10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

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

For the fiscal year ended December 31, 2021

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

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 ⌧

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 ⌧

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 ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

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

Large accelerated filer ◻ Accelerated filer ◻ Non-accelerated filer ⌧ Smaller reporting company ⌧ Emerging growth company ◻

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒

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

The aggregate market value of the registrant’s common stock held by non-affiliates at June 30, 2021, the registrant’s most recently completed second fiscal quarter, was $377,589,321.

The number of shares of common stock outstanding at February 18, 2022 was 15,825,155.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s proxy statement for the annual meeting of its shareholders to be held April 21, 2022 are incorporated by reference into Parts III and IV of this report.

TABLE OF CONTENTS

	Page(s)
Part I:
Item 1. Business	3-5
Item 1A. Risk Factors	5-8
Item 1B. Unresolved Staff Comments	8
Item 2. Properties	9
Item 3. Legal Proceedings	9
Item 4. Mine Safety Disclosure	9
Part II.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	9-12
Item 6. Selected Financial Data	12
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	12-37
Item 8. Financial Statements and Supplementary Data	38-94
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	95
Item 9A. Controls and Procedures	95-96
Item 9B. Other Information	96
Part III:
Item 10. Directors, Executive Officers and Corporate Governance	96
Item 11. Executive Compensation	96
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	96
Item 13. Certain Relationships and Related Transactions, and Director Independence	96
Item 14. Principal Accountant Fees and Services	97
Part IV:
Item 15. Exhibits and Financial Statement Schedules	98-103
Signatures	104

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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.

Over the past few years, the Corporation has been employing a growth strategy. While a majority of the Corporation’s operations are conducted in its legacy markets in the Northern tier/Northcentral region of Pennsylvania and Southern tier of New York, the Corporation has expanded into Southeastern Pennsylvania by acquisitions and Southcentral Pennsylvania by opening new branches. The Corporation acquired Covenant Financial, Inc. (“Covenant”), effective July 1, 2020. Covenant was the parent company of Covenant Bank, a commercial bank which operated a community bank office in Bucks County, Pennsylvania and another in Chester County, Pennsylvania. The Covenant acquisition followed the 2019 acquisition of Monument Bancorp, Inc. (“Monument”), a commercial bank with offices in Bucks County. In Southcentral Pennsylvania, in 2021, the Corporation converted the lending office in York, Pennsylvania to a full-service branch and established a new branch in Lancaster, Pennsylvania. Mainly as a result of the acquisitions, the Corporation’s consolidated total assets at December 31, 2021 of $2.3 billion were up 80% from the corresponding total at December 31, 2018. Similarly, gross loans of $1.6 billion at December 31, 2021 were up 89% from December 31, 2018 and total deposits of $1.9 billion were up 86% from December 31, 2018.

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 in 1971. 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. The Bank has expanded its presence over the past several decades through a series of mergers as well as by opening new branch and lending offices and providing access to banking services via the internet and through ATMs. At December 31, 2021, the Bank had 31 branch offices, including 23 in the Northern tier/Northcentral region of Pennsylvania, 2 in the Southern tier of New York State, 4 in Southeastern Pennsylvania (3 in Bucks County and 1 in Chester County) and 2 in Southcentral Pennsylvania (York and Lancaster). In addition to its branch locations, the Bank has a lending office in Elmira, New York.

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 department that provides a wide range of financial services, such as 401(k) plans, retirement planning, estate planning, estate settlements and asset management. C&N Financial Services Corporation (“C&NFSC”), a wholly-owned subsidiary of the Bank, is a licensed insurance agency that provides insurance products to individuals and businesses and through its broker-dealer division, 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.

In 2017, C&N Bank established Northern Tier Holding LLC, to acquire, hold and dispose of real property acquired by the Bank. C&N Bank is the sole member of Northern Tier Holding LLC.

All phases of the Bank’s business are competitive. The Bank competes with online financial institutions, local commercial banks headquartered in our market areas and other commercial banks with branches in our market area. Many of the online financial institutions and some of the banks that have branches in our market areas 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, exchange-traded funds and other investment vehicles 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 areas 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.

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At December 31, 2021, C&N Bank had total assets of $2,311,213,000, total deposits of $1,959,117,000 and net loans outstanding of $1,551,312,000.

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 (FDIC) and the Pennsylvania Department of Banking and Securities.

● 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

Human Capital

The Corporation’s Board of Directors and executive leadership team have established the following mission, vision and values:

Mission: Creating value through lifelong relationships with our customers, teammates, shareholders and communities.

Vision: Every customer says “C&N is the ONLY bank I need.”

Values: Teamwork, Respect, Responsibility and Accountability, Excellence, Integrity, Client Focus, Have Fun.

We recognize that our ability to create value on a consistent basis is highly dependent upon the effectiveness of our team.

The Corporation’s key human capital management objectives are to attract and retain diverse raw and seasoned talent that fits our values and culture. Our talent strategy focuses on acquiring new employees through branding and outreach programs, developing employees though a robust onboarding program, ongoing training, and performance management, and retaining employees through recognition, engagement, and an attractive total rewards package.

Diversity and Inclusion

At C&N Bank, we are committed to creating value through relationships. At the heart of this mission is a promise of excellence in service to all people, as demonstrated by our commitment to equity of opportunity, inclusion and our fostering of a spirit of belonging. We live our values of respect, integrity and excellence by creating access and providing support to help our diverse constituents of customers, teammates, shareholders and communities in achieving their financial goals. We embrace inclusion of all of our stakeholders as an important component of our vision to be the ONLY bank our customers need.

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Compensation and Benefits

The Corporation offers competitive compensation to attract and retain talent. Our generous total rewards package includes market-competitive salary, bonuses or sales commissions, short-term and long-term equity incentives, healthcare and retirement benefits, and paid time off. Employees have regular performance reviews and salary raises commensurate with performance. Employees have access to a holistic suite of items within our employee assistance program that caters to physical, emotional, and mental wellbeing for the employee and their family.

Training and Development

The Corporation provides a robust training and development program that supports our culture, prepares employees for their immediate role, develops them for long term success at the Bank and supports personal enrichment. We offer functional training, culture building exercises, personal development, C&N Bank history, C&N Bank integration and ongoing technical training throughout each year. Employees also have access to additional educational and development opportunities including tuition reimbursement and certification programs.

Communication and Engagement

At C&N, we believe in the importance of employee communication and engagement. We utilize several methods to foster engagement, including activities such as Employee Recognition programs, Service Anniversary Awards, Bank wide monthly calls, semi-annual Bank wide events, annual employee surveys, focus groups, daily huddles, and the Giving Back, Giving Together community service program. We believe keeping our team well informed, connected, and appreciated adds to the success of our organization.

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.

Coronavirus Outbreak – The COVID-19 pandemic has caused significant disruptions in the international and U.S. economies as well as the Corporation’s local economy. The ultimate effect of COVID-19 on the local or broader economy is not known. Moreover, the Federal Reserve took action to lower the Federal Funds rate in 2020 and maintained a rate of 0% to 0.25% throughout 2021 but has recently signaled its intent to raise the rate in an effort to contain inflation. Fluctuations in interest rates triggered by the Federal Reserve’s actions may negatively affect interest income and, therefore, earnings. Given the ongoing and dynamic nature of the circumstances, it is difficult to predict the impact of the coronavirus outbreak, and there is no guarantee that the Corporation’s efforts to address the adverse impacts of the coronavirus will be effective. The extent of such impact will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of new variants of the coronavirus and actions taken to contain the coronavirus or its impact.

The effect of COVID-19 and related events, including those described above and those not yet known or knowable, could have a negative effect on the Corporation’s business prospects, financial condition and results of operations, as a result of quarantines; market volatility; market downturns; changes in consumer behavior; business closures; deterioration in the credit quality of borrowers or the inability of borrowers to satisfy their obligations (and any related forbearances or restructurings that may be implemented); changes in the value of collateral securing outstanding loans; changes in the value of the investment securities portfolio; effects on key employees, including operational management personnel and those charged with preparing, monitoring and evaluating the Corporation’s financial reporting and internal controls; and declines in the demand for loans and other banking services and products.

Risk Related to Acquisition Activity – As described in Item 1, the Corporation has completed two acquisitions of banking companies over the past two years (Covenant and Monument) and expanded its geographic footprint to Southeastern and Southcentral Pennsylvania. Further, management intends to continue to pursue additional acquisition opportunities. Potential acquisitions may disrupt the

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Corporation’s business and dilute shareholder value. We regularly evaluate merger and acquisition opportunities and conduct due diligence activities related to possible transactions with other financial institutions and financial service companies. Acquiring other banks, businesses, or branches involves various risks commonly associated with acquisitions, including: potential exposure to unknown or contingent liabilities of the target company, exposure to potential asset quality issues of the target company, difficulty and expense of integrating the operations and personnel of the target company, potential disruption to the Corporation’s business, potential diversion of management’s time and attention, the possible loss of key employees and customers of the target company, difficulty in estimating the value of the target company and potential changes in banking or tax laws or regulations that may affect the target company. Acquisitions may involve the payment of a premium over book and market values, and, therefore, some dilution of the Corporation’s tangible book value and net income per share of common stock may occur in connection with any future transaction. Furthermore, failure to realize the expected revenue projections, cost savings, increases in geographic or product presence, and/or other projected benefits from recent or future acquisitions could have a material adverse effect on the Corporation’s financial condition or results of operations.

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.

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 deposits with no stated maturities, 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.

Limited Geographic Diversification - The Corporation grants commercial, residential and personal loans to customers primarily in the Corporation’s legacy markets of the Northern tier/Northcentral regions of Pennsylvania and Southern tier of New York and in Southeastern and Southcentral Pennsylvania. 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 these regions. 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.

Inability to Attract and Develop Qualified Personnel – The Corporation believes that our future success will depend in large part on our ability to attract, develop and retain highly qualified management, lending, financial, technological, marketing, sales, and support personnel. Competition for qualified personnel is intense and we cannot ensure success in attracting or retaining qualified personnel. There may be only a limited number of persons with the requisite skills to serve in these positions, and it may be increasingly difficult for us to hire personnel over time. Our ability to retain key officers and employees may be further impacted by legislation and regulation affecting the financial services industry. For example, legislation and bank regulatory action that places restrictions on executive compensation at, and the pay practices of, financial institutions may further impact our ability to compete for talent with other industries

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that are not subject to the same limitations as financial institutions. Any inability to attract, develop and retain significant numbers of qualified management and other personnel would have a material adverse effect on our business, results of operations and financial condition.

Cyber Security Risks and Technology Dependence – In the ordinary course of business, the Corporation collects and stores sensitive data, including proprietary business information and personally identifiable information of our customers and employees in systems and on networks. In some cases, this confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on our behalf. The secure processing, maintenance and use of this information is critical to operations and our business strategy.

The Corporation has invested in accepted technologies, and continually reviews processes and practices that are designed to protect our networks, computers and data from damage or unauthorized access, and maintains an information security risk insurance policy. On an on-going basis the Corporation assesses its cyber security procedures and controls and performs network penetration tests on at least an annual basis. All employees receive monthly information security awareness training.

Despite these security measures, the Corporation’s computer systems and infrastructure or those of third parties used by us to compile, process or store such information may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions. A breach of any kind could compromise systems and the information stored there could be accessed, damaged or disclosed. A breach in security could result in legal claims, regulatory penalties, disruption in operations, and damage to the Corporation’s reputation, which 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 way 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.

Bank Secrecy Act and Related Laws and Regulations - These laws and regulations have significant implications for all financial institutions. In recent years, they have increased due diligence requirements and reporting obligations for financial institutions, created new crimes and penalties, and required 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.

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 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.

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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 because 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.

Securities Markets – The fair value of the Corporation’s available-for-sale debt securities, as well as the revenues the Corporation earns from its wealth management 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. 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 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.

Mortgage Banking – Since 2009, the Corporation has originated and sold residential mortgage loans to the secondary market through the MPF Xtra program. Since 2014, the Corporation has also originated and sold residential mortgage loans to the secondary market through the MPF Original program. Both of these programs are administered by the Federal Home Loan Banks of Pittsburgh and Chicago. At December 31, 2021, the total outstanding balance of residential mortgages sold and serviced through the two programs amounted to $334,741,000. The Corporation must strictly adhere to the MPF Xtra and MPF 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, 2021, the total outstanding balance of residential mortgage loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $1,571,000. 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.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

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ITEM 2. PROPERTIES

A summary of the Corporation’s operating properties is as follows:

	Number	Number of	Number of
	of	Owned	Leased
	Locations	Properties	Properties
Branches	31	25	6
Limited Purpose Office-Lending	1	1	0
Administrative/Multi-purpose	2	1	1
Ancillary Facilities	2	1	1
Total	36	28	8

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, 2021, there were 2,143 shareholders of record of the Corporation’s common stock.

The following table sets forth the high and low sales prices of the common stock and dividends declared per quarter during 2021 and 2020.

	2021						2020
					Dividend						Dividend
					Declared						Declared
					per						per
	High		Low		Quarter		High		Low		Quarter
First quarter	$	24.99	$	18.98	$	0.27	$	29.06	$	15.69	$	0.27
Second quarter		25.69		23.00		0.28		22.89		16.20		0.27
Third quarter		25.97		23.73		0.28		20.76		14.92		0.27
Fourth quarter		27.99		24.52		0.28		20.84		16.05		0.27

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.

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Effective February 18, 2021, the Corporation amended its treasury stock repurchase program. Under the amended program, the Corporation is authorized to repurchase up to 1,000,000 shares of the Corporation’s common stock, or 6.25% of the Corporation’s issued and outstanding shares at February 18, 2021. As of December 31, 2021, 299,059 shares have been repurchased under the repurchase program. As permitted by securities laws and other legal requirements and subject to market conditions and other factors, purchases may be made from time to time in the open market at prevailing prices, or through privately negotiated transactions.

Consistent with the previously approved program, the Board of Directors' February 18, 2021 approval provides that: (1) the treasury stock repurchase program, as amended to increase the repurchase authorization to 1,000,000 shares, 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 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.

The following table sets forth a summary of purchases by the Corporation, in the open market, of its equity securities during the fourth quarter 2021:

				Total Number of	Maximum
				Shares	Number of
				Purchased	Shares that May
				as Part of	Yet
				Publicly	be Purchased
	Total Number	Average		Announced	Under
	of Shares	Price Paid		Plans	the Plans or
Period	Purchased	per Share		or Programs	Programs
October 1 - 31, 2021	0	$	0	292,100	707,900
November 1 - 30, 2021	2,600	$	24.92	294,700	705,300
December 1 - 31, 2021	4,359	$	25.00	299,059	700,941

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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, 2016 and ended December 31, 2021. 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	12/31/16	12/31/17	12/31/18	12/31/19	12/31/20	12/31/21
Citizens & Northern Corporation	100.00	95.62	109.88	122.93	91.24	125.90
Russell 2000 Index	100.00	114.65	102.02	128.06	153.62	176.39
Peer Group	100.00	116.26	105.87	126.29	101.09	137.51

Peer Group includes all publicly traded SEC filing Commercial Banks & Thrifts within NJ, NY, OH, PA, MD, and WV with assets between 0.5 times and 2.0 times CZNC as of 9/30/2021

Source: S&P Global Market Intelligence

© 2022

11

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, 2021.

				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	24,218	$	20.01	207,109
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.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

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

●the Corporation’s credit standards and its on-going credit assessment processes might not protect it from significant credit losses

● the effect of the novel coronavirus (COVID-19) and related events

●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

● information security breach or other technology difficulties or failures

●changes in accounting principles, or the application of generally accepted accounting principles

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

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

12

CORONAVIRUS (COVID-19) OUTBREAK

Loan Payment Deferral Program

Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) provides that, from the period beginning March 1, 2020 until the earlier of December 31, 2020 or the date that is 60 days after the date on which the national emergency concerning the COVID-19 pandemic declared by the President of the United States under the National Emergencies Act terminates (the “applicable period”), the Corporation may elect to suspend U.S. GAAP for loan modifications related to the pandemic that would otherwise be categorized as troubled debt restructurings (TDRs) and suspend any determination of a loan modified as a result of the effects of the pandemic as being a TDR, including impairment for accounting purposes. The suspension is applicable for the term of the loan modification that occurs during the applicable period for a loan that was not more than 30 days past due as of December 31, 2019. The suspension is not applicable to any adverse impact on the credit of a borrower that is not related to the pandemic.

On December 27, 2020, the President of the United States signed into law the Consolidated Appropriations Act, 2021 (the “CAA”), which includes provisions that broadly address additional COVID-19 responses and relief.  Among the additional relief measures included are certain extensions to elements of the CARES Act, including extension of temporary relief from TDRs established under Section 4013 of the CARES Act to the earlier of a) January 1, 2022, or b) the date that is 60 days after the date on which the national COVID-19 emergency terminates.  

In addition, the banking regulators and other financial regulators, on March 22, 2020 and revised April 7, 2020, issued a joint interagency statement titled the “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” that encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of the COVID-19 pandemic. Pursuant to the interagency statement, loan modifications that do not meet the conditions of Section 4013 of the CARES Act may still qualify as a modification that does not need to be accounted for as a TDR. Specifically, the agencies confirmed with the Financial Accounting Standards Board (“FASB”) staff that short-term modifications made in good faith in response to the pandemic to borrowers who were current prior to any relief are not TDRs under U.S. GAAP. This includes short-term (e.g. six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. Appropriate allowances for loan and lease losses are expected to be maintained. With regard to loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to the pandemic as past due because of the deferral. The interagency statement also states that during short-term pandemic-related loan modifications, these loans generally should not be reported as nonaccrual.

To work with clients impacted by COVID-19, the Corporation offered short-term loan modifications on a case-by-case basis to borrowers who were current in their payments at the inception of the loan modification program. Prior to merging with the Corporation on July 1, 2020, Covenant had a similar program in place, and these modified loans have been incorporated into the Corporation’s program. These efforts have been designed to assist borrowers as they deal with the crisis and help the Corporation mitigate credit risk. For loans subject to the program, each borrower was required to resume making regularly scheduled loan payments at the end of the modification period and the deferred amounts have been moved to the end of the loan term. Consistent with Section 4013 of the CARES Act, the modified loans have not been reported as past due, nonaccrual  or as TDRs at December 31, 2021. Most of the modifications under the program became effective in 2020 and provided a deferral of interest or principal and interest for 90-to-180 days.

At December 31, 2021, there were no loans in deferral status under the program. In comparison, at December 31, 2020, there were 45 loans in deferral status with a total recorded investment of $37,397,000, including 27 commercial loans with a total recorded investment of $35,002,000.

Paycheck Protection Program

The Corporation began accepting and processing applications for loans under the Paycheck Protection Program (“PPP”) through the Small Business Administration (“SBA”) and Treasury Department on April 3, 2020. Covenant also engaged in PPP lending starting in early April 2020. Under the PPP, the Corporation provides SBA-guaranteed loans to small businesses to pay their employees, rent, mortgage interest, and utilities. PPP loans will be forgiven subject to clients providing documentation evidencing their compliant use of funds and otherwise complying with the terms of the program.

13

The maximum term of PPP loans is five years, though the Corporation will be repaid sooner to the extent the loans are forgiven. The interest rate on PPP loans is 1%, and the Corporation has received fees from the SBA ranging between 1% and 5% per loan, depending on the size of the loan. Fees on PPP loans, net of origination costs and a market rate adjustment on PPP loans acquired from Covenant, are recognized in interest income as a yield adjustment over the term of the loans.

The recorded investment in PPP loans at December 31, 2021 was $26.9 million, with contractual principal balances totaling $27.8 million, reduced $0.9 million by the impact of net deferred loan origination fees. The recorded investment in PPP loans at December 31, 2021 decreased $105.4 million from $132.3 million at December 31, 2020, reflecting the impact of loans forgiven and repaid by the SBA. Interest and fees on PPP loans totaled $6.5 million in 2021 and $2.9 million in 2020.

Capital Strength

While it is difficult to estimate the future impact of COVID-19, the Corporation, including the principal subsidiary, Citizens & Northern Bank (“C&N Bank”), entered the crisis from a position of strength. This is especially apparent in the capital ratios, which are at levels that demonstrate the capacity to absorb significant losses if they arise while continuing to meet the requirements to be considered well capitalized.

C&N Bank’s leverage ratio (Tier 1 capital to average assets) at December 31, 2021 of 10.52% is significantly higher than the well-capitalized threshold of 5%, an excess capital amount of $125.1 million. Similarly, the total capital to risk-weighted assets ratio at December 31, 2021 is 16.04%, which exceeds the well-capitalized threshold of 10%, an excess capital amount of $95.1 million.

Additional details regarding the Corporation’s and C&N Bank’s regulatory capital position are provided in the “Stockholders’ Equity and Capital Adequacy” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”).

EARNINGS OVERVIEW

Net income for the year ended December 31, 2021 was $30,554,000, or $1.92 per diluted share as compared to 2020 net income of $19,222,000 or $1.30 per share. Effective July 1, 2020, C&N acquired Covenant Financial, Inc. (“Covenant”). C&N incurred pre-tax merger-related expenses related to the Covenant transaction of $7.7 million for the year ended December 31, 2020. In the fourth quarter 2020, C&N incurred a pre-tax loss of $1.6 million on prepayment of long-term borrowings (Federal Home Loan Bank of Pittsburgh advances) with outstanding balances totaling $48.0 million. The borrowings included several advances maturing in 2022 through 2024 with a weighted-average interest rate of 1.77% and a weighted-average duration of 2.3 years. Excluding the impact of merger-related expenses and loss on prepayment of borrowings, adjusted (non-U.S. GAAP) earnings for 2020 would be $26,648,000 or $1.80 per share.

The following table provides a reconciliation of the Corporation’s 2021 earnings results under U.S. generally accepted accounting principles (U.S. GAAP) to comparative non-U.S. GAAP results excluding merger-related expenses and loss on prepayment of borrowings. Management believes disclosure of 2021 and 2020 earnings results, adjusted to exclude the impact of these items, provides useful information to investors for comparative purposes.

14

RECONCILIATION OF NET INCOME AND

DILUTED EARNINGS PER SHARE TO NON-U.S.

GAAP MEASURE

(Dollars In Thousands, Except Per Share Data)

	Year Ended December 31, 2021								Year Ended December 31, 2020
	Income						Diluted		Income						Diluted
	Before						Earnings		Before						Earnings
	Income		Income				per		Income		Income				per
	Tax		Tax		Net		Common		Tax		Tax		Net		Common
	Provision		Provision		Income		Share		Provision		Provision		Income		Share
Earnings Under U.S. GAAP	$	37,687	$	7,133	$	30,554	$	1.92	$	23,212	$	3,990	$	19,222	$	1.30
Add: Merger-Related Expenses (1)		0		0		0				7,708		1,574		6,134
Add: Loss on Prepayment of Borrowings (1)		0		0		0				1,636		344		1,292
Adjusted Earnings (Non-U.S. GAAP)	$	37,687	$	7,133	$	30,554	$	1.92	$	32,556	$	5,908	$	26,648	$	1.80

(1) Income tax has been allocated based on a marginal income tax rate of 21%. The effect on the income tax provision is adjusted for the estimated nondeductible portion of the expenses.

Other significant variances were as follows:

● Net interest income was up $10,374,000 (15.4%) in 2021 over 2020, reflecting growth mainly attributable to the Covenant acquisition that closed July 1, 2020. In 2021, annual average outstanding loans totaled $1.597 billion, an increase of $151.7 million over 2020, annual average interest-bearing cash and due from banks of $156.2 million were up $75.6 million, annual average available-for-sale debt securities of $390.2 million were up $61.7 million, and annual average total deposits of $1.905 billion were up $319.0 million, while annual average borrowed funds were lower by $42.4 million. The net interest margin was 3.69% for 2021, unchanged from 2020. The average yield on earning assets in 2021 was down 0.22% from 2020, while the average rate on interest-bearing liabilities was down 0.28% between periods. Accretion and amortization of purchase accounting adjustments had a net positive impact on net interest income of $2,659,000 for 2021 as compared to a net positive impact of $3,272,000 for 2020.

● The provision for loan losses of $3,661,000 for 2021 was lower than the 2020 provision by $252,000. In 2021, the provision included the impact of partial charge-offs totaling $1,463,000 on a commercial loan. At December 31, 2021, the recorded investment in this loan was $1,391,000. In total, the provision for 2021 included a net charge of $1,324,000 related to specific loans (net charge-offs of $1,509,000 offset by a net decrease in specific allowances on loans of $185,000), an increase of $2,251,000 in the collectively determined potion of the allowance and an $86,000 increase in the unallocated allowance. The increase in the collectively determined portion of the allowance reflected the impact of an increase in volume of commercial loans, excluding PPP loans. In comparison, the 2020 provision of $3,913,000 included the impact of a charge-off of $2,219,000 on one commercial loan.

● Noninterest income increased $1,513,000, or 6.2% in 2021 over 2020. Significant variances include the following:

Ø Trust revenue totaled $7,234,000 in 2021, an increase of $913,000 over 2020, reflecting the impact of growth in average trust assets under management including the impact of market value appreciation.

Ø Interchange revenue from debit card transactions totaled $3,855,000, an increase of $761,000 over 2020, reflecting an increase in transaction volumes.

Ø Loan servicing fees, net, totaled $694,000, an increase of $755,000 over the 2020 total of negative $61,000 (a decrease in revenue). The net increase reflects growth in volume of residential mortgage loans sold with servicing retained. Further, the fair value of servicing rights decreased $68,000 in 2021 as compared to a reduction in fair value of $576,000 in 2020 mainly due to changes in assumptions related to prepayments of mortgage loans.

Ø Service charges on deposit accounts totaled $4,633,000, an increase of $402,000 over 2020, as consumer and business activity increased.

15

Ø Brokerage and insurance revenue totaled $1,860,000, an increase of $374,000 over 2020, due to commissions on higher transaction volume.

Ø Other noninterest income totaled $3,580,000, an increase of $225,000 over 2020. Within this category, significant variances included the following:

● Income from realization of tax credits of $772,000 was $268,000 higher in 2021 as compared to 2020 due to higher PA Educational Improvement Tax Credit Program donations.

● Credit card interchange income of $434,000 increased $144,000 due to higher transaction volume.

● Fee income for providing credit enhancement on mortgage loans sold of $348,000 increased $122,000.

● Other noninterest income decreased $272,000 as the Corporation recognized income of $279,000 in the third quarter 2020 from a life insurance arrangement in which benefits were split between the Corporation and heirs of a former employee.

● Dividend income from Federal Home Loan Bank stock of $514,000 decreased $140,000.

Ø Net gains from sales of loans totaled $3,428,000, a decrease of $1,975,000 from 2020, reflecting a decrease in volume of mortgage loans sold, resulting mainly from lower refinancing activity and overall market conditions.

● Noninterest expense increased $6,863,000, or 12.3% in 2021 over 2020, excluding merger-related expenses and loss on prepayment of borrowings. Significant variances included the following:

Ø Salaries and employee benefits expense totaled $37,603,000, an increase of $4,541,000 over 2020, reflecting the inclusion of the former Covenant operations for twelve months in 2021 as compared to six months in 2020, as well as increases in lending, human resources, information technology and other personnel needed to accommodate growth, and increases in health care expense due to higher claims on the Corporation’s partially self-insured plan.

Ø Data processing and telecommunications expenses totaled $5,903,000, an increase of $587,000 over 2020, including the impact of growth related to the Covenant acquisition, increased costs from outsourced support services and other increases in software licensing and maintenance costs.

Ø Professional fees expense totaled $2,243,000, an increase of $551,000 over 2020, mainly due to increases in recruiting services and PPP loan processing professional fees.

Ø Net occupancy and equipment expense totaled $4,984,000, an increase of $523,000, primarily reflecting an increase due to the Covenant acquisition.

Ø Pennsylvania shares tax expense totaled $1,951,000, an increase of $262,000, reflecting the increase in in C&N Bank’s stockholder’s equity.

Ø Automated teller machine and interchange expense totaled $1,433,000, an increase of $202,000, reflecting increased volume of activity.

Ø Other noninterest expense totaled $8,355,000, an increase of $197,000 over 2020. Within this category, significant variances included the following:

● FDIC insurance expense of $581,000 increased $258,000.

● Business development expenses of $452,000 increased $220,000, due primarily to an increase in public relations expense.

● Donations expense of $847,000 increased $208,000, mainly due to an increase in donations associated with the Pennsylvania Educational Improvement Tax Credit program.

● Other increases include legal fees and expenses of $83,000, bank insurance of $56,000, accounting and auditing expense of $51,000, and credit card reward redemption expense of $50,000.

16

● Other operational losses of $199,000 decreased $405,000, including a reduction in charges principally related to Trust Department tax compliance and preparation matters.

● Gains on other real estate properties totaled $100,000 in 2021 as compared to net losses of $146,000 in 2020.

● The allowance for SBA claim adjustments decreased, reflecting more favorable claim results than previously estimated, resulting in a reduction in expense of $236,000 in 2021 as compared to a reduction in expense of $70,000 in 2020.

● The income tax provision was $7,133,000 for the year ended December 31, 2021, up from $3,990,000 for the year ended December 31, 2020. Pre-tax income was $14,475,000 higher in 2021 as compared to 2020. The effective tax rate was 18.9% for 2021, higher than the 17.2% effective tax rate for 2020. The tax benefit of tax-exempt interest income was 2.4% of pre-tax income in 2021 as compared to a 3.5% benefit in 2020.

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

ACQUISITION OF COVENANT FINANCIAL, INC.

The Corporation’s acquisition of Covenant was completed July 1, 2020. Covenant was the parent company of Covenant Bank, which operated banking offices in Bucks and Chester Counties of Pennsylvania. Pursuant to the transaction, Covenant merged with and into the Corporation and Covenant Bank merged with and into C&N Bank. Total purchase consideration was $63.3 million, including common stock with a fair value of $41.6 million and cash of $21.7 million. The acquisition of Covenant followed the acquisition of Monument Bancorp, Inc. (“Monument”) on April 1, 2019. Monument was the parent company of Monument Bank, with banking and lending offices in Bucks County, Pennsylvania. The total transaction value of the Monument acquisition was $42.7 million.

In connection with the Covenant acquisition, effective July 1, 2020, the Corporation recorded goodwill of $24.1 million and a core deposit intangible asset of $3.1 million. Assets acquired included loans valued at $464.2 million, cash and due from banks of $97.8 million, bank-owned life insurance valued at $11.2 million and securities valued at $10.8 million. Liabilities assumed included deposits valued at $481.8 million, borrowings valued at $64.0 million and subordinated debt valued at $10.1 million. The assets purchased and liabilities assumed in the acquisition were recorded at their preliminary estimated fair values at the time of closing subject to adjustment for up to one year subsequent to the acquisition. There were no adjustments to the fair values of assets acquired and liabilities assumed in the Covenant acquisition in the year ended December 31, 2021.

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.

Allowance for Loan Losses – 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.

Fair Value of Available-For-Sale Debt Securities – 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.

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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 2021 and 2020. 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.

Fully taxable equivalent net interest income was $79,074,000 in 2021, $10,529,000 (15.4%) higher than in 2020. Interest income was $7,496,000 higher in 2021 as compared to 2020; interest expense was lower by $3,033,000 in comparing the same periods. As presented in Table II, the Net Interest Margin was 3.69% in 2021, unchanged from 2020, and the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) increased to 3.55% in 2021 from 3.49% in 2020. The overall increase in net interest income resulted mainly from the acquisition of Covenant in the third quarter 2020 and income from the PPP loan program.

Accretion and amortization of purchase accounting adjustments related to the Covenant and Monument acquisitions had a positive effect on net interest income in 2021 of $2,659,000, including an increase in income on loans of $1,289,000 and net reductions in interest expense on time deposits and borrowed funds totaling $1,370,000. In comparison, the net positive impact on net interest income of purchase accounting adjustments was $3,272,000 in 2020. The net positive impact to the net interest margin from purchase accounting adjustments was 0.13% in 2021 and 0.18% in 2020.

INTEREST INCOME AND EARNING ASSETS

Interest income totaled $85,636,000 in 2021, an increase of 9.6% from 2020. Interest and fees on loans receivable increased $7,175,000, or 10.3%, to $76,781,000 in 2021 from $69,606,000 in 2020. Interest and fees on PPP loans totaled $6,530,000 in 2021, an increase of $3,606,000 over the total in 2020. Table III shows the increase in interest on loans including $8,016,000 attributable to an increase in volume and a decrease of $841,000 related to a decrease in average yield.

The average balance of loans receivable increased $151,658,000 (10.5%) to $1,596,756,000 in 2021 from $1,445,098,000 in 2020. The increase in average loans outstanding includes the effect of loans acquired from Covenant, effective July 1, 2020.

The fully taxable equivalent yield on loans in 2021 was 4.81% compared to 4.82% in 2020. In 2021, rates on variable rate loans and rates on most new loan originations decreased, and prepayments of loans increased, consistent with falling market interest rates throughout most of 2020 and 2021. Further, yields on loans acquired from Covenant on July 1, 2020 were recorded at then-current market yields, which were lower than the Corporation’s average portfolio yield before the acquisition. The overall yield on loans in 2021 included a benefit from the acceleration of fees recognized on PPP loans as repayments have been received from the SBA. As shown in Table II, in 2021, the average balance of 1st Draw PPP loans was $44,735,000 with an average yield of 7.77% and the average balance of 2nd Draw PPP loans was $52,917,000 with an average yield of 5.77%.

Interest income on available-for-sale debt securities totaled $8,471,000 in 2021, an increase of $268,000 from the total for 2020. As indicated in Table II, average available-for-sale debt securities (at amortized cost) totaled $390,163,000 in 2021, an increase of $61,718,000 (18.8%) from 2020. The average yield on available-for-sale debt securities decreased to 2.17% in 2021 from 2.50% in 2020, reflecting acceleration of calls and prepayments of amortizing securities and purchases of lower-yielding securities at recent, lower market rates.

Interest income from interest-bearing deposits in banks totaled $318,000 in 2021, an increase of $67,000 from the total for 2020. The most significant categories of assets within this category include interest-bearing balances held with the Federal Reserve and investments in certificates of deposit issued by other banks. The average balance increased $75,565,000, as increases in deposits and funds from loan repayments outpaced uses of funds for loan originations, purchases of securities and repayments of borrowings. The average balance of interest-bearing due from banks was 7.3% of average earning assets in 2021 as compared to 4.3% in 2020. The average yield on interest-bearing due from banks fell to 0.20% in 2021 from 0.31% in 2020, due to a decrease in market rates.

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INTEREST EXPENSE AND INTEREST-BEARING LIABILITIES

Interest expense decreased $3,033,000, or 31.6%, to $6,562,000 in 2021 from $9,595,000 in 2020. Table II shows that the overall cost of funds on interest-bearing liabilities decreased to 0.44% in 2021 from 0.72% in 2020.

Total average deposit balances (interest-bearing and noninterest-bearing) increased $318,991,000 to $1,905,400,000 in 2021 from $1,586,409,000 in 2020. The increase in average deposits includes the impact of the Covenant acquisition. The average rate on interest-bearing deposits decreased to 0.33% in 2021 from 0.60% in 2020. The decrease in average rate on deposits includes decreases of 0.54% on time deposits, 0.12% on money market accounts, 0.09% on interest checking accounts and 0.02% on saving accounts. The average balance of time deposits fell to 17.2% of average total deposits in 2021 from 25.1% in 2020, further contributing to the reduction in average rate on deposits.

Interest expense on short-term borrowings decreased $344,000 to $23,000 in 2021 from $367,000 in 2020. The average balance of short-term borrowings decreased to $6,269,000 in 2021 from $34,212,000 in 2020. The average rate on short-term borrowings decreased to 0.37% in 2021 from 1.07% in 2020.

Interest expense on long-term borrowings (FHLB advances) decreased $892,000 to $399,000 in 2021 from $1,291,000 in 2020. The average balance of long-term borrowings was $44,026,000 in 2021, down from an average balance of $83,500,000 in 2020. Borrowings are classified as long-term within the Tables based on their term at origination or assumption in business combinations. The average rate on long-term borrowings was 0.91% in 2021 compared to 1.55% in 2020. The reduction in both average balance and rate reflects the prepayment of higher cost borrowings of $48,036,000 in December 2020.

Interest expense on the senior notes issued in May 2021 totaled $293,000 in 2021. The average balance of the senior notes was $9,129,000 in 2021 with an average rate of 3.21%.

Interest expense on subordinated debt increased $603,000 to $1,309,000 in 2021 from $706,000 in 2020. The average balance of subordinated debt increased to $27,399,000 in 2021 from $11,553,000 in 2020 reflecting the net impact of subordinated debt agreements assumed in the Covenant transaction of $10,091,000 in July 2020, the new issue of subordinated debt of $24,437,000, net, in May 2021 and the redemption of subordinated notes totaling $8,000,000 in June 2021. The average rate on subordinated debt decreased to 4.78% in 2021 from 6.11% in 2020.

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TABLE I - ANALYSIS OF INTEREST INCOME AND EXPENSE

	Year Ended
	December 31,				Increase/
(In Thousands)	2021		2020		(Decrease)
INTEREST INCOME
Interest-bearing due from banks	$	318	$	251	$	67
Available-for-sale debt securities:
Taxable		5,114		5,534		(420)
Tax-exempt		3,357		2,669		688
Total available-for-sale debt securities		8,471		8,203		268
Loans receivable:
Taxable		68,019		64,460		3,559
Paycheck Protection Program - 1st Draw		3,476		2,924		552
Paycheck Protection Program - 2nd Draw		3,054		0		3,054
Tax-exempt		2,232		2,222		10
Total loans receivable		76,781		69,606		7,175
Other earning assets		66		80		(14)
Total Interest Income		85,636		78,140		7,496
INTEREST EXPENSE
Interest-bearing deposits:
Interest checking		897		948		(51)
Money market		1,156		1,172		(16)
Savings		231		230		1
Time deposits		2,254		4,881		(2,627)
Total interest-bearing deposits		4,538		7,231		(2,693)
Borrowed funds:
Short-term		23		367		(344)
Long-term - FHLB advances		399		1,291		(892)
Senior notes, net		293		0		293
Subordinated debt, net		1,309		706		603
Total borrowed funds		2,024		2,364		(340)
Total Interest Expense		6,562		9,595		(3,033)
Net Interest Income	$	79,074	$	68,545	$	10,529

(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 21%.

(2) Fees on loans are included with interest on loans and amounted to $7,958,000 in 2021 and $4,314,000 in 2020.

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TABLE II - ANALYSIS OF AVERAGE DAILY BALANCES AND RATES

(Dollars In Thousands)	Year					Year
	Ended		Rate of			Ended		Rate of
	12/31/2021		Return/			12/31/2020		Return/
	Average		Cost of			Average		Cost of
	Balance		Funds%			Balance		Funds%
EARNING ASSETS
Interest-bearing due from banks	$	156,152		0.20	%	$	80,587		0.31	%
Available-for-sale debt securities, at amortized cost:
Taxable		262,880		1.95	%		238,407		2.32	%
Tax-exempt		127,283		2.64	%		90,038		2.96	%
Total available-for-sale debt securities		390,163		2.17	%		328,445		2.50	%
Loans receivable:
Taxable		1,426,150		4.77	%		1,285,383		5.01	%
Paycheck Protection Program - 1st Draw		44,735		7.77	%		98,466		2.97	%
Paycheck Protection Program - 2nd Draw		52,917		5.77	%		0		0.00	%
Tax-exempt		72,954		3.06	%		61,249		3.63	%
Total loans receivable		1,596,756		4.81	%		1,445,098		4.82	%
Other earning assets		2,404		2.75	%		2,357		3.39	%
Total Earning Assets		2,145,475		3.99	%		1,856,487		4.21	%
Cash		24,132					25,439
Unrealized gain on securities		10,676					12,487
Allowance for loan losses		(12,354)					(11,018)
Bank-owned life insurance		30,373					24,415
Bank premises and equipment		20,814					19,826
Intangible assets		56,086					43,330
Other assets		44,032					38,859
Total Assets	$	2,319,234				$	2,009,825
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking	$	399,130		0.22	%	$	310,782		0.31	%
Money market		433,508		0.27	%		298,736		0.39	%
Savings		228,411		0.10	%		189,316		0.12	%
Time deposits		327,816		0.69	%		397,974		1.23	%
Total interest-bearing deposits		1,388,865		0.33	%		1,196,808		0.60	%
Borrowed funds:
Short-term		6,269		0.37	%		34,212		1.07	%
Long-term - FHLB advances		44,026		0.91	%		83,500		1.55	%
Senior notes, net		9,129		3.21	%		0		0.00	%
Subordinated debt, net		27,399		4.78	%		11,553		6.11	%
Total borrowed funds		86,823		2.33	%		129,265		1.83	%
Total Interest-bearing Liabilities.		1,475,688		0.44	%		1,326,073		0.72	%
Demand deposits		516,535					389,601
Other liabilities		25,785					20,800
Total Liabilities		2,018,008					1,736,474
Stockholders' equity, excluding other comprehensive income		292,683					263,253
Accumulated other comprehensive income		8,543					10,098
Total Stockholders' Equity		301,226					273,351
Total Liabilities and Stockholders' Equity	$	2,319,234				$	2,009,825
Interest Rate Spread				3.55	%				3.49	%
Net Interest Income/Earning Assets				3.69	%				3.69	%
Total Deposits (Interest-bearing and Demand)	$	1,905,400				$	1,586,409

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

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

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TABLE III -  ANALYSIS OF VOLUME AND RATE CHANGES

(In Thousands)	Year Ended 12/31/2021 vs. 12/31/2020
	Change in		Change in		Total
	Volume		Rate		Change
EARNING ASSETS
Interest-bearing due from banks	$	176	$	(109)	$	67
Available-for-sale debt securities:
Taxable		532		(952)		(420)
Tax-exempt		1,008		(320)		688
Total available-for-sale debt securities		1,540		(1,272)		268
Loans receivable:
Taxable		6,821		(3,262)		3,559
Paycheck Protection Program - 1st Draw		(2,247)		2,799		552
Paycheck Protection Program - 2nd Draw		3,054		0		3,054
Tax-exempt		388		(378)		10
Total loans receivable		8,016		(841)		7,175
Other earning assets		2		(16)		(14)
Total Interest Income		9,734		(2,238)		7,496
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking		233		(284)		(51)
Money market		430		(446)		(16)
Savings		43		(42)		1
Time deposits		(752)		(1,875)		(2,627)
Total interest-bearing deposits		(46)		(2,647)		(2,693)
Borrowed funds:
Short-term		(191)		(153)		(344)
Long-term - FHLB advances		(476)		(416)		(892)
Senior notes, net		293		0		293
Subordinated debt, net		786		(183)		603
Total borrowed funds		412		(752)		(340)
Total Interest Expense		366		(3,399)		(3,033)
Net Interest Income	$	9,368	$	1,161	$	10,529

(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 21%.

(2) The change in interest due to both volume and rates has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amounts of the change in each.

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NONINTEREST INCOME

TABLE IV - COMPARISON OF NONINTEREST INCOME

(Dollars in Thousands)	Year Ended
	December 31,					$	%
	2021		2020			Change	Change
Trust revenue	$	7,234	$	6,321	$	913	14.4	%
Brokerage and insurance revenue		1,860		1,486		374	25.2	%
Service charges on deposit accounts		4,633		4,231		402	9.5	%
Interchange revenue from debit card transactions		3,855		3,094		761	24.6	%
Net gains from sales of loans		3,428		5,403		(1,975)	(36.6)	%
Loan servicing fees, net		694		(61)		755	N/M
Increase in cash surrender value of life insurance		573		515		58	11.3	%
Other noninterest income		3,580		3,355		225	6.7	%
Total noninterest income, excluding realized gains on securities, net		25,857		24,344		1,513	6.2	%
Realized gains on available-for-sale debt securities, net		24		169		(145)	(85.8)	%
Total noninterest income	$	25,881	$	24,513	$	1,368	5.6	%

Total noninterest income, excluding realized gains and losses on securities, increased $1,513,000 (6.2%) in 2021 compared to 2020. Changes of significance are discussed in the Earnings Overview section of Management’s Discussion and Analysis.

NONINTEREST EXPENSE

TABLE V - COMPARISON OF NONINTEREST EXPENSE

(Dollars in Thousands)	Year Ended
	December 31,				$		%
	2021		2020		Change		Change
Salaries and employee benefits	$	37,603	$	33,062	$	4,541	13.7	%
Net occupancy and equipment expense		4,984		4,461		523	11.7	%
Data processing and telecommunications expense		5,903		5,316		587	11.0	%
Automated teller machine and interchange expense		1,433		1,231		202	16.4	%
Pennsylvania shares tax		1,951		1,689		262	15.5	%
Professional fees		2,243		1,692		551	32.6	%
Other noninterest expense		8,355		8,158		197	2.4	%
Total noninterest expense, excluding merger-related expenses and loss on prepayment of borrowings		62,472		55,609		6,863	12.3	%
Merger-related expenses		0		7,708		(7,708)	(100.0)	%
Loss on prepayment of borrowings		0		1,636		(1,636)	(100.0)	%
Total noninterest expense	$	62,472	$	64,953	$	(2,481)	(3.8)	%

Total noninterest expenses decreased $2,481,000 (3.8%) in 2021 as compared to 2020. Total noninterest expenses increased $6,863,000 (12.3%) in 2021 excluding Covenant merger-related expenses and loss on prepayment of borrowings in 2020. Changes of significance are discussed in the Earnings Overview section of Management’s Discussion and Analysis.

INCOME TAXES

The effective income tax rate was 18.9% of pre-tax income in 2021, up from 17.2% in 2020. The Corporation’s effective tax rates differed from the federal statutory rate of 21% mainly because of the effects of tax-exempt interest income. The higher effective income tax rate in 2021 as compared to 2020 resulted mainly from a reduction in the proportion of tax-exempt interest income to total pre-tax income.

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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, 2021, the net deferred tax asset was $5,887,000, up from the balance at December 31, 2020 of $2,705,000. The most significant changes in temporary difference components included a net decrease of $1,826,000 in the deferred tax liability resulting from a reduction in the unrealized gain on available-for-sale debt securities attributable to higher interest rates, as well as fluctuations related to bank premises and equipment, the allowance for loan losses, and acquisition-related adjustments to loans.

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, the value of the benefit from realization of deferred tax assets would be impacted if income tax rates were changed from currently enacted levels.

Management believes the recorded net deferred tax asset at December 31, 2021 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

The objectives of the Corporation’s available-for-sale debt securities (investment) portfolio are to maintain high credit quality, achieve good portfolio balance, support liquidity needs, maximize return on earning assets within reasonable risk parameters, provide an adequate amount of pledgeable securities, support local communities by purchasing securities they issue for public projects and programs, provide a means to hedge the Corporation’s interest rate risk exposure, and minimize taxes. Management continually evaluates the size and mix of securities held in the available-for-sale debt securities portfolio while considering these objectives.

Table VI shows the composition of the available-for-sale debt securities portfolio at December 31, 2021 and 2020. The amortized cost of available-for-sale debt securities increased to $511,592,000 at December 31, 2021 from $334,552,000 at December 31, 2020. The increase in the securities portfolio resulted from management’s decision to invest excess funds available from the fast growth in deposits and loan repayments throughout most of 2020 and 2021. At December 31, 2021, the largest categories of securities held as a percentage of total amortized cost, were as follows: (1) tax-exempt and taxable municipal bonds, 42.1%; (2) residential mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, including pass-through securities and collateralized mortgage obligations, 27.8%; and (3) commercial mortgage-backed securities issued or guaranteed by U.S. Government sponsored agencies, 17.0%.

As reflected in Table VI, the fair value of available-for-sale securities as of December 31, 2021 was $6,087,000, or 1.2% greater than the total amortized cost basis. In comparison, the aggregate unrealized gain position at December 31, 2020 was $14,780,000, or 4.4% of the total amortized cost basis. The unrealized decrease in fair value of the portfolio in 2021 resulted from an increase in interest rates.

Management has reviewed the Corporation’s holdings as of December 31, 2021 and concluded that unrealized losses on all of the securities in an unrealized loss position are considered temporary. Note 7 to the consolidated financial statements provides more detail concerning the Corporation’s processes for evaluating securities for other-than-temporary impairment.

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TABLE VI - INVESTMENT SECURITIES

	2021				2020
	Amortized		Fair		Amortized		Fair
(In Thousands)	Cost		Value		Cost		Value
AVAILABLE-FOR-SALE DEBT SECURITIES:
Obligations of the U.S. Treasury	$	25,058	$	24,912	$	12,184	$	12,182
Obligations of U.S. Government agencies		23,936		24,091		25,349		26,344
Bank holding company debt securities		18,000		17,987		0		0
Obligations of states and political subdivisions:
Tax-exempt		143,427		148,028		116,427		122,401
Taxable		72,182		72,765		45,230		47,452
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		98,048		98,181		36,853		38,176
Residential collateralized mortgage obligations		44,015		44,247		56,048		57,467
Commercial mortgage-backed securities		86,926		87,468		42,461		45,310
Total Available-for-Sale Debt Securities	$	511,592	$	517,679	$	334,552	$	349,332

The following table presents the contractual maturities and the weighted-average yields (calculated based on amortized cost) of investment securities as of December 31, 2021. Yields on tax-exempt securities are presented on a fully taxable-equivalent basis. For callable securities, yields on securities purchased at a discount are based on yield-to-maturity, while yields on securities purchased at a premium are based on yield to the first call date. Yields on mortgage-backed securities are estimated and include the effects of prepayment assumptions. 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.

	Within				One-				Five-				After
	One				Five				Ten				Ten
(Dollars In Thousands)	Year		Yield		Years		Yield		Years		Yield		Years		Yield		Total		Yield
AVAILABLE-FOR-SALE DEBT SECURITIES:
Obligations of the U.S. Treasury	$	6,044	0.12	%	$	7,011	0.60	%	$	12,003	1.32	%	$	0	0.00	%	$	25,058	0.83	%
Obligations of U.S. Government agencies		0	0.00	%		10,000	0.55	%		7,505	2.06	%		6,431	3.41	%		23,936	1.79	%
Bank holding company debt securities		0	0.00	%		0	0.00	%		18,000	3.18	%		0	0.00	%		18,000	3.18	%
Obligations of states and political subdivisions:
Tax-exempt		2,365	2.66	%		25,618	2.58	%		24,919	2.92	%		90,525	2.39	%		143,427	2.52	%
Taxable		6,045	3.06	%		15,932	1.88	%		17,105	1.95	%		33,100	2.50	%		72,182	2.28	%
Sub-total	$	14,454	1.77	%	$	58,561	1.81	%	$	79,532	2.45	%	$	130,056	2.47	%	$	282,603	2.29	%
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities																		98,048	1.48	%
Residential collateralized mortgage obligations																		44,015	1.79	%
Commercial mortgage-backed securities																		86,926	1.89	%
Total																	$	511,592	2.02	%

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.

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FINANCIAL CONDITION

This section includes information regarding the Corporation’s lending activities or other significant changes or exposures that are not otherwise addressed in Management’s Discussion and Analysis. Significant changes in the average balances of the Corporation’s earning assets and interest-bearing liabilities are described in the Net Interest Income section of Management’s Discussion and Analysis. Other significant balance sheet items, including securities, the allowance for loan losses and stockholders’ equity, are discussed in separate sections of Management’s Discussion and Analysis. There are no significant concerns that have arisen related to the Corporation’s off-balance sheet loan commitments or outstanding letters of credit at December 31, 2021, and 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 2022.

Table VII shows the composition of the loan portfolio as of the end of the years 2017 through 2021. At December 31, 2021, gross loans outstanding totaled $1,564,849,000, a decrease of $79.4 million (4.8%) from December 31, 2020 as the outstanding balance of PPP loans decreased $105.4 million. The total recorded investment in loans at December 31, 2021 was $749.1 million (92%) higher than the total at December 31, 2017, with most of the growth attributable to the Monument acquisition in 2019, Covenant acquisition in 2020 and expansion in Southcentral Pennsylvania, mainly in 2020 and 2021. Over the period 2017-2021, the Corporation has increased the proportion of residential mortgage loans sold into the secondary market. Consistent with these trends, commercial segment loans increased to 63% of the recorded investment in the portfolio at December 31, 2021 from 43% at December 31, 2017, while residential mortgage segment loans decreased to 36% at December 31, 2021 from 55% at December 31, 2017.

While the Corporation’s lending activities are primarily concentrated in its market areas, a portion of the Corporation’s commercial loan segment consists of participation loans. Participation loans represent portions of larger commercial transactions for which other institutions are the “lead banks”. Although not the lead bank, the Corporation conducts detailed underwriting and monitoring of participation loan opportunities. Participation loans are included in the “Commercial and industrial,” “Commercial loans secured by real estate”, “Political subdivisions” and “Other commercial” classes in the loan tables presented in this Form 10-K. Total participation loans outstanding amounted to $54,372,000 at December 31, 2021, down from $65,741,000 at December 31, 2020. At December 31, 2021, the balance of participation loans outstanding includes a total of $30,196,000 to businesses located outside of the Corporation’s market areas. Also, included within participation loans are “leveraged loans,” meaning loans to businesses with minimal tangible book equity and for which the extent of collateral available is limited, though typically at the time of origination the businesses have demonstrated strong cash flow performance in their recent histories. Leveraged participation loans totaled $7,468,000 at December 31, 2021 and $8,437,000 at December 31, 2020.

Table VIII presents loan maturity data as of December 31, 2021. 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 presents a well-balanced maturity and repricing mix. Total fixed rate loans maturing within one year and variable or adjustable loans repricing within one year amount to $439,016,000 or 28% of the portfolio. Table VIII shows that fixed-rate loans total approximately 44% of the loan portfolio and approximately 33% of the portfolio are variable-rate loans that re-price after more than one year.

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. In late 2019, the Corporation began to originate and sell larger-balance, nonconforming mortgages under the MPF Direct Program, which is also administered by the Federal Home Loan Banks of Pittsburgh and Chicago. The Corporation does not retain servicing rights for loans sold under the MPF Direct Program. Through December 31, 2021, the Corporation’s activity under the MPF Direct Program has been minimal.

For loan sales originated under the MPF 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, 2021, the total outstanding balance of loans the Corporation has

26

repurchased as a result of identified instances of noncompliance amounted to $1,571,000, and the corresponding total outstanding balance of repurchased loans at December 31, 2020 was $1,714,000.

At December 31, 2021, outstanding balances of loans sold and serviced through the MPF Xtra and Original programs totaled $334,741,000, including loans sold through the MPF Xtra program of $165,668,000 and loans sold through the Original program of $169,073,000. At December 31, 2020, outstanding balances of loans sold and serviced through the two programs totaled $278,857,000, including loans sold through the MPF Xtra program of $149,463,000 and loans sold through the Original Program of $129,394,000. 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, 2021 and December 31, 2020.

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, 2021, the Corporation’s maximum credit enhancement obligation under the MPF Original Program was $8,656,000, and the Corporation has recorded a related allowance for credit losses in the amount of $635,000 which is included in accrued interest and other liabilities in the accompanying consolidated balance sheets. At December 31, 2020, the Corporation’s maximum credit enhancement obligation under the MPF Original Program was $6,766,000, and the related allowance for credit losses was $500,000. Income related to providing the credit enhancement (included in other noninterest income in the consolidated statements of income) totaled $348,000 in 2021 and $227,000 in 2020. A provision for losses related to the credit enhancement obligation (included in other noninterest expense in the consolidated statements of income) of $135,000 was recorded in 2021 compared to $167,000 in 2020. The Corporation does not provide a credit enhancement for loans sold through the Xtra program.

The Corporation is a participating SBA lender. Under the terms of its arrangements with the SBA, the Corporation may originate loans to commercial borrowers, with full-or-partial guarantees by the SBA, subject to the SBA’s underwriting and documentation requirements. Covenant had also been a participating SBA lender. Pursuant to the Covenant acquisition, the Corporation acquired loans with partial SBA guarantees, or in some cases, loans where the SBA-guaranteed portion of the loans had been sold back to the SBA subject to ongoing compliance with SBA underwriting and documentation requirements. As part of its due diligence, the Corporation reviewed all the loans originated through the various SBA loan programs acquired from Covenant as of July 1, 2020 and recorded an allowance for SBA claim adjustments of $800,000. Determination of the allowance was subjective in nature and was based on the Corporation’s assessment of the credit quality of the loans and the quality of the documentation supporting compliance with SBA requirements. The Corporation’s total exposure related to SBA guarantees on loans originated by Covenant was $12,856,000 at December 31, 2021 and $17,041,000 at December 31, 2020 with an allowance for SBA claim adjustments (included in accrued interest and other liabilities in the consolidated balance sheets) of $457,000 at December 31, 2021 and $730,000 at December 31, 2020. In the year ended December 31, 2021, the Corporation recorded charges against the allowance for SBA claims totaling $37,000 and a reduction in other noninterest expense of $236,000 representing amounts realized on SBA claims in excess of prior estimates. In comparison, in 2020, there were no charges against the allowance for SBA claims and the Corporation recognized a reduction in other noninterest expense of $70,000.

27

TABLE VII – Five-year Summary of Loans by Type

(Dollars In Thousands)	2021		%	2020		%	2019		%	2018		%	2017		%
Commercial:
Commercial loans secured by real estate	$	569,840	36.4	$	531,810	32.3	$	301,227	25.5	$	162,611	19.6	$	159,266	19.5
Commercial and industrial		159,073	10.2		159,577	9.7		126,374	10.7		91,856	11.1		88,276	10.8
Paycheck Protection Program - 1st Draw		1,356	0.1		132,269	8.0		0	0.0		0	0.0		0	0.0
Paycheck Protection Program - 2nd Draw		25,508	1.6		0	0.0		0	0.0		0	0.0		0	0.0
Political subdivisions		81,301	5.2		53,221	3.2		53,570	4.5		53,263	6.4		59,287	7.3
Commercial construction and land		60,579	3.9		42,874	2.6		33,555	2.8		11,962	1.4		14,527	1.8
Loans secured by farmland		11,121	0.7		11,736	0.7		12,251	1.0		7,146	0.9		7,255	0.9
Multi-family (5 or more) residential		50,089	3.2		55,811	3.4		31,070	2.6		7,180	0.9		7,713	0.9
Agricultural loans		2,351	0.2		3,164	0.2		4,319	0.4		5,659	0.7		6,178	0.8
Other commercial loans		17,153	1.0		17,289	1.1		16,535	1.4		13,950	1.7		10,986	1.3
Total commercial		978,371	62.5		1,007,751	61.2		578,901	49.0		353,627	42.7		353,488	43.3
Residential mortgage:
Residential mortgage loans - first liens		483,629	30.9		532,947	32.4		510,641	43.2		372,339	45.0		359,987	44.1
Residential mortgage loans - junior liens		23,314	1.5		27,311	1.7		27,503	2.3		25,450	3.1		25,325	3.1
Home equity lines of credit		39,252	2.5		39,301	2.4		33,638	2.8		34,319	4.1		35,758	4.4
1-4 Family residential construction		23,151	1.5		20,613	1.3		14,798	1.3		24,698	3.0		26,216	3.2
Total residential mortgage		569,346	36.4		620,172	37.8		586,580	49.6		456,806	55.2		447,286	54.8
Consumer		17,132	1.1		16,286	1.0		16,741	1.4		17,130	2.1		14,939	1.8
Total		1,564,849	100.0		1,644,209	100.0		1,182,222	100.0		827,563	100.0		815,713	100.0
Less: allowance for loan losses		(13,537)			(11,385)			(9,836)			(9,309)			(8,856)
Loans, net	$	1,551,312		$	1,632,824		$	1,172,386		$	818,254		$	806,857

TABLE VIII – LOAN MATURITY DISTRIBUTION

	As of December 31, 2021
	Fixed-Rate Loans								Variable- or Adjustable-Rate Loans								All Loans
	1 Year		1-5		>5				1 Year		1-5		>5
(In Thousands)	or Less		Years		Years		Total		or Less		Years		Years		Total		Total
Commercial:
Commercial loans secured by real estate	$	28,232	$	114,404	$	77,419	$	220,055	$	153,384	$	178,051	$	18,350	$	349,785	$	569,840
Commercial and industrial		15,894		33,420		4,937		54,251		82,969		21,323		530		104,822		159,073
Paycheck Protection Program - 1st Draw		781		575		0		1,356		0		0		0		0		1,356
Paycheck Protection Program - 2nd Draw		0		25,508		0		25,508		0		0		0		0		25,508
Political subdivisions		2,164		5,709		65,371		73,244		1,247		299		6,511		8,057		81,301
Commercial construction and land		1,287		3,959		43,630		48,876		8,049		1,650		2,004		11,703		60,579
Loans secured by farmland		49		183		890		1,122		2,129		7,688		182		9,999		11,121
Multi-family (5 or more) residential		1,569		11,045		5,980		18,594		14,163		10,339		6,993		31,495		50,089
Agricultural loans		120		830		0		950		1,214		187		0		1,401		2,351
Other commercial loans		3		1,043		3,009		4,055		9,765		2,977		356		13,098		17,153
Total commercial		50,099		196,676		201,236		448,011		272,920		222,514		34,926		530,360		978,371
Residential mortgage:
Residential mortgage loans - first liens		10,198		31,761		144,308		186,267		57,760		119,418		120,184		297,362		483,629
Residential mortgage loans - junior liens		381		2,800		12,825		16,006		3,434		3,455		419		7,308		23,314
Home equity lines of credit		95		0		250		345		38,815		0		92		38,907		39,252
1-4 Family residential construction		0		3,198		11,488		14,686		725		589		7,151		8,465		23,151
Total residential mortgage		10,674		37,759		168,871		217,304		100,734		123,462		127,846		352,042		569,346
Consumer		3,827		9,754		2,789		16,370		762		0		0		762		17,132
Total	$	64,600	$	244,189	$	372,896	$	681,685	$	374,416	$	345,976	$	162,772	$	883,164	$	1,564,849

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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 $13,537,000 at December 31, 2021, up from $11,385,000 at December 31, 2020. Table X shows that the collectively determined portion of the allowance increased by a net $2,251,000 across all loan classes, including an increase in the collectively determined portion of the allowance related to commercial loans of $2,008,000. This increase was primarily due to an increase in loan volume, excluding PPP loans.

Table X shows total specific allowances on impaired loans decreased $185,000 to $740,000 at December 31, 2021 from $925,000 at December 31, 2020. At December 31, 2021, there were 3 commercial loans with specific allowances. The total recorded investment in these loans at December 31, 2021 was $6,540,000, including 2 loans secured by hotel properties with total recorded investments of $6,468,000.

Loans acquired from Covenant that were identified as having a deterioration in credit quality (purchased credit impaired, or PCI), were valued at $6,648,000 at July 1, 2020 and $6,259,000 at December 31, 2021.  The remainder of the portfolio was deemed to be the performing component of the portfolio.  Performing loans acquired from Covenant are presented net of a discount for credit losses of $3,059,000 at December 31, 2021 and $5,362,000 at December 31, 2020. This discount reflects an estimate of the present value of credit losses based on market expectations at the date of acquisition of $7,219,000, subsequently reduced as accretion has been recognized based on estimated and actual principal pay-downs.  

Loans acquired from Monument that were identified as having a deterioration in credit quality (PCI) were valued at $441,000 at April 1, 2019 and $299,000 at December 31, 2021.  The remainder of the portfolio was deemed to be the performing component of the portfolio.  Performing loans acquired from Monument are presented net of a discount for credit losses of $276,000 at December 31, 2021 and $617,000 at December 31, 2020. This discount reflects an estimate of the present value of credit losses based on market expectations at the date of acquisition of $1,914,000, subsequently reduced as accretion has been recognized based on estimated and actual principal pay-downs.

Table XI shows the allowance for loan losses totaled 0.87% of gross loans outstanding at December 31, 2021, up from 0.69% at December 31, 2020 and 0.83% at December 31, 2019, and down from levels in excess of 1.00% prior to the Covenant and Monument acquisitions from 2017 to 2018.  Table XI also shows that the total of the allowance and the credit adjustment on purchased non-impaired loans, as a percentage of total loans plus the credit adjustment, was 1.08% at December 31, 2021, up from 1.05% at December 31, 2020 and 0.93% at December 31, 2019, and in line with ratios from the previous years.

The provision for loan losses by segment for 2021 and 2020 is as follows:

(In Thousands)	2021		2020
Commercial	$	3,427	$	3,847
Residential mortgage		90		27
Consumer		58		39
Unallocated		86		0
Total	$	3,661	$	3,913

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The provision for loan losses is further detailed as follows:

Commercial segment

(In Thousands)	2021		2020
Increase in total specific allowance on impaired loans, adjusted for the effect of net charge-offs	$	1,419	$	2,215
Increase in collectively determined portion of the allowance attributable to:
Changes in loan volume		1,879		432
Changes in historical loss experience factors		129		831
Changes in qualitative factors		0		369
Total provision for loan losses - Commercial segment	$	3,427	$	3,847

Residential mortgage segment

(In Thousands)	2021		2020
Decrease in total specific allowance on impaired loans, adjusted for the effect of net charge-offs	$	(157)	$	(58)
Increase (decrease) in collectively determined portion of the allowance attributable to:
Changes in loan volume		348		(240)
Changes in historical loss experience factors		(56)		(88)
Changes in qualitative factors		(45)		413
Total provision for loan losses - Residential mortgage segment	$	90	$	27

Consumer segment

(In Thousands)	2021		2020
Increase in total specific allowance on impaired loans, adjusted for the effect of net charge-offs	$	62	$	81
Increase (decrease) in collectively determined portion of the allowance attributable to:
Changes in loan volume		14		(30)
Changes in historical loss experience factors		(23)		(15)
Changes in qualitative factors		5		3
Total provision for loan losses - Consumer segment	$	58	$	39

Total – All segments

(In Thousands)	2021		2020
Increase in total specific allowance on impaired loans, adjusted for the effect of net charge-offs	$	1,324	$	2,238
Increase (decrease) in collectively determined portion of the allowance attributable to:
Changes in loan volume		2,241		162
Changes in historical loss experience factors		50		728
Changes in qualitative factors		(40)		785
Sub-total		3,575		3,913
Unallocated		86		0
Total provision for loan losses - All segments	$	3,661	$	3,913

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

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

The effect on the provision of changes in historical loss experience and qualitative factors, as shown in the tables above, was determined by: (1) calculating the net change in each factor used in determining the allowance at the end of the period as compared to the preceding

30

period, and (2) applying the net change in each factor to the outstanding balance of loans at the end of the preceding period (excluding loans specifically evaluated for impairment).

In 2021, net charge-offs were $1,509,000, including charge-offs of $1,575,000 and recoveries of $66,000. In 2021, the Corporation recorded partial charge-offs totaling $1,463,000 on a commercial loan. At December 31, 2021, the recorded investment in this loan was $1,391,000. In 2020, the Corporation recorded a charge-off of $2,219,000 on one commercial loan for which there was no recorded investment at December 31, 2021 and 2020. Table XII shows the average rate of net charge-offs as a percentage of loans was 0.09% in 2021, with an annual average over the five-year period ended December 31, 2021 of 0.08%, and annual average rates ranging from a high of 0.16% in 2020 to a low of 0.02% in 2018.

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 1.36% at December 31, 2021, down from 1.42% at December 31, 2020, and nonperforming assets as a percentage of total assets was 0.94% at December 31, 2021, down from 1.10% at December 31, 2020. Table XI presents data at the end of each of the years ended December 31, 2017 through 2021. Table XI shows that total nonperforming loans as a percentage of loans of 1.36% at December 31, 2021, though up from the low of 0.88% at December 31, 2019, was lower than the corresponding ratio at December 31, 2017, 2018 and 2020. Similarly, the December 31, 2021 ratio of total nonperforming assets as a percentage of assets of 0.94% was up from the low of 0.80% at December 31, 2019, but lower than the corresponding ratio at December 31, 2017, 2018 and 2020.

Total impaired loans of $15,734,000 at December 31, 2021 are down $2,084,000 from the corresponding amount at December 31, 2020 of $17,818,000. Table XI shows that while the total balance of impaired loans at December 31, 2021 was lower than the amount at December 31, 2020,  it was higher than the amounts over the periods of 2017-2019, which ranged from a low of $5,486,000 in 2019 to the high of $9,774,000 at December 31, 2018. The increase in total impaired loans in 2020 and 2021 includes the impact of purchased credit impaired loans acquired from Covenant and Monument.

Total nonperforming assets of $21,902,000 at December 31, 2021 are $2,827,000 lower than the corresponding amount at December 31, 2020, summarized as follows:

● Total nonaccrual loans at December 31, 2021 of $18,999,000 was $2,417,000 lower than the corresponding December 31, 2020 total of $21,416,000.

● Total loans past due 90 days or more and still accruing interest amounted to $2,219,000 at December 31, 2021, an increase of $244,000 from the total at December 31, 2020.

● Foreclosed assets held for sale consisted of real estate, and totaled $684,000 at December 31, 2021, a decrease of $654,000 from $1,338,000 at December 31, 2020. At December 31, 2021, the Corporation held four such properties for sale, with total carrying values of $256,000 related to residential real estate and $428,000 related to commercial real estate. At December 31, 2020, the Corporation held six such properties for sale, with total carrying values of $80,000 related to residential real estate and $1,258,000 related to commercial real estate. The Corporation evaluates the carrying values of foreclosed assets each quarter based on the most recent market activity or appraisals for each property.

As reflected in Table XI, total loans past due 30-89 days and still accruing interest amounted to $5,106,000 at December 31, 2021, down from $5,918,000 at December 31, 2020. This variance includes the effect of fluctuations in 30-89 day past due residential mortgage loans, which totaled $4,347,000 at December 31, 2021, down from $5,084,000 at December 31, 2020. Management monitors the status of delinquent residential mortgage loans on an ongoing basis and has considered delinquency trends, which were generally favorable throughout most of 2021, in evaluating the allowance for loan losses at December 31, 2021.

Over the period 2017-2021, 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

31

of December 31, 2021. 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.

TABLE IX - ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES

(Dollars In Thousands)	Years Ended December 31,
	2021			2020			2019			2018			2017
Balance, beginning of year	$	11,385		$	9,836		$	9,309		$	8,856		$	8,473
Charge-offs:
Commercial		(1,464)			(2,343)			(6)			(165)			(132)
Residential mortgage		(11)			0			(190)			(158)			(197)
Consumer		(100)			(122)			(183)			(174)			(150)
Total charge-offs		(1,575)			(2,465)			(379)			(497)			(479)
Recoveries:
Commercial		22			16			6			317			4
Residential mortgage		6			44			12			8			19
Consumer		38			41			39			41			38
Total recoveries		66			101			57			366			61
Net charge-offs		(1,509)			(2,364)			(322)			(131)			(418)
Provision for loan losses		3,661			3,913			849			584			801
Balance, end of period	$	13,537		$	11,385		$	9,836		$	9,309		$	8,856
Net charge-offs as a % of average loans		0.09	%		0.16	%		0.03	%		0.02	%		0.05	%

TABLE X - COMPONENTS OF THE ALLOWANCE FOR LOAN LOSSES

(In Thousands)	As of December 31,
	2021		2020		2019		2018		2017
ASC 310 - Impaired loans - individually evaluated	$	740	$	925	$	1,051	$	1,605	$	1,279
ASC 450 - Collectively evaluated:
Commercial		7,553		5,545		3,913		3,102		3,078
Residential mortgage		4,338		4,091		4,006		3,870		3,841
Consumer		235		239		281		233		159
Unallocated		671		585		585		499		499
Total Allowance	$	13,537	$	11,385	$	9,836	$	9,309	$	8,856

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TABLE XI - PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS AND TROUBLED DEBT RESTRUCTURINGS (TDRs)

(Dollars In Thousands)	As of December 31,
	2021			2020			2019			2018			2017
Impaired loans with a valuation allowance	$	6,540		$	8,082		$	3,375		$	4,851		$	4,100
Impaired loans without a valuation allowance		2,636			2,895			1,670			4,923			5,411
Purchased credit impaired loans		6,558			6,841			441			0			0
Total impaired loans	$	15,734		$	17,818		$	5,486		$	9,774		$	9,511
Total loans past due 30-89 days and still accruing	$	5,106		$	5,918		$	8,889		$	7,142		$	9,449
Nonperforming assets:
Purchased credit impaired loans	$	6,558		$	6,841		$	441		$	0		$	0
Other nonaccrual loans		12,441			14,575			8,777			13,113			13,404
Total nonaccrual loans		18,999			21,416			9,218			13,113			13,404
Total loans past due 90 days or more and still accruing		2,219			1,975			1,207			2,906			3,724
Total nonperforming loans		21,218			23,391			10,425			16,019			17,128
Foreclosed assets held for sale (real estate)		684			1,338			2,886			1,703			1,598
Total nonperforming assets	$	21,902		$	24,729		$	13,311		$	17,722		$	18,726
Loans subject to troubled debt restructurings (TDRs):
Performing	$	288		$	166		$	889		$	655		$	636
Nonperforming		5,517			7,285			1,737			2,884			3,027
Total TDRs	$	5,805		$	7,451		$	2,626		$	3,539		$	3,663
Total nonperforming loans as a % of loans		1.36	%		1.42	%		0.88	%		1.94	%		2.10	%
Total nonperforming assets as a % of assets		0.94	%		1.10	%		0.80	%		1.37	%		1.47	%
Allowance for loan losses as a % of total loans		0.87	%		0.69	%		0.83	%		1.12	%		1.09	%
Credit adjustment on purchased non-impaired loans and allowance for loan losses as a % of total loans and the credit adjustment (a)		1.08	%		1.05	%		0.93	%		1.12	%		1.09	%
Allowance for loan losses as a % of nonperforming loans		63.80	%		48.67	%		94.35	%		58.11	%		51.70	%
(a) Credit adjustment on purchased non-impaired loans at end of period	$	3,335		$	5,979		$	1,216		$	0		$	0
Allowance for loan losses		13,537			11,385			9,836			9,309			8,856
Total credit adjustment on purchased non-impaired loans at end of period and allowance for loan losses (1)	$	16,872		$	17,364		$	11,052		$	9,309		$	8,856
Total loans receivable	$	1,564,849		$	1,644,209		$	1,182,222		$	827,563		$	815,713
Credit adjustment on purchased non-impaired loans at end of period		3,335			5,979			1,216			0			0
Total (2)	$	1,568,184		$	1,650,188		$	1,183,438		$	827,563		$	815,713
Credit adjustment on purchased non-impaired loans and allowance for loan losses as a % of total loans and the credit adjustment (1)/(2)		1.08	%		1.05	%		0.93	%		1.12	%		1.09	%

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TABLE XII – FIVE-YEAR HISTORY OF LOAN LOSSES

(Dollars In Thousands)	2021			2020			2019			2018			2017			Average
Average gross loans	$	1,596,756		$	1,445,098		$	1,057,559		$	822,346		$	780,640		$	1,140,480
Year-end gross loans		1,564,849			1,644,209			1,182,222			827,563			815,713		$	1,206,911
Year-end allowance for loan losses		13,537			11,385			9,836			9,309			8,856		$	10,585
Year-end nonaccrual loans		18,999			21,416			9,218			13,113			13,404		$	15,230
Year-end loans 90 days or more past due and still accruing		2,219			1,975			1,207			2,906			3,724			2,406
Net charge-offs		1,509			2,364			322			131			418			949
Provision for loan losses		3,661			3,913			849			584			801			1,962
Earnings coverage of charge-offs		26	x		10	x		76	x		210	x		56	x		29	x
Allowance coverage of charge-offs		9	x		5	x		31	x		71	x		21	x		11	x
Net charge-offs as a % of provision for loan losses		41.22	%		60.41	%		37.93	%		22.43	%		52.18	%		48.37	%
Net charge-offs as a % of average gross loans		0.09	%		0.16	%		0.03	%		0.02	%		0.05	%		0.08	%
Income before income taxes on a fully taxable equivalent basis		38,822			24,192			24,453			27,564			23,350			27,676

CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

The Corporation’s significant fixed and determinable contractual obligations as of December 31, 2021 include repayment obligations related to time deposits and borrowed funds. Information related to maturities of time deposits is provided in Note 11 to the consolidated financial statements. Information related to maturities of borrowed funds is provided in Note 12 to the consolidated financial statements. The Corporation’s operating lease commitments with terms of one year or less and other commitments at December 31, 2021 are immaterial. Information concerning operating lease commitments with terms greater than one year is provided in Note 17 to the consolidated financial statements. 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, 2021, outstanding balances of such loans sold totaled $334,741,000.

Also, for loans sold under the MPF Original program, the Corporation provides a credit enhancement. At December 31, 2021, the Corporation’s maximum credit enhancement obligation under the MPF Original Program was $8,656,000, and the Corporation has recorded a related allowance for credit losses in the amount of $635,000 which is included in “Accrued interest and other liabilities” in the accompanying consolidated balance sheets.

As discussed in the Financial Condition section of Management’s Discussion and Analysis, the Corporation is a participating SBA lender and may originate loans to commercial borrowers, with full-or-partial guarantees by the SBA, subject to the SBA’s underwriting and documentation requirements. In some cases, the Corporation may sell the SBA-guaranteed portion of the loan back to the SBA subject to ongoing compliance with SBA underwriting and documentation requirements. If it is determined that the ongoing compliance requirements are not met, the Corporation could be subject to claim adjustments on SBA guaranteed loans. At December 31, 2021, the Corporation’s total exposure to SBA guarantees was $12,856,000 with a recorded claims adjustment allowance of $457,000, included in accrued interest and other liabilities in the consolidated balance sheets.

34

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, 2021, the Corporation maintained overnight interest-bearing deposits with the Federal Reserve Bank of Philadelphia and other correspondent banks totaling $79,119,000. The Corporation’s cash position throughout 2021 has been elevated in comparison to historical levels as growth in deposits and funds received from repayment of loans have outpaced loan originations, purchases of securities, repayments of borrowings and other uses of cash.

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 $14,034,000 at December 31, 2021.

The Corporation’s outstanding, available, and total credit facilities at December 31, 2021 and 2020 are as follows:

	Outstanding				Available				Total Credit
(In Thousands)	December 31,		December 31,		December 31,		December 31,		December 31,		December 31,
	2021		2020		2021		2020		2021		2020
Federal Home Loan Bank of Pittsburgh	$	33,311	$	72,222	$	723,557	$	698,977	$	756,868	$	771,199
Federal Reserve Bank Discount Window		0		0		13,642		14,654		13,642		14,654
Other correspondent banks		0		0		45,000		45,000		45,000		45,000
Total credit facilities	$	33,311	$	72,222	$	782,199	$	758,631	$	815,510	$	830,853

At December 31, 2021, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of long-term borrowings of $27,727,000 and letters of credit totaling $5,584,000. At December 31, 2020, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of short-term borrowings of $18,000,000, long-term borrowings of $53,822,000 and a $400,000 letter of credit.

Additionally, the Corporation uses “RepoSweep” arrangements to borrow funds from commercial banking customers on an overnight basis. If required to raise cash in an emergency situation, the Corporation could sell available-for-sale debt securities to meet its obligations. At December 31, 2021, the carrying value of available-for-sale debt securities in excess of amounts required to meet pledging or repurchase agreement obligations was $307,387,000.

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

STOCKHOLDERS’ EQUITY AND CAPITAL ADEQUACY

Details concerning capital ratios at December 31, 2021 and December 31, 2020 are presented in Note 18 to the consolidated financial statements. Management believes, as of December 31, 2021, that C&N Bank meets all capital adequacy requirements to which it is subject and maintains a capital conservation buffer (described in more detail below) that allows the Bank to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. Further, the Corporation’s and C&N Bank’s capital ratios at December 31, 2021 and December 31, 2020 exceed the Corporation’s Board policy threshold levels. Management expects 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.

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. Further, although the Corporation is no longer subject to the specific consolidated capital requirements described herein, the Corporation’s ability

35

to pay dividends, repurchase stock or engage in other activities may be limited by the Federal Reserve if the Corporation fails to hold sufficient capital commensurate with its overall risk profile.

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. At December 31, 2021, the minimum risk-based capital ratios, and the capital ratios including the capital conservation buffer, are as follows:

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

A banking organization with a buffer greater than 2.5% 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 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, 2021, C&N Bank’s Capital Conservation Buffer (determined based on the minimum total capital ratio) was 8.04%.

The Corporation’s total stockholders’ equity is affected by fluctuations in the fair values of available-for-sale debt securities. The difference between amortized cost and fair value of available-for-sale debt securities, net of deferred income tax, is included in Accumulated Other Comprehensive Income within stockholders’ equity. The balance in Accumulated Other Comprehensive Income related to unrealized gains on available-for-sale debt securities, net of deferred income tax, amounted to $4,809,000 at December 31, 2021 and $11,676,000 at December 31, 2020. Changes in accumulated other comprehensive income are excluded from earnings and directly increase or decrease stockholders’ equity. If available-for-sale debt securities are deemed to be other-than-temporarily impaired, unrealized losses are recorded as a charge against earnings, and amortized cost for the affected securities is reduced. Note 7 to the consolidated financial statements provides additional information concerning management’s evaluation of available-for-sale debt securities for other-than-temporary impairment at December 31, 2021.

Stockholders’ equity is also affected by the underfunded or overfunded status of defined benefit pension and postretirement plans. The balance in Accumulated Other Comprehensive Income related to defined benefit plans, net of deferred income tax, was $217,000 at December 31, 2021 and $119,000 at December 31, 2020.

INFLATION

Inflation affects the cost of labor, supplies and services used to provide banking services as well as interest rates. After many years of low inflation, disruptions to labor markets and supply chains triggered by the COVID-19 pandemic and government policies have led to an annual inflation rate in 2021, based on changes in the Consumer Price Index, of 7%.

36

The Corporation is significantly affected by the Federal Reserve Board’s efforts to control inflation through changes in short-term interest rates. In March of 2020, in response to significant concerns about the impact of the COVID-19 pandemic on the U.S. economy, the Federal Reserve lowered the fed funds target rate from 1.75% to 0.25%, which it has maintained through December 31, 2021. Also, 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. The Federal Open Market Committee (FOMC) has noted in its most recent statement that indicators of economic activity and employment have continued to strengthen and that inflationary concerns may no longer be considered transitory in nature. The Committee noted its desire to achieve maximum employment and inflation at a rate of 2 percent over the longer run and with inflation currently well above that level with a strong labor market, it expects it will soon be appropriate to raise the target range for the federal funds rate. The Committee also decided to continue to reduce the monthly pace of its net asset purchases, bringing them to an end in early March of 2022.

Although management cannot predict future changes in the rates of inflation, management monitors the impact of economic trends, including indicators of inflationary pressures, in managing interest rate and other financial risks.

37

ITEM 8. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

	December 31,		December 31,
(In Thousands, Except Share and Per Share Data)	2021		2020
ASSETS
Cash and due from banks:
Noninterest-bearing	$	16,729	$	24,780
Interest-bearing		88,219		77,077
Total cash and due from banks		104,948		101,857
Available-for-sale debt securities, at fair value		517,679		349,332
Loans receivable		1,564,849		1,644,209
Allowance for loan losses		(13,537)		(11,385)
Loans, net		1,551,312		1,632,824
Bank-owned life insurance		30,669		30,096
Accrued interest receivable		7,235		8,293
Bank premises and equipment, net		20,683		21,526
Foreclosed assets held for sale		684		1,338
Deferred tax asset, net		5,887		2,705
Goodwill		52,505		52,505
Core deposit intangibles, net		3,316		3,851
Other assets		32,730		34,773
TOTAL ASSETS	$	2,327,648	$	2,239,100
LIABILITIES
Deposits:
Noninterest-bearing	$	521,206	$	465,332
Interest-bearing		1,403,854		1,355,137
Total deposits		1,925,060		1,820,469
Short-term borrowings		1,803		20,022
Long-term borrowings - FHLB advances		28,042		54,608
Senior notes, net		14,701		0
Subordinated debt, net		33,009		16,553
Accrued interest and other liabilities		23,628		27,692
TOTAL LIABILITIES		2,026,243		1,939,344
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 16,030,172 and outstanding 15,759,090 at December 31, 2021;
issued 15,982,815 and outstanding 15,911,984 at December 31, 2020		16,030		15,983
Paid-in capital		144,453		143,644
Retained earnings		142,612		129,703
Treasury stock, at cost; 271,082 shares at December 31, 2021 and 70,831
shares at December 31, 2020		(6,716)		(1,369)
Accumulated other comprehensive income		5,026		11,795
TOTAL STOCKHOLDERS' EQUITY		301,405		299,756
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	2,327,648	$	2,239,100

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

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Consolidated Statements of Income

	Years Ended December 31,
(In Thousands Except Per Share Data)	2021		2020
INTEREST INCOME
Interest and fees on loans:
Taxable	$	74,549	$	67,384
Tax-exempt		1,770		1,768
Income from available-for-sale debt securities:
Taxable		5,114		5,534
Tax-exempt		2,684		2,143
Other interest and dividend income		384		331
Total interest and dividend income		84,501		77,160
INTEREST EXPENSE
Interest on deposits		4,538		7,231
Interest on short-term borrowings		23		367
Interest on long-term borrowings - FHLB advances		399		1,291
Interest on senior notes, net		293		0
Interest on subordinated debt, net		1,309		706
Total interest expense		6,562		9,595
Net interest income		77,939		67,565
Provision for loan losses		3,661		3,913
Net interest income after provision for loan losses		74,278		63,652
NONINTEREST INCOME
Trust revenue		7,234		6,321
Brokerage and insurance revenue		1,860		1,486
Service charges on deposit accounts		4,633		4,231
Interchange revenue from debit card transactions		3,855		3,094
Net gains from sale of loans		3,428		5,403
Loan servicing fees, net		694		(61)
Increase in cash surrender value of life insurance		573		515
Other noninterest income		3,580		3,355
Sub-total		25,857		24,344
Realized gains on available-for-sale debt securities, net		24		169
Total noninterest income		25,881		24,513
NONINTEREST EXPENSE
Salaries and employee benefits		37,603		33,062
Net occupancy and equipment expense		4,984		4,461
Data processing and telecommunications expense		5,903		5,316
Automated teller machine and interchange expense		1,433		1,231
Pennsylvania shares tax		1,951		1,689
Professional fees		2,243		1,692
Loss on prepayment of borrowings		0		1,636
Merger-related expenses		0		7,708
Other noninterest expense		8,355		8,158
Total noninterest expense		62,472		64,953
Income before income tax provision		37,687		23,212
Income tax provision		7,133		3,990
NET INCOME	$	30,554	$	19,222
EARNINGS PER COMMON SHARE - BASIC	$	1.92	$	1.30
EARNINGS PER COMMON SHARE - DILUTED	$	1.92	$	1.30

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

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Consolidated Statements of Comprehensive Income

	Years Ended December 31,
(In Thousands)	2021		2020
Net income	$	30,554	$	19,222
Available-for-sale debt securities:
Unrealized holding (losses) gains on available-for-sale debt securities		(8,669)		10,504
Reclassification adjustment for (gains) realized in income		(24)		(169)
Other comprehensive (loss) income on available-for-sale debt securities		(8,693)		10,335
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses		140		(49)
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost		(17)		(29)
Other comprehensive income (loss) on pension and postretirement obligations		123		(78)
Other comprehensive (loss) income before income tax		(8,570)		10,257
Income tax related to other comprehensive loss (income)		1,801		(2,153)
Net other comprehensive (loss) income		(6,769)		8,104
Comprehensive income	$	23,785	$	27,326

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

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Consolidated Statements of Changes in Stockholders’ Equity

(In Thousands Except Share and Per Share Data)

									Accumulated
									Other
	Common	Treasury	Common		Paid-in		Retained		Comprehensive		Treasury
	Shares	Shares	Stock		Capital		Earnings		Income		Stock		Total
Balance, January 1, 2020	13,934,996	218,551	$	13,935	$	104,519	$	126,480	$	3,691	$	(4,173)	$	244,452
Net income								19,222						19,222
Other comprehensive income, net										8,104				8,104
Cash dividends declared on common stock, $1.08 per share								(15,999)						(15,999)
Shares issued for dividend reinvestment plan		(77,525)				34						1,496		1,530
Shares issued from treasury and redeemed related to exercise of stock options		(10,407)				(70)						201		131
Restricted stock granted		(70,940)				(1,370)						1,370		0
Forfeiture of restricted stock		5,290				100						(100)		0
Stock-based compensation expense						1,050								1,050
Purchase of restricted stock for tax withholding		5,862										(163)		(163)
Shares issued for acquisition of Covenant Financial, Inc., net of equity issuance costs	2,047,819			2,048		39,381								41,429
Balance, December 31, 2020	15,982,815	70,831		15,983		143,644		129,703		11,795		(1,369)		299,756
Net income								30,554						30,554
Other comprehensive loss, net										(6,769)				(6,769)
Cash dividends declared on common stock, $1.11 per share								(17,645)						(17,645)
Shares issued for dividend reinvestment plan	36,368	(31,877)		36		845						788		1,669
Shares issued from treasury and redeemed related to exercise of stock options		(13,169)				(33)						245		212
Restricted stock granted	10,989	(67,402)		11		(1,319)						1,308		0
Forfeiture of restricted stock		5,290				102						(102)		0
Stock-based compensation expense						1,214								1,214
Purchase of restricted stock for tax withholding		8,350										(174)		(174)
Treasury stock purchases		299,059										(7,412)		(7,412)
Balance, December 31, 2021	16,030,172	271,082	$	16,030	$	144,453	$	142,612	$	5,026	$	(6,716)	$	301,405

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS

	Years Ended December 31,
(In Thousands)	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	30,554	$	19,222
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		3,661		3,913
Loss on prepayment of borrowings		0		1,636
Realized gains on available-for-sale debt securities, net		(24)		(169)
Net amortization of securities		2,204		1,570
Increase in cash surrender value of life insurance		(573)		(515)
Depreciation and amortization of bank premises and equipment		2,130		1,981
Net accretion of purchase accounting adjustments		(2,124)		(2,524)
Stock-based compensation		1,214		1,050
Deferred income taxes		(1,381)		(361)
Decrease in fair value of servicing rights		68		576
Gains on sales of loans, net		(3,428)		(5,403)
Origination of loans held for sale		(105,523)		(158,909)
Proceeds from sales of loans held for sale		107,797		163,149
Decrease (increase) in accrued interest receivable and other assets		186		(2,645)
Increase in accrued interest payable and other liabilities		210		2,473
Other		(127)		(260)
Net Cash Provided by Operating Activities		34,844		24,784
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash and cash equivalents provided by business combination		0		75,955
Purchase of certificates of deposit		(4,500)		(2,500)
Proceeds from maturities of certificates of deposit		1,240		740
Proceeds from sales of available-for-sale debt securities		2,027		28,941
Proceeds from calls and maturities of available-for-sale debt securities		61,684		94,486
Purchase of available-for-sale debt securities		(243,925)		(105,354)
Redemption of Federal Home Loan Bank of Pittsburgh stock		2,517		8,496
Purchase of Federal Home Loan Bank of Pittsburgh stock		(2,110)		(5,146)
Net decrease in loans		78,746		1,564
Proceeds from bank owned life insurance		287		0
Proceeds from sales of premises and equipment		627		0
Purchase of premises and equipment		(1,864)		(3,137)
Proceeds from sale of foreclosed assets		1,148		2,262
Other		228		273
Net Cash (Used in) Provided by Investing Activities		(103,895)		96,580
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits		105,381		86,941
Net decrease in short-term borrowings		(18,154)		(99,969)
Proceeds from long-term borrowings - FHLB advances		0		25,891
Repayments of long-term borrowings - FHLB advances		(26,095)		(54,831)
Proceeds from issuance of senior notes, net of issuance costs		14,663		0
Proceeds from issuance of subordinated debt, net of issuance costs		24,437		0
Redemption of subordinated debt		(8,000)		0
Sale of treasury stock		212		131
Purchases of treasury stock		(7,586)		(163)
Common dividends paid		(15,976)		(14,469)
Net Cash Provided by (Used in) Financing Activities		68,882		(56,469)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS		(169)		64,895
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		96,017		31,122
CASH AND CASH EQUIVALENTS, END OF YEAR	$	95,848	$	96,017

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

	Years Ended December 31,
(In Thousands)	2021		2020
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
(Decrease) increase in accrued purchase of available-for-sale debt securities	$	(994)	$	994
Accrued income from life insurance claim	$	0	$	279
Assets acquired through foreclosure of real estate loans	$	394	$	273
Leased assets obtained in exchange for new operating lease liabilities	$	739	$	167
Interest paid	$	8,174	$	10,742
Income taxes paid	$	10,098	$	3,137
NONCASH INVESTING ASSETS ACQUIRED IN BUSINESS COMBINATION:
Available-for-sale debt securities	$	0	$	10,754
Loans receivable	$	0	$	464,236
Bank-owned life insurance	$	0	$	11,170
Foreclosed assets held for sale	$	0	$	860
NONCASH FINANCING ACTIVITY RELATED TO BUSINESS COMBINATION:
Common stock issued	$	0	$	41,429
Liabilities assumed:
Deposits	$	0	$	481,796
Short-term borrowings	$	0	$	33,950
Long-term borrowings	$	0	$	30,025
Subordinated debt	$	0	$	10,091

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 subsidiaries, C&N Financial Services Corporation and Northern Tier Holding LLC. C&N Bank is the sole member of Northern Tier Holding LLC. All material intercompany balances and transactions have been eliminated in consolidation.

NATURE OF OPERATIONS – The Corporation’s principal office is located in Wellsboro, Pennsylvania. The majority of the Corporation’s operations are conducted in the Northern tier/Northcentral region of Pennsylvania and Southern tier of New York. As discussed further in Note 3, in 2020 the Corporation expanded its presence in Southeastern Pennsylvania by acquiring Covenant Financial, Inc. (“Covenant”). The Covenant acquisition follows the acquisition of Monument Bancorp, Inc. (“Monument”) in 2019, as well as the opening of offices in York and Lancaster, which are located in Southcentral Pennsylvania.

The Corporation provides banking and related services to individual and corporate customers. Lending products include commercial, mortgage 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 provides wealth management services through its trust department, 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 and (2) fair values of available-for-sale debt securities based on estimates from independent valuation services or from brokers.

INVESTMENT SECURITIES – Investment securities are accounted for as follows:

Available-for-sale debt securities – includes debt securities not classified as held-to-maturity or trading. 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. Premiums on non-amortizing available-for-sale debt securities are amortized using the level yield method to the earliest call date, while discounts on non-amortizing securities are amortized to the maturity date. Premiums and discounts on amortizing securities (mortgage-backed securities) are amortized 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.

44

Other-than-temporary impairment – Credit-related declines in the fair value of available-for-sale debt 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.

Marketable equity security – The marketable equity security is carried at fair value with unrealized gains and losses included in other noninterest income in the consolidated statements of income.

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.

DERIVATIVES – The Corporation is a party to derivative financial instruments. These financial instruments consist of interest rate swap agreements which contain master netting and collateral provisions designed to protect the party at risk. Interest rate swaps with commercial banking customers were executed to facilitate their respective risk management strategies. Under the terms of these arrangements, the commercial banking customers effectively exchanged their floating interest rate exposures on loans into fixed interest rate exposures. Those interest rate swaps have been simultaneously economically hedged by offsetting interest rate swaps with a third party such that the Corporation has effectively exchanged its fixed interest rate exposures for floating rate exposures. These derivatives are not designated as hedges and are not speculative. Rather, these derivatives result from a service provided to certain customers. As the interest rate swaps associated with this program do not meet the hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. Interest differentials paid or received under the swap agreements are reflected as adjustments to interest and fees on loans. The notional amounts of the interest rate swaps are not exchanged and do not represent exposure to credit loss. The fair value of interest rate derivatives is included in the balance of other assets and other liabilities in the consolidated balance sheets.

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

LOANS RECEIVABLE – Loans originated by the Corporation 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, multi-family residential 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.

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PURCHASED LOANS – The Corporation purchased loans in 2019 and 2020, some of which had, at the acquisition dates, shown evidence of credit deterioration since origination. The Corporation considers several factors as indicators that an acquired loan has evidence of deterioration in credit quality. These factors include loans 90 days or more past due, loans with an internal risk rating of substandard or below, loans classified as nonaccrual by the acquired institution and loans that have been previously modified in a troubled debt restructuring. The purchased loans that showed evidence of credit impairment were designated as the purchased credit impaired (“PCI”) loans and were recorded at fair value, with no carryover of the allowance for loan losses. The PCI loans acquired are secured by real estate and the fair value of each loan at the acquisition date was determined based on the estimated proceeds to be derived from selling the collateral, net of selling costs. The PCI loans were placed into nonaccrual status upon acquisition (and remained in nonaccrual status at December 31, 2021 and 2020) as the Corporation cannot reasonably estimate cash flows expected to be collected in order to compute yield on the loans.

The excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable yield. The nonaccretable yield represents estimated future credit losses expected to be incurred over the life of the loan. Subsequent decreases to the expected cash flows require us to evaluate the need for an allowance for credit losses. Subsequent improvements in expected cash flows result in the reversal of a corresponding amount of the nonaccretable yield which we then reclassify as accretable yield that is recognized into interest income over the remaining life of the loan using the interest method. Our evaluation of the amount of future cash flows that we expect to collect is performed in a similar manner as that used to determine our allowance for credit losses. Charge-offs of the principal amount on acquired loans would be first applied to the nonaccretable yield portion of the fair value adjustment.

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, 2021 and 2020, 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.

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The scope of loans reviewed individually each quarter to determine if they are impaired include all commercial loan relationships greater than $200,000 and any residential mortgage or consumer loans of $400,000 or more for which there is at least one extension of credit graded Special Mention, Substandard or Doubtful. Loans that are individually reviewed, but which are determined to not be impaired, are combined with all remaining loans that are not reviewed on a specific basis, and such loans are included within larger pools of loans based on similar risk and loss characteristics for purposes of determining the general component of the allowance. All loans classified as troubled debt restructurings (TDR) and all commercial loan relationships less than $200,000 or other loan relationships less than $400,000 in the aggregate, but with an estimated loss of $100,000 or more, are individually evaluated for impairment.

The 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 a loan: (1) is subject to a restructuring agreement, (2) has an outstanding balance of $400,000 or more and a credit grade of Special Mention, Substandard or Doubtful, or (3) has an estimated loss of $100,000 or more. The pools of loans for each loan segment are evaluated for loss exposure based upon average historical net charge-off rates, adjusted for qualitative factors. The time period used in determining the average historical net charge-off rate for each loan class is based on management’s evaluation of an appropriate time period that captures an historical loss experience relevant to the current portfolio. 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.

Purchased loans that did not show evidence of credit deterioration at the acquisition dates were initially recorded at fair value, including a discount for credit losses reflecting an estimate of the present value of credit losses based on market expectations. The general component of the allowance on purchased loans is evaluated separately from the rest of the portfolio.  This evaluation includes consideration of the qualitative risk factors described above as well as the remaining purchased discount.

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.

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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. Nonaccrual troubled debt restructurings may be restored to accrual status if the ultimate 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.

In March 2020, various regulatory agencies, including the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by COVID-19. The interagency statement was effective immediately and impacted accounting for loan modifications. The agencies confirmed with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. Provisions of the CARES Act Section 4013 largely mirrored the provisions of the interagency statement, providing that modified loans were not to be considered TDRs if they were performing at December 31, 2019 and other considerations set forth in the interagency statements were met. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented or at December 31, 2019. Consistent with this guidance, the Corporation has not reported loans that were modified in response to COVID-19 as past due, nonaccrual or as TDRs.

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 – Goodwill represents the excess of the cost of acquisitions over the fair value of the net assets acquired. Goodwill is tested at least annually at December 31 for impairment, or more often if events or circumstances indicate there may be impairment. The Corporation has the option of performing a qualitative assessment to determine whether any further quantitative testing for impairment is necessary. The option of whether or not to perform a qualitative assessment is made annually.

CORE DEPOSIT INTANGIBLES – Amortization of core deposit intangibles is calculated using an accelerated method. In determining amortization using the accelerated method for any given period, the amount of expected cash flows for that period that were used in determining the acquisition-date fair value is divided by the total amount of expected cash flows over the life of the asset. That percentage is multiplied by the initial carrying amount of the asset to arrive at amortization expense for that period. If the Corporation’s cash flow patterns differ significantly from the initial estimates, the amortization schedule would be adjusted prospectively.

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 Loan Servicing Fees, Net, 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

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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. 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.

TREASURY STOCK – Common stock held in treasury is accounted for using the cost method, which treats stock held in treasury as a reduction to total stockholders’ equity. The shares may be purchased in the open market or in privately negotiated transactions from time to time depending upon market conditions and other factors.

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.

REVENUE RECOGNITION – The Corporation generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in the determination of the amount and timing of revenue from contracts with customers.

Additional disclosures related to the Corporation’s largest sources of noninterest income within the consolidated statements of income from contracts with customers that are subject to Accounting Standards Codification (ASC) Topic 606 are as follows:

Trust and financial management revenue – C&N Bank’s trust department provides a wide range of financial services, including wealth management services for individuals, businesses and retirement funds, administration of 401(k) and other retirement plans, retirement planning, estate planning and estate settlement services. Trust clients are located primarily within the Corporation’s geographic markets. Assets held in a fiduciary capacity by C&N Bank are not the Corporation’s assets and are therefore not included in the consolidated balance sheets. The fair value of trust assets under management was approximately $1,232,919,000 at December 31, 2021 and $1,103,228,000 at December 31, 2020. Trust revenue is included within noninterest income in the consolidated statements of income.

Trust revenue is recorded on a cash basis, which is not materially different from the accrual basis. The majority (approximately 84%, based on annual 2021 results) of trust revenue is earned and collected monthly, with the amount determined based on a percentage of the fair value of the trust assets under management. Wealth management fees are contractually agreed with each customer, and fee levels vary based mainly on the size of assets under management. The services provided under such a contract represent a single performance obligation under the Accounting Standards Updates (ASUs) because it embodies a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. None of the contracts with trust customers provide for incentive-based fees. In addition to wealth management fees, trust revenue includes fees for provision of services, including employee benefit plan administration, tax return preparation and estate planning and settlement. Fees for such services are billed based on contractual arrangements or established fee schedules and are typically billed upon completion of providing such services. The costs of acquiring trust customers are incremental and recognized within noninterest expense in the consolidated statements of income.

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

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

2. RECENT ACCOUNTING PRONOUNCEMENTS

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

Recently Issued But Not Yet Effective Accounting Pronouncements

ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), as modified by subsequent ASUs, changes accounting for credit losses on loans receivable and debt securities from an incurred loss methodology to an expected credit loss methodology. Among other things, ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Accordingly, ASU 2016-13 requires the use of forward-looking information to form credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, though the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, ASU 2016-13 amends the accounting for credit losses on debt securities and purchased financial assets with credit deterioration. The effect of implementing this ASU is recorded through a cumulative-effect adjustment to retained earnings. The Corporation has formed a cross functional management team and is working with an outside vendor assessing alternative loss estimation methodologies and the Corporation’s data and system needs to evaluate the impact that adoption of this standard will have on the Corporation’s financial condition and results of operations. In November 2019, the FASB approved a delay of the required implementation date of ASU 2016-13 for smaller reporting companies, including the Corporation, resulting in a required implementation date for the Corporation of January 1, 2023.

ASU 2020-04, Reference Rate Reform (Topic 848) provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The amendments in Update 2020-04 are elective and apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. The guidance includes a general principle that permits an entity to consider contract modifications due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. Some specific optional expedients are as follows:

● Simplifies accounting for contract modifications, including modifications to loans receivable and debt, by prospectively adjusting the effective interest rate.

● Simplifies the assessment of hedge effectiveness and allows hedging relationships affected by reference rate reform to continue.

The amendments in ASU 2020-04 are effective as of March 12, 2020 through December 31, 2022. The Corporation expects to apply the amendments prospectively for applicable loan and other contracts within the effective period of ASU 2020-04.

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3. BUSINESS COMBINATION

On July 1, 2020, the Corporation completed its acquisition of Covenant, which operated banking offices in Bucks and Chester Counties of Pennsylvania. In connection with the transaction, the Corporation recorded goodwill of $24.1 million and a core deposit intangible asset of $3.1 million. Total loans acquired on July 1, 2020 were valued at $464.2 million, while total deposits assumed were valued at $481.8 million, borrowings were valued at $64.0 million and subordinated debt was valued at $10.1 million. The Corporation acquired available-for-sale debt securities valued at $10.8 million and bank-owned life insurance valued at $11.2 million. The assets purchased and liabilities assumed in the merger were recorded at their estimated fair values at the time of closing, subject to refinement for up to one year after the closing date. There were no adjustments to the fair value measurements of assets acquired or liabilities assumed in the year ended December 31, 2021.

Merger-related expenses related to the acquisition of Covenant totaled $7,708,000 in 2020. There were no merger-related expenses in 2021.

4. PER SHARE DATA

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

Diluted earnings per common share are calculated under the more dilutive of either the treasury method or the two-class method. Diluted earnings per common share is computed using weighted-average common shares outstanding, plus weighted-average common shares available from the exercise of all dilutive stock options, less the number of shares that could be repurchased with the proceeds of stock option exercises based on the average share price of the Corporation’s common stock during the period.

(In Thousands, Except Share and Per Share Data)	Years Ended
	December 31,		December 31,
	2021		2020
Basic
Net income	$	30,554	$	19,222
Less: Dividends and undistributed earnings allocated to participating securities		(241)		(116)
Net income attributable to common shares	$	30,313	$	19,106
Basic weighted-average common shares outstanding		15,765,639		14,743,386
Basic earnings per common share (a)	$	1.92	$	1.30
Diluted
Net income attributable to common shares	$	30,313	$	19,106
Basic weighted-average common shares outstanding		15,765,639		14,743,386
Dilutive effect of potential common stock arising from stock options		6,316		3,662
Diluted weighted-average common shares outstanding		15,771,955		14,747,048
Diluted earnings per common share (a)	$	1.92	$	1.30
Weighted-average nonvested restricted shares outstanding		125,539		89,718

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

Anti-dilutive stock options are excluded from net income per share calculations. There were no anti-dilutive instruments in 2021. Weighted-average common shares available from anti-dilutive instruments totaled 32,538 shares in 2020.

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5. COMPREHENSIVE INCOME

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

(In Thousands)	Before-Tax		Income Tax		Net-of-Tax
	Amount		Effect		Amount
2021
Available-for-sale debt securities:
Unrealized holding losses on available-for-sale debt securities	$	(8,669)	$	1,821	$	(6,848)
Reclassification adjustment for (gains) realized in income		(24)		5		(19)
Other comprehensive loss from available-for-sale debt securities		(8,693)		1,826		(6,867)
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses		140		(29)		111
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost		(17)		4		(13)
Other comprehensive income on unfunded retirement obligations		123		(25)		98
Total other comprehensive loss	$	(8,570)	$	1,801	$	(6,769)
(In Thousands)	Before-Tax		Income Tax		Net-of-Tax
	Amount		Effect		Amount
2020
Available-for-sale debt securities:
Unrealized holding gains on available-for-sale debt securities	$	10,504	$	(2,205)	$	8,299
Reclassification adjustment for (gains) realized in income		(169)		35		(134)
Other comprehensive income from available-for-sale debt securities		10,335		(2,170)		8,165
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses		(49)		11		(38)
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost		(29)		6		(23)
Other comprehensive loss on unfunded retirement obligations		(78)		17		(61)
Total other comprehensive income	$	10,257	$	(2,153)	$	8,104

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

	Affected Line Item in the
Description	Consolidated Statements of Income
Reclassification adjustment for (gains) realized in income (before-tax)	Realized gains on available-for-sale debt securities, net
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost (before-tax)	Other noninterest expense
Income tax effect	Income tax provision

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

(In Thousands)					Accumulated
	Unrealized		Unfunded		Other
	Gains		Retirement		Comprehensive
	on Securities		Obligations		Income
2021
Balance, beginning of period	$	11,676	$	119	$	11,795
Other comprehensive loss during year ended December 31, 2021		(6,867)		98		(6,769)
Balance, end of period	$	4,809	$	217	$	5,026
2020
Balance, beginning of period	$	3,511	$	180	$	3,691
Other comprehensive income during year ended December 31, 2020		8,165		(61)		8,104
Balance, end of period	$	11,676	$	119	$	11,795

6. CASH AND DUE FROM BANKS

Cash and due from banks at December 31, 2021 and 2020 include the following:

(In Thousands)	December 31,		December 31,
	2021		2020
Cash and cash equivalents	$	95,848	$	96,017
Certificates of deposit		9,100		5,840
Total cash and due from banks	$	104,948	$	101,857

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 has not experienced any losses in such accounts.

Historically, C&N Bank has been required to maintain reserves against deposit liabilities in the form of cash and balances with the Federal Reserve Bank of Philadelphia. The reserves are based on deposit levels, account activity, and other services provided by the Federal Reserve Bank. In March 2020, the Federal Reserve Board reduced reserve requirements for U.S. banks to 0%. Accordingly, C&N Bank had no required reserves at December 31, 2021 or December 31, 2020.

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7. SECURITIES

Amortized cost and fair value of available-for-sale debt securities at December 31, 2021 and 2020 are summarized as follows:

(In Thousands)	December 31, 2021
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding		Fair
	Cost		Gains		Losses		Value
Obligations of the U.S. Treasury	$	25,058	$	52	$	(198)	$	24,912
Obligations of U.S. Government agencies		23,936		563		(408)		24,091
Bank holding company debt securities		18,000		18		(31)		17,987
Obligations of states and political subdivisions:
Tax-exempt		143,427		4,749		(148)		148,028
Taxable		72,182		1,232		(649)		72,765
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		98,048		705		(572)		98,181
Residential collateralized mortgage obligations		44,015		437		(205)		44,247
Commercial mortgage-backed securities		86,926		1,548		(1,006)		87,468
Total available-for-sale debt securities	$	511,592	$	9,304	$	(3,217)	$	517,679

(In Thousands)	December 31, 2020
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding		Fair
	Cost		Gains		Losses		Value
Obligations of the U.S. Treasury	$	12,184	$	0	$	(2)	$	12,182
Obligations of U.S. Government agencies		25,349		1,003		(8)		26,344
Obligations of states and political subdivisions:
Tax-exempt		116,427		6,000		(26)		122,401
Taxable		45,230		2,246		(24)		47,452
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		36,853		1,323		0		38,176
Residential collateralized mortgage obligations		56,048		1,428		(9)		57,467
Commercial mortgage-backed securities		42,461		2,849		0		45,310
Total available-for-sale debt securities	$	334,552	$	14,849	$	(69)	$	349,332

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The following table presents gross unrealized losses and fair value of available-for-sale debt securities with unrealized loss positions that are not deemed to be other-than-temporarily impaired, aggregated by length of time that individual securities have been in a continuous unrealized loss position at December 31, 2021 and 2020:

December 31, 2021	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 the U.S. Treasury	$	18,886	$	(198)	$	0	$	0	$	18,886	$	(198)
Obligations of U.S. Government agencies		9,735		(264)		4,856		(144)		14,591		(408)
Bank holding company debt securities		12,969		(31)		0		0		12,969		(31)
Obligations of states and political subdivisions:
Tax-exempt		17,852		(141)		549		(7)		18,401		(148)
Taxable		31,261		(517)		3,277		(132)		34,538		(649)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		71,451		(572)		0		0		71,451		(572)
Residential collateralized mortgage obligations		15,117		(205)		0		0		15,117		(205)
Commercial mortgage-backed securities		52,867		(1,006)		0		0		52,867		(1,006)
Total temporarily impaired available-for-sale debt securities	$	230,138	$	(2,934)	$	8,682	$	(283)	$	238,820	$	(3,217)

December 31, 2020	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 the U.S. Treasury	$	9,159	$	(2)	$	0	$	0	$	9,159	$	(2)
Obligations of U.S. Government agencies		4,992		(8)		0		0		4,992		(8)
Obligations of states and political subdivisions:
Tax-exempt		3,811		(26)		0		0		3,811		(26)
Taxable		5,235		(24)		0		0		5,235		(24)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies,
Residential collateralized mortgage obligations		2,861		(9)		0		0		2,861		(9)
Total temporarily impaired available-for-sale debt securities	$	26,058	$	(69)	$	0	$	0	$	26,058	$	(69)

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

(In Thousands)	2021		2020
Gross realized gains from sales	$	27	$	222
Gross realized losses from sales		(3)		(53)
Net realized gains	$	24	$	169
Income tax provision related to net realized gains	$	5	$	35

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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, 2021. 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)	December 31, 2021
	Amortized		Fair
	Cost		Value
Due in one year or less	$	14,454	$	14,538
Due from one year through five years		58,561		59,116
Due from five years through ten years		79,532		81,073
Due after ten years		130,056		133,056
Sub-total		282,603		287,783
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		98,048		98,181
Residential collateralized mortgage obligations		44,015		44,247
Commercial mortgage-backed securities		86,926		87,468
Total	$	511,592	$	517,679

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 $241,428,000 at December 31, 2021 and $247,373,000 at December 31, 2020 were pledged as collateral for public deposits, trusts and certain other deposits, as provided by law, totaling $189,383,000 at December 31, 2021 and $201,176,000 at December 31, 2020. See Note 12 for information concerning securities pledged to secure borrowing arrangements and Note 21 for information related to securities pledged against interest rate swap obligations.

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

A summary of information management considered in evaluating debt and equity securities for OTTI at December 31, 2021 and 2020 is provided below.

Debt Securities

At December 31, 2021 and 2020, 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, 2021 and 2020 to be temporary.

Equity Securities

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 $9,313,000 at December 31, 2021 and $9,720,000 at December 31, 2020. The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at December 31, 2021 and December 31, 2020. In making this determination, management concluded that

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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.

The Corporation’s marketable equity security, with a carrying value of $971,000 at December 31, 2021 and $1,000,000 at December 31, 2020, consisted exclusively of one mutual fund. There was an unrealized loss of $29,000 on the mutual fund at December 31, 2021 and no unrealized gain/loss at December 31, 2020. The increase in the unrealized loss of $29,000 in 2021 and the decrease in the unrealized loss of $21,000 in 2020 are included in other noninterest income in the consolidated statements of income.  There were no sales of equity securities in 2021 and 2020.

8. LOANS

The loans receivable portfolio is segmented into commercial, residential mortgage and consumer loans. Loans outstanding at December 31, 2021 and December 31, 2020 are summarized by segment, and by classes within each segment, as follows:

Summary of Loans by Type

(In Thousands)

	December 31,		December 31,
	2021		2020
Commercial:
Commercial loans secured by real estate	$	569,840	$	531,810
Commercial and industrial		159,073		159,577
Paycheck Protection Program - 1st Draw		1,356		132,269
Paycheck Protection Program - 2nd Draw		25,508		0
Political subdivisions		81,301		53,221
Commercial construction and land		60,579		42,874
Loans secured by farmland		11,121		11,736
Multi-family (5 or more) residential		50,089		55,811
Agricultural loans		2,351		3,164
Other commercial loans		17,153		17,289
Total commercial		978,371		1,007,751
Residential mortgage:
Residential mortgage loans - first liens		483,629		532,947
Residential mortgage loans - junior liens		23,314		27,311
Home equity lines of credit		39,252		39,301
1-4 Family residential construction		23,151		20,613
Total residential mortgage		569,346		620,172
Consumer		17,132		16,286
Total		1,564,849		1,644,209
Less: allowance for loan losses		(13,537)		(11,385)
Loans, net	$	1,551,312	$	1,632,824

In the table above, outstanding loan balances are presented net of deferred loan origination fees of $4,247,000 at December 31, 2021 and $6,286,000 at December 31, 2020.

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 Northcentral Pennsylvania, the Southern tier of New York State, Southeastern Pennsylvania and Southcentral Pennsylvania. 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.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act is a $2 trillion stimulus package designed to provide relief to U.S. businesses and consumers struggling as a result of the pandemic. A provision in the CARES Act includes creation of the Paycheck Protection Program (“PPP”) through the Small Business Administration (“SBA”) and Treasury Department. Under the PPP, the Corporation, as an SBA-certified lender, provides SBA-guaranteed loans to

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small businesses to pay their employees, rent, mortgage interest, and utilities. PPP loans will be forgiven subject to clients’ providing documentation evidencing their compliant use of funds and otherwise complying with the terms of the program.  Information related to PPP loans advanced pursuant to the CARES Act are labeled “1st Draw” within the tables.

Section 4013 of the CARES Act provides that, from the period beginning March 1, 2020 until 60 days after the date on which the national emergency concerning the coronavirus (COVID-19) pandemic declared by the President of the United States under the National Emergencies Act terminates (the “applicable period”), the Corporation may elect to suspend U.S. GAAP for loan modifications related to the pandemic that would otherwise be categorized as troubled debt restructurings (TDRs) and suspend any determination of a loan modified as a result of the effects of the pandemic as being a TDR, including impairment for accounting purposes. The suspension is applicable for the term of the loan modification that occurs during the applicable period for a loan that was not more than 30 days past due as of December 31, 2019. The suspension is not applicable to any adverse impact on the credit of a borrower that is not related to the pandemic.

In addition, the banking regulators and other financial regulators, on March 22, 2020 and revised April 7, 2020, issued a joint interagency statement titled the “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” that encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of the COVID-19 pandemic. Pursuant to the interagency statement, loan modifications that do not meet the conditions of Section 4013 of the CARES Act may still qualify as a modification that does not need to be accounted for as a TDR. Specifically, the agencies confirmed with the FASB staff that short-term modifications made in good faith in response to the pandemic to borrowers who were current prior to any relief are not TDRs under U.S. GAAP. This includes short-term (e.g. six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. Appropriate allowances for loan and lease losses are expected to be maintained. With regard to loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to the pandemic as past due because of the deferral. The interagency statement also states that during short-term pandemic-related loan modifications, these loans generally should not be reported as nonaccrual.

On December 27, 2020, the President of the United States signed into law the Consolidated Appropriations Act, 2021 (the “CAA”), which includes provisions that broadly address additional COVID-19 responses and relief.  Among the additional relief measures included are certain extensions to elements of the CARES Act, including extension of temporary relief from troubled debt restructurings established under Section 4013 of the CARES Act to the earlier of a) January 1, 2022, or b) the date that is 60 days after the date on which the national COVID-19 emergency terminates. The CAA also includes additional funding for the PPP with additional eligibility requirements for borrowers with generally the same loan terms as provided under the CARES Act. Information related to PPP loans advanced pursuant to the CAA are labeled “2nd Draw” within the tables.

The maximum term of PPP loans is five years. Most of the Corporation’s 1st Draw PPP loans have two-year terms, while 2nd Draw PPP loans have  five-year terms and the Corporation will be repaid sooner to the extent the loans are forgiven. The interest rate on PPP loans is 1%, and the Corporation has received fees from the SBA ranging between 1% and 5% per loan, depending on the size of the loan. Fees on PPP loans, net of origination costs and a market rate adjustment on PPP loans acquired from Covenant, are recognized in interest income as a yield adjustment over the term of the loans.

The Corporation began accepting and processing applications for loans under the PPP on April 3, 2020. Covenant also engaged in PPP lending starting in early April 2020. As of December 31, 2021, the recorded investment in 1st Draw PPP loans was $1,356,000, including contractual principal balances of $1,410,000, reduced by net deferred origination fees of $54,000. The recorded investment in 2nd Draw PPP loans was $25,508,000, including contractual principal balances of $26,356,000 reduced by net deferred origination fees of $848,000. Accretion of fees received on PPP loans, net of amortization of the market rate adjustment on PPP loans acquired from Covenant, was $5,515,000 in 2021 and $1,901,000 in 2020. Interest and fees on PPP loans which are included in taxable interest and fees on loans in the consolidated statements of income totaled $6,530,000 in 2021 and $2,924,000 in 2020.

To work with clients impacted by COVID-19, the Corporation offered short-term loan modifications on a case-by-case basis to borrowers who were current in their payments at the inception of the loan modification program. Prior to the merger, Covenant had a similar program in place, and these modified loans have been incorporated into the Corporation’s program. These efforts were designed to assist borrowers as they deal with the crisis and help the Corporation mitigate credit risk. For loans subject to the program, each

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borrower was required to resume making regularly scheduled loan payments at the end of the modification period and the deferred amounts have been moved to the end of the loan term. Consistent with Section 4013 of the CARES Act, the modified loans have not been reported as past due, nonaccrual  or as TDRs at December 31, 2021 and 2020. Most of the initial modifications under the program became effective in 2020 and provided a deferral of interest or principal and interest for 90-to-180 days. At December 31, 2021, there were no loans in deferral status under the program. At December 31, 2020, there were 45 loans with a total recorded investment of $37,397,000, in deferral status under the program.

As described in Note 3, effective July 1, 2020, the Corporation acquired loans pursuant to its acquisition of Covenant. In 2019, the Corporation acquired loans pursuant to the acquisition of Monument Bancorp, Inc. (“Monument”). Acquired loans were recorded at their initial fair value, with adjustments made to the gross amortized cost of loans based on movements in interest rates (market rate adjustment) and based on credit fair value adjustments on non-impaired loans and impaired loans. Subsequent to the acquisitions, the Corporation has recognized amortization and accretion of a portion of the market rate adjustments and credit adjustments on non-impaired (performing) loans, and a partial recovery of purchased credit impaired (PCI) loans. For the years ended December 31, 2021 and 2020, adjustments to the initial market rate and credit fair value adjustments of performing loans were recognized as follows:

(In Thousands)	Year Ended
	December 31,		December 31,
	2021		2020
Market Rate Adjustment
Adjustments to gross amortized cost of loans at beginning of period	$	718	$	(1,415)
Market rate adjustment recorded in acquisition		0		2,909
Amortization recognized in interest income		(1,355)		(776)
Adjustments to gross amortized cost of loans at end of period	$	(637)	$	718
Credit Adjustment on Non-impaired Loans
Adjustments to gross amortized cost of loans at beginning of period	$	(5,979)	$	(1,216)
Credit adjustment recorded in acquisition		0		(7,219)
Accretion recognized in interest income		2,644		2,456
Adjustments to gross amortized cost of loans at end of period	$	(3,335)	$	(5,979)

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A summary of PCI loans held at December 31, 2021 and December 31, 2020 is as follows:

(In Thousands)	December 31,		December 31,
	2021		2020
Outstanding balance	$	9,802	$	10,316
Carrying amount		6,558		6,841

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

	December 31,								December 31,
Year Ended December 31, 2021	2020						Provision		2021
(In Thousands)	Balance		Charge-offs		Recoveries		(Credit)		Balance
Allowance for Loan Losses:
Commercial:
Commercial loans secured by real estate	$	3,051	$	0	$	2	$	1,352	$	4,405
Commercial and industrial		2,245		(1,464)		20		1,922		2,723
Commercial construction and land		454		0		0		183		637
Loans secured by farmland		120		0		0		(5)		115
Multi-family (5 or more) residential		236		0		0		(21)		215
Agricultural loans		34		0		0		(9)		25
Other commercial loans		168		0		0		5		173
Total commercial		6,308		(1,464)		22		3,427		8,293
Residential mortgage:
Residential mortgage loans - first liens		3,524		(11)		4		133		3,650
Residential mortgage loans - junior liens		349		0		0		(165)		184
Home equity lines of credit		281		0		2		19		302
1-4 Family residential construction		99		0		0		103		202
Total residential mortgage		4,253		(11)		6		90		4,338
Consumer		239		(100)		38		58		235
Unallocated		585		0		0		86		671
Total Allowance for Loan Losses	$	11,385	$	(1,575)	$	66	$	3,661	$	13,537

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	December 31,								December 31,
Year Ended December 31, 2020	2019						Provision		2020
(In Thousands)	Balance		Charge-offs		Recoveries		(Credit)		Balance
Allowance for Loan Losses:
Commercial:
Commercial loans secured by real estate	$	1,921	$	0	$	0	$	1,130	$	3,051
Commercial and industrial		1,391		(2,236)		16		3,074		2,245
Commercial construction and land		966		(107)		0		(405)		454
Loans secured by farmland		158		0		0		(38)		120
Multi-family (5 or more) residential		156		0		0		80		236
Agricultural loans		41		0		0		(7)		34
Other commercial loans		155		0		0		13		168
Total commercial		4,788		(2,343)		16		3,847		6,308
Residential mortgage:
Residential mortgage loans - first liens		3,405		0		39		80		3,524
Residential mortgage loans - junior liens		384		0		1		(36)		349
Home equity lines of credit		276		0		4		1		281
1-4 Family residential construction		117		0		0		(18)		99
Total residential mortgage		4,182		0		44		27		4,253
Consumer		281		(122)		41		39		239
Unallocated		585		0		0		0		585
Total Allowance for Loan Losses	$	9,836	$	(2,465)	$	101	$	3,913	$	11,385

For the year ended December 31, 2021, the provision for loan losses was $3,661,000, a decrease in expense of $252,000 as compared to 2020. In 2021, the provision included the impact of partial charge-offs totaling $1,463,000 on a commercial loan. At December 31, 2021, the recorded investment in this loan was $1,391,000. In total, the provision for 2021 included a net charge of $1,324,000 related to specific loans (net charge-offs of $1,509,000 offset by a net decrease in specific allowances on loans of $185,000), an increase of $2,251,000 in the collectively determined potion of the allowance and an $86,000 increase in the unallocated allowance. The increase in the collectively determined portion of the allowance reflected the impact of an increase in volume of commercial loans, excluding PPP loans. In 2020, the provision included a $2,219,000 charge-off on one commercial loan for which there was no recorded investment at December 31, 2021 and 2020.

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. 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. 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. Risk ratings are updated any time that conditions or the situation warrants. Loans not classified are included in the “Pass” column in the table that follows.

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The following tables summarize the aggregate credit quality classification of outstanding loans by risk rating as of December 31, 2021 and 2020:

December 31, 2021									Purchased
(In Thousands)			Special						Credit
	Pass		Mention		Substandard		Doubtful		Impaired		Total
Commercial:
Commercial loans secured by real estate	$	538,966	$	10,510	$	16,220	$	0	$	4,144	$	569,840
Commercial and Industrial		142,775		10,841		4,694		0		763		159,073
Paycheck Protection Program - 1st Draw		1,356		0		0		0		0		1,356
Paycheck Protection Program - 2nd Draw		25,508		0		0		0		0		25,508
Political subdivisions		81,301		0		0		0		0		81,301
Commercial construction and land		59,816		715		48		0		0		60,579
Loans secured by farmland		10,011		186		924		0		0		11,121
Multi-family (5 or more) residential		47,638		0		873		0		1,578		50,089
Agricultural loans		1,802		0		549		0		0		2,351
Other commercial loans		17,150		3		0		0		0		17,153
Total commercial		926,323		22,255		23,308		0		6,485		978,371
Residential Mortgage:
Residential mortgage loans - first liens		469,044		7,981		6,534		0		70		483,629
Residential mortgage loans - junior liens		22,914		114		283		0		3		23,314
Home equity lines of credit		38,652		59		541		0		0		39,252
1-4 Family residential construction		23,151		0		0		0		0		23,151
Total residential mortgage		553,761		8,154		7,358		0		73		569,346
Consumer		17,092		0		40		0		0		17,132
Totals	$	1,497,176	$	30,409	$	30,706	$	0	$	6,558	$	1,564,849

December 31, 2020									Purchased
(In Thousands)			Special						Credit
	Pass		Mention		Substandard		Doubtful		Impaired		Total
Commercial:
Commercial loans secured by real estate	$	494,876	$	17,374	$	15,262	$	0	$	4,298	$	531,810
Commercial and Industrial		143,500		8,025		7,268		0		784		159,577
Paycheck Protection Program - 1st Draw		132,269		0		0		0		0		132,269
Political subdivisions		53,221		0		0		0		0		53,221
Commercial construction and land		42,110		715		49		0		0		42,874
Loans secured by farmland		10,473		405		858		0		0		11,736
Multi-family (5 or more) residential		50,563		2,405		1,229		0		1,614		55,811
Agricultural loans		2,569		0		595		0		0		3,164
Other commercial loans		17,289		0		0		0		0		17,289
Total commercial		946,870		28,924		25,261		0		6,696		1,007,751
Residential Mortgage:
Residential Mortgage loans - first liens		516,685		6,192		9,994		0		76		532,947
Residential Mortgage loans - junior liens		26,480		141		621		0		69		27,311
Home equity lines of credit		38,529		59		713		0		0		39,301
1-4 Family residential construction		20,613		0		0		0		0		20,613
Total residential mortgage		602,307		6,392		11,328		0		145		620,172
Consumer		16,172		0		114		0		0		16,286
Totals	$	1,565,349	$	35,316	$	36,703	$	0	$	6,841	$	1,644,209

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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, 2021 and 2020:

December 31, 2021	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Commercial:
Commercial loans secured by real estate	$	10,926	$	558,914	$	569,840	$	669	$	3,736	$	4,405
Commercial and industrial		2,503		156,570		159,073		71		2,652		2,723
Paycheck Protection Program - 1st Draw		0		1,356		1,356		0		0		0
Paycheck Protection Program - 2nd Draw		0		25,508		25,508		0		0		0
Political subdivisions		0		81,301		81,301		0		0		0
Commercial construction and land		0		60,579		60,579		0		637		637
Loans secured by farmland		83		11,038		11,121		0		115		115
Multi-family (5 or more) residential		1,578		48,511		50,089		0		215		215
Agricultural loans		0		2,351		2,351		0		25		25
Other commercial loans		0		17,153		17,153		0		173		173
Total commercial		15,090		963,281		978,371		740		7,553		8,293
Residential mortgage:
Residential mortgage loans - first liens		630		482,999		483,629		0		3,650		3,650
Residential mortgage loans - junior liens		14		23,300		23,314		0		184		184
Home equity lines of credit		0		39,252		39,252		0		302		302
1-4 Family residential construction		0		23,151		23,151		0		202		202
Total residential mortgage		644		568,702		569,346		0		4,338		4,338
Consumer		0		17,132		17,132		0		235		235
Unallocated												671
Total	$	15,734	$	1,549,115	$	1,564,849	$	740	$	12,126	$	13,537

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December 31, 2020	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Commercial:
Commercial loans secured by real estate	$	11,962	$	519,848	$	531,810	$	692	$	2,359	$	3,051
Commercial and industrial		1,359		158,218		159,577		71		2,174		2,245
Paycheck Protection Program - 1st Draw		0		132,269		132,269		0		0		0
Political subdivisions		0		53,221		53,221		0		0		0
Commercial construction and land		0		42,874		42,874		0		454		454
Loans secured by farmland		84		11,652		11,736		0		120		120
Multi-family (5 or more) residential		1,614		54,197		55,811		0		236		236
Agricultural loans		0		3,164		3,164		0		34		34
Other commercial loans		0		17,289		17,289		0		168		168
Total commercial		15,019		992,732		1,007,751		763		5,545		6,308
Residential mortgage:
Residential mortgage loans - first liens		2,385		530,562		532,947		9		3,515		3,524
Residential mortgage loans - junior liens		414		26,897		27,311		153		196		349
Home equity lines of credit		0		39,301		39,301		0		281		281
1-4 Family residential construction		0		20,613		20,613		0		99		99
Total residential mortgage		2,799		617,373		620,172		162		4,091		4,253
Consumer		0		16,286		16,286		0		239		239
Unallocated												585
Total	$	17,818	$	1,626,391	$	1,644,209	$	925	$	9,875	$	11,385

Summary information related to impaired loans as of December 31, 2021 and 2020 is as follows:

(In Thousands)	December 31, 2021						December 31, 2020
	Unpaid						Unpaid
	Principal		Recorded		Related		Principal		Recorded		Related
	Balance		Investment		Allowance		Balance		Investment		Allowance
With no related allowance recorded:
Commercial loans secured by real estate	$	6,600	$	4,458	$	0	$	7,168	$	5,398	$	0
Commercial and industrial		5,213		2,431		0		1,781		1,287		0
Residential mortgage loans - first liens		656		630		0		1,248		1,248		0
Residential mortgage loans - junior liens		124		14		0		160		105		0
Loans secured by farmland		83		83		0		84		84		0
Multi-family (5 or more) residential		2,734		1,578		0		2,770		1,614		0
Total with no related allowance recorded		15,410		9,194		0		13,211		9,736		0
With a related allowance recorded:
Commercial loans secured by real estate		6,468		6,468		668		6,501		6,501		691
Commercial and industrial		72		72		72		72		72		72
Residential mortgage loans - first liens		0		0		0		1,200		1,200		9
Residential mortgage loans - junior liens		0		0		0		309		309		153
Total with a related allowance recorded		6,540		6,540		740		8,082		8,082		925
Total	$	21,950	$	15,734	$	740	$	21,293	$	17,818	$	925

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

(In Thousands)					Interest Income Recognized on
	Average Investment in				on Impaired Loans
	Impaired Loans				on a Cash Basis
	Year Ended December 31,				Year Ended December 31,
	2021		2020		2021		2020
Commercial:
Commercial loans secured by real estate	$	11,617	$	5,266	$	557	$	258
Commercial and industrial		2,636		2,542		34		34
Commercial construction and land		48		521		3		15
Loans secured by farmland		84		319		1		27
Multi-family (5 or more) residential		1,583		202		133		0
Agricultural loans		67		76		4		4
Other commercial loans		0		18		0		1
Total commercial		16,035		8,944		732		339
Residential mortgage:
Residential mortgage loans - first lien		1,647		1,853		78		116
Residential mortgage loans - junior lien		361		392		11		22
Home equity lines of credit		0		57		0		3
Total residential mortgage		2,008		2,302		89		141
Total	$	18,043	$	11,246	$	821	$	480

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, 2021				December 31, 2020
	Past Due				Past Due
	90+ Days and				90+ Days and
	Accruing		Nonaccrual		Accruing		Nonaccrual
Commercial:
Commercial loans secured by real estate	$	738	$	10,885	$	395	$	11,550
Commercial and industrial		30		2,299		142		970
Commercial construction and land		0		48		0		49
Loans secured by farmland		28		83		188		84
Multi-family (5 or more) residential		0		1,578		0		1,614
Agricultural loans		65		0		0		0
Other commercial		0		0		71		0
Total commercial		861		14,893		796		14,267
Residential mortgage:
Residential mortgage loans - first liens		1,144		4,005		838		6,387
Residential mortgage loans - junior liens		69		3		52		378
Home equity lines of credit		102		82		233		299
Total residential mortgage		1,315		4,090		1,123		7,064
Consumer		43		16		56		85
Totals	$	2,219	$	18,999	$	1,975	$	21,416

Loans past due 90 days or more for which interest continues to be accrued have been evaluated and determind to be well secured and in the process of collection. The amounts shown in the table immediately above include loans classified as troubled debt restructurings (described in more detail below), if such loans are past due ninety days or more or nonaccrual. PCI loans with a total recorded investment of $6,558,000 at December 31, 2021 and $6,841,000 at December 31, 2020 are classified as nonaccrual.

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The table below presents a summary of the contractual aging of loans as of December 31, 2021 and 2020. Loans modified under the Corporation’s program designed to work with clients impacted by COVID-19, as described above, are included in the current and past due less than 30 days category in the table that follows:

(In Thousands)	As of December 31, 2021								As of December 31, 2020
	Current &								Current &
	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
Commercial:
Commercial loans secured by real estate	$	563,658	$	762	$	5,420	$	569,840	$	529,998	$	66	$	1,746	$	531,810
Commercial and industrial		158,188		72		813		159,073		158,523		55		999		159,577
Paycheck Protection Program - 1st Draw		1,339		17		0		1,356		132,269		0		0		132,269
Paycheck Protection Program - 2nd Draw		25,508		0		0		25,508		0		0		0		0
Political subdivisions		81,301		0		0		81,301		53,221		0		0		53,221
Commercial construction and land		60,509		70		0		60,579		42,590		284		0		42,874
Loans secured by farmland		11,010		0		111		11,121		11,419		95		222		11,736
Multi-family (5 or more) residential		48,532		0		1,557		50,089		53,860		1,951		0		55,811
Agricultural loans		2,279		7		65		2,351		3,091		2		71		3,164
Other commercial loans		17,153		0		0		17,153		17,289		0		0		17,289
Total commercial		969,477		928		7,966		978,371		1,002,260		2,453		3,038		1,007,751
Residential mortgage:
Residential mortgage loans - first liens		475,637		5,038		2,954		483,629		523,191		5,703		4,053		532,947
Residential mortgage loans - junior liens		23,229		16		69		23,314		27,009		111		191		27,311
Home equity lines of credit		38,830		279		143		39,252		38,919		101		281		39,301
1-4 Family residential construction		23,151		0		0		23,151		20,457		156		0		20,613
Total residential mortgage		560,847		5,333		3,166		569,346		609,576		6,071		4,525		620,172
Consumer		17,001		72		59		17,132		16,063		83		140		16,286
Totals	$	1,547,325	$	6,333	$	11,191	$	1,564,849	$	1,627,899	$	8,607	$	7,703	$	1,644,209

Nonaccrual loans are included in the contractual aging immediately above. A summary of the contractual aging of nonaccrual loans at December 31, 2021 and 2020 is as follows:

(In Thousands)	Current &
	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Total
December 31, 2021 Nonaccrual Totals	$	8,800	$	1,227	$	8,972	$	18,999
December 31, 2020 Nonaccrual Totals	$	12,999	$	2,689	$	5,728	$	21,416

Loans whose terms are modified are classified as TDRs if the Corporation grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Loans classified as TDRs are designated as impaired. The outstanding balance of loans subject to TDRs, as well as the contractual aging information at December 31, 2021 and 2020 is as follows:

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Troubled Debt Restructurings (TDRs):

(In Thousands)	Current &
	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Nonaccrual		Total
December 31, 2021 Totals	$	248	$	40	$	65	$	5,452	$	5,805
December 31, 2020 Totals	$	166	$	0	$	418	$	6,867	$	7,451

At December 31, 2021 and 2020, there were no commitments to loan additional funds to borrowers whose loans have been classified as TDRs.

A summary of TDRs that occurred during 2021 and 2020 is as follows:

(Balances in Thousands)	2021			2020
		Post-			Post-
	Number	Modification		Number	Modification
	of	Recorded		of	Recorded
	Loans	Investment		Loans	Investment
Residential mortgage - first liens:
Reduced monthly payments and extended maturity date	1	$	12	0	$	0
Reduced monthly payments for a fifteen-month period	1		116	0		0
Residential mortgage - junior liens,
New loan at lower than risk-adjusted market rate to borrower from whom short sale of other collateral was accepted	0		0	1		30
Home equity lines of credit:
Reduced monthly payments and extended maturity date	1		24	0		0
Reduced monthly payments for an eighteen-month period	1		70	0		0
Commercial loans secured by real estate:
Interest only payments for a nine-month period	0		0	1		240
Principal and interest payment deferral non-COVID related	0		0	2		4,831
Multi-family (5 or more) residential,
Principal and interest payment deferral non-COVID related	0		0	3		2,170
Total	4	$	222	7	$	7,271

In the year ended December 31, 2020, the Corporation recorded a specific allowance for loan losses of $416,000 related to a loan secured by commercial real estate for which a TDR concession was made in 2020 and included in the table above. In 2021, the allowance on this loan with a recorded investment of $3,405,000 at December 31, 2021 was increased to $427,000. The other loans for which TDRs were granted in 2021 and 2020 had no specific impact on the provision or allowance for loan losses.

In 2021 and 2020, payment defaults on loans for which modifications considered to be TDRs were entered into within the previous 12 months are summarized as follows:

	2021			2020
	Number			Number
	of	Recorded		of	Recorded
(Balances in Thousands)	Loans	Investment		Loans	Investment
Commercial loans secured by real estate	1	$	3,405	1	$	240
Total	1	$	3,405	1	$	240

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The default that occurred in 2021 was on the loan referred to above with a specific allowance of $427,000 at December 31, 2021. The loan for which a default occurred in 2020 was repaid in full in 2021.

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)	December 31,		December 31,
	2021		2020
Foreclosed residential real estate	$	256	$	80

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)	December 31,		December 31,
	2021		2020
Residential real estate in process of foreclosure	$	1,260	$	1,246

9. BANK PREMISES AND EQUIPMENT

(In Thousands)	December 31,
	2021		2020
Land	$	3,623	$	3,826
Buildings and improvements		32,606		33,058
Furniture and equipment		15,162		15,235
Construction in progress		835		8
Total		52,226		52,127
Less: accumulated depreciation		(31,543)		(30,601)
Net	$	20,683	$	21,526

Depreciation expense is included in the following line items of the consolidated statements of income:

(In Thousands)	2021		2020
Net occupancy and equipment expense	$	1,723	$	1,595
Data processing and telecommunications expense		407		386
Total	$	2,130	$	1,981

10. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Information related to the core deposit intangibles is as follows:

(In Thousands)	December 31,
	2021		2020
Gross amount	$	6,639	$	6,639
Accumulated amortization		(3,323)		(2,788)
Net	$	3,316	$	3,851

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Amortization expense related to core deposit intangibles is included in other noninterest expense in the consolidated statements of income, as follows:

(In Thousands)	Year Ended
	December 31,		December 31,
	2021		2020
Amortization expense	$	535	$	540

The amount of amortization expense to be recognized in each of the ensuing five years is as follows:

(In Thousands)
2022	$	439
2023		408
2024		390
2025		424
2026		396

Goodwill represents the excess of the cost of acquisitions over the fair value of the net assets acquired. Changes in the carrying amount of goodwill are summarized in the following table:

(In Thousands)	Year Ended
	December 31,		December 31,
	2021		2020
Balance, beginning of period	$	52,505	$	28,388
Goodwill arising in business combination		0		24,117
Balance, end of period	$	52,505	$	52,505

In testing goodwill for impairment at December 31, 2021, the Corporation by-passed performing a qualitative assessment and performed a quantitative assessment based on comparison of the Corporation’s market capitalization to its stockholders’ equity, resulting in the determination that the fair value of its reporting unit, its community banking operation, exceeded its carrying amount. Accordingly, there was no goodwill impairment at December 31, 2021.

There were no goodwill impairment charges recorded in the years ended December 31, 2021 and 2020.

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11. DEPOSITS

At December 31, 2021 the scheduled maturities of time deposits are as follows:

(In Thousands)
2022	$	163,170
2023		80,711
2024		22,224
2025		11,963
2026		7,825
Total	$	285,893

Time deposits of more than $250,000 totaled $75,375,000 at December 31, 2021 and $103,024,000 at December 31, 2020. As of December 31, 2021, the remaining maturities or time to next re-pricing of time deposits more than $250,000 was as follows:

(In Thousands)
Three months or less	$	15,981
Over 3 months through 12 months		32,648
Over 1 year through 3 years		25,438
Over 3 years		1,308
Total	$	75,375

12. BORROWED FUNDS

SHORT-TERM BORROWINGS

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

(In Thousands)	December 31,		December 31,
	2021		2020
FHLB-Pittsburgh borrowings	$	0	$	18,066
Customer repurchase agreements		1,803		1,956
Total short-term borrowings	$	1,803	$	20,022

The weighted average interest rate on total short-term borrowings outstanding was 0.10% at December 31, 2021 and 0.40% at December 31, 2020. The maximum amount of total short-term borrowings outstanding at any month-end was $17,353,000 in 2021 and $56,647,000 in 2020.

The Corporation had available credit with other correspondent banks totaling $45,000,000 at December 31, 2021 and 2020. These lines of credit are primarily unsecured. No amounts were outstanding at December 31, 2021 or 2020.

The Corporation has a line of credit with the Federal Reserve Bank of Philadelphia’s Discount Window. At December 31, 2021, the Corporation had available credit in the amount of $13,642,000 on this line with no outstanding advances. At December 31, 2020, the Corporation had available credit in the amount of $14,654,000 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 $14,034,000 at December 31, 2021 and $15,126,000 at December 31, 2020.

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, 2021 and 2020. The carrying value of the underlying securities was $1,820,000 at December 31, 2021 and $1,980,000 at December 31, 2020.

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The FHLB-Pittsburgh loan facility is collateralized by qualifying loans secured by real estate with a book value totaling $1,046,242,000 at December 31, 2021 and $1,049,690,000 at December 31, 2020. 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 $9,313,000 at December 31, 2021 and $9,720,000 at December 31, 2020. The Corporation’s total credit facility with FHLB-Pittsburgh was $756,868,000 at December 31, 2021, including an unused (available) amount of $723,557,000. At December 31, 2020, the Corporation’s total credit facility with FHLB-Pittsburgh was $771,199,000, including an unused (available) amount of $698,977,000.

At December 31, 2021, there were no overnight borrowings or short-term advances from FHLB-Pittsburgh. At December 31, 2020, other short-term advances from FHLB-Pittsburgh included five advances totaling $18,000,000 which are presented in the table net of the unamortized purchase accounting adjustment, with a weighted-average effective rate of 0.43%.

LONG-TERM BORROWINGS – FHLB ADVANCES

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

(In Thousands)	December 31,		December 31,
	2021		2020
Loans matured in 2021	$	0	$	26,098
Loans maturing in 2022 with a weighted-average rate of 0.60%		15,452		15,682
Loans maturing in 2023 with a weighted-average rate of 0.73%		7,119		7,224
Loan maturing in 2024 with a rate of 0.75%		5,099		5,137
Loan maturing in 2025 with a rate of 4.91%		372		467
Total long-term FHLB-Pittsburgh borrowings	$	28,042	$	54,608

Note: Weighted-average rates are presented as of December 31, 2021.

SENIOR NOTES

On May 19, 2021, the Corporation issued and sold $15.0 million in aggregate principal amount of 2.75% Fixed Rate Senior Unsecured Notes due 2026 (the "Senior Notes"). The Senior Notes mature on June 1, 2026 and bear interest at a fixed annual rate of 2.75%. The Corporation is not entitled to redeem the Senior Notes, in whole or in part, at any time prior to maturity and the Senior Notes are not subject to redemption by the holders. The Senior Notes are unsecured and unsubordinated obligations of the Corporation only and are not obligations of, and are not guaranteed by, any subsidiary of the Corporation.

The Senior Notes were recorded, net of debt issuance costs of $337,000, at an initial carrying amount of $14,663,000. Debt issuance costs are amortized over the term of the Senior Notes as an adjustment of the effective interest rate. Amortization of debt issuance costs associated with the Senior Notes totaling $38,000 in 2021 was included in interest expense in the consolidated statements of income.  

At December 31, 2021 and December 31, 2020, outstanding Senior Notes are as follows:

(In Thousands)	December 31,		December 31,
	2021		2020
Senior Notes with an aggregate par value of $15,000,000; bearing interest at 2.75% with an effective interest rate of 3.23%; maturing in June 2026	$	14,701	$	0
Total carrying value	$	14,701	$	0

SUBORDINATED DEBT

On May 19, 2021, the Corporation issued and sold $25.0 million in aggregate principal amount of 3.25% Fixed-to-Floating Rate Subordinated Notes due 2031 (the "Subordinated Notes"). The Subordinated Notes mature on June 1, 2031 and bear interest at a fixed annual rate of 3.25%, to June 1, 2026. From June 1, 2026 to maturity or early redemption, the interest rate will reset quarterly to an interest rate per annum equal to the three-month Secured Overnight Financing Rate provided by the Federal Reserve Bank of New York

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plus 259 basis points. The Corporation is entitled to redeem the Subordinated Notes, in whole or in part, at any time on or after June 1, 2026, and to redeem the Subordinated Notes at any time in whole upon certain other events. Any redemption of the Subordinated Notes will be subject to prior regulatory approval to the extent required.

The Subordinated Notes are not subject to redemption at the option of the holders. The Subordinated Notes are unsecured, subordinated obligations of the Corporation only and are not obligations of, and are not guaranteed by, any subsidiary of the Corporation. The Subordinated Notes rank junior in right to payment to the Corporation's current and future senior indebtedness, including the Senior Notes (described above). The Subordinated Notes are intended to qualify as Tier 2 capital for regulatory capital purposes.

The Subordinated Notes were recorded, net of debt issuance costs of $563,000, at an initial carrying amount of $24,437,000. Debt issuance costs are amortized through June 1, 2026 as an adjustment of the effective interest rate. Amortization of debt issuance costs associated with the Subordinated Notes totaling $63,000 in 2021 was included in interest expense in the unaudited consolidated statements of income.

At December 31, 2021 and 2020, outstanding subordinated debt agreements are as follows:

(In Thousands)	December 31,		December 31,
	2021		2020
Agreements with an aggregate par value of $8,000,000; bearing interest at 6.25% with an effective interest rate of 5.49%; redeemed at par in June 2021	$	0	$	8,027
Agreements with an aggregate par value of $6,500,000; bearing interest at 6.50%; maturing in April 2027 and redeemable at par in April 2022		6,500		6,500
Agreement with a par value of $2,000,000; bearing interest at 6.50% with an effective interest rate of 5.60%; maturing in July 2027 and redeemable at par in July 2022		2,008		2,026
Agreements with a par value of $25,000,000; bearing interest at 3.25% with an effective interest rate of 3.74%; maturing in June 2031 and redeemable at par in June 2026		24,501		0
Total carrying value	$	33,009	$	16,553

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, 2021 and 2020 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.

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

	Pension				Postretirement
(In Thousands)	2021		2020		2021		2020
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year	$	1,101	$	976	$	1,347	$	1,326
Service cost		0		0		63		46
Interest cost		20		23		33		39
Plan participants' contributions		0		0		148		185
Actuarial loss (gain)		12		108		(65)		11
Benefits paid		(5)		(6)		(229)		(260)
Benefit obligation at end of year	$	1,128	$	1,101	$	1,297	$	1,347
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year	$	1,062	$	971	$	0	$	0
Actual return on plan assets		118		97		0		0
Employer contribution		0		0		81		75
Plan participants' contributions		0		0		148		185
Benefits paid		(5)		(6)		(229)		(260)
Fair value of plan assets at end of year	$	1,175	$	1,062	$	0	$	0
Funded status at end of year	$	47	$	(39)	$	(1,297)	$	(1,347)

At December 31, 2021 and 2020, the following pension plan and postretirement plan asset and liability amounts were recognized in the consolidated balance sheets:

	Pension				Postretirement
(In Thousands)	2021		2020		2021		2020
Other assets	$	47	$	0	$	0	$	0
Accrued interest and other liabilities		0		39		1,297		1,347

At December 31, 2021 and 2020, the following items included in accumulated other comprehensive income had not been recognized as components of expense:

	Pension				Postretirement
(In Thousands)	2021		2020		2021		2020
Prior service cost	$	0	$	0	$	(186)	$	(217)
Net actuarial loss (gain)		182		277		(271)		(211)
Total	$	182	$	277	$	(457)	$	(428)

For the defined benefit pension plan, amortization of the net actuarial loss is expected to be $8,000 in 2022. 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 2022 is a reduction in expense of $31,000, and net actuarial gain of $9,000 is expected to be amortized in 2022.

The accumulated benefit obligation for the defined benefit pension plan was $1,128,000 at December 31, 2021 and $1,101,000 at December 31, 2020.

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

	Pension				Postretirement
(In Thousands)	2021		2020		2021		2020
Service cost	$	0	$	0	$	63	$	46
Interest cost		20		23		33		39
Expected return on plan assets		(30)		(27)		0		0
Amortization of prior service cost		0		0		(31)		(31)
Recognized net actuarial loss (gain)		19		16		(5)		(14)
Total net periodic benefit cost	$	9	$	12	$	60	$	40

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

	Pension				Postretirement
	2021		2020		2021		2020
Discount rate	2.30	%	3.10	%	2.50	%	3.25	%
Expected return on plan assets	4.81	%	4.99	%	N/A		N/A
Rate of compensation increase	N/A		N/A		N/A		N/A

The weighted-average assumptions used to determine benefit obligations as of December 31, 2021 and 2020 are as follows:

	Pension				Postretirement
	2021		2020		2021		2020
Discount rate	2.60	%	2.30	%	3.00	%	2.50	%
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
2022	$	542	$	84
2023		187		81
2024		8		83
2025		8		85
2026		14		95
2027-2031		360		428

No estimated minimum contribution to the defined benefit pension plan is required in 2022, 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, 2021 and 2020 are as follows:

	2021		2020
Mutual funds invested principally in:
Cash and cash equivalents	3	%	2	%
Debt securities	38	%	36	%
Equity securities	51	%	51	%
Alternative funds	8	%	11	%
Total	100	%	100	%

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C&N Bank’s Wealth 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 22). The 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 $1,299,000 in 2021 and $1,050,000 in 2020.

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 in 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 over a period of 6 years. As of December 31, 2021, and 2020, 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 513,494 shares of Corporation stock at December 31, 2021 and 481,478 shares at December 31, 2020, all of which had been allocated to Plan participants. The Corporation’s contributions to the ESOP totaled $1,040,000 in 2021 and $912,000 in 2020.

The Corporation has a nonqualified supplemental deferred compensation arrangement with its key officers. Charges to operating expense for officers’ supplemental deferred compensation were $314,000 in 2021 and $286,000 in 2020.

In connection with the Covenant acquisition, the Corporation assumed an obligation to provide a supplemental retirement benefit to a former Covenant executive. Under the terms of the agreement, the executive or his heirs will receive monthly payments totaling $1 million over a 10-year period starting in October 2025. Effective July 1, 2020, the Corporation recorded a liability of $499,000 representing the present value of the obligation prior to the executive fully vesting in the benefit. In 2020, the Corporation recorded expense of $360,000, which is included in merger-related expenses in the consolidated statements of income, representing the impact of the executive fully vesting upon the change in control. In addition, the Corporation recorded expense of $13,000 in 2021 and $6,000 in 2020, which is included in pensions and other employee benefits in the consolidated statements of income, representing the effective interest cost on the obligation. The discount rate used to measure the liability is 1.5%. The balance of the liability, which is included in accrued interest and other liabilities in the consolidated balance sheets, is $878,000 at December 31, 2021 and $865,000 at December 31, 2020.

The Corporation also has a nonqualified deferred compensation plan that allows selected officers 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, 2021, 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 110,800 shares available for issuance under the Stock Incentive Plan as of December 31, 2021.

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 235,000 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

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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 96,309 shares available for issuance under the Independent Directors Stock Incentive Plan as of December 31, 2021.

Total stock-based compensation expense is as follows:

(In Thousands)	2021		2020
Restricted stock	$	1,214	$	1,050
Stock options		0		0
Total	$	1,214	$	1,050

The following summarizes non-vested restricted stock activity for the year ended December 31, 2021:

		Weighted
		Average
	Number	Grant Date
	of Shares	Fair Value
Outstanding, December 31, 2020	101,942	$	23.42
Granted	78,391	$	20.28
Vested	(48,016)	$	23.85
Forfeited	(5,290)	$	22.10
Outstanding, December 31, 2021	127,027	$	21.37

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, 2021, there was $1,498,000 total unrecognized compensation cost related to restricted stock, which is expected to be recognized over a weighted average period of 1.4 years.

In 2021 and 2020, the Corporation awarded shares of restricted stock under the Stock Incentive Plan, as follows:

	2021	2020
Time-based awards to independent directors	10,989	7,580
Time-based awards to employees	50,178	45,457
Performance-based awards to employees	17,224	17,903
Total	78,391	70,940

Time-based restricted stock awards granted under the Independent Directors Stock Incentive Plan in 2021 and 2020 vest over one-year terms. Time-based restricted stock awards granted to employees in 2021 and 2020 vest ratably over three-year terms, subject to continued employment and satisfactory job performance. Performance-based restricted stock awards granted in 2021 and 2020 vest ratably over three-year terms, with vesting contingent upon meeting conditions based on the Corporation’s earnings as specified in the agreements.

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There were no stock options granted in 2021 or 2020. A summary of stock option activity is presented below:

	2021			2020
		Weighted			Weighted
		Average			Average
		Exercise			Exercise
	Shares	Price		Shares	Price
Outstanding, beginning of year	57,111	$	18.92	75,897	$	18.69
Granted	0			0
Exercised	(22,429)	$	18.96	(17,222)	$	18.25
Forfeited	(3,156)	$	19.20	(1,564)	$	15.06
Expired	(7,308)	$	15.06	0	$
Outstanding, end of year	24,218	$	20.01	57,111	$	18.92
Options exercisable at year-end	24,218	$	20.01	57,111	$	18.92
Weighted-average fair value of options forfeited		$	4.59		$	4.26

The weighted-average remaining contractual term of outstanding stock options at December 31, 2021 was 1.6 years. The aggregate intrinsic value of stock options outstanding was $148,000 at December 31, 2021. The total intrinsic value of options exercised was $97,000 in 2021 and $128,000 in 2020.

The Corporation has issued shares from treasury stock for almost all stock option exercises through December 31, 2021. Management does not anticipate that stock repurchases will be necessary to accommodate stock option exercises in 2022.

In January 2022, the Corporation awarded 66,405 shares of restricted stock under the Stock Incentive Plan and 9,588 shares of restricted stock under the Independent Directors Stock Incentive Plans. The January 2022 restricted stock awards under the Stock Incentive Plan vest ratably over three years. The 2022 restricted stock issued under the Independent Directors Stock Incentive Plan vests over one year. Total estimated stock-based compensation for 2022 is $1,600,000. The restricted stock awards made in January 2022 are not included in the tables above.

14. INCOME TAXES

The net deferred tax asset at December 31, 2021 and 2020 represents the following temporary difference components:

	December 31,		December 31,
(In Thousands)	2021		2020
Deferred tax assets:
Allowance for loan losses	$	2,935	$	2,154
Purchase accounting adjustments on loans		1,621		1,930
Net operating loss carryforward		778		896
Operating leases liability		821		724
Other deferred tax assets		3,260		3,089
Total deferred tax assets		9,415		8,793
Deferred tax liabilities:
Unrealized holding gains on securities		1,278		3,104
Defined benefit plans - ASC 835		57		32
Bank premises and equipment		460		1,216
Core deposit intangibles		725		840
Right-of-use assets from operating leases		821		724
Other deferred tax liabilities		187		172
Total deferred tax liabilities		3,528		6,088
Deferred tax asset, net	$	5,887	$	2,705

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The provision for income taxes includes the following:

(In Thousands)	2021		2020
Currently payable	$	8,386	$	4,230
Tax expense resulting from allocations of certain tax benefits to equity or as a reduction in other assets		128		121
Deferred		(1,381)		(361)
Total provision	$	7,133	$	3,990

A reconciliation of income tax at the statutory rate to the Corporation’s effective rate is as follows:

	2021			2020
(Dollars In Thousands)	Amount		%	Amount		%
Expected provision	$	7,914	21.0	$	4,875	21.0
Tax-exempt interest income		(921)	(2.4)		(808)	(3.5)
Increase in cash surrender value and other income from life insurance, net		(118)	(0.3)		(170)	(0.7)
ESOP dividends		(120)	(0.3)		(110)	(0.5)
State income tax, net of Federal benefit		375	1.0		172	0.7
Other, net		3	0.0		31	0.1
Effective income tax provision	$	7,133	18.9	$	3,990	17.2

In connection with the 2020 Covenant merger, the Corporation received a net operating loss (“NOL”) available to be carried forward against future federal taxable income of $4.6 million. Availability of the NOL does not expire; however, the amount that may be offset against taxable income is limited to approximately $563,000 per year and further limited annually to no more than 80% of taxable income without regard to the NOL. At December 31, 2021, the unused amount of the NOL is $3.7 million.

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 2018.

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:

	Beginning		New				Other		Ending
(In Thousands)	Balance		Loans		Repayments		Changes		Balance
13 directors, 9 executive officers 2021	$	18,445	$	1,249	$	(6,034)	$	251	$	13,911
13 directors, 9 executive officers 2020	$	14,455	$	242	$	(2,150)	$	5,898	$	18,445

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 $10,124,000 at December 31, 2021 and $13,182,000 at December 31, 2020.

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.

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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, 2021 and 2020 are as follows:

(In Thousands)	2021		2020
Commitments to extend credit	$	366,076	$	317,470
Standby letters of credit		10,079		9,107

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, 2021 and 2020.

Standby letters of credit as of December 31, 2021 expire as follows:

Year of Expiration	(In Thousands)
2022	$	10,021
2023		13
2024		20
2026		25
Total	$	10,079

17. OPERATING LEASE COMMITMENTS AND CONTINGENCIES

Operating Lease Commitments

Operating leases in which the Corporation is the lessee are recorded as operating lease Right of Use ("ROU") assets and operating lease liabilities, included in other assets and other liabilities, respectively, on the Consolidated Balance Sheets. The Corporation does not currently have any finance leases. Operating lease ROU assets represent the right to use an underlying asset during the lease term and operating lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities were recognized as of the date of adoption of ASU 2017-02 based on the present value of the remaining lease payments using a discount rate that represented the then Corporation’s incremental borrowing rate at the date of initial application.

Operating lease expense, which is comprised of amortization of the ROU assets and the implicit interest accreted on the operating lease liability, is recognized on a straight line basis over the remaining lease term of the operating lease, and is recorded in office occupancy expense in the Consolidated Statements of Income. The leases relate to Bank branches with remaining lease terms of generally 1 to 10 years.

The Corporation leases certain branch locations, office space and equipment. All leases are classified as operating leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term.

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Certain leases include options to renew, with renewal terms that can extend the lease term from one to eight years that are reasonably certain of being exercised. The discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate which corresponded with the remaining lease term as of January 1, 2019 for leases that existed at adoption and as of the lease commencement date for leases subsequently entered into after January 1, 2019. At December 31, 2021, discount rates ranged from 0.84% to 3.50% with a weighted-average discount rate of 1.90%. At December 31, 2021, the weighted-average remaining lease term was 4.8 years.

As shown in the table below, at December 31, 2021, right-of-use assets of $3,751,000 were included in other assets, and the related lease liabilities totaling the same amount were included in accrued interest and other liabilities, in the consolidated balance sheets. At December 31, 2020, right of use assets and the related liabilities totaled $3,446,000.

	December 31,		December 31,
(In Thousands)	2021		2020
Other assets	$	3,751	$	3,446
Other liabilities	$	3,751	$	3,446

In 2021 and 2020, operating lease expenses are included in the following line item of the consolidated statements of income:

(In Thousands)	2021		2020
Net occupancy and equipment expense	$	492	$	371
Total	$	492	$	371

A maturity analysis of the Corporation’s lease liabilities at December 31, 2021 is as follows:

(In Thousands)

Lease Payments Due

2022	$	540
2023		528
2024		521
2025		501
2026		438
Thereafter		1,524
Total lease payments		4,052
Discount on cash flows		(301)
Total lease liabilities	$	3,751

Litigation Matters

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.

Trust Department Tax Reporting Contingency

The Corporation has incurred operational losses from compliance oversight related to trust department tax preparation and administration activities that occurred prior to 2020. In 2020, the Corporation made changes in internal controls and personnel responsible for trust department tax administration activities. Management implemented the changes in internal controls and personnel in an effort to mitigate and prevent the likelihood of new instances of non-compliance from trust department tax administration activities. Losses related to trust department tax compliance matters totaled $164,000 in 2021 and $571,000 in 2020. These losses are included in other noninterest

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expense in the consolidated statements of income. The balance of accrued interest and other liabilities in the consolidated balance sheets includes $465,000 at December 31, 2021 and $322,000 at December 31, 2020 related to specific tax compliance matters that have been identified; however, no estimate can be made of the amount of additional expenses that may be incurred related to these matters.

18. REGULATORY MATTERS

In August 2018, the Federal Reserve Board issued an interim final rule that expanded applicability of the Board’s small bank holding company policy statement. The interim final rule raised the policy statement’s asset threshold from $1 billion to $3 billion in total consolidated assets for a bank holding company or savings and loan holding company that: (1) is not engaged in significant nonbanking activities; (2) does not conduct significant off-balance sheet activities; and (3) does not have a material amount of debt or equity securities, other than trust-preferred securities, outstanding. The interim final rule provides that, if warranted for supervisory purposes, the Federal Reserve may exclude a company from the threshold increase. Management believes the Corporation meets the conditions of the Federal Reserve’s small bank holding company policy statement and is therefore excluded from consolidated capital requirements at December 31, 2021; however, C&N Bank remains subject to regulatory capital requirements administered by the federal banking agencies.

Details concerning capital ratios at December 31, 2021 and December 31, 2020 are presented below. Management believes, as of December 31, 2021, that C&N Bank meets all capital adequacy requirements to which it is subject and maintains a capital conservation buffer (described in more detail below) that allows the Bank to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. Further, as reflected in the table below, the Corporation’s and C&N Bank’s capital ratios at December 31, 2021 and December 31, 2020 exceed the Corporation’s Board policy threshold levels.

											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
(Dollars In Thousands)		Amount	Ratio		Amount	Ratio		Amount	Ratio		Amount	Ratio		Amount		Ratio
December 31, 2021:
Total capital to risk-weighted assets:
Consolidated	$	287,614	18.21	%	N/A	N/A		N/A	N/A		N/A	N/A		$	165,846	³10.5	%
C&N Bank		252,606	16.04	%	126,012	³8	%	165,390	³10.5	%	157,514	³10	%		165,390	³10.5	%
Tier 1 capital to risk-weighted assets:
Consolidated		240,433	15.22	%	N/A	N/A		N/A	N/A		N/A	N/A			134,256	³8.5	%
C&N Bank		238,434	15.14	%	94,509	³6	%	133,887	³8.5	%	126,012	³8	%		133,887	³8.5	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		240,433	15.22	%	N/A	N/A		N/A	N/A		N/A	N/A			110,564	³7	%
C&N Bank		238,434	15.14	%	70,881	³4.5	%	110,260	³7.0	%	102,384	³6.5	%		110,260	³7	%
Tier 1 capital to average assets:
Consolidated		240,433	10.53	%	N/A	N/A		N/A	N/A		N/A	N/A			182,683	³8	%
C&N Bank		238,434	10.52	%	90,688	³4	%	N/A	N/A		113,360	³5	%		181,376	³8	%
December 31, 2020:
Total capital to risk-weighted assets:
Consolidated	$	260,015	17.49	%	N/A	N/A		N/A	N/A		N/A	N/A		$	156,113	³10.5	%
C&N Bank		236,943	15.98	%	118,602	³8	%	155,665	³10.5	%	148,252	³10	%		155,665	³10.5	%
Tier 1 capital to risk-weighted assets:
Consolidated		231,577	15.58	%	N/A	N/A		N/A	N/A		N/A	N/A			126,377	³8.5	%
C&N Bank		225,058	15.18	%	88,951	³6	%	126,015	³8.5	%	118,602	³8	%		126,015	³8.5	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		231,577	15.58	%	N/A	N/A		N/A	N/A		N/A	N/A			104,075	³7	%
C&N Bank		225,058	15.18	%	66,714	³4.5	%	103,777	³7.0	%	96,364	³6.5	%		103,777	³7	%
Tier 1 capital to average assets:
Consolidated		231,577	10.34	%	N/A	N/A		N/A	N/A		N/A	N/A			179,206	³8	%
C&N Bank		225,058	10.12	%	88,959	³4	%	N/A	N/A		111,199	³5	%		177,919	³8	%

Federal regulatory authorities impose a capital rule providing that, to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization subject to the rule must hold a capital conservation buffer composed of common equity tier 1 capital above its minimum risk-based capital requirements. The buffer is

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measured relative to risk-weighted assets. At December 31, 2021, the minimum risk-based capital ratios, and the capital ratios including the capital conservation buffer, are as follows:

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

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

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

At December 31, 2021, C&N Bank’s Capital Conservation Buffer, determined based on the minimum total capital ratio, was 8.04%.

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 $88,252,000 at December 31, 2021, 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 $23,856,000 at December 31, 2021.

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19. PARENT COMPANY ONLY

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

CONDENSED BALANCE SHEET	Dec. 31,		Dec. 31,
(In Thousands)	2021		2020
ASSETS
Cash	$	33,518	$	7,246
Investment in subsidiaries:
Citizens & Northern Bank		298,797		292,455
Citizens & Northern Investment Corporation		13,085		12,959
Bucktail Life Insurance Company		3,825		3,804
Other assets		33		4
TOTAL ASSETS	$	349,258	$	316,468
LIABILITIES AND STOCKHOLDERS' EQUITY
Senior notes, net	$	14,701	$	0
Subordinated debt, net		33,009		16,553
Other liabilities		143		159
Stockholders' equity		301,405		299,756
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	349,258	$	316,468

CONDENSED INCOME STATEMENT
(In Thousands)	2021		2020
Dividends from Citizens & Northern Bank	$	20,200	$	38,507
Expenses		(1,691)		(1,488)
Income before equity in undistributed income (excess distributions) of subsidiaries		18,509		37,019
Equity in undistributed income (excess distributions) of subsidiaries		12,045		(17,797)
NET INCOME	$	30,554	$	19,222

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CONDENSED STATEMENT OF CASH FLOWS
(In Thousands)	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	30,554	$	19,222
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of purchase accounting adjustment		(43)		(38)
Amortization of debt issuance costs		101		0
Equity in (undistributed income) excess distributions of subsidiaries		(12,045)		17,797
(Increase) decrease in other assets		(29)		105
(Decrease) increase in other liabilities		(16)		13
Net Cash Provided by Operating Activities		18,522		37,099
CASH FLOWS FROM INVESTING ACTIVITIES,
Net cash used in business combination		0		(21,837)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of senior notes and subordinated debt		39,100		0
Repayment of subordinated debt		(8,000)		0
Proceeds from sale of treasury stock		212		131
Purchase of treasury stock		(7,586)		(163)
Dividends paid		(15,976)		(14,469)
Net Cash Provided by (Used in) Financing Activities		7,750		(14,501)
INCREASE IN CASH AND CASH EQUIVALENTS		26,272		761
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		7,246		6,485
CASH AND CASH EQUIVALENTS, END OF YEAR	$	33,518	$	7,246
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Investment of net assets acquired in business combination in Citizens & Northern Bank	$	0	$	73,426
Common equity issued in business combination	$	0	$	41,429
Subordinated debt assumed in business combination	$	0	$	10,091
Other liabilities assumed in business combination	$	0	$	69
Interest paid	$	1,567	$	655

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20. SUMMARY OF QUARTERLY CONSOLIDATED FINANCIAL DATA (Unaudited)

The following tables present summarized quarterly financial data for 2021 and 2020:

	2021 Quarter Ended
	March 31,		June 30,		Sept. 30,		Dec. 31,
(In Thousands Except Per Share Data) (Unaudited)	2021		2021		2021		2021
Interest income	$	21,754	$	20,428	$	21,073	$	21,246
Interest expense		1,671		1,747		1,614		1,530
Net interest income		20,083		18,681		19,459		19,716
Provision for loan losses		259		744		1,530		1,128
Net interest income after provision for loan losses		19,824		17,937		17,929		18,588
Noninterest income		6,782		6,300		6,359		6,416
Net gains (losses) on available-for-sale debt securities		0		2		23		(1)
Other noninterest expenses		15,709		15,399		15,346		16,018
Income before income tax provision		10,897		8,840		8,965		8,985
Income tax provision		2,110		1,780		1,566		1,677
Net income	$	8,787	$	7,060	$	7,399	$	7,308
Net income attributable to common shares	$	8,722	$	6,999	$	7,336	$	7,256
Net income per share – basic	$	0.55	$	0.44	$	0.47	$	0.46
Net income per share – diluted	$	0.55	$	0.44	$	0.47	$	0.46
	2020 Quarter Ended
	March 31,		June 30,		Sept. 30,		Dec. 31,
(In Thousands Except Per Share Data) (Unaudited)	2020		2020		2020		2020
Interest income	$	17,037	$	16,513	$	21,751	$	21,859
Interest expense		2,755		2,267		2,469		2,104
Net interest income		14,282		14,246		19,282		19,755
Provision (credit) for loan losses		1,528		(176)		1,941		620
Net interest income after provision (credit) for loan losses		12,754		14,422		17,341		19,135
Noninterest income		5,281		5,528		6,970		6,565
Net gains on available-for-sale debt securities		0		0		25		144
Loss on prepayment of borrowings		0		0		0		1,636
Merger-related expenses		141		983		6,402		182
Other expenses		12,912		12,274		14,648		15,775
Income before income tax provision		4,982		6,693		3,286		8,251
Income tax provision		816		1,255		438		1,481
Net income	$	4,166	$	5,438	$	2,848	$	6,770
Net income attributable to common shares	$	4,146	$	5,405	$	2,830	$	6,727
Net income per share – basic	$	0.30	$	0.39	$	0.18	$	0.43
Net income per share – diluted	$	0.30	$	0.39	$	0.18	$	0.43

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21. DERIVATIVE FINANCIAL INSTRUMENTS

The Corporation is a party to derivative financial instruments. These financial instruments consist of interest rate swap agreements which contain master netting and collateral provisions designed to protect the party at risk.

Interest rate swaps with commercial loan banking customers were executed to facilitate their respective risk management strategies. Under the terms of these arrangements, the commercial banking customers effectively exchanged their floating interest rate exposures on loans into fixed interest rate exposures. Those interest rate swaps have been simultaneously economically hedged by offsetting interest rate swaps with a third party, such that the Corporation has effectively exchanged its fixed interest rate exposures for floating rate exposures. These derivatives are not designated as hedges and are not speculative. Rather, these derivatives result from a service provided to certain customers. As the interest rate swaps associated with this program do not meet the hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.

The aggregate notional amount of interest rate swaps was $123,094,000 at December 31, 2021 and $135,740,000 at December 31, 2020. The Corporation originated no interest rate swaps in 2021 or 2020. There were no gross amounts of interest rate swap-related assets and liabilities not offset in the consolidated balance sheets at December 31, 2021. The net impact on the consolidated statements of income from interest rate swaps was a reduction in interest income on loans of $1,347,000 in 2021 and $698,000 in 2020.

The table below presents the fair value of the Corporation’s derivative financial instruments as well as their classification on the consolidated balance sheets at December 31, 2021:

(In Thousands)	At December 31, 2021								At December 31, 2020
	Asset Derivatives				Liability Derivatives				Asset Derivatives				Liability Derivatives
	Notional		Fair		Notional		Fair		Notional		Fair		Notional		Fair
	Amount		Value (1)		Amount		Value (2)		Amount		Value (1)		Amount		Value (2)
Interest rate swap agreements	$	61,547	$	3,104	$	61,547	$	3,104	$	67,870	$	6,566	$	67,870	$	6,566

(1) Included in other assets in the consolidated balance sheets.

(2) Included in accrued interest and other liabilities in the consolidated balance sheets.

The Corporation’s agreement with its derivative counterparty provides that if the Corporation defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Corporation could also be declared in default on its derivative obligations. Further, if the Corporation were to fail to maintain its status as a well or adequately capitalized institution, then the counterparty could terminate the derivative positions and the Corporation would be required to settle its obligations under the agreements. Available-for-sale securities with a carrying value of $7,027,000 were pledged as collateral against the Corporation’s liability related to the interest rate swaps at December 31, 2021.

22. 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

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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, 2021 and 2020, assets measured at fair value and the valuation methods used are as follows:

	December 31, 2021
	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, assets:
AVAILABLE-FOR-SALE DEBT SECURITIES:
Obligations of the U.S. Treasury	$	24,912	$	0	$	0	$	24,912
Obligations of U.S. Government agencies		0		24,091		0		24,091
Bank holding company debt securities		0		17,987		0		17,987
Obligations of states and political subdivisions:
Tax-exempt		0		148,028		0		148,028
Taxable		0		72,765		0		72,765
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		98,181		0		98,181
Residential collateralized mortgage obligations		0		44,247		0		44,247
Commercial mortgage-backed securities		0		87,468		0		87,468
Total available-for-sale debt securities		24,912		492,767		0		517,679
Marketable equity security		971		0		0		971
Servicing rights		0		0		2,329		2,329
Interest rate swap agreements, assets		0		3,104		0		3,104
Total recurring fair value measurements, assets	$	25,883	$	495,871	$	2,329	$	524,083
Recurring fair value measurements, liabilities,
Interest rate swap agreements, liabilities	$	0	$	3,104	$	0	$	3,104
Nonrecurring fair value measurements, assets:
Impaired loans, net	$	0	$	0	$	5,800	$	5,800
Foreclosed assets held for sale		0		0		684		684
Total nonrecurring fair value measurements, assets	$	0	$	0	$	6,484	$	6,484

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	December 31, 2020
	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, assets:
AVAILABLE-FOR-SALE DEBT SECURITIES:
Obligations of the U.S. Treasury	$	12,182	$	0	$	0	$	12,182
Obligations of U.S. Government agencies		0		26,344		0		26,344
Obligations of states and political subdivisions:
Tax-exempt		0		122,401		0		122,401
Taxable		0		47,452		0		47,452
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		38,176		0		38,176
Residential collateralized mortgage obligations		0		57,467		0		57,467
Commercial mortgage-backed securities		0		45,310		0		45,310
Total available-for-sale debt securities		12,182		337,150		0		349,332
Marketable equity security		1,000		0		0		1,000
Servicing rights		0		0		1,689		1,689
Interest rate swap agreements, assets		0		6,566		0		6,566
Total recurring fair value measurements, assets	$	13,182	$	343,716	$	1,689	$	358,587
Recurring fair value measurements, liabilities,
Interest rate swap agreements, liabilities	$	0	$	6,566	$	0	$	6,566
Nonrecurring fair value measurements, assets:
Impaired loans, net	$	0	$	0	$	7,157	$	7,157
Foreclosed assets held for sale		0		0		1,338		1,338
Total nonrecurring fair value measurements, assets	$	0	$	0	$	8,495	$	8,495

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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, 2021 and 2020 for servicing rights assets measured using unobservable inputs (Level 3 methodologies) on a recurring basis:

	Fair Value at
	12/31/2021		Valuation	Unobservable				Method or Value As of
Asset	(In Thousands)		Technique	Input(s)				12/31/2021
Servicing rights	$	2,329	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		209.00	%	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
	12/31/2020		Valuation	Unobservable				Method or Value As of
Asset	(In Thousands)		Technique	Input(s)				12/31/2020
Servicing rights	$	1,689	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		277.00	%	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,
	2021		2020
Servicing rights balance, beginning of period	$	1,689	$	1,277
Originations of servicing rights		708		988
Unrealized loss included in earnings		(68)		(576)
Servicing rights balance, end of period	$	2,329	$	1,689

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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, 2021 and 2020, quantitative information regarding significant techniques and inputs used for nonrecurring fair value measurements using unobservable inputs (Level 3 methodologies) are as follows:

(Dollars In Thousands)									Weighted
			Valuation						Average
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	12/31/2021		12/31/2021		12/31/2021		Technique	Inputs	12/31/2021
Impaired loans:
Commercial:
Commercial loans secured by real estate	$	6,468	$	668	$	5,800	Sales comparison	Discount to appraised value	27	%
Commercial and industrial		72		72		0	Liquidation of assets	Discount to appraised value	100	%
Total impaired loans	$	6,540	$	740	$	5,800
Foreclosed assets held for sale - real estate:
Commercial real estate	$	428	$	0	$	428	Sales comparison	Discount to appraised value	50	%
Residential (1-4 family)		256		0		256	Sales comparison	Discount to appraised value	53	%
Total foreclosed assets held for sale	$	684	$	0	$	684

(Dollars In Thousands)									Weighted
			Valuation						Average
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	12/31/2020		12/31/2020		12/31/2020		Technique	Inputs	12/31/2020
Impaired loans:
Commercial:
Commercial loans secured by real estate	$	6,501	$	691	$	5,810	Sales comparison	Discount to appraised value	28	%
Commercial and industrial		72		72		0	Liquidation of assets	Discount to appraised value	100	%
Residential mortgage loans - first and junior liens		1,509		162		1,347	Sales comparison	Discount to appraised value	31	%
Total impaired loans	$	8,082	$	925	$	7,157
Foreclosed assets held for sale - real estate:
Commercial real estate	$	1,258	$	0	$	1,258	Sales comparison	Discount to appraised value	44	%
Residential (1-4 family)		80		0		80	Sales comparison	Discount to appraised value	36	%
Total foreclosed assets held for sale	$	1,338	$	0	$	1,338

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.

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

(In Thousands)	Fair Value	December 31, 2021				December 31, 2020
	Hierarchy	Carrying		Fair		Carrying		Fair
	Level	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	95,848	$	95,848	$	96,017	$	96,017
Certificates of deposit	Level 2		9,100		9,142		5,840		6,054
Restricted equity securities (included in Other Assets)	Level 2		9,562		9,562		9,970		9,970
Loans, net	Level 3		1,551,312		1,573,955		1,632,824		1,646,207
Accrued interest receivable	Level 2		7,235		7,235		8,293		8,293
Financial liabilities:
Deposits with no stated maturity	Level 2		1,639,167		1,639,167		1,430,062		1,430,062
Time deposits	Level 2		285,893		286,962		390,407		393,566
Short-term borrowings	Level 2		1,803		1,603		20,022		19,974
Long-term borrowings	Level 2		28,042		28,347		54,608		55,723
Senior debt	Level 2		14,701		15,016		0		0
Subordinated debt	Level 2		33,009		33,171		16,553		16,680
Accrued interest payable	Level 2		205		205		548		548

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Report of Independent Registered Public Accounting Firm

Stockholders and Board of Directors of

Citizens & Northern Corporation

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Citizens & Northern Corporation and subsidiaries (collectively the "Corporation") as of December 31, 2021 and 2020, and the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the "consolidated financial statements"). We also have audited the Corporation’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Corporation as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.

Basis for Opinions

The Corporation’s management is responsible for these consolidated financial statements, 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 the Corporation's consolidated financial statements and an opinion on the Corporation’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. 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 audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

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Definition and Limitations of Internal Control Over Financial Reporting

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 generally accepted accounting principles. 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.

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.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Allowance for Loan Losses – Qualitative Factors

Critical Audit Matter Description

As disclosed in Note 8 to the Corporation's consolidated financial statements, the Corporation's loan portfolio totaled $1,564,849,000 as of December 31, 2021, and the related allowance for loan losses was $13,537,000. As described in Note 1 and Note 8, the allowance for loan losses consists of two major components: (1) a specific component consisting of the valuation allowance for loans individually evaluated for impairment (“specific component”), representing $740,000 and (2) a general component consisting of the valuation allowance for pools of loans with similar risk characteristics collectively evaluated for impairment (“general reserves”), representing $12,797,000. The general reserves are further broken down as reserves assigned to each pool of loans based on both historical net charge-off experience ($1,332,000) and reserves related to qualitative factors ($11,465,000).

The determination of the allowance for loan losses requires significant estimates and subjective assumptions which require a high degree of judgment relating to how those assumptions impact probable incurred credit losses within the loan portfolio. Changes in these assumptions could have a material effect on the Corporation’s financial results. Qualitative risk factors are evaluated for the impact on each of the three distinct loan 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. Management has designed qualitative factors that include such factors as 1) economic conditions within its market area, 2) the Corporation’s lending policies, 3) changes or trends in the portfolio, 4) risk profile, 5) competition, and 6) regulatory requirements. To formulate the additional allocations to the allowance for loan losses for general reserve qualitative factors, management multiplies the outstanding principal balance of the various loan classes by the applicable qualitative factor.

Management’s identification and analysis of these issues requires significant judgment. We identified the estimate of the general reserve's qualitative factors of the allowance for loan losses as a critical audit matter as auditing the underlying qualitative factors requires significant auditor judgment as amounts determined by management rely on analysis that is highly subjective and includes significant estimation uncertainty.

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How We Addressed the Matter in Our Audit

The primary procedures we performed to address this critical audit matter included, among others:

● Obtaining an understanding of the management review control over the determination, review and approval of the qualitative factors, including controls over the underlying internal and external data inputs, and testing such control for design and operating effectiveness.

● Evaluating the reasonableness of management’s judgments related to qualitative factor adjustments to determine if they are calculated in accordance with management’s policies and consistently applied.

● Evaluating the relevance and reliability of underlying internal and external data inputs used as a basis for the qualitative factor adjustments and corroborating these inputs by comparing to the Corporation’s lending practices, historical loan portfolio performance, and third-party macroeconomic data, as well as considering current economic factors.

● Analytically evaluate changes that occurred in the allowance for loan losses.

/s/ Baker Tilly US, LLP

We have served as the Corporation’s auditor since 1979.

Pittsburgh, Pennsylvania
February 22, 2022

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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.

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.

There were no changes in the Corporation’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934) that occurred during the quarter ended December 31, 2021, that have materially affected, or are reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

The Corporation’s management assessed the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2021, 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, 2021, the Corporation’s internal control over financial reporting is effective based on the criteria established in Internal Control – Integrated Framework (2013).

95

Baker Tilly US, 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, 2021. That report appears immediately prior to this report.

February 22, 2022	By:	/s/ J. Bradley Scovill
Date		President and Chief Executive Officer
February 22, 2022	By:	/s/ Mark A. Hughes
Date		Treasurer and Chief Financial Officer

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 2021 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 11, 2022 for the annual meeting of stockholders to be held on April 21, 2022.

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 11, 2022 for the annual meeting of stockholders to be held on April 21, 2022.

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 11, 2022 for the annual meeting of stockholders to be held on April 21, 2022.

“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 11, 2022 for the annual meeting of stockholders to be held on April 21, 2022.

96

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information concerning services provided by the Corporation’s independent auditor Baker Tilly US, 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 11, 2022 for the annual meeting of stockholders to be held on April 21, 2022.

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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 (PCAOB ID: 23)	92-94
Financial Statements:
Consolidated Balance Sheets - December 31, 2021 and 2020	38
Consolidated Statements of Income - Years Ended December 31, 2021 and 2020	39
Consolidated Statements of Comprehensive Income - Years Ended December 31, 2021 and 2020	40
Consolidated Statements of Changes in Stockholders’ Equity - Years Ended December 31, 2021 and 2020	41
Consolidated Statements of Cash Flows - Years Ended December 31, 2021 and 2020	42-43
Notes to Consolidated Financial Statements	44-91

(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:
2.1 Agreement and Plan of Merger dated September 27, 2018, between the Corporation and Monument Bancorp, Inc.	Incorporated by reference to Exhibit 2.1 of the Corporation’s Form 8-K filed September 28, 2018
2.2 Agreement and Plan of Merger dated December 18, 2019, between the Corporation and Covenant Financial, Inc.	Incorporated by reference to Exhibit 2.1 of the Corporation’s Form 8-K filed December 18, 2019
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 February 18, 2022
4. Instruments defining the rights of securities holders, including Indentures
4.1 Indenture, dated May 19, 2021 between Citizens & Northern Corporation and UMB Bank, National Association, as trustee	Incorporated by reference to Exhibit 4.1 of the Corporation’s Form 8-K filed May 19, 2021
4.2 Form of Subordinated Note	Incorporated by reference to Exhibit A-2 to Exhibit 4.1 of the Corporation’s Form 8-K filed May 19, 2021
4.3 Form of Senior Note	Incorporated by reference to Exhibit 4.3 of the Corporation’s Form 8-K filed May 19, 2021
4.4 Description of registrant’s securities	Incorporated by reference to Exhibit 4.(vi) of the Corporation’s Form 10-K filed February 20, 2020
9. Voting trust agreement	Not applicable

98

10. Material contracts:
10.1 Form of Time-Based Restricted Stock agreement dated January 31, 2022 between the Corporation and Executive Officers pursuant to the Citizens & Northern Corporation Stock Incentive Plan	Filed herewith
10.2 Form of Performance-Based Restricted Stock Agreement dated January 31, 2022 between the Corporation and Executive Officers pursuant to the Citizens & Northern Corporation Stock Incentive Plan	Filed herewith
10.3 Form of Restricted Stock agreement dated January 31, 2022 between the Corporation and its independent directors pursuant to the Citizens & Northern Corporation Independent Directors Stock Incentive Plan	Filed herewith
10.4 Form of Time-Based Restricted Stock agreement dated February 17, 2022 between the Corporation and Matthew L. Bower pursuant to the Citizens & Northern Corporation Stock Incentive Plan	Filed herewith
10.5 Form of Time-Based Restricted Stock agreement dated May 10, 2021 between the Corporation and Alexander Balagour pursuant to the Citizens & Northern Corporation Stock Incentive Plan	Filed herewith
10.6 Form of Time-Based Restricted Stock agreement dated July 1, 2020 between the Corporation and Blair T. Rush pursuant to the Citizens & Northern Corporation Stock Incentive Plan	Filed herewith
10.7 2022 Annual Performance Incentive Award Plan	Filed herewith
10.8 2022 Annual Performance Incentive Award Plan - Mortgage Lenders	Filed herewith
10.9 First Amendment to Deferred Compensation Agreement dated June 17, 2021	Filed herewith
10.10 Deferred Compensation Agreement dated December 17, 2015	Incorporated by reference to Exhibit 10.8 filed with Corporation’s Form 10-K on February 15, 2018
10.11 Second Amendment to Employment Agreement dated August 24, 2018 between the Corporation and J. Bradley Scovill	Incorporated by reference to Exhibit 10.1 filed with Corporation’s Form 8-K on August 24, 2018
10.12 First Amendment to Employment Agreement dated June 26, 2017 between the Corporation and J. Bradley Scovill	Incorporated by reference to Exhibit 10.1 filed with Corporation’s Form 8-K on June 27, 2017

99

10.13 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
10.14 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
10.15 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
10.16 Employment agreement dated December 18, 2019 between the Corporation and Blair T. Rush	Incorporated by reference to Exhibit 10.15 filed with Corporation’s Form 10-K on March 5, 2021
10.17 Employment agreement dated April 6, 2021 between the Corporation and Alexander Balagour	Incorporated by reference to Exhibit 10.1 filed with Corporation’s Form 10-Q on August 6, 2021
10.18 Form of Indemnification Agreement dated September 20, 2018 between the Corporation and J. Bradley Scovill	Incorporated by reference to Exhibit 10.1 filed with Corporation’s Form 10-Q on November 1, 2018
10.19 Form of Indemnification Agreement dated January 9, 2018 between the Corporation and Tracy E. Watkins	Incorporated by reference to Exhibit 10.6 filed with Corporation’s Form 10-K on February 15, 2018
10.20 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
10.21 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
10.22 Form of Indemnification Agreement dated January 19, 2011 between the Corporation and John M. Reber	Incorporated by reference to Exhibit 10.8 filed with Corporation’s Form 10-K on March 1, 2011
10.23 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 Form 10-K on March 14, 2005
10.24 Form of Indemnification Agreement dated February 16, 2021 between the Corporation and Blair T. Rush	Incorporated by reference to Exhibit 10.23 filed with Corporation’s Form 10-K on March 5, 2021
10.25 Change in Control Agreement dated January 9, 2018 between the Corporation and Tracy E. Watkins	Incorporated by reference to Exhibit 10.7 filed with Corporation’s Form 10-K on February 15, 2018
10.26 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
10.27 Change in Control Agreement dated January 1, 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

100

10.28 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
10.29 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
10.30 Executive Compensation Recoupment Policy dated September 19, 2013	Incorporated by reference to Exhibit 10.5 filed with Corporation’s Form 8-K on September 19, 2013
10.31 Fifth Amendment to Citizens & Northern Corporation Stock Incentive Plan	Incorporated by reference to Exhibit 10.1 filed with Form 8-K on December 21, 2018
10.32 Fourth Amendment to Citizens & Northern Corporation Stock Incentive Plan and Annual Incentive Plan	Incorporated by reference to Exhibit 10.6 filed with Corporation’s Form 8-K on September 19, 2013
10.33 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
10.34 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
10.35 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
10.36 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
10.37 Second Amendment to Citizens & Northern Independent Directors Stock Incentive Plan	Incorporated by reference to Exhibit 10.2 filed with Form 8-K on December 21, 2018
10.38 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
10.39 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.
10.40 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
10.41 Form of Indemnification Agreements dated May 24, 2018 between the Corporation and Directors Bobbi J. Kilmer, Terry L. Lehman, Frank G. Pellegrino and Aaron K. Singer	Incorporated by reference to Exhibit 10.1 filed with the Corporation’s Form 10-Q filed August 6, 2018

101

10.42 Form of Indemnification Agreement dated July 16, 2020 between the Corporation and Stephen M. Dorwart	Incorporated by reference to Exhibit 10.4 filed with the Corporation's Form 10-Q on August 6, 2020
10.43 Form of Indemnification Agreement dated July 16, 2020 between the Corporation and Robert G. Loughery	Incorporated by reference to Exhibit 10.5 filed with the Corporation's Form 10-Q on August 6, 2020
10.44 Form of Indemnification Agreement dated April 27, 2021 between the Corporation and Helen S. Santiago	Incorporated by reference to Exhibit 10.2 filed with the Corporation’s Form 10-Q on August 6, 2021
10.45 Form of Indemnification Agreement dated July 12, 2021 between the Corporation and Kate Shattuck	Incorporated by reference to Exhibit 10.1 filed with the Corporation’s Form 10-Q on November 8, 2021
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 “About,” “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

102

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 11, 2022	Filed herewith
100. XBRL-related documents	Not applicable
101. Interactive data file	Filed herewith
104. Cover page interactive data file	(Formatted as Inline XBRL and contained in Exhibit 101)

103

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 22, 2022
By:	/s/ Mark A. Hughes
Treasurer and Principal Accounting Officer
Date: February 22, 2022

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/	Stephen M. Dorwart	/s/	Frank G. Pellegrino
	Stephen M. Dorwart		Frank G. Pellegrino
	Date: February 22, 2022		Date: February 22, 2022
/s/	Clark S. Frame	/s/	Helen S. Santiago
	Clark S. Frame		Helen S. Santiago
	Date: February 22, 2022		Date: February 22, 2022
/s/	Susan E. Hartley	/s/	Timothy E. Schoener
	Susan E. Hartley		Timothy E. Schoener
	Date: February 22, 2022		Date: February 22, 2022
/s/	Bobbi J. Kilmer	/s/	J. Bradley Scovill
	Bobbi J. Kilmer		J. Bradley Scovill
	Date: February 22, 2022		Date: February 22, 2022
/s/	Leo F. Lambert	/s/	Kate Shattuck
	Leo F. Lambert		Kate Shattuck
	Date: February 22, 2022		Date: February 22, 2022
/s/	Terry L. Lehman	/s/	Aaron K. Singer
	Terry L. Lehman		Aaron K. Singer
	Date: February 22, 2022		Date: February 22, 2022
/s/	Robert G. Loughery
	Robert G. Loughery
	Date: February 22, 2022

104

EX-10.1

EXHIBIT 10.1

CITIZENS & NORTHERN CORPORATION

1995 STOCK INCENTIVE PLAN (As Amended)

TIME-BASED RESTRICTED STOCK AGREEMENT

RESTRICTED STOCK AGREEMENT dated as of the 31st day of January 2022, 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. One-third of the total shares will be distributed on the last business day in January each of the three years following the 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 release 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-10.2

EXHIBIT 10.2

CITIZENS & NORTHERN CORPORATION

1995 STOCK INCENTIVE PLAN (As Amended)

PERFORMANCE-BASED RESTRICTED STOCK AGREEMENT

RESTRICTED STOCK AGREEMENT dated as of the 31^st day of January 2022, 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, up to one-third of the total shares will be distributed based on the Corporation’s attainment of earnings-based performance standards, based on the following criteria:

●Release of 50% (one-sixth of the total shares awarded) each year will be based on the Corporation achieving a percent ranking of at least 35% of the Core Return on Average Equity (ROAE) within a defined peer group of bank holding companies and thrifts for the defined measurement period as determined by the committee.

●Release of 50% (one-sixth of the total shares awarded) each year will be based on the Corporation achieving a percent ranking of at least 65% of the Core Return on Average Assets (ROAA) within a defined peer group of bank holding companies and thrifts for the defined measurement period as determined by the committee.

For the purpose of determining Core ROAE and Core ROAA. nonrecurring items, as determined by the Committee (to include nonrecurring acquisition expenses), and securities gains and losses, will be excluded from the Corporation’s and the peer group’s earnings results. The Corporation’s earnings will include the operating results of newly acquired business units and the Corporation’s and the peer group’s ROAE and ROAA will be compared on an after-tax basis. The peer group shall include selected publicly traded Commercial Banks and Thrifts within a geographic region reflective of Citizens & Northern’s market area and with total assets of approximately one-half to 2 times those of Citizens & Northern.

The Committee reserves the right to change the composition of the peer group, as well as the method of evaluating the Corporation’s Core ROAE and Core ROAA 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.

All Restricted Shares not distributed due to the Corporation failing to achieve the defined earnings-based performance standards 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 under the Corporation’s, or Subsidiary’s, short-term disability program.

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 Commonwealth 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

INDEPENDENT DIRECTORS STOCK INCENTIVE PLAN

RESTRICTED STOCK AGREEMENT

A total of _______ 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 31, 2022 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, April 19, 2018, and December 20, 2018, and 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 the last business day in January 2023, 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: February 10, 2022CITIZENS & NORTHERN CORPORATION

ATTEST: BY

J. Bradley Scovill - President & CEO

Kaitlynn J. Meyers, Acting 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

CITIZENS & NORTHERN CORPORATION

1995 STOCK INCENTIVE PLAN (As Amended)

TIME-BASED RESTRICTED STOCK AGREEMENT

RESTRICTED STOCK AGREEMENT dated as of the _____th day of February 2022, by and between Citizens & Northern Corporation (the "Corporation") and Matthew L Bower 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, 2,000 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 release of restrictions 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. One-third of the total shares will be distributed on the first anniversary date of this award; one-third of the total shares will be distributed on the second anniversary date of this award and the final one-third of the total shares will be distributed on the third anniversary date of this award. No partial shares may be released, thus an amount equal to the next whole share amount will be released. The shares released may be in certificate form or may be directed to be held in a custodial account designated by theRecipient.

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. 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.

8. 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.

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

10. 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.

11. 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 – Matthew L. Bower

EX-10.5

EXHIBIT 10.5

CITIZENS & NORTHERN CORPORATION

1995 STOCK INCENTIVE PLAN (As Amended)

TIME-BASED RESTRICTED STOCK AGREEMENT

RESTRICTED STOCK AGREEMENT dated as of the 10th day of May 2021, by and between Citizens & Northern Corporation (the "Corporation") and Alexander Balagour 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, 4,000 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. One-third of the total shares will be distributed on the first anniversary date of this award; one-third of the total shares will be distributed on the second anniversary date of this award and the final one-third of the total shares will be distributed on the third anniversary date of this award. No partial shares may be released, thus an amount equal to the next whole share amount will be released. The shares released may be in certificate form or may be directed to be held in a custodial account designated by theRecipient.

5. Terms of Forfeiture. The shares of the Corporation's restricted common stock issued pursuant to the Restricted Stock Grant shall vest ratably over a three (3) year period following the Effective Date. Such grant shall automatically, fully vest (without any further action by the Corporation) as to all unvested shares upon a Change in Control, as defined in Section 5.B of the Employment Agreement, dated as of April 6, 2021 (the "Employment Agreement") by and among the Corporation, Citizens & Northern Bank and Recipient, or in the event of a termination of Employee's employment (a) without Cause, as defined in Section 3.B of the Employment Agreement, (b) upon Employee's death or disability, as defined in Section 3.D of

the Employment Agreement, or (c) upon Employee's resignation of employmentfor Good Reason, as defined in Section 3.C of the Employment Agreement.

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

7. 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.

8. 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.

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

10. 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.

11. 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 – Alexander Balagour

EX-10.6

EXHIBIT 10.6

CITIZENS & NORTHERN CORPORATION 1995 STOCK INCENTIVE PLAN (As Amended)

TIME-BASED RESTRICTED STOCK AGREEMENT

RE STRICTED STOCK AGREEMENT dated as of the 1st day of July 2020, by and between Citizens & Northern Corporation (the "Corporation") and Blair T. Rush 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,7,538 RestrictedSharesoftheCorporation'scommonstockandherebygrantssuchRestrictedShares.

1. Number of Shares and Price. RestrictedStockshallconsistofsharesofStockthatwillbeacquiredbyandissuedtotheRecipient 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 theCode.

2. Rights of Recipient. ExceptasotherwiseprovidedinthePlanortheRestrictedStockAgreement,aRecipientofsharesofRestrictedStockshallhavealltherightsasdoesaholderofStock,includingwithoutlimitationtherighttovotesuchsharesandreceivedividendswithrespectthereto;however,duringthetimeperiodofanyrestrictions,conditionsortermsapplicable tosuchRestrictedStock,thesharesthereofandtherighttovotethesameandreceivedividendsthereonshallnotbesold, assigned,transferred,exchanged,pledged,hypothecated,encumberedorotherwisedisposedofexceptaspermittedbythePlanortheRestrictedStockAgreement.CashdividendsshallbepaidoutandshallnotparticipateinDividendReinvestment. StockdividendsresultinginwholesharesshallbeaddedtothesharesheldintheRestrictedAccountandshallbedistributedtotheRecipientwithsubsequentdistributionsofanyAwardforwhichtheyaccrued.Partialsharesthatresultfromanystock dividend shall be paid to the Recipient in cash at the time of the payment of the stock dividend. If the Restricted Shares expirepriortothesatisfactionofperformancestandardssetforthinsection4orduetoforfeitureassetforthinsection5,allsharesaccruedbyvirtueofstockdividendsshallbeforfeited.

3. Holding of Restricted Shares. EachcertificateforsharesofRestrictedStockshallbedepositedwiththeSecretaryofthe Corporation, or the office thereof, and shall bear a legend in substantially the following form andcontent:

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 (he 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. One-third of the total shares will be distributed on the first anniversary date of this award; one-third of the total shares will be distributed on the second anniversary date of this award and the final one-third of the total shares will be distributed on the third anniversary date of this award. No partial shares may be released, thus an amount equal to the next whole share amount will be released. The shares released may be in certificate form or may be directed to be held in a custodial account designated by theRecipient.

5. Terms of Forfeiture. The shares of the Corporation's restricted common stock issued pursuant to the Restricted Stock Grant shall vest ratably over a three (3) year period following the Effective Date. Such grant shall automatically, fully vest (without any further action by the Corporation) as to all unvested shares upon a Change in Control, as defined in Section 5.2 of the Employment Agreement, dated as of December 18, 2019 (the "Employment Agreement") by and among the Corporation, Citizens & Northern Bank and Recipient, or in the event of a termination of Employee's employment (a) without Cause, as defined in Section 3.2 of the Employment Agreement, (b) upon Employee's death or disability, as defined in Section 3.5 of

the Employment Agreement, or (c) upon Employee's resignation of employment for Good Reason, as defined in Section 3.3 of the Employment Agreement.

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

7. 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.

8. 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 provisionhereof.

9. Governing Law. This Restricted Stock Agreement shall be governed by and construed according to the laws of the Commonwealth ofPennsylvania.

10.Incorporation of Plan. The Plan is hereby incorporated by reference and made a part hereof, and the Restricted Stock and thisRestrictedStockAgreementaresubjecttoalltermsandconditions ofthePlan.

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

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 – Blair T. Rush

EX-10.7

EXHIBIT 10.7

2022 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. To receive the corporate bonus payout, the company must achieve at least the threshold 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, Key Performance Indicators for the participant’s region, or the corporation as a whole, also may be evaluated to determine the unit/functional bonus. To receive the unit/functional bonus payout, the participant must achieve at least the threshold level.

Further, 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.

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.

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.

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 Administrator 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.

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.

Section 8: Performance Progress Reporting

Semi-annually the Plan Administrator 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, 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.

Part II: Operating Rules

Section l: General

The following Incentive Compensation Plan Operating Rules will be in effect for the 2022 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 2022 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 2022

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 selected publicly traded commercial banks and thrifts within MD, NJ, NY, OH, PA, and WV with total assets between 0.5 times to 2.0 times C&N assets as of September 30, 2022.

EX-10.8

EXHIBIT 10.8

2022 Annual Performance Incentive Award Plan — Mortgage Lenders

Section l: 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: (l) 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 Administrator 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.

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.

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.

EX-10.9

EXHIBIT 10.9

CITIZENS & NORTHERN CORPORATION
DEFERRED COMPENSATION PLAN
AMENDMENT RE: DISTRIBUTION PROCEDURES

This amendment is made this 17th day of June, 2021, and effective as of January 1, 2021, by CITIZENS & NORTHERN CORPORATION (“Company”).

W I T N E S S E T H:

WHEREAS, the Employer maintains the Citizens & Northern Corporation Deferred Compensation Plan (“Plan”); and

WHEREAS, the Company may amend the Plan at anytime and from time to time as it sees fit through the action of its Board of Directors (the “Board”); and

WHEREAS, the Company has determined to amend Section 8.1 of the Plan to clarify the intent and operation of the Plan with respect to payment options and forms available to participants.

NOW, THEREFORE, the Company hereby amends Plan Section 8.1, effective as of January 1, 2021 as follows:

8.1 Timing of Payments. Subject to the provisions of this ARTICLE VIII, a

Participant may elect under his Participation Agreement, in accordance with Section 409A of the Code, whether to have his benefit paid to him in monthly or annual installments over a period selected by the Participant or in a lump sum. The Participant may elect a different form of payment pursuant to each annual deferral election. Each annual deferral election shall be independent and records shall be kept separately from each other annual deferral election. The Participant may also elect different payment option forms for each Qualifying Distribution Event.

RESOLVED, that the proper officers of the Company are and each of them is, hereby authorized and directed in the name of and on behalf of the Company, to execute and deliver this amendment pursuant to the Citizens & Northern Corporation Deferred Compensation Plan and to do all other things, including the execution of any other necessary documents setting forth the terms of such amendment.

IN WITNESS WHEREOF, the Company has caused this Amendment to be executed as of the date set forth herein.

CITIZENS & NORTHERN CORPORATION

By: /s/ Kaitlynn J. Meyers

Kaitlynn J. Meyers, Acting Corporate Secretary

1

SL1 1690870v1 002256.00044

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
Northern Tier Holding LLC (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 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 report dated February 22, 2022, relating to the consolidated financial statements and the effectiveness of Citizens & Northern Corporation and subsidiaries’ internal control over financial reporting, which appears in this annual report on Form 10-K for the year ended December 31, 2021.

/s/ Baker Tilly US, LLP

Baker Tilly US, LLP

Pittsburgh, Pennsylvania

February 22, 2022

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 22, 2022	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 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 22, 2022	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, 2021, 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 22, 2022	By:	/s/ J. Bradley Scovill
Date		President and Chief Executive Officer

February 22, 2022	By:	/s/ Mark A. Hughes
Date		Treasurer and Chief Financial Officer

EX-99.1

Exhibit 99.1

Inspire Innovate BUILDING THE CUSTOMER EXPERIENCE 2021 ANNUAL REPORT

TABLE OF CONTENTS President&CEO – Shareholder Letter 4 Lead&Guide – C&N Leadership 8 Dollars&Sense – C&N Financial Profile 10 Quarterly Share Data Operations Comparisons End of Period Balances Consolidated Financial Data C&N Wealth Management Awards&Recognition 16 Honor&Remember 21 Community&Commitment 22

President CEO Dear Shareholder, We’ve learned from great storytellers throughout history that good stories have relatable characters who face adversity and, throughout their journey, they adapt and evolve into a better version of themselves. As we take a look back on 2021, C&N has a great story to tell. C&N delivered a record net income for 2021 of $30.6 million. These results were supported by our relationship-based business model, recent acquisitions, and footprint expansion, as well as the government’s response to COVID-19 and subsequent economic rebound. Lending activity in all segments was solid, PPP forgiveness advanced, the wealth management business continued to grow and the improved base of core deposits was sustained. C&N’s excellent risk profile also carried on as credit metrics improved and liquidity and capital levels remained outstanding. As the year concluded, adversity and volatility remained in the world around us with continued debate and reaction to the pandemic and its impact on the economy, public policy, and our culture. While real GDP increased by 6% in 2021, fueled by robust consumer spending, persistent supply chain, workforce, and inflation pressures are still affecting many individuals and businesses. Cumulatively, these pressures have driven an increase in intermediate and long-term interest rates and more certainty that the Fed will act to raise short-term rates early in 2022. Progress regarding COVID-19 that was evident early in the fourth quarter slipped a bit with the rapid spread of the Omicron variant beginning in December, creating renewed uncertainty about the course of the pandemic and public policy reaction. While respecting these external factors and their ongoing impact, the C&N team did not allow them to become a distraction from our mission. Quite to the contrary, our teams have been fully engaged to support, counsel, and deliver solutions to our customers and communities. This consistency has positioned C&N as a dependable partner, resource, and trusted advisor for all that we serve and underpins the persistency of our earnings and overall financial strength that create long-term value. We know that the pace of change in customer preferences and behaviors has accelerated since the onset of the pandemic. Adoption of digital offerings, like mobile banking, cashless payment systems, and video banking, “ Every success story is a tale of constant adaption, revision and change. - Richard Branson, British Entrepreneur and business magnate. “ 4

advanced at a faster rate than ever before, while the role of brick-and-mortar branches evolves to be more consultative. We also know that innovation is key to keeping pace with customer expectations. C&N’s history as an early adopter of new digital solutions and sustainable platforms has allowed for quick reaction to shutdowns and support of remote workers while continuing to provide high-quality service for our customers. With a focus on our branches & roots, our technology & data, and our teams & culture, we also innovate by inspiring change in each other. Throughout our journey, the team has demonstrated its willingness and ability to adapt and evolve as we continue on our quest to create an excellent, omni-channel experience for our customers. Branches&Roots It is predicted that, as this virus fades and life moves on to the “next” normal, digital will reign for routine transactions. But when it comes to important life decisions, customers will want face-to- face, personal interaction, consultation, and advice they can trust. Starting out on your own, buying a home, establishing a wealth plan, or managing generational wealth transfers, will be the primary conversations that occur inside C&N branches, replacing the transactional, commoditized activities of making deposits, transfers, and withdrawals. With fewer rows of tellers, branches will feel more like service centers. These shifts can be seen in the recent remodels and updates that have taken place in several of our offices. There is a stronger focus on creating an environment conducive to engaging in deeper discussions between the client and the C&N expert. With the expansion of the C&N footprint into Southcentral and Southeastern Pennsylvania, our local teams remain pillars of their communities, facilitated by our regional leadership model. This is important to the C&N culture, as we recognize that we all stand to benefit from a better future if our communities are thriving and strong. From the very beginning, C&N has been rooted in our commitment to local businesses and families by providing needed funding for growth and contributing to local charities which share C&N’s mission to enhance the lives of our neighbors. All regional teams are empowered to strengthen their communities one relationship at a time. The team didn’t break stride in 2021 to build on the momentum of our Giving Back, Giving Together (GBGT) community fundraising campaign. In May, we closed out our annual cause in support of Fighting Hunger with donations totaling $129,129 – that’s enough to provide 775,000 meals to local families. In June, we announced our new annual cause, Children in Need, and the team has already collected $59,000 as of the end of January. That money will go to 22 organizations throughout our footprint to benefit underprivileged youth in need of basic necessities, like food, clothing, and shelter. Our 5

team’s persistence and dedication to GBGT throughout this year has reflected a deep commitment to making a difference for their neighbors in need. Technology&Data The transition to digital platforms for routine transactions like checking balances, depositing checks, or transferring money was inevitable and the technology to handle these services has long been in place. The focus has now moved to upgrades and enhancements to these platforms, making them more integrated and leveraging data and insights to deliver a more personalized, relevant, and easier experience for each individual. By removing friction points and improving the compatibility of systems across our delivery channels, we are creating an improved experience and delivering even more value for the customer. Behind the scenes, innovation is focused on applying technology to streamline operational processes and improve internal productivity. Replacing manual processes with automated or digital workflows and enhancing systems integration removes friction, enables our teams to utilize their skills more effectively, and enhances the employee experience at C&N. This transformational work became a priority in 2021 that will be sustained into 2022 and beyond. Teams&Culture Few things can test a team like the adversity presented by a global pandemic and the related ramifications. In 2021, the C&N team produced great results in this unique environment, adapting to the ongoing changes and challenging and inspiring each other to stay focused on our mission of “Creating Value Through Lifelong Relationships.” The most inspiring element of this past year was how the C&N team took care of each other as every individual and family dealt with serious, and sometimes tragic, issues. Their support for teammates and friends reflects our values and the culture we have collectively built. In addition, we created plenty of change of our own by realigning our structure to support our growth strategy and our relationship- based business model. All business lines were connected into a revenue group, led by Chief Revenue Officer Hal Hoose, to improve coordination of the overall relationship model and customer experience. We named Tom Rudy and Blair Rush as Region Presidents and Jeff Snyder as Region Executive, new positions introduced across the franchise, establishing local leadership to deliver 6

the C&N experience in every community we serve. Concurrently, the Digital & Payments Division was introduced, led by Shelley D’Haene, Chief Digital Channels and Payments Officer. This team will drive digital, mobile, and online capabilities, and the coordination of the Client Care Center and servicing/ operations teams to deliver a seamless customer experience. In June, we welcomed Alex Balagour as Chief Information Officer to lead C&N’s information technology and data journey into the future by identifying and implementing the most effective platforms, secure infrastructure, software applications, and information systems to support business needs. Another way the team at C&N has inspired change is by dedicating resources to create and execute a Diversity & Inclusion plan. By building a culture that recognizes how strong our organization can be when all of our customers, teammates, leaders, and shareholders feel welcomed, represented, and empowered, we can truly fulfill our mission as a promise of excellence in service to all people. We put the work for this important part of our organization into the hands of our best assets - our people. Our D&I Team is made up of volunteers from across our organization who are passionate about Diversity & Inclusion and are motivated to be a positive influence on our culture. This team was tasked with creating a D&I Plan that would bring about necessary changes as well as highlight steps that C&N has already taken towards a more diverse and inclusive culture. Implementation is underway and progress is regularly communicated to our leadership team and our employees. Turning the page to next year, we look forward to transitioning out of the pandemic and building on 2021’s success story. We have a number of initiatives planned that will extend our capacity to Inspire & Innovate as the C&N team drives to grow and create value in a dynamic, competitive, and ever-changing market. We will simplify and reduce points of friction in the customer experience and create efficiencies throughout our network. All of these efforts better position our team to build and deepen relationships with our customers, communities, and shareholders. And in doing so – and doing it well – we will have more good stories yet to tell... As always, we thank you for your continued confidence and support. J. Bradley Scovill President & CEO 7

We are grateful to our Board & Advisory Board members for lending their expertise to further the mission of C&N and for providing us with valuable insight into the communities we serve. Bradford & Sullivan Counties Evan R. Barnes Casandra K. Blaney James A. Bowen Krystle R. Bristol Laura C. Cimino Warren J. Croft John M. Estep Zachary R. Gates Taunya Knolles Rosenbloom J. Wesley Kocsis Dr. Stephen D. Laudermilch Kimberly J. Mastrantonio Jeffrey B. Paul Damian M. Rossettie William B. Saxe Mark W. Smith Andrew R. Wilcox Cameron, McKean & Potter Counties John A. Abplanalp David Mark Errick Joseph R. Kightlinger Lori J. Reed Andrea F. Streich Edwin W. Tompkins, III Lycoming County Robert T. Beiter Thomas F. Charles John M. Confer Roger D. Jarrett Daniel Paul Marrazzo Daniel K. Mathers Jeffrey M. Patterson John F. Perrotto Tyler L. Rhone Camela A. Rooney David A. Schall Melissa M. Young York County Thomas K. Baughman Matthew R. Doran Nicholas E. Hauck Ryan A. Myers Alex E. Snyder Bucks & Chester Counties Carolina Cabrera DiGorgio Glenda R. Childs Joseph A. Fluehr IV Thomas Hebel Linda J. Kilroy Karen J. Miller Louis Quattrocchi Gary B. Rubin Michael J. Rush Irving N. Stein David E. Thompson James Watts Tioga County Brian A. Bicksler Lawrence J. Connolly Matthew S. DeCamp Craig Eccher Brandon E. Hackett Mark R. Howe John S. Johnston John C. Kenyon Danielle M. Lee Scott E. Lewis David C. Murdock Mary C. Owlett William W. Roosa Eric Schoonover Ray E. Wheeland ADVISORY BOARD Lead Guide Alex Balagour EVP and Chief Information Officer Shelley L. D’Haene EVP and Chief Digital Channels & Payments Officer Stan R. Dunsmore EVP and Chief Credit Officer Hal F. Hoose, III EVP and Chief Revenue Officer Mark A. Hughes EVP and Chief Financial Officer John M. Reber EVP and Chief Risk Management Officer Thomas L. Rudy, Jr. EVP and Chief Delivery Officer Blair T. Rush EVP and Regional President J. Bradley Scovill President & CEO Tracy E. Watkins EVP and Chief Human Resource Officer EXECUTIVE TEAM 8

Terry L. Lehman, CPA Chairman, Retired Certified Public Accountant Stephen M. Dorwart, CPA Fischer Dorwart, P.C. Clark S. Frame Retired Chairman of the Board, Monument Bank Susan E. Hartley Attorney at Law Bobbi J. Kilmer Retired President & CEO, Claverack Rural Electric Leo F. Lambert President/GM Fitzpatrick & Lambert, Inc. Robert G. Loughery President, Nehemiah Development Company Frank G. Pellegrino Owner & Developer, Carlton Associates, LLC Helen S. Santiago , CPA , LaBarr and LaBarr Timothy E. Schoener VP & CIO, UPMC Pinnacle J. Bradley Scovill President & CEO, C&N Katherine W. Shattuck Consultant, Senior Client Partner, Korn Ferry Aaron K. Singer President & CEO, Metalkraft Industries, Inc. BOARD OF DIRECTORS CORPORATE OFFICERS Mark A. Hughes , Treasurer Kimberly N. Battin , Corporate Secretary J. Bradley Scovill , President & CEO 9

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 2021 and 2020. 2021 QUARTERLY SHARE PRICE DATA $30.00 $22.50 $15.00 $7.50 $0.00 First Quarter Third Quarter Fourth Quarter Second Quarter High Low Dollars Sense 2021 High Low Dividend Declared per Quarter 2020 High Low Dividend Declared per Quarter First quarter $24.99 $18.98 $0.27 First quarter $29.06 $15.69 $0.27 Second quarter 25.69 23.00 0.28 Second quarter 22.89 16.20 0.27 Third quarter 25.97 23.73 0.28 Third quarter 20.76 14.92 0.27 Fourth quarter 27.99 24.52 0.28 Fourth quarter 20.84 16.05 0.27 10

FIVE-YEAR SUMMARY Operations Comparison INCOME STATEMENT (In Thousands) 2021 2020 2019 2018 2017 Interest and dividend income $84,501 $77,160 $64,771 $50,328 $45,863 Interest expense 6,562 9,595 10,283 4,625 3,915 Net interest income 77,939 67,565 54,488 45,703 41,948 Provision for loan losses 3,661 3,913 849 584 801 Net interest income after provision for loan losses 74,278 63,652 53,639 45,119 41,147 Noninterest income excluding securities gains 25,857 24,344 19,284 18,597 16,153 Net gains on available-for-sale debt securities 24 169 23 2,033 257 Loss on prepayment of borrowings 0 1,636 0 0 0 Merger-related expenses 0 7,708 4,099 328 0 Noninterest expense excluding loss on prepayment of borrowings and merger-related expenses 62,472 55,609 45,438 39,158 36,967 Income before income tax provision 37,687 23,212 23,409 26,263 20,590 Income tax provision 7,133 3,990 3,905 4,250 7,156 Net income $30,554 $19,222 $19,504 $22,013 $13,434 Net income attributable to common shares $30,313 $19,106 $19,404 $21,903 $13,365 PER COMMON SHARE DATA 2021 2020 2019 2018 2017 Basic earnings per share $1.92 $1.30 $1.46 $1.79 $1.10 Diluted earnings per share $1.92 $1.30 $1.46 $1.79 $1.10 Cash dividends declared per share $1.11 $1.08 $1.18 $1.08 $1.04 Book value per common share at period-end $19.13 $18.84 $17.82 $16.02 $15.43 Tangible book value per common share at period-end $15.58 $15.30 $15.66 $15.05 $14.45 Weighted average common shares outstanding - basic 15,765,639 14,743,386 13,298,736 12,219,209 12,115,840 Weighted average common shares outstanding - diluted 15,771,955 14,747,048 13,321,559 12,257,368 12,155,136 DILUTED EARNINGS PER SHARE (In Thousands) $2.10 $1.75 $1.40 $1.05 $0.70 $0.35 $0.00 2021 2020 2019 2018 2017 CASH DIVIDENDS DECLARED PER SHARE $1.20 $1.00 $0.80 $0.60 $0.40 $0.20 $0.00 2021 2020 2019 2018 2017 11

FIVE-YEAR SUMMARY End of Period Balances 2021 2020 2018 2018 2017 $1,700,000 $1,500,000 $1,300,000 $1,100,000 $900,000 $700,000 $500,000 GROSS LOANS (In Thousands) 2021 2020 2019 2018 2017 $2,400,000 $2,000,000 $1,600,000 $1,200,000 $800,000 $400,000 $0 TOTAL ASSETS (In Thousands) END OF PERIOD BALANCES (In Thousands) 2021 2020 2019 2018 2017 Available-for-sale debt securities $517,679 $349,332 $346,723 $363,273 $355,937 Gross loans 1,564,849 1,644,209 1,182,222 827,563 815,713 Allowance for loan losses 13,537 11,385 9,836 9,309 8,856 Total assets 2,327,648 2,239,100 1,654,145 1,290,893 1,276,959 Deposits 1,925,060 1,820,469 1,252,660 1,033,772 1,008,449 Borrowings, senior notes and subordinated debt 77,555 91,183 144,847 48,768 70,955 Stockholders' equity 301,405 299,756 244,452 197,368 188,443 Common shares outstanding 15,759,090 15,911,984 13,716,445 12,319,330 12,214,525 AVERAGE BALANCES (In Thousands) 2021 2020 2019 2018 2017 Total assets 2,319,234 2,009,825 1,540,469 1,276,140 1,247,759 Earning assets 2,145,475 1,856,487 1,437,993 1,205,429 1,169,569 Gross loans 1,596,756 1,445,098 1,057,559 822,346 780,640 Deposits 1,905,400 1,586,409 1,213,687 1,027,831 990,917 Stockholders' equity 301,226 273,351 229,446 187,895 188,958 12

(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 merger-related expenses and 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. KEY RATIOS 2021 2020 2019 2018 2017 Return on average assets 1.32% 0.96% 1.27% 1.72% 1.08% Return on average equity 10.14% 7.03% 8.50% 11.72% 7.11% Average equity to average assets 12.99% 13.60% 14.89% 14.72% 15.14% Net interest margin (1) 3.69% 3.69% 3.86% 3.90% 3.82% Efficiency (2) 59.54% 59.87% 60.73% 59.69% 60.74% Cash dividends as a % of diluted earnings per share 57.81% 83.08% 80.82% 60.34% 94.55% Tier 1 leverage 10.53% 10.34% 13.10% 14.78% 14.23% Tier 1 risk-based capital 15.22% 15.58% 19.19% 23.24% 21.95% Total risk-based capital 18.21% 17.49% 20.70% 24.42% 23.07% Tangible common equity/tangible assets 10.81% 11.15% 13.22% 14.50% 13.95% Nonperforming assets/total assets 0.94% 1.10% 0.80% 1.37% 1.47% Nonperforming loans/total loans 1.36% 1.42% 0.88% 1.94% 2.10% Allowance for loan losses/total loans 0.87% 0.69% 0.83% 1.12% 1.09% Credit adjustment on purchased non-impaired loans and allowance for loan losses as a % of total loans and the credit adjustment 1.08% 1.05% 0.93% 1.12% 1.09% Net charge-offs/average loans 0.09% 0.16% 0.03% 0.02% 0.05% FIVE-YEAR SUMMARY End of Period Balances $2,100,000 $1,800,000 $1,500,000 $1,200,000 $900,000 $600,000 0 2021 2020 2019 2018 2017 DEPOSITS (In Thousands) $350,000 $300,000 $250,000 $200,000 $150,000 $100,000 $0 2021 2020 2019 2018 2017 STOCKHOLDERS’ EQUITY (In Thousands) 13

2021 (In Thousands Except Per Share Data) (Unaudited) 1 st quarter Mar. 31 2 nd quarter June 30 3 rd quarter Sept. 30 4 th quarter Dec. 31 Interest income $21,754 $20,428 $21,073 $21,246 Interest expense 1,671 1,747 1,614 1,530 Net interest income 20,083 18,681 19,459 19,716 Provision for loan losses 259 744 1,530 1,128 Net interest income after provision for loan losses 19,824 17,937 17,929 18,588 Noninterest income 6,782 6,300 6,359 6,416 Net gains (losses) on available-for-sale debt securities 0 2 23 (1) Other expenses 15,709 15,399 15,346 16,018 Income before income tax provision 10,897 8,840 8,965 8,985 Income tax provision 2,110 1,780 1,566 1,677 Net income $8,787 $7,060 $7,399 $7,308 Net income attributable to common shares $8,722 $6,999 $7,336 $7,256 Net income per share – basic $0.55 $0.44 $0.47 $0.46 Net income per share – diluted $0.55 $0.44 $0.47 $0.46 2020 (In Thousands Except Per Share Data) (Unaudited) 1 st quarter Mar. 31 2 nd quarter June 30 3 rd quarter Sept. 30 4 th quarter Dec. 31 Interest income $17,037 $16,513 $21,751 $21,859 Interest expense 2,755 2,267 2,469 2,104 Net interest income 14,282 14,246 19,282 19,755 Provision (credit) for loan losses 1,528 (176) 1,941 620 Net interest income after provision (credit) for loan losses 12,754 14,422 17,341 19,135 Noninterest income 5,281 5,528 6,970 6,565 Net gains on available-for-sale debt securities 0 0 25 144 Loss on prepyament of borrowings 0 0 0 1,636 Merger-related expenses 141 983 6,402 182 Other expenses 12,912 12,274 14,648 15,775 Income before income tax provision 4,982 6,693 3,286 8,251 Income tax provision 816 1,255 438 1,481 Net income $4,166 $5,438 $2,848 $6,770 Net income attributable to common shares $4,146 $5,405 $2,830 $6,727 Net income per share – basic $0.30 $0.39 $0.18 $0.43 Net income per share – diluted $0.30 $0.39 $0.18 $0.43 QUARTERLY CONSOLIDATED FINANCIAL DATA The following table presents summarized financial data for 2021 & 2020 14

TRUST REVENUE $9,000 $7,500 $6,000 $4,500 $3,000 $1,500 $0 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 TRUST ASSETS UNDER MANAGEMENT Some products are not FDIC insured or guaranteed, not a deposit or other obligation of the bank, not guaranteed by the bank and are subject to investment risk, including possible loss of the principal amount invested and are not insured by any other federal government agency. 2021 2020 2019 2018 2017 2021 2020 2019 2018 2017 WEALTH MANAGEMENT (In Thousands) 2021 2020 2019 2018 2017 Trust Assets Under Management $1,232,919 $1,103,228 $1,007,113 $862,517 $916,580 Trust Revenue $7,234 $6,321 $6,106 $5,838 $5,399 INVESTMENTS (In Thousands) 2021 2020 2019 2018 2017 Mutual Funds $797,336 $697,010 $611,539 $506,201 $536,731 Stocks 250,765 223,543 207,847 172,695 194,099 Bonds 95,427 104,833 101,966 103,037 104,184 Savings and money market funds 75,140 63,069 71,936 68,129 69,659 Miscellaneous 8,145 7,873 7,346 6,798 6,069 Real Estate 6,012 6,797 6,349 5,517 5,681 Mortgages 94 103 130 140 157 Total $1,232,919 $1,103,228 $1,007,113 $862,517 $916,580 ACCOUNTS (In Thousands) 2021 2020 2019 2018 2017 Pension/profit sharing $498,714 $439,739 $402,062 $342,501 $374,499 Investment management 391,777 344,688 307,068 256,430 256,348 Trusts 227,821 209,273 196,660 176,428 185,300 Custody 104,562 99,273 89,241 79,786 93,598 Estates 6,193 6,927 9,175 4,941 4,397 Guardianships 3,852 3,328 2,907 2,431 2,438 Total $1,232,919 $1,103,228 $1,007,113 $862,517 $916,580 WEALTH MANAGEMENT DATA The following table presents summarized financial data for C&N’s Wealth Management. 15

Awards Recognition 2021 RETIREES 10 C&N team members were recognized for their combined 161 years of service. C&N is proud and appreciative of their dedication to the organization. 35 Years of Service Christopher Bolt Lori Brown 30 Years of Service Kelly Fasse 25 Years of Service Robert Miller Jenelle Selleck 20 Years of Service George Greeley Kim Kemp Jill Logan Stacey Sickler Teri Snyder Charlene Strykowski 15 Years of Service John Abercrombie Kerry Bliler Kathleen Evert BillieJo Haas Kathryn Harsch Linda Ordway Jill Pino 10 Years of Service Cynthia Carll Thomas Carroll Margaret Cascerceri Dalelyn Colquhoun Benjamin Dale Hannah Thorpe Mark Long Samuel Lush Denise Manley Sonya Route Ryan Satalin Amber Schwab Jamie VanZile Rhonda Washburn Holly Wise 5 Years of Service Steven Avery Andee Bryan Earl Clevenstine Brian Collins Jeremy Gardner Caitlin Hilliard Robert Kile Joy Klun Travis Marzo Carol McPherson Brittany Mondock Anna Morgan-Schill Anne-Marie Muldoon-Bastian Susan Nisen Jay Over Edward Penner Justin Power Tracy Rooke Blair Rush Amy Springer Kimberly Warren Ashley White Holly Young Brittany Zagozewski Cynthia Zamroz SERVICE AWARD RECIPIENTS 58 C&N team members were recognized for their combined 650 years of service. C&N is proud and appreciative of their dedication to the organization. 35 Years of Service Linda Etzel Dushore 30 Years of Service Lynn Errico Wellsboro 20 Years of Service Denise Mattison Wellsboro 18 Years of Service Marla McIlvain Wellsboro 17 Years of Service Claudia Brown Tioga Brenda Mitchell South Williamsport 7 Years of Service Linda Bowen Sayre 6 Years of Service David Plummer Newtown Melody Rosenburg Newtown 5 Years of Service Roberta Herald Doylestown 16

January Jill Pino February Christina Nolte Greg Adamson Billie Jo Haas March Amber Schwab Lauri Dale Lorri Stocum April Corinna Murphy Hannah Molyneux Rhonda Washburn Kelley Cwiklinski Kim Whiting Muhammad Abubaker Ellen Conboy Diane Egly Elizabeth Loman May Kathryn Wesneski Sarah Russell Lauri Dale Bob Burns Cindy Zamroz Robert Herald Brittany Zagozewski Bruce Smithgall Chrissy Nolte June Diane Egly Bob Burns Muhammad Abubaker Lauri Dale Sarah Russell July Joanna Moore Claudia Brown Charity Shaefer Lauri Dale Linda Etzel Ashley White August Melanie Kellogg Rhonda Washburn Linda Gordner Muhammad Abubaker Diane Egly Emily Davenport Lorri Stocum Ashley White Crystal Barrett Kathryn Wesneski Linda Ordway September Bruce Smithgall Lisa Milne October Alyssa Whitehead Lacey Kennedy November Alyssa Whitehead December Billie Jo Haas Amber Schwab Chrissy Nolte Greg Adamson Heather Lanahan Michael Kilgour RAINMAKERS Team members who referred over $100,000 in closed business to C&N Wealth Management. MILLION DOLLAR CLUB Lenders earned one star for each month where they closed $1,000,000 or more in loans. Mortgage Lenders Commercial Lenders Rachel Brill  Kevin Dougherty  Andee Bryan  Will Holmes  Patrick Davis  Thomas Howley  Linda Gordner  Peter Johnson  Kathi Heimbach  Robert Kile  Thomas Maclin  Michael Kilgour  Heather Malvica  Daniel Miller  Jill Pino  Shane Moser  Michelle Rae  Halle Niklaus  Ronald Seymour, Jr.  Janet Nitka  Stacey Sickler  Jay Power  Tyler Sones  Ryan Satalin  Kimberlea Whiting  Patrick Shandera  Commercial Lenders Kathleen Shepard  Greg Adamson  Stephen Sherman  Bob Burns  Bruce Smithgall  Earl Clevenstine  Amy VanBlarcom-Lackey  Courtney Cole  Michael Wetzel  Brian Collins  Cindy Zamroz  Edward Dixon  17

GIVING BACK, GIVING TOGETHER Volunteer of the Year Lacey Kennedy is this year’s volunteer of the year. She volunteered at the Roseville CHOP POP-UP Pantry, where they served 190 families. Throughout the year, Lacey volunteered a total of 45.5 hours there. IMPACTful Awards Manager Nominated TOP PERFORMER AWARD Recipients of this award came from recommendations from supervisors for teammates who displayed excellence in hitting their goals and driving the mission of the bank. Melissa Wilt Treasury Management, Wellsboro Earl Clevenstine Lending, Doylestown GROWTH AWARD Recipients of this award were team members showing tremendous improvement in achieving their goals, learning new skills, and showing initiative in trying to improve and learn from their team members. Amber Schwab Branch Delivery, Emporium Marissa Berthiaume Branch Delivery, Sayre Cultural Excellence Team Award This award recognizes a team that displays excellence in executing the mission of C&N and consistently goes above and beyond to assist their clients. IT Team High Performing Team Award This award recognizes a team that consistently displayed excellence by hitting their goals, as well as continu - ing to drive the mission of C&N. Client Care Center 18

IMPACTful Awards Peer Nominated C&N CARES AWARD T his award honors an employee who shows a commitment to C&N’s values & standards through extraordinary acts of care, selflessness, and dedication to their teammates & community! Mary D’Ottavio Branch Delivery, Laporte Brandi Nowakowski Quality Control, Wellsboro Lindsey Pickering Lending, Wellsboro Aaron Waldon Credit Administration, York Michael Wetzel Lending, Coudersport SPIRIT OF SERVICE AWARD W e all work with someone who makes coming into work a positive & happier experience. This award recognizes those who have positive attitudes, show care and support for their teammates and customers. Linda Etzel Branch Delivery, Laporte Patricia Groover Client Care Center, Wellsboro Alyssa Higham Client Care Center, Wellsboro Cultural Excellence Award This award recognizes an employee who embodies C&N’s mission of developing lifelong relationships with our teammates, community, and customers and assists their teammates to do the same. Rebecca Atkins Credit Administration, Doylestown Heather Malvica Lending, Sayre Dawn Shoemaker Branch Delivery, Dushore Janelle Tombs Credit Administration, Wellsboro Philip Walker Lending, Wellsboro Best Team Partner Award This award recognizes a team for their excellence in supporting fellow teammates by consistently being a trusted source in helping solve problems or by assisting clients throughout the day. Commercial Credit Department 19

TEAMWORK Together we are stronger. RESPONSIBILITY & ACCOUNTABILITY Work like you own it. RESPECT Value one another. 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! C&N Core Values 20

Left Photo (from left to right): Kristi Reynolds, Kelsey Harer, Kait Meyers, Tina King, Brad Scovill, Skye Mahosky, Katrina Diasparra, Cindy Bianchini, Katie Evert, Cindy Carll, Amber Schwab, Rebecca Atkins, Amy Springer and Deb Sharretts. Right Photo: Teri Mitchell. Honor Remember The Teresa (Teri) L. Mitchell Scholarship This scholarship was created to honor Teri Mitchell, a C&N employee for 37 years, who was dedicated to embracing educational opportunities. Her namesake scholarship provides educational opportunities to C&N employees who display a similar commitment to their ongoing professional development and a strong work ethic. In Remembrance C&N lost three team members unexpectedly in 2021. Below we remember them and honor their legacies as friends, teammates, and active community members. All were gone too soon and dearly missed. Brandi Nowakowski was a team member at C&N for over seventeen years. She started her career at C&N in BankCard Services before moving to Quality Control in 2019 doing loan reviews. Brandi was a hard worker and a great team player. If anything was ever in question, she would dig until she found the right answer. She also carried a passion for working with Sister Jenny’s Food Pantry in Middlebury Center, where she volunteered each month, as well as doing some of their bookwork. Her presence at C&N will be greatly missed. Leonard Simpson served as a member of the Board of Directors of Citizens & Northern Corporation from 1989 to 2021. During his tenure, he served as a valuable counselor to the Board, management, and employees of the Company. Len applied his expertise and experience in various ways, including service on multiple committees over the years prior to retiring in April of 2021. He was known for his energy, good humor, and relentless involvement in the community. He is greatly missed by all. Wendy Stottlar was with C&N, formerly Monument Bank, for over thirteen years in Doylestown. Wendy worked with both businesses and consumers, where she developed many long-lasting relationships that she greatly valued. Over the years, Wendy was recognized for her superior customer service by customers and her team members. Outside of work she was committed to family, friends, and her faith. Wendy was a truly valuable asset to C&N and her teammates. She is greatly missed by all who knew her. 21

Community Commitment C&N’s Giving Back, Giving Together program was formed by employees in 2015 as a way to do more to support their local communities. In the years since Giving Back, Giving Together started, our employees have raised $524,444 in monetary donations, collected 34,638 item donations, and volunteered 1,160 hours for 20 local food banks (2015), 52 local emergency services organizations (2016) 16 local organizations that support children in need (2017), 23 local public libraries, 17 military organizations (2019) 17 food banks (2020) and 22 children & youth organization (2021). All the funds and donations raised through this program stay within the local communities. From April 2020 to May 2021, C&N teams partnered with 17 local food banks—a cause that had quickly become increasingly more important with the COVID-19 pandemic putting millions of people suddenly out of work and relying on food banks for their next meal. Meanwhile, food banks were receiving fewer donations, the supply of many necessities was constrained and volunteers, many of whom are seniors, were hesitant to volunteer in person. During this time, the Central PA Food Bank reached out to C&N to ask for help to meet the increase in demand. C&N’s board of directors approved a $40,000 donation to help with immediate needs but also started exploring other options to help the food banks and community members while remaining compliant with the stay-at-home order. C&N began collecting monetary donations through a variety of online platforms, selling t-shirts and hosting different raffles. When the shut- down orders were lifted, teams began hosting on-site fundraisers, collecting food items, and getting out to the food banks to lend a hand. In addition to these efforts, we also hosted a scaled-down version of our annual Charity Classic golf tournament and connected with local businesses owners asking for help on behalf of the local food banks. We had 17 respond, bringing in an additional $11,000. In total, our Giving Back, Giving Together program raised $129,129, which will provide over 775,000 meals to local residents through our partnership with area food banks. In addition to the monetary donations, C&N employees collected 3,012 necessity 22

Feeding our Community :: Volunteer Emergency Services :: Children in Need :: Literacy & Public Libraries :: Honoring Military Servicemembers :: Fighting Hunger :: Children & Youth :: $524,444 Monetary Donations 34,638 Item Donations 1,160 Volunteer Hours items and volunteered 290 hours alongside our food bank partners. In June 2021, C&N team members turned their focus to support local underprivileged youth, ensuring they have access to food, clothing, and shelter. This is another demographic that was greatly impacted by the COVID-19 pandemic. The closing of schools combined with the high cost of childcare forced many parents to give up their jobs and income to care for their kids. This also increased food insecurity by reducing children’s access to free or reduced lunches at school. A survey by the CBPP shows that around 7 to 11 million children lived in households where kids didn’t get enough food because their families couldn’t afford it. Through the end of the year, our teams raised $59,000 in monetary donations and over 4,000 basic necessity items. We sincerely appreciate the time and effort our teammates have put into this program. “The success of GBGT is a direct reflection of the passion and commitment of our teammates to their communities. We also thank our customers, community members, and business partners for sharing in our passion to give back to the communities we serve,” said Caitlin Hilliard, C&N Marketing Specialist. Monetary Donations to Date https://qrco.de/GBGT2021 Scan with Phone 23

THANK YOU FOR YOUR CONTINUED TRUST & SUPPORT.

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Document And Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2021	Feb. 18, 2022	Jun. 30, 2021
Document And Entity Information
Document Type	10-K
Document Annual Report	true
Document Period End Date	Dec. 31, 2021
Document Transition Report	false
Entity File Number	0-16084
Entity Registrant Name	CITIZENS & NORTHERN CORPORATION
Entity Incorporation, State or Country Code	PA
Entity Tax Identification Number	23-2451943
Entity Address, Address Line One	90-92 MAIN STREET
Entity Address, City or Town	WELLSBORO
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	16901
City Area Code	570
Local Phone Number	724-3411
Title of 12(b) Security	Common Stock Par Value $1.00
Trading Symbol	CZNC
Security Exchange Name	NASDAQ
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
ICFR Auditor Attestation Flag	true
Entity Common Stock, Shares Outstanding (in shares)		15,825,155
Entity Public Float			$ 377,589,321
Entity Central Index Key	0000810958
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	FY
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Auditor Name	Baker Tilly US, LLP
Auditor Firm ID	23
Auditor Location	Pittsburgh, Pennsylvania

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Cash and due from banks:
Noninterest-bearing	$ 16,729	$ 24,780
Interest-bearing	88,219	77,077
Total cash and due from banks	104,948	101,857
Available-for-sale debt securities, at fair value	517,679	349,332
Loans receivable	1,564,849	1,644,209
Allowance for loan losses	(13,537)	(11,385)
Loans, net	1,551,312	1,632,824
Bank-owned life insurance	30,669	30,096
Accrued interest receivable	7,235	8,293
Bank premises and equipment, net	20,683	21,526
Foreclosed assets held for sale	684	1,338
Deferred tax asset, net	5,887	2,705
Goodwill	52,505	52,505
Core deposit intangibles, net	3,316	3,851
Other assets	32,730	34,773
TOTAL ASSETS	2,327,648	2,239,100
Deposits:
Noninterest-bearing	521,206	465,332
Interest-bearing	1,403,854	1,355,137
Total deposits	1,925,060	1,820,469
Short-term borrowings	1,803	20,022
Long-term borrowings - FHLB advances	28,042	54,608
Senior notes, net	14,701	0
Subordinated debt, net	33,009	16,553
Accrued interest and other liabilities	23,628	27,692
TOTAL LIABILITIES	2,026,243	1,939,344
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 16,030,172 and outstanding 15,759,090 at December 31, 2021; issued 15,982,815 and outstanding 15,911,984 at December 31, 2020	16,030	15,983
Paid-in capital	144,453	143,644
Retained earnings	142,612	129,703
Treasury stock, at cost; 271,082 shares at December 31, 2021 and 70,831 shares at December 31, 2020	(6,716)	(1,369)
Accumulated other comprehensive income	5,026	11,795
TOTAL STOCKHOLDERS' EQUITY	301,405	299,756
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$ 2,327,648	$ 2,239,100

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CONSOLIDATED BALANCE SHEETS (Parentheticals) - $ / shares	Dec. 31, 2021	Dec. 31, 2020
CONSOLIDATED BALANCE SHEETS
Preferred stock, par value (in dollars per share)	$ 1,000	$ 1,000
Preferred stock, authorized shares (in shares)	30,000	30,000
Preferred stock, liquidation preference per share (in dollars per share)	$ 1,000	$ 1,000
Preferred stock, shares issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 1.00	$ 1.00
Common stock, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares issued (in shares)	16,030,172	15,982,815
Common stock, shares outstanding (in shares)	15,759,090	15,911,984
Treasury stock, shares (in shares)	271,082	70,831

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Consolidated Statements of Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Interest and fees on loans:
Taxable	$ 74,549	$ 67,384
Tax-exempt	1,770	1,768
Income from available-for-sale debt securities:
Taxable	5,114	5,534
Tax-exempt	2,684	2,143
Other interest and dividend income	384	331
Total interest and dividend income	84,501	77,160
INTEREST EXPENSE
Interest on deposits	4,538	7,231
Interest on short-term borrowings	23	367
Interest on long-term borrowings - FHLB advances	399	1,291
Interest on senior notes, net	293	0
Interest on subordinated debt, net	1,309	706
Total interest expense	6,562	9,595
Net interest income	77,939	67,565
Provision for loan losses	3,661	3,913
Net interest income after provision for loan losses	74,278	63,652
NONINTEREST INCOME
Brokerage and insurance revenue	1,860	1,486
Net gains from sale of loans	3,428	5,403
Increase in cash surrender value of life insurance	573	515
Other noninterest income	3,580	3,355
Sub-total	25,857	24,344
Realized gains on available-for-sale debt securities, net	24	169
Total noninterest income	25,881	24,513
NONINTEREST EXPENSE
Salaries and employee benefits	37,603	33,062
Net occupancy and equipment expense	4,984	4,461
Data processing and telecommunications expense	5,903	5,316
Automated teller machine and interchange expense	1,433	1,231
Pennsylvania shares tax	1,951	1,689
Professional fees	2,243	1,692
Loss on prepayment of borrowings	0	1,636
Merger-related expenses	0	7,708
Other noninterest expense	8,355	8,158
Total noninterest expense	62,472	64,953
Income before income tax provision	37,687	23,212
Income tax provision	7,133	3,990
NET INCOME	$ 30,554	$ 19,222
EARNINGS PER COMMON SHARE - BASIC (in dollars per share)	$ 1.92	$ 1.30
EARNINGS PER COMMON SHARE - DILUTED (in dollars per share)	$ 1.92	$ 1.30
Trust revenue
NONINTEREST INCOME
Revenue	$ 7,234	$ 6,321
Service charges on deposit accounts
NONINTEREST INCOME
Revenue	4,633	4,231
Interchange revenue from debit card transactions
NONINTEREST INCOME
Revenue	3,855	3,094
Loan servicing fees, net
NONINTEREST INCOME
Revenue	$ 694	$ (61)

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Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Consolidated Statements of Comprehensive Income
Net income	$ 30,554	$ 19,222
Unrealized holding (losses) gains on available-for-sale debt securities	(8,669)	10,504
Reclassification adjustment for (gains) realized in income	(24)	(169)
Other comprehensive (loss) income on available-for-sale debt securities	(8,693)	10,335
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses	140	(49)
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost	(17)	(29)
Other comprehensive income (loss) on pension and postretirement obligations	123	(78)
Other comprehensive (loss) income before income tax	(8,570)	10,257
Income tax related to other comprehensive loss (income)	1,801	(2,153)
Net other comprehensive (loss) income	(6,769)	8,104
Comprehensive income	$ 23,785	$ 27,326

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Consolidated Statements of Changes in Stockholders' Equity - USD ($) $ in Thousands	Common Stock	Treasury Stock	Paid-in Capital	Retained Earnings	Accumulated Other Comprehensive Income	Total
Balance (in shares) at Dec. 31, 2019	13,934,996	218,551
Balance at Dec. 31, 2019	$ 13,935	$ (4,173)	$ 104,519	$ 126,480	$ 3,691	$ 244,452
Net income				19,222		19,222
Other comprehensive income (loss), net					8,104	8,104
Cash dividends declared on common stock				(15,999)		(15,999)
Shares issued for dividend reinvestment plan (in shares)		(77,525)
Shares issued for dividend reinvestment plan		$ 1,496	34			$ 1,530
Shares issued from treasury and redeemed related to exercise of stock options (in shares)		(10,407)				(17,222)
Shares issued from treasury and redeemed related to exercise of stock options		$ 201	(70)			$ 131
Restricted stock granted (in shares)		(70,940)
Restricted stock granted		$ 1,370	(1,370)			0
Forfeiture of restricted stock (in shares)		5,290
Forfeiture of restricted stock		$ (100)	100			0
Stock-based compensation expense			1,050			1,050
Purchase of restricted stock for tax withholding (in shares)		5,862
Purchase of restricted stock for tax withholding		$ (163)				(163)
Shares issued for acquisition of Covenant Financial, Inc., net of equity issuance costs (in shares)	2,047,819
Shares issued for acquisition of Covenant Financial, Inc., net of equity issuance costs	$ 2,048		39,381			41,429
Balance (in shares) at Dec. 31, 2020	15,982,815	70,831
Balance at Dec. 31, 2020	$ 15,983	$ (1,369)	143,644	129,703	11,795	299,756
Net income				30,554		30,554
Other comprehensive income (loss), net					(6,769)	(6,769)
Cash dividends declared on common stock				(17,645)		(17,645)
Shares issued for dividend reinvestment plan (in shares)	36,368	(31,877)
Shares issued for dividend reinvestment plan	$ 36	$ 788	845			$ 1,669
Shares issued from treasury and redeemed related to exercise of stock options (in shares)		(13,169)				(22,429)
Shares issued from treasury and redeemed related to exercise of stock options		$ 245	(33)			$ 212
Restricted stock granted (in shares)	10,989	(67,402)
Restricted stock granted	$ 11	$ 1,308	(1,319)			0
Forfeiture of restricted stock (in shares)		5,290
Forfeiture of restricted stock		$ (102)	102			0
Stock-based compensation expense			1,214			1,214
Purchase of restricted stock for tax withholding (in shares)		8,350
Purchase of restricted stock for tax withholding		$ (174)				(174)
Treasury stock purchased (in shares)		299,059
Treasury stock purchased		$ (7,412)				(7,412)
Balance (in shares) at Dec. 31, 2021	16,030,172	271,082
Balance at Dec. 31, 2021	$ 16,030	$ (6,716)	$ 144,453	$ 142,612	$ 5,026	$ 301,405

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Consolidated Statements of Changes in Stockholders' Equity (Parentheticals) - $ / shares	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Retained Earnings
Common stock, dividends, per share (in dollars per share)	$ 1.11	$ 1.08

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 30,554	$ 19,222
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	3,661	3,913
Loss on prepayment of borrowings	0	1,636
Realized gains on available-for-sale debt securities, net	(24)	(169)
Net amortization of securities	2,204	1,570
Increase in cash surrender value of life insurance	(573)	(515)
Depreciation and amortization of bank premises and equipment	2,130	1,981
Net accretion of purchase accounting adjustments	(2,124)	(2,524)
Stock-based compensation	1,214	1,050
Deferred income taxes	(1,381)	(361)
Decrease in fair value of servicing rights	68	576
Gains on sales of loans, net	(3,428)	(5,403)
Origination of loans held for sale	(105,523)	(158,909)
Proceeds from sales of loans held for sale	107,797	163,149
Decrease (increase) in accrued interest receivable and other assets	186	(2,645)
Increase in accrued interest payable and other liabilities	210	2,473
Other	(127)	(260)
Net Cash Provided by Operating Activities	34,844	24,784
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash and cash equivalents provided by business combination	0	75,955
Purchase of certificates of deposit	(4,500)	(2,500)
Proceeds from maturities of certificates of deposit	1,240	740
Proceeds from sales of available-for-sale debt securities	2,027	28,941
Proceeds from calls and maturities of available-for-sale debt securities	61,684	94,486
Purchase of available-for-sale debt securities	(243,925)	(105,354)
Redemption of Federal Home Loan Bank of Pittsburgh stock	2,517	8,496
Purchase of Federal Home Loan Bank of Pittsburgh stock	(2,110)	(5,146)
Net decrease in loans	78,746	1,564
Proceeds from bank owned life insurance	287	0
Proceeds from sales of premises and equipment	627	0
Purchase of premises and equipment	(1,864)	(3,137)
Proceeds from sale of foreclosed assets	1,148	2,262
Other	228	273
Net Cash (Used in) Provided by Investing Activities	(103,895)	96,580
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits	105,381	86,941
Net decrease in short-term borrowings	(18,154)	(99,969)
Proceeds from long-term borrowings - FHLB advances	0	25,891
Repayments of long-term borrowings - FHLB advances	(26,095)	(54,831)
Proceeds from issuance of senior notes, net of issuance costs	14,663	0
Proceeds from issuance of subordinated debt, net of issuance costs	24,437	0
Redemption of subordinated debt	(8,000)	0
Sale of treasury stock	212	131
Purchases of treasury stock	(7,586)	(163)
Common dividends paid	(15,976)	(14,469)
Net Cash Provided by (Used in) Financing Activities	68,882	(56,469)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(169)	64,895
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	96,017	31,122
CASH AND CASH EQUIVALENTS, END OF YEAR	$ 95,848	$ 96,017

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Parentheticals) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Increase in accrued purchase of available-for-sale debt securities	$ (994)	$ 994
Accrued income from life insurance claim	0	279
Assets acquired through foreclosure of real estate loans	394	273
Leased assets obtained in exchange for new operating lease liabilities	739	167
Interest paid	8,174	10,742
Income taxes paid	10,098	3,137
NONCASH INVESTING ASSETS ACQUIRED IN BUSINESS COMBINATION:
Available-for-sale debt securities	0	10,754
Loans receivable	0	464,236
Bank-owned life insurance	0	11,170
Foreclosed assets held for sale	0	860
NONCASH FINANCING ACTIVITY RELATED TO BUSINESS COMBINATION:
Common stock issued	0	41,429
Liabilities assumed:
Deposits	0	481,796
Short-term borrowings	0	33,950
Long-term borrowings	0	30,025
Subordinated debt	$ 0	$ 10,091

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2021

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 subsidiaries, C&N Financial Services Corporation and Northern Tier Holding LLC. C&N Bank is the sole member of Northern Tier Holding LLC. All material intercompany balances and transactions have been eliminated in consolidation.

NATURE OF OPERATIONS – The Corporation’s principal office is located in Wellsboro, Pennsylvania. The majority of the Corporation’s operations are conducted in the Northern tier/Northcentral region of Pennsylvania and Southern tier of New York. As discussed further in Note 3, in 2020 the Corporation expanded its presence in Southeastern Pennsylvania by acquiring Covenant Financial, Inc. (“Covenant”). The Covenant acquisition follows the acquisition of Monument Bancorp, Inc. (“Monument”) in 2019, as well as the opening of offices in York and Lancaster, which are located in Southcentral Pennsylvania.

The Corporation provides banking and related services to individual and corporate customers. Lending products include commercial, mortgage 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 provides wealth management services through its trust department, 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 and (2) fair values of available-for-sale debt securities based on estimates from independent valuation services or from brokers.

INVESTMENT SECURITIES – Investment securities are accounted for as follows:

Available-for-sale debt securities – includes debt securities not classified as held-to-maturity or trading. 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. Premiums on non-amortizing available-for-sale debt securities are amortized using the level yield method to the earliest call date, while discounts on non-amortizing securities are amortized to the maturity date. Premiums and discounts on amortizing securities (mortgage-backed securities) are amortized 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 – Credit-related declines in the fair value of available-for-sale debt 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.

Marketable equity security – The marketable equity security is carried at fair value with unrealized gains and losses included in other noninterest income in the consolidated statements of income.

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.

DERIVATIVES – The Corporation is a party to derivative financial instruments. These financial instruments consist of interest rate swap agreements which contain master netting and collateral provisions designed to protect the party at risk. Interest rate swaps with commercial banking customers were executed to facilitate their respective risk management strategies. Under the terms of these arrangements, the commercial banking customers effectively exchanged their floating interest rate exposures on loans into fixed interest rate exposures. Those interest rate swaps have been simultaneously economically hedged by offsetting interest rate swaps with a third party such that the Corporation has effectively exchanged its fixed interest rate exposures for floating rate exposures. These derivatives are not designated as hedges and are not speculative. Rather, these derivatives result from a service provided to certain customers. As the interest rate swaps associated with this program do not meet the hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. Interest differentials paid or received under the swap agreements are reflected as adjustments to interest and fees on loans. The notional amounts of the interest rate swaps are not exchanged and do not represent exposure to credit loss. The fair value of interest rate derivatives is included in the balance of other assets and other liabilities in the consolidated balance sheets.

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

LOANS RECEIVABLE – Loans originated by the Corporation 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, multi-family residential 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.

PURCHASED LOANS – The Corporation purchased loans in 2019 and 2020, some of which had, at the acquisition dates, shown evidence of credit deterioration since origination. The Corporation considers several factors as indicators that an acquired loan has evidence of deterioration in credit quality. These factors include loans 90 days or more past due, loans with an internal risk rating of substandard or below, loans classified as nonaccrual by the acquired institution and loans that have been previously modified in a troubled debt restructuring. The purchased loans that showed evidence of credit impairment were designated as the purchased credit impaired (“PCI”) loans and were recorded at fair value, with no carryover of the allowance for loan losses. The PCI loans acquired are secured by real estate and the fair value of each loan at the acquisition date was determined based on the estimated proceeds to be derived from selling the collateral, net of selling costs. The PCI loans were placed into nonaccrual status upon acquisition (and remained in nonaccrual status at December 31, 2021 and 2020) as the Corporation cannot reasonably estimate cash flows expected to be collected in order to compute yield on the loans.

The excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable yield. The nonaccretable yield represents estimated future credit losses expected to be incurred over the life of the loan. Subsequent decreases to the expected cash flows require us to evaluate the need for an allowance for credit losses. Subsequent improvements in expected cash flows result in the reversal of a corresponding amount of the nonaccretable yield which we then reclassify as accretable yield that is recognized into interest income over the remaining life of the loan using the interest method. Our evaluation of the amount of future cash flows that we expect to collect is performed in a similar manner as that used to determine our allowance for credit losses. Charge-offs of the principal amount on acquired loans would be first applied to the nonaccretable yield portion of the fair value adjustment.

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, 2021 and 2020, 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 scope of loans reviewed individually each quarter to determine if they are impaired include all commercial loan relationships greater than $200,000 and any residential mortgage or consumer loans of $400,000 or more for which there is at least one extension of credit graded Special Mention, Substandard or Doubtful. Loans that are individually reviewed, but which are determined to not be impaired, are combined with all remaining loans that are not reviewed on a specific basis, and such loans are included within larger pools of loans based on similar risk and loss characteristics for purposes of determining the general component of the allowance. All loans classified as troubled debt restructurings (TDR) and all commercial loan relationships less than $200,000 or other loan relationships less than $400,000 in the aggregate, but with an estimated loss of $100,000 or more, are individually evaluated for impairment.

The 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 a loan: (1) is subject to a restructuring agreement, (2) has an outstanding balance of $400,000 or more and a credit grade of Special Mention, Substandard or Doubtful, or (3) has an estimated loss of $100,000 or more. The pools of loans for each loan segment are evaluated for loss exposure based upon average historical net charge-off rates, adjusted for qualitative factors. The time period used in determining the average historical net charge-off rate for each loan class is based on management’s evaluation of an appropriate time period that captures an historical loss experience relevant to the current portfolio. 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.

Purchased loans that did not show evidence of credit deterioration at the acquisition dates were initially recorded at fair value, including a discount for credit losses reflecting an estimate of the present value of credit losses based on market expectations. The general component of the allowance on purchased loans is evaluated separately from the rest of the portfolio.  This evaluation includes consideration of the qualitative risk factors described above as well as the remaining purchased discount.

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. Nonaccrual troubled debt restructurings may be restored to accrual status if the ultimate 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.

In March 2020, various regulatory agencies, including the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by COVID-19. The interagency statement was effective immediately and impacted accounting for loan modifications. The agencies confirmed with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. Provisions of the CARES Act Section 4013 largely mirrored the provisions of the interagency statement, providing that modified loans were not to be considered TDRs if they were performing at December 31, 2019 and other considerations set forth in the interagency statements were met. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented or at December 31, 2019. Consistent with this guidance, the Corporation has not reported loans that were modified in response to COVID-19 as past due, nonaccrual or as TDRs.

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 – Goodwill represents the excess of the cost of acquisitions over the fair value of the net assets acquired. Goodwill is tested at least annually at December 31 for impairment, or more often if events or circumstances indicate there may be impairment. The Corporation has the option of performing a qualitative assessment to determine whether any further quantitative testing for impairment is necessary. The option of whether or not to perform a qualitative assessment is made annually.

CORE DEPOSIT INTANGIBLES – Amortization of core deposit intangibles is calculated using an accelerated method. In determining amortization using the accelerated method for any given period, the amount of expected cash flows for that period that were used in determining the acquisition-date fair value is divided by the total amount of expected cash flows over the life of the asset. That percentage is multiplied by the initial carrying amount of the asset to arrive at amortization expense for that period. If the Corporation’s cash flow patterns differ significantly from the initial estimates, the amortization schedule would be adjusted prospectively.

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 Loan Servicing Fees, Net, 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. 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.

TREASURY STOCK – Common stock held in treasury is accounted for using the cost method, which treats stock held in treasury as a reduction to total stockholders’ equity. The shares may be purchased in the open market or in privately negotiated transactions from time to time depending upon market conditions and other factors.

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.

REVENUE RECOGNITION – The Corporation generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in the determination of the amount and timing of revenue from contracts with customers.

Additional disclosures related to the Corporation’s largest sources of noninterest income within the consolidated statements of income from contracts with customers that are subject to Accounting Standards Codification (ASC) Topic 606 are as follows:

Trust and financial management revenue – C&N Bank’s trust department provides a wide range of financial services, including wealth management services for individuals, businesses and retirement funds, administration of 401(k) and other retirement plans, retirement planning, estate planning and estate settlement services. Trust clients are located primarily within the Corporation’s geographic markets. Assets held in a fiduciary capacity by C&N Bank are not the Corporation’s assets and are therefore not included in the consolidated balance sheets. The fair value of trust assets under management was approximately $1,232,919,000 at December 31, 2021 and $1,103,228,000 at December 31, 2020. Trust revenue is included within noninterest income in the consolidated statements of income.

Trust revenue is recorded on a cash basis, which is not materially different from the accrual basis. The majority (approximately 84%, based on annual 2021 results) of trust revenue is earned and collected monthly, with the amount determined based on a percentage of the fair value of the trust assets under management. Wealth management fees are contractually agreed with each customer, and fee levels vary based mainly on the size of assets under management. The services provided under such a contract represent a single performance obligation under the Accounting Standards Updates (ASUs) because it embodies a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. None of the contracts with trust customers provide for incentive-based fees. In addition to wealth management fees, trust revenue includes fees for provision of services, including employee benefit plan administration, tax return preparation and estate planning and settlement. Fees for such services are billed based on contractual arrangements or established fee schedules and are typically billed upon completion of providing such services. The costs of acquiring trust customers are incremental and recognized within noninterest expense in the consolidated statements of income.

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

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

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RECENT ACCOUNTING PRONOUNCEMENTS

12 Months Ended

Dec. 31, 2021

RECENT ACCOUNTING PRONOUNCEMENTS

RECENT ACCOUNTING PRONOUNCEMENTS

2. RECENT ACCOUNTING PRONOUNCEMENTS

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

Recently Issued But Not Yet Effective Accounting Pronouncements

ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), as modified by subsequent ASUs, changes accounting for credit losses on loans receivable and debt securities from an incurred loss methodology to an expected credit loss methodology. Among other things, ASU 2016-13 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Accordingly, ASU 2016-13 requires the use of forward-looking information to form credit loss estimates. Many of the loss estimation techniques applied today will still be permitted, though the inputs to those techniques will change to reflect the full amount of expected credit losses. In addition, ASU 2016-13 amends the accounting for credit losses on debt securities and purchased financial assets with credit deterioration. The effect of implementing this ASU is recorded through a cumulative-effect adjustment to retained earnings. The Corporation has formed a cross functional management team and is working with an outside vendor assessing alternative loss estimation methodologies and the Corporation’s data and system needs to evaluate the impact that adoption of this standard will have on the Corporation’s financial condition and results of operations. In November 2019, the FASB approved a delay of the required implementation date of ASU 2016-13 for smaller reporting companies, including the Corporation, resulting in a required implementation date for the Corporation of January 1, 2023.

ASU 2020-04, Reference Rate Reform (Topic 848) provides temporary optional guidance to ease the potential burden in accounting for reference rate reform. The amendments in Update 2020-04 are elective and apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. The guidance includes a general principle that permits an entity to consider contract modifications due to reference rate reform to be an event that does not require contract remeasurement at the modification date or reassessment of a previous accounting determination. Some specific optional expedients are as follows:

● Simplifies accounting for contract modifications, including modifications to loans receivable and debt, by prospectively adjusting the effective interest rate.

● Simplifies the assessment of hedge effectiveness and allows hedging relationships affected by reference rate reform to continue.

The amendments in ASU 2020-04 are effective as of March 12, 2020 through December 31, 2022. The Corporation expects to apply the amendments prospectively for applicable loan and other contracts within the effective period of ASU 2020-04.

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BUSINESS COMBINATIONS

12 Months Ended

Dec. 31, 2021

BUSINESS COMBINATIONS

BUSINESS COMBINATIONS

3. BUSINESS COMBINATION

On July 1, 2020, the Corporation completed its acquisition of Covenant, which operated banking offices in Bucks and Chester Counties of Pennsylvania. In connection with the transaction, the Corporation recorded goodwill of $24.1 million and a core deposit intangible asset of $3.1 million. Total loans acquired on July 1, 2020 were valued at $464.2 million, while total deposits assumed were valued at $481.8 million, borrowings were valued at $64.0 million and subordinated debt was valued at $10.1 million. The Corporation acquired available-for-sale debt securities valued at $10.8 million and bank-owned life insurance valued at $11.2 million. The assets purchased and liabilities assumed in the merger were recorded at their estimated fair values at the time of closing, subject to refinement for up to one year after the closing date. There were no adjustments to the fair value measurements of assets acquired or liabilities assumed in the year ended December 31, 2021.

Merger-related expenses related to the acquisition of Covenant totaled $7,708,000 in 2020. There were no merger-related expenses in 2021.

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PER SHARE DATA

12 Months Ended

Dec. 31, 2021

PER SHARE DATA

PER SHARE DATA

4. PER SHARE DATA

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

Diluted earnings per common share are calculated under the more dilutive of either the treasury method or the two-class method. Diluted earnings per common share is computed using weighted-average common shares outstanding, plus weighted-average common shares available from the exercise of all dilutive stock options, less the number of shares that could be repurchased with the proceeds of stock option exercises based on the average share price of the Corporation’s common stock during the period.

(In Thousands, Except Share and Per Share Data)	Years Ended
	December 31,		December 31,
	2021		2020
Basic
Net income	$	30,554	$	19,222
Less: Dividends and undistributed earnings allocated to participating securities		(241)		(116)
Net income attributable to common shares	$	30,313	$	19,106
Basic weighted-average common shares outstanding		15,765,639		14,743,386
Basic earnings per common share (a)	$	1.92	$	1.30
Diluted
Net income attributable to common shares	$	30,313	$	19,106
Basic weighted-average common shares outstanding		15,765,639		14,743,386
Dilutive effect of potential common stock arising from stock options		6,316		3,662
Diluted weighted-average common shares outstanding		15,771,955		14,747,048
Diluted earnings per common share (a)	$	1.92	$	1.30
Weighted-average nonvested restricted shares outstanding		125,539		89,718

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

Anti-dilutive stock options are excluded from net income per share calculations. There were no anti-dilutive instruments in 2021. Weighted-average common shares available from anti-dilutive instruments totaled 32,538 shares in 2020.

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COMPREHENSIVE INCOME

12 Months Ended

Dec. 31, 2021

COMPREHENSIVE INCOME

COMPREHENSIVE INCOME

5. COMPREHENSIVE INCOME

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

(In Thousands)	Before-Tax		Income Tax		Net-of-Tax
	Amount		Effect		Amount
2021
Available-for-sale debt securities:
Unrealized holding losses on available-for-sale debt securities	$	(8,669)	$	1,821	$	(6,848)
Reclassification adjustment for (gains) realized in income		(24)		5		(19)
Other comprehensive loss from available-for-sale debt securities		(8,693)		1,826		(6,867)
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses		140		(29)		111
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost		(17)		4		(13)
Other comprehensive income on unfunded retirement obligations		123		(25)		98
Total other comprehensive loss	$	(8,570)	$	1,801	$	(6,769)
(In Thousands)	Before-Tax		Income Tax		Net-of-Tax
	Amount		Effect		Amount
2020
Available-for-sale debt securities:
Unrealized holding gains on available-for-sale debt securities	$	10,504	$	(2,205)	$	8,299
Reclassification adjustment for (gains) realized in income		(169)		35		(134)
Other comprehensive income from available-for-sale debt securities		10,335		(2,170)		8,165
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses		(49)		11		(38)
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost		(29)		6		(23)
Other comprehensive loss on unfunded retirement obligations		(78)		17		(61)
Total other comprehensive income	$	10,257	$	(2,153)	$	8,104

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

	Affected Line Item in the
Description	Consolidated Statements of Income
Reclassification adjustment for (gains) realized in income (before-tax)	Realized gains on available-for-sale debt securities, net
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost (before-tax)	Other noninterest expense
Income tax effect	Income tax provision

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

(In Thousands)					Accumulated
	Unrealized		Unfunded		Other
	Gains		Retirement		Comprehensive
	on Securities		Obligations		Income
2021
Balance, beginning of period	$	11,676	$	119	$	11,795
Other comprehensive loss during year ended December 31, 2021		(6,867)		98		(6,769)
Balance, end of period	$	4,809	$	217	$	5,026
2020
Balance, beginning of period	$	3,511	$	180	$	3,691
Other comprehensive income during year ended December 31, 2020		8,165		(61)		8,104
Balance, end of period	$	11,676	$	119	$	11,795

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CASH AND DUE FROM BANKS

12 Months Ended

Dec. 31, 2021

CASH AND DUE FROM BANKS

CASH AND DUE FROM BANKS

6. CASH AND DUE FROM BANKS

Cash and due from banks at December 31, 2021 and 2020 include the following:

(In Thousands)	December 31,		December 31,
	2021		2020
Cash and cash equivalents	$	95,848	$	96,017
Certificates of deposit		9,100		5,840
Total cash and due from banks	$	104,948	$	101,857

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 has not experienced any losses in such accounts.

Historically, C&N Bank has been required to maintain reserves against deposit liabilities in the form of cash and balances with the Federal Reserve Bank of Philadelphia. The reserves are based on deposit levels, account activity, and other services provided by the Federal Reserve Bank. In March 2020, the Federal Reserve Board reduced reserve requirements for U.S. banks to 0%. Accordingly, C&N Bank had no required reserves at December 31, 2021 or December 31, 2020.

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SECURITIES

12 Months Ended

Dec. 31, 2021

SECURITIES

SECURITIES

7. SECURITIES

Amortized cost and fair value of available-for-sale debt securities at December 31, 2021 and 2020 are summarized as follows:

(In Thousands)	December 31, 2021
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding		Fair
	Cost		Gains		Losses		Value
Obligations of the U.S. Treasury	$	25,058	$	52	$	(198)	$	24,912
Obligations of U.S. Government agencies		23,936		563		(408)		24,091
Bank holding company debt securities		18,000		18		(31)		17,987
Obligations of states and political subdivisions:
Tax-exempt		143,427		4,749		(148)		148,028
Taxable		72,182		1,232		(649)		72,765
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		98,048		705		(572)		98,181
Residential collateralized mortgage obligations		44,015		437		(205)		44,247
Commercial mortgage-backed securities		86,926		1,548		(1,006)		87,468
Total available-for-sale debt securities	$	511,592	$	9,304	$	(3,217)	$	517,679

(In Thousands)	December 31, 2020
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding		Fair
	Cost		Gains		Losses		Value
Obligations of the U.S. Treasury	$	12,184	$	0	$	(2)	$	12,182
Obligations of U.S. Government agencies		25,349		1,003		(8)		26,344
Obligations of states and political subdivisions:
Tax-exempt		116,427		6,000		(26)		122,401
Taxable		45,230		2,246		(24)		47,452
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		36,853		1,323		0		38,176
Residential collateralized mortgage obligations		56,048		1,428		(9)		57,467
Commercial mortgage-backed securities		42,461		2,849		0		45,310
Total available-for-sale debt securities	$	334,552	$	14,849	$	(69)	$	349,332

The following table presents gross unrealized losses and fair value of available-for-sale debt securities with unrealized loss positions that are not deemed to be other-than-temporarily impaired, aggregated by length of time that individual securities have been in a continuous unrealized loss position at December 31, 2021 and 2020:

December 31, 2021	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 the U.S. Treasury	$	18,886	$	(198)	$	0	$	0	$	18,886	$	(198)
Obligations of U.S. Government agencies		9,735		(264)		4,856		(144)		14,591		(408)
Bank holding company debt securities		12,969		(31)		0		0		12,969		(31)
Obligations of states and political subdivisions:
Tax-exempt		17,852		(141)		549		(7)		18,401		(148)
Taxable		31,261		(517)		3,277		(132)		34,538		(649)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		71,451		(572)		0		0		71,451		(572)
Residential collateralized mortgage obligations		15,117		(205)		0		0		15,117		(205)
Commercial mortgage-backed securities		52,867		(1,006)		0		0		52,867		(1,006)
Total temporarily impaired available-for-sale debt securities	$	230,138	$	(2,934)	$	8,682	$	(283)	$	238,820	$	(3,217)

December 31, 2020	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 the U.S. Treasury	$	9,159	$	(2)	$	0	$	0	$	9,159	$	(2)
Obligations of U.S. Government agencies		4,992		(8)		0		0		4,992		(8)
Obligations of states and political subdivisions:
Tax-exempt		3,811		(26)		0		0		3,811		(26)
Taxable		5,235		(24)		0		0		5,235		(24)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies,
Residential collateralized mortgage obligations		2,861		(9)		0		0		2,861		(9)
Total temporarily impaired available-for-sale debt securities	$	26,058	$	(69)	$	0	$	0	$	26,058	$	(69)

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

(In Thousands)	2021		2020
Gross realized gains from sales	$	27	$	222
Gross realized losses from sales		(3)		(53)
Net realized gains	$	24	$	169
Income tax provision related to net realized gains	$	5	$	35

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, 2021. 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)	December 31, 2021
	Amortized		Fair
	Cost		Value
Due in one year or less	$	14,454	$	14,538
Due from one year through five years		58,561		59,116
Due from five years through ten years		79,532		81,073
Due after ten years		130,056		133,056
Sub-total		282,603		287,783
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		98,048		98,181
Residential collateralized mortgage obligations		44,015		44,247
Commercial mortgage-backed securities		86,926		87,468
Total	$	511,592	$	517,679

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 $241,428,000 at December 31, 2021 and $247,373,000 at December 31, 2020 were pledged as collateral for public deposits, trusts and certain other deposits, as provided by law, totaling $189,383,000 at December 31, 2021 and $201,176,000 at December 31, 2020. See Note 12 for information concerning securities pledged to secure borrowing arrangements and Note 21 for information related to securities pledged against interest rate swap obligations.

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

A summary of information management considered in evaluating debt and equity securities for OTTI at December 31, 2021 and 2020 is provided below.

Debt Securities

At December 31, 2021 and 2020, 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, 2021 and 2020 to be temporary.

Equity Securities

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 $9,313,000 at December 31, 2021 and $9,720,000 at December 31, 2020. The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at December 31, 2021 and December 31, 2020. 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.

The Corporation’s marketable equity security, with a carrying value of $971,000 at December 31, 2021 and $1,000,000 at December 31, 2020, consisted exclusively of one mutual fund. There was an unrealized loss of $29,000 on the mutual fund at December 31, 2021 and no unrealized gain/loss at December 31, 2020. The increase in the unrealized loss of $29,000 in 2021 and the decrease in the unrealized loss of $21,000 in 2020 are included in other noninterest income in the consolidated statements of income.  There were no sales of equity securities in 2021 and 2020.

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LOANS

12 Months Ended

Dec. 31, 2021

LOANS

LOANS

8. LOANS

The loans receivable portfolio is segmented into commercial, residential mortgage and consumer loans. Loans outstanding at December 31, 2021 and December 31, 2020 are summarized by segment, and by classes within each segment, as follows:

Summary of Loans by Type

(In Thousands)

	December 31,		December 31,
	2021		2020
Commercial:
Commercial loans secured by real estate	$	569,840	$	531,810
Commercial and industrial		159,073		159,577
Paycheck Protection Program - 1st Draw		1,356		132,269
Paycheck Protection Program - 2nd Draw		25,508		0
Political subdivisions		81,301		53,221
Commercial construction and land		60,579		42,874
Loans secured by farmland		11,121		11,736
Multi-family (5 or more) residential		50,089		55,811
Agricultural loans		2,351		3,164
Other commercial loans		17,153		17,289
Total commercial		978,371		1,007,751
Residential mortgage:
Residential mortgage loans - first liens		483,629		532,947
Residential mortgage loans - junior liens		23,314		27,311
Home equity lines of credit		39,252		39,301
1-4 Family residential construction		23,151		20,613
Total residential mortgage		569,346		620,172
Consumer		17,132		16,286
Total		1,564,849		1,644,209
Less: allowance for loan losses		(13,537)		(11,385)
Loans, net	$	1,551,312	$	1,632,824

In the table above, outstanding loan balances are presented net of deferred loan origination fees of $4,247,000 at December 31, 2021 and $6,286,000 at December 31, 2020.

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 Northcentral Pennsylvania, the Southern tier of New York State, Southeastern Pennsylvania and Southcentral Pennsylvania. 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.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was signed into law. The CARES Act is a $2 trillion stimulus package designed to provide relief to U.S. businesses and consumers struggling as a result of the pandemic. A provision in the CARES Act includes creation of the Paycheck Protection Program (“PPP”) through the Small Business Administration (“SBA”) and Treasury Department. Under the PPP, the Corporation, as an SBA-certified lender, provides SBA-guaranteed loans to

small businesses to pay their employees, rent, mortgage interest, and utilities. PPP loans will be forgiven subject to clients’ providing documentation evidencing their compliant use of funds and otherwise complying with the terms of the program.  Information related to PPP loans advanced pursuant to the CARES Act are labeled “1st Draw” within the tables.

Section 4013 of the CARES Act provides that, from the period beginning March 1, 2020 until 60 days after the date on which the national emergency concerning the coronavirus (COVID-19) pandemic declared by the President of the United States under the National Emergencies Act terminates (the “applicable period”), the Corporation may elect to suspend U.S. GAAP for loan modifications related to the pandemic that would otherwise be categorized as troubled debt restructurings (TDRs) and suspend any determination of a loan modified as a result of the effects of the pandemic as being a TDR, including impairment for accounting purposes. The suspension is applicable for the term of the loan modification that occurs during the applicable period for a loan that was not more than 30 days past due as of December 31, 2019. The suspension is not applicable to any adverse impact on the credit of a borrower that is not related to the pandemic.

In addition, the banking regulators and other financial regulators, on March 22, 2020 and revised April 7, 2020, issued a joint interagency statement titled the “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” that encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of the COVID-19 pandemic. Pursuant to the interagency statement, loan modifications that do not meet the conditions of Section 4013 of the CARES Act may still qualify as a modification that does not need to be accounted for as a TDR. Specifically, the agencies confirmed with the FASB staff that short-term modifications made in good faith in response to the pandemic to borrowers who were current prior to any relief are not TDRs under U.S. GAAP. This includes short-term (e.g. six months) modifications such as payment deferrals, fee waivers, extensions of repayment terms, or delays in payment that are insignificant. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented. Appropriate allowances for loan and lease losses are expected to be maintained. With regard to loans not otherwise reportable as past due, financial institutions are not expected to designate loans with deferrals granted due to the pandemic as past due because of the deferral. The interagency statement also states that during short-term pandemic-related loan modifications, these loans generally should not be reported as nonaccrual.

On December 27, 2020, the President of the United States signed into law the Consolidated Appropriations Act, 2021 (the “CAA”), which includes provisions that broadly address additional COVID-19 responses and relief.  Among the additional relief measures included are certain extensions to elements of the CARES Act, including extension of temporary relief from troubled debt restructurings established under Section 4013 of the CARES Act to the earlier of a) January 1, 2022, or b) the date that is 60 days after the date on which the national COVID-19 emergency terminates. The CAA also includes additional funding for the PPP with additional eligibility requirements for borrowers with generally the same loan terms as provided under the CARES Act. Information related to PPP loans advanced pursuant to the CAA are labeled “2nd Draw” within the tables.

The maximum term of PPP loans is five years. Most of the Corporation’s 1st Draw PPP loans have two-year terms, while 2nd Draw PPP loans have  five-year terms and the Corporation will be repaid sooner to the extent the loans are forgiven. The interest rate on PPP loans is 1%, and the Corporation has received fees from the SBA ranging between 1% and 5% per loan, depending on the size of the loan. Fees on PPP loans, net of origination costs and a market rate adjustment on PPP loans acquired from Covenant, are recognized in interest income as a yield adjustment over the term of the loans.

The Corporation began accepting and processing applications for loans under the PPP on April 3, 2020. Covenant also engaged in PPP lending starting in early April 2020. As of December 31, 2021, the recorded investment in 1st Draw PPP loans was $1,356,000, including contractual principal balances of $1,410,000, reduced by net deferred origination fees of $54,000. The recorded investment in 2nd Draw PPP loans was $25,508,000, including contractual principal balances of $26,356,000 reduced by net deferred origination fees of $848,000. Accretion of fees received on PPP loans, net of amortization of the market rate adjustment on PPP loans acquired from Covenant, was $5,515,000 in 2021 and $1,901,000 in 2020. Interest and fees on PPP loans which are included in taxable interest and fees on loans in the consolidated statements of income totaled $6,530,000 in 2021 and $2,924,000 in 2020.

To work with clients impacted by COVID-19, the Corporation offered short-term loan modifications on a case-by-case basis to borrowers who were current in their payments at the inception of the loan modification program. Prior to the merger, Covenant had a similar program in place, and these modified loans have been incorporated into the Corporation’s program. These efforts were designed to assist borrowers as they deal with the crisis and help the Corporation mitigate credit risk. For loans subject to the program, each

borrower was required to resume making regularly scheduled loan payments at the end of the modification period and the deferred amounts have been moved to the end of the loan term. Consistent with Section 4013 of the CARES Act, the modified loans have not been reported as past due, nonaccrual  or as TDRs at December 31, 2021 and 2020. Most of the initial modifications under the program became effective in 2020 and provided a deferral of interest or principal and interest for 90-to-180 days. At December 31, 2021, there were no loans in deferral status under the program. At December 31, 2020, there were 45 loans with a total recorded investment of $37,397,000, in deferral status under the program.

As described in Note 3, effective July 1, 2020, the Corporation acquired loans pursuant to its acquisition of Covenant. In 2019, the Corporation acquired loans pursuant to the acquisition of Monument Bancorp, Inc. (“Monument”). Acquired loans were recorded at their initial fair value, with adjustments made to the gross amortized cost of loans based on movements in interest rates (market rate adjustment) and based on credit fair value adjustments on non-impaired loans and impaired loans. Subsequent to the acquisitions, the Corporation has recognized amortization and accretion of a portion of the market rate adjustments and credit adjustments on non-impaired (performing) loans, and a partial recovery of purchased credit impaired (PCI) loans. For the years ended December 31, 2021 and 2020, adjustments to the initial market rate and credit fair value adjustments of performing loans were recognized as follows:

(In Thousands)	Year Ended
	December 31,		December 31,
	2021		2020
Market Rate Adjustment
Adjustments to gross amortized cost of loans at beginning of period	$	718	$	(1,415)
Market rate adjustment recorded in acquisition		0		2,909
Amortization recognized in interest income		(1,355)		(776)
Adjustments to gross amortized cost of loans at end of period	$	(637)	$	718
Credit Adjustment on Non-impaired Loans
Adjustments to gross amortized cost of loans at beginning of period	$	(5,979)	$	(1,216)
Credit adjustment recorded in acquisition		0		(7,219)
Accretion recognized in interest income		2,644		2,456
Adjustments to gross amortized cost of loans at end of period	$	(3,335)	$	(5,979)

A summary of PCI loans held at December 31, 2021 and December 31, 2020 is as follows:

(In Thousands)	December 31,		December 31,
	2021		2020
Outstanding balance	$	9,802	$	10,316
Carrying amount		6,558		6,841

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

	December 31,								December 31,
Year Ended December 31, 2021	2020						Provision		2021
(In Thousands)	Balance		Charge-offs		Recoveries		(Credit)		Balance
Allowance for Loan Losses:
Commercial:
Commercial loans secured by real estate	$	3,051	$	0	$	2	$	1,352	$	4,405
Commercial and industrial		2,245		(1,464)		20		1,922		2,723
Commercial construction and land		454		0		0		183		637
Loans secured by farmland		120		0		0		(5)		115
Multi-family (5 or more) residential		236		0		0		(21)		215
Agricultural loans		34		0		0		(9)		25
Other commercial loans		168		0		0		5		173
Total commercial		6,308		(1,464)		22		3,427		8,293
Residential mortgage:
Residential mortgage loans - first liens		3,524		(11)		4		133		3,650
Residential mortgage loans - junior liens		349		0		0		(165)		184
Home equity lines of credit		281		0		2		19		302
1-4 Family residential construction		99		0		0		103		202
Total residential mortgage		4,253		(11)		6		90		4,338
Consumer		239		(100)		38		58		235
Unallocated		585		0		0		86		671
Total Allowance for Loan Losses	$	11,385	$	(1,575)	$	66	$	3,661	$	13,537

	December 31,								December 31,
Year Ended December 31, 2020	2019						Provision		2020
(In Thousands)	Balance		Charge-offs		Recoveries		(Credit)		Balance
Allowance for Loan Losses:
Commercial:
Commercial loans secured by real estate	$	1,921	$	0	$	0	$	1,130	$	3,051
Commercial and industrial		1,391		(2,236)		16		3,074		2,245
Commercial construction and land		966		(107)		0		(405)		454
Loans secured by farmland		158		0		0		(38)		120
Multi-family (5 or more) residential		156		0		0		80		236
Agricultural loans		41		0		0		(7)		34
Other commercial loans		155		0		0		13		168
Total commercial		4,788		(2,343)		16		3,847		6,308
Residential mortgage:
Residential mortgage loans - first liens		3,405		0		39		80		3,524
Residential mortgage loans - junior liens		384		0		1		(36)		349
Home equity lines of credit		276		0		4		1		281
1-4 Family residential construction		117		0		0		(18)		99
Total residential mortgage		4,182		0		44		27		4,253
Consumer		281		(122)		41		39		239
Unallocated		585		0		0		0		585
Total Allowance for Loan Losses	$	9,836	$	(2,465)	$	101	$	3,913	$	11,385

For the year ended December 31, 2021, the provision for loan losses was $3,661,000, a decrease in expense of $252,000 as compared to 2020. In 2021, the provision included the impact of partial charge-offs totaling $1,463,000 on a commercial loan. At December 31, 2021, the recorded investment in this loan was $1,391,000. In total, the provision for 2021 included a net charge of $1,324,000 related to specific loans (net charge-offs of $1,509,000 offset by a net decrease in specific allowances on loans of $185,000), an increase of $2,251,000 in the collectively determined potion of the allowance and an $86,000 increase in the unallocated allowance. The increase in the collectively determined portion of the allowance reflected the impact of an increase in volume of commercial loans, excluding PPP loans. In 2020, the provision included a $2,219,000 charge-off on one commercial loan for which there was no recorded investment at December 31, 2021 and 2020.

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. 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. 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. Risk ratings are updated any time that conditions or the situation warrants. Loans not classified are included in the “Pass” column in the table that follows.

The following tables summarize the aggregate credit quality classification of outstanding loans by risk rating as of December 31, 2021 and 2020:

December 31, 2021									Purchased
(In Thousands)			Special						Credit
	Pass		Mention		Substandard		Doubtful		Impaired		Total
Commercial:
Commercial loans secured by real estate	$	538,966	$	10,510	$	16,220	$	0	$	4,144	$	569,840
Commercial and Industrial		142,775		10,841		4,694		0		763		159,073
Paycheck Protection Program - 1st Draw		1,356		0		0		0		0		1,356
Paycheck Protection Program - 2nd Draw		25,508		0		0		0		0		25,508
Political subdivisions		81,301		0		0		0		0		81,301
Commercial construction and land		59,816		715		48		0		0		60,579
Loans secured by farmland		10,011		186		924		0		0		11,121
Multi-family (5 or more) residential		47,638		0		873		0		1,578		50,089
Agricultural loans		1,802		0		549		0		0		2,351
Other commercial loans		17,150		3		0		0		0		17,153
Total commercial		926,323		22,255		23,308		0		6,485		978,371
Residential Mortgage:
Residential mortgage loans - first liens		469,044		7,981		6,534		0		70		483,629
Residential mortgage loans - junior liens		22,914		114		283		0		3		23,314
Home equity lines of credit		38,652		59		541		0		0		39,252
1-4 Family residential construction		23,151		0		0		0		0		23,151
Total residential mortgage		553,761		8,154		7,358		0		73		569,346
Consumer		17,092		0		40		0		0		17,132
Totals	$	1,497,176	$	30,409	$	30,706	$	0	$	6,558	$	1,564,849

December 31, 2020									Purchased
(In Thousands)			Special						Credit
	Pass		Mention		Substandard		Doubtful		Impaired		Total
Commercial:
Commercial loans secured by real estate	$	494,876	$	17,374	$	15,262	$	0	$	4,298	$	531,810
Commercial and Industrial		143,500		8,025		7,268		0		784		159,577
Paycheck Protection Program - 1st Draw		132,269		0		0		0		0		132,269
Political subdivisions		53,221		0		0		0		0		53,221
Commercial construction and land		42,110		715		49		0		0		42,874
Loans secured by farmland		10,473		405		858		0		0		11,736
Multi-family (5 or more) residential		50,563		2,405		1,229		0		1,614		55,811
Agricultural loans		2,569		0		595		0		0		3,164
Other commercial loans		17,289		0		0		0		0		17,289
Total commercial		946,870		28,924		25,261		0		6,696		1,007,751
Residential Mortgage:
Residential Mortgage loans - first liens		516,685		6,192		9,994		0		76		532,947
Residential Mortgage loans - junior liens		26,480		141		621		0		69		27,311
Home equity lines of credit		38,529		59		713		0		0		39,301
1-4 Family residential construction		20,613		0		0		0		0		20,613
Total residential mortgage		602,307		6,392		11,328		0		145		620,172
Consumer		16,172		0		114		0		0		16,286
Totals	$	1,565,349	$	35,316	$	36,703	$	0	$	6,841	$	1,644,209

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, 2021 and 2020:

December 31, 2021	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Commercial:
Commercial loans secured by real estate	$	10,926	$	558,914	$	569,840	$	669	$	3,736	$	4,405
Commercial and industrial		2,503		156,570		159,073		71		2,652		2,723
Paycheck Protection Program - 1st Draw		0		1,356		1,356		0		0		0
Paycheck Protection Program - 2nd Draw		0		25,508		25,508		0		0		0
Political subdivisions		0		81,301		81,301		0		0		0
Commercial construction and land		0		60,579		60,579		0		637		637
Loans secured by farmland		83		11,038		11,121		0		115		115
Multi-family (5 or more) residential		1,578		48,511		50,089		0		215		215
Agricultural loans		0		2,351		2,351		0		25		25
Other commercial loans		0		17,153		17,153		0		173		173
Total commercial		15,090		963,281		978,371		740		7,553		8,293
Residential mortgage:
Residential mortgage loans - first liens		630		482,999		483,629		0		3,650		3,650
Residential mortgage loans - junior liens		14		23,300		23,314		0		184		184
Home equity lines of credit		0		39,252		39,252		0		302		302
1-4 Family residential construction		0		23,151		23,151		0		202		202
Total residential mortgage		644		568,702		569,346		0		4,338		4,338
Consumer		0		17,132		17,132		0		235		235
Unallocated												671
Total	$	15,734	$	1,549,115	$	1,564,849	$	740	$	12,126	$	13,537

December 31, 2020	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Commercial:
Commercial loans secured by real estate	$	11,962	$	519,848	$	531,810	$	692	$	2,359	$	3,051
Commercial and industrial		1,359		158,218		159,577		71		2,174		2,245
Paycheck Protection Program - 1st Draw		0		132,269		132,269		0		0		0
Political subdivisions		0		53,221		53,221		0		0		0
Commercial construction and land		0		42,874		42,874		0		454		454
Loans secured by farmland		84		11,652		11,736		0		120		120
Multi-family (5 or more) residential		1,614		54,197		55,811		0		236		236
Agricultural loans		0		3,164		3,164		0		34		34
Other commercial loans		0		17,289		17,289		0		168		168
Total commercial		15,019		992,732		1,007,751		763		5,545		6,308
Residential mortgage:
Residential mortgage loans - first liens		2,385		530,562		532,947		9		3,515		3,524
Residential mortgage loans - junior liens		414		26,897		27,311		153		196		349
Home equity lines of credit		0		39,301		39,301		0		281		281
1-4 Family residential construction		0		20,613		20,613		0		99		99
Total residential mortgage		2,799		617,373		620,172		162		4,091		4,253
Consumer		0		16,286		16,286		0		239		239
Unallocated												585
Total	$	17,818	$	1,626,391	$	1,644,209	$	925	$	9,875	$	11,385

Summary information related to impaired loans as of December 31, 2021 and 2020 is as follows:

(In Thousands)	December 31, 2021						December 31, 2020
	Unpaid						Unpaid
	Principal		Recorded		Related		Principal		Recorded		Related
	Balance		Investment		Allowance		Balance		Investment		Allowance
With no related allowance recorded:
Commercial loans secured by real estate	$	6,600	$	4,458	$	0	$	7,168	$	5,398	$	0
Commercial and industrial		5,213		2,431		0		1,781		1,287		0
Residential mortgage loans - first liens		656		630		0		1,248		1,248		0
Residential mortgage loans - junior liens		124		14		0		160		105		0
Loans secured by farmland		83		83		0		84		84		0
Multi-family (5 or more) residential		2,734		1,578		0		2,770		1,614		0
Total with no related allowance recorded		15,410		9,194		0		13,211		9,736		0
With a related allowance recorded:
Commercial loans secured by real estate		6,468		6,468		668		6,501		6,501		691
Commercial and industrial		72		72		72		72		72		72
Residential mortgage loans - first liens		0		0		0		1,200		1,200		9
Residential mortgage loans - junior liens		0		0		0		309		309		153
Total with a related allowance recorded		6,540		6,540		740		8,082		8,082		925
Total	$	21,950	$	15,734	$	740	$	21,293	$	17,818	$	925

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

(In Thousands)					Interest Income Recognized on
	Average Investment in				on Impaired Loans
	Impaired Loans				on a Cash Basis
	Year Ended December 31,				Year Ended December 31,
	2021		2020		2021		2020
Commercial:
Commercial loans secured by real estate	$	11,617	$	5,266	$	557	$	258
Commercial and industrial		2,636		2,542		34		34
Commercial construction and land		48		521		3		15
Loans secured by farmland		84		319		1		27
Multi-family (5 or more) residential		1,583		202		133		0
Agricultural loans		67		76		4		4
Other commercial loans		0		18		0		1
Total commercial		16,035		8,944		732		339
Residential mortgage:
Residential mortgage loans - first lien		1,647		1,853		78		116
Residential mortgage loans - junior lien		361		392		11		22
Home equity lines of credit		0		57		0		3
Total residential mortgage		2,008		2,302		89		141
Total	$	18,043	$	11,246	$	821	$	480

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, 2021				December 31, 2020
	Past Due				Past Due
	90+ Days and				90+ Days and
	Accruing		Nonaccrual		Accruing		Nonaccrual
Commercial:
Commercial loans secured by real estate	$	738	$	10,885	$	395	$	11,550
Commercial and industrial		30		2,299		142		970
Commercial construction and land		0		48		0		49
Loans secured by farmland		28		83		188		84
Multi-family (5 or more) residential		0		1,578		0		1,614
Agricultural loans		65		0		0		0
Other commercial		0		0		71		0
Total commercial		861		14,893		796		14,267
Residential mortgage:
Residential mortgage loans - first liens		1,144		4,005		838		6,387
Residential mortgage loans - junior liens		69		3		52		378
Home equity lines of credit		102		82		233		299
Total residential mortgage		1,315		4,090		1,123		7,064
Consumer		43		16		56		85
Totals	$	2,219	$	18,999	$	1,975	$	21,416

Loans past due 90 days or more for which interest continues to be accrued have been evaluated and determind to be well secured and in the process of collection. The amounts shown in the table immediately above include loans classified as troubled debt restructurings (described in more detail below), if such loans are past due ninety days or more or nonaccrual. PCI loans with a total recorded investment of $6,558,000 at December 31, 2021 and $6,841,000 at December 31, 2020 are classified as nonaccrual.

The table below presents a summary of the contractual aging of loans as of December 31, 2021 and 2020. Loans modified under the Corporation’s program designed to work with clients impacted by COVID-19, as described above, are included in the current and past due less than 30 days category in the table that follows:

(In Thousands)	As of December 31, 2021								As of December 31, 2020
	Current &								Current &
	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
Commercial:
Commercial loans secured by real estate	$	563,658	$	762	$	5,420	$	569,840	$	529,998	$	66	$	1,746	$	531,810
Commercial and industrial		158,188		72		813		159,073		158,523		55		999		159,577
Paycheck Protection Program - 1st Draw		1,339		17		0		1,356		132,269		0		0		132,269
Paycheck Protection Program - 2nd Draw		25,508		0		0		25,508		0		0		0		0
Political subdivisions		81,301		0		0		81,301		53,221		0		0		53,221
Commercial construction and land		60,509		70		0		60,579		42,590		284		0		42,874
Loans secured by farmland		11,010		0		111		11,121		11,419		95		222		11,736
Multi-family (5 or more) residential		48,532		0		1,557		50,089		53,860		1,951		0		55,811
Agricultural loans		2,279		7		65		2,351		3,091		2		71		3,164
Other commercial loans		17,153		0		0		17,153		17,289		0		0		17,289
Total commercial		969,477		928		7,966		978,371		1,002,260		2,453		3,038		1,007,751
Residential mortgage:
Residential mortgage loans - first liens		475,637		5,038		2,954		483,629		523,191		5,703		4,053		532,947
Residential mortgage loans - junior liens		23,229		16		69		23,314		27,009		111		191		27,311
Home equity lines of credit		38,830		279		143		39,252		38,919		101		281		39,301
1-4 Family residential construction		23,151		0		0		23,151		20,457		156		0		20,613
Total residential mortgage		560,847		5,333		3,166		569,346		609,576		6,071		4,525		620,172
Consumer		17,001		72		59		17,132		16,063		83		140		16,286
Totals	$	1,547,325	$	6,333	$	11,191	$	1,564,849	$	1,627,899	$	8,607	$	7,703	$	1,644,209

Nonaccrual loans are included in the contractual aging immediately above. A summary of the contractual aging of nonaccrual loans at December 31, 2021 and 2020 is as follows:

(In Thousands)	Current &
	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Total
December 31, 2021 Nonaccrual Totals	$	8,800	$	1,227	$	8,972	$	18,999
December 31, 2020 Nonaccrual Totals	$	12,999	$	2,689	$	5,728	$	21,416

Loans whose terms are modified are classified as TDRs if the Corporation grants such borrowers concessions and it is deemed that those borrowers are experiencing financial difficulty. Loans classified as TDRs are designated as impaired. The outstanding balance of loans subject to TDRs, as well as the contractual aging information at December 31, 2021 and 2020 is as follows:

Troubled Debt Restructurings (TDRs):

(In Thousands)	Current &
	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Nonaccrual		Total
December 31, 2021 Totals	$	248	$	40	$	65	$	5,452	$	5,805
December 31, 2020 Totals	$	166	$	0	$	418	$	6,867	$	7,451

At December 31, 2021 and 2020, there were no commitments to loan additional funds to borrowers whose loans have been classified as TDRs.

A summary of TDRs that occurred during 2021 and 2020 is as follows:

(Balances in Thousands)	2021			2020
		Post-			Post-
	Number	Modification		Number	Modification
	of	Recorded		of	Recorded
	Loans	Investment		Loans	Investment
Residential mortgage - first liens:
Reduced monthly payments and extended maturity date	1	$	12	0	$	0
Reduced monthly payments for a fifteen-month period	1		116	0		0
Residential mortgage - junior liens,
New loan at lower than risk-adjusted market rate to borrower from whom short sale of other collateral was accepted	0		0	1		30
Home equity lines of credit:
Reduced monthly payments and extended maturity date	1		24	0		0
Reduced monthly payments for an eighteen-month period	1		70	0		0
Commercial loans secured by real estate:
Interest only payments for a nine-month period	0		0	1		240
Principal and interest payment deferral non-COVID related	0		0	2		4,831
Multi-family (5 or more) residential,
Principal and interest payment deferral non-COVID related	0		0	3		2,170
Total	4	$	222	7	$	7,271

In the year ended December 31, 2020, the Corporation recorded a specific allowance for loan losses of $416,000 related to a loan secured by commercial real estate for which a TDR concession was made in 2020 and included in the table above. In 2021, the allowance on this loan with a recorded investment of $3,405,000 at December 31, 2021 was increased to $427,000. The other loans for which TDRs were granted in 2021 and 2020 had no specific impact on the provision or allowance for loan losses.

In 2021 and 2020, payment defaults on loans for which modifications considered to be TDRs were entered into within the previous 12 months are summarized as follows:

	2021			2020
	Number			Number
	of	Recorded		of	Recorded
(Balances in Thousands)	Loans	Investment		Loans	Investment
Commercial loans secured by real estate	1	$	3,405	1	$	240
Total	1	$	3,405	1	$	240

The default that occurred in 2021 was on the loan referred to above with a specific allowance of $427,000 at December 31, 2021. The loan for which a default occurred in 2020 was repaid in full in 2021.

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)	December 31,		December 31,
	2021		2020
Foreclosed residential real estate	$	256	$	80

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)	December 31,		December 31,
	2021		2020
Residential real estate in process of foreclosure	$	1,260	$	1,246

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BANK PREMISES AND EQUIPMENT

12 Months Ended

Dec. 31, 2021

BANK PREMISES AND EQUIPMENT

BANK PREMISES AND EQUIPMENT

9. BANK PREMISES AND EQUIPMENT

(In Thousands)	December 31,
	2021		2020
Land	$	3,623	$	3,826
Buildings and improvements		32,606		33,058
Furniture and equipment		15,162		15,235
Construction in progress		835		8
Total		52,226		52,127
Less: accumulated depreciation		(31,543)		(30,601)
Net	$	20,683	$	21,526

Depreciation expense is included in the following line items of the consolidated statements of income:

(In Thousands)	2021		2020
Net occupancy and equipment expense	$	1,723	$	1,595
Data processing and telecommunications expense		407		386
Total	$	2,130	$	1,981

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GOODWILL AND OTHER INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2021

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND OTHER INTANGIBLE ASSETS, NET

10. GOODWILL AND OTHER INTANGIBLE ASSETS, NET

Information related to the core deposit intangibles is as follows:

(In Thousands)	December 31,
	2021		2020
Gross amount	$	6,639	$	6,639
Accumulated amortization		(3,323)		(2,788)
Net	$	3,316	$	3,851

Amortization expense related to core deposit intangibles is included in other noninterest expense in the consolidated statements of income, as follows:

(In Thousands)	Year Ended
	December 31,		December 31,
	2021		2020
Amortization expense	$	535	$	540

The amount of amortization expense to be recognized in each of the ensuing five years is as follows:

(In Thousands)
2022	$	439
2023		408
2024		390
2025		424
2026		396

Goodwill represents the excess of the cost of acquisitions over the fair value of the net assets acquired. Changes in the carrying amount of goodwill are summarized in the following table:

(In Thousands)	Year Ended
	December 31,		December 31,
	2021		2020
Balance, beginning of period	$	52,505	$	28,388
Goodwill arising in business combination		0		24,117
Balance, end of period	$	52,505	$	52,505

In testing goodwill for impairment at December 31, 2021, the Corporation by-passed performing a qualitative assessment and performed a quantitative assessment based on comparison of the Corporation’s market capitalization to its stockholders’ equity, resulting in the determination that the fair value of its reporting unit, its community banking operation, exceeded its carrying amount. Accordingly, there was no goodwill impairment at December 31, 2021.

There were no goodwill impairment charges recorded in the years ended December 31, 2021 and 2020.

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DEPOSITS

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

DEPOSITS

11. DEPOSITS

At December 31, 2021 the scheduled maturities of time deposits are as follows:

(In Thousands)
2022	$	163,170
2023		80,711
2024		22,224
2025		11,963
2026		7,825
Total	$	285,893

Time deposits of more than $250,000 totaled $75,375,000 at December 31, 2021 and $103,024,000 at December 31, 2020. As of December 31, 2021, the remaining maturities or time to next re-pricing of time deposits more than $250,000 was as follows:

(In Thousands)
Three months or less	$	15,981
Over 3 months through 12 months		32,648
Over 1 year through 3 years		25,438
Over 3 years		1,308
Total	$	75,375

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BORROWED FUNDS

12 Months Ended

Dec. 31, 2021

BORROWED FUNDS

BORROWED FUNDS

12. BORROWED FUNDS

SHORT-TERM BORROWINGS

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

(In Thousands)	December 31,		December 31,
	2021		2020
FHLB-Pittsburgh borrowings	$	0	$	18,066
Customer repurchase agreements		1,803		1,956
Total short-term borrowings	$	1,803	$	20,022

The weighted average interest rate on total short-term borrowings outstanding was 0.10% at December 31, 2021 and 0.40% at December 31, 2020. The maximum amount of total short-term borrowings outstanding at any month-end was $17,353,000 in 2021 and $56,647,000 in 2020.

The Corporation had available credit with other correspondent banks totaling $45,000,000 at December 31, 2021 and 2020. These lines of credit are primarily unsecured. No amounts were outstanding at December 31, 2021 or 2020.

The Corporation has a line of credit with the Federal Reserve Bank of Philadelphia’s Discount Window. At December 31, 2021, the Corporation had available credit in the amount of $13,642,000 on this line with no outstanding advances. At December 31, 2020, the Corporation had available credit in the amount of $14,654,000 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 $14,034,000 at December 31, 2021 and $15,126,000 at December 31, 2020.

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, 2021 and 2020. The carrying value of the underlying securities was $1,820,000 at December 31, 2021 and $1,980,000 at December 31, 2020.

The FHLB-Pittsburgh loan facility is collateralized by qualifying loans secured by real estate with a book value totaling $1,046,242,000 at December 31, 2021 and $1,049,690,000 at December 31, 2020. 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 $9,313,000 at December 31, 2021 and $9,720,000 at December 31, 2020. The Corporation’s total credit facility with FHLB-Pittsburgh was $756,868,000 at December 31, 2021, including an unused (available) amount of $723,557,000. At December 31, 2020, the Corporation’s total credit facility with FHLB-Pittsburgh was $771,199,000, including an unused (available) amount of $698,977,000.

At December 31, 2021, there were no overnight borrowings or short-term advances from FHLB-Pittsburgh. At December 31, 2020, other short-term advances from FHLB-Pittsburgh included five advances totaling $18,000,000 which are presented in the table net of the unamortized purchase accounting adjustment, with a weighted-average effective rate of 0.43%.

LONG-TERM BORROWINGS – FHLB ADVANCES

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

(In Thousands)	December 31,		December 31,
	2021		2020
Loans matured in 2021	$	0	$	26,098
Loans maturing in 2022 with a weighted-average rate of 0.60%		15,452		15,682
Loans maturing in 2023 with a weighted-average rate of 0.73%		7,119		7,224
Loan maturing in 2024 with a rate of 0.75%		5,099		5,137
Loan maturing in 2025 with a rate of 4.91%		372		467
Total long-term FHLB-Pittsburgh borrowings	$	28,042	$	54,608

Note: Weighted-average rates are presented as of December 31, 2021.

SENIOR NOTES

On May 19, 2021, the Corporation issued and sold $15.0 million in aggregate principal amount of 2.75% Fixed Rate Senior Unsecured Notes due 2026 (the "Senior Notes"). The Senior Notes mature on June 1, 2026 and bear interest at a fixed annual rate of 2.75%. The Corporation is not entitled to redeem the Senior Notes, in whole or in part, at any time prior to maturity and the Senior Notes are not subject to redemption by the holders. The Senior Notes are unsecured and unsubordinated obligations of the Corporation only and are not obligations of, and are not guaranteed by, any subsidiary of the Corporation.

The Senior Notes were recorded, net of debt issuance costs of $337,000, at an initial carrying amount of $14,663,000. Debt issuance costs are amortized over the term of the Senior Notes as an adjustment of the effective interest rate. Amortization of debt issuance costs associated with the Senior Notes totaling $38,000 in 2021 was included in interest expense in the consolidated statements of income.  

At December 31, 2021 and December 31, 2020, outstanding Senior Notes are as follows:

(In Thousands)	December 31,		December 31,
	2021		2020
Senior Notes with an aggregate par value of $15,000,000; bearing interest at 2.75% with an effective interest rate of 3.23%; maturing in June 2026	$	14,701	$	0
Total carrying value	$	14,701	$	0

SUBORDINATED DEBT

On May 19, 2021, the Corporation issued and sold $25.0 million in aggregate principal amount of 3.25% Fixed-to-Floating Rate Subordinated Notes due 2031 (the "Subordinated Notes"). The Subordinated Notes mature on June 1, 2031 and bear interest at a fixed annual rate of 3.25%, to June 1, 2026. From June 1, 2026 to maturity or early redemption, the interest rate will reset quarterly to an interest rate per annum equal to the three-month Secured Overnight Financing Rate provided by the Federal Reserve Bank of New York

plus 259 basis points. The Corporation is entitled to redeem the Subordinated Notes, in whole or in part, at any time on or after June 1, 2026, and to redeem the Subordinated Notes at any time in whole upon certain other events. Any redemption of the Subordinated Notes will be subject to prior regulatory approval to the extent required.

The Subordinated Notes are not subject to redemption at the option of the holders. The Subordinated Notes are unsecured, subordinated obligations of the Corporation only and are not obligations of, and are not guaranteed by, any subsidiary of the Corporation. The Subordinated Notes rank junior in right to payment to the Corporation's current and future senior indebtedness, including the Senior Notes (described above). The Subordinated Notes are intended to qualify as Tier 2 capital for regulatory capital purposes.

The Subordinated Notes were recorded, net of debt issuance costs of $563,000, at an initial carrying amount of $24,437,000. Debt issuance costs are amortized through June 1, 2026 as an adjustment of the effective interest rate. Amortization of debt issuance costs associated with the Subordinated Notes totaling $63,000 in 2021 was included in interest expense in the unaudited consolidated statements of income.

At December 31, 2021 and 2020, outstanding subordinated debt agreements are as follows:

(In Thousands)	December 31,		December 31,
	2021		2020
Agreements with an aggregate par value of $8,000,000; bearing interest at 6.25% with an effective interest rate of 5.49%; redeemed at par in June 2021	$	0	$	8,027
Agreements with an aggregate par value of $6,500,000; bearing interest at 6.50%; maturing in April 2027 and redeemable at par in April 2022		6,500		6,500
Agreement with a par value of $2,000,000; bearing interest at 6.50% with an effective interest rate of 5.60%; maturing in July 2027 and redeemable at par in July 2022		2,008		2,026
Agreements with a par value of $25,000,000; bearing interest at 3.25% with an effective interest rate of 3.74%; maturing in June 2031 and redeemable at par in June 2026		24,501		0
Total carrying value	$	33,009	$	16,553

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EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS

12 Months Ended

Dec. 31, 2021

EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS

EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS

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, 2021 and 2020 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:

	Pension				Postretirement
(In Thousands)	2021		2020		2021		2020
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year	$	1,101	$	976	$	1,347	$	1,326
Service cost		0		0		63		46
Interest cost		20		23		33		39
Plan participants' contributions		0		0		148		185
Actuarial loss (gain)		12		108		(65)		11
Benefits paid		(5)		(6)		(229)		(260)
Benefit obligation at end of year	$	1,128	$	1,101	$	1,297	$	1,347
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year	$	1,062	$	971	$	0	$	0
Actual return on plan assets		118		97		0		0
Employer contribution		0		0		81		75
Plan participants' contributions		0		0		148		185
Benefits paid		(5)		(6)		(229)		(260)
Fair value of plan assets at end of year	$	1,175	$	1,062	$	0	$	0
Funded status at end of year	$	47	$	(39)	$	(1,297)	$	(1,347)

At December 31, 2021 and 2020, the following pension plan and postretirement plan asset and liability amounts were recognized in the consolidated balance sheets:

	Pension				Postretirement
(In Thousands)	2021		2020		2021		2020
Other assets	$	47	$	0	$	0	$	0
Accrued interest and other liabilities		0		39		1,297		1,347

At December 31, 2021 and 2020, the following items included in accumulated other comprehensive income had not been recognized as components of expense:

	Pension				Postretirement
(In Thousands)	2021		2020		2021		2020
Prior service cost	$	0	$	0	$	(186)	$	(217)
Net actuarial loss (gain)		182		277		(271)		(211)
Total	$	182	$	277	$	(457)	$	(428)

For the defined benefit pension plan, amortization of the net actuarial loss is expected to be $8,000 in 2022. 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 2022 is a reduction in expense of $31,000, and net actuarial gain of $9,000 is expected to be amortized in 2022.

The accumulated benefit obligation for the defined benefit pension plan was $1,128,000 at December 31, 2021 and $1,101,000 at December 31, 2020.

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

	Pension				Postretirement
(In Thousands)	2021		2020		2021		2020
Service cost	$	0	$	0	$	63	$	46
Interest cost		20		23		33		39
Expected return on plan assets		(30)		(27)		0		0
Amortization of prior service cost		0		0		(31)		(31)
Recognized net actuarial loss (gain)		19		16		(5)		(14)
Total net periodic benefit cost	$	9	$	12	$	60	$	40

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

	Pension				Postretirement
	2021		2020		2021		2020
Discount rate	2.30	%	3.10	%	2.50	%	3.25	%
Expected return on plan assets	4.81	%	4.99	%	N/A		N/A
Rate of compensation increase	N/A		N/A		N/A		N/A

The weighted-average assumptions used to determine benefit obligations as of December 31, 2021 and 2020 are as follows:

	Pension				Postretirement
	2021		2020		2021		2020
Discount rate	2.60	%	2.30	%	3.00	%	2.50	%
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
2022	$	542	$	84
2023		187		81
2024		8		83
2025		8		85
2026		14		95
2027-2031		360		428

No estimated minimum contribution to the defined benefit pension plan is required in 2022, 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, 2021 and 2020 are as follows:

	2021		2020
Mutual funds invested principally in:
Cash and cash equivalents	3	%	2	%
Debt securities	38	%	36	%
Equity securities	51	%	51	%
Alternative funds	8	%	11	%
Total	100	%	100	%

C&N Bank’s Wealth 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 22). The 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 $1,299,000 in 2021 and $1,050,000 in 2020.

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 in 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 over a period of 6 years. As of December 31, 2021, and 2020, 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 513,494 shares of Corporation stock at December 31, 2021 and 481,478 shares at December 31, 2020, all of which had been allocated to Plan participants. The Corporation’s contributions to the ESOP totaled $1,040,000 in 2021 and $912,000 in 2020.

The Corporation has a nonqualified supplemental deferred compensation arrangement with its key officers. Charges to operating expense for officers’ supplemental deferred compensation were $314,000 in 2021 and $286,000 in 2020.

In connection with the Covenant acquisition, the Corporation assumed an obligation to provide a supplemental retirement benefit to a former Covenant executive. Under the terms of the agreement, the executive or his heirs will receive monthly payments totaling $1 million over a 10-year period starting in October 2025. Effective July 1, 2020, the Corporation recorded a liability of $499,000 representing the present value of the obligation prior to the executive fully vesting in the benefit. In 2020, the Corporation recorded expense of $360,000, which is included in merger-related expenses in the consolidated statements of income, representing the impact of the executive fully vesting upon the change in control. In addition, the Corporation recorded expense of $13,000 in 2021 and $6,000 in 2020, which is included in pensions and other employee benefits in the consolidated statements of income, representing the effective interest cost on the obligation. The discount rate used to measure the liability is 1.5%. The balance of the liability, which is included in accrued interest and other liabilities in the consolidated balance sheets, is $878,000 at December 31, 2021 and $865,000 at December 31, 2020.

The Corporation also has a nonqualified deferred compensation plan that allows selected officers 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, 2021, 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 110,800 shares available for issuance under the Stock Incentive Plan as of December 31, 2021.

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 235,000 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 96,309 shares available for issuance under the Independent Directors Stock Incentive Plan as of December 31, 2021.

Total stock-based compensation expense is as follows:

(In Thousands)	2021		2020
Restricted stock	$	1,214	$	1,050
Stock options		0		0
Total	$	1,214	$	1,050

The following summarizes non-vested restricted stock activity for the year ended December 31, 2021:

		Weighted
		Average
	Number	Grant Date
	of Shares	Fair Value
Outstanding, December 31, 2020	101,942	$	23.42
Granted	78,391	$	20.28
Vested	(48,016)	$	23.85
Forfeited	(5,290)	$	22.10
Outstanding, December 31, 2021	127,027	$	21.37

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, 2021, there was $1,498,000 total unrecognized compensation cost related to restricted stock, which is expected to be recognized over a weighted average period of 1.4 years.

In 2021 and 2020, the Corporation awarded shares of restricted stock under the Stock Incentive Plan, as follows:

	2021	2020
Time-based awards to independent directors	10,989	7,580
Time-based awards to employees	50,178	45,457
Performance-based awards to employees	17,224	17,903
Total	78,391	70,940

Time-based restricted stock awards granted under the Independent Directors Stock Incentive Plan in 2021 and 2020 vest over one-year terms. Time-based restricted stock awards granted to employees in 2021 and 2020 vest ratably over three-year terms, subject to continued employment and satisfactory job performance. Performance-based restricted stock awards granted in 2021 and 2020 vest ratably over three-year terms, with vesting contingent upon meeting conditions based on the Corporation’s earnings as specified in the agreements.

There were no stock options granted in 2021 or 2020. A summary of stock option activity is presented below:

	2021			2020
		Weighted			Weighted
		Average			Average
		Exercise			Exercise
	Shares	Price		Shares	Price
Outstanding, beginning of year	57,111	$	18.92	75,897	$	18.69
Granted	0			0
Exercised	(22,429)	$	18.96	(17,222)	$	18.25
Forfeited	(3,156)	$	19.20	(1,564)	$	15.06
Expired	(7,308)	$	15.06	0	$
Outstanding, end of year	24,218	$	20.01	57,111	$	18.92
Options exercisable at year-end	24,218	$	20.01	57,111	$	18.92
Weighted-average fair value of options forfeited		$	4.59		$	4.26

The weighted-average remaining contractual term of outstanding stock options at December 31, 2021 was 1.6 years. The aggregate intrinsic value of stock options outstanding was $148,000 at December 31, 2021. The total intrinsic value of options exercised was $97,000 in 2021 and $128,000 in 2020.

The Corporation has issued shares from treasury stock for almost all stock option exercises through December 31, 2021. Management does not anticipate that stock repurchases will be necessary to accommodate stock option exercises in 2022.

In January 2022, the Corporation awarded 66,405 shares of restricted stock under the Stock Incentive Plan and 9,588 shares of restricted stock under the Independent Directors Stock Incentive Plans. The January 2022 restricted stock awards under the Stock Incentive Plan vest ratably over three years. The 2022 restricted stock issued under the Independent Directors Stock Incentive Plan vests over one year. Total estimated stock-based compensation for 2022 is $1,600,000. The restricted stock awards made in January 2022 are not included in the tables above.

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INCOME TAXES

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

INCOME TAXES

14. INCOME TAXES

The net deferred tax asset at December 31, 2021 and 2020 represents the following temporary difference components:

	December 31,		December 31,
(In Thousands)	2021		2020
Deferred tax assets:
Allowance for loan losses	$	2,935	$	2,154
Purchase accounting adjustments on loans		1,621		1,930
Net operating loss carryforward		778		896
Operating leases liability		821		724
Other deferred tax assets		3,260		3,089
Total deferred tax assets		9,415		8,793
Deferred tax liabilities:
Unrealized holding gains on securities		1,278		3,104
Defined benefit plans - ASC 835		57		32
Bank premises and equipment		460		1,216
Core deposit intangibles		725		840
Right-of-use assets from operating leases		821		724
Other deferred tax liabilities		187		172
Total deferred tax liabilities		3,528		6,088
Deferred tax asset, net	$	5,887	$	2,705

The provision for income taxes includes the following:

(In Thousands)	2021		2020
Currently payable	$	8,386	$	4,230
Tax expense resulting from allocations of certain tax benefits to equity or as a reduction in other assets		128		121
Deferred		(1,381)		(361)
Total provision	$	7,133	$	3,990

A reconciliation of income tax at the statutory rate to the Corporation’s effective rate is as follows:

	2021			2020
(Dollars In Thousands)	Amount		%	Amount		%
Expected provision	$	7,914	21.0	$	4,875	21.0
Tax-exempt interest income		(921)	(2.4)		(808)	(3.5)
Increase in cash surrender value and other income from life insurance, net		(118)	(0.3)		(170)	(0.7)
ESOP dividends		(120)	(0.3)		(110)	(0.5)
State income tax, net of Federal benefit		375	1.0		172	0.7
Other, net		3	0.0		31	0.1
Effective income tax provision	$	7,133	18.9	$	3,990	17.2

In connection with the 2020 Covenant merger, the Corporation received a net operating loss (“NOL”) available to be carried forward against future federal taxable income of $4.6 million. Availability of the NOL does not expire; however, the amount that may be offset against taxable income is limited to approximately $563,000 per year and further limited annually to no more than 80% of taxable income without regard to the NOL. At December 31, 2021, the unused amount of the NOL is $3.7 million.

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 2018.

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RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2021

Notes to Financial Statements

RELATED PARTY TRANSACTIONS

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:

	Beginning		New				Other		Ending
(In Thousands)	Balance		Loans		Repayments		Changes		Balance
13 directors, 9 executive officers 2021	$	18,445	$	1,249	$	(6,034)	$	251	$	13,911
13 directors, 9 executive officers 2020	$	14,455	$	242	$	(2,150)	$	5,898	$	18,445

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 $10,124,000 at December 31, 2021 and $13,182,000 at December 31, 2020.

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OFF-BALANCE SHEET RISK

12 Months Ended

Dec. 31, 2021

OFF-BALANCE SHEET RISK

OFF-BALANCE SHEET RISK

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, 2021 and 2020 are as follows:

(In Thousands)	2021		2020
Commitments to extend credit	$	366,076	$	317,470
Standby letters of credit		10,079		9,107

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, 2021 and 2020.

Standby letters of credit as of December 31, 2021 expire as follows:

Year of Expiration	(In Thousands)
2022	$	10,021
2023		13
2024		20
2026		25
Total	$	10,079

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OPERATING LEASE COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2021

CONTINGENCIES

OPERATING LEASE COMMITMENTS AND CONTINGENCIES

17. OPERATING LEASE COMMITMENTS AND CONTINGENCIES

Operating Lease Commitments

Operating leases in which the Corporation is the lessee are recorded as operating lease Right of Use ("ROU") assets and operating lease liabilities, included in other assets and other liabilities, respectively, on the Consolidated Balance Sheets. The Corporation does not currently have any finance leases. Operating lease ROU assets represent the right to use an underlying asset during the lease term and operating lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and operating lease liabilities were recognized as of the date of adoption of ASU 2017-02 based on the present value of the remaining lease payments using a discount rate that represented the then Corporation’s incremental borrowing rate at the date of initial application.

Operating lease expense, which is comprised of amortization of the ROU assets and the implicit interest accreted on the operating lease liability, is recognized on a straight line basis over the remaining lease term of the operating lease, and is recorded in office occupancy expense in the Consolidated Statements of Income. The leases relate to Bank branches with remaining lease terms of generally 1 to 10 years.

The Corporation leases certain branch locations, office space and equipment. All leases are classified as operating leases. Leases with an initial term of 12 months or less are not recorded on the balance sheet and the related lease expense is recognized on a straight-line basis over the lease term.

Certain leases include options to renew, with renewal terms that can extend the lease term from one to eight years that are reasonably certain of being exercised. The discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate which corresponded with the remaining lease term as of January 1, 2019 for leases that existed at adoption and as of the lease commencement date for leases subsequently entered into after January 1, 2019. At December 31, 2021, discount rates ranged from 0.84% to 3.50% with a weighted-average discount rate of 1.90%. At December 31, 2021, the weighted-average remaining lease term was 4.8 years.

As shown in the table below, at December 31, 2021, right-of-use assets of $3,751,000 were included in other assets, and the related lease liabilities totaling the same amount were included in accrued interest and other liabilities, in the consolidated balance sheets. At December 31, 2020, right of use assets and the related liabilities totaled $3,446,000.

	December 31,		December 31,
(In Thousands)	2021		2020
Other assets	$	3,751	$	3,446
Other liabilities	$	3,751	$	3,446

In 2021 and 2020, operating lease expenses are included in the following line item of the consolidated statements of income:

(In Thousands)	2021		2020
Net occupancy and equipment expense	$	492	$	371
Total	$	492	$	371

A maturity analysis of the Corporation’s lease liabilities at December 31, 2021 is as follows:

(In Thousands)

Lease Payments Due

2022	$	540
2023		528
2024		521
2025		501
2026		438
Thereafter		1,524
Total lease payments		4,052
Discount on cash flows		(301)
Total lease liabilities	$	3,751

Litigation Matters

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.

Trust Department Tax Reporting Contingency

The Corporation has incurred operational losses from compliance oversight related to trust department tax preparation and administration activities that occurred prior to 2020. In 2020, the Corporation made changes in internal controls and personnel responsible for trust department tax administration activities. Management implemented the changes in internal controls and personnel in an effort to mitigate and prevent the likelihood of new instances of non-compliance from trust department tax administration activities. Losses related to trust department tax compliance matters totaled $164,000 in 2021 and $571,000 in 2020. These losses are included in other noninterest

expense in the consolidated statements of income. The balance of accrued interest and other liabilities in the consolidated balance sheets includes $465,000 at December 31, 2021 and $322,000 at December 31, 2020 related to specific tax compliance matters that have been identified; however, no estimate can be made of the amount of additional expenses that may be incurred related to these matters.

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REGULATORY MATTERS

12 Months Ended

Dec. 31, 2021

REGULATORY MATTERS

REGULATORY MATTERS

18. REGULATORY MATTERS

In August 2018, the Federal Reserve Board issued an interim final rule that expanded applicability of the Board’s small bank holding company policy statement. The interim final rule raised the policy statement’s asset threshold from $1 billion to $3 billion in total consolidated assets for a bank holding company or savings and loan holding company that: (1) is not engaged in significant nonbanking activities; (2) does not conduct significant off-balance sheet activities; and (3) does not have a material amount of debt or equity securities, other than trust-preferred securities, outstanding. The interim final rule provides that, if warranted for supervisory purposes, the Federal Reserve may exclude a company from the threshold increase. Management believes the Corporation meets the conditions of the Federal Reserve’s small bank holding company policy statement and is therefore excluded from consolidated capital requirements at December 31, 2021; however, C&N Bank remains subject to regulatory capital requirements administered by the federal banking agencies.

Details concerning capital ratios at December 31, 2021 and December 31, 2020 are presented below. Management believes, as of December 31, 2021, that C&N Bank meets all capital adequacy requirements to which it is subject and maintains a capital conservation buffer (described in more detail below) that allows the Bank to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. Further, as reflected in the table below, the Corporation’s and C&N Bank’s capital ratios at December 31, 2021 and December 31, 2020 exceed the Corporation’s Board policy threshold levels.

											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
(Dollars In Thousands)		Amount	Ratio		Amount	Ratio		Amount	Ratio		Amount	Ratio		Amount		Ratio
December 31, 2021:
Total capital to risk-weighted assets:
Consolidated	$	287,614	18.21	%	N/A	N/A		N/A	N/A		N/A	N/A		$	165,846	³10.5	%
C&N Bank		252,606	16.04	%	126,012	³8	%	165,390	³10.5	%	157,514	³10	%		165,390	³10.5	%
Tier 1 capital to risk-weighted assets:
Consolidated		240,433	15.22	%	N/A	N/A		N/A	N/A		N/A	N/A			134,256	³8.5	%
C&N Bank		238,434	15.14	%	94,509	³6	%	133,887	³8.5	%	126,012	³8	%		133,887	³8.5	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		240,433	15.22	%	N/A	N/A		N/A	N/A		N/A	N/A			110,564	³7	%
C&N Bank		238,434	15.14	%	70,881	³4.5	%	110,260	³7.0	%	102,384	³6.5	%		110,260	³7	%
Tier 1 capital to average assets:
Consolidated		240,433	10.53	%	N/A	N/A		N/A	N/A		N/A	N/A			182,683	³8	%
C&N Bank		238,434	10.52	%	90,688	³4	%	N/A	N/A		113,360	³5	%		181,376	³8	%
December 31, 2020:
Total capital to risk-weighted assets:
Consolidated	$	260,015	17.49	%	N/A	N/A		N/A	N/A		N/A	N/A		$	156,113	³10.5	%
C&N Bank		236,943	15.98	%	118,602	³8	%	155,665	³10.5	%	148,252	³10	%		155,665	³10.5	%
Tier 1 capital to risk-weighted assets:
Consolidated		231,577	15.58	%	N/A	N/A		N/A	N/A		N/A	N/A			126,377	³8.5	%
C&N Bank		225,058	15.18	%	88,951	³6	%	126,015	³8.5	%	118,602	³8	%		126,015	³8.5	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		231,577	15.58	%	N/A	N/A		N/A	N/A		N/A	N/A			104,075	³7	%
C&N Bank		225,058	15.18	%	66,714	³4.5	%	103,777	³7.0	%	96,364	³6.5	%		103,777	³7	%
Tier 1 capital to average assets:
Consolidated		231,577	10.34	%	N/A	N/A		N/A	N/A		N/A	N/A			179,206	³8	%
C&N Bank		225,058	10.12	%	88,959	³4	%	N/A	N/A		111,199	³5	%		177,919	³8	%

Federal regulatory authorities impose a capital rule providing that, to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization subject to the rule must hold a capital conservation buffer composed of common equity tier 1 capital above its minimum risk-based capital requirements. The buffer is

measured relative to risk-weighted assets. At December 31, 2021, the minimum risk-based capital ratios, and the capital ratios including the capital conservation buffer, are as follows:

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

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

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

At December 31, 2021, C&N Bank’s Capital Conservation Buffer, determined based on the minimum total capital ratio, was 8.04%.

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 $88,252,000 at December 31, 2021, 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 $23,856,000 at December 31, 2021.

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PARENT COMPANY ONLY

12 Months Ended

Dec. 31, 2021

PARENT COMPANY ONLY

PARENT COMPANY ONLY

19. PARENT COMPANY ONLY

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

CONDENSED BALANCE SHEET	Dec. 31,		Dec. 31,
(In Thousands)	2021		2020
ASSETS
Cash	$	33,518	$	7,246
Investment in subsidiaries:
Citizens & Northern Bank		298,797		292,455
Citizens & Northern Investment Corporation		13,085		12,959
Bucktail Life Insurance Company		3,825		3,804
Other assets		33		4
TOTAL ASSETS	$	349,258	$	316,468
LIABILITIES AND STOCKHOLDERS' EQUITY
Senior notes, net	$	14,701	$	0
Subordinated debt, net		33,009		16,553
Other liabilities		143		159
Stockholders' equity		301,405		299,756
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	349,258	$	316,468

CONDENSED INCOME STATEMENT
(In Thousands)	2021		2020
Dividends from Citizens & Northern Bank	$	20,200	$	38,507
Expenses		(1,691)		(1,488)
Income before equity in undistributed income (excess distributions) of subsidiaries		18,509		37,019
Equity in undistributed income (excess distributions) of subsidiaries		12,045		(17,797)
NET INCOME	$	30,554	$	19,222

CONDENSED STATEMENT OF CASH FLOWS
(In Thousands)	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	30,554	$	19,222
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of purchase accounting adjustment		(43)		(38)
Amortization of debt issuance costs		101		0
Equity in (undistributed income) excess distributions of subsidiaries		(12,045)		17,797
(Increase) decrease in other assets		(29)		105
(Decrease) increase in other liabilities		(16)		13
Net Cash Provided by Operating Activities		18,522		37,099
CASH FLOWS FROM INVESTING ACTIVITIES,
Net cash used in business combination		0		(21,837)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of senior notes and subordinated debt		39,100		0
Repayment of subordinated debt		(8,000)		0
Proceeds from sale of treasury stock		212		131
Purchase of treasury stock		(7,586)		(163)
Dividends paid		(15,976)		(14,469)
Net Cash Provided by (Used in) Financing Activities		7,750		(14,501)
INCREASE IN CASH AND CASH EQUIVALENTS		26,272		761
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		7,246		6,485
CASH AND CASH EQUIVALENTS, END OF YEAR	$	33,518	$	7,246
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Investment of net assets acquired in business combination in Citizens & Northern Bank	$	0	$	73,426
Common equity issued in business combination	$	0	$	41,429
Subordinated debt assumed in business combination	$	0	$	10,091
Other liabilities assumed in business combination	$	0	$	69
Interest paid	$	1,567	$	655

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SUMMARY OF QUARTERLY CONSOLIDATED FINANCIAL DATA (Unaudited)

12 Months Ended

Dec. 31, 2021

SUMMARY OF QUARTERLY CONSOLIDATED FINANCIAL DATA

SUMMARY OF QUARTERLY CONSOLIDATED FINANCIAL DATA

20. SUMMARY OF QUARTERLY CONSOLIDATED FINANCIAL DATA (Unaudited)

The following tables present summarized quarterly financial data for 2021 and 2020:

	2021 Quarter Ended
	March 31,		June 30,		Sept. 30,		Dec. 31,
(In Thousands Except Per Share Data) (Unaudited)	2021		2021		2021		2021
Interest income	$	21,754	$	20,428	$	21,073	$	21,246
Interest expense		1,671		1,747		1,614		1,530
Net interest income		20,083		18,681		19,459		19,716
Provision for loan losses		259		744		1,530		1,128
Net interest income after provision for loan losses		19,824		17,937		17,929		18,588
Noninterest income		6,782		6,300		6,359		6,416
Net gains (losses) on available-for-sale debt securities		0		2		23		(1)
Other noninterest expenses		15,709		15,399		15,346		16,018
Income before income tax provision		10,897		8,840		8,965		8,985
Income tax provision		2,110		1,780		1,566		1,677
Net income	$	8,787	$	7,060	$	7,399	$	7,308
Net income attributable to common shares	$	8,722	$	6,999	$	7,336	$	7,256
Net income per share – basic	$	0.55	$	0.44	$	0.47	$	0.46
Net income per share – diluted	$	0.55	$	0.44	$	0.47	$	0.46
	2020 Quarter Ended
	March 31,		June 30,		Sept. 30,		Dec. 31,
(In Thousands Except Per Share Data) (Unaudited)	2020		2020		2020		2020
Interest income	$	17,037	$	16,513	$	21,751	$	21,859
Interest expense		2,755		2,267		2,469		2,104
Net interest income		14,282		14,246		19,282		19,755
Provision (credit) for loan losses		1,528		(176)		1,941		620
Net interest income after provision (credit) for loan losses		12,754		14,422		17,341		19,135
Noninterest income		5,281		5,528		6,970		6,565
Net gains on available-for-sale debt securities		0		0		25		144
Loss on prepayment of borrowings		0		0		0		1,636
Merger-related expenses		141		983		6,402		182
Other expenses		12,912		12,274		14,648		15,775
Income before income tax provision		4,982		6,693		3,286		8,251
Income tax provision		816		1,255		438		1,481
Net income	$	4,166	$	5,438	$	2,848	$	6,770
Net income attributable to common shares	$	4,146	$	5,405	$	2,830	$	6,727
Net income per share – basic	$	0.30	$	0.39	$	0.18	$	0.43
Net income per share – diluted	$	0.30	$	0.39	$	0.18	$	0.43

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DERIVATIVE FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2021

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTS

21. DERIVATIVE FINANCIAL INSTRUMENTS

The Corporation is a party to derivative financial instruments. These financial instruments consist of interest rate swap agreements which contain master netting and collateral provisions designed to protect the party at risk.

Interest rate swaps with commercial loan banking customers were executed to facilitate their respective risk management strategies. Under the terms of these arrangements, the commercial banking customers effectively exchanged their floating interest rate exposures on loans into fixed interest rate exposures. Those interest rate swaps have been simultaneously economically hedged by offsetting interest rate swaps with a third party, such that the Corporation has effectively exchanged its fixed interest rate exposures for floating rate exposures. These derivatives are not designated as hedges and are not speculative. Rather, these derivatives result from a service provided to certain customers. As the interest rate swaps associated with this program do not meet the hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.

The aggregate notional amount of interest rate swaps was $123,094,000 at December 31, 2021 and $135,740,000 at December 31, 2020. The Corporation originated no interest rate swaps in 2021 or 2020. There were no gross amounts of interest rate swap-related assets and liabilities not offset in the consolidated balance sheets at December 31, 2021. The net impact on the consolidated statements of income from interest rate swaps was a reduction in interest income on loans of $1,347,000 in 2021 and $698,000 in 2020.

The table below presents the fair value of the Corporation’s derivative financial instruments as well as their classification on the consolidated balance sheets at December 31, 2021:

(In Thousands)	At December 31, 2021								At December 31, 2020
	Asset Derivatives				Liability Derivatives				Asset Derivatives				Liability Derivatives
	Notional		Fair		Notional		Fair		Notional		Fair		Notional		Fair
	Amount		Value (1)		Amount		Value (2)		Amount		Value (1)		Amount		Value (2)
Interest rate swap agreements	$	61,547	$	3,104	$	61,547	$	3,104	$	67,870	$	6,566	$	67,870	$	6,566

(1) Included in other assets in the consolidated balance sheets.

(2) Included in accrued interest and other liabilities in the consolidated balance sheets.

The Corporation’s agreement with its derivative counterparty provides that if the Corporation defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Corporation could also be declared in default on its derivative obligations. Further, if the Corporation were to fail to maintain its status as a well or adequately capitalized institution, then the counterparty could terminate the derivative positions and the Corporation would be required to settle its obligations under the agreements. Available-for-sale securities with a carrying value of $7,027,000 were pledged as collateral against the Corporation’s liability related to the interest rate swaps at December 31, 2021.

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FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2021

FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS

FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS

22. 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, 2021 and 2020, assets measured at fair value and the valuation methods used are as follows:

	December 31, 2021
	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, assets:
AVAILABLE-FOR-SALE DEBT SECURITIES:
Obligations of the U.S. Treasury	$	24,912	$	0	$	0	$	24,912
Obligations of U.S. Government agencies		0		24,091		0		24,091
Bank holding company debt securities		0		17,987		0		17,987
Obligations of states and political subdivisions:
Tax-exempt		0		148,028		0		148,028
Taxable		0		72,765		0		72,765
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		98,181		0		98,181
Residential collateralized mortgage obligations		0		44,247		0		44,247
Commercial mortgage-backed securities		0		87,468		0		87,468
Total available-for-sale debt securities		24,912		492,767		0		517,679
Marketable equity security		971		0		0		971
Servicing rights		0		0		2,329		2,329
Interest rate swap agreements, assets		0		3,104		0		3,104
Total recurring fair value measurements, assets	$	25,883	$	495,871	$	2,329	$	524,083
Recurring fair value measurements, liabilities,
Interest rate swap agreements, liabilities	$	0	$	3,104	$	0	$	3,104
Nonrecurring fair value measurements, assets:
Impaired loans, net	$	0	$	0	$	5,800	$	5,800
Foreclosed assets held for sale		0		0		684		684
Total nonrecurring fair value measurements, assets	$	0	$	0	$	6,484	$	6,484

	December 31, 2020
	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, assets:
AVAILABLE-FOR-SALE DEBT SECURITIES:
Obligations of the U.S. Treasury	$	12,182	$	0	$	0	$	12,182
Obligations of U.S. Government agencies		0		26,344		0		26,344
Obligations of states and political subdivisions:
Tax-exempt		0		122,401		0		122,401
Taxable		0		47,452		0		47,452
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		38,176		0		38,176
Residential collateralized mortgage obligations		0		57,467		0		57,467
Commercial mortgage-backed securities		0		45,310		0		45,310
Total available-for-sale debt securities		12,182		337,150		0		349,332
Marketable equity security		1,000		0		0		1,000
Servicing rights		0		0		1,689		1,689
Interest rate swap agreements, assets		0		6,566		0		6,566
Total recurring fair value measurements, assets	$	13,182	$	343,716	$	1,689	$	358,587
Recurring fair value measurements, liabilities,
Interest rate swap agreements, liabilities	$	0	$	6,566	$	0	$	6,566
Nonrecurring fair value measurements, assets:
Impaired loans, net	$	0	$	0	$	7,157	$	7,157
Foreclosed assets held for sale		0		0		1,338		1,338
Total nonrecurring fair value measurements, assets	$	0	$	0	$	8,495	$	8,495

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, 2021 and 2020 for servicing rights assets measured using unobservable inputs (Level 3 methodologies) on a recurring basis:

	Fair Value at
	12/31/2021		Valuation	Unobservable				Method or Value As of
Asset	(In Thousands)		Technique	Input(s)				12/31/2021
Servicing rights	$	2,329	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		209.00	%	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
	12/31/2020		Valuation	Unobservable				Method or Value As of
Asset	(In Thousands)		Technique	Input(s)				12/31/2020
Servicing rights	$	1,689	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		277.00	%	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,
	2021		2020
Servicing rights balance, beginning of period	$	1,689	$	1,277
Originations of servicing rights		708		988
Unrealized loss included in earnings		(68)		(576)
Servicing rights balance, end of period	$	2,329	$	1,689

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, 2021 and 2020, quantitative information regarding significant techniques and inputs used for nonrecurring fair value measurements using unobservable inputs (Level 3 methodologies) are as follows:

(Dollars In Thousands)									Weighted
			Valuation						Average
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	12/31/2021		12/31/2021		12/31/2021		Technique	Inputs	12/31/2021
Impaired loans:
Commercial:
Commercial loans secured by real estate	$	6,468	$	668	$	5,800	Sales comparison	Discount to appraised value	27	%
Commercial and industrial		72		72		0	Liquidation of assets	Discount to appraised value	100	%
Total impaired loans	$	6,540	$	740	$	5,800
Foreclosed assets held for sale - real estate:
Commercial real estate	$	428	$	0	$	428	Sales comparison	Discount to appraised value	50	%
Residential (1-4 family)		256		0		256	Sales comparison	Discount to appraised value	53	%
Total foreclosed assets held for sale	$	684	$	0	$	684

(Dollars In Thousands)									Weighted
			Valuation						Average
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	12/31/2020		12/31/2020		12/31/2020		Technique	Inputs	12/31/2020
Impaired loans:
Commercial:
Commercial loans secured by real estate	$	6,501	$	691	$	5,810	Sales comparison	Discount to appraised value	28	%
Commercial and industrial		72		72		0	Liquidation of assets	Discount to appraised value	100	%
Residential mortgage loans - first and junior liens		1,509		162		1,347	Sales comparison	Discount to appraised value	31	%
Total impaired loans	$	8,082	$	925	$	7,157
Foreclosed assets held for sale - real estate:
Commercial real estate	$	1,258	$	0	$	1,258	Sales comparison	Discount to appraised value	44	%
Residential (1-4 family)		80		0		80	Sales comparison	Discount to appraised value	36	%
Total foreclosed assets held for sale	$	1,338	$	0	$	1,338

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

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

(In Thousands)	Fair Value	December 31, 2021				December 31, 2020
	Hierarchy	Carrying		Fair		Carrying		Fair
	Level	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	95,848	$	95,848	$	96,017	$	96,017
Certificates of deposit	Level 2		9,100		9,142		5,840		6,054
Restricted equity securities (included in Other Assets)	Level 2		9,562		9,562		9,970		9,970
Loans, net	Level 3		1,551,312		1,573,955		1,632,824		1,646,207
Accrued interest receivable	Level 2		7,235		7,235		8,293		8,293
Financial liabilities:
Deposits with no stated maturity	Level 2		1,639,167		1,639,167		1,430,062		1,430,062
Time deposits	Level 2		285,893		286,962		390,407		393,566
Short-term borrowings	Level 2		1,803		1,603		20,022		19,974
Long-term borrowings	Level 2		28,042		28,347		54,608		55,723
Senior debt	Level 2		14,701		15,016		0		0
Subordinated debt	Level 2		33,009		33,171		16,553		16,680
Accrued interest payable	Level 2		205		205		548		548

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2021

Accounting Policies [Abstract]

BASIS OF CONSOLIDATION

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 subsidiaries, C&N Financial Services Corporation and Northern Tier Holding LLC. C&N Bank is the sole member of Northern Tier Holding LLC. All material intercompany balances and transactions have been eliminated in consolidation.

NATURE OF OPERATIONS

NATURE OF OPERATIONS – The Corporation’s principal office is located in Wellsboro, Pennsylvania. The majority of the Corporation’s operations are conducted in the Northern tier/Northcentral region of Pennsylvania and Southern tier of New York. As discussed further in Note 3, in 2020 the Corporation expanded its presence in Southeastern Pennsylvania by acquiring Covenant Financial, Inc. (“Covenant”). The Covenant acquisition follows the acquisition of Monument Bancorp, Inc. (“Monument”) in 2019, as well as the opening of offices in York and Lancaster, which are located in Southcentral Pennsylvania.

The Corporation provides banking and related services to individual and corporate customers. Lending products include commercial, mortgage 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 provides wealth management services through its trust department, 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

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 and (2) fair values of available-for-sale debt securities based on estimates from independent valuation services or from brokers.

INVESTMENT SECURITIES

INVESTMENT SECURITIES – Investment securities are accounted for as follows:

Available-for-sale debt securities – includes debt securities not classified as held-to-maturity or trading. 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. Premiums on non-amortizing available-for-sale debt securities are amortized using the level yield method to the earliest call date, while discounts on non-amortizing securities are amortized to the maturity date. Premiums and discounts on amortizing securities (mortgage-backed securities) are amortized 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 – Credit-related declines in the fair value of available-for-sale debt 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.

Marketable equity security – The marketable equity security is carried at fair value with unrealized gains and losses included in other noninterest income in the consolidated statements of income.

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.

DERIVATIVES

DERIVATIVES – The Corporation is a party to derivative financial instruments. These financial instruments consist of interest rate swap agreements which contain master netting and collateral provisions designed to protect the party at risk. Interest rate swaps with commercial banking customers were executed to facilitate their respective risk management strategies. Under the terms of these arrangements, the commercial banking customers effectively exchanged their floating interest rate exposures on loans into fixed interest rate exposures. Those interest rate swaps have been simultaneously economically hedged by offsetting interest rate swaps with a third party such that the Corporation has effectively exchanged its fixed interest rate exposures for floating rate exposures. These derivatives are not designated as hedges and are not speculative. Rather, these derivatives result from a service provided to certain customers. As the interest rate swaps associated with this program do not meet the hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. Interest differentials paid or received under the swap agreements are reflected as adjustments to interest and fees on loans. The notional amounts of the interest rate swaps are not exchanged and do not represent exposure to credit loss. The fair value of interest rate derivatives is included in the balance of other assets and other liabilities in the consolidated balance sheets.

LOANS HELD FOR SALE

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

LOANS RECEIVABLE

LOANS RECEIVABLE – Loans originated by the Corporation 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, multi-family residential 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.

PURCHASED LOANS

PURCHASED LOANS – The Corporation purchased loans in 2019 and 2020, some of which had, at the acquisition dates, shown evidence of credit deterioration since origination. The Corporation considers several factors as indicators that an acquired loan has evidence of deterioration in credit quality. These factors include loans 90 days or more past due, loans with an internal risk rating of substandard or below, loans classified as nonaccrual by the acquired institution and loans that have been previously modified in a troubled debt restructuring. The purchased loans that showed evidence of credit impairment were designated as the purchased credit impaired (“PCI”) loans and were recorded at fair value, with no carryover of the allowance for loan losses. The PCI loans acquired are secured by real estate and the fair value of each loan at the acquisition date was determined based on the estimated proceeds to be derived from selling the collateral, net of selling costs. The PCI loans were placed into nonaccrual status upon acquisition (and remained in nonaccrual status at December 31, 2021 and 2020) as the Corporation cannot reasonably estimate cash flows expected to be collected in order to compute yield on the loans.

The excess of cash flows expected at acquisition over the estimated fair value is referred to as the accretable yield and is recognized into interest income over the remaining life of the loan. The difference between contractually required payments at acquisition and the cash flows expected to be collected at acquisition is referred to as the nonaccretable yield. The nonaccretable yield represents estimated future credit losses expected to be incurred over the life of the loan. Subsequent decreases to the expected cash flows require us to evaluate the need for an allowance for credit losses. Subsequent improvements in expected cash flows result in the reversal of a corresponding amount of the nonaccretable yield which we then reclassify as accretable yield that is recognized into interest income over the remaining life of the loan using the interest method. Our evaluation of the amount of future cash flows that we expect to collect is performed in a similar manner as that used to determine our allowance for credit losses. Charge-offs of the principal amount on acquired loans would be first applied to the nonaccretable yield portion of the fair value adjustment.

ALLOWANCE FOR LOAN LOSSES

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, 2021 and 2020, 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 scope of loans reviewed individually each quarter to determine if they are impaired include all commercial loan relationships greater than $200,000 and any residential mortgage or consumer loans of $400,000 or more for which there is at least one extension of credit graded Special Mention, Substandard or Doubtful. Loans that are individually reviewed, but which are determined to not be impaired, are combined with all remaining loans that are not reviewed on a specific basis, and such loans are included within larger pools of loans based on similar risk and loss characteristics for purposes of determining the general component of the allowance. All loans classified as troubled debt restructurings (TDR) and all commercial loan relationships less than $200,000 or other loan relationships less than $400,000 in the aggregate, but with an estimated loss of $100,000 or more, are individually evaluated for impairment.

The 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 a loan: (1) is subject to a restructuring agreement, (2) has an outstanding balance of $400,000 or more and a credit grade of Special Mention, Substandard or Doubtful, or (3) has an estimated loss of $100,000 or more. The pools of loans for each loan segment are evaluated for loss exposure based upon average historical net charge-off rates, adjusted for qualitative factors. The time period used in determining the average historical net charge-off rate for each loan class is based on management’s evaluation of an appropriate time period that captures an historical loss experience relevant to the current portfolio. 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.

Purchased loans that did not show evidence of credit deterioration at the acquisition dates were initially recorded at fair value, including a discount for credit losses reflecting an estimate of the present value of credit losses based on market expectations. The general component of the allowance on purchased loans is evaluated separately from the rest of the portfolio.  This evaluation includes consideration of the qualitative risk factors described above as well as the remaining purchased discount.

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. Nonaccrual troubled debt restructurings may be restored to accrual status if the ultimate 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.

In March 2020, various regulatory agencies, including the Board of Governors of the Federal Reserve System and the Federal Deposit Insurance Corporation issued an interagency statement on loan modifications and reporting for financial institutions working with customers affected by COVID-19. The interagency statement was effective immediately and impacted accounting for loan modifications. The agencies confirmed with the staff of the FASB that short-term modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any relief, are not to be considered TDRs. Provisions of the CARES Act Section 4013 largely mirrored the provisions of the interagency statement, providing that modified loans were not to be considered TDRs if they were performing at December 31, 2019 and other considerations set forth in the interagency statements were met. Borrowers considered current are those that are less than 30 days past due on their contractual payments at the time a modification program is implemented or at December 31, 2019. Consistent with this guidance, the Corporation has not reported loans that were modified in response to COVID-19 as past due, nonaccrual or as TDRs.

BANK PREMISES AND EQUIPMENT

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

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

GOODWILL

GOODWILL – Goodwill represents the excess of the cost of acquisitions over the fair value of the net assets acquired. Goodwill is tested at least annually at December 31 for impairment, or more often if events or circumstances indicate there may be impairment. The Corporation has the option of performing a qualitative assessment to determine whether any further quantitative testing for impairment is necessary. The option of whether or not to perform a qualitative assessment is made annually.

CORE DEPOSIT INTANGIBLES

CORE DEPOSIT INTANGIBLES – Amortization of core deposit intangibles is calculated using an accelerated method. In determining amortization using the accelerated method for any given period, the amount of expected cash flows for that period that were used in determining the acquisition-date fair value is divided by the total amount of expected cash flows over the life of the asset. That percentage is multiplied by the initial carrying amount of the asset to arrive at amortization expense for that period. If the Corporation’s cash flow patterns differ significantly from the initial estimates, the amortization schedule would be adjusted prospectively.

SERVICING RIGHTS

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 Loan Servicing Fees, Net, 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

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

STOCK COMPENSATION PLANS – The Corporation’s stock-based compensation policy applies to all forms of stock-based compensation including stock options and restricted stock. 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.

TREASURY STOCK

TREASURY STOCK – Common stock held in treasury is accounted for using the cost method, which treats stock held in treasury as a reduction to total stockholders’ equity. The shares may be purchased in the open market or in privately negotiated transactions from time to time depending upon market conditions and other factors.

OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

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

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.

REVENUE RECOGNITION

REVENUE RECOGNITION – The Corporation generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in the determination of the amount and timing of revenue from contracts with customers.

Additional disclosures related to the Corporation’s largest sources of noninterest income within the consolidated statements of income from contracts with customers that are subject to Accounting Standards Codification (ASC) Topic 606 are as follows:

Trust and financial management revenue – C&N Bank’s trust department provides a wide range of financial services, including wealth management services for individuals, businesses and retirement funds, administration of 401(k) and other retirement plans, retirement planning, estate planning and estate settlement services. Trust clients are located primarily within the Corporation’s geographic markets. Assets held in a fiduciary capacity by C&N Bank are not the Corporation’s assets and are therefore not included in the consolidated balance sheets. The fair value of trust assets under management was approximately $1,232,919,000 at December 31, 2021 and $1,103,228,000 at December 31, 2020. Trust revenue is included within noninterest income in the consolidated statements of income.

Trust revenue is recorded on a cash basis, which is not materially different from the accrual basis. The majority (approximately 84%, based on annual 2021 results) of trust revenue is earned and collected monthly, with the amount determined based on a percentage of the fair value of the trust assets under management. Wealth management fees are contractually agreed with each customer, and fee levels vary based mainly on the size of assets under management. The services provided under such a contract represent a single performance obligation under the Accounting Standards Updates (ASUs) because it embodies a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. None of the contracts with trust customers provide for incentive-based fees. In addition to wealth management fees, trust revenue includes fees for provision of services, including employee benefit plan administration, tax return preparation and estate planning and settlement. Fees for such services are billed based on contractual arrangements or established fee schedules and are typically billed upon completion of providing such services. The costs of acquiring trust customers are incremental and recognized within noninterest expense in the consolidated statements of income.

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

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

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PER SHARE DATA (Tables)

12 Months Ended

Dec. 31, 2021

PER SHARE DATA

Schedule of Basic and Diluted earnings per share

(In Thousands, Except Share and Per Share Data)	Years Ended
	December 31,		December 31,
	2021		2020
Basic
Net income	$	30,554	$	19,222
Less: Dividends and undistributed earnings allocated to participating securities		(241)		(116)
Net income attributable to common shares	$	30,313	$	19,106
Basic weighted-average common shares outstanding		15,765,639		14,743,386
Basic earnings per common share (a)	$	1.92	$	1.30
Diluted
Net income attributable to common shares	$	30,313	$	19,106
Basic weighted-average common shares outstanding		15,765,639		14,743,386
Dilutive effect of potential common stock arising from stock options		6,316		3,662
Diluted weighted-average common shares outstanding		15,771,955		14,747,048
Diluted earnings per common share (a)	$	1.92	$	1.30
Weighted-average nonvested restricted shares outstanding		125,539		89,718

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

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COMPREHENSIVE INCOME (Tables)

12 Months Ended

Dec. 31, 2021

COMPREHENSIVE INCOME

Schedule of the components of other comprehensive income (loss), and the related tax effects

(In Thousands)	Before-Tax		Income Tax		Net-of-Tax
	Amount		Effect		Amount
2021
Available-for-sale debt securities:
Unrealized holding losses on available-for-sale debt securities	$	(8,669)	$	1,821	$	(6,848)
Reclassification adjustment for (gains) realized in income		(24)		5		(19)
Other comprehensive loss from available-for-sale debt securities		(8,693)		1,826		(6,867)
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses		140		(29)		111
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost		(17)		4		(13)
Other comprehensive income on unfunded retirement obligations		123		(25)		98
Total other comprehensive loss	$	(8,570)	$	1,801	$	(6,769)
(In Thousands)	Before-Tax		Income Tax		Net-of-Tax
	Amount		Effect		Amount
2020
Available-for-sale debt securities:
Unrealized holding gains on available-for-sale debt securities	$	10,504	$	(2,205)	$	8,299
Reclassification adjustment for (gains) realized in income		(169)		35		(134)
Other comprehensive income from available-for-sale debt securities		10,335		(2,170)		8,165
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses		(49)		11		(38)
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost		(29)		6		(23)
Other comprehensive loss on unfunded retirement obligations		(78)		17		(61)
Total other comprehensive income	$	10,257	$	(2,153)	$	8,104

Schedule of components of other comprehensive income (loss) and affected line item in the consolidated statements of income

	Affected Line Item in the
Description	Consolidated Statements of Income
Reclassification adjustment for (gains) realized in income (before-tax)	Realized gains on available-for-sale debt securities, net
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost (before-tax)	Other noninterest expense
Income tax effect	Income tax provision

Schedule of changes in the components of accumulated other comprehensive income (loss)

(In Thousands)					Accumulated
	Unrealized		Unfunded		Other
	Gains		Retirement		Comprehensive
	on Securities		Obligations		Income
2021
Balance, beginning of period	$	11,676	$	119	$	11,795
Other comprehensive loss during year ended December 31, 2021		(6,867)		98		(6,769)
Balance, end of period	$	4,809	$	217	$	5,026
2020
Balance, beginning of period	$	3,511	$	180	$	3,691
Other comprehensive income during year ended December 31, 2020		8,165		(61)		8,104
Balance, end of period	$	11,676	$	119	$	11,795

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CASH AND DUE FROM BANKS (Tables)

12 Months Ended

Dec. 31, 2021

CASH AND DUE FROM BANKS

Schedule of cash and due from banks

(In Thousands)	December 31,		December 31,
	2021		2020
Cash and cash equivalents	$	95,848	$	96,017
Certificates of deposit		9,100		5,840
Total cash and due from banks	$	104,948	$	101,857

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SECURITIES (Tables)

12 Months Ended

Dec. 31, 2021

SECURITIES

Schedule of amortized cost and fair value of available-for-sale debt securities

(In Thousands)	December 31, 2021
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding		Fair
	Cost		Gains		Losses		Value
Obligations of the U.S. Treasury	$	25,058	$	52	$	(198)	$	24,912
Obligations of U.S. Government agencies		23,936		563		(408)		24,091
Bank holding company debt securities		18,000		18		(31)		17,987
Obligations of states and political subdivisions:
Tax-exempt		143,427		4,749		(148)		148,028
Taxable		72,182		1,232		(649)		72,765
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		98,048		705		(572)		98,181
Residential collateralized mortgage obligations		44,015		437		(205)		44,247
Commercial mortgage-backed securities		86,926		1,548		(1,006)		87,468
Total available-for-sale debt securities	$	511,592	$	9,304	$	(3,217)	$	517,679

(In Thousands)	December 31, 2020
			Gross		Gross
			Unrealized		Unrealized
	Amortized		Holding		Holding		Fair
	Cost		Gains		Losses		Value
Obligations of the U.S. Treasury	$	12,184	$	0	$	(2)	$	12,182
Obligations of U.S. Government agencies		25,349		1,003		(8)		26,344
Obligations of states and political subdivisions:
Tax-exempt		116,427		6,000		(26)		122,401
Taxable		45,230		2,246		(24)		47,452
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		36,853		1,323		0		38,176
Residential collateralized mortgage obligations		56,048		1,428		(9)		57,467
Commercial mortgage-backed securities		42,461		2,849		0		45,310
Total available-for-sale debt securities	$	334,552	$	14,849	$	(69)	$	349,332

Schedule of gross unrealized losses and fair value of available-for-sale debt securities

December 31, 2021	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 the U.S. Treasury	$	18,886	$	(198)	$	0	$	0	$	18,886	$	(198)
Obligations of U.S. Government agencies		9,735		(264)		4,856		(144)		14,591		(408)
Bank holding company debt securities		12,969		(31)		0		0		12,969		(31)
Obligations of states and political subdivisions:
Tax-exempt		17,852		(141)		549		(7)		18,401		(148)
Taxable		31,261		(517)		3,277		(132)		34,538		(649)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		71,451		(572)		0		0		71,451		(572)
Residential collateralized mortgage obligations		15,117		(205)		0		0		15,117		(205)
Commercial mortgage-backed securities		52,867		(1,006)		0		0		52,867		(1,006)
Total temporarily impaired available-for-sale debt securities	$	230,138	$	(2,934)	$	8,682	$	(283)	$	238,820	$	(3,217)

December 31, 2020	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 the U.S. Treasury	$	9,159	$	(2)	$	0	$	0	$	9,159	$	(2)
Obligations of U.S. Government agencies		4,992		(8)		0		0		4,992		(8)
Obligations of states and political subdivisions:
Tax-exempt		3,811		(26)		0		0		3,811		(26)
Taxable		5,235		(24)		0		0		5,235		(24)
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies,
Residential collateralized mortgage obligations		2,861		(9)		0		0		2,861		(9)
Total temporarily impaired available-for-sale debt securities	$	26,058	$	(69)	$	0	$	0	$	26,058	$	(69)

Schedule of gross realized gains and losses from available-for-sale

(In Thousands)	2021		2020
Gross realized gains from sales	$	27	$	222
Gross realized losses from sales		(3)		(53)
Net realized gains	$	24	$	169
Income tax provision related to net realized gains	$	5	$	35

Schedule of the amortized cost and fair value of available-for-sale debt securities by contractual maturity

(In Thousands)	December 31, 2021
	Amortized		Fair
	Cost		Value
Due in one year or less	$	14,454	$	14,538
Due from one year through five years		58,561		59,116
Due from five years through ten years		79,532		81,073
Due after ten years		130,056		133,056
Sub-total		282,603		287,783
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		98,048		98,181
Residential collateralized mortgage obligations		44,015		44,247
Commercial mortgage-backed securities		86,926		87,468
Total	$	511,592	$	517,679

XML

LOANS (Tables)

12 Months Ended

Dec. 31, 2021

LOANS

Summary of loans outstanding

	December 31,		December 31,
	2021		2020
Commercial:
Commercial loans secured by real estate	$	569,840	$	531,810
Commercial and industrial		159,073		159,577
Paycheck Protection Program - 1st Draw		1,356		132,269
Paycheck Protection Program - 2nd Draw		25,508		0
Political subdivisions		81,301		53,221
Commercial construction and land		60,579		42,874
Loans secured by farmland		11,121		11,736
Multi-family (5 or more) residential		50,089		55,811
Agricultural loans		2,351		3,164
Other commercial loans		17,153		17,289
Total commercial		978,371		1,007,751
Residential mortgage:
Residential mortgage loans - first liens		483,629		532,947
Residential mortgage loans - junior liens		23,314		27,311
Home equity lines of credit		39,252		39,301
1-4 Family residential construction		23,151		20,613
Total residential mortgage		569,346		620,172
Consumer		17,132		16,286
Total		1,564,849		1,644,209
Less: allowance for loan losses		(13,537)		(11,385)
Loans, net	$	1,551,312	$	1,632,824

Schedule of adjustments to the initial market rate and credit fair value adjustments recognized

(In Thousands)	Year Ended
	December 31,		December 31,
	2021		2020
Market Rate Adjustment
Adjustments to gross amortized cost of loans at beginning of period	$	718	$	(1,415)
Market rate adjustment recorded in acquisition		0		2,909
Amortization recognized in interest income		(1,355)		(776)
Adjustments to gross amortized cost of loans at end of period	$	(637)	$	718
Credit Adjustment on Non-impaired Loans
Adjustments to gross amortized cost of loans at beginning of period	$	(5,979)	$	(1,216)
Credit adjustment recorded in acquisition		0		(7,219)
Accretion recognized in interest income		2,644		2,456
Adjustments to gross amortized cost of loans at end of period	$	(3,335)	$	(5,979)

Schedule of PCI loans

(In Thousands)	December 31,		December 31,
	2021		2020
Outstanding balance	$	9,802	$	10,316
Carrying amount		6,558		6,841

Schedule of transactions within the allowance for loan losses

	December 31,								December 31,
Year Ended December 31, 2021	2020						Provision		2021
(In Thousands)	Balance		Charge-offs		Recoveries		(Credit)		Balance
Allowance for Loan Losses:
Commercial:
Commercial loans secured by real estate	$	3,051	$	0	$	2	$	1,352	$	4,405
Commercial and industrial		2,245		(1,464)		20		1,922		2,723
Commercial construction and land		454		0		0		183		637
Loans secured by farmland		120		0		0		(5)		115
Multi-family (5 or more) residential		236		0		0		(21)		215
Agricultural loans		34		0		0		(9)		25
Other commercial loans		168		0		0		5		173
Total commercial		6,308		(1,464)		22		3,427		8,293
Residential mortgage:
Residential mortgage loans - first liens		3,524		(11)		4		133		3,650
Residential mortgage loans - junior liens		349		0		0		(165)		184
Home equity lines of credit		281		0		2		19		302
1-4 Family residential construction		99		0		0		103		202
Total residential mortgage		4,253		(11)		6		90		4,338
Consumer		239		(100)		38		58		235
Unallocated		585		0		0		86		671
Total Allowance for Loan Losses	$	11,385	$	(1,575)	$	66	$	3,661	$	13,537

	December 31,								December 31,
Year Ended December 31, 2020	2019						Provision		2020
(In Thousands)	Balance		Charge-offs		Recoveries		(Credit)		Balance
Allowance for Loan Losses:
Commercial:
Commercial loans secured by real estate	$	1,921	$	0	$	0	$	1,130	$	3,051
Commercial and industrial		1,391		(2,236)		16		3,074		2,245
Commercial construction and land		966		(107)		0		(405)		454
Loans secured by farmland		158		0		0		(38)		120
Multi-family (5 or more) residential		156		0		0		80		236
Agricultural loans		41		0		0		(7)		34
Other commercial loans		155		0		0		13		168
Total commercial		4,788		(2,343)		16		3,847		6,308
Residential mortgage:
Residential mortgage loans - first liens		3,405		0		39		80		3,524
Residential mortgage loans - junior liens		384		0		1		(36)		349
Home equity lines of credit		276		0		4		1		281
1-4 Family residential construction		117		0		0		(18)		99
Total residential mortgage		4,182		0		44		27		4,253
Consumer		281		(122)		41		39		239
Unallocated		585		0		0		0		585
Total Allowance for Loan Losses	$	9,836	$	(2,465)	$	101	$	3,913	$	11,385

Schedule of aggregate credit quality classification of outstanding loans by risk

December 31, 2021									Purchased
(In Thousands)			Special						Credit
	Pass		Mention		Substandard		Doubtful		Impaired		Total
Commercial:
Commercial loans secured by real estate	$	538,966	$	10,510	$	16,220	$	0	$	4,144	$	569,840
Commercial and Industrial		142,775		10,841		4,694		0		763		159,073
Paycheck Protection Program - 1st Draw		1,356		0		0		0		0		1,356
Paycheck Protection Program - 2nd Draw		25,508		0		0		0		0		25,508
Political subdivisions		81,301		0		0		0		0		81,301
Commercial construction and land		59,816		715		48		0		0		60,579
Loans secured by farmland		10,011		186		924		0		0		11,121
Multi-family (5 or more) residential		47,638		0		873		0		1,578		50,089
Agricultural loans		1,802		0		549		0		0		2,351
Other commercial loans		17,150		3		0		0		0		17,153
Total commercial		926,323		22,255		23,308		0		6,485		978,371
Residential Mortgage:
Residential mortgage loans - first liens		469,044		7,981		6,534		0		70		483,629
Residential mortgage loans - junior liens		22,914		114		283		0		3		23,314
Home equity lines of credit		38,652		59		541		0		0		39,252
1-4 Family residential construction		23,151		0		0		0		0		23,151
Total residential mortgage		553,761		8,154		7,358		0		73		569,346
Consumer		17,092		0		40		0		0		17,132
Totals	$	1,497,176	$	30,409	$	30,706	$	0	$	6,558	$	1,564,849

December 31, 2020									Purchased
(In Thousands)			Special						Credit
	Pass		Mention		Substandard		Doubtful		Impaired		Total
Commercial:
Commercial loans secured by real estate	$	494,876	$	17,374	$	15,262	$	0	$	4,298	$	531,810
Commercial and Industrial		143,500		8,025		7,268		0		784		159,577
Paycheck Protection Program - 1st Draw		132,269		0		0		0		0		132,269
Political subdivisions		53,221		0		0		0		0		53,221
Commercial construction and land		42,110		715		49		0		0		42,874
Loans secured by farmland		10,473		405		858		0		0		11,736
Multi-family (5 or more) residential		50,563		2,405		1,229		0		1,614		55,811
Agricultural loans		2,569		0		595		0		0		3,164
Other commercial loans		17,289		0		0		0		0		17,289
Total commercial		946,870		28,924		25,261		0		6,696		1,007,751
Residential Mortgage:
Residential Mortgage loans - first liens		516,685		6,192		9,994		0		76		532,947
Residential Mortgage loans - junior liens		26,480		141		621		0		69		27,311
Home equity lines of credit		38,529		59		713		0		0		39,301
1-4 Family residential construction		20,613		0		0		0		0		20,613
Total residential mortgage		602,307		6,392		11,328		0		145		620,172
Consumer		16,172		0		114		0		0		16,286
Totals	$	1,565,349	$	35,316	$	36,703	$	0	$	6,841	$	1,644,209

Summary of loan balances and the related allowance for loan losses

December 31, 2021	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Commercial:
Commercial loans secured by real estate	$	10,926	$	558,914	$	569,840	$	669	$	3,736	$	4,405
Commercial and industrial		2,503		156,570		159,073		71		2,652		2,723
Paycheck Protection Program - 1st Draw		0		1,356		1,356		0		0		0
Paycheck Protection Program - 2nd Draw		0		25,508		25,508		0		0		0
Political subdivisions		0		81,301		81,301		0		0		0
Commercial construction and land		0		60,579		60,579		0		637		637
Loans secured by farmland		83		11,038		11,121		0		115		115
Multi-family (5 or more) residential		1,578		48,511		50,089		0		215		215
Agricultural loans		0		2,351		2,351		0		25		25
Other commercial loans		0		17,153		17,153		0		173		173
Total commercial		15,090		963,281		978,371		740		7,553		8,293
Residential mortgage:
Residential mortgage loans - first liens		630		482,999		483,629		0		3,650		3,650
Residential mortgage loans - junior liens		14		23,300		23,314		0		184		184
Home equity lines of credit		0		39,252		39,252		0		302		302
1-4 Family residential construction		0		23,151		23,151		0		202		202
Total residential mortgage		644		568,702		569,346		0		4,338		4,338
Consumer		0		17,132		17,132		0		235		235
Unallocated												671
Total	$	15,734	$	1,549,115	$	1,564,849	$	740	$	12,126	$	13,537

December 31, 2020	Loans:						Allowance for Loan Losses:
(In Thousands)
	Individually		Collectively				Individually		Collectively
	Evaluated		Evaluated		Totals		Evaluated		Evaluated		Totals
Commercial:
Commercial loans secured by real estate	$	11,962	$	519,848	$	531,810	$	692	$	2,359	$	3,051
Commercial and industrial		1,359		158,218		159,577		71		2,174		2,245
Paycheck Protection Program - 1st Draw		0		132,269		132,269		0		0		0
Political subdivisions		0		53,221		53,221		0		0		0
Commercial construction and land		0		42,874		42,874		0		454		454
Loans secured by farmland		84		11,652		11,736		0		120		120
Multi-family (5 or more) residential		1,614		54,197		55,811		0		236		236
Agricultural loans		0		3,164		3,164		0		34		34
Other commercial loans		0		17,289		17,289		0		168		168
Total commercial		15,019		992,732		1,007,751		763		5,545		6,308
Residential mortgage:
Residential mortgage loans - first liens		2,385		530,562		532,947		9		3,515		3,524
Residential mortgage loans - junior liens		414		26,897		27,311		153		196		349
Home equity lines of credit		0		39,301		39,301		0		281		281
1-4 Family residential construction		0		20,613		20,613		0		99		99
Total residential mortgage		2,799		617,373		620,172		162		4,091		4,253
Consumer		0		16,286		16,286		0		239		239
Unallocated												585
Total	$	17,818	$	1,626,391	$	1,644,209	$	925	$	9,875	$	11,385

Summary of information related to impaired loans

(In Thousands)	December 31, 2021						December 31, 2020
	Unpaid						Unpaid
	Principal		Recorded		Related		Principal		Recorded		Related
	Balance		Investment		Allowance		Balance		Investment		Allowance
With no related allowance recorded:
Commercial loans secured by real estate	$	6,600	$	4,458	$	0	$	7,168	$	5,398	$	0
Commercial and industrial		5,213		2,431		0		1,781		1,287		0
Residential mortgage loans - first liens		656		630		0		1,248		1,248		0
Residential mortgage loans - junior liens		124		14		0		160		105		0
Loans secured by farmland		83		83		0		84		84		0
Multi-family (5 or more) residential		2,734		1,578		0		2,770		1,614		0
Total with no related allowance recorded		15,410		9,194		0		13,211		9,736		0
With a related allowance recorded:
Commercial loans secured by real estate		6,468		6,468		668		6,501		6,501		691
Commercial and industrial		72		72		72		72		72		72
Residential mortgage loans - first liens		0		0		0		1,200		1,200		9
Residential mortgage loans - junior liens		0		0		0		309		309		153
Total with a related allowance recorded		6,540		6,540		740		8,082		8,082		925
Total	$	21,950	$	15,734	$	740	$	21,293	$	17,818	$	925

Schedule of average balance of impaired loans and interest income recognized on impaired loans

(In Thousands)					Interest Income Recognized on
	Average Investment in				on Impaired Loans
	Impaired Loans				on a Cash Basis
	Year Ended December 31,				Year Ended December 31,
	2021		2020		2021		2020
Commercial:
Commercial loans secured by real estate	$	11,617	$	5,266	$	557	$	258
Commercial and industrial		2,636		2,542		34		34
Commercial construction and land		48		521		3		15
Loans secured by farmland		84		319		1		27
Multi-family (5 or more) residential		1,583		202		133		0
Agricultural loans		67		76		4		4
Other commercial loans		0		18		0		1
Total commercial		16,035		8,944		732		339
Residential mortgage:
Residential mortgage loans - first lien		1,647		1,853		78		116
Residential mortgage loans - junior lien		361		392		11		22
Home equity lines of credit		0		57		0		3
Total residential mortgage		2,008		2,302		89		141
Total	$	18,043	$	11,246	$	821	$	480

Schedule of breakdown by portfolio segment and class of non accrual loans

(In Thousands)	December 31, 2021				December 31, 2020
	Past Due				Past Due
	90+ Days and				90+ Days and
	Accruing		Nonaccrual		Accruing		Nonaccrual
Commercial:
Commercial loans secured by real estate	$	738	$	10,885	$	395	$	11,550
Commercial and industrial		30		2,299		142		970
Commercial construction and land		0		48		0		49
Loans secured by farmland		28		83		188		84
Multi-family (5 or more) residential		0		1,578		0		1,614
Agricultural loans		65		0		0		0
Other commercial		0		0		71		0
Total commercial		861		14,893		796		14,267
Residential mortgage:
Residential mortgage loans - first liens		1,144		4,005		838		6,387
Residential mortgage loans - junior liens		69		3		52		378
Home equity lines of credit		102		82		233		299
Total residential mortgage		1,315		4,090		1,123		7,064
Consumer		43		16		56		85
Totals	$	2,219	$	18,999	$	1,975	$	21,416

Summary of the contractual aging of loans

(In Thousands)	As of December 31, 2021								As of December 31, 2020
	Current &								Current &
	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
Commercial:
Commercial loans secured by real estate	$	563,658	$	762	$	5,420	$	569,840	$	529,998	$	66	$	1,746	$	531,810
Commercial and industrial		158,188		72		813		159,073		158,523		55		999		159,577
Paycheck Protection Program - 1st Draw		1,339		17		0		1,356		132,269		0		0		132,269
Paycheck Protection Program - 2nd Draw		25,508		0		0		25,508		0		0		0		0
Political subdivisions		81,301		0		0		81,301		53,221		0		0		53,221
Commercial construction and land		60,509		70		0		60,579		42,590		284		0		42,874
Loans secured by farmland		11,010		0		111		11,121		11,419		95		222		11,736
Multi-family (5 or more) residential		48,532		0		1,557		50,089		53,860		1,951		0		55,811
Agricultural loans		2,279		7		65		2,351		3,091		2		71		3,164
Other commercial loans		17,153		0		0		17,153		17,289		0		0		17,289
Total commercial		969,477		928		7,966		978,371		1,002,260		2,453		3,038		1,007,751
Residential mortgage:
Residential mortgage loans - first liens		475,637		5,038		2,954		483,629		523,191		5,703		4,053		532,947
Residential mortgage loans - junior liens		23,229		16		69		23,314		27,009		111		191		27,311
Home equity lines of credit		38,830		279		143		39,252		38,919		101		281		39,301
1-4 Family residential construction		23,151		0		0		23,151		20,457		156		0		20,613
Total residential mortgage		560,847		5,333		3,166		569,346		609,576		6,071		4,525		620,172
Consumer		17,001		72		59		17,132		16,063		83		140		16,286
Totals	$	1,547,325	$	6,333	$	11,191	$	1,564,849	$	1,627,899	$	8,607	$	7,703	$	1,644,209

Summary of the contractual aging of nonaccrual loans

(In Thousands)	Current &
	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Total
December 31, 2021 Nonaccrual Totals	$	8,800	$	1,227	$	8,972	$	18,999
December 31, 2020 Nonaccrual Totals	$	12,999	$	2,689	$	5,728	$	21,416

Summary of troubled debt restructurings

(In Thousands)	Current &
	Past Due		Past Due		Past Due
	Less than		30-89		90+
	30 Days		Days		Days		Nonaccrual		Total
December 31, 2021 Totals	$	248	$	40	$	65	$	5,452	$	5,805
December 31, 2020 Totals	$	166	$	0	$	418	$	6,867	$	7,451

Schedule of loan modifications considered as TDRs

	2021			2020
	Number			Number
	of	Recorded		of	Recorded
(Balances in Thousands)	Loans	Investment		Loans	Investment
Commercial loans secured by real estate	1	$	3,405	1	$	240
Total	1	$	3,405	1	$	240

Schedule of carrying amount of foreclosed residential real estate properties

(In Thousands)	December 31,		December 31,
	2021		2020
Foreclosed residential real estate	$	256	$	80

Schedule of mortgage loans secured by residential real properties

(In Thousands)	December 31,		December 31,
	2021		2020
Residential real estate in process of foreclosure	$	1,260	$	1,246

Troubled Debt Restructuring

LOANS

Summary of troubled debt restructurings

(Balances in Thousands)	2021			2020
		Post-			Post-
	Number	Modification		Number	Modification
	of	Recorded		of	Recorded
	Loans	Investment		Loans	Investment
Residential mortgage - first liens:
Reduced monthly payments and extended maturity date	1	$	12	0	$	0
Reduced monthly payments for a fifteen-month period	1		116	0		0
Residential mortgage - junior liens,
New loan at lower than risk-adjusted market rate to borrower from whom short sale of other collateral was accepted	0		0	1		30
Home equity lines of credit:
Reduced monthly payments and extended maturity date	1		24	0		0
Reduced monthly payments for an eighteen-month period	1		70	0		0
Commercial loans secured by real estate:
Interest only payments for a nine-month period	0		0	1		240
Principal and interest payment deferral non-COVID related	0		0	2		4,831
Multi-family (5 or more) residential,
Principal and interest payment deferral non-COVID related	0		0	3		2,170
Total	4	$	222	7	$	7,271

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BANK PREMISES AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2021

Notes Tables

Schedule of bank premises and equipment

(In Thousands)	December 31,
	2021		2020
Land	$	3,623	$	3,826
Buildings and improvements		32,606		33,058
Furniture and equipment		15,162		15,235
Construction in progress		835		8
Total		52,226		52,127
Less: accumulated depreciation		(31,543)		(30,601)
Net	$	20,683	$	21,526

Schedule of depreciation expense in consolidated statements of income

(In Thousands)	2021		2020
Net occupancy and equipment expense	$	1,723	$	1,595
Data processing and telecommunications expense		407		386
Total	$	2,130	$	1,981

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GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)

12 Months Ended

Dec. 31, 2021

GOODWILL AND OTHER INTANGIBLE ASSETS

Schedule of core deposit intangibles

(In Thousands)	December 31,
	2021		2020
Gross amount	$	6,639	$	6,639
Accumulated amortization		(3,323)		(2,788)
Net	$	3,316	$	3,851

Schedule of amortization expense related to core deposit intangibles is included in other noninterest expense in the consolidated statements of income

(In Thousands)	Year Ended
	December 31,		December 31,
	2021		2020
Amortization expense	$	535	$	540

Schedule of amortization expense to be recognized in each of the ensuing five years

(In Thousands)
2022	$	439
2023		408
2024		390
2025		424
2026		396

Schedule of changes in the carrying amount of goodwill

(In Thousands)	Year Ended
	December 31,		December 31,
	2021		2020
Balance, beginning of period	$	52,505	$	28,388
Goodwill arising in business combination		0		24,117
Balance, end of period	$	52,505	$	52,505

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DEPOSITS (Tables)

12 Months Ended

Dec. 31, 2021

Notes Tables

Scheduled maturities of time deposits

(In Thousands)
2022	$	163,170
2023		80,711
2024		22,224
2025		11,963
2026		7,825
Total	$	285,893

Schedule of remaining maturities of time deposits in excess of $250,000

(In Thousands)
Three months or less	$	15,981
Over 3 months through 12 months		32,648
Over 1 year through 3 years		25,438
Over 3 years		1,308
Total	$	75,375

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BORROWED FUNDS (Tables)

12 Months Ended

Dec. 31, 2021

BORROWED FUNDS

Schedule of short term borrowings

(In Thousands)	December 31,		December 31,
	2021		2020
FHLB-Pittsburgh borrowings	$	0	$	18,066
Customer repurchase agreements		1,803		1,956
Total short-term borrowings	$	1,803	$	20,022

Schedule of long term borrowings

(In Thousands)	December 31,		December 31,
	2021		2020
Loans matured in 2021	$	0	$	26,098
Loans maturing in 2022 with a weighted-average rate of 0.60%		15,452		15,682
Loans maturing in 2023 with a weighted-average rate of 0.73%		7,119		7,224
Loan maturing in 2024 with a rate of 0.75%		5,099		5,137
Loan maturing in 2025 with a rate of 4.91%		372		467
Total long-term FHLB-Pittsburgh borrowings	$	28,042	$	54,608

Schedule of outstanding senior notes

(In Thousands)	December 31,		December 31,
	2021		2020
Senior Notes with an aggregate par value of $15,000,000; bearing interest at 2.75% with an effective interest rate of 3.23%; maturing in June 2026	$	14,701	$	0
Total carrying value	$	14,701	$	0

Schedule of outstanding subordinated debt

(In Thousands)	December 31,		December 31,
	2021		2020
Agreements with an aggregate par value of $8,000,000; bearing interest at 6.25% with an effective interest rate of 5.49%; redeemed at par in June 2021	$	0	$	8,027
Agreements with an aggregate par value of $6,500,000; bearing interest at 6.50%; maturing in April 2027 and redeemable at par in April 2022		6,500		6,500
Agreement with a par value of $2,000,000; bearing interest at 6.50% with an effective interest rate of 5.60%; maturing in July 2027 and redeemable at par in July 2022		2,008		2,026
Agreements with a par value of $25,000,000; bearing interest at 3.25% with an effective interest rate of 3.74%; maturing in June 2031 and redeemable at par in June 2026		24,501		0
Total carrying value	$	33,009	$	16,553

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EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS (Tables)

12 Months Ended

Dec. 31, 2021

Notes Tables

Schedule of funded status of the defined benefit plans

	Pension				Postretirement
(In Thousands)	2021		2020		2021		2020
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year	$	1,101	$	976	$	1,347	$	1,326
Service cost		0		0		63		46
Interest cost		20		23		33		39
Plan participants' contributions		0		0		148		185
Actuarial loss (gain)		12		108		(65)		11
Benefits paid		(5)		(6)		(229)		(260)
Benefit obligation at end of year	$	1,128	$	1,101	$	1,297	$	1,347
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year	$	1,062	$	971	$	0	$	0
Actual return on plan assets		118		97		0		0
Employer contribution		0		0		81		75
Plan participants' contributions		0		0		148		185
Benefits paid		(5)		(6)		(229)		(260)
Fair value of plan assets at end of year	$	1,175	$	1,062	$	0	$	0
Funded status at end of year	$	47	$	(39)	$	(1,297)	$	(1,347)

Schedule of pension plan and postretirement plan liability amounts were recognized in the consolidated balance sheets

	Pension				Postretirement
(In Thousands)	2021		2020		2021		2020
Other assets	$	47	$	0	$	0	$	0
Accrued interest and other liabilities		0		39		1,297		1,347

Summary of items not yet recognized as a component of net periodic benefit cost

	Pension				Postretirement
(In Thousands)	2021		2020		2021		2020
Prior service cost	$	0	$	0	$	(186)	$	(217)
Net actuarial loss (gain)		182		277		(271)		(211)
Total	$	182	$	277	$	(457)	$	(428)

Summary of components of net periodic benefit costs from defined benefit plans

	Pension				Postretirement
(In Thousands)	2021		2020		2021		2020
Service cost	$	0	$	0	$	63	$	46
Interest cost		20		23		33		39
Expected return on plan assets		(30)		(27)		0		0
Amortization of prior service cost		0		0		(31)		(31)
Recognized net actuarial loss (gain)		19		16		(5)		(14)
Total net periodic benefit cost	$	9	$	12	$	60	$	40

Schedule of weighted-average assumptions used to determine net periodic benefit cost

	Pension				Postretirement
	2021		2020		2021		2020
Discount rate	2.30	%	3.10	%	2.50	%	3.25	%
Expected return on plan assets	4.81	%	4.99	%	N/A		N/A
Rate of compensation increase	N/A		N/A		N/A		N/A

	Pension				Postretirement
	2021		2020		2021		2020
Discount rate	2.60	%	2.30	%	3.00	%	2.50	%
Rate of compensation increase	N/A		N/A		N/A		N/A

Schedule of Estimated future benefit payments

(In Thousands)	Pension		Postretirement
2022	$	542	$	84
2023		187		81
2024		8		83
2025		8		85
2026		14		95
2027-2031		360		428

Schedule of fair values of pension plan assets

	2021		2020
Mutual funds invested principally in:
Cash and cash equivalents	3	%	2	%
Debt securities	38	%	36	%
Equity securities	51	%	51	%
Alternative funds	8	%	11	%
Total	100	%	100	%

Schedule of stock-based compensation expense

(In Thousands)	2021		2020
Restricted stock	$	1,214	$	1,050
Stock options		0		0
Total	$	1,214	$	1,050

Summary of non-vested restricted stock activity

		Weighted
		Average
	Number	Grant Date
	of Shares	Fair Value
Outstanding, December 31, 2020	101,942	$	23.42
Granted	78,391	$	20.28
Vested	(48,016)	$	23.85
Forfeited	(5,290)	$	22.10
Outstanding, December 31, 2021	127,027	$	21.37

Summary of stock option activity

	2021			2020
		Weighted			Weighted
		Average			Average
		Exercise			Exercise
	Shares	Price		Shares	Price
Outstanding, beginning of year	57,111	$	18.92	75,897	$	18.69
Granted	0			0
Exercised	(22,429)	$	18.96	(17,222)	$	18.25
Forfeited	(3,156)	$	19.20	(1,564)	$	15.06
Expired	(7,308)	$	15.06	0	$
Outstanding, end of year	24,218	$	20.01	57,111	$	18.92
Options exercisable at year-end	24,218	$	20.01	57,111	$	18.92
Weighted-average fair value of options forfeited		$	4.59		$	4.26

Restricted Stock

Notes Tables

Summary of awarded shares of restricted stock under the Stock Incentive Plan,

	2021	2020
Time-based awards to independent directors	10,989	7,580
Time-based awards to employees	50,178	45,457
Performance-based awards to employees	17,224	17,903
Total	78,391	70,940

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2021

Notes Tables

Schedule of deferred tax assets and deferred tax liabilities

	December 31,		December 31,
(In Thousands)	2021		2020
Deferred tax assets:
Allowance for loan losses	$	2,935	$	2,154
Purchase accounting adjustments on loans		1,621		1,930
Net operating loss carryforward		778		896
Operating leases liability		821		724
Other deferred tax assets		3,260		3,089
Total deferred tax assets		9,415		8,793
Deferred tax liabilities:
Unrealized holding gains on securities		1,278		3,104
Defined benefit plans - ASC 835		57		32
Bank premises and equipment		460		1,216
Core deposit intangibles		725		840
Right-of-use assets from operating leases		821		724
Other deferred tax liabilities		187		172
Total deferred tax liabilities		3,528		6,088
Deferred tax asset, net	$	5,887	$	2,705

Schedule of components of income tax expense

(In Thousands)	2021		2020
Currently payable	$	8,386	$	4,230
Tax expense resulting from allocations of certain tax benefits to equity or as a reduction in other assets		128		121
Deferred		(1,381)		(361)
Total provision	$	7,133	$	3,990

Schedule of reconciliation of income tax

	2021			2020
(Dollars In Thousands)	Amount		%	Amount		%
Expected provision	$	7,914	21.0	$	4,875	21.0
Tax-exempt interest income		(921)	(2.4)		(808)	(3.5)
Increase in cash surrender value and other income from life insurance, net		(118)	(0.3)		(170)	(0.7)
ESOP dividends		(120)	(0.3)		(110)	(0.5)
State income tax, net of Federal benefit		375	1.0		172	0.7
Other, net		3	0.0		31	0.1
Effective income tax provision	$	7,133	18.9	$	3,990	17.2

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RELATED PARTY TRANSACTIONS (Tables)

12 Months Ended

Dec. 31, 2021

Notes Tables

Schedule of loans to executive officers and directors and associates

	Beginning		New				Other		Ending
(In Thousands)	Balance		Loans		Repayments		Changes		Balance
13 directors, 9 executive officers 2021	$	18,445	$	1,249	$	(6,034)	$	251	$	13,911
13 directors, 9 executive officers 2020	$	14,455	$	242	$	(2,150)	$	5,898	$	18,445

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OFF-BALANCE SHEET RISK (Tables)

12 Months Ended

Dec. 31, 2021

Notes Tables

Schedule of financial instruments whose contract amounts represent credit risk

(In Thousands)	2021		2020
Commitments to extend credit	$	366,076	$	317,470
Standby letters of credit		10,079		9,107

Schedule of expirations of standby letters of credit

Year of Expiration	(In Thousands)
2022	$	10,021
2023		13
2024		20
2026		25
Total	$	10,079

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OPERATING LEASE COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Dec. 31, 2021

CONTINGENCIES

Schedule of balance sheet information relating to operating leases

	December 31,		December 31,
(In Thousands)	2021		2020
Other assets	$	3,751	$	3,446
Other liabilities	$	3,751	$	3,446

Schedule of operating lease expenses

(In Thousands)	2021		2020
Net occupancy and equipment expense	$	492	$	371
Total	$	492	$	371

Schedule of operating lease maturities

Lease Payments Due

2022	$	540
2023		528
2024		521
2025		501
2026		438
Thereafter		1,524
Total lease payments		4,052
Discount on cash flows		(301)
Total lease liabilities	$	3,751

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REGULATORY MATTERS (Tables)

12 Months Ended

Dec. 31, 2021

REGULATORY MATTERS

Schedule of capital ratios

											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
(Dollars In Thousands)		Amount	Ratio		Amount	Ratio		Amount	Ratio		Amount	Ratio		Amount		Ratio
December 31, 2021:
Total capital to risk-weighted assets:
Consolidated	$	287,614	18.21	%	N/A	N/A		N/A	N/A		N/A	N/A		$	165,846	³10.5	%
C&N Bank		252,606	16.04	%	126,012	³8	%	165,390	³10.5	%	157,514	³10	%		165,390	³10.5	%
Tier 1 capital to risk-weighted assets:
Consolidated		240,433	15.22	%	N/A	N/A		N/A	N/A		N/A	N/A			134,256	³8.5	%
C&N Bank		238,434	15.14	%	94,509	³6	%	133,887	³8.5	%	126,012	³8	%		133,887	³8.5	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		240,433	15.22	%	N/A	N/A		N/A	N/A		N/A	N/A			110,564	³7	%
C&N Bank		238,434	15.14	%	70,881	³4.5	%	110,260	³7.0	%	102,384	³6.5	%		110,260	³7	%
Tier 1 capital to average assets:
Consolidated		240,433	10.53	%	N/A	N/A		N/A	N/A		N/A	N/A			182,683	³8	%
C&N Bank		238,434	10.52	%	90,688	³4	%	N/A	N/A		113,360	³5	%		181,376	³8	%
December 31, 2020:
Total capital to risk-weighted assets:
Consolidated	$	260,015	17.49	%	N/A	N/A		N/A	N/A		N/A	N/A		$	156,113	³10.5	%
C&N Bank		236,943	15.98	%	118,602	³8	%	155,665	³10.5	%	148,252	³10	%		155,665	³10.5	%
Tier 1 capital to risk-weighted assets:
Consolidated		231,577	15.58	%	N/A	N/A		N/A	N/A		N/A	N/A			126,377	³8.5	%
C&N Bank		225,058	15.18	%	88,951	³6	%	126,015	³8.5	%	118,602	³8	%		126,015	³8.5	%
Common equity tier 1 capital to risk-weighted assets:
Consolidated		231,577	15.58	%	N/A	N/A		N/A	N/A		N/A	N/A			104,075	³7	%
C&N Bank		225,058	15.18	%	66,714	³4.5	%	103,777	³7.0	%	96,364	³6.5	%		103,777	³7	%
Tier 1 capital to average assets:
Consolidated		231,577	10.34	%	N/A	N/A		N/A	N/A		N/A	N/A			179,206	³8	%
C&N Bank		225,058	10.12	%	88,959	³4	%	N/A	N/A		111,199	³5	%		177,919	³8	%

Schedule of minimum risk-based capital ratios, and the capital ratios including the capital conservation buffer

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

Schedule of summary of payout restrictions based on the capital conservation buffer

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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PARENT COMPANY ONLY (Tables)

12 Months Ended

Dec. 31, 2021

PARENT COMPANY ONLY

Schedule of parent company condensed balance sheet

CONDENSED BALANCE SHEET	Dec. 31,		Dec. 31,
(In Thousands)	2021		2020
ASSETS
Cash	$	33,518	$	7,246
Investment in subsidiaries:
Citizens & Northern Bank		298,797		292,455
Citizens & Northern Investment Corporation		13,085		12,959
Bucktail Life Insurance Company		3,825		3,804
Other assets		33		4
TOTAL ASSETS	$	349,258	$	316,468
LIABILITIES AND STOCKHOLDERS' EQUITY
Senior notes, net	$	14,701	$	0
Subordinated debt, net		33,009		16,553
Other liabilities		143		159
Stockholders' equity		301,405		299,756
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	349,258	$	316,468

Schedule of parent company condensed income statement

CONDENSED INCOME STATEMENT
(In Thousands)	2021		2020
Dividends from Citizens & Northern Bank	$	20,200	$	38,507
Expenses		(1,691)		(1,488)
Income before equity in undistributed income (excess distributions) of subsidiaries		18,509		37,019
Equity in undistributed income (excess distributions) of subsidiaries		12,045		(17,797)
NET INCOME	$	30,554	$	19,222

Schedule of parent company condensed statement of cash flows

CONDENSED STATEMENT OF CASH FLOWS
(In Thousands)	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	30,554	$	19,222
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of purchase accounting adjustment		(43)		(38)
Amortization of debt issuance costs		101		0
Equity in (undistributed income) excess distributions of subsidiaries		(12,045)		17,797
(Increase) decrease in other assets		(29)		105
(Decrease) increase in other liabilities		(16)		13
Net Cash Provided by Operating Activities		18,522		37,099
CASH FLOWS FROM INVESTING ACTIVITIES,
Net cash used in business combination		0		(21,837)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of senior notes and subordinated debt		39,100		0
Repayment of subordinated debt		(8,000)		0
Proceeds from sale of treasury stock		212		131
Purchase of treasury stock		(7,586)		(163)
Dividends paid		(15,976)		(14,469)
Net Cash Provided by (Used in) Financing Activities		7,750		(14,501)
INCREASE IN CASH AND CASH EQUIVALENTS		26,272		761
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		7,246		6,485
CASH AND CASH EQUIVALENTS, END OF YEAR	$	33,518	$	7,246
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Investment of net assets acquired in business combination in Citizens & Northern Bank	$	0	$	73,426
Common equity issued in business combination	$	0	$	41,429
Subordinated debt assumed in business combination	$	0	$	10,091
Other liabilities assumed in business combination	$	0	$	69
Interest paid	$	1,567	$	655

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SUMMARY OF QUARTERLY CONSOLIDATED FINANCIAL DATA (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2021

SUMMARY OF QUARTERLY CONSOLIDATED FINANCIAL DATA

Summarized quarterly financial data

	2021 Quarter Ended
	March 31,		June 30,		Sept. 30,		Dec. 31,
(In Thousands Except Per Share Data) (Unaudited)	2021		2021		2021		2021
Interest income	$	21,754	$	20,428	$	21,073	$	21,246
Interest expense		1,671		1,747		1,614		1,530
Net interest income		20,083		18,681		19,459		19,716
Provision for loan losses		259		744		1,530		1,128
Net interest income after provision for loan losses		19,824		17,937		17,929		18,588
Noninterest income		6,782		6,300		6,359		6,416
Net gains (losses) on available-for-sale debt securities		0		2		23		(1)
Other noninterest expenses		15,709		15,399		15,346		16,018
Income before income tax provision		10,897		8,840		8,965		8,985
Income tax provision		2,110		1,780		1,566		1,677
Net income	$	8,787	$	7,060	$	7,399	$	7,308
Net income attributable to common shares	$	8,722	$	6,999	$	7,336	$	7,256
Net income per share – basic	$	0.55	$	0.44	$	0.47	$	0.46
Net income per share – diluted	$	0.55	$	0.44	$	0.47	$	0.46
	2020 Quarter Ended
	March 31,		June 30,		Sept. 30,		Dec. 31,
(In Thousands Except Per Share Data) (Unaudited)	2020		2020		2020		2020
Interest income	$	17,037	$	16,513	$	21,751	$	21,859
Interest expense		2,755		2,267		2,469		2,104
Net interest income		14,282		14,246		19,282		19,755
Provision (credit) for loan losses		1,528		(176)		1,941		620
Net interest income after provision (credit) for loan losses		12,754		14,422		17,341		19,135
Noninterest income		5,281		5,528		6,970		6,565
Net gains on available-for-sale debt securities		0		0		25		144
Loss on prepayment of borrowings		0		0		0		1,636
Merger-related expenses		141		983		6,402		182
Other expenses		12,912		12,274		14,648		15,775
Income before income tax provision		4,982		6,693		3,286		8,251
Income tax provision		816		1,255		438		1,481
Net income	$	4,166	$	5,438	$	2,848	$	6,770
Net income attributable to common shares	$	4,146	$	5,405	$	2,830	$	6,727
Net income per share – basic	$	0.30	$	0.39	$	0.18	$	0.43
Net income per share – diluted	$	0.30	$	0.39	$	0.18	$	0.43

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DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2021

DERIVATIVE FINANCIAL INSTRUMENTS

Summary of fair value of the Corporation's derivative financial instruments as well as their classification on the consolidated balance sheet

(In Thousands)	At December 31, 2021								At December 31, 2020
	Asset Derivatives				Liability Derivatives				Asset Derivatives				Liability Derivatives
	Notional		Fair		Notional		Fair		Notional		Fair		Notional		Fair
	Amount		Value (1)		Amount		Value (2)		Amount		Value (1)		Amount		Value (2)
Interest rate swap agreements	$	61,547	$	3,104	$	61,547	$	3,104	$	67,870	$	6,566	$	67,870	$	6,566

(1) Included in other assets in the consolidated balance sheets.

(2) Included in accrued interest and other liabilities in the consolidated balance sheets.

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FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2021

FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS

Schedule of assets measured at fair value and the valuation methods used

	December 31, 2021
	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, assets:
AVAILABLE-FOR-SALE DEBT SECURITIES:
Obligations of the U.S. Treasury	$	24,912	$	0	$	0	$	24,912
Obligations of U.S. Government agencies		0		24,091		0		24,091
Bank holding company debt securities		0		17,987		0		17,987
Obligations of states and political subdivisions:
Tax-exempt		0		148,028		0		148,028
Taxable		0		72,765		0		72,765
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		98,181		0		98,181
Residential collateralized mortgage obligations		0		44,247		0		44,247
Commercial mortgage-backed securities		0		87,468		0		87,468
Total available-for-sale debt securities		24,912		492,767		0		517,679
Marketable equity security		971		0		0		971
Servicing rights		0		0		2,329		2,329
Interest rate swap agreements, assets		0		3,104		0		3,104
Total recurring fair value measurements, assets	$	25,883	$	495,871	$	2,329	$	524,083
Recurring fair value measurements, liabilities,
Interest rate swap agreements, liabilities	$	0	$	3,104	$	0	$	3,104
Nonrecurring fair value measurements, assets:
Impaired loans, net	$	0	$	0	$	5,800	$	5,800
Foreclosed assets held for sale		0		0		684		684
Total nonrecurring fair value measurements, assets	$	0	$	0	$	6,484	$	6,484

	December 31, 2020
	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, assets:
AVAILABLE-FOR-SALE DEBT SECURITIES:
Obligations of the U.S. Treasury	$	12,182	$	0	$	0	$	12,182
Obligations of U.S. Government agencies		0		26,344		0		26,344
Obligations of states and political subdivisions:
Tax-exempt		0		122,401		0		122,401
Taxable		0		47,452		0		47,452
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		0		38,176		0		38,176
Residential collateralized mortgage obligations		0		57,467		0		57,467
Commercial mortgage-backed securities		0		45,310		0		45,310
Total available-for-sale debt securities		12,182		337,150		0		349,332
Marketable equity security		1,000		0		0		1,000
Servicing rights		0		0		1,689		1,689
Interest rate swap agreements, assets		0		6,566		0		6,566
Total recurring fair value measurements, assets	$	13,182	$	343,716	$	1,689	$	358,587
Recurring fair value measurements, liabilities,
Interest rate swap agreements, liabilities	$	0	$	6,566	$	0	$	6,566
Nonrecurring fair value measurements, assets:
Impaired loans, net	$	0	$	0	$	7,157	$	7,157
Foreclosed assets held for sale		0		0		1,338		1,338
Total nonrecurring fair value measurements, assets	$	0	$	0	$	8,495	$	8,495

Schedule of reconciliation of level 3 activity

(In Thousands)	Years Ended December 31,
	2021		2020
Servicing rights balance, beginning of period	$	1,689	$	1,277
Originations of servicing rights		708		988
Unrealized loss included in earnings		(68)		(576)
Servicing rights balance, end of period	$	2,329	$	1,689

Schedule of estimated fair values, and carrying amounts of financial instruments not recorded at fair value

(In Thousands)	Fair Value	December 31, 2021				December 31, 2020
	Hierarchy	Carrying		Fair		Carrying		Fair
	Level	Amount		Value		Amount		Value
Financial assets:
Cash and cash equivalents	Level 1	$	95,848	$	95,848	$	96,017	$	96,017
Certificates of deposit	Level 2		9,100		9,142		5,840		6,054
Restricted equity securities (included in Other Assets)	Level 2		9,562		9,562		9,970		9,970
Loans, net	Level 3		1,551,312		1,573,955		1,632,824		1,646,207
Accrued interest receivable	Level 2		7,235		7,235		8,293		8,293
Financial liabilities:
Deposits with no stated maturity	Level 2		1,639,167		1,639,167		1,430,062		1,430,062
Time deposits	Level 2		285,893		286,962		390,407		393,566
Short-term borrowings	Level 2		1,803		1,603		20,022		19,974
Long-term borrowings	Level 2		28,042		28,347		54,608		55,723
Senior debt	Level 2		14,701		15,016		0		0
Subordinated debt	Level 2		33,009		33,171		16,553		16,680
Accrued interest payable	Level 2		205		205		548		548

Recurring fair value measurements

FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS

Schedule of inputs and valuation techniques

	Fair Value at
	12/31/2021		Valuation	Unobservable				Method or Value As of
Asset	(In Thousands)		Technique	Input(s)				12/31/2021
Servicing rights	$	2,329	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		209.00	%	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
	12/31/2020		Valuation	Unobservable				Method or Value As of
Asset	(In Thousands)		Technique	Input(s)				12/31/2020
Servicing rights	$	1,689	Discounted cash flow	Discount rate		13.00	%	Rate used through modeling period
				Loan prepayment speeds		277.00	%	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

Nonrecurring fair value measurements

FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS

Schedule of inputs and valuation techniques

(Dollars In Thousands)									Weighted
			Valuation						Average
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	12/31/2021		12/31/2021		12/31/2021		Technique	Inputs	12/31/2021
Impaired loans:
Commercial:
Commercial loans secured by real estate	$	6,468	$	668	$	5,800	Sales comparison	Discount to appraised value	27	%
Commercial and industrial		72		72		0	Liquidation of assets	Discount to appraised value	100	%
Total impaired loans	$	6,540	$	740	$	5,800
Foreclosed assets held for sale - real estate:
Commercial real estate	$	428	$	0	$	428	Sales comparison	Discount to appraised value	50	%
Residential (1-4 family)		256		0		256	Sales comparison	Discount to appraised value	53	%
Total foreclosed assets held for sale	$	684	$	0	$	684

(Dollars In Thousands)									Weighted
			Valuation						Average
	Balance at		Allowance at		Fair Value at		Valuation	Unobservable	Discount at
Asset	12/31/2020		12/31/2020		12/31/2020		Technique	Inputs	12/31/2020
Impaired loans:
Commercial:
Commercial loans secured by real estate	$	6,501	$	691	$	5,810	Sales comparison	Discount to appraised value	28	%
Commercial and industrial		72		72		0	Liquidation of assets	Discount to appraised value	100	%
Residential mortgage loans - first and junior liens		1,509		162		1,347	Sales comparison	Discount to appraised value	31	%
Total impaired loans	$	8,082	$	925	$	7,157
Foreclosed assets held for sale - real estate:
Commercial real estate	$	1,258	$	0	$	1,258	Sales comparison	Discount to appraised value	44	%
Residential (1-4 family)		80		0		80	Sales comparison	Discount to appraised value	36	%
Total foreclosed assets held for sale	$	1,338	$	0	$	1,338

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NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)	12 Months Ended
	Dec. 31, 2021 USD ($) segment	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)
Number of reportable segments | segment	1
Contractual performance period of nonaccrual loans to be restored to accrual status	6 months
Purchased loans past due as deterioration indicator	90 days
Minimum period past due to charge off loans	120 days
Number of distinct segments in loan portfolio | segment	3
Credit losses related to unfunded loan commitments	$ 13,537,000	$ 11,385,000	$ 9,836,000
Threshold amount of estimate loss for evaluating individual loans for impairment	100,000
Accrued interest related to unrecognized tax benefits	0
Fair value of trust assets under management	$ 1,232,919,000	1,103,228,000
Trust revenue is earned and collected monthly	84.00%
Commercial
Credit losses related to unfunded loan commitments	$ 8,293,000	6,308,000	4,788,000
Commercial | Maximum
Threshold amount of loan balance for evaluating individual impairment loss	200,000
Residential mortgage
Credit losses related to unfunded loan commitments	4,338,000	4,253,000	4,182,000
Residential mortgage | Maximum
Threshold amount of loan balance for evaluating individual impairment loss	400,000
Consumer
Credit losses related to unfunded loan commitments	235,000	239,000	$ 281,000
Consumer | Maximum
Threshold amount of loan balance for evaluating individual impairment loss	400,000
Unfunded Loan Commitment
Credit losses related to unfunded loan commitments	$ 0	$ 0

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BUSINESS COMBINATIONS - Covenant Acquisition (Details) - USD ($)		3 Months Ended				12 Months Ended
	Jul. 01, 2020	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
BUSINESS COMBINATIONS
Goodwill		$ 52,505,000				$ 52,505,000	$ 52,505,000	$ 28,388,000
Merger-related expenses		$ 182,000	$ 6,402,000	$ 983,000	$ 141,000	0	7,708,000
Covenant Financial Inc.
BUSINESS COMBINATIONS
Goodwill	$ 24,100,000
Loans	464,200,000
Deposits	481,800,000
Borrowings	64,000,000.0
Subordinated debt	10,100,000
Available-for-sale debt securities	10,800,000
Bank owned life insurance	$ 11,200,000
Refinement term of assets and liabilities	1 year
Merger-related expenses						$ 0	$ 7,708,000
Covenant Financial Inc. | Core Deposits
BUSINESS COMBINATIONS
Core deposit intangible asset	$ 3,100,000

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PER SHARE DATA (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Basic
Net income	$ 7,308	$ 7,399	$ 7,060	$ 8,787	$ 6,770	$ 2,848	$ 5,438	$ 4,166	$ 30,554	$ 19,222
Less: Dividends and undistributed earnings allocated to participating securities									(241)	(116)
Net income attributable to common shares	$ 7,256	$ 7,336	$ 6,999	$ 8,722	$ 6,727	$ 2,830	$ 5,405	$ 4,146	$ 30,313	$ 19,106
Basic weighted-average common shares outstanding (in shares)									15,765,639	14,743,386
Basic earnings per common share (in dollars per share)	$ 0.46	$ 0.47	$ 0.44	$ 0.55	$ 0.43	$ 0.18	$ 0.39	$ 0.30	$ 1.92	$ 1.30
Diluted
Net income attributable to common shares									$ 30,313	$ 19,106
Basic weighted-average common shares outstanding (in shares)									15,765,639	14,743,386
Dilutive effect of potential common stock arising from stock options (in shares)									6,316	3,662
Diluted weighted-average common shares outstanding (in shares)									15,771,955	14,747,048
Diluted earnings per common share (in dollars per share)	$ 0.46	$ 0.47	$ 0.44	$ 0.55	$ 0.43	$ 0.18	$ 0.39	$ 0.30	$ 1.92	$ 1.30
Weighted-average nonvested restricted shares outstanding (in shares)									125,539	89,718
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount (in shares)									0	32,538

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COMPREHENSIVE INCOME - Components (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
COMPREHENSIVE INCOME
Unrealized holding income (losses) on available-for-sale debt securities	$ (8,669)	$ 10,504
Unrealized holding income (losses) on available-for-sale debt securities, Income Tax Effect	1,821	(2,205)
Unrealized holding income (losses) on available-for-sale debt securities, Net of Tax Amount	(6,848)	8,299
Reclassification adjustment for gains realized in income, Before-Tax Amount	(24)	(169)
Reclassification adjustment for (gains) realized in income, Income Tax Effect	5	35
Reclassification adjustment for (gains) realized in income. Net of Tax Amount	(19)	(134)
Other comprehensive loss from available-for-sale debt securities, Before-Tax Amount	(8,693)	10,335
Other comprehensive income on available-for-sale debt securities, income tax effect	1,826	(2,170)
Other comprehensive loss from available-for-sale debt securities, Net-of-Tax Amount	(6,867)	8,165
Changes from plan amendments and actuarial gains and losses, Before-Tax Amount	140	(49)
Changes from plan amendments and actuarial gains and losses, Income Tax Effect	(29)	11
Changes from plan amendments and actuarial gains and losses, Net-of-Tax Amount	111	(38)
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost, Before-Tax Amount	(17)	(29)
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost, Income Tax Effect	4	6
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost, Net-of-Tax Amount	(13)	(23)
Other comprehensive income (loss) on pension and postretirement obligations	123	(78)
Other comprehensive income (loss) on unfunded retirement obligations, Income Tax Effect	(25)	17
Other comprehensive income (loss) on unfunded retirement obligations, Net-of-Tax Amount	98	(61)
Other comprehensive (loss) income before income tax	(8,570)	10,257
Total other comprehensive income (loss), Income Tax Effect	1,801	(2,153)
Total other comprehensive income (loss)	$ (6,769)	$ 8,104

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COMPREHENSIVE INCOME - Changes of AOCI (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Balance	$ 299,756	$ 244,452
Other comprehensive income (loss) during year	(6,769)	8,104
Balance	301,405	299,756
AOCI, Accumulated Gain (Loss), Debt Securities, Available-for-sale, Parent
Balance	11,676	3,511
Other comprehensive income (loss) during year	(6,867)	8,165
Balance	4,809	11,676
Accumulated Defined Benefit Plans Adjustment Attributable to Parent
Balance	119	180
Other comprehensive income (loss) during year	98	(61)
Balance	217	119
Accumulated Other Comprehensive Income
Balance	11,795	3,691
Other comprehensive income (loss) during year	(6,769)	8,104
Balance	$ 5,026	$ 11,795

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CASH AND DUE FROM BANKS (Details) - USD ($)	Dec. 31, 2021	Dec. 31, 2020
CASH AND DUE FROM BANKS
Cash and cash equivalents	$ 95,848,000	$ 96,017,000
Certificates of deposit	9,100,000	5,840,000
Total cash and due from banks	104,948,000	101,857,000
Cash Reserve Deposit Required and Made	$ 0	$ 0

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SECURITIES - Available-for-sale Securities (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Available-for-sale Securities
Available-for-sale securities, amortized cost	$ 511,592	$ 334,552
Available-for-sale securities, gross unrealized holding gains	9,304	14,849
Available-for-sale securities, gross unrealized holding losses	(3,217)	(69)
Available-for-sale debt securities, fair value	517,679	349,332
Obligations of the U.S. Treasury
Available-for-sale Securities
Available-for-sale securities, amortized cost	25,058	12,184
Available-for-sale securities, gross unrealized holding gains	52	0
Available-for-sale securities, gross unrealized holding losses	(198)	(2)
Available-for-sale debt securities, fair value	24,912	12,182
Obligations of U.S. Government agencies
Available-for-sale Securities
Available-for-sale securities, amortized cost	23,936	25,349
Available-for-sale securities, gross unrealized holding gains	563	1,003
Available-for-sale securities, gross unrealized holding losses	(408)	(8)
Available-for-sale debt securities, fair value	24,091	26,344
Bank holding company debt securities
Available-for-sale Securities
Available-for-sale securities, amortized cost	18,000
Available-for-sale securities, gross unrealized holding gains	18
Available-for-sale securities, gross unrealized holding losses	(31)
Available-for-sale debt securities, fair value	17,987
Obligations Of States And Political Subdivisions Tax Exempt
Available-for-sale Securities
Available-for-sale securities, amortized cost	143,427	116,427
Available-for-sale securities, gross unrealized holding gains	4,749	6,000
Available-for-sale securities, gross unrealized holding losses	(148)	(26)
Available-for-sale debt securities, fair value	148,028	122,401
Obligations Of States And Political Subdivisions Taxable
Available-for-sale Securities
Available-for-sale securities, amortized cost	72,182	45,230
Available-for-sale securities, gross unrealized holding gains	1,232	2,246
Available-for-sale securities, gross unrealized holding losses	(649)	(24)
Available-for-sale debt securities, fair value	72,765	47,452
Residential Passthrough Securities
Available-for-sale Securities
Available-for-sale securities, amortized cost	98,048	36,853
Available-for-sale securities, gross unrealized holding gains	705	1,323
Available-for-sale securities, gross unrealized holding losses	(572)	0
Available-for-sale debt securities, fair value	98,181	38,176
Residential Collateralized Mortgage Obligations
Available-for-sale Securities
Available-for-sale securities, amortized cost	44,015	56,048
Available-for-sale securities, gross unrealized holding gains	437	1,428
Available-for-sale securities, gross unrealized holding losses	(205)	(9)
Available-for-sale debt securities, fair value	44,247	57,467
Commercial Mortgage Backed Securities
Available-for-sale Securities
Available-for-sale securities, amortized cost	86,926	42,461
Available-for-sale securities, gross unrealized holding gains	1,548	2,849
Available-for-sale securities, gross unrealized holding losses	(1,006)	0
Available-for-sale debt securities, fair value	$ 87,468	$ 45,310

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SECURITIES - Available-for-sale Securities With Unrealized Loss Positions (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Available-for-sale Securities With Unrealized Loss Positions
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	$ 230,138	$ 26,058
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(2,934)	(69)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	8,682	0
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(283)	0
Available-for-sale securities with unrealized loss positions, fair value	238,820	26,058
Available-for-sale securities, with unrealized loss positions, unrealized losses	(3,217)	(69)
Obligations of the U.S. Treasury
Available-for-sale Securities With Unrealized Loss Positions
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	18,886	9,159
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(198)	(2)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	0	0
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	0	0
Available-for-sale securities with unrealized loss positions, fair value	18,886	9,159
Available-for-sale securities, with unrealized loss positions, unrealized losses	(198)	(2)
Obligations of U.S. Government agencies
Available-for-sale Securities With Unrealized Loss Positions
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	9,735	4,992
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(264)	(8)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	4,856	0
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(144)	0
Available-for-sale securities with unrealized loss positions, fair value	14,591	4,992
Available-for-sale securities, with unrealized loss positions, unrealized losses	(408)	(8)
Bank holding company debt securities
Available-for-sale Securities With Unrealized Loss Positions
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	12,969
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(31)
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	12,969
Available-for-sale securities, with unrealized loss positions, unrealized losses	(31)
Obligations Of States And Political Subdivisions Tax Exempt
Available-for-sale Securities With Unrealized Loss Positions
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	17,852	3,811
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(141)	(26)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	549	0
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(7)	0
Available-for-sale securities with unrealized loss positions, fair value	18,401	3,811
Available-for-sale securities, with unrealized loss positions, unrealized losses	(148)	(26)
Obligations Of States And Political Subdivisions Taxable
Available-for-sale Securities With Unrealized Loss Positions
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	31,261	5,235
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(517)	(24)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	3,277	0
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	(132)	0
Available-for-sale securities with unrealized loss positions, fair value	34,538	5,235
Available-for-sale securities, with unrealized loss positions, unrealized losses	(649)	(24)
Residential Passthrough Securities
Available-for-sale Securities With Unrealized Loss Positions
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	71,451
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(572)
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	71,451
Available-for-sale securities, with unrealized loss positions, unrealized losses	(572)
Residential Collateralized Mortgage Obligations
Available-for-sale Securities With Unrealized Loss Positions
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	15,117	2,861
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(205)	(9)
Available-for-sale securities with unrealized loss positions, 12 months or more, fair value	0	0
Available-for-sale securities with unrealized loss positions, 12 months or more, unrealized losses	0	0
Available-for-sale securities with unrealized loss positions, fair value	15,117	2,861
Available-for-sale securities, with unrealized loss positions, unrealized losses	(205)	$ (9)
Commercial Mortgage Backed Securities
Available-for-sale Securities With Unrealized Loss Positions
Available-for-sale securities with unrealized loss positions, less than 12 months, fair value	52,867
Available-for-sale securities with unrealized loss positions, less than 12 months, unrealized losses	(1,006)
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	52,867
Available-for-sale securities, with unrealized loss positions, unrealized losses	$ (1,006)

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SECURITIES - Gross Realized Gains and Losses From Available-for-sale Debt Securities (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
SECURITIES
Gross realized gains from sales									$ 27	$ 222
Gross realized losses from sales									(3)	(53)
Net realized gains	$ (1)	$ 23	$ 2	$ 0	$ 144	$ 25	$ 0	$ 0	24	169
Income tax provision related to net realized gains									$ 5	$ 35

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SECURITIES - Available-for-sale Debt Securities by Contractual Maturity (Details) - USD ($)	Dec. 31, 2021	Dec. 31, 2020
Available-for-sale Securities
Due in one year or less, amortized cost	$ 14,454,000
Due in one year or less, fair value	14,538,000
Due from one year through five years. amortized cost	58,561,000
Due from one year through five years, fair value	59,116,000
Due from five years through ten years, amortized cost	79,532,000
Due from five years through ten years, fair value	81,073,000
Due after ten years, amortized cost	130,056,000
Due after ten years, fair value	133,056,000
Sub-total, amortized cost	282,603,000
Sub-total, fair value	287,783,000
Total, amortized cost	511,592,000	$ 334,552,000
Total, fair value	517,679,000	349,332,000
Secured public deposits, trusts and certain other deposits	189,383,000	201,176,000
Investment Securities [Member]
Available-for-sale Securities
Investment pledged as collateral	241,428,000	247,373,000
Residential Passthrough Securities
Available-for-sale Securities
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, amortized cost	98,048,000
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, fair value	98,181,000
Total, amortized cost	98,048,000	36,853,000
Total, fair value	98,181,000	38,176,000
Residential Collateralized Mortgage Obligations
Available-for-sale Securities
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, amortized cost	44,015,000
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, fair value	44,247,000
Total, amortized cost	44,015,000	56,048,000
Total, fair value	44,247,000	$ 57,467,000
Commercial mortgage-backed securities
Available-for-sale Securities
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, amortized cost	86,926,000
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, fair value	$ 87,468,000

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SECURITIES - Equity Securities (Details)	12 Months Ended
	Dec. 31, 2021 USD ($) security	Dec. 31, 2020 USD ($) security
Equity Securities
Marketable equity security	$ 971,000	$ 1,000,000
Number of equity securities sold | security	0	0
Mutual Fund
Equity Securities
Number of mutual funds	1
Unrealized gain/loss on the mutual fund	$ 29,000	$ 0
Unrealized gains (losses) recognized during the period on equity securities still held at the reporting date	(29,000)	(21,000)
Other Assets | Federal Home Loan Bank of Pittsburgh
Equity Securities
Federal Home Loan Bank Stock	$ 9,313,000	$ 9,720,000

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LOANS (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
LOANS
Loans receivable	$ 1,564,849	$ 1,644,209
Allowance for loan losses	(13,537)	(11,385)	$ (9,836)
Loans, net	1,551,312	1,632,824
Commercial
LOANS
Loans receivable	978,371	1,007,751
Allowance for loan losses	(8,293)	(6,308)	(4,788)
Commercial | Real estate loan
LOANS
Loans receivable	569,840	531,810
Allowance for loan losses	(4,405)	(3,051)	(1,921)
Commercial | Commercial and industrial
LOANS
Loans receivable	159,073	159,577
Allowance for loan losses	(2,723)	(2,245)	(1,391)
Commercial | Paycheck Protection Program - 1st Draw
LOANS
Loans receivable	1,356	132,269
Allowance for loan losses	0	0
Commercial | Paycheck Protection Program - 2nd Draw
LOANS
Loans receivable	25,508	0
Allowance for loan losses	0
Commercial | Political subdivisions
LOANS
Loans receivable	81,301	53,221
Allowance for loan losses	0	0
Commercial | Construction Loans
LOANS
Loans receivable	60,579	42,874
Commercial | Commercial Construction And Land
LOANS
Loans receivable	60,579	42,874
Allowance for loan losses	(637)	(454)	(966)
Commercial | Loans secured by farm land
LOANS
Loans receivable	11,121	11,736
Allowance for loan losses	(115)	(120)	(158)
Commercial | Multi-family (5 or more) residential
LOANS
Loans receivable	50,089	55,811
Allowance for loan losses	(215)	(236)	(156)
Commercial | Agricultural loans
LOANS
Loans receivable	2,351	3,164
Allowance for loan losses	(25)	(34)	(41)
Commercial | Other commercial loans
LOANS
Loans receivable	17,153	17,289
Allowance for loan losses	(173)	(168)	(155)
Residential mortgage
LOANS
Loans receivable	569,346	620,172
Allowance for loan losses	(4,338)	(4,253)	(4,182)
Residential mortgage | Real estate loan
LOANS
Loans receivable	569,840
Residential mortgage | Real estate loan | first liens
LOANS
Loans receivable	483,629	532,947
Allowance for loan losses	(3,650)	(3,524)	(3,405)
Residential mortgage | Real estate loan | junior liens
LOANS
Loans receivable	23,314	27,311
Allowance for loan losses	(184)	(349)	(384)
Residential mortgage | Construction Loans
LOANS
Loans receivable	23,151	20,613
Allowance for loan losses	(202)	(99)	(117)
Residential mortgage | Home equity lines of credit
LOANS
Loans receivable	39,252	39,301
Allowance for loan losses	(302)	(281)	(276)
Consumer
LOANS
Loans receivable	17,132	16,286
Allowance for loan losses	$ (235)	$ (239)	$ (281)

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LOANS - Adjustments to Initial Discounts and Carrying Amounts of Loans (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Market Rate Adjustment
LOANS
Adjustments to gross amortized cost of loans at beginning of period	$ 718	$ (1,415)
Adjustment recorded in acquisition	0	2,909
(Amortization) accretion recognized in interest income	(1,355)	(776)
Adjustments to gross amortized cost of loans at end of period	(637)	718
Credit Adjustment on Non-impaired Loans
LOANS
Adjustments to gross amortized cost of loans at beginning of period	(5,979)	(1,216)
Adjustment recorded in acquisition	0	(7,219)
(Amortization) accretion recognized in interest income	2,644	2,456
Adjustments to gross amortized cost of loans at end of period	$ (3,335)	$ (5,979)

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LOANS - Summary of PCI Loans Held (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
LOANS
Outstanding balance	$ 9,802	$ 10,316
Carrying amount	$ 6,558	$ 6,841

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LOANS - Allowance for Loan Losses (Details) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
LOANS
Allowance for Loan losses				$ 11,385,000				$ 9,836,000	$ 11,385,000	$ 9,836,000
Allowance for Loan losses, Charge-offs									(1,575,000)	(2,465,000)
Allowance for Loan losses, Recoveries									66,000	101,000
Allowance for Loan losses, Provision (Credit)	$ 1,128,000	$ 1,530,000	$ 744,000	259,000	$ 620,000	$ 1,941,000	$ (176,000)	1,528,000	3,661,000	3,913,000
Allowance for Loan losses	13,537,000				11,385,000				13,537,000	11,385,000
Commercial
LOANS
Allowance for Loan losses				6,308,000				4,788,000	6,308,000	4,788,000
Allowance for Loan losses, Charge-offs									(1,464,000)	(2,343,000)
Allowance for Loan losses, Recoveries									22,000	16,000
Allowance for Loan losses, Provision (Credit)									3,427,000	3,847,000
Allowance for Loan losses	8,293,000				6,308,000				8,293,000	6,308,000
Commercial | Loan Customer Major Write Off [Member]
LOANS
Allowance for Loan losses, Charge-offs									(1,463,000)	(2,219,000)
Commercial | Real estate loan
LOANS
Allowance for Loan losses				3,051,000				1,921,000	3,051,000	1,921,000
Allowance for Loan losses, Charge-offs									0	0
Allowance for Loan losses, Recoveries									2,000	0
Allowance for Loan losses, Provision (Credit)									1,352,000	1,130,000
Allowance for Loan losses	4,405,000				3,051,000				4,405,000	3,051,000
Commercial | Commercial and industrial
LOANS
Allowance for Loan losses				2,245,000				1,391,000	2,245,000	1,391,000
Allowance for Loan losses, Charge-offs									(1,464,000)	(2,236,000)
Allowance for Loan losses, Recoveries									20,000	16,000
Allowance for Loan losses, Provision (Credit)									1,922,000	3,074,000
Allowance for Loan losses	2,723,000				2,245,000				2,723,000	2,245,000
Commercial | Commercial Construction And Land
LOANS
Allowance for Loan losses				454,000				966,000	454,000	966,000
Allowance for Loan losses, Charge-offs									0	(107,000)
Allowance for Loan losses, Recoveries									0	0
Allowance for Loan losses, Provision (Credit)									183,000	(405,000)
Allowance for Loan losses	637,000				454,000				637,000	454,000
Commercial | Loans secured by farm land
LOANS
Allowance for Loan losses				120,000				158,000	120,000	158,000
Allowance for Loan losses, Charge-offs									0	0
Allowance for Loan losses, Recoveries									0	0
Allowance for Loan losses, Provision (Credit)									(5,000)	(38,000)
Allowance for Loan losses	115,000				120,000				115,000	120,000
Commercial | Multi-family (5 or more) residential
LOANS
Allowance for Loan losses				236,000				156,000	236,000	156,000
Allowance for Loan losses, Charge-offs									0	0
Allowance for Loan losses, Recoveries									0	0
Allowance for Loan losses, Provision (Credit)									(21,000)	80,000
Allowance for Loan losses	215,000				236,000				215,000	236,000
Commercial | Agricultural loans
LOANS
Allowance for Loan losses				34,000				41,000	34,000	41,000
Allowance for Loan losses, Charge-offs									0	0
Allowance for Loan losses, Recoveries									0	0
Allowance for Loan losses, Provision (Credit)									(9,000)	(7,000)
Allowance for Loan losses	25,000				34,000				25,000	34,000
Commercial | Other commercial loans
LOANS
Allowance for Loan losses				168,000				155,000	168,000	155,000
Allowance for Loan losses, Charge-offs									0	0
Allowance for Loan losses, Recoveries									0	0
Allowance for Loan losses, Provision (Credit)									5,000	13,000
Allowance for Loan losses	173,000				168,000				173,000	168,000
Residential mortgage
LOANS
Allowance for Loan losses				4,253,000				4,182,000	4,253,000	4,182,000
Allowance for Loan losses, Charge-offs									(11,000)	0
Allowance for Loan losses, Recoveries									6,000	44,000
Allowance for Loan losses, Provision (Credit)									90,000	27,000
Allowance for Loan losses	4,338,000				4,253,000				4,338,000	4,253,000
Residential mortgage | Real estate loan | first liens
LOANS
Allowance for Loan losses				3,524,000				3,405,000	3,524,000	3,405,000
Allowance for Loan losses, Charge-offs									(11,000)	0
Allowance for Loan losses, Recoveries									4,000	39,000
Allowance for Loan losses, Provision (Credit)									133,000	80,000
Allowance for Loan losses	3,650,000				3,524,000				3,650,000	3,524,000
Residential mortgage | Real estate loan | junior liens
LOANS
Allowance for Loan losses				349,000				384,000	349,000	384,000
Allowance for Loan losses, Charge-offs									0	0
Allowance for Loan losses, Recoveries									0	1,000
Allowance for Loan losses, Provision (Credit)									(165,000)	(36,000)
Allowance for Loan losses	184,000				349,000				184,000	349,000
Residential mortgage | Construction Loans
LOANS
Allowance for Loan losses				99,000				117,000	99,000	117,000
Allowance for Loan losses, Charge-offs										0
Allowance for Loan losses, Recoveries										0
Allowance for Loan losses, Provision (Credit)										(18,000)
Allowance for Loan losses	202,000				99,000				202,000	99,000
Residential mortgage | Home equity lines of credit
LOANS
Allowance for Loan losses				281,000				276,000	281,000	276,000
Allowance for Loan losses, Charge-offs									0	0
Allowance for Loan losses, Recoveries									2,000	4,000
Allowance for Loan losses, Provision (Credit)									19,000	1,000
Allowance for Loan losses	302,000				281,000				302,000	281,000
Residential mortgage | 1-4 Family residential construction
LOANS
Allowance for Loan losses				99,000					99,000
Allowance for Loan losses, Charge-offs									0
Allowance for Loan losses, Recoveries									0
Allowance for Loan losses, Provision (Credit)									103,000
Allowance for Loan losses	202,000				99,000				202,000	99,000
Consumer
LOANS
Allowance for Loan losses				239,000				281,000	239,000	281,000
Allowance for Loan losses, Charge-offs									(100,000)	(122,000)
Allowance for Loan losses, Recoveries									38,000	41,000
Allowance for Loan losses, Provision (Credit)									58,000	39,000
Allowance for Loan losses	235,000				239,000				235,000	239,000
Unallocated
LOANS
Allowance for Loan losses				$ 585,000				$ 585,000	585,000	585,000
Allowance for Loan losses, Charge-offs									0	0
Allowance for Loan losses, Recoveries									0	0
Allowance for Loan losses, Provision (Credit)									86,000	0
Allowance for Loan losses	$ 671,000				$ 585,000				$ 671,000	$ 585,000

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LOANS - Outstanding Loans by Risk Rating (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
LOANS
Loans receivable	$ 1,564,849	$ 1,644,209
Purchased Credit Impaired
LOANS
Loans receivable	6,558	6,841
Commercial
LOANS
Loans receivable	978,371	1,007,751
Commercial | Purchased Credit Impaired
LOANS
Loans receivable	6,485	6,696
Commercial | Real estate loan
LOANS
Loans receivable	569,840	531,810
Commercial | Real estate loan | Purchased Credit Impaired
LOANS
Loans receivable		4,298
Commercial | Commercial and industrial
LOANS
Loans receivable	159,073	159,577
Commercial | Commercial and industrial | Purchased Credit Impaired
LOANS
Loans receivable	763	784
Commercial | Paycheck Protection Program - 1st Draw
LOANS
Loans receivable	1,356	132,269
Commercial | Paycheck Protection Program - 1st Draw | Purchased Credit Impaired
LOANS
Loans receivable	0	0
Commercial | Paycheck Protection Program - 2nd Draw
LOANS
Loans receivable	25,508	0
Commercial | Paycheck Protection Program - 2nd Draw | Purchased Credit Impaired
LOANS
Loans receivable	0
Commercial | Political subdivisions
LOANS
Loans receivable	81,301	53,221
Commercial | Political subdivisions | Purchased Credit Impaired
LOANS
Loans receivable	0	0
Commercial | Commercial Construction And Land
LOANS
Loans receivable	60,579	42,874
Commercial | Commercial Construction And Land | Purchased Credit Impaired
LOANS
Loans receivable	0	0
Commercial | Construction Loans
LOANS
Loans receivable	60,579	42,874
Commercial | Loans secured by farm land
LOANS
Loans receivable	11,121	11,736
Commercial | Loans secured by farm land | Purchased Credit Impaired
LOANS
Loans receivable	0	0
Commercial | Multi-family (5 or more) residential
LOANS
Loans receivable	50,089	55,811
Commercial | Multi-family (5 or more) residential | Purchased Credit Impaired
LOANS
Loans receivable	1,578	1,614
Commercial | Agricultural loans
LOANS
Loans receivable	2,351	3,164
Commercial | Agricultural loans | Purchased Credit Impaired
LOANS
Loans receivable	0	0
Commercial | Other commercial loans
LOANS
Loans receivable	17,153	17,289
Commercial | Other commercial loans | Purchased Credit Impaired
LOANS
Loans receivable	0	0
Residential mortgage
LOANS
Loans receivable	569,346	620,172
Residential mortgage | Purchased Credit Impaired
LOANS
Loans receivable	73	145
Residential mortgage | Real estate loan
LOANS
Loans receivable	569,840
Residential mortgage | Real estate loan | Purchased Credit Impaired
LOANS
Loans receivable	4,144
Residential mortgage | Real estate loan | first liens
LOANS
Loans receivable	483,629	532,947
Residential mortgage | Real estate loan | first liens | Purchased Credit Impaired
LOANS
Loans receivable	70	76
Residential mortgage | Real estate loan | junior liens
LOANS
Loans receivable	23,314	27,311
Residential mortgage | Real estate loan | junior liens | Purchased Credit Impaired
LOANS
Loans receivable	3	69
Residential mortgage | Construction Loans
LOANS
Loans receivable	23,151	20,613
Residential mortgage | Construction Loans | Purchased Credit Impaired
LOANS
Loans receivable	0	0
Residential mortgage | Home equity lines of credit
LOANS
Loans receivable	39,252	39,301
Residential mortgage | Home equity lines of credit | Purchased Credit Impaired
LOANS
Loans receivable	0	0
Consumer
LOANS
Loans receivable	17,132	16,286
Consumer | Purchased Credit Impaired
LOANS
Loans receivable	0	0
Pass
LOANS
Loans receivable	1,497,176	1,565,349
Pass | Commercial
LOANS
Loans receivable	926,323	946,870
Pass | Commercial | Real estate loan
LOANS
Loans receivable		494,876
Pass | Commercial | Commercial and industrial
LOANS
Loans receivable	142,775	143,500
Pass | Commercial | Paycheck Protection Program - 1st Draw
LOANS
Loans receivable	1,356	132,269
Pass | Commercial | Paycheck Protection Program - 2nd Draw
LOANS
Loans receivable	25,508
Pass | Commercial | Political subdivisions
LOANS
Loans receivable	81,301	53,221
Pass | Commercial | Commercial Construction And Land
LOANS
Loans receivable	59,816	42,110
Pass | Commercial | Loans secured by farm land
LOANS
Loans receivable	10,011	10,473
Pass | Commercial | Multi-family (5 or more) residential
LOANS
Loans receivable	47,638	50,563
Pass | Commercial | Agricultural loans
LOANS
Loans receivable	1,802	2,569
Pass | Commercial | Other commercial loans
LOANS
Loans receivable	17,150	17,289
Pass | Residential mortgage
LOANS
Loans receivable	553,761	602,307
Pass | Residential mortgage | Real estate loan
LOANS
Loans receivable	538,966
Pass | Residential mortgage | Real estate loan | first liens
LOANS
Loans receivable	469,044	516,685
Pass | Residential mortgage | Real estate loan | junior liens
LOANS
Loans receivable	22,914	26,480
Pass | Residential mortgage | Construction Loans
LOANS
Loans receivable	23,151	20,613
Pass | Residential mortgage | Home equity lines of credit
LOANS
Loans receivable	38,652	38,529
Pass | Consumer
LOANS
Loans receivable	17,092	16,172
Special Mention
LOANS
Loans receivable	30,409	35,316
Special Mention | Commercial
LOANS
Loans receivable	22,255	28,924
Special Mention | Commercial | Real estate loan
LOANS
Loans receivable		17,374
Special Mention | Commercial | Commercial and industrial
LOANS
Loans receivable	10,841	8,025
Special Mention | Commercial | Paycheck Protection Program - 1st Draw
LOANS
Loans receivable	0	0
Special Mention | Commercial | Paycheck Protection Program - 2nd Draw
LOANS
Loans receivable	0
Special Mention | Commercial | Political subdivisions
LOANS
Loans receivable	0	0
Special Mention | Commercial | Commercial Construction And Land
LOANS
Loans receivable	715	715
Special Mention | Commercial | Loans secured by farm land
LOANS
Loans receivable	186	405
Special Mention | Commercial | Multi-family (5 or more) residential
LOANS
Loans receivable	0	2,405
Special Mention | Commercial | Agricultural loans
LOANS
Loans receivable	0	0
Special Mention | Commercial | Other commercial loans
LOANS
Loans receivable	3	0
Special Mention | Residential mortgage
LOANS
Loans receivable	8,154	6,392
Special Mention | Residential mortgage | Real estate loan
LOANS
Loans receivable	10,510
Special Mention | Residential mortgage | Real estate loan | first liens
LOANS
Loans receivable	7,981	6,192
Special Mention | Residential mortgage | Real estate loan | junior liens
LOANS
Loans receivable	114	141
Special Mention | Residential mortgage | Construction Loans
LOANS
Loans receivable	0	0
Special Mention | Residential mortgage | Home equity lines of credit
LOANS
Loans receivable	59	59
Special Mention | Consumer
LOANS
Loans receivable	0	0
Substandard
LOANS
Loans receivable	30,706	36,703
Substandard | Commercial
LOANS
Loans receivable	23,308	25,261
Substandard | Commercial | Real estate loan
LOANS
Loans receivable		15,262
Substandard | Commercial | Commercial and industrial
LOANS
Loans receivable	4,694	7,268
Substandard | Commercial | Paycheck Protection Program - 1st Draw
LOANS
Loans receivable	0	0
Substandard | Commercial | Paycheck Protection Program - 2nd Draw
LOANS
Loans receivable	0
Substandard | Commercial | Political subdivisions
LOANS
Loans receivable	0	0
Substandard | Commercial | Commercial Construction And Land
LOANS
Loans receivable	48	49
Substandard | Commercial | Loans secured by farm land
LOANS
Loans receivable	924	858
Substandard | Commercial | Multi-family (5 or more) residential
LOANS
Loans receivable	873	1,229
Substandard | Commercial | Agricultural loans
LOANS
Loans receivable	549	595
Substandard | Commercial | Other commercial loans
LOANS
Loans receivable	0	0
Substandard | Residential mortgage
LOANS
Loans receivable	7,358	11,328
Substandard | Residential mortgage | Real estate loan
LOANS
Loans receivable	16,220
Substandard | Residential mortgage | Real estate loan | first liens
LOANS
Loans receivable	6,534	9,994
Substandard | Residential mortgage | Real estate loan | junior liens
LOANS
Loans receivable	283	621
Substandard | Residential mortgage | Construction Loans
LOANS
Loans receivable	0	0
Substandard | Residential mortgage | Home equity lines of credit
LOANS
Loans receivable	541	713
Substandard | Consumer
LOANS
Loans receivable	40	114
Doubtful
LOANS
Loans receivable	0	0
Doubtful | Commercial
LOANS
Loans receivable	0	0
Doubtful | Commercial | Real estate loan
LOANS
Loans receivable		0
Doubtful | Commercial | Commercial and industrial
LOANS
Loans receivable	0	0
Doubtful | Commercial | Paycheck Protection Program - 1st Draw
LOANS
Loans receivable	0	0
Doubtful | Commercial | Paycheck Protection Program - 2nd Draw
LOANS
Loans receivable	0
Doubtful | Commercial | Political subdivisions
LOANS
Loans receivable	0	0
Doubtful | Commercial | Commercial Construction And Land
LOANS
Loans receivable	0	0
Doubtful | Commercial | Loans secured by farm land
LOANS
Loans receivable	0	0
Doubtful | Commercial | Multi-family (5 or more) residential
LOANS
Loans receivable	0	0
Doubtful | Commercial | Agricultural loans
LOANS
Loans receivable	0	0
Doubtful | Commercial | Other commercial loans
LOANS
Loans receivable	0	0
Doubtful | Residential mortgage
LOANS
Loans receivable	0	0
Doubtful | Residential mortgage | Real estate loan
LOANS
Loans receivable	0
Doubtful | Residential mortgage | Real estate loan | first liens
LOANS
Loans receivable	0	0
Doubtful | Residential mortgage | Real estate loan | junior liens
LOANS
Loans receivable	0	0
Doubtful | Residential mortgage | Construction Loans
LOANS
Loans receivable	0	0
Doubtful | Residential mortgage | Home equity lines of credit
LOANS
Loans receivable	0	0
Doubtful | Consumer
LOANS
Loans receivable	$ 0	$ 0

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LOANS - Loan Balances and Allowance for Loan Losses for Each Impairment Method (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
LOANS
Loans receivable: Individually Evaluated	$ 15,734	$ 17,818
Loans receivable: Collectively Evaluated	1,549,115	1,626,391
Loans receivable	1,564,849	1,644,209
Allowance for loan losses: individually evaluated	740	925
Allowance for loan losses: collectively evaluated	12,126	9,875
Allowance for loan losses	13,537	11,385	$ 9,836
Commercial
LOANS
Loans receivable: Individually Evaluated	15,090	15,019
Loans receivable: Collectively Evaluated	963,281	992,732
Loans receivable	978,371	1,007,751
Allowance for loan losses: individually evaluated	740	763
Allowance for loan losses: collectively evaluated	7,553	5,545
Allowance for loan losses	8,293	6,308	4,788
Commercial | Real estate loan
LOANS
Loans receivable: Individually Evaluated	10,926	11,962
Loans receivable: Collectively Evaluated	558,914	519,848
Loans receivable	569,840	531,810
Allowance for loan losses: individually evaluated	669	692
Allowance for loan losses: collectively evaluated	3,736	2,359
Allowance for loan losses	4,405	3,051	1,921
Commercial | Commercial and industrial
LOANS
Loans receivable: Individually Evaluated	2,503	1,359
Loans receivable: Collectively Evaluated	156,570	158,218
Loans receivable	159,073	159,577
Allowance for loan losses: individually evaluated	71	71
Allowance for loan losses: collectively evaluated	2,652	2,174
Allowance for loan losses	2,723	2,245	1,391
Commercial | Paycheck Protection Program - 1st Draw
LOANS
Loans receivable: Individually Evaluated	0	0
Loans receivable: Collectively Evaluated	1,356	132,269
Loans receivable	1,356	132,269
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	0	0
Allowance for loan losses	0	0
Commercial | Paycheck Protection Program - 2nd Draw
LOANS
Loans receivable: Individually Evaluated	0
Loans receivable: Collectively Evaluated	25,508
Loans receivable	25,508	0
Allowance for loan losses: individually evaluated	0
Allowance for loan losses: collectively evaluated	0
Allowance for loan losses	0
Commercial | Political subdivisions
LOANS
Loans receivable: Individually Evaluated	0	0
Loans receivable: Collectively Evaluated	81,301	53,221
Loans receivable	81,301	53,221
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	0	0
Allowance for loan losses	0	0
Commercial | Construction Loans
LOANS
Loans receivable	60,579	42,874
Commercial | Commercial Construction And Land
LOANS
Loans receivable: Individually Evaluated	0	0
Loans receivable: Collectively Evaluated	60,579	42,874
Loans receivable	60,579	42,874
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	637	454
Allowance for loan losses	637	454	966
Commercial | Loans secured by farm land
LOANS
Loans receivable: Individually Evaluated	83	84
Loans receivable: Collectively Evaluated	11,038	11,652
Loans receivable	11,121	11,736
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	115	120
Allowance for loan losses	115	120	158
Commercial | Multi-family (5 or more) residential
LOANS
Loans receivable: Individually Evaluated	1,578	1,614
Loans receivable: Collectively Evaluated	48,511	54,197
Loans receivable	50,089	55,811
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	215	236
Allowance for loan losses	215	236	156
Commercial | Agricultural loans
LOANS
Loans receivable: Individually Evaluated	0	0
Loans receivable: Collectively Evaluated	2,351	3,164
Loans receivable	2,351	3,164
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	25	34
Allowance for loan losses	25	34	41
Commercial | Other commercial loans
LOANS
Loans receivable: Individually Evaluated	0	0
Loans receivable: Collectively Evaluated	17,153	17,289
Loans receivable	17,153	17,289
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	173	168
Allowance for loan losses	173	168	155
Residential mortgage
LOANS
Loans receivable: Individually Evaluated	644	2,799
Loans receivable: Collectively Evaluated	568,702	617,373
Loans receivable	569,346	620,172
Allowance for loan losses: individually evaluated	0	162
Allowance for loan losses: collectively evaluated	4,338	4,091
Allowance for loan losses	4,338	4,253	4,182
Residential mortgage | Real estate loan
LOANS
Loans receivable	569,840
Residential mortgage | Real estate loan | first liens
LOANS
Loans receivable: Individually Evaluated	630	2,385
Loans receivable: Collectively Evaluated	482,999	530,562
Loans receivable	483,629	532,947
Allowance for loan losses: individually evaluated	0	9
Allowance for loan losses: collectively evaluated	3,650	3,515
Allowance for loan losses	3,650	3,524	3,405
Residential mortgage | Real estate loan | junior liens
LOANS
Loans receivable: Individually Evaluated	14	414
Loans receivable: Collectively Evaluated	23,300	26,897
Loans receivable	23,314	27,311
Allowance for loan losses: individually evaluated	0	153
Allowance for loan losses: collectively evaluated	184	196
Allowance for loan losses	184	349	384
Residential mortgage | Construction Loans
LOANS
Loans receivable: Individually Evaluated	0	0
Loans receivable: Collectively Evaluated	23,151	20,613
Loans receivable	23,151	20,613
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	202	99
Allowance for loan losses	202	99	117
Residential mortgage | Home equity lines of credit
LOANS
Loans receivable: Individually Evaluated	0	0
Loans receivable: Collectively Evaluated	39,252	39,301
Loans receivable	39,252	39,301
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	302	281
Allowance for loan losses	302	281	276
Consumer
LOANS
Loans receivable: Individually Evaluated	0	0
Loans receivable: Collectively Evaluated	17,132	16,286
Loans receivable	17,132	16,286
Allowance for loan losses: individually evaluated	0	0
Allowance for loan losses: collectively evaluated	235	239
Allowance for loan losses	235	239	281
Unallocated
LOANS
Allowance for loan losses	$ 671	$ 585	$ 585

XML

LOANS - Impaired Loans (Details) - USD ($)	Dec. 31, 2021	Dec. 31, 2020
LOANS
Unpaid Principal Balance - with no allowance	$ 15,410,000	$ 13,211,000
Recorded Investment - with no allowance	9,194,000	9,736,000
Related Allowance - with no allowance	0	0
Unpaid Principal Balance - with allowance	6,540,000	8,082,000
Recorded investment - with allowance	6,540,000	8,082,000
Related Allowance - with allowance	740,000	925,000
Unpaid Principal Balance	21,950,000	21,293,000
Recorded Investment	15,734,000	17,818,000
Commercial
LOANS
Recorded Investment	1,391,000
Commercial | Real estate loan
LOANS
Unpaid Principal Balance - with no allowance	6,600,000	7,168,000
Recorded Investment - with no allowance	4,458,000	5,398,000
Related Allowance - with no allowance	0	0
Unpaid Principal Balance - with allowance	6,468,000	6,501,000
Recorded investment - with allowance	6,468,000	6,501,000
Related Allowance - with allowance	668,000	691,000
Commercial | Commercial and industrial
LOANS
Unpaid Principal Balance - with no allowance	5,213,000	1,781,000
Recorded Investment - with no allowance	2,431,000	1,287,000
Related Allowance - with no allowance	0	0
Unpaid Principal Balance - with allowance	72,000	72,000
Recorded investment - with allowance	72,000	72,000
Related Allowance - with allowance	72,000	72,000
Commercial | Loans secured by farm land
LOANS
Unpaid Principal Balance - with no allowance	83,000	84,000
Recorded Investment - with no allowance	83,000	84,000
Related Allowance - with no allowance	0	0
Commercial | Multi-family (5 or more) residential
LOANS
Unpaid Principal Balance - with no allowance	2,734,000	2,770,000
Recorded Investment - with no allowance	1,578,000	1,614,000
Related Allowance - with no allowance	0	0
Residential mortgage | Real estate loan | first liens
LOANS
Unpaid Principal Balance - with no allowance	656,000	1,248,000
Recorded Investment - with no allowance	630,000	1,248,000
Related Allowance - with no allowance	0	0
Unpaid Principal Balance - with allowance	0	1,200,000
Recorded investment - with allowance	0	1,200,000
Related Allowance - with allowance	0	9,000
Residential mortgage | Real estate loan | junior liens
LOANS
Unpaid Principal Balance - with no allowance	124,000	160,000
Recorded Investment - with no allowance	14,000	105,000
Related Allowance - with no allowance	0	0
Unpaid Principal Balance - with allowance	0	309,000
Recorded investment - with allowance	0	309,000
Related Allowance - with allowance	$ 0	$ 153,000

XML

LOANS - Average Balance of Impaired Loans and Income Recognized on Impaired Loans (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
LOANS
Average Investment in Impaired Loans	$ 18,043	$ 11,246
Interest Income Recognized on Impaired Loans on a Cash Basis	821	480
Commercial
LOANS
Average Investment in Impaired Loans	16,035	8,944
Interest Income Recognized on Impaired Loans on a Cash Basis	732	339
Commercial | Real estate loan
LOANS
Average Investment in Impaired Loans	11,617	5,266
Interest Income Recognized on Impaired Loans on a Cash Basis	557	258
Commercial | Commercial and industrial
LOANS
Average Investment in Impaired Loans	2,636	2,542
Interest Income Recognized on Impaired Loans on a Cash Basis	34	34
Commercial | Commercial Construction And Land
LOANS
Average Investment in Impaired Loans	48	521
Interest Income Recognized on Impaired Loans on a Cash Basis	3	15
Commercial | Loans secured by farm land
LOANS
Average Investment in Impaired Loans	84	319
Interest Income Recognized on Impaired Loans on a Cash Basis	1	27
Commercial | Multi-family (5 or more) residential.
LOANS
Average Investment in Impaired Loans	1,583	202
Interest Income Recognized on Impaired Loans on a Cash Basis	133	0
Commercial | Agricultural loans
LOANS
Average Investment in Impaired Loans	67	76
Interest Income Recognized on Impaired Loans on a Cash Basis	4	4
Commercial | Other commercial loans
LOANS
Average Investment in Impaired Loans	0	18
Interest Income Recognized on Impaired Loans on a Cash Basis	0	1
Residential mortgage
LOANS
Average Investment in Impaired Loans	2,008	2,302
Interest Income Recognized on Impaired Loans on a Cash Basis	89	141
Residential mortgage | Real estate loan | first liens
LOANS
Average Investment in Impaired Loans	1,647	1,853
Interest Income Recognized on Impaired Loans on a Cash Basis	78	116
Residential mortgage | Real estate loan | junior liens
LOANS
Average Investment in Impaired Loans	361	392
Interest Income Recognized on Impaired Loans on a Cash Basis	11	22
Residential mortgage | Home Equity Line of Credit [Member]
LOANS
Average Investment in Impaired Loans	0	57
Interest Income Recognized on Impaired Loans on a Cash Basis	$ 0	$ 3

XML

LOANS - Nonaccrual Loans and Loans Past Due Ninety Days or More and Still Accruing (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
LOANS
Past Due 90+ Days and Accruing	$ 2,219	$ 1,975
Nonaccrual	18,999	21,416
Commercial
LOANS
Past Due 90+ Days and Accruing	861	796
Nonaccrual	14,893	14,267
Commercial | Real estate loan
LOANS
Past Due 90+ Days and Accruing	738	395
Nonaccrual	10,885	11,550
Commercial | Commercial and industrial
LOANS
Past Due 90+ Days and Accruing	30	142
Nonaccrual	2,299	970
Commercial | Commercial Construction And Land
LOANS
Past Due 90+ Days and Accruing	0	0
Nonaccrual	48	49
Commercial | Loans secured by farm land
LOANS
Past Due 90+ Days and Accruing	28	188
Nonaccrual	83	84
Commercial | Multi-family (5 or more) residential
LOANS
Past Due 90+ Days and Accruing	0	0
Nonaccrual	1,578	1,614
Commercial | Agricultural loans
LOANS
Past Due 90+ Days and Accruing	65	0
Nonaccrual	0	0
Commercial | Other commercial loans
LOANS
Past Due 90+ Days and Accruing	0	71
Nonaccrual	0	0
Residential mortgage
LOANS
Past Due 90+ Days and Accruing	1,315	1,123
Nonaccrual	4,090	7,064
Residential mortgage | Real estate loan | first liens
LOANS
Past Due 90+ Days and Accruing	1,144	838
Nonaccrual	4,005	6,387
Residential mortgage | Real estate loan | junior liens
LOANS
Past Due 90+ Days and Accruing	69	52
Nonaccrual	3	378
Residential mortgage | Home equity lines of credit
LOANS
Past Due 90+ Days and Accruing	102	233
Nonaccrual	82	299
Consumer
LOANS
Past Due 90+ Days and Accruing	43	56
Nonaccrual	$ 16	$ 85

XML

LOANS - Contractual Aging of Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
LOANS
Loans receivable	$ 1,564,849	$ 1,644,209
Current & Past Due Less than 30 Days
LOANS
Loans receivable	1,547,325	1,627,899
Past Due 30-89 Days
LOANS
Loans past due	6,333	8,607
Past Due 90+ Days
LOANS
Loans past due	11,191	7,703
Commercial
LOANS
Loans receivable	978,371	1,007,751
Commercial | Current & Past Due Less than 30 Days
LOANS
Loans receivable	969,477	1,002,260
Commercial | Past Due 30-89 Days
LOANS
Loans past due	928	2,453
Commercial | Past Due 90+ Days
LOANS
Loans past due	7,966	3,038
Commercial | Real estate loan
LOANS
Loans receivable	569,840	531,810
Commercial | Real estate loan | Current & Past Due Less than 30 Days
LOANS
Loans receivable	563,658	529,998
Commercial | Real estate loan | Past Due 30-89 Days
LOANS
Loans past due	762	66
Commercial | Real estate loan | Past Due 90+ Days
LOANS
Loans past due	5,420	1,746
Commercial | Commercial and industrial
LOANS
Loans receivable	159,073	159,577
Commercial | Commercial and industrial | Current & Past Due Less than 30 Days
LOANS
Loans receivable	158,188	158,523
Commercial | Commercial and industrial | Past Due 30-89 Days
LOANS
Loans past due	72	55
Commercial | Commercial and industrial | Past Due 90+ Days
LOANS
Loans past due	813	999
Commercial | Paycheck Protection Program - 1st Draw
LOANS
Loans receivable	1,356	132,269
Commercial | Paycheck Protection Program - 1st Draw | Current & Past Due Less than 30 Days
LOANS
Loans receivable	1,339	132,269
Commercial | Paycheck Protection Program - 1st Draw | Past Due 30-89 Days
LOANS
Loans past due	17	0
Commercial | Paycheck Protection Program - 1st Draw | Past Due 90+ Days
LOANS
Loans past due	0	0
Commercial | Paycheck Protection Program - 2nd Draw
LOANS
Loans receivable	25,508	0
Commercial | Paycheck Protection Program - 2nd Draw | Current & Past Due Less than 30 Days
LOANS
Loans receivable	25,508	0
Commercial | Paycheck Protection Program - 2nd Draw | Past Due 30-89 Days
LOANS
Loans past due	0	0
Commercial | Paycheck Protection Program - 2nd Draw | Past Due 90+ Days
LOANS
Loans past due	0	0
Commercial | Political subdivisions
LOANS
Loans receivable	81,301	53,221
Commercial | Political subdivisions | Current & Past Due Less than 30 Days
LOANS
Loans receivable	81,301	53,221
Commercial | Political subdivisions | Past Due 30-89 Days
LOANS
Loans past due	0	0
Commercial | Political subdivisions | Past Due 90+ Days
LOANS
Loans past due	0	0
Commercial | Commercial Construction And Land
LOANS
Loans receivable	60,579	42,874
Commercial | Commercial Construction And Land | Current & Past Due Less than 30 Days
LOANS
Loans receivable	60,509	42,590
Commercial | Commercial Construction And Land | Past Due 30-89 Days
LOANS
Loans past due	70	284
Commercial | Commercial Construction And Land | Past Due 90+ Days
LOANS
Loans past due	0	0
Commercial | Construction Loans
LOANS
Loans receivable	60,579	42,874
Commercial | Loans secured by farm land
LOANS
Loans receivable	11,121	11,736
Commercial | Loans secured by farm land | Current & Past Due Less than 30 Days
LOANS
Loans receivable	11,010	11,419
Commercial | Loans secured by farm land | Past Due 30-89 Days
LOANS
Loans past due	0	95
Commercial | Loans secured by farm land | Past Due 90+ Days
LOANS
Loans past due	111	222
Commercial | Multi-family (5 or more) residential
LOANS
Loans receivable	50,089	55,811
Commercial | Multi-family (5 or more) residential | Current & Past Due Less than 30 Days
LOANS
Loans receivable	48,532	53,860
Commercial | Multi-family (5 or more) residential | Past Due 30-89 Days
LOANS
Loans past due	0	1,951
Commercial | Multi-family (5 or more) residential | Past Due 90+ Days
LOANS
Loans past due	1,557	0
Commercial | Agricultural loans
LOANS
Loans receivable	2,351	3,164
Commercial | Agricultural loans | Current & Past Due Less than 30 Days
LOANS
Loans receivable	2,279	3,091
Commercial | Agricultural loans | Past Due 30-89 Days
LOANS
Loans past due	7	2
Commercial | Agricultural loans | Past Due 90+ Days
LOANS
Loans past due	65	71
Commercial | Other commercial loans
LOANS
Loans receivable	17,153	17,289
Commercial | Other commercial loans | Current & Past Due Less than 30 Days
LOANS
Loans receivable	17,153	17,289
Commercial | Other commercial loans | Past Due 30-89 Days
LOANS
Loans past due	0	0
Commercial | Other commercial loans | Past Due 90+ Days
LOANS
Loans past due	0	0
Residential mortgage
LOANS
Loans receivable	569,346	620,172
Residential mortgage | Current & Past Due Less than 30 Days
LOANS
Loans receivable	560,847	609,576
Residential mortgage | Past Due 30-89 Days
LOANS
Loans past due	5,333	6,071
Residential mortgage | Past Due 90+ Days
LOANS
Loans past due	3,166	4,525
Residential mortgage | Real estate loan
LOANS
Loans receivable	569,840
Residential mortgage | Real estate loan | first liens
LOANS
Loans receivable	483,629	532,947
Residential mortgage | Real estate loan | first liens | Current & Past Due Less than 30 Days
LOANS
Loans receivable	475,637	523,191
Residential mortgage | Real estate loan | first liens | Past Due 30-89 Days
LOANS
Loans past due	5,038	5,703
Residential mortgage | Real estate loan | first liens | Past Due 90+ Days
LOANS
Loans past due	2,954	4,053
Residential mortgage | Real estate loan | junior liens
LOANS
Loans receivable	23,314	27,311
Residential mortgage | Real estate loan | junior liens | Current & Past Due Less than 30 Days
LOANS
Loans receivable	23,229	27,009
Residential mortgage | Real estate loan | junior liens | Past Due 30-89 Days
LOANS
Loans past due	16	111
Residential mortgage | Real estate loan | junior liens | Past Due 90+ Days
LOANS
Loans past due	69	191
Residential mortgage | Construction Loans
LOANS
Loans receivable	23,151	20,613
Residential mortgage | Construction Loans | Current & Past Due Less than 30 Days
LOANS
Loans receivable	23,151	20,457
Residential mortgage | Construction Loans | Past Due 30-89 Days
LOANS
Loans past due	0	156
Residential mortgage | Construction Loans | Past Due 90+ Days
LOANS
Loans past due	0	0
Residential mortgage | Home equity lines of credit
LOANS
Loans receivable	39,252	39,301
Residential mortgage | Home equity lines of credit | Current & Past Due Less than 30 Days
LOANS
Loans receivable	38,830	38,919
Residential mortgage | Home equity lines of credit | Past Due 30-89 Days
LOANS
Loans past due	279	101
Residential mortgage | Home equity lines of credit | Past Due 90+ Days
LOANS
Loans past due	143	281
Consumer
LOANS
Loans receivable	17,132	16,286
Consumer | Current & Past Due Less than 30 Days
LOANS
Loans receivable	17,001	16,063
Consumer | Past Due 30-89 Days
LOANS
Loans past due	72	83
Consumer | Past Due 90+ Days
LOANS
Loans past due	$ 59	$ 140

XML

LOANS - Contractual Aging of Nonaccrual Loans (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
LOANS
Nonaccrual loans	$ 18,999	$ 21,416
Non accrual Loans [Member]
LOANS
Nonaccrual loans	18,999	21,416
Non accrual Loans [Member] | Current & Past Due Less than 30 Days
LOANS
Nonaccrual loans	8,800	12,999
Non accrual Loans [Member] | Past Due 30-89 Days
LOANS
Nonaccrual loans	1,227	2,689
Non accrual Loans [Member] | Past Due 90+ Days
LOANS
Nonaccrual loans	$ 8,972	$ 5,728

XML

LOANS - Aging of Troubled Debt Restructurings (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Troubled Debt Restructurings
Nonaccrual loans	$ 18,999	$ 21,416
Troubled Debt Restructuring
Troubled Debt Restructurings
Nonaccrual loans	5,452	6,867
Troubled debt restructurings	5,805	7,451
Troubled Debt Restructuring | Current & Past Due Less than 30 Days
Troubled Debt Restructurings
Troubled debt restructurings	248	166
Troubled Debt Restructuring | Past Due 30-89 Days
Troubled Debt Restructurings
Troubled debt restructurings	40	0
Troubled Debt Restructuring | Past Due 90+ Days
Troubled Debt Restructurings
Troubled debt restructurings	$ 65	$ 418

XML

LOANS - Troubled Debt Restructurings (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Troubled Debt Restructurings
Troubled debt restructurings, number of contracts	4	7
Troubled debt restructurings, post-modification recorded investment	$ 222	$ 7,271
Commercial | Commercial and industrial | Principal and interest payment deferral non-COVID related
Troubled Debt Restructurings
Troubled debt restructurings, number of contracts	0	2
Troubled debt restructurings, post-modification recorded investment	$ 0	$ 4,831
Commercial | Commercial and industrial | Interest only payments for a nine-month period
Troubled Debt Restructurings
Troubled debt restructurings, number of contracts	0	1
Troubled debt restructurings, post-modification recorded investment	$ 0	$ 240
Commercial | Multi-family (5 or more) residential | Principal and interest payment deferral non-COVID related
Troubled Debt Restructurings
Troubled debt restructurings, number of contracts	0	3
Troubled debt restructurings, post-modification recorded investment	$ 0	$ 2,170
Residential mortgage | Real estate loan | first liens | Reduced monthly payments for a fifteen-month period
Troubled Debt Restructurings
Troubled debt restructurings, number of contracts	1	0
Troubled debt restructurings, post-modification recorded investment	$ 116	$ 0
Residential mortgage | Real estate loan | first liens | Monthly Payment Reduction and Extended Maturity Date [Member]
Troubled Debt Restructurings
Troubled debt restructurings, number of contracts	1	0
Troubled debt restructurings, post-modification recorded investment	$ 12	$ 0
Residential mortgage | Real estate loan | junior liens | New Loan at Lower Than Risk-adjusted Market Rate to Borrower [Member]
Troubled Debt Restructurings
Troubled debt restructurings, number of contracts	0	1
Troubled debt restructurings, post-modification recorded investment	$ 0	$ 30
Residential mortgage | Home equity lines of credit | Monthly Payment Reduction and Extended Maturity Date [Member]
Troubled Debt Restructurings
Troubled debt restructurings, number of contracts	1	0
Troubled debt restructurings, post-modification recorded investment	$ 24	$ 0
Residential mortgage | Home equity lines of credit | Reduced monthly payments for eighteen-month period
Troubled Debt Restructurings
Troubled debt restructurings, number of contracts	1	0
Troubled debt restructurings, post-modification recorded investment	$ 70	$ 0

XML

LOANS - Payment Defaults on TDR Loans (Details)	12 Months Ended
	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Number of Loans	1	1
Recorded Investment	$ 3,405,000	$ 240,000
Real estate loan | junior liens
Number of Loans	1	1
Recorded Investment	$ 3,405,000	$ 240,000

XML

LOANS - Foreclosed Residential Real Estate (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Residential mortgage
LOANS
Foreclosed residential real estate	$ 256	$ 80

XML

LOANS - Mortgage Loans in Process of Foreclosure (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Residential mortgage
LOANS
Residential real estate in process of foreclosure	$ 1,260	$ 1,246

XML

LOANS - Additional information (Details)	3 Months Ended								12 Months Ended
	Dec. 31, 2021 USD ($) loan	Sep. 30, 2021 USD ($)	Jun. 30, 2021 USD ($)	Mar. 31, 2021 USD ($)	Dec. 31, 2020 USD ($) loan	Sep. 30, 2020 USD ($)	Jun. 30, 2020 USD ($)	Mar. 31, 2020 USD ($)	Dec. 31, 2021 USD ($) loan	Dec. 31, 2020 USD ($) loan	Dec. 31, 2019 USD ($)
LOANS
Unamortized Loan Commitment and Origination Fees and Unamortized Discounts or Premiums, Total	$ 4,247,000				$ 6,286,000				$ 4,247,000	$ 6,286,000
Recorded investment - with allowance	6,540,000				8,082,000				6,540,000	8,082,000
Specific allowances	740,000				925,000				740,000	925,000
Loans receivable	1,564,849,000				1,644,209,000				1,564,849,000	1,644,209,000
Allowance for Loan losses	13,537,000				11,385,000				13,537,000	11,385,000	$ 9,836,000
Interest and fees									74,549,000	67,384,000
Financing receivable charge-offs									1,575,000	2,465,000
Provision (credit) for loan losses	1,128,000	$ 1,530,000	$ 744,000	$ 259,000	620,000	$ 1,941,000	$ (176,000)	$ 1,528,000	3,661,000	3,913,000
Increase (decrease) in provision for loan losses									(252,000)
Amount of net charge related to specific loans									1,324,000
Amount of net increase (decrease) in specific allowances on loans									(185,000)
Amount of net charge offs related to a specific loan									1,509,000
Amount of increase (decrease) in the provision for loan losses from collectively determined portion of allowance									2,251,000
Amount of increase (decrease) in the provision for loan losses from unallocated portion of allowance									86,000
Recorded Investment	15,734,000				17,818,000				15,734,000	17,818,000
Financing Receivable, Troubled Debt Restructuring, Commitment to Lend	0				0				0	0
Purchased Credit Impaired
LOANS
Loans receivable	6,558,000				6,841,000				6,558,000	6,841,000
Loans Modified, Recorded Investment	$ 6,558,000				$ 6,841,000				$ 6,558,000	$ 6,841,000
COVID-19-related loan modifications
LOANS
Loans Modified, Number of Loans | loan	0				45				0	45
Loans Modified, Recorded Investment					$ 37,397,000					$ 37,397,000
Small Business Administration - Paycheck Protection Program
LOANS
Accretion of fees received									$ 5,515,000	1,901,000
Interest and fees									6,530,000	2,924,000
Paycheck Protection Program - 1st Draw
LOANS
Unamortized Loan Commitment and Origination Fees and Unamortized Discounts or Premiums, Total	$ 54,000								54,000
Contractual principal balances	1,410,000								1,410,000
Recorded Investment	1,356,000								1,356,000
Paycheck Protection Program - 2nd Draw
LOANS
Unamortized Loan Commitment and Origination Fees and Unamortized Discounts or Premiums, Total	848,000								848,000
Contractual principal balances	26,356,000								26,356,000
Recorded Investment	25,508,000								25,508,000
Unfunded Loan Commitment
LOANS
Allowance for Loan losses	0				0				0	0
Commercial
LOANS
Loans receivable	978,371,000				1,007,751,000				978,371,000	1,007,751,000
Allowance for Loan losses	8,293,000				6,308,000				8,293,000	6,308,000	4,788,000
Financing receivable charge-offs									1,464,000	2,343,000
Provision (credit) for loan losses									3,427,000	3,847,000
Recorded Investment	1,391,000								1,391,000
Commercial | Maximum
LOANS
Threshold amount of loan balance for evaluating individual impairment loss	200,000								200,000
Commercial | Purchased Credit Impaired
LOANS
Loans receivable	6,485,000				6,696,000				6,485,000	6,696,000
Commercial | Loan Customer Major Write Off [Member]
LOANS
Financing receivable charge-offs									1,463,000	$ 2,219,000
Number of loan charged off | loan										1
Recorded Investment	0				0				0	$ 0
Commercial | Paycheck Protection Program - 1st Draw
LOANS
Loans receivable	1,356,000				132,269,000				1,356,000	132,269,000
Allowance for Loan losses	0				0				0	0
Commercial | Paycheck Protection Program - 1st Draw | Purchased Credit Impaired
LOANS
Loans receivable	0				0				0	0
Commercial | Paycheck Protection Program - 2nd Draw
LOANS
Loans receivable	25,508,000				0				25,508,000	0
Allowance for Loan losses	0								0
Commercial | Paycheck Protection Program - 2nd Draw | Purchased Credit Impaired
LOANS
Loans receivable	0								0
Commercial | Commercial and industrial
LOANS
Recorded investment - with allowance	72,000				72,000				72,000	72,000
Specific allowances	72,000				72,000				72,000	72,000
Loans receivable	159,073,000				159,577,000				159,073,000	159,577,000
Allowance for Loan losses	2,723,000				2,245,000				2,723,000	2,245,000	1,391,000
Financing receivable charge-offs									1,464,000	2,236,000
Provision (credit) for loan losses									1,922,000	3,074,000
Commercial | Commercial and industrial | Purchased Credit Impaired
LOANS
Loans receivable	763,000				784,000				763,000	784,000
Commercial | Real estate loan
LOANS
Recorded investment - with allowance	6,468,000				6,501,000				6,468,000	6,501,000
Specific allowances	668,000				691,000				668,000	691,000
Loans receivable	569,840,000				531,810,000				569,840,000	531,810,000
Allowance for Loan losses	4,405,000				3,051,000				4,405,000	3,051,000	1,921,000
Financing receivable charge-offs									0	0
Provision (credit) for loan losses									1,352,000	1,130,000
Commercial | Real estate loan | TDRs for which payment defaults occurred
LOANS
Specific allowances	427,000				416,000				427,000	416,000
Commercial | Real estate loan | Purchased Credit Impaired
LOANS
Loans receivable					4,298,000					4,298,000
Unallocated
LOANS
Allowance for Loan losses	671,000				585,000				671,000	585,000	585,000
Financing receivable charge-offs									0	0
Provision (credit) for loan losses									86,000	0
Residential mortgage
LOANS
Loans receivable	569,346,000				620,172,000				569,346,000	620,172,000
Allowance for Loan losses	4,338,000				4,253,000				4,338,000	4,253,000	$ 4,182,000
Financing receivable charge-offs									11,000	0
Provision (credit) for loan losses									90,000	27,000
Residential mortgage | Maximum
LOANS
Threshold amount of loan balance for evaluating individual impairment loss	400,000								400,000
Residential mortgage | Purchased Credit Impaired
LOANS
Loans receivable	73,000				$ 145,000				73,000	$ 145,000
Residential mortgage | Real estate loan
LOANS
Loans receivable	569,840,000								569,840,000
Residential mortgage | Real estate loan | Purchased Credit Impaired
LOANS
Loans receivable	$ 4,144,000								$ 4,144,000

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BANK PREMISES AND EQUIPMENT - Summary of Bank Premises and Equipment (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
BANK PREMISES AND EQUIPMENT
Property, plant and equipment	$ 52,226	$ 52,127
Less: accumulated depreciation	(31,543)	(30,601)
Net	20,683	21,526
Land
BANK PREMISES AND EQUIPMENT
Property, plant and equipment	3,623	3,826
Building and Building Improvements
BANK PREMISES AND EQUIPMENT
Property, plant and equipment	32,606	33,058
Furniture and Fixtures
BANK PREMISES AND EQUIPMENT
Property, plant and equipment	15,162	15,235
Construction in Progress
BANK PREMISES AND EQUIPMENT
Property, plant and equipment	$ 835	$ 8

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BANK PREMISES AND EQUIPMENT - Depreciation Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Depreciation expense	$ 2,130	$ 1,981
Net occupancy and equipment expense
Depreciation expense	1,723	1,595
Data processing and telecommunications expense
Depreciation expense	$ 407	$ 386

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GOODWILL AND OTHER INTANGIBLE ASSETS - Core Deposit Intangibles (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
GOODWILL AND OTHER INTANGIBLE ASSETS
Gross amount	$ 6,639	$ 6,639
Accumulated amortization	(3,323)	(2,788)
Net	$ 3,316	$ 3,851

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GOODWILL AND OTHER INTANGIBLE ASSETS - Amortization Expense Core Deposit Intangibles (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
GOODWILL AND OTHER INTANGIBLE ASSETS
Amortization expense	$ 535	$ 540

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GOODWILL AND OTHER INTANGIBLE ASSETS - Future Amortization Expense (Details) $ in Thousands	Dec. 31, 2021 USD ($)
GOODWILL AND OTHER INTANGIBLE ASSETS
2022, Amortization expense	$ 439
2023, Amortization expense	408
2024, Amortization expense	390
2025, Amortization expense	424
2026, Amortization expense	$ 396

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GOODWILL AND OTHER INTANGIBLE ASSETS - Change in Carrying Amount of Goodwill (Details) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Changes in the carrying amount of goodwill
Balance, beginning of period	$ 52,505,000	$ 28,388,000
Goodwill arising in business combination	0	24,117,000
Balance, end of period	52,505,000	52,505,000
Goodwill impairment	$ 0	$ 0

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DEPOSITS - Scheduled Maturities of Time Deposits (Details) $ in Thousands	Dec. 31, 2021 USD ($)
DEPOSITS
2022	$ 163,170
2023	80,711
2024	22,224
2025	11,963
2026	7,825
Total	$ 285,893

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DEPOSITS - Remaining Maturities of Time Deposits In Excess of 250,000 (Details) - USD ($)	Dec. 31, 2021	Dec. 31, 2020
DEPOSITS
Time Deposits, at or Above FDIC Insurance Limit	$ 75,375,000	$ 103,024,000
Three months or less	15,981,000
Over 3 months through 12 months	32,648,000
Over 1 year through 3 years	25,438,000
Over 3 years	1,308,000
Total	$ 75,375,000	$ 103,024,000

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BORROWED FUNDS - Short-term borrowings (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
BORROWED FUNDS AND SUBORDINATED DEBT
Short-term borrowings	$ 1,803	$ 20,022
FHLB-Pittsburgh borrowings
BORROWED FUNDS AND SUBORDINATED DEBT
Short-term borrowings	0	18,066
Customer repurchase agreements
BORROWED FUNDS AND SUBORDINATED DEBT
Short-term borrowings	$ 1,803	$ 1,956

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BORROWED FUNDS - Short-term borrowings - Additional information (Details) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
BORROWED FUNDS AND SUBORDINATED DEBT
Short-term Debt, Weighted Average Interest Rate, at Point in Time	0.10%	0.40%
Letter of credit	$ 0	$ 0
Line of Credit Facility, Maximum Month-end Outstanding Amount	17,353,000	56,647,000
Other Correspondent Banks
BORROWED FUNDS AND SUBORDINATED DEBT
Line of Credit Facility, Maximum Borrowing Capacity	45,000,000	45,000,000
Long-term Line of Credit, Total	0	0
Federal Reserve Bank of Philadelphia | Collateral Pledged
BORROWED FUNDS AND SUBORDINATED DEBT
Investment pledged as collateral	$ 14,034,000	$ 15,126,000
Customer repurchase agreements
BORROWED FUNDS AND SUBORDINATED DEBT
Debt, Weighted Average Interest Rate	0.10%	0.10%
Carrying Value of Securities Sold under Repurchase Agreements and Deposits Received for Securities Loaned, Total	$ 1,820,000	$ 1,980,000
Federal Home Loan Bank of Pittsburgh
BORROWED FUNDS AND SUBORDINATED DEBT
Line of Credit Facility, Maximum Borrowing Capacity	756,868,000	771,199,000
Federal Home Loan Bank, Advances, General Debt Obligations, Disclosures, Collateral Pledged	1,046,242,000	1,049,690,000
Line of Credit Facility, Remaining Borrowing Capacity	723,557,000	698,977,000
Federal Home Loan Bank of Pittsburgh | Other Assets
BORROWED FUNDS AND SUBORDINATED DEBT
Federal Home Loan Bank Stock	9,313,000	9,720,000
Federal Home Loan Bank of Pittsburgh | Federal Reserve Bank of Philadelphia
BORROWED FUNDS AND SUBORDINATED DEBT
Line of Credit Facility, Maximum Borrowing Capacity	13,642,000	14,654,000
Long-term Line of Credit, Total	$ 0	$ 0
Federal Home Loan Bank of Pittsburgh | Federal Home Loan Bank Advances 1
BORROWED FUNDS AND SUBORDINATED DEBT
Number of Short-term Advances		5
Short-term Borrowing, Amount of Each Borrowing		$ 18,000,000
Short-term Debt, Weighted Average Interest Rate, at Point in Time		0.43%

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BORROWED FUNDS - Long-term Borrowings (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Long-term Borrowing
Long-term borrowings	$ 28,042	$ 54,608
Loans maturing in 2022 with a weighted-average rate of 0.60%
Long-term Borrowing
Rate	0.60%	0.60%
Loans maturing in 2023 with a weighted-average rate of 0.73%
Long-term Borrowing
Rate	0.73%	0.73%
Loans maturing in 2024 with a weighted-average rate of 0.75%
Long-term Borrowing
Rate	0.75%	0.75%
Loan maturing in 2025 with a rate of 4.91%
Long-term Borrowing
Rate	4.91%	4.91%
Federal Home Loan Bank of Pittsburgh
Long-term Borrowing
Long-term borrowings	$ 28,042	$ 54,608
Federal Home Loan Bank of Pittsburgh | Loans maturing in 2021 with a weighted-average effective rate of 1.36%
Long-term Borrowing
Long-term borrowings	0	26,098
Federal Home Loan Bank of Pittsburgh | Loans maturing in 2022 with a weighted-average rate of 0.60%
Long-term Borrowing
Long-term borrowings	15,452	15,682
Federal Home Loan Bank of Pittsburgh | Loans maturing in 2023 with a weighted-average rate of 0.73%
Long-term Borrowing
Long-term borrowings	7,119	7,224
Federal Home Loan Bank of Pittsburgh | Loans maturing in 2024 with a weighted-average rate of 0.75%
Long-term Borrowing
Long-term borrowings	5,099	5,137
Federal Home Loan Bank of Pittsburgh | Loan maturing in 2025 with a rate of 4.91%
Long-term Borrowing
Long-term borrowings	$ 372	$ 467

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BORROWED FUNDS - Senior Notes (Details) - USD ($)	May 19, 2021	Dec. 31, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Senior notes, net		$ 14,701,000	$ 0
Senior Notes with an aggregate par value of $15,000,000; bearing interest at 2.75% with an effective interest rate of 3.23%; maturing in June 2026
Debt Instrument [Line Items]
Aggregate par value	$ 15,000,000.0	$ 15,000,000
Stated interest rate	2.75%	2.75%
Debt issuance costs	$ 337,000
Senior notes, net	14,663,000	$ 14,701,000	$ 0
Amortization of debt issuance costs	$ 38,000
Effective interest rate		3.23%

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BORROWED FUNDS - Subordinated Debt (Details) - USD ($)		12 Months Ended
	May 19, 2021	Dec. 31, 2021	Dec. 31, 2020
Debt Instrument [Line Items]
Subordinated debt, net		$ 33,009,000	$ 16,553,000
6.25% maturing in June 2026 and redeemable at par in June 2021
Debt Instrument [Line Items]
Aggregate par value			$ 8,000,000
Stated interest rate			6.25%
Subordinated debt, net		0	$ 8,027,000
Effective interest rate			5.49%
6.50% maturing in April 2027 and redeemable at par in April 2022
Debt Instrument [Line Items]
Aggregate par value		$ 6,500,000	$ 6,500,000
Stated interest rate		6.50%	6.50%
Subordinated debt, net		$ 6,500,000	$ 6,500,000
6.50% maturing in July 2027 and redeemable at par in July 2022
Debt Instrument [Line Items]
Aggregate par value		$ 2,000,000	$ 2,000,000
Stated interest rate		6.50%	6.50%
Subordinated debt, net		$ 2,008,000	$ 2,026,000
Effective interest rate		5.60%	5.60%
3.25% maturing in June 2031 and redeemable at par in June 2026
Debt Instrument [Line Items]
Aggregate par value	$ 25,000,000.0	$ 25,000,000	$ 25,000,000
Stated interest rate	3.25%	3.25%	3.25%
Debt issuance costs	$ 563,000
Subordinated debt, net	$ 24,437,000	$ 24,501,000	$ 0
Amortization of debt issuance costs		$ 63,000
Effective interest rate		3.74%	3.74%
3.25% maturing in June 2031 and redeemable at par in June 2026 | Debt Instrument, Redemption, Period One
Debt Instrument [Line Items]
Stated interest rate	3.25%
Debt Instrument, Redemption Period, Start Date	May 19, 2021
Debt Instrument, Redemption Period, End Date	Jun. 01, 2031
3.25% maturing in June 2031 and redeemable at par in June 2026 | Debt Instrument, Redemption, Period Two
Debt Instrument [Line Items]
Debt Instrument, Redemption Period, Start Date	Jun. 01, 2026
Debt Instrument, Redemption Period, End Date	Jun. 01, 2026
Debt Instrument, Basis Spread on Variable Rate	2.59%

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EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS - Funded Status of Defined Benefit Plans (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Pension Plan [Member]
EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
Benefit obligation at beginning of year	$ 1,101	$ 976
Service cost	0	0
Interest cost	20	23
Plan participants' contributions	0	0
Actuarial (gain) loss	12	108
Benefits paid	(5)	(6)
Benefit obligation at end of year	1,128	1,101
Fair value of plan assets at beginning of year	1,062	971
Actual return on plan assets	118	97
Employer contribution	0	0
Plan participants' contributions	0	0
Benefits paid	(5)	(6)
Fair value of plan assets at end of year	1,175	1,062
Funded status at end of year	47	(39)
Other Postretirement Benefits Plan [Member]
EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
Benefit obligation at beginning of year	1,347	1,326
Service cost	63	46
Interest cost	33	39
Plan participants' contributions	148	185
Actuarial (gain) loss	(65)	11
Benefits paid	(229)	(260)
Benefit obligation at end of year	1,297	1,347
Fair value of plan assets at beginning of year	0	0
Actual return on plan assets	0	0
Employer contribution	81	75
Plan participants' contributions	148	185
Benefits paid	(229)	(260)
Fair value of plan assets at end of year	0	0
Funded status at end of year	$ (1,297)	$ (1,347)

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EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS - Liabilities in Balance Sheet (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Pension Plan [Member]
EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
Other assets	$ 47	$ 0
Accrued interest and other liabilities	0	39
Other Postretirement Benefits Plan [Member]
EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
Other assets	0	0
Accrued interest and other liabilities	$ 1,297	$ 1,347

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EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS - Items Included in Accumulated Other Comprehensive Income (Details) - USD ($)	Dec. 31, 2021	Dec. 31, 2020
Pension Plan [Member]
EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
Prior service cost	$ 0	$ 0
Net actuarial loss (gain)	182,000	277,000
Total	182,000	277,000
Defined Benefit Plan, Expected Amortization of Gain (Loss), Next Fiscal Year	8,000
Defined Benefit Plan, Accumulated Benefit Obligation	1,128,000	1,101,000
Other Postretirement Benefits Plan [Member]
EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
Prior service cost	(186,000)	(217,000)
Net actuarial loss (gain)	(271,000)	(211,000)
Total	(457,000)	$ (428,000)
Defined Benefit Plan, Expected Amortization of Gain (Loss), Next Fiscal Year	9,000
Defined Benefit Plan, Expected Amortization of Prior Service Cost (Credit), Next Fiscal Year	$ 31,000

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EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS - Net Periodic Benefit Costs (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Pension Plan [Member]
EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
Service cost	$ 0	$ 0
Interest cost	20	23
Expected return on plan assets	(30)	(27)
Prior service cost	0	0
Recognized net actuarial loss (gain)	19	16
Total net periodic benefit cost	9	12
Other Postretirement Benefits Plan [Member]
EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
Service cost	63	46
Interest cost	33	39
Expected return on plan assets	0	0
Prior service cost	(31)	(31)
Recognized net actuarial loss (gain)	(5)	(14)
Total net periodic benefit cost	$ 60	$ 40

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EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS - Assumptions Used to Determine Net Periodic Benefit Cost (Details)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Pension Plan [Member]
EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
Discount rate	2.30%	3.10%
Expected return on plan assets	4.81%	4.99%
Discount rate	2.60%	2.30%
Other Postretirement Benefits Plan [Member]
EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
Discount rate	2.50%	3.25%
Discount rate	3.00%	2.50%

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EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS - Future Benefit Payments (Details)	Dec. 31, 2021 USD ($)
EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
Estimated Minimum Contribution to Defined Benefit Pension Plan	$ 0
Pension Plan [Member]
EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
2022	542,000
2023	187,000
2024	8,000
2025	8,000
2026	14,000
2027-2031	360,000
Other Postretirement Benefits Plan [Member]
EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
2022	84,000
2023	81,000
2024	83,000
2025	85,000
2026	95,000
2027-2031	$ 428,000

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EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS - Plan Assets Allocation (Details)	Dec. 31, 2021	Dec. 31, 2020
EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
Percentage of plan assets	100.00%	100.00%
Cash and Cash Equivalents [Member]
EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
Percentage of plan assets	3.00%	2.00%
Debt Securities [Member]
EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
Percentage of plan assets	38.00%	36.00%
Equity Securities [Member]
EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
Percentage of plan assets	51.00%	51.00%
Alternative Funds [Member]
EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
Percentage of plan assets	8.00%	11.00%

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EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS - Profit Sharing and Deferred Compensation Plans (Details)			12 Months Ended
	Dec. 31, 2020 USD ($) shares	Jul. 01, 2020 USD ($)	Dec. 31, 2021 USD ($) shares	Dec. 31, 2020 USD ($) shares
Defined Contribution Plan Disclosure [Line Items]
Matching contributions			$ 1,299,000	$ 1,050,000
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 Repurchased | shares			0	0
Employee Stock Ownership Plan (ESOP), Shares in ESOP, Total | shares	481,478		513,494	481,478
Employee Stock Ownership Plan (ESOP), Cash Contributions to ESOP			$ 1,040,000	$ 912,000
Deferred Compensation, Monthly Payments To Be Made To Executives Or His Heirs		$ 1,000,000
Deferred Compensation Arrangement with Individual, Maximum Contractual Term		10 years
Deferred Compensation Arrangement with Individual, Recorded Liability		$ 499,000
Deferred Compensation Liability Discount Rate	1.50%	1.50%
Deferred Compensation Liability, Current and Noncurrent	$ 865,000		878,000	865,000
Merger Related Expenses
Defined Contribution Plan Disclosure [Line Items]
Deferred Compensation Arrangement with Individual, Compensation Expense		$ 360,000
Pension And Other Employee Benefits Expenses
Defined Contribution Plan Disclosure [Line Items]
Deferred Compensation Arrangement with Individual, Compensation Expense			13,000	6,000
Officers Nonqualified Deferred Compensation Arrangement [Member]
Defined Contribution Plan Disclosure [Line Items]
Deferred Compensation Arrangement with Individual, Compensation Expense			$ 314,000	$ 286,000

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EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS - Stock Based Compensation Paragraphs (Details) - USD ($)	1 Months Ended	12 Months Ended
	Jan. 31, 2022	Dec. 31, 2022	Dec. 31, 2021	Dec. 31, 2020
STOCK-BASED COMPENSATION PLANS
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Remaining Contractual Term			1 year 7 months 6 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value			$ 148,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period, Intrinsic Value			97,000	$ 128,000
Share-based Payment Arrangement, Expense			1,214,000	1,050,000
Forecast
STOCK-BASED COMPENSATION PLANS
Share-based Payment Arrangement, Expense		$ 1,600,000
Share-based Payment Arrangement, Option [Member]
STOCK-BASED COMPENSATION PLANS
Share-based Payment Arrangement, Expense			0	0
Restricted Stock
STOCK-BASED COMPENSATION PLANS
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Amount, Total			$ 1,498,000
Share-based Payment Arrangement, Nonvested Award, Cost Not yet Recognized, Period for Recognition			1 year 4 months 24 days
Granted (in shares)			78,391
Share-based Payment Arrangement, Expense			$ 1,214,000	$ 1,050,000
Stock Incentive Plan
STOCK-BASED COMPENSATION PLANS
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized			850,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant			110,800
Stock Incentive Plan | Share-based Payment Arrangement, Option [Member]
STOCK-BASED COMPENSATION PLANS
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)			6 months
Share-based Compensation Arrangement by Share-based Payment Award, Expiration Period			10 years
Stock Incentive Plan | Restricted Stock | Subsequent event
STOCK-BASED COMPENSATION PLANS
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)	3 years
Granted (in shares)	66,405
Stock Incentive Plan | Restricted Stock | Employees [Member]
STOCK-BASED COMPENSATION PLANS
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)			3 years	3 years
Stock Incentive Plan | Performance Shares | Employees [Member]
STOCK-BASED COMPENSATION PLANS
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)			3 years	3 years
Independent Directors Stock Incentive Plan
STOCK-BASED COMPENSATION PLANS
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized			235,000
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			96,309
Independent Directors Stock Incentive Plan | Restricted Stock | Subsequent event
STOCK-BASED COMPENSATION PLANS
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)	1 year
Granted (in shares)	9,588
Independent Directors Stock Incentive Plan | Restricted Stock | Director [Member]
STOCK-BASED COMPENSATION PLANS
Share-based Compensation Arrangement by Share-based Payment Award, Award Vesting Period (Year)			1 year	1 year

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EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
STOCK-BASED COMPENSATION PLANS
Share-based Payment Arrangement, Expense	$ 1,214	$ 1,050
Restricted Stock
STOCK-BASED COMPENSATION PLANS
Share-based Payment Arrangement, Expense	1,214	1,050
Share-based Payment Arrangement, Option [Member]
STOCK-BASED COMPENSATION PLANS
Share-based Payment Arrangement, Expense	$ 0	$ 0

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EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS - Non-vested Stock Options and Restricted Stock Activity (Details) - Restricted Stock	12 Months Ended
	Dec. 31, 2021 $ / shares shares
Number of Shares
Outstanding, beginning of period (in shares) | shares	101,942
Granted (in shares) | shares	78,391
Vested (in shares) | shares	(48,016)
Forfeited (in shares) | shares	(5,290)
Outstanding, end of period (in shares) | shares	127,027
Weighted Average Grant Date Fair Value
Outstanding, at beginning of period (in dollars per share) | $ / shares	$ 23.42
Granted, (in dollars per share) | $ / shares	20.28
Vested, (in dollars per share) | $ / shares	23.85
Forfeited, (in dollars per share) | $ / shares	22.10
Outstanding, at end period, (in dollars per share) | $ / shares	$ 21.37

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EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS - Awarded Shares of Restricted Stock Under Stock Incentive Plan (Details) - shares	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Restricted Stock | Independent Directors Stock Incentive Plan | Director [Member]
STOCK-BASED COMPENSATION PLANS
Shares awarded (in shares)	10,989	7,580
Restricted Stock | Stock Incentive Plan
STOCK-BASED COMPENSATION PLANS
Shares awarded (in shares)	78,391	70,940
Restricted Stock | Stock Incentive Plan | Employees [Member]
STOCK-BASED COMPENSATION PLANS
Shares awarded (in shares)	50,178	45,457
Performance Shares | Stock Incentive Plan | Employees [Member]
STOCK-BASED COMPENSATION PLANS
Shares awarded (in shares)	17,224	17,903

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EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS - Stock Option Activity (Details) - $ / shares	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding [Roll Forward]
Outstanding, beginning of year (in shares)	57,111	75,897
Granted (in shares)	0	0
Exercised (in shares)	(22,429)	(17,222)
Forfeited (in shares)	(3,156)	(1,564)
Expired (in shares)	(7,308)	0
Outstanding, end of year (in shares)	24,218	57,111
Options exercisable at year-end (in shares)	24,218	57,111
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]
Outstanding, beginning of year (in dollars per share)	$ 18.92	$ 18.69
Exercised (in dollars per share)	18.96	18.25
Forfeited (in dollars per share)	19.20	15.06
Expired (in dollars per share)	15.06
Outstanding, end of year (in dollars per share)	20.01	18.92
Options exercisable at year-end (in dollars per share)	20.01	18.92
Weighted-average fair value of options forfeited (in dollars per share)	$ 4.59	$ 4.26

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INCOME TAXES - Net Deferred Tax Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Deferred tax assets:
Allowance for loan losses	$ 2,935	$ 2,154
Purchase accounting adjustments on loans	1,621	1,930
Net operating loss carryforward	778	896
Operating leases liability	821	724
Other deferred tax assets	3,260	3,089
Total deferred tax assets	9,415	8,793
Deferred tax liabilities:
Unrealized holding gains on securities	1,278	3,104
Defined benefit plans - ASC 835	57	32
Bank premises and equipment	460	1,216
Core deposit intangibles	725	840
Right-of-use assets from operating leases	821	724
Other deferred tax liabilities	187	172
Total deferred tax liabilities	3,528	6,088
Deferred tax asset, net	$ 5,887	$ 2,705

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INCOME TAXES - Provision for Income Taxes (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Provision for income taxes
Currently payable	$ 8,386	$ 4,230
Tax expense resulting from allocations of certain tax benefits to equity or as a reduction in other assets	128	121
Deferred	(1,381)	(361)
Total provision	$ 7,133	$ 3,990

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INCOME TAXES - Reconciliation of Income Tax (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
INCOME TAXES
Expected provision									$ 7,914	$ 4,875
Tax-exempt interest income									(921)	(808)
Increase in cash surrender value and other income from life insurance, net									(118)	(170)
ESOP Dividends									(120)	(110)
State income tax, net of Federal benefit									375	172
Other, net									3	31
Income Tax Expense (Benefit), Total	$ 1,677	$ 1,566	$ 1,780	$ 2,110	$ 1,481	$ 438	$ 1,255	$ 816	$ 7,133	$ 3,990
Expected provision, percentage									21.00%	21.00%
Tax-exempt interest income, percentage									(2.40%)	(3.50%)
Increase in cash surrender value and other income from life insurance, net, percentage									(0.30%)	(0.70%)
ESOP Dividends, percentage									(0.30%)	(0.50%)
State income tax, net of federal benefit, percentage									1.00%	0.70%
Other, net, percentage									0.00%	0.10%
Effective income tax provision, percentage									18.90%	17.20%

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INCOME TAXES - Paragraphs (Details)	12 Months Ended
	Dec. 31, 2021 USD ($)
Net operating loss	$ 3,700,000
Annual offset of net operating loss	$ 563,000
Threshold percentage of taxable income to use net operating loss	80.00%
Unrecognized Tax Benefits, Ending Balance	$ 0
Covenant Financial Inc.
Net operating loss	$ 4,600,000

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RELATED PARTY TRANSACTIONS - (Details)	12 Months Ended
	Dec. 31, 2021 USD ($) person director	Dec. 31, 2020 USD ($) person director
Related Party Transactions
Number of directors | director	13	13
Number of executive directors | person	9	9
Related Party Deposit Liabilities	$ 10,124,000	$ 13,182,000
Management
Related Party Transactions
Beginning Balance	18,445,000	14,455,000
New Loans	1,249,000	242,000
Repayments	(6,034,000)	(2,150,000)
Other Changes	251,000	5,898,000
Ending Balance	$ 13,911,000	$ 18,445,000

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OFF-BALANCE SHEET RISK - Financial Instruments Whose Contract Amounts Represent Credit Risk (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Commitments to Extend Credit
Off-Balance Sheet Risk
Credit risk financial instrument	$ 366,076	$ 317,470
Standby Letters of Credit
Off-Balance Sheet Risk
Credit risk financial instrument	$ 10,079	$ 9,107

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OFF-BALANCE SHEET RISK - Standby Letters of Credit Expirations (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Off-Balance Sheet Risk
Letters of Credit Outstanding, Amount	$ 0	$ 0
Standby Letters of Credit
Off-Balance Sheet Risk
2022	10,021
2023	13
2024	20
2026	25
Total	$ 10,079	$ 9,107

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OPERATING LEASE COMMITMENTS AND CONTINGENCIES - Assets and Liabilities (Details) - USD ($)	Dec. 31, 2021	Dec. 31, 2020
Operating Leases Commitments
Operating Lease, Weighted Average Discount Rate, Percent	1.90%
Operating Lease, Liability	$ 3,751,000	$ 3,446,000
Operating Lease, Liability, Statement of Financial Position [Extensible Enumeration]	Other Liabilities	Other Liabilities
Other Assets
Operating Leases Commitments
Operating Lease, Right-of-Use Asset	$ 3,751,000	$ 3,446,000
Minimum
Operating Leases Commitments
Lessee, Operating Lease, Remaining Lease Term	1 year
Lessee, Operating Lease, Renewal Term	1 year
Lessee, Operating Lease, Discount Rate	0.84%
Maximum
Operating Leases Commitments
Lessee, Operating Lease, Remaining Lease Term	10 years
Lessee, Operating Lease, Renewal Term	8 years
Lessee, Operating Lease, Discount Rate	3.50%
Weighted average
Operating Leases Commitments
Lessee, Operating Lease, Remaining Lease Term	4 years 9 months 18 days

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OPERATING LEASE COMMITMENTS AND CONTINGENCIES - Expense (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Operating Leases Commitments
Operating lease expense	$ 492	$ 371
Net occupancy and equipment expense
Operating Leases Commitments
Operating lease expense	$ 492	$ 371

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OPERATING LEASE COMMITMENTS AND CONTINGENCIES - Maturity (Details) - USD ($)	Dec. 31, 2021	Dec. 31, 2020
Lessee, Lease, Description [Line Items]
2022	$ 540,000
2023	528,000
2024	521,000
2025	501,000
2026	438,000
Thereafter	1,524,000
Total lease payments	4,052,000
Discount on cash flows	(301,000)
Total lease liabilities	3,751,000	$ 3,446,000
Trust Department Tax Reporting Contingency
Lessee, Lease, Description [Line Items]
Loss Contingency, Estimate of Possible Loss	164,000	571,000
Accrued Interest and Other Liabilities | Trust Department Tax Reporting Contingency
Lessee, Lease, Description [Line Items]
Loss Contingency Accrual	$ 465,000	$ 322,000

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REGULATORY MATTERS - Capital Amounts and Ratios (Details) $ in Thousands	Dec. 31, 2021 USD ($)	Dec. 31, 2020 USD ($)
Total capital to risk-weighted assets - actual amount	$ 287,614	$ 260,015
Total capital to risk-weighted assets - actual ratio	18.21	17.49
Total capital to risk-weighted assets - minimum to meet the corporation's policy thresholds amount	$ 165,846	$ 156,113
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	$ 240,433	$ 231,577
Tier 1 capital to risk-weighted assets - actual ratio	15.22	15.58
Tier 1 capital to risk-weighted assets - minimum to meet the corporation's policy thresholds amount	$ 134,256	$ 126,377
Tier 1 capital to risk-weighted assets - minimum to meet the corporation's policy thresholds ratio	8.50%	8.50%
Tier 1 capital to risk-weighted assets - minimum capital requirement with conservation buffer ratio	8.50%
Common equity Tier 1 - amount	$ 240,433	$ 231,577
Common equity Tier 1 - ratio	15.22	15.58
Common equity Tier 1 - minimum to meet the corporation's policy thresholds amount	$ 110,564	$ 104,075
Common equity Tier 1 - minimum to meet the corporation's policy thresholds ratio	7.00%	7.00%
Tier 1 capital average - amount	$ 240,433	$ 231,577
Tier 1 capital average - ratio	10.53	10.34
Tier 1 capital average - minimum to meet the corporation's policy threshold amount	$ 182,683	$ 179,206
Tier 1 capital average - minimum to meet the corporation's policy threshold ratio	8.00%	8.00%
Citizens and Northern Bank
Total capital to risk-weighted assets - actual amount	$ 252,606	$ 236,943
Total capital to risk-weighted assets - actual ratio	16.04	15.98
Total capital to risk-weighted assets - minimum to meet the corporation's policy thresholds amount	$ 165,390	$ 155,665
Total capital to risk-weighted assets - minimum to meet the corporation's policy thresholds ratio	10.50%	10.50%
Total capital to risk-weighted assets - minimum capital requirement amount	$ 126,012	$ 118,602
Minimum total capital ratio	8	8
Total capital to risk-weighted assets - minimum capital requirement with conservation buffer amount	$ 165,390	$ 155,665
Total capital to risk-weighted assets - minimum capital requirement with conservation buffer ratio	10.50%	10.50%
Total capital to risk-weighted assets - minimum to be well capitalized under prompt corrective action provisions amount	$ 157,514	$ 148,252
Total capital to risk-weighted assets - minimum to be well capitalized under prompt corrective action provisions ratio	10	10
Tier 1 capital to risk-weighted assets - actual amount	$ 238,434	$ 225,058
Tier 1 capital to risk-weighted assets - actual ratio	15.14	15.18
Tier 1 capital to risk-weighted assets - minimum to meet the corporation's policy thresholds amount	$ 133,887	$ 126,015
Tier 1 capital to risk-weighted assets - minimum to meet the corporation's policy thresholds ratio	8.50%	8.50%
Tier 1 capital to risk-weighted assets - minimum capital requirement amount	$ 94,509	$ 88,951
Minimum tier 1 capital ratio	6	6
Tier 1 capital to risk-weighted assets - minimum capital requirement with conservation buffer amount	$ 133,887	$ 126,015
Tier 1 capital to risk-weighted assets - minimum capital requirement with conservation buffer ratio		8.50%
Tier 1 capital to risk-weighted assets - minimum to be well capitalized under prompt corrective action provisions amount	$ 126,012	$ 118,602
Tier 1 capital to risk-weighted assets - minimum to be well capitalized under prompt corrective action provisions ratio	8	8
Common equity Tier 1 - amount	$ 238,434	$ 225,058
Common equity Tier 1 - ratio	15.14	15.18
Common equity Tier 1 - minimum to meet the corporation's policy thresholds amount	$ 110,260	$ 103,777
Common equity Tier 1 - minimum to meet the corporation's policy thresholds ratio	7.00%	7.00%
Common equity Tier 1 - minimum capital requirement amount	$ 70,881	$ 66,714
Minimum common equity tier 1 capital ratio	4.50%	4.50%
Common equity Tier 1 - capital conservation buffer amount	$ 110,260	$ 103,777
Common equity Tier 1 - capital conservation buffer ratio	7.00%	7.00%
Common equity Tier 1 Capital - minimum to be well capitalized under prompt corrective action provisions amount	$ 102,384	$ 96,364
Common equity Tier 1 Capital - minimum to be well capitalized under prompt corrective action provisions ratio	6.50%	6.50%
Tier 1 capital average - amount	$ 238,434	$ 225,058
Tier 1 capital average - ratio	10.52	10.12
Tier 1 capital average - minimum to meet the corporation's policy threshold amount	$ 181,376	$ 177,919
Tier 1 capital average - minimum to meet the corporation's policy threshold ratio	8.00%	8.00%
Tier 1 capital average - minimum capital amount	$ 90,688	$ 88,959
Tier 1 capital average - minimum capital ratio	4	4
Tier 1 capital average - minimum to be well capitalized amount	$ 113,360	$ 111,199
Tier 1 capital average - minimum to be well capitalized ratio	5	5

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REGULATORY MATTERS - Transition Schedule for New Ratios, Including the Capital Conservation Buffer (Details) - Phased in Beginning 2018 [Member]	Dec. 31, 2021
Minimum common equity tier 1 capital ratio	4.50%
Minimum common equity tier 1 capital ratio plus capital conservation buffer	7.00%
Minimum tier 1 capital ratio	6.0
Minimum tier 1 capital ratio plus capital conservation buffer	8.50%
Minimum total capital ratio	8.0
Minimum total capital ratio plus capital conservation buffer	10.50%

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REGULATORY MATTERS - Payout Restrictions Based on the Capital Conservation Buffer (Details)	Dec. 31, 2021
Capital Conservation Buffer, Lower Limit	2.50%
Range One [Member]
Maximum Payout	60.00%
Capital Conservation Buffer, Lower Limit	2.50%
Capital Conservation Buffer, Upper Limit	1.875%
Range Two [Member]
Maximum Payout	40.00%
Capital Conservation Buffer, Lower Limit	1.875%
Capital Conservation Buffer, Upper Limit	1.25%
Range Three [Member]
Maximum Payout	20.00%
Capital Conservation Buffer, Lower Limit	1.25%
Capital Conservation Buffer, Upper Limit	0.625%
Range Four [Member]
Maximum Payout	0.00%
Capital Conservation Buffer, Upper Limit	0.625%

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REGULATORY MATTERS - Paragraphs (Details)	Dec. 31, 2021 USD ($)
REGULATORY MATTERS
Capital Conservation Buffer	8.04%
Retained Earnings, Unappropriated	$ 88,252,000
Tangible Capital to Tangible Assets	10
Tangible Capital	$ 23,856,000

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PARENT COMPANY ONLY - Condensed Balance Sheet (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020	Dec. 31, 2019
ASSETS
Other assets	$ 32,730	$ 34,773
TOTAL ASSETS	2,327,648	2,239,100
LIABILITIES AND STOCKHOLDERS' EQUITY
Senior Notes	14,701	0
Subordinated debt, net	33,009	16,553
Other liabilities	23,628	27,692
Stockholders' equity	301,405	299,756	$ 244,452
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	2,327,648	2,239,100
Parent Company
ASSETS
Cash	33,518	7,246
Other assets	33	4
TOTAL ASSETS	349,258	316,468
LIABILITIES AND STOCKHOLDERS' EQUITY
Senior Notes	14,701	0
Subordinated debt, net	33,009	16,553
Other liabilities	143	159
Stockholders' equity	301,405	299,756
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	349,258	316,468
Subsidiaries | Citizens and Northern Bank
ASSETS
Investment in subsidiaries	298,797	292,455
Subsidiaries | Citizens and Northern Investment Corporation
ASSETS
Investment in subsidiaries	13,085	12,959
Subsidiaries | Bucktail Life Insurance Company
ASSETS
Investment in subsidiaries	$ 3,825	$ 3,804

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PARENT COMPANY ONLY - Condensed Income Statement (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
Income before distributions in excess of income from subsidiaries	$ 8,985	$ 8,965	$ 8,840	$ 10,897	$ 8,251	$ 3,286	$ 6,693	$ 4,982	$ 37,687	$ 23,212
NET INCOME	$ 7,308	$ 7,399	$ 7,060	$ 8,787	$ 6,770	$ 2,848	$ 5,438	$ 4,166	30,554	19,222
Parent Company
Dividends from Citizens & Northern Bank									20,200	38,507
Expenses									1,691	1,488
Income before distributions in excess of income from subsidiaries									18,509	37,019
Distributions in excess of income from subsidiaries									12,045	(17,797)
NET INCOME									$ 30,554	$ 19,222

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PARENT COMPANY ONLY - Condensed Statement of Cash Flows (Details) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 7,308	$ 7,399	$ 7,060	$ 8,787	$ 6,770	$ 2,848	$ 5,438	$ 4,166	$ 30,554	$ 19,222
Adjustments to reconcile net income to net cash provided by operating activities:
Decrease (increase) in other assets									186	(2,645)
Increase (decrease) in other liabilities									210	2,473
Net Cash Provided by Operating Activities									34,844	24,784
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of senior notes and subordinated debt									14,663	0
Repayment of subordinated debt									8,000	0
Dividends paid									(15,976)	(14,469)
Net Cash Provided by (Used in) Financing Activities									68,882	(56,469)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS									(169)	64,895
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR				96,017				31,122	96,017	31,122
CASH AND CASH EQUIVALENTS, END OF YEAR	95,848				96,017				95,848	96,017
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid									8,174	10,742
Parent Company
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income									30,554	19,222
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of purchase accounting adjustment									(43)	(38)
Amortization of Debt Issuance Costs									101	0
Distributions in excess of income from subsidiaries									(12,045)	17,797
Decrease (increase) in other assets									(29)	105
Increase (decrease) in other liabilities									(16)	13
Net Cash Provided by Operating Activities									18,522	37,099
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash used in business combination									0	(21,837)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of senior notes and subordinated debt									39,100	0
Repayment of subordinated debt									8,000	0
Proceeds from sale of treasury stock									212	131
Purchases of treasury stock									(7,586)	(163)
Dividends paid									(15,976)	(14,469)
Net Cash Provided by (Used in) Financing Activities									7,750	(14,501)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS									26,272	761
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR				$ 7,246				$ 6,485	7,246	6,485
CASH AND CASH EQUIVALENTS, END OF YEAR	$ 33,518				$ 7,246				33,518	7,246
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Investment of net assets acquired in business combination in Citizens & Northern Bank									0	73,426
Common equity issued in business combination									0	41,429
Subordinated debt assumed in business combination									0	10,091
Other liabilities assumed in business combination									0	69
Interest paid									$ 1,567	$ 655

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SUMMARY OF QUARTERLY CONSOLIDATED FINANCIAL DATA (Unaudited) - Quarterly Financial Data (Details) - USD ($)	3 Months Ended								12 Months Ended
	Dec. 31, 2021	Sep. 30, 2021	Jun. 30, 2021	Mar. 31, 2021	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Mar. 31, 2020	Dec. 31, 2021	Dec. 31, 2020
SUMMARY OF QUARTERLY CONSOLIDATED FINANCIAL DATA
Interest income	$ 21,246,000	$ 21,073,000	$ 20,428,000	$ 21,754,000	$ 21,859,000	$ 21,751,000	$ 16,513,000	$ 17,037,000	$ 84,501,000	$ 77,160,000
Interest expense	1,530,000	1,614,000	1,747,000	1,671,000	2,104,000	2,469,000	2,267,000	2,755,000	6,562,000	9,595,000
Net interest income	19,716,000	19,459,000	18,681,000	20,083,000	19,755,000	19,282,000	14,246,000	14,282,000	77,939,000	67,565,000
Provision (credit) for loan losses	1,128,000	1,530,000	744,000	259,000	620,000	1,941,000	(176,000)	1,528,000	3,661,000	3,913,000
Net interest income after provision (credit) for loan losses	18,588,000	17,929,000	17,937,000	19,824,000	19,135,000	17,341,000	14,422,000	12,754,000	74,278,000	63,652,000
Other income	6,416,000	6,359,000	6,300,000	6,782,000	6,565,000	6,970,000	5,528,000	5,281,000	25,857,000	24,344,000
Net gains on available-for-sale debt securities	(1,000)	23,000	2,000	0	144,000	25,000	0	0	24,000	169,000
Loss on prepayment of borrowings					1,636,000	0	0	0
Merger-related expenses					182,000	6,402,000	983,000	141,000	0	7,708,000
Other expenses	16,018,000	15,346,000	15,399,000	15,709,000	15,775,000	14,648,000	12,274,000	12,912,000
Income before income tax provision	8,985,000	8,965,000	8,840,000	10,897,000	8,251,000	3,286,000	6,693,000	4,982,000	37,687,000	23,212,000
Income tax provision	1,677,000	1,566,000	1,780,000	2,110,000	1,481,000	438,000	1,255,000	816,000	7,133,000	3,990,000
Net income	7,308,000	7,399,000	7,060,000	8,787,000	6,770,000	2,848,000	5,438,000	4,166,000	30,554,000	19,222,000
Net income attributable to common shares	$ 7,256,000	$ 7,336,000	$ 6,999,000	$ 8,722,000	$ 6,727,000	$ 2,830,000	$ 5,405,000	$ 4,146,000	$ 30,313,000	$ 19,106,000
Net income per share - basic (in dollars per share)	$ 0.46	$ 0.47	$ 0.44	$ 0.55	$ 0.43	$ 0.18	$ 0.39	$ 0.30	$ 1.92	$ 1.30
Net income per share - diluted (in dollars per share)	$ 0.46	$ 0.47	$ 0.44	$ 0.55	$ 0.43	$ 0.18	$ 0.39	$ 0.30	$ 1.92	$ 1.30

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DERIVATIVE FINANCIAL INSTRUMENTS - (Details) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Asset pledged
Derivative Financial Instruments
Available-for-sale securities pledged as collateral	$ 7,027,000
Interest rate swap agreements
Derivative Financial Instruments
Aggregate notional amount	123,094,000	$ 135,740,000
Asset Derivatives, Notional Amount	61,547,000	67,870,000
Asset Derivatives, Fair Value	3,104,000	6,566,000
Liability Derivatives, Notional Amount	61,547,000	67,870,000
Liability Derivatives, Fair Value	3,104,000	6,566,000
Derivatives not designated as hedging instruments | Interest rate swap agreements
Derivative Financial Instruments
Interest rate swap	0	0
Increase (decrease) in interest income	$ 1,347,000	$ 698,000

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FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS - Assets Measured at Fair Value (Details) - USD ($)	Dec. 31, 2021	Dec. 31, 2020
Assets Measured at Fair Value
Total, fair value	$ 517,679,000	$ 349,332,000
Marketable equity security	971,000	1,000,000
Impaired loans with a valuation allowance	6,540,000	8,082,000
Valuation allowance	(740,000)	(925,000)
Impaired loans, net	6,540,000	8,082,000
Interest rate swap agreements
Assets Measured at Fair Value
Fair value derivative asset	3,104,000	6,566,000
Fair value of the derivative liability	3,104,000	6,566,000
Obligations of the U.S. Treasury
Assets Measured at Fair Value
Total, fair value	24,912,000	12,182,000
Obligations of U.S. Government agencies
Assets Measured at Fair Value
Total, fair value	24,091,000	26,344,000
Bank holding company debt securities
Assets Measured at Fair Value
Total, fair value	17,987,000
Obligations Of States And Political Subdivisions Tax Exempt
Assets Measured at Fair Value
Total, fair value	148,028,000	122,401,000
Obligations Of States And Political Subdivisions Taxable
Assets Measured at Fair Value
Total, fair value	72,765,000	47,452,000
Residential Passthrough Securities
Assets Measured at Fair Value
Total, fair value	98,181,000	38,176,000
Residential Collateralized Mortgage Obligations
Assets Measured at Fair Value
Total, fair value	44,247,000	57,467,000
Commercial Mortgage Backed Securities
Assets Measured at Fair Value
Total, fair value	87,468,000	45,310,000
Recurring fair value measurements
Assets Measured at Fair Value
Total, fair value	517,679,000	349,332,000
Marketable equity security	971,000	1,000,000
Servicing rights	2,329,000	1,689,000
Total asset fair value measurements	524,083,000	358,587,000
Recurring fair value measurements | Level 1
Assets Measured at Fair Value
Total, fair value	24,912,000	12,182,000
Marketable equity security	971,000	1,000,000
Servicing rights	0	0
Total asset fair value measurements	25,883,000	13,182,000
Recurring fair value measurements | Level 2
Assets Measured at Fair Value
Total, fair value	492,767,000	337,150,000
Marketable equity security	0	0
Servicing rights	0	0
Total asset fair value measurements	495,871,000	343,716,000
Recurring fair value measurements | Level 3
Assets Measured at Fair Value
Total, fair value	0	0
Marketable equity security	0	0
Servicing rights	2,329,000	1,689,000
Total asset fair value measurements	2,329,000	1,689,000
Recurring fair value measurements | Interest rate swap agreements
Assets Measured at Fair Value
Fair value derivative asset	3,104,000	6,566,000
Fair value of the derivative liability	3,104,000	6,566,000
Recurring fair value measurements | Interest rate swap agreements | Level 1
Assets Measured at Fair Value
Fair value derivative asset	0	0
Fair value of the derivative liability	0	0
Recurring fair value measurements | Interest rate swap agreements | Level 2
Assets Measured at Fair Value
Fair value derivative asset	3,104,000	6,566,000
Fair value of the derivative liability	3,104,000	6,566,000
Recurring fair value measurements | Interest rate swap agreements | Level 3
Assets Measured at Fair Value
Fair value derivative asset	0	0
Fair value of the derivative liability	0	0
Recurring fair value measurements | Obligations of the U.S. Treasury
Assets Measured at Fair Value
Total, fair value	24,912,000	12,182,000
Recurring fair value measurements | Obligations of the U.S. Treasury | Level 1
Assets Measured at Fair Value
Total, fair value	24,912,000	12,182,000
Recurring fair value measurements | Obligations of the U.S. Treasury | Level 2
Assets Measured at Fair Value
Total, fair value	0	0
Recurring fair value measurements | Obligations of the U.S. Treasury | Level 3
Assets Measured at Fair Value
Total, fair value	0	0
Recurring fair value measurements | Obligations of U.S. Government agencies
Assets Measured at Fair Value
Total, fair value	24,091,000	26,344,000
Recurring fair value measurements | Obligations of U.S. Government agencies | Level 1
Assets Measured at Fair Value
Total, fair value	0	0
Recurring fair value measurements | Obligations of U.S. Government agencies | Level 2
Assets Measured at Fair Value
Total, fair value	24,091,000	26,344,000
Recurring fair value measurements | Obligations of U.S. Government agencies | Level 3
Assets Measured at Fair Value
Total, fair value	0	0
Recurring fair value measurements | Bank holding company debt securities
Assets Measured at Fair Value
Total, fair value	17,987,000
Recurring fair value measurements | Bank holding company debt securities | Level 1
Assets Measured at Fair Value
Total, fair value	0
Recurring fair value measurements | Bank holding company debt securities | Level 2
Assets Measured at Fair Value
Total, fair value	17,987,000
Recurring fair value measurements | Bank holding company debt securities | Level 3
Assets Measured at Fair Value
Total, fair value	0
Recurring fair value measurements | Obligations Of States And Political Subdivisions Tax Exempt
Assets Measured at Fair Value
Total, fair value	148,028,000	122,401,000
Recurring fair value measurements | Obligations Of States And Political Subdivisions Tax Exempt | Level 1
Assets Measured at Fair Value
Total, fair value	0	0
Recurring fair value measurements | Obligations Of States And Political Subdivisions Tax Exempt | Level 2
Assets Measured at Fair Value
Total, fair value	148,028,000	122,401,000
Recurring fair value measurements | Obligations Of States And Political Subdivisions Tax Exempt | Level 3
Assets Measured at Fair Value
Total, fair value	0	0
Recurring fair value measurements | Obligations Of States And Political Subdivisions Taxable
Assets Measured at Fair Value
Total, fair value	72,765,000	47,452,000
Recurring fair value measurements | Obligations Of States And Political Subdivisions Taxable | Level 1
Assets Measured at Fair Value
Total, fair value	0	0
Recurring fair value measurements | Obligations Of States And Political Subdivisions Taxable | Level 2
Assets Measured at Fair Value
Total, fair value	72,765,000	47,452,000
Recurring fair value measurements | Obligations Of States And Political Subdivisions Taxable | Level 3
Assets Measured at Fair Value
Total, fair value	0	0
Recurring fair value measurements | Residential Passthrough Securities
Assets Measured at Fair Value
Total, fair value	98,181,000	38,176,000
Recurring fair value measurements | Residential Passthrough Securities | Level 1
Assets Measured at Fair Value
Total, fair value	0	0
Recurring fair value measurements | Residential Passthrough Securities | Level 2
Assets Measured at Fair Value
Total, fair value	98,181,000	38,176,000
Recurring fair value measurements | Residential Passthrough Securities | Level 3
Assets Measured at Fair Value
Total, fair value	0	0
Recurring fair value measurements | Residential Collateralized Mortgage Obligations
Assets Measured at Fair Value
Total, fair value	44,247,000	57,467,000
Recurring fair value measurements | Residential Collateralized Mortgage Obligations | Level 1
Assets Measured at Fair Value
Total, fair value	0	0
Recurring fair value measurements | Residential Collateralized Mortgage Obligations | Level 2
Assets Measured at Fair Value
Total, fair value	44,247,000	57,467,000
Recurring fair value measurements | Residential Collateralized Mortgage Obligations | Level 3
Assets Measured at Fair Value
Total, fair value	0	0
Recurring fair value measurements | Commercial Mortgage Backed Securities
Assets Measured at Fair Value
Total, fair value	87,468,000	45,310,000
Recurring fair value measurements | Commercial Mortgage Backed Securities | Level 1
Assets Measured at Fair Value
Total, fair value	0	0
Recurring fair value measurements | Commercial Mortgage Backed Securities | Level 2
Assets Measured at Fair Value
Total, fair value	87,468,000	45,310,000
Recurring fair value measurements | Commercial Mortgage Backed Securities | Level 3
Assets Measured at Fair Value
Total, fair value	0	0
Nonrecurring fair value measurements
Assets Measured at Fair Value
Total asset fair value measurements	6,484,000	8,495,000
Impaired loans, net	5,800,000	7,157,000
Foreclosed assets held for sale	684,000	1,338,000
Nonrecurring fair value measurements | Level 1
Assets Measured at Fair Value
Total asset fair value measurements	0	0
Impaired loans, net	0	0
Foreclosed assets held for sale	0	0
Nonrecurring fair value measurements | Level 2
Assets Measured at Fair Value
Total asset fair value measurements	0	0
Impaired loans, net	0	0
Foreclosed assets held for sale	0	0
Nonrecurring fair value measurements | Level 3
Assets Measured at Fair Value
Total asset fair value measurements	6,484,000	8,495,000
Impaired loans, net	5,800,000	7,157,000
Foreclosed assets held for sale	$ 684,000	$ 1,338,000

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FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS - Level 3 Valuation Techniques Recurring (Details) - USD ($)	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Recurring fair value measurements
Valuation Techniques and the Unobservable Inputs
Fair value	$ 2,329,000	$ 1,689,000
Valuation Technique, Discounted cash flow | Servicing rights.
Valuation Techniques and the Unobservable Inputs
Discount rate	13.00%	13.00%
Weighted-average PSA	209.00%	277.00%
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	6.00	6.00
Additional monthly servicing cost per loan on loans more than 30 days delinquent	$ 24.00	$ 24.00
Servicing costs of loans more than 30 days delinquent	1.50%	1.50%
Annual increase in servicing costs	3.00%	3.00%
Valuation Technique, Discounted cash flow | Recurring fair value measurements
Valuation Techniques and the Unobservable Inputs
Fair value	$ 2,329,000	$ 1,689,000

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FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS - Level 3 Reconciliation (Details) - Level 3 - Servicing rights. - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2021	Dec. 31, 2020
Reconciliation of activity for Level 3 assets (servicing rights) measured at fair value on a recurring basis
Servicing rights balance, beginning of period	$ 1,689	$ 1,277
Originations of servicing rights	708	988
Unrealized (loss) gain included in earnings	(68)	(576)
Servicing rights balance, end of period	$ 2,329	$ 1,689

XML

FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS - Level 3 Valuation Techniques Nonrecurring (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Valuation Techniques and the Unobservable Inputs
Recorded investment - with allowance	$ 6,540	$ 8,082
Related allowance	740	925
Nonrecurring fair value measurements
Valuation Techniques and the Unobservable Inputs
Recorded investment - with allowance	5,800	7,157
Foreclosed assets held for sale	684	1,338
Residential mortgage
Valuation Techniques and the Unobservable Inputs
Foreclosed assets held for sale	256	80
Commercial | Real estate loan
Valuation Techniques and the Unobservable Inputs
Recorded investment - with allowance	6,468	6,501
Related allowance	668	691
Commercial | Commercial and industrial
Valuation Techniques and the Unobservable Inputs
Recorded investment - with allowance	72	72
Related allowance	72	72
Impaired Loans
Valuation Techniques and the Unobservable Inputs
Recorded investment - with allowance	6,540
Related allowance	740
Fair value	5,800
Impaired Loans | Nonrecurring fair value measurements
Valuation Techniques and the Unobservable Inputs
Recorded investment - with allowance		8,082
Related allowance		925
Fair value		7,157
Impaired Loans | Valuation, Market Approach | Residential mortgage | Real estate loan | Nonrecurring fair value measurements
Valuation Techniques and the Unobservable Inputs
Foreclosed assets held for sale		1,509
Valuation allowance		162
Fair value		$ 1,347
Impaired Loans | Valuation, Market Approach | Residential mortgage | Real estate loan | Weighted average | Nonrecurring fair value measurements
Valuation Techniques and the Unobservable Inputs
Discount rate		31.00%
Impaired Loans | Valuation, Market Approach | Commercial | Real estate loan | Nonrecurring fair value measurements
Valuation Techniques and the Unobservable Inputs
Recorded investment - with allowance	6,468	$ 6,501
Related allowance	668	691
Fair value	$ 5,800	$ 5,810
Impaired Loans | Valuation, Market Approach | Commercial | Real estate loan | Weighted average | Nonrecurring fair value measurements
Valuation Techniques and the Unobservable Inputs
Discount rate	27.00%	28.00%
Impaired Loans | Valuation, Market Approach | Commercial | Commercial and industrial | Measurement Input Discount To Borrowers Financial Statement Value Member
Valuation Techniques and the Unobservable Inputs
Recorded investment - with allowance		$ 72
Related allowance		72
Fair value		$ 0
Impaired Loans | Valuation, Market Approach | Commercial | Commercial and industrial | Nonrecurring fair value measurements
Valuation Techniques and the Unobservable Inputs
Foreclosed assets held for sale	$ 72
Valuation allowance	72
Fair value	$ 0
Impaired Loans | Valuation, Market Approach | Commercial | Commercial and industrial | Weighted average | Measurement Input Discount To Borrowers Financial Statement Value Member
Valuation Techniques and the Unobservable Inputs
Discount rate		100.00%
Impaired Loans | Valuation, Market Approach | Commercial | Commercial and industrial | Weighted average | Nonrecurring fair value measurements
Valuation Techniques and the Unobservable Inputs
Discount rate	100.00%
Foreclosed Assets Held For Sale
Valuation Techniques and the Unobservable Inputs
Foreclosed assets held for sale	$ 684
Valuation allowance	0
Fair value	684
Foreclosed Assets Held For Sale | Nonrecurring fair value measurements
Valuation Techniques and the Unobservable Inputs
Foreclosed assets held for sale		$ 1,338
Valuation allowance		0
Fair value		1,338
Foreclosed Assets Held For Sale | Valuation, Market Approach | Commercial Real Estate Receivables | Nonrecurring fair value measurements
Valuation Techniques and the Unobservable Inputs
Foreclosed assets held for sale	428	1,258
Valuation allowance	0	0
Fair value	$ 428	$ 1,258
Foreclosed Assets Held For Sale | Valuation, Market Approach | Commercial Real Estate Receivables | Weighted average | Nonrecurring fair value measurements
Valuation Techniques and the Unobservable Inputs
Discount rate	50.00%	44.00%
Foreclosed Assets Held For Sale | Valuation, Market Approach | Residential mortgage | Nonrecurring fair value measurements
Valuation Techniques and the Unobservable Inputs
Foreclosed assets held for sale	$ 256	$ 80
Valuation allowance	0	0
Fair value	$ 256	$ 80
Foreclosed Assets Held For Sale | Valuation, Market Approach | Residential mortgage | Weighted average | Nonrecurring fair value measurements
Valuation Techniques and the Unobservable Inputs
Discount rate	53.00%	36.00%

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FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS - Financial Instruments Not Recorded at Fair Value (Details) - USD ($) $ in Thousands	Dec. 31, 2021	Dec. 31, 2020
Interest rate swap agreements
Fair values, and carrying amounts financial instruments not recorded at fair value
Fair value derivative asset	$ 3,104	$ 6,566
Reported value measurement | Level 1
Fair values, and carrying amounts financial instruments not recorded at fair value
Cash and cash equivalents	95,848	96,017
Reported value measurement | Level 2
Fair values, and carrying amounts financial instruments not recorded at fair value
Certificates of deposit	9,100	5,840
Restricted equity securities (included in Other Assets)	9,562	9,970
Accrued interest receivable	7,235	8,293
Short-term borrowings	1,803	20,022
Long-term borrowings	28,042	54,608
Senior debt	14,701	0
Subordinated debt	33,009	16,553
Accrued interest payable	205	548
Reported value measurement | Level 2 | Deposits with no stated maturity
Fair values, and carrying amounts financial instruments not recorded at fair value
Deposits, fair value	1,639,167	1,430,062
Reported value measurement | Level 2 | Time deposits
Fair values, and carrying amounts financial instruments not recorded at fair value
Deposits, fair value	285,893	390,407
Reported value measurement | Level 3
Fair values, and carrying amounts financial instruments not recorded at fair value
Loans, net	1,551,312	1,632,824
Estimate of fair value measurement | Level 1
Fair values, and carrying amounts financial instruments not recorded at fair value
Cash and cash equivalents	95,848	96,017
Estimate of fair value measurement | Level 2
Fair values, and carrying amounts financial instruments not recorded at fair value
Certificates of deposit	9,142	6,054
Restricted equity securities (included in Other Assets)	9,562	9,970
Accrued interest receivable	7,235	8,293
Short-term borrowings	1,603	19,974
Long-term borrowings	28,347	55,723
Senior debt	15,016	0
Subordinated debt	33,171	16,680
Accrued interest payable	205	548
Estimate of fair value measurement | Level 2 | Deposits with no stated maturity
Fair values, and carrying amounts financial instruments not recorded at fair value
Deposits, fair value	1,639,167	1,430,062
Estimate of fair value measurement | Level 2 | Time deposits
Fair values, and carrying amounts financial instruments not recorded at fair value
Deposits, fair value	286,962	393,566
Estimate of fair value measurement | Level 3
Fair values, and carrying amounts financial instruments not recorded at fair value
Loans, net	$ 1,573,955	$ 1,646,207