CZNC 10-K & 10-Q changes, risk factors and insider trading

The Corporation is subject to the many risks and uncertainties applicable to all banking companies, as well as risks specific to the Corporation’s geographic locations. Although the Corporation seeks to effectively manage risks, and maintains a level of equity that exceeds the banking regulatory agencies’ thresholds for being considered “well capitalized” (see Note 1718 to the consolidated financial statements), management cannot predict the future and cannot eliminate the possibility of credit, operational or other losses. Accordingly, actual results may differ materially from management’s expectations. SomeWe ofbelieve that the Corporation’s most significant risks and uncertainties are discussed below.

Risk Related to Acquisition Activity – As described in Item 1, the Corporation has completed three acquisitions of banking companies in 2025, 2020 and 2019 (Susquehanna, Covenant and Monument) and expanded its geographic footprint toin SoutheasternNorthcentral, Southcentral, and SouthcentralSoutheastern Pennsylvania. Further, management intends to continue to pursue additional acquisition opportunities. Potential acquisitions may disrupt the Corporation’s business and dilute shareholder value. We regularly evaluate merger and acquisition opportunities and conduct due diligence activities related to possible transactions with other financial institutions and financial service companies. Acquiring other banks, businesses, or branches involves various risks commonly associated with acquisitions, including: potential exposure to unknown or contingent liabilities of the target company, exposure to potential asset quality issues of the target company, difficulty and expense of integrating the operations and personnel of the target company, potential disruption to the Corporation’s business, potential diversion of management’s time and attention, the possible loss of key employees and customers of the target company, difficulty in estimating the value of the target company and potential changes in banking or tax laws or regulations that may affect the target company. Acquisitions may involve the payment of a premium over book and market values, and, therefore, some dilution of the Corporation’s tangible book value and earnings per common share may occur in connection with any future transaction. Furthermore, failure to realize the expected revenue projections, cost savings, increases in geographic or product presence, and/or other projected benefits from recent or future acquisitions could have a material adverse effect on the Corporation’s business, financial condition or results of operations.

Credit Risk from Lending Activities - A significant source of risk is the possibility that losses will be sustained because borrowers, guarantors and related parties may fail to perform in accordance with the terms of their loan agreements. Most of the Corporation’s loans are secured, but some loans are unsecured. With respect to secured loans, the collateral securing the repayment of these loans may be insufficient to cover the obligations owed under such loans. A significant portion of such collateral is real estate located in the Corporation's core banking markets. Collateral values may be adversely affected by changes in economic, environmental and other conditions, including declines in the value of real estate, changes in interest rates, changes in monetary and fiscal policies of the federal government, wide-spread disease, terrorist activity, environmental contamination and other external events. A decline in local economic conditions may have a greater effect on the Corporation’s earnings and capital than on the earnings and capital of other financial institutions whose real estate loan portfolios are more geographically diverse. In addition, collateral appraisals that are out of date or that do not meet industry recognized standards may create the impression that a loan is adequately collateralized when it is not. The Corporation has adopted underwriting and credit monitoring procedures and policies, including regular reviews of appraisals and borrower financial statements, that management believes are appropriate to mitigate the risk of loss. Also, as discussed further in the “Provision and Allowance for Credit Losses” section of Management’s Discussion and Analysis, the Corporation uses an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts. Such risk management and accounting policies and procedures, however, may not prevent unexpected losses that could have a material adverse effect on the Corporation’s business, financial condition, results of operations or liquidity.

Over the past few years, the banking regulatory agencies have expressed concerns about weaknesses in the current commercial real estate market. Banking regulators generally give commercial real estate lending greater scrutiny and may require banks with higher levels of commercial real estate loans to implement enhanced risk management practices, including stricter underwriting, internal controls, risk management policies, more granular reporting, and portfolio stress testing, as well as possibly higher levels of allowances for credit losses and capital levels as a result of commercial real estate lending growth and exposures. If the Corporation's banking regulators determine that our commercial real estate lending activities areinvolve particularlymore riskythan customary risk and therefore are subject to such heightened scrutiny, the Corporation may incur significant additional costs or be required to restrict certain of our commercial real estate lending activities. Furthermore, failures in the Corporation's risk management policies, procedures and controls could adversely affect our ability to manage this portfolio going forward and could result in an increased rate of delinquencies in, and increased losses from, this portfolio, which could have a material adverse effect on the Corporation's business, financial condition, and results of operations.

Moreover, the Federal Reserve lowered the Federal Funds rate in 2020 and maintained a rate of 0% to 0.25% throughout 2021 while injecting massiveunusually large amounts of liquidity into the nation’s monetary system. In 2022 and 2023, the Federal Reserve changed course and raised the rate several times to a range of 5.25% to 5.50% at December 31, 2023. The Federal Reserve’s rate increases, along with an accompanying tightening of the money supply, were conducted in an effort to contain inflation. In the latter portion of 2024, theThe Federal Reserve lowered the Federal Funds rate twice to a range of 4.25% to 4.50% at December 31, 2024.2024 and continued to lower the Federal Funds rate three times in 2025 to a range of 3.50% to 3.75% at December 31, 2025.

Significant fluctuations in interest rates, including fluctuations in interest rates triggered by the Federal Reserve’s actions, could have a material adverse effect on the Corporation’s business, financial condition, results of operations or liquidity.

Limited Geographic Diversification - The Corporation grants commercial, residential and personal loans to customers primarily in the Corporation’s markets of the Northern tier/Northcentral regions of Pennsylvania, Southern tier of New York and Southeastern and Southcentral Pennsylvania. Although the Corporation has a diversified loan portfolio, a significant portion of its debtors’ ability to honor their contracts is dependent on the local economic conditions within these regions. Deterioration in economic conditions could adversely affect the quality of the Corporation’s loan portfolio and the demand for its products and services, and accordingly, could have a material adverse effect on the Corporation’s business, financial condition, results of operations or liquidity.

Competition - All phases of the Corporation’s business are competitive. Some competitors are much larger in total assets and capitalization than the Corporation, have greater access to capital markets and can offer a broader array of financial services. There can be no assurance that the Corporation will be able to compete effectively in its markets. Additionally, the financial services industry is undergoing rapid technological change with frequent introductions of new technology-driven products and services, including those related to artificial intelligence, to technologies that automate functions previously performed manually, facilitate the ability of customers to engage in financial transactions and otherwise enhance the customer experience. Many of these initiatives take a significant amount of time to develop and implement, are tied to critical systems, and require substantial financial, human, and other resources. The investments by larger competitors in these initiatives may be more substantial than those of the Corporation, which may cause the Corporation to lose market share. Although the Corporation, in making such investments, takes steps to mitigate the risks and uncertainties associated with these initiatives, they are not always implemented on time, within budget, or without negative financial, operational, or customer impact and do not always perform as the Corporation or its customers expect. Moreover, costs associated with implementing technology-driven products or other services, or technology-related or other developments increasing the nature or level of competition, could have a material adverse effect on the Corporation’s business, financial condition, results of operations or liquidity.

Despite these security measures, the Corporation’s computer systems and infrastructure or those of third parties used by us to compile, process or store such information may be vulnerable to attacks by hackers or breached due to employee error, malfeasance, or other disruptions. Financial services institutions and companies engaged in data processing have reported breaches in the security of their websites or other systems, some of which have involved sophisticated and targeted attacks intended to obtain unauthorized access to sensitive information, destroy data, steal financial assets, disable or degrade service, or sabotage systems, often through the introduction of computer viruses or malware, cyber-attacks and other means. Denial of service attacks have been launched against a number of large financial services institutions. The Corporation may be subject to similar attacks in the future. Hacking and identity theft risks could cause serious reputational harm and financial loss to the Corporation. Cyber threats are rapidly evolving and the Corporation may not be able to anticipate or prevent all such attacks. Advancements in the use of artificial intelligence could lead to attacks by exploiting vulnerabilities to manipulate model outputs or bypass security controls. A breach of any kind could compromise systems and the information stored there could be accessed, damaged, locked up, or disclosed. A breach in security could result in legal claims, regulatory penalties, disruption in operations, and damage to the Corporation’s reputation, which could have a material adverse effect on the Corporation’s business, financial condition, results of operations or liquidity.

Government Regulation and Monetary Policy - The Corporation and the banking industry are subject to extensive regulation and supervision under federal and state laws and regulations. The requirements and limitations imposed by such laws and regulations limit the way the Corporation conducts its business, undertakes new investments and activities, and obtains financing. These regulations are designed primarily for the protection of the deposit insurance funds and consumers and not to benefit the Corporation’s shareholders. Financial institution regulation has been the subject of significant legislation in recent years and may be the subject of further significant legislation in the future, none of which is in the control of the Corporation. Significant new laws or changes in, or repeals of, existing laws could have a material adverse effect on the Corporation’s business, financial condition, results of operations or liquidity. For example, the regulatory authorities may take actions that could result in decreases in service charge revenue from deposit accounts, including overdraft privilege and other fees. Further, federal monetary policy, particularly as implemented through the Federal Reserve System, significantly affects short-term interest rates and credit conditions, and any unfavorable change in these conditions could have a material adverse effect on the Corporation’s business, financial condition, results of operations or liquidity.

Bank Secrecy Act and Related Laws and Regulations - These lawsLaws and regulations relating to the Bank Secrecy Act have significant implications for all financial institutions. In recent years, theythese laws and regulations have increased due diligence requirements and reporting obligations for financial institutions, created new crimes and penalties, and required the federal banking agencies, in reviewing merger and other acquisition transactions, to consider the effectiveness of the parties to such transactions in combating money laundering activities. Even innocent noncompliance and inconsequential failure to follow the regulations could result in significant fines or other penalties, which could have a material adverse impact on the Corporation’s business, financial condition, results of operations or liquidity.

Moreover, the Corporation is exposed to the risk that when a bank or other financial institution experiences financial difficulties, there could be an adverse “contagion” impact on other banking institutions. For example, the failures of Silicon Valley Bank in California, Signature Bank in New York and First Republic Bank in California in 2023 caused an element of panic and uncertainty in the investor community and among bank customers generally, including, specifically, deposit customers. These types of events may reduce customer confidence and may affect sources of funding and liquidity, increase regulatory requirements and costs, adversely affect financial markets and/or have negative reputational ramifications for institutions in the banking industry, including, possibly, the Corporation.

Mortgage Banking – Since 2009, theThe Corporation has originatedoriginates and soldsells residential mortgage loans to the secondary market through the MPF Xtra program. Since 2014, the Corporation has also originated and sold residential mortgage loans to the secondary market through the MPF Original program.programs. Both of these programs are administered by the Federal Home Loan Banks of Pittsburgh and Chicago. At December 31, 2024,2025, the total outstanding balance of residential mortgages sold and serviced through the two programs amounted to $329,766,000.$450,120,000. The Corporation must strictly adhere to the MPF Xtra and MPF Original program guidelines for origination, underwriting and servicing loans, and failure to do so may result in the Corporation being forced to repurchase loans or being dropped from the program. As of December 31, 2024,2025, the total outstanding balance of residential mortgage loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $2,671,000.$2,598,000. If the volume of such forced repurchases of loans were to increase significantly, or if the Corporation were to be dropped from the programs, it could have a material adverse effect on the Corporation’s business, financial condition, results of operations or liquidity.

Certain statements in this section and elsewhere in this Annual Report on Form 10-K are forward-looking statements.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, whichstatements are not historical facts, are based on certain assumptions and describe future plans, business objectives and expectations, and are generally identifiable by the use of words such as, “may”, “would”, “will”, "should", “likely”, “possibly”, "expect", “plan”, "anticipate", “intend”, “pro forma”, “estimate”, “target”, “potentially”, “probably”, “outlook”, “predict”, “contemplate”, “continue”, “strategic”, “objective”, “plan”, “forecast”, “project”, “believe” and “goal”. Theseor forward-lookingother similar words, phrases or concepts. Persons reading this document are cautioned that such statements are subjectonly to riskspredictions, and uncertainties that arethe difficultCorporation’s toactual predict,future results or performance may be beyondmaterially management’sdifferent. controlA andnumber of factors could cause our actual results, events or developments, or industry results, to be materially different from any future results, events or developments expressed, implied or anticipated by such forward-looking statements. In addition to factors previously disclosed in the reports filed by the Corporation with the SEC, including the Risk Factors section of this Form 10-K, and those identified elsewhere in this document, the following factors, among others, could cause actual results to differ materially from thoseforward expressedlooking or implied by such forward-looking statements. Factors which could have a material, adverse impact on the operations and future prospects of the Corporation include, but are not limited to, the followingstatements:

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.

The Corporation’s primary source of operating income is net interest income, which is equal to the difference between the amounts of interest income and interest expense. Tables I, II and III include information regarding the Corporation’s net interest income in 2024,2025, 20232024 and 2022.2023. In each of these tables, the amounts of interest income earned on tax-exempt securities and loans have been adjusted to a fully taxable-equivalent basis.basis using the Corporation’s marginal tax rate of 21%. The Corporation believes presentation of net interest income on a fully taxable-equivalent basis provides investors with meaningful information for purposes of comparing returns on tax-exempt securities and loans with returns on taxable securities and loans. Accordingly, the net interest income amounts reflected in these tables exceed the amounts presented in the consolidated financial statements. Fully-taxable-equivalent interest income is reconciled to interest income following Table I. The discussion that follows is based on amounts in the tables.

Interest and fees from loans receivable increased $11,730,000 in 2024 as compared to 2023. In 2024, the fully taxable equivalent yield on loans was 6.03%, up from 5.67% in 2023, reflecting the effects of primarily rising interest rates on new loan originations and floating-rate loans. Average outstanding loans receivable increased $88,973,000 (5.0%) to $1,881,122,000 in 2024 from $1,792,149,000 in 2023. The Corporation has experienced growth in commercial real estate and other commercial loans in 2023 and in 2024.

(1) N/M = Not Meaningfulmeaningful

The effective income tax rate was 18.6%18.2% of pre-tax income in 2024,2025, down from 18.6% in 2024 and 20.8% in 2023 and up from 17.7% in 2022.2023. Tax-exempt interest income and income from BOLI contributed to the effective rate being lower than the federal statutory rate in 20222023 through 2024.The2025.The higher effective income tax rate in 2023 included the net impact of a tax charge of $950,000 for the initiated surrender of BOLI.

The Corporation recognizes deferred tax assets and liabilities based on differences between the financial statement carrying amounts and the tax basis of assets and liabilities. At December 31, 2024,2025, the net deferred tax asset was $19,098,000,$17,615,000, updown from the balance at December 31, 20232024 of $17,441,000.$19,098,000. The most significantlargest change in temporary difference components among those periods was a decrease of $3,928,000 in the net deferred tax liabilities of $950,000asset related to athe unrealized loss on available-for-sale debt securities resulting from decreases in interest rates. Other significant changes included increases in the net deferred tax chargeasset forrelated to the surrenderACL ofand BOLIacquisition inaccounting 2023.valuation adjustments on loans and a decrease related to core deposit intangibles.

Table VI shows the composition of the available-for-sale debt securities portfolio at December 31, 2024,2025, 20232024 and 2022.2023. The total amortized cost of available-for-sale debt securities at December 31, 20242025 was lowerhigher by $15,045,000$86,377,000 from December 31, 20232024 and by $111,871,000$71,292,000 from December 31, 2022.2023. ProceedsThe increase in amortized cost of the portfolio at December 31, 2025 resulted from maturities and salespurchases of available-for-sale debt securities overwith funding provided by proceeds from the pastsale threeof yearsmost haveof beenthe usedsecurities toacquired helpfrom fund loan growth and for other purposes.Susquehanna.

At December 31, 2024,2025, the largest categories of securities held as a percentage of total amortized cost, were as follows: (1) tax-exempt and taxable municipal bonds, 36.3%; (2) residential mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies, including pass-through securities and collateralized mortgage obligations, 35.1%40.0%; (2) tax-exempt and taxable municipal bonds, 29.0%; and (3) commercial mortgage-backed securities issued or guaranteed by U.S. Government sponsored agencies, 16.3%.18.5%.

The composition of the available-for-sale debt securities portfolio at December 31, 2024,2025, December 31, 20232024 and December 31, 20222023 is as follows:

(a) Source: Treasury.gov (Daily Treasury Par Yield Curve Rates) As reflected in the table above, the fair value of available-for-sale securities was lower than the amortized cost basis by $29,685,000, or 5.5% at December 31, 2025, $47,543,000, or 10.6% at December 31, 2024,2024 and $49,213,000 or 10.6% at December 31, 2023 and $63,761,000 or 11.3% at December 31, 2022.2023. The volatility in the fair value of the portfolio, including the significant reduction in fair value, resulted from changes in interest rates. As shown above, the market yield on the 5-year U.S. Treasury Note was 0.54% higher at December 31, 2024 in comparison to December 31, 2023, and 0.39% higher than at December 31, 2022.

As described in Note 67 to the consolidated financial statements, management determined the Corporation does not have the intent to sell, nor is it more likely than not that it will be required to sell, available-for-sale debt securities in an unrealized loss position at December 31, 20242025 before it is able to recover the amortized cost basis. Further, management reviewed the Corporation’s holdings as of December 31, 20242025 and concluded there were no credit-related declines in fair value. Additional information related to the types of securities held at December 31, 2024,2025, other than securities issued or guaranteed by U.S. Government entities or agencies, iswas as follows:

The following table presents the contractual maturities and the weighted-average yields (calculated based on amortized cost) of investment securities as of December 31, 2024.2025. Yields on tax-exempt securities are presented on a fully taxable-equivalent basis.basis using the Corporation’s marginal tax rate of 21%. For callable securities, yields on securities purchased at a discount are based on yield-to-maturity, while yields on securities purchased at a premium are based on yield to the first call date. Yields on mortgage-backed securities are estimated and include the effects of prepayment assumptions. Actual maturities may differ from contractual maturities because counterparties may have the right to call or prepay obligations with or without call or prepayment penalties.

As presented in Table VII, total loans outstanding at December 31, 20242025 were $1,895,848,000$2,354,365,000 which is an increase of $47,709,000$458,517,000 (2.6%24.2%) from total loans at December 31, 2023.2024 including $393,587,000 of gross loans receivable, net of purchase accounting adjustments, recorded effective October 1, 2025 pursuant to the acquisition of Susquehanna. In comparing outstanding balances at December 31, 20242025 and 2023,2024, total commercial loans were up $49,632,000$376,154,000 (3.6%),or reflecting26.4%, growthtotal inoutstanding owner occupied commercial real estate loans of $23,825,000, other commercial loans of $23,584,000 and non-owner occupied commercial real estate loans of $2,223,000. Within non-owner occupied commercial real estate loans, multi-family residentialconsumer loans increased $41,098,000$46,422,000 reflectingor the72.6% completionand of several Corporation-financed construction projects in 2024. Total outstandingtotal residential mortgage loans were down $5,705,000 (1.4%), and total consumer loans increased $3,782,000$35,941,000 (6.3%).or 8.8%.

Also included in Table VII is additional detail regarding the composition of the non-owner occupied commercial real estate loan portfolio at December 31, 2024.2025. The data in Table VII shows the amortized cost inof non-owner occupied commercial real estate loans for which the primary purpose is utilization of office space by third parties was $102,831,000,$125,175,000, or 5.4%5.3% of gross loans receivable. At December 31, 2024,2025, within this segment there were two loans with a total amortized cost basis of $3,147,000$2,787,000 in nonaccrual status with no specificindividual allowances.allowances Duringand the third quarter 2024, there was a partial charge-off of $640,000 on one of the office loans in nonaccrual status. The charge-off resulted from a decrease in the appraised value of property which is the primary source of collateral. At December 31, 2024, the carrying value of this loan was $1,814,000. The remainder of the non-owner occupied commercial real estate loans with a primary purpose of office space utilization were in accrual status with no specificindividual allowance at December 31, 2024.2025.

While the Corporation’s lending activities are primarily concentrated in its market areas, a portion of the Corporation’s commercial loan segment consists of participation loans. Participation loans represent portions of larger commercial transactions for which other institutions are the “lead banks”. Although not the lead bank, the Corporation conducts detailed underwriting and monitoring of participation loan opportunities. Participation loans are included in the “Commercial and industrial”, “Commercial loans secured by real estate”, “Political subdivisions” and “Other commercial” classes in the loan tables presented in this Form 10-K. Total participation loans outstanding amounted to $107,351,000 at December 31, 2025, up from $35,129,000 at December 31, 2024,2024. downThe increase in 2025 resulted from $38,652,000participation atloans Decemberacquired 31,from 2023.Susquehanna.

The Corporation originates and sells residential mortgage loans to the secondary market through the MPF Xtra program administered by the Federal Home Loan Banks of Pittsburgh and Chicago. Residential mortgages originated and sold through the MPF Xtra program consist primarily of conforming, prime loans sold to the Federal National Mortgage Association (Fannie Mae), a quasi-government entity. The Corporation also originates and sells residential mortgage loans to the secondary market through the MPF Original program, administered by the Federal Home Loan Banks of Pittsburgh and Chicago. Residential mortgages originated and sold through the MPF Original program consist primarily of conforming, prime loans sold to the Federal Home Loan Bank of Pittsburgh. The Corporation also may originateoriginates and sell larger-balance, nonconformingsells mortgages under the MPFPennsylvania DirectHousing Program.Finance TheAgency Corporationand doesother notprograms retainthough servicingthe rightsvolume forof loanssales soldhas been small in comparison to the volume under the MPF Direct Program. Through December 31, 2024, the Corporation’s activity under the MPF Direct Program has been minimal.programs.

For loan sales originated under the MPF programs, the Corporation provides customary representations and warranties to investors that specify, among other things, that the loans have been underwritten to the standards established by the investor. The Corporation may be required to repurchase a loan and reimburse a portion of fees received or reimburse the investor for a credit loss incurred on a loan, if it is determined that the representations and warranties have not been met. Such repurchases or reimbursements generally result from an underwriting or documentation deficiency. At December 31, 2024,2025, the total outstanding balance of loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $2,671,000.$2,598,000 and the corresponding total outstanding balance of repurchased loans at December 31, 2024 was $3,029,000.

At December 31, 2025, outstanding balances of loans sold and serviced through the MPF Xtra and Original programs totaled $450,120,000, including loans sold through the MPF Xtra program of $272,656,000 and loans sold through the Original program of $177,464,000. At December 31, 2024, outstanding balances of loans sold and serviced through the MPF Xtra and Original programs totaled $329,$329,766,000. 766,000,The includingoutstanding balance of residential mortgage loans soldoriginated throughand serviced by the MPFCorporation Xtrathat programhave been sold to third parties increased $120,354,000 from the total at December 31, 2024, reflecting the impact of $158,302,000servicing andobligations assumed on such loans that had been sold throughby Susquehanna prior to the Original program of $171,464,000.merger. Based on the fairly limited volume of required repurchases to date, no allowance has been established for representation and warranty exposures as of December 31, 2024.2025.

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

On October 1, 2025, the Corporation completed its acquisition of Susquehanna Community Financial, Inc. (“Susquehanna”). Susquehanna was the parent company of Susquehanna Community Bank, with seven banking offices located in Lycoming, Northumberland, Snyder and Union Counties in Pennsylvania. In connection with the acquisition, the Corporation issued approximately 2.3 million shares of common stock to the former Susquehanna shareholders, resulting in merger consideration valued at $44.6 million and an increase in stockholders’ equity of $44.4 million, net of issuance costs. Intangible assets recorded included goodwill of $10.8 million and a core deposit intangible asset of $10.7 million. Assets acquired included loans valued at $393.6 million, securities valued at $147.6 million, bank-owned life insurance valued at $8.0 million and cash and due from banks of $6.1 million. Liabilities assumed included deposits valued at $501.5 million and short-term borrowings valued at $45.8 million. The assets purchased and liabilities assumed were recorded at their preliminary estimated fair values at the time of closing and may be adjusted for up to one year subsequent to the acquisition. There were no adjustments to the fair value measurements of assets acquired or liabilities assumed in the first quartersix months of 2026.

FirstSecond Quarter 2026 as Compared to FirstSecond Quarter 2025

FirstSecond quarter 2026 net income was $273,000,$14,057,000, or $0.02$0.79 per diluted share, as compared to $6,293,000,$6,117,000, or $0.41$0.40 per diluted share, in the firstsecond quarter 2025. First quarter 2026 earnings were impacted by an elevated provision for credit losses discussed below. Significant variances were as follows:

The presentation of consolidated financial statements in conformity with U.S. generally accepted accounting principlesGAAP requires management to make estimates and assumptions that affect many of the reported amounts and disclosures. Actual results could differ from these estimates.

For acquired loans at the merger date, management evaluated and classified loans based upon whether the loans had experienced a more-than-insignificant amount of credit deterioratingdeterioration since origination. To determine the fair value of the loans, significant estimates and assumptions were applied, including projected cash flows, discount rates, repayment speeds, credit loss severity rates, default rates and realizable collateral values. In November 2025, the Financial Accounting Standards Board issued Accounting Standards Update 2025-08, Financial Instruments – Credit Losses (“ASU 2025-08”). The Corporation adopted ASU 2025-08 in accounting for the Susquehanna acquisition. Consistent with ASU 2025-08, the Corporation recorded loans receivable at fair value plus an allowance for credit losses of $7.1 million, including allowances totaling $2.6 million on loans with more than insignificant deterioration in credit quality subsequent to origination (“PCD”) loans and an allowance of $4.5 million on non-PCD loans at acquisition.

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 six-month periods ended MarchJune 31,30, 2026 and 2025. In each of these tables, the amounts of interest income earned on tax-exempt securities and loans have been adjusted to a fully taxable-equivalent basis. Management believes presentation of net interest income on a fully taxable-equivalent basis, which is a non-GAAPnon-U.S. GAAP financial measure, provides investors with meaningful information for purposes of comparing returns on tax-exempt securities and loans with returns on taxable securities and loans. Accordingly, the amount of net interest income on a fully taxable-equivalent basis reflected in these tables exceed the net interest income amounts presented in the consolidated financial statements. A reconciliation of net interest income on a fully taxable-equivalent basis to the closest U.S. GAAP financial measure is included with Table IV. The discussion that follows is based on amounts in the related tables.

Three-Month Periods Ended MarchJune 31,30, 2026 and 2025

Fully taxable equivalent net interest income (a non-GAAPnon-U.S. GAAP measure) was $28,685,000$29,855,000 in the firstsecond quarter of 2026, $8,499,000$8,493,000 (42.1%39.8%) higher than in the firstsecond quarter of 2025, including the benefit of income from growth in net earning assets resulting from the Susquehanna merger. As presented in Table VI showsVI, the net impact of changes in the volume increased net interest income by $5,949,000$6,058,000 in the firstsecond quarter 2026 as compared to firstsecond quarter 2025 and changes in interest rates increased net interest income by $2,550,000$2,435,000 in the firstsecond quarter 2026 as compared to firstsecond quarter 2025. The increase in net interest income reflected an increase in interest income of $8,899,000$9,129,000 and an increase in interest expense of $400,000.$636,000. As presented in Table V, the Net Interest Margin was 3.98%4.07% in the firstsecond quarter 2026 as compared to 3.38%3.52% in the firstsecond quarter 2025, and the “Interest Rate Spread” (excess of average rate of return on earning assets over average cost of funds on interest-bearing liabilities) increased to 3.45%3.55% in 2026 from 2.69%2.84% in 2025. The average yield on earning assets of 5.66%5.70% was 0.31% higher in 2026 compared to 2025, and the average rate on interest-bearing liabilities of 2.21%2.15% in 2026 was 0.45%0.40% lower. Accretion of acquisition accounting valuation adjustments related to the Susquehanna merger had a positive impact of $765,000$416,000 including accretion of $379,000 on loans of $728,000 and $37,000 on time deposits.

Interest expense on deposits increased $466,000,$536,000, as the average balance of interest-bearing deposits increased $435,482,000$432,070,000 while the average rate on interest-bearing deposits decreased to 2.02%1.95% in 2026 from 2.45%2.34% in 2025. The increase in average deposit balances included the impact of the Susquehanna acquisition as well as organic growth. Within average deposits, average brokered deposits were $2,247,000 at an average rate of 3.79% in 2026 as compared to $26,580,000 at an average rate of 4.76% in 2025. In comparing 2026 to 2025, average savings deposits increased $166,089,000, average interest checking deposits increased $130,728,000,$154,475,000, average savings deposits increased $149,192,000, average time deposits increased $108,224,000,$93,499,000, average noninterest-bearing demand deposits increased $63,561,000$55,659,000 and average total money market accounts increased $30,441,000.$34,904,000.

Interest expense on borrowed funds decreasedincreased $66,000$100,000 in 2026 as compared to 2025. Interest expense on short-term borrowings was $276,000$337,000 in 2026 compared to less than $1,000 in 2025 as the average balance of short-term borrowings increased to $28,203,000$34,880,000 in 2026 from $1,400,000$980,000 in 2025. Interest expense on long-term borrowings (FHLB advances) decreased $343,000$251,000 to $1,446,000$1,423,000 in 2026 from $1,789,000$1,674,000 in 2025. The average balance of long-term borrowings was $134,034,000$133,004,000 in 2026, down from an average balance of $162,392,000$149,704,000 in 2025. Borrowings are classified as long-term within the Tables based on their term at origination or assumption in business combinations. The average rate on long-termtotal borrowingsborrowed funds was 4.38%4.21% in 2026 compared to 4.47%4.27% in 2025.

Note: Interest income from tax-exempt securities and loans has been adjusted to a fully taxable-equivalent basis (a non-GAAPnon-U.S. GAAP measure), using the Corporation’s marginal federal income tax rate of 21%. The following table reconciles net interest income under U.S. GAAP as compared to net interest income as adjusted to a fully taxable-equivalent basis.

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 firstsecond quarter 2026 of $62,000$3,368,000 was $1,349,000$1,953,000 lowerhigher than the provision for the firstsecond quarter 2025.2025, and the provision for the six months ended June 30, 2026 of $3,430,000 was $604,000 higher than the amount for the first six months of 2025 due to a higher amount of pre-tax income in 2026. The effective tax rate (tax provision as a percentage of pre-tax income) was 18.5%19.3% in the firstsecond quarter 2026 compared to 18.3%18.8% in the second quarter 2025 and 19.3% for the first quartersix months of 2026 as compared to 18.5% for the first six months of 2025. The Corporation’s effective tax rates differ from the statutory federal rate of 21% principally because of the effects of tax-exempt interest income, nondeductible interest expense, state income taxes and other permanent differences.

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 MarchJune 31,30, 2026 and December 31, 2025 represents the following temporary difference components:

Management believes the recorded net deferred tax asset at MarchJune 31,30, 2026 is fully realizable; however, if management determines the Corporation will be unable to realize all or part of the net deferred tax asset, the Corporation would adjust the deferred tax asset, which would negatively impact earnings.

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

As reflected in the table above, the fair value of available-for-sale securities was lower than the amortized cost basis by $32,175,000,$31,132,000, or 6.1%,5.9%, at MarchJune 31,30, 2026, $29,685,000, or 5.5%, at December 31, 2025, $47,543,000, or 10.6%, at December 31, 2024 and $49,213,000, or 10.6%, at December 31, 2023. The volatility in the fair value of the portfolio, including the significant reduction in fair value, resulted from changes in interest rates.

As described in Note 6 to the unaudited consolidated financial statements, management determined the Corporation does not have the intent to sell, nor is it more likely than not that it will be required to sell, available-for-sale debt securities in an unrealized loss position at MarchJune 31,30, 2026 before it is able to recover the amortized cost basis. Further, management reviewed the Corporation’s holdings as of MarchJune 31,30, 2026 and concluded there were no credit-related declines in fair value. Additional information related to the types of securities held at MarchJune 31,30, 2026, other than securities issued or guaranteed by U.S. Government entities or agencies, was as follows:

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 MarchJune 31,30, 2026.

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 MarchJune 31,30, 2026.

Table VII shows the composition of the loan portfolio at MarchJune 31,30, 2026 and at year-end from 2021 through 2025. Throughout this time period, the portfolio was primarily commercial in nature. At MarchJune 31,30, 2026, commercial loans represented 76% of the portfolio while residential loans totaled 19% of the portfolio. As shown in Table VII, total loans receivable were higher by $458,517,000 at December 31, 2025 as compared to December 31, 2024. On October 1, 2025, $393,587,000 of gross loans receivable, net of purchase accounting adjustments, were recorded pursuant to the acquisition of Susquehanna.

Also included in Table VII is additional detail as of June 30, 2026 and December 31, 2025 regarding the composition of the non-owner occupied commercial real estate loan portfolio at March 31, 2026.portfolio. As shown in Table VII, at June 30, 2026, the amortized cost of non-owner occupied commercial real estate loans for which the primary purpose is utilization of office space by third parties was $109,404,000,$107,923,000, or 4.6% of gross loans receivable. At MarchJune 31,30, 2026, within this segment there were threetwo loans with a total recordedamortized investmentcost basis of $8,600,000$6,832,000 in nonaccrual status with no individual allowances, including the loan discussed in the Earnings Overview and Provision and Allowance for Credit Losses section with a partial charge-off of $10,056,000 in the first quarter 2026 and an amortized cost basis at MarchJune 31,30, 2026 of $5,836,000.$5,665,000. During the second quarter of 2026, a nonaccrual loan within this category of $1,717,000 was paid off by the borrower through third-party financing and a $675,000 recovery was recorded. The remainder of the non-owner occupied commercial real estate loans with a primary purpose of office space utilization were in accrual status with no individual allowance at MarchJune 31,30, 2026.

While the Corporation’s lending activities are primarily concentrated in its market areas, a portion of the Corporation’s commercial loan segment consists of participation loans. 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 $105,610,000$102,228,000 at MarchJune 31,30, 2026, down from $107,351,000 at December 31, 2025.

The Corporation is a party to financial instruments with off-balance sheet risk, including commitments to extend credit and standby letters of credit. At MarchJune 31,30, 2026, the total contract amount of commitments to extend credit was $489,887,000$474,891,000 as compared to $506,996,000 at December 31, 2025, and the contract amount of standby letters of credit was $59,161,000$62,133,000 at MarchJune 31,30, 2026 as compared to $58,914,000 at December 31, 2025.

The Corporation maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, commercial letters of credit and credit enhancement obligations related to residential mortgage loans sold with recourse, when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable (i.e. commitment cannot be canceled at any time). The allowance for off-balance sheet credit exposures is adjusted as a (credit) provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated lives. The allowance for credit losses for off-balance sheet exposures of $1,039,000$845,000 at MarchJune 31,30, 2026 and $1,029,000 at December 31, 2025, is included in accrued interest and other liabilities in the unaudited consolidated balance sheets.

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 MarchJune 31,30, 2026, the total outstanding balance of loans the Corporation has repurchased as a result of identified instances of noncompliance amounted to $2,562,000,$2,532,000, and the corresponding total outstanding balance of repurchased loans at December 31, 2025 was $2,598,000.

At MarchJune 31,30, 2026, outstanding balances of loans sold and serviced through the MPF Xtra and Original programs totaled $451,162,000,$454,642,000, including loans sold through the MPF Xtra program of $176,497,000$175,388,000 and loans sold through the Original program of $274,665,000.$279,254,000. At December 31, 2025, outstanding balances of loans sold and serviced through the MPF Xtra and Original programs totaled $450,120,000, including loans sold through the MPF Xtra program of $177,464,000 and loans sold through the Original program of $272,656,000. Based on the fairly limited volume of required repurchases to date, no allowance has been established for representation and warranty exposures as of MarchJune 31,30, 2026 and December 31, 2025.

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 MarchJune 30, 2026 and December 31, 20262025 iswas as follows:

A summary of the (credit) provision for credit losses for the three-month and six-month periods ended MarchJune 31,30, 2026 and 2025 is as follows:

As shown in Table IX, the ACL on loans individually evaluated decreased to $2,655,000$2,636,000 at MarchJune 31,30, 2026 from $2,772,000 at December 31, 2025, including an ACL of $2,433,000$2,414,000 at MarchJune 31,30, 2026 on acquired PCD loans as part of the Susquehanna acquisition.

In the first quartersix months of 2026, net charge-offs totaled $10,808,000,$10,405,000, or 1.83%0.88% (annualized) of average outstanding loans. Table VIII shows annual average net charge-off rates over the prior five calendar years ranging from a high of 0.26% in 2022 to a low of 0.01% in 2023.

Total nonperforming assets were $42,113,000$40,275,000 at MarchJune 31,30, 2026, up $9,000,000$7,162,000 from December 31, 2025. Nonperforming loans increased $9,008,000$7,170,000 from December 31, 2025. The increase in nonperforming assets and nonperforming loans in the first quarter 2026 included the impact of classifying the nonowner occupied commercial real estate loan referenced above as nonaccrual at MarchJune 31,30, 2026. Table X shows that total nonperforming assets as a percentage of total assets was 1.33%1.28% at MarchJune 31,30, 2026, up from 1.06% at December 31, 2025. Table X also shows that total nonperforming assets as a percentage of assets as of year-end 2021 through 2024, ranged from a high of 1.04% at December 31, 2021 to a low of 0.75% at December 31, 2023.

Over the period 2021-2025from 2021through 2025 and the first 36 months of 2026, each period includes a few large commercial relationships that have required significant monitoring and workout efforts. As a result, a limited number of relationships may significantly impact the total amount of allowance required on individual loans and may significantly impact the (credit) provision for credit losses and the amount of total charge-offs reported in any one period.

Management believes it has been prudent in its decisions concerning identification of loans requiring individual evaluation for credit loss, estimates of loss, and nonaccrual status; however, the actual losses realized from these relationships could vary materially from the ACL calculated as of MarchJune 31,30, 2026. Management continues to closely monitor its commercial loan relationships for credit losses and will adjust its estimates of loss and decisions concerning nonaccrual status, if appropriate.

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

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 $26,151,000$24,882,000 at MarchJune 31,30, 2026.

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

At MarchJune 31,30, 2026, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of consisted of overnightshort-term borrowingborrowings oftotaling $13,113,000,$14,260,000, long-term borrowings with par values totaling $139,489,000$130,392,000 and letters of credit totaling $21,600,000. At December 31, 2025, the Corporation’s outstanding credit facilities with the Federal Home Loan Bank of Pittsburgh consisted of overnight borrowing of $27,000,000, long-term borrowings with par values totaling $120,935,000 and letters of credit totaling $22,987,000. 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 9 to the unaudited consolidated financial statements.