Companies: 10,793     total market cap: $139.375 T
โ‚ฌEUR๐Ÿ‡ช๐Ÿ‡บโ‚นINR๐Ÿ‡ฎ๐Ÿ‡ณยฃGBP๐Ÿ‡ฌ๐Ÿ‡ง$CAD๐Ÿ‡จ๐Ÿ‡ฆ$AUD๐Ÿ‡ฆ๐Ÿ‡บ$NZD๐Ÿ‡ณ๐Ÿ‡ฟ$HKD๐Ÿ‡ญ๐Ÿ‡ฐ$SGD๐Ÿ‡ธ๐Ÿ‡ฌ
Citizens & Northern Corp
CZNC
#7489
Rank
$0.42 B
Marketcap
๐Ÿ‡บ๐Ÿ‡ธ United States
Country
$23.74
Share price
-0.71%
Change (1 day)
33.52%
Change (1 year)
๐Ÿฆ Banks๐Ÿ’ณ Financial services
Categories
  1. Citizens & Northern Corp
  2. Quarterly Reports (10-Q)
  3. Financial Year FY2020 Q3

Citizens & Northern Corp - 10-Q quarterly report FY2020 Q3


Text size:
0000810958--12-312020Q3falsePA0000810958us-gaap:TreasuryStockMember2020-07-012020-09-300000810958us-gaap:TreasuryStockMember2020-01-012020-09-300000810958us-gaap:TreasuryStockMember2019-07-012019-09-300000810958us-gaap:TreasuryStockMember2019-01-012019-09-300000810958us-gaap:CommonStockMember2020-07-012020-09-300000810958us-gaap:CommonStockMember2020-01-012020-09-300000810958us-gaap:CommonStockMember2019-01-012019-09-300000810958us-gaap:RetainedEarningsMember2020-09-300000810958us-gaap:AdditionalPaidInCapitalMember2020-09-300000810958us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-09-300000810958us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-09-300000810958us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-09-300000810958us-gaap:RetainedEarningsMember2020-06-300000810958us-gaap:AdditionalPaidInCapitalMember2020-06-300000810958us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-06-300000810958us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-06-300000810958us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-06-300000810958us-gaap:RetainedEarningsMember2019-12-310000810958us-gaap:AdditionalPaidInCapitalMember2019-12-310000810958us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-12-310000810958us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2019-12-310000810958us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-12-310000810958us-gaap:RetainedEarningsMember2019-09-300000810958us-gaap:AdditionalPaidInCapitalMember2019-09-300000810958us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-09-300000810958us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2019-09-300000810958us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-09-300000810958us-gaap:RetainedEarningsMember2019-06-300000810958us-gaap:AdditionalPaidInCapitalMember2019-06-300000810958us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-06-300000810958us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2019-06-300000810958us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-06-300000810958us-gaap:RetainedEarningsMember2018-12-310000810958us-gaap:AdditionalPaidInCapitalMember2018-12-310000810958us-gaap:AccumulatedOtherComprehensiveIncomeMember2018-12-310000810958us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2018-12-310000810958us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2018-12-310000810958srt:FederalHomeLoanBankOfPittsburghMembercznc:OvernightBorrowingMember2020-09-300000810958srt:FederalHomeLoanBankOfPittsburghMembercznc:OtherShortTermDebtMember2020-09-300000810958us-gaap:FederalHomeLoanBankAdvancesMember2020-09-300000810958srt:FederalHomeLoanBankOfPittsburghMembercznc:OvernightBorrowingMember2019-12-310000810958srt:FederalHomeLoanBankOfPittsburghMembercznc:OtherShortTermDebtMember2019-12-310000810958us-gaap:FederalHomeLoanBankAdvancesMember2019-12-310000810958us-gaap:TreasuryStockMember2020-09-300000810958us-gaap:CommonStockMember2020-09-300000810958us-gaap:TreasuryStockMember2020-06-300000810958us-gaap:CommonStockMember2020-06-300000810958us-gaap:TreasuryStockMember2019-12-310000810958us-gaap:CommonStockMember2019-12-310000810958us-gaap:TreasuryStockMember2019-09-300000810958us-gaap:CommonStockMember2019-09-300000810958us-gaap:TreasuryStockMember2019-06-300000810958us-gaap:CommonStockMember2019-06-300000810958us-gaap:TreasuryStockMember2018-12-310000810958us-gaap:CommonStockMember2018-12-310000810958us-gaap:RestrictedStockMembercznc:StockIncentivePlanMember2020-01-012020-09-300000810958cznc:TimeBasedRestrictedStockAwardsMembercznc:IndependentDirectorsStockIncentivePlanMember2020-01-012020-09-300000810958us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2020-09-300000810958us-gaap:FairValueMeasurementsRecurringMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2019-12-310000810958us-gaap:DepositAccountMember2020-07-012020-09-300000810958us-gaap:DebitCardMember2020-07-012020-09-300000810958us-gaap:BankServicingMember2020-07-012020-09-300000810958cznc:TrustAndAssetManagementMember2020-07-012020-09-300000810958cznc:ServiceChargesAndFeesMember2020-07-012020-09-300000810958us-gaap:DepositAccountMember2020-01-012020-09-300000810958us-gaap:DebitCardMember2020-01-012020-09-300000810958us-gaap:BankServicingMember2020-01-012020-09-300000810958cznc:TrustAndAssetManagementMember2020-01-012020-09-300000810958cznc:ServiceChargesAndFeesMember2020-01-012020-09-300000810958us-gaap:DepositAccountMember2019-07-012019-09-300000810958us-gaap:DebitCardMember2019-07-012019-09-300000810958us-gaap:BankServicingMember2019-07-012019-09-300000810958cznc:TrustAndAssetManagementMember2019-07-012019-09-300000810958cznc:ServiceChargesAndFeesMember2019-07-012019-09-300000810958us-gaap:DepositAccountMember2019-01-012019-09-300000810958us-gaap:DebitCardMember2019-01-012019-09-300000810958us-gaap:BankServicingMember2019-01-012019-09-300000810958cznc:TrustAndAssetManagementMember2019-01-012019-09-300000810958cznc:ServiceChargesAndFeesMember2019-01-012019-09-300000810958cznc:SpecificLoansPortfolioSegmentMember2020-07-012020-09-300000810958cznc:ImpactOfIncreaseInLoansMember2020-07-012020-09-300000810958cznc:FinancialAssetsFacingAdditionalCreditDeteriorationDueToToEconomicImpactOfCovid19Member2020-07-012020-09-300000810958cznc:ChangesToExperienceFactorsUsedToEstimateAllowanceMember2020-07-012020-09-300000810958cznc:SpecificLoansPortfolioSegmentMember2020-01-012020-09-300000810958cznc:ImpactOfReductionInLoansMember2020-01-012020-09-300000810958cznc:FinancialAssetsFacingAdditionalCreditDeteriorationDueToToEconomicImpactOfCovid19Member2020-01-012020-09-300000810958cznc:ChangesToExperienceFactorsUsedToEstimateAllowanceMember2020-01-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2020-01-012020-03-310000810958cznc:ImpactOfIncreaseInLoansMember2019-07-012019-09-300000810958cznc:ChangesToExperienceFactorsUsedToEstimateAllowanceMember2019-01-012019-09-300000810958us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-07-012020-09-300000810958us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-07-012020-09-300000810958us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-07-012020-09-300000810958us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-01-012020-09-300000810958us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2020-01-012020-09-300000810958us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2020-01-012020-09-300000810958us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-07-012019-09-300000810958us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2019-07-012019-09-300000810958us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-07-012019-09-300000810958us-gaap:AccumulatedOtherComprehensiveIncomeMember2019-01-012019-09-300000810958us-gaap:AccumulatedNetUnrealizedInvestmentGainLossMember2019-01-012019-09-300000810958us-gaap:AccumulatedDefinedBenefitPlansAdjustmentMember2019-01-012019-09-300000810958us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2020-09-300000810958us-gaap:FairValueInputsLevel3Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2020-09-300000810958us-gaap:FairValueInputsLevel3Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2019-12-310000810958us-gaap:FairValueInputsLevel3Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SubstandardMemberus-gaap:SeniorLienMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SubstandardMemberus-gaap:JuniorLienMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SpecialMentionMemberus-gaap:SeniorLienMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SpecialMentionMemberus-gaap:JuniorLienMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:PassMemberus-gaap:SeniorLienMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:PassMemberus-gaap:JuniorLienMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:DoubtfulMemberus-gaap:SeniorLienMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:DoubtfulMemberus-gaap:JuniorLienMember2020-09-300000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SeniorLienMember2020-09-300000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMember2020-09-300000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SeniorLienMember2020-09-300000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:SubstandardMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:SpecialMentionMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:PassMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:DoubtfulMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Memberus-gaap:SubstandardMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Memberus-gaap:SpecialMentionMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Memberus-gaap:PassMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Memberus-gaap:DoubtfulMember2020-09-300000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-09-300000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Member2020-09-300000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2020-09-300000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-09-300000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMember2020-09-300000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:PoliticalSubdivisionsMember2020-09-300000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMember2020-09-300000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMember2020-09-300000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMember2020-09-300000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMember2020-09-300000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMember2020-09-300000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-09-300000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Member2020-09-300000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2020-09-300000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-09-300000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMember2020-09-300000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:PoliticalSubdivisionsMember2020-09-300000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMember2020-09-300000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMember2020-09-300000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMember2020-09-300000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMember2020-09-300000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SubstandardMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SpecialMentionMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:PassMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:DoubtfulMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:SubstandardMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:SpecialMentionMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:PassMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:DoubtfulMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMemberus-gaap:SubstandardMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMemberus-gaap:SpecialMentionMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMemberus-gaap:PassMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMemberus-gaap:DoubtfulMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:PoliticalSubdivisionsMemberus-gaap:SubstandardMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:PoliticalSubdivisionsMemberus-gaap:SpecialMentionMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:PoliticalSubdivisionsMemberus-gaap:PassMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:PoliticalSubdivisionsMemberus-gaap:DoubtfulMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMemberus-gaap:SubstandardMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMemberus-gaap:SpecialMentionMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMemberus-gaap:PassMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMemberus-gaap:DoubtfulMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMemberus-gaap:SubstandardMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMemberus-gaap:SpecialMentionMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMemberus-gaap:PassMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMemberus-gaap:DoubtfulMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMemberus-gaap:SubstandardMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMemberus-gaap:SpecialMentionMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMemberus-gaap:PassMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMemberus-gaap:DoubtfulMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMemberus-gaap:SubstandardMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMemberus-gaap:SpecialMentionMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMemberus-gaap:PassMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMemberus-gaap:DoubtfulMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMemberus-gaap:SubstandardMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMemberus-gaap:SpecialMentionMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMemberus-gaap:PassMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMemberus-gaap:DoubtfulMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:SubstandardMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:SpecialMentionMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:PassMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:DoubtfulMember2020-09-300000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMember2020-09-300000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMember2020-09-300000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMember2020-09-300000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMember2020-09-300000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMember2020-09-300000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMember2020-09-300000810958us-gaap:ConsumerPortfolioSegmentMemberus-gaap:SubstandardMember2020-09-300000810958us-gaap:ConsumerPortfolioSegmentMemberus-gaap:SpecialMentionMember2020-09-300000810958us-gaap:ConsumerPortfolioSegmentMemberus-gaap:PassMember2020-09-300000810958us-gaap:ConsumerPortfolioSegmentMemberus-gaap:DoubtfulMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:SubstandardMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:SpecialMentionMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:PassMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:DoubtfulMember2020-09-300000810958us-gaap:SubstandardMember2020-09-300000810958us-gaap:SpecialMentionMember2020-09-300000810958us-gaap:PassMember2020-09-300000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMember2020-09-300000810958us-gaap:DoubtfulMember2020-09-300000810958cznc:CommercialLoanWithSpecificAllowanceMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SubstandardMemberus-gaap:SeniorLienMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SubstandardMemberus-gaap:JuniorLienMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SpecialMentionMemberus-gaap:SeniorLienMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SpecialMentionMemberus-gaap:JuniorLienMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:PassMemberus-gaap:SeniorLienMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:PassMemberus-gaap:JuniorLienMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:DoubtfulMemberus-gaap:SeniorLienMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:DoubtfulMemberus-gaap:JuniorLienMember2019-12-310000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SeniorLienMember2019-12-310000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMember2019-12-310000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SeniorLienMember2019-12-310000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:SubstandardMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:SpecialMentionMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:PassMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:DoubtfulMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Memberus-gaap:SubstandardMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Memberus-gaap:SpecialMentionMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Memberus-gaap:PassMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Memberus-gaap:DoubtfulMember2019-12-310000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2019-12-310000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Member2019-12-310000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2019-12-310000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2019-12-310000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:PoliticalSubdivisionsMember2019-12-310000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMember2019-12-310000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMember2019-12-310000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMember2019-12-310000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMember2019-12-310000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMember2019-12-310000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2019-12-310000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Member2019-12-310000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2019-12-310000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:PoliticalSubdivisionsMember2019-12-310000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMember2019-12-310000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMember2019-12-310000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMember2019-12-310000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:CommercialConstructionAndLandMember2019-12-310000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMember2019-12-310000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SubstandardMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SpecialMentionMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:PassMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:DoubtfulMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:SubstandardMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:SpecialMentionMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:PassMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:DoubtfulMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:PoliticalSubdivisionsMemberus-gaap:SubstandardMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:PoliticalSubdivisionsMemberus-gaap:SpecialMentionMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:PoliticalSubdivisionsMemberus-gaap:PassMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:PoliticalSubdivisionsMemberus-gaap:DoubtfulMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMemberus-gaap:SubstandardMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMemberus-gaap:SpecialMentionMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMemberus-gaap:PassMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMemberus-gaap:DoubtfulMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMemberus-gaap:SubstandardMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMemberus-gaap:SpecialMentionMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMemberus-gaap:PassMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMemberus-gaap:DoubtfulMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMemberus-gaap:SubstandardMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMemberus-gaap:SpecialMentionMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMemberus-gaap:PassMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMemberus-gaap:DoubtfulMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMemberus-gaap:SubstandardMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMemberus-gaap:SpecialMentionMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMemberus-gaap:PassMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMemberus-gaap:DoubtfulMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMemberus-gaap:SubstandardMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMemberus-gaap:SpecialMentionMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMemberus-gaap:PassMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMemberus-gaap:DoubtfulMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:SubstandardMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:SpecialMentionMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:PassMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:DoubtfulMember2019-12-310000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMember2019-12-310000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMember2019-12-310000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMember2019-12-310000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:ResidentialPortfolioSegmentMember2019-12-310000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:ConsumerPortfolioSegmentMember2019-12-310000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMemberus-gaap:CommercialPortfolioSegmentMember2019-12-310000810958us-gaap:ConsumerPortfolioSegmentMemberus-gaap:SubstandardMember2019-12-310000810958us-gaap:ConsumerPortfolioSegmentMemberus-gaap:SpecialMentionMember2019-12-310000810958us-gaap:ConsumerPortfolioSegmentMemberus-gaap:PassMember2019-12-310000810958us-gaap:ConsumerPortfolioSegmentMemberus-gaap:DoubtfulMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:SubstandardMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:SpecialMentionMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:PassMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:DoubtfulMember2019-12-310000810958us-gaap:SubstandardMember2019-12-310000810958us-gaap:SpecialMentionMember2019-12-310000810958us-gaap:PassMember2019-12-310000810958us-gaap:FinancialAssetAcquiredAndNoCreditDeteriorationMember2019-12-310000810958us-gaap:DoubtfulMember2019-12-310000810958srt:FederalHomeLoanBankOfPittsburghMembercznc:FederalReserveBankOfPhiladelphiaMember2020-09-300000810958cznc:OtherCorrespondentBanksMember2020-09-300000810958srt:FederalHomeLoanBankOfPittsburghMembercznc:FederalReserveBankOfPhiladelphiaMember2019-12-310000810958cznc:OtherCorrespondentBanksMember2019-12-310000810958us-gaap:InterestRateSwapMemberus-gaap:NondesignatedMember2020-09-300000810958cznc:MonumentBancorpIncMemberus-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember2020-07-012020-09-300000810958us-gaap:InterestRateSwapMemberus-gaap:NondesignatedMember2020-07-012020-09-300000810958cznc:TroubledDebtRestructuringMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2020-09-300000810958cznc:SpecificLoansPortfolioSegmentMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2019-12-310000810958cznc:TroubledDebtRestructuredDefaultedMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2019-09-300000810958cznc:OneRealEstateSecuredCommercialLoanMember2019-09-300000810958cznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityMember2020-07-012020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityMember2020-01-012020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityMember2019-07-012019-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:HomeEquityMember2019-01-012019-09-300000810958cznc:MonumentBancorpIncMembercznc:SubordinatedDebtRedeemedApril12019Member2019-04-012019-04-010000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMemberus-gaap:SeniorLienMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMemberus-gaap:JuniorLienMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMembercznc:FinancingReceivables30To89DaysPastDueMemberus-gaap:SeniorLienMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMembercznc:FinancingReceivables30To89DaysPastDueMemberus-gaap:JuniorLienMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMembercznc:FinancingReceivables30To89DaysPastDueMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Memberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Membercznc:FinancingReceivables30To89DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMembercznc:FinancingReceivables30To89DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMembercznc:FinancingReceivables30To89DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMembercznc:FinancingReceivables30To89DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:PoliticalSubdivisionsMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:PoliticalSubdivisionsMembercznc:FinancingReceivables30To89DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMembercznc:FinancingReceivables30To89DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMembercznc:FinancingReceivables30To89DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMembercznc:FinancingReceivables30To89DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMembercznc:FinancingReceivables30To89DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMembercznc:FinancingReceivables30To89DaysPastDueMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMembercznc:FinancingReceivables30To89DaysPastDueMember2020-09-300000810958us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-09-300000810958us-gaap:ConsumerPortfolioSegmentMembercznc:FinancingReceivables30To89DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:FinancingReceivables30To89DaysPastDueMember2020-09-300000810958cznc:TroubledDebtRestructuringMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-09-300000810958cznc:TroubledDebtRestructuringMembercznc:FinancingReceivables30To89DaysPastDueMember2020-09-300000810958us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2020-09-300000810958cznc:FinancingReceivables30To89DaysPastDueMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMemberus-gaap:SeniorLienMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMemberus-gaap:JuniorLienMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMembercznc:FinancingReceivables30To89DaysPastDueMemberus-gaap:SeniorLienMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMembercznc:FinancingReceivables30To89DaysPastDueMemberus-gaap:JuniorLienMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMembercznc:FinancingReceivables30To89DaysPastDueMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Memberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Membercznc:FinancingReceivables30To89DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMembercznc:FinancingReceivables30To89DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMembercznc:FinancingReceivables30To89DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMembercznc:FinancingReceivables30To89DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:PoliticalSubdivisionsMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:PoliticalSubdivisionsMembercznc:FinancingReceivables30To89DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMembercznc:FinancingReceivables30To89DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMembercznc:FinancingReceivables30To89DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMembercznc:FinancingReceivables30To89DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMembercznc:FinancingReceivables30To89DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMembercznc:FinancingReceivables30To89DaysPastDueMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMembercznc:FinancingReceivables30To89DaysPastDueMember2019-12-310000810958us-gaap:ConsumerPortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2019-12-310000810958us-gaap:ConsumerPortfolioSegmentMembercznc:FinancingReceivables30To89DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:FinancingReceivables30To89DaysPastDueMember2019-12-310000810958cznc:TroubledDebtRestructuringMemberus-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2019-12-310000810958cznc:TroubledDebtRestructuringMembercznc:FinancingReceivables30To89DaysPastDueMember2019-12-310000810958us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMember2019-12-310000810958cznc:FinancingReceivables30To89DaysPastDueMember2019-12-310000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember2020-09-300000810958us-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember2019-12-310000810958cznc:Multifamily5OrMoreResidentialMember2020-09-300000810958cznc:Multifamily5OrMoreResidentialMember2019-12-3100008109582019-01-012019-12-310000810958us-gaap:ResidentialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMembercznc:PrincipalAndInterestPaymentDeferralNonCovidRelatedMember2020-07-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMembercznc:PrincipalAndInterestPaymentDeferralNonCovidRelatedMember2020-07-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMembercznc:ExtendedInterestOnlyPaymentsAndReducedMonthlyPaymentsWithBalloonPaymentMember2020-07-012020-09-300000810958cznc:TroubledDebtRestructuringMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:JuniorLienMember2020-07-012020-09-300000810958cznc:TroubledDebtRestructuringMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2020-07-012020-09-300000810958cznc:TroubledDebtRestructuringMembercznc:CommercialAndIndustrialMember2020-07-012020-09-300000810958cznc:TroubledDebtRestructuringMembercznc:AgriculturalLoansMember2020-07-012020-09-300000810958cznc:TroubledDebtRestructuringMember2020-07-012020-09-300000810958cznc:InterestOnlyPaymentsForNineMonthPeriodMember2020-07-012020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMembercznc:NewLoanAtLowerThanRiskAdjustedMarketRateToBorrowerMember2020-01-012020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMembercznc:MonthlyPaymentReductionAndExtendedMaturityDateMember2020-01-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMembercznc:PrincipalAndInterestPaymentDeferralNonCovidRelatedMember2020-01-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMembercznc:PrincipalAndInterestPaymentDeferralNonCovidRelatedMember2020-01-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMembercznc:MonthlyPaymentReductionAndExtendedMaturityDateMember2020-01-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMembercznc:InterestOnlyPaymentsForNineMonthPeriodMember2020-01-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMembercznc:ExtendedInterestOnlyPaymentsAndReducedMonthlyPaymentsWithBalloonPaymentMember2020-01-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMembercznc:MonthlyPaymentReductionAndExtendedMaturityDateMember2020-01-012020-09-300000810958cznc:TroubledDebtRestructuringMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:JuniorLienMember2020-01-012020-09-300000810958cznc:TroubledDebtRestructuringMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2020-01-012020-09-300000810958cznc:TroubledDebtRestructuringMembercznc:CommercialAndIndustrialMember2020-01-012020-09-300000810958cznc:TroubledDebtRestructuringMembercznc:AgriculturalLoansMember2020-01-012020-09-300000810958cznc:TroubledDebtRestructuringMember2020-01-012020-09-300000810958us-gaap:ResidentialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMembercznc:PrincipalAndInterestPaymentDeferralNonCovidRelatedMember2019-07-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMembercznc:PrincipalAndInterestPaymentDeferralNonCovidRelatedMember2019-07-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMembercznc:ExtendedInterestOnlyPaymentsAndReducedMonthlyPaymentsWithBalloonPaymentMember2019-07-012019-09-300000810958cznc:TroubledDebtRestructuringMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:JuniorLienMember2019-07-012019-09-300000810958cznc:TroubledDebtRestructuringMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2019-07-012019-09-300000810958cznc:TroubledDebtRestructuringMembercznc:CommercialAndIndustrialMember2019-07-012019-09-300000810958cznc:TroubledDebtRestructuringMembercznc:AgriculturalLoansMember2019-07-012019-09-300000810958cznc:TroubledDebtRestructuringMember2019-07-012019-09-300000810958cznc:InterestOnlyPaymentsForNineMonthPeriodMember2019-07-012019-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMembercznc:NewLoanAtLowerThanRiskAdjustedMarketRateToBorrowerMember2019-01-012019-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMembercznc:MonthlyPaymentReductionAndExtendedMaturityDateMember2019-01-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMembercznc:PrincipalAndInterestPaymentDeferralNonCovidRelatedMember2019-01-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMembercznc:PrincipalAndInterestPaymentDeferralNonCovidRelatedMember2019-01-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMembercznc:MonthlyPaymentReductionAndExtendedMaturityDateMember2019-01-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMembercznc:InterestOnlyPaymentsForNineMonthPeriodMember2019-01-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMembercznc:ExtendedInterestOnlyPaymentsAndReducedMonthlyPaymentsWithBalloonPaymentMember2019-01-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMembercznc:MonthlyPaymentReductionAndExtendedMaturityDateMember2019-01-012019-09-300000810958cznc:TroubledDebtRestructuringMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:JuniorLienMember2019-01-012019-09-300000810958cznc:TroubledDebtRestructuringMemberus-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2019-01-012019-09-300000810958cznc:TroubledDebtRestructuringMembercznc:CommercialAndIndustrialMember2019-01-012019-09-300000810958cznc:TroubledDebtRestructuringMembercznc:AgriculturalLoansMember2019-01-012019-09-300000810958cznc:TroubledDebtRestructuringMember2019-01-012019-09-300000810958cznc:CommercialLoanWithSpecificAllowanceMemberus-gaap:RealEstateLoanMember2020-07-012020-09-300000810958cznc:TroubledDebtRestructuredDefaultedMember2020-07-012020-09-300000810958cznc:CommercialLoanWithSpecificAllowanceMemberus-gaap:RealEstateLoanMember2020-01-012020-09-300000810958cznc:SpecificLoansPortfolioSegmentMemberus-gaap:RealEstateLoanMember2020-01-012020-09-300000810958us-gaap:UnallocatedFinancingReceivablesMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SeniorLienMember2020-06-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMember2020-06-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-06-300000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Member2020-06-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2020-06-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-06-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMember2020-06-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMember2020-06-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMember2020-06-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMember2020-06-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMember2020-06-300000810958us-gaap:UnallocatedFinancingReceivablesMember2020-06-300000810958us-gaap:ResidentialPortfolioSegmentMember2020-06-300000810958us-gaap:ConsumerPortfolioSegmentMember2020-06-300000810958us-gaap:CommercialPortfolioSegmentMember2020-06-3000008109582020-06-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialConstructionAndLandMember2019-12-310000810958us-gaap:UnallocatedFinancingReceivablesMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SeniorLienMember2019-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMember2019-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2019-09-300000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Member2019-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2019-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMember2019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMember2019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMember2019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMember2019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMember2019-09-300000810958us-gaap:UnallocatedFinancingReceivablesMember2019-09-300000810958us-gaap:ResidentialPortfolioSegmentMember2019-09-300000810958us-gaap:ConsumerPortfolioSegmentMember2019-09-300000810958us-gaap:CommercialPortfolioSegmentMember2019-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SeniorLienMember2019-06-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMember2019-06-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2019-06-300000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Member2019-06-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2019-06-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2019-06-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMember2019-06-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMember2019-06-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMember2019-06-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMember2019-06-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMember2019-06-300000810958us-gaap:UnallocatedFinancingReceivablesMember2019-06-300000810958us-gaap:ResidentialPortfolioSegmentMember2019-06-300000810958us-gaap:ConsumerPortfolioSegmentMember2019-06-300000810958us-gaap:CommercialPortfolioSegmentMember2019-06-3000008109582019-06-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SeniorLienMember2018-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMember2018-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2018-12-310000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Member2018-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2018-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2018-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMember2018-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMember2018-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMember2018-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMember2018-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMember2018-12-310000810958us-gaap:UnallocatedFinancingReceivablesMember2018-12-310000810958us-gaap:ResidentialPortfolioSegmentMember2018-12-310000810958us-gaap:ConsumerPortfolioSegmentMember2018-12-310000810958us-gaap:CommercialPortfolioSegmentMember2018-12-310000810958srt:FederalHomeLoanBankOfPittsburghMembercznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2025WithRateOf491Member2020-09-300000810958srt:FederalHomeLoanBankOfPittsburghMembercznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2024WithWeightedAverageRateOf1.06Member2020-09-300000810958srt:FederalHomeLoanBankOfPittsburghMembercznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2023WithWeightedAverageRateOf1.44Member2020-09-300000810958srt:FederalHomeLoanBankOfPittsburghMembercznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2022WithWeightedAverageRateOf1.40Member2020-09-300000810958srt:FederalHomeLoanBankOfPittsburghMembercznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2021WithRateOf1.36Member2020-09-300000810958srt:FederalHomeLoanBankOfPittsburghMembercznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2020WithRateOf270Member2020-09-300000810958srt:FederalHomeLoanBankOfPittsburghMembercznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2025WithRateOf491Member2019-12-310000810958srt:FederalHomeLoanBankOfPittsburghMembercznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2024WithWeightedAverageRateOf1.06Member2019-12-310000810958srt:FederalHomeLoanBankOfPittsburghMembercznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2023WithWeightedAverageRateOf1.44Member2019-12-310000810958srt:FederalHomeLoanBankOfPittsburghMembercznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2022WithWeightedAverageRateOf1.40Member2019-12-310000810958srt:FederalHomeLoanBankOfPittsburghMembercznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2021WithRateOf1.36Member2019-12-310000810958srt:FederalHomeLoanBankOfPittsburghMembercznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2020WithRateOf270Member2019-12-310000810958srt:FederalHomeLoanBankOfPittsburghMemberus-gaap:OtherAssetsMember2020-09-300000810958srt:FederalHomeLoanBankOfPittsburghMember2020-09-300000810958srt:FederalHomeLoanBankOfPittsburghMemberus-gaap:OtherAssetsMember2019-12-310000810958srt:FederalHomeLoanBankOfPittsburghMember2019-12-310000810958cznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2025WithRateOf491Member2020-09-300000810958cznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2024WithWeightedAverageRateOf1.06Member2020-09-300000810958cznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2023WithWeightedAverageRateOf1.44Member2020-09-300000810958cznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2022WithWeightedAverageRateOf1.40Member2020-09-300000810958cznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2020WithRateOf270Member2020-09-300000810958cznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2025WithRateOf491Member2019-12-310000810958cznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2024WithWeightedAverageRateOf1.06Member2019-12-310000810958cznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2023WithWeightedAverageRateOf1.44Member2019-12-310000810958cznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2022WithWeightedAverageRateOf1.40Member2019-12-310000810958cznc:FederalHomeLoanBankBorrowingsLoanMaturingIn2020WithRateOf270Member2019-12-310000810958cznc:ServicingRightsAssetsMemberus-gaap:FairValueInputsLevel3Member2020-09-300000810958cznc:ServicingRightsAssetsMemberus-gaap:FairValueInputsLevel3Member2020-06-300000810958cznc:ServicingRightsAssetsMemberus-gaap:FairValueInputsLevel3Member2019-12-310000810958cznc:ServicingRightsAssetsMemberus-gaap:FairValueInputsLevel3Member2019-09-300000810958cznc:ServicingRightsAssetsMemberus-gaap:FairValueInputsLevel3Member2019-06-300000810958cznc:ServicingRightsAssetsMemberus-gaap:FairValueInputsLevel3Member2018-12-310000810958cznc:ServicingRightsAssetsMemberus-gaap:FairValueInputsLevel3Member2020-07-012020-09-300000810958cznc:ServicingRightsAssetsMemberus-gaap:FairValueInputsLevel3Member2020-01-012020-09-300000810958cznc:ServicingRightsAssetsMemberus-gaap:FairValueInputsLevel3Member2019-07-012019-09-300000810958cznc:ServicingRightsAssetsMemberus-gaap:FairValueInputsLevel3Member2019-01-012019-09-300000810958us-gaap:FairValueMeasurementsRecurringMember2020-01-012020-09-300000810958us-gaap:InterestRateSwapMember2020-07-010000810958us-gaap:InterestRateSwapMemberus-gaap:FairValueInputsLevel3Member2020-09-300000810958us-gaap:InterestRateSwapMemberus-gaap:FairValueInputsLevel2Member2020-09-300000810958us-gaap:InterestRateSwapMemberus-gaap:FairValueInputsLevel1Member2020-09-300000810958us-gaap:InterestRateSwapMember2020-09-300000810958us-gaap:FairValueInputsLevel2Membercznc:TimeDepositsMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2020-09-300000810958us-gaap:FairValueInputsLevel2Membercznc:TimeDepositsMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2020-09-300000810958us-gaap:FairValueInputsLevel2Membercznc:DepositsWithNoStatedMaturityMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2020-09-300000810958us-gaap:FairValueInputsLevel2Membercznc:DepositsWithNoStatedMaturityMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2020-09-300000810958us-gaap:FairValueInputsLevel2Membercznc:TimeDepositsMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2019-12-310000810958us-gaap:FairValueInputsLevel2Membercznc:TimeDepositsMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2019-12-310000810958us-gaap:FairValueInputsLevel2Membercznc:DepositsWithNoStatedMaturityMemberus-gaap:EstimateOfFairValueFairValueDisclosureMember2019-12-310000810958us-gaap:FairValueInputsLevel2Membercznc:DepositsWithNoStatedMaturityMemberus-gaap:CarryingReportedAmountFairValueDisclosureMember2019-12-310000810958us-gaap:CollateralPledgedMembercznc:FederalReserveBankOfPhiladelphiaMember2020-09-300000810958us-gaap:AssetPledgedAsCollateralMember2020-09-300000810958cznc:InvestmentSecuritiesMember2020-09-300000810958us-gaap:CollateralPledgedMembercznc:FederalReserveBankOfPhiladelphiaMember2019-12-310000810958cznc:InvestmentSecuritiesMember2019-12-310000810958cznc:CovenantFinancialIncMembercznc:SubordinatedDebtMaturityJune2021Interest6.25Member2020-09-300000810958cznc:SixPointTwoFivePercentSubordinateDebtMaturingInJune2026AndRedeemableAtParInJune2021Member2020-09-300000810958cznc:SixPointFiveZeroPercentSubordinateDebtMaturingInJuly2027AndRedeemableAtParInJuly2022Member2020-09-300000810958cznc:SixPointFiveZeroPercentSubordinateDebtMaturingInApril2027AndRedeemableAtParInApril2022Member2020-09-300000810958cznc:CovenantFinancialIncMembercznc:SubordinatedDebtMaturityJune2021Interest6.25Member2020-07-010000810958cznc:CovenantFinancialIncMembercznc:SubordinatedDebtMaturityJuly2027Interest6.50Member2020-07-010000810958cznc:SixPointTwoFivePercentSubordinateDebtMaturingInJune2026AndRedeemableAtParInJune2021Member2019-12-310000810958cznc:SixPointFiveZeroPercentSubordinateDebtMaturingInJuly2027AndRedeemableAtParInJuly2022Member2019-12-310000810958cznc:SixPointFiveZeroPercentSubordinateDebtMaturingInApril2027AndRedeemableAtParInApril2022Member2019-12-310000810958cznc:LoansReceivable1Memberus-gaap:CreditAvailabilityConcentrationRiskMember2020-01-012020-09-300000810958cznc:LoansReceivable1Memberus-gaap:CreditAvailabilityConcentrationRiskMember2019-01-012019-12-310000810958us-gaap:RetainedEarningsMember2020-07-012020-09-300000810958us-gaap:RetainedEarningsMember2020-01-012020-09-300000810958us-gaap:RetainedEarningsMember2019-07-012019-09-300000810958us-gaap:RetainedEarningsMember2019-01-012019-09-3000008109582020-03-3100008109582019-09-3000008109582018-12-310000810958us-gaap:FairValueInputsLevel1Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2020-09-300000810958us-gaap:FairValueInputsLevel1Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2020-09-300000810958us-gaap:FairValueInputsLevel1Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2019-12-310000810958us-gaap:FairValueInputsLevel1Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2019-12-310000810958us-gaap:SecuritiesSoldUnderAgreementsToRepurchaseMember2020-09-300000810958us-gaap:SecuritiesSoldUnderAgreementsToRepurchaseMember2019-12-310000810958cznc:CovenantFinancialIncMember2020-07-012020-09-300000810958cznc:CovenantFinancialIncMemberus-gaap:CoreDepositsMember2020-07-010000810958cznc:MonumentBancorpIncMemberus-gaap:CoreDepositsMember2019-04-010000810958cznc:MonumentBancorpIncMember2019-07-012019-09-300000810958cznc:MonumentBancorpIncMember2019-01-012019-09-300000810958us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2020-09-300000810958us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialMortgageBackedSecuritiesMember2020-09-300000810958us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMembercznc:U.s.TreasuryDebtSecuritiesMember2020-09-300000810958us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ResidentialPassthroughSecuritiesMember2020-09-300000810958us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ResidentialCollateralizedMortgageObligationsMember2020-09-300000810958us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxExemptMember2020-09-300000810958us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxableMember2020-09-300000810958us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2020-09-300000810958us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialMortgageBackedSecuritiesMember2020-09-300000810958us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMembercznc:U.s.TreasuryDebtSecuritiesMember2020-09-300000810958us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ResidentialPassthroughSecuritiesMember2020-09-300000810958us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ResidentialCollateralizedMortgageObligationsMember2020-09-300000810958us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxExemptMember2020-09-300000810958us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxableMember2020-09-300000810958us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2020-09-300000810958us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialMortgageBackedSecuritiesMember2020-09-300000810958us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMembercznc:U.s.TreasuryDebtSecuritiesMember2020-09-300000810958us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ResidentialPassthroughSecuritiesMember2020-09-300000810958us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ResidentialCollateralizedMortgageObligationsMember2020-09-300000810958us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxExemptMember2020-09-300000810958us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxableMember2020-09-300000810958us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2020-09-300000810958us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialMortgageBackedSecuritiesMember2020-09-300000810958us-gaap:FairValueMeasurementsRecurringMembercznc:U.s.TreasuryDebtSecuritiesMember2020-09-300000810958us-gaap:FairValueMeasurementsRecurringMembercznc:ResidentialPassthroughSecuritiesMember2020-09-300000810958us-gaap:FairValueMeasurementsRecurringMembercznc:ResidentialCollateralizedMortgageObligationsMember2020-09-300000810958us-gaap:FairValueMeasurementsRecurringMembercznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxExemptMember2020-09-300000810958us-gaap:FairValueMeasurementsRecurringMembercznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxableMember2020-09-300000810958us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2019-12-310000810958us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialMortgageBackedSecuritiesMember2019-12-310000810958us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ResidentialPassthroughSecuritiesMember2019-12-310000810958us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ResidentialCollateralizedMortgageObligationsMember2019-12-310000810958us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxExemptMember2019-12-310000810958us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxableMember2019-12-310000810958us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2019-12-310000810958us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialMortgageBackedSecuritiesMember2019-12-310000810958us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ResidentialPassthroughSecuritiesMember2019-12-310000810958us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ResidentialCollateralizedMortgageObligationsMember2019-12-310000810958us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxExemptMember2019-12-310000810958us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxableMember2019-12-310000810958us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2019-12-310000810958us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialMortgageBackedSecuritiesMember2019-12-310000810958us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ResidentialPassthroughSecuritiesMember2019-12-310000810958us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ResidentialCollateralizedMortgageObligationsMember2019-12-310000810958us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxExemptMember2019-12-310000810958us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMembercznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxableMember2019-12-310000810958us-gaap:FairValueMeasurementsRecurringMemberus-gaap:USGovernmentAgenciesDebtSecuritiesMember2019-12-310000810958us-gaap:FairValueMeasurementsRecurringMemberus-gaap:CommercialMortgageBackedSecuritiesMember2019-12-310000810958us-gaap:FairValueMeasurementsRecurringMembercznc:ResidentialPassthroughSecuritiesMember2019-12-310000810958us-gaap:FairValueMeasurementsRecurringMembercznc:ResidentialCollateralizedMortgageObligationsMember2019-12-310000810958us-gaap:FairValueMeasurementsRecurringMembercznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxExemptMember2019-12-310000810958us-gaap:FairValueMeasurementsRecurringMembercznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxableMember2019-12-310000810958cznc:CommercialMortgagebackedSecurities1Member2020-09-300000810958us-gaap:USGovernmentAgenciesDebtSecuritiesMember2020-09-300000810958us-gaap:CommercialMortgageBackedSecuritiesMember2020-09-300000810958cznc:U.s.TreasuryDebtSecuritiesMember2020-09-300000810958cznc:ResidentialPassthroughSecuritiesMember2020-09-300000810958cznc:ResidentialCollateralizedMortgageObligationsMember2020-09-300000810958cznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxExemptMember2020-09-300000810958cznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxableMember2020-09-300000810958us-gaap:USGovernmentAgenciesDebtSecuritiesMember2019-12-310000810958us-gaap:CommercialMortgageBackedSecuritiesMember2019-12-310000810958cznc:ResidentialPassthroughSecuritiesMember2019-12-310000810958cznc:ResidentialCollateralizedMortgageObligationsMember2019-12-310000810958cznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxExemptMember2019-12-310000810958cznc:ObligationsOfStatesAndPoliticalSubdivisionsTaxableMember2019-12-310000810958us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300000810958us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMember2020-09-300000810958us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300000810958us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsNonrecurringMember2020-09-300000810958us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2020-09-300000810958us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsNonrecurringMember2020-09-300000810958us-gaap:FairValueMeasurementsRecurringMember2020-09-300000810958us-gaap:FairValueMeasurementsNonrecurringMember2020-09-300000810958us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310000810958us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsNonrecurringMember2019-12-310000810958us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310000810958us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsNonrecurringMember2019-12-310000810958us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2019-12-310000810958us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsNonrecurringMember2019-12-310000810958us-gaap:FairValueMeasurementsRecurringMember2019-12-310000810958us-gaap:FairValueMeasurementsNonrecurringMember2019-12-310000810958cznc:CovenantFinancialIncMember2020-01-012020-09-300000810958cznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMember2020-07-012020-09-300000810958cznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMember2020-01-012020-09-300000810958cznc:MonumentBancorpIncMemberus-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember2020-01-012020-09-300000810958cznc:MonumentBancorpIncMemberus-gaap:FinancialAssetAcquiredWithCreditDeteriorationMember2019-01-012019-12-310000810958us-gaap:RestrictedStockMember2020-07-012020-09-300000810958srt:ScenarioForecastMemberus-gaap:RestrictedStockMember2020-01-012020-12-310000810958us-gaap:RestrictedStockMember2020-01-012020-09-300000810958us-gaap:RestrictedStockMember2019-07-012019-09-300000810958us-gaap:RestrictedStockMember2019-01-012019-09-300000810958us-gaap:AdditionalPaidInCapitalMember2020-07-012020-09-300000810958us-gaap:AdditionalPaidInCapitalMember2020-01-012020-09-300000810958us-gaap:AdditionalPaidInCapitalMember2019-07-012019-09-300000810958us-gaap:AdditionalPaidInCapitalMember2019-01-012019-09-300000810958cznc:CovenantFinancialIncMemberus-gaap:CoreDepositsMember2020-07-012020-07-0100008109582020-11-050000810958cznc:ChangeOfControlPremiumToCorporationsVolumeWeightedAverageMarketPriceMember2020-01-012020-09-300000810958cznc:ChangeInControlPremiumToCorporationMarketPriceApproachMember2020-01-012020-09-300000810958srt:DirectorMembercznc:TimeBasedRestrictedStockAwardsMembercznc:FirstQuarterAwardsMember2020-01-012020-09-300000810958us-gaap:PerformanceSharesMembercznc:FirstQuarterAwardsMember2020-01-012020-09-300000810958cznc:TimeBasedRestrictedStockAwardsMembercznc:ThirdQuarterAwardsMember2020-01-012020-09-300000810958cznc:TimeBasedRestrictedStockAwardsMembercznc:FirstQuarterAwardsMember2020-01-012020-09-300000810958cznc:ChangeOfControlPremiumToCorporationsVolumeWeightedAverageMarketPriceMember2020-09-300000810958cznc:ChangeInControlPremiumToCorporationMarketPriceApproachMember2020-09-300000810958srt:MinimumMemberus-gaap:IncomeApproachValuationTechniqueMember2020-09-300000810958srt:MedianMemberus-gaap:IncomeApproachValuationTechniqueMember2020-09-300000810958srt:MaximumMemberus-gaap:IncomeApproachValuationTechniqueMember2020-09-300000810958us-gaap:IncomeApproachValuationTechniqueMember2020-09-300000810958cznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMember2020-03-272020-03-270000810958srt:FederalHomeLoanBankOfPittsburghMembercznc:FederalHomeLoanBankAdvances1Member2020-09-300000810958srt:WeightedAverageMembercznc:ImpairedLoansMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:MarketApproachValuationTechniqueMember2020-09-300000810958srt:WeightedAverageMembercznc:ImpairedLoansMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CommercialPortfolioSegmentMembercznc:CommercialLoansSecuredByRealEstateMemberus-gaap:MarketApproachValuationTechniqueMember2020-09-300000810958srt:WeightedAverageMembercznc:ImpairedLoansMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMemberus-gaap:MarketApproachValuationTechniqueMember2020-09-300000810958srt:WeightedAverageMembercznc:ForeclosedAssetsHeldForSaleMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:MarketApproachValuationTechniqueMember2020-09-300000810958srt:WeightedAverageMembercznc:ForeclosedAssetsHeldForSaleMemberus-gaap:FairValueMeasurementsNonrecurringMembercznc:CommercialRealEstateReceivablesMemberus-gaap:MarketApproachValuationTechniqueMember2020-09-300000810958srt:WeightedAverageMembercznc:ImpairedLoansMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMembercznc:MeasurementInputDiscountToBorrowersFinancialStatementValueMemberus-gaap:MarketApproachValuationTechniqueMember2019-12-310000810958srt:WeightedAverageMembercznc:ImpairedLoansMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:MarketApproachValuationTechniqueMember2019-12-310000810958srt:WeightedAverageMembercznc:ImpairedLoansMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMemberus-gaap:MarketApproachValuationTechniqueMember2019-12-310000810958srt:WeightedAverageMembercznc:ImpairedLoansMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CommercialPortfolioSegmentMembercznc:CommercialConstructionAndLandMemberus-gaap:MarketApproachValuationTechniqueMember2019-12-310000810958srt:WeightedAverageMembercznc:ImpairedLoansMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMemberus-gaap:MarketApproachValuationTechniqueMember2019-12-310000810958srt:WeightedAverageMembercznc:ForeclosedAssetsHeldForSaleMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:MarketApproachValuationTechniqueMember2019-12-310000810958srt:WeightedAverageMembercznc:ForeclosedAssetsHeldForSaleMemberus-gaap:FairValueMeasurementsNonrecurringMembercznc:LandReceivableMemberus-gaap:MarketApproachValuationTechniqueMember2019-12-310000810958srt:WeightedAverageMembercznc:ForeclosedAssetsHeldForSaleMemberus-gaap:FairValueMeasurementsNonrecurringMembercznc:CommercialRealEstateReceivablesMemberus-gaap:MarketApproachValuationTechniqueMember2019-12-310000810958cznc:ImpairedLoansMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:MarketApproachValuationTechniqueMember2020-09-300000810958cznc:ImpairedLoansMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CommercialPortfolioSegmentMembercznc:CommercialLoansSecuredByRealEstateMemberus-gaap:MarketApproachValuationTechniqueMember2020-09-300000810958cznc:ImpairedLoansMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMemberus-gaap:MarketApproachValuationTechniqueMember2020-09-300000810958cznc:ImpairedLoansMemberus-gaap:FairValueMeasurementsNonrecurringMember2020-09-300000810958cznc:ImpairedLoansMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMembercznc:MeasurementInputDiscountToBorrowersFinancialStatementValueMemberus-gaap:MarketApproachValuationTechniqueMember2019-12-310000810958cznc:ImpairedLoansMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:MarketApproachValuationTechniqueMember2019-12-310000810958cznc:ImpairedLoansMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMemberus-gaap:MarketApproachValuationTechniqueMember2019-12-310000810958cznc:ImpairedLoansMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CommercialPortfolioSegmentMembercznc:CommercialConstructionAndLandMemberus-gaap:MarketApproachValuationTechniqueMember2019-12-310000810958cznc:ImpairedLoansMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMemberus-gaap:MarketApproachValuationTechniqueMember2019-12-310000810958cznc:ImpairedLoansMemberus-gaap:FairValueMeasurementsNonrecurringMember2019-12-310000810958cznc:ForeclosedAssetsHeldForSaleMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:MarketApproachValuationTechniqueMember2020-09-300000810958cznc:ForeclosedAssetsHeldForSaleMemberus-gaap:FairValueMeasurementsNonrecurringMembercznc:CommercialRealEstateReceivablesMemberus-gaap:MarketApproachValuationTechniqueMember2020-09-300000810958cznc:ForeclosedAssetsHeldForSaleMemberus-gaap:FairValueMeasurementsNonrecurringMember2020-09-300000810958cznc:ForeclosedAssetsHeldForSaleMemberus-gaap:FairValueMeasurementsNonrecurringMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:MarketApproachValuationTechniqueMember2019-12-310000810958cznc:ForeclosedAssetsHeldForSaleMemberus-gaap:FairValueMeasurementsNonrecurringMembercznc:LandReceivableMemberus-gaap:MarketApproachValuationTechniqueMember2019-12-310000810958cznc:ForeclosedAssetsHeldForSaleMemberus-gaap:FairValueMeasurementsNonrecurringMembercznc:CommercialRealEstateReceivablesMemberus-gaap:MarketApproachValuationTechniqueMember2019-12-310000810958cznc:ForeclosedAssetsHeldForSaleMemberus-gaap:FairValueMeasurementsNonrecurringMember2019-12-310000810958us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMembercznc:NonAccrualLoansMember2020-09-300000810958cznc:FinancingReceivables30To89DaysPastDueMembercznc:NonAccrualLoansMember2020-09-300000810958cznc:NonAccrualLoansMember2020-09-300000810958us-gaap:FinancingReceivablesEqualToGreaterThan90DaysPastDueMembercznc:NonAccrualLoansMember2019-12-310000810958cznc:FinancingReceivables30To89DaysPastDueMembercznc:NonAccrualLoansMember2019-12-310000810958cznc:NonAccrualLoansMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SeniorLienMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Member2020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:PoliticalSubdivisionsMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMember2020-09-300000810958us-gaap:ConsumerPortfolioSegmentMember2020-09-300000810958cznc:TroubledDebtRestructuringMember2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SeniorLienMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Member2019-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:PoliticalSubdivisionsMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMember2019-12-310000810958us-gaap:ConsumerPortfolioSegmentMember2019-12-310000810958us-gaap:CommercialPortfolioSegmentMember2019-12-310000810958cznc:TroubledDebtRestructuringMember2019-12-310000810958us-gaap:ResidentialPortfolioSegmentMember2020-09-300000810958us-gaap:CommercialPortfolioSegmentMember2020-09-300000810958srt:MinimumMemberus-gaap:ResidentialPortfolioSegmentMember2020-09-300000810958srt:MinimumMemberus-gaap:CommercialPortfolioSegmentMember2020-09-300000810958srt:MaximumMemberus-gaap:ResidentialPortfolioSegmentMember2020-09-300000810958srt:MaximumMemberus-gaap:CommercialPortfolioSegmentMember2020-09-300000810958us-gaap:IncomeApproachValuationTechniqueMember2020-01-012020-09-300000810958cznc:MutualFund1Member2019-12-310000810958cznc:MutualFund1Member2020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SeniorLienMember2020-07-012020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMember2020-07-012020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-07-012020-09-300000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Member2020-07-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2020-07-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-07-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMember2020-07-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMember2020-07-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMember2020-07-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMember2020-07-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMember2020-07-012020-09-300000810958us-gaap:UnallocatedFinancingReceivablesMember2020-07-012020-09-300000810958us-gaap:ResidentialPortfolioSegmentMember2020-07-012020-09-300000810958us-gaap:ConsumerPortfolioSegmentMember2020-07-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMember2020-07-012020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SeniorLienMember2020-01-012020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMember2020-01-012020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-01-012020-09-300000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Member2020-01-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2020-01-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2020-01-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMember2020-01-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMember2020-01-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMember2020-01-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMember2020-01-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMember2020-01-012020-09-300000810958us-gaap:UnallocatedFinancingReceivablesMember2020-01-012020-09-300000810958us-gaap:ResidentialPortfolioSegmentMember2020-01-012020-09-300000810958us-gaap:ConsumerPortfolioSegmentMember2020-01-012020-09-300000810958us-gaap:CommercialPortfolioSegmentMember2020-01-012020-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SeniorLienMember2019-07-012019-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMember2019-07-012019-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2019-07-012019-09-300000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Member2019-07-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2019-07-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2019-07-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMember2019-07-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMember2019-07-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMember2019-07-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMember2019-07-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMember2019-07-012019-09-300000810958us-gaap:UnallocatedFinancingReceivablesMember2019-07-012019-09-300000810958us-gaap:ResidentialPortfolioSegmentMember2019-07-012019-09-300000810958us-gaap:ConsumerPortfolioSegmentMember2019-07-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMember2019-07-012019-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SeniorLienMember2019-01-012019-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMember2019-01-012019-09-300000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2019-01-012019-09-300000810958us-gaap:ResidentialPortfolioSegmentMembercznc:HomeEquityLineOfCredit1Member2019-01-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:RealEstateLoanMember2019-01-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMemberus-gaap:ConstructionLoansMember2019-01-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:OtherCommercialLoansMember2019-01-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:Multifamily5OrMoreResidentialMember2019-01-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByFarmlandMember2019-01-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:CommercialAndIndustrialMember2019-01-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMembercznc:AgriculturalLoansMember2019-01-012019-09-300000810958us-gaap:UnallocatedFinancingReceivablesMember2019-01-012019-09-300000810958us-gaap:ResidentialPortfolioSegmentMember2019-01-012019-09-300000810958us-gaap:ConsumerPortfolioSegmentMember2019-01-012019-09-300000810958us-gaap:CommercialPortfolioSegmentMember2019-01-012019-09-300000810958srt:MinimumMembercznc:ChangeOfControlPremiumToCorporationsVolumeWeightedAverageMarketPriceMember2020-09-300000810958srt:MinimumMembercznc:ChangeInControlPremiumToCorporationMarketPriceApproachMember2020-09-300000810958srt:MaximumMembercznc:ChangeOfControlPremiumToCorporationsVolumeWeightedAverageMarketPriceMember2020-09-300000810958srt:MaximumMembercznc:ChangeInControlPremiumToCorporationMarketPriceApproachMember2020-09-300000810958cznc:MarketRateAdjustmentMember2020-09-300000810958cznc:CreditAdjustmentOnNonimpairedLoansMember2020-09-300000810958cznc:MarketRateAdjustmentMember2020-06-300000810958cznc:CreditAdjustmentOnNonimpairedLoansMember2020-06-300000810958cznc:MarketRateAdjustmentMember2019-12-310000810958cznc:CreditAdjustmentOnNonimpairedLoansMember2019-12-310000810958cznc:MarketRateAdjustmentMember2019-09-300000810958cznc:CreditAdjustmentOnNonimpairedLoansMember2019-09-300000810958cznc:MarketRateAdjustmentMember2019-06-300000810958cznc:CreditAdjustmentOnNonimpairedLoansMember2019-06-300000810958cznc:MarketRateAdjustmentMember2018-12-310000810958cznc:CreditAdjustmentOnNonimpairedLoansMember2018-12-310000810958cznc:MarketRateAdjustmentMembercznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMember2020-01-012020-09-300000810958cznc:MarketRateAdjustmentMember2020-07-012020-09-300000810958cznc:CreditAdjustmentOnNonimpairedLoansMember2020-07-012020-09-300000810958cznc:MarketRateAdjustmentMember2020-01-012020-09-300000810958cznc:CreditAdjustmentOnNonimpairedLoansMember2020-01-012020-09-300000810958cznc:MarketRateAdjustmentMember2019-07-012019-09-300000810958cznc:CreditAdjustmentOnNonimpairedLoansMember2019-07-012019-09-300000810958cznc:MarketRateAdjustmentMember2019-01-012019-09-300000810958cznc:CreditAdjustmentOnNonimpairedLoansMember2019-01-012019-09-3000008109582019-12-310000810958cznc:MonumentBancorpIncMembercznc:SubordinatedDebtRedeemedApril12019Member2019-04-010000810958cznc:MonumentBancorpIncMember2019-04-010000810958us-gaap:PerformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SeniorLienMember2020-07-010000810958us-gaap:PerformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMember2020-07-010000810958us-gaap:NonperformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SeniorLienMember2020-07-010000810958us-gaap:NonperformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMember2020-07-010000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:SeniorLienMember2020-07-010000810958us-gaap:ResidentialPortfolioSegmentMemberus-gaap:RealEstateLoanMemberus-gaap:JuniorLienMember2020-07-010000810958us-gaap:PerformingFinancingReceivableMemberus-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByRealEstateMember2020-07-010000810958us-gaap:NonperformingFinancingReceivableMemberus-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByRealEstateMember2020-07-010000810958us-gaap:PerformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMember2020-07-010000810958us-gaap:PerformingFinancingReceivableMemberus-gaap:ConsumerPortfolioSegmentMember2020-07-010000810958us-gaap:PerformingFinancingReceivableMemberus-gaap:ConstructionLoansMember2020-07-010000810958us-gaap:PerformingFinancingReceivableMemberus-gaap:CommercialPortfolioSegmentMember2020-07-010000810958us-gaap:PerformingFinancingReceivableMembercznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMember2020-07-010000810958us-gaap:PerformingFinancingReceivableMembercznc:OtherCommercialLoansMember2020-07-010000810958us-gaap:PerformingFinancingReceivableMembercznc:Multifamily5OrMoreResidentialMember2020-07-010000810958us-gaap:PerformingFinancingReceivableMembercznc:LoansSecuredByFarmlandMember2020-07-010000810958us-gaap:PerformingFinancingReceivableMembercznc:HomeEquityLineOfCredit1Member2020-07-010000810958us-gaap:PerformingFinancingReceivableMembercznc:CommercialAndIndustrialMember2020-07-010000810958us-gaap:NonperformingFinancingReceivableMemberus-gaap:ResidentialPortfolioSegmentMember2020-07-010000810958us-gaap:NonperformingFinancingReceivableMemberus-gaap:ConsumerPortfolioSegmentMember2020-07-010000810958us-gaap:NonperformingFinancingReceivableMemberus-gaap:ConstructionLoansMember2020-07-010000810958us-gaap:NonperformingFinancingReceivableMemberus-gaap:CommercialPortfolioSegmentMember2020-07-010000810958us-gaap:NonperformingFinancingReceivableMembercznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMember2020-07-010000810958us-gaap:NonperformingFinancingReceivableMembercznc:OtherCommercialLoansMember2020-07-010000810958us-gaap:NonperformingFinancingReceivableMembercznc:Multifamily5OrMoreResidentialMember2020-07-010000810958us-gaap:NonperformingFinancingReceivableMembercznc:LoansSecuredByFarmlandMember2020-07-010000810958us-gaap:NonperformingFinancingReceivableMembercznc:HomeEquityLineOfCredit1Member2020-07-010000810958us-gaap:NonperformingFinancingReceivableMembercznc:CommercialAndIndustrialMember2020-07-010000810958us-gaap:CommercialPortfolioSegmentMembercznc:LoansSecuredByRealEstateMember2020-07-010000810958us-gaap:ResidentialPortfolioSegmentMember2020-07-010000810958us-gaap:PerformingFinancingReceivableMember2020-07-010000810958us-gaap:NonperformingFinancingReceivableMember2020-07-010000810958us-gaap:ConsumerPortfolioSegmentMember2020-07-010000810958us-gaap:ConstructionLoansMember2020-07-010000810958us-gaap:CommercialPortfolioSegmentMember2020-07-010000810958cznc:SmallBusinessAdministrationPaycheckProtectionProgramLoansCaresActMember2020-07-010000810958cznc:OtherCommercialLoansMember2020-07-010000810958cznc:Multifamily5OrMoreResidentialMember2020-07-010000810958cznc:LoansSecuredByFarmlandMember2020-07-010000810958cznc:HomeEquityLineOfCredit1Member2020-07-010000810958cznc:CommercialAndIndustrialMember2020-07-0100008109582020-07-010000810958cznc:CovenantFinancialIncMember2020-07-012020-07-010000810958cznc:MonumentBancorpIncMember2019-04-012019-04-010000810958cznc:CovenantFinancialIncMember2020-07-010000810958cznc:CovenantFinancialIncMember2020-07-012020-09-300000810958cznc:CovenantFinancialIncMember2020-01-012020-09-300000810958cznc:CovenantFinancialIncMember2019-07-012019-09-300000810958cznc:CovenantFinancialIncMember2019-01-012019-09-3000008109582020-09-3000008109582020-09-012020-09-3000008109582019-10-012019-12-310000810958cznc:ServicingRightsAssetsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2020-09-300000810958cznc:ServicingRightsAssetsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2019-12-3100008109582020-07-012020-09-3000008109582019-07-012019-09-300000810958cznc:ServicingRightsAssetsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2020-01-012020-09-300000810958cznc:ServicingRightsAssetsMemberus-gaap:FairValueMeasurementsRecurringMemberus-gaap:ValuationTechniqueDiscountedCashFlowMember2019-01-012019-12-310000810958us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2020-09-300000810958us-gaap:FairValueInputsLevel2Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2020-09-300000810958us-gaap:FairValueInputsLevel2Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2019-12-310000810958us-gaap:FairValueInputsLevel2Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2019-12-3100008109582020-01-012020-09-3000008109582019-01-012019-09-30xbrli:sharesiso4217:USDxbrli:pureiso4217:USDxbrli:sharescznc:loancznc:itemcznc:borrowercznc:Officecznc:Dcznc:loanfacility

Table of Contents

​

​

Graphic

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2020

or

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

For the transition period from _______________ to _________________________.

Commission file number: 000-16084

CITIZENS & NORTHERN CORPORATION

(Exact name of Registrant as specified in its charter)

​

​

​

​

PENNSYLVANIA

    

23-2451943

(State or other jurisdiction of

​

(I.R.S. Employer

incorporation or organization)

​

Identification No.)

​

90-92 MAIN STREET, WELLSBORO, PA 16901

(Address of principal executive offices) (Zip code)

570-724-3411

(Registrant’s telephone number including area code)

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

​

​

​

​

​

​

Title of Each Class

    

Trading Symbol

    

Name of Each Exchange on Which Registered

Common Stock Par Value $1.00

​

CZNC

​

NASDAQ Capital Market

​

Indicate 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 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 definition 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ⌧

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.

​

Common Stock ($1.00 par value)

15,890,353 Shares Outstanding on November 5, 2020

​

​

​

​

​

​

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

CITIZENS & NORTHERN CORPORATION

Index

​

​

Part I. Financial Information

 

 

 

Item 1. Financial Statements

 

 

 

Consolidated Balance Sheets (Unaudited) – September 30, 2020 and December 31, 2019

Page 3

 

 

Consolidated Statements of Income (Unaudited) – Three-month and Nine-month Periods Ended September 30, 2020 and 2019

Page 4

​

Consolidated Statements of Comprehensive Income (Unaudited) - Three-month and Nine-month Periods Ended September 30, 2020 and 2019

Page 5

 

 

Consolidated Statements of Cash Flows (Unaudited) – Nine-month Periods Ended September 30, 2020 and 2019

Page 6

 

 

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) – Three-month and Nine-month Periods Ended September 30, 2020 and 2019

Page 7 - 8 

 

 

Notes to Unaudited Consolidated Financial Statements

Pages 9 – 53

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Pages 54 – 89

 

 

Item 4. Controls and Procedures

Page 89

 

 

Part II. Other Information

Pages 90 – 92

 

 

Signatures

Page 93

​

​

​

2

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

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

​

​

​

​

​

​

​

​

    

September 30, 

    

December 31, 

​

​

2020

​

2019

ASSETS

 

​

  

 

​

  

Cash and due from banks:

 

​

  

 

​

  

Noninterest-bearing

​

$

30,968

​

$

17,667

Interest-bearing

​

 

143,510

​

 

17,535

Total cash and due from banks

​

 

174,478

​

 

35,202

Available-for-sale debt securities, at fair value

​

 

340,545

​

 

346,723

Marketable equity security

​

 

1,003

​

 

979

Loans held for sale

​

 

1,200

​

 

767

​

​

​

​

​

​

​

Loans receivable

​

 

1,691,370

​

 

1,182,222

Allowance for loan losses

​

 

(10,753)

​

 

(9,836)

Loans, net

​

 

1,680,617

​

 

1,172,386

​

​

​

​

​

​

​

Bank-owned life insurance

​

 

29,942

​

 

18,641

Accrued interest receivable

​

 

8,296

​

 

5,001

Bank premises and equipment, net

​

 

21,504

​

 

17,170

Foreclosed assets held for sale

​

 

2,369

​

 

2,886

Deferred tax asset, net

​

 

1,335

​

 

2,618

Goodwill

​

 

52,526

​

 

28,388

Core deposit intangibles, net

​

 

4,059

​

 

1,247

Other assets

​

 

34,919

​

 

22,137

TOTAL ASSETS

​

$

2,352,793

​

$

1,654,145

​

​

​

​

​

​

​

LIABILITIES

​

 

​

​

 

​

Deposits:

​

 

​

​

 

​

Noninterest-bearing

​

$

467,544

​

$

285,904

Interest-bearing

​

 

1,403,970

​

 

966,756

Total deposits

​

 

1,871,514

​

 

1,252,660

Short-term borrowings

​

 

40,870

​

 

86,220

Long-term borrowings

​

 

102,787

​

 

52,127

Subordinated debt

​

 

16,572

​

 

6,500

Accrued interest and other liabilities

​

 

24,734

​

 

12,186

TOTAL LIABILITIES

​

 

2,056,477

​

 

1,409,693

​

​

​

​

​

​

​

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 15,982,815 and outstanding 15,890,353 at September 30, 2020;

​

 

​

​

 

​

issued 13,934,996 and outstanding 13,716,445 at December 31, 2019

​

 

15,983

​

 

13,935

Paid-in capital

​

 

143,286

​

 

104,519

Retained earnings

​

 

127,224

​

 

126,480

Treasury stock, at cost; 92,462 shares at September 30, 2020 and 218,551

​

 

​

​

 

​

shares at December 31, 2019

​

 

(1,786)

​

 

(4,173)

Accumulated other comprehensive income

​

 

11,609

​

 

3,691

TOTAL STOCKHOLDERS' EQUITY

​

 

296,316

​

 

244,452

TOTAL LIABILITIES & STOCKHOLDERS' EQUITY

​

$

2,352,793

​

$

1,654,145

​

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

​

3

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Consolidated Statements of Income

(In Thousands Except Per Share Data) (Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Three Months Ended

​

Nine Months Ended

​

​

September 30, 

​

September 30, 

​

September 30, 

​

September 30, 

​

​

2020

​

2019

​

2020

​

2019

INTEREST INCOME

 

​

  

 

​

  

​

​

  

 

​

  

Interest and fees on loans:

 

​

  

 

​

  

​

​

  

 

​

  

Taxable

​

$

19,158

​

$

14,400

​

$

47,745

​

$

38,446

Tax-exempt

​

 

450

​

 

509

​

 

1,348

​

 

1,597

Interest on mortgages held for sale

​

 

26

​

 

5

​

 

47

​

 

14

Interest on balances with depository institutions

​

 

69

​

 

159

​

 

191

​

 

424

Income from available-for-sale debt securities:

​

 

​

​

 

​

​

 

​

​

 

​

Taxable

​

 

1,483

​

 

1,732

​

 

4,451

​

 

5,392

Tax-exempt

​

 

561

​

 

466

​

 

1,505

​

 

1,591

Dividends on marketable equity security

​

 

4

​

 

6

​

 

14

​

 

17

Total interest and dividend income

​

 

21,751

​

 

17,277

​

 

55,301

​

 

47,481

INTEREST EXPENSE

​

 

  

​

 

​

​

 

  

​

 

​

Interest on deposits

​

 

1,787

​

 

2,461

​

 

5,726

​

 

5,877

Interest on short-term borrowings

​

 

73

​

 

146

​

 

335

​

 

453

Interest on long-term borrowings

​

 

362

​

 

277

​

 

970

​

 

723

Interest on subordinated debt

​

 

247

​

 

116

​

 

460

​

 

231

Total interest expense

​

 

2,469

​

 

3,000

​

 

7,491

​

 

7,284

Net interest income

​

 

19,282

​

 

14,277

​

 

47,810

​

 

40,197

Provision for loan losses

​

 

1,941

​

 

1,158

​

 

3,293

​

 

197

Net interest income after provision for loan losses

​

 

17,341

​

 

13,119

​

 

44,517

​

 

40,000

NONINTEREST INCOME

​

 

  

​

 

  

​

 

  

​

 

  

Trust and financial management revenue

​

 

1,595

​

 

1,479

​

 

4,639

​

 

4,422

Brokerage revenue

​

 

351

​

 

333

​

 

1,027

​

 

1,001

Insurance commissions, fees and premiums

​

 

41

​

 

71

​

 

126

​

 

149

Service charges on deposit accounts

​

 

1,045

​

 

1,436

​

 

3,126

​

 

3,963

Service charges and fees

​

 

83

​

 

91

​

 

230

​

 

259

Interchange revenue from debit card transactions

​

 

828

​

 

722

​

 

2,277

​

 

2,064

Net gains from sale of loans

​

 

2,052

​

 

310

​

 

3,931

​

 

618

Loan servicing fees, net

​

 

(87)

​

 

(54)

​

 

(259)

​

 

9

Increase in cash surrender value of life insurance

​

 

159

​

 

105

​

 

361

​

 

296

Other noninterest income

​

 

903

​

 

470

​

 

2,321

​

 

1,437

Sub-total

​

​

6,970

​

​

4,963

​

​

17,779

​

​

14,218

Realized gains on available-for-sale debt securities, net

​

​

25

​

​

13

​

​

25

​

​

20

Total noninterest income

​

 

6,995

​

 

4,976

​

 

17,804

​

 

14,238

NONINTEREST EXPENSE

​

 

​

​

 

​

​

 

  

​

 

  

Salaries and wages

​

 

6,833

​

 

5,480

​

 

17,537

​

 

15,249

Pensions and other employee benefits

​

 

1,870

​

 

1,449

​

 

5,527

​

 

4,292

Occupancy expense, net

​

 

806

​

 

654

​

 

2,215

​

 

1,976

Furniture and equipment expense

​

 

383

​

 

333

​

 

1,052

​

 

967

Data processing expenses

​

 

1,251

​

 

802

​

 

3,309

​

 

2,567

Automated teller machine and interchange expense

​

 

340

​

 

297

​

 

912

​

 

763

Pennsylvania shares tax

​

 

422

​

 

341

​

 

1,267

​

 

1,035

Professional fees

​

 

422

​

 

242

​

 

1,265

​

 

795

Telecommunications

​

 

231

​

 

197

​

 

650

​

 

537

Directors' fees

​

 

175

​

 

162

​

 

523

​

 

486

Merger-related expenses

​

 

6,402

​

 

206

​

 

7,526

​

 

3,818

Other noninterest expense

​

 

1,915

​

 

1,529

​

 

5,577

​

 

4,937

Total noninterest expense

​

 

21,050

​

 

11,692

​

 

47,360

​

 

37,422

Income before income tax provision

​

 

3,286

​

 

6,403

​

 

14,961

​

 

16,816

Income tax provision

​

 

438

​

 

1,096

​

 

2,509

​

 

2,770

NET INCOME

​

$

2,848

​

$

5,307

​

$

12,452

​

$

14,046

EARNINGS PER COMMON SHARE - BASIC

​

$

0.18

​

$

0.39

​

$

0.86

​

$

1.06

EARNINGS PER COMMON SHARE - DILUTED

​

$

0.18

​

$

0.39

​

$

0.86

​

$

1.06

​

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

4

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

Consolidated Statements of Comprehensive Income

(In Thousands) (Unaudited)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Three Months Ended

​

Nine Months Ended

​

​

September 30, 

​

September 30, 

​

September 30, 

​

September 30, 

​

 

2020

    

2019

​

2020

    

2019

Net income

​

$

2,848

​

$

5,307

​

$

12,452

​

$

14,046

​

​

​

​

​

​

​

​

​

​

​

​

​

Unrealized gains on available-for-sale debt securities:

​

​

​

​

​

​

​

​

​

​

​

​

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

​

​

(95)

​

​

1,323

​

​

9,980

​

​

10,754

Reclassification adjustment for gains realized in income

​

​

(25)

​

​

(13)

​

​

(25)

​

​

(20)

Other comprehensive (loss) income on available-for-sale debt securities

​

​

(120)

​

​

1,310

​

​

9,955

​

​

10,734

​

​

​

​

​

​

​

​

​

​

​

​

​

Unfunded pension and postretirement obligations:

​

 

​

​

 

​

​

 

​

​

 

​

Changes from plan amendments and actuarial gains and losses

​

 

0

​

 

0

​

 

88

​

 

214

Amortization of prior service cost and net actuarial loss included in net periodic benefit cost

​

 

(8)

​

 

(8)

​

 

(22)

​

 

(23)

Other comprehensive (loss) income on unfunded retirement obligations

​

 

(8)

​

 

(8)

​

 

66

​

 

191

​

​

​

​

​

​

​

​

​

​

​

​

​

Other comprehensive (loss) income before income tax

​

 

(128)

​

 

1,302

​

 

10,021

​

 

10,925

Income tax related to other comprehensive loss (income)

​

 

26

​

 

(274)

​

 

(2,103)

​

 

(2,295)

​

​

​

​

​

​

​

​

​

​

​

​

​

Net other comprehensive (loss) income

​

 

(102)

​

 

1,028

​

 

7,918

​

 

8,630

​

​

​

​

​

​

​

​

​

​

​

​

​

Comprehensive income

​

$

2,746

​

$

6,335

​

$

20,370

​

$

22,676

​

​

​

​

​

​

​

​

​

​

​

​

​

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

​

5

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands) (Unaudited)

​

​

​

​

​

​

​

​

    

Nine Months Ended

​

​

September 30, 

​

September 30, 

​

​

2020

    

2019

CASH FLOWS FROM OPERATING ACTIVITIES:

 

​

  

 

​

  

Net income

​

$

12,452

​

$

14,046

Adjustments to reconcile net income to net cash provided by operating activities:

​

 

​

​

 

​

Provision for loan losses

​

 

3,293

​

 

197

Realized gains on available-for-sale debt securities, net

​

 

(25)

​

 

(20)

Accretion and amortization on securities, net

​

​

1,020

​

​

880

Increase in cash surrender value of life insurance

​

 

(361)

​

 

(296)

Depreciation and amortization of bank premises and equipment

​

 

1,429

​

 

1,315

Other accretion and amortization, net

​

 

(1,547)

​

 

(265)

Stock-based compensation

​

 

672

​

 

646

Deferred income taxes

​

 

649

​

 

187

Decrease in fair value of servicing rights

​

 

617

​

 

312

Gains on sales of loans, net

​

 

(3,931)

​

 

(618)

Origination of loans held for sale

​

 

(123,547)

​

 

(20,663)

Proceeds from sales of loans held for sale

​

 

126,268

​

 

19,325

(Decrease) increase in accrued interest receivable and other assets

​

 

(1,194)

​

 

895

(Decrease) increase in accrued interest payable and other liabilities

​

 

(856)

​

 

236

Other

​

 

(339)

​

 

99

Net Cash Provided by Operating Activities

​

 

14,600

​

 

16,276

CASH FLOWS FROM INVESTING ACTIVITIES:

​

 

​

​

 

  

Net cash and cash equivalents provided by (used in) business combination

​

​

75,955

​

​

(1,778)

Proceeds from maturities of certificates of deposit

​

 

250

​

 

100

Purchase of certificates of deposit

​

​

(2,500)

​

​

0

Proceeds from sales of available-for-sale debt securities

​

 

20,535

​

 

95,640

Proceeds from calls and maturities of available-for-sale debt securities

​

 

71,009

​

 

61,241

Purchase of available-for-sale debt securities

​

 

(65,853)

​

 

(48,776)

Redemption of Federal Home Loan Bank of Pittsburgh stock

​

 

5,712

​

 

8,275

Purchase of Federal Home Loan Bank of Pittsburgh stock

​

 

(4,571)

​

 

(4,911)

Net increase in loans

​

 

(45,564)

​

 

(53,859)

Proceeds from bank owned life insurance

​

 

0

​

 

796

Purchase of premises and equipment

​

 

(2,550)

​

 

(1,300)

Proceeds from sale of foreclosed assets

​

 

1,347

​

 

1,740

Other

​

 

178

​

 

120

Net Cash Provided by Investing Activities

​

 

53,948

​

 

57,288

CASH FLOWS FROM FINANCING ACTIVITIES:

​

 

​

​

 

  

Net increase in deposits

​

 

137,543

​

 

37,532

Net decrease in short-term borrowings

​

 

(79,213)

​

 

(103,246)

Proceeds from long-term borrowings

​

 

25,891

​

 

48,500

Repayments of long-term borrowings and subordinated debt

​

 

(5,136)

​

 

(31,590)

Sale of treasury stock

​

 

124

​

 

198

Purchase of vested restricted stock

​

 

(163)

​

 

(189)

Common dividends paid

​

 

(10,568)

​

 

(10,713)

Net Cash Provided by (Used in) Financing Activities

​

 

68,478

​

 

(59,508)

INCREASE IN CASH AND CASH EQUIVALENTS

​

 

137,026

​

 

14,056

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD

​

 

31,122

​

 

32,827

CASH AND CASH EQUIVALENTS, END OF PERIOD

​

$

168,148

​

$

46,883

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

​

 

  

​

 

  

Right-of-use assets recognized at adoption of ASU 2016-02

​

$

0

​

$

1,132

Leased assets obtained in exchange for new operating lease liabilities

​

$

167

​

$

745

Accrued purchase of available-for-sale debt securities

​

$

287

​

$

3,857

Accrued sale of available-for-sale securities

​

$

488

​

$

0

Accrued income from life insurance claim

​

$

279

​

$

0

Assets acquired through foreclosure of real estate loans

​

$

0

​

$

1,863

Interest paid

​

$

7,635

​

$

6,721

Income taxes paid

​

$

2,975

​

$

1,500

​

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

6

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Consolidated Statements of Changes in Stockholders’ Equity

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

​

​

​

​

​

​

​

​

​

​

​

​

​

Accumulated

​

​

​

​

​

​

​

 

​

​

​

​

​

​

​

​

​

​

​

​

​

Other

​

​

​

​

​

​

​

 

Common

 

Treasury

 

Common

 

Paid-in

 

Retained

 

Comprehensive

 

Treasury

​

​

​

Three Months Ended September 30, 2020

 

Shares

 

Shares

 

Stock

 

Capital

 

Earnings

 

Income

 

Stock

 

Total

Balance, June 30, 2020

 

13,934,996

 

127,839

​

$

13,935

​

$

103,954

​

$

128,661

​

$

11,711

​

$

(2,470)

​

$

255,791

Net income

 

​

 

​

​

 

​

​

 

​

​

 

2,848

​

 

​

​

 

​

​

 

2,848

Other comprehensive loss, net

 

​

 

​

​

 

​

​

 

​

​

 

​

​

 

(102)

​

 

​

​

 

(102)

Cash dividends declared on common stock, $.27 per share

 

​

 

​

​

 

​

​

 

​

​

 

(4,285)

​

 

​

​

 

​

​

 

(4,285)

Shares issued for dividend reinvestment plan

 

​

 

(21,949)

​

 

​

​

 

(36)

​

 

​

​

 

​

​

 

423

​

 

387

Restricted stock granted

 

​

 

(15,076)

​

 

​

​

 

(291)

​

 

​

​

 

​

​

 

291

​

 

0

Forfeiture of restricted stock

 

​

 

1,648

​

 

​

​

 

30

​

 

​

​

 

​

​

 

(30)

​

 

0

Stock-based compensation expense

 

​

 

​

​

 

​

​

 

248

​

 

​

​

 

​

​

 

​

​

 

248

Shares issued for acquisition of Covenant Financial, Inc., net of equity issuance costs

​

2,047,819

​

​

​

 

2,048

​

 

39,381

​

 

​

​

 

​

​

 

​

​

 

41,429

Balance, September 30, 2020

 

15,982,815

 

92,462

​

$

15,983

​

$

143,286

​

$

127,224

​

$

11,609

​

$

(1,786)

​

$

296,316

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended September 30, 2019

 

  

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

Balance, June 30, 2019

 

13,934,996

 

246,997

​

$

13,935

​

$

103,953

​

$

123,112

​

$

3,432

​

$

(4,716)

​

$

239,716

Net income

 

​

 

​

​

 

​

​

 

​

​

 

5,307

​

 

​

​

 

​

​

 

5,307

Other comprehensive income, net

 

​

 

​

​

 

​

​

 

​

​

 

​

​

 

1,028

​

 

​

​

 

1,028

Cash dividends declared on common stock, $.27 per share

 

​

 

​

​

 

​

​

 

​

​

 

(3,696)

​

 

​

​

 

​

​

 

(3,696)

Shares issued for dividend reinvestment plan

 

​

 

(15,023)

​

 

​

​

 

82

​

 

​

​

 

​

​

 

287

​

 

369

Stock-based compensation expense

 

​

 

​

​

 

​

​

 

215

​

 

​

​

 

​

​

 

​

​

 

215

Balance, September 30, 2019

 

13,934,996

 

231,974

​

$

13,935

​

$

104,250

​

$

124,723

​

$

4,460

​

$

(4,429)

​

$

242,939

​

​

7

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Consolidated Statements of Changes in Stockholders’ Equity

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

(Continued)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

    

​

    

​

​

    

​

​

    

​

​

    

Accumulated

    

​

​

    

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Other

​

​

​

​

​

​

​

​

Common

​

Treasury

​

Common

​

Paid-in

​

Retained

​

Comprehensive

​

Treasury

​

​

​

​

​

Shares

​

Shares

​

Stock

​

Capital

​

Earnings

​

Income (Loss)

​

Stock

​

Total

Nine Months Ended September 30, 2020

 

  

 

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Balance, December 31, 2019

 

13,934,996

 

218,551

​

$

13,935

​

$

104,519

​

$

126,480

​

$

3,691

​

$

(4,173)

​

$

244,452

Net income

 

​

 

​

​

 

  

​

 

  

​

 

12,452

​

 

  

​

 

  

​

 

12,452

Other comprehensive income, net

 

​

 

​

​

 

  

​

 

  

​

 

  

​

 

7,918

​

 

  

​

 

7,918

Cash dividends declared on common stock, $.81 per share

 

​

 

​

​

 

  

​

 

  

​

 

(11,708)

​

 

  

​

 

  

​

 

(11,708)

Shares issued for dividend reinvestment plan

 

​

 

(56,649)

​

 

​

​

 

46

​

 

​

​

 

​

​

 

1,094

​

 

1,140

Shares issued from treasury and redeemed related to exercise of stock options

 

​

 

(9,652)

​

 

​

​

 

(62)

​

 

  

​

 

  

​

 

186

​

 

124

Restricted stock granted

 

​

 

(70,940)

​

 

​

​

 

(1,370)

​

 

  

​

 

  

​

 

1,370

​

 

0

Forfeiture of restricted stock

 

​

 

5,290

​

 

​

​

 

100

​

 

  

​

 

  

​

 

(100)

​

 

0

Stock-based compensation expense

 

​

 

​

​

 

  

​

 

672

​

 

  

​

 

  

​

 

  

​

 

672

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, September 30, 2020

 

15,982,815

 

92,462

​

$

15,983

​

$

143,286

​

$

127,224

​

$

11,609

​

$

(1,786)

​

$

296,316

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Nine Months Ended September 30, 2019

 

  

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

Balance, December 31, 2018

 

12,655,171

 

335,841

​

$

12,655

​

$

72,602

​

$

122,643

​

$

(4,170)

​

$

(6,362)

​

$

197,368

Net income

 

​

 

​

​

 

  

​

 

  

​

 

14,046

​

 

  

​

 

  

​

 

14,046

Other comprehensive income, net

 

​

 

​

​

 

  

​

 

  

​

 

  

​

 

8,630

​

 

  

​

 

8,630

Cash dividends declared on common stock, $.91 per share

 

​

 

​

​

 

  

​

 

  

​

 

(11,966)

​

 

  

​

 

  

​

 

(11,966)

Shares issued for dividend reinvestment plan

 

​

 

(48,195)

​

 

​

​

 

333

​

 

  

​

 

  

​

 

920

​

 

1,253

Shares issued from treasury and redeemed related to exercise of stock options

 

​

 

(18,071)

​

 

​

​

 

(146)

​

 

  

​

 

  

​

 

344

​

 

198

Restricted stock granted

 

​

 

(48,137)

​

 

​

​

 

(918)

​

 

  

​

 

  

​

 

918

​

 

0

Forfeiture of restricted stock

 

​

 

3,144

​

 

​

​

 

60

​

 

  

​

 

  

​

 

(60)

​

 

0

Stock-based compensation expense

 

​

 

​

​

 

  

​

 

646

​

 

  

​

 

  

​

 

  

​

 

646

Purchase of restricted stock for tax withholding

 

​

 

7,392

​

 

​

​

 

  

​

 

  

​

 

  

​

 

(189)

​

 

(189)

Shares issued for acquisition of Monument Bancorp, Inc., net of equity issuance costs

 

1,279,825

 

​

​

 

1,280

​

 

31,673

​

 

​

​

 

  

​

 

  

​

 

32,953

Balance, September 30, 2019

 

13,934,996

 

231,974

​

$

13,935

​

$

104,250

​

$

124,723

​

$

4,460

​

$

(4,429)

​

$

242,939

​

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

​

​

8

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Notes to Unaudited Consolidated Financial Statements

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

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

The consolidated financial information included herein, except the consolidated balance sheet dated December 31, 2019, is unaudited. Such information reflects all adjustments (consisting solely of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations, comprehensive income, cash flows and changes in stockholders’ equity for the interim periods; however, the information does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for a complete set of financial statements. Certain 2019 information has been reclassified for consistency with the 2020 presentation.

Operating results reported for the nine-month period ended September 30, 2020 might not be indicative of the results for the year ending December 31, 2020. The Corporation evaluates subsequent events through the date of filing with the Securities and Exchange Commission.

RECENT ACCOUNTING PRONOUNCEMENTS

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

Recent Accounting Pronouncements - Adopted

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

9

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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.

​

2. BUSINESS COMBINATIONS

Acquisition of Covenant Financial, Inc.

On July 1, 2020, the Corporation completed its acquisition of Covenant Financial, Inc. (“Covenant”). Covenant was the holding company for Covenant Bank, which operated banking offices in Bucks and Chester Counties of Pennsylvania. Management believes the acquisition provides an opportunity to expand the Corporation’s presence in a higher growth market and further leverage the Corporation’s capital to enhance long-term shareholder value.

The unaudited consolidated financial statements include the formerly separate Covenant operations from July 1, 2020 through September 30, 2020. Since the activities of the former Covenant operations have been combined with those of the Corporation, separate disclosure of Covenant-related financial information included in the unaudited consolidated financial statements is not practicable.

Total purchase consideration was $63,266,000, including cash paid to former Covenant shareholders totaling $21,654,000 and 2,047,819 shares of Corporation common stock issued with a value of $41,612,000. In the table below, the cash portion of merger consideration includes $183,000 of costs directly related to issuance of stock, and the equity portion of merger consideration has been reduced by these costs.

10

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The merger was accounted for using the acquisition method of accounting and, accordingly, purchased assets, including identifiable intangible assets, and assumed liabilities were recorded at their respective acquisition date fair values. The fair value measurements of assets acquired and liabilities assumed are subject to refinement for up to one year after the closing date of the acquisition as additional information relative to closing date fair values becomes available.

The preliminary fair value of assets acquired, excluding goodwill, totaled $608,631,000, while the preliminary fair value of liabilities assumed totaled $569,503,000. Goodwill represents consideration transferred in excess of the fair value of the net assets acquired. At July 1, 2020, the Corporation recognized preliminary goodwill of $24,138,000 associated with the acquisition. The goodwill resulting from the acquisition represents the value expected from the further expansion of the Corporation’s market penetration into Southeastern Pennsylvania, adding to the base established in the acquisition of Monument Bancorp, Inc. in 2019. Goodwill acquired in the Covenant merger is not deductible for tax purposes as the acquisition is accounted for as a tax-free exchange for tax purposes.

The following table summarizes the consideration paid for Covenant and the preliminary estimated fair values of the assets acquired and liabilities assumed at the acquisition date:

​

​

​

​

​

(In Thousands)

 

​

  

Fair value of consideration transferred:

​

​

​

Cash

​

$

21,837

Common stock issued

​

 

41,429

Total consideration transferred

​

$

63,266

​

​

​

​

Estimated fair value of assets acquired and (liabilities) assumed:

​

​

​

Cash and cash equivalents

​

$

97,792

Available-for-sale debt securities

​

 

10,754

Loans receivable

​

 

464,792

Bank-owned life insurance

​

 

11,170

Accrued interest receivable

​

 

1,922

Bank premises and equipment

​

 

3,250

Foreclosed assets held for sale

​

 

860

Deferred tax asset, net

​

 

1,469

Core deposit intangible

​

 

3,144

Goodwill

​

 

24,138

Other assets

​

 

13,478

Deposits

​

 

(481,796)

Short-term borrowings

​

 

(33,950)

Long-term borrowings

​

 

(30,025)

Subordinated debt

​

 

(10,091)

Accrued interest and other liabilities

​

​

(13,641)

Estimated excess fair value of assets acquired over liabilities assumed

​

$

63,266

​

​

​

​

​

In the consolidated statements of cash flows, noncash investing and financing activities include the issuance of common stock as part of the merger consideration as well as the following categories of assets acquired and liabilities assumed from Covenant as reflected in the table above: available-for-sale debt securities, loans receivable, bank-owned life insurance, bank premises and equipment, foreclosed assets held for sale, core deposit intangible, goodwill, other assets (including Federal Home Loan Bank of Pittsburgh stock of $2,939,000), deposits, short-term borrowings, long-term borrowings, subordinated debt and accrued interest and other liabilities.

Acquisition date fair values for available-for-sale securities were determined using Level 1 inputs consistent with the methods discussed further in Note 13.

The determination of estimated fair values of the acquired loans required the Corporation to make certain estimates about discount rates, future expected cash flows, market conditions and other future events that are highly subjective in nature. Based on such factors as past due status, nonaccrual status, bankruptcy status, and credit risk ratings, the acquired loans were evaluated, and twenty-four loans displayed evidence of credit quality deterioration. These loans are accounted for under ASC 310-30 (purchased credit impaired, or “PCI”). The majority of the purchased loans did not

11

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

display evidence of impairment, and thus are accounted for under ASC 310-20. Expected cash flows, both principal and interest, were estimated based on key assumptions covering such factors as prepayments, default rates and severity of loss given default. These assumptions were developed using both Covenant’s historical experience and the portfolio characteristics as of the acquisition date as well as available market research. The fair value estimates for acquired loans were based on the amount and timing of expected principal, interest and other cash flows, including expected prepayments, discounted at prevailing market interest rates applicable to the types of acquired loans, which the Corporation considers Level 3 fair value measurements.

Loans acquired from Covenant were measured at fair value at the acquisition date with no carryover of an allowance for loan losses. The following table presents performing and PCI loans acquired, by loan segment and class, at July 1, 2020:

​

​

​

​

​

​

​

​

​

​

(In Thousands)

 

​

Performing

 

​

PCI

 

​

Total

Residential mortgage:

​

​

​

​

​

​

​

​

​

Residential mortgage loans - first liens

​

$

65,883

​

$

0

​

$

65,883

Residential mortgage loans - junior liens

​

 

4,141

​

​

75

​

​

4,216

Home equity lines of credit

​

​

8,368

​

​

0

​

​

8,368

1-4 Family residential construction

​

​

11,437

​

​

0

​

​

11,437

Total residential mortgage

​

​

89,829

​

​

75

​

​

89,904

Commercial:

​

​

​

​

​

​

​

​

​

Commercial loans secured by real estate

​

 

240,482

​

​

4,152

​

​

244,634

Commercial and industrial

​

 

39,068

​

​

806

​

​

39,874

Small Business Adminstration - Paycheck Protection Program

​

​

63,740

​

​

0

​

​

63,740

Loans secured by farmland

​

 

73

​

​

0

​

​

73

Multi-family (5 or more) residential

​

 

23,065

​

​

2,171

​

​

25,236

Other commercial loans

​

 

952

​

​

0

​

​

952

Total commercial

​

 

367,380

​

​

7,129

​

​

374,509

Consumer

​

 

379

​

​

0

​

​

379

Total

​

$

457,588

​

$

7,204

​

​

464,792

The following table presents the preliminary fair value adjustments made to the amortized cost basis of loans acquired on July 1, 2020:

​

​

​

​

​

(In Thousands)

 

​

​

Gross amortized cost at acquisition

​

$

472,012

Fair value adjustments:

​

​

​

Market rates

​

 

2,909

Credit adjustment on non-impaired loans

​

​

(7,219)

Credit adjustment on impaired loans

​

​

(2,910)

Fair value at acquisition

​

$

464,792

​

​

​

​

​

The market rate adjustment represents the movement in interest rates, irrespective of credit adjustments, compared to the contractual rates of the acquired loans. The credit adjustment made on non-PCI loans represents changes in credit quality of the underlying borrowers from loan inception to the acquisition date.

The credit adjustment on PCI loans is derived in accordance with ASC 310-30 and represents the portion of the loan balances that have been deemed uncollectible for each loan. The PCI loans are secured by real estate or other collateral, and the fair value of each loan 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 September 30, 2020) as the Corporation cannot reasonably estimate cash flows expected to be collected in order to compute yield on the loans.

The Corporation recognized a core deposit intangible of $3,144,000. The core deposit intangible represents the estimated value of lower-cost funding provided by the nonmaturity deposits assumed in comparison with the Corporation’s estimated cost of borrowing funds in the market. The valuation assumptions to determine the core deposit intangible

12

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

were comprised of level 2 and level 3 inputs. The core deposit intangible will be amortized over a weighted-average life of 5.4 years.

Deposit liabilities assumed were segregated into two categories: (1) nonmaturity deposits (checking, savings and money market), and (2) time deposits (deposit accounts with a stated maturity). The fair values of both categories of deposits were determined using level 2 fair value measurements. For nonmaturity deposits, the acquisition date outstanding balance of the assumed demand deposit accounts approximates fair value. In determining the fair value of time deposits, the Corporation discounted the contractual cash flows of the deposit accounts using prevailing market interest rates for time deposit accounts of similar type and duration.

Short-term and long-term borrowings assumed consisted of advances from the Federal Home Loan Bank of Pittsburgh. The fair value of borrowings was determined using Level 2 measurements by discounting the contractual cash flows of the borrowings using Federal Home Loan Bank interest rates available July 1, 2020 for advances to the same maturities as those of the deposits assumed.

Subordinated debt assumed included two issues: (1) agreements with par values totaling $8,000,000, maturing in June 2021, redeemable at par beginning in June 2021 and bearing interest at 6.25%; and (2) an agreement with a par value of $2,000,000, maturing in July 2027, redeemable at par beginning in July 2022 and bearing interest at 6.50%. The fair value of subordinated debt was determined using Level 2 measurements by comparing the interest rates on the debt to the rates on similar recent issues of comparable size by other similar-sized banking companies.

The Corporation incurred merger-related expenses associated with the Covenant transaction of $6,402,000 in the third quarter 2020. For the nine months ended September 30, 2020, merger-related expenses totaled $7,526,000. Merger-related expenses include severance and similar expenses, costs associated with termination of data processing contracts and conversion of Covenant’s customer accounting data into the Corporation’s core system, legal and other professional fees and various other costs.

The following table presents pro forma information as if the merger between the Corporation and Covenant had been completed on January 1, 2019. The pro forma information does not necessarily reflect the results of operations that would have occurred had the merger taken place at the beginning of 2019. The supplemental pro forma information excludes merger-related expenses totaling $6,402,000 in the third quarter 2020, or $5,095,000 net of tax. Similarly, the pro forma information excludes merger-related expenses totaling $8,879,000 in the nine months ended September 30, 2020 (including $1,353,000 incurred by Covenant), or $7,101,000 net of tax (including $1,111,000 incurred by Covenant). The pro forma also excludes a tax benefit of $600,000 that Covenant realized from stock-based compensation vested upon completion of the merger. The pro forma information does not include the impact of possible business model changes nor does it consider any potential impacts of current market conditions or revenues, expense efficiencies or other factors.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands Except Per Share Data)

    

Three Months Ended

​

Nine Months Ended

​

​

September 30,

​

September 30,

​

September 30,

​

September 30,

​

​

2020

​

2019

​

2020

​

2019

Interest income

 

$

21,632

 

$

23,142

​

$

66,564

 

$

64,800

Interest expense

 

​

3,091

 

​

4,367

​

​

10,727

 

​

10,747

Net interest income

​

​

18,541

​

​

18,775

​

​

55,837

​

​

54,053

Provision for loan losses

​

 

1,941

​

 

1,208

​

 

3,393

​

 

1,047

Net interest after provision for loan losses

​

 

16,600

​

 

17,567

​

 

52,444

​

 

53,006

Noninterest income

​

 

6,970

​

 

5,523

​

 

18,092

​

 

15,546

Net gains on securities

​

 

25

​

 

13

​

 

25

​

 

20

Other noninterest expenses

​

 

14,572

​

 

14,530

​

 

45,604

​

 

46,198

Income before income tax provision

​

 

9,023

​

 

8,573

​

 

24,957

​

 

22,374

Income tax provision

​

 

1,605

​

 

1,511

​

 

4,610

​

 

3,886

Net income

​

$

7,418

​

$

7,062

​

$

20,347

​

$

18,488

Earnings per common share - basic

​

$

0.47

​

$

0.45

​

$

1.28

​

$

1.21

Earnings per common share - diluted

​

$

0.47

​

$

0.45

​

$

1.28

​

$

1.21

13

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Business Combination – Acquisition of Monument Bancorp, Inc.

On April 1, 2019, the Corporation completed its acquisition of 100% of the common stock of Monument Bancorp, Inc. (“Monument”). Monument was the parent company of Monument Bank, a commercial bank which operated two community bank offices and one lending office in Bucks County, Pennsylvania. Pursuant to the merger, Monument was merged into Citizens & Northern Corporation and Monument Bank was merged into C&N Bank.

Total purchase consideration was $42.7 million, including cash paid to former Monument shareholders totaling $9.6 million and 1,279,825 shares of Corporation common stock issued with a value of $33.1 million, net of costs directly related to stock issuance of $181,000.

In connection with the transaction, the Corporation recorded goodwill of $16.4 million and a core deposit intangible asset of $1.5 million. Total loans acquired on April 1, 2019 were valued at $259.3 million, while total deposits assumed were valued at $223.3 million, borrowings were valued at $111.6 million and subordinated debt was valued at $12.4 million. The subordinated debt included an instrument with a fair value of $5.4 million that was redeemed on April 1, 2019 with no realized gain or loss. The Corporation acquired available-for-sale debt securities valued at $94.6 million and sold the securities in early April for approximately no realized gain or loss. 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 or liabilities in 2020.

Merger-related expenses, including legal and professional expenses and conversion of Monument’s customer accounting data into the Corporation’s core system, were $206,000 in the third quarter 2019 and $3,818,000 in the nine-month period ended September 30, 2019.

​

​

3. 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.

14

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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)

​

Three Months Ended

    

Nine Months Ended

​

​

September 30, 

​

September 30, 

​

September 30, 

​

September 30, 

​

    

2020

    

2019

    

2020

    

2019

Basic

​

​

  

 

​

  

 

​

  

 

​

  

Net income

​

$

2,848

​

$

5,307

​

$

12,452

​

$

14,046

Less: Dividends and undistributed earnings allocated to participating securities

​

 

(18)

​

 

(26)

​

 

(74)

​

 

(72)

Net income attributable to common shares

​

$

2,830

​

$

5,281

​

$

12,378

​

$

13,974

Basic weighted-average common shares outstanding

​

 

15,778,391

​

 

13,627,676

​

 

14,388,797

​

 

13,182,960

Basic earnings per common share (a)

​

$

0.18

​

$

0.39

​

$

0.86

​

$

1.06

Diluted

​

 

  

​

 

  

​

 

  

​

 

  

Net income attributable to common shares

​

$

2,830

​

$

5,281

​

$

12,378

​

$

13,974

Basic weighted-average common shares outstanding

​

 

15,778,391

​

 

13,627,676

​

 

14,388,797

​

 

13,182,960

Dilutive effect of potential common stock arising from stock options

​

 

1,330

​

 

19,142

​

 

4,632

​

 

23,284

Diluted weighted-average common shares outstanding

​

 

15,779,721

​

 

13,646,818

​

 

14,393,429

​

 

13,206,244

Diluted earnings per common share (a)

​

$

0.18

​

$

0.39

​

$

0.86

​

$

1.06

Weighted-average nonvested restricted shares outstanding

​

 

102,629

​

 

68,814

​

 

85,611

​

 

68,284

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

Anti-dilutive stock options are excluded from net income per share calculations. Weighted-average common shares available from anti-dilutive instruments totaled 39,012 shares in the three-month period ended September 30, 2020 and 19,506 shares in the nine-month period ended September 30, 2020. There were no anti-dilutive instruments in the three-month and nine-month periods ended September 30, 2019.

​

15

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

4. 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

Nine Months Ended September 30, 2020

 

​

  

 

​

  

 

​

  

Unrealized gains on available-for-sale debt securities:

​

​

​

​

​

​

​

​

​

Unrealized holding gains on available-for-sale debt securities

​

$

9,980

​

$

(2,095)

​

$

7,885

Reclassification adjustment for (gains) realized in income

​

​

(25)

​

​

5

​

​

(20)

Other comprehensive income on available-for-sale debt securities

​

​

9,955

​

​

(2,090)

​

​

7,865

Unfunded pension and postretirement obligations:

​

 

  

​

 

  

​

 

  

Changes from plan amendments and actuarial gains and losses included in other comprehensive income

​

 

88

​

 

(18)

​

 

70

Amortization of prior service cost and net actuarial loss included in net periodic benefit cost

​

 

(22)

​

 

5

​

 

(17)

Other comprehensive income on unfunded retirement obligations

​

 

66

​

 

(13)

​

 

53

Total other comprehensive income

​

$

10,021

​

$

(2,103)

​

$

7,918

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

    

Before-Tax

    

Income Tax

    

Net-of-Tax

​

​

Amount

​

Effect

​

Amount

Nine Months Ended September 30, 2019

 

​

  

 

​

  

 

​

  

Unrealized gains on available-for-sale debt securities:

​

​

​

​

​

​

​

​

​

Unrealized holding gains on available-for-sale debt securities

​

$

10,754

​

$

(2,258)

​

$

8,496

Reclassification adjustment for (gains) realized in income

​

​

(20)

​

​

4

​

​

(16)

Other comprehensive income on available-for-sale debt securities

​

​

10,734

​

​

(2,254)

​

​

8,480

Unfunded pension and postretirement obligations:

​

 

  

​

 

  

​

 

  

Changes from plan amendments and actuarial gains and losses included in other comprehensive income

​

 

214

​

 

(45)

​

 

169

Amortization of prior service cost and net actuarial loss included in net periodic benefit cost

​

 

(23)

​

 

4

​

 

(19)

Other comprehensive income on unfunded retirement obligations

​

 

191

​

 

(41)

​

 

150

Total other comprehensive income

​

$

10,925

​

$

(2,295)

​

$

8,630

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

    

Before-Tax

    

Income Tax

    

Net-of-Tax

​

​

Amount

​

Effect

​

Amount

Three Months Ended September 30, 2020

 

​

  

 

​

  

 

​

  

Unrealized gains on available-for-sale debt securities:

 

​

  

 

​

  

 

​

  

Unrealized holding losses on available-for-sale debt securities

​

$

(95)

​

$

19

​

$

(76)

Reclassification adjustment for (gains) realized in income

​

​

(25)

​

​

5

​

​

(20)

Other comprehensive loss on available-for-sale debt securities

​

​

(120)

​

​

24

​

​

(96)

Unfunded pension and postretirement obligations,

​

 

  

​

 

  

​

 

  

Amortization of prior service cost and net actuarial loss included in net periodic benefit cost

​

 

(8)

​

 

2

​

 

(6)

Total other comprehensive loss

​

$

(128)

​

$

26

​

$

(102)

​

16

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

​

​

​

​

​

​

​

​

​

(In Thousands)

    

Before-Tax

    

Income Tax

    

Net-of-Tax

​

​

Amount

​

Effect

​

Amount

Three Months Ended September 30, 2019

 

​

  

 

​

  

 

​

  

Unrealized gains on available-for-sale debt securities:

 

​

  

 

​

  

 

​

  

Unrealized holding gains on available-for-sale debt securities

​

$

1,323

​

$

(278)

​

$

1,045

Reclassification adjustment for (gains) realized in income

​

 

(13)

​

 

3

​

 

(10)

Other comprehensive income on available-for-sale debt securities

​

 

1,310

​

 

(275)

​

 

1,035

Unfunded pension and postretirement obligations,

​

 

  

​

 

  

​

 

  

Amortization of prior service cost and net actuarial loss included in net periodic benefit cost

​

 

(8)

​

 

1

​

 

(7)

Total other comprehensive income

​

$

1,302

​

$

(274)

​

$

1,028

​

The amounts shown in the table immediately above are included in the following line items in the consolidated statements of income:

​

​

    

Affected Line Item in the

 

Description

​

Consolidated Statements of Income

​

Amortization of prior service cost and

​

Other noninterest expense

​

net actuarial loss included in net

​

​

​

periodic benefit cost (before-tax)

​

​

​

Reclassification adjustment for (gains)

​

Realized gains on available-for-sale

​

realized in income (before-tax)

​

debt securities, net

​

Income tax effect

​

Income tax provision

​

​

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

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

    

​

    

​

    

Accumulated

​

​

Unrealized

​

Unfunded

​

Other

​

 

Gains

 

Retirement

 

Comprehensive

​

 

on Securities

 

Obligations

 

Income (Loss)

Nine Months Ended September 30, 2020

 

​

  

 

​

  

 

​

  

Balance, beginning of period

​

$

3,511

​

$

180

​

$

3,691

Other comprehensive income during nine months ended September 30, 2020

​

 

7,865

​

 

53

​

 

7,918

Balance, end of period

​

$

11,376

​

$

233

​

$

11,609

​

​

​

​

​

​

​

​

​

​

Nine Months Ended September 30, 2019

​

 

  

​

 

  

​

 

  

Balance, beginning of period

​

$

(4,307)

​

$

137

​

$

(4,170)

Other comprehensive income during nine months ended September 30, 2019

​

 

8,480

​

 

150

​

 

8,630

Balance, end of period

​

$

4,173

​

$

287

​

$

4,460

​

​

​

​

​

​

​

​

​

​

​

17

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

​

​

​

​

​

​

​

​

​

(In Thousands)

    

Unrealized

    

    

​

    

Accumulated

​

​

Gains

​

Unfunded

​

Other

​

​

(Losses)

​

Retirement

​

Comprehensive

​

​

on Securities

​

Obligations

​

Income

Three Months Ended September 30, 2020

 

​

  

 

​

  

 

​

  

Balance, beginning of period

​

$

11,472

​

$

239

​

$

11,711

Other comprehensive loss during three months ended September 30, 2020

​

 

(96)

​

 

(6)

​

 

(102)

Balance, end of period

​

$

11,376

​

$

233

​

$

11,609

​

​

​

​

​

​

​

​

​

​

Three Months Ended September 30, 2019

​

 

  

​

 

  

​

 

  

Balance, beginning of period

​

$

3,138

​

$

294

​

$

3,432

Other comprehensive income during three months ended September 30, 2019

​

 

1,035

​

 

(7)

​

 

1,028

Balance, end of period

​

$

4,173

​

$

287

​

$

4,460

​

​

​

​

5. CASH AND DUE FROM BANKS

Cash and due from banks at September 30, 2020 and December 31, 2019 include the following:

​

​

​

​

​

​

​

​

(In Thousands)

    

September 30, 

    

December 31, 

​

​

2020

​

2019

Cash and cash equivalents

​

$

168,148

​

$

31,122

Certificates of deposit

​

 

6,330

​

 

4,080

Total cash and due from banks

​

$

174,478

​

$

35,202

​

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.

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 September 30, 2020. Required reserves were $20,148,000 at December 31, 2019.

​

18

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

6. SECURITIES

Amortized cost and fair value of available-for-sale debt securities at September 30, 2020 and December 31, 2019 are summarized as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

    

September 30, 2020

​

​

​

​

​

Gross

​

Gross

​

​

​

​

​

​

​

​

Unrealized

​

Unrealized

​

​

​

​

 

Amortized

 

Holding

 

Holding

 

Fair

​

    

Cost

    

Gains

    

Losses

    

Value

​

​

​

​

​

​

​

​

​

​

​

​

​

Obligations of the U.S. Treasury

​

$

12,228

​

$

0

​

$

(2)

​

$

12,226

Obligations of U.S. Government agencies

​

​

15,348

​

​

1,007

​

​

0

​

​

16,355

Obligations of states and political subdivisions:

​

 

  

​

 

  

​

 

  

​

 

  

Tax-exempt

​

 

104,821

​

 

5,057

​

 

(210)

​

 

109,668

Taxable

​

 

42,079

​

 

2,161

​

 

(45)

​

 

44,195

Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:

​

 

  

​

 

  

​

 

  

​

 

  

Residential pass-through securities

​

 

44,697

​

 

1,514

​

 

0

​

 

46,211

Residential collateralized mortgage obligations

​

 

67,635

​

 

1,726

​

 

(24)

​

 

69,337

Commercial mortgage-backed securities

​

 

39,337

​

 

3,216

​

 

0

​

 

42,553

Total available-for-sale debt securities

​

$

326,145

​

$

14,681

​

$

(281)

​

$

340,545

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

    

December 31, 2019

​

​

​

​

​

Gross

​

Gross

​

​

​

​

 

​

 

Unrealized

​

Unrealized

​

​

​

​

 

Amortized

 

Holding

 

Holding

 

Fair

​

    

Cost

    

Gains

    

Losses

    

Value

​

​

​

​

​

​

​

​

​

​

​

​

​

Obligations of U.S. Government agencies

​

$

16,380

​

$

620

​

$

0

​

$

17,000

Obligations of states and political subdivisions:

​

 

  

​

 

  

​

 

  

​

 

  

Tax-exempt

​

 

68,787

​

 

2,011

​

 

(38)

​

 

70,760

Taxable

​

 

35,446

​

 

927

​

 

(70)

​

 

36,303

Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:

​

 

  

​

 

  

​

 

  

​

 

  

Residential pass-through securities

​

 

58,875

​

 

472

​

 

(137)

​

 

59,210

Residential collateralized mortgage obligations

​

 

115,025

​

 

308

​

 

(610)

​

 

114,723

Commercial mortgage-backed securities

​

 

47,765

​

 

1,069

​

 

(107)

​

 

48,727

Total available-for-sale debt securities

​

$

342,278

​

$

5,407

​

$

(962)

​

$

346,723

​

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 September 30, 2020 and December 31, 2019:

​

19

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 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

​

$

12,226

​

$

(2)

​

$

0

​

$

0

​

$

12,226

​

$

(2)

Obligations of states and political subdivisions:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Tax-exempt

​

​

17,061

​

​

(210)

​

​

0

​

​

0

​

​

17,061

​

​

(210)

Taxable

​

 

4,856

​

 

(45)

​

 

0

​

 

0

​

 

4,856

​

 

(45)

Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies,

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

Residential collateralized mortgage obligations

​

 

4,165

​

 

(24)

​

 

0

​

 

0

​

 

4,165

​

 

(24)

Total temporary impaired available for sale debt securities

​

$

38,308

​

$

(281)

​

$

0

​

$

0

​

$

38,308

​

$

(281)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2019

    

Less Than 12 Months

    

12 Months or More

    

Total

(In Thousands)

​

Fair

​

Unrealized

​

Fair

​

Unrealized

​

Fair

​

Unrealized

​

 

Value

 

Losses

 

Value

 

Losses

 

Value

 

Losses

Obligations of states and political subdivisions:

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Tax-exempt

​

$

6,429

​

$

(38)

​

$

0

​

$

0

​

$

6,429

​

$

(38)

Taxable

​

 

5,624

​

 

(68)

​

 

161

​

 

(2)

​

 

5,785

​

 

(70)

Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

Residential pass-through securities

​

 

9,771

​

 

(35)

​

 

14,787

​

 

(102)

​

 

24,558

​

 

(137)

Residential collateralized mortgage obligations

​

 

31,409

​

 

(195)

​

 

30,535

​

 

(415)

​

 

61,944

​

 

(610)

Commercial mortgage-backed securities

​

 

0

​

 

0

​

 

8,507

​

 

(107)

​

 

8,507

​

 

(107)

Total temporarily impaired available-for-sale debt securities

​

$

53,233

​

$

(336)

​

$

53,990

​

$

(626)

​

$

107,223

​

$

(962)

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

Three Months Ended

​

Nine Months Ended

​

​

September 30, 

​

September 30, 

​

September 30, 

​

September 30, 

​

    

2020

    

2019

    

2020

    

2019

Gross realized gains from sales

​

$

26

​

$

14

​

$

78

​

$

21

Gross realized losses from sales

​

 

(1)

​

 

(1)

​

 

(53)

​

 

(1)

Net realized gains

​

$

25

​

$

13

​

$

25

​

$

20

​

20

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The amortized cost and fair value of available-for-sale debt securities by contractual maturity are shown in the following table as of September 30, 2020. 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)

​

September 30, 2020

​

​

Amortized

​

Fair

​

    

Cost

    

Value

Due in one year or less

​

$

14,411

​

$

14,469

Due from one year through five years

​

 

45,804

​

 

47,460

Due from five years through ten years

​

 

37,479

​

 

40,088

Due after ten years

​

 

76,782

​

 

80,427

Sub-total

​

 

174,476

​

 

182,444

Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:

​

 

  

​

 

  

Residential pass-through securities

​

 

44,697

​

 

46,211

Residential collateralized mortgage obligations

​

 

67,635

​

 

69,337

Commercial mortgage-backed securities

​

 

39,337

​

 

42,553

Total

​

$

326,145

​

$

340,545

​

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 $255,312,000 at September 30, 2020 and $215,270,000 at December 31, 2019 were pledged as collateral for public deposits, trusts and certain other deposits as provided by law. See Note 9 for information concerning securities pledged to secure borrowing arrangements.

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

A summary of information management considered in evaluating debt and equity securities for other-than-temporary impairment (“OTTI”) at September 30, 2020 is provided below.

Debt Securities

At September 30, 2020 and December 31, 2019, management performed an assessment for possible OTTI of the Corporation’s debt securities on an issue-by-issue basis, relying on information obtained from various sources, including publicly available financial data, ratings by external agencies, brokers and other sources. The extent of individual analysis applied to each security depended on the size of the Corporation’s investment, as well as management’s perception of the credit risk associated with each security. Based on the results of the assessment, management believes impairment of debt securities at September 30, 2020 and December 31, 2019 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

21

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

balance sheets, was $11,929,000 at September 30, 2020 and $10,131,000 at December 31, 2019. The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at September 30, 2020 and December 31, 2019. 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 $1,003,000 at September 30, 2020 and $979,000 at December 31, 2019, consisted exclusively of one mutual fund. There was an unrealized gain on the mutual fund of $3,000 at September 30, 2020 and an unrealized loss of $21,000 at December 31, 2019. Changes in the unrealized gains or losses on this security are included in other noninterest income in the consolidated statements of income.

​

7. LOANS

The loans receivable portfolio is segmented into residential mortgage, commercial and consumer loans. Loans outstanding at September 30, 2020 and December 31, 2019 are summarized by segment, and by classes within each segment, as follows:

Summary of Loans by Type

(In Thousands)

​

​

​

​

​

​

​

​

​

    

September 30, 

    

December 31, 

​

​

2020

​

2019

Residential mortgage:

 

​

  

 

​

  

Residential mortgage loans - first liens

​

$

541,827

​

$

510,641

Residential mortgage loans - junior liens

​

 

27,907

​

 

27,503

Home equity lines of credit

​

 

40,143

​

 

33,638

1-4 Family residential construction

​

 

29,146

​

 

14,798

Total residential mortgage

​

 

639,023

​

 

586,580

Commercial:

​

 

  

​

 

  

Commercial loans secured by real estate

​

 

530,874

​

 

301,227

Commercial and industrial

​

 

156,169

​

 

126,374

Small Business Administration - Paycheck Protection Program

​

​

163,050

​

​

0

Political subdivisions

​

 

47,883

​

 

53,570

Commercial construction and land

​

 

41,906

​

 

33,555

Loans secured by farmland

​

 

11,913

​

 

12,251

Multi-family (5 or more) residential

​

 

62,330

​

 

31,070

Agricultural loans

​

 

3,561

​

 

4,319

Other commercial loans

​

 

17,385

​

 

16,535

Total commercial

​

 

1,035,071

​

 

578,901

Consumer

​

 

17,276

​

 

16,741

Total

​

 

1,691,370

​

 

1,182,222

Less: allowance for loan losses

​

 

(10,753)

​

 

(9,836)

Loans, net

​

$

1,680,617

​

$

1,172,386

​

In the table above, outstanding loan balances are presented net of deferred loan origination fees, net, of $7,620,000 at September 30, 2020 and $2,482,000 at December 31, 2019.

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 and southeastern 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.

22

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

There is no concentration of loans to borrowers engaged in similar businesses or activities that exceed 10% of total loans at either September 30, 2020 or December 31, 2019.

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.

The maximum term of PPP loans is five years, though most of the Corporation’s PPP loans have two-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 September 30, 2020, the recorded investment in PPP loans was $163,050,000, including contractual principal balances of $166,690,000, increased by a market rate adjustment on PPP loans acquired from Covenant of $762,000 and reduced by net deferred origination fees of $4,402,000. Net deferred origination fees and the market rate adjustment on PPP loans are recognized in interest income as yield adjustments (net accretion over the term of the loans). Accretion of fees received on PPP loans, net of amortization of the market rate adjustment on PPP loans acquired from Covenant, was $467,000 in the three-month period ended September 30, 2020 and $804,000 in the nine-month period ended September 30, 2020.

Section 4013 of 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 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.

To work with clients impacted by COVID-19, the Corporation is offering 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

23

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

the merger, 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 current crisis and help the Corporation mitigate credit risk. For loans subject to the program, each borrower is required to resume making regularly scheduled loan payments at the end of the modification period and the deferred amounts will be 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 September 30, 2020. Most of the modifications under the program became effective in March and the second quarter 2020 and provided a deferral of interest or principal and interest for 90-to-180 days. Accordingly, many of the loans for which deferrals were granted returned to full payment status prior to September 30, 2020. The quantity and balances of modifications outstanding under the program at September 30, 2020 are as follows:

​

​

​

​

​

​

​

​

​

Deferrals Remaining

​

​

As of September 30, 2020

(Dollars in Thousands)

​

Number

​

​

​

​

​

of

​

Recorded

​

    

Loans

    

Investment

COVID-19-related loan modifications:

 

  

    

​

  

Residential mortgage

 

16

​

$

1,727

Commercial

 

28

​

 

39,912

Total

 

44

​

$

41,639

​

The ultimate effect of COVID-19 on the local or broader economy is not known. In the first nine months of 2020, the Corporation increased the allowance for loan losses $725,000, including $79,000 in the third quarter, based on an increase in qualitative factors related to potential deterioration in economic conditions. Further, in June and September 2020, the Corporation’s credit administration and commercial lending staffs performed a review of commercial credits with “Pass” ratings in an effort to reduce the risk of failing to identify loans that should be evaluated for risk rating downgrade or a specific allowance. Updated risk ratings and specific allowances based on that review have been included in the September 30, 2020 information presented below. Because of the significant uncertainties related to the ultimate duration of the COVID-19 pandemic and its economic impact, the total impact on the Corporation’s loan portfolio is not determinable.

As described in Note 2, effective July 1, 2020, the Corporation acquired loans pursuant to its acquisition of Covenant, and effective April 1, 2019, the Corporation acquired loans pursuant to the acquisition of Monument. The 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. In the last three quarters of 2019 and first nine months of 2020, the Corporation 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 three-month and nine-month periods ended September 30, 2020 and 2019, adjustments to the initial market rate and credit fair value adjustments of performing loans were recognized as follows:

​

24

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

    

​

​

    

​

​

    

​

​

    

​

​

​

​

Three Months Ended

​

Nine Months Ended

​

​

September 30, 

​

September 30, 

​

September 30, 

​

September 30, 

​

​

2020

​

2019

​

2020

​

2019

Market Rate Adjustment

 

​

  

 

​

  

 

​

  

 

​

  

Adjustments to gross amortized cost of loans at beginning of period

​

$

(1,103)

​

$

(1,658)

​

$

(1,415)

​

$

0

Market rate adjustment recorded in acquisition

​

​

2,909

​

​

0

​

​

2,909

​

​

(1,807)

(Amortization) accretion recognized in interest income

​

​

(452)

​

​

110

​

​

(140)

​

​

259

Adjustments to gross amortized cost of loans at end of period

​

$

1,354

​

$

(1,548)

​

$

1,354

​

$

(1,548)

Credit Adjustment on Non-impaired Loans

​

​

​

​

​

​

​

​

​

​

​

​

Adjustments to gross amortized cost of loans at beginning of period

​

$

(878)

​

$

(1,653)

​

$

(1,216)

​

$

0

Credit adjustment recorded in acquisition

​

​

(7,219)

​

​

0

​

​

(7,219)

​

​

(1,914)

Accretion recognized in interest income

​

 

970

​

 

260

​

 

1,308

​

 

521

Adjustments to gross amortized cost of loans at end of period

​

$

(7,127)

​

$

(1,393)

​

$

(7,127)

​

$

(1,393)

​

The following table presents the components of the purchase accounting adjustments related to the PCI loans acquired from Covenant as of July 1, 2020:

​

​

​

​

​

(In Thousands)

​

July 1, 2020

Contractually required principal at acquisition

​

$

10,114

Non-accretable discount

​

 

(2,910)

Expected cash flows

​

$

7,204

​

A summary of PCI loans held at September 30, 2020 and December 31, 2019 is as follows:

​

​

​

​

​

​

​

​

(In Thousands)

​

September 30, 

​

December 31, 

​

    

2020

    

2019

Outstanding balance

​

$

10,453

​

$

759

Carrying amount

​

 

7,447

​

 

441

​

In the first nine months of 2020, the Corporation recorded interest income of $120,000, including $7,000 in the third quarter 2020, from the excess of proceeds received on the pay-off of PCI loans acquired from Monument in 2019 over their carrying amounts.

The Corporation maintains an allowance for loan losses that represents management’s estimate of the losses inherent in the loan portfolio as of the balance sheet date and recorded as a reduction of the investment in loans. The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the Corporation’s past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect the borrower’s ability to repay, the estimated value of any underlying collateral, composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available. In the process of evaluating the loan portfolio, management also considers the Corporation’s exposure to losses from unfunded loan commitments. As of September 30, 2020, and December 31, 2019, management determined that no allowance for credit losses related to unfunded loan commitments was required.

25

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Transactions within the allowance for loan losses, summarized by segment and class, for the three-month and nine-month periods ended September 30, 2020 and 2019 were as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended September 30, 2020

​

June 30, 2020

    

    

​

    

    

​

    

    

​

    

September 30, 2020

(In Thousands)

    

Balance

    

 Charge-offs 

    

 Recoveries 

    

 Provision (Credit) 

    

Balance

Allowance for Loan Losses:

 

​

  

​

​

  

​

​

  

​

​

  

​

​

  

Residential mortgage:

 

​

  

​

​

  

​

​

  

​

​

  

​

​

  

Residential mortgage loans - first liens

​

$

3,531

​

$

0

​

$

26

​

$

(92)

​

$

3,465

Residential mortgage loans - junior liens

​

 

365

​

 

0

​

 

0

​

 

(7)

​

 

358

Home equity lines of credit

​

 

287

​

 

0

​

 

1

​

 

1

​

 

289

1-4 Family residential construction

​

 

137

​

 

0

​

 

0

​

 

32

​

 

169

Total residential mortgage

​

 

4,320

​

 

0

​

 

27

​

 

(66)

​

​

4,281

Commercial:

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

Commercial loans secured by real estate

​

 

2,426

​

 

0

​

 

0

​

 

(40)

​

 

2,386

Commercial and industrial

​

 

2,496

​

 

(2,219)

​

 

0

​

 

1,974

​

 

2,251

Commercial construction and land

​

 

420

​

 

0

​

 

0

​

 

20

​

 

440

Loans secured by farmland

​

 

146

​

 

0

​

 

0

​

 

(25)

​

 

121

Multi-family (5 or more) residential

​

 

163

​

 

0

​

 

0

​

 

64

​

 

227

Agricultural loans

​

 

40

​

 

0

​

 

0

​

 

(3)

​

 

37

Other commercial loans

​

 

167

​

 

0

​

 

0

​

 

0

​

 

167

Total commercial

​

 

5,858

​

 

(2,219)

​

 

0

​

 

1,990

​

 

5,629

Consumer

​

 

263

​

 

(30)

​

 

8

​

 

17

​

 

258

Unallocated

​

 

585

​

 

0

​

 

0

​

 

0

​

 

585

Total Allowance for Loan Losses

​

$

11,026

​

$

(2,249)

​

$

35

​

$

1,941

​

$

10,753

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended September 30, 2019

​

June 30, 2020

    

    

​

    

    

​

    

    

​

    

September 30, 2020

(In Thousands)

    

Balance

    

 Charge-offs 

    

 Recoveries 

    

 Provision (Credit) 

    

Balance

Allowance for Loan Losses:

 

​

  

​

​

  

​

​

  

​

​

  

​

​

  

Residential mortgage:

 

​

  

​

​

  

​

​

  

​

​

  

​

​

  

Residential mortgage loans - first liens

​

$

3,130

​

$

(50)

​

$

1

​

$

83

​

$

3,164

Residential mortgage loans - junior liens

​

 

333

​

 

0

​

 

1

​

 

16

​

 

350

Home equity lines of credit

​

 

280

​

 

0

​

 

1

​

 

1

​

 

282

1-4 Family residential construction

​

 

220

​

 

0

​

 

0

​

 

38

​

 

258

Total residential mortgage

​

 

3,963

​

 

(50)

​

 

3

​

 

138

​

 

4,054

Commercial:

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

Commercial loans secured by real estate

​

 

1,577

​

 

0

​

 

0

​

 

928

​

 

2,505

Commercial and industrial

​

 

1,246

​

 

0

​

 

3

​

 

7

​

 

1,256

Commercial construction and land

​

 

152

​

 

0

​

 

0

​

 

6

​

 

158

Loans secured by farmland

​

 

102

​

 

0

​

 

0

​

 

(1)

​

 

101

Multi-family (5 or more) residential

​

 

150

​

 

0

​

 

0

​

 

5

​

 

155

Agricultural loans

​

 

42

​

 

0

​

 

0

​

 

7

​

 

49

Other commercial loans

​

 

119

​

 

0

​

 

0

​

 

1

​

 

120

Total commercial

​

 

3,388

​

 

0

​

 

3

​

 

953

​

 

4,344

Consumer

​

 

264

​

 

(66)

​

 

9

​

 

67

​

 

274

Unallocated

​

 

585

​

 

0

​

 

0

​

 

0

​

 

585

Total Allowance for Loan Losses

​

$

8,200

​

$

(116)

​

$

15

​

$

1,158

​

$

9,257

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

26

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

December 31, 

    

​

​

    

​

​

    

​

​

    

September 30, 

Nine Months Ended September 30, 2020

​

2019

​

​

​

​

​

​

​

Provision

​

2020

(In Thousands)

​

Balance

​

Charge-offs

​

Recoveries

​

(Credit)

​

Balance

Allowance for Loan Losses:

​

  

​

​

  

​

​

  

​

​

  

​

​

  

​

Residential mortgage:

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Residential mortgage loans - first liens

​

$

3,405

​

$

0

​

$

28

​

$

32

​

$

3,465

Residential mortgage loans - junior liens

​

 

384

​

 

0

​

 

1

​

 

(27)

​

 

358

Home equity lines of credit

​

 

276

​

 

0

​

 

3

​

 

10

​

 

289

1-4 Family residential construction

​

 

117

​

 

0

​

 

0

​

 

52

​

 

169

Total residential mortgage

​

 

4,182

​

 

0

​

 

32

​

 

67

​

 

4,281

Commercial:

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

Commercial loans secured by real estate

​

 

1,921

​

 

0

​

 

0

​

 

465

​

 

2,386

Commercial and industrial

​

 

1,391

​

 

(2,236)

​

 

0

​

 

3,096

​

 

2,251

Commercial construction and land

​

 

966

​

 

(107)

​

 

0

​

 

(419)

​

 

440

Loans secured by farmland

​

 

158

​

 

0

​

 

0

​

 

(37)

​

 

121

Multi-family (5 or more) residential

​

 

156

​

 

0

​

 

0

​

 

71

​

 

227

Agricultural loans

​

 

41

​

 

0

​

 

0

​

 

(4)

​

 

37

Other commercial loans

​

 

155

​

 

0

​

 

0

​

 

12

​

 

167

Total commercial

​

 

4,788

​

 

(2,343)

​

 

0

​

 

3,184

​

 

5,629

Consumer

​

 

281

​

 

(100)

​

 

35

​

 

42

​

 

258

Unallocated

​

 

585

​

 

0

​

 

0

​

 

0

​

 

585

Total Allowance for Loan Losses

​

$

9,836

​

$

(2,443)

​

$

67

​

$

3,293

​

$

10,753

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

December 31, 

    

​

​

    

​

​

    

​

​

    

September 30, 

Nine Months Ended September 30, 2019

​

2018

​

​

​

​

​

​

​

Provision

​

2019

(In Thousands)

​

Balance

​

Charge-offs

​

Recoveries

​

(Credit)

​

Balance

Allowance for Loan Losses:

​

  

​

​

  

​

​

  

​

​

  

​

​

  

​

Residential mortgage:

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Residential mortgage loans - first liens

​

$

3,156

​

$

(133)

​

$

3

​

$

138

​

$

3,164

Residential mortgage loans - junior liens

​

 

325

​

 

(24)

​

 

1

​

 

48

​

 

350

Home equity lines of credit

​

 

302

​

 

0

​

 

5

​

 

(25)

​

 

282

1-4 Family residential construction

​

 

203

​

 

0

​

 

0

​

 

55

​

 

258

Total residential mortgage

​

 

3,986

​

 

(157)

​

 

9

​

 

216

​

 

4,054

Commercial:

​

 

​

​

 

​

​

 

​

​

 

​

​

 

  

Commercial loans secured by real estate

​

 

2,538

​

 

0

​

 

0

​

 

(33)

​

 

2,505

Commercial and industrial

​

 

1,553

​

 

(6)

​

 

6

​

 

(297)

​

 

1,256

Commercial construction and land

​

 

110

​

 

0

​

 

0

​

 

48

​

 

158

Loans secured by farmland

​

 

102

​

 

0

​

 

0

​

 

(1)

​

 

101

Multi-family (5 or more) residential

​

 

114

​

 

0

​

 

0

​

 

41

​

 

155

Agricultural loans

​

 

46

​

 

0

​

 

0

​

 

3

​

 

49

Other commercial loans

​

 

128

​

 

0

​

 

0

​

 

(8)

​

 

120

Total commercial

​

 

4,591

​

 

(6)

​

 

6

​

 

(247)

​

 

4,344

Consumer

​

 

233

​

 

(132)

​

 

31

​

 

142

​

 

274

Unallocated

​

 

499

​

 

0

​

 

0

​

 

86

​

 

585

Total Allowance for Loan Losses

​

$

9,309

​

$

(295)

​

$

46

​

$

197

​

$

9,257

​

27

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

In the evaluation of the loan portfolio, management determines two major components for the allowance for loan losses – (1) a specific component based on an assessment of certain larger relationships, mainly commercial purpose loans, on a loan-by-loan basis; and (2) a general component for the remainder of the portfolio, except for performing loans purchased from Covenant and Monument, 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.

Performing loans acquired from Covenant and Monument are presented net of a discount for credit losses totaling $7,127,000 at September 30, 2020. Performing loans acquired from Monument are presented net of a discount of $1,216,000 at December 31, 2019. The discounts reflect estimates of the present value of credit losses based on market expectations at the acquisition dates, subsequently reduced as accretion has been recognized based on estimated and actual principal pay-downs. Purchased performing loans were excluded from the loan pools for which the general component of the allowance for loan losses was calculated.

The provision for loan losses was $1,941,000 in the third quarter 2020. The provision for loan losses in the third quarter 2020 included the net impact of a charge-off of $2,219,000 on a commercial loan of $3,500,000 for which the previously-established allowance had been $1,193,000. In total, the third quarter 2020 provision included: a net charge of $909,000 related to specific loans (net charge-offs of $2,214,000 partially offset by a decrease in specific allowances on loans of $1,305,000); a charge of $834,000 from an increase in the net charge-off experience factors used to estimate the allowance; a charge of $119,000 from the impact of loan growth, excluding loans purchased from Covenant and PPP loans; and a charge of $79,000 attributable to increases in qualitative factors. There was no provision for loan losses recorded on PPP loans because the SBA guarantees the loans, subject to compliance with program requirements. In comparison, the provision in the third quarter 2019 was $1,158,000, including recognition of a specific allowance of $678,000 on a commercial real estate secured loan and a charge of $373,000 attributable to loan growth.

For the first nine months of 2020, the provision for loan losses was $3,293,000, an increase in expense of $3,096,000 as compared to $197,000 recorded in the first nine months of 2019. The provision included the impact of the $2,219,000 charge-off of a commercial loan referenced above. In total, the provision for the first nine months of 2020 included a net charge of $1,976,000 related to specific loans (net decrease in specific allowances on loans of $400,000 and net charge-offs of $2,376,000); a charge of $745,000 from an increase in the net charge-off experience factors used to estimate the allowance; a charge of $725,000 attributable to increases in qualitative factors; and a credit of $153,000 from the impact of a reduction in outstanding loans, excluding PPP and recently purchased loans. The comparative provision for loan losses in the first nine months of 2019 included a benefit from eliminating specific allowances on commercial loans that were no longer considered impaired and a net credit of $347,000 related to changes in net charge-off experience factors used to calculate the allowance.

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

28

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The following tables summarize the aggregate credit quality classification of outstanding loans by risk rating as of September 30, 2020 and December 31, 2019:

September 30, 2020

(In Thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

​

    

​

​

    

​

​

    

​

​

    

Purchased

    

​

​

​

​

​

​

​

Special

​

​

​

​

​

​

​

Credit

​

​

​

​

​

Pass

​

Mention

​

Substandard

​

Doubtful

​

Impaired

​

Total

Residential Mortgage:

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Residential Mortgage loans - first liens

​

$

525,833

​

$

6,331

​

$

9,586

​

$

0

​

$

77

​

$

541,827

Residential Mortgage loans - junior liens

​

 

27,078

​

 

124

​

 

570

​

 

63

​

 

72

​

 

27,907

Home Equity lines of credit

​

 

39,408

​

 

59

​

 

676

​

 

0

​

 

0

​

 

40,143

1-4 Family residential construction

​

 

29,146

​

 

0

​

 

0

​

 

0

​

 

0

​

 

29,146

Total residential mortgage

​

 

621,465

​

 

6,514

​

 

10,832

​

 

63

​

 

149

​

 

639,023

Commercial:

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

Commercial loans secured by real estate

​

 

508,540

​

 

7,920

​

 

10,072

​

 

0

​

 

4,342

​

 

530,874

Commercial and Industrial

​

 

142,181

​

 

9,495

​

 

2,905

​

 

802

​

 

786

​

 

156,169

Small Business Administration - Paycheck Protection Program

​

​

163,050

​

​

0

​

​

0

​

​

0

​

​

0

​

​

163,050

Political subdivisions

​

 

47,883

​

 

0

​

 

0

​

 

0

​

 

0

​

 

47,883

Commercial construction and land

​

 

41,659

​

 

198

​

 

49

​

 

0

​

 

0

​

 

41,906

Loans secured by farmland

​

 

10,231

​

 

453

​

 

1,229

​

 

0

​

 

0

​

 

11,913

Multi-family (5 or more) residential

​

 

56,507

​

 

2,420

​

 

1,233

​

 

0

​

 

2,170

​

 

62,330

Agricultural loans

​

 

2,959

​

 

0

​

 

602

​

 

0

​

 

0

​

 

3,561

Other commercial loans

​

 

17,385

​

 

0

​

 

0

​

 

0

​

 

0

​

 

17,385

Total commercial

​

 

990,395

​

 

20,486

​

 

16,090

​

 

802

​

 

7,298

​

 

1,035,071

Consumer

​

 

17,184

​

 

0

​

 

92

​

 

0

​

 

0

​

 

17,276

Totals

​

$

1,629,044

​

$

27,000

​

$

27,014

​

$

865

​

$

7,447

​

$

1,691,370

​

29

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

December 31, 2019

(In Thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

​

​

    

​

​

    

​

​

    

​

​

    

Purchased

    

​

​

​

​

​

​

​

Special

​

​

​

​

​

​

​

Credit

​

​

​

​

​

Pass

​

Mention

​

Substandard

​

Doubtful

​

Impaired

​

Total

Residential Mortgage:

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Residential Mortgage loans - first liens

​

$

500,963

​

$

193

​

$

9,324

​

$

84

​

$

77

​

$

510,641

Residential Mortgage loans - junior liens

​

 

26,953

​

 

79

​

 

471

​

 

0

​

 

0

​

 

27,503

Home equity lines of credit

​

 

33,170

​

 

59

​

 

409

​

 

0

​

 

0

​

 

33,638

1-4 Family residential construction

​

 

14,798

​

 

0

​

 

0

​

 

0

​

 

0

​

 

14,798

Total residential mortgage

​

 

575,884

​

 

331

​

 

10,204

​

 

84

​

 

77

​

 

586,580

Commercial:

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

Commercial loans secured by real estate

​

 

294,397

​

 

4,773

​

 

1,693

​

 

0

​

 

364

​

 

301,227

Commercial and Industrial

​

 

114,293

​

 

9,538

​

 

2,543

​

 

0

​

 

0

​

 

126,374

Political subdivisions

​

 

53,570

​

 

0

​

 

0

​

 

0

​

 

0

​

 

53,570

Commercial construction and land

​

 

32,224

​

 

0

​

 

1,331

​

 

0

​

 

0

​

 

33,555

Loans secured by farmland

​

 

6,528

​

 

4,681

​

 

1,042

​

 

0

​

 

0

​

 

12,251

Multi-family (5 or more) residential

​

 

30,160

​

 

0

​

 

910

​

 

0

​

 

0

​

 

31,070

Agricultural loans

​

 

3,343

​

 

335

​

 

641

​

 

0

​

 

0

​

 

4,319

Other commercial loans

​

 

16,416

​

 

0

​

 

119

​

 

0

​

 

0

​

 

16,535

Total commercial

​

 

550,931

​

 

19,327

​

 

8,279

​

 

0

​

 

364

​

 

578,901

Consumer

​

 

16,720

​

 

0

​

 

21

​

 

0

​

 

0

​

 

16,741

Totals

​

$

1,143,535

​

$

19,658

​

$

18,504

​

$

84

​

$

441

​

$

1,182,222

​

The general component of the allowance for loan losses covers pools of loans including commercial loans not considered individually impaired, as well as smaller balance homogeneous classes of loans, such as residential real estate, home equity lines of credit and other consumer loans. Accordingly, the Corporation generally does not separately identify individual consumer and residential loans for impairment disclosures, unless such a loan: (1) is subject to a restructuring agreement, or (2) has an outstanding balance of $400,000 or more and a credit grade of Special Mention, Substandard or Doubtful. The pools of loans are evaluated for loss exposure based upon average historical net charge-off rates for each loan class, adjusted for qualitative factors (described in the following paragraphs). The time period used in determining the average historical net charge-off rate for each loan class is based on management’s evaluation of an appropriate time period that captures an historical loss experience relevant to the current portfolio. At September 30, 2020 and December 31, 2019, a five-year average net charge-off rate was used for commercial loans secured by real estate and for multi-family residential loans, while a three-year average net charge-off rate was used for all other loan classes.

Qualitative risk factors are evaluated for the impact on each of the three segments (residential mortgage, commercial and consumer) within the loan portfolio. Each qualitative factor is assigned a value to reflect improving, stable or declining conditions based on management’s judgment using relevant information available at the time of the evaluation. The adjustment for qualitative factors is applied as an increase or decrease to the average net charge-off rate for each loan class within each segment.

The qualitative factors used in the general component calculations are designed to address credit risk characteristics associated with each segment. The Corporation’s credit risk associated with all of the segments is significantly impacted by these factors, which include economic conditions within its market area, the Corporation’s lending policies, changes or trends in the portfolio, risk profile, competition, regulatory requirements and other factors.

30

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Loans are classified as impaired, when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial loans, by the fair value of the collateral (if the loan is collateral dependent), by future cash flows discounted at the loan’s effective rate or by the loan’s observable market price.

The scope of loans reviewed individually each quarter to determine if they are impaired include all commercial loan relationships greater than $200,000 and any residential mortgage or consumer loans of $400,000 or more for which there is at least one extension of credit graded Special Mention, Substandard or Doubtful. Loans that are individually reviewed, but which are determined to not be impaired, are combined with all remaining loans that are not reviewed on a specific basis, and such loans are included within larger pools of loans based on similar risk and loss characteristics for purposes of determining the general component of the allowance. The loans that have been individually reviewed, but which have been determined to not be impaired, are included in the “Collectively Evaluated” column in the table summarizing the allowance and associated loan balances as of September 30, 2020 and December 31, 2019. All loans classified as troubled debt restructurings (discussed in more detail below), all PCI loans 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.

31

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The following tables present a summary of loan balances and the related allowance for loan losses summarized by portfolio segment and class for each impairment method used as of September 30, 2020 and December 31, 2019.

September 30, 2020

(In Thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Loans:

​

Allowance for Loan Losses:

​

​

​

​

​

​

​

​

Purchased

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Individually

​

Collectively

​

Performing

​

​

​

​

Individually

​

Collectively

​

  

​

​

    

Evaluated

    

Evaluated

    

Loans

    

Totals

    

Evaluated

    

Evaluated

    

Totals

Residential mortgage:

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Residential mortgage loans - first liens

​

$

2,238

​

$

380,348

​

$

159,241

​

$

541,827

​

$

9

​

$

3,456

​

$

3,465

Residential mortgage loans - junior liens

​

 

424

​

 

21,777

​

 

5,706

​

 

27,907

​

 

161

​

 

197

​

 

358

Home equity lines of credit

​

 

85

​

 

30,368

​

 

9,690

​

 

40,143

​

 

0

​

 

289

​

 

289

1-4 Family residential construction

​

 

0

​

 

18,946

​

 

10,200

​

 

29,146

​

 

0

​

 

169

​

 

169

Total residential mortgage

​

 

2,747

​

 

451,439

​

 

184,837

​

 

639,023

​

 

170

​

 

4,111

​

 

4,281

Commercial:

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

Commercial loans secured by real estate

​

 

12,242

​

 

190,045

​

 

328,587

​

 

530,874

​

 

410

​

 

1,976

​

 

2,386

Commercial and industrial

​

 

1,367

​

 

119,401

​

 

35,401

​

 

156,169

​

 

71

​

 

2,180

​

 

2,251

Small Business Administration - Paycheck Protection Program

​

 

0

​

 

99,310

​

 

63,740

​

 

163,050

​

 

0

​

 

0

​

 

0

Political subdivisions

​

 

0

​

 

47,883

​

 

0

​

 

47,883

​

 

0

​

 

0

​

 

0

Commercial construction and land

​

 

0

​

 

41,906

​

 

0

​

 

41,906

​

 

0

​

 

440

​

 

440

Loans secured by farmland

​

 

85

​

 

11,505

​

 

323

​

 

11,913

​

 

0

​

 

121

​

 

121

Multi-family (5 or more) residential

​

 

2,171

​

 

16,754

​

 

43,405

​

 

62,330

​

 

0

​

 

227

​

 

227

Agricultural loans

​

 

0

​

 

3,561

​

 

0

​

 

3,561

​

 

0

​

 

37

​

 

37

Other commercial loans

​

 

0

​

 

15,895

​

 

1,490

​

 

17,385

​

 

0

​

 

167

​

 

167

Total commercial

​

 

15,865

​

 

546,260

​

 

472,946

​

 

1,035,071

​

 

481

​

 

5,148

​

 

5,629

Consumer

​

 

0

​

 

16,918

​

 

358

​

 

17,276

​

 

0

​

 

258

​

 

258

Unallocated

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

585

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total

​

$

18,612

​

$

1,014,617

​

$

658,141

​

$

1,691,370

​

$

651

​

$

9,517

​

$

10,753

​

32

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

December 31, 2019

(In Thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Loans:

​

Allowance for Loan Losses:

​

​

​

​

​

​

​

​

Purchased

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Individually

​

Collectively

​

Performing

​

​

​

​

Individually

​

Collectively

​

  

​

​

    

Evaluated

    

Evaluated

    

Loans

    

Totals

    

Evaluated

    

Evaluated

    

Totals

Residential mortgage:

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Residential mortgage loans - first liens

​

$

1,023

​

$

405,186

​

$

104,432

​

$

510,641

​

$

0

​

$

3,405

​

$

3,405

Residential mortgage loans - junior liens

​

 

368

​

 

24,730

​

 

2,405

​

 

27,503

​

 

176

​

 

208

​

 

384

Home equity lines of credit

​

 

0

​

 

32,147

​

 

1,491

​

 

33,638

​

 

0

​

 

276

​

 

276

1-4 Family residential construction

​

 

0

​

 

14,640

​

 

158

​

 

14,798

​

 

0

​

 

117

​

 

117

Total residential mortgage

​

 

1,391

​

 

476,703

​

 

108,486

​

 

586,580

​

 

176

​

 

4,006

​

 

4,182

Commercial:

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

Commercial loans secured by real estate

​

 

684

​

 

198,532

​

 

102,011

​

 

301,227

​

 

0

​

 

1,921

​

 

1,921

Commercial and industrial

​

 

1,467

​

 

122,313

​

 

2,594

​

 

126,374

​

 

149

​

 

1,242

​

 

1,391

Political subdivisions

​

 

0

​

 

53,570

​

 

0

​

 

53,570

​

 

0

​

 

0

​

 

0

Commercial construction and land

​

 

1,261

​

 

29,710

​

 

2,584

​

 

33,555

​

 

678

​

 

288

​

 

966

Loans secured by farmland

​

 

607

​

 

11,386

​

 

258

​

 

12,251

​

 

48

​

 

110

​

 

158

Multi-family (5 or more) residential

​

 

0

​

 

10,617

​

 

20,453

​

 

31,070

​

 

0

​

 

156

​

 

156

Agricultural loans

​

 

76

​

 

4,243

​

 

0

​

 

4,319

​

 

0

​

 

41

​

 

41

Other commercial loans

​

 

0

​

 

15,947

​

 

588

​

 

16,535

​

 

0

​

 

155

​

 

155

Total commercial

​

 

4,095

​

 

446,318

​

 

128,488

​

 

578,901

​

 

875

​

 

3,913

​

 

4,788

Consumer

​

 

0

​

 

16,741

​

 

0

​

 

16,741

​

 

0

​

 

281

​

 

281

Unallocated

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

585

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total

​

$

5,486

​

$

939,762

​

$

236,974

​

$

1,182,222

​

$

1,051

​

$

8,200

​

$

9,836

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

33

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Summary information related to impaired loans at September 30, 2020 and December 31, 2019 is provided in the table immediately below.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

September 30, 2020

​

December 31, 2019

​

​

Unpaid

​

​

​

​

​

​

​

Unpaid

​

​

​

​

​

​

​

​

Principal

​

Recorded

​

Related

​

Principal

​

Recorded

​

Related

​

    

Balance

    

Investment

    

Allowance

    

Balance

    

Investment

    

Allowance

With no related allowance recorded:

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Residential mortgage loans - first liens

​

$

1,084

​

$

1,034

​

$

0

​

$

645

​

$

617

​

$

0

Residential mortgage loans - junior liens

​

 

167

​

 

112

​

 

0

​

 

42

​

 

42

​

 

0

Home equity lines of credit

​

​

151

​

​

85

​

​

0

​

​

0

​

​

0

​

​

0

Commercial loans secured by real estate

​

 

7,570

​

 

5,745

​

 

0

​

 

684

​

 

684

​

 

0

Commercial and industrial

​

 

1,732

​

 

1,295

​

 

0

​

 

563

​

 

563

​

 

0

Loans secured by farmland

​

 

85

​

 

85

​

 

0

​

 

129

​

 

129

​

 

0

Multi-family (5 or more) residential

​

​

2,771

​

​

2,171

​

​

0

​

​

0

​

​

0

​

​

0

Agricultural loans

​

 

0

​

 

0

​

 

0

​

 

76

​

 

76

​

 

0

Total with no related allowance recorded

​

 

13,560

​

 

10,527

​

 

0

​

 

2,139

​

 

2,111

​

 

0

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

With a related allowance recorded:

​

 

​

​

 

​

​

 

​

​

 

  

​

 

  

​

 

  

Residential mortgage loans - first liens

​

 

1,204

​

 

1,204

​

 

9

​

 

406

​

 

406

​

 

0

Residential mortgage loans - junior liens

​

 

312

​

 

312

​

 

161

​

 

326

​

 

326

​

 

176

Commercial loans secured by real estate

​

​

6,497

​

​

6,497

​

​

409

​

​

0

​

​

0

​

​

0

Commercial and industrial

​

 

72

​

 

72

​

 

72

​

 

904

​

 

904

​

 

149

Construction and other land loans

​

 

0

​

 

0

​

 

0

​

 

1,261

​

 

1,261

​

 

678

Loans secured by farmland

​

 

0

​

 

0

​

 

0

​

 

478

​

 

478

​

 

48

Total with a related allowance recorded

​

 

8,085

​

 

8,085

​

 

651

​

 

3,375

​

 

3,375

​

 

1,051

Total

​

$

21,645

​

$

18,612

​

$

651

​

$

5,514

​

$

5,486

​

$

1,051

​

In the table immediately above, loans to two borrowers are presented under the Residential mortgage loans – first liens and Residential mortgage loans – junior liens classes. Each of these loans is collateralized by one property, and the allowance associated with each of these loans was determined based on an analysis of the total amounts of the Corporation’s exposure in comparison to the estimated net proceeds if the Corporation were to sell the property. The total allowance related to these two borrowers was $161,000 at September 30, 2020 and $176,000 at December 31, 2019.

34

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The average balance of impaired loans, excluding purchased credit impaired loans, and interest income recognized on these impaired loans is as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest Income Recognized on

​

​

Average Investment in Impaired Loans

​

Impaired Loans on a Cash Basis

​

​

Three Months Ended

​

Nine Months Ended

​

Three Months Ended

​

Nine Months Ended

​

​

September 30, 

​

September 30, 

​

September 30, 

​

September 30, 

​

    

2020

​

2019

​

2020

    

2019

​

2020

​

2019

​

2020

    

2019

Residential mortgage:

 

​

​

​

​

​

​

​

  

 

​

  

​

​

​

​

​

​

​

​

  

 

​

  

Residential mortgage loans - first lien

​

$

2,159

​

$

1,057

​

$

1,579

​

$

997

​

$

27

​

$

21

​

$

70

​

$

39

Residential mortgage loans - junior lien

​

​

384

​

​

285

​

 

386

​

 

289

​

​

5

​

​

8

​

 

18

​

 

10

Home equity lines of credit

​

​

65

​

​

65

​

 

65

​

 

16

​

​

0

​

​

3

​

 

2

​

 

3

Total residential mortgage

​

​

2,608

​

​

1,407

​

 

2,030

​

 

1,302

​

​

32

​

​

32

​

 

90

​

 

52

Commercial:

​

​

​

​

​

​

​

 

​

​

 

​

​

​

​

​

​

​

​

 

​

​

 

​

Commercial loans secured by real estate

​

​

7,298

​

​

1,738

​

 

3,779

​

 

2,371

​

​

65

​

​

49

​

 

81

​

 

66

Commercial and industrial

​

​

2,235

​

​

1,202

​

 

3,178

​

 

1,460

​

​

1

​

​

4

​

 

21

​

 

38

Commercial construction and land

​

​

49

​

​

0

​

 

678

​

 

0

​

​

1

​

​

0

​

 

14

​

 

0

Loans secured by farmland

​

​

253

​

​

1,359

​

 

397

​

 

1,443

​

​

2

​

​

23

​

 

26

​

 

42

Agricultural loans

​

​

76

​

​

6

​

 

76

​

 

481

​

​

2

​

​

0

​

 

4

​

 

24

Other commercial loans

​

​

0

​

​

50

​

 

25

​

 

13

​

​

0

​

​

2

​

 

1

​

 

2

Total commercial

​

​

9,911

​

​

4,355

​

 

8,133

​

 

5,768

​

​

71

​

​

78

​

 

147

​

 

172

Consumer

​

​

0

​

​

0

​

 

0

​

 

4

​

​

0

​

​

0

​

 

0

​

 

0

Total

​

$

12,519

​

$

5,762

​

$

10,163

​

$

7,074

​

$

103

​

$

110

​

$

237

​

$

224

​

Loans are placed on nonaccrual status for all classes of loans when, in the opinion of management, collection of interest is doubtful. Any unpaid interest previously accrued on those loans is reversed from income. Interest income is not recognized on specific impaired loans unless the likelihood of further loss is remote. Interest payments received on loans for which the risk of further loss is greater than remote are applied as a reduction of the loan principal balance. Interest income on other nonaccrual loans, including impaired loans, is recognized only to the extent of interest payments received. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The past due status of all classes of loans receivable is determined based on contractual due dates for loan payments. Also, the amortization of deferred loan fees is discontinued when a loan is placed on nonaccrual status.

35

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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)

​

September 30, 2020

​

December 31, 2019

​

​

Past Due

​

​

​

​

Past Due

​

​

​

​

​

90+ Days and

​

​

​

​

90+ Days and

​

​

​

​

    

Accruing

    

Nonaccrual

    

Accruing

    

Nonaccrual

Residential mortgage:

 

​

  

 

​

  

 

​

  

 

​

  

Residential mortgage loans - first liens

​

$

1,336

​

$

6,354

​

$

878

​

$

4,679

Residential mortgage loans - junior liens

​

 

56

​

 

383

​

 

53

​

 

326

Home equity lines of credit

​

 

213

​

 

255

​

 

71

​

 

73

1-4 Family residential construction

​

 

0

​

 

39

​

 

0

​

 

0

Total residential mortgage

​

 

1,605

​

 

7,031

​

 

1,002

​

 

5,078

Commercial:

​

 

​

​

 

​

​

 

  

​

 

  

Commercial loans secured by real estate

​

 

381

​

 

12,414

​

 

107

​

 

1,148

Commercial and industrial

​

 

112

​

 

955

​

 

15

​

 

1,051

Commercial construction and land

​

 

0

​

 

49

​

 

0

​

 

1,311

Loans secured by farmland

​

 

188

​

 

85

​

 

43

​

 

565

Multi-family (5 or more) residential

​

​

0

​

​

2,170

​

​

0

​

​

0

Other commercial

​

 

0

​

 

0

​

 

0

​

 

49

Total commercial

​

 

681

​

 

15,673

​

 

165

​

 

4,124

Consumer

​

 

22

​

 

92

​

 

40

​

 

16

Totals

​

$

2,308

​

$

22,796

​

$

1,207

​

$

9,218

​

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 $7,447,000 at September 30, 2020 and $441,000 at December 31, 2019 are classified as nonaccrual.

The table below presents a summary of the contractual aging of loans as of September 30, 2020 and December 31, 2019. 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.

36

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

As of September 30, 2020

​

As of December 31, 2019

​

    

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

Residential mortgage:

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Residential mortgage loans - first liens

​

$

534,303

​

$

2,819

​

$

4,705

​

$

541,827

​

$

499,024

​

$

7,839

​

$

3,778

​

$

510,641

Residential mortgage loans - junior liens

​

 

27,660

​

 

44

​

 

203

​

 

27,907

​

 

27,041

​

 

83

​

 

379

​

 

27,503

Home equity lines of credit

​

 

39,737

​

 

145

​

 

261

​

 

40,143

​

 

33,115

​

 

452

​

 

71

​

 

33,638

1-4 Family residential construction

​

 

28,629

​

 

517

​

 

0

​

 

29,146

​

 

14,758

​

 

40

​

 

0

​

 

14,798

Total residential mortgage

​

 

630,329

​

 

3,525

​

 

5,169

​

 

639,023

​

 

573,938

​

 

8,414

​

 

4,228

​

 

586,580

​

​

 

​

​

 

​

​

 

​

​

 

​

​

 

  

​

 

  

​

 

  

​

 

  

Commercial:

​

 

​

​

 

​

​

 

​

​

 

​

​

 

  

​

 

  

​

 

  

​

 

  

Commercial loans secured by real estate

​

 

525,211

​

 

867

​

 

4,796

​

 

530,874

​

 

299,640

​

 

737

​

 

850

​

 

301,227

Commercial and industrial

​

 

155,140

​

 

57

​

 

972

​

 

156,169

​

 

126,221

​

 

16

​

 

137

​

 

126,374

Small Business Administration - Paycheck Protection Program

​

​

163,050

​

​

0

​

​

0

​

​

163,050

​

​

0

​

​

0

​

​

0

​

​

0

Political subdivisions

​

 

47,883

​

 

0

​

 

0

​

 

47,883

​

 

53,570

​

 

0

​

 

0

​

 

53,570

Commercial construction and land

​

 

41,857

​

 

49

​

 

0

​

 

41,906

​

 

33,505

​

 

0

​

 

50

​

 

33,555

Loans secured by farmland

​

 

11,654

​

 

37

​

 

222

​

 

11,913

​

 

11,455

​

 

666

​

 

130

​

 

12,251

Multi-family (5 or more) residential

​

 

62,330

​

 

0

​

 

0

​

 

62,330

​

 

31,070

​

 

0

​

 

0

​

 

31,070

Agricultural loans

​

 

3,456

​

 

105

​

 

0

​

 

3,561

​

 

4,318

​

 

1

​

 

0

​

 

4,319

Other commercial loans

​

 

17,385

​

 

0

​

 

0

​

 

17,385

​

 

16,535

​

 

0

​

 

0

​

 

16,535

Total commercial

​

 

1,027,966

​

 

1,115

​

 

5,990

​

 

1,035,071

​

 

576,314

​

 

1,420

​

 

1,167

​

 

578,901

Consumer

​

 

17,077

​

 

87

​

 

112

​

 

17,276

​

 

16,496

​

 

189

​

 

56

​

 

16,741

Totals

​

$

1,675,372

​

$

4,727

​

$

11,271

​

$

1,691,370

​

$

1,166,748

​

$

10,023

​

$

5,451

​

$

1,182,222

​

37

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Nonaccrual loans are included in the contractual aging in the immediately preceding table. A summary of the contractual aging of nonaccrual loans at September 30, 2020 and December 31, 2019 is as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

Current &

​

​

​

​

​

​

​

 

​

​

​

Past Due

​

Past Due

​

Past Due

​

 

​

​

​

Less than

​

30-89

​

90+

​

 

​

​

    

30 Days

    

Days

    

Days

    

Total

September 30, 2020 Nonaccrual Totals

​

$

12,605

​

$

1,228

​

$

8,963

​

$

22,796

December 31, 2019 Nonaccrual Totals

​

$

3,840

​

$

1,134

​

$

4,244

​

$

9,218

​

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 contractual aging information at September 30, 2020 and December 31, 2019 is as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

Current &

​

​

​

​

​

​

​

 

​

​

 

​

​

​

Past Due

​

Past Due

​

Past Due

​

 

​

​

 

​

​

​

Less than

​

30-89

​

90+

​

 

​

​

 

​

​

    

30 Days

    

Days

    

Days

    

Nonaccrual

    

Total

September 30, 2020 Totals

​

$

167

​

$

91

​

$

338

​

$

7,441

​

$

8,037

December 31, 2019 Totals

​

$

889

​

$

0

​

$

0

​

$

1,737

​

$

2,626

​

At September 30, 2020 and December 31, 2019, there were no commitments to loan additional funds to borrowers whose loans have been classified as TDRs.

TDRs that occurred during the three-month and nine-month periods ended September 30, 2020 and 2019 are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

Three Months Ended

​

​

September 30, 2020

​

September 30, 2019

​

​

​

​

Post-

​

​

​

Post-

​

​

Number

​

Modification

​

Number

​

Modification

​

​

of

​

Recorded

​

of

​

Recorded

(Balances in Thousands)

​

Loans

​

Investment

​

Loans

​

Investment

Commercial loans secured by real estate:

​

​

​

​

​

​

​

​

​

​

Principal and interest payment deferral non-COVID related

    

2

    

$

4,831

    

0

    

$

0

Extended interest only payments and reduced monthly payments with a balloon payment at maturity

    

0

    

​

0

    

1

    

​

1,261

Multi-family (5 or more) residential:

​

​

​

​

​

​

​

​

​

​

Principal and interest payment deferral non-COVID related

​

3

​

​

2,170

​

0

​

​

0

Total

    

5

    

$

7,001

    

1

    

$

1,261

38

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

​

​

​

​

​

​

​

​

​

​

​

(Balances in Thousands)

​

Nine Months Ended

​

Nine Months Ended

​

​

September 30, 2020

​

September 30, 2019

​

    

​

    

Post-

    

​

    

Post-

​

​

Number

​

Modification

​

Number

​

Modification

​

​

of

​

Recorded

​

of

​

Recorded

​

​

Loans

​

Investment

​

Loans

​

Investment

Residential mortgage - junior liens:

 

  

​

 

  

 

  

​

 

  

Reduced monthly payments and extended maturity date

 

0

​

$

0

 

1

​

$

18

New loan at lower than risk-adjusted market rate to borrower from whom short sale of other collateral was accepted

 

1

​

 

30

 

0

​

 

0

Commerical loans secured by real estate:

​

​

​

​

​

​

​

​

​

​

Interest only payments for a nine-month period

​

1

​

​

240

​

0

​

​

0

Principal and interest payment deferral non-COVID related

​

2

​

​

4,831

​

0

​

​

0

Extended interest only payments and reduced monthly payments with a balloon payment at maturity

​

0

​

​

0

​

1

​

​

1,261

Commercial and industrial,

 

  

​

 

  

 

  

​

 

  

Reduced monthly payments and extended maturity date

 

0

​

​

0

 

9

​

​

448

Multi-family (5 or more) residential,

​

​

​

​

​

​

​

​

​

​

Principal and interest payment deferral non-COVID related

​

3

​

​

2,170

​

0

​

​

0

Agricultural loans,

 

  

​

 

  

 

  

​

 

  

Reduced monthly payments and extended maturity date

 

0

​

 

0

 

1

​

 

84

Total

 

7

​

$

7,271

 

12

​

$

1,811

​

In the three-month and nine-month periods ended September 30, 2020, the Corporation recorded a specific allowance for loan losses of $134,000 related to a loan secured by commercial real estate for which a TDR concession was also made in the quarter and included in the table above. The other loans for which TDRs were granted in the three-month and nine month periods ended September 30, 2020 had no specific impact on the provision or allowance for loan losses.

In the third quarter 2019, the Corporation recorded a specific allowance for loan losses of $678,000 related to the commercial loan secured by real estate in the table above. This loan was subsequently paid off in the first quarter of 2020 for less than the full principal balance, resulting in a charge-off of $107,000.

In the three-month and nine-month periods ended September 30, 2020 and 2019, payment defaults on loans for which modifications considered to be TDRs were entered into within the previous 12 months are summarized as follows:

​

​

​

​

​

​

​

​

​

​

​

​

(Balances in Thousands)

​

Three Months Ended

​

Three Months Ended

​

​

September 30, 2020

​

September 30, 2019

​

​

Number

​

​

​

Number

​

​

​

​

of

​

Recorded

​

of

​

Recorded

​

​

Loans

​

Investment

​

Loans

​

Investment

Residential mortgage - junior liens

 

0

 

$

0

 

1

 

$

18

Commercial loans secured by real estate

​

1

​

​

240

​

0

​

​

0

Commercial and industrial

 

0

​

​

0

 

9

​

​

431

Agricultural loans

​

0

​

​

0

​

1

​

​

81

Total

 

1

​

$

240

 

12

​

$

530

​

39

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

​

​

​

​

​

​

​

​

​

​

(Balances in Thousands)

​

Nine Months Ended

​

Nine Months Ended

​

​

September 30, 2020

​

September 30, 2019

​

​

Number

​

​

​

Number

​

​

​

​

of

​

Recorded

​

of

​

Recorded

​

​

Loans

​

Investment

​

Loans

​

Investment

Residential mortgage - junior liens

 

0

 

$

0

 

1

 

$

18

Commercial loans secured by real estate

​

1

​

​

240

​

0

​

​

0

Commercial and industrial

 

0

​

​

0

 

9

​

​

431

Agricultural loans

​

0

​

​

0

​

1

​

​

81

Total

 

1

​

$

240

 

12

​

$

530

​

In the third quarter of 2020, one commercial real estate loan experienced a payment default. This loan was individually evaluated for impairment at September 30, 2020 and no specific allowance was recorded as the estimated value of collateral exceeded the outstanding loan balance. All of the TDRs for which payment defaults occurred in the third quarter of 2019 were related to one commercial relationship. These loans were individually evaluated for impairment at September 30, 2019 and no specific allowance for loan losses was recognized because the estimate values of collateral and U.S. Government (Small Business Administration) guarantees exceeded the outstanding balances of the loans.

The carrying amount of foreclosed residential real estate properties held as a result of obtaining physical possession (included in foreclosed assets held for sale in the unaudited consolidated balance sheets) is as follows:

​

​

​

​

​

​

​

​

(In Thousands)

    

September 30, 

    

December 31, 

​

​

2020

​

2019

Foreclosed residential real estate

​

$

104

​

$

292

​

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)

    

September 30, 

    

December 31, 

​

​

2020

​

2019

Residential real estate in process of foreclosure

​

$

1,719

​

$

1,717

​

​

​

8. GOODWILL AND OTHER INTANGIBLE ASSETS

Information related to core deposit intangibles, net are as follows:

​

​

​

​

​

​

​

​

(In Thousands)

    

September 30, 

    

December 31, 

​

​

2020

​

2019

Gross amount

​

$

6,639

​

$

3,495

Accumulated amortization

​

 

(2,580)

​

 

(2,248)

Net

​

$

4,059

​

$

1,247

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

Three Months Ended

​

Nine Months Ended

​

​

September 30, 

​

September 30, 

​

September 30, 

​

September 30, 

​

    

2020

    

2019

    

2020

    

2019

Amortization expense

​

$

208

    

$

74

    

$

332

    

$

149

​

Amortization expense of $208,000 in the third quarter 2020 and $332,000 in the nine-month period ended September 30, 2020 included $146,000 related to the Covenant acquisition as described in Note 2.

40

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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)

Three Months Ended

​

Nine Months Ended

​

September 30,

​

September 30,

​

September 30,

​

September 30,

​

2020

​

2019

​

2020

​

2019

Balance, beginning of period

$

28,388

​

$

28,618

​

$

28,388

​

$

11,942

Goodwill arising in business combination

​

24,138

​

​

0

​

​

24,138

​

​

16,676

Balance, end of period

$

52,526

​

$

28,618

​

$

52,526

​

$

28,618

​

​

​

​

​

​

​

​

​

​

​

​

​

Goodwill is tested at least annually at December 31 for impairment, or more often if events or circumstances indicate there may be impairment. In 2020, the COVID-19 pandemic led to government-imposed emergency restrictions that have had significant adverse effects on macroeconomic conditions. The ultimate effect of COVID-19 on the local or broader economy is not known nor is the ultimate length of the restrictions described and any accompanying effects.

Broader US stock market valuations decreased significantly in the latter part of the first quarter and early second quarter 2020 but have bounced back to levels consistent with, or higher than, pre-COVID-19 levels. Bank stock valuations have lagged, reflecting market concerns about potential credit losses and the effects of a substantial drop in interest rates. The closing price (last trade) of the Corporation’s common stock on September 30, 2020 was $16.24 per share. The average closing price for the last 10 trading days of the third quarter 2020 (September 17 through September 30, 2020) was $15.96 per share. In comparison, the average closing price of the Corporation’s common stock in the fourth quarter 2019 was $26.05 per share and the book value of the Corporation’s common stock at September 30, 2020 was $18.65 per share.

In light of the decline in the Corporation’s stock price triggered by the adverse circumstances resulting from COVID-19, management determined it necessary to evaluate goodwill for impairment at September 30, 2020.

In evaluating goodwill for impairment, the Corporation performed a quantitative assessment and determined that the fair value of its reporting unit, its community banking operation, exceeded its carrying amount, including goodwill, at September 30, 2020. In reaching this conclusion, management estimated the fair value of the reporting unit to be $352.7 million, which exceeded the Corporation’s stockholders’ equity (book value) of $296.3 million by 19%.

Management calculated the estimated fair value of the reporting unit based on the weighted average of values determined using the following valuation approaches:

​

●Income approach - This approach was given a weighting of 60%, and resulted in a value of $375.3 million, which was the mid-point of a range of $340.0 million to $410.7 million. This approach is based on estimated cash flows to an acquirer based on anticipated future results assuming a change of control transaction. This approach assumes an acquirer will achieve an expected base level of earnings, achieve integration cost savings and incur certain transaction costs. The analysis then calculates the present value of all excess cash flows generated (above a minimum tangible capital ratio), plus the present value of a terminal value, to determine the fair value.

​

●Change of control premium to the Corporation’s September 30, 2020 market price – This approach was given a weighting of 20%, and resulted in a valuation of $329.0 million, which was the mid-point of a range of $322.6 million to $335.5 million. The premium to market approach calculates the change of control price a market participant would pay for a firm by adding a change of control premium to the Corporation’s recent trading value. Management used a subjectively determined range of control premiums from 25% to 30%. This range of control premiums was in line with data for publicly traded banks and thrifts comparing control premiums paid, as compared to target valuations one-month and three-months prior to deal announcements, for the annual periods 2017 through 2019 and the nine months ended September 30, 2020.

​

41

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

●Change of control premium to the Corporation’s volume-weighted average market price – Similar to the approach described immediately above, management applied a subjectively determined 25% to 30% range of control premiums to the 5-day average volume-weighted average trading price for the period September 23, 2020 through September 29, 2020. This approach was given a weighting of 20%, and resulted in a valuation of $319.2 million, which was the mid-point of a range of $312.7 million to $325.7 million.

​

Key assumptions used in the calculation of estimated fair value include:

​

●The valuation techniques utilized. Management used the valuation techniques identified above, which represent a range of techniques commonly used to estimate the value of a company using either an income-based or a market-based approach.

​

●The weighting assigned to each of the valuation approaches considered. Management believes a market participant would apply a significant weighting to the income approach (60%) since it incorporates specific expected operating cash flows and merger synergies to be generated by the reporting unit. Management assigned equal (20%) weightings to the comparison of change of control premiums from comparable transactions to the Corporation’s recent trading price. Management believes market participants would typically consider current trading values, and recent pricing of comparable transactions, in considering an acquisition price, but that the weighting should be lower than the income approach because it does not incorporate company-specific cash flow projections or merger synergies. Management considered use of a guideline market-based approach based on recent, selected sale transactions with consideration of relevant price-to-tangible book value and price-to-earnings multiples; however, given the general lack of bank merger and acquisition transactions since the COVID-19 epidemic started, and in particular, lack of transactions in which the seller’s total assets exceeded $2 billion, management did not believe this method would produce a relevant indication of value for the goodwill impairment analysis at September 30, 2020.

​

●In applying the income approach, key assumptions included: estimated earnings for each of the next 5 years, which reflected the effects of assumptions related to deposit and loan growth, loan losses, changes in noninterest revenues and expenses and other cash flows; reduction in operating expenses to be realized by an acquirer (integration synergies) of 20%; the level of post-acquisition capital the acquirer would be required to maintain, of 9% of tangible assets; the discount rates applied to projected cash flows, which ranged from 12% to 14% with a midpoint of 13% used in determining the midpoint valuation; and the capitalization rates applied to terminal cash flows, which ranged from 9% to 11% with a midpoint of 10% used in determining the midpoint valuation.

​

All of the key assumptions identified above are significant and subjective, and changes in those assumptions would result in a different calculation of estimated fair value of the reporting unit.

​

Based on the results of its impairment analysis, the Corporation determined that the fair value of its only reporting unit, its community banking operation, exceeded its book value, and there was no goodwill impairment as of September 30, 2020.

​

​

42

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

9. BORROWED FUNDS AND SUBORDINATED DEBT

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

​

​

​

​

​

​

​

​

(In Thousands)

    

September 30, 

    

December 31, 

​

​

2020

​

2019

FHLB-Pittsburgh borrowings

​

$

38,557

​

$

84,292

Customer repurchase agreements

​

 

2,313

​

 

1,928

Total short-term borrowings

​

$

40,870

​

$

86,220

​

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

​

​

​

​

​

​

​

​

(In Thousands)

    

September 30, 

    

December 31, 

​

​

2020

​

2019

Overnight borrowing

​

$

0

​

$

64,000

Other short-term advances

​

 

38,557

​

 

20,292

Total short-term FHLB-Pittsburgh borrowings

​

$

38,557

​

$

84,292

​

At September 30, 2020, other short-term advances included ten advances totaling $38,400,000 which are presented in the table inclusive of the unaccreted purchase accounting adjustment, with a weighted-average effective interest rate of 0.58%.

The Corporation had available credit with other correspondent banks totaling $45,000,000 at September 30, 2020 and December 31, 2019. These lines of credit are primarily unsecured. No amounts were outstanding at September 30, 2020 or December 31, 2019.

The Corporation has a line of credit with the Federal Reserve Bank of Philadelphia’s Discount Window. At September 30, 2020, the Corporation had available credit in the amount of $14,654,000 on this line with no outstanding advances. At December 31, 2019, the Corporation had available credit in the amount of $14,244,000 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 $15,124,000 at September 30, 2020 and $14,728,000 at December 31, 2019.

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 September 30, 2020 and December 31, 2019. The carrying value of the underlying securities was $2,350,000 at September 30, 2020 and $1,951,000 at December 31, 2019.

The FHLB-Pittsburgh loan facility is collateralized by qualifying loans secured by real estate with a book value totaling $1,062,779,000 at September 30, 2020 and $778,877,000 at December 31, 2019. 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 in the consolidated balance sheets) were $11,929,000 at September 30, 2020 and $10,131,000 at December 31, 2019. In addition to the short-term and long-term borrowings shown in these tables, there was a $400,000 letter of credit from FHLB-Pittsburgh outstanding at September 30, 2020. The Corporation’s total credit facility with FHLB-Pittsburgh was $782,434,000 at September 30, 2020, including an unused (available) amount of $641,753,000. At December 31, 2019, the Corporation’s total credit facility with FHLB-Pittsburgh was $552,546,000, including an unused (available) amount of $416,122,000.

43

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

LONG-TERM BORROWINGS

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

​

​

​

​

​

​

​

​

(In Thousands)

    

September 30, 

    

December 31, 

​

​

2020

​

2019

Loans matured in 2020 with a weighted-average rate of 2.71%

​

$

0

​

$

5,069

Loans maturing in 2021 with a weighted-average effective rate of 1.36%

​

​

26,124

​

​

6,000

Loans maturing in 2022 with a weighted-average effective rate of 1.40%

​

​

35,740

​

​

20,000

Loans maturing in 2023 with a weighted-average effective rate of 1.44%

​

​

27,750

​

​

20,500

Loans maturing in 2024 with a weighted-average effective rate of 1.06%

​

​

12,683

​

​

0

Loan maturing in 2025 with a rate of 4.91%

​

 

490

​

 

558

Total long-term FHLB-Pittsburgh borrowings

​

$

102,787

​

$

52,127

​

SUBORDINATED DEBT

At September 30, 2020 and December 31, 2019, outstanding subordinated debt agreements are as follows:

​

​

​

​

​

​

​

​

(In Thousands)

    

September 30, 

    

December 31, 

​

​

2020

​

2019

Agreements with an aggregate par value of $8,000,000; bearing interest at 6.25%; maturing in June 2026 and redeemable at par in June 2021

​

$

8,042

​

$

0

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%; maturing in July 2027 and redeemable at par in July 2022

​

​

2,030

​

​

0

Total carrying value

​

$

16,572

​

$

6,500

​

​

10. STOCK-BASED COMPENSATION PLANS

The Corporation has a Stock Incentive Plan for a selected group of officers and an Independent Directors Stock Incentive Plan. The 2020 restricted stock awards under the Stock Incentive Plan vest ratably over three years, and the 2020 restricted stock issued under the Independent Directors Stock Incentive Plan vests over one year. Following is a summary of restricted stock awards granted in the nine-month period ended September 30, 2020:

​

​

​

​

​

​

​

(Dollars in Thousands)

    

​

    

Aggregate

​

​

​

​

Grant

​

​

​

​

Date

​

​

Number of

​

Fair

​

​

Shares

​

Value

1st quarter 2020 awards:

​

​

​

​

​

Time-based awards to independent directors

​

7,580

​

$

200

Time-based awards to employees

​

30,381

​

​

801

Performance-based awards to employees

​

17,903

​

​

343

3rd quarter 2020 awards,

​

​

​

​

​

Time-based awards to employees

​

15,076

​

​

300

Total

​

70,940

​

$

1,644

​

Compensation cost related to restricted stock is recognized based on the fair value of the stock at the grant date over the vesting period, adjusted for estimated and actual forfeitures. Total annual stock-based compensation for the year ending December 31, 2020 is estimated to total $920,000. Total stock-based compensation expense attributable to restricted stock awards amounted to $248,000 in the third quarter 2020 and $215,000 in the third quarter 2019. Total stock-based

44

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

compensation expense attributable to restricted stock awards amounted to $672,000 in the nine-month period ended September 30, 2020 and $646,000 in the nine-month period ended September 30, 2019.

​

11. CONTINGENCIES

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

​

12. DERIVATIVE FINANCIAL INSTRUMENTS

In connection with the acquisition of Covenant, the Corporation became 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. At July 1, 2020, the aggregate notional amount of commercial loans subject to interest rate swaps was $137,176,000, and the Corporation recorded the fair value of the derivative asset of $7,932,000 and the fair value of the derivative liability of $7,932,000.

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 from Covenant (acquired by the Corporation) into fixed interest rate exposures. Those interest rate swaps have been simultaneously economically hedged by offsetting interest rate swaps that Covenant had in place with a third party (assumed by the Corporation), 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.

At September 30, 2020, the aggregate notional amount of interest rate swaps was $136,620,000. There were no interest rate swaps originated in the third quarter 2020. There were no gross amounts of interest rate swap-related assets and liabilities not offset in the consolidated balance sheets at September 30, 2020. In the third quarter 2020, the net impact on the consolidated statements of income from interest rate swaps was a reduction in interest income on loans of $351,000.

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 September 30, 2020:

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

At September 30, 2020

​

Asset Derivatives

​

Liability Derivatives

​

Notional

​

Fair

​

Notional

​

Fair

​

Amount

​

Value (1)

​

Amount

​

Value (2)

Interest rate swap agreements

$

68,310

​

$

7,478

​

$

68,310

​

$

7,478

​

(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 $12,226,000 were pledged as collateral against the Corporation’s liability related to the interest rate swaps at September 30, 2020.

45

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

13. FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS

The Corporation measures certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB 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 or liabilities. 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 or liability through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets or liabilities, quoted market prices in markets that are not active for identical or similar assets or liabilities 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 or liability becoming active or inactive, changes in the availability of quoted prices, or changes in the availability of other market data.

46

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

At September 30, 2020 and December 31, 2019, assets and liabilities measured at fair value and the valuation methods used are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 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

​

$

0

​

$

12,226

​

$

0

​

$

12,226

Obligations of U.S. Government agencies

​

​

0

​

​

16,355

​

​

0

​

​

16,355

Obligations of states and political subdivisions:

​

 

  

​

 

​

​

 

  

​

 

​

Tax-exempt

​

 

0

​

 

109,668

​

 

0

​

 

109,668

Taxable

​

 

0

​

 

44,195

​

 

0

​

 

44,195

Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:

​

 

  

​

 

  

​

 

  

​

 

  

Residential pass-through securities

​

 

0

​

 

46,211

​

 

0

​

 

46,211

Residential collateralized mortgage obligations

​

 

0

​

 

69,337

​

 

0

​

 

69,337

Commercial mortgage-backed securities

​

 

0

​

 

42,553

​

 

0

​

 

42,553

Total available for sale debt Securities

​

 

0

​

 

340,545

​

 

0

​

 

340,545

Marketable equity security

​

 

1,003

​

 

0

​

 

0

​

 

1,003

Servicing rights

​

 

0

​

 

0

​

 

1,437

​

 

1,437

Interest rate swap agreements, assets

​

​

0

​

​

7,478

​

​

0

​

​

7,478

Total recurring fair value measurements, assets

​

$

1,003

​

$

348,023

​

$

1,437

​

$

350,463

​

​

​

​

​

​

​

​

​

​

​

​

​

Recurring fair value measurements, liabilities,

​

​

​

​

​

​

​

​

​

​

​

​

Interest rate swap agreements, liabilities

​

$

0

​

$

7,478

​

$

0

​

$

7,478

​

​

​

​

​

​

​

​

​

​

​

​

​

Nonrecurring fair value measurements, assets:

​

 

  

​

 

  

​

 

  

​

 

  

Impaired loans with a valuation allowance

​

​

0

​

​

0

​

​

8,085

​

​

8,085

Valuation allowance

​

 

0

​

 

0

​

 

(651)

​

 

(651)

Impaired loans, net

​

 

0

​

 

0

​

 

7,434

​

 

7,434

Foreclosed assets held for sale

​

 

0

​

 

0

​

 

2,369

​

 

2,369

Total nonrecurring fair value measurements, assets

​

$

0

​

$

0

​

$

9,803

​

$

9,803

​

47

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

December 31, 2019

​

    

Quoted

    

​

​

    

​

​

    

​

​

​

​

Prices

​

Other

​

​

​

​

​

​

​

​

in Active

​

Observable

​

Unobservable

​

Total

​

​

Markets

​

Inputs

​

Inputs

​

Fair

(In Thousands)

​

(Level 1)

​

(Level 2)

​

(Level 3)

​

Value

Recurring fair value measurements, assets:

 

​

  

 

​

  

 

​

  

 

​

  

AVAILABLE-FOR-SALE DEBT SECURITIES:

 

​

  

 

​

  

 

​

  

 

​

  

Obligations of U.S. Government agencies

​

$

0

​

$

17,000

​

$

0

​

$

17,000

Obligations of states and political subdivisions:

​

 

  

​

 

  

​

 

  

​

 

  

Tax-exempt

​

 

0

​

 

70,760

​

 

0

​

 

70,760

Taxable

​

 

0

​

 

36,303

​

 

0

​

 

36,303

Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:

​

 

  

​

 

  

​

 

  

​

 

  

Residential pass-through securities

​

 

0

​

 

59,210

​

 

0

​

 

59,210

Residential collateralized mortgage obligations

​

 

0

​

 

114,723

​

 

0

​

 

114,723

Commercial mortgage-backed securities

​

 

0

​

 

48,727

​

 

0

​

 

48,727

Total available-for-sale debt securities

​

 

0

​

 

346,723

​

 

0

​

 

346,723

Marketable equity security

​

 

979

​

 

0

​

 

0

​

 

979

Servicing rights

​

 

0

​

 

0

​

 

1,277

​

 

1,277

Total recurring fair value measurements

​

$

979

​

$

346,723

​

$

1,277

​

$

348,979

​

​

​

​

​

​

​

​

​

​

​

​

​

Nonrecurring fair value measurements, assets

​

 

  

​

 

  

​

 

  

​

 

  

Impaired loans with a valuation allowance

​

$

0

​

$

0

​

$

3,375

​

$

3,375

Valuation allowance

​

 

0

​

 

0

​

 

(1,051)

​

 

(1,051)

Impaired loans, net

​

 

0

​

 

0

​

 

2,324

​

 

2,324

Foreclosed assets held for sale

​

 

0

​

 

0

​

 

2,886

​

 

2,886

Total nonrecurring fair value measurements, assets

​

$

0

​

$

0

​

$

5,210

​

$

5,210

​

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.

48

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

At September 30, 2020 and December 31, 2019, quantitative information regarding valuation techniques and the significant unobservable inputs used for assets measured on a recurring basis using unobservable inputs (Level 3 methodologies) are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Fair Value at

    

  

    

  

    

​

  

    

  

​

​

9/30/2020

​

Valuation

​

Unobservable

​

​

​

​

Method or Value As of

Asset

​

(In Thousands)

​

Technique

​

Input(s)

​

​

​

​

9/30/2020

Servicing rights

​

$

1,437

 

Discounted cash flow

 

Discount rate

 

​

12.50

%  

Rate used through modeling period

​

​

 

​

 

​

​

Loan prepayment speeds

​

​

354.00

%  

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

    

  

    

  

    

​

  

    

  

​

​

12/31/2019

​

Valuation

​

Unobservable

​

​

​

​

Method or Value As of

Asset

​

(In Thousands)

​

Technique

​

Input(s)

​

​

​

​

12/31/2019

Servicing rights

​

$

1,277

 

Discounted cash flow

 

Discount rate

 

​

12.50

%  

Rate used through modeling period

​

​

 

​

 

​

​

Loan prepayment speeds

​

​

183.00

%  

Weighted-average PSA

​

​

 

​

 

​

​

Servicing fees

​

​

0.25

%  

of loan balances

​

​

 

​

​

​

​

​

​

​

4.00

%  

of payments are late

​

​

​

​

​

​

​

​

​

​

5.00

%  

late fees assessed

​

​

​

​

​

​

​

​

​

$

1.94

 

Miscellaneous fees per account per month

​

​

​

​

​

​

 

Servicing costs

​

$

6.00

​

Monthly servicing cost per account

​

​

​

​

​

​

​

​

​

$

24.00

​

Additional monthly servicing cost per loan on loans more than 30 days delinquent

​

​

​

​

​

​

​

​

​

​

1.50

%  

of loans more than 30 days delinquent

​

​

 

​

​

 

​

​

​

​

3.00

%  

annual increase in servicing costs

​

The fair value of servicing rights is affected by expected future interest rates. Increases (decreases) in future expected interest rates tend to increase (decrease) the fair value of the Corporation’s servicing rights because of changes in expected prepayment behavior by the borrowers on the underlying loans. Unrealized gains (losses) in fair value of servicing rights are included in Loan servicing fees, net, in the unaudited consolidated statements of income.

49

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

Three Months Ended

​

Nine Months Ended

​

    

September 30, 2020

    

September 30, 2019

    

September 30, 2020

    

September 30, 2019

Servicing rights balance, beginning of period

​

$

1,284

​

$

1,322

​

$

1,277

​

$

1,404

Originations of servicing rights

​

 

374

​

 

70

​

 

777

​

 

136

Unrealized losses included in earnings

​

 

(221)

​

 

(164)

​

 

(617)

​

 

(312)

Servicing rights balance, end of period

​

$

1,437

​

$

1,228

​

$

1,437

​

$

1,228

​

Loans are classified as impaired when, based on current information and events, it is probable that the Corporation will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Foreclosed assets held for sale consist of real estate acquired by foreclosure. For impaired commercial loans secured by real estate and foreclosed assets held for sale, estimated fair values are determined primarily using values from third-party appraisals. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property. For commercial and industrial and agricultural loans secured by non-real estate collateral, such as accounts receivable, inventory and equipment, estimated fair values are determined based on the borrower’s financial statements, inventory reports, accounts receivable aging data or equipment appraisals or invoices. Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets.

50

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

At September 30, 2020 and December 31, 2019, quantitative information regarding valuation techniques and the significant unobservable inputs used for nonrecurring fair value measurements using Level 3 methodologies are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands, Except

    

​

​

    

  

​

    

  

​

    

  

    

  

    

Weighted

 

Percentages)

​

​

​

​

Valuation

​

  

​

​

  

​

  

​

Average

 

​

​

Balance at

​

Allowance at

​

Fair Value at

​

Valuation

​

Unobservable

​

Discount at

 

Asset

​

9/30/2020

​

9/30/2020

​

9/30/2020

​

Technique

​

Inputs

​

9/30/2020

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Impaired loans:

 

​

  

 

​

  

 

​

  

 

  

 

  

 

  

​

Residential mortgage loans - first and junior liens

​

$

1,516

​

$

170

​

$

1,346

 

Sales comparison

 

Discount to appraised value

 

31

%

Commercial:

​

 

  

​

 

​

​

 

​

 

  

 

  

 

​

​

Commercial loans secured by real estate

​

 

6,497

​

 

409

​

 

6,088

 

Sales comparison

 

Discount to appraised value

 

38

%

Commercial and industrial

​

 

72

​

 

72

​

 

0

 

Liquidation of assets

 

Discount to appraised value

 

100

%

Total impaired loans

​

$

8,085

​

$

651

​

$

7,434

 

  

 

  

 

  

​

Foreclosed assets held for sale - real estate:

​

 

  

​

 

  

​

 

  

 

  

 

  

 

  

​

Residential (1-4 family)

​

$

104

​

$

0

​

$

104

 

Sales comparison

 

Discount to appraised value

 

47

%

Commercial real estate

​

 

2,265

​

 

0

​

 

2,265

 

Sales comparison

 

Discount to appraised value

 

34

%

Total foreclosed assets held for sale

​

$

2,369

​

$

0

​

$

2,369

 

  

 

  

 

  

​

​

51

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands, Except

    

​

​

    

  

​

    

  

​

    

  

    

  

    

Weighted  

 

Percentages)

​

​

​

Valuation

​

  

​

​

  

​

  

​

Average  

 

​

​

Balance at

​

Allowance at

​

Fair Value at

​

Valuation

​

Unobservable

​

Discount at

 

Asset

​

12/31/2019

​

12/31/2019

​

12/31/2019

​

Technique

​

Inputs

​

12/31/2019

 

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Impaired loans:

 

​

  

 

​

  

 

​

  

 

  

 

  

 

  

​

Residential mortgage loans - first and junior liens

​

$

732

​

$

176

​

$

556

 

Sales comparison

 

Discount to appraised value

 

30

%

Commercial:

​

 

  

​

 

  

​

 

  

 

  

 

  

 

  

​

Commercial and industrial

​

 

106

​

 

89

​

 

17

 

Sales comparison

 

Discount to appraised value

 

69

%

Commercial and industrial

​

 

798

​

 

60

​

 

738

 

Liquidation of accounts receivable

 

Discount to borrower's financial statement value

 

15

%

Commercial construction and land

​

 

1,261

​

 

678

​

 

583

 

Sales comparison

 

Discount to appraised value

 

47

%

Loans secured by farmland

​

 

478

​

 

48

​

 

430

 

Sales comparison

 

Discount to appraised value

 

46

%

Total impaired loans

​

$

3,375

​

$

1,051

​

$

2,324

 

  

 

  

 

  

​

Foreclosed assets held for sale - real estate:

​

 

  

​

 

  

​

 

  

 

  

 

  

 

  

​

Residential (1-4 family)

​

$

292

​

$

0

​

$

292

 

Sales comparison

 

Discount to appraised value

 

46

%

Land

​

 

70

​

 

0

​

 

70

 

Sales comparison

 

Discount to appraised value

 

53

%

Commercial real estate

​

 

2,524

​

 

0

​

 

2,524

 

Sales comparison

 

Discount to appraised value

 

39

%

Total foreclosed assets held for sale

​

$

2,886

​

$

0

​

$

2,886

 

  

 

  

 

  

​

​

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.

52

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

Fair Value

​

September 30, 2020

​

December 31, 2019

​

​

Hierarchy

​

Carrying

​

Fair

​

Carrying

​

Fair

​

    

Level

    

Amount

    

Value

    

Amount

    

Value

Financial assets:

 

  

 

​

  

 

​

  

 

​

  

 

​

  

Cash and cash equivalents

 

Level 1

​

$

168,148

​

$

168,148

​

$

31,122

​

$

31,122

Certificates of deposit

 

Level 2

​

 

6,330

​

 

6,567

​

 

4,080

​

 

4,227

Restricted equity securities (included in Other Assets)

 

Level 2

​

 

12,179

​

 

12,179

​

 

10,321

​

 

10,321

Loans, net

 

Level 3

​

 

1,680,617

​

 

1,686,087

​

 

1,172,386

​

 

1,181,000

Accrued interest receivable

 

Level 2

​

 

8,296

​

 

8,296

​

 

5,001

​

 

5,001

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Financial liabilities:

 

  

​

 

  

​

 

  

​

 

  

​

 

  

Deposits with no stated maturity

 

Level 2

​

 

1,440,602

​

 

1,440,602

​

 

877,965

​

 

877,965

Time deposits

 

Level 2

​

 

430,912

​

 

434,978

​

 

374,695

​

 

376,738

Short-term borrowings

 

Level 2

​

 

40,870

​

 

40,902

​

 

86,220

​

 

86,166

Long-term borrowings

 

Level 2

​

 

102,787

​

 

105,336

​

 

52,127

​

 

52,040

Subordinated debt

​

Level 2

​

​

16,572

​

​

16,680

​

​

6,500

​

​

6,499

Accrued interest payable

 

Level 2

​

 

563

​

 

563

​

 

311

​

 

311

​

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

​

​

​

53

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

●the effect of the novel coronavirus (COVID-19) and related events
●changes in monetary and fiscal policies of the Federal Reserve Board and the U. S. Government, particularly related to changes in interest rates
●changes in general economic conditions
●legislative or regulatory changes
●downturn in demand for loan, deposit and other financial services in the Corporation’s market area
●increased competition from other banks and non-bank providers of financial services
●technological changes and increased technology-related costs
●changes in accounting principles, or the application of generally accepted accounting principles
●failure to achieve merger-related synergies and difficulties in integrating the business and operations of acquired institutions.

​

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

CORONAVIRUS (COVID-19) OUTBREAK

The Corporation’s Pandemic Committee has been very active since March 2020, providing frequent communication with employees and clients by telephone, video conference, email and digital tools, while substantially limiting business travel. Since the pandemic began, the Committee instituted measures to protect the health of employees and clients, including temporarily operating branch locations on a drive-through only basis and transitioning a significant portion of the Corporation’s employees to remote work. Currently all branches are open for walk-in traffic though some branches are running on reduced hours. Many employees who were working from home have returned to the offices where social distancing allows. No furloughs or layoffs of employees have been made to date.

Emergency restrictions on the activities of businesses and individuals have resulted in significant adverse economic effects and a significant number of layoffs and furloughs of employees nationwide and in the regions in which the Corporation operates. The ultimate effect of COVID-19 on the local or broader economy is not known nor is the ultimate length of the restrictions described and any accompanying effects. In the first nine months of 2020, the Corporation increased the allowance for loan losses $725,000 based on an increase in qualitative factors related to potential deterioration in economic conditions. Because of the significant uncertainties related to the ultimate duration of the COVID-19 pandemic and its economic impact, the total impact on the Corporation’s loan portfolio is not determinable.

54

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Section 4013 of 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.

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.

55

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

To work with clients impacted by COVID-19, the Corporation is offering 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 Financial Inc. (“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 current crisis and help the Corporation mitigate credit risk. For loans subject to the program, each borrower is required to resume making regularly scheduled loan payments at the end of the modification period and the deferred amounts will be moved to the end of the loan term. Consistent with Section 4013 of the CARES Act and guidance from the joint interagency statement described in the preceding paragraphs, the modified loans have not been reported as past due, nonaccrual or as TDRs at September 30, 2020. Most of the modifications under the program became effective in March or the second quarter 2020 and provided a deferral of interest or principal and interest for 90-to-180 days. Accordingly, most of the loans for which deferrals were granted returned to full payment status prior to September 30, 2020. At September 30, 2020, there were 44 loans in deferral status with a total recorded investment of $41,639,000, including 28 commercial loans with a total recorded investment of $39,912,000. A breakdown of these commercial loans by industry is as follows:

​

​

​

​

​

​

​

​

Deferrals Remaining

​

​

As of September 30, 2020

(Dollars in Thousands)

​

Number

​

​

​

​

of

​

Recorded

Commercial Loans Modified - Summary

​

Loans

​

Investment

Accommodation and food services - hotels

 

6

​

$

25,090

Lessors of nonresidential buildings (except miniwarehouses)

    

5

    

​

8,235

Health care and social assistance

 

3

​

 

3,224

Real estate rental and leasing - other

 

3

​

 

1,052

Transportation and warehousing

 

3

​

 

927

Lessors of residential buildings & dwellings

 

3

​

 

456

Accommodation and food services - other

 

2

​

 

554

Agriculture, forestry, fishing and hunting

 

3

​

 

374

​

 

28

​

$

39,912

​

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.

The maximum term of PPP loans is five years, though most of the Corporation’s PPP loans have two-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, will be recognized in interest income as a yield adjustment over the term of the loans.

As of September 30, 2020, the recorded investment in PPP loans was $163,050,000, including contractual principal balances of $166,690,000, increased by a market rate adjustment on PPP loans acquired from Covenant of $762,000 and reduced by net deferred origination fees of $4,402,000. Net deferred origination fees and the market rate adjustment on PPP loans are recognized in interest income as a yield adjustment (net accretion over the term of the loans). Net accretion on PPP loans of $467,000 in the third quarter 2020 and $804,000 in the nine-month period ended September 30, 2020 was included in interest and fees on (taxable) loans in the consolidated statements of income.

56

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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 September 30, 2020 of 9.74% is significantly higher than the well-capitalized threshold of 5%, an excess capital amount of $108.5 million. Similarly, the total capital to risk-weighted assets ratio at September 30, 2020 is 15.65%, which exceeds the well-capitalized threshold of 10%, an excess capital amount of $84.4 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”).

ACQUISITIONS OF COVENANT FINANCIAL, INC. AND MONUMENT BANCORP, INC.

The Corporation’s acquisition of Covenant was completed 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. 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. Holders of Covenant common stock prior to the consummation of the merger held approximately 12.9% of the Corporation’s common stock outstanding immediately following the merger.

In connection with the 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 $464.8 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 and may be adjusted for up to one year subsequent to the acquisition.

The acquisition of Covenant follows the acquisition of Monument Bancorp, Inc. (“Monument”) on April 1, 2019. Monument was the parent company of Monument Bank, with two community banking offices and a lending office in Bucks County, Pennsylvania. Monument merged with and into the Corporation and Monument Bank merged with and into C&N Bank. The total transaction value of the Monument acquisition was $42.7 million.

In the first nine months of 2020, the Corporation incurred pre-tax merger-related expenses related to the Covenant transaction of $7.5 million, including expenses totaling $6.4 million in the third quarter 2020. Merger-related expenses include severance and similar expenses as well as expenses related to conversion of Covenant’s core customer system data into the Corporation’s core system and legal and other professional expenses. Management expects additional merger-related expenses associated with the Covenant acquisition will be insignificant.

Merger-related expenses associated with the Monument transaction totaled $3.8 million in the first nine months of 2019, including $0.2 million in the third quarter 2019.

57

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

EARNINGS OVERVIEW

Net income was $0.18 per diluted share in the third quarter 2020, as compared to $0.39 per share in the second quarter 2020 and $0.39 in the third quarter 2019. For the nine months ended September 30, 2020, net income per diluted share was $0.86 as compared to $1.06 per share for the first nine months of 2019.

Earnings for the third quarter and nine months ended September 30, 2020 were significantly impacted by the Covenant acquisition, including the effects of merger-related expenses described earlier. Further, interest income on loans acquired from Covenant, partially offset by interest expense on deposits, borrowings and subordinated debt assumed, contributed to growth in the Corporation’s net interest income, while costs associated with the expansion contributed to an increase in noninterest expenses. Results for the third quarter and nine months ended September 30, 2019 were significantly impacted by merger-related expenses and other effects of the Monument acquisition.

As described below, excluding merger-related expenses and net realized gains on securities, adjusted (non-U.S. GAAP) earnings of $0.50 per share for the third quarter 2020 were higher than the comparative $0.40 per share for the third quarter 2019, and adjusted (non-U.S. GAAP) earnings were $1.27 per share for the first nine months of 2020 as compared to $1.31 per share for the first nine months of 2019.

The following table provides a reconciliation of the Corporation’s third quarter and September 30, 2020 year-to-date unaudited earnings results under U.S. generally accepted accounting principles (U.S. GAAP) to comparative non-U.S. GAAP results excluding merger-related expenses and realized gains and losses on securities. Management believes disclosure of unaudited third quarter and nine-months ended September 30, 2020 and 2019 earnings results, adjusted to exclude the impact of these items, provides useful information for comparative purposes.

RECONCILIATION OF NET INCOME AND DILUTED EARNINGS PER SHARE TO NON-U.S. GAAP MEASURE

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

3rd Quarter 2020

​

3nd Quarter 2019

​

​

Income

​

​

​

​

​

Diluted

​

​

​

​

​

​

​

​

​

​

Diluted

(Dollars In Thousands,

​

Before

​

Income

​

​

​

Earnings

​

Income

​

Earnings

​

​

​

​

Earnings

Except Per Share Data)

​

Income

​

Tax

​

​

​

Per

​

Before

​

per

​

​

​

​

Per

(Unaudited)

​

Tax

​

Provision

​

Net

​

Common

​

Tax

​

Provision

​

Net

​

Common

​

​

Provision

​

(1)

​

Income

​

Share

​

Provision

​

(1)

​

Income

​

Share

Results as Presented Under U.S. GAAP

​

$

3,286

​

$

438

​

$

2,848

​

$

0.18

​

$

6,403

​

$

1,096

​

$

5,307

​

$

0.39

Add: Merger-Related Expenses

​

 

6,402

​

 

1,307

​

 

5,095

​

 

​

​

 

206

​

 

59

​

 

147

​

 

  

Net Gains on Available-for-Sale Debt Securities

​

 

(25)

​

 

(5)

​

 

(20)

​

 

​

​

 

(13)

​

 

(3)

​

 

(10)

​

 

  

Adjusted Earnings, Excluding Effect of Merger-Related Expenses and Net Gains on Available-for Sale Debt Securities (Non-U.S. GAAP)

​

$

9,663

​

$

1,740

​

$

7,923

​

$

0.50

​

$

6,596

​

$

1,152

​

$

5,444

​

$

0.40

​

58

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

Nine Months Ended September 30, 2020

    

Nine Months Ended September 30, 2019

​

​

Income

​

​

​

​

​

Diluted

​

​

​

​

​

​

​

​

​

​

Diluted

​

​

Before

​

Income

​

​

​

Earnings

​

Income

​

Earnings

​

​

​

​

Earnings

​

​

Income

​

Tax

​

​

​

Per

​

Before

​

per

​

​

​

​

Per

​

​

Tax

​

Provision

​

Net

​

Common

​

Tax

​

Provision

​

Net

​

Common

​

​

Provision

​

(1)

​

Income

​

Share

​

Provision

​

(1)

​

Income

​

Share

Results as Presented Under U.S. GAAP

​

$

14,961

​

$

2,509

​

$

12,452

​

$

0.86

​

$

16,816

​

$

2,770

​

$

14,046

​

$

1.06

Add: Merger-Related Expenses

​

 

7,526

​

 

1,536

​

 

5,990

​

 

​

​

 

3,818

​

 

798

​

 

3,020

​

 

  

Net Gains on Available-for-Sale Debt Securities

​

 

(25)

​

 

(5)

​

 

(20)

​

 

​

​

 

(20)

​

 

(4)

​

 

(16)

​

 

  

Adjusted Earnings, Excluding Effect of Merger-Related Expenses and Net Gains on Available-for Sale Debt Securities (Non-U.S. GAAP)

​

$

22,462

​

$

4,040

​

$

18,422

​

$

1.27

​

$

20,614

​

$

3,564

​

$

17,050

​

$

1.31

​

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

Additional highlights related to the Corporation’s third quarter and September 30, 2020 year-to-date unaudited earnings results as compared to the corresponding periods of 2019 are presented below.

Third Quarter 2020 as Compared to Third Quarter 2019

Third quarter 2020 net income was $2,848,000, and excluding the impact of merger-related expenses and net securities gains, adjusted (non-U.S. GAAP) earnings were $7,923,000. In comparison, third quarter 2019 net income was $5,307,000, and excluding merger-related expenses and net securities gains, adjusted (non-U.S. GAAP) earnings were $5,444,000. Other significant variances were as follows:

●Third quarter 2020 net interest income of $19,282,000 was $5,005,000 higher than the third quarter 2019 total, reflecting the impact of growth mainly attributable to the Covenant acquisition. The net interest margin of 3.57% in the third quarter 2020 was down from 3.81% in the third quarter 2019, as the net interest rate spread decreased 0.09% and average interest-bearing liabilities grew 48% as compared to growth in average earning assets of 44%. Accretion and amortization of purchase accounting valuation adjustments had a net positive impact on net interest income of $1,298,000 in the third quarter 2020 as compared to a net positive impact of $195,000 in the third quarter 2019. Net interest income for the third quarter 2020 also included accelerated accretion of $264,000 from a security that was redeemed prior to maturity. In addition to the impact of the Covenant acquisition and other factors, the significant drop in interest rates in 2020 contributed to changes in components of the net interest margin.
●The provision for loan losses was $1,941,000 in the third quarter 2020 as compared to $1,158,000 in the third quarter 2019. The provision for loan losses in the third quarter 2020 included the net impact of a charge-off of $2,219,000 on a commercial loan of $3,500,000 for which the previously-established allowance had been $1,193,000. In total, the third quarter 2020 provision included: a net charge of $909,000 related to specific loans (net charge-offs of $2,214,000 partially offset by a decrease in specific allowances on loans of $1,305,000); a charge of $834,000 from an increase in the net charge-off experience factors used to estimate the allowance; a charge of $119,000 from the impact of loan growth, excluding loans purchased from Covenant and PPP loans; and a charge of $79,000 attributable to increases in qualitative factors. There was no provision for loan losses recorded on PPP loans because the SBA guarantees the loans, subject to compliance with program requirements.

59

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

●Total noninterest income for the third quarter 2020 was up $2,007,000 from the third quarter 2019 total. Significant variances included the following:
oNet gains from sales of loans of $2,052,000 for the third quarter 2020 were up $1,742,000 from the total for the third quarter 2019. The increase reflects an increase in volume of mortgage loans sold, due mainly to the impact of historically low interest rates on the housing market and refinancing activity.
oOther noninterest income totaled $903,000, an increase of $433,000 from the third quarter 2019. In the third quarter 2020, income from a life insurance arrangement in which benefits were split between the Corporation and heirs of a former employee was $279,000. Credit card interchange income increased $31,000 and dividend income from Federal Home Loan Bank stock was up $30,000.
oTrust and financial management revenues of $1,595,000 were up $116,000 from the third quarter 2019, reflecting an increase in fees from services provided to estates.
oInterchange revenue from debit card transactions totaled $828,000 in the third quarter 2020, an increase of $106,000 over the third quarter 2019 total.
oService charges on deposit accounts of $1,045,000 in the third quarter 2020 were down $391,000 from the third quarter 2019 amount, as the volume of consumer and business overdraft activity fell.
●Noninterest expense, excluding merger-related expenses, increased $3,162,000 in the third quarter 2020 over the third quarter 2019 amount. Significant variances included the following:
oSalaries and wages of $6,833,000 increased $1,353,000 from the third quarter 2019, primarily reflecting an increase in personnel due to the Covenant acquisition.
oData processing expenses increased $449,000 including the impact of increases in software licensing and maintenance costs associated with core banking, lending, trust and other functions as well as costs associated with running two concurrent core systems for a portion of the third quarter 2020.
oPensions and other employee benefits expense increased $421,000, reflecting the increase in personnel from the Covenant acquisition and an increase in health care expense from the Corporation’s partially self-insured plan.
oOther noninterest expense increased $386,000. Other operational losses increased $178,000, including an estimated accrual of $200,000 related to a state tax reporting matter. Also within this category, amortization of core deposit intangibles increased $134,000 related to the Covenant acquisition.
oProfessional fees expense increased $180,000, including costs associated with increased use of outsourced services to support a range of activities, most significantly in certain trust administrative activities.
oOccupancy expense increased $152,000, primarily reflecting an increase due to the Covenant acquisition.
oPennsylvania shares tax expense increased $81,000, reflecting the impact of an increase in C&N Bank’s stockholder’s equity.
●The income tax provision of $438,000 for the third quarter 2020 was down from $1,096,000 for the third quarter 2019. Pre-tax income was $3,117,000 lower in the third quarter 2020 as compared to the third quarter 2019. The effective tax rate of 13.3% for the third quarter 2020 was down from 17.1% for the third quarter 2019 in part due to a higher proportion of revenue from tax-exempt sources.

60

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Nine Months Ended September 30, 2020 as Compared to Nine Months Ended September 30, 2019

Net income for the nine-month period ended September 30, 2020 was $12,452,000, or $0.86 per diluted share, while net income for the first nine months of 2019 was $14,046,000, or $1.06 per share. Excluding the impact of merger-related expenses and net securities gains, adjusted (non-U.S. GAAP) earnings for the first nine months of 2020 would be $18,422,000 or $1.27 per share as compared to similarly adjusted earnings of $17,050,000 or $1.31 per share for the first nine months of 2019. Other significant variances were as follows:

●Net interest income was up $7,613,000 (18.9%) for the first nine months of 2020 over the same period in 2019. The increase in net interest income resulted mainly from the benefit of growth from the Covenant and Monument acquisitions. The net interest margin was 3.67% for the nine months ended September 30, 2020, down from 3.90% for the first nine months of 2019. The average yield on PPP loans was 2.38%, comparatively lower than the average yields on other taxable loans in 2020 and 2019, contributing to the margin compression. Accretion and amortization of purchase accounting valuation adjustments had a net positive impact on net interest income of $1,999,000 in the first nine months of 2020 as compared to a net positive impact of $408,000 in the first nine months of 2019. In addition to the impact of the Covenant acquisition and PPP, the significant drop in interest rates in 2020 contributed to changes in components of the net interest margin.
●For the first nine months of 2020, the provision for loan losses was $3,293,000, an increase in expense of $3,096,000 as compared to $197,000 recorded in the first nine months of 2019. The provision included the net impact of a charge off of $2,219,000 on a commercial loan of $3,500,000 for which the previously-established allowance had been $1,193,000. In total, the provision for the first nine months of 2020 included a net charge of $1,976,000 related to specific loans (net decrease in specific allowances on loans of $400,000 and net charge-offs of $2,376,000); a charge of $745,000 from an increase in the net charge-off experience factors used to estimate the allowance; a charge of $725,000 attributable to increases in qualitative factors; and a credit of $153,000 from the impact of a reduction in outstanding loans, excluding PPP and recently purchased loans. The comparative provision for loan losses in the first nine months of 2019 included a benefit from eliminating specific allowances on commercial loans that were no longer considered impaired and a net credit of $347,000 related to changes in net charge-off experience factors used to calculate the allowance.
●Total noninterest income, excluding realized securities gains, for the first nine months of 2020 was up $3,561,000 from the total for the first nine months of 2019. Significant variances included the following:
oNet gains from sales of loans totaled $3,931,000 in the first nine months of 2020, an increase of $3,313,000 over the total for the first nine months of 2019. As noted above, the increase reflects an increase in volume of mortgage loans sold, resulting mainly from lower interest rates.
oOther noninterest income totaled $2,321,000, an increase of $884,000 over 2019. Income from realization of tax credits was $349,000 higher in the first nine months of 2020 as compared to 2019. In 2020, income from a life insurance arrangement in which benefits were split between C&N and heirs of a former employee was $279,000. Dividend income from Federal Home Loan Bank stock was up $130,000, reflecting a higher average balance of stock held due to increased borrowings and credit card interchange income increased $50,000.
oTrust and financial management revenue of $4,639,000 was $217,000 (4.9%) higher in the first nine months of 2020 as compared to 2019, reflecting the impact of fees from new business growth in 2019.
oInterchange revenue from debit card transactions totaled $2,277,000 for the first nine months of 2020, an increase of $213,000, reflecting an increase in transaction volumes.

61

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

oService charges on deposit accounts of $3,126,000 in the first nine months of 2020 were down $837,000 (21.1%) from the total for the first nine months of 2019, as the volume of consumer and business overdraft activity fell.
oNet revenue from loan servicing fees decreased $268,000, as net fees were negative $259,000 (a decrease in revenue) in the first nine months of 2020 as compared to net revenue of $9,000 in the first nine months of 2019. The fair value of mortgage servicing rights decreased $617,000 in the first nine months of 2020, as compared to a decrease of $312,000 in the first nine months of 2019.
●Noninterest expense, excluding merger-related expenses, increased $6,230,000 for the nine months ended September 30, 2020 over the total for the first nine months of 2019. Significant variances included the following:
oTotal salaries and wages and benefits expenses increased $3,523,000, reflecting: inclusion of Covenant for three months in 2020 and the former Monument operations for nine months in 2020 as compared to six months in 2019; annual merit-based salary adjustments; an increase in overtime pay related mainly to mortgage lending activity; a reduction in expense due to a higher proportion of payroll costs capitalized (added to the carrying value of loans) due to the high volume of PPP loans originated; and an increase in health care expense due to higher claims on the Corporation’s partially self-insured plan.
oData processing expenses increased $742,000, including the impact of increases in software licensing and maintenance costs associated with core banking, lending, trust and other functions as well as professional fees associated with analysis of the Corporation’s online delivery channel.
oOther noninterest expense increased $640,000. Within this category, significant variances included the following:
●Other operational losses increased $534,000, including an estimated accrual of $300,000 for penalties related to certain information returns in the second quarter 2020 and an estimated accrual of $200,000 related to a state tax reporting matter in the third quarter 2020.
●Donations expense increased $434,000, mainly due to an increase in donations associated with the Pennsylvania Educational Improvement Tax Credit program.
●Expenses related to other real estate properties decreased $285,000. The reduction resulted from the completion in the first quarter 2020 of a complex commercial workout situation for which a significant amount of expenses were incurred in 2019. Also, net losses from sales or write-downs of other real estate properties totaled $30,000 for the first nine months of 2020, down from $128,000 for the first nine months of 2019.
oProfessional fees expense increased $470,000, including costs associated with a change in certain trust administrative activities to handle them on an outsourced basis.
oOccupancy expense increased $239,000, primarily reflecting an increase due to the Covenant acquisition.
oPennsylvania shares tax expense increased $232,000, reflecting the impact of an increase in Citizens & Northern Bank’s stockholder’s equity.

62

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

●The income tax provision was $2,509,000 for the nine months ended September 30, 2020, down from $2,770,000 for the first nine months of 2019. Pre-tax income was $1,855,000 lower in the first nine months of 2020 as compared to 2019. The effective tax rate was 16.8% for the first nine months of 2020, slightly higher than the 16.5% effective tax rate for the first nine months of 2019.

More detailed information concerning fluctuations in the Corporation’s earnings results and other financial information are provided in other sections of MD&A.

TABLE I – QUARTERLY FINANCIAL DATA

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended :

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars In Thousands, Except Per Share Data)

​

September 30, 

​

June 30,

​

March 31,

​

December 31,

​

September 30,

​

June 30, 

​

March 31, 

(Unaudited)

    

2020

    

2020

    

2020

    

2019

​

2019

    

2019

    

2019

Interest income

​

$

21,751

​

$

16,513

​

$

17,037

​

$

17,290

​

$

17,277

​

$

17,139

​

$

13,065

Interest expense

​

 

2,469

​

 

2,267

​

 

2,755

​

 

2,999

​

 

3,000

​

 

2,934

​

 

1,350

Net interest income

​

 

19,282

​

 

14,246

​

 

14,282

​

 

14,291

​

 

14,277

​

 

14,205

​

 

11,715

Provision (credit) for loan losses

​

 

1,941

​

 

(176)

​

 

1,528

​

 

652

​

 

1,158

​

 

(4)

​

 

(957)

Net interest income after provision (credit) for loan losses

​

 

17,341

​

 

14,422

​

 

12,754

​

 

13,639

​

 

13,119

​

 

14,209

​

 

12,672

Noninterest income

​

 

6,970

​

 

5,528

​

 

5,281

​

 

5,066

​

 

4,963

​

 

4,849

​

 

4,406

Net gains on securities

​

 

25

​

 

0

​

 

0

​

 

3

​

 

13

​

 

7

​

 

0

Merger-related expenses

​

 

6,402

​

 

983

​

 

141

​

 

281

​

 

206

​

 

3,301

​

 

311

Other noninterest expenses

​

 

14,648

​

 

12,274

​

 

12,912

​

 

11,834

​

 

11,486

​

 

11,422

​

 

10,696

Income before income tax provision

​

 

3,286

​

 

6,693

​

 

4,982

​

 

6,593

​

 

6,403

​

 

4,342

​

 

6,071

Income tax provision

​

 

438

​

 

1,255

​

 

816

​

 

1,135

​

 

1,096

​

 

693

​

 

981

Net income

​

$

2,848

​

$

5,438

​

$

4,166

​

$

5,458

​

$

5,307

​

$

3,649

​

$

5,090

Net income attributable to common shares

​

$

2,830

​

$

5,405

​

$

4,146

​

$

5,431

​

$

5,281

​

$

3,630

​

$

5,063

Basic earnings per common share

​

$

0.18

​

$

0.39

​

$

0.30

​

$

0.40

​

$

0.39

​

$

0.27

​

$

0.41

Diluted earnings per common share

​

$

0.18

​

$

0.39

​

$

0.30

​

$

0.40

​

$

0.39

​

$

0.27

​

$

0.41

​

CRITICAL ACCOUNTING POLICIES

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

A material estimate that is particularly susceptible to significant change is the determination of the allowance for loan losses. Management believes the allowance for loan losses is adequate and reasonable. Analytical information related to the Corporation’s aggregate loans and the related allowance for loan losses is summarized by loan segment and classes of loans in Note 7 to the unaudited consolidated financial statements. Additional discussion of the Corporation’s allowance for loan losses is provided in a separate section later in MD&A. 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.

The fair values of assets acquired and liabilities assumed in business combinations are based on material estimates. Discussion regarding the acquisition date preliminary estimated fair values related to the Covenant transaction is provided in Note 2 to the unaudited consolidated financial statements.

Goodwill is tested at least annually at December 31 for impairment, or more often if events or circumstances indicate there may be impairment. In 2020, the COVID 19 pandemic led to government-imposed emergency restrictions that

63

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

have had significant adverse effects on macroeconomic conditions. Bank stock valuations have generally fallen in 2020, reflecting market concerns about potential credit losses and the effects of a substantial drop in interest rates. Consistent with that trend, the closing price (last trade) of the Corporation’s common stock on September 30, 2020 of $16.24 per share was lower than the book value of the Corporation’s common stock at September 30, 2020 of $18.65 per share. In light of the decline in the Corporation’s stock price triggered by the adverse circumstances resulting from COVID-19, management determined it necessary to evaluate goodwill for impairment at September 30, 2020.

In evaluating goodwill for impairment, the Corporation performed a quantitative assessment of the fair value of its reporting unit, its community banking operation. The selection and weighting of valuation techniques were key assumptions utilized in the evaluation. Further, in applying the income valuation approach, key assumptions included: estimated earnings for each of the next 5 years, which reflected the effects of assumptions related to deposit and loan growth, loan losses, changes in noninterest revenues and expenses and other cash flows; reduction in operating expenses to be realized by an acquirer (integration synergies) of 20%; the level of post-acquisition capital the acquirer would be required to maintain, of 9% of tangible assets; the discount rates applied to projected cash flows, which ranged from 12% to 14% with a midpoint of 13% used in determining the midpoint valuation; and the capitalization rates applied to terminal cash flows, which ranged from 9% to 11% with a midpoint of 10% used in determining the midpoint valuation.

Based on the results of its impairment analysis, the Corporation determined that the fair value of its only reporting unit, its community banking operation, exceeded its book value, and there was no goodwill impairment as of September 30, 2020. All of the key assumptions identified above are significant and subjective, and changes in those assumptions would result in a different calculation of estimated fair value of the reporting unit. Additional information regarding the goodwill impairment test is provided in Note 8 to the unaudited consolidated financial statements.

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.

NET INTEREST INCOME

The Corporation’s primary source of operating income is net interest income, which is equal to the difference between the amounts of interest income and interest expense. Tables II, III and IV include information regarding the Corporation’s net interest income for the three-month and nine-month periods ended September 30, 2020 and 2019. In each of these tables, the amounts of interest income earned on tax-exempt securities and loans have been adjusted to a fully taxable-equivalent basis. Accordingly, the net interest income amounts reflected in these tables exceed the amounts presented in the consolidated financial statements. The discussion that follows is based on amounts in the related Tables.

Three-Month Periods Ended September 30, 2020 and 2019

For the three-month periods, fully taxable equivalent net interest income was $19,535,000 in 2020, which was $5,011,000 (34.5%) higher than in 2019. Interest income was $4,480,000 higher in 2020 as compared to 2019, while interest expense was lower by $531,000 in comparing the same periods. The increase in net interest income reflects the impact of growth mainly attributable to the Covenant acquisition. Table IV shows the net effect of changes in volume was an increase in net interest income of $5,202,000, while changes in interest rates had a negative impact of $191,000. As presented in Table III, the Net Interest Margin was 3.57% in 2020 as compared to 3.81% in 2019, and the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) decreased to 3.40% in 2020 from 3.49% in 2019. The average yield on earning assets of 4.02% was 0.58% lower in 2020 as compared to 2019, while the average rate on interest-bearing liabilities decreased 0.49% between periods.

64

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Accretion and amortization of purchase accounting-related adjustments from marking financial instruments to fair value had a positive effect on net interest income in the third quarter 2020 of $1,298,000, including an increase in income on loans of $525,000 and net reductions in interest expense on time deposits and borrowed funds totaling $773,000. The net positive impact to the third quarter 2020 net interest margin from accretion and amortization of purchase accounting adjustments was 0.24%. In comparison, the net positive impact to the third quarter 2019 net interest margin from purchase accounting adjustments was $195,000, or 0.05%.

INTEREST INCOME AND EARNING ASSETS

Interest income totaled $22,004,000 in 2020, an increase of $4,480,000 (25.6%) from 2019. Interest and fees from loans receivable increased $4,686,000, or 31.2%, in 2020 as compared to 2019. Table IV shows the increase in interest on loans includes $6,099,000 related to an increase in average volume, offset by a decrease of $1,413,000 attributable to a decrease in average rate.

Average outstanding loans increased $575.3 million, including an increase in average loans from the former Covenant operations of $471.7 million, of which the average balance of PPP loans was $64.0 million. Excluding Covenant, the Corporation’s average loans outstanding increased $103.6 million, including an increase in average PPP loans of $98.2 million and a net increase in other loans outstanding of $5.4 million. The net increase in average loans outstanding from sources other than Covenant included the impact of growth in commercial real estate secured and other commercial loans, partially offset by reductions in advances outstanding on commercial lines of credit and residential mortgage loans. The reduction in average outstanding residential mortgage loans resulted from a greater proportion of residential mortgage loans originated being sold on the secondary market.

The average yield on loans in the third quarter 2020 was 4.60%, down from 5.28% in the third quarter 2019, as rates on variable rate loans and rates on recent new loan originations have decreased due to decreases in market interest rates. Further, yields on loans acquired from Covenant reflect market yields at the acquisition date (July 1, 2020), which were lower than the Corporation’s average portfolio yield before the transaction. The average yield on loans in the third quarter 2020 was also affected by the comparatively low average yield on PPP loans with a total average balance of $162.2 million and a yield of 2.18%.

Interest income from available-for-sale debt securities decreased $135,000 (5.8%) in 2020 from 2019. Total average available-for-sale debt securities (at amortized cost) in 2020 decreased to $321,541,000 from $354,586,000 in 2019. The average balance of tax-exempt securities increased $24.6 million, while the average balance of mortgage-backed securities and other taxable securities decreased $57.6 million. The average yield on available-for-sale debt securities was 2.70% for 2020, up from 2.59% in 2019, including the impact of accelerated accretion of $264,000 from a security that was redeemed prior to maturity.

For the three-month period, income from interest-bearing due from banks totaled $69,000 in 2020, a decrease of $90,000 (56.6%) from $159,000 in 2019. The average balance increased $121,004,000, due in part to cash received in the Covenant acquisition, and the average yield on interest-bearing due from banks dropped to 0.19% in 2020 from 2.38% in 2019, consistent with the decrease in market rates.

INTEREST EXPENSE AND INTEREST-BEARING LIABILITIES

For the three-month periods, interest expense decreased $531,000 to $2,469,000 in 2020 from $3,000,000 in 2019. Interest expense on deposits decreased $674,000, as the average rate on interest-bearing deposits decreased to 0.50% in 2020 from 0.99% in 2019. The decrease in average rates on deposits includes decreases of 0.86% on time deposits, 0.34% on interest checking accounts, 0.14% on money market accounts and 0.04% on saving accounts.

Average total deposits increased $594.8 million, including a net increase from the former Covenant operations of $465.6 million. Excluding Covenant, average deposits increased $129.2 million, including a significant increase in average

65

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

balances held by municipal customers as well as increases in deposits related to PPP and other government stimulus programs.

Interest expense on total borrowed funds increased $143,000 in 2020 as compared to 2019. The average balance of total borrowed funds increased to $164,057,000 in the third quarter 2020 from $81,774,000 in the third quarter 2019, while the average rate on borrowed funds decreased to 1.65% in the third quarter 2020 from 2.62% in the third quarter 2019. The increase in borrowed funds includes the impact of borrowings assumed from Covenant which were recorded at fair values totaling $74,066,000 on July 1, 2020.

Interest expense on short-term borrowings decreased $73,000 to $73,000 in 2020 from $146,000 in 2019. The average balance of short-term borrowings increased to $44,660,000 in 2020 from $25,823,000 in 2019. The average rate on short-term borrowings decreased to 0.65% in 2020 from 2.24% in 2019, reflecting the impact of lower short-term market rates in 2020.

Interest expense on long-term borrowings (FHLB advances) increased $85,000 to $362,000 in 2020 from $277,000 in 2019. The average balance of long-term borrowings was $102,857,000 in 2020, up from an average balance of $48,953,000 in 2019. 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 1.40% in 2020 compared to 2.24% in the third quarter of 2019.

Interest expense on subordinated debt increased $131,000 to $247,000 in 2020 from $116,000 in 2019. The average balance of subordinated debt increased to $16,540,000 in 2020 from $6,998,000 in 2019 as a result of subordinated debt agreements assumed in the Covenant transaction. The average rate incurred on subordinated debt was 5.94% in 2020, down from 6.58% in 2019.

Nine-Month Periods Ended September 30, 2020 and 2019

For the nine-month periods, fully taxable equivalent net interest income was $48,524,000 in 2020, $7,515,000 (18.3%) higher than in 2019. Interest income was $7,722,000 higher in 2020 as compared to 2019, while interest expense was higher by $207,000 in comparing the same periods. As presented in Table III, the Net Interest Margin was 3.67% in 2020 as compared to 3.90% in 2019, and the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) was 3.44% in 2020, down from 3.61% in 2019. The overall increase in net interest income, despite margin compression, resulted mainly from growth attributable to the acquisitions of Monument in the second quarter 2019 and Covenant in the third quarter 2020.

Accretion and amortization of purchase accounting adjustments related to the Covenant and Monument acquisitions had a positive effect on net interest income in the nine months ended September 30, 2020 of $1,999,000, including an increase in income on loans of $1,288,000 and net reductions in interest expense on time deposits and borrowed funds totaling $711,000. The net positive impact to the net interest margin from purchase accounting adjustments was 0.15% in the first nine months of 2020 and $408,000, or 0.04% in 2019.

INTEREST INCOME AND EARNING ASSETS

Interest income totaled $56,015,000 in 2020, an increase of $7,722,000 (16.0%) from 2019. Interest and fees on loans receivable increased $8,988,000, or 22.2%, to $49,438,000 in 2020 from $40,450,000 in 2019. Table IV shows the increase in interest on loans includes an increase of $11,816,000 attributable to changes in volume and a decrease of $2,828,000 related to changes in average rates.

For the first nine months of 2020, average outstanding loans totaled $1.370 billion, an increase of $348.8 million (34.2%) over the comparative amount for the first nine months of 2019. The nine-month average amount of loans outstanding attributable to the former Covenant operations totaled $158.7 million, of which the nine-month average balance of PPP loans was $21.6 million. Excluding Covenant, the Corporation’s average loans outstanding increased

66

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

$190.1 million, including PPP loans of $58.7 million and a net increase in other loans outstanding of $131.4 million. The increase in average loans outstanding includes the effect of loans acquired from Monument, effective April 1, 2019, as well as subsequent loan growth over the last three quarters of 2019.

The fully taxable equivalent yield on loans in 2020 was 4.82% compared to 5.30% in 2019 as current rates on variable rate loans and rates on recent new loan originations have decreased, consistent with decreases in market interest rates. 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 acquisition. The reduction in fully taxable equivalent yield on loans was also affected by PPP loans with an average balance of $80.3 million at an average yield of 2.38% in 2020, with no comparative amounts in 2019.

Interest income on available-for-sale debt securities totaled $6,325,000 in 2020, a decrease of $1,063,000 from the total for 2019. As indicated in Table III, average available-for-sale debt securities (at amortized cost) totaled $327,517,000 in 2020, a decrease of $32,284,000 (9.0%) from 2019. The average yield on available-for-sale debt securities decreased to 2.58% in 2020 from 2.75% in 2019.

For the comparative nine-month periods, interest income from interest-bearing due from banks totaled $191,000 in 2020, a decrease of $233,000 from $424,000 in 2019. The average balance increased $45,433,000, partly due to cash received in the Covenant acquisition that had not been fully deployed, and the average yield on interest-bearing due from banks was 0.37% in 2020 as compared to 2.45% in 2019, consistent with the decrease in market rates.

INTEREST EXPENSE AND INTEREST-BEARING LIABILITIES

Interest expense increased $207,000 to $7,491,000 in 2020 from $7,284,000 in 2019. Table III shows that the overall cost of funds on interest-bearing liabilities decreased to 0.79% in 2020 from 0.99% in 2019. The average rate on interest-bearing deposits decreased to 0.67% in 2020 from 0.86% in 2019.

For the nine-month period ended September 30, 2020, average total deposits increased $305.0 million over the corresponding amount for the first nine months of 2019. The nine-month average amount of deposits from the former Covenant operations totaled $156.3 million. Excluding Covenant, average deposits for the first nine months of 2020 increased $148.7 million over the comparative amount for the first nine months of 2019, reflecting the inclusion of deposits assumed from Monument for nine months in 2020 as compared to six months in 2019 as well as increases in deposits related to PPP and other government stimulus programs.

Interest expense on borrowed funds increased $358,000 in 2020 as compared to 2019. Total average borrowed funds increased $55,664,000 to $126,393,000 in 2020 from $70,729,000 in 2019. The increase in average borrowed funds includes the impact of borrowings originated to fund loan growth in the last three quarters of 2019 and borrowings assumed from Covenant. The average rate on total borrowed funds was 1.87% in 2020 compared to 2.66% in 2019. The decrease in the average rate on borrowed funds in 2020 reflects the impact of decreases in market rates.

67

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE II - ANALYSIS OF INTEREST INCOME AND EXPENSE

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

​

​

​

​

​

Nine Months Ended

​

​

​

​

​

September 30, 

​

Increase/

.

​

September 30, 

​

Increase/

(In Thousands)

    

2020

    

2019

    

(Decrease)

​

    

2020

    

2019

    

(Decrease)

INTEREST INCOME

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest-bearing due from banks

​

$

69

​

$

159

​

$

(90)

​

​

$

191

​

$

424

​

$

(233)

Available-for-sale debt securities:

​

 

​

​

 

​

​

 

​

​

​

 

​

​

 

​

​

 

​

Taxable

​

 

1,483

​

 

1,732

​

 

(249)

​

​

 

4,451

​

 

5,392

​

 

(941)

Tax-exempt

​

 

698

​

 

584

​

 

114

​

​

 

1,874

​

 

1,996

​

 

(122)

Total available-for-sale debt securities

​

 

2,181

​

 

2,316

​

 

(135)

​

​

 

6,325

​

 

7,388

​

 

(1,063)

Loans receivable:

​

 

​

​

 

​

​

 

​

​

​

 

​

​

 

​

​

 

​

Taxable

​

 

18,269

​

 

14,400

​

 

3,869

​

​

 

46,316

​

 

38,446

​

 

7,870

Paycheck Protection Program (Taxable)

​

​

889

​

​

0

​

​

889

​

​

​

1,429

​

​

0

​

​

1,429

Tax-exempt

​

 

566

​

 

638

​

 

(72)

​

​

 

1,693

​

 

2,004

​

 

(311)

Total loans receivable

​

 

19,724

​

 

15,038

​

 

4,686

​

​

 

49,438

​

 

40,450

​

 

8,988

Other earning assets

​

 

30

​

 

11

​

 

19

​

​

 

61

​

 

31

​

 

30

Total Interest Income

​

 

22,004

​

 

17,524

​

 

4,480

​

​

 

56,015

​

 

48,293

​

 

7,722

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

INTEREST EXPENSE

​

 

​

​

 

​

​

 

​

​

​

 

​

​

 

​

​

 

​

Interest-bearing deposits:

​

 

​

​

 

​

​

 

​

​

​

 

​

​

 

​

​

 

​

Interest checking

​

 

271

​

 

362

​

 

(91)

​

​

 

716

​

 

908

​

 

(192)

Money market

​

 

368

​

 

265

​

 

103

​

​

 

863

​

 

695

​

 

168

Savings

​

 

57

​

 

66

​

 

(9)

​

​

 

175

​

 

179

​

 

(4)

Time deposits

​

 

1,091

​

 

1,768

​

 

(677)

​

​

 

3,972

​

 

4,095

​

 

(123)

Total interest-bearing deposits

​

 

1,787

​

 

2,461

​

 

(674)

​

​

 

5,726

​

 

5,877

​

 

(151)

Borrowed funds:

​

 

​

​

 

​

​

 

​

​

​

 

​

​

 

​

​

 

​

Short-term

​

 

73

​

 

146

​

 

(73)

​

​

 

335

​

 

453

​

 

(118)

Long-term

​

 

362

​

 

277

​

 

85

​

​

 

970

​

 

723

​

 

247

Subordinated debt

​

 

247

​

 

116

​

 

131

​

​

 

460

​

 

231

​

 

229

Total borrowed funds

​

 

682

​

 

539

​

 

143

​

​

 

1,765

​

 

1,407

​

 

358

Total Interest Expense

​

 

2,469

​

 

3,000

​

 

(531)

​

​

 

7,491

​

 

7,284

​

 

207

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net Interest Income

​

$

19,535

​

$

14,524

​

$

5,011

​

​

$

48,524

​

$

41,009

​

$

7,515

​

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

68

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Table III - Analysis of Average Daily Balances and Rates

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in Thousands)

​

Three Months

​

​

​

Three Months

​

​

 

​

Nine Months

​

​

​

Nine Months

​

​

 

​

​

Ended

​

Rate of

​

Ended

​

Rate of

 

​

Ended

​

Rate of

​

Ended

​

Rate of

 

​

​

9/30/2020

​

Return/

​

9/30/2019

​

Return/

 

​

9/30/2020

​

Return/

​

9/30/2019

​

Return/

 

​

​

Average

​

Cost of

​

Average

​

Cost of

 

​

Average

​

Cost of

​

Average

​

Cost of

 

​

    

Balance

    

Funds %

    

Balance

    

Funds %

 

    

Balance

    

Funds %

    

Balance

    

Funds %

 

EARNING ASSETS

 

​

  

 

  

 

​

  

 

  

​

 

​

  

 

  

 

​

  

 

  

​

Interest-bearing due from banks

​

$

147,543

 

0.19

%  

$

26,539

 

2.38

%

 

$

68,537

 

0.37

%  

$

23,104

 

2.45

%

Available-for-sale debt securities,

 

​

​

 

​

 

​

​

 

​

​

 

​

​

 

​

 

​

​

 

  

​

at amortized cost:

 

​

​

 

​

 

​

​

 

​

​

 

​

​

 

​

 

​

​

 

  

​

Taxable

​

​

227,483

 

2.59

%  

​

285,114

 

2.41

%

​

​

245,487

 

2.42

%  

​

285,332

 

2.53

%

Tax-exempt

​

 

94,058

 

2.95

%  

 

69,472

 

3.34

%

​

 

82,030

 

3.05

%  

 

74,469

 

3.58

%

Total available-for-sale debt securities

​

 

321,541

 

2.70

%  

 

354,586

 

2.59

%

​

 

327,517

 

2.58

%  

 

359,801

 

2.75

%

Loans receivable:

​

 

  

 

  

​

 

  

 

  

​

​

 

  

 

  

​

 

  

 

  

​

Taxable

​

 

1,480,247

 

4.91

%  

 

1,062,578

 

5.38

%

​

 

1,228,521

 

5.04

%  

 

950,948

 

5.41

%

Paycheck Protection Program (Taxable)

​

​

162,234

​

2.18

%  

​

0

​

0.00

%  

​

​

80,322

​

2.38

%  

​

0

​

0.00

%  

Tax-exempt

​

 

63,111

 

3.57

%  

 

67,741

 

3.74

%

​

 

60,893

 

3.71

%  

 

69,944

 

3.83

%

Total loans receivable

​

 

1,705,592

 

4.60

%  

 

1,130,319

 

5.28

%

​

 

1,369,736

 

4.82

%  

 

1,020,892

 

5.30

%

Other earning assets

​

 

3,361

 

3.55

%  

 

1,515

 

2.88

%

​

 

2,346

 

3.47

%  

 

1,344

 

3.08

%

Total Earning Assets

​

 

2,178,037

 

4.02

%  

 

1,512,959

 

4.60

%

​

 

1,768,136

 

4.23

%  

 

1,405,141

 

4.60

%

Cash

​

 

33,291

 

  

​

 

22,341

 

  

​

​

 

23,467

 

  

​

 

19,880

 

  

​

Unrealized gain/loss on securities

​

 

15,277

 

  

​

 

4,915

 

  

​

​

 

12,021

 

  

​

 

97

 

  

​

Allowance for loan losses

​

 

(11,473)

 

  

​

 

(8,322)

 

  

​

​

 

(10,988)

 

  

​

 

(8,676)

 

  

​

Bank-owned life insurance

​

​

30,078

​

​

​

​

18,468

​

​

​

​

​

22,539

​

​

​

​

18,533

​

​

​

Bank premises and equipment

​

 

21,763

 

  

​

 

16,103

 

  

​

​

 

19,251

 

  

​

 

15,615

 

  

​

Intangible Assets

​

 

57,008

 

  

​

 

29,986

 

  

​

​

 

38,786

 

  

​

 

24,058

 

  

​

Other assets

​

 

48,451

 

  

​

 

29,808

 

  

​

​

 

36,632

 

  

​

 

28,614

 

  

​

Total Assets

​

$

2,372,432

 

  

​

$

1,626,258

 

  

​

​

$

1,909,844

 

  

​

$

1,503,262

 

  

​

​

​

 

  

 

  

​

 

  

 

  

​

​

 

  

 

  

​

 

  

 

  

​

INTEREST-BEARING LIABILITIES

​

 

  

 

  

​

 

  

 

  

​

​

 

  

 

  

​

 

  

 

  

​

Interest-bearing deposits:

​

 

  

 

  

​

 

  

 

  

​

​

 

  

 

  

​

 

  

 

  

​

Interest checking

​

$

382,997

 

0.28

%  

$

232,549

 

0.62

%

​

$

290,420

 

0.33

%  

$

216,851

 

0.56

%

Money market

​

 

386,848

 

0.38

%  

 

200,873

 

0.52

%

​

 

268,095

 

0.43

%  

 

192,366

 

0.48

%

Savings

​

 

201,401

 

0.11

%  

 

170,583

 

0.15

%

​

 

184,829

 

0.13

%  

 

167,116

 

0.14

%

Time deposits

​

 

449,964

 

0.96

%  

 

385,538

 

1.82

%

​

 

391,827

 

1.35

%  

 

332,651

 

1.65

%

Total interest-bearing deposits

​

 

1,421,210

 

0.50

%  

 

989,543

 

0.99

%

​

 

1,135,171

 

0.67

%  

 

908,984

 

0.86

%

Borrowed funds:

​

 

  

 

  

​

 

  

 

  

​

​

 

  

 

  

​

 

  

 

  

​

Short-term

​

 

44,660

 

0.65

%  

 

25,823

 

2.24

%

​

 

36,492

 

1.23

%  

 

26,382

 

2.30

%

Long-term

​

 

102,857

 

1.40

%  

 

48,953

 

2.24

%

​

 

80,030

 

1.62

%  

 

39,655

 

2.44

%

Subordinated debt

​

 

16,540

 

5.94

%  

 

6,998

 

6.58

%

​

 

9,871

 

6.22

%  

 

4,692

 

6.58

%

Total borrowed funds

​

 

164,057

 

1.65

%  

 

81,774

 

2.62

%

​

 

126,393

 

1.87

%  

 

70,729

 

2.66

%

Total Interest-bearing Liabilities

​

 

1,585,267

 

0.62

%  

 

1,071,317

 

1.11

%

​

 

1,261,564

 

0.79

%  

 

979,713

 

0.99

%

Demand deposits

​

 

463,333

 

  

​

 

300,183

 

  

​

​

 

364,200

 

  

​

 

285,339

 

  

​

Other liabilities

​

 

26,367

 

  

​

 

13,584

 

  

​

​

 

18,804

 

  

​

 

13,336

 

  

​

Total Liabilities

​

 

2,074,967

 

  

​

 

1,385,084

 

  

​

​

 

1,644,568

 

  

​

 

1,278,388

 

  

​

Stockholders' equity, excluding

​

 

  

 

  

​

 

  

 

  

​

​

 

  

 

  

​

 

  

 

  

​

other comprehensive income/loss

​

 

285,158

 

  

​

 

237,000

 

  

​

​

 

255,545

 

  

​

 

224,519

 

  

​

Accumulated other comprehensive income/loss

​

 

12,307

 

  

​

 

4,174

 

  

​

​

 

9,731

 

  

​

 

355

 

  

​

Total Stockholders' Equity

​

 

297,465

 

  

​

 

241,174

 

  

​

​

 

265,276

 

  

​

 

224,874

 

  

​

Total Liabilities and Stockholders' Equity

​

$

2,372,432

 

  

​

$

1,626,258

 

  

​

​

$

1,909,844

 

  

​

$

1,503,262

 

  

​

Interest Rate Spread

​

 

  

 

3.40

%  

 

  

 

3.49

%

​

 

  

 

3.44

%  

 

  

 

3.61

%

Net Interest Income/Earning Assets

​

 

  

 

3.57

%  

 

  

 

3.81

%

​

 

  

 

3.67

%  

 

  

 

3.90

%

​

​

 

  

 

  

​

 

  

 

  

​

​

 

  

 

  

​

 

  

 

  

​

Total Deposits (Interest-bearing

​

 

  

 

  

​

 

  

 

  

​

​

 

  

 

  

​

 

  

 

  

​

and Demand)

​

$

1,884,543

 

  

​

$

1,289,726

 

  

​

​

$

1,499,371

 

  

​

$

1,194,323

 

  

​

(1)Annualized rates of return on tax-exempt securities and loans are presented on a fully taxable-equivalent basis, using the Corporation’s marginal federal income tax rate of 21%.
(2)Nonaccrual loans have been included with loans for the purpose of analyzing net interest earnings.
(3)Rates of return on earning assets and costs of funds are presented on an annualized basis.

69

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE IV - ANALYSIS OF VOLUME AND RATE CHANGES

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

Three Months Ended  9/30/20 vs. 9/30/19

.

​

Nine Months Ended  9/30/20 vs. 9/30/19

 

​

​

Change in

​

Change in

​

Total

 

​

Change in

​

Change in

​

Total

 

​

    

Volume

    

Rate

    

Change

 

​

Volume

    

Rate

    

Change

 

EARNING ASSETS

 

​

  

 

​

  

 

​

  

​

​

​

  

 

​

  

 

​

  

​

Interest-bearing due from banks

​

$

270

​

$

(360)

​

$

(90)

​

​

$

340

​

$

(573)

​

$

(233)

​

Available-for-sale debt securities:

​

 

​

​

 

​

​

 

​

​

​

 

​

​

 

​

​

 

​

​

Taxable

​

 

(353)

​

 

104

​

 

(249)

​

​

 

(725)

​

 

(216)

​

 

(941)

​

Tax-exempt

​

 

210

​

 

(96)

​

 

114

​

​

 

192

​

 

(314)

​

 

(122)

​

Total available-for-sale debt securities

​

 

(143)

​

 

8

​

 

(135)

​

​

 

(533)

​

 

(530)

​

 

(1,063)

​

Loans receivable:

​

 

  

​

 

  

​

 

​

​

​

 

​

​

 

​

​

 

​

​

Taxable

​

 

5,252

​

 

(1,383)

​

 

3,869

​

​

 

10,639

​

 

(2,769)

​

 

7,870

​

Paycheck Protection Program (Taxable)

​

​

889

​

​

0

​

​

889

​

​

​

1,429

​

​

0

​

​

1,429

​

Tax-exempt

​

 

(42)

​

 

(30)

​

 

(72)

​

​

 

(252)

​

 

(59)

​

 

(311)

​

Total loans receivable

​

 

6,099

​

 

(1,413)

​

 

4,686

​

​

 

11,816

​

 

(2,828)

​

 

8,988

​

Other earning assets

​

 

16

​

 

3

​

 

19

​

​

 

26

​

 

4

​

 

30

​

Total Interest Income

​

 

6,242

​

 

(1,762)

​

 

4,480

​

​

 

11,649

​

 

(3,927)

​

 

7,722

​

​

​

 

  

​

 

  

​

 

  

​

​

 

  

​

 

  

​

 

  

​

INTEREST-BEARING LIABILITIES

​

 

  

​

 

  

​

 

  

​

​

 

  

​

 

  

​

 

  

​

Interest-bearing deposits:

​

 

  

​

 

  

​

 

  

​

​

 

  

​

 

  

​

 

  

​

Interest checking

​

 

169

​

 

(260)

​

 

(91)

​

​

 

251

​

 

(443)

​

 

(192)

​

Money market

​

 

203

​

 

(100)

​

 

103

​

​

 

251

​

 

(83)

​

 

168

​

Savings

​

 

10

​

 

(19)

​

 

(9)

​

​

 

18

​

 

(22)

​

 

(4)

​

Time deposits

​

 

214

​

 

(891)

​

 

(677)

​

​

 

666

​

 

(789)

​

 

(123)

​

Total interest-bearing deposits

​

 

596

​

 

(1,270)

​

 

(674)

​

​

 

1,186

​

 

(1,337)

​

 

(151)

​

Borrowed funds:

​

 

​

​

 

​

​

 

​

​

​

 

​

​

 

​

​

 

​

​

Short-term

​

 

79

​

 

(152)

​

 

(73)

​

​

 

137

​

 

(255)

​

 

(118)

​

Long-term

​

 

220

​

 

(135)

​

 

85

​

​

 

551

​

 

(304)

​

 

247

​

Subordinated debt

​

 

145

​

 

(14)

​

 

131

​

​

 

243

​

 

(14)

​

 

229

​

Total borrowed funds

​

 

444

​

 

(301)

​

 

143

​

​

 

931

​

 

(573)

​

 

358

​

Total Interest Expense

​

 

1,040

​

 

(1,571)

​

 

(531)

​

​

 

2,117

​

 

(1,910)

​

 

207

​

​

​

 

​

​

 

​

​

 

​

​

​

 

​

​

 

​

​

 

​

​

Net Interest Income

​

$

5,202

​

$

(191)

​

$

5,011

​

​

$

9,532

​

$

(2,017)

​

$

7,515

​

(1)Changes in income on tax-exempt securities and loans are presented on a fully tax-equivalent basis, using the Corporation’s federal income tax rate of 21%.
(2)The change in interest due to both volume and rates has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amount of the change in each.

70

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

NONINTEREST INCOME

TABLE V – COMPARISON OF NONINTEREST INCOME

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in Thousands)

​

Three Months Ended

​

​

​

​

​

 

​

​

September 30, 

​

​

$

​

%

 

​

    

2020

​

2019

    

​

Change

​

Change

 

Trust and financial management revenue

​

$

1,595

​

$

1,479

​

$

116

​

7.8

%

Brokerage revenue

​

 

351

​

​

333

​

​

18

​

5.4

%

Insurance commissions, fees and premiums

​

 

41

​

​

71

​

​

(30)

​

(42.3)

%

Service charges on deposit accounts

​

 

1,045

​

​

1,436

​

​

(391)

​

(27.2)

%

Service charges and fees

​

 

83

​

​

91

​

​

(8)

​

(8.8)

%

Interchange revenue from debit card transactions

​

 

828

​

​

722

​

​

106

​

14.7

%

Net gains from sales of loans

​

 

2,052

​

​

310

​

​

1,742

​

561.9

%

Loan servicing fees, net

​

 

(87)

​

​

(54)

​

​

(33)

​

61.1

%

Increase in cash surrender value of life insurance

​

 

159

​

​

105

​

​

54

​

51.4

%

Other noninterest income

​

 

903

​

​

470

​

​

433

​

92.1

%

Total noninterest income, excluding realized gains on securities, net

​

$

6,970

​

$

4,963

​

$

2,007

​

40.4

%

​

Total noninterest income shown in Table V in the third quarter 2020 was up $2,007,000 from the third quarter 2019 total. Significant variances included the following:

●Net gains from sales of loans of $2,052,000 for the third quarter 2020 were up $1,742,000 from the total for the third quarter 2019. The increase reflects an increase in volume of mortgage loans sold, due mainly to the impact of historically low interest rates on the housing market and refinancing activity. Total proceeds from sales of residential mortgage loans in the third quarter 2020 was $64.5 million as compared to $10.2 million in the third quarter 2019.
●Other noninterest income totaled $903,000, an increase of $433,000 from the third quarter 2019. In the third quarter 2020, income from a life insurance arrangement in which benefits were split between the Corporation and heirs of a former employee was $279,000. Credit card interchange income increased $31,000 and dividend income from Federal Home Loan Bank stock was up $30,000.
●Trust and financial management revenues of $1,595,000 were up $116,000 from the third quarter 2019, reflecting an increase in fees from services provided to estates.
●Interchange revenue from debit card transactions totaled $828,000 in the third quarter 2020, an increase of $106,000 over the third quarter 2019 total.
●Service charges on deposit accounts of $1,045,000 in the third quarter 2020 were down $391,000 from the third quarter 2019 amount, as the volume of consumer and business overdraft activity fell.

71

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE VI – COMPARISON OF NONINTEREST INCOME

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in Thousands)

​

Nine Months Ended

​

​

​

​

​

 

​

​

September 30, 

​

​

$

​

%

 

​

    

2020

    

2019

    

​

Change

​

Change

 

Trust and financial management revenue

​

$

4,639

​

$

4,422

​

$

217

​

4.9

%

Brokerage revenue

​

 

1,027

​

 

1,001

​

​

26

​

2.6

%

Insurance commissions, fees and premiums

​

 

126

​

 

149

​

​

(23)

​

(15.4)

%

Service charges on deposit accounts

​

 

3,126

​

 

3,963

​

​

(837)

​

(21.1)

%

Service charges and fees

​

 

230

​

 

259

​

​

(29)

​

(11.2)

%

Interchange revenue from debit card transactions

​

 

2,277

​

 

2,064

​

​

213

​

10.3

%

Net gains from sales of loans

​

 

3,931

​

 

618

​

​

3,313

​

536.1

%

Loan servicing fees, net

​

 

(259)

​

 

9

​

​

(268)

​

(2977.8)

%

Increase in cash surrender value of life insurance

​

 

361

​

 

296

​

​

65

​

22.0

%

Other noninterest income

​

 

2,321

​

 

1,437

​

​

884

​

61.5

%

Total noninterest income, excluding realized gains on securities, net

​

$

17,779

​

$

14,218

​

$

3,561

​

25.0

%

​

Total noninterest income, excluding realized gains on securities, net, shown in Table VI increased $3,561,000 for the first nine months of 2020 compared to 2019. Significant variances included the following:

●Net gains from sales of loans totaled $3,931,000 in the first nine months of 2020, an increase of $3,313,000 over the total for the first nine months of 2019. As noted above, the increase reflects an increase in volume of mortgage loans sold, resulting mainly from lower interest rates. Proceeds from sales of residential mortgage loans of $126.3 million in the first nine months of 2020 were 6.5 times the comparative 2019 volume of $19.3 million.
●Other noninterest income totaled $2,321,000, an increase of $884,000 over 2019. Income from realization of tax credits was $349,000 higher in the first nine months of 2020 as compared to 2019. In 2020, income from a life insurance arrangement in which benefits were split between the Corporation and heirs of a former employee was $279,000. Dividend income from Federal Home Loan Bank stock was up $130,000, reflecting a higher average balance of stock held due to increased borrowings and credit card interchange income increased $50,000.
●Trust and financial management revenue of $4,639,000 was $217,000 (4.9%) higher in the first nine months of 2020 as compared to 2019, reflecting the impact of fees from new business growth in 2019.
●Interchange revenue from debit card transactions totaled $2,277,000 for the first nine months of 2020, an increase of $213,000, reflecting an increase in transaction volumes.
●Service charges on deposit accounts of $3,126,000 in the first nine months of 2020 were down $837,000 (21.1%) from the total for the first nine months of 2019, as the volume of consumer and business overdraft activity fell.
●Net revenue from loan servicing fees decreased $268,000, as net fees were negative $259,000 (a decrease in revenue) in the first nine months of 2020 as compared to net revenue of $9,000 in the first nine months of 2019. The fair value of mortgage servicing rights decreased $617,000 in the first nine months of 2020, as compared to a decrease of $312,000 in the first nine months of 2019.

72

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

NONINTEREST EXPENSE

TABLE VII - COMPARISON OF NONINTEREST EXPENSE

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in Thousands)

​

 Three Months Ended 

​

​

​

​

​

 

​

​

September 30, 

​

 $ 

​

 % 

 

​

 

2020

 

2019

 

 Change 

 

 Change 

​

Salaries and wages

    

$

6,833

    

$

5,480

    

$

1,353

    

24.7

%

Pensions and other employee benefits

​

 

1,870

​

 

1,449

​

 

421

 

29.1

%

Occupancy expense, net

​

 

806

​

 

654

​

 

152

 

23.2

%

Furniture and equipment expense

​

 

383

​

 

333

​

 

50

 

15.0

%

Data processing expenses

​

 

1,251

​

 

802

​

 

449

 

56.0

%

Automated teller machine and interchange expense

​

 

340

​

 

297

​

 

43

 

14.5

%

Pennsylvania shares tax

​

 

422

​

 

341

​

 

81

 

23.8

%

Professional fees

​

 

422

​

 

242

​

 

180

 

74.4

%

Telecommunications

​

 

231

​

 

197

​

 

34

 

17.3

%

Directors' fees

​

​

175

​

​

162

​

​

13

​

8.0

%

Other noninterest expense

​

​

1,915

​

​

1,529

​

​

386

​

25.2

%

Total noninterest expense, excluding merger-related expenses

​

​

14,648

​

​

11,486

​

​

3,162

​

27.5

%

Merger-related expenses

​

​

6,402

​

​

206

​

​

6,196

​

3007.8

%

Total noninterest expense

​

$

21,050

​

$

11,692

​

$

9,358

 

80.0

%

​

As shown in Table VII, total noninterest expense, excluding merger-related expenses, increased $3,162,000 (27.5%) for the three months ended September 30, 2020 over the total for the three months ended September 30, 2019. The most significant variances include the following:

●Salaries and wages of $6,833,000 increased $1,353,000 from the third quarter 2019, primarily reflecting an increase in personnel due to the Covenant acquisition.
●Data processing expenses increased $449,000, including the impact of increases in software licensing and maintenance costs associated with core banking, lending, trust and other functions as well as costs associated with running two concurrent core systems for a portion of the third quarter 2020.
●Pensions and other employee benefits expense increased $421,000, reflecting the increase in personnel from the Covenant acquisition and an increase in health care expense from the Corporation’s partially self-insured plan.
●Other noninterest expense increased $386,000. Other operational losses increased $178,000, reflecting the impact of a $200,000 charge related to a state tax reporting matter. Also within this category, amortization of core deposit intangibles increased $134,000 related to the Covenant acquisition.
●Professional fees expense increased $180,000, including costs associated with increased use of outsourced services to support a range of activities, most significantly in certain trust administrative activities.
●Occupancy expense increased $152,000, primarily reflecting an increase due to the Covenant acquisition.
●Pennsylvania shares tax expense increased $81,000, reflecting the impact of an increase in C&N Bank’s stockholder’s equity.

73

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE VIII - COMPARISON OF NONINTEREST EXPENSE

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in Thousands)

​

Nine Months Ended

​

​

​

​

​

 

​

​

September 30, 

​

 $ 

​

 % 

 

​

​

2020

​

2019

​

 Change 

​

 Change 

 

Salaries and wages

    

$

17,537

    

$

15,249

    

$

2,288

    

15.0

%

Pensions and other employee benefits

​

 

5,527

​

 

4,292

​

 

1,235

 

28.8

%

Occupancy expense, net

​

 

2,215

​

 

1,976

​

 

239

 

12.1

%

Furniture and equipment expense

​

 

1,052

​

 

967

​

 

85

 

8.8

%

Data processing expenses

​

 

3,309

​

 

2,567

​

 

742

 

28.9

%

Automated teller machine and interchange expense

​

 

912

​

 

763

​

 

149

 

19.5

%

Pennsylvania shares tax

​

 

1,267

​

 

1,035

​

 

232

 

22.4

%

Professional fees

​

 

1,265

​

 

795

​

 

470

 

59.1

%

Telecommunications

​

 

650

​

 

537

​

 

113

 

21.0

%

Directors' fees

​

 

523

​

 

486

​

 

37

 

7.6

%

Other noninterest expense

​

 

5,577

​

 

4,937

​

 

640

 

13.0

%

Total noninterest expense, excluding merger-related expenses

​

 

39,834

​

 

33,604

​

 

6,230

 

18.5

%

Merger-related expenses

​

 

7,526

​

 

3,818

​

 

3,708

 

97.1

%

Total noninterest expense

​

$

47,360

​

$

37,422

​

$

9,938

 

26.6

%

​

As shown in Table VIII, total noninterest expense, excluding merger-related expenses, increased $6,230,000 (18.5%) for the nine months ended September 30, 2020 over the total for the first nine months of 2019. The most significant variances include the following:

●Total salaries and wages and benefits expenses increased $3,523,000, reflecting: inclusion of Covenant for three months in 2020 and the former Monument operations for nine months in 2020 as compared to six months in 2019; annual merit-based salary adjustments; an increase in overtime pay related mainly to mortgage lending activity; a reduction in expense due to a higher proportion of payroll costs capitalized (added to the carrying value of loans) due to the high volume of PPP loans originated; and an increase in health care expense due to higher claims on the Corporation’s partially self-insured plan.
●Data processing expenses increased $742,000, including the impact of increases in software licensing and maintenance costs associated with core banking, lending, trust and other functions as well as professional fees associated with analysis of the Corporation’s online delivery channel.
●Other noninterest expense increased $640,000. Within this category, significant variances included the following:

o

Other operational losses increased $534,000, including an estimated accrual of $300,000 for penalties related to certain information returns in the second quarter 2020 and an estimated accrual of $200,000 related to a state tax reporting matter in the third quarter 2020.

o

Donations expense increased $434,000, mainly due to an increase in donations associated with the Pennsylvania Educational Improvement Tax Credit program.

o

Expenses related to other real estate properties decreased $285,000. The reduction resulted from the completion in the first quarter 2020 of a complex commercial workout situation for which a significant amount of expenses were incurred in 2019. Also, net losses from sales or write-downs of other real estate properties totaled $30,000 for the first nine months of 2020, down from $128,000 for the first nine months of 2019.

●Professional fees expense increased $470,000, including costs associated with a change in certain trust administrative activities to handle them on an outsourced basis.

74

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

●Occupancy expense increased $239,000, primarily reflecting an increase due to the Covenant acquisition.
●Pennsylvania shares tax expense increased $232,000, reflecting the impact of an increase in C&N Bank’s stockholder’s equity.

INCOME TAXES

The income tax provision in interim periods is based on the Corporation’s estimate of the effective tax rate expected to be applicable for the full year. The income tax provision for the first nine months of 2020 was $2,509,000, which was $261,000 lower than the provision for the first nine months of 2019 of $2,770,000. The effective tax rate (tax provision as a percentage of pre-tax income) was 16.8% in the first nine months of 2020 compared to 16.5% in the first nine months of 2019. The Corporation’s effective tax rates differ from the statutory rate of 21% in the first nine months of 2020 and 2019 principally because of the effects of tax-exempt interest income. The higher effective tax rate in the first nine months of 2020 as compared to 2019 resulted mainly from a reduction in tax-exempt interest income and an increase in nondeductible penalties.

The Corporation recognizes deferred tax assets and liabilities based on differences between the financial statement carrying amounts and the tax basis of assets and liabilities. The net deferred tax asset at September 30, 2020 and December 31, 2019 represents the following temporary difference components:

​

​

​

​

​

​

​

​

​

    

September 30, 

    

December 31, 

(In Thousands)

​

2020

​

2019

Deferred tax assets:

 

​

  

 

​

  

Allowance for loan losses

​

$

1,450

​

$

2,080

Purchase accounting adjustments on loans

​

 

1,956

​

 

640

Operating leases liability

​

 

754

​

 

344

Other deferred tax assets

​

 

3,287

​

 

2,173

Total deferred tax assets

​

 

7,447

​

 

5,237

​

​

 

  

​

 

  

Deferred tax liabilities:

​

 

  

​

 

  

Unrealized holding gains on securities

​

 

3,024

​

 

934

Defined benefit plans - ASC 835

​

 

62

​

 

49

Bank premises and equipment

​

 

1,104

​

 

763

Core deposit intangibles

​

 

886

​

 

272

Right-of-use assets from operating leases

​

 

754

​

 

344

Other deferred tax liabilities

​

 

282

​

 

257

Total deferred tax liabilities

​

 

6,112

​

 

2,619

Deferred tax asset, net

​

$

1,335

​

$

2,618

​

75

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

At September 30, 2020, the net deferred tax asset was $1,335,000, down from $2,618,000 at December 31, 2019. The most significant changes in temporary difference components include a net increase of $2,090,000 in the deferred tax liability resulting from appreciation in available-for-sale debt securities attributable to lower interest rates as well as purchase accounting-related adjustments to loans, core deposit intangibles, bank premises and equipment and operating leases.

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

Management believes the recorded net deferred tax asset at September 30, 2020 is fully realizable; however, if management determines the Corporation will be unable to realize all or part of the net deferred tax asset, the Corporation would adjust the deferred tax asset, which would negatively impact earnings.

FINANCIAL CONDITION

This section includes information regarding the Corporation’s lending activities or other significant changes or exposures that are not otherwise addressed in MD&A. 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 MD&A. Other significant balance sheet items, including the allowance for loan losses and stockholders’ equity, are discussed in separate sections of MD&A. There are no significant concerns that have arisen related to the Corporation’s off-balance sheet loan commitments or outstanding standby letters of credit at September 30, 2020. Management does not expect capital expenditures to have a material, detrimental effect on the Corporation’s financial condition in 2020.

Net loans outstanding (excluding mortgage loans held for sale) were $1,680,617,000 at September 30, 2020, up 43.4% from $1,172,386,000 at December 31, 2019 and up $550.5 million or 48.7% from $1,130,143,000 at September 30, 2019. As previously noted, a significant portion of the increase in loans in the third quarter 2020 was related to the Covenant acquisition. As presented in Table XII, total outstanding commercial loans were $456.2 million higher at September 30, 2020 from December 31, 2019, including an increase in PPP loans of $163.1 million. Residential mortgage loans were $52.4 million higher at September 30, 2020 as compared to December 31, 2019, reflecting an increase in mortgage loans acquired from Covenant partially offset by large amounts of refinancing activity occurring due to lower interest rates. While residential mortgage loans outstanding (on-balance sheet), excluding Covenant-acquired loans, decreased in the first nine months of 2020, the volume of residential mortgage loans originated and sold increased dramatically, resulting in an increase of $3.3 million in revenue from sales of residential mortgage loans compared to the nine months ended September 30, 2019.

While the Corporation’s lending activities are primarily concentrated in its market area, a portion of the Corporation’s commercial loan segment consists of participation loans. Participation loans represent portions of larger commercial transactions for which other institutions are the “lead banks”. Although not the lead bank, the Corporation conducts detailed underwriting and monitoring of participation loan opportunities. Participation loans are included in the “Commercial and industrial,” “Commercial loans secured by real estate”, “Political subdivisions” and “Other commercial” classes in the loan tables presented in this Form 10-Q. Total participation loans outstanding amounted to $73,063,000 at September 30, 2020, up from $64,633,000 at December 31, 2019 and $58,541,000 at September 30, 2019. The increase in participation loans outstanding at September 30, 2020 includes $9.9 million acquired from Covenant. At September 30, 2020, the balance of participation loans outstanding includes a total of $46,326,000 to businesses located outside of the Corporation’s market area. Also, included within participation loans outstanding are “leveraged loans,” meaning loans to businesses with minimal tangible book equity and for which the extent of collateral available is limited, though typically at the time of origination the businesses have demonstrated strong cash flow performance in their recent histories. Leveraged participation loans outstanding totaled $8,983,000 at September 30, 2020 and $9,947,000 at December 31, 2019.

76

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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. Prior to the April 2019 merger, Monument Bank had participated in the MPF Original program. 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 September 30, 2020, the Corporation’s activity under the MPF Direct Program was minimal.

For loan sales originated and sold under these 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 September 30, 2020, the total outstanding balance of loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $1,729,000, and the corresponding total outstanding balance repurchased at December 31, 2019 was $1,770,000.

At September 30, 2020, outstanding balances of loans sold and serviced through these programs totaled $254,462,000, including loans sold through the MPF Xtra program of $140,430,000 and loans sold through the Original program of $114,032,000. In addition, the outstanding balance of loans sold under the MPF Original program by Monument totaled $16,251,000. The loans sold by Monument are not serviced by the Corporation; however, the Corporation has assumed the credit enhancement obligation on these loans (as discussed in the next paragraph). At December 31, 2019, outstanding balances of loans sold and serviced through these programs totaled $178,446,000, including loans sold through the MPF Xtra program of $104,707,000 and loans sold through the Original program of $73,739,000. Based on the fairly limited volume of required repurchases to date, no allowance has been established for representation and warranty exposures as of September 30, 2020 and December 31, 2019.

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 September 30, 2020, the Corporation’s maximum credit enhancement obligation under the MPF Original Program was $6,180,000, and the Corporation has recorded a related allowance for credit losses of $361,000 which is included in “Accrued interest and other liabilities” in the accompanying consolidated balance sheets. At December 31, 2019, the Corporation’s maximum credit enhancement obligation under the MPF Original Program was $4,618,000, and the related allowance for credit losses was $333,000. 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

77

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

$14,081,000 on July 1, 2020 and $14,603,000 at September 30, 2020. There were no adjustments to the allowance during the third quarter 2020, and the allowance for SBA claim adjustments (included in accrued interest and other liabilities in the unaudited consolidated balance sheets) had a balance of $800,000 at September 30, 2020.

PROVISION AND ALLOWANCE FOR LOAN LOSSES

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

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

The allowance for loan losses was $10,753,000 at September 30, 2020, up from $9,836,000 at December 31, 2019. Table X shows total specific allowances on impaired loans decreased $400,000 to $651,000 at September 30, 2020 from $1,051,000 at December 31, 2019. This net decrease included the impact of the elimination of a specific allowance of $678,000 at December 31, 2019 on a commercial loan that was repaid for less than the full principal balance resulting in a charge-off of $107,000 in the second quarter of 2020 as well as the elimination of $125,000 in specific allowances on loans no longer considered impaired at September 30, 2020. This reduction in specific allowances on impaired loans at September 30, 2020 was partially offset by allowances totaling $419,000 at September 30, 2020 related to three commercial loan relationships with an aggregate recorded investment of $7,312,000 at September 30, 2020 that management identified as impaired in the second quarter 2020 and that was still considered impaired at September 30, 2020.

Loans acquired from Covenant that were identified as having a deterioration in credit quality (purchased credit impaired, or PCI), were valued at $7,204,000 at July 1, 2020 and $7,142,000 at September 30, 2020. The remainder of the portfolio was deemed to be the performing component of the portfolio. The calculation of the fair value of performing loans included a discount for credit losses of $7,219,000 reduced by accretion of $847,000 in the third quarter 2020 to $6,372,000 at September 30, 2020. The discount recorded in the acquisition represented an estimate of the present value of credit losses based on market expectations at the date of acquisition. None of the performing loans purchased were found to be impaired in the third quarter 2020, and the recently purchased performing loans totaling $457,588,000 were excluded from the loan pools for which the general component of the allowance for loan losses was calculated. Accordingly, there was no allowance for loan losses at September 30, 2020 on loans purchased from Covenant.

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 $305,000 at September 30, 2020. 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 $756,000 at September 30, 2020 and $1,216,000 at December 31, 2019. 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. Purchased performing loans from the Monument transaction with an aggregate recorded investment of $200,553,000 at September 30, 2020 were excluded from the loan pools for which the general component of the allowance for loan losses was calculated.

78

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The (credit) provision for loan losses by segment in the three-month and nine-month periods ended September 30, 2020 and 2019 are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Three Months Ended

    

Nine Months Ended

​

​

September 30, 

​

September 30, 

​

September 30, 

​

September 30, 

(In Thousands)

    

2020

​

2019

 

2020

    

2019

Residential mortgage

​

$

(66)

​

$

138

​

$

67

​

$

216

Commercial

​

 

1,990

​

 

953

​

 

3,184

​

 

(247)

Consumer

​

 

17

​

 

67

​

 

42

​

 

142

Unallocated

​

 

0

​

 

0

​

 

0

​

 

86

Total

​

$

1,941

​

$

1,158

​

$

3,293

​

$

197

​

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

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Residential mortgage segment

​

Three Months Ended

    

Nine Months Ended

​

​

​

September 30, 

​

September 30, 

​

September 30, 

​

September 30, 

​

(In thousands)

    

2020

​

2019

 

2020

    

2019

​

(Decrease) increase in total specific allowance on impaired loans, adjusted for the effect of net charge-offs

​

$

(21)

​

$

60

​

$

(38)

​

$

159

​

(Decrease) increase in collectively determined portion of the allowance attributable to:

​

​

​

​

​

​

​

 

  

​

 

  

​

Loan (reduction) growth

​

​

(87)

​

​

76

​

 

(227)

​

 

132

​

Changes in historical loss experience factors

​

​

0

​

​

1

​

 

(82)

​

 

8

​

Changes in qualitative factors

​

​

42

​

​

1

​

 

414

​

 

(83)

​

Total (credit) provision for loan losses - Residential mortgage segment

​

$

(66)

​

$

138

​

$

67

​

$

216

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Commercial segment

​

Three Months Ended

    

Nine Months Ended

​

​

​

September 30, 

​

September 30, 

​

September 30, 

​

September 30, 

​

(In thousands)

    

2020

​

2019

 

2020

    

2019

​

Increase (decrease) in total specific allowance on impaired loans, adjusted for the effect of net charge-offs

​

$

908

​

$

673

​

$

1,949

​

$

(630)

​

Increase (decrease) in collectively determined portion of the allowance attributable to:

​

​

​

​

​

​

​

 

  

​

 

  

​

Loan growth

​

​

194

​

​

292

​

 

84

​

 

616

​

Changes in historical loss experience factors

​

​

848

​

​

(45)

​

 

841

​

 

(357)

​

Changes in qualitative factors

​

​

40

​

​

33

​

 

310

​

 

124

​

Total provision (credit) for loan losses - Commercial segment

​

$

1,990

​

$

953

​

$

3,184

​

$

(247)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Consumer segment

​

Three Months Ended

    

Nine Months Ended

​

​

​

September 30, 

​

September 30, 

​

September 30, 

​

September 30, 

​

(In thousands)

    

2020

​

2019

 

2020

    

2019

​

Increase in total specific allowance on impaired loans, adjusted for the effect of net charge-offs

​

$

22

​

$

57

​

$

65

​

$

101

​

Increase (decrease) in collectively determined portion of the allowance attributable to:

​

​

​

​

​

​

​

 

  

​

 

  

​

Loan growth (reduction)

​

​

12

​

​

5

​

 

(10)

​

 

23

​

Changes in historical loss experience factors

​

​

(14)

​

​

2

​

 

(14)

​

 

2

​

Changes in qualitative factors

​

​

(3)

​

​

3

​

 

1

​

 

16

​

Total provision for loan losses - Consumer segment

​

$

17

​

$

67

​

$

42

​

$

142

​

79

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Total - All segments

​

Three Months Ended

​

Nine Months Ended

​

​

September 30, 

​

September 30, 

    

September 30, 

​

September 30, 

(In Thousands)

    

2020

​

2019

​

2020

​

2019

Increase (decrease) increase in total specific allowance on impaired loans, adjusted for the effect of net charge-offs

​

$

909

​

$

790

 

$

1,976

​

$

(370)

Increase (decrease) in collectively determined portion of the allowance attributable to:

​

​

​

​

​

​

​

 

  

​

 

  

Loan growth (reduction)

​

​

119

​

​

373

​

 

(153)

​

 

771

Changes in historical loss experience factors

​

​

834

​

​

(42)

​

 

745

​

 

(347)

Changes in qualitative factors

​

​

79

​

​

37

​

 

725

​

 

57

Sub-total

​

​

1,941

​

​

1,158

​

 

3,293

​

 

111

Unallocated

​

​

0

​

​

0

​

 

0

​

 

86

Total provision for loan losses - All segments

​

$

1,941

​

$

1,158

​

$

3,293

​

$

197

​

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

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

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

Table 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 1.48% at September 30, 2020, up from 0.88% at December 31, 2019, and nonperforming assets as a percentage of total assets was 1.17% at September 30, 2020, up from 0.80% at December 31, 2019. At September 30, 2020, these ratios were affected by the net impact of classification as nonperforming of the commercial loans with specific allowances and the loans purchased with credit impairment from Covenant referred to above.

Table XI presents data at September 30, 2020 and at the end of each of the years ended December 31, 2015 through 2019. Table XI shows that total nonperforming loans as a percentage of loans of 1.48% at September 30, 2020, though up from December 31, 2019, was lower than the corresponding year-end ratio from 2015 through 2018. Similarly, the September 30, 2020 ratio of total nonperforming assets as a percentage of assets of 1.17% was lower than the corresponding ratio from 2015 through 2018.

Total impaired loans of $18,612,000 at September 30, 2020 are up $13,126,000 from the corresponding amount at December 31, 2019 of $5,486,000. The increase in impaired loans includes the net impact of classification as impaired of the commercial loans referred to above in the discussion of specific allowances and the loans purchased with credit impairment from Covenant.

80

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Total nonperforming assets of $27,473,000 at September 30, 2020 are $14,162,000 higher than the corresponding amount at December 31, 2019, summarized as follows:

●Total nonaccrual loans at September 30, 2020 of $22,796,000 was $13,578,000 higher than the corresponding December 31, 2019 total of $9,218,000. Similar to the discussions above related to impaired loans and nonperforming assets, this increase reflects the impact of net changes in classification as impaired of the commercial loans subject to specific allowances and the loans purchased from Covenant with credit impairment described above.
●Total loans past due 90 days or more and still accruing interest amounted to $2,308,000 at September 30, 2020, an increase of $1,101,000 from the total at December 31, 2019. The increase includes an $603,000 increase on residential mortgages and $516,000 from loans secured by commercial real estate. Management has evaluated the loans within this category and determined they are well secured and in the process of collection at September 30, 2020.
●Foreclosed assets held for sale consisted of real estate and totaled $2,369,000 at September 30, 2020, a decrease of $517,000 from $2,886,000 at December 31, 2019. Within this decrease, there was a reduction of $1,134,000 related to the sale of a commercial real estate property in the first quarter of 2020, partially offset by the addition of an OREO property acquired from Covenant with a carrying value of $860,000. At September 30, 2020, the Corporation held eight such properties for sale, with total carrying values of $104,000 related to residential real estate and $2,265,000 related to commercial real estate. At December 31, 2019, the Corporation held ten such properties for sale, with total carrying values of $292,000 related to residential real estate, $70,000 of land and $2,524,000 related to commercial real estate. The Corporation evaluates the carrying values of foreclosed assets each quarter based on the most recent market activity or appraisals for each property.

Over the period 2015-2019 and the first nine months of 2020, each period includes a few large commercial relationships that have required significant monitoring and workout efforts. As a result, a limited number of relationships may significantly impact the total amount of allowance required on impaired loans and may significantly impact the amount of total charge-offs reported in any one period.

Management believes it has been conservative in its decisions concerning identification of impaired loans, estimates of loss, and nonaccrual status; however, the actual losses realized from these relationships could vary materially from the allowances calculated as of September 30, 2020. 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.

81

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

TABLE IX - ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars In Thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

 

​

​

September 30, 

​

September 30, 

​

​

Years Ended December 31, 

​

​

    

2020

    

2019

  

  

2019

    

2018

    

2017

    

2016

    

2015

 

Balance, beginning of year

​

$

9,836

​

$

9,309

​

​

$

9,309

​

$

8,856

​

$

8,473

​

$

7,889

​

$

7,336

​

Charge-offs:

​

 

​

​

 

​

​

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

Residential mortgage

​

 

0

​

 

(157)

​

​

 

(190)

​

 

(158)

​

 

(197)

​

 

(73)

​

 

(217)

​

Commercial

​

 

(2,343)

​

 

(6)

​

​

 

(6)

​

 

(165)

​

 

(132)

​

 

(597)

​

 

(251)

​

Consumer

​

 

(100)

​

 

(132)

​

​

 

(183)

​

 

(174)

​

 

(150)

​

 

(87)

​

 

(94)

​

Total charge-offs

​

 

(2,443)

​

 

(295)

​

​

 

(379)

​

 

(497)

​

 

(479)

​

 

(757)

​

 

(562)

​

Recoveries:

​

 

​

​

 

​

​

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

Residential mortgage

​

 

32

​

 

9

​

​

 

12

​

 

8

​

 

19

​

 

3

​

 

1

​

Commercial

​

 

0

​

 

6

​

​

 

6

​

 

317

​

 

4

​

 

35

​

 

214

​

Consumer

​

 

35

​

 

31

​

​

 

39

​

 

41

​

 

38

​

 

82

​

 

55

​

Total recoveries

​

 

67

​

 

46

​

​

 

57

​

 

366

​

 

61

​

 

120

​

 

270

​

Net charge-offs

​

 

(2,376)

​

 

(249)

​

​

 

(322)

​

 

(131)

​

 

(418)

​

 

(637)

​

 

(292)

​

Provision for loan losses

​

 

3,293

​

 

197

​

​

 

849

​

 

584

​

 

801

​

 

1,221

​

 

845

​

Balance, end of period

​

$

10,753

​

$

9,257

​

​

$

9,836

​

$

9,309

​

$

8,856

​

$

8,473

​

$

7,889

​

Net charge-offs as a % of average loans

​

 

0.17

%  

 

0.02

%  

​

 

0.03

%  

 

0.02

%  

 

0.05

%  

 

0.09

%  

 

0.04

%

​

TABLE X - COMPONENTS OF THE ALLOWANCE FOR LOAN LOSSES

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

September 30, 

​

​

As of December 31, 

​

    

2020

    

    

2019

    

2018

    

2017

    

2016

    

2015

ASC 310 - Impaired loans

​

$

651

​

​

$

1,051

​

$

1,605

​

$

1,279

​

$

674

​

$

820

ASC 450 - Collective segments:

​

 

  

​

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

Commercial

​

 

5,148

​

​

 

3,913

​

 

3,102

​

 

3,078

​

 

3,373

​

 

3,103

Residential mortgage

​

 

4,111

​

​

 

4,006

​

 

3,870

​

 

3,841

​

 

3,890

​

 

3,417

Consumer

​

 

258

​

​

 

281

​

 

233

​

 

159

​

 

138

​

 

122

Unallocated

​

 

585

​

​

 

585

​

 

499

​

 

499

​

 

398

​

 

427

Total Allowance

​

$

10,753

​

​

$

9,836

​

$

9,309

​

$

8,856

​

$

8,473

​

$

7,889

​

82

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE XI - PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS

AND TROUBLED DEBT RESTRUCTURINGS (TDRs)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars In Thousands)

​

September 30, 

​

​

As of December 31, 

 

​

    

2020

    

    

2019

    

2018

    

2017

    

2016

    

2015

 

Impaired loans with a valuation allowance

​

$

8,085

​

​

$

3,375

​

$

4,851

​

$

4,100

​

$

3,372

​

$

1,933

​

Impaired loans without a valuation allowance

​

 

3,080

​

​

 

1,670

​

 

4,923

​

 

5,411

​

 

7,488

​

 

8,041

​

Purchased credit impaired loans

​

​

7,447

​

​

​

441

​

​

0

​

​

0

​

​

0

​

​

0

​

Total impaired loans

​

$

18,612

​

​

$

5,486

​

$

9,774

​

$

9,511

​

$

10,860

​

$

9,974

​

Total loans past due 30-89 days and still accruing

​

$

3,499

​

​

$

8,889

​

$

7,142

​

$

9,449

​

$

7,735

​

$

7,057

​

Nonperforming assets:

​

 

​

​

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

Purchased credit impaired loans

​

$

7,447

​

​

$

441

​

$

0

​

$

0

​

$

0

​

$

0

​

Other nonaccrual loans

​

​

15,349

​

​

​

8,777

​

​

13,113

​

​

13,404

​

​

8,736

​

​

11,517

​

Total nonaccrual loans

​

​

22,796

​

​

​

9,218

​

​

13,113

​

​

13,404

​

​

8,736

​

​

11,517

​

Total loans past due 90 days or more and still accruing

​

 

2,308

​

​

 

1,207

​

 

2,906

​

 

3,724

​

 

6,838

​

 

3,229

​

Total nonperforming loans

​

 

25,104

​

​

 

10,425

​

 

16,019

​

 

17,128

​

 

15,574

​

 

14,746

​

Foreclosed assets held for sale (real estate)

​

 

2,369

​

​

 

2,886

​

 

1,703

​

 

1,598

​

 

2,180

​

 

1,260

​

Total nonperforming assets

​

$

27,473

​

​

$

13,311

​

$

17,722

​

$

18,726

​

$

17,754

​

$

16,006

​

Loans subject to troubled debt restructurings (TDRs):

​

 

​

​

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

​

Performing

​

$

258

​

​

$

889

​

$

655

​

$

636

​

$

5,803

​

$

1,186

​

Nonperforming

​

 

7,779

​

​

 

1,737

​

 

2,884

​

 

3,027

​

 

2,874

​

 

5,178

​

Total TDRs

​

$

8,037

​

​

$

2,626

​

$

3,539

​

$

3,663

​

$

8,677

​

$

6,364

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

83

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE XI - PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS

AND TROUBLED DEBT RESTRUCTURINGS (TDRs)

(Continued)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars In Thousands)

​

September 30, 

​

​

As of December 31, 

​

​

​

2020

​

​

2019

    

2018

    

2017

    

2016

    

2015

​

Total nonperforming loans as a % of loans

​

 

1.48

%  

​

 

0.88

%  

 

1.94

%  

 

2.10

%  

 

2.07

%  

 

2.09

%

Total nonperforming assets as a % of assets

​

 

1.17

%  

​

 

0.80

%  

 

1.37

%  

 

1.47

%  

 

1.43

%  

 

1.31

%

Allowance for loan losses as a % of total loans

​

 

0.64

%  

​

 

0.83

%  

 

1.12

%  

 

1.09

%  

 

1.13

%  

 

1.12

%

Credit adjustment on purchased non-impaired loans and allowance for loan losses
as a % of total loans and the credit adjustment (a)

​

​

1.05

%  

​

​

0.93

%  

​

1.12

%  

​

1.09

%  

​

1.13

%  

​

1.12

%

Allowance for loan losses as a % of nonperforming loans

​

 

42.83

%  

​

 

94.35

%  

 

58.11

%  

 

51.70

%  

 

54.40

%  

 

53.50

%

(a) Credit adjustment on purchased non-impaired loans at end of period

​

$

7,127

​

​

$

1,216

​

$

0

​

$

0

​

$

0

​

$

0

​

Allowance for loan losses

​

​

10,753

​

​

​

9,836

​

​

9,309

​

​

8,856

​

​

8,473

​

​

7,889

​

Total credit adjustment on purchased non-impaired loans at end of period and allowance for loan losses (1)

​

$

17,880

​

​

$

11,052

​

$

9,309

​

$

8,856

​

$

8,473

​

$

7,889

​

Total loans receivable

​

$

1,691,370

​

​

$

1,182,222

​

$

827,563

​

$

815,713

​

$

751,835

​

$

704,880

​

Credit adjustment on purchased non-impaired loans at end of period

​

​

7,127

​

​

​

1,216

​

​

0

​

​

0

​

​

0

​

​

0

​

Total (2)

​

$

1,698,497

​

​

$

1,183,438

​

$

827,563

​

$

815,713

​

$

751,835

​

$

704,880

​

Credit adjustment on purchased non-impaired loans and allowance for loan losses as a % of total loans and the credit adjustment (1)/(2)

​

​

1.05

%  

​

​

0.93

%  

​

1.12

%  

​

1.09

%  

​

1.13

%  

​

1.12

%  

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

84

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE XII - SUMMARY OF LOANS BY TYPE

Summary of Loans by Type

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(In Thousands)

​

September 30, 

​

December 31, 

​

    

2020

    

2019

    

2018

    

2017

    

2016

    

2015

Residential mortgage:

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

Residential mortgage loans - first liens

​

$

541,827

​

$

510,641

​

$

372,339

​

$

359,987

​

$

334,102

​

$

304,783

Residential mortgage loans - junior liens

​

 

27,907

​

 

27,503

​

 

25,450

​

 

25,325

​

 

23,706

​

 

21,146

Home equity lines of credit

​

 

40,143

​

 

33,638

​

 

34,319

​

 

35,758

​

 

38,057

​

 

39,040

1-4 Family residential construction

​

 

29,146

​

 

14,798

​

 

24,698

​

 

26,216

​

 

24,908

​

 

21,121

Total residential mortgage

​

 

639,023

​

 

586,580

​

 

456,806

​

 

447,286

​

 

420,773

​

 

386,090

Commercial:

​

 

​

​

 

  

​

 

  

​

 

  

​

 

  

​

 

  

Commercial loans secured by real estate

​

 

530,874

​

 

301,227

​

 

162,611

​

 

159,266

​

 

150,468

​

 

154,779

Commercial and industrial

​

 

156,169

​

 

126,374

​

 

91,856

​

 

88,276

​

 

83,854

​

 

75,196

Small Business Administration - Paycheck Protection Program

​

​

163,050

​

​

0

​

​

0

​

​

0

​

​

0

​

​

0

Political subdivisions

​

 

47,883

​

 

53,570

​

 

53,263

​

 

59,287

​

 

38,068

​

 

40,007

Commercial construction and land

​

 

41,906

​

 

33,555

​

 

11,962

​

 

14,527

​

 

14,287

​

 

5,122

Loans secured by farmland

​

 

11,913

​

 

12,251

​

 

7,146

​

 

7,255

​

 

7,294

​

 

7,019

Multi-family (5 or more) residential

​

 

62,330

​

 

31,070

​

 

7,180

​

 

7,713

​

 

7,896

​

 

9,188

Agricultural loans

​

 

3,561

​

 

4,319

​

 

5,659

​

 

6,178

​

 

3,998

​

 

4,671

Other commercial loans

​

 

17,385

​

 

16,535

​

 

13,950

​

 

10,986

​

 

11,475

​

 

12,152

Total commercial

​

 

1,035,071

​

 

578,901

​

 

353,627

​

 

353,488

​

 

317,340

​

 

308,134

Consumer

​

 

17,276

​

 

16,741

​

 

17,130

​

 

14,939

​

 

13,722

​

 

10,656

Total

​

 

1,691,370

​

 

1,182,222

​

 

827,563

​

 

815,713

​

 

751,835

​

 

704,880

Less: allowance for loan losses

​

 

(10,753)

​

 

(9,836)

​

 

(9,309)

​

 

(8,856)

​

 

(8,473)

​

 

(7,889)

Loans, net

​

$

1,680,617

​

$

1,172,386

​

$

818,254

​

$

806,857

​

$

743,362

​

$

696,991

​

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 September 30, 2020, the Corporation maintained overnight interest-bearing deposits with the Federal Reserve Bank of Philadelphia and other correspondent banks totaling $137,180,000. The Corporation’s cash position at September 30, 2020 was elevated in part due to net cash received from the Covenant transaction on July 1, 2020 of $76.0 million that was not fully deployed in the third quarter 2020.

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 debt securities with a carrying value of $15,124,000 at September 30, 2020.

85

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The Corporation’s outstanding, available, and total credit facilities at September 30, 2020 and December 31, 2019 are as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Outstanding

​

Available

​

Total Credit

(In Thousands)

    

September 30, 

    

December 31, 

    

September 30, 

    

December 31, 

    

September 30, 

    

December 31, 

​

​

2020

​

2019

​

2020

​

2019

​

2020

​

2019

Federal Home Loan Bank of Pittsburgh

​

$

140,681

​

$

136,424

​

$

641,753

​

$

416,122

​

$

782,434

​

$

552,546

Federal Reserve Bank Discount Window

​

 

0

​

 

0

​

 

14,654

​

 

14,244

​

 

14,654

​

 

14,244

Other correspondent banks

​

 

0

​

 

0

​

 

45,000

​

 

45,000

​

 

45,000

​

 

45,000

Total credit facilities

​

$

140,681

​

$

136,424

​

$

701,407

​

$

475,366

​

$

842,088

​

$

611,790

​

At September 30, 2020, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of short-term borrowings of $38,400,000, long-term borrowings of $101,881,000 and a letter of credit of $400,000. At December 31, 2019, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of overnight borrowings of $64,000,000, short-term borrowings of $20,297,000 and long-term borrowings with a total amount of $52,127,000. Additional information regarding borrowed funds is included in Note 9 to the unaudited consolidated financial statements.

Additionally, the Corporation uses “RepoSweep” arrangements to borrow funds from commercial banking customers on an overnight basis. If required to raise cash in an emergency situation, the Corporation could sell available-for-sale securities to meet its obligations or use repurchase agreements placed with brokers to borrow funds secured by investment assets. At September 30, 2020, the carrying value of available-for-sale securities in excess of amounts required to meet pledging or repurchase agreement obligations was $98,509,000.

STOCKHOLDERS’ EQUITY AND CAPITAL ADEQUACY

Details concerning capital ratios at September 30, 2020 and December 31, 2019 are presented below. As a small bank holding company, the Corporation is not subject to consolidated capital requirements at September 30, 2020; however, C&N Bank remains subject to regulatory capital requirements administered by the federal banking agencies. Management believes, as of September 30, 2020, 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 September 30, 2020 and December 31, 2019 exceed the Corporation’s Board policy threshold levels.

86

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

In October 2019, the Federal Reserve Board, FDIC and Office of the Comptroller of the Currency finalized a rule that provides qualifying community banking organizations an option to calculate a simple leverage ratio, rather than multiple measures of capital adequacy. In 2020, C&N Bank has not elected the community bank leverage ratio (“CBLR”) framework. The decision to continue to measure capital adequacy using previously existing risk-based and leverage capital requirements reflects concerns that reliance on the leverage ratio as a single measurement could, in certain circumstances, limit the ability to grow or encourage taking excessive risk. C&N Bank could elect the CBLR framework in the future.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

(Dollars in Thousands)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Minimum To Be

​

​

​

​

​

 

​

​

​

​

​

​

​

​

​

​

​

Minimum To Maintain

​

Well

​

​

 

​

​

​

​

​

​

​

Minimum

​

Capital Conservation

​

Capitalized Under

​

Minimum To Meet

 

​

​

​

​

​

​

​

Capital

​

Buffer at Reporting

​

Prompt Corrective

​

the Corporation's

 

​

​

Actual

​

Requirement

​

Date

​

Action Provisions

​

Policy Thresholds

 

​

    

Amount

    

Ratio

    

Amount

    

Ratio

    

Amount

    

Ratio

    

Amount

    

Ratio

    

Amount

    

Ratio

 

September 30, 2020:

​

  

​

​

  

​

  

​

  

​

  

​

  

​

  

​

  

​

  

​

​

  

 

Total capital to risk-weighted assets:

​

  

​

​

  

​

  

​

  

​

  

​

  

​

  

​

  

​

  

​

​

  

 

Consolidated

​

$

256,661

​

17.04

%  

N/A

​

N/A

​

N/A

​

N/A

​

N/A

​

N/A

​

$

157,448

​

≥10.5

%

C&N Bank

 

​

233,969

 

15.65

%  

119,625

 

≥8

%

157,008

 

≥10.5

%

149,531

 

≥10

%

​

157,008

 

≥10.5

%

Tier 1 capital to risk-weighted assets:

 

​

​

 

​

 

  

 

​

 

  

 

  

 

  

 

  

 

​

​

 

  

​

Consolidated

 

​

228,974

 

15.20

%  

N/A

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

 

​

127,458

 

≥8.5

%

C&N Bank

 

​

222,854

 

14.90

%  

89,719

 

≥6

%

127,101

 

≥8.5

%

119,625

 

≥8

%

​

127,101

 

≥8.5

%

Common equity tier 1 capital to risk-weighted assets:

 

​

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

​

​

  

 

  

​

Consolidated

 

​

228,974

 

15.20

%  

N/A

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

 

​

104,965

 

≥7

%

C&N Bank

 

​

222,854

 

14.90

%  

67,289

 

≥4.5

%

104,672

 

≥7.0

%

97,195

 

≥6.5

%

​

104,672

 

≥7

%

Tier 1 capital to average assets:

 

​

​

 

​

 

  

 

  

 

  

 

  

 

  

 

  

 

​

​

 

  

​

Consolidated

 

​

228,974

 

9.94

%  

N/A

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

 

​

184,289

 

≥8

%

C&N Bank

 

​

222,854

 

9.74

%  

91,514

 

≥4

%

N/A

 

N/A

 

114,393

 

≥5

%

​

183,029

 

≥8

%

​

 

​

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

​

  

 

  

​

December 31, 2019:

 

​

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

​

  

 

  

​

Total capital to risk-weighted assets:

 

​

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

​

  

 

  

​

Consolidated

​

$

228,057

 

20.70

%  

N/A

 

N/A

​

N/A

 

N/A

 

N/A

 

N/A

​

$

115,689

 

≥10.5

%

C&N Bank

​

 

205,863

 

18.75

%  

87,817

 

≥8

%

115,260

 

≥10.5

%

109,771

 

≥10

%

 

115,260

 

≥10.5

%

Tier 1 capital to risk-weighted assets:

​

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

​

 

  

 

  

​

Consolidated

​

 

211,388

 

19.19

%  

N/A

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

​

 

93,653

 

≥8.5

%

C&N Bank

​

 

195,694

 

17.83

%  

65,863

 

≥6

%

93,306

 

≥8.5

%

87,817

 

≥8

%

 

93,306

 

≥8.5

%

Common equity tier 1 capital to risk-weighted assets:

​

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

​

 

  

 

  

​

Consolidated

​

 

211,388

 

19.19

%  

N/A

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

​

 

77,126

 

≥7

%

C&N Bank

​

 

195,694

 

17.83

%  

49,397

 

≥4.5

%

76,840

 

≥7.0

%

71,351

 

≥6.5

%

 

76,840

 

≥7

%

Tier 1 capital to average assets:

​

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

  

​

 

  

 

  

​

Consolidated

​

 

211,388

 

13.10

%  

N/A

 

N/A

 

N/A

 

N/A

 

N/A

 

N/A

​

 

129,126

 

≥8

%

C&N Bank

​

 

195,694

 

12.24

%  

63,940

 

≥4

%

N/A

 

N/A

 

79,925

 

≥5

%

 

127,879

 

≥8

%

​

While it is difficult to estimate the future impact of COVID-19, the Corporation’s and C&N Bank’s capital ratios at September 30, 2020 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.

Future dividend payments will depend upon maintenance of a strong financial condition, future earnings and capital and regulatory requirements. As described in more detail below, C&N Bank is subject to restrictions on the amount of dividends that may be paid without approval of banking regulatory authorities. Further, although the Corporation is no longer subject to the specific consolidated capital requirements described herein, the Corporation’s ability to pay dividends, repurchase stock or engage in other activities may be limited by the Federal Reserve if the Corporation fails to hold capital commensurate with its overall risk profile.

87

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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 September 30, 2020, 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 September 30, 2020, C&N Bank’s Capital Conservation Buffer, determined based on the minimum total capital ratio, was 7.65%.

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 (losses) on available-for-sale debt securities, net of deferred income tax, amounted to $11,376,000 at September 30, 2020 and $3,511,000 at December 31, 2019. 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 6 to the unaudited consolidated financial statements provides additional information concerning management’s evaluation of available-for-sale debt securities for other-than-temporary impairment at September 30, 2020.

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 $233,000 at September 30, 2020 and $180,000 at December 31, 2019.

88

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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). Changes in the components of Accumulated Other Comprehensive Income are included in Other Comprehensive Income (Loss), and for the Corporation, consist of changes in unrealized gains or losses on available-for-sale debt securities and changes in underfunded or overfunded defined benefit plans. Fluctuations in interest rates significantly affect fair values of available-for-sale debt securities, and accordingly have an effect on Other Comprehensive Income (Loss) in each period.

Comprehensive Income totaled $2,746,000 for the third quarter 2020 as compared to $6,335,000 in the third quarter 2019. For the three months ended September 30, 2020, Comprehensive Income included: (1) Net Income of $2,848,000, which was $2,459,000 lower than in the third quarter 2019; (2) Other Comprehensive Loss from available-for-sale debt securities of $96,000 as compared to Other Comprehensive Income of $1,035,000 in the third quarter 2019; and (3) Other Comprehensive Loss from defined benefit plans of ($6,000) as compared to ($7,000) for the third quarter 2019.

For the nine months ended September 30, 2020, Comprehensive Income totaled $20,370,000 as compared to $22,676,000 in the first nine months of 2019. For the nine months ended September 30, 2020, Comprehensive Income included: (1) Net Income of $12,452,000, which was $1,594,000 lower than net income for the first nine months of 2019; (2) Other Comprehensive Income from available-for-sale debt securities of $7,865,000 as compared to Other Comprehensive Income of $8,480,000 from net unrealized gains on available-for-sale debt securities in the first nine months of 2019; and (3) Other Comprehensive Income from defined benefit plans of $53,000 for the nine months ended September 30, 2020 as compared to Other Comprehensive Income of $150,000 for the first nine months of 2019.

​

​

ITEM 4. CONTROLS AND PROCEDURES

The Corporation’s management, under the supervision of and with the participation of the Corporation’s Chief Executive Officer and Chief Financial Officer, has carried out an evaluation of the design and effectiveness of the Corporation’s disclosure controls and procedures as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report. This evaluation did not include an assessment of those disclosure controls and procedures that are involved in, and did not include an assessment of, internal control over financial reporting as it relates to Covenant Financial, Inc. 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.

​

Except as described in the following paragraph, there were no significant changes in the Corporation’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or that are reasonably likely to affect, our internal control over financial reporting.

​

The Covenant Financial, Inc. acquisition was completed July 1, 2020, and during the third quarter 2020 the Corporation began the process of integrating processes and internal control over financial reporting for the former Covenant locations into those of the Corporation. Through August 24, 2020, information related to former Covenant loans, deposits and other customer data was processed using Covenant’s legacy computer system. Effective August 24, 2020, the integration of Covenant’s core customer data system into the Corporation’s system was completed. Though completion of the Covenant core system conversion was a significant milestone, at September 30, 2020, the Corporation’s management had not yet completed changes to processes, information technology systems and other components of internal control over financial reporting as part of integration activities.

​

​

89

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

PART II – OTHER INFORMATION

Item 1.       Legal Proceedings

The Corporation and C&N Bank are involved in various legal proceedings incidental to their business. Management believes the aggregate liability, if any, resulting from such pending and threatened legal proceedings will not have a material, adverse effect on the Corporation’s financial condition or results of operations.

​

Item 1A.    Risk Factors

Except for the risk factor described immediately below, there have been no material changes from the risk factors previously disclosed in Item 1A of the Corporation’s Form 10-K filed February 20, 2020.

Coronavirus Outbreak - In December 2019, a coronavirus (COVID-19) was reported in China, and, in March 2020, the World Health Organization declared it a pandemic. Since first being reported in China, the coronavirus has spread to additional countries including the United States.

In response, many state and local governments, including the Commonwealth of Pennsylvania, have instituted emergency restrictions that have substantially limited the operation of non-essential businesses and the activities of individuals. It has been widely reported that these restrictions have resulted in significant adverse effects for many different types of businesses, particularly those in the travel, hospitality and food and beverage industries, among many others, and has resulted in a significant number of layoffs and furloughs of employees nationwide and in the regions in which the Corporation operates. The ultimate effect of COVID-19 on the local or broader economy is not known nor is the ultimate length of the restrictions described and any accompanying effects. Moreover, the Federal Reserve has taken action to lower the Federal Funds rate, which 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 the coronavirus and actions taken to contain the coronavirus or its impact, among others.

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; declines in the demand for loans and other banking services and products; declines in demand resulting from adverse impacts of the disease on businesses deemed to be “non-essential” by governments; branch or office closures and business interruptions; and efforts to integrate the businesses of the Corporation and Covenant.

​

Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

90

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The following table sets forth a summary of the purchases by the Corporation of its common stock during the third quarter 2020.

​

​

​

​

​

​

​

​

​

​

​

​

    

​

    

​

​

    

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

July 1 - 31, 2020

 

0

​

$

0

 

0

 

600,000

August 1 - 31, 2020

 

0

​

$

0

 

0

 

600,000

September 1 - 30, 2020

 

0

​

$

0

 

0

 

600,000

​

Note to Table: Effective April 21, 2016, the Corporation’s Board of Directors approved a treasury stock repurchase program. Under this stock repurchase program, the Corporation is authorized to repurchase up to 600,000 shares of the Corporation’s common stock. The Board of Directors’ April 21, 2016 authorization provides that: (1) the treasury stock repurchase program shall be effective when publicly announced and shall continue thereafter until suspended or terminated by the Board of Directors, in its sole discretion; and (2) all shares of common stock repurchased pursuant to the new program shall be held as treasury shares and be available for use and reissuance for purposes as and when determined by the Board of Directors including, without limitation, pursuant to the Corporation’s Dividend Reinvestment and Stock Purchase Plan and its equity compensation program. To date, no purchases have been made under this repurchase program.

​

​

Item 3.       Defaults Upon Senior Securities

None

​

Item 4.       Mine Safety Disclosures

Not applicable

​

Item 5.       Other Information

None

​

​

91

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

​

Item 6.       Exhibits

​

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(ii) of The Corporation’s Form S-4/A filed April 20, 2020

​

 

 

4.

Instruments defining the rights of Security holders, including Indentures

 

Not applicable

​

 

 

10.

Material Contracts

 

Not applicable

​

​

​

​

​

 

 

15.

Letter re: unaudited interim information

 

Not applicable

​

 

 

18.

Letter re: change in accounting principles

 

Not applicable

​

 

 

22.

Published report regarding matters submitted to vote of security holders

 

Not applicable

​

 

 

23.

Consents of experts and counsel

 

Not applicable

​

 

 

24.

Power of attorney

 

Not applicable

​

 

 

31.

Rule 13a-14(a)/15d-14(a) certifications:

 

 

​

​

​

​

31.1

Certification of Chief Executive Officer

 

Filed herewith

​

​

​

​

31.2

Certification of Chief Financial Officer

 

Filed herewith

 

​

 

 

32.

Section 1350 certifications

 

Filed herewith

 

​

 

 

99.

Additional exhibits

 

Not applicable

 

​

 

 

100.

XBRL-related documents

 

Not applicable

 

​

 

 

101.

Interactive data file

 

Filed herewith

 

​

 

 

104.

Cover page interactive data file

 

Filed herewith

​

​

​

​

92

Table of Contents

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

CITIZENS & NORTHERN CORPORATION

 

 

 

 

 

November 6, 2020

 

By: /s/ J. Bradley Scovill

Date

 

President and Chief Executive Officer

 

 

 

 

 

 

 

November 6, 2020

 

By: /s/ Mark A. Hughes

Date

 

Treasurer and Chief Financial Officer

 

 

​

​

​

​

93

What is the market capitalization of a company?

The market capitalization sometimes referred as Marketcap, is the value of a publicly listed company.
In most cases it can be easily calculated by multiplying the share price with the amount of outstanding shares.

DISCLAIMER

CompaniesMarketCap is not associated in any way with CoinMarketCap.com
Stock prices are delayed, the delay can range from a few minutes to several hours.
Company logos are from the CompaniesLogo.com logo database and belong to their respective copyright holders. Companies Marketcap displays them for editorial purposes only.

Contact

For inquiries or if you want to report a problem write to hello@8marketcap.com

Links

- Privacy policy

- Terms and conditions

© 2025 CompaniesMarketcap.com