What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-07 compared with 2026-05-08 · 274 added, 150 removed, 510 unchanged (45% of the section changed)

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A number of factors could cause our actual results, events or developments, or industry results, to be materially different from any future results, events or developments expressed, implied or anticipated by such forward-looking statements.

In addition to factors previously disclosed in the reports filed by the Corporation with the SEC, including our most recent annual report on Form 10-K and subsequent filings, and those identified elsewhere in this document, the following factors, among others, could cause actual results to differ materially from forward looking statements:

In addition to factors previously disclosed in the reports filed by the Corporation with the U.S.

Securities and Exchange Commission, including our most recent annual report on Form 10-K and subsequent filings, and those identified elsewhere in this document, the following factors, among others, could cause actual results to differ materially from forward looking statements:

● changes in monetary and fiscal policies of the Federal Reserve Board and the U.S.

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● information security breaches or other technology difficulties or failures

● changes in, or the application of, generally accepted accounting principles with respect to the presentation of the Corporation’s financial statements

● changes in, or the application of, U.S GAAP with respect to the presentation of the Corporation’s financial statements

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

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● 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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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.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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.

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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.

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

EARNINGS OVERVIEW

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.

Second Quarter 2026 as Compared to Second Quarter 2025

Second quarter 2026 net income was $14,057,000, or $0.79 per diluted share, as compared to $6,117,000, or $0.40 per diluted share, in the second quarter 2025.

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.

● Net interest income of $29,618,000 in the second quarter 2026 was $8,476,000 higher than in the second quarter 2025, including the benefit of income from growth in net earning assets resulting from the Susquehanna merger.

The net interest margin increased to 4.07% in the second quarter 2026 from 3.52% in the second quarter 2025.

The interest rate spread increased 0.71%, as the average yield on earning assets increased 0.31% while the average rate on interest-bearing liabilities decreased 0.40%.

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

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.

Average total earning assets increased $508,544,000 from the second quarter 2025, as average total loans receivable increased $480,770,000, including the impact of loans acquired from Susquehanna, and average available-for-sale debt securities increased $79,739,000 while average interest-bearing due from banks decreased $53,262,000.

Average total deposits increased $487,729,000, including the impact of deposits assumed from Susquehanna, while average brokered deposits decreased $8,450,000.

● The credit for credit losses was $1,846,000 in the second quarter 2026 as compared to a provision of $2,354,000 in the second quarter 2025.

The credit for credit losses in the second quarter 2026 included the impact on the allowance for credit losses (“ACL”) of changes in qualitative factors, net recoveries of $403,000 and a reduction in loans receivable.

The provision in the second quarter 2025 resulted mainly from increases in the ACL related to changes in qualitative factors and an economic forecast.

In the second quarter 2026, net recoveries totaled $403,000 or 0.07% (annualized) of average loans receivable compared to net charge-offs of $548,000 or 0.12% (annualized) of average loans receivable in the second quarter 2025.

During the second quarter 2026, there was a $675,000 recovery on a loan classified as nonaccrual that was paid off by a borrower through third-party financing.

The ACL was 1.39% of gross loans receivable at June 30, 2026, down from 1.42% at March 31, 2026 and up from 1.32% at December 31, 2025 and 1.13% at June 30, 2025.

● Noninterest income of $9,800,000 in the second quarter 2026 increased $1,658,000 from the second quarter 2025 result.

Significant variances included the following:

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 Service charges on deposit accounts of $1,761,000 increased $339,000, 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 Net gains from sale of loans of $608,000 increased $296,000, reflecting an increase in volume of residential mortgage loans sold and includes the impact of $207,000 in net gains from sale of loans primarily attributable to Susquehanna region lending personnel.

Ø Other noninterest income of $2,305,000 increased $275,000, including an increase of $123,000 in dividends on Federal Home Loan Bank of Pittsburgh stock.

Ø Trust revenue of $2,242,000 increased $275,000, consistent with appreciation in the trading prices of many U.S.

equity securities and an increase in new business.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Ø Brokerage and insurance revenue of $816,000 increased $262,000, reflecting an increase in volume of new transactions.

Ø Interchange revenue from debit card transactions of $1,347,000 increased $129,000, including an increase in volume-related incentive income.

● Noninterest expense of $23,839,000 in the second quarter 2026 increased $4,441,000 from the second quarter 2025 result, reflecting the impact of the Susquehanna acquisition.

Significant variances included the following:

Ø Salaries and employee benefits expense of $13,197,000 increased $2,130,000, including the impact of the Susquehanna acquisition, while cash and stock-based incentive compensation decreased $225,000.

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

Ø Other noninterest expense of $4,799,000 increased $1,398,000 from the second quarter 2025 total.

Within this category, significant variances included the following:

◾ 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.

◾ FDIC insurance expense increased $260,000 from the second quarter of 2026, reflecting the impact of the Susquehanna acquisition.

◾ Collection expense, net increased $103,000 to $98,000 for the second quarter 2026 from a credit of $5,000 for the second quarter 2025.

Ø Net occupancy and equipment expense of $1,728,000 was $325,000 higher than in the second quarter 2025, including the impact of the Susquehanna acquisition and increases in snow removal/lawn care, light and power and repairs and maintenance expenses.

Ø Data processing and telecommunications expenses of $2,249,000 were $268,000 higher than in the second quarter 2025, reflecting higher software license expense of $189,000 and higher internet banking expenses of $66,000, primarily related to the Susquehanna acquisition.

● The income tax provision of $3,368,000, or 19.3% of pre-tax income, for the second quarter 2026 increased $1,953,000 from $1,415,000, or 18.8% of pre-tax income, for the second quarter 2025 reflecting an increase in pre-tax income.

Six Months Ended June 30, 2026 as Compared to Six Months Ended June 30, 2025

Net income for the six-month period ended June 30, 2026 was $14,330,000, or $0.81 per diluted share, as compared to $12,410,000, or $0.80 per diluted share, for the first six months of 2025.

Significant variances were as follows:

● Net interest income of $58,072,000 in the first six months of 2026 was $16,955,000 higher than in the first six months of 2025, including the benefit of income from growth in net earning assets resulting from the Susquehanna merger.

The consolidated net interest margin increased to 4.02% for the six months ended June 30, 2026 from 3.45% for the six months ended June 30, 2025.

The interest rate spread increased 0.73%, as the average yield on earning assets increased 0.31% while the average rate on interest-bearing liabilities decreased 0.42%.

Average total earning assets increased $507,185,000 as average total loans receivable increased $473,193,000, including the impact of loans acquired from Susquehanna, and average available-for-sale debt securities increased $80,636,000 while average interest-bearing due from banks decreased $47,851,000.

Average total deposits increased $493,355,000, including the impact of deposits assumed from Susquehanna, while average brokered deposits decreased $16,347,000.

● For the six months ended June 30, 2026, the provision for credit losses was $11,756,000 as compared to $2,590,000 in 2025.

The increase in provision in the six months ended June 30, 2026 was driven by the impact on the ACL of an

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

elevated level of net charge-offs and was partially offset by decreases in the ACL related to changes in qualitative factors.

Net charge-offs totaled $10,405,000, or 0.88% (annualized) of average loans receivable in the six months ended June 30, 2026 compared to $639,000 or 0.07% (annualized) of average loans receivable in the six months ended June 30, 2025.

The significant increase in charge-offs in the six months ended June 30, 2026 was 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 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 which was recorded in the first quarter 2026.

In the second quarter 2026, the Corporation entered into a forbearance agreement with the borrower.

During the second quarter 2026, the borrower made payments consistent with the terms of the forbearance agreement, including payments the Corporation recorded as reductions in the amortized cost basis of the loan totaling $171,000.

At June 30, 2026, the amortized cost basis of the loan, net of the partial charge-off, is $5,665,000.

● Noninterest income totaled $17,995,000 in the first six months of 2026, up $2,845,000 from the total for the first six months of 2025.

The inclusion of Susquehanna in 2026 contributed significantly to volume-related increases in several categories of noninterest income.

Significant variances included the following:

Ø Other noninterest income of $3,891,000 increased $729,000, including a conversion assistance payment of $241,000 related to the integration of former Susquehanna brokerage accounts to the Corporation’s wealth management platform, an increase of $201,000 in dividends on Federal Home Loan Bank of Pittsburgh stock and an increase of $82,000 in credit card interchange fees.

Ø Service charges on deposit accounts of $3,411,000 increased $549,000, reflecting an increase in volume of fees.

Ø Net gains from sale of loans of $978,000 increased $461,000, reflecting an increase in volume of residential mortgage loans sold and includes the impact of $340,000 in net gains from sale of loans primarily attributable to Susquehanna region lending personnel.

Ø Interchange revenue from debit card transactions of $2,614,000 increased $360,000, including an increase in volume-related incentive income.

Ø Brokerage and insurance revenues of $1,404,000 increased $352,000, reflecting an increase in volume of new transactions.

Ø Trust revenue of $4,327,000 increased $258,000, consistent with appreciation in the trading prices of many U.S.

equity securities and an increase in new business.

● Noninterest expense totaled $46,551,000 for the first six months of 2026, an increase of $8,110,000 from the total for the first six months of 2025.

The inclusion of Susquehanna in 2026 contributed to volume-related increases in several categories of noninterest expense.

Significant variances included the following:

Ø Salaries and employee benefits expense of $26,398,000 increased $3,572,000, including the impact of the Susquehanna acquisition.

Health insurance costs increased $608,000, or 32%, due to an increase in claims on the partially self-insured plan while cash and stock-based incentive compensation decreased $503,000.

Ø Other noninterest expense of $8,163,000 increased $2,408,000.

Within this category, significant variances included the following:

◾ Core deposit intangible amortization expense increased $1,417,000, including $1,431,000 related to core deposits assumed from Susquehanna.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

◾ FDIC insurance expense increased $503,000 from 2025, reflecting the impact of the Susquehanna acquisition.

Ø Net occupancy and equipment expense was $757,000 higher than in 2025, including $412,000 related to the Susquehanna acquisition and increases in snow removal/lawn care, light and power and repairs and maintenance.

Ø Data processing expense was $646,000 higher than in 2025 reflecting higher software license expense of $368,000 and higher internet banking expenses of $236,000, mainly due to the Susquehanna acquisition.

Ø Professional fees increased $360,000, including an increase in employment search firm fees.

Ø ATM and interchange expenses increased $328,000, reflecting the impact of the Susquehanna acquisition.

● The income tax provision of $3,430,000, or 19.3% of pre-tax income, for 2026 increased $604,000 from $2,826,000, or 18.5% of pre-tax income, for 2025 reflecting an increase in pre-tax income for 2026 .

TABLE I – QUARTERLY FINANCIAL DATA

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Net interest income

Provision (credit) for credit losses

Net interest income after provision (credit) for credit losses

(Credit) provision for credit losses

Net interest income after (credit) provision for credit losses

Noninterest income

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Basic and diluted earnings per common share

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

NONINTEREST INCOME

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Total noninterest income

(Dollars in Thousands)

Six Months Ended

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

N/M Not Meaningful

NONINTEREST EXPENSE

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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

(Dollars in Thousands)

Six Months Ended

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

CRITICAL ACCOUNTING POLICIES

The presentation of consolidated financial statements in conformity with U.S.

generally accepted accounting principles requires management to make estimates and assumptions that affect many of the reported amounts and disclosures.

GAAP requires management to make estimates and assumptions that affect many of the reported amounts and disclosures.

Actual results could differ from these estimates.

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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.

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(i) an allowance established on loans which share similar risk characteristics collectively evaluated for credit losses (collective basis), and (ii) an allowance established on loans which do not share similar risk characteristics with any loan segment and which are individually evaluated for credit losses (individual basis).

Management considers the determination of the ACL on loans to be critical because it requires significant judgment regarding estimates of expected credit losses based on the Corporation’s historical loss experience, current conditions and economic forecasts.

Management considers the determination of the ACL on loans to be critical because it requires significant judgment

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

regarding estimates of expected credit losses based on the Corporation’s historical loss experience, current conditions and economic forecasts.

Management’s evaluation is based upon a continuous review of the Corporation’s loans, with consideration given to evaluations resulting from examinations performed by regulatory authorities.

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Because current economic conditions and forecasts can change and future events are inherently difficult to predict, the anticipated amount of estimated credit losses on loans, and therefore the appropriateness of the ACL, could change significantly.

The allowance for credit losses is adjusted by qualitative factors to capture current economic conditions and risk characteristics not fully reflected in historical data.

During the three months ended June 30, 2026, the Corporation refined its estimation methodology for calculating some of the qualitative factors, including changes in the application of external data used to assess trends in regional economic conditions, commercial real estate values and residential real estate values.

Management believes these refinements in methodology result in an improved estimate of the impact on the ACL of recent trends in the external data.

NET INTEREST INCOME

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

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

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

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

Management believes presentation of net interest income on a fully taxable-equivalent basis, which is a non-GAAP financial measure, provides investors with meaningful information for purposes of comparing returns on tax-exempt securities and loans with returns on taxable securities and loans.

Management believes presentation of net interest income on a fully taxable-equivalent basis, which is a non-U.S.

GAAP financial measure, provides investors with meaningful information for purposes of comparing returns on tax-exempt securities and loans with returns on taxable securities and loans.

Accordingly, the amount of net interest income on a fully taxable-equivalent basis reflected in these tables exceed the net interest income amounts presented in the consolidated financial statements.

A reconciliation of net interest income on a fully taxable-equivalent basis to the closest GAAP financial measure is included with Table IV.

A reconciliation of net interest income on a fully taxable-equivalent basis to the closest U.S.

GAAP financial measure is included with Table IV.

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

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.

Three-Month Periods Ended June 30, 2026 and 2025

Fully taxable equivalent net interest income (a non-U.S.

GAAP measure) was $29,855,000 in the second quarter of 2026, $8,493,000 (39.8%) higher than in the second quarter of 2025, including the benefit of income from growth in net earning assets resulting from the Susquehanna merger.

As presented in Table VI, the net impact of changes in volume increased net interest income by $6,058,000 in the second quarter 2026 as compared to second quarter 2025 and changes in interest rates increased net interest income by $2,435,000 in the second quarter 2026 as compared to second quarter 2025.

The increase in net interest income reflected an increase in interest income of $9,129,000 and an increase in interest expense of $636,000.

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.

As presented in Table V, the Net Interest Margin was 4.07% in the second quarter 2026 as compared to 3.52% in the second 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 3.55% in 2026 from 2.84% in 2025.

The average yield on earning assets of 5.70% was 0.31% higher in 2026 compared to 2025, and the average rate on interest-bearing liabilities of 2.15% in 2026 was 0.40% lower.

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.

Accretion of acquisition accounting valuation adjustments related to the Susquehanna merger had a positive impact of $416,000 including accretion of $379,000 on loans and $37,000 on time deposits.

INTEREST INCOME AND EARNING ASSETS

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Average outstanding loans receivable increased $480,770,000 (25.3%) to $2,382,190,000 in 2026 from $1,901,420,000 in 2025 including the impact of the Susquehanna acquisition as well as organic growth.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Interest income from available-for-sale debt securities, on a fully taxable-equivalent basis, totaled $4,156,000 in 2026, up $1,169,000 from 2025.

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Interest expense increased $636,000 to $11,948,000 in 2026 from $11,312,000 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.

Interest expense on deposits increased $536,000, as the average balance of interest-bearing deposits increased $432,070,000 while the average rate on interest-bearing deposits decreased to 1.95% in 2026 from 2.34% 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

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$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 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.

In comparing 2026 to 2025, average interest checking deposits increased $154,475,000, average savings deposits increased $149,192,000, average time deposits increased $93,499,000, average noninterest-bearing demand deposits increased $55,659,000 and average total money market accounts increased $34,904,000.

Interest expense on borrowed funds increased $100,000 in 2026 as compared to 2025.

Interest expense on short-term borrowings was $337,000 in 2026 compared to $1,000 in 2025 as the average balance of short-term borrowings increased to $34,880,000 in 2026 from $980,000 in 2025.

Interest expense on long-term borrowings (FHLB advances) decreased $251,000 to $1,423,000 in 2026 from $1,674,000 in 2025.

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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.

The average rate on total borrowed funds was 4.21% in 2026 compared to 4.27% in 2025.

On June 1, 2026, senior notes totaling $15,000,000 matured and were redeemed.

Also on June 1, 2026, the interest rate on subordinated notes totaling $25,000,000 adjusted from a fixed rate of 3.25% to a variable rate that will reset quarterly based on the Term Secured Overnight Financing Rate plus 259 basis points.

At June 30, 2026, the interest rate on the outstanding subordinated notes was 6.25%.

The Corporation is entitled to redeem the subordinated notes, in whole or in part, at any time on or after June 1, 2026, subject to regulatory approval to the extent required.

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

Six-Month Periods Ended June 30, 2026 and 2025

For the six-month periods, fully taxable equivalent net interest income was $58,540,000 in 2026, which was $16,992,000 (40.9%) higher than in 2025 including the benefit of income from growth in net earning assets resulting from the Susquehanna merger.

The increase in net interest income reflected an increase in interest income of $18,028,000 and an increase in interest expense of $1,036,000.

As presented in Table VI, the net impact of changes in volume increased net interest income by $12,007,000 in the six-month period ended June 30, 2026 as compared to the six-month period ended June 30, 2025 and changes in interest rates increased net interest income by $4,985,000 in the six-month period ended June 30, 2026 as compared to the six-month period ended June 30, 2025.

As presented in Table V, the Net Interest Margin was 4.02% in the first six months of 2026 as compared to 3.45% in the first six months of 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 3.50% in 2026 from 2.77% in 2025.

The average yield on earning assets of 5.68% was 0.31% higher in 2026 as compared to 2025, while the average rate on interest-bearing liabilities of 2.18% in 2026 was 0.42% lower compared to 2025.

INTEREST INCOME AND EARNING ASSETS

Interest income totaled $82,622,000 in 2026, an increase of $18,028,000 from 2025.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

Interest and fees from loans receivable increased $16,743,000 in 2026 as compared to 2025.

In 2026, the fully taxable equivalent yield on loans was 6.27%, up from 6.05% 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 $473,193,000 (24.9%) to $2,373,625,000 in 2026 from $1,900,432,000 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 $8,321,000 in 2026, up $2,384,000 from 2025.

The average balance (at amortized cost) increased $80,636,000 from 2025 and the average yield on the portfolio increased to 3.17% in 2026 from 2.66% 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 $450,000 in 2026, a decrease of $1,126,000 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 decreased to 3.48% in 2026 from 4.30% in 2025.

The average balance of interest-bearing due from banks was $26,064,000 in 2026, down from $73,915,000 in 2025.

INTEREST EXPENSE AND INTEREST-BEARING LIABILITIES

For the six-month periods, interest expense increased $1,036,000 to $24,082,000 in 2026 from $23,046,000 in 2025.

Interest expense on deposits increased $1,002,000, as the average balance of interest-bearing deposits increased $433,767,000 while the average rate on interest-bearing deposits decreased to 1.98% in 2026 from 2.40% in 2025.

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

Average total deposits (interest-bearing and noninterest-bearing) amounted to $2,568,895,000 for the first six months of 2026, up $493,355,000 (23.8%) from the first six months of 2025.

Within average total deposits, average brokered deposits were $1,184,000 with an average interest rate of 3.75% in 2026, down from $17,531,000 with an average interest rate of 4.69% in 2025.

In comparing 2026 to 2025, average savings accounts increased $157,594,000, average interest checking deposits increased $142,667,000, average time deposits increased $100,821,000, average noninterest-bearing demand deposits increased $59,588,000 and average money market accounts increased $32,685,000.

Interest expense on borrowed funds increased $34,000 in 2026 as compared to 2025.

Interest expense on short-term borrowings of $613,000 in 2026 was up from $1,000 in 2025 as the average balance of short-term borrowings increased to $31,560,000 in 2026 from $1,189,000 in 2025.

The average rate on short-term borrowings was 3.92% in 2026 compared to 0.17% in 2025.

Interest expense on long-term borrowings (FHLB advances) decreased $594,000 to $2,869,000 in 2026 from $3,463,000 in 2025 as the average balance of long-term borrowings decreased to $133,516,000 in 2026 from $156,013,000 in 2025 and the average rate on long-term borrowings was 4.33% in 2026 compared to 4.48% 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 total borrowed funds was 4.19% in 2026 and 4.27% in 2025.

On June 1, 2026, senior notes totaling $15,000,000 matured and were redeemed.

At June 30, 2026, the interest rate on the outstanding subordinated notes was 6.25%.

The Corporation is entitled to redeem the subordinated notes, in whole or in part, at any time on or after June 1, 2026, subject to regulatory approval to the extent required.

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

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

TABLE IV - ANALYSIS OF INTEREST INCOME AND EXPENSE

Three Months Ended

Six Months Ended

(In Thousands)

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Net Interest Income

Interest income from tax-exempt securities and loans has been adjusted to a fully taxable-equivalent basis (a non-GAAP measure), using the Corporation’s marginal federal income tax rate of 21%.

Interest income from tax-exempt securities and loans has been adjusted to a fully taxable-equivalent basis (a non-U.S.

GAAP measure), using the Corporation’s marginal federal income tax rate of 21%.

The following table reconciles net interest income under U.S.

2 unchanged sentences

Three Months Ended

Six Months Ended

Net Interest Income Under U.S.

1 unchanged sentence

fully taxable-equivalent interest income adjustment from tax-exempt loans

Net Interest Income as adjusted to a fully taxable-equivalent basis - Non-GAAP

Net Interest Income as adjusted to a fully taxable-equivalent basis - Non-U.S.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

4 unchanged sentences

Available-for-sale debt securities, at amortized cost:

Tax-exempt (1)

Total available-for-sale debt securities

Loans receivable:

Tax-exempt (1)

Total loans receivable (2)

1 unchanged sentence

Total Earning Assets

Unrealized loss on securities

Allowance for credit losses

Bank-owned life insurance

Bank premises and equipment

Intangible assets

28 unchanged sentences

Three Months Ended 6/30/2026 vs.

Six Months Ended 6/30/2026 vs.

EARNING ASSETS

21 unchanged sentences

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

The income tax provision for the first 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 income tax provision for the second quarter 2026 of $3,368,000 was $1,953,000 higher than the provision for the second quarter 2025, and the provision for the six months ended June 30, 2026 of $3,430,000 was $604,000 higher than the amount for the first six months of 2025 due to a higher amount of pre-tax income in 2026.

The effective tax rate (tax provision as a percentage of pre-tax income) was 19.3% in the second quarter 2026 compared to 18.8% in the second quarter 2025 and 19.3% for the first six months of 2026 as compared to 18.5% for the first six months of 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.

1 unchanged sentence

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 March 31, 2026 and December 31, 2025 represents the following temporary difference components:

The net deferred tax asset at June 30, 2026 and December 31, 2025 represents the following temporary difference components:

(In Thousands)

Deferred tax assets:

Unrealized holding losses on securities

Unrealized holding losses on available-for-sale debt securities

Allowance for credit losses on loans

18 unchanged sentences

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

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

Management believes the recorded net deferred tax asset at June 30, 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 .

2 unchanged sentences

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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

The composition of the available-for-sale debt securities portfolio at June 30, 2026 and December 31, 2025, 2024 and 2023 is as follows:

(Dollars In Thousands)

March 31, 2026

June 30, 2026

December 31, 2025

15 unchanged sentences

Total Available-for-Sale Debt Securities

Aggregate Unrealized Loss

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 $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.

Net Unrealized Loss

Net 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 $31,132,000, or 5.9%, at June 30, 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 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.

As described in Note 6 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 June 30, 2026 before it is able to recover the amortized cost basis.

Further, management reviewed the Corporation’s holdings as of June 30, 2026 and concluded there were no credit-related declines in fair value.

Additional information related to the types of securities held at June 30, 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.

● Bank holding company debt securities – The Corporation’s holdings of bank holding company debt securities included one senior and fourteen 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-.

All of the obligors have publicly traded common stock.

At June 30, 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

● 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:

Summary ratings information at June 30, 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;

1 unchanged sentence

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 March 31, 2026.

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 June 30, 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 March 31, 2026.

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

There are no significant concerns that have arisen related to the Corporation’s off-balance sheet loan commitments or outstanding letters of credit at June 30, 2026.

Table VII shows the composition of the loan portfolio at June 30, 2026 and at year-end from 2021 through 2025.

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

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

At June 30, 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.

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.

Also included in Table VII is additional detail as of June 30, 2026 and December 31, 2025 regarding the composition of the non-owner occupied commercial real estate loan portfolio.

As shown in Table VII, at June 30, 2026, 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 $107,923,000, or 4.6% of gross loans receivable.

At June 30, 2026, within this segment there were two loans with a total amortized cost basis of $6,832,000 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 June 30, 2026 of $5,665,000.

During the second quarter of 2026, a nonaccrual loan within this category o f $1,717,000 was paid off by the borrower through third-party financing and a $675,000 recovery was recorded .

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 June 30, 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.

1 unchanged sentence

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

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

Total participation loans outstanding amounted to $102,228,000 at June 30, 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 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.

At June 30, 2026, the total contract amount of commitments to extend credit was $474,891,000 as compared to $506,996,000 at December 31, 2025, and the contract amount of standby letters of credit was $62,133,000 at June 30, 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.

commitment cannot be canceled at any time).

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

The allowance for off-balance sheet credit exposures is adjusted as a

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.

(credit) 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 $845,000 at June 30, 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.

6 unchanged sentences

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

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 June 30, 2026, the total outstanding balance of loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $2,532,000, and the corresponding total outstanding balance of repurchased loans at December 31, 2025 was $2,598,000.

At June 30, 2026, outstanding balances of loans sold and serviced through the MPF Xtra and Original programs totaled $454,642,000, including loans sold through the MPF Xtra program of $175,388,000 and loans sold through the Original program of $279,254,000.

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 March 31, 2026 and December 31, 2025.

Based on the fairly limited volume of required repurchases to date, no allowance has been established for representation and warranty exposures as of June 30, 2026 and December 31, 2025.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

24 unchanged sentences

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 March 31, 2026 is as follows:

NON-OWNER OCCUPIED COMMERCIAL REAL ESTATE

6 unchanged sentences

PROVISION AND ALLOWANCE FOR CREDIT LOSSES

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

A summary of the (credit) provision for credit losses for the three-month and six-month periods ended June 30, 2026 and 2025 is as follows:

(In Thousands)

Provision for credit losses:

(Credit) provision for credit losses:

Loans receivable

Off-balance sheet exposures

Total provision for credit losses

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.

Total (credit) provision for credit losses

For the quarter ended June 30, 2026, there was a credit for credit losses (reduction in expense) of $1,846,000 as compared to a provision for credit losses of $2,354,000 in the second quarter 2025.

For the six months ended June 30, 2026, there was a provision for credit losses of $11,756,000, compared to a provision for credit losses of $2,590,000 in 2025.

The increase in the provision in the six months ended June 30, 2026 was driven by the impact of the elevated level of net charge-offs, including a charge-off in the first quarter 2026 of $10,056,000 on a non-owner occupied commercial real estate loan discussed in more detail in the Earnings Overview section and was partially offset by net decreases in the ACL related to changes in qualitative factors.

The ACL was 1.39% of gross loans receivable at June 30, 2026, down from 1.42% at March 31, 2026 and up from 1.32% December 31, 2025 and 1.13% at June 30, 2025.

As shown in Table IX, the ACL on loans individually evaluated decreased to $2,636,000 at June 30, 2026 from $2,772,000 at December 31, 2025, including an ACL of $2,414,000 at June 30, 2026 on acquired PCD loans as part of the Susquehanna acquisition.

Table IX also summarizes collectively evaluated components of the ACL, including the most significant changes at June 30, 2026 as compared to December 31, 2025 summarized as follows:

● Commercial real estate loans – nonowner occupied – The collectively determined ACL increased $2,412,000, reflecting the impact of an increase in average net charge-off experience and an increase in a qualitative factor related to regional economic conditions, partially offset by reductions in qualitative factors related to regional commercial real estate values and credit concentrations.

● Residential mortgage – The collectively determined ACL increased $1,041,000, reflecting the impact of increases in qualitative factors related to residential real estate values and regional economic conditions.

● Commercial real estate – owner occupied and All other commercial loans – The collectively determined ACL decreased by a total of $1,831,000, mainly due to the net effect of reductions in qualitative factors related to regional commercial real estate values and credit concentrations, partially offset by an increase in a qualitative factor related to regional economic conditions.

In the first six months of 2026, net charge-offs totaled $10,405,000, or 0.88% (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.

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

Total nonperforming assets were $40,275,000 at June 30, 2026, up $7,162,000 from December 31, 2025.

Nonperforming loans increased $7,170,000 from December 31, 2025.

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.

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.

As a result, a limited number of relationships may significantly impact the total amount of allowance required on individual loans and may significantly impact the provision for credit losses and the amount of total charge-offs reported in any one period.

The increase in nonperforming assets and nonperforming loans in 2026 included the impact of classifying the nonowner occupied commercial real estate loan referenced above as nonaccrual at June 30, 2026.

Table X shows that total nonperforming assets as a percentage of total assets was 1.28% at June 30, 2026, up from 1.06% at December 31, 2025.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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.

Over the period from 2021through 2025 and the first 6 months of 2026, each period includes a few large commercial relationships that have required significant monitoring and workout efforts.

As a result, a limited number of relationships may significantly impact the total amount of allowance required on individual loans and may significantly impact the (credit) provision for credit losses and the amount of total charge-offs reported in any one period.

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 March 31, 2026.

however, the actual losses realized from these relationships could vary materially from the ACL calculated as of June 30, 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)

Three Months Ended

Six Months Ended

Years Ended December 31

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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

19 unchanged sentences

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 :

Included in the table above at June 30, 2026 and December 31, 2025 were loans acquired from Susquehanna with credit deterioration (“PCD loans”) totaled as follows:

(Dollars In Thousands)

5 unchanged sentences

Total nonaccrual loans

Total amortized cost basis of PCD 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 $26,151,000 at March 31, 2026.

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

As collateral for the line, the Corporation has pledged available-for-sale debt securities with a carrying value of $24,882,000 at June 30, 2026.

The Corporation’s outstanding, available, and total credit facilities at June 30, 2026 and December 31, 2025 are as follows:

(In Thousands)

3 unchanged sentences

Total credit facilities

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 June 30, 2026, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of consisted of short-term borrowings totaling $14,260,000, long-term borrowings with par values totaling $130,392,000 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.

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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 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.

At June 30, 2026, the carrying value of available-for-sale securities in excess of amounts required to meet pledging or repurchase agreement obligations was $316,129,000.

Deposits totaled $2,603,735,000 at June 30, 2026, up $39,019,000 from December 31, 2025.

Average total deposits were $493,355,000 or 23.8% higher for the six months ended June 30, 2026 as compared to the first six months of 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.

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, totaled $1.4 billion at March 31, 2026.

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

As shown in the table below, at June 30, 2026, estimated uninsured deposits totaled $820.2 million, or 31.4%, 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 $167.8 million at June 30, 2026.

As shown in the table below, total uninsured and uncollateralized deposits amounted to 25.0% of total deposits at June 30, 2026, as compared to 24.7% of total deposits at December 31, 2025.

Available funding from these sources totaled 169.1% of uninsured deposits and 212.6% of total uninsured and uncollateralized deposits at June 30, 2026.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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STOCKHOLDERS’ EQUITY AND CAPITAL ADEQUACY

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.

Details concerning capital ratios at June 30, 2026 and December 31, 2025 are presented below.

Management believes, as of June 30, 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 C&N 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 June 30, 2026 and December 31, 2025 exceed the Corporation’s Board policy threshold levels.

CITIZENS & NORTHERN CORPORATION – FORM 10-Q

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Policy Thresholds

March 31, 2026:

June 30, 2026:

Total capital to risk-weighted assets:

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The buffer is measured relative to risk-weighted assets.

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

At June 30, 2026, the minimum risk-based capital ratios, and the capital ratios including the capital conservation buffer, were as follows:

Minimum common equity tier 1 capital ratio

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≤1.25% and >0.625%

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

At June 30, 2026 , the Corporation’s Capital Conservation Buffer was 6.44% and C&N Bank’s Capital Conservation Buffer was 6.10%.

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.

There were no shares repurchased during the first six months of 2026.

At June 30, 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.

In addition, the Corporation and C&N Bank are subject to restrictions on the amount of dividends that may be paid without approval of banking regulatory authorities.

Further, although the Corporation is not currently subject to the specific consolidated capital requirements described herein, the Corporation’s ability to pay dividends, repurchase stock or engage in other activities may be limited by the Federal Reserve if the Corporation fails to hold capital commensurate with its overall risk profile.

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

The Corporation’s total stockholders’ equity is affected by fluctuations in the fair values of available-for-sale debt securities.

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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 $25,096,000 at March 31, 2026 and $23,154,000 at December 31, 2025.

The balance in accumulated other comprehensive loss related to unrealized losses on available-for-sale debt securities, net of deferred income tax, amounted to $24,284,000 at June 30, 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 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:

Tangible common equity is a non- U.S.

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

Management believes this non- U.S.

GAAP information is helpful in evaluating the strength of the Corporation’s capital and in providing an alternative presentation of the Corporation’s net worth.

Information at June 30, 2026 and December 31, 2025 is as follows:

(Dollars In Thousands, Except Per Share Data)

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Common Shares Outstanding, End of Period (3)

Common Book Value per Share (GAAP)

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

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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