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, 2019

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 every Interactive Data File required to be submitted 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 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 x

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

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol	Name of Each Exchange on Which Registered
Common Stock Par Value $1.00	CZNC	NASDAQ Capital Market

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) 13,674,399 Shares Outstanding on May 2, 2019

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

CITIZENS & NORTHERN CORPORATION
Index
Part I.  Financial Information
Item 1.  Financial Statements
Consolidated Balance Sheets (Unaudited) – March 31, 2019 and December 31, 2018	Page 3
Consolidated Statements of Income (Unaudited) – Three-month Periods Ended March 31, 2019 and 2018	Page 4
Consolidated Statements of Comprehensive Income (Unaudited) - Three-month Periods Ended March 31, 2019 and 2018	Page 5
Consolidated Statements of Cash Flows (Unaudited) – Three-month Periods Ended March 31, 2019 and 2018	Page 6
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) – Three-month Periods Ended March 31, 2019 and 2018	Page 7
Notes to Unaudited Consolidated Financial Statements	Pages 8 – 32
Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations	Pages 33 – 53
Item 4.  Controls and Procedures	Page 53
Part II.  Other Information	Pages 54 – 55
Signatures	Page 56
Exhibit 31.1.  Rule 13a-14(a)/15d-14(a) Certification - Chief Executive Officer	Page 57
Exhibit 31.2.  Rule 13a-14(a)/15d-14(a) Certification -Chief Financial Officer	Page 58
Exhibit 32.  Section 1350 Certifications	Page 59

 2

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

	March 31,			December 31,
(In Thousands, Except Share and Per Share Data) (Unaudited)	2019			2018
ASSETS
Cash and due from banks:
Noninterest-bearing	$	20,667		$	20,970
Interest-bearing		23,335			16,517
Total cash and due from banks		44,002			37,487
Available-for-sale debt securities, at fair value		357,646			363,273
Marketable equity security		962			950
Loans held for sale		0			213
Loans receivable		825,392			827,563
Allowance for loan losses		(8,256	)		(9,309	)
Loans, net		817,136			818,254
Bank-owned life insurance		18,331			19,035
Accrued interest receivable		4,270			3,968
Bank premises and equipment, net		14,663			14,592
Foreclosed assets held for sale		1,875			1,703
Deferred tax asset, net		2,696			4,110
Intangible assets - Goodwill and core deposit intangibles		11,949			11,951
Other assets		16,470			15,357
TOTAL ASSETS	$	1,290,000		$	1,290,893
LIABILITIES
Deposits:
Noninterest-bearing	$	274,759		$	272,520
Interest-bearing		765,152			761,252
Total deposits		1,039,911			1,033,772
Short-term borrowings		5,132			12,853
Long-term borrowings		32,844			35,915
Accrued interest and other liabilities		9,986			10,985
TOTAL LIABILITIES		1,087,873			1,093,525
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 12,393,044 at March 31, 2019 and 12,319,330 December 31, 2018		12,655			12,655
Paid-in capital		71,963			72,602
Retained earnings		123,155			122,643
Treasury stock, at cost; 262,127 shares at March 31, 2019 and 335,841 shares at December 31, 2018		(5,005	)		(6,362	)
Accumulated other comprehensive loss		(641	)		(4,170	)
TOTAL STOCKHOLDERS' EQUITY		202,127			197,368
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	1,290,000		$	1,290,893

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

 3

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Consolidated Statements of Income

	3 Months Ended
	March 31,			March 31,
(In Thousands Except Per Share Data) (Unaudited)	2019			2018
INTEREST INCOME
Interest and fees on loans:
Taxable	$	9,948		$	9,201
Tax-exempt		564			556
Interest on mortgages held for sale		3			2
Interest on balances with depository institutions		116			50
Income from available-for-sale debt securities:
Taxable		1,834			1,363
Tax-exempt		594			713
Dividends on marketable equity security		6			5
Total interest and dividend income		13,065			11,890
INTEREST EXPENSE
Interest on deposits		1,053			729
Interest on short-term borrowings		79			199
Interest on long-term borrowings		218			65
Total interest expense		1,350			993
Net interest income		11,715			10,897
(Credit) provision for loan losses		(957	)		292
Net interest income after (credit) provision for loan losses		12,672			10,605
NONINTEREST INCOME
Trust and financial management revenue		1,360			1,422
Brokerage revenue		307			212
Insurance commissions, fees and premiums		30			44
Service charges on deposit accounts		1,250			1,204
Service charges and fees		79			86
Interchange revenue from debit card transactions		643			579
Net gains from sale of loans		87			184
Loan servicing fees, net		28			128
Increase in cash surrender value of life insurance		92			97
Other noninterest income		530			450
Total noninterest income		4,406			4,406
NONINTEREST EXPENSE
Salaries and wages		4,493			4,124
Pensions and other employee benefits		1,618			1,610
Occupancy expense, net		657			637
Furniture and equipment expense		301			271
Data processing expenses		803			641
Automated teller machine and interchange expense		189			322
Pennsylvania shares tax		347			336
Professional fees		424			276
Telecommunications		164			233
Directors' fees		183			184
Other noninterest expense		1,828			1,261
Total noninterest expense		11,007			9,895
Income before income tax provision		6,071			5,116
Income tax provision		981			741
NET INCOME	$	5,090		$	4,375
EARNINGS PER COMMON SHARE - BASIC	$	0.41		$	0.36
EARNINGS PER COMMON SHARE - DILUTED	$	0.41		$	0.36

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

 4

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Consolidated Statements of Comprehensive Income

	Three Months Ended
	March 31,			March 31,
(In Thousands) (Unaudited)	2019			2018
Net income	$	5,090		$	4,375
Unrealized holding gains (losses) on available-for-sale debt securities		4,261			(4,839	)
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in accumulated other comprehensive gain		214			93
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost		(8	)		(5	)
Other comprehensive gain on unfunded retirement obligations		206			88
Other comprehensive income (loss) before income tax		4,467			(4,751	)
Income tax related to other comprehensive (income) loss		(938	)		997
Net other comprehensive income (loss)		3,529			(3,754	)
Comprehensive income	$	8,619		$	621

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

 5

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

CONSOLIDATED STATEMENTS OF CASH FLOWS

	3 Months Ended
	March 31,			March 31,
(In Thousands) (Unaudited)	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	5,090		$	4,375
Adjustments to reconcile net income to net cash provided by operating activities:
(Credit) provision for loan losses		(957	)		292
Unrealized (gain) loss on marketable equity security		(12	)		15
Depreciation and amortization expense		425			412
Accretion and amortization on securities, net		209			268
Increase in cash surrender value of life insurance		(92	)		(97	)
Stock-based compensation and other expense		229			183
Deferred income taxes		476			166
Decrease (increase) in fair value of servicing rights		77			(20	)
Gains on sales of loans, net		(87	)		(184	)
Origination of loans held for sale		(2,259	)		(5,327	)
Proceeds from sales of loans held for sale		2,539			6,001
(Increase) decrease in accrued interest receivable and other assets		(649	)		757
Decrease in accrued interest payable and other liabilities		(2,217	)		(482	)
Other		48			(29	)
Net Cash Provided by Operating Activities		2,820			6,330
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of certificates of deposit		100			820
Purchase of certificates of deposit		0			(100	)
Proceeds from calls and maturities of available-for-sale securities		18,613			10,516
Purchase of available-for-sale securities		(8,934	)		(312	)
Redemption of Federal Home Loan Bank of Pittsburgh stock		2,308			2,990
Purchase of Federal Home Loan Bank of Pittsburgh stock		(1,753	)		(1,706	)
Net decrease (increase) in loans		1,681			(1,805	)
Proceeds from bank owned life insurance		796			0
Purchase of premises and equipment		(496	)		(467	)
Proceeds from sale of foreclosed assets		176			603
Other		46			51
Net Cash Provided by Investing Activities		12,537			10,590
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits		6,139			9,632
Net decrease in short-term borrowings		(7,721	)		(35,284	)
Proceeds from long-term borrowings		5,000			9,000
Repayments of long-term borrowings		(8,071	)		(67	)
Sale of treasury stock		162			63
Repurchase of restricted stock for tax withholding		(189	)		0
Common dividends paid		(4,062	)		(2,928	)
Net Cash Used in Financing Activities		(8,742	)		(19,584	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		6,615			(2,664	)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		32,827			37,004
CASH AND CASH EQUIVALENTS, END OF YEAR	$	39,442		$	34,340
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Assets acquired through foreclosure of real estate loans	$	399		$	72
Accrued purchase of available-for-sale debt security	$	0		$	507
Interest paid	$	1,377		$	978
Income taxes paid	$	50		$	125

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

 6

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, 2019
Balance, December 31, 2018		12,655,171		335,841		$	12,655	$	72,602		$	122,643		$	(4,170	)	$	(6,362	)	$	197,368
Net income												5,090									5,090
Other comprehensive income, net															3,529						3,529
Cash dividends declared on common stock, $.37 per share												(4,578	)								(4,578	)
Shares issued for dividend reinvestment plan				(20,487	)				125									391			516
Shares issued from treasury and redeemed related to exercise of stock options				(12,638	)				(78	)								240			162
Restricted stock granted				(48,137	)				(918	)								918			0
Forfeiture of restricted stock				156					3									(3	)		0
Stock-based compensation expense									229												229
Repurchase of restricted stock for tax withholding				7,392														(189	)		(189	)
Balance, March 31, 2019		12,655,171		262,127		$	12,655	$	71,963		$	123,155		$	(641	)	$	(5,005	)	$	202,127
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, $.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

(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.

 7

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”). The consolidated financial statements also include C&N Bank’s wholly-owned subsidiaries, C&N Financial Services Corporation, and Northern Tier Holding LLC. 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, except the consolidated balance sheet dated December 31, 2018, 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 2018 information has been reclassified for consistency with the 2019 presentation.

Operating results reported for the three-month period ended March 31, 2019 might not be indicative of the results for the year ending December 31, 2019. 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

Effective January 1, 2019, the Corporation adopted ASU 2016-02, Leases (Topic 842), as modified by subsequent ASUs, which changed GAAP by requiring that lease assets and liabilities arising from operating leases be recognized on the balance sheet. Topic 842, as modified, does not significantly change the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee from prior U.S. GAAP. For leases with a term of 12 months or less, the Corporation made an accounting policy election by class of underlying asset not to recognize lease assets and liabilities. The Corporation elected to adopt this pronouncement using an optional transition method resulting in recognition of right-of-use assets and lease liabilities for operating leases of $1,132,000 on its consolidated balance sheets at January 1, 2019, with no adjustment to stockholders’ equity and no material impact to its consolidated statements of income. At March 31, 2019, right-of-use assets of $1,424,000 were included in other assets, and the related liabilities totaling the same amount were included in accrued interest and other liabilities, in the unaudited consolidated balance sheets.

Effective January 1, 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. Disclosures required by the ASU have been included in Note 11.

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 debt 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).

 8

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Effective January 1, 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.

Effective January 1, 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 the following changes:

· A marketable equity security previously included in available-for-sale securities on the consolidated balance sheets is presented as a separate asset.

· Changes in the fair value of the marketable equity security are captured in the consolidated statements of income.

· Retained earnings was reduced and a corresponding increase in accumulated other comprehensive loss was recognized (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 marketable equity security.

· Adoption of ASU 2016-01 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 2016-13, 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 was permitted beginning in the first quarter 2019; however, the Corporation did not early adopt the ASU. The Corporation has formed a cross functional management team and is working with an outside vendor assessing alternative loss estimation methodologies, the Corporation’s data and system needs and the impact of loans acquired in the merger with Monument Bancorp, Inc. (described in more detail in Note 12) 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 January 1, 2020.

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.

ASU 2018-13, Fair Value Measurement (Topic 820) modifies disclosure requirements on fair value measurements. This ASU removes requirements to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements. ASU 2018-13 clarifies that disclosure regarding measurement uncertainty is intended to communicate information about the uncertainty in measurement as of the reporting date. ASU 2018-13 adds certain disclosure requirements, including disclosure of changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this ASU are effective for the Corporation beginning in the first quarter 2020. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively, while all other amendments should be applied retrospectively for all periods presented. The Corporation does not expect adoption of this ASU to have a material impact on its consolidated financial position or results of operations.

 9

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

ASU 2018-14, Compensation - Retirement Benefits - Defined Benefit Plans – General (Subtopic 715-20) modifies the disclosure requirements for defined benefit and other postretirement plans. This ASU eliminates certain disclosures associated with accumulated other comprehensive income, plan assets, related parties, and the effects of interest rate basis point changes on assumed health care costs; while other disclosures have been added to address significant gains and losses related to changes in benefit obligations. This ASU also clarifies disclosure requirements for projected benefit and accumulated benefit obligations. The amendments in this ASU are effective for the Corporation beginning in the first quarter 2021. Adoption on a retrospective basis for all periods presented is required. The Corporation does not expect adoption of this ASU to have a material impact on its consolidated financial statements.

ASU 2018-15, Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40) was issued to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is not affected by the amendments. This guidance will become effective for the Corporation beginning in the first quarter 2020, with early adoption permitted. The Corporation does not expect adoption of this ASU to have a material impact on its consolidated financial statements.

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.

 10

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

	3 Months Ended
	March 31,			March 31,
(In Thousands, Except Share and Per Share Data)	2019			2018
Basic
Net income	$	5,090		$	4,375
Less: Dividends and undistributed earnings allocated to participating securities		(27	)		(23	)
Net income attributable to common shares	$	5,063		$	4,352
Basic weighted-average common shares outstanding		12,308,862			12,189,471
Basic earnings per common share (a)	$	0.41		$	0.36
Diluted
Net income attributable to common shares	$	5,063		$	4,352
Basic weighted-average common shares outstanding		12,308,862			12,189,471
Dilutive effect of potential common stock arising from stock options		25,445			32,785
Diluted weighted-average common shares outstanding		12,334,307			12,222,256
Diluted earnings per common share (a)	$	0.41		$	0.36
Weighted-average nonvested restricted shares outstanding		65,639			62,922

(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 non-vested restricted shares with nonforfeitable dividends (participating securities).

Anti-dilutive stock options are excluded from net income per share calculations. There were no anti-dilutive instruments in the first quarter of 2019 or 2018.

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 (loss). The components of other comprehensive income (loss), 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, 2019
Other comprehensive income on available-for-sale debt securities, Unrealized holding gains on available-for-sale debt securities	$	4,261		$	(895	)	$	3,366
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		214			(45	)		169
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost		(8	)		2			(6	)
Other comprehensive income on unfunded retirement obligations		206			(43	)		163
Total other comprehensive income	$	4,467		$	(938	)	$	3,529

 11

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

	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 debt securities, Unrealized holding losses on available-for-sale debt 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	)

Changes in the components of accumulated other comprehensive (loss) income 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, 2019
Balance, beginning of period	$	(4,307	)	$	137	$	(4,170	)
Other comprehensive income during three   months ended March 31, 2019		3,366			163		3,529
Balance, end of period	$	(941	)	$	300	$	(641	)
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	)

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

For the Three Months Ended March 31, 2019
(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
		2		Income tax provision
Total reclassifications for the period	$	(6	)

 12

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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
Total reclassifications for the period	$	(4	)

4. CASH AND DUE FROM BANKS

Cash and due from banks at March 31, 2019 and December 31, 2018 include the following:

	March 31,		Dec. 31,
(In thousands)	2019		2018
Cash and cash equivalents	$	39,442	$	32,827
Certificates of deposit		4,560		4,660
Total cash and due from banks	$	44,002	$	37,487

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 $17,545,000 at March 31, 2019 and $18,141,000 at December 31, 2018.

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.

 13

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

At March 31, 2019 and December 31, 2018, assets measured at fair value and the valuation methods used are as

follows:

			March 31, 2019
	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	$	12,265	$	0		$	12,265
Obligations of states and political subdivisions:
Tax-exempt		0		76,902		0			76,902
Taxable		0		30,435		0			30,435
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		57,049		0			57,049
Residential collateralized mortgage obligations		0		140,722		0			140,722
Commercial mortgage-backed securities		0		40,273		0			40,273
Total available-for-sale debt securities		0		357,646		0			357,646
Marketable equity security		962		0		0			962
Servicing rights		0		0		1,347			1,347
Total recurring fair value measurements	$	962	$	357,646	$	1,347		$	359,955
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	2,769		$	2,769
Valuation allowance		0		0		(498	)		(498	)
Impaired loans, net		0		0		2,271			2,271
Foreclosed assets held for sale		0		0		1,875			1,875
Total nonrecurring fair value measurements	$	0	$	0	$	4,146		$	4,146

 14

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

			December 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	$	12,500	$	0		$	15,500
Obligations of states and political subdivisions:
Tax-exempt		0		83,952		0			83,952
Taxable		0		27,699		0			27,699
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		53,445		0			53,445
Residential collateralized mortgage obligations		0		145,912		0			145,912
Commercial mortgage-backed securities		0		39,765		0			39,765
Total available-for-sale debt securities		0		363,273		0			363,273
Marketable equity security		950		0		0			950
Servicing rights		0		0		1,404			1,404
Total recurring fair value measurements	$	950	$	363,273	$	1,404		$	365,627
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	4,851		$	4,851
Valuation allowance		0		0		(1,605	)		(1,605	)
Impaired loans, net		0		0		3,246			3,246
Foreclosed assets held for sale		0		0		1,703			1,703
Total nonrecurring fair value measurements	$	0	$	0	$	4,949		$	4,949

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, 2019 and December 31, 2018, 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
	3/31/19		Valuation	Unobservable				Method or Value As of
Asset	(In Thousands)		Technique	Input(s)				3/31/19
Servicing rights	$	1,347	Discounted cash flow	Discount rate		12.50	%	Rate used through modeling period
				Loan prepayment speeds		129.00	%	Weighted-average PSA
				Servicing fees		0.25	%	of loan balances
						4.00	%	of payments are late
						5.00	%	late fees assessed
					$	1.94		Miscellaneous fees per account per month
				Servicing costs	$	6.00		Monthly servicing cost per account
					$	24.00		Additional monthly servicing cost per loan on loans more than 30 days delinquent
						1.50	%	of loans more than 30 days delinquent
						3.00	%	annual increase in servicing costs

 15

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

	Fair Value at
	12/31/18		Valuation	Unobservable				Method or Value As of
Asset	(In Thousands)		Technique	Input(s)				12/31/18
Servicing rights	$	1,404	Discounted cash flow	Discount rate		12.50	%	Rate used through modeling period
				Loan prepayment speeds		114.00	%	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:

	3 Months Ended March 31,
(In Thousands)	2019			2018
Servicing rights balance, beginning of period	$	1,404		$	1,299
Issuances of servicing rights		20			50
Unrealized (losses) gains included in earnings		(77	)		20
Servicing rights balance, end of period	$	1,347		$	1,369

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, 2019 and December 31, 2018, 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)									Average
	Balance at		Valuation Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	3/31/19		3/31/19		3/31/19		Technique	Inputs	3/31/19
Impaired loans:
Residential mortgage loans - first and junior liens	$	509	$	114	$	395	Sales comparison	Discount to appraised value		26	%
Commercial:
Commercial loans secured by real estate		991		160		831	Sales comparison	Discount to appraised value		39	%
Commercial and industrial		75		75		0	Sales comparison	Discount to appraised value		100	%
Commercial and industrial		40		40		0	Sales comparison	Discount to appraised value		100	%
Commercial and industrial		669		60		609	Liquidation of accounts receivable	Discount to borrower's financial statement value		15	%
Loans secured by farmland		485		49		436	Sales comparison	Discount to appraised value		46	%
Total impaired loans	$	2,769	$	498	$	2,271
Foreclosed assets held for sale - real estate:
Residential (1-4 family)	$	109	$	0	$	109	Sales comparison	Discount to appraised value		51	%
Land		110		0		110	Sales comparison	Discount to appraised value		61	%
Commercial real estate		1,656		0		1,656	Sales comparison	Discount to appraised value		32	%
Total foreclosed assets held for sale	$	1,875	$	0	$	1,875

(In Thousands, Except									Weighted-
Percentages)									Average
	Balance at		Valuation Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	12/31/18		12/31/18		12/31/18		Technique	Inputs	12/31/18
Impaired loans:
Residential mortgage loans - first and junior liens	$	509	$	116	$	393	Sales comparison	Discount to appraised value		26	%
Commercial:
Commercial loans secured by real estate		2,515		781		1,734	Sales comparison	Discount to appraised value		16	%
Commercial and industrial		75		75		0	Sales comparison	Discount to appraised value		100	%
Commercial and industrial		1,265		584		681	Sales comparison	Discount to borrower's financial statement value		36	%
Loans secured by farmland		487		49		438	Sales comparison	Discount to appraised value		56	%
Total impaired loans	$	4,851	$	1,605	$	3,246
Foreclosed assets held for sale -
real estate:
Residential (1-4 family)	$	64	$	0	$	64	Sales comparison	Discount to appraised value		68	%
Land		110		0		110	Sales comparison	Discount to appraised value		61	%
Commercial real estate		1,529		0		1,529	Sales comparison	Discount to appraised value		20	%
Total foreclosed assets held for sale	$	1,703	$	0	$	1,703

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, 2019				December 31, 2018
	Hierarchy		Carrying		Fair		Carrying		Fair
(In Thousands)	Level		Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents		Level 1	$	39,442	$	39,442	$	32,827	$	32,827
Certificates of deposit		Level 2		4,560		4,611		4,660		4,634
Restricted equity securities (included in Other Assets)		Level 2		5,157		5,157		5,712		5,712
Loans, net		Level 3		817,136		824,036		818,254		825,809
Accrued interest receivable		Level 2		4,270		4,270		3,968		3,968
Financial liabilities:
Deposits with no stated maturity		Level 2		810,409		810,409		804,207		804,207
Time deposits		Level 2		229,502		229,730		229,565		229,751
Short-term borrowings		Level 2		5,132		4,941		12,853		12,617
Long-term borrowings		Level 2		32,844		32,877		35,915		35,902
Accrued interest payable		Level 2		115		115		142		142

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, 2019 and December 31, 2018 are summarized as follows:

			March 31, 2019
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	11,916	$	349	$	0		$	12,265
Obligations of states and political subdivisions:
Tax-exempt		75,910		1,290		(298	)		76,902
Taxable		30,059		443		(67	)		30,435
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		57,727		155		(833	)		57,049
Residential collateralized mortgage obligations		142,642		204		(2,124	)		140,722
Commercial mortgage-backed securities		40,583		361		(671	)		40,273
Total available-for-sale debt securities	$	358,837	$	2,802	($	3,993	)	$	357,646

 18

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

			December 31, 2018
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	12,331	$	169	$	0		$	12,500
Obligations of states and political subdivisions:
Tax-exempt		84,204		949		(1,201	)		83,952
Taxable		27,618		208		(127	)		27,699
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		54,827		48		(1,430	)		53,445
Residential collateralized mortgage obligations		148,964		238		(3,290	)		145,912
Commercial mortgage-backed securities		40,781		166		(1,182	)		39,765
Total available-for-sale debt securities	$	368,725	$	1,778	$	(7,230	)	$	363,273

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, 2019 and December 31, 2018:

March 31, 2019

	Less Than 12 Months					12 Months or More					Total
(In Thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Obligations of states and political subdivisions:
Tax-exempt	$	0	$	0		$	21,103	$	(298	)	$	21,103	$	(298	)
Taxable		0		0			8,315		(67	)		8,315		(67	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		5,054		(77	)		41,750		(756	)		46,804		(833	)
Residential collateralized mortgage obligations		0		0			98,164		(2,124	)		98,164		(2,124	)
Commercial mortgage-backed securities		0		0			28,590		(671	)		28,590		(671	)
Total temporarily impaired available-for-sale debt securities	$	5,054	$	(77	)	$	197,922	$	(3,916	)	$	202,976	$	(3,993	)

December 31, 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 states and political subdivisions:
Tax-exempt	$	5,084	$	(11	)	$	32,684	$	(1,190	)	$	37,768	$	(1,201	)
Taxable		980		(2	)		11,418		(125	)		12,398		(127	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		5,592		(4	)		42,309		(1,426	)		47,901		(1,430	)
Residential collateralized mortgage obligations		1,892		(8	)		101,662		(3,282	)		103,554		(3,290	)
Commercial mortgage-backed securities		0		0			32,552		(1,182	)		32,552		(1,182	)
Total temporarily impaired available-for-sale debt securities	$	13,548	$	(25	)	$	220,625	$	(7,205	)	$	234,173	$	(7,230	)

 19

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

There were no realized gains or losses from available-for-sale securities in the first quarter 2019 or 2018.

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, 2019. 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
	Cost		Value
(In Thousands)
Due in one year or less	$	14,204	$	14,299
Due from one year through five years		34,281		34,637
Due from five years through ten years		40,819		41,190
Due after ten years		28,581		29,476
Sub-total		117,885		119,602
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		57,727		57,049
Residential collateralized mortgage obligations		142,642		140,722
Commercial mortgage-backed securities		40,583		40,273
Total	$	358,837	$	357,646

The Corporation’s mortgage-backed securities and collateralized mortgage obligations have stated maturities that may differ from actual maturities due to borrowers’ ability to prepay obligations. 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 $219,532,000 at March 31, 2019 and $229,418,000 at December 31, 2018 were pledged as collateral for public deposits, trusts and certain other deposits as provided by law. See Note 8 for information concerning securities pledged to secure borrowing arrangements.

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

A summary of information management considered in evaluating debt and equity securities for other-than-temporary impairment (“OTTI”) at March 31, 2019 is provided below.

Debt Securities

At March 31, 2019 and December 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, 2019 and December 31, 2018 to be temporary.

 20

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Equity Securities

The Corporation’s marketable equity security, with a carrying value of $962,000 at March 31, 2019 and $950,000 at December 31, 2018, consisted exclusively of one mutual fund. There was an unrealized loss on the mutual fund of $38,000 at March 31, 2019 and $50,000 at December 31, 2018. The decrease in the unrealized loss of $12,000 in the first quarter 2019 and increase in the unrealized loss of $15,000 in the first quarter 2018 are included in other noninterest income in the consolidated statements of income.

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 $5,027,000 at March 31, 2019 and $5,582,000 at December 31, 2018. The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at March 31, 2019 and December 31, 2018. 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, 2019 and December 31, 2018 are summarized by segment, and by classes within each segment, as follows:

Summary of Loans by Type
	March 31,			Dec. 31,
(In Thousands)	2019			2018
Residential mortgage:
Residential mortgage loans - first liens	$	374,764		$	372,339
Residential mortgage loans - junior liens		25,538			25,450
Home equity lines of credit		32,847			34,319
1-4 Family residential construction		24,437			24,698
Total residential mortgage		457,586			456,806
Commercial:
Commercial loans secured by real estate		160,177			162,611
Commercial and industrial		92,842			91,856
Political subdivisions		52,142			53,263
Commercial construction and land		12,701			11,962
Loans secured by farmland		6,938			7,146
Multi-family (5 or more) residential		7,031			7,180
Agricultural loans		5,471			5,659
Other commercial loans		13,467			13,950
Total commercial		350,769			353,627
Consumer		17,037			17,130
Total		825,392			827,563
Less: allowance for loan losses		(8,256	)		(9,309	)
Loans, net	$	817,136		$	818,254

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, 2019 or December 31, 2018.

 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, 2019 and December 31, 2018, 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, 2019 and 2018 were as follows:

Three Months Ended March 31, 2019

	Dec. 31,										March 31,
(In Thousands)	2018 Balance		Charge-offs			Recoveries		Provision (Credit)			2019 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	3,156	$	(50	)	$	1	$	71		$	3,178
Residential mortgage loans - junior liens		325		(24	)		0		28			329
Home equity lines of credit		302		0			3		(19	)		286
1-4 Family residential construction		203		0			0		(5	)		198
Total residential mortgage		3,986		(74	)		4		75			3,991
Commercial:
Commercial loans secured by real estate		2,538		0			0		(651	)		1,887
Commercial and industrial		1,553		0			2		(486	)		1,069
Commercial construction and land		110		0			0		4			114
Loans secured by farmland		102		0			0		(4	)		98
Multi-family (5 or more) residential		114		0			0		(2	)		112
Agricultural loans		46		0			0		(3	)		43
Other commercial loans		128		0			0		(7	)		121
Total commercial		4,591		0			2		(1,149	)		3,444
Consumer		233		(37	)		9		31			236
Unallocated		499		0			0		86			585
Total Allowance for Loan Losses	$	9,309	$	(111	)	$	15	$	(957	)	$	8,256

 22

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

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.

The credit for loan losses (reduction in expense) was $957,000 in the first quarter 2019 as compared to a provision of $292,000 in the first quarter 2018. Specific allowances totaling $1,365,000 at December 31, 2018 on two commercial loans were eliminated in the first quarter 2019. These two loans were no longer considered impaired at March 31, 2019 and were returned to full accrual status in the first quarter 2019. A specific allowance of $781,000 at December 31, 2018 on a real estate secured commercial loan was eliminated in the first quarter 2019 due to the borrower’s improved financial performance and receipt of an updated, higher appraised value of the underlying collateral. Also, a specific allowance of $584,000 on a commercial loan was eliminated, consistent with improvements in both the borrower’s financial position and the Corporation’s security position on the credit. In total, the first quarter 2019 credit for loan losses included a credit of $1,011,000 related to the change in total specific allowances on impaired loans, as adjusted for net charge-offs during the period, partially offset by a net increase of $54,000 in the collectively determined and unallocated portions of the allowance for loan losses.

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, 2019 and December 31, 2018:

March 31, 2019
			Special
(In Thousands)	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	365,301	$	609	$	8,854	$	0	$	374,764
Residential mortgage loans - junior liens		24,934		98		506		0		25,538
Home equity lines of credit		32,182		59		606		0		32,847
1-4 Family residential construction		24,256		0		181		0		24,437
Total residential mortgage		446,673		766		10,147		0		457,586
Commercial:
Commercial loans secured by real estate		153,387		3,660		3,130		0		160,177
Commercial and Industrial		84,736		6,532		1,574		0		92,842
Political subdivisions		52,142		0		0		0		52,142
Commercial construction and land		12,627		0		74		0		12,701
Loans secured by farmland		4,681		422		1,835		0		6,938
Multi-family (5 or more) residential		7,031		0		0		0		7,031
Agricultural loans		4,679		53		739		0		5,471
Other commercial loans		13,381		15		71		0		13,467
Total commercial		332,664		10,682		7,423		0		350,769
Consumer		17,007		0		30		0		17,037
Totals	$	796,344	$	11,448	$	17,600	$	0	$	825,392

December 31, 2018
			Special
(In Thousands)	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	363,407	$	937	$	7,944	$	51	$	372,339
Residential mortgage loans - junior liens		24,841		176		433		0		25,450
Home equity lines of credit		33,659		59		601		0		34,319
1-4 Family residential construction		24,698		0		0		0		24,698
Total residential mortgage		446,605		1,172		8,978		51		456,806
Commercial:
Commercial loans secured by real estate		156,308		740		5,563		0		162,611
Commercial and Industrial		84,232		5,230		2,394		0		91,856
Political subdivisions		53,263		0		0		0		53,263
Commercial construction and land		11,887		0		75		0		11,962
Loans secured by farmland		5,171		168		1,796		11		7,146
Multi-family (5 or more) residential		7,180		0		0		0		7,180
Agricultural loans		4,910		84		665		0		5,659
Other commercial loans		13,879		0		71		0		13,950
Total commercial		336,830		6,222		10,564		11		353,627
Consumer		17,116		0		14		0		17,130
Totals	$	800,551	$	7,394	$	19,556	$	62	$	827,563

 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, 2019 and December 31, 2018, 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, 2019) 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, 2019 and December 31, 2018. 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, 2019 and December 31, 2018:

March 31, 2019

	Loans:						Allowance for Loan Losses:
	Individually		Collectively				Individually		Collectively
(In Thousands)	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	970	$	373,794	$	374,764	$	0	$	3,178	$	3,178
Residential mortgage loans - junior liens		289		25,249		25,538		114		215		329
Home equity lines of credit		0		32,847		32,847		0		286		286
1-4 Family residential construction		0		24,437		24,437		0		198		198
Total residential mortgage		1,259		456,327		457,586		114		3,877		3,991
Commercial:
Commercial loans secured by real estate		1,756		158,421		160,177		160		1,727		1,887
Commercial and industrial		1,292		91,550		92,842		175		894		1,069
Political subdivisions		0		52,142		52,142		0		0		0
Commercial construction and land		0		12,701		12,701		0		114		114
Loans secured by farmland		1,534		5,404		6,938		49		49		98
Multi-family (5 or more) residential		0		7,031		7,031		0		112		112
Agricultural loans		656		4,815		5,471		0		43		43
Other commercial loans		0		13,467		13,467		0		121		121
Total commercial		5,238		345,531		350,769		384		3,060		3,444
Consumer		0		17,037		17,037		0		236		236
Unallocated												585
Total	$	6,497	$	818,895	$	825,392	$	498	$	7,173	$	8,256

December 31, 2018

	Loans:						Allowance for Loan Losses:
	Individually		Collectively				Individually		Collectively
(In Thousands)	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	991	$	371,348	$	372,339	$	0	$	3,156	$	3,156
Residential mortgage loans - junior liens		293		25,157		25,450		116		209		325
Home equity lines of credit		0		34,319		34,319		0		302		302
1-4 Family residential construction		0		24,698		24,698		0		203		203
Total residential mortgage		1,284		455,522		456,806		116		3,870		3,986
Commercial:
Commercial loans secured by real estate		4,302		158,309		162,611		781		1,757		2,538
Commercial and industrial		2,157		89,699		91,856		659		894		1,553
Political subdivisions		0		53,263		53,263		0		0		0
Commercial construction and land		0		11,962		11,962		0		110		110
Loans secured by farmland		1,349		5,797		7,146		49		53		102
Multi-family (5 or more) residential		0		7,180		7,180		0		114		114
Agricultural loans		665		4,994		5,659		0		46		46
Other commercial loans		0		13,950		13,950		0		128		128
Total commercial		8,473		345,154		353,627		1,489		3,102		4,591
Consumer		17		17,113		17,130		0		233		233
Unallocated												499
Total	$	9,774	$	817,789	$	827,563	$	1,605	$	7,205	$	9,309

 26

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Summary information related to impaired loans at March 31, 2019 and December 31, 2018 is as follows:

	March 31, 2019						December 31, 2018
	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	$	729	$	701	$	0	$	750	$	721	$	0
Residential mortgage loans - junior liens		50		50		0		54		54		0
Commercial loans secured by real estate		765		765		0		1,787		1,787		0
Commercial and industrial		507		507		0		817		817		0
Loans secured by farmland		1,049		1,049		0		862		862		0
Agricultural loans		656		656		0		665		665		0
Consumer		0		0		0		17		17		0
Total with no related allowance recorded		3,756		3,728		0		4,952		4,923		0
With a related allowance recorded:
Residential mortgage loans - first liens		270		270		0		270		270		0
Residential mortgage loans - junior liens		239		239		114		239		239		116
Commercial loans secured by real estate		991		991		160		2,515		2,515		781
Commercial and industrial		784		784		175		1,340		1,340		659
Loans secured by farmland		485		485		49		487		487		49
Total with a related allowance recorded		2,769		2,769		498		4,851		4,851		1,605
Total	$	6,525	$	6,497	$	498	$	9,803	$	9,774	$	1,605

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)	2019		2018		2019		2018
Residential mortgage:
Residential mortgage loans - first lien	$	981	$	1,046	$	10	$	19
Residential mortgage loans - junior lien		291		301		2		3
Total residential mortgage		1,272		1,347		12		22
Commercial:
Commercial loans secured by real estate		3,040		5,882		10		35
Commercial and industrial		1,713		508		26		6
Loans secured by farmland		1,442		1,364		1		6
Multi-family (5 or more) residential		0		392		0		0
Agricultural loans		660		346		12		11
Total commercial		6,855		8,492		49		58
Consumer		8		19		0		0
Total	$	8,135	$	9,858	$	61	$	80

 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, 2019				December 31, 2018
	Past Due				Past Due
	90+ Days and				90+ Days and
(In Thousands)	Accruing		Nonaccrual		Accruing		Nonaccrual
Residential mortgage:
Residential mortgage loans - first liens	$	1,327	$	4,315	$	1,633	$	4,750
Residential mortgage loans - junior liens		111		239		151		239
Home equity lines of credit		78		9		219		27
Total residential mortgage		1,516		4,563		2,003		5,016
Commercial:
Commercial loans secured by real estate		286		1,458		394		3,958
Commercial and industrial		61		1,226		18		2,111
Commercial construction and land		0		52		0		52
Loans secured by farmland		0		1,486		459		1,297
Agricultural loans		0		656		0		665
Total commercial		347		4,878		871		8,083
Consumer		39		0		32		14
Totals	$	1,902	$	9,441	$	2,906	$	13,113

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, 2019 and December 31, 2018:

	As of March 31, 2019								As of December 31, 2018
	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	$	364,905	$	6,148	$	3,711	$	374,764	$	361,362	$	6,414	$	4,563	$	372,339
Residential mortgage loans - junior liens		25,134		54		350		25,538		24,876		184		390		25,450
Home equity lines of credit		32,478		282		87		32,847		33,611		480		228		34,319
1-4 Family residential construction		24,119		318		0		24,437		24,531		167		0		24,698
Total residential mortgage		446,636		6,802		4,148		457,586		444,380		7,245		5,181		456,806
Commercial:
Commercial loans secured by real estate		158,276		294		1,607		160,177		160,668		226		1,717		162,611
Commercial and industrial		92,535		100		207		92,842		90,915		152		789		91,856
Political subdivisions		52,142		0		0		52,142		53,263		0		0		53,263
Commercial construction and land		12,387		262		52		12,701		11,910		0		52		11,962
Loans secured by farmland		5,258		689		991		6,938		5,390		487		1,269		7,146
Multi-family (5 or more) residential		7,031		0		0		7,031		7,104		76		0		7,180
Agricultural loans		5,380		85		6		5,471		5,624		29		6		5,659
Other commercial loans		13,467		0		0		13,467		13,950		0		0		13,950
Total commercial		346,476		1,430		2,863		350,769		348,824		970		3,833		353,627
Consumer		16,919		79		39		17,037		16,991		93		46		17,130
Totals	$	810,031	$	8,311	$	7,050	$	825,392	$	810,195	$	8,308	$	9,060	$	827,563

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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, 2019 and December 31, 2018 is as follows:

	Current &
	Past Due		Past Due		Past Due
	Less than		30-89		90+
(In Thousands)	30 Days		Days		Days		Total
March 31, 2019 Nonaccrual Totals	$	3,105	$	1,188	$	5,148	$	9,441
December 31, 2018 Nonaccrual Totals	$	5,793	$	1,166	$	6,154	$	13,113

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, 2019 and December 31, 2018 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, 2019 Totals	$	775	$	1	$	74	$	700	$	1,550
December 31, 2018 Totals	$	612	$	43	$	0	$	2,884	$	3,539

At March 31, 2019 and December 31, 2018, 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, 2019 and 2018 are as follows:

	2019				2018
			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		0	$	0		1	$	80
Residential mortgage - junior liens,
Reduced monthly payments and extended maturity date		1		18		0		0
Commercial loans secured by real estate,
Extended interest only payments for a six-month period		0		0		2		36
Commercial and industrial:
Extended interest only payments for a six-month period		0		0		1		46
Reduced monthly payments and extended maturity date		9		448		0		0
Agricultural loans,
Reduced monthly payments and extended maturity date		1		84		2		36
Total		11	$	550		4	$	162

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

All of the loans for which TDRs were granted in the table above in the three-month period ended March 31, 2019 are associated with one relationship.

In the three-month periods ended March 31, 2019 and 2018, there were no defaults on loans for which modifications considered to be TDRs were entered into within the previous 12 months.

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)	2019		2018
Foreclosed residential real estate	$	109	$	64

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)	2019		2018
Residential real estate in process of foreclosure	$	1,291	$	1,097

8. BORROWED FUNDS

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

	March 31,		Dec. 31,
(In Thousands)	2019		2018
FHLB-Pittsburgh borrowings	$	0	$	7,000
Customer repurchase agreements		5,132		5,853
Total short-term borrowings	$	5,132	$	12,853

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, 2019 and December 31, 2018. The carrying value of the underlying securities was $5,190,000 at March 31, 2019 and $5,890,000 at December 31, 2018.

The FHLB-Pittsburgh loan facilities are collateralized by qualifying loans secured by real estate with a book value totaling $494,459,000 at March 31, 2019 and $495,143,000 at December 31, 2018. 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 $5,027,000 at March 31, 2019 and $5,582,000 at December 31, 2018.

The overnight borrowing from FHLB-Pittsburgh at December 31, 2018 had an interest rate of 2.62%.

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

	March 31,		Dec. 31,
(In Thousands)	2019		2018
Loan matured in January 2019 with a rate of 1.83%	$	0	$	2,000
Loan matured in February 2019 with a rate of 1.95%		0		3,000
Loan matured in March 2019 with a rate of 2.15%		0		3,000
Loan maturing in April 2019 with a rate of 2.24%		3,000		3,000
Loan maturing in May 2019 with a rate of 2.30%		3,000		3,000
Loan maturing in June 2019 with a rate of 2.42%		3,000		3,000
Loan maturing in July 2019 with a rate of 2.41%		3,000		3,000
Loan maturing in August 2019 with a rate of 2.48%		3,000		3,000
Loan maturing in September 2019 with a rate of 2.53%		3,000		3,000
Loan maturing in November 2019 with a rate of 2.75%		3,000		3,000
Loan maturing in December 2019 with a rate of 2.77%		3,000		3,000
Loan maturing in January 2020 with a rate of 2.73%		3,000		3,000
Loan maturing in February 2020 with a rate of 2.66%		2,000		0
Loan maturing in April 2020 with a rate of 4.79%		221		271
Loan maturing in March 2022 with a rate of 2.46%		3,000		0
Loan maturing in June 2025 with a rate of 4.91%		623		644
Total long-term FHLB-Pittsburgh borrowings	$	32,844	$	35,915

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

9. 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 2019, the Corporation awarded 40,517 shares of restricted stock under the Stock Incentive Plan and 7,620 shares of restricted stock under the Independent Directors Stock Incentive Plan. The 2019 restricted stock awards under the Stock Incentive Plan vest ratably over three years and vesting for one-half of the 27,380 restricted shares awarded to Executive Officers depends on the Corporation meeting a return on average equity (“ROAE”) target each year. The 2019 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 2019 based on an assumption that the ROAE target for awards to Executive Officers in 2017, 2018 and 2019 will be met.

Total annual stock-based compensation for the year ending December 31, 2019 is estimated to total $880,000. Total stock-based compensation expense attributable to restricted stock awards amounted to $229,000 in the first quarter 2019 and $183,000 in the first quarter 2018.

10. 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.

11. 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 $924,080,000 at March 31, 2019 and $862,517,000 at December 31, 2018. 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 2018 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.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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.

12. SUBSEQUENT EVENT – MERGER – MONUMENT BANCORP, INC.

In September 2018, the Corporation, along with Monument Bancorp, Inc. (“Monument”) announced the signing of an Agreement and Plan of Merger. In April 2019, the Corporation and Monument announced the completion of the merger as of April 1, 2019. Monument was the parent company of Monument Bank, a commercial bank which operated two community bank offices and one loan production office in Bucks County, Pennsylvania. Under the terms of the Agreement and Plan of Merger, Monument merged into the Corporation, and Monument Bank merged into C&N Bank. In the transaction, Monument shareholders elected to receive either 1.0144 shares of Corporation common stock or $28.10 in cash for each share of Monument common stock owned, subject to proration to ensure that, overall, 20% of the Monument shares are converted into cash and 80% of the Monument shares are converted into Corporation stock. The election and proration process commenced in late March 2019 and was completed on April 24, 2019. Holders of Monument common stock prior to the consummation of the merger own approximately 9.4% of the Corporation’s common stock outstanding following the merger.

The estimated total purchase consideration is valued at approximately $42.7 million based on the average of the high and low trading price of the Corporation’s common stock on April 1, 2019. As of March 31, 2019, Monument reported total assets of $376 million, including gross loans of $263 million, total deposits of $224 million and total stockholders’ equity of $27 million. As of the date the Corporation’s first quarter financial statements are issued, some of the information required to be disclosed under U.S. GAAP was not available since, given the short period between April 1, 2019 merger date and the financial statement issuance, the calculation of the fair value of all material Monument assets acquired and liabilities assumed had not yet been completed.

First quarter 2019 expenses included $311,000 of non-payroll expenses related to the acquisition, including $202,000 included in professional fees related to conversion of Monument’s information technology systems and $109,000 included in other noninterest expense in the unaudited consolidated statements of income. Management estimates the Corporation will incur merger-related expenses in the second quarter 2019 ranging between $2,900,000 and $3,500,000, including costs associated with termination of data processing contracts, conversion of Monument’s customer accounting data into the Corporation’s core system, severance and similar expenses, investment banking fees based on successful closing of the transaction and various other costs.

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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

· failure to achieve merger-related synergies and difficulties in integrating the business and operations of acquired institutions.

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

EARNINGS OVERVIEW

Earnings per basic and diluted common share were $0.41 in the first quarter 2019, as compared to $0.46 per share in the fourth quarter 2018 and up 13.9% from $0.36 per share in the first quarter 2018. The annualized return on average assets for the first quarter 2019 was 1.59%, and the annualized return on average equity was 10.33%. Highlights related to the Corporation’s earnings results for the first quarters of 2019 and 2018 are presented below.

Net income of $5,090,000 in the first quarter 2019 was up $715,000 (16.3%) from the first quarter 2018 amount. Significant variances were as follows:

· Net interest income increased $818,000 (7.5%) in the first quarter 2019 over the first quarter 2018 amount. Total interest and dividend income increased $1,175,000, while interest expense increased $357,000. The net interest margin was 4.04% for the first quarter 2019, up 0.20% from the first quarter 2018 level. The average fully taxable equivalent yield on earning assets increased to 4.49% in the first quarter 2019 from 4.18% in the first quarter 2018, reflecting the effect of increases in interest rates that took place over most of 2018. Average total earning assets increased $21,895,000, including increases in the average balances of available-for-sale debt securities of $8,912,000, total loans of $6,849,000 (0.8%) and interest-bearing balances with other banks of $6,175,000. The growth in assets was funded mainly by an increase in average total deposits of $23,558,000 (2.4%), including an increase in average noninterest-bearing demand deposits of $25,359,000. The average rate paid on interest-bearing liabilities was 0.68% for the first quarter 2019, up from 0.49% in the first quarter 2018.

· The credit for loan losses (reduction in expense) was $957,000 in the first quarter 2019 as compared to a provision of $292,000 in the first quarter 2018. Specific allowances totaling $1,365,000 at December 31, 2018 on two commercial loans were eliminated in the first quarter 2019. These two loans were no longer considered impaired at March 31, 2019 and were returned to full accrual status in the first quarter 2019. A specific allowance of $781,000 at December 31, 2018 on a real estate secured commercial loan was eliminated in the first quarter 2019 due to the borrower’s improved financial performance and receipt of an updated, higher appraised value of the underlying collateral. Also, a specific allowance of $584,000 on a commercial loan was eliminated, consistent with improvements in both the borrower’s financial position and C&N’s security position on the credit. In total, the first quarter 2019 credit for loan losses included a credit of $1,011,000 related to the change in total specific allowances on impaired loans, as adjusted for net charge-offs during the period, partially offset by a net increase of $54,000 in the collectively determined and unallocated portions of the allowance for loan losses.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

· Total noninterest income of $4,406,000 in the first quarter 2019 was equal to the first quarter 2018 amount. Brokerage revenue increased $95,000, mainly due to an increase in volume. Other noninterest income increased $80,000, including increases in dividends on Federal Home Loan Bank of Pittsburgh stock and interchange fees from credit card transactions. Interchange revenue from debit card transactions increased $64,000 (11.1%), reflecting an increase in transaction volume. Loan servicing fees, net, decreased $100,000, as the fair value of mortgage servicing rights decreased $77,000 in the first quarter 2019 as compared to an increase in fair value of $20,000 in the first quarter 2018. Net gains from sales of mortgage loans decreased $97,000 in the first quarter 2019 from the first quarter 2018 amount, mainly due to a lower volume of transactions. Trust and financial management revenue decreased $62,000 (4.4%), including a reduction in fees from estate settlements.

· Total noninterest expense increased $1,112,000 (11.2%) in the first quarter 2019 over the first quarter 2018 amount. Expenses and net losses from other real estate increased $261,000, and loan collection expense increased $109,000, in the first quarter 2019 over the first quarter 2018 amounts. First quarter 2019 expenses included $311,000 of non-payroll expenses related to the acquisition of Monument Bancorp, Inc. (Monument), which was completed April 1, 2019. The most significant category of merger-related expenses was $202,000 of professional fees related to conversion of Monument’s information technology systems (conversion planned to be completed in late June 2019). Additional information regarding the Monument merger is provided in Note 12 to the unaudited consolidated financial statements and in the Monument Acquisition section of Management’s Discussion and Analysis. First quarter 2019 expenses also included $188,000 related to the start-up of a limited purpose office (for lending) which opened in York, PA in April 2019. Additional discussion of significant variances related to individual categories of expenses is detailed below following Table VI.

· The income tax provision was $981,000 for the first quarter 2019, up from $741,000 for the first quarter 2018. The higher income tax provision in 2019 resulted mainly from higher pre-tax income. The effective tax rate of 16.2% for the first quarter 2019 was higher than the effective tax rate of 14.5% for the first quarter 2018 due to a reduction in tax-exempt interest income as a percentage of pre-tax income and because a portion of the merger-related expenses incurred in the first quarter 2019 are estimated to be nondeductible.

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 CONDENSED, CONSOLIDATED INCOME STATEMENT INFORMATION

(Dollars In Thousands, Except Per Share Data)	For the Three Months Ended:
(Unaudited)	March 31,			Dec. 31,			Sept. 30,		June 30,			March 31,
	2019			2018			2018		2018			2018
Interest income	$	13,065		$	13,304		$	12,800	$	12,334		$	11,890
Interest expense		1,350			1,312			1,241		1,079			993
Net interest income		11,715			11,992			11,559		11,255			10,897
(Credit) provision for loan losses		(957	)		252			60		(20	)		292
Net interest income after (credit) provision for loan losses		12,672			11,740			11,499		11,275			10,605
Noninterest income		4,406			5,040			4,462		4,689			4,406
Net (losses) gains on securities		0			(4	)		569		1,468			0
Noninterest expense		11,007			10,074			9,833		9,684			9,895
Income before income tax provision		6,071			6,702			6,697		7,748			5,116
Income tax provision		981			1,021			1,111		1,377			741
Net income	$	5,090		$	5,681		$	5,586	$	6,371		$	4,375
Net income attributable to common shares	$	5,063		$	5,653		$	5,558	$	6,339		$	4,352
Basic earnings per common share	$	0.41		$	0.46		$	0.45	$	0.52		$	0.36
Diluted earnings per common share	$	0.41		$	0.46		$	0.45	$	0.52		$	0.36

 34

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

CRITICAL ACCOUNTING POLICIES

The presentation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect many of the reported amounts and disclosures. Actual results could differ from these estimates.

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

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, 2019 and 2018. 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 $12,016,000 in 2019, which was $790,000 (7.0%) higher than in 2018. Interest income was $1,147,000 higher in 2019 as compared to 2018, while interest expense was higher by $357,000 in comparing the same periods. As presented in Table III, the Net Interest Margin was 4.04% in 2019 as compared to 3.84% in 2018, and the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) increased to 3.81% in 2019 from 3.69% in 2018.

Interest income totaled $13,366,000 in 2019, an increase of $1,147,000 (9.4%) from 2018. Interest and fees from loans receivable increased $757,000, or 7.6%, in 2019 as compared to 2018. Table IV shows the increase in interest on loans includes $660,000 attributable to an increase in average rate and $97,000 related to an increase in volume. The average balance of loans receivable increased $6,849,000 (0.8%) to $823,746,000 in 2019 from $816,897,000 in 2018. The increase in average balance reflects growth in the average balance of residential mortgage and consumer loans, partially offset by a reduction in the average balance of commercial loans. The average yield on loans in the first quarter of 2019 was 5.25% compared to 4.92% in the first quarter 2018 as current rates on variable rate loans and rates on recent new loan originations have increased due to increases in market interest rates that occurred over the first several months of 2018.

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Interest income from available-for-sale debt securities increased $322,000 (14.2%) in 2019 over 2018. Total average available-for-sale debt securities (at amortized cost) in 2019 increased to $361,929,000 from $353,017,000 in 2018. The average rate of return on available-for-sale debt securities was 2.89% for 2019, up from 2.60% in 2018. The increase in average rate of return on available-for-sale debt securities is mainly the result of lower yielding securities maturing with the proceeds reinvested in higher yielding securities as rates increased throughout most of 2018.

For the three-month periods, interest expense increased $357,000, or 36.0%, to $1,350,000 in 2019 from $993,000 in 2018. Interest expense on deposits increased $324,000, as the average rate paid on interest-bearing deposits increased to 0.56% in 2019 from 0.39% in 2018. The increase in average rates on deposits includes increases of 0.41% on certificates of deposit, 0.20% on money market accounts, 0.12% on interest checking accounts and 0.09% on Individual Retirement Accounts. Total average deposits (interest-bearing and noninterest-bearing) amounted to $1,021,073,000 in 2019, an increase of $23,558,000 (2.4%) from 2018. The increase in total average deposits included an increase in noninterest-bearing demand deposits of $25,359,000.

Interest expense on total borrowed funds increased $33,000 in 2019 as compared to 2018. The average balance of total borrowed funds decreased to $50,623,000 in the first quarter 2019 from $65,359,000 in the first quarter 2018, while the average rate on borrowed funds increased to 2.38% in the first quarter 2019 from 1.64% in the first quarter 2018.

Interest expense on short-term borrowings decreased $120,000 to $79,000 in 2019 from $199,000 in 2018. The average balance of short-term borrowings decreased to $15,935,000 in 2019 from $52,305,000 in 2018. The total average short-term borrowings balance for the first quarter 2018 included average short-term advances from FHLB-Pittsburgh of $25,733,000, with no corresponding balance in the first quarter 2019, as short-term advances were paid off with proceeds from longer-term FHLB advances (mainly with 13-month terms) over the course of 2018. Also, the average total balance of overnight borrowings and customer repurchase agreements decreased $10,637,000 in 2019 as compared to 2018. The average rate on short-term borrowings increased to 2.01% in 2019 from 1.54% in 2018, reflecting increases in short-term rates consistent with the four quarterly increases in the Federal Reserve’s target rate in 2018.

Interest expense on long-term borrowings increased $153,000 to $218,000 in 2019 from $65,000 in 2018. The average balance of long-term borrowings was $34,688,000 in 2019, up from an average balance of $13,054,000 in 2018. Borrowings are classified as long-term within the Tables based on their term at origination. The average balance of long-term borrowings in 2019 and 2018 consisted mainly of FHLB advances with 13-month terms at origination. The average rate on long-term borrowings was 2.55% in 2019 compared to 2.02% in the first quarter of 2018, reflecting increases in market rates that occurred over the first several months of 2018.

 36

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE II - ANALYSIS OF INTEREST INCOME AND EXPENSE

	Three Months Ended
	March 31,				Increase/
(In Thousands)	2019		2018		(Decrease)
INTEREST INCOME
Available-for-sale debt securities:
Taxable	$	1,834	$	1,363	$	471
Tax-exempt		749		898		(149	)
Total available-for-sale debt securities		2,583		2,261		322
Dividends on marketable equity security		6		5		1
Interest-bearing due from banks		116		50		66
Loans held for sale		3		2		1
Loans receivable:
Taxable		9,948		9,201		747
Tax-exempt		710		700		10
Total loans receivable		10,658		9,901		757
Total Interest Income		13,366		12,219		1,147
INTEREST EXPENSE
Interest-bearing deposits:
Interest checking		227		181		46
Money market		178		93		85
Savings		39		37		2
Certificates of deposit		486		305		181
Individual Retirement Accounts		123		113		10
Total interest-bearing deposits		1,053		729		324
Borrowed funds:
Short-term		79		199		(120	)
Long-term		218		65		153
Total borrowed funds		297		264		33
Total Interest Expense		1,350		993		357
Net Interest Income	$	12,016	$	11,226	$	790

Note: Interest income from tax-exempt securities and loans has been adjusted to a fully tax-equivalent basis, using the Corporation’s federal income tax rate of 21%.

 37

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
	3/31/2019			Return/			3/31/2018			Return/
	Average			Cost of			Average			Cost of
	Balance			Funds %			Balance			Funds %
EARNING ASSETS
Available-for-sale debt securities, at amortized cost:
Taxable	$	281,805			2.64	%	$	249,840			2.21	%
Tax-exempt		80,124			3.79	%		103,177			3.53	%
Total available-for-sale debt securities		361,929			2.89	%		353,017			2.60	%
Marketable equity security		952			2.56	%		962			2.11	%
Interest-bearing due from banks		20,306			2.32	%		14,131			1.43	%
Loans held for sale		137			8.88	%		168			4.83	%
Loans receivable:
Taxable		751,172			5.37	%		740,655			5.04	%
Tax-exempt		72,574			3.97	%		76,242			3.72	%
Total loans receivable		823,746			5.25	%		816,897			4.92	%
Total Earning Assets		1,207,070			4.49	%		1,185,175			4.18	%
Cash		16,914						16,874
Unrealized gain/loss on securities		(4,628	)					(5,529	)
Allowance for loan losses		(9,339	)					(9,002	)
Bank premises and equipment		14,511						15,451
Intangible Assets		11,950						11,954
Other assets		43,172						42,781
Total Assets	$	1,279,650					$	1,257,704
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking	$	198,903			0.46	%	$	212,981			0.34	%
Money market		176,869			0.41	%		179,923			0.21	%
Savings		156,691			0.10	%		149,618			0.10	%
Certificates of deposit		140,142			1.41	%		123,974			1.00	%
Individual Retirement Accounts		86,411			0.58	%		94,311			0.49	%
Other time deposits		762			0.00	%		772			0.00	%
Total interest-bearing deposits		759,778			0.56	%		761,579			0.39	%
Borrowed funds:
Short-term		15,935			2.01	%		52,305			1.54	%
Long-term		34,688			2.55	%		13,054			2.02	%
Total borrowed funds		50,623			2.38	%		65,359			1.64	%
Total Interest-bearing Liabilities		810,401			0.68	%		826,938			0.49	%
Demand deposits		261,295						235,936
Other liabilities		10,941						8,870
Total Liabilities		1,082,637						1,071,744
Stockholders' equity, excluding other comprehensive income/loss		200,422						190,129
Accumulated other comprehensive income/loss		(3,409	)					(4,169	)
Total Stockholders' Equity		197,013						185,960
Total Liabilities and Stockholders' Equity	$	1,279,650					$	1,257,704
Interest Rate Spread					3.81	%					3.69	%
Net Interest Income/Earning Assets					4.04	%					3.84	%
Total Deposits (Interest-bearing and Demand)	$	1,021,073					$	997,515

(1) Annualized rates of return on tax-exempt securities and loans are presented on a fully taxable-equivalent basis, using the Corporation’s federal income tax rate of 21%.

(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.

 38

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE IV - ANALYSIS OF VOLUME AND RATE CHANGES

(In Thousands)	3 Months Ended 3/31/19 vs. 3/31/18
	Change in			Change in		Total
	Volume			Rate		Change
EARNING ASSETS
Available-for-sale debt securities:
Taxable	$	188		$	283	$	471
Tax-exempt		(212	)		63		(149	)
Total available-for-sale debt securities		(24	)		346		322
Marketable equity security		0			1		1
Interest-bearing due from banks		27			39		66
Loans held for sale		0			1		1
Loans receivable:
Taxable		132			615		747
Tax-exempt		(35	)		45		10
Total loans receivable		97			660		757
Total Interest Income		100			1,047		1,147
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking		(13	)		59		46
Money market		(2	)		87		85
Savings		2			0		2
Certificates of deposit		44			137		181
Individual Retirement Accounts		(10	)		20		10
Total interest-bearing deposits		21			303		324
Borrowed funds:
Short-term		(167	)		47		(120	)
Long-term		132			21		153
Total borrowed funds		(35	)		68		33
Total Interest Expense		(14	)		371		357
Net Interest Income	$	114		$	676	$	790

(1) Changes in income on tax-exempt securities and loans are presented on a fully tax-equivalent basis, using the Corporation’s federal income tax rate of 21%.

(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.

 39

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

NONINTEREST INCOME

TABLE V - COMPARISON OF NONINTEREST INCOME

(Dollars in Thousands)

	3 Months Ended
	March 31,				$			%
	2019		2018		Change			Change
Trust and financial management revenue	$	1,360	$	1,422	$	(62	)		-4.4	%
Brokerage revenue		307		212		95			44.8	%
Insurance commissions, fees and premiums		30		44		(14	)		-31.8	%
Service charges on deposit accounts		1,250		1,204		46			3.8	%
Service charges and fees		79		86		(7	)		-8.1	%
Interchange revenue from debit card transactions		643		579		64			11.1	%
Net gains from sales of loans		87		184		(97	)		-52.7	%
Loan servicing fees, net		28		128		(100	)		-78.1	%
Increase in cash surrender value of life insurance		92		97		(5	)		-5.2	%
Other noninterest income		530		450		80			17.8	%
Total noninterest income	$	4,406	$	4,406	$	0			0.0	%

Total noninterest income shown in Table V in the first three months of 2019 was equal to the first quarter 2018 amount. Within the totals, the most significant variances include the following:

· Brokerage revenue was up $95,000 due to an increase in volume of transactions compared to 2018.

· Other Income increased $80,000, including a $31,000 increase in dividend income on FHLB stock ($100,000 in 2019 as compared to $69,000 in 2018) and an increase of $26,000 in credit card-related interchange and other fees ($47,000 in 2019 as compared to $21,000 in 2018). The unrealized gain on a marketable equity security was $12,000 in 2019 compared to an unrealized loss of $15,000 on the security in 2018.

· Interchange revenue from debit card transactions was up $64,000 reflecting an increase in volume.

· Loan servicing fees, net, decreased $100,000, as the fair value of mortgage servicing rights decreased by $77,000 in the first three months of 2019 as compared to an increase of $20,000 in the first three months of 2018.

· Net gains from sales of loans decreased $97,000 (52.7%), as the dollar volume of residential mortgage loans sold decreased by approximately $3.4 million (58%). Gains on sales of loans totaled 3.5% of the origination cost of loans sold in 2019 as compared to 3.2% in 2018.

· Trust and financial management revenue was $62,000 lower in the first three months of 2019 than in the same period in 2018, mainly due to timing issues associated with the collection of fees. Trust revenue is recorded on a cash basis, which is not materially different from the accrual basis.

 40

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

NONINTEREST EXPENSE

TABLE VI - COMPARISON OF NONINTEREST EXPENSE

(Dollars in Thousands)

	3 Months Ended
	March 31,				$			%
	2019		2018		Change			Change
Salaries and wages	$	4,493	$	4,124	$	369			8.9	%
Pensions and other employee benefits		1,618		1,610		8			0.5	%
Occupancy expense, net		657		637		20			3.1	%
Furniture and equipment expense		301		271		30			11.1	%
Data processing expenses		803		641		162			25.3	%
Automated teller machine and interchange expense		189		322		(133	)		-41.3	%
Pennsylvania shares tax		347		336		11			3.3	%
Professional fees		424		276		148			53.6	%
Telecommunications		164		233		(69	)		-29.6	%
Directors' fees		183		184		(1	)		-0.5	%
Other noninterest expense		1,828		1,261		567			45.0	%
Total noninterest expense	$	11,007	$	9,895	$	1,112			11.2	%

As shown in Table VI, total noninterest expense increased $1,112,000 (11.2%) in the first three months of 2019 as compared to the first three months of 2018. The most significant variances include the following:

· Other noninterest expense increased $567,000.  Expenses associated with other real estate totaled $244,000 in 2019, an increase of $177,000 over 2018, with a significant portion of the expenses in 2019 related to one commercial property.  Net losses from sales and valuation write-downs of other real estate amounted to $51,000 in 2019 as compared to net gains from sales of $33,000 in 2018.  Loan collection expense totaled $119,000 in 2019, an increase of $109,000 over 2018, as most of the 2019 expense was related to one commercial lending workout situation.  Also within other noninterest expense, Monument merger-related expenses of $109,000 were incurred in 2019 (included in the $311,000 aggregate amount cited in the Earnings Overview section of Management’s Discussion and Analysis).

· Salaries and wages expense increased $369,000 (8.9%), including the effects of annual merit-based increases, an increase of $165,000 in estimated cash and stock-based compensation expense and an increase in the average number of full-time equivalent employees (FTEs) to 299 in the first quarter 2019 from 294 in the first quarter 2018.

· Data processing expenses increased $162,000, reflecting expenses associated with product development efforts in connection with a fintech organization as well as increases in expenses related to a new loan origination system implemented in 2018 and other increases in software licensing costs.

· Professional fees expense increased $148,000, including $202,000 of professional fees related to conversion of Monument’s information technology systems as described above.

· Automated teller machine and interchange expense decreased $133,000, reflecting cost reductions pursuant to a contract for processing services that was renegotiated in the latter portion of 2018.  

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 2019 was $981,000, or 16.2% of pre-tax earnings, which was $240,000 higher than the provision for the first three months of 2018 of $741,000, or 14.5% of pre-tax income. The Corporation’s effective tax rates differ from the statutory rate of 21% in the first three months of 2019 and 2018 principally because of the effects of tax-exempt interest income. The higher effective tax rate in 2019 reflects a reduction in tax-exempt interest income as a percentage of pre-tax income and the expectation that a portion of the merger-related expenses to be incurred in 2019 will be nondeductible.

 41

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The Corporation recognizes deferred tax assets and liabilities based on differences between the financial statement carrying amounts and the tax basis of assets and liabilities. The net deferred tax asset at March 31, 2019 and December 31, 2018 represents the following temporary difference components:

	March 31,		December 31,
(In Thousands)	2019		2018
Deferred tax assets:
Unrealized holding losses on available-for-sale debt securities	$	250	$	1,145
Allowance for loan losses		1,779		2,005
Other deferred tax assets		1,732		2,049
Total deferred tax assets		3,761		5,199
Deferred tax liabilities:
Unfunded retirement obligations		80		37
Bank premises and equipment		882		907
Core deposit intangibles		2		2
Other deferred tax liabilities		101		143
Total deferred tax liabilities		1,065		1,089
Deferred tax asset, net	$	2,696	$	4,110

At March 31, 2019, the net deferred tax asset was $2,696,000, down from $4,110,000 at December 31, 2018. The most significant changes in temporary difference components was a net decrease of $895,000 related to unrealized losses on available-for-sale debt securities, a reduction of $226,000 in the deferred tax asset related to the allowance for loan losses, and a reduction of $209,000 in the deferred tax asset associated with the first quarter 2019 payment of incentive compensation that had been accrued in 2018 (included in “Other deferred tax assets” in the table shown above).

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, 2019 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.

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, 2019. Management does not expect capital expenditures or completion of the Monument acquisition (described in more detail in the Monument Acquisition section of Management’s Discussion and Analysis) to have a material, detrimental effect on the Corporation’s financial condition in 2019.

Gross loans outstanding (excluding mortgage loans held for sale) were $825,392,000 at March 31, 2019, down 0.3% from $827,563,000 at December 31, 2018 and up 1.2% from $817,349,000 at March 31, 2018. Total outstanding mortgages and other consumer real estate loans were $780,000 (0.2%) higher at March 31, 2019 as compared to December 31, 2018 and increased $12,545,000 (2.6%) as compared to March 31, 2018. Total outstanding commercial loans were lower by $2,858,000 (0.8%) at March 31, 2019 as compared to December 31, 2018 and lower by $6,122,000 (0.9%) compared to March 31, 2018. Average loans outstanding in the first quarter of 2019 of $823,746,000 were $6,849,000 (0.8%) higher than the corresponding total in the first quarter of 2018.

 42

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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 $68,418,000 at March 31, 2019, up from $67,340,000 at December 31, 2018 and $62,788,000 at March 31, 2018. At March 31, 2019, the balance of participation loans outstanding includes a total of $58,561,000 to businesses located outside of the Corporation’s market area. Also, included within participation loans outstanding are “leveraged loans,” meaning loans to businesses with minimal tangible book equity and for which the extent of collateral available is limited, though typically at the time of origination the businesses have demonstrated strong cash flow performance in their recent histories. Leveraged participation loans outstanding totaled $13,241,000 at March 31, 2019 and $13,315,000 at December 31, 2018.

Since 2009, the Corporation has originated and sold residential mortgage loans to the secondary market through the MPF Xtra program administered by the Federal Home Loan Banks of Pittsburgh and Chicago. Residential mortgages originated and sold through the MPF Xtra program consist primarily of conforming, prime loans sold to the Federal National Mortgage Association (Fannie Mae), a quasi-government entity. In 2014, the Corporation began to originate and sell residential mortgage loans to the secondary market through the MPF Original program, which is also administered by the Federal Home Loan Banks of Pittsburgh and Chicago. Residential mortgages originated and sold through the MPF Original program consist primarily of conforming, prime loans sold to the Federal Home Loan Bank of Pittsburgh.

For loan sales originated under the MPF Xtra and Original programs, the Corporation provides customary representations and warranties to investors that specify, among other things, that the loans have been underwritten to the standards established by the investor. The Corporation may be required to repurchase a loan and reimburse a portion of fees received or reimburse the investor for a credit loss incurred on a loan, if it is determined that the representations and warranties have not been met. Such repurchases or reimbursements generally result from an underwriting or documentation deficiency. At March 31, 2019, the total outstanding balance of loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $2,130,000, and the corresponding total outstanding balance repurchased at December 31, 2018 was $2,146,000.

At March 31, 2019, outstanding balances of loans sold and serviced through the two programs totaled $170,676,000, including loans sold through the MPF Xtra program of $95,653,000 and loans sold through the Original program of $75,023,000. At December 31, 2018, outstanding balances of loans sold and serviced through the two programs totaled $171,742,000, including loans sold through the MPF Xtra program of $96,841,000 and loans sold through the Original program of $74,901,000. 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, 2019 and December 31, 2018.

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, 2019, the Corporation’s maximum credit enhancement obligation under the MPF Original Program was $4,188,000, and the Corporation has recorded a related allowance for credit losses of $315,000 which is included in “Accrued interest and other liabilities” in the accompanying consolidated balance sheets. At December 31, 2018, the Corporation’s maximum credit enhancement obligation under the MPF Original Program was $4,157,000, and the related allowance for credit losses was $328,000. The Corporation does not provide a credit enhancement for loans sold through the Xtra program.

PROVISION AND ALLOWANCE FOR LOAN LOSSES

The Corporation maintains an allowance for loan losses that represents management’s estimate of the losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction of the investment in loans. Note 7 to the unaudited consolidated financial statements provides an overview of the process management uses for evaluating and determining the allowance for loan losses.

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

The allowance for loan losses was $8,256,000 at March 31, 2019, down from $9,309,000 at December 31, 2018. Table VIII shows total specific allowances on impaired loans decreased $1,107,000 to $498,000 at March 31, 2019 from $1,605,000 at December 31, 2018. As described above in the Earnings Overview, this decrease is the result of specific allowances totaling $1,365,000 that were eliminated in the first quarter 2019 and which was the main cause of the credit for loan losses recorded in the quarter. These two loans were no longer considered impaired at March 31, 2019 and were returned to full accrual status in the first quarter 2019. This decrease was partially offset by a specific allowance of $160,000 recorded on a commercial real estate secured loan with an outstanding balance of $991,000 at March 31, 2019 as well as other changes.

 43

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The (credit) provision for loan losses by segment in the three-month periods ended March 31, 2019 and 2018 are as follows:

(In Thousands)	3 Months Ended
	March 31,			March 31,
	2019			2018
Residential mortgage	$	75		$	31
Commercial		(1,149	)		217
Consumer		31			44
Unallocated		86			0
Total	$	(957	)	$	292

The (credit) provision for loan losses is further detailed as follows:

	3 Months		3 Months
Residential mortgage segment	Ended		Ended
(In thousands)	March 31,		March 31,
	2019		2018
Increase in total specific allowance on impaired loans, adjusted for the effect of net charge-offs	$	68	$	51
Increase (decrease) in collectively determined portion of the allowance attributable to:
Loan growth (reduction)		2		(20	)
Changes in historical loss experience factors		5		0
Changes in qualitative factors		0		0
Total provision for loan losses - Residential mortgage segment	$	75	$	31

	3 Months			3 Months
Commercial segment	Ended			Ended
(In thousands)	March 31,			March 31,
	2019			2018
(Decrease) increase in total specific allowance on impaired loans, adjusted for the effect of net charge-offs	$	(1,107	)	$	111
Increase (decrease) in collectively determined portion of the allowance attributable to:
Loan growth		14			53
Changes in historical loss experience factors		2			53
Changes in qualitative factors		(58	)		0
Total (credit) provision for loan losses - Commercial segment	$	(1,149	)	$	217

 44

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

	3 Months			3 Months
Consumer segment	Ended			Ended
(In thousands)	March 31,			March 31,
	2019			2018
Increase in total specific allowance on impaired loans, adjusted for the effect of net charge-offs	$	28		$	29
Increase (decrease) in collectively determined portion of the allowance attributable to:
Loan growth		0			4
Changes in historical loss experience factors		10			10
Changes in qualitative factors		(7	)		1
Total provision for loan losses - Consumer segment	$	31		$	44

	3 Months			3 Months
Total - All segments	Ended			Ended
(In thousands)	March 31,			March 31,
	2019			2018
(Decrease) increase in total specific allowance on impaired loans, adjusted for the effect of net charge-offs	$	(1,011	)	$	191
Increase (decrease) in collectively determined portion of the allowance attributable to:
Loan growth		16			37
Changes in historical loss experience factors		17			63
Changes in qualitative factors		(65	)		1
Subtotal		(1,043	)		292
Unallocated		86			0
Total (credit) provision for loan losses - All segments	$	(957	)	$	292

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 or decrease 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 1.37% at March 31, 2019, down from 1.94% at December 31, 2018, and nonperforming assets as a percentage of total assets was 1.02% at March 31, 2019, down from 1.37% at December 31, 2018. Table IX presents data at March 31, 2019 and at the end of each of the years ended December 31, 2014 through 2018. Table IX shows that total nonperforming loans as a percentage of loans of 1.37% at March 31, 2019 was lower than the corresponding year-end ratio from 2014 through 2018. Similarly, the March 31, 2019 ratio of total nonperforming assets as a percentage of assets of 1.02% was lower than the corresponding ratio from 2014 through 2018.

 45

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Total impaired loans of $6,497,000 at March 31, 2019 are down $3,277,000 from the corresponding amount at December 31, 2018 of $9,774,000. As described above, the two commercial loans for which specific allowances were eliminated in the first quarter 2019 were not considered to be impaired at March 31, 2019 but were considered impaired at December 31, 2018. Total outstanding balances of these loans were $3,781,000 at December 31, 2018 ($3,679,000 at March 31, 2019). Other significant changes in impaired loans in the first quarter 2019 included: (1) recognition of an allowance on one real estate secured commercial loan with a balance of $991,000 at March 31, 2019 and December 31, 2018, resulting in a reclassification within the table from “Impaired loans without a valuation allowance” to “Impaired loans with a valuation allowance;” (2) addition to impaired status of a commercial and industrial loan with a balance of $669,000 and a specific allowance of $60,000 at March 31, 2019; and (3) removal from impaired status of a commercial loan with an outstanding balance of $326,000 at December 31, 2018 for which foreclosure proceedings were completed and the related real estate acquired in the first quarter 2019 (included in Foreclosed assets held for sale with a carrying value of $326,000 at March 31, 2019). Table IX shows that the total balance of impaired loans at March 31, 2019 was lower than the year-end amounts over the period 2014-2018, which ranged from a low of $9,511,000 in 2017 to a high of $12,316,000 in 2014.

Total nonperforming assets of $13,218,000 at March 31, 2019 are $4,504,000 lower than the corresponding amount at December 31, 2018, summarized as follows:

· Total nonaccrual loans at March 31, 2019 of $9,411,000 was $3,672,000 lower than the corresponding December 31, 2018 total of $13,113,000, including the effect of reducing nonaccrual loans due to the return to full accrual status of the two commercial loans described above with balances totaling $3,781,000 at December 31, 2018.

· Total loans past due 90 days or more and still accruing interest amounted to $1,902,000 at March 31, 2019, a decrease of $1,004,000 from the total at December 31, 2018.  The reduction in loans past due 90 days or more included a reduction in loans secured by farmland of $459,000 and a decrease in residential mortgage loans of $306,000.  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.

· Foreclosed assets held for sale consisted of real estate, and totaled $1,875,000 at March 31, 2019, an increase of $172,000 from $1,703,000 at December 31, 2018.  At March 31, 2019, the Corporation held eight such properties for sale, with total carrying values of $109,000 related to residential real estate, $110,000 of land and $1,656,000 related to commercial real estate.  At December 31, 2018, the Corporation held six such properties for sale, with total carrying values of $64,000 related to residential real estate, $110,000 of land and $1,529,000 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 2014-2018 and the first three months of 2019, 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, 2019. 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.

 46

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE VII - ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES

(Dollars In Thousands)

	March 31,			March 31,			Years Ended December 31,
	2019			2018			2018			2017			2016			2015			2014
Balance, beginning of year	$	9,309		$	8,856		$	8,856		$	8,473		$	7,889		$	7,336		$	8,663
Charge-offs:
Residential mortgage		(74	)		(53	)		(158	)		(197	)		(73	)		(217	)		(327	)
Commercial		0			(21	)		(165	)		(132	)		(597	)		(251	)		(1,715	)
Consumer		(37	)		(41	)		(174	)		(150	)		(87	)		(94	)		(97	)
Total charge-offs		(111	)		(115	)		(497	)		(479	)		(757	)		(562	)		(2,139	)
Recoveries:
Residential mortgage		4			2			8			19			3			1			25
Commercial		2			2			317			4			35			214			264
Consumer		9			12			41			38			82			55			47
Total recoveries		15			16			366			61			120			270			336
Net charge-offs		(96	)		(99	)		(131	)		(418	)		(637	)		(292	)		(1,803	)
(Credit) provision for loan losses		(957	)		292			584			801			1,221			845			476
Balance, end of period	$	8,256		$	9,049		$	9,309		$	8,856		$	8,473		$	7,889		$	7,336
Net charge-offs as a % of average loans		0.01	%		0.01	%		0.02	%		0.05	%		0.09	%		0.04	%		0.29	%

TABLE VIII - COMPONENTS OF THE ALLOWANCE FOR LOAN LOSSES

(In Thousands)

	March 31,		As of December 31,
	2019		2018		2017		2016		2015		2014
ASC 310 - Impaired loans	$	498	$	1,605	$	1,279	$	674	$	820	$	769
ASC 450 - Collective segments:
Commercial		3,060		3,102		3,078		3,373		3,103		2,732
Residential mortgage		3,877		3,870		3,841		3,890		3,417		3,295
Consumer		236		233		159		138		122		145
Unallocated		585		499		499		398		427		395
Total Allowance	$	8,256	$	9,309	$	8,856	$	8,473	$	7,889	$	7,336

 47

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE IX - PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS

AND TROUBLED DEBT RESTRUCTURINGS (TDRs)

(Dollars In Thousands)

	March 31,			As of December 31,
	2019			2018			2017			2016			2015			2014
Impaired loans with a valuation allowance	$	2,769		$	4,851		$	4,100		$	3,372		$	1,933		$	3,241
Impaired loans without a valuation allowance		3,728			4,923			5,411			7,488			8,041			9,075
Total impaired loans	$	6,497		$	9,774		$	9,511		$	10,860		$	9,974		$	12,316
Total loans past due 30-89 days and still accruing	$	7,123		$	7,142		$	9,449		$	7,735		$	7,057		$	7,121
Nonperforming assets:
Total nonaccrual loans	$	9,441		$	13,113		$	13,404		$	8,736		$	11,517		$	12,610
Total loans past due 90 days or more and still accruing		1,902			2,906			3,724			6,838			3,229			2,843
Total nonperforming loans		11,343			16,019			17,128			15,574			14,746			15,453
Foreclosed assets held for sale (real estate)		1,875			1,703			1,598			2,180			1,260			1,189
Total nonperforming assets	$	13,218		$	17,722		$	18,726		$	17,754		$	16,006		$	16,642
Loans subject to troubled debt restructurings (TDRs):
Performing	$	776		$	655		$	636		$	5,803		$	1,186		$	1,807
Nonperforming		774			2,884			3,027			2,874			5,178			5,388
Total TDRs	$	1,550		$	3,539		$	3,663		$	8,677		$	6,364		$	7,195
Total nonperforming loans as a % of loans		1.37	%		1.94	%		2.10	%		2.07	%		2.09	%		2.45	%
Total nonperforming assets as a % of assets		1.02	%		1.37	%		1.47	%		1.43	%		1.31	%		1.34	%
Allowance for loan losses as a % of total loans		1.00	%		1.12	%		1.09	%		1.13	%		1.12	%		1.16	%
Allowance for loan losses as a % of nonperforming loans		72.78	%		58.11	%		51.70	%		54.40	%		53.50	%		47.47	%

TABLE X - SUMMARY OF LOANS BY TYPE

Summary of Loans by Type

(In Thousands)	March 31,			As of December 31,
	2019			2018			2017			2016			2015			2014
Residential mortgage:
Residential mortgage loans - first liens	$	374,764		$	372,339		$	359,987		$	334,102		$	304,783		$	291,882
Residential mortgage loans - junior liens		25,538			25,450			25,325			23,706			21,146			21,166
Home equity lines of credit		32,847			34,319			35,758			38,057			39,040			36,629
1-4 Family residential construction		24,437			24,698			26,216			24,908			21,121			16,739
Total residential mortgage		457,586			456,806			447,286			420,773			386,090			366,416
Commercial:
Commercial loans secured by real estate		160,177			162,611			159,266			150,468			154,779			145,878
Commercial and industrial		92,842			91,856			88,276			83,854			75,196			50,157
Political subdivisions		52,142			53,263			59,287			38,068			40,007			17,534
Commercial construction and land		12,701			11,962			14,527			14,287			5,122			6,938
Loans secured by farmland		6,938			7,146			7,255			7,294			7,019			7,916
Multi-family (5 or more) residential		7,031			7,180			7,713			7,896			9,188			8,917
Agricultural loans		5,471			5,659			6,178			3,998			4,671			3,221
Other commercial loans		13,467			13,950			10,986			11,475			12,152			13,334
Total commercial		350,769			353,627			353,488			317,340			308,134			253,895
Consumer		17,037			17,130			14,939			13,722			10,656			10,234
Total		825,392			827,563			815,713			751,835			704,880			630,545
Less: allowance for loan losses		(8,256	)		(9,309	)		(8,856	)		(8,473	)		(7,889	)		(7,336	)
Loans, net	$	817,136		$	818,254		$	806,857		$	743,362		$	696,991		$	623,209

 48

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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, 2019, the Corporation maintained overnight interest-bearing deposits with the Federal Reserve Bank of Philadelphia and other correspondent banks totaling $18,775,000.

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

The Corporation has a line of credit with the Federal Reserve Bank of Philadelphia’s Discount Window. Management intends to use this line of credit as a contingency funding source. As collateral for the line, the Corporation has pledged available-for-sale securities with a carrying value of $17,983,000 at March 31, 2019.

The Corporation’s outstanding, available, and total credit facilities at March 31, 2019 and December 31, 2018 are as follows:

	Outstanding				Available				Total Credit
(In Thousands)	March 31,		Dec. 31,		March 31,		Dec. 31,		March 31,		Dec. 31,
	2019		2018		2019		2018		2019		2018
Federal Home Loan Bank of Pittsburgh	$	32,844	$	42,915	$	332,944	$	318,699	$	365,788	$	361,614
Federal Reserve Bank Discount Window		0		0		17,455		15,262		17,455		15,262
Other correspondent banks		0		0		45,000		45,000		45,000		45,000
Total credit facilities	$	32,844	$	42,915	$	395,399	$	378,961	$	428,243	$	421,876

At March 31, 2019, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of long-term borrowings of $32,844,000. At December 31, 2018, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of overnight borrowings of $7,000,000 and long-term borrowings with a total amount of $35,915,000. Additional information regarding borrowed funds is included in Note 8 to the unaudited consolidated financial statements.

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, 2019, the carrying value of available-for-sale securities in excess of amounts required to meet pledging or repurchase agreement obligations was $210,626,000.

Management believes the Corporation is well-positioned to meet its short-term and long-term obligations, including the impact of additional lending opportunities and other potential cash requirements arising from the Monument merger discussed in the Monument Acquisition section of Management’s Discussion and Analysis.

STOCKHOLDERS’ EQUITY AND CAPITAL ADEQUACY

As required by the Economic Growth, Regulatory Relief, and Consumer Protection Act (discussed further in the Recent Legislative Developments section of Management’s Discussion and Analysis), in August 2018, the Federal Reserve Board issued an interim final rule that expanded applicability of the Board’s small bank holding company policy statement. The interim final rule raised the policy statement’s asset threshold from $1 billion to $3 billion in total consolidated assets for a bank holding company or savings and loan holding company that: (1) is not engaged in significant nonbanking activities; (2) does not conduct significant off-balance sheet activities; and (3) does not have a material amount of debt or equity securities, other than trust-preferred securities, outstanding. The interim final rule provides that, if warranted for supervisory purposes, the Federal Reserve may exclude a company from the threshold increase. Management believes the Corporation meets the conditions of the Federal Reserve’s small bank holding company policy statement and is therefore excluded from consolidated capital requirements at March 31, 2019; however, C&N Bank remains subject to regulatory capital requirements administered by the federal banking agencies.

 49

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Details concerning capital ratios at March 31, 2019 and December 31, 2018 are presented below. Management believes, as of March 31, 2019, that C&N Bank meets all capital adequacy requirements to which it is subject and maintains a capital conservation buffer (described in more detail below) that allows the Bank to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. Further, as reflected in the table below, the Corporation’s and C&N Bank’s capital ratios at March 31, 2019 and December 31, 2018 exceed the Corporation’s Board policy threshold levels.

(Dollars in Thousands)																Minimum To Be Well
						Minimum					Minimum To Maintain					Capitalized Under					Minimum To Meet
						Capital					Capital Conservation					Prompt Corrective					the Corporation's
	Actual					Requirement					Buffer at Reporting Date					Action Provisions					Policy Thresholds
	Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio			Amount		Ratio
March 31, 2019:
Total capital to risk-weighted assets:
Consolidated	$	199,391		24.60	%		N/A		N/A			N/A		N/A			N/A		N/A		$	85,119		³10.5	%
C&N Bank		167,025		20.71	%		64,533		³8	%		84,699		³10.5	%		80,666		³10	%		84,699		³10.5	%
Tier 1 capital to risk-weighted assets:
Consolidated		190,820		23.54	%		N/A		N/A			N/A		N/A			N/A		N/A			68,906		³8.5	%
C&N Bank		158,454		19.64	%		48,400		³6	%		68,566		³8.5	%		64,533		³8	%		68,566		³8.5	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		190,820		23.54	%		N/A		N/A			N/A		N/A			N/A		N/A			56,746		³7	%
C&N Bank		158,454		19.64	%		36,300		³4.5	%		56,466		³7.0	%		52,433		³6.5	%		56,466		³7	%
Tier 1 capital to average assets:
Consolidated		190,820		15.01	%		N/A		N/A			N/A		N/A			N/A		N/A			101,684		³8	%
C&N Bank		158,454		12.62	%		50,231		³4	%		N/A		N/A			62,789		³5	%		100,463		³8	%
December 31, 2018:
Total capital to risk-weighted assets:
Consolidated	$	199,226		24.42	%		N/A		N/A			N/A		N/A			N/A		N/A		$	85,653		³10.5	%
C&N Bank		176,499		21.75	%		64,916		³8	%		80,130		³9.875	%		81,145		³10	%		85,202		³10.5	%
Tier 1 capital to risk-weighted assets:
Consolidated		189,589		23.24	%		N/A		N/A			N/A		N/A			N/A		N/A			69,338		³8.5	%
C&N Bank		166,862		20.56	%		48,687		³6	%		63,901		³7.875	%		64,916		³8	%		68,973		³8.5	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		189,589		23.24	%		N/A		N/A			N/A		N/A			N/A		N/A			57,102		³7	%
C&N Bank		166,862		20.56	%		36,515		³4.5	%		51,730		³6.375	%		52,744		³6.5	%		56,801		³7	%
Tier 1 capital to average assets:
Consolidated		189,589		14.78	%		N/A		N/A			N/A		N/A			N/A		N/A			102,634		³8	%
C&N Bank		166,862		13.16	%		50,715		³4	%		N/A		N/A			63,394		³5	%		101,430		³8	%

Management expects C&N Bank to maintain capital levels that exceed the regulatory standards for well-capitalized institutions and the applicable capital conservation buffer, including the impact of the Monument merger discussed in Note 12 to the unaudited, consolidated financial statements, 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, C&N Bank is subject to restrictions on the amount of dividends that may be paid without approval of banking regulatory authorities. Further, although the Corporation is no longer subject to the specific consolidated capital requirements described herein, the Corporation’s ability to pay dividends, repurchase stock or engage in other activities may be limited by the Federal Reserve if the Corporation fails to hold capital commensurate with its overall risk profile.

 50

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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). This capital rule provides that, to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization subject to the rule must hold a capital conservation buffer composed of common equity tier 1 capital above its minimum risk-based capital requirements. The buffer is measured relative to risk-weighted assets. In 2019, the minimum risk-based capital ratios, and the capital ratios including the capital conservation buffer, are as follows:

Minimum common equity tier 1 capital ratio	4.5%
Minimum common equity tier 1 capital ratio plus capital conservation buffer	7.0%
Minimum tier 1 capital ratio	6.0%
Minimum tier 1 capital ratio plus capital conservation buffer	8.5%
Minimum total capital ratio	8.0%
Minimum total capital ratio plus capital conservation buffer	10.5%

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

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

At March 31, 2019, C&N Bank’s Capital Conservation Buffer, determined based on the minimum total capital ratio, was 12.71%.

The Corporation’s total stockholders’ equity is affected by fluctuations in the fair values of available-for-sale debt securities. The difference between amortized cost and fair value of available-for-sale debt securities, net of deferred income tax, is included in Accumulated Other Comprehensive Income (Loss) within stockholders’ equity. The balance in Accumulated Other Comprehensive Income (Loss) related to unrealized gains (losses) on available-for-sale debt securities, net of deferred income tax, amounted to ($941,000) at March 31, 2019 and ($4,307,000) at December 31, 2018. Changes in accumulated other comprehensive income (loss) are excluded from earnings and directly increase or decrease stockholders’ equity. If available-for-sale debt 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, 2019.

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 $300,000 at March 31, 2019 and $137,000 at December 31, 2018.

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 debt securities and changes in underfunded or overfunded defined benefit plans. Fluctuations in interest rates significantly affect fair values of available-for-sale debt securities, and accordingly have an effect on Other Comprehensive Income (Loss) in each period.

 51

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Comprehensive Income totaled $8,619,000 for the first quarter 2019 as compared to $621,000 in the first quarter 2018. For the three months ended March 31, 2019, Comprehensive Income included: (1) Net Income of $5,090,000, which was $715,000 higher than in the first quarter 2018; (2) Other Comprehensive Income from available-for-sale debt securities of $3,366,000 as compared to Other Comprehensive Loss of ($3,824,000) in the first quarter 2018; and (3) Other Comprehensive Income from defined benefit plans of $163,000 for the first quarter 2019 as compared to $70,000 for the first quarter 2018.

RECENT LEGISLATIVE DEVELOPMENTS

On May 24, 2018, President Trump signed into law the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Act”), which was designed to ease certain restrictions imposed by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. Most of the changes made by the new Act can be grouped into five general areas: mortgage lending; certain regulatory relief for “community” banks; enhanced consumer protections in specific areas, including subjecting credit reporting agencies to additional requirements; certain regulatory relief for large financial institutions, including increasing the threshold at which institutions are classified as systemically important financial institutions (from $50 billion to $250 billion) and therefore subject to stricter oversight, and revising the rules for larger institution stress testing; and certain changes to federal securities regulations designed to promote capital formation.

As noted in the Stockholders’ Equity and Capital Adequacy section of Management’s Discussion and Analysis, as required by the Act, the Federal Reserve Board issued an interim final rule that expanded applicability of the Board’s small bank holding company policy statement, raising the policy statement’s asset threshold from $1 billion to $3 billion in total consolidated assets for a bank holding company or savings and loan holding company, subject to other conditions. Management believes the Corporation meets the conditions of the Federal Reserve’s small bank holding company policy statement and is therefore excluded from consolidated capital requirements at March 31, 2019. Further, qualification as a small bank holding company allows the Corporation to file more abbreviated, and less frequent, consolidated and holding company reports with the Federal Reserve.

Also, as required by the Act, in November 2018 the Federal Reserve Board, FDIC and Office of the Comptroller of the Currency issued a joint proposal that would provide qualifying community banking organizations an option to calculate a simple leverage ratio, rather than multiple measures of capital adequacy. Under the proposal, a community banking organization would be eligible to elect the community bank leverage ratio framework if it has less than $10 billion in total consolidated assets, limited amounts of certain assets and off-balance sheet exposures, and a community bank leverage ratio greater than 9%. A qualifying community banking organization that has chosen the proposed framework would not be required to calculate the existing risk-based and leverage capital requirements.  Such a community banking organization would be considered to have met the capital ratio requirements to be well capitalized for the agencies’ prompt corrective action rules provided it has a community bank leverage ratio greater than 9 percent. The Corporation is in the process of evaluating whether it will adopt the optional community bank leverage ratio framework if a final rule is issued consistent with the proposal.

Some of the other key provisions of the Act as it relates to community banks and bank holding companies include, but are not limited to: (i) designating mortgages held in portfolio as “qualified mortgages” for banks with less than $10 billion in assets, subject to certain documentation and product limitations; (ii) exempting banks with less than $10 billion in assets from Volcker Rule requirements relating to proprietary trading; (iii) assisting smaller banks with obtaining stable funding by providing an exception for reciprocal deposits from FDIC restrictions on acceptance of brokered deposits; (iv) raising the eligibility for use of short-form Call Reports from $1 billion to $5 billion in assets; and (v) clarifying definitions pertaining to high volatility commercial real estate loans (HVCRE), which require higher capital allocations, so that only loans with increased risk are subject to higher risk weightings.

The Corporation continues to analyze the changes implemented by the Act.

MONUMENT ACQUISITION

As described in Note 12 to the unaudited consolidated financial statements, the Corporation’s acquisition of Monument was completed on April 1, 2019. Accordingly, except for previously discussed merger-related expenses, the first quarter 2019 financial statements were not significantly affected by the transaction.

 52

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Monument was the parent company of Monument Bank, a commercial bank which operated two community bank offices and one loan production office in Bucks County, Pennsylvania. Effective April 1, 2019, Monument merged into the Corporation, and Monument Bank merged into C&N Bank. The transaction was structured such that, overall, 20% of the Monument shares were converted into cash and 80% of the Monument shares were converted into Corporation stock. Holders of Monument common stock prior to the consummation of the merger own approximately 9.4% of the Corporation’s common stock outstanding following the merger.

The estimated total purchase consideration is valued at approximately $42.7 million based on the average of the high and low trading price of the Corporation’s common stock on April 1, 2019. As of March 31, 2019, Monument reported total assets of $376 million, including gross loans of $263 million, total deposits of $224 million and total stockholders’ equity of $27 million. Management is in the process of completing the detailed accounting analysis required for the acquisition, including completion of an updated credit review of the acquired loan portfolio and determination of the fair values of the assets acquired and liabilities assumed as of the acquisition date.

Management expects the Corporation will incur merger-related expenses in the second quarter 2019 ranging between $2,900,000 and $3,500,000, including costs associated with termination of data processing contracts, conversion of Monument’s customer accounting data into the Corporation’s core system, severance and similar expenses, investment banking fees and various other costs.

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.

 53

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 21, 2019.

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 of its common stock during the first quarter 2019. All of the purchases were of common stock withheld to satisfy tax obligations of employees or independent directors due upon vesting of restricted stock awards.

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, 2019		7,392	$	25.64		0		600,000
February 1 - 28, 2019		0	$	0		0		600,000
March 1 - 31, 2019		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

 54

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
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

 55

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 7, 2019	By: /s/ J. Bradley Scovill
Date	President and Chief Executive Officer
May 7, 2019	By: /s/ Mark A. Hughes
Date	Treasurer and Chief Financial Officer

 56

EX-31.1

 

Exhibit 31.1

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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 7, 2019	By:	/s/ J. Bradley Scovill
Date		President and Chief Executive Officer

EX-31.2

 Exhibit 31.2

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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 7, 2019	By:	/s/ Mark A. Hughes
Date		Treasurer and Chief Financial Officer

EX-32

Exhibit 32

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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, 2019, 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 7, 2019	By:	/s/ J. Bradley Scovill
Date		President and Chief Executive Officer
May 7, 2019	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, 2019	May 02, 2019
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 Emerging Growth Company	false
Entity Small Business	true
Entity Common Stock, Shares Outstanding (in shares)		13,674,399
Document Type	10-Q
Document Period End Date	Mar. 31, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Amendment Flag	false

XML

Consolidated Balance Sheets (Current Period Unaudited) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
ASSETS
Noninterest-bearing	$ 20,667,000	$ 20,970,000
Interest-bearing	23,335,000	16,517,000
Total cash and due from banks	44,002,000	37,487,000
Available-for-sale debt securities, at fair value	357,646,000	363,273,000
Marketable equity security	962,000	950,000
Loans held for sale	0	213,000
Loans receivable	825,392,000	827,563,000
Allowance for loan losses	(8,256,000)	(9,309,000)
Loans, net	817,136,000	818,254,000
Bank-owned life insurance	18,331,000	19,035,000
Accrued interest receivable	4,270,000	3,968,000
Bank premises and equipment, net	14,663,000	14,592,000
Foreclosed assets held for sale	1,875,000	1,703,000
Deferred tax asset, net	2,696,000	4,110,000
Intangible assets - Goodwill and core deposit intangibles	11,949,000	11,951,000
Other assets	16,470,000	15,357,000
TOTAL ASSETS	1,290,000,000	1,290,893,000
LIABILITIES
Noninterest-bearing	274,759,000	272,520,000
Interest-bearing	765,152,000	761,252,000
Total deposits	1,039,911,000	1,033,772,000
Short-term borrowings	5,132,000	12,853,000
Long-term borrowings	32,844,000	35,915,000
Accrued interest and other liabilities	9,986,000	10,985,000
TOTAL LIABILITIES	1,087,873,000	1,093,525,000
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 12,393,044 at March 31, 2019 and 12,319,330 December 31, 2018	12,655,000	12,655,000
Paid-in capital	71,963,000	72,602,000
Retained earnings	123,155,000	122,643,000
Treasury stock, at cost; 262,127 shares at March 31, 2019 and 335,841 shares at December 31, 2018	(5,005,000)	(6,362,000)
Accumulated other comprehensive loss	(641,000)	(4,170,000)
TOTAL STOCKHOLDERS' EQUITY	202,127,000	197,368,000
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$ 1,290,000,000	$ 1,290,893,000

XML

Consolidated Balance Sheets (Current Period Unaudited) (Parentheticals) - $ / shares	Mar. 31, 2019	Dec. 31, 2018
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)	12,393,044	12,319,330
Treasury stock, shares (in shares)	262,127	335,841

XML

Consolidated Statements of Income (Unaudited) - USD ($)		3 Months Ended
		Mar. 31, 2019	Mar. 31, 2018
Interest and fees on loans:
Taxable		$ 9,948,000	$ 9,201,000
Tax-exempt		564,000	556,000
Interest on mortgages held for sale		3,000	2,000
Interest on balances with depository institutions		116,000	50,000
Income from available-for-sale debt securities:
Taxable		1,834,000	1,363,000
Tax-exempt		594,000	713,000
Dividends on marketable equity security		6,000	5,000
Total interest and dividend income		13,065,000	11,890,000
INTEREST EXPENSE
Interest on deposits		1,053,000	729,000
Interest on short-term borrowings		79,000	199,000
Interest on long-term borrowings		218,000	65,000
Total interest expense		1,350,000	993,000
Net interest income		11,715,000	10,897,000
Provision for Loan, Lease, and Other Losses, Total		(957,000)	292,000
Net interest income after (credit) provision for loan losses		12,672,000	10,605,000
NONINTEREST INCOME
Brokerage revenue		307,000	212,000
Insurance commissions, fees and premiums		30,000	44,000
Net gains from sale of loans		87,000	184,000
Increase in cash surrender value of life insurance		92,000	97,000
Other noninterest income		530,000	450,000
Total noninterest income		4,406,000	4,406,000
NONINTEREST EXPENSE
Salaries and wages		4,493,000	4,124,000
Pensions and other employee benefits		1,618,000	1,610,000
Occupancy expense, net		657,000	637,000
Furniture and equipment expense		301,000	271,000
Data processing expenses		803,000	641,000
Automated teller machine and interchange expense		189,000	322,000
Pennsylvania shares tax		347,000	336,000
Professional fees		424,000	276,000
Telecommunications		164,000	233,000
Directors' fees		183,000	184,000
Other noninterest expense		1,828,000	1,261,000
Total noninterest expense		11,007,000	9,895,000
Income before income tax provision		6,071,000	5,116,000
Income tax provision		981,000	741,000
NET INCOME		$ 5,090,000	$ 4,375,000
EARNINGS PER COMMON SHARE - BASIC (in dollars per share)	[1]	$ 0.41	$ 0.36
EARNINGS PER COMMON SHARE - DILUTED (in dollars per share)	[1]	$ 0.41	$ 0.36
Trust and Asset Management [Member]
NONINTEREST INCOME
Revenue		$ 1,360,000	$ 1,422,000
Deposit Account [Member]
NONINTEREST INCOME
Revenue		1,250,000	1,204,000
Service Charges and Fees [Member]
NONINTEREST INCOME
Revenue		79,000	86,000
Debit Card [Member]
NONINTEREST INCOME
Revenue		643,000	579,000
Bank Servicing [Member]
NONINTEREST INCOME
Revenue		$ 28,000	$ 128,000

[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 non-vested restricted shares with nonforfeitable dividends (participating securities).

XML

Consolidated Statements of Comprehensive Income (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Net income	$ 5,090	$ 4,375
Unrealized holding gains (losses) on available-for-sale debt securities	4,261	(4,839)
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in accumulated other comprehensive gain	214	93
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost	(8)	(5)
Other comprehensive gain on unfunded retirement obligations	206	88
Other comprehensive income (loss) before income tax	4,467	(4,751)
Income tax related to other comprehensive (income) loss	(938)	997
Net other comprehensive income (loss)	3,529	(3,754)
Comprehensive income	$ 8,619	$ 621

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 5,090,000	$ 4,375,000
Adjustments to reconcile net income to net cash provided by operating activities:
(Credit) provision for loan losses	(957,000)	292,000
Unrealized (gain) loss on marketable equity security	(12,000)	15,000
Depreciation and amortization expense	425,000	412,000
Accretion and amortization on securities, net	209,000	268,000
Increase in cash surrender value of life insurance	(92,000)	(97,000)
Stock-based compensation and other expense	229,000	183,000
Deferred income taxes	476,000	166,000
Decrease (increase) in fair value of servicing rights	77,000	(20,000)
Gains on sales of loans, net	(87,000)	(184,000)
Origination of loans held for sale	(2,259,000)	(5,327,000)
Proceeds from sales of loans held for sale	2,539,000	6,001,000
(Increase) decrease in accrued interest receivable and other assets	(649,000)	757,000
Decrease in accrued interest payable and other liabilities	(2,217,000)	(482,000)
Other	48,000	(29,000)
Net Cash Provided by Operating Activities	2,820,000	6,330,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of certificates of deposit	100,000	820,000
Purchase of certificates of deposit	0	(100,000)
Proceeds from calls and maturities of available-for-sale securities	18,613,000	10,516,000
Purchase of available-for-sale securities	(8,934,000)	(312,000)
Redemption of Federal Home Loan Bank of Pittsburgh stock	2,308,000	2,990,000
Purchase of Federal Home Loan Bank of Pittsburgh stock	(1,753,000)	(1,706,000)
Net decrease (increase) in loans	1,681,000	(1,805,000)
Proceeds from bank owned life insurance	796,000	0
Purchase of premises and equipment	(496,000)	(467,000)
Proceeds from sale of foreclosed assets	176,000	603,000
Other	46,000	51,000
Net Cash Provided by Investing Activities	12,537,000	10,590,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits	6,139,000	9,632,000
Net decrease in short-term borrowings	(7,721,000)	(35,284,000)
Proceeds from long-term borrowings	5,000,000	9,000,000
Repayments of long-term borrowings	(8,071,000)	(67,000)
Sale of treasury stock	162,000	63,000
Repurchase of restricted stock for tax withholding	(189,000)	0
Common dividends paid	(4,062,000)	(2,928,000)
Net Cash Used in Financing Activities	(8,742,000)	(19,584,000)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	6,615,000	(2,664,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	32,827,000	37,004,000	$ 37,004,000
CASH AND CASH EQUIVALENTS, END OF YEAR	39,442,000	34,340,000	$ 32,827,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Assets acquired through foreclosure of real estate loans	399,000	72,000
Accrued purchase of available-for-sale debt security	0	507,000
Interest paid	1,377,000	978,000
Income taxes paid	$ 50,000	$ 125,000

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, 2017		12,655,171	440,646
Balance, beginning of period at Dec. 31, 2017		$ 12,655	$ (8,348)	$ 72,035	$ 113,608	$ (1,507)	$ 188,443
Net income					4,375		4,375
Total other comprehensive income, net of tax amount						(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
Impact of accounting standards change (Accounting Standards Update 2018-02 [Member]) at Dec. 31, 2017	[1]				325	(325)	0
Impact of accounting standards change (Accounting Standards Update 2017-08 [Member]) at Dec. 31, 2017	[2]				(26)	26	0
Impact of accounting standards change (Accounting Standards Update 2016-01 [Member]) at Dec. 31, 2017	[3]				(22)	22	0
Shares issued for dividend reinvestment plan (in shares)			(16,371)
Balance (in shares) at Mar. 31, 2018		12,655,171	390,887
Balance, end of period at Mar. 31, 2018		$ 12,655	$ (7,404)	71,716	114,953	(5,538)	186,382
Balance (in shares) at Dec. 31, 2018		12,655,171	335,841
Balance, beginning of period at Dec. 31, 2018		$ 12,655	$ (6,362)	72,602	122,643	(4,170)	197,368
Net income					5,090		5,090
Total other comprehensive income, net of tax amount						3,529	3,529
Cash dividends declared on common stock					(4,578)		(4,578)
Shares issued for dividend reinvestment plan (in shares)			(20,487)
Shares issued for dividend reinvestment plan			$ 391	125			516
Shares issued from treasury and redeemed related to exercise of stock options (in shares)			(12,638)
Shares issued from treasury and redeemed related to exercise of stock options			$ 240	(78)			162
Restricted stock granted (in shares)			(48,137)
Restricted stock granted			$ 918	(918)			0
Forfeiture of restricted stock (in shares)			156
Forfeiture of restricted stock			$ (3)	3			0
Stock-based compensation expense				229			229
Repurchase of restricted stock for tax withholding (in shares)			7,392
Repurchase of restricted stock for tax withholding			$ (189)				(189)
Shares issued for dividend reinvestment plan (in shares)			20,487
Balance (in shares) at Mar. 31, 2019		12,655,171	262,127
Balance, end of period at Mar. 31, 2019		$ 12,655	$ (5,005)	$ 71,963	$ 123,155	$ (641)	$ 202,127

[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, 2019	Mar. 31, 2018
Retained Earnings [Member]
Common stock, dividends, per share (in dollars per share)	$ 0.37	$ 0.27

XML

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

3 Months Ended

Mar. 31, 2019

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”).  The consolidated financial statements also include C&N Bank’s wholly-owned subsidiaries, C&N Financial Services Corporation, and Northern Tier Holding LLC. 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, except the consolidated balance sheet dated

December 31, 2018,

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

2018

information has been reclassified for consistency with the

2019

presentation.

Operating results reported for the

three

-month period ended

March 31, 2019

might

not

be indicative of the results for the year ending

December 31, 2019.

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

Effective

January 1, 2019,

the Corporation adopted ASU

2016

-

02,

Leases (Topic

842

), as modified by subsequent ASUs, which changed GAAP by requiring that lease assets and liabilities arising from operating leases be recognized on the balance sheet. Topic

842,

as modified, does

not

significantly change the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee from prior U.S. GAAP. For leases with a term of

12

months or less, the Corporation made an accounting policy election by class of underlying asset

not

to recognize lease assets and liabilities. The Corporation elected to adopt this pronouncement using an optional transition method resulting in recognition of right-of-use assets and lease liabilities for operating leases of

$1,132,000

on its consolidated balance sheets at

January 1, 2019,

with

no

adjustment to stockholders’ equity and

no

material impact to its consolidated statements of income.  At

March 31, 2019,

right-of-use assets of

$1,424,000

were included in other assets, and the related liabilities totaling the same amount were included in accrued interest and other liabilities, in the unaudited consolidated balance sheets.

Effective

January 1, 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.  Disclosures required by the ASU have been included in Note

11.

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 debt 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).

Effective

January 1, 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.

Effective

January 1, 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 the following changes:

● A marketable equity security previously included in available-for-sale securities on the consolidated balance sheets is presented as a separate asset.

● Changes in the fair value of the marketable equity security are captured in the consolidated statements of income.

● Retained earnings was reduced and a corresponding increase in accumulated other comprehensive loss was recognized ( 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 marketable equity security.

● Adoption of ASU 2016 - 01 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

B

ut

Not

Yet Effective Accounting Pronouncements

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 was permitted beginning in the

first

quarter

2019;

however, the Corporation did

not

early adopt the ASU. The Corporation has formed a cross functional management team and is working with an outside vendor assessing alternative loss estimation methodologies, the Corporation’s data and system needs and the impact of loans acquired in the merger with Monument Bancorp, Inc. (described in more detail in Note

12

) 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

January 1, 2020.

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.

ASU

2018

-

13,

Fair Value Measurement (Topic

820

) modifies disclosure requirements on fair value measurements. This ASU removes requirements to disclose the amount of and reasons for transfers between Level

1

and Level

2

of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level

3

fair value measurements. ASU

2018

-

13

clarifies that disclosure regarding measurement uncertainty is intended to communicate information about the uncertainty in measurement as of the reporting date. ASU

2018

-

13

adds certain disclosure requirements, including disclosure of changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level

3

fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level

3

fair value measurements. The amendments in this ASU are effective for the Corporation beginning in the

first

quarter

2020.

The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level

3

fair value measurements and the narrative description of measurement uncertainty should be applied prospectively, while all other amendments should be applied retrospectively for all periods presented. The Corporation does

not

expect adoption of this ASU to have a material impact on its consolidated financial position or results of operations.

ASU

2018

-

14,

Compensation - Retirement Benefits - Defined Benefit Plans – General (Subtopic

715

-

20

) modifies the disclosure requirements for defined benefit and other postretirement plans. This ASU eliminates certain disclosures associated with accumulated other comprehensive income, plan assets, related parties, and the effects of interest rate basis point changes on assumed health care costs; while other disclosures have been added to address significant gains and losses related to changes in benefit obligations. This ASU also clarifies disclosure requirements for projected benefit and accumulated benefit obligations. The amendments in this ASU are effective for the Corporation beginning in the

first

quarter

2021.

Adoption on a retrospective basis for all periods presented is required. The Corporation does

not

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

ASU

2018

-

15,

Intangibles – Goodwill and Other – Internal-Use Software (Subtopic

350

-

40

) was issued to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is 

not

 affected by the amendments. This guidance will become effective for the Corporation beginning in the

first

quarter

2020,

with early adoption permitted. 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, 2019

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,
	2019			2018
Basic
Net income	$	5,090		$	4,375
Less: Dividends and undistributed earnings allocated to participating securities		(27	)		(23	)
Net income attributable to common shares	$	5,063		$	4,352
Basic weighted-average common shares outstanding		12,308,862			12,189,471
Basic earnings per common share (a)	$	0.41		$	0.36
Diluted
Net income attributable to common shares	$	5,063		$	4,352
Basic weighted-average common shares outstanding		12,308,862			12,189,471
Dilutive effect of potential common stock arising from stock options		25,445			32,785
Diluted weighted-average common shares outstanding		12,334,307			12,222,256
Diluted earnings per common share (a)	$	0.41		$	0.36
Weighted-average nonvested restricted shares outstanding		65,639			62,922

(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 non-vested restricted shares with nonforfeitable dividends (participating securities).

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

no

anti-dilutive instruments in the

first

quarter of

2019

or

2018.

XML

Note 3 - Comprehensive Income

3 Months Ended

Mar. 31, 2019

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 (loss). The components of other comprehensive income (loss), 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, 2019
Other comprehensive income on available-for-sale debt securities,
Unrealized holding gains on available-for-sale debt securities	$	4,261		$	(895	)	$	3,366
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		214			(45	)		169
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost		(8	)		2			(6	)
Other comprehensive income on unfunded retirement obligations		206			(43	)		163
Total other comprehensive income	$	4,467		$	(938	)	$	3,529

(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 debt securities,
Unrealized holding losses on available-for-sale debt 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	)

Changes in the components of accumulated other comprehensive (loss) income 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, 2019
Balance, beginning of period	$	(4,307	)	$	137	$	(4,170	)
Other comprehensive income during three months ended March 31, 2019		3,366			163		3,529
Balance, end of period	$	(941	)	$	300	$	(641	)
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	)

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

For the Three Months Ended March 31, 2019
(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
		2		Income tax provision
Total reclassifications for the period	$	(6	)

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
Total reclassifications for the period	$	(4	)

XML

Note 4 - Cash and Due From Banks

3 Months Ended

Mar. 31, 2019

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, 2019

and

December 31, 2018

include the following:

(In thousands)	Mar ch 3 1 ,		Dec. 31,
	201 9		201 8
Cash and cash equivalents	$	39,442	$	32,827
Certificates of deposit		4,560		4,660
Total cash and due from banks	$	44,002	$	37,487

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

$17,545,000

at

March 31, 2019

and

$18,141,000

at

December 31, 2018.

XML

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

3 Months Ended

Mar. 31, 2019

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, 2019

and

December 31, 2018,

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

			March 3 1 , 201 9
	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	$	12,265	$	0		$	12,265
Obligations of states and political subdivisions:
Tax-exempt		0		76,902		0			76,902
Taxable		0		30,435		0			30,435
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		57,049		0			57,049
Residential collateralized mortgage obligations		0		140,722		0			140,722
Commercial mortgage-backed securities		0		40,273		0			40,273
Total available-for-sale debt securities		0		357,646		0			357,646
Marketable equity security		962		0		0			962
Servicing rights		0		0		1,347			1,347
Total recurring fair value measurements	$	962	$	357,646	$	1,347		$	359,955
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	2,769		$	2,769
Valuation allowance		0		0		(498	)		(498	)
Impaired loans, net		0		0		2,271			2,271
Foreclosed assets held for sale		0		0		1,875			1,875
Total nonrecurring fair value measurements	$	0	$	0	$	4,146		$	4,146

			December 31, 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	$	12,500	$	0		$	15,500
Obligations of states and political subdivisions:
Tax-exempt		0		83,952		0			83,952
Taxable		0		27,699		0			27,699
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		53,445		0			53,445
Residential collateralized mortgage obligations		0		145,912		0			145,912
Commercial mortgage-backed securities		0		39,765		0			39,765
Total available-for-sale debt securities		0		363,273		0			363,273
Marketable equity security		950		0		0			950
Servicing rights		0		0		1,404			1,404
Total recurring fair value measurements	$	950	$	363,273	$	1,404		$	365,627
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	4,851		$	4,851
Valuation allowance		0		0		(1,605	)		(1,605	)
Impaired loans, net		0		0		3,246			3,246
Foreclosed assets held for sale		0		0		1,703			1,703
Total nonrecurring fair value measurements	$	0	$	0	$	4,949		$	4,949

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, 2019

and

December 31, 2018,

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 9		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	3 /3 1 /1 9
Servicing rights	$	1,347	Discounted cash flow	Discount rate		12.50	%	Rate used through modeling period
				Loan prepayment speeds		129.00	%	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 8		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	12/31/1 8
Servicing rights	$	1,404	Discounted cash flow	Discount rate		12.50	%	Rate used through modeling period
				Loan prepayment speeds		114.00	%	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)	3 Months Ended March 31,
	2019			2018
Servicing rights balance, beginning of period	$	1,404		$	1,299
Issuances of servicing rights		20			50
Unrealized (losses) gains included in earnings		(77	)		20
Servicing rights balance, end of period	$	1,347		$	1,369

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, 2019

and

December 31, 2018,

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)									Average
	Balance at		Valuation Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	3/31/19		3/31/19		3/31/19		Technique	Inputs	3/31/19
Impaired loans:
Residential mortgage loans - first and junior liens	$	509	$	114	$	395	Sales comparison	Discount to appraised value		26	%
Commercial:
Commercial loans secured by real estate		991		160		831	Sales comparison	Discount to appraised value		39	%
Commercial and industrial		75		75		0	Sales comparison	Discount to appraised value		100	%
Commercial and industrial		40		40		0	Sales comparison	Discount to appraised value		100	%
Commercial and industrial		669		60		609	Liquidation of accounts receivable	Discount to borrower's financial statement value		15	%
Loans secured by farmland		485		49		436	Sales comparison	Discount to appraised value		46	%
Total impaired loans	$	2,769	$	498	$	2,271
Foreclosed assets held for sale - real estate:
Residential (1-4 family)	$	109	$	0	$	109	Sales comparison	Discount to appraised value		51	%
Land		110		0		110	Sales comparison	Discount to appraised value		61	%
Commercial real estate		1,656		0		1,656	Sales comparison	Discount to appraised value		32	%
Total foreclosed assets held for sale	$	1,875	$	0	$	1,875

(In Thousands, Except									Weighted-
Percentages)									Average
	Balance at		Valuation Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	12/31/18		12/31/18		12/31/18		Technique	Inputs	12/31/18
Impaired loans:
Residential mortgage loans - first and junior liens	$	509	$	116	$	393	Sales comparison	Discount to appraised value		26	%
Commercial:
Commercial loans secured by real estate		2,515		781		1,734	Sales comparison	Discount to appraised value		16	%
Commercial and industrial		75		75		0	Sales comparison	Discount to appraised value		100	%
Commercial and industrial		1,265		584		681	Sales comparison	Discount to borrower's financial statement value		36	%
Loans secured by farmland		487		49		438	Sales comparison	Discount to appraised value		56	%
Total impaired loans	$	4,851	$	1,605	$	3,246
Foreclosed assets held for sale - real estate:
Residential (1-4 family)	$	64	$	0	$	64	Sales comparison	Discount to appraised value		68	%
Land		110		0		110	Sales comparison	Discount to appraised value		61	%
Commercial real estate		1,529		0		1,529	Sales comparison	Discount to appraised value		20	%
Total foreclosed assets held for sale	$	1,703	$	0	$	1,703

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 3 1 , 201 9				December 31, 201 8
	Hierarchy	Carrying		Fair		Carrying		Fair
	Level	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	39,442	$	39,442	$	32,827	$	32,827
Certificates of deposit	Level 2		4,560		4,611		4,660		4,634
Restricted equity securities (included in Other Assets)	Level 2		5,157		5,157		5,712		5,712
Loans, net	Level 3		817,136		824,036		818,254		825,809
Accrued interest receivable	Level 2		4,270		4,270		3,968		3,968
Financial liabilities:
Deposits with no stated maturity	Level 2		810,409		810,409		804,207		804,207
Time deposits	Level 2		229,502		229,730		229,565		229,751
Short-term borrowings	Level 2		5,132		4,941		12,853		12,617
Long-term borrowings	Level 2		32,844		32,877		35,915		35,902
Accrued interest payable	Level 2		115		115		142		142

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, 2019

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, 2019

and

December 31, 2018

are summarized as follows:

			March 31, 201 9
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	11,916	$	349	$	0		$	12,265
Obligations of states and political subdivisions:
Tax-exempt		75,910		1,290		(298	)		76,902
Taxable		30,059		443		(67	)		30,435
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		57,727		155		(833	)		57,049
Residential collateralized mortgage obligations		142,642		204		(2,124	)		140,722
Commercial mortgage-backed securities		40,583		361		(671	)		40,273
Total available-for-sale debt securities	$	358,837	$	2,802	$	(3,993	)	$	357,646

			December 31, 201 8
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	12,331	$	169	$	0		$	12,500
Obligations of states and political subdivisions:
Tax-exempt		84,204		949		(1,201	)		83,952
Taxable		27,618		208		(127	)		27,699
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		54,827		48		(1,430	)		53,445
Residential collateralized mortgage obligations		148,964		238		(3,290	)		145,912
Commercial mortgage-backed securities		40,781		166		(1,182	)		39,765
Total available-for-sale debt securities	$	368,725	$	1,778	$	(7,230	)	$	363,273

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, 2019

and

December 31, 2018:

March 3 1 , 201 9	Less Than 12 Months					12 Months or More					Total
(In Thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Obligations of states and political subdivisions:
Tax-exempt	$	0	$	0		$	21,103	$	(298	)	$	21,103	$	(298	)
Taxable		0		0			8,315		(67	)		8,315		(67	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		5,054		(77	)		41,750		(756	)		46,804		(833	)
Residential collateralized mortgage obligations		0		0			98,164		(2,124	)		98,164		(2,124	)
Commercial mortgage-backed securities		0		0			28,590		(671	)		28,590		(671	)
Total temporarily impaired available-for-sale debt securities	$	5,054	$	(77	)	$	197,922	$	(3,916	)	$	202,976	$	(3,993	)

December 31, 201 8	Less Than 12 Months					12 Months or More					Total
(In Thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Obligations of states and political subdivisions:
Tax-exempt	$	5,084	$	(11	)	$	32,684	$	(1,190	)	$	37,768	$	(1,201	)
Taxable		980		(2	)		11,418		(125	)		12,398		(127	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		5,592		(4	)		42,309		(1,426	)		47,901		(1,430	)
Residential collateralized mortgage obligations		1,892		(8	)		101,662		(3,282	)		103,554		(3,290	)
Commercial mortgage-backed securities		0		0			32,552		(1,182	)		32,552		(1,182	)
Total temporarily impaired available-for-sale debt securities	$	13,548	$	(25	)	$	220,625	$	(7,205	)	$	234,173	$	(7,230	)

There were

no

realized gains or losses from available-for-sale securities in the

first

quarter

2019

or

2018.

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, 2019.

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	$	14,204	$	14,299
Due from one year through five years		34,281		34,637
Due from five years through ten years		40,819		41,190
Due after ten years		28,581		29,476
Sub-total		117,885		119,602
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		57,727		57,049
Residential collateralized mortgage obligations		142,642		140,722
Commercial mortgage-backed securities		40,583		40,273
Total	$	358,837	$	357,646

The Corporation’s mortgage-backed securities and collateralized mortgage obligations have stated maturities that

may

differ from actual maturities due to borrowers’ ability to prepay obligations. 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

$219,532,000

at

March 31, 2019

and

$229,418,000

at

December 31, 2018

were pledged as collateral for public deposits, trusts and certain other deposits as provided by law. See Note

8

for information concerning securities pledged to secure borrowing arrangements.

Management evaluates securities for other-than-temporary impairment (OTTI) at least on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. Consideration is given to (

1

) the length of time and the extent to which the fair value has been less than cost, (

2

) the financial condition and near-term prospects of the issuer, and (

3

) whether the Corporation intends to sell the security or more likely than

not

will be required to sell the security before its anticipated recovery.

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

March 31, 2019

is provided below.

Debt Securities

At

March 31, 2019

and

December 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, 2019

and

December 31, 2018

to be temporary.

Equity Securities

The Corporation’s marketable equity security, with a carrying value of

$962,000

at

March 31, 2019

and

$950,000

at

December 31, 2018,

consisted exclusively of

one

mutual fund. There was an unrealized loss on the mutual fund of

$38,000

at

March 31, 2019

and

$50,000

at

December 31, 2018.

The decrease in the unrealized loss of

$12,000

in the

first

quarter

2019

and increase in the unrealized loss of

$15,000

in the

first

quarter

2018

are included in other noninterest income in the consolidated statements of income.

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

$5,027,000

at

March 31, 2019

and

$5,582,000

at

December 31, 2018.

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

not

be impaired at

March 31, 2019

and

December 31, 2018.

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, 2019

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, 2019

and

December 31, 2018

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

Summary of Loans by Type
(In Thousands)	March 31,			Dec. 31,
	2019			2018
Residential mortgage:
Residential mortgage loans - first liens	$	374,764		$	372,339
Residential mortgage loans - junior liens		25,538			25,450
Home equity lines of credit		32,847			34,319
1-4 Family residential construction		24,437			24,698
Total residential mortgage		457,586			456,806
Commercial:
Commercial loans secured by real estate		160,177			162,611
Commercial and industrial		92,842			91,856
Political subdivisions		52,142			53,263
Commercial construction and land		12,701			11,962
Loans secured by farmland		6,938			7,146
Multi-family (5 or more) residential		7,031			7,180
Agricultural loans		5,471			5,659
Other commercial loans		13,467			13,950
Total commercial		350,769			353,627
Consumer		17,037			17,130
Total		825,392			827,563
Less: allowance for loan losses		(8,256	)		(9,309	)
Loans, net	$	817,136		$	818,254

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, 2019

or

December 31, 2018.

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, 2019

and

December 31, 2018,

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, 2019

and

2018

were as follows:

Three Months Ended March 31, 2019	Dec. 31,										March 31,
(In Thousands)	2018 Balance		Charge-offs			Recoveries		Provision (Credit)			2019 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	3,156	$	(50	)	$	1	$	71		$	3,178
Residential mortgage loans - junior liens		325		(24	)		0		28			329
Home equity lines of credit		302		0			3		(19	)		286
1-4 Family residential construction		203		0			0		(5	)		198
Total residential mortgage		3,986		(74	)		4		75			3,991
Commercial:
Commercial loans secured by real estate		2,538		0			0		(651	)		1,887
Commercial and industrial		1,553		0			2		(486	)		1,069
Commercial construction and land		110		0			0		4			114
Loans secured by farmland		102		0			0		(4	)		98
Multi-family (5 or more) residential		114		0			0		(2	)		112
Agricultural loans		46		0			0		(3	)		43
Other commercial loans		128		0			0		(7	)		121
Total commercial		4,591		0			2		(1,149	)		3,444
Consumer		233		(37	)		9		31			236
Unallocated		499		0			0		86			585
Total Allowance for Loan Losses	$	9,309	$	(111	)	$	15	$	(957	)	$	8,256

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

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.

The credit for loan losses (reduction in expense) was

$957,000

in the

first

quarter

2019

as compared to a provision of

$292,000

in the

first

quarter

2018.

  Specific allowances totaling

$1,365,000

at

December 31, 2018

on

two

commercial loans were eliminated in the

first

quarter

2019.

  These

two

loans were

no

longer considered impaired at

March 31, 2019

and were returned to full accrual status in the

first

quarter

2019.

  A specific allowance of

$781,000

at

December 31, 2018

on a real estate secured commercial loan was eliminated in the

first

quarter

2019

due to the borrower’s improved financial performance and receipt of an updated, higher appraised value of the underlying collateral.  Also, a specific allowance of

$584,000

on a commercial loan was eliminated, consistent with improvements in both the borrower’s financial position and the Corporation’s security position on the credit.  In total, the

first

quarter

2019

credit for loan losses included a credit of

$1,011,000

related to the change in total specific allowances on impaired loans, as adjusted for net charge-offs during the period, partially offset by a net increase of

$54,000

in the collectively determined and unallocated portions of the allowance for loan losses.

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, 2019

and

December 31, 2018:

March 31, 2019
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	365,301	$	609	$	8,854	$	0	$	374,764
Residential mortgage loans - junior liens		24,934		98		506		0		25,538
Home equity lines of credit		32,182		59		606		0		32,847
1-4 Family residential construction		24,256		0		181		0		24,437
Total residential mortgage		446,673		766		10,147		0		457,586
Commercial:
Commercial loans secured by real estate		153,387		3,660		3,130		0		160,177
Commercial and Industrial		84,736		6,532		1,574		0		92,842
Political subdivisions		52,142		0		0		0		52,142
Commercial construction and land		12,627		0		74		0		12,701
Loans secured by farmland		4,681		422		1,835		0		6,938
Multi-family (5 or more) residential		7,031		0		0		0		7,031
Agricultural loans		4,679		53		739		0		5,471
Other commercial loans		13,381		15		71		0		13,467
Total commercial		332,664		10,682		7,423		0		350,769
Consumer		17,007		0		30		0		17,037
Totals	$	796,344	$	11,448	$	17,600	$	0	$	825,392

December 31, 2018
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	363,407	$	937	$	7,944	$	51	$	372,339
Residential mortgage loans - junior liens		24,841		176		433		0		25,450
Home equity lines of credit		33,659		59		601		0		34,319
1-4 Family residential construction		24,698		0		0		0		24,698
Total residential mortgage		446,605		1,172		8,978		51		456,806
Commercial:
Commercial loans secured by real estate		156,308		740		5,563		0		162,611
Commercial and Industrial		84,232		5,230		2,394		0		91,856
Political subdivisions		53,263		0		0		0		53,263
Commercial construction and land		11,887		0		75		0		11,962
Loans secured by farmland		5,171		168		1,796		11		7,146
Multi-family (5 or more) residential		7,180		0		0		0		7,180
Agricultural loans		4,910		84		665		0		5,659
Other commercial loans		13,879		0		71		0		13,950
Total commercial		336,830		6,222		10,564		11		353,627
Consumer		17,116		0		14		0		17,130
Totals	$	800,551	$	7,394	$	19,556	$	62	$	827,563

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, 2019

and

December 31, 2018,

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, 2019)

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, 2019

and

December 31, 2018.

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, 2019

and

December 31, 2018:

March 31, 2019	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	970	$	373,794	$	374,764	$	0	$	3,178	$	3,178
Residential mortgage loans - junior liens		289		25,249		25,538		114		215		329
Home equity lines of credit		0		32,847		32,847		0		286		286
1-4 Family residential construction		0		24,437		24,437		0		198		198
Total residential mortgage		1,259		456,327		457,586		114		3,877		3,991
Commercial:
Commercial loans secured by real estate		1,756		158,421		160,177		160		1,727		1,887
Commercial and industrial		1,292		91,550		92,842		175		894		1,069
Political subdivisions		0		52,142		52,142		0		0		0
Commercial construction and land		0		12,701		12,701		0		114		114
Loans secured by farmland		1,534		5,404		6,938		49		49		98
Multi-family (5 or more) residential		0		7,031		7,031		0		112		112
Agricultural loans		656		4,815		5,471		0		43		43
Other commercial loans		0		13,467		13,467		0		121		121
Total commercial		5,238		345,531		350,769		384		3,060		3,444
Consumer		0		17,037		17,037		0		236		236
Unallocated												585
Total	$	6,497	$	818,895	$	825,392	$	498	$	7,173	$	8,256

December 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	$	991	$	371,348	$	372,339	$	0	$	3,156	$	3,156
Residential mortgage loans - junior liens		293		25,157		25,450		116		209		325
Home equity lines of credit		0		34,319		34,319		0		302		302
1-4 Family residential construction		0		24,698		24,698		0		203		203
Total residential mortgage		1,284		455,522		456,806		116		3,870		3,986
Commercial:
Commercial loans secured by real estate		4,302		158,309		162,611		781		1,757		2,538
Commercial and industrial		2,157		89,699		91,856		659		894		1,553
Political subdivisions		0		53,263		53,263		0		0		0
Commercial construction and land		0		11,962		11,962		0		110		110
Loans secured by farmland		1,349		5,797		7,146		49		53		102
Multi-family (5 or more) residential		0		7,180		7,180		0		114		114
Agricultural loans		665		4,994		5,659		0		46		46
Other commercial loans		0		13,950		13,950		0		128		128
Total commercial		8,473		345,154		353,627		1,489		3,102		4,591
Consumer		17		17,113		17,130		0		233		233
Unallocated												499
Total	$	9,774	$	817,789	$	827,563	$	1,605	$	7,205	$	9,309

Summary information related to impaired loans at

March 31, 2019

and

December 31, 2018

is as follows:

(In Thousands)	March 31, 2019						December 31, 2018
	Unpaid						Unpaid
	Principal		Recorded		Related		Principal		Recorded		Related
	Balance		Investment		Allowance		Balance		Investment		Allowance
With no related allowance recorded:
Residential mortgage loans - first liens	$	729	$	701	$	0	$	750	$	721	$	0
Residential mortgage loans - junior liens		50		50		0		54		54		0
Commercial loans secured by real estate		765		765		0		1,787		1,787		0
Commercial and industrial		507		507		0		817		817		0
Loans secured by farmland		1,049		1,049		0		862		862		0
Agricultural loans		656		656		0		665		665		0
Consumer		0		0		0		17		17		0
Total with no related allowance recorded		3,756		3,728		0		4,952		4,923		0
With a related allowance recorded:
Residential mortgage loans - first liens		270		270		0		270		270		0
Residential mortgage loans - junior liens		239		239		114		239		239		116
Commercial loans secured by real estate		991		991		160		2,515		2,515		781
Commercial and industrial		784		784		175		1,340		1,340		659
Loans secured by farmland		485		485		49		487		487		49
Total with a related allowance recorded		2,769		2,769		498		4,851		4,851		1,605
Total	$	6,525	$	6,497	$	498	$	9,803	$	9,774	$	1,605

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,
	2019		2018		2019		2018
Residential mortgage:
Residential mortgage loans - first lien	$	981	$	1,046	$	10	$	19
Residential mortgage loans - junior lien		291		301		2		3
Total residential mortgage		1,272		1,347		12		22
Commercial:
Commercial loans secured by real estate		3,040		5,882		10		35
Commercial and industrial		1,713		508		26		6
Loans secured by farmland		1,442		1,364		1		6
Multi-family (5 or more) residential		0		392		0		0
Agricultural loans		660		346		12		11
Total commercial		6,855		8,492		49		58
Consumer		8		19		0		0
Total	$	8,135	$	9,858	$	61	$	80

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, 2019				December 31, 2018
	Past Due				Past Due
	90+ Days and				90+ Days and
	Accruing		Nonaccrual		Accruing		Nonaccrual
Residential mortgage:
Residential mortgage loans - first liens	$	1,327	$	4,315	$	1,633	$	4,750
Residential mortgage loans - junior liens		111		239		151		239
Home equity lines of credit		78		9		219		27
Total residential mortgage		1,516		4,563		2,003		5,016
Commercial:
Commercial loans secured by real estate		286		1,458		394		3,958
Commercial and industrial		61		1,226		18		2,111
Commercial construction and land		0		52		0		52
Loans secured by farmland		0		1,486		459		1,297
Agricultural loans		0		656		0		665
Total commercial		347		4,878		871		8,083
Consumer		39		0		32		14
Totals	$	1,902	$	9,441	$	2,906	$	13,113

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, 2019

and

December 31, 2018:

	As of March 31, 2019								As of December 31, 2018
	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	$	364,905	$	6,148	$	3,711	$	374,764	$	361,362	$	6,414	$	4,563	$	372,339
Residential mortgage loans - junior liens		25,134		54		350		25,538		24,876		184		390		25,450
Home equity lines of credit		32,478		282		87		32,847		33,611		480		228		34,319
1-4 Family residential construction		24,119		318		0		24,437		24,531		167		0		24,698
Total residential mortgage		446,636		6,802		4,148		457,586		444,380		7,245		5,181		456,806
Commercial:
Commercial loans secured by real estate		158,276		294		1,607		160,177		160,668		226		1,717		162,611
Commercial and industrial		92,535		100		207		92,842		90,915		152		789		91,856
Political subdivisions		52,142		0		0		52,142		53,263		0		0		53,263
Commercial construction and land		12,387		262		52		12,701		11,910		0		52		11,962
Loans secured by farmland		5,258		689		991		6,938		5,390		487		1,269		7,146
Multi-family (5 or more) residential		7,031		0		0		7,031		7,104		76		0		7,180
Agricultural loans		5,380		85		6		5,471		5,624		29		6		5,659
Other commercial loans		13,467		0		0		13,467		13,950		0		0		13,950
Total commercial		346,476		1,430		2,863		350,769		348,824		970		3,833		353,627
Consumer		16,919		79		39		17,037		16,991		93		46		17,130
Totals	$	810,031	$	8,311	$	7,050	$	825,392	$	810,195	$	8,308	$	9,060	$	827,563

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, 2019

and

December 31, 2018

is as follows:

	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Total
March 31, 2019 Nonaccrual Totals	$	3,105	$	1,188	$	5,148	$	9,441
December 31, 2018 Nonaccrual Totals	$	5,793	$	1,166	$	6,154	$	13,113

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, 2019

and

December 31, 2018

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, 2019 Totals	$	775	$	1	$	74	$	700	$	1,550
December 31, 2018 Totals	$	612	$	43	$	0	$	2,884	$	3,539

At

March 31, 2019

and

December 31, 2018,

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, 2019

and

2018

are as follows:

(Balances in Thousands)
	2019				2018
			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		0	$	0		1	$	80
Residential mortgage - junior liens,
Reduced monthly payments and extended maturity date		1		18		0		0
Commercial loans secured by real estate,
Extended interest only payments for a six-month period		0		0		2		36
Commercial and industrial :
Extended interest only payments for a six-month period		0		0		1		46
Reduced monthly payments and extended maturity date		9		448		0		0
Agricultural loans,
Reduced monthly payments and extended maturity date		1		84		2		36
Total		11	$	550		4	$	162

All of the loans for which TDRs were granted in the table above in the

three

-month period ended

March 31, 2019

are associated with

one

relationship.

In the

three

-month periods ended

March 31, 2019

and

2018,

there were

no

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

12

months.

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,
	2019		2018
Foreclosed residential real estate	$	109	$	64

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,
	2019		2018
Residential real estate in process of foreclosure	$	1,291	$	1,097

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Note 8 - Borrowed Funds

3 Months Ended

Mar. 31, 2019

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 3 1 ,		Dec. 31,
	201 9		201 8
FHLB-Pittsburgh borrowings	$	0	$	7,000
Customer repurchase agreements		5,132		5,853
Total short-term borrowings	$	5,132	$	12,853

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, 2019

and

December 31, 2018.

The carrying value of the underlying securities was

$5,190,000

at

March 31, 2019

and

$5,890,000

at

December 31, 2018.

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

$494,459,000

at

March 31, 2019

and

$495,143,000

at

December 31, 2018.

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

$5,027,000

at

March 31, 2019

and

$5,582,000

at

December 31, 2018.

The overnight borrowing from FHLB-Pittsburgh at

December 31, 2018

had an interest rate of

2.62%.

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

(In Thousands)	Mar ch 3 1 ,		Dec. 31,
	201 9		201 8
Loan matured in January 2019 with a rate of 1.83%	$	0	$	2,000
Loan matured in February 2019 with a rate of 1.95%		0		3,000
Loan matured in March 2019 with a rate of 2.15%		0		3,000
Loan maturing in April 2019 with a rate of 2.24%		3,000		3,000
Loan maturing in May 2019 with a rate of 2.30%		3,000		3,000
Loan maturing in June 2019 with a rate of 2.42%		3,000		3,000
Loan maturing in July 2019 with a rate of 2.41%		3,000		3,000
Loan maturing in August 2019 with a rate of 2.48%		3,000		3,000
Loan maturing in September 2019 with a rate of 2.53%		3,000		3,000
Loan maturing in November 2019 with a rate of 2.75%		3,000		3,000
Loan maturing in December 2019 with a rate of 2.77%		3,000		3,000
Loan maturing in January 2020 with a rate of 2.73%		3,000		3,000
Loan maturing in February 2020 with a rate of 2.66%		2,000		0
Loan maturing in April 2020 with a rate of 4.79%		221		271
Loan maturing in March 2022 with a rate of 2.46%		3,000		0
Loan maturing in June 2025 with a rate of 4.91%		623		644
Total long-term FHLB-Pittsburgh borrowings	$	32,844	$	35,915

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Note 9 - Stock-based Compensation Plans

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Share-based Payment Arrangement [Text Block]

9.

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

2019,

the Corporation awarded

40,517

shares of restricted stock under the Stock Incentive Plan and

7,620

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

2019

restricted stock awards under the Stock Incentive Plan vest ratably over

three

years and vesting for

one

-half of the

27,380

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

2019

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

2019

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

2017,

2018

and

2019

will be met. 

Total annual stock-based compensation for the year ending

December 31, 2019

is estimated to total

$880,000.

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

$229,000

in the

first

quarter

2019

and

$183,000

in the

first

quarter

2018.

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Note 10 - Contingencies

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

10

.

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.

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Note 11 - Revenue Recognition

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Revenue from Contract with Customer [Text Block]

1

1

.   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

$924,080,000

at

March 31, 2019

and

$862,517,000

at

December 31, 2018.

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

2018

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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Note 12 - Subsequent Event - Merger - Monument Bancorp, Inc.

3 Months Ended

Mar. 31, 2019

Notes to Financial Statements

Subsequent Events [Text Block]

12.

SUBSEQUENT EVENT – MERGER – MONUMENT BANCORP, INC.

In

September 2018,

the Corporation, along with Monument Bancorp, Inc. (“Monument”) announced the signing of an Agreement and Plan of Merger.  In

April 2019,

the Corporation and Monument announced the completion of the merger as of

April 1, 2019. 

Monument was the parent company of Monument Bank, a commercial bank which operated

two

community bank offices and

one

loan production office in Bucks County, Pennsylvania.  Under the terms of the Agreement and Plan of Merger, Monument merged into the Corporation, and Monument Bank merged into C&N Bank. In the transaction, Monument shareholders elected to receive either

1.0144

shares of Corporation common stock or

$28.10

in cash for each share of Monument common stock owned, subject to proration to ensure that, overall,

20%

of the Monument shares are converted into cash and

80%

of the Monument shares are converted into Corporation stock.  The election and proration process commenced in late

March 2019

and was completed on

April 24, 2019.

Holders of Monument common stock prior to the consummation of the merger own approximately

9.4%

of the Corporation’s common stock outstanding following the merger.

The estimated total purchase consideration is valued at approximately

$42.7

 million based on the average of the high and low trading price of the Corporation’s common stock on

April 1, 2019. 

As of

March 31, 2019,

Monument reported total assets of

$376

million, including gross loans of

$263

million, total deposits of

$224

million and total stockholders’ equity of

$27

million.  As of the date the Corporation’s

first

quarter financial statements are issued, some of the information required to be disclosed under U.S. GAAP was

not

available since, given the short period between

April 1, 2019

merger date and the financial statement issuance, the calculation of the fair value of all material Monument assets acquired and liabilities assumed had

not

yet been completed.

First quarter

2019

expenses included

$311,000

of non-payroll expenses related to the acquisition, including

$202,000

included in professional fees related to conversion of Monument’s information technology systems and

$109,000

included in other noninterest expense in the unaudited consolidated statements of income.  Management estimates the Corporation will incur merger-related expenses in the

second

quarter

2019

ranging between

$2,900,000

and

$3,500,000,

including costs associated with termination of data processing contracts, conversion of Monument’s customer accounting data into the Corporation’s core system, severance and similar expenses, investment banking fees based on successful closing of the transaction and various other costs.

XML

Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2019

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

Effective

January 1, 2019,

the Corporation adopted ASU

2016

-

02,

Leases (Topic

842

), as modified by subsequent ASUs, which changed GAAP by requiring that lease assets and liabilities arising from operating leases be recognized on the balance sheet. Topic

842,

as modified, does

not

significantly change the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee from prior U.S. GAAP. For leases with a term of

12

months or less, the Corporation made an accounting policy election by class of underlying asset

not

to recognize lease assets and liabilities. The Corporation elected to adopt this pronouncement using an optional transition method resulting in recognition of right-of-use assets and lease liabilities for operating leases of

$1,132,000

on its consolidated balance sheets at

January 1, 2019,

with

no

adjustment to stockholders’ equity and

no

material impact to its consolidated statements of income.  At

March 31, 2019,

right-of-use assets of

$1,424,000

were included in other assets, and the related liabilities totaling the same amount were included in accrued interest and other liabilities, in the unaudited consolidated balance sheets.

Effective

January 1, 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.  Disclosures required by the ASU have been included in Note

11.

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 debt 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).

Effective

January 1, 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.

Effective

January 1, 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 the following changes:

● A marketable equity security previously included in available-for-sale securities on the consolidated balance sheets is presented as a separate asset.

● Changes in the fair value of the marketable equity security are captured in the consolidated statements of income.

● Retained earnings was reduced and a corresponding increase in accumulated other comprehensive loss was recognized ( 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 marketable equity security.

● Adoption of ASU 2016 - 01 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

B

ut

Not

Yet Effective Accounting Pronouncements

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 was permitted beginning in the

first

quarter

2019;

however, the Corporation did

not

early adopt the ASU. The Corporation has formed a cross functional management team and is working with an outside vendor assessing alternative loss estimation methodologies, the Corporation’s data and system needs and the impact of loans acquired in the merger with Monument Bancorp, Inc. (described in more detail in Note

12

) 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

January 1, 2020.

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.

ASU

2018

-

13,

Fair Value Measurement (Topic

820

) modifies disclosure requirements on fair value measurements. This ASU removes requirements to disclose the amount of and reasons for transfers between Level

1

and Level

2

of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level

3

fair value measurements. ASU

2018

-

13

clarifies that disclosure regarding measurement uncertainty is intended to communicate information about the uncertainty in measurement as of the reporting date. ASU

2018

-

13

adds certain disclosure requirements, including disclosure of changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level

3

fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level

3

fair value measurements. The amendments in this ASU are effective for the Corporation beginning in the

first

quarter

2020.

The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level

3

fair value measurements and the narrative description of measurement uncertainty should be applied prospectively, while all other amendments should be applied retrospectively for all periods presented. The Corporation does

not

expect adoption of this ASU to have a material impact on its consolidated financial position or results of operations.

ASU

2018

-

14,

Compensation - Retirement Benefits - Defined Benefit Plans – General (Subtopic

715

-

20

) modifies the disclosure requirements for defined benefit and other postretirement plans. This ASU eliminates certain disclosures associated with accumulated other comprehensive income, plan assets, related parties, and the effects of interest rate basis point changes on assumed health care costs; while other disclosures have been added to address significant gains and losses related to changes in benefit obligations. This ASU also clarifies disclosure requirements for projected benefit and accumulated benefit obligations. The amendments in this ASU are effective for the Corporation beginning in the

first

quarter

2021.

Adoption on a retrospective basis for all periods presented is required. The Corporation does

not

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

ASU

2018

-

15,

Intangibles – Goodwill and Other – Internal-Use Software (Subtopic

350

-

40

) was issued to help entities evaluate the accounting for fees paid by a customer in a cloud computing arrangement (hosting arrangement) by providing guidance for determining when the arrangement includes a software license. The amendments align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal use software license). The accounting for the service element of a hosting arrangement that is a service contract is 

not

 affected by the amendments. This guidance will become effective for the Corporation beginning in the

first

quarter

2020,

with early adoption permitted. 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, 2019

Notes Tables

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

	3 Months Ended
	March 31,			March 31,
	2019			2018
Basic
Net income	$	5,090		$	4,375
Less: Dividends and undistributed earnings allocated to participating securities		(27	)		(23	)
Net income attributable to common shares	$	5,063		$	4,352
Basic weighted-average common shares outstanding		12,308,862			12,189,471
Basic earnings per common share (a)	$	0.41		$	0.36
Diluted
Net income attributable to common shares	$	5,063		$	4,352
Basic weighted-average common shares outstanding		12,308,862			12,189,471
Dilutive effect of potential common stock arising from stock options		25,445			32,785
Diluted weighted-average common shares outstanding		12,334,307			12,222,256
Diluted earnings per common share (a)	$	0.41		$	0.36
Weighted-average nonvested restricted shares outstanding		65,639			62,922

XML

Note 3 - Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2019

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, 2019
Other comprehensive income on available-for-sale debt securities,
Unrealized holding gains on available-for-sale debt securities	$	4,261		$	(895	)	$	3,366
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		214			(45	)		169
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost		(8	)		2			(6	)
Other comprehensive income on unfunded retirement obligations		206			(43	)		163
Total other comprehensive income	$	4,467		$	(938	)	$	3,529

(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 debt securities,
Unrealized holding losses on available-for-sale debt 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	)

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, 2019
Balance, beginning of period	$	(4,307	)	$	137	$	(4,170	)
Other comprehensive income during three months ended March 31, 2019		3,366			163		3,529
Balance, end of period	$	(941	)	$	300	$	(641	)
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	)

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

For the Three Months Ended March 31, 2019
(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
		2		Income tax provision
Total reclassifications for the period	$	(6	)

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
Total reclassifications for the period	$	(4	)

XML

Note 4 - Cash and Due From Banks (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Cash and Cash Equivalents [Table Text Block]

(In thousands)	Mar ch 3 1 ,		Dec. 31,
	201 9		201 8
Cash and cash equivalents	$	39,442	$	32,827
Certificates of deposit		4,560		4,660
Total cash and due from banks	$	44,002	$	37,487

XML

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

3 Months Ended

Mar. 31, 2019

Notes Tables

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

			March 3 1 , 201 9
	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	$	12,265	$	0		$	12,265
Obligations of states and political subdivisions:
Tax-exempt		0		76,902		0			76,902
Taxable		0		30,435		0			30,435
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		57,049		0			57,049
Residential collateralized mortgage obligations		0		140,722		0			140,722
Commercial mortgage-backed securities		0		40,273		0			40,273
Total available-for-sale debt securities		0		357,646		0			357,646
Marketable equity security		962		0		0			962
Servicing rights		0		0		1,347			1,347
Total recurring fair value measurements	$	962	$	357,646	$	1,347		$	359,955
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	2,769		$	2,769
Valuation allowance		0		0		(498	)		(498	)
Impaired loans, net		0		0		2,271			2,271
Foreclosed assets held for sale		0		0		1,875			1,875
Total nonrecurring fair value measurements	$	0	$	0	$	4,146		$	4,146

			December 31, 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	$	12,500	$	0		$	15,500
Obligations of states and political subdivisions:
Tax-exempt		0		83,952		0			83,952
Taxable		0		27,699		0			27,699
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		53,445		0			53,445
Residential collateralized mortgage obligations		0		145,912		0			145,912
Commercial mortgage-backed securities		0		39,765		0			39,765
Total available-for-sale debt securities		0		363,273		0			363,273
Marketable equity security		950		0		0			950
Servicing rights		0		0		1,404			1,404
Total recurring fair value measurements	$	950	$	363,273	$	1,404		$	365,627
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	4,851		$	4,851
Valuation allowance		0		0		(1,605	)		(1,605	)
Impaired loans, net		0		0		3,246			3,246
Foreclosed assets held for sale		0		0		1,703			1,703
Total nonrecurring fair value measurements	$	0	$	0	$	4,949		$	4,949

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

(In Thousands)	3 Months Ended March 31,
	2019			2018
Servicing rights balance, beginning of period	$	1,404		$	1,299
Issuances of servicing rights		20			50
Unrealized (losses) gains included in earnings		(77	)		20
Servicing rights balance, end of period	$	1,347		$	1,369

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

(In Thousands)	Fair Value	March 3 1 , 201 9				December 31, 201 8
	Hierarchy	Carrying		Fair		Carrying		Fair
	Level	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	39,442	$	39,442	$	32,827	$	32,827
Certificates of deposit	Level 2		4,560		4,611		4,660		4,634
Restricted equity securities (included in Other Assets)	Level 2		5,157		5,157		5,712		5,712
Loans, net	Level 3		817,136		824,036		818,254		825,809
Accrued interest receivable	Level 2		4,270		4,270		3,968		3,968
Financial liabilities:
Deposits with no stated maturity	Level 2		810,409		810,409		804,207		804,207
Time deposits	Level 2		229,502		229,730		229,565		229,751
Short-term borrowings	Level 2		5,132		4,941		12,853		12,617
Long-term borrowings	Level 2		32,844		32,877		35,915		35,902
Accrued interest payable	Level 2		115		115		142		142

Fair Value, Nonrecurring [Member]

Notes Tables

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

(In Thousands, Except									Weighted -
Percentages)									Average
	Balance at		Valuation Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	3/31/19		3/31/19		3/31/19		Technique	Inputs	3/31/19
Impaired loans:
Residential mortgage loans - first and junior liens	$	509	$	114	$	395	Sales comparison	Discount to appraised value		26	%
Commercial:
Commercial loans secured by real estate		991		160		831	Sales comparison	Discount to appraised value		39	%
Commercial and industrial		75		75		0	Sales comparison	Discount to appraised value		100	%
Commercial and industrial		40		40		0	Sales comparison	Discount to appraised value		100	%
Commercial and industrial		669		60		609	Liquidation of accounts receivable	Discount to borrower's financial statement value		15	%
Loans secured by farmland		485		49		436	Sales comparison	Discount to appraised value		46	%
Total impaired loans	$	2,769	$	498	$	2,271
Foreclosed assets held for sale - real estate:
Residential (1-4 family)	$	109	$	0	$	109	Sales comparison	Discount to appraised value		51	%
Land		110		0		110	Sales comparison	Discount to appraised value		61	%
Commercial real estate		1,656		0		1,656	Sales comparison	Discount to appraised value		32	%
Total foreclosed assets held for sale	$	1,875	$	0	$	1,875

(In Thousands, Except									Weighted-
Percentages)									Average
	Balance at		Valuation Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	12/31/18		12/31/18		12/31/18		Technique	Inputs	12/31/18
Impaired loans:
Residential mortgage loans - first and junior liens	$	509	$	116	$	393	Sales comparison	Discount to appraised value		26	%
Commercial:
Commercial loans secured by real estate		2,515		781		1,734	Sales comparison	Discount to appraised value		16	%
Commercial and industrial		75		75		0	Sales comparison	Discount to appraised value		100	%
Commercial and industrial		1,265		584		681	Sales comparison	Discount to borrower's financial statement value		36	%
Loans secured by farmland		487		49		438	Sales comparison	Discount to appraised value		56	%
Total impaired loans	$	4,851	$	1,605	$	3,246
Foreclosed assets held for sale - real estate:
Residential (1-4 family)	$	64	$	0	$	64	Sales comparison	Discount to appraised value		68	%
Land		110		0		110	Sales comparison	Discount to appraised value		61	%
Commercial real estate		1,529		0		1,529	Sales comparison	Discount to appraised value		20	%
Total foreclosed assets held for sale	$	1,703	$	0	$	1,703

Fair Value, Recurring [Member]

Notes Tables

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

	Fair Value at
	3 /3 1 /1 9		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	3 /3 1 /1 9
Servicing rights	$	1,347	Discounted cash flow	Discount rate		12.50	%	Rate used through modeling period
				Loan prepayment speeds		129.00	%	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 8		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	12/31/1 8
Servicing rights	$	1,404	Discounted cash flow	Discount rate		12.50	%	Rate used through modeling period
				Loan prepayment speeds		114.00	%	Weighted-average PSA
				Servicing fees		0.25	%	of loan balances
						4.00	%	of payments are late
						5.00	%	late fees assessed
					$	1.94		Miscellaneous fees per account per month
				Servicing costs	$	6.00		Monthly servicing cost per account
					$	24.00		Additional monthly servicing cost per loan on loans more than 30 days delinquent
						1.50	%	of loans more than 30 days delinquent
						3.00	%	annual increase in servicing costs

XML

Note 6 - Securities (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Available-for-sale Securities [Table Text Block]

			March 31, 201 9
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	11,916	$	349	$	0		$	12,265
Obligations of states and political subdivisions:
Tax-exempt		75,910		1,290		(298	)		76,902
Taxable		30,059		443		(67	)		30,435
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		57,727		155		(833	)		57,049
Residential collateralized mortgage obligations		142,642		204		(2,124	)		140,722
Commercial mortgage-backed securities		40,583		361		(671	)		40,273
Total available-for-sale debt securities	$	358,837	$	2,802	$	(3,993	)	$	357,646

			December 31, 201 8
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding			Fair
(In Thousands)	Cost		Gains		Losses			Value
Obligations of U.S. Government agencies	$	12,331	$	169	$	0		$	12,500
Obligations of states and political subdivisions:
Tax-exempt		84,204		949		(1,201	)		83,952
Taxable		27,618		208		(127	)		27,699
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		54,827		48		(1,430	)		53,445
Residential collateralized mortgage obligations		148,964		238		(3,290	)		145,912
Commercial mortgage-backed securities		40,781		166		(1,182	)		39,765
Total available-for-sale debt securities	$	368,725	$	1,778	$	(7,230	)	$	363,273

Schedule of Unrealized Loss on Investments [Table Text Block]

March 3 1 , 201 9	Less Than 12 Months					12 Months or More					Total
(In Thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Obligations of states and political subdivisions:
Tax-exempt	$	0	$	0		$	21,103	$	(298	)	$	21,103	$	(298	)
Taxable		0		0			8,315		(67	)		8,315		(67	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		5,054		(77	)		41,750		(756	)		46,804		(833	)
Residential collateralized mortgage obligations		0		0			98,164		(2,124	)		98,164		(2,124	)
Commercial mortgage-backed securities		0		0			28,590		(671	)		28,590		(671	)
Total temporarily impaired available-for-sale debt securities	$	5,054	$	(77	)	$	197,922	$	(3,916	)	$	202,976	$	(3,993	)

December 31, 201 8	Less Than 12 Months					12 Months or More					Total
(In Thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Obligations of states and political subdivisions:
Tax-exempt	$	5,084	$	(11	)	$	32,684	$	(1,190	)	$	37,768	$	(1,201	)
Taxable		980		(2	)		11,418		(125	)		12,398		(127	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		5,592		(4	)		42,309		(1,426	)		47,901		(1,430	)
Residential collateralized mortgage obligations		1,892		(8	)		101,662		(3,282	)		103,554		(3,290	)
Commercial mortgage-backed securities		0		0			32,552		(1,182	)		32,552		(1,182	)
Total temporarily impaired available-for-sale debt securities	$	13,548	$	(25	)	$	220,625	$	(7,205	)	$	234,173	$	(7,230	)

Investments Classified by Contractual Maturity Date [Table Text Block]

	Amortized		Fair
(In Thousands)	Cost		Value
Due in one year or less	$	14,204	$	14,299
Due from one year through five years		34,281		34,637
Due from five years through ten years		40,819		41,190
Due after ten years		28,581		29,476
Sub-total		117,885		119,602
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		57,727		57,049
Residential collateralized mortgage obligations		142,642		140,722
Commercial mortgage-backed securities		40,583		40,273
Total	$	358,837	$	357,646

XML

Note 7 - Loans (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

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

Summary of Loans by Type
(In Thousands)	March 31,			Dec. 31,
	2019			2018
Residential mortgage:
Residential mortgage loans - first liens	$	374,764		$	372,339
Residential mortgage loans - junior liens		25,538			25,450
Home equity lines of credit		32,847			34,319
1-4 Family residential construction		24,437			24,698
Total residential mortgage		457,586			456,806
Commercial:
Commercial loans secured by real estate		160,177			162,611
Commercial and industrial		92,842			91,856
Political subdivisions		52,142			53,263
Commercial construction and land		12,701			11,962
Loans secured by farmland		6,938			7,146
Multi-family (5 or more) residential		7,031			7,180
Agricultural loans		5,471			5,659
Other commercial loans		13,467			13,950
Total commercial		350,769			353,627
Consumer		17,037			17,130
Total		825,392			827,563
Less: allowance for loan losses		(8,256	)		(9,309	)
Loans, net	$	817,136		$	818,254

Financing Receivable, Allowance for Credit Loss [Table Text Block]

Three Months Ended March 31, 2019	Dec. 31,										March 31,
(In Thousands)	2018 Balance		Charge-offs			Recoveries		Provision (Credit)			2019 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	3,156	$	(50	)	$	1	$	71		$	3,178
Residential mortgage loans - junior liens		325		(24	)		0		28			329
Home equity lines of credit		302		0			3		(19	)		286
1-4 Family residential construction		203		0			0		(5	)		198
Total residential mortgage		3,986		(74	)		4		75			3,991
Commercial:
Commercial loans secured by real estate		2,538		0			0		(651	)		1,887
Commercial and industrial		1,553		0			2		(486	)		1,069
Commercial construction and land		110		0			0		4			114
Loans secured by farmland		102		0			0		(4	)		98
Multi-family (5 or more) residential		114		0			0		(2	)		112
Agricultural loans		46		0			0		(3	)		43
Other commercial loans		128		0			0		(7	)		121
Total commercial		4,591		0			2		(1,149	)		3,444
Consumer		233		(37	)		9		31			236
Unallocated		499		0			0		86			585
Total Allowance for Loan Losses	$	9,309	$	(111	)	$	15	$	(957	)	$	8,256

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

Financing Receivable Credit Quality Indicators [Table Text Block]

March 31, 2019
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	365,301	$	609	$	8,854	$	0	$	374,764
Residential mortgage loans - junior liens		24,934		98		506		0		25,538
Home equity lines of credit		32,182		59		606		0		32,847
1-4 Family residential construction		24,256		0		181		0		24,437
Total residential mortgage		446,673		766		10,147		0		457,586
Commercial:
Commercial loans secured by real estate		153,387		3,660		3,130		0		160,177
Commercial and Industrial		84,736		6,532		1,574		0		92,842
Political subdivisions		52,142		0		0		0		52,142
Commercial construction and land		12,627		0		74		0		12,701
Loans secured by farmland		4,681		422		1,835		0		6,938
Multi-family (5 or more) residential		7,031		0		0		0		7,031
Agricultural loans		4,679		53		739		0		5,471
Other commercial loans		13,381		15		71		0		13,467
Total commercial		332,664		10,682		7,423		0		350,769
Consumer		17,007		0		30		0		17,037
Totals	$	796,344	$	11,448	$	17,600	$	0	$	825,392

December 31, 2018
(In Thousands)			Special
	Pass		Mention		Substandard		Doubtful		Total
Residential Mortgage:
Residential mortgage loans - first liens	$	363,407	$	937	$	7,944	$	51	$	372,339
Residential mortgage loans - junior liens		24,841		176		433		0		25,450
Home equity lines of credit		33,659		59		601		0		34,319
1-4 Family residential construction		24,698		0		0		0		24,698
Total residential mortgage		446,605		1,172		8,978		51		456,806
Commercial:
Commercial loans secured by real estate		156,308		740		5,563		0		162,611
Commercial and Industrial		84,232		5,230		2,394		0		91,856
Political subdivisions		53,263		0		0		0		53,263
Commercial construction and land		11,887		0		75		0		11,962
Loans secured by farmland		5,171		168		1,796		11		7,146
Multi-family (5 or more) residential		7,180		0		0		0		7,180
Agricultural loans		4,910		84		665		0		5,659
Other commercial loans		13,879		0		71		0		13,950
Total commercial		336,830		6,222		10,564		11		353,627
Consumer		17,116		0		14		0		17,130
Totals	$	800,551	$	7,394	$	19,556	$	62	$	827,563

Impaired Financing Receivable by Portfolio Segment [Table Text Block]

March 31, 2019	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	970	$	373,794	$	374,764	$	0	$	3,178	$	3,178
Residential mortgage loans - junior liens		289		25,249		25,538		114		215		329
Home equity lines of credit		0		32,847		32,847		0		286		286
1-4 Family residential construction		0		24,437		24,437		0		198		198
Total residential mortgage		1,259		456,327		457,586		114		3,877		3,991
Commercial:
Commercial loans secured by real estate		1,756		158,421		160,177		160		1,727		1,887
Commercial and industrial		1,292		91,550		92,842		175		894		1,069
Political subdivisions		0		52,142		52,142		0		0		0
Commercial construction and land		0		12,701		12,701		0		114		114
Loans secured by farmland		1,534		5,404		6,938		49		49		98
Multi-family (5 or more) residential		0		7,031		7,031		0		112		112
Agricultural loans		656		4,815		5,471		0		43		43
Other commercial loans		0		13,467		13,467		0		121		121
Total commercial		5,238		345,531		350,769		384		3,060		3,444
Consumer		0		17,037		17,037		0		236		236
Unallocated												585
Total	$	6,497	$	818,895	$	825,392	$	498	$	7,173	$	8,256

December 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	$	991	$	371,348	$	372,339	$	0	$	3,156	$	3,156
Residential mortgage loans - junior liens		293		25,157		25,450		116		209		325
Home equity lines of credit		0		34,319		34,319		0		302		302
1-4 Family residential construction		0		24,698		24,698		0		203		203
Total residential mortgage		1,284		455,522		456,806		116		3,870		3,986
Commercial:
Commercial loans secured by real estate		4,302		158,309		162,611		781		1,757		2,538
Commercial and industrial		2,157		89,699		91,856		659		894		1,553
Political subdivisions		0		53,263		53,263		0		0		0
Commercial construction and land		0		11,962		11,962		0		110		110
Loans secured by farmland		1,349		5,797		7,146		49		53		102
Multi-family (5 or more) residential		0		7,180		7,180		0		114		114
Agricultural loans		665		4,994		5,659		0		46		46
Other commercial loans		0		13,950		13,950		0		128		128
Total commercial		8,473		345,154		353,627		1,489		3,102		4,591
Consumer		17		17,113		17,130		0		233		233
Unallocated												499
Total	$	9,774	$	817,789	$	827,563	$	1,605	$	7,205	$	9,309

Impaired Financing Receivables [Table Text Block]

(In Thousands)	March 31, 2019						December 31, 2018
	Unpaid						Unpaid
	Principal		Recorded		Related		Principal		Recorded		Related
	Balance		Investment		Allowance		Balance		Investment		Allowance
With no related allowance recorded:
Residential mortgage loans - first liens	$	729	$	701	$	0	$	750	$	721	$	0
Residential mortgage loans - junior liens		50		50		0		54		54		0
Commercial loans secured by real estate		765		765		0		1,787		1,787		0
Commercial and industrial		507		507		0		817		817		0
Loans secured by farmland		1,049		1,049		0		862		862		0
Agricultural loans		656		656		0		665		665		0
Consumer		0		0		0		17		17		0
Total with no related allowance recorded		3,756		3,728		0		4,952		4,923		0
With a related allowance recorded:
Residential mortgage loans - first liens		270		270		0		270		270		0
Residential mortgage loans - junior liens		239		239		114		239		239		116
Commercial loans secured by real estate		991		991		160		2,515		2,515		781
Commercial and industrial		784		784		175		1,340		1,340		659
Loans secured by farmland		485		485		49		487		487		49
Total with a related allowance recorded		2,769		2,769		498		4,851		4,851		1,605
Total	$	6,525	$	6,497	$	498	$	9,803	$	9,774	$	1,605

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,
	2019		2018		2019		2018
Residential mortgage:
Residential mortgage loans - first lien	$	981	$	1,046	$	10	$	19
Residential mortgage loans - junior lien		291		301		2		3
Total residential mortgage		1,272		1,347		12		22
Commercial:
Commercial loans secured by real estate		3,040		5,882		10		35
Commercial and industrial		1,713		508		26		6
Loans secured by farmland		1,442		1,364		1		6
Multi-family (5 or more) residential		0		392		0		0
Agricultural loans		660		346		12		11
Total commercial		6,855		8,492		49		58
Consumer		8		19		0		0
Total	$	8,135	$	9,858	$	61	$	80

Financing Receivable, Nonaccrual [Table Text Block]

(In Thousands)	March 31, 2019				December 31, 2018
	Past Due				Past Due
	90+ Days and				90+ Days and
	Accruing		Nonaccrual		Accruing		Nonaccrual
Residential mortgage:
Residential mortgage loans - first liens	$	1,327	$	4,315	$	1,633	$	4,750
Residential mortgage loans - junior liens		111		239		151		239
Home equity lines of credit		78		9		219		27
Total residential mortgage		1,516		4,563		2,003		5,016
Commercial:
Commercial loans secured by real estate		286		1,458		394		3,958
Commercial and industrial		61		1,226		18		2,111
Commercial construction and land		0		52		0		52
Loans secured by farmland		0		1,486		459		1,297
Agricultural loans		0		656		0		665
Total commercial		347		4,878		871		8,083
Consumer		39		0		32		14
Totals	$	1,902	$	9,441	$	2,906	$	13,113

Financing Receivable, Past Due [Table Text Block]

	As of March 31, 2019								As of December 31, 2018
	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	$	364,905	$	6,148	$	3,711	$	374,764	$	361,362	$	6,414	$	4,563	$	372,339
Residential mortgage loans - junior liens		25,134		54		350		25,538		24,876		184		390		25,450
Home equity lines of credit		32,478		282		87		32,847		33,611		480		228		34,319
1-4 Family residential construction		24,119		318		0		24,437		24,531		167		0		24,698
Total residential mortgage		446,636		6,802		4,148		457,586		444,380		7,245		5,181		456,806
Commercial:
Commercial loans secured by real estate		158,276		294		1,607		160,177		160,668		226		1,717		162,611
Commercial and industrial		92,535		100		207		92,842		90,915		152		789		91,856
Political subdivisions		52,142		0		0		52,142		53,263		0		0		53,263
Commercial construction and land		12,387		262		52		12,701		11,910		0		52		11,962
Loans secured by farmland		5,258		689		991		6,938		5,390		487		1,269		7,146
Multi-family (5 or more) residential		7,031		0		0		7,031		7,104		76		0		7,180
Agricultural loans		5,380		85		6		5,471		5,624		29		6		5,659
Other commercial loans		13,467		0		0		13,467		13,950		0		0		13,950
Total commercial		346,476		1,430		2,863		350,769		348,824		970		3,833		353,627
Consumer		16,919		79		39		17,037		16,991		93		46		17,130
Totals	$	810,031	$	8,311	$	7,050	$	825,392	$	810,195	$	8,308	$	9,060	$	827,563

Contractual Aging of Nonaccrual Loans [Table Text Block]

<div style="display: inline; font-family: times new roman; font-size: 10pt"><table border="0" cellpadding="0" cellspacing="0" style="margin-right: 15%; font-size: 10pt; font-family: "Times New Roman", Times, serif; text-indent: 0px; min-; min-width: 700px;"> <tr style="vertical-align: bottom;"> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><div style="display: inline; font-weight: bold;"><div style="display: inline; font-weight: bold;">Current &</div></div></div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"><div style="display: inline; font-weight: bold;"> </div></td> <td style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt;"><div style="display: inline; font-weight: bold;"> </div></td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"><div style="display: inline; font-weight: bold;"> </div></td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"><div style="display: inline; font-weight: bold;"> </div></td> <td style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt;"><div style="display: inline; font-weight: bold;"> </div></td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"><div style="display: inline; font-weight: bold;"> </div></td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"><div style="display: inline; font-weight: bold;"> </div></td> <td style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt;"><div style="display: inline; font-weight: bold;"> </div></td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"><div style="display: inline; font-weight: bold;"> </div></td> </tr> <tr style="vertical-align: bottom;"> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt; width: 40%;"> <div style=" font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-top: 0pt; margin-bottom: 0pt; margin-left: 18pt;"><div style="display: inline; font-weight: bold;">(In Thousands)</div></div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> </div><div style=" font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><div style="display: inline; font-weight: bold;"><div style="display: inline; font-weight: bold;">Past Due</div></div></div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> </div><div style=" font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><div style="display: inline; font-weight: bold;"><div style="display: inline; font-weight: bold;">Past Due</div></div></div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> </div><div style=" font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><div style="display: inline; font-weight: bold;"><div style="display: inline; font-weight: bold;">Past Due</div></div></div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"><div style="display: inline; font-weight: bold;"> </div></td> <td style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"><div style="display: inline; font-weight: bold;"> </div></div></td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"><div style="display: inline; font-weight: bold;"> </div></td> </tr> <tr style="vertical-align: bottom;"> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> </div><div style=" font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><div style="display: inline; font-weight: bold;"><div style="display: inline; font-weight: bold;">Less than</div></div></div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td colspan="2" rowspan="1" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; text-align: center;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"><div style="display: inline; font-weight: bold;">30-89</div></div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> </div><div style=" font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><div style="display: inline; font-weight: bold;"><div style="display: inline; font-weight: bold;">90+</div></div></div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"><div style="display: inline; font-weight: bold;"> </div></td> <td style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"><div style="display: inline; font-weight: bold;"> </div></div></td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"><div style="display: inline; font-weight: bold;"> </div></td> </tr> <tr style="vertical-align: bottom;"> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> </div><div style=" font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><div style="display: inline; font-weight: bold;"><div style="display: inline; font-weight: bold;">30 Days</div></div></div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> </div><div style=" font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><div style="display: inline; font-weight: bold;"><div style="display: inline; font-weight: bold;">Days</div></div></div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> </div><div style=" font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><div style="display: inline; font-weight: bold;"><div style="display: inline; font-weight: bold;">Days</div></div></div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;"> </div><div style=" font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><div style="display: inline; font-weight: bold;"><div style="display: inline; font-weight: bold;">Total</div></div></div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom: 3px double rgb(0, 0, 0);"> <div style=" font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-top: 0pt; margin-bottom: 0pt;"><div style="display: inline; font-weight: bold;">March 31, 2019 Nonaccrual Totals</div></div> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom: 3px double rgb(0, 0, 0);"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td style="width: 12%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">3,105</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom: 3px double rgb(0, 0, 0);"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td style="width: 12%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">1,188</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom: 3px double rgb(0, 0, 0);"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td style="width: 12%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">5,148</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom: 3px double rgb(0, 0, 0);"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td style="width: 12%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">9,441</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; padding-bottom: 3px;"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(255, 255, 255);"> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom: 3px double rgb(0, 0, 0);"> <div style=" font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-top: 0pt; margin-bottom: 0pt;"><div style="display: inline; font-weight: bold;">December 31, 2018 Nonaccrual Totals</div></div> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom: 3px double rgb(0, 0, 0);"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td style="width: 12%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">5,793</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom: 3px double rgb(0, 0, 0);"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td style="width: 12%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">1,166</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom: 3px double rgb(0, 0, 0);"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td style="width: 12%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">6,154</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; border-bottom: 3px double rgb(0, 0, 0);"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);">$</td> <td style="width: 12%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; border-bottom: 3px double rgb(0, 0, 0);"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">13,113</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt; padding-bottom: 3px;"> </td> </tr> </table></div>

Financing Receivable, Troubled Debt Restructuring [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, 2019 Totals	$	775	$	1	$	74	$	700	$	1,550
December 31, 2018 Totals	$	612	$	43	$	0	$	2,884	$	3,539

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

(In Thousands)	March 31,		Dec. 31,
	2019		2018
Foreclosed residential real estate	$	109	$	64

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

<div style="display: inline; font-family: times new roman; font-size: 10pt"><table border="0" cellpadding="0" cellspacing="0" style="margin-right: 15%; font-size: 10pt; font-family: "Times New Roman", Times, serif; text-indent: 0px; min-; min-width: 700px;"> <tr style="vertical-align: bottom;"> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt; width: 64%;"> <div style=" font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-top: 0pt; margin-bottom: 0pt;"><div style="display: inline; font-weight: bold;">(In Thousands)</div></div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><div style="display: inline; font-weight: bold;"><div style="display: inline; font-weight: bold;">March 31,</div></div></div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><div style="display: inline; font-weight: bold;"><div style="display: inline; font-weight: bold;">Dec. 31,</div></div></div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> </tr> <tr style="vertical-align: bottom;"> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><div style="display: inline; font-weight: bold;"><div style="display: inline; font-weight: bold;">2019</div></div></div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td colspan="2" style="text-align: center; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> <div style=" font-family:'Times New Roman', Times, serif;font-size:10pt;margin:0pt;text-align:center;"><div style="display: inline; font-weight: bold;"><div style="display: inline; font-weight: bold;">2018</div></div></div> </td> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> </tr> <tr style="vertical-align: bottom; background-color: rgb(204, 238, 255);"> <td style="font-family: "Times New Roman", Times, serif; font-size: 10pt;"> <div style=" font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-top: 0pt; margin-bottom: 0pt;">Residential real estate in process of foreclosure</div> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td style="width: 15%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">1,291</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt;"> </td> <td style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;">$</td> <td style="width: 15%; text-align: right; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"><div style="display: inline; font-style: italic; font-weight: inherit; font-style: normal;">1,097</div></td> <td nowrap="nowrap" style="width: 1%; font-family: "Times New Roman", Times, serif; font-size: 10pt; margin-left: 0pt;"> </td> </tr> </table></div>

Troubled Debt Restructuring [Member]

Notes Tables

Financing Receivable, Troubled Debt Restructuring [Table Text Block]

(Balances in Thousands)
	2019				2018
			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		0	$	0		1	$	80
Residential mortgage - junior liens,
Reduced monthly payments and extended maturity date		1		18		0		0
Commercial loans secured by real estate,
Extended interest only payments for a six-month period		0		0		2		36
Commercial and industrial :
Extended interest only payments for a six-month period		0		0		1		46
Reduced monthly payments and extended maturity date		9		448		0		0
Agricultural loans,
Reduced monthly payments and extended maturity date		1		84		2		36
Total		11	$	550		4	$	162

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Note 8 - Borrowed Funds (Tables)

3 Months Ended

Mar. 31, 2019

Notes Tables

Schedule of Short-term Debt [Table Text Block]

(In Thousands)	Mar ch 3 1 ,		Dec. 31,
	201 9		201 8
FHLB-Pittsburgh borrowings	$	0	$	7,000
Customer repurchase agreements		5,132		5,853
Total short-term borrowings	$	5,132	$	12,853

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

(In Thousands)	Mar ch 3 1 ,		Dec. 31,
	201 9		201 8
Loan matured in January 2019 with a rate of 1.83%	$	0	$	2,000
Loan matured in February 2019 with a rate of 1.95%		0		3,000
Loan matured in March 2019 with a rate of 2.15%		0		3,000
Loan maturing in April 2019 with a rate of 2.24%		3,000		3,000
Loan maturing in May 2019 with a rate of 2.30%		3,000		3,000
Loan maturing in June 2019 with a rate of 2.42%		3,000		3,000
Loan maturing in July 2019 with a rate of 2.41%		3,000		3,000
Loan maturing in August 2019 with a rate of 2.48%		3,000		3,000
Loan maturing in September 2019 with a rate of 2.53%		3,000		3,000
Loan maturing in November 2019 with a rate of 2.75%		3,000		3,000
Loan maturing in December 2019 with a rate of 2.77%		3,000		3,000
Loan maturing in January 2020 with a rate of 2.73%		3,000		3,000
Loan maturing in February 2020 with a rate of 2.66%		2,000		0
Loan maturing in April 2020 with a rate of 4.79%		221		271
Loan maturing in March 2022 with a rate of 2.46%		3,000		0
Loan maturing in June 2025 with a rate of 4.91%		623		644
Total long-term FHLB-Pittsburgh borrowings	$	32,844	$	35,915

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Note 1 - Basis of Interim Presentation and Status of Recent Accounting Pronouncements (Details Textual) - USD ($)		Jan. 01, 2019	Jan. 01, 2018	Dec. 31, 2017
Accounting Standards Update 2016-02 [Member]
Operating Lease, Right-of-Use Asset		$ 1,132,000
Operating Lease, Liability, Total		$ 1,132,000
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 shares in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
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 ($) $ / shares in Units, $ in Thousands		3 Months Ended
		Mar. 31, 2019	Mar. 31, 2018
Net income		$ 5,090	$ 4,375
Less: Dividends and undistributed earnings allocated to participating securities		(27)	(23)
Net income attributable to common shares		$ 5,063	$ 4,352
Basic weighted-average common shares outstanding (in shares)		12,308,862	12,189,471
Basic earnings per common share (a) (in dollars per share)	[1]	$ 0.41	$ 0.36
Net income attributable to common shares		$ 5,063	$ 4,352
Dilutive effect of potential common stock arising from stock options (in shares)		25,445	32,785
Diluted weighted-average common shares outstanding (in shares)		12,334,307	12,222,256
Diluted earnings per common share (a) (in dollars per share)	[1]	$ 0.41	$ 0.36
Weighted-average nonvested restricted shares outstanding (in shares)		65,639	62,922

[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 non-vested 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, 2019	Mar. 31, 2018
Unrealized holding gains on available-for-sale debt securities, before tax amount	$ 4,261	$ (4,839)
Unrealized holding gains on available-for-sale debt securities, income tax effect	(895)	1,015
Unrealized holding gains on available-for-sale debt securities, net of tax amount	3,366	(3,824)
Changes from plan amendments and actuarial gains and losses included in other comprehensive income, before tax amount	214	93
Changes from plan amendments and actuarial gains and losses included in other comprehensive income, income tax effect	(45)	(19)
Changes from plan amendments and actuarial gains and losses included in other comprehensive income, net of tax amount	169	74
Amortization of prior service cost and net actuarial gain included in net periodic benefit cost, before tax amount	(8)	(5)
Amortization of prior service cost and net actuarial gain included in net periodic benefit cost, income tax effect	2	1
Amortization of prior service cost and net actuarial gain included in net periodic benefit cost, net of tax amount	(6)	(4)
Other comprehensive (income) loss on unfunded retirement obligations, before tax amount	206	88
Other comprehensive income (loss) on unfunded retirement obligations, income tax effect	(43)	(18)
Other comprehensive income (loss) on unfunded retirement obligations, net of tax amount	163	70
Total other comprehensive income, before tax amount	4,467	(4,751)
Total other comprehensive income, income tax effect	(938)	997
Total other comprehensive income, net of tax amount	3,529	(3,754)
Unrealized holding gains (losses) on available-for-sale debt securities	4,261	(4,839)
Unrealized holding losses on available-for-sale debt securities, income tax effect	$ (895)	$ 1,015

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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, 2019	Mar. 31, 2018
Balance, beginning of period		$ 197,368	$ 188,443
Other comprehensive income (loss)		3,529	(3,754)
Balance, end of period		202,127	186,382
Accounting Standards Update 2018-02 [Member]
Impact of accounting standards change	[1]		0
Accounting Standards Update 2017-08 [Member]
Impact of accounting standards change	[2]		0
Accounting Standards Update 2016-01 [Member]
Impact of accounting standards change	[3]		0
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member]
Balance, beginning of period		(4,307)	(1,566)
Other comprehensive income (loss)		3,366	(3,824)
Balance, end of period		(941)	(5,679)
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member] | Accounting Standards Update 2018-02 [Member]
Impact of accounting standards change			(337)
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member] | Accounting Standards Update 2017-08 [Member]
Impact of accounting standards change			26
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member] | Accounting Standards Update 2016-01 [Member]
Impact of accounting standards change			22
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Balance, beginning of period		137	59
Other comprehensive income (loss)		163	70
Balance, end of period		300	141
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member] | Accounting Standards Update 2018-02 [Member]
Impact of accounting standards change			12
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member] | Accounting Standards Update 2017-08 [Member]
Impact of accounting standards change			0
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member] | Accounting Standards Update 2016-01 [Member]
Impact of accounting standards change			0
AOCI Attributable to Parent [Member]
Balance, beginning of period		(4,170)	(1,507)
Other comprehensive income (loss)		3,529	(3,754)
Balance, end of period		$ (641)	(5,538)
AOCI Attributable to Parent [Member] | Accounting Standards Update 2018-02 [Member]
Impact of accounting standards change	[1]		(325)
AOCI Attributable to Parent [Member] | Accounting Standards Update 2017-08 [Member]
Impact of accounting standards change	[2]		26
AOCI Attributable to Parent [Member] | Accounting Standards Update 2016-01 [Member]
Impact of accounting standards change	[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, 2019	Mar. 31, 2018
Income tax provision	$ 981	$ 741
Net income	(5,090)	(4,375)
Reclassification out of Accumulated Other Comprehensive Income [Member]
Net income	(6)	(4)
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
Reclassification out of Accumulated Other Comprehensive Income [Member] | AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent [Member]
Income tax provision	$ 2	(5)
Net income		$ 1

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Note 4 - Cash and Due From Banks (Details Textual) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Restricted Cash and Cash Equivalents, Current, Total	$ 17,545,000	$ 18,141,000

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Note 4 - Cash and Due From Banks - Summary of Cash and Due From Banks (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Cash and cash equivalents	$ 39,442	$ 32,827
Certificates of deposit	4,560	4,660
Total cash and due from banks	$ 44,002	$ 37,487

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Note 5 - Fair Value Measurements and Fair Values of Financial Instruments - Assets Measured at Fair Value (Details) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Total, fair value	$ 357,646,000	$ 363,273,000
Marketable equity security	962,000	950,000
Unpaid principal - with allowance	2,769,000	4,851,000
Valuation allowance	(498,000)	(1,605,000)
Impaired loans, net	2,769,000	4,851,000
US Government Agencies Debt Securities [Member]
Total, fair value	12,265,000	12,500,000
Obligations of States and Political Subdivisions Tax Exempt [Member]
Total, fair value	76,902,000	83,952,000
Obligations of States and Political Subdivisions Taxable [Member]
Total, fair value	30,435,000	27,699,000
Residential Pass-Through Securities [Member]
Total, fair value	57,049,000	53,445,000
Residential Collateralized Mortgage Obligations [Member]
Total, fair value	140,722,000	145,912,000
Commercial Mortgage Backed Securities [Member]
Total, fair value	40,273,000	39,765,000
Fair Value, Recurring [Member]
Total, fair value	357,646,000	363,273,000
Marketable equity security	962,000	950,000
Servicing rights	1,347,000	1,404,000
Total asset fair value measurements	359,955,000	365,627,000
Fair Value, Recurring [Member] | US Government Agencies Debt Securities [Member]
Total, fair value	12,265,000	15,500,000
Fair Value, Recurring [Member] | Obligations of States and Political Subdivisions Tax Exempt [Member]
Total, fair value	76,902,000	83,952,000
Fair Value, Recurring [Member] | Obligations of States and Political Subdivisions Taxable [Member]
Total, fair value	30,435,000	27,699,000
Fair Value, Recurring [Member] | Residential Pass-Through Securities [Member]
Total, fair value	57,049,000	53,445,000
Fair Value, Recurring [Member] | Residential Collateralized Mortgage Obligations [Member]
Total, fair value	140,722,000	145,912,000
Fair Value, Recurring [Member] | Commercial Mortgage Backed Securities [Member]
Total, fair value	40,273,000	39,765,000
Fair Value, Nonrecurring [Member]
Total asset fair value measurements	4,146,000	4,949,000
Unpaid principal - with allowance	2,769,000	4,851,000
Valuation allowance	(498,000)	(1,605,000)
Impaired loans, net	2,271,000	3,246,000
Foreclosed assets held for sale	1,875,000	1,703,000
Fair Value, Inputs, Level 1 [Member] | Fair Value, Recurring [Member]
Total, fair value	0	0
Marketable equity security	962,000	950,000
Servicing rights	0	0
Total asset fair value measurements	962,000	950,000
Fair Value, Inputs, Level 1 [Member] | Fair Value, Recurring [Member] | US Government Agencies Debt Securities [Member]
Total, fair value	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Recurring [Member] | Obligations of States and Political Subdivisions Tax Exempt [Member]
Total, fair value	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Recurring [Member] | Obligations of States and Political Subdivisions Taxable [Member]
Total, fair value	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Recurring [Member] | Residential Pass-Through Securities [Member]
Total, fair value	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Recurring [Member] | Residential Collateralized Mortgage Obligations [Member]
Total, fair value	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Recurring [Member] | Commercial Mortgage Backed Securities [Member]
Total, fair value	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, 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 assets held for sale	0	0
Fair Value, Inputs, Level 2 [Member] | Fair Value, Recurring [Member]
Total, fair value	357,646,000	363,273,000
Marketable equity security	0	0
Servicing rights	0	0
Total asset fair value measurements	357,646,000	363,273,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Recurring [Member] | US Government Agencies Debt Securities [Member]
Total, fair value	12,265,000	12,500,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Recurring [Member] | Obligations of States and Political Subdivisions Tax Exempt [Member]
Total, fair value	76,902,000	83,952,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Recurring [Member] | Obligations of States and Political Subdivisions Taxable [Member]
Total, fair value	30,435,000	27,699,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Recurring [Member] | Residential Pass-Through Securities [Member]
Total, fair value	57,049,000	53,445,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Recurring [Member] | Residential Collateralized Mortgage Obligations [Member]
Total, fair value	140,722,000	145,912,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, Recurring [Member] | Commercial Mortgage Backed Securities [Member]
Total, fair value	40,273,000	39,765,000
Fair Value, Inputs, Level 2 [Member] | Fair Value, 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 assets held for sale	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Recurring [Member]
Total, fair value	0	0
Marketable equity security	0	0
Servicing rights	1,347,000	1,404,000
Total asset fair value measurements	1,347,000	1,404,000
Fair Value, Inputs, Level 3 [Member] | Fair Value, Recurring [Member] | US Government Agencies Debt Securities [Member]
Total, fair value	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Recurring [Member] | Obligations of States and Political Subdivisions Tax Exempt [Member]
Total, fair value	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Recurring [Member] | Obligations of States and Political Subdivisions Taxable [Member]
Total, fair value	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Recurring [Member] | Residential Pass-Through Securities [Member]
Total, fair value	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Recurring [Member] | Residential Collateralized Mortgage Obligations [Member]
Total, fair value	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Recurring [Member] | Commercial Mortgage Backed Securities [Member]
Total, fair value	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Nonrecurring [Member]
Total asset fair value measurements	4,146,000	4,949,000
Unpaid principal - with allowance	2,769,000	4,851,000
Valuation allowance	(498,000)	(1,605,000)
Impaired loans, net	2,271,000	3,246,000
Foreclosed assets held for sale	$ 1,875,000	$ 1,703,000

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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, 2019	Dec. 31, 2018
Fair Value, Recurring [Member]
Fair value	$ 1,347,000	$ 1,404,000
Valuation Technique, Discounted Cash Flow [Member] | Servicing Rights Assets [Member]
Discount rate	12.50%	12.50%
Weighted-average PSA	129.00%	114.00%
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, Recurring [Member]
Fair value	$ 1,347,000	$ 1,404,000

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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, 2019	Mar. 31, 2018
Servicing rights balance, beginning of period	$ 1,404	$ 1,299
Issuances of servicing rights	20	50
Unrealized (losses) gains included in earnings	(77)	20
Servicing rights balance, end of period	$ 1,347	$ 1,369

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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, 2019	Dec. 31, 2018
Recorded investment - with allowance	$ 2,769	$ 4,851
Related allowance	498	1,605
Fair Value, Nonrecurring [Member]
Recorded investment - with allowance	2,271	3,246
Related allowance	498	1,605
Fair value	2,271	3,246
Foreclosed assets held for sale	1,875	1,703
Fair value	1,875	1,703
Residential Portfolio Segment [Member]
Foreclosed assets held for sale	109	64
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Recorded investment - with allowance	991	2,515
Related allowance	160	781
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Recorded investment - with allowance	784	1,340
Related allowance	175	659
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Recorded investment - with allowance	485	487
Related allowance	49	49
Valuation, Market Approach [Member] | Land Receivable [Member] | Fair Value, Nonrecurring [Member]
Fair value	110	110
Valuation, Market Approach [Member] | Commercial Real Estate Receivables [Member] | Fair Value, Nonrecurring [Member]
Fair value	1,656	1,529
Valuation, Market Approach [Member] | Residential Portfolio Segment [Member] | Fair Value, Nonrecurring [Member]
Fair value	109	64
Valuation, Market Approach [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Fair Value, Nonrecurring [Member]
Fair value	831	1,734
Valuation, Market Approach [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Fair Value, Nonrecurring [Member]
Fair value	0	0
Valuation, Market Approach [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Fair Value, Nonrecurring [Member]
Fair value	436	438
Impaired Loans [Member]
Recorded investment - with allowance	2,769	4,851
Related allowance	498	1,605
Impaired Loans [Member] | Valuation, Market Approach [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member]
Recorded investment - with allowance	509	509
Related allowance	114	116
Fair value	$ 395	$ 393
Impaired Loans [Member] | Valuation, Market Approach [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Weighted Average [Member]
Discount rate	26.00%	26.00%
Impaired Loans [Member] | Valuation, Market Approach [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Recorded investment - with allowance	$ 991	$ 2,515
Related allowance	$ 160	$ 781
Impaired Loans [Member] | Valuation, Market Approach [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Weighted Average [Member]
Discount rate	39.00%	16.00%
Impaired Loans [Member] | Valuation, Market Approach [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Recorded investment - with allowance	$ 75	$ 75
Related allowance	75	75
Impaired Loans [Member] | Valuation, Market Approach [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Measurement Input, Discount to Borrower's Financial Statement Value [Member]
Recorded investment - with allowance	40	1,265
Related allowance	40	584
Fair value	$ 0	$ 681
Discount rate	100.00%	36.00%
Impaired Loans [Member] | Valuation, Market Approach [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Weighted Average [Member]
Discount rate	100.00%	100.00%
Impaired Loans [Member] | Valuation, Market Approach [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Recorded investment - with allowance	$ 485	$ 487
Related allowance	$ 49	$ 49
Impaired Loans [Member] | Valuation, Market Approach [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Weighted Average [Member]
Discount rate	46.00%	56.00%
Impaired Loans [Member] | Valuation Technique, Discounted Cash Flow [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Recorded investment - with allowance	$ 669
Related allowance	60
Fair value	$ 609
Discount rate	15.00%
Foreclosed Assets Held For Sale [Member]
Foreclosed assets held for sale	$ 1,875	$ 1,703
Valuation allowance	0	0
Foreclosed Assets Held For Sale [Member] | Valuation, Market Approach [Member] | Land Receivable [Member]
Foreclosed assets held for sale	110	110
Valuation allowance	$ 0	$ 0
Foreclosed Assets Held For Sale [Member] | Valuation, Market Approach [Member] | Land Receivable [Member] | Weighted Average [Member]
Discount rate	61.00%	61.00%
Foreclosed Assets Held For Sale [Member] | Valuation, Market Approach [Member] | Commercial Real Estate Receivables [Member]
Foreclosed assets held for sale	$ 1,656	$ 1,529
Valuation allowance	$ 0	$ 0
Foreclosed Assets Held For Sale [Member] | Valuation, Market Approach [Member] | Commercial Real Estate Receivables [Member] | Weighted Average [Member]
Discount rate	32.00%	20.00%
Foreclosed Assets Held For Sale [Member] | Valuation, Market Approach [Member] | Residential Portfolio Segment [Member]
Foreclosed assets held for sale	$ 109	$ 64
Valuation allowance	$ 0	$ 0
Foreclosed Assets Held For Sale [Member] | Valuation, Market Approach [Member] | Residential Portfolio Segment [Member] | Weighted Average [Member]
Discount rate	51.00%	68.00%

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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, 2019	Dec. 31, 2018
Reported Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents	$ 39,442	$ 32,827
Reported Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Certificates of deposit	4,560	4,660
Restricted equity securities (included in Other Assets)	5,157	5,712
Accrued interest receivable	4,270	3,968
Short-term borrowings	5,132	12,853
Long-term borrowings	32,844	35,915
Accrued interest payable	115	142
Reported Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member] | Deposits With No Stated Maturity [Member]
Deposits, fair value	810,409	804,207
Reported Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member] | Time Deposits [Member]
Deposits, fair value	229,502	229,565
Reported Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Loans, net	817,136	818,254
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents	39,442	32,827
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Certificates of deposit	4,611	4,634
Restricted equity securities (included in Other Assets)	5,157	5,712
Accrued interest receivable	4,270	3,968
Short-term borrowings	4,941	12,617
Long-term borrowings	32,877	35,902
Accrued interest payable	115	142
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member] | Deposits With No Stated Maturity [Member]
Deposits, fair value	810,409	804,207
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member] | Time Deposits [Member]
Deposits, fair value	229,730	229,751
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Loans, net	$ 824,036	$ 825,809

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Note 6 - Securities (Details Textual)	3 Months Ended		12 Months Ended
	Mar. 31, 2019 USD ($)	Mar. 31, 2018 USD ($)	Dec. 31, 2018 USD ($)
Equity Securities, FV-NI, Realized Gain (Loss), Total	$ 0	$ 0
Equity Securities, FV-NI	962,000		$ 950,000
Equity Securities, FV-NI, Unrealized Gain (Loss), Total	12,000	$ (15,000)
Other Assets [Member] | Federal Home Loan Bank of Pittsburgh [Member]
Federal Home Loan Bank Stock	$ 5,027,000		$ 5,582,000
Mutual Fund [Member]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions, Total	1		1
Mutual Fund [Member] | Other Noninterest Income [Member]
Equity Securities, FV-NI, Unrealized Gain (Loss), Total	$ (38,000)		$ (50,000)
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	$ 219,532,000		$ 229,418,000

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Note 6 - Securities - Available-for-sale Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Available-for-sale securities, amortized cost	$ 358,837	$ 368,725
Available-for-sale securities, gross unrealized holding gains	2,802	1,778
Available-for-sale securities, gross unrealized holding losses	(3,993)	(7,230)
Available-for-sale debt securities, at fair value	357,646	363,273
US Government Agencies Debt Securities [Member]
Available-for-sale securities, amortized cost	11,916	12,331
Available-for-sale securities, gross unrealized holding gains	349	169
Available-for-sale securities, gross unrealized holding losses	0	0
Available-for-sale debt securities, at fair value	12,265	12,500
Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities, amortized cost	75,910	84,204
Available-for-sale securities, gross unrealized holding gains	1,290	949
Available-for-sale securities, gross unrealized holding losses	(298)	(1,201)
Available-for-sale debt securities, at fair value	76,902	83,952
Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities, amortized cost	30,059	27,618
Available-for-sale securities, gross unrealized holding gains	443	208
Available-for-sale securities, gross unrealized holding losses	(67)	(127)
Available-for-sale debt securities, at fair value	30,435	27,699
Residential Pass-Through Securities [Member]
Available-for-sale securities, amortized cost	57,727	54,827
Available-for-sale securities, gross unrealized holding gains	155	48
Available-for-sale securities, gross unrealized holding losses	(833)	(1,430)
Available-for-sale debt securities, at fair value	57,049	53,445
Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities, amortized cost	142,642	148,964
Available-for-sale securities, gross unrealized holding gains	204	238
Available-for-sale securities, gross unrealized holding losses	(2,124)	(3,290)
Available-for-sale debt securities, at fair value	140,722	145,912
Commercial Mortgage Backed Securities [Member]
Available-for-sale securities, amortized cost	40,583	40,781
Available-for-sale securities, gross unrealized holding gains	361	166
Available-for-sale securities, gross unrealized holding losses	(671)	(1,182)
Available-for-sale debt securities, at fair value	$ 40,273	$ 39,765

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Note 6 - Securities - Available-for-sale Securities With Unrealized Loss Positions (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	$ 5,054	$ 13,548
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(77)	(25)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	197,922	220,625
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(3,916)	(7,205)
Available-for-sale securities with unrealized loss positions, fair value	202,976	234,173
Available-for-sale securities, with unrealized loss positions, unrealized losses	(3,993)	(7,230)
Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	0	5,084
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	0	(11)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	21,103	32,684
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(298)	(1,190)
Available-for-sale securities with unrealized loss positions, fair value	21,103	37,768
Available-for-sale securities, with unrealized loss positions, unrealized losses	(298)	(1,201)
Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	0	980
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	0	(2)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	8,315	11,418
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(67)	(125)
Available-for-sale securities with unrealized loss positions, fair value	8,315	12,398
Available-for-sale securities, with unrealized loss positions, unrealized losses	(67)	(127)
Residential Pass-Through Securities [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	5,054	5,592
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(77)	(4)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	41,750	42,309
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(756)	(1,426)
Available-for-sale securities with unrealized loss positions, fair value	46,804	47,901
Available-for-sale securities, with unrealized loss positions, unrealized losses	(833)	(1,430)
Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	0	1,892
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	0	(8)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	98,164	101,662
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(2,124)	(3,282)
Available-for-sale securities with unrealized loss positions, fair value	98,164	103,554
Available-for-sale securities, with unrealized loss positions, unrealized losses	(2,124)	(3,290)
Commercial Mortgage Backed 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	28,590	32,552
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(671)	(1,182)
Available-for-sale securities with unrealized loss positions, fair value	28,590	32,552
Available-for-sale securities, with unrealized loss positions, unrealized losses	$ (671)	$ (1,182)

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Note 6 - Securities - Available-for-sale Debt Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Due in one year or less, amortized cost	$ 14,204
Due in one year or less, fair value	14,299
Due from one year through five years. amortized cost	34,281
Due from one year through five years, fair value	34,637
Due from five years through ten years, amortized cost	40,819
Due from five years through ten years, fair value	41,190
Due after ten years, amortized cost	28,581
Due after ten years, fair value	29,476
Sub-total, amortized cost	117,885
Sub-total, fair value	119,602
Total, amortized cost	358,837	$ 368,725
Total, fair value	357,646	363,273
Residential Pass-Through Securities [Member]
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, amortized cost	57,727
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, fair value	57,049
Total, amortized cost	57,727	54,827
Total, fair value	57,049	53,445
Residential Collateralized Mortgage Obligations [Member]
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, amortized cost	142,642
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, fair value	140,722
Total, amortized cost	142,642	148,964
Total, fair value	140,722	$ 145,912
Commercial Mortgage-backed Securities [Member]
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, amortized cost	40,583
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, fair value	$ 40,273

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Note 7 - Loans (Details Textual)	3 Months Ended		12 Months Ended
	Mar. 31, 2019 USD ($)	Mar. 31, 2018 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Financing Receivable, Allowance for Credit Loss, Ending Balance	$ 8,256,000	$ 9,049,000	$ 9,309,000	$ 8,856,000
Provision for Loan, Lease, and Other Losses, Total	(957,000)	$ 292,000
Financing Receivable, Troubled Debt Restructuring, Commitment to Lend	$ 0		0
Financing Receivable, Troubled Debt Restructuring, Subsequent Default, Number of Contracts	0	0
Commercial Loan [Member]
Loans Receivable Secured by Real Estate Percentage	53.00%
Financial Asset Acquired with Credit Deterioration [Member]
Provision for Loan, Lease, and Other Losses, Total	$ (1,011,000)
Commercial Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Loss, Ending Balance	3,444,000	$ 4,433,000	4,591,000	4,235,000
Commercial Portfolio Segment [Member] | Maximum [Member]
Financing Receivable Individually Evaluated for Impairment Threshold With Estimated Loss	200,000
Commercial Portfolio Segment [Member] | Two Commercial Loans [Member]
Provision for Loan, Lease, and Other Losses, Total	1,365,000
Commercial Portfolio Segment [Member] | One Commercial Loan [Member]
Provision for Loan, Lease, and Other Losses, Total	584,000
Commercial Real Estate Portfolio Segment [Member] | One Real Estate Secured Commercial Loan [Member]
Provision for Loan, Lease, and Other Losses, Total	781,000
Unallocated Financing Receivables [Member]
Financing Receivable, Allowance for Credit Loss, Ending Balance	585,000	499,000	499,000	499,000
Provision for Loan, Lease, and Other Losses, Total	54,000
Residential Portfolio Segment [Member]
Financing Receivable, Allowance for Credit Loss, Ending Balance	3,991,000	$ 3,943,000	3,986,000	$ 3,963,000
Residential Portfolio Segment [Member] | Maximum [Member]
Financing Receivable Individually Evaluated for Impairment Threshold With Estimated Loss	400,000
Unfunded Loan Commitments [Member]
Financing Receivable, Allowance for Credit Loss, 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, 2019	Dec. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
Loans receivable	$ 825,392	$ 827,563
Allowance for loan losses	(8,256)	(9,309)	$ (9,049)	$ (8,856)
Loans, net	817,136	818,254
Residential Portfolio Segment [Member]
Loans receivable	457,586	456,806
Allowance for loan losses	(3,991)	(3,986)	(3,943)	(3,963)
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	374,764	372,339
Allowance for loan losses	(3,178)	(3,156)	(3,067)	(3,200)
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	25,538	25,450
Allowance for loan losses	(329)	(325)	(351)	(224)
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	32,847	34,319
Allowance for loan losses	(286)	(302)	(286)	(296)
Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	24,437	24,698
Allowance for loan losses	(198)	(203)	(239)	(243)
Commercial Portfolio Segment [Member]
Loans receivable	350,769	353,627
Allowance for loan losses	(3,444)	(4,591)	(4,433)	(4,235)
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	160,177	162,611
Allowance for loan losses	(1,887)	(2,538)	(2,635)	(2,584)
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	12,701	11,962
Allowance for loan losses	(114)	(110)	(137)	(150)
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	92,842	91,856
Allowance for loan losses	(1,069)	(1,553)	(1,036)	(1,065)
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	52,142	53,263
Allowance for loan losses	0	0
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	6,938	7,146
Allowance for loan losses	(98)	(102)	(102)	(105)
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	7,031	7,180
Allowance for loan losses	(112)	(114)	(169)	(172)
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	5,471	5,659
Allowance for loan losses	(43)	(46)	(205)	(57)
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	13,467	13,950
Allowance for loan losses	(121)	(128)	(149)	(102)
Consumer Portfolio Segment [Member]
Loans receivable	17,037	17,130
Allowance for loan losses	$ (236)	$ (233)	$ (174)	$ (159)

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Note 7 - Loans - Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Allowance for loan losses	$ 9,309	$ 8,856
Allowance for loan losses, charge-offs	(111)	(115)
Allowance for loan losses, recoveries	15	16
Allowance for loan losses, provision	(957)	292
Allowance for loan losses	8,256	9,049
Residential Portfolio Segment [Member]
Allowance for loan losses	3,986	3,963
Allowance for loan losses, charge-offs	(74)	(53)
Allowance for loan losses, recoveries	4	2
Allowance for loan losses, provision	75	31
Allowance for loan losses	3,991	3,943
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Allowance for loan losses	3,156	3,200
Allowance for loan losses, charge-offs	(50)	(53)
Allowance for loan losses, recoveries	1	1
Allowance for loan losses, provision	71	(81)
Allowance for loan losses	3,178	3,067
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Allowance for loan losses	325	224
Allowance for loan losses, charge-offs	(24)	0
Allowance for loan losses, recoveries	0	1
Allowance for loan losses, provision	28	126
Allowance for loan losses	329	351
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Allowance for loan losses	302	296
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	3	0
Allowance for loan losses, provision	(19)	(10)
Allowance for loan losses	286	286
Residential Portfolio Segment [Member] | Construction Loans [Member]
Allowance for loan losses	203	243
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	(5)	(4)
Allowance for loan losses	198	239
Commercial Portfolio Segment [Member]
Allowance for loan losses	4,591	4,235
Allowance for loan losses, charge-offs	0	(21)
Allowance for loan losses, recoveries	2	2
Allowance for loan losses, provision	(1,149)	217
Allowance for loan losses	3,444	4,433
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Allowance for loan losses	2,538	2,584
Allowance for loan losses, charge-offs	0	(21)
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	(651)	72
Allowance for loan losses	1,887	2,635
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Allowance for loan losses	110	150
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	4	(13)
Allowance for loan losses	114	137
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Allowance for loan losses	1,553	1,065
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	2	2
Allowance for loan losses, provision	(486)	(31)
Allowance for loan losses	1,069	1,036
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Allowance for loan losses	102	105
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	(4)	(3)
Allowance for loan losses	98	102
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Allowance for loan losses	114	172
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	(2)	(3)
Allowance for loan losses	112	169
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Allowance for loan losses	46	57
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	(3)	148
Allowance for loan losses	43	205
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Allowance for loan losses	128	102
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	(7)	47
Allowance for loan losses	121	149
Consumer Portfolio Segment [Member]
Allowance for loan losses	233	159
Allowance for loan losses, charge-offs	(37)	(41)
Allowance for loan losses, recoveries	9	12
Allowance for loan losses, provision	31	44
Allowance for loan losses	236	174
Unallocated Financing Receivables [Member]
Allowance for loan losses	499	499
Allowance for loan losses, charge-offs	0	0
Allowance for loan losses, recoveries	0	0
Allowance for loan losses, provision	86	0
Allowance for loan losses	$ 585	$ 499

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Note 7 - Loans - Outstanding Loans by Risk Rating (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Loans and Leases Receivable, Gross, Total	$ 825,392	$ 827,563
Residential Portfolio Segment [Member]
Loans and Leases Receivable, Gross, Total	457,586	456,806
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans and Leases Receivable, Gross, Total	374,764	372,339
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans and Leases Receivable, Gross, Total	25,538	25,450
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans and Leases Receivable, Gross, Total	32,847	34,319
Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans and Leases Receivable, Gross, Total	24,437	24,698
Commercial Portfolio Segment [Member]
Loans and Leases Receivable, Gross, Total	350,769	353,627
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans and Leases Receivable, Gross, Total	160,177	162,611
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans and Leases Receivable, Gross, Total	12,701	11,962
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans and Leases Receivable, Gross, Total	92,842	91,856
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans and Leases Receivable, Gross, Total	52,142	53,263
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans and Leases Receivable, Gross, Total	6,938	7,146
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans and Leases Receivable, Gross, Total	7,031	7,180
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans and Leases Receivable, Gross, Total	5,471	5,659
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans and Leases Receivable, Gross, Total	13,467	13,950
Consumer Portfolio Segment [Member]
Loans and Leases Receivable, Gross, Total	17,037	17,130
Pass [Member]
Loans and Leases Receivable, Gross, Total	796,344	800,551
Pass [Member] | Residential Portfolio Segment [Member]
Loans and Leases Receivable, Gross, Total	446,673	446,605
Pass [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans and Leases Receivable, Gross, Total	365,301	363,407
Pass [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans and Leases Receivable, Gross, Total	24,934	24,841
Pass [Member] | Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans and Leases Receivable, Gross, Total	32,182	33,659
Pass [Member] | Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans and Leases Receivable, Gross, Total	24,256	24,698
Pass [Member] | Commercial Portfolio Segment [Member]
Loans and Leases Receivable, Gross, Total	332,664	336,830
Pass [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans and Leases Receivable, Gross, Total	153,387	156,308
Pass [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans and Leases Receivable, Gross, Total	12,627	11,887
Pass [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans and Leases Receivable, Gross, Total	84,736	84,232
Pass [Member] | Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans and Leases Receivable, Gross, Total	52,142	53,263
Pass [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans and Leases Receivable, Gross, Total	4,681	5,171
Pass [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans and Leases Receivable, Gross, Total	7,031	7,180
Pass [Member] | Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans and Leases Receivable, Gross, Total	4,679	4,910
Pass [Member] | Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans and Leases Receivable, Gross, Total	13,381	13,879
Pass [Member] | Consumer Portfolio Segment [Member]
Loans and Leases Receivable, Gross, Total	17,007	17,116
Special Mention [Member]
Loans and Leases Receivable, Gross, Total	11,448	7,394
Special Mention [Member] | Residential Portfolio Segment [Member]
Loans and Leases Receivable, Gross, Total	766	1,172
Special Mention [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans and Leases Receivable, Gross, Total	609	937
Special Mention [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans and Leases Receivable, Gross, Total	98	176
Special Mention [Member] | Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans and Leases Receivable, Gross, Total	59	59
Special Mention [Member] | Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans and Leases Receivable, Gross, Total	0	0
Special Mention [Member] | Commercial Portfolio Segment [Member]
Loans and Leases Receivable, Gross, Total	10,682	6,222
Special Mention [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans and Leases Receivable, Gross, Total	3,660	740
Special Mention [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans and Leases Receivable, Gross, Total	0	0
Special Mention [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans and Leases Receivable, Gross, Total	6,532	5,230
Special Mention [Member] | Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans and Leases Receivable, Gross, Total	0	0
Special Mention [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans and Leases Receivable, Gross, Total	422	168
Special Mention [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans and Leases Receivable, Gross, Total	0	0
Special Mention [Member] | Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans and Leases Receivable, Gross, Total	53	84
Special Mention [Member] | Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans and Leases Receivable, Gross, Total	15	0
Special Mention [Member] | Consumer Portfolio Segment [Member]
Loans and Leases Receivable, Gross, Total	0	0
Substandard [Member]
Loans and Leases Receivable, Gross, Total	17,600	19,556
Substandard [Member] | Residential Portfolio Segment [Member]
Loans and Leases Receivable, Gross, Total	10,147	8,978
Substandard [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans and Leases Receivable, Gross, Total	8,854	7,944
Substandard [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans and Leases Receivable, Gross, Total	506	433
Substandard [Member] | Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans and Leases Receivable, Gross, Total	606	601
Substandard [Member] | Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans and Leases Receivable, Gross, Total	181	0
Substandard [Member] | Commercial Portfolio Segment [Member]
Loans and Leases Receivable, Gross, Total	7,423	10,564
Substandard [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans and Leases Receivable, Gross, Total	3,130	5,563
Substandard [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans and Leases Receivable, Gross, Total	74	75
Substandard [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans and Leases Receivable, Gross, Total	1,574	2,394
Substandard [Member] | Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans and Leases Receivable, Gross, Total	0	0
Substandard [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans and Leases Receivable, Gross, Total	1,835	1,796
Substandard [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans and Leases Receivable, Gross, Total	0	0
Substandard [Member] | Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans and Leases Receivable, Gross, Total	739	665
Substandard [Member] | Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans and Leases Receivable, Gross, Total	71	71
Substandard [Member] | Consumer Portfolio Segment [Member]
Loans and Leases Receivable, Gross, Total	30	14
Doubtful [Member]
Loans and Leases Receivable, Gross, Total	0	62
Doubtful [Member] | Residential Portfolio Segment [Member]
Loans and Leases Receivable, Gross, Total	0	51
Doubtful [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans and Leases Receivable, Gross, Total	0	51
Doubtful [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans and Leases Receivable, Gross, Total	0	0
Doubtful [Member] | Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans and Leases Receivable, Gross, Total	0	0
Doubtful [Member] | Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans and Leases Receivable, Gross, Total	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member]
Loans and Leases Receivable, Gross, Total	0	11
Doubtful [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans and Leases Receivable, Gross, Total	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans and Leases Receivable, Gross, Total	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans and Leases Receivable, Gross, Total	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans and Leases Receivable, Gross, Total	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans and Leases Receivable, Gross, Total	0	11
Doubtful [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans and Leases Receivable, Gross, Total	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans and Leases Receivable, Gross, Total	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans and Leases Receivable, Gross, Total	0	0
Doubtful [Member] | Consumer Portfolio Segment [Member]
Loans and Leases Receivable, Gross, Total	$ 0	$ 0

XML

Note 7 - Loans - Loan Balances and Allowance for Loan Losses for Each Impairment Method (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018	Mar. 31, 2018	Dec. 31, 2017
Loans receivable: individually evaluated	$ 6,497	$ 9,774
Loans receivable: collectively evaluated	818,895	817,789
Loans receivable	825,392	827,563
Allowance for loan losses: individually evaluated	498	1,605
Allowance for loan losses: collectively evaluated	7,173	7,205
Allowance for loan losses	8,256	9,309	$ 9,049	$ 8,856
Residential Portfolio Segment [Member]
Loans receivable: individually evaluated	1,259	1,284
Loans receivable: collectively evaluated	456,327	455,522
Loans receivable	457,586	456,806
Allowance for loan losses: individually evaluated	114	116
Allowance for loan losses: collectively evaluated	3,877	3,870
Allowance for loan losses	3,991	3,986	3,943	3,963
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable: individually evaluated	970	991
Loans receivable: collectively evaluated	373,794	371,348
Loans receivable	374,764	372,339
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	3,178	3,156
Allowance for loan losses	3,178	3,156	3,067	3,200
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable: individually evaluated	289	293
Loans receivable: collectively evaluated	25,249	25,157
Loans receivable	25,538	25,450
Allowance for loan losses: individually evaluated	114	116
Allowance for loan losses: collectively evaluated	215	209
Allowance for loan losses	329	325	351	224
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	32,847	34,319
Loans receivable	32,847	34,319
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	286	302
Allowance for loan losses	286	302	286	296
Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	24,437	24,698
Loans receivable	24,437	24,698
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	198	203
Allowance for loan losses	198	203	239	243
Commercial Portfolio Segment [Member]
Loans receivable: individually evaluated	5,238	8,473
Loans receivable: collectively evaluated	345,531	345,154
Loans receivable	350,769	353,627
Allowance for loan losses: individually evaluated	384	1,489
Allowance for loan losses: collectively evaluated	3,060	3,102
Allowance for loan losses	3,444	4,591	4,433	4,235
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable: individually evaluated	1,756	4,302
Loans receivable: collectively evaluated	158,421	158,309
Loans receivable	160,177	162,611
Allowance for loan losses: individually evaluated	160	781
Allowance for loan losses: collectively evaluated	1,727	1,757
Allowance for loan losses	1,887	2,538	2,635	2,584
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	12,701	11,962
Loans receivable	12,701	11,962
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	114	110
Allowance for loan losses	114	110	137	150
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable: individually evaluated	1,292	2,157
Loans receivable: collectively evaluated	91,550	89,699
Loans receivable	92,842	91,856
Allowance for loan losses: individually evaluated	175	659
Allowance for loan losses: collectively evaluated	894	894
Allowance for loan losses	1,069	1,553	1,036	1,065
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	52,142	53,263
Loans receivable	52,142	53,263
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	1,534	1,349
Loans receivable: collectively evaluated	5,404	5,797
Loans receivable	6,938	7,146
Allowance for loan losses: individually evaluated	49	49
Allowance for loan losses: collectively evaluated	49	53
Allowance for loan losses	98	102	102	105
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	7,031	7,180
Loans receivable	7,031	7,180
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	112	114
Allowance for loan losses	112	114	169	172
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable: individually evaluated	656	665
Loans receivable: collectively evaluated	4,815	4,994
Loans receivable	5,471	5,659
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	43	46
Allowance for loan losses	43	46	205	57
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	13,467	13,950
Loans receivable	13,467	13,950
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	121	128
Allowance for loan losses	121	128	149	102
Consumer Portfolio Segment [Member]
Loans receivable: individually evaluated	0	17
Loans receivable: collectively evaluated	17,037	17,113
Loans receivable	17,037	17,130
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	236	233
Allowance for loan losses	236	233	174	159
Unallocated Financing Receivables [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	0	0
Loans receivable	0	0
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	0	0
Allowance for loan losses	$ 585	$ 499	$ 499	$ 499

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Note 7 - Loans - Impaired Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Unpaid principal - with no allowance	$ 3,756	$ 4,952
Recorded investment - with no allowance	3,728	4,923
Unpaid principal - with allowance	2,769	4,851
Recorded investment - with allowance	2,769	4,851
Related allowance	498	1,605
Unpaid principal	6,525	9,803
Recorded investment	6,497	9,774
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Unpaid principal - with no allowance	729	750
Recorded investment - with no allowance	701	721
Unpaid principal - with allowance	270	270
Recorded investment - with allowance	270	270
Related allowance	0	0
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Unpaid principal - with no allowance	50	54
Recorded investment - with no allowance	50	54
Unpaid principal - with allowance	239	239
Recorded investment - with allowance	239	239
Related allowance	114	116
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Unpaid principal - with no allowance	765	1,787
Recorded investment - with no allowance	765	1,787
Unpaid principal - with allowance	991	2,515
Recorded investment - with allowance	991	2,515
Related allowance	160	781
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Unpaid principal - with no allowance	507	817
Recorded investment - with no allowance	507	817
Unpaid principal - with allowance	784	1,340
Recorded investment - with allowance	784	1,340
Related allowance	175	659
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Unpaid principal - with no allowance	1,049	862
Recorded investment - with no allowance	1,049	862
Unpaid principal - with allowance	485	487
Recorded investment - with allowance	485	487
Related allowance	49	49
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Unpaid principal - with no allowance	656	665
Recorded investment - with no allowance	656	665
Consumer Portfolio Segment [Member]
Unpaid principal - with no allowance	0	17
Recorded investment - with no allowance	$ 0	$ 17

XML

Note 7 - Loans - Average Balance of Impaired Loans and Income Recognized on Impaired Loans (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2018
Average investment in impaired loans	$ 8,135	$ 9,858
Interest income recognized on impaired loans on a cash basis	61	80
Residential Portfolio Segment [Member]
Average investment in impaired loans	1,272	1,347
Interest income recognized on impaired loans on a cash basis	12	22
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Average investment in impaired loans	981	1,046
Interest income recognized on impaired loans on a cash basis	10	19
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Average investment in impaired loans	291	301
Interest income recognized on impaired loans on a cash basis	2	3
Commercial Portfolio Segment [Member]
Average investment in impaired loans	6,855	8,492
Interest income recognized on impaired loans on a cash basis	49	58
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Average investment in impaired loans	3,040	5,882
Interest income recognized on impaired loans on a cash basis	10	35
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Average investment in impaired loans	1,713	508
Interest income recognized on impaired loans on a cash basis	26	6
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Average investment in impaired loans	1,442	1,364
Interest income recognized on impaired loans on a cash basis	1	6
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Average investment in impaired loans	0	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	660	346
Interest income recognized on impaired loans on a cash basis	12	11
Consumer Portfolio Segment [Member]
Average investment in impaired loans	8	19
Interest income recognized on impaired loans on a cash basis	$ 0	$ 0

XML

Note 7 - Loans - Nonaccrual Loans and Loans Past Due Ninety Days or More and Still Accruing (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Loans past due 90+ days and accruing	$ 1,902	$ 2,906
Nonaccrual loans	9,441	13,113
Residential Portfolio Segment [Member]
Loans past due 90+ days and accruing	1,516	2,003
Nonaccrual loans	4,563	5,016
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans past due 90+ days and accruing	1,327	1,633
Nonaccrual loans	4,315	4,750
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans past due 90+ days and accruing	111	151
Nonaccrual loans	239	239
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans past due 90+ days and accruing	78	219
Nonaccrual loans	9	27
Commercial Portfolio Segment [Member]
Loans past due 90+ days and accruing	347	871
Nonaccrual loans	4,878	8,083
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans past due 90+ days and accruing	286	394
Nonaccrual loans	1,458	3,958
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans past due 90+ days and accruing	61	18
Nonaccrual loans	1,226	2,111
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans past due 90+ days and accruing	0	0
Nonaccrual loans	52	52
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans past due 90+ days and accruing	0	459
Nonaccrual loans	1,486	1,297
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans past due 90+ days and accruing	0	0
Nonaccrual loans	656	665
Consumer Portfolio Segment [Member]
Loans past due 90+ days and accruing	39	32
Nonaccrual loans	$ 0	$ 14

XML

Note 7 - Loans - Contractual Aging of Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Loans current and past due less than 30 days	$ 810,031	$ 810,195
Loans receivable	825,392	827,563
Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	8,311	8,308
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans past due	7,050	9,060
Residential Portfolio Segment [Member]
Loans current and past due less than 30 days	446,636	444,380
Loans receivable	457,586	456,806
Residential Portfolio Segment [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	6,802	7,245
Residential Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans past due	4,148	5,181
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans current and past due less than 30 days	364,905	361,362
Loans receivable	374,764	372,339
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	6,148	6,414
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans past due	3,711	4,563
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans current and past due less than 30 days	25,134	24,876
Loans receivable	25,538	25,450
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	54	184
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans past due	350	390
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans current and past due less than 30 days	32,478	33,611
Loans receivable	32,847	34,319
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	282	480
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans past due	87	228
Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans current and past due less than 30 days	24,119	24,531
Loans receivable	24,437	24,698
Residential Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	318	167
Residential Portfolio Segment [Member] | Construction Loans [Member] | Financial Asset, Equal to or 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	346,476	348,824
Loans receivable	350,769	353,627
Commercial Portfolio Segment [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	1,430	970
Commercial Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans past due	2,863	3,833
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans current and past due less than 30 days	158,276	160,668
Loans receivable	160,177	162,611
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	294	226
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans past due	1,607	1,717
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans current and past due less than 30 days	12,387	11,910
Loans receivable	12,701	11,962
Commercial Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	262	0
Commercial Portfolio Segment [Member] | Construction Loans [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans past due	52	52
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans current and past due less than 30 days	92,535	90,915
Loans receivable	92,842	91,856
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	100	152
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans past due	207	789
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans current and past due less than 30 days	52,142	53,263
Loans receivable	52,142	53,263
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] | Financial Asset, Equal to or 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	5,258	5,390
Loans receivable	6,938	7,146
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	689	487
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans past due	991	1,269
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans current and past due less than 30 days	7,031	7,104
Loans receivable	7,031	7,180
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	0	76
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans past due	0	0
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans current and past due less than 30 days	5,380	5,624
Loans receivable	5,471	5,659
Commercial Portfolio Segment [Member] | Agricultural Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	85	29
Commercial Portfolio Segment [Member] | Agricultural Loans [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans past due	6	6
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans current and past due less than 30 days	13,467	13,950
Loans receivable	13,467	13,950
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] | Financial Asset, Equal to or 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	16,919	16,991
Loans receivable	17,037	17,130
Consumer Portfolio Segment [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	79	93
Consumer Portfolio Segment [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans past due	$ 39	$ 46

XML

Note 7 - Loans - Contractual Aging of Nonaccrual Loans (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Nonaccrual loans	$ 9,441	$ 13,113
Non accrual Loans [Member]
Loans current and past due, nonaccrual	3,105	5,793
Nonaccrual loans	9,441	13,113
Non accrual Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Nonaccrual loans	1,188	1,166
Non accrual Loans [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Nonaccrual loans	$ 5,148	$ 6,154

XML

Note 7 - Loans - Aging of Troubled Debt Restructurings (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Loans current and past due less than 30 days	$ 810,031	$ 810,195
Nonaccrual loans	9,441	13,113
Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	8,311	8,308
Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans past due	7,050	9,060
Troubled Debt Restructuring [Member]
Loans current and past due less than 30 days	775	612
Nonaccrual loans	700	2,884
Troubled debt restructurings	1,550	3,539
Troubled Debt Restructuring [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Loans past due	1	43
Troubled Debt Restructuring [Member] | Financial Asset, Equal to or Greater than 90 Days Past Due [Member]
Loans past due	$ 74	$ 0

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Note 7 - Loans - Troubled Debt Restructurings (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2019 USD ($)	Mar. 31, 2018 USD ($)
Troubled debt restructurings, number of contracts	11	4
Troubled debt restructurings, post-modification recorded investment	$ 550	$ 162
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member] | Monthly Payment Reduction for 6 Months [Member]
Troubled debt restructurings, number of contracts	0	1
Troubled debt restructurings, post-modification recorded investment	$ 0	$ 80
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member] | Monthly Payment Reduction and Extended Maturity Date [Member]
Troubled debt restructurings, number of contracts	1	0
Troubled debt restructurings, post-modification recorded investment	$ 18	$ 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	0	2
Troubled debt restructurings, post-modification recorded investment	$ 0	$ 36
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Monthly Payment Reduction and Extended Maturity Date [Member]
Troubled debt restructurings, number of contracts	9	0
Troubled debt restructurings, post-modification recorded investment	$ 448	$ 0
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Extended Interest Payments for 6 Months [Member]
Troubled debt restructurings, number of contracts	0	1
Troubled debt restructurings, post-modification recorded investment	$ 0	$ 46
Commercial Portfolio Segment [Member] | Agricultural Loans [Member] | Monthly Payment Reduction and Extended Maturity Date [Member]
Troubled debt restructurings, number of contracts	1	2
Troubled debt restructurings, post-modification recorded investment	$ 84	$ 36

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Note 7 - Loans - Foreclosed Residential Real Estate (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Residential Portfolio Segment [Member]
Foreclosed residential real estate	$ 109	$ 64

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Note 7 - Loans - Mortgage Loans in Process of Foreclosure (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Residential Portfolio Segment [Member]
Residential real estate in process of foreclosure	$ 1,291	$ 1,097

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Note 8 - Borrowed Funds (Details Textual) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Federal Home Loan Bank of Pittsburgh [Member]
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged	$ 494,459,000	$ 495,143,000
Debt Instrument, Interest Rate, Stated Percentage		2.62%
Federal Home Loan Bank of Pittsburgh [Member] | Other Assets [Member]
Federal Home Loan Bank Stock	$ 5,027,000	$ 5,582,000
Securities Sold under Agreements to Repurchase [Member]
Debt, Weighted Average Interest Rate	0.10%	0.10%
Carrying Value of Securities Sold under Repurchase Agreements and Deposits Received for Securities Loaned, Total	$ 5,190,000	$ 5,890,000

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Note 8 - Borrowed Funds - Short-term Borrowings (Details) - USD ($) $ in Thousands	Mar. 31, 2019	Dec. 31, 2018
Short-term borrowings	$ 5,132	$ 12,853
Securities Sold under Agreements to Repurchase [Member]
Short-term borrowings	5,132	5,853
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Advances [Member]
Short-term borrowings	$ 0	$ 7,000

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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, 2019	Dec. 31, 2018
Long-term borrowings from FHLB - Pittsburgh	$ 32,844	$ 35,915
Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 1.83% [Member]
Long-term borrowings from FHLB - Pittsburgh	0	2,000
Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 1.95% [Member]
Long-term borrowings from FHLB - Pittsburgh	0	3,000
Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.15% [Member]
Long-term borrowings from FHLB - Pittsburgh	0	3,000
Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.24% [Member]
Long-term borrowings from FHLB - Pittsburgh	3,000	3,000
Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.3% [Member]
Long-term borrowings from FHLB - Pittsburgh	3,000	3,000
Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.42% [Member]
Long-term borrowings from FHLB - Pittsburgh	3,000	3,000
Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.41% [Member]
Long-term borrowings from FHLB - Pittsburgh	3,000	3,000
Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.48% [Member]
Long-term borrowings from FHLB - Pittsburgh	3,000	3,000
Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.53% [Member]
Long-term borrowings from FHLB - Pittsburgh	3,000	3,000
Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.75% [Member]
Long-term borrowings from FHLB - Pittsburgh	3,000	3,000
Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.77% [Member]
Long-term borrowings from FHLB - Pittsburgh	3,000	3,000
Federal Home Loan Bank Borrowings Loan Maturing in 2020 with Rate of 2.73% [Member]
Long-term borrowings from FHLB - Pittsburgh	3,000	3,000
Federal Home Loan Bank Borrowings Loan Maturing in 2020 with Rate of 2.66% [Member]
Long-term borrowings from FHLB - Pittsburgh	2,000	0
Federal Home Loan Bank Borrowings Loan Maturing in 2020 with Rate of 4.79% [Member]
Long-term borrowings from FHLB - Pittsburgh	221	271
Federal Home Loan Bank Borrowings Loan Maturing in 2022 with Rate of 2.46% [Member]
Long-term borrowings from FHLB - Pittsburgh	3,000	0
Federal Home Loan Bank Borrowings Loan Maturing in 2025 with Rate of 4.91% [Member]
Long-term borrowings from FHLB - Pittsburgh	$ 623	$ 644

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Note 8 - Borrowed Funds - Long-term Borrowing Maturities (Details) (Parentheticals)	Mar. 31, 2019	Dec. 31, 2018
Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 1.95% [Member]
Rate		1.95%
Federal Home Loan Bank of Pittsburgh [Member]
Rate		2.62%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 1.83% [Member]
Rate		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		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	2.24%	2.24%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.3% [Member]
Rate	2.30%	2.30%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.42% [Member]
Rate	2.42%	2.42%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.41% [Member]
Rate	2.41%	2.41%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.48% [Member]
Rate	2.48%	2.48%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.53% [Member]
Rate	2.53%	2.53%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.75% [Member]
Rate	2.75%	2.75%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Borrowings Loan Maturing in 2019 with Rate of 2.77% [Member]
Rate	2.77%	2.77%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Borrowings Loan Maturing in 2020 with Rate of 2.73% [Member]
Rate	2.73%	2.73%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Borrowings Loan Maturing in 2020 with Rate of 2.66% [Member]
Rate	2.66%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Borrowings Loan Maturing in 2020 with Rate of 4.79% [Member]
Rate	4.79%	4.79%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Borrowings Loan Maturing in 2022 with Rate of 2.46% [Member]
Rate	2.46%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Borrowings Loan Maturing in 2025 with Rate of 4.91% [Member]
Rate	4.91%	4.91%

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Note 9 - Stock-based Compensation Plans (Details Textual) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2019	Mar. 31, 2018	Dec. 31, 2019
Share-based Payment Arrangement, Expense	$ 229,000	$ 183,000
Forecast [Member]
Share-based Payment Arrangement, Expense			$ 880,000
Stock Incentive Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period	40,517
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	27,380
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	7,620
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 - Revenue Recognition (Details Textual) - USD ($)	Mar. 31, 2019	Dec. 31, 2018
Assets Under Management Fair Value	$ 924,080,000	$ 862,517,000
Percent of Trust Asset Revenue Earned Monthly	81.00%

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Note 12 - Subsequent Event - Merger - Monument Bancorp, Inc. (Details Textual)		3 Months Ended
	Apr. 01, 2019 USD ($) $ / shares	Jun. 30, 2019 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Mar. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)
Assets, Total			$ 1,290,000,000	$ 1,290,893,000
Loans and Leases Receivable, Gross, Total			825,392,000	827,563,000
Deposits, Total			1,039,911,000	1,033,772,000
Stockholders' Equity Attributable to Parent, Ending Balance			202,127,000	$ 197,368,000	$ 186,382,000	$ 188,443,000
Monument Bancorp, Inc [Member]
Assets, Total			376,000,000
Loans and Leases Receivable, Gross, Total			263,000,000
Deposits, Total			224,000,000
Stockholders' Equity Attributable to Parent, Ending Balance			27,000,000
Monument Bancorp, Inc [Member]
Business Combination, Acquisition Related Costs			311,000
Monument Bancorp, Inc [Member] | Forecast [Member] | Minimum [Member]
Business Combination, Acquisition Related Costs		$ 2,900,000
Monument Bancorp, Inc [Member] | Forecast [Member] | Maximum [Member]
Business Combination, Acquisition Related Costs		$ 3,500,000
Monument Bancorp, Inc [Member] | Professional Fees [Member]
Business Combination, Acquisition Related Costs			202,000
Monument Bancorp, Inc [Member] | Other Noninterest Expense [Member]
Business Combination, Acquisition Related Costs			$ 109,000
Subsequent Event [Member] | Monument Bancorp, Inc [Member]
Business Acquisition, Stock Exchange Ratio	1.0144
Business Acquisition, Share Price | $ / shares	$ 28.10
Percenatge of Acquiree's Shares Converted Into Cash	20.00%
Percenatge of Acquiree's Shares Converted Into Stock	80.00%
Percent of Acquired Company Shareholders Ownership of Acquirers Common Stock	9.40%
Business Combination, Consideration Transferred, Total	$ 42,700,000