13. EMPLOYEE AND POSTRETIREMENT BENEFIT PLANS

DEFINED BENEFIT PLANS

The Corporation sponsors a defined benefit health care plan that provides postretirement medical benefits and life insurance to employees who meet certain age and length of service requirements. Full-time employees no longer accrue service time toward the Corporation-subsidized portion of the medical benefits. The plan contains a cost-sharing feature which causes participants to pay for all future increases in costs related to benefit coverage. Accordingly, actuarial assumptions related to health care cost trend rates do not significantly affect the liability balance at December 31, 2025 and 2024 and are not expected to significantly affect the Corporation’s future expenses. The Corporation uses a December 31 measurement date for the postretirement plan.

In an acquisition in 2007, the Corporation assumed the Citizens Trust Company Retirement Plan, a defined benefit pension plan. This plan covers certain employees who were employed by Citizens Trust Company on December 31, 2002, when the plan was amended to discontinue admittance of any future participant and to freeze benefit accruals. Information related to the Citizens Trust Company Retirement Plan has been included in the tables that follow. The Corporation uses a December 31 measurement date for this plan. In January 2026, the Corporation’s Board of Directors adopted amendments to terminate the Citizens Trust Company Retirement Plan, effective January 31, 2026. The Corporation expects to fund and settle its obligation under the plan sometime in 2026.

The following table shows the funded status of the defined benefit plans:

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In 2025, there was a distribution of $659,000 or approximately 66% of the pension plan’s total accumulated benefit obligation prior to the distribution. The Corporation recognized a loss of $93,000 (included in net periodic benefit cost) in 2025 as a result of this settlement.

At December 31, 2025 and 2024, the following pension plan and postretirement plan liability amounts were recognized in the consolidated balance sheets:

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At December 31, 2025 and 2024, the following items included in accumulated other comprehensive loss had not been recognized as components of expense:

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For the defined benefit pension plan, amortization of the net actuarial loss is expected to be $1,000 in 2026. For the postretirement plan, effective in 2024, amendments to the plan resulted in a decrease of $413,000 in unrecognized prior service cost and a related reduction in net periodic benefit costs from curtailment of $469,000.  In 2026, the net actuarial gain to be amortized as a reduction in expense is $67,000 and the estimated reduction in expense related to prior service cost is $8,000.

The accumulated benefit obligation for the defined benefit pension plan was $340,000 at December 31, 2025 and $938,000 at December 31, 2024.

The components of net periodic benefit costs from defined benefit plans are as follows:

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The weighted-average assumptions used to determine net periodic benefit cost are as follows:

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The weighted-average assumptions used to determine benefit obligations as of December 31, 2025 and 2024 are as follows:

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Estimated future benefit payments, including only estimated employer contributions for the postretirement plan, which reflect expected future service, are as follows:

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The expected return on pension plan assets is a significant assumption used in the calculation of net periodic benefit cost. This assumption reflects the average long-term rate of earnings expected on the funds invested or to be invested to provide for the benefits included in the projected benefit obligation.

C&N Bank’s Wealth Management Department manages the investment of the pension plan assets. The Plan’s securities include mutual funds invested principally in cash and cash equivalents. The fair values of plan assets are determined based on Level 1 inputs (as described in Note 21). The Plan’s assets do not include any shares of the Corporation’s common stock.

PROFIT SHARING AND DEFERRED COMPENSATION PLANS

The Corporation has a profit sharing plan that incorporates the deferred salary savings provisions of Section 401(k) of the Internal Revenue Code. The Corporation’s matching contributions to the Plan depend upon the tax deferred contributions of employees. The Corporation’s total basic and matching contributions were $1,562,000 in 2025, $1,468,000 in 2024 and $1,419,000 in 2023.

The Corporation has an Employee Stock Ownership Plan (ESOP). Contributions to the ESOP are discretionary, and the ESOP uses funds contributed to purchase Corporation stock for the accounts of ESOP participants. These purchases are made in the market (not

directly from the Corporation), and employees are not permitted to purchase Corporation stock under the ESOP. The ESOP includes a diversification feature, which allows participants, upon reaching age 55 and 10 years of service (as defined), to sell up to 50% of their Corporation shares over a period of 6 years. As of December 31, 2025 and 2024, there were no shares allocated for repurchase by the ESOP.

Dividends paid on shares held by the ESOP are charged to retained earnings. All Corporation shares owned through the ESOP are included in the calculation of weighted-average shares outstanding for purposes of calculating earnings per share – basic and diluted. The ESOP held 614,083 shares of Corporation stock at December 31, 2025, 618,148 shares at December 31, 2024 and 579,567 shares at December 31, 2023, all of which had been allocated to Plan participants. The Corporation’s contributions to the ESOP totaled $725,000 in 2025, $665,000 in 2024 and $1,244,000 in 2023.

The Corporation has a nonqualified supplemental deferred compensation arrangement with some of its key officers. Charges to operating expense for officers’ supplemental deferred compensation were $274,000 in 2025, $223,000 in 2024 and $489,000 in 2023. The balance of the liability, which is included in accrued interest and other liabilities in the consolidated balance sheets, is $4,558,000 at December 31, 2025 and $3,164,000 at December 31, 2024.

In connection with the Susquehanna acquisition, the Corporation assumed deferred compensation arrangements with certain former Susquehanna officers who became employees of the Corporation, effective October 1, 2025. Under the terms of the agreement with one of the officers, payments accelerated as a result of the change in control, resulting in payments totaling $35,000 in 2025 with additional payment commitments totaling $206,000 in 2026, $206,000 in 2027 and $172,000 in 2028. The agreements with the other officers provide for payments to be made in monthly installments over 15-year periods, commencing upon retirement. The Corporation recorded expense of $15,000 related to these arrangements in 2025. The discount rates used to measure the liability associated with these obligations ranged from 3.93% to 4.73%. The balance of the liability, which is included in accrued interest and other liabilities in the consolidated balance sheets, is $1,853,000 at December 31, 2025.

In connection with an acquisition in 2020, the Corporation assumed an obligation to provide a supplemental retirement benefit to a former executive. Under the terms of the agreement, the executive or his heirs will receive monthly payments totaling $1 million over a 10-year period which started in October 2025. The Corporation recorded expense of $14,000 in 2025, $14,000 in 2024 and $13,000 in 2023, which is included in salaries and employee benefits in the consolidated statements of income, representing the effective interest cost on the obligation. The discount rate used to measure the liability is 1.5%. The balance of the liability, which is included in accrued interest and other liabilities in the consolidated balance sheets, is $908,000 at December 31, 2025 and $919,000 at December 31, 2024.

The Corporation also has a nonqualified deferred compensation plan that allows selected officers the option to defer receipt of cash compensation, including base salary and any cash bonuses or other cash incentives. This nonqualified deferred compensation plan does not provide for Corporation contributions.

STOCK-BASED COMPENSATION PLANS

At the Annual Meeting of Shareholders on April 20, 2023, the Citizens & Northern Corporation 2023 Equity Incentive Plan (“2023 Equity Incentive Plan”) was approved. A total of 500,000 shares of common stock may be issued under the 2023 Equity Incentive Plan. Awards may be made to participating employees and independent directors under the 2023 Equity Incentive Plan in the form of qualified options (“Incentive Stock Options,” as defined in the Internal Revenue Code), nonqualified options, restricted stock units or restricted stock, any or all of which can be granted with performance-based vesting conditions. At December 31, 2025, 357,936 shares of common stock were available to be issued under this plan.

Outstanding restricted stock awards granted prior to adoption of the 2023 Equity Incentive Plan, including awards made in 2023, are governed under the 1995 Stock Incentive Plan and the Independent Directors Stock Incentive Plan. The restricted stock awards in 2023 under the 1995 Stock Incentive Plan and the Independent Directors Stock Incentive Plan were the final awards under these plans.  

Total stock-based compensation expense is as follows:

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The following summarizes non-vested restricted stock activity for the year ended December 31, 2025:

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Compensation cost related to restricted stock is recognized based on the market price of the stock at the grant date over the vesting period, adjusted for estimated and actual forfeitures. As of December 31, 2025, there was $1,352,000 total unrecognized compensation cost related to restricted stock, which is expected to be recognized over a weighted average period of 1.3 years.

In 2025 and 2024, the Corporation awarded shares of restricted stock under the Stock Incentive Plan, as follows:

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Time-based restricted stock awards granted to independent (non-employee) directors in 2025 and 2024 vest over one-year terms. Time-based restricted stock awards granted to employees in 2025 and 2024 vest ratably over three-year terms, subject to continued employment and satisfactory job performance. Performance-based restricted stock awards granted in 2025 and 2024 vest ratably over three-year terms, with vesting contingent upon meeting conditions based on the Corporation’s earnings as specified in the agreements.

There were no stock options granted in 2025, 2024, or 2023. There was no stock option activity for 2025 and a summary of stock option activity for 2024 and 2023 is presented below.

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There were no outstanding stock options at December 31, 2025 and 2024. The total intrinsic value of options exercised was $14,000 in 2023.

In January 2026, the Corporation granted 57,618 shares of time-based restricted stock awards and 21,246 shares of performance-based restricted stock awards under the 2023 Equity Incentive Plan. The time-based shares vest ratably over three years while the performance-based restricted stock awards vest ratably over three years, with vesting contingent upon meeting earnings-related conditions specified in the agreements. The restricted stock awards made in January 2026 are not included in the tables above.