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, 2018

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, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

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

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

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) 12,262,474 Shares Outstanding on April 30, 2018

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

CITIZENS & NORTHERN CORPORATION

Index

Part I. Financial Information
Item 1. Financial Statements	Page 3
Consolidated Balance Sheets (Unaudited) – March 31, 2018 and December 31, 2017	Page 3
Consolidated Statements of Income (Unaudited) – Three-month Periods Ended March 31, 2018 and 2017	Page 4
Consolidated Statements of Comprehensive Income (Unaudited) - Three-month Periods Ended March 31, 2018 and 2017	Page 5
Consolidated Statements of Cash Flows (Unaudited) – Three-month Periods Ended March 31, 2018 and 2017	Page 6
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) – Three-month Periods Ended March 31, 2018 and 2017	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 – 54
Item 3. Quantitative and Qualitative Disclosures About Market Risk	Pages 55 – 56
Item 4. Controls and Procedures	Page 57
Part II. Other Information	Pages 58 – 59
Signatures	Page 60
Exhibit 31.1. Rule 13a-14(a)/15d-14(a) Certification - Chief Executive Officer
Exhibit 31.2. Rule 13a-14(a)/15d-14(a) Certification - Chief Financial Officer
Exhibit 32. Section 1350 Certifications

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

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

	March 31,			December 31,
	2018			2017
ASSETS
Cash and due from banks:
Noninterest-bearing	$	18,740		$	25,664
Interest-bearing		18,120			14,580
Total cash and due from banks		36,860			40,244
Available-for-sale debt securities, at fair value		341,133			355,937
Marketable equity security		956			971
Loans held for sale		225			765
Loans receivable		817,349			815,713
Allowance for loan losses		(9,049	)		(8,856	)
Loans, net		808,300			806,857
Bank-owned life insurance		20,180			20,083
Accrued interest receivable		3,899			4,048
Bank premises and equipment, net		15,482			15,432
Foreclosed assets held for sale		1,100			1,598
Deferred tax asset, net		4,120			3,289
Intangible assets - Goodwill and core deposit intangibles		11,953			11,954
Other assets		13,908			15,781
TOTAL ASSETS	$	1,258,116		$	1,276,959
LIABILITIES
Deposits:
Noninterest-bearing	$	250,839		$	241,214
Interest-bearing		767,242			767,235
Total deposits		1,018,081			1,008,449
Short-term borrowings		26,482			61,766
Long-term borrowings		18,122			9,189
Accrued interest and other liabilities		9,049			9,112
TOTAL LIABILITIES		1,071,734			1,088,516
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 12,264,284 at March 31, 2018 and 12,214,525 December 31, 2017		12,655			12,655
Paid-in capital		71,716			72,035
Retained earnings		114,953			113,608
Treasury stock, at cost; 390,887 shares at March 31, 2018 and 440,646 shares at December 31, 2017		(7,404	)		(8,348	)
Accumulated other comprehensive loss		(5,538	)		(1,507	)
TOTAL STOCKHOLDERS' EQUITY		186,382			188,443
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	1,258,116		$	1,276,959

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

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Consolidated Statements of Income

(In Thousands Except Per Share Data) (Unaudited)

	3 Months Ended
	March 31,		March 31,
	2018		2017
INTEREST INCOME
Interest and fees on loans:
Taxable	$	9,201	$	8,374
Tax-exempt		556		450
Interest on mortgages held for sale		2		4
Interest on balances with depository institutions		50		32
Income from available-for-sale debt securities:
Taxable		1,363		1,403
Tax-exempt		713		844
Dividends on marketable equity security		5		5
Total interest and dividend income		11,890		11,112
INTEREST EXPENSE
Interest on deposits		729		521
Interest on short-term borrowings		199		77
Interest on long-term borrowings		65		355
Total interest expense		993		953
Net interest income		10,897		10,159
Provision for loan losses		292		452
Net interest income after provision for loan losses		10,605		9,707
NONINTEREST INCOME
Trust and financial management revenue		1,422		1,180
Brokerage revenue		212		156
Insurance commissions, fees and premiums		44		41
Service charges on deposit accounts		1,204		1,101
Service charges and fees		86		80
Interchange revenue from debit card transactions		579		520
Net gains from sale of loans		184		166
Loan servicing fees, net		128		72
Increase in cash surrender value of life insurance		97		90
Other noninterest income		450		458
Sub-total		4,406		3,864
Realized gains on securities, net		0		145
Total noninterest income		4,406		4,009
NONINTEREST EXPENSE
Salaries and wages		4,124		3,868
Pensions and other employee benefits		1,610		1,524
Occupancy expense, net		637		578
Furniture and equipment expense		271		313
Data processing expenses		641		575
Automated teller machine and interchange expense		322		294
Pennsylvania shares tax		336		336
Professional fees		276		187
Directors' fees		184		185
Other noninterest expense		1,494		1,438
Total noninterest expense		9,895		9,298
Income before income tax provision		5,116		4,418
Income tax provision		741		984
NET INCOME	$	4,375	$	3,434
EARNINGS PER COMMON SHARE - BASIC	$	0.36	$	0.28
EARNINGS PER COMMON SHARE - DILUTED	$	0.36	$	0.28

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

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Consolidated Statements of Comprehensive Income

(In Thousands)

	Three Months Ended
	March 31,			March 31,
	2018			2017
Net income	$	4,375		$	3,434
Unrealized (losses) gains on available-for-sale securities:
Unrealized holding (losses) gains on available-for-sale securities		(4,839	)		636
Reclassification adjustment for gains realized in income		0			(145	)
Other comprehensive (loss) gain on available-for-sale securities		(4,839	)		491
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in accumulated other comprehensive (loss) gain		93			166
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost		(5	)		(6	)
Other comprehensive gain on unfunded retirement obligations		88			160
Other comprehensive (loss) income before income tax		(4,751	)		651
Income tax related to other comprehensive loss (income)		997			(228	)
Net other comprehensive (loss) income		(3,754	)		423
Comprehensive income	$	621		$	3,857

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

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands) (Unaudited)

	3 Months Ended
	March 31,			March 31,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	4,375		$	3,434
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		292			452
Realized gains on available-for-sale securities, net		0			(145	)
Unrealized loss on marketable equity security		15			0
Depreciation expense		412			404
Accretion and amortization on securities, net		268			314
Increase in cash surrender value of life insurance		(97	)		(90	)
Stock-based compensation and other expense		183			168
Deferred income taxes		166			273
(Increase) decrease in fair value of servicing rights		(20	)		30
Gains on sales of loans, net		(184	)		(166	)
Origination of loans for sale		(5,327	)		(5,558	)
Proceeds from sales of loans		6,001			5,657
Decrease (increase) in accrued interest receivable and other assets		757			(171	)
Decrease in accrued interest payable and other liabilities		(482	)		(461	)
Other		(29	)		34
Net Cash Provided by Operating Activities		6,330			4,175
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of certificates of deposit		820			100
Purchase of certificates of deposit		(100	)		(100	)
Proceeds from sales of available-for-sale securities		0			13,856
Proceeds from calls and maturities of available-for-sale securities		10,516			12,771
Purchase of available-for-sale securities		(312	)		(8,147	)
Redemption of Federal Home Loan Bank of Pittsburgh stock		2,990			2,491
Purchase of Federal Home Loan Bank of Pittsburgh stock		(1,706	)		(2,130	)
Net increase in loans		(1,805	)		(10,580	)
Purchase of premises and equipment		(467	)		(745	)
Proceeds from sale of foreclosed assets		603			469
Other		51			46
Net Cash Provided by Investing Activities		10,590			8,031
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits		9,632			(3,592	)
Net decrease in short-term borrowings		(35,284	)		(5,431	)
Proceeds from long-term borrowings		9,000			0
Repayments of long-term borrowings		(67	)		(66	)
Sale of treasury stock		63			53
Common dividends paid		(2,928	)		(2,736	)
Net Cash Used in Financing Activities		(19,584	)		(11,772	)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(2,664	)		434
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		37,004			28,621
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	34,340		$	29,055
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Assets acquired through foreclosure of real estate loans	$	72		$	216
Accrued purchase of available-for-sale debt security	$	507		$	0
Interest paid	$	978		$	951
Income taxes paid	$	125		$	200

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

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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			Stock			Total
Three Months Ended March 31, 2018
Balance, December 31, 2017		12,655,171		440,646		$	12,655	$	72,035		$	113,608		$	(1,507	)	$	(8,348	)	$	188,443
Impact of change in enacted income tax rate (a)												325			(325	)					0
Impact of change in method of premium amortization of callable debt securities (b)												(26	)		26						0
Impact of change in method of accounting for marketable equity security (c)												(22	)		22						0
Net income												4,375									4,375
Other comprehensive loss, net															(3,754	)					(3,754	)
Cash dividends declared on common stock, $0.27 per share												(3,307	)								(3,307	)
Shares issued for dividend reinvestment plan				(16,371	)				69									310			379
Shares issued from treasury and redeemed
related to exercise of stock options				(4,198	)				(16	)								79			63
Restricted stock granted				(34,552	)				(655	)								655			0
Forfeiture of restricted stock				5,362					100									(100	)		0
Stock-based compensation expense									183												183
Balance, March 31, 2018		12,655,171		390,887		$	12,655	$	71,716		$	114,953		$	(5,538	)	$	(7,404	)	$	186,382
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

(a) As described in more detail in the Recent Accounting Pronouncements - Adopted section of Note 1, this reclassification resulted from adoption of Accounting Standards Update (ASU) 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, effective January 1, 2018.

(b) As described in more detail in the Recent Accounting Pronouncements - Adopted section of Note 1, this reclassification resulted from adoption of ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20), effective January 1, 2018.

(c) As described in more detail in the Recent Accounting Pronouncements - Adopted section of Note 1, this reclassification resulted from adoption of ASU 2016-01, Recognition and Measurement of Financial Assets and Liabilities, effective January 1, 2018.

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

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Notes to Unaudited Consolidated Financial Statements

1. BASIS OF INTERIM PRESENTATION AND STATUS OF RECENT ACCOUNTING PRONOUNCEMENTS

The consolidated financial statements include the accounts of Citizens & Northern Corporation and its subsidiaries, Citizens & Northern Bank (“C&N Bank”), Bucktail Life Insurance Company and Citizens & Northern Investment Corporation (collectively, “Corporation”), as well as C&N Bank’s wholly-owned subsidiary, C&N Financial Services Corporation. In December 2017, C&N Bank established a new entity, Northern Tier Holding LLC, for the purpose of acquiring, holding and disposing of real property acquired by the Bank. C&N Bank is the sole member of Northern Tier Holding LLC. All material intercompany balances and transactions have been eliminated in consolidation.

The consolidated financial information included herein, with the exception of the consolidated balance sheet dated December 31, 2017, 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 2017 information has been reclassified for consistency with the 2018 presentation.

Operating results reported for the three-month period ended March 31, 2018 might not be indicative of the results for the year ending December 31, 2018. The Corporation evaluates subsequent events through the date of filing with the Securities and Exchange Commission.

RECENT ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) issues Accounting Standards Updates (ASUs) to the FASB Accounting Standards Codification (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.

Recent Accounting Pronouncements - Adopted

In the first quarter 2018, the Corporation adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606).  Under the ASU, as modified by subsequent ASUs, revenue is recognized when a customer obtains control of promised services in an amount that reflects the consideration the entity expects to receive in exchange for those services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.  The Corporation applied the five-step method outlined in the ASU to all revenue streams scoped-in by the ASU and elected the modified retrospective implementation method. Substantially all of the Corporation’s interest income and certain noninterest income were not impacted by the adoption of this ASU because the revenue from those contracts with customers is covered by other guidance in U.S. GAAP. The Corporation’s largest sources of noninterest revenue which are subject to the guidance include Trust and financial management revenue, service charges on deposit accounts and interchange revenue from debit card transactions. Adoption of ASU 2014-09 did not change the timing and pattern of the Corporation’s revenue recognition related to scoped-in noninterest income. New disclosures required by the ASU have been included in Note 13.

In February 2018, the FASB issued ASU 2018-02, Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which permits, but does not require, entities to reclassify tax effects stranded in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act of 2017 to retained earnings. Companies that elect to reclassify these amounts must reclassify stranded tax effects for all items accounted for in accumulated other comprehensive income. The Corporation elected early adoption and adopted this standard update, effective January 1, 2018. The Corporation’s stranded tax effects were related to valuation of the net deferred tax asset attributable to items of accumulated other comprehensive income (loss), which are unrealized gains (losses) on available-for-sale securities and unfunded defined benefit plan obligations. Adoption resulted in a reclassification between two categories of stockholders’ equity at January 1, 2018, with an increase of $325,000 in retained earnings and a decrease in accumulated other comprehensive loss for the same amount (no net change in stockholders’ equity).

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

In the first quarter 2018, the Corporation elected early adoption of ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20). This Update shortens the amortization period for certain callable debt securities held at a premium. Discounts will continue to be amortized to maturity. Adoption resulted in a reduction in retained earnings and corresponding increase in accumulated other comprehensive loss (no net change in stockholders’ equity) of $26,000 at January 1, 2018 for the cumulative after-tax impact of the change in accounting for debt securities held as of that date.

In the first quarter 2018, the Corporation adopted ASU 2016-01, Recognition and Measurement of Financial Assets and Liabilities. The guidance affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. ASU 2016-01 was effective for the Corporation on January 1, 2018 and resulted in: (1) separate classification of a marketable equity security previously included in available-for-sale securities on the consolidated balance sheets, (2) changes in the fair value of the equity security being captured in the consolidated statements of income and (3) a reduction in retained earnings and corresponding increase in accumulated other comprehensive loss (no net change in stockholders’ equity) of $22,000 at January 1, 2018 for the after-tax impact of the change in accounting for the unrealized loss on the equity security. Additional disclosures related to equity securities are provided in Note 6. Adoption of the standard also resulted in the use of an exit price to determine the fair value of financial instruments not measured at fair value in the consolidated balance sheets. Further information regarding valuation of financial instruments is provided in Note 5.

Recently Issued But Not Yet Effective Accounting Pronouncements

ASU 2016-02, Leases (Topic 842) changes current GAAP by requiring that lease assets and liabilities arising from operating leases be recognized on the balance sheet. 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. 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 will become effective for the Corporation for annual and interim periods beginning in the first quarter 2019. Adoption of ASU 2016-02 is not expected to have a material impact on the Corporation’s consolidated financial statements. The Corporation leases certain properties and equipment under operating leases that will result in the recognition of lease assets and lease liabilities on the consolidated balance sheet under the ASU; however, the majority of the Corporation’s properties and equipment are owned, not leased.

ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), changes accounting for credit losses on loans receivable and debt securities from an incurred loss methodology to an expected credit loss methodology. Among other things, ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Accordingly, ASU 2016-13 requires the use of forward-looking information to form credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, though the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, ASU 2016-13 amends the accounting for credit losses on debt securities and purchased financial assets with credit deterioration. The amendments in ASU 2016-13 will be effective for the Corporation beginning in the first quarter 2020. Earlier adoption is permitted beginning in the first quarter 2019; however, the Corporation does not currently plan to early adopt the ASU. The Corporation has formed a cross functional management team that is assessing alternative loss estimation methodologies and the Corporation’s data and system needs in order to evaluate the impact that adoption of this standard will have on the Corporation’s financial condition and results of operations. The Corporation 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.

ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) simplifies 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 2020. The Corporation does not expect adoption of this ASU to have a material impact on its consolidated financial statements.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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,
	2018			2017
Basic
Net income	$	4,375,000		$	3,434,000
Less: Dividends and undistributed earnings allocated to participating securities		(23,000	)		(18,000	)
Net income attributable to common shares	$	4,352,000		$	3,416,000
Basic weighted-average common shares outstanding		12,189,471			12,085,729
Basic earnings per common share (a)	$	0.36		$	0.28
Diluted
Net income attributable to common shares	$	4,352,000		$	3,416,000
Basic weighted-average common shares outstanding		12,189,471			12,085,729
Dilutive effect of potential common stock arising from stock options		32,785			45,681
Diluted weighted-average common shares outstanding		12,222,256			12,131,410
Diluted earnings per common share (a)	$	0.36		$	0.28

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

The weighted-average number of nonvested restricted shares outstanding was 65,204 shares in the three-month period ended March 31, 2018 and 65,208 shares in the three-month period ended March 31, 2017.

Anti-dilutive stock options are excluded from net income per share calculations. There were no anti-dilutive instruments in the first quarter of 2018 or 2017.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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:

	Before-Tax			Income Tax			Net-of-Tax
(In Thousands)	Amount			Effect			Amount
Three Months Ended March 31, 2018
Other comprehensive loss on available-for-sale securities,
Unrealized holding losses on available-for-sale securities	$	(4,839	)	$	1,015		$	(3,824	)
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		93			(19	)		74
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost		(5	)		1			(4	)
Other comprehensive income on unfunded retirement obligations		88			(18	)		70
Total other comprehensive loss	$	(4,751	)	$	997		$	(3,754	)

	Before-Tax			Income Tax			Net-of-Tax
(In Thousands)	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 prior service cost and net actuarial loss 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

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

						Accumulated
	Unrealized			Unfunded		Other
	(Losses)			Retirement		Comprehensive
(In Thousands)	on Securities			Obligations		Loss
Three Months Ended March 31, 2018
Balance, beginning of period	$	(1,566	)	$	59	$	(1,507	)
Impact of change in enacted income tax rate		(337	)		12		(325	)
Impact of change in the method of premium amortization of callable debt securities		26			0		26
Impact of change in the method of accounting for marketable equity security		22			0		22
Other comprehensive (loss) income during three months ended March 31, 2018		(3,824	)		70		(3,754	)
Balance, end of period	$	(5,679	)	$	141	$	(5,538	)

11

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Three Months Ended March 31, 2017
Balance, beginning of period	$	(949	)	$	51	$	(898	)
Other comprehensive income during three months ended March 31, 2017		319			104		423
Balance, end of period	$	(630	)	$	155	$	(475	)

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

For the Three Months Ended March 31, 2018

(In Thousands)

	Reclassified from
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Consolidated
Comprehensive Loss Components	Comprehensive Loss			Statements of Income
Amortization of defined benefit pension and postretirement items:
Prior service cost	$	(8	)	Other noninterest expense
Actuarial loss		3		Other noninterest expense
		(5	)	Total before tax
		1		Income tax provision
		(4	)	Net of tax
Total reclassifications for the period	$	(4	)

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 Loss Components	Comprehensive Loss			Statements of Income
Unrealized gains and losses on available-for-sale
securities	$	(145	)	Realized gains on securities, net
		51		Income tax provision
		(94	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(8	)	Other noninterest expense
Actuarial loss		2		Other noninterest expense
		(6	)	Total before tax
		2		Income tax provision
		(4	)	Net of tax
Total reclassifications for the period	$	(98	)

4. CASH AND DUE FROM BANKS

Cash and due from banks at March 31, 2018 and December 31, 2017 include the following:

	March 31,		Dec. 31,
(In thousands)	2018		2017
Cash and cash equivalents	$	34,340	$	37,004
Certificates of deposit		2,520		3,240
Total cash and due from banks	$	36,860	$	40,244

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 $16,376,000 at March 31, 2018 and $17,178,000 at December 31, 2017.

12

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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. 

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

At March 31, 2018 and December 31, 2017, assets measured at fair value and the valuation methods used are as follows:

			March 31, 2018
	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 DEBT SECURITIES:
Obligations of U.S. Government agencies	$	0	$	7,803	$	0		$	7,803
Obligations of states and political subdivisions:
Tax-exempt		0		103,403		0			103,403
Taxable		0		24,038		0			24,038
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		49,335		0			49,335
Residential collateralized mortgage obligations		0		124,008		0			124,008
Commercial mortgage-backed securities		0		32,546		0			32,546
Total available-for-sale debt securities		0		341,133		0			341,133
Marketable equity security		956		0		0			956
Servicing rights		0		0		1,369			1,369
Total recurring fair value measurements	$	956	$	341,133	$	1,369		$	343,458
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	4,368		$	4,368
Valuation allowance		0		0		(1,289	)		(1,289	)
Impaired loans, net		0		0		3,079			3,079
Foreclosed assets held for sale		0		0		1,100			1,100
Total nonrecurring fair value measurements	$	0	$	0	$	4,179		$	4,179

14

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

			December 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 DEBT SECURITIES:
Obligations of U.S. Government agencies	$	0	$	7,873	$	0		$	7,873
Obligations of states and political subdivisions:
Tax-exempt		0		105,111		0			105,111
Taxable		0		25,573		0			25,573
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		52,347		0			52,347
Residential collateralized mortgage obligations		0		131,814		0			131,814
Commercial mortgage-backed securities		0		33,219		0			33,219
Total available-for-sale debt securities		0		355,937		0			355,937
Marketable equity security		971		0		0			971
Servicing rights		0		0		1,299			1,299
Total recurring fair value measurements	$	971	$	355,937	$	1,299		$	358,207
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	3,776		$	3,776
Valuation allowance		0		0		(1,183	)		(1,183	)
Impaired loans, net		0		0		2,593			2,593
Foreclosed assets held for sale		0		0		1,598			1,598
Total nonrecurring fair value measurements	$	0	$	0	$	4,191		$	4,191

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, 2018 and December 31, 2017, 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
	3/31/18		Valuation	Unobservable				Method or Value As of
Asset	(In Thousands)		Technique	Input(s)				3/31/18
Servicing rights	$	1,369	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		118.00	%	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

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

	Fair Value at
	12/31/17		Valuation	Unobservable				Method or Value As of
Asset	(In Thousands)		Technique	Input(s)				12/31/17
Servicing rights	$	1,299	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		140.00	%	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:

	Three Months Ended
(In Thousands)	March 31, 2018		March 31, 2017
Servicing rights balance, beginning of period	$	1,299	$	1,262
Issuances of servicing rights		50		46
Unrealized gains (losses) included in earnings		20		(30	)
Servicing rights balance, end of period	$	1,369	$	1,278

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. For commercial and industrial and agricultural loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower’s financial statements, inventory reports, accounts receivable aging data or equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets.

16

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

At March 31, 2018 and December 31, 2017, 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	3/31/18		3/31/18		3/31/18		Technique	Inputs	3/31/18
Impaired loans:
Residential mortgage loans - first liens	$	515	$	122	$	393	Sales comparison	Discount to appraised value		26	%
Commercial:
Commercial loans secured by real estate		2,607		884		1,723	Sales comparison	Discount to appraised value		16	%
Commercial and industrial		75		75		0	Sales comparison	Discount to appraised value		100	%
Loans secured by farmland		494		50		444	Sales comparison	Discount to appraised value		53	%
Agricultural Loans		677		158		519	Sales comparison	Discount to appraised value		36	%
Total impaired loans	$	4,368	$	1,289	$	3,079
Foreclosed assets held for sale - real estate:
Residential (1-4 family)	$	396	$	0	$	396	Sales comparison	Discount to appraised value		32	%
Land		632		0		632	Sales comparison	Discount to appraised value		35	%
Commercial real estate		72		0		72	Sales comparison	Discount to appraised value		76	%
Total foreclosed assets held for sale	$	1,100	$	0	$	1,100

(In Thousands, Except									Weighted-
Percentages)			Valuation						Average
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	12/31/17		12/31/17		12/31/17		Technique	Inputs	12/31/17
Impaired loans:
Residential mortgage loans - first liens	$	515	$	122	$	393	Sales comparison	Discount to appraised value		26	%
Commercial:
Commercial loans secured by real estate		2,641		919		1,722	Sales comparison	Discount to appraised value		16	%
Commercial and industrial		126		92		34	Sales comparison	Discount to appraised value		72	%
Loans secured by farmland		494		50		444	Sales comparison	Discount to appraised value		53	%
Total impaired loans	$	3,776	$	1,183	$	2,593
Foreclosed assets held for sale - real estate:
Residential (1-4 family)	$	721	$	0	$	721	Sales comparison	Discount to appraised value		37	%
Land		632		0		632	Sales comparison	Discount to appraised value		35	%
Commercial real estate		245		0		245	Sales comparison	Discount to appraised value		71	%
Total foreclosed assets held for sale	$	1,598	$	0	$	1,598

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.

17

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The estimated fair values, and related carrying amounts, of the Corporation’s financial instruments that are not recorded at fair value are as follows:

	Fair Value	March 31, 2018				December 31, 2017
	Hierarchy	Carrying		Fair		Carrying		Fair
(In Thousands)	Level	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	34,340	$	34,340	$	37,004	$	37,004
Certificates of deposit	Level 2		2,520		2,508		3,240		3,234
Restricted equity securities (included in Other Assets)	Level 2		6,228		6,228		6,556		6,556
Loans held for sale	Level 1		225		225		765		765
Loans, net	Level 3		808,300		808,653		806,857		789,891
Accrued interest receivable	Level 2		3,899		3,899		4,048		4,048
Financial liabilities:
Deposits with no stated maturity	Level 2		793,351		793,351		794,778		794,778
Time deposits	Level 2		224,730		224,814		213,671		213,734
Short-term borrowings	Level 2		26,482		26,263		61,766		61,643
Long-term borrowings	Level 2		18,122		18,155		9,189		9,256
Accrued interest payable	Level 2		61		61		46		46

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.

6. SECURITIES

Amortized cost and fair value of available-for-sale debt securities at March 31, 2018 and December 31, 2017 are summarized as follows:

			March 31, 2018
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	8,023	$	0	$	(220	)	$	7,803
Obligations of states and political subdivisions:
Tax-exempt		103,598		1,651		(1,846	)		103,403
Taxable		24,140		98		(200	)		24,038
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		50,880		66		(1,611	)		49,335
Residential collateralized mortgage obligations		127,886		44		(3,922	)		124,008
Commercial mortgage-backed securities		33,793		0		(1,247	)		32,546
Total available-for-sale-debt securities	$	348,320	$	1,859	$	(9,046	)	$	341,133

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

			December 31, 2017
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	8,026	$	0	$	(153	)	$	7,873
Obligations of states and political subdivisions:
Tax-exempt		103,673		2,291		(853	)		105,111
Taxable		25,431		226		(84	)		25,573
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		52,992		79		(724	)		52,347
Residential collateralized mortgage obligations		134,314		110		(2,610	)		131,814
Commercial mortgage-backed securities		33,881		4		(666	)		33,219
Total available-for-sale debt securities	$	358,317	$	2,710	$	(5,090	)	$	355,937

The following table presents gross unrealized losses and fair value of available-for-sale debt 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, 2018 and December 31, 2017:

	Less Than 12 Months					12 Months or More					Total
March 31, 2018	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(In Thousands)	Value		Losses			Value		Losses			Value		Losses
Obligations of U.S. Government agencies	$	0	$	0		$	7,803	$	(220	)	$	7,803	$	(220	)
Obligations of states and political subdivisions:
Tax-exempt		30,641		(439	)		23,636		(1,407	)		54,277		(1,846	)
Taxable		14,526		(143	)		2,245		(57	)		16,771		(200	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		27,259		(718	)		21,227		(893	)		48,486		(1,611	)
Residential collateralized mortgage obligations		55,506		(1,210	)		64,378		(2,712	)		119,884		(3,922	)
Commercial mortgage-backed securities		18,267		(539	)		14,279		(708	)		32,546		(1,247	)
Total temporarily impaired available-for-sale debt securities	$	146,199	$	(3,049	)	$	133,568	$	(5,997	)	$	279,767	$	(9,046	)

	Less Than 12 Months					12 Months or More					Total
December 31, 2017	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(In Thousands)	Value		Losses			Value		Losses			Value		Losses
Obligations of U.S. Government agencies	$	0	$	0		$	7,873	$	(153	)	$	7,873	$	(153	)
Obligations of states and political subdivisions:
Tax-exempt		19,050		(135	)		24,391		(718	)		43,441		(853	)
Taxable		9,279		(45	)		2,116		(39	)		11,395		(84	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		25,255		(242	)		22,549		(482	)		47,804		(724	)
Residential collateralized mortgage obligations		50,812		(589	)		68,558		(2,021	)		119,370		(2,610	)
Commercial mortgage-backed securities		14,713		(173	)		14,569		(493	)		29,282		(666	)
Total temporarily impaired available-for-sale debt securities	$	119,109	$	(1,184	)	$	140,056	$	(3,906	)	$	259,165	$	(5,090	)

19

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

	3 Months Ended
	March 31,		March 31,
(In Thousands)	2018		2017
Gross realized gains from sales	$	0	$	161
Gross realized losses from sales		0		(16	)
Net realized gains	$	0	$	145

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, 2018. 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	$	18,713	$	18,844
Due from one year through five years		63,703		63,793
Due from five years through ten years		33,100		32,226
Due after ten years		20,245		20,381
Sub-total		135,761		135,244
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		50,880		49,335
Residential collateralized mortgage obligations		127,886		124,008
Commercial mortgage-backed securities		33,793		32,546
Total	$	348,320	$	341,133

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 $209,321,000 at March 31, 2018 and $217,925,000 at December 31, 2017 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. The Corporation recognized no net impairment losses in earnings in the three-month periods ended March 31, 2018 and 2017.

A summary of information management considered in evaluating debt and equity securities for other-than-temporary impairment (“OTTI”) at March 31, 2018 is provided below.

Debt Securities

At March 31, 2018, 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, 2018 and December 31, 2017 to be temporary.

20

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Equity Securities

The Corporation’s marketable equity security at March 31, 2018 and December 31, 2017 consisted exclusively of one mutual fund. As required by ASU 2016-01, the Corporation’s investment in the marketable equity security, previously included in available-for-sale securities, was separately classified in the consolidated balance sheets. Further, retained earnings was reduced by $22,000 and accumulated other comprehensive loss was increased by the same amount for the after-tax impact of the unrealized loss on the security at January 1, 2018. At March 31, 2018, there was an unrealized loss on the mutual fund of $44,000, and at December 31, 2017 there was an unrealized loss of $29,000, with the $15,000 increase in the unrealized loss included in other noninterest income in the consolidated statements of income for the three months ended March 31, 2018.

The Corporation had no realized gains or losses from the sale of equity securities in the first quarter of 2018 or 2017.

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 $5,142,000 at March 31, 2018 and $6,426,000 at December 31, 2017. The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at March 31, 2018 and December 31, 2017. 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, 2018 and December 31, 2017 are summarized by segment, and by classes within each segment, as follows:

Summary of Loans by Type	March 31,			Dec. 31,
(In Thousands)	2018			2017
Residential mortgage:
Residential mortgage loans - first liens	$	358,786		$	359,987
Residential mortgage loans - junior liens		25,870			25,325
Home equity lines of credit		34,595			35,758
1-4 Family residential construction		25,790			26,216
Total residential mortgage		445,041			447,286
Commercial:
Commercial loans secured by real estate		161,571			159,266
Commercial and industrial		89,346			88,276
Political subdivisions		56,224			59,287
Commercial construction and land		13,232			14,527
Loans secured by farmland		7,015			7,255
Multi-family (5 or more) residential		7,621			7,713
Agricultural loans		5,803			6,178
Other commercial loans		16,079			10,986
Total commercial		356,891			353,488
Consumer		15,417			14,939
Total		817,349			815,713
Less: allowance for loan losses		(9,049	)		(8,856	)
Loans, net	$	808,300		$	806,857

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, 2018 or December 31, 2017.

21

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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, 2018 and December 31, 2017, 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, 2018 and 2017 were as follows:

Three Months Ended March 31, 2018	Dec. 31,										March 31,
(In Thousands)	2017 Balance		Charge-offs			Recoveries		Provision (Credit)			2018 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	3,200	$	(53	)	$	1	$	(81	)	$	3,067
Residential mortgage loans - junior liens		224		0			1		126			351
Home equity lines of credit		296		0			0		(10	)		286
1-4 Family residential construction		243		0			0		(4	)		239
Total residential mortgage		3,963		(53	)		2		31			3,943
Commercial:
Commercial loans secured by real estate		2,584		(21	)		0		72			2,635
Commercial and industrial		1,065		0			2		(31	)		1,036
Commercial construction and land		150		0			0		(13	)		137
Loans secured by farmland		105		0			0		(3	)		102
Multi-family (5 or more) residential		172		0			0		(3	)		169
Agricultural loans		57		0			0		148			205
Other commercial loans		102		0			0		47			149
Total commercial		4,235		(21	)		2		217			4,433
Consumer		159		(41	)		12		44			174
Unallocated		499		0			0		0			499
Total Allowance for Loan Losses	$	8,856	$	(115	)	$	16	$	292		$	9,049

22

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

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 that follows.

23

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The following tables summarize the aggregate credit quality classification of outstanding loans by risk rating as of March 31, 2018 and December 31, 2017:

March 31, 2018			Special
(In Thousands)	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	349,713	$	313	$	8,708	$	52	$	358,786
Residential mortgage loans - junior liens		25,328		100		442		0		25,870
Home equity lines of credit		34,045		99		451		0		34,595
1-4 Family residential construction		25,790		0		0		0		25,790
Total residential mortgage		434,876		512		9,601		52		445,041
Commercial:
Commercial loans secured by real estate		152,743		924		7,904		0		161,571
Commercial and Industrial		82,445		5,412		1,478		11		89,346
Political subdivisions		56,224		0		0		0		56,224
Commercial construction and land		13,155		0		77		0		13,232
Loans secured by farmland		5,001		626		1,376		12		7,015
Multi-family (5 or more) residential		7,047		0		574		0		7,621
Agricultural loans		4,851		268		684		0		5,803
Other commercial loans		16,007		0		72		0		16,079
Total commercial		337,473		7,230		12,165		23		356,891
Consumer		15,383		0		34		0		15,417
Totals	$	787,732	$	7,742	$	21,800	$	75	$	817,349

December 31, 2017			Special
(In Thousands)	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	350,609	$	307	$	9,019	$	52	$	359,987
Residential mortgage loans - junior liens		24,795		104		426		0		25,325
Home equity lines of credit		35,233		61		464		0		35,758
1-4 Family residential construction		26,216		0		0		0		26,216
Total residential mortgage		436,853		472		9,909		52		447,286
Commercial:
Commercial loans secured by real estate		150,806		936		7,524		0		159,266
Commercial and Industrial		82,724		3,896		1,645		11		88,276
Political subdivisions		59,287		0		0		0		59,287
Commercial construction and land		14,449		0		78		0		14,527
Loans secured by farmland		5,283		581		1,379		12		7,255
Multi-family (5 or more) residential		7,130		0		583		0		7,713
Agricultural loans		5,203		270		705		0		6,178
Other commercial loans		10,913		0		73		0		10,986
Total commercial		335,795		5,683		11,987		23		353,488
Consumer		14,853		0		86		0		14,939
Totals	$	787,501	$	6,155	$	21,982	$	75	$	815,713

24

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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 a loan: (1) is subject to a restructuring agreement, or (2) has an outstanding balance of $400,000 or more and a credit grade of Special Mention, Substandard or Doubtful. The pools of loans are evaluated for loss exposure based upon average historical net charge-off rates for each loan class, adjusted for qualitative factors (described in the following paragraphs). The time period used in determining the average historical net charge-off rate for each loan class is based on management’s evaluation of an appropriate time period that captures an historical loss experience relevant to the current portfolio. At March 31, 2018 and December 31, 2017, a five-year average net charge-off rate was used for commercial loans secured by real estate and for multi-family residential loans, while a three-year average net charge-off rate was used for all other loan classes.

Qualitative risk factors 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 average net charge-off rate for 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 53% at March 31, 2018) 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 commercial loan relationships greater than $200,000 and any residential mortgage or consumer loans of $400,000 or more 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, 2018 and December 31, 2017. All loans classified as troubled debt restructurings (discussed in more detail below) and all commercial loan relationships less than $200,000 or other loan relationships less than $400,000 in the aggregate, but with an estimated loss of $100,000 or more, are individually evaluated for impairment.

25

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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, 2018 and December 31, 2017:

	Loans:						Allowance for Loan Losses:
March 31, 2018	Individually		Collectively				Individually		Collectively
(In Thousands)	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	969	$	357,817	$	358,786	$	0	$	3,067	$	3,067
Residential mortgage loans - junior liens		300		25,570		25,870		122		229		351
Home equity lines of credit		0		34,595		34,595		0		286		286
1-4 Family residential construction		0		25,790		25,790		0		239		239
Total residential mortgage		1,269		443,772		445,041		122		3,821		3,943
Commercial:
Commercial loans secured by real estate		5,982		155,589		161,571		884		1,751		2,635
Commercial and industrial		498		88,848		89,346		157		879		1,036
Political subdivisions		0		56,224		56,224		0		0		0
Commercial construction and land		0		13,232		13,232		0		137		137
Loans secured by farmland		1,362		5,653		7,015		50		52		102
Multi-family (5 or more) residential		392		7,229		7,621		0		169		169
Agricultural loans		684		5,119		5,803		158		47		205
Other commercial loans		0		16,079		16,079		0		149		149
Total commercial		8,918		347,973		356,891		1,249		3,184		4,433
Consumer		19		15,398		15,417		0		174		174
Unallocated												499
Total	$	10,206	$	807,143	$	817,349	$	1,371	$	7,179	$	9,049

	Loans:						Allowance for Loan Losses:
December 31, 2017	Individually		Collectively				Individually		Collectively
(In Thousands)	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	984	$	359,003	$	359,987	$	0	$	3,200	$	3,200
Residential mortgage loans - junior liens		302		25,023		25,325		122		102		224
Home equity lines of credit		0		35,758		35,758		0		296		296
1-4 Family residential construction		0		26,216		26,216		0		243		243
Total residential mortgage		1,286		446,000		447,286		122		3,841		3,963
Commercial:
Commercial loans secured by real estate		5,873		153,393		159,266		919		1,665		2,584
Commercial and industrial		568		87,708		88,276		188		877		1,065
Political subdivisions		0		59,287		59,287		0		0		0
Commercial construction and land		0		14,527		14,527		0		150		150
Loans secured by farmland		1,365		5,890		7,255		50		55		105
Multi-family (5 or more) residential		392		7,321		7,713		0		172		172
Agricultural loans		7		6,171		6,178		0		57		57
Other commercial loans		0		10,986		10,986		0		102		102
Total commercial		8,205		345,283		353,488		1,157		3,078		4,235
Consumer		20		14,919		14,939		0		159		159
Unallocated												499
Total	$	9,511	$	806,202	$	815,713	$	1,279	$	7,078	$	8,856

26

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Summary information related to impaired loans at March 31, 2018 and December 31, 2017 is as follows:

	March 31, 2018						December 31, 2017
	Unpaid						Unpaid
	Principal		Recorded		Related		Principal		Recorded		Related
(In Thousands)	Balance		Investment		Allowance		Balance		Investment		Allowance
With no related allowance recorded:
Residential mortgage loans - first liens	$	725	$	696	$	0	$	740	$	711	$	0
Residential mortgage loans - junior liens		58		58		0		60		60		0
Commercial loans secured by real estate		3,375		3,375		0		3,230		3,230		0
Commercial and industrial		92		92		0		119		119		0
Loans secured by farmland		868		868		0		871		871		0
Multi-family (5 or more) residential		987		392		0		987		392		0
Agricultural loans		7		7		0		8		8		0
Consumer		19		19		0		20		20		0
Total with no related allowance recorded		6,131		5,507		0		6,035		5,411		0
With a related allowance recorded:
Residential mortgage loans - first liens		273		273		0		273		273		0
Residential mortgage loans - junior liens		242		242		122		242		242		122
Commercial loans secured by real estate		2,607		2,607		884		2,641		2,641		919
Commercial and industrial		406		406		157		449		449		188
Loans secured by farmland		494		494		50		495		495		50
Agricultural loans		677		677		158		0		0		0
Total with a related allowance recorded		4,699		4,699		1,371		4,100		4,100		1,279
Total	$	10,830	$	10,206	$	1,371	$	10,135	$	9,511	$	1,279

In the table immediately above, two loans to one borrower are presented under the Residential mortgage loans – first liens and Residential mortgage loans – junior liens classes. These loans are collateralized by one property, and the allowance associated with these loans was determined based on an analysis of the total amounts of the Corporation’s exposure in comparison to the estimated net proceeds if the Corporation were to sell the property.

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
	3 Months Ended				3 Months Ended
	March 31,				March 31,
(In Thousands)	2018		2017		2018		2017
Residential mortgage:
Residential mortgage loans - first lien	$	1,046	$	748	$	19	$	9
Residential mortgage loans - junior lien		301		67		3		1
Total residential mortgage		1,347		815		22		10
Commercial:
Commercial loans secured by real estate		5,882		6,889		35		56
Commercial and industrial		508		247		6		3
Loans secured by farmland		1,364		1,390		6		8
Multi-family (5 or more) residential		392		392		0		0
Agricultural loans		346		12		11		1
Total commercial		8,492		8,930		58		68
Consumer		19		33		0		0
Total	$	9,858	$	9,778	$	80	$	78

27

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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:

	March 31, 2018				December 31, 2017
	Past Due				Past Due
	90+ Days and				90+ Days and
(In Thousands)	Accruing		Nonaccrual		Accruing		Nonaccrual
Residential mortgage:
Residential mortgage loans - first liens	$	1,840	$	4,354	$	2,340	$	5,131
Residential mortgage loans - junior liens		10		242		105		242
Home equity lines of credit		230		42		203		44
Total residential mortgage		2,080		4,638		2,648		5,417
Commercial:
Commercial loans secured by real estate		128		6,000		175		5,645
Commercial and industrial		347		498		603		517
Commercial construction and land		25		52		26		52
Loans secured by farmland		215		1,307		271		1,308
Multi-family (5 or more) residential		0		392		0		392
Agricultural loans		0		684		0		7
Total commercial		715		8,933		1,075		7,921
Consumer		0		16		1		66
Totals	$	2,795	$	13,587	$	3,724	$	13,404

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.

28

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The table below presents a summary of the contractual aging of loans as of March 31, 2018 and December 31, 2017:

	As of March 31, 2018								As of December 31, 2017
	Current &								Current &
	Past Due		Past Due		Past Due				Past Due		Past Due		Past Due
	Less than		30-89		90+				Less than		30-89		90+
(In Thousands)	30 Days		Days		Days		Total		30 Days		Days		Days		Total
Residential mortgage:
Residential mortgage loans - first liens	$	351,132	$	4,475	$	3,179	$	358,786	$	347,032	$	7,967	$	4,988	$	359,987
Residential mortgage loans - junior liens		25,716		144		10		25,870		25,133		87		105		25,325
Home equity lines of credit		33,960		381		254		34,595		34,789		732		237		35,758
1-4 Family residential construction		25,651		139		0		25,790		25,667		549		0		26,216
Total residential mortgage		436,459		5,139		3,443		445,041		432,621		9,335		5,330		447,286
Commercial:
Commercial loans secured by real estate		157,605		581		3,385		161,571		155,917		311		3,038		159,266
Commercial and industrial		88,386		549		411		89,346		87,306		303		667		88,276
Political subdivisions		56,224		0		0		56,224		59,287		0		0		59,287
Commercial construction and land		12,839		316		77		13,232		14,400		49		78		14,527
Loans secured by farmland		5,548		494		973		7,015		6,226		12		1,017		7,255
Multi-family (5 or more) residential		7,229		0		392		7,621		7,321		0		392		7,713
Agricultural loans		5,651		145		7		5,803		6,114		57		7		6,178
Other commercial loans		16,079		0		0		16,079		10,986		0		0		10,986
Total commercial		349,561		2,085		5,245		356,891		347,557		732		5,199		353,488
Consumer		15,307		94		16		15,417		14,760		123		56		14,939
Totals	$	801,327	$	7,318	$	8,704	$	817,349	$	794,938	$	10,190	$	10,585	$	815,713

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, 2018 and December 31, 2017 is as follows:

	Current &
	Past Due		Past Due		Past Due
	Less than		30-89		90+
(In Thousands)	30 Days		Days		Days		Total
March 31, 2018 Nonaccrual Totals	$	6,287	$	1,391	$	5,909	$	13,587
December 31, 2017 Nonaccrual Totals	$	5,802	$	741	$	6,861	$	13,404

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, 2018 and December 31, 2017 is as follows:

	Current &
	Past Due		Past Due		Past Due
	Less than		30-89		90+
(In Thousands)	30 Days		Days		Days		Nonaccrual		Total
March 31, 2018 Totals	$	774	$	0	$	0	$	2,987	$	3,761
December 31, 2017 Totals	$	636	$	0	$	0	$	3,027	$	3,663

At March 31, 2018 and December 31, 2017, there were no commitments to loan additional funds to borrowers whose loans have been classified as TDRs.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TDRs that occurred during the three-month periods ended March 31, 2018 and 2017 are as follows:

	March 31, 2018				March 31, 2017
			Post-				Post-
	Number		Modification		Number		Modification
	of		Recorded		of		Recorded
(Balances in Thousands)	Loans		Investment		Loans		Investment
Residential mortgage - first liens,
Reduced monthly payments for a six-month period		1	$	80		0	$	0
Commercial loans secured by real estate,
Extended interest only payments for a six-month period		2		36		0		0
Commercial and industrial,
Extended interest only payments for a six-month period		1		46		0		0
Total		4	$	162		0	$	0

In the three-month periods ended March 31, 2018 and 2017, defaults on loans for which modifications considered to be TDRs were entered into within the previous 12 months are summarized as follows:

	March 31, 2018				March 31, 2017
	Number				Number
	of		Recorded		of		Recorded
(Balances in Thousands)	Loans		Investment		Loans		Investment
Residential mortgage - first liens		0	$	0		2	$	293
Residential mortgage - junior liens		0		0		1		28
Consumer		0		0		1		26
Total		0	$	0		4	$	347

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 sheets) is as follows:

	March 31,		Dec. 31,
(In Thousands)	2018		2017
Foreclosed residential real estate	$	396	$	721

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

	March 31,		Dec. 31,
(In Thousands)	2018		2017
Residential real estate in process of foreclosure	$	1,470	$	1,789

8. BORROWED FUNDS

Short-term borrowings (initial maturity within one year) include the following:

	March 31,		Dec. 31,
(In Thousands)	2018		2017
FHLB-Pittsburgh borrowings	$	21,000	$	58,000
Customer repurchase agreements		5,482		3,766
Total short-term borrowings	$	26,482	$	61,766

The FHLB-Pittsburgh loan facilities are collateralized by qualifying loans secured by real estate with a book value totaling $494,290,000 at March 31, 2018 and $488,889,000 at December 31, 2017. 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 $5,142,000 at March 31, 2018 and $6,426,000 at December 31, 2017.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

At March 31, 2018, the short-term borrowings from FHLB-Pittsburgh consisted of 7 advances of $3,000,000 each maturing monthly from April to October 2018, with a weighted average interest rate of 1.72%. At December 31, 2017, the short-term borrowings from FHLB-Pittsburgh of $58,000,000 included an overnight borrowing of $29,000,000 with an interest rate of 1.54% and other short-term advances totaling $29,000,000 with a weighted average rate of 1.69%.

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, 2018 and December 31, 2017. The carrying value of the underlying securities was $11,417,000 at March 31, 2018 and $12,158,000 at December 31, 2017.

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

	March 31,		Dec. 31,
(In Thousands)	2018		2017
Loan maturing in November 2018 with a rate of 1.63%	$	3,000	$	3,000
Loan maturing in December 2018 with a rate of 1.35%		3,000		3,000
Loan maturing in January 2019 with a rate of 1.83%		2,000		2,000
Loan maturing in February 2019 with a rate of 1.95%		3,000		0
Loan maturing in March 2019 with a rate of 2.15%		3,000		0
Loan maturing in April 2019 with a rate of 2.24%		3,000		0
Loan maturing in April 2020 with a rate of 4.79%		416		463
Loan maturing in June 2025 with a rate of 4.91%		706		726
Total long-term FHLB-Pittsburgh borrowings	$	18,122	$	9,189

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, 2018 and December 31, 2017, 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:

	Pension						Postretirement
	Three Months Ended						Three Months Ended
Defined Benefit Plans	March 31,						March 31,
(In Thousands)	2018			2017			2018			2017
Service cost	$	0		$	0		$	10		$	9
Interest cost		6			6			13			14
Expected return on plan assets		(5	)		(8	)		0			0
Amortization of prior service cost		0			0			(8	)		(8	)
Recognized net actuarial loss		3			2			0			0
Net periodic benefit cost	$	4		$	0		$	15		$	15

Service cost, interest cost and expected return on plan assets are included in pensions and other employee benefits expense in the consolidated statements of income in the first quarter 2018 and 2017. Amortization of prior service cost and the recognized net actuarial loss are included in other noninterest expense in the consolidated statements of income in the first quarter 2018 and 2017.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

In the first three months of 2018, the Corporation funded postretirement contributions totaling $12,000, with estimated annual postretirement contributions of $60,000 expected in 2018 for the full year. No defined benefit pension contributions are required in 2018, 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 2018, the Corporation awarded 25,466 shares of restricted stock under the Stock Incentive Plan and 9,086 shares of restricted stock under the Independent Directors Stock Incentive Plan. The 2018 restricted stock awards under the Stock Incentive Plan vest ratably over three years, and vesting for one-half of the 16,578 restricted shares awarded to Executive Officers depends on the Corporation meeting a return on average equity (“ROAE”) target each year. The 2018 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 fair value of the stock at the grant date over the vesting period, adjusted for estimated and actual forfeitures. Management has estimated restricted stock expense in the first three months of 2018 based on an assumption that the ROAE target for awards to Executive Officers in 2016, 2017 and 2018 will not be met, resulting in forfeiture of the restricted stock.

Total annual stock-based compensation for the year ending December 31, 2018 is estimated to total $714,000. If the ROAE targets for awards to Executive Officers in 2016, 2017 and 2018 are met or exceeded, total annual stock-based compensation would increase by approximately $190,000. Total stock-based compensation expense attributable to restricted stock awards amounted to $183,000 in the first quarter 2018 and $168,000 in the first quarter 2017.

11. INCOME TAXES

The net deferred tax asset at March 31, 2018 and December 31, 2017 represents the following temporary difference components:

	March 31,		December 31,
(In Thousands)	2018		2017
Deferred tax assets:
Unrealized holding losses on securities:
Included in accumulated other comprehensive loss	$	1,508	$	843
Included in retained earnings		0		(337	)
Allowance for loan losses		1,935		1,894
Other deferred tax assets		1,544		1,726
Total deferred tax assets		4,987		4,126
Deferred tax liabilities:
Defined benefit plans - ASC 835:
Included in accumulated other comprehensive loss		37		31
Included in retained earnings		0		(12	)
Bank premises and equipment		765		751
Core deposit intangibles		2		3
Other deferred tax liabilities		63		64
Total deferred tax liabilities		867		837
Deferred tax asset, net	$	4,120	$	3,289

In December 2017, the Corporation recognized an adjustment in the carrying value of the net deferred tax asset as a result of a reduction in the federal corporate income tax rate to 21%, effective January 1, 2018, from the 35% marginal rate that had previously been in effect. At December 31, 2017, the portion of the adjustment attributable to items of accumulated other comprehensive income (loss) were stranded in retained earnings, including components related to unrealized losses on securities and defined benefit plans. As described in Note 1, the Corporation elected early adoption of ASU 2018-02, resulting in a reclassification between two categories of stockholders’ equity at January 1, 2018, with an increase of $325,000 in retained earnings and a decrease in accumulated other comprehensive loss for the same amount. Management believes the Corporation’s accounting for the effects of the reduction in the federal income tax rate is materially complete at March 31, 2018.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The provision for income tax for the three-month periods ended March 31, 2018 and 2017 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,
	2018			2017
Income before income tax provision	$	5,116		$	4,418
Income tax provision		741			984
Effective tax rate		14.48	%		22.27	%

The effective tax rate for each period presented differs from the statutory rate of 21% for the period ended March 31, 2018 and 35% for the period ended March 31, 2017 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 2017 and expects to continue to receive tax credits annually through 2022. The carrying amount of the Corporation’s investment is $581,000 at March 31, 2018 and $608,000 at December 31, 2017 (included in Other Assets in the consolidated balance sheets). For the year ending December 31, 2018, the estimated amount of tax credits and other tax benefits to be received is $150,000 and the estimated amount to be recognized as a reduction of the provision for income taxes is $54,000. The total reduction in the provision for income taxes resulting from this investment is $14,000 in the first quarter 2018 and $18,000 in the first quarter 2017.

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 2014.

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.   REVENUE RECOGNITION

As disclosed in Note 1, as of January 1, 2018, the Corporation adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), as well as subsequent ASUs that modified ASC 606. The Company has elected to apply the ASU and all related ASUs using the modified retrospective implementation method. The implementation of the guidance had no material impact on the measurement or recognition of revenue of prior periods. The Corporation generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic 606 that significantly affects the determination of the amount and timing of revenue from contracts with customers.

Additional disclosures related to the Corporation’s largest sources of noninterest income within the consolidated statements of income that are subject to ASC 606 are as follows:

Trust and financial management revenue – C&N Bank’s trust division provides a wide range of financial services, including wealth management services for individuals, businesses and retirement funds, administration of 401(k) and other retirement plans, retirement planning, estate planning and estate settlement services. Trust clients are located primarily within the Corporation’s geographic markets. Assets held in a fiduciary capacity by C&N Bank are not the Corporation’s assets and are therefore not included in the consolidated balance sheets. The fair value of trust assets under management was approximately $916,295,000 at March 31, 2018 and $916,580,000 at December 31, 2017. Trust and financial management revenue is included within noninterest income in the consolidated statements of income.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Trust revenue is recorded on a cash basis, which is not materially different from the accrual basis. The majority (approximately 81%, based on annual 2017 results) of trust revenue is earned and collected monthly, with the amount determined based on a percentage of the fair value of the trust assets under management. Wealth management fees are contractually agreed with each customer, and fee levels vary based mainly on the size of assets under management. The services provided under such a contract represent a single performance obligation under the ASU because it embodies a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. None of the contracts with trust customers provide for incentive-based fees. In addition to wealth management fees, trust revenue includes fees for provision of services, including employee benefit plan administration, tax return preparation and estate planning and settlement. Fees for such services are billed based on contractual arrangements or established fee schedules, and are typically billed upon completion of providing such services. The costs of acquiring trust customers are incremental and recognized within noninterest expense in the consolidated statements of income.

Service charges on deposit accounts - Deposits are included as liabilities in the consolidated balance sheets. Service charges on deposit accounts include: overdraft fees, which are charged when customers overdraw their accounts beyond available funds; automated teller machine (ATM) fees charged for withdrawals by deposit customers from other financial institutions’ ATMs; and a variety of other monthly or transactional fees for services provided to retail and business customers, mainly associated with checking accounts. All deposit liabilities are considered to have one-day terms and therefore related fees are recognized in income at the time when the services are provided to the customers. Incremental costs of obtaining deposit contracts are not significant and are recognized as expense when incurred within noninterest expense in the consolidated statements of income.

Interchange revenue from debit card transactions – The Corporation issues debit cards to consumer and business customers with checking, savings or money market deposit accounts. Debit card and ATM transactions are processed via electronic systems that involve several parties. The Corporation’s debit card and ATM transaction processing is executed via contractual arrangements with payment processing networks, a processor and a settlement bank. As described above, all deposit liabilities are considered to have one-day terms and therefore interchange revenue from customers’ use of their debit cards to initiate transactions are recognized in income at the time when the services are provided and related fees received in the Corporation’s deposit account with the settlement bank. Incremental costs associated with ATM and interchange processing are recognized as expense when incurred within noninterest expense in the consolidated statements of income.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

Basic and diluted earnings per common share were $0.36 for the first quarter 2018, up from $0.16 in the fourth quarter 2017 and $0.28 in the first quarter 2017. First quarter 2018 earnings reflected the benefit of the reduction in the federal corporate income tax rate to 21%, effective January 1, 2018, from the 35% marginal tax rate in effect throughout 2017. In contrast, fourth quarter 2017 results included additional income tax expense related to a reduction in the carrying value of the net deferred tax asset, resulting in a reduction of $0.18 in diluted earnings per share. The annualized return on average assets for the first three months of 2018 was 1.39%, and the annualized return on average equity was 9.41%. Highlights related to the Corporation’s earnings results for the first quarters of 2018 and 2017 are presented below.

Net income for the first quarter 2018 of $4,375,000 was higher by $941,000 (27.4%) than the first quarter 2017 amount. Pre-tax income was $698,000 (15.8%) higher in the first quarter 2018 as compared to the first quarter 2017, while the income tax provision was $243,000 lower. As noted above, the marginal federal income tax rate in effect in 2018 is 21%, down from the 2017 marginal rate of 35%. Accordingly, the effective tax rate of 14.5% for the first quarter 2018 was significantly lower than the first quarter 2017 effective tax rate of 22.3%. Other significant earnings-related variances were as follows:

· Net interest income increased $738,000 (7.3%) in the first quarter 2018 over the first quarter 2017 amount. Total interest and dividend income increased $778,000, while interest expense increased $40,000. The net interest margin of 3.84% for the first quarter 2018 was 0.06% higher than the first quarter 2017 level. Despite the decrease in fully taxable-equivalent yields on municipal securities and loans resulting from the reduced corporate tax rate, the average yield on earning assets increased to 4.18% in the first quarter 2018 from 4.11% in the first quarter 2017. The improvement in average yield included the impact of an increase in average yield on taxable loans, reflecting the effects of recent increases in interest rates, along with a favorable change in the mix of earning assets with growth in loans and a reduction in securities. Average total loans outstanding were higher by $57.5 million (7.6%) in the first quarter 2018 as compared to the first quarter 2017, while average total available-for-sale debt securities were lower by $34.9 million. Average total deposits were $30.3 million (3.1%) higher in the first quarter 2018 as compared to the first quarter 2017. The average rate paid on interest-bearing liabilities of 0.49% in the first quarter 2018 was up 0.02% as compared to the first quarter 2017. The average rate paid on deposits was up 0.11% in the first quarter 2018 as compared to the first quarter 2017, while the average cost of borrowed funds dropped to 1.64% from 2.20% as a result of the pay-off of higher-cost borrowings that matured in the latter portion of 2017.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

· The provision for loan losses of $292,000 in the first quarter 2018 was lower than the first quarter 2017 provision of $452,000. As noted above, the first quarter 2018 provision included $191,000 attributable to the change in total specific allowances on impaired loans, as adjusted for net charge-offs during the period. In comparison, the first quarter 2017 provision included $388,000 from the net increase in specific allowances on impaired loans as adjusted for net charge-offs.

· Noninterest income, excluding net gains on securities, increased $542,000 (14.0%) in the first quarter 2018 over the first quarter 2017 amount. Trust and financial management revenue increased $242,000 (20.5%), reflecting growth in assets under management resulting from market appreciation and new business, as well as an increase in fee levels. Service charges on deposit accounts increased $103,000 (9.4%) in the first quarter 2018 over the first quarter 2017 total, mainly due to increased fees from the overdraft privilege program and reflecting the benefit of operational improvements to the program that were instituted early in 2018.

· There were no realized gains or losses from available-for-sale debt securities in the first quarter 2018. In comparison, gains from sales of securities totaled $145,000 in the first quarter 2017.

· Total noninterest expense increased $597,000 (6.4%) in the first quarter 2018 over the first quarter 2017 amount. Salaries and wages expense increased $256,000 (6.6%), including the effects of annual performance-based salary adjustments for a majority of employees along with an increase of $86,000 in estimated cash and stock-based compensation expense and an increase in the average number of full-time equivalent employees (FTEs) to 294 in the first quarter 2018 from 289 in the first quarter 2017. Pensions and other employee benefits expense increased $86,000, including an increase of $81,000 in health care expenses due to higher claims on the partially self-insured plan. Over the last half of 2017 and first three months of 2018, C&N installed a new telephone system throughout most locations and implemented a new loan origination system. Costs associated with these projects contributed to increases in professional fees, data processing and other noninterest expense in the first quarter 2018 as compared to the first quarter 2017.

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, Except Per Share Data)
(Unaudited)

	For the Three Months Ended:
	March 31,		Dec. 31,		Sept. 30,		June 30,		March 31,
	2018		2017		2017		2017		2017
Interest income	$	11,890	$	11,785	$	11,626	$	11,340	$	11,112
Interest expense		993		999		985		978		953
Net interest income		10,897		10,786		10,641		10,362		10,159
Provision for loan losses		292		23		322		4		452
Net interest income after provision for loan losses		10,605		10,763		10,319		10,358		9,707
Noninterest income		4,406		4,117		4,066		4,106		3,864
Net gains on securities		0		0		5		107		145
Noninterest expense		9,895		9,401		9,192		9,076		9,298
Income before income tax provision		5,116		5,479		5,198		5,495		4,418
Income tax provision		741		3,536		1,262		1,374		984
Net income	$	4,375	$	1,943	$	3,936	$	4,121	$	3,434
Net income attributable to common shares	$	4,352	$	1,933	$	3,916	$	4,100	$	3,416
Basic earnings per common share	$	0.36	$	0.16	$	0.32	$	0.34	$	0.28
Diluted earnings per common share	$	0.36	$	0.16	$	0.32	$	0.34	$	0.28

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.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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.

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, 2018 and March 31, 2017. 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 $11,226,000 in 2018, $385,000 (3.6%) higher than in 2017. Interest income was $425,000 higher in 2018 as compared to 2017, while interest expense was higher by $40,000 in comparing the same periods. As presented in Table III, the Net Interest Margin was 3.84% in 2018 as compared to 3.78% in 2017, and the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) was 3.69% in 2018, up from 3.64% in 2017.

INTEREST INCOME AND EARNING ASSETS

Interest income totaled $12,219,000 in 2018, an increase of 3.6% from 2017. Interest and fees on loans receivable increased $839,000, or 9.3%, to $9,901,000 in 2018 from $9,062,000 in 2017. Table IV shows the increase in interest on loans includes $672,000 attributable to an increase in volume and $167,000 related to an increase in average rate. The average balance of loans receivable increased $57,519,000 to $816,897,000 in 2018 from $759,378,000 in 2017. The increase in average balance is due to the continued loan growth the Corporation has experienced over the course of 2017 and the first quarter of 2018, especially in residential real estate, commercial loans, and tax-exempt loans. The average rate on taxable loans in 2018 was 5.04% compared to 4.87% in 2017 as current rates on variable rate loans and rates on recent new loan originations have increased, consistent with increases in market interest rates. The yield on tax-exempt loans receivable decreased to 3.72% in 2018 compared to 4.55% in 2017. This decrease reflects the reduced tax benefit on tax-exempt assets as compared to taxable assets resulting from the marginal tax rate being reduced to 21% in 2018 from 35% in 2017.

As indicated in Table III, average available-for-sale debt securities (at amortized cost) totaled $353,017,000 in 2018, a decrease of $34,862,000 (9.0%) from 2017. Proceeds from maturities and calls of securities have been used to help fund loan growth throughout 2017 and the first quarter of 2018. The average yield on available-for-sale debt securities decreased to 2.60% in 2018 from 2.81% in 2017. The reduction in yield on available-for-sale debt securities includes the impact of a reduced tax benefit on tax-exempt municipal bonds as a result of the reduction in the federal income tax rate.

INTEREST EXPENSE AND INTEREST-BEARING LIABILITIES

Interest expense increased $40,000, or 4.2%, to $993,000 in 2018 from $953,000 in 2017. Table III shows that the overall cost of funds on interest-bearing liabilities increased to 0.49% in 2018 from 0.47% in 2017.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Interest expense on deposits increased $208,000 in 2018 over 2017. The average rate on interest-bearing deposits increased to 0.39% in 2018 from 0.28% in 2017. The average rate on certificates of deposit increased 0.20% while rates on interest checking accounts increased 0.18% when comparing the same periods. Total average deposits (interest-bearing and noninterest-bearing) increased 3.1% to $997,515,000 in 2018 from $967,223,000 in 2017.

Interest expense on total borrowed funds decreased $168,000 in 2018 as compared to 2017. The average balance of total borrowed funds decreased to $65,359,000 in 2018 from $79,805,000 in 2017. The average rate on total borrowed funds decreased to 1.64% in 2018, down from 2.20% in 2017.

Interest expense on short-term borrowings increased $122,000 to $199,000 in 2018 from $77,000 in 2017. The increase in interest expense is due primarily to higher short-term interest rates in 2018 compared 2017 as the average rate on short-term borrowings increased to 1.54% in 2018 from 0.75% in 2017. The average balance of short-term borrowings increased to $52,305,000 in the first quarter 2018 from $41,386,000 in 2017.

Interest expense on long-term borrowings decreased $290,000 to $65,000 in 2018 from $355,000 in 2017. The average balance of long-term borrowings was $13,054,000 in the first quarter 2018, at an average rate of 2.02%, down from an average balance of $38,419,000 at an average rate of 3.75% in 2017. The reduction in average balance and rate on long-term borrowings reflected the impact of repayments of two higher-cost borrowings in the latter portion of 2017. These borrowings included a $10 million FHLB advance with an interest rate of 3.81% and a $27 million repurchase agreement with a rate of 3.595%.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE II - ANALYSIS OF INTEREST INCOME AND EXPENSE

	Three Months Ended
	March 31,				Increase/
(In Thousands)	2018		2017		(Decrease)
INTEREST INCOME
Available-for-sale debt securities:
Taxable	$	1,363	$	1,403	($	40	)
Tax-exempt		898		1,288		(390	)
Total available-for-sale debt securities		2,261		2,691		(430	)
Dividends on marketable equity security		5		5		0
Interest-bearing due from banks		50		32		18
Loans held for sale		2		4		(2	)
Loans receivable:
Taxable		9,201		8,374		827
Tax-exempt		700		688		12
Total loans receivable		9,901		9,062		839
Total Interest Income		12,219		11,794		425
INTEREST EXPENSE
Interest-bearing deposits:
Interest checking		181		77		104
Money market		93		81		12
Savings		37		34		3
Certificates of deposit		305		224		81
Individual Retirement Accounts		113		105		8
Total interest-bearing deposits		729		521		208
Borrowed funds:
Short-term		199		77		122
Long-term		65		355		(290	)
Total borrowed funds		264		432		(168	)
Total Interest Expense		993		953		40
Net Interest Income	$	11,226	$	10,841	$	385

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 21% for 2018 and 35% for 2017.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE III - ANALYSIS OF AVERAGE DAILY BALANCES AND RATES

(Dollars in Thousands)

	3 Months						3 Months
	Ended			Rate of			Ended			Rate of
	3/31/2018			Return/			3/31/2017			Return/
	Average			Cost of			Average			Cost of
	Balance			Funds %			Balance			Funds %
EARNING ASSETS
Available-for-sale debt securities, at amortized cost:
Taxable	$	249,840			2.21	%	$	270,251			2.11	%
Tax-exempt		103,177			3.53	%		117,628			4.44	%
Total available-for-sale debt securities		353,017			2.60	%		387,879			2.81	%
Marketable equity security		962			2.11	%		1,000			2.03	%
Interest-bearing due from banks		14,131			1.43	%		14,923			0.87	%
Loans held for sale		168			4.83	%		201			8.07	%
Loans receivable:
Taxable		740,655			5.04	%		698,042			4.87	%
Tax-exempt		76,242			3.72	%		61,336			4.55	%
Total loans receivable		816,897			4.92	%		759,378			4.84	%
Total Earning Assets		1,185,175			4.18	%		1,163,381			4.11	%
Cash		16,874						16,013
Unrealized gain/loss on securities		(5,529	)					(958	)
Allowance for loan losses		(9,002	)					(8,593	)
Bank premises and equipment		15,451						15,712
Intangible assets		11,954						11,959
Other assets		42,781						43,878
Total Assets	$	1,257,704					$	1,241,392
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking	$	212,981			0.34	%	$	201,120			0.16	%
Money market		179,923			0.21	%		191,103			0.17	%
Savings		149,618			0.10	%		138,805			0.10	%
Certificates of deposit		123,974			1.00	%		113,636			0.80	%
Individual Retirement Accounts		94,311			0.49	%		99,028			0.43	%
Other time deposits		772			0.00	%		791			0.00	%
Total interest-bearing deposits		761,579			0.39	%		744,483			0.28	%
Borrowed funds:
Short-term		52,305			1.54	%		41,386			0.75	%
Long-term		13,054			2.02	%		38,419			3.75	%
Total borrowed funds		65,359			1.64	%		79,805			2.20	%
Total Interest-bearing Liabilities		826,938			0.49	%		824,288			0.47	%
Demand deposits		235,936						222,740
Other liabilities		8,870						8,162
Total Liabilities		1,071,744						1,055,190
Stockholders' equity, excluding other comprehensive loss		190,129						186,689
Accumulated other comprehensive loss		(4,169	)					(487	)
Total Stockholders' Equity		185,960						186,202
Total Liabilities and Stockholders' Equity	$	1,257,704					$	1,241,392
Interest Rate Spread					3.69	%					3.64	%
Net Interest Income/Earning Assets					3.84	%					3.78	%
Total Deposits (Interest-bearing and Demand)	$	997,515					$	967,223

(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 21% in 2018 and 35% in 2017.

(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.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE IV - ANALYSIS OF VOLUME AND RATE CHANGES

(In Thousands)	3 Months Ended 3/31/18 vs. 3/31/17
	Change in			Change in			Total
	Volume			Rate			Change
EARNING ASSETS
Available-for-sale debt securities:
Taxable	($	109	)	$	69		($	40	)
Tax-exempt		(146	)		(244	)		(390	)
Total available-for-sale debt securities		(255	)		(175	)		(430	)
Marketable equity security		0			0			0
Interest-bearing due from banks		(2	)		20			18
Loans held for sale		(1	)		(1	)		(2	)
Loans receivable:
Taxable		522			305			827
Tax-exempt		150			(138	)		12
Total loans receivable		672			167			839
Total Interest Income		414			11			425
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking		5			99			104
Money market		(5	)		17			12
Savings		3			0			3
Certificates of deposit		21			60			81
Individual Retirement Accounts		(5	)		13			8
Total interest-bearing deposits		19			189			208
Borrowed funds:
Short-term		24			98			122
Long-term		(171	)		(119	)		(290	)
Total borrowed funds		(147	)		(21	)		(168	)
Total Interest Expense		(128	)		168			40
Net Interest Income	$	542		($	157	)	$	385

(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 21% for 2018 and 35% for 2017.

(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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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

NONINTEREST INCOME

TABLE V - COMPARISON OF NONINTEREST INCOME

(In Thousands)

	3 Months Ended
	March 31,				$			%
	2018		2017		Change			Change
Trust and financial management revenue	$	1,422	$	1,180	$	242			20.5
Brokerage revenue		212		156		56			35.9
Insurance commissions, fees and premiums		44		41		3			7.3
Service charges on deposit accounts		1,204		1,101		103			9.4
Service charges and fees		86		80		6			7.5
Interchange revenue from debit card transactions		579		520		59			11.3
Net gains from sales of loans		184		166		18			10.8
Loan servicing fees, net		128		72		56			77.8
Increase in cash surrender value of life insurance		97		90		7			7.8
Other noninterest income		450		458		(8	)		(1.7	)
Total noninterest income before realized gains on securities, net	$	4,406	$	3,864	$	542			14.0

Table V excludes realized gains on securities, which are discussed in the “Earnings Overview” section of Management’s Discussion and Analysis. Total noninterest income shown in Table V increased $542,000 (14.0%) in the first three months of 2018 over the first three months of 2017 amount. The most significant variances include the following:

· Trust and financial management revenue increased $242,000 (20.5%). The increase included the effects of a mid-year 2017 increase in fee levels and an increase in the value of assets under management to $916,295,000 at March 31, 2018, up 4.0% from one year earlier. The increase in value of Trust assets under management resulted from appreciation in equity values and new business.

· Service charges on deposit accounts increased $103,000 (9.4%), mainly due to increased fees from the overdraft privilege program and reflecting the benefit of operational improvements to the program that were instituted early in 2018.

· Interchange revenue from debit card transactions increased $59,000 (11.3%), reflecting an increase in volume of transactions.

· Loan servicing fees, net, increased $56,000. 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 increased by $20,000 in the first three months of 2018 as compared to a reduction of $30,000 in the same period of 2017.

· As a result of increased volume, broker-dealer revenue increased $56,000 (35.9%).

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

NONINTEREST EXPENSE

TABLE VI - COMPARISON OF NONINTEREST EXPENSE

(Dollars In Thousands)

	Three Months Ended
	March 31,				$			%
	2018		2017		Change			Change
Salaries and wages	$	4,124	$	3,868	$	256			6.6
Pensions and other employee benefits		1,610		1,524		86			5.6
Occupancy expense, net		637		578		59			10.2
Furniture and equipment expense		271		313		(42	)		(13.4	)
Data processing expenses		641		575		66			11.5
Automated teller machine and interchange expense		322		294		28			9.5
Pennsylvania shares tax		336		336		0			0.0
Professional fees		276		187		89			47.6
Directors' fees		184		185		(1	)		(0.5	)
Other noninterest expense		1,494		1,438		56			3.9
Total noninterest expense	$	9,895	$	9,298	$	597			6.4

As shown in Table VI, total noninterest expense increased $597,000 (6.4%) in the first three months of 2018 as compared to the first three months of 2017. The most significant variances include the following:

· Salaries and wages expense increased $256,000 (6.6%), including the effects of annual performance-based salary adjustments for a majority of employees along with an increase of $86,000 in estimated cash and stock-based compensation expense and an increase in the average number of full-time equivalent employees (FTEs) to 294 in the first quarter 2018 from 289 in the first quarter 2017.

· Pensions and other employee benefits expense increased $86,000, including an increase of $81,000 in health care expenses due to higher claims on the partially self-insured plan.

· Professional fees were $89,000 higher in 2018 than in 2017. The increase in professional fees included expenses in the first quarter 2018 related to implementation of a new mortgage loan origination system as well as a consulting project related to Board governance and committee structure.

· Data processing expenses increased $66,000, including costs associated with the new mortgage loan origination system.

· Occupancy costs increased $59,000, primarily due to increases in fuel and utility costs.

· Other noninterest expense increased $56,000. Within this category, the largest changes were: (1) telecommunications expense, which increased $100,000 as a result of additional costs related to a new telephone system, along with costs from the prior legacy system during the transition period, and (2) collection expense, net of reimbursements, which was $101,000 lower in the first three months of 2018 than in the same period of 2017.

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 income tax provision for the first three months of 2018 was $741,000, or 14.5% of pre-tax earnings, which was $243,000 lower than the provision for the first three months of 2017 of $984,000, or 22.3% of pre-tax income. The Corporation benefited from the reduction in the federal corporate income tax rate to 21%, effective January 1, 2018, from the 35% marginal tax rate in effect throughout 2017. The Corporation’s effective tax rates differ from the statutory rate of 21% in the first three months of 2018 and 35% for the first three months of 2017 principally because of the effects of tax-exempt interest income.

The Corporation recognizes deferred tax assets and liabilities based on differences between the financial statement carrying amounts and the tax basis of assets and liabilities. At March 31, 2018 the net deferred tax asset was $4,120,000, up from $3,289,000 at December 31, 2017. The most significant change in temporary difference components was a net increase of $1,002,000 related to unrealized losses on available-for-sale securities. At March 31, 2018, the net deferred tax asset associated with the unrealized loss was $1,508,000, while at December 31, 2017, the deferred tax asset associated with the unrealized loss was $506,000, including $843,000 recorded as an offset to the pre-tax unrealized loss within accumulated other comprehensive loss, partially offset by $337,000 charged against retained earnings.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The Corporation regularly reviews deferred tax assets for recoverability based on history of earnings, expectations for future earnings and expected timing of reversals of temporary differences. Realization of deferred tax assets ultimately depends on the existence of sufficient taxable income, including taxable income in prior carryback years, as well as future taxable income.

Management believes the recorded net deferred tax asset at March 31, 2018 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.

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 of credit at March 31, 2018, and management does not expect capital expenditures to have a material, detrimental effect on the Corporation’s financial condition in 2018.

Gross loans outstanding (excluding mortgage loans held for sale) were $817,349,000 at March 31, 2018, up 0.2% from $815,713,000 at December 31, 2017 and 7.3% from $762,021,000 at March 31, 2017. Total outstanding mortgages and other consumer real estate loans were $2,245,000 (0.5%) lower at March 31, 2018 as compared to December 31, 2017; and total outstanding commercial loans were higher by $3,403,000 (1.0%) at March 31, 2018 as compared to December 31, 2017. Average loans outstanding in the first quarter of 2018 of $816,897,000 were $57,519,000 (7.6%) higher than the corresponding total in the first quarter of 2017. The increase in loans outstanding over the last three quarters of 2017 and first quarter of 2018 have included significant increases in residential mortgages, tax-exempt loans and participation loans purchased.

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”, “Political subdivisions” and “Other commercial” classes in the loan tables presented in this Form 10-Q. Total participation loans outstanding amounted to $62,788,000 at March 31, 2018, up from $61,245,000 at December 31, 2017 and $43,586,000 at March 31, 2017. At March 31, 2018, the balance of participation loans outstanding includes a total of $52,596,000 to businesses located outside of the Corporation’s market area, including $9,977,000 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, totaled $13,975,000 at March 31, 2018, and $15,328,000 at December 31, 2017.

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.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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, 2018, the total outstanding balance of loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $1,791,000, and the corresponding total outstanding balance repurchased at December 31, 2017 was $1,805,000.

At March 31, 2018, outstanding balances of loans sold and serviced through the two programs totaled $171,237,000, including loans sold through the MPF Xtra program of $105,197,000 and loans sold through the Original program of $66,040,000. At December 31, 2017, outstanding balances of loans sold and serviced through the two programs totaled $169,725,000, including loans sold through the MPF Xtra program of $107,117,000 and loans sold through the Original program of $62,608,000. 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, 2018 and December 31, 2017.

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, 2018, the Corporation’s maximum credit enhancement obligation under the MPF Original Program was $3,427,000, and the Corporation has recorded a related allowance for credit losses of $291,000 which is included in “Accrued interest and other liabilities” in the accompanying consolidated balance sheets. At December 31, 2017, the Corporation’s maximum credit enhancement obligation under the MPF Original Program was $5,742,000, and the related allowance for credit losses was $260,000. 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 $9,049,000 at March 31, 2018, up from $8,856,000 at December 31, 2017. Table VIII shows total specific allowances on impaired loans increased $92,000 to $1,371,000 at March 31, 2018 from $1,279,000 at December 31, 2017. The largest individual loan balance for which a specific allowance has been recorded is a real estate secured commercial loan with an outstanding balance of $2,607,000 and a specific allowance of $884,000 at March 31, 2018, down from an outstanding balance of $2,641,000 and a specific allowance of $919,000 at December 31, 2017. The net increase in specific allowances in the first three months of 2018 included the addition of a specific allowance of $158,000 on a commercial loan relationship with outstanding balances totaling $677,000 at March 31, 2018.

The provision for loan losses by segment in the three-month period ended March 31, 2018 and 2017 is as follows:

(In Thousands)	3 Months Ended
	March 31,		March 31,
	2018		2017
Residential mortgage	$	31	$	129
Commercial		217		303
Consumer		44		20
Total	$	292	$	452

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The provision for loan losses is further detailed as follows:

	3 Months			3 Months
Residential mortgage segment	Ended			Ended
(In thousands)	March 31,			March 31,
	2018			2017
Increase in total specific allowance on impaired loans, adjusted for the effect of net charge-offs	$	51		$	60
Increase (decrease) in collectively determined portion of the allowance attributable to:
Loan (reduction) growth		(20	)		37
Changes in historical loss experience factors		0			32
Changes in qualitative factors		0			0
Total provision for loan losses -
Residential mortgage segment	$	31		$	129

	3 Months		3 Months
Commercial segment	Ended		Ended
(In thousands)	March 31,		March 31,
	2018		2017
Increase in total specific allowance on impaired loans, adjusted for the effect of net charge-offs	$	111	$	302
Increase (decrease) in collectively determined portion of the allowance attributable to:
Loan growth		53		13
Changes in historical loss experience factors		53		43
Changes in qualitative factors		0		(55	)
Total provision for loan losses -
Commercial segment	$	217	$	303

	3 Months		3 Months
Consumer segment	Ended		Ended
(In thousands)	March 31,		March 31,
	2018		2017
Increase in total specific allowance on impaired loans, adjusted for the effect of net charge-offs	$	29	$	26
Increase (decrease) in collectively determined portion of the allowance attributable to:
Loan growth		4		2
Changes in historical loss experience factors		10		(7	)
Changes in qualitative factors		1		(1	)
Total provision for loan losses -
Consumer segment	$	44	$	20

46

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

	3 Months		3 Months
Total - All segments	Ended		Ended
(In thousands)	March 31,		March 31,
	2018		2017
Increase in total specific allowance on impaired loans, adjusted for the effect of net charge-offs	$	191	$	388
Increase (decrease) in collectively determined portion of the allowance attributable to:
Loan growth		37		52
Changes in historical loss experience factors		63		68
Changes in qualitative factors		1		(56	)
Total provision for loan losses -
All segments	$	292	$	452

For the periods shown in the tables immediately above, the provision related to increases or decreases in specific allowances on impaired loans was affected by changes in the results of management’s assessment of the amount of probable or actual (charged-off) losses associated with a small number of larger, individual loans. This line item also includes net charge-offs or recoveries from smaller loans that had not been individually evaluated for impairment prior to charge-off.

In the tables immediately above, the portion of the net change in the collectively determined allowance attributable to loan growth was determined by applying the historical loss experience and qualitative factors used in the allowance calculation at the end of the preceding period to the net increase in loans outstanding (excluding loans specifically evaluated for impairment) for the period.

The effect on the provision of changes in historical loss experience and qualitative factors, as shown in the tables above, was determined by: (1) calculating the net change in each factor used in determining the allowance at the end of the period as compared to the preceding period, and (2) applying the net change in each factor to the outstanding balance of loans at the end of the preceding period (excluding loans specifically evaluated for impairment).

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 2.00% at March 31, 2018, down from 2.10% at December 31, 2017, and nonperforming assets as a percentage of total assets was 1.39% at March 31, 2018, down from 1.47% at December 31, 2017. Table IX presents data at March 31, 2018 and at the end of each of the years ended December 31, 2013 through 2017. For the range of dates presented in Table IX, total nonperforming loans as a percentage of loans has ranged from a low of 2.00% at March 31, 2018 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 1.31% at December 31, 2015 to a high of 1.53% at December 31, 2013.

Total impaired loans of $10,206,000 at March 31, 2018 are up $695,000 from the corresponding amount at December 31, 2017 of $9,511,000, including an increase in impaired loans with a valuation allowance of $599,000. Table IX shows that over the period 2013-2017, the year-end total outstanding balance of impaired loans has ranged from a low of $9,511,000 in 2017 to a high of $16,321,000 in 2013.

Total nonperforming assets of $17,482,000 at March 31, 2018 are $1,244,000 lower than the corresponding amount at December 31, 2017, summarized as follows:

· Total nonaccrual loans at March 31, 2018 of $13,587,000 was $183,000 higher than the corresponding December 31, 2017 total of $13,404,000.

· Total loans past due 90 days or more and still accruing interest amounted to $2,795,000 at March 31, 2018, a decrease of $929,000 from the total at December 31, 2017. The reduction in loans past due 90 days or more included a reduction in residential mortgage loans of $568,000 and commercial loans of $360,000. 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.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

· Foreclosed assets held for sale consisted of real estate, and totaled $1,100,000 at March 31, 2018, a decrease of $498,000 from $1,598,000 at December 31, 2017. At March 31, 2018, the Corporation held 12 such properties for sale, with total carrying values of $396,000 related to residential real estate, $632,000 of land and $72,000 related to commercial real estate. At December 31, 2017, the Corporation held 16 such properties for sale, with total carrying values of $721,000 related to residential real estate, $632,000 of land and $245,000 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 2013-2017 and the first three months of 2018, 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, 2018. 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,
	2018			2017			2017			2016			2015			2014			2013
Balance, beginning of year	$	8,856		$	8,473		$	8,473		$	7,889		$	7,336		$	8,663		$	6,857
Charge-offs:
Residential mortgage		(53	)		(63	)		(197	)		(73	)		(217	)		(327	)		(95	)
Commercial		(21	)		(96	)		(132	)		(597	)		(251	)		(1,715	)		(459	)
Consumer		(41	)		(41	)		(150	)		(87	)		(94	)		(97	)		(117	)
Total charge-offs		(115	)		(200	)		(479	)		(757	)		(562	)		(2,139	)		(671	)
Recoveries:
Residential mortgage		2			3			19			3			1			25			24
Commercial		2			1			4			35			214			264			348
Consumer		12			15			38			82			55			47			58
Total recoveries		16			19			61			120			270			336			430
Net charge-offs		(99	)		(181	)		(418	)		(637	)		(292	)		(1,803	)		(241	)
Provision for loan losses		292			452			801			1,221			845			476			2,047
Balance, end of period	$	9,049		$	8,744		$	8,856		$	8,473		$	7,889		$	7,336		$	8,663
Net charge-offs as a % of average loans		0.01	%		0.02	%		0.05	%		0.09	%		0.04	%		0.29	%		0.04	%

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE VIII - COMPONENTS OF THE ALLOWANCE FOR LOAN LOSSES

(In Thousands)

	March 31,		As of December 31,
	2018		2017		2016		2015		2014		2013
ASC 310 - Impaired loans	$	1,371	$	1,279	$	674	$	820	$	769	$	2,333
ASC 450 - Collective segments:
Commercial		3,184		3,078		3,373		3,103		2,732		2,583
Residential mortgage		3,821		3,841		3,890		3,417		3,295		3,156
Consumer		174		159		138		122		145		193
Unallocated		499		499		398		427		395		398
Total Allowance	$	9,049	$	8,856	$	8,473	$	7,889	$	7,336	$	8,663

TABLE IX - PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS

AND TROUBLED DEBT RESTRUCTURINGS (TDRs)

(Dollars In Thousands)

	March 31,			As of December 31,
	2018			2017			2016			2015			2014			2013
Impaired loans with a valuation allowance	$	4,699		$	4,100		$	3,372		$	1,933		$	3,241		$	9,889
Impaired loans without a valuation allowance		5,507			5,411			7,488			8,041			9,075			6,432
Total impaired loans	$	10,206		$	9,511		$	10,860		$	9,974		$	12,316		$	16,321
Total loans past due 30-89 days and still accruing	$	5,927		$	9,449		$	7,735		$	7,057		$	7,121		$	8,305
Nonperforming assets:
Total nonaccrual loans	$	13,587		$	13,404		$	8,736		$	11,517		$	12,610		$	14,934
Total loans past due 90 days or more and still accruing		2,795			3,724			6,838			3,229			2,843			3,131
Total nonperforming loans		16,382			17,128			15,574			14,746			15,453			18,065
Foreclosed assets held for sale (real estate)		1,100			1,598			2,180			1,260			1,189			892
Total nonperforming assets	$	17,482		$	18,726		$	17,754		$	16,006		$	16,642		$	18,957
Loans subject to troubled debt restructurings (TDRs):
Performing	$	774		$	636		$	5,803		$	1,186		$	1,807		$	3,267
Nonperforming		2,987			3,027			2,874			5,178			5,388			908
Total TDRs	$	3,761		$	3,663		$	8,677		$	6,364		$	7,195		$	4,175
Total nonperforming loans as a % of loans		2.00	%		2.10	%		2.07	%		2.09	%		2.45	%		2.80	%
Total nonperforming assets as a % of assets		1.39	%		1.47	%		1.43	%		1.31	%		1.34	%		1.53	%
Allowance for loan losses as a % of total loans		1.11	%		1.09	%		1.13	%		1.12	%		1.16	%		1.34	%
Allowance for loan losses as a % of nonperforming loans		55.24	%		51.70	%		54.40	%		53.50	%		47.47	%		47.95	%

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE X - SUMMARY OF LOANS BY TYPE

Summary of Loans by Type

(In Thousands)

	March 31,			As of December 31,
	2018			2017			2016			2015			2014			2013
Residential mortgage:
Residential mortgage loans - first liens	$	358,786		$	359,987		$	334,102		$	304,783		$	291,882		$	299,831
Residential mortgage loans - junior liens		25,870			25,325			23,706			21,146			21,166			23,040
Home equity lines of credit		34,595			35,758			38,057			39,040			36,629			34,530
1-4 Family residential construction		25,790			26,216			24,908			21,121			16,739			13,909
Total residential mortgage		445,041			447,286			420,773			386,090			366,416			371,310
Commercial:
Commercial loans secured by real estate		161,571			159,266			150,468			154,779			145,878			147,215
Commercial and industrial		89,346			88,276			83,854			75,196			50,157			42,387
Political subdivisions		56,224			59,287			38,068			40,007			17,534			16,291
Commercial construction and land		13,232			14,527			14,287			5,122			6,938			17,003
Loans secured by farmland		7,015			7,255			7,294			7,019			7,916			10,468
Multi-family (5 or more) residential		7,621			7,713			7,896			9,188			8,917			10,985
Agricultural loans		5,803			6,178			3,998			4,671			3,221			3,251
Other commercial loans		16,079			10,986			11,475			12,152			13,334			14,631
Total commercial		356,891			353,488			317,340			308,134			253,895			262,231
Consumer		15,417			14,939			13,722			10,656			10,234			10,762
Total		817,349			815,713			751,835			704,880			630,545			644,303
Less: allowance for loan losses		(9,049	)		(8,856	)		(8,473	)		(7,889	)		(7,336	)		(8,663	)
Loans, net	$	808,300		$	806,857		$	743,362		$	696,991		$	623,209		$	635,640

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, 2018, the Corporation maintained overnight interest-bearing deposits with the Federal Reserve Bank of Philadelphia and other correspondent banks totaling $15,600,000.

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 $15,544,000 at March 31, 2018.

The Corporation’s outstanding, available, and total credit facilities at March 31, 2018 and December 31, 2017 are as follows:

	Outstanding				Available				Total Credit
(In Thousands)	Mar 31,		Dec. 31,		Mar. 31,		Dec. 31,		Mar. 31,		Dec. 31,
	2018		2017		2018		2017		2018		2017
Federal Home Loan Bank of Pittsburgh	$	39,122	$	67,189	$	319,222	$	295,441	$	358,344	$	362,630
Federal Reserve Bank Discount Window		0		0		15,141		15,877		15,141		15,877
Other correspondent banks		0		0		45,000		45,000		45,000		45,000
Total credit facilities	$	39,122	$	67,189	$	379,363	$	356,318	$	418,485	$	423,507

At March 31, 2018, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of a short-term borrowings of $21,000,000 and long-term borrowings with a total amount of $18,122,000. At December 31, 2017, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of overnight borrowings of $29,000,000, short-term borrowings of $29,000,000 and long-term borrowings with a total amount of $9,189,000. Additional information regarding borrowed funds is included in Note 8 of the unaudited consolidated financial statements.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Additionally, the Corporation uses “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 or use repurchase agreements placed with brokers to borrow funds secured by investment assets. At March 31, 2018, the carrying value of available-for-sale securities in excess of amounts required to meet pledging or repurchase agreement obligations was $188,290,000.

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, 2018 and December 31, 2017 are presented below. Management believes, as of March 31, 2018 and December 31, 2017, 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, 2018 and December 31, 2017 exceed the Corporation’s policy threshold levels.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

(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, 2018:
Total capital to risk-weighted assets:
Consolidated	$	189,309		23.49	%	$	64,470		³8	%	$	79,580		³9.875	%	$	80,587		³10	%	$	84,617		³10.5	%
C&N Bank		167,117		20.85	%		64,116		³8	%		79,143		³9.875	%		80,145		³10	%		84,152		³10.5	%
Tier 1 capital to risk-weighted assets:
Consolidated		179,969		22.33	%		48,352		³6	%		63,463		³7.875	%		64,470		³8	%		68,499		³8.5	%
C&N Bank		157,777		19.69	%		48,087		³6	%		63,114		³7.875	%		64,116		³8	%		68,123		³8.5	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		179,969		22.33	%		36,264		³4.5	%		51,374		³6.375	%		52,382		³6.5	%		56,411		³7	%
C&N Bank		157,777		19.69	%		36,065		³4.5	%		51,092		³6.375	%		52,094		³6.5	%		56,101		³7	%
Tier 1 capital to average assets:
Consolidated		179,969		14.33	%		50,239		³4	%		N/A		N/A			62,798		³5	%		62,798		³5	%
C&N Bank		157,777		12.75	%		49,480		³4	%		N/A		N/A			61,850		³5	%		61,850		³5	%
December 31, 2017:
Consolidated	$	187,097		23.07	%	$	64,872		³8	%	$	75,008		³9.25	%	$	81,090		³10	%	$	85,144		³10.5	%
C&N Bank		165,142		20.47	%		64,528		³8	%		74,611		³9.25	%		80,661		³10	%		84,694		³10.5	%
Tier 1 capital to risk-weighted assets:
Consolidated		177,981		21.95	%		48,654		³6	%		58,790		³7.25	%		64,872		³8	%		68,926		³8.5	%
C&N Bank		156,026		19.34	%		48,396		³6	%		58,479		³7.25	%		64,528		³8	%		68,561		³8.5	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		177,981		21.95	%		36,490		³4.5	%		46,626		³5.75	%		52,708		³6.5	%		56,763		³7	%
C&N Bank		156,026		19.34	%		36,297		³4.5	%		46,380		³5.75	%		52,429		³6.5	%		56,462		³7	%
Tier 1 capital to average assets:
Consolidated		177,981		14.23	%		50,023		³4	%		N/A		N/A			62,529		³5	%		62,529		³5	%
C&N Bank		156,026		12.63	%		49,418		³4	%		N/A		N/A			61,772		³5	%		61,772		³5	%

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

Future dividend payments will depend upon maintenance of a strong financial condition, future earnings and capital and regulatory requirements. As described in more detail 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.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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 current and remaining transition schedule for capital ratios, including the capital conservation buffer, is as follows:

	As of January 1:
	2018			2019
Minimum common equity tier 1 capital ratio		4.5	%		4.5	%
Common equity tier 1 capital conservation buffer		1.875	%		2.5	%
Minimum common equity tier 1 capital ratio plus capital conservation buffer		6.375	%		7.0	%
Phase-in of most deductions from common equity tier 1 capital		100	%		100	%
Minimum tier 1 capital ratio		6.0	%		6.0	%
Minimum tier 1 capital ratio plus capital conservation buffer		7.875	%		8.5	%
Minimum total capital ratio		8.0	%		8.0	%
Minimum total capital ratio plus capital conservation buffer		9.875	%		10.5	%

As fully phased in, a banking organization with a buffer greater than 2.5% would not be subject to additional limits on dividend payments or discretionary bonus payments; however, a banking organization with a buffer less than 2.5% would be subject to increasingly stringent limitations as the buffer approaches zero. The new rule also prohibits a banking organization from making dividend payments or discretionary bonus payments if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5% as of the beginning of that quarter. Eligible net income is defined as net income for the four calendar quarters preceding the current calendar quarter, net of any distributions and associated tax effects not already reflected in net income. A summary of payout restrictions based on the capital conservation buffer is as follows:

Capital Conservation Buffer	Maximum Payout
(as a % of risk-weighted assets)	(as a % of eligible retained income)
Greater than 2.5%		No payout limitation applies
≤2.5% and >1.875%		60	%
≤1.875% and >1.25%		40	%
≤1.25% and >0.625%		20	%
≤0.625%		0	%

At March 31, 2018, the Corporation’s Capital Conservation Buffer, determined based on the minimum total capital ratio, was 15.49%. C&N Bank’s Capital Conservation Buffer (also determined based on the minimum total capital ratio) was 12.85%.

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 Income (Loss) related to unrealized gains (losses) on available-for-sale securities, net of deferred income tax, amounted to ($5,679,000) at March 31, 2018 and ($1,566,000) at December 31, 2017. 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, 2018.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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 $141,000 at March 31, 2018 and $59,000 at December 31, 2017.

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 $621,000 in the first quarter 2018 as compared to $3,857,000 in the first quarter 2017. For the three months ended March 31, 2018, Comprehensive Income included: (1) Net Income of $4,375,000, which was $941,000 higher than in the first quarter 2017; (2) Other Comprehensive Loss from a decrease in net unrealized losses on available-for-sale securities of ($3,824,000) as compared to Other Comprehensive Income of $319,000 from net unrealized gains on available-for-sale securities in the first quarter 2017; and (3) Other Comprehensive Income from defined benefit plans of $70,000 for the first quarter 2018 as compared to $104,000 for the first quarter 2017.

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 six separate 0.25% increases from December 2015 through March 2018, resulting in the current range of 1.50% to 1.75%. Inflation has remained subdued, measured through 2017 and the first three months of 2018 at levels below the Federal Open Market Committee’s 2% longer run objective, though the FOMC noted in its latest statement that the labor market continues to strengthen and that economic activity continues to rise at a moderate rate. The Committee continues to suggest that as market conditions continue to improve, further gradual increases in the federal funds rate will be warranted.

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.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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.

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 March 31, 2018 and December 31, 2017. 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.

55

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE XI - THE EFFECT OF HYPOTHETICAL CHANGES IN INTEREST RATES

March 31, 2018 Data
(Dollars In Thousands)	Period Ending March 31, 2019
Basis Point	Interest		Interest		Net Interest		NII			NII
Change in Rates	Income		Expense		Income (NII)		% Change			Risk Limit
+400	$	59,148	$	18,287	$	40,861		-6.5	%		25.0	%
+300		56,381		14,757		41,624		-4.8	%		20.0	%
+200		53,639		11,227		42,412		-3.0	%		15.0	%
+100		50,817		7,697		43,120		-1.4	%		10.0	%
0		47,889		4,172		43,717		0.0	%		0.0	%
-100		44,619		2,927		41,692		-4.6	%		10.0	%
-200		41,874		2,510		39,364		-10.0	%		15.0	%
-300		40,563		2,390		38,173		-12.7	%		20.0	%
-400		40,263		2,390		37,873		-13.4	%		25.0	%

	Market Value of Portfolio Equity at March 31, 2018
	Present		Present			Present
Basis Point	Value		Value			Value
Change in Rates	Equity		% Change			Risk Limit
+400	$	198,879		-15.0	%		50.0	%
+300		206,239		-11.9	%		45.0	%
+200		215,431		-7.9	%		35.0	%
+100		224,330		-4.1	%		25.0	%
0		233,972		0.0	%		0.0	%
-100		234,934		0.4	%		25.0	%
-200		233,932		0.0	%		35.0	%
-300		237,523		1.5	%		45.0	%
-400		276,905		18.3	%		50.0	%

December 31, 2017 Data
(Dollars in Thousands)			Period Ending December 31, 2018
Basis Point	Interest		Interest		Net Interest		NII			NII
Change in Rates	Income		Expense		Income (NII)		% Change			Risk Limit
+400	$	57,619	$	19,730	$	37,889		-10.8	%		25.0	%
+300		54,978		15,852		39,126		-7.9	%		20.0	%
+200		52,334		11,974		40,360		-5.0	%		15.0	%
+100		49,620		8,095		41,525		-2.2	%		10.0	%
0		46,717		4,243		42,474		0.0	%		0.0	%
-100		43,581		2,781		40,800		-3.9	%		10.0	%
-200		41,290		2,216		39,074		-8.0	%		15.0	%
-300		40,463		2,191		38,272		-9.9	%		20.0	%
-400		40,194		2,191		38,003		-10.5	%		25.0	%

	Market Value of Portfolio Equity at December 31, 2017
	Present		Present			Present
Basis Point	Value		Value			Value
Change in Rates	Equity		% Change			Risk Limit
+400	$	195,385		-16.8	%		50.0	%
+300		203,648		-13.3	%		45.0	%
+200		213,689		-9.0	%		35.0	%
+100		224,389		-4.4	%		25.0	%
0		234,759		0.0	%		0.0	%
-100		236,030		0.5	%		25.0	%
-200		234,863		0.0	%		35.0	%
-300		252,464		7.5	%		45.0	%
-400		292,124		24.4	%		50.0	%

56

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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.

57

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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 15, 2018.

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 2018:

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, 2018		0	$	0		0		600,000
February 1 - 28, 2018		0	$	0		0		600,000
March 1 - 31, 2018		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 

58

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

59

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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 3, 2018	By:	/s/ J. Bradley Scovill
Date	President and Chief Executive Officer
May 3, 2018	By:	/s/ Mark A. Hughes
Date	Treasurer and Chief Financial Officer

60

EX-31.1

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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 3, 2018	By:	/s/ J. Bradley Scovill
Date		President and Chief Executive Officer

EX-31.2

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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 3, 2018	By:	/s/ Mark A. Hughes
Date		Treasurer and Chief Financial Officer

EX-32

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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, 2018, 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 3, 2018	By:	/s/ J. Bradley Scovill
Date		President and Chief Executive Officer
May 3, 2018	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, 2018	Apr. 30, 2018
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)		12,262,474
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
ASSETS
Noninterest-bearing	$ 18,740	$ 25,664
Interest-bearing	18,120	14,580
Total cash and due from banks	36,860	40,244
Available-for-sale debt securities, at fair value	341,133	355,937
Marketable equity security	956	971
Loans held for sale	225	765
Loans receivable	817,349	815,713
Allowance for loan losses	(9,049)	(8,856)
Loans, net	808,300	806,857
Bank-owned life insurance	20,180	20,083
Accrued interest receivable	3,899	4,048
Bank premises and equipment, net	15,482	15,432
Foreclosed assets held for sale	1,100	1,598
Deferred tax asset, net	4,120	3,289
Intangible assets - Goodwill and core deposit intangibles	11,953	11,954
Other assets	13,908	15,781
TOTAL ASSETS	1,258,116	1,276,959
LIABILITIES
Noninterest-bearing	250,839	241,214
Interest-bearing	767,242	767,235
Total deposits	1,018,081	1,008,449
Short-term borrowings	26,482	61,766
Long-term borrowings	18,122	9,189
Accrued interest and other liabilities	9,049	9,112
TOTAL LIABILITIES	1,071,734	1,088,516
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 12,264,284 at March 31, 2018 and 12,214,525 December 31, 2017	12,655	12,655
Paid-in capital	71,716	72,035
Retained earnings	114,953	113,608
Treasury stock, at cost; 390,887 shares at March 31, 2018 and 440,646 shares at December 31, 2017	(7,404)	(8,348)
Accumulated other comprehensive loss	(5,538)	(1,507)
TOTAL STOCKHOLDERS' EQUITY	186,382	188,443
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$ 1,258,116	$ 1,276,959

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Mar. 31, 2018	Dec. 31, 2017
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 (in shares)	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)	12,264,284	12,214,525
Treasury stock, shares (in shares)	390,887	440,646

XML

Consolidated Statements of Income (Unaudited) - USD ($) $ in Thousands		3 Months Ended
		Mar. 31, 2018	Mar. 31, 2017
Interest and fees on loans:
Taxable		$ 9,201	$ 8,374
Tax-exempt		556	450
Interest on mortgages held for sale		2	4
Interest on balances with depository institutions		50	32
Taxable		1,363	1,403
Tax-exempt		713	844
Dividends on marketable equity security		5	5
Total interest and dividend income		11,890	11,112
INTEREST EXPENSE
Interest on deposits		729	521
Interest on short-term borrowings		199	77
Interest on long-term borrowings		65	355
Total interest expense		993	953
Net interest income		10,897	10,159
Provision for loan losses		292	452
Net interest income after provision for loan losses		10,605	9,707
NONINTEREST INCOME
Brokerage revenue		212	156
Insurance commissions, fees and premiums		44	41
Net gains from sale of loans		184	166
Increase in cash surrender value of life insurance		97	90
Other noninterest income		450	458
Sub-total		4,406	3,864
Realized gains on securities, net		0	145
Total noninterest income		4,406	4,009
NONINTEREST EXPENSE
Salaries and wages		4,124	3,868
Pensions and other employee benefits		1,610	1,524
Occupancy expense, net		637	578
Furniture and equipment expense		271	313
Data processing expenses		641	575
Automated teller machine and interchange expense		322	294
Pennsylvania shares tax		336	336
Professional fees		276	187
Directors' fees		184	185
Other noninterest expense		1,494	1,438
Total noninterest expense		9,895	9,298
Income before income tax provision		5,116	4,418
Income tax provision		741	984
NET INCOME		$ 4,375	$ 3,434
EARNINGS PER COMMON SHARE - BASIC (in dollars per share)	[1]	$ 0.36	$ 0.28
EARNINGS PER COMMON SHARE - DILUTED (in dollars per share)	[1]	$ 0.36	$ 0.28
Trust and Asset Management [Member]
NONINTEREST INCOME
Revenue		$ 1,422	$ 1,180
Deposit Account [Member]
NONINTEREST INCOME
Revenue		1,204	1,101
Service Charges and Fees [Member]
NONINTEREST INCOME
Revenue		86	80
Debit Card [Member]
NONINTEREST INCOME
Revenue		579	520
Bank Servicing [Member]
NONINTEREST INCOME
Revenue		$ 128	$ 72

[1] Basic and diluted earnings per share under the two-class method are determined on net income reported on the consolidated statements of income, less earnings allocated to nonvested restricted shares with nonforfeitable dividends (participating securities).

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Net income	$ 4,375	$ 3,434
Unrealized (losses) gains on available-for-sale securities:
Unrealized holding (losses) gains on available-for-sale securities	(4,839)	636
Reclassification adjustment for gains realized in income	0	(145)
Other comprehensive (loss) gain on available-for-sale securities	(4,839)	491
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in accumulated other comprehensive (loss) gain	93	166
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost	(5)	(6)
Other comprehensive gain on unfunded retirement obligations	88	160
Other comprehensive (loss) income before income tax	(4,751)	651
Income tax related to other comprehensive loss (income)	997	(228)
Net other comprehensive (loss) income	(3,754)	423
Comprehensive income	$ 621	$ 3,857

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 4,375	$ 3,434
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	292	452
Realized gains on available-for-sale securities, net	0	(145)
Unrealized loss on marketable equity security	15	0
Depreciation expense	412	404
Accretion and amortization on securities, net	268	314
Increase in cash surrender value of life insurance	(97)	(90)
Stock-based compensation and other expense	183	168
Deferred income taxes	166	273
(Increase) decrease in fair value of servicing rights	(20)	30
Gains on sales of loans, net	(184)	(166)
Origination of loans for sale	(5,327)	(5,558)
Proceeds from sales of loans	6,001	5,657
Decrease (increase) in accrued interest receivable and other assets	757	(171)
Decrease in accrued interest payable and other liabilities	(482)	(461)
Other	(29)	34
Net Cash Provided by Operating Activities	6,330	4,175
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of certificates of deposit	820	100
Purchase of certificates of deposit	(100)	(100)
Proceeds from sales of available-for-sale securities	0	13,856
Proceeds from calls and maturities of available-for-sale securities	10,516	12,771
Purchase of available-for-sale securities	(312)	(8,147)
Redemption of Federal Home Loan Bank of Pittsburgh stock	2,990	2,491
Purchase of Federal Home Loan Bank of Pittsburgh stock	(1,706)	(2,130)
Net increase in loans	(1,805)	(10,580)
Purchase of premises and equipment	(467)	(745)
Proceeds from sale of foreclosed assets	603	469
Other	51	46
Net Cash Provided by Investing Activities	10,590	8,031
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits	9,632	(3,592)
Net decrease in short-term borrowings	(35,284)	(5,431)
Proceeds from long-term borrowings	9,000	0
Repayments of long-term borrowings	(67)	(66)
Sale of treasury stock	63	53
Common dividends paid	(2,928)	(2,736)
Net Cash Used in Financing Activities	(19,584)	(11,772)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(2,664)	434
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	37,004	28,621
CASH AND CASH EQUIVALENTS, END OF PERIOD	34,340	29,055
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Assets acquired through foreclosure of real estate loans	72	216
Interest paid	978	951
Income taxes paid	125	200
Available-for-sale Securities [Member]
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Accrued purchase of available-for-sale debt security	$ 507	$ 0

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, 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
Other comprehensive income (loss), net						423	423
Cash dividends declared on common stock					(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
Other comprehensive income (loss), net						423	423
Balance (in shares) at Dec. 31, 2017		12,655,171	440,646
Balance at Dec. 31, 2017		$ 12,655	$ (8,348)	72,035	113,608	(1,507)	188,443
Impact of change in enacted income tax rate (a) (Accounting Standards Update 2018-02 Member) at Dec. 31, 2017	[1]				325	(325)	0
Impact of change in enacted income tax rate (a) (Accounting Standards Update 2017-08 [Member]) at Dec. 31, 2017	[2]				(26)	26	0
Impact of change in enacted income tax rate (a) (Accounting Standards Update 2016-01 [Member]) at Dec. 31, 2017	[3]				(22)	22	0
Net income					4,375		4,375
Other comprehensive income (loss), net						(3,754)	(3,754)
Cash dividends declared on common stock					(3,307)		(3,307)
Shares issued for dividend reinvestment plan (in shares)			(16,371)
Shares issued for dividend reinvestment plan			$ 310	69			379
Shares issued from treasury and redeemed related to exercise of stock options (in shares)			(4,198)
Shares issued from treasury and redeemed related to exercise of stock options			$ 79	(16)			63
Restricted stock granted (in shares)			(34,552)
Restricted stock granted			$ 655	(655)			0
Forfeiture of restricted stock (in shares)			5,362
Forfeiture of restricted stock			$ (100)	100			0
Stock-based compensation expense				183			183
Balance (in shares) at Mar. 31, 2018		12,655,171	390,887
Balance at Mar. 31, 2018		$ 12,655	$ (7,404)	71,716	$ 114,953	(5,538)	186,382
Other comprehensive income (loss), net						$ (3,754)	$ (3,754)

[1] As described in more detail in the Recent Accounting Pronouncements - Adopted section of Note 1, this reclassification resulted from adoption of Accounting Standards Update (ASU) 2018-02, Reclassification of Certain tax Effects from Accumulated Other Comprehensive Income, effective January 1, 2018.

[2] As described in more detail in the Recent Accounting Pronouncements - Adopted section of Note 1, this reclassification resulted from adoption of ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20), effective January 1, 2018.

[3] As described in more detail in the Recent Accounting Pronouncements - Adopted section of Note 1, this reclassification resulted from adoption of ASU 2016-01, Recognition and Measurement of Financial Assets and Liabilities, effective January 1, 2018.

XML

Consolidated Statements of Changes in Stockholders' Equity (Unaudited) (Parentheticals) - $ / shares	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Retained Earnings [Member]
Common stock, dividends, per share (in dollars per share)	$ 0.27	$ 0.26

XML

Note 1 - Basis of Interim Presentation and Status of Recent Accounting Pronouncements

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Significant Accounting Policies [Text Block]

1.

BASIS OF INTERIM PRESENTATION

AND STATUS OF RECENT ACCOUNTING PRONOUNCEMENTS

The consolidated financial statements include the accounts of Citizens & Northern Corporation and its subsidiaries, Citizens & Northern Bank (“C&N Bank”), Bucktail Life Insurance Company and Citizens & Northern Investment Corporation (collectively, “Corporation”), as well as C&N Bank’s wholly-owned subsidiary, C&N Financial Services Corporation. In

December 2017,

C&N Bank established a new entity, Northern Tier Holding LLC, for the purpose of acquiring, holding and disposing of real property acquired by the Bank. C&N Bank is the sole member of Northern Tier Holding LLC. All material intercompany balances and transactions have been eliminated in consolidation.

The consolidated financial information included herein, with the exception of the consolidated balance sheet dated

December 31, 2017,

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

2017

information has been reclassified for consistency with the

2018

presentation.

Operating results reported for the

three

-month period ended

March 31, 2018

might

not

be indicative of the results for the year ending

December 31, 2018.

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

RECENT ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) issues Accounting Standards Updates (ASUs) to the FASB Accounting Standards Codification (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.

Recent Accounting Pronouncements - Adopted

In the

first

quarter

2018,

the Corporation adopted ASU

2014

-

09,

Revenue from Contracts with Customers (Topic

606

).Under the ASU, as modified by subsequent ASUs, revenue is recognized when a customer obtains control of promised services in an amount that reflects the consideration the entity expects to receive in exchange for those services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.  The Corporation applied the

five

-step method outlined in the ASU to all revenue streams scoped-in by the ASU and elected the modified retrospective implementation method. Substantially all of the Corporation’s interest income and certain noninterest income were

not

impacted by the adoption of this ASU because the revenue from those contracts with customers is covered by other guidance in U.S. GAAP. The Corporation’s largest sources of noninterest revenue which are subject to the guidance include Trust and financial management revenue, service charges on deposit accounts and interchange revenue from debit card transactions. Adoption of ASU

2014

-

09

did

not

change the timing and pattern of the Corporation’s revenue recognition related to scoped-in noninterest income. New disclosures required by the ASU have been included in Note

13.

In

February 2018,

the FASB issued ASU

2018

-

02,

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which permits, but does

not

require, entities to reclassify tax effects stranded in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act of

2017

to retained earnings. Companies that elect to reclassify these amounts must reclassify stranded tax effects for all items accounted for in accumulated other comprehensive income. The Corporation elected early adoption and adopted this standard update, effective

January 1, 2018.

The Corporation’s stranded tax effects were related to valuation of the net deferred tax asset attributable to items of accumulated other comprehensive income (loss), which are unrealized gains (losses) on available-for-sale securities and unfunded defined benefit plan obligations. Adoption resulted in a reclassification between

two

categories of stockholders’ equity at

January 1, 2018,

with an increase of

$325,000

in retained earnings and a decrease in accumulated other comprehensive loss for the same amount (

no

net change in stockholders’ equity). 

In the

first

quarter

2018,

the Corporation elected early adoption of ASU

2017

-

08,

Receivables – Nonrefundable Fees and Other Costs (Subtopic

310

-

20

). This Update shortens the amortization period for certain callable debt securities held at a premium. Discounts will continue to be amortized to maturity. Adoption resulted in a reduction in retained earnings and corresponding increase in accumulated other comprehensive loss (

no

net change in stockholders’ equity) of

$26,000

at

January 1, 2018

for the cumulative after-tax impact of the change in accounting for debt securities held as of that date.

In the

first

quarter

2018,

the Corporation adopted ASU

2016

-

01,

Recognition and Measurement of Financial Assets and Liabilities. The guidance affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. ASU

2016

-

01

was effective for the Corporation on

January 1, 2018

and resulted in: (

1

) separate classification of a marketable equity security previously included in available-for-sale securities on the consolidated balance sheets, (

2

) changes in the fair value of the equity security being captured in the consolidated statements of income and (

3

) a reduction in retained earnings and corresponding increase in accumulated other comprehensive loss (

no

net change in stockholders’ equity) of

$22,000

at

January 1, 2018

for the after-tax impact of the change in accounting for the unrealized loss on the equity security. Additional disclosures related to equity securities are provided in Note

6.

Adoption of the standard also resulted in the use of an exit price determine the fair value of financial instruments

not

measured at fair value in the consolidated balance sheets. Further information regarding valuation of financial instruments is provided in Note

5.

Recent

ly Issued But

Not

Yet Effective

Accounting Pronouncements

ASU

2016

-

02,

Leases (Topic

842

) changes current GAAP by requiring that lease assets and liabilities arising from operating leases be recognized on the balance sheet. 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. 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

will become effective for the Corporation for annual and interim periods beginning in the

first

quarter

2019.

Adoption of ASU

2016

-

02

is

not

expected to have a material impact on the Corporation’s consolidated financial statements. The Corporation leases certain properties and equipment under operating leases that will result in the recognition of lease assets and lease liabilities on the consolidated balance sheet under the ASU; however, the majority of the Corporation’s properties and equipment are owned,

not

leased.

ASU

2016

-

13,

Financial Instruments-Credit Losses (Topic

326

), changes accounting for credit losses on loans receivable and debt securities from an incurred loss methodology to an expected credit loss methodology. Among other things, ASU

2016

-

13

requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Accordingly, ASU

2016

-

13

requires the use of forward-looking information to form credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, though the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, ASU

2016

-

13

amends the accounting for credit losses on debt securities and purchased financial assets with credit deterioration. The amendments in ASU

2016

-

13

will be effective for the Corporation beginning in the

first

quarter

2020.

Earlier adoption is permitted beginning in the

first

quarter

2019;

however, the Corporation does

not

currently plan to early adopt the ASU. The Corporation has formed a cross functional management team that is assessing alternative loss estimation methodologies and the Corporation’s data and system needs in order to evaluate the impact that adoption of this standard will have on the Corporation’s financial condition and results of operations. The Corporation 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.

ASU

2017

-

04,

Intangibles – Goodwill and Other (Topic

350

) simplifies 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

2020.

The Corporation does

not

expect adoption of this ASU to have a material impact on its consolidated financial statements.

XML

Note 2 - Per Share Data

3 Months Ended

Mar. 31, 2018

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,
	2018			2017
Basic
Net income	$	4,375,000		$	3,434,000
Less: Dividends and undistributed earnings allocated to participating securities		(23,000	)		(18,000	)
Net income attributable to common shares	$	4,352,000		$	3,416,000
Basic weighted-average common shares outstanding		12,189,471			12,085,729
Basic earnings per common share (a)	$	0.36		$	0.28
Diluted
Net income attributable to common shares	$	4,352,000		$	3,416,000
Basic weighted-average common shares outstanding		12,189,471			12,085,729
Dilutive effect of potential common stock arising from stock options		32,785			45,681
Diluted weighted-average common shares outstanding		12,222,256			12,131,410
Diluted earnings per common share (a)	$	0.36		$	0.28

(a) Basic and diluted earnings per share under the

two

-class method are determined on net income reported on the consolidated statements of income, less earnings allocated to nonvested restricted shares with nonforfeitable dividends (participating securities).

The weighted-average number of nonvested restricted shares outstanding was

65,204

shares in the

three

-month period ended

March 31, 2018

and

65,208

shares in the

three

-month period ended

March 31, 2017.

Anti-dilutive stock options are excluded from net income per share calculations. There were

no

anti-dilutive instruments in the

first

quarter of

2018

or

2017.

XML

Note 3 - Comprehensive Income

3 Months Ended

Mar. 31, 2018

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, 2018
Other comprehensive loss on available-for-sale securities,
Unrealized holding losses on available-for-sale securities	$	(4,839	)	$	1,015		$	(3,824	)
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		93			(19	)		74
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost		(5	)		1			(4	)
Other comprehensive income on unfunded retirement obligations		88			(18	)		70
Total other comprehensive loss	$	(4,751	)	$	997		$	(3,754	)

(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 prior service cost and net actuarial loss 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

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

(In Thousands)						Accumulated
	Unrealized			Unfunded		Other
	(Losses)			Retirement		Comprehensive
	on Securities			Obligations		Loss
Three Months Ended March 31, 2018
Balance, beginning of period	$	(1,566	)	$	59	$	(1,507	)
Impact of change in enacted income tax rate		(337	)		12		(325	)
Impact of change in the method of premium amortization of callable debt securities		26			0		26
Impact of change in the method of accounting for marketable equity security		22			0		22
Other comprehensive (loss) income during three months ended March 31, 2018		(3,824	)		70		(3,754	)
Balance, end of period	$	(5,679	)	$	141	$	(5,538	)

Three Months Ended March 31, 2017
Balance, beginning of period	$	(949	)	$	51	$	(898	)
Other comprehensive income during three months ended March 31, 2017		319			104		423
Balance, end of period	$	(630	)	$	155	$	(475	)

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

For the Three Months Ended

March 31, 2018

(In Thousands)

	Reclassified from
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Consolidated
Comprehensive Loss Components	C omprehensive Loss			Statements of Income
Amortization of defined benefit pension and postretirement items:
Prior service cost	$	(8	)	Other noninterest expense
Actuarial loss		3		Other noninterest expense
		(5	)	Total before tax
		1		Income tax provision
		(4	)	Net of tax
Total reclassifications for the period	$	(4	)

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 Loss Components	C omprehensive Loss			Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(145	)	Realized gains on securities, net
		51		Income tax provision
		(94	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(8	)	Other noninterest expense
Actuarial loss		2		Other noninterest expense
		(6	)	Total before tax
		2		Income tax provision
		(4	)	Net of tax
Total reclassifications for the period	$	(98	)

XML

Note 4 - Cash and Due From Banks

3 Months Ended

Mar. 31, 2018

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, 2018

and

December 31, 2017

include the following:

(In thousands)	Mar ch 31,		Dec. 31,
	2018		2017
Cash and cash equivalents	$	34,340	$	37,004
Certificates of deposit		2,520		3,240
Total cash and due from banks	$	36,860	$	40,244

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

$16,376,000

at

March 31, 2018

and

$17,178,000

at

December 31, 2017.

XML

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

3 Months Ended

Mar. 31, 2018

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, 2018

and

December 31, 2017,

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

			March 3 1, 201 8
	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 DEBT SECURITIES:
Obligations of U.S. Government agencies	$	0	$	7,803	$	0		$	7,803
Obligations of states and political subdivisions:
Tax-exempt		0		103,403		0			103,403
Taxable		0		24,038		0			24,038
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		49,335		0			49,335
Residential collateralized mortgage obligations		0		124,008		0			124,008
Commercial mortgage-backed securities		0		32,546		0			32,546
Total available-for-sale debt securities		0		341,133		0			341,133
Marketable equity security		956		0		0			956
Servicing rights		0		0		1,369			1,369
Total recurring fair value measurements	$	956	$	341,133	$	1,369		$	343,458
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	4,368		$	4,368
Valuation allowance		0		0		(1,289	)		(1,289	)
Impaired loans, net		0		0		3,079			3,079
Foreclosed assets held for sale		0		0		1,100			1,100
Total nonrecurring fair value measurements	$	0	$	0	$	4,179		$	4,179

			December 31, 201 7
	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 DEBT SECURITIES:
Obligations of U.S. Government agencies	$	0	$	7,873	$	0		$	7,873
Obligations of states and political subdivisions:
Tax-exempt		0		105,111		0			105,111
Taxable		0		25,573		0			25,573
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		52,347		0			52,347
Residential collateralized mortgage obligations		0		131,814		0			131,814
Commercial mortgage-backed securities		0		33,219		0			33,219
Total available-for-sale debt securities		0		355,937		0			355,937
Marketable equity security		971		0		0			971
Servicing rights		0		0		1,299			1,299
Total recurring fair value measurements	$	971	$	355,937	$	1,299		$	358,207
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	3,776		$	3,776
Valuation allowance		0		0		(1,183	)		(1,183	)
Impaired loans, net		0		0		2,593			2,593
Foreclosed assets held for sale		0		0		1,598			1,598
Total nonrecurring fair value measurements	$	0	$	0	$	4,191		$	4,191

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, 2018

and

December 31, 2017,

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 /3 1 /1 8		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	3 /3 1/18
Servicing rights	$	1,369	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		118.00	%	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
	12/31/1 7		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	12/31/1 7
Servicing rights	$	1,299	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		140.00	%	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, 2018		Mar ch 31, 2017
Servicing rights balance, beginning of period	$	1,299	$	1,262
Issuances of servicing rights		50		46
Unrealized gains (losses) included in earnings		20		(30	)
Servicing rights balance, end of period	$	1,369	$	1,278

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. For commercial and industrial and agricultural loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower’s financial statements, inventory reports, accounts receivable aging data or equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets.

At

March 31, 2018

and

December 31, 2017,

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	3/31/18		3/31/18		3/31/18		Technique	Inputs	3/31/18
Impaired loans:
Residential mortgage loans - first liens	$	515	$	122	$	393	Sales comparison	Discount to appraised value		26	%
Commercial:
Commercial loans secured by real estate		2,607		884		1,723	Sales comparison	Discount to appraised value		16	%
Commercial and industrial		75		75		0	Sales comparison	Discount to appraised value		100	%
Loans secured by farmland		494		50		444	Sales comparison	Discount to appraised value		53	%
Agricultural Loans		677		158		519	Sales comparison	Discount to appraised value		36	%
Total impaired loans	$	4,368	$	1,289	$	3,079
Foreclosed assets held for sale - real estate:
Residential (1-4 family)	$	396	$	0	$	396	Sales comparison	Discount to appraised value		32	%
Land		632		0		632	Sales comparison	Discount to appraised value		35	%
Commercial real estate		72		0		72	Sales comparison	Discount to appraised value		76	%
Total foreclosed assets held for sale	$	1,100	$	0	$	1,100

(In Thousands, Except									Weighted-
Percentages)			Valuation						Average
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	12/31/17		12/31/17		12/31/17		Technique	Inputs	12/31/17
Impaired loans:
Residential mortgage loans - first liens	$	515	$	122	$	393	Sales comparison	Discount to appraised value		26	%
Commercial:
Commercial loans secured by real estate		2,641		919		1,722	Sales comparison	Discount to appraised value		16	%
Commercial and industrial		126		92		34	Sales comparison	Discount to appraised value		72	%
Loans secured by farmland		494		50		444	Sales comparison	Discount to appraised value		53	%
Total impaired loans	$	3,776	$	1,183	$	2,593
Foreclosed assets held for sale - real estate:
Residential (1-4 family)	$	721	$	0	$	721	Sales comparison	Discount to appraised value		37	%
Land		632		0		632	Sales comparison	Discount to appraised value		35	%
Commercial real estate		245		0		245	Sales comparison	Discount to appraised value		71	%
Total foreclosed assets held for sale	$	1,598	$	0	$	1,598

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 estimated fair values, and related carrying amounts, of the Corporation’s financial instruments that are

not

recorded at fair value are as follows:

(In Thousands)	Fair Value	March 31, 2018				December 31, 2017
	Hierarchy	Carrying		Fair		Carrying		Fair
	Level	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	34,340	$	34,340	$	37,004	$	37,004
Certificates of deposit	Level 2		2,520		2,508		3,240		3,234
Restricted equity securities (included in Other Assets)	Level 2		6,228		6,228		6,556		6,556
Loans held for sale	Level 1		225		225		765		765
Loans, net	Level 3		808,300		808,653		806,857		789,891
Accrued interest receivable	Level 2		3,899		3,899		4,048		4,048
Financial liabilities:
Deposits with no stated maturity	Level 2		793,351		793,351		794,778		794,778
Time deposits	Level 2		224,730		224,814		213,671		213,734
Short-term borrowings	Level 2		26,482		26,263		61,766		61,643
Long-term borrowings	Level 2		18,122		18,155		9,189		9,256
Accrued interest payable	Level 2		61		61		46		46

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.

XML

Note 6 - Securities

3 Months Ended

Mar. 31, 2018

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 debt securities at

March 31, 2018

and

December 31, 2017

are summarized as follows:

			March 31, 2018
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	8,023	$	0	$	(220	)	$	7,803
Obligations of states and political subdivisions:
Tax-exempt		103,598		1,651		(1,846	)		103,403
Taxable		24,140		98		(200	)		24,038
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		50,880		66		(1,611	)		49,335
Residential collateralized mortgage obligations		127,886		44		(3,922	)		124,008
Commercial mortgage-backed securities		33,793		0		(1,247	)		32,546
Total available-for-sale-debt securities	$	348,320	$	1,859	$	(9,046	)	$	341,133

			December 31, 2017
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	8,026	$	0	$	(153	)	$	7,873
Obligations of states and political subdivisions:
Tax-exempt		103,673		2,291		(853	)		105,111
Taxable		25,431		226		(84	)		25,573
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		52,992		79		(724	)		52,347
Residential collateralized mortgage obligations		134,314		110		(2,610	)		131,814
Commercial mortgage-backed securities		33,881		4		(666	)		33,219
Total available-for-sale debt securities	$	358,317	$	2,710	$	(5,090	)	$	355,937

The following table presents gross unrealized losses and fair value of available-for-sale debt 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, 2018

and

December 31, 2017:

March 3 1, 2018	Less Than 12 Months					12 Months or More					Total
(In Thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Obligations of U.S. Government agencies	$	0	$	0		$	7,803	$	(220	)	$	7,803	$	(220	)
Obligations of states and political subdivisions:
Tax-exempt		30,641		(439	)		23,636		(1,407	)		54,277		(1,846	)
Taxable		14,526		(143	)		2,245		(57	)		16,771		(200	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		27,259		(718	)		21,227		(893	)		48,486		(1,611	)
Residential collateralized mortgage obligations		55,506		(1,210	)		64,378		(2,712	)		119,884		(3,922	)
Commercial mortgage-backed securities		18,267		(539	)		14,279		(708	)		32,546		(1,247	)
Total temporarily impaired available-for-sale debt securities	$	146,199	$	(3,049	)	$	133,568	$	(5,997	)	$	279,767	$	(9,046	)

December 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	$	0	$	0		$	7,873	$	(153	)	$	7,873	$	(153	)
Obligations of states and political subdivisions:
Tax-exempt		19,050		(135	)		24,391		(718	)		43,441		(853	)
Taxable		9,279		(45	)		2,116		(39	)		11,395		(84	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		25,255		(242	)		22,549		(482	)		47,804		(724	)
Residential collateralized mortgage obligations		50,812		(589	)		68,558		(2,021	)		119,370		(2,610	)
Commercial mortgage-backed securities		14,713		(173	)		14,569		(493	)		29,282		(666	)
Total temporarily impaired available-for-sale debt securities	$	119,109	$	(1,184	)	$	140,056	$	(3,906	)	$	259,165	$	(5,090	)

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

(In Thousands)	3 Months Ended
	Mar ch 31,		Mar ch 31,
	2018		2017
Gross realized gains from sales	$	0	$	161
Gross realized losses from sales		0		(16	)
Net realized gains	$	0	$	145

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, 2018.

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	$	18,713	$	18,844
Due from one year through five years		63,703		63,793
Due from five years through ten years		33,100		32,226
Due after ten years		20,245		20,381
Sub-total		135,761		135,244
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		50,880		49,335
Residential collateralized mortgage obligations		127,886		124,008
Commercial mortgage-backed securities		33,793		32,546
Total	$	348,320	$	341,133

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

$209,321,000

at

March 31, 2018

and

$217,925,000

at

December 31, 2017

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. The Corporation recognized

no

net impairment losses in earnings in the

three

-month periods ended

March 31, 2018

and

2017.

A summary of information management considered in evaluating debt and equity securities for other-than-temporary impairment (“OTTI”) at

March 31, 2018

is provided below.

Debt Securities

At

March 31, 2018,

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, 2018

and

December 31, 2017

to be temporary.

Equity Securities

The Corporation’s marketable equity security at

March 31, 2018

and

December 31, 2017

consisted exclusively of

one

mutual fund. As required by ASU

2016

-

01,

the Corporation’s investment in the marketable equity security, previously included in available-for-sale securities, was separately classified in the consolidated balance sheets. Further, retained earnings was reduced by

$22,000

and accumulated other comprehensive loss was increased by the same amount for the after-tax impact of the unrealized loss on the security at

January 1, 2018.

At

March 31, 2018,

there was an unrealized loss on the mutual fund of

$44,000,

and at

December 31, 2017

there was an unrealized loss of

$29,000,

with the

$15,000

increase in the unrealized loss included in other noninterest income in the consolidated statements of income for the

three

months ended March

31,

2018.

 

The Corporation had

no

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

first

quarter of

2018

or

2017.

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

$5,142,000

at

March 31, 2018

and

$6,426,000

at

December 31, 2017.

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

not

be impaired at

March 31, 2018

and

December 31, 2017.

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, 2018

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, 2018

and

December 31, 2017

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

Summary of Loans by Type
(In Thousands)	March 31,			Dec. 31,
	2018			2017
Residential mortgage:
Residential mortgage loans - first liens	$	358,786		$	359,987
Residential mortgage loans - junior liens		25,870			25,325
Home equity lines of credit		34,595			35,758
1-4 Family residential construction		25,790			26,216
Total residential mortgage		445,041			447,286
Commercial:
Commercial loans secured by real estate		161,571			159,266
Commercial and industrial		89,346			88,276
Political subdivisions		56,224			59,287
Commercial construction and land		13,232			14,527
Loans secured by farmland		7,015			7,255
Multi-family (5 or more) residential		7,621			7,713
Agricultural loans		5,803			6,178
Other commercial loans		16,079			10,986
Total commercial		356,891			353,488
Consumer		15,417			14,939
Total		817,349			815,713
Less: allowance for loan losses		(9,049	)		(8,856	)
Loans, net	$	808,300		$	806,857

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, 2018

or

December 31, 2017.

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, 2018

and

December 31, 2017,

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, 2018

and

2017

were as follows:

Three Months Ended March 31, 2018	Dec. 31,										March 31,
(In Thousands)	2017 Balance		Charge-offs			Recoveries		Provision (Credit)			2018 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	3,200	$	(53	)	$	1	$	(81	)	$	3,067
Residential mortgage loans - junior liens		224		0			1		126			351
Home equity lines of credit		296		0			0		(10	)		286
1-4 Family residential construction		243		0			0		(4	)		239
Total residential mortgage		3,963		(53	)		2		31			3,943
Commercial:
Commercial loans secured by real estate		2,584		(21	)		0		72			2,635
Commercial and industrial		1,065		0			2		(31	)		1,036
Commercial construction and land		150		0			0		(13	)		137
Loans secured by farmland		105		0			0		(3	)		102
Multi-family (5 or more) residential		172		0			0		(3	)		169
Agricultural loans		57		0			0		148			205
Other commercial loans		102		0			0		47			149
Total commercial		4,235		(21	)		2		217			4,433
Consumer		159		(41	)		12		44			174
Unallocated		499		0			0		0			499
Total Allowance for Loan Losses	$	8,856	$	(115	)	$	16	$	292		$	9,049

Three Months Ended March 31, 2017	Dec. 31,										March 31,
(In Thousands)	2016 Balance		Charge-offs			Recoveries		Provision (Credit)			2017 B alance
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

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 that follows.   

The following tables summarize the aggregate credit quality classification of outstanding loans by risk rating as of

March 31, 2018

and

December 31, 2017:

March 31, 2018
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	349,713	$	313	$	8,708	$	52	$	358,786
Residential mortgage loans - junior liens		25,328		100		442		0		25,870
Home equity lines of credit		34,045		99		451		0		34,595
1-4 Family residential construction		25,790		0		0		0		25,790
Total residential mortgage		434,876		512		9,601		52		445,041
Commercial:
Commercial loans secured by real estate		152,743		924		7,904		0		161,571
Commercial and Industrial		82,445		5,412		1,478		11		89,346
Political subdivisions		56,224		0		0		0		56,224
Commercial construction and land		13,155		0		77		0		13,232
Loans secured by farmland		5,001		626		1,376		12		7,015
Multi-family (5 or more) residential		7,047		0		574		0		7,621
Agricultural loans		4,851		268		684		0		5,803
Other commercial loans		16,007		0		72		0		16,079
Total commercial		337,473		7,230		12,165		23		356,891
Consumer		15,383		0		34		0		15,417
Totals	$	787,732	$	7,742	$	21,800	$	75	$	817,349

December 31, 2017
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	350,609	$	307	$	9,019	$	52	$	359,987
Residential mortgage loans - junior liens		24,795		104		426		0		25,325
Home equity lines of credit		35,233		61		464		0		35,758
1-4 Family residential construction		26,216		0		0		0		26,216
Total residential mortgage		436,853		472		9,909		52		447,286
Commercial:
Commercial loans secured by real estate		150,806		936		7,524		0		159,266
Commercial and Industrial		82,724		3,896		1,645		11		88,276
Political subdivisions		59,287		0		0		0		59,287
Commercial construction and land		14,449		0		78		0		14,527
Loans secured by farmland		5,283		581		1,379		12		7,255
Multi-family (5 or more) residential		7,130		0		583		0		7,713
Agricultural loans		5,203		270		705		0		6,178
Other commercial loans		10,913		0		73		0		10,986
Total commercial		335,795		5,683		11,987		23		353,488
Consumer		14,853		0		86		0		14,939
Totals	$	787,501	$	6,155	$	21,982	$	75	$	815,713

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 loan: (

1

) is subject to a restructuring agreement, or (

2

) has an outstanding balance of

$400,000

or more and a credit grade of Special Mention, Substandard or Doubtful. The pools of loans are evaluated for loss exposure based upon average historical net charge-off rates for each loan class, adjusted for qualitative factors (described in the following paragraphs). The time period used in determining the average historical net charge-off rate for each loan class is based on management’s evaluation of an appropriate time period that captures an historical loss experience relevant to the current portfolio. At

March 31, 2018

and

December 31, 2017,

a

five

-year average net charge-off rate was used for commercial loans secured by real estate and for multi-family residential loans, while a

three

-year average net charge-off rate was used for all other loan classes.

Qualitative risk factors 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 average net charge-off rate for 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

53%

at

March 31, 2018)

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 commercial loan relationships greater than

$200,000

and any residential mortgage or consumer loans of

$400,000

or more 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, 2018

and

December 31, 2017.

All loans classified as troubled debt restructurings (discussed in more detail below) and all commercial loan relationships less than

$200,000

or other loan relationships less than

$400,000

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, 2018

and

December 31, 2017:

March 31, 2018	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	969	$	357,817	$	358,786	$	0	$	3,067	$	3,067
Residential mortgage loans - junior liens		300		25,570		25,870		122		229		351
Home equity lines of credit		0		34,595		34,595		0		286		286
1-4 Family residential construction		0		25,790		25,790		0		239		239
Total residential mortgage		1,269		443,772		445,041		122		3,821		3,943
Commercial:
Commercial loans secured by real estate		5,982		155,589		161,571		884		1,751		2,635
Commercial and industrial		498		88,848		89,346		157		879		1,036
Political subdivisions		0		56,224		56,224		0		0		0
Commercial construction and land		0		13,232		13,232		0		137		137
Loans secured by farmland		1,362		5,653		7,015		50		52		102
Multi-family (5 or more) residential		392		7,229		7,621		0		169		169
Agricultural loans		684		5,119		5,803		158		47		205
Other commercial loans		0		16,079		16,079		0		149		149
Total commercial		8,918		347,973		356,891		1,249		3,184		4,433
Consumer		19		15,398		15,417		0		174		174
Unallocated												499
Total	$	10,206	$	807,143	$	817,349	$	1,371	$	7,179	$	9,049

December 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	$	984	$	359,003	$	359,987	$	0	$	3,200	$	3,200
Residential mortgage loans - junior liens		302		25,023		25,325		122		102		224
Home equity lines of credit		0		35,758		35,758		0		296		296
1-4 Family residential construction		0		26,216		26,216		0		243		243
Total residential mortgage		1,286		446,000		447,286		122		3,841		3,963
Commercial:
Commercial loans secured by real estate		5,873		153,393		159,266		919		1,665		2,584
Commercial and industrial		568		87,708		88,276		188		877		1,065
Political subdivisions		0		59,287		59,287		0		0		0
Commercial construction and land		0		14,527		14,527		0		150		150
Loans secured by farmland		1,365		5,890		7,255		50		55		105
Multi-family (5 or more) residential		392		7,321		7,713		0		172		172
Agricultural loans		7		6,171		6,178		0		57		57
Other commercial loans		0		10,986		10,986		0		102		102
Total commercial		8,205		345,283		353,488		1,157		3,078		4,235
Consumer		20		14,919		14,939		0		159		159
Unallocated												499
Total	$	9,511	$	806,202	$	815,713	$	1,279	$	7,078	$	8,856

Summary information related to impaired loans at

March 31, 2018

and

December 31, 2017

is as follows:

(In Thousands)	March 31, 2018						December 31, 2017
	Unpaid						Unpaid
	Principal		Recorded		Related		Principal		Recorded		Related
	Balance		Investment		Allowance		Balance		Investment		Allowance
With no related allowance recorded:
Residential mortgage loans - first liens	$	725	$	696	$	0	$	740	$	711	$	0
Residential mortgage loans - junior liens		58		58		0		60		60		0
Commercial loans secured by real estate		3,375		3,375		0		3,230		3,230		0
Commercial and industrial		92		92		0		119		119		0
Loans secured by farmland		868		868		0		871		871		0
Multi-family (5 or more) residential		987		392		0		987		392		0
Agricultural loans		7		7		0		8		8		0
Consumer		19		19		0		20		20		0
Total with no related allowance recorded		6,131		5,507		0		6,035		5,411		0
With a related allowance recorded:
Residential mortgage loans - first liens		273		273		0		273		273		0
Residential mortgage loans - junior liens		242		242		122		242		242		122
Commercial loans secured by real estate		2,607		2,607		884		2,641		2,641		919
Commercial and industrial		406		406		157		449		449		188
Loans secured by farmland		494		494		50		495		495		50
Agricultural loans		677		677		158		0		0		0
Total with a related allowance recorded		4,699		4,699		1,371		4,100		4,100		1,279
Total	$	10,830	$	10,206	$	1,371	$	10,135	$	9,511	$	1,279

In the table immediately above,

two

loans to

one

borrower are presented under the Residential mortgage loans –

first

liens and Residential mortgage loans – junior liens classes. These loans are collateralized by

one

property, and the allowance associated with these loans was determined based on an analysis of the total amounts of the Corporation’s exposure in comparison to the estimated net proceeds if the Corporation were to sell the property.

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,
	2018		2017		2018		2017
Residential mortgage:
Residential mortgage loans - first lien	$	1,046	$	748	$	19	$	9
Residential mortgage loans - junior lien		301		67		3		1
Total residential mortgage		1,347		815		22		10
Commercial:
Commercial loans secured by real estate		5,882		6,889		35		56
Commercial and industrial		508		247		6		3
Loans secured by farmland		1,364		1,390		6		8
Multi-family (5 or more) residential		392		392		0		0
Agricultural loans		346		12		11		1
Total commercial		8,492		8,930		58		68
Consumer		19		33		0		0
Total	$	9,858	$	9,778	$	80	$	78

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, 2018				December 31, 2017
	Past Due				Past Due
	90+ Days and				90+ Days and
	Accruing		Nonaccrual		Accruing		Nonaccrual
Residential mortgage:
Residential mortgage loans - first liens	$	1,840	$	4,354	$	2,340	$	5,131
Residential mortgage loans - junior liens		10		242		105		242
Home equity lines of credit		230		42		203		44
Total residential mortgage		2,080		4,638		2,648		5,417
Commercial:
Commercial loans secured by real estate		128		6,000		175		5,645
Commercial and industrial		347		498		603		517
Commercial construction and land		25		52		26		52
Loans secured by farmland		215		1,307		271		1,308
Multi-family (5 or more) residential		0		392		0		392
Agricultural loans		0		684		0		7
Total commercial		715		8,933		1,075		7,921
Consumer		0		16		1		66
Totals	$	2,795	$	13,587	$	3,724	$	13,404

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, 2018

and

December 31, 2017:

	As of March 31, 2018								As of December 31, 2017
	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	$	351,132	$	4,475	$	3,179	$	358,786	$	347,032	$	7,967	$	4,988	$	359,987
Residential mortgage loans - junior liens		25,716		144		10		25,870		25,133		87		105		25,325
Home equity lines of credit		33,960		381		254		34,595		34,789		732		237		35,758
1-4 Family residential construction		25,651		139		0		25,790		25,667		549		0		26,216
Total residential mortgage		436,459		5,139		3,443		445,041		432,621		9,335		5,330		447,286
Commercial:
Commercial loans secured by real estate		157,605		581		3,385		161,571		155,917		311		3,038		159,266
Commercial and industrial		88,386		549		411		89,346		87,306		303		667		88,276
Political subdivisions		56,224		0		0		56,224		59,287		0		0		59,287
Commercial construction and land		12,839		316		77		13,232		14,400		49		78		14,527
Loans secured by farmland		5,548		494		973		7,015		6,226		12		1,017		7,255
Multi-family (5 or more) residential		7,229		0		392		7,621		7,321		0		392		7,713
Agricultural loans		5,651		145		7		5,803		6,114		57		7		6,178
Other commercial loans		16,079		0		0		16,079		10,986		0		0		10,986
Total commercial		349,561		2,085		5,245		356,891		347,557		732		5,199		353,488
Consumer		15,307		94		16		15,417		14,760		123		56		14,939
Totals	$	801,327	$	7,318	$	8,704	$	817,349	$	794,938	$	10,190	$	10,585	$	815,713

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, 2018

and

December 31, 2017

is as follows:

	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than			30-89	90+
	30 Days		Days		Days		Total
March 31, 2018 Nonaccrual Totals	$	6,287	$	1,391	$	5,909	$	13,587
December 31, 2017 Nonaccrual Totals	$	5,802	$	741	$	6,861	$	13,404

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, 2018

and

December 31, 2017

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, 2018 Totals	$	774	$	0	$	0	$	2,987	$	3,761
December 31, 2017 Totals	$	636	$	0	$	0	$	3,027	$	3,663

At

March 31, 2018

and

December 31, 2017,

there were

no

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

TDRs that occurred during the

three

-month periods ended

March 31, 2018

and

2017

are as follows:

(Balances in Thousands)
	March 31, 2018				March 31, 2017
			Post-				Post-
	Number		Modification		Number		Modification
	of		Recorded		of		Recorded
	Loans		Investment		Loans		Investment
Residential mortgage - first liens,
Reduced monthly payments for a six-month period		1	$	80		0	$	0
Commercial loans secured by real estate,
Extended interest only payments for a six-month period		2		36		0		0
Commercial and industrial,
Extended interest only payments for a six-month period		1		46		0		0
Total		4	$	162		0	$	0

In the

three

-month periods ended

March 31, 2018

and

2017,

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, 2018				March 31, 2017
	Number				Number
	of		Recorded		of		Recorded
	Loans		Investment		Loans		Investment
Residential mortgage - first liens		0	$	0		2	$	293
Residential mortgage - junior liens		0		0		1		28
Consumer		0		0		1		26
Total		0	$	0		4	$	347

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 sheets) is as follows:

(In Thousands)	March 31,		Dec. 31,
	2018		2017
Foreclosed residential real estate	$	396	$	721

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,
	2018		2017
Residential real estate in process of foreclosure	$	1,470	$	1,789

XML

Note 8 - Borrowed Funds

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Debt Disclosure [Text Block]

8.

BORROWED FUNDS

Short-term borrowings (initial maturity within

one

year) include the following:

(In Thousands)	Mar ch 31,		Dec. 31,
	2018		2017
FHLB-Pittsburgh borrowings	$	21,000	$	58,000
Customer repurchase agreements		5,482		3,766
Total short-term borrowings	$	26,482	$	61,766

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

$494,290,000

at

March 31,

2018

and

$488,889,000

at

December 31, 2017.

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

$5,142,000

at

March 31, 2018

and

$6,426,000

at

December 31, 2017.

At

March 31, 2018,

the short-term borrowings from FHLB-Pittsburgh consisted of

7

advances of

$3,000,000

each maturing monthly from

April

to

October 2018,

with a weighted average interest rate of

1.72%.

At

December 31, 2017,

the short-term borrowings from FHLB-Pittsburgh of

$58,000,000

included an overnight borrowing of

$29,000,000

with an interest rate of

1.54%

and other short-term advances totaling

$29,000,000

with a weighted average rate of

1.69%.

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, 2018

and

December 31, 2017.

The carrying value of the underlying securities was

$11,417,000

at

March 31, 2018

and

$12,158,000

at

December 31, 2017.

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

(In Thousands)	Mar ch 31,		Dec. 31,
	2018		2017
Loan maturing in November 2018 with a rate of 1.63%	$	3,000	$	3,000
Loan maturing in December 2018 with a rate of 1.35%		3,000		3,000
Loan maturing in January 2019 with a rate of 1.83%		2,000		2,000
Loan maturing in February 2019 with a rate of 1.95%		3,000		0
Loan maturing in March 2019 with a rate of 2.15%		3,000		0
Loan maturing in April 2019 with a rate of 2.24%		3,000		0
Loan maturing in April 2020 with a rate of 4.79%		416		463
Loan maturing in June 2025 with a rate of 4.91%		706		726
Total long-term FHLB-Pittsburgh borrowings	$	18,122	$	9,189

XML

Note 9 - Defined Benefit Plans

3 Months Ended

Mar. 31, 2018

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, 2018

and

December 31, 2017,

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,
	2018			2017			2018			2017
Service cost	$	0		$	0		$	10		$	9
Interest cost		6			6			13			14
Expected return on plan assets		(5	)		(8	)		0			0
Amortization of prior service cost		0			0			(8	)		(8	)
Recognized net actuarial loss		3			2			0			0
Net periodic benefit cost	$	4		$	0		$	15		$	15

Service cost, interest cost and expected return on plan assets are included in pensions and other employee benefits expense in the consolidated statements of income in the

first

quarter

2018

and

2017.

Amortization of prior service cost and the recognized net actuarial loss are included in other noninterest expense in the consolidated statements of income in the

first

quarter

2018

and

2017.

In the

first

three

months of

2018,

the Corporation funded postretirement contributions totaling

$12,000,

with estimated annual postretirement contributions of

$60,000

expected in

2018

for the full year.

No

defined benefit pension contributions are required in

2018,

though the Corporation

may

make discretionary contributions.

XML

Note 10 - Stock-based Compensation Plans

3 Months Ended

Mar. 31, 2018

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

2018,

the Corporation awarded

25,466

shares of restricted stock under the Stock Incentive Plan and

9,086

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

2018

restricted stock awards under the Stock Incentive Plan vest ratably over

three

years, and vesting for

one

-half of the

16,578

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

2018

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 fair value of the stock at the grant date over the vesting period, adjusted for estimated and actual forfeitures. Management has estimated restricted stock expense in the

first

three

months of

2018

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

2016,

2017

and

2018

will

not

be met, resulting in forfeiture of the restricted stock.

Total annual stock-based compensation for the year ending

December 31, 2018

is estimated to total

$714,000.

If the ROAE targets for awards to Executive Officers in

2016,

2017

and

2018

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

$190,000.

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

$183,000

in the

first

quarter

2018

and

$168,000

in the

first

quarter

2017.

XML

Note 11 - Income Taxes

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Income Tax Disclosure [Text Block]

11

. INCOME TAXES

The net deferred tax asset at

March 31, 2018

and

December 31, 2017

represents the following temporary difference components:

	March 31,		December 31,
(In Thousands)	2018		2017
Deferred tax assets:
Unrealized holding losses on securities:
Included in accumulated other comprehensive loss	$	1,508	$	843
Included in retained earnings		0		(337	)
Allowance for loan losses		1,935		1,894
Other deferred tax assets		1,544		1,726
Total deferred tax assets		4,987		4,126
Deferred tax liabilities:
Defined benefit plans - ASC 835:
Included in accumulated other comprehensive loss		37		31
Included in retained earnings		0		(12	)
Bank premises and equipment		765		751
Core deposit intangibles		2		3
Other deferred tax liabilities		63		64
Total deferred tax liabilities		867		837
Deferred tax asset, net	$	4,120	$	3,289

In

December 2017,

the Corporation recognized an adjustment in the carrying value of the net deferred tax asset as a result of a reduction in the federal corporate income tax rate to

21%,

effective

January 1, 2018,

from the

35%

marginal rate that had previously been in effect. At

December 31, 2017,

the portion of the adjustment attributable to items of accumulated other comprehensive income (loss) were stranded in retained earnings, including components related to unrealized losses on securities and defined benefit plans. As described in Note

1,

the Corporation elected early adoption of ASU

2018

-

02,

resulting in a reclassification between

two

categories of stockholders’ equity at

January 1, 2018,

with an increase of

$325,000

in retained earnings and a decrease in accumulated other comprehensive loss for the same amount. Management believes the Corporation’s accounting for the effects of the reduction in the federal income tax rate is materially complete at

March 31, 2018.

The provision for income tax for the

three

-month periods ended

March 31, 2018

and

2017

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,
	2018			2017
Income before income tax provision	$	5,116		$	4,418
Income tax provision		741			984
Effective tax rate		14.48	%		22.27	%

The effective tax rate for each period presented differs from the statutory rate of

21%

for the period ended

March 31, 2018

and

35%

for the period ended

March 31, 2017

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

2017

and expects to continue to receive tax credits annually through

2022.

The carrying amount of the Corporation’s investment is

$581,000

at

March 31, 2018

and

$608,000

at

December 31, 2017 (

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

December 31, 2018,

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

$150,000

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

$54,000.

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

$14,000

in the

first

quarter

2018

and

$18,000

in the

first

quarter

2017.

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

2014.

XML

Note 12 - Contingencies

3 Months Ended

Mar. 31, 2018

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 - Revenue Recognition

3 Months Ended

Mar. 31, 2018

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

13.

   REVENUE RECOGNITION

As disclosed in Note

1,

as of

January 1, 2018,

the Corporation adopted ASU

2014

-

09,

Revenue from Contracts with Customers (Topic

606

), as well as subsequent ASUs that modified ASC

606.

The Company has elected to apply the ASU and all related ASUs using the modified retrospective implementation method. The implementation of the guidance had

no

material impact on the measurement or recognition of revenue of prior periods. The Corporation generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity.  Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in applying Topic

606

that significantly affects the determination of the amount and timing of revenue from contracts with customers.

Additional disclosures related to the Corporation’s largest sources of noninterest income within the consolidated statements of income that are subject to ASC

606

are as follows:

Trust and financial management revenue

– C&N Bank’s trust division provides a wide range of financial services, including wealth management services for individuals, businesses and retirement funds, administration of

401

(k) and other retirement plans, retirement planning, estate planning and estate settlement services. Trust clients are located primarily within the Corporation’s geographic markets. Assets held in a fiduciary capacity by C&N Bank are

not

the Corporation’s assets and are therefore

not

included in the consolidated balance sheets. The fair value of trust assets under management was approximately

$916,295,000

at

March 31, 2018

and

$916,580,000

at

December 31, 2017.

Trust and financial management revenue is included within noninterest income in the consolidated statements of income.

Trust revenue is recorded on a cash basis, which is

not

materially different from the accrual basis. The majority (approximately

81%,

based on annual

2017

results) of trust revenue is earned and collected monthly, with the amount determined based on a percentage of the fair value of the trust assets under management. Wealth management fees are contractually agreed with each customer, and fee levels vary based mainly on the size of assets under management. The services provided under such a contract represent a single performance obligation under the ASU because it embodies a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer.

None

of the contracts with trust customers provide for incentive-based fees. In addition to wealth management fees, trust revenue includes fees for provision of services, including employee benefit plan administration, tax return preparation and estate planning and settlement. Fees for such services are billed based on contractual arrangements or established fee schedules, and are typically billed upon completion of providing such services. The costs of acquiring trust customers are incremental and recognized within noninterest expense in the consolidated statements of income.

Service charges on deposit accounts

- Deposits are included as liabilities in the consolidated balance sheets. Service charges on deposit accounts include: overdraft fees, which are charged when customers overdraw their accounts beyond available funds; automated teller machine (ATM) fees charged for withdrawals by deposit customers from other financial institutions’ ATMs; and a variety of other monthly or transactional fees for services provided to retail and business customers, mainly associated with checking accounts. All deposit liabilities are considered to have

one

-day terms and therefore related fees are recognized in income at the time when the services are provided to the customers. Incremental costs of obtaining deposit contracts are

not

significant and are recognized as expense when incurred within noninterest expense in the consolidated statements of income.

Interchange revenue from debit card transactions

– The Corporation issues debit cards to consumer and business customers with checking, savings or money market deposit accounts. Debit card and ATM transactions are processed via electronic systems that involve several parties. The Corporation’s debit card and ATM transaction processing is executed via contractual arrangements with payment processing networks, a processor and a settlement bank. As described above, all deposit liabilities are considered to have

one

-day terms and therefore interchange revenue from customers’ use of their debit cards to initiate transactions are recognized in income at the time when the services are provided and related fees received in the Corporation’s deposit account with the settlement bank. Incremental costs associated with ATM and interchange processing are recognized as expense when incurred within noninterest expense in the consolidated statements of income.

XML

Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2018

Accounting Policies [Abstract]

New Accounting Pronouncements, Policy [Policy Text Block]

RECENT ACCOUNTING PRONOUNCEMENTS

The Financial Accounting Standards Board (FASB) issues Accounting Standards Updates (ASUs) to the FASB Accounting Standards Codification (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.

Recent Accounting Pronouncements - Adopted

In the

first

quarter

2018,

the Corporation adopted ASU

2014

-

09,

Revenue from Contracts with Customers (Topic

606

).Under the ASU, as modified by subsequent ASUs, revenue is recognized when a customer obtains control of promised services in an amount that reflects the consideration the entity expects to receive in exchange for those services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.  The Corporation applied the

five

-step method outlined in the ASU to all revenue streams scoped-in by the ASU and elected the modified retrospective implementation method. Substantially all of the Corporation’s interest income and certain noninterest income were

not

impacted by the adoption of this ASU because the revenue from those contracts with customers is covered by other guidance in U.S. GAAP. The Corporation’s largest sources of noninterest revenue which are subject to the guidance include Trust and financial management revenue, service charges on deposit accounts and interchange revenue from debit card transactions. Adoption of ASU

2014

-

09

did

not

change the timing and pattern of the Corporation’s revenue recognition related to scoped-in noninterest income. New disclosures required by the ASU have been included in Note

13.

In

February 2018,

the FASB issued ASU

2018

-

02,

Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income, which permits, but does

not

require, entities to reclassify tax effects stranded in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act of

2017

to retained earnings. Companies that elect to reclassify these amounts must reclassify stranded tax effects for all items accounted for in accumulated other comprehensive income. The Corporation elected early adoption and adopted this standard update, effective

January 1, 2018.

The Corporation’s stranded tax effects were related to valuation of the net deferred tax asset attributable to items of accumulated other comprehensive income (loss), which are unrealized gains (losses) on available-for-sale securities and unfunded defined benefit plan obligations. Adoption resulted in a reclassification between

two

categories of stockholders’ equity at

January 1, 2018,

with an increase of

$325,000

in retained earnings and a decrease in accumulated other comprehensive loss for the same amount (

no

net change in stockholders’ equity). 

In the

first

quarter

2018,

the Corporation elected early adoption of ASU

2017

-

08,

Receivables – Nonrefundable Fees and Other Costs (Subtopic

310

-

20

). This Update shortens the amortization period for certain callable debt securities held at a premium. Discounts will continue to be amortized to maturity. Adoption resulted in a reduction in retained earnings and corresponding increase in accumulated other comprehensive loss (

no

net change in stockholders’ equity) of

$26,000

at

January 1, 2018

for the cumulative after-tax impact of the change in accounting for debt securities held as of that date.

In the

first

quarter

2018,

the Corporation adopted ASU

2016

-

01,

Recognition and Measurement of Financial Assets and Liabilities. The guidance affects the accounting for equity investments, financial liabilities under the fair value option and the presentation and disclosure requirements of financial instruments. ASU

2016

-

01

was effective for the Corporation on

January 1, 2018

and resulted in: (

1

) separate classification of a marketable equity security previously included in available-for-sale securities on the consolidated balance sheets, (

2

) changes in the fair value of the equity security being captured in the consolidated statements of income and (

3

) a reduction in retained earnings and corresponding increase in accumulated other comprehensive loss (

no

net change in stockholders’ equity) of

$22,000

at

January 1, 2018

for the after-tax impact of the change in accounting for the unrealized loss on the equity security. Additional disclosures related to equity securities are provided in Note

6.

Adoption of the standard also resulted in the use of an exit price determine the fair value of financial instruments

not

measured at fair value in the consolidated balance sheets. Further information regarding valuation of financial instruments is provided in Note

5.

Recent

ly Issued But

Not

Yet Effective

Accounting Pronouncements

ASU

2016

-

02,

Leases (Topic

842

) changes current GAAP by requiring that lease assets and liabilities arising from operating leases be recognized on the balance sheet. 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. 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

will become effective for the Corporation for annual and interim periods beginning in the

first

quarter

2019.

Adoption of ASU

2016

-

02

is

not

expected to have a material impact on the Corporation’s consolidated financial statements. The Corporation leases certain properties and equipment under operating leases that will result in the recognition of lease assets and lease liabilities on the consolidated balance sheet under the ASU; however, the majority of the Corporation’s properties and equipment are owned,

not

leased.

ASU

2016

-

13,

Financial Instruments-Credit Losses (Topic

326

), changes accounting for credit losses on loans receivable and debt securities from an incurred loss methodology to an expected credit loss methodology. Among other things, ASU

2016

-

13

requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Accordingly, ASU

2016

-

13

requires the use of forward-looking information to form credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, though the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, ASU

2016

-

13

amends the accounting for credit losses on debt securities and purchased financial assets with credit deterioration. The amendments in ASU

2016

-

13

will be effective for the Corporation beginning in the

first

quarter

2020.

Earlier adoption is permitted beginning in the

first

quarter

2019;

however, the Corporation does

not

currently plan to early adopt the ASU. The Corporation has formed a cross functional management team that is assessing alternative loss estimation methodologies and the Corporation’s data and system needs in order to evaluate the impact that adoption of this standard will have on the Corporation’s financial condition and results of operations. The Corporation 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.

ASU

2017

-

04,

Intangibles – Goodwill and Other (Topic

350

) simplifies 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

2020.

The Corporation does

not

expect adoption of this ASU to have a material impact on its consolidated financial statements.

XML

Note 2 - Per Share Data (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

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

	3 Months Ended
	March 31,			March 31,
	2018			2017
Basic
Net income	$	4,375,000		$	3,434,000
Less: Dividends and undistributed earnings allocated to participating securities		(23,000	)		(18,000	)
Net income attributable to common shares	$	4,352,000		$	3,416,000
Basic weighted-average common shares outstanding		12,189,471			12,085,729
Basic earnings per common share (a)	$	0.36		$	0.28
Diluted
Net income attributable to common shares	$	4,352,000		$	3,416,000
Basic weighted-average common shares outstanding		12,189,471			12,085,729
Dilutive effect of potential common stock arising from stock options		32,785			45,681
Diluted weighted-average common shares outstanding		12,222,256			12,131,410
Diluted earnings per common share (a)	$	0.36		$	0.28

XML

Note 3 - Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2018

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, 2018
Other comprehensive loss on available-for-sale securities,
Unrealized holding losses on available-for-sale securities	$	(4,839	)	$	1,015		$	(3,824	)
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		93			(19	)		74
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost		(5	)		1			(4	)
Other comprehensive income on unfunded retirement obligations		88			(18	)		70
Total other comprehensive loss	$	(4,751	)	$	997		$	(3,754	)

(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 prior service cost and net actuarial loss 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

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

(In Thousands)						Accumulated
	Unrealized			Unfunded		Other
	(Losses)			Retirement		Comprehensive
	on Securities			Obligations		Loss
Three Months Ended March 31, 2018
Balance, beginning of period	$	(1,566	)	$	59	$	(1,507	)
Impact of change in enacted income tax rate		(337	)		12		(325	)
Impact of change in the method of premium amortization of callable debt securities		26			0		26
Impact of change in the method of accounting for marketable equity security		22			0		22
Other comprehensive (loss) income during three months ended March 31, 2018		(3,824	)		70		(3,754	)
Balance, end of period	$	(5,679	)	$	141	$	(5,538	)

Three Months Ended March 31, 2017
Balance, beginning of period	$	(949	)	$	51	$	(898	)
Other comprehensive income during three months ended March 31, 2017		319			104		423
Balance, end of period	$	(630	)	$	155	$	(475	)

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

	Reclassified from
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Consolidated
Comprehensive Loss Components	C omprehensive Loss			Statements of Income
Amortization of defined benefit pension and postretirement items:
Prior service cost	$	(8	)	Other noninterest expense
Actuarial loss		3		Other noninterest expense
		(5	)	Total before tax
		1		Income tax provision
		(4	)	Net of tax
Total reclassifications for the period	$	(4	)

	Reclassified from
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Consolidated
Comprehensive Loss Components	C omprehensive Loss			Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(145	)	Realized gains on securities, net
		51		Income tax provision
		(94	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(8	)	Other noninterest expense
Actuarial loss		2		Other noninterest expense
		(6	)	Total before tax
		2		Income tax provision
		(4	)	Net of tax
Total reclassifications for the period	$	(98	)

XML

Note 4 - Cash and Due From Banks (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Cash and Cash Equivalents [Table Text Block]

(In thousands)	Mar ch 31,		Dec. 31,
	2018		2017
Cash and cash equivalents	$	34,340	$	37,004
Certificates of deposit		2,520		3,240
Total cash and due from banks	$	36,860	$	40,244

XML

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

3 Months Ended

Mar. 31, 2018

Notes Tables

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

			March 3 1, 201 8
	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 DEBT SECURITIES:
Obligations of U.S. Government agencies	$	0	$	7,803	$	0		$	7,803
Obligations of states and political subdivisions:
Tax-exempt		0		103,403		0			103,403
Taxable		0		24,038		0			24,038
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		49,335		0			49,335
Residential collateralized mortgage obligations		0		124,008		0			124,008
Commercial mortgage-backed securities		0		32,546		0			32,546
Total available-for-sale debt securities		0		341,133		0			341,133
Marketable equity security		956		0		0			956
Servicing rights		0		0		1,369			1,369
Total recurring fair value measurements	$	956	$	341,133	$	1,369		$	343,458
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	4,368		$	4,368
Valuation allowance		0		0		(1,289	)		(1,289	)
Impaired loans, net		0		0		3,079			3,079
Foreclosed assets held for sale		0		0		1,100			1,100
Total nonrecurring fair value measurements	$	0	$	0	$	4,179		$	4,179

			December 31, 201 7
	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 DEBT SECURITIES:
Obligations of U.S. Government agencies	$	0	$	7,873	$	0		$	7,873
Obligations of states and political subdivisions:
Tax-exempt		0		105,111		0			105,111
Taxable		0		25,573		0			25,573
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		52,347		0			52,347
Residential collateralized mortgage obligations		0		131,814		0			131,814
Commercial mortgage-backed securities		0		33,219		0			33,219
Total available-for-sale debt securities		0		355,937		0			355,937
Marketable equity security		971		0		0			971
Servicing rights		0		0		1,299			1,299
Total recurring fair value measurements	$	971	$	355,937	$	1,299		$	358,207
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	3,776		$	3,776
Valuation allowance		0		0		(1,183	)		(1,183	)
Impaired loans, net		0		0		2,593			2,593
Foreclosed assets held for sale		0		0		1,598			1,598
Total nonrecurring fair value measurements	$	0	$	0	$	4,191		$	4,191

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

(In Thousands)	Three Months Ended
	Mar ch 31, 2018		Mar ch 31, 2017
Servicing rights balance, beginning of period	$	1,299	$	1,262
Issuances of servicing rights		50		46
Unrealized gains (losses) included in earnings		20		(30	)
Servicing rights balance, end of period	$	1,369	$	1,278

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

(In Thousands)	Fair Value	March 31, 2018				December 31, 2017
	Hierarchy	Carrying		Fair		Carrying		Fair
	Level	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	34,340	$	34,340	$	37,004	$	37,004
Certificates of deposit	Level 2		2,520		2,508		3,240		3,234
Restricted equity securities (included in Other Assets)	Level 2		6,228		6,228		6,556		6,556
Loans held for sale	Level 1		225		225		765		765
Loans, net	Level 3		808,300		808,653		806,857		789,891
Accrued interest receivable	Level 2		3,899		3,899		4,048		4,048
Financial liabilities:
Deposits with no stated maturity	Level 2		793,351		793,351		794,778		794,778
Time deposits	Level 2		224,730		224,814		213,671		213,734
Short-term borrowings	Level 2		26,482		26,263		61,766		61,643
Long-term borrowings	Level 2		18,122		18,155		9,189		9,256
Accrued interest payable	Level 2		61		61		46		46

Fair Value, Measurements, Nonrecurring [Member]

Notes Tables

Fair Value Measurement Inputs and Valuation Techniques [Table Text Block]

(In Thousands, Except									Weighted-
Percentages)			Valuation						Average)
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	3/31/18		3/31/18		3/31/18		Technique	Inputs	3/31/18
Impaired loans:
Residential mortgage loans - first liens	$	515	$	122	$	393	Sales comparison	Discount to appraised value		26	%
Commercial:
Commercial loans secured by real estate		2,607		884		1,723	Sales comparison	Discount to appraised value		16	%
Commercial and industrial		75		75		0	Sales comparison	Discount to appraised value		100	%
Loans secured by farmland		494		50		444	Sales comparison	Discount to appraised value		53	%
Agricultural Loans		677		158		519	Sales comparison	Discount to appraised value		36	%
Total impaired loans	$	4,368	$	1,289	$	3,079
Foreclosed assets held for sale - real estate:
Residential (1-4 family)	$	396	$	0	$	396	Sales comparison	Discount to appraised value		32	%
Land		632		0		632	Sales comparison	Discount to appraised value		35	%
Commercial real estate		72		0		72	Sales comparison	Discount to appraised value		76	%
Total foreclosed assets held for sale	$	1,100	$	0	$	1,100

(In Thousands, Except									Weighted-
Percentages)			Valuation						Average
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	12/31/17		12/31/17		12/31/17		Technique	Inputs	12/31/17
Impaired loans:
Residential mortgage loans - first liens	$	515	$	122	$	393	Sales comparison	Discount to appraised value		26	%
Commercial:
Commercial loans secured by real estate		2,641		919		1,722	Sales comparison	Discount to appraised value		16	%
Commercial and industrial		126		92		34	Sales comparison	Discount to appraised value		72	%
Loans secured by farmland		494		50		444	Sales comparison	Discount to appraised value		53	%
Total impaired loans	$	3,776	$	1,183	$	2,593
Foreclosed assets held for sale - real estate:
Residential (1-4 family)	$	721	$	0	$	721	Sales comparison	Discount to appraised value		37	%
Land		632		0		632	Sales comparison	Discount to appraised value		35	%
Commercial real estate		245		0		245	Sales comparison	Discount to appraised value		71	%
Total foreclosed assets held for sale	$	1,598	$	0	$	1,598

Fair Value, Measurements, Recurring [Member]

Notes Tables

Fair Value Measurement Inputs and Valuation Techniques [Table Text Block]

	Fair Value at
	3 /3 1 /1 8		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	3 /3 1/18
Servicing rights	$	1,369	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		118.00	%	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
	12/31/1 7		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	12/31/1 7
Servicing rights	$	1,299	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		140.00	%	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

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Note 6 - Securities (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Available-for-sale Securities [Table Text Block]

			March 31, 2018
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	8,023	$	0	$	(220	)	$	7,803
Obligations of states and political subdivisions:
Tax-exempt		103,598		1,651		(1,846	)		103,403
Taxable		24,140		98		(200	)		24,038
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		50,880		66		(1,611	)		49,335
Residential collateralized mortgage obligations		127,886		44		(3,922	)		124,008
Commercial mortgage-backed securities		33,793		0		(1,247	)		32,546
Total available-for-sale-debt securities	$	348,320	$	1,859	$	(9,046	)	$	341,133

			December 31, 2017
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	8,026	$	0	$	(153	)	$	7,873
Obligations of states and political subdivisions:
Tax-exempt		103,673		2,291		(853	)		105,111
Taxable		25,431		226		(84	)		25,573
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		52,992		79		(724	)		52,347
Residential collateralized mortgage obligations		134,314		110		(2,610	)		131,814
Commercial mortgage-backed securities		33,881		4		(666	)		33,219
Total available-for-sale debt securities	$	358,317	$	2,710	$	(5,090	)	$	355,937

Schedule of Unrealized Loss on Investments [Table Text Block]

March 3 1, 2018	Less Than 12 Months					12 Months or More					Total
(In Thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Obligations of U.S. Government agencies	$	0	$	0		$	7,803	$	(220	)	$	7,803	$	(220	)
Obligations of states and political subdivisions:
Tax-exempt		30,641		(439	)		23,636		(1,407	)		54,277		(1,846	)
Taxable		14,526		(143	)		2,245		(57	)		16,771		(200	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		27,259		(718	)		21,227		(893	)		48,486		(1,611	)
Residential collateralized mortgage obligations		55,506		(1,210	)		64,378		(2,712	)		119,884		(3,922	)
Commercial mortgage-backed securities		18,267		(539	)		14,279		(708	)		32,546		(1,247	)
Total temporarily impaired available-for-sale debt securities	$	146,199	$	(3,049	)	$	133,568	$	(5,997	)	$	279,767	$	(9,046	)

December 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	$	0	$	0		$	7,873	$	(153	)	$	7,873	$	(153	)
Obligations of states and political subdivisions:
Tax-exempt		19,050		(135	)		24,391		(718	)		43,441		(853	)
Taxable		9,279		(45	)		2,116		(39	)		11,395		(84	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		25,255		(242	)		22,549		(482	)		47,804		(724	)
Residential collateralized mortgage obligations		50,812		(589	)		68,558		(2,021	)		119,370		(2,610	)
Commercial mortgage-backed securities		14,713		(173	)		14,569		(493	)		29,282		(666	)
Total temporarily impaired available-for-sale debt securities	$	119,109	$	(1,184	)	$	140,056	$	(3,906	)	$	259,165	$	(5,090	)

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

(In Thousands)	3 Months Ended
	Mar ch 31,		Mar ch 31,
	2018		2017
Gross realized gains from sales	$	0	$	161
Gross realized losses from sales		0		(16	)
Net realized gains	$	0	$	145

Investments Classified by Contractual Maturity Date [Table Text Block]

	Amortized		Fair
(In Thousands)	Cost		Value
Due in one year or less	$	18,713	$	18,844
Due from one year through five years		63,703		63,793
Due from five years through ten years		33,100		32,226
Due after ten years		20,245		20,381
Sub-total		135,761		135,244
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		50,880		49,335
Residential collateralized mortgage obligations		127,886		124,008
Commercial mortgage-backed securities		33,793		32,546
Total	$	348,320	$	341,133

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Note 7 - Loans (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

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

Summary of Loans by Type
(In Thousands)	March 31,			Dec. 31,
	2018			2017
Residential mortgage:
Residential mortgage loans - first liens	$	358,786		$	359,987
Residential mortgage loans - junior liens		25,870			25,325
Home equity lines of credit		34,595			35,758
1-4 Family residential construction		25,790			26,216
Total residential mortgage		445,041			447,286
Commercial:
Commercial loans secured by real estate		161,571			159,266
Commercial and industrial		89,346			88,276
Political subdivisions		56,224			59,287
Commercial construction and land		13,232			14,527
Loans secured by farmland		7,015			7,255
Multi-family (5 or more) residential		7,621			7,713
Agricultural loans		5,803			6,178
Other commercial loans		16,079			10,986
Total commercial		356,891			353,488
Consumer		15,417			14,939
Total		817,349			815,713
Less: allowance for loan losses		(9,049	)		(8,856	)
Loans, net	$	808,300		$	806,857

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

Three Months Ended March 31, 2018	Dec. 31,										March 31,
(In Thousands)	2017 Balance		Charge-offs			Recoveries		Provision (Credit)			2018 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	3,200	$	(53	)	$	1	$	(81	)	$	3,067
Residential mortgage loans - junior liens		224		0			1		126			351
Home equity lines of credit		296		0			0		(10	)		286
1-4 Family residential construction		243		0			0		(4	)		239
Total residential mortgage		3,963		(53	)		2		31			3,943
Commercial:
Commercial loans secured by real estate		2,584		(21	)		0		72			2,635
Commercial and industrial		1,065		0			2		(31	)		1,036
Commercial construction and land		150		0			0		(13	)		137
Loans secured by farmland		105		0			0		(3	)		102
Multi-family (5 or more) residential		172		0			0		(3	)		169
Agricultural loans		57		0			0		148			205
Other commercial loans		102		0			0		47			149
Total commercial		4,235		(21	)		2		217			4,433
Consumer		159		(41	)		12		44			174
Unallocated		499		0			0		0			499
Total Allowance for Loan Losses	$	8,856	$	(115	)	$	16	$	292		$	9,049

Three Months Ended March 31, 2017	Dec. 31,										March 31,
(In Thousands)	2016 Balance		Charge-offs			Recoveries		Provision (Credit)			2017 B alance
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

Financing Receivable Credit Quality Indicators [Table Text Block]

March 31, 2018
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	349,713	$	313	$	8,708	$	52	$	358,786
Residential mortgage loans - junior liens		25,328		100		442		0		25,870
Home equity lines of credit		34,045		99		451		0		34,595
1-4 Family residential construction		25,790		0		0		0		25,790
Total residential mortgage		434,876		512		9,601		52		445,041
Commercial:
Commercial loans secured by real estate		152,743		924		7,904		0		161,571
Commercial and Industrial		82,445		5,412		1,478		11		89,346
Political subdivisions		56,224		0		0		0		56,224
Commercial construction and land		13,155		0		77		0		13,232
Loans secured by farmland		5,001		626		1,376		12		7,015
Multi-family (5 or more) residential		7,047		0		574		0		7,621
Agricultural loans		4,851		268		684		0		5,803
Other commercial loans		16,007		0		72		0		16,079
Total commercial		337,473		7,230		12,165		23		356,891
Consumer		15,383		0		34		0		15,417
Totals	$	787,732	$	7,742	$	21,800	$	75	$	817,349

December 31, 2017
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	350,609	$	307	$	9,019	$	52	$	359,987
Residential mortgage loans - junior liens		24,795		104		426		0		25,325
Home equity lines of credit		35,233		61		464		0		35,758
1-4 Family residential construction		26,216		0		0		0		26,216
Total residential mortgage		436,853		472		9,909		52		447,286
Commercial:
Commercial loans secured by real estate		150,806		936		7,524		0		159,266
Commercial and Industrial		82,724		3,896		1,645		11		88,276
Political subdivisions		59,287		0		0		0		59,287
Commercial construction and land		14,449		0		78		0		14,527
Loans secured by farmland		5,283		581		1,379		12		7,255
Multi-family (5 or more) residential		7,130		0		583		0		7,713
Agricultural loans		5,203		270		705		0		6,178
Other commercial loans		10,913		0		73		0		10,986
Total commercial		335,795		5,683		11,987		23		353,488
Consumer		14,853		0		86		0		14,939
Totals	$	787,501	$	6,155	$	21,982	$	75	$	815,713

Impaired Financing Receivable by Portfolio Segment [Table Text Block]

March 31, 2018	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	969	$	357,817	$	358,786	$	0	$	3,067	$	3,067
Residential mortgage loans - junior liens		300		25,570		25,870		122		229		351
Home equity lines of credit		0		34,595		34,595		0		286		286
1-4 Family residential construction		0		25,790		25,790		0		239		239
Total residential mortgage		1,269		443,772		445,041		122		3,821		3,943
Commercial:
Commercial loans secured by real estate		5,982		155,589		161,571		884		1,751		2,635
Commercial and industrial		498		88,848		89,346		157		879		1,036
Political subdivisions		0		56,224		56,224		0		0		0
Commercial construction and land		0		13,232		13,232		0		137		137
Loans secured by farmland		1,362		5,653		7,015		50		52		102
Multi-family (5 or more) residential		392		7,229		7,621		0		169		169
Agricultural loans		684		5,119		5,803		158		47		205
Other commercial loans		0		16,079		16,079		0		149		149
Total commercial		8,918		347,973		356,891		1,249		3,184		4,433
Consumer		19		15,398		15,417		0		174		174
Unallocated												499
Total	$	10,206	$	807,143	$	817,349	$	1,371	$	7,179	$	9,049

December 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	$	984	$	359,003	$	359,987	$	0	$	3,200	$	3,200
Residential mortgage loans - junior liens		302		25,023		25,325		122		102		224
Home equity lines of credit		0		35,758		35,758		0		296		296
1-4 Family residential construction		0		26,216		26,216		0		243		243
Total residential mortgage		1,286		446,000		447,286		122		3,841		3,963
Commercial:
Commercial loans secured by real estate		5,873		153,393		159,266		919		1,665		2,584
Commercial and industrial		568		87,708		88,276		188		877		1,065
Political subdivisions		0		59,287		59,287		0		0		0
Commercial construction and land		0		14,527		14,527		0		150		150
Loans secured by farmland		1,365		5,890		7,255		50		55		105
Multi-family (5 or more) residential		392		7,321		7,713		0		172		172
Agricultural loans		7		6,171		6,178		0		57		57
Other commercial loans		0		10,986		10,986		0		102		102
Total commercial		8,205		345,283		353,488		1,157		3,078		4,235
Consumer		20		14,919		14,939		0		159		159
Unallocated												499
Total	$	9,511	$	806,202	$	815,713	$	1,279	$	7,078	$	8,856

Impaired Financing Receivables [Table Text Block]

(In Thousands)	March 31, 2018						December 31, 2017
	Unpaid						Unpaid
	Principal		Recorded		Related		Principal		Recorded		Related
	Balance		Investment		Allowance		Balance		Investment		Allowance
With no related allowance recorded:
Residential mortgage loans - first liens	$	725	$	696	$	0	$	740	$	711	$	0
Residential mortgage loans - junior liens		58		58		0		60		60		0
Commercial loans secured by real estate		3,375		3,375		0		3,230		3,230		0
Commercial and industrial		92		92		0		119		119		0
Loans secured by farmland		868		868		0		871		871		0
Multi-family (5 or more) residential		987		392		0		987		392		0
Agricultural loans		7		7		0		8		8		0
Consumer		19		19		0		20		20		0
Total with no related allowance recorded		6,131		5,507		0		6,035		5,411		0
With a related allowance recorded:
Residential mortgage loans - first liens		273		273		0		273		273		0
Residential mortgage loans - junior liens		242		242		122		242		242		122
Commercial loans secured by real estate		2,607		2,607		884		2,641		2,641		919
Commercial and industrial		406		406		157		449		449		188
Loans secured by farmland		494		494		50		495		495		50
Agricultural loans		677		677		158		0		0		0
Total with a related allowance recorded		4,699		4,699		1,371		4,100		4,100		1,279
Total	$	10,830	$	10,206	$	1,371	$	10,135	$	9,511	$	1,279

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,
	2018		2017		2018		2017
Residential mortgage:
Residential mortgage loans - first lien	$	1,046	$	748	$	19	$	9
Residential mortgage loans - junior lien		301		67		3		1
Total residential mortgage		1,347		815		22		10
Commercial:
Commercial loans secured by real estate		5,882		6,889		35		56
Commercial and industrial		508		247		6		3
Loans secured by farmland		1,364		1,390		6		8
Multi-family (5 or more) residential		392		392		0		0
Agricultural loans		346		12		11		1
Total commercial		8,492		8,930		58		68
Consumer		19		33		0		0
Total	$	9,858	$	9,778	$	80	$	78

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

(In Thousands)	March 31, 2018				December 31, 2017
	Past Due				Past Due
	90+ Days and				90+ Days and
	Accruing		Nonaccrual		Accruing		Nonaccrual
Residential mortgage:
Residential mortgage loans - first liens	$	1,840	$	4,354	$	2,340	$	5,131
Residential mortgage loans - junior liens		10		242		105		242
Home equity lines of credit		230		42		203		44
Total residential mortgage		2,080		4,638		2,648		5,417
Commercial:
Commercial loans secured by real estate		128		6,000		175		5,645
Commercial and industrial		347		498		603		517
Commercial construction and land		25		52		26		52
Loans secured by farmland		215		1,307		271		1,308
Multi-family (5 or more) residential		0		392		0		392
Agricultural loans		0		684		0		7
Total commercial		715		8,933		1,075		7,921
Consumer		0		16		1		66
Totals	$	2,795	$	13,587	$	3,724	$	13,404

Past Due Financing Receivables [Table Text Block]

	As of March 31, 2018								As of December 31, 2017
	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	$	351,132	$	4,475	$	3,179	$	358,786	$	347,032	$	7,967	$	4,988	$	359,987
Residential mortgage loans - junior liens		25,716		144		10		25,870		25,133		87		105		25,325
Home equity lines of credit		33,960		381		254		34,595		34,789		732		237		35,758
1-4 Family residential construction		25,651		139		0		25,790		25,667		549		0		26,216
Total residential mortgage		436,459		5,139		3,443		445,041		432,621		9,335		5,330		447,286
Commercial:
Commercial loans secured by real estate		157,605		581		3,385		161,571		155,917		311		3,038		159,266
Commercial and industrial		88,386		549		411		89,346		87,306		303		667		88,276
Political subdivisions		56,224		0		0		56,224		59,287		0		0		59,287
Commercial construction and land		12,839		316		77		13,232		14,400		49		78		14,527
Loans secured by farmland		5,548		494		973		7,015		6,226		12		1,017		7,255
Multi-family (5 or more) residential		7,229		0		392		7,621		7,321		0		392		7,713
Agricultural loans		5,651		145		7		5,803		6,114		57		7		6,178
Other commercial loans		16,079		0		0		16,079		10,986		0		0		10,986
Total commercial		349,561		2,085		5,245		356,891		347,557		732		5,199		353,488
Consumer		15,307		94		16		15,417		14,760		123		56		14,939
Totals	$	801,327	$	7,318	$	8,704	$	817,349	$	794,938	$	10,190	$	10,585	$	815,713

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, 2018 Nonaccrual Totals	$	6,287	$	1,391	$	5,909	$	13,587
December 31, 2017 Nonaccrual Totals	$	5,802	$	741	$	6,861	$	13,404

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than			30-89	90+
	30 Days		Days		Days		Nonaccrual		Total
March 31, 2018 Totals	$	774	$	0	$	0	$	2,987	$	3,761
December 31, 2017 Totals	$	636	$	0	$	0	$	3,027	$	3,663

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

(Balances in Thousands)
	March 31, 2018				March 31, 2017
	Number				Number
	of		Recorded		of		Recorded
	Loans		Investment		Loans		Investment
Residential mortgage - first liens		0	$	0		2	$	293
Residential mortgage - junior liens		0		0		1		28
Consumer		0		0		1		26
Total		0	$	0		4	$	347

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

(In Thousands)	March 31,		Dec. 31,
	2018		2017
Foreclosed residential real estate	$	396	$	721

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

(In Thousands)	March 31,		Dec. 31,
	2018		2017
Residential real estate in process of foreclosure	$	1,470	$	1,789

Troubled Debt Restructuring [Member]

Notes Tables

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

(Balances in Thousands)
	March 31, 2018				March 31, 2017
			Post-				Post-
	Number		Modification		Number		Modification
	of		Recorded		of		Recorded
	Loans		Investment		Loans		Investment
Residential mortgage - first liens,
Reduced monthly payments for a six-month period		1	$	80		0	$	0
Commercial loans secured by real estate,
Extended interest only payments for a six-month period		2		36		0		0
Commercial and industrial,
Extended interest only payments for a six-month period		1		46		0		0
Total		4	$	162		0	$	0

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Note 8 - Borrowed Funds (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

Schedule of Short-term Debt [Table Text Block]

(In Thousands)	Mar ch 31,		Dec. 31,
	2018		2017
FHLB-Pittsburgh borrowings	$	21,000	$	58,000
Customer repurchase agreements		5,482		3,766
Total short-term borrowings	$	26,482	$	61,766

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

(In Thousands)	Mar ch 31,		Dec. 31,
	2018		2017
Loan maturing in November 2018 with a rate of 1.63%	$	3,000	$	3,000
Loan maturing in December 2018 with a rate of 1.35%		3,000		3,000
Loan maturing in January 2019 with a rate of 1.83%		2,000		2,000
Loan maturing in February 2019 with a rate of 1.95%		3,000		0
Loan maturing in March 2019 with a rate of 2.15%		3,000		0
Loan maturing in April 2019 with a rate of 2.24%		3,000		0
Loan maturing in April 2020 with a rate of 4.79%		416		463
Loan maturing in June 2025 with a rate of 4.91%		706		726
Total long-term FHLB-Pittsburgh borrowings	$	18,122	$	9,189

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Note 9 - Defined Benefit Plans (Tables)

3 Months Ended

Mar. 31, 2018

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,
	2018			2017			2018			2017
Service cost	$	0		$	0		$	10		$	9
Interest cost		6			6			13			14
Expected return on plan assets		(5	)		(8	)		0			0
Amortization of prior service cost		0			0			(8	)		(8	)
Recognized net actuarial loss		3			2			0			0
Net periodic benefit cost	$	4		$	0		$	15		$	15

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Note 11 - Income Taxes (Tables)

3 Months Ended

Mar. 31, 2018

Notes Tables

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

	March 31,		December 31,
(In Thousands)	2018		2017
Deferred tax assets:
Unrealized holding losses on securities:
Included in accumulated other comprehensive loss	$	1,508	$	843
Included in retained earnings		0		(337	)
Allowance for loan losses		1,935		1,894
Other deferred tax assets		1,544		1,726
Total deferred tax assets		4,987		4,126
Deferred tax liabilities:
Defined benefit plans - ASC 835:
Included in accumulated other comprehensive loss		37		31
Included in retained earnings		0		(12	)
Bank premises and equipment		765		751
Core deposit intangibles		2		3
Other deferred tax liabilities		63		64
Total deferred tax liabilities		867		837
Deferred tax asset, net	$	4,120	$	3,289

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

	Three Months Ended
(Dollars In thousands)	March 31,
	2018			2017
Income before income tax provision	$	5,116		$	4,418
Income tax provision		741			984
Effective tax rate		14.48	%		22.27	%

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Note 1 - Basis of Interim Presentation and Status of Recent Accounting Pronouncements (Details Textual) - USD ($)		Jan. 01, 2018	Dec. 31, 2017
Accounting Standards Update 2018-02 Member
Cumulative Effect of New Accounting Principle in Period of Adoption	[1]		$ 0
Accounting Standards Update 2018-02 Member | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption		$ 325,000	325,000	[1]
Accounting Standards Update 2018-02 Member | AOCI Attributable to Parent [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption		(325,000)	(325,000)	[1]
Accounting Standards Update 2017-08 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	[2]		0
Accounting Standards Update 2017-08 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption		(26,000)	(26,000)	[2]
Accounting Standards Update 2017-08 [Member] | AOCI Attributable to Parent [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption		26,000	26,000	[2]
Accounting Standards Update 2016-01 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	[3]		0
Accounting Standards Update 2016-01 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption		(22,000)	(22,000)	[3]
Accounting Standards Update 2016-01 [Member] | AOCI Attributable to Parent [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption		$ 22,000	$ 22,000	[3]

[1] As described in more detail in the Recent Accounting Pronouncements - Adopted section of Note 1, this reclassification resulted from adoption of Accounting Standards Update (ASU) 2018-02, Reclassification of Certain tax Effects from Accumulated Other Comprehensive Income, effective January 1, 2018.

[2] As described in more detail in the Recent Accounting Pronouncements - Adopted section of Note 1, this reclassification resulted from adoption of ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20), effective January 1, 2018.

[3] As described in more detail in the Recent Accounting Pronouncements - Adopted section of Note 1, this reclassification resulted from adoption of ASU 2016-01, Recognition and Measurement of Financial Assets and Liabilities, effective January 1, 2018.

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Note 2 - Per Share Data (Details Textual) - shares	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Weighted Average Number of Shares, Restricted Stock	65,204	65,208
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	0	0

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Note 2 - Per Share Data - Net Income Per Share (Details) - USD ($)		3 Months Ended
		Mar. 31, 2018	Mar. 31, 2017
Net income		$ 4,375,000	$ 3,434,000
Less: Dividends and undistributed earnings allocated to participating securities		(23,000)	(18,000)
Net income attributable to common shares		$ 4,352,000	$ 3,416,000
Basic weighted-average common shares outstanding (in shares)		12,189,471	12,085,729
Basic earnings per common share (a) (in dollars per share)	[1]	$ 0.36	$ 0.28
Net income attributable to common shares		$ 4,352,000	$ 3,416,000
Dilutive effect of potential common stock arising from stock options (in shares)		32,785	45,681
Diluted weighted-average common shares outstanding (in shares)		12,222,256	12,131,410
Diluted earnings per common share (a) (in dollars per share)	[1]	$ 0.36	$ 0.28

[1] Basic and diluted earnings per share under the two-class method are determined on net income reported on the consolidated statements of income, less earnings allocated to nonvested restricted shares with nonforfeitable dividends (participating securities).

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Note 3 - Comprehensive Income - Components of Other Comprehensive Income (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Unrealized holding gains (losses) on available-for-sale securities, before tax amount	$ (4,839)	$ 636
Unrealized holding gains (losses) on available-for-sale securities, income tax effect	1,015	(223)
Unrealized holding (income) losses on available-for-sale securities, net of tax amount	(3,824)	413
Changes from plan amendments and actuarial gains and losses included in other comprehensive income, before tax amount	93	166
Changes from plan amendments and actuarial gains and losses included in other comprehensive income, income tax effect	(19)	(58)
Changes from plan amendments and actuarial gains and losses included in other comprehensive income, net of tax amount	74	108
Amortization of net transition obligation, prior service cost and net actuarial gain included in net periodic benefit cost, before tax amount	(5)	(6)
Amortization of net transition obligation, prior service cost and net actuarial gain included in net periodic benefit cost, income tax effect	1	2
Amortization of net transition obligation, prior service cost and net actuarial gain included in net periodic benefit cost, net of tax amount	(4)	(4)
Other comprehensive (income) loss on unfunded retirement obligations, before tax amount	88	160
Other comprehensive income (loss) on unfunded retirement obligations, income tax effect	(18)	(56)
Other comprehensive income (loss) on unfunded retirement obligations, net of tax amount	70	104
Total other comprehensive income, before tax amount	(4,751)	651
Total other comprehensive income (loss), income tax effect	997	(228)
Net other comprehensive (loss) income	(3,754)	423
Reclassification adjustment for (gains) realized in income, before tax amount		(145)
Reclassification adjustment for (gains) realized in income, income tax effect		51
Reclassification adjustment for (gains) realized in income, net of tax amount		(94)
Other comprehensive income on available-for-sale securities, before tax amount	$ (4,839)	491
Other comprehensive income on available-for-sale securities, income tax effect		(172)
Other comprehensive income on available-for-sale securities, net of tax amount		$ 319

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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, 2018	Mar. 31, 2017
Balance		$ 188,443	$ 186,008
Other comprehensive income (loss), net		(3,754)	423
Balance		186,382	187,350
Accounting Standards Update 2018-02 Member
Impact of change in enacted income tax rate (a)	[1]	0
Accounting Standards Update 2017-08 [Member]
Impact of change in enacted income tax rate (a)	[2]	0
Accounting Standards Update 2016-01 [Member]
Impact of change in enacted income tax rate (a)	[3]	0
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Balance		(1,566)	(949)
Other comprehensive income (loss), net		(3,824)	319
Balance		(5,679)	(630)
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member] | Accounting Standards Update 2018-02 Member
Impact of change in enacted income tax rate (a)		(337)
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member] | Accounting Standards Update 2017-08 [Member]
Impact of change in enacted income tax rate (a)		26
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member] | Accounting Standards Update 2016-01 [Member]
Impact of change in enacted income tax rate (a)		22
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Balance		59	51
Other comprehensive income (loss), net		70	104
Balance		141	155
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member] | Accounting Standards Update 2018-02 Member
Impact of change in enacted income tax rate (a)		12
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member] | Accounting Standards Update 2017-08 [Member]
Impact of change in enacted income tax rate (a)		0
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member] | Accounting Standards Update 2016-01 [Member]
Impact of change in enacted income tax rate (a)		0
AOCI Attributable to Parent [Member]
Balance		(1,507)	(898)
Other comprehensive income (loss), net		(3,754)	423
Balance		(5,538)	$ (475)
AOCI Attributable to Parent [Member] | Accounting Standards Update 2018-02 Member
Impact of change in enacted income tax rate (a)	[1]	(325)
AOCI Attributable to Parent [Member] | Accounting Standards Update 2017-08 [Member]
Impact of change in enacted income tax rate (a)	[2]	26
AOCI Attributable to Parent [Member] | Accounting Standards Update 2016-01 [Member]
Impact of change in enacted income tax rate (a)	[3]	$ 22

[1] As described in more detail in the Recent Accounting Pronouncements - Adopted section of Note 1, this reclassification resulted from adoption of Accounting Standards Update (ASU) 2018-02, Reclassification of Certain tax Effects from Accumulated Other Comprehensive Income, effective January 1, 2018.

[2] As described in more detail in the Recent Accounting Pronouncements - Adopted section of Note 1, this reclassification resulted from adoption of ASU 2017-08, Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20), effective January 1, 2018.

[3] As described in more detail in the Recent Accounting Pronouncements - Adopted section of Note 1, this reclassification resulted from adoption of ASU 2016-01, Recognition and Measurement of Financial Assets and Liabilities, effective January 1, 2018.

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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, 2018	Mar. 31, 2017
Income tax provision	$ 741	$ 984
Net income	(4,375)	(3,434)
Total before tax	(5,116)	(4,418)
Unrealized gains and losses on available-for-sale securities	0	(145)
Reclassification out of Accumulated Other Comprehensive Income [Member]
Net income	(4)	(98)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Income tax provision	(5)	51
Net income	1	(94)
Unrealized gains and losses on available-for-sale securities		(145)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Prior service cost	(8)	(8)
Actuarial loss	3	2
Income tax provision		2
Net income		(4)
Total before tax	$ (4)	$ (6)

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Note 4 - Cash and Due From Banks (Details Textual) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Restricted Cash and Cash Equivalents, Current, Total	$ 16,376,000	$ 17,178,000

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Note 4 - Cash and Due From Banks - Summary of Cash and Due From Banks (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Cash and cash equivalents	$ 34,340	$ 37,004
Certificates of deposit	2,520	3,240
Total cash and due from banks	$ 36,860	$ 40,244

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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, 2018	Dec. 31, 2017
Available-for-sale securities	$ 341,133	$ 355,937
Marketable equity security	956	971
Unpaid principal - with allowance	4,699	4,100
Valuation allowance	(1,371)	(1,279)
Impaired loans, net	4,699	4,100
Marketable equity security	956	971
Nonrecurring fair value measurements
Unpaid principal - with allowance	4,699	4,100
Valuation allowance	(1,371)	(1,279)
Impaired loans, net	4,699	4,100
US Government Agencies Debt Securities [Member]
Available-for-sale securities	7,803	7,873
Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities	103,403	105,111
Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities	24,038	25,573
Residential Pass-Through Securities [Member]
Available-for-sale securities	49,335	52,347
Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities	124,008	131,814
Commercial Mortgage Backed Securities [Member]
Available-for-sale securities	32,546	33,219
Fair Value, Measurements, Recurring [Member]
Fair value	1,369	1,299
Total asset fair value measurements	343,458	358,207
Nonrecurring fair value measurements
Total asset fair value measurements	343,458	358,207
Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member]
Available-for-sale securities	7,803	7,873
Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities	103,403	105,111
Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities	24,038	25,573
Fair Value, Measurements, Recurring [Member] | Residential Pass-Through Securities [Member]
Available-for-sale securities	49,335	52,347
Fair Value, Measurements, Recurring [Member] | Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities	124,008	131,814
Fair Value, Measurements, Recurring [Member] | Commercial Mortgage Backed Securities [Member]
Available-for-sale securities	32,546	33,219
Fair Value, Measurements, Nonrecurring [Member]
Total asset fair value measurements	4,179	4,191
Unpaid principal - with allowance	4,368	3,776
Valuation allowance	(1,289)	(1,183)
Impaired loans, net	3,079	2,593
Foreclosed residential real estate	1,100	1,598
Nonrecurring fair value measurements
Unpaid principal - with allowance	4,368	3,776
Valuation allowance	(1,289)	(1,183)
Impaired loans, net	3,079	2,593
Foreclosed residential real estate	1,100	1,598
Total asset fair value measurements	4,179	4,191
Fair Value, Inputs, Level 1 [Member]
Available-for-sale securities	0	0
Marketable equity security	956	971
Marketable equity security	956	971
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Fair value	0	0
Total asset fair value measurements	956	971
Nonrecurring fair value measurements
Total asset fair value measurements	956	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, Nonrecurring [Member]
Total asset fair value measurements	0	0
Unpaid principal - with allowance	0	0
Valuation allowance	0	0
Impaired loans, net	0	0
Foreclosed residential real estate	0	0
Nonrecurring fair value measurements
Unpaid principal - with allowance	0	0
Valuation allowance	0	0
Impaired loans, net	0	0
Foreclosed residential real estate	0	0
Total asset fair value measurements	0	0
Fair Value, Inputs, Level 2 [Member]
Available-for-sale securities	341,133	355,937
Marketable equity security	0	0
Marketable equity security	0	0
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Fair value	0	0
Total asset fair value measurements	341,133	355,937
Nonrecurring fair value measurements
Total asset fair value measurements	341,133	355,937
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member]
Available-for-sale securities	7,803	7,873
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities	103,403	105,111
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities	24,038	25,573
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Residential Pass-Through Securities [Member]
Available-for-sale securities	49,335	52,347
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities	124,008	131,814
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Commercial Mortgage Backed Securities [Member]
Available-for-sale securities	32,546	33,219
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Total asset fair value measurements	0	0
Unpaid principal - with allowance	0	0
Valuation allowance	0	0
Impaired loans, net	0	0
Foreclosed residential real estate	0	0
Nonrecurring fair value measurements
Unpaid principal - with allowance	0	0
Valuation allowance	0	0
Impaired loans, net	0	0
Foreclosed residential real estate	0	0
Total asset fair value measurements	0	0
Fair Value, Inputs, Level 3 [Member]
Available-for-sale securities	0	0
Marketable equity security	0	0
Marketable equity security	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Fair value	1,369	1,299
Total asset fair value measurements	1,369	1,299
Nonrecurring fair value measurements
Total asset fair value measurements	1,369	1,299
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, Nonrecurring [Member]
Total asset fair value measurements	4,179	4,191
Unpaid principal - with allowance	4,368	3,776
Valuation allowance	(1,289)	(1,183)
Impaired loans, net	3,079	2,593
Foreclosed residential real estate	1,100	1,598
Nonrecurring fair value measurements
Unpaid principal - with allowance	4,368	3,776
Valuation allowance	(1,289)	(1,183)
Impaired loans, net	3,079	2,593
Foreclosed residential real estate	1,100	1,598
Total asset fair value measurements	$ 4,179	$ 4,191

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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) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017
Fair Value, Measurements, Recurring [Member]
Fair value	$ 1,369,000	$ 1,299,000
Valuation Technique, Discounted Cash Flow [Member] | Servicing Rights Assets [Member]
Discount rate	13.00%	13.00%
Weighted-average PSA	118.00%	140.00%
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%
Valuation Technique, Discounted Cash Flow [Member] | Fair Value, Measurements, Recurring [Member]
Fair value	$ 1,369,000	$ 1,299,000

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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, 2018	Mar. 31, 2017
Servicing rights balance, beginning of period	$ 1,299	$ 1,262
Issuances of servicing rights	50	46
Unrealized gains (losses) included in earnings	20	(30)
Servicing rights balance, end of period	$ 1,369	$ 1,278

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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, 2018	Dec. 31, 2017
Recorded investment - with allowance	$ 4,699	$ 4,100
Related allowance	1,371	1,279
Fair Value, Measurements, Nonrecurring [Member]
Recorded investment - with allowance	3,079	2,593
Related allowance	1,289	1,183
Fair value	3,079	2,593
Foreclosed assets held for sale	1,100	1,598
Fair value	1,100	1,598
Land Receivable [Member] | Valuation, Market Approach [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair value	632	632
Commercial Real Estate Receivables [Member] | Valuation, Market Approach [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair value	72	245
Residential Portfolio Segment [Member]
Foreclosed assets held for sale	396	721
Residential Portfolio Segment [Member] | Valuation, Market Approach [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair value	396	721
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Valuation, Market Approach [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair value	393	393
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Recorded investment - with allowance	2,607	2,641
Related allowance	884	919
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Valuation, Market Approach [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair value	1,723	1,722
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Recorded investment - with allowance	406	449
Related allowance	157	188
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Valuation, Market Approach [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair value	0	34
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Recorded investment - with allowance	494	495
Related allowance	50	50
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Valuation, Market Approach [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair value	444	444
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Recorded investment - with allowance	677	0
Related allowance	158	0
Commercial Portfolio Segment [Member] | Agricultural Loans [Member] | Valuation, Market Approach [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair value	519
Impaired Loans [Member]
Recorded investment - with allowance	4,368	3,776
Related allowance	$ 1,289	$ 1,183
Discount rate
Impaired Loans [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Valuation, Market Approach [Member]
Recorded investment - with allowance	$ 515	$ 515
Related allowance	$ 122	$ 122
Discount rate	26.00%	26.00%
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Valuation, Market Approach [Member]
Recorded investment - with allowance	$ 2,607	$ 2,641
Related allowance	$ 884	$ 919
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Valuation, Market Approach [Member] | Weighted Average [Member]
Discount rate	16.00%	16.00%
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Valuation, Market Approach [Member]
Recorded investment - with allowance	$ 75	$ 126
Related allowance	$ 75	$ 92
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Valuation, Market Approach [Member] | Weighted Average [Member]
Discount rate	100.00%	72.00%
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Valuation, Market Approach [Member]
Recorded investment - with allowance	$ 494	$ 494
Related allowance	$ 50	$ 50
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Valuation, Market Approach [Member] | Weighted Average [Member]
Discount rate	53.00%	53.00%
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Agricultural Loans [Member] | Valuation, Market Approach [Member]
Recorded investment - with allowance	$ 677
Related allowance	$ 158
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Agricultural Loans [Member] | Valuation, Market Approach [Member] | Weighted Average [Member]
Discount rate	36.00%
Foreclosed Assets Held For Sale [Member]
Foreclosed assets held for sale	$ 1,100	$ 1,598
Valuation allowance	0	0
Foreclosed Assets Held For Sale [Member] | Land Receivable [Member] | Valuation, Market Approach [Member]
Foreclosed assets held for sale	632	632
Valuation allowance	$ 0	$ 0
Foreclosed Assets Held For Sale [Member] | Land Receivable [Member] | Valuation, Market Approach [Member] | Weighted Average [Member]
Discount rate	35.00%	35.00%
Foreclosed Assets Held For Sale [Member] | Commercial Real Estate Receivables [Member] | Valuation, Market Approach [Member]
Foreclosed assets held for sale	$ 72	$ 245
Valuation allowance	$ 0	$ 0
Foreclosed Assets Held For Sale [Member] | Commercial Real Estate Receivables [Member] | Valuation, Market Approach [Member] | Weighted Average [Member]
Discount rate	76.00%	71.00%
Foreclosed Assets Held For Sale [Member] | Residential Portfolio Segment [Member] | Valuation, Market Approach [Member]
Foreclosed assets held for sale	$ 396	$ 721
Valuation allowance	$ 0	$ 0
Foreclosed Assets Held For Sale [Member] | Residential Portfolio Segment [Member] | Valuation, Market Approach [Member] | Weighted Average [Member]
Discount rate	32.00%	37.00%

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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, 2018	Dec. 31, 2017
Reported Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Financial assets:
Cash and cash equivalents	$ 34,340	$ 37,004
Loans held for sale	225	765
Reported Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Financial assets:
Certificates of deposit	2,520	3,240
Restricted equity securities (included in Other Assets)	6,228	6,556
Accrued interest receivable	3,899	4,048
Financial liabilities:
Short-term borrowings	26,482	61,766
Long-term borrowings	18,122	9,189
Accrued interest payable	61	46
Reported Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member] | Deposits With No Stated Maturity [Member]
Financial liabilities:
Deposits, fair value	793,351	794,778
Reported Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member] | Time Deposits [Member]
Financial liabilities:
Deposits, fair value	224,730	213,671
Reported Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Financial assets:
Loans, net	808,300	806,857
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Financial assets:
Cash and cash equivalents	34,340	37,004
Loans held for sale	225	765
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Financial assets:
Certificates of deposit	2,508	3,234
Restricted equity securities (included in Other Assets)	6,228	6,556
Accrued interest receivable	3,899	4,048
Financial liabilities:
Short-term borrowings	26,263	61,643
Long-term borrowings	18,155	9,256
Accrued interest payable	61	46
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member] | Deposits With No Stated Maturity [Member]
Financial liabilities:
Deposits, fair value	793,351	794,778
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member] | Time Deposits [Member]
Financial liabilities:
Deposits, fair value	224,814	213,734
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Financial assets:
Loans, net	$ 808,653	$ 789,891

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Note 6 - Securities (Details Textual)		3 Months Ended		12 Months Ended
		Mar. 31, 2018 USD ($)	Mar. 31, 2017 USD ($)	Dec. 31, 2017 USD ($)		Jan. 01, 2018 USD ($)
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net, Available-for-sale Securities		$ 0	$ 0
Equity Securities, FV-NI, Unrealized Gain (Loss), Total		(15,000)	0
Equity Securities, FV-NI, Realized Gain (Loss), Total		0	$ 0
Other Assets [Member] | Federal Home Loan Bank of Pittsburgh [Member]
Federal Home Loan Bank Stock		$ 5,142,000		$ 6,426,000
Accounting Standards Update 2016-01 [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	[1]			0
Accounting Standards Update 2016-01 [Member] | Retained Earnings [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption				(22,000)	[1]	$ (22,000)
Accounting Standards Update 2016-01 [Member] | AOCI Attributable to Parent [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption				$ 22,000	[1]	$ 22,000
Mutual Fund [Member]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Total		1		1
Equity Securities Unrealized Loss Cumulative Amount		$ 44,000		$ 29,000
Mutual Fund [Member] | Other Noninterest Income [Member]
Equity Securities, FV-NI, Unrealized Gain (Loss), Total		(15,000)
FHLB Stock [Member] | Federal Home Loan Bank of Pittsburgh [Member]
Other than Temporary Impairment Losses, Investments, Total		0		0
Investment Securities [Member]
Debt Securities, Available-for-sale, Restricted		$ 209,321,000		$ 217,925,000

[1] As described in more detail in the Recent Accounting Pronouncements - Adopted section of Note 1, this reclassification resulted from adoption of ASU 2016-01, Recognition and Measurement of Financial Assets and Liabilities, effective January 1, 2018.

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Note 6 - Securities - Available-for-sale Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Total, amortized cost	$ 348,320	$ 358,317
Available-for-sale securities, gross unrealized holding gains	1,859	2,710
Available-for-sale securities, gross unrealized holding losses	(9,046)	(5,090)
Available-for-sale debt securities, at fair value	341,133	355,937
US Government Agencies Debt Securities [Member]
Total, amortized cost	8,023	8,026
Available-for-sale securities, gross unrealized holding gains	0	0
Available-for-sale securities, gross unrealized holding losses	(220)	(153)
Available-for-sale debt securities, at fair value	7,803	7,873
Obligations of States and Political Subdivisions Tax Exempt [Member]
Total, amortized cost	103,598	103,673
Available-for-sale securities, gross unrealized holding gains	1,651	2,291
Available-for-sale securities, gross unrealized holding losses	(1,846)	(853)
Available-for-sale debt securities, at fair value	103,403	105,111
Obligations of States and Political Subdivisions Taxable [Member]
Total, amortized cost	24,140	25,431
Available-for-sale securities, gross unrealized holding gains	98	226
Available-for-sale securities, gross unrealized holding losses	(200)	(84)
Available-for-sale debt securities, at fair value	24,038	25,573
Residential Pass-Through Securities [Member]
Total, amortized cost	50,880	52,992
Available-for-sale securities, gross unrealized holding gains	66	79
Available-for-sale securities, gross unrealized holding losses	(1,611)	(724)
Available-for-sale debt securities, at fair value	49,335	52,347
Residential Collateralized Mortgage Obligations [Member]
Total, amortized cost	127,886	134,314
Available-for-sale securities, gross unrealized holding gains	44	110
Available-for-sale securities, gross unrealized holding losses	(3,922)	(2,610)
Available-for-sale debt securities, at fair value	124,008	131,814
Commercial Mortgage Backed Securities [Member]
Total, amortized cost	33,793	33,881
Available-for-sale securities, gross unrealized holding gains	0	4
Available-for-sale securities, gross unrealized holding losses	(1,247)	(666)
Available-for-sale debt securities, at fair value	$ 32,546	$ 33,219

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Note 6 - Securities - Available-for-sale Securities With Unrealized Loss Positions (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	$ 146,199	$ 119,109
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(3,049)	(1,184)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	133,568	140,056
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(5,997)	(3,906)
Available-for-sale securities with unrealized loss positions, fair value	279,767	259,165
Available-for-sale securities, with unrealized loss positions, unrealized losses	(9,046)	(5,090)
US Government Agencies Debt Securities [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	0	0
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	0	0
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	7,803	7,873
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(220)	(153)
Available-for-sale securities with unrealized loss positions, fair value	7,803	7,873
Available-for-sale securities, with unrealized loss positions, unrealized losses	(220)	(153)
Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	30,641	19,050
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(439)	(135)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	23,636	24,391
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(1,407)	(718)
Available-for-sale securities with unrealized loss positions, fair value	54,277	43,441
Available-for-sale securities, with unrealized loss positions, unrealized losses	(1,846)	(853)
Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	14,526	9,279
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(143)	(45)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	2,245	2,116
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(57)	(39)
Available-for-sale securities with unrealized loss positions, fair value	16,771	11,395
Available-for-sale securities, with unrealized loss positions, unrealized losses	(200)	(84)
Residential Pass-Through Securities [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	27,259	25,255
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(718)	(242)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	21,227	22,549
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(893)	(482)
Available-for-sale securities with unrealized loss positions, fair value	48,486	47,804
Available-for-sale securities, with unrealized loss positions, unrealized losses	(1,611)	(724)
Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	55,506	50,812
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(1,210)	(589)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	64,378	68,558
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(2,712)	(2,021)
Available-for-sale securities with unrealized loss positions, fair value	119,884	119,370
Available-for-sale securities, with unrealized loss positions, unrealized losses	(3,922)	(2,610)
Commercial Mortgage Backed Securities [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	18,267	14,713
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(539)	(173)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	14,279	14,569
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(708)	(493)
Available-for-sale securities with unrealized loss positions, fair value	32,546	29,282
Available-for-sale securities, with unrealized loss positions, unrealized losses	$ (1,247)	$ (666)

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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, 2018	Mar. 31, 2017
Gross realized gains from sales	$ 0	$ 161
Gross realized losses from sales	0	(16)
Net realized gains	$ 0	$ 145

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Note 6 - Securities - Available-for-sale Debt Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Due in one year or less, amortized cost	$ 18,713
Due in one year or less, fair value	18,844
Due from one year through five years. amortized cost	63,703
Due from one year through five years, fair value	63,793
Due from five years through ten years, amortized cost	33,100
Due from five years through ten years, fair value	32,226
Due after ten years, amortized cost	20,245
Due after ten years, fair value	20,381
Sub-total, amortized cost	135,761
Sub-total, fair value	135,244
Total, amortized cost	348,320	$ 358,317
Available-for-sale debt securities, at fair value	341,133	355,937
Residential Pass-Through Securities [Member]
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, amortized cost	50,880
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, fair value	49,335
Total, amortized cost	50,880	52,992
Available-for-sale debt securities, at fair value	49,335	52,347
Residential Collateralized Mortgage Obligations [Member]
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, amortized cost	127,886
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, fair value	124,008
Total, amortized cost	127,886	134,314
Available-for-sale debt securities, at fair value	124,008	$ 131,814
Commercial Mortgage-backed Securities [Member]
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, amortized cost	33,793
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, fair value	$ 32,546

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Note 7 - Loans (Details Textual) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Financing Receivable, Allowance for Credit Losses, Ending Balance	$ 9,049,000	$ 8,856,000	$ 8,744,000	$ 8,473,000
Loans and Leases Receivable, Impaired, Commitment to Lend	0	0
Commercial Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses, Ending Balance	4,433,000	4,235,000	4,255,000	4,047,000
Residential Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses, Ending Balance	3,943,000	3,963,000	3,959,000	3,890,000
Consumer Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Losses, Ending Balance	174,000	159,000	$ 132,000	$ 138,000
Maximum [Member] | Commercial Portfolio Segment [Member]
Financing Receivable Individually Evaluated for Impairment Threshold With Estimated Loss	200,000
Maximum [Member] | Residential Portfolio Segment [Member]
Financing Receivable Individually Evaluated for Impairment Threshold With Estimated Loss	400,000
Maximum [Member] | Consumer Portfolio Segment [Member]
Financing Receivable Individually Evaluated for Impairment Threshold With Estimated Loss	400,000
Minimum [Member]
Financing Receivable Individually Evaluated for Impairment Estimated Loss Trigger	$ 100,000
Commercial Loan [Member]
Loans Receivable Secured by Real Estate Percentage	53.00%
Unfunded Loan Commitment [Member]
Financing Receivable, Allowance for Credit Losses, Ending Balance	$ 0	$ 0
Loans Receivable 1 [Member] | Credit Availability Concentration Risk [Member]
Concentration Risk, Percentage	0.00%	0.00%

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Note 7 - Loans - Loans Receivable (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Loans receivable	$ 817,349	$ 815,713
Allowance for loan losses	(9,049)	(8,856)	$ (8,744)	$ (8,473)
Loans, net	808,300	806,857
Residential Portfolio Segment [Member]
Loans receivable	445,041	447,286
Allowance for loan losses	(3,943)	(3,963)	(3,959)	(3,890)
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	358,786	359,987
Allowance for loan losses	(3,067)	(3,200)	(3,125)	(3,033)
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	25,870	25,325
Allowance for loan losses	(351)	(224)	(256)	(258)
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	34,595	35,758
Allowance for loan losses	(286)	(296)	(338)	(350)
Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	25,790	26,216
Allowance for loan losses	(239)	(243)	(240)	(249)
Commercial Portfolio Segment [Member]
Loans receivable	356,891	353,488
Allowance for loan losses	(4,433)	(4,235)	(4,255)	(4,047)
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	161,571	159,266
Allowance for loan losses	(2,635)	(2,584)	(2,685)	(2,380)
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	13,232	14,527
Allowance for loan losses	(137)	(150)	(169)	(162)
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	89,346	88,276
Allowance for loan losses	(1,036)	(1,065)	(906)	(999)
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	56,224	59,287
Allowance for loan losses	0	0
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	7,015	7,255
Allowance for loan losses	(102)	(105)	(111)	(110)
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	7,621	7,713
Allowance for loan losses	(169)	(172)	(236)	(241)
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	5,803	6,178
Allowance for loan losses	(205)	(57)	(39)	(40)
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	16,079	10,986
Allowance for loan losses	(149)	(102)	(109)	(115)
Consumer Portfolio Segment [Member]
Loans receivable	15,417	14,939
Allowance for loan losses	$ (174)	$ (159)	$ (132)	$ (138)

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Note 7 - Loans - Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Allowance for loan losses	$ 8,856	$ 8,473
Allowance for loan losses, charge-offs	(115)	(200)
Allowance for loan losses, recoveries	16	19
Allowance for loan losses, provision	292	452
Allowance for loan losses	9,049	8,744
Residential Portfolio Segment [Member]
Allowance for loan losses	3,963	3,890
Allowance for loan losses, charge-offs	(53)	(63)
Allowance for loan losses, recoveries	2	3
Allowance for loan losses, provision	31	129
Allowance for loan losses	3,943	3,959
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Allowance for loan losses	3,200	3,033
Allowance for loan losses, charge-offs	(53)	(63)
Allowance for loan losses, recoveries	1	2
Allowance for loan losses, provision	(81)	153
Allowance for loan losses	3,067	3,125
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Allowance for loan losses	224	258
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	1	1
Allowance for loan losses, provision	126	(3)
Allowance for loan losses	351	256
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Allowance for loan losses	296	350
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	(10)	(12)
Allowance for loan losses	286	338
Residential Portfolio Segment [Member] | Construction Loans [Member]
Allowance for loan losses	243	249
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	(4)	(9)
Allowance for loan losses	239	240
Commercial Portfolio Segment [Member]
Allowance for loan losses	4,235	4,047
Allowance for loan losses, charge-offs	(21)	(96)
Allowance for loan losses, recoveries	2	1
Allowance for loan losses, provision	217	303
Allowance for loan losses	4,433	4,255
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Allowance for loan losses	2,584	2,380
Allowance for loan losses, charge-offs	(21)	(96)
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	72	401
Allowance for loan losses	2,635	2,685
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Allowance for loan losses	150	162
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	(13)	7
Allowance for loan losses	137	169
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Allowance for loan losses	1,065	999
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	2	1
Allowance for loan losses, provision	(31)	(94)
Allowance for loan losses	1,036	906
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Allowance for loan losses	105	110
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	(3)	1
Allowance for loan losses	102	111
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Allowance for loan losses	172	241
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	(3)	(5)
Allowance for loan losses	169	236
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Allowance for loan losses	57	40
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	148	(1)
Allowance for loan losses	205	39
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Allowance for loan losses	102	115
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	47	(6)
Allowance for loan losses	149	109
Consumer Portfolio Segment [Member]
Allowance for loan losses	159	138
Allowance for loan losses, charge-offs	(41)	(41)
Allowance for loan losses, recoveries	12	15
Allowance for loan losses, provision	44	20
Allowance for loan losses	174	132
Unallocated Financing Receivables [Member]
Allowance for loan losses	499	398
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	$ 499	$ 398

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Note 7 - Loans - Outstanding Loans by Risk Rating (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Loans receivable	$ 817,349	$ 815,713
Residential Portfolio Segment [Member]
Loans receivable	445,041	447,286
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	358,786	359,987
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	25,870	25,325
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	34,595	35,758
Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	25,790	26,216
Commercial Portfolio Segment [Member]
Loans receivable	356,891	353,488
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	161,571	159,266
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	13,232	14,527
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	89,346	88,276
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	56,224	59,287
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	7,015	7,255
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	7,621	7,713
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	5,803	6,178
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	16,079	10,986
Consumer Portfolio Segment [Member]
Loans receivable	15,417	14,939
Pass [Member]
Loans receivable	787,732	787,501
Pass [Member] | Residential Portfolio Segment [Member]
Loans receivable	434,876	436,853
Pass [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	349,713	350,609
Pass [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	25,328	24,795
Pass [Member] | Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	34,045	35,233
Pass [Member] | Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	25,790	26,216
Pass [Member] | Commercial Portfolio Segment [Member]
Loans receivable	337,473	335,795
Pass [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	152,743	150,806
Pass [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	13,155	14,449
Pass [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	82,445	82,724
Pass [Member] | Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	56,224	59,287
Pass [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	5,001	5,283
Pass [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	7,047	7,130
Pass [Member] | Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	4,851	5,203
Pass [Member] | Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	16,007	10,913
Pass [Member] | Consumer Portfolio Segment [Member]
Loans receivable	15,383	14,853
Special Mention [Member]
Loans receivable	7,742	6,155
Special Mention [Member] | Residential Portfolio Segment [Member]
Loans receivable	512	472
Special Mention [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	313	307
Special Mention [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	100	104
Special Mention [Member] | Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	99	61
Special Mention [Member] | Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	0	0
Special Mention [Member] | Commercial Portfolio Segment [Member]
Loans receivable	7,230	5,683
Special Mention [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	924	936
Special Mention [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	0	0
Special Mention [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	5,412	3,896
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	626	581
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	268	270
Special Mention [Member] | Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	0	0
Special Mention [Member] | Consumer Portfolio Segment [Member]
Loans receivable	0	0
Substandard [Member]
Loans receivable	21,800	21,982
Substandard [Member] | Residential Portfolio Segment [Member]
Loans receivable	9,601	9,909
Substandard [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	8,708	9,019
Substandard [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	442	426
Substandard [Member] | Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	451	464
Substandard [Member] | Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	0	0
Substandard [Member] | Commercial Portfolio Segment [Member]
Loans receivable	12,165	11,987
Substandard [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	7,904	7,524
Substandard [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	77	78
Substandard [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	1,478	1,645
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	1,376	1,379
Substandard [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	574	583
Substandard [Member] | Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	684	705
Substandard [Member] | Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	72	73
Substandard [Member] | Consumer Portfolio Segment [Member]
Loans receivable	34	86
Doubtful [Member]
Loans receivable	75	75
Doubtful [Member] | Residential Portfolio Segment [Member]
Loans receivable	52	52
Doubtful [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	52	52
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	23	23
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	12	12
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, 2018	Dec. 31, 2017	Mar. 31, 2017	Dec. 31, 2016
Loans receivable: individually evaluated	$ 10,206	$ 9,511
Loans receivable: collectively evaluated	807,143	806,202
Loans receivable	817,349	815,713
Allowance for loan losses: individually evaluated	1,371	1,279
Allowance for loan losses: collectively evaluated	7,179	7,078
Allowance for loan losses	9,049	8,856	$ 8,744	$ 8,473
Residential Portfolio Segment [Member]
Loans receivable: individually evaluated	1,269	1,286
Loans receivable: collectively evaluated	443,772	446,000
Loans receivable	445,041	447,286
Allowance for loan losses: individually evaluated	122	122
Allowance for loan losses: collectively evaluated	3,821	3,841
Allowance for loan losses	3,943	3,963	3,959	3,890
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable: individually evaluated	969	984
Loans receivable: collectively evaluated	357,817	359,003
Loans receivable	358,786	359,987
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	3,067	3,200
Allowance for loan losses	3,067	3,200	3,125	3,033
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable: individually evaluated	300	302
Loans receivable: collectively evaluated	25,570	25,023
Loans receivable	25,870	25,325
Allowance for loan losses: individually evaluated	122	122
Allowance for loan losses: collectively evaluated	229	102
Allowance for loan losses	351	224	256	258
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	34,595	35,758
Loans receivable	34,595	35,758
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	286	296
Allowance for loan losses	286	296	338	350
Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	25,790	26,216
Loans receivable	25,790	26,216
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	239	243
Allowance for loan losses	239	243	240	249
Commercial Portfolio Segment [Member]
Loans receivable: individually evaluated	8,918	8,205
Loans receivable: collectively evaluated	347,973	345,283
Loans receivable	356,891	353,488
Allowance for loan losses: individually evaluated	1,249	1,157
Allowance for loan losses: collectively evaluated	3,184	3,078
Allowance for loan losses	4,433	4,235	4,255	4,047
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable: individually evaluated	5,982	5,873
Loans receivable: collectively evaluated	155,589	153,393
Loans receivable	161,571	159,266
Allowance for loan losses: individually evaluated	884	919
Allowance for loan losses: collectively evaluated	1,751	1,665
Allowance for loan losses	2,635	2,584	2,685	2,380
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	13,232	14,527
Loans receivable	13,232	14,527
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	137	150
Allowance for loan losses	137	150	169	162
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable: individually evaluated	498	568
Loans receivable: collectively evaluated	88,848	87,708
Loans receivable	89,346	88,276
Allowance for loan losses: individually evaluated	157	188
Allowance for loan losses: collectively evaluated	879	877
Allowance for loan losses	1,036	1,065	906	999
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	56,224	59,287
Loans receivable	56,224	59,287
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	1,362	1,365
Loans receivable: collectively evaluated	5,653	5,890
Loans receivable	7,015	7,255
Allowance for loan losses: individually evaluated	50	50
Allowance for loan losses: collectively evaluated	52	55
Allowance for loan losses	102	105	111	110
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable: individually evaluated	392	392
Loans receivable: collectively evaluated	7,229	7,321
Loans receivable	7,621	7,713
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	169	172
Allowance for loan losses	169	172	236	241
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable: individually evaluated	684	7
Loans receivable: collectively evaluated	5,119	6,171
Loans receivable	5,803	6,178
Allowance for loan losses: individually evaluated	158	0
Allowance for loan losses: collectively evaluated	47	57
Allowance for loan losses	205	57	39	40
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	16,079	10,986
Loans receivable	16,079	10,986
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	149	102
Allowance for loan losses	149	102	109	115
Consumer Portfolio Segment [Member]
Loans receivable: individually evaluated	19	20
Loans receivable: collectively evaluated	15,398	14,919
Loans receivable	15,417	14,939
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	174	159
Allowance for loan losses	174	159	132	138
Unallocated Financing Receivables [Member]
Allowance for loan losses	$ 499	$ 499	$ 398	$ 398

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Note 7 - Loans - Impaired Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
With no related allowance recorded:
Unpaid principal - with no allowance	$ 6,131	$ 6,035
Recorded investment - with no allowance	5,507	5,411
With a related allowance recorded:
Unpaid principal - with allowance	4,699	4,100
Recorded investment - with allowance	4,699	4,100
Related allowance	1,371	1,279
Unpaid principal	10,830	10,135
Recorded investment	10,206	9,511
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
With no related allowance recorded:
Unpaid principal - with no allowance	725	740
Recorded investment - with no allowance	696	711
With a related allowance recorded:
Unpaid principal - with allowance	273	273
Recorded investment - with allowance	273	273
Related allowance	0	0
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
With no related allowance recorded:
Unpaid principal - with no allowance	58	60
Recorded investment - with no allowance	58	60
With a related allowance recorded:
Unpaid principal - with allowance	242	242
Recorded investment - with allowance	242	242
Related allowance	122	122
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
With no related allowance recorded:
Unpaid principal - with no allowance	3,375	3,230
Recorded investment - with no allowance	3,375	3,230
With a related allowance recorded:
Unpaid principal - with allowance	2,607	2,641
Recorded investment - with allowance	2,607	2,641
Related allowance	884	919
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
With no related allowance recorded:
Unpaid principal - with no allowance	92	119
Recorded investment - with no allowance	92	119
With a related allowance recorded:
Unpaid principal - with allowance	406	449
Recorded investment - with allowance	406	449
Related allowance	157	188
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
With no related allowance recorded:
Unpaid principal - with no allowance	868	871
Recorded investment - with no allowance	868	871
With a related allowance recorded:
Unpaid principal - with allowance	494	495
Recorded investment - with allowance	494	495
Related allowance	50	50
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
With no related allowance recorded:
Unpaid principal - with no allowance	987	987
Recorded investment - with no allowance	392	392
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
With no related allowance recorded:
Unpaid principal - with no allowance	7	8
Recorded investment - with no allowance	7	8
With a related allowance recorded:
Unpaid principal - with allowance	677	0
Recorded investment - with allowance	677	0
Related allowance	158	0
Consumer Portfolio Segment [Member]
With no related allowance recorded:
Unpaid principal - with no allowance	19	20
Recorded investment - with no allowance	$ 19	$ 20

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Note 7 - Loans - Average Balance of Impaired Loans and Income Recognized on Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Average investment in impaired loans	$ 9,858	$ 9,778
Interest income recognized on impaired loans on a cash basis	80	78
Residential Portfolio Segment [Member]
Average investment in impaired loans	1,347	815
Interest income recognized on impaired loans on a cash basis	22	10
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Average investment in impaired loans	1,046	748
Interest income recognized on impaired loans on a cash basis	19	9
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Average investment in impaired loans	301	67
Interest income recognized on impaired loans on a cash basis	3	1
Commercial Portfolio Segment [Member]
Average investment in impaired loans	8,492	8,930
Interest income recognized on impaired loans on a cash basis	58	68
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Average investment in impaired loans	5,882	6,889
Interest income recognized on impaired loans on a cash basis	35	56
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Average investment in impaired loans	508	247
Interest income recognized on impaired loans on a cash basis	6	3
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Average investment in impaired loans	1,364	1,390
Interest income recognized on impaired loans on a cash basis	6	8
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Average investment in impaired loans	392	392
Interest income recognized on impaired loans on a cash basis	0	0
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Average investment in impaired loans	346	12
Interest income recognized on impaired loans on a cash basis	11	1
Consumer Portfolio Segment [Member]
Average investment in impaired loans	19	33
Interest income recognized on impaired loans on a cash basis	$ 0	$ 0

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Note 7 - Loans - Nonaccrual Loans and Loans Past Due Ninety Days or More and Still Accruing (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Loans past due 90+ days and accruing	$ 2,795	$ 3,724
Nonaccrual loans	13,587	13,404
Residential Portfolio Segment [Member]
Loans past due 90+ days and accruing	2,080	2,648
Nonaccrual loans	4,638	5,417
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans past due 90+ days and accruing	1,840	2,340
Nonaccrual loans	4,354	5,131
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans past due 90+ days and accruing	10	105
Nonaccrual loans	242	242
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans past due 90+ days and accruing	230	203
Nonaccrual loans	42	44
Commercial Portfolio Segment [Member]
Loans past due 90+ days and accruing	715	1,075
Nonaccrual loans	8,933	7,921
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans past due 90+ days and accruing	128	175
Nonaccrual loans	6,000	5,645
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans past due 90+ days and accruing	347	603
Nonaccrual loans	498	517
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans past due 90+ days and accruing	25	26
Nonaccrual loans	52	52
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans past due 90+ days and accruing	215	271
Nonaccrual loans	1,307	1,308
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	684	7
Consumer Portfolio Segment [Member]
Loans past due 90+ days and accruing	0	1
Nonaccrual loans	$ 16	$ 66

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Note 7 - Loans - Contractual Aging of Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Loans current and past due less than 30 days	$ 801,327	$ 794,938
Loans receivable	817,349	815,713
Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	7,318	10,190
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due	8,704	10,585
Residential Portfolio Segment [Member]
Loans current and past due less than 30 days	436,459	432,621
Loans receivable	445,041	447,286
Residential Portfolio Segment [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	5,139	9,335
Residential Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due	3,443	5,330
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans current and past due less than 30 days	351,132	347,032
Loans receivable	358,786	359,987
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	4,475	7,967
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due	3,179	4,988
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans current and past due less than 30 days	25,716	25,133
Loans receivable	25,870	25,325
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	144	87
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due	10	105
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans current and past due less than 30 days	33,960	34,789
Loans receivable	34,595	35,758
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	381	732
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due	254	237
Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans current and past due less than 30 days	25,651	25,667
Loans receivable	25,790	26,216
Residential Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	139	549
Residential Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due	0	0
Commercial Portfolio Segment [Member]
Loans current and past due less than 30 days	349,561	347,557
Loans receivable	356,891	353,488
Commercial Portfolio Segment [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	2,085	732
Commercial Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due	5,245	5,199
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans current and past due less than 30 days	157,605	155,917
Loans receivable	161,571	159,266
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	581	311
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due	3,385	3,038
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans current and past due less than 30 days	12,839	14,400
Loans receivable	13,232	14,527
Commercial Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	316	49
Commercial Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due	77	78
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans current and past due less than 30 days	88,386	87,306
Loans receivable	89,346	88,276
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	549	303
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due	411	667
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans current and past due less than 30 days	56,224	59,287
Loans receivable	56,224	59,287
Commercial Portfolio Segment [Member] | Political Subdivisions [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	0	0
Commercial Portfolio Segment [Member] | Political Subdivisions [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due	0	0
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans current and past due less than 30 days	5,548	6,226
Loans receivable	7,015	7,255
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	494	12
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due	973	1,017
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans current and past due less than 30 days	7,229	7,321
Loans receivable	7,621	7,713
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	0	0
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due	392	392
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans current and past due less than 30 days	5,651	6,114
Loans receivable	5,803	6,178
Commercial Portfolio Segment [Member] | Agricultural Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	145	57
Commercial Portfolio Segment [Member] | Agricultural Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due	7	7
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans current and past due less than 30 days	16,079	10,986
Loans receivable	16,079	10,986
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	0	0
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due	0	0
Consumer Portfolio Segment [Member]
Loans current and past due less than 30 days	15,307	14,760
Loans receivable	15,417	14,939
Consumer Portfolio Segment [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	94	123
Consumer Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due	$ 16	$ 56

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Note 7 - Loans - Contractual Aging of Nonaccrual Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Nonaccrual loans	$ 13,587	$ 13,404
Non accrual Loans [Member]
Loans current and past due, nonaccrual	6,287	5,802
Nonaccrual loans	13,587	13,404
Non accrual Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Nonaccrual loans	1,391	741
Non accrual Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Nonaccrual loans	$ 5,909	$ 6,861

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Note 7 - Loans - Aging of Troubled Debt Restructurings (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Loans current and past due less than 30 days	$ 801,327	$ 794,938
Nonaccrual loans	13,587	13,404
Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	7,318	10,190
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due	8,704	10,585
Troubled Debt Restructuring [Member]
Loans current and past due less than 30 days	774	636
Nonaccrual loans	2,987	3,027
Troubled debt restructurings	3,761	3,663
Troubled Debt Restructuring [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	0	0
Troubled Debt Restructuring [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Loans past due	$ 0	$ 0

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Note 7 - Loans - Troubled Debt Restructurings (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($)	Mar. 31, 2017 USD ($)
Troubled debt restructurings, number of contracts	4	0
Troubled debt restructurings, post-modification recorded investment	$ 162	$ 0
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member] | Monthly Payment Reduction for 6 Months [Member]
Troubled debt restructurings, number of contracts	1	0
Troubled debt restructurings, post-modification recorded investment	$ 80	$ 0
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member] | Extended Interest Payments for 6 Months [Member]
Troubled debt restructurings, number of contracts	2	0
Troubled debt restructurings, post-modification recorded investment	$ 36	$ 0
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Extended Interest Payments for 6 Months [Member]
Troubled debt restructurings, number of contracts	1	0
Troubled debt restructurings, post-modification recorded investment	$ 46	$ 0

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Note 7 - Loans - Defaults on Loans With Previous Modifications (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2018 USD ($)	Mar. 31, 2017 USD ($)
Troubled debt restructuring defaults, number of contracts	0	4
Troubled debt restructuring defaults, recorded investment	$ 0	$ 347
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Troubled debt restructuring defaults, number of contracts	0	2
Troubled debt restructuring defaults, recorded investment	$ 0	$ 293
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Troubled debt restructuring defaults, number of contracts	0	1
Troubled debt restructuring defaults, recorded investment	$ 0	$ 28
Consumer Portfolio Segment [Member]
Troubled debt restructuring defaults, number of contracts	0	1
Troubled debt restructuring defaults, recorded investment	$ 0	$ 26

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Note 7 - Loans - Foreclosed Residential Real Estate (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Residential Portfolio Segment [Member]
Foreclosed residential real estate	$ 396	$ 721

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Note 7 - Loans - Mortgage Loans in Process of Foreclosure (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Residential Portfolio Segment [Member]
Residential real estate in process of foreclosure	$ 1,470	$ 1,789

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Note 8 - Borrowed Funds (Details Textual)	Mar. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Short-term Debt, Total	$ 26,482,000	$ 61,766,000
Carrying Value of Securities Sold under Repurchase Agreements and Deposits Received for Securities Loaned, Total	11,417,000	12,158,000
Securities Sold under Agreements to Repurchase [Member]
Short-term Debt, Total	$ 5,482,000	$ 3,766,000
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	$ 494,290,000	$ 488,889,000
Number of Short-term Advances	7
Short-term Borrowing, Amount of Each Borrowing	$ 3,000,000
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Advances 1 [Member]
Debt Instrument, Interest Rate, Stated Percentage	1.72%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Advances [Member]
Short-term Debt, Total	$ 21,000,000	$ 58,000,000
Federal Home Loan Bank of Pittsburgh [Member] | Overnight Borrowing [Member]
Debt Instrument, Interest Rate, Stated Percentage		1.54%
Short-term Debt, Total		$ 29,000,000
Federal Home Loan Bank of Pittsburgh [Member] | Other Short-term Advances [Member]
Short-term Debt, Total		$ 29,000,000
Short-term Debt, Weighted Average Interest Rate, at Point in Time		1.69%
Federal Home Loan Bank of Pittsburgh [Member] | Other Assets [Member]
Federal Home Loan Bank Stock	$ 5,142,000	$ 6,426,000

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Note 8 - Borrowed Funds - Short-term Borrowings (Details) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Short-term borrowings	$ 26,482,000	$ 61,766,000
Securities Sold under Agreements to Repurchase [Member]
Short-term borrowings	5,482,000	3,766,000
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Advances [Member]
Short-term borrowings	$ 21,000,000	$ 58,000,000

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Note 8 - Borrowed Funds - Long-term Borrowing Maturities (Details) - Federal Home Loan Bank of Pittsburgh [Member] - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Long-term borrowings from FHLB - Pittsburgh	$ 18,122	$ 9,189
Federal Home Loan Bank Borrowings Loan Maturing in 2018 with Rate of 1.63% [Member]
Long-term borrowings from FHLB - Pittsburgh	3,000	3,000
Federal Home Loan Bank Borrowings Loan Maturing in 2018 with Rate of 1.35% [Member]
Long-term borrowings from FHLB - Pittsburgh	3,000	3,000
Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 1.83% [Member]
Long-term borrowings from FHLB - Pittsburgh	2,000	2,000
Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 1.95% [Member]
Long-term borrowings from FHLB - Pittsburgh	3,000	0
Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.15% [Member]
Long-term borrowings from FHLB - Pittsburgh	3,000	0
Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.24% [Member]
Long-term borrowings from FHLB - Pittsburgh	3,000	0
Federal Home Loan Bank Borrowings Loan Maturing in 2020 with Rate of 4.79% [Member]
Long-term borrowings from FHLB - Pittsburgh	416	463
Federal Home Loan Bank Borrowings Loan Maturing in 2025 with Rate of 4.91% [Member]
Long-term borrowings from FHLB - Pittsburgh	$ 706	$ 726

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Note 8 - Borrowed Funds - Long-term Borrowing Maturities (Details) (Parentheticals)	Mar. 31, 2018 Rate	Dec. 31, 2017 Rate
Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 1.95% [Member]
Rate (Rate)	1.95%	1.95%
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%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Borrowings Loan Maturing in 2018 with Rate of 1.63% [Member]
Rate (Rate)	1.63%	1.63%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Borrowings Loan Maturing in 2018 with Rate of 1.35% [Member]
Rate (Rate)	1.35%	1.35%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 1.83% [Member]
Rate (Rate)	1.83%	1.83%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.15% [Member]
Rate (Rate)	2.15%	2.15%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.24% [Member]
Rate (Rate)	2.24%	2.24%

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Note 9 - Defined Benefit Plans (Details Textual) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2018	Dec. 31, 2018
Payment for Pension and Other Postretirement Benefits, Total	$ 12,000
Defined Benefit Plan Required Contributions in Current Fiscal Year	$ 0
Scenario, Forecast [Member]
Payment for Pension and Other Postretirement Benefits, Total		$ 60,000

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Note 9 - Defined Benefit Plans - Net Periodic Benefit Costs (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Pension Plan [Member]
Service cost	$ 0	$ 0
Interest cost	6	6
Expected return on plan assets	(5)	(8)
Prior service cost	0	0
Recognized net actuarial loss	3	2
Net periodic benefit cost	4	0
Other Postretirement Benefits Plan [Member]
Service cost	10	9
Interest cost	13	14
Expected return on plan assets	0	0
Prior service cost	(8)	(8)
Recognized net actuarial loss	0	0
Net periodic benefit cost	$ 15	$ 15

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Note 10 - Stock-based Compensation Plans (Details Textual) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2018
Scenario, Forecast [Member]
Allocated Share-based Compensation Expense, Total			$ 714,000
Increase in Allocated Share-based Compensation Expense, Upon Meeting of Return on Average Equity Target			$ 190,000
Restricted Stock [Member]
Allocated Share-based Compensation Expense, Total	$ 183,000	$ 168,000
Stock Incentive Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	25,466
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	16,578
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	9,086
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year
Independent Directors 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%

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Note 11 - Income Taxes (Details Textual) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Dec. 31, 2018	Dec. 31, 2017
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	21.00%	35.00%		35.00%
Income Tax Expense (Benefit), Included in AOCI				$ 325,000
Increase (Decrease) in Income Taxes	$ (14,000)	$ (18,000)
Unrecognized Tax Benefits, Ending Balance	0			0
Other Assets [Member]
Amortization Method Qualified Affordable Housing Project Investments	$ 581,000			$ 608,000
Scenario, Forecast [Member]
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent			21.00%
Income Tax Credits and Adjustments			$ 150,000
Increase (Decrease) in Income Taxes			$ (54,000)

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Note 11 - Income Taxes - Net Deferred Tax Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Dec. 31, 2017
Deferred tax assets:
Allowance for loan losses	$ 1,935	$ 1,894
Other deferred tax assets	1,544	1,726
Total deferred tax assets	4,987	4,126
Deferred tax liabilities:
Bank premises and equipment	765	751
Core deposit intangibles	2	3
Other deferred tax liabilities	63	64
Total deferred tax liabilities	867	837
Deferred tax asset, net	4,120	3,289
AOCI Attributable to Parent [Member]
Deferred tax assets:
Unrealized holding losses on securities	1,508	843
Deferred tax liabilities:
Defined benefit plans - ASC 835	37	31
Retained Earnings [Member]
Deferred tax assets:
Unrealized holding losses on securities	0	(337)
Deferred tax liabilities:
Defined benefit plans - ASC 835	$ 0	$ (12)

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Note 11 - Income Taxes - Reconciliation of Income Tax (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Income before income tax provision	$ 5,116	$ 4,418
Income tax provision	$ 741	$ 984
Effective tax rate	14.48%	22.27%

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Note 13 - Revenue Recognition (Details Textual) - USD ($)	Mar. 31, 2018	Dec. 31, 2017
Assets Under Management Fair Value	$ 916,295,000	$ 916,580,000
Percent of Trust Asset Revenue Earned Monthly		81.00%