What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-08 compared with 2025-11-07 · 208 added, 306 removed, 452 unchanged (53% of the section changed)

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Citizens & Northern Corporation and its wholly-owned subsidiaries (collectively, the “Corporation”) intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995.

Forward-looking statements are not statements of historical facts, are based on certain assumptions and describe future plans, business objectives and expectations, and are generally identifiable by the use of words such as, “may”, “would”, “will”, "should", “likely”, “possibly”, "expect", "anticipate", “intend”, “pro forma”, “estimate”, “target”, “potentially”, “probably”, “outlook”, “predict”, “contemplate”, “continue”, “strategic”, “objective”, “plan”, “forecast”, “project”, “believe” and “goal” or other similar words, phrases or concepts.

Forward-looking statements are not historical facts, are based on certain assumptions and describe future plans, business objectives and expectations, and are generally identifiable by the use of words such as, “may”, “would”, “will”, "should", “likely”, “possibly”, "expect", "anticipate", “intend”, “pro forma”, “estimate”, “target”, “potentially”, “probably”, “outlook”, “predict”, “contemplate”, “continue”, “strategic”, “objective”, “plan”, “forecast”, “project”, “believe” and “goal” or other similar words, phrases or concepts.

Persons reading this document are cautioned that such statements are only predictions, and that the Corporation’s actual future results or performance may be materially different.

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Government, particularly related to changes in interest rates

● changes in general economic conditions

● changes in general economic conditions, including unfavorable conditions and trends related to costs of living, unemployment levels, inflation, tariffs and economic growth

● military conflicts including the conflict in the Middle East and the possible expansion of such conflict and the potential geopolitical and economic consequences

● the potential for adverse developments in the banking industry that could have a negative impact on customer confidence

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

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

● difficulties in integrating the operations of the former Susquehanna (acquired by the Corporation October 1, 2025)

● legislative or regulatory changes

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● fraud and cyber malfunction risks as usage of artificial intelligence continues to expand

● integration efforts between the Corporation and Susquehanna Community Financial, Inc., (“Susquehanna”) may divert the attention of the management teams of the Corporation and Susquehanna and cause a loss in the momentum of their ongoing businesses

● integration efforts between the Corporation and Susquehanna may divert the attention of the management teams of the Corporation and Susquehanna and cause a loss in the momentum of their ongoing businesses

● success of the Corporation in Susquehanna’s geographic market area will require the Corporation to attract and retain key personnel in the market and to differentiate the Corporation from its competitors in the market

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

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The Corporation does not undertake to update forward-looking statements.

RECENTLY COMPLETED MERGER

On October 1, 2025, C&N completed its previously announced merger with Susquehanna.

Susquehanna was the parent company of Susquehanna Community Bank, with seven banking offices located in Lycoming, Northumberland, Synder and Union counties in Pennsylvania.

Pursuant to the Agreement and Plan of Merger dated April 23, 2025 between the Corporation and Susquehanna, Susquehanna merged with and into the Corporation, with the Corporation as the surviving corporation in the Merger.

Immediately following the completion of the Merger, Susquehanna Community Bank, the wholly owned subsidiary of Susquehanna, merged with and into C&N Bank, with C&N Bank surviving.

Upon completion of the merger, shareholders of Susquehanna became entitled to exchange each share of Susquehanna common stock owned for 0.80 shares of the Corporation’s common stock.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Based on the average of the high and low trading price of the Corporation’s common stock of $19.64 per share on October 1, 2025, the total purchase consideration in the merger is valued at approximately $44.6 million.

As of September 30, 2025, Susquehanna reported total assets of $587 million, including gross loans of $400 million, total deposits of $501 million and total stockholders’ equity of $36 million.

As of the date the Corporation’s September 30, 2025 financial statements are issued, some of the information required to be disclosed under U.S.

GAAP was not available since, given the short period between the October 1, 2025 merger date and the financial statement issuance, the calculation of the fair value of all material Susquehanna assets acquired and liabilities assumed had not yet been completed.

In the first nine months of 2025, the Corporation incurred pre-tax merger-related expenses related to the Susquehanna transaction of $1,049,000, including expenses totaling $882,000 in the third quarter of 2025.

Management estimates total pre-tax merger-related expenses associated with the Susquehanna transaction will be approximately $7.5 million, with most of the expenses expected to be incurred in the fourth quarter of 2025.

Merger-related expenses will include expenses related to conversion of Susquehanna’s core customer system data into the Corporation’s core system, severance and similar expenses and legal and other professional expenses.

BUSINESS COMBINATION

On October 1, 2025, the Corporation completed its acquisition of Susquehanna Community Financial, Inc.

(“Susquehanna”).

Susquehanna was the parent company of Susquehanna Community Bank, with seven banking offices located in Lycoming, Northumberland, Snyder and Union Counties in Pennsylvania.

In connection with the acquisition, the Corporation issued approximately 2.3 million shares of common stock to the former Susquehanna shareholders, resulting in merger consideration valued at $44.6 million and an increase in stockholders’ equity of $44.4 million, net of issuance costs.

Intangible assets recorded included goodwill of $10.8 million and a core deposit intangible asset of $10.7 million.

Assets acquired included loans valued at $393.6 million, securities valued at $147.6 million, bank-owned life insurance valued at $8.0 million and cash and due from banks of $6.1 million.

Liabilities assumed included deposits valued at $501.5 million and short-term borrowings valued at $45.8 million.

The assets purchased and liabilities assumed were recorded at their preliminary estimated fair values at the time of closing and may be adjusted for up to one year subsequent to the acquisition.

There were no adjustments to the fair value measurements of assets acquired or liabilities assumed in the first quarter of 2026.

EARNINGS OVERVIEW

Third Quarter 2025 as Compared to Third Quarter 2024

Third quarter 2025 net income was $6,551,000, or $0.42 per diluted share, as compared to $6,365,000, or $0.41 per diluted share, in the third quarter 2024.

Excluding the effects of merger-related expenses, net of taxes, of $697,000, adjusted earnings (non-GAAP) per share were $0.47 per diluted share for the third quarter 2025.

See “Reconciliation of Net Income and Diluted Earnings Per Share to Non-GAAP Measure” for additional information.

Other significant variances were as follows:

● Net interest income of $22,263,000 in the third quarter 2025 was $2,107,000 higher than in the third quarter 2024.

The net interest margin increased to 3.62% in the third quarter 2025 from 3.29% in the third quarter 2024.

First Quarter 2026 as Compared to First Quarter 2025

First quarter 2026 net income was $273,000, or $0.02 per diluted share, as compared to $6,293,000, or $0.41 per diluted share, in the first quarter 2025.

First quarter 2026 earnings were impacted by an elevated provision for credit losses discussed below.

Significant variances were as follows:

● Net interest income of $28,454,000 in the first quarter 2026 was $8,479,000 higher than in the first quarter 2025, including the benefit of income from growth in net earning assets resulting from the Susquehanna merger.

The net interest margin increased to 3.98% in the first quarter 2026 from 3.38% in the first quarter 2025.

The interest rate spread increased 0.76%, as the average yield on earning assets increased 0.31% while the average rate on interest-bearing liabilities decreased 0.45%.

Average total deposits increased $41,554,000 despite a decrease in average brokered deposits of $53,846,000 and average total borrowed funds decreased $56,519,000.

Average total earning assets increased $1,585,000 from the third quarter 2024, as average total loans receivable increased $37,761,000, or 2.0%, while average interest-bearing due from banks decreased $31,228,000 or 26.0%.

● The provision for credit losses was $2,163,000 for the third quarter 2025, compared to a provision for credit losses of $1,207,000 in the third quarter 2024.

The provision for the third quarter 2025 included a provision related to loans receivable of $1,869,000 and a provision related to off-balance sheet exposures of $294,000.

The provision in the third quarter of 2025 mainly resulted from increases in the allowance for credit losses (“ACL”) related to changes in qualitative factors partially offset by a decrease resulting from changes in an economic forecast.

Net charge-offs totaled $94,000, or 0.02% (annualized) of average loans receivable, in the third quarter of 2025 as compared to $1,237,000, or 0.26% (annualized) of average loans receivable, in the third quarter of 2024.

The ACL as a percentage of gross loans receivable was 1.21% at September 30, 2025, an increase from 1.08% at September 30, 2024.

● Noninterest income of $7,304,000 in the third quarter 2025 increased $171,000 from the third quarter 2024 result, including trust revenue of $2,056,000 which increased $110,000, or 5.7%, reflecting an increase in estate and pension fees.

● Noninterest expense totaled $19,389,000 in the third quarter of 2025, an increase of $1,120,000 from $18,269,000 in third quarter of 2024.

Excluding merger-related expenses of $882,000, non-interest expense totaled $18,507,000 in the third quarter of 2025, an increase of $238,000 from the third quarter of 2024 result.

Significant variances included the following:

Average total earning assets increased $505,810,000 from the first quarter 2025, as average total loans receivable increased $465,531,000, including the impact of loans acquired from Susquehanna, and average available-for-sale debt securities increased $81,543,000 while average interest-bearing due from banks decreased $42,380,000.

Average total deposits increased $499,043,000, including the impact of deposits assumed from Susquehanna, w hile average brokered deposits decreased $24,333,000.

● The provision for credit losses was $13,602,000 in the first quarter 2026 as compared to $236,000 in the first quarter 2025.

The increase in the first quarter 2026 provision was primarily driven by the impact on the allowance for credit losses (“ACL”) of an increase in net charge-offs to $10,808,000 as compared to $91,000 in the first quarter of 2025.

The significant increase in charge-offs in the first quarter of 2026 is due to a non-owner occupied;

commercial real estate loan originated in 2022 in the amount of $24 million of which $7,200,000 was participated with another financial institution.

The loan is secured by a first lien on the leasehold interests of an approximately 190,000 square foot Class A office property with multiple buildings and tenants, located in Bucks County, PA.

The loss of a large tenant as well as cash flow requirements of the borrower’s other properties (which the Corporation has not financed) caused the loan to be downgraded to substandard and placed on nonaccrual status as of March 31, 2026.

The Corporation obtained an updated appraisal in April 2026 which was significantly lower than the original appraisal when the loan was originated, resulting in a charge-off of $10,056,000.

At March 31, 2026, the amortized cost basis of the loan, net of the partial charge-off, is $5,836,000.

Management believes the property’s location and condition provide an opportunity for recovery of value in the future.

The ACL was 1.42% of gross loans receivable at March 31, 2026, up from 1.32% at December 31, 2025

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Ø Salaries and employee benefits expense of $11,293,000 increased $418,000 from the third quarter of 2024 including increases of $172,000 in health insurance expense, $150,000 in cash and stock-based compensation and an increase in base salaries expense of $77,000, or 1.0%.

Ø Other noninterest expense of $2,496,000 decreased $141,000 from the third quarter 2024 as legal fees and expenses totaled $60,000, a decrease of $158,000 from $218,000 in the third quarter of 2024.

Nine Months Ended September 30, 2025 as Compared to Nine Months Ended September 30, 2024

Net income for the nine-month period ended September 30, 2025 was $18,961,000, or $1.22 per diluted share, as compared to $17,784,000, or $1.16 per diluted share, for the first nine months of 2024.

Excluding the impact of merger-related expenses, net of taxes of $850,000, adjusted earnings (non-GAAP) for the first nine months of 2025 were $19,811,000, or $1.28 per diluted share.

See “Reconciliation of Net Income and Diluted Earnings Per Share to Non-GAAP Measure” for additional information Other significant variances were as follows:

● Net interest income totaled $63,380,000 in the nine months ended September 30, 2025, an increase of $4,738,000 from the total for the first nine months of 2024.

The net interest margin was 3.51% for the first nine months of 2025, up from 3.30% in the corresponding period of 2024.

The interest rate spread increased 0.23%, as the average rate on interest-bearing liabilities was 0.14% lower while the average yield on earning assets increased 0.09%.

Average total earning assets increased $37,834,000, including an increase in average loans receivable of $32,050,000, or 1.7%, and an increase in interest-bearing due from banks of $13,434,000.

Average total deposits increased $58,280,000, or 2.9%, despite a $57,141,000 reduction in average brokered deposits to $13,287,000 for the first nine months of 2025 as compared to $70,428,000 for the first nine months of 2024, while average total borrowed funds decreased $44,150,000.

● For the nine months ended September 30, 2025, the provision for credit losses was $4,753,000, an increase of $2,027,000 from the provision for the first nine months of 2024.

The provision in the nine months ended September 30, 2025 included the impact of increases in the ACL related to changes in qualitative factors partially offset by a reduction related to changes in the Corporation’s average net charge-off experience.

In the first nine months of 2025, the ACL on loans receivable increased $3,439,000 to 1.21% at September 30, 2025 as compared to 1.06% at December 31, 2024.

Net charge-offs totaled $733,000, or 0.05% (annualized) of average loans receivable for the nine months ended September 30, 2025 compared to $1,589,000, or 0.11% (annualized) of average loans receivable for the first nine months of 2024.

● Noninterest income totaled $22,454,000 in the first nine months of 2025, up $792,000 from the total for the first nine months of 2024.

and 1.06% at March 31, 2025, as the higher level of net charge-offs in the first quarter 2026 impacted the portion of the Corporation’s ACL determined based on historical loss experience.

● Noninterest income of $8,195,000 in the first quarter 2026 increased $1,187,000 from the first quarter 2025 result.

Significant variances included the following:

Ø Trust revenue of $6,125,000 increased $268,000, consistent with appreciation in the trading prices of many U.S.

equity securities and included an increase in estate fees.

Ø Other noninterest income of $4,320,000 increased $237,000, including increases in credit enhancement fees of $69,000, income from merchant services of $55,000, income from tax credits related to donations of $51,000 and letter of credit fees of $50,000.

Ø Other noninterest income of $1,586,000 increased $454,000, including a conversion assistance payment of $241,000 received related to the merger integration of the wealth management platform, an increase of $94,000 in tax credit income and an increase of $78,000 in dividends on Federal Home Loan Bank of Pittsburgh stock.

Ø Interchange revenue from debit card transactions of $1,267,000 increased $231,000, including an increase in volume-related incentive income.

Ø Net gains from sale of loans of $925,000 increased $139,000, reflecting an increase in volume of residential mortgage loans sold.

● Noninterest expense totaled $57,830,000 for the first nine months of 2025, an increase of $2,002,000 from $55,828,000for the first nine months of 2024.

Excluding merger-related expenses of $1,049,000, non-interest expense

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

totaled $56,781,000 for the first nine months of 2025, an increase of $953,000 from the total for the first nine months of 2024.

Significant variances included the following:

Ø Salaries and employee benefits expense of $34,119,000 increased $659,000, including increases of $548,000 in cash-and stock-based incentive compensation and $137,000 in wealth management-related commissions, while base salaries decreased $52,000.

Ø Other noninterest expense of $8,251,000 increased $315,000.

Ø Service charges on deposit accounts of $1,650,000 increased $210,000, reflecting an increase in volume of fees.

Ø Net gains from sale of loans of $370,000 increased $165,000, reflecting an increase in volume of residential mortgage loans sold and includes the impact of $133,000 in net gains from sale of loans resulting from the Susquehanna acquisition.

● Noninterest expense of $22,712,000 in the first quarter 2026 increased $3,669,000 from the first quarter 2025 result, reflecting the impact of the Susquehanna acquisition.

Other significant variances included the following:

Ø Salaries and employee benefits expense of $13,201,000 increased $1,442,000, including the impact of the Susquehanna acquisition, while cash and stock-based incentive compensation decreased $219,000.

Ø Other noninterest expense of $3,364,000 increased $1,010,000 from the first quarter 2025.

Within this category, significant variances included the following :

◾ In 2025, there was a reduction in expense associated with the defined benefit postretirement medical benefit plan of $49,000.

In comparison, in 2024, there was a reduction in expense of $513,000 related to the defined benefit postretirement medical benefit plan, including a curtailment gain of $469,000.

In addition, pension costs from a frozen defined benefit plan increased $93,000 to $109,000 in 2025 from $14,000 in 2024, primarily from a settlement charge of $87,000 in 2025, and net collection expense increased $60,000 to $38,000 in 2025 as compared to net recoveries of $22,000 in 2024.

◾ Legal fees totaled $199,000 in the first nine months of 2025, a decrease of $292,000 from 2024.

● The income tax provision of $4,290,000, or 18.5% of pre-tax income for 2025 increased $324,000 from $3,966,000, or 18.2% of pre-tax income, for 2024.

The increase in income tax provision was consistent with the increase in pre-tax income of $1,501,000.

The following table provides a reconciliation of the Corporation’s third quarter and September 30, 2025 year-to-date unaudited earnings results under U.S.

generally accepted accounting principles (U.S.

GAAP) to comparative non-U.S.

GAAP results excluding merger-related expenses.

Management believes disclosure of unaudited third quarter and September 30, 2025 earnings results, adjusted to exclude the impact of merger-related expenses, provides useful information for comparative purposes.

RECONCILIATION OF NET INCOME AND DILUTED EARNINGS PER SHARE TO NON-GAAP MEASURE:

Three Months Ended

Nine Months Ended

(Dollars In Thousands, Except Per Share Data)

September 30,

Calculation of Adjusted Net Income:

Net Income (GAAP) (A)

Merger-related expenses (B)

Tax effect of merger-related expenses (C)

Adjusted Net Income (D=A+B-C) - Non-GAAP

Adjusted Net Income Attributable to Common Shares - Non-GAAP

Number of Shares Used in Computation - Basic and Diluted

Net Income- Basic and Diluted per Common Share - GAAP

Adjusted Net Income- Basic and Diluted Per Common Share - Non-GAAP

◾ Core deposit intangible amortization expense increased $708,000, related to core deposits assumed from Susquehanna.

◾ FDIC insurance expense increased $243,000 from the first quarter of 2025, reflecting the impact of the Susquehanna acquisition.

◾ Legal fees unrelated to merger activity decreased $104,000 from the first quarter of 2025.

Ø Net occupancy and equipment expense was $432,000 higher than in first quarter 2025, including $337,000 related to the Susquehanna acquisition and increases in snow removal, light and power and repairs and maintenance expenses.

Ø Data processing and telecommunications expenses were $378,000 higher than in the first quarter 2025, reflecting higher software license expense of $179,000 and higher internet banking expenses of $170,000, related to the Susquehanna acquisition.

● The income tax provision of $62,000, or 18.5% of pre-tax income, for the first quarter 2026 decreased $1,349,000 from $ 1,411 ,000, or 18.3% of pre-tax income , for the first quarter 2025 reflecting a decrease in pre-tax income for the quarter.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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September 30,

Interest and dividend income

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Three Months Ended

September 30,

Trust revenue

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Other noninterest income

Total noninterest income

(Dollars in Thousands)

Nine Months Ended

September 30,

Trust revenue

Brokerage and insurance revenue

Service charges on deposit accounts

Interchange revenue from debit card transactions

Net gains from sales of loans

Loan servicing fees, net

Increase in cash surrender value of life insurance

Other noninterest income

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

Total noninterest income

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

NONINTEREST EXPENSE

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Three Months Ended

September 30,

Salaries and employee benefits

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Other noninterest expense

Total noninterest expense, excluding merger-related expenses

Merger-related expenses

Total noninterest expense

(Dollars in Thousands)

Nine Months Ended

September 30,

Salaries and employee benefits

Net occupancy and equipment expense

Data processing and telecommunications expense

Automated teller machine and interchange expense

Pennsylvania shares tax

Professional fees

Other noninterest expense

Total noninterest expense, excluding merger-related expenses

Merger-related expenses

Total noninterest expense

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

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

CRITICAL ACCOUNTING POLICIES

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Actual results could differ from these estimates.

Business Combinations – The Corporation accounts for its mergers and acquisitions using the acquisition method of accounting under the provisions of FASB ASC Topic 805 ("ASC 805"), Business Combinations.

Under ASC 805, the assets acquired, including identified intangible assets such as core deposit intangibles and liabilities assumed in a business combination are recognized at their acquisition-date fair value, while transaction costs and restructuring costs associated with the business combination are expensed as incurred.

The excess of the merger consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill.

The valuations are based upon management’s assumptions of future growth rates, future attrition, discount rates and other relevant factors, which involves a significant level of estimation and uncertainty.

In addition, management engaged independent third-party specialists to assist in the development of the fair values of the acquired assets and assumed liabilities.

The preliminary estimates of fair values may be adjusted for a period of time subsequent to the acquisition date if new information is obtained about facts and circumstances that existed as of the merger date that, if known, would have affected the measurement of the amounts recognized as of that date.

Adjustments would be recorded to goodwill during the current reporting period.

Examples of the impacted acquired assets and assumed liabilities include loans, deposits, identifiable intangible assets and certain other assets and liabilities.

For acquired loans at the merger date, management evaluated and classified loans based upon whether the loans had experienced a more-than-insignificant amount of credit deteriorating since origination.

To determine the fair value of the loans, significant estimates and assumptions were applied, including projected cash flows, discount rates, repayment speeds, credit loss severity rates, default rates and realizable collateral values.

In November 2025, the Financial Accounting Standards Board issued Accounting Standards Update 2025-08, Financial Instruments – Credit Losses (ASU 2025-08).

The Corporation adopted ASU 2025-08 in accounting for the Susquehanna acquisition.

Consistent with ASU 2025-08, the Corporation recorded loans receivable at fair value plus an allowance for credit losses of $7.1 million, including allowances totaling $2.6 million on loans with more than insignificant deterioration in credit quality subsequent to origination (“PCD”) loans and an allowance of $4.5 million on non-PCD loans at acquisition.

Allowance for Credit Losses on Loans – A material estimate that is particularly susceptible to significant change is the determination of the allowance for credit losses (ACL) on loans.

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Note 7 to the unaudited consolidated financial statements provides an overview of the process management uses for determining the ACL, and additional discussion of the ACL is provided in a separate section below of Management’s Discussion and Analysis.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The ACL may increase or decrease due to changes in economic conditions affecting borrowers and macroeconomic variables, including new information regarding existing problem loans, identification of additional problem loans, changes in the fair value of underlying collateral, unforeseen events such as natural disasters and pandemics, and other factors.

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The Corporation’s primary source of operating income is net interest income, which is equal to the difference between the amounts of interest income and interest expense.

Tables IV, V and VI include information regarding the Corporation’s net interest income for the three-month and nine-month periods ended September 30, 2025 and 2024.

Tables IV, V and VI include information regarding the Corporation’s net interest income for the

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

three-month periods ended March 31, 2026 and 2025.

In each of these tables, the amounts of interest income earned on tax-exempt securities and loans have been adjusted to a fully taxable-equivalent basis.

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The discussion that follows is based on amounts in the related tables.

Three-Month Periods Ended September 30, 2025 and 2024

Fully taxable equivalent net interest income (a non-GAAP measure) was $22,481,000 in the third quarter of 2025, $2,120,000 (10.4%) higher than in the third quarter of 2024.

The increase in net interest income reflected an increase in interest income of $576,000 and a decrease in interest expense of $1,544,000.

As presented in Table V, the Net Interest Margin was 3.62% in the third quarter 2025 as compared to 3.29% in the third quarter 2024, and the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) increased to 2.94% in 2025 from 2.55% in 2024.

Three-Month Periods Ended March 31, 2026 and 2025

Fully taxable equivalent net interest income (a non-GAAP measure) was $28,685,000 in the first quarter of 2026, $8,499,000 (42.1%) higher than in the first quarter of 2025, including the benefit of income from growth in net earning assets resulting from the Susquehanna merger.

Table VI shows the net impact of changes in the volume increased net interest income by $5,949,000 in the first quarter 2026 as compared to first quarter 2025 and changes in interest rates increased net interest income by $2,550,000 in the first quarter 2026 as compared to first quarter 2025.

The increase in net interest income reflected an increase in interest income of $8,899,000 and an increase in interest expense of $400,000.

As presented in Table V, the Net Interest Margin was 3.98% in the first quarter 2026 as compared to 3.38% in the first quarter 2025, and the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) increased to 3.45% in 2026 from 2.69% in 2025.

The average yield on earning assets of 5.66% was 0.31% higher in 2026 compared to 2025, and the average rate on interest-bearing liabilities of 2.21% in 2026 was 0.45% lower.

Additionally, average total deposits increased $41,554,000 despite a decrease in average brokered deposits of $53,846,000 and total average borrowed funds decreased $56,519,000.

Average total earning assets increased $1,585,000 from the third quarter 2024, as average total loans receivable increased $37,761,000 while average interest-bearing due from banks decreased $31,228,000.

As presented in Table VI, the net impact of changes in interest rates increased net interest income in the third quarter 2025 as compared to third quarter 2024 by $1,483,000 and changes in volume of earning assets and interest-bearing liabilities increased net interest income by $637,000.

Accretion of acquisition accounting valuation adjustments related to the Susquehanna merger had a positive impact of $765,000 including accretion on loans of $728,000 and $37,000 on time deposits.

INTEREST INCOME AND EARNING ASSETS

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Interest and fees from loans receivable increased $8,175,000 in 2026 as compared to 2025.

The fully taxable equivalent yield on loans in 2025 increased to 6.14% from 6.08% in 2024, r eflecting the effects of gradual paydowns on loans originated prior to interest rates rising in 2022 and 2023 with more recent loans originated at higher market rates.

Average outstanding loans receivable increased $37,761,000, or 2.0% to $1,926,231,000 in 2025 from $1,888,470,000 in 2024.

Income from interest-bearing due from banks totaled $982,000 in 2025, a decrease of $640,000 from the total for 2024.

In 2026, the fully taxable equivalent yield on loans was 6.24%, up from 6.03% in 2025, r eflecting the effects of loans acquired from Susquehanna and valued based on current market yields as of October 1, 2025 as well as gradual paydowns on loans originated prior to interest rates rising in 2022 and 2023 with more recent loans originated at higher market rates .

Average outstanding loans receivable increased $465,531,000 (24.5%) to $2,364,964,000 in 2026 from $1,899,433,000 in 2025 including the impact of the Susquehanna acquisition as well as organic growth.

Interest income from available-for-sale debt securities, on a fully taxable-equivalent basis, totaled $4,165,000 in 2026, up $1,215,000 from 2025.

The average balance (at amortized cost) increased $81,543,000 from 2025 and the average yield on the portfolio increased to 3.17% in 2026 from 2.65% in 2025.

The Susquehanna merger resulted in an initial increase in available-for-sale debt securities of $147,617,000.

The majority of these securities were sold, and a significant portion of the proceeds were reinvested in securities contributing to the increase in average balance and yield.

Income from interest-bearing due from banks totaled $218,000 in 2026, a decrease of $503,000 from 2025.

Within this category, the largest asset balance in 2026 and 2025 has been interest-bearing deposits held with the Federal Reserve.

The average yield on interest-bearing due from banks was 4.39% in 2025, down from 5.38% in 2024.

The average yield on interest-bearing due from banks decreased to 3.46% in 2026 from 4.31% in 2025.

The average balance of interest-bearing due from banks was $25,516,000 in 2026, down from $67,896,000 in 2025.

The net decrease in average interest-bearing due from banks for 2025 as compared to 2024 reflected net uses of cash for loan growth and a decrease in borrowed funds partially offset by net sources of cash from deposit growth and a reduction in average available-for-sale debt securities.

Interest income from available-for-sale debt securities, on a fully taxable-equivalent basis, totaled $3,039,000 in 2025, up $265,000 from 2024, as the average yield on available-for-sale debt securities was 2.71% in 2025, up from 2.45% in 2024.

The average balance (at amortized cost) of available-for-sale debt securities decreased $4,681,000 between periods.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

INTEREST EXPENSE AND INTEREST-BEARING LIABILITIES

Interest expense decreased $1,544,000 to $11,387,000 in 2025 from $12,931,000 in 2024.

Interest expense on deposits decreased $956,000, as the average rate decreased to 2.32% in 2025 from 2.62% in 2024 while the average balance of interest-bearing deposits increased $31,611,000.

Average total deposits (interest-bearing and noninterest-bearing) increased $41,554,000 or 2.0% in the third quarter of 2025 as compared to 2024.

Within average deposits, average brokered deposits were $4,936,000 at an average rate of 4.18% in the third quarter of 2025 as compared to $58,782,000 at an average rate of 5.28% in the third quarter of 2024.

In comparing the third quarter 2025 to the third quarter 2024, average total money market accounts increased $20,274,000, average time deposits increased $13,341,000, average noninterest-bearing demand deposits increased $9,943,000 and average interest checking deposits increased $1,716,000 while average savings deposits decreased $3,720,000.

Interest expense on borrowed funds decreased $588,000 in 2025 as compared to 2024.

Interest expense on short-term borrowings was less than $1,000 in the third quarter 2025 compared to $184,000 in the third quarter 2024 as the average balance of short-term borrowings decreased to $658,000 in 2025 from $15,038,000 in 2024.

Interest expense on long-term borrowings (FHLB advances) decreased $406,000 to $1,577,000 in 2025 from $1,983,000 in 2024.

The average balance of long-term borrowings was $138,749,000 in 2025, down from an average balance of $181,075,000 in 2024.

The average rate on long-term borrowings was 4.51% in 2025 compared to 4.36% in 2024.

Borrowings are classified as long-term within the Tables based on their term at origination or assumption in business combinations.

More information regarding borrowed funds is provided in Note 8 to the unaudited consolidated financial statements.

Nine Month Periods Ended September 30, 2025 and 2024

For the nine-month periods, fully taxable equivalent net interest income was $64,029,000 in 2025, which was $4,785,000 or 8.1% higher than in 2024.

The increase in net interest income reflected an increase in interest income of $3,111,000 and a decrease in interest expense of $1,674,000.

As presented in Table VI, the net impact of changes in interest rates increased net interest income for the nine months ended September 30, 2025 over the nine months ended September 30, 2024 by $3,362,000 and the net impact of changes in volume of earning assets and interest-bearing liabilities increased net interest income by $1,423,000.

As presented in Table V, the Net Interest Margin was 3.51% in the first nine months of 2025 as compared to 3.30% in the first nine months of 2024, and the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) increased to 2.83% in 2025 from 2.60% in 2024.

The average yield on earning assets of 5.40% was 0.09% higher in 2025 as compared to 2024, while the average rate on interest-bearing liabilities of 2.57% in 2025 was 0.14% lower compared to 2024.

INTEREST INCOME AND EARNING ASSETS

Interest income totaled $98,462,000 in 2025, an increase of $3,111,000 from 2024.

Interest and fees from loans receivable increased $2,396,000 in 2025 as compared to 2024.

In the nine-month period ended September 30, 2025, t he fully taxable equivalent yield on loans was 6.08%, up from 6.01% in the first nine months of 2024, r eflecting the effects of gradual paydowns on loans originated prior to interest rates rising in 2022 and 2023 with more recent loans originated at higher market rates.

Average outstanding loans receivable increased $32,050,000 or 1.7% to $1,909,126,000 in 2025 from $1,877,076,000 in 2024.

Income from interest-bearing due from banks totaled $2,558,000 in 2025, an increase of $37,000 from 2024.

The average balance of interest-bearing due from banks was $78,883,000 in 2025, up from $65,449,000 in 2024.

Within this category, the largest asset balance in 2025 and 2024 has been interest-bearing deposits held with the Federal Reserve.

The average yield on interest-bearing due from banks was 4.34% in 2025, down from 5.15% in 2024.

Interest income from available-for-sale debt securities, on a fully taxable-equivalent basis, totaled $8,976,000 in 2025, up $680,000 from 2024, as the average yield on available-for-sale debt securities was 2.68% in 2025, up from 2.43% in 2024.

The average balance (at amortized cost) of available-for-sale debt securities decreased to $448,032,000 in 2025 from $455,944,000 in 2024 .

Interest expense increased $400,000 to $12,134,000 in 2026 from $11,734,000 in 2025.

Interest expense on deposits increased $466,000, as the average balance of interest-bearing deposits increased $435,482,000 while the average rate decreased to 2.02% in 2026 from 2.45% in 2025.

The increase in average deposit balances included the impact of the Susquehanna acquisition as well as organic growth.

Within average deposits, average brokered deposits were $2,247,000 at an average rate of 3.79% in 2026 as compared to $26,580,000 at an average rate of 4.76% in 2025.

In comparing 2026 to 2025, average savings deposits increased $166,089,000, average interest checking deposits increased $130,728,000, average time deposits increased

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

INTEREST EXPENSE AND INTEREST-BEARING LIABILITIES

For the nine-month periods, interest expense decreased $1,674,000 to $34,433,000 in 2025 from $36,107,000 in 2024.

Interest expense on deposits decreased $285,000, as the average rate on interest-bearing deposits was 2.37% in 2025 and 2.48% in 2024.

The average balance of interest-bearing deposits increased $54,971,000.

Average total deposits (interest-bearing and noninterest-bearing) amounted to $2,092,615,000 for the first nine months of 2025, up $58,280,000 or 2.9% from the first nine months of 2024.

Within average total deposits, average brokered deposits (primarily time and money market) were $13,287,000 with an average interest rate of 4.63% in 2025, down from $70,428,000 with an average interest rate of 5.24% in 2024.

Average time deposits increased $35,528,000, average interest checking deposits increased $17,102,000, average money market accounts increased $12,318,000 and average noninterest-bearing demand deposits increased $3,309,000, while average balance of savings accounts decreased $9,977,000.

$108,224,000, average noninterest-bearing demand deposits increased $63,561,000 and average total money market accounts increased $30,441,000.

Interest expense on borrowed funds decreased $66,000 in 2026 as compared to 2025.

Interest expense on short-term borrowings of $1,000 in 2025 was down from $1,141,000 in 2024 as the average balance of short-term borrowings decreased to $1,010,000 in 2025 from $29,086,000 in 2024.

The average rate on short-term borrowings was 0.13% in 2025 compared to 5.24% in 2024.

Interest expense on short-term borrowings was $276,000 in 2026 compared to less than $1,000 in 2025 as the average balance of short-term borrowings increased to $28,203,000 in 2026 from $1,400,000 in 2025.

Interest expense on long-term borrowings (FHLB advances) decreased $343,000 to $1,446,000 in 2026 from $1,789,000 in 2025.

The average rate on long-term borrowings was 4.49% in 2025 compared to 4.25% in 2024 while the average balance of long-term borrowings decreased to $150,195,000 in 2025 from $166,454,000 in 2024.

The average balance of long-term borrowings was $134,034,000 in 2026, down from an average balance of $162,392,000 in 2025.

Borrowings are classified as long-term within the Tables based on their term at origination or assumption in business combinations.

The average rate on long-term borrowings was 4.38% in 2026 compared to 4.47% in 2025.

More information regarding borrowed funds is provided in Note 9 to the unaudited consolidated financial statements.

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Three Months Ended

Nine Months Ended

September 30,

(In Thousands)

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Three Months Ended

Nine Months Ended

September 30,

Net Interest Income Under U.S.

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Total Interest-bearing Liabilities

Demand deposits

Demand deposits (noninterest bearing)

Other liabilities

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Interest Rate Spread

Net Interest Income/Earning Assets

Net Interest Income/Earning Assets (Net Interest Margin)

Total Deposits (Interest-bearing and Demand)

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Three Months Ended 3/31/2026 vs.

Nine Months Ended 9/30/2025 vs.

EARNING ASSETS

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The income tax provision in interim periods is based on the Corporation’s estimate of the effective tax rate expected to be applicable for the full year.

The income tax provision for the third quarter 2025 of $1,464,000 was $16,000 higher than the provision for the third quarter 2024, and the provision for the nine months ended September 30, 2025 of $4,290,000 was $324,000 higher than the amount for the first nine months of 2025 due to a higher amount of pre-tax income in 2025.

The effective tax rate (tax provision as a percentage of pre-tax income) was 18.3% in the third quarter 2025 compared to 18.5% in the third quarter 2024 and 18.5% for the first nine months of 2025 as compared to 18.2% for the first nine months of 2024.

The income tax provision for the first quarter 2026 of $62,000 was $1,349,000 lower than the provision for the first quarter 2025.

The effective tax rate (tax provision as a percentage of pre-tax income) was 18.5% in the first quarter 2026 compared to 18.3% in the first quarter 2025.

The Corporation’s effective tax rates differ from the statutory federal rate of 21% principally because of the effects of tax-exempt interest income, nondeductible interest expense, state income taxes and other permanent differences.

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The Corporation recognizes deferred tax assets and liabilities based on differences between the consolidated financial statement carrying amounts and the tax basis of assets and liabilities.

The net deferred tax asset at September 30, 2025 and December 31, 2024 represents the following temporary difference components:

September 30,

The net deferred tax asset at March 31, 2026 and December 31, 2025 represents the following temporary difference components:

(In Thousands)

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Deferred compensation

Operating leases liability

Deferred loan origination fees

Operating leases liability

Net operating loss carryforward

Accrued incentive compensation

Bank premises and equipment

Other deferred tax assets

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Deferred tax liabilities:

Right-of-use assets from operating leases

Core deposit intangibles

Bank premises and equipment

Right-of-use assets from operating leases

Mortgage servicing rights

Defined benefit plans - ASC 835

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Realization of deferred tax assets ultimately depends on the existence of sufficient taxable income.

Management believes the recorded net deferred tax asset at September 30, 2025 is fully realizable;

Management believes the recorded net deferred tax asset at March 31, 2026 is fully realizable;

however, if management determines the Corporation will be unable to realize all or part of the net deferred tax asset, the Corporation would adjust the deferred tax asset, which would negatively impact earnings .

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CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The composition of the available-for-sale debt securities portfolio at September 30, 2025 and December 31, 2024, 2023 and 2022 is as follows:

The composition of the available-for-sale debt securities portfolio at March 31, 2026 and December 31, 2025, 2024 and 2023 is as follows:

(Dollars In Thousands)

September 30, 2025

March 31, 2026

December 31, 2025

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Aggregate Unrealized Loss as a % of Amortized Cost

As reflected in the table above, the fair value of available-for-sale securities was lower than the amortized cost basis by $33,786,000, or 7.5% at September 30, 2025, $47,543,000, or 10.6%, at December 31, 2024, $49,213,000, or 10.6%, at December 31, 2023 and $63,761,000, or 11.3%, at December 31, 2022.

The volatility in the fair value of the portfolio, including the reduction in fair value, resulted from changes in interest rates.

The table also shows that the amortized cost basis of the portfolio has been reduced to $449,099,000 at September 30, 2025 from $561,794,000 at December 31, 2022 as proceeds from maturities and sales have been used to help fund loan growth and for other purposes.

As reflected in the table above, the fair value of available-for-sale securities was lower than the amortized cost basis by $32,175,000, or 6.1%, at March 31, 2026, $29,685,000, or 5.5%, at December 31, 2025, $47,543,000, or 10.6%, at December 31, 2024 and $49,213,000, or 10.6%, at December 31, 2023.

The volatility in the fair value of the portfolio, including the significant reduction in fair value, resulted from changes in interest rates.

Additional information regarding the potential impact of interest rate changes on all of the Corporation’s financial instruments is provided in Item 3, Quantitative and Qualitative Disclosures about Market Risk.

As described in Note 5 to the unaudited consolidated financial statements, management determined the Corporation does not have the intent to sell, nor is it more likely than not that it will be required to sell, available-for-sale debt securities in an unrealized loss position at September 30, 2025 before it is able to recover the amortized cost basis.

Further, management reviewed the Corporation’s holdings as of September 30, 2025 and concluded there were no credit-related declines in fair value.

Additional information related to the types of securities held at September 30, 2025, other than securities issued or guaranteed by U.S.

Government entities or agencies, is as follows:

As described in Note 6 to the consolidated financial statements, management determined the Corporation does not have the intent to sell, nor is it more likely than not that it will be required to sell, available-for-sale debt securities in an unrealized loss position at March 31, 2026 before it is able to recover the amortized cost basis.

Further, management reviewed the Corporation’s holdings as of March 31, 2026 and concluded there were no credit-related declines in fair value.

Additional information related to the types of securities held at March 31, 2026, other than securities issued or guaranteed by U.S.

Government entities or agencies, was as follows:

● Bank holding company debt securities – The Corporation’s holdings of bank holding company debt securities included one senior and eleven subordinated securities with face amounts ranging from $250,000 to $5 million.

There have been no payment defaults on the securities .

Eleven of the issuers have publicly traded common stock.

At March 31, 2026, one of the securities with a face amount of $400,000 is unrated, and the rest of securities have external ratings ranging from BBB-/Baa3 to A-.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

● Bank holding company debt securities – All of the Corporation’s holdings of bank holding company debt securities were investment grade and there have been no payment defaults.

There were seven securities with face amounts ranging from $3 million to $5 million, including one senior security and six subordinated securities.

All of the issuers have publicly traded common stock .

At September 30, 2025, the securities have external ratings ranging from BBB-/Baa3 to A-.

● Obligations of states and political subdivisions (municipal bonds) –Most of the Corporation’s holdings of municipal bonds were investment grade and there have been no payment defaults.

Summary ratings information at September 30, 2025, based on the amortized cost basis and reflecting the lowest enhanced or underlying rating by Moody’s, Standard & Poors or Fitch, is as follows:

● Obligations of states and political subdivisions (municipal bonds) – All of the Corporation’s holdings of municipal bonds were investment grade and there have been no payment defaults.

Summary ratings information at March 31, 2026, based on the amortized cost basis and reflecting the lowest enhanced or underlying rating by Moody’s, Standard & Poors or Fitch, is as follows:

AAA or pre-refunded – 20% of the portfolio;

● Private label commercial mortgage-backed security (PLCMBS) – There was one PLCMBS security which was from the most senior payment (subordination) class.

This security was investment grade (rated Aaa), and there have been no payment defaults on this security.

● Collateralized loan obligations (CLOs) – There were three CLOs securities, all of which were from the most senior payment (subordination) classes of their respective issuances.

These securities were investment grade (rated Aaa), and there have been no payment defaults on these securities.

Based on the results of management’s assessment, there was no ACL required on available-for-sale debt securities in an unrealized loss position at September 30, 2025.

Based on the results of management’s assessment, there was no ACL required on available-for-sale debt securities in an unrealized loss position at March 31, 2026.

FINANCIAL CONDITION

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Other significant balance sheet items, including securities, the allowance for credit losses and stockholders’ equity, are discussed in separate sections of Management’s Discussion and Analysis.

There are no significant concerns that have arisen related to the Corporation’s off-balance sheet loan commitments or outstanding letters of credit at September 30, 2025.

Table VII shows the composition of the loan portfolio at September 30, 2025 and at year-end from 2020 through 2024.

There are no significant concerns that have arisen related to the Corporation’s off-balance sheet loan commitments or outstanding letters of credit at March 31, 2026.

Table VII shows the composition of the loan portfolio at March 31, 2026 and at year-end from 2021 through 2025.

Throughout this time period, the portfolio was primarily commercial in nature.

At September 30, 2025, commercial loans represented 76% of the portfolio while residential loans totaled 20% of the portfolio.

Also included in Table VII is additional detail regarding the composition of the non-owner occupied commercial real estate loan portfolio at September 30, 2025.

At March 31, 2026, commercial loans represented 76% of the portfolio while residential loans totaled 19% of the portfolio.

As shown in Table VII, total loans receivable were higher by $458,517,000 at December 31, 2025 as compared to December 31, 2024.

On October 1, 2025, $ 393,587,000 of gross loans receivable, net of purchase accounting adjustments, were recorded pursuant to the acquisition of Susquehanna.

Also included in Table VII is additional detail regarding the composition of the non-owner occupied commercial real estate loan portfolio at March 31, 2026.

As shown in Table VII, the amortized cost of non-owner occupied commercial real estate loans for which the primary purpose is utilization of office space by third parties was $109,404,000, or 4.6% of gross loans receivable.

Within this segment there were two loans with a total amortized cost basis of $2,874,000 in nonaccrual status with no individual allowances and the remainder of the non-owner occupied commercial real estate loans with a primary purpose of office space utilization were in accrual status with no individual allowance at September 30, 2025.

At March 31, 2026, within this segment there were three loans with a total recorded investment of $8,600,000 in nonaccrual status with no individual allowances, including the loan discussed in the Earnings Overview and Provision and Allowance for Credit Losses section with a partial charge-off of $10,056,000 in the first quarter 2026 and an amortized cost basis at March 31, 2026 of $5,836,000.

The remainder of the non-owner occupied commercial real estate loans with a primary purpose of office space utilization were in accrual status with no individual allowance at March 31, 2026.

While the Corporation’s lending activities are primarily concentrated in its market areas, a portion of the Corporation’s commercial loan segment consists of participation loans.

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Although not the lead bank, the Corporation conducts detailed underwriting and monitoring of participation loan opportunities.

Total participation loans outstanding amounted to $33,518,000 at September 30, 2025, down from $35,129,000 at December 31, 2024.

Total participation loans outstanding amounted to $105,610,000 at March 31, 2026, down from $107,351,000 at December 31, 2025.

The Corporation is a party to financial instruments with off-balance sheet risk, including commitments to extend credit and standby letters of credit.

At September 30, 2025, the total contract amount of commitments to extend credit was $426,396,000 as compared to $380,003,000 at December 31, 2024, and the contract amount of standby letters of credit was $58,653,000 at September 30, 2025 as compared to $64,586,000 at December 31, 2024.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

At March 31, 2026, the total contract amount of commitments to extend credit was $489,887,000 as compared to $506,996,000 at December 31, 2025, and the contract amount of standby letters of credit was $59,161,000 at March 31, 2026 as compared to $58,914,000 at December 31, 2025.

The Corporation maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, commercial letters of credit and credit enhancement obligations related to residential mortgage loans sold with recourse, when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable (i.e.

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The allowance for off-balance sheet credit exposures is adjusted as a provision for credit loss expense.

The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated lives.

The allowance for credit losses for off-balance sheet exposures of $1,036,000 at September 30, 2025 and $455,000 at December 31, 2024, is included in accrued interest and other liabilities in the unaudited consolidated balance sheets.

The estimate includes consideration of the likelihood that funding will occur and an estimate of

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

expected credit losses on commitments expected to be funded over their estimated lives.

The allowance for credit losses for off-balance sheet exposures of $1,039,000 at March 31, 2026 and $1,029,000 at December 31, 2025, is included in accrued interest and other liabilities in the unaudited consolidated balance sheets.

The Corporation originates and sells residential mortgage loans to the secondary market through the MPF Xtra program administered by the Federal Home Loan Banks of Pittsburgh and Chicago.

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Residential mortgages originated and sold through the MPF Original program consist primarily of conforming, prime loans sold to the Federal Home Loan Bank of Pittsburgh.

The Corporation also originates and sells mortgages under the Pennsylvania Housing Finance Agency and other programs though the volume of sales has been small in comparison to the volume under the MPF programs.

For loan sales originated under the MPF programs, the Corporation provides customary representations and warranties to investors that specify, among other things, that the loans have been underwritten to the standards established by the investor.

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Such repurchases or reimbursements generally result from an underwriting or documentation deficiency.

At September 30, 2025, the total outstanding balance of loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $2,635,000, and the corresponding total outstanding balance of repurchased loans at December 31, 2024 was $3,029,000.

At September 30, 2025, outstanding balances of loans sold and serviced through the MPF Xtra and Original programs totaled $335,330,000, including loans sold through the MPF Xtra program of $153,657,000 and loans sold through the Original program of $181,673,000.

At March 31, 2026, the total outstanding balance of loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $2,562,000, and the corresponding total outstanding balance of repurchased loans at December 31, 2025 was $2,598,000.

At March 31, 2026, outstanding balances of loans sold and serviced through the MPF Xtra and Original programs totaled $451,162,000, including loans sold through the MPF Xtra program of $176,497,000 and loans sold through the Original program of $274,665,000.

At December 31, 2025, outstanding balances of loans sold and serviced through the MPF Xtra and Original programs totaled $450,120,000, including loans sold through the MPF Xtra program of $177,464,000 and loans sold through the Original program of $272,656,000.

Based on the fairly limited volume of required repurchases to date, no allowance has been established for representation and warranty exposures as of September 30, 2025 and December 31, 2024.

Based on the fairly limited volume of required repurchases to date, no allowance has been established for representation and warranty exposures as of March 31, 2026 and December 31, 2025.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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(In Thousands)

September 30,

Commercial real estate - non-owner occupied:

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allowance for credit losses on loans

Additional details regarding the composition of the non-owner occupied commercial real estate loan portfolio, excluding multi-family (5 or more) residential and 1-4 Family-commercial purpose loans, at September 30, 2025 is as follows:

NON-OWNER OCCUPIED COMMERCIAL REAL ESTATE

(In Thousands)

September 30,

% of Non-owner

Self Storage Facilities

Total Non-owner Occupied CRE Loans

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PROVISION AND ALLOWANCE FOR CREDIT LOSSES

A summary of the provision for credit losses for the three-month and nine-month periods ended September 30, 2025 and 2024 is as follows:

A summary of the provision for credit losses for the three-month periods ended March 31, 2026 and 2025 is as follows:

(In Thousands)

September 30,

Provision for credit losses:

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Total provision for credit losses

For the quarter ended September 30, 2025, there was a provision for credit losses of $2,163,000, an increase of $956,000 from a provision for credit losses of $1,207,000 in the third quarter 2024 .

For the nine months ended September 30, 2025, there was a provision for credit losses of $4,753,000, an increase of $2,027,000 compared to $2,726,000 in 2024.

The provision in the nine months ended September 30, 2025 included the impact of increases in the ACL related to changes in qualitative factors partially offset by a reduction in the portion of the ACL based on the Corporation’s WARM method estimated losses resulting partially from a reduction in the estimated average life of the portfolio .

The ACL was 1.21% of gross loans receivable at September 30, 2025, up from 1.13% at June 30, 2025 and 1.06% at December 31, 2024.

As shown in Table IX, the ACL on loans individually evaluated decreased to $51,000 at September 30, 2025 from $122,000 at December 31, 2024.

At September 30, 2025, there was a loan to one borrower with an amortized cost basis of $263,000 for which an individual ACL was recorded.

At December 21, 2024, there were loans to one borrower with a total amortized cost basis of $258,000 for which individual ACLs were recorded.

Table IX also shows that, at September 30, 2025 as compared to December 31, 2024, the ACL related to collectively evaluated commercial loans increased by a total of $3,332,000 and the ACL on collectively evaluated residential mortgage loans increased $353,000 while the ACL on collectively evaluated consumer loans decreased $175,000.

The net increase in the collectively determined portion of the ACL included the impact of an aggregate increase from changes in qualitative adjustments, partially offset by a decrease in WARM method estimated losses resulting partially from a reduction in the estimated average life of the portfolio.

The increase in the ACL at September 30, 2025 from December 31, 2024 related to changes in qualitative adjustments included increases in estimates based on:

the volume and severity of past due, nonaccrual and criticized or adversely classified loans;

regional and local economic conditions;

and regional values of residential housing.

In the first nine months of 2025, net charge-offs totaled $733,000, or 0.05% (annualized) of average outstanding loans.

The provision for credit losses was $13,602,000 in the first quarter 2026 as compared to $236,000 in the first quarter 2025.

The increase in the first quarter 2026 provision was primarily driven by the impact on the ACL of an increase in net charge-offs to $10,808,000 as compared to $91,000 in the first quarter of 2025 .

As described in more detail in the Earnings Overview section, the significant increase in charge-offs in the first quarter of 2026 was mainly due to a partial charge-off of $10,056,000 on a non-owner occupied commercial real estate loan.

The ACL was 1.42% of gross loans receivable at March 31, 2026, up from 1.32% at December 31, 2025 and 1.06% at March 31, 2025, as the higher level of net charge-offs in the first quarter 2026 impacted the portion of the Corporation’s ACL determined based on historical loss experience.

As shown in Table IX, the ACL on loans individually evaluated decreased to $2,655,000 at March 31, 2026 from $2,772,000 at December 31, 2025, including an ACL of $2,433,000 at March 31, 2026 on acquired PCD loans as part of the Susquehanna acquisition.

Table IX also shows that, at March 31, 2026 as compared to December 31, 2025, the ACL related to collectively evaluated commercial loans increased by a total of $1,848,000 and the ACL on collectively evaluated residential mortgage loans increased $1,028,000.

The increase for commercial loans includes the impact of growth in the portfolio partially offset by a net decrease in qualitative adjustments resulting mainly from changes in external indexes and a decrease in loan concentrations.

The increase for residential mortgage loans includes the impact of an increase in qualitative adjustments resulting mainly from changes in external indexes.

In the first quarter of 2026, net charge-offs totaled $10,808,000, or 1.83% (annualized) of average outstanding loans.

Table VIII shows annual average net charge-off rates over the prior five calendar years ranging from a high of 0.26% in 2022 to a low of 0.01% in 2023.

As presented in Table X, collateral dependent loans totaled $21,437,000 at September 30, 2025, down from $30,125,000 at December 31, 2024.

The decrease from December 31, 2024 included two loans related to one relationship with a total amortized cost basis of $11,023,000 at December 31, 2024 that were paid off in April 2025.

Total nonperforming assets were $27,189,000 at September 30, 2025, up $3,047,000 from December 31, 2024.

Total nonperforming assets were $42,113,000 at March 31, 2026, up $9,000,000 from December 31, 2025.

Nonperforming loans increased $9,008,000 from December 31, 2025.

Nonperforming loans included an increase in nonaccrual loans of $1,920,000 from December 31, 2024 and an increase of $906,000 in loans past due 90 days or more still accruing from December 31, 2024.

Table X shows that total nonperforming assets as a percentage of total assets was 1.02% at September 30, 2025, up from 0.92% at December 31,

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

The increase in nonperforming assets and nonperforming loans in the first quarter 2026 included the impact of classifying the nonowner occupied commercial real estate loan referenced above as nonaccrual at March 31, 2026.

Table X shows that total nonperforming assets as a percentage of total assets was 1.33% at March 31, 2026, up from 1.06% at December 31, 2025.

Table X also shows that total nonperforming assets as a percentage of assets as of year-end 2021 through 2024, ranged from a high of 1.04% at December 31, 2021 to a low of 0.75% at December 31, 2023.

Table X also shows that loans past due 30-89 days totaled $2,509,000 at September 30, 2025, down from $5,658,000 at December 31, 2024 as there was a net decrease of $3,656,000 in 1-4 Family residential loans past due 30-89 days from December 31, 2024.

Over the period 2021-2025 and the first 3 months of 2026, each period includes a few large commercial relationships that have required significant monitoring and workout efforts.

1 unchanged sentence

Management believes it has been prudent in its decisions concerning identification of loans requiring individual evaluation for credit loss, estimates of loss, and nonaccrual status;

however, the actual losses realized from these relationships could vary materially from the ACL calculated as of September 30, 2025.

however, the actual losses realized from these relationships could vary materially from the ACL calculated as of March 31, 2026.

Management continues to closely monitor its commercial loan relationships for credit losses and will adjust its estimates of loss and decisions concerning nonaccrual status, if appropriate.

Tables VIII through X present historical data related to loans and the allowance for credit losses.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE VIII - ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES ON LOANS

(Dollars In Thousands)

Nine Months Ended September 30,

Three Months Ended

Years Ended December 31

1 unchanged sentence

Adoption of ASU 2016-13 (CECL)

Allowance recorded in business combination- PCD loans

Allowance recorded in business combination- Non PCD loans

Net charge-offs

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(In Thousands)

September 30,

Loans individually evaluated

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Total Allowance

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

PRIOR TO CECL ADOPTION

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Total Allowance

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE X - PAST DUE LOANS AND NONPERFORMING ASSETS

(Dollars In Thousands)

September 30,

As of December 31,

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Allowance for credit losses as a % of total loans

Included in the table above at March 31, 2026 and December 31, 2025 were loans acquired from Susquehanna with credit deterioration (“PCD loans”) totaled as follows :

(Dollars In Thousands)

Collateral dependent loans with a valuation allowance

Collateral dependent loans without a valuation allowance

Total collateral dependent loans

Total loans past due 30-89 days and still accruing

Nonperforming assets,

Total nonaccrual loans

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

5 unchanged sentences

Management intends to use this line of credit as a contingency funding source.

As collateral for the line, the Corporation has pledged available-for-sale debt securities with a carrying value of $26,732,000 at September 30, 2025.

The Corporation’s outstanding, available, and total credit facilities at September 30, 2025 and December 31, 2024 are as follows:

As collateral for the line, the Corporation has pledged available-for-sale debt securities with a carrying value of $26,151,000 at March 31, 2026.

The Corporation’s outstanding, available, and total credit facilities at March 31, 2026 and December 31, 2025 are as follows:

(In Thousands)

September 30,

Federal Home Loan Bank of Pittsburgh

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Total credit facilities

At September 30, 2025, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of long-term borrowings with par values totaling $132,894,000 and letters of credit totaling $22,987,000.

At December 31, 2024, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of long-term borrowings with par values totaling $165,451,000 and letters of credit totaling $23,241,000.

At March 31, 2026, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of consisted of overnight borrowing of $13,113,000, long-term borrowings with par values totaling $139,489,000 and letters of credit totaling $21,600,000.

At December 31, 2025, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of overnight borrowing of $27,000,000, long-term borrowings with par values totaling $120,935,000 and letters of credit totaling $22,987,000.

Availability on the facility is also reduced by accrued interest payable on the borrowings and by the total of the Corporation’s credit enhancement obligations on residential mortgage loans sold under the MPF Original Program.

2 unchanged sentences

If required to raise cash in an emergency situation, the Corporation could sell available-for-sale securities to meet its obligations or use repurchase agreements placed with brokers to borrow funds secured by investment assets.

At September 30, 2025, the carrying value of available-for-sale securities in excess of amounts required to meet pledging or repurchase agreement obligations was $244,348,000.

Deposits totaled $2,165,735,000 at September 30, 2025, up $71,826,000 or 3.4% from $2,093,909,000 at December 31, 2024.

Average total deposits were $58,280,000 or 2.9% higher for the nine months ended September 30, 2025 as compared to the first nine months of 2024 despite a reduction in average brokered deposits of $57,141,000.

Brokered deposits, consisting of short-term certificates of deposit and money market funds, totaled $5,004,000 at September 30, 2025, a decrease of $19,017,000 from December 31, 2024.

As shown in the table below, at September 30, 2025, estimated uninsured deposits totaled $696.5 million, or 31.9%, of total deposits, as compared to $632.8 million, or 30.0% of total deposits at December 31, 2024.

Included in uninsured deposits are deposits collateralized by securities (almost exclusively municipal deposits) totaling $178.5 million at September 30, 2025.

As shown in the table below, total uninsured and uncollateralized deposits amounted to 23.7% of total deposits at September 30, 2025, as compared to 22.3% at December 31, 2024.

As summarized in the table that immediately follows, the Corporation’s highly liquid sources of available funds described above, including unused borrowing capacity with the Federal Home Loan Bank of Pittsburgh, unused availability on the Federal Reserve Bank of Philadelphia’s discount window, available federal funds lines with other banks and unencumbered available-for-sale debt securities,

At March 31, 2026, the carrying value of available-for-sale securities in excess of amounts required to meet pledging or repurchase agreement obligations was $315,391,000.

Deposits totaled $2,600,053,000 at March 31, 2026, up $35,337,000 from December 31, 2025.

Deposits of $501,488,000 were assumed from Susquehanna, effective October 1, 2025.

Average total deposits were 24.2% higher for the first quarter 2026 as compared to the first quarter 2025.

Brokered deposits totaled $702,000 at March 31, 2026, a decrease of $3,148,000 from December 31, 2025.

As shown in the table below, at March 31, 2026, estimated uninsured deposits totaled $856.0 million, or 32.7%, of total deposits, as compared to $811.2 million, or 31.4% of total deposits at December 31, 2025.

Included in uninsured deposits are deposits collateralized by securities (almost exclusively municipal deposits) totaling $171.3 million at March 31, 2026.

As shown in the table below, total uninsured and uncollateralized deposits amounted to 26.1% of total deposits at March 31, 2026, as compared to 24.7% of total deposits at December 31, 2025.

Available funding from these sources totaled 159.3% of uninsured deposits and 199.1% of total uninsured and uncollateralized deposits at March 31, 2026.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

totaled $1.1 billion at September 30, 2025.

Available funding from these sources totaled 164.6% of uninsured deposits and 221.4% of total uninsured and uncollateralized deposits at September 30, 2025.

Uninsured Deposits Information

September 30,

Total Deposits - C&N Bank

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STOCKHOLDERS’ EQUITY AND CAPITAL ADEQUACY

In August 2018, the Federal Reserve Board issued an interim final rule that expanded applicability of the Board’s small bank holding company capital adequacy policy statement.

The interim final rule raised the policy statement’s asset threshold from $1 billion to $3 billion in total consolidated assets for a bank holding company or savings and loan holding company that:

(1) is not engaged in significant nonbanking activities;

(2) does not conduct significant off-balance sheet activities;

and (3) does not have a material amount of debt or equity securities, other than trust-preferred securities, outstanding.

The interim final rule provides that, if warranted for supervisory purposes, the Federal Reserve may exclude a company from the threshold increase.

Management believes the Corporation meets the conditions of the Federal Reserve’s small bank holding company policy statement and is therefore excluded from consolidated capital requirements at September 30, 2025;

however, management believes the Corporation will likely be subject to the consolidated capital requirements in future periods due to the completion of the previously described acquisition of Susquehanna.

Further, at September 30, 2025, C&N Bank remains subject to regulatory capital requirements administered by the federal banking agencies.

Details concerning capital ratios at March 31, 2026 and December 31, 2025 are presented below.

Management believes, as of March 31, 2026, that the Corporation and C&N Bank meet all capital adequacy requirements to which they are subject and maintain a capital conservation buffer (described in more detail below) that allows the Corporation and Bank to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers.

Further, as reflected in the table below, the Corporation’s and C&N Bank’s capital ratios at March 31, 2026 and December 31, 2025 exceed the Corporation’s Board policy threshold levels.

Management expects the Corporation and C&N Bank to maintain capital levels that exceed the regulatory standards for well-capitalized institutions for the next 12 months and for the foreseeable future.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Details concerning capital ratios at September 30, 2025 and December 31, 2024 are presented below.

Management believes, as of September 30, 2025, that C&N Bank meets all capital adequacy requirements to which it is subject and maintains a capital conservation buffer (described in more detail below) that allows C&N Bank to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers.

For comparison purposes, the Corporation’s capital ratios are presented along with those of C&N Bank in the table below.

Further, as reflected in the table below, the Corporation’s and C&N Bank’s capital ratios at September 30, 2025 and December 31, 2024 exceed the Corporation’s Board policy threshold levels.

(Dollars in Thousands)

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Policy Thresholds

September 30, 2025:

March 31, 2026:

Total capital to risk-weighted assets:

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The buffer is measured relative to risk-weighted assets.

At September 30, 2025, the minimum risk-based capital ratios, and the capital ratios including the capital conservation buffer, are as follows:

At March 31, 2026, the minimum risk-based capital ratios, and the capital ratios including the capital conservation buffer, are as follows:

Minimum common equity tier 1 capital ratio

7 unchanged sentences

Also, a banking organization is prohibited from making dividend payments or discretionary bonus payments if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5% as of the beginning of that quarter.

Eligible net income is defined as net income for the four calendar

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

quarters preceding the current calendar quarter, net of any distributions and associated tax effects not already reflected in net income.

Eligible net income is defined as net income for the four calendar quarters preceding the current calendar quarter, net of any distributions and associated tax effects not already reflected in net income.

A summary of payout restrictions based on the capital conservation buffer is as follows:

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Capital Conservation Buffer

7 unchanged sentences

≤1.25% and >0.625%

At September 30, 2025 , C&N Bank’s Capital Conservation Buffer, determined based on the minimum total capital ratio, was 7.23%.

On September 25, 2023, the Corporation announced a treasury stock repurchase program.

Under the program, the Corporation is authorized to repurchase up to 750,000 shares of the Corporation’s common stock, or slightly less than 5% of the Corporation’s issued and outstanding shares at August 4, 2023.

The program was effective when publicly announced and has no stated expiration date;

it will continue until suspended or terminated by the Board of Directors, in its sole discretion.

All shares of common stock repurchased pursuant to the program will be held as treasury shares and be available for use and reissuance for purposes as and when determined by the Board of Directors including, without limitation, pursuant to the Corporation’s Dividend Reinvestment and Stock Purchase and Sale Plan and its equity compensation program.

For the three and nine months ended September 30, 2025, there were no shares repurchased.

At September 30, 2025, there were 723,966 shares available to be repurchased under the program.

At March 31, 2026 , the Corporation’s Capital Conservation Buffer was 5.84% and C&N Bank’s Capital Conservation Buffer was 5.49%.

On September 25, 2023, the Corporation announced a treasury stock repurchase program with no expiration that can be suspended or terminated by the Board of Directors, in its sole discretion.

Under this program, the Corporation is authorized to repurchase up to 750,000 shares of its common stock.

For the three ended March 31, 2026, there were no shares repurchased.

At March 31, 2026, there were 723,465 shares available to be repurchased under the program.

Future dividend payments and repurchases of common stock will depend upon maintenance of a strong financial condition, future earnings and capital and regulatory requirements.

4 unchanged sentences

Accumulated other comprehensive (loss) income is excluded from the Bank’s and the Corporation’s regulatory capital ratios.

The balance in accumulated other comprehensive loss related to unrealized losses on available-for-sale debt securities, net of deferred income tax, amounted to $26,352,000 at September 30, 2025 and $37,084,000 at December 31, 2024 .

The balance in accumulated other comprehensive loss related to unrealized losses on available-for-sale debt securities, net of deferred income tax, amounted to $25,096,000 at March 31, 2026 and $23,154,000 at December 31, 2025.

Changes in accumulated other comprehensive loss are excluded from earnings and directly increase or decrease stockholders’ equity.

To the extent unrealized losses on available-for-sale debt securities result from credit losses, unrealized losses are recorded as a charge against earnings.

The securities section of Management’s Discussion and Analysis and Note 5 to the unaudited consolidated financial statements provide additional information concerning management’s evaluation of available-for-sale debt securities for credit losses at September 30, 2025.

The securities section of Management’s Discussion and Analysis and Note 6 to the unaudited consolidated financial statements provide additional information concerning management’s evaluation of available-for-sale debt securities for credit losses at March 31, 2026.

Tangible common equity is a non-GAAP measure, and tangible common book value per share and tangible common equity as a percentage of tangible assets are non-GAAP ratios.

Management believes this non-GAAP information is helpful in evaluating the strength of the Corporation’s capital and in providing an alternative valuation of the Corporation’s net worth.

Information at March 31, 2026 and December 31, 2025 is as follows:

(Dollars In Thousands, Except Per Share Data)

Intangible Asset, Goodwill

Intangible Asset, Core Deposit Intangibles, net

Related Tax Effect on Core Deposit Intangibles, net

Tangible Assets (1)

Total Stockholders' Equity

Intangible Asset, Goodwill

Intangible Asset, Core Deposit Intangibles, net

Related Tax Effect on Core Deposit Intangibles, net

Tangible Common Equity (2)

Common Shares Outstanding, End of Period (3)

Tangible Common Book Value per Share = (2)/(3)

Tangible Common Equity (2) / Tangible Assets (1)

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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 2. Management’s Discussion and Analysis