10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2016

OR

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

For the transition period from _______________ to _________________________.

Commission file number: 0-16084

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)

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

Title of Each Class	Name of Exchange Where Registered
Common Stock Par Value $1.00	The NASDAQ Stock Market LLC

Securities registered pursuant to section 12(g) of the Act: None

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes  ¨   No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨   No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.          x

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

(Check one:)   Large accelerated filer  ¨   Accelerated filer    x  Non-accelerated filer    ¨   Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ¨   No  x

The aggregate market value of the registrant's common stock held by non-affiliates at June 30, 2016, the registrant’s most recently completed second fiscal quarter, was $237,079,156.

The number of shares of common stock outstanding at February 9, 2017 was 12,143,776.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s proxy statement for the annual meeting of its shareholders to be held April 20, 2017 are incorporated by reference into Parts III and IV of this report.

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TABLE OF CONTENTS

	Page(s)
Part I:
Item 1. Business	3-4
Item 1A. Risk Factors	4-7
Item 1B. Unresolved Staff Comments	7
Item 2. Properties	7-8
Item 3. Legal Proceedings	8
Item 4. Mine Safety Disclosure	8
Part II.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	8-11
Item 6. Selected Financial Data	12-13
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	14-39
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	39-40
Item 8. Financial Statements and Supplementary Data	41-87
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	88
Item 9A. Controls and Procedures	88-90
Item 9B. Other Information	91
Part III:
Item 10. Directors, Executive Officers and Corporate Governance	91
Item 11. Executive Compensation	91
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	91
Item 13. Certain Relationships and Related Transactions, and Director Independence	91
Item 14. Principal Accountant Fees and Services	91
Part IV:
Item 15. Exhibits and Financial Statement Schedules	92-94
Signatures	95

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PART I

ITEM 1. BUSINESS

Citizens & Northern Corporation (“Corporation”) is a holding company whose principal activity is community banking. The Corporation’s principal office is located in Wellsboro, Pennsylvania. The largest subsidiary is Citizens & Northern Bank (“C&N Bank” or the “Bank”). The Corporation’s other wholly-owned subsidiaries are Citizens & Northern Investment Corporation and Bucktail Life Insurance Company (“Bucktail”). Citizens & Northern Investment Corporation was formed in 1999 to engage in investment activities. Bucktail reinsures credit and mortgage life and accident and health insurance on behalf of C&N Bank.

C&N Bank is a Pennsylvania banking institution that was formed by the consolidation of Northern National Bank of Wellsboro and Citizens National Bank of Towanda on October 1, 1971. Subsequent mergers included: First National Bank of Ralston in May 1972; Sullivan County National Bank in October 1977; Farmers National Bank of Athens in January 1984; and First National Bank of East Smithfield in May 1990. In 2005, the Corporation acquired Canisteo Valley Corporation and its subsidiary, First State Bank, a New York State chartered commercial bank with offices in Canisteo and South Hornell, NY. In 2010, the First State Bank operations were merged into C&N Bank and Canisteo Valley Corporation was merged into the Corporation. On May 1, 2007, the Corporation acquired Citizens Bancorp, Inc. (“Citizens”), with banking offices in Coudersport, Emporium and Port Allegany, Pennsylvania. Citizens Trust Company, the banking subsidiary of Citizens, was merged with and into C&N Bank as part of the transaction. C&N Bank has held its current name since May 6, 1975, at which time C&N Bank changed its charter from a national bank to a Pennsylvania bank.

C&N Bank provides an extensive range of banking services, including deposit and loan products for personal and commercial customers. The Bank also maintains a trust division that provides a wide range of financial services, such as 401(k) plans, retirement planning, estate planning, estate settlements and asset management. In January 2000, C&N Bank formed a subsidiary, C&N Financial Services Corporation (“C&NFSC”). C&NFSC is a licensed insurance agency that provides insurance products to individuals and businesses. In 2001, C&NFSC added a broker-dealer division, which offers mutual funds, annuities, educational savings accounts and other investment products through registered agents. C&NFSC’s operations are not significant in relation to the total operations of the Corporation.

All phases of the Bank’s business are competitive. The Bank primarily competes in Tioga, Bradford, Sullivan, Lycoming, Potter, Cameron and McKean counties in Pennsylvania, and Steuben and Allegany counties in New York. The Bank competes with local commercial banks headquartered in our market area as well as other commercial banks with branches in our market area. Some of the banks that have branches in our market area are larger in overall size. With respect to lending activities and attracting deposits, the Bank also competes with savings banks, savings and loan associations, insurance companies, regulated small loan companies and credit unions. Also, the Bank competes with mutual funds for deposits. C&N Bank competes with insurance companies, investment counseling firms, mutual funds and other business firms and individuals for trust, investment management, brokerage and insurance services. The Bank is generally competitive with all financial institutions in our service area with respect to interest rates paid on time and savings deposits, service charges on deposit accounts and interest rates charged on loans. The Bank serves a diverse customer base, and is not economically dependent on any small group of customers or on any individual industry.

Major initiatives within the last 5 years included the following:

· in April 2012, re-opened the Athens, PA, facility, which was damaged by flooding in September 2011;

· in 2013, worked with consultants on projects which resulted in ongoing increases in revenues from service charges on deposit accounts, starting primarily in the fourth quarter 2013, and ongoing reductions in electronic funds processing expenses;

· in 2014, approved a treasury stock repurchase program for repurchase up to 622,500 shares of the Corporation’s common stock, or approximately 5% of the Corporation’s outstanding shares at July 16, 2014. In the first four months of 2016, the Corporation repurchased the remainder of the shares authorized under the program. In total, 622,500 shares were repurchased for a total cost of $12,140,000, at an average price of $19.50 per share;

· in 2015, began an organization-wide effort to enhance customer relationships, growth and profitability, including working with consultants on enhanced employee engagement and customer service training, and hiring additional lending personnel to provide more access to commercial and mortgage lending opportunities;

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· in April 2016, approved a new treasury stock repurchase program authorizing repurchase of 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; and

· in 2016, submitted application for regulatory approval to establish a loan production office in Elmira, New York. Formal approval has been received, and the office is scheduled to open in the first quarter 2017.

Virtually all of the Corporation’s banking offices are located in the “Marcellus Shale,” an area extending across portions of New York State, Pennsylvania, Ohio, Maryland, West Virginia and Virginia. In recent years, most of the Pennsylvania counties in which the Corporation operates were significantly affected by an upsurge in natural gas exploration, as technological developments made exploration of the Marcellus Shale commercially feasible. After a surge of activity in 2009 through most of 2011, the market price of natural gas declined, causing Marcellus Shale natural gas exploration activity to slow, though some activity has continued to occur throughout the Corporation’s market area. Through December 31, 2016, the Corporation has not experienced significant credit issues as a result of the expansion and subsequent reduction in Marcellus Shale-related activity.

At December 31, 2016, C&N Bank had total assets of $1,228,026,000, total deposits of $990,241,000, net loans outstanding of $743,362,000 and 291 full-time equivalent employees.

Most activities of the Corporation and its subsidiaries are regulated by federal or state agencies. The primary regulatory relationships are described as follows:

· The Corporation is a bank holding company formed under the provisions of Section 3 of the Federal Reserve Act. The Corporation is under the direct supervision of the Federal Reserve and must comply with the reporting requirements of the Federal Bank Holding Company Act.

· C&N Bank is a state-chartered, nonmember bank, supervised by the Federal Deposit Insurance Corporation and the Pennsylvania Department of Banking and Securities.

· C&NFSC is a Pennsylvania corporation. The Pennsylvania Department of Insurance regulates C&NFSC’s insurance activities. Brokerage products are offered through third party networking agreements.

· Bucktail is incorporated in the state of Arizona and supervised by the Arizona Department of Insurance.

A copy of the Corporation’s annual report on Form 10-K, quarterly reports on Form 10-Q, current events reports on Form 8-K, and amendments to these reports, will be furnished without charge upon written request to the Corporation’s Treasurer at P.O. Box 58, Wellsboro, PA 16901. Copies of these reports will be furnished as soon as reasonably possible, after they are filed electronically with the Securities and Exchange Commission. The information is also available through the Corporation’s web site at www.cnbankpa.com.

ITEM 1A. RISK FACTORS

The Corporation is subject to the many risks and uncertainties applicable to all banking companies, as well as risks specific to the Corporation’s geographic locations. Although the Corporation seeks to effectively manage risks, and maintains a level of equity that exceeds the banking regulatory agencies’ thresholds for being considered “well capitalized” (see Note 18 to the consolidated financial statements), management cannot predict the future and cannot eliminate the possibility of credit, operational or other losses. Accordingly, actual results may differ materially from management's expectations. Some of the Corporation’s significant risks and uncertainties are discussed below.

Credit Risk from Lending Activities - A significant source of risk is the possibility that losses will be sustained because borrowers, guarantors and related parties may fail to perform in accordance with the terms of their loan agreements. Most of the Corporation’s loans are secured, but some loans are unsecured. With respect to secured loans, the collateral securing the repayment of these loans may be insufficient to cover the obligations owed under such loans. Collateral values may be adversely affected by changes in economic, environmental and other conditions, including declines in the value of real estate, changes in interest rates, changes in monetary and fiscal policies of the federal government, wide-spread disease, terrorist activity, environmental contamination and other external events. In addition, collateral appraisals that are out of date or that do not meet industry recognized standards may create the impression that a loan is adequately collateralized when it is not. The Corporation has adopted underwriting and credit monitoring procedures and policies, including regular reviews of appraisals and borrower financial statements, that management believes are appropriate to mitigate the risk of loss. Also, as discussed further in the “Provision and Allowance for Loan Losses” section of Management’s Discussion and Analysis, the Corporation attempts to estimate the amount of losses that may be inherent in the portfolio through a quarterly evaluation process that includes several members of management and that addresses specifically identified problem loans, as well as other quantitative data and qualitative factors. Such risk management and accounting policies and procedures, however, may not prevent unexpected losses that could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity.

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Interest Rate Risk - Business risk arising from changes in interest rates is an inherent factor in operating a banking organization. The Corporation’s assets are predominantly long-term, fixed-rate loans and debt securities. Funding for these assets comes principally from shorter-term deposits and borrowed funds. Accordingly, there is an inherent risk of lower future earnings or decline in fair value of the Corporation’s financial instruments when interest rates change. Significant fluctuations in interest rates could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity. For additional information regarding interest rate risk, see Part II, Item 7A, "Quantitative and Qualitative Disclosures About Market Risk."

Breach of Information Security and Technology Dependence - The Corporation relies on software, communication, and information exchange on a variety of computing platforms and networks and over the Internet. Despite numerous safeguards, the Corporation cannot be certain that all of its systems are entirely free from vulnerability to attack or other technological difficulties or failures. The Corporation relies on the services of a variety of vendors to meet its data processing and communication needs. If information security is breached or other technology difficulties or failures occur, information may be lost or misappropriated, services and operations may be interrupted and the Corporation could be exposed to claims from customers. Any of these results could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity.

Limited Geographic Diversification - The Corporation grants commercial, residential and personal loans to customers primarily in the Pennsylvania counties of Tioga, Bradford, Sullivan, Lycoming, Potter, Cameron and McKean, and in Steuben and Allegany Counties in New York State. 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. Deterioration in economic conditions could adversely affect the quality of the Corporation's loan portfolio and the demand for its products and services, and accordingly, could have a material adverse effect on the Corporation's financial condition, results of operations or liquidity.

Competition - All phases of the Corporation’s business are competitive. Some competitors are much larger in total assets and capitalization than the Corporation, have greater access to capital markets and can offer a broader array of financial services. There can be no assurance that the Corporation will be able to compete effectively in its markets. Furthermore, developments increasing the nature or level of competition could have a material adverse effect on the Corporation's financial condition, results of operations or liquidity.

Government Regulation and Monetary Policy - The Corporation and the banking industry are subject to extensive regulation and supervision under federal and state laws and regulations. The requirements and limitations imposed by such laws and regulations limit the manner in which the Corporation conducts its business, undertakes new investments and activities and obtains financing. These regulations are designed primarily for the protection of the deposit insurance funds and consumers and not to benefit the Corporation's shareholders. Financial institution regulation has been the subject of significant legislation in recent years and may be the subject of further significant legislation in the future, none of which is in the control of the Corporation. Significant new laws or changes in, or repeals of, existing laws could have a material adverse effect on the Corporation's financial condition, results of operations or liquidity. Further, federal monetary policy, particularly as implemented through the Federal Reserve System, significantly affects short-term interest rates and credit conditions, and any unfavorable change in these conditions could have a material adverse effect on the Corporation's financial condition, results of operations or liquidity.

Mortgage Banking – In September 2009, the Corporation entered into an agreement to originate and sell residential mortgage loans to the secondary market through the MPF Xtra program administered by the Federal Home Loan Banks of Pittsburgh and Chicago. The Corporation’s mortgage sales activity under this program was not significant in 2009, but has subsequently increased. In 2014, the Corporation entered into an agreement and in June 2014 began to originate and sell residential mortgage loans to the secondary market through the MPFX Original program, which is also administered by the Federal Home Loan Banks of Pittsburgh and Chicago. At December 31, 2016, total residential mortgages sold and serviced through the two programs amounted to $163,296,000. The Corporation must strictly adhere to the MPF Xtra and MPFX Original program guidelines for origination, underwriting and servicing loans, and failure to do so may result in the Corporation being forced to repurchase loans or being dropped from the program. As of December 31, 2016, the total outstanding balance of residential mortgage loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $1,852,000. If the volume of such forced repurchases of loans were to increase significantly, or if the Corporation were to be dropped from the programs, it could have a material adverse effect on the Corporation’s financial condition, results of operations or liquidity.

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Securities Markets – The fair value of the Corporation's available-for-sale securities, as well as the revenues the Corporation earns from its Trust and Financial Management and brokerage services, are sensitive to price fluctuations and market events.

Declines in the values of the Corporation’s securities holdings, combined with adverse changes in the expected cash flows from these investments, could result in other-than-temporary impairment charges.

A portion of the Corporation's securities portfolio consists of obligations of states and political subdivisions (also known as municipal bonds). As discussed in more detail in the “Income Taxes” section of Management’s Discussion and Analysis, the Trump Administration and the U.S. Congress have recently been discussing the possibility of lowering corporate income tax rates. If corporate income tax rates were lowered, fully taxable-equivalent yields on tax-exempt securities (municipal bonds) would decrease from their recent levels, which may result in a reduction in the fair value of such securities held at December 31, 2016.

For additional information regarding debt securities, see the “Securities” section of Management’s Discussion and Analysis and Note 7 to the consolidated financial statements.

The Corporation's Trust and Financial Management revenue is determined, in part, from the value of the underlying investment portfolios. Accordingly, if the values of those investment portfolios decrease, whether due to factors influencing U.S. or international securities markets, in general, or otherwise, the Corporation's revenue could be negatively impacted. In addition, the Corporation's ability to sell its brokerage services is dependent, in part, upon consumers' level of confidence in securities markets.

The Federal Home Loan Bank of Pittsburgh - Through its subsidiary (C&N Bank), the Corporation is a member of the Federal Home Loan Bank of Pittsburgh (FHLB-Pittsburgh), which is one of 11 regional Federal Home Loan Banks. The Corporation has a line of credit with the FHLB-Pittsburgh that is secured by a blanket lien on its loan portfolio. Access to this line of credit is critical if a funding need arises. However, there can be no assurance that the FHLB-Pittsburgh will be able to provide funding when needed, nor can there be assurance that the FHLB-Pittsburgh will provide funds specifically to the Corporation should its financial condition deteriorate and/or regulators prevent that access. The inability to access this source of funds could have a materially adverse effect on the Corporation’s financial flexibility if alternate financing is not available at acceptable interest rates. The failure of the FHLB-Pittsburgh or the FHLB system in general, may materially impair the Corporation’s ability to meet short- and long-term liquidity needs or to meet growth plans.

The Corporation owns common stock of the FHLB-Pittsburgh in order to qualify for membership in the FHLB system and access services from the FHLB-Pittsburgh. The FHLB-Pittsburgh faces a variety of risks in its operations including interest rate risk, counterparty credit risk, and adverse changes in its regulatory framework. In addition, the 11 Federal Home Loan Banks are jointly liable for the consolidated obligations of the FHLB system. To the extent that one FHLB cannot meet its obligations, other FHLBs can be called upon to make required payments. Such risks affecting the FHLB-Pittsburgh could adversely impact the value of the Corporation’s investment in the common stock of the FHLB-Pittsburgh and/or affect its access to credit.

Soundness of Other Financial Institutions - In addition to the FHLB-Pittsburgh, the Corporation maintains other credit facilities that provide it with additional liquidity. These facilities include secured and unsecured borrowings from the Federal Reserve Bank and third-party commercial banks. The Corporation believes that it maintains a strong liquidity position and that it is well positioned to withstand foreseeable market conditions. However, legal agreements with counterparties typically include provisions allowing them to restrict or terminate the Corporation’s access to these credit facilities with or without advance notice and at their sole discretion.

Financial institutions are interconnected as a result of trading, clearing, counterparty, and other relationships. Financial market conditions have been negatively impacted in the past and such disruptions or adverse changes in the Corporation's results of operations or financial condition could, in the future, have a negative impact on available sources of liquidity. Such a situation may arise due to circumstances that are outside the Corporation’s control, such as general market disruptions or operational problems affecting the Corporation or third parties. The Corporation’s efforts to monitor and manage liquidity risk may not be successful or sufficient to deal with dramatic or unanticipated reductions in available liquidity. In such events, the Corporation’s cost of funds may increase, thereby reducing net interest income, or the Corporation may need to sell a portion of its securities and/or loan portfolio, which, depending upon market conditions, could necessitate realizing a loss.

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FDIC Insurance Assessments - In 2008 and 2009, higher levels of bank failures dramatically increased the resolution costs of the Federal Deposit Insurance Corporation, or the FDIC, and depleted the deposit insurance fund. In addition, the FDIC and the U.S. Congress increased federal deposit insurance coverage, placing additional stress on the deposit insurance fund. In order to maintain a strong funding position and restore reserve ratios of the deposit insurance fund, in 2009 the FDIC increased assessment rates. As a result of lowering assessment levels for the Corporation and other US banks, the Corporation’s 2016 FDIC assessment expense decreased to $488,000 from $603,000 in 2015. Although the Corporation’s total expenses from FDIC assessments have steadily decreased from $2,092,000 in 2009, the Corporation is generally unable to control the cost of the premiums. If a significant number of bank or financial institution failures occur, the Corporation may be required to pay higher FDIC premiums. Future increases in FDIC insurance premiums or additional special assessments may materially adversely affect the Corporation’s results of operations.

Bank Secrecy Act and Related Laws and Regulations - These laws and regulations have significant implications for all financial institutions. They increase due diligence requirements and reporting obligations for financial institutions, create new crimes and penalties, and require the federal banking agencies, in reviewing merger and other acquisition transactions, to consider the effectiveness of the parties to such transactions in combating money laundering activities. Even innocent noncompliance and inconsequential failure to follow the regulations could result in significant fines or other penalties, which could have a material adverse impact on the Corporation's financial condition, results of operations or liquidity.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

The Bank owns each of its properties, except for the branch facilities located at 130 Court Street, Williamsport, PA, and at 2 East Mountain Avenue, South Williamsport, PA, which are leased. All of the properties are in good condition. None of the owned properties are subject to encumbrance.

A listing of properties is as follows:

Main administrative offices:

90-92 Main Street	or	10 Nichols Street
Wellsboro, PA  16901		Wellsboro, PA  16901

Branch offices – Citizens & Northern Bank:

428 S. Main Street	514 Main Street	2 East Mountain Avenue **
Athens, PA  18810	Laporte, PA  18626	South Williamsport, PA  17702
10 North Main Street	4534 Williamson Trail	41 Main Street
Coudersport, PA  16915	Liberty, PA  16930	Tioga, PA  16946
111 W. Main Street	1085 S. Main Street	428 Main Street
Dushore, PA  18614	Mansfield, PA  16933	Towanda, PA  18848
563 Main Street	612 James Monroe Avenue	64 Elmira Street
East Smithfield, PA 18817	Monroeton, PA  18832	Troy, PA  16947
104 W. Main Street	3461 Route 405 Highway	90-92 Main Street
Elkland, PA  16920	Muncy, PA  17756	Wellsboro, PA  16901
135 East Fourth Street	100 Maple Street	1510 Dewey Avenue
Emporium, PA  15834	Port Allegany, PA  16743	Williamsport, PA  17701
230 Railroad Street	24 Thompson Street	130 Court Street **
Jersey Shore, PA  17740	Ralston, PA  17763	Williamsport, PA  17701
102 E. Main Street	1827 Elmira Street	1467 Golden Mile Road
Knoxville, PA  16928	Sayre, PA  18840	Wysox, PA  18854
3 Main Street	6250 County Rte 64
Canisteo, NY  14823	Hornell, NY  14843

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Loan production office of Citizens & Northern Bank (opening first quarter 2017):

250 East Water Street

Elmira, NY 14901

Facilities management office:

13 Water Street

Wellsboro, PA 16901

** designates leased branch facility

ITEM 3. LEGAL PROCEEDINGS

The Corporation and the 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 4. MINE SAFETY DISCLOSURE

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

QUARTERLY SHARE DATA

Trades of the Corporation’s stock are executed through various brokers who maintain a market in the Corporation’s stock. The Corporation’s stock is listed on the NASDAQ Capital Market with the trading symbol CZNC. As of December 31, 2016, there were 2,260 shareholders of record of the Corporation’s common stock.

The following table sets forth the high and low sales prices of the common stock during 2016 and 2015.

			2016						2015
					Dividend						Dividend
					Declared						Declared
					per						per
	High		Low		Quarter		High		Low		Quarter
First quarter	$	20.99	$	19.26	$	0.26	$	21.50	$	19.01	$	0.26
Second quarter		21.00		19.40		0.26		21.17		19.16		0.26
Third quarter		22.67		20.00		0.26		20.73		19.25		0.26
Fourth quarter		26.57		20.54		0.26		21.45		19.07		0.26

Future dividend payments will depend upon maintenance of a strong financial condition, future earnings and capital and regulatory requirements. Also, the Corporation and C&N Bank are subject to restrictions on the amount of dividends that may be paid without approval of banking regulatory authorities. These restrictions are described in Note 18 to the consolidated financial statements.

Effective July 17, 2014, the Corporation established a treasury stock repurchase program authorizing repurchase of up to 622,500 shares of the Corporation’s common stock, or approximately 5% of the Corporation’s issued and outstanding shares at July 16, 2014. As permitted by securities laws and other legal requirements and subject to market conditions and other factors, purchases under the program could be made from time to time in the open market at prevailing prices, or through privately negotiated transactions. In the first four months of 2016, the Corporation repurchased the remainder of the shares authorized under the program. In total, 622,500 shares were repurchased for a total cost of $12,140,000, at an average price of $19.50 per share.

Effective April 21, 2016, the Corporation’s Board of Directors approved a new treasury stock repurchase program. Under the newly approved stock repurchase program, the Corporation is authorized to repurchase up to 600,000 shares of the Corporation's common stock or slightly less than 5% of the Corporation's issued and outstanding shares at April 19, 2016. Consistent with the previous program, 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.

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

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

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PERFORMANCE GRAPH

Set forth below is a chart comparing the Corporation’s cumulative return to stockholders against the cumulative return of the Russell 2000 and a Peer Group Index of similar banking organizations selected by the Corporation for the five-year period commencing December 31, 2011 and ended December 31, 2016. The index values are market-weighted dividend-reinvestment numbers, which measure the total return for investing $100.00 five years ago. This meets Securities & Exchange Commission requirements for showing dividend reinvestment share performance over a five-year period and measures the return to an investor for placing $100.00 into a group of bank stocks and reinvesting any and all dividends into the purchase of more of the same stock for which dividends were paid.

 

			Period Ending
Index	12/31/11		12/31/12		12/31/13		12/31/14		12/31/15		12/31/16
Citizens & Northern Corporation		100.00		106.83		122.52		129.48		138.55		181.75
Russell 2000		100.00		116.35		161.52		169.43		161.95		196.45
CZNC Peer Group Index*		100.00		124.14		157.02		172.35		180.02		253.70

The Corporation’s peer group consists of all publicly traded (who file financial statements with the Securities & Exchange Commission) commercial banks and thrifts within New Jersey, New York, Ohio and Pennsylvania with total assets between $750 million and $3.5 billion as of September 30, 2016.

The data for this graph was obtained from SNL Financial LC, Charlottesville, VA.

10

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth information concerning the Stock Incentive Plan and Independent Directors Stock Incentive Plan, both of which have been approved by the Corporation’s shareholders. The figures shown in the table below are as of December 31, 2016.

					Number of
	Number of		Weighted-		Securities
	Securities to be		average		Remaining
	Issued Upon		Exercise		for Future
	Exercise of		Price of		Issuance Under
	Outstanding		Outstanding		Equity Compen-
	Options		Options		sation Plans
Equity compensation plans  approved by shareholders		202,037	$	18.58		302,550
Equity compensation plans  not approved by shareholders		0		N/A		0

More details related to the Corporation’s equity compensation plans are provided in Notes 1 and 13 to the consolidated financial statements.

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ITEM 6. SELECTED FINANCIAL DATA

	As of or for the Year Ended December 31,
INCOME STATEMENT (In Thousands)	2016		2015		2014		2013			2012
Interest and fee income	$	44,098	$	44,519	$	46,009	$	48,914		$	56,632
Interest expense		3,693		4,602		5,122		5,765			9,031
Net interest income		40,405		39,917		40,887		43,149			47,601
Provision for loan losses		1,221		845		476		2,047			288
Net interest income after provision for loan losses		39,184		39,072		40,411		41,102			47,313
Noninterest income excluding securities gains		15,511		15,478		15,420		16,451			16,383
Net impairment losses recognized in earnings from
available-for-sale securities		0		0		0		(25	)		(67	)
Net realized gains on available-for-sale securities		1,158		2,861		1,104		1,743			2,749
Loss on prepayment of debt		0		2,573		0		1,023			2,333
Noninterest expense excluding loss on prepayment of debt		34,744		33,030		34,157		33,471			32,914
Income before income tax provision		21,109		21,808		22,778		24,777			31,131
Income tax provision		5,347		5,337		5,692		6,183			8,426
Net income	$	15,762	$	16,471	$	17,086	$	18,594		$	22,705
PER COMMON SHARE:
Basic earnings per share	$	1.30	$	1.35	$	1.38	$	1.51		$	1.86
Diluted earnings per share	$	1.30	$	1.35	$	1.38	$	1.50		$	1.85
Cash dividends declared per share	$	1.04	$	1.04	$	1.04	$	1.00		$	0.84
Book value per common share at period-end	$	15.36	$	15.39	$	15.34	$	14.49		$	14.89
Tangible book value per common share at period-end	$	14.37	$	14.41	$	14.36	$	13.51		$	13.91
Weighted average common shares outstanding - basic		12,098,129		12,211,941		12,390,067		12,352,383			12,235,748
Weighted average common shares outstanding - diluted		12,128,364		12,233,773		12,412,050		12,382,790			12,260,208
END OF PERIOD BALANCES (Dollars In Thousands)
Available-for-sale securities	$	395,077	$	420,290	$	516,807	$	482,658		$	472,577
Gross loans		751,835		704,880		630,545		644,303			683,910
Allowance for loan losses		8,473		7,889		7,336		8,663			6,857
Total assets		1,242,292		1,223,417		1,241,963		1,237,695			1,286,907
Deposits		983,843		935,615		967,989		954,516			1,006,106
Borrowings		64,629		92,263		78,597		96,723			89,379
Stockholders' equity		186,008		187,487		188,362		179,472			182,786
Common shares outstanding		12,113,228		12,180,623		12,279,980		12,390,063			12,274,035
AVERAGE BALANCES (In Thousands)
Total assets		1,229,866		1,243,209		1,239,897		1,237,096			1,305,163
Earning assets		1,147,549		1,159,298		1,155,401		1,145,340			1,199,538
Gross loans		723,076		657,727		627,753		656,495			700,241
Deposits		970,447		968,201		965,418		964,031			1,008,469
Stockholders' equity		188,373		188,905		185,469		181,412			175,822

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ITEM 6. SELECTED FINANCIAL DATA (Continued)

	As of or for the Year Ended December 31,
	2016			2015			2014			2013			2012
KEY RATIOS
Return on average assets		1.28	%		1.32	%		1.38	%		1.50	%		1.74	%
Return on average equity		8.37	%		8.72	%		9.21	%		10.25	%		12.91	%
Average equity to average assets		15.32	%		15.19	%		14.96	%		14.66	%		13.47	%
Net interest margin (1)		3.76	%		3.69	%		3.80	%		4.05	%		4.26	%
Efficiency (2)		59.22	%		56.66	%		57.59	%		53.27	%		48.82	%
Cash dividends as a % of diluted earnings per share		80.00	%		77.04	%		75.36	%		66.67	%		45.41	%
Tier 1 leverage		14.27	%		14.31	%		13.89	%		13.78	%		12.53	%
Tier 1 risk-based capital		22.48	%		23.29	%		26.26	%		25.15	%		22.86	%
Total risk-based capital		23.60	%		24.40	%		27.60	%		26.60	%		24.01	%
Tangible common equity/tangible assets		14.15	%		14.49	%		14.34	%		13.66	%		13.39	%
Nonperforming assets/total assets		1.43	%		1.31	%		1.34	%		1.53	%		0.82	%
Nonperforming loans/total loans		2.07	%		2.09	%		2.45	%		2.80	%		1.41	%
Allowance for loan losses/total loans		1.13	%		1.12	%		1.16	%		1.34	%		1.00	%
Net charge-offs/average loans		0.09	%		0.04	%		0.29	%		0.04	%		0.16	%

(1) Rates of return on tax-exempt securities and loans are calculated on a fully-taxable equivalent basis.

(2) The efficiency ratio is calculated by dividing: (a) total noninterest expense excluding losses from prepayment of debt, by (b) the sum of net interest income (including income from tax-exempt securities and loans on a fully-taxable equivalent basis) and noninterest income excluding securities gains or losses.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

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

· changes in general economic conditions

· legislative or regulatory changes

· downturn in demand for loan, deposit and other financial services in the Corporation’s market area

· increased competition from other banks and non-bank providers of financial services

· technological changes and increased technology-related costs

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

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

EARNINGS OVERVIEW

In 2016, net income totaled $15,762,000, or $1.30 per common share - basic and diluted, as compared to $1.35 per share – basic and diluted in 2015 and $1.38 per share - basic and diluted in 2014. The results for 2016 represented a return on average assets of 1.28% and a return on average equity of 8.37%.

2016 vs. 2015

Net income per share – diluted for 2016 was 3.7% lower than in 2015. Some of the more significant highlights related to annual earnings in 2016 as compared to 2015 are as follows:

· Net interest income was $488,000 (1.2%) higher than the comparable total for 2015. The net interest margin was 3.76%, which was 0.07% higher than the margin for 2015, reflecting the benefits of a lower cost of borrowed funds and a more favorable mix of earning assets. The average balance of total borrowed funds was $62,516,000 at an average interest rate of 2.57% in 2016, down from average borrowings of $77,642,000 at an average interest rate of 3.45% in 2015. Average total loans outstanding were higher by $65.3 million (9.9%) in 2016 as compared to 2015, while average total available-for-sale securities were lower by $74.2 million. Average total deposits increased $2.2 million (0.2%).

· The provision for loan losses was $1,221,000 in 2016, an increase of $376,000 over 2015. In 2016, the provision included the impact of increasing the allowance for loan losses for the effects of loan growth and slight increases in net charge-off experience and qualitative factors used in determining the collectively evaluated portion of the allowance. In comparison, in 2015 the provision also reflected the effects of loan growth, but the qualitative factors used in determining a portion of the collectively determined allowance decreased slightly during the period. Also in 2016, the provision included an increase of $148,000 as compared to 2015 from changes in specific allowances on loans individually identified as impaired, adjusted for the impact of net charge-offs.

· Total noninterest revenue for 2016 increased $33,000 (0.2%) over 2015. Net gains from sales of loans increased $294,000 (40.0%), reflecting higher volume of sales, and Trust and Financial Management revenue increased $134,000 (2.9%). Other operating income increased $35,000 (2.1%), including an increase of $148,000 from redemptions of tax credits and increases in lending-related fees of $80,000, while this category included a gain of $212,000 from a split-dollar life insurance policy in 2015. Service charges on deposit accounts decreased $169,000 (3.5%) in 2016, reflecting a reduction in consumer overdraft volume. The fair value of mortgage servicing rights decreased $282,000 in 2016, which was a larger decrease by $120,000 as compared to 2015. Brokerage revenue decreased $83,000 (9.9%), as the volume of sales of annuities declined.

14

· In 2016, realized gains from securities totaled $1,158,000, including gains from sales of bank stocks of $1,125,000. In 2015, the Corporation generated gains from sales of securities totaling $2,861,000, including gains from sales of bank stocks of $2,220,000, and also incurred losses of $2,573,000 from prepayments of a borrowing in the second and fourth quarters totaling $34 million. In the fourth quarter 2016, the Corporation completed its program of bank stock sales that had begun in 2015, and had no remaining investments in bank stocks at December 31, 2016.

· Noninterest expenses, excluding losses on prepayment of borrowings, in 2016 exceeded the amount for 2015 by $1,714,000 (5.2%). Salaries and wages expense increased $729,000 (5.0%). Several new positions were established in the latter portion of 2015 and early 2016, including new positions established for lending, lending support, information technology, training, human resources and marketing functions. Professional fees expense increased $488,000, including increases related to employee sales and service training, information technology and marketing. Other operating expense increased $399,000 (7.8%), including increases in other real estate expenses of $123,000, donations and public relations-related expenses of $94,000 and education and training-related expenses of $60,000. Also, other operating expense was reduced in 2015 by $69,000 as a result of a recovery of sales tax previously paid.

· The provision for income tax totaled $5,347,000 in 2016, or an effective tax rate of 25.3% of pre-tax income. In comparison, the provision for income tax of $5,337,000 in 2015 represented a 24.5% effective rate. The higher effective tax rate in 2016 included the impact of a $300,000 reduction in tax-exempt interest income and an increase in the provision for state income tax of $64,000 that resulted mainly from a catch-up adjustment to increase New York State taxes for the effect of changes in the tax methodology that first became effective in 2015.

2015 vs. 2014

Basic and diluted net income of $1.35 per share for 2015 was 2.2% lower than in 2014. Some of the more significant highlights related to annual earnings in 2015 as compared to 2014 are as follows:

· Net interest income totaled $39,917,000 in 2015, down $970,000 (2.4%) from 2014. In 2015, yields earned on securities and loans fell by more than the corresponding drop in interest rates paid on deposits and borrowings. The net interest margin was 3.69% in 2015, down from 3.80% in 2014.

· The provision for loan losses was $845,000 in 2015, up from $476,000 in 2014. The higher 2015 provision for loan losses reflected an increase in outstanding loans in the year which resulted in an increase in the collectively determined portion of the allowance for loan losses. Gross loans at December 31, 2015 were $74.3 million, or 11.8%, higher than the balance a year earlier.

· In 2015, noninterest revenue, excluding net realized gains on available-for-sale securities, totaled $15,478,000, which was up slightly from $15,420,000 in 2014 The most significant changes in components of noninterest revenue for the year ended December 31, 2015 as compared to the corresponding period in 2014 included the following: (1) decrease of $161,000 (3.2%) in service charges on deposit accounts, primarily as a result of lower overdraft fees; (2) reduction of $135,000 as the fair value of servicing rights declined $162,000 in 2015 as compared to $27,000 in 2014; (3) net increase in revenues from Trust and brokerage services of $74,000 (1.4%); and (4) an increase in other operating income of $380,000, including a gain of $212,000 from a life insurance arrangement in which benefits were split between the Corporation and the heirs of a former employee.

· Realized gains from available-for-sale securities totaled $2,861,000 and losses from prepayment of borrowings totaled $2,573,000 in 2015, while in 2014 realized gains from securities totaled $1,104,000 and there were no losses from prepayment of borrowings. In 2015, the Corporation sold a significant portion of its marketable equity securities portfolio, which was made up of bank stocks, generating realized gains of $2,220,000. Losses from prepayment of borrowings stemmed from pay-downs made in May and December 2015 totaling $34,000,000 on a long-term repurchase agreement with an interest rate of 4.265%.

15

· In 2015, noninterest expenses, excluding losses on prepayment of borrowings; totaled $33,030,000, which was $1,127,000 (3.3%) lower than total 2014 noninterest expenses. The reduction in noninterest expenses for the year ended December 31, 2015 as compared to the corresponding period in 2014 included the following: (1) a reduction in salaries and wages expenses of $439,000, mainly due to severance expenses in 2014; (2) a reduction in employee benefit-related expenses of $349,000 due to lower employee health insurance expense as a result of lower claims; (3) a reduction in professional fees expense of $161,000, as 2014 included expenses associated with an executive search; (4) a reduction in Pennsylvania shares tax expense of $102,000; and (5) a reduction in other expenses of $282,000, including reductions in expenses from loan collections and other real estate properties.

More detailed information concerning fluctuations in the Corporation’s earnings results are provided in other sections of Management’s Discussion and Analysis.

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. 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. Management believes the allowance for loan losses is adequate and reasonable. Notes 1 and 8 to the consolidated financial statements provide an overview of the process management uses for evaluating and determining the allowance for loan losses, and additional discussion of the 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 7 to the 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 I, II and III include information regarding the Corporation’s net interest income in 2016, 2015, and 2014. 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 tables.

The calculations of fully taxable-equivalent yields on tax-exempt loans and securities in Tables I, II and III reflect inherent tax benefit based on the Corporation’s marginal federal income tax rate of 35% for all periods presented. As discussed in more detail in the “Income Taxes” section of Management’s Discussion and Analysis, the Trump Administration and the U.S. Congress have recently been discussing the possibility of lowering corporate income tax rates. If corporate income tax rates were lowered, fully taxable-equivalent yields on tax-exempt loans and securities held at December 31, 2016 would decrease from their recent levels.

16

2016 vs. 2015

Fully taxable equivalent net interest income was $43,157,000 in 2016, which was $338,000 (0.8%) higher than in 2015. As shown in Table III, in 2016 compared to 2015, net changes in volume had the effect of increasing net interest income $2,754,000, and interest rate changes had the effect of decreasing net interest income $2,416,000. The most significant components of the volume-related increase in net interest income in 2016 was an increase in interest income of $3,255,000 attributable to an increase in the balance of loans receivable and a decrease in interest expense of $991,000 attributable to a reduction in the balance of borrowed funds, partially offset by a volume-related decrease in interest income on available-for-securities of $1,542,000. The most significant components of the rate-related change in net interest income in 2016 were a decrease in interest income of $1,560,000 attributable to lower rates earned on loans receivable and a decrease of $758,000 in interest income on available-for-sale securities. As presented in Table II, the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) was 3.63% in 2016 as compared to 3.54% in 2015.

INTEREST INCOME AND EARNING ASSETS

Interest income totaled $46,850,000 in 2016, a decrease of 1.2% from 2015. Although yields on securities and loans fell, overall yield on earning assets dropped only 0.01% due to a change in mix of earning assets to increase loans and decrease securities. Interest and fees on loans receivable increased $1,695,000, or 5.0%, while interest on available-for-sale securities decreased $2,300,000, or 17.1%. The average balance of gross loans receivable increased 9.9% to $723,076,000 in 2016 from $657,727,000 in 2015. The Corporation experienced significant growth in all loan categories, particularly in participation loans purchased of $19,664,000, residential mortgages of $16,405,000, commercial real estate loans of $13,452,000, and tax free municipal loans of $6,351,000. The Corporation’s average rate of return on loans receivable declined to 4.92% in 2016 from 5.15% in 2015 as average interest rates on new loans are lower, reflecting recent market conditions.

As indicated in Table II, average available-for-sale securities (at amortized cost) totaled $404,979,000 in 2016, a decrease of $74,169,000 (15.5%) from 2015. Funds generated from the net decrease in the Corporation’s available-for-sale securities portfolio were used, in part, to fund the loan growth described above. The Corporation’s yield on securities was lower in 2016 than in 2015, primarily due to higher-yielding securities maturing as the portfolio size was reduced. The average rate of return on available-for-sale securities was 2.75% in 2016 and 2.81% in 2015.

The average balance of interest-bearing due from banks decreased to $19,022,000 in 2016 from $22,201,000 in 2015. This has consisted primarily of balances held by the Federal Reserve and also includes other overnight deposits and FDIC-insured certificates of deposit issued by other financial institutions.

INTEREST EXPENSE AND INTEREST-BEARING LIABILITIES

Interest expense fell $909,000, or 19.8%, to $3,693,000 in 2016 from $4,602,000 in 2015. Table II shows that the overall cost of funds on interest-bearing liabilities fell to 0.45% in 2016 from 0.55% in 2015.

Total average deposits (interest-bearing and noninterest-bearing) increased slightly (0.2%) to $970,447,000 in 2016 from $968,201,000 in 2015. Decreases in the average balances of certificates of deposit and Individual Retirement Accounts were offset by increases in average balances of interest checking, money market accounts, savings accounts and noninterest-bearing demand deposits. The average rate paid on interest-bearing deposits increased slightly to 0.28% in 2016 from 0.26% in 2015.

Total average borrowed funds decreased $15,126,000 to $62,516,000 in 2016 from $77,642,000 in 2015. The average rate on borrowed funds was 2.57% in 2016 compared to 3.45% in 2015, reflecting a $27,604,000 reduction in the average balance of higher-rate, long-term borrowings resulting from prepayment in the second and fourth quarters of 2015 of a long-term repurchase agreement borrowing with an interest rate of 4.265%. The average balance of short-term borrowings increased $12,478,000 in 2016 over 2015, as average overnight borrowings were higher in 2016 and the Corporation funded the pay-off of the long-term repurchase agreement with a series of short-term advances from the FHLB-Pittsburgh that matured over the course of 2016.

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2015 vs. 2014

Fully taxable equivalent net interest income was $42,819,000 in 2015, which was $1,074,000 (2.4%) lower than in 2014. As shown in Table III, in 2015 compared to 2014, interest rate changes had the effect of decreasing net interest income $2,283,000, and net changes in volume had the effect of increasing net interest income $1,209,000. The most significant components of the rate-related change in net interest income in 2015 were a decrease in interest income of $1,957,000 attributable to lower rates earned on loans receivable and a decrease of $468,000 in interest income on available-for-sale securities. The most significant components of the volume-related increase in net interest income in 2015 was an increase in interest income of $1,544,000 attributable to an increase in the balance of loans receivable, a decrease in interest expense of $270,000 attributable to a reduction in the balance of borrowed funds, and a decrease in interest expense of $117,000 attributable to a reduction in the balance of interest-bearing deposits (primarily certificates of deposit), partially offset by a volume-related decrease in interest income on available-for-securities of $681,000. As presented in Table II, the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) was 3.54% in 2015 as compared to 3.63% in 2014.

INTEREST INCOME AND EARNING ASSETS

Interest income totaled $47,421,000 in 2015, a decrease of 3.2% from 2014. Interest and fees on loans receivable decreased $413,000, or 1.2%. As indicated in Table II, average available-for-sale securities (at amortized cost) totaled $479,148,000 in 2015, a decrease of $15,786,000 (3.2%) from 2014. The net decrease in the Corporation’s available-for-sale securities portfolio consisted of decreases in tax-exempt municipal securities, U.S. Government mortgage-backed securities, U.S. Government agency bonds, and equity securities. These decreases were partially offset by increases in the balances of collateralized mortgage obligations and taxable municipal securities. The Corporation’s yield on securities was lower in 2015 than in 2014, primarily because of low market interest rates on new investments combined with higher-yielding securities maturing. The average rate of return on available-for-sale securities was 2.81% for 2015 and 2.95% in 2014.

The average balance of gross loans receivable increased 4.8% to $657,727,000 in 2015 from $627,753,000 in 2014. The Corporation experienced growth in the balances of tax free municipal loans, residential mortgages and participation loans purchased. These increases were partially offset by decreases in balances of commercial real estate loans. The Corporation’s average rate of return on loans receivable declined to 5.15% in 2015 from 5.46% in 2014.

The average balance of interest-bearing due from banks decreased to $22,201,000 in 2015 from $32,510,000 in 2014. This has consisted primarily of balances held by the Federal Reserve and also includes other overnight deposits and FDIC-insured certificates of deposit issued by other financial institutions.

INTEREST EXPENSE AND INTEREST-BEARING LIABILITIES

Interest expense fell $520,000, or 10.2%, to $4,602,000 in 2015 from $5,122,000 in 2014. Table II shows that the overall cost of funds on interest-bearing liabilities fell to 0.55% in 2015 from 0.61% in 2014.

Total average deposits (interest-bearing and noninterest-bearing) increased 0.3%, to $968,201,000 in 2015 from $965,418,000 in 2014. Decreases in the average balances of certificates of deposit, Individual Retirement Accounts, and money market accounts were partially offset by increases in average balances of interest checking, savings accounts and non-interest bearing demand deposits. The average rate paid on interest-bearing deposits fell slightly to 0.26% in 2015 from 0.28% in 2014.

Total average borrowed funds decreased $2,298,000 to $77,642,000 in 2015 from $79,940,000 in 2014. The average rate on borrowed funds was 3.45% in 2015 compared to 3.70% in 2014, reflecting a $6,982,000 reduction in the average balance of higher-rate, long-term borrowings resulting from pre-payment of a long-term repurchase agreement borrowing with an interest rate of 4.265%. The Corporation paid off $10 million of principal on this borrowing in May 2015, and $24 million in December 2015, leaving no remaining balance outstanding at December 31, 2015. (The pre-payment of long-term borrowings is described in the Earnings Overview section.) The average balance of short-term borrowings increased $4,684,000 in 2015 over 2014, as average overnight borrowings were higher in 2015 and the Corporation funded the pay-off of the long-term repurchase agreement in December 2015 with funds from a series of short-term advances from the FHLB-Pittsburgh totaling $25,072,000 at an average rate of 0.86%.

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TABLE I - ANALYSIS OF INTEREST INCOME AND EXPENSE

	Years Ended December 31,						Increase/(Decrease)
(In Thousands)	2016		2015		2014		2016/2015			2015/2014
INTEREST INCOME
Available-for-sale securities:
Taxable	$	5,916	$	7,587	$	8,028	$	(1,671	)	$	(441	)
Tax-exempt		5,240		5,869		6,577		(629	)		(708	)
Total available-for-sale securities		11,156		13,456		14,605		(2,300	)		(1,149	)
Interest-bearing due from banks		116		93		125		23			(32	)
Loans held for sale		27		16		16		11			0
Loans receivable:
Taxable		32,827		31,311		32,127		1,516			(816	)
Tax-exempt		2,724		2,545		2,142		179			403
Total loans receivable		35,551		33,856		34,269		1,695			(413	)
Total Interest Income		46,850		47,421		49,015		(571	)		(1,594	)
INTEREST EXPENSE
Interest-bearing deposits:
Interest checking		293		214		216		79			(2	)
Money market		342		299		286		43			13
Savings		133		128		121		5			7
Certificates of deposit		882		831		1,069		51			(238	)
Individual Retirement Accounts		434		451		470		(17	)		(19	)
Other time deposits		1		1		1		0			0
Total interest-bearing deposits		2,085		1,924		2,163		161			(239	)
Borrowed funds:
Short-term		155		32		9		123			23
Long-term		1,453		2,646		2,950		(1,193	)		(304	)
Total borrowed funds		1,608		2,678		2,959		(1,070	)		(281	)
Total Interest Expense		3,693		4,602		5,122		(909	)		(520	)
Net Interest Income	$	43,157	$	42,819	$	43,893	$	338		$	(1,074	)

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

(2) Fees on loans are included with interest on loans and amounted to $1,000,000 in 2016, $1,004,000 in 2015, and $1,013,000 in 2014.

19

TABLE II - ANALYSIS OF AVERAGE DAILY BALANCES AND RATES

(Dollars in Thousands)

	Year						Year						Year
	Ended			Rate of			Ended			Rate of			Ended			Rate of
	12/31/2016			Return/			12/31/2015			Return/			12/31/2014			Return/
	Average			Cost of			Average			Cost of			Average			Cost of
	Balance			Funds %			Balance			Funds %			Balance			Funds %
EARNING ASSETS
Available-for-sale securities, at amortized cost:
Taxable	$	293,636			2.01	%	$	366,448			2.07	%	$	371,125			2.16	%
Tax-exempt		111,343			4.71	%		112,700			5.21	%		123,809			5.31	%
Total available-for-sale securities		404,979			2.75	%		479,148			2.81	%		494,934			2.95	%
Interest-bearing due from banks		19,022			0.61	%		22,201			0.42	%		32,510			0.38	%
Federal funds sold		0			0.00	%		0			0.00	%		0			0.00	%
Loans held for sale		472			5.72	%		222			7.21	%		204			7.84	%
Loans receivable:
Taxable		662,769			4.95	%		603,771			5.19	%		589,120			5.45	%
Tax-exempt		60,307			4.52	%		53,956			4.72	%		38,633			5.54	%
Total loans receivable		723,076			4.92	%		657,727			5.15	%		627,753			5.46	%
Total Earning Assets		1,147,549			4.08	%		1,159,298			4.09	%		1,155,401			4.24	%
Cash		16,570						16,639						16,865
Unrealized gain/loss on securities		7,166						8,871						6,350
Allowance for loan losses		(8,082	)					(7,380	)					(7,992	)
Bank premises and equipment		15,413						15,911						16,789
Intangible Asset - Core Deposit Intangible		24						41						70
Intangible Asset – Goodwill		11,942						11,942						11,942
Other assets		39,284						37,887						40,472
Total Assets	$	1,229,866					$	1,243,209					$	1,239,897
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking	$	201,357			0.15	%	$	195,940			0.11	%	$	183,874			0.12	%
Money market		199,405			0.17	%		196,585			0.15	%		198,990			0.14	%
Savings		132,679			0.10	%		128,355			0.10	%		121,685			0.10	%
Certificates of deposit		117,130			0.75	%		121,803			0.68	%		134,732			0.79	%
Individual Retirement Accounts		103,467			0.42	%		110,659			0.41	%		120,016			0.39	%
Other time deposits		1,036			0.10	%		1,031			0.10	%		1,039			0.10	%
Total interest-bearing deposits		755,074			0.28	%		754,373			0.26	%		760,336			0.28	%
Borrowed funds:
Short-term		23,906			0.65	%		11,428			0.28	%		6,744			0.13	%
Long-term		38,610			3.76	%		66,214			4.00	%		73,196			4.03	%
Total borrowed funds		62,516			2.57	%		77,642			3.45	%		79,940			3.70	%
Total Interest-bearing Liabilities		817,590			0.45	%		832,015			0.55	%		840,276			0.61	%
Demand deposits		215,373						213,828						205,082
Other liabilities		8,530						8,461						9,070
Total Liabilities		1,041,493						1,054,304						1,054,428
Stockholders' equity, excluding accumulated other comprehensive income		183,671						183,125						181,271
Accumulated other comprehensive income		4,702						5,780						4,198
Total Stockholders' Equity		188,373						188,905						185,469
Total Liabilities and Stockholders' Equity	$	1,229,866					$	1,243,209					$	1,239,897
Interest Rate Spread					3.63	%					3.54	%					3.63	%
Net Interest Income/Earning Assets					3.76	%					3.69	%					3.80	%
Total Deposits (Interest-bearing and Demand)	$	970,447					$	968,201					$	965,418

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

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

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

20

TABLE III - ANALYSIS OF VOLUME AND RATE CHANGES

(In Thousands) 

	Year Ended 12/31/16 vs. 12/31/15									Year Ended 12/31/15 vs. 12/31/14
	Change in			Change in			Total			Change in			Change in			Total
	Volume			Rate			Change			Volume			Rate			Change
EARNING ASSETS
Available-for-sale securities:
Taxable	$	(1,472	)	$	(199	)	$	(1,671	)	$	(100	)	$	(341	)	$	(441	)
Tax-exempt		(70	)		(559	)		(629	)		(581	)		(127	)		(708	)
Total available-for-sale securities		(1,542	)		(758	)		(2,300	)		(681	)		(468	)		(1,149	)
Interest-bearing due from banks		(14	)		37			23			(42	)		10			(32	)
Loans held for sale		15			(4	)		11			1			(1	)		0
Loans receivable:
Taxable		2,965			(1,449	)		1,516			786			(1,602	)		(816	)
Tax-exempt		290			(111	)		179			758			(355	)		403
Total loans receivable		3,255			(1,560	)		1,695			1,544			(1,957	)		(413	)
Total Interest Income		1,714			(2,285	)		(571	)		822			(2,416	)		(1,594	)
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking		6			73			79			14			(16	)		(2	)
Money market		4			39			43			(3	)		16			13
Savings		4			1			5			7			0			7
Certificates of deposit		(33	)		84			51			(97	)		(141	)		(238	)
Individual Retirement Accounts		(30	)		13			(17	)		(38	)		19			(19	)
Other time deposits		0			0			0			0			0			0
Total interest-bearing deposits		(49	)		210			161			(117	)		(122	)		(239	)
Borrowed funds:
Short-term		56			67			123			9			14			23
Long-term		(1,047	)		(146	)		(1,193	)		(279	)		(25	)		(304	)
Total borrowed funds		(991	)		(79	)		(1,070	)		(270	)		(11	)		(281	)
Total Interest Expense		(1,040	)		131			(909	)		(387	)		(133	)		(520	)
Net Interest Income	$	2,754		$	(2,416	)	$	338		$	1,209		$	(2,283	)	$	(1,074	)

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

(2) 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 amounts of the change in each.

21

NONINTEREST INCOME

Years Ended December 31, 2016, 2015 and 2014

The table below presents a comparison of noninterest income and excludes realized gains on available-for-sale securities, which are discussed in the “Earnings Overview” section of Management’s Discussion and Analysis.

TABLE IV - COMPARISON OF NONINTEREST INCOME

(In Thousands)

	Years Ended
	December 31,						$			%
	2016			2015			Change			Change
Service charges on deposit accounts	$	4,695		$	4,864		$	(169	)		(3.5	)
Service charges and fees		439			494			(55	)		(11.1	)
Trust and financial management revenue		4,760			4,626			134			2.9
Brokerage revenue		756			839			(83	)		(9.9	)
Insurance commissions, fees and premiums		102			109			(7	)		(6.4	)
Interchange revenue from debit card transactions		1,943			1,935			8			0.4
Net gains from sales of loans		1,029			735			294			40.0
Decrease in fair value of servicing rights		(282	)		(162	)		(120	)		74.1
Increase in cash surrender value of life insurance		382			386			(4	)		(1.0	)
Other operating income		1,687			1,652			35			2.1
Total other operating income before realized gains   on available-for-sale securities, net	$	15,511		$	15,478		$	33			0.2

	Years Ended
	December 31,						$			%
	2015			2014			Change			Change
Service charges on deposit accounts	$	4,864		$	5,025		$	(161	)		(3.2	)
Service charges and fees		494			538			(44	)		(8.2	)
Trust and financial management revenue		4,626			4,490			136			3.0
Brokerage revenue		839			901			(62	)		(6.9	)
Insurance commissions, fees and premiums		109			118			(9	)		(7.6	)
Interchange revenue from debit card transactions		1,935			1,959			(24	)		(1.2	)
Net gains from sales of loans		735			768			(33	)		(4.3	)
Decrease in fair value of servicing rights		(162	)		(27	)		(135	)		500.0
Increase in cash surrender value of life insurance		386			376			10			2.7
Other operating income		1,652			1,272			380			29.9
Total other operating income before realized gains   on available-for-sale securities, net	$	15,478		$	15,420		$	58			0.4

Total noninterest income, excluding realized gains on available-for-sale securities, increased $33,000 in 2016 compared to 2015. In 2015, total noninterest income increased $58,000 from 2014. Changes of significance are discussed in the narrative that follows.

2016 vs. 2015

Net gains from sales of loans increased $294,000 (40.0%), reflecting higher volume of sales. The increase in volume in 2016 included the impact of employing one additional mortgage lender in a dedicated, full-time capacity throughout most of 2016 as compared to 2015.

Trust and Financial Management revenue increased $134,000 (2.9%). The increase in Trust revenue in 2016 reflected, in part, the effect of higher value of U.S. equity markets in the latter portion of the year.

Other operating income increased $35,000 (2.1%), including an increase of $148,000 from redemptions of tax credits and increases in lending-related fees of $80,000, while this category included a gain of $212,000 from a split-dollar life insurance policy in 2015.

22

Service charges on deposit accounts decreased $169,000 (3.5%) in 2016, including a $131,000 reduction in consumer overdraft fees due to a lower volume of overdrafts.

The fair value of mortgage servicing rights decreased $282,000 in 2016, as their valuation was negatively impacted by a reduction in demand by banks for purchasing servicing rights resulting from regulatory changes that have generally increased their risk-based capital weighting. In comparison, the fair value of mortgage servicing rights decreased $162,000 in 2015.

Brokerage revenue decreased $83,000 (9.9%), as the volume of sales of annuities declined.

2015 vs. 2014

Service charges on deposit accounts were $161,000 lower in 2015 than 2014. Total consumer and business overdraft and uncollected funds fees decreased $387,000 in 2015 as compared to 2014. These decreases were partially offset by revenues resulting from adjustments to the existing fee structure of certain checking products in April 2015.

The fair value of servicing rights decreased $162,000 in 2015 as compared to a decrease of $27,000 in 2014. The greater decline in fair value in 2015 reflected the impact of a reduction in the outstanding balance of mortgage loans sold and serviced in 2015, as compared to an increase in the balance of loans serviced in 2014 over 2013.

Included in the $380,000 increase in other operating revenue in 2015 is the effect of a $212,000 gain recognized from a life insurance arrangement in which the benefits were split between Corporation and the heirs of the former employee. In addition, dividend income from Federal Home Loan Bank of Pittsburgh stock increased $36,000, and revenue from merchant services increased $28,000, in 2015 as compared to 2014.

In 2015, Trust and financial management revenue increased $136,000, or 3.0%. This increase was primarily in retirement services revenue.

NONINTEREST EXPENSE

Years Ended December 31, 2016, 2015 and 2014

Total noninterest expense decreased $859,000, or 2.4%, in 2016 as compared to 2015; however, excluding losses from prepayment of borrowings in 2015, noninterest expense was $1,714,000 (5.2%) higher in 2016 as compared to 2015. Excluding losses from prepayment of debt in 2015, total noninterest expense decreased $1,127,000 (3.3%) in 2015 as compared to 2014. In 2015, the Corporation incurred losses totaling $2,573,000 from prepayment of borrowings (repurchase agreements). There were no losses from prepayment of borrowings incurred in 2016 or 2014. Changes of significance (other than the previously discussed losses on prepayment of debt) are discussed in the narrative that follows.

TABLE V - COMPARISON OF NONINTEREST EXPENSE

(In Thousands)

	Years Ended
	December 31,				$			%
	2016		2015		Change			Change
Salaries and wages	$	15,411	$	14,682	$	729			5.0
Pensions and other employee benefits		4,717		4,420		297			6.7
Occupancy expense, net		2,340		2,574		(234	)		(9.1	)
Furniture and equipment expense		1,730		1,860		(130	)		(7.0	)
FDIC Assessments		488		603		(115	)		(19.1	)
Pennsylvania shares tax		1,274		1,248		26			2.1
Professional fees		1,126		638		488			76.5
Automated teller machine and interchange expense		1,137		988		149			15.1
Software subscriptions		981		876		105			12.0
Loss on prepayment of borrowings		0		2,573		(2,573	)		(100.0	)
Other operating expense		5,540		5,141		399			7.8
Total Other Expense	$	34,744	$	35,603	$	(859	)		(2.4	)

23

	Years Ended
	December 31,				$			%
	2015		2014		Change			Change
Salaries and wages	$	14,682	$	15,121	$	(439	)		(2.9	)
Pensions and other employee benefits		4,420		4,769		(349	)		(7.3	)
Occupancy expense, net		2,574		2,628		(54	)		(2.1	)
Furniture and equipment expense		1,860		1,859		1			0.1
FDIC Assessments		603		600		3			0.5
Pennsylvania shares tax		1,248		1,350		(102	)		(7.6	)
Professional fees		638		699		(61	)		(8.7	)
Automated teller machine and interchange expense		988		924		64			6.9
Software subscriptions		876		784		92			11.7
Loss on prepayment of borrowings		2,573		0		2,573			100.0
Other operating expense		5,141		5,423		(282	)		(5.2	)
Total Other Expense	$	35,603	$	34,157	$	1,446			4.2

2016 vs 2015

Salaries and wages expense increased $729,000 (5.0%), reflecting an increase in number of employees. The average number of full-time equivalent employees was 287 in 2016, up from 281 in 2015, including new positions established for lending, lending support, information technology, training and marketing functions.

Pension and other employee benefits expense increased $297,000 (6.7%). The increase resulted mainly from an increase of $214,000 in healthcare expense as a result of increased healthcare claims. The Corporation is self-insured for health insurance, up to a cap for catastrophic levels of losses, which are insured by a third party. Payroll taxes and other expenses within this category increased in 2016, as well, due to the increase in number of employees described above.

Professional fees expense increased $488,000, including increases related to employee sales and service training, information technology and marketing.

Automated teller machine and interchange expense increased $149,000, including the costs of purchasing new debit cards with EMV functionality.

Software subscriptions increased $105,000 as a result of enhancements and new applications initiated in 2015 and continuing into 2016 including costs associated with the network operating system, automated document signatures and marketing-related functionality.

Other operating expense increased $399,000 (7.8%), including increases in other real estate expenses of $123,000, donations and public relations-related expenses of $94,000 and education and training-related expenses of $60,000. Also, other operating expense was reduced in 2015 by $69,000 as a result of a recovery of sales tax previously paid.

Occupancy expenses in 2016 were $234,000 under 2015 primarily as a result lower depreciation costs as well as lower winter-related expenses such as snow removal and fuel costs.

Furniture and equipment expenses in 2016 were $130,000 under 2015 primarily as a result lower depreciation costs.

FDIC insurance decreased $115,000 in 2016 reflecting lower assessment levels beginning in the third quarter of 2016.

24

2015 vs 2014

Salaries and wages decreased $439,000 (2.9%). As noted in the Earnings Overview section, this decrease is primarily the result of severance benefits incurred and paid in 2014. The decrease from severance benefits was partially offset by annual merit-based pay increases, an increase in incentive and other bonuses of $168,000 and the addition of new lending and other personnel.

Pensions and other employee benefits decreased $349,000 (7.3%). Health care expense decreased $342,000 as the amount of claims incurred during 2015 was lower than in 2014. In addition, pension expense decreased $111,000 as the result of a charge in 2014 related to a distribution from a defined benefit plan. These decreases were partially offset by annual increases in other benefit and administrative costs.

Other operating expense decreased $282,000 (5.2%). The reduction included a $191,000 decrease in loan collection expenses and an $86,000 decrease in other real estate expenses.

INCOME TAXES

The effective income tax rate was 25.3% of pre-tax income in 2016, 24.5% in 2015 and 25.0% in 2014. The Corporation’s effective tax rates differ from the statutory rate of 35% principally because of the effects of tax-exempt interest income.

The Corporation recognizes deferred tax assets and liabilities based on differences between the financial statement carrying amounts and the tax basis of assets and liabilities. At December 31, 2016, the net deferred tax asset was $5,117,000, an increase from the balance at December 31, 2015 of $3,115,000. The largest change in temporary difference components was a change to a deferred tax asset of $512,000 on the aggregate unrealized loss on available-for-sale securities at December 31, 2016 from a deferred tax liability of $1,342,000 on the aggregate unrealized gain on available-for-sale securities at December 31, 2015. The decline in fair values of available-for-sale securities was mainly due to an increase in interest rates in the last few months of 2016.

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

The following schedule estimates the amount of initial reduction in the net deferred tax asset that would be recognized, at varying marginal federal income tax rates, based on the Corporation’s temporary difference components at December 31, 2016. The schedule also shows the pro forma impact on the 2016 provision for income taxes, assuming the alternative tax rates presented had been in effect throughout the year, without adjustment for reinvestment of additional funds and assuming no other changes in the composition of the Corporation’s assets and liabilities.

(Dollars in Thousands)
	Valuation at Marginal Federal Tax Rate of:
	35%		25%			20%			15%
	(Actual)
Carrying Value of Deferred Tax Asset at 12/31/16:
Accumulated Other Comprehensive Items, Net	$	485	$	347		$	278		$	207
Other Items, Net		4,632		3,309			2,647			1,985
Total	$	5,117	$	3,656		$	2,925		$	2,192
Pro Forma Reduction in Carrying Value of Deferred Tax Asset from 12/31/16:
Accumulated Other Comprehensive Items, Net			$	(138	)	$	(207	)	$	(278	)
Other Items, Net (Initial Charge to Earnings)				(1,323	)		(1,985	)		(2,647	)
Total			$	(1,461	)	$	(2,192	)	$	(2,925	)

25

	For the Year Ended 12/31/16 at Marginal
	Federal Tax Rate of:
	35%			25%			20%			15%
	(Actual)
Income Tax Provision	$	5,347		$	3,797		$	3,025		$	2,250
Income Tax Provision as % of Pre-tax Income		25.3	%		18.0	%		14.3	%		10.7	%
Pro Forma Reduction in 2016 Annual Income Tax Provision if Alternative Rate Were in Effect Throughout 2016				$	(1,550	)	$	(2,322	)	$	(3,097	)

The Corporation regularly reviews deferred tax assets for recoverability based on history of earnings, expectations for future earnings and expected timing of reversals of temporary differences. Realization of deferred tax assets ultimately depends on the existence of sufficient taxable income, including taxable income in prior carryback years, as well as future taxable income. Further, as discussed above, realization of deferred tax assets would be impacted if income tax rates are lowered from currently enacted levels.

Management believes the recorded net deferred tax asset at December 31, 2016 is fully realizable; however, if management determines the Corporation will be unable to realize all or part of the net deferred tax asset, the Corporation would adjust the deferred tax asset, which would negatively impact earnings.

Additional information related to income taxes is presented in Note 14 to the consolidated financial statements.

SECURITIES

Table VI shows the composition of the investment portfolio at December 31, 2016, 2015 and 2014. Comparison of the amortized cost totals of available-for-sale securities at each year-end presented reflects a decrease of $92,227,000 to $416,455,000 at December 31, 2015 from December 31, 2014. This change was followed by a decrease of $19,917,000 to $396,538,000 at December 31, 2016. The continued decrease in securities in 2016 reflects the use of cash generated from the investment portfolio to help fund the increase in loans outstanding. The Corporation’s holdings of mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies have decreased to $237,654,000 at December 31, 2016 from $266,372,000 at December 31, 2015 and $322,099,000 at December 31, 2014. Within that overall category, in 2016, the Corporation added some commercial mortgage-backed securities for which the underlying collateral consists of multi-family properties. The total amortized cost of commercial mortgage-backed securities held at December 31, 2016 was $30,817,000.

As reflected in Table VI, the fair value of available-for-sale securities as of December 31, 2016 was $1,461,000, or 0.37%, less than the total amortized cost basis. The aggregate unrealized loss position at December 31, 2016 was down from an unrealized gain of $3,835,000 at December 31, 2015, partly due to an increase in interest rates in the last few months of 2016. Changes in intermediate-term and long-term interest rates have a significant impact on changes in fair values of debt securities. The fair values of tax-exempt municipal bonds at December 31, 2016 may have been negatively impacted, as well, by the market’s perception that U.S. corporate income tax rates may be reduced within the next 1-2 years. The aggregate unrealized gain on tax-exempt municipal bonds was $897,000, or 0.8% of amortized cost, at December 31, 2016. In comparison, the aggregate unrealized gain on tax-exempt municipal bonds held at December 31, 2015 was $4,343,000, or 4.2%. The aggregate unrealized loss on debt securities at December 31, 2016 was 0.36% of the amortized cost basis, down from net unrealized gains on debt securities of 0.75% at December 31, 2015 and 1.01% at December 31, 2014. Also contributing to the reduction in aggregate unrealized gain (loss) was the liquidation of the bank stock portfolio in 2015 and 2016 as the Corporation realized gains from the sale of bank stocks. As discussed in more detail in Note 7 to the consolidated financial statements, the Corporation reported net realized gains from available-for-sale securities of $1,158,000 in 2016, including realized gains from sales of equity securities (bank stocks) of $1,125,000. In comparison, net realized gains from available-for-sale securities totaled $2,861,000 in 2015 and $1,104,000 in 2014.

Management has reviewed the Corporation’s holdings as of December 31, 2016 and concluded that unrealized losses on all of the securities in an unrealized loss position are considered temporary. Notes 6 and 7 to the consolidated financial statements provide more detail concerning the Corporation’s processes for evaluating securities for other-than-temporary impairment. Management will continue to closely monitor the status of impaired securities in 2017.

26

TABLE VI - INVESTMENT SECURITIES

					As of December 31,
	2016				2015				2014
	Amortized		Fair		Amortized		Fair		Amortized		Fair
(In Thousands)	Cost		Value		Cost		Value		Cost		Value
AVAILABLE-FOR-SALE SECURITIES:
Obligations of U.S. Government agencies	$	9,671	$	9,541	$	10,663	$	10,483	$	27,221	$	26,676
Obligations of states and political subdivisions:
Tax-exempt		118,140		119,037		103,414		107,757		120,086		124,839
Taxable		30,073		30,297		34,317		34,597		33,637		33,878
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		58,922		58,404		73,227		73,343		82,479		83,903
Residential collateralized mortgage obligations		147,915		146,608		193,145		191,715		239,620		238,823
Commercial mortgage-backed securities		30,817		30,219		0		0		0		0
Other collateralized debt obligations		0		0		9		9		34		34
Total debt securities		395,538		394,106		414,775		417,904		503,077		508,153
Marketable equity securities		1,000		971		1,680		2,386		5,605		8,654
Total	$	396,538	$	395,077	$	416,455	$	420,290	$	508,682	$	516,807

The following table presents the contractual maturities and the weighted-average yields (calculated based on amortized cost) of investment securities as of December 31, 2016. Yields on tax-exempt securities are presented on a nominal basis, that is, the yields are not presented on a fully taxable-equivalent basis. 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.

(In Thousands, Except for Percentages)	Within					One-					Five-					After
	One					Five					Ten					Ten
	Year		Yield			Years		Yield			Years		Yield			Years		Yield			Total		Yield
AVAILABLE-FOR-SALE SECURITIES:
Obligations of U.S. Government agencies	$	1,637		1.36	%	$	8,034		1.42	%	$	0		0.00	%	$	0		0.00	%	$	9,671		1.41	%
Obligations of states and political subdivisions:
Tax-exempt		13,429		3.13	%		43,417		2.80	%		36,175		2.22	%		25,119		3.77	%		118,140		2.86	%
Taxable		3,613		1.81	%		18,108		2.25	%		8,352		3.07	%		0		0.00	%		30,073		2.43	%
Sub-total	$	18,679		2.72	%	$	69,559		2.50	%	$	44,527		2.38	%	$	25,119		3.77	%		157,884		2.69	%
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities																						58,922		2.07	%
Residential collateralized mortgage obligations																						147,915		1.96	%
Commercial mortgage-backed securities																						30,817		2.34	%
Total																					$	395,538		2.12	%

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. As rates increase, cash flows generally decrease as prepayments on the underlying mortgage loans decrease. As rates decrease, cash flows generally increase as prepayments increase due to increased refinance activity and other factors. In the table above, the entire balances and weighted-average rates for mortgage-backed securities and collateralized mortgage obligations are shown in one period.

27

FINANCIAL CONDITION

Gross loans outstanding (excluding mortgage loans held for sale) were $751,835,000 at December 31, 2016, up 6.7% from $704,880,000 at December 31, 2015. The total outstanding balances of residential mortgage segment loans at December 31, 2016 increased $34,683,000 (9.0%) as compared to December 31, 2015, and the total outstanding balances of commercial segment loans at December 31, 2016 increased $9,206,000 (3.0%) as compared to December 31, 2015. The 2016 loan growth followed significant growth in loans outstanding in 2015, as gross loans outstanding at December 31, 2015 were up 11.8% from December 31, 2014. Total outstanding commercial loans were higher by $54,239,000 (21.4%), and residential mortgage segment loans were up $19,674,000 (5.4%), at December 31, 2015 as compared to December 31, 2014.

The increases in loans outstanding in 2015 and 2016 included increases in commercial participation loans. Participation loans represent portions of larger commercial transactions for which other institutions are the “lead banks”. Although not the lead bank, the Corporation conducts detailed underwriting and monitoring of participation loan opportunities. Participation loans are included in the “Commercial and industrial,” “Commercial loans secured by real estate” and “Political subdivisions” classes in the loan tables presented in this Form 10-K. Total participation loans outstanding amounted to $47,508,000 at December 31, 2016, up from $44,456,000 at December 31, 2015. At December 31, 2016, the balance of participation loans outstanding includes a total of $34,890,000 to businesses located outside of the Corporation’s market area, including $11,967,000 from participations in loans originated through the Corporation’s membership in a network that originates loans throughout the U.S. The Corporation’s participation loans originated through the network consist of loans to businesses that are larger than the Corporation’s typical commercial customer base. The loans originated through the network are considered “leveraged loans,” meaning the businesses typically have minimal tangible book equity and the extent of collateral available is limited, though the businesses have demonstrated strong cash flow performance in their recent histories. At December 31, 2016, total leveraged participation loans, including loans originated through the network and two loans to one borrower originated through another lead institution, totaled $15,207,000.

Table VIII presents loan maturity data as of December 31, 2016. The interest rate simulation model classifies certain loans under different categories from the categories that appear in Table VII. Fixed-rate loans are shown in Table VIII based on their contractually scheduled principal repayments, and variable-rate loans are shown based on the date of the next change in rate. Table VIII shows that fixed-rate loans are approximately 38% of the loan portfolio. Of the 62% of the portfolio made up of variable-rate loans, a significant portion (36%) will re-price after more than one year. Variable-rate loans re-pricing after more than one year include residential and commercial real estate secured loans. The Corporation’s substantial investment in long-term, fixed-rate loans and variable-rate loans with extended periods until re-pricing is one of the concerns management attempts to address through interest rate risk management practices. See Part II, Item 7A for a more detailed discussion of the Corporation’s interest rate risk.

Other significant changes in the average balances of the Corporation’s earning assets and interest-bearing liabilities are described in the “Net Interest Income” section of Management’s Discussion and Analysis. Other significant balance sheet items, including securities, the allowance for loan losses and stockholders’ equity, are discussed in separate sections of Management’s Discussion and Analysis.

Total purchases of bank premises and equipment in 2017 are estimated at approximately $2.5 million. Management does not expect the amount of purchases of bank premises and equipment to have a material, detrimental effect on the Corporation’s financial condition in 2017.

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

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 December 31, 2016, the total outstanding balance of loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $1,852,000, and the corresponding total outstanding balance repurchased at December 31, 2015 was $1,968,000.

28

At December 31, 2016, outstanding balances of loans sold and serviced through the two programs totaled $163,296,000, including loans sold through the MPF Xtra program of $116,978,000 and loans sold through the Original program of $46,318,000. At December 31, 2015, outstanding balances of loans sold and serviced through the two programs totaled $152,448,000, including loans sold through the MPF Xtra program of $125,571,000 and loans sold through the Original Program of $26,877,000. Based on the fairly limited volume of required repurchases to date, no allowance has been established for representation and warranty exposures as of December 31, 2016 and December 31, 2015.

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 December 31, 2016, the Corporation’s maximum credit enhancement obligation under the MPF Original Program was $4,664,000, and the Corporation has recorded a related allowance for credit losses in the amount of $196,000 which is included in “Accrued interest and other liabilities” in the accompanying consolidated balance sheets. There was no allowance recorded at December 31, 2015. The Corporation does not provide a credit enhancement for loans sold through the Xtra program.

Table VII – Summary of Loans by Type
(In Thousands)
	2016			%		2015			%		2014			%		2013			%		2012			%
Residential mortgage:
Residential mortgage loans - first liens	$	334,102			44.4	$	304,783			43.2	$	291,882			46.3	$	299,831			46.5	$	311,627			45.6
Residential mortgage loans - junior liens		23,706			3.2		21,146			3.0		21,166			3.4		23,040			3.6		26,748			3.9
Home equity lines of credit		38,057			5.1		39,040			5.5		36,629			5.8		34,530			5.4		33,017			4.8
1-4 Family residential construction		24,908			3.3		21,121			3.0		16,739			2.7		13,909			2.2		12,842			1.9
Total residential mortgage		420,773			56.0		386,090			54.8		366,416			58.1		371,310			57.6		384,234			56.2
Commercial:
Commercial loans secured by real estate		150,468			20.0		154,779			22.0		145,878			23.1		147,215			22.8		158,413			23.2
Commercial and industrial		83,854			11.2		75,196			10.7		50,157			8.0		42,387			6.6		48,442			7.1
Political subdivisions		38,068			5.1		40,007			5.7		17,534			2.8		16,291			2.5		31,789			4.6
Commercial construction		14,287			1.9		5,122			0.7		6,938			1.1		17,003			2.6		28,200			4.1
Loans secured by farmland		7,294			1.0		7,019			1.0		7,916			1.3		10,468			1.6		11,403			1.7
Multi-family (5 or more) residential		7,896			1.1		9,188			1.3		8,917			1.4		10,985			1.7		6,745			1.0
Agricultural loans		3,998			0.5		4,671			0.7		3,221			0.5		3,251			0.5		3,053			0.4
Other commercial loans		11,475			1.5		12,152			1.7		13,334			2.1		14,631			2.3		362			0.1
Total commercial		317,340			42.2		308,134			43.7		253,895			40.3		262,231			40.7		288,407			42.2
Consumer		13,722			1.8		10,656			1.5		10,234			1.6		10,762			1.7		11,269			1.6
Total		751,835			100.0		704,880			100.0		630,545			100.0		644,303			100.0		683,910			100.0
Less: allowance for loan losses		(8,473	)				(7,889	)				(7,336	)				(8,663	)				(6,857	)
Loans, net	$	743,362				$	696,991				$	623,209				$	635,640				$	677,053

TABLE VIII – LOAN MATURITY DISTRIBUTION

(In Thousands) As of December 31, 2016

	Fixed-Rate Loans								Variable- or Adjustable-Rate Loans
	1 Year		1-5		>5				1 Year		1-5		>5
	or Less		Years		Years		Total		or Less		Years		Years		Total
Real Estate	$	4,027	$	22,376	$	170,014	$	196,417	$	144,585	$	152,883	$	94,394	$	391,862
Commercial		8,814		39,959		23,926		72,699		54,631		21,798		985		77,414
Consumer		1,733		8,432		3,218		13,383		60		0		0		60
Total	$	14,574	$	70,767	$	197,158	$	282,499	$	199,276	$	174,681	$	95,379	$	469,336

29

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 recorded as a reduction of the investment in loans. Notes 1 and 8 to the consolidated financial statements provide 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 $8,473,000 at December 31, 2016, up from $7,889,000 at December 31, 2015. As shown in Table X, specific allowances on impaired loans totaled $674,000 at December 31, 2016, which was $146,000 lower than the total of specific allowances on impaired loans at December 31, 2015. Table X shows the collectively determined component of the allowance for residential mortgages was $473,000 higher at December 31, 2016 than at December 31, 2015, reflecting growth in outstanding loans and use of slightly higher qualitative factors to estimate the required allowance. Also, the collectively determined component of the allowance for commercial loans was $270,000 higher at December 31, 2016 than at December 31, 2015, reflecting the effects of growth in outstanding loans and increases in the average net charge-offs experience and qualitative factors used to estimate the required allowance.

The provision for loan losses by segment for 2016, 2015 and 2014 is as follows:

(In Thousands)
	2016			2015			2014
Residential mortgage	$	542		$	(19	)	$	250
Commercial		687			816			227
Consumer		21			16			2
Unallocated		(29	)		32			(3	)
Total	$	1,221		$	845		$	476

As shown in Table XII, the average provision for loan losses for the five-year period ended December 31, 2016 was $975,000. The total amount of the provision for loan losses for each period is determined based on the amount required to maintain an appropriate allowance.

The $542,000 provision for the residential mortgage segment in 2016 included the $473,000 increase in the collectively determined allowance, as noted above, and a net charge of $69,000 related to the change in total specific allowances on impaired loans, as adjusted for net charge-offs during the period. In 2015, the $19,000 credit for loan losses in the residential mortgage segment resulted mainly from a reduction in the specific allowance related to one loan relationship, partially offset by the effects of an increase of $122,000 in the collectively determined allowance due to loan growth. The provision for the residential segment of $250,000 in 2014 included the effects of an increase in the collectively determined allowance of $139,000, mainly due to loan growth.

In 2016, the $687,000 provision for loan losses for the commercial segment included $417,000 from the net change in total specific allowances on impaired loans, as adjusted for net charge-offs during the period, and $270,000 from the net increase in the collectively determined allowance as described above. In comparison, the $816,000 provision for the commercial segment in 2015 included $445,000 from the net change in total specific allowances on impaired loans, as adjusted for net charge-offs during the period, and $371,000 from the net increase in the collectively determined allowance, with growth in the collectively determined allowance in 2015 caused by growth in outstanding loans. The provision for the commercial segment of $227,000 in 2014 included the effects of an increase in the collectively determined allowance of $149,000, reflecting loan growth and a slight increase in qualitative factors used to estimate the required allowance.

30

Table XI presents information related to past due and impaired loans, and loans that have been modified under terms that are considered troubled debt restructurings (TDRs). Total nonperforming loans as a percentage of outstanding loans was 2.07% at December 31, 2016, down slightly from 2.09% at December 31, 2015, and nonperforming assets as a percentage of total assets was 1.43% at December 31, 2016, up from 1.31% at December 31, 2015. Table XI presents data at the end of each of the years ended December 31, 2012 through 2016. For the range of dates presented in Table XI, total nonperforming loans as a percentage of loans has ranged from a low of 1.41% at December 31, 2012 to a high of 2.80% at December 31, 2013, and total nonperforming assets as a percentage of assets has ranged from a low of 0.82% at December 31, 2012 to a high of 1.53% at December 31, 2013.

Total impaired loans of $10,860,000 at December 31, 2016, are up $886,000 from the corresponding amount at December 31, 2015 of $9,974,000, including an increase in impaired loans with a valuation allowance of $1,439,000. In 2016, the Corporation recorded an allowance of $528,000 related to one real estate secured commercial loan relationship with an outstanding balance of $2,773,000 that was classified as impaired with a valuation allowance at December 31, 2016. Table XI shows that over the period 2012-2016, the year-end total outstanding balance of impaired loans has ranged from a low of $7,429,000 in 2012 to a high of $16,321,000 in 2013.

Total nonperforming assets of $17,754,000 at December 31, 2016 are up $1,748,000 from the corresponding amount at December 31, 2015. A summary of changes in the components of nonperforming assets at December 31, 2016 as compared to December 31, 2015 is as follows:

· Nonaccrual loans totaled $8,736,000 at December 31, 2016, down from $11,517,000 at December 31, 2015. As described in more detail below, the net reduction in nonaccrual loans included the effect of moving loans to one commercial borrower with recorded investments totaling $4,786,000 to full accrual status in the fourth quarter 2016. The net change in nonaccrual loans also included the effect of classifying the real estate secured commercial loan noted above with an outstanding balance at December 31, 2016 of $2,773,000 as nonaccrual in 2016.

· Total loans past due 90 days or more and still accruing interest amounted to $6,838,000 at December 31, 2016, an increase of $3,609,000 from $3,229,000 at December 31, 2015. The increase in 2016 in the balance of loans past due 90 days or more and still accruing interest included a commercial loan with a balance of $2,677,000 at December 31, 2016 that was deemed by management to be well secured and in the process of collection. At December 31, 2016, in addition to this commercial loan, total residential mortgage loans that were more than 90 days past due but deemed to be well secured and in the process of collection amounted to $3,022,000, up from $2,381,000 at December 31, 2015. The Corporation reviews the status of loans past due 90 days or more each quarter to determine if it is appropriate to continue to accrue interest, and has determined the loans included in this category are well secured and that ultimate collection of all principal and interest is probable.

· Foreclosed assets held for sale consisted of real estate, and totaled $2,180,000 at December 31, 2016, an increase of $920,000 from $1,260,000 at December 31, 2015. At December 31, 2016, the Corporation held 19 such properties for sale, with total carrying values of $1,102,000 related to residential real estate, $650,000 of land and $428,000 related to commercial real estate. At December 31, 2015, the Corporation held 12 such properties for sale, with total carrying values of $556,000 related to residential real estate and $704,000 of land. The Corporation evaluates the carrying values of foreclosed assets each quarter based on the most recent market activity or appraisals for each property.

As shown in Table XI, loans classified as TDRs increased to $8,677,000 at December 31, 2016 from $6,364,000 at December 31, 2015. The increase resulted primarily from a concession granted to one commercial customer with a loan balance of $2,773,000 at December 31, 2016. The Corporation entered into a forbearance agreement with this customer which includes extending the period to twelve months for which required monthly payments will include interest only. Table XI shows that over the period 2012-2016, the year-end total outstanding balance of TDRs has ranged from a low of $2,061,000 in 2012 to a high of $8,677,000 in 2016.

31

Recorded investments in impaired loans without a valuation allowance and performing TDRs at December 31, 2016 include $4,786,000 from loans to one commercial entity. In 2014, the Corporation entered into a forbearance agreement with this commercial borrower which included a reduction in monthly payment amounts over a fifteen-month period. At the end of the fifteen-month period, the monthly payment amounts would revert to the original amounts, unless the forbearance agreement was extended or the payment requirements otherwise modified. The forbearance agreement was extended for two additional twelve-month periods, most recently in July 2016. The Corporation recorded a charge-off of $1,486,000 in 2014 as a result of these modifications, as the payment amounts based on the forbearance agreement were not sufficient to fully amortize the contractual amount of principal outstanding on the loans. In December 2016, the Corporation and the borrower entered into a modification agreement, terminating the forbearance agreement and establishing loan terms with essentially the same interest rate and monthly payment amounts as had been in effect under the forbearance agreement. The weighted average maturity of the loan contracts has been extended under the modification agreement as compared to the maturities provided for in the original loan contracts. At December 31, 2016, the outstanding contractual balances of these loans total $6,529,000, and the recorded investments total $4,786,000. These loans are still classified as TDRs at December 31, 2016. The borrower made all required payments on the loans in accordance with the terms of the forbearance agreement, as extended, and (as noted above), the loans were restored to full accrual status at December 31, 2016.

Over the period 2012-2016, 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 December 31, 2016. Management continues to closely monitor its commercial loan relationships for possible credit losses, and will adjust its estimates of loss and decisions concerning nonaccrual status, if appropriate.

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

32

TABLE IX - ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES

(Dollars In Thousands)	Years Ended December 31,
	2016			2015			2014			2013			2012
Balance, beginning of year	$	7,889		$	7,336		$	8,663		$	6,857		$	7,705
Charge-offs:
Residential mortgage		(73	)		(217	)		(327	)		(95	)		(552	)
Commercial		(597	)		(251	)		(1,715	)		(459	)		(498	)
Consumer		(87	)		(94	)		(97	)		(117	)		(171	)
Total charge-offs		(757	)		(562	)		(2,139	)		(671	)		(1,221	)
Recoveries:
Residential mortgage		3			1			25			24			18
Commercial		35			214			264			348			8
Consumer		82			55			47			58			59
Total recoveries		120			270			336			430			85
Net charge-offs		(637	)		(292	)		(1,803	)		(241	)		(1,136	)
Provision for loan losses		1,221			845			476			2,047			288
Balance, end of period	$	8,473		$	7,889		$	7,336		$	8,663		$	6,857
Net charge-offs as a % of average loans		0.09	%		0.04	%		0.29	%		0.04	%		0.16	%

TABLE X - COMPONENTS OF THE ALLOWANCE FOR LOAN LOSSES

(In Thousands)

	As of December 31,
	2016		2015		2014		2013		2012
ASC 310 - Impaired loans	$	674	$	820	$	769	$	2,333	$	623
ASC 450 - Collective segments:
Commercial		3,373		3,103		2,732		2,583		2,594
Residential mortgage		3,890		3,417		3,295		3,156		3,011
Consumer		138		122		145		193		188
Unallocated		398		427		395		398		441
Total Allowance	$	8,473	$	7,889	$	7,336	$	8,663	$	6,857

33

TABLE XI  - PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS

AND TROUBLED DEBT RESTRUCTURINGS (TDRs)

(Dollars In Thousands)

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

TABLE XII - FIVE-YEAR HISTORY OF LOAN LOSSES

(Dollars In Thousands)

	2016			2015			2014			2013			2012			Average
Average gross loans	$	723,076		$	657,727		$	627,753		$	656,495		$	700,241		$	673,058
Year-end gross loans		751,835			704,880			630,545			644,303			683,910			683,095
Year-end allowance for loan losses		8,473			7,889			7,336			8,663			6,857			7,844
Year-end nonaccrual loans		8,736			11,517			12,610			14,934			7,353			11,030
Year-end loans 90 days or more past due and still accruing		6,838			3,229			2,843			3,131			2,311			3,670
Net charge-offs		637			292			1,803			241			1,136			822
Provision for loan losses		1,221			845			476			2,047			288			975
Earnings coverage of charge-offs		37	x		85	x		14	x		116	x		30	x		33	x
Allowance coverage of charge-offs		13	x		27	x		4	x		36	x		6	x		10	x
Net charge-offs as a % of provision for loan losses		52.17	%		34.56	%		378.78	%		11.77	%		394.44	%		84.31	%
Net charge-offs as a % of average gross loans		0.09	%		0.04	%		0.29	%		0.04	%		0.16	%		0.12	%
Income before income taxes on a fully taxable equivalent basis		23,861			24,710			25,784			28,012			34,571			27,388

34

CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

Table XIII presents the Corporation’s significant fixed and determinable contractual obligations as of December 31, 2016 by payment date. The payment amounts represent the principal amounts of time deposits and borrowings and do not include interest.

TABLE XIII – CONTRACTUAL OBLIGATIONS

(In Thousands)

	1 Year		1-3		3-5		Over 5
	or Less		Years		Years		Years		Total
Time deposits	$	113,974	$	76,828	$	21,168	$	248	$	212,218
Short-term borrowings:
Federal Home Loan Bank of Pittsburgh		21,000		0		0		0		21,000
Customer repurchase agreements		5,175		0		0		0		5,175
Long-term borrowings:
Federal Home Loan Bank of Pittsburgh		10,004		0		646		804		11,454
Repurchase agreements		27,000		0		0		0		27,000
Total	$	177,153	$	76,828	$	21,814	$	1,052	$	276,847

In addition to the amounts described in Table XIII, the Corporation has obligations related to deposits without a stated maturity with outstanding principal balances totaling $771,625,000 at December 31, 2016.

The Corporation’s operating lease and other commitments at December 31, 2016 are immaterial. The Corporation’s significant off-balance sheet arrangements include commitments to extend credit and standby letters of credit. Off-balance sheet arrangements are described in Note 16 to the consolidated financial statements.

As described in more detail in the “Financial Condition” section of Management’s Discussion and Analysis, the Corporation sells residential mortgage loans for which 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. At December 31, 2016, outstanding balances of such loans sold totaled $163,296,000.

Also, for loans sold under the MPF Original program, the Corporation provides a credit enhancement. At December 31, 2016, the Corporation’s maximum credit enhancement obligation under the MPF Original Program was $4,664,000, and the Corporation has recorded a related allowance for credit losses in the amount of $196,000 which is included in “Accrued interest and other liabilities” in the accompanying consolidated balance sheets.

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 December 31, 2016, the Corporation maintained overnight interest-bearing deposits with the Federal Reserve Bank of Philadelphia and other correspondent banks totaling $11,070,000.

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 $17,690,000 at December 31, 2016.

35

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

	Outstanding				Available				Total Credit
(In Thousands)	Dec. 31,		Dec. 31,		Dec. 31,		Dec. 31,		Dec. 31,		Dec. 31,
	2016		2015		2016		2015		2016		2015
Federal Home Loan Bank of Pittsburgh	$	32,454	$	60,348	$	306,767	$	262,361	$	339,221	$	322,709
Federal Reserve Bank Discount Window		0		0		15,636		19,606		15,636		19,606
Other correspondent banks		0		0		45,000		45,000		45,000		45,000
Total credit facilities	$	32,454	$	60,348	$	367,403	$	326,967	$	399,857	$	387,315

At December 31, 2016, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of overnight borrowings of $21,000,000 and long-term borrowings with a total amount of $11,454,000. At December 31, 2015, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of overnight borrowings of $23,500,000, short-term borrowings of $25,081,000, and long-term borrowings with a total amount of $11,767,000. Additional information regarding borrowed funds is included in Note 12 to the consolidated financial statements.

Additionally, the Corporation uses repurchase agreements placed with brokers to borrow funds secured by investment assets and “RepoSweep” arrangements to borrow funds from commercial banking customers on an overnight basis. If required to raise cash in an emergency situation, the Corporation could sell available-for-sale securities to meet its obligations. At December 31, 2016, the carrying value of available-for-sale securities in excess of amounts required to meet pledging or repurchase agreement obligations was $199,364,000.

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

STOCKHOLDERS’ EQUITY AND CAPITAL ADEQUACY

The Corporation and C&N Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Details concerning regulatory capital amounts and ratios are presented in Note 18 to the consolidated financial statements. As reflected in Note 18, at December 31, 2016 and 2015, the Corporation and C&N Bank meet all capital adequacy requirements to which they are subject and maintain capital conservation buffers that allow the Corporation and C&N Bank to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to certain executive officers.

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

36

The new capital rule provides that, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization must hold a capital conservation buffer composed of common equity tier 1 capital above its minimum risk-based capital requirements. The buffer is measured relative to risk-weighted assets. Phase-in of the capital conservation buffer requirements began January 1, 2016. The transition schedule for new ratios, including the capital conservation buffer, is as follows:

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

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

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

At December 31, 2016, the Corporation’s Capital Conservation Buffer, determined based on the minimum total capital ratio, was 15.60%. C&N Bank’s Capital Conservation Buffer (also determined based on the minimum total capital ratio) was 13.03%.

Future dividend payments will depend upon maintenance of a strong financial condition, future earnings and capital and regulatory requirements. In addition, the Corporation and C&N Bank are subject to restrictions on the amount of dividends that may be paid without approval of banking regulatory authorities. These restrictions are described in Note 18 to the consolidated financial statements.

Management expects the Corporation and C&N Bank to maintain capital levels that exceed the regulatory standards for well-capitalized institutions for the next 12 months and for the foreseeable future. Planned capital expenditures are not expected to have a significantly detrimental effect on capital ratios.

37

The Corporation’s total stockholders’ equity is affected by fluctuations in the fair values of available-for-sale securities. The difference between amortized cost and fair value of available-for-sale securities, net of deferred income tax, is included in Accumulated Other Comprehensive Income (Loss) within stockholders’ equity. The balance in Accumulated Other Comprehensive Income (Loss) related to unrealized gains (losses) on available-for-sale securities, net of deferred income tax, amounted to ($949,000) at December 31, 2016, $2,493,000 at December 31, 2015 and $5,281,000 at December 31, 2014. Changes in accumulated other comprehensive income (loss) are excluded from earnings and directly increase or decrease stockholders’ equity. If available-for-sale securities are deemed to be other-than-temporarily impaired, unrealized losses are recorded as a charge against earnings, and amortized cost for the affected securities is reduced. Note 7 to the consolidated financial statements provides additional information concerning management’s evaluation of available-for-sale securities for other-than-temporary impairment at December 31, 2016.

Stockholders’ equity is also affected by the underfunded or overfunded status of defined benefit pension and postretirement plans. The balance in Accumulated Other Comprehensive Income (Loss) related to defined benefit plans, net of deferred income tax, was $51,000 at December 31, 2016, $35,000 at December 31, 2015 and $79,000 at December 31, 2014.

COMPREHENSIVE INCOME

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

Comprehensive Income totaled $12,336,000 in 2016 as compared to $13,639,000 in 2015 and $23,439,000 in 2014. In 2016, Comprehensive Income included: (1) Net Income of $15,762,000, which was $709,000 lower than in 2015 and $1,324,000 lower than in 2014; (2) Other Comprehensive Loss from unrealized losses on available-for-sale securities, net of deferred income tax, of ($3,442,000) as compared to Other Comprehensive Loss of ($2,788,000) in 2015 and Other Comprehensive Income of $6,285,000 in 2014; and (3) Other Comprehensive Income from defined benefit plans of $16,000 in 2016 as compared to Other Comprehensive Loss of ($44,000) in 2015 and Other Comprehensive Income of $68,000 in 2014. Fluctuations in interest rates significantly affected fair values of available-for-sale securities in 2014 through 2016, and accordingly had an effect on Other Comprehensive Income (Loss) in each year.

INFLATION

The Corporation is significantly affected by the Federal Reserve Board’s efforts to control inflation through changes in short-term interest rates. Beginning in September 2007, in response to concerns about weakness in the U.S. economy, the Federal Reserve lowered the fed funds target rate numerous times; in December 2008, it established a target range of 0% to 0.25%, which it maintained through mid-December 2015. On December 16, 2015, the Federal Reserve raised their target for the federal funds rate to 0.25% to 0.50%. The Federal Reserve then raised the target rate to 0.50% to 0.75% on December 14, 2016. The most recent decision was based on data available that suggested economic activity had been expanding at a moderate pace and the labor market had continued to strengthen since mid-year. The Fed noted that the data indicated an increase in household spending, though business fixed investments had remained soft. While inflation increased from the beginning of 2016, it is still below the Federal Open Market Committee’s (FOMC) 2.00% longer run objective. This was partly due to declines in energy prices and in prices of non-energy imports. The FOMC expects to continue gradual adjustments in the stance of monetary policy, which will allow economic activity to expand at a moderate pace with inflation reaching the forecasted 2.00% over the medium term.

Also, throughout the period of low interest rates, the Federal Reserve has injected massive amounts of liquidity into the nation’s monetary system through a variety of programs. The Federal Reserve has purchased large amounts of securities in an effort to keep interest rates low and stimulate economic growth. Beginning in late 2013, the Federal Reserve began reducing the amount of securities purchased under its asset purchase program and then ended the program in October 2014, though still reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and continued to roll over maturing Treasury securities at auction. The Federal Reserve maintained their commitment to this policy in their December 14, 2016 statement and anticipates doing so until normalization of the level of the federal funds rate is well under way.

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

38

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 2 to the consolidated financial statements for a description of recent accounting pronouncements and their recent or potential future effects on the Corporation’s financial statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISK

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

The Corporation’s major category of market risk, interest rate risk, is discussed in the following section.

INTEREST RATE RISK

Business risk arising from changes in interest rates is an inherent factor in operating a bank. A significant portion of the Corporation’s assets are long-term, fixed-rate loans and debt securities. Funding for these assets comes principally from shorter-term deposits and borrowed funds. Accordingly, there is an inherent risk of lower future earnings or decline in fair value of the Corporation’s financial instruments when interest rates change.

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

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

The Corporation’s Board of Directors has established policy guidelines for acceptable levels of interest rate risk, based on an immediate increase or decrease in interest rates. The policy limits acceptable fluctuations in net interest income from the baseline (flat rates) one-year scenario and variances in the market value of portfolio equity from the baseline values based on current rates.

Table XIV, which follows this discussion, is based on the results of calculations performed using the simulation model as of December 31, 2016 and December 31, 2015. The table shows that as of the respective dates, the changes in net interest income and changes in market value were within the policy limits in all scenarios.

39

TABLE XIV - THE EFFECT OF HYPOTHETICAL CHANGES IN INTEREST RATES

December 31, 2016 Data

(In Thousands)

Period Ending December 31, 2017

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

Market Value of Portfolio Equity at December 31, 2016

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

December 31, 2015 Data

(In Thousands)

Period Ending December 31, 2016

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

Market Value of Portfolio Equity at December 31, 2015

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

40

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share and Per Share Data)	December 31,			December 31,
	2016			2015
ASSETS
Cash and due from banks:
Noninterest-bearing	$	17,551		$	14,710
Interest-bearing		14,558			21,351
Total cash and due from banks		32,109			36,061
Available-for-sale securities, at fair value		395,077			420,290
Loans held for sale		142			280
Loans receivable		751,835			704,880
Allowance for loan losses		(8,473	)		(7,889	)
Loans, net		743,362			696,991
Bank-owned life insurance		19,704			20,764
Accrued interest receivable		3,963			3,768
Bank premises and equipment, net		15,397			15,406
Foreclosed assets held for sale		2,180			1,260
Deferred tax asset, net		5,117			3,115
Intangible assets - Goodwill and core deposit intangibles		11,959			11,972
Other assets		13,282			13,510
TOTAL ASSETS	$	1,242,292		$	1,223,417
LIABILITIES
Deposits:
Noninterest-bearing	$	224,175		$	211,041
Interest-bearing		759,668			724,574
Total deposits		983,843			935,615
Short-term borrowings		26,175			53,496
Long-term borrowings		38,454			38,767
Accrued interest and other liabilities		7,812			8,052
TOTAL LIABILITIES		1,056,284			1,035,930
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 12,113,228 at December 31, 2016 and 12,180,623 December 31, 2015		12,655			12,655
Paid-in capital		71,730			71,654
Retained earnings		112,790			109,454
Treasury stock, at cost; 541,943 shares at December 31, 2016 and 474,548 shares at December 31, 2015		(10,269	)		(8,804	)
Accumulated other comprehensive (loss) income		(898	)		2,528
TOTAL STOCKHOLDERS' EQUITY		186,008			187,487
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	1,242,292		$	1,223,417

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

41

Consolidated Statements of Income

(In Thousands Except Per Share Data)

	Years Ended December 31,
	2016			2015			2014
INTEREST INCOME
Interest and fees on loans:
Taxable	$	32,827		$	31,311		$	32,127
Tax-exempt		1,783			1,668			1,403
Interest on mortgages held for sale		27			16			16
Interest on balances with depository institutions		116			93			125
Income from available-for-sale securities:
Taxable		5,846			7,303			7,721
Tax-exempt		3,429			3,844			4,310
Dividends		70			284			307
Total interest and dividend income		44,098			44,519			46,009
INTEREST EXPENSE
Interest on deposits		2,085			1,924			2,163
Interest on short-term borrowings		155			32			9
Interest on long-term borrowings		1,453			2,646			2,950
Total interest expense		3,693			4,602			5,122
Net interest income		40,405			39,917			40,887
Provision for loan losses		1,221			845			476
Net interest income after provision for loan losses		39,184			39,072			40,411
OTHER INCOME
Service charges on deposit accounts		4,695			4,864			5,025
Service charges and fees		439			494			538
Trust and financial management revenue		4,760			4,626			4,490
Brokerage revenue		756			839			901
Insurance commissions, fees and premiums		102			109			118
Interchange revenue from debit card transactions		1,943			1,935			1,959
Net gains from sale of loans		1,029			735			768
Decrease in fair value of servicing rights		(282	)		(162	)		(27	)
Increase in cash surrender value of life insurance		382			386			376
Other operating income		1,687			1,652			1,272
Sub-total		15,511			15,478			15,420
Realized gains on available-for-sale securities, net		1,158			2,861			1,104
Total other income		16,669			18,339			16,524
OTHER EXPENSES
Salaries and wages		15,411			14,682			15,121
Pensions and other employee benefits		4,717			4,420			4,769
Occupancy expense, net		2,340			2,574			2,628
Furniture and equipment expense		1,730			1,860			1,859
FDIC assessments		488			603			600
Pennsylvania shares tax		1,274			1,248			1,350
Professional fees		1,126			638			699
Automated teller machine and interchange expense		1,137			988			924
Software subscriptions		981			876			784
Loss on prepayment of debt		0			2,573			0
Other operating expense		5,540			5,141			5,423
Total other expenses		34,744			35,603			34,157
Income before income tax provision		21,109			21,808			22,778
Income tax provision		5,347			5,337			5,692
NET INCOME	$	15,762		$	16,471		$	17,086
NET INCOME PER SHARE - BASIC	$	1.30		$	1.35		$	1.38
NET INCOME PER SHARE - DILUTED	$	1.30		$	1.35		$	1.38

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

42

Consolidated Statements of Comprehensive Income

(In Thousands)

	Years Ended December 31,
	2016			2015			2014
Net income	$	15,762		$	16,471		$	17,086
Unrealized (losses) gains on available-for-sale securities:
Unrealized holding (losses) gains on available-for-sale securities		(4,138	)		(1,429	)		10,774
Reclassification adjustment for gains realized in income		(1,158	)		(2,861	)		(1,104	)
Other comprehensive (loss) gain on available-for-sale securities		(5,296	)		(4,290	)		9,670
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in accumulated other comprehensive gain (loss)		46			(135	)		(79	)
Amortization of net transition obligation, prior service cost, net actuarial (gain) loss, and loss on settlement included in net periodic benefit cost		(22	)		67			184
Other comprehensive gain (loss) on unfunded retirement obligations		24			(68	)		105
Other comprehensive (loss) income before income tax		(5,272	)		(4,358	)		9,775
Income tax related to other comprehensive loss (income)		1,846			1,526			(3,422	)
Net other comprehensive (loss) income		(3,426	)		(2,832	)		6,353
Comprehensive income	$	12,336		$	13,639		$	23,439

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

43

Consolidated Statements of Changes in Stockholders' Equity

(In Thousands Except Share and Per Share Data)

																Accumulated
																Other
																Comprehensive
	Common			Treasury			Common			Paid-in			Retained			Income			Treasury
	Shares			Shares			Stock			Capital			Earnings			(Loss)			Stock			Total
Balance, January 1, 2014		12,596,540			206,477		$	12,596		$	70,105		$	101,216		$	(993	)	$	(3,452	)	$	179,472
Net income														17,086									17,086
Other comprehensive income, net																	6,353						6,353
Cash dividends declared on common stock, $1.04 per share														(12,889	)								(12,889	)
Shares issued for dividend reinvestment Plan		59,498			(18,473	)		60			1,069									368			1,497
Treasury stock purchased					208,300															(4,002	)		(4,002	)
Shares issued from treasury related to exercise of stock options		(867	)		(11,860	)		(1	)		(64	)								188			123
Restricted stock granted					(16,711	)					(279	)								279			0
Forfeiture of restricted stock					7,458						125									(125	)		0
Stock-based compensation expense											565												565
Tax benefit from compensation plans											20			137									157
Balance, December 31, 2014		12,655,171			375,191			12,655			71,541			105,550			5,360			(6,744	)		188,362
Net income														16,471									16,471
Other comprehensive loss, net																	(2,832	)					(2,832	)
Cash dividends declared on common stock, $1.04 per share														(12,710	)								(12,710	)
Shares issued for dividend reinvestment Plan					(73,810	)					86									1,379			1,465
Treasury stock purchased					226,900															(4,415	)		(4,415	)
Shares issued from treasury related to exercise of stock options					(22,435	)					(27	)								408			381
Restricted stock granted					(34,800	)					(627	)								627			0
Forfeiture of restricted stock					3,502						59									(59	)		0
Stock-based compensation expense											606												606
Tax benefit from compensation plans											16			143									159
Balance, December 31, 2015		12,655,171			474,548			12,655			71,654			109,454			2,528			(8,804	)		187,487
Net income														15,762									15,762
Other comprehensive loss, net																	(3,426	)					(3,426	)
Cash dividends declared on common stock, $1.04 per share														(12,578	)								(12,578	)
Shares issued for dividend reinvestment Plan					(68,571	)					170									1,296			1,466
Treasury stock purchased					187,300															(3,723	)		(3,723	)
Shares issued from treasury related to exercise of stock options					(19,113	)					(98	)								361			263
Restricted stock granted					(35,427	)					(658	)								658			0
Forfeiture of restricted stock					3,431						61									(61	)		0
Stock-based compensation expense											578												578
Other stock-based expense					(225	)														4			4
Tax benefit from compensation plans											23			152									175
Balance, December 31, 2016		12,655,171			541,943		$	12,655		$	71,730		$	112,790		$	(898	)	$	(10,269	)	$	186,008

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

	Years Ended December 31,
	2016			2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	15,762		$	16,471		$	17,086
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		1,221			845			476
Realized gains on available-for-sale securities, net		(1,158	)		(2,861	)		(1,104	)
Loss on prepayment of debt		0			2,573			0
Realized loss (gain) on foreclosed assets		49			(84	)		(136	)
(Gain) loss on disposition of premises and equipment		(3	)		1			(8	)
Depreciation expense		1,589			1,888			1,940
Accretion and amortization on securities, net		1,462			1,562			1,375
Accretion and amortization on loans and deposits, net		(15	)		(21	)		(27	)
Decrease in fair value of servicing rights		282			162			27
Increase in cash surrender value of life insurance		(382	)		(386	)		(376	)
Gain on life insurance benefits		0			(212	)		0
Stock-based compensation and other expense		582			606			565
Amortization of core deposit intangibles		13			22			35
Deferred income taxes		(156	)		79			1,254
Gains on sales of loans, net		(1,029	)		(735	)		(768	)
Origination of loans for sale		(29,296	)		(21,823	)		(21,680	)
Proceeds from sales of loans		30,215			22,101			22,317
(Increase) decrease in accrued interest receivable and other assets		(410	)		(1,697	)		1,395
(Decrease) increase in accrued interest payable and other liabilities		(216	)		1,195			(90	)
Net Cash Provided by Operating Activities		18,510			19,686			22,281
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of certificates of deposit		1,540			1,780			2,560
Purchase of certificates of deposit		(2,280	)		(100	)		(960	)
Proceeds from sales of available-for-sale securities		37,032			44,504			56,269
Proceeds from calls and maturities of available-for-sale securities		74,477			89,159			78,101
Purchase of available-for-sale securities		(91,896	)		(40,363	)		(158,894	)
Redemption of Federal Home Loan Bank of Pittsburgh stock		5,277			5,029			2,804
Purchase of Federal Home Loan Bank of Pittsburgh stock		(5,046	)		(8,102	)		(602	)
Net (increase) decrease in loans		(49,085	)		(77,129	)		10,317
Proceeds from bank owned life insurance		1,442			1,953			0
Purchase of premises and equipment		(1,580	)		(1,039	)		(801	)
Proceeds from disposition of premises and equipment		3			0			43
Return of principal on limited liability entity investments		178			181			173
Proceeds from sale of foreclosed assets		539			2,536			1,504
Net Cash (Used in) Provided by Investing Activities		(29,399	)		18,409			(9,486	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits		48,228			(32,374	)		13,473
Net (decrease) increase in short-term borrowings		(27,321	)		47,959			(17,848	)
Repayments of long-term borrowings		(313	)		(36,866	)		(278	)
Purchase of treasury stock		(3,723	)		(4,415	)		(4,002	)
Sale of treasury stock		263			381			123
Tax benefit from compensation plans		175			159			157
Common dividends paid		(11,112	)		(11,245	)		(11,392	)
Net Cash Provided by (Used in) Financing Activities		6,197			(36,401	)		(19,767	)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(4,692	)		1,694			(6,972	)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		33,313			31,619			38,591
CASH AND CASH EQUIVALENTS, END OF YEAR	$	28,621		$	33,313		$	31,619
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Accrued purchase of available-for-sale securities	$	0		$	0		$	226
Assets acquired through foreclosure of real estate loans	$	1,508		$	2,523		$	1,665
Interest paid	$	3,698		$	4,636		$	5,138
Income taxes paid	$	5,129		$	4,827		$	4,432

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION - The consolidated financial statements include the accounts of Citizens & Northern Corporation and its subsidiaries, Citizens & Northern Bank (“C&N Bank”), Bucktail Life Insurance Company and Citizens & Northern Investment Corporation (collectively, “Corporation”), as well as C&N Bank’s wholly-owned subsidiary, C&N Financial Services Corporation. All material intercompany balances and transactions have been eliminated in consolidation.

NATURE OF OPERATIONS - The Corporation is primarily engaged in providing a full range of banking and mortgage services to individual and corporate customers in North Central Pennsylvania and Southern New York State. Lending products include mortgage loans, commercial loans and consumer loans, as well as specialized instruments such as commercial letters-of-credit. Deposit products include various types of checking accounts, passbook and statement savings, money market accounts, interest checking accounts, Individual Retirement Accounts and certificates of deposit. The Corporation also offers non-insured “RepoSweep” accounts.

The Corporation provides Trust and Financial Management services, including administration of trusts and estates, retirement plans, and other employee benefit plans, and investment management services. The Corporation offers a variety of personal and commercial insurance products through C&N Financial Services Corporation. C&N Financial Services Corporation also offers mutual funds, annuities, educational savings accounts and other investment products through registered agents. Management has determined that the Corporation has one reportable segment, “Community Banking.” All of the Corporation’s activities are interrelated, and each activity is dependent and assessed based on how each of the activities of the Corporation supports the others.

The Corporation is subject to competition from other financial institutions. It is also subject to regulation by certain federal and state agencies and undergoes periodic examination by those regulatory authorities. As a consequence, the Corporation’s business is particularly susceptible to being affected by future federal and state legislation and regulations.

USE OF ESTIMATES - The financial information is presented in accordance with generally accepted accounting principles and general practice for financial institutions in the United States of America (“U.S. GAAP”). In preparing financial statements, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements. In addition, these estimates and assumptions affect revenues and expenses in the financial statements and as such, actual results could differ from those estimates.

Material estimates that are particularly susceptible to change include: (1) the allowance for loan losses, (2) fair values of debt securities based on estimates from independent valuation services or from brokers, (3) assessment of impaired securities to determine whether or not the securities are other-than-temporarily impaired, (4) valuation of deferred tax assets and (5) valuation of obligations from defined benefit plans.

INVESTMENT SECURITIES - Investment securities are accounted for as follows:

Available-for-sale securities - includes debt securities not classified as held-to-maturity or trading, and unrestricted equity securities. Such securities are reported at fair value, with unrealized gains and losses excluded from earnings and reported separately through accumulated other comprehensive income (loss), net of tax. Amortization of premiums and accretion of discounts on available-for-sale securities are recorded using the level yield method over the remaining contractual life of the securities, adjusted for actual prepayments. Realized gains and losses on sales of available-for-sale securities are computed on the basis of specific identification of the adjusted cost of each security. Securities within the available-for-sale portfolio may be used as part of the Corporation’s asset and liability management strategy and may be sold in response to changes in interest rate risk, prepayment risk or other factors.

Other-than-temporary impairment - Declines in the fair value of available-for-sale securities that are deemed to be other-than-temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment (OTTI) losses, management considers (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, (3) the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value, and (4) whether the Corporation intends to sell the security or if it is more likely than not that the Corporation will be required to sell the security before the recovery of its amortized cost basis. The credit-related impairment is recognized in earnings and is the difference between a security’s amortized cost basis and the present value of expected future cash flows discounted at the security’s effective interest rate. For debt securities classified as held-to-maturity, if any, the amount of noncredit-related impairment is recognized in other comprehensive income and accreted over the remaining life of the debt security as an increase in the carrying value of the security.

46

Restricted equity securities - Restricted equity securities consist primarily of Federal Home Loan Bank of Pittsburgh stock, and are carried at cost and evaluated for impairment. Holdings of restricted equity securities are included in Other Assets in the consolidated balance sheets, and dividends received on restricted securities are included in Other Income in the consolidated statements of income.

LOANS HELD FOR SALE - Mortgage loans held for sale are reported at the lower of cost or market, determined in the aggregate.

LOANS RECEIVABLE - Loans receivable which management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at unpaid principal balances, less the allowance for loan losses and net deferred loan fees. Interest income is accrued on the unpaid principal balance. Loan origination and commitment fees, as well as certain direct origination costs, are deferred and amortized as a yield adjustment over the lives of the related loans using the interest method.

The loans receivable portfolio is segmented into residential mortgage, commercial and consumer loans. The residential mortgage segment includes the following classes: first and junior lien residential mortgages, home equity lines of credit and residential construction loans. The most significant classes of commercial loans are commercial loans secured by real estate, non-real estate secured commercial and industrial loans, loans to political subdivisions, commercial construction, and loans secured by farmland.

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 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.

ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the collection of all, or part, of the principal balance is highly unlikely. Non-residential consumer loans are generally charged off no later than when they are 120 days past due on a contractual basis, or earlier in the event of bankruptcy or if there is an amount deemed uncollectible.

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 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. In the process of evaluating the loan portfolio, management also considers the Corporation’s exposure to losses from unfunded loan commitments. As of December 31, 2016 and 2015, management determined that no allowance for credit losses related to unfunded loan commitments was required.

The allowance consists primarily of two major components – (1) a specific component based on a detailed assessment of certain larger loan relationships, mainly commercial purpose, determined 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 specific component relates to loans that are classified as impaired based on a detailed assessment of certain larger loan relationships evaluated by a management committee referred to as the Watch List Committee. Specific loan relationships are identified for evaluation based on the related credit risk rating. For individual loans classified as impaired, an allowance is established when the collateral value less estimated selling costs, present value of discounted cash flows or observable market price of the impaired loan is lower than the carrying value of that loan.

47

The general component covers pools of loans by loan class including commercial loans not considered individually impaired, as well as smaller balance homogeneous classes of loans, such as residential real estate, home equity lines of credit and other consumer loans. Accordingly, the Corporation generally does not separately identify individual consumer and residential loans for impairment disclosures, unless such loans are subject to a restructuring agreement. The pools of loans for each loan segment are evaluated for loss exposure based upon average historical net charge-off rates (currently thirty-six months), adjusted for qualitative factors. Qualitative risk factors (described in the following paragraph) are evaluated for the impact on each of the three distinct 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. Any adjustments to the factors are supported by a narrative documentation of changes in conditions accompanying the allowance for loan losses calculation.

The qualitative factors used in the general component calculations are designed to address credit risk characteristics associated with each segment. The Corporation’s credit risk associated with all of the segments is significantly impacted by these factors, which include economic conditions within its market area, the Corporation’s lending policies, changes or trends in the portfolio, risk profile, competition, regulatory requirements and other factors. Further, the residential mortgage segment is significantly affected by the values of residential real estate that provide collateral for the loans. The majority of the Corporation’s commercial segment loans (approximately 57% at December 31, 2016) are 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.

For commercial loans secured by real estate, estimated fair values are determined primarily through third-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. 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 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.

Loans whose terms are modified are classified as troubled debt restructurings if the Corporation grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve reductions in required payments, an extension of a loan’s stated maturity date or a temporary reduction in interest rate. Loans classified as troubled debt restructurings are designated as impaired. Non-accrual troubled debt restructurings may be restored to accrual status if the ultimately collectability of principal and interest payments under the modified terms is not in doubt, and there has been a period (generally, for at least six consecutive months) of satisfactory payment performance by the borrower either immediately before or after the restructuring.

BANK PREMISES AND EQUIPMENT - Bank premises and equipment are stated at cost less accumulated depreciation. Repair and maintenance expenditures which extend the useful lives of assets are capitalized, and other repair and maintenance expenditures are expensed as incurred. Depreciation expense is computed using the straight-line method.

IMPAIRMENT OF LONG-LIVED ASSETS - The Corporation reviews long-lived assets, such as premises and equipment and intangibles, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. These changes in circumstances may include a significant decrease in the market value of an asset or the manner in which an asset is used. If there is an indication the carrying value of an asset may not be recoverable, future undiscounted cash flows expected to result from use of the asset are estimated. If the sum of the expected cash flows is less than the carrying value of the asset, a loss is recognized for the difference between the carrying value and fair market value of the asset.

48

FORECLOSED ASSETS HELD FOR SALE - Foreclosed assets held for sale consist of real estate acquired by foreclosure and are initially recorded at fair value, less estimated selling costs.

GOODWILL AND CORE DEPOSIT INTANGIBLE ASSETS - Goodwill represents the excess of the cost of acquisitions over the fair value of the net assets acquired. Goodwill is tested at least annually for impairment, or more often if events or circumstances indicate there may be impairment. Core deposit intangibles are being amortized over periods of time that represent the expected lives using a method of amortization that reflects the pattern of economic benefit. Core deposit intangibles are subject to impairment testing whenever events or changes in circumstances indicate their carrying amounts may not be recoverable.

SERVICING RIGHTS - The estimated fair value of servicing rights related to mortgage loans sold and serviced by the Corporation is recorded as an asset upon the sale of such loans. The valuation of servicing rights is adjusted quarterly, with changes in fair value included in Other Income in the consolidated statements of income. Significant inputs to the valuation include expected net servicing income to be received, the expected life of the underlying loans and the discount rate. The servicing rights asset is included in Other Assets in the consolidated balance sheets.

INCOME TAXES - Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases given the provisions of the enacted tax laws. Deferred tax assets are reduced, if necessary, by the amount of such benefits that are not expected to be realized based upon available evidence. Tax benefits from investments in limited partnerships that have qualified for federal low-income tax credits are recognized as a reduction in the provision for income tax over the term of the investment using the effective yield method. The Corporation includes income tax penalties in the provision for income tax. The Corporation has no accrued interest related to unrecognized tax benefits.

STOCK COMPENSATION PLANS - The Corporation’s stock-based compensation policy applies to all forms of stock-based compensation including stock options and restricted stock units. All stock-based compensation is accounted for under the fair value method as required by U.S. GAAP. The expense associated with stock-based compensation is recognized over the vesting period of each individual arrangement.

The fair value of each stock option is estimated on the date of grant using the Black-Scholes-Merton option valuation model. The fair value of restricted stock is based on the current market price on the date of grant.

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS - In the ordinary course of business, the Corporation has entered into off-balance sheet financial instruments consisting of commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable.

CASH FLOWS - The Corporation utilizes the net reporting of cash receipts and cash payments for certain deposit and lending activities. Cash equivalents include federal funds sold and all cash and amounts due from depository institutions and interest-bearing deposits in other banks with original maturities of three months or less.

TRUST ASSETS AND INCOME - Assets held by the Corporation in a fiduciary or agency capacity for its customers are not included in the financial statements since such items are not assets of the Corporation. Trust income is recorded on a cash basis, which is not materially different from the accrual basis.

2. 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.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which provides a principles-based framework for revenue recognition that supersedes virtually all previously issued revenue recognition guidance under U.S. GAAP. Additionally, the ASU requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. The core principle of the five-step revenue recognition framework is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In April 2016, the FASB issued ASU 2016-10, which provides clarifying information related to identifying performance obligations and licensing. In May 2016, the FASB issued ASU 2016-12 and in December 2016, the FASB issued ASU 2016-20, which provide clarifying guidance in a few narrow areas and adds some practical expedients to the guidance. In August 2015 the FASB issued ASU 2015-14, which deferred the effective date of the revenue recognition standard by a year, making it applicable for the Corporation in the first quarter 2018 and for the annual period ending December 31, 2018. The amendments should be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the amendments recognized at the date of initial application. Initial adoption of this ASU is not expected to have a significant impact on the Corporation, as recognition of interest income and the larger sources of noninterest income in the Corporation’s current business model would not be impacted by the ASU. The Corporation is in the process of evaluating whether there will be any impact as a result of adopting the amendments.

49

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

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

In March 2016, the FASB issued ASU No. 2016-07, Investments – Equity Method and Joint Ventures. This ASU eliminates the requirement that when an investment qualifies for the equity method as a result of an increase in the level of ownership interest or influence, an investor must adjust the investment, results of operations and retained earnings retroactively as if the equity method had been in effect during all previous periods the investment had been held. The ASU requires the equity method investor to add the cost of acquiring an additional interest in the investee to the basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for the equity method. The ASU further requires that an entity that has an available-for-sale equity security that becomes qualified for the equity method recognize through earnings the unrealized gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. The amendments in this Update are effective for the Corporation for annual and interim periods beginning in the first quarter 2017. The amendments should be applied prospectively upon their effective date. Initial adoption of this ASU in 2017 did not have a significant impact on the Corporation.

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In March 2016, the FASB issued ASU No. 2016-09, Compensation – Stock Compensation. This ASU changes several aspects of accounting for share-based payment transactions, and includes some changes that apply only to nonpublic companies. This Update includes amendments that currently apply, or may apply in the future, to the Corporation related to the following: (1) accounting for the difference between the deduction for tax purposes and the amount of compensation cost recognized for financial reporting purposes; (2) classification of excess tax benefits on the statement of cash flows; (3) accounting for forfeitures; (4) accounting for awards partially settled in cash in excess of the employer’s minimum statutory tax withholding requirements; and (5) classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. The amendments in this Update are effective for the Corporation for annual and interim periods beginning in the first quarter 2017, with earlier adoption permitted. The ASU provides separate transition provisions for each of the amendments. Initial adoption of this ASU in 2017 did not have a significant impact on the Corporation.

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

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

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

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

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

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

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

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

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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 (loss) income. The components of other comprehensive (loss) income, and the related tax effects, are as follows:

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
2016
Unrealized losses on available-for-sale securities:
Unrealized holding losses on available-for-sale securities	$	(4,138	)	$	1,448		$	(2,690	)
Reclassification adjustment for (gains) realized in income		(1,158	)		406			(752	)
Other comprehensive loss on available-for-sale securities		(5,296	)		1,854			(3,442	)
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		46			(16	)		30
Amortization of net transition obligation, prior service cost and net actuarial gain included in net periodic benefit cost		(22	)		8			(14	)
Other comprehensive income on unfunded retirement obligations		24			(8	)		16
Total other comprehensive loss	$	(5,272	)	$	1,846		$	(3,426	)

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
2015
Unrealized losses on available-for-sale securities:
Unrealized holding losses on available-for-sale securities	$	(1,429	)	$	500		$	(929	)
Reclassification adjustment for (gains) realized in income		(2,861	)		1,002			(1,859	)
Other comprehensive loss on available-for-sale securities		(4,290	)		1,502			(2,788	)
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive loss		(135	)		47			(88	)
Amortization of net transition obligation, prior service cost, net actuarial loss and loss on settlement included in net periodic benefit cost		67			(23	)		44
Other comprehensive loss on unfunded retirement obligations		(68	)		24			(44	)
Total other comprehensive loss	$	(4,358	)	$	1,526		$	(2,832	)

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
2014
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	10,774		$	(3,771	)	$	7,003
Reclassification adjustment for (gains) realized in income		(1,104	)		386			(718	)
Other comprehensive income on available-for-sale securities		9,670			(3,385	)		6,285
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		(79	)		28			(51	)
Amortization of net transition obligation, prior service cost, net actuarial loss and loss on settlement included in net periodic benefit cost		184			(65	)		119
Other comprehensive income on unfunded retirement obligations		105			(37	)		68
Total other comprehensive income	$	9,775		$	(3,422	)	$	6,353

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Changes in the components of accumulated other comprehensive income (loss), included in stockholders’ equity, are as follows:

(In Thousands)	Unrealized			Unfunded			Accumulated
	Holding Gains			Pension and			Other
	(Losses)			Postretirement			Comprehensive
	on Securities			Obligations			Income (Loss)
2016
Balance, beginning of period	$	2,493		$	35		$	2,528
Other comprehensive loss before reclassifications		(2,690	)		30			(2,660	)
Amounts reclassified from accumulated other comprehensive (loss) income		(752	)		(14	)		(766	)
Other comprehensive (loss) income		(3,442	)		16			(3,426	)
Balance, end of period	$	(949	)	$	51		$	(898	)
2015
Balance, beginning of period	$	5,281		$	79		$	5,360
Other comprehensive loss before reclassifications		(929	)		(88	)		(1,017	)
Amounts reclassified from accumulated other comprehensive income		(1,859	)		44			(1,815	)
Other comprehensive loss		(2,788	)		(44	)		(2,832	)
Balance, end of period	$	2,493		$	35		$	2,528
2014
Balance, beginning of period	$	(1,004	)	$	11		$	(993	)
Other comprehensive income before reclassifications		7,003			(51	)		6,952
Amounts reclassified from accumulated other comprehensive income		(718	)		119			(599	)
Other comprehensive income		6,285			68			6,353
Balance, end of period	$	5,281		$	79		$	5,360

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

For the Year Ended December 31, 2016
(In Thousands)
	Reclassified from
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Consolidated
Comprehensive Income Components	Comprehensive Income			Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(1,158	)	Realized gains on available-for-sale securities, net
		406		Income tax provision
		(752	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(31	)	Pensions and other employee benefits
Actuarial loss		9		Pensions and other employee benefits
		(22	)	Total before tax
		8		Income tax provision
		(14	)	Net of tax
Total reclassifications for the period	$	(766	)

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For the Year Ended December 31, 2015
(In Thousands)
	Reclassified from
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Consolidated
Comprehensive Income Components	Comprehensive Income			Statements of Income
Unrealized gains and losses on available-for-sale Securities	$	(2,861	)	Realized gains on available-for-sale securities, net
		1,002		Income tax provision
		(1,859	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(31	)	Pensions and other employee benefits
Actuarial loss		11		Pensions and other employee benefits
Loss on settlement		87		Pensions and other employee benefits
		67		Total before tax
		(23	)	Income tax provision
		44		Net of tax
Total reclassifications for the period	$	(1,815	)

For the Year Ended December 31, 2014
(In Thousands)
	Reclassified from
Details about Accumulated Other	Accumulated Other			Affected Line Item in the Consolidated
Comprehensive Income Components	Comprehensive Income			Statements of Income
Unrealized gains and losses on available-for-sale Securities	$	(1,104	)	Realized gains on available-for-sale securities, net
		386		Income tax provision
		(718	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(31	)	Pensions and other employee benefits
Actuarial loss		19		Pensions and other employee benefits
Loss on settlement		196		Pensions and other employee benefits
		184		Total before tax
		(65	)	Income tax provision
		119		Net of tax
Total reclassifications for the period	$	(599	)

4. PER SHARE DATA

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

			Weighted-
			Average			Earnings
	Net		Common			Per
	Income		Shares			Share
2016
Earnings per share – basic	$	15,762,000		12,098,129		$	1.30
Dilutive effect of potential common stock
arising from stock options:
Exercise of outstanding stock options				215,581
Hypothetical share repurchase at $21.23				(185,346	)
Earnings per share – diluted	$	15,762,000		12,128,364		$	1.30

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			Weighted-
			Average			Earnings
	Net		Common			Per
	Income		Shares			Share
2015
Earnings per share – basic	$	16,471,000		12,211,941		$	1.35
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				210,402
Hypothetical share repurchase at $20.04				(188,570	)
Earnings per share – diluted	$	16,471,000		12,233,773		$	1.35
2014
Earnings per share – basic	$	17,086,000		12,390,067		$	1.38
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				224,015
Hypothetical share repurchase at $19.41				(202,032	)
Earnings per share – diluted	$	17,086,000		12,412,050		$	1.38

Stock options that were anti-dilutive were excluded from net income per share calculations. Weighted-average common shares available from anti-dilutive instruments totaled 31,153 shares in 2016, 61,590 shares in 2015 and 151,310 shares in 2014.

5. CASH AND DUE FROM BANKS

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

(In thousands)	Dec. 31,		Dec. 31,
	2016		2015
Cash and cash equivalents	$	28,621	$	33,313
Certificates of deposit		3,488		2,748
Total cash and due from banks	$	32,109	$	36,061

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

The Corporation is required to maintain reserves against deposit liabilities in the form of cash and balances with the Federal Reserve Bank. The reserves are based on deposit levels, account activity, and other services provided by the Federal Reserve Bank. Required reserves were $16,654,000 at December 31, 2016 and $15,327,000 at December 31, 2015.

6. 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 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.

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

			December 31, 2016
	Quoted Prices		Other
	in Active		Observable		Unobservable			Total
	Markets		Inputs		Inputs			Fair
(In Thousands)	(Level 1)		(Level 2)		(Level 3)			Value
Recurring fair value measurements
AVAILABLE-FOR-SALE SECURITIES:
Obligations of U.S. Government agencies	$	0	$	9,541	$	0		$	9,541
Obligations of states and political subdivisions:
Tax-exempt		0		119,037		0			119,037
Taxable		0		30,297		0			30,297
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		58,404		0			58,404
Residential collateralized mortgage obligations		0		146,608		0			146,608
Commercial mortgage-backed securities		0		30,219		0			30,219
Total debt securities		0		394,106		0			394,106
Marketable equity securities		971		0		0			971
Total available-for-sale securities		971		394,106		0			395,077
Servicing rights		0		0		1,262			1,262
Total recurring fair value measurements	$	971	$	394,106	$	1,262		$	396,339
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	3,372		$	3,372
Valuation allowance		0		0		(674	)		(674	)
Impaired loans, net		0		0		2,698			2,698
Foreclosed assets held for sale		0		0		2,180			2,180
Total nonrecurring fair value measurements	$	0	$	0	$	4,878		$	4,878

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

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 less estimated selling costs.

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. The following table shows quantitative information regarding significant techniques and inputs used at December 31, 2016 and 2015 for servicing rights assets measured using unobservable inputs (Level 3 methodologies) on a recurring basis:

	Fair Value at
	12/31/16		Valuation	Unobservable				Method or Value As of
Asset	(In Thousands)		Technique	Input(s)				12/31/16
Servicing rights	$	1,262	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		138.00	%	Weighted-average PSA
				Servicing fees		0.25	%	of loan balances
						4.00	%	of payments are late
						5.00	%	late fees assessed
					$	1.94		Miscellaneous fees per account per month
				Servicing costs	$	6.00		Monthly servicing cost per account
					$	24.00		Additional monthly servicing cost per loan on loans more than 30 days delinquent
						1.50	%	of loans more than 30 days delinquent
						3.00	%	annual increase in servicing costs

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

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

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

(In Thousands)	Years Ended December 31,
	2016			2015			2014
Balance, beginning of period	$	1,296		$	1,281		$	1,123
Issuances of servicing rights		248			177			185
Unrealized losses included in earnings		(282	)		(162	)		(27	)
Balance, end of period	$	1,262		$	1,296		$	1,281

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

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

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

58

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

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

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

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

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

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

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

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

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

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

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

59

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

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

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

(In Thousands)	Valuation	December 31, 2016				December 31, 2015
	Method(s)	Carrying		Fair		Carrying		Fair
	Used	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	28,621	$	28,621	$	33,313	$	33,313
Certificates of deposit	Level 2		3,488		3,481		2,748		2,752
Available-for-sale securities	See Above		395,077		395,077		420,290		420,290
Restricted equity securities (included in Other Assets)	Level 2		4,426		4,426		4,657		4,657
Loans held for sale	Level 2		142		142		280		280
Loans, net	Level 3		743,362		725,787		696,991		685,552
Accrued interest receivable	Level 2		3,963		3,963		3,768		3,768
Servicing rights	Level 3		1,262		1,262		1,296		1,296
Financial liabilities:
Deposits with no stated maturity	Level 2		771,625		771,625		713,931		713,931
Time deposits	Level 2		212,218		212,274		221,684		221,891
Short-term borrowings	Level 2		26,175		26,024		53,496		53,398
Long-term borrowings	Level 2		38,454		39,062		38,767		40,166
Accrued interest payable	Level 2		65		65		70		70

7. SECURITIES

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

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

60

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

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

December 31, 2016	Less Than 12 Months					12 Months or More					Total
(In Thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Obligations of U.S. Government agencies	$	7,899	$	(135	)	$	0	$	0		$	7,899	$	(135	)
Obligations of states and political subdivisions:
Tax-exempt		54,479		(1,676	)		1,278		(19	)		55,757		(1,695	)
Taxable		9,594		(79	)		0		0			9,594		(79	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		48,674		(824	)		0		0			48,674		(824	)
Residential collateralized mortgage obligations		85,198		(1,124	)		16,073		(591	)		101,271		(1,715	)
Commercial mortgage-backed securities		30,219		(598	)		0		0			30,219		(598	)
Total debt securities		236,063		(4,436	)		17,351		(610	)		253,414		(5,046	)
Marketable equity securities		1,000		(29	)		0		0			1,000		(29	)
Total temporarily impaired available-for-sale securities	$	237,063	$	(4,465	)	$	17,351	$	(610	)	$	254,414	$	(5,075	)

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

61

Gross realized gains and losses from available-for-sale securities and the related income tax provision were as follows:

(In Thousands)
	2016			2015			2014
Gross realized gains from sales	$	1,392		$	2,972		$	1,328
Gross realized losses from sales		(234	)		(111	)		(224	)
Net realized gains	$	1,158		$	2,861		$	1,104
Income tax provision related to net realized gains	$	406		$	1,002		$	386

The amortized cost and fair value of available-for-sale debt securities by contractual maturity are shown in the following table as of December 31, 2016. Actual maturities may differ from contractual maturities because counterparties may have the right to call or prepay obligations with or without call or prepayment penalties.

	December 31, 2016
	Amortized		Fair
(In Thousands)	Cost		Value
Due in one year or less	$	18,678	$	18,832
Due from one year through five years		69,558		70,657
Due from five years through ten years		44,527		43,979
Due after ten years		25,121		25,407
Sub-total		157,884		158,875
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		58,922		58,404
Residential collateralized mortgage obligations		147,915		146,608
Commercial mortgage-backed securities		30,817		30,219
Total	$	395,538	$	394,106

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 $230,803,000 at December 31, 2016 and $228,616,000 at December 31, 2015 were pledged as collateral for public deposits, trusts and certain other deposits as provided by law. See Note 12 for information concerning securities pledged to secure borrowing arrangements.

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

The Corporation recognized no net impairment losses in earnings for the years ended December 31, 2016, 2015 and 2014.

A summary of information management considered in evaluating debt and equity securities for OTTI at December 31, 2016 is provided below.

Debt Securities

At December 31, 2016 and 2015, 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 these debt securities at December 31, 2016 to be temporary.

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Equity Securities

The Corporation’s marketable equity securities at December 31, 2016 consisted exclusively of one mutual fund. At December 31, 2015, the Corporation’s marketable equity securities consisted of stocks of banking companies. The Corporation recognized no other-than-temporary impairment losses related to equities in 2016, 2015 or 2014. At December 31, 2016, the mutual fund held by the Corporation had an unrealized loss of $29,000 for which management determined an OTTI charge was not required.

Realized gains from sales of equity securities (bank stocks) totaled $1,125,000 in 2016, $2,220,000 in 2015 and $363,000 in 2014.

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 sheets, was $4,296,000 at December 31, 2016 and $4,527,000 at December 31, 2015. The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at December 31, 2016 and December 31, 2015. In making this determination, management concluded that recovery of total outstanding par value, which equals the carrying value, is expected. The decision was based on review of financial information that FHLB-Pittsburgh has made publicly available.

8. LOANS

Loans outstanding at December 31, 2016 and 2015 are summarized as follows:

Summary of Loans by Type
(In Thousands)	Dec. 31,			Dec. 31,
	2016			2015
Residential mortgage:
Residential mortgage loans - first liens	$	334,102		$	304,783
Residential mortgage loans - junior liens		23,706			21,146
Home equity lines of credit		38,057			39,040
1-4 Family residential construction		24,908			21,121
Total residential mortgage		420,773			386,090
Commercial:
Commercial loans secured by real estate		150,468			154,779
Commercial and industrial		83,854			75,196
Political subdivisions		38,068			40,007
Commercial construction and land		14,287			5,122
Loans secured by farmland		7,294			7,019
Multi-family (5 or more) residential		7,896			9,188
Agricultural loans		3,998			4,671
Other commercial loans		11,475			12,152
Total commercial		317,340			308,134
Consumer		13,722			10,656
Total		751,835			704,880
Less: allowance for loan losses		(8,473	)		(7,889	)
Loans, net	$	743,362		$	696,991

The Corporation grants loans to individuals as well as commercial and tax-exempt entities. Commercial, residential and personal loans are made to customers geographically concentrated in the Pennsylvania and New York counties that make up 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 December 31, 2016.

63

Transactions within the allowance for loan losses, summarized by segment and class, were as follows:

Year Ended December 31, 2016	Dec. 31										Dec. 31
(In Thousands)	2015 Balance		Charge- offs			Recoveries		Provision (Credit)			2016 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,645	$	(73	)	$	3	$	458		$	3,033
Residential mortgage loans - junior liens		219		0			0		39			258
Home equity lines of credit		347		0			0		3			350
1-4 Family residential construction		207		0			0		42			249
Total residential mortgage		3,418		(73	)		3		542			3,890
Commercial:
Commercial loans secured by real estate		1,939		0			2		439			2,380
Commercial and industrial		981		(2	)		3		17			999
Political subdivisions		0		0			0		0			0
Commercial construction and land		58		0			30		74			162
Loans secured by farmland		106		0			0		4			110
Multi-family (5 or more) residential		675		(595	)		0		161			241
Agricultural loans		45		0			0		(5	)		40
Other commercial loans		118		0			0		(3	)		115
Total commercial		3,922		(597	)		35		687			4,047
Consumer		122		(87	)		82		21			138
Unallocated		427		0			0		(29	)		398
Total Allowance for Loan Losses	$	7,889	$	(757	)	$	120	$	1,221		$	8,473

Year Ended December 31, 2015	Dec. 31,										Dec. 31,
(In Thousands)	2014 Balance		Charge- offs			Recoveries		Provision (Credit)			2015 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,941	$	(175	)	$	1	$	(122	)	$	2,645
Residential mortgage loans - junior liens		176		(42	)		0		85			219
Home equity lines of credit		322		0			0		25			347
1-4 Family residential construction		214		0			0		(7	)		207
Total residential mortgage		3,653		(217	)		1		(19	)		3,418
Commercial:
Commercial loans secured by real estate		1,758		(115	)		208		88			1,939
Commercial and industrial		688		(21	)		6		308			981
Political subdivisions		0		0			0		0			0
Commercial construction and land		283		(115	)		0		(110	)		58
Loans secured by farmland		165		0			0		(59	)		106
Multi-family (5 or more) residential		87		0			0		588			675
Agricultural loans		31		0			0		14			45
Other commercial loans		131		0			0		(13	)		118
Total commercial		3,143		(251	)		214		816			3,922
Consumer		145		(94	)		55		16			122
Unallocated		395		0			0		32			427
Total Allowance for Loan Losses	$	7,336	$	(562	)	$	270	$	845		$	7,889

64

Year Ended December 31, 2014	Dec. 31,										Dec. 31,
(In Thousands)	2013 Balance		Charge- offs			Recoveries		Provision (Credit)			2014 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,974	$	(164	)	$	25	$	106		$	2,941
Residential mortgage loans - junior liens		294		(101	)		0		(17	)		176
Home equity lines of credit		269		(62	)		0		115			322
1-4 Family residential construction		168		0			0		46			214
Total residential mortgage		3,705		(327	)		25		250			3,653
Commercial:
Commercial loans secured by real estate		3,123		(1,521	)		250		(94	)		1,758
Commercial and industrial		591		(24	)		9		112			688
Political subdivisions		0		0			0		0			0
Commercial construction and land		267		(170	)		5		181			283
Loans secured by farmland		115		0			0		50			165
Multi-family (5 or more) residential		103		0			0		(16	)		87
Agricultural loans		30		0			0		1			31
Other commercial loans		138		0			0		(7	)		131
Total commercial		4,367		(1,715	)		264		227			3,143
Consumer		193		(97	)		47		2			145
Unallocated		398		0			0		(3	)		395
Total Allowance for Loan Losses	$	8,663	$	(2,139	)	$	336	$	476		$	7,336

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.

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

65

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

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

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

66

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

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

December 31, 2016	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	753	$	333,349	$	334,102	$	0	$	3,033	$	3,033
Residential mortgage loans - junior liens		68		23,638		23,706		0		258		258
Home equity lines of credit		0		38,057		38,057		0		350		350
1-4 Family residential construction		0		24,908		24,908		0		249		249
Total residential mortgage		821		419,952		420,773		0		3,890		3,890
Commercial:
Commercial loans secured by real estate		8,005		142,463		150,468		528		1,852		2,380
Commercial and industrial		212		83,642		83,854		95		904		999
Political subdivisions		0		38,068		38,068		0		0		0
Commercial construction and land		0		14,287		14,287		0		162		162
Loans secured by farmland		1,394		5,900		7,294		51		59		110
Multi-family (5 or more) residential		392		7,504		7,896		0		241		241
Agricultural loans		13		3,985		3,998		0		40		40
Other commercial loans		0		11,475		11,475		0		115		115
Total commercial		10,016		307,324		317,340		674		3,373		4,047
Consumer		23		13,699		13,722		0		138		138
Unallocated												398
Total	$	10,860	$	740,975	$	751,835	$	674	$	7,401	$	8,473

67

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

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

(In Thousands)	December 31, 2016						December 31, 2015
	Unpaid						Unpaid
	Principal		Recorded		Related		Principal		Recorded		Related
	Balance		Investment		Allowance		Balance		Investment		Allowance
With no related allowance recorded:
Residential mortgage loans - first liens	$	783	$	753	$	0	$	842	$	842	$	0
Residential mortgage loans - junior liens		68		68		0		74		74		0
Commercial loans secured by real estate		6,975		5,232		0		7,580		5,945		0
Commercial and industrial		117		117		0		249		249		0
Loans secured by farmland		890		890		0		915		915		0
Multi-family (5 or more) residential		987		392		0		0		0		0
Agricultural loans		13		13		0		16		16		0
Consumer		23		23		0		0		0		0
Total with no related allowance recorded		9,856		7,488		0		9,676		8,041		0
With a related allowance recorded:
Residential mortgage loans - first liens		0		0		0		42		42		1
Commercial loans secured by real estate		2,773		2,773		528		317		317		97
Commercial and industrial		95		95		95		75		75		75
Loans secured by farmland		504		504		51		512		512		52
Multi-family (5 or more) residential		0		0		0		987		987		595
Total with a related allowance recorded		3,372		3,372		674		1,933		1,933		820
Total	$	13,228	$	10,860	$	674	$	11,609	$	9,974	$	820

68

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)	Year Ended December 31,						Year Ended December 31,
	2016		2015		2014		2016		2015		2014
Residential mortgage:
Residential mortgage loans - first lien	$	806	$	2,206	$	4,272	$	43	$	86	$	81
Residential mortgage loans - junior lien		71		64		168		3		4		3
Total residential mortgage		877		2,270		4,440		46		90		84
Commercial:
Commercial loans secured by real estate		6,806		6,357		7,192		495		380		469
Commercial and industrial		547		438		877		20		20		37
Commercial construction and land		0		40		395		0		0		9
Loans secured by farmland		1,409		1,459		1,413		94		103		101
Multi-family (5 or more) residential		511		790		0		0		0		0
Agricultural loans		14		21		41		1		3		3
Total commercial		9,287		9,105		9,918		610		506		619
Consumer		21		0		1		1		0		0
Total	$	10,185	$	11,375	$	14,359	$	657	$	596	$	703

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)	December 31, 2016				December 31, 2015
	Past Due				Past Due
	90+ Days and				90+ Days and
	Accruing		Nonaccrual		Accruing		Nonaccrual
Residential mortgage:
Residential mortgage loans - first liens	$	3,022	$	3,770	$	2,381	$	3,044
Residential mortgage loans - junior liens		114		0		79		0
Home equity lines of credit		320		11		130		0
Total residential mortgage		3,456		3,781		2,590		3,044
Commercial:
Commercial loans secured by real estate		2,774		3,080		503		5,730
Commercial and industrial		286		119		65		313
Loans secured by farmland		219		1,331		0		1,427
Multi-family (5 or more) residential		0		392		0		987
Agricultural loans		0		13		0		16
Total commercial		3,279		4,935		568		8,473
Consumer		103		20		71		0
Totals	$	6,838	$	8,736	$	3,229	$	11,517

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

69

The tables below present a summary of the contractual aging of loans as of December 31, 2016 and 2015:

	As of December 31, 2016								As of December 31, 2015
	Current &								Current &
(In Thousands)	Past Due		Past Due		Past Due				Past Due		Past Due		Past Due
	Less than		30-89		90+				Less than		30-89		90+
	30 Days		Days		Days		Total		30 Days		Days		Days		Total
Residential mortgage:
Residential mortgage loans - first liens	$	321,670	$	6,695	$	5,737	$	334,102	$	294,703	$	6,156	$	3,924	$	304,783
Residential mortgage loans - junior liens		23,268		324		114		23,706		20,816		251		79		21,146
Home equity lines of credit		37,603		134		320		38,057		38,581		329		130		39,040
1-4 Family residential construction		24,567		341		0		24,908		21,121		0		0		21,121
Total residential mortgage		407,108		7,494		6,171		420,773		375,221		6,736		4,133		386,090
Commercial:
Commercial loans secured by real estate		147,464		82		2,922		150,468		153,427		108		1,244		154,779
Commercial and industrial		83,364		185		305		83,854		75,002		118		76		75,196
Political subdivisions		38,068		0		0		38,068		40,007		0		0		40,007
Commercial construction and land		14,199		88		0		14,287		5,018		104		0		5,122
Loans secured by farmland		6,181		83		1,030		7,294		5,970		223		826		7,019
Multi-family (5 or more) residential		7,439		65		392		7,896		8,201		0		987		9,188
Agricultural loans		3,981		4		13		3,998		4,642		13		16		4,671
Other commercial loans		11,475		0		0		11,475		12,152		0		0		12,152
Total commercial		312,171		507		4,662		317,340		304,419		566		3,149		308,134
Consumer		13,446		153		123		13,722		10,537		48		71		10,656
Totals	$	732,725	$	8,154	$	10,956	$	751,835	$	690,177	$	7,350	$	7,353	$	704,880

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

	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Total
December 31, 2016 Nonaccrual Totals	$	4,199	$	419	$	4,118	$	8,736
December 31, 2015 Nonaccrual Totals	$	7,100	$	293	$	4,124	$	11,517

Loans whose terms are modified are classified as Troubled Debt Restructurings (TDRs) if the Corporation grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Loans classified as TDRs are designated as impaired and reviewed each quarter to determine if a specific allowance for loan losses is required. The outstanding balance of loans subject to TDRs, as well as the contractual aging information at December 31, 2016 and 2015 is as follows:

Troubled Debt Restructurings (TDRs):
	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Nonaccrual		Total
December 31, 2016 Totals	$	5,453	$	350	$	0	$	2,874	$	8,677
December 31, 2015 Totals	$	1,186	$	0	$	81	$	5,097	$	6,364

At December 31, 2016 and 2015, there were no commitments to loan additional funds to borrowers whose loans have been classified as TDRs.

70

A summary of TDRs that occurred during 2016, 2015 and 2014 is as follows:

(Balances in Thousands)
	2016				2015				2014
			Post-				Post-				Post-
	Number		Modification		Number		Modification		Number		Modification
	of		Recorded		of		Recorded		Of		Recorded
	Loans		Investment		Loans		Investment		Loans		Investment
Residential mortgage - first liens:
Extended maturity with interest rate reduction		1	$	71		1	$	56		1	$	83
Extended maturity with reduced monthly payments		1		26		0		0		0		0
Interest only payments for a period of one year		0		0		0		0		1		34
Reduced monthly payments for a six-month period		0		0		1		242		1		33
Residential mortgage - junior liens,
Interest rate and monthly payment reduction		0		0		1		32		0		0
Commercial loans secured by real estate:
Interest only payments for a period of one year		1		2,773		0		0		0		0
Reduced monthly payments		0		0		0		0		5		5,193
Commercial and industrial:
Extended maturity		1		5		0		0		0		0
Reduced monthly payments		0		0		0		0		1		80
Consumer:
Interest rate and monthly payment reduction		0		0		1		30		0		0
New unsecured loan after short-fall from sale   of property		1		24		0		0		0		0
Total		5	$	2,899		4	$	360		9	$	5,423

In 2014, the TDRs for commercial loans relate to six contracts associated with one relationship. The Corporation entered into a forbearance agreement with this commercial borrower which included a reduction in monthly payment amounts over a fifteen-month period. At the end of the fifteen-month period, the monthly payment amounts would revert to the original amounts, unless the forbearance agreement was extended or the payment requirements otherwise modified. The forbearance agreement was extended for two additional twelve-month periods, most recently in July 2016. The Corporation recorded a charge-off of $1,486,000 in 2014 as a result of these modifications, as the payment amounts based on the forbearance agreement were not sufficient to fully amortize the contractual amount of principal outstanding on the loans. The amount of the charge-off was determined based on the excess of the contractual principal due over the present value of the payment amounts provided for in the forbearance agreement, assuming the revised payment amounts would continue until maturity, at the contractual interest rates. In December 2016, the Corporation and the borrower entered into a modification agreement, terminating the forbearance agreement and establishing loan terms with essentially the same interest rate and monthly payment amounts as had been in effect under the forbearance agreement. The weighted average maturity of the loan contracts has been extended under the modification agreement as compared to the maturities provided for in the original loan contracts. At December 31, 2016, the outstanding contractual balances of these loans total $6,529,000, and the recorded investments total $4,786,000. These loans are still classified as TDRs at December 31, 2016.

Except for the 2014 TDRs described in the immediately preceding paragraph, there were no differences between the outstanding contractual amounts and the recorded investments in receivables resulting from TDRs occurring in 2016, 2015 and 2014.

71

For 2016, 2015 and 2014, defaults on loans for which modifications considered to be TDRs were entered into within the previous 12 months are summarized as follows:

(Balances in Thousands)

	2016				2015				2014
	Number				Number				Number
	of		Recorded		of		Recorded		of		Recorded
	Loans		Investment		Loans		Investment		Loans		Investment
Residential mortgage - first liens		2	$	294		1	$	32		3	$	257
Residential mortgage - junior liens		1		29		0		0		1		62
Commercial loans secured by real estate		0		0		0		0		1		429
Commercial and industrial		1		5		0		0		0		0
Commercial construction and land		0		0		0		0		1		25
Loans secured by farmland		0		0		0		0		4		490
Agricultural loans		0		0		0		0		1		13
Consumer		1		27		0		0		0		0
Total		5	$	355		1	$	32		11	$	1,276

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 consolidated balance sheets) is as follows:

(In Thousands)	Dec. 31,		Dec. 31,
	2016		2015
Foreclosed residential real estate	$	1,102	$	555

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

(In Thousands)	Dec. 31,		Dec. 31,
	2016		2015
Residential real estate in process of foreclosure	$	2,738	$	1,173

9. BANK PREMISES AND EQUIPMENT

Bank premises and equipment are summarized as follows:

(In Thousands)	December 31,
	2016			2015
Land	$	2,818		$	2,818
Buildings and improvements		27,619			27,092
Furniture and equipment		18,741			17,922
Construction in progress		392			243
Total		49,570			48,075
Less: accumulated depreciation		(34,173	)		(32,669	)
Net	$	15,397		$	15,406

Depreciation expense included in occupancy expense and furniture and equipment expense was as follows:

(In Thousands)	2016		2015		2014
Occupancy expense	$	804	$	954	$	998
Furniture and equipment expense		785		934		942
Total	$	1,589	$	1,888	$	1,940

10. INTANGIBLE ASSETS

There were no changes in the carrying amount of goodwill in 2016 and 2015. The balance in goodwill was $11,942,000 at December 31, 2016 and 2015. The Corporation did not complete any acquisitions in 2016 or 2015.

72

In testing goodwill for impairment as of December 31, 2016, the Corporation assessed qualitative factors to determine whether it is more likely than not that the fair value of its only reporting unit, its community banking operation, is less than its carrying amount. The qualitative factors assessed included the Corporation’s recent financial performance, economic conditions in the Corporation’s market area, macroeconomic conditions and other factors. Based on the assessment of qualitative factors, the Corporation determined that it is not more likely than not that the fair value of the community banking operation has fallen below its carrying value, and therefore, the Corporation did not perform the more detailed, two-step goodwill impairment test described in Topic 350. Accordingly, there was no goodwill impairment as of December 31, 2016.

Information related to the core deposit intangibles is as follows:

	December 31,
(In Thousands)	2016			2015
Gross amount	$	2,034		$	2,034
Less: accumulated amortization		(2,017	)		(2,004	)
Net	$	17		$	30

Amortization expense was $13,000 in 2016, $22,000 in 2015 and $35,000 in 2014. The amount of amortization expense to be recognized each of the ensuing five years is not significant.

11. DEPOSITS

At December 31, 2016, the scheduled maturities of time deposits are as follows:

(In Thousands)
	2017	$	113,974
	2018		51,526
	2019		25,302
	2020		14,458
	2021		6,710
	Thereafter		248
	Total	$	212,218

Included in interest-bearing deposits are time deposits in the amount of $100,000 or more. As of December 31, 2016, the remaining maturities or time to next re-pricing of time deposits of $100,000 or more are as follows:

(In Thousands)
Three months or less	$	32,987
Over 3 months through 12 months		11,663
Over 1 year through 3 years		11,508
Over 3 years		7,605
Total	$	63,763

Interest expense from time deposits of $100,000 or more amounted to $524,000 in 2016, $482,000 in 2015 and $563,000 in 2014.

Time deposits of more than $250,000 totaled $7,929,000 at December 31, 2016 and $6,531,000 at December 31, 2015.

12. BORROWED FUNDS

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

(In Thousands)	Dec. 31,		Dec. 31,
	2016		2015
FHLB-Pittsburgh borrowings	$	21,000	$	48,581
Customer repurchase agreements		5,175		4,915
Total short-term borrowings	$	26,175	$	53,496

73

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

(In Thousands)	Dec. 31,		Dec. 31
	2016		2015
Overnight borrowing	$	21,000	$	23,500
Other short-term advances		0		25,081
Total short-term FHLB-Pittsburgh borrowings	$	21,000	$	48,581

The weighted average interest rate on total short-term borrowings outstanding was 0.61% at December 31, 2016 and 0.60% at December 31, 2015. The maximum amount of total short-term borrowings outstanding at any month-end was $47,005,000 in 2016, $53,496,000 in 2015 and $7,919,000 in 2014.

The Corporation had available credit with other correspondent banks totaling $45,000,000 at December 31, 2016 and 2015. These lines of credit are primarily unsecured. No amounts were outstanding at December 31, 2016 or 2015.

The Corporation has a line of credit with the Federal Reserve Bank of Philadelphia’s Discount Window. At December 31, 2016, the Corporation had available credit in the amount of $15,636,000 on this line with no outstanding advances. At December 31, 2015, the Corporation had available credit in the amount of $19,606,000 on this line with no outstanding advances. As collateral for this line, the Corporation has pledged available-for-sale securities with a carrying value of $17,690,000 at December 31, 2016 and $20,039,000 at December 31, 2015.

The FHLB-Pittsburgh loan facility is collateralized by qualifying loans secured by real estate with a book value totaling $471,454,000 at December 31, 2016 and $450,883,000 at December 31, 2015. Also, the FHLB-Pittsburgh loan facility requires 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 $4,296,000 at December 31, 2016 and $4,527,000 at December 31, 2015. The Corporation’s total credit facility with FHLB-Pittsburgh was $339,221,000 at December 31, 2016, including an unused (available) amount of $306,767,000. At December 31, 2015, the Corporation’s total credit facility with FHLB-Pittsburgh was $322,709,000, including an unused (available) amount of $262,361,000.

At December 31, 2016, the overnight borrowing from FHLB-Pittsburgh of $21,000,000 had an interest rate of 0.74%. At December 31, 2015, the overnight borrowing from FHLB-Pittsburgh of $23,500,000 had an interest rate of 0.43%, and the other short-term advances included 12 advances of $2,090,000 each maturing monthly throughout 2016, with a weighted average interest rate of 0.86% and rates ranging from 0.54% to 1.052%.

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 rate paid by the Corporation on customer repurchase agreements was 0.10% at December 31, 2016 and December 31, 2015. The carrying value of the underlying securities was $15,019,000 at December 31, 2016 and $12,613,000 at December 31, 2015.

LONG-TERM BORROWINGS
Long-term borrowings (initial maturity of greater than one year) are as follows:
(In Thousands)		Dec. 31,		Dec. 31,
		2016		2015
FHLB-Pittsburgh borrowings	$	11,454	$	11,767
Repurchase agreements		27,000		27,000
Total long-term borrowings	$	38,454	$	38,767
Long-term borrowings from FHLB - Pittsburgh are as follows:
(In Thousands)		Dec. 31,		Dec. 31,
		2016		2015
Loan maturing in 2016 with a rate of 6.86%	$	0	$	57
Loan maturing in 2017 with a rate of 6.83%		4		10
Loan maturing in 2017 with a rate of 3.81%		10,000		10,000
Loan maturing in 2020 with a rate of 4.79%		646		821
Loan maturing in 2025 with a rate of 4.91%		804		879
Total long-term FHLB-Pittsburgh borrowings	$	11,454	$	11,767

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

74

In 2015, the Corporation incurred losses totaling $2,573,000 on prepayment of $34,000,000 of a repurchase agreement with an interest rate of 4.265%.

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

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

The carrying value of the underlying securities was $31,494,000 at December 31, 2016 and $33,780,000 at December 31, 2015, as detailed in the following table:

(In Thousands)	Dec. 31,		Dec. 31,
	2016		2015
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities	$	18,181	$	15,772
Residential collateralized mortgage obligations		13,313		18,008
Total	$	31,494	$	33,780

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

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

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

Average daily repurchase agreement borrowings amounted to $27,000,000 in 2016, $54,304,000 in 2015 and $61,000,000 in 2014. The maximum amounts of outstanding borrowings under repurchase agreements with broker-dealers were $27,000,000 in 2016 and $61,000,000 in 2015 and in 2014. The weighted average interest rate on repurchase agreements was 3.60% in 2016, 3.99% in 2015 and 4.02% in 2014.

13. EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS

DEFINED BENEFIT PLANS

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

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

The following table shows the funded status of the defined benefit plans:

(In Thousands)

	Pension						Postretirement
	2016			2015			2016			2015
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year	$	722		$	1,085		$	1,539		$	1,378
Service cost		0			0			37			38
Interest cost		26			36			62			57
Plan participants' contributions		0			0			215			203
Actuarial loss (gain)		3			(46	)		(30	)		120
Benefits paid		(38	)		(16	)		(268	)		(257	)
Settlement of plan obligation		0			(337	)		0			0
Benefit obligation at end of year	$	713		$	722		$	1,555		$	1,539
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year	$	839		$	1,208		$	0		$	0
Actual return on plan assets		45			(16	)		0			0
Employer contribution		0			0			53			54
Plan participants' contributions		0			0			215			203
Benefits paid		(38	)		(16	)		(268	)		(257	)
Settlement of plan obligation		0			(337	)		0			0
Fair value of plan assets at end of year	$	846		$	839		$	0		$	0
Funded status at end of year	$	133		$	117		($	1,555	)	($	1,539	)

At December 31, 2016 and 2015, the following pension plan and postretirement plan asset and liability amounts were recognized in the consolidated balance sheets:

Assets and liabilities:
(In Thousands)	Pension				Postretirement
	2016		2015		2016		2015
Other assets	$	133	$	117
Accrued interest and other liabilities					$	1,555	$	1,539

At December 31, 2016 and 2015, the following items included in accumulated other comprehensive income had not been recognized as components of expense:

Items not yet recognized as a component
of net periodic benefit cost:
(In Thousands)	Pension				Postretirement
	2016		2015		2016			2015
Prior service cost	$	0	$	0	$	(340	)	$	(371	)
Net actuarial loss		161		186		101			131
Total	$	161	$	186	$	(239	)	$	(240	)

For the defined benefit pension plan, amortization of the net actuarial loss is expected to be $7,000 in 2017. For the postretirement plan, the estimated amount of prior service cost that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2017 is a reduction in expense of $31,000, and no net actuarial loss is expected to be amortized in 2017.

The accumulated benefit obligation for the defined benefit pension plan was $713,000 at December 31, 2016 and $722,000 at December 31, 2015.

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

(In Thousands)	Pension									Postretirement
	2016			2015			2014			2016			2015			2014
Service cost	$	0		$	0		$	0		$	37		$	38		$	34
Interest cost		26			36			73			62			57			57
Expected return on plan assets		(26	)		(45	)		(88	)		0			0			0
Amortization of prior service cost		0			0			0			(31	)		(31	)		(31	)
Recognized net actuarial loss		9			11			19			0			0			0
Loss on settlement		0			87			196			0			0			0
Total net periodic benefit cost	$	9		$	89		$	200		$	68		$	64		$	60

In 2015, there was a distribution from the pension plan of $337,000, or 32% of the plan’s total accumulated benefit obligation prior to the distribution. The Corporation recognized a loss of $87,000 (included in net periodic benefit cost) in 2015 as a result of this settlement. In 2014, there was a distribution from the pension plan of $781,000, or 42% of the plan’s total accumulated benefit obligation prior to the distribution. The Corporation recognized a loss of $196,000 (included in net periodic benefit cost) in 2014 as a result of this settlement.

The weighted-average assumptions used to determine net periodic benefit cost are as follows:

	Pension									Postretirement
	2016			2015			2014			2016			2015			2014
Discount rate		4.30	%		3.75	%		4.50	%		4.25	%		4.00	%		4.00	%
Expected return on plan assets		5.00	%		5.31	%		5.31	%		N/A			N/A			N/A
Rate of compensation increase		N/A			N/A			N/A			N/A			N/A			N/A

The weighted-average assumptions used to determine benefit obligations as of December 31, 2016 and 2015 are as follows:

	Pension						Postretirement
	2016			2015			2016			2015
Discount rate		4.05	%		4.30	%		4.25	%		4.25	%
Rate of compensation increase		N/A			N/A			N/A			N/A

Estimated future benefit payments, including only estimated employer contributions for the postretirement plan, which reflect expected future service, are as follows:

(In Thousands)		Pension		Postretirement
	2017	$	222	$	99
	2018		15		103
	2019		39		108
	2020		12		114
	2021		12		114
	2022-2026		220		563

No estimated minimum contribution to the defined benefit pension plan is required in 2017, though the Corporation may make discretionary contributions.

The expected return on pension plan assets is a significant assumption used in the calculation of net periodic benefit cost. This assumption reflects the average long-term rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the projected benefit obligation.

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The fair values of pension plan assets at December 31, 2016 and 2015 are as follows:

	2016			2015
Mutual funds invested principally in:
Cash and cash equivalents		2	%		2	%
Debt securities		38	%		38	%
Equity securities		44	%		46	%
Alternative funds		16	%		14	%
Total		100	%		100	%

C&N Bank’s Trust and Financial Management Department manages the investment of the pension plan assets. The Plan’s securities include mutual funds invested principally in debt securities, a diversified mix of large, mid- and small-capitalization U.S. stocks, foreign stocks and alternative asset classes such as real estate, commodities, and inflation-protected securities. The fair values of plan assets are determined based on Level 1 inputs (as described in Note 6). At December 31, 2016, the targeted asset allocation of mutual funds for the pension plan was 44% equity securities, 38% debt securities, 16% alternative assets, and 2% cash. At December 31, 2015, the targeted asset allocation of mutual funds for the pension plan was 46% equity securities, 38% debt securities, 14% alternative assets and 2% cash. The pension plan’s assets do not include any shares of the Corporation’s common stock.

PROFIT SHARING AND DEFERRED COMPENSATION PLANS

The Corporation has a profit sharing plan that incorporates the deferred salary savings provisions of Section 401(k) of the Internal Revenue Code. The Corporation’s matching contributions to the Plan depend upon the tax deferred contributions of employees. The Corporation’s total basic and matching contributions were $646,000 in 2016, $609,000 in 2015 and $595,000 in 2014.

The Corporation has an Employee Stock Ownership Plan (ESOP). Contributions to the ESOP are discretionary, and the ESOP uses funds contributed to purchase Corporation stock for the accounts of ESOP participants. These purchases are made on the market (not directly from the Corporation), and employees are not permitted to purchase Corporation stock under the ESOP. The ESOP includes a diversification feature, which allows participants, upon reaching age 55 and 10 years of service (as defined), to sell up to 50% of their Corporation shares back to the ESOP over a period of 6 years. As of December 31, 2016 and 2015, there were no shares allocated for repurchase by the ESOP.

Dividends paid on shares held by the ESOP are charged to retained earnings. All Corporation shares owned through the ESOP are included in the calculation of weighted-average shares outstanding for purposes of calculating earnings per share - basic and diluted. The ESOP held 417,753 shares of Corporation stock at December 31, 2016 and 410,004 shares at December 31, 2015, all of which had been allocated to Plan participants. The Corporation’s contributions to the ESOP totaled $549,000 in 2016, $522,000 in 2015 and $512,000 in 2014.

The Corporation has a nonqualified supplemental deferred compensation arrangement with its key officers. Charges to operating expense for officers’ supplemental deferred compensation were $184,000 in 2016, $167,000 in 2015 and $138,000 in 2014.

In December 2015, the Corporation established a nonqualified deferred compensation plan that allows selected officers, beginning in 2016, the option to defer receipt of cash compensation, including base salary and any cash bonuses or other cash incentives. This nonqualified deferred compensation plan does not provide for Corporation contributions.

STOCK-BASED COMPENSATION PLANS

The Corporation has a Stock Incentive Plan for a selected group of senior officers. A total of 850,000 shares of common stock may be issued under the Stock Incentive Plan. Awards may be made under the Stock Incentive Plan in the form of qualified options (“Incentive Stock Options,” as defined in the Internal Revenue Code), nonqualified options, stock appreciation rights or restricted stock. Historically through December 31, 2016, all awards made under this Plan have consisted of Incentive Stock Options or restricted stock. Incentive Stock Options have an exercise price equal to the market value of the stock at the date of grant, vest after 6 months and expire after 10 years. There are 280,682 shares available for issuance under the Stock Incentive Plan as of December 31, 2016.

Also, the Corporation has an Independent Directors Stock Incentive Plan. This plan permits awards of nonqualified stock options and/or restricted stock to non-employee directors. A total of 135,000 shares of common stock may be issued under the Independent Directors Stock Incentive Plan. The recipients’ rights to exercise stock options under this plan expire 10 years from the date of grant. The exercise prices of all stock options awarded under the Independent Directors Stock Incentive Plan are equal to market value as of the dates of grant. There are 21,868 shares available for issuance under the Independent Directors Stock Incentive Plan as of December 31, 2016.

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Total stock-based compensation expense is as follows:

(In Thousands)	2016		2015		2014
Restricted stock	$	578	$	606	$	412
Stock options		0		0		153
Total	$	578	$	606	$	565

The following summarizes non-vested restricted stock activity for the year ended December 31, 2016:

				Weighted
				Average
	Number			Grant Date
	of Shares			Fair Value
Outstanding, December 31, 2015		62,212		$	20.10
Granted		35,427		$	20.42
Vested		(30,846	)	$	19.90
Forfeited		(3,431	)	$	20.41
Outstanding, December 31, 2016		63,362		$	20.35

Compensation cost related to restricted stock is recognized based on the market price of the stock at the grant date over the vesting period, adjusted for estimated and actual forfeitures. As of December 31, 2016, there was $662,000 total unrecognized compensation cost related to restricted stock, which is expected to be recognized over a weighted average period of 1.4 years.

In 2016, the Corporation awarded a total of 27,593 shares of restricted stock under the Stock Incentive Plan. Restricted stock awards under the Stock Incentive Plan in 2016 included the following: (1) a total of 17,289 shares to Executive Officers, vesting over a three-year term, with vesting for half of the shares dependent on satisfactory performance (time vesting) and vesting for half of the shares based on time vesting and upon the Corporation meeting an annual return on average equity (“ROAE”) performance ratio, as defined; and (2) a total of 10,304 shares to other employees, with time vesting over a three-year term. The Corporation did not meet the performance condition defined in the 2016 awards, as the Corporation’s return on average equity (“ROAE”) was in the 47^th percentile of the defined Peer Group’s results for the 12-month period ended September 30, 2016. The minimum level for satisfying the performance condition defined in the 2016 awards was an ROAE at the 50^th percentile of the Peer Group’s results. For purposes of the 2016 awards, the Peer Group included all publicly traded commercial banks and bank holding companies with headquarters in Pennsylvania, New York, New Jersey and Ohio, and total assets ranging between $750 million and $3.5 billion as of the beginning of the applicable period.

Restricted stock awards in 2015 included the following: (1) a total of 20,298 shares to employees, vesting over a four-year term, with vesting of all of the applicable shares contingent upon the Corporation meeting an annual ROAE performance ratio, as defined; (2) a total of 2,198 shares to employees, with time vesting over a four-year term; and (3) an award to the Chief Executive Officer of 5,174 shares, with time vesting over a three-year term. Most of the restricted stock awards issued under this Plan in 2015, 2014 and 2013 include a condition that the Corporation must meet an annual targeted ROAE performance ratio, as defined, in order for participants to vest. In 2016, 2015 and 2014, the Corporation met the ROAE target applicable to awards granted prior to 2016, which is based on the Corporation’s ROAE for 12-month periods ended September 30 of each year as compared to the applicable peer group of bank holding companies based in Pennsylvania and one local competitor based in New York with total assets of $750 million to $2 billion as of the beginning of each applicable period. For 2016, 2015 and 2014 restricted stock awards to individuals who are substantially involved in mortgage lending, vesting is not dependent on the Corporation’s ROAE.

In 2016, a total of 7,834 restricted shares were granted under the Independent Directors Stock Incentive Plan, subject to time vesting over a term of one year. In 2015, a total of 7,130 restricted shares were granted under the Independent Directors Stock Incentive Plan, also with time vesting over a term of one year.

There were no stock options granted in 2016 or 2015. The Corporation recorded stock option expense in 2014 based on estimated fair value calculated using the Black-Scholes-Merton option-pricing model with the following assumptions:

	2014
Volatility		39	%
Expected option lives		8 Years
Risk-free interest rate		2.85	%
Dividend yield		4.33	%

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Management estimated the lives for options based on the Corporation’s average historical experience with both plans. The Corporation utilized its historical volatility and dividend yield over the immediately prior 8-year period to estimate future levels of volatility and dividend yield for the 2014 awards. The risk-free interest rate was based on the published yield of zero-coupon U.S. Treasury strips as of the grant date, with a maturity coinciding with the estimated option lives.

A summary of stock option activity is presented below:

	2016					2015					2014
				Weighted					Weighted					Weighted
				Average					Average					Average
				Exercise					Exercise					Exercise
	Shares			Price		Shares			Price		Shares			Price
Outstanding, beginning of year		248,486		$	18.59		316,157		$	19.05		358,176		$	19.03
Granted		0					0					39,027		$	20.45
Exercised		(35,880	)	$	18.86		(29,557	)	$	17.56		(50,415	)	$	17.57
Forfeited		(10,569	)	$	18.03		(20,211	)	$	19.76		(16,424	)	$	20.03
Expired		0					(17,903	)	$	27.00		(14,207	)	$	26.59
Outstanding, end of year		202,037		$	18.58		248,486		$	18.59		316,157		$	19.05
Options exercisable at year-end		202,037		$	18.58		248,486		$	18.59		316,157		$	19.05
Weighted-average fair value of options granted					N/A					N/A				$	5.50
Weighted-average fair value of options forfeited				$	4.04				$	4.86				$	4.89

The weighted-average remaining contractual term of outstanding stock options at December 31, 2016 was 4.0 years. The aggregate intrinsic value of stock options outstanding was $1,540,000 at December 31, 2016. The total intrinsic value of options exercised was $183,000 in 2016, $77,000 in 2015 and $90,000 in 2014.

The Corporation has issued shares from treasury stock for almost all stock option exercises through December 31, 2016. Management does not anticipate that stock repurchases will be necessary to accommodate stock option exercises in 2017.

In January 2017, the Corporation awarded 22,312 shares of restricted stock under the Stock Incentive Plan and 8,470 shares of restricted stock under the Independent Directors Stock Incentive Plans. The 2017 restricted stock awards under the Stock Incentive Plan vest ratably over three years, and vesting for one-half of the 14,897 restricted shares awarded to Executive Officers depends on the Corporation meeting a ROAE target each year. The 2017 restricted stock issued under the Independent Directors Stock Incentive Plan vests over one year. Total estimated stock-based compensation for 2017 is $652,000. The restricted stock awards made in January 2017 are not included in the tables above.

14. INCOME TAXES

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

	December 31,		December 31,
(In Thousands)	2016		2015
Deferred tax assets:
Unrealized holding losses on securities	$	512	$	0
Net realized losses on securities		0		69
Allowance for loan losses		2,998		2,761
Other deferred tax assets		2,658		2,634
Total deferred tax assets		6,168		5,464
Deferred tax liabilities:
Unrealized holding gains on securities		0		1,342
Defined benefit plans - ASC 835		27		19
Bank premises and equipment		913		869
Core deposit intangibles		6		11
Other deferred tax liabilities		105		108
Total deferred tax liabilities		1,051		2,349
Deferred tax asset, net	$	5,117	$	3,115

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The provision for income taxes includes the following:

(In thousands)	2016			2015		2014
Currently payable	$	5,328		$	5,097	$	4,280
Tax expense resulting from allocations  of certain tax benefits to equity or as a  reduction in other assets		175			161		158
Deferred		(156	)		79		1,254
Total provision	$	5,347		$	5,337	$	5,692

A reconciliation of income tax at the statutory rate to the Corporation’s effective rate is as follows (amounts in thousands):

(Amounts in thousands)	2016						2015						2014
	Amount			%			Amount			%			Amount			%
Expected provision	$	7,388			35.00		$	7,633			35.00		$	7,972			35.00
Tax-exempt interest income		(1,801	)		(8.53	)		(1,914	)		(8.78	)		(1,982	)		(8.70	)
Nondeductible interest expense		40			0.19			51			0.23			56			0.25
Dividends received deduction		(22	)		(0.10	)		(75	)		(0.34	)		(79	)		(0.35	)
Increase in cash surrender value of life insurance		(134	)		(0.63	)		(135	)		(0.62	)		(132	)		(0.58	)
Employee stock option compensation		0			0.00			0			0.00			41			0.18
Tax benefit from limited partnership investment		(76	)		(0.36	)		(80	)		(0.37	)		(83	)		(0.36	)
Other, net		(48	)		(0.23	)		(143	)		(0.66	)		(101	)		(0.44	)
Effective income tax provision	$	5,347			25.33		$	5,337			24.47		$	5,692			24.99

The Corporation has investments in three limited partnerships that manage affordable housing projects that have qualified for the federal low-income housing tax credit. The Corporation’s expected return from these investments is based on the receipt of tax credits and tax benefits from deductions of operating losses. The Corporation uses the effective yield method to account for these investments, with the benefits recognized as a reduction of the provision for income taxes. For two of the three limited partnership investments, the tax credits have been received in full in prior years, and the Corporation has fully realized the benefits of the credits and amortized its initial investments in the partnerships. The most recent affordable housing project was completed in 2013, and the Corporation received tax credits in 2013 through 2015 and expects to continue to receive tax credits annually through 2022. The carrying amount of the Corporation’s investment is $713,000 at December 31, 2016 and $812,000 at December 31, 2015 (included in Other Assets in the consolidated balance sheets). For 2016, the estimated amount of tax credits and other tax benefits to be received is $158,000 and the amount recognized as a reduction of the provision for income taxes is $76,000. In 2015, the Corporation received tax credits and other tax benefits totaling $160,000, and recognized a reduction of the provision for income tax of $80,000. In 2014, the Corporation received tax credits and other tax benefits totaling $159,000, and recognized a reduction of the provision for income tax of $83,000.

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

15. RELATED PARTY TRANSACTIONS

Loans to executive officers, directors of the Corporation and its subsidiaries and any associates of the foregoing persons are as follows:

(In Thousands)	Beginning		New					Other			Ending
	Balance		Loans		Repayments			Changes			Balance
12 directors, 7 executive officers 2016	$	10,246	$	307	$	(1,160	)	$	2,021		$	11,414
11 directors, 7 executive officers 2015		12,023		52		(808	)		(1,021	)		10,246
12 directors, 8 executive officers 2014		12,547		188		(1,358	)		646			12,023

In the table above, other changes represent net changes in the balance of existing lines of credit and transfers in and out of the related party category.

Deposits from related parties held by the Corporation amounted to $2,899,000 at December 31, 2016 and $3,194,000 at December 31, 2015.

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16. OFF-BALANCE SHEET RISK

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit, interest rate or liquidity risk in excess of the amount recognized in the consolidated balance sheets. The contract amounts of these instruments express the extent of involvement the Corporation has in particular classes of financial instruments.

The Corporation’s exposure to credit loss from nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual amount of these instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Financial instruments whose contract amounts represent credit risk at December 31, 2016 and 2015 are as follows:

(In Thousands)	2016		2015
Commitments to extend credit	$	180,768	$	156,407
Standby letters of credit		9,025		13,340

Commitments to extend credit are legally binding agreements to lend to customers. Commitments generally have fixed expiration dates or other termination clauses and may require payment of fees. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future liquidity requirements. The Corporation evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation, for extensions of credit is based on management’s credit assessment of the counterparty.

Standby letters of credit are conditional commitments issued by the Corporation guaranteeing performance by a customer to a third party. Those guarantees are issued primarily to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Some of the standby letters of credit are collateralized by real estate or other assets, and others are unsecured. The extent to which proceeds from liquidation of collateral would be expected to cover the maximum potential amount of future payments related to standby letters of credit is not estimable. The Corporation has recorded no liability associated with standby letters of credit as of December 31, 2016 and 2015.

Standby letters of credit as of December 31, 2016 expire as follows:

Year of Expiration		(In Thousands)
	2017	$	7,612
	2018		387
	2019		193
	2020		64
	2021		0
	Thereafter		769
	Total	$	9,025

17. CONTINGENCIES

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

18. REGULATORY MATTERS

The Corporation (on a consolidated basis) and C&N Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on the Corporation’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and C&N Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

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Quantitative measures established by regulation to ensure capital adequacy require the Corporation and C&N Bank to maintain minimum amounts and ratios (set forth in the following table) of total capital, Tier I capital (as defined in the regulations) and Common equity Tier 1 capital (as defined) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined). Management believes, as of December 31, 2016 and 2015, that the Corporation and C&N Bank meet all capital adequacy requirements (described in more detail below) to which they are subject and maintain capital conservation buffers that allow the Corporation and C&N Bank to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to certain executive officers.

To be categorized as well capitalized, an institution must maintain minimum total risk based, Tier I risk based, Common equity risk based and Tier I leverage ratios as set forth in the following table. The Corporation’s and C&N Bank’s actual capital amounts and ratios are also presented in the following table:

(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
December 31, 2016:
Total capital to risk-weighted assets:
Consolidated	$	183,597	23.60	%	$	62,245	³8	%	$	67,108	³8.625	%	$	77,806	³10	%	$	81,697	³10.5	%
C&N Bank		162,705	21.03	%		61,894	³8	%		66,730	³8.625	%		77,368	³10	%		81,236	³10.5	%
Tier 1 capital to risk-weighted assets:
Consolidated		174,928	22.48	%		31,122	³6	%		51,547	³6.625	%		62,245	³8	%		66,135	³8.5	%
C&N Bank		154,036	19.91	%		30,947	³6	%		51,256	³6.625	%		61,894	³8	%		65,762	³8.5	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		174,928	22.48	%		31,122	³4.5	%		39,876	³5.125	%		50,574	³6.5	%		54,464	³7	%
C&N Bank		154,036	19.91	%		30,947	³4.5	%		39,651	³5.125	%		50,289	³6.5	%		54,157	³7	%
Tier 1 capital to average assets:
Consolidated		174,928	14.27	%		49,026	³4	%		N/A	N/A			61,282	³5	%		61,282	³5	%
C&N Bank		154,036	12.73	%		48,404	³4	%		N/A	N/A			60,506	³5	%		60,506	³5	%
December 31, 2015:
Total capital to risk-weighted assets:
Consolidated	$	181,216	24.40	%	$	59,424	³8	%		N/A	N/A		$	74,281	³10	%	$	77,995	³10.5	%
C&N Bank		161,187	21.83	%		59,058	³8	%		N/A	N/A			73,823	³10	%		77,514	³10.5	%
Tier 1 capital to risk-weighted assets:
Consolidated		173,009	23.29	%		29,712	³6	%		N/A	N/A			59,424	³8	%		63,139	³8.5	%
C&N Bank		153,298	20.77	%		29,529	³6	%		N/A	N/A			59,058	³8	%		62,749	³8.5	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		173,009	23.29	%		29,712	³4.5	%		N/A	N/A			48,282	³6.5	%		51,996	³7	%
C&N Bank		153,298	20.77	%		29,529	³4.5	%		N/A	N/A			47,985	³6.5	%		51,676	³7	%
Tier 1 capital to average assets:
Consolidated		173,009	14.31	%		48,355	³4	%		N/A	N/A			60,444	³5	%		60,444	³5	%
C&N Bank		153,298	12.81	%		47,861	³4	%		N/A	N/A			59,826	³5	%		59,826	³5	%

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

The current (new) capital rule provides that, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization must hold a capital conservation buffer composed of common equity tier 1 capital above its minimum risk-based capital requirements. The buffer is measured relative to risk-weighted assets. Phase-in of the capital conservation buffer requirements became effective January 1, 2016. The transition schedule for new ratios, including the capital conservation buffer, is as follows:

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

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

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

At December 31, 2016, the Corporation’s Capital Conservation Buffer, determined based on the minimum total capital ratio, was 15.60%. C&N Bank’s Capital Conservation Buffer (also determined based on the minimum total capital ratio) was 13.03%.

Banking regulators limit the amount of dividends that may be paid by C&N Bank to the Corporation. Retained earnings against which dividends may be paid without prior approval of the banking regulators amounted to approximately $87,631,000 at December 31, 2016, subject to the minimum capital ratio requirements noted above.

Restrictions imposed by federal law prohibit the Corporation from borrowing from C&N Bank unless the loans are secured in specific amounts. Such secured loans to the Corporation are generally limited to 10% of C&N Bank’s tangible stockholder’s equity (excluding accumulated other comprehensive income) or $15,404,000 at December 31, 2016.

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19. PARENT COMPANY ONLY

The following is condensed financial information for Citizens & Northern Corporation:

CONDENSED BALANCE SHEET	December 31,
(In Thousands)	2016		2015
ASSETS
Cash	$	6,033	$	5,847
Investment in subsidiaries:
Citizens & Northern Bank		165,397		167,277
Citizens & Northern Investment Corporation		11,168		10,966
Bucktail Life Insurance Company		3,419		3,392
Other assets		4		24
TOTAL ASSETS	$	186,021	$	187,506
LIABILITIES AND STOCKHOLDERS' EQUITY
Other liabilities	$	13	$	19
Stockholders' equity		186,008		187,487
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	186,021	$	187,506

CONDENSED INCOME STATEMENT
(In Thousands)	2016			2015			2014
Dividends from Citizens & Northern Bank	$	14,960		$	11,569		$	22,608
Expenses		(367	)		(234	)		(112	)
Income before equity in undistributed income of subsidiaries		14,593			11,335			22,496
Equity in undistributed income of subsidiaries		1,169			5,136			(5,410	)
NET INCOME	$	15,762		$	16,471		$	17,086

CONDENSED STATEMENT OF CASH FLOWS
(In Thousands)
	2016			2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	15,762		$	16,471		$	17,086
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income of Subsidiaries		(1,169	)		(5,136	)		5,410
Decrease (increase) in other assets		20			12			(36	)
(Decrease) increase in other liabilities		(6	)		12			1
Net Cash Provided by Operating Activities		14,607			11,359			22,461
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of treasury stock		263			381			123
Tax benefit from compensation plans, net		151			143			137
Purchase of treasury stock		(3,723	)		(4,415	)		(4,002	)
Dividends paid		(11,112	)		(11,245	)		(11,392	)
Net Cash Used in Financing Activities		(14,421	)		(15,136	)		(15,134	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		186			(3,777	)		7,327
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		5,847			9,624			2,297
CASH AND CASH EQUIVALENTS, END OF YEAR	$	6,033		$	5,847		$	9,624

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20. SUMMARY OF QUARTERLY CONSOLIDATED FINANCIAL DATA (Unaudited)

The following table presents summarized quarterly financial data for 2016 and 2015:

(In Thousands Except Per Share Data) (Unaudited)

	2016 Quarter Ended
	Mar. 31,		June 30,		Sept. 30,		Dec. 31,
Interest income	$	10,937	$	10,924	$	11,131	$	11,106
Interest expense		904		925		944		920
Net interest income		10,033		9,999		10,187		10,186
Provision (credit) for loan losses		368		318		538		(3	)
Net interest income after provision (credit)  for loan losses		9,665		9,681		9,649		10,189
Other income		3,690		3,906		3,884		4,031
Net gains on available-for-sale securities		383		122		584		69
Other expenses		9,072		8,535		8,579		8,558
Income before income tax provision		4,666		5,174		5,538		5,731
Income tax provision		1,093		1,303		1,451		1,500
Net income	$	3,573	$	3,871	$	4,087	$	4,231
Net income per share – basic	$	0.29	$	0.32	$	0.34	$	0.35
Net income per share – diluted	$	0.29	$	0.32	$	0.34	$	0.35

	2015 Quarter Ended
	Mar. 31,		June 30,		Sept. 30,		Dec. 31,
Interest income	$	11,163	$	11,186	$	11,134	$	11,036
Interest expense		1,213		1,176		1,126		1,087
Net interest income		9,950		10,010		10,008		9,949
Provision for loan losses		3		221		302		319
Net interest income after provision  for loan losses		9,947		9,789		9,706		9,630
Other income		3,556		3,962		3,961		3,999
Net gains on available-for-sale securities		74		932		79		1,776
Loss on prepayment of borrowings		0		910		0		1,663
Other expenses		8,533		7,964		8,117		8,416
Income before income tax provision		5,044		5,809		5,629		5,326
Income tax provision		1,229		1,452		1,395		1,261
Net income	$	3,815	$	4,357	$	4,234	$	4,065
Net income per share – basic	$	0.31	$	0.36	$	0.35	$	0.33
Net income per share – diluted	$	0.31	$	0.36	$	0.35	$	0.33

86

Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors of Citizens & Northern Corporation:

We have audited the accompanying consolidated balance sheets of Citizens & Northern Corporation and subsidiaries as of December 31, 2016 and 2015 and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2016. Citizens & Northern Corporation and subsidiaries’ management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Citizens & Northern Corporation and subsidiaries as of December 31, 2016 and 2015, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2016 in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Citizens & Northern Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 16, 2017 expressed an unqualified opinion.

/s/ Baker Tilly Virchow Krause, LLP

Williamsport, Pennsylvania

February 16, 2017

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None

ITEM 9A. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE 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 has materially affected, or that is reasonably likely to affect, our internal control over financial reporting.

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

The Corporation’s management is responsible for establishing and maintaining effective internal control over financial reporting, as that term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The Corporation’s system of internal control over financial reporting has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Corporation’s internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Corporation’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Corporation are being made only in accordance with authorizations of the Corporation’s management and directors; and (3) provide reasonable assurance regarding prevention, or timely detection and correction of unauthorized acquisition, use or disposition of the Corporation’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect and correct misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

The Corporation’s management assessed the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2016, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). Based on that assessment, we concluded that, as of December 31, 2016, the Corporation’s internal control over financial reporting is effective based on the criteria established in Internal Control – Integrated Framework (2013).

Baker Tilly Virchow Krause, LLP, the independent registered public accounting firm that audited the Corporation’s consolidated financial statements, has issued an audit report on the Corporation’s internal control over financial reporting as of December 31, 2016. That report appears below.

February 16, 2017	By:	/s/ J. Bradley Scovill
Date		President and Chief Executive Officer
February 16, 2017	By:	/s/ Mark A. Hughes
Date		Treasurer and Chief Financial Officer

88

Report Of Independent Registered Public Accounting Firm

Stockholders and Board of Directors of Citizens & Northern Corporation:

We have audited Citizens & Northern Corporation and subsidiaries’ internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control-Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Citizens & Northern Corporation and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on Citizens & Northern Corporation and subsidiaries’ internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

89

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Citizens & Northern Corporation and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows of Citizens & Northern Corporation and subsidiaries, and our report dated February 16, 2017 expressed an unqualified opinion.

/s/ Baker Tilly Virchow Krause, LLP

Williamsport, Pennsylvania

February 16, 2017

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ITEM 9B. OTHER INFORMATION

There was no information the Corporation was required to disclose in a report on Form 8-K during the fourth quarter 2016 that was not disclosed.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Information concerning Directors and Executive Officers is incorporated herein by reference to disclosure under the captions “Proposal 1 - Election of Directors,” “Executive Officers,” “Information Concerning Security Ownership” and “Meetings and Committees of the Board of Directors” of the Corporation’s proxy statement dated March 10, 2017 for the annual meeting of stockholders to be held on April 20, 2017.

The Corporation’s Board of Directors has adopted a Code of Ethics, available on the Corporation’s web site at www.cnbankpa.com for the Corporation’s employees, officers and directors. (The provisions of the Code of Ethics are also included in the Corporation’s employee handbook.)

ITEM 11. EXECUTIVE COMPENSATION

Information concerning executive compensation is incorporated herein by reference to disclosure under the captions “Compensation Discussion and Analysis” and “Executive Compensation Tables” of the Corporation’s proxy statement dated March 10, 2017 for the annual meeting of stockholders to be held on April 20, 2017.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information concerning security ownership of certain beneficial owners and management is incorporated herein by reference to disclosure under the caption “Beneficial Ownership of Executive Officers and Directors” of the Corporation’s proxy statement dated March 10, 2017 for the annual meeting of stockholders to be held on April 20, 2017.

“Equity Compensation Plan Information” as required by Item 201(d) of Regulation S-K is incorporated by reference herein from Item 5 (Market for Registrant’s Common Equity and Related Stockholder Matters) of this Form 10-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Information concerning loans and deposit balances with Directors and Executive Officers is provided in Note 15 to the Consolidated Financial Statements, which is included in Part II, Item 8 of this Annual Report on Form 10-K. Additional information, including information concerning director independence, is incorporated herein by reference to disclosure appearing under the captions “Director Independence” and "Related Person Transaction and Policies" of the Corporation's proxy statement dated March 10, 2017 for the annual meeting of stockholders to be held on April 20, 2017.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information concerning services provided by the Corporation’s independent auditor Baker Tilly Virchow Krause, LLP, the audit committee’s pre-approval policies and procedures for such services, and fees paid by the Corporation to that firm, is incorporated herein by reference to disclosure under the caption “Fees of Independent Public Accountants” of the Corporation’s proxy statement dated March 10, 2017 for the annual meeting of stockholders to be held on April 20, 2017.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) (1). The following consolidated financial statements are set forth in Part II, Item 8:

	Page
Report of Independent Registered Public Accounting Firm	87
Financial Statements:
Consolidated Balance Sheets - December 31, 2016 and 2015	41
Consolidated Statements of Income - Years Ended  December 31, 2016, 2015 and 2014	42
Consolidated Statements of Comprehensive Income - Years Ended December 31, 2016, 2015 and 2014	43
Consolidated Statements of Changes in Stockholders' Equity -Years Ended December 31, 2016, 2015 and 2014	44
Consolidated Statements of Cash Flows - Years Ended December 31, 2016, 2015 and 2014	45
Notes to Consolidated Financial Statements	46-86

(a)(2) Financial statement schedules are not applicable or included in the financial statements or related notes.

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
9. Voting trust agreement	Not applicable
10. Material contracts:
10.1 Form of Restricted Stock agreement dated January 4, 2017 between the Corporation and Executive Officers pursuant to the Citizens & Northern Corporation Stock Incentive Plan	Filed herewith
10.2 Form of Restricted Stock agreement dated January 4, 2017 between the Corporation and certain non-executive officers pursuant to the Citizens & Northern Corporation Stock Incentive Plan	Filed herewith
10.3 Form of Restricted Stock agreement dated January 4, 2017 between the Corporation and its independent directors pursuant to the Citizens & Northern Corporation Independent Directors Stock Incentive Plan	Filed herewith
10.4 2017 Annual Performance Incentive Award Plan	Filed herewith
10.5 2017 Annual Performance Incentive Award Plan - Mortgage Lenders	Filed herewith

92

10.6 Employment agreement dated March 2, 2015 between the Corporation and J. Bradley Scovill	Incorporated by reference to Exhibit 10.1 filed with Corporation’s Form 8-K on February 9, 2015
10.7 Employment agreement dated September 19, 2013 between the Corporation and Mark A. Hughes	Incorporated by reference to Exhibit 10.2 filed with Corporation’s Form 8-K on September 19, 2013
10.8 Employment agreement dated September 19, 2013 between the Corporation and Harold F. Hoose, III	Incorporated by reference to Exhibit 10.3 filed with Corporation’s Form 8-K on September 19, 2013
10.9 Employment agreement dated September 19, 2013 between the Corporation and Deborah E. Scott	Incorporated by reference to Exhibit 10.4 filed with Corporation’s Form 8-K on September 19, 2013
10.10 Form of Indemnification Agreement dated February 11, 2015 between the Corporation and Stan R. Dunsmore	Incorporated by reference to Exhibit 10.9 filed with Corporation’s Form 10-K on February 26, 2015
10.11 Form of Indemnification Agreement dated January 2, 2013 between the Corporation and Shelley L. D'Haene	Incorporated by reference to Exhibit 10.5 filed with Corporation’s Form 10-K on February 21, 2013
10.12 Form of Indemnification Agreement dated January 19, 2011 between the Corporation and John M. Reber	Incorporated by reference to Exhibit 10.6 filed with Corporation's Form 10-K on Feb. 28, 2011
10.13 Form of Indemnification Agreements dated May 2004 between the Corporation and the Directors and certain officers	Incorporated by reference to Exhibit 10.1 filed with Corporation’s 10-K on March 14, 2005
10.14 Change in Control Agreement dated March 17, 2015 between the Corporation and Stan R. Dunsmore	Incorporated by reference to Exhibit 10.1 filed with Corporation’s Form 10-Q on May 8, 2015
10.15 Change in Control Agreement dated January 2, 2013 between the Corporation and Shelley L. D'Haene	Incorporated by reference to Exhibit 10.7 filed with Corporation’s Form 10-K on February 21, 2013
10.16 Change in Control Agreement dated January 20, 2005 Between the Corporation and John M. Reber	Incorporated by reference to Exhibit 10.18 filed with Corporation’s Form 10-K on February 18, 2016
10.17 Change in Control Agreement dated December 31, 2003 between the Corporation and Thomas L. Rudy, Jr.	Incorporated by reference to Exhibit 10.2 filed with the Corporation's Form 10-K on March 14, 2005
10.18 Third Amendment to Citizens & Northern Corporation Stock Incentive Plan	Incorporated by reference to Exhibit A to the Corporation's proxy statement dated March 18, 2008 for the annual meeting of stockholders held on April 15, 2008
10.19 Second Amendment to Citizens & Northern Corporation Stock Incentive Plan	Incorporated by reference to Exhibit 10.5 filed with the Corporation's Form 10-K on March 10, 2004
10.20 First Amendment to Citizens & Northern Corporation Stock Incentive Plan	Incorporated by reference to Exhibit 10.6 filed with the Corporation's Form 10-K on March 10, 2004
10.21 Citizens & Northern Corporation Stock Incentive Plan	Incorporated by reference to Exhibit 10.7 filed with the Corporation's Form 10-K on March 10, 2004
10.22 First Amendment to Citizens & Northern Corporation Independent Directors Stock Incentive Plan	Incorporated by reference to Exhibit B to the Corporation's proxy statement dated March 18, 2008 for the annual meeting of stockholders held on April 15, 2008

93

10.23 Citizens & Northern Corporation Independent Directors  Stock Incentive Plan	Incorporated by reference to Exhibit A to the Corporation's proxy statement dated March 19, 2001 for the annual meeting of stockholders held on April 17, 2001.
10.24 Citizens & Northern Corporation Supplemental Executive  Retirement Plan (as amended and restated)	Incorporated by reference to Exhibit 10.21 filed with the Corporation's Form 10-K on March 6, 2009
11. Statement re: computation of per share earnings	Information concerning the computation of earnings per share is provided in Note 4 to the Consolidated Financial Statements, which is included in Part II, Item 8 of Form 10-K
12. Statements re: computation of ratios	Not applicable
13. Annual report to security holders, Form 10-Q or quarterly report to security holders	Not applicable
14. Code of ethics	The Code of Ethics is available through the Corporation's website at www.cnbankpa.com. To access the Code of Ethics, click on "Investor Relations," followed by “Pages within Investor Relations,” “Corporate Governance Policies,” and “Code of Ethics.”
16. Letter re: change in certifying accountant	Not applicable
18. Letter re: change in accounting principles	Not applicable
21. Subsidiaries of the registrant	Filed herewith
22. Published report regarding matters submitted to vote of security holders	Not applicable
23. Consent of Independent Registered Public Accounting Firm	Filed herewith
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
33. Report on assessment of compliance with servicing criteria for asset-backed securities	Not applicable
34. Attestation report on assessment of compliance with servicing criteria for asset-backed securities	Not applicable
35. Service compliance statement	Not applicable
99. Additional exhibits:
99.1 Additional information mailed or made available online to shareholders with proxy statement and Form 10-K on March 10, 2017	Filed herewith
100. XBRL-related documents	Not applicable
101. Interactive data file	Filed herewith

94

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated.

By: /s/ J. Bradley Scovill

President and Chief Executive Officer

Date: February 16, 2017

By: /s/ Mark A. Hughes

Treasurer and Principal Accounting Officer

Date: February 16, 2017

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

BOARD OF DIRECTORS

/s/	Dennis F. Beardslee	/s/	Edward H. Owlett, III
	Dennis F. Beardslee		Edward H. Owlett, III
	Date: February 16, 2017		Date: February 16, 2017
/s/	Jan E. Fisher	/s/	J. Bradley Scovill
	Jan E. Fisher		J. Bradley Scovill
	Date: February 16, 2017		Date: February 16, 2017
/s/	R. Bruce Haner	/s/	Leonard Simpson
	R. Bruce Haner		Leonard Simpson
	Date: February 16, 2017		Date: February 16, 2017
/s/	Susan E. Hartley	/s/	James E. Towner
	Susan E. Hartley		James E. Towner
	Date: February 16, 2017		Date: February 16, 2017
/s/	Leo F. Lambert	/s/	Ann M. Tyler
	Leo F. Lambert		Ann M. Tyler
	Date: February 16, 2017		Date: February 16, 2017
/s/	Terry L. Lehman	/s/	Frank G. Pellegrino
	Terry L. Lehman		Frank G. Pellegrino
	Date: February 16, 2017		Date: February 16, 2017

95

EX-10.1

EXHIBIT 10.1

 

CITIZENS & NORTHERN CORPORATION

1995 STOCK INCENTIVE PLAN (As Amended)

RESTRICTED STOCK AGREEMENT – EXECUTIVE OFFICER

RESTRICTED STOCK AGREEMENT dated as of the 4^th day of January, 2017, by and between Citizens & Northern Corporation (the "Corporation") and _________________ an employee of the Corporation or of a subsidiary (the "Recipient").

Pursuant to the Citizens & Northern Corporation 1995 Stock Incentive Plan (the "Plan"), as amended, the Compensation Committee of the Board of Directors (the "Committee") has determined that the Recipient is to be granted, on the terms and conditions set forth herein, ____Restricted Shares of the Corporation's common stock and hereby grants such Restricted Shares.

1. Number of Shares and Price. Restricted Stock shall consist of shares of Stock that will be acquired by and issued to the Recipient at a designated time approved by the board of directors, for no purchase price, and under and subject to such transfer, forfeiture and other restrictions, conditions or terms as shall be determined by the Committee, including but not limited to prohibitions against transfer and substantial risks of forfeiture within the meaning of Section 83 of the Code.

2. Rights of Recipient. Except as otherwise provided in the Plan or the Restricted Stock Agreement, a Recipient of shares of Restricted Stock shall have all the rights as does a holder of Stock, including without limitation the right to vote such shares and receive dividends with respect thereto; however, during the time period of any restrictions, conditions or terms applicable to such Restricted Stock, the shares thereof and the right to vote the same and receive dividends thereon shall not be sold, assigned, transferred, exchanged, pledged, hypothecated, encumbered or otherwise disposed of except as permitted by the Plan or the Restricted Stock Agreement. Cash dividends shall be paid out and shall not participate in Dividend Reinvestment. Stock dividends resulting in whole shares shall be added to the shares held in the Restricted Account and shall be distributed to the Recipient with subsequent distributions of any Award for which they accrued. Partial shares that result from any stock dividend shall be paid to the Recipient in cash at the time of the payment of the stock dividend. If the Restricted Shares expire prior to the satisfaction of performance standards set forth in section 4 or due to forfeiture as set forth in section 5, all shares accrued by virtue of stock dividends shall be forfeited.

3. Holding of Restricted Shares. Each certificate for shares of Restricted Stock shall be deposited with the Secretary of the Corporation, or the office thereof, and shall bear a legend in substantially the following form and content:

This Certificate and the shares of Stock hereby represented are subject to the provisions of the Corporation’s Stock Incentive Plan and a certain agreement entered into between the owner and the Corporation pursuant to said Plan. The release of the Certificate and the shares of Stock hereby represented from such provision shall occur only as provided by said Plan and Agreement, a copy of which are on file in the office of the Secretary of the Corporation.

Upon the lapse or satisfaction of the restrictions, conditions and terms applicable to such Restricted Stock, a certificate for the shares of Stock without such legend shall be issued to the Recipient.

4. Release and Lapse of Restricted Shares. The release of restrictions or expiration of restricted shares awarded under this agreement shall occur over a period of three years. On each anniversary date of this award, one-sixth of the total shares will be distributed based on the Recipient’s satisfactory performance of his or her job. Additionally, on each anniversary date of this award, one-sixth of the total shares will be distributed based on the Recipient’s satisfactory performance of his or her job and the Corporation’s attainment of an earnings-based performance standard. The performance standard will be based on the Corporation achieving Return on Average Equity (ROAE) with a percent ranking of at least 50% of the ROAE achieved by a defined peer group of bank holding companies, herein defined, for the four consecutive calendar quarters ending with the third quarter of each calendar year following the Award Date. All Restricted Shares not distributed due to the Recipient’s unsatisfactory performance of his or her job or due to the Corporation failing to achieve an ROAE with a percent ranking of at least 50% of that of the defined peer group shall expire and revert back to the Corporation as of the anniversary date on which such determinations are made. No partial shares may be released, thus an amount equal to the next whole share amount will be released subject to the specified performance criteria at each anniversary. The shares released may be in certificate form, or may be directed to be held in a custodial account designated by the Recipient. The peer group consists of all publicly traded Commercial Banks and Thrifts headquartered in New Jersey, New York, Ohio and Pennsylvania with total assets of $750 million to $3.5 billion as of the end of the four consecutive calendar quarters ending with the third quarter of each calendar year following the Award Date.

The Committee reserves the right to change the composition of the peer group, as well as the method of evaluating the Corporation’s earnings performance as compared to the peer group, based on mergers or acquisitions involving members of the peer group, changes in size of the Corporation or members of the peer group, or other factors deemed appropriate by the Committee.

5. Terms of Forfeiture. If a Recipient’s employment with the Corporation, or a subsidiary, ceases for any reason prior to the lapse of the restrictions, conditions or terms applicable to his or her Restricted Stock, all of the Recipient’s Restricted Stock still subject to unexpired restrictions, conditions or terms shall be forfeited absolutely by the Recipient to the Corporation without payment or delivery of any consideration or other thing of value by the Corporation or its affiliates, and thereupon and thereafter neither the Recipient nor his or her heirs, personal or legal representatives, successors, assigns, beneficiaries, or any claimants under the Recipient’s Last Will or laws of descent and distribution, shall have any rights or claims to or interests in the forfeited Restricted Stock or any certificates representing shares thereof, or claims against the Corporation or its affiliates with respect thereto. Except in the case of disability, employment ceases with the Corporation, or its Subsidiary, on the day the Recipient’s employment is terminated with or without cause, or on their date of death. In the event of disability, the Recipient’s employment is considered terminated on the date for which the Recipient receives the final payment of the Corporation’s, or Subsidiary’s, short-term disability.

6. Non-Transferability of Restricted Stock. The Restricted Stock and this Restricted Stock Agreement shall not be transferable.

7. Change in Control. If any of the change in control events described in Section 11 of the Plan occur, all shares of Restricted Stock shall fully vest and all restrictions on the shares of Restricted Stock shall lapse as follows: In the case of an event specified in clause (a) of the second sentence of the third paragraph of Section 11, the lapse of all restrictions on the shares of Restricted Stock shall occur immediately prior to the consummation of the described transaction and, in the case of an event specified in clause (b) or (c) of said sentence, the full vesting and lapse of restrictions shall occur upon occurrence of the described event.

8. Notices. Any notice required or permitted under this Restricted Stock Agreement shall be deemed given when delivered personally, or when deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to the Recipient either at his or her address herein above set forth or such other address as he or she may designate in writing to the Corporation.

9. Failure to Enforce Not a Waiver. The failure of the Corporation to enforce at any time any provision of this Restricted Stock Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

10. Governing Law. This Restricted Stock Agreement shall be governed by and construed according to the laws of the State of Pennsylvania.

11. Incorporation of Plan. The Plan is hereby incorporated by reference and made a part hereof, and the Restricted Stock and this Restricted Stock Agreement are subject to all terms and conditions of the Plan.

12. Amendments. This Restricted Stock Agreement may be amended or modified at any time by an instrument in writing signed by the parties hereto.

IN WITNESS WHEREOF, the parties have executed this Restricted Stock Agreement on the day and year first above written.

By
	J. Bradley Scovill - President & CEO
The undersigned hereby accepts and agrees to all the terms and provisions of the foregoing Restricted Stock Agreement and to all the terms and provisions of the Citizens & Northern Corporation 1995 Stock Incentive Plan herein incorporated by reference.
	Recipient - _

EX-10.2

EXHIBIT 10.2

 

CITIZENS & NORTHERN CORPORATION 

1995 STOCK INCENTIVE PLAN (As Amended)

RESTRICTED STOCK AGREEMENT – NON-EXECUTIVE OFFICER

RESTRICTED STOCK AGREEMENT dated as of the 4^th day of January, 2017, by and between Citizens & Northern Corporation (the "Corporation") and ________________ an employee of the Corporation or of a subsidiary (the "Recipient").

Pursuant to the Citizens & Northern Corporation 1995 Stock Incentive Plan (the "Plan"), as amended, the Compensation Committee of the Board of Directors (the "Committee") has determined that the Recipient is to be granted, on the terms and conditions set forth herein, ____ Restricted Shares of the Corporation's common stock and hereby grants such Restricted Shares.

1. Number of Shares and Price. Restricted Stock shall consist of shares of Stock that will be acquired by and issued to the Recipient at a designated time approved by the board of directors, for no purchase price, and under and subject to such transfer, forfeiture and other restrictions, conditions or terms as shall be determined by the Committee, including but not limited to prohibitions against transfer and substantial risks of forfeiture within the meaning of Section 83 of the Code.

2. Rights of Recipient. Except as otherwise provided in the Plan or the Restricted Stock Agreement, a Recipient of shares of Restricted Stock shall have all the rights as does a holder of Stock, including without limitation the right to vote such shares and receive dividends with respect thereto; however, during the time period of any restrictions, conditions or terms applicable to such Restricted Stock, the shares thereof and the right to vote the same and receive dividends thereon shall not be sold, assigned, transferred, exchanged, pledged, hypothecated, encumbered or otherwise disposed of except as permitted by the Plan or the Restricted Stock Agreement. Cash dividends shall be paid out and shall not participate in Dividend Reinvestment. Stock dividends resulting in whole shares shall be added to the shares held in the Restricted Account and shall be distributed to the Recipient with subsequent distributions of any Award for which they accrued. Partial shares that result from any stock dividend shall be paid to the Recipient in cash at the time of the payment of the stock dividend. If the Restricted Shares expire prior to the satisfaction of performance standards set forth in section 4 or due to forfeiture as set forth in section 5, all shares accrued by virtue of stock dividends shall be forfeited.

3. Holding of Restricted Shares. Each certificate for shares of Restricted Stock shall be deposited with the Secretary of the Corporation, or the office thereof, and shall bear a legend in substantially the following form and content:

This Certificate and the shares of Stock hereby represented are subject to the provisions of the Corporation’s Stock Incentive Plan and a certain agreement entered into between the owner and the Corporation pursuant to said Plan. The release of the Certificate and the shares of Stock hereby represented from such provision shall occur only as provided by said Plan and Agreement, a copy of which are on file in the office of the Secretary of the Corporation.

Upon the lapse or satisfaction of the restrictions, conditions and terms applicable to such Restricted Stock, a certificate for the shares of Stock without such legend shall be issued to the Recipient.

4. Release and Lapse of Restricted Shares. The release of restrictions or expiration of restricted shares awarded under this agreement shall occur over a period of three years. On each anniversary date of this award, one-third of the total shares will be distributed on the anniversary date of this award based on the Recipient’s satisfactory performance of his or her job. All Restricted Shares not distributed due to the Recipient’s unsatisfactory performance of his or her job shall expire and revert back to the Corporation as of the anniversary date on which such determinations are made. No partial shares may be released, thus an amount equal to the next whole share amount will be released subject to the specified performance criteria at each anniversary. The shares released may be in certificate form, or may be directed to be held in a custodial account designated by the Recipient.

5. Terms of Forfeiture. If a Recipient’s employment with the Corporation, or a subsidiary, ceases for any reason prior to the lapse of the restrictions, conditions or terms applicable to his or her Restricted Stock, all of the Recipient’s Restricted Stock still subject to unexpired restrictions, conditions or terms shall be forfeited absolutely by the Recipient to the Corporation without payment or delivery of any consideration or other thing of value by the Corporation or its affiliates, and thereupon and thereafter neither the Recipient nor his or her heirs, personal or legal representatives, successors, assigns, beneficiaries, or any claimants under the Recipient’s Last Will or laws of descent and distribution, shall have any rights or claims to or interests in the forfeited Restricted Stock or any certificates representing shares thereof, or claims against the Corporation or its affiliates with respect thereto. Except in the case of disability, employment ceases with the Corporation, or its Subsidiary, on the day the Recipient’s employment is terminated with or without cause, or on their date of death. In the event of disability, the Recipient’s employment is considered terminated on the date for which the Recipient receives the final payment of the Corporation’s, or Subsidiary’s, short-term disability.

6. Non-Transferability of Restricted Stock. The Restricted Stock and this Restricted Stock Agreement shall not be transferable.

7. Change in Control. If any of the change in control events described in Section 11 of the Plan occur, all shares of Restricted Stock shall fully vest and all restrictions on the shares of Restricted Stock shall lapse as follows: In the case of an event specified in clause (a) of the second sentence of the third paragraph of Section 11, the lapse of all restrictions on the shares of Restricted Stock shall occur immediately prior to the consummation of the described transaction and, in the case of an event specified in clause (b) or (c) of said sentence, the full vesting and lapse of restrictions shall occur upon occurrence of the described event.

8. Notices. Any notice required or permitted under this Restricted Stock Agreement shall be deemed given when delivered personally, or when deposited in a United States Post Office, postage prepaid, addressed, as appropriate, to the Recipient either at his or her address herein above set forth or such other address as he or she may designate in writing to the Corporation.

9. Failure to Enforce Not a Waiver. The failure of the Corporation to enforce at any time any provision of this Restricted Stock Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.

10. Governing Law. This Restricted Stock Agreement shall be governed by and construed according to the laws of the State of Pennsylvania.

11. Incorporation of Plan. The Plan is hereby incorporated by reference and made a part hereof, and the Restricted Stock and this Restricted Stock Agreement are subject to all terms and conditions of the Plan.

12. Amendments. This Restricted Stock Agreement may be amended or modified at any time by an instrument in writing signed by the parties hereto.

IN WITNESS WHEREOF, the parties have executed this Restricted Stock Agreement on the day and year first above written.

By
	J. Bradley Scovill – President & CEO
The undersigned hereby accepts and agrees to all the terms and provisions of the foregoing Restricted Stock Agreement and to all the terms and provisions of the Citizens & Northern Corporation 1995 Stock Incentive Plan herein incorporated by reference.
	Recipient -

EX-10.3

EXHIBIT 10.3

CITIZENS & NORTHERN CORPORATION

INDEPENDENT DIRECTORS STOCK INCENTIVE PLAN

RESTRICTED STOCK AGREEMENT

A total of Seven Hundred Seventy (770) shares of RESTRICTED common STOCK, par value $1.00, of Citizens & Northern Corporation, a Pennsylvania business corporation (herein the “Corporation”) is hereby awarded as of January 4, 2017 to __________________ (herein the “Director”), subject in all respects to the terms and provisions of the Citizens & Northern Corporation Independent Directors Stock Incentive Plan (herein the “Plan”), dated April 17, 2001 and amended April 15, 2008, which has been adopted by the Corporation’s shareholders and which is incorporated herein by reference.

These shares cannot be sold, exchanged, transferred, pledged or otherwise disposed of, except in accordance with the Plan. These transferability restrictions will lapse on January 4, 2018, except as provided for in the Plan or described in the following section of this Agreement titled “Change in Control.”

CHANGE IN CONTROL

All Awards of Restricted Stock issued under the Plan which have not fully vested (i.e., continue to have restrictions that have not lapsed) shall automatically fully vest (i.e., all restrictions shall lapse) upon a change in control event as follows: (a) If the Corporation or its stockholders execute an agreement to dispose of all or substantially all of the Corporation’s assets or capital stock by means of sale, merger, consolidation, reorganization, liquidation or otherwise, as a result of which the Corporation’s stockholders as of immediately before such transaction will not own at least fifty percent (50%) of the total combined voting power of all classes of voting capital stock of the surviving entity (be it the Corporation or otherwise), the full lapse of any restrictions on shares of Restricted Stock shall occur immediately prior to the consummation of such transaction; (b) if there is an actual, attempted or threatened change in the ownership of at least twenty-five percent (25%) of all classes of voting capital stock of the Corporation through the acquisition of, or an offer to acquire such percentage of the Corporation’s voting capital stock by any person or entity, or persons or entities acting in concert or as a group, and such acquisition or offer has not been duly approved by the Board; or (c) if during any period of two (2) consecutive years, the individuals who at the beginning of such period constituted the Board, cease for any reason to constitute at least a majority of the Board, unless the election of each director of the Board, who was not a director of the Board at the beginning of such period, was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of such period, thereupon (upon the occurrence of the events described in clause (b) or (c)), the full vesting and lapse of any restrictions on shares of Restricted Stock shall occur.

Dated: January 4, 2017

	CITIZENS & NORTHERN CORPORATION
		BY
ATTEST:		J. Bradley Scovill - President & CEO
Kimberly N. Battin, Corporate Secretary

The Director acknowledges receipt of a copy of the Plan, and represents that he or she is familiar with the terms and provisions thereof. The Director hereby accepts this Award subject to all the terms and provisions of the Plan.

Dated:
	________________________, Director

EX-10.4

EXHIBIT 10.4

 

2017 Annual Performance Incentive Award Plan (*)

Part I: Plan Administration

Section 1: Purpose of the Plan

The purpose of the Performance Incentive Award Plan ("the Plan") is to provide variable compensation to those employees in key positions who attain and sustain consistently high levels of performance by meeting and exceeding goals and expectations that contribute to the success, profitability, and return to the shareholders of Citizens & Northern Corporation and affiliated Employer(s). The Plan is designed to support operational objectives and financial goals as defined by the long-range and short-range strategic and financial Plans. Additionally, the Plan is designed to provide a component of the management compensation package essential to retaining and attracting quality employees to key positions that contribute significantly to the bank’s financial performance. A key position for the purpose of this plan is a job role that is typically, within the community banking and financial services industries, eligible for performance-based incentive compensation.

Section 2: General Description

There are three components of the Plan: (1) corporate performance; (2) unit/functional performance; and (3) individual performance. The corporate performance component will be subject to the Corporation’s attainment of financial goals relative to a defined peer group. Further, in order for a participant to earn the corporate performance component, the participant must attain at least the threshold performance level for the aggregate of composite unit/functional and individual goals. The individual performance component will be subject to an evaluation of the participants’ overall contributions to the “team”. To earn the individual component, the participant must attain at least the threshold performance level.

The unit/functional component is based on the attainment of pre-established goals by the participant and often a team of participants in a given business unit, e.g., retail branch system, commercial lending team. Depending upon the participant’s function, attainment of goals for the participant’s region also may be evaluated to determine a portion of the unit/functional bonus. For example, a Community Office Manager’s unit/functional component goals for deposit growth, loan growth, non-interest income growth, FTE management, et cetera could be a combination of group performances by the Retail Unit as a whole and individual achievement by the manager in his/her own territory/office. To receive the unit/functional bonus payout, the participant must achieve at least the threshold level. Even after attaining at least the Threshold performance, the plan permits the participant’s supervisor or the executive officer for the participant’s area to recommend no bonus payout, or a reduced amount (Corporate, Unit/Functional or Individual) if aspects of the participant’s performance are deemed unsatisfactory.

(*) Employees who are actively engaged in interviewing residential real estate mortgage applicants, processing the applications and closing the loans are excluded from this plan. The Corporation has a separate incentive award plan for such employees.

The Plan protects shareholders' interests by requiring that the goals established will enhance bottom line performance while not encouraging excessive risk-taking and that a minimum level of performance is achieved before any incentive award can be made. At the same time the Plan provides management with a means to retain and attract top performers who increase the organization’s financial performance by attaining their performance goals. The Plan requires that management perform an annual assessment and establishment of goals and provides a performance review and measurement system. The Plan requires management to consider non-financial goals designed to improve operational and risk management effectiveness, as well as financial goals, as appropriate for each participant’s position. The Plan permits future inclusion of additional positions during a Plan year, if the need arises.

The calculation of the bonus to be distributed to the Plan participants, and the incentive formulas, are constructed to provide awards consistent with strong corporate financial performance and the participant’s exceptional performance in his/her unit/functional area. The incentive formulas ensure a level of incentive award that is competitive with comparable positions and job levels in similar financial institutions, thus enabling Citizens & Northern to attract, retain, and motivate high-performing personnel and support continued growth and profitability. The determination of the bonus payable is described in Part II of this Plan.

The Plan is established to augment regular salary and benefit programs already in existence. The Incentive Plan is not meant to be a substitute for salary increases but supplemental to salary and as stated earlier, a reward for “exceptional" performance.

The Plan has been developed to recognize that the amount of incentive bonus award attainable by key executives should vary depending upon the executive’s position with the company and the competitive levels of incentive bonus for those positions within the banking and financial service industry. Thus threshold, target and maximum Incentive Opportunities are established for each position.

Section 3: Other Payment Conditions

Termination for Reasons Other Than Death, Permanent Disability or Retirement – In the event of termination of employment for reasons other than death, permanent disability or retirement, the participant, at the discretion of the committee, may forfeit all unpaid incentive awards.

The Compensation Committee of the Board, and management, reserve the right to deny or modify an award to any participant. Such action may be due to, but not limited to, the failure of the participant to properly perform during the Plan year. Economic or other circumstances and considerations may dictate that incentive bonuses be reduced or eliminated in any given year. Accordingly, the Board of Directors may amend, alter or terminate the Plan at any time.

In the event a participant becomes disabled for a period greater than two (2) weeks, any salary continuation as a result of the Corporation’s short and long-term disability programs will not be included in the base salary used for the incentive bonus calculation.

Page 2 of 6

Section 4: Administration of the Plan

Throughout this Plan, reference to the actions and authority of the Compensation Committee of the Board of Directors ("the Committee") also presumes that the Committee will recommend, and the board of directors will approve or disapprove, final disposition of all matters pertaining to administration of the Plan. The Committee, with board approval, has the responsibility to interpret, administer, and amend the Plan as necessary. The recommendations of the Committee as approved by the board, affecting the construction, interpretation, and administration of the Plan shall be final and binding on all parties, including the Corporation, its subsidiaries and employees.

At or before the beginning of each Plan year, the Committee will review and may revise the operating rules. Performance targets the Incentive Bonus Plan Performance Matrix, and the Incentive Opportunity levels for corporate, individual and unit/functional awards for attaining those targets may be changed in order to emphasize specific goals and objectives of the Plan and to maintain a competitive incentive program. However, it is expected that the Plan will require modification only when significant changes in the organization, goals, personnel, or performance occur. The Chief Executive Officer shall be the Plan czar with the power to control and oversee proper administration of the Plan, and may recommend to the Committee proposed changes to the operating rules. Additionally, the Committee may engage a third party expert to review and amend the plan.

An individual or individuals designated by the Chief Executive Officer will perform the computation of incentive awards. Maintenance of participant payment records shall be the responsibility of the Human Resource Director.

Finally, the committee, with board approval, may exclude extraordinary occurrences, which could affect the performance awards, either positively or negatively, but are by their nature outside the significant influence of Plan participants. The characteristics of such extraordinary occurrences are generally that they involve the senior management and the board of directors in:

· The original decision to take some action.

· Mission-driven strategic Initiatives that sacrifice short-term income for long-term gain.

· Issues most related to a restructuring of assets, or unusual expense or income realization.

Extraordinary occurrences may be excluded when calculating performance results to ensure that the best interests of the shareholders are protected and are not brought into conflict with the intent of the Plan. When and if extraordinary occurrences are excluded from the calculation of corporate performance measures, they should also be excluded in calculating the bonus.

Section 5: Plan Participants

Executive management shall select and recommend for participation in the Plan employees in those job positions that are responsible for directing, implementing and performing functions that have a significant influence on the profitability and operational performance of the bank (key employees). Those job positions which are selected for participation in the Plan will be in positions that normally include an incentive bonus component in the compensation package offered by similar financial institutions.

Page 3 of 6

At or before the beginning of each Plan year, the Committee shall review the recommendations of management on the selection of those positions eligible for participation in the Plan for that year. Management shall recommend the Incentive Bonus Plan Performance Matrix for the year. Additionally, management shall recommend a threshold, target and maximum Incentive Opportunity percentage of base salary for each position. Participants shall be notified of their eligibility as soon as selection is completed and the board of directors has adopted the Plan. The Committee shall review and recommend the inclusion of participants to the full board for their approval.

Positions and thus participants may be added during the Plan year at the discretion of management and the Committee, and the incentive award will be prorated from date of entry into the Plan.

Section 6: Payment of Individual Incentive Compensation Awards

Within 60 days following the end of the Plan year and as soon as the participant’s performance has been evaluated and the financial and operating results are known, participants will receive their incentive payment as determined by the Incentive Bonus Plan Performance Matrix.

Section 7: Incentive Compensation Plan Operating Rules

Before the beginning of each Plan year, the Committee may review and revise, if deemed appropriate, Part II: Operating Rules of the Plan for the year then beginning. The operating rules shall include the following:

a) Identification of positions selected for participation in the Plan

b) The method for determining the amount of the total bonus to be paid to Plan participants, including the Incentive Bonus Plan Performance Matrix.

c) Schedules and formulas for determining the amount of the incentive compensation awards to Plan participants for the Plan year then beginning, including threshold, target and maximum performance measures and the percentage of bonus award determined by corporate, functional/unit and individual performances. Participants will be informed at or before the Plan year of the manner in which performance will be evaluated.

d) Other administrative and procedural rules, which the committee considers appropriate.

After approval by the Committee and the board of directors, management shall, as soon as practical, inform each of the participants of the operating rules for the Plan year then beginning.

Page 4 of 6

Section 8: Performance Progress Reporting

Semi-annually the Plan czar will be responsible for communicating attainment of corporate goals during the course of the Plan year. Participants and their direct supervisors will meet periodically to review their performance relative to the established unit/functional and individual goals.

Section 9: Amendment or Termination of Plan

The committee, with concurrence of the board of directors, may terminate, amend, or modify this Plan at any time. The termination, amendment, or modification of the Plan may affect a participant's right to unpaid incentive compensation awards under this Plan.

Section 10: Other Considerations

Recoupment-  Amounts allocated or paid pursuant to this Plan shall be subject to recovery by the Corporation under any claw back, recovery, recoupment or similar policy hereafter adopted by the Corporation, whether in connection with Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended from time to time, or otherwise, whether or not required by law.

Active Employment Contingency- Except in the case of a retirement, if a participant voluntarily terminates his or her employment with the Corporation or Bank prior to the date of bonus payout, the bonus will be forfeited.

Right of Assignment - No right or interest of any participant in the Plan shall be assignable or transferable, or subject to any lien, directly, by operation of law, or otherwise, including levy, garnishment, attachment, pledge, or bankruptcy.

Right of Employment - The participation in or the receipt of an award under this Plan shall not guarantee any employee any right to continued employment; the right to dismiss any employee is specifically reserved to the organization. The receipt of an award for any one year shall not guarantee an employee the right to receive an award for any subsequent year.

Change of Position – If a participant transfers to another position in the organization that is not included in the Incentive Compensation Plan, they will cease being a Plan participant. At the time of the position change a determination will be made as to whether the participant will be eligible for a bonus for the period during which they were a participant.

Withholding for Taxes - The organization shall have the right to deduct from all payments under this Plan any federal, state or local taxes required by law to be withheld with respect to such payments.

Salary - Salary is defined as base earnings for the year, which includes any increase in weekly rate of pay but not including any referral awards, brokerage or insurance commissions, golden nugget payments, taxable fringe benefits or prior bonus payments.

Board Prerogatives – It will be the right of the Board of Directors to amend, alter and/or terminate the plan in its sole discretion at any time.

Page 5 of 6

Part II: Operating Rules

Section l: General

The following Incentive Compensation Plan Operating Rules will be in effect for the 2017 plan year and until revised. These operating rules are subject to change by the Committee before the start of the Plan year, with the approval of the board of directors. It is anticipated that the rules for 2017 will be revised only if significant changes occur in organization, operations, industry compensation practices, or other pertinent factors.

Section 2: Corporate Performance Component - Incentive Bonus Plan Performance Matrix for 2017

The corporate performance component of the Incentive Bonus is calculated based on comparison of C&N’s Return on Average Equity (ROAE) to that of a Peer Group. The chart below will determine the Incentive Opportunity percentage of base salary from which the corporate performance component of a participant’s bonus would be paid:

C&N's		Corporate
Percent		Award as
ROAE Rank		% of
vs Peer		Target
	25		33	%
	30		46.4	%
	35		59.8	%
	40		73.2	%
	45		86.6	%
	50		100	%
	55		110.0	%
	60		120.0	%
	65		130.0	%
	70		140.0	%
	75		150	%
	80		150	%
	85		150	%
	90		150	%
	95		150	%
	100		150	%
	>100		150	%

****************************************************************

*The Peer Group shall include all publicly traded commercial banks and thrifts within NJ, NY, OH and PA with total assets between $750 million and $3.5 Billion.

Page 6 of 6

EX-10.5

EXHIBIT 10.5

 

2017 Annual Performance Incentive Award Plan – Mortgage Lenders

Section 1: Purpose of the Plan

The purpose of the Performance Incentive Award Plan ("the Plan") is to provide variable compensation to Citizens & Northern employees who are actively engaged in interviewing residential real estate applicants, processing the applications and closing the loans. The Plan is designed to reward mortgage lending employees who attain and sustain consistently high levels of performance by meeting and exceeding defined goals and to provide a component of the compensation package essential to retaining and attracting quality employees in mortgage lending positions. Incentive awards are not directly tied to Company/mortgage business profits nor the terms of the closed-end mortgage transaction or a proxy for a transaction term. The expense of the plan is incorporated into the Company’s operating budget. The objective is to align the interests of these employees with the interests of the Company in obtaining superior performance results while being in compliance with the SAFE Act and 12 CFR Part 1026.36 (Regulation Z).

Section 2: General Description

There are two components of the Plan: (1) unit/functional performance; and (2) individual performance. The individual performance component will be subject to an evaluation of the participants’ overall contributions to the “team”. To earn the individual component, the participant must attain at least the threshold performance level.The unit/functional component is based on the attainment of pre-established goals by the applicable branch or mortgage lending business unit,. To receive the unit/functional bonus payout, the participant must achieve at least the threshold level.

In addition to goals based on production, the Plan requires management to consider non-financial goals designed to improve operational and risk management effectiveness, as appropriate for each participant’s position. The Plan permits future inclusion of additional positions during a Plan year, if the need arises.

The incentive formulas ensure a level of incentive award that is competitive with comparable positions and job levels in similar financial institutions, thus enabling Citizens & Northern to attract, retain, and motivate high-performing mortgage lending employees.

The Plan is established to augment regular salary and benefit programs already in existence. The Incentive Plan is not meant to be a substitute for salary increases but supplemental to salary and as stated earlier, a reward for “exceptional" performance.

The Plan has been developed to recognize that the amount of incentive bonus award attainable by key mortgage lending employees should vary depending upon the employee’s position with the company and the competitive levels of incentive bonus for those positions within the banking and financial service industry. Thus threshold, target and maximum Incentive Opportunities are established for each position.

Section 3: Other Payment Conditions

Termination for Reasons Other Than Death, Permanent Disability or Retirement – In the event of termination of employment for reasons other than death, permanent disability or retirement, the participant, at the discretion of the committee, may forfeit all unpaid incentive awards.

In the event a participant becomes disabled for a period greater than two (2) weeks, any salary continuation as a result of the Corporation’s short and long-term disability programs will not be included in the base salary used for the incentive bonus calculation.

Section 4: Administration of the Plan

Throughout this Plan, reference to the actions and authority of the Compensation Committee of the Board of Directors ("the Committee") presumes that the Committee will recommend, and the board of directors will approve or disapprove, final disposition of all matters pertaining to administration of the Plan. The Committee, with board approval, has the responsibility to interpret, administer, and amend the Plan as necessary. The recommendations of the Committee as approved by the board, affecting the construction, interpretation, and administration of the Plan shall be final and binding on all parties, including the Corporation, its subsidiaries and employees.

At or before the beginning of each Plan year, the Committee will review and may revise the operating rules. The Incentive Opportunity levels for individual and unit/functional awards for attaining those targets may be changed in order to maintain a competitive incentive program. However, it is expected that the Plan will require modification only when significant changes in the organization, goals, personnel, or performance occur. The Chief Executive Officer shall be the Plan czar with the power to control and oversee proper administration of the Plan, and may recommend to the Committee proposed changes to the operating rules. Additionally, the Committee may engage a third party expert to review and amend the plan.

An individual or individuals designated by the Chief Executive Officer will perform the computation of incentive awards. Maintenance of participant payment records shall be the responsibility of the Human Resource Director.

Section 5: Plan Participants

Executive management shall select and recommend for participation in the Plan employees in those job positions that are responsible for mortgage lending functions. Those job positions which are selected for participation in the Plan will be in positions that normally include an incentive bonus component in the compensation package offered by similar financial institutions.

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At or before the beginning of each Plan year, the Committee shall review the recommendations of management on the selection of those positions eligible for participation in the Plan for that year. Additionally, management shall recommend a threshold, target and maximum Incentive Opportunity percentage of base salary for each position. Participants shall be notified of their eligibility as soon as selection is completed and the board of directors has adopted the Plan. The Committee shall review and recommend the inclusion of participants to the full board for their approval.

Positions and thus participants may be added during the Plan year at the discretion of management and the Committee, and the incentive award will be prorated from date of entry into the Plan.

Section 6: Payment of Individual Incentive Compensation Awards

Within 60 days following the end of the Plan year and as soon as the participant’s performance has been evaluated, participants will receive their incentive payment.

Section 7: Incentive Compensation Plan Operating Rules

Before the beginning of each Plan year, the Committee may review and revise, if deemed appropriate, the operating rules of the Plan for the year then beginning. The operating rules shall include the following:

a) Identification of positions selected for participation in the Plan

b) The method for determining the amount of the total bonus to be paid to Plan participants.

c) Schedules and formulas for determining the amount of the incentive compensation awards to Plan participants for the Plan year then beginning, including threshold, target and maximum performance measures and the percentage of bonus award determined by functional/unit and individual performances. Participants will be informed at or before the Plan year of the manner in which performance will be evaluated.

d) Other administrative and procedural rules, which the Committee considers appropriate.

After approval by the Committee and the board of directors, management shall, as soon as practical, inform each of the participants of the operating rules for the Plan year then beginning.

Section 8: Performance Progress Reporting

Participants and their direct supervisors will meet periodically to review their performance relative to the established unit/functional and individual goals.

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Section 9: Amendment or Termination of Plan

The Committee, with concurrence of the board of directors, may terminate, amend, or modify this Plan at any time. The termination, amendment, or modification of the Plan will not affect a participant's right to unpaid incentive compensation awards under this Plan.

Section 10: Other Considerations

Recoupment-  Amounts allocated or paid pursuant to this Plan shall be subject to recovery by the Corporation under any claw back, recovery, recoupment or similar policy hereafter adopted by the Corporation, whether in connection with Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, as amended from time to time, or otherwise, whether or not required by law.

Active Employment Contingency- Except in the case of a retirement, if a participant voluntarily is not actively employed by the Corporation prior to the date of bonus payout, the bonus will be forfeited.

Right of Assignment - No right or interest of any participant in the Plan shall be assignable or transferable, or subject to any lien, directly, by operation of law, or otherwise, including levy, garnishment, attachment, pledge, or bankruptcy.

Right of Employment - The participation in or the receipt of an award under this Plan shall not guarantee any employee any right to continued employment; the right to dismiss any employee is specifically reserved to the organization. The receipt of an award for any one year shall not guarantee an employee the right to receive an award for any subsequent year.

Change of Position – If a participant transfers to another position in the organization that is not included in the Incentive Compensation Plan, they will cease being a Plan participant. At the time of the position change a determination will be made as to whether the participant will be eligible for a bonus for the period during which they were a participant.

Withholding for Taxes - The organization shall have the right to deduct from all payments under this Plan any federal, state or local taxes required by law to be withheld with respect to such payments.

Salary - Salary is defined as base earnings for the year, which includes any increase in weekly rate of pay but not including any referral awards, brokerage or insurance commissions, golden nugget payments, taxable fringe benefits or prior bonus payments.

Board Prerogatives – It will be the right of the Board of Directors to amend, alter and/or terminate the plan in its sole discretion at any time. Any Incentive Bonus earned by the Participant at the time of amendment, alteration and/or termination shall remain due and payable as stated.

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EX-21

EXHIBIT 21

	Jurisdiction or
Name	State of Incorporation
Citizens & Northern Bank (A)	Pennsylvania
Bucktail Life Insurance Company (A)	Arizona
Citizens & Northern Investment Corporation (A)	Delaware
C&N Financial Services Corporation (B)	Pennsylvania

(A) Wholly-owned subsidiary of Citizens & Northern Corporation

(B) Wholly-owned subsidiary of Citizens & Northern Bank

EX-23

EXHIBIT 23

Consent of Independent Registered Public Accounting Firm

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-162279 and 333-160682) and Form S-8 (No. 333-150517 and 333-138398) of Citizens & Northern Corporation and subsidiaries of our reports dated February 16, 2017, relating to the consolidated financial statements and the effectiveness of Citizens & Northern Corporation and subsidiaries’ internal control over financial reporting, which appear in this Form 10-K.

/s/ Baker Tilly Virchow Krause, LLP

Williamsport, Pennsylvania

February 16, 2017

EX-31.1

Exhibit 31.1

CERTIFICATION

I, J. Bradley Scovill, certify that:

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

2. Based on my knowledge, this annual 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 annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual 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.

February 16, 2017	By: /s/ J. Bradley Scovill
Date	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Mark A. Hughes, certify that:

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

2. Based on my knowledge, this annual 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 annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this annual 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 annual report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure control 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.

February 16, 2017	By: /s/ Mark A. Hughes
Date	Treasurer and Chief Financial Officer

EX-32

Exhibit 32

SECTION 1350 CERTIFICATIONS

In connection with the Annual Report of Citizens & Northern Corporation (the “Corporation”) on Form 10-K for the year ended December 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned hereby certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002, that to each of the undersigned’s best knowledge and belief:

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

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

February 16, 2017	By: /s/ J. Bradley Scovill
Date	President and Chief Executive Officer
February 16, 2017	By: /s/ Mark A. Hughes
Date	Treasurer and Chief Financial Officer

EX-99.1

Exhibit 99.1

2016 Annual Highlights Alignment: The Bridge to Advancement logo

Giving Back, Giving Together We are committed to building stronger, more prosperous communities in the areas we serve. In 2016, we were able to give over $240,000 in charitable contributions to support programs and services vital to the success of these communities. In 2015 we initiated our "Giving Back, Giving Together" program, with the purpose of focusing on a different cause each year that will have a positive and lasting impact on our local communities. Since the program's inception two years ago, our C&N teams have raised over $110,000 and our team members have volunteered on 283 occasions. Giving Back, Giving Together Surpasses Expectations Again At some point in our lives, we will all rely upon our local volunteer emergency services. Our mission for 2016 was to help make a difference for 52 of our local Fire Departments and Ambulance Associations. We set an aggressive goal of $50,000 to help fund equipment and training for the men and women who regularly put their lives on the line in order to keep us safe. By giving together as employees, customers, clients, friends and neighbors, we raised over $64,000 across all eight of our counties of operation. In addition to our fundraising efforts, C&N employees volunteered their personal time on 172 separate occasions throughout the year at emergency volunteer organization events. Thank you to everyone who helped make such a substantial impact on our local communities and for our hometown heroes. They certainly deserve our support. Let the Momentum Continue As we turn the page to 2017, we're shifting our focus to helping disadvantaged children in our area who have faced neglect or other types of hardship. While it's heartbreaking to hear their stories, it will be inspiring to see how we will all work together to give them faith that there is good in this world. And we can't wait to get started again! If you would like to get involved, stop by any C&N branch during the following weeks, when our locations will be coordinating on-site events to raise awareness and funds for this important cause: March 27 - April 1 June 26 - July 1 September 25 - 30 December 11 - 16 To learn more about how you can help, visit our Facebook page or www.cnbankpa.com. "We appreciate your efforts to help support us financially. This money helps us support our community through protection & preservation of life & property." - Michael Dincher, President, Old Lycoming Fire Department

Giving Back, Giving Together 2 Letter from the CEO 4 Corporate Profile 6 Corporate Officers 6 Executive Team 6 Board of Directors 7 Advisory Boards 7 Financial Profile 8 Summary of Operations 9 Quarterly Financial Data 12 Trust and Financial Management Group 13 Employee Highlights 14 Service Awards 15 Retirements 16 Connect With Us 17 Inside this report Throughout this year’s Annual Highlights, we’ll feature individuals throughout our network who have experienced fi the benefi of having a team of professionals working together in alignment to deliver consistent value. The company’s renewed emphasis on alignment stems from the shared belief that the more united we all are in living our values and delivering on our promise every day, the more value we collectively create for our company, our customers, our communities and our shareholders. Alignment: The Bridge to Advancement

A Message from Our President & CEO J. Bradley Scovill In 2016, C&N continued to advance our Mission of “Creating Value through Lifelong Relationships” with our customers, Team members, communities, and shareholders. During the past two years, we have been working to align all that we do with this Mission and to create a culture based on core Values in order to deliver on this promise in a consistent and sustainable manner. Our efforts on this foundational focus are taking hold across the Company and will significantly strengthen our competitive position moving forward. Growth in loans, deposits, and trust assets under management are beginning to drive revenue growth and our focus on deepening customer relationships is reflected in improving customer engagement metrics. This is a direct result of the investment we continue to make in engaging, developing, and aligning our Team of professionals to deliver value to existing and new customers. Recent and ongoing investment in online and mobile banking technology and other internal systems are also contributing to this growth. Importantly, during the fourth quarter, the growth in expenses tapered, providing some operating leverage as we transition into 2017. For 2016, Citizens & Northern Corporation’s earnings were $15.8 million as compared to $16.5 million in 2015. Earnings per share were $1.30 and $1.35 for the same periods. Return on average equity (ROAE) for 2016 was 8.37% and return on average assets (ROAA) was 1.28% as compared to 2015’s ROAE of 8.72% and ROAA of 1.32%. Net interest income grew by 1.2% to $40.4 million during 2016, the first annual increase since 2011, as a result of substantial loan growth and changing the mix of funding away from high- cost borrowing. Persistently low interest rates and a flat yield curve have created some headwinds to increasing net interest income even as the balance sheet position has improved. Credit quality has remained strong throughout and the increase of $376,000 (44.5%) in the provision for loan losses was primarily to support loan growth. Other income increased slightly during 2016 to $15.5 million. Strong performance in the Trust and Wealth Management business and sales of residential mortgage loans into the secondary market were key drivers of this source of revenue. “Our Team has been working to align all that we do to deliver value to our customers and drive growth.” -Brad Scovill, President & CEO

Growth in both of these business lines reflects the focus of our market teams on expanding relationships across all regions. The ongoing trend of declining overdraft fees has been the primary offset to growth in non-interest revenue. Non-interest expenses increased 5.2% to $34.7 million during 2016 primarily driven by salaries and benefits associated with new positions in a variety of areas and professional fees to support sales and service training, information technology, and marketing activities. As stated earlier, the rate of expense growth declined during the latter part of 2016 and the efficiency ratio for the year was 59.2%, still very solid by industry standards. Overall balance sheet growth has come slowly, even as the mix of assets and funding has improved. Total assets were $1.242 billion at year-end 2016, an increase of 1.5% from a year earlier. Net loans increased $46.4 million (6.7%) to $743 million, with loan growth funded partially by a decrease in available-for-sale securities. Deposits grew 5.2% to $984 million as of December 31, 2016, an increase of $48 million, while borrowed funds declined by $28 million (30.0%) to $65 million. C&N’s capital position remains one of the strongest in the industry. All ratios are well in excess of regulatory standards and provide an excellent base for growth, expansion, and targeted acquisitions. During the first four months of 2016, we completed the 2014 share repurchase program, as a total of 622,500 shares were repurchased over a period of slightly less than two years. In April 2016, the Board authorized a new program allowing the repurchase of 600,000 shares. No shares have been repurchased to date under that program. CZNC shares closed 2016 at $26.20, an increase of 24.8% for the year as your company participated in the post-election rally that lifted the shares of many financial stocks. Dividends per share remained at $1.04 providing a yield of 3.97% based on the December 31, 2016 market price. As noted earlier, our Team has been working to align all that we do to deliver value to our customers and drive growth. These efforts are most notable in the progress we have made in building teams in each region to execute Regional Market Plans. This model brings leadership for our brand of relationship banking into each market and enhances our engagement in each community. During the fourth quarter, we announced plans to establish a loan production office in Elmira, NY, and will be officially opening the new facility around the end of February. We have an excellent leader in the market and are already building relationships and generating new business as we take our model into this, and other, communities in our southern tier Regional Market. 2016 was also noteworthy for the addition of two new Directors, Terry Lehman and Frank Pellegrino, who have enhanced the Board’s ability to provide oversight and guidance to C&N. The Board also formed an Information Technology Committee to further engage and align their contribution to this important element of our business. Looking forward, C&N is focused on elevating our performance in 2017. New public policy driven by the Trump administration may provide a better business and banking environment and support economic growth. While we are heartened by the pro-growth elements of the agenda and look forward to tax and regulatory relief, the timing and impact of any changes are impossible to estimate. In the meantime, we remain committed to building our culture and capacity to create value for our shareholders, customers, and communities. I extend my thanks to the entire C&N Team for your engagement and energy as we pursue this mission, and to our shareholders for your confidence and ongoing support.

Corporate Profile Citizens & Northern Corporation is a bank holding company with assets of approximately $1.2 billion and is headquartered in Wellsboro, PA. Banking services are provided by its subsidiary, Citizens & Northern Bank, from 26 banking offices in Bradford, Cameron, Lycoming, McKean, Potter, Sullivan and Tioga Counties in Pennsylvania and Steuben County in New York. Investment products are offered through C&N Investment Services and insurance products are offered by C&N Financial Services Corp. Trust services are offered by Citizens & Northern Bank through the C&N Trust and Financial Management Group. Citizens & Northern stock trades on the NASDAQ Capital Market Securities under the symbol CZNC. 2016 Corporate Officers J. Bradley Scovill President & CEO Mark A. Hughes Treasurer Kimberly N. Battin Corporate Secretary 2016 Executive Team Shelley L. D'Haene EVP and Senior Operations Officer Stan Dunsmore EVP and Chief Credit Officer Harold F. Hoose, III EVP and Director of Lending Mark A. Hughes EVP and Director Financial Division John M. Reber EVP and Director of Risk Management Thomas L. Rudy, Jr. EVP and Director of Branch Delivery Deborah E. Scott EVP and Trust Division Director J. Bradley Scovill President & CEO "C&N created a 401(K) plan for our business, creating a smoother and better environment for our staff." -Dr. Eric Ecker, Ecker Family Dental

2016 Board of Directors Citizens & Northern Corporation and Citizens & Northern Bank Leo F. Lambert, Chairman Dennis F. Beardslee Jan E. Fisher R. Bruce Haner Susan E. Hartley Terry Lehman Edward H. Owlett, III Frank Pellegrino J. Bradley Scovill Leonard Simpson James E. Towner Ann M. Tyler President/GM, Fitzpatrick & Lambert, Inc. Owner, Terrace Lanes Bowling Center Executive Vice President/COO Susquehanna Health System Retired auto buyer for new car dealers Attorney at Law Retired Certified Public Accountant President & CEO, Putnam Company Owner & Developer, Carlton Associates, LLC President & CEO, Citizens & Northern Attorney at Law and Sullivan County District Attorney Retired General Manager, The Scranton Times CPA, Ann M. Tyler CPA 2016 Advisory Boards We thank our Advisory Board members who give us valuable insight into the communities we serve. Athens, East Smithfield & Sayre Warren J. Croft, Max P. Gannon, Jr., L. Joseph Tomasso, Jr. Coudersport, Emporium & Port Allegany Peter Fragale, Patrice D. Levavasseur, Edwin M. Schott, Edwin W. Tompkins III Dushore & Laporte Ronald A. Gutosky, William B. Saxe Elkland, Knoxville & Tioga Brian Bicksler, Mark R. Howe, John C. Kenyon, Leisa L. LaVancher, Mary C. Owlett, William W. Roosa Mansfield & Wellsboro Donald R. Abplanalp, Craig Eccher, Scott Lewis Ralston & Liberty Lawrence J. Connolly, Stephen L. Davis, Ronald W. Roan, James H. Route, Jr., Ray E. Wheeland Jersey Shore, Muncy, Old Lycoming, South Williamsport & Williamsport Thomas F. Charles, John M. Confer, Roger D. Jarrett, Daniel K. Mathers, David Schall, Louis Terry Waldman Monroeton, Towanda, Troy & Wysox Gary Baker, James A. Bowen, Robert L. Fulmer, James E. Parks, Mark W. Smith

Financial Profile Quarterly Share Data Trades of the Corporation's stock are executed through various brokers who maintain a market in the Corporation's stock. The Corporation's stock is listed on NASDAQ Capital Market Securities with the trading symbol CZNC. The following tables show the approximate high and low sales price of the common stock during 2015 and 2016. 016 Quarterly Share Data "Working with C&N Bank has allowed our company to become more strategic in our planning and asset allocations. We are able to bid larger contracts that would not be practical without C&N." -John Young, President & CEO Young Industries 2016 High Low Cash Dividends Declared First quarter $20.99 $19.26 $0.26 Second quarter $21.00 $19.40 $0.26 Third quarter $22.67 $20.00 $0.26 Fourth quarter $26.57 $20.54 $0.26 2015 High Low Cash Dividends Declared First quarter $21.50 $19.01 $0.26 Second quarter $21.17 $19.16 $0.26 Third quarter $20.73 $19.25 $0.26 Fourth quarter $21.45 $19.07 $0.26

Summary of Operations Five-Year Comparison PER COMMON SHARE DATA 2016 2015 2014 2013 2012 Basic earnings per share $1.30 $1.35 $1.38 $1.51 $1.86 Diluted earnings per share $1.30 $1.35 $1.38 $1.50 $1.85 Cash dividends declared per share $1.04 $1.04 $1.04 $1.00 $0.84 Book value per common share at period-end $15.36 $15.39 $15.34 $14.49 $14.89 Tangible book value at period-end $14.37 $14.41 $14.36 $13.51 $13.91 Weighted average common shares outstanding - basic 12,098,129 12,211,941 12,390,067 12,352,383 12,235,748 Weighted average common shares outstanding - diluted 12,128,364 12,233,773 12,412,050 12,382,790 12,260,208 AVERAGE BALANCES (In Thousands) 2016 2015 2014 2013 2012 Total assets $1,229,866 $1,243,209 $1,239,897 $1,237,096 $1,305,163 Earning assets 1,147,549 1,159,298 1,155,401 1,145,340 1,199,538 Gross loans 723,076 657,727 627,753 656,495 700,241 Deposits 970,447 968,201 965,418 964,031 1,008,469 Stockholders' equity 188,373 188,905 185,469 181,412 175,822

END OF PERIOD BALANCES (In Thousands)   2016   2015   2014   2013   2012 Available-for-sale securities $395,077 $420,290 $516,807 $482,658 $472,577 Gross loans 751,835 704,880 630,545 644,303 683,910 Allowance for loan losses 8,473 7,889 7,336 8,663 6,857 Total assets 1,242,292 1,223,417 1,241,963 1,237,695 1,286,907 Deposits 983,843 935,615 967,989 954,516 1,006,106 Borrowings 64,629 92,263 78,597 96,723 89,379 Stockholders' equity 186,008 187,487 188,362 179,472 182,786 Common shares outstanding 12,113,228 12,180,623 12,279,980 12,390,063 12,274,035 INCOME STATEMENT (In Thousands) 2016 2015 2014 2013 2012 Interest and fee income $44,098 $44,519 $46,009 $48,914 $56,632 Interest expense 3,693 4,602 5,122 5,765 9,031 Net interest income 40,405 39,917 40,887 43,149 47,601 Provision for loan losses 1,221 845 476 2,047 288 Net interest income after provision for loan losses 39,184 39,072 40,411 41,102 47,313 Non-interest income excluding securities gains 15,511 15,478 15,420 16,451 16,383 Net impairment losses recognized in earnings from available-for-sale securities 0 0 0 (25) (67) Net realized gains on available-for-sale securities 1,158 2,861 1,104 1,743 2,749 Loss on prepayment of debt 0 2,573 0 1,023 2,333 Non-interest expense excluding loss on prepayment of debt 34,744 33,030 34,157 33,471 32,914 Income before income tax provision 21,109 21,808 22,778 24,777 31,131 Income tax provision 5,347 5,337 5,692 6,183 8,426 Net income $15,762 $16,471 $17,086 $18,594 $22,705

KEY RATIOS 2016 2015 2014 2013 2012 Return on average assets 1.28% 1.32% 1.38% 1.50% 1.74% Return on average equity 8.37% 8.72% 9.21% 10.25% 12.91% Average equity to average assets 15.32% 15.19% 14.96% 14.66% 13.47% Net interest margin (1) 3.76% 3.69% 3.80% 4.05% 4.26% Efficiency (2) 59.22% 56.66% 57.59% 53.27% 48.82% Cash dividends as a % of diluted earnings per share 80.00% 77.04% 75.36% 66.67% 45.41% Tier 1 leverage 14.27% 14.31% 13.89% 13.78% 12.53% Tier 1 risk-based capital 22.48% 23.29% 26.26% 25.15% 22.86% Total risk-based capital 23.60% 24.40% 27.60% 26.60% 24.01% Tangible common equity/tangible assets 14.15% 14.49% 14.34% 13.66% 13.39% Nonperforming assets/total assets 1.43% 1.31% 1.34% 1.53% 0.82% Nonperforming loans/total loans 2.07% 2.09% 2.45% 2.80% 1.41% Allowance for loan losses/total loans 1.13% 1.12% 1.16% 1.34% 1.00% Net charge-offs/average loans 0.09% 0.04% 0.29% 0.04% 0.16% (1) Rates of return on tax-exempt securities and loans are calculated on a fully-taxable equivalent basis. (2) The efficiency ratio is calculated by dividing: (a) total non-interest expense excluding losses from prepayment of debt, by (b) the sum of net interest in- come (including income from tax-exempt securities and loans on a fully-taxable equivalent basis) and non-interest income excluding securities gains or losses.

Quarterly Financial Data The following table presents summarized financial data for 2015 & 2016. SUMMARY OF QUARTERLY CONSOLIDATED FINANCIAL DATA (In Thousands Except Per Share Data) (Unaudited) Mar. 31, 2016 June 30, 2016 Sept. 30, 2016 Dec. 31, 2016 Interest income $10,937 $10,924 $11,131 $11,106 Interest expense 904 925 944 920 Net interest income 10,033 9,999 10,187 10,186 Provision (credit) for loan losses 368 318 538 (3) Net interest income after provision (credit) for loan losses 9,665 9,681 9,649 10,189 Other income 3,690 3,906 3,884 4,031 Net gains on available-for-sale securities 383 122 584 69 Other expenses 9,072 8,535 8,579 8,558 Income before income tax provision 4,666 5,174 5,538 5,731 Income tax provision 1,093 1,303 1,451 1,500 Net income $3,573 $3,871 $4,087 $4,231 Net income per share – basic $0.29 $0.32 $0.34 $0.35 Net income per share – diluted $0.29 $0.32 $0.34 $0.35 SUMMARY OF QUARTERLY CONSOLIDATED FINANCIAL DATA (In Thousands Except Per Share Data) (Unaudited) Mar. 31, 2015 June 30, 2015 Sept. 30, 2015 Dec. 31, 2015 Interest income $11,163 $11,186 $11,134 $11,036 Interest expense 1,213 1,176 1,126 1,087 Net interest income 9,950 10,010 10,008 9,949 Provision for loan losses 3 221 302 319 Net interest income after provision for loan losses 9,947 9,789 9,706 9,630 Other income 3,556 3,962 3,961 3,999 Net gains on available-for-sale securities 74 932 79 1,776 Loss on prepayment of borrowings 0 910 0 1,663 Other expenses 8,533 7,964 8,117 8,416 Income before income tax provision 5,044 5,809 5,629 5,326 Income tax provision 1,229 1,452 1,395 1,261 Net income $3,815 $4,357 $4,234 $4,065 Net income per share – basic $0.31 $0.36 $0.35 $0.33 Net income per share – diluted $0.31 $0.36 $0.35 $0.33

Trust and Financial Management Group Five-Year Comparison Trust and Financial Management (In Thousands) 2016 2015 2014 2013 2012 Assets $879,844 $814,788 $825,918 $796,115 $707,912 Revenue $4,760 $4,626 $4,490 $4,087 $3,847 INVESTMENTS (In Thousands) 2016 2015 2014 Mutual Funds $507,473 $458,942 $456,375 Stocks 179,345 167,098 178,636 Bonds 100,249 88,471 95,674 Savings and money market funds 80,860 90,038 85,629 Miscellaneous 6,864 7,216 6,588 Real Estate 4,876 2,827 2,810 Mortgages 177 196 206 Total $879,844 $814,788 $825,918 ACCOUNTS (In Thousands) 2016 2015 2014 Pension/profit sharing $369,916 $339,953 $345,772 Investment management 223,737 211,645 211,699 Trusts 177,860 166,433 171,934 Custody 98,844 92,451 92,236 Estates 7,367 1,874 2,344 Guardianships 2,120 2,432 1,933 Total $879,844 $814,788 $825,918

Celebrating our company and people Employee Highlights Employee MVP Awards Throughout 2016, employees were selected to to receive an MVP award for their consistent personification of C&N’s company values. Listed below are the twenty-eight employees chosen to receive this award. Billie Jo Haas Brandi Nowakowski Brittany Hopkins Casey Lane Courtney Cole Elaine Wagner Ginger Reap Heather McNett Janice Wilcox Jess Sweet Jill Pino John Abercrombie Kathi Heimbach Kelly Fasse Linda Bowen Linda Gordner Lorri Stocum Lynn Northup Lynne Smith Marcy Hughes Maria Garcia Matt Landis Phil Walker Samuel Lush Sonya Route Stacey Keener Teri Snyder Phil Walker Spotlight Award Winners The Spotlight Award began in May 2016 to recognize Customer Transaction Specialists who go above and beyond to ensure that C&N is the only bank their customers need. Darlene Sewell , Sayre Branch Ellen Conboy , Troy Branch Traci Spencer , East Smithfield Branch Anna Phelps , Liberty Branch Alexandria Young , Sayre Branch Rebekah Lund-Immel, Dushore Branch Deborah Martin, Coudersport Branch “I enjoy knowing our customers look at me as a person who can help with their needs and a person they can trust.” -Stacey Keener, Customer Service Representative, Sayre

2016 Service Awards 45 Years of Service Joan Blackwell , Community Office Manager 30 Years of Service Lori Blascak , Trust Officer Glenda Marzo , VP / Internal Auditor Chris Bolt , AVP / Senior System Analyst Programmer Nancy Tubbs , Compliance Coordinator 25 Years of Service Kelly Fasse , AVP / Mortgage Loan Sales Officer Lora Pier , Deposit Operations Specialist 20 Years of Service Robert Miller , Maintenance Jenelle Selleck , Community Office Manager 15 Years of Service Elizabeth Chamberlain, Customer Transaction Specialist Mike Charles, VP/Trust Tax Specialist, Asst. Trust Officer Lisa Cook, Community Office Manager George Greeley, AVP / Senior Loan Underwriter Nancy Hardes, Customer Service Representative Kim Kemp, Accounting Manager 10 Years of Service John Abercrombie, AC / Residential Appraiser Ellen Black , Customer Transaction Specialist Kerry Bliler, Community Office Manager Kathleen Evert, Deposit Operations Specialist Nathan Gage, Retirement Services Support Manager Billie Jo Haas, Community Office Manager Kathryn Harsch, Loan Center Manager Jill Logan, Loan Processor Document Preparation Laura Losinger, Customer Services Specialist Stacey Sickler, VP / Team Leader - Mortgage Lending Teri Snyder, Loan Specialist Assistant Charlene Strykowski, Deposit Operations Specialist Terry Turner, Customer Transaction Specialist Harland Webster, Senior Programming & Systems Support Analyst Michael Hatlee, VP / Manager of Retirement Services Delivery Marcy Hughes, AVP / Loan Operations Team Leader Peggy Majot, Customer Service Representative Lynn Northup , CNFS Associate Linda Ordway, Community Office Manager Jill Pino, Community Office Manager Elaine Wagner, Loan Support Specialist 5 Years of Service Kimberly Battin , Corporate Secretary Cindy Carll , Loan Support Specialist Bambi Cramm , MIS Second Shift Operator Maria Garcia , Retirement Plan Administrator Hannah Kelley , Customer Transaction Specialist Amber Kuleck , Customer Service Representative Mark Long , Financial Analyst Samuel Lush , Regional Manager Financial Services Delivery Denise Manley , Treasury Management Sales Specialist Sonya Route , Deposit Operations Specialist Ryan Satalin , VP / Senior Commercial Loan Sales Officer Jamie VanZile , Customer Service Representative Rhonda Washburn , Customer Service Representative Holly Wise , Customer Transaction Specialist

2016 Retirements 44 Years of Service Eileen Ranck - BankCard Operations Manager in Wellsboro 42 Years of Service James Shelmire - Director IT Systems & Analyst Programming in Wellsboro 34 Years of Service Mary Wood - Trust Account Administrator in Wellsboro 29 Years of Service Rhonda Litchfield - Trust Investment Officer in Wellsboro 26 Years of Service Brenda Whiteley - Mortgage Loan Sales Officer in Dushore 21 Years of Service Barbara Clinger - Customer Service Representative in Emporium 19 Years of Service Leda Bowers - Deposit Operations Representative in Wellsboro 14 Years of Service Yvonne Gil l - Marketing Director in Elkland 11 Years of Service Sandra Christ - Marketing Assistant in Wellsboro 11 Years of Service Bonnie Hargarther - Staff Auditor in Wellsboro 4 Years of Service James Seltzer - Resource Recovery Officer in Wellsboro “I was so proud to be a part of C&N when I heard that we raised over $ 64,000 for our local Emergency Services organizations. This is only the second year of this initiative & our goal was $ 50,000.” -Cassie Brelo, Regional Community Offi e Manager

Connect With Us Branch Locations Athens - 428S.MainStreet Canisteo --- 3 Main Street Coudersport 10 N. Main Street Dushore - 111 W. Main Street East Smithfield --- 563 Main Street Elkland -- 104 Main Street Emporium - 135 East Fourth Street Hornell -- 6250 County Route 64 Jersey Shore - 230 Railroad Street Knoxville - 102 East Main Street Laporte - 514 Main Street Liberty -- 4534 Williamson Trail Mansfield -- 1085 Main Street Monroeton --- 612 James Monroe Avenue Muncy 3461 Route 405 Highway Old Lycoming 1510 Dewey Avenue Port Allegany 100 Maple Street Ralston --- 24 Thompson Street Sayre - 1827 Elmira Street SouthWilliamsport -- 2 EastMountainAvenue Tioga --- 41 N. Main Street Towanda --- 428 Main Street Troy - 64 Elmira Street Wellsboro - 90-92 Main Street Williamsport - 130 Court Street Wysox 1467 Golden Mile Road Contact Information Client Contact Center 877-838-2517 Internet Banking 877-838-2517 Telephone Banking 877-622-5526 C&N Financial Services Wellsboro 866-ASK-CNFS Coudersport 814-274-1929 Trust and Financial Management Group Wellsboro 800-487-8784 Sayre 888-760-8192 Towanda 888-987-8784 Williamsport 866-732-7213 Canisteo 607-698-4295 Coudersport 814-274-1929 On the Web www.cnbankpa.com Facebook www.facebook.com/citizensandnorthernbank Opening First Quarter 2017 Elmira Loan Production Office 250 E.WaterStreet Investor Information The annual meeting of shareholders will be held at the Deane Center, 104 Main Street in Wellsboro, PA at 2:00 p.m. Thursday, April 20, 2017. General shareholder inquiries should be sent to Citizens & Northern Corporation, 90-92 Main Street, P.O. Box 58, Wellsboro, PA 16901. Our Stock Transfer Agent is American Stock Transfer & Trust Company, 59 Maiden Lane, Plaza Level, New York, NY 10038. Telephone: 800-278-4353. Our independent auditors are Baker Tilly Virchow Krause, LLP, 400 Market Street, Williamsport, PA 17701. Stockholder Inquiries A copy of the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2016, as required to be filed with the Securities and Exchange Commission, will be furnished to any stockholder without charge upon written request to the Corporation’s treasurer at our principal office at P.O. Box 58, Wellsboro, PA 16901. The information is also available through the Citizens & Northern Bank website at www.cnbankpa.com and the website of the Securities and Exchange Commission at www.sec.gov. This statement has not been reviewed or confirmed for accuracy or relevance by the Federal Deposit Insurance Corporation.

Our Core Values Teamwork - Together we are stronger. Respect - Value one another. Responsibility & Accountability - Work like you own it. Excellence - Do your best. Every day. Every time. Integrity - Do the right thing when no one is looking. Client-Focus - Consider your customer in everything you do. Have Fun - Work hard! Play hard! WIN!

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Document And Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2016	Feb. 09, 2017	Jun. 30, 2016
Document Information [Line Items]
Entity Registrant Name	CITIZENS & NORTHERN CORP
Entity Central Index Key	0000810958
Trading Symbol	cznc
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Entity Common Stock, Shares Outstanding (in shares)		12,143,776
Entity Public Float			$ 237,079,156
Document Type	10-K
Document Period End Date	Dec. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	FY
Amendment Flag	false

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Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
ASSETS
Noninterest-bearing	$ 17,551	$ 14,710
Interest-bearing	14,558	21,351
Total cash and due from banks	32,109	36,061
Available-for-sale securities, at fair value	395,077	420,290
Loans held for sale	142	280
Loans receivable	751,835	704,880
Allowance for loan losses	(8,473)	(7,889)
Loans, net	743,362	696,991
Bank-owned life insurance	19,704	20,764
Accrued interest receivable	3,963	3,768
Bank premises and equipment, net	15,397	15,406
Foreclosed assets held for sale	2,180	1,260
Deferred tax asset, net	5,117	3,115
Intangible assets - Goodwill and core deposit intangibles	11,959	11,972
Other assets	13,282	13,510
TOTAL ASSETS	1,242,292	1,223,417
LIABILITIES
Noninterest-bearing	224,175	211,041
Interest-bearing	759,668	724,574
Total deposits	983,843	935,615
Short-term borrowings	26,175	53,496
Long-term borrowings	38,454	38,767
Accrued interest and other liabilities	7,812	8,052
TOTAL LIABILITIES	1,056,284	1,035,930
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 12,113,228 at December 31, 2016 and 12,180,623 December 31, 2015	12,655	12,655
Paid-in capital	71,730	71,654
Retained earnings	112,790	109,454
Treasury stock, at cost; 541,943 shares at December 31, 2016 and 474,548 shares at December 31, 2015	(10,269)	(8,804)
Accumulated other comprehensive (loss) income	(898)	2,528
TOTAL STOCKHOLDERS' EQUITY	186,008	187,487
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$ 1,242,292	$ 1,223,417

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Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Preferred stock, par value (in dollars per share)	$ 1,000	$ 1,000
Preferred stock, authorized shares (in shares)	30,000	30,000
Preferred stock, liquidation preference per share (in dollars per share)	$ 1,000	$ 1,000
Preferred stock, shares issued	$ 0	$ 0
Common stock, par value (in dollars per share)	$ 1	$ 1
Common stock, 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)	12,113,228	12,180,623
Treasury stock, shares (in shares)	541,943	474,548

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Consolidated Statements of Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Interest and fees on loans:
Taxable	$ 32,827	$ 31,311	$ 32,127
Tax-exempt	1,783	1,668	1,403
Interest on mortgages held for sale	27	16	16
Interest on balances with depository institutions	116	93	125
Income from available-for-sale securities:
Taxable	5,846	7,303	7,721
Tax-exempt	3,429	3,844	4,310
Dividends	70	284	307
Total interest and dividend income	44,098	44,519	46,009
INTEREST EXPENSE
Interest on deposits	2,085	1,924	2,163
Interest on short-term borrowings	155	32	9
Interest on long-term borrowings	1,453	2,646	2,950
Total interest expense	3,693	4,602	5,122
Net interest income	40,405	39,917	40,887
Provision for loan losses	1,221	845	476
Net interest income after provision for loan losses	39,184	39,072	40,411
OTHER INCOME
Service charges on deposit accounts	4,695	4,864	5,025
Service charges and fees	439	494	538
Trust and financial management revenue	4,760	4,626	4,490
Brokerage revenue	756	839	901
Insurance commissions, fees and premiums	102	109	118
Interchange revenue from debit card transactions	1,943	1,935	1,959
Net gains from sale of loans	1,029	735	768
Decrease in fair value of servicing rights	(282)	(162)	(27)
Increase in cash surrender value of life insurance	382	386	376
Other operating income	1,687	1,652	1,272
Sub-total	15,511	15,478	15,420
Realized gains on available-for-sale securities, net	1,158	2,861	1,104
Total other income	16,669	18,339	16,524
OTHER EXPENSES
Salaries and wages	15,411	14,682	15,121
Pensions and other employee benefits	4,717	4,420	4,769
Occupancy expense, net	2,340	2,574	2,628
Furniture and equipment expense	1,730	1,860	1,859
FDIC assessments	488	603	600
Pennsylvania shares tax	1,274	1,248	1,350
Professional fees	1,126	638	699
Automated teller machine and interchange expense	1,137	988	924
Software subscriptions	981	876	784
Loss on prepayment of debt	0	2,573	0
Other operating expense	5,540	5,141	5,423
Total other expenses	34,744	35,603	34,157
Income before income tax provision	21,109	21,808	22,778
Effective income tax provision	5,347	5,337	5,692
NET INCOME	$ 15,762	$ 16,471	$ 17,086
NET INCOME PER SHARE - BASIC (in dollars per share)	$ 1.30	$ 1.35	$ 1.38
NET INCOME PER SHARE - DILUTED (in dollars per share)	$ 1.30	$ 1.35	$ 1.38

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Net income	$ 15,762	$ 16,471	$ 17,086
Unrealized (losses) gains on available-for-sale securities:
Unrealized holding (losses) gains on available-for-sale securities	(4,138)	(1,429)	10,774
Reclassification adjustment for gains realized in income	(1,158)	(2,861)	(1,104)
Other comprehensive (loss) gain on available-for-sale securities	(5,296)	(4,290)	9,670
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in accumulated other comprehensive gain (loss)	46	(135)	(79)
Amortization of net transition obligation, prior service cost, net actuarial (gain) loss, and loss on settlement included in net periodic benefit cost	(22)	67	184
Other comprehensive gain (loss) on unfunded retirement obligations	24	(68)	105
Other comprehensive (loss) income before income tax	(5,272)	(4,358)	9,775
Income tax related to other comprehensive loss (income)	1,846	1,526	(3,422)
Net other comprehensive (loss) income	(3,426)	(2,832)	6,353
Comprehensive income	$ 12,336	$ 13,639	$ 23,439

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Consolidated Statements of Changes in Stockholders' Equity - 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, 2013	12,596,540	206,477
Balance at Dec. 31, 2013	$ 12,596	$ (3,452)	$ 70,105	$ 101,216	$ (993)	$ 179,472
Net income				17,086		17,086
Net other comprehensive (loss) income					6,353	6,353
Cash dividends declared on common stock, $1.04 per share				(12,889)		(12,889)
Shares issued for dividend reinvestment Plan (in shares)	59,498	(18,473)
Shares issued for dividend reinvestment Plan	$ 60	$ 368	1,069			1,497
Treasury stock purchased (in shares)		208,300
Treasury stock purchased		$ (4,002)				(4,002)
Shares issued from treasury related to exercise of stock options (in shares)	(867)	(11,860)
Shares issued from treasury related to exercise of stock options	$ (1)	$ 188	(64)			123
Restricted stock granted (in shares)		(16,711)
Restricted stock granted		$ 279	(279)			0
Forfeiture of restricted stock (in shares)		7,458
Forfeiture of restricted stock		$ (125)	125			0
Stock-based compensation expense			565			565
Tax benefit from compensation plans			20	137		157
Balance (in shares) at Dec. 31, 2014	12,655,171	375,191
Balance at Dec. 31, 2014	$ 12,655	$ (6,744)	71,541	105,550	5,360	188,362
Net income				16,471		16,471
Net other comprehensive (loss) income					(2,832)	(2,832)
Cash dividends declared on common stock, $1.04 per share				(12,710)		(12,710)
Shares issued for dividend reinvestment Plan (in shares)		(73,810)
Shares issued for dividend reinvestment Plan		$ 1,379	86			1,465
Treasury stock purchased (in shares)		226,900
Treasury stock purchased		$ (4,415)				(4,415)
Shares issued from treasury related to exercise of stock options (in shares)		(22,435)
Shares issued from treasury related to exercise of stock options		$ 408	(27)			381
Restricted stock granted (in shares)		(34,800)
Restricted stock granted		$ 627	(627)			0
Forfeiture of restricted stock (in shares)		3,502
Forfeiture of restricted stock		$ (59)	59			0
Stock-based compensation expense			606			606
Tax benefit from compensation plans			16	143		159
Balance (in shares) at Dec. 31, 2015	12,655,171	474,548
Balance at Dec. 31, 2015	$ 12,655	$ (8,804)	71,654	109,454	2,528	187,487
Net income				15,762		15,762
Net other comprehensive (loss) income					(3,426)	(3,426)
Cash dividends declared on common stock, $1.04 per share				(12,578)		(12,578)
Shares issued for dividend reinvestment Plan (in shares)		(68,571)
Shares issued for dividend reinvestment Plan		$ 1,296	170			1,466
Treasury stock purchased (in shares)		187,300
Treasury stock purchased		$ (3,723)				(3,723)
Shares issued from treasury related to exercise of stock options (in shares)		(19,113)
Shares issued from treasury related to exercise of stock options		$ 361	(98)			263
Restricted stock granted (in shares)		(35,427)
Restricted stock granted		$ 658	(658)			0
Forfeiture of restricted stock (in shares)		3,431
Forfeiture of restricted stock		$ (61)	61			0
Stock-based compensation expense			578			578
Tax benefit from compensation plans			23	152		175
Balance (in shares) at Dec. 31, 2016	12,655,171	541,943
Balance at Dec. 31, 2016	$ 12,655	$ (10,269)	$ 71,730	$ 112,790	$ (898)	186,008
Other stock-based expense (in shares)		(225)
Other stock-based expense		$ 4				$ 4

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Consolidated Statements of Changes in Stockholders' Equity (Parentheticals) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Retained Earnings [Member]
Common stock, dividends, per share (in dollars per share)	$ 1.04	$ 1.04	$ 1.04

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Consolidated Statements of Cash Flows - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 15,762,000	$ 16,471,000	$ 17,086,000
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	1,221,000	845,000	476,000
Realized gains on available-for-sale securities, net	(1,158,000)	(2,861,000)	(1,104,000)
Loss on prepayment of debt	0	2,573,000	0
Realized loss (gain) on foreclosed assets	49,000	(84,000)	(136,000)
(Gain) loss on disposition of premises and equipment	(3,000)	1,000	(8,000)
Depreciation expense	1,589,000	1,888,000	1,940,000
Accretion and amortization on securities, net	1,462,000	1,562,000	1,375,000
Accretion and amortization on loans and deposits, net	(15,000)	(21,000)	(27,000)
Decrease in fair value of servicing rights	282,000	162,000	27,000
Increase in cash surrender value of life insurance	(382,000)	(386,000)	(376,000)
Gain on life insurance benefits	0	(212,000)	0
Stock-based compensation and other expense	582,000	606,000	565,000
Amortization of core deposit intangibles	13,000	22,000	35,000
Deferred income taxes	(156,000)	79,000	1,254,000
Gains on sales of loans, net	(1,029,000)	(735,000)	(768,000)
Origination of loans for sale	(29,296,000)	(21,823,000)	(21,680,000)
Proceeds from sales of loans	30,215,000	22,101,000	22,317,000
(Increase) decrease in accrued interest receivable and other assets	(410,000)	(1,697,000)	1,395,000
(Decrease) increase in accrued interest payable and other liabilities	(216,000)	1,195,000	(90,000)
Net Cash Provided by Operating Activities	18,510,000	19,686,000	22,281,000
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of certificates of deposit	1,540,000	1,780,000	2,560,000
Purchase of certificates of deposit	(2,280,000)	(100,000)	(960,000)
Proceeds from sales of available-for-sale securities	37,032,000	44,504,000	56,269,000
Proceeds from calls and maturities of available-for-sale securities	74,477,000	89,159,000	78,101,000
Purchase of available-for-sale securities	(91,896,000)	(40,363,000)	(158,894,000)
Redemption of Federal Home Loan Bank of Pittsburgh stock	5,277,000	5,029,000	2,804,000
Purchase of Federal Home Loan Bank of Pittsburgh stock	(5,046,000)	(8,102,000)	(602,000)
Net (increase) decrease in loans	(49,085,000)	(77,129,000)	10,317,000
Proceeds from bank owned life insurance	1,442,000	1,953,000	0
Purchase of premises and equipment	(1,580,000)	(1,039,000)	(801,000)
Proceeds from disposition of premises and equipment	3,000	0	43,000
Return of principal on limited liability entity investments	178,000	181,000	173,000
Proceeds from sale of foreclosed assets	539,000	2,536,000	1,504,000
Net Cash (Used in) Provided by Investing Activities	(29,399,000)	18,409,000	(9,486,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits	48,228,000	(32,374,000)	13,473,000
Net (decrease) increase in short-term borrowings	(27,321,000)	47,959,000	(17,848,000)
Repayments of long-term borrowings	(313,000)	(36,866,000)	(278,000)
Purchase of treasury stock	(3,723,000)	(4,415,000)	(4,002,000)
Sale of treasury stock	263,000	381,000	123,000
Tax benefit from compensation plans	175,000	159,000	157,000
Common dividends paid	(11,112,000)	(11,245,000)	(11,392,000)
Net Cash Provided by (Used in) Financing Activities	6,197,000	(36,401,000)	(19,767,000)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(4,692,000)	1,694,000	(6,972,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	33,313,000	31,619,000	38,591,000
CASH AND CASH EQUIVALENTS, END OF YEAR	28,621,000	33,313,000	31,619,000
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Accrued purchase of available-for-sale securities	0	0	226,000
Assets acquired through foreclosure of real estate loans	1,508,000	2,523,000	1,665,000
Interest paid	3,698,000	4,636,000	5,138,000
Income taxes paid	$ 5,129,000	$ 4,827,000	$ 4,432,000

XML

Note 1 - Nature of Operations and Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Significant Accounting Policies [Text Block]

1

.

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF CONSOLIDATION -

The consolidated financial statements include the accounts of Citizens & Northern Corporation and its subsidiaries, Citizens & Northern Bank (“C&N Bank”), Bucktail Life Insurance Company and Citizens & Northern Investment Corporation (collectively, “Corporation”), as well as C&N Bank’s wholly-owned subsidiary, C&N Financial Services Corporation. All material intercompany balances and transactions have been eliminated in consolidation.

NATURE OF OPERATIONS -

The Corporation is primarily engaged in providing a full range of banking and mortgage services to individual and corporate customers in North Central Pennsylvania and Southern New York State. Lending products include mortgage loans, commercial loans and consumer loans, as well as specialized instruments such as commercial letters-of-credit. Deposit products include various types of checking accounts, passbook and statement savings, money market accounts, interest checking accounts, Individual Retirement Accounts and certificates of deposit. The Corporation also offers non-insured “RepoSweep” accounts.

The Corporation provides Trust and Financial Management services, including administration of trusts and estates, retirement plans, and other employee benefit plans, and investment management services. The Corporation offers a variety of personal and commercial insurance products through C&N Financial Services Corporation. C&N Financial Services Corporation also offers mutual funds, annuities, educational savings accounts and other investment products through registered agents. Management has determined that the Corporation has

one

reportable segment, “Community Banking.” All of the Corporation’s activities are interrelated, and each activity is dependent and assessed based on how each of the activities of the Corporation supports the others.

The Corporation is subject to competition from other financial institutions. It is also subject to regulation by certain federal and state agencies and undergoes periodic examination by those regulatory authorities. As a consequence, the Corporation’s business is particularly susceptible to being affected by future federal and state legislation and regulations.

USE OF ESTIMATES -

The financial information is presented in accordance with generally accepted accounting principles and general practice for financial institutions in the United States of America (“U.S. GAAP”). In preparing financial statements, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements. In addition, these estimates and assumptions affect revenues and expenses in the financial statements and as such, actual results could differ from those estimates.

Material estimates that are particularly susceptible to change include:

(1)

the allowance for loan losses,

(2)

fair values of debt securities based on estimates from independent valuation services or from brokers,

(3)

assessment of impaired securities to determine whether or not the securities are other-than-temporarily impaired,

(4)

valuation of deferred tax assets and

(5)

valuation of obligations from defined benefit plans.

INVESTMENT SECURITIES -

Investment securities are accounted for as follows:

Available-for-sale securities -

includes debt securities not classified as held-to-maturity or trading, and unrestricted equity securities. Such securities are reported at fair value, with unrealized gains and losses excluded from earnings and reported separately through accumulated other comprehensive income (loss), net of tax. Amortization of premiums and accretion of discounts on available-for-sale securities are recorded using the level yield method over the remaining contractual life of the securities, adjusted for actual prepayments. Realized gains and losses on sales of available-for-sale securities are computed on the basis of specific identification of the adjusted cost of each security. Securities within the available-for-sale portfolio

may

be used as part of the Corporation’s asset and liability management strategy and

may

be sold in response to changes in interest rate risk, prepayment risk or other factors.

Other-than-temporary impairment

- Declines in the fair value of available-for-sale securities that are deemed to be other-than-temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment (OTTI) losses, management considers

(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,

(3)

the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value, and

(4)

whether the Corporation intends to sell the security or if it is more likely than not that the Corporation will be required to sell the security before the recovery of its amortized cost basis. The credit-related impairment is recognized in earnings and is the difference between a security’s amortized cost basis and the present value of expected future cash flows discounted at the security’s effective interest rate. For debt securities classified as held-to-maturity, if any, the amount of noncredit-related impairment is recognized in other comprehensive income and accreted over the remaining life of the debt security as an increase in the carrying value of the security.

Restricted equity securities

- Restricted equity securities consist primarily of Federal Home Loan Bank of Pittsburgh stock, and are carried at cost and evaluated for impairment. Holdings of restricted equity securities are included in Other Assets in the consolidated balance sheets, and dividends received on restricted securities are included in Other Income in the consolidated statements of income.

LOANS HELD FOR SALE

-Mortgage loans held for sale are reported at the lower of cost or market, determined in the aggregate.

LOANS RECEIVABLE -

Loans receivable which management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at unpaid principal balances, less the allowance for loan losses and net deferred loan fees. Interest income is accrued on the unpaid principal balance. Loan origination and commitment fees, as well as certain direct origination costs, are deferred and amortized as a yield adjustment over the lives of the related loans using the interest method.

The loans receivable portfolio is segmented into residential mortgage, commercial and consumer loans. The residential mortgage segment includes the following classes:

first

and junior lien residential mortgages, home equity lines of credit and residential construction loans. The most significant classes of commercial loans are commercial loans secured by real estate, non-real estate secured commercial and industrial loans, loans to political subdivisions, commercial construction, and loans secured by farmland.

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 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.

ALLOWANCE FOR LOAN LOSSES

-The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the collection of all, or part, of the principal balance is highly unlikely. Non-residential consumer loans are generally charged off no later than when they are

120

days past due on a contractual basis, or earlier in the event of bankruptcy or if there is an amount deemed uncollectible.

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 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. In the process of evaluating the loan portfolio, management also considers the Corporation’s exposure to losses from unfunded loan commitments. As of

December

31,

2016

and

2015,

management determined that

no

allowance for credit losses related to unfunded loan commitments was required.

The allowance consists primarily of

two

major components –

(1)

a specific component based on a detailed assessment of certain larger loan relationships, mainly commercial purpose, determined 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 specific component relates to loans that are classified as impaired based on a detailed assessment of certain larger loan relationships evaluated by a management committee referred to as the Watch List Committee. Specific loan relationships are identified for evaluation based on the related credit risk rating. For individual loans classified as impaired, an allowance is established when the collateral value less estimated selling costs, present value of discounted cash flows or observable market price of the impaired loan is lower than the carrying value of that loan.

The general component covers pools of loans by loan class including commercial loans not considered individually impaired, as well as smaller balance homogeneous classes of loans, such as residential real estate, home equity lines of credit and other consumer loans. Accordingly, the Corporation generally does not separately identify individual consumer and residential loans for impairment disclosures, unless such loans are subject to a restructuring agreement. The pools of loans for each loan segment are evaluated for loss exposure based upon average historical net charge-off rates (currently

thirty

-

six

months), adjusted for qualitative factors. Qualitative risk factors (described in the following paragraph) are evaluated for the impact on each of the

three

distinct 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. Any adjustments to the factors are supported by a narrative documentation of changes in conditions accompanying the allowance for loan losses calculation.

The qualitative factors used in the general component calculations are designed to address credit risk characteristics associated with each segment. The Corporation’s credit risk associated with all of the segments is significantly impacted by these factors, which include economic conditions within its market area, the Corporation’s lending policies, changes or trends in the portfolio, risk profile, competition, regulatory requirements and other factors. Further, the residential mortgage segment is significantly affected by the values of residential real estate that provide collateral for the loans. The majority of the Corporation’s commercial segment loans (approximately

57%

at

December

31,

2016)

are 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.

For commercial loans secured by real estate, estimated fair values are determined primarily through

third

-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. 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 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.

Loans whose terms are modified are classified as troubled debt restructurings if the Corporation grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve reductions in required payments, an extension of a loan’s stated maturity date or a temporary reduction in interest rate. Loans classified as troubled debt restructurings are designated as impaired. Non-accrual troubled debt restructurings

may

be restored to accrual status if the ultimately collectability of principal and interest payments under the modified terms is not in doubt, and there has been a period (generally, for at least

six

consecutive months) of satisfactory payment performance by the borrower either immediately before or after the restructuring.

BANK PREMISES AND EQUIPMENT

- Bank premises and equipment are stated at cost less accumulated depreciation. Repair and maintenance expenditures which extend the useful lives of assets are capitalized, and other repair and maintenance expenditures are expensed as incurred. Depreciation expense is computed using the straight-line method.

IMPAIRMENT OF LONG-LIVED ASSETS

- The Corporation reviews long-lived assets, such as premises and equipment and intangibles, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset

may

not be recoverable. These changes in circumstances

may

include a significant decrease in the market value of an asset or the manner in which an asset is used. If there is an indication the carrying value of an asset

may

not be recoverable, future undiscounted cash flows expected to result from use of the asset are estimated. If the sum of the expected cash flows is less than the carrying value of the asset, a loss is recognized for the difference between the carrying value and fair market value of the asset.

FORECLOSED ASSETS HELD FOR SALE

- Foreclosed assets held for sale consist of real estate acquired by foreclosure and are initially recorded at fair value, less estimated selling costs.

GOODWILL AND CORE DEPOSIT INTANGIBLE ASSETS

-

Goodwill represents the excess of the cost of acquisitions over the fair value of the net assets acquired. Goodwill is tested at least annually for impairment, or more often if events or circumstances indicate there

may

be impairment. Core deposit intangibles are being amortized over periods of time that represent the expected lives using a method of amortization that reflects the pattern of economic benefit. Core deposit intangibles are subject to impairment testing whenever events or changes in circumstances indicate their carrying amounts

may

not be recoverable

.

SERVICING RIGHTS

- The estimated fair value of servicing rights related to mortgage loans sold and serviced by the Corporation is recorded as an asset upon the sale of such loans. The valuation of servicing rights is adjusted quarterly, with changes in fair value included in Other Income in the consolidated statements of income. Significant inputs to the valuation include expected net servicing income to be received, the expected life of the underlying loans and the discount rate. The servicing rights asset is included in Other Assets in the consolidated balance sheets.

INCOME TAXES

- Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases given the provisions of the enacted tax laws. Deferred tax assets are reduced, if necessary, by the amount of such benefits that are not expected to be realized based upon available evidence.

Tax benefits from investments in limited partnerships that have qualified for federal low-income tax credits are recognized as a reduction in the provision for income tax over the term of the investment using the effective yield method. The Corporation includes income tax penalties in the provision for income tax. The Corporation has

no

accrued interest related to unrecognized tax benefits.

STOCK COMPENSATION PLANS

- The Corporation’s stock-based compensation policy applies to all forms of stock-based compensation including stock options and restricted stock units. All stock-based compensation is accounted for under the fair value method as required by U.S. GAAP. The expense associated with stock-based compensation is recognized over the vesting period of each individual arrangement.

The fair value of each stock option is estimated on the date of grant using the Black-Scholes-Merton option valuation model. The fair value of restricted stock is based on the current market price on the date of grant.

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS -

In the ordinary course of business, the Corporation has entered into off-balance sheet financial instruments consisting of commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable.

CASH FLOWS

- The Corporation utilizes the net reporting of cash receipts and cash payments for certain deposit and lending activities. Cash equivalents include federal funds sold and all cash and amounts due from depository institutions and interest-bearing deposits in other banks with original maturities of

three

months or less.

TRUST ASSETS AND INCOME

- Assets held by the Corporation in a fiduciary or agency capacity for its customers are not included in the financial statements since such items are not assets of the Corporation. Trust income is recorded on a cash basis, which is not materially different from the accrual basis.

XML

Note 2 - Recent Accounting Pronouncements

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Accounting Changes and Error Corrections [Text Block]

2.

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.

In

May

2014,

the FASB issued ASU

2014

-

09,

Revenue from Contracts with Customers, which provides a principles-based framework for revenue recognition that supersedes virtually all previously issued revenue recognition guidance under U.S. GAAP. Additionally, the ASU requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. The core principle of the

five

-step revenue recognition framework is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In

April

2016,

the FASB issued ASU

2016

-

10,

which provides clarifying information related to identifying performance obligations and licensing. In

May

2016,

the FASB issued ASU

2016

-

12

and in

December

2016,

the FASB issued ASU

2016

-

20,

which provide clarifying guidance in a few narrow areas and adds some practical expedients to the guidance. In

August

2015

the FASB issued ASU

2015

-

14,

which deferred the effective date of the revenue recognition standard by a year, making it applicable for the Corporation in the

first

quarter

2018

and for the annual period ending

December

31,

2018.

The amendments should be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the amendments recognized at the date of initial application. Initial adoption of this ASU is not expected to have a significant impact on the Corporation, as recognition of interest income and the larger sources of noninterest income in the Corporation’s current business model would not be impacted by the ASU. The Corporation is in the process of evaluating whether there will be any impact as a result of adopting the amendments.

In

January

2016,

the FASB issued ASU

2016

-

01,

Recognition and Measurement of Financial Assets and Liabilities. This makes significant changes in U.S. GAAP related to certain aspects of recognition, measurement, presentation and disclosure of financial instruments. The changes provided for in this Update that are applicable to the Corporation are as follows:

(1)

require equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income; however, an entity

may

choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer;

(2)

for equity investments without readily determinable fair values, require a qualitative assessment to identify impairment, and if a qualitative assessment indicates that impairment exists, requiring an entity to measure the investment at fair value;

(3)

eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet;

(4)

require public business entities to use the exit price notion when measuring the fair value of financial instruments for disclosure purposes;

(5)

require an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability resulting from a change in the instrument-specific credit risk when the entity has elected to measure the liability at fair value in accordance with the fair value option for financial instruments (at

December

31,

2016

and

2015,

the Corporation has no liabilities for which the fair value measurement option has been elected);

(6)

require separate presentation of financial assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements; and

(7)

clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. The amendments in this Update will become effective for the Corporation for annual and interim periods beginning in the

first

quarter

2018.

With limited exceptions, early adoption of the amendments in this Update is not permitted. Amendments are to be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values should be applied prospectively. Initial adoption of this ASU is not expected to have a significant impact on the Corporation’s financial position; however, the method for determining the fair value of loans and other financial instruments for disclosure purposes will be affected.

In

February

2016,

the FASB issued ASU

2016

-

02,

Leases (Topic

842).

The core principle of Topic

842

is that a lessee should recognize the assets and liabilities that arise from leases. Specifically, a lessee should recognize on the balance sheet a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. For leases with a term of

12

months or less, a lessee would be permitted to make an accounting policy election by class of underlying asset not to recognize lease assets and liabilities. Topic

842

would not significantly change the recognition, measurement and presentation of expenses and cash flows arising from a lease by a lessee from current U.S. GAAP; however, the principal change from current GAAP is that lease assets and liabilities arising from operating leases would be recognized on the balance sheet. Topic

842

provides several other changes or clarifications to existing GAAP, and will require qualitative disclosures, along with quantitative disclosures, so that financial statement users can understand more about the nature of an entity’s leasing activities. In transition, Topic

842

provides that lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, including optional practical expedients. An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous GAAP unless the lease is modified, except that lessees will be required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous GAAP. Topic

842

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

first

quarter

2019.

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

In

March

2016,

the FASB issued ASU No.

2016

-

07,

Investments – Equity Method and Joint Ventures. This ASU eliminates the requirement that when an investment qualifies for the equity method as a result of an increase in the level of ownership interest or influence, an investor must adjust the investment, results of operations and retained earnings retroactively as if the equity method had been in effect during all previous periods the investment had been held. The ASU requires the equity method investor to add the cost of acquiring an additional interest in the investee to the basis of the investor’s previously held interest and adopt the equity method of accounting as of the date the investment becomes qualified for the equity method. The ASU further requires that an entity that has an available-for-sale equity security that becomes qualified for the equity method recognize through earnings the unrealized gain or loss in accumulated other comprehensive income at the date the investment becomes qualified for use of the equity method. The amendments in this Update are effective for the Corporation for annual and interim periods beginning in the

first

quarter

2017.

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

2017

did not have a significant impact on the Corporation.

In

March

2016,

the FASB issued ASU No.

2016

-

09,

Compensation – Stock Compensation. This ASU changes several aspects of accounting for share-based payment transactions, and includes some changes that apply only to nonpublic companies. This Update includes amendments that currently apply, or

may

apply in the future, to the Corporation related to the following:

(1)

accounting for the difference between the deduction for tax purposes and the amount of compensation cost recognized for financial reporting purposes;

(2)

classification of excess tax benefits on the statement of cash flows;

(3)

accounting for forfeitures;

(4)

accounting for awards partially settled in cash in excess of the employer’s minimum statutory tax withholding requirements; and

(5)

classification of employee taxes paid on the statement of cash flows when an employer withholds shares for tax-withholding purposes. The amendments in this Update are effective for the Corporation for annual and interim periods beginning in the

first

quarter

2017,

with earlier adoption permitted. The ASU provides separate transition provisions for each of the amendments. Initial adoption of this ASU in

2017

did not have a significant impact on the Corporation.

In

June

2016,

the FASB issued ASU

2016

-

13,

Financial Instruments-Credit Losses (Topic

326).

This ASU will result in significant changes in the Corporation’s accounting for credit losses related to loans receivable and investment securities. A summary of significant provisions of this ASU is as follows:

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

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

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

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

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

In

June

2016,

the FASB issued ASU

2016

-

15,

Statement of Cash Flows (Topic

230)

–Classification of Certain Cash Receipts and Cash Payments. This Update provides clarification regarding

eight

specific cash flow issues with the objective of reducing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. For the Corporation, the amendments in this Update are effective beginning in the

first

quarter

2018.

The amendments in this Update should be applied using a retroactive transition method to each period presented. The Corporation anticipates there will be no adjustments to the Consolidated Statements of Cash Flows, as previously reported, as a result of the clarifications provided in the Update.

In

January

2017,

the FASB issued ASU

2017

-

04,

Intangibles – Goodwill and Other (Topic

350)

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

2

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

may

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

first

quarter of

2020.

 

XML

Note 3 - Comprehensive Income

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Comprehensive Income (Loss) Note [Text Block]

3.

COMPREHENSIVE INCOME

Comprehensive income is the total of

(1)

net income, and

(2)

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

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
2016
Unrealized losses on available-for-sale securities:
Unrealized holding losses on available-for-sale securities	$	(4,138	)	$	1,448		$	(2,690	)
Reclassification adjustment for (gains) realized in income		(1,158	)		406			(752	)
Other comprehensive loss on available-for-sale securities		(5,296	)		1,854			(3,442	)
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		46			(16	)		30
Amortization of net transition obligation, prior service cost and net actuarial gain included in net periodic benefit cost		(22	)		8			(14	)
Other comprehensive income on unfunded retirement obligations		24			(8	)		16
Total other comprehensive loss	$	(5,272	)	$	1,846		$	(3,426	)

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
2015
Unrealized losses on available-for-sale securities:
Unrealized holding losses on available-for-sale securities	$	(1,429	)	$	500		$	(929	)
Reclassification adjustment for (gains) realized in income		(2,861	)		1,002			(1,859	)
Other comprehensive loss on available-for-sale securities		(4,290	)		1,502			(2,788	)
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive loss		(135	)		47			(88	)
Amortization of net transition obligation, prior service cost, net actuarial loss and loss on settlement included in net periodic benefit cost		67			(23	)		44
Other comprehensive loss on unfunded retirement obligations		(68	)		24			(44	)
Total other comprehensive loss	$	(4,358	)	$	1,526		$	(2,832	)

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
2014
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	10,774		$	(3,771	)	$	7,003
Reclassification adjustment for (gains) realized in income		(1,104	)		386			(718	)
Other comprehensive income on available-for-sale securities		9,670			(3,385	)		6,285
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		(79	)		28			(51	)
Amortization of net transition obligation, prior service cost, net actuarial loss and loss on settlement included in net periodic benefit cost		184			(65	)		119
Other comprehensive income on unfunded retirement obligations		105			(37	)		68
Total other comprehensive income	$	9,775		$	(3,422	)	$	6,353

Changes in the components of accumulated other comprehensive income (loss), included in stockholders’ equity, are as follows:

(In Thousands)

	Unrealized			Unfunded			Accumulated
	Holding Gains			Pension and			Other
	(Losses)			Postretirement			Comprehensive
	on Securities			Obligations			Income (Loss)
2016
Balance, beginning of period	$	2,493		$	35		$	2,528
Other comprehensive loss before reclassifications		(2,690	)		30			(2,660	)
Amounts reclassified from accumulated other comprehensive (loss) income		(752	)		(14	)		(766	)
Other comprehensive (loss) income		(3,442	)		16			(3,426	)
Balance, end of period	$	(949	)	$	51		$	(898	)
2015
Balance, beginning of period	$	5,281		$	79		$	5,360
Other comprehensive loss before reclassifications		(929	)		(88	)		(1,017	)
Amounts reclassified from accumulated other comprehensive income		(1,859	)		44			(1,815	)
Other comprehensive loss		(2,788	)		(44	)		(2,832	)
Balance, end of period	$	2,493		$	35		$	2,528
2014
Balance, beginning of period	$	(1,004	)	$	11		$	(993	)
Other comprehensive income before reclassifications		7,003			(51	)		6,952
Amounts reclassified from accumulated other comprehensive income		(718	)		119			(599	)
Other comprehensive income		6,285			68			6,353
Balance, end of period	$	5,281		$	79		$	5,360

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

For the Year Ended

December

31,

2016

(In Thousands)

Details about Accumulated Other Comprehensive Income Components	Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(1,158	)	Realized gains on available-for-sale securities, net
		406		Income tax provision
		(752	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(31	)	Pensions and other employee benefits
Actuarial loss		9		Pensions and other employee benefits
		(22	)	Total before tax
		8		Income tax provision
		(14	)	Net of tax
Total reclassifications for the period	$	(766	)

For the Year Ended

December

31,

2015

(In Thousands)

Details about Accumulated Other Comprehensive Income Components	Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(2,861	)	Realized gains on available-for-sale securities, net
		1,002		Income tax provision
		(1,859	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(31	)	Pensions and other employee benefits
Actuarial loss		11		Pensions and other employee benefits
Loss on settlement		87		Pensions and other employee benefits
		67		Total before tax
		(23	)	Income tax provision
		44		Net of tax
Total reclassifications for the period	$	(1,815	)

For the Year Ended

December

31,

2014

(In Thousands)

Details about Accumulated Other Comprehensive Income Components	Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(1,104	)	Realized gains on available-for-sale securities, net
		386		Income tax provision
		(718	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(31	)	Pensions and other employee benefits
Actuarial loss		19		Pensions and other employee benefits
Loss on settlement		196		Pensions and other employee benefits
		184		Total before tax
		(65	)	Income tax provision
		119		Net of tax
Total reclassifications for the period	$	(599	)

XML

Note 4 - Per Share Data

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Earnings Per Share [Text Block]

4.

PER SHARE DATA

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

			Weighted-
			Average			Earnings
	Net		Common			Per
	Income		Shares			Share
2016
Earnings per share – basic	$	15,762,000		12,098,129		$	1.30
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				215,581
Hypothetical share repurchase at $21.23				(185,346	)
Earnings per share – diluted	$	15,762,000		12,128,364		$	1.30

			Weighted-
			Average			Earnings
	Net		Common			Per
	Income		Shares			Share
2015
Earnings per share – basic	$	16,471,000		12,211,941		$	1.35
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				210,402
Hypothetical share repurchase at $20.04				(188,570	)
Earnings per share – diluted	$	16,471,000		12,233,773		$	1.35
2014
Earnings per share – basic	$	17,086,000		12,390,067		$	1.38
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				224,015
Hypothetical share repurchase at $19.41				(202,032	)
Earnings per share – diluted	$	17,086,000		12,412,050		$	1.38

Stock options that were anti-dilutive were excluded from net income per share calculations. Weighted-average common shares available from anti-dilutive instruments totaled

31,153

shares in

2016,

61,590

shares in

2015

and

151,310

shares in

2014.

XML

Note 5 - Cash and Due From Banks

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Cash and Cash Equivalents Disclosure [Text Block]

5.

CASH AND DUE FROM BANKS

Cash and due from banks at

December

31,

2016

and

2015

include the following:

(In thousands)	Dec. 31,		Dec. 31,
	2016		2015
Cash and cash equivalents	$	28,621	$	33,313
Certificates of deposit		3,488		2,748
Total cash and due from banks	$	32,109	$	36,061

Certificates of deposit are issues by U.S. banks with original maturities greater than

three

months. Each certificate of deposit is fully FDIC-insured. The Corporation maintains cash and cash equivalents with certain financial institutions in excess of the FDIC insurance limit.

The Corporation is required to maintain reserves against deposit liabilities in the form of cash and balances with the Federal Reserve Bank. The reserves are based on deposit levels, account activity, and other services provided by the Federal Reserve Bank. Required reserves were

$16,654,000

at

December

31,

2016

and

$15,327,000

at

December

31,

2015.

XML

Note 6 - Fair Value Measurements and Fair Values of Financial Instruments

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Fair Value Disclosures [Text Block]

6.

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 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

December

31,

2016

and

2015,

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

			December 31, 2016
	Quoted Prices		Other
	in Active		Observable		Unobservable			Total
	Markets		Inputs		Inputs			Fair
(In Thousands)	(Level 1)		(Level 2)		(Level 3)			Value
Recurring fair value measurements
AVAILABLE-FOR-SALE SECURITIES:
Obligations of U.S. Government agencies	$	0	$	9,541	$	0		$	9,541
Obligations of states and political subdivisions:
Tax-exempt		0		119,037		0			119,037
Taxable		0		30,297		0			30,297
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		58,404		0			58,404
Residential collateralized mortgage obligations		0		146,608		0			146,608
Commercial mortgage-backed securities		0		30,219		0			30,219
Total debt securities		0		394,106		0			394,106
Marketable equity securities		971		0		0			971
Total available-for-sale securities		971		394,106		0			395,077
Servicing rights		0		0		1,262			1,262
Total recurring fair value measurements	$	971	$	394,106	$	1,262		$	396,339
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	3,372		$	3,372
Valuation allowance		0		0		(674	)		(674	)
Impaired loans, net		0		0		2,698			2,698
Foreclosed assets held for sale		0		0		2,180			2,180
Total nonrecurring fair value measurements	$	0	$	0	$	4,878		$	4,878

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

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 less estimated selling costs.

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. The following table shows quantitative information regarding significant techniques and inputs used at

December

31,

2016

and

2015

for servicing rights assets measured using unobservable inputs (Level

3

methodologies) on a recurring basis:

	Fair Value at
	12/31/16		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	12/31/16
Servicing rights	$	1,262	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		138.00	%	Weighted-average PSA
				Servicing fees		0.25	%	of loan balances
						4.00	%	of payments are late
						5.00	%	late fees assessed
					$	1.94		Miscellaneous fees per account per month
				Servicing costs	$	6.00		Monthly servicing cost per account
					$	24.00		Additional monthly servicing cost per loan on loans more than 30 days delinquent
						1.50	%	of loans more than 30 days delinquent
						3.00	%	annual increase in servicing costs

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

The fair value of servicing rights is affected by expected future interest rates. Increases (decreases) in future expected interest rates

tend

to increase (decrease) the fair value of the Corporation’s servicing rights because of changes in expected prepayment behavior by the borrowers on the underlying loans.

Following is a reconciliation of activity for Level

3

assets (servicing rights) measured at fair value on a recurring basis:

(In Thousands)	Years Ended December 31,
	2016			2015			2014
Balance, beginning of period	$	1,296		$	1,281		$	1,123
Issuances of servicing rights		248			177			185
Unrealized losses included in earnings		(282	)		(162	)		(27	)
Balance, end of period	$	1,262		$	1,296		$	1,281

Loans are classified as impaired when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Foreclosed assets held for sale consist of real estate acquired by foreclosure. For impaired commercial loans secured by real estate and foreclosed assets held for sale, estimated fair values are determined primarily using values from

third

-party appraisals. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property.

At

December

31,

2016

and

2015,

quantitative information regarding significant techniques and inputs used for nonrecurring fair value measurements using unobservable inputs (Level

3

methodologies) are as follows:

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

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

Certain of the Corporation’s financial instruments are not measured at fair value in the consolidated financial statements. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates

may

not be realized in an immediate settlement of the instrument. Certain financial instruments and all nonfinancial instruments are excluded from disclosure requirements. Therefore, the aggregate fair value amounts presented

may

not represent the underlying fair value of the Corporation.

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

CASH AND CASH EQUIVALENTS -

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

CERTIFICATES OF DEPOSIT -

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

SECURITIES -

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

LOANS HELD FOR SALE -

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

LOANS -

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

SERVICING RIGHTS -

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

DEPOSITS -

The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, savings, money market and interest checking accounts, is (by definition) equal to the amount payable at

December

31,

2016

and

2015.

The fair value of time deposits, such as certificates of deposit and Individual Retirement Accounts, is based on the discounted value of contractual cash flows. The discount rate is estimated using the rates currently offered for deposits of similar remaining maturities. The fair value estimates of deposits do not include the benefit that results from the low-cost funding provided by the deposit liabilities compared to the cost of borrowing funds in the market, commonly referred to as the core deposit intangible.

BORROWED FUNDS -

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

ACCRUED INTEREST -

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

OFF-BALANCE SHEET COMMITMENTS -

The Corporation has commitments to extend credit and has issued standby letters of credit. Standby letters of credit are conditional guarantees of performance by a customer to a

third

party. Estimates of the fair value of these off-balance sheet items were not made because of the short-term nature of these arrangements and the credit standing of the counterparties.

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

(In Thousands)	Valuation	December 31, 2016				December 31, 2015
	Method(s)	Carrying		Fair		Carrying		Fair
	Used	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	28,621	$	28,621	$	33,313	$	33,313
Certificates of deposit	Level 2		3,488		3,481		2,748		2,752
Available-for-sale securities	See Above		395,077		395,077		420,290		420,290
Restricted equity securities (included in Other Assets)	Level 2		4,426		4,426		4,657		4,657
Loans held for sale	Level 2		142		142		280		280
Loans, net	Level 3		743,362		725,787		696,991		685,552
Accrued interest receivable	Level 2		3,963		3,963		3,768		3,768
Servicing rights	Level 3		1,262		1,262		1,296		1,296
Financial liabilities:
Deposits with no stated maturity	Level 2		771,625		771,625		713,931		713,931
Time deposits	Level 2		212,218		212,274		221,684		221,891
Short-term borrowings	Level 2		26,175		26,024		53,496		53,398
Long-term borrowings	Level 2		38,454		39,062		38,767		40,166
Accrued interest payable	Level 2		65		65		70		70

XML

Note 7 - Securities

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

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

7.

SECURITIES

Amortized cost and fair value of available-for-sale securities at

December

31,

2016

and

2015

are summarized as follows:

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

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

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

December

31,

2016

and

2015:

December 31, 2016	Less Than 12 Months					12 Months or More					Total
(In Thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Obligations of U.S. Government agencies	$	7,899	$	(135	)	$	0	$	0		$	7,899	$	(135	)
Obligations of states and political subdivisions:
Tax-exempt		54,479		(1,676	)		1,278		(19	)		55,757		(1,695	)
Taxable		9,594		(79	)		0		0			9,594		(79	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		48,674		(824	)		0		0			48,674		(824	)
Residential collateralized mortgage obligations		85,198		(1,124	)		16,073		(591	)		101,271		(1,715	)
Commercial mortgage-backed securities		30,219		(598	)		0		0			30,219		(598	)
Total debt securities		236,063		(4,436	)		17,351		(610	)		253,414		(5,046	)
Marketable equity securities		1,000		(29	)		0		0			1,000		(29	)
Total temporarily impaired available-for-sale securities	$	237,063	$	(4,465	)	$	17,351	$	(610	)	$	254,414	$	(5,075	)

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

Gross realized gains and losses from available-for-sale securities and the related income tax provision were as follows:

(In Thousands)
	2016			2015			2014
Gross realized gains from sales	$	1,392		$	2,972		$	1,328
Gross realized losses from sales		(234	)		(111	)		(224	)
Net realized gains	$	1,158		$	2,861		$	1,104
Income tax provision related to net realized gains	$	406		$	1,002		$	386

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

December

31,

2016.

Actual maturities

may

differ from contractual maturities because counterparties

may

have the right to call or prepay obligations with or without call or prepayment penalties.

	December 31, 2016
	Amortized		Fair
(In Thousands)	Cost		Value
Due in one year or less	$	18,678	$	18,832
Due from one year through five years		69,558		70,657
Due from five years through ten years		44,527		43,979
Due after ten years		25,121		25,407
Sub-total		157,884		158,875
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		58,922		58,404
Residential collateralized mortgage obligations		147,915		146,608
Commercial mortgage-backed securities		30,817		30,219
Total	$	395,538	$	394,106

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

$230,803,000

at

December

31,

2016

and

$228,616,000

at

December

31,

2015

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

12

for information concerning securities pledged to secure borrowing arrangements.

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

(1)

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

(2)

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

(3)

whether the Corporation intends to sell the security or more likely than not will be required to sell the security before its anticipated recovery.

The Corporation recognized

no

net impairment losses in earnings for the years ended

December

31,

2016,

2015

and

2014.

A summary of information management considered in evaluating debt and equity securities for OTTI at

December

31,

2016

is provided below.

Debt Securities

At

December

31,

2016

and

2015,

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 these debt securities at

December

31,

2016

to be temporary.

Equity Securities

The Corporation’s marketable equity securities at

December

31,

2016

consisted exclusively of

one

mutual fund. At

December

31,

2015,

the Corporation’s marketable equity securities consisted of stocks of banking companies. The Corporation recognized

no

other-than-temporary impairment losses related to equities in

2016,

2015

or

2014.

At

December

31,

2016,

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

$29,000

for which management determined an OTTI charge was not required.

Realized gains from sales of equity securities (bank stocks) totaled

$1,125,000

in

2016,

$2,220,000

in

2015

and

$363,000

in

2014.

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 sheets, was

$4,296,000

at

December

31,

2016

and

$4,527,000

at

December

31,

2015.

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

not

be impaired at

December

31,

2016

and

December

31,

2015.

In making this determination, management concluded that recovery of total outstanding par value, which equals the carrying value, is expected. The decision was based on review of financial information that FHLB-Pittsburgh has made publicly available.

XML

Note 8 - Loans

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

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

8.

LOANS

Loans outstanding at

December

31,

2016

and

2015

are summarized as follows:

Summary of Loans by Type
(In Thousands)	Dec. 31,			Dec. 31,
	2016			2015
Residential mortgage:
Residential mortgage loans - first liens	$	334,102		$	304,783
Residential mortgage loans - junior liens		23,706			21,146
Home equity lines of credit		38,057			39,040
1-4 Family residential construction		24,908			21,121
Total residential mortgage		420,773			386,090
Commercial:
Commercial loans secured by real estate		150,468			154,779
Commercial and industrial		83,854			75,196
Political subdivisions		38,068			40,007
Commercial construction and land		14,287			5,122
Loans secured by farmland		7,294			7,019
Multi-family (5 or more) residential		7,896			9,188
Agricultural loans		3,998			4,671
Other commercial loans		11,475			12,152
Total commercial		317,340			308,134
Consumer		13,722			10,656
Total		751,835			704,880
Less: allowance for loan losses		(8,473	)		(7,889	)
Loans, net	$	743,362		$	696,991

The Corporation grants loans to individuals as well as commercial and tax-exempt entities. Commercial, residential and personal loans are made to customers geographically concentrated in the Pennsylvania and New York counties that make up 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

December

31,

2016.

Transactions within the allowance for loan losses, summarized by segment and class, were as follows:

Year Ended December 31, 2016	Dec. 31										Dec. 31
(In Thousands)	2015 Balance		Charge-offs			Recoveries		Provision (Credit)			2016 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,645	$	(73	)	$	3	$	458		$	3,033
Residential mortgage loans - junior liens		219		0			0		39			258
Home equity lines of credit		347		0			0		3			350
1-4 Family residential construction		207		0			0		42			249
Total residential mortgage		3,418		(73	)		3		542			3,890
Commercial:
Commercial loans secured by real estate		1,939		0			2		439			2,380
Commercial and industrial		981		(2	)		3		17			999
Political subdivisions		0		0			0		0			0
Commercial construction and land		58		0			30		74			162
Loans secured by farmland		106		0			0		4			110
Multi-family (5 or more) residential		675		(595	)		0		161			241
Agricultural loans		45		0			0		(5	)		40
Other commercial loans		118		0			0		(3	)		115
Total commercial		3,922		(597	)		35		687			4,047
Consumer		122		(87	)		82		21			138
Unallocated		427		0			0		(29	)		398
Total Allowance for Loan Losses	$	7,889	$	(757	)	$	120	$	1,221		$	8,473

Year Ended December 31, 2015	Dec. 31,										Dec. 31,
(In Thousands)	2014 Balance		Charge- offs			Recoveries		Provision (Credit)			2015 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,941	$	(175	)	$	1	$	(122	)	$	2,645
Residential mortgage loans - junior liens		176		(42	)		0		85			219
Home equity lines of credit		322		0			0		25			347
1-4 Family residential construction		214		0			0		(7	)		207
Total residential mortgage		3,653		(217	)		1		(19	)		3,418
Commercial:
Commercial loans secured by real estate		1,758		(115	)		208		88			1,939
Commercial and industrial		688		(21	)		6		308			981
Political subdivisions		0		0			0		0			0
Commercial construction and land		283		(115	)		0		(110	)		58
Loans secured by farmland		165		0			0		(59	)		106
Multi-family (5 or more) residential		87		0			0		588			675
Agricultural loans		31		0			0		14			45
Other commercial loans		131		0			0		(13	)		118
Total commercial		3,143		(251	)		214		816			3,922
Consumer		145		(94	)		55		16			122
Unallocated		395		0			0		32			427
Total Allowance for Loan Losses	$	7,336	$	(562	)	$	270	$	845		$	7,889

Year Ended December 31, 2014	Dec. 31,										Dec. 31,
(In Thousands)	2013 Balance		Charge- offs			Recoveries		Provision (Credit)			2014 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,974	$	(164	)	$	25	$	106		$	2,941
Residential mortgage loans - junior liens		294		(101	)		0		(17	)		176
Home equity lines of credit		269		(62	)		0		115			322
1-4 Family residential construction		168		0			0		46			214
Total residential mortgage		3,705		(327	)		25		250			3,653
Commercial:
Commercial loans secured by real estate		3,123		(1,521	)		250		(94	)		1,758
Commercial and industrial		591		(24	)		9		112			688
Political subdivisions		0		0			0		0			0
Commercial construction and land		267		(170	)		5		181			283
Loans secured by farmland		115		0			0		50			165
Multi-family (5 or more) residential		103		0			0		(16	)		87
Agricultural loans		30		0			0		1			31
Other commercial loans		138		0			0		(7	)		131
Total commercial		4,367		(1,715	)		264		227			3,143
Consumer		193		(97	)		47		2			145
Unallocated		398		0			0		(3	)		395
Total Allowance for Loan Losses	$	8,663	$	(2,139	)	$	336	$	476		$	7,336

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.

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

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

December

31,

2016

and

2015:

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

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

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

$200,000

for which there is at least

one

extension of credit graded Special Mention, Substandard or Doubtful. Loans that are individually reviewed, but which are determined to not be impaired, are combined with all remaining loans that are not reviewed on a specific basis, and such loans are included within larger pools of loans based on similar risk and loss characteristics for purposes of determining the general component of the allowance. The loans that have been individually reviewed, but which have been determined to not be impaired, are included in the “Collectively Evaluated” column in the table summarizing the allowance and associated loan balances as of

December

31,

2016

and

2015.

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

$200,000

in the aggregate, but with an estimated loss of

$100,000

or more, are individually evaluated for impairment.

The following tables present a summary of loan balances and the related allowance for loan losses summarized by portfolio segment and class for each impairment method used as of

December

31,

2016

and

2015:

December 31, 2016
	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	753	$	333,349	$	334,102	$	0	$	3,033	$	3,033
Residential mortgage loans - junior liens		68		23,638		23,706		0		258		258
Home equity lines of credit		0		38,057		38,057		0		350		350
1-4 Family residential construction		0		24,908		24,908		0		249		249
Total residential mortgage		821		419,952		420,773		0		3,890		3,890
Commercial:
Commercial loans secured by real estate		8,005		142,463		150,468		528		1,852		2,380
Commercial and industrial		212		83,642		83,854		95		904		999
Political subdivisions		0		38,068		38,068		0		0		0
Commercial construction and land		0		14,287		14,287		0		162		162
Loans secured by farmland		1,394		5,900		7,294		51		59		110
Multi-family (5 or more) residential		392		7,504		7,896		0		241		241
Agricultural loans		13		3,985		3,998		0		40		40
Other commercial loans		0		11,475		11,475		0		115		115
Total commercial		10,016		307,324		317,340		674		3,373		4,047
Consumer		23		13,699		13,722		0		138		138
Unallocated												398
Total	$	10,860	$	740,975	$	751,835	$	674	$	7,401	$	8,473

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

Summary information related to impaired loans as of

December

31,

2016

and

2015

is as follows:

(In Thousands)	December 31, 2016						December 31, 2015
	Unpaid						Unpaid
	Principal		Recorded		Related		Principal		Recorded		Related
	Balance		Investment		Allowance		Balance		Investment		Allowance
With no related allowance recorded:
Residential mortgage loans - first liens	$	783	$	753	$	0	$	842	$	842	$	0
Residential mortgage loans - junior liens		68		68		0		74		74		0
Commercial loans secured by real estate		6,975		5,232		0		7,580		5,945		0
Commercial and industrial		117		117		0		249		249		0
Loans secured by farmland		890		890		0		915		915		0
Multi-family (5 or more) residential		987		392		0		0		0		0
Agricultural loans		13		13		0		16		16		0
Consumer		23		23		0		0		0		0
Total with no related allowance recorded		9,856		7,488		0		9,676		8,041		0
With a related allowance recorded:
Residential mortgage loans - first liens		0		0		0		42		42		1
Commercial loans secured by real estate		2,773		2,773		528		317		317		97
Commercial and industrial		95		95		95		75		75		75
Loans secured by farmland		504		504		51		512		512		52
Multi-family (5 or more) residential		0		0		0		987		987		595
Total with a related allowance recorded		3,372		3,372		674		1,933		1,933		820
Total	$	13,228	$	10,860	$	674	$	11,609	$	9,974	$	820

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)	Year Ended December 31,						Year Ended December 31,
	2016		2015		2014		2016		2015		2014
Residential mortgage:
Residential mortgage loans - first lien	$	806	$	2,206	$	4,272	$	43	$	86	$	81
Residential mortgage loans - junior lien		71		64		168		3		4		3
Total residential mortgage		877		2,270		4,440		46		90		84
Commercial:
Commercial loans secured by real estate		6,806		6,357		7,192		495		380		469
Commercial and industrial		547		438		877		20		20		37
Commercial construction and land		0		40		395		0		0		9
Loans secured by farmland		1,409		1,459		1,413		94		103		101
Multi-family (5 or more) residential		511		790		0		0		0		0
Agricultural loans		14		21		41		1		3		3
Total commercial		9,287		9,105		9,918		610		506		619
Consumer		21		0		1		1		0		0
Total	$	10,185	$	11,375	$	14,359	$	657	$	596	$	703

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)	December 31, 2016				December 31, 2015
	Past Due				Past Due
	90+ Days and				90+ Days and
	Accruing		Nonaccrual		Accruing		Nonaccrual
Residential mortgage:
Residential mortgage loans - first liens	$	3,022	$	3,770	$	2,381	$	3,044
Residential mortgage loans - junior liens		114		0		79		0
Home equity lines of credit		320		11		130		0
Total residential mortgage		3,456		3,781		2,590		3,044
Commercial:
Commercial loans secured by real estate		2,774		3,080		503		5,730
Commercial and industrial		286		119		65		313
Loans secured by farmland		219		1,331		0		1,427
Multi-family (5 or more) residential		0		392		0		987
Agricultural loans		0		13		0		16
Total commercial		3,279		4,935		568		8,473
Consumer		103		20		71		0
Totals	$	6,838	$	8,736	$	3,229	$	11,517

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

ninety

days or more, or nonaccrual.

The tables below present a summary of the contractual aging of loans as of

December

31,

2016

and

2015:

	As of December 31, 2016								As of December 31, 2015
	Current &								Current &
(In Thousands)	Past Due		Past Due		Past Due				Past Due		Past Due		Past Due
	Less than		30-89		90+				Less than		30-89		90+
	30 Days		Days		Days		Total		30 Days		Days		Days		Total
Residential mortgage:
Residential mortgage loans - first liens	$	321,670	$	6,695	$	5,737	$	334,102	$	294,703	$	6,156	$	3,924	$	304,783
Residential mortgage loans - junior liens		23,268		324		114		23,706		20,816		251		79		21,146
Home equity lines of credit		37,603		134		320		38,057		38,581		329		130		39,040
1-4 Family residential construction		24,567		341		0		24,908		21,121		0		0		21,121
Total residential mortgage		407,108		7,494		6,171		420,773		375,221		6,736		4,133		386,090
Commercial:
Commercial loans secured by real estate		147,464		82		2,922		150,468		153,427		108		1,244		154,779
Commercial and industrial		83,364		185		305		83,854		75,002		118		76		75,196
Political subdivisions		38,068		0		0		38,068		40,007		0		0		40,007
Commercial construction and land		14,199		88		0		14,287		5,018		104		0		5,122
Loans secured by farmland		6,181		83		1,030		7,294		5,970		223		826		7,019
Multi-family (5 or more) residential		7,439		65		392		7,896		8,201		0		987		9,188
Agricultural loans		3,981		4		13		3,998		4,642		13		16		4,671
Other commercial loans		11,475		0		0		11,475		12,152		0		0		12,152
Total commercial		312,171		507		4,662		317,340		304,419		566		3,149		308,134
Consumer		13,446		153		123		13,722		10,537		48		71		10,656
Totals	$	732,725	$	8,154	$	10,956	$	751,835	$	690,177	$	7,350	$	7,353	$	704,880

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

December

31,

2016

and

2015

is as follows:

	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Total
December 31, 2016 Nonaccrual Totals	$	4,199	$	419	$	4,118	$	8,736
December 31, 2015 Nonaccrual Totals	$	7,100	$	293	$	4,124	$	11,517

Loans whose terms are modified are classified as Troubled Debt Restructurings (TDRs) if the Corporation grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Loans classified as TDRs are designated as impaired and reviewed each quarter to determine if a specific allowance for loan losses is required. The outstanding balance of loans subject to TDRs, as well as the contractual aging information at

December

31,

2016

and

2015

is as follows:

Troubled Debt Restructurings (TDRs):
	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Nonaccrual		Total
December 31, 2016 Totals	$	5,453	$	350	$	0	$	2,874	$	8,677
December 31, 2015 Totals	$	1,186	$	0	$	81	$	5,097	$	6,364

At

December

31,

2016

and

2015,

there were

no

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

A summary of TDRs that occurred during

2016,

2015

and

2014

is as follows:

(Balances in Thousands)
	2016				2015				2014
			Post-				Post-				Post-
	Number		Modification		Number		Modification		Number		Modification
	of		Recorded		of		Recorded		Of		Recorded
	Loans		Investment		Loans		Investment		Loans		Investment
Residential mortgage - first liens:
Extended maturity with interest rate reduction		1	$	71		1	$	56		1	$	83
Extended maturity with reduced monthly payments		1		26		0		0		0		0
Interest only payments for a period of one year		0		0		0		0		1		34
Reduced monthly payments for a six-month period		0		0		1		242		1		33
Residential mortgage - junior liens,
Interest rate and monthly payment reduction		0		0		1		32		0		0
Commercial loans secured by real estate:
Interest only payments for a period of one year		1		2,773		0		0		0		0
Reduced monthly payments		0		0		0		0		5		5,193
Commerc i al and industrial:
Extended maturity		1		5		0		0		0		0
Reduced monthly payments		0		0		0		0		1		80
Consumer:
Interest rate and monthly payment reduction		0		0		1		30		0		0
New unsecured loan after short-fall from sale of property		1		24		0		0		0		0
Total		5	$	2,899		4	$	360		9	$	5,423

In

2014,

the TDRs for commercial loans relate to

six

contracts associated with

one

relationship. The Corporation entered into a forbearance agreement with this commercial borrower which included a reduction in monthly payment amounts over a

fifteen

-month period. At the end of the

fifteen

-month period, the monthly payment amounts would revert to the original amounts, unless the forbearance agreement was extended or the payment requirements otherwise modified. The forbearance agreement was extended for

two

additional

twelve

-month periods, most recently in

July

2016.

The Corporation recorded a charge-off of

$1,486,000

in

2014

as a result of these modifications, as the payment amounts based on the forbearance agreement were not sufficient to fully amortize the contractual amount of principal outstanding on the loans. The amount of the charge-off was determined based on the excess of the contractual principal due over the present value of the payment amounts provided for in the forbearance agreement, assuming the revised payment amounts would continue until maturity, at the contractual interest rates. In

December

2016,

the Corporation and the borrower entered into a modification agreement, terminating the forbearance agreement and establishing loan terms with essentially the same interest rate and monthly payment amounts as had been in effect under the forbearance agreement. The weighted average maturity of the loan contracts has been extended under the modification agreement as compared to the maturities provided for in the original loan contracts. At

December

31,

2016,

the outstanding contractual balances of these loans total

$6,529,000,

and the recorded investments total

$4,786,000.

These loans are still classified as TDRs at

December

31,

2016.

Except for the

2014

TDRs described in the immediately preceding paragraph, there were no differences between the outstanding contractual amounts and the recorded investments in receivables resulting from TDRs occurring in

2016,

2015

and

2014.

For

2016,

2015

and

2014,

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

12

months are summarized as follows:

(Balances in Thousands)
	2016				2015				2014
	Number				Number				Number
	of		Recorded		of		Recorded		of		Recorded
	Loans		Investment		Loans		Investment		Loans		Investment
Residential mortgage - first liens		2	$	294		1	$	32		3	$	257
Residential mortgage - junior liens		1		29		0		0		1		62
Commercial loans secured by real estate		0		0		0		0		1		429
Commercial and industrial		1		5		0		0		0		0
Commercial construction and land		0		0		0		0		1		25
Loans secured by farmland		0		0		0		0		4		490
Agricultural loans		0		0		0		0		1		13
Consumer		1		27		0		0		0		0
Total		5	$	355		1	$	32		11	$	1,276

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 consolidated balance sheets) is as follows:

(In Thousands)	Dec. 31,		Dec. 31,
	2016		2015
Foreclosed residential real estate	$	1,102	$	555

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

(In Thousands)	Dec. 31,		Dec. 31,
	2016		2015
Residential real estate in process of foreclosure	$	2,738	$	1,173

XML

Note 9 - Bank Premises and Equipment

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Property, Plant and Equipment Disclosure [Text Block]

9.

BANK PREMISES AND EQUIPMENT

Bank premises and equipment are summarized as follows:

(In Thousands)	December 31,
	2016			2015
Land	$	2,818		$	2,818
Buildings and improvements		27,619			27,092
Furniture and equipment		18,741			17,922
Construction in progress		392			243
Total		49,570			48,075
Less: accumulated depreciation		(34,173	)		(32,669	)
Net	$	15,397		$	15,406

Depreciation expense included in occupancy expense and furniture and equipment expense was as follows:

(In Thousands)	201 6		2015		2014
Occupancy expense	$	804	$	954	$	998
Furniture and equipment expense		785		934		942
Total	$	1,589	$	1,888	$	1,940

XML

Note 10 - Intangible Assets

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Intangible Assets Disclosure [Text Block]

10.

INTANGIBLE ASSETS

There were

no

changes in the carrying amount of goodwill in

2016

and

2015.

The balance in goodwill was

$11,942,000

at

December

31,

2016

and

2015.

The Corporation did

not

complete any acquisitions in

2016

or

2015.

In testing goodwill for impairment as of

December

31,

2016,

the Corporation assessed qualitative factors to determine whether it is more likely than not that the fair value of its only reporting unit, its community banking operation, is less than its carrying amount. The qualitative factors assessed included the Corporation’s recent financial performance, economic conditions in the Corporation’s market area, macroeconomic conditions and other factors. Based on the assessment of qualitative factors, the Corporation determined that it is not more likely than not that the fair value of the community banking operation has fallen below its carrying value, and therefore, the Corporation did not perform the more detailed,

two

-step goodwill impairment test described in Topic

350.

Accordingly, there was

no

goodwill impairment as of

December

31,

2016.

Information related to the core deposit intangibles is as follows:

	December 31,
(In Thousands)	2016			2015
Gross amount	$	2,034		$	2,034
Less: accumulated amortization		(2,017	)		(2,004	)
Net	$	17		$	30

Amortization expense was

$13,000

in

2016,

$22,000

in

2015

and

$35,000

in

2014.

The amount of amortization expense to be recognized each of the ensuing

five

years is not significant.

XML

Note 11 - Deposits

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Deposit Liabilities Disclosures [Text Block]

11.

DEPOSITS

At

December

31,

2016,

the scheduled maturities of time deposits are as follows:

(In Thousands)
2017	$	113,974
2018		51,526
2019		25,302
2020		14,458
2021		6,710
Thereafter		248
Total	$	212,218

Included in interest-bearing deposits are time deposits in the amount of

$100,000

or more. As of

December

31,

2016,

the remaining maturities or time to next re-pricing of time deposits of

$100,000

or more are as follows:

(In Thousands)
Three months or less	$	32,987
Over 3 months through 12 months		11,663
Over 1 year through 3 years		11,508
Over 3 years		7,605
Total	$	63,763

Interest expense from time deposits of

$100,000

or more amounted to

$524,000

in

2016,

$482,000

in

2015

and

$563,000

in

2014.

Time deposits of more than

$250,000

totaled

$7,929,000

at

December

31,

2016

and

$6,531,000

at

December

31,

2015.

XML

Note 12 - Borrowed Funds

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Debt Disclosure [Text Block]

12.

BORROWED FUNDS

Short-term borrowings (initial maturity within

one

year) include the following:

(In Thousands)	Dec. 31,		Dec. 31,
	2016		2015
FHLB-Pittsburgh borrowings	$	21,000	$	48,581
Customer repurchase agreements		5,175		4,915
Total short-term borrowings	$	26,175	$	53,496

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

(In Thousands)	Dec. 31,		Dec. 31
	2016		2015
Overnight borrowing	$	21,000	$	23,500
Other short-term advances		0		25,081
Total short-term FHLB-Pittsburgh borrowings	$	21,000	$	48,581

The weighted average interest rate on total short-term borrowings outstanding was

0.61%

at

December

31,

2016

and

0.60%

at

December

31,

2015.

The maximum amount of total short-term borrowings outstanding at any month-end was

$47,005,000

in

2016,

$53,496,000

in

2015

and

$7,919,000

in

2014.

The Corporation had available credit with other correspondent banks totaling

$45,000,000

at

December

31,

2016

and

2015.

These lines of credit are primarily unsecured.

No

amounts were outstanding at

December

31,

2016

or

2015.

The Corporation has a line of credit with the Federal Reserve Bank of Philadelphia’s Discount Window. At

December

31,

2016,

the Corporation had available credit in the amount of

$15,636,000

on this line with

no

outstanding advances. At

December

31,

2015,

the Corporation had available credit in the amount of

$19,606,000

on this line with

no

outstanding advances. As collateral for this line, the Corporation has pledged available-for-sale securities with a carrying value of

$17,690,000

at

December

31,

2016

and

$20,039,000

at

December

31,

2015.

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

$471,454,000

at

December

31,

2016

and

$450,883,000

at

December

31,

2015.

Also, the FHLB-Pittsburgh loan facility requires 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

$4,296,000

at

December

31,

2016

and

$4,527,000

at

December

31,

2015.

The Corporation’s total credit facility with FHLB-Pittsburgh was

$339,221,000

at

December

31,

2016,

including an unused (available) amount of

$306,767,000.

At

December

31,

2015,

the Corporation’s total credit facility with FHLB-Pittsburgh was

$322,709,000,

including an unused (available) amount of

$262,361,000.

At

December

31,

2016,

the overnight borrowing from FHLB-Pittsburgh of

$21,000,000

had an interest rate of

0.74%.

At

December

31,

2015,

the overnight borrowing from FHLB-Pittsburgh of

$23,500,000

had an interest rate of

0.43%,

and the other short-term advances included

12

advances of

$2,090,000

each maturing monthly throughout

2016,

with a weighted average interest rate of

0.86%

and rates ranging from

0.54%

to

1.052%.

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 rate paid by the Corporation on customer repurchase agreements was

0.10%

at

December

31,

2016

and

December

31,

2015.

The carrying value of the underlying securities was

$15,019,000

at

December

31,

2016

and

$12,613,000

at

December

31,

2015.

LONG-TERM BORROWINGS
Long-term borrowings (initial maturity of greater than one year) are as follows:
(In Thousands)	Dec. 31,		Dec. 31,
	2016		2015
FHLB-Pittsburgh borrowings	$	11,454	$	11,767
Repurchase agreements		27,000		27,000
Total long-term borrowings	$	38,454	$	38,767

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

(In Thousands)	Dec. 31,		Dec. 31,
	2016		2015
Loan maturing in 2016 with a rate of 6.86%	$	0	$	57
Loan maturing in 2017 with a rate of 6.83%		4		10
Loan maturing in 2017 with a rate of 3.81%		10,000		10,000
Loan maturing in 2020 with a rate of 4.79%		646		821
Loan maturing in 2025 with a rate of 4.91%		804		879
Total long-term FHLB-Pittsburgh borrowings	$	11,454	$	11,767

The repurchase agreement included in long-term borrowings has an interest rate of

3.595%

and an effective maturity date

in

December

2017.

In

2015,

the Corporation incurred losses totaling

$2,573,000

on prepayment of

$34,000,000

of a repurchase agreement with an interest rate of

4.265%.

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

20

th

of each

March,

June,

September

and

December

until the “Final Repurchase Date” (as defined) on

December

20,

2017.

The Corporation pays interest, and the borrowing is putable by the issuer, on each Repurchase Date. The Final Repurchase Date is the effective maturity date of the borrowing.

Securities sold under repurchase agreements were delivered to the broker-dealer who is the counter-party to the transactions. The broker-dealer

may

have sold, loaned or otherwise disposed of such securities to other parties in the normal course of their operations, and has agreed to resell to the Corporation substantially identical securities at the maturities of the agreements. The Master Repurchase Agreement between the Corporation and the broker-dealer provides that the Agreement constitutes a “netting contract,” as defined; however, the Corporation and the broker-dealer have no other obligations to

one

another and accordingly, no netting has occurred.

The carrying value of the underlying securities was

$31,494,000

at

December

31,

2016

and

$33,780,000

at

December

31,

2015,

as detailed in the following table:

(In Thousands)	Dec. 31,		Dec. 31,
	2016		2015
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities	$	18,181	$	15,772
Residential collateralized mortgage obligations		13,313		18,008
Total	$	31,494	$	33,780

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

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

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

Average daily repurchase agreement borrowings amounted to

$27,000,000

in

2016,

$54,304,000

in

2015

and

$61,000,000

in

2014.

The maximum amounts of outstanding borrowings under repurchase agreements with broker-dealers were

$27,000,000

in

2016

and

$61,000,000

in

2015

and in

2014.

The weighted average interest rate on repurchase agreements was

3.60%

in

2016,

3.99%

in

2015

and

4.02%

in

2014.

XML

Note 13 - Employee and Postretirement Benefit Plans

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Pension and Other Postretirement Benefits Disclosure [Text Block]

13.

EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS

DEFINED BENEFIT PLANS

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

December

31,

2016

and

December

31,

2015,

and are not expected to significantly affect the Corporation's future expenses. The Corporation uses a

December

31

measurement date for the postretirement plan.

In an acquisition in

2007,

the Corporation assumed the Citizens Trust Company Retirement Plan, a defined benefit pension plan. This plan covers certain employees who were employed by Citizens Trust Company on

December

31,

2002,

when the plan was amended to discontinue admittance of any future participant and to freeze benefit accruals. Information related to the Citizens Trust Company Retirement Plan has been included in the tables that follow. The Corporation uses a

December

31

measurement date for this plan.

The following table shows the funded status of the defined benefit plans:

(In Thousands)

	Pension						Postretirement
	2016			2015			2016			2015
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year	$	722		$	1,085		$	1,539		$	1,378
Service cost		0			0			37			38
Interest cost		26			36			62			57
Plan participants' contributions		0			0			215			203
Actuarial loss (gain)		3			(46	)		(30	)		120
Benefits paid		(38	)		(16	)		(268	)		(257	)
Settlement of plan obligation		0			(337	)		0			0
Benefit obligation at end of year	$	713		$	722		$	1,555		$	1,539
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year	$	839		$	1,208		$	0		$	0
Actual return on plan assets		45			(16	)		0			0
Employer contribution		0			0			53			54
Plan participants' contributions		0			0			215			203
Benefits paid		(38	)		(16	)		(268	)		(257	)
Settlement of plan obligation		0			(337	)		0			0
Fair value of plan assets at end of year	$	846		$	839		$	0		$	0
Funded status at end of year	$	133		$	117		$	(1,555	)	$	(1,539	)

At

December

31,

2016

and

2015,

the following pension plan and postretirement plan asset and liability amounts were recognized in the consolidated balance sheets:

Assets and liabilities:

(In Thousands)	Pension				Postretirement
	2016		2015		2016		2015
Other assets	$	133	$	117
Accrued interest and other liabilities					$	1,555	$	1,539

At

December

31,

2016

and

2015,

the following items included in accumulated other comprehensive income had not been recognized as components of expense:

Items not yet recognized as a component

of net periodic benefit cost:

(In Thousands)	Pension				Postretirement
	2016		2015		2016			2015
Prior service cost	$	0	$	0	$	(340	)	$	(371	)
Net actuarial loss		161		186		101			131
Total	$	161	$	186	$	(239	)	$	(240	)

For the defined benefit pension plan, amortization of the net actuarial loss is expected to be

$7,000

in

2017.

For the postretirement plan, the estimated amount of prior service cost that will be amortized from accumulated other comprehensive income into net periodic benefit cost in

2017

is a reduction in expense of

$31,000,

and

no

net actuarial loss is expected to be amortized in

2017.

The accumulated benefit obligation for the defined benefit pension plan was

$713,000

at

December

31,

2016

and

$722,000

at

December

31,

2015.

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

(In Thousands)	Pension									Postretirement
	2016			2015			2014			2016			2015			2014
Service cost	$	0		$	0		$	0		$	37		$	38		$	34
Interest cost		26			36			73			62			57			57
Expected return on plan assets		(26	)		(45	)		(88	)		0			0			0
Amortization of prior service cost		0			0			0			(31	)		(31	)		(31	)
Recognized net actuarial loss		9			11			19			0			0			0
Loss on settlement		0			87			196			0			0			0
Total net periodic benefit cost	$	9		$	89		$	200		$	68		$	64		$	60

In

2015,

there was a distribution from the pension plan of

$337,000,

or

32%

of the plan’s total accumulated benefit obligation prior to the distribution. The Corporation recognized a loss of

$87,000

(included in net periodic benefit cost) in

2015

as a result of this settlement.

In

2014,

there was a distribution from the pension plan of

$781,000,

or

42%

of the plan’s total accumulated benefit obligation prior to the distribution. The Corporation recognized a loss of

$196,000

(included in net periodic benefit cost) in

2014

as a result of this settlement.

The weighted-average assumptions used to determine net periodic benefit cost are as follows:

	Pension									Postretirement
	2016			2015			2014			2016			2015			2014
Discount rate		4.30	%		3.75	%		4.50	%		4.25	%		4.00	%		4.00	%
Expected return on plan assets		5.00	%		5.31	%		5.31	%		N/A			N/A			N/A
Rate of compensation increase		N/A			N/A			N/A			N/A			N/A			N/A

The weighted-average assumptions used to determine benefit obligations as of

December

31,

2016

and

2015

are as follows:

	Pension						Postretirement
	2016			2015			2016			2015
Discount rate		4.05	%		4.30	%		4.25	%		4.25	%
Rate of compensation increase		N/A			N/A			N/A			N/A

Estimated future benefit payments, including only estimated employer contributions for the postretirement plan, which reflect expected future service, are as follows:

(In Thousands)	Pension		Postretirement
2017	$	222	$	99
2018		15		103
2019		39		108
2020		12		114
2021		12		114
2022-2026		220		563

No

estimated minimum contribution to the defined benefit pension plan is required in

2017,

though the Corporation

may

make discretionary contributions.

The expected return on pension plan assets is a significant assumption used in the calculation of net periodic benefit cost. This assumption reflects the average long-term rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the projected benefit obligation.

The fair values of pension plan assets at

December

31,

2016

and

2015

are as follows:

	2016			2015
Mutual funds invested principally in:
Cash and cash equivalents		2	%		2	%
Debt securities		38	%		38	%
Equity securities		44	%		46	%
Alternative funds		16	%		14	%
Total		100	%		100	%

C&N Bank’s Trust and Financial Management Department manages the investment of the pension plan assets. The Plan’s securities include mutual funds invested principally in debt securities, a diversified mix of large, mid- and small-capitalization U.S. stocks, foreign stocks and alternative asset classes such as real estate, commodities, and inflation-protected securities. The fair values of plan assets are determined based on Level

1

inputs (as described in Note

6).

At

December

31,

2016,

the targeted asset allocation of mutual funds for the pension plan was

44%

equity securities,

38%

debt securities,

16%

alternative assets, and

2%

cash. At

December

31,

2015,

the targeted asset allocation of mutual funds for the pension plan was

46%

equity securities,

38%

debt securities,

14%

alternative assets and

2%

cash. The pension plan’s assets do not include any shares of the Corporation’s common stock.

PROFIT SHARING AND DEFERRED COMPENSATION PLANS

 

The Corporation has a profit sharing plan that incorporates the deferred salary savings provisions of Section

401(k)

of the Internal Revenue Code. The Corporation’s matching contributions to the Plan depend upon the tax deferred contributions of employees. The Corporation’s total basic and matching contributions were

$646,000

in

2016,

$609,000

in

2015

and

$595,000

in

2014.

The Corporation has an Employee Stock Ownership Plan (ESOP). Contributions to the ESOP are discretionary, and the ESOP uses funds contributed to purchase Corporation stock for the accounts of ESOP participants. These purchases are made on the market (not directly from the Corporation), and employees are not permitted to purchase Corporation stock under the ESOP. The ESOP includes a diversification feature, which allows participants, upon reaching age

55

and

10

years of service (as defined), to sell up to

50%

of their Corporation shares back to the ESOP over a period of

6

years. As of

December

31,

2016

and

2015,

there were no shares allocated for repurchase by the ESOP.

Dividends paid on shares held by the ESOP are charged to retained earnings. All Corporation shares owned through the ESOP are included in the calculation of weighted-average shares outstanding for purposes of calculating earnings per share - basic and diluted. The ESOP held

417,753

shares of Corporation stock at

December

31,

2016

and

410,004

shares at

December

31,

2015,

all of which had been allocated to Plan participants. The Corporation’s contributions to the ESOP totaled

$549,000

in

2016,

$522,000

in

2015

and

$512,000

in

2014.

The Corporation has a nonqualified supplemental deferred compensation arrangement with its key officers. Charges to operating expense for officers’ supplemental deferred compensation were

$184,000

in

2016,

$167,000

in

2015

and

$138,000

in

2014.

In

December

2015,

the Corporation established a nonqualified deferred compensation plan that allows selected officers, beginning in

2016,

the option to defer receipt of cash compensation, including base salary and any cash bonuses or other cash incentives. This nonqualified deferred compensation plan does not provide for Corporation contributions.

STOCK-BASED COMPENSATION PLANS

The Corporation has a Stock Incentive Plan for a selected group of senior officers. A total of

850,000

shares of common stock

may

be issued under the Stock Incentive Plan. Awards

may

be made under the Stock Incentive Plan in the form of qualified options (“Incentive Stock Options,” as defined in the Internal Revenue Code), nonqualified options, stock appreciation rights or restricted stock. Historically through

December

31,

2016,

all awards made under this Plan have consisted of Incentive Stock Options or restricted stock. Incentive Stock Options have an exercise price equal to the market value of the stock at the date of grant, vest after

6

months and expire after

10

years. There are

280,682

shares available for issuance under the Stock Incentive Plan as of

December

31,

2016.

Also, the Corporation has an Independent Directors Stock Incentive Plan. This plan permits awards of nonqualified stock options and/or restricted stock to non-employee directors. A total of

135,000

shares of common stock

may

be issued under the Independent Directors Stock Incentive Plan. The recipients’ rights to exercise stock options under this plan expire

10

years from the date of grant. The exercise prices of all stock options awarded under the Independent Directors Stock Incentive Plan are equal to market value as of the dates of grant. There are

21,868

shares available for issuance under the Independent Directors Stock Incentive Plan as of

December

31,

2016.

Total stock-based compensation expense is as follows:

(In Thousands)	2016		2015		2014
Restricted stock	$	578	$	606	$	412
Stock options		0		0		153
Total	$	578	$	606	$	565

The following summarizes non-vested restricted stock activity for the year ended

December

31,

2016:

				Weighted
				Average
	Number			Grant Date
	of Shares			Fair Value
Outstanding, December 31, 2015		62,212		$	20.10
Granted		35,427		$	20.42
Vested		(30,846	)	$	19.90
Forfeited		(3,431	)	$	20.41
Outstanding, December 31, 2016		63,362		$	20.35

Compensation cost related to restricted stock is recognized based on the market price of the stock at the grant date over the vesting period, adjusted for estimated and actual forfeitures. As of

December

31,

2016,

there was

$662,000

total unrecognized compensation cost related to restricted stock, which is expected to be recognized over a weighted average period of

1.4

years.

In

2016,

the Corporation awarded a total of

27,593

shares of restricted stock under the Stock Incentive Plan. Restricted stock awards under the Stock Incentive Plan in

2016

included the following:

(1)

a total of

17,289

shares to Executive Officers, vesting over a

three

-year term, with vesting for half of the shares dependent on satisfactory performance (time vesting) and vesting for half of the shares based on time vesting and upon the Corporation meeting an annual return on average equity (“ROAE”) performance ratio, as defined; and

(2)

a total of

10,304

shares to other employees, with time vesting over a

three

-year term. The Corporation did not meet the performance condition defined in the

2016

awards, as the Corporation’s return on average equity (“ROAE”) was in the

47

th

percentile of the defined Peer Group’s results for the

12

-month period ended

September

30,

2016.

The minimum level for satisfying the performance condition defined in the

2016

awards was an ROAE at the

50

th

percentile of the Peer Group’s results. For purposes of the

2016

awards, the Peer Group included all publicly traded commercial banks and bank holding companies with headquarters in Pennsylvania, New York, New Jersey and Ohio, and total assets ranging between

$750

million and

$3.5

billion as of the beginning of the applicable period.

Restricted stock awards in

2015

included the following:

(1)

a total of

20,298

shares to employees, vesting over a

four

-year term, with vesting of all of the applicable shares contingent upon the Corporation meeting an annual ROAE performance ratio, as defined;

(2)

a total of

2,198

shares to employees, with time vesting over a

four

-year term; and

(3)

an award to the Chief Executive Officer of

5,174

shares, with time vesting over a

three

-year term. Most of the restricted stock awards issued under this Plan in

2015,

2014

and

2013

include a condition that the Corporation must meet an annual targeted ROAE performance ratio, as defined, in order for participants to vest. In

2016,

2015

and

2014,

the Corporation met the ROAE target applicable to awards granted prior to

2016,

which is based on the Corporation’s ROAE for

12

-month periods ended

September

30

of each year as compared to the applicable peer group of bank holding companies based in Pennsylvania and

one

local competitor based in New York with total assets of

$750

million to

$2

billion as of the beginning of each applicable period. For

2016,

2015

and

2014

restricted stock awards to individuals who are substantially involved in mortgage lending, vesting is not dependent on the Corporation’s ROAE.

In

2016,

a total of

7,834

restricted shares were granted under the Independent Directors Stock Incentive Plan, subject to time vesting over a term of

one

year. In

2015,

a total of

7,130

restricted shares were granted under the Independent Directors Stock Incentive Plan, also with time vesting over a term of

one

year.

There were no stock options granted in

2016

or

2015.

The Corporation recorded stock option expense in

2014

based on estimated fair value calculated using the Black-Scholes-Merton option-pricing model with the following assumptions:

	2014
Volatility		39	%
Expected option lives (years)		8
Risk-free interest rate		2.85	%
Dividend yield		4.33	%

Management estimated the lives for options based on the Corporation’s average historical experience with both plans. The Corporation utilized its historical volatility and dividend yield over the immediately prior

8

-year period to estimate future levels of volatility and dividend yield for the

2014

awards. The risk-free interest rate was based on the published yield of

zero

-coupon U.S. Treasury strips as of the grant date, with a maturity coinciding with the estimated option lives.

A summary of stock option activity is presented below:

	2016					2015					2014
				Weighted					Weighted					Weighted
				Average					Average					Average
				Exercise					Exercise					Exercise
	Shares			Price		Shares			Price		Shares			Price
Outstanding, beginning of year		248,486		$	18.59		316,157		$	19.05		358,176		$	19.03
Granted		0					0					39,027		$	20.45
Exercised		(35,880	)	$	18.86		(29,557	)	$	17.56		(50,415	)	$	17.57
Forfeited		(10,569	)	$	18.03		(20,211	)	$	19.76		(16,424	)	$	20.03
Expired		0					(17,903	)	$	27.00		(14,207	)	$	26.59
Outstanding, end of year		202,037		$	18.58		248,486		$	18.59		316,157		$	19.05
Options exercisable at year-end		202,037		$	18.58		248,486		$	18.59		316,157		$	19.05
Weighted-average fair value of options granted					N/A					N/A				$	5.50
Weighted-average fair value of options forfeited				$	4.04				$	4.86				$	4.89

The weighted-average remaining contractual term of outstanding stock options at

December

31,

2016

was

4.0

years. The aggregate intrinsic value of stock options outstanding was

$1,540,000

at

December

31,

2016.

The total intrinsic value of options exercised was

$183,000

in

2016,

$77,000

in

2015

and

$90,000

in

2014.

The Corporation has issued shares from treasury stock for almost all stock option exercises through

December

31,

2016.

Management does not anticipate that stock repurchases will be necessary to accommodate stock option exercises in

2017.

In

January

2017,

the Corporation awarded

22,312

shares of restricted stock under the Stock Incentive Plan and

8,470

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

2017

restricted stock awards under the Stock Incentive Plan vest ratably over

three

years, and vesting for

one

-half of the

14,897

restricted shares awarded to Executive Officers depends on the Corporation meeting a ROAE target each year. The

2017

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

one

year. Total estimated stock-based compensation for

2017

is

$652,000.

The restricted stock awards made in

January

2017

are not included in the tables above.

XML

Note 14 - Income Taxes

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Income Tax Disclosure [Text Block]

14.

INCOME TAXES

The net deferred tax asset at

December

31,

2016

and

2015

represents the following temporary difference components:

	December 31,		December 31,
(In Thousands)	2016		2015
Deferred tax assets:
Unrealized holding losses on securities	$	512	$	0
Net realized losses on securities		0		69
Allowance for loan losses		2,998		2,761
Other deferred tax assets		2,658		2,634
Total deferred tax assets		6,168		5,464
Deferred tax liabilities:
Unrealized holding gains on securities		0		1,342
Defined benefit plans - ASC 835		27		19
Bank premises and equipment		913		869
Core deposit intangibles		6		11
Other deferred tax liabilities		105		108
Total deferred tax liabilities		1,051		2,349
Deferred tax asset, net	$	5,117	$	3,115

The provision for income taxes includes the following:

(In thousands)	2016			2015		2014
Currently payable	$	5,328		$	5,097	$	4,280
Tax expense resulting from allocations of certain tax benefits to equity or as a reduction in other assets		175			161		158
Deferred		(156	)		79		1,254
Total provision	$	5,347		$	5,337	$	5,692

A reconciliation of income tax at the statutory rate to the Corporation’s effective rate is as follows (amounts in thousands):

(Amounts in thousands)	2016						2015						2014
	Amount			%			Amount			%			Amount			%
Expected provision	$	7,388			35.00		$	7,633			35.00		$	7,972			35.00
Tax-exempt interest income		(1,801	)		(8.53	)		(1,914	)		(8.78	)		(1,982	)		(8.70	)
Nondeductible interest expense		40			0.19			51			0.23			56			0.25
Dividends received deduction		(22	)		(0.10	)		(75	)		(0.34	)		(79	)		(0.35	)
Increase in cash surrender value of life insurance		(134	)		(0.63	)		(135	)		(0.62	)		(132	)		(0.58	)
Employee stock option compensation		0			0.00			0			0.00			41			0.18
Tax benefit from limited partnership investment		(76	)		(0.36	)		(80	)		(0.37	)		(83	)		(0.36	)
Other, net		(48	)		(0.23	)		(143	)		(0.66	)		(101	)		(0.44	)
Effective income tax provision	$	5,347			25.33		$	5,337			24.47		$	5,692			24.99

The Corporation has investments in

three

limited partnerships that manage affordable housing projects that have qualified for the federal low-income housing tax credit. The Corporation’s expected return from these investments is based on the receipt of tax credits and tax benefits from deductions of operating losses. The Corporation uses the effective yield method to account for these investments, with the benefits recognized as a reduction of the provision for income taxes. For

two

of the

three

limited partnership investments, the tax credits have been received in full in prior years, and the Corporation has fully realized the benefits of the credits and amortized its initial investments in the partnerships. The most recent affordable housing project was completed in

2013,

and the Corporation received tax credits in

2013

through

2015

and expects to continue to receive tax credits annually through

2022.

The carrying amount of the Corporation’s investment is

$713,000

at

December

31,

2016

and

$812,000

at

December

31,

2015

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

2016,

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

$158,000

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

$76,000.

In

2015,

the Corporation received tax credits and other tax benefits totaling

$160,000,

and recognized a reduction of the provision for income tax of

$80,000.

In

2014,

the Corporation received tax credits and other tax benefits totaling

$159,000,

and recognized a reduction of the provision for income tax of

$83,000.

The Corporation has

no

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

2013.

XML

Note 15 - Related Party Transactions

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Related Party Transactions Disclosure [Text Block]

15.

RELATED PARTY TRANSACTIONS

Loans to executive officers, directors of the Corporation and its subsidiaries and any associates of the foregoing persons are as follows:

(In Thousands)	Beginning		New					Other			Ending
	Balance		Loans		Repayments			Changes			Balance
12 directors, 7 executive officers 2016	$	10,246	$	307	$	(1,160	)	$	2,021		$	11,414
11 directors, 7 executive officers 2015		12,023		52		(808	)		(1,021	)		10,246
12 directors, 8 executive officers 2014		12,547		188		(1,358	)		646			12,023

In the table above, other changes represent net changes in the balance of existing lines of credit and transfers in and out of the related party category.

Deposits from related parties held by the Corporation amounted to

$2,899,000

at

December

31,

2016

and

$3,194,000

at

December

31,

2015.

XML

Note 16 - Off-balance Sheet Risk

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Supplemental Balance Sheet Disclosures [Text Block]

16.

OFF-BALANCE SHEET RISK

The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit, interest rate or liquidity risk in excess of the amount recognized in the consolidated balance sheets. The contract amounts of these instruments express the extent of involvement the Corporation has in particular classes of financial instruments.

The Corporation’s exposure to credit loss from nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual amount of these instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Financial instruments whose contract amounts represent credit risk at

December

31,

2016

and

2015

are as follows:

(In Thousands)	2016		2015
Commitments to extend credit	$	180,768	$	156,407
Standby letters of credit		9,025		13,340

Commitments to extend credit are legally binding agreements to lend to customers. Commitments generally have fixed expiration dates or other termination clauses and

may

require payment of fees. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future liquidity requirements. The Corporation evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation, for extensions of credit is based on management’s credit assessment of the counterparty.

Standby letters of credit are conditional commitments issued by the Corporation guaranteeing performance by a customer to a

third

party. Those guarantees are issued primarily to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Some of the standby letters of credit are collateralized by real estate or other assets, and others are unsecured. The extent to which proceeds from liquidation of collateral would be expected to cover the maximum potential amount of future payments related to standby letters of credit is not estimable. The Corporation has recorded no liability associated with standby letters of credit as of

December

31,

2016

and

2015.

Standby letters of credit as of

December

31,

2016

expire as follows:

Year of Expiration	(In Thousands)
2017	$	7,612
2018		387
2019		193
2020		64
2021		0
Thereafter		769
Total	$	9,025

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Note 17 - Contingencies

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Commitments and Contingencies Disclosure [Text Block]

17.

CONTINGENCIES

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

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Note 18 - Regulatory Matters

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Regulatory Capital Requirements under Banking Regulations [Text Block]

18.

REGULATORY MATTERS

The Corporation (on a consolidated basis) and C&N Bank are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on the Corporation’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Corporation and C&N Bank must meet specific capital guidelines that involve quantitative measures of their assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Corporation and C&N Bank to maintain minimum amounts and ratios (set forth in the following table) of total capital, Tier I capital (as defined in the regulations) and Common equity Tier

1

capital (as defined) to risk-weighted assets (as defined) and of Tier I capital (as defined) to average assets (as defined). Management believes, as of

December

31,

2016

and

2015,

that the Corporation and C&N Bank meet all capital adequacy requirements (described in more detail below) to which they are subject and maintain capital conservation buffers that allow the Corporation and C&N Bank to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to certain executive officers.

To be categorized as well capitalized, an institution must maintain minimum total risk based, Tier I risk based, Common equity risk based and Tier I leverage ratios as set forth in the following table. The Corporation’s and C&N Bank’s actual capital amounts and ratios are also presented in the following table:

(Dollars in Thousands)	Actual					Minimum Capital Requirement					Minimum To Maintain Capital Conservation Buffer at Reporting Date				Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions				Minimum To Meet the Corporation's Policy Thresholds
	Amount		Ratio			Amount		Ratio			Amount Ratio				Amount Ratio				Amount Ratio
December 31 , 2016:
Total capital to risk-weighted assets:
Consolidated	$	183,597		23.60	%	$	62,245		> 8	%	$	67,108	> 8.625	%	$	77,806	> 10	%	$	81,697	> 10.5	%
C&N Bank		162,705		21.03	%		61,894		> 8	%		66,730	> 8.625	%		77,368	> 10	%		81,236	> 10.5	%
Tier 1 capital to risk-weighted assets:
Consolidated		174,928		22.48	%		31,122		> 6	%		51,547	> 6.625	%		62,245	> 8	%		66,135	> 8.5	%
C&N Bank		154,036		19.91	%		30,947		> 6	%		51,256	> 6.625	%		61,894	> 8	%		65,762	> 8.5	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		174,928		22.48	%		31,122		> 4.5	%		39,876	> 5.125	%		50,574	> 6.5	%		54,464	> 7	%
C&N Bank		154,036		19.91	%		30,947		> 4.5	%		39,651	> 5.125	%		50,289	> 6.5	%		54,157	> 7	%
Tier 1 capital to average assets:
Consolidated		174,928		14.27	%		49,026		> 4	%		N/A	N/A			61,282	> 5	%		61,282	> 5	%
C&N Bank		154,036		12.73	%		48,404		> 4	%		N/A	N/A			60,506	> 5	%		60,506	> 5	%
December 31, 2015:
Total capital to risk-weighted assets:
Consolidated	$	181,216		24.40	%	$	59,424		> 8	%		N/A	N/A		$	74,281	> 10	%	$	77,995	> 10.5	%
C&N Bank		161,187		21.83	%		59,058		> 8	%		N/A	N/A			73,823	> 10	%		77,514	> 10.5	%
Tier 1 capital to risk-weighted assets:
Consolidated		173,009		23.29	%		29,712		> 6	%		N/A	N/A			59,424	> 8	%		63,139	> 8.5	%
C&N Bank		153,298		20.77	%		29,529		> 6	%		N/A	N/A			59,058	> 8	%		62,749	> 8.5	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		173,009		23.29	%		29,712		> 4.5	%		N/A	N/A			48,282	> 6.5	%		51,996	> 7	%
C&N Bank		153,298		20.77	%		29,529		> 4.5	%		N/A	N/A			47,985	> 6.5	%		51,676	> 7	%
Tier 1 capital to average assets:
Consolidated		173,009		14.31	%		48,355		> 4	%		N/A	N/A			60,444	> 5	%		60,444	> 5	%
C&N Bank		153,298		12.81	%		47,861		> 4	%		N/A	N/A			59,826	> 5	%		59,826	> 5	%

In

July

2013,

the federal regulatory authorities issued a new capital rule based, in part, on revisions developed by the Basel Committee on Banking Supervision to the Basel capital framework (Basel III). The Corporation and C&N Bank became subject to the new rule effective

January

1,

2015.

Generally, the new rule implements higher minimum capital requirements, revises the definition of regulatory capital components and related calculations, adds a new common equity tier

1

capital ratio, implements a new capital conservation buffer, increases the risk weighting for past due loans and provides a transition period for several aspects of the new rule. 

The current (new) capital rule provides that, in order to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization must hold a capital conservation buffer composed of common equity tier

1

capital above its minimum risk-based capital requirements. The buffer is measured relative to risk-weighted assets. Phase-in of the capital conservation buffer requirements became effective

January

1,

2016.

The transition schedule for new ratios, including the capital conservation buffer, is as follows:

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

As fully phased in, a banking organization with a buffer greater than

2.5%

would not be subject to additional limits on dividend payments or discretionary bonus payments; however, a banking organization with a buffer less than

2.5%

would be subject to increasingly stringent limitations as the buffer approaches

zero.

The new rule also prohibits a banking organization from making dividend payments or discretionary bonus payments if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than

2.5%

as of the beginning of that quarter. Eligible net income is defined as net income for the

four

calendar quarters preceding the current calendar quarter, net of any distributions and associated tax effects not already reflected in net income. A summary of payout restrictions based on the capital conservation buffer is as follows:

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

At

December

31,

2016,

the Corporation’s Capital Conservation Buffer, determined based on the minimum total capital ratio, was

15.60%.

C&N Bank’s Capital Conservation Buffer (also determined based on the minimum total capital ratio) was

13.03%.

Banking regulators limit the amount of dividends that

may

be paid by C&N Bank to the Corporation. Retained earnings against which dividends

may

be paid without prior approval of the banking regulators amounted to approximately

$87,631,000

at

December

31,

2016,

subject to the minimum capital ratio requirements noted above.

Restrictions imposed by federal law prohibit the Corporation from borrowing from C&N Bank unless the loans are secured in specific amounts. Such secured loans to the Corporation are generally limited to

10%

of C&N Bank’s tangible stockholder’s equity (excluding accumulated other comprehensive income) or

$15,404,000

at

December

31,

2016.

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Note 19 - Parent Company Only

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Condensed Financial Information of Parent Company Only Disclosure [Text Block]

19.

PARENT COMPANY ONLY

The following is condensed financial information for Citizens & Northern Corporation:

CONDENSED BALANCE SHEET	December 31,
(In Thousands)	2016		2015
ASSETS
Cash	$	6,033	$	5,847
Investment in subsidiaries:
Citizens & Northern Bank		165,397		167,277
Citizens & Northern Investment Corporation		11,168		10,966
Bucktail Life Insurance Company		3,419		3,392
Other assets		4		24
TOTAL ASSETS	$	186,021	$	187,506
LIABILITIES AND STOCKHOLDERS' EQUITY
Other liabilities	$	13	$	19
Stockholders' equity		186,008		187,487
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	186,021	$	187,506

CONDENSED INCOME STATEMENT
(In Thousands)	2016			2015			2014
Dividends from Citizens & Northern Bank	$	14,960		$	11,569		$	22,608
Expenses		(367	)		(234	)		(112	)
Income before equity in undistributed income of subsidiaries		14,593			11,335			22,496
Equity in undistributed income of subsidiaries		1,169			5,136			(5,410	)
NET INCOME	$	15,762		$	16,471		$	17,086

CONDENSED STATEMENT OF CASH FLOWS
(In Thousands)
	2016			2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	15,762		$	16,471		$	17,086
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income of subsidiaries		(1,169	)		(5,136	)		5,410
Decrease (increase) in other assets		20			12			(36	)
(Decrease) increase in other liabilities		(6	)		12			1
Net Cash Provided by Operating Activities		14,607			11,359			22,461
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of treasury stock		263			381			123
Tax benefit from compensation plans, net		151			143			137
Purchase of treasury stock		(3,723	)		(4,415	)		(4,002	)
Dividends paid		(11,112	)		(11,245	)		(11,392	)
Net Cash Used in Financing Activities		(14,421	)		(15,136	)		(15,134	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		186			(3,777	)		7,327
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		5,847			9,624			2,297
CASH AND CASH EQUIVALENTS, END OF YEAR	$	6,033		$	5,847		$	9,624

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Note 20 - Summary of Quarterly Consolidated Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2016

Notes to Financial Statements

Quarterly Financial Information [Text Block]

20.

SUMMARY OF QUARTERLY CONSOLIDATED FINANCIAL DATA (Unaudited)

The following table presents summarized quarterly financial data for

2016

and

2015:

(In Thousands Except Per Share Data) (Unaudited)
	2016 Quarter Ended
	Mar. 31,		June 30,		Sept. 30,		Dec. 31,
Interest income	$	10,937	$	10,924	$	11,131	$	11,106
Interest expense		904		925		944		920
Net interest income		10,033		9,999		10,187		10,186
Provision (credit) for loan losses		368		318		538		(3	)
Net interest income after provision (credit) for loan losses		9,665		9,681		9,649		10,189
Other income		3,690		3,906		3,884		4,031
Net gains on available-for-sale securities		383		122		584		69
Other expenses		9,072		8,535		8,579		8,558
Income before income tax provision		4,666		5,174		5,538		5,731
Income tax provision		1,093		1,303		1,451		1,500
Net income	$	3,573	$	3,871	$	4,087	$	4,231
Net income per share – basic	$	0.29	$	0.32	$	0.34	$	0.35
Net income per share – diluted	$	0.29	$	0.32	$	0.34	$	0.35

	2015 Quarter Ended
	Mar. 31,		June 30,		Sept. 30,		Dec. 31,
Interest income	$	11,163	$	11,186	$	11,134	$	11,036
Interest expense		1,213		1,176		1,126		1,087
Net interest income		9,950		10,010		10,008		9,949
Provision for loan losses		3		221		302		319
Net interest income after provision for loan losses		9,947		9,789		9,706		9,630
Other income		3,556		3,962		3,961		3,999
Net gains on available-for-sale securities		74		932		79		1,776
Loss on prepayment of borrowings		0		910		0		1,663
Other expenses		8,533		7,964		8,117		8,416
Income before income tax provision		5,044		5,809		5,629		5,326
Income tax provision		1,229		1,452		1,395		1,261
Net income	$	3,815	$	4,357	$	4,234	$	4,065
Net income per share – basic	$	0.31	$	0.36	$	0.35	$	0.33
Net income per share – diluted	$	0.31	$	0.36	$	0.35	$	0.33

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Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2016

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

BASIS OF CONSOLIDATION -

The consolidated financial statements include the accounts of Citizens & Northern Corporation and its subsidiaries, Citizens & Northern Bank (“C&N Bank”), Bucktail Life Insurance Company and Citizens & Northern Investment Corporation (collectively, “Corporation”), as well as C&N Bank’s wholly-owned subsidiary, C&N Financial Services Corporation. All material intercompany balances and transactions have been eliminated in consolidation.

Nature of Operations, Policy [Policy Text Block]

NATURE OF OPERATIONS -

The Corporation is primarily engaged in providing a full range of banking and mortgage services to individual and corporate customers in North Central Pennsylvania and Southern New York State. Lending products include mortgage loans, commercial loans and consumer loans, as well as specialized instruments such as commercial letters-of-credit. Deposit products include various types of checking accounts, passbook and statement savings, money market accounts, interest checking accounts, Individual Retirement Accounts and certificates of deposit. The Corporation also offers non-insured “RepoSweep” accounts.

The Corporation provides Trust and Financial Management services, including administration of trusts and estates, retirement plans, and other employee benefit plans, and investment management services. The Corporation offers a variety of personal and commercial insurance products through C&N Financial Services Corporation. C&N Financial Services Corporation also offers mutual funds, annuities, educational savings accounts and other investment products through registered agents. Management has determined that the Corporation has

one

reportable segment, “Community Banking.” All of the Corporation’s activities are interrelated, and each activity is dependent and assessed based on how each of the activities of the Corporation supports the others.

The Corporation is subject to competition from other financial institutions. It is also subject to regulation by certain federal and state agencies and undergoes periodic examination by those regulatory authorities. As a consequence, the Corporation’s business is particularly susceptible to being affected by future federal and state legislation and regulations.

Use of Estimates, Policy [Policy Text Block]

USE OF ESTIMATES -

The financial information is presented in accordance with generally accepted accounting principles and general practice for financial institutions in the United States of America (“U.S. GAAP”). In preparing financial statements, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements. In addition, these estimates and assumptions affect revenues and expenses in the financial statements and as such, actual results could differ from those estimates.

Material estimates that are particularly susceptible to change include:

(1)

the allowance for loan losses,

(2)

fair values of debt securities based on estimates from independent valuation services or from brokers,

(3)

assessment of impaired securities to determine whether or not the securities are other-than-temporarily impaired,

(4)

valuation of deferred tax assets and

(5)

valuation of obligations from defined benefit plans.

Marketable Securities, Policy [Policy Text Block]

INVESTMENT SECURITIES -

Investment securities are accounted for as follows:

Available-for-sale securities -

includes debt securities not classified as held-to-maturity or trading, and unrestricted equity securities. Such securities are reported at fair value, with unrealized gains and losses excluded from earnings and reported separately through accumulated other comprehensive income (loss), net of tax. Amortization of premiums and accretion of discounts on available-for-sale securities are recorded using the level yield method over the remaining contractual life of the securities, adjusted for actual prepayments. Realized gains and losses on sales of available-for-sale securities are computed on the basis of specific identification of the adjusted cost of each security. Securities within the available-for-sale portfolio

may

be used as part of the Corporation’s asset and liability management strategy and

may

be sold in response to changes in interest rate risk, prepayment risk or other factors.

Other-than-temporary impairment

- Declines in the fair value of available-for-sale securities that are deemed to be other-than-temporary are reflected in earnings as realized losses. In estimating other-than-temporary impairment (OTTI) losses, management considers

(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,

(3)

the intent and ability of the Corporation to retain its investment in the issuer for a period of time sufficient to allow for any anticipated recovery in fair value, and

(4)

whether the Corporation intends to sell the security or if it is more likely than not that the Corporation will be required to sell the security before the recovery of its amortized cost basis. The credit-related impairment is recognized in earnings and is the difference between a security’s amortized cost basis and the present value of expected future cash flows discounted at the security’s effective interest rate. For debt securities classified as held-to-maturity, if any, the amount of noncredit-related impairment is recognized in other comprehensive income and accreted over the remaining life of the debt security as an increase in the carrying value of the security.

Restricted equity securities

- Restricted equity securities consist primarily of Federal Home Loan Bank of Pittsburgh stock, and are carried at cost and evaluated for impairment. Holdings of restricted equity securities are included in Other Assets in the consolidated balance sheets, and dividends received on restricted securities are included in Other Income in the consolidated statements of income.

Finance, Loan and Lease Receivables, Held-for-sale, Policy [Policy Text Block]

LOANS HELD FOR SALE

-Mortgage loans held for sale are reported at the lower of cost or market, determined in the aggregate.

Finance, Loans and Leases Receivable, Policy [Policy Text Block]

LOANS RECEIVABLE -

Loans receivable which management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at unpaid principal balances, less the allowance for loan losses and net deferred loan fees. Interest income is accrued on the unpaid principal balance. Loan origination and commitment fees, as well as certain direct origination costs, are deferred and amortized as a yield adjustment over the lives of the related loans using the interest method.

The loans receivable portfolio is segmented into residential mortgage, commercial and consumer loans. The residential mortgage segment includes the following classes:

first

and junior lien residential mortgages, home equity lines of credit and residential construction loans. The most significant classes of commercial loans are commercial loans secured by real estate, non-real estate secured commercial and industrial loans, loans to political subdivisions, commercial construction, and loans secured by farmland.

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 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.

Loans and Leases Receivable, Allowance for Loan Losses Policy [Policy Text Block]

ALLOWANCE FOR LOAN LOSSES

-The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the balance sheet date and is recorded as a reduction to loans. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the collection of all, or part, of the principal balance is highly unlikely. Non-residential consumer loans are generally charged off no later than when they are

120

days past due on a contractual basis, or earlier in the event of bankruptcy or if there is an amount deemed uncollectible.

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 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. In the process of evaluating the loan portfolio, management also considers the Corporation’s exposure to losses from unfunded loan commitments. As of

December

31,

2016

and

2015,

management determined that

no

allowance for credit losses related to unfunded loan commitments was required.

The allowance consists primarily of

two

major components –

(1)

a specific component based on a detailed assessment of certain larger loan relationships, mainly commercial purpose, determined 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 specific component relates to loans that are classified as impaired based on a detailed assessment of certain larger loan relationships evaluated by a management committee referred to as the Watch List Committee. Specific loan relationships are identified for evaluation based on the related credit risk rating. For individual loans classified as impaired, an allowance is established when the collateral value less estimated selling costs, present value of discounted cash flows or observable market price of the impaired loan is lower than the carrying value of that loan.

The general component covers pools of loans by loan class including commercial loans not considered individually impaired, as well as smaller balance homogeneous classes of loans, such as residential real estate, home equity lines of credit and other consumer loans. Accordingly, the Corporation generally does not separately identify individual consumer and residential loans for impairment disclosures, unless such loans are subject to a restructuring agreement. The pools of loans for each loan segment are evaluated for loss exposure based upon average historical net charge-off rates (currently

thirty

-

six

months), adjusted for qualitative factors. Qualitative risk factors (described in the following paragraph) are evaluated for the impact on each of the

three

distinct 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. Any adjustments to the factors are supported by a narrative documentation of changes in conditions accompanying the allowance for loan losses calculation.

The qualitative factors used in the general component calculations are designed to address credit risk characteristics associated with each segment. The Corporation’s credit risk associated with all of the segments is significantly impacted by these factors, which include economic conditions within its market area, the Corporation’s lending policies, changes or trends in the portfolio, risk profile, competition, regulatory requirements and other factors. Further, the residential mortgage segment is significantly affected by the values of residential real estate that provide collateral for the loans. The majority of the Corporation’s commercial segment loans (approximately

57%

at

December

31,

2016)

are 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.

For commercial loans secured by real estate, estimated fair values are determined primarily through

third

-party appraisals. When a real estate secured loan becomes impaired, a decision is made regarding whether an updated certified appraisal of the real estate is necessary. This decision is based on various considerations, including the age of the most recent appraisal, the loan-to-value ratio based on the original appraisal and the condition of the property. 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 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.

Loans whose terms are modified are classified as troubled debt restructurings if the Corporation grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Concessions granted under a troubled debt restructuring generally involve reductions in required payments, an extension of a loan’s stated maturity date or a temporary reduction in interest rate. Loans classified as troubled debt restructurings are designated as impaired. Non-accrual troubled debt restructurings

may

be restored to accrual status if the ultimately collectability of principal and interest payments under the modified terms is not in doubt, and there has been a period (generally, for at least

six

consecutive months) of satisfactory payment performance by the borrower either immediately before or after the restructuring.

Property, Plant and Equipment, Policy [Policy Text Block]

BANK PREMISES AND EQUIPMENT

- Bank premises and equipment are stated at cost less accumulated depreciation. Repair and maintenance expenditures which extend the useful lives of assets are capitalized, and other repair and maintenance expenditures are expensed as incurred. Depreciation expense is computed using the straight-line method.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

IMPAIRMENT OF LONG-LIVED ASSETS

- The Corporation reviews long-lived assets, such as premises and equipment and intangibles, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset

may

not be recoverable. These changes in circumstances

may

include a significant decrease in the market value of an asset or the manner in which an asset is used. If there is an indication the carrying value of an asset

may

not be recoverable, future undiscounted cash flows expected to result from use of the asset are estimated. If the sum of the expected cash flows is less than the carrying value of the asset, a loss is recognized for the difference between the carrying value and fair market value of the asset.

Finance, Loan and Lease Receivables, Held for Investments, Foreclosed Assets Policy [Policy Text Block]

FORECLOSED ASSETS HELD FOR SALE

- Foreclosed assets held for sale consist of real estate acquired by foreclosure and are initially recorded at fair value, less estimated selling costs.

Goodwill and Intangible Assets, Policy [Policy Text Block]

GOODWILL AND CORE DEPOSIT INTANGIBLE ASSETS

-

Goodwill represents the excess of the cost of acquisitions over the fair value of the net assets acquired. Goodwill is tested at least annually for impairment, or more often if events or circumstances indicate there

may

be impairment. Core deposit intangibles are being amortized over periods of time that represent the expected lives using a method of amortization that reflects the pattern of economic benefit. Core deposit intangibles are subject to impairment testing whenever events or changes in circumstances indicate their carrying amounts

may

not be recoverable

.

Transfers and Servicing of Financial Assets, Policy [Policy Text Block]

SERVICING RIGHTS

- The estimated fair value of servicing rights related to mortgage loans sold and serviced by the Corporation is recorded as an asset upon the sale of such loans. The valuation of servicing rights is adjusted quarterly, with changes in fair value included in Other Income in the consolidated statements of income. Significant inputs to the valuation include expected net servicing income to be received, the expected life of the underlying loans and the discount rate. The servicing rights asset is included in Other Assets in the consolidated balance sheets.

Income Tax, Policy [Policy Text Block]

INCOME TAXES

- Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases given the provisions of the enacted tax laws. Deferred tax assets are reduced, if necessary, by the amount of such benefits that are not expected to be realized based upon available evidence.

Tax benefits from investments in limited partnerships that have qualified for federal low-income tax credits are recognized as a reduction in the provision for income tax over the term of the investment using the effective yield method. The Corporation includes income tax penalties in the provision for income tax. The Corporation has

no

accrued interest related to unrecognized tax benefits.

Compensation Related Costs, Policy [Policy Text Block]

STOCK COMPENSATION PLANS

- The Corporation’s stock-based compensation policy applies to all forms of stock-based compensation including stock options and restricted stock units. All stock-based compensation is accounted for under the fair value method as required by U.S. GAAP. The expense associated with stock-based compensation is recognized over the vesting period of each individual arrangement.

The fair value of each stock option is estimated on the date of grant using the Black-Scholes-Merton option valuation model. The fair value of restricted stock is based on the current market price on the date of grant.

Off-Balance-Sheet Credit Exposure, Policy [Policy Text Block]

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS -

In the ordinary course of business, the Corporation has entered into off-balance sheet financial instruments consisting of commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the financial statements when they become payable.

Cash and Cash Equivalents, Policy [Policy Text Block]

CASH FLOWS

- The Corporation utilizes the net reporting of cash receipts and cash payments for certain deposit and lending activities. Cash equivalents include federal funds sold and all cash and amounts due from depository institutions and interest-bearing deposits in other banks with original maturities of

three

months or less.

Trust Assets and Income, Policy [Policy Text Block]

TRUST ASSETS AND INCOME

- Assets held by the Corporation in a fiduciary or agency capacity for its customers are not included in the financial statements since such items are not assets of the Corporation. Trust income is recorded on a cash basis, which is not materially different from the accrual basis.

XML

Note 3 - Comprehensive Income (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Comprehensive Income (Loss) [Table Text Block]

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
2016
Unrealized losses on available-for-sale securities:
Unrealized holding losses on available-for-sale securities	$	(4,138	)	$	1,448		$	(2,690	)
Reclassification adjustment for (gains) realized in income		(1,158	)		406			(752	)
Other comprehensive loss on available-for-sale securities		(5,296	)		1,854			(3,442	)
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		46			(16	)		30
Amortization of net transition obligation, prior service cost and net actuarial gain included in net periodic benefit cost		(22	)		8			(14	)
Other comprehensive income on unfunded retirement obligations		24			(8	)		16
Total other comprehensive loss	$	(5,272	)	$	1,846		$	(3,426	)

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
2015
Unrealized losses on available-for-sale securities:
Unrealized holding losses on available-for-sale securities	$	(1,429	)	$	500		$	(929	)
Reclassification adjustment for (gains) realized in income		(2,861	)		1,002			(1,859	)
Other comprehensive loss on available-for-sale securities		(4,290	)		1,502			(2,788	)
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive loss		(135	)		47			(88	)
Amortization of net transition obligation, prior service cost, net actuarial loss and loss on settlement included in net periodic benefit cost		67			(23	)		44
Other comprehensive loss on unfunded retirement obligations		(68	)		24			(44	)
Total other comprehensive loss	$	(4,358	)	$	1,526		$	(2,832	)

(In Thousands)	Before-Tax			Income Tax			Net-of-Tax
	Amount			Effect			Amount
2014
Unrealized gains on available-for-sale securities:
Unrealized holding gains on available-for-sale securities	$	10,774		$	(3,771	)	$	7,003
Reclassification adjustment for (gains) realized in income		(1,104	)		386			(718	)
Other comprehensive income on available-for-sale securities		9,670			(3,385	)		6,285
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses included in other comprehensive income		(79	)		28			(51	)
Amortization of net transition obligation, prior service cost, net actuarial loss and loss on settlement included in net periodic benefit cost		184			(65	)		119
Other comprehensive income on unfunded retirement obligations		105			(37	)		68
Total other comprehensive income	$	9,775		$	(3,422	)	$	6,353

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

	Unrealized			Unfunded			Accumulated
	Holding Gains			Pension and			Other
	(Losses)			Postretirement			Comprehensive
	on Securities			Obligations			Income (Loss)
2016
Balance, beginning of period	$	2,493		$	35		$	2,528
Other comprehensive loss before reclassifications		(2,690	)		30			(2,660	)
Amounts reclassified from accumulated other comprehensive (loss) income		(752	)		(14	)		(766	)
Other comprehensive (loss) income		(3,442	)		16			(3,426	)
Balance, end of period	$	(949	)	$	51		$	(898	)
2015
Balance, beginning of period	$	5,281		$	79		$	5,360
Other comprehensive loss before reclassifications		(929	)		(88	)		(1,017	)
Amounts reclassified from accumulated other comprehensive income		(1,859	)		44			(1,815	)
Other comprehensive loss		(2,788	)		(44	)		(2,832	)
Balance, end of period	$	2,493		$	35		$	2,528
2014
Balance, beginning of period	$	(1,004	)	$	11		$	(993	)
Other comprehensive income before reclassifications		7,003			(51	)		6,952
Amounts reclassified from accumulated other comprehensive income		(718	)		119			(599	)
Other comprehensive income		6,285			68			6,353
Balance, end of period	$	5,281		$	79		$	5,360

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

Details about Accumulated Other Comprehensive Income Components	Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(1,158	)	Realized gains on available-for-sale securities, net
		406		Income tax provision
		(752	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(31	)	Pensions and other employee benefits
Actuarial loss		9		Pensions and other employee benefits
		(22	)	Total before tax
		8		Income tax provision
		(14	)	Net of tax
Total reclassifications for the period	$	(766	)

Details about Accumulated Other Comprehensive Income Components	Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(2,861	)	Realized gains on available-for-sale securities, net
		1,002		Income tax provision
		(1,859	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(31	)	Pensions and other employee benefits
Actuarial loss		11		Pensions and other employee benefits
Loss on settlement		87		Pensions and other employee benefits
		67		Total before tax
		(23	)	Income tax provision
		44		Net of tax
Total reclassifications for the period	$	(1,815	)

Details about Accumulated Other Comprehensive Income Components	Reclassified from Accumulated Other Comprehensive Income			Affected Line Item in the Consolidated Statements of Income
Unrealized gains and losses on available-for-sale securities	$	(1,104	)	Realized gains on available-for-sale securities, net
		386		Income tax provision
		(718	)	Net of tax
Amortization of defined benefit pension and postretirement items:
Prior service cost		(31	)	Pensions and other employee benefits
Actuarial loss		19		Pensions and other employee benefits
Loss on settlement		196		Pensions and other employee benefits
		184		Total before tax
		(65	)	Income tax provision
		119		Net of tax
Total reclassifications for the period	$	(599	)

XML

Note 4 - Per Share Data (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

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

			Weighted-
			Average			Earnings
	Net		Common			Per
	Income		Shares			Share
2016
Earnings per share – basic	$	15,762,000		12,098,129		$	1.30
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				215,581
Hypothetical share repurchase at $21.23				(185,346	)
Earnings per share – diluted	$	15,762,000		12,128,364		$	1.30

			Weighted-
			Average			Earnings
	Net		Common			Per
	Income		Shares			Share
2015
Earnings per share – basic	$	16,471,000		12,211,941		$	1.35
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				210,402
Hypothetical share repurchase at $20.04				(188,570	)
Earnings per share – diluted	$	16,471,000		12,233,773		$	1.35
2014
Earnings per share – basic	$	17,086,000		12,390,067		$	1.38
Dilutive effect of potential common stock arising from stock options:
Exercise of outstanding stock options				224,015
Hypothetical share repurchase at $19.41				(202,032	)
Earnings per share – diluted	$	17,086,000		12,412,050		$	1.38

XML

Note 5 - Cash and Due From Banks (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Cash and Cash Equivalents [Table Text Block]

(In thousands)	Dec. 31,		Dec. 31,
	2016		2015
Cash and cash equivalents	$	28,621	$	33,313
Certificates of deposit		3,488		2,748
Total cash and due from banks	$	32,109	$	36,061

XML

Note 6 - Fair Value Measurements and Fair Values of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

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

			December 31, 2016
	Quoted Prices		Other
	in Active		Observable		Unobservable			Total
	Markets		Inputs		Inputs			Fair
(In Thousands)	(Level 1)		(Level 2)		(Level 3)			Value
Recurring fair value measurements
AVAILABLE-FOR-SALE SECURITIES:
Obligations of U.S. Government agencies	$	0	$	9,541	$	0		$	9,541
Obligations of states and political subdivisions:
Tax-exempt		0		119,037		0			119,037
Taxable		0		30,297		0			30,297
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		58,404		0			58,404
Residential collateralized mortgage obligations		0		146,608		0			146,608
Commercial mortgage-backed securities		0		30,219		0			30,219
Total debt securities		0		394,106		0			394,106
Marketable equity securities		971		0		0			971
Total available-for-sale securities		971		394,106		0			395,077
Servicing rights		0		0		1,262			1,262
Total recurring fair value measurements	$	971	$	394,106	$	1,262		$	396,339
Nonrecurring fair value measurements
Impaired loans with a valuation allowance	$	0	$	0	$	3,372		$	3,372
Valuation allowance		0		0		(674	)		(674	)
Impaired loans, net		0		0		2,698			2,698
Foreclosed assets held for sale		0		0		2,180			2,180
Total nonrecurring fair value measurements	$	0	$	0	$	4,878		$	4,878

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

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

(In Thousands)	Years Ended December 31,
	2016			2015			2014
Balance, beginning of period	$	1,296		$	1,281		$	1,123
Issuances of servicing rights		248			177			185
Unrealized losses included in earnings		(282	)		(162	)		(27	)
Balance, end of period	$	1,262		$	1,296		$	1,281

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

(In Thousands)	Valuation	December 31, 2016				December 31, 2015
	Method(s)	Carrying		Fair		Carrying		Fair
	Used	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	28,621	$	28,621	$	33,313	$	33,313
Certificates of deposit	Level 2		3,488		3,481		2,748		2,752
Available-for-sale securities	See Above		395,077		395,077		420,290		420,290
Restricted equity securities (included in Other Assets)	Level 2		4,426		4,426		4,657		4,657
Loans held for sale	Level 2		142		142		280		280
Loans, net	Level 3		743,362		725,787		696,991		685,552
Accrued interest receivable	Level 2		3,963		3,963		3,768		3,768
Servicing rights	Level 3		1,262		1,262		1,296		1,296
Financial liabilities:
Deposits with no stated maturity	Level 2		771,625		771,625		713,931		713,931
Time deposits	Level 2		212,218		212,274		221,684		221,891
Short-term borrowings	Level 2		26,175		26,024		53,496		53,398
Long-term borrowings	Level 2		38,454		39,062		38,767		40,166
Accrued interest payable	Level 2		65		65		70		70

Fair Value, Measurements, Nonrecurring [Member]

Notes Tables

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

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

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

Fair Value, Measurements, Recurring [Member]

Notes Tables

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

	Fair Value at
	12/31/16		Valuation	Unobservable	Method or Value As of
Asset	(In Thousands)		Technique	Input(s)	12/31/16
Servicing rights	$	1,262	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		138.00	%	Weighted-average PSA
				Servicing fees		0.25	%	of loan balances
						4.00	%	of payments are late
						5.00	%	late fees assessed
					$	1.94		Miscellaneous fees per account per month
				Servicing costs	$	6.00		Monthly servicing cost per account
					$	24.00		Additional monthly servicing cost per loan on loans more than 30 days delinquent
						1.50	%	of loans more than 30 days delinquent
						3.00	%	annual increase in servicing costs

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

XML

Note 7 - Securities (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Available-for-sale Securities [Table Text Block]

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

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

Schedule of Unrealized Loss on Investments [Table Text Block]

December 31, 2016	Less Than 12 Months					12 Months or More					Total
(In Thousands)	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
	Value		Losses			Value		Losses			Value		Losses
Obligations of U.S. Government agencies	$	7,899	$	(135	)	$	0	$	0		$	7,899	$	(135	)
Obligations of states and political subdivisions:
Tax-exempt		54,479		(1,676	)		1,278		(19	)		55,757		(1,695	)
Taxable		9,594		(79	)		0		0			9,594		(79	)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		48,674		(824	)		0		0			48,674		(824	)
Residential collateralized mortgage obligations		85,198		(1,124	)		16,073		(591	)		101,271		(1,715	)
Commercial mortgage-backed securities		30,219		(598	)		0		0			30,219		(598	)
Total debt securities		236,063		(4,436	)		17,351		(610	)		253,414		(5,046	)
Marketable equity securities		1,000		(29	)		0		0			1,000		(29	)
Total temporarily impaired available-for-sale securities	$	237,063	$	(4,465	)	$	17,351	$	(610	)	$	254,414	$	(5,075	)

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

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

(In Thousands)
	2016			2015			2014
Gross realized gains from sales	$	1,392		$	2,972		$	1,328
Gross realized losses from sales		(234	)		(111	)		(224	)
Net realized gains	$	1,158		$	2,861		$	1,104
Income tax provision related to net realized gains	$	406		$	1,002		$	386

Investments Classified by Contractual Maturity Date [Table Text Block]

	December 31, 2016
	Amortized		Fair
(In Thousands)	Cost		Value
Due in one year or less	$	18,678	$	18,832
Due from one year through five years		69,558		70,657
Due from five years through ten years		44,527		43,979
Due after ten years		25,121		25,407
Sub-total		157,884		158,875
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		58,922		58,404
Residential collateralized mortgage obligations		147,915		146,608
Commercial mortgage-backed securities		30,817		30,219
Total	$	395,538	$	394,106

XML

Note 8 - Loans (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

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

Summary of Loans by Type
(In Thousands)	Dec. 31,			Dec. 31,
	2016			2015
Residential mortgage:
Residential mortgage loans - first liens	$	334,102		$	304,783
Residential mortgage loans - junior liens		23,706			21,146
Home equity lines of credit		38,057			39,040
1-4 Family residential construction		24,908			21,121
Total residential mortgage		420,773			386,090
Commercial:
Commercial loans secured by real estate		150,468			154,779
Commercial and industrial		83,854			75,196
Political subdivisions		38,068			40,007
Commercial construction and land		14,287			5,122
Loans secured by farmland		7,294			7,019
Multi-family (5 or more) residential		7,896			9,188
Agricultural loans		3,998			4,671
Other commercial loans		11,475			12,152
Total commercial		317,340			308,134
Consumer		13,722			10,656
Total		751,835			704,880
Less: allowance for loan losses		(8,473	)		(7,889	)
Loans, net	$	743,362		$	696,991

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

Year Ended December 31, 2016	Dec. 31										Dec. 31
(In Thousands)	2015 Balance		Charge-offs			Recoveries		Provision (Credit)			2016 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,645	$	(73	)	$	3	$	458		$	3,033
Residential mortgage loans - junior liens		219		0			0		39			258
Home equity lines of credit		347		0			0		3			350
1-4 Family residential construction		207		0			0		42			249
Total residential mortgage		3,418		(73	)		3		542			3,890
Commercial:
Commercial loans secured by real estate		1,939		0			2		439			2,380
Commercial and industrial		981		(2	)		3		17			999
Political subdivisions		0		0			0		0			0
Commercial construction and land		58		0			30		74			162
Loans secured by farmland		106		0			0		4			110
Multi-family (5 or more) residential		675		(595	)		0		161			241
Agricultural loans		45		0			0		(5	)		40
Other commercial loans		118		0			0		(3	)		115
Total commercial		3,922		(597	)		35		687			4,047
Consumer		122		(87	)		82		21			138
Unallocated		427		0			0		(29	)		398
Total Allowance for Loan Losses	$	7,889	$	(757	)	$	120	$	1,221		$	8,473

Year Ended December 31, 2015	Dec. 31,										Dec. 31,
(In Thousands)	2014 Balance		Charge- offs			Recoveries		Provision (Credit)			2015 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,941	$	(175	)	$	1	$	(122	)	$	2,645
Residential mortgage loans - junior liens		176		(42	)		0		85			219
Home equity lines of credit		322		0			0		25			347
1-4 Family residential construction		214		0			0		(7	)		207
Total residential mortgage		3,653		(217	)		1		(19	)		3,418
Commercial:
Commercial loans secured by real estate		1,758		(115	)		208		88			1,939
Commercial and industrial		688		(21	)		6		308			981
Political subdivisions		0		0			0		0			0
Commercial construction and land		283		(115	)		0		(110	)		58
Loans secured by farmland		165		0			0		(59	)		106
Multi-family (5 or more) residential		87		0			0		588			675
Agricultural loans		31		0			0		14			45
Other commercial loans		131		0			0		(13	)		118
Total commercial		3,143		(251	)		214		816			3,922
Consumer		145		(94	)		55		16			122
Unallocated		395		0			0		32			427
Total Allowance for Loan Losses	$	7,336	$	(562	)	$	270	$	845		$	7,889

Year Ended December 31, 2014	Dec. 31,										Dec. 31,
(In Thousands)	2013 Balance		Charge- offs			Recoveries		Provision (Credit)			2014 Balance
Allowance for Loan Losses:
Residential mortgage:
Residential mortgage loans - first liens	$	2,974	$	(164	)	$	25	$	106		$	2,941
Residential mortgage loans - junior liens		294		(101	)		0		(17	)		176
Home equity lines of credit		269		(62	)		0		115			322
1-4 Family residential construction		168		0			0		46			214
Total residential mortgage		3,705		(327	)		25		250			3,653
Commercial:
Commercial loans secured by real estate		3,123		(1,521	)		250		(94	)		1,758
Commercial and industrial		591		(24	)		9		112			688
Political subdivisions		0		0			0		0			0
Commercial construction and land		267		(170	)		5		181			283
Loans secured by farmland		115		0			0		50			165
Multi-family (5 or more) residential		103		0			0		(16	)		87
Agricultural loans		30		0			0		1			31
Other commercial loans		138		0			0		(7	)		131
Total commercial		4,367		(1,715	)		264		227			3,143
Consumer		193		(97	)		47		2			145
Unallocated		398		0			0		(3	)		395
Total Allowance for Loan Losses	$	8,663	$	(2,139	)	$	336	$	476		$	7,336

Financing Receivable Credit Quality Indicators [Table Text Block]

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

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

Impaired Financing Receivable by Portfolio Segment [Table Text Block]

December 31, 2016
	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Residential mortgage:
Residential mortgage loans - first liens	$	753	$	333,349	$	334,102	$	0	$	3,033	$	3,033
Residential mortgage loans - junior liens		68		23,638		23,706		0		258		258
Home equity lines of credit		0		38,057		38,057		0		350		350
1-4 Family residential construction		0		24,908		24,908		0		249		249
Total residential mortgage		821		419,952		420,773		0		3,890		3,890
Commercial:
Commercial loans secured by real estate		8,005		142,463		150,468		528		1,852		2,380
Commercial and industrial		212		83,642		83,854		95		904		999
Political subdivisions		0		38,068		38,068		0		0		0
Commercial construction and land		0		14,287		14,287		0		162		162
Loans secured by farmland		1,394		5,900		7,294		51		59		110
Multi-family (5 or more) residential		392		7,504		7,896		0		241		241
Agricultural loans		13		3,985		3,998		0		40		40
Other commercial loans		0		11,475		11,475		0		115		115
Total commercial		10,016		307,324		317,340		674		3,373		4,047
Consumer		23		13,699		13,722		0		138		138
Unallocated												398
Total	$	10,860	$	740,975	$	751,835	$	674	$	7,401	$	8,473

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

Impaired Financing Receivables [Table Text Block]

(In Thousands)	December 31, 2016						December 31, 2015
	Unpaid						Unpaid
	Principal		Recorded		Related		Principal		Recorded		Related
	Balance		Investment		Allowance		Balance		Investment		Allowance
With no related allowance recorded:
Residential mortgage loans - first liens	$	783	$	753	$	0	$	842	$	842	$	0
Residential mortgage loans - junior liens		68		68		0		74		74		0
Commercial loans secured by real estate		6,975		5,232		0		7,580		5,945		0
Commercial and industrial		117		117		0		249		249		0
Loans secured by farmland		890		890		0		915		915		0
Multi-family (5 or more) residential		987		392		0		0		0		0
Agricultural loans		13		13		0		16		16		0
Consumer		23		23		0		0		0		0
Total with no related allowance recorded		9,856		7,488		0		9,676		8,041		0
With a related allowance recorded:
Residential mortgage loans - first liens		0		0		0		42		42		1
Commercial loans secured by real estate		2,773		2,773		528		317		317		97
Commercial and industrial		95		95		95		75		75		75
Loans secured by farmland		504		504		51		512		512		52
Multi-family (5 or more) residential		0		0		0		987		987		595
Total with a related allowance recorded		3,372		3,372		674		1,933		1,933		820
Total	$	13,228	$	10,860	$	674	$	11,609	$	9,974	$	820

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

							Interest Income Recognized on
	Average Investment in Impaired Loans						Impaired Loans on a Cash Basis
(In Thousands)	Year Ended December 31,						Year Ended December 31,
	2016		2015		2014		2016		2015		2014
Residential mortgage:
Residential mortgage loans - first lien	$	806	$	2,206	$	4,272	$	43	$	86	$	81
Residential mortgage loans - junior lien		71		64		168		3		4		3
Total residential mortgage		877		2,270		4,440		46		90		84
Commercial:
Commercial loans secured by real estate		6,806		6,357		7,192		495		380		469
Commercial and industrial		547		438		877		20		20		37
Commercial construction and land		0		40		395		0		0		9
Loans secured by farmland		1,409		1,459		1,413		94		103		101
Multi-family (5 or more) residential		511		790		0		0		0		0
Agricultural loans		14		21		41		1		3		3
Total commercial		9,287		9,105		9,918		610		506		619
Consumer		21		0		1		1		0		0
Total	$	10,185	$	11,375	$	14,359	$	657	$	596	$	703

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

(In Thousands)	December 31, 2016				December 31, 2015
	Past Due				Past Due
	90+ Days and				90+ Days and
	Accruing		Nonaccrual		Accruing		Nonaccrual
Residential mortgage:
Residential mortgage loans - first liens	$	3,022	$	3,770	$	2,381	$	3,044
Residential mortgage loans - junior liens		114		0		79		0
Home equity lines of credit		320		11		130		0
Total residential mortgage		3,456		3,781		2,590		3,044
Commercial:
Commercial loans secured by real estate		2,774		3,080		503		5,730
Commercial and industrial		286		119		65		313
Loans secured by farmland		219		1,331		0		1,427
Multi-family (5 or more) residential		0		392		0		987
Agricultural loans		0		13		0		16
Total commercial		3,279		4,935		568		8,473
Consumer		103		20		71		0
Totals	$	6,838	$	8,736	$	3,229	$	11,517

Past Due Financing Receivables [Table Text Block]

	As of December 31, 2016								As of December 31, 2015
	Current &								Current &
(In Thousands)	Past Due		Past Due		Past Due				Past Due		Past Due		Past Due
	Less than		30-89		90+				Less than		30-89		90+
	30 Days		Days		Days		Total		30 Days		Days		Days		Total
Residential mortgage:
Residential mortgage loans - first liens	$	321,670	$	6,695	$	5,737	$	334,102	$	294,703	$	6,156	$	3,924	$	304,783
Residential mortgage loans - junior liens		23,268		324		114		23,706		20,816		251		79		21,146
Home equity lines of credit		37,603		134		320		38,057		38,581		329		130		39,040
1-4 Family residential construction		24,567		341		0		24,908		21,121		0		0		21,121
Total residential mortgage		407,108		7,494		6,171		420,773		375,221		6,736		4,133		386,090
Commercial:
Commercial loans secured by real estate		147,464		82		2,922		150,468		153,427		108		1,244		154,779
Commercial and industrial		83,364		185		305		83,854		75,002		118		76		75,196
Political subdivisions		38,068		0		0		38,068		40,007		0		0		40,007
Commercial construction and land		14,199		88		0		14,287		5,018		104		0		5,122
Loans secured by farmland		6,181		83		1,030		7,294		5,970		223		826		7,019
Multi-family (5 or more) residential		7,439		65		392		7,896		8,201		0		987		9,188
Agricultural loans		3,981		4		13		3,998		4,642		13		16		4,671
Other commercial loans		11,475		0		0		11,475		12,152		0		0		12,152
Total commercial		312,171		507		4,662		317,340		304,419		566		3,149		308,134
Consumer		13,446		153		123		13,722		10,537		48		71		10,656
Totals	$	732,725	$	8,154	$	10,956	$	751,835	$	690,177	$	7,350	$	7,353	$	704,880

Contractual Aging of Nonaccrual Loans [Table Text Block]

	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Total
December 31, 2016 Nonaccrual Totals	$	4,199	$	419	$	4,118	$	8,736
December 31, 2015 Nonaccrual Totals	$	7,100	$	293	$	4,124	$	11,517

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

Troubled Debt Restructurings (TDRs):
	Current &
(In Thousands)	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Nonaccrual		Total
December 31, 2016 Totals	$	5,453	$	350	$	0	$	2,874	$	8,677
December 31, 2015 Totals	$	1,186	$	0	$	81	$	5,097	$	6,364

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

(Balances in Thousands)
	2016				2015				2014
	Number				Number				Number
	of		Recorded		of		Recorded		of		Recorded
	Loans		Investment		Loans		Investment		Loans		Investment
Residential mortgage - first liens		2	$	294		1	$	32		3	$	257
Residential mortgage - junior liens		1		29		0		0		1		62
Commercial loans secured by real estate		0		0		0		0		1		429
Commercial and industrial		1		5		0		0		0		0
Commercial construction and land		0		0		0		0		1		25
Loans secured by farmland		0		0		0		0		4		490
Agricultural loans		0		0		0		0		1		13
Consumer		1		27		0		0		0		0
Total		5	$	355		1	$	32		11	$	1,276

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

(In Thousands)	Dec. 31,		Dec. 31,
	2016		2015
Foreclosed residential real estate	$	1,102	$	555

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

(In Thousands)	Dec. 31,		Dec. 31,
	2016		2015
Residential real estate in process of foreclosure	$	2,738	$	1,173

Troubled Debt Restructuring [Member]

Notes Tables

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

(Balances in Thousands)
	2016				2015				2014
			Post-				Post-				Post-
	Number		Modification		Number		Modification		Number		Modification
	of		Recorded		of		Recorded		Of		Recorded
	Loans		Investment		Loans		Investment		Loans		Investment
Residential mortgage - first liens:
Extended maturity with interest rate reduction		1	$	71		1	$	56		1	$	83
Extended maturity with reduced monthly payments		1		26		0		0		0		0
Interest only payments for a period of one year		0		0		0		0		1		34
Reduced monthly payments for a six-month period		0		0		1		242		1		33
Residential mortgage - junior liens,
Interest rate and monthly payment reduction		0		0		1		32		0		0
Commercial loans secured by real estate:
Interest only payments for a period of one year		1		2,773		0		0		0		0
Reduced monthly payments		0		0		0		0		5		5,193
Commerc i al and industrial:
Extended maturity		1		5		0		0		0		0
Reduced monthly payments		0		0		0		0		1		80
Consumer:
Interest rate and monthly payment reduction		0		0		1		30		0		0
New unsecured loan after short-fall from sale of property		1		24		0		0		0		0
Total		5	$	2,899		4	$	360		9	$	5,423

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Note 9 - Bank Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Property, Plant and Equipment [Table Text Block]

(In Thousands)	December 31,
	2016			2015
Land	$	2,818		$	2,818
Buildings and improvements		27,619			27,092
Furniture and equipment		18,741			17,922
Construction in progress		392			243
Total		49,570			48,075
Less: accumulated depreciation		(34,173	)		(32,669	)
Net	$	15,397		$	15,406

Schedule of Depreciation Expense [Table Text Block]

(In Thousands)	201 6		2015		2014
Occupancy expense	$	804	$	954	$	998
Furniture and equipment expense		785		934		942
Total	$	1,589	$	1,888	$	1,940

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Note 10 - Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Finite-Lived Intangible Assets [Table Text Block]

	December 31,
(In Thousands)	2016			2015
Gross amount	$	2,034		$	2,034
Less: accumulated amortization		(2,017	)		(2,004	)
Net	$	17		$	30

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Note 11 - Deposits (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Scheduled Maturities of Time Deposits [Table Text Block]

(In Thousands)
2017	$	113,974
2018		51,526
2019		25,302
2020		14,458
2021		6,710
Thereafter		248
Total	$	212,218

Schedule of Remaining Maturities of Time Deposits in Excess of 100000 [Table Text Block]

(In Thousands)
Three months or less	$	32,987
Over 3 months through 12 months		11,663
Over 1 year through 3 years		11,508
Over 3 years		7,605
Total	$	63,763

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Note 12 - Borrowed Funds (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Short-term Debt [Table Text Block]

(In Thousands)	Dec. 31,		Dec. 31,
	2016		2015
FHLB-Pittsburgh borrowings	$	21,000	$	48,581
Customer repurchase agreements		5,175		4,915
Total short-term borrowings	$	26,175	$	53,496

(In Thousands)	Dec. 31,		Dec. 31
	2016		2015
Overnight borrowing	$	21,000	$	23,500
Other short-term advances		0		25,081
Total short-term FHLB-Pittsburgh borrowings	$	21,000	$	48,581

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

LONG-TERM BORROWINGS
Long-term borrowings (initial maturity of greater than one year) are as follows:
(In Thousands)	Dec. 31,		Dec. 31,
	2016		2015
FHLB-Pittsburgh borrowings	$	11,454	$	11,767
Repurchase agreements		27,000		27,000
Total long-term borrowings	$	38,454	$	38,767

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

(In Thousands)	Dec. 31,		Dec. 31,
	2016		2015
Loan maturing in 2016 with a rate of 6.86%	$	0	$	57
Loan maturing in 2017 with a rate of 6.83%		4		10
Loan maturing in 2017 with a rate of 3.81%		10,000		10,000
Loan maturing in 2020 with a rate of 4.79%		646		821
Loan maturing in 2025 with a rate of 4.91%		804		879
Total long-term FHLB-Pittsburgh borrowings	$	11,454	$	11,767

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

(In Thousands)	Dec. 31,		Dec. 31,
	2016		2015
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities	$	18,181	$	15,772
Residential collateralized mortgage obligations		13,313		18,008
Total	$	31,494	$	33,780

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Note 13 - Employee and Postretirement Benefit Plans (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Net Funded Status [Table Text Block]

	Pension						Postretirement
	2016			2015			2016			2015
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year	$	722		$	1,085		$	1,539		$	1,378
Service cost		0			0			37			38
Interest cost		26			36			62			57
Plan participants' contributions		0			0			215			203
Actuarial loss (gain)		3			(46	)		(30	)		120
Benefits paid		(38	)		(16	)		(268	)		(257	)
Settlement of plan obligation		0			(337	)		0			0
Benefit obligation at end of year	$	713		$	722		$	1,555		$	1,539
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year	$	839		$	1,208		$	0		$	0
Actual return on plan assets		45			(16	)		0			0
Employer contribution		0			0			53			54
Plan participants' contributions		0			0			215			203
Benefits paid		(38	)		(16	)		(268	)		(257	)
Settlement of plan obligation		0			(337	)		0			0
Fair value of plan assets at end of year	$	846		$	839		$	0		$	0
Funded status at end of year	$	133		$	117		$	(1,555	)	$	(1,539	)

Schedule of Amounts Recognized in Balance Sheet [Table Text Block]

(In Thousands)	Pension				Postretirement
	2016		2015		2016		2015
Other assets	$	133	$	117
Accrued interest and other liabilities					$	1,555	$	1,539

Schedule of Amounts Recognized in Other Comprehensive Income (Loss) [Table Text Block]

(In Thousands)	Pension				Postretirement
	2016		2015		2016			2015
Prior service cost	$	0	$	0	$	(340	)	$	(371	)
Net actuarial loss		161		186		101			131
Total	$	161	$	186	$	(239	)	$	(240	)

Schedule of Defined Benefit Plans Disclosures [Table Text Block]

(In Thousands)	Pension									Postretirement
	2016			2015			2014			2016			2015			2014
Service cost	$	0		$	0		$	0		$	37		$	38		$	34
Interest cost		26			36			73			62			57			57
Expected return on plan assets		(26	)		(45	)		(88	)		0			0			0
Amortization of prior service cost		0			0			0			(31	)		(31	)		(31	)
Recognized net actuarial loss		9			11			19			0			0			0
Loss on settlement		0			87			196			0			0			0
Total net periodic benefit cost	$	9		$	89		$	200		$	68		$	64		$	60

Schedule of Assumptions Used [Table Text Block]

	Pension									Postretirement
	2016			2015			2014			2016			2015			2014
Discount rate		4.30	%		3.75	%		4.50	%		4.25	%		4.00	%		4.00	%
Expected return on plan assets		5.00	%		5.31	%		5.31	%		N/A			N/A			N/A
Rate of compensation increase		N/A			N/A			N/A			N/A			N/A			N/A

	Pension						Postretirement
	2016			2015			2016			2015
Discount rate		4.05	%		4.30	%		4.25	%		4.25	%
Rate of compensation increase		N/A			N/A			N/A			N/A

Schedule of Expected Benefit Payments [Table Text Block]

(In Thousands)	Pension		Postretirement
2017	$	222	$	99
2018		15		103
2019		39		108
2020		12		114
2021		12		114
2022-2026		220		563

Schedule of Allocation of Plan Assets [Table Text Block]

	2016			2015
Mutual funds invested principally in:
Cash and cash equivalents		2	%		2	%
Debt securities		38	%		38	%
Equity securities		44	%		46	%
Alternative funds		16	%		14	%
Total		100	%		100	%

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

(In Thousands)	2016		2015		2014
Restricted stock	$	578	$	606	$	412
Stock options		0		0		153
Total	$	578	$	606	$	565

Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity [Table Text Block]

				Weighted
				Average
	Number			Grant Date
	of Shares			Fair Value
Outstanding, December 31, 2015		62,212		$	20.10
Granted		35,427		$	20.42
Vested		(30,846	)	$	19.90
Forfeited		(3,431	)	$	20.41
Outstanding, December 31, 2016		63,362		$	20.35

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

	2014
Volatility		39	%
Expected option lives (years)		8
Risk-free interest rate		2.85	%
Dividend yield		4.33	%

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

	2016					2015					2014
				Weighted					Weighted					Weighted
				Average					Average					Average
				Exercise					Exercise					Exercise
	Shares			Price		Shares			Price		Shares			Price
Outstanding, beginning of year		248,486		$	18.59		316,157		$	19.05		358,176		$	19.03
Granted		0					0					39,027		$	20.45
Exercised		(35,880	)	$	18.86		(29,557	)	$	17.56		(50,415	)	$	17.57
Forfeited		(10,569	)	$	18.03		(20,211	)	$	19.76		(16,424	)	$	20.03
Expired		0					(17,903	)	$	27.00		(14,207	)	$	26.59
Outstanding, end of year		202,037		$	18.58		248,486		$	18.59		316,157		$	19.05
Options exercisable at year-end		202,037		$	18.58		248,486		$	18.59		316,157		$	19.05
Weighted-average fair value of options granted					N/A					N/A				$	5.50
Weighted-average fair value of options forfeited				$	4.04				$	4.86				$	4.89

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Note 14 - Income Taxes (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

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

	December 31,		December 31,
(In Thousands)	2016		2015
Deferred tax assets:
Unrealized holding losses on securities	$	512	$	0
Net realized losses on securities		0		69
Allowance for loan losses		2,998		2,761
Other deferred tax assets		2,658		2,634
Total deferred tax assets		6,168		5,464
Deferred tax liabilities:
Unrealized holding gains on securities		0		1,342
Defined benefit plans - ASC 835		27		19
Bank premises and equipment		913		869
Core deposit intangibles		6		11
Other deferred tax liabilities		105		108
Total deferred tax liabilities		1,051		2,349
Deferred tax asset, net	$	5,117	$	3,115

Schedule of Components of Income Tax Expense (Benefit) [Table Text Block]

(In thousands)	2016			2015		2014
Currently payable	$	5,328		$	5,097	$	4,280
Tax expense resulting from allocations of certain tax benefits to equity or as a reduction in other assets		175			161		158
Deferred		(156	)		79		1,254
Total provision	$	5,347		$	5,337	$	5,692

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

(Amounts in thousands)	2016						2015						2014
	Amount			%			Amount			%			Amount			%
Expected provision	$	7,388			35.00		$	7,633			35.00		$	7,972			35.00
Tax-exempt interest income		(1,801	)		(8.53	)		(1,914	)		(8.78	)		(1,982	)		(8.70	)
Nondeductible interest expense		40			0.19			51			0.23			56			0.25
Dividends received deduction		(22	)		(0.10	)		(75	)		(0.34	)		(79	)		(0.35	)
Increase in cash surrender value of life insurance		(134	)		(0.63	)		(135	)		(0.62	)		(132	)		(0.58	)
Employee stock option compensation		0			0.00			0			0.00			41			0.18
Tax benefit from limited partnership investment		(76	)		(0.36	)		(80	)		(0.37	)		(83	)		(0.36	)
Other, net		(48	)		(0.23	)		(143	)		(0.66	)		(101	)		(0.44	)
Effective income tax provision	$	5,347			25.33		$	5,337			24.47		$	5,692			24.99

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Note 15 - Related Party Transactions (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Related Party Transactions [Table Text Block]

(In Thousands)	Beginning		New					Other			Ending
	Balance		Loans		Repayments			Changes			Balance
12 directors, 7 executive officers 2016	$	10,246	$	307	$	(1,160	)	$	2,021		$	11,414
11 directors, 7 executive officers 2015		12,023		52		(808	)		(1,021	)		10,246
12 directors, 8 executive officers 2014		12,547		188		(1,358	)		646			12,023

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Note 16 - Off-balance Sheet Risk (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedules of Concentration of Risk, by Risk Factor [Table Text Block]

(In Thousands)	2016		2015
Commitments to extend credit	$	180,768	$	156,407
Standby letters of credit		9,025		13,340

Standby Letters of Credit [Member]

Notes Tables

Schedules of Concentration of Risk, by Risk Factor [Table Text Block]

Year of Expiration	(In Thousands)
2017	$	7,612
2018		387
2019		193
2020		64
2021		0
Thereafter		769
Total	$	9,025

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Note 18 - Regulatory Matters (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Schedule of Compliance with Regulatory Capital Requirements under Banking Regulations [Table Text Block]

(Dollars in Thousands)	Actual					Minimum Capital Requirement					Minimum To Maintain Capital Conservation Buffer at Reporting Date				Minimum To Be Well Capitalized Under Prompt Corrective Action Provisions				Minimum To Meet the Corporation's Policy Thresholds
	Amount		Ratio			Amount		Ratio			Amount Ratio				Amount Ratio				Amount Ratio
December 31 , 2016:
Total capital to risk-weighted assets:
Consolidated	$	183,597		23.60	%	$	62,245		> 8	%	$	67,108	> 8.625	%	$	77,806	> 10	%	$	81,697	> 10.5	%
C&N Bank		162,705		21.03	%		61,894		> 8	%		66,730	> 8.625	%		77,368	> 10	%		81,236	> 10.5	%
Tier 1 capital to risk-weighted assets:
Consolidated		174,928		22.48	%		31,122		> 6	%		51,547	> 6.625	%		62,245	> 8	%		66,135	> 8.5	%
C&N Bank		154,036		19.91	%		30,947		> 6	%		51,256	> 6.625	%		61,894	> 8	%		65,762	> 8.5	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		174,928		22.48	%		31,122		> 4.5	%		39,876	> 5.125	%		50,574	> 6.5	%		54,464	> 7	%
C&N Bank		154,036		19.91	%		30,947		> 4.5	%		39,651	> 5.125	%		50,289	> 6.5	%		54,157	> 7	%
Tier 1 capital to average assets:
Consolidated		174,928		14.27	%		49,026		> 4	%		N/A	N/A			61,282	> 5	%		61,282	> 5	%
C&N Bank		154,036		12.73	%		48,404		> 4	%		N/A	N/A			60,506	> 5	%		60,506	> 5	%
December 31, 2015:
Total capital to risk-weighted assets:
Consolidated	$	181,216		24.40	%	$	59,424		> 8	%		N/A	N/A		$	74,281	> 10	%	$	77,995	> 10.5	%
C&N Bank		161,187		21.83	%		59,058		> 8	%		N/A	N/A			73,823	> 10	%		77,514	> 10.5	%
Tier 1 capital to risk-weighted assets:
Consolidated		173,009		23.29	%		29,712		> 6	%		N/A	N/A			59,424	> 8	%		63,139	> 8.5	%
C&N Bank		153,298		20.77	%		29,529		> 6	%		N/A	N/A			59,058	> 8	%		62,749	> 8.5	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		173,009		23.29	%		29,712		> 4.5	%		N/A	N/A			48,282	> 6.5	%		51,996	> 7	%
C&N Bank		153,298		20.77	%		29,529		> 4.5	%		N/A	N/A			47,985	> 6.5	%		51,676	> 7	%
Tier 1 capital to average assets:
Consolidated		173,009		14.31	%		48,355		> 4	%		N/A	N/A			60,444	> 5	%		60,444	> 5	%
C&N Bank		153,298		12.81	%		47,861		> 4	%		N/A	N/A			59,826	> 5	%		59,826	> 5	%

Regulatory Capital Requirements Under Banking Regulations Transition Schedule for New Ratios [Table Text Block]

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

Regulatory Capital Requirements Payout Restrictions Based on Capital Conservation Buffer [Table Text Block]

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

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Note 19 - Parent Company Only (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Condensed Balance Sheet [Table Text Block]

CONDENSED BALANCE SHEET	December 31,
(In Thousands)	2016		2015
ASSETS
Cash	$	6,033	$	5,847
Investment in subsidiaries:
Citizens & Northern Bank		165,397		167,277
Citizens & Northern Investment Corporation		11,168		10,966
Bucktail Life Insurance Company		3,419		3,392
Other assets		4		24
TOTAL ASSETS	$	186,021	$	187,506
LIABILITIES AND STOCKHOLDERS' EQUITY
Other liabilities	$	13	$	19
Stockholders' equity		186,008		187,487
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	186,021	$	187,506

Condensed Income Statement [Table Text Block]

CONDENSED INCOME STATEMENT
(In Thousands)	2016			2015			2014
Dividends from Citizens & Northern Bank	$	14,960		$	11,569		$	22,608
Expenses		(367	)		(234	)		(112	)
Income before equity in undistributed income of subsidiaries		14,593			11,335			22,496
Equity in undistributed income of subsidiaries		1,169			5,136			(5,410	)
NET INCOME	$	15,762		$	16,471		$	17,086

Condensed Cash Flow Statement [Table Text Block]

CONDENSED STATEMENT OF CASH FLOWS
(In Thousands)
	2016			2015			2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	15,762		$	16,471		$	17,086
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income of subsidiaries		(1,169	)		(5,136	)		5,410
Decrease (increase) in other assets		20			12			(36	)
(Decrease) increase in other liabilities		(6	)		12			1
Net Cash Provided by Operating Activities		14,607			11,359			22,461
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of treasury stock		263			381			123
Tax benefit from compensation plans, net		151			143			137
Purchase of treasury stock		(3,723	)		(4,415	)		(4,002	)
Dividends paid		(11,112	)		(11,245	)		(11,392	)
Net Cash Used in Financing Activities		(14,421	)		(15,136	)		(15,134	)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		186			(3,777	)		7,327
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		5,847			9,624			2,297
CASH AND CASH EQUIVALENTS, END OF YEAR	$	6,033		$	5,847		$	9,624

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Note 20 - Summary of Quarterly Consolidated Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2016

Notes Tables

Quarterly Financial Information [Table Text Block]

(In Thousands Except Per Share Data) (Unaudited)
	2016 Quarter Ended
	Mar. 31,		June 30,		Sept. 30,		Dec. 31,
Interest income	$	10,937	$	10,924	$	11,131	$	11,106
Interest expense		904		925		944		920
Net interest income		10,033		9,999		10,187		10,186
Provision (credit) for loan losses		368		318		538		(3	)
Net interest income after provision (credit) for loan losses		9,665		9,681		9,649		10,189
Other income		3,690		3,906		3,884		4,031
Net gains on available-for-sale securities		383		122		584		69
Other expenses		9,072		8,535		8,579		8,558
Income before income tax provision		4,666		5,174		5,538		5,731
Income tax provision		1,093		1,303		1,451		1,500
Net income	$	3,573	$	3,871	$	4,087	$	4,231
Net income per share – basic	$	0.29	$	0.32	$	0.34	$	0.35
Net income per share – diluted	$	0.29	$	0.32	$	0.34	$	0.35

	2015 Quarter Ended
	Mar. 31,		June 30,		Sept. 30,		Dec. 31,
Interest income	$	11,163	$	11,186	$	11,134	$	11,036
Interest expense		1,213		1,176		1,126		1,087
Net interest income		9,950		10,010		10,008		9,949
Provision for loan losses		3		221		302		319
Net interest income after provision for loan losses		9,947		9,789		9,706		9,630
Other income		3,556		3,962		3,961		3,999
Net gains on available-for-sale securities		74		932		79		1,776
Loss on prepayment of borrowings		0		910		0		1,663
Other expenses		8,533		7,964		8,117		8,416
Income before income tax provision		5,044		5,809		5,629		5,326
Income tax provision		1,229		1,452		1,395		1,261
Net income	$	3,815	$	4,357	$	4,234	$	4,065
Net income per share – basic	$	0.31	$	0.36	$	0.35	$	0.33
Net income per share – diluted	$	0.31	$	0.36	$	0.35	$	0.33

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Note 1 - Nature of Operations and Summary of Significant Accounting Policies (Details Textual) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)
Number of Reportable Segments	1
Financing Receivable, Allowance for Credit Losses	$ 8,473	$ 7,889	$ 7,336	$ 8,663
Loans Receivable Secured by Real Estate Percentage	57.00%
Unrecognized Tax Benefits, Interest on Income Taxes Accrued	$ 0
Unfunded Loan Commitment [Member]
Financing Receivable, Allowance for Credit Losses	$ 0	$ 0

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Note 3 - Comprehensive Income - Components of Other Comprehensive Income (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Unrealized holding (losses) gains on available-for-sale securities	$ (4,138)	$ (1,429)	$ 10,774
Unrealized holding gains (losses) on available-for-sale securities, income tax effect	1,448	500	(3,771)
Unrealized holding (income) losses on available-for-sale securities, net of tax amount	(2,690)	(929)	7,003
Reclassification adjustment for (gains) realized in income, before tax amount	(1,158)	(2,861)	(1,104)
Reclassification adjustment for (gains) realized in income, income tax effect	406	1,002	386
Reclassification adjustment for (gains) realized in income, net of tax amount	(752)	(1,859)	(718)
Other comprehensive income (loss) on available-for-sale securities, before tax amount	(5,296)	(4,290)	9,670
Other comprehensive income (loss) on available-for-sale securities, income tax effect	1,854	1,502	(3,385)
Other comprehensive loss on available-for-sale securities, net of tax amount	(3,442)	(2,788)	6,285
Changes from plan amendments and actuarial gains and losses included in accumulated other comprehensive gain (loss)	46	(135)	(79)
Changes from plan amendments and actuarial gains and losses included in other comprehensive income, income tax effect	(16)	47	28
Changes from plan amendments and actuarial gains and losses included in other comprehensive income, net of tax amount	30	(88)	(51)
Amortization of net transition obligation, prior service cost and net actuarial gain included in net periodic benefit cost, before tax amount	(22)	67	184
Amortization of net transition obligation, prior service cost and net actuarial gain included in net periodic benefit cost, income tax effect	8	(23)	(65)
Amortization of net transition obligation, prior service cost and net actuarial gain included in net periodic benefit cost, net of tax amount	(14)	44	119
Other comprehensive (income) loss on unfunded retirement obligations, before tax amount	24	(68)	105
Other comprehensive income (loss) on unfunded retirement obligations, income tax effect	(8)	24	(37)
Other comprehensive income (loss) on unfunded retirement obligations, net of tax amount	16	(44)	68
Total other comprehensive income (loss), before tax amount	(5,272)	(4,358)	9,775
Total other comprehensive income (loss), income tax effect	1,846	1,526	(3,422)
Net other comprehensive (loss) income	(3,426)	(2,832)	6,353
Reclassification adjustment for (gains) realized in income, income tax effect	$ 406	$ 1,002	$ 386

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Note 3 - Comprehensive Income - Changes in the Components of Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Balance, beginning of period	$ 2,528
Net other comprehensive (loss) income	(3,426)	$ (2,832)	$ 6,353
Balance, end of period	(898)	2,528
Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Balance, beginning of period	2,493	5,281	(1,004)
Other comprehensive income (loss) before reclassifications	(2,690)	(929)	7,003
Amounts reclassified from accumulated other comprehensive (loss) income	(752)	(1,859)	(718)
Net other comprehensive (loss) income	(3,442)	(2,788)	6,285
Balance, end of period	(949)	2,493	5,281
Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Balance, beginning of period	35	79	11
Other comprehensive income (loss) before reclassifications	30	(88)	(51)
Amounts reclassified from accumulated other comprehensive (loss) income	(14)	44	119
Net other comprehensive (loss) income	16	(44)	68
Balance, end of period	51	35	79
AOCI Attributable to Parent [Member]
Balance, beginning of period	2,528	5,360	(993)
Other comprehensive income (loss) before reclassifications	(2,660)	(1,017)	6,952
Amounts reclassified from accumulated other comprehensive (loss) income	(766)	(1,815)	(599)
Net other comprehensive (loss) income	(3,426)	(2,832)	6,353
Balance, end of period	$ (898)	$ 2,528	$ 5,360

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Note 3 - Comprehensive Income - Amounts Reclassified Out of Each Component of OCI (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Unrealized gains and losses on available-for-sale securities									$ (1,158)	$ (2,861)	$ (1,104)
Income tax provision									5,347	5,337	5,692
Net income	$ (4,231)	$ (4,087)	$ (3,871)	$ (3,573)	$ (4,065)	$ (4,234)	$ (4,357)	$ (3,815)	(15,762)	(16,471)	(17,086)
Total before tax	$ (5,731)	$ (5,538)	$ (5,174)	$ (4,666)	$ (5,326)	$ (5,629)	$ (5,809)	$ (5,044)	(21,109)	(21,808)	(22,778)
Reclassification out of Accumulated Other Comprehensive Income [Member]
Net income									(766)	(1,815)	(599)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Net Investment Gain (Loss) Attributable to Parent [Member]
Unrealized gains and losses on available-for-sale securities									(1,158)	(2,861)	(1,104)
Income tax provision									406	1,002	386
Net income									(752)	(1,859)	(718)
Reclassification out of Accumulated Other Comprehensive Income [Member] | Accumulated Defined Benefit Plans Adjustment Attributable to Parent [Member]
Income tax provision									8	(23)	(65)
Net income									(14)	44	119
Prior service cost									(31)	(31)	(31)
Actuarial loss									9	11	19
Total before tax									$ (22)	67	184
Loss on settlement										$ 87	$ 196

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Note 4 - Per Share Data (Details Textual) - shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Employee Stock Option [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	31,153	61,590	151,310

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Note 4 - Per Share Data - Net Income Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Net income	$ 4,231	$ 4,087	$ 3,871	$ 3,573	$ 4,065	$ 4,234	$ 4,357	$ 3,815	$ 15,762	$ 16,471	$ 17,086
Weighted average common shares – basic (in shares)									12,098,129	12,211,941	12,390,067
Earnings per share – basic (in dollars per share)	$ 0.35	$ 0.34	$ 0.32	$ 0.29	$ 0.33	$ 0.35	$ 0.36	$ 0.31	$ 1.30	$ 1.35	$ 1.38
Weighted average common shares, exercise of outstanding stock options (in shares)									215,581	210,402	224,015
Weighted average common shares, hypothetical share repurchase (in shares)									(185,346)	(188,570)	(202,032)
Weighted average common shares – diluted (in shares)									12,128,364	12,233,773	12,412,050
Earnings per share – diluted (in dollars per share)									$ 1.30	$ 1.35	$ 1.38

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Note 4 - Per Share Data - Net Income Per Share (Details) (Parentheticals) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Hypothetical share repurchase price (in dollars per share)	$ 21.23	$ 20.04	$ 19.41

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Note 5 - Cash and Due From Banks (Details Textual) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Restricted Cash and Cash Equivalents, Current	$ 16,654,000	$ 15,327,000

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Note 5 - Cash and Due Fom Banks - Summary of Cash and Due From Banks (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Cash and cash equivalents	$ 28,621	$ 33,313
Certificates of deposit	3,488	2,748
Total cash and due from banks	$ 32,109	$ 36,061

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Note 6 - Fair Value Measurements and Fair Values of Financial Instruments - Assets Measured at Fair Value (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Available-for-sale securities	$ 395,077	$ 420,290
Impaired loans with a valuation allowance	3,372	1,933
Valuation allowance	(674)	(820)
Impaired loans, net	3,372	1,933
US Government Agencies Debt Securities [Member]
Available-for-sale securities	9,541	10,483
Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities	119,037	107,757
Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities	30,297	34,597
Residential Pass-Through Securities [Member]
Available-for-sale securities	58,404	73,343
Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities	146,608	191,715
Commercial Mortgage Backed Securities [Member]
Available-for-sale securities	30,219
Collateralized Debt Obligations [Member]
Available-for-sale securities		9
Debt Securities [Member]
Available-for-sale securities	394,106	417,904
Equity Securities [Member]
Available-for-sale securities	971	2,386
Fair Value, Measurements, Recurring [Member]
Available-for-sale securities	395,077	420,290
Servicing rights	1,262	1,296
Total asset fair value measurements	396,339	421,586
Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member]
Available-for-sale securities	9,541	10,483
Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities	119,037	107,757
Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities	30,297	34,597
Fair Value, Measurements, Recurring [Member] | Residential Pass-Through Securities [Member]
Available-for-sale securities	58,404	73,343
Fair Value, Measurements, Recurring [Member] | Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities	146,608	191,715
Fair Value, Measurements, Recurring [Member] | Commercial Mortgage Backed Securities [Member]
Available-for-sale securities	30,219
Fair Value, Measurements, Recurring [Member] | Collateralized Debt Obligations [Member]
Available-for-sale securities		9
Fair Value, Measurements, Recurring [Member] | Debt Securities [Member]
Available-for-sale securities	394,106	417,904
Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
Available-for-sale securities	971	2,386
Fair Value, Measurements, Nonrecurring [Member]
Total asset fair value measurements	4,878	2,373
Impaired loans with a valuation allowance	3,372	1,933
Valuation allowance	(674)	(820)
Impaired loans, net	2,698	1,113
Foreclosed assets held for sale	2,180	1,260
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Available-for-sale securities	971	2,386
Servicing rights	0	0
Total asset fair value measurements	971	2,386
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Residential Pass-Through Securities [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Commercial Mortgage Backed Securities [Member]
Available-for-sale securities	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Collateralized Debt Obligations [Member]
Available-for-sale securities		0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Debt Securities [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
Available-for-sale securities	971	2,386
Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Total asset fair value measurements	0	0
Impaired loans with a valuation allowance	0	0
Valuation allowance	0	0
Impaired loans, net	0	0
Foreclosed assets held for sale	0	0
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Available-for-sale securities	394,106	417,904
Servicing rights	0	0
Total asset fair value measurements	394,106	417,904
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member]
Available-for-sale securities	9,541	10,483
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities	119,037	107,757
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities	30,297	34,597
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Residential Pass-Through Securities [Member]
Available-for-sale securities	58,404	73,343
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities	146,608	191,715
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Commercial Mortgage Backed Securities [Member]
Available-for-sale securities	30,219
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Collateralized Debt Obligations [Member]
Available-for-sale securities		9
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Debt Securities [Member]
Available-for-sale securities	394,106	417,904
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 2 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Total asset fair value measurements	0	0
Impaired loans with a valuation allowance	0	0
Valuation allowance	0	0
Impaired loans, net	0	0
Foreclosed assets held for sale	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Available-for-sale securities	0	0
Servicing rights	1,262	1,296
Total asset fair value measurements	1,262	1,296
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | US Government Agencies Debt Securities [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Residential Pass-Through Securities [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Commercial Mortgage Backed Securities [Member]
Available-for-sale securities	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Collateralized Debt Obligations [Member]
Available-for-sale securities		0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Debt Securities [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Recurring [Member] | Equity Securities [Member]
Available-for-sale securities	0	0
Fair Value, Inputs, Level 3 [Member] | Fair Value, Measurements, Nonrecurring [Member]
Total asset fair value measurements	4,878	2,373
Impaired loans with a valuation allowance	3,372	1,933
Valuation allowance	(674)	(820)
Impaired loans, net	2,698	1,113
Foreclosed assets held for sale	$ 2,180	$ 1,260

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Note 6 - Fair Value Measurements and Fair Values of Financial Instruments - Valuation Techniques and the Unobservable Inputs Used in Determining Fair Value - Recurring Basis (Details) - Servicing Rights Assets [Member] - Income Approach Valuation Technique [Member] - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Fair value	$ 1,262,000	$ 1,296,000
Discount rate	13.00%	10.00%
Weighted-average PSA	138.00%	146.00%
Servicing fees of loan balances	0.25%	0.25%
Servicing fees of payments are late	4.00%	4.00%
Late fees assessed	5.00%	5.00%
Miscellaneous fees per account per month	$ 1.94	$ 1.94
Monthly servicing cost per account	6	6
Additional monthly servicing cost per loan on loans more than 30 days delinquent	$ 24	$ 24
Servicing costs of loans more than 30 days delinquent	1.50%	1.50%
Annual increase in servicing costs	3.00%	3.00%

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Note 6 - 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	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Balance, beginning of period	$ 1,296	$ 1,281	$ 1,123
Issuances of servicing rights	248	177	185
Unrealized losses included in earnings	(282)	(162)	(27)
Balance, end of period	$ 1,262	$ 1,296	$ 1,281

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Note 6 - 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	Dec. 31, 2016	Dec. 31, 2015
Recorded investment - with allowance	$ 3,372	$ 1,933
Valuation allowance	674	820
Residential Portfolio Segment [Member]
Foreclosed residential real estate	1,102	555
Foreclosed assets held for sale	1,102	555
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Recorded investment - with allowance	2,773	317
Valuation allowance	528	97
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Recorded investment - with allowance	95	75
Valuation allowance	95	75
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Recorded investment - with allowance	504	512
Valuation allowance	51	52
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Recorded investment - with allowance	0	987
Valuation allowance	0	595
Impaired Loans [Member]
Recorded investment - with allowance	3,372	1,933
Valuation allowance	674	820
Fair value	2,698	1,113
Impaired Loans [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Market Approach Valuation Technique [Member]
Recorded investment - with allowance		42
Valuation allowance		1
Fair value		$ 41
Discount rate		31.00%
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Market Approach Valuation Technique [Member]
Recorded investment - with allowance	2,773	$ 317
Valuation allowance	528	97
Fair value	$ 2,245	$ 220
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	7.00%	46.00%
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Market Approach Valuation Technique [Member]
Recorded investment - with allowance	$ 95	$ 75
Valuation allowance	95	75
Fair value	$ 0	$ 0
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	100.00%	31.00%
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Market Approach Valuation Technique [Member]
Recorded investment - with allowance	$ 504	$ 512
Valuation allowance	51	52
Fair value	$ 453	$ 460
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	55.00%	49.00%
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member] | Market Approach Valuation Technique [Member]
Recorded investment - with allowance		$ 987
Valuation allowance		595
Fair value		$ 392
Impaired Loans [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate		41.00%
Foreclosed Assets Held For Sale [Member]
Fair value	$ 2,180	$ 1,260
Foreclosed residential real estate	2,180	1,260
Valuation allowance	0	0
Foreclosed assets held for sale	2,180	1,260
Foreclosed Assets Held For Sale [Member] | Land Receivable [Member] | Market Approach Valuation Technique [Member]
Fair value	650	704
Foreclosed residential real estate	650	704
Valuation allowance	0	0
Foreclosed assets held for sale	$ 650	$ 704
Foreclosed Assets Held For Sale [Member] | Land Receivable [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	33.00%	29.00%
Foreclosed Assets Held For Sale [Member] | Commercial Real Estate Receivables [Member] | Market Approach Valuation Technique [Member]
Fair value	$ 428
Foreclosed residential real estate	428
Valuation allowance	0
Foreclosed assets held for sale	$ 428
Foreclosed Assets Held For Sale [Member] | Commercial Real Estate Receivables [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	50.00%
Foreclosed Assets Held For Sale [Member] | Residential Portfolio Segment [Member] | Market Approach Valuation Technique [Member]
Fair value	$ 1,102	$ 556
Foreclosed residential real estate	1,102	556
Valuation allowance	0	0
Foreclosed assets held for sale	$ 1,102	$ 556
Foreclosed Assets Held For Sale [Member] | Residential Portfolio Segment [Member] | Market Approach Valuation Technique [Member] | Weighted Average [Member]
Discount rate	35.00%	32.00%

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Note 6 - Fair Value Measurements and Fair Values of Financial Instruments - Estimated Fair Values, and Related Carrying Amounts, of the Financial Instruments (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Cash and cash equivalents	$ 28,621	$ 33,313	$ 31,619	$ 38,591
Certificates of deposit	3,488	2,748
Available-for-sale securities	395,077	420,290
Loans held for sale	142	280
Loans, net	743,362	696,991
Accrued interest receivable	3,963	3,768
Time deposits	212,218
Short-term Debt	26,175	53,496
Long-term borrowings	38,454	38,767
Reported Value Measurement [Member]
Available-for-sale securities	395,077	420,290
Reported Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents	28,621	33,313
Reported Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Certificates of deposit	3,488	2,748
Restricted equity securities (included in Other Assets)	4,426	4,657
Loans held for sale	142	280
Accrued interest receivable	3,963	3,768
Deposits with no stated maturity	771,625	713,931
Time deposits	212,218	221,684
Short-term Debt	26,175	53,496
Long-term borrowings	38,454	38,767
Accrued interest payable	65	70
Reported Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Loans, net	743,362	696,991
Servicing rights	1,262	1,296
Estimate of Fair Value Measurement [Member]
Available-for-sale securities	395,077	420,290
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 1 [Member]
Cash and cash equivalents	28,621	33,313
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 2 [Member]
Certificates of deposit	3,481	2,752
Restricted equity securities (included in Other Assets)	4,426	4,657
Loans held for sale	142	280
Accrued interest receivable	3,963	3,768
Deposits with no stated maturity	771,625	713,931
Time deposits	212,274	221,891
Short-term borrowings	26,024	53,398
Long-term borrowings	39,062	40,166
Accrued interest payable	65	70
Estimate of Fair Value Measurement [Member] | Fair Value, Inputs, Level 3 [Member]
Loans, net	725,787	685,552
Servicing rights	$ 1,262	$ 1,296

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Note 7 - Securities (Details Textual)	12 Months Ended
	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Available-for-sale Securities Pledged as Collateral	$ 230,803,000	$ 228,616,000
Other than Temporary Impairment Losses, Investments, Portion Recognized in Earnings, Net, Available-for-sale Securities	0	0	$ 0
Available-for-sale Securities, Gross Realized Gains	1,392,000	2,972,000	1,328,000
Other Assets [Member] | Federal Home Loan Bank of Pittsburgh [Member]
Federal Home Loan Bank Stock	$ 4,296,000	4,527,000
Mutual Fund [Member]
Available-for-sale, Securities in Unrealized Loss Positions, Qualitative Disclosure, Number of Positions	1
Other than Temporary Impairment Losses, Investments, Available-for-sale Securities	$ 0	0	0
Available-for-sale Equity Securities, Gross Unrealized Loss	29,000
Bank Stocks [Member]
Available-for-sale Securities, Gross Realized Gains	1,125,000	2,220,000	$ 363,000
FHLB Stock [Member] | Federal Home Loan Bank of Pittsburgh [Member]
Other than Temporary Impairment Losses, Investments	$ 0	$ 0

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Note 7 - Securities - Available-for-sale Securities (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Available-for-sale securities, amortized cost	$ 396,538	$ 416,455
Available-for-sale securities, gross unrealized holding gains	3,614	6,573
Available-for-sale securities, gross unrealized holding losses	(5,075)	(2,738)
Available-for-sale securities	395,077	420,290
US Government Agencies Debt Securities [Member]
Available-for-sale securities, amortized cost	9,671	10,663
Available-for-sale securities, gross unrealized holding gains	5	12
Available-for-sale securities, gross unrealized holding losses	(135)	(192)
Available-for-sale securities	9,541	10,483
Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities, amortized cost	118,140	103,414
Available-for-sale securities, gross unrealized holding gains	2,592	4,365
Available-for-sale securities, gross unrealized holding losses	(1,695)	(22)
Available-for-sale securities	119,037	107,757
Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities, amortized cost	30,073	34,317
Available-for-sale securities, gross unrealized holding gains	303	381
Available-for-sale securities, gross unrealized holding losses	(79)	(101)
Available-for-sale securities	30,297	34,597
Residential Pass-Through Securities [Member]
Available-for-sale securities, amortized cost	58,922	73,227
Available-for-sale securities, gross unrealized holding gains	306	486
Available-for-sale securities, gross unrealized holding losses	(824)	(370)
Available-for-sale securities	58,404	73,343
Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities, amortized cost	147,915	193,145
Available-for-sale securities, gross unrealized holding gains	408	623
Available-for-sale securities, gross unrealized holding losses	(1,715)	(2,053)
Available-for-sale securities	146,608	191,715
Commercial Mortgage Backed Securities [Member]
Available-for-sale securities, amortized cost	30,817
Available-for-sale securities, gross unrealized holding gains	0
Available-for-sale securities, gross unrealized holding losses	(598)
Available-for-sale securities	30,219
Collateralized Debt Obligations [Member]
Available-for-sale securities, amortized cost		9
Available-for-sale securities, gross unrealized holding gains		0
Available-for-sale securities, gross unrealized holding losses		0
Available-for-sale securities		9
Debt Securities [Member]
Available-for-sale securities, amortized cost	395,538	414,775
Available-for-sale securities, gross unrealized holding gains	3,614	5,867
Available-for-sale securities, gross unrealized holding losses	(5,046)	(2,738)
Available-for-sale securities	394,106	417,904
Equity Securities [Member]
Available-for-sale securities, amortized cost	1,000	1,680
Available-for-sale securities, gross unrealized holding gains	0	706
Available-for-sale securities, gross unrealized holding losses	(29)	0
Available-for-sale securities	$ 971	$ 2,386

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Note 7 - Securities - Available-for-sale Securities With Unrealized Loss Positions (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	$ 237,063	$ 142,924
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(4,465)	(1,022)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	17,351	63,752
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(610)	(1,716)
Available-for-sale securities with unrealized loss positions, fair value	254,414	206,676
Available-for-sale securities, with unrealized loss positions, unrealized losses	(5,075)	(2,738)
US Government Agencies Debt Securities [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	7,899	0
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(135)	0
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	0	7,850
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	0	(192)
Available-for-sale securities with unrealized loss positions, fair value	7,899	7,850
Available-for-sale securities, with unrealized loss positions, unrealized losses	(135)	(192)
Obligations of States and Political Subdivisions Tax Exempt [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	54,479	5,200
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(1,676)	(19)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	1,278	216
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(19)	(3)
Available-for-sale securities with unrealized loss positions, fair value	55,757	5,416
Available-for-sale securities, with unrealized loss positions, unrealized losses	(1,695)	(22)
Obligations of States and Political Subdivisions Taxable [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	9,594	10,605
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(79)	(60)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	0	2,910
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	0	(41)
Available-for-sale securities with unrealized loss positions, fair value	9,594	13,515
Available-for-sale securities, with unrealized loss positions, unrealized losses	(79)	(101)
Residential Pass-Through Securities [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	48,674	38,764
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(824)	(295)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	0	3,503
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	0	(75)
Available-for-sale securities with unrealized loss positions, fair value	48,674	42,267
Available-for-sale securities, with unrealized loss positions, unrealized losses	(824)	(370)
Residential Collateralized Mortgage Obligations [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	85,198	88,355
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(1,124)	(648)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	16,073	49,273
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(591)	(1,405)
Available-for-sale securities with unrealized loss positions, fair value	101,271	137,628
Available-for-sale securities, with unrealized loss positions, unrealized losses	(1,715)	$ (2,053)
Commercial Mortgage Backed Securities [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	30,219
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(598)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	0
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	0
Available-for-sale securities with unrealized loss positions, fair value	30,219
Available-for-sale securities, with unrealized loss positions, unrealized losses	(598)
Debt Securities [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	236,063
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(4,436)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	17,351
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(610)
Available-for-sale securities with unrealized loss positions, fair value	253,414
Available-for-sale securities, with unrealized loss positions, unrealized losses	(5,046)
Equity Securities [Member]
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	1,000
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(29)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	0
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	0
Available-for-sale securities with unrealized loss positions, fair value	1,000
Available-for-sale securities, with unrealized loss positions, unrealized losses	$ (29)

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Note 7 - Securities - Gross Realized Gains and Losses From Available-for-sale Securities (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Gross realized gains from sales									$ 1,392	$ 2,972	$ 1,328
Gross realized losses from sales									(234)	(111)	(224)
Net realized gains	$ 69	$ 584	$ 122	$ 383	$ 1,776	$ 79	$ 932	$ 74	1,158	2,861	1,104
Income tax provision related to net realized gains									$ 406	$ 1,002	$ 386

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Note 7 - Securities - Available-for-sale Debt Securities by Contractual Maturity (Details) $ in Thousands	Dec. 31, 2016 USD ($)
Due in one year or less	$ 18,678
Due in one year or less	18,832
Due from one year through five years	69,558
Due from one year through five years	70,657
Due from five years through ten years	44,527
Due from five years through ten years	43,979
Due after ten years	25,121
Due after ten years	25,407
Sub-total	157,884
Sub-total	158,875
Total	395,538
Total	394,106
Residential Pass-Through Securities [Member]
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, amortized cost	58,922
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, fair value	58,404
Residential Collateralized Mortgage Obligations [Member]
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, amortized cost	147,915
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, fair value	146,608
Commercial Mortgage-backed Securities [Member]
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, amortized cost	30,817
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, fair value	$ 30,219

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Note 8 - Loans (Details Textual)	1 Months Ended	12 Months Ended
	Jul. 31, 2016	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Loans and Leases Receivable, Impaired, Commitment to Lend		$ 0	$ 0
Financing Receivable, Modifications, Number of Contracts		5	4	9
Financing Receivable, Outstanding Contractual Balance		$ 6,529,000
Financing Receivable, Modifications, Recorded Investment		$ 4,786,000
Commercial Portfolio Segment [Member] | Reduction in Payment [Member]
Financing Receivable, Modifications, Number of Contracts		6
Financing Receivable Modification Reduced Payment Period	1 year	1 year 90 days
Financing Receivables, Impaired, Troubled Debt Restructuring, Write-down				$ 1,486,000
Minimum [Member]
Financing Receivable Individually Evaluated for Impairment Threshold With Extension of Credit		$ 200,000
Financing Receivable Individually Evaluated for Impairment Estimated Loss Trigger		100,000
Maximum [Member]
Financing Receivable Individually Evaluated for Impairment Threshold With Estimated Loss		$ 200,000
Loans Receivable 1 [Member] | Credit Availability Concentration Risk [Member]
Concentration Risk, Percentage		0.00%

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Note 8 - Loans - Loans Receivable (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Loans receivable	$ 751,835	$ 704,880
Less: allowance for loan losses	(8,473)	(7,889)
Loans, net	743,362	696,991
Residential Portfolio Segment [Member]
Loans receivable	420,773	386,090
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	334,102	304,783
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	23,706	21,146
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	38,057	39,040
Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	24,908	21,121
Commercial Portfolio Segment [Member]
Loans receivable	317,340	308,134
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	150,468	154,779
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	14,287	5,122
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	83,854	75,196
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	38,068	40,007
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	7,294	7,019
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	7,896	9,188
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	3,998	4,671
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	11,475	12,152
Consumer Portfolio Segment [Member]
Loans receivable	$ 13,722	$ 10,656

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Note 8 - Loans - Allowance for Loan Losses (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Allowance for loan losses				$ 7,889				$ 7,336	$ 7,889	$ 7,336	$ 8,663
Allowance for loan losses, charge-offs									(757)	(562)	(2,139)
Allowance for loan losses, recoveries									120	270	336
Allowance for loan losses, provision	$ (3)	$ 538	$ 318	368	$ 319	$ 302	$ 221	3	1,221	845	476
Allowance for loan losses	8,473				7,889				8,473	7,889	7,336
Residential Portfolio Segment [Member]
Allowance for loan losses				3,418				3,653	3,418	3,653	3,705
Allowance for loan losses, charge-offs									(73)	(217)	(327)
Allowance for loan losses, recoveries									3	1	25
Allowance for loan losses, provision									542	(19)	250
Allowance for loan losses	3,890				3,418				3,890	3,418	3,653
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Allowance for loan losses				2,645				2,941	2,645	2,941	2,974
Allowance for loan losses, charge-offs									(73)	(175)	(164)
Allowance for loan losses, recoveries									3	1	25
Allowance for loan losses, provision									458	(122)	106
Allowance for loan losses	3,033				2,645				3,033	2,645	2,941
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Allowance for loan losses				219				176	219	176	294
Allowance for loan losses, charge-offs									0	(42)	(101)
Allowance for loan losses, recoveries									0	0	0
Allowance for loan losses, provision									39	85	(17)
Allowance for loan losses	258				219				258	219	176
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Allowance for loan losses				347				322	347	322	269
Allowance for loan losses, charge-offs									0	0	(62)
Allowance for loan losses, recoveries									0	0	0
Allowance for loan losses, provision									3	25	115
Allowance for loan losses	350				347				350	347	322
Residential Portfolio Segment [Member] | Construction Loans [Member]
Allowance for loan losses				207				214	207	214	168
Allowance for loan losses, charge-offs									0	0	0
Allowance for loan losses, recoveries									0	0	0
Allowance for loan losses, provision									42	(7)	46
Allowance for loan losses	249				207				249	207	214
Commercial Portfolio Segment [Member]
Allowance for loan losses				3,922				3,143	3,922	3,143	4,367
Allowance for loan losses, charge-offs									(597)	(251)	(1,715)
Allowance for loan losses, recoveries									35	214	264
Allowance for loan losses, provision									687	816	227
Allowance for loan losses	4,047				3,922				4,047	3,922	3,143
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Allowance for loan losses				1,939				1,758	1,939	1,758	3,123
Allowance for loan losses, charge-offs									0	(115)	(1,521)
Allowance for loan losses, recoveries									2	208	250
Allowance for loan losses, provision									439	88	(94)
Allowance for loan losses	2,380				1,939				2,380	1,939	1,758
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Allowance for loan losses				58				283	58	283	267
Allowance for loan losses, charge-offs									0	(115)	(170)
Allowance for loan losses, recoveries									30	0	5
Allowance for loan losses, provision									74	(110)	181
Allowance for loan losses	162				58				162	58	283
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Allowance for loan losses				981				688	981	688	591
Allowance for loan losses, charge-offs									(2)	(21)	(24)
Allowance for loan losses, recoveries									3	6	9
Allowance for loan losses, provision									17	308	112
Allowance for loan losses	999				981				999	981	688
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Allowance for loan losses				0				0	0	0	0
Allowance for loan losses, charge-offs									0	0	0
Allowance for loan losses, recoveries									0	0	0
Allowance for loan losses, provision									0	0	0
Allowance for loan losses	0				0				0	0	0
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Allowance for loan losses				106				165	106	165	115
Allowance for loan losses, charge-offs									0	0	0
Allowance for loan losses, recoveries									0	0	0
Allowance for loan losses, provision									4	(59)	50
Allowance for loan losses	110				106				110	106	165
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Allowance for loan losses				675				87	675	87	103
Allowance for loan losses, charge-offs									(595)	0	0
Allowance for loan losses, recoveries									0	0	0
Allowance for loan losses, provision									161	588	(16)
Allowance for loan losses	241				675				241	675	87
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Allowance for loan losses				45				31	45	31	30
Allowance for loan losses, charge-offs									0	0	0
Allowance for loan losses, recoveries									0	0	0
Allowance for loan losses, provision									(5)	14	1
Allowance for loan losses	40				45				40	45	31
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Allowance for loan losses				118				131	118	131	138
Allowance for loan losses, charge-offs									0	0	0
Allowance for loan losses, recoveries									0	0	0
Allowance for loan losses, provision									(3)	(13)	(7)
Allowance for loan losses	115				118				115	118	131
Consumer Portfolio Segment [Member]
Allowance for loan losses				122				145	122	145	193
Allowance for loan losses, charge-offs									(87)	(94)	(97)
Allowance for loan losses, recoveries									82	55	47
Allowance for loan losses, provision									21	16	2
Allowance for loan losses	138				122				138	122	145
Unallocated Financing Receivables [Member]
Allowance for loan losses				$ 427				$ 395	427	395	398
Allowance for loan losses, charge-offs									0	0	0
Allowance for loan losses, recoveries									0	0	0
Allowance for loan losses, provision									(29)	32	(3)
Allowance for loan losses	$ 398				$ 427				$ 398	$ 427	$ 395

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Note 8 - Loans - Outstanding Loans by Risk Rating (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Loans receivable	$ 751,835	$ 704,880
Residential Portfolio Segment [Member]
Loans receivable	420,773	386,090
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	334,102	304,783
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	23,706	21,146
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	38,057	39,040
Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	24,908	21,121
Commercial Portfolio Segment [Member]
Loans receivable	317,340	308,134
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	150,468	154,779
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	14,287	5,122
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	83,854	75,196
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	38,068	40,007
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	7,294	7,019
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	7,896	9,188
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	3,998	4,671
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	11,475	12,152
Consumer Portfolio Segment [Member]
Loans receivable	13,722	10,656
Pass [Member]
Loans receivable	721,772	671,850
Pass [Member] | Residential Portfolio Segment [Member]
Loans receivable	409,831	375,035
Pass [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	324,377	295,302
Pass [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	23,274	20,558
Pass [Member] | Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	37,360	38,071
Pass [Member] | Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	24,820	21,104
Pass [Member] | Commercial Portfolio Segment [Member]
Loans receivable	298,395	286,325
Pass [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	139,358	140,381
Pass [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	14,136	4,957
Pass [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	79,202	71,225
Pass [Member] | Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	38,068	40,007
Pass [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	5,745	5,084
Pass [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	7,277	7,943
Pass [Member] | Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	3,208	4,655
Pass [Member] | Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	11,401	12,073
Pass [Member] | Consumer Portfolio Segment [Member]
Loans receivable	13,546	10,490
Special Mention [Member]
Loans receivable	8,134	9,684
Special Mention [Member] | Residential Portfolio Segment [Member]
Loans receivable	663	1,152
Special Mention [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	408	407
Special Mention [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	132	185
Special Mention [Member] | Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	123	543
Special Mention [Member] | Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	0	17
Special Mention [Member] | Commercial Portfolio Segment [Member]
Loans receivable	7,471	8,511
Special Mention [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	3,092	5,862
Special Mention [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	70	60
Special Mention [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	4,180	2,106
Special Mention [Member] | Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	0	0
Special Mention [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	129	483
Special Mention [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	0	0
Special Mention [Member] | Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	0	0
Special Mention [Member] | Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	0	0
Special Mention [Member] | Consumer Portfolio Segment [Member]
Loans receivable	0	21
Substandard [Member]
Loans receivable	21,843	23,131
Substandard [Member] | Residential Portfolio Segment [Member]
Loans receivable	10,220	9,836
Substandard [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	9,258	9,007
Substandard [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	300	403
Substandard [Member] | Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	574	426
Substandard [Member] | Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	88	0
Substandard [Member] | Commercial Portfolio Segment [Member]
Loans receivable	11,447	13,150
Substandard [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	8,018	8,536
Substandard [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	81	105
Substandard [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	461	1,737
Substandard [Member] | Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	0	0
Substandard [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	1,404	1,432
Substandard [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	619	1,245
Substandard [Member] | Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	790	16
Substandard [Member] | Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	74	79
Substandard [Member] | Consumer Portfolio Segment [Member]
Loans receivable	176	145
Doubtful [Member]
Loans receivable	86	215
Doubtful [Member] | Residential Portfolio Segment [Member]
Loans receivable	59	67
Doubtful [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable	59	67
Doubtful [Member] | Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable	0	0
Doubtful [Member] | Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable	0	0
Doubtful [Member] | Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member]
Loans receivable	27	148
Doubtful [Member] | Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable	11	128
Doubtful [Member] | Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable	16	20
Doubtful [Member] | Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable	0	0
Doubtful [Member] | Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable	0	0
Doubtful [Member] | Consumer Portfolio Segment [Member]
Loans receivable	$ 0	$ 0

XML

Note 8 - Loans - Loan Balances and Allowance for Loan Losses for Each Impairment Method (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Loans receivable: individually evaluated	$ 10,860	$ 9,974
Loans receivable: collectively evaluated	740,975	694,906
Loans receivable	751,835	704,880
Allowance for loan losses: individually evaluated	674	820
Allowance for loan losses: collectively evaluated	7,401	6,642
Allowance for loan losses	8,473	7,889	$ 7,336	$ 8,663
Residential Portfolio Segment [Member]
Loans receivable: individually evaluated	821	958
Loans receivable: collectively evaluated	419,952	385,132
Loans receivable	420,773	386,090
Allowance for loan losses: individually evaluated	0	1
Allowance for loan losses: collectively evaluated	3,890	3,417
Allowance for loan losses	3,890	3,418	3,653	3,705
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans receivable: individually evaluated	753	884
Loans receivable: collectively evaluated	333,349	303,899
Loans receivable	334,102	304,783
Allowance for loan losses: individually evaluated	0	1
Allowance for loan losses: collectively evaluated	3,033	2,644
Allowance for loan losses	3,033	2,645	2,941	2,974
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans receivable: individually evaluated	68	74
Loans receivable: collectively evaluated	23,638	21,072
Loans receivable	23,706	21,146
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	258	219
Allowance for loan losses	258	219	176	294
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	38,057	39,040
Loans receivable	38,057	39,040
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	350	347
Allowance for loan losses	350	347	322	269
Residential Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	24,908	21,121
Loans receivable	24,908	21,121
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	249	207
Allowance for loan losses	249	207	214	168
Commercial Portfolio Segment [Member]
Loans receivable: individually evaluated	10,016	9,016
Loans receivable: collectively evaluated	307,324	299,118
Loans receivable	317,340	308,134
Allowance for loan losses: individually evaluated	674	819
Allowance for loan losses: collectively evaluated	3,373	3,103
Allowance for loan losses	4,047	3,922	3,143	4,367
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans receivable: individually evaluated	8,005	6,262
Loans receivable: collectively evaluated	142,463	148,517
Loans receivable	150,468	154,779
Allowance for loan losses: individually evaluated	528	97
Allowance for loan losses: collectively evaluated	1,852	1,842
Allowance for loan losses	2,380	1,939	1,758	3,123
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	14,287	5,122
Loans receivable	14,287	5,122
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	162	58
Allowance for loan losses	162	58	283	267
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans receivable: individually evaluated	212	324
Loans receivable: collectively evaluated	83,642	74,872
Loans receivable	83,854	75,196
Allowance for loan losses: individually evaluated	95	75
Allowance for loan losses: collectively evaluated	904	906
Allowance for loan losses	999	981	688	591
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	38,068	40,007
Loans receivable	38,068	40,007
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	0	0
Allowance for loan losses	0	0	0	0
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans receivable: individually evaluated	1,394	1,427
Loans receivable: collectively evaluated	5,900	5,592
Loans receivable	7,294	7,019
Allowance for loan losses: individually evaluated	51	52
Allowance for loan losses: collectively evaluated	59	54
Allowance for loan losses	110	106	165	115
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans receivable: individually evaluated	392	987
Loans receivable: collectively evaluated	7,504	8,201
Loans receivable	7,896	9,188
Allowance for loan losses: individually evaluated	0	595
Allowance for loan losses: collectively evaluated	241	80
Allowance for loan losses	241	675	87	103
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans receivable: individually evaluated	13	16
Loans receivable: collectively evaluated	3,985	4,655
Loans receivable	3,998	4,671
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	40	45
Allowance for loan losses	40	45	31	30
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Loans receivable: individually evaluated	0	0
Loans receivable: collectively evaluated	11,475	12,152
Loans receivable	11,475	12,152
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	115	118
Allowance for loan losses	115	118	131	138
Consumer Portfolio Segment [Member]
Loans receivable: individually evaluated	23	0
Loans receivable: collectively evaluated	13,699	10,656
Loans receivable	13,722	10,656
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	138	122
Allowance for loan losses	138	122	145	193
Unallocated Financing Receivables [Member]
Allowance for loan losses	$ 398	$ 427	$ 395	$ 398

XML

Note 8 - Loans - Impaired Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Unpaid principal - with no allowance	$ 9,856	$ 9,676
Recorded investment - with no allowance	7,488	8,041
Unpaid principal - with allowance	3,372	1,933
Recorded investment - with allowance	3,372	1,933
Related allowance - with allowance	674	820
Total	13,228	11,609
Total	10,860	9,974
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Unpaid principal - with no allowance	783	842
Recorded investment - with no allowance	753	842
Unpaid principal - with allowance	0	42
Recorded investment - with allowance	0	42
Related allowance - with allowance	0	1
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Unpaid principal - with no allowance	68	74
Recorded investment - with no allowance	68	74
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Unpaid principal - with no allowance	6,975	7,580
Recorded investment - with no allowance	5,232	5,945
Unpaid principal - with allowance	2,773	317
Recorded investment - with allowance	2,773	317
Related allowance - with allowance	528	97
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Unpaid principal - with no allowance	117	249
Recorded investment - with no allowance	117	249
Unpaid principal - with allowance	95	75
Recorded investment - with allowance	95	75
Related allowance - with allowance	95	75
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Unpaid principal - with no allowance	890	915
Recorded investment - with no allowance	890	915
Unpaid principal - with allowance	504	512
Recorded investment - with allowance	504	512
Related allowance - with allowance	51	52
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Unpaid principal - with no allowance	987	0
Recorded investment - with no allowance	392	0
Unpaid principal - with allowance	0	987
Recorded investment - with allowance	0	987
Related allowance - with allowance	0	595
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Unpaid principal - with no allowance	13	16
Recorded investment - with no allowance	13	16
Consumer Portfolio Segment [Member]
Unpaid principal - with no allowance	23	0
Recorded investment - with no allowance	$ 23	$ 0

XML

Note 8 - Loans - Average Balance of Impaired Loans and Income Recognized on Impaired Loans (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Average investment in impaired loans	$ 10,185	$ 11,375	$ 14,359
Interest income recognized on impaired loans on a cash basis	657	596	703
Residential Portfolio Segment [Member]
Average investment in impaired loans	877	2,270	4,440
Interest income recognized on impaired loans on a cash basis	46	90	84
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Average investment in impaired loans	806	2,206	4,272
Interest income recognized on impaired loans on a cash basis	43	86	81
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Average investment in impaired loans	71	64	168
Interest income recognized on impaired loans on a cash basis	3	4	3
Commercial Portfolio Segment [Member]
Average investment in impaired loans	9,287	9,105	9,918
Interest income recognized on impaired loans on a cash basis	610	506	619
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Average investment in impaired loans	6,806	6,357	7,192
Interest income recognized on impaired loans on a cash basis	495	380	469
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Average investment in impaired loans	547	438	877
Interest income recognized on impaired loans on a cash basis	20	20	37
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Average investment in impaired loans	0	40	395
Interest income recognized on impaired loans on a cash basis	0	0	9
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Average investment in impaired loans	1,409	1,459	1,413
Interest income recognized on impaired loans on a cash basis	94	103	101
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Average investment in impaired loans	511	790	0
Interest income recognized on impaired loans on a cash basis	0	0	0
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Average investment in impaired loans	14	21	41
Interest income recognized on impaired loans on a cash basis	1	3	3
Consumer Portfolio Segment [Member]
Average investment in impaired loans	21	0	1
Interest income recognized on impaired loans on a cash basis	$ 1	$ 0	$ 0

XML

Note 8 - Loans - Nonaccrual Loans and Loans Past Due Ninety Days or More and Still Accruing (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Loans past due 90+ days and accruing	$ 6,838	$ 3,229
Nonaccrual loans	8,736	11,517
Residential Portfolio Segment [Member]
Loans past due 90+ days and accruing	3,456	2,590
Nonaccrual loans	3,781	3,044
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Loans past due 90+ days and accruing	3,022	2,381
Nonaccrual loans	3,770	3,044
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Loans past due 90+ days and accruing	114	79
Nonaccrual loans	0	0
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Loans past due 90+ days and accruing	320	130
Nonaccrual loans	11	0
Commercial Portfolio Segment [Member]
Loans past due 90+ days and accruing	3,279	568
Nonaccrual loans	4,935	8,473
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Loans past due 90+ days and accruing	2,774	503
Nonaccrual loans	3,080	5,730
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Loans past due 90+ days and accruing	286	65
Nonaccrual loans	119	313
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Loans past due 90+ days and accruing	219	0
Nonaccrual loans	1,331	1,427
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Loans past due 90+ days and accruing	0	0
Nonaccrual loans	392	987
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Loans past due 90+ days and accruing	0	0
Nonaccrual loans	13	16
Consumer Portfolio Segment [Member]
Loans past due 90+ days and accruing	103	71
Nonaccrual loans	$ 20	$ 0

XML

Note 8 - Loans - Contractual Aging of Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Troubled debt restructurings, current and past due less than 30 days	$ 732,725	$ 690,177
Loans receivable	751,835	704,880
Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	8,154	7,350
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	10,956	7,353
Residential Portfolio Segment [Member]
Troubled debt restructurings, current and past due less than 30 days	407,108	375,221
Loans receivable	420,773	386,090
Residential Portfolio Segment [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	7,494	6,736
Residential Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	6,171	4,133
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Troubled debt restructurings, current and past due less than 30 days	321,670	294,703
Loans receivable	334,102	304,783
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	6,695	6,156
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	5,737	3,924
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Troubled debt restructurings, current and past due less than 30 days	23,268	20,816
Loans receivable	23,706	21,146
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	324	251
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	114	79
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member]
Troubled debt restructurings, current and past due less than 30 days	37,603	38,581
Loans receivable	38,057	39,040
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	134	329
Residential Portfolio Segment [Member] | Home Equity Line of Credit 1 [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	320	130
Residential Portfolio Segment [Member] | Construction Loans [Member]
Troubled debt restructurings, current and past due less than 30 days	24,567	21,121
Loans receivable	24,908	21,121
Residential Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	341	0
Residential Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	0	0
Commercial Portfolio Segment [Member]
Troubled debt restructurings, current and past due less than 30 days	312,171	304,419
Loans receivable	317,340	308,134
Commercial Portfolio Segment [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	507	566
Commercial Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	4,662	3,149
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Troubled debt restructurings, current and past due less than 30 days	147,464	153,427
Loans receivable	150,468	154,779
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	82	108
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	2,922	1,244
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Troubled debt restructurings, current and past due less than 30 days	14,199	5,018
Loans receivable	14,287	5,122
Commercial Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	88	104
Commercial Portfolio Segment [Member] | Construction Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	0	0
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Troubled debt restructurings, current and past due less than 30 days	83,364	75,002
Loans receivable	83,854	75,196
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	185	118
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	305	76
Commercial Portfolio Segment [Member] | Political Subdivisions [Member]
Troubled debt restructurings, current and past due less than 30 days	38,068	40,007
Loans receivable	38,068	40,007
Commercial Portfolio Segment [Member] | Political Subdivisions [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	0	0
Commercial Portfolio Segment [Member] | Political Subdivisions [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	0	0
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Troubled debt restructurings, current and past due less than 30 days	6,181	5,970
Loans receivable	7,294	7,019
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	83	223
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	1,030	826
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member]
Troubled debt restructurings, current and past due less than 30 days	7,439	8,201
Loans receivable	7,896	9,188
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	65	0
Commercial Portfolio Segment [Member] | Multifamily 5 or More Residential [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	392	987
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Troubled debt restructurings, current and past due less than 30 days	3,981	4,642
Loans receivable	3,998	4,671
Commercial Portfolio Segment [Member] | Agricultural Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	4	13
Commercial Portfolio Segment [Member] | Agricultural Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	13	16
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member]
Troubled debt restructurings, current and past due less than 30 days	11,475	12,152
Loans receivable	11,475	12,152
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	0	0
Commercial Portfolio Segment [Member] | Other Commercial Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	0	0
Consumer Portfolio Segment [Member]
Troubled debt restructurings, current and past due less than 30 days	13,446	10,537
Loans receivable	13,722	10,656
Consumer Portfolio Segment [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	153	48
Consumer Portfolio Segment [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	$ 123	$ 71

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Note 8 - Loans - Contractual Aging of Nonaccrual Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Nonaccrual loans	$ 8,736	$ 11,517
Non accrual Loans [Member]
Loans current and past due, nonaccrual	4,199	7,100
Nonaccrual loans	8,736	11,517
Non accrual Loans [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Nonaccrual loans	419	293
Non accrual Loans [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Nonaccrual loans	$ 4,118	$ 4,124

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Note 8 - Loans - Aging of Troubled Debt Restructurings (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Troubled debt restructurings, current and past due less than 30 days	$ 732,725,000	$ 690,177,000
Nonaccrual loans	8,736,000	11,517,000
Troubled debt restructurings	4,786,000
Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	8,154,000	7,350,000
Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	10,956,000	7,353,000
Troubled Debt Restructuring [Member]
Troubled debt restructurings, current and past due less than 30 days	5,453,000	1,186,000
Nonaccrual loans	2,874,000	5,097,000
Troubled debt restructurings	8,677,000	6,364,000
Troubled Debt Restructuring [Member] | Financing Receivables 30 to 89 Days Past Due [Member]
Troubled debt restructurings, past due	350,000	0
Troubled Debt Restructuring [Member] | Financing Receivables, Equal to Greater than 90 Days Past Due [Member]
Troubled debt restructurings, past due	$ 0	$ 81,000

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Note 8 - Loans - Troubled Debt Restructurings (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Troubled debt restructurings, number of contracts	5	4	9
Troubled debt restructurings, post-modification recorded investment	$ 2,899	$ 360	$ 5,423
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member] | Extended Maturity and Contractual Interest Rate Reduction [Member]
Troubled debt restructurings, number of contracts	1	1	1
Troubled debt restructurings, post-modification recorded investment	$ 71	$ 56	$ 83
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member] | Extended Maturity with Reduced Monthly Payments [Member]
Troubled debt restructurings, number of contracts	1	0	0
Troubled debt restructurings, post-modification recorded investment	$ 26	$ 0	$ 0
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member] | Interest Payments Only for 1 Year [Member]
Troubled debt restructurings, number of contracts	0	0	1
Troubled debt restructurings, post-modification recorded investment	$ 0	$ 0	$ 34
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	1
Troubled debt restructurings, post-modification recorded investment	$ 0	$ 242	$ 33
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member] | Interest Rate and Monthly Payment Reduction [Member]
Troubled debt restructurings, number of contracts	0	1	0
Troubled debt restructurings, post-modification recorded investment	$ 0	$ 32	$ 0
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Interest Payments Only for 1 Year [Member]
Troubled debt restructurings, number of contracts	1	0	0
Troubled debt restructurings, post-modification recorded investment	$ 2,773	$ 0	$ 0
Commercial Portfolio Segment [Member] | Real Estate Loan [Member] | Monthly Payment Reduction [Member]
Troubled debt restructurings, number of contracts	0	0	5
Troubled debt restructurings, post-modification recorded investment	$ 0	$ 0	$ 5,193
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Monthly Payment Reduction [Member]
Troubled debt restructurings, number of contracts	0	0	1
Troubled debt restructurings, post-modification recorded investment	$ 0	$ 0	$ 80
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member] | Extended Maturity [Member]
Troubled debt restructurings, number of contracts	1	0	0
Troubled debt restructurings, post-modification recorded investment	$ 5	$ 0	$ 0
Consumer Portfolio Segment [Member] | Interest Rate and Monthly Payment Reduction [Member]
Troubled debt restructurings, number of contracts	0	1	0
Troubled debt restructurings, post-modification recorded investment	$ 0	$ 30	$ 0
Consumer Portfolio Segment [Member] | New Unsecured Loan after Short-fall from Sale of Property [Member]
Troubled debt restructurings, number of contracts	1	0	0
Troubled debt restructurings, post-modification recorded investment	$ 24	$ 0	$ 0

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Note 8 - Loans - Defaults on Loans with Previous Modifications (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)
Troubled debt restructuring defaults, number of contracts	5	1	11
Troubled debt restructuring defaults, recorded investment	$ 355	$ 32	$ 1,276
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Senior Lien [Member]
Troubled debt restructuring defaults, number of contracts	2	1	3
Troubled debt restructuring defaults, recorded investment	$ 294	$ 32	$ 257
Residential Portfolio Segment [Member] | Real Estate Loan [Member] | Junior Lien [Member]
Troubled debt restructuring defaults, number of contracts	1	0	1
Troubled debt restructuring defaults, recorded investment	$ 29	$ 0	$ 62
Commercial Portfolio Segment [Member] | Real Estate Loan [Member]
Troubled debt restructuring defaults, number of contracts	0	0	1
Troubled debt restructuring defaults, recorded investment	$ 0	$ 0	$ 429
Commercial Portfolio Segment [Member] | Commercial and Industrial [Member]
Troubled debt restructuring defaults, number of contracts	1	0	0
Troubled debt restructuring defaults, recorded investment	$ 5	$ 0	$ 0
Commercial Portfolio Segment [Member] | Construction Loans [Member]
Troubled debt restructuring defaults, number of contracts	0	0	1
Troubled debt restructuring defaults, recorded investment	$ 0	$ 0	$ 25
Commercial Portfolio Segment [Member] | Loans Secured by Farmland [Member]
Troubled debt restructuring defaults, number of contracts	0	0	4
Troubled debt restructuring defaults, recorded investment	$ 0	$ 0	$ 490
Commercial Portfolio Segment [Member] | Agricultural Loans [Member]
Troubled debt restructuring defaults, number of contracts	0	0	1
Troubled debt restructuring defaults, recorded investment	$ 0	$ 0	$ 13
Consumer Portfolio Segment [Member]
Troubled debt restructuring defaults, number of contracts	1	0	0
Troubled debt restructuring defaults, recorded investment	$ 27	$ 0	$ 0

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Note 8 - Loans - Foreclosed Residential Real Estate (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Residential Portfolio Segment [Member]
Foreclosed residential real estate	$ 1,102	$ 555

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Note 8 - Loans - Mortgage Loans in Process of Foreclosure (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Residential Portfolio Segment [Member]
Residential real estate in process of foreclosure	$ 2,738	$ 1,173

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Note 9 - Bank Premises and Equipment - Summary of Bank Premises and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Property, plant and equipment	$ 49,570	$ 48,075
Less: accumulated depreciation	(34,173)	(32,669)
Net	15,397	15,406
Land [Member]
Property, plant and equipment	2,818	2,818
Building and Building Improvements [Member]
Property, plant and equipment	27,619	27,092
Furniture and Fixtures [Member]
Property, plant and equipment	18,741	17,922
Construction in Progress [Member]
Property, plant and equipment	$ 392	$ 243

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Note 9 - Bank Premises and Equipment - Depreciation Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Depreciation expense	$ 1,589	$ 1,888	$ 1,940
Occupancy Expense [Member]
Depreciation expense	804	954	998
Furniture and Fixtures Expense [Member]
Depreciation expense	$ 785	$ 934	$ 942

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Note 10 - Intangible Assets (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Goodwill, Period Increase (Decrease)	$ 0	$ 0
Goodwill	11,942,000
Goodwill, Acquired During Period	0	0
Goodwill, Impairment Loss	0
Amortization of Intangible Assets	$ 13,000	$ 22,000	$ 35,000

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Note 10 - Intangible Assets - Core Deposit Intangibles (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Gross amount	$ 2,034	$ 2,034
Less: accumulated amortization	(2,017)	(2,004)
Net	$ 17	$ 30

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Note 11 - Deposits (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Interest Expense, Time Deposits, $100,000 or More	$ 524,000	$ 482,000	$ 563,000
Time Deposits, at or Above FDIC Insurance Limit	$ 7,929,000	$ 6,531,000

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Note 11 - Deposits - Scheduled Maturities of Time Deposits (Details) $ in Thousands	Dec. 31, 2016 USD ($)
2017	$ 113,974
2018	51,526
2019	25,302
2020	14,458
2021	6,710
Thereafter	248
Total	$ 212,218

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Note 11 - Deposits - Remaining Maturities of Time Deposits In Excess of $100,000 (Details) $ in Thousands	Dec. 31, 2016 USD ($)
Three months or less	$ 32,987
Over 3 months through 12 months	11,663
Over 1 year through 3 years	11,508
Over 3 years	7,605
Total	$ 63,763

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Note 12 - Borrowed Funds (Details Textual)	3 Months Ended				12 Months Ended
	Dec. 31, 2015 USD ($)	Sep. 30, 2015 USD ($)	Jun. 30, 2015 USD ($)	Mar. 31, 2015 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Jan. 01, 2016 USD ($)	Jan. 01, 2015 USD ($)
Short-term Debt, Weighted Average Interest Rate	0.60%				0.61%	0.60%
Line of Credit Facility, Maximum Month-end Outstanding Amount					$ 47,005,000	$ 53,496,000	$ 7,919,000
Available-for-sale Securities Pledged as Collateral	$ 228,616,000				230,803,000	228,616,000
Short-term Debt	53,496,000				26,175,000	53,496,000
Carrying Value of Securities Sold under Repurchase Agreements and Deposits Received for Securities Loaned	12,613,000				15,019,000	12,613,000
Gain (Loss) on Extinguishment of Debt	(1,663,000)	$ 0	$ (910,000)	$ 0	0	(2,573,000)	0
Repayments of Long-term Debt					313,000	36,866,000	$ 278,000
Securities Sold under Agreements to Repurchase, Asset	$ 33,780,000				$ 31,494,000	$ 33,780,000
Repurchase Agreements [Member]
Debt, Weighted Average Interest Rate	3.99%				3.60%	3.99%	4.02%
Short-term Debt, Average Outstanding Amount					$ 27,000,000	$ 54,304,000	$ 61,000,000
Repurchase Agreement Maturing in 2017 with a Rate of 3.595% [Member]
Debt Instrument, Interest Rate, Stated Percentage					3.595%
Repurchase Agreement Maturing in 2017 with a Rate of 4.265% [Member]
Gain (Loss) on Extinguishment of Debt						(2,573,000)
Repayments of Long-term Debt						$ 34,000,000
Prepaid Debt, Weighted Average Interest Rate	4.265%					4.265%
Maximum [Member]
Securities Sold under Agreements to Repurchase, Asset	$ 61,000,000				$ 27,000,000	$ 61,000,000	$ 61,000,000
Securities Sold under Agreements to Repurchase [Member]
Short-term Debt	$ 4,915,000				$ 5,175,000	$ 4,915,000
Debt, Weighted Average Interest Rate	0.10%				0.10%	0.10%
Federal Home Loan Bank of Pittsburgh [Member]
Line of Credit Facility, Maximum Borrowing Capacity	$ 322,709,000				$ 339,221,000	$ 322,709,000
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged	450,883,000				471,454,000	450,883,000
Line of Credit Facility, Remaining Borrowing Capacity	262,361,000				306,767,000	262,361,000
Short-term Debt	48,581,000				21,000,000	48,581,000
Federal Home Loan Bank of Pittsburgh [Member] | Overnight Borrowing [Member]
Short-term Debt	$ 23,500,000				$ 21,000,000	$ 23,500,000
Debt Instrument, Interest Rate, Stated Percentage	0.43%				0.74%	0.43%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Advances [Member]
Short-term Debt, Weighted Average Interest Rate	0.86%					0.86%
Short-term Debt	$ 48,581,000				$ 21,000,000	$ 48,581,000
Number of Short-term Advances	12					12
Short-term Borrowing, Amount of Each Borrowing	$ 2,090,000					$ 2,090,000
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Advances [Member] | Minimum [Member]
Debt Instrument, Interest Rate, Stated Percentage	0.54%					0.54%
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Advances [Member] | Maximum [Member]
Debt Instrument, Interest Rate, Stated Percentage	1.052%					1.052%
Federal Home Loan Bank of Pittsburgh [Member] | Other Assets [Member]
Federal Home Loan Bank Stock	$ 4,527,000				4,296,000	$ 4,527,000
Other Correspondent Banks [Member]
Line of Credit Facility, Maximum Borrowing Capacity	45,000,000				45,000,000	45,000,000
Long-term Line of Credit								$ 0	$ 0
Federal Reserve Bank of Philadelphia [Member]
Line of Credit Facility, Maximum Borrowing Capacity	19,606,000				15,636,000	19,606,000
Long-term Line of Credit	0				0	0
Available-for-sale Securities Pledged as Collateral	$ 20,039,000				$ 17,690,000	$ 20,039,000

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Note 12 - Borrowed Funds - Short-term Borrowings (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Short-term borrowings	$ 26,175,000	$ 53,496,000
Securities Sold under Agreements to Repurchase [Member]
Short-term borrowings	5,175,000	4,915,000
Federal Home Loan Bank of Pittsburgh [Member]
Short-term borrowings	21,000,000	48,581,000
Federal Home Loan Bank of Pittsburgh [Member] | Federal Home Loan Bank Advances [Member]
Short-term borrowings	21,000,000	48,581,000
Federal Home Loan Bank of Pittsburgh [Member] | Overnight Borrowing [Member]
Short-term borrowings	21,000,000	23,500,000
Federal Home Loan Bank of Pittsburgh [Member] | Other Short-term Debt [Member]
Short-term borrowings	$ 0	$ 25,081,000

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Note 12 - Borrowed Funds - Long-term Borrowings (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Long-term borrowings	$ 38,454	$ 38,767
Repurchase Agreements [Member]
Long-term borrowings	27,000	27,000
Federal Home Loan Bank Advances [Member]
Long-term borrowings	$ 11,454	$ 11,767

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Note 12 - Borrowed Funds - Long-term Borrowing Maturities (Details) - Federal Home Loan Bank of Pittsburgh [Member] - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Long-term borrowings from FHLB - Pittsburgh	$ 11,454	$ 11,767
Federal Home Loan Bank Borrowings Loan Maturing in 2016 with Rate of 6.86% [Member]
Long-term borrowings from FHLB - Pittsburgh	0	57
Federal Home Loan Bank Borrowings Loan Maturing in 2017 With Rate of 6.83% [Member]
Long-term borrowings from FHLB - Pittsburgh	4	10
Federal Home Loan Bank Borrowings Loan Maturing in 2017 with Rate of 3.81% [Member]
Long-term borrowings from FHLB - Pittsburgh	10,000	10,000
Federal Home Loan Bank Borrowings Loan Maturing in 2020 with Rate of 4.79% [Member]
Long-term borrowings from FHLB - Pittsburgh	646	821
Federal Home Loan Bank Borrowings Loan Maturing in 2025 with Rate of 4.91% [Member]
Long-term borrowings from FHLB - Pittsburgh	$ 804	$ 879

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Note 12 - Borrowed Funds - Long-term Borrowing Maturities (Details) (Parentheticals) - Federal Home Loan Bank of Pittsburgh [Member]	Dec. 31, 2016 Rate	Dec. 31, 2015 Rate
Federal Home Loan Bank Borrowings Loan Maturing in 2016 with Rate of 6.86% [Member]
Rate (Rate)	6.86%	6.86%
Federal Home Loan Bank Borrowings Loan Maturing in 2017 With Rate of 6.83% [Member]
Rate (Rate)	6.83%	6.83%
Federal Home Loan Bank Borrowings Loan Maturing in 2017 with Rate of 3.81% [Member]
Rate (Rate)	3.81%	3.81%
Federal Home Loan Bank Borrowings Loan Maturing in 2020 with Rate of 4.79% [Member]
Rate (Rate)	4.79%	4.79%
Federal Home Loan Bank Borrowings Loan Maturing in 2025 with Rate of 4.91% [Member]
Rate (Rate)	4.91%	4.91%

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Note 12 - Borrowed Funds - Underlying Securities (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Securities Sold under Agreements to Repurchase, Asset	$ 31,494,000	$ 33,780,000
Residential Pass-Through Securities [Member]
Securities Sold under Agreements to Repurchase, Asset	18,181,000	15,772,000
Collateralized Mortgage Obligations [Member]
Securities Sold under Agreements to Repurchase, Asset	$ 13,313,000	$ 18,008,000

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Note 13 - Employee and Postretirement Benefit Plans (Details Textual)	1 Months Ended	12 Months Ended
	Jan. 31, 2017 shares	Dec. 31, 2017 USD ($)	Dec. 31, 2016 USD ($) shares	Dec. 31, 2015 USD ($) shares	Dec. 31, 2014 USD ($)	Jan. 01, 2016 USD ($)	Dec. 03, 2015 USD ($)
Pension Contributions			$ 646,000	$ 609,000	$ 595,000
Employee Stock Ownership Plan (ESOP), Diversification Feature, Age Requirement			55
Deferred Compensation Arrangement with Individual, Requisite Service Period			10 years
Employee Stock Ownership Plan (ESOP), Diversification Feature Percentage			50.00%
Employee Stock Ownership Plan (ESOP), Policy Diversification Feature Term			6 years
Employee Stock Ownership Plan (ESOP), Shares in ESOP | shares			417,753	410,004
Employee Stock Ownership Plan (ESOP), Cash Contributions to ESOP			$ 549,000	$ 522,000	512,000
Pension and Other Postretirement Benefit Expense			$ 4,717,000	4,420,000	4,769,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term			4 years
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value			$ 1,540,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value			183,000	77,000	90,000
Allocated Share-based Compensation Expense			578,000	606,000	565,000
Estimated Minimum Contribution to Defined Benefit Pension Plan						$ 0
Scenario, Forecast [Member]
Allocated Share-based Compensation Expense		$ 652,000
Minimum [Member]
Performance Conditions on Return on Average Equity, Peer Group, Total Assets			750,000,000				$ 750,000,000
Maximum [Member]
Performance Conditions on Return on Average Equity, Peer Group, Total Assets			3,500,000,000				$ 2,000,000,000
Employee Stock Option [Member]
Allocated Share-based Compensation Expense			0	0	153,000
Restricted Stock [Member]
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized			$ 662,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition			1 year 146 days
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | shares			35,427
Allocated Share-based Compensation Expense			$ 578,000	$ 606,000	412,000
Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | shares			850,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant | shares			280,682
Stock Incentive Plan [Member] | Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period			180 days
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period			10 years
Stock Incentive Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | shares			27,593
Stock Incentive Plan [Member] | Restricted Stock [Member] | Subsequent Event [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | shares	22,312
Stock Incentive Plan [Member] | Restricted Stock [Member] | Vesting Contingent Upon ROAE Performance Ratio [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period				4 years
Share Based Compensation Arrangement by Share Based Payment Award Contingent Vesting Shares | shares				20,298
Stock Incentive Plan [Member] | Restricted Stock [Member] | Vesting Contingent upon Corporation Meeting ROAE Performance Ratio [Member] | Subsequent Event [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Rights, Percentage	50.00%
Stock Incentive Plan [Member] | Restricted Stock [Member] | Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period			3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | shares			17,289
Stock Incentive Plan [Member] | Restricted Stock [Member] | Executive Officer [Member] | Subsequent Event [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | shares	14,897
Stock Incentive Plan [Member] | Restricted Stock [Member] | Other Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period			3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | shares			10,304
Stock Incentive Plan [Member] | Restricted Stock [Member] | Employees [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period				4 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | shares				2,198
Stock Incentive Plan [Member] | Restricted Stock [Member] | Chief Executive Officer [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period				3 years
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | shares				5,174
Independent Directors Stock Incentive Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized | shares			135,000
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period			10 years
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant | shares			21,868
Independent Directors Stock Incentive Plan [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period			1 year	1 year
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | shares			7,834	7,130
Independent Directors Stock Incentive Plan [Member] | Restricted Stock [Member] | Subsequent Event [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period	1 year
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Grants in Period | shares	8,470
Equity Securities [Member]
Defined Benefit Plan, Target Plan Asset Allocations			44.00%	46.00%
Debt Securities [Member]
Defined Benefit Plan, Target Plan Asset Allocations			38.00%	38.00%
Alternative Funds [Member]
Defined Benefit Plan, Target Plan Asset Allocations			16.00%	14.00%
Cash [Member]
Defined Benefit Plan, Target Plan Asset Allocations			2.00%	2.00%
Pension Plan [Member]
Defined Benefit Plan, Future Amortization of Gain (Loss)			$ (7,000)
Defined Benefit Plan, Accumulated Benefit Obligation			713,000	$ 722,000
Defined Benefit Plan, Settlements, Benefit Obligation			0	$ 337,000	$ 781,000
Defined Benefit Plan, Benefits Paid Percentage of Benefit Obligation				32.00%	42.00%
Defined Benefit Plan, Recognized Net Gain (Loss) Due to Settlements			0	$ (87,000)	$ (196,000)
Other Postretirement Benefit Plan [Member]
Defined Benefit Plan, Future Amortization of Gain (Loss)			0
Defined Benefit Plan, Future Amortization of Prior Service Cost (Credit)			31,000
Defined Benefit Plan, Settlements, Benefit Obligation			0	0
Defined Benefit Plan, Recognized Net Gain (Loss) Due to Settlements			0	0	0
Supplemental Employee Retirement Plan [Member]
Pension and Other Postretirement Benefit Expense			$ 184,000	$ 167,000	$ 138,000

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Note 13 - Employee and Postretirement Benefit Plans - Funded Status of Defined Benefit Plans (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Pension Plan [Member]
Benefit obligation at beginning of year	$ 722,000	$ 1,085,000
Service cost	0	0	$ 0
Interest cost	26,000	36,000	73,000
Plan participants' contributions	0	0
Actuarial loss (gain)	3,000	(46,000)
Benefits paid	(38,000)	(16,000)
Settlement of plan obligation	0	(337,000)	(781,000)
Benefit obligation at end of year	713,000	722,000	1,085,000
Fair value of plan assets at beginning of year	839,000	1,208,000
Actual return on plan assets	45,000	(16,000)
Employer contribution	0	0
Plan participants' contributions	0	0
Benefits paid	(38,000)	(16,000)
Settlement of plan obligation	0	(337,000)
Fair value of plan assets at end of year	846,000	839,000	1,208,000
Funded status at end of year	133,000	117,000
Other Postretirement Benefit Plan [Member]
Benefit obligation at beginning of year	1,539,000	1,378,000
Service cost	37,000	38,000	34,000
Interest cost	62,000	57,000	57,000
Plan participants' contributions	215,000	203,000
Actuarial loss (gain)	(30,000)	120,000
Benefits paid	(268,000)	(257,000)
Settlement of plan obligation	0	0
Benefit obligation at end of year	1,555,000	1,539,000	1,378,000
Fair value of plan assets at beginning of year	0	0
Actual return on plan assets	0	0
Employer contribution	53,000	54,000
Plan participants' contributions	215,000	203,000
Benefits paid	(268,000)	(257,000)
Settlement of plan obligation	0	0
Fair value of plan assets at end of year	0	0	$ 0
Funded status at end of year	$ (1,555,000)	$ (1,539,000)

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Note 13 - Employee and Postretirement Benefit Plans - Plan Assets and Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Pension Plan [Member]
Other assets	$ 133	$ 117
Accrued interest and other liabilities
Other Postretirement Benefit Plan [Member]
Other assets
Accrued interest and other liabilities	$ 1,555	$ 1,539

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Note 13 - Employee and Postretirement Benefit Plans - Items Included in Accumulated Other Comprehensive Income (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Pension Plan [Member]
Prior service cost	$ 0	$ 0
Net actuarial loss	161	186
Total	161	186
Other Postretirement Benefit Plan [Member]
Prior service cost	(340)	(371)
Net actuarial loss	101	131
Total	$ (239)	$ (240)

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Note 13 - Defined Benefit Plans - Net Periodic Benefit Costs (Details) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Pension Plan [Member]
Service cost	$ 0	$ 0	$ 0
Interest cost	26,000	36,000	73,000
Expected return on plan assets	(26,000)	(45,000)	(88,000)
Amortization of prior service cost	0	0	0
Recognized net actuarial loss	9,000	11,000	19,000
Loss on settlement	0	87,000	196,000
Total net periodic benefit cost	9,000	89,000	200,000
Other Postretirement Benefit Plan [Member]
Service cost	37,000	38,000	34,000
Interest cost	62,000	57,000	57,000
Expected return on plan assets	0	0	0
Amortization of prior service cost	(31,000)	(31,000)	(31,000)
Recognized net actuarial loss	0	0	0
Loss on settlement	0	0	0
Total net periodic benefit cost	$ 68,000	$ 64,000	$ 60,000

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Note 13 - Employee and Postretirement Benefit Plans - Assumptions Used to Determine Net Periodic Benefit Cost (Details)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Pension Plan [Member]
Discount rate	4.30%	3.75%	4.50%
Expected return on plan assets	5.00%	5.31%	5.31%
Discount rate	4.05%	4.30%
Other Postretirement Benefit Plan [Member]
Discount rate	4.25%	4.00%	4.00%
Discount rate	4.25%	4.25%

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Note 13 - Employee and Postretirement Benefit Plans - Estimated Future Benefit Payments (Details) $ in Thousands	Dec. 31, 2016 USD ($)
Pension Plan [Member]
2017	$ 222
2018	15
2019	39
2020	12
2021	12
2022-2026	220
Other Postretirement Benefit Plan [Member]
2017	99
2018	103
2019	108
2020	114
2021	114
2022-2026	$ 563

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Note 13 - Employee and Postretirement Benefit Plans - Fair Values of Pension Plan Assets (Details)	Dec. 31, 2016	Dec. 31, 2015
Fair value of plan assets	100.00%	100.00%
Cash and Cash Equivalents [Member]
Fair value of plan assets	2.00%	2.00%
Debt Securities [Member]
Fair value of plan assets	38.00%	38.00%
Equity Securities [Member]
Fair value of plan assets	44.00%	46.00%
Alternative Funds [Member]
Fair value of plan assets	16.00%	14.00%

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Note 13 - Employee and Postretirement Benefit Plans - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Allocated Share-based Compensation Expense	$ 578	$ 606	$ 565
Restricted Stock [Member]
Allocated Share-based Compensation Expense	578	606	412
Employee Stock Option [Member]
Allocated Share-based Compensation Expense	$ 0	$ 0	$ 153

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Note 13 - Employee and Postretirement Benefit Plans - Non-vested Stock Options and Restricted Stock Activity (Details) - Restricted Stock [Member]	12 Months Ended
	Dec. 31, 2016 $ / shares shares
Outstanding, restricted shares, beginning of year (in shares) | shares	62,212
Outstanding, weighted average grant date fair value (in dollars per share) | $ / shares	$ 20.10
Granted, restricted shares (in shares) | shares	35,427
Granted, weighted average grant date fair value (in dollars per share) | $ / shares	$ 20.42
Vested, restricted shares (in shares) | shares	(30,846)
Vested, weighted average grant date fair value (in dollars per share) | $ / shares	$ 19.90
Forfeited, restricted shares (in shares) | shares	(3,431)
Forfeited, weighted average grant date fair value (in dollars per share) | $ / shares	$ 20.41
Outstanding, restricted shares, end of year (in shares) | shares	63,362
Outstanding, weighted average grant date fair value (in dollars per share) | $ / shares	$ 20.35

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Note 13 - Employee and Postretirement Benefit Plans - Stock Option Fair Value Assumptions (Details)	12 Months Ended
	Dec. 31, 2014
Volatility	39.00%
Expected option lives (years) (Year)	8 years
Risk-free interest rate	2.85%
Dividend yield	4.33%

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Note 13 - Employee and Postretirement Benefit Plans - Stock Option Activity (Details) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Outstanding, beginning of year (in shares)	248,486	316,157	358,176
Outstanding, beginning of year (in dollars per share)	$ 18.59	$ 19.05	$ 19.03
Granted (in shares)	0	0	39,027
Granted (in dollars per share)			$ 20.45
Exercised (in shares)	(35,880)	(29,557)	(50,415)
Exercised (in dollars per share)	$ 18.86	$ 17.56	$ 17.57
Forfeited (in shares)	(10,569)	(20,211)	(16,424)
Forfeited (in dollars per share)	$ 18.03	$ 19.76	$ 20.03
Expired (in shares)	0	(17,903)	(14,207)
Expired (in dollars per share)		$ 27	$ 26.59
Outstanding, end of year (in shares)	202,037	248,486	316,157
Outstanding, end of year (in dollars per share)	$ 18.58	$ 18.59	$ 19.05
Options exercisable at year-end (in shares)	248,486	248,486	316,157	202,037	248,486	316,157
Options exercisable at year-end (in dollars per share)				$ 18.58	$ 18.59	$ 19.05
Weighted-average fair value of options granted (in dollars per share)			$ 5.50
Weighted-average fair value of options forfeited (in dollars per share)	$ 4.04	$ 4.86	$ 4.89

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Note 14 - Income Taxes (Details Textual) - USD ($)	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Tax Credits and Adjustments	$ 158,000	$ 160,000	$ 159,000
Increase (Decrease) in Income Taxes	(76,000)	(80,000)	$ (83,000)
Unrecognized Tax Benefits	0
Other Assets [Member]
Amortization Method Qualified Affordable Housing Project Investments	$ 713,000	$ 812,000

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Note 14 - Income Taxes - Net Deferred Tax Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Deferred tax assets:
Unrealized holding losses on securities	$ 512	$ 0
Net realized losses on securities	0	69
Allowance for loan losses	2,998	2,761
Other deferred tax assets	2,658	2,634
Total deferred tax assets	6,168	5,464
Deferred tax liabilities:
Unrealized holding gains on securities	0	1,342
Defined benefit plans - ASC 835	27	19
Bank premises and equipment	913	869
Core deposit intangibles	6	11
Other deferred tax liabilities	105	108
Total deferred tax liabilities	1,051	2,349
Deferred tax asset, net	$ 5,117	$ 3,115

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Note 14 - Income Taxes - Provision for Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Currently payable	$ 1,500	$ 1,451	$ 1,303	$ 1,093	$ 1,261	$ 1,395	$ 1,452	$ 1,229	$ 5,328	$ 5,097	$ 4,280
Tax expense resulting from allocations of certain tax benefits to equity or as a reduction in other assets									175	161	158
Deferred									(156)	79	1,254
Total provision									$ 5,347	$ 5,337	$ 5,692

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Note 14 - Income Taxes - Reconciliation of Income Tax (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Expected provision	$ 7,388	$ 7,633	$ 7,972
Expected provision, percentage	35.00%	35.00%	35.00%
Tax-exempt interest income	$ (1,801)	$ (1,914)	$ (1,982)
Tax-exempt interest income, percentage	(8.53%)	(8.78%)	(8.70%)
Nondeductible interest expense	$ 40	$ 51	$ 56
Nondeductible interest expense, percentage	0.19%	0.23%	0.25%
Dividends received deduction	$ (22)	$ (75)	$ (79)
Dividends received deduction, percentage	(0.10%)	(0.34%)	(0.35%)
Increase in cash surrender value of life insurance	$ (134)	$ (135)	$ (132)
Increase in cash surrender value of life insurance, percentage	(0.63%)	(0.62%)	(0.58%)
Employee stock option compensation	$ 0	$ 0	$ 41
Employee stock option compensation, percentage	0.00%	0.00%	0.18%
Tax benefit from limited partnership investment	$ (76)	$ (80)	$ (83)
Tax benefit from limited partnership investment, percentage	(0.36%)	(0.37%)	(0.36%)
Other, net	$ (48)	$ (143)	$ (101)
Other, net, percentage	(0.23%)	(0.66%)	(0.44%)
Effective income tax provision	$ 5,347	$ 5,337	$ 5,692
Effective income tax provision, percentage	25.33%	24.47%	24.99%

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Note 15 - Related Party Transactions (Details Textual) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Related Party Deposit Liabilities	$ 2,899,000	$ 3,194,000

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Note 15 - Related Party Transactions - Related Party Loans (Details) - Management [Member] - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Beginning Balance	$ 10,246	$ 12,023	$ 12,547
New Loans	307	52	188
Repayments	(1,160)	(808)	(1,358)
Other Changes	2,021	(1,021)	646
Ending Balance	$ 11,414	$ 10,246	$ 12,023

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Note 16 - Off-balance Sheet Risk (Details Textual) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Letters of Credit Outstanding, Amount	$ 0	$ 0

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Note 16 - Off-balance Sheet Risk - Financial Instruments Whose Contract Amounts Represent Credit Risk (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Standby Letters of Credit [Member]
Credit risk financial instrument	$ 9,025	$ 13,340
Commitments to Extend Credit [Member]
Credit risk financial instrument	$ 180,768	$ 156,407

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Note 16 - Off-balance Sheet Risk - Standby Letters of Credit Expirations (Details) - Standby Letters of Credit [Member] $ in Thousands	Dec. 31, 2016 USD ($)
2017	$ 7,612
2018	387
2019	193
2020	64
2021	0
Thereafter	769
Total	$ 9,025

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Note 18 - Regulatory Matters (Details Textual) - USD ($)	Dec. 31, 2019	Dec. 31, 2016
Common Equity Tier One Capital Conservation Buffer Required for Capital Adequacy to Risk Weighted Assets		0.625%
Capital Conservation Buffer		15.60%
Retained Earnings, Unappropriated		$ 87,631,000
Tangible Capital to Tangible Assets		10.00%
Tangible Capital		$ 15,404,000
Citizens and Northern Bank [Member]
Capital Conservation Buffer		13.03%
Scenario, Forecast [Member]
Common Equity Tier One Capital Conservation Buffer Required for Capital Adequacy to Risk Weighted Assets	2.50%

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Note 18 - Regulatory Matters - Capital Amounts and Ratios (Details) - USD ($)	Dec. 31, 2016	Dec. 31, 2015
Total capital to risk-weighted assets - actual amount	$ 183,597	$ 181,216
Total capital to risk-weighted assets - actual ratio	23.60%	24.40%
Total capital to risk-weighted assets - minimum capital requirement amount	$ 62,245	$ 59,424
Minimum total capital ratio	8.00%	8.00%
Total capital to risk-weighted assets - minimum capital requirement with conservation buffer amount	$ 67,108
Total capital to risk-weighted assets - minimum capital requirement with conservation buffer ratio	8.625%
Total capital to risk-weighted assets - minimum to be well capitalized under prompt corrective action provisions amount	$ 77,806	$ 74,281
Total capital to risk-weighted assets - minimum to be well capitalized under prompt corrective action provisions ratio	10.00%	10.00%
Total capital to risk-weighted assets - minimum to meet the corporation's policy thresholds amount	$ 81,697	$ 77,995
Total capital to risk-weighted assets - minimum to meet the corporation's policy thresholds ratio	10.50%	10.50%
Tier 1 capital to risk-weighted assets - actual amount	$ 174,928	$ 173,009
Tier 1 capital to risk-weighted assets - actual ratio	22.48%	23.29%
Tier 1 capital to risk-weighted assets - minimum capital requirement amount	$ 31,122	$ 29,712
Minimum tier 1 capital ratio	6.00%	6.00%
Tier 1 captial to risk-weighted assets - minimum capital requirement with conservation buffer amount	$ 51,547
Tier 1 capital to risk-weighted assets - minimum capital requirement with conservation buffer ratio	6.625%
Tier 1 capital to risk-weighted assets - minimum to be well capitalized under prompt corrective action provisions amount	$ 62,245	$ 59,424
Tier 1 capital to risk-weighted assets - minimum to be well capitalized under prompt corrective action provisions ratio	8.00%	8.00%
Tier 1 capital to risk-weighted assets - minimum to meet the corporation's policy thresholds amount	$ 66,135	$ 63,139
Tier 1 capital to risk-weighted assets - minimum to meet the corporation's policy thresholds ratio	8.50%	8.50%
Common equity Tier 1 - amount	$ 174,928	$ 173,009
Common equity Tier 1 - ratio	22.48%	23.29%
Common equity Tier 1 - minimum capital requirement amount	$ 31,122	$ 29,712
Minimum common equity tier 1 capital ratio	4.50%	4.50%
Common equity Tier 1 - capital conservation buffer amount	$ 39,876
Common equity Tier 1 - capital conservation buffer ratio	5.125%
Common equity Tier 1 - minimum to be well capitalized under prompt corrective action provisions amount	$ 50,574	$ 48,282
Common equity Tier 1 - minimum to be well capitalized under prompt corrective action provisions ratio	6.50%	6.50%
Common equity Tier 1 - minimum to meet the corporation's policy thresholds amount	$ 54,464	$ 51,996
Common equity Tier 1 - minimum to meet the corporation's policy thresholds ratio	7.00%	7.00%
Tier 1 capital average - amount	$ 174,928	$ 173,009
Tier 1 capital average - ratio	14.27%	14.31%
Tier 1 capital average - minimum capital amount	$ 49,026	$ 48,355
Tier 1 capital average - minimum capital ratio	4.00%	4.00%
Tier 1 capital average - minimum to be well capitalized amount	$ 61,282	$ 60,444
Tier 1 capital average - minimum to be well capitalized ratio	5.00%	5.00%
Tier 1 capital average - minimum to meet the corporation's policy threshold amount	$ 61,282	$ 60,444
Tier 1 capital average - minimum to meet the corporation's policy threshold ratio	5.00%	5.00%
Citizens and Northern Bank [Member]
Total capital to risk-weighted assets - actual amount	$ 162,705	$ 161,187
Total capital to risk-weighted assets - actual ratio	21.03%	21.83%
Total capital to risk-weighted assets - minimum capital requirement amount	$ 61,894	$ 59,058
Minimum total capital ratio	8.00%	8.00%
Total capital to risk-weighted assets - minimum capital requirement with conservation buffer amount	$ 66,730
Total capital to risk-weighted assets - minimum capital requirement with conservation buffer ratio	8.625%
Total capital to risk-weighted assets - minimum to be well capitalized under prompt corrective action provisions amount	$ 77,368	$ 73,823
Total capital to risk-weighted assets - minimum to be well capitalized under prompt corrective action provisions ratio	10.00%	10.00%
Total capital to risk-weighted assets - minimum to meet the corporation's policy thresholds amount	$ 81,236	$ 77,514
Total capital to risk-weighted assets - minimum to meet the corporation's policy thresholds ratio	10.50%	10.50%
Tier 1 capital to risk-weighted assets - actual amount	$ 154,036	$ 153,298
Tier 1 capital to risk-weighted assets - actual ratio	19.91%	20.77%
Tier 1 capital to risk-weighted assets - minimum capital requirement amount	$ 30,947	$ 29,529
Minimum tier 1 capital ratio	6.00%	6.00%
Tier 1 captial to risk-weighted assets - minimum capital requirement with conservation buffer amount	$ 51,256
Tier 1 capital to risk-weighted assets - minimum capital requirement with conservation buffer ratio	6.625%
Tier 1 capital to risk-weighted assets - minimum to be well capitalized under prompt corrective action provisions amount	$ 61,894	$ 59,058
Tier 1 capital to risk-weighted assets - minimum to be well capitalized under prompt corrective action provisions ratio	8.00%	8.00%
Tier 1 capital to risk-weighted assets - minimum to meet the corporation's policy thresholds amount	$ 65,762	$ 62,749
Tier 1 capital to risk-weighted assets - minimum to meet the corporation's policy thresholds ratio	8.50%	8.50%
Common equity Tier 1 - amount	$ 154,036	$ 153,298
Common equity Tier 1 - ratio	19.91%	20.77%
Common equity Tier 1 - minimum capital requirement amount	$ 30,947	$ 29,529
Minimum common equity tier 1 capital ratio	4.50%	4.50%
Common equity Tier 1 - capital conservation buffer amount	$ 39,651
Common equity Tier 1 - capital conservation buffer ratio	5.125%
Common equity Tier 1 - minimum to be well capitalized under prompt corrective action provisions amount	$ 50,289	$ 47,985
Common equity Tier 1 - minimum to be well capitalized under prompt corrective action provisions ratio	6.50%	6.50%
Common equity Tier 1 - minimum to meet the corporation's policy thresholds amount	$ 54,157	$ 51,676
Common equity Tier 1 - minimum to meet the corporation's policy thresholds ratio	7.00%	7.00%
Tier 1 capital average - amount	$ 154,036	$ 153,298
Tier 1 capital average - ratio	12.73%	12.81%
Tier 1 capital average - minimum capital amount	$ 48,404	$ 47,861
Tier 1 capital average - minimum capital ratio	4.00%	4.00%
Tier 1 capital average - minimum to be well capitalized amount	$ 60,506	$ 59,826
Tier 1 capital average - minimum to be well capitalized ratio	5.00%	5.00%
Tier 1 capital average - minimum to meet the corporation's policy threshold amount	$ 60,506	$ 59,826
Tier 1 capital average - minimum to meet the corporation's policy threshold ratio	5.00%	5.00%

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Note 18 - Regulatory Matters - Transition Schedule for New Ratios, Including the Capital Conservation Buffer (Details)	Dec. 31, 2016	Dec. 31, 2015
Minimum common equity tier 1 capital ratio	4.50%	4.50%
Common equity tier 1 capital conservation buffer	0.625%
Minimum common equity tier 1 capital ratio plus capital conservation buffer	5.125%	4.50%
Phase-in of most deductions from common equity tier 1 capital	60.00%	40.00%
Minimum tier 1 capital ratio	6.00%	6.00%
Minimum tier 1 capital ratio plus capital conservation buffer	6.625%
Minimum total capital ratio	8.00%	8.00%
Minimum total capital ratio plus capital conservation buffer	8.625%
Phased in Beginning 2017 [Member]
Minimum common equity tier 1 capital ratio	4.50%
Common equity tier 1 capital conservation buffer	1.25%
Minimum common equity tier 1 capital ratio plus capital conservation buffer	5.75%
Phase-in of most deductions from common equity tier 1 capital	80.00%
Minimum tier 1 capital ratio	6.00%
Minimum tier 1 capital ratio plus capital conservation buffer	7.25%
Minimum total capital ratio	8.00%
Minimum total capital ratio plus capital conservation buffer	9.25%
Phased in Beginning 2018 [Member]
Minimum common equity tier 1 capital ratio	4.50%
Common equity tier 1 capital conservation buffer	1.875%
Minimum common equity tier 1 capital ratio plus capital conservation buffer	6.375%
Phase-in of most deductions from common equity tier 1 capital	100.00%
Minimum tier 1 capital ratio	6.00%
Minimum tier 1 capital ratio plus capital conservation buffer	7.875%
Minimum total capital ratio	8.00%
Minimum total capital ratio plus capital conservation buffer	9.875%
Phased in Beginning 2019 [Member]
Minimum common equity tier 1 capital ratio	4.50%
Common equity tier 1 capital conservation buffer	2.50%
Minimum common equity tier 1 capital ratio plus capital conservation buffer	7.00%
Phase-in of most deductions from common equity tier 1 capital	100.00%
Minimum tier 1 capital ratio	6.00%
Minimum tier 1 capital ratio plus capital conservation buffer	8.50%
Minimum total capital ratio	8.00%
Minimum total capital ratio plus capital conservation buffer	10.50%

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Note 18 - Regulatory Matters - Payout Restrictions Based on the Capital Conservation Buffer (Details)	Dec. 31, 2016
Range One [Member]
Maximum Payout	60.00%
Range Two [Member]
Maximum Payout	40.00%
Range Three [Member]
Maximum Payout	20.00%
Range Four [Member]
Maximum Payout	0.00%

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Note 18 - Regulatory Matters - Payout Restrictions Based on the Capital Conservation Buffer (Details) (Parentheticals)	Dec. 31, 2016
Range One [Member]
Capital conservation buffer, high	2.50%
Capital conservation buffer, low	1.875%
Range Two [Member]
Capital conservation buffer, high	1.875%
Capital conservation buffer, low	1.25%
Range Three [Member]
Capital conservation buffer, high	1.25%
Capital conservation buffer, low	0.625%
Range Four [Member]
Capital conservation buffer, high	0.625%
Capital conservation buffer, low	0.00%

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Note 19 - Parent Company Only - Condensed Balance Sheet (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
ASSETS
Other assets	$ 13,282	$ 13,510
TOTAL ASSETS	1,242,292	1,223,417
LIABILITIES AND STOCKHOLDERS' EQUITY
Other liabilities	7,812	8,052
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	1,242,292	1,223,417
Parent Company [Member]
ASSETS
Cash	6,033	5,847
Other assets	4	24
TOTAL ASSETS	186,021	187,506
LIABILITIES AND STOCKHOLDERS' EQUITY
Other liabilities	13	19
Stockholders' equity	186,008	187,487
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	186,021	187,506
Parent Company [Member] | Citizens and Northern Bank [Member]
ASSETS
Equity method investment	165,397	167,277
Parent Company [Member] | Citizens and Northern Investment Corporation [Member]
ASSETS
Equity method investment	11,168	10,966
Parent Company [Member] | Bucktail Life Insurance Company [Member]
ASSETS
Equity method investment	$ 3,419	$ 3,392

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Note 19 - Parent Company Only - Condensed Income Statement (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Dividends from Citizens & Northern Bank									$ 70	$ 284	$ 307
Income before equity in undistributed income of subsidiaries	$ 5,731	$ 5,538	$ 5,174	$ 4,666	$ 5,326	$ 5,629	$ 5,809	$ 5,044	21,109	21,808	22,778
NET INCOME	$ 4,231	$ 4,087	$ 3,871	$ 3,573	$ 4,065	$ 4,234	$ 4,357	$ 3,815	15,762	16,471	17,086
Parent Company [Member]
Dividends from Citizens & Northern Bank									14,960	11,569	22,608
Expenses									(367)	(234)	(112)
Income before equity in undistributed income of subsidiaries									14,593	11,335	22,496
Equity in undistributed income of subsidiaries									1,169	5,136	(5,410)
NET INCOME									$ 15,762	$ 16,471	$ 17,086

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Note 19 - Parent Company Only - Condensed Statement of Cash Flows (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 4,231	$ 4,087	$ 3,871	$ 3,573	$ 4,065	$ 4,234	$ 4,357	$ 3,815	$ 15,762	$ 16,471	$ 17,086
Adjustments to reconcile net income to net cash provided by operating activities:
(Increase) decrease in accrued interest receivable and other assets									(410)	(1,697)	1,395
(Decrease) increase in accrued interest payable and other liabilities									(216)	1,195	(90)
Net Cash Provided by Operating Activities									18,510	19,686	22,281
CASH FLOWS FROM FINANCING ACTIVITIES:
Tax benefit from compensation plans, net									175	159	157
Purchase of treasury stock									(3,723)	(4,415)	(4,002)
Common dividends paid									(11,112)	(11,245)	(11,392)
Net Cash Used in Financing Activities									6,197	(36,401)	(19,767)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS									(4,692)	1,694	(6,972)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR				33,313				31,619	33,313	31,619	38,591
CASH AND CASH EQUIVALENTS, END OF YEAR	28,621				33,313				28,621	33,313	31,619
Parent Company [Member]
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income									15,762	16,471	17,086
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in undistributed net income of subsidiaries									(1,169)	(5,136)	5,410
(Increase) decrease in accrued interest receivable and other assets									20	12	(36)
(Decrease) increase in accrued interest payable and other liabilities									(6)	12	1
Net Cash Provided by Operating Activities									14,607	11,359	22,461
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of treasury stock									263	381	123
Tax benefit from compensation plans, net									151	143	137
Purchase of treasury stock									(3,723)	(4,415)	(4,002)
Common dividends paid									(11,112)	(11,245)	(11,392)
Net Cash Used in Financing Activities									(14,421)	(15,136)	(15,134)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS									186	(3,777)	7,327
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR				$ 5,847				$ 9,624	5,847	9,624	2,297
CASH AND CASH EQUIVALENTS, END OF YEAR	$ 6,033				$ 5,847				$ 6,033	$ 5,847	$ 9,624

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Note 20 - Summary of Quarterly Consolidated Financial Data (Unaudited) - Quarterly Financial Data (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Interest income	$ 11,106	$ 11,131	$ 10,924	$ 10,937	$ 11,036	$ 11,134	$ 11,186	$ 11,163	$ 44,098	$ 44,519	$ 46,009
Interest expense	920	944	925	904	1,087	1,126	1,176	1,213	3,693	4,602	5,122
Net interest income	10,186	10,187	9,999	10,033	9,949	10,008	10,010	9,950	40,405	39,917	40,887
Provision (credit) for loan losses	(3)	538	318	368	319	302	221	3	1,221	845	476
Net interest income after provision (credit) for loan losses	10,189	9,649	9,681	9,665	9,630	9,706	9,789	9,947	39,184	39,072	40,411
Other income	4,031	3,884	3,906	3,690	3,999	3,961	3,962	3,556
Net gains on available-for-sale securities	69	584	122	383	1,776	79	932	74	1,158	2,861	1,104
Other expenses	8,558	8,579	8,535	9,072	8,416	8,117	7,964	8,533	5,540	5,141	5,423
Income before equity in undistributed income of subsidiaries	5,731	5,538	5,174	4,666	5,326	5,629	5,809	5,044	21,109	21,808	22,778
Income tax provision	1,500	1,451	1,303	1,093	1,261	1,395	1,452	1,229	5,328	5,097	4,280
NET INCOME	$ 4,231	$ 4,087	$ 3,871	$ 3,573	$ 4,065	$ 4,234	$ 4,357	$ 3,815	$ 15,762	$ 16,471	$ 17,086
Net income per share – basic (in dollars per share)	$ 0.35	$ 0.34	$ 0.32	$ 0.29	$ 0.33	$ 0.35	$ 0.36	$ 0.31	$ 1.30	$ 1.35	$ 1.38
Net income per share – diluted (in dollars per share)	$ 0.35	$ 0.34	$ 0.32	$ 0.29	$ 0.33	$ 0.35	$ 0.36	$ 0.31
Loss on prepayment of borrowings					$ 1,663	$ 0	$ 910	$ 0	$ 0	$ 2,573	$ 0