CITIZENS & NORTHERN CORP

The following is a discussion of the primary purpose of each element within our executive compensation program.

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Long-term Incentives (“LTI”). The Corporation’s 1995 Stock Incentive Plan provided participating executives with the ability to receive equity awards (as determined by the Committee, as administrator of the plan), and was intended to focus the recipient’s efforts on the strategic direction and goals of the business, incent ownership in the Corporation and promote a vested interest in the Corporation’s long-term success. The LTI awards made in 2023 were the final awards made under the 1995 Stock Incentive Plan. Outstanding restricted stock awards that were granted prior to adoption of the Citizens & Northern Corporation 2023 Equity Incentive Plan (the “2023 Equity Plan,” as described below) will be governed under the 1995 Stock Incentive Plan.

In 2023, the Committee reviewed and recommended approval of restricted stock awards to executives based upon its assessment of individual performance, a review of the executive’s existing long-term incentives, and retention considerations, including LTI grants to its NEOs in the form of 50% RSAs and 50% PRSAs. RSAs granted to the Corporation’s and the Bank’s executive officers in 2023 vest equally over a three-year period. On each anniversary date of the 2023 RSAs, one-third of the total shares will be distributed based on the recipient’s satisfactory performance of his or her job.

The Corporation’s PRSAs granted in 2023 are structured in a way where performance is assessed at the end of each year within the three-year performance period. On each anniversary date, up to one-third of the total PRSA shares will be distributed based on the recipient’s satisfactory performance of his or her job and the Corporation’s attainment of an earnings-based performance standard. For the 2023 LTI awards, 50% of the PRSAs are evaluated based on Core ROAE performance while 50% are evaluated based on Core ROAA performance. Like the Annual Incentive Plan, 2023 Core ROAE and Core ROAA performance is assessed by comparison of the Corporation’s level of performance to goals based on the peer group’s performance for the 12 months ended September 30, 2023. The threshold requirement for Core ROAE is based on the 35th percentile rank, while the threshold requirement for Core ROAA is based on the 65th percentile rank as compared to the peer group’s 12 months ended September 30, 2023 results. All restricted shares not distributed due to the recipient’s unsatisfactory performance of his or her job or due to the Corporation failing to achieve the minimum Core ROAE or Core ROAA threshold are forfeited by the executive and revert back to the Corporation as of the anniversary date on which such determinations are made.

In April 2023, upon approval by the shareholders, the 2023 Equity Plan became effective. Adoption of the new plan permits the continued use of equity incentives as a component of compensation for participating employees and independent directors and will assist executive officers and independent directors in meeting the Board of Directors’ Stock Ownership requirements as described in the Corporate Governance section of this proxy statement. The purpose of the 2023 Equity Plan is to promote the Corporation’s long-term financial success by providing a means to attract, retain and reward individuals who contribute to that success and to further align their interests with those of the Corporation’s shareholders through the ownership of shares of common stock of the Corporation and/or through compensation tied to the value of the Corporation’s common stock. The Committee administers the 2023 Equity Plan. At December 31, 2023, a balance of 500,000 shares of common stock remain available for issuance under the 2023 Equity Incentive Plan.

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SERP - The SERP is intended to replace some of the benefits lost by executives under federally mandated restrictions on retirement income benefits to highly compensated employees under qualified retirement income plans like pensions and 401(k) plans. The Corporation’s SERP provides a retirement benefit to participants who retire after attaining age 55, with 5 years of Participation in the Plan. Participants vest earlier than age 55 in the event of disability, death or in the event of a change in control of the Corporation. Annual contributions to the SERP are at the discretion of the Board of Directors, and the Board may terminate the SERP at any time.

Historically, the Corporation’s annual contribution has been based on a formula designed to provide an annual benefit equal to 20% of the individual’s highest five-year average compensation and assumes retirement at age 65. In determining the annual contribution amounts, the Corporation assumes interest rates of 8% for preretirement and 6% for postretirement and utilizes a standard mortality table.

The annual contribution is deposited into each participant’s account held in a trust account at the Bank. While the Bank’s Wealth Management Group manages the trust assets, each participant may direct the investment of the funds credited to their account. All assets in the trust are subject to the claims of the Bank’s creditors in the event of insolvency. The actual amount available to be distributed to a participant at separation of service depends upon the return on the investment of the funds held in the account over time. The actual investment returns do not impact the Corporation’s determination of the annual contribution. Investment returns are allocated to participant accounts daily based on units held of each investment. Upon vesting, amounts credited to a participant’s account are payable, at the election of the participant, in monthly or annual installments.

Deferred Compensation Plan - The Corporation has a nonqualified Deferred Compensation Plan that allows selected officers the option to defer receipt of up to 100% of base salary plus any non-equity incentive plan compensation. The Compensation Committee of the Board of Directors determines employees eligible to participate (“Participants”). The Deferred Compensation Plan does not provide for Corporation contributions.

Participants are given an annual opportunity to elect, by entering into a Participation Agreement with the Corporation, to defer the receipt of eligible compensation by a dollar amount or percentage specified in the Participation Agreement. Participant contributions are deposited into each Participant’s account held in a trust account at the Bank. While the Bank’s Wealth Management Group manages the trust assets, each Participant may direct the investment of the funds credited to their account. All assets in the trust are subject to the claims of the Bank’s creditors in the event of insolvency. The Board of Directors may amend or terminate the Plan at any time; provided, however, that no such amendment or termination shall reduce the balance in any Participant’s account nor affect the terms of the Plan relating to the payment of any account.

Participants are fully vested in their accounts at all times. Upon separation from service, amounts credited to a participant’s account are payable, at the election of the participant, in monthly or annual installments.

None of the named executive officers has a commitment from the Corporation for a tax gross-up payment in the event that their severance benefits exceed the deduction limitations under Internal Revenue Code Section 4999.