Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
⌧ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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: 000-16084
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
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 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 definition 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ⌧
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Common Stock ($1.00 par value)
17,801,873 Shares Outstanding on November 5, 2025
X
CITIZENS & NORTHERN CORPORATION – FORM 10-Q
Index
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets (Unaudited) –September 30, 2025 and December 31, 2024
Page 3
Consolidated Statements of Income (Unaudited) – Three-month and Nine-month Periods Ended September 30, 2025 and 2024
Page 4
Consolidated Statements of Comprehensive Income (Unaudited) – Three-month and Nine-month Periods Ended September 30, 2025 and 2024
Page 5
Consolidated Statements of Cash Flows (Unaudited) – Nine-month Periods Ended September 30, 2025 and 2024
Page 6
Consolidated Statements of Changes in Stockholders’ Equity (Unaudited) – Three-month and Nine-month Periods Ended September 30, 2025 and 2024
Page 7
Notes to Unaudited Consolidated Financial Statements
Pages 8 –33
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Pages 34 – 57
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Pages 58 – 60
Item 4. Controls and Procedures
Page 60
Part II. Other Information
Item 1. Legal Proceedings
Page 61
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Page 61– 62
Item 3. Default upon Senior Securities
Page 62
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
Page 62– 63
Signatures
Page 64
2
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Data) (Unaudited)
September 30,
December 31,
(In Thousands, Except Share and Per Share Data)
2025
2024
ASSETS
Cash and due from banks:
Noninterest-bearing
$
27,430
21,110
Interest-bearing
95,660
105,064
Total cash and due from banks
123,090
126,174
Available-for-sale debt securities, at fair value
415,313
402,380
Loans receivable
1,945,107
1,895,848
Allowance for credit losses
(23,474)
(20,035)
Loans, net
1,921,633
1,875,813
Bank-owned life insurance
52,614
51,214
Accrued interest receivable
9,656
8,735
Bank premises and equipment, net
21,055
21,338
Foreclosed assets held for sale
402
181
Deferred tax asset, net
16,759
19,098
Goodwill
52,505
Core deposit intangibles, net
1,762
2,080
Other assets
49,244
51,135
TOTAL ASSETS
2,664,033
2,610,653
LIABILITIES
Deposits:
508,475
486,566
1,657,260
1,607,343
Total deposits
2,165,735
2,093,909
Short-term borrowings
1,489
2,488
Long-term borrowings - FHLB advances
132,894
165,451
Senior notes, net
14,952
14,899
Subordinated debt, net
24,919
24,831
Accrued interest and other liabilities
30,085
33,791
TOTAL LIABILITIES
2,370,074
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
0
Common stock, par value $1.00 per share; authorized 30,000,000 shares;
issued 16,030,172 and outstanding 15,531,700 at September 30, 2025;
issued 16,030,172 and outstanding 15,433,494 at December 31, 2024
16,030
Paid-in capital
143,352
143,565
Retained earnings
171,733
165,778
Treasury stock, at cost; 498,472 shares at September 30, 2025 and 596,678
shares at December 31, 2024
(11,130)
(13,328)
Accumulated other comprehensive loss
(26,026)
(36,761)
TOTAL STOCKHOLDERS' EQUITY
293,959
275,284
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY
The accompanying notes are an integral part of these unaudited consolidated financial statements.
3
Consolidated Statements of Income
(In Thousands Except Per Share Data) (Unaudited)
Three Months Ended
Nine Months Ended
(In Thousands, Except Per Share Data)
INTEREST INCOME
Interest and fees on loans:
Taxable
29,085
28,099
84,639
82,292
Tax-exempt
590
610
1,784
1,749
Income from available-for-sale debt securities:
2,390
2,136
7,021
6,409
568
572
1,720
1,685
Other interest and dividend income
1,017
1,670
2,649
2,614
Total interest and dividend income
33,650
33,087
97,813
94,749
INTEREST EXPENSE
Interest on deposits
9,456
10,412
28,332
28,617
Interest on short-term borrowings
184
1
1,141
Interest on long-term borrowings - FHLB advances
1,577
1,983
5,040
5,294
Interest on senior notes, net
121
120
362
360
Interest on subordinated debt, net
233
232
698
695
Total interest expense
11,387
12,931
34,433
36,107
Net interest income
22,263
20,156
63,380
58,642
Provision for credit losses
2,163
1,207
4,753
2,726
Net interest income after provision for credit losses
20,100
18,949
58,627
55,916
NONINTEREST INCOME
Trust revenue
2,056
1,946
6,125
5,857
Brokerage and insurance revenue
490
523
1,542
1,589
Service charges on deposit accounts
1,471
1,546
4,333
4,336
Interchange revenue from debit card transactions
1,137
1,103
3,391
3,205
Net gains from sale of loans
408
925
786
Loan servicing fees, net
107
74
418
434
Increase in cash surrender value of life insurance
477
458
1,400
1,372
Other noninterest income
1,158
1,123
4,320
4,083
Total noninterest income
7,304
7,133
22,454
21,662
NONINTEREST EXPENSE
Salaries and employee benefits
11,293
10,875
34,119
33,460
Net occupancy and equipment expense
1,336
1,377
4,198
4,160
Data processing and telecommunications expense
1,939
1,882
5,991
5,877
Automated teller machine and interchange expense
529
510
1,319
1,470
Pennsylvania shares tax
469
433
1,435
1,300
Professional fees
445
555
1,468
1,625
Merger-related expenses
882
1,049
Other noninterest expense
2,496
2,637
8,251
7,936
Total noninterest expense
19,389
18,269
57,830
55,828
Income before income tax provision
8,015
7,813
23,251
21,750
Income tax provision
1,464
1,448
4,290
3,966
NET INCOME
6,551
6,365
18,961
17,784
EARNINGS PER COMMON SHARE - BASIC AND DILUTED
0.42
0.41
1.22
1.16
4
Consolidated Statements of Comprehensive Income
(In Thousands) (Unaudited)
(In Thousands)
Net income
Available-for-sale debt securities:
Unrealized holding gains on available-for-sale debt securities
5,979
13,829
13,757
10,243
Reclassification adjustment for losses (gains) realized in income
Other comprehensive income on available-for-sale debt securities
Unfunded pension and postretirement obligations:
Changes from plan amendments and actuarial gains and losses
69
394
Amortization of prior service cost, net actuarial loss and curtailment gain included in net periodic benefit cost
(21)
(22)
(65)
(532)
Other comprehensive (loss) income on pension and postretirement obligations
(138)
Other comprehensive income before income tax
5,958
13,807
13,761
10,105
Income tax related to other comprehensive income
(1,310)
(2,510)
(3,026)
(1,732)
Other comprehensive income, net
4,648
11,297
10,735
8,373
Comprehensive income
11,199
17,662
29,696
26,157
5
CONSOLIDATED STATEMENTS OF CASH FLOWS
CASH FLOWS FROM OPERATING ACTIVITIES:
Adjustments to reconcile net income to net cash provided by operating activities:
Net amortization of securities
1,056
1,269
(1,400)
(1,372)
Depreciation and amortization of bank premises and equipment
1,676
1,632
Net accretion of acquisition accounting adjustment
(66)
(197)
Stock-based compensation
993
1,099
Deferred income taxes
(687)
(1,338)
Decrease in fair value of servicing rights
200
172
(925)
(786)
Origination of loans held for sale
(31,334)
(27,070)
Proceeds from sales of loans held for sale
32,689
24,773
Decrease (increase) in accrued interest receivable and other assets
852
(3,196)
(Decrease) increase in accrued interest payable and other liabilities
(5,456)
5,340
Other
112
124
Net Cash Provided by Operating Activities
21,424
20,960
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of certificates of deposit
1,000
1,250
Proceeds from calls and maturities of available-for-sale debt securities
35,499
28,734
Purchase of available-for-sale debt securities
(35,731)
(11,516)
Redemption of Federal Home Loan Bank of Pittsburgh stock
1,596
Purchase of Federal Home Loan Bank of Pittsburgh stock
(924)
(6,748)
Purchase of Federal Reserve Bank stock
(32)
(36)
Net increase in loans
(49,839)
(45,752)
Proceeds from bank-owned life insurance
14,289
Purchase of premises and equipment
(1,453)
(1,554)
Proceeds from sale of foreclosed assets
58
293
33
Net Cash Used in Investing Activities
(49,824)
(15,016)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in deposits
71,826
121,077
Net decrease in short-term borrowings
(999)
(22,448)
Proceeds from long-term borrowings - FHLB advances
59,386
Repayments of long-term borrowings - FHLB advances
(32,557)
(23,083)
Purchases of treasury stock
(208)
(655)
Common dividends paid
(11,746)
(11,636)
Net Cash Provided by Financing Activities
26,316
122,641
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(2,084)
128,585
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
123,574
52,778
CASH AND CASH EQUIVALENTS, END OF PERIOD
121,490
181,363
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Increase in accrued purchase of available-for-sale debt securities
911
Assets acquired through foreclosure of real estate loans
231
Leased assets obtained in exchange for new operating lease liabilities
1,126
187
Interest paid
34,753
35,134
Income taxes paid
6,548
4,839
6
Consolidated Statements of Changes in Stockholders’ Equity
Accumulated
Common
Treasury
Paid-in
Retained
Comprehensive
Three Months Ended September 30, 2025
Shares
Stock
Capital
Earnings
Loss
Total
Balance, June 30, 2025
16,030,172
515,229
142,982
169,521
(30,674)
(11,502)
286,357
Cash dividends declared on common stock, $.28 per share
(4,339)
Shares issued for dividend reinvestment plan
(20,886)
(61)
466
405
Forfeiture of restricted stock
4,129
94
(94)
Stock-based compensation expense
337
Balance, September 30, 2025
498,472
Three Months Ended September 30, 2024
Balance, June 30, 2024
654,190
159,859
(41,361)
(14,659)
263,221
(4,304)
(21,688)
(81)
484
403
Restricted stock granted
(20,000)
(448)
448
383
Treasury stock purchases
3,538
(60)
Balance, September 30, 2024
616,040
143,206
161,920
(30,064)
(13,787)
277,305
Nine Months Ended September 30, 2025
Balance, December 31, 2024
596,678
Cash dividends declared on common stock, $.84 per share
(13,006)
(59,629)
(130)
1,330
1,200
(55,661)
(1,243)
1,243
7,351
167
(167)
Purchase of restricted stock for tax withholding
9,733
Nine Months Ended September 30, 2024
Balance, December 31, 2023
735,037
144,388
157,028
(38,437)
(16,628)
262,381
Other comprehensive loss, net
(12,892)
(64,476)
(237)
1,452
1,215
(92,860)
(2,094)
2,094
2,076
50
(50)
10,229
(212)
26,034
(443)
7
1. BASIS OF INTERIM PRESENTATION AND STATUS OF RECENT ACCOUNTING PRONOUNCEMENTS
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”). The consolidated financial statements also include 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.
The consolidated financial information included herein, except the consolidated balance sheet dated December 31, 2024, is unaudited. Such information reflects all adjustments (consisting solely of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the financial position, results of operations, comprehensive income, cash flows and changes in stockholders’ equity for the interim periods; however, the information does not include all disclosures required by accounting principles generally accepted in the United States of America (“U.S. GAAP”) for a complete set of financial statements.
Operating results reported for the nine-month period ended September 30, 2025 might not be indicative of the results for the year ending December 31, 2025. The Corporation evaluates subsequent events through the date of filing with the Securities and Exchange Commission.
RECENT ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) issues Accounting Standard Updates (ASUs) to communicate changes to the FASB Accounting Standards 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 consolidated financial statements issued in the foreseeable future.
Recently Issued but Not Yet Effective Accounting Pronouncements
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. ASU No. 2023-09 is effective for public business entities for annual periods beginning after December 15, 2024. The ASU may be adopted on a prospective or retrospective basis and early adoption is permitted. The Corporation is currently evaluating the impact the new guidance will have on disclosures related to income taxes; however, management does not expect it will have a significant impact on its consolidated financial statements.
In December 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. The Corporation is currently evaluating the impact of the standard to our consolidated financial statement disclosures.
2. PER SHARE DATA
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 share are the same because there are no potential dilutive shares of common stock outstanding.
8
Less: Dividends and undistributed earnings allocated to participating securities
(53)
(54)
(153)
(140)
Net income attributable to common shares
6,498
6,311
18,808
17,644
Weighted-average common shares outstanding
15,398,262
15,267,120
15,371,733
15,254,124
Earnings per common share - Basic and Diluted
Weighted-average nonvested restricted shares outstanding
126,451
131,302
125,204
121,035
3. COMPREHENSIVE INCOME
Comprehensive income 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
(1,314)
4,665
Reclassification adjustment for (gains) realized in income
Other comprehensive income from available-for-sale debt securities
Amortization of prior service cost and net actuarial loss included in net periodic benefit cost
(17)
Other comprehensive loss on unfunded retirement obligations
Total other comprehensive income
(2,515)
11,314
(3,025)
10,732
(15)
54
14
(51)
Other comprehensive income on unfunded retirement obligations
(1)
9
(1,761)
8,482
(83)
311
Amortization of prior service cost and net actuarial loss and curtailment gain included in net periodic benefit cost
(420)
29
(109)
The amounts shown in the table immediately above are included in the following line items in the consolidated statements of income:
Affected Line Item in the
Description
Amortization of prior service cost and net actuarial gain and curtailment gain included in net periodic benefit cost (before-tax)
Income tax effect
Changes in the components of accumulated other comprehensive (loss) income are as follows and are presented net of tax:
Unrealized
(Losses)
Unfunded
Gains
Retirement
on Securities
Obligations
(Loss) Income
Balance, beginning of period
(31,017)
343
Other comprehensive income (loss) during three months ended September 30, 2025
Balance, end of period
(26,352)
326
(41,710)
349
Other comprehensive income (loss) during three months ended September 30, 2024
(30,396)
332
(37,084)
323
Other comprehensive income during nine months ended September 30, 2025
(38,878)
441
Other comprehensive income (loss) during nine months ended September 30, 2024
10
4. CASH AND DUE FROM BANKS
Cash and due from banks at September 30, 2025 and December 31, 2024 include the following:
Cash and cash equivalents
Certificates of deposit
1,600
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.
5. SECURITIES
Amortized cost and fair value of available-for-sale debt securities at September 30, 2025 and December 31, 2024 are summarized as follows. No allowance for credit losses was recorded at September 30, 2025 and December 31, 2024.
September 30, 2025
Gross
Amortized
Holding
Fair
Cost
Losses
Value
Obligations of the U.S. Treasury
8,052
(623)
7,429
Obligations of U.S. Government agencies
9,436
(766)
8,670
Bank holding company debt securities
28,963
(2,672)
26,291
Obligations of states and political subdivisions:
105,922
275
(8,669)
97,528
50,373
(6,512)
43,862
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities
107,771
451
(6,287)
101,935
Residential collateralized mortgage obligations
54,678
52
(2,310)
52,420
Commercial mortgage-backed securities
72,433
13
(6,749)
65,697
Private label commercial mortgage-backed securities
3,471
Asset-backed securities,
Collateralized loan obligations
8,000
11
8,010
Total available-for-sale debt securities
449,099
803
(34,589)
December 31, 2024
8,067
(949)
7,118
10,154
(1,129)
9,025
28,958
(3,712)
25,246
111,995
238
(10,931)
101,302
51,147
(8,641)
42,506
104,378
(9,970)
94,414
53,389
(3,505)
49,894
73,470
(8,969)
64,501
8,365
8,374
449,923
263
(47,806)
The following table presents gross unrealized losses and fair value of available-for-sale debt securities with unrealized loss positions aggregated by length of time that individual securities have been in a continuous unrealized loss position at September 30, 2025 and December 31, 2024 for which an allowance for credit losses has not been recorded:
Less Than 12 Months
12 Months or More
554
(11)
86,573
(8,658)
87,127
43,289
6,631
59,944
(6,255)
66,575
15,224
(28)
21,952
(2,282)
37,176
861
(10)
62,464
(6,739)
63,325
2,999
26,269
(82)
316,612
(34,507)
342,881
12
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
(38)
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 $34,589,000 at September 30, 2025 and $47,806,000 at December 31, 2024. At September 30, 2025, the Corporation did 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 increases in market interest rates that have occurred subsequent to the purchase of most of the securities.
At September 30, 2025 and December 31, 2024, management performed an assessment for possible 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 September 30, 2025 and December 31, 2024, all of the Corporation’s holdings of bank holding company debt securities, obligations of states and political subdivisions, private label commercial mortgage-backed securities and collateralized loan obligations 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 September 30, 2025 and December 31, 2024.
There were no gross realized gains and losses from the sale of available-for-sale debt securities for the three and nine months ended September 30, 2025 and 2024.
The amortized cost and fair value of available-for-sale debt securities by contractual maturity are shown in the following table as of September 30, 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
2,691
2,679
Due from one year through five years
36,667
35,024
Due from five years through ten years
78,966
73,179
Due after ten years
84,422
72,898
Sub-total
202,746
183,780
The Corporation’s mortgage-backed securities, collateralized mortgage obligations and asset-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, collateralized mortgage obligations and asset-backed securities are shown in one period.
Investment securities carried at $205,194,000 at September 30, 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. See Note 8 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 $14,346,000 at September 30, 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 September 30, 2025 and December 31, 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.
C&N Bank is 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 $6,331,000 at September 30, 2025 and $6,299,000 at December 31, 2024.
The Corporation has a marketable equity security included in other assets in the consolidated balance sheets with a carrying value of $887,000 at September 30, 2025 and $863,000 at December 31, 2024, consisting exclusively of one mutual fund. There was an unrealized loss on the mutual fund of $113,000 at September 30, 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 $9,000 in the third quarter of 2025 and a gain of $31,000 in the third quarter of 2024, a gain of $24,000 in the nine-month period ended September 30, 2025 and a gain of $18,000 in the nine-month period ended September 30, 2024.
6. LOANS AND ALLOWANCE FOR CREDIT LOSSES
Loans receivable at September 30, 2025 and December 31, 2024 are summarized as follows:
Summary of Loans by Type
Commercial real estate - non-owner occupied
765,366
739,565
Commercial real estate - owner occupied
260,365
261,071
All other commercial loans
449,175
423,277
Residential mortgage loans
396,810
408,009
Consumer loans
73,391
63,926
Less: allowance for credit losses on loans
In the table above, outstanding loan balances are presented net of deferred loan origination fees of $4,021,000 at September 30, 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 tables present an analysis of past due loans as of September 30, 2025 and December 31, 2024:
As of September 30, 2025
Past Due
30-89
90+ Days
Nonaccrual
Current
Days
Still Accruing
Loans
31
6,845
758,490
717
4,791
254,857
272
995
9,801
438,107
1,278
4,055
391,477
211
30
270
72,880
2,509
1,025
25,762
1,915,811
As of December 31, 2024
266
7,370
731,929
62
1,725
259,284
296
10,006
412,975
4,934
4,310
398,765
162
57
431
63,276
5,658
119
23,842
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.
15
The following table presents the amortized cost of loans by credit quality indicators by year of origination as of September 30, 2025:
Term Loans by Year of Origination
2023
2022
2021
Prior
Revolving
Pass
53,250
65,536
107,900
149,368
76,627
268,253
720,934
Special Mention
78
582
15,998
804
4,738
22,231
Substandard
106
840
9,782
11,473
22,201
Doubtful
Total commercial real estate - non-owner occupied
53,328
65,673
109,322
175,148
77,431
284,464
Year-to-date gross charge-offs
19,593
24,980
31,686
49,970
46,419
71,348
243,996
378
829
814
5,563
7,944
2,217
6,208
8,425
Total commercial real estate - owner occupied
25,340
32,064
50,799
49,450
83,119
65,748
42,675
66,799
37,466
35,968
43,265
123,303
415,224
19
501
36
80
28
8,359
11,532
10,749
3,610
4,892
1,119
2,049
22,419
Total all other commercial loans
65,767
53,925
66,835
41,156
40,888
46,893
133,711
333
253
586
26,375
39,628
43,545
73,911
46,258
162,643
392,360
407
129
3,581
4,450
Total residential mortgage loans
43,952
74,244
46,387
166,224
2,331
2,340
2,031
1,978
557
733
62,870
72,840
65
473
546
Total consumer loans
2,333
2,344
2,033
798
63,343
40
148
221
Total Loans
167,297
175,159
251,961
312,693
205,829
546,242
186,173
1,845,354
97
892
996
16,912
1,646
12,810
41,712
10,859
1,249
13,725
7,238
22,446
2,522
58,041
167,396
186,910
254,206
343,330
214,713
581,498
197,054
401
821
16
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
116
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
44
3,478
5,229
109
1,078
8,765
18,703
74,389
50,029
49,598
23,193
31,734
120,033
427
60
21
122
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
679
50,860
63,299
71
544
627
3,449
2,852
750
51,404
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
67
880
1,716
17
The following tables are 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
6,582
25,499
1,467
258
23,584
The Corporation recognized interest income on nonaccrual loans of $203,000 and $660,000 in the three and nine months ended September 30, 2025, respectively and $234,000 and $750,000 in the three and nine months ended September 30, 2024, respectively.
The following table represents the accrued interest receivable written off by reversing interest income during the three-month and nine-month periods ended September 30, 2025 and 2024:
September 30, 2024
51
79
197
24
89
72
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 discussion provides more detail about the types of collateral that secure collateral dependent loans:
18
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 allocated to these loans:
Allowance
6,749
16,006
21,437
30,125
Allowance for Credit Losses
The allowance for credit losses (“ACL”) on loans represents management’s estimate of lifetime credit losses inherent in loans as of the consolidated balance sheet date. The ACL on loans includes two primary components: (i) an allowance established on loans which share similar risk characteristics which are collectively evaluated for credit losses, 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.
Management determines the ACL on loans that are collectively evaluated by considering the following: (a) the weighted-average remaining maturity (WARM) method is used to estimate credit losses, based on the Corporation’s historical loss experience, for pools of loans with similar risk and cash flow characteristics; (b) subjective adjustments are made, generally increasing the ACL, for qualitative risk factors that are deemed likely to cause estimated credit losses to differ from historical experience; and (c) an additional adjustment to expected credit losses is made, based on an economic forecast, and applied for the first 2 years of the weighted-average remaining life of the portfolio.
The following table summarizes the activity related to the allowance for credit losses for the three and nine months ended September 30, 2025 and 2024.
Commercial
All
real estate -
other
Residential
nonowner
owner
commercial
mortgage
Consumer
occupied
loans
13,093
3,055
3,891
1,314
346
21,699
Charge-offs
(45)
(77)
(122)
Recoveries
27
Provision for credit losses on loans
730
176
530
39
1,869
13,823
3,231
4,376
1,709
335
23,474
11,964
2,844
3,361
1,356
20,035
(9)
(586)
(5)
(221)
(821)
83
88
Provision (credit) for credit losses on loans
1,868
387
1,599
355
(37)
4,172
12,177
2,901
3,678
1,112
514
20,382
(640)
(570)
(1,268)
25
381
647
(14)
1,297
11,918
2,873
3,424
1,760
467
20,442
12,010
2,116
2,918
1,764
400
19,208
(757)
(630)
(297)
(1,684)
95
665
1,096
(8)
313
2,823
The ACL on loans individually evaluated decreased to $51,000 at September 30, 2025 from $122,000 at December 31, 2024. At September 30, 2025, there was a loan to one borrower with a amortized cost basis of $263,000 for which an individual ACL was recorded. At December 31, 2024, there were loans to one borrower with a total amortized cost basis of $258,000 for which an individual ACL was recorded.
The ACL on loans collectively evaluated was $23,423,000 at September 30, 2025, up from $19,913,000 at December 31, 2024. The increase in the collectively evaluated portion of the ACL at September 30, 2025 as compared to December 31, 2024 included a net increase related to changes in qualitative adjustments, partially offset by a decrease in the portion of the ACL based on the WARM method estimated losses resulting partially from a reduction in the estimated average life of the portfolio. The increase in the ACL at September 30, 2025 from December 31, 2024 related to changes in qualitative adjustments included increases in estimates based on: the volume and severity of past due, nonaccrual and criticized or adversely classified loans; regional and local economic conditions; and regional values of residential housing.
Modifications Made to Borrowers Experiencing Financial Difficulty
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. During the three and nine months ended September 30, 2025 and September 30, 2024, the Corporation made no modifications of loans to borrowers experiencing financial difficulty.
The following table presents the performance of such loans that have been modified in the twelve-month period preceding September 30, 2025 and the twelve-month period preceding September 30, 2024 (in thousands):
Payment Status (Amortized Cost Basis)
Current or Past Due Less than 30 Days
90+ Days Past Due
2,572
217
2,789
20
1,846
1,357
3,203
Included in performance of loans modified in the twelve-month period preceding September 30, 2025 table above, was one loan secured by non-owner occupied commercial real estate with an amortized cost basis of $1,781,000 that was in nonaccrual status at September 30, 2025. The Corporation had extended the maturity of that loan 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. There was no specific ACL on this loan at September 30, 2025 and December 31, 2024.
The loan that was past due more than 90 days at September 30, 2024 in the table above was in default with its modified terms at September 30, 2024. The Corporation received payments totaling $264,000 in the twelve-month period ended September 30, 2025, all of which were applied to principal. The amortized cost basis of the loan was $1,093,000 at September 30, 2025.
The Corporation had no commitments to lend any additional funds on modified loans during the three and nine months ended September 30, 2025 and 2024, and the Corporation had no loans that defaulted during the three and nine months ended September 30, 2025 and 2024 that 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 unaudited consolidated balance sheets) is as follows:
Foreclosed residential real estate
246
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
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. The contract amounts of these financial instruments at September 30, 2025 and December 31, 2024 are as follows:
Commitments to extend credit
426,396
380,003
Standby letters of credit
58,653
64,586
The Corporation maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, commercial letters of credit and credit enhancement obligations related to residential mortgage loans sold with recourse, when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable (i.e. commitment cannot be canceled at any time). The allowance for off-balance sheet credit exposures is adjusted through the provision for credit losses. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated lives. The allowance for credit losses for off-balance sheet exposures of $1,036,000 at September 30, 2025 and $455,000 at December 31, 2024, is included in accrued interest and other liabilities on the unaudited consolidated balance sheets.
The following table presents the balance and activity in the allowance for credit losses for off-balance sheet exposures for the three and nine months ended September 30, 2025 and 2024:
Beginning Balance
742
683
455
690
Provision (credit) for unfunded commitments
294
(90)
581
(97)
Ending Balance, September 30
1,036
593
7. GOODWILL AND CORE DEPOSIT INTANGIBLES, NET
Goodwill represents the excess of the cost of acquisitions over the fair value of the net assets acquired. At September 30, 2025 and December 31, 2024, the net carrying value of goodwill was $52,505,000.
Information related to core deposit intangibles is as follows:
Gross amount
6,639
Accumulated amortization
(4,877)
(4,559)
Net
Amortization expense related to core deposit intangibles is included in other noninterest expense in the consolidated statements of income, as follows:
Amortization expense
318
292
8. BORROWED FUNDS
SHORT-TERM BORROWINGS
Short-term borrowings (initial maturity within one year) include the following:
FHLB-Pittsburgh borrowings
Customer repurchase agreements
Total short-term borrowings
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 both September 30, 2025 and December 31, 2024. The carrying value of the underlying securities was $1,490,000 at September 30, 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 $1,386,299,000 at September 30, 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
22
(included in other assets in the consolidated balance sheets) were $14,346,000 at September 30, 2025 and $15,018,000 at December 31, 2024. The Corporation’s total credit facility with FHLB-Pittsburgh was $973,060,000 at September 30, 2025, including an unused (available) amount of $802,213,000. 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 September 30, 2025 and December 31, 2024, the Corporation’s use of the FHLB-Pittsburgh facility included borrowed funds (detailed below) and letters of credit totaling $27,987,000 at September 30, 2025 and $23,241,000 at December 31, 2024. 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.
The Corporation had available credit with other correspondent banks totaling $75,000,000 at September 30, 2025 and December 31, 2024. These lines of credit are primarily unsecured. No amounts were outstanding at September 30, 2025 or December 31, 2024.
The Corporation has a line of credit with the Federal Reserve Bank of Philadelphia’s Discount Window. At September 30, 2025, the Corporation had available credit in the amount of $25,228,000 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 $26,732,000 at September 30, 2025 and $18,881,000 at December 31, 2024.
LONG-TERM BORROWINGS – FHLB ADVANCES
Long-term borrowings from FHLB-Pittsburgh are as follows:
Loans maturing in 2025 with a weighted-average rate of 4.66%
11,959
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: Weighted-average rates are presented as of September 30, 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 $18,000 in the third quarter 2025 and $53,000 for the nine-month period ended September 30, 2025 and $17,000 in the third quarter 2024 and $51,000 for the nine-month period ended September 30, 2024 was included in interest expense on senior notes, net in the unaudited consolidated statements of income.
23
At September 30, 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 $30,000 in the third quarter 2025 and $88,000 for the nine-month period ended September 30, 2025 and $29,000 in the third quarter 2024 and $85,000 for the nine-month period ended September 30, 2024, was included in interest expense on subordinated debt, net in the unaudited consolidated statements of income.
At September 30, 2025 and December 31, 2024, the carrying amounts of 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
9. STOCK-BASED COMPENSATION PLANS
The Corporation has a stock incentive plan for selected officers and the independent directors. The first quarter 2025 restricted stock awards to employees vest ratably over three years, and the second quarter 2025 restricted stock awards to the independent directors vest over one year. Following is a summary of restricted stock awards granted in the nine-month period ended September 30, 2025:
(Dollars in Thousands)
Aggregate
Grant
Date
Number of
Nine Months Ended September 30, 2025 awards:
Time-based awards to independent directors
12,700
250
Time-based awards to employees
31,113
684
Performance-based awards to employees
11,848
261
55,661
1,195
Compensation cost related to restricted stock is recognized based on the fair value of the stock at the grant date over the vesting period, adjusted for estimated and actual forfeitures. Total stock-based compensation expense attributable to restricted stock awards amounted to $337,000 in the third quarter 2025 and $383,000 in the third quarter 2024. Total stock-based compensation expense attributable to restricted stock awards amounted to $993,000 in the nine-month period ended September 30, 2025 and $1,099,000 in the nine-month period ended September 30, 2024.
10. CONTINGENCIES
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 have sued C&N Bank, along with another bank, and additional law firm and accounting firm defendants. The case is 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 is 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.
C&N Bank believes that it has substantial defenses against the action, and it intends to defend itself against the plaintiffs’ allegations. 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.
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.
11. 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 $137,920,000 at September 30, 2025 and $141,940,000 at December 31, 2024. The Corporation originated one interest rate swap in the nine-month period ended September 30, 2025. The notional amount of the swap was $1,791,000 at September 30, 2025. Fee income on the interest swap originated in the nine-month period ended September 30, 2025 of $24,000 was included in other noninterest income in the consolidated statements of income. There were no interest rate swaps originated in the nine-month period ended September 30, 2024. There were no gross amounts of interest rate swap-related assets and liabilities not offset in the consolidated balance sheets at September 30, 2025 and December 31, 2024.
The Corporation has entered into an RPA with another institution as a means to assume a portion of the credit risk associated with a loan structure which includes a derivative instrument, 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.” There was an increase of $1,000 included in other noninterest income from RPAs in the third quarter 2025 and $10,000 in the nine-month period ended September 30, 2025 as compared to a decrease of $1,000, included in other noninterest income, in the third quarter 2024 and an increase of $1,000 in the nine-month period ended September 30, 2024.
The table below presents the fair value of the Corporation’s derivative financial instruments as well as their classification on the consolidated balance sheets at September 30, 2025 and December 31, 2024:
At September 30, 2025
At December 31, 2024
Asset Derivatives
Liability Derivatives
Notional
Value (1)
Value (2)
Interest rate swap agreements
68,960
1,483
70,970
2,385
RPA Out
6,856
6,957
RPA In
13,831
9,916
26
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 September 30, 2025 and $1,090,000 at December 31, 2024.
12. FAIR VALUE MEASUREMENTS AND FAIR VALUES OF FINANCIAL INSTRUMENTS
The Corporation measures certain assets and liabilities at fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB Topic 820, “Fair 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 or liabilities. 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 or liability through corroboration with observable market data. Level 2 inputs include quoted market prices in active markets for similar assets or liabilities, quoted market prices in markets that are not active for identical or similar assets or liabilities 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 or liability becoming active or inactive, changes in the availability of quoted prices, or changes in the availability of other market data.
At September 30, 2025 and December 31, 2024, assets and liabilities 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)
Fair Value
Recurring fair value measurements, assets:
AVAILABLE-FOR-SALE DEBT SECURITIES:
407,884
Marketable equity security
887
Servicing rights
2,839
Interest rate swap agreements, assets
Total recurring fair value measurements, assets
8,316
409,370
420,525
Recurring fair value measurements, liabilities:
Interest rate swap agreements, liabilities
Total recurring fair value measurements, liabilities
1,490
Nonrecurring fair value measurements, assets:
Loans individually evaluated for credit loss, net
212
Total nonrecurring fair value measurements, assets
614
395,262
863
2,782
7,981
397,649
408,412
Recurring fair value measurements, liabilities,
2,387
136
317
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.
At September 30, 2025 and December 31, 2024, quantitative information regarding valuation techniques and the significant unobservable inputs used for assets measured on a recurring basis using unobservable inputs (Level 3 methodologies) are as follows:
Fair Value at
9/30/2025
Valuation
Method or Value As of
Asset
Technique
Input(s)
Discounted cash flow
Discount rate
13.00
%
Rate used through modeling period
Loan prepayment speeds
123.00
Weighted-average PSA
12/31/2024
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 measured at fair value on a recurring basis:
Servicing rights balance, beginning of period
2,819
2,720
2,659
Originations of servicing rights
91
257
195
Unrealized loss included in earnings
(99)
(129)
(200)
(172)
Servicing rights balance, end of period
2,682
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 September 30, 2025 and December 31, 2024, quantitative information regarding valuation techniques and the significant unobservable inputs used for nonrecurring fair value measurements using Level 3 methodologies are as follows:
(Dollars In Thousands)
Range (Weighted
Average)
Balance at
Allowance at
Discount at
Loans individually evaluated for credit loss:
Commercial real estate - nonowner occupied
Sales comparison
Discount to appraised value
45% (45)
Total loans individually evaluated for credit loss
Foreclosed assets held for sale - real estate:
Residential (1-4 family)
1%-84% (25)
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
1,571
2,513
Restricted equity securities (included in other assets)
N/A
20,927
21,567
Level 3
1,856,861
1,789,044
Financial liabilities:
Deposits with no stated maturity
1,661,238
1,609,552
Time deposits
504,497
502,416
484,357
484,900
134,251
165,616
14,538
13,579
22,986
21,051
Accrued interest payable
1,309
1,771
13. 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 it to and monitoring it 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.
Segment performance is evaluated using consolidated net income.
Interest income
Interest expense
Other income:
Total other income
Other Noninterest Expense:
Other segment expenses (1)
7,214
7,394
22,662
22,368
32
(1 ) Other segment expenses included expenses for professional fees, data processing and telecommunications, net occupancy and equipment, automated teller machine and interchange, Pennsylvania shares tax and other noninterest expenses.
The Corporation’s segment assets represent the total assets as presented in the consolidated balance sheets at September 30, 2025 and December 31, 2024.
14. SUBSEQUENT EVENT- COMPLETED MERGER
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, Synder and Union counties in Pennsylvania. Pursuant to the Agreement and Plan of Merger dated April 23, 2025 between the Corporation and Susquehanna, Susquehanna merged with and into the Corporation, with the Corporation as the surviving corporation in the Merger. Immediately following the completion of the Merger, Susquehanna Community Bank, the wholly owned subsidiary of Susquehanna, merged with and into the 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.
Based on the average of the high and low trading price of the Corporation’s common stock of $19.64 per share on October 1, 2025, the total purchase consideration is valued at approximately $44.6 million. As of September 30, 2025, Susquehanna reported total assets of $587 million, including gross loans of $400 million, total deposits of $501 million and total stockholders’ equity of $36 million. As of the date the Corporation’s September 30, 2025 financial statements are issued, some of the information required to be disclosed under U.S. GAAP was not available since, given the short period between the October 1, 2025 merger date and the financial statement issuance, the calculation of the fair value of all material Susquehanna assets acquired and liabilities assumed had not yet been completed.
In the first nine months of 2025, the Corporation incurred pre-tax merger-related expenses related to the Susquehanna transaction of $1,049,000, including expenses totaling $882,000 in the third quarter of 2025. Merger-related expenses recorded through September 30, 2025 included initial expenses related to conversion of Susquehanna’s core customer system data into the Corporation’s core system and legal and other professional expenses.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Certain statements in this section and elsewhere in this quarterly report on Form 10-Q 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 statements of historical facts, are based on certain assumptions and describe future plans, business objectives and expectations, and are generally identifiable by the use of words such as, “may”, “would”, “will”, "should", “likely”, “possibly”, "expect", "anticipate", “intend”, “pro forma”, “estimate”, “target”, “potentially”, “probably”, “outlook”, “predict”, “contemplate”, “continue”, “strategic”, “objective”, “plan”, “forecast”, “project”, “believe” and “goal” or other similar words, phrases or concepts. 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 our most recent annual report on Form 10-K and subsequent filings, and those identified elsewhere in this document, the following factors, among others, could cause actual results to differ materially from forward looking statements:
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.
RECENTLY COMPLETED MERGER
On October 1, 2025, C&N completed its previously announced merger with Susquehanna. Susquehanna was the parent company of Susquehanna Community Bank, with seven banking offices located in Lycoming, Northumberland, Synder and Union counties in Pennsylvania. Pursuant to the Agreement and Plan of Merger dated April 23, 2025 between the Corporation and Susquehanna, Susquehanna merged with and into the Corporation, with the Corporation as the surviving corporation in the Merger. Immediately following the completion of the Merger, Susquehanna Community Bank, the wholly owned subsidiary of Susquehanna, merged with and into C&N Bank, with C&N Bank surviving. Upon completion of the merger, shareholders of Susquehanna became entitled to exchange each share of Susquehanna common stock owned for 0.80 shares of the Corporation’s common stock.
34
Based on the average of the high and low trading price of the Corporation’s common stock of $19.64 per share on October 1, 2025, the total purchase consideration in the merger is valued at approximately $44.6 million. As of September 30, 2025, Susquehanna reported total assets of $587 million, including gross loans of $400 million, total deposits of $501 million and total stockholders’ equity of $36 million. As of the date the Corporation’s September 30, 2025 financial statements are issued, some of the information required to be disclosed under U.S. GAAP was not available since, given the short period between the October 1, 2025 merger date and the financial statement issuance, the calculation of the fair value of all material Susquehanna assets acquired and liabilities assumed had not yet been completed.
In the first nine months of 2025, the Corporation incurred pre-tax merger-related expenses related to the Susquehanna transaction of $1,049,000, including expenses totaling $882,000 in the third quarter of 2025. Management estimates total pre-tax merger-related expenses associated with the Susquehanna transaction will be approximately $7.5 million, with most of the expenses expected to be incurred in the fourth quarter of 2025. Merger-related expenses will include expenses related to conversion of Susquehanna’s core customer system data into the Corporation’s core system, severance and similar expenses and legal and other professional expenses.
EARNINGS OVERVIEW
Third Quarter 2025 as Compared to Third Quarter 2024
Third quarter 2025 net income was $6,551,000, or $0.42 per diluted share, as compared to $6,365,000, or $0.41 per diluted share, in the third quarter 2024. Excluding the effects of merger-related expenses, net of taxes, of $697,000, adjusted earnings (non-GAAP) per share were $0.47 per diluted share for the third quarter 2025. See “Reconciliation of Net Income and Diluted Earnings Per Share to Non-GAAP Measure” for additional information. Other significant variances were as follows:
35
Nine Months Ended September 30, 2025 as Compared to Nine Months Ended September 30, 2024
Net income for the nine-month period ended September 30, 2025 was $18,961,000, or $1.22 per diluted share, as compared to $17,784,000, or $1.16 per diluted share, for the first nine months of 2024. Excluding the impact of merger-related expenses, net of taxes of $850,000, adjusted earnings (non-GAAP) for the first nine months of 2025 were $19,811,000, or $1.28 per diluted share. See “Reconciliation of Net Income and Diluted Earnings Per Share to Non-GAAP Measure” for additional information Other significant variances were as follows:
The following table provides a reconciliation of the Corporation’s third quarter and September 30, 2025 year-to-date unaudited earnings results under U.S. generally accepted accounting principles (U.S. GAAP) to comparative non-U.S. GAAP results excluding merger-related expenses. Management believes disclosure of unaudited third quarter and September 30, 2025 earnings results, adjusted to exclude the impact of merger-related expenses, provides useful information for comparative purposes.
RECONCILIATION OF NET INCOME AND DILUTED EARNINGS PER SHARE TO NON-GAAP MEASURE:
(Dollars In Thousands, Except Per Share Data)
(Unaudited)
Calculation of Adjusted Net Income:
Net Income (GAAP) (A)
Add: Merger-related expenses (B)
Less: Tax effect of merger-related expenses (C)
(185)
(199)
Adjusted Net Income (D=A+B-C) - Non-GAAP
7,248
19,811
Adjusted Net Income Attributable to Common Shares - Non-GAAP
7,189
19,651
Number of Shares Used in Computation - Basic and Diluted
Net Income- Basic and Diluted per Common Share - GAAP
Adjusted Net Income- Basic and Diluted Per Common Share - Non-GAAP
0.47
1.28
37
TABLE I – QUARTERLY FINANCIAL DATA
(Dollars In Thousands,
For the Three Months Ended :
Except Per Share Data)
June 30,
March 31,
Interest and dividend income
32,454
31,709
33,329
11,312
11,734
12,856
21,142
19,975
20,473
Provision (credit) for credit losses
2,354
236
(531)
Net interest income after provision (credit) for credit losses
18,788
19,739
21,004
Noninterest income
8,142
7,008
7,547
Other noninterest expenses
18,507
19,231
19,043
18,430
7,532
7,704
10,121
1,415
1,411
1,947
6,117
6,293
8,174
6,068
6,242
8,103
Basic and diluted earnings per common share
0.40
0.53
TABLE II – COMPARISON OF NONINTEREST INCOME
Change
110
5.7
(33)
(6.3)
(75)
(4.9)
3.1
Net gains from sales of loans
48
13.3
44.6
4.1
171
2.4
268
4.6
(47)
(3.0)
(3)
(0.1)
186
5.8
139
17.7
(16)
(3.7)
2.0
237
792
3.7
38
TABLE III - COMPARISON OF NONINTEREST EXPENSE
3.8
(41)
3.0
8.3
(110)
(19.8)
(141)
(5.3)
Total noninterest expense, excluding merger-related expenses
1.3
0.0
1,120
6.1
659
0.9
1.9
(151)
(10.3)
135
10.4
(157)
(9.7)
315
4.0
56,781
953
1.7
2,002
3.6
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.
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.
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. Note 6 to the unaudited consolidated financial statements provides an overview of the process management uses for determining the ACL, and additional discussion of the ACL is provided in a separate section below of Management’s Discussion and Analysis.
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 IV, V and VI include information regarding the Corporation’s net interest income for the three-month and nine-month periods ended September 30, 2025 and 2024. In each of these tables, the amounts of interest income earned on tax-exempt securities and loans have been adjusted to a fully taxable-equivalent basis. Management believes presentation of net interest income on a fully taxable-equivalent basis, which is a non-GAAP financial measure, provides investors with meaningful information for purposes of comparing returns on tax-exempt securities and loans with returns on taxable securities and loans. Accordingly, the amount of net interest income on a fully taxable-equivalent basis reflected in these tables exceed the net interest income amounts presented in the consolidated financial statements. A reconciliation of net interest income on a fully taxable-equivalent basis to the closest GAAP financial measure is included with Table IV. The discussion that follows is based on amounts in the related tables.
Three-Month Periods Ended September 30, 2025 and 2024
Fully taxable equivalent net interest income (a non-GAAP measure) was $22,481,000 in the third quarter of 2025, $2,120,000 (10.4%) higher than in the third quarter of 2024. The increase in net interest income reflected an increase in interest income of $576,000 and a decrease in interest expense of $1,544,000. As presented in Table V, the Net Interest Margin was 3.62% in the third quarter 2025 as compared to 3.29% in the third quarter 2024, and the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) increased to 2.94% in 2025 from 2.55% in 2024. The average yield on earning assets of 5.46% was 0.08% higher in 2025 compared to 2024, and the average rate on interest-bearing liabilities of 2.52% in 2025 was 0.31% lower. Additionally, average total deposits increased $41,554,000 despite a decrease in average brokered deposits of $53,846,000 and total average borrowed funds decreased $56,519,000. Average total earning assets increased $1,585,000 from the third quarter 2024, as average total loans receivable increased $37,761,000 while average interest-bearing due from banks decreased $31,228,000. As presented in Table VI, the net impact of changes in interest rates increased net interest income in the third quarter 2025 as compared to third quarter 2024 by $1,483,000 and changes in volume of earning assets and interest-bearing liabilities increased net interest income by $637,000.
INTEREST INCOME AND EARNING ASSETS
Interest income totaled $33,868,000 in 2025, an increase of $576,000, or 1.7%, from 2024.
Interest and fees from loans receivable increased $964,000 in 2025 as compared to 2024. The fully taxable equivalent yield on loans in 2025 increased to 6.14% from 6.08% in 2024, reflecting the effects of gradual paydowns on loans originated prior to interest rates rising in 2022 and 2023 with more recent loans originated at higher market rates. Average outstanding loans receivable increased $37,761,000, or 2.0% to $1,926,231,000 in 2025 from $1,888,470,000 in 2024.
Income from interest-bearing due from banks totaled $982,000 in 2025, a decrease of $640,000 from the total for 2024. Within this category, the largest asset balance in 2025 and 2024 has been interest-bearing deposits held with the Federal Reserve. The average yield on interest-bearing due from banks was 4.39% in 2025, down from 5.38% in 2024. The average balance of interest-bearing due from banks was $88,657,000 in 2025, down $31,228,000 from $119,885,000 in 2024. The net decrease in average interest-bearing due from banks for 2025 as compared to 2024 reflected net uses of cash for loan growth and a decrease in borrowed funds partially offset by net sources of cash from deposit growth and a reduction in average available-for-sale debt securities.
Interest income from available-for-sale debt securities, on a fully taxable-equivalent basis, totaled $3,039,000 in 2025, up $265,000 from 2024, as the average yield on available-for-sale debt securities was 2.71% in 2025, up from 2.45% in 2024. The average balance (at amortized cost) of available-for-sale debt securities decreased $4,681,000 between periods.
INTEREST EXPENSE AND INTEREST-BEARING LIABILITIES
Interest expense decreased $1,544,000 to $11,387,000 in 2025 from $12,931,000 in 2024.
Interest expense on deposits decreased $956,000, as the average rate decreased to 2.32% in 2025 from 2.62% in 2024 while the average balance of interest-bearing deposits increased $31,611,000. Average total deposits (interest-bearing and noninterest-bearing) increased $41,554,000 or 2.0% in the third quarter of 2025 as compared to 2024. Within average deposits, average brokered deposits were $4,936,000 at an average rate of 4.18% in the third quarter of 2025 as compared to $58,782,000 at an average rate of 5.28% in the third quarter of 2024. In comparing the third quarter 2025 to the third quarter 2024, average total money market accounts increased $20,274,000, average time deposits increased $13,341,000, average noninterest-bearing demand deposits increased $9,943,000 and average interest checking deposits increased $1,716,000 while average savings deposits decreased $3,720,000.
Interest expense on borrowed funds decreased $588,000 in 2025 as compared to 2024. Interest expense on short-term borrowings was less than $1,000 in the third quarter 2025 compared to $184,000 in the third quarter 2024 as the average balance of short-term borrowings decreased to $658,000 in 2025 from $15,038,000 in 2024. Interest expense on long-term borrowings (FHLB advances) decreased $406,000 to $1,577,000 in 2025 from $1,983,000 in 2024. The average balance of long-term borrowings was $138,749,000 in 2025, down from an average balance of $181,075,000 in 2024. The average rate on long-term borrowings was 4.51% in 2025 compared to 4.36% in 2024. Borrowings are classified as long-term within the Tables based on their term at origination or assumption in business combinations.
More information regarding borrowed funds is provided in Note 8 to the unaudited consolidated financial statements.
Nine Month Periods Ended September 30, 2025 and 2024
For the nine-month periods, fully taxable equivalent net interest income was $64,029,000 in 2025, which was $4,785,000 or 8.1% higher than in 2024. The increase in net interest income reflected an increase in interest income of $3,111,000 and a decrease in interest expense of $1,674,000. As presented in Table VI, the net impact of changes in interest rates increased net interest income for the nine months ended September 30, 2025 over the nine months ended September 30, 2024 by $3,362,000 and the net impact of changes in volume of earning assets and interest-bearing liabilities increased net interest income by $1,423,000. As presented in Table V, the Net Interest Margin was 3.51% in the first nine months of 2025 as compared to 3.30% in the first nine months of 2024, and the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) increased to 2.83% in 2025 from 2.60% in 2024. The average yield on earning assets of 5.40% was 0.09% higher in 2025 as compared to 2024, while the average rate on interest-bearing liabilities of 2.57% in 2025 was 0.14% lower compared to 2024.
Interest income totaled $98,462,000 in 2025, an increase of $3,111,000 from 2024.
Interest and fees from loans receivable increased $2,396,000 in 2025 as compared to 2024. In the nine-month period ended September 30, 2025, the fully taxable equivalent yield on loans was 6.08%, up from 6.01% in the first nine months of 2024, reflecting the effects of gradual paydowns on loans originated prior to interest rates rising in 2022 and 2023 with more recent loans originated at higher market rates. Average outstanding loans receivable increased $32,050,000 or 1.7% to $1,909,126,000 in 2025 from $1,877,076,000 in 2024.
Income from interest-bearing due from banks totaled $2,558,000 in 2025, an increase of $37,000 from 2024. The average balance of interest-bearing due from banks was $78,883,000 in 2025, up from $65,449,000 in 2024. Within this category, the largest asset balance in 2025 and 2024 has been interest-bearing deposits held with the Federal Reserve. The average yield on interest-bearing due from banks was 4.34% in 2025, down from 5.15% in 2024.
Interest income from available-for-sale debt securities, on a fully taxable-equivalent basis, totaled $8,976,000 in 2025, up $680,000 from 2024, as the average yield on available-for-sale debt securities was 2.68% in 2025, up from 2.43% in 2024. The average balance (at amortized cost) of available-for-sale debt securities decreased to $448,032,000 in 2025 from $455,944,000 in 2024.
41
For the nine-month periods, interest expense decreased $1,674,000 to $34,433,000 in 2025 from $36,107,000 in 2024.
Interest expense on deposits decreased $285,000, as the average rate on interest-bearing deposits was 2.37% in 2025 and 2.48% in 2024. The average balance of interest-bearing deposits increased $54,971,000. Average total deposits (interest-bearing and noninterest-bearing) amounted to $2,092,615,000 for the first nine months of 2025, up $58,280,000 or 2.9% from the first nine months of 2024. Within average total deposits, average brokered deposits (primarily time and money market) were $13,287,000 with an average interest rate of 4.63% in 2025, down from $70,428,000 with an average interest rate of 5.24% in 2024. Average time deposits increased $35,528,000, average interest checking deposits increased $17,102,000, average money market accounts increased $12,318,000 and average noninterest-bearing demand deposits increased $3,309,000, while average balance of savings accounts decreased $9,977,000.
Interest expense on borrowed funds decreased $1,389,000 in 2025 as compared to 2024. Interest expense on short-term borrowings of $1,000 in 2025 was down from $1,141,000 in 2024 as the average balance of short-term borrowings decreased to $1,010,000 in 2025 from $29,086,000 in 2024. The average rate on short-term borrowings was 0.13% in 2025 compared to 5.24% in 2024. Interest expense on long-term borrowings (FHLB advances) decreased $254,000 to $5,040,000 in 2025 from $5,294,000 in 2024. The average rate on long-term borrowings was 4.49% in 2025 compared to 4.25% in 2024 while the average balance of long-term borrowings decreased to $150,195,000 in 2025 from $166,454,000 in 2024. Borrowings are classified as long-term within the Tables based on their term at origination or assumption in business combinations.
42
TABLE IV - ANALYSIS OF INTEREST INCOME AND EXPENSE
Increase/
(Decrease)
Interest-bearing due from banks
982
1,622
2,558
2,521
254
612
649
638
1,955
1,887
68
3,039
2,774
265
8,976
8,296
680
Loans receivable:
986
2,347
727
749
2,198
2,149
49
Total loans receivable
29,812
28,848
964
86,837
84,441
2,396
Other earning assets
(13)
93
(2)
Total Interest Income
33,868
33,292
576
98,462
95,351
3,111
Interest-bearing deposits:
Interest checking
2,770
3,240
(470)
8,205
8,882
(677)
Money market
2,034
2,159
(125)
5,963
6,256
(293)
Savings
157
4,602
4,963
(361)
14,016
13,322
694
Total interest-bearing deposits
(956)
(285)
Borrowed funds:
Short-term
(184)
(1,140)
Long-term - FHLB advances
(406)
(254)
Total borrowed funds
1,931
2,519
(588)
6,101
7,490
(1,389)
Total Interest Expense
(1,544)
(1,674)
Net Interest Income
22,481
20,361
2,120
64,029
59,244
4,785
Note: Interest income from tax-exempt securities and loans has been adjusted to a fully taxable-equivalent basis (a non-GAAP measure), using the Corporation’s marginal federal income tax rate of 21%. The following table reconciles net interest income under U.S. GAAP as compared to net interest income as adjusted to a fully taxable-equivalent basis.
Net Interest Income Under U.S. GAAP
2,107
Add: fully taxable-equivalent interest income adjustment from tax-exempt securities
81
66
235
202
Add: fully taxable-equivalent interest income adjustment from tax-exempt loans
137
414
Net Interest Income as adjusted to a fully taxable-equivalent basis - Non-GAAP
43
TABLE V - Analysis of Average Daily Balances and Rates
Three Months
Nine Months
Ended
Rate of
Return/
9/30/2024
Average
Cost of
Balance
Funds %
EARNING ASSETS
88,657
4.39
119,885
5.38
78,883
4.34
65,449
5.15
Available-for-sale debt securities, at amortized cost:
337,101
2.81
336,246
2.53
338,390
2.77
342,677
2.50
107,978
2.38
113,514
2.24
109,642
113,267
2.23
445,079
2.71
449,760
2.45
448,032
2.68
455,944
2.43
1,841,875
6.26
1,797,224
6.22
1,821,817
6.21
1,787,982
6.15
84,356
3.42
91,246
3.27
87,309
3.37
89,094
3.22
1,926,231
6.14
1,888,470
6.08
1,909,126
1,877,076
6.01
2,809
4.94
3,076
2,477
4.91
2,215
5.61
Total Earning Assets
2,462,776
5.46
2,461,191
2,438,518
5.40
2,400,684
5.31
Cash
22,592
24,987
21,890
22,619
Unrealized loss on securities
(39,294)
(42,068)
(51,792)
(22,040)
(20,643)
(20,989)
(20,141)
52,321
50,470
51,853
51,647
Bank premises and equipment
21,263
21,793
21,310
21,858
Intangible assets
54,320
54,730
54,424
54,827
73,209
73,320
72,730
81,988
Total Assets
2,625,147
2,618,042
2,597,668
2,561,690
INTEREST-BEARING LIABILITIES
545,004
2.02
543,288
2.37
542,281
525,179
2.26
376,761
2.14
356,487
2.41
365,460
2.18
353,142
194,592
0.10
198,312
196,367
206,344
499,049
3.66
485,708
4.07
493,190
3.80
457,662
3.89
1,615,406
2.32
1,583,795
2.62
1,597,298
1,542,327
2.48
658
0.00
15,038
4.87
1,010
0.13
29,086
5.24
138,749
4.51
181,075
4.36
150,195
4.49
166,454
4.25
14,944
3.21
14,875
14,926
3.24
14,857
24,905
3.71
24,787
3.72
24,875
3.75
24,759
179,256
4.27
235,775
191,006
235,156
Total Interest-bearing Liabilities
1,794,662
2.52
1,819,570
2.83
1,788,304
2.57
1,777,483
Demand deposits
510,802
500,859
495,317
492,008
Other liabilities
31,823
29,226
31,119
29,527
Total Liabilities
2,337,287
2,349,655
2,314,740
2,299,018
Stockholders' equity, excluding accumulated other comprehensive loss
318,175
305,808
315,395
303,209
(30,315)
(37,421)
(32,467)
(40,537)
Total Stockholders' Equity
287,860
268,387
282,928
262,672
Total Liabilities and Stockholders' Equity
Interest Rate Spread
2.94
2.55
2.60
Net Interest Income/Earning Assets
3.62
3.29
3.51
3.30
Total Deposits (Interest-bearing and Demand)
2,126,208
2,084,654
2,092,615
2,034,335
Brokered Deposits
4,936
4.18
58,782
5.28
13,287
4.63
70,428
TABLE VI - ANALYSIS OF VOLUME AND RATE CHANGES
Three Months Ended 9/30/2025 vs. 9/30/2024
.
Nine Months Ended 9/30/2025 vs. 9/30/2024
Change in
Volume
Rate
(304)
(336)
(432)
248
(62)
(26)
291
(144)
824
739
247
1,517
830
(56)
(44)
281
1,473
923
351
225
1,809
1,302
(493)
280
(957)
(245)
(504)
(491)
1,005
(311)
273
(1,229)
1,487
(1,772)
(89)
(95)
(567)
(573)
(472)
(538)
284
(559)
(29)
(1,101)
(288)
(286)
(1,258)
386
(2,060)
637
1,423
3,362
INCOME TAXES
The income tax provision in interim periods is based on the Corporation’s estimate of the effective tax rate expected to be applicable for the full year. The income tax provision for the third quarter 2025 of $1,464,000 was $16,000 higher than the provision for the third quarter 2024, and the provision for the nine months ended September 30, 2025 of $4,290,000 was $324,000 higher than the amount for the first nine months of 2025 due to a higher amount of pre-tax income in 2025. The effective tax rate (tax provision as a percentage of pre-tax income) was 18.3% in the third quarter 2025 compared to 18.5% in the third quarter 2024 and 18.5% for the first nine months of 2025 as compared to 18.2% for the first nine months of 2024. The Corporation’s effective tax rates differ from the statutory federal rate of 21% principally because of the effects of tax-exempt interest income, nondeductible interest expense, state income taxes and other permanent differences.
45
The Corporation recognizes deferred tax assets and liabilities based on differences between the consolidated financial statement carrying amounts and the tax basis of assets and liabilities. The net deferred tax asset at September 30, 2025 and December 31, 2024 represents the following temporary difference components:
Deferred tax assets:
Unrealized holding losses on securities
7,434
10,459
Allowance for credit losses on loans
5,121
4,400
Acquisition accounting adjustment on loans
Deferred compensation
1,556
1,465
Operating leases liability
815
692
Deferred loan origination fees
696
697
Net operating loss carryforward
347
423
Accrued incentive compensation
564
678
Other deferred tax assets
1,598
1,520
Total deferred tax assets
18,378
20,667
Deferred tax liabilities:
Right-of-use assets from operating leases
Core deposit intangibles
385
456
279
290
Defined benefit plans - ASC 835
90
Other deferred tax liabilities
Total deferred tax liabilities
1,619
1,569
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.
Management believes the recorded net deferred tax asset at September 30, 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.
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.
46
The composition of the available-for-sale debt securities portfolio at September 30, 2025 and December 31, 2024, 2023 and 2022 is as follows:
December 31, 2023
December 31, 2022
12,325
11,290
35,166
31,836
11,119
9,946
25,938
23,430
28,952
23,500
28,945
25,386
113,464
104,199
146,149
132,623
58,720
50,111
68,488
56,812
105,549
95,405
112,782
99,941
50,212
46,462
44,868
40,296
76,412
66,682
91,388
79,686
8,215
8,160
8,070
8,023
Total Available-for-Sale Debt Securities
464,968
415,755
561,794
498,033
Aggregate Unrealized Loss
(33,786)
(47,543)
(49,213)
(63,761)
Aggregate Unrealized Loss as a % of Amortized Cost
(7.5)
(10.6)
(11.3)
As reflected in the table above, the fair value of available-for-sale securities was lower than the amortized cost basis by $33,786,000, or 7.5% at September 30, 2025, $47,543,000, or 10.6%, at December 31, 2024, $49,213,000, or 10.6%, at December 31, 2023 and $63,761,000, or 11.3%, at December 31, 2022. The volatility in the fair value of the portfolio, including the reduction in fair value, resulted from changes in interest rates. The table also shows that the amortized cost basis of the portfolio has been reduced to $449,099,000 at September 30, 2025 from $561,794,000 at December 31, 2022 as proceeds from maturities and sales have been used to help fund loan growth and for other purposes.
Additional information regarding the potential impact of interest rate changes on all of the Corporation’s financial instruments is provided in Item 3, Quantitative and Qualitative Disclosures about Market Risk.
As described in Note 5 to the unaudited consolidated financial statements, management determined the Corporation does not have the intent to sell, nor is it more likely than not that it will be required to sell, available-for-sale debt securities in an unrealized loss position at September 30, 2025 before it is able to recover the amortized cost basis. Further, management reviewed the Corporation’s holdings as of September 30, 2025 and concluded there were no credit-related declines in fair value. Additional information related to the types of securities held at September 30, 2025, other than securities issued or guaranteed by U.S. Government entities or agencies, is as follows:
47
Based on the results of management’s assessment, there was no ACL required on available-for-sale debt securities in an unrealized loss position at September 30, 2025.
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 and stockholders’ equity, are discussed in separate sections of Management’s Discussion and Analysis. There are no significant concerns that have arisen related to the Corporation’s off-balance sheet loan commitments or outstanding letters of credit at September 30, 2025.
Table VII shows the composition of the loan portfolio at September 30, 2025 and at year-end from 2020 through 2024. Throughout this time period, the portfolio was primarily commercial in nature. At September 30, 2025, commercial loans represented 76% of the portfolio while residential loans totaled 20% of the portfolio.
Also included in Table VII is additional detail regarding the composition of the non-owner occupied commercial real estate loan portfolio at September 30, 2025. As shown in Table VII, the amortized cost of non-owner occupied commercial real estate loans for which the primary purpose is utilization of office space by third parties was $117,046,000, or 6.0% of gross loans receivable. Within this segment there were two loans with a total amortized cost basis of $2,874,000 in nonaccrual status with no individual allowances and the remainder of the non-owner occupied commercial real estate loans with a primary purpose of office space utilization were in accrual status with no individual allowance at September 30, 2025.
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. Total participation loans outstanding amounted to $33,518,000 at September 30, 2025, down from $35,129,000 at December 31, 2024.
The Corporation is a party to financial instruments with off-balance sheet risk, including commitments to extend credit and standby letters of credit. At September 30, 2025, the total contract amount of commitments to extend credit was $426,396,000 as compared to $380,003,000 at December 31, 2024, and the contract amount of standby letters of credit was $58,653,000 at September 30, 2025 as compared to $64,586,000 at December 31, 2024.
The Corporation maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, commercial letters of credit and credit enhancement obligations related to residential mortgage loans sold with recourse, when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable (i.e. commitment cannot be canceled at any time). The allowance for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated lives. The allowance for credit losses for off-balance sheet exposures of $1,036,000 at September 30, 2025 and $455,000 at December 31, 2024, is included in accrued interest and other liabilities in the unaudited consolidated balance sheets.
The 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.
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 September 30, 2025, the total outstanding balance of loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $2,635,000, and the corresponding total outstanding balance of repurchased loans at December 31, 2024 was $3,029,000.
At September 30, 2025, outstanding balances of loans sold and serviced through the MPF Xtra and Original programs totaled $335,330,000, including loans sold through the MPF Xtra program of $153,657,000 and loans sold through the Original program of $181,673,000. At December 31, 2024, outstanding balances of loans sold and serviced through the MPF Xtra and Original programs totaled $329,766,000, including loans sold through the MPF Xtra program of $158,302,000 and loans sold through the Original program of $171,464,000. Based on the fairly limited volume of required repurchases to date, no allowance has been established for representation and warranty exposures as of September 30, 2025 and December 31, 2024.
TABLE VII - SUMMARY OF LOANS BY TYPE
Commercial real estate - non-owner occupied:
Non-owner occupied
497,295
471,171
499,104
454,386
358,352
328,662
Multi-family (5 or more) residential
108,376
105,174
64,076
55,406
49,054
54,893
1-4 Family - commercial purpose
159,695
163,220
174,162
165,805
175,027
198,918
737,342
675,597
582,433
582,473
237,246
205,910
196,083
191,075
All other commercial loans:
Commercial and industrial
112,667
96,665
78,832
95,368
118,488
222,923
Commercial lines of credit
133,726
120,078
117,236
141,444
106,338
105,802
Political subdivisions
82,728
94,009
79,031
86,663
75,401
46,295
Commercial construction and land
100,015
92,741
104,123
60,892
59,505
41,000
Other commercial loans
20,039
19,784
20,471
25,710
26,498
29,310
399,693
410,077
386,230
445,330
Residential mortgage loans:
1-4 Family - residential
369,452
383,797
389,262
363,005
327,593
356,532
1-4 Family residential construction
27,358
24,212
24,452
30,577
23,151
18,736
Total residential mortgage
413,714
393,582
350,744
375,268
Consumer loans:
Consumer lines of credit (including HELOCs)
58,888
47,196
41,503
36,650
33,522
34,566
All other consumer
14,503
16,730
18,641
18,224
15,837
15,497
Total consumer
60,144
54,874
49,359
50,063
1,848,139
1,740,040
1,564,849
1,644,209
(19,208)
(16,615)
(13,537)
(11,385)
1,828,931
1,723,425
1,551,312
1,632,824
Additional details regarding the composition of the non-owner occupied commercial real estate loan portfolio, excluding multi-family (5 or more) residential and 1-4 Family-commercial purpose loans, at September 30, 2025 is as follows:
NON-OWNER OCCUPIED COMMERCIAL REAL ESTATE
% of Non-owner
% of
Occupied CRE
Office
117,046
23.5
6.0
Industrial
89,953
18.1
Retail
88,328
17.8
4.5
Hotels
72,776
14.6
Mixed Use
62,872
12.6
3.2
66,320
3.4
Total Non-owner Occupied CRE Loans
Total Gross Loans
PROVISION AND ALLOWANCE FOR CREDIT LOSSES
A summary of the provision for credit losses for the three-month and nine-month periods ended September 30, 2025 and 2024 is as follows:
3 Months
9 Months
Provision for credit losses:
Off-balance sheet exposures
Total provision for credit losses
For the quarter ended September 30, 2025, there was a provision for credit losses of $2,163,000, an increase of $956,000 from a provision for credit losses of $1,207,000 in the third quarter 2024. For the nine months ended September 30, 2025, there was a provision for credit losses of $4,753,000, an increase of $2,027,000 compared to $2,726,000 in 2024. The provision in the nine months ended September 30, 2025 included the impact of increases in the ACL related to changes in qualitative factors partially offset by a reduction in the portion of the ACL based on the Corporation’s WARM method estimated losses resulting partially from a reduction in the estimated average life of the portfolio. The ACL was 1.21% of gross loans receivable at September 30, 2025, up from 1.13% at June 30, 2025 and 1.06% at December 31, 2024.
As shown in Table IX, the ACL on loans individually evaluated decreased to $51,000 at September 30, 2025 from $122,000 at December 31, 2024. At September 30, 2025, there was a loan to one borrower with an amortized cost basis of $263,000 for which an individual ACL was recorded. At December 21, 2024, there were loans to one borrower with a total amortized cost basis of $258,000 for which individual ACLs were recorded.
Table IX also shows that, at September 30, 2025 as compared to December 31, 2024, the ACL related to collectively evaluated commercial loans increased by a total of $3,332,000 and the ACL on collectively evaluated residential mortgage loans increased $353,000 while the ACL on collectively evaluated consumer loans decreased $175,000. The net increase in the collectively determined portion of the ACL included the impact of an aggregate increase from changes in qualitative adjustments, partially offset by a decrease in WARM method estimated losses resulting partially from a reduction in the estimated average life of the portfolio. The increase in the ACL at September 30, 2025 from December 31, 2024 related to changes in qualitative adjustments included increases in estimates based on: the volume and severity of past due, nonaccrual and criticized or adversely classified loans; regional and local economic conditions; and regional values of residential housing.
In the first nine months of 2025, net charge-offs totaled $733,000, or 0.05% (annualized) of average outstanding loans. Table VIII shows annual average net charge-off rates over the prior five calendar years ranging from a high of 0.26% in 2022 to a low of 0.01% in 2023.
As presented in Table X, collateral dependent loans totaled $21,437,000 at September 30, 2025, down from $30,125,000 at December 31, 2024. The decrease from December 31, 2024 included two loans related to one relationship with a total amortized cost basis of $11,023,000 at December 31, 2024 that were paid off in April 2025.
Total nonperforming assets were $27,189,000 at September 30, 2025, up $3,047,000 from December 31, 2024. Nonperforming loans increased $2,826,000 from December 31, 2024. Nonperforming loans included an increase in nonaccrual loans of $1,920,000 from December 31, 2024 and an increase of $906,000 in loans past due 90 days or more still accruing from December 31, 2024. Table X shows that total nonperforming assets as a percentage of total assets was 1.02% at September 30, 2025, up from 0.92% at December 31,
2024. Table X also shows that total nonperforming assets as a percentage of assets as of year-end 2020 through 2024, ranged from a high of 1.10% at December 31, 2020 to a low of 0.75% at December 31, 2023.
Table X also shows that loans past due 30-89 days totaled $2,509,000 at September 30, 2025, down from $5,658,000 at December 31, 2024 as there was a net decrease of $3,656,000 in 1-4 Family residential loans past due 30-89 days from December 31, 2024.
Over the period 2020-2024 and the first 9 months of 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 September 30, 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 VIII through X present historical data related to loans and the allowance for credit losses.
TABLE VIII - ANALYSIS OF THE ALLOWANCE FOR CREDIT LOSSES ON LOANS
Nine Months Ended September 30,
Years Ended December 31,
Balance, beginning of year
16,615
13,537
11,385
9,836
Adoption of ASU 2016-13 (CECL)
2,104
(1,716)
(356)
(4,245)
(1,575)
(2,465)
113
92
101
Net charge-offs
(733)
(1,589)
(1,603)
(264)
(4,177)
(1,509)
(2,364)
2,430
753
7,255
3,661
3,913
Net charge-offs as a % of average loans (annualized)
0.05
0.11
0.09
0.01
0.26
0.16
TABLE IX - COMPONENTS OF THE ALLOWANCE FOR CREDIT LOSSES ON LOANS
January 1,
Loans individually evaluated
743
751
Loans collectively evaluated:
13,772
10,379
9,641
2,722
2,111
1,765
3,811
3,914
Residential mortgage
2,407
241
Total Allowance
18,719
PRIOR TO CECL ADOPTION
As of December 31,
ASC 310 - Impaired loans - individually evaluated
453
740
ASC 450 - Collectively evaluated:
10,845
7,553
5,545
4,073
4,338
4,091
244
239
Unallocated
671
585
TABLE X - PAST DUE LOANS AND NONPERFORMING ASSETS
Collateral dependent loans with a valuation allowance
7,786
3,460
6,540
8,082
Collateral dependent loans without a valuation allowance
21,174
29,867
14,871
2,636
2,895
Purchased credit impaired loans
1,027
6,558
6,841
Total collateral dependent loans
11,264
19,358
15,734
17,818
Total loans past due 30-89 days and still accruing
9,275
7,079
5,106
5,918
Nonperforming assets:
Other nonaccrual loans
15,177
22,058
12,441
14,575
Total nonaccrual loans
23,085
18,999
21,416
Total loans past due 90 days or more and still accruing
3,190
2,237
2,219
1,975
Total nonperforming loans
26,787
23,961
18,367
25,322
21,218
23,391
Foreclosed assets held for sale (real estate)
478
1,338
Total nonperforming assets
27,189
24,142
18,845
25,597
21,902
24,729
Total nonperforming loans as a % of loans
1.38
1.26
0.99
1.46
1.36
1.42
Total nonperforming assets as a % of assets
1.02
0.92
0.75
1.04
0.94
1.10
Nonaccrual loans as a % of loans
1.32
0.82
1.33
1.21
1.30
Allowance for credit losses as a % of nonaccrual loans
91.12
84.03
79.01
71.97
71.25
53.16
Allowance for credit losses as a % of total loans
1.06
0.95
0.87
0.69
53
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 borrowing facilities with the Federal Home Loan Bank of Pittsburgh, secured by various mortgage loans. In addition, the Corporation maintains overnight borrowing facilities with several correspondent banks that provide a source of day-to-day liquidity.
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 debt securities with a carrying value of $26,732,000 at September 30, 2025.
The Corporation’s outstanding, available, and total credit facilities at September 30, 2025 and December 31, 2024 are as follows:
Outstanding
Available
Total Credit
Federal Home Loan Bank of Pittsburgh
155,881
188,692
802,213
749,999
973,060
938,691
Federal Reserve Bank Discount Window
25,228
18,093
Other correspondent banks
75,000
Total credit facilities
902,441
843,092
1,073,288
1,031,784
At September 30, 2025, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of long-term borrowings with par values totaling $132,894,000 and letters of credit totaling $22,987,000. At December 31, 2024, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of long-term borrowings with par values totaling $165,451,000 and letters of credit totaling $23,241,000. 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. Additional information regarding borrowed funds is included in Note 8 to the unaudited consolidated financial statements.
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 sell available-for-sale securities to meet its obligations or use repurchase agreements placed with brokers to borrow funds secured by investment assets. At September 30, 2025, the carrying value of available-for-sale securities in excess of amounts required to meet pledging or repurchase agreement obligations was $244,348,000.
Deposits totaled $2,165,735,000 at September 30, 2025, up $71,826,000 or 3.4% from $2,093,909,000 at December 31, 2024. Average total deposits were $58,280,000 or 2.9% higher for the nine months ended September 30, 2025 as compared to the first nine months of 2024 despite a reduction in average brokered deposits of $57,141,000. Brokered deposits, consisting of short-term certificates of deposit and money market funds, totaled $5,004,000 at September 30, 2025, a decrease of $19,017,000 from December 31, 2024.
As shown in the table below, at September 30, 2025, estimated uninsured deposits totaled $696.5 million, or 31.9%, of total deposits, as compared to $632.8 million, or 30.0% of total deposits at December 31, 2024. Included in uninsured deposits are deposits collateralized by securities (almost exclusively municipal deposits) totaling $178.5 million at September 30, 2025. As shown in the table below, total uninsured and uncollateralized deposits amounted to 23.7% of total deposits at September 30, 2025, as compared to 22.3% at December 31, 2024.
As summarized in the table that immediately follows, the Corporation’s highly liquid sources of available funds described above, including unused borrowing capacity with the Federal Home Loan Bank of Pittsburgh, unused availability on the Federal Reserve Bank of Philadelphia’s discount window, available federal funds lines with other banks and unencumbered available-for-sale debt securities,
totaled $1.1 billion at September 30, 2025. Available funding from these sources totaled 164.6% of uninsured deposits and 221.4% of total uninsured and uncollateralized deposits at September 30, 2025.
Uninsured Deposits Information
Total Deposits - C&N Bank
2,184,401
2,111,547
Estimated Total Uninsured Deposits
696,542
632,804
Portion of Uninsured Deposits that are
Collateralized
178,525
161,958
Uninsured and Uncollateralized Deposits
518,017
470,846
Uninsured and Uncollateralized Deposits as
a % of Total Deposits
23.7
22.3
Available Funding from Credit Facilities
Fair Value of Available-for-sale Debt
Securities in Excess of Pledging Obligations
244,348
236,945
Highly Liquid Available Funding
1,146,789
1,080,037
Highly Liquid Available Funding as a % of
Uninsured Deposits
164.6
170.7
221.4
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
In August 2018, the Federal Reserve Board issued an interim final rule that expanded applicability of the Board’s small bank holding company capital adequacy policy statement. The interim final rule raised the policy statement’s asset threshold from $1 billion to $3 billion in total consolidated assets for a bank holding company or savings and loan holding company that: (1) is not engaged in significant nonbanking activities; (2) does not conduct significant off-balance sheet activities; and (3) does not have a material amount of debt or equity securities, other than trust-preferred securities, outstanding. The interim final rule provides that, if warranted for supervisory purposes, the Federal Reserve may exclude a company from the threshold increase. Management believes the Corporation meets the conditions of the Federal Reserve’s small bank holding company policy statement and is therefore excluded from consolidated capital requirements at September 30, 2025; however, management believes the Corporation will likely be subject to the consolidated capital requirements in future periods due to the completion of the previously described acquisition of Susquehanna. Further, at September 30, 2025, C&N Bank remains subject to regulatory capital requirements administered by the federal banking agencies.
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Details concerning capital ratios at September 30, 2025 and December 31, 2024 are presented below. Management believes, as of September 30, 2025, that C&N Bank meets all capital adequacy requirements to which it is subject and maintains a capital conservation buffer (described in more detail below) that allows C&N Bank to avoid limitations on capital distributions, including dividend payments and certain discretionary bonus payments to executive officers. For comparison purposes, the Corporation’s capital ratios are presented along with those of C&N Bank in the table below. Further, as reflected in the table below, the Corporation’s and C&N Bank’s capital ratios at September 30, 2025 and December 31, 2024 exceed the Corporation’s Board policy threshold levels.
Minimum To Be
Minimum To Maintain
Well
Minimum
Capital Conservation
Capitalized Under
Minimum To Meet
Buffer at Reporting
Prompt Corrective
the Corporation's
Actual
Requirement
Action Provisions
Policy Thresholds
Ratio
September 30, 2025:
Total capital to risk-weighted assets:
Consolidated
315,170
16.01
216,568
≥11
C&N Bank
299,291
15.23
157,241
≥8
206,379
≥10.5
196,551
≥10
216,206
Tier 1 capital to risk-weighted assets:
265,741
13.50
177,192
≥9
274,781
13.98
117,931
≥6
167,069
≥8.5
176,896
Common equity tier 1 capital to risk-weighted assets:
147,660
≥7.5
88,448
≥4.5
137,586
≥7.0
127,758
≥6.5
147,413
Tier 1 capital to average assets:
10.21
208,229
10.61
103,559
≥4
129,449
≥5
207,119
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
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 September 30, 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
Minimum common equity tier 1 capital ratio plus capital conservation buffer
7.0
Minimum tier 1 capital ratio
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 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
56
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%
≤1.875% and >1.25%
≤1.25% and >0.625%
≤0.625%
At September 30, 2025, C&N Bank’s Capital Conservation Buffer, determined based on the minimum total capital ratio, was 7.23%.
On September 25, 2023, the Corporation announced a treasury stock repurchase program. Under the program, the Corporation is authorized to repurchase up to 750,000 shares of the Corporation’s common stock, or slightly less than 5% of the Corporation’s issued and outstanding shares at August 4, 2023. The program was effective when publicly announced and has no stated expiration date; it will continue until suspended or terminated by the Board of Directors, in its sole discretion. All shares of common stock repurchased pursuant to the program will be held as treasury shares and be available for use and reissuance for purposes as and when determined by the Board of Directors including, without limitation, pursuant to the Corporation’s Dividend Reinvestment and Stock Purchase and Sale Plan and its equity compensation program. For the three and nine months ended September 30, 2025, there were no shares repurchased. At September 30, 2025, there were 723,966 shares available to be repurchased under the program.
Future dividend payments and repurchases of common stock will depend upon maintenance of a strong financial condition, future earnings and capital and regulatory requirements. In addition, the Corporation and C&N Bank are subject to restrictions on the amount of dividends that may be paid without approval of banking regulatory authorities. Further, although the Corporation is not currently subject to the specific consolidated capital requirements described herein, the Corporation’s ability to pay dividends, repurchase stock or engage in other activities may be limited by the Federal Reserve if the Corporation fails to hold capital commensurate with its overall risk profile.
The Corporation’s 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) income within stockholders’ equity. Accumulated other comprehensive (loss) income is excluded from the Bank’s and the Corporation’s regulatory capital ratios. The balance in accumulated other comprehensive loss related to unrealized losses on available-for-sale debt securities, net of deferred income tax, amounted to $26,352,000 at September 30, 2025 and $37,084,000 at December 31, 2024. Changes in accumulated other comprehensive loss are excluded from earnings and directly increase or decrease stockholders’ equity. To the extent unrealized losses on available-for-sale debt securities result from credit losses, unrealized losses are recorded as a charge against earnings. The securities section of Management’s Discussion and Analysis and Note 5 to the unaudited consolidated financial statements provide additional information concerning management’s evaluation of available-for-sale debt securities for credit losses at September 30, 2025.
ITEM 3. 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 XI, which follows this discussion, is based on the results of calculations performed using the simulation model as of September 30, 2025 and December 31, 2024. The Table shows that as of the respective dates, the changes in net interest income and changes in economic value of equity were within the policy limits in all scenarios.
Based on September 30, 2025 and December 31, 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 September 30, 2025 and December 31, 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 $26.0 million at September 30, 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.
TABLE XI – THE EFFECT OF HYPOTHETICAL CHANGES IN INTEREST RATES
September 30, 2025 Data
Period Ending September 30, 2026
Basis Point
Interest
Net Interest
NII
Change in Rates
Income
Expense
Income (NII)
% Change
Risk Limit
+400
164,305
86,064
78,241
(16.4)
25.0
+300
157,838
73,841
83,997
20.0
+200
151,318
62,827
88,491
(5.5)
15.0
+100
144,725
53,021
91,704
(2.1)
10.0
138,066
44,423
93,643
-100
131,387
39,625
91,762
(2.0)
-200
123,474
34,868
88,606
(5.4)
-300
115,303
30,120
85,183
(9.0)
-400
106,320
25,577
80,743
(13.8)
Economic Value of Equity at September 30, 2025
Present
Equity
493,628
(11.7)
40.0
520,713
(6.8)
30.0
542,358
(2.9)
556,139
(0.5)
558,794
532,775
(4.7)
491,578
(12.0)
432,985
(22.5)
363,893
(34.9)
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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
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
(5.6)
555,058
566,339
552,813
(2.4)
520,196
(8.1)
470,155
(17.0)
403,255
(28.8)
ITEM 4. 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. 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.
There were no significant changes made to 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 materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
The information provided in Note 10 of the Consolidated Unaudited Financial Statements is hereby incorporated into this Part II, Item 1 by reference.
Except for the risk factor described immediately below, there have been no material changes from the risk factors previously disclosed in Item 1A of the Corporation’s Annual Report on Form 10-K filed March 6, 2025.
Risk Related to Recent Acquisition of Susquehanna - The success of the acquisition will depend, in part, on the Corporation’s ability to realize the anticipated benefits and cost savings from successfully combining the businesses of the Corporation and Susquehanna within the Corporation’s projected timeframe. If the Corporation is not able to achieve these objectives, the anticipated benefits and cost savings of the acquisition may not be realized fully or at all, or may take longer to realize than expected. It is possible that the integration process could result in the loss of key employees, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the Corporation’s ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits of the acquisition. Integration efforts between the two companies will also divert management attention and resources. These integration matters could have an adverse effect on the Corporation during the transition period. Additionally, the Corporation’s business may be adversely impacted by the failure to pursue other beneficial opportunities due to the focus of management on the acquisition, without realizing any of the anticipated benefits of completing the acquisition.
The acquisition may not be accretive, and may be dilutive, to the Corporation’s earnings per share, which may negatively affect the market price of the Corporation’s common stock.
The Corporation currently expects the acquisition to be accretive to earnings per share beginning in the first year after closing (excluding one-time charges). This expectation, however, is based on preliminary estimates which may materially change. The Corporation may encounter additional transaction and integration related costs or other factors, such as failure to realize all of the benefits anticipated in the acquisition or other factors that affect preliminary estimates or the Corporation’s ability to realize operational efficiencies. Any of these factors could cause a decrease in the Corporation’s earnings per share or decrease or delay the expected accretive effect of the acquisition and contribute to a decrease in the price of the Corporation’s common stock.
Issuer Purchases of Equity Securities
On September 25, 2023, the Corporation announced a treasury stock repurchase program. Under the approved 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. There were no shares repurchased under the repurchase program during the third quarter 2025. At September 30, 2025, there were 723,966 shares available to be repurchased under the program.
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The following table sets forth a summary of purchases by the Corporation, in the open market, of its equity securities during the third quarter 2025:
Total Number of
Maximum
Purchased
Shares that May
as Part of
Yet
Publicly
be Purchased
Total Number
Announced
Under
of Shares
Price Paid
Plans
the Plans or
Period
per Share
or Programs
Programs
July 1 - 31, 2025
723,966
August 1 - 31, 2025
September 1 - 30, 2025
Item 3. Defaults Upon Senior Securities
None
Not applicable
During the three months ended September 30, 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.
Agreement and Plan of Merger dated April 23, 2025 between Susquehanna Community Financial, Inc. and Citizens & Northern Corporation
2.1
Incorporated by reference to Exhibit 2.1 of the Corporation’s Form 8-K filed April 23, 2025
Articles of Incorporation
Incorporated by reference to Exhibit 3.1 of the Corporation’s Form 10-Q filed May 6, 2022
By-laws
Incorporated by reference to Exhibit 3.1 of the Corporation’s Form 8-K filed February 18, 2022
31.
Rule 13a-14(a)/15d-14(a) certifications:
31.1
Certification of Chief Executive Officer
Filed herewith
31.2
Certification of Chief Financial Officer
32.
Section 1350 certifications
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
The cover page of the Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2025, formatted in Inline XBRL (contained in Exhibit 101).
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
November 7, 2025
By: /s/ J. Bradley Scovill
President and Chief Executive Officer
By: /s/ Mark A. Hughes
Treasurer and Chief Financial Officer
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