Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2025
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _________________________.
Commission file number: 0-16084
CITIZENS & NORTHERN CORPORATION
(Exact name of Registrant as specified in its charter)
PENNSYLVANIA
23-2451943
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
90-92 MAIN STREET, WELLSBORO, PA 16901
(Address of principal executive offices) (Zip code)
570-724-3411
(Registrant’s telephone number including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol
Name of Each Exchange on Which Registered
Common Stock Par Value $1.00
CZNC
NASDAQ Capital Market
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ◻ No ⌧
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ◻ No ⌧
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,“ “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ◻ Accelerated filer ⌧ Non-accelerated filer ◻ Smaller reporting company ◻ Emerging growth company ◻
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ⌧
The aggregate market value of the registrant’s common stock held by non-affiliates at June 30, 2025, the last business day of registrant’s most recently completed second fiscal quarter, was $280,273,757.
The number of shares of common stock outstanding at March 2, 2026 was 17,910,243.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant’s proxy statement for the annual meeting of its shareholders to be held April 23, 2026 are incorporated by reference into Parts III and IV of this report.
TABLE OF CONTENTS
Page(s)
Part I:
Item 1. Business
3-5
Item 1A. Risk Factors
5-9
Item 1B. Unresolved Staff Comments
9
Item 1C. Cybersecurity
10-11
Item 2. Properties
11
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosure
12
Part II.
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
12-14
Item 6. Reserved
14
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
14-38
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
39-41
Item 8. Financial Statements and Supplementary Data
42-98
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
99
Item 9A. Controls and Procedures
Item 9B. Other Information
100
Part III:
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
101
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services
Part IV:
Item 15. Exhibits and Financial Statement Schedules
101-101
Signatures
106
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PART I
ITEM 1. BUSINESS
Citizens & Northern Corporation (“Corporation”) is a bank holding company whose principal activity is community banking. The Corporation’s principal office is located in Wellsboro, Pennsylvania. The largest subsidiary is Citizens & Northern Bank (“C&N Bank” or the “Bank”). The Corporation’s other wholly-owned subsidiaries are Citizens & Northern Investment Corporation and Bucktail Life Insurance Company (“Bucktail”). Citizens & Northern Investment Corporation was formed in 1999 to engage in investment activities. Bucktail reinsures credit and mortgage life and accident and health insurance on behalf of C&N Bank.
C&N Bank is a Pennsylvania banking institution that was formed by the consolidation of Northern National Bank of Wellsboro and Citizens National Bank of Towanda in 1971. C&N Bank has operated under its current name since May 6, 1975, at which time C&N Bank changed its charter from a national bank to a Pennsylvania bank. The Bank has expanded its presence over the past several decades through a series of mergers as well as by opening new branch and lending offices and providing access to banking services via the internet and through ATMs. At December 31, 2025, the Bank had 35 branch offices, including 28 in the Northern tier/Northcentral region of Pennsylvania, 1 in the Southern tier of New York State, 4 in Southeastern Pennsylvania (3 in Bucks County and 1 in Chester County) and 2 in Southcentral Pennsylvania (York and Lancaster). In addition to its branch locations, the Bank has a lending office in Elmira, New York.
On October 1, 2025, the Corporation completed its previously announced merger with 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. 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. The Corporation issued 2,272,948 shares of common stock to the former Susquehanna stockholders resulting in total merger consideration valued at $44.6 million. Management believes the combination creates additional scale in central Pennsylvania and further diversifies its loan portfolio and funding base, thus increasing resiliency and efficiency.
Since 2019, the Corporation has expanded into Southeastern Pennsylvania by acquisitions and Southcentral Pennsylvania by opening new branches. The Corporation acquired Covenant Financial, Inc. (“Covenant”), effective July 1, 2020. Covenant was the parent company of Covenant Bank, a commercial bank which operated a community bank office in Bucks County, Pennsylvania and another in Chester County, Pennsylvania. The Covenant acquisition followed the 2019 acquisition of Monument Bancorp, Inc. (“Monument”), a commercial bank with offices in Bucks County. In Southcentral Pennsylvania, in 2021, the Corporation converted the lending office in York, Pennsylvania to a full-service branch and established a new branch in Lancaster, Pennsylvania. Mainly as a result of the acquisitions and subsequent growth in the newer markets, the Corporation’s consolidated total assets at December 31, 2025 increased to $3.1 billion, up 89% from the corresponding total at December 31, 2019. Similarly, gross loans of $2.4 billion at December 31, 2025 were up 99% from December 31, 2019 and total deposits of $2.6 billion were up 105% from December 31, 2019.
C&N Bank provides an extensive range of banking services, including deposit and loan products for personal and commercial customers. The Bank also provides wealth management services through its trust department and C&N Financial Services, LLC (“CNFS”). The trust department offers a wide range of financial services, such as 401(k) plans, retirement planning, estate planning, estate settlements and asset management. CNFS, a wholly-owned subsidiary of the Bank, is a licensed insurance agency that provides insurance products to individuals and businesses and through a broker-dealer arrangement, offers mutual funds, annuities, educational savings accounts and other investment products through registered agents. CNFS’s operations are not significant in relation to the total operations of the Corporation.
Northern Tier Holding LLC acquires, holds and disposes of real property acquired by the Bank through foreclosure procedures. C&N Bank is the sole member of Northern Tier Holding LLC.
All phases of the Bank’s business are competitive. The Bank competes with fintech and other online financial institutions, local commercial banks headquartered in our market areas and other commercial banks with branches in our market areas. Many of the online financial institutions and some of the banks that have branches in our market areas are larger in overall size. With respect to lending activities and attracting deposits, the Bank also competes with savings banks, savings and loan associations, insurance companies, regulated small loan companies and credit unions. Also, the Bank competes with mutual funds, exchange-traded funds and other
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investment vehicles for deposits. C&N Bank competes with insurance companies, investment counseling firms, mutual funds and other business firms and individuals for trust, investment management, brokerage and insurance services. The Bank is generally competitive with all financial institutions in our service areas with respect to interest rates paid on time and savings deposits, service charges on deposit accounts and interest rates charged on loans. The Bank serves a diverse customer base and is not economically dependent on any small group of customers or on any individual industry.
At December 31, 2025, C&N Bank had total assets of $3,121,869,000, total deposits of $2,584,952,000 and net loans outstanding of $2,323,317,000.
Most activities of the Corporation and its subsidiaries are regulated by federal or state agencies. Our primary regulatory relationships are as follows:
A copy of the Corporation’s annual report on Form 10-K, quarterly reports on Form 10-Q, current events reports on Form 8-K, and amendments to these reports, are available, free of charge, through the Corporation’s web site at www.cnbankpa.com. These reports, as well as any amendments thereto, are posted on our website as soon as reasonably practicable after they are electronically filed with the SEC. The information contained on our website or in any websites linked by our website is not a part of this 2025 Annual Report on Form 10-K.
Human Capital
The Corporation’s Board of Directors and executive leadership team have established the following mission, vision and values:
Mission: Creating value through lifelong relationships with our customers, teammates, shareholders and communities.
Vision: Every customer says “C&N is the ONLY bank I need.”
Values: Teamwork, Respect, Responsibility and Accountability, Excellence, Integrity, Client Focus, Have Fun.
We recognize that our ability to create value on a consistent basis is highly dependent upon the effectiveness of our team.
The Corporation’s key human capital management objectives are to attract and retain diverse raw and seasoned talent that fits our values and culture. Our talent strategy focuses on acquiring new employees through branding and outreach programs, developing employees through a robust onboarding program, ongoing training, and performance management, and retaining employees through recognition, engagement, and an attractive total rewards package. At December 31, 2025, the Corporation had 460 full-time equivalent employees.
At C&N Bank, we are committed to creating value through relationships. At the heart of this mission is a promise of excellence in service to all people, as demonstrated by our commitment to equity of opportunity, inclusion and our fostering of a spirit of belonging. We live our values of respect, integrity and excellence by creating access and providing support to help our diverse constituents of customers, teammates, shareholders and communities in achieving their financial goals. We embrace inclusion of all of our stakeholders as an important component of our vision to be the ONLY bank our customers need.
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Compensation and Benefits
The Corporation offers competitive compensation to attract and retain talent. Our generous total rewards package includes market-competitive salary, bonuses or sales commissions, short-term and long-term equity incentives, healthcare and retirement benefits, and paid time off. Employees have regular performance reviews and receive salary raises commensurate with performance. Employees have access to a holistic suite of items within our employee assistance program that caters to physical, emotional, and mental wellbeing for the employee and their family.
Training and Development
The Corporation provides a robust training and development program that supports our culture, prepares employees for their immediate role, develops them for long term success at the Bank and supports personal enrichment. We offer functional training, culture building exercises, personal development, C&N Bank history, C&N Bank integration and ongoing technical training throughout each year. Employees also have access to additional educational and development opportunities including tuition reimbursement and certification programs.
Communication and Engagement
At C&N, we believe in the importance of employee communication and engagement. We utilize several methods to foster engagement, including activities such as Employee Recognition programs, Service Anniversary Awards, Bank wide monthly calls, semi-annual Bank wide events, annual employee surveys, focus groups, daily huddles, and the Giving Back, Giving Together community service program. We believe keeping our team well informed, connected, and appreciated adds to the success of our organization.
ITEM 1A. RISK FACTORS
The Corporation is subject to the many risks and uncertainties applicable to all banking companies, as well as risks specific to the Corporation’s geographic locations. Although the Corporation seeks to effectively manage risks, and maintains a level of equity that exceeds the banking regulatory agencies’ thresholds for being considered “well capitalized” (see Note 18 to the consolidated financial statements), management cannot predict the future and cannot eliminate the possibility of credit, operational or other losses. Accordingly, actual results may differ materially from management’s expectations. We believe that the Corporation’s most significant risks and uncertainties are discussed below.
Risk Related to Acquisition Activity – As described in Item 1, the Corporation has completed three acquisitions of banking companies in 2025, 2020 and 2019 (Susquehanna, Covenant and Monument) and expanded its geographic footprint in Northcentral, Southcentral, and Southeastern Pennsylvania. Further, management intends to continue to pursue additional acquisition opportunities. Potential acquisitions may disrupt the Corporation’s business and dilute shareholder value. We regularly evaluate merger and acquisition opportunities and conduct due diligence activities related to possible transactions with other financial institutions and financial service companies. Acquiring other banks, businesses, or branches involves various risks commonly associated with acquisitions, including: potential exposure to unknown or contingent liabilities of the target company, exposure to potential asset quality issues of the target company, difficulty and expense of integrating the operations and personnel of the target company, potential disruption to the Corporation’s business, potential diversion of management’s time and attention, the possible loss of key employees and customers of the target company, difficulty in estimating the value of the target company and potential changes in banking or tax laws or regulations that may affect the target company. Acquisitions may involve the payment of a premium over book and market values, and, therefore, some dilution of the Corporation’s tangible book value and earnings per common share may occur in connection with any future transaction. Furthermore, failure to realize the expected revenue projections, cost savings, increases in geographic or product presence, and/or other projected benefits from recent or future acquisitions could have a material adverse effect on the Corporation’s business, financial condition or results of operations.
Credit Risk from Lending Activities - A significant source of risk is the possibility that losses will be sustained because borrowers, guarantors and related parties may fail to perform in accordance with the terms of their loan agreements. Most of the Corporation’s loans are secured, but some loans are unsecured. With respect to secured loans, the collateral securing the repayment of these loans may be insufficient to cover the obligations owed under such loans. A significant portion of such collateral is real estate located in the Corporation's core banking markets. Collateral values may be adversely affected by changes in economic, environmental and other conditions, including declines in the value of real estate, changes in interest rates, changes in monetary and fiscal policies of the federal
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government, wide-spread disease, terrorist activity, environmental contamination and other external events. A decline in local economic conditions may have a greater effect on the Corporation’s earnings and capital than on the earnings and capital of other financial institutions whose real estate loan portfolios are more geographically diverse. In addition, collateral appraisals that are out of date or that do not meet industry recognized standards may create the impression that a loan is adequately collateralized when it is not. The Corporation has adopted underwriting and credit monitoring procedures and policies, including regular reviews of appraisals and borrower financial statements, that management believes are appropriate to mitigate the risk of loss. Also, as discussed further in the “Provision and Allowance for Credit Losses” section of Management’s Discussion and Analysis, the Corporation uses an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts. Such risk management and accounting policies and procedures, however, may not prevent unexpected losses that could have a material adverse effect on the Corporation’s business, financial condition, results of operations or liquidity.
A significant portion of the Corporation's loan portfolio consists of commercial real estate loans, including owner occupied properties, non-owner-occupied properties, and other commercial properties. These types of loans are generally viewed as having more risk of default than residential real estate loans and depend on cash flows from the owner’s business or the property’s tenants to service the debt. The borrower’s cash flows may be affected significantly by general economic conditions, a downturn in the local economy or in occupancy rates in the market where the property is located, or other external events, any of which could increase the likelihood of default. Commercial real estate loans also typically have larger loan balances, and, therefore, the deterioration of one or a few of these loans could cause a significant increase in the percentage of the Corporation's non-performing loans. An increase in non-performing loans could result in a loss of earnings from these loans, an increase in the provision for credit losses for loans, and an increase in charge-offs, all of which could have a material adverse effect on the Corporation's business, financial condition, and results of operations.
Over the past few years, the banking regulatory agencies have expressed concerns about weaknesses in the current commercial real estate market. Banking regulators generally give commercial real estate lending greater scrutiny and may require banks with higher levels of commercial real estate loans to implement enhanced risk management practices, including stricter underwriting, internal controls, risk management policies, more granular reporting, and portfolio stress testing, as well as possibly higher levels of allowances for credit losses and capital levels as a result of commercial real estate lending growth and exposures. If the Corporation's banking regulators determine that our commercial real estate lending activities involve more than customary risk and therefore are subject to such heightened scrutiny, the Corporation may incur significant additional costs or be required to restrict certain of our commercial real estate lending activities. Furthermore, failures in the Corporation's risk management policies, procedures and controls could adversely affect our ability to manage this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which could have a material adverse effect on the Corporation's business, financial condition, and results of operations.
Interest Rate Risk - Business risk arising from changes in interest rates is an inherent factor in operating a banking organization. The Corporation’s assets are predominantly long-term, fixed-rate loans and debt securities. Funding for these assets comes principally from deposits with no stated maturities, term deposits and borrowed funds. Accordingly, there is an inherent risk of lower future earnings or decline in fair value of the Corporation’s financial instruments when interest rates change.
Moreover, the Federal Reserve lowered the Federal Funds rate in 2020 and maintained a rate of 0% to 0.25% throughout 2021 while injecting unusually large amounts of liquidity into the nation’s monetary system. In 2022 and 2023, the Federal Reserve changed course and raised the rate several times to a range of 5.25% to 5.50% at December 31, 2023. The Federal Reserve’s rate increases, along with an accompanying tightening of the money supply, were conducted in an effort to contain inflation. The Federal Reserve lowered the Federal Funds rate twice to a range of 4.25% to 4.50% at December 31, 2024 and continued to lower the Federal Funds rate three times in 2025 to a range of 3.50% to 3.75% at December 31, 2025.
Significant fluctuations in interest rates, including fluctuations in interest rates triggered by the Federal Reserve’s actions, could have a material adverse effect on the Corporation’s business, financial condition, results of operations or liquidity.
Holding Company Liquidity Risk- The Corporation relies on dividends from its subsidiaries for substantially all of its revenue and its ability to make dividends, distributions and other payments.
Limited Geographic Diversification - The Corporation grants commercial, residential and personal loans to customers primarily in the Corporation’s markets of the Northern tier/Northcentral regions of Pennsylvania, Southern tier of New York and Southeastern and
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Southcentral Pennsylvania. Although the Corporation has a diversified loan portfolio, a significant portion of its debtors’ ability to honor their contracts is dependent on the local economic conditions within these regions. Deterioration in economic conditions could adversely affect the quality of the Corporation’s loan portfolio and the demand for its products and services, and accordingly, could have a material adverse effect on the Corporation’s business, financial condition, results of operations or liquidity.
Competition - All phases of the Corporation’s business are competitive. Some competitors are much larger in total assets and capitalization than the Corporation, have greater access to capital markets and can offer a broader array of financial services. There can be no assurance that the Corporation will be able to compete effectively in its markets. Additionally, the financial services industry is undergoing rapid technological change with frequent introductions of new technology-driven products and services, including those related to artificial intelligence, to technologies that automate functions previously performed manually, facilitate the ability of customers to engage in financial transactions and otherwise enhance the customer experience. Many of these initiatives take a significant amount of time to develop and implement, are tied to critical systems, and require substantial financial, human, and other resources. The investments by larger competitors in these initiatives may be more substantial than those of the Corporation, which may cause the Corporation to lose market share. Although the Corporation, in making such investments, takes steps to mitigate the risks and uncertainties associated with these initiatives, they are not always implemented on time, within budget, or without negative financial, operational, or customer impact and do not always perform as the Corporation or its customers expect. Moreover, costs associated with implementing technology-driven products or other services, or technology-related or other developments increasing the nature or level of competition, could have a material adverse effect on the Corporation’s business, financial condition, results of operations or liquidity.
Inability to Attract and Develop Qualified Personnel – The future success of the Corporation will depend in large part on our ability to attract, develop and retain highly qualified management, lending, financial, technological, marketing, sales, and support personnel. Competition for qualified personnel is intense and we cannot ensure success in attracting or retaining qualified personnel. There may be only a limited number of persons with the requisite skills to serve in these positions, and it may be increasingly difficult for us to hire personnel over time. Our ability to retain key officers and employees may be further impacted by legislation and regulation affecting the financial services industry. For example, legislation and bank regulatory action that places restrictions on executive compensation at, and the pay practices of, financial institutions may further impact our ability to compete for talent with other industries that are not subject to the same limitations as financial institutions. Any inability to attract, develop and retain significant numbers of qualified management and other personnel would have a material adverse effect on our business, results of operations and financial condition.
Cyber Security Risks and Technology Dependence – In the ordinary course of business, the Corporation collects and stores sensitive data, including proprietary business information and personally identifiable information of our customers and employees in systems and on networks. In some cases, this confidential or proprietary information is collected, compiled, processed, transmitted or stored by third parties on our behalf. The secure processing, maintenance and use of this information is critical to operations and our business strategy.
The Corporation has invested in accepted technologies, and continually reviews processes and practices that are designed to protect our networks, computers and data from damage or unauthorized access, and maintains an information security risk insurance policy. On an on-going basis the Corporation assesses its cyber security procedures and controls and performs network penetration tests on at least an annual basis. All employees receive monthly information security awareness training.
Despite these security measures, the Corporation’s computer systems and infrastructure or those of third parties used by us to compile, process or store such information may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions. Financial services institutions and companies engaged in data processing have reported breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to sensitive information, destroy data, steal financial assets, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, cyber-attacks and other means. Denial of service attacks have been launched against a number of large financial services institutions. The Corporation may be subject to similar attacks in the future. Hacking and identity theft risks could cause serious reputational harm and financial loss to the Corporation. Cyber threats are rapidly evolving and the Corporation may not be able to anticipate or prevent all such attacks. Advancements in the use of artificial intelligence could lead to attacks by exploiting vulnerabilities to manipulate model outputs or bypass security controls. A breach of any kind could compromise systems and the information stored there could be accessed, damaged, locked up, or disclosed. A breach in security could result in legal claims, regulatory penalties, disruption in operations, and damage to the Corporation’s reputation, which could have a material adverse effect on the Corporation’s business, financial condition, results of operations or liquidity.
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Artificial Intelligence Risks and Challenges - The Corporation or its third-party vendors, clients or counterparties may develop or incorporate artificial intelligence ("AI") technology in certain business processes, services, or products. The development and use of AI presents a number of risks and challenges to the Corporation's business. The legal and regulatory environment relating to AI is uncertain and rapidly evolving, both in the U.S. and internationally, and includes regulatory schemes targeted specifically at AI as well as provisions in intellectual property, privacy, consumer protection, employment, and other laws applicable to the use of AI. These evolving laws and regulations could require changes in the Corporation's implementation of AI technology and increase its compliance costs and the risk of non-compliance. AI models, particularly generative AI models, may produce output or take action that is incorrect, that reflects biases included in the data on which they are trained, that results in the release of private, confidential, or proprietary information, that infringes on the intellectual property rights of others, or that is otherwise harmful. In addition, the complexity of many AI models makes it difficult to understand why they are generating particular outputs. This limited transparency increases the challenges associated with assessing the proper operation of AI models, understanding and monitoring the capabilities of the AI models, reducing erroneous output, eliminating bias, and complying with regulations that require documentation or explanation of the basis on which decisions are made. Further, the Corporation may rely on AI models developed by third parties, and, to that extent, would be dependent in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material in the training data for their models and the effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models, matters over which the Corporation may have limited visibility. Any of these risks could expose us to liability or adverse legal or regulatory consequences and harm our reputation and the public perception of our business or the effectiveness of our security measures.
Government Regulation and Monetary Policy - The Corporation and the banking industry are subject to extensive regulation and supervision under federal and state laws and regulations. The requirements and limitations imposed by such laws and regulations limit the way the Corporation conducts its business, undertakes new investments and activities, and obtains financing. These regulations are designed primarily for the protection of the deposit insurance funds and consumers and not to benefit the Corporation’s shareholders. Financial institution regulation has been the subject of significant legislation in recent years and may be the subject of further significant legislation in the future, none of which is in the control of the Corporation. Significant new laws or changes in, or repeals of, existing laws could have a material adverse effect on the Corporation’s business, financial condition, results of operations or liquidity. For example, the regulatory authorities may take actions that could result in decreases in service charge revenue from deposit accounts, including overdraft privilege and other fees. Further, federal monetary policy, particularly as implemented through the Federal Reserve System, significantly affects short-term interest rates and credit conditions, and any unfavorable change in these conditions could have a material adverse effect on the Corporation’s business, financial condition, results of operations or liquidity.
Bank Secrecy Act and Related Laws and Regulations - Laws and regulations relating to the Bank Secrecy Act have significant implications for all financial institutions. In recent years, these laws and regulations have increased due diligence requirements and reporting obligations for financial institutions, created new crimes and penalties, and required the federal banking agencies, in reviewing merger and other acquisition transactions, to consider the effectiveness of the parties to such transactions in combating money laundering activities. Even innocent noncompliance and inconsequential failure to follow the regulations could result in significant fines or other penalties, which could have a material adverse impact on the Corporation’s business, financial condition, results of operations or liquidity.
The Federal Home Loan Bank of Pittsburgh - Through its subsidiary (C&N Bank), the Corporation is a member of the Federal Home Loan Bank of Pittsburgh (FHLB-Pittsburgh), which is one of 11 regional Federal Home Loan Banks. The Corporation has a line of credit with the FHLB-Pittsburgh that is secured by a blanket lien on its loan portfolio. Access to this line of credit is critical if a funding need arises. However, there can be no assurance that the FHLB-Pittsburgh will be able to provide funding when needed, nor can there be assurance that the FHLB-Pittsburgh will provide funds specifically to the Corporation should its financial condition deteriorate and/or regulators prevent that access. The inability to access this source of funds could have a materially adverse effect on the Corporation’s financial flexibility if alternate financing is not available at acceptable interest rates. The failure of the FHLB-Pittsburgh or the FHLB system in general, may materially impair the Corporation’s ability to meet short- and long-term liquidity needs or to meet growth plans.
The Corporation owns common stock of the FHLB-Pittsburgh to qualify for membership in the FHLB system and access services from the FHLB-Pittsburgh. The FHLB-Pittsburgh faces a variety of risks in its operations including interest rate risk, counterparty credit risk, and adverse changes in its regulatory framework. In addition, the 11 Federal Home Loan Banks are jointly liable for the consolidated obligations of the FHLB system. To the extent that one FHLB cannot meet its obligations, other FHLBs can be called upon to make required payments. Such risks affecting the FHLB-Pittsburgh could adversely impact the value of the Corporation’s investment in the common stock of the FHLB-Pittsburgh and/or affect its access to credit.
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Soundness of Other Financial Institutions - In addition to the FHLB-Pittsburgh, the Corporation maintains other credit facilities that provide it with additional liquidity. These facilities include secured and unsecured borrowings from the Federal Reserve Bank and third-party commercial banks. The Corporation believes that it maintains a strong liquidity position and that it is well positioned to withstand foreseeable market conditions. However, legal agreements with counterparties typically include provisions allowing them to restrict or terminate the Corporation’s access to these credit facilities with or without advance notice and at their sole discretion.
Financial institutions are interconnected because of trading, clearing, counterparty, and other relationships. Financial market conditions have been negatively impacted in the past and such disruptions or adverse changes in the Corporation’s results of operations or financial condition could, in the future, have a negative impact on available sources of liquidity. Such a situation may arise due to circumstances that are outside the Corporation’s control, such as general market disruptions or operational problems affecting the Corporation or third parties. The Corporation’s efforts to monitor and manage liquidity risk may not be successful or sufficient to deal with dramatic or unanticipated reductions in available liquidity. In such events, the Corporation’s cost of funds may increase, thereby reducing net interest income, or the Corporation may need to sell a portion of its securities and/or loan portfolio, which, depending upon market conditions, could necessitate realizing a loss.
Moreover, the Corporation is exposed to the risk that when a bank or other financial institution experiences financial difficulties, there could be an adverse “contagion” impact on other banking institutions. For example, the failures of Silicon Valley Bank in California, Signature Bank in New York and First Republic Bank in California in 2023 caused an element of uncertainty in the investor community and among bank customers generally, including, specifically, deposit customers. These types of events may reduce customer confidence and may affect sources of funding and liquidity, increase regulatory requirements and costs, adversely affect financial markets and/or have negative reputational ramifications for institutions in the banking industry, including, possibly, the Corporation.
Securities Markets – The fair value of the Corporation’s available-for-sale debt securities, as well as the revenues the Corporation earns from its wealth management services, are sensitive to price fluctuations and market events.
Declines in the values of the Corporation’s securities holdings, combined with adverse changes in the expected cash flows from these investments, would negatively impact their value for liquidity management purposes and could result in the recording of an allowance for credit losses. At December 31, 2025, the fair value of the Corporation’s available-for-sale debt securities portfolio was $506.6 million, or 5.5% less than the amortized cost basis. The unrealized decrease in fair value was consistent with the increases in market interest rates that occurred subsequent to the purchases of the securities, and no allowance for credit losses was required on available-for-sale debt securities in an unrealized loss position at December 31, 2025. Further increases in interest rates would cause the fair value of the available-for-sale debt securities portfolio to decrease further. For additional information regarding debt securities, see the “Securities” section of Management’s Discussion and Analysis and Note 7 to the consolidated financial statements.
The Corporation’s trust revenue is determined, in part, from the value of the underlying investment portfolios. Accordingly, if the values of those investment portfolios decrease, whether due to factors influencing U.S. or international securities markets, in general, or otherwise, the Corporation’s revenue could be negatively impacted. In addition, the Corporation’s ability to sell its brokerage services is dependent, in part, upon consumers’ level of confidence in securities markets.
Mortgage Banking – The Corporation originates and sells residential mortgage loans to the secondary market through the MPF Xtra and MPF Original programs. Both of these programs are administered by the Federal Home Loan Banks of Pittsburgh and Chicago. At December 31, 2025, the total outstanding balance of residential mortgages sold and serviced through the two programs amounted to $450,120,000. The Corporation must strictly adhere to the MPF Xtra and MPF Original program guidelines for origination, underwriting and servicing loans, and failure to do so may result in the Corporation being forced to repurchase loans or being dropped from the program. As of December 31, 2025, the total outstanding balance of residential mortgage loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $2,598,000. If the volume of such forced repurchases of loans were to increase significantly, or if the Corporation were to be dropped from the programs, it could have a material adverse effect on the Corporation’s business, financial condition, results of operations or liquidity.
ITEM 1B. UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 1C. CYBERSECURITY
Risk Management and Strategy- The Corporation’s cybersecurity risk management program is designed to assess, identify, and manage material risks from cybersecurity threats and is an integral part of the overall risk management program. Cybersecurity risk includes exposure to failures or interruptions of service or security breaches resulting from malicious technological attacks that impact the confidentiality, integrity, or availability of our or third parties’ operations, systems, or data. The Corporation assesses its cyber security procedures and controls on an on-going basis as safeguarding its systems and data is critical to its operations and business strategy.
The Corporation uses third-party vendors, including a managed security service provider, to assist in monitoring, detecting, and managing cyber threats. The Board of Directors has established risk management guidelines for third-party vendors. Further, the Corporation conducts due diligence reviews of third-party vendors before contracts or agreements for provision of services are signed and conducts ongoing due diligence and oversight procedures with the frequency of the procedures determined based on a risk assessment of the services provided. The Corporation generally has agreements in place with its service providers that include requirements related to cybersecurity and data privacy. Due diligence and oversight procedures may include, but are not limited to, reviews of financial information, internal control reports, business continuity and disaster recovery plans, and information security and cyber security policies and associated tests of effectiveness. The Corporation cannot guarantee, however, that such agreements, due diligence, and oversight procedures will prevent a cyber incident from impacting our systems or information. Additionally, the Corporation may not be able to obtain adequate or any reimbursement from its insurance coverage or from its service providers in the event it should suffer any such incidents. Due to applicable laws and regulations or contractual obligations, the Corporation may be held responsible for cyber incidents attributed to its service providers in relation to any data that the Corporation shares with them.
During 2025, the Corporation did not experience a cybersecurity threat or incident that has materially affected or is reasonably likely to materially affect the Corporation, including its business strategy, results of consolidated operations or financial condition. Refer to the risk factor captioned “Cyber Security Risks and Technology Dependence” in Part I, Item 1A. “Risk Factors” for additional information.
Governance- The Board of Directors provides oversight of the risk management program and setting the Corporation’s cyber risk profile, which includes risks from cybersecurity threats, enterprise cyber strategy, and key cyber initiatives. The Board has appointed a Risk Management Committee currently made up of six members of the Board with governance and oversight of the Corporation’s enterprise-wide risk management program. The members of the Risk Management Committee collectively have years of business management and professional experience in the banking industry and other industries including exposure to cyber risk management considerations. The Board also meets with our internal and external auditors, and federal and state regulators to review and discuss reports on risk, examination, and regulatory compliance matters. In fulfilling its role, the Risk Management Committee is actively engaged with management regarding cyber security procedures and controls to manage and mitigate cybersecurity-related risks. Management provides at least quarterly information security reports to the Risk Management Committee who provides a report to the Board of its discussions and decisions. These reports to the Risk Management Committee address management’s efforts to monitor, detect and prevent cyber threats. In addition, the Board of Directors is engaged, as needed, in accordance with the Incident Response Plan.
The Corporation has an information security program that is primarily managed by the Information Security Department, which is led by the Chief Risk Management Officer and the Director of Information Security and supported by the Information Technology Operations Department, which is led by the Chief Information Officer. The Information Security Department is led by the Director of Information Security, and is responsible for day-to-day management of the information security program including system monitoring, vulnerability scans, employee security training including phishing exercises, security controls, and building strong relationships with security vendors. The Chief Risk Management Officer, the Chief Information Officer, the Director of Information Security and the other members of the Information Security Department are qualified by years of experience, post-secondary education, industry certifications and regular continuing education. A network penetration test and vulnerability assessment are performed at a minimum annually by a third-party vendor. The information security committee is the management committee responsible for the oversight of the information security program and is also responsible for policy development and information security risk assessment. This committee meets at least quarterly to discuss and review the information security program. The information security program is updated at least annually and the Board of Directors, with input from the Risk Management Committee, approves all material changes.
10
The Corporation has an Incident Response Plan that provides a documented guideline for handling potential threats and taking appropriate measures including timely notification and escalation to executive leadership and the Board of Directors. The Incident Response Plan is managed by the Incident Response Team which includes the Director of Information Security, Chief Risk Management Officer, Chief Information Officer, and other essential members of management. The Incident Response Plan is reviewed and tested at least annually.
ITEM 2. PROPERTIES
A summary of the Corporation’s operating properties is as follows:
Number
Number of
of
Owned
Leased
Locations
Properties
Branches
35
29
Limited Purpose Office-Lending
1
0
Administrative/Multi-purpose
Total
40
32
ITEM 3. LEGAL PROCEEDINGS
Class Action Litigation
On March 27, 2024, a putative class action lawsuit was filed in the US District Court for the Western District of Texas by investors in a purported Ponzi scheme operated by two individuals, one of whom maintained accounts at C&N Bank. The plaintiffs sued C&N Bank, along with another bank, and additional law firm and accounting firm defendants. The case was styled Goldovsky, et al. v. Rauld, et al. Plaintiffs asserted claims against C&N Bank and the other bank for aiding and abetting alleged violations of the Texas Securities Act, and additional claims against the legal and accounting professionals for statutory fraud, common law fraud, negligent misrepresentation, and knowing participation in breach of fiduciary duty.
C&N Bank filed motions to dismiss the Texas case for wont of personal jurisdiction and failure to state a claim. The Plaintiffs responded to those motions. By order of the District Court judge dated March 27, 2025, C&N Bank’s motion to dismiss for wont of personal jurisdiction was granted.
Plaintiffs filed an application for certification of the Texas suit as a class action. On October 16, 2025, the District Court in Texas issued an order denying the plaintiffs’ motion for class certification.
On May 23, 2025, C&N Bank was served with a complaint filed by Goldovsky, et al in the US District Court for the Middle District of Pennsylvania. The complaint was predicated upon Texas securities law, alleging substantially the same facts and asserting the same legal arguments as in the Texas case. C&N Bank filed motions to dismiss the Pennsylvania case. Plaintiffs filed a motion to certify the case as class action. C&N Bank filed its response brief in opposition to class certification in the Pennsylvania case on October 22, 2025. On December 30, 2025, the US District Judge for the Middle District of Pennsylvania issued an order dismissing the case with prejudice on the grounds that the complaint was filed after the statute of limitations had run. Plaintiffs had until January 29, 2026 to file a timely notice of appeal. No such notice was filed.
C&N Bank believes that it has substantial defenses against any additional actions the plaintiffs may initiate and intends to defend itself in the event of any such actions. Based on the information available to the Corporation, the Corporation does not believe at this time that a loss is probable in this matter, nor can a range of possible losses be determined. Accordingly, no liability has been recorded for this litigation matter in the accompanying consolidated financial statements. The Corporation’s estimate may change from time to time, and actual losses could vary.
The Corporation and the Bank are involved in various legal proceedings incidental to their business. Management believes the aggregate liability, if any, resulting from such pending and threatened legal proceedings will not have a material adverse effect on the Corporation’s financial condition or results of operations.
ITEM 4. MINE SAFETY DISCLOSURE
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
QUARTERLY SHARE DATA
Trades of the Corporation’s stock are executed through various brokers who maintain a market in the Corporation’s stock. The Corporation’s stock is listed on the NASDAQ Capital Market with the trading symbol CZNC. As of December 31, 2025, there were 2,283 shareholders of record of the Corporation’s common stock.
While the Corporation has a history of paying cash dividends, future dividend payments will depend upon the Corporation’s financial condition and future earnings and capital and regulatory requirements. Also, 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. These restrictions are described in Note 18 to the consolidated financial statements.
On September 25, 2023, the Corporation announced a new 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 will continue thereafter until suspended or terminated by the Board of Directors, in its sole discretion. All shares of common stock repurchased pursuant to the program shall be held as treasury shares and be available for use and reissuance for purposes as and when determined by the Board of Directors including, without limitation, pursuant to the Corporation’s Dividend Reinvestment and Stock Purchase and Sale Plan and its equity compensation program. During the year ended December 31, 2025, 501 shares were repurchased for a total cost of $9,534, at an average price of $19.03 per share. At December 31, 2025, there were 723,465 shares available to be repurchased under the program. As permitted by securities laws and other legal requirements and subject to market conditions and other factors, purchases may be made from time to time in the open market at prevailing prices, or through privately negotiated transactions.
The following table sets forth a summary of purchases by the Corporation, in the open market, of its equity securities during the fourth quarter 2025:
Total Number of
Maximum
Shares
Purchased
Shares that May
as Part of
Yet
Publicly
be Purchased
Total Number
Average
Announced
Under
of Shares
Price Paid
Plans
the Plans or
Period
per Share
or Programs
Programs
October 1 - 31, 2025
$
723,966
November 1 - 30, 2025
501
19.03
723,465
December 1 - 31, 2025
PERFORMANCE GRAPH
Set forth below is a chart comparing the Corporation’s cumulative return to stockholders against the cumulative return of the Russell 2000 Index and the Corporation’s peer group index (the NASDAQ Bank Index) for the five-year period commencing December 31, 2020 and ended December 31, 2025.
The index values are market-weighted dividend-reinvestment amounts, which measure the total return on a $100.00 investment made five years ago. This chart meets Securities & Exchange Commission requirements for showing dividend reinvestment share performance over a five-year period and measures the return to an investor for investing $100.00 into a group of bank stocks and reinvesting any and all dividends into the purchase of more of the same stock for which dividends were paid.
Period Ending
Index
12/31/20
12/31/21
12/31/22
12/31/23
12/31/24
12/31/25
Citizens & Northern Corporation
100.00
138.06
126.52
131.21
115.22
132.52
Russell 2000 Index
114.78
91.30
106.71
119.00
134.23
Peer Group (NASDAQ Bank Index)
142.91
119.65
115.54
139.30
149.15
13
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information concerning the Citizens & Northern 2023 Equity Stock Incentive Plan which was approved by the Corporation’s shareholders in April 2023. The figures shown in the table below are as of December 31, 2025.
Weighted-
Securities
Securities to be
average
Remaining
Issued Upon
Exercise
for Future
Exercise of
Price of
Issuance Under
Outstanding
Equity Compen-
Options
sation Plans
Equity compensation plans approved by shareholders
N/A
357,936
Equity compensation plans not approved by shareholders
More details related to the Corporation’s equity compensation plans are provided in Notes 1 and 13 to the consolidated financial statements.
ITEM 6. RESERVED
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements in this section and elsewhere in this Annual Report on Form 10-K are forward-looking statements for purposes of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Such forward-looking statements may include financial and other projections as well as statements regarding the Corporation that may include future plans, objectives, performance, revenues, growth, profits, operating expenses or the Corporation’s underlying assumptions. 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 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. 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 the Risk Factors section of this Form 10-K, and those identified elsewhere in this document, the following factors, among others, could cause actual results to differ materially from forward looking statements:
These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. All forward-looking statements and information made herein are based on management’s current beliefs and assumptions as of the date of filing of this document. The Corporation does not undertake to update forward-looking statements.
Completion of Merger with Susquehanna Community Financial, Inc.
On October 1, 2025, the Corporation completed its previously announced merger with Susquehanna. Susquehanna was the parent company of Susquehanna Community Bank, with seven banking offices located in Lycoming, Northumberland, Snyder 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. Cash was issued in lieu of fractional shares resulting from the conversion of Susquehanna’s stock. In total, C&N issued approximately 2.3 million shares of common stock to the former Susquehanna stockholders, resulting in total merger consideration valued at $44.6 million and an increase in the Corporation’s stockholders’ equity of $44.4 million, net of equity issuance costs.
In connection with the acquisition, effective October 1, 2025, tangible common book value per share (a non-GAAP ratio- see reconciliation on. page 38) was diluted by $0.56, or 3.6%, as the Corporation recorded goodwill of $10.8 million and a core deposit intangible asset of $10.7 million. Assets acquired included loans valued at $393.6 million, cash and due from banks of $6.1 million, bank-owned life insurance valued at $8.0 million and securities valued at $147.6 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 in the acquisition were recorded at their preliminary estimated fair values at the time of closing and may be adjusted for up to one year subsequent to the acquisition.
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 date, the recorded value of loans receivable included PCD loans totaling $23.7 million.
In 2025, the Corporation incurred pre-tax merger-related expenses related to the Susquehanna acquisition of $7,940,000. Merger-related expenses include expenses related to conversion of Susquehanna’s core customer system data into C&N’s core system, severance and legal and other professional expenses. Management believes disclosure of 2025 earnings results, adjusted to exclude the impact of merger-related expenses, net of tax, provides useful information to investors for comparative purposes. The following table provides a reconciliation of the Corporation’s 2025 earnings results under U.S. generally accepted accounting principles (U.S. GAAP) to comparative non-U.S. GAAP results excluding merger-related expenses, net of tax.
15
(Dollars in Thousands)
Year Ended
December 31,
2025
2024
Calculation of Adjusted Net Income:
Net Income (GAAP) (A)
23,427
25,958
Add: Merger-related expenses (B)
7,940
Less: Tax effect of merger-related expenses (C)
(1,590)
Adjusted Net Income (D=A+B-C) - Non-GAAP
29,777
Adjusted Net Income Attributable to Common Shares - Non-GAAP
29,546
25,747
Number of Shares Used in Computation-Basic and Diluted - Non-GAAP
15,949,789
15,262,504
Net Income-Basic and Diluted per Common Share - GAAP
1.46
1.69
Adjusted Net Income-Basic and Diluted Per Common Share - Non-GAAP
1.85
EARNINGS OVERVIEW
2025 vs. 2024
Net income for the year ended December 31, 2025 was $23,427,000 or $1.46 per diluted share, as compared to $25,958,000, or $1.69 per diluted share, for the year ended December 31, 2024. The addition of Susquehanna contributed to growth in net interest income, noninterest income and noninterest expenses. As disclosed in the table above, adjusted earnings (which is a non-GAAP number that excludes the impact of merger-related expenses, net of tax), for the year ended December 31, 2025 were $29,777,000, or $1.85 per diluted share.
Significant variances were as follows:
16
2024 vs. 2023
Net income for the year ended December 31, 2024 was $25,958,000, or $1.69 per diluted share, as compared to $24,148,000, or $1.57 per diluted share, for the year ended December 31, 2023. The results for 2023 included the impact of a $1.3 million charge, or $0.08 per diluted share, related to the repositioning of available-for-sale securities and bank-owned life insurance (BOLI).
17
More detailed information concerning the Corporation’s earnings results are provided in other sections of Management’s Discussion and Analysis.
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. Actual results could differ from these estimates.
18
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. The Corporation maintains an ACL on loans which represents management’s estimate of expected net charge-offs over the life of the loans. The ACL includes two primary components: (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’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. Notes 1 and 8 to the consolidated financial statements provide an overview of the process management uses for determining the ACL, and additional discussion of the ACL is provided in a separate section of Management’s Discussion and Analysis.
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. 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.
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 I, II and III include information regarding the Corporation’s net interest income in 2025, 2024 and 2023. 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 using the Corporation’s marginal tax rate of 21%. The Corporation believes presentation of net interest income on a fully taxable-equivalent basis 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 net interest income amounts reflected in these tables exceed the amounts presented in the consolidated financial statements. Fully-taxable-equivalent interest income is reconciled to interest income following Table I. The discussion that follows is based on amounts in the tables.
19
Fully taxable equivalent net interest income was $92,735,000 in 2025, $12,801,000 (16.0%) higher than in 2024 including the benefit of three months of income from growth in net earning assets resulting from the Susquehanna merger. Table III shows the net impact of changes in the volume increased net interest income by $6,832,000 and changes in interest rates increased net interest income by $5,969,000. The increase in net interest income reflected an increase in interest income of $11,202,000 and a decrease in interest expense of $1,599,000. As presented in Table II, the Net Interest Margin was 3.61% in 2025, as compared to 3.30% in 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 2.97% in 2025 from 2.59% in 2024. The average yield on earning assets of 5.45% was 0.13% higher in 2025 as compared to 2024, while the average rate on interest bearing liabilities of 2.48% was 0.25% lower in 2025 as compared to 2024. Accretion of acquisition accounting valuation adjustments related to the Susquehanna merger had a positive impact of $789,000 including accretion on loans of $486,000 and $303,000 on time deposits.
INTEREST INCOME AND EARNING ASSETS
Interest income totaled $140,099,000 in 2025, an increase of $11,202,000, or 8.7%, from 2024.
Interest and fees from loans receivable increased $10,242,000 in 2025 as compared to 2024. In 2025, the fully taxable equivalent yield on loans was 6.12%, up from 6.03% in 2024, reflecting 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 $137,995,000 (7.3%) to $2,019,117,000 in 2025 from $1,881,122,000 in 2024. The increase in average annual loans attributable to Susquehanna was $97,392,000.
Income from interest-bearing due from banks totaled $3,359,000 in 2025, a decrease of $948,000 from 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 decreased to 4.21% in 2025 from 4.97% in 2024. The average balance of interest-bearing due from banks was $79,833,000 in 2025, down from $86,703,000 in 2024.
Interest income from available-for-sale debt securities, on a fully taxable-equivalent basis, increased $1,905,000 in 2025. The average yield on the portfolio increased to 2.78% for 2025 from 2.45% for 2024, and the average balance (at amortized cost) increased $15,534,000. 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.
INTEREST EXPENSE AND INTEREST-BEARING LIABILITIES
Interest expense decreased $1,599,000 to $47,364,000 in 2025 from $48,963,000 in 2024.
Interest expense on deposits increased $275,000, as average total deposits (interest-bearing and noninterest-bearing) increased $170,214,000 (8.3%) in 2025 as compared to 2024. The increase in average annual deposit balances included $121,038,000 attributable to the Susquehanna acquisition. The average rate on interest-bearing deposits decreased to 2.29% in 2025 from 2.51% in 2024. Within average deposits, average brokered deposits were $11,123,000 at an average rate of 4.57% in 2025 as compared to $61,537,000 at an average rate of 5.19% in 2024. Average time deposits increased $58,512,000, average interest checking deposits increased $41,761,000, average savings deposits increased $38,120,000, average total balance of money market accounts increased $18,405,000 and the average balance of noninterest bearing demand deposits increased $13,416,000.
Interest expense on borrowed funds decreased $1,874,000 in 2025 as compared to 2024. Interest expense on short-term borrowings of $7,000 in 2025 was down from $1,168,000 in 2024 as the average balance of short-term borrowings decreased to $1,370,000 in 2025 from 22,743,000 in 2024. The average rate on short-term borrowings was 0.51% in 2025 compared to 5.14% in 2024. Interest expense on long-term borrowings (FHLB advances) decreased $720,000 to $6,468,000 in 2025 from $7,188,000 in 2024. The average balance of long-term borrowings was $144,114,000 in 2025, down from an average balance of $167,181,000 in 2024. 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 4.49% in 2025 compared to 4.30% in 2024.
20
Fully taxable equivalent net interest income was $79,934,000 in 2024, $1,385,000 (1.7%) lower than in 2023. The decrease in net interest income reflected an increase in interest expense of $15,859,000 and an increase in interest income of $14,474,000. As presented in Table II, the Net Interest Margin was 3.30% in 2024, as compared to 3.47% in 2023, and the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) decreased to 2.59% in 2024 from 2.91% in 2023. The average yield on earning assets of 5.32% was 0.43% higher in 2024 as compared to 2023, while the average rate on interest bearing liabilities of 2.73% was 0.75% higher in 2024 as compared to 2023. Additionally, average total earning assets increased $81,866,000, average total loans increased $88,973,000 (5.0%) and average total deposits increased $85,644,000 (4.3%). Table III shows the net impact of changes in volume of earning assets and interest-bearing liabilities increased net interest income for 2024 over 2023 by $2,539,000, while the net impact of changes in interest rates (primarily increases) decreased net interest income by $3,924,000.
Interest income totaled $128,897,000 in 2024, an increase of $14,474,000, or 12.6%, from 2023.
Interest and fees from loans receivable increased $11,730,000 in 2024 as compared to 2023. In 2024, the fully taxable equivalent yield on loans was 6.03%, up from 5.67% in 2023, reflecting the effects of primarily rising interest rates on new loan originations and floating-rate loans. Average outstanding loans receivable increased $88,973,000 (5.0%) to $1,881,122,000 in 2024 from $1,792,149,000 in 2023. The Corporation experienced growth in commercial real estate and other commercial loans in 2023 and in 2024.
Income from interest-bearing due from banks totaled $4,307,000 in 2024, an increase of $2,928,000 from 2023. Within this category, the largest asset balance in 2024 and 2023 has been interest-bearing deposits held with the Federal Reserve. The average yield on interest-bearing due from banks was 4.97% in 2024, up from 4.22% in 2023. The average balance of interest-bearing due from banks was $86,703,000 in 2024, up from $32,709,000 in 2023. The net increase in average interest-bearing due from banks for 2024 as compared to 2023 reflected net sources of cash from deposit growth, a reduction in average available-for-sale debt securities and an increase in borrowed funds, partially offset by net uses of cash for loan growth and an increase in Bank-Owned Life Insurance.
Interest income from available-for-sale debt securities, on a fully taxable-equivalent basis, decreased $246,000 in 2024 as compared to 2023, as the average balance (at amortized cost) of available-for-sale debt securities decreased $61,916,000 as indicated in Table II. The average yield on available-for-sale debt securities was 2.45% for 2024, up from 2.21% in 2023.
Interest expense increased $15,859,000 to $48,963,000 in 2024 from $33,104,000 in 2023.
Interest expense on deposits increased $14,967,000, as the average rate on interest-bearing deposits increased to 2.51% in 2024 from 1.66% in 2023. Average total deposits (interest-bearing and noninterest-bearing) increased $85,644,000 (4.3%) in 2024 as compared to 2023. Within average deposits, average brokered deposits were $61,537,000 at an average rate of 5.19% in 2024 as compared to $47,424,000 at an average rate of 4.78% for 2023. Average time deposits increased $84,394,000, average interest checking deposits increased $48,472,000 and the average total balance of money market accounts increased $11,144,000 while average savings deposits decreased $35,631,000 and the average balance of noninterest bearing demand deposits decreased $22,735,000.
Interest expense on borrowed funds increased $892,000 in 2024 as compared to 2023. Interest expense on short-term borrowings in 2024 of $1,168,000 was down from $3,240,000 in 2023 as the average balance of short-term borrowings decreased to $22,743,000 in 2024 from $62,926,000 in 2023. The average rate on short-term borrowings was 5.14% in 2024 compared to 5.15% in 2023. Interest expense on long-term borrowings (FHLB advances) increased $2,958,000 to $7,188,000 in 2024 from $4,230,000 in 2023. The average balance of long-term borrowings was $167,181,000 in 2024, up from an average balance of $110,943,000 in 2023. 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 4.30% in 2024 compared to 3.81% in 2023.
21
TABLE I - ANALYSIS OF INTEREST INCOME AND EXPENSE
Increase/(Decrease)
(In Thousands)
2023
2025/2024
2024/2023
INTEREST INCOME
Interest-bearing due from banks
3,359
4,307
1,379
(948)
2,928
Available-for-sale debt securities:
Taxable
10,420
8,593
8,555
1,827
38
Tax-exempt
2,609
2,531
2,815
78
(284)
Total available-for-sale debt securities
13,029
11,124
11,370
1,905
(246)
Loans receivable:
120,597
110,396
98,854
10,201
11,542
2,985
2,944
2,756
41
188
Total loans receivable
123,582
113,340
101,610
10,242
11,730
Other earning assets
129
126
64
62
Total Interest Income
140,099
128,897
114,423
11,202
14,474
INTEREST EXPENSE
Interest-bearing deposits:
Interest checking
10,869
12,151
7,668
(1,282)
4,483
Money market
8,168
8,589
5,686
(421)
2,903
Savings
1,187
207
243
980
(36)
Time deposits
19,251
18,253
10,636
998
7,617
Total interest-bearing deposits
39,475
39,200
24,233
275
14,967
Borrowed funds:
Short-term
1,168
3,240
(1,161)
(2,072)
Long-term - FHLB advances
6,468
7,188
4,230
(720)
2,958
Senior notes, net
483
481
479
Subordinated debt, net
931
926
922
Total borrowed funds
7,889
9,763
8,871
(1,874)
892
Total Interest Expense
47,364
48,963
33,104
(1,599)
15,859
Net Interest Income
92,735
79,934
81,319
12,801
(1,385)
Net Interest Income Under U.S. GAAP
91,853
79,115
80,400
12,738
(1,285)
Add: fully taxable-equivalent interest income adjustment from tax-exempt securities
317
271
388
46
(117)
Add: fully taxable-equivalent interest income adjustment from tax-exempt loans
565
548
531
Net Interest Income as adjusted to a fully taxable-equivalent basis - Non-GAAP
22
TABLE II - ANALYSIS OF AVERAGE DAILY BALANCES AND RATES
(Dollars In Thousands)
Year
Ended
Rate of
12/31/2025
Return/
12/31/2024
12/31/2023
Cost of
Balance
Funds%
EARNING ASSETS
79,863
4.21
%
86,703
4.97
32,709
4.22
Available-for-sale debt securities, at amortized cost:
360,179
2.89
340,339
2.52
389,456
2.20
108,815
2.40
113,121
2.24
125,920
468,994
2.78
453,460
2.45
515,376
2.21
1,931,125
6.24
1,791,187
6.16
1,703,839
5.80
87,992
3.39
89,935
3.27
88,310
3.12
2,019,117
6.12
1,881,122
6.03
1,792,149
5.67
2,616
4.93
2,198
5.73
1,383
4.63
Total Earning Assets
2,570,590
5.45
2,423,483
5.32
2,341,617
4.89
Cash
22,286
22,209
22,108
Unrealized loss on securities
(39,435)
(49,520)
(63,118)
Allowance for credit losses
(23,484)
(20,294)
(18,498)
Bank-owned life insurance
54,097
51,465
31,808
Bank premises and equipment
22,987
21,765
21,330
Intangible assets
59,745
54,778
55,176
Other assets
76,598
79,220
72,433
Total Assets
2,743,384
2,583,106
2,462,856
INTEREST-BEARING LIABILITIES
578,994
1.88
537,233
2.26
488,761
1.57
376,679
2.17
358,274
347,130
1.64
241,249
0.49
203,129
0.10
238,760
524,394
3.67
465,882
3.92
381,488
2.79
1,721,316
2.29
1,564,518
2.51
1,456,139
1.66
1,370
0.51
22,743
5.14
62,926
5.15
144,114
4.49
167,181
4.30
110,943
3.81
14,935
3.23
14,865
3.24
14,798
24,890
3.74
24,774
24,662
185,309
4.26
229,563
4.25
213,329
4.16
Total Interest-bearing Liabilities.
1,906,625
2.48
1,794,081
2.73
1,669,468
1.98
Demand deposits (noninterest bearing)
506,468
493,052
515,787
Other liabilities
32,650
30,089
29,107
Total Liabilities
2,445,743
2,317,222
2,214,362
Stockholders' equity, excluding accumulated other comprehensive loss
328,061
304,532
297,894
Accumulated other comprehensive loss
(30,420)
(38,648)
(49,400)
Total Stockholders' Equity
297,641
265,884
248,494
Total Liabilities and Stockholders' Equity
Interest Rate Spread
2.97
2.59
2.91
Net Interest Income/Earning Assets
3.61
3.30
3.47
Total Deposits (Interest-bearing and Demand)
2,227,784
2,057,570
1,971,926
Brokered Deposits
11,123
4.57
61,538
5.19
47,424
4.78
23
TABLE III - ANALYSIS OF VOLUME AND RATE CHANGES
Year Ended 12/31/2025 vs. 12/31/2024
.
Year Ended 12/31/2024 vs. 12/31/2023
Change in
Volume
Rate
Change
(322)
(626)
2,642
286
522
1,305
(1,153)
1,191
(98)
176
(286)
424
1,481
(1,439)
1,193
8,722
1,479
5,209
6,333
(65)
52
136
8,657
1,585
5,261
6,469
(19)
44
8,781
2,421
6,508
7,966
894
(2,176)
822
3,661
426
(847)
2,715
45
935
2,196
(1,198)
2,690
4,927
3,561
(3,286)
3,664
11,303
(593)
(568)
(2,064)
(8)
(1,025)
305
2,363
595
(1,612)
(262)
587
1,949
(3,548)
3,969
11,890
6,832
5,969
2,539
(3,924)
24
NONINTEREST INCOME
TABLE IV - COMPARISON OF NONINTEREST INCOME
Trust revenue
8,212
7,928
284
3.6
Brokerage and insurance revenue
2,313
2,271
42
1.8
Service charges on deposit accounts
5,976
5,867
109
1.9
Interchange revenue from debit card transactions
4,623
4,276
347
8.1
Net gains from sales of loans
1,483
1,158
325
28.1
Loan servicing fees, net
643
649
(6)
(0.9)
Increase in cash surrender value of life insurance
1,927
1,830
97
5.3
Other noninterest income
5,637
5,230
407
7.8
Realized gains on available-for-sale debt securities, net
N/M
Total noninterest income
30,852
29,209
1,643
5.6
7,413
515
6.9
1,675
596
35.6
5,567
300
5.4
4,160
116
2.8
723
435
60.2
602
47
2,703
(873)
(32.3)
4,610
620
13.4
Realized losses on available-for-sale debt securities, net
(3,036)
3,036
24,417
4,792
19.6
N/M = Not meaningful
NONINTEREST EXPENSE
TABLE V - COMPARISON OF NONINTEREST EXPENSE
Salaries and employee benefits
47,386
44,930
2,456
5.5
Net occupancy and equipment expense
5,860
5,473
387
7.1
Data processing and telecommunications expense
8,742
7,768
974
12.5
Automated teller machine and interchange expense
1,863
1,818
2.5
Pennsylvania shares tax
1,904
1,733
171
9.9
Professional fees
2,759
2,175
584
26.9
Other noninterest expense
11,535
10,361
1,174
11.3
Total noninterest expense, excluding merger-related expenses
80,049
74,258
5,791
Merger-related expenses
Total noninterest expense
87,989
13,731
18.5
25
44,195
735
1.7
5,357
2.2
7,582
186
1,682
1,602
131
8.2
2,497
(12.9)
11,233
(872)
(7.8)
74,148
110
0.1
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.
INCOME TAXES
The effective income tax rate was 18.2% of pre-tax income in 2025, down from 18.6% in 2024 and 20.8% in 2023. Tax-exempt interest income and income from BOLI contributed to the effective rate being lower than the federal statutory rate in 2023 through 2025.The higher effective income tax rate in 2023 included the net impact of a tax charge of $950,000 for the initiated surrender of BOLI.
The Corporation recognizes deferred tax assets and liabilities based on differences between the financial statement carrying amounts and the tax basis of assets and liabilities. At December 31, 2025, the net deferred tax asset was $17,615,000, down from the balance at December 31, 2024 of $19,098,000. The largest change in temporary difference components was a decrease of $3,928,000 in the net deferred tax asset related to the unrealized loss on available-for-sale debt securities resulting from decreases in interest rates. Other significant changes included increases in the net deferred tax asset related to the ACL and acquisition accounting valuation adjustments on loans and a decrease related to core deposit intangibles.
The Corporation regularly reviews deferred tax assets for recoverability based on history of earnings, expectations for future earnings and expected timing of reversals of temporary differences. Realization of deferred tax assets ultimately depends on the existence of sufficient taxable income, including taxable income in prior carryback years, as well as future taxable income. Further, the value of the benefit from realization of deferred tax assets would be impacted if income tax rates were changed from currently enacted levels.
Management believes the recorded net deferred tax asset at December 31, 2025 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.
Additional information related to income taxes is presented in Note 14 to the consolidated financial statements.
SECURITIES
Management continually evaluates several objectives in determining the size, securities mix and other characteristics of the available-for-sale debt securities (investment) portfolio. Key objectives include supporting liquidity needs and maximizing return on earning assets within reasonable risk parameters.
Table VI shows the composition of the available-for-sale debt securities portfolio at December 31, 2025, 2024 and 2023. The total amortized cost of available-for-sale debt securities at December 31, 2025 was higher by $86,377,000 from December 31, 2024 and by $71,292,000 from December 31, 2023. The increase in amortized cost of the portfolio at December 31, 2025 resulted from purchases of available-for-sale debt securities with funding provided by proceeds from the sale of most of the securities acquired from Susquehanna.
At December 31, 2025, the largest categories of securities held as a percentage of total amortized cost, were as follows: (1) residential mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, including pass-through securities
26
and collateralized mortgage obligations, 40.0%; (2) tax-exempt and taxable municipal bonds, 29.0%; and (3) commercial mortgage-backed securities issued or guaranteed by U.S. Government sponsored agencies, 18.5%.
The composition of the available-for-sale debt securities portfolio at December 31, 2025, 2024 and 2023 is as follows:
TABLE VI - INVESTMENT SECURITIES
Amortized
Fair
Cost
Value
AVAILABLE-FOR-SALE DEBT SECURITIES:
Obligations of the U.S. Treasury
8,047
7,482
8,067
7,118
12,325
11,290
Obligations of U.S. Government agencies
11,423
10,749
10,154
9,025
11,119
9,946
Bank holding company debt securities
36,103
34,076
28,958
25,246
28,952
23,500
Obligations of states and political subdivisions:
105,149
98,359
111,995
101,302
113,464
104,199
50,306
44,152
51,147
42,506
58,720
50,111
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities
148,865
143,921
104,378
94,414
105,549
95,405
Residential collateralized mortgage obligations
65,782
63,707
53,389
49,894
50,212
46,462
Commercial mortgage-backed securities
99,095
92,631
73,470
64,501
76,412
66,682
Private label commercial mortgage-backed securities
3,490
3,489
8,365
8,374
8,215
8,160
Asset-backed securities,
Collateralized loan obligations
8,000
8,009
Total Available-for-Sale Debt Securities
536,260
506,575
449,923
402,380
464,968
415,755
Aggregate Unrealized Loss
(29,685)
(47,543)
(49,213)
Aggregate Unrealized Loss as a % of Amortized Cost
(5.5)
(10.6)
As reflected in the table above, the fair value of available-for-sale securities was lower than the amortized cost basis by $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 7A, Quantitative and Qualitative Disclosures about Market Risk.
As described in Note 7 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 December 31, 2025 before it is able to recover the amortized cost basis. Further, management reviewed the Corporation’s holdings as of December 31, 2025 and concluded there were no credit-related declines in fair value. Additional information related to the types of securities held at December 31, 2025, other than securities issued or guaranteed by U.S. Government entities or agencies, was as follows:
27
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 December 31, 2025.
The following table presents the contractual maturities and the weighted-average yields (calculated based on amortized cost) of investment securities as of December 31, 2025. Yields on tax-exempt securities are presented on a fully taxable-equivalent basis using the Corporation’s marginal tax rate of 21%. For callable securities, yields on securities purchased at a discount are based on yield-to-maturity, while yields on securities purchased at a premium are based on yield to the first call date. Yields on mortgage-backed securities are estimated and include the effects of prepayment assumptions. Actual maturities may differ from contractual maturities because counterparties may have the right to call or prepay obligations with or without call or prepayment penalties.
Within
One-
Five-
After
One
Five
Ten
Yield
Years
0.00
7,045
1.37
1,002
1.60
1.39
5,000
1.34
1,942
4.31
4,481
3.98
2.88
398
10.38
35,705
4.52
4.58
3,209
12,579
2.70
31,432
2.90
57,929
2.42
2.62
1,437
2.11
15,284
1.99
11,577
2.81
22,008
2.41
2.37
Sub-total
4,646
2.57
40,306
2.13
81,658
84,418
2.50
211,028
2.86
3.54
2.63
5.24
3.18
The Corporation’s mortgage-backed securities and collateralized mortgage obligations have stated maturities that may differ from actual maturities due to borrowers’ ability to prepay obligations. Cash flows from such investments are dependent upon the performance of the underlying mortgage loans and are generally influenced by the level of interest rates. As rates increase, cash flows generally decrease as prepayments on the underlying mortgage loans decrease. As rates decrease, cash flows generally increase as prepayments increase due to increased refinance activity and other factors. In the table above, the entire balances and weighted-average rates for mortgage-backed securities and collateralized mortgage obligations are shown in one period.
FINANCIAL CONDITION
This section includes information regarding the Corporation’s lending activities or other significant changes or exposures that are not otherwise addressed in Management’s Discussion and Analysis. Significant changes in the average balances of the Corporation’s earning assets and interest-bearing liabilities are described in the Net Interest Income section of Management’s Discussion and Analysis. Other significant balance sheet items, including securities, the allowance for credit losses for loans 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 December 31, 2025.
28
Table VII shows the composition of the loan portfolio at year-end from 2021 through 2025. Throughout this time period, the portfolio was primarily commercial in nature. At December 31, 2025, commercial loans represented 76% of the portfolio while residential loans totaled 19% of the portfolio.
As presented in Table VII, total loans outstanding at December 31, 2025 were $2,354,365,000 which is an increase of $458,517,000 (24.2%) from total loans at December 31, 2024 including $393,587,000 of gross loans receivable, net of purchase accounting adjustments, recorded effective October 1, 2025 pursuant to the acquisition of Susquehanna. In comparing outstanding balances at December 31, 2025 and 2024, total commercial loans were up $376,154,000 or 26.4%, total outstanding consumer loans increased $46,422,000 or 72.6% and total residential mortgage loans increased $35,941,000 or 8.8%.
Also included in Table VII is additional detail regarding the composition of the non-owner occupied commercial real estate loan portfolio at December 31, 2025. The data in Table VII shows 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 $125,175,000, or 5.3% of gross loans receivable. At December 31, 2025, within this segment there were two loans with a total amortized cost basis of $2,787,000 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 December 31, 2025.
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. Participation loans represent portions of larger commercial transactions for which other institutions are the “lead banks”. Although not the lead bank, the Corporation conducts detailed underwriting and monitoring of participation loan opportunities. Participation loans are included in the “Commercial and industrial”, “Commercial loans secured by real estate”, “Political subdivisions” and “Other commercial” classes in the loan tables presented in this Form 10-K. Total participation loans outstanding amounted to $107,351,000 at December 31, 2025, up from $35,129,000 at December 31, 2024. The increase in 2025 resulted from participation loans acquired from Susquehanna.
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. Residential mortgages originated and sold through the MPF Xtra program consist primarily of conforming, prime loans sold to the Federal National Mortgage Association (Fannie Mae), a quasi-government entity. The Corporation also originates and sells residential mortgage loans to the secondary market through the MPF Original program, administered by the Federal Home Loan Banks of Pittsburgh and Chicago. 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. The Corporation may be required to repurchase a loan and reimburse a portion of fees received or reimburse the investor for a credit loss incurred on a loan, if it is determined that the representations and warranties have not been met. Such repurchases or reimbursements generally result from an underwriting or documentation deficiency. At December 31, 2025, the total outstanding balance of loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $2,598,000 and the corresponding total outstanding balance of repurchased loans at December 31, 2024 was $3,029,000.
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 $272,656,000 and loans sold through the Original program of $177,464,000. At December 31, 2024, outstanding balances of loans sold and serviced through the MPF Xtra and Original programs totaled $329,766,000. The outstanding balance of residential mortgage loans originated and serviced by the Corporation that have been sold to third parties increased $120,354,000 from the total at December 31, 2024, reflecting the impact of servicing obligations assumed on such loans that had been sold by Susquehanna prior to the merger. Based on the fairly limited volume of required repurchases to date, no allowance has been established for representation and warranty exposures as of December 31, 2025.
TABLE VII – Five-Year Summary of Loans by Type
2022
2021
Commercial real estate - non-owner occupied:
Non-owner occupied
569,974
24.2
471,171
24.9
499,104
27.0
454,386
26.1
358,352
22.9
Multi-family (5 or more) residential
160,284
6.8
105,174
64,076
3.5
55,406
3.2
49,054
3.1
1-4 Family - commercial purpose
197,480
8.4
163,220
8.6
174,162
9.4
165,805
9.5
175,027
11.2
Total commercial real estate - non-owner occupied
927,738
39.4
739,565
39.0
737,342
39.9
675,597
38.8
582,433
37.2
Commercial real estate - owner occupied
311,792
13.2
261,071
13.8
237,246
12.8
205,910
11.8
196,083
All other commercial loans:
Commercial and industrial
128,679
96,665
5.1
78,832
4.3
95,368
118,488
7.6
Commercial lines of credit
139,727
5.9
120,078
6.3
117,236
141,444
106,338
Political subdivisions
96,349
4.1
94,009
5.0
79,031
86,663
75,401
4.8
Commercial construction and land
123,887
92,741
4.9
104,123
60,892
59,505
3.8
Other commercial loans
71,895
3.0
19,784
1.0
20,471
1.2
25,710
1.5
26,498
Total all other commercial loans
560,537
23.8
423,277
22.3
399,693
21.7
410,077
23.6
386,230
24.8
Residential mortgage loans:
1-4 Family - residential
411,827
17.5
383,797
20.2
389,262
21.1
363,005
20.9
327,593
1-4 Family residential construction
32,123
1.4
24,212
1.3
24,452
30,577
23,151
Total residential mortgage
443,950
18.9
408,009
21.5
413,714
22.4
393,582
22.7
350,744
Consumer loans:
Consumer lines of credit (including HELOCs)
94,060
4.0
47,196
41,503
36,650
2.1
33,522
All other consumer
16,288
0.7
16,730
0.9
18,641
18,224
15,837
Total consumer
110,348
4.7
63,926
3.4
60,144
54,874
49,359
2,354,365
100.0
1,895,848
1,848,139
1,740,040
1,564,849
Less: allowance for credit losses on loans
(31,048)
(20,035)
(19,208)
(16,615)
(13,537)
Loans, net
2,323,317
1,875,813
1,828,931
1,723,425
1,551,312
Additional details regarding the composition of the non-owner occupied commercial real estate loan portfolio at December 31, 2025 is as follows:
% of Non-owner
% of
Occupied CRE
Total Loans
Office
125,175
22.0
Retail
104,513
18.3
4.4
Industrial
99,476
4.2
Hotels
82,692
14.5
Mixed Use
64,390
2.7
Self Storage Facilities
55,434
9.7
2.4
Other
38,294
6.7
1.6
Total Non-owner Occupied CRE Loans
Total Gross Loans
30
TABLE VIII – LOAN MATURITY DISTRIBUTION
As of December 31, 2025
Fixed-Rate Loans
Variable- or Adjustable-Rate Loans
All Loans
1 Year
1-5
>5-15
>15
or Less
Commercial Real Estate- Nonowner Occupied:
53,384
205,341
13,073
271,806
108,069
184,627
5,472
298,168
5,126
25,971
12,675
759
44,531
33,724
80,505
1,524
115,753
13,428
38,720
10,546
62,722
24,932
104,359
5,467
134,758
71,938
270,032
36,294
795
379,059
166,725
369,491
12,463
548,679
17,104
74,817
26,793
394
119,108
44,597
141,962
6,125
192,684
5,550
62,691
18,369
453
87,063
11,073
29,441
1,102
41,616
9,278
129,416
1,033
130,449
10,652
15,420
47,604
4,403
78,079
7,329
10,918
18,270
11,659
16,403
786
28,848
81,494
13,346
199
95,039
648
3,333
2,237
2,064
8,282
23,999
32,493
7,121
63,613
37,787
97,847
68,996
6,920
211,550
246,005
83,642
19,340
348,987
480
6,639
87,060
54,047
148,226
29,805
72,511
160,906
379
263,601
1,701
445
5,978
2,874
10,998
94
330
20,701
21,125
2,181
7,084
93,038
56,921
159,224
29,899
72,841
181,607
284,726
307
589
3,000
3,897
89,198
889
76
90,163
1,559
8,494
1,821
11,874
4,414
1,866
9,083
4,821
15,771
93,612
94,577
130,876
458,863
229,942
65,031
884,712
580,838
668,825
219,611
1,469,653
31
PROVISION AND ALLOWANCE FOR CREDIT LOSSES
A summary of the provision for credit losses for the years ended December 31, 2025 and 2024 is as follows:
12 Months
Provision for credit losses:
Loans receivable
5,556
2,430
Off-balance sheet exposures
517
(235)
Total provision for credit losses
6,073
2,195
For the year ended December 31, 2025, there was a provision for credit losses of $6,073,000, an increase of $3,878,000 compared to $2,195,000 in 2024. The provision for 2025 included expense related to loans receivable of $5,556,000 and expense related to off-balance sheet exposures of $517,000. The provision for the year ended December 31, 2025 included the impact of increases in the ACL related to changes in qualitative factors. The ACL increased $11,013,000, to 1.32% of loans receivable at December 31, 2025 as compared to 1.06% at December 31, 2024, including the impact of an increase in the ACL attributable to the Susquehanna acquisition and an increase related to changes in qualitative factors.
As shown in Table X, the ACL on loans individually evaluated increased to $2,772,000 at December 31, 2025 from $122,000 at December 31, 2024, including an ACL of $2,632,000 at December 31, 2025 on acquired PCD loans as part of the Susquehanna acquisition.
Table X also shows that, at December 31, 2025 as compared to December 31, 2024, the ACL related to collectively evaluated commercial loans increased by a total of $8,234,000 and the ACL on collectively evaluated residential mortgage increased $273,000, while the ACL on collectively evaluated consumer loans decreased $144,000. The increase for commercial loans includes the impact of growth in the portfolio, mainly from the Susquehanna acquisition and an increase in qualitative adjustments resulting mainly from changes in external indexes and an increase in past due and nonaccrual loans.
In 2025, net charge-offs totaled $1,617,000, or 0.08% of average outstanding loans compared to net charge-offs for 2024 of $1,603,000, or 0.09% of average outstanding loan. Table IX shows annual average net charge-off rates ranging from a high of 0.26% in 2022 to a low of 0.01% in 2023. Table XII shows that over the five-year period ended December 31, 2025, the average net-charge off rate was 0.10%.
Table XI shows that total nonperforming assets as a percentage of total assets was 1.06% at December 31, 2025, up from 0.92% at December 31, 2024 and higher than that at year-end 2021 through 2023. Total nonperforming assets were $33.1 million at December 31, 2025, up from $24.1 million at December 31, 2024, including the impact of nonaccrual PCD loans acquired as part of the merger with a total amortized cost basis of $6.8 million at December 31, 2025.
Over the period 2021-2025, 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.
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 December 31, 2025. 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 IX through XII present historical data related to loans and the allowance for credit losses.
TABLE IX - ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES ON LOANS
Years Ended December 31,
Balance, beginning of year
20,035
19,208
16,615
13,537
11,385
Adoption of ASU 2016-13 (CECL)
2,104
Allowance recorded in business combination- PCD loans
2,637
Allowance recorded in business combination- Non PCD loans
4,437
Charge-offs
(1,726)
(1,716)
(356)
(4,245)
(1,575)
Recoveries
113
92
68
66
Net charge-offs
(1,617)
(1,603)
(264)
(4,177)
(1,509)
Provision for credit losses on loans
753
7,255
Balance, end of period
31,048
Net charge-offs as a % of average loans (annualized)
0.08
0.09
0.01
0.26
TABLE X - COMPONENTS OF THE ALLOWANCE FOR CREDIT LOSSES
UPON ADOPTION OF CECL
January 1,
Loans individually evaluated
2,772
122
743
751
Loans collectively evaluated:
Commercial real estate - nonowner occupied
17,171
11,964
10,379
9,641
3,820
2,722
2,111
1,765
All other commercial loans
5,290
3,361
3,811
3,914
Residential mortgage
1,629
1,356
1,764
2,407
Consumer
366
510
400
241
Total Allowance
18,719
PRIOR TO CECL ADOPTION
As of December 31,
ASC 310 - Impaired loans - individually evaluated
740
ASC 450 - Collectively evaluated:
Commercial
10,845
7,553
4,073
4,338
244
235
Unallocated
1,000
671
33
TABLE XI - PAST DUE AND NONPERFORMING ASSETS
PCD Loans
Non PCD Loans
Collateral dependent loans with a valuation allowance
5,138
263
5,401
258
7,786
3,460
6,540
Collateral dependent loans without a valuation allowance
5,553
21,474
27,027
29,867
3,478
14,871
2,636
Purchased credit impaired loans
1,027
6,558
Total collateral dependent loans
10,691
21,737
32,428
30,125
11,264
19,358
15,734
Total loans past due 30-89 days and still accruing
5,810
12,499
18,309
5,658
9,275
7,079
5,106
Nonperforming assets:
Other nonaccrual loans
6,762
26,074
32,836
23,842
15,177
22,058
12,441
Total nonaccrual loans
23,085
18,999
Total loans past due 90 days or more and still accruing
88
119
3,190
2,219
Total nonperforming loans
26,162
32,924
23,961
18,367
25,322
21,218
Foreclosed assets held for sale (real estate)
189
181
478
684
Total nonperforming assets
26,351
33,113
24,142
18,845
25,597
21,902
Total nonperforming loans as a % of loans
1.40
1.26
0.99
1.36
Total nonperforming assets as a % of assets
1.06
0.92
0.75
1.04
0.94
Nonaccrual loans as a % of loans
0.82
1.33
1.21
Allowance for credit losses as a % of nonaccrual loans
94.55
84.03
79.01
71.97
71.25
Allowance for credit losses as a % of total loans
1.32
0.95
0.87
TABLE XII – FIVE-YEAR HISTORY OF LOAN LOSSES
Average gross loans
1,628,094
1,596,756
1,783,448
Year-end gross loans
1,880,648
Year-end allowance for credit losses on loans
20,089
Year-end nonaccrual loans
22,788
Year-end loans 90 days or more past due and still accruing
1,571
1,617
1,603
264
4,177
1,509
1,834
3,931
Earnings coverage of charge-offs
x
Allowance coverage of charge-offs
73
Net charge-offs as a % of provision for credit losses on loans
29.10
65.97
35.06
57.57
41.22
46.65
Net charge-offs as a % of average gross loans
Income before income taxes on a fully taxable equivalent basis
29,525
32,690
31,402
33,576
38,822
33,203
34
CONTRACTUAL OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS
The Corporation’s significant fixed and determinable contractual obligations as of December 31, 2025 include repayment obligations related to time deposits and borrowed funds. Information related to maturities of time deposits is provided in Note 11 to the consolidated financial statements. Information related to maturities of borrowed funds is provided in Note 12 to the consolidated financial statements. The Corporation’s operating lease commitments with terms of one year or less and other commitments at December 31, 2025 are immaterial. Information concerning operating lease commitments with terms greater than one year is provided in Note 17 to the consolidated financial statements.
The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit, interest rate or liquidity risk in excess of the amount recognized in the consolidated balance sheets. Commitments to extend credit are legally binding agreements to lend to customers and generally have fixed expiration dates or other termination clauses and may require payment of fees. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Commitments and standby letters of credit do not necessarily represent future liquidity requirements, as they may expire without being used.
The following table presents the Corporation's commitments to extend credit and standby letters of credit as of December 31, 2025:
Commercial real estate loans
11,748
255,869
32,250
37,200
1-4 family residential construction
16,085
100,334
All other consumer loans
53,510
Total commitments to extend credit
506,996
Financial letters of credit
6,276
Performance letters of credit
52,638
Total standby letters of credit
58,914
Off-balance sheet arrangements are further described in Note 16 and the allowance for credit losses on off-balance sheet exposures is described in Note 8 to the consolidated financial statements.
As described in more detail in the Financial Condition section of Management’s Discussion and Analysis, the Corporation sells residential mortgage loans for which the Corporation provides customary representations and warranties to investors that specify, among other things, that the loans have been underwritten to the standards established by the investor. The Corporation may be required to repurchase a loan and reimburse a portion of fees received or reimburse the investor for a credit loss incurred on a loan, if it is determined that the representations and warranties have not been met. At December 31, 2025, outstanding balances of such loans sold totaled $450,120,000.
LIQUIDITY
Liquidity is the ability to quickly raise cash at a reasonable cost. An adequate liquidity position permits the Corporation to pay creditors, compensate for unforeseen deposit fluctuations and fund unexpected loan demand.
The Corporation maintains overnight borrowing facilities with several correspondent banks that provide a source of day-to-day liquidity. Also, the Corporation maintains borrowing facilities with the Federal Home Loan Bank of Pittsburgh, secured by various mortgage loans.
The Corporation has a line of credit with the Federal Reserve Bank of Philadelphia’s Discount Window. Management intends to use this line of credit as a contingency funding source. As collateral for the line, the Corporation has pledged available-for-sale securities with a carrying value of $26,947,000 at December 31, 2025.
The Corporation’s outstanding, available, and total credit facilities at December 31, 2025 and 2024 are as follows:
Available
Total Credit
Federal Home Loan Bank of Pittsburgh
170,922
188,692
785,822
749,999
971,946
938,691
Federal Reserve Bank Discount Window
25,484
18,093
Other correspondent banks
75,000
Total credit facilities
886,306
843,092
1,072,430
1,031,784
At December 31, 2025, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of overnight and borrowings of $27,000,000, long-term borrowings with par values totaling $120,935,000 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. 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.
Additionally, the Corporation uses “RepoSweep” arrangements to borrow funds from commercial banking customers on an overnight basis. If required to raise cash in an emergency situation, the Corporation could utilize available-for-sale debt securities as collateral for borrowings or sell securities to meet its obligations. At December 31, 2025, the carrying value of available-for-sale debt securities in excess of amounts required to meet pledging or repurchase agreement obligations was $319,624,000.
Deposits totaled $2,564,716,000 at December 31, 2025, up $470,807,000 from $2,093,909,000 at December 31, 2024. Deposits of $501,488,000 were assumed from Susquehanna, effective October 1, 2025. After the impact of the initial balances of deposits assumed from Susquehanna, total deposits were down at December 31, 2025, mainly due to seasonal declines in balances maintained by municipal customers. Average total deposits of $2,227,784,000 were 8.3% higher for the year ended December 31, 2024, as compared to $2,057,570,000 for the year ended December 31, 2024. Average brokered deposits decreased $50,415,000 to $11,123,000 for the year ended December 31, 2025 from $61,538,000 for the year ended December 31, 2024.
As shown in the table below, at December 31, 2025, estimated uninsured deposits totaled $811.2 million, or 31.4% of total deposits, up from $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 $172.6 million at December 31, 2025. As shown in the table below, total uninsured and uncollateralized deposits amounted to 24.7% of total deposits at December 31, 2025, up from 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 totaled $1.2 billion at December 31, 2025. Available funding from these sources totaled 148.7% of uninsured deposits and 188.8% of total uninsured and uncollateralized deposits at December 31, 2025.
36
Uninsured Deposits Information
Total Deposits - C&N Bank
2,584,952
2,111,547
Estimated Total Uninsured Deposits
811,209
632,804
Portion of Uninsured Deposits that are
Collateralized
172,585
161,958
Uninsured and Uncollateralized Deposits
638,624
470,846
Uninsured and Uncollateralized Deposits as
a % of Total Deposits
24.7
Available Funding from Credit Facilities
Fair Value of Available-for-sale Debt
Securities in Excess of Pledging Obligations
319,624
236,945
Highly Liquid Available Funding
1,205,930
1,080,037
Highly Liquid Available Funding as a % of
Uninsured Deposits
148.7
170.7
188.8
229.4
Based on the ample sources of highly liquid funds as described above, management believes the Corporation is well-positioned to meet its short-term and long-term funding obligations.
STOCKHOLDERS’ EQUITY AND CAPITAL ADEQUACY
Details concerning capital ratios at December 31, 2025 and December 31, 2024 are presented in Note 18 to the consolidated financial statements. Management believes, as of December 31, 2025, 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, the Corporation’s and C&N Bank’s capital ratios at December 31, 2025 and December 31, 2024 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.
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. These restrictions are described in Note 18 to the consolidated financial statements.
To avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, the Corporation and C&N Bank must hold a capital conservation buffer composed of common equity tier 1 capital above its minimum risk-based capital requirements. The buffer is measured relative to risk-weighted assets. At December 31, 2025, the minimum risk-based capital ratios, and the capital ratios including the capital conservation buffer, are as follows:
Minimum common equity tier 1 capital ratio
4.5
Minimum common equity tier 1 capital ratio plus capital conservation buffer
7.0
Minimum tier 1 capital ratio
6.0
Minimum tier 1 capital ratio plus capital conservation buffer
8.5
Minimum total capital ratio
8.0
Minimum total capital ratio plus capital conservation buffer
10.5
A banking organization with a buffer greater than 2.5% over the minimum risk-based capital ratios would not be subject to additional limits on dividend payments or discretionary bonus payments; however, a banking organization with a buffer less than 2.5% would be subject to increasingly stringent limitations as the buffer approaches zero. Also, a banking organization is prohibited from making dividend payments or discretionary bonus payments if its eligible retained income is negative in that quarter and its capital conservation
37
buffer ratio was less than 2.5% as of the beginning of that quarter. Eligible net income is defined as net income for the four calendar quarters preceding the current calendar quarter, net of any distributions and associated tax effects not already reflected in net income. A summary of payout restrictions based on the capital conservation buffer is as follows:
Capital Conservation Buffer
Maximum Payout
(as a % of risk-weighted assets)
(as a % of eligible retained income)
Greater than 2.5%
No payout limitation applies
≤2.5% and >1.875%
60
≤1.875% and >1.25%
≤1.25% and >0.625%
≤0.625%
At December 31, 2025, the Corporation’s Capital Conservation Buffer was 6.18% and C&N Bank’s Capital Conservation Buffer was 5.82%.
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. During the year ended December 31, 2025, 501 shares were repurchased for a total cost of $9,534, at an average price of $19.03 per share. At December 31, 2025, there were 723,465 shares available to be repurchased under the program.
The Corporation’s total stockholders’ equity is affected by fluctuations in the fair values of available-for-sale debt securities. The difference between amortized cost and fair value of available-for-sale debt securities, net of deferred income tax, is included in accumulated other comprehensive loss within stockholders’ equity. Accumulated other comprehensive loss is excluded from the Bank’s and Corporation’s regulatory capital ratios but is included for the determination of tangible common equity, as discussed in the following paragraph. The balance in accumulated other comprehensive loss related to unrealized losses on available-for-sale debt securities, net of deferred income tax, amounted to $23,154,000 at December 31, 2025 and $37,084,000 at December 31, 2024. The volatility in stockholders’ equity related to accumulated other comprehensive loss from available-for-sale debt securities has been caused by fluctuations in interest rates including overall increases in rates as compared to market rates when most of the Corporation’s securities were purchased. The securities section of Management’s Discussion and Analysis and Note 7 to the consolidated financial statements provide additional information concerning information management considered in evaluating debt and equity securities for credit losses at December 31, 2025.
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 December 31, 2025 and 2024 is as follows:
(Dollars In Thousands, Except Per Share Data)
3,132,469
2,610,653
Less: Intangible Asset, Goodwill
(63,311)
(52,505)
Less: Intangible Asset, Core Deposit Intangibles, net
(11,573)
(2,080)
Related Tax Effect on Core Deposit Intangibles, net
2,546
458
Tangible Assets (1)
3,060,131
2,556,526
341,714
275,284
Tangible Common Equity (2)
269,376
221,157
Common Shares Outstanding, End of Period (3)
17,823,444
15,433,494
Tangible Common Book Value per Share = (2)/(3)
15.11
14.33
Tangible Common Equity (2) / Tangible Assets (1)
8.80
8.65
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
MARKET RISK
Market risk is the risk of loss arising from adverse changes in market rates and prices of the Corporation’s financial instruments. In addition to the effects of interest rates, the market prices of the Corporation’s available-for-sale debt securities are affected by fluctuations in the risk premiums (amounts of spread over risk-free rates) demanded by investors. Management attempts to limit the risk that economic conditions would force the Corporation to sell securities for realized losses by maintaining a strong capital position (discussed in the “Stockholders’ Equity and Capital Adequacy” section of Management’s Discussion and Analysis) and ample sources of liquidity (discussed in the “Liquidity” section of Management’s Discussion and Analysis).
The Corporation’s major category of market risk, interest rate risk, is discussed in the following section.
INTEREST RATE RISK
The Corporation uses a simulation model to calculate the potential effects of interest rate fluctuations on net interest income and the economic value of equity (“EVE”). For purposes of these calculations, EVE includes the discounted present values of financial instruments, such as securities, loans, deposits and borrowed funds, and the book values of nonfinancial assets and liabilities, such as premises and equipment and accrued expenses. The model measures and projects the amount of potential changes in net interest income and calculates the discounted present value of anticipated cash flows of financial instruments, assuming an immediate increase or decrease in interest rates. Management ordinarily runs a variety of scenarios within a range of plus or minus 100-400 basis points of current rates.
The projected results based on the model include the impact of estimates, at each level of interest rate change, regarding cash flows from principal repayments on loans and mortgage-backed securities and call activity on other investment securities. Further, the projected results are impacted by assumptions regarding the run-off and the extent of sensitivity to interest rate changes of deposits with no stated maturity (checking, savings and money market accounts). Actual results could vary significantly from these estimates, which could result in significant differences in the calculations of projected changes in net interest income and EVE. Also, the model does not make estimates related to changes in the composition of the deposit portfolio that could occur due to rate competition, and the table does not necessarily reflect changes that management would make to realign the portfolio as a result of changes in interest rates.
The Corporation’s Board of Directors has established policy guidelines for acceptable levels of interest rate risk, based on an immediate increase or decrease in interest rates. The policy limits acceptable fluctuations in net interest income from the baseline (flat rates) one-year scenario and variances in EVE from the baseline values based on current rates.
Table XIII, which follows this discussion, is based on the results of calculations performed using the simulation model as of December 31, 2025 and 2024. The Table shows that as of the respective dates, the changes in net interest income and changes in EVE were within the policy limits in all scenarios.
Based on December 31, 2025 and 2024 data, the amounts of net interest income decrease, as compared to the amounts based on current interest rates, in both the upward and downward rate scenarios. Similarly, at December 31, 2025 and 2024, EVE is modeled to decrease compared to the 0 basis point scenario in all of the rising and falling rate scenarios. The modeling results reflect the impact of management’s assumptions that the Corporation’s deposit rates would rise in the increasing rate scenarios to a greater extent than they would fall in the decreasing rate scenarios. Further, results in the downward rate scenarios reflect limitations on the benefit of falling rates on some deposit types due to a 0% assumed floor.
Under U.S. generally accepted accounting principles, available-for-sale debt securities are carried at fair value as of each balance sheet date. The difference between amortized cost and fair value of available-for-sale debt securities, net of deferred income tax, is included in accumulated other comprehensive income (loss) within stockholders’ equity. Increases in interest rates have caused the fair value of the Corporation’s available-for-sale debt securities to decrease, resulting in an accumulated other comprehensive loss related to securities of $23.2 million at December 31, 2025. In contrast, most of the Corporation’s other financial instruments, including loans receivable (held for investment), deposits and borrowed funds are carried on the balance sheet at historical cost without adjustment for the impact of changes in interest rates.
39
TABLE XIII – THE EFFECT OF HYPOTHETICAL CHANGES IN INTEREST RATES
December 31, 2025 Data
Period Ending December 31, 2026
Basis Point
Interest
Net Interest
NII
Change in Rates
Income
Expense
Income (NII)
% Change
Risk Limit
+400
190,241
101,840
88,401
(22.4)
25.0
+300
183,502
86,341
97,161
(14.7)
20.0
+200
176,675
72,323
104,352
(8.4)
15.0
+100
169,739
59,787
109,952
(3.5)
10.0
162,684
48,733
113,951
0.0
-100
155,164
41,661
113,503
(0.4)
-200
146,491
34,657
111,834
(1.9)
-300
136,961
28,400
108,561
(4.7)
-400
126,625
23,288
103,337
(9.3)
Economic Value of Equity at December 31, 2025
Present
Equity
572,841
(16.8)
40.0
614,522
(10.7)
30.0
649,738
(5.6)
675,284
688,389
665,037
(3.4)
617,865
(10.2)
553,948
(19.5)
474,663
(31.0)
December 31, 2024 Data
Period Ending December 31, 2025
157,710
87,489
70,221
(17.4)
151,610
75,796
75,814
(10.8)
145,458
65,308
80,150
(5.7)
139,233
56,023
83,210
(2.1)
132,939
47,942
84,997
126,757
42,671
84,086
(1.1)
119,814
37,450
82,364
(3.1)
111,964
32,229
79,735
(6.2)
103,390
27,650
75,740
(10.9)
Economic Value of Equity at December 31, 2024
475,112
(16.1)
507,221
(10.4)
534,636
555,058
(2.0)
566,339
552,813
(2.4)
520,196
(8.1)
470,155
(17.0)
403,255
(28.8)
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data)
ASSETS
Cash and due from banks:
Noninterest-bearing
22,289
21,110
Interest-bearing
23,767
105,064
Total cash and due from banks
46,056
126,174
Available-for-sale debt securities, at fair value
61,094
51,214
Accrued interest receivable
11,594
8,735
Bank premises and equipment, net
27,755
21,338
Foreclosed assets held for sale
Deferred tax asset, net
17,615
19,098
Goodwill
63,311
52,505
Core deposit intangibles, net
11,573
2,080
63,390
51,135
TOTAL ASSETS
LIABILITIES
Deposits:
531,442
486,566
2,033,274
1,607,343
Total deposits
2,564,716
2,093,909
Short-term borrowings
28,618
2,488
Long-term borrowings - FHLB advances
120,935
165,451
14,970
14,899
24,949
24,831
Accrued interest and other liabilities
36,567
33,791
TOTAL LIABILITIES
2,790,755
2,335,369
COMMITMENTS AND CONTINGENT LIABILITIES
STOCKHOLDERS' EQUITY
Preferred stock, $1,000 par value; authorized 30,000 shares; $1,000 liquidation
preference per share; no shares issued
Common stock, par value $1.00 per share; authorized 30,000,000 shares;
issued 18,303,120 and outstanding 17,823,444 at December 31, 2025;
issued 16,030,172 and outstanding 15,433,494 at December 31, 2024
18,303
16,030
Paid-in capital
185,696
143,565
Retained earnings
171,214
165,778
Treasury stock, at cost; 479,676 shares at December 31, 2025 and 596,678
shares at December 31, 2024
(10,704)
(13,328)
(22,795)
(36,761)
TOTAL STOCKHOLDERS' EQUITY
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY
The accompanying notes are an integral part of the consolidated financial statements.
Consolidated Statements of Income
(In Thousands, Except Per Share Data)
Interest and fees on loans:
2,420
2,396
2,225
Income from available-for-sale debt securities:
2,292
2,260
2,427
Other interest and dividend income
3,488
4,433
1,443
Total interest and dividend income
139,217
128,078
113,504
Interest on deposits
Interest on short-term borrowings
Interest on long-term borrowings - FHLB advances
Interest on senior notes, net
Interest on subordinated debt, net
Total interest expense
Net interest income
Provision for credit losses
Net interest income after provision for credit losses
85,780
76,920
80,214
Net gains from sale of loans
Realized gains (losses) on available-for-sale debt securities, net
Income before income tax provision
28,643
31,871
30,483
Income tax provision
5,216
5,913
6,335
NET INCOME
24,148
EARNINGS PER COMMON SHARE - BASIC AND DILUTED
The accompanying notes are an integral part of consolidated financial statements.
43
Consolidated Statements of Comprehensive Income
Net income
Unrealized holding gains on available-for-sale debt securities
17,896
1,670
11,512
Reclassification adjustment for (gains) losses realized in income
(38)
Other comprehensive income on available-for-sale debt securities
17,858
14,548
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses
405
(9)
Amortization of prior service cost, net actuarial gain (loss), settlement of plan obligation and curtailment gain included in net periodic benefit cost
(552)
(56)
Other comprehensive income (loss) on pension and postretirement obligations
(147)
Other comprehensive income before income tax
17,901
1,523
14,483
Income tax related to other comprehensive (income) loss
(3,935)
153
(3,042)
Other comprehensive income, net
13,966
1,676
11,441
Comprehensive income
37,393
27,634
35,589
Consolidated Statements of Changes in Stockholders’ Equity
(In Thousands Except Share and Per Share Data)
Accumulated
Common
Treasury
Paid-in
Retained
Comprehensive
Stock
Capital
Earnings
Loss
Balance, January 1, 2023
16,030,172
511,353
143,950
151,743
(49,878)
(12,520)
249,325
(1,652)
Cash dividends declared on common stock, $1.12 per share
(17,211)
Shares issued for dividend reinvestment plan
(81,930)
1,888
1,642
Shares issued from treasury and redeemed related to exercise of stock options
(612)
(30)
Restricted stock granted
(53,788)
(1,314)
1,314
Forfeiture of restricted stock
25,261
556
(556)
Stock-based compensation expense
1,472
Purchase of restricted stock for tax withholding
9,453
(219)
Treasury stock purchases
325,300
(6,565)
Balance, December 31, 2023
735,037
144,388
157,028
(38,437)
(16,628)
262,381
(17,208)
(83,838)
(273)
1,885
1,612
(92,860)
(2,094)
2,094
2,076
50
(50)
1,494
10,229
(212)
26,034
(417)
Balance, December 31, 2024
596,678
(17,991)
Shares issued to acquire Susquehanna Community Financial, Inc.
2,272,948
2,273
42,115
44,388
Treasury stock acquired as part of the Susquehanna Community Financial, Inc. acquisition
1,875
(37)
(80,592)
(190)
1,798
1,608
(56,417)
(1,261)
1,261
7,898
180
(180)
1,287
9,733
(208)
(10)
Balance, December 31, 2025
18,303,120
479,676
CONSOLIDATED STATEMENTS OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES:
Adjustments to reconcile net income to net cash provided by operating activities:
Realized (gains) losses on available-for-sale debt securities, net
Net amortization of securities
1,380
1,645
2,062
(1,927)
(1,830)
(2,703)
Depreciation and amortization of bank premises and equipment
2,183
2,151
Net accretion of acquisition accounting adjustments
(91)
(253)
(288)
Stock-based compensation
Deferred income taxes
2,718
(1,504)
836
Decrease in fair value of servicing rights
164
200
(1,483)
(1,158)
(723)
Origination of loans held for sale
(47,587)
(37,841)
(24,630)
Proceeds from sales of loans held for sale
49,558
36,810
25,106
Increase in accrued interest receivable and other assets
(755)
(3,014)
(1,400)
(Decrease) increase in accrued interest payable and other liabilities
(3,300)
7,992
4,161
120
194
(66)
Net Cash Provided by Operating Activities
32,003
33,035
33,548
CASH FLOWS FROM INVESTING ACTIVITIES:
Net cash and cash equivalents provided by business combination
5,826
Proceeds from maturities of certificates of deposit
1,250
1,500
3,250
Proceeds from sales of available-for-sale debt securities
143,197
60,819
Proceeds from calls and maturities of available-for-sale debt securities
50,778
39,188
52,323
Purchase of available-for-sale debt securities
(134,037)
(25,788)
(23,414)
Redemption of Federal Home Loan Bank of Pittsburgh stock
4,116
7,006
22,634
Purchase of Federal Home Loan Bank of Pittsburgh stock
(2,279)
(6,810)
(23,680)
Purchase of Federal Reserve Bank stock
(1,338)
(47)
(6,252)
Net increase in loans
(65,800)
(48,697)
(107,356)
Purchase of bank-owned life insurance
(30,000)
Proceeds from bank-owned life insurance
14,290
363
Purchase of premises and equipment
(1,905)
(1,906)
(2,265)
Proceeds from sale of foreclosed assets
346
293
267
Net Cash Provided by (Used in) Investing Activities
196
(20,938)
(53,202)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) increase in deposits
(30,370)
79,107
17,234
Net decrease in short-term borrowings
(19,670)
(31,386)
(46,188)
Proceeds from long-term borrowings - FHLB advances
59,386
85,436
Repayments of long-term borrowings - FHLB advances
(44,516)
(32,249)
(9,395)
Purchases of treasury stock
(218)
(629)
(6,784)
Common dividends paid
(16,293)
(15,530)
(15,569)
Net Cash (Used in) Provided by Financing Activities
(111,067)
58,699
24,734
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(78,868)
70,796
5,080
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
123,574
52,778
47,698
CASH AND CASH EQUIVALENTS, END OF PERIOD
44,706
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Decrease in accrued purchase of available-for-sale debt securities
(2,000)
Assets acquired through foreclosure of real estate loans
231
423
Leased assets obtained in exchange for new operating lease liabilities
1,126
187
Interest paid
49,049
48,563
31,936
Income taxes paid
8,795
4,839
6,383
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION – The consolidated financial statements include the accounts of Citizens & Northern Corporation and its subsidiaries, Citizens & Northern Bank (“C&N Bank”), Bucktail Life Insurance Company and Citizens & Northern Investment Corporation (collectively, “Corporation”), as well as C&N Bank’s wholly-owned subsidiaries, C&N Financial Services, LLC and Northern Tier Holding LLC. C&N Bank is the sole member of C&N Financial Services, LLC and Northern Tier Holding LLC. All material intercompany balances and transactions have been eliminated in consolidation.
NATURE OF OPERATIONS – The Corporation’s principal office is located in Wellsboro, Pennsylvania. The Corporation’s operations are conducted in the Northern tier/Northcentral region of Pennsylvania and Southern tier of New York, Southeastern Pennsylvania (offices in Bucks and Chester counties) and Southcentral Pennsylvania (offices in York and Lancaster counties).
The Corporation provides banking and related services to individual and corporate customers. Lending products include commercial, mortgage and consumer loans, as well as specialized instruments such as commercial letters-of-credit. Deposit products include various types of checking accounts, passbook and statement savings, money market accounts, interest checking accounts, Individual Retirement Accounts and certificates of deposit.
The Corporation provides wealth management services through its trust department, including administration of trusts and estates, retirement plans, and other employee benefit plans, and investment management services. The Corporation offers a variety of personal and commercial insurance products through C&N Financial Services, LLC. C&N Financial Services, LLC also offers mutual funds, annuities, educational savings accounts and other investment products through registered agents.
The Corporation conducts its operations through one reportable segment. All of the Corporation’s activities are interrelated, and each activity is dependent and assessed based on how each of the activities of the Corporation supports the others. See Note 22, Segment Reporting, for additional information.
The Corporation is subject to competition from other financial institutions. It is also subject to regulation by certain federal and state agencies and undergoes periodic examination by those regulatory authorities.
USE OF ESTIMATES – The financial information is presented in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In preparing consolidated financial statements, management is required to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent liabilities as of the date of the consolidated financial statements. In addition, these estimates and assumptions affect revenues and expenses in the consolidated financial statements and as such, actual results could differ from those estimates.
Material estimates that are particularly susceptible to change include the allowance for credit losses.
ACQUISITION ACCOUNTING
The Corporation accounts for its mergers and acquisitions using the acquisition method of accounting under the provisions of the FASB ASC Topic 805, Business Combinations ("ASC 805"). Under ASC 805, all of the assets acquired 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 determination of fair values involves significant judgment regarding methods and assumptions, including discount rates, future expected cash flows, market conditions and other future events. The excess of the merger consideration over the fair value of assets acquired and liabilities assumed, if any, is allocated to goodwill. The results of operations of the acquired entity are included in the consolidated statements of income from the acquisition date. In accordance with business combination accounting guidance, the Corporation's review of the fair values of the assets and liabilities acquired is ongoing, and management will continue to evaluate these fair values for up to one year following the merger date of October 1, 2025. Adjustments would be recorded to goodwill during the current reporting period.
INVESTMENT SECURITIES – Investment securities are accounted for as follows:
Available-for-sale debt securities – Available-for-sale debt securities include debt securities not classified as held-to-maturity or trading. Such securities are reported at fair value, with unrealized gains and losses excluded from earnings and reported separately through accumulated other comprehensive loss, net of tax. Premiums on non-amortizing available-for-sale debt securities are amortized using the level yield method to the earliest call date, while discounts on non-amortizing securities are amortized to the maturity date. Premiums and discounts on amortizing securities (mortgage-backed securities) are amortized using the level yield method over the remaining contractual life of the securities, adjusted for actual prepayments. Realized gains and losses on sales of available-for-sale securities are computed on the basis of specific identification of the adjusted cost of each security. Securities within the available-for-sale portfolio may be used as part of the Corporation’s asset and liability management strategy and may be sold in response to changes in interest rate risk, prepayment risk or other factors.
A debt security is placed on nonaccrual status at the time any principal or interest payments become over 90 days delinquent. Interest accrued but not received for a security placed on nonaccrual is reversed against interest income.
Allowance for Credit Losses- Available-for-Sale Debt Securities – For available-for-sale debt securities, management evaluates all investments in an unrealized loss position on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. If the Corporation has the intent to sell the security or it is more likely than not that the Corporation will be required to sell the security, the security is written down to fair value and the entire loss is recorded in earnings. If either of the above criteria is not met, the Corporation evaluates whether the decline in fair value is the result of credit losses or other factors. The Corporation has elected the practical expedient of zero credit loss estimates for securities issued or guaranteed by U.S. Government entities or agencies. In making the credit loss assessment of securities not issued or guaranteed by U.S. Government entities or agencies, the Corporation may consider various factors including the extent to which fair value is less than amortized cost, performance on any underlying collateral, downgrades in the ratings of the security by a rating agency, the failure of the issuer to make scheduled interest or principal payments and adverse conditions specifically related to the security. If the assessment indicates that a credit loss exists, the present value of cash flows expected to be collected are compared to the amortized cost basis of the security and any excess is recorded as an allowance for credit loss, limited by the amount that the fair value is less than the amortized cost basis. Any amount of unrealized loss that has not been recorded through an allowance for credit loss is recognized in other comprehensive income (loss).
Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance for credit losses when management believes an available-for-sale debt security is confirmed to be uncollectible or when either of the criteria regarding intent or requirement to sell is met. At December 31, 2025 and 2024, there was no allowance for credit losses related to the available-for-sale portfolio.
Accrued interest receivable on available-for-sale debt securities totaled $2,514,000 at December 31, 2025 and $1,964,000 at December 31, 2024 and was excluded from the estimate of credit losses.
Marketable equity security – The marketable equity security is carried at fair value with unrealized gains and losses included in other noninterest income in the consolidated statements of income.
Restricted equity securities – Restricted equity securities consist primarily of Federal Home Loan Bank of Pittsburgh and Federal Reserve Bank of Philadelphia stock, and are carried at cost and evaluated for impairment. Holdings of restricted equity securities are included in other assets in the consolidated balance sheets, and dividends received on restricted securities are included in other income in the consolidated statements of income.
DERIVATIVES – The Corporation is a party to derivative financial instruments. These financial instruments consist of interest rate swap agreements and risk participation agreements (RPAs) which contain master netting and collateral provisions designed to protect the party at risk.
48
Interest rate swaps with commercial banking customers were executed to enable the commercial banking customers to effectively exchange their floating interest rate exposures on loans into fixed interest rate exposures. Those interest rate swaps have been simultaneously economically hedged by offsetting interest rate swaps with a third party such that the Corporation has effectively exchanged its fixed interest rate exposures for floating rate exposures. These derivatives are not designated as hedges and are not speculative. Changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings. Interest differentials paid or received under the swap agreements are reflected as adjustments to interest and fees on loans in the consolidated statements of income. The fair value of interest rate derivatives is included in the balance of other assets and other liabilities in the consolidated balance sheets.
The Corporation has entered into RPAs with other institutions as a means to assume a portion of credit risk associated with loan structures which include derivative instruments, in exchange for fee income commensurate with the risk assumed. This type of derivative is referred to as an “RPA In.” The fair value of the RPA In is included in accrued interest and other liabilities in the consolidated balance sheets.
In an effort to reduce the credit risk associated with an interest rate swap agreement with a borrower for whom the Corporation has provided a loan structured with a derivative, the Corporation purchased an RPA from an institution participating in the facility in exchange for a fee commensurate with the risk shared. This type of derivative is referred to as an “RPA Out.” The fair value of the RPA Out is included in other assets in the consolidated balance sheets.
Fees paid and received associated with RPAs, as well as changes in fair value of the related derivatives, are included in other noninterest income in the consolidated statements of income.
LOANS HELD FOR SALE – Mortgage loans held for sale which are included in other assets in the consolidated balance sheets, are reported at the lower of cost or fair value, determined in the aggregate. At December 31, 2025 and 2024, loans held for sale were $1,591,000 and $2,485,000, respectively.
LOANS RECEIVABLE – Loans originated by the Corporation which management has the intent and ability to hold for the foreseeable future or until maturity or payoff are stated at unpaid principal balances, less the allowance for credit losses and net deferred loan fees. Interest income is accrued on the unpaid principal balance. Loan origination and commitment fees, as well as certain direct origination costs, are deferred and amortized as a yield adjustment over the lives of the related loans using the interest method.
Loans are placed on nonaccrual status for all classes of loans when, in the opinion of management, collection of interest is doubtful. Any unpaid interest previously accrued on those loans is reversed from income. Interest payments received on loans for which the risk of loss is greater than remote are applied as a reduction of the loan principal balance. Interest income on other nonaccrual loans is recognized only to the extent of interest payments received. Generally, loans are restored to accrual status when the obligation is brought current, has performed in accordance with the contractual terms for a reasonable period of time (generally six months) and the ultimate collectability of the total contractual principal and interest is no longer in doubt. The past due status of loans receivable is determined based on contractual due dates for loan payments. Also, the amortization of deferred loan fees is discontinued when a loan is placed on nonaccrual status. Loans are placed on nonaccrual or charged off at an earlier date if collection of principal or interest is considered doubtful.
PURCHASED LOANS – Prior to 2023, the Corporation purchased loans in business combinations, some of which had, at the acquisition dates, shown evidence of credit deterioration since origination. The purchased loans that showed evidence of credit impairment were designated as the purchased credit impaired (“PCI”) loans and were recorded at fair value, with no carryover of the allowance for loan losses. On January 1, 2023, the Corporation adopted Accounting Standard Update (ASU) 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASC 326) which replaced the prior accounting for PCI loans and required purchase credit deteriorated (“PCD”) loans receive an initial allowance at the acquisition date that represents an adjustment to the amortized cost basis of the loan, with no impact to earnings. In accordance with ASC 326, management did not reassess whether PCI assets met the criteria of PCD assets as of the date of adoption. On January 1, 2023, the amortized cost basis of PCD assets was adjusted to establish the allowance for credit losses. Essentially all of the PCD loans acquired prior to 2023 were reported as nonaccrual loans at December 31, 2025 and 2024.
49
Purchased loans that do not qualify as PCD assets were accounted for in accordance with Accounting Standards Update 2025-08, Financial Instruments – Credit Losses (Topic 326) (“ASU 2025-08”) (see Note 2, Recent Accounting Pronouncements for more detail). Under ASU 2025-08, acquired loans are deemed purchased seasoned loans and accounted for using the gross-up approach which records an initial allowance for credit losses through an adjustment to the initial amortized cost basis. The Corporation recorded an increase in the allowance for credit losses of $4,437,000 at October 1, 2025 related to the acquisition of non-PCD loans.
ALLOWANCE FOR CREDIT LOSSES ON LOANS –On January 1, 2023, the Corporation adopted ASC 326. This standard replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. The Corporation adopted ASC 326 using the modified retrospective approach for all financial assets measured at amortized cost and off-balance sheet credit exposures.
The allowance for credit losses is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the allowance when management believes the uncollectibility of a loan balance is confirmed. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.
The allowance for credit losses represents management’s estimate of lifetime credit losses inherent in loans as of the consolidated balance sheet date. The allowance for credit losses is estimated by management using relevant available information, from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.
Accrued interest receivable on loans totaled $9,039,000 and $6,680,000 at December 31, 2025 and 2024, respectively, and was excluded from the estimate of credit losses.
The allowance for credit losses (“ACL”) includes two primary components: (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).
Evaluation of Expected Losses on Individual Loans
Loans evaluated on an individual basis are identified based on a detailed assessment of certain larger loan relationships, and their related credit risk ratings, by a management committee referred to as the Watch List Committee. The scope of loans discussed by the Watch List Committee each quarter includes all commercial loan relationships greater than $400,000 and any residential mortgage or consumer loans of $400,000 or more for which there is at least one extension of credit graded Special Mention, Substandard or Doubtful.
Based on the results of the Watch List analysis, certain loans are evaluated individually for credit loss. The allowance is determined on an individual basis using the present value of expected cash flows or, for collateral-dependent loans, the fair value of the collateral as of the reporting date, less estimated selling costs, as applicable. If the fair value of the collateral is less than the amortized cost basis of the loan, the Corporation will create a specific allocation in the allowance for credit losses for the difference between the fair value of the collateral, less costs to sell at the reporting date and the amortized cost basis of the loan. Additionally, all PCD loans are evaluated individually for credit loss.
Collective Evaluation of Expected Losses – Pool Basis
The Corporation measures expected credit losses for loans on a pooled basis when similar risk characteristics exist. The Corporation has identified the following portfolio segments and calculates the allowance for credit losses for each using the weighted-average remaining maturity (“WARM”) method:
Commercial real estate - nonowner occupied, further broken down into the following classes:
All other commercial loans, further broken down into the following classes:
Residential mortgage loans, further broken down into the following classes:
1-4 Family – residential
Consumer loans, further broken down into the following classes:
In determining the pools for collective evaluation, management uses a combination of loan purpose, collateral and payment type (for example, lines of credit vs. amortizing).
A summary of risk characteristics by portfolio segment is as follows:
Commercial real estate - non-owner occupied- Commercial real estate properties primarily include retail buildings/shopping centers, hotels, office buildings and mixed use properties. Increases in vacancy rates, interest rates or other changes in general economic conditions can have an impact on the borrower’s ability to repay the loan. Commercial real estate loans are generally considered to have a higher degree of credit risk as they may be dependent on the ongoing success and operating viability of a fewer number of tenants who are occupying the property and who may have a greater degree of exposure to economic conditions. This segment also includes commercial purpose loans collateralized by multi-family (5 or more) and 1-4 Family residential properties. Multi-family loans and commercial loans collateralized by 1-4 Family residences are expected to be repaid from the cash flows of the underlying properties so the collective amount of rents must be sufficient to cover all operating expenses, property management and maintenance, taxes and debt service. Increases in vacancy rates, interest rates or other changes in general economic conditions can have an impact on the borrower’s ability to repay the loan.
Commercial real estate - owner-occupied - Owner-occupied loans are typically repaid first by the cash flows generated by the borrower’s business operations. The primary risk characteristics are specific to the underlying business and its ability to generate sustainable profitability and positive cash flow. Factors that may influence a borrower's ability to repay the loan include demand for the business’ products or services, the quality and depth of management, the degree of competition, regulatory changes, and general economic conditions.
All other commercial loans- All other commercial loans include commercial and industrial loans, commercial lines of credit, loans to political subdivisions, commercial construction and land loans and other commercial loans. The primary risk characteristics for commercial and industrial loans are specific to the underlying business and its ability to generate sustainable profitability and positive cash flow. Factors that may influence a borrower's ability to repay the loan include demand for the business’ products or services, the quality and depth of management, the degree of competition, regulatory changes, and general economic conditions. The Corporation’s ability to foreclose and realize sufficient value from business assets securing these loans is often uncertain. To mitigate the risk characteristics of commercial and industrial loans, commercial real estate may be included as a secondary source of collateral. The Corporation will often require more frequent reporting requirements from the borrower in order to better monitor its business performance. The Corporation also originates various types of loans made directly to political subdivisions. These loans are repaid
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through general cash flows or through specific revenue streams. The primary risk characteristics associated with political subdivisions are the municipalities’ ability to manage cash flow and balance the fiscal budget, fixed asset and infrastructure requirements. Additional risks include changes in demographics, as well as social and political conditions. The primary risk characteristics for commercial construction and land loans are specific to the uncertainty on whether the construction will be completed according to the specifications and schedules. Factors that may influence the completion of construction may be customer specific, such as the quality and depth of property management, or related to changes in general economic conditions.
Residential mortgage loans - Residential mortgage loans include 1-4 Family residential mortgage loans and 1-4 Family construction mortgage loans. These loans are secured by first or second liens on a primary residence or investment property. The primary risk characteristics associated with residential mortgage loans typically involve major changes to the borrower, including unemployment or other loss of income; unexpected significant expenses, such as medical expenses, catastrophic events, divorce or death. Residential mortgage loans that have adjustable rates could expose the borrower to higher payments in a rising rate environment. Real estate values could decrease and cause the value of the underlying property to fall below the loan amount, creating additional potential loss exposure for the Corporation. Residential construction loans are exposed to uncertainty on whether the construction will be completed according to the specifications and schedules. Factors that may influence the completion of construction may be customer specific or related to changes in general economic conditions.
Consumer loans - Consumer loans include consumer lines of credit (including HELOCs) and all other consumer loans. Risks associated with HELOCs are similar to those of other residential mortgage loans. Other consumer loans generally have higher interest rates and shorter terms than residential loans but tend to have higher credit risk due to the type of collateral securing the loan or in some cases the absence of collateral. The primary risk characteristics associated with HELOCs and other consumer loans typically involve major changes to the borrower, including unemployment or other loss of income, unexpected significant expenses, such as for major medical expenses, catastrophic events, divorce or death.
Estimation Method - WARM (Weighted-Average Remaining Maturity Method)
In applying the WARM method, for each pool identified above, the Corporation determines the annual net charge-offs as a percentage of average total loan balances (net charge-off percentage). For each loan pool, the average annualized net charge-off percentage is multiplied by the estimated weighted-average remaining average life of the loans to calculate the loss rate.
The calculation of the estimated weighted-average remaining life of each loan pool is based on instrument-level data, with contractual principal payments adjusted for the estimated impact of prepayments. Commercial lines of credit and other revolving credit facilities are generally assumed to be repaid after 1 year. The estimated weighted-average remaining life of the entire portfolio was calculated to be 3.87 years at December 31, 2025, 4.04 years at December 31, 2024 and 4.48 years at December 31, 2023.
Qualitative Factors
The allowance for credit losses calculation includes subjective adjustments for qualitative risk factors that are deemed likely to cause estimated credit losses to differ from historical experience. These qualitative adjustments generally increase allowance levels and include adjustments for factors deemed relevant, including: the nature and volume of portfolio changes, including loan portfolio growth; concentrations of credit based on loan type (such as non-owner occupied commercial real estate) or industry; the volume and severity of past due, nonaccrual or adversely classified loans; trends in real estate or other collateral values; lending policies and procedures, including changes in underwriting and collections practices; credit review function; lending, credit and other relevant management experience and risk tolerance; external factors and economic conditions not already captured.
Economic Forecast
ASC 326 requires management to consider forward-looking information that is both reasonable and supportable and relevant to the collectability of cash flows. Reasonable and supportable forecasts may extend over the entire contractual term of a financial asset or a period shorter than the contractual term. In that regard, management has selected a forecast period of 2 years, which is shorter than the estimated weighted-average remaining life of the loan portfolio.
The Corporation calculates an additional expected credit loss based on the high correlation between past loss experience and the U.S national unemployment rate. This additional credit loss is added to the allowance calculation, conceptually for the first 2 years of the
weighted-average remaining life of the portfolio after which time the credit loss for each pool is determined based on the WARM historical loss rate as adjusted for qualitative factors.
ALLOWANCE FOR CREDIT LOSSES ON OFF-BALANCE SHEET EXPOSURES
Financial instruments include off-balance sheet credit instruments, such as commitments to make loans, commercial letters of credit and credit enhancement obligations related to residential mortgage loans sold with recourse. The Corporation’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for off-balance sheet loan commitments is represented by the contractual amount of those instruments. Such financial instruments are recorded when they are funded.
The Corporation records an allowance for credit losses on off-balance sheet credit exposures, unless the commitments to extend credit are unconditionally cancelable, through a charge to provision for unfunded commitments in the Corporation’s consolidated statements of income. The allowance for credit losses on off-balance sheet credit exposures is estimated by loan segment at each consolidated balance sheet date under the current expected credit loss model using the same methodologies as portfolio loans, taking into consideration the likelihood that funding will occur as well as any third-party guarantees. The allowance for off-balance sheet exposures is included in accrued interest and other liabilities in the Corporation’s consolidated balance sheets and the related credit expense is recorded in the provision for credit losses in the consolidated statements of income.
BANK PREMISES AND EQUIPMENT – Bank premises and equipment are stated at cost less accumulated depreciation and amortization. Repair and maintenance expenditures which extend the useful lives of assets are capitalized, and other repair and maintenance expenditures are expensed as incurred. Depreciation and amortization expense is computed using the straight-line method with useful lives ranging from 3 to 40 years for building and improvements and 3 to 10 years for furniture and equipment.
IMPAIRMENT OF LONG-LIVED ASSETS – The Corporation reviews long-lived assets, such as premises and equipment and intangibles, for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. These changes in circumstances may include a significant decrease in the market value of an asset or the manner in which an asset is used. If there is an indication the carrying value of an asset may not be recoverable, future undiscounted cash flows expected to result from use of the asset are estimated. If the sum of the expected cash flows is less than the carrying value of the asset, a loss is recognized for the difference between the carrying value and fair market value of the asset.
FORECLOSED ASSETS HELD FOR SALE – Foreclosed assets held for sale consist of real estate acquired by foreclosure and are initially recorded at fair value, less estimated selling costs, establishing a new cost basis. If fair value declines subsequent to foreclosure, a valuation allowance is recorded through expense. Operating costs after acquisition are expensed.
GOODWILL – Goodwill represents the excess of the cost of acquisitions over the fair value of the net assets acquired. Goodwill is tested at least annually at December 31 for impairment, or more often if events or circumstances indicate there may be impairment. The Corporation has performed a qualitative assessment for impairment at December 31, 2025 and 2024.
CORE DEPOSIT INTANGIBLES – Amortization of core deposit intangibles is calculated using an accelerated method. In determining amortization using the accelerated method for any given period, the amount of expected cash flows for that period that were used in determining the acquisition-date fair value is divided by the total amount of expected cash flows over the life of the asset. That percentage is multiplied by the initial carrying amount of the asset to arrive at amortization expense for that period. If the Corporation’s cash flow patterns differ significantly from the initial estimates, the amortization schedule would be adjusted prospectively.
SERVICING RIGHTS – When mortgage loans are sold with servicing retained by the Corporation, the servicing rights are initially recorded at fair value as an asset with the consolidated statement of income effect recorded in net gains on sales of loans. Under the fair value method, the valuation of servicing rights is adjusted quarterly, with changes in fair value included in loan servicing fees, net, in the consolidated statements of income. Significant inputs to the valuation include expected net servicing income to be received, the expected life of the underlying loans and the discount rate. The servicing rights asset is included in other assets in the consolidated balance sheets.
INCOME TAXES – Income tax provision is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases given the provisions of the enacted
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tax laws. Deferred tax assets are reduced, if necessary, by the amount of such benefits that are not expected to be realized based upon available evidence. Tax benefits from investments in limited partnerships that have qualified for federal low-income tax credits are recognized as a reduction in the provision for income tax over the term of the investment using the effective yield method. The Corporation includes income tax penalties in the provision for income tax. The Corporation has no accrued interest related to unrecognized tax benefits.
STOCK-BASED COMPENSATION –Stock-based compensation is accounted for under the fair value method as required by U.S. GAAP. The fair value of restricted stock is based on the current market price on the date of grant. The expense associated with stock-based compensation is recognized over the vesting period of each individual arrangement.
TREASURY STOCK – Common stock held in treasury is accounted for using the cost method, which treats stock held in treasury as a reduction to total stockholders’ equity. The shares may be purchased in the open market or in privately negotiated transactions from time to time depending upon market conditions and other factors.
OFF-BALANCE SHEET FINANCIAL INSTRUMENTS – In the ordinary course of business, the Corporation has entered into off-balance sheet financial instruments consisting of commitments to extend credit and standby letters of credit. Such financial instruments are recorded in the consolidated financial statements when they are funded.
CASH FLOWS – The Corporation utilizes the net reporting of cash receipts and cash payments for certain deposit and lending activities. Cash equivalents include federal funds sold and all cash and amounts due from depository institutions and interest-bearing deposits in other banks with original maturities of three months or less.
REVENUE RECOGNITION – The Corporation generally fully satisfies its performance obligations on its contracts with customers as services are rendered and the transaction prices are typically fixed; charged either on a periodic basis or based on activity. Because performance obligations are satisfied as services are rendered and the transaction prices are fixed, there is little judgment involved in the determination of the amount and timing of revenue from contracts with customers.
Additional disclosures related to the Corporation’s largest sources of noninterest income within the consolidated statements of income from contracts with customers that are subject to ASC Topic 606 are as follows:
Trust revenue – C&N Bank’s trust department provides a wide range of financial services, including wealth management services for individuals, businesses and retirement funds, administration of 401(k) and other retirement plans, retirement planning, estate planning and estate settlement services. Trust clients are located primarily within the Corporation’s geographic markets. Assets held in a fiduciary capacity by C&N Bank are not the Corporation’s assets and are therefore not included in the consolidated balance sheets. The fair value of trust assets under administration was approximately $1,468,691,000 at December 31, 2025 and $1,347,853,000 at December 31, 2024. Trust revenue is included within noninterest income in the consolidated statements of income.
The majority (approximately 79%, based on annual 2025 results) of trust revenue is earned and collected monthly, with the amount determined based on a percentage of the fair value of the trust assets under administration. Wealth management fees are contractually agreed with each customer, and fee levels vary based mainly on the size of assets under administration. The services provided under such a contract represent a single performance obligation under ASC 606 because it embodies a series of distinct goods or services that are substantially the same and have the same pattern of transfer to the customer. None of the contracts with trust customers provide for incentive-based fees. In addition to wealth management fees, trust revenue includes fees for provision of services, including employee benefit plan administration, tax return preparation and estate planning and settlement. Fees for such services are billed based on contractual arrangements or established fee schedules and are typically billed upon completion of providing such services. The costs of acquiring trust customers are incremental and recognized within noninterest expense in the consolidated statements of income.
Brokerage and insurance revenue- Investment commissions are earned through the sales of non-deposit investment products to customers of the Corporation. The sales are conducted through a third-party broker-dealer. When the commissions are received and recorded into income on the Corporation’s consolidated income statement, there is no contingent portion that may need to be refunded back to the broker-dealer.
Service charges on deposit accounts – Deposits are included as liabilities in the consolidated balance sheets. Service charges on deposit accounts include: overdraft fees, which are charged when customers overdraw their accounts beyond available funds; automated teller machine (ATM) fees charged for withdrawals by deposit customers from other financial institutions’ ATMs; and a variety of other monthly or transactional fees for services provided to retail and business customers, mainly associated with checking accounts.
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All deposit liabilities are considered to have one-day terms and therefore related fees are recognized in income at the time when the services are provided to the customers. Incremental costs of obtaining deposit contracts are not significant and are recognized as expense when incurred within noninterest expense in the consolidated statements of income.
Interchange revenue from debit card transactions – The Corporation issues debit cards to consumer and business customers with checking, savings or money market deposit accounts. Debit card and ATM transactions are processed via electronic systems that involve several parties. The Corporation’s debit card and ATM transaction processing is executed via contractual arrangements with payment processing networks, a processor and a settlement bank. As described above, all deposit liabilities are considered to have one-day terms and therefore interchange revenue from customers’ use of their debit cards to initiate transactions are recognized in income at the time when the services are provided and related fees received in the Corporation’s deposit account with the settlement bank. Incremental costs associated with ATM and interchange processing are recognized as expense when incurred within noninterest expense in the consolidated statements of income.
Bank-Owned Life Insurance- The Corporation has purchased bank-owned life insurance policies (“BOLI”) and is the beneficiary of these policies that insure the lives of certain of its current and former officers. The Corporation recognizes the cash surrender value under the insurance policies as an asset in the consolidated balance sheet. Changes in the cash surrender value are recorded in non-interest income in the consolidated statements of income.
Transfer of Financial Assets- Transfers of financials assets are accounted for as sales, when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when (1) the assets have been legally isolated from the Corporation, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Corporation does not maintain effective control over the transferred assets.
2. RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issues Accounting Standard Updates (ASUs) to communicate changes to the FASB Accounting Standard Codification (ASC). This section provides a summary description of recent ASUs that have significant implications (elected or required) within the consolidated financial statements, or that management expects may have a significant impact on financial statements issued in the foreseeable future.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures which improves the transparency of income tax disclosures by requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. The Corporation adopted the amended guidance in its consolidated financial statements for the year ended December 31, 2025, on a prospective basis and the related disclosures are included in Note 14.
In November 2025, the FASB issued Accounting Standards Update 2025-08, Financial Instruments – Credit Losses (Topic 326). ASU 2025-08 expands the use of the gross up method to certain acquired loans beyond purchased financial assets with credit deterioration. The ASU expands the population of acquired financial assets accounted for using a gross-up approach which records an initial allowance for credit losses through an adjustment to the initial amortized cost basis. Acquired loans (excluding credit cards) are deemed purchased seasoned loans and accounted for using the gross-up approach upon acquisition if criteria established by the new guidance are met. All non-PCD loans (excluding credit cards) that are acquired in a business combination are deemed seasoned. The ASU is effective for interim and annual reporting periods in fiscal years beginning after December 15, 2026 and is applied on a prospective basis. Early adoption is permitted. The Corporation adopted the ASU in accounting for the business combination in the fourth quarter of 2025 and recorded in the acquisition an initial allowance for credit losses of $4,437,000 for non-PCD loans.
Recently Issued but Not Yet Effective Accounting Pronouncements
In December of 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40), which requires disclosure of certain costs and expenses in the notes to the consolidated financial statements. The amendments in this ASU will become effective for fiscal years beginning after December 15, 2026, and will be effective for interim periods with fiscal years beginning after December 15, 2027, with early adoption permitted. The amendments will be applied prospectively with the option for retrospective application. We are currently evaluating the impact of the standard to our consolidated financial statement disclosures.
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3. BUSINESS COMBINATION
On October 1, 2025, the Corporation completed its previously announced merger with 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. 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. Management believes the combination creates additional scale in central Pennsylvania and further diversifies its loan portfolio and funding base, thus increasing resiliency and efficiency.
The consolidated financial statements include the formerly separate Susquehanna operations from October 1, 2025 through December 31, 2025. Since the activities of the former Susquehanna operations have been combined with those of the Corporation, the Corporation’s ability to report on the former operations of Susquehanna is inherently limited. The Corporation estimates that included in the Consolidated Statement of Income for 2025 are total revenues of $6.3 million and net income of $2.4 million attributable to the former Susquehanna operations, excluding merger-related expenses.
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. Cash was issued in lieu of fractional shares resulting from the conversion of Susquehanna’s stock. In total, the Corporation issued 2,272,948 shares of common stock to the former Susquehanna stockholders resulting in total merger consideration valued at $44.6 million and an increase in stockholders’ equity of $44.4 million, net of equity issuance costs. The value of the stock consideration transferred at the close of the transaction was 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 merger was accounted for using the acquisition method of accounting and, accordingly, purchased assets, including identifiable intangible assets, and assumed liabilities were recorded at their respective acquisition date fair values. The fair value measurements of assets acquired and liabilities assumed are subject to refinement for up to one year after the closing date of the acquisition as additional information relative to closing date fair values becomes available. The merger was also accounted for using Accounting Standards Update 2025-08, Financial Instruments – Credit Losses (Topic 326). The Corporation early adopted ASU 2025-08 which applies the gross-up method to acquired non-PCD assets that are purchased seasoned loans using a gross-up approach which records an initial allowance for credit losses through to the initial amortized cost basis.
The following tables summarize the consideration paid for the Susquehanna acquisition and the estimated fair values of the assets acquired and liabilities assumed at the acquisition date. As reflected in the following tables, goodwill represents consideration transferred in the transaction in excess of the fair value of net assets acquired. The goodwill resulting from the transaction represents the value management expects the Corporation to realize from additional scale and diversification of the loan portfolio and funding base, and related increases in resiliency and efficiency. The goodwill recorded in the Susquehanna merger is attributable to the Corporation’s sole business segment, community banking, and is not deductible for income tax reporting purposes.
(Dollars in thousands, except share and per share data)
Common shares of Susquehanna at September 30, 2025
2,841,314
Exchange ratio
0.8
2,273,051
Less: impact of fractional shares
(103)
Corporation's shares issued
Price per share of the Corporation's common stock (average of the high and low trading price on October 1, 2025)
19.64
Value of the Corporation's stock consideration
44,641
Cash paid in lieu of fractional shares
Total merger consideration
44,643
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Susquehanna
Book Value
Fair Value
October 1, 2025
Adjustments
Merger consideration
Recognized amounts of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents
6,080
Available-for-sale debt securities
148,243
147,617
Loans, net of allowance for credit losses
396,851
(10,337)
386,514
7,953
10,163
(3,210)
6,953
10,690
4,458
712
5,170
13,634
788
14,422
Total identifiable assets acquired
587,382
(1,983)
585,399
Deposits
501,037
451
501,488
Short-term borrowing
45,800
4,158
4,274
Total liabilities assumed
550,995
567
551,562
Total identifiable net assets
36,387
(2,550)
33,837
10,806
Total Allocation
8,256
The following is a description of the methodologies used to estimate the fair values of the significant assets acquired and liabilities assumed at the acquisition date:
Acquisition-date fair values for available-for-sale debt securities were determined using Level 1 inputs consistent with the methods described in Note 21. In October 2025, the Corporation sold most of the available-for-sale debt securities acquired from Susquehanna. Proceeds from the sales totaled $143.2 million with no realized gain or loss on the sales.
The Corporation decreased the fair value of premises and equipment by $3.2 million with a corresponding increase to goodwill. The adjustment is based primarily on a comparison of third-party appraisals for buildings, land and land improvements. The fair value adjustments will be depreciated over the estimated useful lives of the applicable assets, primarily 20 years.
The Corporation recognized a core deposit intangible of $10,690,000. The core deposit intangible represents the estimated value of lower-cost funding provided by the nonmaturity deposits assumed in comparison with the Corporation’s estimated cost of borrowing funds in the market. The core deposit intangible was valued based on discounted future cash flows expected to result from ownership including estimates of the timing and amount of cash flows as well as estimated discount rates. The core deposit intangible will be amortized over a weighted-average life of 4.2 years, subject to adjustment if the Corporation’s cash flow patterns vary significantly from the initial estimates.
Deposit liabilities assumed were segregated into two categories: (1) nonmaturity deposits (checking, savings and money market), and (2) time deposits (deposit accounts with a stated maturity). For nonmaturity deposits, the acquisition date outstanding balance of the assumed deposit accounts approximates fair value. In determining the fair value of time deposits, the Corporation discounted the contractual cash flows of the deposit accounts using prevailing market interest rates for time deposit accounts of similar type and duration. An adjustment of $451,000 was recorded to reflect the fair value of the time deposits assumed, which was determined using a discounted cash flow approach that utilized discount rates equal to current market interest rates for instruments with similar terms and maturities. The fair value adjustment for time deposits will be amortized over 1.25 years.
The short-term borrowing consisted of an overnight advance from the Federal Home Loan Bank of Pittsburgh at a market rate of interest with no fair value adjustment. This advance was paid off on October 1, 2025.
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Loans: The fair values of loans were generally based on a discounted cashflow methodology that considered market interest rates, expected credit losses, prepayment assumptions and other market factors for loans with similar characteristics including loan type, collateral, fixed or variable interest rate and credit risk characteristics. Expected credit losses were determined based on credit characteristics and other factors such as default and recovery rates of similar products.
The Corporation evaluated and classified the acquired loans as non-PCD or PCD. The PCD loans include loans which experienced more-than-insignificant credit deterioration since origination. PCD loans included loans on nonaccrual status and loans with a risk rating of special mention or substandard based on the Corporation’s internal risk rating system. For PCD and non-PCD loans, an ACL is recorded on day 1 and added to the fair value of the loan to determine its amortized cost. The following table presents details related to the fair value of acquired PCD loans at the acquisition date:
PCD
Non-PCD
Unpaid principal balance
26,999
373,827
Allowance for credit losses at acquisition
(2,637)
(4,437)
Other discount
(3,952)
Fair value
21,076
365,438
The allowance for credit losses at acquisition represents the amount of principal not expected to be collected.
The following table presents pro forma information as if the merger between the Corporation and Susquehanna had been completed on January 1, 2024. These results combine the historical results of Susquehanna into the Corporation’s Consolidated Statements of Income and, while adjustments were made for the estimated impact of certain fair value adjustments, the pro forma information does not necessarily reflect the results of operations that would have occurred had the merger taken place at the beginning of 2024. For example, merger-related expenses are included in the periods where such expenses were incurred. The pro forma information does not include the impact of expected expense efficiencies nor does it consider any potential impacts of current market conditions or other factors.
Pro forma (Unaudited)
106,670
97,687
Noninterest income
32,920
32,050
Total revenue
139,590
129,737
Net Income
31,866
29,845
The pro forma information for 2025 immediately above was adjusted to exclude the impact of merger-related expenses. Merger-related expenses include expenses related to conversion of Susquehanna’s core customer system data into the Corporation’s core system, severance and similar expenses, legal and other professional fees and various other costs. Total merger-related expenses incurred in 2025 and eliminated from the pro forma information was $9,400,000 (including $1,460,000 incurred by Susquehanna), or $7,652,000 net of tax (including $1,302,000 incurred by Susquehanna).
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4. PER SHARE DATA
Basic earnings per common share are calculated using the two-class method to determine income attributable to common shareholders. Unvested restricted stock awards that contain nonforfeitable rights to dividends are considered participating securities under the two-class method. Distributed dividends and an allocation of undistributed net income to participating securities reduce the amount of income attributable to common shareholders. Income attributable to common shareholders is then divided by weighted-average common shares outstanding for the period to determine basic earnings per common share. The Corporation’s basic and diluted earnings per shares are the same because there are no potential dilutive shares of common stock outstanding.
Years Ended
Less: Dividends and undistributed earnings allocated to participating securities
(182)
(211)
(186)
Net income attributable to common shares
23,245
23,962
Weighted-average common shares outstanding
15,241,859
Earnings per common share - Basic and Diluted
Weighted-average nonvested restricted shares outstanding
124,661
125,254
118,122
Anti-dilutive stock options are excluded from net income per share calculations. There were no anti-dilutive instruments in 2025 or 2024. Weighted-average common shares available from anti-dilutive instruments totaled 8,963 shares in 2023.
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5. COMPREHENSIVE INCOME (LOSS)
Comprehensive income (loss) is the total of (1) net income, and (2) all other changes in equity from non-stockholder sources, which are referred to as other comprehensive income (loss). The components of other comprehensive income (loss), and the related tax effects, are as follows:
Before-Tax
Income Tax
Net-of-Tax
Amount
Effect
(3,936)
13,960
Reclassification adjustment for gains realized in income
Other comprehensive income from available-for-sale debt securities
(3,928)
13,930
Amortization of prior service cost, net actuarial gain and settlement of plan obligation included in net periodic benefit cost
(1)
Other comprehensive income on unfunded retirement obligations
(7)
Total other comprehensive income
124
1,794
Reclassification adjustment for losses realized in income
(87)
318
Amortization of prior service cost and net actuarial loss and curtailment gain included in net periodic benefit cost
(436)
Other comprehensive loss on unfunded retirement obligations
(118)
(2,418)
9,094
(638)
2,398
(3,056)
11,492
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost
(44)
(51)
Items reclassified out of each component of accumulated other comprehensive loss are as follows:
Affected Line Item in the
Description
Reclassification adjustment for (gains) losses realized in income (before-tax)
Amortization of prior service cost, net actuarial gain (loss), settlement of plan obligation and curtailment gain included in net periodic benefit cost (before-tax)
Income tax effect
Changes in the components of accumulated other comprehensive loss, included in stockholders’ equity, are as follows:
Unrealized
Unfunded
(Losses) Gains
Retirement
on Securities
Obligations
Balance, beginning of period
(37,084)
323
Other comprehensive income during year ended December 31, 2025
(23,154)
359
(38,878)
441
Other comprehensive income (loss) during year ended December 31, 2024
(50,370)
492
Other comprehensive income (loss) during year ended December 31, 2023
6. CASH AND DUE FROM BANKS
Cash and due from banks at December 31, 2025 and 2024 include the following:
Certificates of deposit
1,350
2,600
Certificates of deposit are issues by U.S. banks with original maturities greater than three months. Each certificate of deposit is fully FDIC-insured. The Corporation maintains cash and cash equivalents with certain financial institutions in excess of the FDIC insurance limit.
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7. SECURITIES
Amortized cost and fair value of available-for-sale debt securities at December 31, 2025 and 2024 are summarized as follows. No allowance for credit losses was recorded at December 31, 2025 and 2024.
December 31, 2025
Gross
Holding
Gains
Losses
(565)
(677)
(2,035)
(7,107)
(6,158)
679
(5,623)
107
(2,182)
(6,487)
1,150
(30,835)
December 31, 2024
(949)
(1,129)
(3,712)
238
(10,931)
(8,641)
(9,970)
(3,505)
(8,969)
(47,806)
The following table presents gross unrealized losses and fair value of available-for-sale debt securities aggregated by length of time that individual securities have been in a continuous unrealized loss position at December 31, 2025 and 2024 for which an allowance for credit losses has not been recorded.
Less Than 12 Months
12 Months or More
8,570
2,188
23,008
(1,991)
25,196
86,724
1,324
42,027
(5,940)
43,351
20,235
57,647
(5,572)
77,882
23,194
27,643
(183)
62,605
(6,304)
90,248
54,879
(497)
311,257
(30,338)
366,136
6,581
(58)
91,316
(10,873)
97,897
22,777
(375)
69,282
(9,595)
92,059
19,586
(156)
27,157
(3,349)
46,743
2,314
62,187
(8,931)
51,258
(627)
333,837
(47,179)
385,095
As reflected in the table above, gross unrealized holding losses on available-for-sale debt securities totaled $30,835,000 at December 31, 2025 and $47,806,000 at December 31, 2024. At December 31, 2025, the Corporation does not have the intent to sell, nor is it more likely than not it will be required to sell these securities before it is able to recover the amortized cost basis. The unrealized holding losses were consistent with significant increases in market interest rates that occurred subsequent to the purchase of most of the securities.
At December 31, 2025 and December 31, 2024, management performed an assessment for credit losses of the Corporation’s debt securities on an issue-by-issue basis, relying on information obtained from various sources, including publicly available financial data, ratings by external agencies, brokers and other sources. At December 31, 2025 and 2024, all of the Corporation’s holdings of bank holding company debt securities, obligations of states and political subdivisions and private label commercial mortgage-backed securities were investment grade and there have been no payment defaults.
Based on the results of the assessment, there was no ACL required on available-for-sale debt securities in an unrealized loss position at December 31, 2025 and 2024.
63
Gross realized gains and losses from available-for-sale debt securities and the related income tax provision were as follows:
Gross realized gains from sales
89
Gross realized losses from sales
(3,125)
Net realized gains (losses)
Income tax provision related to net realized gains (losses)
The amortized cost and fair value of available-for-sale debt securities by contractual maturity are shown in the following table as of December 31, 2025. Actual maturities may differ from contractual maturities because counterparties may have the right to call or prepay obligations with or without call or prepayment penalties.
Due in one year or less
4,607
Due from one year through five years
40,307
38,290
Due from five years through ten years
81,657
77,459
Due after ten years
74,462
194,818
The Corporation’s mortgage-backed securities have stated maturities that may differ from actual maturities due to borrowers’ ability to prepay obligations. Cash flows from such investments are dependent upon the performance of the underlying mortgage loans and are generally influenced by the level of interest rates. In the table above, mortgage-backed securities and collateralized mortgage obligations are shown in one period.
Investment securities carried at $215,252,000 at December 31, 2025 and $190,949,000 at December 31, 2024 were pledged as collateral for public deposits, trusts and certain other deposits, as provided by law, to secure uninsured deposits totaling $158,387,000 at December 31, 2025 and $144,066,000 at December 31, 2024. See Note 12 for information concerning securities pledged to secure borrowing arrangements.
Equity Securities
C&N Bank is a member of the Federal Home Loan Bank of Pittsburgh (FHLB-Pittsburgh), which is one of 11 regional Federal Home Loan Banks. As a member, C&N Bank is required to purchase and maintain stock in FHLB-Pittsburgh. There is no active market for FHLB-Pittsburgh stock, and it must ordinarily be redeemed by FHLB-Pittsburgh in order to be liquidated. C&N Bank’s investment in FHLB-Pittsburgh stock, included in other assets in the consolidated balance sheets, was $18,724,000 at December 31, 2025 and $15,018,000 at December 31, 2024. The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at December 31, 2025 and 2024. In making this determination, management concluded that recovery of total outstanding par value, which equals the carrying value, is expected. The decision was based on review of financial information that FHLB-Pittsburgh has made publicly available.
In July 2023, C&N Bank became a member of the Federal Reserve System. As a member, C&N Bank is required to purchase and maintain stock in the Federal Reserve Bank of Philadelphia. There is no active market for Federal Reserve Bank stock, and it must ordinarily be redeemed by the Federal Reserve Bank of Philadelphia in order to be liquidated. C&N Bank’s investment in Federal Reserve Bank stock, included in other assets in the consolidated balance sheets, was $7,637,000 at December 31, 2025 and $6,299,000 at December 31, 2024.
The Corporation’s marketable equity security, with a carrying value of $890,000 at December 31, 2025 and $863,000 at December 31, 2024 consisted exclusively of one mutual fund. There was an unrealized loss of $110,000 on the mutual fund at December 31, 2025 and $137,000 at December 31, 2024. Changes in the unrealized gains or losses on this security, which are included in other noninterest income in the consolidated statements of income, were a gain of $27,000 in 2025, a loss of $8,000 in 2024 and a gain of $12,000 in 2023. There were no sales of equity securities in 2025, 2024 and 2023.
8. LOANS AND ALLOWANCE FOR CREDIT LOSSES
Loans receivable at December 31, 2025 and 2024 are summarized as follows:
Summary of Loans by Type
Commercial real estate - non-owner occupied
Residential mortgage loans
Consumer loans
In the table above, outstanding loan balances are presented net of deferred loan origination fees of $4,074,000 at December 31, 2025 and $4,136,000 at December 31, 2024.
The Corporation grants loans to individuals as well as commercial and tax-exempt entities. Commercial, residential and personal loans are made to customers geographically concentrated in Northcentral Pennsylvania, the Southern tier of New York State, Southeastern Pennsylvania and Southcentral Pennsylvania. Although the Corporation has a diversified loan portfolio, a significant portion of its debtors’ ability to honor their contracts is dependent on the local economic conditions within the region.
The following table presents an analysis of past due loans as of December 31, 2025 and 2024:
Past Due
30-89
90+ Days
Nonaccrual
Current
Days
Still Accruing
Loans
2,619
10,766
914,353
2,453
5,955
303,384
6,287
11,102
543,094
6,365
4,324
433,261
585
689
109,040
2,303,132
65
As of December 31, 2024
266
7,370
731,929
1,725
259,284
296
10,006
412,975
4,934
4,310
398,765
162
431
63,276
1,866,229
The Corporation uses an internal risk rating system. Under the risk rating system, the Corporation classifies problem or potential problem loans as “Special Mention,” “Substandard,” or “Doubtful” on the basis of currently existing facts, conditions and values. Loans that do not currently expose the Corporation to sufficient risk to warrant classification as Substandard or Doubtful, but possess weaknesses that deserve management’s close attention, are deemed to be Special Mention. Substandard loans include those characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. Risk ratings are updated any time that conditions or the situation warrants. Loans not classified are included in the “Pass” rows in the table that follows.
Residential mortgage and consumer loans are classified as Pass unless they become 90 days delinquent at which time their classification is changed to Substandard. Such loans are classified as Substandard until six consecutive on-time payments are made at which time their classification is changed back to Pass.
The following table presents the amortized cost of loans by credit quality indicators by year of origination as of December 31, 2025:
Term Loans by Year of Origination
Prior
Revolving
Pass
82,832
84,330
149,720
171,419
90,420
295,369
874,090
Special Mention
77
15,920
2,073
8,045
28,087
Substandard
102
838
10,459
1,980
12,182
25,561
Doubtful
82,909
84,462
152,500
197,798
94,473
315,596
Year-to-date gross charge-offs
807
34,602
36,786
35,411
53,260
51,396
80,809
292,264
357
2,406
1,159
805
5,127
9,854
354
2,167
7,022
9,674
Total commercial real estate - owner occupied
37,143
38,171
54,550
54,368
92,958
123,534
45,148
64,103
46,670
44,056
64,539
134,404
522,454
4,443
732
2,028
9,237
470
12,932
1,471
6,933
3,748
3,292
28,846
125,384
58,602
64,135
48,241
55,432
69,019
139,724
333
46,534
45,988
53,163
83,848
45,494
164,033
439,060
901
3,343
4,890
Total residential mortgage loans
46,010
54,064
84,272
45,694
167,376
2,751
1,780
1,850
506
2,460
97,976
109,385
170
777
963
Total consumer loans
2,752
2,069
1,786
508
2,630
98,753
242
290,253
214,314
304,177
357,047
231,872
607,210
232,380
2,237,253
1,457
909
4,380
17,179
7,321
13,904
47,178
471
13,063
2,099
12,485
11,282
26,465
4,069
69,934
292,181
228,286
310,656
386,711
250,475
647,579
238,477
336
812
505
1,726
67
The following table presents the amortized cost of loans by credit quality indicators by year of origination as of December 31, 2024.
2020
59,708
99,900
161,497
78,884
51,851
243,578
695,418
16,233
1,371
8,188
25,792
9,928
8,311
18,355
59,824
187,658
80,255
260,077
757
25,552
33,533
52,207
49,410
11,444
76,558
248,704
961
5,125
729
2,367
3,185
11,406
38,658
52,936
51,777
80,704
73,812
74,301
44,245
44,367
23,084
30,656
109,121
399,586
533
2,306
2,147
4,988
5,229
1,078
8,765
18,703
74,389
50,029
49,598
23,193
31,734
120,033
427
630
41,450
48,937
80,789
50,108
35,601
146,231
403,116
380
85
82
4,346
4,893
49,317
50,193
35,683
150,577
3,859
3,441
2,848
1,013
599
50,860
63,299
71
544
627
3,449
2,852
750
51,404
69
130
114
329
204,381
260,112
341,586
223,782
122,579
497,702
159,981
1,810,123
18,539
1,373
9,149
31,741
160
5,513
14,139
7,681
191
16,991
9,309
53,984
205,074
265,625
374,264
232,836
122,770
523,842
171,437
557
880
1,716
The following table is a summary of the Corporation’s nonaccrual loans by major categories for the periods indicated.
Nonaccrual Loans with
Nonaccrual Loans
Total Nonaccrual
No Allowance
with an Allowance
9,343
1,423
5,470
485
7,609
3,493
27,435
1,467
23,584
The Corporation recognized $815,000 and $1,042,000 of interest income on nonaccrual loans during the years ended December 31, 2025 and 2024.
The following table presents the accrued interest receivable written off by reversing interest income during the years ended December 31, 2025 and 2024:
198
86
269
The Corporation has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans:
The following table details the amortized cost of collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related allowance for credit losses on these loans:
Allowance
10,876
140
6,325
6,749
14,551
2,366
16,006
350
326
The following tables summarize the activity related to the ACL on loans for the years ended December 31, 2025, 2024 and 2023:
All
real estate -
other
Residential
nonowner
owner
commercial
mortgage
occupied
loans
2,844
Allowance recorded in business combination - PCD loans
215
Allowance recorded in business combination - non-PCD loans
2,681
601
818
303
(807)
(596)
(5)
(318)
104
Provision (credit) for credit losses on loans
3,473
370
1,706
(29)
19,462
4,086
5,505
12,010
2,116
2,918
(757)
(630)
(329)
711
728
(414)
372
Balance, December 31, 2022
6,305
4,142
475
3,763
(88)
(344)
(234)
(1,000)
(12)
(33)
(311)
167
(1,168)
(621)
433
The ACL on loans individually evaluated increased to $2,772,000 at December 31, 2025 from $122,000 at December 31, 2024, including an ACL of $2,632,000 at December 31, 2025 on acquired PCD loans as part of the Susquehanna acquisition.
The ACL on loans collectively evaluated increased to $28,276,000 at December 31, 2025 from $19,913,000 at December 31, 2024. The increase included the impact of growth in the portfolio, mainly from the Susquehanna acquisition, as well as a net increase related to changes in qualitative factors.
70
The ACL on loans individually evaluated decreased to $122,000 at December 31, 2024 from $743,000 at December 31, 2023, primarily from partial charge-offs including two loans with individual ACLs at December 31, 2023. The increase in the ACL at December 31, 2024 as compared to December 31, 2023 included a net increase related to changes in qualitative adjustments and the net impact of an increase in loans receivable, partially offset by a decrease in the WARM method estimate and a decrease related to the economic forecast.
The ACL on loans individually evaluated was $743,000 at December 31, 2023 compared to $751,000 at January 1, 2023, upon the initial adoption of CECL. The decrease in the ACL at December 31, 2023 from January 1, 2023 included a net increase related to changes in qualitative adjustments, an increase related to the economic forecast and the net impact of an increase in loans receivable, partially offset by a decrease in the WARM method estimate.
Modifications Made to Borrowers Experiencing Financial Difficulty
The following table summarizes the amortized cost basis of loans modified during the years ended December 31, 2025 and 2024:
Year Ended December 31, 2025
Term Extension
Amortized Cost
% of Total
Basis
Loan Type
Financial Effect
Commercial Real Estate - Non-owner Occupied
1,717
0.30
Extended the maturity of one loan for 4 months
Year Ended December 31, 2024
2,625
0.35
Extended the maturity of one loan for 6 months and one loan for 5 years
Commercial Real Estate - Owner Occupied
218
Extended the maturity of one loan for 12 months
2,843
The Corporation closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification.
The following tables present the performance of such loans that have been modified in the twelve-month period preceding December 31, 2025 and 2024 (in thousands):
Payment Status (Amortized Cost Basis)
Current or Past Due Less than 30 Days
30-89 Days Past Due
90+ Days Past Due
2,572
217
2,789
In the table immediately above, at December 31, 2024 the loan secured by owner occupied commercial real estate of $218,000 and one of the loans secured by non-owner occupied commercial real estate with an amortized cost basis of $1,814,000 were in nonaccrual status.
For the loan secured by non-owner occupied real estate with an amortized cost basis of $1,814,000 at December 31, 2024, the Corporation had extended the maturity for 12 months in the fourth quarter 2023. In 2024, the borrower continued to experience financial difficulty, and the Corporation provided another six-month extension of the maturity. The Corporation recorded a partial charge-off of $640,000 on this loan in 2024. In 2025, the Corporation provided another four-month extension of the maturity and recorded a partial charge-off of $35,000 on this loan. The amortized cost basis of the loan was $1,717,000 at December 31, 2025. There was no specific allowance on this loan at December 31, 2025 and 2024.
The Corporation had no commitments to lend any additional funds on modified loans during the year ended December 31, 2025 and 2024, the Corporation had no loans that defaulted during the year ended December 31, 2025 and 2024 and had been modified preceding the payment default when the borrower was experiencing financial difficulty at the time of modification.
The carrying amount of foreclosed residential real estate properties held as a result of obtaining physical possession (included in Foreclosed assets held for sale in the consolidated balance sheets) is as follows:
Foreclosed residential real estate
The amortized cost of consumer mortgage loans secured by residential real properties for which formal foreclosure proceedings were in process is as follows:
Residential real estate in process of foreclosure
717
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). Additional information related to commitments to extend credit and standby letter of credits is provided in Note 16. 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 $1,029,000 at December 31, 2025 and $455,000 at December 31, 2024, is included in accrued interest and other liabilities on the consolidated balance sheets.
The following table presents the balance and activity in the allowance for credit losses for off-balance sheet exposures for the years ended December 31, 2025 and 2024.
Balance, Beginning of Period
455
690
Allowance recorded in business combination
Provision (credit) for unfunded commitments
Balance, End of Period
1,029
72
9. BANK PREMISES AND EQUIPMENT
Land
5,635
3,573
Buildings and improvements
38,895
33,623
Furniture and equipment
15,413
14,266
Construction in progress
60,019
51,648
Less: accumulated depreciation
(32,264)
(30,310)
Net
Depreciation and amortization expense is included in the following line items of the consolidated statements of income:
2,327
2,122
1,915
236
10. GOODWILL AND CORE DEPOSIT INTANGIBLES, NET
Information related to the core deposit intangibles is as follows:
Gross amount
17,329
Accumulated amortization
(5,756)
(4,559)
Amortization expense related to core deposit intangibles is included in other noninterest expense in the consolidated statements of income, as follows:
Year Ended December 31,
Amortization expense
1,197
389
408
In 2025, amortization expense included $773,000 related to the Susquehanna acquisition as described in Note 3 and $324,000 related to previous acquisitions. In 2024 and 2023, amortization expense was related to previous acquisitions.
The amount of amortization expense to be recognized in each of the ensuing five years is as follows:
2026
3,258
2027
2,370
2028
1,736
2029
1,277
2030
955
Goodwill represents the excess of the cost of acquisitions over the fair value of the net assets acquired. Changes in the carrying amount of goodwill are summarized in the following table:
Goodwill arising in business combination
In testing goodwill for impairment at December 31, 2025, the Corporation performed a qualitative assessment based on comparison of the Corporation’s market capitalization to its stockholders’ equity, resulting in the determination that it was more likely than not the fair value of its reporting unit, its community banking operation, exceeded its carrying amount. Accordingly, there was no goodwill impairment at December 31, 2025.
There were no goodwill impairment charges recorded in the years ended December 31, 2025, 2024 and 2023.
11. DEPOSITS
At December 31, 2025, the scheduled maturities of time deposits are as follows:
507,861
61,063
24,041
7,123
6,617
606,705
Time deposits of more than $250,000 totaled $215,574,000 at December 31, 2025 and $175,447,000 at December 31, 2024. As of December 31, 2025, the remaining maturities or time to next re-pricing of time deposits more than $250,000 was as follows:
Three months or less
74,346
Over 3 months through 12 months
122,832
Over 1 year through 3 years
17,723
Over 3 years
673
215,574
12. BORROWED FUNDS
SHORT-TERM BORROWINGS
Short-term borrowings (initial maturity within one year) include the following:
FHLB-Pittsburgh borrowings
27,000
Customer repurchase agreements
1,618
Total short-term borrowings
74
The weighted average interest rate on total short-term borrowings outstanding was 3.73% at December 31, 2025 and 0.10% at December 31, 2024. The maximum amount of total short-term borrowings outstanding at any month-end was $28,618,000 in 2025, $61,936,000 in 2024 and $120,290,000 in 2023.
The Corporation had available credit with other correspondent banks totaling $75,000,000 at December 31, 2025 and at December 31, 2024. These lines of credit are primarily unsecured. No amounts were outstanding at December 31, 2025 or 2024.
The Corporation has a line of credit with the Federal Reserve Bank of Philadelphia’s Discount Window. At December 31, 2025, the Corporation had available credit in the amount of $25,484,000 on this line with no outstanding advances. At December 31, 2024, the Corporation had available credit in the amount of $18,093,000 on this line with no outstanding advances. As collateral for this line, the Corporation has pledged available-for-sale securities with a carrying value of $26,947,000 at December 31, 2025 and $18,881,000 at December 31, 2024.
The Corporation engages in repurchase agreements with certain commercial customers. These agreements provide that the Corporation sells specified investment securities to the customers on an overnight basis and repurchases them on the following business day. The weighted average rate paid by the Corporation on customer repurchase agreements was 0.10% at December 31, 2025 and 2024. The carrying value of the underlying securities was $1,630,000 at December 31, 2025 and $2,500,000 at December 31, 2024.
The FHLB-Pittsburgh loan facility is collateralized by qualifying loans secured by real estate with a book value totaling $1,624,412,000 at December 31, 2025 and $1,351,770,000 at December 31, 2024. Also, the FHLB-Pittsburgh loan facility requires the Corporation to invest in established amounts of FHLB-Pittsburgh stock. The carrying values of the Corporation’s holdings of FHLB-Pittsburgh stock (included in other assets) were $18,724,000 at December 31, 2025 and $15,018,000 at December 31, 2024. The Corporation’s total credit facility with FHLB-Pittsburgh was $971,946,000 at December 31, 2025, including an unused (available) amount of $785,822,000. At December 31, 2024, the Corporation’s total credit facility with FHLB-Pittsburgh was $938,691,000, including an unused (available) amount of $749,999,000.
At December 31, 2025, short-term borrowings from FHLB-Pittsburgh was an overnight borrowing of $27,000,000, at an interest rate of 3.93%. At December 31, 2024, there were no outstanding short-term borrowings from FHLB-Pittsburgh.
LONG-TERM BORROWINGS – FHLB ADVANCES
Long-term borrowings from FHLB-Pittsburgh are as follows:
Loans maturing in 2025 with a weighted-average rate of 4.30%
44,516
Loans maturing in 2026 with a weighted-average rate of 4.61%
48,018
Loans maturing in 2027 with a weighted-average rate of 4.24%
34,571
Loans maturing in 2028 with a weighted-average rate of 4.30%
26,027
Loans maturing in 2029 with a weighted-average rate of 4.42%
12,319
Total long-term FHLB-Pittsburgh borrowings
Note: For loans maturing after 2025, weighted-average rates are presented as of December 31, 2025.
SENIOR NOTES
In 2021, the Corporation issued and sold $15.0 million in aggregate principal amount of 2.75% Fixed Rate Senior Unsecured Notes due 2026 (the "Senior Notes"). The Senior Notes mature on June 1, 2026 and bear interest at a fixed annual rate of 2.75%. The Corporation is not entitled to redeem the Senior Notes, in whole or in part, at any time prior to maturity and the Senior Notes are not subject to redemption by the holders. The Senior Notes are unsecured and unsubordinated obligations of the Corporation only and are not obligations of, and are not guaranteed by, any subsidiary of the Corporation.
The Senior Notes were recorded, net of debt issuance costs of $337,000, at an initial carrying amount of $14,663,000. Debt issuance costs are amortized over the term of the Senior Notes as an adjustment of the effective interest rate. Amortization of debt issuance costs associated with the Senior Notes totaling $71,000 in 2025, $68,000 in 2024 and $66,000 in 2023 was included in interest expense in the consolidated statements of income.
75
At December 31, 2025 and December 31, 2024, outstanding Senior Notes are as follows:
Senior Notes with an aggregate par value of $15,000,000; bearing interest at 2.75% with an effective interest rate of 3.23%; maturing in June 2026
Total carrying value
SUBORDINATED DEBT
In 2021, the Corporation issued and sold $25.0 million in aggregate principal amount of 3.25% Fixed-to-Floating Rate Subordinated Notes due 2031 (the "Subordinated Notes"). The Subordinated Notes mature on June 1, 2031 and bear interest at a fixed annual rate of 3.25%, to June 1, 2026. From June 1, 2026 to maturity or early redemption, the interest rate will reset quarterly to an interest rate per annum equal to the three-month Secured Overnight Financing Rate provided by the Federal Reserve Bank of New York plus 259 basis points. The Corporation is entitled to redeem the Subordinated Notes, in whole or in part, at any time on or after June 1, 2026, and to redeem the Subordinated Notes at any time in whole upon certain other events. Any redemption of the Subordinated Notes will be subject to prior regulatory approval to the extent required.
The Subordinated Notes are not subject to redemption at the option of the holders. The Subordinated Notes are unsecured, subordinated obligations of the Corporation only and are not obligations of, and are not guaranteed by, any subsidiary of the Corporation. The Subordinated Notes rank junior in right to payment to the Corporation's current and future senior indebtedness, including the Senior Notes (described above). The Subordinated Notes are intended to qualify as Tier 2 capital for regulatory capital purposes.
The Subordinated Notes were recorded, net of debt issuance costs of $563,000, at an initial carrying amount of $24,437,000. Debt issuance costs are amortized through June 1, 2026 as an adjustment of the effective interest rate. Amortization of debt issuance costs associated with the Subordinated Notes totaling $118,000 in 2025, $114,000 in 2024, and $110,000 in 2023 was included in interest expense in the consolidated statements of income.
At December 31, 2025 and 2024, outstanding subordinated debt agreements are as follows:
Agreements with a par value of $25,000,000; bearing interest at 3.25% with an effective interest rate of 3.74%; maturing in June 2031 and redeemable at par in June 2026
13. EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS
DEFINED BENEFIT PLANS
The Corporation sponsors a defined benefit health care plan that provides postretirement medical benefits and life insurance to employees who meet certain age and length of service requirements. Full-time employees no longer accrue service time toward the Corporation-subsidized portion of the medical benefits. The plan contains a cost-sharing feature which causes participants to pay for all future increases in costs related to benefit coverage. Accordingly, actuarial assumptions related to health care cost trend rates do not significantly affect the liability balance at December 31, 2025 and 2024 and are not expected to significantly affect the Corporation’s future expenses. The Corporation uses a December 31 measurement date for the postretirement plan.
In an acquisition in 2007, the Corporation assumed the Citizens Trust Company Retirement Plan, a defined benefit pension plan. This plan covers certain employees who were employed by Citizens Trust Company on December 31, 2002, when the plan was amended to discontinue admittance of any future participant and to freeze benefit accruals. Information related to the Citizens Trust Company Retirement Plan has been included in the tables that follow. The Corporation uses a December 31 measurement date for this plan. In January 2026, the Corporation’s Board of Directors adopted amendments to terminate the Citizens Trust Company Retirement Plan, effective January 31, 2026. The Corporation expects to fund and settle its obligation under the plan sometime in 2026.
The following table shows the funded status of the defined benefit plans:
Pension
Postretirement
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year
938
896
586
Service cost
Interest cost
Plan participants' contributions
103
118
Actuarial loss (gain)
(54)
Gain from plan amendments
(413)
Benefits paid
(152)
(179)
Settlement of plan obligation
(659)
Benefit obligation at end of year
340
514
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year
977
946
Actual return on plan assets
Employer contribution
Fair value of plan assets at end of year
Funded status at end of year
(514)
(586)
In 2025, there was a distribution of $659,000 or approximately 66% of the pension plan’s total accumulated benefit obligation prior to the distribution. The Corporation recognized a loss of $93,000 (included in net periodic benefit cost) in 2025 as a result of this settlement.
At December 31, 2025 and 2024, the following pension plan and postretirement plan liability amounts were recognized in the consolidated balance sheets:
At December 31, 2025 and 2024, the following items included in accumulated other comprehensive loss had not been recognized as components of expense:
Prior service cost
(48)
Net actuarial loss (gain)
(454)
(486)
(502)
(542)
For the defined benefit pension plan, amortization of the net actuarial loss is expected to be $1,000 in 2026. For the postretirement plan, effective in 2024, amendments to the plan resulted in a decrease of $413,000 in unrecognized prior service cost and a related reduction in net periodic benefit costs from curtailment of $469,000. In 2026, the net actuarial gain to be amortized as a reduction in expense is $67,000 and the estimated reduction in expense related to prior service cost is $8,000.
The accumulated benefit obligation for the defined benefit pension plan was $340,000 at December 31, 2025 and $938,000 at December 31, 2024.
The components of net periodic benefit costs from defined benefit plans are as follows:
Expected return on plan assets
(16)
(18)
Amortization of prior service cost
(31)
Recognized net actuarial loss (gain)
(86)
(77)
Effect of curtailment
(469)
93
Total net periodic benefit cost
(63)
(521)
The weighted-average assumptions used to determine net periodic benefit cost are as follows:
Discount rate
5.35
4.80
5.05
5.00
5.25
Rate of compensation increase
The weighted-average assumptions used to determine benefit obligations as of December 31, 2025 and 2024 are as follows:
4.98
5.29
Estimated future benefit payments, including only estimated employer contributions for the postretirement plan, which reflect expected future service, are as follows:
2031-2035
206
The expected return on pension plan assets is a significant assumption used in the calculation of net periodic benefit cost. This assumption reflects the average long-term rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the projected benefit obligation.
C&N Bank’s Wealth Management Department manages the investment of the pension plan assets. The Plan’s securities include mutual funds invested principally in cash and cash equivalents. The fair values of plan assets are determined based on Level 1 inputs (as described in Note 21). The Plan’s assets do not include any shares of the Corporation’s common stock.
PROFIT SHARING AND DEFERRED COMPENSATION PLANS
The Corporation has a profit sharing plan that incorporates the deferred salary savings provisions of Section 401(k) of the Internal Revenue Code. The Corporation’s matching contributions to the Plan depend upon the tax deferred contributions of employees. The Corporation’s total basic and matching contributions were $1,562,000 in 2025, $1,468,000 in 2024 and $1,419,000 in 2023.
The Corporation has an Employee Stock Ownership Plan (ESOP). Contributions to the ESOP are discretionary, and the ESOP uses funds contributed to purchase Corporation stock for the accounts of ESOP participants. These purchases are made in the market (not
directly from the Corporation), and employees are not permitted to purchase Corporation stock under the ESOP. The ESOP includes a diversification feature, which allows participants, upon reaching age 55 and 10 years of service (as defined), to sell up to 50% of their Corporation shares over a period of 6 years. As of December 31, 2025 and 2024, there were no shares allocated for repurchase by the ESOP.
Dividends paid on shares held by the ESOP are charged to retained earnings. All Corporation shares owned through the ESOP are included in the calculation of weighted-average shares outstanding for purposes of calculating earnings per share – basic and diluted. The ESOP held 614,083 shares of Corporation stock at December 31, 2025, 618,148 shares at December 31, 2024 and 579,567 shares at December 31, 2023, all of which had been allocated to Plan participants. The Corporation’s contributions to the ESOP totaled $725,000 in 2025, $665,000 in 2024 and $1,244,000 in 2023.
The Corporation has a nonqualified supplemental deferred compensation arrangement with some of its key officers. Charges to operating expense for officers’ supplemental deferred compensation were $274,000 in 2025, $223,000 in 2024 and $489,000 in 2023. The balance of the liability, which is included in accrued interest and other liabilities in the consolidated balance sheets, is $4,558,000 at December 31, 2025 and $3,164,000 at December 31, 2024.
In connection with the Susquehanna acquisition, the Corporation assumed deferred compensation arrangements with certain former Susquehanna officers who became employees of the Corporation, effective October 1, 2025. Under the terms of the agreement with one of the officers, payments accelerated as a result of the change in control, resulting in payments totaling $35,000 in 2025 with additional payment commitments totaling $206,000 in 2026, $206,000 in 2027 and $172,000 in 2028. The agreements with the other officers provide for payments to be made in monthly installments over 15-year periods, commencing upon retirement. The Corporation recorded expense of $15,000 related to these arrangements in 2025. The discount rates used to measure the liability associated with these obligations ranged from 3.93% to 4.73%. The balance of the liability, which is included in accrued interest and other liabilities in the consolidated balance sheets, is $1,853,000 at December 31, 2025.
In connection with an acquisition in 2020, the Corporation assumed an obligation to provide a supplemental retirement benefit to a former executive. Under the terms of the agreement, the executive or his heirs will receive monthly payments totaling $1 million over a 10-year period which started in October 2025. The Corporation recorded expense of $14,000 in 2025, $14,000 in 2024 and $13,000 in 2023, which is included in salaries and employee benefits in the consolidated statements of income, representing the effective interest cost on the obligation. The discount rate used to measure the liability is 1.5%. The balance of the liability, which is included in accrued interest and other liabilities in the consolidated balance sheets, is $908,000 at December 31, 2025 and $919,000 at December 31, 2024.
The Corporation also has a nonqualified deferred compensation plan that allows selected officers the option to defer receipt of cash compensation, including base salary and any cash bonuses or other cash incentives. This nonqualified deferred compensation plan does not provide for Corporation contributions.
STOCK-BASED COMPENSATION PLANS
At the Annual Meeting of Shareholders on April 20, 2023, the Citizens & Northern Corporation 2023 Equity Incentive Plan (“2023 Equity Incentive Plan”) was approved. A total of 500,000 shares of common stock may be issued under the 2023 Equity Incentive Plan. Awards may be made to participating employees and independent directors under the 2023 Equity Incentive Plan in the form of qualified options (“Incentive Stock Options,” as defined in the Internal Revenue Code), nonqualified options, restricted stock units or restricted stock, any or all of which can be granted with performance-based vesting conditions. At December 31, 2025, 357,936 shares of common stock were available to be issued under this plan.
Outstanding restricted stock awards granted prior to adoption of the 2023 Equity Incentive Plan, including awards made in 2023, are governed under the 1995 Stock Incentive Plan and the Independent Directors Stock Incentive Plan. The restricted stock awards in 2023 under the 1995 Stock Incentive Plan and the Independent Directors Stock Incentive Plan were the final awards under these plans.
Total stock-based compensation expense is as follows:
Restricted stock
Stock options
79
The following summarizes non-vested restricted stock activity for the year ended December 31, 2025:
Weighted
Grant Date
Outstanding, December 31, 2024
137,824
21.80
Granted
56,417
21.43
Vested
(63,139)
22.69
Forfeited
(7,898)
21.63
Outstanding, December 31, 2025
123,204
21.19
Compensation cost related to restricted stock is recognized based on the market price of the stock at the grant date over the vesting period, adjusted for estimated and actual forfeitures. As of December 31, 2025, there was $1,352,000 total unrecognized compensation cost related to restricted stock, which is expected to be recognized over a weighted average period of 1.3 years.
In 2025 and 2024, the Corporation awarded shares of restricted stock under the Stock Incentive Plan, as follows:
Time-based awards to independent directors
13,456
10,000
Time-based awards to employees
31,113
63,514
Performance-based awards to employees
11,848
19,346
92,860
Time-based restricted stock awards granted to independent (non-employee) directors in 2025 and 2024 vest over one-year terms. Time-based restricted stock awards granted to employees in 2025 and 2024 vest ratably over three-year terms, subject to continued employment and satisfactory job performance. Performance-based restricted stock awards granted in 2025 and 2024 vest ratably over three-year terms, with vesting contingent upon meeting conditions based on the Corporation’s earnings as specified in the agreements.
There were no stock options granted in 2025, 2024, or 2023. There was no stock option activity for 2025 and a summary of stock option activity for 2024 and 2023 is presented below.
Price
Outstanding, beginning of year
646
20.45
10,564
Exercised
(8,288)
(1,630)
Expired
(646)
Outstanding, end of year
Options exercisable at year-end
Weighted-average fair value of options forfeited
5.50
There were no outstanding stock options at December 31, 2025 and 2024. The total intrinsic value of options exercised was $14,000 in 2023.
In January 2026, the Corporation granted 57,618 shares of time-based restricted stock awards and 21,246 shares of performance-based restricted stock awards under the 2023 Equity Incentive Plan. The time-based shares vest ratably over three years while the performance-based restricted stock awards vest ratably over three years, with vesting contingent upon meeting earnings-related conditions specified in the agreements. The restricted stock awards made in January 2026 are not included in the tables above.
80
14. INCOME TAXES
The net deferred tax asset at December 31, 2025 and 2024 represents the following temporary difference components:
Deferred tax assets:
Unrealized holding losses on securities
6,531
Allowance for credit losses on loans
6,765
4,400
Purchase accounting adjustments on loans
1,727
Deferred compensation
2,008
1,465
Operating leases liability
780
692
Deferred loan origination fees
697
Accrued incentive compensation
678
Net operating loss carryforward
Other deferred tax assets
1,708
1,520
Total deferred tax assets
21,327
20,667
Deferred tax liabilities:
Core deposit intangibles
2,522
456
Right-of-use assets from operating leases
290
Mortgage servicing rights
210
Defined benefit plans - ASC 835
90
Other deferred tax liabilities
Total deferred tax liabilities
3,712
1,569
The provision for income taxes for the year ended December 31, 2025 includes the following:
Current expense:
Federal
2,171
State
327
Deferred expense:
2,705
Total provision
The Company operates exclusively in the United States and had no foreign income, foreign income tax expense, or foreign income taxes paid for the year ended December 31, 2025.
The provision for income taxes for the years ended December 31, 2024 and 2023 includes the following
Currently payable
7,417
5,499
Deferred
81
A reconciliation of income tax at the statutory rate to the Corporation’s effective rate is as follows:
Federal at statutory rate
6,015
21.0
6,693
6,401
State income tax, net of federal benefit
(a)
297
1.1
Nontaxable or nondeductible items:
Tax-exempt interest income
(978)
(964)
(3.0)
(3.2)
Increase in cash surrender value and other income from life insurance, net
(398)
(1.4)
(369)
(1.2)
ESOP dividends
(150)
(0.5)
(144)
(143)
Surrender of bank-owned life insurance
950
Nondeductible interest expense
322
368
283
Other, net
0.5
0.3
Effective income tax provision
18.2
18.6
20.8
(a) State taxes in New Jersey and New York State made up the majority (greater than 50 percent) of the tax effect in this category.
Income taxes paid by jurisdiction were as follows:
8,238
State:
New Jersey
New York
Total cash taxes paid
The Corporation has a net operating loss (“NOL”) available to be carried forward against future federal taxable income. Availability of the NOL does not expire; however, the amount is subject to an annual limitation under Code Section 382 and further limited annually to no more than 80% of taxable income without regard to the NOL. At December 31, 2025, the unused amount of the NOL is $1.6 million.
The Corporation has no unrecognized tax benefits, nor pending examination issues related to tax positions taken in preparation of its income tax returns. The Corporation is generally no longer subject to examination for returns prior to 2022.
15. RELATED PARTY TRANSACTIONS
Loans to executive officers, directors of the Corporation and its subsidiaries and any associates of the foregoing persons are as follows:
Beginning
New
Ending
Repayments
Changes
11 directors, 11 executive officers 2025
13,448
571
(2,798)
237
11,458
11 directors, 11 executive officers 2024
13,975
1,579
(2,212)
11 directors, 11 executive officers 2023
14,504
549
(823)
(255)
In the table above, other changes represent net changes in the balance of existing lines of credit and transfers in and out of the related party category.
Deposits from related parties held by the Corporation amounted to $13,706,000 at December 31, 2025 and $12,259,000 at December 31, 2024.
16. OFF-BALANCE SHEET RISK
The Corporation is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit, interest rate or liquidity risk in excess of the amount recognized in the consolidated balance sheets. The contract amounts of these instruments express the extent of involvement the Corporation has in particular classes of financial instruments.
The Corporation’s exposure to credit loss from nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual amount of these instruments. The Corporation uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.
Financial instruments whose contract amounts represent credit risk at December 31, 2025 and 2024 are as follows:
Commitments to extend credit
380,003
Standby letters of credit
64,586
Commitments to extend credit are legally binding agreements to lend to customers. Commitments generally have fixed expiration dates or other termination clauses and may require payment of fees. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future liquidity requirements. The Corporation evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Corporation, for extensions of credit is based on management’s credit assessment of the counterparty.
Standby letters of credit are conditional commitments issued by the Corporation guaranteeing performance by a customer to a third party. Those guarantees are issued primarily to support public and private borrowing arrangements, including commercial paper, bond financing and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Some of the standby letters of credit are collateralized by real estate or other assets, and others are unsecured. The extent to which proceeds from liquidation of collateral would be expected to cover the maximum potential amount of future payments related to standby letters of credit is not estimable.
Standby letters of credit as of December 31, 2025 expire as follows:
Year of Expiration
58,545
341
Information related to the allowance for credit losses on off-balance sheet exposures is provided in Note 8.
17. OPERATING LEASE COMMITMENTS AND CONTINGENCIES
Operating Lease Commitments
Operating leases in which the Corporation is the lessee are recorded as operating lease Right of Use ("ROU") assets and operating lease liabilities, included in other assets and other liabilities, respectively, on the consolidated balance sheets. The Corporation does not currently have any finance leases. Operating lease ROU assets represent the right to use an underlying asset during the lease term and operating lease liabilities represent the obligation to make lease payments arising from the lease.
The Corporation leases certain branch locations, office space and equipment. All leases are classified as operating leases. Operating lease expense, which is comprised of amortization of the ROU assets and the implicit interest accreted on the operating lease liability, is recognized on a straight line basis over the remaining lease term of the operating lease. Leases with an initial term of 12 months or
83
less are not recorded on the consolidated balance sheet and the related lease expense is recognized on a straight-line basis over the lease term.
Certain leases include options to renew, with renewal terms that can extend the lease term from one to eight years that are reasonably certain of being exercised. The discount rate used in determining the lease liability for each individual lease was the FHLB fixed advance rate which corresponded with the remaining lease term as of January 1, 2019 for leases that existed at adoption of ASU 2017-02 and as of the lease commencement date for leases subsequently entered into after January 1, 2019. At December 31, 2025, discount rates ranged from 1.27% to 4.88% with a weighted-average discount rate of 2.71%. At December 31, 2025, the weighted-average remaining lease term was 4.9 years. At December 31, 2024, the weighted-average discount rate was 1.96% and the weighted-average remaining lease term was 4.1 years.
At December 31, 2025, right-of-use assets of $3,579,000 were included in other assets, and the related lease liabilities totaling the same amount were included in accrued interest and other liabilities, in the consolidated balance sheets. At December 31, 2024, right of use assets and the related liabilities totaled $3,151,000.
In 2025, 2024 and 2023, operating lease expenses are included in the following line item of the consolidated statements of income:
792
666
644
A maturity analysis of the Corporation’s lease liabilities at December 31, 2025 is as follows:
Lease Payments Due
719
638
509
Thereafter
1,018
Total lease payments
3,955
Discount on cash flows
(376)
Total lease liabilities
3,579
Litigation Matters
84
Other Matters
In the normal course of business, the Corporation is subject to pending and threatened litigation in which claims for monetary damages are asserted. In management’s opinion, the Corporation’s financial position and results of operations would not be materially affected by the outcome of these legal proceedings.
18. REGULATORY MATTERS
The Corporation and C&N Bank are subject to regulatory capital requirements administered by federal banking agencies. At December 31, 2024, management believed the Corporation met the conditions of the Federal Reserve’s small bank holding company policy statement and was therefore excluded from consolidated capital requirements; however, C&N Bank was subject to regulatory capital requirements administered by the federal banking agencies. At December 31, 2025, the Corporation exceeded $3.0 billion in assets and, as a result, no longer qualifies as a small bank holding company under the Federal Reserve’s policy statement.
Details concerning capital ratios at December 31, 2025 and 2024 are presented below. Management believes, as of December 31, 2025, that the Corporation and C&N Bank met all regulatory capital adequacy requirements and maintained a capital conservation buffer (described in more detail below) that allowed the Corporation and Bank to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. The net unrealized loss on available-for-sale debt securities is not included in computing regulatory capital. Further, as reflected in the table below, the Corporation’s and C&N Bank’s capital ratios at December 31, 2025 and 2024 exceeded the Corporation’s Board policy threshold levels.
Minimum To Be Well
Minimum
Minimum To Maintain
Capitalized Under
Minimum To Meet
Capital Conservation
Prompt Corrective
the Corporation's
Actual
Requirement
Buffer at Reporting Date
Action Provisions
Policy Thresholds
Ratio
December 31, 2025:
Total capital to risk-weighted assets:
Consolidated
346,139
14.45
191,582
³8
251,452
³10.5
239,478
³10
263,425
³11
C&N Bank
330,427
13.82
191,318
251,105
239,148
263,062
Tier 1 capital to risk-weighted assets:
291,746
12.18
143,687
³6
203,556
³8.5
215,530
³9
300,983
12.59
143,489
203,275
215,233
Common equity tier 1 capital to risk-weighted assets:
107,765
³4.5
167,634
³7.0
155,661
³6.5
179,608
³7.5
107,616
167,403
155,446
179,361
Tier 1 capital to average assets:
9.32
125,149
³4
156,437
³5
250,299
9.66
124,597
155,747
249,195
December 31, 2024:
302,783
15.95
208,779
287,721
15.19
151,567
198,832
189,459
208,405
257,462
13.56
170,819
267,231
14.10
113,675
161,040
170,513
142,349
85,256
132,621
123,148
142,094
9.80
210,160
10.23
104,514
130,642
209,027
Federal regulatory authorities impose a capital rule providing that, to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers, a banking organization subject to the rule must hold a capital conservation buffer composed of common equity tier 1 capital above its minimum risk-based capital requirements. The buffer is measured relative to risk-weighted assets. At December 31, 2025, the minimum risk-based capital ratios, and the capital ratios including the capital conservation buffer, are as follows:
A banking organization with a buffer greater than 2.5% over the minimum risk-based capital ratios would not be subject to additional limits on dividend payments or discretionary bonus payments; however, a banking organization with a buffer less than 2.5% would be subject to increasingly stringent limitations as the buffer approaches zero. Also, a banking organization is prohibited from making dividend payments or discretionary bonus payments if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5% as of the beginning of that quarter. Eligible net income is defined as net income for the four calendar
quarters preceding the current calendar quarter, net of any distributions and associated tax effects not already reflected in net income. A summary of payout restrictions based on the capital conservation buffer is as follows:
Banking regulators limit the amount of dividends that may be paid by C&N Bank to the Corporation. Retained earnings against which dividends may be paid without prior approval of the banking regulators amounted to approximately $117,572,000 at December 31, 2025, subject to the minimum capital ratio requirements noted above.
Restrictions imposed by federal law prohibit the Corporation from borrowing from C&N Bank unless the loans are secured in specific amounts. Such secured loans to the Corporation are generally limited to 10% of C&N Bank’s tangible stockholder’s equity (excluding accumulated other comprehensive loss) or $29,496,000 at December 31, 2025.
19. PARENT COMPANY ONLY
The following is condensed financial information for Citizens & Northern Corporation:
CONDENSED BALANCE SHEET
Dec. 31,
18,079
16,013
Investment in subsidiaries:
Citizens & Northern Bank
351,132
285,465
Citizens & Northern Investment Corporation
8,305
9,768
Bucktail Life Insurance Company
3,941
3,804
473
381,930
315,186
LIABILITIES AND STOCKHOLDERS' EQUITY
172
Stockholders' equity
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
87
CONDENSED INCOME STATEMENT AND COMPREHENSIVE INCOME
Dividends from Citizens & Northern Bank
18,723
17,341
19,405
Dividends from Citizens & Northern Investment Corporation
1,900
1,800
Expenses
(1,758)
(1,644)
(2,003)
Income before equity in undistributed income of subsidiaries
18,865
17,197
19,202
Equity in undistributed income of subsidiaries
4,562
8,761
4,946
COMPREHENSIVE INCOME
CONDENSED STATEMENT OF CASH FLOWS
Amortization of debt issuance costs
182
(4,562)
(8,761)
(4,946)
(Increase) decrease in other assets
(260)
(167)
Increase (decrease) in other liabilities
(93)
18,829
17,350
19,308
CASH FLOWS FROM INVESTING ACTIVITIES,
Net cash used in business combination
(252)
Purchase of treasury stock
Dividends paid
Net Cash Used in Financing Activities
(16,511)
(16,159)
(22,353)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
2,066
(3,045)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
14,822
17,867
CASH AND CASH EQUIVALENTS, END OF YEAR
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION,
1,312
1,234
20. DERIVATIVE FINANCIAL INSTRUMENTS
The Corporation is a party to derivative financial instruments. These financial instruments consist of interest rate swap agreements and risk participation agreements (RPAs) which contain master netting and collateral provisions designed to protect the party at risk.
Interest rate swaps with commercial loan banking customers were executed to facilitate their respective risk management strategies. Under the terms of these arrangements, the commercial banking customers effectively exchanged their floating interest rate exposures on loans into fixed interest rate exposures. Those interest rate swaps have been simultaneously economically hedged by offsetting interest rate swaps with a third party, such that the Corporation has effectively exchanged its fixed interest rate exposures for floating rate exposures. These derivatives are not designated as hedges and are not speculative. Rather, these derivatives result from a service provided to certain customers. As the interest rate swaps associated with this program do not meet the hedge accounting requirements, changes in the fair value of both the customer swaps and the offsetting swaps are recognized directly in earnings.
The aggregate notional amount of interest rate swaps was $136,776,000 at December 31, 2025 and $141,940,000 at December 31, 2024. The Corporation originated one interest rate swap in the year ended December 31, 2025. The notional amount of the swap was $1,786,000 at December 31, 2025. Fee income on the interest swap originated in the year ended December 31, 2025 of $24,000 was included in other noninterest income in the consolidated statements of income. There were no interest rate swaps originated in 2024 and 2023. There were no gross amounts of interest rate swap-related assets and liabilities not offset in the consolidated balance sheets at December 31, 2025 and 2024.
The Corporation has entered into RPAs with other institutions as a means to assume a portion of the credit risk associated with loan structures which include derivative instruments, in exchange for fee income commensurate with the risk assumed. This type of derivative is referred to as an “RPA In.” In addition, in an effort to reduce the credit risk associated with an interest rate swap agreement with a borrower for whom the Corporation has provided a loan structured with a derivative, the Corporation purchased an RPA from an institution participating in the facility in exchange for a fee commensurate with the risk shared. This type of derivative is referred to as an “RPA Out.” The net impact on the consolidated statements of income from RPAs was an increase in other noninterest income of $11,000 in 2025, an increase in other noninterest income of $2,000 in 2024 and an increase in other noninterest income of $18,000 in 2023.
The table below presents the fair value of the Corporation’s derivative financial instruments as well as their classification on the consolidated balance sheets at December 31, 2025 and 2024:
At December 31, 2025
At December 31, 2024
Asset Derivatives
Liability Derivatives
Notional
Value (1)
Value (2)
Interest rate swap agreements
68,388
1,318
70,970
2,385
RPA Out
6,823
6,957
RPA In
13,660
9,916
The Corporation’s agreements with its derivative counterparties provide that if the Corporation defaults on any of its indebtedness, including default where repayment of the indebtedness has not been accelerated by the lender, then the Corporation could also be declared in default on its derivative obligations. Further, if the Corporation were to fail to maintain its status as a well or adequately capitalized institution, then the counterparties could terminate the derivative positions and the Corporation would be required to settle its obligations under the agreements. There was interest-bearing cash pledged as collateral against the Corporation’s liability related to the interest rate swaps of $1,400,000 at December 31, 2025 and $1,090,000 at December 31, 2024.
21. FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS
The Corporation measures certain assets at fair value. Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. FASB ASC Topic 820, “Fair Value Measurements and Disclosures” establishes a framework for measuring fair value that includes a hierarchy used to classify the inputs used in measuring fair value. The hierarchy prioritizes the inputs used in determining valuations into three levels. The level in the fair value hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement. The levels of the fair value hierarchy are as follows:
Level 1 – Fair value is based on unadjusted quoted prices in active markets that are accessible to the Corporation for identical assets. These generally provide the most reliable evidence and are used to measure fair value whenever available.
Level 2 – Fair value is based on significant inputs, other than Level 1 inputs, that are observable either directly or indirectly for substantially the full term of the asset through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets, quoted market prices in markets that are not active for identical or similar assets and other observable inputs.
Level 3 – Fair value is based on significant unobservable inputs. Examples of valuation methodologies that would result in Level 3 classification include option pricing models, discounted cash flows and other similar techniques.
The Corporation monitors and evaluates available data relating to fair value measurements on an ongoing basis and recognizes transfers among the levels of the fair value hierarchy as of the date of an event or change in circumstances that affects the valuation method chosen. Examples of such changes may include the market for a particular asset becoming active or inactive, changes in the availability of quoted prices, or changes in the availability of other market data.
At December 31, 2025 and 2024, assets measured at fair value and the valuation methods used are as follows:
Quoted Prices
Other Observable
Unobservable
in Active Markets
Inputs
(Level 1)
(Level 2)
(Level 3)
Recurring fair value measurements, assets:
499,093
Marketable equity security
890
Servicing rights
3,893
Interest rate swap agreements, assets
Total recurring fair value measurements, assets
8,372
500,413
512,678
Recurring fair value measurements, liabilities:
Interest rate swap agreements, liabilities
Total recurring fair value measurements, liabilities
1,323
Nonrecurring fair value measurements, assets:
Loans individually evaluated for credit loss, net
2,629
Total nonrecurring fair value measurements, assets
2,818
395,262
863
2,782
7,981
397,649
408,412
Recurring fair value measurements, liabilities,
2,387
Level 2 valuation techniques used to measure fair value for the financial instruments in the preceding tables are as follows:
Available-for-sale debt securities - Level 2 debt securities are valued by a third-party pricing service. The pricing service uses pricing models that vary based on asset class and incorporate available market information, including quoted prices of investment securities with similar characteristics. Because many fixed income securities do not trade on a daily basis, pricing models use available information, as applicable, through processes such as benchmark yield curves, benchmarking of like securities, sector groupings and matrix pricing.
Derivative instruments - Interest rate SWAP agreements, RPA Out and RPA In- The fair value of derivatives are based on valuation models using observable market data as of the measurement date, valued by a third-party pricing service using quantitative models that utilize multiple market inputs. The inputs include prices and indices to generate continuous yield or pricing curves, estimates of current and potential future credit exposure and calculated discounted cash flow factors to value the position. The majority of market inputs are actively quoted and can be validated through external sources, including brokers, market transactions and third-party pricing services.
Management’s evaluation and selection of valuation techniques and the unobservable inputs used in determining the fair values of assets valued using Level 3 methodologies include sensitive assumptions. Other market participants might use substantially different assumptions, which could result in calculations of fair values that would be substantially different than the amount calculated by management.
91
The following table shows quantitative information regarding significant techniques and inputs used at December 31, 2025 and 2024 for servicing rights assets measured using unobservable inputs (Level 3 methodologies) on a recurring basis:
Fair Value at
Valuation
Method or Value As of
Asset
Technique
Input(s)
Discounted cash flow
13.00
Rate used through modeling period
Loan prepayment speeds
124.00
Weighted-average PSA
116.00
The fair value of servicing rights is affected by expected future interest rates. Increases (decreases) in future expected interest rates tend to increase (decrease) the fair value of the Corporation’s servicing rights because of changes in expected prepayment behavior by the borrowers on the underlying loans.
Following is a reconciliation of activity for Level 3 assets (servicing rights) measured at fair value on a recurring basis:
Servicing rights balance, beginning of period
2,659
2,653
Acquired servicing rights
Originations of servicing rights
406
287
Unrealized loss included in earnings
(258)
(164)
(200)
Servicing rights balance, end of period
Loans are individually evaluated for credit loss when they do not share similar risk characteristics as similar loans within its loan pool. Foreclosed assets held for sale consist of real estate acquired by foreclosure. For individually evaluated loans secured by real estate and foreclosed assets held for sale, estimated fair values are determined primarily using values from third-party appraisals. Appraised values are discounted to arrive at the estimated selling price of the collateral, which is considered to be the estimated fair value. The discounts also include estimated costs to sell the property. The estimated fair value determined for individually evaluated loans secured by real estate and foreclosed assets held for sale used unobservable inputs (Level 3 methodologies).
At December 31, 2025 and 2024, quantitative information regarding significant techniques and inputs used for nonrecurring fair value measurements using unobservable inputs (Level 3 methodologies) are as follows:
Range (Weighted
Average)
Balance at
Allowance at
Discount at
Loans individually evaluated for credit loss:
1,283
Sales comparison
Discount to appraised value
18%-77% (66)
219
34% (34)
All other commercial Loans
1,127
0%-100% (82)
Total loans individually evaluated for credit loss
Foreclosed assets held for sale - real estate:
Residential (1-4 family)
62%-84% (72)
Commercial real estate
156
18%-77% (34)
Total foreclosed assets held for sale
Sales comparison & SBA guaranty
95% (95)
62% (62)
Certain of the Corporation’s financial instruments are not measured at fair value in the consolidated financial statements. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. Certain financial instruments and all nonfinancial instruments are excluded from disclosure requirements. Therefore, the aggregate fair value amounts presented may not represent the underlying fair value of the Corporation.
The estimated fair values, and related carrying amounts, of the Corporation’s financial instruments that are not recorded at fair value are as follows:
Hierarchy
Carrying
Level
Financial assets:
Level 1
Level 2
1,331
2,513
Restricted equity securities (included in other assets)
26,623
21,567
Level 3
2,261,934
1,789,044
Financial liabilities:
Deposits with no stated maturity
1,958,011
1,609,552
603,494
484,357
484,900
122,211
165,616
14,751
13,579
23,361
21,051
Accrued interest payable
1,744
1,771
22. SEGMENT REPORTING
The Corporation’s one reportable segment is determined by the President and Chief Executive Officer, who is the designated chief operating decision maker, based upon information provided about the Corporation’s products and services offered, primarily community banking operations. The chief operating decision maker uses consolidated net income to assess performance by comparing to and monitoring against budget and prior year results. In addition, the chief operating decision maker uses the consolidated net income to benchmark the Corporation against its competitors. This information is used to manage resources to drive business and net earnings growth, including investment in key strategic priorities, as well as determine the Corporation's ability to return capital to shareholders. Loans, investments, deposits and assets held in a fiduciary or custodial capacity provide the revenues in the banking operation. Interest expense, provisions for credit losses, and payroll provide the significant expenses in the banking operation. All operations are domestic.
Accounting policies for segments are the same as those described in Note 1. Segment performance is evaluated using consolidated net income.
Year Months Ended
December 31, 2023
Interest income
Interest expense
Other income:
30,814
27,453
Total other income
Other noninterest expense:
Other segment expenses (1)
32,663
29,328
29,953
The Corporation’s segment assets represent the total assets as presented on the Consolidated Balance Sheets at December 31, 2025 and 2024.
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors of Citizens & Northern Corporation
Wellsboro, Pennsylvania
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheets of Citizens & Northern Corporation (the "Corporation") as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, stockholders’ equity, and cash flows for each of the years then ended, and the related notes (collectively referred to as the "financial statements"). We also have audited the Corporation’s internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework: (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Corporation as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework: (2013) issued by COSO.
Basis for Opinions
The Corporation’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Corporation’s financial statements and an opinion on the Corporation’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk.
95
As permitted, the Corporation has excluded the operations of Susquehanna Community Financial, Inc. acquired during 2025, which is described in Note 3 of the consolidated financial statements, from the scope of management’s report on internal control over financial reporting. As such, it has also been excluded from the scope of our audit of internal control over financial reporting. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Allowance for Credit Losses on Loans – Qualitative Factors
The allowance for credit losses (the “ACL”) as described in Notes 1 and 8 is an accounting estimate of expected credit losses over the estimated life of loans. The Corporation’s loan portfolio, measured at amortized cost, is presented at the net amount expected to be collected. Estimates of expected credit losses for loans are based on historical experience, current conditions and reasonable and supportable forecasts over the life of the loans.
The Corporation measures expected credit losses on pooled loans when similar risk characteristics exist using the weighted-average remaining maturity model, which includes an additional expected credit loss based on reasonable and supportable forecast. The Corporation adjusts its quantitative model for certain qualitative factors that are deemed likely to cause estimated credit losses to differ from the conditions that existed for the period over which historical information was evaluated.
Auditing the qualitative factors included in the allowance for credit losses on loans was identified by us as a critical audit matter because of the extent of auditor judgment and significant audit effort to evaluate the significant subjective and complex judgments made by management related to the determination of the qualitative factors used in the calculation.
96
The primary procedures performed to address this critical audit matter included:
Business Combination – Fair Value of Acquired Loans
As more fully described in Notes 1 and 3, the Corporation completed the acquisition of Susquehanna Community Financial, Inc. for stock and cash consideration totaling approximately $44,643,000 on October 1, 2025. Accounting for an acquisition requires management to record the assets acquired and liabilities assumed at fair value. The estimation of fair values related to acquired loans required management to make significant judgments and assumptions. Significant assumptions included loss rates, recovery lag, prepayment speeds, and discount rates. The acquired loans were initially recorded at $386,514,000.
We identified auditing the fair value of acquired loans as a critical audit matter because it involved especially subjective auditor judgment and audit effort to evaluate the significant judgments made by management, including the need for professionals with specialized skill and knowledge.
/s/Crowe LLP
We have served as the Corporation’s auditor since 2024.
Columbus, Ohio
March 6, 2026
To Stockholders and Board of Directors of Citizens & Northern Corporation
Opinion on the Financial Statements
We have audited the accompanying consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows of Citizens & Northern Corporation and subsidiaries (the “Corporation”) for the year ended December 31, 2023, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on the Corporation's consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Corporation in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audit of the financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Baker Tilly US, LLP
We served as the Corporation’s auditor from 1979 to 2024.
Pittsburgh, PennsylvaniaMarch 11, 2024,
Except for Note 22, as to which the date is March 6, 2025
98
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
ITEM 9A. CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
The Corporation’s management, under the supervision of and with the participation of the Corporation’s Chief Executive Officer and Chief Financial Officer, has carried out an evaluation of the design and effectiveness of the Corporation’s disclosure controls and procedures as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Securities Exchange Act of 1934 as of the end of the period covered by this report. This evaluation did not include an assessment of those disclosure controls and procedures that are involved in, and did not include an assessment of, internal control over financial reporting as it relates to Susquehanna Community Financial, Inc. (“Susquehanna”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Corporation’s disclosure controls and procedures are effective to ensure that all material information required to be disclosed in reports the Corporation files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms.
Except as described in the following paragraph, there were no significant changes in the Corporation’s internal control over financial reporting that occurred during the period covered by this report that have materially affected, or that are reasonably likely to affect, our internal control over financial reporting.
The Susquehanna acquisition was completed October 1, 2025, and during the last three months of 2025 the Corporation has been engaged in integrating processes and internal control over financial reporting for the former Susquehanna locations into those of the Corporation. Through December 7, 2025, information related to former Susquehanna loans, deposits and other customer data was processed using Susquehanna’s legacy computer system. Effective December 8, 2025, the integration of Susquehanna’s core customer data system into the Corporation’s system was completed. Though completion of the Susquehanna core system conversion was a significant milestone, at December 31, 2025, the Corporation’s management had not yet completed changes to processes, information technology systems and other components of internal control over financial reporting as part of integration activities.
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
The Corporation’s management is responsible for establishing and maintaining effective internal control over financial reporting, as that term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). The Corporation’s system of internal control over financial reporting has been designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. The Corporation’s internal control over financial reporting includes those policies and procedures that: (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the Corporation’s assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Corporation are being made only in accordance with authorizations of the Corporation’s management and directors; and (3) provide reasonable assurance regarding prevention, or timely detection and correction of unauthorized acquisition, use or disposition of the Corporation’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect and correct misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.
The Corporation acquired Susquehanna effective October 1, 2025. Management excluded from its assessment of the Corporation’s internal control over financial reporting, as of December 31, 2025, Susquehanna’s internal control over financial reporting associated with assets of approximately 13% of the Corporation’s consolidated total assets, and interest income and noninterest income of approximately 4% of the Corporation’s consolidated total interest income and noninterest income, as of and for the year ended December 31, 2025.
The Corporation’s management assessed the effectiveness of the Corporation’s internal control over financial reporting as of December 31, 2025, based on the framework set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control – Integrated Framework (2013). Based on that assessment, we concluded that, as of December 31, 2025, the Corporation’s internal control over financial reporting is effective based on the criteria established in Internal Control – Integrated Framework (2013).
Crowe LLP, the independent registered public accounting firm that audited the Corporation’s consolidated financial statements, has issued an audit report on the Corporation’s internal control over financial reporting as of December 31, 2025.
By:
/s/ J. Bradley Scovill
Date
President and Chief Executive Officer
/s/ Mark A. Hughes
Treasurer and Chief Financial Officer
ITEM 9B. OTHER INFORMATION
During the three months ended December 31, 2025, no director or officer of the Corporation adopted or terminated a “Rule 10b5-1 trading arrangement” or “non-Rule 10b5-1 trading arrangement”, as each term is defined in Item 408(a) of Regulation S-K.
There was no information the Corporation was required to disclose in a report on Form 8-K during the fourth quarter 2025 that was not disclosed.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information concerning Directors and Executive Officers is incorporated herein by reference to disclosure under the captions “Proposal 1 – Election of Directors,” “Executive Officers,” “Information Concerning Security Ownership” and “Meetings and Committees of the Board of Directors” of the Corporation’s proxy statement dated March 13, 2026 for the annual meeting of stockholders to be held on April 23, 2026.
The Corporation’s Board of Directors has adopted a Code of Ethics, available on the Corporation’s web site at www.cnbankpa.com for the Corporation’s employees, officers and directors. (The provisions of the Code of Ethics are also included in the Corporation’s employee handbook.)
ITEM 11. EXECUTIVE COMPENSATION
Information concerning executive compensation is incorporated herein by reference to disclosure under the captions “Compensation Discussion and Analysis” and “Executive Compensation Tables” of the Corporation’s proxy statement dated March 13, 2026 for the annual meeting of stockholders to be held on April 23, 2026.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information concerning security ownership of certain beneficial owners and management is incorporated herein by reference to disclosure under the caption “Beneficial Ownership of Executive Officers and Directors” of the Corporation’s proxy statement dated March 13, 2026 for the annual meeting of stockholders to be held on April 23, 2026.
“Equity Compensation Plan Information” as required by Item 201(d) of Regulation S-K is incorporated by reference herein from Item 5 (Market for Registrant’s Common Equity and Related Stockholder Matters) of this Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information concerning loans and deposit balances with Directors and Executive Officers is provided in Note 15 to the Consolidated Financial Statements, which is included in Part II, Item 8 of this Annual Report on Form 10-K. Additional information, including information concerning director independence, is incorporated herein by reference to disclosure appearing under the captions “Director Independence” and “Related Person Transactions and Policies” of the Corporation’s proxy statement dated March 13, 2026 for the annual meeting of stockholders to be held on April 23, 2026.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information concerning services provided by the Corporation’s independent auditor Crowe LLP, the audit committee’s pre-approval policies and procedures for such services, and fees paid by the Corporation to that firm, is incorporated herein by reference to disclosure under the caption “Fees of Independent Public Accountants” of the Corporation’s proxy statement dated March 13, 2026 for the annual meeting of stockholders to be held on April 23, 2026.
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 173)
95-97
Report of Predecessor Auditor (PCAOB ID: 23)
Financial Statements:
Consolidated Balance Sheets - December 31, 2025 and 2024
Consolidated Statements of Income - Years Ended December 31, 2025, 2024 and 2023
Consolidated Statements of Comprehensive Income - Years Ended December 31, 2025, 2024 and 2023
Consolidated Statements of Changes in Stockholders’ Equity - Years Ended December 31, 2025, 2024 and 2023
Consolidated Statements of Cash Flows - Years Ended December 31, 2025, 2024 and 2023
Notes to Consolidated Financial Statements
47-94
2. Plan of acquisition, reorganization, arrangement, liquidation or succession:
2.1 Agreement and Plan of Merger dated April 23, 2025, between the Corporation and Susquehanna Community Financial, Inc.
Incorporated by reference to Exhibit 2.1 of the Corporation’s Form 8-K filed April 23, 2025
3.1 Articles of Incorporation
Incorporated by reference to Exhibit 3.1 of the Corporation’s Form 10-Q filed May 6, 2022
3.2 By-laws
Incorporated by reference to Exhibit 3.1 of the Corporation's Form 8-K filed February 18, 2022
4. Instruments defining the rights of securities holders, including Indentures:
4.1 Indenture, dated May 19, 2021 between Citizens & Northern Corporation and UMB Bank, National Association, as trustee
Incorporated by reference to Exhibit 4.1 of the Corporation’s Form 8-K filed May 19, 2021
4.2 Form of Subordinated Note
Incorporated by reference to Exhibit A-2 to Exhibit 4.1 of the Corporation’s Form 8-K filed May 19, 2021
4.3 Form of Senior Note
Incorporated by reference to Exhibit 4.3 of the Corporation’s Form 8-K filed May 19, 2021
4.4 Description of registrant’s securities
Incorporated by reference to Exhibit 4.(vi) of the Corporation’s Form 10-K filed February 20, 2020
10. Material contracts:
10.1 Form of Time-Based Restricted Stock agreement dated January 30, 2026 between the Corporation and Executive Officers pursuant to the Citizens & Northern Corporation 2023 Equity Incentive Plan
Filed herewith
10.2 Form of Performance-Based Restricted Stock Agreement dated January 30, 2026 between the Corporation and Executive Officers pursuant to the Citizens & Northern Corporation 2023 Equity Incentive Plan
10.3 Restricted Stock Agreement dated November 21, 2025 between the Corporation and Christian C. Trate
10.4 Restricted Stock Agreement dated July 30, 2024 between the Corporation and J. Bradley Scovill
Incorporated by reference to Exhibit 10.1 filed with the Corporation’s Form 8-K on July 31, 2024
10.5 2026 Annual Performance Incentive Award Plan
10.6 2026 Annual Performance Incentive Award Plan - Mortgage Lenders
10.7 First Amendment to Deferred Compensation Agreement dated June 17, 2021
Incorporated by reference to Exhibit 10.9 filed with Corporation’s Form 10-K on February 22, 2022
10.8 Deferred Compensation Agreement dated December 17, 2015
Incorporated by reference to Exhibit 10.8 filed with Corporation’s Form 10-K on February 15, 2018
10.9 Employment Agreement dated April 23, 2025 between the Corporation and David S. Runk
10.10 Separation Agreement dated April 23, 2025 between the Corporation and David S. Runk
10.11 Amended and Restated Employment Agreement dated May 22, 2024 between the Corporation and J. Bradley Scovill
Incorporated by reference to Exhibit 10.1 filed with Corporation’s Form 8-K on May 28, 2024
10.12 Employment agreement dated September 19, 2013 between the Corporation and Mark A. Hughes
Incorporated by reference to Exhibit 10.2 filed with Corporation’s Form 8-K on September 19, 2013
10.13 Employment agreement dated September 19, 2013 between the Corporation and Harold F. Hoose, III
Incorporated by reference to Exhibit 10.3 filed with Corporation’s Form 8-K on September 19, 2013
10.14 Employment agreement dated December 18, 2019 between the Corporation and Blair T. Rush
Incorporated by reference to Exhibit 10.15 filed with Corporation’s Form 10-K on March 5, 2021
10.15 Employment agreement dated April 6, 2021 between the Corporation and Alexander Balagour
Incorporated by reference to Exhibit 10.1 filed with Corporation’s Form 10-Q on August 6, 2021
10.16 Employment agreement dated February 1, 2023 between the Corporation and Kelley A. Cwiklinski
Incorporated by reference to Exhibit 10.1 filed with Corporation’s Form 10-Q on May 5, 2023
10.17 Form of Indemnification Agreement dated September 20, 2018 between the Corporation and J. Bradley Scovill
Incorporated by reference to Exhibit 10.1 filed with Corporation’s Form 10-Q on November 1, 2018
10.18 Form of Indemnification Agreement dated January 9, 2018 between the Corporation and Tracy E. Watkins
Incorporated by reference to Exhibit 10.6 filed with Corporation’s Form 10-K on February 15, 2018
10.19 Form of Indemnification Agreement dated February 11, 2015 between the Corporation and Stan R. Dunsmore
Incorporated by reference to Exhibit 10.9 filed with Corporation’s Form 10-K on February 26, 2015
10.20 Form of Indemnification Agreement dated January 19, 2011 between the Corporation and John M. Reber
Incorporated by reference to Exhibit 10.8 filed with Corporation’s Form 10-K on March 1, 2011
10.21 Form of Indemnification Agreements dated May 2004 between the Corporation and the Directors and certain officers
Incorporated by reference to Exhibit 10.1 filed with Corporation’s Form 10-K on March 14, 2005
10.22 Form of Indemnification Agreement dated February 16, 2021 between the Corporation and Blair T. Rush
Incorporated by reference to Exhibit 10.23 filed with Corporation’s Form 10-K on March 5, 2021
10.23 Change in Control Agreement dated January 9, 2018 between the Corporation and Tracy E. Watkins
Incorporated by reference to Exhibit 10.7 filed with Corporation’s Form 10-K on February 15, 2018
10.24 Change in Control Agreement dated March 17, 2015 between the Corporation and Stan R. Dunsmore
Incorporated by reference to Exhibit 10.1 filed with Corporation’s Form 10-Q on May 8, 2015
10.25 Change in Control Agreement dated January 20, 2005 between the Corporation and John M. Reber
Incorporated by reference to Exhibit 10.18 filed with Corporation’s Form 10-K on February 18, 2016
10.26 Change in Control Agreement dated December 31, 2003 between the Corporation and Thomas L. Rudy, Jr.
Incorporated by reference to Exhibit 10.2 filed with the Corporation’s Form 10-K on March 14, 2005
10.27 Fifth Amendment to Citizens & Northern Corporation Stock Incentive Plan
Incorporated by reference to Exhibit 10.1 filed with Form 8-K on December 21, 2018
10.28 Fourth Amendment to Citizens & Northern Corporation Stock Incentive Plan and Annual Incentive Plan
Incorporated by reference to Exhibit 10.6 filed with Corporation’s Form 8-K on September 19, 2013
10.29 Third Amendment to Citizens & Northern Corporation Stock Incentive Plan
Incorporated by reference to Exhibit A to the Corporation’s proxy statement dated March 18, 2008 for the annual meeting of stockholders held on April 15, 2008
10.30 Second Amendment to Citizens & Northern Corporation Stock Incentive Plan
Incorporated by reference to Exhibit 10.5 filed with the Corporation’s Form 10-K on March 10, 2004
10.31 First Amendment to Citizens & Northern Corporation Stock Incentive Plan
Incorporated by reference to Exhibit 10.6 filed with the Corporation’s Form 10-K on March 10, 2004
10.32 Citizens & Northern Corporation Stock Incentive Plan
Incorporated by reference to Exhibit 10.7 filed with the Corporation’s Form 10-K on March 10, 2004
10.33 Second Amendment to Citizens & Northern Independent Directors Stock Incentive Plan
Incorporated by reference to Exhibit 10.2 filed with Form 8-K on December 21, 2018
10.34 First Amendment to Citizens & Northern Corporation Independent Directors Stock Incentive Plan
Incorporated by reference to Exhibit B to the Corporation’s proxy statement dated March 18, 2008 for the annual meeting of stockholders held on April 15, 2008
10.35 Citizens & Northern Corporation Independent Directors Stock Incentive Plan
Incorporated by reference to Exhibit A to the Corporation’s proxy statement dated March 19, 2001 for the annual meeting of stockholders held on April 17, 2001.
10.36 Citizens & Northern Corporation 2023 Equity Incentive Plan
Incorporated by reference to Exhibit A to the Corporation’s proxy statement dated March 10, 2023 for the annual meeting of stockholders held on April 20, 2023
10.37 Citizens & Northern Corporation Supplemental Executive Retirement Plan (as amended and restated)
Incorporated by reference to Exhibit 10.21 filed with the Corporation’s Form 10-K on March 6, 2009
10.38 Form of Indemnification Agreements dated May 24, 2018 between the Corporation and Directors Bobbi J. Kilmer, Terry L. Lehman, Frank G. Pellegrino and Aaron K. Singer
Incorporated by reference to Exhibit 10.1 filed with the Corporation’s Form 10-Q filed August 6, 2018
10.39 Form of Indemnification Agreement dated July 16, 2020 between the Corporation and Stephen M. Dorwart
Incorporated by reference to Exhibit 10.4 filed with the Corporation's Form 10-Q on August 6, 2020
10.40 Form of Indemnification Agreement dated July 16, 2020 between the Corporation and Robert G. Loughery
Incorporated by reference to Exhibit 10.5 filed with the Corporation's Form 10-Q on August 6, 2020
10.41 Form of Indemnification Agreement dated April 27, 2021 between the Corporation and Helen S. Santiago
Incorporated by reference to Exhibit 10.2 filed with the Corporation’s Form 10-Q on August 6, 2021
10.42 Form of Indemnification Agreement dated July 12, 2021 between the Corporation and Kate Shattuck
Incorporated by reference to Exhibit 10.1 filed with the Corporation’s Form 10-Q on November 8, 2021
14. Code of ethics
The Code of Ethics is available through the Corporation’s website at www.cnbankpa.com. To access the Code of Ethics, click on “About,” “Investor Relations,” “Corporate Governance Policies,” and “Code of Ethics.”
19. Citizens & Northern Corporation Insider Trading Policy
21. Subsidiaries of the registrant
23.1 Consent of Crowe LLP
23.2 Consent of Baker Tilly US, LLP
31. Rule 13a-14(a)/15d-14(a) certifications:
31.1 Certification of Chief Executive Officer
31.2 Certification of Chief Financial Officer
32. Section 1350 certifications
97 Executive Compensation Recoupment Policy
Incorporated by reference to Exhibit 10.5 filed with Corporation’s Form 8-K on September 19, 2013
101.INS Inline XBRL Instance Document.
101.SCH Inline XBRL Schema Document.
101.CAL Inline XBRL Calculation Linkbase Document.
101.DEF Inline XBRL Definition Linkbase Document.
101.LAB Inline XBRL Label Linkbase Document.
101.PRE Inline XBRL Presentation Linkbase Document.
104. Cover Page Interactive Data File (Formatted as Inline XBRL and contained in Exhibit 101)
105
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: March 6, 2026
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/
J. Bradley Scovill (Director and Chief Executive Officer,
Terry L. Lehman, Director
Principal Executive Officer)
Terry L. Lehman
J. Bradley Scovill
Mark A. Hughes (Executive Vice President, Treasurer and
Frank G. Pellegrino, Director
Chief Financial Officer, Principal Accounting Officer and
Frank G. Pellegrino
Principal Financial Officer)
Mark A. Hughes
Stephen M. Dorwart, Director
Helen S. Santiago, Director
Stephen M. Dorwart
Helen S. Santiago
Robert G. Loughery, Director
Kate Shattuck, Director
Robert G. Loughery
Kate Shattuck
Bobbi J. Kilmer, Director
Aaron K. Singer, Director
Bobbi J. Kilmer
Aaron K. Singer
Leo F. Lambert, Director
Christian C. Trate, Director
Leo F. Lambert
Christian C. Trate