CITIZENS & NORTHERN CORP

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 three-month period ended March 31, 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.

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.

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:

The amounts shown in the table immediately above are included in the following line items in the consolidated statements of income:

Changes in the components of accumulated other comprehensive (loss) income are as follows and are presented net of tax:

4. CASH AND DUE FROM BANKS

Cash and due from banks at March 31, 2025 and December 31, 2024 include the following:

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 March 31, 2025 and December 31, 2024 are summarized as follows. No allowance for credit losses was recorded at March 31, 2025 and December 31, 2024.

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 March 31, 2025 and December 31, 2024 for which an allowance for credit losses has not been recorded:

As reflected in the table above, gross unrealized holding losses on available-for-sale debt securities totaled $42,819,000 at March 31, 2025 and $47,806,000 at December 31, 2024. At March 31, 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 March 31, 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 March 31, 2025 and December 31, 2024, all of the Corporation’s holdings of bank holding company debt securities, obligations of states and political subdivisions and private label commercial mortgage-backed securities were investment grade and there have beenno payment defaults.

Based on the results of the assessment, there wasno ACL required on available-for-sale debt securities in an unrealized loss position at March 31, 2025 and December 31, 2024.

There wereno gross realized gains and losses from the sale of available-for-sale debt securities for the three months ended March 31, 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 March 31, 2025. Actual maturities may differ from contractual maturities because counterparties may have the right to call or prepay obligations with or without call or prepayment penalties.

The Corporation’s mortgage-backed securities and collateralized mortgage obligations have stated maturities that may differ from actual maturities due to borrowers’ ability to prepay obligations. Cash flows from such investments are dependent upon the performance of the underlying mortgage loans and are generally influenced by the level of interest rates. In the table above, mortgage-backed securities and collateralized mortgage obligations are shown in one period.

Investment securities carried at $168,981,000 at March 31, 2025 and $190,949,000 at December 31, 2024 were pledged as collateral for public deposits, trusts and certain other deposits as provided by law. 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 $14,834,000 at March 31, 2025 and $15,018,000 at December 31, 2024. The Corporation evaluated its holding of FHLB-Pittsburgh stock for impairment and deemed the stock to not be impaired at March 31, 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.

In July 2023, C&N Bank became a member of the Federal Reserve System. As a member, C&N Bank is required to purchase and maintain stock in the Federal Reserve Bank of Philadelphia. There is no active market for Federal Reserve Bank stock, and it must ordinarily be redeemed by the Federal Reserve Bank of Philadelphia in order to be liquidated. C&N Bank’s investment in Federal Reserve Bank stock, included in other assets in the consolidated balance sheets, was $6,311,000 at March 31, 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 $876,000 at March 31, 2025 and $863,000 December 31, 2024, consisting exclusively ofone mutual fund. There was an unrealized loss on the mutual fund of $124,000 at March 31, 2025 and $137,000 at December 31, 2024. Changes in the unrealized gains or losses on

this security, which are included in other noninterest income in the consolidated statements of income, were a gain of $13,000 in the first quarter 2025 and a loss of $9,000 in the first quarter 2024.

6. LOANS AND ALLOWANCE FOR CREDIT LOSSES

Loans receivable at March 31, 2025 and December 31, 2024 are summarized as follows:

Summary of Loans by Type

(In Thousands)

In the table above, outstanding loan balances are presented net of deferred loan origination fees, net, of $4,005,000 at March 31, 2025 and $4,136,000 at December 31, 2024.

The Corporation grants loans to individuals as well as commercial and tax-exempt entities. Commercial, residential and personal loans are made to customers geographically concentrated in Northcentral Pennsylvania, the Southern tier of New York State, Southeastern Pennsylvania and Southcentral Pennsylvania. Although the Corporation has a diversified loan portfolio, a significant portion of its debtors’ ability to honor their contracts is dependent on the local economic conditions within the region.

The following tables presents an analysis of past due loans as of March 31, 2025 and December 31, 2024:

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.

The following table presents the amortized cost of loans by credit quality indicators by year of origination as of March 31, 2025:

The following table presents the amortized cost of loans by credit quality indicators by year of origination as of December 31, 2024:

The following tables are a summary of the Corporation’s nonaccrual loans by major categories for the periods indicated.

The Corporation recognized interest income on nonaccrual loans of $230,000 in the three months ended March 31, 2025 and $231,000 in the three months ended March 31, 2024.

The following table represents the accrued interest receivable written off by reversing interest income during the three-month periods ended March 31, 2025 and 2024:

The Corporation has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans:

The following table details the amortized cost of collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related allowance for credit losses allocated to these loans:

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 includestwo 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 months ended March 31, 2025 and 2024.

The ACL on loans individually evaluated increased to $189,000 at March 31, 2025 from $122,000 at December 31, 2024. At March 31,2025, there were loans to two borrowers with a total amortized cost basis of $945,000 for which individual ACLs were recorded. At December 31, 2024, there were loans toone borrower with a total amortized cost basis of $258,000 for which an individual ACL was recorded.

The ACL on loans collectively evaluated was $19,983,000 at March 31, 2025, up from $19,913,000 at December 31, 2024. The increase in the collectively evaluated portion of the ACL at March 31, 2025 as compared to December 31, 2024 included a net increase related to changes in qualitative adjustments partially offset by decreases in the WARM method estimate based on the Corporation’s net charge-off experience and in the economic forecast.

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 months ended March 31, 2025 and March 31, 2024, the Corporation madeno 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 March 31, 2025 and the twelve-month period preceding March 31, 2024 (in thousands):

As shown, in the table immediately above, at March 31, 2025 one loan secured by owner occupied commercial real estate with an amortized cost of $217,000 and one of the loans secured by non-owner occupied commercial real estate with an amortized cost basis of $1,801,000 were in nonaccrual status.

For the loan secured by non-owner occupied real estate with an amortized cost basis of $1,801,000 at March 31, 2025, the Corporation had extended the maturity for 12 months in the fourth quarter 2023. In 2024, the borrower continued to experience financial difficulty, and the Corporation provided anothersix-month extension of the maturity. The Corporation recorded a partial charge-off of $640,000 on this loan in 2024. There wasno specific ACL on this loan at March 31, 2025 and December 31, 2024.

The loan that was past due more than 90 days at March 31, 2024 in the table above was in default with its modified terms at March 31, 2025 and March 31, 2024. The Corporation received payments totaling $228,000 in the twelve-month period ended March 31, 2025, all of which were applied to principal. The amortized cost basis of the loan was $1,153,000 at March 31, 2025.

Except as described above, the Corporation had no commitments to lend any additional funds on modified loans during the three months ended March 31, 2025 and 2024, and the Corporation hadno loans that defaulted during the three months ended March 31, 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:

The amortized cost of consumer mortgage loans secured by residential real properties for which formal foreclosure proceedings were in process is as follows:

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 March 31, 2025 and December 31, 2024 are as follows:

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 $463,000 at March 31, 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 months ended March 31, 2025 and 2024:

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 March 31, 2025 and December 31, 2024, the net carrying value of goodwill was $52,505,000.

Information related to core deposit intangibles is as follows:

Amortization expense related to core deposit intangibles is included in other noninterest expense in the consolidated statements of income, as follows:

8. BORROWED FUNDS

SHORT-TERM BORROWINGS

Short-term borrowings (initial maturity within one year) include the following:

The weighted average interest rate on total short-term borrowings outstanding was 0.10% at March 31, 2025 and December 31, 2024.

The Corporation engages in repurchase agreements with certain commercial customers. These agreements provide that the Corporation sells specified investment securities to the customers on an overnight basis and repurchases them on the following business day. The weighted average rate paid by the Corporation on customer repurchase agreements was 0.10% at March 31, 2025 and December 31, 2024. The carrying value of the underlying securities was $580,000 at March 31, 2025 and $2,500,000 at December 31, 2024.

The FHLB-Pittsburgh loan facility is collateralized by qualifying loans secured by real estate with a book value totaling $1,347,840,000 at March 31, 2025 and $1,351,770,000 at December 31, 2024. Also, the FHLB-Pittsburgh loan facility requires the Corporation to invest in established amounts of FHLB-Pittsburgh stock. The carrying values of the Corporation’s holdings of FHLB-Pittsburgh stock (included in other assets in the consolidated balance sheets) were $14,834,000 at March 31, 2025 and $15,018,000 at December 31, 2024. The Corporation’s total credit facility with FHLB-Pittsburgh was $948,970,000 at March 31, 2025, including an unused (available) amount of $772,430,000. 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.

The Corporation had available credit with other correspondent banks totaling $75,000,000 at March 31, 2025 and December 31, 2024. These lines of credit are primarily unsecured. No amounts were outstanding at March 31, 2025 or December 31, 2024.

The Corporation has a line of credit with the Federal Reserve Bank of Philadelphia’s Discount Window. At March 31, 2025, the Corporation had available credit in the amount of $17,431,000 on this line withno outstanding advances. At December 31, 2024, the Corporation had available credit in the amount of $18,093,000 on this line withno outstanding advances. As collateral for this line, the Corporation has pledged available-for-sale securities with a carrying value of $18,236,000 at March 31, 2025 and $18,881,000 at December 31, 2024.

LONG-TERM BORROWINGS – FHLB ADVANCES

Long-term borrowings from FHLB-Pittsburgh are as follows:

Note: Weighted-average rates are presented as of March 31, 2025.

SENIOR NOTES

In 2021, the Corporation issued and sold $15.0 million in aggregate principal amount of 2.75% Fixed Rate Senior Unsecured Notes due 2026 (the "Senior Notes"). The Senior Notes mature on June 1, 2026 and bear interest at a fixed annual rate of 2.75%. The Corporation is not entitled to redeem the Senior Notes, in whole or in part, at any time prior to maturity and the Senior Notes are not subject to redemption by the holders. The Senior Notes are unsecured and unsubordinated obligations of the Corporation only and are not obligations of, and are not guaranteed by, any subsidiary of the Corporation.

The Senior Notes were recorded, net of debt issuance costs of $337,000, at an initial carrying amount of $14,663,000. Debt issuance costs are amortized over the term of the Senior Notes as an adjustment of the effective interest rate. Amortization of debt issuance costs associated with the Senior Notes totaling $18,000 in the first quarter 2025 and $17,000 in the first quarter 2024 was included in interest expense in the unaudited consolidated statements of income.

At March 31, 2025 and December 31, 2024, outstanding Senior Notes are as follows:

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 $29,000 in the first quarter 2025 and $28,000 in the first quarter 2024, was included in interest expense in the unaudited consolidated statements of income.

At March 31, 2025 and December 31, 2024, the carrying amounts of subordinated debt agreements are as follows:

9. STOCK-BASED COMPENSATION PLANS

The Corporation has a stock incentive plan for selected officers and the independent directors. The Corporation made first quarter 2025 restricted stock awards to employees that vest ratably over three years. Following is a summary of restricted stock awards granted in the three-month period ended March 31, 2025:

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 $325,000 in the first quarter 2025 and $326,000 in the first quarter 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 bytwo individuals, one of whom maintained accounts at C&N Bank. The plaintiffs have sued C&N Bank, along with another bank, an additional law firm and accounting firm defendants. The case is styled Goldovsky, et al. v. Rauld, et al. Plaintiffs have 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 has filed motions to dismiss the case for wont of personal jurisdiction and failure to state a claim. The Plaintiffs have responded to those motions. Plaintiffs have filed an application for certification of the suit as a class action. The court has stayed the motions to dismiss pending consideration of the class action certification application. Following depositions of thefour plaintiffs on issues germane to class action certification, C&N Bank and each of the other defendants have filed briefs in opposition to the plaintiffs’ class certification motion. A hearing on the motion for class certification took place on February 18, 2025. 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. To date, the plaintiffs have not petitioned the Court of Appeals for leave to appeal the order to dismiss.

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 $140,772,000 at March 31, 2025 and $141,940,000 at December 31, 2024. There wereno interest rate swaps originated in the three-month periods ended March 31, 2025, and 2024. There wereno gross amounts of interest rate swap-related assets and liabilities not offset in the consolidated balance sheets at March 31, 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 no net impact on the consolidated statements of income from RPAs in the first quarter 2025 as compared to an increase of $1,000, included in other noninterest income, in the first quarter 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 March 31, 2025 and December 31, 2024:

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 $1,090,000 at March 31, 2025 and 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 March 31, 2025 and December 31, 2024, assets and liabilities measured at fair value and the valuation methods used are as follows:

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 March 31, 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:

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:

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 March 31, 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:

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:

13. SEGMENT REPORTING

The Corporation’sone 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.

(1 )Other segment expenses included expenses for professional fees, data processing and telecommunications, occupancy and Pennsylvania shares tax.

The Corporation’s segment assets represent the total assets as presented in the consolidated balance sheets at March 31, 2025 and December 31, 2024.

14. SUBSEQUENT EVENTS

On April 23, 2025, the Corporation announced that it had entered into an Agreement and Plan of Merger with Susquehanna Community Financial, Inc. (“SQCF”) pursuant to which it will acquire SQCF. SQCF is the financial holding company for Susquehanna Community Bank (“Susquehanna”), which operates 7 banking offices in Central Pennsylvania. SQCF had assets of $598 million as of March 31, 2025. Under the terms of the definitive agreement, each share of SQCF’s common stock issued and outstanding immediately prior to the effective time of the merger will be converted into the right to receive 0.80 shares of the Corporation’s common stock. Holders of SQCF common stock prior to the consummation of the merger will own approximately 13% of the Corporation’s common stock outstanding immediately following the consummation of the merger. The merger, which is expected to close in the fourth quarter of 2025, is subject to the satisfaction of customary closing conditions, including receipt of customary regulatory approvals and approval by SQCF’s shareholders.