.26	$ 0.26

XML

Note 1 - Basis of interim Presentation

3 Months Ended

Mar. 31, 2017

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,

2016,

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

2016

information has been reclassified for consistency with the

2017

presentation.

Operating results reported for the

three

-month period ended

March

31,

2017

might not be indicative of the results for the year ending

December

31,

2017.

The Corporation evaluates subsequent events through the date of filing with the Securities and Exchange Commission.

XML

Note 2 - Per Share Data

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Earnings Per Share [Text Block]

2.

PER SHARE DATA

Basic earnings per common share are calculated using the

two

-class method to determine income attributable to common shareholders. Unvested restricted stock awards that contain nonforfeitable rights to dividends are considered participating securities under the

two

-class method. Distributed dividends and an allocation of undistributed net income to participating securities reduce the amount of income attributable to common shareholders. Income attributable to common shareholders is then divided by weighted-average common shares outstanding for the period to determine basic earnings per common share.

Diluted earnings per common share are calculated under the more dilutive of either the treasury method or the

two

-class method. Diluted earnings per common 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.

	3 Months Ended
	March 31,			March 31,
	2017			2016
Basic
Net income	$	3,434,000		$	3,573,000
Less: Dividends and undistributed earnings allocated to participating securities		(18,000	)		(20,000	)
Net income attributable to common shares	$	3,416,000		$	3,553,000
Basic weighted-average common shares outstanding		12,085,729			12,087,290
Basic earnings per common share (a)	$	0.28		$	0.29
Diluted
Net income attributable to common shares	$	3,416,000		$	3,553,000
Basic weighted-average common shares outstanding		12,085,729			12,087,290
Dilutive effect of potential common stock arising from stock options		45,681			20,770
Diluted weighted-average common shares outstanding		12,131,410			12,108,060
Diluted earnings per common share (a)	$	0.28		$	0.29

(a) Basic and diluted earnings per share under the

two

-class method are determined on

net income reported on the income statement less earnings allocated to nonvested

restricted shares with nonforfeitable dividends (participating securities). The weighted-average number of nonvested restricted shares outstanding was

65,208

shares in the

three

-month period ended

March

31,

2017

and

67,818

shares in the

three

-month period ended

March

31,

2016.

Stock options that were anti-dilutive were excluded from net income per share calculations. There were

no

anti-dilutive shares in the

first

quarter

2017.

Weighted-average common shares available from anti-dilutive instruments totaled

47,309

shares in the

first

quarter

2016.

XML

Note 3 - Comprehensive Income

3 Months Ended

Mar. 31, 2017

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
Three Months Ended March 31, 2017
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	636		$	(223	)	$	413
Reclassification adjustment for (gains) realized in income		(145	)		51			(94	)
Other comprehensive income on available-for-sale securities		491			(172	)		319
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		166			(58	)		108
Amortization of net transition obligation, prior service cost and net actuarial gain included in net periodic benefit cost		(6	)		2			(4	)
Other comprehensive income on unfunded retirement obligations		160			(56	)		104
Total other comprehensive income	$	651		$	(228	)	$	423

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
Three Months Ended March 31, 2016
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	4,774		$	(1,671	)	$	3,103
Reclassification adjustment for (gains) realized in income		(383	)		134			(249	)
Other comprehensive income on available-for-sale securities		4,391			(1,537	)		2,854
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		(5	)		2			(3	)
Other comprehensive income on unfunded retirement obligations		21			(7	)		14
Total other comprehensive income	$	4,412		$	(1,544	)	$	2,868

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

(In Thousands)	Unrealized					Accumulated
	Holding Gains			Unfunded		Other
	(Losses)			Retirement		Comprehensive
	on Securities			Obligations		Loss
Three Months Ended March 31, 2017
Balance, beginning of period	$	(949	)	$	51	$	(898	)
Change during three months ended March 31, 2017		319			104		423
Balance, end of period	$	(630	)	$	155	$	(475	)

(In Thousands)	Unrealized				Accumulated
	Holding Gains		Unfunded		Other
	(Losses)		Retirement		Comprehensive
	on Securities		Obligations		Income
Three Months Ended March 31, 2016
Balance, beginning of period	$	2,493	$	35	$	2,528
Change during three months ended March 31, 2016		2,854		14		2,868
Balance, end of period	$	5,347	$	49	$	5,396

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

For the Three Months Ended March 31, 2017
(In Thousands)
Details about Accumulated Other	Reclassified from Accumulated Other Comprehensive			Affected Line Item in the Consolidated
Comprehensive Income Components	Income			Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(145	)	Realized gains on available-for-sale securities, net
		51		Income tax provision
		(94	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(8	)	Pensions and other employee benefits
Actuarial loss		2		Pensions and other employee benefits
		(6	)	Total before tax
		2		Income tax provision
		(4	)	Net of tax
Total reclassifications for the period	$	(98	)

For the Three Months Ended March 31, 2016
(In Thousands)
Details about Accumulated Other	Reclassified from Accumulated Other Comprehensive			Affected Line Item in the Consolidated
Comprehensive Income Components	Income			Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(383	)	Realized gains on available-for-sale securities, net
		134		Income tax provision
		(249	)	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	$	(252	)

XML

Note 4 - Cash and Due From Banks

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Cash and Cash Equivalents Disclosure [Text Block]

4.

CASH AND DUE FROM BANKS

Cash and due from banks at

March

31,

2017

and

December

31,

2016

include the following:

(In thousands)	Mar ch 31,		Dec. 31,
	2017		2016
Cash and cash equivalents	$	29,055	$	28,621
Certificates of deposit		3,488		3,488
Total cash and due from banks	$	32,543	$	32,109

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

$15,491,000

at

March

31,

2017

and

$16,654,000

at

December

31,

2016.

XML

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

3 Months Ended

Mar. 31, 2017

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.

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

March

31,

2017

and

December

31,

2016,

assets measured at fair value and the valuation methods used are as follows:

			March 31, 2017
	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	$	9,568	$	0		$	9,568
Obligations of states and political subdivisions:
Tax-exempt		0		118,710		0			118,710
Taxable		0		28,805		0			28,805
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		49,359		0			49,359
Residential collateralized mortgage obligations		0		135,681		0			135,681
Commercial mortgage-backed securities		0		33,825		0			33,825
Total debt securities		0		375,948		0			375,948
Marketable equity securities		971		0		0			971
Total available-for-sale securities		971		375,948		0			376,919
Servicing rights		0		0		1,278			1,278
Total recurring fair value measurements	$	971	$	375,948	$	1,278		$	378,197
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	3,319		$	3,319
Valuation allowance		0		0		(881	)		(881	)
Impaired loans, net		0		0		2,438			2,438
Foreclosed assets held for sale		0		0		1,878			1,878
Total nonrecurring fair value measurements	$	0	$	0	$	4,316		$	4,316

			December 31, 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	$	9,541	$	0		$	9,541
Obligations of states and political subdivisions:
Tax-exempt		0		119,037		0			119,037
Taxable		0		30,297		0			30,297
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		58,404		0			58,404
Residential collateralized mortgage obligations		0		146,608		0			146,608
Commercial mortgage-Backed securities		0		30,219		0			30,219
Total debt securities		0		394,106		0			394,106
Marketable equity securities		971		0		0			971
Total available-for-sale securities		971		394,106		0			395,077
Servicing rights		0		0		1,262			1,262
Total recurring fair value measurements	$	971	$	394,106	$	1,262		$	396,339
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	3,372		$	3,372
Valuation allowance		0		0		(674	)		(674	)
Impaired loans, net		0		0		2,698			2,698
Foreclosed assets held for sale		0		0		2,180			2,180
Total nonrecurring fair value measurements	$	0	$	0	$	4,878		$	4,878

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

March

31,

2017

and

December

31,

2016,

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
	3/31/17		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	3/31/17
Servicing rights	$	1,278	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		132.00	%	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
	12/31/16		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	12/31/16
Servicing rights	$	1,262	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		138.00	%	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. Unrealized gains (losses) in fair value of servicing rights are included in Loan servicing fees, net, in the unaudited consolidated statements of income.

Following is a reconciliation of activity for Level

3

assets measured at fair value on a recurring basis:

(In Thousands)	Three Months Ended
	Mar ch 31			Mar ch 31,
	2017			2016
Servicing rights balance, beginning of period	$	1,262		$	1,296
Capitalization of servicing rights		46			36
Unrealized (losses) included in earnings		(30	)		(71	)
Servicing rights balance, end of period	$	1,278		$	1,261

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

March

31,

2017

and

December

31,

2016,

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									Weighted-
Percentages)			Valuation						Average
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	3/31/17		3/31/17		3/31/17		Technique	Inputs	3/31/17
Impaired loans:
Commercial:
Commercial loans secured by real estate	$	2,740	$	753	$	1,987	Sales comparison	Discount to appraised value		16	%
Commercial and industrial		77		77		0	Sales comparison	Discount to appraised value		100	%
Loans secured by farmland		502		51		451	Sales comparison	Discount to appraised value		55	%
Total impaired loans	$	3,319	$	881	$	2,438
Foreclosed assets held for sale - real estate:
Residential (1-4 family)	$	800	$	0	$	800	Sales comparison	Discount to appraised value		44	%
Land		650		0		650	Sales comparison	Discount to appraised value		33	%
Commercial real estate		428		0		428	Sales comparison	Discount to appraised value		50	%
Total foreclosed assets held for sale	$	1,878	$	0	$	1,878

(In Thousands, Except									Weighted-
Percentages)			Valuation						Average
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	12/31/16		12/31/16		12/31/16		Technique	Inputs	12/31/16
Impaired loans:
Commercial:
Commercial loans secured by real estate	$	2,773	$	528	$	2,245	Sales comparison	Discount to appraised value		7	%
Commercial and industrial		95		95		0	Sales comparison	Discount to appraised value		100	%
Loans secured by farmland		504		51		453	Sales comparison	Discount to appraised value		55	%
Total impaired loans	$	3,372	$	674	$	2,698
Foreclosed assets held for sale - real estate:
Residential (1-4 family)	$	1,102	$	0	$	1,102	Sales comparison	Discount to appraised value		35	%
Land		650		0		650	Sales comparison	Discount to appraised value		33	%
Commercial real estate		428		0		428	Sales comparison	Discount to appraised value		50	%
Total foreclosed assets held for sale	$	2,180	$	0	$	2,180

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.

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

March

31,

2017

and

December

31,

2016.

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	Mar ch 31, 201 7				December 31, 2016
	Method(s)	Carrying		Fair		Carrying		Fair
	Used	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	29,055	$	29,055	$	28,621	$	28,621
Certificates of deposit	Level 2		3,488		3,483		3,488		3,481
Available-for-sale securities	See Above		376,919		376,919		395,077		395,077
Restricted equity securities (included in Other Assets)	Level 2		4,065		4,065		4,426		4,426
Loans held for sale	Level 1		163		163		142		142
Loans, net	Level 3		753,277		736,876		743,362		725,787
Accrued interest receivable	Level 2		3,804		3,804		3,963		3,963
Servicing rights	Level 3		1,278		1,278		1,262		1,262
Financial liabilities:
Deposits with no stated maturity	Level 2		764,048		764,048		771,625		771,625
Time deposits	Level 2		216,203		216,378		212,218		212,274
Short-term borrowings	Level 2		20,744		20,612		26,175		26,024
Long-term borrowings	Level 2		38,388		38,960		38,454		39,062
Accrued interest payable	Level 2		67		67		65		65

XML

Note 6 - Securities

3 Months Ended

Mar. 31, 2017

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

March

31,

2017

and

December

31,

2016

are summarized as follows:

			March 31, 2017
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	9,674	$	3	$	(109	)	$	9,568
Obligations of states and political subdivisions:
Tax-exempt		117,272		2,756		(1,318	)		118,710
Taxable		28,559		310		(64	)		28,805
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		49,896		117		(654	)		49,359
Residential collateralized mortgage obligations		137,077		372		(1,768	)		135,681
Commercial mortgage-backed securities		34,411		7		(593	)		33,825
Total debt securities		376,889		3,565		(4,506	)		375,948
Marketable equity securities		1,000		0		(29	)		971
Total	$	377,889	$	3,565	$	(4,535	)	$	376,919

			December 31, 2016
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	9,671	$	5	$	(135	)	$	9,541
Obligations of states and political subdivisions:
Tax-exempt		118,140		2,592		(1,695	)		119,037
Taxable		30,073		303		(79	)		30,297
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		58,922		306		(824	)		58,404
Residential collateralized mortgage obligations		147,915		408		(1,715	)		146,608
Commercial mortgage-backed securities		30,817		0		(598	)		30,219
Total debt securities		395,538		3,614		(5,046	)		394,106
Marketable equity securities		1,000		0		(29	)		971
Total	$	396,538	$	3,614	$	(5,075	)	$	395,077

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

March

31,

2017

and

December

31,

2016:

March 31, 2017	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	$	7,922	$	(109	)	$	0	$	0		$	7,922	$	(109	)
Obligations of states and political subdivisions:
Tax-exempt		36,264		(1,253	)		2,697		(65	)		38,961		(1,318	)
Taxable		8,212		(64	)		0		0			8,212		(64	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		37,612		(654	)		0		0			37,612		(654	)
Residential collateralized mortgage obligations		80,476		(1,159	)		15,140		(609	)		95,616		(1,768	)
Commercial mortgage-backed securities		29,840		(593	)		0		0			29,840		(593	)
Total debt securities		200,326		(3,832	)		17,837		(674	)		218,163		(4,506	)
Marketable equity securities		1,000		(29	)		0		0			1,000		(29	)
Total temporarily impaired available-for-sale securities	$	201,326	$	(3,861	)	$	17,837	$	(674	)	$	219,163	$	(4,535	)

December 31, 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 U.S. Government agencies	$	7,899	$	(135	)	$	0	$	0		$	7,899	$	(135	)
Obligations of states and political subdivisions:
Tax-exempt		54,479		(1,676	)		1,278		(19	)		55,757		(1,695	)
Taxable		9,594		(79	)		0		0			9,594		(79	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		48,674		(824	)		0		0			48,674		(824	)
Residential collateralized mortgage obligations		85,198		(1,124	)		16,073		(591	)		101,271		(1,715	)
Commercial mortgage-backed securities		30,219		(598	)		0		0			30,219		(598	)
Total debt securities		236,063		(4,436	)		17,351		(610	)		253,414		(5,046	)
Marketable equity securities		1,000		(29	)		0		0			1,000		(29	)
Total temporarily impaired available-for-sale securities	$	237,063	$	(4,465	)	$	17,351	$	(610	)	$	254,414	$	(5,075	)

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

(In Thousands)	3 Months Ended
	Mar ch 31,			Mar ch 31,
	2017			2016
Gross realized gains from sales	$	161		$	383
Gross realized losses from sales		(16	)		0
Net realized gains	$	145		$	383

The amortized cost and fair value of available-for-sale debt securities by contractual maturity are shown in the following table as of

March

31,

2017.

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	$	18,630	$	18,730
Due from one year through five years		72,025		73,398
Due from five years through ten years		40,291		39,963
Due after ten years		24,559		24,992
Sub-total		155,505		157,083
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		49,896		49,359
Residential collateralized mortgage obligations		137,077		135,681
Commercial mortgage-backed securities		34,411		33,825
Total	$	376,889	$	375,948

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

$220,272,000

at

March

31,

2017

and

$230,803,000

at

December

31,

2016

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 other-than-temporary impairment (“OTTI”) at

March

31,

2017

is provided below.

Debt Securities

At

March

31,

2017,

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

March

31,

2017

to be temporary.

Equity Securities

The Corporation’s marketable equity securities at

March

31,

2017

and

December

31,

2016

consisted exclusively of

one

mutual fund. At

March

31,

2017

and

December

31,

2016,

the mutual fund held by the Corporation had an unrealized loss of

$29,000

for which management determined an OTTI charge was not required.

The Corporation had

no

realized gains or losses from the sale of equity securities in the

first

quarter of

2017.

In the

first

quarter

2016,

the Corporation had realized gains of

$249,000

from the sale of bank stocks.

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

$3,935,000

at

March

31,

2017

and

$4,296,000

at

December

31,

2016.

The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to

not

be impaired at

March

31,

2017

and

December

31,

2016.

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

3 Months Ended

Mar. 31, 2017

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

March

31,

2017

and

December

31,

2016

are summarized by segment, and by classes within each segment, as follows:

Summary of Loans by Type
(In Thousands)	Mar ch 31,			Dec. 31,
	2017			2016
Residential mortgage:
Residential mortgage loans - first liens	$	340,431		$	334,102
Residential mortgage loans - junior liens		23,717			23,706
Home equity lines of credit		36,810			38,057
1-4 Family residential construction		24,041			24,908
Total residential mortgage		424,999			420,773
Commercial:
Commercial loans secured by real estate		153,385			150,468
Commercial and industrial		79,493			83,854
Political subdivisions		44,625			38,068
Commercial construction and land		15,252			14,287
Loans secured by farmland		7,497			7,294
Multi-family (5 or more) residential		7,622			7,896
Agricultural loans		3,992			3,998
Other commercial loans		11,131			11,475
Total commercial		322,997			317,340
Consumer		14,025			13,722
Total		762,021			751,835
Less: allowance for loan losses		(8,744	)		(8,473	)
Loans, net	$	753,277		$	743,362

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

March

31,

2017

or

December

31,

2016.

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

March

31,

2017

and

December

31,

2016,

management determined that no allowance for credit losses related to unfunded loan commitments was required.

Transactions within the allowance for loan losses, summarized by segment and class, for the

three

-month periods ended

March

31,

2017

and

2016

were as follows:

Three Months Ended March 31, 2017	Dec. 31 ,										March 31 ,
(In Thousands)	2016 Balance		Charge-offs			Recoveries		Provision (Credit)			2017 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	3,033	$	(63	)	$	2	$	153		$	3,125
Residential mortgage loans - junior liens		258		0			1		(3	)		256
Home equity lines of credit		350		0			0		(12	)		338
1-4 Family residential construction		249		0			0		(9	)		240
Total residential mortgage		3,890		(63	)		3		129			3,959
Commercial:
Commercial loans secured by real estate		2,380		(96	)		0		401			2,685
Commercial and industrial		999		0			1		(94	)		906
Commercial construction and land		162		0			0		7			169
Loans secured by farmland		110		0			0		1			111
Multi-family (5 or more) residential		241		0			0		(5	)		236
Agricultural loans		40		0			0		(1	)		39
Other commercial loans		115		0			0		(6	)		109
Total commercial		4,047		(96	)		1		303			4,255
Consumer		138		(41	)		15		20			132
Unallocated		398		0			0		0			398
Total Allowance for Loan Losses	$	8,473	$	(200	)	$	19	$	452		$	8,744

Three Months Ended March 31, 2016	Dec. 31,										March 31 ,
(In Thousands)	2015 Balance		Charge-offs			Recoveries		Provision (Credit)			2016 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,645	$	0		$	0	$	77		$	2,722
Residential mortgage loans - junior liens		219		0			0		9			228
Home equity lines of credit		347		0			0		4			351
1-4 Family residential construction		207		0			0		(7	)		200
Total residential mortgage		3,418		0			0		83			3,501
Commercial:
Commercial loans secured by real estate		1,939		0			1		87			2,027
Commercial and industrial		981		0			1		(6	)		976
Commercial construction and land		58		0			0		26			84
Loans secured by farmland		106		0			0		2			108
Multi-family (5 or more) residential		675		(595	)		0		176			256
Agricultural loans		45		0			0		(1	)		44
Other commercial loans		118		0			0		(6	)		112
Total commercial		3,922		(595	)		2		278			3,607
Consumer		122		(18	)		15		7			126
Unallocated		427		0			0		0			427
Total Allowance for Loan Losses	$	7,889	$	(613	)	$	17	$	368		$	7,661

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

March

31,

2017

and

December

31,

2016:

March 31, 2017
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	330,808	$	293	$	9,274	$	56	$	340,431
Residential mortgage loans - junior liens		23,318		142		257		0		23,717
Home equity lines of credit		36,150		63		597		0		36,810
1-4 Family residential construction		23,954		0		87		0		24,041
Total residential mortgage		414,230		498		10,215		56		424,999
Commercial:
Commercial loans secured by real estate		142,711		2,721		7,953		0		153,385
Commercial and Industrial		73,006		5,046		1,430		11		79,493
Political subdivisions		44,625		0		0		0		44,625
Commercial construction and land		15,112		60		80		0		15,252
Loans secured by farmland		5,482		601		1,399		15		7,497
Multi-family (5 or more) residential		7,013		0		609		0		7,622
Agricultural loans		3,138		84		770		0		3,992
Other commercial loans		11,057		0		74		0		11,131
Total commercial		302,144		8,512		12,315		26		322,997
Consumer		13,812		7		206		0		14,025
Totals	$	730,186	$	9,017	$	22,736	$	82	$	762,021

December 31, 2016
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	324,377	$	408	$	9,258	$	59	$	334,102
Residential mortgage loans - junior liens		23,274		132		300		0		23,706
Home equity lines of credit		37,360		123		574		0		38,057
1-4 Family residential construction		24,820		0		88		0		24,908
Total residential mortgage		409,831		663		10,220		59		420,773
Commercial:
Commercial loans secured by real estate		139,358		3,092		8,018		0		150,468
Commercial and Industrial		79,202		4,180		461		11		83,854
Political subdivisions		38,068		0		0		0		38,068
Commercial construction and land		14,136		70		81		0		14,287
Loans secured by farmland		5,745		129		1,404		16		7,294
Multi-family (5 or more) residential		7,277		0		619		0		7,896
Agricultural loans		3,208		0		790		0		3,998
Other commRercial loans		11,401		0		74		0		11,475
Total commercial		298,395		7,471		11,447		27		317,340
Consumer		13,546		0		176		0		13,722
Totals	$	721,772	$	8,134	$	21,843	$	86	$	751,835

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

57%

at

March

31,

2017)

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.

The scope of loans reviewed individually each quarter to determine if they are impaired include all loan relationships greater than

$200,000

for which there is at least

one

extension of credit graded Special Mention, Substandard or Doubtful. Loans that are individually reviewed, but which are determined to not 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 reviewed, but which have been determined to

not

be impaired, are included in the “Collectively Evaluated” column in the table summarizing the allowance and associated loan balances as of

March

31,

2017

and

December

31,

2016.

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.

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

March

31,

2017

and

December

31,

2016:

March 31, 2017	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	743	$	339,688	$	340,431	$	0	$	3,125	$	3,125
Residential mortgage loans - junior liens		66		23,651		23,717		0		256		256
Home equity lines of credit		0		36,810		36,810		0		338		338
1-4 Family residential construction		0		24,041		24,041		0		240		240
Total residential mortgage		809		424,190		424,999		0		3,959		3,959
Commercial:
Commercial loans secured by real estate		5,915		147,470		153,385		753		1,932		2,685
Commercial and industrial		162		79,331		79,493		77		829		906
Political subdivisions		0		44,625		44,625		0		0		0
Commercial construction and land		0		15,252		15,252		0		169		169
Loans secured by farmland		1,387		6,110		7,497		51		60		111
Multi-family (5 or more) residential		392		7,230		7,622		0		236		236
Agricultural loans		12		3,980		3,992		0		39		39
Other commercial loans		0		11,131		11,131		0		109		109
Total commercial		7,868		315,129		322,997		881		3,374		4,255
Consumer		22		14,003		14,025		0		132		132
Unallocated												398
Total	$	8,699	$	753,322	$	762,021	$	881	$	7,465	$	8,744

December 31, 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	$	753	$	333,349	$	334,102	$	0	$	3,033	$	3,033
Residential mortgage loans - junior liens		68		23,638		23,706		0		258		258
Home equity lines of credit		0		38,057		38,057		0		350		350
1-4 Family residential construction		0		24,908		24,908		0		249		249
Total residential mortgage		821		419,952		420,773		0		3,890		3,890
Commercial:
Commercial loans secured by real estate		8,005		142,463		150,468		528		1,852		2,380
Commercial and industrial		212		83,642		83,854		95		904		999
Political subdivisions		0		38,068		38,068		0		0		0
Commercial construction and land		0		14,287		14,287		0		162		162
Loans secured by farmland		1,394		5,900		7,294		51		59		110
Multi-family (5 or more) residential		392		7,504		7,896		0		241		241
Agricultural loans		13		3,985		3,998		0		40		40
Other commercial loans		0		11,475		11,475		0		115		115
Total commercial		10,016		307,324		317,340		674		3,373		4,047
Consumer		23		13,699		13,722		0		138		138
Unallocated												398
Total	$	10,860	$	740,975	$	751,835	$	674	$	7,401	$	8,473

Summary information related to impaired loans at

March

31,

2017

and

December

31,

2016

is as follows:

(In Thousands)	March 31, 2017						December 31, 2016
	Unpaid						Unpaid
	Principal		Recorded		Related		Principal		Recorded		Related
	Balance		Investment		Allowance		Balance		Investment		Allowance
With no related allowance recorded:
Residential mortgage loans - first liens	$	773	$	743	$	0	$	783	$	753	$	0
Residential mortgage loans - junior liens		66		66		0		68		68		0
Commercial loans secured by real estate		3,175		3,175		0		6,975		5,232		0
Commercial and industrial		85		85		0		117		117		0
Loans secured by farmland		885		885		0		890		890		0
Multi-family (5 or more) residential		987		392		0		987		392		0
Agricultural loans		12		12		0		13		13		0
Consumer		22		22		0		23		23		0
Total with no related allowance recorded		6,005		5,380		0		9,856		7,488		0
With a related allowance recorded:
Commercial loans secured by real estate		2,740		2,740		753		2,773		2,773		528
Commercial and industrial		77		77		77		95		95		95
Loans secured by farmland		502		502		51		504		504		51
Total with a related allowance recorded		3,319		3,319		881		3,372		3,372		674
Total	$	9,324	$	8,699	$	881	$	13,228	$	10,860	$	674

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				3 Months Ended
	March 31,				March 31,
	2017		2016		2017		2016
Residential mortgage:
Residential mortgage loans - first lien	$	748	$	861	$	9	$	10
Residential mortgage loans - junior lien		67		73		1		1
Total residential mortgage		815		934		10		11
Commercial:
Commercial loans secured by real estate		6,889		6,160		56		110
Commercial and industrial		247		568		3		3
Loans secured by farmland		1,390		1,423		8		21
Multi-family (5 or more) residential		392		690		0		0
Agricultural loans		12		15		1		1
Total commercial		8,930		8,856		68		135
Consumer		33		12		0		0
Total	$	9,778	$	9,802	$	78	$	146

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)	March 31, 2017				December 31, 2016
	Past Due				Past Due
	90+ Days and				90+ Days and
	Accruing		Nonaccrual		Accruing		Nonaccrual
Residential mortgage:
Residential mortgage loans - first liens	$	1,979	$	3,478	$	3,022	$	3,770
Residential mortgage loans - junior liens		40		0		114		0
Home equity lines of credit		158		11		320		11
Total residential mortgage		2,177		3,489		3,456		3,781
Commercial:
Commercial loans secured by real estate		96		5,713		2,774		3,080
Commercial and industrial		218		160		286		119
Loans secured by farmland		216		1,326		219		1,331
Multi-family (5 or more) residential		0		392		0		392
Agricultural loans		0		12		0		13
Total commercial		530		7,603		3,279		4,935
Consumer		7		139		103		20
Totals	$	2,714	$	11,231	$	6,838	$	8,736

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

March

31,

2017

and

December

31,

2016:

	As of March 31, 2017								As of December 31, 2016
	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	$	330,781	$	6,044	$	3,606	$	340,431	$	321,670	$	6,695	$	5,737	$	334,102
Residential mortgage loans - junior liens		23,593		84		40		23,717		23,268		324		114		23,706
Home equity lines of credit		36,427		225		158		36,810		37,603		134		320		38,057
1-4 Family residential construction		23,543		498		0		24,041		24,567		341		0		24,908
Total residential mortgage		414,344		6,851		3,804		424,999		407,108		7,494		6,171		420,773
Commercial:
Commercial loans secured by real estate		150,231		240		2,914		153,385		147,464		82		2,922		150,468
Commercial and industrial		79,202		13		278		79,493		83,364		185		305		83,854
Political subdivisions		44,625		0		0		44,625		38,068		0		0		38,068
Commercial construction and land		15,154		98		0		15,252		14,199		88		0		14,287
Loans secured by farmland		6,334		138		1,025		7,497		6,181		83		1,030		7,294
Multi-family (5 or more) residential		7,230		0		392		7,622		7,439		65		392		7,896
Agricultural loans		3,979		1		12		3,992		3,981		4		13		3,998
Other commercial loans		11,131		0		0		11,131		11,475		0		0		11,475
Total commercial		317,886		490		4,621		322,997		312,171		507		4,662		317,340
Consumer		13,857		72		96		14,025		13,446		153		123		13,722
Totals	$	746,087	$	7,413	$	8,521	$	762,021	$	732,725	$	8,154	$	10,956	$	751,835

Nonaccrual loans are included in the contractual aging in the immediately preceding table. A summary of the contractual aging of nonaccrual loans at

March

31,

2017

and

December

31,

2016

is as follows:

	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Total
March 31, 2017 Nonaccrual Totals	$	4,487	$	937	$	5,807	$	11,231
December 31, 2016 Nonaccrual Totals	$	4,199	$	419	$	4,118	$	8,736

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

March

31,

2017

and

December

31,

2016

is as follows:

	Current &
(In Thousandas)	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Nonaccrual		Total
March 31, 2017 Totals	$	701	$	51	$	242	$	2,841	$	3,835
December 31, 2016 Totals	$	5,453	$	350	$	0	$	2,874	$	8,677

At

March

31,

2017

and

December

31,

2016,

there were

no

commitments to loan additional funds to borrowers whose loans have been classified as TDRs.

TDRs that occurred during the

three

-month period ended

March

31,

2017

and

2016

are as follows:

(Balances in Thousands)
	March 31, 2017				March 31, 2016
			Post-				Post-
	Number		Modification		Number		Modification
	of		Recorded		of		Recorded
	Loans		Investment		Loans		Investment
Commercial and industrial,
Extended maturity		0	$	0		1	$	5
Total		0	$	0		1	$	5

In the

three

-month period ended

March

31

2017

and

2016,

defaults on loans for which modifications considered to be TDRs were entered into within the previous

12

months are summarized as follows:

(Balances in Thousands)
	March 31, 2017				March 31, 2016
	Number				Number
	of		Recorded		of		Recorded
	Loans		Investment		Loans		Investment
Residential mortgage - first liens		2	$	293		1	$	31
Residential mortgage - junior liens		1		28		0		0
Commercial and industrial		0		0		1		5
Consumer		1		26		0		0
Total		4	$	347		2	$	36

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)	March 31,		Dec. 31,
	2017		2016
Foreclosed residential real estate	$	800	$	1,102

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)	March 31,		Dec. 31,
	2017		2016
Residential real estate in process of foreclosure	$	2,544	$	2,738

XML

Note 8 - Borrowed Funds

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Debt Disclosure [Text Block]

8.

BORROWED FUNDS

Short-term borrowings include the following:

(In Thousands)	Mar ch 31,		Dec. 31,
	2017		2016
FHLB-Pittsburgh borrowings	$	14,500	$	21,000
Customer repurchase agreements		6,244		5,175
Total short-term borrowings	$	20,744	$	26,175

The FHLB-Pittsburgh loan facilities are collateralized by qualifying loans secured by real estate with a book value totaling

$483,045,000

at

March

31,

2017

and

$471,454,000

at

December

31,

2016.

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

$3,935,000

at

March

31,

2017

and

$4,296,000

at

December

31,

2016.

At

March

31,

2017,

the short-term borrowing from FHLB-Pittsburgh of

$14,500,000

was an overnight borrowing with an interest rate of

0.99%.

At

December

31,

2016,

the short-term borrowing from FHLB-Pittsburgh of

$21,000,000

was an overnight borrowing with an interest rate of

0.74%.

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

March

31,

2017

and

December

31,

2016.

Long-term borrowings are as follows:

(In Thousands)	Mar ch 31,		Dec. 31,
	2017		2016
FHLB-Pittsburgh borrowings	$	11,388	$	11,454
Repurchase agreement		27,000		27,000
Total long-term borrowings	$	38,388	$	38,454

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

(In Thousands)	Mar ch 31,		Dec. 31,
	2017		2016
Loan maturing in June 2017 with a rate of 6.83%	$	2	$	4
Loan maturing in September 2017 with a rate of 3.81%		10,000		10,000
Loan maturing in April 2020 with a rate of 4.79%		601		646
Loan maturing in June 2025 with a rate of 4.91%		785		804
Total long-term FHLB-Pittsburgh borrowings	$	11,388	$	11,454

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

$34,675,000

at

March

31,

2017

and

$31,494,000

at

December

31,

2016,

detailed in the following table:

(In Thousands)	Mar ch 31,		Dec. 31,
	2017		2016
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities	$	15,268	$	18,181
Residential collateralized mortgage obligations		19,407		13,313
Total	$	34,675	$	31,494

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

$320,661,000

at

March

31,

2017.

 

XML

Note 9 - Employee and Postretirement Benefit Plans

3 Months Ended

Mar. 31, 2017

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. The 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

March

31,

2017

and

December

31,

2016,

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
	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2017			2016			2017			2016
Service cost	$	0		$	0		$	9		$	9
Interest cost		6			7			14			16
Expected return on plan assets		(8	)		(7	)		0			0
Amortization of prior service cost		0			0			(8	)		(8	)
Recognized net actuarial loss		2			3			0			0
Net periodic benefit cost	$	0		$	3		$	15		$	17

In the

first

three

months of

2017,

the Corporation funded postretirement contributions totaling

$12,000,

with estimated annual postretirement contributions of

$62,000

expected in

2017

for the full year. Based upon preliminary actuarial information,

no

defined benefit pension contributions are required in

2017,

though the Corporation

may

make discretionary contributions.

XML

Note 10 - Stock-based Compensation Plans

3 Months Ended

Mar. 31, 2017

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

first

quarter

2017,

the Corporation awarded

22,312

shares of restricted stock under the Stock Incentive Plan and

8,470

shares of restricted stock under the Independent Directors Stock Incentive Plan. The

2017

restricted stock awards under the Stock Incentive Plan vest ratably over

three

years, and vesting for

one

-half of the

14,897

restricted shares awarded to Executive Officers depends on the Corporation meeting a return on average equity (“ROAE”) target each year. The

2017

restricted stock issued under the Independent Directors Stock Incentive Plan vests over

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

three

months of

2017

based on an assumption that the ROAE target for awards to Executive Officers in

2016

and

2017

will not be met, resulting in forfeiture of the restricted stock.

Total annual stock-based compensation for the year ending

December

31,

2017

is estimated to total

$652,000.

If the ROAE targets for awards to Executive Officers in

2016

and

2017

are met or exceeded, total annual stock-based compensation would increase by approximately

$123,000.

Total stock-based compensation expense attributable to restricted stock awards amounted to

$168,000

in the

first

quarter of

2017

and

$162,000

in the

first

quarter

2016.

XML

Note 11 - Income Taxes

3 Months Ended

Mar. 31, 2017

Notes to Financial Statements

Income Tax Disclosure [Text Block]

11.

INCOME TAXES

The net deferred tax asset at

March

31,

2017

and

December

31,

2016

represents the following temporary difference components:

	March 31,		December 31,
(In Thousands)	2017		2016
Deferred tax assets:
Unrealized holding losses on securities	$	340	$	512
Allowance for loan losses		3,094		2,998
Other deferred tax assets		2,309		2,658
Total deferred tax assets		5,743		6,168
Deferred tax liabilities:
Defined benefit plans - ASC 835		83		27
Bank premises and equipment		933		913
Core deposit intangibles		6		6
Other deferred tax liabilities		105		105
Total deferred tax liabilities		1,127		1,051
Deferred tax asset, net	$	4,616	$	5,117

The provision for income tax for the

three

-month periods ended

March

31,

2017

and

2016

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:

	Three Months Ended
(Dollars In thousands)	March 31,
	2017			2016
Income before income tax provision	$	4,418		$	4,666
Income tax provision		984			1,093
Effective tax rate		22.27	%		23.42	%

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

through

2016

and expects to continue to receive tax credits annually through

2022.

The carrying amount of the Corporation’s investment is

$687,000

at

March

31,

2017

and

$713,000

at

December

31,

2016

(included in Other Assets in the consolidated balance sheets). For the year ending

December

31,

2017,

the estimated amount of tax credits and other tax benefits to be received is

$157,000

and the estimated amount to be recognized as a reduction of the provision for income taxes is

$73,000.

The total reduction in the provision for income taxes resulting from this investment is

$18,000

in the

first

quarter

2017

and

$19,000

in the

first

quarter

2016.

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

3 Months Ended

Mar. 31, 2017

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

3 Months Ended

Mar. 31, 2017

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. Additional ASUs related to revenue recognition include the following:

● 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.

● 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 and in December 2016, the FASB issued ASU 2016 - 20, which provide clarifying guidance in a few narrow areas and adds some practical expedients to the guidance.

● In February 2017, the FASB issued ASU 2017 - 05, which provides guidance on the accounting for gains and losses on the derecognition of nonfinancial assets.

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. Initial adoption of this ASU is not expected to have a significant impact on the Corporation, as recognition of interest income and the larger sources of noninterest income in the Corporation’s current business model would not be impacted by the ASU.

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

March

31,

2017

and

December

31,

2016,

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. Initial adoption of this ASU is not expected to have a significant impact on the Corporation’s financial position; however, the method for determining the fair value of loans and other financial instruments for disclosure purposes will be affected.

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.

The Corporation is in the early stages of evaluating the potential impact of adopting this amendment.

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.

The amendments should be applied prospectively upon their effective date. Initial adoption of this ASU in

2017

did not have a significant impact on the Corporation.

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. Initial adoption of this ASU in

2017

did not have a significant impact on the Corporation.

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.

In

January

2017,

the FASB issued ASU

2017

-

04,

Intangibles – Goodwill and Other (Topic

350)

to simplify the accounting for goodwill impairment. This guidance, among other things, removes step

2

of the goodwill impairment test thus eliminating the need to determine the fair value of individual assets and liabilities of the reporting unit. Upon adoption of this ASU, goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. This

may

result in more or less impairment being recognized than under current guidance. This Update will become effective for the Corporation’s annual and interim goodwill impairment tests beginning in the

first

quarter of

2020.

In

March

2017,

the FASB issued ASU

2017

-

08,

Receivables –Nonrefundable Fees and Other Costs (Subtopic

310

-

20).

This Update will shorten the amortization period for certain callable debt securities held at a premium. Under current U.S. GAAP, entities generally amortize the premium over the contractual life of the instrument. Discounts will continue to be amortized to maturity. The amendments in this Update are effective for the Corporation for annual and interim periods beginning in the

first

quarter

2019.

An entity should apply the amendments in this Update through a cumulative-effect adjustment directly to retained earnings as of the beginning of the year of adoption. Early adoption is permitted, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Corporation does not expect adoption of the amendments to have a significant impact on its financial position, and is in the process of evaluating whether to early adopt the amendments.

XML

Note 2 - Per Share Data (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

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

	3 Months Ended
	March 31,			March 31,
	2017			2016
Basic
Net income	$	3,434,000		$	3,573,000
Less: Dividends and undistributed earnings allocated to participating securities		(18,000	)		(20,000	)
Net income attributable to common shares	$	3,416,000		$	3,553,000
Basic weighted-average common shares outstanding		12,085,729			12,087,290
Basic earnings per common share (a)	$	0.28		$	0.29
Diluted
Net income attributable to common shares	$	3,416,000		$	3,553,000
Basic weighted-average common shares outstanding		12,085,729			12,087,290
Dilutive effect of potential common stock arising from stock options		45,681			20,770
Diluted weighted-average common shares outstanding		12,131,410			12,108,060
Diluted earnings per common share (a)	$	0.28		$	0.29

XML

Note 3 - Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

Comprehensive Income (Loss) [Table Text Block]

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
Three Months Ended March 31, 2017
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	636		$	(223	)	$	413
Reclassification adjustment for (gains) realized in income		(145	)		51			(94	)
Other comprehensive income on available-for-sale securities		491			(172	)		319
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		166			(58	)		108
Amortization of net transition obligation, prior service cost and net actuarial gain included in net periodic benefit cost		(6	)		2			(4	)
Other comprehensive income on unfunded retirement obligations		160			(56	)		104
Total other comprehensive income	$	651		$	(228	)	$	423

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
Three Months Ended March 31, 2016
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	4,774		$	(1,671	)	$	3,103
Reclassification adjustment for (gains) realized in income		(383	)		134			(249	)
Other comprehensive income on available-for-sale securities		4,391			(1,537	)		2,854
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		(5	)		2			(3	)
Other comprehensive income on unfunded retirement obligations		21			(7	)		14
Total other comprehensive income	$	4,412		$	(1,544	)	$	2,868

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

(In Thousands)	Unrealized					Accumulated
	Holding Gains			Unfunded		Other
	(Losses)			Retirement		Comprehensive
	on Securities			Obligations		Loss
Three Months Ended March 31, 2017
Balance, beginning of period	$	(949	)	$	51	$	(898	)
Change during three months ended March 31, 2017		319			104		423
Balance, end of period	$	(630	)	$	155	$	(475	)

(In Thousands)	Unrealized				Accumulated
	Holding Gains		Unfunded		Other
	(Losses)		Retirement		Comprehensive
	on Securities		Obligations		Income
Three Months Ended March 31, 2016
Balance, beginning of period	$	2,493	$	35	$	2,528
Change during three months ended March 31, 2016		2,854		14		2,868
Balance, end of period	$	5,347	$	49	$	5,396

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

For the Three Months Ended March 31, 2017
(In Thousands)
Details about Accumulated Other	Reclassified from Accumulated Other Comprehensive			Affected Line Item in the Consolidated
Comprehensive Income Components	Income			Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(145	)	Realized gains on available-for-sale securities, net
		51		Income tax provision
		(94	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(8	)	Pensions and other employee benefits
Actuarial loss		2		Pensions and other employee benefits
		(6	)	Total before tax
		2		Income tax provision
		(4	)	Net of tax
Total reclassifications for the period	$	(98	)

For the Three Months Ended March 31, 2016
(In Thousands)
Details about Accumulated Other	Reclassified from Accumulated Other Comprehensive			Affected Line Item in the Consolidated
Comprehensive Income Components	Income			Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(383	)	Realized gains on available-for-sale securities, net
		134		Income tax provision
		(249	)	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	$	(252	)

XML

Note 4 - Cash and Due From Banks (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

Schedule of Cash and Cash Equivalents [Table Text Block]

(In thousands)	Mar ch 31,		Dec. 31,
	2017		2016
Cash and cash equivalents	$	29,055	$	28,621
Certificates of deposit		3,488		3,488
Total cash and due from banks	$	32,543	$	32,109

XML

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

3 Months Ended

Mar. 31, 2017

Notes Tables

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

			March 31, 2017
	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	$	9,568	$	0		$	9,568
Obligations of states and political subdivisions:
Tax-exempt		0		118,710		0			118,710
Taxable		0		28,805		0			28,805
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		49,359		0			49,359
Residential collateralized mortgage obligations		0		135,681		0			135,681
Commercial mortgage-backed securities		0		33,825		0			33,825
Total debt securities		0		375,948		0			375,948
Marketable equity securities		971		0		0			971
Total available-for-sale securities		971		375,948		0			376,919
Servicing rights		0		0		1,278			1,278
Total recurring fair value measurements	$	971	$	375,948	$	1,278		$	378,197
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	3,319		$	3,319
Valuation allowance		0		0		(881	)		(881	)
Impaired loans, net		0		0		2,438			2,438
Foreclosed assets held for sale		0		0		1,878			1,878
Total nonrecurring fair value measurements	$	0	$	0	$	4,316		$	4,316

			December 31, 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	$	9,541	$	0		$	9,541
Obligations of states and political subdivisions:
Tax-exempt		0		119,037		0			119,037
Taxable		0		30,297		0			30,297
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		58,404		0			58,404
Residential collateralized mortgage obligations		0		146,608		0			146,608
Commercial mortgage-Backed securities		0		30,219		0			30,219
Total debt securities		0		394,106		0			394,106
Marketable equity securities		971		0		0			971
Total available-for-sale securities		971		394,106		0			395,077
Servicing rights		0		0		1,262			1,262
Total recurring fair value measurements	$	971	$	394,106	$	1,262		$	396,339
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	3,372		$	3,372
Valuation allowance		0		0		(674	)		(674	)
Impaired loans, net		0		0		2,698			2,698
Foreclosed assets held for sale		0		0		2,180			2,180
Total nonrecurring fair value measurements	$	0	$	0	$	4,878		$	4,878

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

(In Thousands)	Three Months Ended
	Mar ch 31			Mar ch 31,
	2017			2016
Servicing rights balance, beginning of period	$	1,262		$	1,296
Capitalization of servicing rights		46			36
Unrealized (losses) included in earnings		(30	)		(71	)
Servicing rights balance, end of period	$	1,278		$	1,261

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

(In Thousands)	Valuation	Mar ch 31, 201 7				December 31, 2016
	Method(s)	Carrying		Fair		Carrying		Fair
	Used	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	29,055	$	29,055	$	28,621	$	28,621
Certificates of deposit	Level 2		3,488		3,483		3,488		3,481
Available-for-sale securities	See Above		376,919		376,919		395,077		395,077
Restricted equity securities (included in Other Assets)	Level 2		4,065		4,065		4,426		4,426
Loans held for sale	Level 1		163		163		142		142
Loans, net	Level 3		753,277		736,876		743,362		725,787
Accrued interest receivable	Level 2		3,804		3,804		3,963		3,963
Servicing rights	Level 3		1,278		1,278		1,262		1,262
Financial liabilities:
Deposits with no stated maturity	Level 2		764,048		764,048		771,625		771,625
Time deposits	Level 2		216,203		216,378		212,218		212,274
Short-term borrowings	Level 2		20,744		20,612		26,175		26,024
Long-term borrowings	Level 2		38,388		38,960		38,454		39,062
Accrued interest payable	Level 2		67		67		65		65

Fair Value, Measurements, Nonrecurring [Member]

Notes Tables

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

(In Thousands, Except									Weighted-
Percentages)			Valuation						Average
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	3/31/17		3/31/17		3/31/17		Technique	Inputs	3/31/17
Impaired loans:
Commercial:
Commercial loans secured by real estate	$	2,740	$	753	$	1,987	Sales comparison	Discount to appraised value		16	%
Commercial and industrial		77		77		0	Sales comparison	Discount to appraised value		100	%
Loans secured by farmland		502		51		451	Sales comparison	Discount to appraised value		55	%
Total impaired loans	$	3,319	$	881	$	2,438
Foreclosed assets held for sale - real estate:
Residential (1-4 family)	$	800	$	0	$	800	Sales comparison	Discount to appraised value		44	%
Land		650		0		650	Sales comparison	Discount to appraised value		33	%
Commercial real estate		428		0		428	Sales comparison	Discount to appraised value		50	%
Total foreclosed assets held for sale	$	1,878	$	0	$	1,878

(In Thousands, Except									Weighted-
Percentages)			Valuation						Average
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	12/31/16		12/31/16		12/31/16		Technique	Inputs	12/31/16
Impaired loans:
Commercial:
Commercial loans secured by real estate	$	2,773	$	528	$	2,245	Sales comparison	Discount to appraised value		7	%
Commercial and industrial		95		95		0	Sales comparison	Discount to appraised value		100	%
Loans secured by farmland		504		51		453	Sales comparison	Discount to appraised value		55	%
Total impaired loans	$	3,372	$	674	$	2,698
Foreclosed assets held for sale - real estate:
Residential (1-4 family)	$	1,102	$	0	$	1,102	Sales comparison	Discount to appraised value		35	%
Land		650		0		650	Sales comparison	Discount to appraised value		33	%
Commercial real estate		428		0		428	Sales comparison	Discount to appraised value		50	%
Total foreclosed assets held for sale	$	2,180	$	0	$	2,180

Fair Value, Measurements, Recurring [Member]

Notes Tables

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

	Fair Value at
	3/31/17		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	3/31/17
Servicing rights	$	1,278	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		132.00	%	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
	12/31/16		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	12/31/16
Servicing rights	$	1,262	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		138.00	%	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

XML

Note 6 - Securities (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

Available-for-sale Securities [Table Text Block]

			March 31, 2017
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	9,674	$	3	$	(109	)	$	9,568
Obligations of states and political subdivisions:
Tax-exempt		117,272		2,756		(1,318	)		118,710
Taxable		28,559		310		(64	)		28,805
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		49,896		117		(654	)		49,359
Residential collateralized mortgage obligations		137,077		372		(1,768	)		135,681
Commercial mortgage-backed securities		34,411		7		(593	)		33,825
Total debt securities		376,889		3,565		(4,506	)		375,948
Marketable equity securities		1,000		0		(29	)		971
Total	$	377,889	$	3,565	$	(4,535	)	$	376,919

			December 31, 2016
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	9,671	$	5	$	(135	)	$	9,541
Obligations of states and political subdivisions:
Tax-exempt		118,140		2,592		(1,695	)		119,037
Taxable		30,073		303		(79	)		30,297
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		58,922		306		(824	)		58,404
Residential collateralized mortgage obligations		147,915		408		(1,715	)		146,608
Commercial mortgage-backed securities		30,817		0		(598	)		30,219
Total debt securities		395,538		3,614		(5,046	)		394,106
Marketable equity securities		1,000		0		(29	)		971
Total	$	396,538	$	3,614	$	(5,075	)	$	395,077

Schedule of Unrealized Loss on Investments [Table Text Block]

March 31, 2017	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	$	7,922	$	(109	)	$	0	$	0		$	7,922	$	(109	)
Obligations of states and political subdivisions:
Tax-exempt		36,264		(1,253	)		2,697		(65	)		38,961		(1,318	)
Taxable		8,212		(64	)		0		0			8,212		(64	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		37,612		(654	)		0		0			37,612		(654	)
Residential collateralized mortgage obligations		80,476		(1,159	)		15,140		(609	)		95,616		(1,768	)
Commercial mortgage-backed securities		29,840		(593	)		0		0			29,840		(593	)
Total debt securities		200,326		(3,832	)		17,837		(674	)		218,163		(4,506	)
Marketable equity securities		1,000		(29	)		0		0			1,000		(29	)
Total temporarily impaired available-for-sale securities	$	201,326	$	(3,861	)	$	17,837	$	(674	)	$	219,163	$	(4,535	)

December 31, 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 U.S. Government agencies	$	7,899	$	(135	)	$	0	$	0		$	7,899	$	(135	)
Obligations of states and political subdivisions:
Tax-exempt		54,479		(1,676	)		1,278		(19	)		55,757		(1,695	)
Taxable		9,594		(79	)		0		0			9,594		(79	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		48,674		(824	)		0		0			48,674		(824	)
Residential collateralized mortgage obligations		85,198		(1,124	)		16,073		(591	)		101,271		(1,715	)
Commercial mortgage-backed securities		30,219		(598	)		0		0			30,219		(598	)
Total debt securities		236,063		(4,436	)		17,351		(610	)		253,414		(5,046	)
Marketable equity securities		1,000		(29	)		0		0			1,000		(29	)
Total temporarily impaired available-for-sale securities	$	237,063	$	(4,465	)	$	17,351	$	(610	)	$	254,414	$	(5,075	)

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

(In Thousands)	3 Months Ended
	Mar ch 31,			Mar ch 31,
	2017			2016
Gross realized gains from sales	$	161		$	383
Gross realized losses from sales		(16	)		0
Net realized gains	$	145		$	383

Investments Classified by Contractual Maturity Date [Table Text Block]

	Amortized		Fair
(In Thousands)	Cost		Value
Due in one year or less	$	18,630	$	18,730
Due from one year through five years		72,025		73,398
Due from five years through ten years		40,291		39,963
Due after ten years		24,559		24,992
Sub-total		155,505		157,083
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		49,896		49,359
Residential collateralized mortgage obligations		137,077		135,681
Commercial mortgage-backed securities		34,411		33,825
Total	$	376,889	$	375,948

XML

Note 7 - Loans (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

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

Summary of Loans by Type
(In Thousands)	Mar ch 31,			Dec. 31,
	2017			2016
Residential mortgage:
Residential mortgage loans - first liens	$	340,431		$	334,102
Residential mortgage loans - junior liens		23,717			23,706
Home equity lines of credit		36,810			38,057
1-4 Family residential construction		24,041			24,908
Total residential mortgage		424,999			420,773
Commercial:
Commercial loans secured by real estate		153,385			150,468
Commercial and industrial		79,493			83,854
Political subdivisions		44,625			38,068
Commercial construction and land		15,252			14,287
Loans secured by farmland		7,497			7,294
Multi-family (5 or more) residential		7,622			7,896
Agricultural loans		3,992			3,998
Other commercial loans		11,131			11,475
Total commercial		322,997			317,340
Consumer		14,025			13,722
Total		762,021			751,835
Less: allowance for loan losses		(8,744	)		(8,473	)
Loans, net	$	753,277		$	743,362

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

Three Months Ended March 31, 2017	Dec. 31 ,										March 31 ,
(In Thousands)	2016 Balance		Charge-offs			Recoveries		Provision (Credit)			2017 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	3,033	$	(63	)	$	2	$	153		$	3,125
Residential mortgage loans - junior liens		258		0			1		(3	)		256
Home equity lines of credit		350		0			0		(12	)		338
1-4 Family residential construction		249		0			0		(9	)		240
Total residential mortgage		3,890		(63	)		3		129			3,959
Commercial:
Commercial loans secured by real estate		2,380		(96	)		0		401			2,685
Commercial and industrial		999		0			1		(94	)		906
Commercial construction and land		162		0			0		7			169
Loans secured by farmland		110		0			0		1			111
Multi-family (5 or more) residential		241		0			0		(5	)		236
Agricultural loans		40		0			0		(1	)		39
Other commercial loans		115		0			0		(6	)		109
Total commercial		4,047		(96	)		1		303			4,255
Consumer		138		(41	)		15		20			132
Unallocated		398		0			0		0			398
Total Allowance for Loan Losses	$	8,473	$	(200	)	$	19	$	452		$	8,744

Three Months Ended March 31, 2016	Dec. 31,										March 31 ,
(In Thousands)	2015 Balance		Charge-offs			Recoveries		Provision (Credit)			2016 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,645	$	0		$	0	$	77		$	2,722
Residential mortgage loans - junior liens		219		0			0		9			228
Home equity lines of credit		347		0			0		4			351
1-4 Family residential construction		207		0			0		(7	)		200
Total residential mortgage		3,418		0			0		83			3,501
Commercial:
Commercial loans secured by real estate		1,939		0			1		87			2,027
Commercial and industrial		981		0			1		(6	)		976
Commercial construction and land		58		0			0		26			84
Loans secured by farmland		106		0			0		2			108
Multi-family (5 or more) residential		675		(595	)		0		176			256
Agricultural loans		45		0			0		(1	)		44
Other commercial loans		118		0			0		(6	)		112
Total commercial		3,922		(595	)		2		278			3,607
Consumer		122		(18	)		15		7			126
Unallocated		427		0			0		0			427
Total Allowance for Loan Losses	$	7,889	$	(613	)	$	17	$	368		$	7,661

Financing Receivable Credit Quality Indicators [Table Text Block]

March 31, 2017
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	330,808	$	293	$	9,274	$	56	$	340,431
Residential mortgage loans - junior liens		23,318		142		257		0		23,717
Home equity lines of credit		36,150		63		597		0		36,810
1-4 Family residential construction		23,954		0		87		0		24,041
Total residential mortgage		414,230		498		10,215		56		424,999
Commercial:
Commercial loans secured by real estate		142,711		2,721		7,953		0		153,385
Commercial and Industrial		73,006		5,046		1,430		11		79,493
Political subdivisions		44,625		0		0		0		44,625
Commercial construction and land		15,112		60		80		0		15,252
Loans secured by farmland		5,482		601		1,399		15		7,497
Multi-family (5 or more) residential		7,013		0		609		0		7,622
Agricultural loans		3,138		84		770		0		3,992
Other commercial loans		11,057		0		74		0		11,131
Total commercial		302,144		8,512		12,315		26		322,997
Consumer		13,812		7		206		0		14,025
Totals	$	730,186	$	9,017	$	22,736	$	82	$	762,021

December 31, 2016
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	324,377	$	408	$	9,258	$	59	$	334,102
Residential mortgage loans - junior liens		23,274		132		300		0		23,706
Home equity lines of credit		37,360		123		574		0		38,057
1-4 Family residential construction		24,820		0		88		0		24,908
Total residential mortgage		409,831		663		10,220		59		420,773
Commercial:
Commercial loans secured by real estate		139,358		3,092		8,018		0		150,468
Commercial and Industrial		79,202		4,180		461		11		83,854
Political subdivisions		38,068		0		0		0		38,068
Commercial construction and land		14,136		70		81		0		14,287
Loans secured by farmland		5,745		129		1,404		16		7,294
Multi-family (5 or more) residential		7,277		0		619		0		7,896
Agricultural loans		3,208		0		790		0		3,998
Other commRercial loans		11,401		0		74		0		11,475
Total commercial		298,395		7,471		11,447		27		317,340
Consumer		13,546		0		176		0		13,722
Totals	$	721,772	$	8,134	$	21,843	$	86	$	751,835

Impaired Financing Receivable by Portfolio Segment [Table Text Block]

March 31, 2017	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	743	$	339,688	$	340,431	$	0	$	3,125	$	3,125
Residential mortgage loans - junior liens		66		23,651		23,717		0		256		256
Home equity lines of credit		0		36,810		36,810		0		338		338
1-4 Family residential construction		0		24,041		24,041		0		240		240
Total residential mortgage		809		424,190		424,999		0		3,959		3,959
Commercial:
Commercial loans secured by real estate		5,915		147,470		153,385		753		1,932		2,685
Commercial and industrial		162		79,331		79,493		77		829		906
Political subdivisions		0		44,625		44,625		0		0		0
Commercial construction and land		0		15,252		15,252		0		169		169
Loans secured by farmland		1,387		6,110		7,497		51		60		111
Multi-family (5 or more) residential		392		7,230		7,622		0		236		236
Agricultural loans		12		3,980		3,992		0		39		39
Other commercial loans		0		11,131		11,131		0		109		109
Total commercial		7,868		315,129		322,997		881		3,374		4,255
Consumer		22		14,003		14,025		0		132		132
Unallocated												398
Total	$	8,699	$	753,322	$	762,021	$	881	$	7,465	$	8,744

December 31, 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	$	753	$	333,349	$	334,102	$	0	$	3,033	$	3,033
Residential mortgage loans - junior liens		68		23,638		23,706		0		258		258
Home equity lines of credit		0		38,057		38,057		0		350		350
1-4 Family residential construction		0		24,908		24,908		0		249		249
Total residential mortgage		821		419,952		420,773		0		3,890		3,890
Commercial:
Commercial loans secured by real estate		8,005		142,463		150,468		528		1,852		2,380
Commercial and industrial		212		83,642		83,854		95		904		999
Political subdivisions		0		38,068		38,068		0		0		0
Commercial construction and land		0		14,287		14,287		0		162		162
Loans secured by farmland		1,394		5,900		7,294		51		59		110
Multi-family (5 or more) residential		392		7,504		7,896		0		241		241
Agricultural loans		13		3,985		3,998		0		40		40
Other commercial loans		0		11,475		11,475		0		115		115
Total commercial		10,016		307,324		317,340		674		3,373		4,047
Consumer		23		13,699		13,722		0		138		138
Unallocated												398
Total	$	10,860	$	740,975	$	751,835	$	674	$	7,401	$	8,473

Impaired Financing Receivables [Table Text Block]

(In Thousands)	March 31, 2017						December 31, 2016
	Unpaid						Unpaid
	Principal		Recorded		Related		Principal		Recorded		Related
	Balance		Investment		Allowance		Balance		Investment		Allowance
With no related allowance recorded:
Residential mortgage loans - first liens	$	773	$	743	$	0	$	783	$	753	$	0
Residential mortgage loans - junior liens		66		66		0		68		68		0
Commercial loans secured by real estate		3,175		3,175		0		6,975		5,232		0
Commercial and industrial		85		85		0		117		117		0
Loans secured by farmland		885		885		0		890		890		0
Multi-family (5 or more) residential		987		392		0		987		392		0
Agricultural loans		12		12		0		13		13		0
Consumer		22		22		0		23		23		0
Total with no related allowance recorded		6,005		5,380		0		9,856		7,488		0
With a related allowance recorded:
Commercial loans secured by real estate		2,740		2,740		753		2,773		2,773		528
Commercial and industrial		77		77		77		95		95		95
Loans secured by farmland		502		502		51		504		504		51
Total with a related allowance recorded		3,319		3,319		881		3,372		3,372		674
Total	$	9,324	$	8,699	$	881	$	13,228	$	10,860	$	674

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				3 Months Ended
	March 31,				March 31,
	2017		2016		2017		2016
Residential mortgage:
Residential mortgage loans - first lien	$	748	$	861	$	9	$	10
Residential mortgage loans - junior lien		67		73		1		1
Total residential mortgage		815		934		10		11
Commercial:
Commercial loans secured by real estate		6,889		6,160		56		110
Commercial and industrial		247		568		3		3
Loans secured by farmland		1,390		1,423		8		21
Multi-family (5 or more) residential		392		690		0		0
Agricultural loans		12		15		1		1
Total commercial		8,930		8,856		68		135
Consumer		33		12		0		0
Total	$	9,778	$	9,802	$	78	$	146

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

(In Thousands)	March 31, 2017				December 31, 2016
	Past Due				Past Due
	90+ Days and				90+ Days and
	Accruing		Nonaccrual		Accruing		Nonaccrual
Residential mortgage:
Residential mortgage loans - first liens	$	1,979	$	3,478	$	3,022	$	3,770
Residential mortgage loans - junior liens		40		0		114		0
Home equity lines of credit		158		11		320		11
Total residential mortgage		2,177		3,489		3,456		3,781
Commercial:
Commercial loans secured by real estate		96		5,713		2,774		3,080
Commercial and industrial		218		160		286		119
Loans secured by farmland		216		1,326		219		1,331
Multi-family (5 or more) residential		0		392		0		392
Agricultural loans		0		12		0		13
Total commercial		530		7,603		3,279		4,935
Consumer		7		139		103		20
Totals	$	2,714	$	11,231	$	6,838	$	8,736

Past Due Financing Receivables [Table Text Block]

	As of March 31, 2017								As of December 31, 2016
	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	$	330,781	$	6,044	$	3,606	$	340,431	$	321,670	$	6,695	$	5,737	$	334,102
Residential mortgage loans - junior liens		23,593		84		40		23,717		23,268		324		114		23,706
Home equity lines of credit		36,427		225		158		36,810		37,603		134		320		38,057
1-4 Family residential construction		23,543		498		0		24,041		24,567		341		0		24,908
Total residential mortgage		414,344		6,851		3,804		424,999		407,108		7,494		6,171		420,773
Commercial:
Commercial loans secured by real estate		150,231		240		2,914		153,385		147,464		82		2,922		150,468
Commercial and industrial		79,202		13		278		79,493		83,364		185		305		83,854
Political subdivisions		44,625		0		0		44,625		38,068		0		0		38,068
Commercial construction and land		15,154		98		0		15,252		14,199		88		0		14,287
Loans secured by farmland		6,334		138		1,025		7,497		6,181		83		1,030		7,294
Multi-family (5 or more) residential		7,230		0		392		7,622		7,439		65		392		7,896
Agricultural loans		3,979		1		12		3,992		3,981		4		13		3,998
Other commercial loans		11,131		0		0		11,131		11,475		0		0		11,475
Total commercial		317,886		490		4,621		322,997		312,171		507		4,662		317,340
Consumer		13,857		72		96		14,025		13,446		153		123		13,722
Totals	$	746,087	$	7,413	$	8,521	$	762,021	$	732,725	$	8,154	$	10,956	$	751,835

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
March 31, 2017 Nonaccrual Totals	$	4,487	$	937	$	5,807	$	11,231
December 31, 2016 Nonaccrual Totals	$	4,199	$	419	$	4,118	$	8,736

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	Current &
(In Thousandas)	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Nonaccrual		Total
March 31, 2017 Totals	$	701	$	51	$	242	$	2,841	$	3,835
December 31, 2016 Totals	$	5,453	$	350	$	0	$	2,874	$	8,677

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

(Balances in Thousands)
	March 31, 2017				March 31, 2016
	Number				Number
	of		Recorded		of		Recorded
	Loans		Investment		Loans		Investment
Residential mortgage - first liens		2	$	293		1	$	31
Residential mortgage - junior liens		1		28		0		0
Commercial and industrial		0		0		1		5
Consumer		1		26		0		0
Total		4	$	347		2	$	36

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

(In Thousands)	March 31,		Dec. 31,
	2017		2016
Foreclosed residential real estate	$	800	$	1,102

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

(In Thousands)	March 31,		Dec. 31,
	2017		2016
Residential real estate in process of foreclosure	$	2,544	$	2,738

Troubled Debt Restructuring [Member]

Notes Tables

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

(Balances in Thousands)
	March 31, 2017				March 31, 2016
			Post-				Post-
	Number		Modification		Number		Modification
	of		Recorded		of		Recorded
	Loans		Investment		Loans		Investment
Commercial and industrial,
Extended maturity		0	$	0		1	$	5
Total		0	$	0		1	$	5

XML

Note 8 - Borrowed Funds (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

Schedule of Short-term Debt [Table Text Block]

(In Thousands)	Mar ch 31,		Dec. 31,
	2017		2016
FHLB-Pittsburgh borrowings	$	14,500	$	21,000
Customer repurchase agreements		6,244		5,175
Total short-term borrowings	$	20,744	$	26,175

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

(In Thousands)	Mar ch 31,		Dec. 31,
	2017		2016
FHLB-Pittsburgh borrowings	$	11,388	$	11,454
Repurchase agreement		27,000		27,000
Total long-term borrowings	$	38,388	$	38,454

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

(In Thousands)	Mar ch 31,		Dec. 31,
	2017		2016
Loan maturing in June 2017 with a rate of 6.83%	$	2	$	4
Loan maturing in September 2017 with a rate of 3.81%		10,000		10,000
Loan maturing in April 2020 with a rate of 4.79%		601		646
Loan maturing in June 2025 with a rate of 4.91%		785		804
Total long-term FHLB-Pittsburgh borrowings	$	11,388	$	11,454

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

(In Thousands)	Mar ch 31,		Dec. 31,
	2017		2016
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities	$	15,268	$	18,181
Residential collateralized mortgage obligations		19,407		13,313
Total	$	34,675	$	31,494

XML

Note 9 - Employee and Postretirement Benefit Plans (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

Schedule of Defined Benefit Plans Disclosures [Table Text Block]

Defined Benefit Plans
(In Thousands)	Pension						Postretirement
	Three Months Ended						Three Months Ended
	March 31,						March 31,
	2017			2016			2017			2016
Service cost	$	0		$	0		$	9		$	9
Interest cost		6			7			14			16
Expected return on plan assets		(8	)		(7	)		0			0
Amortization of prior service cost		0			0			(8	)		(8	)
Recognized net actuarial loss		2			3			0			0
Net periodic benefit cost	$	0		$	3		$	15		$	17

XML

Note 11 - Income Taxes (Tables)

3 Months Ended

Mar. 31, 2017

Notes Tables

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

	March 31,		December 31,
(In Thousands)	2017		2016
Deferred tax assets:
Unrealized holding losses on securities	$	340	$	512
Allowance for loan losses		3,094		2,998
Other deferred tax assets		2,309		2,658
Total deferred tax assets		5,743		6,168
Deferred tax liabilities:
Defined benefit plans - ASC 835		83		27
Bank premises and equipment		933		913
Core deposit intangibles		6		6
Other deferred tax liabilities		105		105
Total deferred tax liabilities		1,127		1,051
Deferred tax asset, net	$	4,616	$	5,117

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

	Three Months Ended
(Dollars In thousands)	March 31,
	2017			2016
Income before income tax provision	$	4,418		$	4,666
Income tax provision		984			1,093
Effective tax rate		22.27	%		23.42	%

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Note 2 - Per Share Data (Details Textual) - shares	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Weighted Average Number of Shares, Restricted Stock	65,208	67,818
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	0	47,309

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Note 2 - Per Share Data - Net Income Per Share (Details) - USD ($)		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
Net income		$ 3,434,000	$ 3,573,000
Less: Dividends and undistributed earnings allocated to participating securities		(18,000)	(20,000)
Net income attributable to common shares		$ 3,416,000	$ 3,553,000
Basic weighted-average common shares outstanding (in shares)		12,085,729	12,087,290
EARNINGS PER COMMON SHARE - BASIC (in dollars per share)	[1]	$ 0.28	$ 0.29
Net income attributable to common shares		$ 3,416,000	$ 3,553,000
Dilutive effect of potential common stock arising from stock options (in shares)		45,681	20,770
Diluted weighted-average common shares outstanding (in shares)		12,131,410	12,108,060
EARNINGS PER COMMON SHARE - DILUTED (in dollars per share)	[1]	$ 0.28	$ 0.29

[1] Basic and diluted earnings per share under the two-class method are determined on net income reported on the income statement less earnings allocated to nonvested restricted shares with nonforfeitable dividends (participating securities). The weighted-average number of nonvested restricted shares outstanding was 65,208 shares in the three-month period ended March 31, 2017 and 67,818 shares in the three-month period ended March 31, 2016.

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Note 3 - Comprehensive Income - Components of Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Unrealized holding gains on available-for-sale securities	$ 636	$ 4,774
Unrealized holding gains on available-for-sale securities, income tax effect	(223)	(1,671)
Unrealized holding gains on available-for-sale securities, net of tax amount	413	3,103
Reclassification adjustment for (gains) realized in income, before tax amount	(145)	(383)
Reclassification adjustment for (gains) realized in income, income tax effect	51	134
Reclassification adjustment for (gains) realized in income, net of tax amount	(94)	(249)
Other comprehensive income on available-for-sale securities, before tax amount	491	4,391
Other comprehensive income (loss) on available-for-sale securities, income tax effect	(172)	(1,537)
Other comprehensive income on available-for-sale securities, net of tax amount	319	2,854
Changes from plan amendments and actuarial gains and losses included in accumulated other comprehensive gain	166	26
Changes from plan amendments and actuarial gains and losses included in other comprehensive income, income tax effect	(58)	(9)
Changes from plan amendments and actuarial gains and losses included in other comprehensive income, net of tax amount	108	17
Amortization of net transition obligation, prior service cost and net actuarial gain included in net periodic benefit cost, before tax amount	(6)	(5)
Amortization of net transition obligation, prior service cost and net actuarial gain included in net periodic benefit cost, income tax effect	2	2
Amortization of net transition obligation, prior service cost and net actuarial gain included in net periodic benefit cost, net of tax amount	(4)	(3)
Other comprehensive (income) loss on unfunded retirement obligations, before tax amount	160	21
Other comprehensive income (loss) on unfunded retirement obligations, income tax effect	(56)	(7)
Other comprehensive income (loss) on unfunded retirement obligations, net of tax amount	104	14
Total other comprehensive income (loss), before tax amount	651	4,412
Total other comprehensive income (loss), income tax effect	(228)	(1,544)
Total other comprehensive income	$ 423	$ 2,868

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Note 3 - Comprehensive Income - Changes in the Components of Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Balance, beginning of period	$ (898)
Balance, end of period	(475)
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Balance, beginning of period	(949)	$ 2,493
Change during the period	319	2,854
Balance, end of period	(630)	5,347
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Balance, beginning of period	51	35
Change during the period	104	14
Balance, end of period	155	49
AOCI Attributable to Parent [Member]
Balance, beginning of period	(898)	2,528
Change during the period	423	2,868
Balance, end of period	$ (475)	$ 5,396

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Note 3 - Comprehensive Income - Amounts Reclassified Out of Each Component of OCI (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Unrealized gains and losses on available-for-sale securities	$ (145)	$ (383)
Income tax provision	984	1,093
Net income	(3,434)	(3,573)
Total before tax	(4,418)	(4,666)
Reclassification out of Accumulated Other Comprehensive Income [Member]
Net income	(98)	(252)
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	(145)	(383)
Income tax provision	51	134
Net income	(94)	(249)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Income tax provision	2	2
Net income	(4)	(3)
Prior service cost	(8)	(8)
Actuarial loss	2	3
Total before tax	$ (6)	$ (5)

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Note 4 - Cash and Due From Banks (Details Textual) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Restricted Cash and Cash Equivalents, Current	$ 15,491,000	$ 16,654,000

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Note 4 - Cash and Due From Banks - Summary of Cash and Due From Banks (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Cash and cash equivalents	$ 29,055	$ 28,621
Certificates of deposit	3,488	3,488
Total cash and due from banks	$ 32,543	$ 32,109

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Note 5 - Fair Value Measurements and Fair Values of Financial Instruments - Assets Measured at Fair Value (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Available-for-sale securities	$ 376,919	$ 395,077
Impaired loans with a valuation allowance	3,319	3,372
Valuation allowance	(881)	(674)
Impaired loans	3,319	3,372
US Government Agencies Debt Securities [Member]
Available-for-sale securities	9,568	9,541
Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities	118,710	119,037
Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities	28,805	30,297
Residential Pass-Through Securities [Member]
Available-for-sale securities	49,359	58,404
Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities	135,681	146,608
Commercial Mortgage Backed Securities [Member]
Available-for-sale securities	33,825	30,219
Debt Securities [Member]
Available-for-sale securities	375,948	394,106
Equity Securities [Member]
Available-for-sale securities	971	971
Fair Value, Measurements, Recurring [Member]
Available-for-sale securities	376,919	395,077
Servicing rights	1,278	1,262
Total asset fair value measurements	378,197	396,339
Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member]
Available-for-sale securities	9,568	9,541
Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities	118,710	119,037
Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities	28,805	30,297
Fair Value, Measurements, Recurring [Member] | Residential Pass-Through Securities [Member]
Available-for-sale securities	49,359	58,404
Fair Value, Measurements, Recurring [Member] | Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities	135,681	146,608
Fair Value, Measurements, Recurring [Member] | Commercial Mortgage Backed Securities [Member]
Available-for-sale securities	33,825	30,219
Fair Value, Measurements, Recurring [Member] | Debt Securities [Member]
Available-for-sale securities	375,948	394,106
Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
Available-for-sale securities	971	971
Fair Value, Measurements, Nonrecurring [Member]
Total asset fair value measurements	4,316	4,878
Impaired loans with a valuation allowance	3,319	3,372
Valuation allowance	(881)	(674)
Impaired loans	2,438	2,698
Foreclosed assets held for sale	1,878	2,180
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Available-for-sale securities	971	971
Servicing rights	0	0
Total asset fair value measurements	971	971
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member]
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	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	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Residential Pass-Through Securities [Member]
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	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Commercial Mortgage Backed Securities [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Debt Securities [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
Available-for-sale securities	971	971
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Total asset fair value measurements	0	0
Impaired loans with a valuation allowance	0	0
Valuation allowance	0	0
Impaired loans	0	0
Foreclosed assets held for sale	0	0
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Available-for-sale securities	375,948	394,106
Servicing rights	0	0
Total asset fair value measurements	375,948	394,106
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member]
Available-for-sale securities	9,568	9,541
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities	118,710	119,037
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities	28,805	30,297
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Residential Pass-Through Securities [Member]
Available-for-sale securities	49,359	58,404
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities	135,681	146,608
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Commercial Mortgage Backed Securities [Member]
Available-for-sale securities	33,825	30,219
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Debt Securities [Member]
Available-for-sale securities	375,948	394,106
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Total asset fair value measurements	0	0
Impaired loans with a valuation allowance	0	0
Valuation allowance	0	0
Impaired loans	0	0
Foreclosed assets held for sale	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Available-for-sale securities	0	0
Servicing rights	1,278	1,262
Total asset fair value measurements	1,278	1,262
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member]
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	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	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Residential Pass-Through Securities [Member]
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	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Commercial Mortgage Backed Securities [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Debt Securities [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Total asset fair value measurements	4,316	4,878
Impaired loans with a valuation allowance	3,319	3,372
Valuation allowance	(881)	(674)
Impaired loans	2,438	2,698
Foreclosed assets held for sale	$ 1,878	$ 2,180

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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 ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Fair value	$ 1,278,000	$ 1,262,000
Discount rate	13.00%	13.00%
Weighted-average PSA	132.00%	138.00%
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	$ 1.94	$ 1.94
Monthly servicing cost per account	6	6
Additional monthly servicing cost per loan on loans more than 30 days delinquent	$ 24	$ 24
Servicing costs of loans more than 30 days delinquent	1.50%	1.50%
Annual increase in servicing costs	3.00%	3.00%

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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
	Mar. 31, 2017	Mar. 31, 2016
Servicing rights balance, beginning of period	$ 1,262	$ 1,296
Capitalization of servicing rights	46	36
Unrealized (losses) included in earnings	(30)	(71)
Servicing rights balance, end of period	$ 1,278	$ 1,261

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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 ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Impaired loans	$ 3,319	$ 3,372
Valuation allowance	881	674
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Impaired loans	2,740	2,773
Valuation allowance	753	528
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Impaired loans	77	95
Valuation allowance	77	95
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Impaired loans	502	504
Valuation allowance	51	51
Residential Portfolio Segment [Member]
Foreclosed assets held for sale	800	1,102
Impaired Loans [Member]
Impaired loans	3,319	3,372
Valuation allowance	881	674
Fair value	2,438	2,698
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Market Approach Valuation Technique [Member]
Impaired loans	2,740	2,773
Valuation allowance	753	528
Fair value	$ 1,987	$ 2,245
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	16.00%	7.00%
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Market Approach Valuation Technique [Member]
Impaired loans	$ 77	$ 95
Valuation allowance	77	95
Fair value	$ 0	$ 0
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	100.00%	100.00%
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Market Approach Valuation Technique [Member]
Impaired loans	$ 502	$ 504
Valuation allowance	51	51
Fair value	$ 451	$ 453
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	55.00%	55.00%
Foreclosed Assets Held For Sale [Member]
Fair value	$ 1,878	$ 2,180
Foreclosed assets held for sale	1,878	2,180
Valuation allowance	0	0
Foreclosed Assets Held For Sale [Member] | Land Receivable [Member] | Market Approach Valuation Technique [Member]
Fair value	650	650
Foreclosed assets held for sale	650	650
Valuation allowance	$ 0	$ 0
Foreclosed Assets Held For Sale [Member] | Land Receivable [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	33.00%	33.00%
Foreclosed Assets Held For Sale [Member] | Commercial Real Estate Receivables [Member] | Market Approach Valuation Technique [Member]
Fair value	$ 428	$ 428
Foreclosed assets held for sale	428	428
Valuation allowance	$ 0	$ 0
Foreclosed Assets Held For Sale [Member] | Commercial Real Estate Receivables [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	50.00%	50.00%
Foreclosed Assets Held For Sale [Member] | Residential Portfolio Segment [Member] | Market Approach Valuation Technique [Member]
Fair value	$ 800	$ 1,102
Foreclosed assets held for sale	800	1,102
Valuation allowance	$ 0	$ 0
Foreclosed Assets Held For Sale [Member] | Residential Portfolio Segment [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	44.00%	35.00%

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Note 5 - Fair Value Measurements and Fair Values of Financial Instruments - Estimated Fair Values, and Related Carrying Amounts, of the Financial Instruments (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016	Dec. 31, 2015
Cash and cash equivalents	$ 29,055	$ 28,621	$ 38,425	$ 33,313
Certificates of deposit	3,488	3,488
Available-for-sale securities	376,919	395,077
Loans held for sale	163	142
Loans, net	753,277	743,362
Accrued interest receivable	3,804	3,963
Short-term Debt	20,744	26,175
Long-term borrowings	38,388	38,454
Reported Value Measurement [Member]
Available-for-sale securities	376,919	395,077
Reported Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents	29,055	28,621
Reported Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Certificates of deposit	3,488	3,488
Restricted equity securities (included in Other Assets)	4,065	4,426
Loans held for sale	163	142
Accrued interest receivable	3,804	3,963
Deposits with no stated maturity	764,048	771,625
Time deposits	216,203	212,218
Short-term Debt	20,744	26,175
Long-term borrowings	38,388	38,454
Accrued interest payable	67	65
Reported Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Loans, net	753,277	743,362
Servicing rights	1,278	1,262
Estimate of Fair Value Measurement [Member]
Available-for-sale securities	376,919	395,077
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents	29,055	28,621
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Certificates of deposit	3,483	3,481
Restricted equity securities (included in Other Assets)	4,065	4,426
Loans held for sale	163	142
Accrued interest receivable	3,804	3,963
Deposits with no stated maturity	764,048	771,625
Time deposits	216,378	212,274
Short-term borrowings	20,612	26,024
Long-term borrowings	38,960	39,062
Accrued interest payable	67	65
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Loans, net	736,876	725,787
Servicing rights	$ 1,278	$ 1,262

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Note 6 - Securities (Details Textual)	3 Months Ended		12 Months Ended
	Mar. 31, 2017 USD ($)	Mar. 31, 2016 USD ($)	Dec. 31, 2016 USD ($)
Available-for-sale Securities Pledged as Collateral	$ 220,272,000		$ 230,803,000
Available-for-sale Securities, Gross Realized Gains	161,000	$ 383,000
Other Assets [Member] | Federal Home Loan Bank of Pittsburgh [Member]
Federal Home Loan Bank Stock	$ 3,935,000		$ 4,296,000
Mutual Fund [Member]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	1		1
Available-for-sale Equity Securities, Gross Unrealized Loss	$ 29,000		$ 29,000
Bank Stocks [Member]
Available-for-sale Securities, Gross Realized Gains	0	$ 249,000
FHLB Stock [Member] | Federal Home Loan Bank of Pittsburgh [Member]
Other than Temporary Impairment Losses, Investments	$ 0		$ 0

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Note 6 - Securities - Available-for-sale Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Available-for-sale securities, amortized cost	$ 377,889	$ 396,538
Available-for-sale securities, gross unrealized holding gains	3,565	3,614
Available-for-sale securities, gross unrealized holding losses	(4,535)	(5,075)
Available-for-sale securities	376,919	395,077
US Government Agencies Debt Securities [Member]
Available-for-sale securities, amortized cost	9,674	9,671
Available-for-sale securities, gross unrealized holding gains	3	5
Available-for-sale securities, gross unrealized holding losses	(109)	(135)
Available-for-sale securities	9,568	9,541
Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities, amortized cost	117,272	118,140
Available-for-sale securities, gross unrealized holding gains	2,756	2,592
Available-for-sale securities, gross unrealized holding losses	(1,318)	(1,695)
Available-for-sale securities	118,710	119,037
Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities, amortized cost	28,559	30,073
Available-for-sale securities, gross unrealized holding gains	310	303
Available-for-sale securities, gross unrealized holding losses	(64)	(79)
Available-for-sale securities	28,805	30,297
Residential Pass-Through Securities [Member]
Available-for-sale securities, amortized cost	49,896	58,922
Available-for-sale securities, gross unrealized holding gains	117	306
Available-for-sale securities, gross unrealized holding losses	(654)	(824)
Available-for-sale securities	49,359	58,404
Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities, amortized cost	137,077	147,915
Available-for-sale securities, gross unrealized holding gains	372	408
Available-for-sale securities, gross unrealized holding losses	(1,768)	(1,715)
Available-for-sale securities	135,681	146,608
Commercial Mortgage Backed Securities [Member]
Available-for-sale securities, amortized cost	34,411	30,817
Available-for-sale securities, gross unrealized holding gains	7	0
Available-for-sale securities, gross unrealized holding losses	(593)	(598)
Available-for-sale securities	33,825	30,219
Debt Securities [Member]
Available-for-sale securities, amortized cost	376,889	395,538
Available-for-sale securities, gross unrealized holding gains	3,565	3,614
Available-for-sale securities, gross unrealized holding losses	(4,506)	(5,046)
Available-for-sale securities	375,948	394,106
Equity Securities [Member]
Available-for-sale securities, amortized cost	1,000	1,000
Available-for-sale securities, gross unrealized holding gains	0	0
Available-for-sale securities, gross unrealized holding losses	(29)	(29)
Available-for-sale securities	$ 971	$ 971

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Note 6 - Securities - Available-for-sale Securities With Unrealized Loss Positions (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	$ 201,326	$ 237,063
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(3,861)	(4,465)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	17,837	17,351
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(674)	(610)
Available-for-sale securities with unrealized loss positions, fair value	219,163	254,414
Available-for-sale securities, with unrealized loss positions, unrealized losses	(4,535)	(5,075)
US Government Agencies Debt Securities [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	7,922	7,899
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(109)	(135)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	0	0
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	0	0
Available-for-sale securities with unrealized loss positions, fair value	7,922	7,899
Available-for-sale securities, with unrealized loss positions, unrealized losses	(109)	(135)
Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	36,264	54,479
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(1,253)	(1,676)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	2,697	1,278
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(65)	(19)
Available-for-sale securities with unrealized loss positions, fair value	38,961	55,757
Available-for-sale securities, with unrealized loss positions, unrealized losses	(1,318)	(1,695)
Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	8,212	9,594
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(64)	(79)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	0	0
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	0	0
Available-for-sale securities with unrealized loss positions, fair value	8,212	9,594
Available-for-sale securities, with unrealized loss positions, unrealized losses	(64)	(79)
Residential Pass-Through Securities [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	37,612	48,674
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(654)	(824)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	0	0
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	0	0
Available-for-sale securities with unrealized loss positions, fair value	37,612	48,674
Available-for-sale securities, with unrealized loss positions, unrealized losses	(654)	(824)
Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	80,476	85,198
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(1,159)	(1,124)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	15,140	16,073
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(609)	(591)
Available-for-sale securities with unrealized loss positions, fair value	95,616	101,271
Available-for-sale securities, with unrealized loss positions, unrealized losses	(1,768)	(1,715)
Commercial Mortgage Backed Securities [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	29,840	30,219
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(593)	(598)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	0	0
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	0	0
Available-for-sale securities with unrealized loss positions, fair value	29,840	30,219
Available-for-sale securities, with unrealized loss positions, unrealized losses	(593)	(598)
Debt Securities [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	200,326	236,063
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(3,832)	(4,436)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	17,837	17,351
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(674)	(610)
Available-for-sale securities with unrealized loss positions, fair value	218,163	253,414
Available-for-sale securities, with unrealized loss positions, unrealized losses	(4,506)	(5,046)
Equity Securities [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	1,000	1,000
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(29)	(29)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	0	0
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	0	0
Available-for-sale securities with unrealized loss positions, fair value	1,000	1,000
Available-for-sale securities, with unrealized loss positions, unrealized losses	$ (29)	$ (29)

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Note 6 - Securities - Gross Realized Gains and Losses From Available-for-sale Securities (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Gross realized gains from sales	$ 161	$ 383
Gross realized losses from sales	(16)	0
Net realized gains	$ 145	$ 383

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Note 6 - Securities - Available-for-sale Debt Securities by Contractual Maturity (Details) $ in Thousands	Mar. 31, 2017 USD ($)
Due in one year or less, amortized cost	$ 18,630
Due in one year or less, fair value	18,730
Due from one year through five years. amortized cost	72,025
Due from one year through five years, fair value	73,398
Due from five years through ten years, amortized cost	40,291
Due from five years through ten years, fair value	39,963
Due after ten years, amortized cost	24,559
Due after ten years, fair value	24,992
Sub-total, amortized cost	155,505
Sub-total, fair value	157,083
Total, amortized cost	376,889
Total, fair value	375,948
Residential Pass-Through Securities [Member]
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, amortized cost	49,896
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, fair value	49,359
Residential Collateralized Mortgage Obligations [Member]
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, amortized cost	137,077
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, fair value	135,681
Commercial Mortgage-backed Securities [Member]
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, amortized cost	34,411
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, fair value	$ 33,825

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Note 7 - Loans (Details Textual) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016	Dec. 31, 2015
Financing Receivable, Allowance for Credit Losses	$ 8,744,000	$ 8,473,000	$ 7,661,000	$ 7,889,000
Loans and Leases Receivable, Impaired, Commitment to Lend	0	0
Unfunded Loan Commitment [Member]
Financing Receivable, Allowance for Credit Losses	$ 0	$ 0
Loans Receivable 1 [Member] | Credit Availability Concentration Risk [Member]
Concentration Risk, Percentage	0.00%	0.00%
Minimum [Member]
Financing Receivable Individually Evaluated for Impairment Threshold With Extension of Credit		$ 200,000
Financing Receivable Individually Evaluated for Impairment Estimated Loss Trigger		100,000
Maximum [Member]
Financing Receivable Individually Evaluated for Impairment Threshold With Estimated Loss		$ 200,000
Commercial Loan [Member]
Loans Receivable Secured by Real Estate Percentage	57.00%

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Note 7 - Loans - Loans Receivable (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Loans receivable	$ 762,021	$ 751,835
Less: allowance for loan losses	(8,744)	(8,473)
Loans, net	753,277	743,362
Residential Portfolio Segment [Member]
Loans receivable	424,999	420,773
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	340,431	334,102
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	23,717	23,706
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	36,810	38,057
Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	24,041	24,908
Commercial Portfolio Segment [Member]
Loans receivable	322,997	317,340
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	153,385	150,468
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	15,252	14,287
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	79,493	83,854
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	44,625	38,068
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	7,497	7,294
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	7,622	7,896
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	3,992	3,998
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	11,131	11,475
Consumer Portfolio Segment [Member]
Loans receivable	$ 14,025	$ 13,722

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Note 7 - Loans - Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Allowance for loan losses	$ 8,473	$ 7,889
Allowance for loan losses, charge-offs	(200)	(613)
Allowance for loan losses, recoveries	19	17
Allowance for loan losses, provision	452	368
Allowance for loan losses	8,744	7,661
Residential Portfolio Segment [Member]
Allowance for loan losses	3,890	3,418
Allowance for loan losses, charge-offs	(63)	0
Allowance for loan losses, recoveries	3	0
Allowance for loan losses, provision	129	83
Allowance for loan losses	3,959	3,501
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Allowance for loan losses	3,033	2,645
Allowance for loan losses, charge-offs	(63)	0
Allowance for loan losses, recoveries	2	0
Allowance for loan losses, provision	153	77
Allowance for loan losses	3,125	2,722
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Allowance for loan losses	258	219
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	1	0
Allowance for loan losses, provision	(3)	9
Allowance for loan losses	256	228
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Allowance for loan losses	350	347
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	(12)	4
Allowance for loan losses	338	351
Residential Portfolio Segment [Member] | Construction Loans [Member]
Allowance for loan losses	249	207
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	(9)	(7)
Allowance for loan losses	240	200
Commercial Portfolio Segment [Member]
Allowance for loan losses	4,047	3,922
Allowance for loan losses, charge-offs	(96)	(595)
Allowance for loan losses, recoveries	1	2
Allowance for loan losses, provision	303	278
Allowance for loan losses	4,255	3,607
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Allowance for loan losses	2,380	1,939
Allowance for loan losses, charge-offs	(96)	0
Allowance for loan losses, recoveries	0	1
Allowance for loan losses, provision	401	87
Allowance for loan losses	2,685	2,027
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Allowance for loan losses	162	58
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	7	26
Allowance for loan losses	169	84
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Allowance for loan losses	999	981
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	1	1
Allowance for loan losses, provision	(94)	(6)
Allowance for loan losses	906	976
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Allowance for loan losses	110	106
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	1	2
Allowance for loan losses	111	108
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Allowance for loan losses	241	675
Allowance for loan losses, charge-offs	0	(595)
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	(5)	176
Allowance for loan losses	236	256
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Allowance for loan losses	40	45
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	(1)	(1)
Allowance for loan losses	39	44
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Allowance for loan losses	115	118
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	(6)	(6)
Allowance for loan losses	109	112
Consumer Portfolio Segment [Member]
Allowance for loan losses	138	122
Allowance for loan losses, charge-offs	(41)	(18)
Allowance for loan losses, recoveries	15	15
Allowance for loan losses, provision	20	7
Allowance for loan losses	132	126
Unallocated Financing Receivables [Member]
Allowance for loan losses	398	427
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	0	0
Allowance for loan losses	$ 398	$ 427

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Note 7 - Loans - Outstanding Loans by Risk Rating (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Loans receivable	$ 762,021	$ 751,835
Residential Portfolio Segment [Member]
Loans receivable	424,999	420,773
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	340,431	334,102
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	23,717	23,706
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	36,810	38,057
Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	24,041	24,908
Commercial Portfolio Segment [Member]
Loans receivable	322,997	317,340
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	153,385	150,468
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	15,252	14,287
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	79,493	83,854
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	44,625	38,068
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	7,497	7,294
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	7,622	7,896
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	3,992	3,998
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	11,131	11,475
Consumer Portfolio Segment [Member]
Loans receivable	14,025	13,722
Pass [Member]
Loans receivable	730,186	721,772
Pass [Member] | Residential Portfolio Segment [Member]
Loans receivable	414,230	409,831
Pass [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	330,808	324,377
Pass [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	23,318	23,274
Pass [Member] | Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	36,150	37,360
Pass [Member] | Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	23,954	24,820
Pass [Member] | Commercial Portfolio Segment [Member]
Loans receivable	302,144	298,395
Pass [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	142,711	139,358
Pass [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	15,112	14,136
Pass [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	73,006	79,202
Pass [Member] | Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	44,625	38,068
Pass [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	5,482	5,745
Pass [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	7,013	7,277
Pass [Member] | Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	3,138	3,208
Pass [Member] | Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	11,057	11,401
Pass [Member] | Consumer Portfolio Segment [Member]
Loans receivable	13,812	13,546
Special Mention [Member]
Loans receivable	9,017	8,134
Special Mention [Member] | Residential Portfolio Segment [Member]
Loans receivable	498	663
Special Mention [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	293	408
Special Mention [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	142	132
Special Mention [Member] | Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	63	123
Special Mention [Member] | Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	0	0
Special Mention [Member] | Commercial Portfolio Segment [Member]
Loans receivable	8,512	7,471
Special Mention [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	2,721	3,092
Special Mention [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	60	70
Special Mention [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	5,046	4,180
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	601	129
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	84	0
Special Mention [Member] | Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	0	0
Special Mention [Member] | Consumer Portfolio Segment [Member]
Loans receivable	7	0
Substandard [Member]
Loans receivable	22,736	21,843
Substandard [Member] | Residential Portfolio Segment [Member]
Loans receivable	10,215	10,220
Substandard [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	9,274	9,258
Substandard [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	257	300
Substandard [Member] | Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	597	574
Substandard [Member] | Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	87	88
Substandard [Member] | Commercial Portfolio Segment [Member]
Loans receivable	12,315	11,447
Substandard [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	7,953	8,018
Substandard [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	80	81
Substandard [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	1,430	461
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	1,399	1,404
Substandard [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	609	619
Substandard [Member] | Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	770	790
Substandard [Member] | Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	74	74
Substandard [Member] | Consumer Portfolio Segment [Member]
Loans receivable	206	176
Doubtful [Member]
Loans receivable	82	86
Doubtful [Member] | Residential Portfolio Segment [Member]
Loans receivable	56	59
Doubtful [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	56	59
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] | Commercial Portfolio Segment [Member]
Loans receivable	26	27
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	11
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	15	16
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] | Consumer Portfolio Segment [Member]
Loans receivable	$ 0	$ 0

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Note 7 - Loans - Loan Balances and Allowance for Loan Losses for Each Impairment Method (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016	Mar. 31, 2016	Dec. 31, 2015
Loans receivable: individually evaluated	$ 8,699	$ 10,860
Loans receivable: collectively evaluated	753,322	740,975
Loans receivable	762,021	751,835
Allowance for loan losses: individually evaluated	881	674
Allowance for loan losses: collectively evaluated	7,465	7,401
Allowance for loan losses	8,744	8,473	$ 7,661	$ 7,889
Residential Portfolio Segment [Member]
Loans receivable: individually evaluated	809	821
Loans receivable: collectively evaluated	424,190	419,952
Loans receivable	424,999	420,773
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	3,959	3,890
Allowance for loan losses	3,959	3,890	3,501	3,418
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable: individually evaluated	743	753
Loans receivable: collectively evaluated	339,688	333,349
Loans receivable	340,431	334,102
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	3,125	3,033
Allowance for loan losses	3,125	3,033	2,722	2,645
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable: individually evaluated	66	68
Loans receivable: collectively evaluated	23,651	23,638
Loans receivable	23,717	23,706
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	256	258
Allowance for loan losses	256	258	228	219
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	36,810	38,057
Loans receivable	36,810	38,057
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	338	350
Allowance for loan losses	338	350	351	347
Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	24,041	24,908
Loans receivable	24,041	24,908
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	240	249
Allowance for loan losses	240	249	200	207
Commercial Portfolio Segment [Member]
Loans receivable: individually evaluated	7,868	10,016
Loans receivable: collectively evaluated	315,129	307,324
Loans receivable	322,997	317,340
Allowance for loan losses: individually evaluated	881	674
Allowance for loan losses: collectively evaluated	3,374	3,373
Allowance for loan losses	4,255	4,047	3,607	3,922
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable: individually evaluated	5,915	8,005
Loans receivable: collectively evaluated	147,470	142,463
Loans receivable	153,385	150,468
Allowance for loan losses: individually evaluated	753	528
Allowance for loan losses: collectively evaluated	1,932	1,852
Allowance for loan losses	2,685	2,380	2,027	1,939
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	15,252	14,287
Loans receivable	15,252	14,287
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	169	162
Allowance for loan losses	169	162	84	58
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable: individually evaluated	162	212
Loans receivable: collectively evaluated	79,331	83,642
Loans receivable	79,493	83,854
Allowance for loan losses: individually evaluated	77	95
Allowance for loan losses: collectively evaluated	829	904
Allowance for loan losses	906	999	976	981
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	44,625	38,068
Loans receivable	44,625	38,068
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	1,387	1,394
Loans receivable: collectively evaluated	6,110	5,900
Loans receivable	7,497	7,294
Allowance for loan losses: individually evaluated	51	51
Allowance for loan losses: collectively evaluated	60	59
Allowance for loan losses	111	110	108	106
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable: individually evaluated	392	392
Loans receivable: collectively evaluated	7,230	7,504
Loans receivable	7,622	7,896
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	236	241
Allowance for loan losses	236	241	256	675
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable: individually evaluated	12	13
Loans receivable: collectively evaluated	3,980	3,985
Loans receivable	3,992	3,998
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	39	40
Allowance for loan losses	39	40	44	45
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	11,131	11,475
Loans receivable	11,131	11,475
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	109	115
Allowance for loan losses	109	115	112	118
Consumer Portfolio Segment [Member]
Loans receivable: individually evaluated	22	23
Loans receivable: collectively evaluated	14,003	13,699
Loans receivable	14,025	13,722
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	132	138
Allowance for loan losses	132	138	126	122
Unallocated Financing Receivables [Member]
Allowance for loan losses	$ 398	$ 398	$ 427	$ 427

XML

Note 7 - Loans - Impaired Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Unpaid principal - with no allowance	$ 6,005	$ 9,856
Recorded investment - with no allowance	5,380	7,488
Unpaid principal - with allowance	3,319	3,372
Recorded investment - with allowance	3,319	3,372
Related allowance - with allowance	881	674
Total	9,324	13,228
Total	8,699	10,860
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Unpaid principal - with no allowance	773	783
Recorded investment - with no allowance	743	753
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Unpaid principal - with no allowance	66	68
Recorded investment - with no allowance	66	68
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Unpaid principal - with no allowance	3,175	6,975
Recorded investment - with no allowance	3,175	5,232
Unpaid principal - with allowance	2,740	2,773
Recorded investment - with allowance	2,740	2,773
Related allowance - with allowance	753	528
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Unpaid principal - with no allowance	85	117
Recorded investment - with no allowance	85	117
Unpaid principal - with allowance	77	95
Recorded investment - with allowance	77	95
Related allowance - with allowance	77	95
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Unpaid principal - with no allowance	885	890
Recorded investment - with no allowance	885	890
Unpaid principal - with allowance	502	504
Recorded investment - with allowance	502	504
Related allowance - with allowance	51	51
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Unpaid principal - with no allowance	987	987
Recorded investment - with no allowance	392	392
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Unpaid principal - with no allowance	12	13
Recorded investment - with no allowance	12	13
Consumer Portfolio Segment [Member]
Unpaid principal - with no allowance	22	23
Recorded investment - with no allowance	$ 22	$ 23

XML

Note 7 - Loans - Average Balance of Impaired Loans and Income Recognized on Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Average investment in impaired loans	$ 9,778	$ 9,802
Interest income recognized on impaired loans on a cash basis	78	146
Residential Portfolio Segment [Member]
Average investment in impaired loans	815	934
Interest income recognized on impaired loans on a cash basis	10	11
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Average investment in impaired loans	748	861
Interest income recognized on impaired loans on a cash basis	9	10
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Average investment in impaired loans	67	73
Interest income recognized on impaired loans on a cash basis	1	1
Commercial Portfolio Segment [Member]
Average investment in impaired loans	8,930	8,856
Interest income recognized on impaired loans on a cash basis	68	135
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Average investment in impaired loans	6,889	6,160
Interest income recognized on impaired loans on a cash basis	56	110
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Average investment in impaired loans	247	568
Interest income recognized on impaired loans on a cash basis	3	3
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Average investment in impaired loans	1,390	1,423
Interest income recognized on impaired loans on a cash basis	8	21
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Average investment in impaired loans	392	690
Interest income recognized on impaired loans on a cash basis	0	0
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Average investment in impaired loans	12	15
Interest income recognized on impaired loans on a cash basis	1	1
Consumer Portfolio Segment [Member]
Average investment in impaired loans	33	12
Interest income recognized on impaired loans on a cash basis	$ 0	$ 0

XML

Note 7 - Loans - Nonaccrual Loans and Loans Past Due Ninety Days or More and Still Accruing (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Loans past due 90+ days and accruing	$ 2,714	$ 6,838
Nonaccrual loans	11,231	8,736
Residential Portfolio Segment [Member]
Loans past due 90+ days and accruing	2,177	3,456
Nonaccrual loans	3,489	3,781
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans past due 90+ days and accruing	1,979	3,022
Nonaccrual loans	3,478	3,770
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans past due 90+ days and accruing	40	114
Nonaccrual loans	0	0
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans past due 90+ days and accruing	158	320
Nonaccrual loans	11	11
Commercial Portfolio Segment [Member]
Loans past due 90+ days and accruing	530	3,279
Nonaccrual loans	7,603	4,935
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans past due 90+ days and accruing	96	2,774
Nonaccrual loans	5,713	3,080
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans past due 90+ days and accruing	218	286
Nonaccrual loans	160	119
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans past due 90+ days and accruing	216	219
Nonaccrual loans	1,326	1,331
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans past due 90+ days and accruing	0	0
Nonaccrual loans	392	392
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans past due 90+ days and accruing	0	0
Nonaccrual loans	12	13
Consumer Portfolio Segment [Member]
Loans past due 90+ days and accruing	7	103
Nonaccrual loans	$ 139	$ 20

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Note 7 - Loans - Contractual Aging of Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Troubled debt restructurings, current and past due less than 30 days	$ 746,087	$ 732,725
Loans receivable	762,021	751,835
Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	7,413	8,154
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	8,521	10,956
Residential Portfolio Segment [Member]
Troubled debt restructurings, current and past due less than 30 days	414,344	407,108
Loans receivable	424,999	420,773
Residential Portfolio Segment [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	6,851	7,494
Residential Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	3,804	6,171
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Troubled debt restructurings, current and past due less than 30 days	330,781	321,670
Loans receivable	340,431	334,102
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	6,044	6,695
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, past due	3,606	5,737
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Troubled debt restructurings, current and past due less than 30 days	23,593	23,268
Loans receivable	23,717	23,706
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	84	324
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, past due	40	114
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Troubled debt restructurings, current and past due less than 30 days	36,427	37,603
Loans receivable	36,810	38,057
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	225	134
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, past due	158	320
Residential Portfolio Segment [Member] | Construction Loans [Member]
Troubled debt restructurings, current and past due less than 30 days	23,543	24,567
Loans receivable	24,041	24,908
Residential Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	498	341
Residential Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	0	0
Commercial Portfolio Segment [Member]
Troubled debt restructurings, current and past due less than 30 days	317,886	312,171
Loans receivable	322,997	317,340
Commercial Portfolio Segment [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	490	507
Commercial Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	4,621	4,662
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Troubled debt restructurings, current and past due less than 30 days	150,231	147,464
Loans receivable	153,385	150,468
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	240	82
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	2,914	2,922
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Troubled debt restructurings, current and past due less than 30 days	15,154	14,199
Loans receivable	15,252	14,287
Commercial Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	98	88
Commercial Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	0	0
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Troubled debt restructurings, current and past due less than 30 days	79,202	83,364
Loans receivable	79,493	83,854
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	13	185
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	278	305
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Troubled debt restructurings, current and past due less than 30 days	44,625	38,068
Loans receivable	44,625	38,068
Commercial Portfolio Segment [Member] | Political Subdivisions [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, 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, past due	0	0
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Troubled debt restructurings, current and past due less than 30 days	6,334	6,181
Loans receivable	7,497	7,294
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	138	83
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	1,025	1,030
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Troubled debt restructurings, current and past due less than 30 days	7,230	7,439
Loans receivable	7,622	7,896
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	0	65
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	392	392
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Troubled debt restructurings, current and past due less than 30 days	3,979	3,981
Loans receivable	3,992	3,998
Commercial Portfolio Segment [Member] | Agricultural Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	1	4
Commercial Portfolio Segment [Member] | Agricultural Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	12	13
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Troubled debt restructurings, current and past due less than 30 days	11,131	11,475
Loans receivable	11,131	11,475
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, 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, past due	0	0
Consumer Portfolio Segment [Member]
Troubled debt restructurings, current and past due less than 30 days	13,857	13,446
Loans receivable	14,025	13,722
Consumer Portfolio Segment [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	72	153
Consumer Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	$ 96	$ 123

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Note 7 - Loans - Contractual Aging of Nonaccrual Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Nonaccrual loans	$ 11,231	$ 8,736
Non accrual Loans [Member]
Loans current and past due, nonaccrual	4,487	4,199
Nonaccrual loans	11,231	8,736
Non accrual Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Nonaccrual loans	937	419
Non accrual Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Nonaccrual loans	$ 5,807	$ 4,118

XML

Note 7 - Loans - Aging of Troubled Debt Restructurings (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Troubled debt restructurings, current and past due less than 30 days	$ 746,087	$ 732,725
Nonaccrual loans	11,231	8,736
Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	7,413	8,154
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	8,521	10,956
Troubled Debt Restructuring [Member]
Troubled debt restructurings, current and past due less than 30 days	701	5,453
Nonaccrual loans	2,841	2,874
Troubled debt restructurings	3,835	8,677
Troubled Debt Restructuring [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	51	350
Troubled Debt Restructuring [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	$ 242	$ 0

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Note 7 - Loans - Troubled Debt Restructurings (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($)	Mar. 31, 2016 USD ($)
Troubled debt restructurings, number of contracts	0	1
Troubled debt restructurings, post-modification recorded investment	$ 0	$ 5
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Extended Maturity [Member]
Troubled debt restructurings, number of contracts	0	1
Troubled debt restructurings, post-modification recorded investment	$ 0	$ 5

XML

Note 7 - Loans - Defaults on Loans with Previous Modifications (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($)	Mar. 31, 2016 USD ($)
Troubled debt restructuring defaults, number of contracts	4	2
Troubled debt restructuring defaults, recorded investment	$ 347	$ 36
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Troubled debt restructuring defaults, number of contracts	2	1
Troubled debt restructuring defaults, recorded investment	$ 293	$ 31
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Troubled debt restructuring defaults, number of contracts	1	0
Troubled debt restructuring defaults, recorded investment	$ 28	$ 0
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Troubled debt restructuring defaults, number of contracts	0	1
Troubled debt restructuring defaults, recorded investment	$ 0	$ 5
Consumer Portfolio Segment [Member]
Troubled debt restructuring defaults, number of contracts	1	0
Troubled debt restructuring defaults, recorded investment	$ 26	$ 0

XML

Note 7 - Loans - Foreclosed Residential Real Estate (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Residential Portfolio Segment [Member]
Foreclosed residential real estate	$ 800	$ 1,102

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Note 7 - Loans - Mortgage Loans in Process of Foreclosure (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Residential Portfolio Segment [Member]
Residential real estate in process of foreclosure	$ 2,544	$ 2,738

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Note 8 - Borrowed Funds (Details Textual) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Short-term Debt	$ 20,744,000	$ 26,175,000
Securities Sold under Agreements to Repurchase, Asset	$ 34,675,000	31,494,000
Repurchase Agreement Maturing in 2017 with a Rate of 3.595% [Member]
Debt Instrument, Interest Rate, Stated Percentage	3.595%
Securities Sold under Agreements to Repurchase [Member]
Short-term Debt	$ 6,244,000	$ 5,175,000
Debt, Weighted Average Interest Rate	0.10%	0.10%
Federal Home Loan Bank of Pittsburgh [Member]
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged	$ 483,045,000	$ 471,454,000
Line of Credit Facility, Remaining Borrowing Capacity	320,661,000
Federal Home Loan Bank of Pittsburgh [Member] | Overnight Borrowing [Member]
Short-term Debt	$ 14,500,000	$ 21,000,000
Debt Instrument, Interest Rate, Stated Percentage	0.99%	0.74%
Federal Home Loan Bank of Pittsburgh [Member] | Other Assets [Member]
Federal Home Loan Bank Stock	$ 3,935,000	$ 4,296,000

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Note 8 - Borrowed Funds - Short-term Borrowings (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Short-term borrowings	$ 20,744	$ 26,175
Securities Sold under Agreements to Repurchase [Member]
Short-term borrowings	6,244	5,175
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Advances [Member]
Short-term borrowings	$ 14,500	$ 21,000

XML

Note 8 - Borrowed Funds - Long-term Borrowings (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Long-term borrowings	$ 38,388	$ 38,454
Repurchase Agreements [Member]
Long-term borrowings	27,000	27,000
Federal Home Loan Bank Advances [Member]
Long-term borrowings	$ 11,388	$ 11,454

XML

Note 8 - Borrowed Funds - Long-term Borrowing Maturities (Details) - Federal Home Loan Bank of Pittsburgh [Member] - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Long-term borrowings from FHLB - Pittsburgh	$ 11,388	$ 11,454
Federal Home Loan Bank Borrowings Loan Maturing in 2017 With Rate of 6.83% [Member]
Long-term borrowings from FHLB - Pittsburgh	2	4
Federal Home Loan Bank Borrowings Loan Maturing in 2017 with Rate of 3.81% [Member]
Long-term borrowings from FHLB - Pittsburgh	10,000	10,000
Federal Home Loan Bank Borrowings Loan Maturing in 2020 with Rate of 4.79% [Member]
Long-term borrowings from FHLB - Pittsburgh	601	646
Federal Home Loan Bank Borrowings Loan Maturing in 2025 with Rate of 4.91% [Member]
Long-term borrowings from FHLB - Pittsburgh	$ 785	$ 804

XML

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

XML

Note 8 - Borrowed Funds - Underlying Securities (Details) - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Securities Sold under Agreements to Repurchase, Asset	$ 34,675,000	$ 31,494,000
Residential Pass-Through Securities [Member]
Securities Sold under Agreements to Repurchase, Asset	15,268,000	18,181,000
Collateralized Mortgage Obligations [Member]
Securities Sold under Agreements to Repurchase, Asset	$ 19,407,000	$ 13,313,000

XML

Note 9 - Employee and Postretirement Benefit Plans (Details Textual) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2017
Payment for Pension and Other Postretirement Benefits	$ 12,000
Defined Benefit Plan Required Contributions in Current Fiscal Year	$ 0
Scenario, Forecast [Member]
Payment for Pension and Other Postretirement Benefits		$ 62,000

XML

Note 9 - Defined Benefit Plans - Net Periodic Benefit Costs (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Pension Plan [Member]
Service cost	$ 0	$ 0
Interest cost	6	7
Expected return on plan assets	(8)	(7)
Amortization of prior service cost	0	0
Recognized net actuarial loss	2	3
Net periodic benefit cost	0	3
Other Postretirement Benefits Plan [Member]
Service cost	9	9
Interest cost	14	16
Expected return on plan assets	0	0
Amortization of prior service cost	(8)	(8)
Recognized net actuarial loss	0	0
Net periodic benefit cost	$ 15	$ 17

XML

Note 10 - Stock-based Compensation Plans (Details Textual) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2017
Scenario, Forecast [Member]
Allocated Share-based Compensation Expense			$ 652,000
Increase in Allocated Share-based Compensation Expense, Upon Meeting of Return on Average Equity Target			$ 123,000
Restricted Stock [Member]
Allocated Share-based Compensation Expense	$ 168,000	$ 162,000
Stock Incentive Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	22,312
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Stock Incentive Plan [Member] | Restricted Stock [Member] | Chief Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	14,897
Stock Incentive Plan [Member] | Restricted Stock [Member] | Vesting Contingent upon Corporation Meeting ROAE Performance Ratio [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	50.00%
Independent Directors Stock Incentive Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	8,470
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year

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Note 11 - Income Taxes (Details Textual) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2017	Dec. 31, 2016
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	35.00%
Increase (Decrease) in Income Taxes	$ (18,000)	$ (19,000)
Unrecognized Tax Benefits	0
Scenario, Forecast [Member]
Income Tax Credits and Adjustments			$ 157,000
Increase (Decrease) in Income Taxes			$ (73,000)
Other Assets [Member]
Amortization Method Qualified Affordable Housing Project Investments	$ 687,000			$ 713,000

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Note 11 - Income Taxes - Net Deferred Tax Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2017	Dec. 31, 2016
Deferred tax assets:
Unrealized holding losses on securities	$ 340	$ 512
Allowance for loan losses	3,094	2,998
Other deferred tax assets	2,309	2,658
Total deferred tax assets	5,743	6,168
Deferred tax liabilities:
Defined benefit plans - ASC 835	83	27
Bank premises and equipment	933	913
Core deposit intangibles	6	6
Other deferred tax liabilities	105	105
Total deferred tax liabilities	1,127	1,051
Deferred tax asset, net	$ 4,616	$ 5,117

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Note 11 - Income Taxes - Reconciliation of Income Tax (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Income before income tax provision	$ 4,418	$ 4,666
Income tax provision	$ 984	$ 1,093
Effective tax rate	22.27%	23.42%