8-K - CZNC - Equibles

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

January 20, 2022

Date of Report (Date of earliest event reported)

Citizens & Northern Corporation

(Exact name of registrant as specified in its charter)


Pennsylvania	****	0-16084	****	23-2451943
(State or other jurisdiction		(Commission		(IRS Employer
of incorporation)		File Number)		Ident. No.)

90-92 Main Street , Wellsboro , Pennsylvania				16901
(Address of principal executive offices)				(Zip Code)

( 570 ) 724-3411

Registrant’s telephone number, including area code

N/A

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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 per share	CZNC	Nasdaq Capital Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

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. ☐

ITEM 2.02. Results of Operations and Financial Condition

Citizens & Northern Corporation (the “Company”) announced unaudited, consolidated financial results for the year ended December 31, 2021. On January 20, 2022, the Company issued a press release titled “C&N Declares Dividend and Announces Fourth Quarter 2021 Unaudited Financial Results,” a copy of which is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference. The Company’s “banCNotes,” a report that includes unaudited financial information, will be mailed to shareholders on or about January 27, 2022. A copy of the unaudited quarterly financial information included in banCNotes is furnished as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference. Also, supplemental, unaudited financial information is furnished as Exhibit 99.3 to this Current Report on Form 8-K and is incorporated herein by reference.

ITEM 9.01. Financial Statements and Exhibits

(a) Not applicable.

(b) Not applicable.

(d) Exhibits.


	Exhibit 99.1: Press Release issued by Citizens & Northern Corporation dated January 20, 2022, titled “C&N Declares Dividend and Announces Fourth Quarter 2021 Unaudited Financial Results.”

	Exhibit 99.2: Unaudited financial information included in “banCNotes” report to be mailed to shareholders on or about January 27, 2022.

	Exhibit 99.3: Supplemental, unaudited financial information.

	Exhibit 104: Cover Page Interactive Data File (embedded in the cover page formatted in Inline XBRL)

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 hereunto duly authorized.

	CITIZENS & NORTHERN CORPORATION
Dated: January 20, 2022	By:	/s/ Mark A. Hughes
		Mark A. Hughes
		Treasurer and Chief Financial Officer

Exhibit 99.1

	Contact: Charity Frantz
January 20, 2022	570-724-0225
	charityf@cnbankpa.com

C&N DECLARES DIVIDEND AND ANNOUNCES FOURTH QUARTER 2021 UNAUDITED FINANCIAL RESULTS

For Immediate Release:

Wellsboro, PA – Citizens & Northern Corporation (“C&N”) (NASDAQ: CZNC) announced its most recent dividend declaration and its unaudited, consolidated financial results for the three-month and annual periods ended December 31, 2021. Brad Scovill, President and CEO, said “C&N delivered a strong fourth quarter performance and record net income for 2021 of $30.6 million. These results were supported by our relationship-based business model and recent acquisitions, as well as the government’s response to COVID-19 and subsequent economic rebound.”

Dividend Declared

On January 20, 2022, C&N’s Board of Directors declared a regular quarterly cash dividend of $0.28 per share. The dividend is payable on February 11, 2022 to shareholders of record as of January 31, 2022.

Unaudited Financial Information

Net income was $0.46 per diluted share in the fourth quarter 2021, down from $0.47 in the third quarter 2021 and up $0.03 from $0.43 in the fourth quarter 2020. For the year ended December 31, 2021, net income per diluted share was $1.92, up from $1.30 per share for the year ended December 31, 2020.

As described below, earnings of $0.46 per share for the fourth quarter 2021 were 11.5% lower than fourth quarter 2020 non-U.S. generally accepted accounting principles (U.S. GAAP) earnings per share of $0.52 as adjusted to exclude the impact of merger-related expenses and loss on prepayment of borrowings. For the year ended December 31, 2021, earnings of $1.92 per share were 6.7% higher than the year ended December 31, 2020 non-U.S. GAAP earnings per share of $1.80 as adjusted to exclude the impact of merger-related expenses and loss on prepayment of borrowings. Effective July 1, 2020, C&N acquired Covenant Financial, Inc. (“Covenant”). C&N incurred pre-tax merger-related expenses related to the Covenant transaction of $7.7 million for the year ended December 31, 2020, including expenses totaling $0.2 million in the fourth quarter 2020. In the fourth quarter 2020, C&N incurred a pre-tax loss of $1.6 million on prepayment of long-term borrowings (Federal Home Loan Bank of Pittsburgh advances) with outstanding balances totaling $48.0 million. The borrowings included several advances maturing in 2022 through 2024 with a weighted-average interest rate of 1.77% and a weighted-average duration of 2.3 years.

The following table provides a reconciliation of C&N’s unaudited earnings results under U.S. GAAP to comparative non-U.S. GAAP results excluding merger-related expenses and loss on prepayment of borrowings. Management believes disclosure of unaudited earnings results for the periods presented, adjusted to exclude the impact of these items, provides useful information to investors for comparative purposes.

RECONCILIATION OF UNAUDITED U.S. GAAP NET INCOME AND

DILUTED EARNINGS PER SHARE TO NON-U.S. GAAP MEASURE

(Dollars In Thousands, Except Per Share Data)

(Unaudited)


	4th Quarter 2021								4th Quarter 2020
	Income						Diluted		Income						Diluted
	Before						Earnings		Before						Earnings
	Income		Income				per		Income		Income				per
	Tax		Tax		Net		Common		Tax		Tax		Net		Common
	Provision		Provision		Income		Share		Provision		Provision		Income		Share
Earnings Under U.S. GAAP	$	8,985	$	1,677	$	7,308	$	0.46	$	8,251	$	1,481	$	6,770	$	0.43
Add: Merger-Related Expenses (1)		0		0		0				182		38		144
Add: Loss on Prepayment of Borrowings (1)		0		0		0				1,636		344		1,292
Adjusted Earnings (Non-U.S. GAAP)	$	8,985	$	1,677	$	7,308	$	0.46	$	10,069	$	1,863	$	8,206	$	0.52


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

(1)	Income tax has been allocated based on a marginal income tax rate of 21%. The effect on the income tax provision is adjusted for the estimated nondeductible portion of the expenses. Merger-related expenses are for the Covenant Financial, Inc. (“Covenant”) acquisition completed on July 1, 2020.

Additional highlights related to C&N’s fourth quarter and annual unaudited U.S. GAAP earnings results as compared to the third quarter 2021 and comparative periods of 2020 are presented below.

Fourth Quarter 2021 as Compared to Third Quarter 2021

Net income was $7,308,000, or $0.46 per diluted share, for the fourth quarter 2021 as compared to $7,399,000, or $0.47 per diluted share, in the third quarter 2021.

●

Net interest income totaled $19,716,000 in the fourth quarter 2021, up $257,000 from the third quarter. The net interest rate spread increased 0.06%, as the average yield on earning assets increased 0.04% to 3.93% while the average rate on interest-bearing liabilities decreased 0.02% to 0.41%. The net interest margin was 3.65% in the fourth quarter 2021, up from 3.59% in the third quarter. Total interest and fees from loans originated under the U.S. Small Business Administration (SBA) Paycheck Protection Program (PPP) were $1,644,000 in the fourth quarter 2021, a slight increase from the third quarter 2021 total of $1,639,000. Income from PPP loans included fees recognized upon the SBA’s repayment of loans tied to the forgiveness of the underlying borrowers. Accretion and amortization of purchase accounting adjustments had a net positive impact on net interest income of $431,000 in the fourth quarter 2021 as compared to a net positive impact of $563,000 in the third quarter 2021.

●

The provision for loan losses was $1,128,000 in the fourth quarter 2021, a decrease in expense of $402,000 from the third quarter 2021 provision of $1,530,000. The fourth quarter provision included a net charge of $148,000 related to specific loans (net charge-offs of $291,000 offset by a net decrease in specific allowances on loans of $143,000), and an increase of $980,000 in the collectively determined portion of the allowance. The increase in the collectively determined portion of the allowance reflected the impact of an increase in volume of commercial loans, excluding PPP loans. In the fourth quarter 2021, C&N recorded a partial charge-off of $269,000 on a commercial loan for which a partial charge-off of $1,194,000 was recorded in the third quarter. At December 31, 2021, the outstanding balance on this loan was $1,391,000.

●	Noninterest income of $6,416,000 in the fourth quarter 2021, increased $57,000 from the third quarter 2021 amount. Significant variances included the following:

Ø	Trust revenue of $1,980,000 increased $159,000 from the third quarter 2021 total, reflecting the impact of growth in trust assets under management including the impact of market value appreciation.

Ø	Other noninterest income of $743,000 increased $78,000 from the third quarter 2021 total, including a $46,000 gain from a sale of land adjacent to a branch facility.

Ø	Net gains from sales of loans of $642,000 decreased $155,000 from the third quarter 2021 total, reflecting a reduction in volume of residential mortgage loans sold.

Ø	Brokerage and insurance revenue of $468,000 decreased $92,000 from the third quarter 2021 total, due to commissions on lower transaction volume.

●	Noninterest expense of $16,018,000 in the fourth quarter 2021, increased $672,000 from the third quarter 2021 amount. Significant variances included the following:

Ø	Salaries and employee benefits of $9,782,000 increased $355,000 from the third quarter 2021 total, including an increase in health care expense of $345,000 due to higher claims on C&N’s partially self-insured plan, partially offset by stock-based compensation expense decreasing $100,000 consistent with an updated comparison of C&N’s earnings performance to that of defined peer groups.

Ø	Other noninterest expense of $1,999,000 increased $149,000 from the third quarter 2021 total. Within this category, significant variances included the following:

◾	The provision for credit losses on off balance sheet exposures related to residential mortgage loans sold totaled $85,000, with no corresponding expense in the third quarter. At December 31, 2021, the allowance for credit losses on residential mortgage loans sold was $635,000. There have been no charge-offs associated with residential mortgage loans sold through December 31, 2021.
◾	Other increases include subscription and professional association dues of $31,000, other operational losses of $30,000, other loan losses of $24,000, legal fees and expenses of $23,000, and business development expenses of $22,000.
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◾	Gains on other real estate properties totaled $78,000 in the fourth quarter 2021 as compared to net losses of $16,000 in the third quarter.
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●	The income tax provision was $1,677,000 for the fourth quarter 2021, up from $1,566,000 for the third quarter 2021. In the third quarter 2021, the provision for state and local income taxes was reduced based on adjustments to apportionment estimates and other factors.

Fourth Quarter 2021 as Compared to Fourth Quarter 2020

As described above, fourth quarter 2021 net income was $7,308,000. In comparison, fourth quarter 2020 net income was $6,770,000, and excluding merger-related expenses, adjusted (non-U.S. GAAP) earnings were $8,206,000. Other significant variances were as follows:

●

Fourth quarter 2021 net interest income of $19,716,000 was $39,000 lower than the fourth quarter 2020 total. Average outstanding loans decreased $115.2 million, including a reduction in average PPP loans of $112.5 million, and average total deposits increased $87.6 million. The net interest margin for the fourth quarter 2021 was 3.65% as compared to 3.76% for the fourth quarter 2020. The average yield on earning assets of 3.93% for the fourth quarter 2021 was down 0.22% from the fourth quarter 2020, while the average rate on interest-bearing liabilities of 0.41% in the fourth quarter 2021 was 0.14% lower than the comparable fourth quarter 2020 average rate. Interest and fees on PPP loans totaled $1,644,000 in the fourth quarter 2021, an increase of $149,000 over the fourth quarter 2020 amount. Accretion and amortization of purchase accounting adjustments had a net positive impact on net interest income of $431,000 in the fourth quarter 2021 as compared to a net positive impact of $1,273,000 in the fourth quarter 2020.

●

The provision for loan losses was $1,128,000 in the fourth quarter 2021 as compared to $620,000 in the fourth quarter 2020. Details concerning the fourth quarter 2021 provision for loan losses were described previously. The fourth quarter 2020 provision included a net charge of $262,000 related to specific loans (increase in specific allowances on loans of $274,000, partially offset by net recoveries of $12,000) and a charge of $358,000 attributable to increases in the collectively determined portion of the allowance for loan losses.

●	Noninterest income of $6,416,000 in the fourth quarter 2021, decreased $149,000 from the fourth quarter 2020 amount. Significant variances included the following:

Ø	Net gains from sales of loans of $642,000 decreased $830,000 from the fourth quarter 2020 total, as the volume of residential mortgage loans sold in the fourth quarter 2021 was down from the fourth quarter 2020 level.

Ø	Trust revenue of $1,980,000 increased $298,000 from the fourth quarter 2020 total, reflecting the impact of growth in trust assets under management including the impact of market value appreciation.

Ø	Service charges on deposit accounts of $1,296,000 increased $191,000 from the fourth quarter 2020 total, as the volume of consumer and business overdraft and other activity increased.

Ø	Interchange revenue from debit card transactions of $1,001,000 increased $184,000 from the fourth quarter 2020 total, reflecting increases in transaction volumes.

Ø	Brokerage and insurance revenue of $468,000 increased $103,000 from the fourth quarter 2020 total, due to commissions on higher transaction volume.

●	Noninterest expense of $16,018,000 in the fourth quarter 2021, increased $243,000 from the fourth quarter 2020 amount, excluding merger-related expenses and loss on prepayment of borrowings. Significant variances included the following:

Ø	Data processing and telecommunications expense of $1,561,000 increased $204,000 from the fourth quarter 2020 total, including the impact of increases in software licensing and maintenance costs associated with core banking, lending, trust and other functions.

Ø	Professional fees of $560,000 increased $133,000 from the fourth quarter 2020 total, including increases in recruiting services and expense related to the annual strategic planning process.

Salaries and employee benefits of $9,782,000 decreased $216,000 from the fourth quarter 2020 total, including a $723,000 decrease in cash-and-stock-based incentive compensation based on updated comparisons of C&N’s earnings performance to that of defined peer groups in both years, partially offset by an increase in health care expense of $436,000 due to higher claims on C&N’s partially self-insured plan.

●	The income tax provision of $1,677,000 for the fourth quarter 2021 increased $196,000 from $1,481,000 for the fourth quarter 2020, reflecting higher pre-tax income.

Year ended December 31, 2021 as Compared to Year Ended December 31, 2020

Net income for the year ended December 31, 2021 was $30,554,000, or $1.92 per diluted share, while net income for the year ended December 31, 2020 was $19,222,000, or $1.30 per share. Excluding the impact of merger-related expenses and loss on prepayment of borrowings, adjusted (non-U.S. GAAP) earnings for the year ended December 31, 2020 would be $26,648,000 or $1.80 per share. Other significant variances were as follows:

●

For the year ended December 31, 2021, net interest income of $77,939,000 was up $10,374,000 over the 2020 total, reflecting growth mainly attributable to the Covenant acquisition that closed July 1, 2020. Average outstanding loans increased $151.7 million, and average total deposits increased $319.0 million. The net interest margin for the year ended December 31, 2021 was 3.69%, unchanged from 2020. Interest and fees on PPP loans totaled $6,530,000 for the year ended December 31, 2021, an increase of $3,606,000 compared to 2020. Accretion and amortization of purchase accounting adjustments had a net positive impact on net interest income of $2,659,000 for the year ended December 31, 2021 as compared to a net positive impact of $3,272,000 in 2020.

●

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

●	Noninterest income of $25,857,000 for the year ended December 31, 2021, increased $1,513,000 from the total for the year ended December 31, 2020. Significant variances included the following:

Ø	Trust revenue of $7,234,000 increased $913,000 reflecting the impact of growth in average trust assets under management including the impact of market value appreciation.

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

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

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

Ø	Brokerage and insurance revenue of $1,860,000 increased $374,000, due to commissions on higher transaction volume.

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

◾	Income from realization of tax credits was $268,000 higher in 2021 as compared to 2020 due to higher PA Educational Improvement Tax Credit Program donations.
◾	Credit card interchange income increased $144,000 due to higher transaction volume.
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◾	Fee income for providing credit enhancement on mortgage loans sold increased $122,000.
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◾	Other noninterest income decreased $272,000 as C&N recognized income of $279,000 in the third quarter 2020 from a life insurance arrangement in which benefits were split between C&N and heirs of a former employee.
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◾	Dividend income from Federal Home Loan Bank stock decreased $140,000.
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Ø	Net gains from sales of loans totaled $3,428,000 in 2021, a decrease of $1,975,000 from 2020. The decrease reflects a decrease in volume of mortgage loans sold, resulting mainly from lower refinancing activity and overall market conditions.

●	Noninterest expense of $62,472,000 for the year ended December 31, 2021 increased $6,863,000 from the 2020 total, excluding merger-related expenses and loss on prepayment of borrowings. Significant variances included the following:

Total salaries and wages and benefits expenses increased $4,541,000, reflecting inclusion of the former Covenant operations for twelve months in 2021 as compared to six months in 2020, as well as increases in lending, human resources, information technology and other personnel needed to accommodate growth, and increases in health care expense due to higher claims on C&N’s partially self-insured plan.

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

Ø	Professional fees expense increased $551,000, mainly due to increases in recruiting services and PPP loan processing professional fees.

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

Ø	Pennsylvania shares tax expense increased $262,000 reflecting the increase in C&N Bank’s stockholders’ equity.

Ø	Automated teller machine and interchange expense increased $202,000 reflecting increased volume of activity.

Ø	Other noninterest expense increased $197,000. Within this category, significant variances included the following:

◾	FDIC insurance expense totaled $581,000, an increase of $258,000.
◾	Business development expenses totaled $452,000, an increase of $220,000, due primarily to an increase in public relations expense.
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◾	Donations expense increased $208,000, mainly due to an increase in donations associated with the PA Educational Improvement Tax Credit program.
◾	Other increases include legal fees and expenses of $83,000, bank insurance of $56,000, accounting and auditing expense of $51,000, and credit card reward redemption expense of $50,000.
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◾	Other operational losses totaled $199,000, a decrease of $405,000, including a reduction in charges related to Trust Department tax compliance and preparation matters.
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◾	Gains on other real estate properties totaled $100,000 in 2021 as compared to net losses of $146,000 in 2020.
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◾	The allowance for SBA claim adjustments decreased, reflecting more favorable claim results than previously estimated, resulting in a reduction in expense of $236,000 in 2021 as compared to a reduction in expense of $70,000 in 2020.
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●

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

Other Information:

Changes in other unaudited financial information are as follows:

●	Total assets amounted to $2,327,648,000 at December 31, 2021, down from $2,354,896,000 at September 30, 2021 and up 4.0% from $2,239,100,000 at December 31, 2020.

●

Net loans outstanding (excluding mortgage loans held for sale) were $1,551,312,000 at December 31, 2021, down from $1,563,008,000 at September 30, 2021 and down 5.0% from $1,632,824,000 at December 31, 2020. Loans outstanding, excluding PPP loans, totaled $1,537,985,000 at December 31, 2021, an increase of $25,005,000 from total loans excluding PPP loans at September 30, 2021. In comparing outstanding balances at December 31, 2021 and 2020, total commercial loans were down $29.4 million (2.9%), including a reduction in PPP loans of $105.4 million and an increase in other commercial loans of $76.0 million, total residential mortgage loans were lower by $50.8 million (8.2%) and total consumer loans were up $0.8 million (5.2%). The outstanding balance of residential mortgage loans originated and serviced by C&N that have been sold to third parties was $334.7 million at December 31, 2021, up $55.9 million (20.0%) from December 31, 2020.

●

To work with clients impacted by COVID-19, C&N offered short-term loan modifications (deferrals) on a case-by-case basis to borrowers throughout most of 2021 and 2020 who were current in their payments prior to modification. These loans were not reported as past due or troubled debt restructurings during the deferral period. At December 31, 2021 and September 30, 2021, there were no loans in deferral status under the program. In comparison, at December 31, 2020, there were 45 loans with an aggregate recorded investment of $44.6 million in deferral status.

●	Total nonperforming assets as a percentage of total assets was 0.94% at December 31, 2021, down from 1.05% at September 30, 2021 and 1.10% at December 31, 2020. Total nonperforming assets were $21.9 million at December 31, 2021, down from $24.6 million at September 30, 2021 and $24.7 million at December 31, 2020.

●

The allowance for loan losses was $13.5 million at December 31, 2021, or 0.87% of total loans as compared to $12.7 million or 0.81% of total loans at September 30, 2021. In 2020 and 2019, C&N recorded performing loans purchased from other financial institutions at fair value. The calculations of fair value included discounts for credit losses, reflecting an estimate of the present value of credit losses based on market expectations. The total allowance for loan losses and the credit adjustment on purchased non-impaired loans at December 31, 2021 was $16.9 million, or 1.08% of total loans receivable and the credit adjustment. The comparative ratios were 1.05% at September 30, 2021 and December 31, 2020.

●	Deposits totaled $1,925,060,000 at December 31, 2021, down from $1,940,141,000 at September 30, 2021, and up 5.7% from $1,820,469,000 at December 31, 2020.

●

Total stockholders’ equity was $301,405,000 at December 31, 2021, up from $299,402,000 at September 30, 2021 and $299,756,000 at December 31, 2020. Within stockholders’ equity, the portion of accumulated other comprehensive income related to available-for-sale debt securities was $4,809,000 at December 31, 2021, down from $6,300,000 at September 30, 2021 and $11,676,000 at December 31, 2020. Fluctuations in accumulated other comprehensive income related to valuations of available-for-sale debt securities have been caused by changes in interest rates.

●

In February 2021, C&N amended its existing treasury stock repurchase program. Under the amended program, C&N is authorized to repurchase up to 1,000,000 shares of the Corporation’s common stock, or 6.25% of the Corporation’s issued and outstanding shares at February 18, 2021. In the fourth quarter 2021, 6,959 shares were repurchased for a total cost of $174,000, at an average price of $24.97 per share. Cumulatively through December 31, 2021, 299,059 shares have been repurchased for a total cost of $7,412,000, at an average price of $24.78 per share.

●

In May 2021, C&N completed a private placement of $25 million of 3.25% Fixed-to-Floating Rate Subordinated Debt due 2031 and $15 million of 2.75% Fixed Rate Senior Unsecured Notes due 2026. The Subordinated Debt qualifies as Tier 2 capital. In June 2021, a portion of the proceeds was used to redeem subordinated debt with par values totaling $8 million. The remaining proceeds are available for general corporate purposes.

●	Citizens & Northern Bank is subject to various regulatory capital requirements. At December 31, 2021, Citizens & Northern Bank maintains regulatory capital ratios that exceed all capital adequacy requirements. Management expects the Bank to remain well-capitalized for the foreseeable future.

●	Trust assets under management by C&N’s Wealth Management Group amounted to $1,232,919,000 at December 31, 2021, up 4.1% from $1,183,900,000 at September 30, 2021 and up 11.8% from $1,103,228,000 at December 31, 2020. Fluctuations in values of assets under management reflect the impact of high recent market volatility.

Citizens & Northern Corporation is the bank holding company for Citizens & Northern Bank, headquartered in Wellsboro, Pennsylvania which operates 30 banking offices located in Bradford, Bucks, Cameron, Chester, Lycoming, McKean, Potter, Sullivan, Tioga, York and Lancaster Counties in Pennsylvania and Steuben County in New York, as well as a loan production office in Elmira, New York. Citizens & Northern Corporation trades on NASDAQ under the symbol “CZNC.” For more information about Citizens & Northern Bank and Citizens & Northern Corporation, visit www.cnbankpa.com.

Safe Harbor Statement: Except for historical information contained herein, the matters discussed in this release are forward-looking statements. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation, the following: the effect of COVID-19 and related events, which could have a negative effect on C&N’s business prospects, financial condition and results of operations, including 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 to C&N (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 companies’ financial reporting and internal controls; declines in the demand for loans and other banking services and products, as well as increases in non-performing loans, owing to the effects of COVID-19 in the markets served by C&N and in the United States as a whole; declines in demand resulting from adverse impacts of the disease on businesses deemed to be “non-essential” by governments and individual customers in the markets served by C&N; or branch or office closures and business interruptions triggered by the disease; 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 caused by factors other than COVID-19; 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 management’s assessment of realization of securities and other assets; and changes in accounting principles, or the application of generally accepted accounting principles. Citizens & Northern disclaims any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. 8

EXHIBIT 99.2


December 31, 2021	QUARTERLY REPORT

Dear Shareholder:

C&N delivered a strong fourth quarter performance and record net income for 2021 of $30.6 million. These results were supported by our relationship-based business model and recent acquisitions, as well as the government’s response to COVID-19 and subsequent economic rebound. The C&N Team was steadfast in its focus on our mission of “Creating Value Through Lifelong Relationships” during 2021, producing great results in a unique environment. The last three months of 2021 remained volatile as the world continued to debate and react to the pandemic and its impact on the economy, public policy, and our culture. Real GDP is estimated to have increased by 6%, fueled by robust consumer spending. While this is good news, there are persistent supply chain, workforce, and inflation pressures affecting many individuals and businesses. Cumulatively, these pressures have driven a modest increase in intermediate and long-term interest rates and more certainty that the Fed will act to raise short-term rates early in 2022. Progress regarding COVID-19 that was evident early in the fourth quarter slipped a bit with the rapid spread of the Omicron variant beginning in December, creating renewed uncertainty about the course of the pandemic and public policy reaction.

Through all these challenges, C&N’s team members have been fully engaged to provide support, counsel, and solutions to the needs of our customers and communities. This consistency has positioned C&N as a dependable partner, resource, and trusted advisor for all that we serve, and underpins the persistency of our earnings and overall financial strength. Themes for the quarter also remained consistent with prior periods as lending activity in all segments was solid, PPP forgiveness advanced, the wealth management business continued to grow, and the improved base of core deposits was sustained. C&N’s excellent risk profile also carried on as credit metrics improved, and liquidity and capital levels remained outstanding.

Earnings for the fourth quarter of 2021 were $7.3 million, or $.46 per share compared to $6.8 million, or $.43 per share during the fourth quarter of 2020. After adjusting for merger-related expenses and loss on prepayment of borrowings, net income for the fourth quarter of 2020 was $8.2 million, or $.52 per share. Net interest income for the fourth quarter of $19.72 million was $39,000 lower than 2020 as average loans outstanding declined by $115.2 million, including a reduction in average PPP loans of $112.5 million, while average total deposits increased $87.6 million. The net interest margin was 3.65% for the quarter compared to 3.76% a year earlier. The ongoing low interest rate environment, and higher than normal average balance of lower-yielding deposits with the Federal Reserve and other banks, continue to put pressure on the net interest margin.

The provision for loan losses was $1,128,000 in the fourth quarter compared to $620,000 in the fourth quarter of 2020. In each of these quarters, the provision was impacted by increases in the collectively determined portion of the allowance due to loan growth, other than PPP. C&N’s credit metrics improved during 2021 as reflected in past due, non-performing loans, and troubled debt restructuring (TDR) balances. As of December 31, 2021, no loans remain in deferral status to support clients impacted by COVID-19.

Noninterest income for the fourth quarter of 2021 was $6.4 million, a decrease of $149,000 from the fourth quarter 2020 total. Increased revenue from wealth management, deposit service charges and interchange fees were more than offset by a reduction in net gains from sale of loans due to lower volumes.

Noninterest expenses of $16.0 million increased $243,000 during the fourth quarter 2021 compared to the fourth quarter 2020 total, excluding merger-related costs and loss on prepayment of borrowings. Information technology-related expenses and professional fees were the primary drivers of expense growth, while salaries and employee benefits costs declined as the costs of incentive compensation plans were adjusted at year-end.

Earnings for the year ended December 31, 2021 were $30.55 million, or $1.92 per share, compared to $19.22 million, or $1.30 per share in 2020. Excluding merger related expenses and loss on prepayment of borrowings, net income for 2020 would be $26.65 million, or $1.80 per share. The impact of the July 1, 2020 Covenant acquisition is evident in assessing performance in 2021 compared to 2020 including the growth in net interest income of $10.6 million and noninterest expenses of $6.9 million. In 2021, noninterest income was up $1.5 million from the total for 2020, reflecting revenues from wealth management activities, growth in loan servicing fees, and interchange revenue, while net gains from sales of mortgage loans declined. The provision for loan losses of $3.66 million for 2021 was $252,000 lower than the comparable amount for 2020 as charges related to specific loans were lower in the current year.

C&N amended its existing stock repurchase program to authorize the repurchase of up to 1,000,000 shares, or 6.25% of the issued and outstanding shares as of February 18, 2021. In the fourth quarter of 2021, 6,959 shares were repurchased at an average price of $24.97 per share. Cumulatively through December 31, 2021, 299,059 shares have been repurchased for a total cost of $7,412,000 at an average price of $24.78 per share. Activating the repurchase program enables C&N to manage total capital and shares outstanding to support growth in return on equity and earnings per share which are ultimately key drivers of our stock price.

Shareholder value is also supported by C&N’s cash dividend. Consistent with the third quarter payout, the Board declared a regular quarterly cash dividend of $.28 per share payable to shareholders of record on January 31, 2022, payable February 11, 2022. On an annualized basis, the dividend yield is 4.25% based on the December 31, 2021 market price of $26.12.

The accomplishments of the C&N team in 2021, amid a volatile environment, are commendable. With a number of exciting initiatives planned to build on this success in 2022 and beyond, we will continue to create value and deepen relationships with our customers, communities, and shareholders.

As always, we thank you for your support!

J. Bradley Scovill

President and CEO

CONDENSED, CONSOLIDATED EARNINGS INFORMATION

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


	****	4TH		****	4TH
		QUARTER			QUARTER
		2021			2020
		(Current)			(Prior Year)		Incr. (Decr.)		% Incr. (Decr.)	****
Interest and Dividend Income		$	21,246		$	21,859			(2.80)	%
Interest Expense			1,530			2,104			(27.28)	%
Net Interest Income			19,716			19,755			(0.20)	%
Provision for Loan Losses			1,128			620			81.94	%
Net Interest Income After Provision for Loan Losses			18,588			19,135			(2.86)	%
Noninterest Income			6,416			6,565			(2.27)	%
Net (Losses) Gains on Available-for-sale Debt Securities			(1)			144			(100.69)	%
Loss on Prepayment of Borrowings			0			1,636			(100.00)	%
Merger-Related Expenses			0			182			(100.00)	%
Other Noninterest Expenses			16,018			15,775			1.54	%
Income Before Income Tax Provision			8,985			8,251			8.90	%
Income Tax Provision			1,677			1,481			13.23	%
Net Income		$	7,308		$	6,770		****	7.95	%
Net Income Attributable to Common Shares (1)		$	7,256		$	6,727		****	7.86	%
PER COMMON SHARE DATA:
Net Income - Basic		$	0.46		$	0.43			6.98	%
Net Income - Diluted		$	0.46		$	0.43			6.98	%
Dividend Per Share		$	0.28		$	0.27			3.70	%
Number of Shares Used in Computation - Basic			15,630,094			15,799,436
Number of Shares Used in Computation - Diluted			15,635,892			15,801,068

All values are in US Dollars.

CONDENSED, CONSOLIDATED EARNINGS INFORMATION

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


	YEARS ENDED
	December 31,
	2021		2020
	(Current)		(Prior Year)		Incr. (Decr.)		% Incr. (Decr.)
Interest and Dividend Income	$	84,501	$	77,160			9.51	%
Interest Expense		6,562		9,595			(31.61)	%
Net Interest Income		77,939		67,565			15.35	%
Provision for Loan Losses		3,661		3,913			(6.44)	%
Net Interest Income After Provision for Loan Losses		74,278		63,652			16.69	%
Noninterest Income		25,857		24,344			6.22	%
Net Gains on Available-for-sale Debt Securities		24		169			(85.80)	%
Loss on Prepayment of Borrowings		0		1,636			(100.00)	%
Merger-Related Expenses		0		7,708			(100.00)	%
Other Noninterest Expenses		62,472		55,609			12.34	%
Income Before Income Tax Provision		37,687		23,212			62.36	%
Income Tax Provision		7,133		3,990			78.77	%
Net Income	$	30,554	$	19,222		****	58.95	%
Net Income Attributable to Common Shares (1)	$	30,313	$	19,106		****	58.66	%
PER COMMON SHARE DATA:
Net Income - Basic	$	1.92	$	1.30			47.69	%
Net Income - Diluted	$	1.92	$	1.30			47.69	%
Dividend Per Share	$	1.11	$	1.08			2.78	%
Number of Shares Used in Computation - Basic		15,765,639		14,743,386
Number of Shares Used in Computation - Diluted		15,771,955		14,747,048

All values are in US Dollars.

(1)	Basic and diluted net income per common share are determined based on net income less earnings allocated to nonvested restricted shares with nonforfeitable dividends.

CONDENSED, CONSOLIDATED BALANCE SHEET DATA

(Dollars In Thousands) (Unaudited)


	December 31,		December 31,
	2021		2020		Incr. (Decr.)		% Incr. (Decr.)
ASSETS
Cash & Due from Banks	$	104,948	$	101,857			3.03	%
Available-for-sale Debt Securities		517,679		349,332			48.19	%
Loans, Net		1,551,312		1,632,824			(4.99)	%
Bank-Owned Life Insurance		30,670		30,096			1.91	%
Bank Premises and Equipment, Net		20,683		21,526			(3.92)	%
Intangible Assets		55,821		56,356			(0.95)	%
Other Assets		46,535		47,109			(1.22)	%
TOTAL ASSETS	$	2,327,648	$	2,239,100		****	3.95	%

LIABILITIES
Deposits	$	1,925,060	$	1,820,469			5.75	%
Borrowed Funds - Federal Home Loan Bank and Repurchase Agreements		29,845		74,630			(60.01)	%
Senior Notes, Net		14,701		0				%
Subordinated Debt, Net		33,009		16,553			99.41	%
Other Liabilities		23,628		27,692			(14.68)	%
TOTAL LIABILITIES	****	2,026,243	****	1,939,344		****	4.48	%

STOCKHOLDERS' EQUITY
Common Stockholders' Equity, Excluding Accumulated
Other Comprehensive Income		296,379		287,961			2.92	%
Accumulated Other Comprehensive Income:
Net Unrealized Gains on Available-for-sale Debt Securities		4,809		11,676			(58.81)	%
Defined Benefit Plans		217		119			82.35	%
TOTAL STOCKHOLDERS' EQUITY	****	301,405	****	299,756		****	0.55	%
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY	$	2,327,648	$	2,239,100		****	3.95	%

All values are in US Dollars.

EXHIBIT 99.3 – Supplemental, Unaudited Financial Information

CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS

(Dollars In Thousands, Except Per Share Data)

(Unaudited)


	****	FOR THE
		THREE MONTHS ENDED						%
		December 31,						INCREASE
	****	2021		****	2020		****	(DECREASE)	****
EARNINGS PERFORMANCE
Net Income		$	7,308		$	6,770		7.95	%
Return on Average Assets (Annualized)			1.25	%		1.17	%	6.84	%
Return on Average Equity (Annualized)			9.73	%		9.11	%	6.81	%

	****	AS OF OR FOR THE
		YEARS ENDED						%
		December 31,						INCREASE
	****	2021		****	2020		****	(DECREASE)	****
EARNINGS PERFORMANCE
Net Income		$	30,554		$	19,222		58.95	%
Return on Average Assets (Annualized)			1.32	%		0.96	%	37.50	%
Return on Average Equity (Annualized)			10.14	%		7.03	%	44.24	%

BALANCE SHEET HIGHLIGHTS
Total Assets		$	2,327,648		$	2,239,100		3.95	%
Available-for-Sale Debt Securities			517,679			349,332		48.19	%
Loans, Net			1,551,312			1,632,824		(4.99)	%
Allowance for Loan Losses			13,537			11,385		18.90	%
Deposits			1,925,060			1,820,469		5.75	%

OFF-BALANCE SHEET
Outstanding Balance of Mortgage Loans Sold with Servicing Retained		$	334,741		$	278,857		20.04	%
Trust Assets Under Management			1,232,919			1,103,228		11.76	%

STOCKHOLDERS' VALUE (PER COMMON SHARE)
Net Income - Basic		$	1.92		$	1.30		47.69	%
Net Income - Diluted		$	1.92		$	1.30		47.69	%
Dividends		$	1.11		$	1.08		2.78	%
Common Book Value		$	19.13		$	18.84		1.54	%
Tangible Common Book Value (a)		$	15.58		$	15.30		1.83	%
Market Value (Last Trade)		$	26.12		$	19.84		31.65	%
Market Value / Common Book Value			136.54	%		105.31	%	29.66	%
Market Value / Tangible Common Book Value			167.65	%		129.67	%	29.29	%
Price Earnings Multiple (Annualized)			13.60			15.26		(10.88)	%
Dividend Yield (Annualized)			4.25	%		5.44	%	(21.88)	%
Common Shares Outstanding, End of Period			15,759,090			15,911,984		(0.96)	%

CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS (Continued)

(Dollars In Thousands, Except Per Share Data)

(Unaudited)


		AS OF OR FOR THE
		YEARS ENDED						%	****
		December 31,						INCREASE	****
	****	2021		****	2020		****	(DECREASE)	****
SAFETY AND SOUNDNESS
Tangible Common Equity / Tangible Assets (a)			10.81	%		11.15	%	(3.05)	%
Nonperforming Assets / Total Assets			0.94	%		1.10	%	(14.55)	%
Allowance for Loan Losses / Total Loans			0.87	%		0.69	%	26.09	%
Total Risk Based Capital Ratio (b)			18.37	%		17.49	%	5.03	%
Tier 1 Risk Based Capital Ratio (b)			15.36	%		15.58	%	(1.41)	%
Common Equity Tier 1 Risk Based Capital Ratio (b)			15.36	%		15.58	%	(1.41)	%
Leverage Ratio (b)			10.53	%		10.34	%	1.84	%

AVERAGE BALANCES
Average Assets		$	2,319,234		$	2,009,825		15.39	%
Average Equity		$	301,226		$	273,351		10.20	%

EFFICIENCY RATIO (c)
Net Interest Income on a Fully Taxable-Equivalent
Basis (c)		$	79,074		$	68,545		15.36	%
Noninterest Income			25,857			24,344		6.22	%
Total (1)		$	104,931		$	92,889		12.96	%
Noninterest Expense Excluding Merger Expenses and Loss on Prepayment of Borrowings (2)		$	62,472		$	55,609		12.34	%
Efficiency Ratio = (2)/(1)			59.54	%		59.87	%	(0.55)	%

(a)Tangible book value per common share and tangible common equity as a percentage of tangible assets are non-U.S. GAAP ratios. Management believes this non-GAAP information is helpful in evaluating the strength of the Corporation's capital and in providing an alternative, conservative valuation of the Corporation's net worth. The ratios shown above are based on the following calculations of tangible assets and tangible common equity:


Total Assets	$	2,327,648	$	2,239,100
Less: Intangible Assets, Primarily Goodwill		(55,821)		(56,356)
Tangible Assets	$	2,271,827	$	2,182,744
Total Stockholders' Equity	$	301,405	$	299,756
Less: Intangible Assets, Primarily Goodwill		(55,821)		(56,356)
Tangible Common Equity (3)	$	245,584	$	243,400

Common Shares Outstanding, End of Period (4)		15,759,090		15,911,984
Tangible Common Book Value per Share = (3)/(4)	$	15.58	$	15.30

(b)Capital ratios for the most recent period are estimated.

(c)The efficiency ratio is a non-GAAP ratio that is calculated as shown above. For purposes of calculating the efficiency ratio, net interest income on a fully taxable-equivalent basis includes amounts of interest income on tax-exempt securities and loans that have been increased to a fully taxable-equivalent basis, using the Corporation's marginal federal income tax rate of 21%. In the calculation above, management excluded merger-related expenses.

QUARTERLY CONDENSED, CONSOLIDATED

INCOME STATEMENT INFORMATION

(Dollars In Thousands, Except Per Share Data)

(Unaudited)


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

QUARTERLY CONDENSED, CONSOLIDATED

BALANCE SHEET INFORMATION

(In Thousands) (Unaudited)


	****	As of:
		Dec. 31,		Sep. 30,		Jun. 30,		Mar. 31,		Dec. 31,		Sep. 30,		Jun. 30,		Mar. 31,
		2021		2021		2021		2021		2020		2020		2020		2020
ASSETS
Cash & Due from Banks		$	104,948	$	198,995	$	208,860	$	207,145	$	101,857	$	174,478	$	77,642	$	32,678
Available-for-Sale Debt Securities			517,679		437,857		391,881		366,376		349,332		340,545		332,188		342,416
Loans, Net			1,551,312		1,563,008		1,585,481		1,602,926		1,632,824		1,680,617		1,230,387		1,156,143
Bank-Owned Life Insurance			30,670		30,530		30,391		30,247		30,096		29,942		18,843		18,745
Bank Premises and Equipment, Net			20,683		20,526		20,620		20,740		21,526		21,504		18,332		18,023
Intangible Assets			55,821		55,955		56,088		56,222		56,356		56,585		29,511		29,573
Other Assets			46,535		48,025		45,742		49,939		47,109		49,122		38,563		31,867
TOTAL ASSETS		$	2,327,648	$	2,354,896	$	2,339,063	$	2,333,595	$	2,239,100	$	2,352,793	$	1,745,466	$	1,629,445

LIABILITIES
Deposits		$	1,925,060	$	1,940,141	$	1,916,809	$	1,923,925	$	1,820,469	$	1,871,514	$	1,381,178	$	1,249,912
Borrowed Funds - Federal Home Loan Bank and Repurchase Agreements			29,845		40,555		46,450		60,230		74,630		143,657		87,308		110,551
Senior Notes, Net			14,701		14,685		14,670		0		0		0		0		0
Subordinated Debt, Net			33,009		32,988		32,967		16,534		16,553		16,572		6,500		6,500
Other Liabilities			23,628		27,125		24,034		32,850		27,692		24,734		14,689		11,254
TOTAL LIABILITIES		****	2,026,243	****	2,055,494	****	2,034,930	****	2,033,539	****	1,939,344	****	2,056,477	****	1,489,675	****	1,378,217

STOCKHOLDERS' EQUITY
Common Stockholders' Equity, Excluding Accumulated Other Comprehensive Income			296,379		292,997		294,857		293,097		287,961		284,707		244,080		241,754
Accumulated Other Comprehensive Income:
Net Unrealized Gains on Available-for-sale Securities			4,809		6,300		9,167		6,847		11,676		11,376		11,472		9,230
Defined Benefit Plans			217		105		109		112		119		233		239		244
TOTAL STOCKHOLDERS' EQUITY		****	301,405	****	299,402	****	304,133	****	300,056	****	299,756	****	296,316	****	255,791	****	251,228
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY		$	2,327,648	$	2,354,896	$	2,339,063	$	2,333,595	$	2,239,100	$	2,352,793	$	1,745,466	$	1,629,445

AVAILABLE-FOR-SALE DEBT SECURITIES

(In Thousands)


	****	December 31, 2021				September 30, 2021				December 31, 2020
		Amortized		Fair		Amortized		Fair		Amortized		Fair
		Cost		Value		Cost		Value		Cost		Value
Obligations of the U.S. Treasury		$	25,058	$	24,912	$	25,088	$	25,068	$	12,184	$	12,182
Obligations of U.S. Government agencies			23,936		24,091		23,935		24,312		25,349		26,344
Bank holding company debt securities			18,000		17,987		0		0		0		0
Obligations of states and political subdivisions:
Tax-exempt			143,427		148,028		135,362		139,244		116,427		122,401
Taxable			72,182		72,765		69,426		70,493		45,230		47,452
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities			98,048		98,181		59,920		60,629		36,853		38,176
Residential collateralized mortgage obligations			44,015		44,247		43,811		44,593		56,048		57,467
Commercial mortgage-backed securities			86,926		87,468		72,341		73,518		42,461		45,310
Total Available-for-Sale Debt Securities		$	511,592	$	517,679	$	429,883	$	437,857	$	334,552	$	349,332

SUMMARY OF LOANS BY TYPE

(Excludes Loans Held for Sale)

(In Thousands)


	****	December 31,		****	September 30,		****	December 31,
		2021			2021			2020
Commercial:
Commercial loans secured by real estate		$	569,840		$	553,389		$	531,810
Commercial and industrial			159,073			152,244			159,577
Paycheck Protection Program - 1st Draw			1,356			5,747			132,269
Paycheck Protection Program - 2nd Draw			25,508			56,981			0
Political subdivisions			81,301			73,503			53,221
Commercial construction and land			60,579			53,267			42,874
Loans secured by farmland			11,121			10,812			11,736
Multi-family (5 or more) residential			50,089			52,962			55,811
Agricultural loans			2,351			3,092			3,164
Other commercial loans			17,153			17,312			17,289
Total commercial			978,371			979,309			1,007,751
Residential mortgage:
Residential mortgage loans - first liens			483,629			494,376			532,947
Residential mortgage loans - junior liens			23,314			24,303			27,311
Home equity lines of credit			39,252			38,465			39,301
1-4 Family residential construction			23,151			21,719			20,613
Total residential mortgage			569,346			578,863			620,172
Consumer			17,132			17,536			16,286
Total			1,564,849			1,575,708			1,644,209
Less: allowance for loan losses			(13,537)			(12,700)			(11,385)
Loans, net		$	1,551,312		$	1,563,008		$	1,632,824

ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES

(In Thousands)


	****	3 Months		****	3 Months		****	Year		****	Year
		Ended			Ended			Ended			Ended
		December 31,			September 30,			December 31,			December 31,
		2021			2021			2021			2020
Balance, beginning of period		$	12,700		$	12,375		$	11,385		$	9,836
Charge-offs			(297)			(1,220)			(1,575)			(2,465)
Recoveries			6			15			66			101
Net charge-offs			(291)			(1,205)			(1,509)			(2,364)
Provision for loan losses			1,128			1,530			3,661			3,913
Balance, end of period		$	13,537		$	12,700		$	13,537		$	11,385

PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS

AND TROUBLED DEBT RESTRUCTURINGS (TDRs)

(Dollars In Thousands)


	****	December 31,		****	September 30,		****	December 31,		****
		2021			2021			2020
Impaired loans with a valuation allowance		$	6,540		$	7,225		$	8,082
Impaired loans without a valuation allowance			2,636			4,165			2,895
Purchased credit impaired loans			6,558			6,624			6,841
Total impaired loans		$	15,734		$	18,014		$	17,818

Total loans past due 30-89 days and still accruing		$	5,106		$	2,139		$	5,918

Nonperforming assets:
Purchased credit impaired loans		$	6,558		$	6,624		$	6,841
Other nonaccrual loans			12,441			14,717			14,575
Total nonaccrual loans			18,999			21,341			21,416
Total loans past due 90 days or more and still accruing			2,219			1,924			1,975
Total nonperforming loans			21,218			23,265			23,391
Foreclosed assets held for sale (real estate)			684			1,374			1,338
Total nonperforming assets		$	21,902		$	24,639		$	24,729

Loans subject to troubled debt restructurings (TDRs):
Performing		$	288		$	232		$	166
Nonperforming			5,517			5,591			7,285
Total TDRs		$	5,805		$	5,823		$	7,451

Total nonperforming loans as a % of total loans			1.36	%		1.48	%		1.42	%
Total nonperforming assets as a % of assets			0.94	%		1.05	%		1.10	%
Allowance for loan losses as a % of total loans			0.87	%		0.81	%		0.69	%
Credit adjustment on purchased non-impaired loans and allowance for loan losses as a % of total loans and the credit adjustment (a)			1.08	%		1.05	%		1.05	%
Allowance for loan losses as a % of nonperforming loans			63.80	%		54.59	%		48.67	%

(a) Credit adjustment on purchased non-impaired loans at end of period		$	3,335		$	3,836		$	5,979
Allowance for loan losses			13,537			12,700			11,385
Total credit adjustment on purchased non-impaired loans at end of period and allowance for loan losses (1)		$	16,872		$	16,536		$	17,364
Total loans receivable		$	1,564,849		$	1,575,708		$	1,644,209
Credit adjustment on purchased non-impaired loans at end of period			3,335			3,836			5,979
Total (2)		$	1,568,184		$	1,579,544		$	1,650,188
Credit adjustment on purchased non-impaired loans and allowance for loan losses as a % of total loans and the credit adjustment (1)/(2)			1.08	%		1.05	%		1.05	%

ADJUSTMENTS TO GROSS AMORTIZED COST OF LOANS


(In Thousands)
	Three Months Ended						Year Ended
	December 31,		September 30,		December 31,		December 31,		December 31,
	2021		2021		2020		2021		2020
Market Rate Adjustment
Adjustments to gross amortized cost of loans at beginning of period	$	(373)	$	(5)	$	1,354	$	718	$	(1,415)
Market rate adjustment recorded in acquisition		0		0		0		0		2,909
Amortization recognized in interest income		(264)		(368)		(636)		(1,355)		(776)
Adjustments to gross amortized cost of loans at end of period	$	(637)	$	(373)	$	718	$	(637)	$	718
Credit Adjustment on Non-impaired Loans
Adjustments to gross amortized cost of loans at beginning of period	$	(3,836)	$	(4,502)	$	(7,127)	$	(5,979)	$	(1,216)
Credit adjustment recorded in acquisition		0		0		0		0		(7,219)
Accretion recognized in interest income		501		666		1,148		2,644		2,456
Adjustments to gross amortized cost of loans at end of period	$	(3,335)	$	(3,836)	$	(5,979)	$	(3,335)	$	(5,979)

PURCHASED CREDIT IMPAIRED (PCI) LOANS


(In Thousands)
	December 31,		September 30,		December 31,
	2021		2021		2020
Outstanding balance	$	9,802	$	10,064	$	10,316
Carrying amount		6,558		6,624		6,841

COMPARISON OF INTEREST INCOME AND EXPENSE

(In Thousands)


	****	Three Months Ended						Year Ended
		December 31,		September 30,		December 31,		December 31,		December 31,
		2021		2021		2020		2021		2020
INTEREST INCOME
Interest-bearing due from banks		$	88	$	106	$	60	$	318	$	251
Available-for-sale debt securities:
Taxable			1,510		1,304		1,083		5,114		5,534
Tax-exempt			890		842		795		3,357		2,669
Total available-for-sale debt securities			2,400		2,146		1,878		8,471		8,203
Loans receivable:
Taxable			16,810		16,890		18,144		68,019		64,460
Paycheck Protection Program -1st Draw			187		618		1,495		3,476		2,924
Paycheck Protection Program - 2nd Draw			1,457		1,021		0		3,054		0
Tax-exempt			593		568		529		2,232		2,222
Total loans receivable			19,047		19,097		20,168		76,781		69,606
Other earning assets			13		16		19		66		80
Total Interest Income			21,548		21,365		22,125		85,636		78,140

INTEREST EXPENSE
Interest-bearing deposits:
Interest checking			211		230		232		897		948
Money market			261		269		309		1,156		1,172
Savings			61		58		55		231		230
Time deposits			447		506		909		2,254		4,881
Total interest-bearing deposits			980		1,063		1,505		4,538		7,231
Borrowed funds:
Short-term			1		0		32		23		367
Long-term - FHLB advances			69		87		321		399		1,291
Senior notes, net			118		118		0		293		0
Subordinated debt, net			362		346		246		1,309		706
Total borrowed funds			550		551		599		2,024		2,364
Total Interest Expense			1,530		1,614		2,104		6,562		9,595

Net Interest Income		$	20,018	$	19,751	$	20,021	$	79,074	$	68,545

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%. 8

ANALYSIS OF AVERAGE DAILY BALANCES AND RATES

(Dollars in Thousands)


	****	3 Months		****		****	3 Months				3 Months
		Ended			Rate of		Ended		Rate of		Ended		Rate of	****
		12/31/2021			Return/		9/30/2021		Return/		12/31/2020		Return/	****
		Average			Cost of		Average		Cost of		Average		Cost of	****
		Balance			Funds %		Balance		Funds %		Balance		Funds %
EARNING ASSETS
Interest-bearing due from banks		$	152,950		0.23	%	$	195,359	0.22	%	$	116,475	0.20	%
Available-for-sale debt securities, at amortized cost:
Taxable			325,682		1.84	%		263,682	1.96	%		217,321	1.98	%
Tax-exempt			140,776		2.51	%		127,466	2.62	%		113,888	2.78	%
Total available-for-sale debt securities			466,458		2.04	%		391,148	2.18	%		331,209	2.26	%
Loans receivable:
Taxable			1,431,174		4.66	%		1,426,503	4.70	%		1,454,733	4.96	%
Paycheck Protection Program - 1st Draw			2,702		27.46	%		19,625	12.49	%		152,504	3.90	%
Paycheck Protection Program - 2nd Draw			37,320		15.49	%		68,108	5.95	%		0	0.00	%
Tax-exempt			83,197		2.83	%		77,621	2.90	%		62,309	3.38	%
Total loans receivable			1,554,393		4.86	%		1,591,857	4.76	%		1,669,546	4.81	%
Other earning assets			1,953		2.64	%		2,355	2.70	%		2,390	3.16	%
Total Earning Assets			2,175,754		3.93	%		2,180,719	3.89	%		2,119,620	4.15	%
Cash			22,850					24,436				31,312
Unrealized gain on securities			7,249					12,411				13,875
Allowance for loan losses			(12,980)					(12,688)				(11,107)
Bank-owned life insurance			30,587					30,445				30,002
Bank premises and equipment			20,678					20,620				21,539
Intangible assets			55,887					56,021				56,863
Other assets			45,035					43,947				45,491
Total Assets		$	2,345,060				$	2,355,911			$	2,307,595

INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking		$	428,154		0.20	%	$	423,371	0.22	%	$	371,425	0.25	%
Money market			446,930		0.23	%		446,385	0.24	%		389,993	0.32	%
Savings			241,352		0.10	%		231,093	0.10	%		202,679	0.11	%
Time deposits			292,973		0.61	%		312,979	0.64	%		416,281	0.87	%
Total interest-bearing deposits			1,409,409		0.28	%		1,413,828	0.30	%		1,380,378	0.43	%
Borrowed funds:
Short-term			2,177		0.18	%		2,185	0.00	%		27,422	0.46	%
Long-term - FHLB advances			35,608		0.77	%		41,083	0.84	%		93,835	1.36	%
Senior notes, net			14,690		3.19	%		14,674	3.19	%		0	0.00	%
Subordinated debt, net			32,918		4.36	%		32,978	4.16	%		16,562	5.91	%
Total borrowed funds			85,393		2.56	%		90,920	2.40	%		137,819	1.73	%
Total Interest-bearing Liabilities			1,494,802		0.41	%		1,504,748	0.43	%		1,518,197	0.55	%
Demand deposits			523,817					522,930				465,252
Other liabilities			25,951					25,386				26,746
Total Liabilities			2,044,570					2,053,064				2,010,195
Stockholders' equity, excluding accumulated other comprehensive income			294,659					292,936				286,209
Accumulated other comprehensive income			5,831					9,911				11,191
Total Stockholders' Equity			300,490					302,847				297,400
Total Liabilities and Stockholders' Equity		$	2,345,060				$	2,355,911			$	2,307,595
Interest Rate Spread					3.52	%			3.46	%			3.60	%
Net Interest Income/Earning Assets					3.65	%			3.59	%			3.76	%

Total Deposits (Interest-bearing and Demand)		$	1,933,226				$	1,936,758			$	1,845,630

(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 have been presented on an annualized basis.
---	---

ANALYSIS OF AVERAGE DAILY BALANCES AND RATES

(Dollars in Thousands)


	****	Year		****			Year
		Ended			Rate of		Ended		Rate of	****
		12/31/2021			Return/		12/31/2020		Return/	****
		Average			Cost of		Average		Cost of	****
		Balance			Funds %	****	Balance		Funds%	****
EARNING ASSETS
Interest-bearing due from banks		$	156,152		0.20	%	$	80,587	0.31	%
Available-for-sale debt securities, at amortized cost:
Taxable			262,880		1.95	%		238,407	2.32	%
Tax-exempt			127,283		2.64	%		90,038	2.96	%
Total available-for-sale debt securities			390,163		2.17	%		328,445	2.50	%
Loans receivable:
Taxable			1,426,150		4.77	%		1,285,383	5.01	%
Paycheck Protection Program - 1st Draw			44,735		7.77	%		98,466	2.97	%
Paycheck Protection Program - 2nd Draw			52,917		5.77	%		0	0.00	%
Tax-exempt			72,954		3.06	%		61,249	3.63	%
Total loans receivable			1,596,756		4.81	%		1,445,098	4.82	%
Other earning assets			2,404		2.75	%		2,357	3.39	%
Total Earning Assets			2,145,475		3.99	%		1,856,487	4.21	%
Cash			24,132					25,439
Unrealized gain on securities			10,676					12,487
Allowance for loan losses			(12,354)					(11,018)
Bank-owned life insurance			30,373					24,415
Bank premises and equipment			20,814					19,826
Intangible assets			56,086					43,330
Other assets			44,032					38,859
Total Assets		$	2,319,234				$	2,009,825

INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking		$	399,130		0.22	%	$	310,782	0.31	%
Money market			433,508		0.27	%		298,736	0.39	%
Savings			228,411		0.10	%		189,316	0.12	%
Time deposits			327,816		0.69	%		397,974	1.23	%
Total interest-bearing deposits			1,388,865		0.33	%		1,196,808	0.60	%
Borrowed funds:
Short-term			6,269		0.37	%		34,212	1.07	%
Long-term - FHLB advances			44,026		0.91	%		83,500	1.55	%
Senior notes, net			9,129		3.21	%		0	0.00	%
Subordinated debt, net			27,399		4.78	%		11,553	6.11	%
Total borrowed funds			86,823		2.33	%		129,265	1.83	%
Total Interest-bearing Liabilities			1,475,688		0.44	%		1,326,073	0.72	%
Demand deposits			516,535					389,601
Other liabilities			25,785					20,800
Total Liabilities			2,018,008					1,736,474
Stockholders' equity, excluding accumulated other comprehensive income			292,683					263,253
Accumulated other comprehensive income			8,543					10,098
Total Stockholders' Equity			301,226					273,351
Total Liabilities and Stockholders' Equity		$	2,319,234				$	2,009,825
Interest Rate Spread					3.55	%			3.49	%
Net Interest Income/Earning Assets					3.69	%			3.69	%

Total Deposits (Interest-bearing and Demand)		$	1,905,400				$	1,586,409

(1)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 have been presented on an annualized basis.
---	---

COMPARISON OF NONINTEREST INCOME

(In Thousands)


	****	Three Months Ended						Year Ended
		December 31,		September 30,		December 31,		December 31,		December 31,
		2021		2021		2020		2021		2020
Trust revenue		$	1,980	$	1,821	$	1,682	$	7,234	$	6,321
Brokerage and insurance revenue			468		560		365		1,860		1,486
Service charges on deposit accounts			1,296		1,249		1,105		4,633		4,231
Interchange revenue from debit card transactions			1,001		975		817		3,855		3,094
Net gains from sales of loans			642		797		1,472		3,428		5,403
Loan servicing fees, net			147		153		198		694		(61)
Increase in cash surrender value of life insurance			139		139		154		573		515
Other noninterest income			743		665		772		3,580		3,355
Total noninterest income, excluding realized gains<br>on securities, net		$	6,416	$	6,359	$	6,565	$	25,857	$	24,344

COMPARISON OF NONINTEREST EXPENSE

(In Thousands)


	****	Three Months Ended						Year Ended
	****	December 31,		September 30,		December 31,		December 31,		December 31,
		2021		2021		2020		2021		2020
Salaries and employee benefits		$	9,782	$	9,427	$	9,998	$	37,603	$	33,062
Net occupancy and equipment expense			1,244		1,217		1,194		4,984		4,461
Data processing and telecommunications expenses			1,561		1,475		1,357		5,903		5,316
Automated teller machine and interchange expense			384		357		319		1,433		1,231
Pennsylvania shares tax			488		482		422		1,951		1,689
Professional fees			560		538		427		2,243		1,692
Other noninterest expense			1,999		1,850		2,058		8,355		8,158
Total noninterest expense, excluding merger-related<br>expenses and loss on prepayment of borrowings			16,018		15,346		15,775		62,472		55,609
Merger-related expenses			0		0		182		0		7,708
Loss on prepayment of borrowings			0		0		1,636		0		1,636
Total noninterest expense		$	16,018	$	15,346	$	17,593	$	62,472	$	64,953