What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2021-11-08 compared with 2021-08-06 · 294 added, 225 removed, 1046 unchanged (33% of the section changed)

2 unchanged sentences

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

September 30,

Cash and due from banks:

28 unchanged sentences

authorized 20,000,000 shares;

issued 16,030,172 and outstanding 15,957,512 at June 30, 2021;

issued 16,030,172 and outstanding 15,750,250 at September 30, 2021;

issued 15,982,815 and outstanding 15,911,984 at December 31, 2020

2 unchanged sentences

Treasury stock, at cost;

72,660 shares at June 30, 2021 and 70,831

279,922 shares at September 30, 2021 and 70,831

shares at December 31, 2020

7 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

INTEREST INCOME

11 unchanged sentences

Net interest income

Provision (credit) for loan losses

Net interest income after provision (credit) for loan losses

Provision for loan losses

Net interest income after provision for loan losses

NONINTEREST INCOME

28 unchanged sentences

Three Months Ended

Six Months Ended

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

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

Nine Months Ended

September 30,

Available-for-sale debt securities:

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

Reclassification adjustment for (gains) realized in income

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

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

Unfunded pension and postretirement obligations:

2 unchanged sentences

Other comprehensive (loss) income on unfunded retirement obligations

Other comprehensive income (loss) before income tax

Income tax related to other comprehensive income (loss)

Net other comprehensive income (loss)

Other comprehensive (loss) income before income tax

Income tax related to other comprehensive loss (income)

Net other comprehensive (loss) income

Comprehensive income

3 unchanged sentences

(In Thousands) (Unaudited)

Six Months Ended

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

8 unchanged sentences

Deferred income taxes

(Increase) decrease in fair value of servicing rights

Decrease in fair value of servicing rights

Gains on sales of loans, net

2 unchanged sentences

Decrease (increase) in accrued interest receivable and other assets

(Decrease) increase in accrued interest payable and other liabilities

Decrease in accrued interest payable and other liabilities

Net Cash Provided by Operating Activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Net cash and cash equivalents provided by business combination

Purchase of certificates of deposit

10 unchanged sentences

Proceeds from sale of foreclosed assets

Net Cash Used in Investing Activities

Net Cash (Used in) Provided by Investing Activities

CASH FLOWS FROM FINANCING ACTIVITIES:

13 unchanged sentences

CASH AND CASH EQUIVALENTS, END OF PERIOD

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands) (Unaudited)

Nine Months Ended

September 30,

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Increase in accrued purchase of available-for-sale debt securities

Accrued sale of available-for-sale securities

Accrued income from life insurance claim

Assets acquired through foreclosure of real estate loans

Leased assets obtained in exchange for new operating lease liabilities

Interest paid

Income taxes paid

NONCASH INVESTING ASSETS ACQUIRED IN BUSINESS COMBINATION:

Available-for-sale debt securities

Loans receivable

Bank-owned life insurance

Foreclosed assets held for sale

NONCASH FINANCING ACTIVITY RELATED TO BUSINESS COMBINATION:

Common stock issued

Liabilities assumed:

Short-term borrowings

Long-term borrowings

Subordinated debt

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

3 unchanged sentences

Comprehensive

Three Months Ended June 30, 2021

Balance, March 31, 2021

Other comprehensive income, net

Three Months Ended September 30, 2021

Balance, June 30, 2021

Other comprehensive loss, net

Cash dividends declared on common stock, $ .28 per share

Shares issued for dividend reinvestment plan

Restricted stock granted

Forfeiture of restricted stock

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

Stock-based compensation expense

Purchase of restricted stock for tax withholding

Treasury stock purchases

Balance, September 30, 2021

Three Months Ended September 30, 2020

Balance, June 30, 2020

Three Months Ended June 30, 2020

Balance, March 31, 2020

Other comprehensive income, net

Other comprehensive loss, net

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

Shares issued for dividend reinvestment plan

Restricted stock granted

Forfeiture of restricted stock

Stock-based compensation expense

Balance, June 30, 2020

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

Balance, September 30, 2020

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

2 unchanged sentences

Comprehensive

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Balance, December 31, 2020

8 unchanged sentences

Treasury stock purchases

Balance, June 30, 2021

Six Months Ended June 30, 2020

Balance, September 30, 2021

Nine Months Ended September 30, 2020

Balance, December 31, 2019

7 unchanged sentences

Purchase of restricted stock for tax withholding

Balance, June 30, 2020

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

Balance, September 30, 2020

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

11 unchanged sentences

Certain 2020 information has been reclassified for consistency with the 2021 presentation.

Operating results reported for the six-month period ended June 30, 2021 might not be indicative of the results for the year ending December 31, 2021.

Operating results reported for the nine-month period ended September 30, 2021 might not be indicative of the results for the year ending December 31, 2021.

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

30 unchanged sentences

The assets purchased and liabilities assumed in the merger were recorded at their estimated fair values at the time of closing, subject to refinement for up to one year after the closing date.

There were no adjustments to the fair value measurements of assets acquired or liabilities assumed in the six months ended June 30, 2021.

Merger-related expenses related to the acquisition of Covenant totaled $ 983,000 in the second quarter 2020 and $ 1,124,000 in the six months ended June 30, 2020.

There were no merger-related expenses in the six months ended June 30, 2021.

There were no adjustments to the fair value measurements of assets acquired or liabilities assumed in the nine months ended September 30, 2021.

Merger-related expenses related to the acquisition of Covenant totaled $ 6,402,000 in the third quarter 2020 and $ 7,526,000 in the nine months ended September 30, 2020.

There were no merger-related expenses in the nine months ended September 30, 2021.

PER SHARE DATA

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Dividends and undistributed earnings allocated to participating securities

10 unchanged sentences

Anti-dilutive stock options are excluded from earnings per share calculations.

There were no anti-dilutive instruments in the three-month and six month periods ended June 30, 2021.

Weighted-average common shares available from anti-dilutive instruments totaled 39,012 shares in the three-month period ended June 30, 2020 and 19,506 shares in the six-month period ended June 30, 2020.

There were no anti-dilutive instruments in the three-month and nine month periods ended September 30, 2021.

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.

COMPREHENSIVE INCOME

2 unchanged sentences

(In Thousands)

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Available-for-sale debt securities:

Unrealized holding gains on available-for-sale debt securities

Unrealized holding losses on available-for-sale debt securities

Reclassification adjustment for (gains) realized in income

Other comprehensive income from available-for-sale debt securities

Other comprehensive loss from available-for-sale debt securities

Unfunded pension and postretirement obligations,

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

Other comprehensive loss on unfunded retirement obligations

Total other comprehensive income

Total other comprehensive loss

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

(In Thousands)

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Available-for-sale debt securities:

Unrealized holding gains on available-for-sale debt securities

Unrealized holding losses on available-for-sale debt securities

Reclassification adjustment for (gains) realized in income

Other comprehensive loss from available-for-sale debt securities

Unfunded pension and postretirement obligations,

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

Total other comprehensive income

Total other comprehensive loss

(In Thousands)

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Available-for-sale debt securities:

8 unchanged sentences

(In Thousands)

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Available-for-sale debt securities:

Unrealized holding gains on available-for-sale debt securities

Reclassification adjustment for (gains) realized in income

Other comprehensive income from available-for-sale debt securities

Unfunded pension and postretirement obligations:

17 unchanged sentences

on Securities

Three Months Ended June 30, 2021

Three Months Ended September 30, 2021

Balance, beginning of period

Other comprehensive income during three months ended June 30, 2021

Other comprehensive loss during three months ended September 30, 2021

Balance, end of period

Three Months Ended June 30, 2020

Three Months Ended September 30, 2020

Balance, beginning of period

Other comprehensive income during three months ended June 30, 2020

Other comprehensive loss during three months ended September 30, 2020

Balance, end of period

2 unchanged sentences

on Securities

Income (Loss)

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Balance, beginning of period

Other comprehensive loss during six months ended June 30, 2021

Other comprehensive loss during nine months ended September 30, 2021

Balance, end of period

Six Months Ended June 30, 2020

Nine Months Ended September 30, 2020

Balance, beginning of period

Other comprehensive income during six months ended June 30, 2020

Other comprehensive income during nine months ended September 30, 2020

Balance, end of period

CASH AND DUE FROM BANKS

Cash and due from banks at June 30, 2021 and December 31, 2020 include the following:

Cash and due from banks at September 30, 2021 and December 31, 2020 include the following:

(In Thousands)

September 30,

Cash and cash equivalents

8 unchanged sentences

In March 2020, the Federal Reserve Board reduced reserve requirements for U.S.

Accordingly, C&N Bank had no required reserves at June 30, 2021 and December 31, 2020.

Accordingly, C&N Bank had no required reserves at September 30, 2021 and December 31, 2020.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Amortized cost and fair value of available-for-sale debt securities at June 30, 2021 and December 31, 2020 are summarized as follows:

Amortized cost and fair value of available-for-sale debt securities at September 30, 2021 and December 31, 2020 are summarized as follows:

(In Thousands)

June 30, 2021

September 30, 2021

Obligations of the U.S.

21 unchanged sentences

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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 June 30, 2021 and December 31, 2020:

June 30, 2021

September 30, 2021

Less Than 12 Months

26 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Gross realized gains from sales

2 unchanged sentences

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 June 30, 2021.

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, 2021.

Actual maturities may differ from contractual maturities because counterparties may have the right to call or prepay obligations with or without call or prepayment penalties.

(In Thousands)

June 30, 2021

September 30, 2021

Due in one year or less

10 unchanged sentences

In the table above, mortgage-backed securities and collateralized mortgage obligations are shown in one period.

Investment securities carried at $ 250,123,000 at June 30, 2021 and $ 247,373,000 at December 31, 2020 were pledged as collateral for public deposits, trusts and certain other deposits as provided by law.

Investment securities carried at $ 254,062,000 at September 30, 2021 and $ 247,373,000 at December 31, 2020 were pledged as collateral for public deposits, trusts and certain other deposits as provided by law.

See Note 9 for information concerning securities pledged to secure borrowing arrangements and Note 12 for information related to securities pledged against interest rate swap obligations.

1 unchanged sentence

Consideration is given to (1) the length of time and the extent to which the fair value has been less than cost, (2) the financial condition and near-term prospects of the issuer, and (3) whether the Corporation intends to sell the security or more likely than not will be required to sell the security before its anticipated recovery.

A summary of information management considered in evaluating debt and equity securities for OTTI at June 30, 2021 is provided below.

A summary of information management considered in evaluating debt and equity securities for OTTI at September 30, 2021 is provided below.

Debt Securities

At June 30, 2021 and December 31, 2020, management performed an assessment for possible OTTI of the Corporation’s debt securities on an issue-by-issue basis, relying on information obtained from various sources, including publicly available financial data, ratings by external agencies, brokers and other sources.

At September 30, 2021 and December 31, 2020, management performed an assessment for possible OTTI of the Corporation’s debt securities on an issue-by-issue basis, relying on information obtained from various sources, including publicly available financial data, ratings by external agencies, brokers and other sources.

The extent of individual analysis applied to each security depended on the size of the Corporation’s investment, as well as management’s perception of the credit risk associated with each security.

Based on the results of the assessment, management believes impairment of debt securities at June 30, 2021 and December 31, 2020 to be temporary.

Based on the results of the assessment, management believes impairment of debt securities at September 30, 2021 and December 31, 2020 to be temporary.

Equity Securities

2 unchanged sentences

There is no active market for FHLB-Pittsburgh stock, and it must ordinarily be redeemed by FHLB-Pittsburgh in order to be liquidated.

C&N Bank’s investment in FHLB-Pittsburgh stock, included in Other Assets in the consolidated balance sheets, was $ 9,350,000 at June 30, 2021 and $ 9,720,000 at December 31, 2020.

The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at June 30, 2021 and December 31, 2020.

In making this determination, management concluded that recovery of total

C&N Bank’s investment in FHLB-Pittsburgh stock, included in Other Assets in the consolidated balance sheets, was $ 9,400,000 at September 30, 2021 and $ 9,720,000 at December 31, 2020.

The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at September 30, 2021 and December 31, 2020.

In making this determination, management concluded that

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

outstanding par value, which equals the carrying value, is expected.

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 has a marketable equity security included in other assets in the consolidated balance sheets with a carrying value of $ 985,000 at June 30, 2021 and $ 1,000,000 at December 31, 2020, consisting exclusively of one mutual fund.

There was an unrealized loss on the mutual fund of $ 15,000 at June 30, 2021 and no unrealized gain or loss on the mutual fund at December 31, 2020.

The Corporation has a marketable equity security included in other assets in the consolidated balance sheets with a carrying value of $ 981,000 at September 30, 2021 and $ 1,000,000 at December 31, 2020, consisting exclusively of one mutual fund.

There was an unrealized loss on the mutual fund of $ 19,000 at September 30, 2021 and no unrealized gain or loss on the mutual fund at December 31, 2020.

Changes in the unrealized gains or losses on this security are included in other noninterest income in the consolidated statements of income.

The loans receivable portfolio is segmented into commercial, residential mortgage and consumer loans.

Loans outstanding at June 30, 2021 and December 31, 2020 are summarized by segment, and by classes within each segment, as follows:

Loans outstanding at September 30, 2021 and December 31, 2020 are summarized by segment, and by classes within each segment, as follows:

Summary of Loans by Type

(In Thousands)

September 30,

Commercial loans secured by real estate

16 unchanged sentences

allowance for loan losses

In the table above, outstanding loan balances are presented net of deferred loan origination fees, net, of $ 7,044,000 at June 30, 2021 and $ 6,286,000 at December 31, 2020.

In the table above, outstanding loan balances are presented net of deferred loan origination fees, net, of $ 5,719,000 at September 30, 2021 and $ 6,286,000 at December 31, 2020.

The Corporation grants loans to individuals as well as commercial and tax-exempt entities.

Commercial, residential and personal loans are made to customers geographically concentrated in northcentral Pennsylvania, the southern tier of New York State and southeastern Pennsylvania.

Commercial, residential and personal loans are made to customers geographically concentrated in northcentral Pennsylvania, the southern tier of New York State, southeastern Pennsylvania and southcentral Pennsylvania.

Although the Corporation has a diversified loan portfolio, a significant portion of its debtors’ ability to honor their contracts is dependent on the local economic conditions within the region.

2 unchanged sentences

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

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

(“SBA”) and Treasury Department.

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.

14 unchanged sentences

The interagency statement also states that during short-term pandemic-related loan modifications, these loans generally should not be reported as nonaccrual.

On December 27, 2020, the President of the United States signed into law the Consolidated Appropriations Act, 2021 (the “CAA”), which both funds the federal government until September 30, 2021 and broadly addresses additional COVID-19 responses and relief.

On December 27, 2020, the President of the United States signed into law the Consolidated Appropriations Act, 2021 (the “CAA”), which includes provisions that broadly address additional COVID-19 responses and relief.

Among the additional relief measures included are certain extensions to elements of the CARES Act, including extension of temporary relief from troubled debt restructurings established under Section 4013 of the CARES Act to the earlier of a) January 1, 2022, or b) the date that is 60 days after the date on which the national COVID-19 emergency terminates.

7 unchanged sentences

Covenant also engaged in PPP lending starting in early April 2020.

As of June 30, 2021, the recorded investment in 1st Draw PPP loans was $ 37,902,000 , including contractual principal balances of $ 38,706,000 , increased by a market rate adjustment on PPP loans acquired from Covenant of $ 50,000 and reduced by net deferred origination fees of $ 854,000 .

As of September 30, 2021, the recorded investment in 1st Draw PPP loans was $ 5,747,000 , including contractual principal balances of $ 5,982,000 , increased by a market rate adjustment on PPP loans acquired from Covenant of $ 2,000 and reduced by net deferred origination fees of $ 237,000 .

The recorded investment in 2nd Draw PPP loans was $ 56,981,000 , including contractual principal balances of $ 59,190,000 reduced by net deferred origination fees of $ 2,208,000 .

Accretion of fees received on 1st Draw PPP loans, net of amortization of the market rate adjustment on PPP loans acquired from Covenant, was $ 722,000 and the accretion of fees on 2nd Draw PPP loans was $ 200,000 in the three-month period ended June 30, 2021.

For the six-month period ended June 30, 2021, accretion of fees received on 1st Draw PPP loans, net of amortization of the market rate adjustment on PPP loans acquired from Covenant, was $ 2,270,000 and the accretion of fees on 2nd Draw PPP loans was $ 297,000 .

For the three-month and six-month periods ended June 30, 2020, accretion of fees on 1st draw PPP loans was $ 337,000 .

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 the merger, Covenant had a

Accretion of fees received on PPP loans, net of amortization of the market rate adjustment on PPP loans acquired from Covenant, was $ 1,409,000 in the three-month period ended September 30, 2021 and $ 467,000 in the three-month period ended September 30, 2020.

Accretion of fees received on PPP loans, net of amortization of the market rate adjustment on PPP loans acquired from Covenant, was $ 3,975,000 in the nine-month period ended September 30, 2021 and $ 804,000 in the nine-month period ended September 30, 2020.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

similar program in place, and these modified loans have been incorporated into the Corporation’s program.

To work with clients impacted by COVID-19, the Corporation offers short-term loan modifications on a case-by-case basis to borrowers who were current in their payments at the inception of the loan modification program.

Prior to the merger, Covenant had a similar program in place, and these modified loans have been incorporated into the Corporation’s program.

These efforts have been designed to assist borrowers as they deal with the crisis and help the Corporation mitigate credit risk.

For loans subject to the program, each borrower 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 June 30, 2021.

Most of the initial modifications under the program became effective in March 2020 or the second quarter 2020 and provided a deferral of interest or principal and interest for 90-to-180 days.

Many of the loans for which deferrals were granted returned to full payment status prior to June 30, 2021, while additional deferrals have been granted on certain loans.

At June 30, 2021, there were 12 loans in deferral status subject to CARES Act Section 4013 guidance with a total recorded investment of $ 6.7 million.

Total loans in deferral status at June 30, 2021 is down from $ 26.0 million at March 31, 2021 and down significantly from 693 loans and $ 241.2 million (including 152 loans and $ 82.5 million reported by Covenant) at June 30, 2020.

The amount of loans in deferral status has fallen over the past several quarters as the local and U.S.

economy has reopened.

The quantity and balances of modifications outstanding under the program and a summary of their risk ratings at June 30, 2021 are as follows:

Deferrals Remaining

As of June 30, 2021

(Dollars in Thousands)

COVID-19-related loan modifications:

Accommodation and food services - hotels

Lessors of residential buildings and dwellings

Transportation and warehousing

Real estate rental and leasing - other

Total commercial

Residential mortgage

For the loans in the table above, the deferral periods as of June 30, 2021 expire in the third quarter of 2021.

The Corporation will continue to evaluate requests for additional deferrals on a case-by-case basis.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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, 2021.

Most of the initial modifications under the program became effective in 2020 and provided a deferral of interest or principal and interest for 90-to-180 days.

At September 30, 2021, there were no loans in deferral status under the program.

At December 31, 2020, there were 45 loans with a total recorded investment of $ 37,397,000 , in deferral status under the program.

As described in Note 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 Bancorp, Inc.

2 unchanged sentences

Subsequent to the acquisitions, the Corporation has recognized amortization and accretion of a portion of the market rate adjustments and credit adjustments on non-impaired (performing) loans, and a partial recovery of purchased credit impaired (PCI) loans.

For the three-month and six-month periods ended June 30, 2021 and 2020, adjustments to the initial market rate and credit fair value adjustments of performing loans were recognized as follows:

For the three-month and nine-month periods ended September 30, 2021 and 2020, adjustments to the initial market rate and credit fair value adjustments of performing loans were recognized as follows:

(In Thousands)

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Market Rate Adjustment

Adjustments to gross amortized cost of loans at beginning of period

(Amortization) accretion recognized in interest income

Market rate adjustment recorded in acquisition

Amortization recognized in interest income

Adjustments to gross amortized cost of loans at end of period

1 unchanged sentence

Adjustments to gross amortized cost of loans at beginning of period

Credit adjustment recorded in acquisition

Accretion recognized in interest income

Adjustments to gross amortized cost of loans at end of period

A summary of PCI loans held at June 30, 2021 and December 31, 2020 is as follows:

A summary of PCI loans held at September 30, 2021 and December 31, 2020 is as follows:

(In Thousands)

September 30,

Outstanding balance

6 unchanged sentences

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

As of June 30, 2021 and December 31, 2020, management determined that no allowance for credit losses related to unfunded loan commitments was required.

As of September 30, 2021 and December 31, 2020, management determined that no allowance for credit losses related to unfunded loan commitments was required.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Transactions within the allowance for loan losses, summarized by segment and class, for the three-month and six-month periods ended June 30, 2021 and 2020 were as follows:

Three Months Ended June 30, 2021

March 31, 2021

Transactions within the allowance for loan losses, summarized by segment and class, for the three-month and nine-month periods ended September 30, 2021 and 2020 were as follows:

Three Months Ended September 30, 2021

June 30, 2021

September 30, 2021

(In Thousands)

16 unchanged sentences

Total Allowance for Loan Losses

Three Months Ended June 30, 2020

March 31, 2020

Three Months Ended September 30, 2020

June 30, 2020

September 30, 2020

(In Thousands)

16 unchanged sentences

Total Allowance for Loan Losses

For the three months ended June 30, 2021, the provision for loan losses was $ 744,000 , an increase in expense of $ 920,000 as compared to the credit for loan losses of $ 176,000 for the three months ended June 30, 2020.

The second quarter 2021 provision included a net charge of $ 383,000 related to specific loans (net increase in specific allowances on loans of $ 353,000 and net charge-offs of $ 30,000 ), an increase of $ 367,000 in the collectively determined portion of the allowance and a $ 6,000 decrease in the unallocated portion.

The credit for loan losses in the second quarter 2020 included the benefit of repayment of a loan for less than the full principal balance,

For the three months ended September 30, 2021, the provision for loan losses was $ 1,530,000 , a decrease in expense of $ 411,000 as compared to $ 1,941,000 for the three months ended September 30, 2020.

The third quarter 2021 provision included a net charge of $ 611,000 related to specific loans (net charge-offs of $ 1,205,000 offset by a net decrease in specific allowances on loans of $ 594,000 ), and an increase of $ 919,000 in the collectively determined portion of the allowance.

In the third quarter 2021, the Corporation recorded a partial charge-off of $ 1,194,000 on a commercial loan with an outstanding balance of $ 3,496,000 at the time of the charge-off.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

resulting in a charge-off of $ 107,000 on a commercial loan for which an allowance for loan losses of $ 674,000 had been recorded at March 31, 2020.

Six Months Ended June 30, 2021

partial charge-off amount exceeded the specific allowance of $ 583,000 that had been established on this loan at June 30, 2021.

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 .

September 30,

Nine Months Ended September 30, 2021

(In Thousands)

15 unchanged sentences

Total Allowance for Loan Losses

Six Months Ended June 30, 2020

September 30,

Nine Months Ended September 30, 2020

(In Thousands)

15 unchanged sentences

Total Allowance for Loan Losses

For the six months ended June 30, 2021, the provision for loan losses was $ 1,003,000 , a decrease in expense of $ 349,000 as compared to $ 1,352,000 recorded for the first six months ended June 30, 2020.

The provision for the six months ended June 30, 2021, includes a net charge of $ 565,000 related to specific loans (increase in specific allowances on loans of $ 552,000 and net charge-offs of $ 13,000 ),

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

an increase of $ 352,000 in the collectively determined portion of the allowance and an $ 86,000 increase in the unallocated portion.

In comparison, the provision for loan losses in the first six months of 2020 included the effects of recording a specific allowance of $ 1,193,000 on a commercial loan for which a charge-off of $ 2,219,000 was subsequently recorded in the third quarter 2020.

For the nine months ended September 30, 2021, the provision for loan losses was $ 2,533,000 , a decrease in expense of $ 760,000 as compared to $ 3,293,000 recorded for the nine months ended September 30, 2020.

The provision for the nine months ended September 30, 2021, includes the impact of a charge-off of $ 1,194,000 on a commercial loan with an ouststanding balance of $ 3,496,000 , as previously discussed.

In comparison, the provision for loan losses in the first nine months of 2020 included the impact of the $ 2,219,000 charge-off of a commercial loan of $ 3,500,000 .

In determining the larger loan relationships for detailed assessment under the specific allowance component, the Corporation uses an internal risk rating system.

5 unchanged sentences

Loans not classified are included in the “Pass” column in the table that follows.

The following tables summarize the aggregate credit quality classification of outstanding loans by risk rating as of June 30, 2021 and December 31, 2020:

June 30, 2021

The following tables summarize the aggregate credit quality classification of outstanding loans by risk rating as of September 30, 2021 and December 31, 2020:

September 30, 2021

(In Thousands)

35 unchanged sentences

Total residential mortgage

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 June 30, 2021 and December 31, 2020.

June 30, 2021

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, 2021 and December 31, 2020.

September 30, 2021

Allowance for Loan Losses:

37 unchanged sentences

Total residential mortgage

Summary information related to impaired loans at June 30, 2021 and December 31, 2020 is provided in the table immediately below.

Summary information related to impaired loans at September 30, 2021 and December 31, 2020 is provided in the table immediately below.

(In Thousands)

June 30, 2021

September 30, 2021

December 31, 2020

13 unchanged sentences

Total with a related allowance recorded

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

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

proceeds if the Corporation were to sell the property.

The total allowance related to these two borrowers was $ 140,000 at June 30, 2021 and $ 153,000 at December 31, 2020.

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.

The total allowance related to these two borrowers was $ 139,000 at September 30, 2021 and $ 153,000 at December 31, 2020.

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

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Commercial loans secured by real estate

14 unchanged sentences

(In Thousands)

June 30, 2021

September 30, 2021

December 31, 2020

13 unchanged sentences

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

PCI loans with a total recorded investment of $ 6,733,000 at June 30, 2021 and $ 6,841,000 at December 31, 2020 are classified as nonaccrual.

PCI loans with a total recorded investment of $ 6,624,000 at September 30, 2021 and $ 6,841,000 at December 31, 2020 are classified as nonaccrual.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The table below presents a summary of the contractual aging of loans as of June 30, 2021 and December 31, 2020.

The table below presents a summary of the contractual aging of loans as of September 30, 2021 and December 31, 2020.

Loans modified under the Corporation’s program designed to work with clients impacted by COVID-19, as described above, are included in the current and past due less than 30 days category in the table that follows.

(In Thousands)

As of June 30, 2021

As of September 30, 2021

As of December 31, 2020

18 unchanged sentences

Nonaccrual loans are included in the contractual aging in the immediately preceding table.

A summary of the contractual aging of nonaccrual loans at June 30, 2021 and December 31, 2020 is as follows:

A summary of the contractual aging of nonaccrual loans at September 30, 2021 and December 31, 2020 is as follows:

(In Thousands)

June 30, 2021 Nonaccrual Totals

September 30, 2021 Nonaccrual Totals

December 31, 2020 Nonaccrual Totals

1 unchanged sentence

Loans classified as TDRs are designated as impaired.

The outstanding balance of loans subject to TDRs, as well as contractual aging information at June 30, 2021 and December 31, 2020 is as follows:

The outstanding balance of loans subject to TDRs, as well as contractual aging information at September 30, 2021 and December 31, 2020 is as follows:

(In Thousands)

June 30, 2021 Totals

September 30, 2021 Totals

December 31, 2020 Totals

At June 30, 2021 and December 31, 2020, 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 six-month periods ended June 30, 2021 and 2020 are as follows:

At September 30, 2021 and December 31, 2020, 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, 2021 and 2020 are as follows:

(Balances in Thousands)

1 unchanged sentence

Three Months Ended

June 30, 2021

June 30, 2020

Residential mortgage - first liens,

Reduced monthly payments for a fifteen-month period

Commercial and industrial,

Interest only payments for a nine-month period

September 30, 2021

September 30, 2020

Home equity lines of credit,

Reduced monthly payments for an eighteen-month period

Commercial loans secured by real estate,

Principal and interest payment deferral non-COVID related

Multi-family (5 or more) residential,

Principal and interest payment deferral non-COVID related

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

(Balances in Thousands)

Six Months Ended

June 30, 2021

June 30, 2020

Nine Months Ended

September 30, 2021

September 30, 2020

Residential mortgage - first liens:

5 unchanged sentences

Reduced monthly payments and extended maturity date

Commercial and industrial,

Reduced monthly payments for an eighteen-month period

Commercial loans secured by real estate:

Interest only payments for a nine-month period

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

In the second quarters of 2021 and 2020, there were no defaults on loans for which TDRs were entered into within the previous 12 months.

In the six-month periods ended June 30, 2021 and 2020, defaults on loans for which modifications that were considered to be TDR and were entered into within the previous 12 months are summarized as follows:

Principal and interest payment deferral non-COVID related

Multi-family (5 or more) residential,

Principal and interest payment deferral non-COVID related

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 third quarter 2020 and included in the table above.

At December 31, 2020, the Corporation increased the specific allowance for loan losses related to this credit to $ 416,000 , where it remains at September 30, 2021.

The other loans for which TDRs were granted in the three-month and nine-month periods ended September 30, 2021 and 2020 had no specific impact on the provision or allowance for loan losses.

In the three-month and nine-month periods ended September 30, 2021 and 2020, defaults on loans for which modifications that were considered to be TDR and were entered into within the previous 12 months are summarized as follows:

(Balances in Thousands)

Six Months Ended

June 30, 2021

June 30, 2020

Three Months Ended

September 30, 2021

September 30, 2020

Commercial loans secured by real estate

(Balances in Thousands)

Nine Months Ended

September 30, 2021

September 30, 2020

Commercial loans secured by real estate

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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,

Foreclosed residential real estate

1 unchanged sentence

(In Thousands)

September 30,

Residential real estate in process of foreclosure

2 unchanged sentences

(In Thousands)

September 30,

Accumulated amortization

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Amortization expense

Goodwill represents the excess of the cost of acquisitions over the fair value of the net assets acquired.

At June 30, 2021 and December 31, 2020, the net carrying value of goodwill was $ 52,505,000 .

There were no changes in the carrying value of goodwill in the three-month or six-month periods ended June 30, 2021 and 2020.

At September 30, 2021 and December 31, 2020, the net carrying value of goodwill was $ 52,505,000 .

Changes in the carrying amount of goodwill are summarized in the following table:

(In Thousands)

Three Months Ended

Nine Months Ended

September 30,

Balance, beginning of period

Goodwill arising in business combination

Balance, end of period

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

3 unchanged sentences

(In Thousands)

September 30,

FHLB-Pittsburgh borrowings

1 unchanged sentence

Total short-term borrowings

The Corporation had available credit with other correspondent banks totaling $ 45,000,000 at June 30, 2021 and December 31, 2020.

The Corporation had available credit with other correspondent banks totaling $ 45,000,000 at September 30, 2021 and December 31, 2020.

These lines of credit are primarily unsecured.

No amounts were outstanding at June 30, 2021 or December 31, 2020.

No amounts were outstanding at September 30, 2021 or December 31, 2020.

The Corporation has a line of credit with the Federal Reserve Bank of Philadelphia’s Discount Window.

At June 30, 2021, the Corporation had available credit in the amount of $ 14,588,000 on this line with no outstanding advances.

At September 30, 2021, the Corporation had available credit in the amount of $ 14,482,000 on this line with no outstanding advances.

At December 31, 2020, the Corporation had available credit in the amount of $ 14,654,000 on this line with no outstanding advances.

As collateral for this line, the Corporation has pledged available-for-sale securities with a carrying value of $ 15,035,000 at June 30, 2021 and $ 15,126,000 at December 31, 2020.

As collateral for this line, the Corporation has pledged available-for-sale securities with a carrying value of $ 14,936,000 at September 30, 2021 and $ 15,126,000 at December 31, 2020.

The Corporation engages in repurchase agreements with certain commercial customers.

These agreements provide that the Corporation sells specified investment securities to the customers on an overnight basis and repurchases them on the following business day.

The weighted average rate paid by the Corporation on customer repurchase agreements was 0.10 %at June 30, 2021 and December 31, 2020.

The carrying value of the underlying securities was $ 2,150,000 at June 30, 2021 and $ 1,980,000 at December 31, 2020.

The FHLB-Pittsburgh loan facility is collateralized by qualifying loans secured by real estate with a book value totaling $ 1,038,860,000 at June 30, 2021 and $ 1,049,690,000 at December 31, 2020.

The weighted average rate paid by the Corporation on customer repurchase agreements was 0.10 %at September 30, 2021 and December 31, 2020.

The carrying value of the underlying securities was $ 1,900,000 at September 30, 2021 and $ 1,980,000 at December 31, 2020.

The FHLB-Pittsburgh loan facility is collateralized by qualifying loans secured by real estate with a book value totaling $ 1,044,507,000 at September 30, 2021 and $ 1,049,690,000 at December 31, 2020.

Also, the FHLB-Pittsburgh loan facility requires the Corporation to invest in established amounts of FHLB-Pittsburgh stock.

The carrying values of the Corporation’s holdings of FHLB-Pittsburgh stock (included in other assets in the consolidated balance sheets) were $ 9,350,000 at June 30, 2021 and $ 9,720,000 at December 31, 2020.

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 June 30, 2021.

The Corporation’s total credit facility with FHLB-Pittsburgh was $ 749,994,000 at June 30, 2021, including an unused (available) amount of $ 705,819,000 .

The carrying values of the Corporation’s holdings of FHLB-Pittsburgh stock (included in other assets in the consolidated balance sheets) were $ 9,400,000 at September 30, 2021 and $ 9,720,000 at December 31, 2020.

In addition to the short-term and long-term borrowings shown in these tables, there are letters of credit from FHLB-Pittsburgh outstanding in the amount of $ 5,584,000 at September 30, 2021 and $ 400,000 at December 31, 2020.

The Corporation’s total credit facility with FHLB-Pittsburgh was $ 752,847,000 at September 30, 2021, including an unused (available) amount of $ 709,012,000 .

At December 31, 2020, the Corporation’s total credit facility with FHLB-Pittsburgh was $ 771,199,000 , including an unused (available) amount of $ 698,977,000 .

At June 30, 2021, there were no outstanding short-term borrowings from FHLB-Pittsburgh.

At September 30, 2021, there were no outstanding short-term borrowings from FHLB-Pittsburgh.

At December 31, 2020, short-term borrowings from FHLB-Pittsburgh included five advances totaling $ 18,000,000 par value, with a weighted average effective interest rate of 0.43 %.

2 unchanged sentences

(In Thousands)

September 30,

Loans maturing in 2021 with a weighted-average rate of 0.94 %

2 unchanged sentences

Loans maturing in 2024 with a weighted-average rate of 0.75 %

Loan maturing in 2025 with a rate of 4.91 %

Loan maturing in 2025 with an average rate of 4.91 %

Total long-term FHLB-Pittsburgh borrowings

Weighted-average rates are presented as of June 30, 2021.

Weighted-average rates are presented as of September 30, 2021.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

5 unchanged sentences

Debt issuance costs are amortized over the term of the Senior Notes as an adjustment of the effective interest rate.

In the three-month and six-month periods ended June 30, 2021, amortization of debt issuance costs associated with the Senior Notes totaling $ 7,000 was included in interest expense in the unaudited consolidated statements of income.

At June 30, 2021 and December 31, 2020, outstanding Senior Notes are as follows:

Amortization of debt issuance costs associated with the Senior Notes totaling $ 15,000 in the third quarter 2021 and $ 22,000 in the nine-month period ended September 30, 2021 was included in interest expense in the unaudited consolidated statements of income.

At September 30, 2021 and December 31, 2020, outstanding Senior Notes are as follows:

(In Thousands)

September 30,

Senior Notes with an aggregate par value of $ 15,000,000 ;

14 unchanged sentences

Debt issuance costs are amortized through June 1, 2026 as an adjustment of the effective interest rate.

In the three-month and six-month periods ended June 30, 2021, amortization of debt issuance costs associated with the Subordinated Notes totaling $ 13,000 was included in interest expense in the unaudited consolidated statements of income.

Amortization of debt issuance costs associated with the Subordinated Notes totaling $ 25,000 in the third quarter 2021 and $ 38,000 in the nine-month period ended September 30, 2021 was included in interest expense in the unaudited consolidated statements of income.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

At June 30, 2021 and December 31, 2020, the carrying amounts of subordinated debt agreements are as follows:

At September 30, 2021 and December 31, 2020, the carrying amounts of subordinated debt agreements are as follows:

(In Thousands)

September 30,

Agreements with an aggregate par value of $ 8,000,000 ;

14 unchanged sentences

The 2021 restricted stock awards under the Stock Incentive Plan vest ratably over three years , and the 2021 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 six-month period ended June 30, 2021:

Following is a summary of restricted stock awards granted in the nine-month period ended September 30, 2021:

(Dollars in Thousands)

7 unchanged sentences

Total annual stock-based compensation for the year ending December 31, 2021 is estimated to total $ 1,314,000 .

Total stock-based compensation expense attributable to restricted stock awards amounted to $ 284,000 in the second quarter 2021 and $ 230,000 in the second quarter 2020.

Total stock-based compensation expense attributable to restricted stock awards amounted to $ 625,000 in the six-month period ended June 30, 2021 and $ 424,000 in the six-month period ended June 30, 2020.

Total stock-based compensation expense attributable to restricted stock awards amounted to $ 345,000 in the third quarter 2021 and $ 248,000 in the third quarter 2020.

Total stock-based compensation expense attributable to restricted stock awards amounted to $ 970,000 in the nine-month period ended September 30, 2021 and $ 672,000 in the nine-month period ended September 30, 2020.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

CONTINGENCIES

Litigation Matters

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 the normal course of business, the Corporation is subject to pending and threatened lawsuits in which claims for monetary damages have been 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.

1 unchanged sentence

The Corporation has incurred operational losses from compliance oversight related to trust department tax preparation and administration activities that occurred prior to 2020.

In 2020, the Corporation made changes in internal controls and personnel responsible for trust

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

department tax administration activities.

In 2020, the Corporation made changes in internal controls and personnel responsible for trust department tax administration activities.

Management implemented the changes in internal controls and personnel in an effort to mitigate and prevent the likelihood of new instances of non-compliance from trust department tax administration activities.

There were no losses related to trust department tax compliance matters in the second quarter 2021.

Losses related to trust department tax compliance matters totaled $ 107,000 in the six months ended June 30, 2021, and $ 300,000 in the three-month and six-month periods ended June 30, 2020.

There were no losses related to trust department tax compliance matters in the third quarter 2021.

Losses related to a state tax reporting matter totaled $ 200,000 in the third quarter 2020.

Losses related to trust department tax compliance matters totaled $ 107,000 in the nine months ended September 30, 2021, and $ 500,000 in the nine-month period ended September 30, 2020.

These losses are included in other noninterest expense in the consolidated statements of income.

The balance of accrued interest and other liabilities in the consolidated balance sheets includes $ 429,000 at June 30, 2021 and $ 322,000 at December 31, 2020 related to specific tax compliance matters that have been identified;

The balance of accrued interest and other liabilities in the consolidated balance sheets includes $ 429,000 at September 30, 2021 and $ 322,000 at December 31, 2020 related to specific tax compliance matters that have been identified;

however, no estimate can be made of the amount of additional expenses that may be incurred related to these matters.

8 unchanged sentences

As the interest rate swaps associated with this program do not meet the hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.

The aggregate notional amount of interest rate swaps was $ 126,716,000 at June 30, 2021 and $ 135,740,000 at December 31, 2020.

There were no interest rate swaps originated in the six-month period ended June 30, 2021.

There were no gross amounts of interest rate swap-related assets and liabilities not offset in the consolidated balance sheets at June 30, 2021.

The net impact on the consolidated statements of income from interest rate swaps was a reduction in interest income on loans of $ 340,000 in the second quarter 2021 and $ 678,000 in the six months ended June 30, 2021.

There were no interest rate swaps in place in the six months ended June 30, 2020.

The table below presents the fair value of the Corporation’s derivative financial instruments as well as their classification on the consolidated balance sheets at June 30, 2021 and December 31, 2020:

The aggregate notional amount of interest rate swaps was $ 123,990,000 at September 30, 2021 and $ 135,740,000 at December 31, 2020.

There were no interest rate swaps originated in the nine-month periods ended September 30, 2021 and 2020.

There were no gross amounts of interest rate swap-related assets and liabilities not offset in the consolidated balance sheets at September 30, 2021.

The net impact on the consolidated statements of income from interest rate swaps was a reduction in interest income on loans of $ 335,000 in the third quarter 2021 and $ 1,013,000 in the nine months ended September 30, 2021 as compared to a reduction in interest income on loans of $ 351,000 in the third quarter 2020 and the nine months ended September 30, 2020.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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, 2021 and December 31, 2020:

(In Thousands)

At June 30, 2021

At September 30, 2021

At December 31, 2020

8 unchanged sentences

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 $ 9,109,000 were pledged as collateral against the Corporation’s liability related to the interest rate swaps at June 30, 2021.

Available-for-sale securities with a carrying value of $ 7,069,000 were pledged as collateral against the Corporation’s liability related to the interest rate swaps at September 30, 2021.

FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS

1 unchanged sentence

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

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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.

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.

9 unchanged sentences

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.

At June 30, 2021 and December 31, 2020, assets and liabilities measured at fair value and the valuation methods used are as follows:

June 30, 2021

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

At September 30, 2021 and December 31, 2020, assets and liabilities measured at fair value and the valuation methods used are as follows:

September 30, 2021

(In Thousands)

53 unchanged sentences

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

At June 30, 2021 and December 31, 2020, 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:

At September 30, 2021 and December 31, 2020, 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

42 unchanged sentences

Three Months Ended

Six Months Ended

June 30, 2021

June 30, 2020

June 30, 2021

June 30, 2020

Nine Months Ended

September 30, 2021

September 30, 2020

September 30, 2021

September 30, 2020

Servicing rights balance, beginning of period

Originations of servicing rights

Unrealized (loss) gain included in earnings

Unrealized loss included in earnings

Servicing rights balance, end of period

7 unchanged sentences

Indications of value from these sources are generally discounted based on the age of the financial information or the quality of the assets.

At June 30, 2021 and December 31, 2020, quantitative information regarding valuation techniques and the significant unobservable inputs used for nonrecurring fair value measurements using Level 3 methodologies are as follows:

At September 30, 2021 and December 31, 2020, quantitative information regarding valuation techniques and the significant unobservable inputs used for nonrecurring fair value measurements using Level 3 methodologies are as follows:

(Dollars In Thousands)

5 unchanged sentences

Commercial and industrial

Liquidation of accounts receivable and equipment

Discount to borrower's financial statement value

Commercial and industrial

Liquidation of assets

42 unchanged sentences

(In Thousands)

June 30, 2021

September 30, 2021

December 31, 2020

4 unchanged sentences

Accrued interest receivable

Interest rate swap agreements

Financial liabilities:

5 unchanged sentences

Accrued interest payable

Interest rate swap agreements

The Corporation has commitments to extend credit and has issued standby letters of credit.

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements