Annual report
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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2025 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 000-13222 CITIZENS FINANCIAL SERVICES, INC. (Exact name of registrant as specified in its charter) Pennsylvania 23-2265045 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 15 South Main Street, Mansfield, Pennsylvania 16933 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code (570) 662-2121 Securities registered pursuant to Section 12(b) of the Act: Common Stock, Par value $1.00 per share CZFS The Nasdaq Stock Market, LLC Title ofEach Class TradingSymbol(s) Name of Each Exchangeon Which Registered Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒ No Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ☐ Yes ☒ No Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. ☒ Yes ☐ No Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).☒ Yes ☐ No Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or anemerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” inRule 12b-2 of the Exchange Act.: Large accelerated filer ☐ Accelerated filer ☒ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended reporting transition period for complying withany new or revised financial accounting standards provided pursuant to Section 13(a) if the Exchange Act. Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal controlover financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued itsaudit report.☒ If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in thefiling reflect the correction of an error to previously issued financial statements. ☐
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Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation receivedby any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). ☐ Yes ☒ No State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which thecommon equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completedsecond fiscal quarter; $264,808,000 as of June 30, 2025. As of March 3, 2026, there were 4,807,219 shares of the registrant’s common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Certain information required by Part III is incorporated by reference to the Registrant’s Definitive Proxy Statement for the 2026 Annual Meeting ofShareholders.
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Citizens Financial Services, Inc.Form 10-KINDEX PagePART IITEM 1 – BUSINESS 1 – 8ITEM 1A – RISK FACTORS 9 – 17ITEM 1B – UNRESOLVED STAFF COMMENTS 17ITEM 1C – CYBER SECURITY 17-18ITEM 2 – PROPERTIES 18ITEM 3 – LEGAL PROCEEDINGS 18ITEM 4 – MINE SAFETY DISCLOSURES 18PART IIITEM 5 – MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASESOF EQUITY SECURITIES 18 – 20 ITEM 6 – RESERVED 20ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 21 – 51ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 51ITEM 8 – FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 52 – 112ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 113ITEM 9A – CONTROLS AND PROCEDURES 113-114ITEM 9B– OTHER INFORMATION 115ITEM 9C– DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 115PART IIIITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 116ITEM 11 – EXECUTIVE COMPENSATION 116ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS 116 ITEM 13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 117ITEM 14 – PRINCIPAL ACCOUNTANT FEES AND SERVICES 117PART IVITEM 15 – EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 118 – 120ITEM 16 – FORM 10-K SUMMARY 120 SIGNATURES 121
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Index PART IITEM 1 – BUSINESS. CITIZENS FINANCIAL SERVICES, INC. Citizens Financial Services, Inc. (the “Company”), a Pennsylvania corporation, was incorporated on April 30, 1984 to be the holding company for FirstCitizens Community Bank (the “Bank”), a Pennsylvania-chartered bank and trust company. During 2020, CZFS Acquisition Company, LLC (“CZFS”) wasformed as a wholly owned subsidiary of the Company, and subsequently the Company’s interest in the Bank was transferred to CZFS to facilitate the mergerwith MidCoast Community Bancorp, Inc. (“MidCoast”) and its wholly owned subsidiary, MidCoast Community Bank (“MC Bank”), which was completed onApril 17, 2020. During 2024, the Company terminated the corporate existence of CZFS and the interest in the Bank was transferred back to the Company. OnJune 16, 2023, the Company acquired HV Bancorp, Inc. (“HVBC”) and its wholly owned subsidiary, Huntingdon Valley Bank (“HVB”). The Company isprimarily engaged in the ownership and management of CZFS, its subsidiary, the Bank and the Bank’s wholly owned subsidiaries, First Citizens InsuranceAgency, Inc. (“First Citizens Insurance”) and 1st Realty of PA LLC (“Realty”). During 2024, the Bank terminated the corporate existence of Realty. AVAILABLE INFORMATION A copy of the Company’s annual report on Form 10-K, quarterly reports on Form 10-Q, current events reports on Form 8-K, and amendments to thesereports, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are made available free of charge through theCompany’s web site at www.firstcitizensbank.com as soon as reasonably practicable after such reports are filed with or furnished to the Securities and ExchangeCommission. Copies of the reports the Company files electronically with the Securities and Exchange Commission are also available through the Securities andExchange Commission’s website at www.sec.gov. Information on our website shall not be considered as incorporated by reference into this Form 10-K. FIRST CITIZENS COMMUNITY BANK The Bank is a full-service bank engaged in a broad range of banking activities and services for individual, business, governmental and institutionalcustomers. These activities and services principally include checking, savings, and time deposit accounts; residential, commercial and agricultural real estate,commercial and industrial, state and political subdivision and consumer loans; and a variety of other specialized financial services. The Trust and Investmentdivision of the Bank offers a full range of client investment, estate, mineral management and retirement services. The Bank’s main office is located at 15 South Main Street, Mansfield (Tioga County), Pennsylvania. In addition to the main office in Mansfield, the Bankoperates 38 full service offices, two limited branch offices and two mortgage centers in its market areas. The Bank’s north central, Pennsylvania market areaconsists of the Pennsylvania Counties of Bradford, Clinton, Potter, Lycoming and Tioga in north central Pennsylvania. It also includes Allegany, Steuben,Chemung and Tioga Counties in Southern New York. The south-central Pennsylvania market consists of Lebanon county and portions of Berks, Lancaster andSchuylkill Counties in Pennsylvania. The Central Pennsylvania market consists of our offices in Centre, Clinton, Lycoming and Union counties and thesurrounding communities. Our Delaware market consists of Wilmington and Dover, Delaware and portions of Chester County, Pennsylvania and was due to theMidCoast acquisition, which added two offices in Wilmington, Delaware and one office in Dover, Delaware. In November of 2020, the Bank opened a full-service branch in Chester County, Pennsylvania and in 2024, the Bank opened a limited production office in Georgetown, Delaware. The south eastPennsylvania market consists of Montgomery, Bucks and Philadelphia counties in Pennsylvania, as well as Burlington County New Jersey and was the result ofthe HVBC acquisition. The economy of the Bank’s market areas are diversified and include manufacturing industries, wholesale and retail trade, serviceindustries, agricultural and the production of natural resources of gas and timber. We are dependent geographically upon the economic conditions in northcentral, central and south-central Pennsylvania, the southern tier of New York and the cities and surrounding areas of Wilmington and Dover, Delaware. The economy of the Bank’s market areas are diversified and include manufacturing industries, wholesale and retail trade, service industries, agriculturaland the production of natural resources of gas and timber. We are dependent geographically upon the economic conditions in north central, central south-eastand south-central Pennsylvania, the southern tier of New York and the cities and surrounding areas of Wilmington and Dover, Delaware. 1
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Index COMPETITION The banking industry in the Bank’s service areas is intensely competitive, with competitors including local community banks, larger regional banks, andfinancial service providers such as consumer finance companies, thrifts, investment firms, mutual funds, insurance companies, credit unions, mortgage bankingfirms, financial companies, financial affiliates of industrial companies, FinTech and internet entities, and government sponsored agencies, such as Freddie Mac,Fannie Mae and Farm Credit. Competitive pressures continue to increase in our service areas as entities seek both loan and deposit growth, as well asgeographic expansion. The Bank is generally competitive with all competing financial institutions in its service areas with respect to interest rates paid on timeand savings deposits, service charges on deposit accounts and interest rates charged on loans. Additional information related to our business and competition is included in Part II, Item 7, “Management’s Discussion and Analysis of FinancialCondition and Results of Operations.” HUMAN CAPITAL RESOURCES At December 31, 2025, we had a total of 405 employees, including 32 part-time and 8 commissioned employees and of which approximately 71% arewomen. The full-time equivalent of our total employees at December 31, 2025 was 380. As a financial institution, approximately 42% of our employees areemployed at our branch and loan production offices. The success of our business is highly dependent on our employees, who provide value to our customers andcommunities through their dedication to our mission. Our employees are not represented by any collective bargaining group. Management considers itsemployee relations to be good. We encourage and support the growth and development of our associates and, wherever possible, seek to fill positions by promotion and transfer fromwithin the organization. Continual learning and career development are advanced through internally developed training programs and specialty education withinbanking and using universities that offer Banking Management programs. We believe our ability to attract and retain employees is a key to our success.Accordingly, we strive to offer competitive salaries and employee benefits to all employees and monitor salaries in our market areas. At December 31, 2025,19% of our current staff had been with us for fifteen years or more. The safety, health and wellness of our employees is a top priority. All employees are asked not to come to work when they experience signs or symptoms ofillness. On an ongoing basis, we further promote the health and wellness of our associates by strongly encouraging work-life balance and sponsoring variouswellness programs, whereby associates are compensated for incorporating healthy habits into their daily routines. SUPERVISION AND REGULATION GENERAL The Bank is subject to extensive regulation, examination and supervision by the Pennsylvania Department of Banking and Securities (“PDB”) and, as amember of the Federal Reserve System, by the Board of Governors of the Federal Reserve System (the “FRB”). Federal and state banking laws and regulationsgovern, among other things, the scope of a bank’s business, the investments a bank may make, the reserves against deposits a bank must maintain, terms ofdeposit accounts, loans a bank makes, the interest rates a bank charges and collateral a bank takes, the activities of a bank with respect to mergers andconsolidations and the establishment of branches. The Company is registered as a bank holding company and is subject to supervision and regulation by theFRB under the Bank Holding Company Act of 1956, as amended (the “BHCA”). 2
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Index PENNSYLVANIA BANKING LAWS The Pennsylvania Banking Code (“Banking Code”) contains detailed provisions governing the organization, location of offices, rights and responsibilitiesof directors, officers, and employees, as well as corporate powers, savings and investment operations and other aspects of the Bank and its affairs. The BankingCode delegates extensive rule-making power and administrative discretion to the PDB so that the supervision and regulation of state-chartered banks may beflexible and readily responsive to changes in economic conditions and in savings and lending practices. Pennsylvania law also provides Pennsylvania state-chartered institutions elective parity with the power of national banks, federal thrifts, and state-charteredinstitutions in other states as authorized by the FDIC, subject to a required notice to the PDB. The Federal Deposit Insurance Corporation Act (“FDIA”),however, prohibits state-chartered banks from making new investments, loans, or becoming involved in activities as principal and equity investments which arenot permitted for national banks unless (1) the FDIC determines the activity or investment does not pose a significant risk of loss to the Deposit Insurance Fundand (2) the bank meets all applicable capital requirements. Accordingly, the additional operating authority provided to the Bank by the Banking Code isrestricted by the FDIA. In April 2008, banking regulators in the States of New Jersey, New York, and Pennsylvania entered into a Memorandum of Understanding (the “InterstateMOU”) to clarify their respective roles, as home and host state regulators, regarding interstate branching activity on a regional basis pursuant to the Riegle-NealAmendments Act of 1997. The Interstate MOU establishes the regulatory responsibilities of the respective state banking regulators regarding bank regulatoryexaminations and is intended to reduce the regulatory burden on state-chartered banks branching within the region by eliminating duplicative host statecompliance exams. Under the Interstate MOU, the activities of branches we established in New York would be governed by Pennsylvania state law to the sameextent that federal law governs the activities of the branch of an out-of-state national bank in such host states. Issues regarding whether a particular host statelaw is preempted are to be determined in the first instance by the PDB. In the event that the PDB and the applicable host state regulator disagree regardingwhether a particular host state law is pre-empted, the PDB and the applicable host state regulator would use their reasonable best efforts to consider all points ofview and to resolve the disagreement. COMMUNITY REINVESTMENT ACT The Community Reinvestment Act, (“CRA”), as implemented by FRB regulations, provides that the Bank has a continuing and affirmative obligationconsistent with its safe and sound operation to help meet the credit needs of its entire community, including low and moderate income neighborhoods. The CRAdoes not establish specific lending requirements or programs for financial institutions nor does it limit an institution’s discretion to develop the types of productsand services that it believes are best suited to its particular community, consistent with the CRA. The CRA requires the FRB, in connection with its examinationof the Bank, to assess the institution’s record of meeting the credit needs of its community and to take such record into account in its evaluation of certaincorporate applications by such institution, such as mergers and branching. The Bank’s most recent rating was “Satisfactory”. Various consumer laws andregulations also affect the operations of the Bank. In addition to the impact of regulation, commercial banks are affected significantly by the actions of the FRBas it attempts to control the money supply and credit availability in order to influence the economy. CAPITAL REQUIREMENTS Federal regulations require FDIC-insured depository institutions, including state-chartered, FRB-member banks, to meet several minimum capitalstandards. These capital standards were effective January 1, 2015, and result from a final rule implementing regulatory amendments based on recommendationsof the Basel Committee on Banking Supervision and certain requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-FrankAct”). The capital standards require the maintenance of common equity Tier 1 capital, Tier 1 capital and total capital to risk-weighted assets of at least 4.5%, 6.0%and 8.0%, respectively, and a leverage ratio of at least 4% of Tier 1 capital. Common equity Tier 1 capital is generally defined as common stockholders’ equityand retained earnings. Tier 1 capital is generally defined as common equity Tier 1 and Additional Tier 1 capital. Additional Tier 1 capital generally includescertain noncumulative perpetual preferred stock and related surplus and minority interests in equity accounts of consolidated subsidiaries. Total capital includesTier 1 capital (common equity Tier 1 capital plus Additional Tier 1 capital) and Tier 2 capital. Tier 2 capital is comprised of capital instruments and relatedsurplus meeting specified requirements, and may include cumulative preferred stock and long-term perpetual preferred stock, mandatory convertible securities,intermediate preferred stock and subordinated debt. Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% ofrisk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income(“AOCI”), up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. The Company has exercisedthe AOCI opt-out option and therefore AOCI is not incorporated into common equity Tier 1 capital. Calculation of all types of regulatory capital is subject todeductions and adjustments specified in the regulations. 3
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Index In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, assets, including certain off-balance sheet assets(e.g., recourse obligations, direct credit substitutes, residual interests) are multiplied by a risk weight factor assigned by the regulations based on the risksbelieved inherent in the type of asset. Higher levels of capital are required for asset categories believed to present greater risk. For example, a risk weight of 0%is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one- to four-family residentialmortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weightof between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors. In addition to establishing the minimum regulatory capital requirements, the regulations limit capital distributions by the institution and certaindiscretionary bonus payments to management if an institution does not hold a “capital conservation buffer” consisting of 2.5% of common equity Tier 1 capitalto risk-weighted assets above the amount necessary to meet its minimum risk-based capital requirements. The FRB has authority to establish individual minimum capital requirements in appropriate cases upon a determination that an institution’s capital level isor may become inadequate in light of the particular risks or circumstances. As permitted by applicable federal regulation, the Bank has opted to use the community bank leverage ratio (the “CBLR”) framework for determining itscapital adequacy, as discussed above. If a qualifying community bank fails to maintain the applicable minimum CBLR during the grace period, or if it is unableto restore compliance with the CBLR within the grace period, then it will revert to the Basel III capital framework and the normal Prompt Corrective Actioncapital categories will apply. At December 31, 2025, the Bank’s leverage ratio was 9.54%, which is more than the ratio required to be considered “well-capitalized” under the CBLR framework. PROMPT CORRECTIVE ACTION RULES Federal law establishes a system of prompt corrective action to resolve the problems of undercapitalized institutions. The law requires that certainsupervisory actions be taken against undercapitalized institutions, the severity of which depends on the degree of undercapitalization. The FRB has adoptedregulations to implement the prompt corrective action legislation as to state member banks. The regulations were amended to incorporate the previouslymentioned increased regulatory capital standards that were effective January 1, 2015. An institution is deemed to be “well capitalized” if it has a total risk-basedcapital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of6.5% or greater. An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% orgreater, a leverage ratio of 4.0% or greater and a common equity Tier 1 ratio of 4.5% or greater. An institution is “undercapitalized” if it has a total risk-basedcapital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 ratio of less than4.5%. An institution is deemed to be “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio ofless than 4.0%, a leverage ratio of less than 3.0% or a common equity Tier 1 ratio of less than 3.0%. An institution is considered to be “criticallyundercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets that is equal to or less than 2.0%. Subject to a narrow exception, a receiver or conservator must be appointed for an institution that is “critically undercapitalized” within specified timeframes. The regulations also provide that a capital restoration plan must be filed with the FRB within 45 days of the date an institution is deemed to havereceived notice that it is “undercapitalized”, “significantly undercapitalized” or “critically undercapitalized”. Compliance with the capital restoration plan mustbe guaranteed by any parent holding company up to the lesser of 5% of the depository institution’s total assets when it was deemed to be undercapitalized or theamount necessary to achieve compliance with applicable capital requirements. In addition, numerous mandatory supervisory actions become immediatelyapplicable to an undercapitalized institution including, but not limited to, increased monitoring by regulators and restrictions on growth, capital distributions andexpansion. The FRB could also take any one of a number of discretionary supervisory actions, including the issuance of a capital directive and the replacementof senior executive officers and directors. Significantly and critically undercapitalized institutions are subject to additional mandatory and discretionarymeasures. 4
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Index STANDARDS FOR SAFETY AND SOUNDNESS The federal banking agencies have adopted Interagency Guidelines prescribing Standards for Safety and Soundness in various areas such as internalcontrols and information systems, internal audit, loan documentation and credit underwriting, interest rate exposure, asset growth and quality, earnings andcompensation, fees and benefits. The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and addressproblems at insured depository institutions before capital becomes impaired. If the FRB determines that a state member bank fails to meet any standardprescribed by the guidelines, the FRB may require the institution to submit an acceptable plan to achieve compliance with the standard. ENFORCEMENT The PDB maintains enforcement authority over the Bank, including the power to issue cease and desist orders and civil money penalties and removedirectors, officers or employees. The PDB also has the power to appoint a conservator or receiver for a bank upon insolvency, imminent insolvency, unsafe orunsound condition or certain other situations. The FRB has primary federal enforcement responsibility over FRB-member state banks and has authority to bringactions against the institution and all institution-affiliated parties, including shareholders, who knowingly or recklessly participate in wrongful actions likely tohave an adverse effect on the bank. Formal enforcement action may range from the issuance of a capital directive or a cease and desist order, to removal ofofficers and/or directors. Civil penalties cover a wide range of violations and can amount to $25,000 per day, or even $1 million per day in especially egregiouscases. The FDIC, as deposit insurer, has the authority to recommend to the FRB that enforcement action be taken with respect to a member bank. If the FRBdoes not take action, the FDIC has authority to take such action under certain circumstances. In general, regulatory enforcement actions occur with respect tosituations involving unsafe or unsound practices or conditions, violations of law or regulation or breaches of fiduciary duty. Federal and Pennsylvania law alsoestablish criminal penalties for certain violations. REGULATORY RESTRICTIONS ON BANK DIVIDENDS The Bank may not declare a dividend without approval of the FRB, unless the dividend to be declared by the Bank’s Board of Directors does not exceed thetotal of: (i) the Bank’s net profits for the current year to date, plus (ii) its retained net profits for the preceding two years, less any required transfers to surplus. Under Pennsylvania law, the Bank may only declare and pay dividends from its accumulated net earnings. In addition, the Bank may not declare and paydividends from the surplus funds that Pennsylvania law requires that it maintain. Under these policies and subject to the restrictions applicable to the Bank, theBank could have declared, during 2025, without prior regulatory approval, aggregate dividends of approximately $21.1 million, plus net profits earned to thedate of such dividend declaration. BANK SECRECY ACT Under the Bank Secrecy Act (“BSA”), banks and other financial institutions are required to retain records to assure that the details of financial transactionscan be traced if investigators need to do so. Banks are also required to report most cash transactions in amounts exceeding $10,000 made by or on behalf of theircustomers. Failure to meet BSA requirements may expose the Bank to statutory penalties, and a negative compliance record may affect the willingness ofregulating authorities to approve certain actions by the Bank requiring regulatory approval, including acquisitions and opening new branches. INSURANCE OF DEPOSIT ACCOUNTS The Bank’s deposits are insured up to applicable limits by the Deposit Insurance Fund (“DIF”) of the FDIC. Under the FDIC’s risk-based assessmentsystem, insured institutions are assigned to one of four risk categories based on supervisory evaluations, regulatory capital levels and certain other factors, withless risky institutions paying lower assessments. An institution’s assessment rate depends upon the category to which it is assigned, and certain adjustmentsspecified by FDIC regulations. 5
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Index As required by the Dodd-Frank Act, the FDIC has issued final rules implementing changes to the assessment rules. The rules change the assessment baseused for calculating deposit insurance assessments from deposits to total assets, less tangible (Tier 1) capital. Since the new base is larger than the previous base,the FDIC also lowered assessment rates so that the rule would not significantly alter the total amount of revenue collected from the industry. The range ofadjusted assessment rates is now 2.5 to 45 basis points of the new assessment base. The rule is expected to benefit smaller financial institutions, which typicallyrely more on deposits for funding, and shift more of the burden for supporting the insurance fund to larger institutions, which are thought to have greater accessto nondeposit funding. No institution may pay a dividend if it is in default of its assessments. As a result of the Dodd-Frank Act, deposit insurance per accountowner is $250,000 for all types of accounts. The Dodd-Frank Act increased the minimum target DIF ratio from 1.15% to 1.35% of estimated insured deposits. The Dodd-Frank Act eliminated the 1.5%maximum fund ratio, instead leaving it to the discretion of the FDIC to establish a maximum fund ratio. The FDIC has exercised that discretion by establishinga long range fund ratio of 2%. The FDIC has authority to increase insurance assessments. A significant increase in insurance premiums would likely have an adverse effect on theoperating expenses and results of operations of the Bank. Management cannot predict what insurance assessment rates will be in the future. Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe orunsound condition to continue operations or has violated any applicable law, regulation, rule, order or regulatory condition imposed in writing. The managementof the Bank does not know of any practice, condition or violation that might lead to termination of deposit insurance. FEDERAL RESERVE SYSTEM Under FRB regulations, the Bank is required to maintain reserves against its transaction accounts (primarily NOW and regular checking accounts). Thesereserve requirements are subject to annual adjustment by the FRB. For 2025, the Bank would have been required to maintain average daily reserves equal to 3%on aggregate transaction accounts of up to and including $645.8 million, plus 10% on the remainder, and the first $37.8 million of otherwise reservable balanceswould have been exempt. In March 2020, the FRB reduced all reserve requirements to zero in response to the COVID-19 pandemic. PROHIBITIONS AGAINST TYING ARRANGEMENTS State-chartered banks are prohibited, subject to some exceptions, from extending credit to or offering any other service, or fixing or varying theconsideration for such extension of credit or service, on the condition that the customer obtain some additional service from the institution or its affiliates or notobtain services of a competitor of the institution. OTHER REGULATIONS Interest and other charges collected or contracted for by the Bank are subject to state usury laws and federal laws concerning interest rates. The Bank’soperations are also subject to federal and state laws applicable to credit transactions, such as the: • Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;• Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether afinancial institution is fulfilling its obligation to help meet the housing needs of the community it serves;• Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit;• Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies;• Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies;• Truth in Savings Act; and• Rules and regulations of the various federal and state agencies charged with the responsibility of implementing such laws. 6
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Index The Bank’s operations also are subject to the: • Right to Financial Privacy Act, which imposes a duty to maintain confidentiality of consumer financial records and prescribes procedures forcomplying with administrative subpoenas of financial records;• Electronic Funds Transfer Act and Regulation E promulgated thereunder, which govern automatic deposits to and withdrawals from deposit accountsand customers’ rights and liabilities arising from the use of automated teller machines and other electronic banking services;• Check Clearing for the 21st Century Act (also known as “Check 21”), which gives “substitute checks,” such as digital check images and copies madefrom that image, the same legal standing as the original paper check;• The USA PATRIOT Act, which requires banks operating to, among other things, establish broadened anti-money laundering compliance programs, duediligence policies and controls to ensure the detection and reporting of money laundering. Such required compliance programs are intended tosupplement existing compliance requirements also applicable to financial institutions under the Bank Secrecy Act and the Office of Foreign AssetsControl regulations; and• The Gramm-Leach-Bliley Act, which places limitations on the sharing of consumer financial information by financial institutions with unaffiliatedthird parties. Specifically, the Gramm-Leach-Bliley Act requires all financial institutions offering financial products or services to retail customers toprovide such customers with the financial institution’s privacy policy and provide such customers the opportunity to “opt out” of the sharing of certainpersonal financial information with unaffiliated third parties. HOLDING COMPANY REGULATION The Company, as a bank holding company, is subject to examination, supervision, regulation, and periodic reporting under the BHCA, as administered bythe FRB. The Company is required to obtain the prior approval of the FRB to acquire all, or substantially all, of the assets of any bank or bank holdingcompany. Prior FRB approval is also required for the Company to acquire direct or indirect ownership or control of any voting securities of any bank or bankholding company if it would, directly or indirectly, own or control more than 5% of any class of voting shares of the bank or bank holding company. A bank holding company is generally prohibited from engaging in, or acquiring, direct or indirect control of more than 5% of the voting securities of anycompany engaged in nonbanking activities. One of the principal exceptions to this prohibition is for activities found by the FRB to be so closely related tobanking or managing or controlling banks as to be a proper incident thereto. Some of the principal activities that the FRB has determined by regulation to beclosely related to banking are: (i) making or servicing loans; (ii) performing certain data processing services; (iii) providing securities brokerage services; (iv)acting as fiduciary, investment or financial advisor; (v) leasing personal or real property under certain conditions; (vi) making investments in corporations orprojects designed primarily to promote community welfare; and (vii) acquiring a savings association. A bank holding company that meets specified conditions, including that its depository institutions subsidiaries are “well capitalized” and “well managed,”can opt to become a “financial holding company.” A “financial holding company” may engage in a broader array of financial activities than permitted to atypical bank holding company. Such activities can include insurance underwriting and investment banking. The Company does not anticipate opting for“financial holding company” status at this time. The Company is exempt from the FRB’s consolidated capital adequacy guidelines for bank holding companies because the Company’s consolidated assetsare less than $3.0 billion as of June 30, 2025. The FRB consolidated capital adequacy guidelines are at least as stringent as those required for the subsidiarydepository institutions. A bank holding company is generally required to give the FRB prior written notice of any purchase or redemption of then outstanding equity securities ifthe gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during thepreceding 12 months, is equal to 10% or more of the Company’s consolidated net worth. The FRB may disapprove such a purchase or redemption if itdetermines that the proposal would constitute an unsafe and unsound practice, or would violate any law, regulation, FRB order or directive, or any conditionimposed by, or written agreement with, the FRB. The FRB has adopted an exception to that approval requirement for well-capitalized bank holding companiesthat meet certain other conditions. 7
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Index The FRB has issued a policy statement regarding the payment of dividends and other capital distributions by bank holding companies. In general, theFRB’s policies provide that dividends should be paid only out of current earnings and only if the prospective rate of earnings retention by the bank holdingcompany appears consistent with the organization’s capital needs, asset quality and overall financial condition. The FRB’s policies also require that a bankholding company serve as a source of financial strength to its subsidiary banks by using available resources to provide capital funds during periods of financialstress or adversity and by maintaining the financial flexibility and capital-raising capacity to obtain additional resources for assisting its subsidiary banks wherenecessary. The Dodd-Frank Act codified the source of strength policy and requires the promulgation of implementing regulations. Under the prompt correctiveaction laws, the ability of a bank holding company to pay dividends may be restricted if a subsidiary bank becomes undercapitalized. These regulatory policiescould affect the ability of the Company to pay dividends or otherwise engage in capital distributions. The Federal Deposit Insurance Act makes depository institutions liable to the Federal Deposit Insurance Corporation for losses suffered or anticipated bythe insurance fund in connection with the default of a commonly controlled depository institution or any assistance provided by the Federal Deposit InsuranceCorporation to such an institution in danger of default. That law would have potential applicability if the Company ever held as a separate subsidiary adepository institution in addition to the Bank. The status of the Company as a registered bank holding company under the Bank Holding Company Act will not exempt it from certain federal and statelaws and regulations applicable to corporations generally, including, without limitation, certain provisions of the federal securities laws. ACQUISITION OF THE HOLDING COMPANY Under the Change in Bank Control Act (the “CIBCA”), a federal statute, a notice must be submitted to the FRB if any person (including a company), orgroup acting in concert, seeks to acquire 10% or more of the Company’s shares of outstanding common stock, unless the FRB has found that the acquisition willnot result in a change in control of the Company. Under the CIBCA, the FRB generally has 60 days within which to act on such notices, taking intoconsideration certain factors, including the financial and managerial resources of the acquirer, the convenience and needs of the communities served by theCompany and the Bank, and the anti-trust effects of the acquisition. Under the BHCA, any company would be required to obtain prior approval from the FRBbefore it may obtain “control” of the Company within the meaning of the BHCA. Control generally is defined to mean the ownership or power to vote 25% ormore of any class of voting securities of the Company or the ability to control in any manner the election of a majority of the Company’s directors. An existingbank holding company would be required to obtain the FRB’s prior approval under the BHCA before acquiring more than 5% of the Company’s voting stock. EFFECT OF GOVERNMENT MONETARY POLICIES The earnings and growth of the banking industry are affected by the credit policies of monetary authorities, including the Federal Reserve System. Animportant function of the Federal Reserve System is to regulate the national supply of bank credit in order to control recessionary and inflationary pressures.Among the instruments of monetary policy used by the Federal Reserve to implement these objectives are open market activities in U.S. government securities,changes in the discount rate on member bank borrowings and changes in reserve requirements against member bank deposits. These operations are used invarying combinations to influence overall economic growth and indirectly, bank loans, securities, and deposits. These variables may also affect interest ratescharged on loans or paid on deposits. The monetary policies of the Federal Reserve authorities have had a significant effect on the operating results ofcommercial banks in the past and are expected to continue to have such an effect in the future. In view of the changing conditions in the national economy and in the money markets, as well as the effect of actions by monetary and fiscal authoritiesincluding the Federal Reserve System, no prediction can be made as to possible changes in interest rates, deposit levels, loan demand or their effect on thebusiness and earnings of the Company and the Bank. Additional information is included under the caption “Management’s Discussion and Analysis of FinancialCondition and Results of Operations” appearing in this Annual Report on Form 10-K. 8
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Index ITEM 1A – RISK FACTORS. The following discussion sets forth the material risk factors that could affect the Company’s consolidated financial condition and results of operations.Readers should not consider any descriptions of these factors to be a complete set of all potential risks that could affect the Company. Any risk factor discussedbelow could by itself, or combined with other factors, materially and adversely affect the Company’s business, results of operations, financial condition, capitalposition, liquidity, competitive position or reputation, including by materially increasing expenses or decreasing revenues, which could result in material lossesor a decrease in earnings. RISKS RELATED TO CHANGES IN MARKET INTEREST RATES Changing interest rates may decrease our earnings and asset values. Our net interest income is the interest we earn on loans and investments less the interest we pay on our deposits and borrowings. Our net interest margin isthe difference between the yield we earn on our assets and the interest rate we pay for deposits and our other sources of funding. Changes in interest rates—upor down—could adversely affect our net interest margin and, as a result, our net interest income. Although the yield we earn on our assets and our funding coststend to move in the same direction in response to changes in interest rates, one can rise or fall faster than the other, causing our net interest margin to expand orcontract. Our liabilities tend to be shorter in duration than our assets, so they may adjust faster in response to changes in interest rates. As a result, when interestrates rise, our funding costs may rise faster than the yield we earn on our assets, causing our net interest margin to contract until the asset yields catch up.Changes in the slope of the “yield curve”—or the spread between short-term and long-term interest rates—could also reduce our net interest margin. Normally,the yield curve is upward sloping, meaning short-term rates are lower than long-term rates. Because our liabilities tend to be shorter in duration than our assets,when the yield curve flattens or even inverts, we could experience pressure on our net interest margin as our cost of funds increases relative to the yield we canearn on our assets. Changes in interest rates also affect the value of the Bank’s interest-earning assets, and in particular the Bank’s securities portfolio. Generally, the value offixed-rate securities fluctuates inversely with changes in interest rates. Unrealized gains and losses on securities available for sale are reported as a separatecomponent of stockholders’ equity, net of tax, while unrealized gains and losses on equity securities directly impact earnings. Decreases in the fair value ofsecurities available for sale resulting from increases in interest rates could have an adverse effect on stockholders’ equity or net income. Impact of Inflation The effects of price changes and inflation can vary substantially for most financial institutions. While management believes that inflation affects the growthof total assets, it believes that it is difficult to assess the overall impact. Management believes this to be the case due to the fact that generally neither the timingnor the magnitude of the inflationary changes in the CPI coincides with changes in interest rates. The price of one or more of the components of the CPI mayfluctuate considerably and thereby influence the overall CPI without having a corresponding effect on interest rates or upon the cost of those goods and servicesnormally purchased by us. In years of high inflation and high interest rates, intermediate and long-term interest rates tend to increase, thereby adverselyimpacting the market values of investment securities, mortgage loans and other long-term fixed rate loans. In addition, higher short-term interest rates caused byinflation tend to increase the cost of funds. In other years, the opposite may occur. In addition, inflation increases the cost of goods and services we use in ourbusiness operations, such as electricity and other utilities, which increases our noninterest expenses. Our customers are also affected by inflation and the risingcosts of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us. RISKS RELATED TO OUR LIQUIDITY Access to Liquidity Liquidity is the ability to meet cash flow obligations as they come due and cash flow needs on a timely basis and at a reasonable cost. The liquidity of theBank is used to make loans and to repay deposit and borrowing liabilities as they become due, or are demanded by customers and creditors. Many factors affectthe Bank’s ability to meet liquidity needs, including variations in the markets served by its network of offices, its mix of assets and liabilities, reputation andstanding in the marketplace, and general economic conditions. 9
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Index The Bank’s primary source of funding is customer deposits, gathered throughout its network of banking offices. Through its subsidiary (First CitizensCommunity Bank), the Company is a member of the Federal Home Loan Bank of Pittsburgh (FHLB-Pittsburgh), which is one of 11 regional Federal HomeLoan Banks. The Company has a line of credit with the FHLB-Pittsburgh that is secured by a blanket lien on its loan portfolio. Access to this line of credit iscritical if a funding need arises. However, there can be no assurance that the FHLB-Pittsburgh will be able to provide funding when needed, nor can there beassurance that the FHLB-Pittsburgh will provide funds specifically to the Company should its financial condition deteriorate and/or regulators prevent thataccess. The inability to access this source of funds could have a materially adverse effect on the Company’s financial flexibility if alternate financing is notavailable at acceptable interest rates. The failure of the FHLB-Pittsburgh or the FHLB system in general, may materially impair the Corporation’s ability tomeet short- and long-term liquidity needs or to meet growth plans. In addition, the Bank also maintains borrowing capacity with the Federal Reserve Bank ofPhiladelphia. The Bank’s securities and loan portfolios provide a source of contingent liquidity that could be accessed in a reasonable time period through sales. The Corporation’s management and Board of Directors, through the Asset-Liability Committee (the “ALCO”), monitor liquidity and the ALCO establishesand monitors acceptable liquidity ranges. The Bank actively manages its liquidity position through target ratios. Continual monitoring of these ratios, bothhistorical and through forecasts under multiple rate scenarios, allows the Bank to employ strategies necessary to maintain adequate liquidity. Changes in economic conditions, including consumer savings habits and availability of or access to capital, could potentially have a significant impact onthe Bank’s liquidity position, which in turn could materially impact the Corporation’s financial condition, results of operations and cash flows. RISKS RELATED TO OUR LENDING ACTIVITIES Activities related to the drilling for natural gas in the Marcellus and Utica Shale formations impacts certain customers of the Bank. Our north central Pennsylvania market area is predominately centered in the Marcellus and Utica Shale natural gas exploration and drilling area, and as aresult, the economy in north central Pennsylvania is influenced by the natural gas industry. Loan demand, deposit levels and the market value of local real estateare impacted by this activity. While the Company does not lend to the various entities directly engaged in exploration, drilling or production activities, many ofour customers provide transportation and other services and products that support natural gas exploration and production activities. Therefore, our customers areimpacted by changes in the market price for natural gas, as a significant downturn in this industry could impact the ability of our borrowers to repay their loansin accordance with their terms. Additionally, exploration and drilling activities may be affected by federal, state and local laws and regulations such asrestrictions on production, permitting, changes in taxes and environmental protection. Regulatory and market pricing of natural gas could also impact and/orreduce demand for loans and deposit levels or loan collateral values. These factors could have a material adverse effect on our business, prospects, financialcondition and results of operations. Higher credit losses could require us to increase our allowance for credit losses through a charge to earnings. When we loan money, we incur the risk that our borrowers do not repay their loans. We reserve for credit losses by establishing an allowance through acharge to earnings. The amount of this allowance is based on our assessment of credit losses inherent in our loan portfolio. The process for determining theamount of the allowance is critical to our financial results and condition. It requires subjective and complex judgments about the future, including forecasts ofeconomic or market conditions that might impair the ability of our borrowers to repay their loans. We might underestimate the credit losses inherent in our loanportfolio and have credit losses in excess of the amount reserved. We might increase the allowance because of changing economic conditions. For example, in arising interest rate environment, borrowers with adjustable-rate loans could see their payments increase. There may be a significant increase in the number ofborrowers who are unable or unwilling to repay their loans, resulting in our charging off more loans and increasing our allowance. In addition, when real estatevalues decline, the potential severity of loss on a real estate-secured loan can increase significantly, especially in the case of loans with high combined loan-to-value ratios. A decline in the national economy and the local economies of the areas in which the loans are concentrated could result in an increase in loandelinquencies, foreclosures or repossessions resulting in increased charge-off amounts and the need for additional credit loss allowances in future periods. Inaddition, bank regulators may require us to make a provision for credit losses or otherwise recognize further loan charge-offs following their periodic review ofour loan portfolio, our underwriting procedures, and our credit loss allowance. Any increase in our allowance for credit losses or loan charge-offs as required bysuch regulatory authorities could have a material adverse effect on our financial condition and results of operations. 10
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Index Our allowance for credit losses amounted to $22.8 million, or 0.97% of total loans outstanding and 85.7% of nonperforming loans, on December 31, 2025.Our allowance for credit losses at December 31, 2025 may not be sufficient to cover future credit losses. A large loss could deplete the allowance and requireincreased provisions to replenish the allowance, which would decrease our earnings. During 2023, the Bank implemented ASU 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments, whichchanged the impairment model for most financial assets. The underlying premise of the update was that financial assets measured at amortized cost should bepresented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The allowance forcredit losses should reflect management’s current estimate of credit losses that are expected to occur over the remaining life of a financial asset. The incomestatement was affected for the measurement of credit losses for newly recognized financial assets, as well as the expected increases or decreases of expectedcredit losses that have taken place during the period. The implementation of this standard did result in a decrease of $2.2 million to the Company’s allowancefor credit losses effective January 1, 2023 compared to December 31, 2022. Our emphasis on commercial real estate, agricultural real estate, construction and other commercial loan lending may expose us to increased lendingrisks. At December 31, 2025, we had $1.22 billion in loans secured by commercial real estate, $347.4 million in agricultural real estate loans, $94.0 million inconstruction loans and $179.2 million in other commercial loans. Commercial real estate loans, agricultural real estate, construction and other commercial loansrepresented 51.8%, 14.8%, 4.0% and 7.6%, respectively, of our loan portfolio. At December 31, 2025, we had $18.3 million of reserves specifically allocated tothese loan types. While commercial real estate, agricultural real estate, construction and other commercial loans are generally more interest rate sensitive andcarry higher yields than do residential mortgage loans, these types of loans generally expose a lender to greater risk of non-payment and loss than single-familyresidential mortgage loans because repayment of the loans often depends on the successful operation of the property, the income stream of the borrowers and,for construction loans, the accuracy of the estimate of the property’s value at completion of construction and the estimated cost of construction. Such loanstypically involve larger loan balances to single borrowers or groups of related borrowers compared to single-family residential mortgage loans. We monitor loanconcentrations on an individual relationship and industry wide basis to monitor the amount of risk we have in our loan portfolio. Agricultural loans are dependent for repayment on the successful operation and management of the farm property, the health of the agriculturalindustry broadly, and on the location of the borrower in particular, and other factors outside of the borrower’s control. At December 31, 2025, our agricultural loans, consisting primarily of agricultural real estate loans and other agricultural loans, totaled $377.7 million,representing 16.1% of our total loan portfolio. The primary activities of our agricultural customers include dairy and beef farms, poultry and swine operations,crops and support businesses. Agricultural markets are highly sensitive to real and perceived changes in the supply and demand of agricultural products.Weaker prices could reduce the value of agricultural land in our local markets and thereby increase the risk of default by our borrowers or reduce the foreclosurevalue of agricultural land, animals and equipment that serves as collateral for certain of our loans. At December 31, 2025, the Company had loans to the dairyindustry totaling $114.6 million, or 4.9% of total loans and 30.3% of total agricultural loans compared to 4.8% of total loans and 31.3% of total agriculturalloans at December 31, 2024. As of December 31, 2025, we have loans to poultry producers for layers, broilers and turkeys totaling $110.2 million, or 4.7% oftotal loans and 29.2% of total agricultural loans. 11
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Index Our agricultural loans are dependent on the profitable operation and management of the farm property securing the loan and its cash flows. The success of afarm property may be affected by many factors outside the control of the borrower, including: • adverse weather conditions (such as hail, drought and floods), restrictions on water supply or other conditions that prevent the planting orharvesting of a crop or limit crop yields;• loss of crops or livestock due to disease, like Avian influenza, or other factors;• declines in the market prices or demand for agricultural products (both domestically and internationally), for any reason;• increases in production costs (such as the costs of labor, rent, feed, fuel and fertilizer);• the impact of domestic and international government policies and regulations (including changes in price supports, subsidies, government-sponsored crop insurance, minimum ethanol content requirements for gasoline, tariffs, trade barriers, trade agreements and health andenvironmental regulations);• access to technology and the successful implementation of production technologies;• changes in the general economy that could affect the availability of off-farm sources of income and prices of real estate for borrowers;• and disruptions in the supply chain and the processing of product and delivery to the final retail channel Lower prices for agricultural products may cause farm revenues to decline and farm operators may be unable to reduce expenses as quickly as theirrevenues decline. In addition, many farms are dependent on a limited number of key individuals whose injury or death could significantly affect the successfuloperation of the farm. If the cash flow from a farming operation is diminished, the borrower’s ability to repay the loan may be impaired. Consequently,agricultural loans may involve a greater degree of risk than residential mortgage lending, particularly in the case of loans that are unsecured or secured byrapidly depreciating assets such as farm equipment (some of which is highly specialized with a limited or no market for resale) or perishable assets such aslivestock or crops. In such cases, any repossessed collateral for a defaulted agricultural operating loan may not provide an adequate source of repayment of theoutstanding loan balance as a result of the greater likelihood of damage, loss or depreciation or because the assessed value of the collateral exceeds the eventualrealization value. Loan participations comprise a portion of our loan portfolio and a decline in loan participation volume could hurt profits and slow loan growth. We have actively engaged in loan participations whereby we are invited to participate in loans, primarily commercial real estate and municipal loans,originated by another financial institution known as the lead lender. We have participated with other financial institutions in both our primary markets and outof market areas. We underwrite any loan we participate in as if we are originating the loan. The primary difference is that financial information is received fromthe participating financial institution and not the borrower. The loans we participate in as a purchaser totaled $121.0 million and $95.9 million at December 31,2025 and 2024, respectively. As a percent of total loans, participation purchased loans were 5.1%, and 4.2% as of December 31, 2025 and 2024, respectively. Our profits and loan growth could be significantly and adversely affected if the volume of loan participations would materially decrease, whether because loandemand declines, loan payoffs, lead lenders may come to perceive us as a potential competitor in their respective market areas, or otherwise. Environmental liability associated with lending activities could result in losses. In the course of our business, we may foreclose on and take title to properties securing our loans. If hazardous substances were discovered on any of theseproperties, we could be liable to governmental entities or third parties for the costs of remediation of the hazard, as well as for personal injury and propertydamage. Many environmental laws can impose liability regardless of whether we knew of, or were responsible for, the contamination. In addition, if we arrangefor the disposal of hazardous or toxic substances at another site, we may be liable for the costs of cleaning up and removing those substances from the site evenif we neither own nor operate the disposal site. Environmental laws may require us to incur substantial expenses and may materially limit use of properties weacquire through foreclosure, reduce their value or limit our ability to sell them in the event of a default on the loans they secure. In addition, future laws or morestringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability. 12
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Index RISKS RELATED TO OUR INVESTMENT SECURITIES The Company’s investment securities portfolio is subject to credit risk, market risk, and liquidity risk, and declines in value in its investment securitiesportfolio may require it to record impairment charges that could have a material adverse effect on its results of operations and financial condition. The Company’s investment securities portfolio has risks beyond its control that can significantly influence the portfolio’s fair value. These factors include,but are not limited to, changes in interest rates, changes in prepayment speeds, changes in general economic conditions, rating agency downgrades of thesecurities, defaults of the issuers of the securities and market liquidity. Any change in current accounting principles or interpretations of these principles couldimpact the Company’s assessment of fair value and thus its determination of other-than-temporary impairment of the securities in its investment securitiesportfolio. The Bank may be required to record other-than-temporary impairment charges on its investment securities if they suffer declines in value that areconsidered other-than-temporary. Numerous factors, including collateral deterioration underlying securities, lack of liquidity for resales of certain investmentsecurities, absence of reliable pricing information for certain investment securities, adverse changes in business climate, adverse actions by regulators, orunanticipated changes in the competitive environment could negatively affect the Bank’s securities portfolio in future periods. An other-than-temporaryimpairment charge could have a material adverse effect on the Company’s results of operations and financial condition. RISKS RELATED TO OUR SECONDARY MORTGAGE OPERATIONS Income from secondary mortgage market operations is volatile, and we may incur losses or charges with respect to our secondary mortgage marketoperations which would negatively affect our earnings. We generally sell in the secondary market the longer term fixed-rate residential mortgage loans that we originate, earning non-interest income in the formof gains on sale. When interest rates rise, the demand for mortgage loans tends to fall and may reduce the number of loans available for sale. In addition tointerest rate levels, weak or deteriorating economic conditions also tend to reduce loan demand. Although we sell loans in the secondary market withoutrecourse, we are required to give customary representations and warranties to the buyers. If we breach those representations and warranties, the buyers canrequire us to repurchase the loans and we may incur a loss on the repurchase. Because we generally retain the servicing rights on the loans we sell in thesecondary market, we are required to record a mortgage servicing right asset, which we test annually for impairment. The value of mortgage servicing rightstends to increase with rising interest rates and to decrease with falling interest rates, with refinance activity increasing in falling rate environments. If we arerequired to take an impairment charge on our mortgage servicing rights our earnings would be adversely affected. As a result of acquisitions, the Bank acquired a portfolio of loans sold to the FHLB, which were sold under the Mortgage Partnership Finance Program(“MPF”). While the Bank was not an active participant in the MPF program in 2025, we continue to evaluate the program to see if it would be beneficial to ourcustomers and our performance. The MPF portfolio balance was $7,774,000 at December 31, 2025. The FHLB maintains a first-loss position for the MPFportfolio that totals $171,000. Should the FHLB exhaust its first-loss position, recourse to the Bank’s credit enhancement would be up to the next $197,000 oflosses. The Bank has not experienced any losses for the MPF portfolio. RISKS RELATED TO OUR MARKET AREA The Company’s financial condition and results of operations are dependent on the economy in the Bank’s market area. The Bank’s primary market area consists of the Pennsylvania Counties of Bradford, Clinton, Lycoming, Potter, and Tioga in north central Pennsylvania,Lebanon, Schuylkill, Berks and Lancaster in south central, Pennsylvania, Centre and Clinton in central Pennsylvania, and Allegany, Steuben, Chemung andTioga Counties in southern New York. In Delaware, we consider the cities and surrounding areas of Wilmington and Dover, Delaware, as well as KennettSquare, Pennsylvania in Chester County, as primary market areas. With the acquisition of HVBC, we have expanded further into southeast Pennsylvania,including Montgomery, Bucks and Philadelphia Counties as well as Burlington County, New Jersey through the acquisition of five full service branches, fourmortgage centers and one business banking facility. The majority of the Bank’s loans and deposits come from households and businesses whose primary addressis located in the Bank’s primary market areas. Because of the Bank’s concentration of business activities in its market area, the Company’s financial conditionand results of operations depend upon economic conditions in its market areas. Adverse economic conditions in our market areas could reduce our growth rate,affect the ability of our customers to repay their loans and generally affect our financial condition and results of operations. Conditions such as inflation,recession, unemployment, high interest rates and short money supply and other factors beyond our control may adversely affect our profitability. We are lessable than a larger institution to spread the risks of unfavorable local economic conditions across a large number of diversified economies. Any sustained periodof increased payment delinquencies, foreclosures or losses caused by adverse market or economic conditions in the States of Pennsylvania, New York, NewJersey and Delaware could adversely affect the value of our assets, revenues, results of operations and financial condition. Moreover, we cannot give anyassurance we will benefit from any market growth or favorable economic conditions in our primary market areas if they do occur. 13
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Index RISKS RELATED TO LAWS AND REGULATIONS Regulation of the financial services industry is significant, and future legislation could increase our cost of doing business or harm our competitiveposition. We are subject to extensive regulation, supervision and examination by the FRB and the PDB, our primary regulators, and by the FDIC, as insurer of ourdeposits. Such regulation and supervision govern the activities in which an institution and its holding company may engage and are intended primarily for theprotection of the insurance fund and the depositors and borrowers of the Bank rather than for holders of our common stock. Regulatory authorities haveextensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets anddetermination of the level of our allowance for credit losses. Any change in such regulation and oversight, whether in the form of regulatory policy, regulations,legislation or supervisory action, may have a material impact on our profitability and operations. Future legislative changes could require changes to businesspractices or force us to discontinue businesses and potentially expose us to additional costs, liabilities, enforcement action and reputational risk. Our ability to pay dividends is limited by law. Our ability to pay dividends to our shareholders largely depends on our receipt of dividends from the Bank. The amount of dividends that the Bank may payto us is limited by federal and state laws and regulations. We also may decide to limit the payment of dividends even when we have the legal ability to pay themin order to retain earnings for use in our business. Federal and state banking laws, our articles of incorporation and our by-laws may have an anti-takeover effect. Federal law imposes restrictions, including regulatory approval requirements, on persons seeking to acquire control over us. Pennsylvania law also hasprovisions that may have an anti-takeover effect. These provisions may serve to entrench management or discourage a takeover attempt that shareholdersconsider to be in their best interest or in which they would receive a substantial premium over the current market price. RISKS RELATED TO COMPETITION Strong competition within the Bank’s market areas could hurt profits and slow growth. The Bank faces intense competition both in making loans and attracting deposits. This competition has made it more difficult for the Bank to make newloans and at times has forced the Bank to offer higher deposit rates. Price competition for loans and deposits might result in the Bank earning less on loans andpaying more on deposits, which would reduce net interest income. Competition also makes it more difficult to increase the volume of our loan and depositportfolios. As of June 30, 2025, which is the most recent date for which information is made available by the FDIC, we held 34.1% of the FDIC insured depositsin Bradford, Potter and Tioga Counties, Pennsylvania, which was the second largest share of deposits out of eight financial institutions with offices in the area,and 6.1% of the FDIC insured deposits in Allegany County, New York, which was the third largest share of deposits out of three financial institutions withoffices in this area. As of June 30, 2025, we held 9.1% of the FDIC insured deposits in Lebanon County, Pennsylvania, which was the fourth largest share out ofthe 12 financial institutions with offices in the County. As of June 30, 2025, we held 3.7% of the FDIC insured deposits in Clinton County, Pennsylvania, whichwas the eighth largest share out of the eight financial institutions with offices in the County. Our offices in Berks, Centre, Chester, Lancaster, Lycoming,Schuylkill, Montgomery, Bucks and Philadelphia Counties of Pennsylvania and our offices in Wilmington and Dover, Delaware and Burlington, New Jersey allhave less than 3% of the FDIC insured deposits of the corresponding County as of June 30, 2025. This data does not include deposits held by credit unions.Competition also makes it more difficult to hire employees and more expensive to retain experienced employees. Some of the institutions with which the Bankcompetes have substantially greater resources and lending limits than the Bank has and may offer services that the Bank does not provide. Management expectscompetition to increase in the future as a result of legislative, regulatory and technological changes (fintech) and the continuing trend of consolidation in thefinancial services industry. The Bank’s profitability depends upon its continued ability to compete successfully in its market area. 14
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Index Disintermediation of Banks Customers can maintain funds that would have historically been held as bank deposits in brokerage accounts or mutual funds. Customers can also completetransactions such as paying bills and/or transferring funds directly without the assistance of banks. In addition, the emergence, adoption and evolution of newtechnologies that do not require intermediation, including distributed ledgers such as digital assets and blockchain, as well as advances in robotic processautomation, could significantly affect the competition for financial services. The process of eliminating banks as intermediaries, known as “disintermediation,”could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of deposits wouldalso decrease the amount of funds available to lend back to our communities. Further, many of our competitors have fewer regulatory constraints and may havelower cost structures than us. Additionally, due to their size, many competitors may be able to achieve economies of scale and, as a result, may offer a broaderrange of products and services as well as better pricing for those products and services than we can. Our ability to compete successfully depends on a number offactors, including, among other things, (i) the ability to develop, maintain and build long-term customer relationships based on top quality service, high ethicalstandards and safe, sound assets; (ii) the ability to expand within our marketplace and with our market position; (iii) the scope, relevance and pricing of productsand services offered to meet customer needs and demands; (iv) the rate at which we introduce new products and services relative to our competitors; (v)customer satisfaction with our level of service; and (vi) industry and general economic trends. Failure to perform in any of these areas could significantlyweaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our business,financial condition and results of operations. RISKS RELATED TO OUR OPERATIONS We rely on our management and other key personnel, and the loss of any of them may adversely affect our operations. We are and will continue to be dependent upon the services of our executive management team. In addition, we will continue to depend on our ability toretain and recruit key commercial and agricultural loan officers. The unexpected loss of services of any key management personnel or commercial andagricultural loan officers could have an adverse effect on our business and financial condition because of their skills, knowledge of our market, years of industryexperience and the difficulty of promptly finding qualified replacement personnel. We are periodically subject to examination and regulation by a number of banking agencies and, depending upon the findings and determinations ofthese agencies, we may be required to make adjustments to our business that could adversely affect us. Federal and state banking agencies periodically conduct examinations of our business, including compliance with applicable laws and regulations. If, as aresult of an examination, a banking agency was to determine that the financial condition, capital resources, asset quality, asset concentration, earnings prospects,management, liquidity, sensitivity to market risk or other aspects of any of our operations has become unsatisfactory, or that we or our management is inviolation of any law or regulation, it could take a number of different remedial actions as it deems appropriate. These actions include the power to enjoin“unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative orderthat can be judicially enforced, to direct an increase in our capital, to restrict our growth, to change the composition of our assets or liabilities, to assess civilmonetary penalties against us and/or our officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected orthere is an imminent risk of loss to depositors, to terminate our deposit insurance. If we become subject to such regulatory actions, our business, results ofoperations and reputation may be negatively impacted. 15
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Index We are subject to certain risks in connection with our use of technology. Communications and information systems are essential to the conduct of our business, as we use such systems to manage our customer relationships, ourgeneral ledger, our deposits, our loans, and to deliver on-line and electronic banking services. Our operations rely on the secure processing, storage, andtransmission of confidential and other information in our computer systems and networks. Although we take protective measures and endeavor to modify themas circumstances warrant, the security of our computer systems, software, and networks may be vulnerable to breaches, unauthorized access, misuse, computerviruses, or other malicious code and cyber attacks that could have a security impact. In addition, breaches of security may occur through intentional or unintentional acts by those having authorized or unauthorized access to our confidentialor other information or the confidential or other information of our customers, clients, or counterparties. If one or more of such events were to occur, theconfidential and other information processed and stored in, and transmitted through, our computer systems and networks could potentially be jeopardized, orcould otherwise cause interruptions or malfunctions in our operations or the operations of our customers, clients, or counterparties. This could cause ussignificant reputational damage or result in our experiencing significant losses from fraud or otherwise. Furthermore, we may be required to expend significant additional resources to modify our protective measures or to investigate and remediatevulnerabilities or other exposures arising from operational and security risks. Also, we may be subject to litigation and financial losses that are either not insuredagainst or not fully covered through any insurance we maintain. We routinely transmit and receive personal, confidential, and proprietary information by e-mail and other electronic means. We have discussed and workedwith our customers, clients, and counterparties to develop secure transmission capabilities, but we do not have, and may be unable to put in place, securecapabilities with all of these constituents, and we may not be able to ensure that these third parties have appropriate controls in place to protect theconfidentiality of such information. Any interception, misuse, or mishandling of personal, confidential, or proprietary information being sent to or received froma customer, client, or counterparty could result in legal liability, regulatory action, and reputational harm, and could have a significant adverse effect on ourcompetitive position, financial condition, and results of operations. Our risk management framework may not be effective in mitigating risks and/or losses to us. We have implemented a risk management framework to manage our risk exposure. This framework is comprised of various processes, systems andstrategies, and is designed to manage the types of risk to which we are subject, including, among others, credit, market, liquidity, interest rate and compliance.Our framework also includes financial or other modeling methodologies which involve management assumptions and judgment. There is no assurance that ourrisk management framework will be effective under all circumstances or that it will adequately mitigate any risk or loss to us. If our framework is not effective,we could suffer unexpected losses and our business, financial condition, results of operations or prospects could be materially and adversely affected. We mayalso be subject to potentially adverse regulatory consequences. RISKS RELATED TO OUR MERGER AND ACQUISITION ACTIVITY Impairment of goodwill could require charges to earnings, which could result in a negative impact on our results of operations. Our goodwill could become impaired in the future. If goodwill were to become impaired, it could limit the ability of the Bank to pay dividends to theCompany, adversely impacting the Company’s liquidity and ability to pay dividends. The most significant assumptions affecting our goodwill impairmentevaluation are variables including the market price of our Common Stock, projections of earnings, and the control premium above our current stock price thatan acquirer would pay to obtain control of us. We are required to test goodwill for impairment at least annually or when impairment indicators are present. If animpairment determination is made in a future reporting period, our earnings and book value of goodwill will be reduced by the amount of the impairment. If animpairment loss is recorded, it will have little or no impact on the tangible book value of our Common Stock, or our regulatory capital levels, but such animpairment loss could significantly reduce the Bank’s earnings and thereby restrict the Bank’s ability to make dividend payments to us without prior regulatoryapproval, because Federal Reserve policy states the bank holding company dividends should be paid from current earnings. At December 31, 2025, the bookvalue of our goodwill was $85.8 million, all of which was recorded at the Bank. 16
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Index We may fail to realize all of the anticipated benefits of entering new markets. As a result of completed and proposed acquisitions and the hiring of additional agricultural and commercial lending teams, the Company enters newbanking market areas. The success of entering these new markets depends upon, in part, the Company’s ability to realize the anticipated benefits and costsavings from combining the businesses of the Company and the acquisition, as well as organically growing loans and deposits. To realize these anticipatedbenefits and cost savings, the businesses and individuals must be successfully combined and operated. If the Company is not able to achieve these objectives,the anticipated benefits, including growth and cost savings related to the combined businesses, may not be realized at all or may take longer to realize thanexpected. If the Company fails to realize the anticipated benefits of the acquisitions and the new employee hiring’s, the Company’s results of operations couldbe adversely affected. ITEM 1B – UNRESOLVED STAFF COMMENTS. Not applicable. ITEM 1C – CYBERSECURITY Risk Management and Strategy Cybersecurity is a critical component of our risk management program, given the increasing reliance on technology and potential of cyber threats. OurInformation Security Officer is primarily responsible for the cybersecurity / information security program. The Information Security Officer reports directly tothe Chief Operating Officer and periodically reports to the Audit and Examination Committee of our board of directors. Our objective for managing cybersecurity risk is to avoid or minimize the impacts of external threat events or other efforts to penetrate, disrupt or misuseour systems or information. The structure of our information security program is designed around regulatory guidance and related industry standards. Inaddition, we leverage various cyber-related associations, threat intelligence feeds, and audits to facilitate and promote program effectiveness. The informationsecurity program is periodically reviewed by the Information Security Officer in collaboration with information technology management with the goal ofaddressing changing threats and conditions. We employ a layered defensive strategy when designing our cybersecurity controls. We leverage people, processes, and technology as part of our efforts tomanage and maintain cybersecurity controls. We employ a variety of preventative and detective tools designed to monitor, block, and provide alerts regardingsuspicious activity, as well as to report on suspected threats. We have established processes and systems designed to mitigate cyber risk, including regular andon-going education and training for employees, preparedness simulations, and tabletop exercises. We engage in regular monitoring and assessments of ourtechnology infrastructure using internal staff and third-party specialists. We conduct ongoing social engineering testing and training across our entire employeebase. We maintain a vendor management program designed to identify, assess, and manage risks, including cybersecurity risks, associated with external serviceproviders and our supply chain. Our internal audit group, as well as our independent auditors periodically review our processes, systems, and controls, includingwith respect to our information security program, to assess their design and operating effectiveness and make recommendations to strengthen our riskmanagement program. We maintain an Incident Response Plan that provides a documented framework for responding to actual or potential cybersecurity incidents, includingengagement of appropriate third parties such as insurance providers and incident response professionals, and timely reporting to our CEO and Board ofDirectors as appropriate. The Incident Response Plan is coordinated by the Information Security Officer and key members of management are embedded intothe Plan by its design. The Incident Response Plan facilitates coordination across multiple areas of our organization and is evaluated at least annually. Notwithstanding our defensive measures and processes, the threat posed by cyber-attacks is always present. Our internal systems, processes, and controlsare designed to mitigate loss from cyber-attacks. While we have experienced cybersecurity incidents in the past, risks from cybersecurity threats have notmaterially affected our company to date. For further discussion of risks from cybersecurity threats, see the section captioned “We are subject to certain risks inconnection with our use of technology” in Item 1A. Risk Factors. 17
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Index Governance Our Information Security Officer is responsible for managing our information security program, inclusive of cybersecurity risk assessment, incidentresponse, vulnerability assessment, threat intelligence, identity access governance, third-party risk management, and business continuity. Some of theseresponsibilities are carried out in collaboration with other internal departments, such as the information technology department. In any case, the InformationSecurity Officer provides guidance, oversight, and monitoring of the information security program, and acts in an independent role, reporting directly to theChief Operating Officer and subsequently to the Audit and Examination Committee of the board of directors. Our Information Security Officer has extensivebank operations experience, has attained Certified Banking Security Manager certification with the banking industry, and attends relevant cybersecurity trainingsessions on a regular basis. Our information technology department consists of technology professionals with varying degrees of education and experience. Ourinformation technology management team has significant technology and operational experience, including experience in mitigating and responding tocybersecurity threats. The Audit and Examination Committee of our board of directors is responsible for overseeing our information and cybersecurity risk management program,including management’s actions to identify, assess, mitigate, and remediate or prevent material cybersecurity issues and risks. Our Information Security Officerprovides quarterly reports to the Audit and Examination Committee of our board of directors regarding the information security program, cybersecurity and/orprivacy incidents, key cybersecurity initiatives, and other matters relating to cybersecurity processes. These reports may occur more frequently if a significantissue or incident is being addressed. ITEM 2 – PROPERTIES. The headquarters of the Company and Bank are located at 15 South Main Street, Mansfield, Pennsylvania. The building contains the central offices of theCompany and Bank. The Bank owns twenty-five banking facilities and leases twenty-two other facilities. The net book value of owned banking facilities and leasehold improvements totaled $16,857,000 as of December 31, 2025. The properties are adequate tomeet the needs of the employees and customers. We have equipped all of our facilities with current technological improvements for data processing. ITEM 3 - LEGAL PROCEEDINGS. The Company is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business. Suchroutine legal proceedings in the aggregate are believed by management to be immaterial to the Company’s consolidated financial condition or results ofoperations. ITEM 4 – MINE SAFETY DISCLOSURES Not applicable. PART II ITEM 5 - MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIES. The Company’s common stock is listed on the Nasdaq Stock Market under the symbol “CZFS”. The Company has paid dividends since April 30, 1984, theeffective date of our formation as a bank holding company. The Company’s Board of Directors expects that comparable cash dividends will continue to be paidby the Company in the future; however, future dividends necessarily depend upon earnings, financial condition, appropriate legal restrictions and other factorsin existence at the time the Board of Directors considers a dividend distribution. Cash available for dividend distributions to stockholders of the Companycomes primarily from dividends paid to the Company by the Bank. Therefore, restrictions on the ability of the Bank to make dividend payments are directlyapplicable to the Company. Under the Pennsylvania Business Corporation Law of 1988, the Company may pay dividends only if, after payment, the Companywould be able to pay debts as they become due in the usual course of our business and total assets will be greater than the sum of total liabilities. Theseregulatory policies could affect the ability of the Company to pay dividends or otherwise engage in capital distributions. Also see “Supervision and Regulation –Regulatory Restrictions on Bank Dividends,” “Supervision and Regulation – Holding Company Regulation,” and “Note 16 – Regulatory Matters” to theconsolidated financial statements. 18
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Index As of March 3, 2026, the Company had 1,793 stockholders of record. The computation of stockholders of record excludes investors whose shares wereheld for them by a bank or broker at that date. The following table presents information regarding the Company’s stock repurchases during the three monthsended December 31, 2025: Period Total Number of Shares(or units Purchased) AveragePrice Paidper Share(or Unit) Total Number of Shares (or Units)Purchased as Part of PubliclyAnnounced Plans of Programs Maximum Number (or ApproximateDollar Value) of Shares (or Units) thatMay Yet Be Purchased Under the Plansor Programs (1) 10/1/25 to 10/31/25 - $ 0.00 - 143,203 11/1/25 to 11/30/25 2,080 $ 56.06 2,080 141,123 12/1/25 to 12/31/25 985 $ 55.82 985 140,138 Total 3,065 $ 55.85 3,065 140,138 (1) On April 22, 2023, the Company announced that the Board of Directors authorized the Company to repurchase up to an additional 150,000 shares at anaggregate purchase price not to exceed $15.0 million over a period of 36 months. The repurchases will be conducted through open-market purchases orprivately negotiated transactions and will be made from time to time depending on market conditions and other factors. No time limit was placed onthe duration of the share repurchase program. Any repurchased shares will be held as treasury stock and will be available for general corporatepurposes. Additionally, during the quarter ended December 31, 2025, certain employees surrendered shares of common stock owned by them to satisfy their statutoryminimum U.S. federal and state tax obligations associated with the vesting of shares of restricted common stock issued under the Amended and Restated FirstCitizens Community Bank Annual Incentive Plan. Additionally, during the quarter ended December 31, 2025, certain employees resigned from the Companyand forfeited unvested restricted shares awarded to them through the Amended and Restated First Citizens Community Bank Annual Incentive Plan. Performance Graph The performance graph below compares the cumulative total shareholder return on Citizens Financial Services, Inc. Common Stock with the cumulativetotal return on the equity securities of companies included in the Russell 3000 Index and the KBW NASDAQ Regional Banking index, measured at the lasttrading day of each year shown. The graph assumes an investment of $100 on December 31, 2020 and reinvestment of dividends on the date of payment withoutcommissions. The performance graph represents past performance and should not be considered to be an indication of future performance. 19
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Index Copyright© 2026 Russell Investment Group. All rights reserved. 12/20 12/21 12/22 12/23 12/24 12/25 Citizens Financial Services, Inc. 100.00 112.91 148.10 129.87 133.40 125.46 Russell 3000 100.00 125.66 101.53 127.88 158.32 185.47 KBW NASDAQ Regional Banking 100.00 136.64 127.17 126.66 143.38 152.71 ITEM 6 – [RESERVED] 20
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Index ITEM 7 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. CAUTIONARY STATEMENT We have made forward-looking statements in this document, and in documents that we incorporate by reference, that are subject to risks and uncertainties.Forward-looking statements include information concerning possible or assumed future results of operations of the Company, the Bank, First CitizensInsurance, Realty or the Company on a consolidated basis. When we use words such as “believes,” “expects,” “anticipates,” or similar expressions, we aremaking forward-looking statements. Forward-looking statements may prove inaccurate. For a variety of reasons, actual results could differ materially fromthose contained in or implied by forward-looking statements: • Interest rates could change more rapidly or more significantly than we expect or remain inverted for a longer period than anticipated.• The economy could change significantly in an unexpected way, which would cause the demand for new loans and the ability of borrowers to repayoutstanding loans to change in ways that our models do not anticipate.• The financial markets could suffer a significant disruption, which may have a negative effect on our financial condition and that of our borrowers, andon our ability to raise money by issuing new securities.• It could take us longer than we anticipate implementing strategic initiatives, including expansions, designed to increase revenues or manage expenses,or we may be unable to implement those initiatives at all.• Acquisitions and dispositions of assets and companies could affect us in ways that management has not anticipated.• We may become subject to new legal obligations or the resolution of litigation may have a negative effect on our financial condition or operatingresults.• We may become subject to new and unanticipated accounting, tax, regulatory or compliance practices or requirements. Failure to comply with any oneor more of these requirements could have an adverse effect on our operations.• We could experience greater loan delinquencies than anticipated, adversely affecting our earnings and financial condition. • We could experience greater losses than expected due to the ever-increasing volume of information theft and fraudulent scams impacting our customersand the banking industry.• We could lose the services of some or all of our key personnel, which would negatively impact our business because of their business developmentskills, financial expertise, lending experience, technical expertise and market area knowledge.• The agricultural economy is subject to extreme swings in both the costs of resources and the prices received from the sale of products as a result ofweather, government regulations, international trade agreements and consumer tastes, which could negatively impact certain of our customers.• Loan concentrations in certain industries could negatively impact our results, if financial results or economic conditions deteriorate.• A budget impasse in the Commonwealth of Pennsylvania and/or a Federal Government shutdown could impact our asset values, liquidity andprofitability as a result of either delayed or reduced funding to school districts and municipalities who are customers of the Bank, as well as individualswho receive state and federal benefits.• Companies providing support services related to the exploration and drilling of the natural gas reserves in our market area may be affected by federal,state and local laws and regulations such as restrictions on production, permitting, changes in taxes and environmental protection, which couldnegatively impact our customers and, as a result, negatively impact our loan and deposit volume and loan quality. Additionally, the activities thecompanies providing support services related to the exploration and drilling of the natural gas reserves may be dependent on the market price of naturalgas. As a result, decreases in the market price of natural gas could also negatively impact these companies, our customers. Additional factors are discussed in this Annual Report on Form 10-K under “Item 1A. Risk Factors.” These risks and uncertainties should be considered inevaluating forward-looking statements and undue reliance should not be placed on such statements. Forward-looking statements speak only as of the date theyare made and the Company does not undertake to update forward-looking statements to reflect circumstances or events that occur after the date of the forward-looking statements or to reflect the occurrence of unanticipated events. Accordingly, past results and trends should not be used by investors to anticipate futureresults or trends. 21
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Index INTRODUCTION The following is management’s discussion and analysis of the significant changes in financial condition, the results of operations, capital resources andliquidity presented in the accompanying consolidated financial statements for the Company. The Company’s consolidated financial condition and results ofoperations consist almost entirely of the Bank’s financial condition and results of operations. Management’s discussion and analysis should be read inconjunction with the audited consolidated financial statements and related notes. Except as noted, tabular information is presented in thousands of dollars. The Company engages in the general business of banking throughout our service area of Potter, Tioga, Clinton, Lycoming, Bradford and Centre counties innorth central Pennsylvania, Lebanon, Berks, Schuylkill, Lancaster and Chester counties in south central Pennsylvania and Allegany County in southern NewYork. In Delaware, the primary areas are the Cities of Wilmington and Dover and the surrounding area. We also have a limited branch office in Union county,Pennsylvania, which primarily serves agricultural and commercial customers in the central Pennsylvania market. With the HVBC acquisition, we haveexpanded further into southeast Pennsylvania, including Montgomery, Bucks and Philadelphia Counties as well as Burlington County, New Jersey through theacquisition of five full service branches, four mortgage centers and one business banking facility. We maintain our central office in Mansfield, Pennsylvania.Presently we operate 47 banking facilities, 39 of which operate as bank branches. In Pennsylvania, the Company has full service offices located in Mansfield,Blossburg, Ulysses, Genesee, Wellsboro, Troy, Sayre, Canton, Gillett, Millerton, LeRaysville, Towanda, Rome, the Mansfield Wal-Mart Super Center, MillHall, Schuylkill Haven, Friedensburg, Mt. Aetna, Fredericksburg, Mount Joy, Ephrata, Fivepointville, State College, Kennett Square, Warrington, Williamsport,Plumsteadville, Philadelphia, two branches near the city of Lebanon and two branches in Huntington Valley. The Company has limited branch offices located inWinfield, Pennsylvania and Georgetown, Delaware. In New York, our office is in Wellsville. In Delaware, we have three branches in Wilmington and one inDover. The mortgage centers acquired as part of the acquisition are located in Huntington Valley, PA and Mount Laurel, NJ. The business banking facility islocated in Philadelphia, PA. In the fourth quarter of 2023, we opened a branch in Williamsport, Pennsylvania. During 2024, the Montgomeryville, PA mortgageoffice was closed and the Georgetown office was opened. Risk identification and management are essential elements for the successful management of the Company. In the normal course of business, the Companyis subject to various types of risk, including interest rate, credit, liquidity, reputational and regulatory risk. Interest rate risk is the sensitivity of net interest income and the market value of financial instruments to the direction and frequency of changes in interestrates. Interest rate risk results from various re-pricing frequencies and the maturity structure of the financial instruments owned by the Company. The Companyuses its asset/liability and funds management policies to control and manage interest rate risk. Credit risk represents the possibility that a customer may not perform in accordance with contractual terms. Credit risk results from loans with customersand the purchasing of securities. The Company’s primary credit risk is in the loan portfolio. The Company manages credit risk by adhering to an establishedcredit policy and through a disciplined evaluation of the adequacy of the allowance for credit losses. Also, the investment policy limits the amount of credit riskthat may be taken in the investment portfolio. Liquidity risk represents the inability to generate or otherwise obtain funds at reasonable rates to satisfy commitments to borrowers and obligations todepositors. The Company has established guidelines within its asset/liability and funds management policy to manage liquidity risk. These guidelines include,among other things, contingent funding alternatives. Reputational risk, or the risk to our business, earnings, liquidity, and capital from negative public opinion, could result from our actual or alleged conduct ina variety of areas, including legal and regulatory compliance, lending practices, corporate governance, litigation, ethical issues, or inadequate protection ofcustomer information, which could include identify theft, or theft of customer information through third parties. We expend significant resources to comply withregulatory requirements. Failure to comply could result in reputational harm or significant legal or remedial costs. Damage to our reputation could adverselyaffect our ability to retain and attract new customers, and adversely impact our earnings and liquidity. Regulatory risk represents the possibility that a change in law, regulations or regulatory policy may have a material effect on the business of the Companyand its subsidiary. We cannot predict what legislation might be enacted or what regulations might be adopted, or if adopted, the effect thereof on our operations. 22
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Index Readers should carefully review the risk factors described in other documents the Company files with the SEC, including the annual reports on Form 10-K,the quarterly reports on Form 10-Q and any current reports on Form 8-K filed by us. TRUST AND INVESTMENT SERVICES; OIL AND GAS SERVICES Our Investment and Trust Division is committed to helping our customers meet their financial goals. The Trust Division offers professional trustadministration, investment management services, estate planning and administration, custody of securities and individual retirement accounts. In addition totraditional trust and investment services offered, we assist our customers through various oil and gas specific leasing matters from lease negotiations toestablishing a successful approach to personal wealth management. Assets held by the Bank in a fiduciary or agency capacity for its customers are not includedin the consolidated financial statements since such items are not assets of the Bank. As of December 31, 2025, and 2024, assets owned and invested bycustomers of the Bank through the Bank’s investment representatives totaled $317,895,000 and $395,869,000 million, respectively. Additionally, as summarizedin the table below, the Trust Department had assets under management as of December 31, 2025 and 2024 of $194,841,000 and $180,710,000, respectively.During the year ended December 31, 2025, $3,918,000 of new trust accounts were opened, $8,312,000 of additional contributions to trust accounts were made,$15,622,000 was distributed from trust accounts, and $2,081,000 of accounts were closed. As a result of market fluctuations, the fair value of the trust accountsincreased approximately $19,604,000 during the year ended December 31, 2025. The following table reflects trust accounts by investment type and structure: (market values - in thousands) 2025 2024 INVESTMENTS: Bonds $ 19,721 $ 18,432 Stock 30,970 32,804 Savings and Money Market Funds 22,242 21,496 Mutual Funds 105,599 91,846 Mineral interests 3,760 3,000 Mortgages 718 738 Real Estate 9,807 9,812 Miscellaneous 2,024 2,582 TOTAL $ 194,841 $ 180,710 ACCOUNTS: Trusts 54,244 51,232 Guardianships 745 330 Employee Benefits 74,067 67,275 Investment Management 65,784 61,871 Custodial 1 2 TOTAL $ 194,841 $ 180,710 Our financial consultants offer full service brokerage and financial planning services throughout the Bank’s market areas. Appointments can be made at anyBank branch. Products such as mutual funds, annuities, health and life insurance are made available through our insurance subsidiary, First Citizens InsuranceAgency, Inc. RESULTS OF OPERATIONS Net income for the year ended December 31, 2025 was $36,572,000, which represents an increase of $8,754,000, or 31.5%, when compared to 2024primarily due to an increase in net interest income after the provision for credit losses of $11,758,000. Net income for the year ended December 31, 2024 was$27,818,000, which represents an increase of $10,007,000, or 56.2%, when compared to 2023 due primarily to the absence of one-time costs associated with theHVBC acquisition that were recognized in 2023. Basic earnings per share were $7.62, $5.80 and $3.98 for 2025, 2024 and 2023, respectively, while dilutedearnings per share were $7.62, $5.79 and $3.98 for 2025, 2024 and 2023, respectively. Net income is influenced by five key components: net interest income, provision for credit losses, non-interest income, non-interest expenses, and theprovision for income taxes. 23
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Index Net Interest Income The most significant source of revenue is net interest income; the amount by which interest earned on interest-earning assets exceeds interest paid oninterest-bearing liabilities. Factors that influence net interest income are changes in volume of interest-earning assets and interest-bearing liabilities as well aschanges in the associated interest rates. The following table sets forth the Company’s average balances of, and the interest earned or incurred on, each principal category of assets, liabilities andstockholders’ equity, the related rates, net interest income and rate “spread” created. Analysis of Average Balances and Interest Rates 2025 2024 2023 AverageBalance(1) Interest AverageRate AverageBalance(1) Interest AverageRate AverageBalance(1) Interest AverageRate (dollars in thousands) $ $ % $ $ % $ $ % ASSETS Short-term investments: Interest-bearing depositsat banks 23,767 384 1.62 28,264 730 2.58 24,470 572 2.34 Total short-term investments 23,767 384 1.62 28,264 730 2.58 24,470 572 2.34 Interest bearing timedeposits at banks 3,820 118 3.09 3,878 121 3.09 5,255 164 3.10 Investment securities: Taxable (6) 378,387 11,610 3.07 359,724 8,685 2.41 383,241 8,043 2.10 Tax-exempt (3) 109,125 3,324 3.05 105,141 2,650 2.52 112,806 2,866 2.54 Total investment securities 487,512 14,934 3.06 464,865 11,335 2.44 496,047 10,909 2.20 Loans: Residential mortgageloans 346,313 20,841 6.02 356,292 20,758 5.83 290,971 15,918 5.47 Construction loans 135,920 9,744 7.17 182,714 13,607 7.45 135,315 9,485 7.01 Commercial Loans 1,320,836 84,059 6.36 1,265,922 80,849 6.39 1,101,452 66,105 6.00 Agricultural Loans 362,880 21,227 5.85 350,588 18,978 5.41 342,980 17,061 4.97 Loans to state & politicalsubdivisions 52,730 2,071 3.93 55,919 2,213 3.96 59,308 2,299 3.88 Other loans 96,097 6,898 7.18 83,916 6,717 8.00 74,555 5,660 7.59 Loans, net of discount (2)(3)(4) 2,314,776 144,840 6.26 2,295,351 143,122 6.24 2,004,581 116,528 5.81 Total interest-earningassets 2,829,875 160,276 5.66 2,792,358 155,308 5.56 2,530,353 128,173 5.07 Cash and due from banks 9,727 9,306 9,341 Bank premises andequipment 21,638 21,124 19,871 Other assets 180,011 183,674 139,474 Total non-interest earningassets 211,376 214,104 168,686 Total assets 3,041,251 3,006,462 2,699,039 LIABILITIES ANDSTOCKHOLDERS’EQUITY Interest-bearing liabilities: Business InterestChecking 20,148 179 0.89 8,756 88 1.01 - - - NOW accounts 718,185 15,361 2.14 756,689 19,117 2.53 666,505 13,396 2.01 Savings accounts 287,162 1,336 0.47 296,275 1,532 0.52 318,299 1,314 0.41 Money market accounts 453,545 12,919 2.85 397,942 12,482 3.14 364,385 8,713 2.39 Certificates of deposit 470,285 17,255 3.67 481,862 19,107 3.97 328,553 8,276 2.52 Total interest-bearingdeposits 1,949,325 47,050 2.41 1,941,524 52,326 2.70 1,677,742 31,699 1.89 Other borrowed funds 326,026 14,117 4.33 323,409 15,536 4.80 326,577 15,159 4.64 Total interest-bearingliabilities 2,275,351 61,167 2.69 2,264,933 67,862 3.00 2,004,319 46,858 2.34 Demand deposits 387,914 385,702 382,979 Other liabilities 40,650 40,593 38,419 Total non-interest-bearingliabilities 428,564 426,295 421,398 Stockholders’ equity 337,336 315,234 273,322 Total liabilities &stockholders’ equity 3,041,251 3,006,462 2,699,039 Net interest income 99,109 87,446 81,315 Net interest spread (5) 2.97% 2.56% 2.73%Net interest income as apercentage of averageinterest-earning assets 3.50% 3.13% 3.21%
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Ratio of interest-earningassets to interest-bearingliabilities 124.00 123.00 126.00 (1) Averages are based on daily averages.(2) Includes loan origination and commitment fees.(3) Tax exempt interest revenue is shown on a tax equivalent basis for proper comparison using a statutory federal income tax rate of 21% for 2025, 2024 and2023.(4) Income on non-accrual loans is accounted for on a cash basis, and the loan balances are included in interest-earning assets.(5) Interest rate spread represents the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearingliabilities.(6) Included dividend income 24
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Index For purposes of the comparison, as well as the discussion that follows, this presentation facilitates performance comparisons between taxable and tax-freeassets by increasing the tax-free income by an amount equivalent to the Federal income taxes that would have been paid if this income were taxable at theFederal statutory rate for the corresponding year. Accordingly, tax equivalent adjustments for investments and loans have been made accordingly to the previoustable for the years ended December 31, 2025, 2024 and 2023, respectively (in thousands): 2025 2024 2023 Interest and dividend income from investment securities, interest bearing time deposits and short-terminvestments (non-tax adjusted) (GAAP) $ 14,738 $ 11,629 $ 11,043 Tax equivalent adjustment 698 557 602 Interest and dividend income from investment securities, interest bearing time deposits and short-terminvestments (tax equivalent basis) (Non-GAAP) $ 15,436 $ 12,186 $ 11,645 2025 2024 2023 Interest and fees on loans (non-tax adjusted) (GAAP) $ 144,430 $ 142,688 $ 116,075 Tax equivalent adjustment 410 434 453 Interest and fees on loans (tax equivalent basis) (Non-GAAP) $ 144,840 $ 143,122 $ 116,528 2025 2024 2023 Total interest income $ 159,168 $ 154,317 $ 127,118 Total interest expense 61,167 67,862 46,858 Net interest income (GAAP) 98,001 86,455 80,260 Total tax equivalent adjustment 1,108 991 1,055 Net interest income (tax equivalent basis) (Non-GAAP) $ 99,109 $ 87,446 $ 81,315 The following table shows the tax-equivalent effect of changes in volume and rates on interest income and expense (in thousands): Analysis of Changes in Net Interest Income on a Tax-Equivalent Basis 2025 vs. 2024 (1) 2024 vs. 2023 (1) Change inVolume Changein Rate TotalChange Change inVolume Changein Rate TotalChange Interest Income: Short-term investments: Interest-bearing deposits at banks $ (103) $ (243) $ (346) $ 95 $ 63 $ 158 Interest bearing time deposits at banks (3) - (3) (43) - (43)Investment securities: Taxable 472 2,453 2,925 (438) 1,080 642 Tax-exempt 102 572 674 (194) (22) (216) Total investment securities 574 3,025 3,599 (632) 1,058 426 Total investment income 468 2,782 3,250 (580) 1,121 541 Loans: Residential mortgage loans (475) 558 83 3,752 1,088 4,840 Construction loans (3,372) (491) (3,863) 3,499 623 4,122 Commercial Loans 3,494 (284) 3,210 10,314 4,430 14,744 Agricultural Loans 681 1,568 2,249 370 1,547 1,917 Loans to state & political subdivisions (125) (17) (142) (134) 48 (86)Other loans 626 (445) 181 737 320 1,057 Total loans, net of discount 829 889 1,718 18,538 8,056 26,594 Total Interest Income 1,297 3,671 4,968 17,958 9,177 27,135 Interest Expense: Interest-bearing deposits: Business Interest Checking 100 (9) 91 - 88 88 NOW accounts (936) (2,820) (3,756) 1,974 3,747 5,721 Savings accounts (46) (150) (196) (90) 308 218 Money Market accounts 1,277 (840) 437 854 2,915 3,769 Certificates of deposit (452) (1,400) (1,852) 4,861 5,970 10,831 Total interest-bearing deposits (57) (5,219) (5,276) 7,599 13,028 20,627 Other borrowed funds 126 (1,545) (1,419) (151) 528 377 Total interest expense 69 (6,764) (6,695) 7,448 13,556 21,004 Net interest income $ 1,228 $ 10,435 $ 11,663 $ 10,510 $ (4,379) $ 6,131 (1) The portion of the total change attributable to both volume and rate changes during the year has been allocated to volume and rate components based uponthe absolute dollar amount of the change in each component prior to allocation. 25
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Index 2025 vs. 2024 Tax equivalent net interest income for 2025 was $99,109,000 compared to $87,446,000 for 2024, an increase of $11,663,000 or 13.3%. Total interestincome increased $4,968,000, as loan interest income increased $1,718,000, and total investment income increased $3,250,000. Interest expense decreased$6,695,000 from 2024. Total tax equivalent interest income from investment securities increased $3,599,000 in 2025 from 2024. The average balance of investment securitiesincreased $22,647,000, which had an effect of increasing interest income by $574,000 due to volume. During 2025, the Bank made purchases to replacematuring securities, as well as making purchases to increase the size of the investment portfolio for pledging purposes, as well as enhancing yield. The averagetax-effected yield on our investment portfolio increased from 2.44% in 2024 to 3.06% in 2025. The increase in the tax-effected yield is attributable to purchasesmade during 2024 and 2025, which were made in a higher market interest rate environment. As a result of the yield on investment securities increasing 62 basispoints (bps) to 3.06%, interest income on investment securities increased $3,025,000, with the increase related to taxable securities. The investment strategy for2025 used cashflow from the investment portfolio to increase convexity and improve yield as opportunities became available. As the rate cycle continues toprogress, the bank will seek investments to improve portfolio yield while monitoring interest rate risk exposure under various rate environments and providingcash flow to meet liquidity needs as they arise. During 2025, the investment purchases made were primarily in mortgage-backed securities that provided thewidest spread to treasuries and municipal securities that provided convexity to the Bank’s investment portfolio. The Company believes its investment strategyhas appropriately mitigated its interest rate risk exposure for various rate environments, including a rising rate environment, while providing sufficientcashflows to meet liquidity needs. Loan interest income increased $1,718,000 in 2025 from 2024. The average balance of our loan portfolio increased by $19,425,000 in 2025 compared to2024, which resulted in an increase in interest income of $829,000 due to volume. The increase in average loans for 2025 was due to an increase in the averagebalance of outstanding student loans and an increase in agricultural loans. The average tax-effected yield on our loan portfolio was 6.26% for 2025 compared to6.24% for 2024 resulting in an increase in loan interest income of $889,000. • Interest income on residential mortgage loans increased $83,000. The average balance of residential mortgage loans decreased $9,979,000 due toloan payments and pay-offs from individuals refinancing loans on the secondary market. This resulted in a decrease of $475,000 due to volume.The change due to rate was an increase of $558,000 as the average yield on residential mortgages increased from 5.83% in 2024 to 6.02% in 2025as loans originated and added to the portfolio are at higher rates than the average portfolio loan rate as of December 31, 2024. • The average balance of construction loans decreased $46,794,000 from 2024 to 2025 as a result of projects in our Delaware market and thesoutheast Pennsylvania market being completed and the related construction loans either transferring to other portfolios or being paid off. Thisresulted in a decrease of $3,372,000 on total interest income due to volume. The average yield on construction loans decreased from 7.45% to7.17%, which correlated to a $491,000 decrease in interest income and is due to a decrease in market interest due to the Federal Reservedecreasing the Fed Fund target rate in 2024 and 2025. • Interest income on commercial loans increased $3,210,000 from 2024 to 2025 due to an increase in the average balance of commercial loans of$54,914,000. The growth was primarily attributable to completed construction projects converting to permanent financing. The increase in theaverage balance of these loans resulted in an increase in interest income due to volume of $3,494,000. Our lenders have been able to attract andretain loan relationships in their markets by providing excellent customer service and having attractive products. We believe our lenders are adeptat customizing and structuring loans to customers that meet their needs and satisfy our commitment to credit quality. In many cases, the Bankworks with the Small Business Administration (SBA) guaranteed loan programs to offset credit risk and to further promote economic growth inour market area. The average yield on commercial loans decreased 3 bps to 6.36% in 2025, resulting in a decrease in interest income due to rate of$284,000. The decrease in yield on commercial loans was due to a decrease in market interest due to the Federal Reserve decreasing the Fed Fundtarget rate in 2024 and 2025. 26
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Index • Interest income on agricultural loans increased $2,249,000 from 2024 to 2025. The increase in the average balance of agricultural loans of$12,292,000 is primarily attributable to the south-central Pennsylvania market. The increase in the average balance of these loans resulted in anincrease in interest income due to volume of $681,000. The average yield on agricultural loans increased from 5.41% in 2024 to 5.85% in 2025due to the increase in market rates as well as the pay-off of an agricultural relationship that was previously on non-accrual status that paid severalloans off during 2025 that generated $781,000 of additional interest income. This resulted in an increase in interest income due to rate of$1,568,000. We believe our lenders are adept at customizing and understanding the needs of individual borrowers, and have the expertise tostructure loans for customers that meet their needs and satisfy our commitment to credit quality. In many cases, the Bank works with the UnitedStates Department of Agriculture’s (USDA) guaranteed loan programs to offset credit risk and to further promote economic growth in our marketarea. • The average balance of other loans increased $12,181,000 as a result of an increase in outstanding student loans. This resulted in an increase of$626,000 on total interest income due to volume. The average tax equivalent yield on other loans decreased from 8.00% in 2024 to 7.18% in 2025,decreasing interest income by $445,000 in other loans. This decline is attributable to the decrease in market rates in 2025 due to the FederalReserve decreasing the Fed Fund target rate in 2024 and 2025. Total interest expense decreased $6,695,000 in 2025 compared to 2024. The majority of the decrease was due to a decrease in the average rate paid oninterest bearing liabilities of 31 basis points to 2.69%, resulting in interest expense of $6,764,000. The decrease in rates was driven by the Federal Reservedecreasing the Fed Fund target rate in 2024 and 2025. The average rate on money markets decreased from 3.14% to 2.85%, resulting in a decrease in interestexpense of $840,000. The average rate paid on savings accounts decreased 5 bps and resulted in a decrease in interest expense of $46,000. The average rate paidon NOW accounts decreased from 2.53% to 2.14% resulting in a decrease in interest expense of $2,820,000. The average rate paid on certificates of depositsdecreased from 3.97% to 3.67% resulting in a decrease in interest expense of $1,400,000. The average rate paid on other borrowed funds decreased from 4.80%to 4.33% resulting in a decrease in interest expense of $1,545,000. Average interest-bearing liabilities increased $10,418,000 million in 2025, with average interest-bearing deposits increasing $7,801,000 million and averageother borrowings increasing $2,617,000. While there was an overall increase in average deposits, average NOW accounts and certificates of deposits decreasedin total $50,081,000, decreasing interest expense $1,388,000, which offset the increase in interest expense of $1,277,000 from the average balance of moneymarket accounts increasing $55,603,000. The increase in average deposits was due to organic growth across all regions of the Company and helped offset adecrease in average brokered deposits of $51,216,000. We continue to see customers exchange non-interest bearing deposits for interest bearing products thatare both non-maturity and term. The average balance of other borrowed funds increased $2,617,000 which corresponds to an increase in interest expense of$126,000. Our tax equivalent net interest margin for 2025 was 3.50% compared to 3.13% for 2024, with the change attributable to the yield of interest-earning assetsincreasing and the cost from interest-bearing liabilities decreasing during 2025. The yield on interest-earning assets increased primarily due to investmentsecurities purchased during 2025 replacing investment cashflows from purchases made prior to 2023 in a much lower rate environment. Due to the FederalReserve decreasing the Fed Fund target rate in late 2024 and in 2025. We experienced a decrease in the cost of interest-bearing deposits and borrowings.Inflation levels remain above the Fed’s target but the committee believes sufficient progress has been made to bring overnight rates down to what they considerthe upper band of neutral in response to some weakening in employment. The yield curve has a positive slope but flatter relative to long term averages. 2024 vs. 2023 Tax equivalent net interest income for 2024 was $87,446,000 compared to $81,315,000 for 2023, an increase of $6,131,000 or 7.5%. Total interest incomeincreased $27,135,000, as loan interest income increased $26,594,000, and total investment income increased $541,000. Interest expense increased $21,004,000from 2023. 27
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Index Total tax equivalent interest income from investment securities increased $426,000 in 2024 from 2023. The average balance of investment securitiesdecreased $31,182,000, which had an effect of decreasing interest income by $632,000 due to volume. During 2024, the Bank had limited investment activity inthe first half of the year and used investment cashflows to fund loan activity, as well as to offset seasonal deposit fluctuations. The average tax-effected yield onour investment portfolio increased from 2.20% in 2023 to 2.44% in 2024. The increase in the tax-effected yield is attributable to purchases made during 2023and 2024, which were made in a higher market interest rate environment. As a result of the yield on investment securities increasing 24 basis points (bps) to2.44%, interest income on investment securities increased $1,058,000, with the increase related to taxable securities. The investment strategy for 2024 wassimilar to 2023 in that cashflows from the investment portfolio were used to repay overnight borrowings as well as fund loan growth. The decrease in theaverage balance of the investment portfolio was due to investment repayments and maturities. During 2024, the investment purchases made were primarily inmortgage-backed securities that provided the widest spread to treasuries, which were primarily purchased at a discount. In total, loan interest income increased $26,594,000 in 2024 from 2023. The average balance of our loan portfolio increased by $290,770,000 in 2024compared to 2023, which resulted in an increase in interest income of $18,538,000 due to volume, primarily due to the HVBC acquisition completed in June2023 being included in the Company’s results for the entirety of 2024 and an increase in the average balance of student loans. The average tax-effected yield onour loan portfolio was 6.24% for 2024 compared to 5.81% for 2023 resulting in an increase in loan interest income of $8,056,000. The tax-effected yieldincreased during 2024 due to a rise in market interest rates. • Interest income on residential mortgage loans increased $4,840,000. The average balance of residential mortgage loans increased $65,321,000 as aresult of the HVBC acquisition, resulting in an increase of $3,752,000 due to volume. The change due to rate was an increase of $1,088,000 as theaverage yield on residential mortgages increased from 5.47% in 2023 to 5.83% in 2023 as a result of the higher rate environment in 2023 and2024. • The average balance of construction loans increased $47,399,000 from 2023 to 2024 as a result of projects in our south eastern Pennsylvaniamarket acquired as part of the HVBC acquisition, and the Delaware market, which resulted in an increase of $3,499,000 in interest income. Theaverage yield on construction loans increased from 7.01% to 7.45%, which correlated to a $623,000 increase in interest income. • Interest income on commercial loans increased $14,744,000 from 2023 to 2024. The increase in the average balance of commercial loans of$164,470,000 is primarily attributable to the HVBC acquisition. The increase in the average balance of these loans resulted in an increase ininterest income due to volume of $10,314,000. The average yield on commercial loans increased 39 bps to 6.39% in 2024, resulting in an increasein interest income due to rate of $4,430,000. The increase in yield on commercial loans was a result of the higher rate environment in 2023 and2024. • Interest income on agricultural loans increased $1,917,000 from 2023 to 2024. The increase in the average balance of agricultural loans of$7,608,000 is primarily attributable to the south-central Pennsylvania market. The increase in the average balance of these loans resulted in anincrease in interest income due to volume of $370,000. The average yield on agricultural loans increased from 4.97% in 2023 to 5.41% in 2024due to the increase in market rates, resulting in an increase in interest income due to rate of $1,547,000. • The average balance of other loans increased $9,361,000 million as a result of an increase in outstanding student loans. This resulted in an increaseof $737,000 on total interest income due to volume. The average tax equivalent yield on other loans increased from 7.59% in 2023 to 8.00% in2024, increasing interest income by $320,000 in other loans due to the increase in market rates in 2023 and 2024. Total interest expense increased $21,004,000 in 2024 compared to 2023. The majority of the increase was due to an increase in the average rate paid oninterest bearing liabilities of 66 basis points to 3.00%. This increase resulted in an increase in interest expense of $13,356,000. The increase in rates was drivenby the Federal Reserve’s response to inflation during 2022 and 2023 by increasing interest rates, which were not offset by the rate cuts made in the second halfof 2024. The average rate on money markets increased from 2.39% to 3.14% resulting in an increase in interest expense of $2,915,000. The average rate paid onsavings accounts increased 11 bps and resulted in an increase in interest expense of $308,000. The average rate paid on NOW accounts increased from 2.01% to2.53% resulting in an increase in interest expense of $3,747,000. The average rate paid on certificates of deposits increased from 2.52% to 3.97% resulting in anincrease in interest expense of $5,970,000. The average rate paid on other borrowed funds increased from 4.64% to 4.80% resulting in an increase in interestexpense of $528,000. 28
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Index Average interest-bearing liabilities increased $260,614,000 in 2024, with average interest-bearing deposits increasing $263,782,000 and average otherborrowings decreasing $3,168,000. As a result of the increase in average deposits, interest expense increased $7,599,000 as a result of the change in volume.Increases in average deposits, which were primarily driven by the HVBC acquisition, included NOW accounts of $90,184,000 and money market accounts of$33,557,000. Certificates of deposits increased $153,309,000 due to the acquisition, an increase in brokered CD’s and conversion of non-maturity deposits toterm products. During 2024, a new business interest bearing checking account was created that had an average balance $8,756,000. The average balance ofother borrowed funds decreased $3,168,000 due to the maturity of several borrowings, which corresponds to a decrease in interest expense of $151,000. Our tax equivalent net interest margin for 2024 was 3.13% compared to 3.21% for 2023, with the change attributable to the yield of interest-earning assetsincreasing less than the cost from interest-bearing liabilities during 2024. Interest rates continued to increase during the first half of 2024 due to the increases inmarket interest rates and competitive pressure for deposits. With inflation decreasing, the Federal Reserve did start decreasing rates, but rates still remained highin relation to previous years. During 2024, inflation remained above the Federal Reserve’s targets, but had decreased enough that allowed the Federal Reserve tolower rates, but not to the extent the market had forecast at the beginning of 2024. The yield curve remained inverted for the majority of 2024, but some positiveslope did return to the curve during the 4th quarter of 2024 due to a decrease in short term rates as well as an increase in long term interest rates. PROVISION FOR CREDIT LOSSES For the year ended December 31, 2025, we recorded a provision for credit losses of $2,375,000, which represents a decrease of $212,000 from the$2,587,000 provision recorded in 2024. The provision for 2025 was driven by the current economic forecasts and specific reserves for non-accrual loans atDecember 31, 2025. The provision for 2024 was driven by other commercial loans that were originated by HVBC that subsequent to the acquisition deterioratedand were charged-off during 2024. The provision in 2024 was also impacted by an increase in past due and non-accrual loans, the vast majority of which wereacquired as part of the HVBC acquisition, and an increase in classified loans. (see also “Financial Condition – Allowance for Credit Losses - Loans and CreditQuality Risk”). For the year ended December 31, 2024, we recorded a provision for credit losses of $2,587,000, which represents a decrease of $2,941,000 from the$5,528,000 provision recorded in 2023. The provision for 2023 includes $4,591,000 associated with the HVBC acquisition and $162,000 as a provision for off-balance sheet items, which is also primarily attributable to the HVBC acquisition. Excluding these items, the provision for 2024 is $1,650,000 more than 2023and is due to other commercial loans that were originated by HVBC that subsequent to the acquisition have deteriorated and were charged-off during 2024. Theprovision in 2024 is also higher due to an increase in past due and non-accrual loans, the vast majority of which were acquired as part of the HVBC acquisition,and an increase in classified loans. (see also “Financial Condition – Allowance for Credit Losses - Loans and Credit Quality Risk”). NON-INTEREST INCOME The following table reflects non-interest income by major category for the years ended December 31 (dollars in thousands): 2025 2024 2023 Service charges 5,569 5,749 5,639 Trust 792 816 764 Brokerage and insurance 2,627 2,381 1,924 Equity security gains (losses), net 67 145 (144)Available for sale security losses, net - - (51)Gains on loans sold 2,290 2,316 1,452 Earnings on bank owned life insurance 1,433 1,684 1,254 Gain on sale of Braavo division - 1,102 - Other 1,566 1,208 767 Total $ 14,344 $ 15,401 $ 11,605 29
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Index 2025/2024 2024/2023 Change Change Amount % Amount % Service charges $ (180) (3.1) $ 110 2.0 Trust (24) (2.9) 52 6.8 Brokerage and insurance 246 10.3 457 23.8 Equity security gains (losses), net (78) (53.8) 289 (200.7)Available for sale security losses, net - NA 51 (100.0)Gains on loans sold (26) (1.1) 864 59.5 Earnings on bank owned life insurance (251) (14.9) 430 34.3 Gain on sale of Braavo division (1,102) (100.0) 1,102 NA Other 358 29.6 441 57.5 Total $ (1,057) (6.9) $ 3,796 32.7 2025 vs. 2024 Non-interest income decreased $1,057,000 in 2025 from 2024, or (6.9%). There were no sales of available for sale securities during 2025 or 2024. During2025, net equity security gains amounted to $67,000 as a result of market conditions experienced in 2025 compared to gains of $145,000 in 2024. Gains on loans sold decreased $26,000 compared to 2024. The decrease in gains on loans sold is attributable to a slight decrease in the amount of loans of$1,417,000, or (1.0%). The decrease in earnings on bank owned life insurance is due to death proceeds from the passing of former employees in 2024. Duringthe first quarter of 2024, the Company completed the sale of certain assets acquired as part of the HVBC acquisition, which included loans and accrued interest,software, as well as transferring certain contracts, processes and employees of a division internally known as Braavo. The proceeds from the sale totaledapproximately $7.2 million and generated a pre-tax gain of approximately $1.1 million. The increase in other income is due to derivative income earned byoffering customers a product similar to a back to back swap. 2024 vs. 2023 Non-interest income increased $3,796,000 in 2024 from 2023, or 32.7%. There were no sales of available for securities during 2024. During 2023, weexperienced a $51,000 net loss on available for sale securities. During 2023, we sold $10.0 million of municipal securities for a pre-tax loss of $51,000.Additionally, $76.5 million of securities obtained as part of the HVBC acquisition were sold for no gain or loss during the second quarter of 2023. During 2024,net equity security gains amounted to $145,000 as a result of market conditions experienced in 2024 compared to losses of $144,000 in 2023. Gains on loans sold increased $864,000 compared to 2023. The increase in gains on loans sold is attributable to the HVBC acquisition and its residentiallending model, which focused on originating and selling residential mortgage loans, which includes the use of interest rate locks and other derivative activities,which is included in other income and accounts for the majority of the change in other income of $441,000. The increase in earnings on bank owned lifeinsurance is due to the HVBC acquisition as well as death proceeds from the passing of former employees in 2024 exceeding those received in 2023. During thefirst quarter of 2024, the Company completed the sale of certain assets acquired as part of the HVBC acquisition, which included loans and accrued interest,software, as well as transferring certain contracts, processes and employees of a division internally known as Braavo. 30
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Index Non-interest Expenses The following tables reflect the breakdown of non-interest expense by major category for the years ended December 31 (dollars in thousands): 2025 2024 2023 Salaries and employee benefits 39,402 39,347 34,990 Occupancy 5,299 5,013 4,123 Furniture and equipment 1,209 1,038 822 Professional fees 2,341 2,599 1,962 FDIC insurance 1,710 1,996 1,475 Pennsylvania shares tax 739 1,114 583 Amortization of intangibles 478 564 373 Merger and acquisition - - 9,269 ORE expenses 267 212 166 Software expenses 1,844 1,953 1,784 Other 11,443 11,550 9,215 Total $ 64,732 $ 65,386 $ 64,762 2025/2024 2024/2023 Change Change Amount % Amount % Salaries and employee benefits $ 55 0.1 $ 4,357 12.5 Occupancy 286 5.7 890 21.6 Furniture and equipment 171 16.5 216 26.3 Professional fees (258) (9.9) 637 32.5 FDIC insurance (286) (14.3) 521 35.3 Pennsylvania shares tax (375) (33.7) 531 91.1 Amortization of intangibles (86) (15.2) 191 51.2 Merger and acquisition - NA (9,269) (100.0)ORE expenses 55 25.9 46 27.7 Software expenses (109) (5.6) 169 9.5 Other (107) (0.9) 2,335 25.3 Total $ (654) (1.0) $ 624 1.0 2025 vs. 2024 Non-interest expenses for 2025 totaled $64,732,000, which represents a decrease of $654,000 compared to 2024 expenses of $65,386,000. Salary andbenefit costs increased $55,000, or 0.1%, due to due to additional healthcare expenses and post-employment benefits. There were 12 fewer full-time equivalentemployees FTEs in 2025 compared to 2024. The decrease in professional fees and software costs is due to the sale of the Braavo division in 2024. The decrease in FDIC insurance expense is due to anincrease in the Bank’s leverage ratio experienced during 2025. Pennsylvania shares tax decreased due to an increase in tax credits obtained through charitablecontributions that are included in other expenses. Occupancy expenses increased due to an increase in depreciation associated with the Company’s decision torelocate its branch in the City of Williamsport that is expected to occur in the first half of 2026 that shortened the useful life of the current location. The increasein furniture and fixture expense is due to depreciation associated with purchases made in 2025 and 2024. 2024 vs. 2023 Non-interest expenses for 2024 totaled $65,386,000, which represents an increase of 624,000, compared to 2023 expenses of $64,762,000. Salary andbenefit costs increased $4,357,000, or 12.5%, due to an additional 34.3 full-time equivalent employees (FTE) as a result of the HVBC acquisition, meritincreases for 2024, as well as an increase in health insurance costs due to additional headcount and claims. The increases in occupancy, furniture and fixtures, software expenses and amortization expenses was due to the HVBC acquisition and additional branchesacquired as part of it. FDIC insurance expense increased $521,000 due to the Company’s increased size and the Bank’s lower leverage capital ratio during thefirst half of 2024 compared to 2023. Professional fees increased due to increased legal expenses, of which $201,000 was related to the sale of certain Braavoassets. Pennsylvania shares tax increased due to the increased size of the Bank. Other expenses increased primarily due to the acquisition, with increasesexperienced in subscriptions, marketing and advertising, postage, printing, data communication expenses and FHLB letter of credit fees. Independent of theHVBC acquisition, other expenses increased due to insurance reimbursements received in 2023 to cover amounts previously charged-off through expense.Merger and acquisition costs for the HVBC acquisition totaled $9,269,000 in 2023 and included professional and consulting fees, printing, travel, contracttermination payments and severance-related expenses. 31
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Index Provision for Income Taxes The provision for income taxes was $8,666,000, $6,065,000 and $3,764,000 for 2025, 2024 and 2023, respectively. The effective tax rates for 2025, 2024and 2023 were 19.2%, 17.9% and 17.5%, respectively. The increase in income tax expense of $2,601,000 in 2025 compared to 2024 was due to the increase of $11,405,000 in income before the provision forincome taxes, which accounts for an increase in tax expense of $2,395,000 at a 21% tax rate. The increase in income tax expense of $2,301,000 in 2024 compared to 2023 was due to the increase of $12,168,000 in income before the provision forincome taxes, which accounts for an increase in tax expense of $2,555,000 at a 21% tax rate. We are involved in seven limited partnership agreements that operate low-income housing projects in our market areas. During 2025 and 2024 werecognized credits on three of the seven projects, while in 2023 we recognized credits related to two projects. Tax credits associated with four of thepartnerships were fully utilized by December 2022. We started recognizing credits on two of the partnerships during 2023 and on one partnership in 2024. Weanticipate recognizing an aggregate of $6.9 million of tax credits over the next eleven years. FINANCIAL CONDITION The following table presents ending balances (dollars in millions), the dollar amount of change and the percentage change during the past year: 2025Balance Increase %Change 2024Balance Total assets $ 3,064.6 $ 38.9 1.3 $ 3,025.7 Total investments 444.7 18.8 4.4 425.9 Total loans, net 2,327.8 36.3 1.6 2,291.5 Total deposits 2,377.0 (5.0) (0.2) 2,382.0 Total borrowings 309.4 11.7 3.9 297.7 Total stockholders’ equity 338.1 38.4 12.8 299.7 Cash and Cash Equivalents Cash and cash equivalents totaled $34,291,000 at December 31, 2025 compared to $42,202,000 at December 31, 2024. The decrease is due to a decrease inthe cash held at the Federal Reserve. Management actively measures and evaluates the Company’s liquidity through our Asset – Liability Committee andbelieves its liquidity needs are satisfied by the current balance of cash and cash equivalents, readily available access to traditional funding sources, FederalHome Loan Bank financing, federal funds lines with correspondent banks, brokered certificates of deposit and the portion of the investment and loan portfoliosthat mature within one year. Management expects that these sources of funds will permit us to meet cash obligations and off-balance sheet commitments as theycome due. 32
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Index Investments The following table shows the year-end composition of the investment portfolio, at fair value, for the two years ended December 31 (dollars in thousands): 2025Amount % ofTotal 2024Amount % ofTotal Available-for-sale: U. S. Agency securities $ 49,755 11.1 $ 53,487 12.5 U.S. Treasuries 82,654 18.5 120,502 28.2 Obligations of state & political Subdivisions 115,886 26.0 94,902 22.2 Corporate obligations 11,297 2.5 10,438 2.4 Mortgage-backed securities 185,149 41.5 146,583 34.3 Equity securities 1,815 0.4 1,747 0.4 Total $ 446,556 100.0 $ 427,659 100.0 The Company’s investment portfolio increased during 2025 by $18,897,000. This increase was fueled by $82,406,000 of purchases made during 2025,which offset the maturities and calls that took place in 2025. During 2025, $58,301,000, $23,105,000 and $1,000,000 of mortgage backed securities, obligationsof political subdivisions and corporate securities were purchased, respectively. The purchases in 2025 were offset by $25,346,000 of principal repayments and$53,460,000 of calls and maturities. The fair value of our investment portfolio increased approximately $15,847,000 in 2025 due to decreases in market interestrates during 2025. Excluding our short-term investments consisting of monies held primarily at the Federal Reserve, the effective yield on our investmentportfolio for 2025 was 3.06% compared to 2.44% for 2024 on a tax equivalent basis. In related to activity by the Federal Reserve, there were similarities between 2024 and 2025 in that there was elevated volatility and, after a long pause, theFed cut rates the last few months of each year. A new Presidential administration introduced tariffs as a negotiation strategy which caused big market swings inthe first half of the year. As the year progressed the Fed became comfortable with the effect of tariffs and the two mandates of full employment and stable priceswere sufficiently in balance to permit them to lower rates to the top end of what the FOMC considered a neutral rate. This also provided a measure of cushion inresponse to a weakening employment market. At the end of the year, officials became increasingly divided with each move, leading to another call for a pauseafter the December rate decision. The record-long government shutdown distorted and delayed many key economic reports officials use to assess the economy’strajectory. After 175 bps of easing over the cycle, policy was back within a range of neutral estimates. Importantly, economic growth remained resilient,inflation remained above target, and a run of data fostered a quippy catch phrase of low-hiring, low-firing labor conditions. These rate cuts allowed the yieldcurve to steepen with the 2-year to 10-year US Treasury spread increasing from 30bps at the start of the year to 69bps at the end of the year. Even so, the veryshort end of the yield curve remained inverted. The Bank’s investment strategy used cashflow from the investment portfolio to increase convexity and improveyield as opportunities became available. As the rate cycle continues to progress, the Bank will seek investments to improve portfolio yield while monitoringinterest rate risk exposure under various rate environments and providing cash flow to meet liquidity needs as they arise. At December 31, 2025, the Company did not own any securities, other than government-sponsored and government-guaranteed mortgage-backedsecurities, that had an aggregate book value in excess of 10% of its consolidated stockholders’ equity at that date. The expected principal repayments at amortized cost and average weighted yields for the investment portfolio (excluding equity securities) as of December31, 2025, are shown below (dollars in thousands). Expected principal repayments, which include prepayment speed assumptions for mortgage-backed securities,are significantly different than the contractual maturities detailed in Note 4 of the consolidated financial statements. Yields on tax-exempt securities arepresented on a fully taxable equivalent basis, assuming a 21% tax rate, which was the rate in effect at December 31, 2025. One Year or Less After One Yearto Five years After Five Yearsto Ten Years After Ten Years Total AmortizedCost Yield% AmortizedCost Yield% AmortizedCost Yield% AmortizedCost Yield% AmortizedCost Yield% Available-for-sale securities: U.S. agency securities $ 8,602 3.3 $ 35,052 1.9 $ 8,997 2.0 $ - - $ 52,651 2.2 U.S. treasuries 28,953 1.3 55,598 1.7 - - - - 84,551 1.6 Obligations of state &political subdivisions 16,470 3.5 38,025 1.9 36,295 2.9 29,818 3.3 120,608 2.8 Corporate obligations 9,512 5.4 1,792 8.5 - - - - 11,304 5.9 Mortgage-backed securities 61,728 4.5 59,967 3.7 49,651 3.0 22,059 3.5 193,405 3.7 Total available-for-sale $ 125,265 3.6 $ 190,434 2.5 $ 94,943 2.9 $ 51,877 3.4 $ 462,519 3.0 33
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Index At December 31, 2025, approximately 68.3% of the amortized cost of debt securities is expected to mature, call or pre-pay within five years or less. TheCompany expects that earnings from operations, the levels of cash held at the Federal Reserve and other correspondent banks, the high liquidity level of theavailable-for-sale securities, growth of deposits and the availability of borrowings from the Federal Home Loan Bank and other third-party banks will besufficient to meet future liquidity needs. Loans Held for Sale Loans held for sale decreased $214,000 to $9,393,000 as of December 31, 2025 from December 31, 2024. The rate environment for 2025 continued toplace pressure on refinancing activity as well as new home purchases. Loans The Bank’s lending efforts have historically focused on the north central Pennsylvania counties of Tioga, Bradford and Potter, south central Pennsylvaniacounties of Lebanon, Schuylkill, Berks and Lancaster and Allegheny, Steuben and Tioga counties of southern New York. We have a limited branch office inUnion County that is staffed by a lending team to primarily support agricultural opportunities, and offices in State College, Mill Hall and Williamsport tosupport commercial opportunities in central Pennsylvania, especially Centre, Clinton and Lycoming Counties. The Williamsport branch was opened in 2023.The MidCoast acquisition expanded our markets into the State of Delaware with activity centered around the cities of Wilmington and Dover, Delaware, whichwas further supported by branch openings in Kennett Square, Pennsylvania and Greenville, Delaware. During 2024, the Bank opened a limited productionoffice in Georgetown, Delaware, to primarily support agricultural customers in the Delaware market. In June 2023, we completed the HVBC acquisition, whichexpanded our markets into south east Pennsylvania, including the counties of Montgomery, Bucks and Philadelphia. It also includes a Mortgage productionoffice in Mount Laurel, New Jersey. We originate loans primarily to our existing customer base, with new customers generated through the strong relationships that our lending teams have withtheir customers, as well as by referrals from real estate brokers, building contractors, attorneys, accountants, corporate and advisory board members, existingcustomers and the Bank’s website. The Bank offers a variety of loans, although historically most of our lending has focused on real estate loans includingresidential, commercial, agricultural, and construction loans. As of December 31, 2025, approximately 85.1% of our loan portfolio consisted of real estate loans.All lending is governed by a lending policy that is developed and administered by management and approved by the Board of Directors. The Bank primarily offers fixed rate residential mortgage loans with terms of up to 25 years and adjustable rate mortgage loans (with amortizationschedules up to 30 years) with interest rates and payments that adjust based on one, three, five and fifteen year fixed periods. Loan to value ratios are usually80% or less with exceptions for individuals with excellent credit and low debt to income and/or high net worth. Adjustable rate mortgages are tied to a marginabove the comparable Federal Home Loan Bank of Pittsburgh borrowing rate. Home equity loans are written with terms of up to 15 years at fixed rates. Homeequity lines of credit are variable rate loans tied to the Prime Rate generally with a ten year draw period followed by a ten year repayment period. Home equityloans are typically written with a maximum 80% loan to value. Commercial real estate loan terms are generally 20 years or less, with one to five year adjustable interest rates. The adjustable rates are typically tied to amargin above the comparable Federal Home Loan Bank of Pittsburgh borrowing rate with a typical loan to value ratio of 80% or less. During 2025, 2024 and2023, the Bank offered certain customers derivative contracts that allowed the customer to obtain a fixed interest rate for a period up to 10 years. Wherefeasible, the Bank participates in the United States Department of Agriculture’s (USDA) and Small Business Administration (“SBA”) guaranteed loan programsto offset credit risk and to further promote economic growth in our market area. Agriculture is an important industry throughout our market areas. Therefore, the Bank has not only developed an agriculture lending team with significantexperience that has a thorough understanding of this industry, but also continually looks for additional employees with a thorough understanding of agriculture.We have an agricultural loan policy to assist in underwriting agricultural loans. Agricultural loans are made to a diversified customer base that include dairy,swine and poultry farmers and their support businesses. Agricultural loans focus on character, cash flow and collateral, while also considering the particularrisks of the industry. Loan terms are generally 20 years or less, with one to five year adjustable interest rates. The adjustable rates are typically tied to a marginabove the comparable Federal Home Loan Bank of Pittsburgh borrowing rate with a typical loan to value of less than 80%. We evaluate the financial strength ofthe integrators we have exposure to with our poultry and swine agricultural customers. The Bank is a preferred lender under the USDA’s Farm Service Agency(FSA) and participates in the FSA guaranteed loan program. The Bank believes that a secondary education can provide individuals with upward mobility. As such, the Bank has partnered with industry leaders toprovide individuals with private student loans that can undergraduate, graduate and parent loans that can cover up to the cost of attendance of college oruniversity. In addition, prior student loans can also be refinanced. Our partners assist in ensuring that the application, approval and servicing processes are bestin class. Loans are offered with either fixed or variable rates and terms typically range from five to fifteen years, but depending on the program can be up totwenty years. Payments options include deferral until after graduation, interest only while enrolled in school, a flat payment and full principal and interest. 34
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Index The Bank, as part of its commitment to the communities it serves, is an active lender for projects by our local municipalities and school districts. Theseloans range from short term bridge financing to 20 year term loans for specific projects. These loans are typically written at rates that adjust at least every fiveyears. Due to the size of certain municipal loans, we have developed participation lending relationships with other community banks that allow us to meetregulatory compliance issues, while meeting the needs of the customer. At December 31, 2025, the aggregate balance of our participation loans, in which aportion was sold to other lenders totaled $334,913,000, of which $149,344,000 was sold. Activity associated with exploration for natural gas continued in 2024 in the Company’s north central Pennsylvania market. Certain entities drilled newwells and created new pad sites and pipelines, while other companies only maintained their existing wells. While the Bank has loaned to companies that servicethe exploration activities, the Bank has not originated any loans to companies performing the actual drilling and exploration activities. Loans made by theCompany were to service industry customers which included trucking companies, stone quarries and other support businesses. We also originated loans tobusinesses and individuals for restaurants, hotels and apartment rentals that were developed and expanded to meet the housing and living needs of the gasworkers. Due to our understanding of the industry and its cyclical nature, the loans made for natural gas-related activities were originated in a prudent andcautious manner and were subject to specific policies and procedures for lending to these entities, which included lower loan to value thresholds, shortenedamortization periods, and expansion of our monitoring of loan concentrations associated with this activity. The following table shows the year-end composition of the loan portfolio as of December 31, 2025 and 2024 (dollars in thousands): 2025 2024 Amount % Amount % Real estate: Residential $ 340,972 14.5 $ 351,398 15.2 Commercial 1,218,514 51.8 1,121,435 48.5 Agricultural 347,448 14.8 327,722 14.2 Construction 93,965 4.0 164,326 7.1 Consumer 88,210 3.8 109,505 4.7 Other commercial loans 179,166 7.6 155,012 6.7 Other agricultural loans 30,247 1.3 29,662 1.3 State & political subdivision loans 52,100 2.2 54,182 2.3 Total loans 2,350,622 100.0 2,313,242 100.0 Less allowance for credit losses 22,806 21,699 Net loans $ 2,327,816 $ 2,291,543 2025/2024 Change Amount % Real estate: Residential $ (10,426) (3.0)Commercial 97,079 8.7 Agricultural 19,726 6.0 Construction (70,361) (42.8)Consumer (21,295) (19.4)Other commercial loans 24,154 15.6 Other agricultural loans 585 2.0 State & political subdivision loans (2,082) (3.8) Total loans $ 37,380 1.6 Total loans grew $37,380,0000 in 2025 and total $2,350,622,000 at the end of 2025. The primary driver of growth during 2025 was increases in real estatelending and other commercial loans. 35
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Index Residential real estate loans decreased $10,426,000 primarily due to the interest rate environment that lessened demand. During 2025, $153,519,000 ofresidential real estate loans were originated for sale on the secondary market, which compares to $155,379,000 for 2024. For loans sold on the secondarymarket, the Company recognizes fee income for servicing these sold loans, which is included in non-interest income. During 2025, the Bank originated andadded to its residential real estate portfolio $13,909,000 of loans. The following table presents the maturity distribution of our loan portfolio as of December 31, 2025 (in thousands). The table does not include any estimateof prepayments which significantly shorten the average life of all loans and may cause our actual repayment experience to differ from that shown below.Demand loans having no stated schedule of repayments and no stated maturity are reported as due in one year or less. Due in One year orless After one year but withinfive years After five years throughfifteen years After fifteenyears Total Real estate: Residential $ 1,667 $ 9,324 $ 61,161 $ 268,820 $ 340,972 Commercial 175,823 542,011 376,851 123,829 1,218,514 Agricultural 22,626 24,608 171,679 128,535 347,448 Construction 27,345 33,966 12,645 20,009 93,965 Consumer 80,506 2,983 4,554 167 88,210 Other commercial loans 90,042 39,583 49,364 177 179,166 Other agricultural loans 18,151 8,250 3,846 - 30,247 State & political subdivision loans 1,415 817 39,745 10,123 52,100 $ 417,575 $ 661,542 $ 719,845 $ 551,660 $ 2,350,622 The following table presents the portion of loans that have fixed interest rates or variable interest rates that fluctuate over the life of loans in accordancewith changes in the interest rate index that mature after December 31, 2026 (in thousands). Sensitivity of loans to changes in interest rates - loans due afterDecember 31, 2026: Predetermined interestrate Floating or adjustable interestrate Total Real estate: Residential $ 178,013 $ 161,292 $ 339,305 Commercial 493,008 549,683 1,042,691 Agricultural 16,594 308,228 324,822 Construction 24,023 42,597 66,620 Consumer 4,767 2,937 7,704 Other commercial loans 24,393 64,731 89,124 Other agricultural loans 6,606 5,490 12,096 State & political subdivision loans 16,314 34,371 50,685 $ 763,718 $ 1,169,329 $ 1,933,047 The federal banking regulators have issued guidance for those institutions which are deemed to have concentrations in commercial real estate lending.Pursuant to the supervisory criteria contained in the guidance for identifying institutions with a potential commercial real estate concentration risk, institutionswhich have (1) total reported loans for construction, land development and other land acquisitions which represent 100% or more of an institution’s total risk-based capital; or (2) total commercial real estate loans representing 300% or more of the institution’s total risk-based capital and the institution’s commercialreal estate loan portfolio has increased 50% or more during the prior 36 months are identified as having potential commercial real estate concentration risk.Institutions which are deemed to have concentrations in commercial real estate lending are expected to employ heightened levels of risk management withrespect to their commercial real estate portfolios and may be required to hold higher levels of capital. The Company, like many community banks, has aconcentration in commercial real estate loans, and the Company has experienced growth in its commercial real estate portfolio in recent years. As of December31, 2025, non-owner-occupied commercial real estate loans (including construction, land and land development loans) represented 287.0% of consolidated riskbased capital. Construction, land and land development loans represented 30.5% of consolidated risk based capital as of December 31, 2025. Management hasextensive experience in commercial real estate lending and has implemented and continues to maintain heightened risk management procedures and strongunderwriting criteria with respect to its commercial real estate portfolio. We may be required to maintain higher levels of capital as a result of our commercialreal estate concentrations, which could require us to obtain additional capital and may adversely affect shareholder returns. The Company has an extensiveCapital Policy and Capital Plan, which includes pro-forma projections including stress testing within which the Board of Directors has established internalminimum targets for regulatory capital ratios that are in excess of well capitalized ratios. Due to the concentration in commercial real estate loans, the Companyhas implemented enhanced monitoring and risk assessment procedures with respect to this portfolio. As of December 31, 2025, management believes that it hasimplemented appropriate risk management practices, including risk assessments, board-approved underwriting policies and related procedures, which includemonitoring loan portfolio performance and stressing of the commercial real estate portfolio under adverse economic conditions. 36
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Index Given the significance of commercial real estate (“CRE”) loans to our total loan portfolio, the following table further disaggregates these loans by occupiedstatus and by collateral type as of December 31, 2025 (dollars in thousands): 2025 Owner Occupied Non-Owner Occupied Total Commercial Real Estate: Amount % Amount % Amount % Residential Rental and Speculation $ 7,636 0.63% $ 185,033 15.19% $ 192,669 15.81%Multifamily Rental - 0.00% 185,860 15.25% 185,860 15.25%Retail 41,287 3.39% 123,523 10.14% 164,810 13.53%Mixed Use 14,699 1.21% 87,757 7.20% 102,456 8.41%Hotel/Motel - 0.00% 98,063 8.05% 98,063 8.05%Office 14,224 1.17% 67,660 5.55% 81,884 6.72%Industrial/Flex/Warehouse 21,865 1.79% 57,323 4.70% 79,188 6.50%Specialty 51,019 4.19% 24,785 2.03% 75,804 6.22%Land 2,425 0.20% 55,709 4.57% 58,134 4.77%Student Housing - 0.00% 52,797 4.33% 52,797 4.33%Amusement/Entertainment 30,632 2.51% 837 0.07% 31,469 2.58%Self Storage 479 0.04% 24,166 1.98% 24,645 2.02%Schools/Higher Ed/Vocational 6,918 0.57% 13,187 1.08% 20,105 1.65%Food and beverage 14,999 1.23% 1,221 0.10% 16,220 1.33%Medical office 8,636 0.71% 7,521 0.62% 16,157 1.33%Healthcare/Hospitals 6,748 0.55% - 0.00% 6,748 0.55%Senior Living - 0.00% 6,529 0.54% 6,529 0.54%Other 2,351 0.19% 2,625 0.22% 4,976 0.41% Total $ 223,918 18.38% $ 994,596 81.62% $ 1,218,514 100.00% 2024 Owner Occupied Non-Owner Occupied Total Commercial Real Estate: Amount % Amount % Amount % Residential Rental $ 6,717 0.60% $ 177,003 15.78% $ 183,720 16.38%Multifamily Rental 522 0.05% 175,314 15.63% 175,836 15.68%Retail 57,365 5.12% 114,620 10.22% 171,985 15.34%Hotel/Motel 43,178 3.85% 62,941 5.61% 106,119 9.46%Mixed Use 21,051 1.88% 69,783 6.22% 90,834 8.10%Industrial/Flex/Warehouse 24,387 2.17% 65,232 5.82% 89,619 7.99%Office 11,280 1.01% 57,767 5.15% 69,047 6.16%Land 2,800 0.25% 49,111 4.38% 51,911 4.63%Specialty 26,545 2.37% 23,427 2.09% 49,972 4.46%Student Housing - 0.00% 47,346 4.22% 47,346 4.22%Amusement/Entertainment 16,896 1.51% 5,067 0.45% 21,963 1.96%Medical office 10,549 0.94% 7,664 0.68% 18,213 1.62%Self Storage 1,921 0.17% 9,769 0.87% 11,690 1.04%Other 1,865 0.17% 9,221 0.82% 11,086 0.99%Schools/Higher Ed/Vocational 934 0.08% 8,020 0.72% 8,954 0.80%Healthcare/Hospitals 7,162 0.64% - 0.00% 7,162 0.64%Senior Living - 0.00% 5,978 0.53% 5,978 0.53% Total $ 233,172 20.79% $ 888,263 79.21% $ 1,121,435 100.00% 37
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Index The following table provides a breakdown of our construction portfolio by collateral type as of December 31, 2025 (dollars in thousands): December 31, 2025 December 31, 2024 Construction: Amount % Amount % Residential $ 32,732 34.83% $ 59,334 36.11%Multifamily 24,844 26.44% 49,838 30.33%Industrial/Flex/Warehouse 19,586 20.84% 15,337 9.33%Agricultural and land 10,432 11.10% 4,528 2.76%Office 3,148 3.35% 8,456 5.15%Food and beverage 1,519 1.62% - 0.00%Mixed Use 558 0.59% 7,580 4.61%Self Storage 476 0.51% 11,986 7.29%Specialty 398 0.42% - 0.00%Retail 150 0.16% 2,299 1.40%Other 122 0.13% 881 0.54%Hotel/Motel - 0.00% 623 0.38%Schools/Higher Ed/Vocational - 0.00% 3,464 2.11% Total $ 93,965 100.00% $ 164,326 100.00% The Company obtains an appraisal of the real estate collateral securing a CRE loan prior to originating the loan. The appraised value is used to calculate theratio of the outstanding loan balance to the value of the real estate collateral, or loan-to-value ratio (“LTV”). The original appraisal is used to monitor the LTVswithin the CRE portfolio unless an updated appraisal is received, which may happen for a variety of reasons, including but not limited to payment delinquency,additional loan requests using the same collateral, and loan modifications. The following table presents the ranges in the LTVs of our CRE loans at December31, 2025 and 2024 (dollars in thousands): 2025 2024 LTV Range Number of Loans Amount % Number of Loans Amount % 0%-25% 832 $ 177,207 14.54% 820 $ 152,157 12.49%25.01%-50% 550 387,019 31.76% 546 323,919 26.58%50.01%-60% 289 226,199 18.56% 303 209,845 17.22%60.01%-70% 340 273,932 22.48% 333 267,687 21.97%70.01%-75% 132 117,272 9.62% 181 122,075 10.02%75.01%-80% 44 30,080 2.47% 51 36,544 3.00%>80% 5 6,805 0.56% 8 9,208 0.76% Total 2,192 $ 1,218,514 100.00% 2,242 $ 1,121,435 92.03% Allowance for Credit Losses – Loans and Credit Quality Risk The allowance for credit losses – loans is maintained at a level which, in management’s judgment, is adequate to absorb probable future credit lossesinherent in the loan portfolio. The provision for credit losses is charged against current income. Loans deemed not collectable are charged-off against theallowance while subsequent recoveries increase the allowance. The allowance for credit losses - loans was $22,806,000 or 0.97% of total loans as of December31, 2025 as compared to $21,699,000 or 0.94% of loans as of December 31, 2024. The $1,107,000 increase is a result of a $1,888,000 provision for credit losses– loans, less net charge-offs of $781,000. Net charge-offs for 2025 are driven by loans acquired as part of the HVBC acquisition due to collateral issues and theacquired medical student loan portfolio from HVBC. The adequacy of the allowance for credit losses – loans is subject to a formal, quarterly analysis by management of the Company. In order to better analyzethe risks associated with the loan portfolio, the entire portfolio is divided into several categories. As stated above, commercial loans on non-accrual status arespecifically reviewed and given a specific reserve, if appropriate. Historical credit loss experience provides the basis for the estimation of expected credit losses.Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards,changes in environmental conditions, delinquency level, segment growth rates and changes in duration within new markets, or other relevant factors. For furtherinformation on the allowance for credit losses on loans, Note 1, “Summary of Significant Accounting Policies,” and Note 5, “Loans,” in the consolidatedfinancial statements provides additional disclosure on the allowance for credit losses. The Company adopted ASC 326 effective January 1, 2023. Note 1,“Summary of Significant Accounting Policies,” in the consolidated financial statements provides additional disclosure on the adoption of ASC 326. 38
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Index The following table shows the distribution of the allowance for credit losses - loans and the percentage of loans compared to total loans by loan category(dollars in thousands) as of December 31: 2025 2024 Amount % Amount % Real estate loans: Residential $ 3,112 14.5 $ 1,940 15.2 Commercial 10,017 51.8 9,174 48.5 Agricultural 4,841 14.8 3,529 14.2 Construction 916 4.0 1,402 7.1 Consumer 1,201 3.8 1,338 4.7 Other commercial loans 2,534 7.6 3,766 6.7 Other agricultural loans 115 1.3 133 1.3 State & political subdivision loans 55 2.2 61 2.3 Unallocated 15 N/A 356 N/A Total allowance for loan losses $ 22,806 100.0 $ 21,699 100.0 The following tables presents the activity in the allowance for credit losses – loans, by portfolio segment, for 2025, 2024 and 2023 (in thousands). Balance atDecember 31, 2024 Charge-offs Recoveries Provision Balance atDecember 31, 2025 Real estate loans: Residential $ 1,940 $ - $ - $ 1,172 $ 3,112 Commercial 9,174 (40) - 883 10,017 Agricultural 3,529 - - 1,312 4,841 Construction 1,402 - - (486) 916 Consumer 1,338 (327) 41 149 1,201 Other commercial loans 3,766 (491) 36 (777) 2,534 Other agricultural loans 133 - - (18) 115 State and political subdivision loans 61 - - (6) 55 Unallocated 356 - - (341) 15 Total $ 21,699 $ (858) $ 77 $ 1,888 $ 22,806 Balance atDecember 31, 2023 Charge-offs Recoveries Provision Balance atDecember 31, 2024 Real estate loans: Residential $ 2,354 $ (5) $ - $ (409) $ 1,940 Commercial 9,178 - - (4) 9,174 Agricultural 3,264 - - 265 3,529 Construction 1,950 - - (548) 1,402 Consumer 1,412 (107) 22 11 1,338 Other commercial loans 2,313 (2,561) 21 3,993 3,766 Other agricultural loans 270 - - (137) 133 State and political subdivision loans 45 - - 16 61 Unallocated 367 - - (11) 356 Total $ 21,153 $ (2,673) $ 43 $ 3,176 $ 21,699 39
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Index Balance atDecember 31,2022 Impact ofadopting CECL Allowance for creditloss on PCDacquired loans Charge-offs Recoveries Provision Balance atDecember 31,2023 Real estate loans: Residential $ 1,056 $ 79 $ 108 $ (1) $ - $ 1,112 $ 2,354 Commercial 10,120 (3,070) 39 - - 2,089 9,178 Agricultural 4,589 (1,145) - - - (180) 3,264 Construction 801 (103) 37 - - 1,215 1,950 Consumer 135 1,040 677 (365) 40 (115) 1,412 Other commercial loans 1,040 (328) 828 (963) 9 1,727 2,313 Other agricultural loans 489 (219) - - - - 270 State and political subdivision loans 322 (280) - - - 3 45 Unallocated - 726 - - - (359) 367 Total $ 18,552 $ (3,300) $ 1,689 $ (1,329) $ 49 $ 5,492 $ 21,153 The following table provides information related to credit loss experience and net (charge-offs) recoveries for 2025, 2024 and 2023 (dollars in thousands). 2025 Credit LossExpense(Benefit) Net (charge-offs) Recoveries AverageLoans Ratio of net(charge-offs)recoveries toAverage loans Allowanceto totalloans Non-accrualloans as apercent ofloans Allowance tototal non-accrual loans Real estate: Residential $ 1,172 - $ 346,313 0.00% 0.91% 1.01% 90.39%Commercial 883 (40) 1,153,166 0.00% 0.82% 0.94% 86.14%Agricultural 1,312 - 334,201 0.00% 1.39% 0.62% 225.69%Construction (486) - 135,920 0.00% 0.97% 0.55% 177.52%Consumer 149 (286) 96,097 -0.30% 1.36% 0.87% 155.97%Other commercial loans (777) (455) 167,670 -0.27% 1.41% 4.37% 33.81%Other agricultural loans (18) - 28,679 0.00% 0.38% 1.33% 28.54%State & political subdivision loans (6) - 52,730 0.00% 0.11% 0.00% NA Unallocated (341) - - NA NA NA NA Total $ 1,888 $ (781) $ 2,314,776 -0.03% 0.97% 1.13% 85.73% 2024 Credit LossExpense(Benefit) Net (charge-offs) Recoveries AverageLoans Ratio of net(charge-offs)recoveries toAverage loans Allowanceto totalloans Non-accrualloans as apercent ofloans Allowance tototal non-accrual loans Real estate: Residential $ (409) $ (5) $ 356,292 0.00% 0.55% 0.82% 67.57%Commercial (4) - 1,109,075 0.00% 0.82% 1.28% 63.87%Agricultural 265 - 324,500 0.00% 1.08% 1.24% 86.88%Construction (548) - 182,714 0.00% 0.85% 0.17% 495.41%Consumer 11 (85) 83,916 -0.10% 1.22% 0.92% 133.53%Other commercial loans 3,993 (2,540) 156,847 -1.62% 2.43% 1.67% 145.86%Other agricultural loans (137) - 26,088 0.00% 0.45% 1.81% 24.77%State & political subdivision loans 16 - 55,919 0.00% 0.11% 0.00% NA Unallocated (11) - - NA NA NA NA Total $ 3,176 $ (2,630) $ 2,295,351 -0.11% 0.94% 1.11% 84.43% 40
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Index 2023 Real estate: Residential $ 1,112 (1) $ 290,971 0.00% 0.65% 0.86% 76.38%Commercial 2,089 - 986,188 0.00% 0.84% 0.10% 808.63%Agricultural (180) - 312,423 0.00% 1.04% 0.85% 122.25%Construction 1,215 - 135,315 0.00% 1.00% 1.20% 82.73%Consumer (115) (325) 74,555 -0.44% 2.72% 1.35% 201.43%Other commercial loans 1,727 (954) 115,264 -0.83% 1.59% 1.20% 132.17%Other agricultural loans - - 30,557 0.00% 0.88% 1.60% 54.88%State & political subdivision loans 3 - 59,308 0.00% 0.08% 0.00% NA Unallocated (359) - - NA NA NA NA Total $ 5,492 $ (1,280) $ 2,004,581 -0.06% 0.94% 0.54% 173.57% The Company believes it utilizes a disciplined and thorough loan review process based upon its internal loan policy approved by the Company’s Board ofDirectors. The purpose of the review is to assess loan quality, analyze delinquencies, identify problem loans, evaluate potential charge-offs and recoveries, andassess general overall economic conditions in the markets served. An external independent loan review is performed on our commercial portfolio at least semi-annually for the Company. The external consultant is engaged to review 1) a minimum of 50% of the dollar volume of the commercial loan portfolio on anannual basis, 2) a large sample of relationships in aggregate over $1,000,000, 3) selected loan relationships over $750,000 which are over 30 days past due, orclassified Special Mention, Substandard, Doubtful, or Loss, and 4) such other loans which management or the consultant deems appropriate. As part of thisreview, our underwriting process and loan grading system is evaluated. Management believes it uses the best information available to make such determinations and the allowance for credit losses – loans is adequate as ofDecember 31, 2025. However, future adjustments could be required if circumstances differ substantially from assumptions and estimates used in making theinitial determination. A prolonged downturn in the economy, changes in the economies of various segments of our agricultural and commercial portfolios, highunemployment rates, significant changes in the value of collateral and delays in receiving financial information from borrowers could result in increased levelsof non-performing assets, charge-offs, credit loss provisions and reduction in income. Additionally, bank regulatory agencies periodically examine the Bank’sallowance for credit losses - loans. The banking agencies could require the recognition of additions to the allowance for credit losses based upon their judgmentof information available to them at the time of their examination. On a monthly basis, problem loans are identified and updated primarily using internally prepared past due reports. Based on data surrounding the collectionprocess of each identified loan, the loan may be added or deleted from the monthly watch list. The watch list includes loans graded special mention,substandard, doubtful, and loss, as well as additional loans that management may choose to include. Watch list loans are continually monitored going forwarduntil satisfactory conditions exist that allow management to upgrade and remove the loan from the watchlist. In certain cases, loans may be placed on non-accrual status or charged-off based upon management’s evaluation of the borrower’s ability to pay. All commercial loans, which include commercial real estate,agricultural real estate, state and political subdivision loans, other commercial loans and other agricultural loans on non-accrual are evaluated quarterly forimpairment. See also “Note 5 – Loans and Related Allowance for Credit Losses - Loans” to the consolidated financial statements. As a result of previous loss experiences and other risk factors utilized in determining the allowance, the Bank’s allocation of the allowance does not directlycorrespond to the actual balances of the loan portfolio. While commercial and agricultural real estate loans total 66.6% of the loan portfolio at December 312025, 64.7% of the allowance is assigned to these portions of the loan portfolio. Residential real estate loans comprise 14.5% of the loan portfolio as ofDecember 31, 2025 and 13.7% of the allowance is assigned to this segment. Other commercial loans comprise 7.6% of the loan portfolio as of December 31,2025 and 11.6% of the allowance is assigned to this segment. 41
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Index The following table is a summary of our non-performing assets for the years ended December 31, 2025 and 2024 (in thousands). 2025 2024 Non-performing loans: Non-accruing loans $ 26,602 $ 25,701 Accrual loans - 90 days or more past due 229 276 Total non-performing loans 26,831 25,977 Foreclosed assets held for sale 2,358 2,635 Total non-performing assets $ 29,189 $ 28,612 The following table identifies amounts of loans contractually past due 30 to 90 days and non-performing loans by loan category, as well as the change fromDecember 31, 2024 to December 31, 2025 in non-performing loans (in thousands). Non-performing loans include those accruing loans that are contractuallypast due 90 days or more and non-accrual loans. Interest does not accrue on non-accrual loans. Subsequent cash payments received are applied to theoutstanding principal balance or recorded as interest income, depending upon management’s assessment of its ultimate ability to collect principal and interest. December 31, 2025 December 31, 2024 Non-Performing Loans Non-Performing Loans 30 - 89 DaysPast Due 90 Days PastDue Accruing Non-accrual Total Non-Performing 30 - 89 DaysPast Due 90 Days PastDue Accruing Non-accrual Total Non-Performing Real estate: Residential $ 3,168 $ 151 $ 3,443 $ 3,594 $ 1,527 $ - $ 2,871 $ 2,871 Commercial 4,394 - 11,497 11,497 3,915 - 14,364 14,364 Agricultural 1,178 55 2,145 2,200 383 269 4,062 4,331 Construction - - 516 516 1,119 - 283 283 Consumer 309 15 770 785 312 7 1,002 1,009 Other commercial loans 203 8 7,828 7,836 760 - 2,582 2,582 Other agricultural loans 17 - 403 403 - - 537 537 Total nonperforming loans $ 9,269 $ 229 $ 26,602 $ 26,831 $ 8,016 $ 276 $ 25,701 $ 25,977 Change in Non-Performing Loans 2025 / 2024 Amount % Real estate: Residential $ 723 25.2 Commercial (2,867) (20.0)Agricultural (2,131) (49.2)Construction 233 NA Consumer (224) (22.2)Other commercial loans 5,254 203.5 Other agricultural loans (134) (25.0) Total nonperforming loans $ 854 3.3 Nonperforming loans increased $854,000 during 2025. During 2025, several large relationships were placed on non-accrual status, including oneconstruction loan relationship, a commercial relationship that includes a commercial real estate loan and an other commercial loan and finally a commercial realestate relationship. Two commercial relationships and two agricultural relationships were returned to accrual status during 2025 and three loans that were onnon-accrual status as of December 31, 2024 paid off during 2025. All non-performing commercial, agricultural and construction loans are reviewed on anindividual basis to determine the need for a specific reserve at quarter ends. In addition, non-performing residential loans with a balance in excess of $150,000are individually evaluated. The specific reserves for these non-performing loans as of December 31, 2025 was $1,039,000 compared to specific reserves fornon-performing loans as of December 31, 2024 of $888,529. In addition, the Bank’s policy is to reserve 100% of all non-performing student loans. The reservefor these loans was $770,000 and $1,002,000 as of December 31, 2025 and 2024, respectively. Management believes that the allowance for credit losses - loans December 31, 2025 was adequate at that date, which was based on the following factors: • Specific reserves for non-performing loans total $1,808,000.• The Company has a history of low charge-offs, which were 0.03% of average loans on an annualized basis for 2025 and 0.11% for 2024,which included the charge-offs related to the Braavo loans. 42
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Index Bank Owned Life Insurance The Company holds bank owned life insurance policies to offset current and future employee benefit costs. These policies provide the Bank with an assetthat generates earnings to partially offset the current costs of benefits, and eventually (at the death of the insureds) provide partial recovery of cash outflowsassociated with the benefits. As of December 31, 2025, and 2024, the cash surrender value of the life insurance was $51,501,000 and $50,341,000, respectively.The change in cash surrender value, net of purchases and amounts acquired through acquisitions, is recognized in the results of operations. The amountsrecorded as non-interest income totaled $1,433,000, $1,684,000 and $1,254,000 in 2025, 2024 and 2023, respectively. The decrease in 2025 compared to 2024is due to death proceeds received in 2024 upon the passing of a former employee. The increase in 2024 compared to 2023 is due to the HVBC acquisition beingoutstanding for the entire year versus a partial year in 2023. The Company evaluates annually the risks associated with the life insurance policies, includinglimits on the amount of coverage and an evaluation of the various carriers’ credit ratings. Effective January 1, 2015, the Company restructured its agreements so that any death benefits received from a policy while the insured person is an activeemployee of the Bank will be split with the beneficiary of the policy. Under the restructured agreements, the employee’s beneficiary will be entitled to receive50% of the net amount at risk from the proceeds. The policies acquired as part of the acquisition of MidCoast are only for the benefit of the Bank. The netamount at risk is the total death benefit payable less the cash surrender value of the policy as of the date of death. The policies acquired as part of an acquisitionin 2015, provide a fixed dollar benefit for the beneficiary’s’ estate, which is dependent on several factors including whether the covered individual was aDirector of the acquired company or an employee of the acquired company and their salary level. As of December 31, 2025, and 2024, included in otherliabilities on the Consolidated Balance sheet is a liability of $529,000 and $514,000, respectively, for the obligation under the split-dollar benefit agreements. Fair Value of Derivative Instruments - asset The Company holds derivative instruments to hedge interest rate risk, to offer customers longer term fixed rate loans through a program similar to a back toback swap, which results in both a derivative asset and liability on the Consolidated Balance Sheet, and through the residential lending platform through interestrate locks. (See Note 18 for additional information). As of December 31, 2025, and 2024, the fair value for the derivative instrument assets was $6,927,000 and$10,370,000, respectively. The change in the fair value of financial instruments was due to the changes in market interest rates during 2025, the time to maturityof the various instruments and the maturity or early termination of certain instruments. The effective portion of changes in the fair value of the cash flow interestrate hedge derivative is initially reported in other comprehensive income (outside of earnings), net of tax, and subsequently reclassified to earnings when thehedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. Deferred Tax Asset Deferred tax assets are computed based on the difference between the financial statement basis and income tax basis of assets and liabilities using theenacted marginal tax rates. Deferred income tax expenses or benefits are based on the changes in the net deferred tax asset or liability from period to period.(See Note 12 for additional information) As of December 31, 2025 and 2024, the balance for deferred tax assets was $11,440,000 and $15,199,000, respectively.The change was due to the change in the market value of the Bank’s available-for-sale investment portfolio, the amortization of various credit and interest ratemarks associated with acquisitions and the usage of net operating losses acquired from acquisitions. Other Assets Other assets decreased $1,486,000 in 2025 to $53,145,000 from $54,631,000 in 2024. The decrease was driven by a decrease in other receivables of$2,871,000 due to timing of payments associated with a participation loan and a participating bank and a decrease in tax receivable of $2,098,000. Regulatorystock increased $2,221,000 and there was a $634,000 increase in the right to use asset. 43
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Index Deposits The following table shows the breakdown of deposits by deposit type (dollars in thousands) at December 31: 2025 2024 2023 Amount % Amount % Amount % Non-interest-bearing deposits $ 516,657 21.7 $ 532,776 22.4 $ 523,784 22.6 Interest-bearing demand deposits 25,576 1.1 18,004 0.8 $ - - NOW accounts 593,825 25.0 581,673 24.4 670,712 28.9 Savings deposits 286,554 12.1 292,918 12.3 307,357 13.2 Money market deposit accounts 480,509 20.2 434,856 18.3 400,154 17.2 Certificates of deposit 473,858 19.9 521,801 21.8 419,474 18.1 Total $ 2,376,979 100.0 $ 2,382,028 100.0 $ 2,321,481 100.0 2025/2024 2024/2023 Change Change Amount % Amount % Non-interest-bearing deposits $ (16,119) (3.0) $ 8,992 1.7 Interest-bearing demand deposits 7,572 42.1 18,004 NA NOW accounts 12,152 2.1 (89,039) (13.3)Savings deposits (6,364) (2.2) (14,439) (4.7)Money market deposit accounts 45,653 10.5 34,702 8.7 Certificates of deposit (47,943) (9.2) 102,327 24.4 Total $ (5,049) (0.2) $ 60,547 2.6 2025 Total deposits decreased $5,049,000 in 2025, or 0.2%. While less in 2025 than 2024, competitive pressure for deposits continues to be at the forefront.Additionally, we have numerous state and political organization depositors with seasonal funding timelines. During 2025, brokered certificates of depositdecreased $33,055,000 to $60,000,000. Additionally, a school district in our southeastern Pennsylvania market saw a decrease in their balance of $58,946,000due to the lack of state budget for parts of 2025. We continue to work on enhancing our cash management services to improve our customer services. As apercentage of total deposits, non-interest-bearing deposits totaled 21.7% as of the end of 2025, which compares to 22.4% at the end of 2024. The rates paid oncertificates of deposit by the Company remain competitive with rates paid by our competition. 2024 Total deposits increased $60,547,000 in 2024, or 2.6%. With the rise in market interest rates, competitive pressure for deposits increased during 2024.During 2024, brokered certificates of deposit decreased $16.2 million to $93.1 million. As a percentage of total deposits, non-interest-bearing deposits totaled22.4% as of the end of 2024, which compares to 22.6% at the end of 2023. Remaining maturities of certificates of deposit in excess of FDIC insurance limits are as follows for December 31, 2025 (dollars in thousands): 2025 3 months or less $ 35,532 Over 3 months through 6 months 30,842 Over 6 months through 12 months 41,106 Over 12 months 29,136 Total $ 136,616 As a percent of total certificates of deposit 28.83% Uninsured deposits as of December 31, 2025 and 2024 are estimated based on regulatory reporting requirements to be $1,124,675,000 and $1,160,581,000,respectively. Included in this balance as of December 31, 2025 and 2024 are balances held through Intrafi, which provides customers with FDIC insurancecoverage by placing customer funds with insured banks within the Intrafi network, as well as deposits collateralized by securities (almost exclusively municipaldeposits), which together total $646,677,000, or 27.2%, and $638,624,000, or 26.8% of the Bank’s total deposits, respectively. As a result, deposits in excess of$250,000 that are unsecured total $477,998,000, or 20.1% and $521,957,00, or 21.9% of deposits as of December 31, 2025 and 2024, respectively. 44
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Index Deposits by type of depositor are as follows (dollars in thousands) at December 31: 2025 2024 2023 Amount % Amount % Amount % Individuals $ 1,072,845 45.1 $ 1,134,144 47.6 $ 1,129,655 48.7 Businesses and other organizations 767,673 32.3 741,566 31.1 748,257 32.2 State & political subdivisions 536,461 22.6 506,318 21.3 443,569 19.1 Total $ 2,376,979 100.0 $ 2,382,028 100.0 $ 2,321,481 100.0 Borrowed Funds Borrowed funds increased $11,727,000 during 2025. Short term borrowings from the FHLB increased $65,339,000 and totaled $263,483,000 as ofDecember 31, 2025 compared to $198,144,000 as of December 31, 2024. Long term borrowings from the FHLB decreased $41,350,000 and were all paid-off asof December 31, 2025. The Company has a line of credit with an unaffiliated bank for $15.0 million, which is unused as of December, 31, 2025. Managementcontinually monitors interest rates in order to minimize interest rate risk in future years and as part of this may extend some of the short-term borrowings viaterm notes. The Bank has four interest rate swap agreements outstanding to convert floating-rate debt to fixed rate debt on notional amounts of $10.0 millionand three agreements with individual notional amounts of $6.0 million. The $10.0 million agreements were originated on April 1, 2020 and expire on April 1,2025 and April 1, 2027, respectively. The three $6.0 million agreements originated on May 14, 2020 had a two year forward start date and expire on May 14,2027, 2029 and 2032. During 2025, one swap agreement for $15.0 million matured. The Company has an interest rate swap agreement outstanding that wasentered into on April 13, 2020 to convert floating-rate debt to fixed rate debt on a notional amount of $7.5 million. The interest rate swap agreement expires onJune 17, 2027. The interest rate swap instruments involve an agreement to receive a floating rate and pay a fixed rate, at specified intervals, calculated on theagreed-upon notional amounts. The differentials paid or received on interest rate swap agreements are recognized as adjustments to interest expense in theperiod in which they arise. The fair value of the interest rate swaps at December 31, 2025 was $2,487,000 and is included within fair value of derivativeinstruments – asset on the consolidated balance sheets. Fair Value of Derivative Instruments – liability The Company holds derivative instruments to hedge interest rate risk and to offer customers longer term fixed rate loans through a program similar to aback to back swap, which results in both a derivative asset and liability on the Consolidated Balance Sheet and through the residential lending platform throughinterest rate locks. (See Note 18 for additional information). As of December 31, 2025, and 2024, the fair value for the derivatives instrument liabilities was$4,100,000 and $5,817,000, respectively. The change in the fair value of financial instruments was due to changes in market interest rates during 2025, the timeto maturity of the various instruments and the maturity or early termination of certain instruments. The effective portion of changes in the fair value of the cashflow interest hate hedge derivative is initially reported in other comprehensive income (outside of earnings), net of tax, and subsequently reclassified to earningswhen the hedged transaction affects earnings, and the ineffective portion of changes in the fair value of the derivative is recognized directly in earnings. Other Liabilities Other liabilities decreased $2,875,000 to $32,856,000 during 2025. The primary driver was a decrease of $4,459,000 due to payments made in 2025 to thelow-income housing projects in which the Bank is a partner. Other liabilities increased $682,000 due to an increase in the liability associated with right of useassets due to leases entered into during 2025. Stockholders’ Equity We evaluate stockholders’ equity in relation to total assets and the risk associated with those assets. The greater our capital resources, the greater thelikelihood of meeting our cash obligations and absorbing unforeseen losses. For these reasons, capital adequacy has been, and will continue to be, of paramountimportance. Due to its importance, we develop a capital plan and stress test capital levels using various techniques and assumptions annually to ensure that inthe event of unforeseen circumstances, we would remain in compliance with our capital plan approved by the Board of Directors and regulatory requirementlevels. Our Board of Directors determines our cash dividend rate after considering our capital requirements, current and projected net income, and other factors. In2025 and 2024, the Company paid out 26.11% and 33.44% of net income in cash dividends, respectively. The decrease in the payout percentage was due to theincrease in net income in 2025 due to the expansion of the net interest margin. 45
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Index As of December 31, 2025, the total number of common shares outstanding was 4,807,080. For comparative purposes, outstanding shares for prior periodswere adjusted for the June 2025 stock dividend in computing earnings and cash dividends per share as detailed in Note 1 of the consolidated financialstatements. As part of the Company’s employee stock purchase plan, the Company issued 1,157 shares at a cost of $68,000. During 2025, we purchased 6,151shares of treasury stock at a weighted average cost of $58.09 per share. The Company awarded 4,431 shares of restricted stock to employees at a weightedaverage cost per share of $57.28 under an equity incentive plan. The Board of Directors was awarded 3,674 shares at a cost of $58.71 per share. Stockholders’ equity increased 12.8% in 2025 to $338,051,000. Excluding accumulated other comprehensive loss, stockholders’ equity increased$27,173,000, or 8.4%. Net income for 2025 was $36,572,000, offset by net cash dividends of $9,548,000 and net treasury stock activity of ($36,000). All of theCompany’s debt investment securities are classified as available-for-sale, making this portion of the Company’s balance sheet more sensitive to the changingmarket value of investments. Accumulated other comprehensive loss decreased $11,144,000 from December 31, 2024, primarily as a result of the increase in thefair market value of the investment portfolio. Total stockholders’ equity was approximately 11.0% of total assets as of December 31, 2025, compared to 9.9% oftotal assets as of December 31, 2024. LIQUIDITY Liquidity is a measure of the Company’s ability to efficiently meet normal cash flow requirements of both borrowers and depositors. Liquidity is needed tomeet depositors’ withdrawal demands, extend credit to meet borrowers’ needs, provide funds for normal operating expenses and cash dividends, and fund futurecapital expenditures. To maintain proper liquidity, we use funds management policies along with our investment and asset liability policies to assure we can meet our financialobligations to depositors, credit customers and stockholders. Management monitors liquidity by reviewing loan demand, investment opportunities, depositpricing and the cost and availability of borrowing funds. Additionally, the bank has established various limits and ratios to monitor liquidity. On a quarterlybasis, we stress test our liquidity position to ensure that the Bank has the capability of meeting its cash flow requirements in the event of unforeseencircumstances. The Company’s historical activity in this area can be seen in the Consolidated Statement of Cash Flows from investing and financing activities. Cash generated by operating activities, investing activities and financing activities influences liquidity management. The most important source of funds isthe deposits that are primarily core deposits (deposits from customers with other relationships). Short-term debt from the Federal Home Loan Bank supplementsthe Company’s availability of funds as well as a line of credit arrangement with a corresponding bank. Other sources of short-term funds include brokered CDsand the sale of loans, if needed. The Company’s use of funds is shown in the investing activity section of the Consolidated Statement of Cash Flows, where the net loan activity is detailed.Other significant uses of funds are capital expenditures, purchase of loans and acquisition premiums. Surplus funds are then invested in investment securities. Capital expenditures, including software purchases in 2025 totaled $1,296,000, which included: ■ ATM upgrades totaling $463,000■ Computers, servers and copier purchases of $162,000■ Dover branch remodel totaling $321,000 Capital expenditures, including software purchases in 2024 totaled $1,314,000, which included: ■ ATM upgrades totaling $935,000■ Computers, servers and copier purchases of $245,000 We expect these expenditures will support our initiatives and will create operating efficiencies, while providing quality customer service. 46
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Index In addition to the Bank’s cash balances, the Bank achieves additional liquidity primarily from its investment in the FHLB of Pittsburgh and the resultingborrowing capacity obtained through this investment, investments that mature in less than one year and expected principal repayments from mortgage backedsecurities. The Bank has a maximum borrowing capacity at the Federal Home Loan Bank of approximately $1,115,189,000, inclusive of any outstandingamounts, as a source of liquidity. The Bank also has two unsecured federal funds lines with third party providers in the total amount of $34.0 million as ofDecember 31, 2025, which are unsecured and a borrower in custody agreement was established with the FRB in the amount of $11,798,000, which iscollateralized by $21,827,000 of municipal loans, which is unused at December 31, 2025. The Company has a $15.0 million line of credit with a New Yorkcommunity bank, which is unused as of December 31, 2025. The Company is a separate legal entity from the Bank and must provide for its own liquidity. In addition to its operating expenses, the Company isresponsible for paying any dividends declared to its shareholders. The Company also has repurchased shares of its common stock. The Company’s primarysource of income is dividends received from the Bank. The Bank may not declare a dividend without approval from the FRB, unless the dividend to be declaredby the Bank’s Board of Directors does not exceed the total of: (i) the Bank’s net profits for the current year to date, plus (ii) its retained net profits for thepreceding two current years, less any required transfers to surplus. In addition, the Bank can only pay dividends to the extent that its retained net profits(including the portion transferred to surplus) exceed its bad debts. The FRB, the OCC, the PDB and the FDIC have formal and informal policies which providethat insured banks and bank holding companies should generally pay dividends only out of current operating earnings, with some exceptions. The PromptCorrective Action Rules, described above, further limit the ability of banks to pay dividends, because banks which are not classified as well capitalized oradequately capitalized may not pay dividends and no dividend may be paid which would make the Bank undercapitalized after the dividend. At December 31,2025, the Company (unconsolidated basis) had liquid assets of $4,586,000. CONTRACTUAL OBLIGATIONS The Company has various financial obligations, including contractual obligations which may require cash payments. The following table (in thousands)presents as of December 31, 2025, significant fixed and determinable contractual obligations to third parties by payment date. Further discussion of theobligations can be found in Notes 9, 10, 13 and 19 to the Consolidated Financial Statements. Contractual Obligations One yearor Less One toThree Years Three toFive Years Over FiveYears Total Deposits without a stated maturity $ 1,877,545 $ - $ - $ - $ 1,877,545 Time deposits 366,083 82,962 19,456 5,357 473,858 FHLB Advances 160,483 - - - 160,483 Term borrowings - FHLB 103,000 - - - 103,000 Stifel 3,320 - - - 3,320 Note Payable - - - 7,500 7,500 Subordinated Debt - - - 19,648 19,648 Repurchase agreements 15,497 - - - 15,497 Low income housing partnerships 605 787 26 121 1,539 Operating leases 1,921 3,814 3,035 4,285 13,055 Total $ 2,528,454 $ 87,563 $ 22,517 $ 36,911 $ 2,675,445 OFF-BALANCE SHEET ARRANGEMENTS In the normal course of operations, we engage in a variety of financial transactions that, in accordance with generally accepted accounting principles, arenot recorded in our financial statements. These transactions involve, to varying degrees, elements of credit, interest rate and liquidity risk. Such transactions areused primarily to manage customers’ requests for funding and take the form of loan commitments, unused lines of credit and letters of credit. For informationabout our loan commitments, unused lines of credit and letters of credit, see Note 17 of the notes to consolidated financial statements. For the year ended December 31, 2025, we did not engage in any off-balance sheet transactions reasonably likely to have a material effect on ourconsolidated financial condition, results of operations or cash flows. 47
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Index INTEREST RATE AND MARKET RISK MANAGEMENT The objective of interest rate sensitivity management is to maintain an appropriate balance between the stable growth of income and the risks associatedwith maximizing income through interest sensitivity imbalances and the market value risk of assets and liabilities. Because of the nature of our operations, we are not subject to foreign currency exchange or commodity price risk and, since the Company has no tradingportfolio, it is not subject to trading risk. At December 31, 2025, the Company had equity securities that represent only 0.06% of our total assets, and therefore market risk related to equitysecurities is not significant. The primary factors that make assets interest-sensitive include adjustable-rate features on loans and investments, loan repayments, investment maturitiesand money market investments. The primary components of interest-sensitive liabilities include maturing certificates of deposit, IRA certificates of deposit,repurchase agreements and short-term borrowings. Savings deposits, NOW accounts and money market investor accounts, with the exception of top interest tiermoney market and NOW accounts, are considered core deposits and are not short-term interest sensitive and therefore are included in the table below in the overfive year column. Top interest tier money market and NOW accounts are included in the table below in the within three month column. Borrowings subject toswap arrangements are included in the table below based on the swap arrangement maturity. The following table shows the cumulative static gap (at amortized cost) for various time intervals (dollars in thousands): Maturity or Re-pricing of Company Assets and Liabilities as of December 31, 2025 WithinThreeMonths Four toTwelveMonths One toTwoYears Two toThreeYears Three toFiveYears OverFiveYears Total Interest-earning assets: Interest-bearing deposits at banks $ 10,358 $ 844 $ 2,976 $ - $ - $ - $ 14,178 Investment securities 76,879 50,995 69,993 33,386 58,511 172,755 462,519 Residential mortgage loans 40,328 71,112 57,332 47,691 68,903 55,606 340,972 Construction loans 46,430 22,980 24,555 - - - 93,965 Commercial and farm loans 477,468 325,290 458,669 203,257 231,422 79,269 1,775,375 Loans to state & political subdivisions 8,441 11,418 7,000 1,781 3,655 19,805 52,100 Other loans 81,218 1,590 1,518 861 804 2,219 88,210 Total interest-earning assets $ 741,122 $ 484,229 $ 622,043 $ 286,976 $ 363,295 $ 329,654 $ 2,827,319 Interest-bearing liabilities: Interest-bearing demand deposits $ 21,074 $ - $ - $ - $ - $ 4,502 $ 25,576 NOW accounts 406,828 - - - - 186,997 593,825 Savings accounts - - - - - 286,554 286,554 Money Market accounts 440,874 - - - - 39,635 480,509 Certificates of deposit 126,086 239,997 56,357 26,605 19,456 5,357 473,858 Long-term borrowing 254,300 19,648 23,500 - 6,000 6,000 309,448 Total interest-bearing liabilities $ 1,249,162 $ 259,645 $ 79,857 $ 26,605 $ 25,456 $ 529,045 $ 2,169,770 Excess interest-earning assets (liabilities) $ (508,040) $ 224,584 $ 542,186 $ 260,371 $ 337,839 $ (199,391) Cumulative interest-earning assets $ 741,122 $ 1,225,351 $ 1,847,394 $ 2,134,370 $ 2,497,665 $ 2,827,319 Cumulative interest-bearing liabilities 1,249,162 1,508,807 1,588,664 1,615,269 1,640,725 2,169,770 Cumulative gap $ (508,040) $ (283,456) $ 258,730 $ 519,101 $ 856,940 $ 657,549 Cumulative interest rate sensitivity ratio (1) 0.59 0.81 1.16 1.32 1.52 1.30 (1) Cumulative interest-earning assets divided by interest-bearing liabilities. The previous table and the simulation models discussed below are presented assuming money market investment accounts and NOW accounts in the topinterest rate tier are re-priced within the first three months. The loan amounts reflect the principal balances expected to be re-priced as a result of contractualamortization and anticipated early payoffs. Gap analysis, one of the methods used by us to analyze interest rate risk, does not necessarily show the precise impact of specific interest rate movementson the Bank’s net interest income because the re-pricing of certain assets and liabilities is discretionary and is subject to competition and other pressures. Inaddition, assets and liabilities within the same period may, in fact, be repaid at different times and at different rate levels. We have not experienced the kind ofearnings volatility that might be indicated from gap analysis. 48
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Index The Bank currently uses a computer simulation model to better measure the impact of interest rate changes on net interest income. We use the model as partof our risk management and asset liability management processes that we believe will effectively identify, measure, and monitor the Bank’s risk exposure. Inthis analysis, the Bank examines the results of movements in interest rates with additional assumptions made concerning the timing of interest rate changes,prepayment speeds on mortgage loans and mortgage securities and deposit pricing movements. Shock scenarios, which assume a parallel shift in interest ratesand is instantaneous, typically have the greatest impact on net interest income. The following is a rate shock analysis and the impact on net interest income as ofDecember 31, 2025 (dollars in thousands): Changes in Rates Prospective One-YearNet Interest Income Change InProspectiveNet Interest Income % Change InProspectiveNet Interest Income -400 Shock $ 114,544 $ 10,869 10.48%-300 Shock 111,243 7,568 7.30%-200 Shock 107,847 4,172 4.02%-100 Shock 105,526 1,851 1.79%Base 103,675 - 0.00%+100 Shock 101,236 (2,439) -2.35%+200 Shock 98,513 (5,162) -4.98%+300 Shock 95,941 (7,734) -7.46%+400 Shock 93,325 (10,350) -9.98% The model makes estimates, at each level of interest rate change, regarding cash flows from principal repayments on loans and mortgage backed securities,call activity of other investment securities, and deposit selection, re-pricing and maturity structure. Because of these assumptions, actual results could differsignificantly from these estimates which would result in significant differences in the calculated projected change on net interest income. Additionally, thechanges above do not necessarily represent the level of change under which management would undertake specific measures to realign its portfolio in order toreduce the projected level of change. The projections above utilize a static balance sheet and do not include any changes that may result from the growth of theBank. Management has developed policy limits for acceptable changes in net interest income for multiple scenarios, including shock scenarios. As of December31, 2025, changes in net interest income projected for all scenarios, including the shock scenarios noted above, are in line with Bank policy limits for interestrate risk. CRITICAL ACCOUNTING POLICIES; CRITICAL ACCOUNTING ESTIMATES The Company’s accounting policies are integral to understanding the results reported. The accounting policies are described in detail in Note 1 of theconsolidated financial statements. Our most complex accounting policies require management’s judgment to ascertain the valuation of assets, liabilities,commitments and contingencies. We have established detailed policies and control procedures that are intended to ensure valuation methods are well controlledand applied consistently from period to period. In addition, the policies and procedures are intended to ensure that the process for changing methodologiesoccurs in an appropriate manner. The following is a brief description of our current accounting policies involving significant management valuation judgmentsand critical accounting estimates. Allowance for Credit Losses The Company’s allowance for credit losses is a critical accounting policy that requires the most significant judgments and estimates used in preparation ofits consolidated financial statements. In determining the appropriate estimate for the allowance for credit losses, management considers a number of factorsrelative to both individually evaluated credits in the loan portfolio and macroeconomic factors relative to the economy of the U.S. as a whole and the economiesof the areas in which the Company does business. Management performs a quarterly evaluation of the adequacy of the allowance for credit losses. Management considers a variety of factors in establishingthis estimate. This evaluation is inherently subjective as it requires material estimates by management that may be susceptible to significant change based onchanges in economic and real estate market conditions. 49
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Index The evaluation is comprised of specific and pooled components. The specific component is the Company’s evaluation of credit loss on individuallyevaluated loans based on the fair value of the collateral less estimated selling costs if collateral dependent or based on the present value of expected future cashflows discounted at the loan’s initial effective interest rate if not collateral dependent. The majority of the Company’s loans subject to individual evaluation areconsidered collateral dependent. All other loans are evaluated collectively for credit loss by pooling loans based on similar risk characteristics. As a significant percentage of the Company’s loan portfolio is collateralized by real estate, appraisals of the underlying value of property securing loans arecritical in determining the charge-offs for specific loans. Assumptions are instrumental in determining the value of properties. Overly optimistic assumptions ornegative changes to assumptions could significantly affect the valuation of a property securing a loan and the related allowance determined. Managementcarefully reviews the assumptions supporting such appraisals to determine that the resulting values reasonably reflect amounts realizable on the related loans. The pooled component of the evaluation is determined by applying reasonable and supportable economic forecasts and historical averages to the remainingloans segmented by similar risk characteristics. The key assumptions used in projecting future loss rates include the economic forecast, the forecast andreversion to mean time periods, and prepayment and curtailment assumptions. The assumptions are used to calculate and aggregate estimated cash flows for thetime period that remains in each loan’s contractual life. The cash flows are discounted back to the balance sheet date using each loan’s effective yield, to arriveat a present value of future cash flows, which is compared to the amortized cost basis of the loan pool to determine the amount of allowance for credit lossrequired by the calculation. One of the most significant judgments used in projecting loss rates when estimating the allowance for credit losses is the macro-economic forecastsprovided by a third party. The economic indices sourced from the macro-economic forecast and used in projecting loss rates are national unemployment rate,national gross domestic product and changes in home values. The economic index used in the calculation to which the calculation is most sensitive is thenational unemployment rate and gross domestic product. Changes in the macro-economic forecast, especially for the national unemployment rate and grossdomestic product, could significantly impact the calculated estimated credit losses between reporting periods. Other key assumptions in the calculation of the allowance for credit losses include the forecast and reversion to mean time periods and prepayment andcurtailment assumptions. The macro-economic forecast is applied for a reasonable and supportable time period before reverting to long-term historical averagesfor each economic index. The forecast and reversion to mean time period used for each economic index at December 31, 2025 were four quarters and eightquarters, respectively. Prepayment and curtailment assumptions are based on the Company’s historical experience over the trailing 12 months and are adjustedby management as deemed necessary. The prepayment and curtailment assumptions vary based on segment. The quantitative estimated losses are supplemented by more qualitative factors that impact potential losses. Qualitative factors include changes inunderwriting standards, changes in environmental conditions, delinquency level, segment growth rates and changes in duration within new markets, or otherrelevant factors. The allowance for credit loss may be materially affected by these qualitative factors, especially during periods of economic uncertainty, foritems not reflected in the lifetime credit loss calculation, but which are deemed appropriate by management’s current assessment of the risks related to the loanportfolio and/or external factors. The qualitative factors applied at December 31, 2025, and the importance and levels of the qualitative factors applied, maychange in future periods depending on the level of changes to items such as the uncertainty of economic conditions and management’s assessment of the level ofcredit risk within the loan portfolio as a result of such changes, compared to the amount of allowance for credit loss calculated by the model. The evaluation ofqualitative factors is inherently imprecise and requires significant management judgment. While management utilizes its best judgment and information available, the adequacy of the allowance for credit loss is determined by certain factorsoutside of the Company’s control, such as the performance of the Company’s portfolios, changes in the economic environment including economic uncertainty,changes in interest rates, and the view of the regulatory authorities toward classification of assets and the level of allowance for credit losses. Additionally, thelevel of allowance for credit losses may fluctuate based on the balance and mix of the loan portfolio. If actual results differ significantly from management’sassumptions, the Company’s allowance for credit loss may not be sufficient to cover inherent losses in the Company’s loan portfolio, resulting in additions tothe Company’s allowance for credit losses and an increase in the provision for credit losses. 50
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Index Goodwill and Other Intangible Assets As discussed in Note 1 of the consolidated financial statements, the Company performs an evaluation of goodwill for impairment on an annual basis, ormore frequently if events or changes in circumstances indicate that the asset might be impaired. The Company performed a quantitative assessment in 2025 todetermine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. Based on the fair value of the reporting unit,no impairment of goodwill was recognized in 2025, 2024 or 2023. Business Combinations Business combinations are accounted for by applying the acquisition method. As of the acquisition date, the identifiable assets acquired and liabilitiesassumed are measured at fair value and recognized separately from goodwill. Results of operations of the acquired entities are included in the consolidatedstatement of income from the date of acquisition. The calculation of intangible assets including core deposits and the fair value of loans are based on significantjudgements. Core deposits intangibles are calculated using a discounted cash flow model based on various factors including discount rate, attrition rate, interestrate, cost of alternative funds and net maintenance costs. Loans acquired in connection with acquisitions are recorded at their acquisition-date fair value. Determining the fair value of the acquired loans involvesestimating the principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest. Managementconsiders a number of factors in evaluating the acquisition-date fair value including the remaining life of the acquired loans, delinquency status, estimatedprepayments, payment options and other loan features, internal risk grade, estimated value of the underlying collateral and interest rate environment. ITEM 7A – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. This information is included under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Interest Rate andMarket Risk Management”, appearing in this Annual Report on Form 10-K. 51
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Index ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Citizens Financial Services, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Citizens Financial Services, Inc. and subsidiaries (the “Company”) as of December 31, 2025and 2024; the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the three years inthe period ended December 31, 2025; and the related notes to the consolidated financial statements (collectively, the financial statements). In our opinion, thefinancial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of itsoperations and its cash flows for each of the three years in the period ended December 31, 2025, in conformity with accounting principles generally accepted inthe United States of America. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internalcontrol over financial reporting as of December 31, 2025, based on criteria established in Internal Control — Integrated Framework issued by the Committee ofSponsoring Organizations of the Treadway Commission in 2013, and our report dated March 12, 2026, expressed an unqualified opinion on the effectiveness ofthe Company's internal control over financial reporting. Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) andare required to be independent, with respect to the Company, in accordance with U.S. federal securities laws and the applicable rules and regulations of theSecurities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures toassess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Suchprocedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluatingthe accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Webelieve that our audits provide a reasonable basis for our opinion. Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or requiredto be communicated to the Audit Committee and that: (1) relate to accounts or disclosures that are material to the financial statements; and (2) involve ourespecially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter, in any way, our opinion on the financialstatements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or onthe accounts or disclosures to which they relate. 52
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Index Allowance for Credit Losses (ACL) Description of the Matter The Company’s loan portfolio totaled $2.3 billion as of December 31, 2025, which includes the associated ACL on loans totaling $22.8 million. As discussed inNotes 1 and 5 to the financial statements, the ACL related to loan requires significant judgment about the expected future losses, which is based on a base loss projection determined through the calculation of discounted cash flows of each loan portfolio segment. The probably of default and other loss rate assumptionsare based on a combination of peer loss data, Company-specific data, and economic forecasts. Management then applies qualitative adjustments to the base lossprojection to reflect changes in the Company’s internal and external environment that are different from the conditions that existed during the historical losscalculation period. The qualitative adjustments are based on observable data points evaluated over a historical period, which help management determine howthe related risks are evolving over time. Management uses a Qualitative Scorecard (Scorecard) to provide the adjustments to the historical loss information. TheScorecard contains a five-category approach (improvement, no change, minor risk, moderate risk, and major risk) to measure risk in the loan pools that may notbe captured in the quantitative methodology. We identified these qualitative adjustments within the ACL as critical audit matters because they involve a high degree of subjectivity. While the determinationof these qualitative adjustments includes analysis of observable data over the historical loss period, the judgments required to assess the directionality andmagnitude of adjustments are highly subjective. Auditing these complex judgments and assumptions involved especially challenging auditor judgment due tothe nature of audit evidence and the nature and extent of effort required to address these matters. 53
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Index How We Addressed the Matter in Our Audit The primary procedures we performed related to this critical audit matter (CAM) included the following: • Obtained an understanding of the Company’s process for establishing the ACL, including how management evaluates the qualitative adjustmentsto the base loss projection • Tested the design, implementation, and operating effectiveness of internal controls specifically related to the determination and review of thesequalitative adjustments • Evaluated and tested the reliability of the data used to evaluate the significant qualitative factor adjustments • Evaluated the directional consistency and reasonableness of management’s conclusions regarding Scorecard category based on the trendsidentified in the underlying data • Reconciled the Scorecard category from management’s calculation back to the ACL model for accuracy We have served as the Company’s auditor since 1994. /s/S.R. Snodgrass, P.C. Cranberry Township, PennsylvaniaMarch 12, 2026 54
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Index Citizens Financial Services, Inc.Consolidated Balance Sheet December 31, (in thousands, except share data) 2025 2024 ASSETS: Cash and cash equivalents: Noninterest-bearing $ 23,933 $ 30,284 Interest-bearing 10,358 11,918 Total cash and cash equivalents 34,291 42,202 Interest bearing time deposits with other banks 3,820 3,820 Equity securities 1,815 1,747 Available-for-sale securities 444,741 425,912 Loans held for sale 9,393 9,607 Loans (net of allowance for credit losses: $ 2025, 22,806; 2024, $21,699) 2,327,816 2,291,543 Premises and equipment 20,998 21,395 Accrued interest receivable 10,698 10,307 Goodwill 85,758 85,758 Bank owned life insurance 51,501 50,341 Other intangibles 2,221 2,892 Fair value of derivative instruments - asset 6,927 10,370 Deferred tax asset 11,440 15,199 Other assets 53,145 54,631 TOTAL ASSETS $ 3,064,564 $ 3,025,724 LIABILITIES: Deposits: Noninterest-bearing $ 516,657 $ 532,776 Interest-bearing 1,860,322 1,849,252 Total deposits 2,376,979 2,382,028 Borrowed funds 309,448 297,721 Accrued interest payable 3,130 4,693 Fair value of derivative instruments - liability 4,100 5,817 Other liabilities 32,856 35,731 TOTAL LIABILITIES 2,726,513 2,725,990 STOCKHOLDERS’ EQUITY: Preferred Stock $1.00 par value; authorized 3,000,000 shares 2025 and 2024; none issued in 2025 or 2024 - - Common Stock $1.00 par value; authorized 25,000,000 shares 2025 and 2024; issued 5,255,807 and 5,207,577 share in2025 and 2024, respectively 5,256 5,208 Additional paid-in capital 147,965 144,984 Retained earnings 213,623 189,443 Accumulated other comprehensive loss (12,377) (23,521)Treasury stock, at cost: 448,727 and 447,965 shares for 2025 and 2024, respectively (16,416) (16,380) TOTAL STOCKHOLDERS’ EQUITY 338,051 299,734 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 3,064,564 $ 3,025,724 See accompanying notes to consolidated financial statements. 55
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Index Citizens Financial Services, Inc.Consolidated Statement of IncomeYear Ended December 31, (in thousands, except per share data) 2025 2024 2023 INTEREST AND DIVIDEND INCOME: Interest and fees on loans $ 144,430 $ 142,688 $ 116,075 Interest-bearing deposits with banks 502 851 736 Investment securities: Taxable 9,910 7,135 6,636 Nontaxable 2,626 2,093 2,264 Dividends 1,700 1,550 1,407 TOTAL INTEREST AND DIVIDEND INCOME 159,168 154,317 127,118 INTEREST EXPENSE: Deposits 47,050 52,326 31,699 Borrowed funds 14,117 15,536 15,159 TOTAL INTEREST EXPENSE 61,167 67,862 46,858 NET INTEREST INCOME 98,001 86,455 80,260 Provision for credit losses 2,375 2,587 937 Provision for credit losses - acquisition day 1 non-PCD - - 4,591 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 95,626 83,868 74,732 NON-INTEREST INCOME: Service charges 5,569 5,749 5,639 Trust 792 816 764 Brokerage and insurance 2,627 2,381 1,924 Equity security gains (losses), net 67 145 (144)Available for sale security losses, net - - (51)Gains on loans sold 2,290 2,316 1,452 Earnings on bank owned life insurance 1,433 1,684 1,254 Gain on sale of Braavo division - 1,102 - Other 1,566 1,208 767 TOTAL NON-INTEREST INCOME 14,344 15,401 11,605 NON-INTEREST EXPENSES: Salaries and employee benefits 39,402 39,347 34,990 Occupancy 5,299 5,013 4,123 Furniture and equipment 1,209 1,038 822 Professional fees 2,341 2,599 1,962 Federal depository insurance 1,710 1,996 1,475 Pennsylvania shares tax 739 1,114 583 Amortization of intangibles 478 564 373 Merger and acquisition - - 9,269 ORE expenses 267 212 166 Software expenses 1,844 1,953 1,784 Other 11,443 11,550 9,215 TOTAL NON-INTEREST EXPENSES 64,732 65,386 64,762 Income before provision for income taxes 45,238 33,883 21,575 Provision for income taxes 8,666 6,065 3,764 NET INCOME $ 36,572 $ 27,818 $ 17,811 PER COMMON SHARE DATA: EARNINGS PER SHARE - BASIC $ 7.62 $ 5.80 $ 3.98 EARNINGS PER SHARE – DILUTED $ 7.62 $ 5.79 $ 3.98 Number of shares used in computation - basic 4,797,520 4,797,258 4,476,235 Number of shares used in computation - diluted 4,800,093 4,802,139 4,476,235 See accompanying notes to consolidated financial statements. 56
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Index Citizens Financial Services, Inc.Consolidated Statement of Changes in Comprehensive IncomeYear Ended December 31, (in thousands) 2025 2024 2023 Net Income $ 36,572 $ 27,818 $ 17,811 Other Comprehensive income Securities available for sale Unrealized holding gain (loss) during the period 15,847 2,118 11,692 Income tax effect (3,328) (444) (2,455) Subtotal 12,519 1,674 9,237 Reclassification adjustment for (gains) losses included in income - - 51 Income tax effect - - (12) Subtotal - - 39 Unrealized loss (gain) on interest rate swap (1,750) (1,205) (1,431)Income tax effect 368 253 301 Other comprehensive (loss) gain on interest rate swap (1,382) (952) (1,130) Change in unrecognized pension costs 9 846 106 Income tax effect (2) (178) (22) Other comprehensive gain (loss) gain on unrecognized pension costs 7 668 84 Net other comprehensive income 11,144 1,390 8,230 Comprehensive income $ 47,716 $ 29,208 $ 26,041 See accompanying notes to consolidated financial statements. 57
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Index Citizens Financial Services, Inc.Consolidated Statement of Changes in Stockholders’ Equity (in thousands, except sharedata) AdditionalPaid-inCapital RetainedEarnings AccumulatedOtherComprehensiveIncome (Loss) TreasuryStock Total Common Stock Shares Amount Balance, December 31, 2022 4,427,687 $ 4,428 $ 80,911 $ 164,922 $ (33,141) $ (16,973) $ 200,147 Comprehensive income: Net income 17,811 17,811 Net other comprehensiveincome 8,230 8,230 Stock dividend (1%) 39,209 39 2,982 (3,021) - Issuance of Common stock 693,858 694 59,443 60,137 Purchase of treasury stock(2,775 shares) (265) (265)Restricted stock, executiveand Board of Directorawards (319) 431 112 Restricted stock vesting 197 197 Sale of treasury stock (410shares) 6 28 34 Forfeited restricted stock 13 (13) - Change in Accountingpolicy for allowance forcredit losses 1,766 1,766 Cash dividends, $1.899 pershare (8,503) (8,503) Balance, December 31, 2023 5,160,754 $ 5,161 $ 143,233 $ 172,975 $ (24,911) $ (16,792) $ 279,666 Comprehensive income: Net income 27,818 27,818 Net other comprehensiveincome 1,390 1,390 Stock dividend (1%) 46,589 47 2,001 (2,048) - Issuance of Common stockfor ESPP 234 - 16 16 Purchase of treasury stock(3,881 shares) (202) (202)Restricted stock, executiveand Board of Directorawards (541) 647 106 Restricted stock vesting 242 242 Forfeited restricted stock 33 (33) - Cash dividends, $1.931 pershare (9,302) (9,302) Balance, December 31, 2024 5,207,577 $ 5,208 $ 144,984 $ 189,443 $ (23,521) $ (16,380) $ 299,734 Comprehensive income: Net income 36,572 36,572 Net other comprehensiveincome 11,144 11,144 Stock dividend (1%) 47,073 47 2,797 (2,844) - Issuance of Common stockfor ESPP 1,157 1 67 68 Purchase of treasury stock(6,151 shares) (358) (358)Restricted stock, executiveand Board of Directorawards (261) 380 119 Restricted stock vesting 320 320 Sale of treasury stock - - - Forfeited restricted stock 58 (58) - Cash dividends, $1.980 pershare (9,548) (9,548) Balance, December 31,2025 5,255,807 $ 5,256 $ 147,965 $ 213,623 $ (12,377) $ (16,416) $ 338,051 See accompanying notes to consolidated financial statements. 58
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Index Citizens Financial Services, Inc.Consolidated Statement of Cash Flows Year Ended December 31, (in thousands) 2025 2024 2023 Cash Flows from Operating Activities: Net income $ 36,572 $ 27,818 $ 17,811 Adjustments to reconcile net income to net cash provided by operating activities: Provision for credit losses 2,375 2,587 5,528 Depreciation and amortization 2,104 1,806 1,520 Amortization and accretion of loans and other assets (3,810) (3,186) (3,119)Amortization and accretion on investment securities 618 1,372 1,581 Deferred income taxes 797 1,771 595 Equity security (gains) losses, net (67) (145) 144 Available for sale security (gains) losses, net - - 51 Earnings on bank owned life insurance (1,433) (1,684) (1,254)Stock awards 625 412 309 Originations of loans held for sale (153,519) (155,379) (87,323)Proceeds from sales of loans held for sale 155,948 157,365 90,782 Realized gains on loans sold (2,290) (2,316) (1,452)Realized gains on sale of Braavo - (1,102) - (Increase) decrease in accrued interest receivable (391) 736 (1,485)Increase (decrease) in accrued interest payable (1,563) 395 2,181 Other, net 568 2,732 668 Net cash provided by operating activities 36,534 33,182 26,537 Cash Flows from Investing Activities: Available-for-sale securities: Proceeds from sales of available-for-sale securities - - 86,504 Proceeds from maturity and principal repayments of securities 78,806 62,858 27,007 Purchase of securities (82,406) (70,423) (10,246)Proceeds from sale of equity securities - 335 127 Proceeds from redemption of Regulatory Stock 33,638 28,072 24,915 Purchase of Regulatory Stock (35,859) (27,599) (29,127)Net increase in loans (33,481) (70,245) (43,951)Purchase of interest bearing time deposits - (100) (100)Proceeds from matured interest bearing time deposits with other banks - 350 2,085 Purchase of premises, equipment and software (1,296) (1,314) (2,617)Proceeds from sale of premises and equipment 12 - - Proceeds from bank owned life insurance 272 1,241 1,098 Investments in low income housing partnerships - - (1,470)Proceeds from sale of foreclosed assets held for sale 238 567 335 Proceeds from sale of Braavo assets - 7,185 - Acquisition, net of cash paid - - 4,905 Net cash (used in) provided by investing activities (40,076) (69,073) 59,465 Cash Flows from Financing Activities: Net (decrease) increase in deposits (5,049) 60,548 (56,092)Proceeds from long-term borrowings - - 40,000 Repayments of long-term borrowings (42,000) (35,000) - Net increase (decrease) in short-term borrowed funds 52,705 9,279 (34,569)Purchase of treasury stock (358) (202) (265)Purchase of restricted stock (187) (64) - Sale of treasury stock - - 34 Issuance of common stock for employee stock purchase plan 68 16 - Dividends paid (9,548) (9,302) (8,503) Net cash (used in) provided by financing activities (4,369) 25,275 (59,395) Net (decrease) increase in cash and cash equivalents (7,911) (10,616) 26,607 Cash and Cash Equivalents at Beginning of Year 42,202 52,818 26,211 Cash and Cash Equivalents at End of Year $ 34,291 $ 42,202 $ 52,818 59
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Index Supplemental Disclosures of Cash Flow Information: Interest paid $ 62,730 $ 67,466 $ 44,677 Income taxes paid $ 6,590 $ 2,826 $ 5,130 Non-cash activities: Stock dividend $ 2,844 $ 2,048 $ 3,021 Real estate acquired in settlement of loans $ 40 $ 2,635 $ 147 Investments matured and not settled included in other assets $ - $ - $ 8,000 Investments in low income housing included in other assets and liabilities $ - $ - $ 6,530 Right of use asset and liability $ 2,065 $ 306 $ 28 CECL adjustment $ - $ - $ 3,300 Acquisition of HV Bancorp,Inc. Non-cash assets acquired Available-for-sale securities $ - $ - $ 79,248 Interest bearing time deposits with other banks - - - Loans held fo sale - - 10,750 Loans - - 475,338 Premises and equipment - - 2,310 Accrued interest receivable - - 2,226 Bank owned life insurance - - 10,387 Intangibles - - 2,972 Deferred tas asset - - 7,706 Other assets - - 18,213 Goodwill - - 54,382 - - 663,532 Liabilities assumed Noninterest-bearing deposits - - 197,549 Interest-bearing deposits - - 335,815 Accrued interest payable - - 885 Borrowed funds - - 58,647 Other liabilities - - 11,988 - - 604,884 Net non-cash assets acquired - - 58,648 Cash and cash equivalents acquired $ - $ - $ 18,017 See accompanying notes to consolidated financial statements. 60
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Index CITIZENS FINANCIAL SERVICES, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business and Organization Citizens Financial Services, Inc. (individually and, collectively with its subsidiaries, the “Company”) is headquartered in Mansfield, Pennsylvania, andprovides a full range of banking and related services through its wholly owned subsidiary, First Citizens Community Bank (the “Bank”), and its wholly ownedsubsidiary, First Citizens Insurance Agency, Inc. (“First Citizens Insurance”). During 2024, the Company terminated the corporate existence of CZFSAcquisition Company, LLC (“CZFS”), which included transferring ownership of the Bank to the Company. CZFS was formed in March 2020 as part of themerger with Midcoast Community Bancorp. Inc. (“MidCoast”). During 2024, the Bank terminated the corporate existence of 1st Realty of PA, LLC (“Realty”),which included transferring ownership of all assets to the Bank. Realty was formed in March of 2019 to manage and sell properties acquired by the Bank in thesettlement of a bankruptcy filing with a commercial customer. On December 11, 2015, the Company completed its acquisition of The First National Bank ofFredericksburg (“FNB”). On December 8, 2017, the Bank completed its acquisition of the S&T Bank branch in State College (“State College”). On April 17,2020, the Company completed its acquisition of MidCoast. On June 16, 2023, the Company completed the HVBC acquisition. In December 2023, the Bankopened a full-service branch in Williamsport, Pennsylvania. In October 2024, the Bank opened a limited production office in Georgetown, Delaware. As ofDecember 31, 2025, the Bank operates thirty-nine full-service banking branches in Potter, Tioga, Bradford, Clinton, Lycoming, Lebanon, Lancaster, Berks,Schuylkill, Centre, Chester, Bucks, Montgomery and Philadelphia counties, Pennsylvania, Allegany County, New York, the cities of Wilmington and Dover,Delaware, Burlington County, New Jersey, a limited branch office in Union county, Pennsylvania, a limited production officer in Georgetown, Delaware andtwo mortgage centers in Bucks county, Pennsylvania and Burlington County, New Jersey. The Bank also provides trust services, including the administration oftrusts and estates, retirement plans, and other employee benefit plans, along with a brokerage division that provides a comprehensive menu of investmentservices. The Bank serves individual and corporate customers and is subject to competition from other financial institutions and intermediaries with respect tothese services. The Company and Bank are supervised by the Board of Governors of the Federal Reserve System, while the Bank is subject to additionalregulation and supervision by the Pennsylvania Department of Banking. A summary of significant accounting and reporting policies applied in the presentation of the accompanying financial statements follows: Basis of Presentation The consolidated financial statements include the accounts of the Company, and its subsidiary, First Citizens Community Bank, and its subsidiary, FirstCitizens Insurance Agency, Inc. for 2025 and 2024. For 2023, the consolidated financial statements include the accounts of the Company, and its subsidiaryCZFS, and its subsidiary, First Citizens Community Bank, and its subsidiaries, First Citizens Insurance Agency, Inc. and 1st Realty of PA, LLC. Theseconsolidated statements have been prepared in accordance with U.S. generally accepted accounting principles. All significant inter-company accounts andtransactions have been eliminated in the consolidated financial statements. Use of Estimates In preparing the consolidated financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilitiesand disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses for theperiod. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change relate todetermination of the allowance for credit losses, goodwill, derivatives, pension plans and deferred tax assets and liabilities. 61
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Index Operating Segments An operating segment is defined as a component of an enterprise that engages in business activities that generates revenue and incurs expense, and theoperating results of which are reviewed by the chief operating decision maker in the determination of resource allocation and performance. While theCompany’s chief decision makers monitor the revenue streams of the various Company’s products, services and regions, operations are managed and financialperformance is evaluated on a Company-wide basis. Consistent with our internal reporting, the Company’s business activities are reported as one segment,which is community banking. Cash and Cash Equivalents Cash equivalents include cash on hand, deposits in banks and interest-earning deposits. Interest-earning deposits with original maturities of 90 days or lessare considered cash equivalents. Interest bearing time deposits with other banks are not included with cash and cash equivalents as the original maturities were greater than 90 days. Investment Securities Investment securities at the time of purchase are classified as one of the three following types: Held-to-Maturity Securities - Includes securities that the Company has the positive intent and ability to hold to maturity. These securities are reported atamortized cost. The Company had no held-to-maturity securities as of December 31, 2025 and 2024. Trading Securities - Includes debt securities bought and held principally for the purpose of selling them in the near term. Such securities are reported atfair value with unrealized holding gains and losses included in earnings. The Company had no trading securities as of December 31, 2025 and 2024. Available-for-Sale Securities – Includes debt securities not classified as held-to-maturity or trading securities that will be held for indefinite periods oftime. These securities may be sold in response to changes in market interest or prepayment rates, needs for liquidity and changes in the availability of and yieldof alternative investments. Such securities are reported at fair value, with unrealized holding gains and losses excluded from earnings and reported as a separatecomponent of stockholders’ equity, net of the estimated income tax effect. The amortized cost of investments in debt securities is adjusted for amortization of premiums and accretion of discounts, computed by a method that resultsin a level yield. Gains and losses on the sale of investment securities are computed on the basis of specific identification of the adjusted cost of each security. The fair value of investments, except certain state and municipal securities, is based on bid prices published in financial newspapers or bid quotationsreceived from securities dealers. The fair value of certain state and municipal securities is not readily available through market sources other than dealerquotations, so fair value is based on quoted market prices of similar instruments, adjusted for differences between the quoted instruments and the instrumentsbeing valued. Allowance for Credit Losses (Debt Securities Available-for Sale) For available-for-sale debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more likely than not that itwill be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, thesecurity’s amortized cost basis is written down to fair value through income. For debt securities available-for-sale that do not meet the aforementioned criteria,the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers theextent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related tothe security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the securityare compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a creditloss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost basis. Anyimpairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income. 62
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Index Changes in the allowance for credit losses are recorded as provision for (or reversal of) credit loss expense. Losses are charged against the allowance whenmanagement confirms that an available-for-sale security is uncollectable or when either of the criteria regarding intent or requirement to sell is met. As ofDecember 31, 2025 and 2024, the Company determined that the unrealized loss positions in available-for-sale debt securities were not the result of credit losses,and therefore, an allowance for credit losses was not recorded. See Note 4, “Investment Securities,” and Note 20, “Fair Value of Financial Instruments,” formore information about available-for-sale debt securities. Accrued interest receivable on available-for-sale debt securities totaled $2,399,000 and $2,135,000 at December 31, 2025 and 2024, respectively, and isincluded within accrued interest receivable on the consolidated balance sheet. This amount is excluded from the estimate of expected credit losses. Available-for-sale debt securities are typically classified as nonaccrual when the contractual payment of principal or interest has become 90 days past due or managementhas serious doubts about the further collectability of principal or interest. When available-for-sale debt securities are placed on nonaccrual status, unpaid interestcredited to income is reversed. Equity Securities – This category includes common stocks of public companies. Such securities are reported at fair value with unrealized holding gainsand losses included in earnings. Dividends are recognized as income when earned. Restricted Stock - Common stock of the Federal Reserve Bank, Federal Home Loan Bank of Pittsburgh (“FHLB”) and correspondent banks representownership in institutions which are wholly owned by other financial institutions. These restricted equity securities are accounted for at cost and are classified asother assets. Loans Held for Sale Certain newly originated fixed-rate residential mortgage loans are classified as held for sale, because it is management’s intent to sell these residentialmortgage loans. The residential mortgage loans held for sale are carried at fair value. Loans Interest on all loans is recognized on the accrual basis based upon the principal amount outstanding. The accrual of interest income on loans is discontinuedwhen, in the opinion of management, doubt exists as to the ability to collect such interest. Payments received on non-accrual loans are applied to the outstandingprincipal balance or recorded as interest income, depending upon our assessment of our ultimate ability to collect principal and interest. Loans are returned tothe accrual status when factors indicating doubtful collectability cease to exist. The Company recognizes nonrefundable loan origination fees, SBA fees and certain direct loan origination costs over the life of the related loan as anadjustment of loan yield using the interest method. Purchased Credit Deteriorated (“PCD”) Loans The Company has purchased loans, some of which have experienced more than insignificant credit deterioration since origination. PCD loans are recordedat the amount paid. An allowance for credit losses is determined using the same methodology as other loans held for investment. The initial allowance for creditlosses determined on a collective basis is allocated to individual loans. The sum of the loan’s purchase price and allowance for credit losses becomes its initialamortized cost basis. The difference between the initial amortized cost basis and the par value of the loan is a noncredit discount or premium, which isamortized into interest income over the life of the loan. Subsequent changes to the allowance for credit losses are recorded through provision expense. 63
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Index Allowance for Credit Losses - Loans The allowance for credit losses on loans represents management’s estimate of expected credit losses over the estimated life of our existing portfolio ofloans. The allowance for credit losses is a valuation account that is deducted from the loan’s amortized cost basis to present the net amount expected to becollected on the loans. The expense for credit loss recorded through earnings is the amount necessary to maintain the allowance for credit losses on loans at theamount of expected credit losses inherent within the loan portfolio. Loans are recorded as charge-offs against the allowance when management confirms a loanbalance is uncollectable. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. Managementestimates the allowance balance using relevant available information, from internal and external sources, relating to past events, current conditions, andreasonable and supportable forecasts, and other significant qualitative and quantitative factors. Historical credit loss experience provides the basis for theestimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such asdifferences in underwriting standards, changes in environmental conditions, delinquency level, segment growth rates and changes in duration within newmarkets, or other relevant factors. For further information on the allowance for credit losses on loans, see Note 5, “Loans,” for additional detail. The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Company has segregated its portfoliosegments based on federal call report codes which classify loans based on the primary collateral supporting the loan. The following are the Company’ssegmented portfolios: Residential Real Estate: The Bank originates residential mortgage and home equity loans primarily in its various market areas in Pennsylvania, New Yorkand Delaware. These loans are secured by first and junior liens on a primary residence or investment property. The primary risk characteristics associated withresidential loans typically involve major changes to the borrower, including unemployment or other loss of income; unexpected significant expenses, such asmajor medical expenses, catastrophic events, divorce or death. Residential loans that have adjustable rates could expose the borrower to higher payments in arising interest rate environment. Real estate values could decrease and cause the value of the underlying property to fall below the loan amount, creatingadditional potential loss exposure for the Bank. Commercial Real Estate: The Bank originates mortgage loans to operating companies primarily in its various market areas in Pennsylvania, New York andDelaware. The property may be owner-occupied or non-owner-occupied real estate properties and include retail buildings/shopping centers, hotels,office/medical buildings and industrial/warehouse space. Owner-occupied loans are typically repaid first by the cash flows generated by the borrower’s businessoperations. The primary risk characteristics are specific to the underlying business and its ability to generate sustainable profitability and positive cash flow.Factors that may influence a borrower’s ability to repay their loan include demand for the business’ products or services, the quality and depth of management,the degree of competition, regulatory changes, and general economic conditions. Increases in vacancy rates, interest rates or other changes in general economicconditions can have an impact on the borrower and its ability to repay the loan. Commercial real estate loans are generally considered to have a higher degree ofcredit risk as they may be dependent on the ongoing success and operating viability of a fewer number of tenants who are occupying the property and who mayhave a greater degree of exposure to economic conditions. Agricultural Real Estate: The Bank originates loans secured by farmland and improvements thereon, secured by mortgages primarily in its various marketareas in Pennsylvania, New York and Delaware. Farmland includes all land known to be used or usable for agricultural purposes, such as crop and livestockproduction. Farmland also includes grazing or pasture land, whether tillable or not and whether wooded or not. The primary risk characteristics are specific tothe uncertainty on production, market, financial, environmental and human resources. Construction: The Bank originates construction loans to finance land development preparatory to erecting new structures or the on-site construction ofresidential, industrial, commercial, or multi-family buildings, primarily in its various market areas in Pennsylvania, New York and Delaware. Construction loansinclude not only construction of new structures, but also additions or alterations to existing structures and the demolition of existing structures to make way fornew structures. Construction loans are generally secured by real estate. The primary risk characteristics are specific to the uncertainty on whether theconstruction will be completed according to the specifications and schedules. Factors that may influence the completion of construction may be customerspecific, such as the quality and depth of property management, or related to changes in general economic conditions. Consumer: The Bank originates loans to individuals for household, family, and other personal expenditures, which may include automobile loans and loansfor college. Consumer loans generally have higher interest rates and shorter terms than residential loans but tend to have higher credit risk due to the type ofcollateral securing the loan or in some cases the absence of collateral. The primary risk characteristics associated with other consumer loans typically involvemajor changes to the borrower, including unemployment or other loss of income, unexpected significant expenses, such as for major medical expenses,catastrophic events, divorce or death. 64
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Index Other Commercial Loans: The Bank originates lines of credit and term loans to operating companies for business purposes. The loans are generally securedby business assets such as accounts receivable, inventory, business vehicles and equipment as well as other assets of the business, or guarantors. Othercommercial loans are typically repaid first by the cash flows generated by the borrower’s business operations. The primary risk characteristics are specific to theunderlying business and its ability to generate sustainable profitability and positive cash flow. Factors that may influence a borrower’s ability to repay their loaninclude demand for the business’ products or services, the quality and depth of management, the degree of competition, regulatory changes, and generaleconomic conditions. The ability of the Bank to foreclose and realize sufficient value from business assets securing these loans is often uncertain. To mitigatethe risk characteristics of commercial and industrial loans, commercial real estate may be included as a secondary source of collateral. The Bank will oftenrequire more frequent reporting requirements from the borrower in order to better monitor its business performance. Other Agricultural Loans: The Bank originates loans secured or unsecured to farm owners and operators (including tenants) or to nonfarmers for thepurpose of financing agricultural production, including the growing and storing of crops, the marketing or carrying of agricultural products by the growersthereof, and the breeding, raising, fattening, or marketing of livestock, and for purchases of farm machinery, equipment, and implements. The primary riskcharacteristics are specific to the uncertainty on production, market, financial, environmental and human resources. State and Political Subdivision Loans: The Bank originates various types of loans made directly to municipalities. These loans are repaid through generalcash flows or through specific revenue streams, such as water and sewer fees. The primary risk characteristics associated with municipal loans are themunicipality’s ability to manage cash flow, balance the fiscal budget, fixed asset and infrastructure requirements. Additional risks include changes indemographics, as well as social and political conditions. Methods utilized by management to estimate expected credit losses include a discounted cash flow (“DCF”) model that discounts instrument-levelcontractual cash flows, adjusted for prepayments and curtailments, incorporating loss expectations and a weighted average remaining maturity (“WARM”)model which contemplates expected losses at a pool-level, utilizing historic loss information. Management estimates the allowance for credit losses on loansusing relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts.After the end of the reasonable and supportable forecast period, the loss rates revert to the mean loss rate over a period of eight quarters. Historical credit loss experience, including examination of loss experience at representative peer institutions when the Company’s loss history does notresult in estimations that are meaningful to users of the Company’s Consolidated Financial Statements, provides the basis for the estimation of expected creditlosses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwritingstandards, changes in environmental conditions, delinquency level, segment growth rates and changes in duration within new markets, or other relevant factors. The DCF model uses inputs of current and forecasted macroeconomic indicators to predict future loss rates. The current macroeconomic indicators utilizedby the Company are federal unemployment rates, national gross domestic production and national housing price index. In building the CECL methodologyutilized in the DCF model, a correlation between this indicator and historic loss levels was developed, enabling a prediction of future loss rates related to futureFederal unemployment rates and national gross domestic production and national housing price index. The WARM model uses combined historic loss rates for the Company and peer institutions, if necessary, gathered from call report filings. The selectedperiod for which historic loss rates are used is dependent on management’s evaluation of current conditions and expectations of future loss conditions. 65
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Index Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collectiveevaluation and typically represent collateral dependent loans but may also include other nonperforming loans. The Company uses the practical expedient tomeasure individually evaluated loans as collateral dependent and/or when repayment is expected to be provided substantially through the operation or sale ofthe collateral. Expected credit losses are based on the fair value at the reporting date, adjusted for selling costs as appropriate. For collateral dependent loans,credit loss is measured as the difference between the amortized cost basis in the loan and the fair value of the underlying collateral. The fair value of thecollateral is adjusted for the estimated cost to sell if repayment or satisfaction of a loan is dependent on the sale (rather than only on the operation) of thecollateral. Accrued interest receivable on loans held for investment totaled $7,943,000 and $7,868,000 at December 31, 2025 and 2024, respectively, and is includedwithin Accrued interest receivable. This amount is excluded from the estimate of expected credit losses. Allowance for Credit Losses on Off-Balance Sheet Credit Exposures Management estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation toextend credit, unless that obligation is unconditionally cancellable by the Company. The estimate includes consideration of the likelihood that funding willoccur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. Management estimates the amount of expectedlosses by calculating a commitment usage factor over the contractual period for exposures that are not unconditionally cancellable by the Bank and applying theloss factors used in the allowance for credit losses on loans methodology to the results of the usage calculation to estimate the liability for credit losses related tounfunded commitments for each loan segment. The estimate of credit losses on off balance sheet credit exposures is $1,163,000 and $676,000 at December 31,2025 and 2024, respectively, and was reported in other liabilities on the consolidated balance sheets. Loan Charge-off Policies Consumer loans are generally fully or partially charged down to the fair value of collateral securing the asset when the loan is 180 days past due for open-end loans or 120 days past due for closed-end loans unless the loan is well secured and in the process of collection. All other loans are generally charged downto the estimated net realizable value when the loan is 90 days past due. Collateral-Dependent Loans A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be providedsubstantially through the sale or operation of the collateral. For all classes of loans and leases deemed collateral-dependent, the Company elected the practicalexpedient to estimate expected credit losses based on the collateral’s fair value less cost to sell. In most cases, the Company records a partial charge-off toreduce the loan’s carrying value to the collateral’s fair value less cost to sell. Substantially all of the collateral consists of various types of real estate includingresidential properties; commercial properties such as retail centers, office buildings, and lodging; agriculture land; and vacant land. Loans to Borrowers Experiencing Financial Difficulty A loan is classified as a modified loan to a borrower experiencing financial difficulty when a contractual loan modification in the form of principalforgiveness, an interest rate reduction, an other-than-significant payment delay or a term extension (or a combination thereof) has been granted to an existingborrower experiencing financial difficulties. The goal when modifying a credit is to establish a reasonable period of time to provide cash flow relief tocustomers experiencing cash flow difficulties. Accruing modified loans to borrowers experiencing financial difficulty are primarily comprised of loans on whichinterest is being accrued under the modified terms, and the loans are current or less than 90 days past due. Foreclosed Assets Held For Sale Foreclosed assets acquired in settlement of loans are carried at fair value, less estimated costs to sell. Prior to foreclosure, as the value of the underlyingloan is written down to fair market value of the real estate or other assets to be acquired by a charge to the allowance for credit losses, if necessary. Anysubsequent write-downs are charged against operating expenses. Operating expenses of such properties, net of related income and losses on disposition, areincluded in other expenses and gains and losses are included in other non-interest income or other non-interest expense. 66
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Index Premises and Equipment Land is carried at cost. Premises and equipment are stated at cost, less accumulated depreciation. Depreciation expense is computed on straight line andaccelerated methods over the estimated useful lives of the assets, which range from 3 to 15 years for furniture, fixtures and equipment and 5 to 40 years forbuilding premises. Repair and maintenance expenditures which extend the useful life of an asset are capitalized and other repair expenditures are expensed asincurred. When premises or equipment are retired or sold, the remaining cost and accumulated depreciation are removed from the accounts and any gain or loss iscredited to income or charged to expense, respectively. Leases The Company has operating leases for several branch locations. Generally, the underlying lease agreements do not contain any material residual valueguarantees or material restrictive covenants. The Company may also lease certain office equipment under operating leases. Many of our leases include bothlease (e.g., minimum rent payments) and non-lease components (e.g., common-area or other maintenance costs). The Company accounts for each componentseparately based on the standalone price of each component. In addition, there are several operating leases with lease terms of less than one year and therefore,we have elected the practical expedient to exclude these short-term leases from our right of use (“ROU”) assets and lease liabilities. Most leases include one or more options to renew. The exercise of lease renewal options is typically at the sole discretion of management and is based onwhether the extension options are reasonably certain to be exercised after considering all facts and circumstances of the lease. If management determines thatthe Company is reasonably certain to exercise the extension option(s), the additional term is included in the calculation of the lease liability. As most of our leases do not provide an implicit rate, we use the fully collateralized FHLB borrowing rate, commensurate with the lease terms based on theinformation available at the lease commencement date in determining the present value of the lease payments. Intangible Assets Intangible assets, other than goodwill, include core deposit intangibles and mortgage servicing rights (“MSRs”). Core deposit intangibles are a measure ofthe value of consumer demand and savings deposits acquired in business combinations accounted for as purchases. The core deposit intangibles are beingamortized over 10 years using the sum-of-the-years digits method of amortization. The Company recognizes MSRs as assets when mortgage loans are sold and the rights to service those loans are retained. Mortgage servicing rights areinitially recorded at fair value by using discounted cash flows to calculate the present value of estimated future net servicing income. The Company accounts for the MSRs under the amortization method. The mortgage servicing rights are initially recorded at fair value and amortized inproportion to the estimated expected future net servicing income generated from servicing the loan. The mortgage servicing rights are evaluated for impairmentby estimating the fair value of the mortgage servicing rights and comparing that value to the carrying amount. The Company obtains a third-party valuation toassist with estimating the fair value of the MSRs. A valuation allowance would be established if the carrying amount of these mortgage servicing rights exceedsfair value. There was no impairment recognized in 2025, 2024 or 2023. Goodwill On an annual basis, the Company evaluated its goodwill for impairment. When management determines that a quantitative assessment of impairment isnecessary, a calculation of the fair value of the reporting unit is completed and compared to its carrying amount. If the fair value exceeds the carrying amount,no impairment is present. If the carrying of the reporting unit exceeds its calculated fair value and impairment loss is recognized equal to the differencebetween fair value and carrying value. The Company may also perform a qualitative assessment to determine whether it is more likely than not that the fairvalue of the reporting unit is less than its carrying value. During 2025, management’s approach to goodwill impairment was a quantitative assessment. During2024 and 2023, the assessments were qualitative. Based on the fair value of the reporting unit, no impairment of goodwill was recognized in 2025, 2024 or2023. 67
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Index Bank Owned Life Insurance The Company has purchased life insurance policies on certain employees. Any death benefits received from a policy while the insured person is an activeemployee of the Bank will be split with the beneficiary of the policy. Under these agreements, the Company receives the cash surrender value of the policy plus50% of the benefit in excess of the cash surrender value and the remaining amount of the payout will be given to the beneficiary named by the insured person inthe policy. The Company is the sole beneficiary of any death benefits received from non-active insured persons. Additionally, as a result of the MidCoastacquisition, the Company acquired life insurance policies on former MidCoast employees. The Company is owner and sole beneficiary of these policies.Additionally, as part of the HVBC acquisition, the Company acquired life insurance policies on former HVBC employees. Under these agreements, the Bankreceives the cash surrender value of the policy plus the benefit in excess of the cash surrender value less $50,000 to $100,000 that be given to the beneficiarynamed by the insured person in the policy if the insured person passes while employed by the Company. The Company is the sole beneficiary of any deathbenefits received from non-active insured persons. The Company acquired life insurance policies on former FNB employees and directors, as part of theacquisition of FNB. The policies obtained as part of the acquisition provide a fixed dollar benefit to the former employee or director beneficiaries, whether ornot the insured person is affiliated with the Company at the time of his or her death. Bank owned life insurance is recorded at its cash surrender value, or theamount that can be realized. Increases in the cash surrender value are recognized as other non-interest income. The obligation of $529,000 and $514,000 undersplit-dollar benefit agreements to former employees and directors or their beneficiaries have been recognized as liabilities on the consolidated balance sheet atDecember 31, 2025 and 2024. The (benefit)/expenses associated with the split dollar benefit were $51,000, ($96,000) and ($50,000) for 2025, 2024 and 2023,respectively. Income Taxes The Company and the Bank file a consolidated federal income tax return. Deferred tax assets and liabilities are computed based on the difference betweenthe financial statement basis and income tax basis of assets and liabilities using the enacted marginal tax rates. Deferred income tax expenses or benefits arebased on the changes in the net deferred tax asset or liability from period to period. Derivatives Derivative financial instruments are recognized as assets or liabilities at fair value. The Company has interest rate swap agreements which are used as partof its asset liability management to help manage interest rate risk. The Company also has derivatives as a result of its residential lending platform. TheCompany does not use derivatives for trading purposes. At the inception of a derivative contract, the Company designates the derivative as one of three types based on the purpose of the contract and belief as toits effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (“fairvalue hedge”), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability (“cash flowhedge”), or (3) an instrument with no hedging designation (“stand-alone derivative”). For a fair value hedge, the gain or loss on the derivative, as well as theoffsetting loss or gain on the hedged item, are recognized in current earnings as fair values change. For a cash flow hedge, the gain or loss on the derivative isreported in other comprehensive income and is reclassified into earnings in the same periods during which the hedged transaction affects earnings. For bothtypes of hedges, changes in the fair value of derivatives that are not highly effective in hedging the changes in fair value or expected cash flows of the hedgeditem are recognized immediately in current earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting are reported currently inearnings, as non-interest income. Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged.Net cash settlements on derivatives that do not qualify for hedge accounting are reported in non-interest income. Cash flows on hedges are classified in the cashflow statement the same as the cash flows of the items being hedged. 68
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Index The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy forundertaking hedge transactions, at the inception of the hedging relationship. This documentation includes linking fair value or cash flow hedges to specificassets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company also formally assesses, both at the hedge’sinception and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in fair values or cash flows of thehedged items. The Company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value orcash flows of the hedged item, the derivative is settled or terminates, a hedged forecasted transaction is no longer probable, a hedged firm commitment is nolonger firm, or treatment of the derivative as a hedge is no longer appropriate or intended. When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as non-interest income. When a fair value hedge isdiscontinued, the hedged asset or liability is no longer adjusted for changes in fair value and the existing basis adjustment is amortized or accreted over theremaining life of the asset or liability. When a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to occur,gains or losses that were accumulated in other comprehensive income are amortized into earnings over the same periods which the hedged transactions willaffect earnings. Employee Benefit Plans The Company has a noncontributory defined benefit pension plan covering employees hired before January 1, 2007. It is the Company’s policy to fundpension costs on a current basis to the extent deductible under existing tax regulations. Such contributions are intended to provide not only for benefitsattributed to service to date, but also for those expected to be earned in the future. The Company has a defined contribution 401(k) plan covering eligible employees. The employee may also contribute to the plan on a voluntary basis, up toa maximum percentage allowable not to exceed the limits of Code Sections 401(k). Under the plan, the Company also makes contributions on behalf of eligibleemployees, which vest immediately. For employees hired after January 1, 2007, in lieu of the pension plan, an additional annual discretionary 401(k) plancontribution is made and is equal to a percentage of an employee’s base compensation. The Company also has a profit-sharing plan for employees which provide tax-deferred salary savings to plan participants. The Company has a deferredcompensation plan for directors who have elected to defer all or portions of their fees until their retirement or termination from service. The Company has a restricted stock plan which covers eligible employees and non-employee corporate directors. Under the plan, awards are granted basedupon performance related requirements and are subject to certain vesting criteria. Compensation cost related to restricted stock is recognized based on themarket price of the stock at the grant date over the vesting period. The Company has an employee stock purchase plan that allows employees to withhold money from their paychecks, which is then utilized to purchaseshares of the Company’s stock. The Company maintains a non-qualified supplemental executive retirement plan (“SERP”) for certain executives to compensate those executiveparticipants in the Company’s noncontributory defined benefit pension plan whose benefits are limited by compensation limitations under current tax law. TheSERP is considered an unfunded plan for tax and ERISA purposes and all obligations arising under the SERP are payable from the general assets of theCompany. Expenses under the SERP are recognized as earned over the expected years of service. The Company maintains a non-tax qualified executive deferred compensation plan (“Deferred Compensation Plan”) for eligible employees designated bythe board of directors. Each of the named executive officers are eligible to participate in the Deferred Compensation Plan. The Deferred Compensation Plan isconsidered an unfunded plan for tax and ERISA purposes and all obligations arising under the Deferred Compensation Plan are payable from the general assetsof the Company. Expenses under the Deferred Compensation Plan are recognized as earned over the expected years of service. Advertising Costs Advertising and promotion costs are generally expensed as incurred and amounted to $1,114,000, $1,178,000 and $952,000 for the years ended December31, 2025, 2024 and 2023, respectively. 69
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Index Comprehensive Income (Loss) The Company is required to present comprehensive income in a full set of general purpose financial statements for all periods presented. Othercomprehensive income (loss) is comprised of unrealized holding gains (losses) on the available-for-sale securities portfolio, unrealized gains (losses) on interestrate swaps and unrecognized pension costs. Recent Accounting Pronouncements – Adopted in 2025 In December 2023, the FASB issued ASU 2023-09, Expanded Income Tax Disclosure Requirements (Topic 740, which requires public business entities toimprove income tax disclosures primarily related to an entity’s effective tax rate reconciliation and income taxes paid information. This guidance becameeffective for annual periods beginning after December 15, 2024. This Update did not have a significant impact on the Company’s financial statements. See footnote 12 for the revised disclosures. 70
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Index Recent Accounting Pronouncements – Not Yet Effective In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures. ThisASU requires disclosure in the notes to financial statements of specified information about certain costs and expenses. Specific disclosures are required for (a)purchases of inventory, (b) employee compensation, (c) depreciation, (d) intangible asset amortization, and (e) depreciation, depletion, and amortizationrecognized as part of oil and gas producing activities. The amendments in this Update do not change or remove current expense disclosure requirements.However, the amendments affect where this information appears in the notes to financial statements because entities are required to include certain currentdisclosures in the same tabular format disclosure as the other disaggregation requirements in the amendments. The amendments in ASU 2024-03 apply only topublic business entities and are effective for fiscal years beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027,with early adoption permitted. The Company is currently evaluating the impact of this new guidance on its financial statements. In December 2024, the FASB issued ASU 2024-04, Debt – Debt with Conversion and Other Options (Subtopic 470-20): Induced Conversions ofConvertible Debt Instruments. This new guidance clarifies the assessment of whether a transaction should be accounted for as an induced conversion orextinguishment of convertible debt when changes are made to conversion features as part of an offer to settle the instrument. The ASU requires entities to applya preexisting contract approach. To qualify for induced conversion accounting under this approach, the inducement offer is required to preserve the form ofconsideration and result in an amount of consideration that is no less than that issuable pursuant to the preexisting conversion privileges. The guidance iseffective for fiscal years beginning after December 15, 2025, with early adoption permitted, and it can be adopted either on a prospective or retrospective basis.This Update is not expected to have a significant impact on the Company’s financial statements. In January 2025, the FASB issued ASU 2025-01, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic220-40), which revises the effective date of ASU 2024-03 (on disclosures about disaggregation of income statement expenses) “to clarify that all public businessentities are required to adopt the guidance in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periodsbeginning after December 15, 2027.” Entities within the ASU’s scope are permitted to early adopt the ASU. The Company is currently evaluating the impact ofthis new guidance on its financial statements. In January 2025, the FASB issued ASU 2025-02, Liabilities (405): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 122. This ASU was issued pursuant to SEC Staff Accounting Bulletin No. 122, which rescinds the interpretive guidance included in Section FF of Topic 5 in theStaff Accounting Bulletin series entitled Accounting for Obligations to Safeguard Crypto-Assets an Entity Holds for its Platform Users. This ASU has no impacton non-public business entities and is effective for fiscal years beginning after December 15, 2024. This Update is not expected to have a significant impact onthe Company’s financial statements. 71
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Index In May 2025, the FASB issued ASU 2025-03, Determining the Accounting Acquirer in the Acquisition of a Variable Interest Entity, which revises theguidance in ASC 805 on identifying the accounting acquirer in a business combination in which the legal acquiree is a variable interest entity (VIE). Thereporting entity can determine that a transaction in which the legal acquiree is a VIE represents a reverse acquisition in which the legal acquirer is identified asthe acquiree for accounting purposes. ASU 2025-03 is effective for fiscal years beginning after December 15, 2026, including interim periods within thosefiscal years. Early adoption is permitted. The amendments in ASU 2025-03 must be applied prospectively to any business combination that occurs after theinitial adoption date. This Update is not expected to have a significant impact on the Company’s financial statements. In May 2025, the FASB issued ASU 2025-04, Compensation – Stock Compensation (Topic 718) and Revenue from Contracts With Customers (Topic 606):Clarifications to Share-Based Consideration Payable to a Customer, which clarifies the accounting for share-based consideration payable to a customer underASC 718 and ASC 606. The amendments refine key aspects of the guidance, including the definition of “performance condition” as well as the measurementrequirements and the treatment of forfeitures. The amendments will be effective for annual reporting periods beginning after December 15, 2026, includinginterim periods within those annual periods. Early adoption is permitted for financial statements that have not yet been issued. The Company is currentlyevaluating the impact of this new guidance on its financial statements. In July 2025, the FASB issued ASU 2025-05, Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides the followingrelief when estimating expected credit losses for current accounts receivable and current contract assets arising from transactions accounted for under Topic 606,including those acquired in a business combination under Topic 805, Business Combinations: (1) Practical expedient (available to all entities): Allows an entityto assume that current conditions as of the balance sheet date remain unchanged over the remaining life of an asset in developing reasonable and supportableforecasts as part of estimating expected credit losses. This removes the requirement to incorporate macroeconomic forecasts for assets within the scope of theASU; (2) Accounting policy election (available to entities other than public business entities): Provided that the practical expedient is elected, this policyelection permits eligible entities to consider post-balance-sheet collection activity when estimating expected credit losses. The new guidance will be effectivefor interim and annual periods beginning after December 15, 2025, and is to be adopted on a prospective basis. The Company is currently evaluating the impactof this new guidance on its financial statements. In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvementsto the Accounting for Internal-Use Software, which modernizes the accounting for internal-use software that is developed using an incremental and iterativemethod (e.g., agile method). The guidance removes all references to project stages in ASC 350-40 and clarifies the threshold entities apply to begin capitalizingcosts. The guidance specifies that the property, plant, and equipment disclosure requirements under ASC 360-10 apply to capitalized software costs accountedfor under ASC 350-40, regardless of how those costs are presented in the financial statements. The guidance, which applies to all entities, is effective for fiscalyears beginning after December 15, 2027, and interim periods within those fiscal years. Entities may apply the guidance using a prospective, retrospective, ormodified transition approach. Early adoption is permitted. The Company is currently evaluating the impact of this new guidance on its financial statements. In 2025, the FASB issued ASU 2025-07, Derivatives and Hedging (Topic 815) and Revenue from Contracts with Customers (Topic 606): Derivatives ScopeRefinements and Scope Clarification for Share-Based Noncash Consideration from a Customer in a Revenue Contract, which (1) refines the scope of theguidance on derivatives in ASC 815 (Issue 1) and (2) clarifies the guidance on share-based payments from a customer in ASC 606 (Issue 2). The ASU isintended to address concerns about the application of derivative accounting to contracts that have features based on the operations or activities of one of theparties to the contract and to reduce diversity in the accounting for share-based payments in revenue contracts. The ASU adds a new scope exception for certaincontracts that are not traded on an exchange and have an underlying that is based on operations or activities specific to one of the parties to the contract. ThisASU clarifies that when an entity has a right to receive a share-based payment from its customer in exchange for the transfer of goods or services, the share-based payment should be accounted for as noncash consideration within the scope of ASC 606. ASU 2025-07 is effective for annual reporting periodsbeginning after December 15, 2026, including interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company iscurrently evaluating the impact of this new guidance on its financial statements. 72
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Index In November 2025, the FASB issued ASU 2025-08, Financial Instruments – Credit Losses (Topic 326), which amends the guidance in Topic 326 to expandthe population of acquired financial assets subject to the gross-up approach to include loans (excluding credit cards) that are acquired without creditdeterioration and deemed “seasoned.” All non-purchased credit deteriorated loans (excluding credit cards) that are acquired in a business combination aredeemed seasoned. Other non-purchased credit deteriorated loans (excluding credit cards) are considered to be seasoned if they were purchased at least 90 daysafter origination and the acquirer was not involved in the origination of the loans. ASU 2025-08 should be applied prospectively and is effective for annualreporting periods beginning after December 15, 2026, including interim reporting periods within those annual reporting periods. Early adoption is permitted. The Company is currently evaluating the impact of this new guidance on its financial statements. In November 2025, the FASB issued ASU 2025-09, Derivatives and Hedging (Topic 815), which amends certain aspects of the hedge accounting guidancein ASC 815 to more closely align hedge accounting with the economics of an entity’s risk management activities. The amendments, among other things, providemore flexibility for cash flow hedges and hedging of raw materials and other nonfinancial assets, as well as simplify hedge accounting for flexible debt andforeign currency debt. ASU 2025-09 should be applied prospectively for public business entities for annual reporting periods beginning after December 15,2026, including interim reporting periods within those annual reporting periods. For all other entities, the ASU is to be applied prospectively and is effective forfiscal years beginning after December 15, 2027, including interim reporting periods within those annual reporting periods. Early adoption is permitted. TheCompany is currently evaluating the impact of this new guidance on its financial statements. In December 2025, the FASB issued ASU 2025-10, Accounting for Government Grants Received by Business Entities (Topic 832), which adds guidance onthe recognition, measurement, and presentation of government grants. Among other things, the ASU defines whether a grant is related to an asset or to income.Under either scenario, an entity will not be able to recognize the grant until it is probable that both (a) the entity will comply with the conditions attached to thegovernment grant, and (b) the government grant will be received. The new guidance is effective for public business entities in annual periods beginning afterDecember 15, 2028, (including interim periods within) and one year later for all other entities, with early adoption permitted in any period for which financialstatements have not yet been issued. The guidance can be applied on a modified prospective basis, a modified retrospective basis, or a full retrospective basis.This Update is not expected to have a significant impact on the Company’s financial statements. In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements, to clarify interim disclosure requirements,the form and content of interim financial statements, and when ASC Topic 270 applies. The amendments in the ASU provide a list of specific interimdisclosures that are required by generally accepted accounting principles (GAAP), which, together with the disclosure principle, represent the completepopulation of required disclosures in interim reporting periods. The intent of the disclosure principle is to help entities determine whether any disclosures notspecified in Topic 270 should be provided in interim reporting periods. ASU 2025-11 may be applied either prospectively or retrospectively to any or all priorperiods presented in the financial statements for public business entities for interim periods in fiscal years beginning after December 15, 2027, and all otherentities in interim periods in fiscal years beginning after December 15, 2028. The Company is currently evaluating the impact of this new guidance on itsfinancial statements. In December 2025, the FASB issued ASU 2025-12, Codification Improvements, to address 33 issues that amend the Codification to (1) clarify, (2) correcterrors, or (3) make minor improvements that affect a wide variety of Topics in the Codification and apply to all reporting entities within the scope of the affectedaccounting guidance. The amendments make the Codification easier to understand and apply. The amendments in this Update are effective for all entities forannual reporting periods beginning after December 15, 2026, and interim reporting periods within those annual reporting periods. This Update is not expectedto have a significant impact on the Company’s financial statements. Other accounting standards that have been issued by the FASB or other standards-setting bodies are not currently expected to have a material effect on theCompany’s consolidated financial position, results of operations or cash flows. 73
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Index Treasury Stock The purchase of the Company’s common stock is recorded at cost. At the date of subsequent reissue, the treasury stock account is reduced by the cost ofsuch stock on a last-in-first-out basis. Cash Flows The Company utilizes the net reporting of cash receipts and cash payments for deposit, short-term borrowing and lending activities. Trust, Brokerage and Insurance Assets and Income Assets held by the Company in a fiduciary or agency capacity for its customers are not included in the consolidated financial statements since such assetsare not assets of the Company. The majority of trust revenue is earned and collected monthly, with the amount determined based on a percentage of the fairvalue of the trust assets under management. Trust fees are contractually agreed with each customer, and fee levels vary based mainly on the size of assets undermanagement. None of the contracts with trust customers provide for incentive-based fees. In addition, trust revenue includes fees for provision of services,including employee benefit plan administration, tax return preparation and estate planning and settlement. Fees for such services are billed based on contractualarrangements or established fee schedules and are typically billed upon completion of providing such services. Brokerage and insurance commissions from thesales of investments and insurance products are recognized on a trade date basis as the performance obligation is satisfied at the point in time in which the tradeis processed. Additional fees are based on a percentage of the market value of customer accounts and billed on a monthly or quarterly basis. The Company’sperformance obligation under the contracts with certain customers is generally satisfied through the passage of time as the Company monitors and manages theassets in the customer’s portfolio and is not dependent on certain return or performance level of the customer’s portfolio. Other performance obligations (suchas the delivery of account statements to customers) are generally considered immaterial to the overall transaction price. Earnings Per Share The following table sets forth the computation of earnings per share. Earnings per share calculations give retroactive effect to stock dividends declared bythe Company. 2025 2024 2023 Basic earnings per share computation: Net income applicable to common stock $ 36,572,000 $ 27,818,000 $ 17,811,000 Weighted average common shares outstanding 4,797,520 4,797,258 4,476,235 Earnings per share - basic $ 7.62 $ 5.80 $ 3.98 Diluted earnings per share computation: Net income applicable to common stock $ 36,572,000 $ 27,818,000 $ 17,811,000 Weighted average common shares outstanding for basic earnings per share 4,797,520 4,797,258 4,476,235 Add: Dilutive effects of restricted stock 2,573 4,881 - Weighted average common shares outstanding for dilutive earnings per share 4,800,093 4,802,139 4,476,235 Earnings per share - dilutive $ 7.62 $ 5.79 $ 3.98 Nonvested shares of restricted stock totaling 1,883, 2,430 and 4,623 were outstanding during 2025, 2024 and 2023, respectively, but were not included inthe computation of diluted earnings per common share because to do so would be anti-dilutive. These anti-dilutive shares had per share prices ranging from$49.43-$83.38, $61.98-$83.38 and $56.81-$83.38 for 2025, 2024 and 2023, respectively. Reclassification Certain of the prior year amounts have been reclassified to conform to the current year presentation. Such reclassifications had no material effect on netincome or stockholders’ equity. 2. REVENUE RECOGNITION Under ASC Topic 606, management determined that the primary sources of revenue emanating from interest and dividend income on loans and investmentsalong with noninterest revenue resulting from investment security gains, loan servicing, gains on loans sold and earnings on bank owned life insurances are notwithin the scope of this topic. The main types of noninterest income within the scope of the standard are as follows: • Service charges on deposit accounts – The Company has contracts with its deposit customers where fees are charged if certain parameters are not met.These agreements can be cancelled at any time by either the Company or the deposit customer. Revenue from these transactions is recognized on amonthly basis as the Company has an unconditional right to the fee consideration. The Company also has transaction fees related to specifictransactions or activities resulting from a customer request or activity that include overdraft fees, online banking fees, interchange fees, ATM fees andother transaction fees. All of these fees are attributable to specific performance obligations of the Company where the revenue is recognized at adefined point in time upon the completion of the requested service/transaction. 74
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Index • Trust fees – Typical contracts for trust services are based on a fixed percentage of the assets earned ratably over a defined period and billed on amonthly basis. Fees charged to customers’ accounts are recognized as revenue over the period during which the Company fulfills its performanceobligation under the contract (i.e., holding client assets in a managed fiduciary trust account). For these accounts, the performance obligation of theCompany is typically satisfied by holding and managing the customer’s assets over time. Other fees related to specific customer requests areattributable to specific performance obligations of the Company where the revenue is recognized at a defined point in time, upon completion of therequested service/transaction. • Gains (losses) on sale of other real estate owned – Gains and losses are recognized at the completion of the property sale when the buyer obtainscontrol of the real estate and all of the performance obligations of the Company have been satisfied. Evidence of the buyer obtaining control of theasset include transfer of the property title, physical possession of the asset, and the buyer obtaining control of the risks and rewards related to the asset.In situations where the Company agrees to provide financing to facilitate the sale, additional analysis is performed to ensure that the contract for saleidentifies the buyer and seller, the asset to be transferred, payment terms, and that the contract has a true commercial substance and that collection ofamounts due from the buyer are reasonable. In situations where financing terms are not reflective of current market terms, the transaction price isdiscounted impacting the gain/loss and the carrying value of the asset. • Brokerage and insurance – Fees include commissions from the sales of investments and insurance products recognized on a trade date basis as theperformance obligation is satisfied at the point in time in which the trade is processed. Additional fees are based on a percentage of the market value ofcustomer accounts and billed on a monthly or quarterly basis. The Company’s performance obligation under the contracts with certain customers isgenerally satisfied through the passage of time as the Company monitors and manages the assets in the customer’s portfolio and is not dependent oncertain return or performance level of the customer’s portfolio. Fees for these services are billed monthly and are recorded as revenue at the end of themonth for which the wealth management service has been performed. Other performance obligations (such as the delivery of account statements tocustomers) are generally considered immaterial to the overall transaction price. The following table depicts the disaggregation of revenue derived from contracts with customers to depict the nature, amount, timing, and uncertainty ofrevenue and cash flows for the years ended December 31, 2025, 2024 and 2023 (in thousands). All revenue in the table below relates to goods and servicestransferred at a point in time. Revenue stream Service charges on deposit accounts 2025 2024 2023 Overdraft fees $ 1,505 $ 1,612 $ 1,501 Statement fees 255 181 194 Interchange revenue 3,307 3,382 3,246 ATM income 120 134 138 Other service charges 382 440 560 Total Service Charges 5,569 5,749 5,639 Trust 792 816 764 Brokerage and insurance 2,627 2,381 1,924 Other 893 664 645 Total $ 9,881 $ 9,610 $ 8,972 3. RESTRICTIONS ON CASH AND DUE FROM BANKS Effective March 26, 2020, the Federal Reserve reduced reserve requirements to zero for all depository institutions. There were no required federal reservesincluded in “Cash and due from banks” at December 31, 2025 or December 31, 2024. The required reserves are used to facilitate the implementation ofmonetary policy by the Federal Reserve System. The required reserves are computed by applying prescribed ratios to the classes of average deposit balances.These are held in the form of vault cash and a depository amount held with the Federal Reserve Bank. Federal law prohibits the Company from borrowing fromthe Bank unless the loans are secured by specific collateral. Non-retirement account deposits with one financial institution are insured up to $250,000. At times, the Company maintains cash and cash equivalents withother financial institutions in excess of the insured amount. 75
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Index 4. INVESTMENT SECURITIES The amortized cost, gross unrealized gains and losses, and fair value of investment securities at December 31, 2025 and 2024 were as follows (inthousands): December 31, 2025 AmortizedCost GrossUnrealizedGains GrossUnrealizedLosses Allowancefor CreditLosses FairValue Available-for-sale securities: U.S. Agency securities $ 52,651 $ 12 $ (2,908) $ - $ 49,755 U.S. Treasuries 84,551 225 (2,122) - 82,654 Obligations of state and political subdivisions 120,608 1,070 (5,792) - 115,886 Corporate obligations 11,304 405 (412) - 11,297 Mortgage-backed securities in government sponsoredentities 193,405 1,103 (9,359) - 185,149 Total available-for-sale securities $ 462,519 $ 2,815 $ (20,593) $ - $ 444,741 December 31, 2024 Available-for-sale securities: U.S. Agency securities $ 58,594 $ 6 $ (5,113) $ - $ 53,487 U.S. Treasuries 126,220 6 (5,724) - 120,502 Obligations of state and political subdivisions 103,137 4 (8,239) - 94,902 Corporate obligations 11,206 297 (1,065) - 10,438 Mortgage-backed securities in government sponsored entities 160,380 232 (14,029) - 146,583 Total available-for-sale securities $ 459,537 $ 545 $ (34,170) $ - $ 425,912 The following table shows the Company’s gross unrealized losses and fair value for available for sale securities, aggregated by investment category andlength of time, that the individual securities have been in a continuous unrealized loss position, at December 31, 2025 and 2024 (in thousands). As of December31, 2025, the Company owned 242 securities each of whose fair value was less than its cost basis for a period twelve months or greater and 21 securities each ofwhose fair value was less than its cost basis for a period less than twelve months. As of December 31, 2024, the Company owned 312 securities each of whosefair value was less than its cost basis for a period twelve months or greater and five securities each of whose fair value was less than its cost basis for a periodless than twelve months. Less than Twelve Months Twelve Months or Greater Total 2025 FairValue GrossUnrealizedLosses FairValue GrossUnrealizedLosses FairValue GrossUnrealizedLosses U.S. agency securities $ - $ - $ 45,104 $ (2,908) $ 45,104 $ (2,908)U.S. Treasuries - - 72,784 (2,122) 72,784 (2,122)Obligations of states and politicalsubdivisions 5,642 (98) 72,858 (5,694) 78,500 (5,792)Corporate obligations - - 6,588 (412) 6,588 (412)Mortgage-backed securities ingovernment sponsored entities 36,858 (247) 79,922 (9,112) 116,780 (9,359) Total securities $ 42,500 $ (345) $ 277,256 $ (20,248) $ 319,756 $ (20,593) 2024 U.S. agency securities $ - $ - $ 51,470 $ (5,113) $ 51,470 $ (5,113)U.S. Treasuries 5,553 (11) 110,992 (5,713) 116,545 (5,724)Obligations of states and politicalsubdivisions 4,186 (39) 86,773 (8,200) 90,959 (8,239)Corporate obligations 345 (33) 6,970 (1,032) 7,315 (1,065)Mortgage-backed securities in governmentsponsored entities 35,044 (817) 82,425 (13,212) 117,469 (14,029) Total securities $ 45,128 $ (900) $ 338,630 $ (33,270) $ 383,758 $ (34,170) 76
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Index As of December 31, 2025 and 2024, no allowance for credit losses has been recognized on available for sale securities in an unrealized loss position asmanagement does not believe any of the securities are impaired due to reasons of credit quality. This is based upon our analysis of the underlying riskcharacteristics, including credit ratings, and other qualitative factors related to our available for sale securities and in consideration of our historical credit lossexperience and internal forecasts. The issuers of these securities continue to make timely principal and interest payments under the contractual terms of thesecurities. Furthermore, management does not have the intent to sell any of the securities classified as available for sale in the table above and believes that it ismore likely than not that we will not have to sell any such securities before a recovery of cost. The unrealized losses are due to increases in market interest ratesover the yields available at the time the underlying securities were purchased. The fair value is expected to recover as the securities approach their maturity dateor repricing date or if market yields for such investments decline. There were no sales of available-for-sale securities during 2025 and 2024. Proceeds from sales of securities available-for-sale during 2023 were$86,504,000. Sales for 2023 were primarily the result of selling investments obtained as part of the HVBC acquisition for no gain or loss on the day ofacquisition. The gross losses realized during 2023 consisted of $89,000 from the sales of seven municipal securities. The gross gains realized during 2023consisted of $38,000 from the sales of two municipal securities. Gross gains and gross losses were realized as follows on available for sale securities (inthousands): 2025 2024 2023 Gross gains $ - $ - $ 38 Gross losses - - (89) Net losses $ - $ - $ (51) 77
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Index The following table presents the net gains (losses) on the Company’s equity investments recognized in earnings during 2025, 2024 and 2023 and the portionof unrealized gains for the period that relates to equity investments held at December 31, 2025, 2024 and 2023 (in thousands): Equity Securities 2025 2024 2023 Net gains (losses) recognized in equity securities during the period $ 67 $ 145 $ (144)Less: Net gains (losses) realized on the sale of equity securities during the period - (4) 14 Net unrealized gains (losses) $ 67 $ 149 $ (158) Investment securities with an approximate carrying value of $367,936,000 and $340,371,000 at December 31, 2025 and 2024, respectively, were pledged tosecure public funds and certain other deposits as provided by law and certain borrowing arrangements of the Company. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call orprepayment penalties. The amortized cost and fair value of debt securities at December 31, 2025, by contractual maturity are shown below (in thousands).Municipal securities that have been refunded and will therefore pay-off on the call date are reflected in the table below utilizing the call date as the date ofrepayment as payment is guaranteed on that date: Available-for-sale securities: AmortizedCost Fair Value Due in one year or less $ 36,430 $ 36,054 Due after one year through five years 114,102 110,690 Due after five years through ten years 96,763 92,014 Due after ten years 215,224 205,983 Total $ 462,519 $ 444,741 5. LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES The Company grants commercial, industrial, agricultural, residential, and consumer loans primarily to customers throughout north central, central, south-central and south-eastern Pennsylvania, Burlington County, New Jersey, southern New York and Wilmington and Dover, Delaware. Although the Company hada diversified loan portfolio at December 31, 2025 and 2024, a substantial portion of its debtors’ ability to honor their contracts is dependent on the economicconditions within these regions. The following table summarizes the primary segments of the loan portfolio, as well as how those segments are analyzed withinthe allowance for credit losses as of December 31, 2025 and 2024 (in thousands): December 31, 2025 2024 Real estate loans: Residential $ 340,972 $ 351,398 Commercial 1,218,514 1,121,435 Agricultural 347,448 327,722 Construction 93,965 164,326 Consumer 88,210 109,505 Other commercial loans 179,166 155,012 Other agricultural loans 30,247 29,662 State and political subdivision loans 52,100 54,182 Total 2,350,622 2,313,242 Allowance for credit losses – loans 22,806 21,699 Net loans $ 2,327,816 $ 2,291,543 As of December 31, 2025, and 2024, net unamortized loan fees and costs of $1,981,000 and $2,587,000, respectively, were included in the carrying valueof loans. Purchased loans acquired in connection with the FNB acquisition, the State College branch acquisition, the MidCoast acquisition and the HVBCacquisition were recorded at fair value on their acquisition date without a carryover of the related allowance for credit losses. Real estate loans serviced for Freddie Mac, Fannie Mae and the FHLB, which are not included in the Consolidated Balance Sheet, totaled $181,675,000and $193,507,000 at December 31, 2025 and 2024, respectively. Loans sold to Freddie Mac and Fannie Mae were sold without recourse and total $173,901,000and $184,578,000 at December 31, 2025 and 2024, respectively. Additionally, the Bank acquired a portfolio of loans sold to the FHLB during the acquisitions ofFNB and HVBC, which were sold under the Mortgage Partnership Finance Program (“MPF”). The Bank was not an active participant in the MPF program in2025 or 2024. The MPF portfolio balance was $7,774,000 and $8,929,000 at December 31, 2025 and 2024, respectively. The FHLB maintained a first-lossposition for the MPF portfolio that totaled $171,000 and $168,000 as of December 31, 2025 and 2024, respectively. Should the FHLB exhaust its first-lossposition, recourse to the Bank’s credit enhancement would be up to the next $197,000 and $229,000 of losses as of December 31, 2025 and 2024, respectively.The Bank did not experience any losses for the MPF portfolio during 2025, 2024 or 2023. 78
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Index The segments of the Bank’s loan portfolio are disaggregated into classes to a level that allows management to monitor risk and performance. Residentialreal estate mortgages consist of 15 to 30 year first mortgages on residential real estate, while residential real estate home equities are consumer purposeinstallment loans or lines of credit secured by a mortgage which is often a second lien on residential real estate with terms of 15 years or less. Commercial realestate are business purpose loans secured by a mortgage on commercial real estate. Agricultural real estate are loans secured by a mortgage on real estate used inagriculture production. Construction real estate are loans secured by residential or commercial real estate used during the construction phase of residential andcommercial projects. Consumer loans are typically unsecured or primarily secured by collateral other than real estate and overdraft lines of credit connectedwith customer deposit accounts. Other commercial loans are loans for commercial purposes primarily secured by non-real estate collateral. Other agriculturalloans are loans for agricultural purposes primarily secured by non-real estate collateral. State and political subdivisions are loans for state and localmunicipalities for capital and operating expenses or tax-free loans used to finance commercial development. Allowance for Credit Losses The following table presents the components of the allowance for credit losses as of December 31, 2025 and 2024 (in thousands): December 31, 2025 2024 Allowance for Credit Losses – Loans $ 22,806 $ 21,699 Allowance for Credit Losses – Off-Balance Sheet credit Exposure 1,163 676 Total allowance for credit losses $ 23,969 $ 22,375 79
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Index The following table presents the activity in the allowance for credit losses for 2025, 2024 and 2023 (in thousands): Allowance for CreditLosses – Loans Allowance for Credit Losses – Off-Balance Sheet credit Exposure Total Balance at December 31, 2022 $ 18,552 $ 165 $ 18,717 Impact of adopting CECL (3,300) 1,064 (2,236)Allowance for credit loss on PCD acquired loans 1,689 - 1,689 Loans charge-off (1,329) - (1,329)Recoveries of loans previously charged-off 49 - 49 Net loans charged-off (1,280) - (1,280)Provision for credit losses – acquisition day 1 non-PCD 4,591 - 4,591 Provision for credit losses 901 36 937 Balance at December 31, 2023 $ 21,153 $ 1,265 $ 22,418 Balance at December 31, 2023 $ 21,153 $ 1,265 $ 22,418 Loans charge-off (2,673) - (2,673)Recoveries of loans previously charged-off 43 - 43 Net loans charged-off (2,630) - (2,630)Provision for credit losses 3,176 (589) 2,587 Balance at December 31, 2024 $ 21,699 $ 676 $ 22,375 Balance at December 31, 2024 $ 21,699 $ 676 $ 22,375 Loans charge-off (858) - (858)Recoveries of loans previously charged-off 77 - 77 Net loans charged-off (781) - (781)Provision for credit losses 1,888 487 2,375 Balance at December 31, 2025 $ 22,806 $ 1,163 $ 23,969 The following tables presents the activity in the allowance for credit losses – loans, by portfolio segment, for 2025, 2024 and 2023 (in thousands). Balance atDecember 31, 2024 Charge-offs Recoveries Provision Balance atDecember 31, 2025 Real estate loans: Residential $ 1,940 $ - $ - $ 1,172 $ 3,112 Commercial 9,174 (40) - 883 10,017 Agricultural 3,529 - - 1,312 4,841 Construction 1,402 - - (486) 916 Consumer 1,338 (327) 41 149 1,201 Other commercial loans 3,766 (491) 36 (777) 2,534 Other agricultural loans 133 - - (18) 115 State and political subdivision loans 61 - - (6) 55 Unallocated 356 - - (341) 15 Total $ 21,699 $ (858) $ 77 $ 1,888 $ 22,806 Balance atDecember 31, 2023 Charge-offs Recoveries Provision Balance atDecember 31, 2024 Real estate loans: Residential $ 2,354 $ (5) $ - $ (409) $ 1,940 Commercial 9,178 - - (4) 9,174 Agricultural 3,264 - - 265 3,529 Construction 1,950 - - (548) 1,402 Consumer 1,412 (107) 22 11 1,338 Other commercial loans 2,313 (2,561) 21 3,993 3,766 Other agricultural loans 270 - - (137) 133 State and political subdivision loans 45 - - 16 61 Unallocated 367 - - (11) 356 Total $ 21,153 $ (2,673) $ 43 $ 3,176 $ 21,699 80
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Index Balance atDecember 31,2022 Impact ofadopting CECL Allowance for creditloss on PCDacquired loans Charge-offs Recoveries Provision Balance atDecember 31,2023 Real estate loans: Residential $ 1,056 $ 79 $ 108 $ (1) $ - $ 1,112 $ 2,354 Commercial 10,120 (3,070) 39 - - 2,089 9,178 Agricultural 4,589 (1,145) - - - (180) 3,264 Construction 801 (103) 37 - - 1,215 1,950 Consumer 135 1,040 677 (365) 40 (115) 1,412 Other commercial loans 1,040 (328) 828 (963) 9 1,727 2,313 Other agricultural loans 489 (219) - - - - 270 State and political subdivision loans 322 (280) - - - 3 45 Unallocated - 726 - - - (359) 367 Total $ 18,552 $ (3,300) $ 1,689 $ (1,329) $ 49 $ 5,492 $ 21,153 The following table presents loans and the allowance for credit losses by portfolio segment, under the CECL methodology as of December 31, 2025 and2024 (in thousands): Allowance for Credit Losses – Loans Loans 2025 Collectively evaluatedfor impairment Individuallyevaluated forimpairment TotalAllowance forCredit Losses– Loans Collectivelyevaluated forimpairment Individuallyevaluated forimpairment Total Loans Real estate loans: Residential $ 3,050 $ 62 $ 3,112 $ 338,600 $ 2,372 $ 340,972 Commercial 9,757 260 10,017 1,193,742 24,772 1,218,514 Agricultural 4,841 - 4,841 345,302 2,146 347,448 Construction 830 86 916 93,450 515 93,965 Consumer 327 874 1,201 87,301 909 88,210 Other commercial loans 1,903 631 2,534 171,343 7,823 179,166 Other agricultural loans 115 - 115 29,844 403 30,247 State and political subdivision loans 55 - 55 52,100 - 52,100 Unallocated 15 - 15 - - - Total $ 20,893 $ 1,913 $ 22,806 $ 2,311,682 $ 38,940 $ 2,350,622 2024 Real estate loans: Residential $ 1,902 $ 38 $ 1,940 $ 349,909 $ 1,489 $ 351,398 Commercial 9,070 104 9,174 1,105,847 15,588 1,121,435 Agricultural 3,529 - 3,529 323,660 4,062 327,722 Construction 1,402 - 1,402 164,043 283 164,326 Consumer 324 1,014 1,338 108,478 1,027 109,505 Other commercial loans 3,019 747 3,766 152,430 2,582 155,012 Other agricultural loans 133 - 133 29,125 537 29,662 State and political subdivision loans 61 - 61 54,182 - 54,182 Unallocated 356 - 356 - - - Total $ 19,796 $ 1,903 $ 21,699 $ 2,287,674 $ 25,568 $ 2,313,242 Non-performing Loans Non-performing loans include nonaccrual loans, described in more detail below, and all loans past due 90 or more days. Loans are considered for non-accrual status upon reaching 90 days delinquency, although the Company may be receiving partial payments of interest and partial repayments of principal onsuch loans, or if full payment of principal and interest is not expected. Additionally, if management is made aware of other information including bankruptcy,repossession, death, or legal proceedings, the loan may be placed on non-accrual status. If a loan is 90 days or more past due and is well secured and in theprocess of collection, it may still be considered accruing. 81
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Index The following table reflects the non-performing loan receivables, as well as those on non-accrual status as of December 31, 2025 and 2024, respectively.The balances are presented by class of loan receivable (in thousands): December 31, 2025 December 31, 2024 NonaccrualWith arelatedallowance NonaccrualWithout arelatedallowance 90 days orgreater pastdue andaccruing Total non-performingloans NonaccrualWith arelatedallowance NonaccrualWithout arelatedallowance 90 days orgreater pastdue andaccruing Total non-performingloans Real estate loans: Mortgages $ 153 $ 3,229 $ - $ 3,382 $ 165 $ 2,541 $ - $ 2,706 Home Equity - 61 151 212 - 165 - 165 Commercial 2,860 8,637 - 11,497 2,099 12,265 - 14,364 Agricultural - 2,145 55 2,200 - 4,062 269 4,331 Construction 233 283 - 516 - 283 - 283 Consumer 770 - 15 785 1,002 - 7 1,009 Other commercial loans 6,282 1,546 8 7,836 2,382 200 - 2,582 Other agricultural loans - 403 - 403 - 537 - 537 $ 10,298 $ 16,304 $ 229 $ 26,831 $ 5,648 $ 20,053 $ 276 $ 25,977 As of December 31, 2025 and 2024, there were $16,304,000 and $20,053,000, respectively, of non-accrual loans that did not have a related allowance forcredit losses. The estimated fair values of the collateral securing these loans exceeded their carrying amount, or the loans were previously charged down to therealizable collateral values. Accordingly, no specific valuation allowance was considered to be necessary. The following table presents, by class of loans and leases, the amortized cost basis of collateral-dependent nonaccrual loans and leases and type ofcollateral as of December 31, 2025 and 2024 (in thousands): December 31, 2025 December 31, 2024 Real Estate Other None Total Real Estate Other None Total Real estate loans: Mortgages $ 3,382 $ - $ - $ 3,382 $ 2,706 $ - $ - $ 2,706 Home Equity 61 - - 61 165 - - 165 Commercial 11,497 - - 11,497 14,364 - - 14,364 Agricultural 2,145 - - 2,145 4,062 - - 4,062 Construction 516 - - 516 283 - - 283 Consumer - - 770 770 - - 1,002 1,002 Other commercial loans - 7,828 - 7,828 - 2,582 - 2,582 Other agricultural loans - 403 - 403 - 537 - 537 $ 17,601 $ 8,231 $ 770 $ 26,602 $ 21,580 $ 3,119 $ 1,002 $ 25,701 Credit Quality Information For commercial real estate, agricultural real estate, construction, other commercial, other agricultural, and state and political subdivision loans, managementuses an internal risk rating system to monitor and assess credit quality. The criticized rating categories utilized by management generally follow bank regulatorydefinitions. The definitions of each rating are defined below: • Pass (Grades 1-6) – These loans are to customers with credit quality ranging from an acceptable to very high quality and are protected by thecurrent net worth and paying capacity of the obligor or by the value of the underlying collateral. • Special Mention (Grade 7) – This loan grade is in accordance with regulatory guidance and includes loans where a potential weakness or riskexists, which could cause a more serious problem if not corrected. 82
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Index • Substandard (Grade 8) – This loan grade is in accordance with regulatory guidance and includes loans that have a well-defined weakness based onobjective evidence and be characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. • Doubtful (Grade 9) – This loan grade is in accordance with regulatory guidance and includes loans that have all the weaknesses inherent in asubstandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable, based on existingcircumstances. • Loss (Grade 10) – This loan grade is in accordance with regulatory guidance and includes loans that are considered uncollectible, or of such valuethat continuance as an asset is not warranted. To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay the loan as agreed, the Company’s loan ratingprocess includes several layers of internal and external oversight. The Company’s loan officers are responsible for the timely and accurate risk rating of theloans in each of their portfolios at origination and on an ongoing basis under the supervision of management. All commercial, agricultural and state and politicalrelationships over $500,000 are reviewed annually to ensure the appropriateness of the loan grade. In addition, the Company engages an external consultant onat least an annual basis to: 1) review a minimum of 50% of the dollar volume of the commercial loan portfolio on an annual basis, 2) a large sample ofrelationships in aggregate over $1,000,000, 3) selected loan relationships over $750,000 which are over 30 days past due, or classified Special Mention,Substandard, Doubtful, or Loss, and 4) such other loans which management or the consultant deems appropriate. As part of this review, our underwritingprocess and loan grading system is evaluated. The following tables represent credit exposures by internally assigned grades, by origination year, as of December 31, 2025 and 2024 (in thousands): 83
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Index Revolving Revolving Loans Loans Amortized Converted December 31, 2025 2025 2024 2023 2022 2021 Prior Cost Basis to Term Total Commercial realestate Risk Rating Pass $ 127,490 $ 59,760 $ 128,989 $ 329,694 $ 172,617 $ 294,237 $ 34,709 $ 1,971 $ 1,149,467 Special Mention - 5,042 797 5,784 8,770 7,208 733 - 28,334 Substandard - - 1,021 24,582 3,024 9,772 2,314 - 40,713 Doubtful - - - - - - - - - Total $ 127,490 $ 64,802 $ 130,807 $ 360,060 $ 184,411 $ 311,217 $ 37,756 $ 1,971 $ 1,218,514 Current periodgross charge-offs $ - $ - $ - $ - $ - $ 40 $ - $ - $ 40 Agricultural realestate Risk Rating Pass $ 54,278 $ 30,648 $ 18,810 $ 47,254 $ 20,747 $ 139,424 $ 18,558 $ 131 $ 329,850 Special Mention 55 40 3,276 1,384 1,731 1,893 1,723 - 10,102 Substandard 1,297 667 - 2,052 657 2,103 645 75 7,496 Doubtful - - - - - - - - - Total $ 55,630 $ 31,355 $ 22,086 $ 50,690 $ 23,135 $ 143,420 $ 20,926 $ 206 $ 347,448 Current periodgross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Construction - Risk Rating Pass $ 30,394 $ 15,456 $ 8,490 $ 25,772 $ - $ - $ 5,215 $ - $ 85,327 Special Mention - - - 206 2,943 - - - 3,149 Substandard - - 789 4,417 283 - - - 5,489 Doubtful - - - - - - - - - Total $ 30,394 $ 15,456 $ 9,279 $ 30,395 $ 3,226 $ - $ 5,215 $ - $ 93,965 Current periodgross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Other commercialloans - Risk Rating Pass $ 33,300 $ 27,244 $ 18,039 $ 4,938 $ 6,098 $ 3,819 $ 74,628 $ 232 $ 168,298 Special Mention - - - - - - 2,442 - 2,442 Substandard - 117 - 1,784 40 714 4,257 1,443 8,355 Doubtful - - - - - - 66 5 71 Total $ 33,300 $ 27,361 $ 18,039 $ 6,722 $ 6,138 $ 4,533 $ 81,393 $ 1,680 $ 179,166 Current periodgross charge-offs $ - $ 49 $ - $ - $ - $ 63 $ 379 $ - $ 491 Other agriculturalloans - Risk Rating Pass $ 5,677 $ 3,520 $ 1,440 $ 408 $ 1,602 $ 288 $ 14,761 $ - $ 27,696 Special Mention - 936 15 - - - 639 - 1,590 Substandard - - 294 438 - - 229 - 961 Doubtful - - - - - - - - - Total $ 5,677 $ 4,456 $ 1,749 $ 846 $ 1,602 $ 288 $ 15,629 $ - $ 30,247 Current periodgross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - State and politicalsubdivision loans - Risk Rating Pass $ 1,504 $ 27 $ 1,291 $ 12,737 $ 9,932 $ 26,509 $ 100 $ - $ 52,100 Special Mention - - - - - - - - - Substandard - - - - - - - - - Doubtful - - - - - - - - - Total $ 1,504 $ 27 $ 1,291 $ 12,737 $ 9,932 $ 26,509 $ 100 $ - $ 52,100
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Current periodgross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Total - Risk Rating Pass $ 252,643 $ 136,655 $ 177,059 $ 420,803 $ 210,996 $ 464,277 $ 147,971 $ 2,334 $ 1,812,738 Special Mention 55 6,018 4,088 7,374 13,444 9,101 5,537 - 45,617 Substandard 1,297 784 2,104 33,273 4,004 12,589 7,445 1,518 63,014 Doubtful - - - - - - 66 5 71 Total $ 253,995 $ 143,457 $ 183,251 $ 461,450 $ 228,444 $ 485,967 $ 161,019 $ 3,857 $ 1,921,440 84
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Index Revolving Revolving Loans Loans Amortized Converted December 31, 2024 2024 2023 2022 2021 2020 Prior Cost Basis to Term Total Commercial real estate Risk Rating Pass $ 52,122 $ 84,465 $ 360,989 $ 200,869 $ 114,839 $ 223,601 $ 28,178 $ 1,786 $ 1,066,849 Special Mention - 810 3,495 1,874 1,372 8,501 1,674 - 17,726 Substandard 85 1,057 19,884 2,843 629 11,785 176 401 36,860 Doubtful - - - - - - - - - Total $ 52,207 $ 86,332 $ 384,368 $ 205,586 $ 116,840 $ 243,887 $ 30,028 $ 2,187 $ 1,121,435 Current period grosscharge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Agricultural real estate Risk Rating Pass $ 32,199 $ 22,372 $ 46,644 $ 26,132 $ 29,770 $ 126,876 $ 14,351 $ 115 $ 298,459 Special Mention 2,930 3,138 7,109 - - 5,315 2,248 - 20,740 Substandard 708 140 2,179 1,250 - 3,604 529 113 8,523 Doubtful - - - - - - - - - Total $ 35,837 $ 25,650 $ 55,932 $ 27,382 $ 29,770 $ 135,795 $ 17,128 $ 228 $ 327,722 Current period grosscharge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Construction - Risk Rating Pass $ 48,026 $ 56,916 $ 34,995 $ - $ - $ - $ 1,355 $ - $ 141,292 Special Mention - - 19,391 2,950 - - - - 22,341 Substandard - - 410 283 - - - - 693 Doubtful - - - - - - - - - Total $ 48,026 $ 56,916 $ 54,796 $ 3,233 $ - $ - $ 1,355 $ - $ 164,326 Current period grosscharge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Other commercial loans - Risk Rating Pass $ 33,211 $ 22,808 $ 6,773 $ 7,542 $ 2,150 $ 3,464 $ 68,573 $ 75 $ 144,596 Special Mention 20 - 1,798 178 62 56 4,888 32 7,034 Substandard 213 - 195 - 234 641 422 1,661 3,366 Doubtful - - - - - - - 16 16 Total $ 33,444 $ 22,808 $ 8,766 $ 7,720 $ 2,446 $ 4,161 $ 73,883 $ 1,784 $ 155,012 Current period grosscharge-offs $ - $ - $ 59 $ - $ - $ - $ 2,502 $ - $ 2,561 Other agricultural loans - Risk Rating Pass $ 4,576 $ 2,008 $ 888 $ 3,870 $ 407 $ 220 $ 14,812 $ - $ 26,781 Special Mention 1,341 - - - - 400 67 - 1,808 Substandard - 354 455 9 - 113 131 11 1,073 Doubtful - - - - - - - - - Total $ 5,917 $ 2,362 $ 1,343 $ 3,879 $ 407 $ 733 $ 15,010 $ 11 $ 29,662 Current period grosscharge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - State and politicalsubdivision loans - Risk Rating Pass $ - $ 1,442 $ 13,460 $ 10,522 $ 5,319 $ 23,439 $ - $ - $ 54,182 Special Mention - - - - - - - - - Substandard - - - - - - - - - Doubtful - - - - - - - - - Total $ - $ 1,442 $ 13,460 $ 10,522 $ 5,319 $ 23,439 $ - $ - $ 54,182 Current period grosscharge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Total - Risk Rating Pass $ 170,134 $ 190,011 $ 463,749 $ 248,935 $ 152,485 $ 377,600 $ 127,269 $ 1,976 $ 1,732,159 Special Mention 4,291 3,948 31,793 5,002 1,434 14,272 8,877 32 69,649 Substandard 1,006 1,551 23,123 4,385 863 16,143 1,258 2,186 50,515 Doubtful - - - - - - - 16 16 Total $ 175,431 $ 195,510 $ 518,665 $ 258,322 $ 154,782 $ 408,015 $ 137,404 $ 4,210 $ 1,852,339
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Index For residential real estate mortgage loans, home equity loans, and consumer loans, credit quality is monitored based on whether the loan is performing ornon-performing, which is typically based on the aging status of the loan and payment activity, unless a specific action, such as bankruptcy, repossession, deathor significant delay in payment occurs to raise awareness of a possible credit event. Non-performing loans include those loans that are considered nonaccrual,described in more detail above, and all loans past due 90 or more days and still accruing. The following table presents the recorded investment in those loanclasses based on payment activity, by origination year, as of December 31, 2025 and 2024 (in thousands): Revolving Revolving Loans Loans Amortized Converted December 31, 2025 2025 2024 2023 2022 2021 Prior Cost Basis to Term Total Residential real estate Payment Performance Performing $ 13,909 $ 13,209 $ 23,135 $ 81,239 $ 41,842 $ 111,948 $ - $ - $ 285,282 Nonperforming - - - 1,057 1,132 1,193 - - 3,382 Total $ 13,909 $ 13,209 $ 23,135 $ 82,296 $ 42,974 $ 113,141 $ - $ - $ 288,664 Current period grosscharge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Home equity - Payment Performance Performing $ 2,854 $ 2,528 $ 2,533 $ 1,727 $ 1,150 $ 6,918 $ 34,100 $ 286 $ 52,096 Nonperforming 63 - 18 - - 110 21 - 212 Total $ 2,917 $ 2,528 $ 2,551 $ 1,727 $ 1,150 $ 7,028 $ 34,121 $ 286 $ 52,308 Current period grosscharge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Consumer - Payment Performance Performing $ 1,934 $ 1,050 $ 373 $ 354 $ 412 $ 2,577 $ 80,725 $ - $ 87,425 Nonperforming - 10 - - 11 764 - - 785 Total $ 1,934 $ 1,060 $ 373 $ 354 $ 423 $ 3,341 $ 80,725 $ - $ 88,210 Current period grosscharge-offs $ - $ - $ 11 $ 1 $ - $ 285 $ 30 $ - $ 327 Total - Payment Performance Performing $ 18,697 $ 16,787 $ 26,041 $ 83,320 $ 43,404 $ 121,443 $ 114,826 $ 286 $ 424,804 Nonperforming 63 10 18 1,057 1,143 2,067 20 - 4,378 Total $ 18,760 $ 16,797 $ 26,059 $ 84,377 $ 44,547 $ 123,510 $ 114,846 $ 286 $ 429,182 Revolving Revolving Loans Loans Amortized Converted December 31, 2024 2024 2023 2022 2021 2020 Prior Cost Basis to Term Total Residential real estate Payment Performance Performing $ 11,487 $ 23,870 $ 88,581 $ 45,731 $ 27,537 $ 101,823 $ - $ - $ 299,029 Nonperforming - - 382 751 463 1,110 - - 2,706 Total $ 11,487 $ 23,870 $ 88,963 $ 46,482 $ 28,000 $ 102,933 $ - $ - $ 301,735 Current period grosscharge-offs $ - $ - $ - $ - $ - $ 5 $ - $ - $ 5 Home equity - Payment Performance Performing $ 2,987 $ 3,456 $ 2,418 $ 1,454 $ 1,525 $ 7,937 $ 29,302 $ 419 $ 49,498 Nonperforming - - - - 83 82 - - 165 Total $ 2,987 $ 3,456 $ 2,418 $ 1,454 $ 1,608 $ 8,019 $ 29,302 $ 419 $ 49,663 Current period grosscharge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ - Consumer - Payment Performance Performing $ 2,076 $ 880 $ 589 $ 543 $ 317 $ 2,520 $ 101,570 $ 1 $ 108,496 Nonperforming - 7 - - 6 996 - - 1,009 Total $ 2,076 $ 887 $ 589 $ 543 $ 323 $ 3,516 $ 101,570 $ 1 $ 109,505 Current period grosscharge-offs $ - $ 13 $ 27 $ - $ - $ 38 $ 29 $ - $ 107 Total - Payment Performance Performing $ 16,550 $ 28,206 $ 91,588 $ 47,728 $ 29,379 $ 112,280 $ 130,872 $ 420 $ 457,023 Nonperforming - 7 382 751 552 2,188 - - 3,880 Total $ 16,550 $ 28,213 $ 91,970 $ 48,479 $ 29,931 $ 114,468 $ 130,872 $ 420 $ 460,903
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Index Aging Analysis of Past Due Loan Receivables Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length oftime a recorded payment is past due. The following table includes an aging analysis of the recorded investment of past due loan receivables as of December 31,2025 and 2024 (in thousands): Total 30-59 Days 60-89 Days 90 Days Total Past Loans December 31, 2025 Past Due Past Due Or Greater Due Current Receivables Real estate loans: Mortgages $ 2,737 $ 1,073 $ 1,675 $ 5,485 $ 283,179 $ 288,664 Home Equity 146 17 181 344 51,964 52,308 Commercial 1,733 2,695 9,871 14,299 1,204,215 1,218,514 Agricultural 1,020 158 1,982 3,160 344,288 347,448 Construction - 233 283 516 93,449 93,965 Consumer 161 148 785 1,094 87,116 88,210 Other commercial loans 256 49 7,500 7,805 171,361 179,166 Other agricultural loans 17 - 403 420 29,827 30,247 State and political subdivisionloans - - - - 52,100 52,100 Total $ 6,070 $ 4,373 $ 22,680 $ 33,123 $ 2,317,499 $ 2,350,622 Loans considered non-accrual $ 396 $ 778 $ 22,451 $ 23,625 $ 2,977 $ 26,602 Loans still accruing 5,674 3,595 229 9,498 2,314,522 2,324,020 Total $ 6,070 $ 4,373 $ 22,680 $ 33,123 $ 2,317,499 $ 2,350,622 December 31, 2024 Real estate loans: Mortgages $ 1,464 $ 227 $ 1,605 $ 3,296 $ 298,439 $ 301,735 Home Equity 138 170 148 456 49,207 49,663 Commercial 2,782 1,360 6,528 10,670 1,110,765 1,121,435 Agricultural 1,569 140 1,845 3,554 324,168 327,722 Construction 1,119 - 283 1,402 162,924 164,326 Consumer 292 20 1,009 1,321 108,184 109,505 Other commercial loans 478 282 2,336 3,096 151,916 155,012 Other agricultural loans 403 - - 403 29,259 29,662 State and political subdivision loans - - - - 54,182 54,182 Total $ 8,245 $ 2,199 $ 13,754 $ 24,198 $ 2,289,044 $ 2,313,242 Loans considered non-accrual $ 2,428 $ - $ 13,478 $ 15,906 $ 9,795 $ 25,701 Loans still accruing 5,817 2,199 276 8,292 2,279,249 2,287,541 Total $ 8,245 $ 2,199 $ 13,754 $ 24,198 $ 2,289,044 $ 2,313,242 Modifications to Borrowers Experiencing Financial Difficulty Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificantpayment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for creditlosses. In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is grantedinitially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. 87
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Index The following table shows the amortized cost basis, by class of loans receivable, information regarding accruing and nonaccrual modified loans toborrowers experiencing financial difficulty during 2025, 2024 and 2023 (dollars in thousands): For the year ended December 31, 2025 Number of loans Amortized Cost Basis % of Total Class of Financing Receivable Accruing Modified Loans to Borrowers Experiencing Financial Difficulty Real estate loans: Mortgages 1 $ 108 0.04%Commercial 7 13,275 1.09%Other commercial loans 1 178 0.10% Total 9 $ 13,561 Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty Real estate loans: Commercial 4 $ 1,369 0.11%Agricultural 1 219 0.06% Total 5 $ 1,588 For the year ended December 31, 2024 Number of loans Amortized Cost Basis % of Total Class of Financing Receivable Accruing Modified Loans to Borrowers Experiencing Financial Difficulty Real estate loans: Mortgages 1 $ 12 0.00% Total 1 $ 12 Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty Other commercial loans 1 $ 149 0.11% Total 1 $ 149 For the year ended December 31, 2023 Number of loans Amortized Cost Basis % of Total Class of Financing Receivable Accruing Modified Loans to Borrowers Experiencing Financial Difficulty Real estate loans: Mortgages 1 $ 126 0.04%Commercial 4 1,142 0.10%Agricultural 3 688 0.22%Other commercial loans 1 610 0.45% Total 9 $ 2,566 Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty Real estate loans: Mortgages 1 $ 315 0.10%Commercial 3 261 0.02%Other commercial loans 5 1,108 0.81% Total 9 $ 1,684 The following table shows, by class of loans receivable, information regarding the financial effect on accruing and nonaccrual modified loans to borrowersexperiencing financial difficulty during 2025, 2024 and 2023: For the year ended December 31, 2025Term Extension Loan Type Number of loans Financial Effect Accruing Modified Loans to Borrowers Experiencing Financial DifficultyReal estate loans: Mortgages 1 Extended the loan maturity 5 years with a 30 year amortizationCommercial 7 Extended the loan maturity one yearOther commercial loans 1 Extended the loan maturity 10 years as termed out or line of credit Total 9 Non-Accruing Modified Loans to Borrowers Experiencing Financial DifficultyReal estate loans: Commercial 4 Extended the loan maturity 5 years with 3 loans having a 30 year amortization and one loanhaving a 20 year amortizationAgricultural 1 Extended the loan maturity 5 years with amortization of 12 years Total 5 For the year ended December 31, 2024Term Extension Loan Type Number of loans Financial Effect Accruing Modified Loans to Borrowers Experiencing Financial Difficulty Real estate loans: Mortgages 1 Extended the loan maturity 4 months
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Total 1 Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty Other commercial loans 1 Extended the loan maturity 120 months Total 1 For the year ended December 31, 2023 Term Extension Loan Type Number of loans Financial Effect Accruing Modified Loans to Borrowers Experiencing Financial Difficulty Real estate loans: Mortgages 1 Extended the loan maturity 4 monthsCommercial 4 Extended the weighted average loan maturity 4 monthsAgricultural 3 Extended the weighted average loan maturity 5 monthsOther commercial loans 1 Extended the loan maturity 60 months Total 9 Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty Real estate loans: Mortgages 1 Extended the loan maturing 10 monthsCommercial 3 Extended the weighted average loan maturity 5 monthsOther commercial loans 5 Extended the weighted average loan maturity 13 months Total 9 There were no accruing or nonaccrual modified loans to borrowers experiencing financial difficulty that were modified during 2025 for which there werepayment defaults after the modification date for 2025. The following presents, by class of loans, the amortized cost and payment status of accruing and nonaccrual modified loans to borrowers experiencingfinancial difficulty at December 31, 2025 (in thousands): 30-89 Days 90 Days Accruing Modified Loans to Borrowers Experiencing Financial Difficulty Current Past Due Or Greater Total Real estate loans: Mortgages $ 108 $ - $ - $ 108 Commercial 13,275 - - 13,275 Other commercial loans 178 - - 178 Total $ 13,561 $ - $ - $ 13,561 Non-Accruing Modified Loans to Borrowers Experiencing Financial Difficulty Real estate loans: Commercial $ 1,369 $ - $ - $ 1,369 Agricultural 219 - - 219 Total $ 1,588 $ - $ - $ 1,588 88
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Index Foreclosed Assets Held For Sale Foreclosed assets acquired in settlement of loans are carried at fair value, less estimated costs to sell, and are included in other assets on the ConsolidatedBalance Sheet. As of December 31, 2025 and 2024, included with other assets are $2,358,000 and $2,635,000, respectively, of foreclosed assets. As ofDecember 31, 2025, there are no consumer residential mortgages included within the foreclosed assets. As of December 31, 2025, the Company has initiatedformal foreclosure proceedings on $617,000 of consumer residential mortgages, which have not yet been transferred into foreclosed assets. 6. PREMISES & EQUIPMENT Premises and equipment at December 31, 2025 and 2024 are summarized as follows (in thousands): December 31, 2025 2024 Land $ 5,839 $ 5,839 Buildings 22,970 23,012 Furniture, fixtures and equipment 9,439 9,047 Construction in process 1,999 2,172 40,247 40,070 Less: accumulated depreciation 19,249 18,675 Premises and equipment, net $ 20,998 $ 21,395 Depreciation expense amounted to $1,625,000, $1,242,000 and $1,147,000 for 2025, 2024 and 2023, respectively. 7. GOODWILL AND OTHER INTANGIBLE ASSETS The following table provides the gross carrying value and accumulated amortization of intangible assets as of December 31, 2025 and 2024 (in thousands): December 31, 2025 December 31, 2024 Grosscarryingvalue Accumulatedamortization Netcarryingvalue Grosscarryingvalue Accumulatedamortization Netcarryingvalue Amortized intangible assets (1): MSRs $ 2,362 $ (1,793) $ 569 $ 2,478 $ (1,717) $ 761 Core deposit intangibles 3,072 (1,420) 1,652 4,713 (2,582) 2,131 Total amortized intangible assets $ 5,434 $ (3,213) $ 2,221 $ 7,191 $ (4,299) $ 2,892 Unamortized intangible assets: Goodwill $ 85,758 $ 85,758 (1) Excludes fully amortized intangible assets The following table provides the current year and estimated future amortization expense for the next five years of amortized intangible assets (inthousands). We based our projections of amortization expense shown below on existing asset balances at December 31, 2025. Future amortization expense mayvary from these projections: MSRs Core deposit intangibles Total Year ended December 31, 2025 $ 266 $ 478 $ 744 Estimate for year ending December 31, 2026 205 395 600 2027 150 339 489 2028 103 284 387 2029 67 230 297 2030 33 177 210 2031 and thereafter 11 227 238 Total 569 1,652 2,221 89
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Index 8. FEDERAL HOME LOAN BANK STOCK As a member of the FHLB of Pittsburgh, the Bank is required to maintain a minimum investment in stock of the FHLB that varies with the level ofadvances outstanding with the FHLB. As of December 31, 2025, and 2024, included in other assets, the Bank held $16,745,000 and $14,524,000, respectively,of FHLB stock. The stock does not have a readily determinable fair value and as such is classified as restricted stock, carried at cost and evaluated bymanagement. The stock’s value is determined by the ultimate recoverability of the par value rather than by recognizing temporary declines. The determinationof whether the par value will ultimately be recovered is influenced by criteria such as the following: (a) A significant decline in net assets of the FHLB ascompared to the capital stock amount and the length of time this situation has persisted (b) commitments by the FHLB to make payments required by law orregulation and the level of such payments in relation to the operating performance (c) the impact of legislative and regulatory changes on the customer base ofthe FHLB and (d) the liquidity position of the FHLB. Management evaluated the stock and concluded that the stock was not impaired for the periods presentedherein. Management considered that the FHLB’s regulatory capital ratios are strong, liquidity appears adequate, new shares of FHLB stock continue toexchange hands at the $100 par value and the FHLB has repurchased shares of excess capital stock from its members and has paid a quarterly cash dividend. 9. DEPOSITS The following table shows the breakdown of deposits as of December 31, 2025 and 2024, by deposit type (in thousands): 2025 2024 Non-interest-bearing deposits $ 516,657 $ 532,776 Interest bearing demand deposits 25,576 18,004 NOW accounts 593,825 581,673 Savings deposits 286,554 292,918 Money market deposit accounts 480,509 434,856 Certificates of deposit 473,858 521,801 Total $ 2,376,979 $ 2,382,028 Certificates of deposit of $250,000 or more amounted to $138,366,000 and $191,015,000 at December 31, 2025 and 2024, respectively. Brokered depositstotaled $60,000,000 and $93,055,000 as of December 31, 2025 and 2024, respectively. The following are maturities of certificates of deposit as of December 31, 2025 (in thousands): 2026 $ 366,083 2027 56,357 2028 26,605 2029 11,369 2030 8,087 Thereafter 5,357 Total certificates of deposit $ 473,858 10. BORROWED FUNDS AND REPURCHASE AGREEMENTS The following table shows the breakdown of borrowed funds as of December 31, 2025 and 2024 (dollars in thousands): Weighted average interest rate: 2025 Balance atDecember 31 Highest balance at anymonth-end Averagebalance Paid during theyear As ofyear-end Securities Sold Under Agreements to Repurchases (a) $ 15,497 $ 18,997 $ 16,891 3.89% 3.37%FHLB Advances(b) 160,483 236,253 193,712 4.64% 3.93%Bank Federal Funds Lines I - - 1 4.63% 0.00%FRB BIC Line (d) - - 91 4.48% 0.00%Line of Credit I - 7,072 2,012 8.56% 0.00%Other Secured Borrowings (g) 3,320 6,540 4,705 4.25% 3.64%Subordinated Debt (h) 19,648 19,648 19,447 6.29% 6.22%Notes Payable (i) 7,500 7,500 7,500 3.57% 3.57%Term Loans (j) 103,000 134,536 81,667 3.19% 3.91% Total Borrowed Funds $ 309,448 $ 430,546 $ 326,026 4.33% 4.03% 90
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Index Weighted average interest rate: 2024 Balance atDecember 31 Highestbalance at anymonth-end Averagebalance Paid during theyear As of year-end Securities Sold Under Agreements to Repurchases (a) $ 17,338 $ 17,921 $ 16,768 4.79% 4.06%FHLB Advances(b) 135,144 199,789 147,727 5.64% 4.71%Bank Federal Funds Lines I - - 1 5.66% 0.00%FRB BIC Line (d) - - 99 5.50% 0.00%Line of Credit I 7,572 12,572 10,467 8.71% 7.76%FRB Term Funding Program (f) - 20,000 15,137 4.85% 0.00%Other Secured Borrowings (g) 6,540 12,060 9,281 5.24% 4.33%Subordinated Debt (h) 19,277 19,276 19,090 6.25% 6.11%Notes Payable (i) 7,500 7,500 7,500 3.65% 3.65%Term Loans (j) 104,350 109,170 97,339 2.88% 4.45% Total Borrowed Funds $ 297,721 $ 398,288 $ 323,409 4.80% 4.73% (a) We utilize securities sold under agreements to repurchase to facilitate the needs of our customers and to facilitate secured short-term funding needs.Securities sold under agreements to repurchase are stated at the amount of cash received in connection with the transaction. We monitor collateral levels on acontinuous basis. We may be required to provide additional collateral based on the fair value of the underlying securities. Securities pledged as collateral underrepurchase agreements are maintained with our safekeeping agents. The collateral pledged on the repurchase agreements by the remaining contractual maturityof the repurchase agreements in the Consolidated Balance Sheets as of December 31, 2025 and December 31, 2024 is presented in the following tables (inthousands). Remaining Contractual Maturity of the Agreements Overnight and Up to Greater than 2025 Continuous 30 Days 30 – 90 Days 90 days Total Repurchase Agreements: U.S. agency securities $ 21,977 $ - $ - $ - $ 21,977 Total carrying value of collateral pledged $ 21,977 $ - $ - $ - $ 21,977 Total liability recognized for repurchase agreements $ 15,497 2024 Repurchase Agreements: U.S. agency securities $ 21,364 $ - $ - $ - $ 21,364 Total carrying value of collateral pledged $ 21,364 $ - $ - $ - $ 21,364 Total liability recognized for repurchase agreements $ 17,338 (b) FHLB Advances consist of an “Open RepoPlus” agreement with the FHLB of Pittsburgh. FHLB “Open RepoPlus” advances are short-term borrowings thatbear interest based on the FHLB discount rate or Federal Funds rate, whichever is higher. The Company has a borrowing limit of $1,115,189,000, inclusive ofany outstanding advances and letters of credit. FHLB advances are secured by a blanket security agreement that includes the Company’s FHLB stock, as well ascertain investment and mortgage-backed securities held in safekeeping at the FHLB and certain residential and commercial mortgage loans. A portion of theseadvances, $28,000,000, are subject to interest rate swap arrangements as of December 31, 2025. See Note 18 for additional information. (c) The federal funds lines consist of unsecured lines from two third party banks at market rates. The Bank has a borrowing limit totaling $34,000,000,inclusive of any outstanding balances. No specific collateral is required to be pledged for these borrowings. (d) The Federal Reserve Bank Borrower in Custody (FRB BIC) Line consists of a borrower in custody agreement opened in January 2010 with the FederalReserve Bank of Philadelphia secured by municipal loans maintained in the Company’s possession. As of December 31, 2025, and 2024, the Company has aborrowing limit of $11,798,000 and $14,353,000, respectively, inclusive of any outstanding advances. The approximate carrying value of the municipal loancollateral was $21,827,000 and $25,750,000 as of December 31, 2025 and 2024, respectively. (e) The Company renewed a $15.0 million revolving line of credit in December 2025 with an unaffiliated bank with a maturity date of January 1, 2027, subjectto certain covenants. The line is subject to an unused fee on the unborrowed portion of the Line of Credit on a quarterly basis, equal to 0.25% of the unusedamount of the Line of Credit, calculated on a pro-rata basis, payable within thirty (30)-days after the end of each calendar quarter. Interest on outstandingborrowings is payable at 3 month term SOFR plus 300 bps. No specific collateral is required to be pledged for these borrowings. 91
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Index (f) The Federal Reserve’s Bank Term Funding Program (BTFP) consisted of a loan agreement opened in the second quarter of 2023 with the Federal ReserveBank of Philadelphia secured by US treasury and SBA securities. The BTFP offered loans of up to one year in length. The loan was repaid and closed in thefourth quarter of 2024. (g) The Company entered into an agreement with a counterparty that provides for the Company the right to obtain collateral from the counterparty dependingon the value of the underlying derivative instrument. The value of the collateral obtained can fluctuate daily. A market interest rate is required to be paid on anycollateral held. As of December 31, 2025, the Company is holding $3,320,000 of collateral, which is included in cash and cash equivalents on the ConsolidatedBalance sheet. (h) In April 2021, the Company issued $10.0 million of fixed to floating rate subordinated notes that mature on April 16, 2031, unless redeemed earlier. Thenotes bear interest at 4% per annum through April 16, 2026 and subsequently pay interest at the 90-day average secured overnight financing rate, determined onthe determination date of the applicable interest period, plus 323 basis points. The Company may redeem the notes, in whole or in part, on or after April 16,2026, and at any time upon the occurrence of certain events, subject in each case to the approval of the Board of Governors of the Federal Reserve System (the“Federal Reserve”). Issuance costs associated with the notes totaled $131,000 and were capitalized and will be amortized over the life of the note on a straight-line basis, which approximates the effective yield method. As of December 31, 2025, the net unamortized issuance costs totaled $69,000. As part of the HVBCacquisition, the Company acquired a subordinated note issued by HVBC with a par value of $10.0 million and a fair market value of $8,873,000 on the date ofacquisition. This note has a maturity date of May 28, 2031, and has a coupon rate of 4.50% per annum through May 28, 2026. Thereafter, the note rate isadjustable and resets quarterly based on the then current 90-day average Secured Overnight Financing Rate (“SOFR”) plus 325 basis points for U.S. dollardenominated loans as published by the Federal Reserve Bank of New York. The Company may, at its option, at any time on an interest payment date, on or afterMay 28, 2026, redeem the notes, in whole or in part, at par plus accrued interest to the date of redemption. The carrying value of the note as of December 31,2025 and 2024 was $9,717,000 and $9,358,000, respectively. (i) In December 2003, the Company formed a special purpose entity (“Entity”) to issue $7,500,000 of floating rate obligated mandatory redeemable trustpreferred securities as part of a pooled offering. The rate was determined quarterly and floated based on the 3-month SOFR plus 2.80 percent. The Entity mayredeem them, in whole or in part, at face value after December 17, 2008, and on a quarterly basis thereafter. The Company borrowed the proceeds of theissuance from the Entity in December 2003 in the form of a $7,500,000 note payable. Debt issue costs of $75,000 have been capitalized and fully amortized asof December 31, 2008. Under current accounting rules, the Company’s minority interest in the Entity was recorded at the initial investment amount and isincluded in the other assets section of the balance sheet. The Entity is not consolidated as part of the Company’s consolidated financial statements. The$7,500,000 note payable is subject to an interest rate swap arrangement. See Note 18 for additional information. (j) Term Loans consist of separate loans with the FHLB of Pittsburgh as follows (dollars in thousands): December 31, December 31, Interest Rate Maturity 2025 2024 Fixed: 4.14% January 2, 2026 10,000 - 4.15% February 13, 2026 18,000 - 3.82% January 30, 2026 75,000 - 4.92% January 2, 2025 - 25,000 4.76% February 14, 2025 - 18,000 5.05% January 6, 2025 - 20,000 4.47% May 12, 2025 - 10,000 5.03% July 7, 2025 - 26,350 4.32% November 12,2025 - 5,000 Total term loans $ 103,000 $ 104,350 92
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Index The following are maturities of borrowed funds as of December 31, 2025 (in thousands): 2026 $ 282,300 2027 - 2028 - 2029 - 2030 - Thereafter 27,148 Total borrowed funds $ 309,448 11. EMPLOYEE BENEFIT PLANS Noncontributory Defined Benefit Pension Plan The Bank sponsors a trusteed, noncontributory defined benefit pension plan covering substantially all employees and officers hired prior to January 1,2007. The pension plan calls for benefits to be paid to eligible employees at retirement based primarily upon years of service with the Bank and compensationrates during employment. Upon retirement or other termination of employment, employees can elect either an annuity benefit or a lump sum distribution ofvested benefits in the pension plan. The Bank’s funding policy is to make annual contributions, if needed, based upon the funding formula developed by thepension plans’ actuary. The Bank did not make any contributions to the pension plans in 2025, 2024 or 2023. In lieu of the pension plan, employees with a hire date of January 1, 2007 or later are eligible to receive, after meeting length of service requirements, anannual discretionary 401(k) plan contribution from the Bank equal to a percentage of an employee’s base compensation. The contribution amount is placed in aseparate account within the 401(k) plan and is subject to a vesting requirement. Contributions by the Company totaled $618,000, $539,000 and $354,000 for2025, 2024 and 2023, respectively. The following table sets forth the obligation and funded status of the pension plan as of December 31 (in thousands): 2025 2024 Change in benefit obligation Benefit obligation at beginning of year $ 8,871 $ 9,556 Service cost 274 329 Interest cost 452 422 Actuarial (Gain) / Loss 307 (395)Settlement gain - (18)Benefits paid (944) (1,023) Benefit obligation at end of year 8,960 8,871 Change in plan assets Fair value of plan assets at beginning of year 11,726 11,662 Actual return (loss) on plan assets 1,110 1,087 Employer contribution - - Plan expenses - - Benefits paid (944) (1,023) Fair value of plan assets at end of year 11,892 11,726 Funded status $ 2,932 $ 2,855 Amounts not yet recognized as a component of net periodic pension cost as of December 31 (in thousands): Amounts recognized in accumulated other comprehensive loss consists of: 2025 2024 Net loss $ 376 $ 385 Prior service cost - - Total $ 376 $ 385 The accumulated benefit obligation for the defined benefit pension plan was $8,960,000 and $8,871,000 at December 31, 2025 and 2024 respectively. 93
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Index The components of net periodic benefit costs for the years ended December 31 are as follows (in thousands): 2025 2024 2023 Service cost $ 274 $ 329 $ 306 Interest cost 452 422 433 Return on plan assets (794) (791) (769)Settlement loss - 104 - Net amortization and deferral - 33 41 Net periodic benefit (income) cost $ (68) $ 97 $ 11 The Company does not expect to amortize any estimated net loss from accumulated other comprehensive loss into the net periodic benefit cost (income) in2026. The weighted-average assumptions used to determine benefit obligations at December 31, 2025, 2024 and 2023 is summarized in the following table. Thechange in the discount rate is the primary driver of the actuarial loss that occurred in 2025 of $307,000. 2025 2024 2023 Discount rate FCCB Plan 5.00% 5.25% 4.50%Rate of compensation increase 3.00% 3.00% 3.00% The weighted-average assumptions used to determine net periodic benefit cost (income) for the year ended December 31, 2025, 2024 and 2023 issummarized in the following table. 2025 2024 2023 Discount rate FCCB Plan 5.25% 4.50% 4.75%Expected long-term return on plan assets FCCB plan 7.00% 7.00% 7.00%Rate of compensation increase 3.00% 3.00% 3.00% The long-term rate of return on plan assets gives consideration to returns currently being earned on plan assets as well as future rates expected to be earned. The investment objective is to maximize total return consistent with the interests of the participants and beneficiaries, and prudent investment management. Theallocation of the pension plan assets is determined on the basis of sound economic principles and is continually reviewed in light of changes in marketconditions. Asset allocation favors equity securities, with a target allocation of 50-70%. The target allocation for debt securities is 30-50%. At December 31,2025, the pension plan had a sufficient cash and money market position in order to re-allocate the equity portfolio for diversification purposes and reduce risk inthe total portfolio. The following table sets forth by level, within the fair value hierarchy as defined in footnote 20, the Plan’s assets at fair value as ofDecember 31, 2025 and 2024 (dollars in thousands): 2025 Level I Level II Level III Total Allocation Cash and cash equivalents $ 362 $ - $ - $ 362 3.0%Equity Securities 671 - - 671 5.6%Mutual Funds and ETF’s 7,804 - - 7,804 65.6%Corporate Bonds - 3,055 - 3,055 25.8% Total $ 8,837 $ 3,055 $ - $ 11,892 100.0% 2024 Level I Level II Level III Total Allocation Cash and cash equivalents $ 312 $ - $ - $ 312 2.7%Equity Securities 5,902 - - 5,902 50.3%Mutual Funds and ETF’s 3,025 - - 3,025 25.8%Corporate Bonds - 2,487 - 2,487 21.2% Total $ 9,239 $ 2,487 $ - $ 11,726 100.0% Equity securities include the Company’s common stock in the amounts of $671,000 (5.6% of total plan assets) and $737,000 (6.3% of total plan assets) atDecember 31, 2025 and 2024, respectively. 94
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Index The Bank does not expect to make a contribution to its pension plan in 2026. Expected future benefit payments that the Bank estimates from its pensionplan are as follows (in thousands): 2026 $ 1,141 2027 956 2028 684 2029 608 2030 274 2031- 2035 5,911 Defined Contribution Plan The Company sponsors a voluntary 401(k) savings plan which eligible employees can elect to contribute up to the maximum amount allowable not toexceed the limits of IRS Code Sections 401(k). Under the plan, the Company also makes required contributions on behalf of the eligible employees. TheCompany’s contributions vest immediately. Contributions by the Company totaled $903,000, $898,000 and $769,000 for 2025, 2024 and 2023, respectively. Directors’ Deferred Compensation Plan The Company’s directors may elect to defer all or portions of their fees until their retirement or termination from service. Amounts deferred under thedeferred compensation plan earn interest based upon the highest current rate offered to certificate of deposit customers. Amounts deferred under the deferredcompensation plan are not guaranteed and represent a general liability of the Company. As of December 31, 2025, and 2024, an obligation of $648,000 and$626,000, respectively, was included in other liabilities for this plan in the Consolidated Balance Sheet. Amounts included in interest expense on the deferredamounts totaled $26,000, $30,000 and $27,000 for the years ended December 31, 2025 2024 and 2023, respectively. Restricted Stock Plan The Company maintains a Restricted Stock Plan (“the Plan”) whereby employees and non-employee corporate directors are eligible to receive awards ofrestricted stock based upon performance related requirements. Awards granted under the Plan are in the form of the Company’s common stock and may besubject to certain vesting requirements including in the case of employees, continuous employment or service with the Company. In April 2016, the Company’sstockholders authorized a total of 150,000 shares of the Company’s common stock to be made available under the Plan. As of December 31, 2025, 99,781shares remain available to be issued under the Plan. The Plan assists the Company in attracting, retaining and motivating employees to make substantialcontributions to the success of the Company and to increase the emphasis on the use of equity as a key component of compensation. The following table detailsthe vesting, awarding and forfeiting of unearned restricted shares during 2025: 2025 Weighted Average Shares Market Price Outstanding, beginning of year 10,927 $ 53.81 Granted 4,431 57.28 Forfeited (1,162) 49.83 Vested (5,682) 56.23 Outstanding, end of year 8,514 $ 54.54 Compensation cost related to restricted stock is recognized based on the market price of the stock at the grant date over the vesting period. Compensationexpense related to restricted stock was $291,000, $264,000 and $239,000 for the years ended December 31, 2025, 2024 and 2023, respectively. The per shareweighted-average grant-date fair value of restricted shares granted during 2025, 2024 and 2023 was $57.28, $45.59 and $77.77, respectively. At December 31,2025, the total compensation cost related to nonvested awards that has not yet been recognized was $464,000, which is expected to be recognized over the next3 years. 95
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Index Supplemental Executive Retirement Plan The Company maintains a non-qualified supplemental executive retirement plan (“SERP”) for certain executives to compensate those executiveparticipants in the Company’s noncontributory defined benefit pension plan whose benefits are limited by compensation limitations under current tax law. AtDecember 31, 2025 and 2024, an obligation of $2,367,000 and $2,131,000, respectively, for the SERP was included in other liabilities in the ConsolidatedBalance Sheet. Expenses related to the SERP totaled $278,000, $124,000 and $233,000 for the years ended December 31, 2025, 2024 and 2023, respectively.Benefit payments for 2025, 2024 and 2023 were $42,000, $889,000 and $42,000, respectively. Deferred Compensation Plan In 2018, the Company initiated a non-qualified executive deferred compensation plan for eligible employees designated by the Board of Directors. AtDecember 31, 2025 and 2024, an obligation of $2,037,000 and $1,757,000, respectively, was included in other liabilities for the deferred compensation plan inthe Consolidated Balance Sheet. Expenses related to the deferred compensation plan totaled $302,000, $254,000 and $268,000 for the years ended December31, 2025, 2024 and 2023, respectively. There were no benefit payments in 2025, 2024 and 2023. Benefit payments related to the deferred compensation plantotaled $22,000 for the year ended December 31, 2025. There were no benefit payments made in 2024 or 2023. Employee Stock Purchase Plan The Company maintains an employee stock purchase plan (“ESPP”) in which most employees are eligible to participate. Employees in the United Stateswho choose to participate are granted an opportunity to purchase common stock at 95 percent of market value on the last day of the quarterly purchase period.The ESPP authorizes the issuance, and the purchase by employees, of up to 100,000 shares of common stock through payroll deductions. No employee isallowed to buy more than $25,000 of common stock in any year, based on the market value of the common stock at the beginning of the purchase period.Employees purchased 1,157 shares at a weighted average price of $59.16 under the ESPP during 2025. During 2024, employees purchased 234 shares at aweighted average price of $70.61 under the ESPP. At December 31, 2025, 98,609 shares remained available to be issued through the ESPP. Salary Continuation Plan The Company maintains a salary continuation plan for certain employees acquired through the acquisition of FNB. At December 31, 2025 and 2024 anobligation of $471,000 and $525,000 respectively, was included in other liabilities for this plan in the Consolidated Balance Sheet. Expenses related to thesalary continuation plan totaled $37,000, $41,000 and $44,000 for the years ended December 31, 2025, 2024 and 2023, respectively. Benefit payments relatedto the salary continuation plan totaled $91,000, $91,000 and $87,000 for the years ended December 31, 2025, 2024 and 2023, respectively. Continuation of Life Insurance Plan The Company has promised a continuation of life insurance coverage to certain persons post-retirement. GAAP requires the recording of post-retirementcosts and a liability equal to the present value of the cost of post-retirement insurance during the person’s term of service. The estimated present value of futurebenefits to be paid totaled $529,000 and $514,000 at December 31, 2025 and 2024, respectively, which is included in other liabilities in the ConsolidatedBalance Sheet. (Benefits)/Expenses for the plan totaled $51,000, ($96,000) and ($50,000) for the years ended December 31, 2025, 2024 and 2023, respectively. 12. INCOME TAXES The provision for income taxes consists of the following (in thousands): Year Ended December 31, 2025 2024 2023 Currently payable $ 7,869 $ 4,294 $ 3,169 Deferred 797 1,771 595 Provision for income taxes $ 8,666 $ 6,065 $ 3,764 96
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Index The following temporary differences gave rise to the net deferred tax asset and liabilities at December 31, 2025 and 2024, respectively (in thousands): 2025 2024 Deferred tax assets: Allowance for credit losses $ 5,439 $ 5,449 Deferred compensation 704 648 Allowance for losses on available-for-sale securities 112 130 Interest on non-accrual loans 1,886 1,588 Incentive plan accruals 684 682 Other real estate owned 16 16 Unrealized losses on available-for-sale securities 3,733 7,061 Low income housing tax credits - 15 NOL carry forward 898 1,458 Non-PCD loan interest rate 3,575 4,200 Right of use asset 2,263 2,120 Accrued vacation 301 308 Other 429 334 Total $ 20,040 $ 24,009 Deferred tax liabilities: Premises and equipment $ (926) $ (745)Investment securities accretion (652) (611)Loan fees and costs (1,056) (933)Goodwill and core deposit intangibles (2,736) (2,804)Pension and other retirement obligation (119) (152)Low income housing tax credits (17) - Mortgage servicing rights (120) (160)Unrealized gains on equity securities (21) (3)Unrealized gains on interest rate swap (522) (890)Borrowings fair value adjustment (59) (254)Right of use asset (2,226) (2,093)Other (146) (165) Total (8,600) (8,810) Deferred tax (liability) asset, net $ 11,440 $ 15,199 No valuation allowance was established at December 31, 2025 and 2024, due to the certain tax strategies and anticipated future taxable income asevidenced by the Company’s expected earnings potential. The total provision for income taxes is different from that computed at the statutory rates due to the following items (dollars in thousands): Year Ended December 31, 2025 2024 2023 Provision at statutory rates on pre-tax income $ 9,500 21.0% $ 7,115 21.0% $ 4,531 21.0%Effect of tax-exempt income (934) -2.1% (854) -2.5% (895) -4.1%State and local income taxes, net of federal income tax benefit (a) 150 0.3% 172 0.5% 62 0.3%Low income housing tax credits (820) -1.8% (688) -2.1% (585) -2.8%Low income housing expense 755 1.7% 339 1.0% 399 1.8%Bank owned life insurance (301) -0.7% (354) -1.0% (263) -1.2%Nondeductible interest 290 0.7% 308 0.9% 251 1.2%Nondeductible merger and acquisition expenses - 0.0% - 0.0% 247 1.1%Other items 26 0.1% 27 0.1% 17 0.1% Provision for income taxes $ 8,666 19.2% $ 6,065 17.9% $ 3,764 17.4% (a) Taxes in New York and New Jersey make up the majority of the effect of the state and local tax category. Income taxes paid for 2025, 2024 and 2023 were $6,590,000, $2,826,000 and $5,130,000, respectively. The following table provides a breakdown of thepayments by taxing entity as well as the 5% threshold used to determine whether further disaggregation of information is required (dollars in thousands): Taxes Paid 2025 2024 2023 U.S. Federal Taxes $ 6,500 $ 2,500 $ 5,100 State and Local Taxes New Jersey 35 320 - New York 55 6 30 Total income taxes paid $ 6,590 $ 2,826 $ 5,130 Threshold % 5% 5% 5% Threshold amount $ 330 $ 141 $ 257 97
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Index The Company prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax positiontaken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than notthat the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A taxposition that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50 percent likely of beingrealized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the firstsubsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-notrecognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. There is currently noliability for uncertain tax positions and no known unrecognized tax benefits. With limited exception, the Company’s federal and state income tax returns fortaxable years through 2021 have been closed for purposes of examination by the federal and state taxing authorities. 13. AFFORDABLE HOUSING PROJECTS TAX CREDIT PARTNERSHIPS The Company makes equity investments in various limited partnerships or limited liability companies that sponsor affordable housing projects utilizing theLow Income Housing Tax Credit (“LIHTC”) pursuant to Section 42 of the Internal Revenue Code. The purpose of these investments is to achieve a satisfactoryreturn on capital, to facilitate the sale of affordable housing product offerings, and to assist in achieving goals associated with the Community ReinvestmentAct. The primary activities of these entities include the identification, development, and operation of multi-family housing that is leased to qualifyingresidential tenants. Generally, these types of investments are funded through a combination of debt and equity. The Company is a limited partner or non-managing member in each LIHTC limited partnership or limited liability company, respectively. Each of theseentities is managed by an unrelated third-party general partner or managing member who exercises significant control over the affairs of the entity. The generalpartner or managing member has all the rights, powers and authority granted or permitted to be granted to a general partner of a limited partnership or managingmember of a limited liability company. Duties entrusted to the general partner or managing member include, but are not limited to: investment in operatingcompanies, company expenditures, investment of excess funds, borrowing funds, employment of agents, disposition of fund property, prepayment andrefinancing of liabilities, votes and consents, contract authority, disbursement of funds, accounting methods, tax elections, bank accounts, insurance, litigation,cash reserve, and use of working capital reserve funds. Except for limited rights granted to the limited partner(s) or non-managing member(s) relating to theapproval of certain transactions, the limited partner(s) and non-managing members may not participate in the operation, management, or control of the entity’sbusiness, transact any business in the entity’s name or have any power to sign documents for or otherwise bind the entity. In addition, the general partner ormanaging member may only be removed by the limited partner(s) or managing member(s) in the event of a failure to comply with the terms of the agreement ornegligence in performing its duties. The general partner or managing member of each entity has both the power to direct the activities which most significantly affect the performance of eachentity and the obligation to absorb losses or the right to receive benefits that could be significant to the entities. Therefore, the Company has determined that itis not the primary beneficiary of any LIHTC entity. The Company uses the effective yield method to account for its pre-2015 investments in these entities. Beginning January 1, 2015, any new investments that meet the requirements of the proportional amortization method are recognized using the proportionalamortization method. The Company’s net affordable housing tax credit investments were $7,139,000 and $7,915,000 as of December 31, 2025 and 2024,respectively, and are included in other assets in the consolidated balance sheet. The Company’s net affordable housing tax credit unfunded commitments were$1,539,000 and $5,997,000 as of December 31, 2025 and 2024, respectively, and are included in other liabilities in the consolidated balance sheet. Allpartnerships entered into prior to 2015 were fully amortized as of December 31, 2022. Unfunded Commitments As of December 31, 2025, the expected payments for unfunded affordable housing commitments were as follows (in thousands): 2026 $ 605 2027 491 2028 296 2029 12 2030 14 Thereafter 121 $ 1,539 98
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Index The following table presents tax credits and other tax benefits recognized and amortization expense related to affordable housing for the years endedDecember 31, 2025, December 31, 2024, and December 31, 2023 (in thousands). 2025 2024 2023 Proportional Amortization Method Tax credits and other tax benefits recognized $ 971 $ 976 $ 948 Amortization Expense in Provision for Income Taxes 776 627 762 There were no impairment losses related to LIHTC investments for the years ended December 31, 2025, December 31, 2024, and December 31, 2023. 14. ACCUMULATED OTHER COMPREHENSIVE LOSS The components of accumulated other comprehensive loss, net of tax, as of December 31, were as follows (in thousands): 2025 2024 Net unrealized gain on securities available for sale $ (17,778) $ (33,624)Tax effect 3,733 7,060 Net -of-tax amount (14,045) (26,564) Unrealized loss on interest rate swap 2,486 4,236 Tax effect 521 889 Net -of-tax amount 1,965 3,347 Unrecognized pension costs (376) (385)Tax effect 79 81 Net -of-tax amount (297) (304) Total accumulated other comprehensive income $ (12,377) $ (23,521) The following tables present the changes in accumulated other comprehensive loss by component net of tax for the years ended December 31, 2025, 2024and 2023 (in thousands): Unrealized gain(loss) on available forsale securities (a) Unrealized gain(loss) on interestrate swap (a) Defined BenefitPension Items(a) Total Balance as of December 31, 2022 $ (37,514) $ 5,429 $ (1,056) $(33,141)Other comprehensive income (loss) before reclassifications (net of tax) 9,237 610 52 9,899 Amounts reclassified from accumulated other comprehensive income (loss) (net of tax) 39 (1,740) 32 (1,669) Net current period other comprehensive income (loss) 9,276 (1,130) 84 8,230 Balance as of December 31, 2023 $ (28,238) $ 4,299 $ (972) $(24,911) Balance as of December 31, 2023 $ (28,238) $ 4,299 $ (972) $(24,911)Other comprehensive income (loss) before reclassifications (net of tax) 1,674 1,036 642 3,352 Amounts reclassified from accumulated other comprehensive income (loss) (net of tax) - (1,988) 26 (1,962) Net current period other comprehensive income (loss) 1,674 (952) 668 1,390 Balance as of December 31, 2024 $ (26,564) $ 3,347 $ (304) $(23,521) Balance as of December 31, 2024 $ (26,564) $ 3,347 $ (304) $(23,521)Other comprehensive income (loss) before reclassifications (net of tax) 12,519 (13) 7 12,513 Amounts reclassified from accumulated other comprehensive income (loss) (net of tax) - (1,369) - (1,369) Net current period other comprehensive income (loss) 12,519 (1,382) 7 11,144 Balance as of December 31, 2025 $ (14,045) $ 1,965 $ (297) $(12,377) (a) Amounts in parentheses indicate debits 99
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Index The following table presents the significant amounts reclassified out of each component of accumulated other comprehensive loss for the years endedDecember 31, 2025, 2024 and 2023 (in thousands): Details about accumulated other comprehensive income (loss) Amount reclassified from accumulatedcomprehensive income (loss) (a) Affected line item in the Consolidated Statement of Income December 31, 2025 2024 2023 Unrealized gains and losses on available for sale securities $ - $ - $ (51)Available for sale securities (losses) gains, net - - 12 Provision for income taxes $ - $ - $ (39)Net of tax Unrealized gain (loss) on interest rate swap $ 1,733 $ 2,516 $ 2,203 Interest expense (364) (528) (463)Provision for income taxes $ 1,369 $ 1,988 $ 1,740 Net of tax Defined benefit pension items $ - $ (33) $ (41)Other expenses - 7 9 Provision for income taxes $ - $ (26) $ (32)Net of tax Total reclassifications $ 1,369 $ 1,962 $ 1,669 (a) Amounts in parentheses indicate debits 15. RELATED PARTY TRANSACTIONS Certain executive officers and directors of the Company, or companies in which they have 10 percent or more beneficial ownership, were indebted to theBank. A summary of loan activity for the years ended December 31, 2025 and 2024 with officers, directors, stockholders and associates of such persons is listedbelow (in thousands): Year Ended December 31, 2025 2024 Balance, beginning of year $ 10,985 $ 12,915 New loans 3,444 3,388 Repayments (4,267) (5,318) Balance, end of year $ 10,162 $ 10,985 letter of credits $ - $ 10 16. REGULATORY MATTERS Dividend Restrictions: The approval of the Federal Reserve Board (“FRB”) is required for the Bank to pay dividends to the Company if the total of all dividends declared in anycalendar year exceeds the Bank’s net income (as defined) for that year combined with its retained net income for the preceding two calendar years. Under thisformula, the Bank can declare dividends in 2026 without approval of the FRB or Pennsylvania Department of Banking of approximately $31,723,000, plus theBank’s 2026 year-to-date net income at the time of the dividend declaration. Loans: The Bank is subject to regulatory restrictions which limit its ability to loan funds to the Company. At December 31, 2025, the Bank’s regulatory lendinglimit amounted to approximately $46,266,000. 100
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Index Regulatory Capital Requirements: Federal regulations require the Bank to maintain minimum amounts of capital. Specifically, the Bank is required to maintain certain minimum dollaramounts and ratios of Total, Tier I and Common Equity Tier I capital to risk-weighted assets and of Tier I capital to average total assets. In addition to the capital requirements, the Federal Deposit Insurance Corporation Improvement Act (“FDICIA”) established five capital categories rangingfrom “well capitalized” to “critically under-capitalized.” Should any institution fail to meet the requirements to be considered “adequately capitalized”, it wouldbecome subject to a series of increasingly restrictive regulatory actions. As permitted by applicable federal regulation, the Bank has opted to use the community bank leverage ratio (the “CBLR”) framework for determining itscapital adequacy. Under the CBLR framework a qualifying community bank is considered well-capitalized if its leverage ratio (Tier 1 capital divided byaverage total consolidated assets) exceeds 9%. If a qualifying community bank’s leverage ratio falls below 9%, then it will have two calendar quarters to returnto 9%, subject to the qualifying community bank utilizing the grace period must maintain a CBLR of at least 8%. If a qualifying community bank fails tomaintain the applicable minimum CBLR during the grace period, or if it is unable to restore compliance with the CBLR within the grace period, then it willrevert to the Basel III capital framework and the normal Prompt Corrective Action capital categories will apply. At December 31, 2025, the Bank wasconsidered “well-capitalized” under the CBLR framework, with a leverage ratio of 9.54%. At December 31, 2024, the Bank leverage ratio under the CBLRframework was 8.99%, which is less than the 9.0% requirement to be considered “well-capitalized” under the CBLR. As such, as of December 31, 2024, theBank reverted to the prompt corrective action framework. The following table provides the Bank’s computed risk‐based capital ratios as of December 31, 2024,which reflects the Bank being well capitalized on that date (dollars in thousands): Actual For Capital Adequacy Purposes To Be Well Capitalized UnderPrompt Corrective Action Provisions 2024 Amount Ratio Amount Ratio Amount Ratio Total Capital (to Risk Weighted Assets): Company $ 284,931 11.88% $ 191,824 8.00% $ 239,780 10.00%Bank $ 287,020 11.99% $ 191,501 8.00% $ 239,376 10.00% Tier 1 Capital (to Risk Weighted Assets): Company $ 243,761 10.17% $ 143,868 6.00% $ 191,824 8.00%Bank $ 265,207 11.08% $ 143,625 6.00% $ 191,501 8.00% Common Equity Tier 1 Capital (to Risk Weighted Assets): Company $ 236,261 9.86% $ 107,901 4.50% $ 155,857 6.50%Bank $ 265,207 11.08% $ 107,719 4.50% $ 155,594 6.50% Tier 1 Capital (to Average Assets): Company $ 243,761 8.26% $ 118,096 4.00% $ 147,620 5.00%Bank $ 265,207 8.99% $ 118,007 4.00% $ 147,508 5.00% 17. COMMITMENTS, CONTINGENT LIABILITIES, RISKS AND UNCERTAINTIES The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers.These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements ofcredit and interest rate or liquidity risk in excess of the amount recognized in the consolidated balance sheet. Credit Extension Commitments The Company’s exposure to credit loss from nonperformance by the other party to the financial instruments for commitments to extend credit and standbyletters of credit is represented by the contractual amount of these instruments. The Company uses the same credit policies in making commitments andconditional obligations as it does for on-balance sheet instruments. Financial instruments, whose contract amounts represent credit risk at December 31, 2025and 2024, are as follows (in thousands): 101
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Index 2025 2024 Commitments to extend credit $ 503,969 $ 432,123 Standby letters of credit 11,612 9,799 $ 515,581 $ 441,922 Commitments to extend credit are legally binding agreements to lend to customers. Commitments generally have fixed expiration dates or other terminationclauses and may require payment of fees. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts donot necessarily represent future liquidity requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount ofcollateral obtained if deemed necessary by the Company on extension of credit is based on management’s credit assessment of the counter party. Standby letters of credit are conditional commitments issued by the Company to guarantee a financial agreement between a customer and a third party.Performance letters of credit represent conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Theseinstruments are issued primarily to support bid or performance related contracts. The coverage period for these instruments is typically a one-year period withan annual renewal option subject to prior approval by management. Fees earned from the issuance of these letters are recognized during the coverage period.For secured letters of credit, the collateral is typically Bank deposit instruments or customer business assets. The Company also offers limited overdraft protection as a non-contractual courtesy which is available to demand deposit accounts in good standing forbusiness, personal or household use. The non-contractual amount of financial instruments with off-balance sheet risk at December 31, 2025 was $12,207,000.The Company reserves the right to discontinue this service without prior notice. Legal and Regulatory Proceedings In the ordinary course of business, the Company is subject to legal proceedings, including claims, litigation, investigations and administrative proceedings,all of which are considered incidental to the normal conduct of business. Litigation may relate to lending, deposit and other customer relationships, vendor andcontractual issues, employee matters, intellectual property matters, personal injuries and torts, regulatory and legal compliance, and other matters. The Companybelieves it has substantial defenses to the claims asserted against it in its currently outstanding legal proceedings and, with respect to such legal proceedings,intends to defend itself vigorously. The Company assesses its liabilities and contingencies in connection with outstanding legal proceedings utilizing the latest information available. Where itis probable that the Company will incur a loss and the amount of the loss can be reasonably estimated, the Company records a liability in its consolidatedfinancial statements. These legal reserves may be increased or decreased to reflect any relevant developments. Where a loss is not probable or the amount of aprobable loss is not reasonably estimable, the Company does not accrue legal reserves. Additionally, for those matters where a loss is reasonably possible andthe amount of loss is reasonably estimable, the Company estimates the amount of losses that it could incur beyond the accrued legal reserves. Under U.S.GAAP, an event is “reasonably possible” if “the chance of the future event or events occurring is more than remote but less than likely” and an event is“remote” if “the chance of the future event or events occurring is slight.” While the outcome of legal proceedings and the timing of the ultimate resolution are inherently difficult to predict, based on information currentlyavailable, advice of counsel and available insurance coverage, the Company believes that it has established adequate legal reserves. Further, based uponavailable information, the Company is of the opinion that these legal proceedings, individually or in the aggregate, will not have a material adverse effect on theCompany’s financial condition or results of operations. However, in the event of unexpected future developments, it is reasonably possible that an adverseoutcome in any of the matters discussed above could be material to the Company’s business, consolidated financial position, results of operations or cash flowsfor any particular reporting period of occurrence. 102
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Index 18. DERIVATIVE FINANCIAL INSTRUMENTS The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages itsexposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks,including interest rate, liquidity, and credit risk, primarily by managing the amount, sources, and duration of its assets and liabilities and through the use ofderivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activitiesthat result in the receipt or payment of future known and uncertain cash amounts, the value of which are determined by interest rates. The Company’s derivativefinancial instruments are used to manage differences in the amount, timing, and duration of the Company’s known or expected cash receipts and its known orexpected cash payments principally related to certain variable rate borrowings. Cash Flow Hedges of Interest Rate Risk The Company’s objectives in using interest rate derivatives are to add stability to interest income and expense and to manage its exposure to interest ratemovements. To accomplish this objective, the Company has entered into interest rate swaps as part of its interest rate risk management strategy. These interestrate swaps are designated as cash flow hedges and involve the receipt of variable rate amounts from a counterparty in exchange for the Company making fixedinterest payments. As of December 31, 2025, the Company had five interest rate swaps with a notional of $35,500,000 associated with the Company’s cashoutflows associated with various floating-rate amounts. As of December 31, 2024, the Company had six interest rate swaps with a notional of $50,500,000associated with the Company’s cash outflows with various floating-rate amounts. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in othercomprehensive income (outside of earnings), net of tax, and subsequently reclassified to earnings when the hedged transaction affects earnings, and theineffective portion of changes in the fair value of the derivative is recognized directly in earnings. The Company assesses the effectiveness of each hedgingrelationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged transactions.The Company did not recognize any hedge ineffectiveness in earnings during the periods ended December 31, 2025 and 2024. Amounts reported inaccumulated other comprehensive income related to derivatives will be reclassified to interest expense as interest payments are made on the Company’svariable-rate liabilities. Customer Swaps The Company also enters into derivative contracts, which consist of interest rate swaps, to facilitate the needs of customers desiring to manage interest raterisk. These swaps are not designated as accounting hedges under ASC 815, Derivatives and Hedging. In order to economically hedge the interest rate riskassociated with offering this product, the Company simultaneously enters into derivative contracts with third parties to offset the customer contracts, such thatthe Company minimizes its net risk exposure resulting from such transactions. The derivative contracts are structured such that the notional amounts decreaseover time to generally match the expected amortization of the underlying loans. These derivatives are not speculative and arise from a service provided tocustomers. The Company utilizes a loan hedging program to accommodate clients preferring a fixed rate loan. The loan documents include an addendum with azero premium collar. The zero premium collar is a cap and floor at the same interest rate, resulting in a fixed rate to the borrower. To hedge this embeddedoption, the Company enters into a dealer facing trade exactly mirroring the terms of the loan addendum. At December 31, 2025, the Company had interest rateswaps related to this program with an aggregate notional amount of $54,089,000. Mortgage Banking Derivatives To Be Announced Securities To be announced securities (“TBAs”) are “forward delivery” securities considered derivative instruments under derivatives and hedging accountingguidance. The Company utilizes TBAs to protect against the price risk inherent in derivative loan commitments. TBAs are valued based on forward dealermarks from the Company’s approved counterparties. The Company utilizes a third-party market pricing service, which compiles current prices for instrumentsfrom market sources and those prices represent the current executable price. TBAs are recorded at fair value on the consolidated statements of financialcondition in mortgage banking derivatives or other liabilities with changes in fair value recorded as a gain (loss) from hedging instruments in non-interestincome in the Consolidated Statements of Income. The fair value of the Company’s derivative instruments, other than IRLCs, that are measured at fair value ona recurring basis is determined by utilizing quoted prices from dealers in such securities or third-party models utilizing observable market inputs. 103
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Index Interest Rate Lock Commitments Interest rate loan commitments known as IRLCs that relate to the origination of mortgages that will be held for sale upon funding are considered derivativeinstruments under the derivatives and hedging accounting guidance FASB ASC 815, Derivatives and Hedging. IRLCs are recognized at fair value on theconsolidated statements of financial condition as mortgage banking derivatives or as other liabilities with changes in their fair values recorded as a gain (loss)from hedging instruments in non-interest income in the Consolidated Statements of Income. Forward Loan Sales Commitments Outstanding IRLCs are subject to interest rate risk and related price risk during the period from the date of issuance through the date of loan funding,cancellation or expiration. IRLC, generally range between 30 and 90 days; however, the borrower is not obligated to obtain the loan. The Company is subject tofallout risk related to IRLCs, which is realized if approved borrowers choose not to close on the loans within the terms of the IRLCs. Forward loan salescommitments are recognized at fair value on the Consolidated Statements of Financial Condition as mortgage banking derivatives or as other liabilities withchanges in their fair values recorded as a gain (loss) from hedging instruments in non-interest income in the Consolidated Statements of Income. Counterparty Credit Risk As a result of its derivative contracts, the Company is exposed to credit risk. Specifically, approved counterparties and exposure limits are defined. On atleast an annual basis, the customer derivative contracts and related counterparties are evaluated for credit risk with an adjustment made to the contract’s fairvalue. In accordance with the interest rate agreements with derivative dealers, the Company may be required to post margin to these counterparties. AtDecember 31, 2025, the Company has required collateral with certain of its derivative counterparties in the amount of $5,560,000 and was holding $3,320,000of collateral from derivative counterparties. The following table reflects the estimated fair value positions of derivative contracts as of December 31, 2025 and 2024: Derivatives designated as hedging instruments under ASC 815 (in thousands): Notional Amount Fair ValueDecember 31, Third party interest rate swaps Balance Sheet Location 2025 2024 Interest rate Paid Interest rate Received 2025 2024 Maturing in 2027 Fair value of derivativeinstruments - asset $ 10,000 $ 10,000 Fixed - 0.65% CompoundedOvernight SOFR +26.161 $ 366 $ 786 Maturing in 2027 Fair value of derivativeinstruments - asset 7,500 7,500 Fixed - 3.57% CompoundedOvernight SOFR +26.161+280 303 620 Maturing in 2027 Fair value of derivativeinstruments - asset 6,000 6,000 Fixed - 0.61% CompoundedOvernight SOFR +26.161 241 500 Maturing in 2029 Fair value of derivativeinstruments - asset 6,000 6,000 Fixed - 0.72% CompoundedOvernight SOFR +26.161 552 854 Maturing in 2032 Fair value of derivativeinstruments - asset 6,000 6,000 Fixed - 0.82% CompoundedOvernight SOFR +26.161 1,025 1,326 Maturing in 2025 Fair value of derivativeinstruments - asset - 15,000 Fixed - 0.57% CompoundedOvernight SOFR +26.161 - 150 $ 35,500 $ 50,500 $ 2,487 $ 4,236 Derivatives not designated as hedging instruments under ASC 815 (in thousands): December 31, 2025 December 31, 2024 Interest Rate Products Balance Sheet Location NotionalAmount Fair Value NotionalAmount Fair Value Zero Premium Collar (Fair value of derivative instruments - liability) $ 38,348 $ (3,693) $ 49,678 $ (5,817)Zero Premium Collar Fair value of derivative instruments - asset 15,741 407 - - IRLCs Fair value of derivative instruments - asset 11,596 340 10,728 317 Dealer Offset to Zero PremiumCollar Fair value of derivative instruments - asset 38,348 3,693 49,678 5,817 Dealer Offset to Zero PremiumCollar (Fair value of derivative instruments - liability) 15,741 (407) - - 104
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Index The following table presents the effect of the Company’s cash flow hedge accounting on Accumulated Other Comprehensive Income for the years endedDecember 31, 2025, 2024 and 2023 (in thousands): The Effect of Fair Value and Cash Flow Hedge Accounting on Accumulated Other Comprehensive Income Amount of (Loss) Gain Recognized in OCI onDerivatives Location of GainReclassified fromAccumulated OCIintoIncome Amount of (loss) gain reclassified fromAccumulated OCI into income Year Ended December 31, Year Ended December 31, Derivatives in Hedging relationships 2025 2024 2023 2025 2024 2023 Interest rate Products $ (1,749) $ (1,205) $ (1,431)Interest Expense $ 1,733 $ 2,516 $ 2,203 19. LEASES A lease is defined as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of timein exchange for consideration. On January 1, 2019, the Company adopted ASU No. 2016-02 “Leases” (Topic 842) and all subsequent ASUs that modified Topic842. For the Company, Topic 842 primarily affected the accounting treatment for operating lease agreements in which the Company is the lessee. Lessee Accounting Substantially all of the leases in which the Company is the lessee are comprised of real estate property for branches with terms extending through 2039. Allof the Company’s leases are classified as operating leases, and therefore, were previously not recognized on the Company’s Consolidated Balance Sheet. Withthe adoption of Topic 842, operating lease agreements are required to be recognized on the consolidated statements of condition as right-of-use (“ROU”) assetsand corresponding lease liabilities. The following table represents the Consolidated Balance Sheet classification of the Company’s ROU assets and lease liabilities (in thousands). TheCompany elected not to include short-term leases (i.e., leases with initial terms of twelve months or less), on the Consolidated Balance Sheet. Balance at December 31, Lease Type 2025 2024 Affected line item on the Consolidated Balance Sheet Right of Use Assets Operating $ 10,600 $ 9,966 Other Assets Lease Liabilities: Operating $ 10,777 $ 10,095 Other Liabilities The calculated amount of the ROU assets and lease liabilities in the table above are impacted by the length of the lease term and the discount rate used topresent value the minimum lease payments. The Company’s lease agreements often include one or more options to renew at the Company’s discretion. If atlease inception, the Company considers the exercising of a renewal option to be reasonably certain, the Company will include the extended term in thecalculation of the ROU asset and lease liability. Regarding the discount rate, Topic 842 requires the use of the rate implicit in the lease whenever this rate isreadily determinable. As this rate is rarely determinable, the Company utilizes its incremental borrowing rate at lease inception, on a collateralized basis, over asimilar term. For operating leases existing prior to January 1, 2019, the rate for the remaining lease term as of January 1, 2019 was used. For leases obtained asof the HVBC acquisition, the rate for the remaining lease term as of June 16, 2023 was used. The following table displays the weighted average remaining leaseterm and the weighted average discount rate for the Company’s operating leases outstanding as of December 31, 2025: Operating Weighted average term (years) 7.78 Weighted average discount rate 4.29% The following table represents lease costs and other lease information for the years ended December 31, 2025, 2024, and 2023, respectively (in thousands).As the Company elected not to separate lease and non-lease components and instead to account for them as a single lease component, the variable lease costprimarily represents variable payments such as common area maintenance and utilities. 105
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Index December 31, Lease Cost 2025 2024 2023 Operating lease cost $ 1,895 $ 1,953 $ 1,400 Variable lease cost 264 250 177 Total lease cost $ 2,159 $ 2,203 $ 1,577 Future minimum payments for operating leases with initial or remaining terms of one year or more as of December 31, 2025 along with a reconciliation tothe discounted amount recorded on the December 31, 2025 Consolidated Balance Sheet (in thousands): Undiscounted cash flows due within Operating 2026 $ 1,921 2027 1,951 2028 1,863 2029 1,643 2030 1,392 2031 and thereafter 4,285 Total undiscounted cash flows 13,055 Impact of present value discount 2,278 Amount reported on balance sheet $ 10,777 20. FAIR VALUE OF FINANCIAL INSTRUMENTS The Company established a hierarchal disclosure framework associated with the level of pricing observability utilized in measuring assets and liabilities atfair value. The three broad levels defined by this hierarchy are as follows: Level I: Quoted prices are available in active markets for identical assets or liabilities as of the reported date. Level II: Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reported date.The nature of these assets and liabilities include items for which quoted prices are available but traded less frequently, and items that arefair valued using other financial instruments, the parameters of which can be directly observed. Level III: Assets and liabilities that have little to no pricing observability as of the reported date. These items do not have two-way markets and aremeasured using management’s best estimate of fair value, where the inputs into the determination of fair value require significantmanagement judgment or estimation. A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuantto the valuation hierarchy, is set forth below. In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internallydeveloped models that primarily use, as inputs, observable market-based parameters. Valuation adjustments may be made to ensure that financial instrumentsare recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality, the Company’s creditworthiness, among other things, aswell as unobservable parameters. Any such valuation adjustments are applied consistently over time. Our valuation methodologies may produce a fair valuecalculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuationmethodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value ofcertain financial instruments could result in a different estimate of fair value at the reporting date. Transfers between levels of the fair value hierarchy arerecognized on the actual date of the event or circumstances that caused the transfer, which generally coincides with the Company’s monthly and/or quarterlyvaluation process. 106
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Index Assets and Liabilities Required to be Measured at Fair Value on a Recurring Basis The fair values of equity securities and securities available for sale are determined by quoted prices in active markets, when available, and classified asLevel I. If quoted market prices are not available, the fair value is determined by a matrix pricing, which is a mathematical technique widely used in the industryto value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on the securities’ relationship to otherbenchmark quoted securities and classified as Level II. The fair values consider observable data that may include dealer quotes, market spreads, cash flows, theU.S. Treasury yield curve, live trading levels, trade execution data, market consensus prepayment speeds, credit information and the bond’s terms andconditions, among other things. The following tables present the assets reported on the consolidated balance sheet at their fair value on a recurring basis as of December 31, 2025 and 2024(in thousands) by level within the fair value hierarchy. Financial assets and liabilities are classified in their entirety based on the lowest level of input that issignificant to the fair value measurement. 2025 Level I Level II Level III Total Fair value measurements on a recurring basis: Assets Equity securities $ 1,815 $ - $ - $ 1,815 Available for sale securities: U.S. Agency securities - 49,755 - 49,755 U.S. Treasuries securities - 82,654 - 82,654 Obligations of state and political subdivisions - 115,886 - 115,886 Corporate obligations - 11,297 - 11,297 Mortgage-backed securities in government sponsored entities - 185,149 - 185,149 Other Assets Derivative instruments - 6,587 340 6,927 Liabilities Derivative instruments - (4,100) - (4,100) 2024 Level I Level II Level III Total Fair value measurements on a recurring basis: Assets Equity securities $ 1,747 $ - $ - $ 1,747 Available for sale securities: U.S. Agency securities - 53,487 - 53,487 U.S. Treasuries securities - 120,502 - 120,502 Obligations of state and political subdivisions - 94,902 - 94,902 Corporate obligations - 10,438 - 10,438 Mortgage-backed securities in government sponsored entities - 146,583 - 146,583 Other Assets Derivative instruments - 10,053 317 10,370 Liabilities Derivative instruments - (5,817) - (5,817) The following tables represent assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) at December 31, 2025 and2024 (in thousands): Level 3 IRLC - Asset IRLC - Liability Beginning Balance: December 31, 2024 $ 317 $ - Total gains (losses) (unrealized): Included in other comprehensive loss - - Total (loss) gains included in earnings and held at reporting date 23 - Purchases, sales and settlements - - Transfers out of Level 3 - - Ending Balance December 31, 2025 $ 340 $ - Change in unrealized (losses) gains for the period included in earnings (or changes in net assets) for assets held as ofDecember 31, 2025 $ 23 - Change in unrealized losses for the period included other comprehensive loss for assets held as of December 31, 2025 $ - - 107
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Index Level 3 IRLC - Asset IRLC - Liability Beginning Balance: December 31, 2023 $ 324 $ - Total gains (losses) (unrealized): Included in other comprehensive loss - - Total (loss) gains included in earnings and held at reporting date (7) - Purchases, sales and settlements - - Transfers out of Level 3 - - Ending Balance December 31, 2024 $ 317 $ - Change in unrealized (losses) gains for the period included in earnings (or changes in net assets) for assets held as ofDecember 31, 2024 $ (7) - Change in unrealized losses for the period included other comprehensive loss for assets held as of December 31, 2024 $ - - At December 31, 2025 and 2024, the Company has classified $340,000 and $317,000, respectively, of net derivative assets related to IRLC as Level 3. Thefair value of IRLCs is based on prices obtained for loans with similar characteristics from third parties, adjusted by the pull-through rate, which represents theCompany’s best estimate of the probability that a committed loan will fund. Significant unobservable inputs for assets and liabilities measured at fair value on a recurring basis at December 31, 2025 and 2024 (dollars in thousands): Quantitative Information about Level 3 Fair Value Measurements2025 Fair Value Valuation Technique(s) Unobservable input Range Weighted average Measured at Fair Value on a Recurring Basis: Net derivative asset and liability: IRLC 340 Discounted cashflows Pull-though rates 75.39%-97.16% 85.90% 2024 Measured at Fair Value on a Recurring Basis: Net derivative asset and liability: IRLC 317 Discounted cashflows Pull-though rates 76.35%-100.00% 89.65% Financial Instruments, Non-Financial Assets and Non-Financial Liabilities Recorded at Fair Value on a Nonrecurring Basis The Company may be required, from time to time, to measure certain financial assets, financial liabilities, non-financial assets and non-financial liabilitiesat fair value on a nonrecurring basis in accordance with U.S. generally accepted accounting principles. These include assets that are measured at the lower ofcost or market value that were recognized at fair value below cost at the end of the period. Certain non-financial assets measured at fair value on a non-recurringbasis include foreclosed assets (upon initial recognition or subsequent impairment), non-financial assets and non-financial liabilities measured at fair value inthe second step of a goodwill impairment test, and intangible assets and other non-financial long-lived assets measured at fair value for impairment assessment.Non-financial assets measured at fair value on a non-recurring basis during 2025 and 2024 include certain foreclosed assets which, upon initial recognition,were remeasured and reported at fair value through a charge-off to the allowance for possible credit losses and certain foreclosed assets which, subsequent totheir initial recognition, were remeasured at fair value through a write-down included in other non-interest expense. Assets measured at fair value on a nonrecurring basis as of December 31, 2025 and 2024 (in thousands) are included in the table below: 2025 Level I Level II Level III Total Collateral dependent loans $ - $ - $ 8,628 $ 8,628 Other real estate owned - - 2,358 2,358 108
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Index 2024 Level I Level II Level III Total Collateral dependent loans $ - $ - $ 3,579 $ 3,579 Other real estate owned - - 2,486 2,486 • Collateral-Dependent Loans (in accordance with ASC 326) - The Company records nonrecurring adjustments of collateral-dependent loans held forinvestment. Such amounts are generally based on the fair value of the underlying collateral supporting the loan. Appraisals are generally obtained tosupport the fair value of the collateral and incorporate measures that include recent sales prices for comparable properties and cost of construction.Periodically, in cases where the carrying value exceeds the fair value of the collateral less cost to sell, an impairment charge is recognized in the formof a charge-off. The fair values above excluded estimated selling costs of $259,000 at December 31, 2025. • Other Real Estate Owned – OREO is carried at the lower of cost or fair value, less estimated costs to sell, which is measured at the date of foreclosure.If the fair value of the collateral exceeds the carrying amount of the loan, no charge-off or adjustment is necessary, the loan is not considered to becarried at fair value, and is therefore not included in the table above. If the fair value of the collateral is less than the carrying amount of the loan,management will charge the loan down to its estimated realizable value. The fair value of OREO is based on the appraised value of the property, whichis generally unadjusted by management and is based on comparable sales for similar properties in the same geographic region as the subject property,and is included in the above table as a Level II measurement. In some cases, management may adjust the appraised value due to the age of theappraisal, changes in market conditions, or observable deterioration of the property since the appraisal was completed. In these cases, the loans arecategorized in the above table as a Level III measurement since these adjustments are considered to be unobservable inputs. Income and expenses fromoperations and further declines in the fair value of the collateral subsequent to foreclosure are included in net expenses from OREO. The following table provides a listing of the significant unobservable inputs used in the fair value measurement process for items valued utilizing level IIItechniques (dollars in thousands). Quantitative Information about Level 3 Fair Value Measurements2025 Fair Value Valuation Technique(s) Unobservable input Range Weighted average Collateral dependent loans 8,628 Appraised Collateral Values Discount for time since appraisal 0-100% 32.18% Selling costs 8%-10% 9.43% Holding period 1 - 12 months 11.62 months Other real estate owned 2,358 Appraised Collateral Values Discount for time since appraisal 7.5% 7.50% 2024 Fair Value Valuation Technique(s) Unobservable input Range Weighted average Collateral dependent loans 3,579 Appraised Collateral Values Discount for time since appraisal 0-100% 36.67% Selling costs 4%-12% 7.05% Holding period 1 - 12 months 11.04 months Other real estate owned 2,486 Appraised Collateral Values Discount for time since appraisal 20-32% 31.32% 109
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Index Financial Instruments Not Required to be Measured or Reported at Fair Value The carrying amount and fair value of the Company’s financial instruments that are not required to be measured or reported at fair value on a recurringbasis are as follows (in thousands): December 31, 2025 CarryingAmount Fair Value Level I Level II Level III Financial assets: Interest bearing time deposits with other banks $ 3,820 $ 3,802 $ - $ - $ 3,802 Loans held for sale 9,393 9,393 - - 9,393 Net loans 2,327,816 2,295,926 - - 2,295,926 Financial liabilities: Deposits 2,376,979 2,375,552 1,877,545 - 498,007 Borrowed funds 309,448 304,486 - - 304,486 December 31, 2024 Financial assets: Interest bearing time deposits with other banks $ 3,820 $ 3,820 $ - $ - $ 3,820 Loans held for sale 9,607 9,607 - - 9,607 Net loans 2,291,543 2,209,083 - - 2,209,083 Financial liabilities: Deposits 2,382,028 2,377,438 1,842,223 - 535,215 Borrowed funds 297,721 284,852 - - 284,952 Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. Theseestimates do not reflect any premium or discount that could result from offering for sale at one time the Company’s entire holdings of a particular financialinstrument. Because no market exists for a significant portion of the Company’s financial instruments, fair value estimates are based on judgments regardingfuture expected loss experience, current economic conditions, risk characteristics of various financial instruments and other factors. These estimates aresubjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptionscan significantly affect the estimates. Estimated fair values have been determined by the Company using historical data, as generally provided in the Company’s regulatory reports, and anestimation methodology suitable for each category of financial instruments. The carrying amounts for cash and cash equivalents, bank owned life insurance,regulatory stock, accrued interest receivable and payable approximate fair value and are considered Level I measurements. 21. SEGMENT REPORTING The Company’s reportable segment is determined by the Chief Executive Officer, who is the designated the chief operating decision maker, based uponinformation provided about the Company’s products and services offered, primarily banking operations. The segment is also distinguished by the level ofinformation provided to the chief operating decision maker, who uses such information to review performance of various components of the business such asbranches, which are then aggregated if operating performance, products/services, and customers are similar. The chief operating decision maker will evaluatethe financial performance of the Company’s business components such as by evaluating revenue streams, significant expenses, and budget to actual results inassessing the Company’s segment and in the determination of allocating resources. The chief operating decision maker uses revenue streams to evaluate productpricing and significant expenses to assess performance and evaluate return on assets. The chief operating decision maker uses consolidated net income tobenchmark the Company against its competitors. The benchmarking analysis coupled with monitoring of budget to actual results are used in assessmentperformance and in establishing compensation. Loans, investments, and deposits provide the revenues in the banking operation. Interest expense, provisions forcredit losses, payroll, and occupancy expenses provide the significant expenses in the banking operation. All operations are domestic. 110
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Index Accounting policies for the segment are the same as those described in Note 1. The measure of segment assets is reported on the balance sheet as totalconsolidated assets. Segment performance is evaluated using consolidated net income. Information reported internally for performance assessment by the chiefoperating decision maker follows, inclusive of reconciliations of significant segment totals to the consolidated financial statements (in thousands): Community Banking 2025 2024 2023 Total Interest and Dividend Income $ 159,168 $ 154,317 $ 127,118 Total non-interest income 14,344 15,401 11,605 Total Consolidated Revenues 173,512 169,718 138,723 Less: Interest Expense 61,167 67,862 46,858 Segment net interest income and non-interest income 112,345 101,856 91,865 Less: Provision for credit losses 2,375 2,587 5,528 Salaries and employee benefits 39,402 39,347 34,990 Occupancy 5,299 5,013 4,123 Other segment expenses 20,181 21,226 25,709 Income Taxes 8,516 5,865 3,704 Segment net income/consolidated net income $ 36,572 $ 27,818 $ 17,811 22. CONDENSED FINANCIAL INFORMATION - PARENT COMPANY ONLY The following is condensed financial information for Citizens Financial Services, Inc.: CITIZENS FINANCIAL SERVICES, INC.CONDENSED BALANCE SHEET December 31, (in thousands) 2025 2024 Assets: Cash $ 2,904 $ 1,743 Investments 1,682 1,599 Investment in subsidiary: First Citizens Community Bank 358,001 328,190 Other assets 3,342 3,389 Total assets $ 365,929 $ 334,921 Liabilities: Other liabilities $ 730 $ 840 Borrowed funds 27,148 34,348 Total liabilities 27,878 35,188 Stockholders’ equity 338,051 299,733 Total liabilities and stockholders’ equity $ 365,929 $ 334,921 CITIZENS FINANCIAL SERVICES, INC.CONDENSED STATEMENT OF INCOME Year Ended December 31, (in thousands) 2025 2024 2023 Dividends from: Bank subsidiary $ 21,053 $ 16,676 $ 13,213 Equity securities 101 98 113 Interest income 6 12 20 Total income 21,160 16,786 13,346 Realized securities gains (losses) 83 153 (209)Expenses 3,087 2,427 3,130 Income before equity in undistributed earnings of subsidiary 18,156 14,512 10,007 Equity in undistributed earnings - First Citizens Community Bank 18,416 13,306 7,804 Net income $ 36,572 $ 27,818 $ 17,811 Comprehensive income $ 47,716 $ 29,208 $ 26,041 111
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Index CITIZENS FINANCIAL SERVICES, INC.STATEMENT OF CASH FLOWS Year Ended December 31, (in thousands) 2025 2024 2023 Cash flows from operating activities: Net income $ 36,572 $ 27,818 $ 17,811 Adjustments to reconcile net income to net cash provided by operating activities: Equity in undistributed earnings of subsidiaries (18,416) (13,306) (7,804)Investment securities losses (gains), net (83) (153) 209 Other, net 685 (84) (206) Net cash provided by operating activities 18,758 14,275 10,010 Cash flows from investing activities: Proceeds from the sale of equity securities - 335 127 Investment in subsidiaries - - (15,000)Acquisition of HVB - - (10,780) Net cash provided by (used in) investing activities - 335 (25,653) Cash flows from financing activities: Cash dividends paid (9,548) (9,302) (8,503)(Repayment) Issuance of short-term debt (7,572) (5,000) 12,572 Purchase of treasury stock (358) (202) (265)Sale of treasury stock - - 34 Issuance of common stock for employee stock purchase plan 68 16 - Purchase of restricted stock (187) (64) - Net cash (used in) provided by financing activities (17,597) (14,552) 3,838 Net increase (decrease) in cash 1,161 58 (11,805)Cash at beginning of year 1,743 1,685 13,490 Cash at end of year $ 2,904 $ 1,743 $ 1,685 112
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Index ITEM 9 – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. ITEM 9A – CONTROLS AND PROCEDURES. As of the end of the period covered by this Annual Report on Form 10-K, an evaluation was carried out by our management, with the participation of ourChief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under theSecurities Exchange Act of 1934). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controlsand procedures were effective as of the end of the period covered by this report. No changes were made to our internal control over financial reporting (asdefined in Rule 13a-15(f) under the Securities Exchange Act of 1934) during the last fiscal quarter that materially affected, or are reasonably likely to materiallyaffect, our internal control over financial reporting. MANAGEMENT’S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate. A material weakness is a significant deficiency (as defined in Public Company Accounting Oversight Board Auditing Standard No. 5), or a combination ofsignificant deficiencies, that results in there being more than a remote likelihood that a material misstatement of the annual or interim financial statements willnot be prevented or detected on a timely basis by management or employees in the normal course by management or employees in the normal course ofperforming their assigned functions. Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2025. Management’s assessment didnot identify any material weaknesses in the Company’s internal control over financial reporting. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) inthe 2013 Internal Control-Integrated Framework. Because there were no material weaknesses discovered, management believes that, as of December 31, 2025,the Company’s internal control over financial reporting was effective. The Company’s independent registered public accounting firm that audited the consolidated financial statements has issued an audit report on the effectiveoperation of the Company’s internal control over financial reporting as of December 31, 2025, and this report is included in this Item under the heading“Attestation Report of Independent Registered Public Accounting Firm.” /s/ Randall E. BlackBy: Randall E. BlackChief Executive Officer and President(Principal Executive Officer)Date: March 12, 2026 /s/ Stephen J. GuillaumeBy: Stephen J. GuillaumeChief Financial Officer(Principal Financial & Accounting Officer)Date: March 12, 2026 113
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Index Attestation Report of Independent Registered Public Accounting Firm REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Citizens Financial Services, Inc. Opinion on Internal Control over Financial Reporting We have audited Citizens Financial Services, Inc. and subsidiaries (the “Company”)’s internal control over financial reporting as of December 31, 2025, basedon criteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission in2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, based oncriteria established in Internal Control – Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balancesheets of the Company as of December 31, 2025 and 2024; and the related consolidated statements of income, comprehensive income, changes in stockholders’equity, and cash flows for each of the three years in the period ended December 31, 2025, of the Company; and our report dated March 12, 2026, expressed anunqualified opinion. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting. Our responsibility isto express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with thePCAOB and are required to be independent, with respect to the Company, in accordance with U.S. federal securities laws and the applicable rules andregulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining anunderstanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in thecircumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting andthe preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control overfinancial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflectthe transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparationof financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only inaccordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliancewith the policies or procedures may deteriorate. /s/S.R. Snodgrass, P.C. Cranberry Township, PennsylvaniaMarch 12, 2026 114
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Index ITEM 9B – OTHER INFORMATION. During the three months ended December 31, 2025, none of the Company’s directors or executive officers adopted or terminated any contract, instructionor written plan for the purchase or sale of the Company’s securities that was intended to satisfy the affirmative defense conditions of SEC Rule 10b5-1(c) or any“non-Rule 10b5-1 trading arrangement “ (as such term is defined in Item 408 of SEC Regulation S-K). ITEM 9C – DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not applicable 115
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Index PART III ITEM 10 – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE Directors For information relating to the directors of the Company, the section captioned “Proposal 1. Election of Directors” in the Company’s Proxy Statementfor the 2026 Annual Meeting of Stockholders (the “2026 Proxy Statement”) is incorporated by reference. Executive Officers For information relating to officers of the Company, the section captioned “Proposal 1. Election of Directors” in the 2026 Proxy Statement isincorporated by reference. Compliance with Section 16(a) of the Exchange Act For information regarding compliance with Section 16(a) of the Exchange Act, the section captioned “Other Information Relating to Directors andExecutive Officers - Section 16(a) Beneficial Ownership Reporting Compliance” in the Company’s 2026 Proxy Statement is incorporated by reference. Disclosure of Code of Ethics The Company has adopted a Code of Ethics that applies to directors, officers and employees of the Company and the Bank. A copy of the Code of Ethicsis posted on the Company’s website at www.firstcitizensbank.com. The Company intends to satisfy the disclosure requirement of Form 8-K regarding anamendment to, or a waiver from, a provision of its Code of Ethics by posting such information on its website. Corporate Governance For information regarding the audit committee and its composition and the audit committee financial expert, the section captioned “CorporateGovernance – Committees of the Board of Directors” in the Company’s 2026 Proxy Statement is incorporated by reference. Insider Trading Policy The Company has adopted an Insider Trading Policy governing the purchase, sale and/or other dispositions of the Company’s securities by its directors,officers and employees and by the Company itself. A copy of the Insider Trading Policy is filed as an exhibit to this Annual Report on Form 10-K. ITEM 11 – EXECUTIVE COMPENSATION Executive Compensation For information regarding executive and director compensation, the sections captioned “Director Compensation”, “Executive Compensation”,“Compensation Discussion and Analysis” and “Compensation Committee Report” in the Company’s 2026 Proxy Statement are incorporated by reference. ITEM 12 – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERSMATTERS (a) Security Ownership of Certain Beneficial Owners Information required by this item is incorporated herein by reference to the sectioncaptioned “Stock Ownership” in the Company’s 2026 Proxy Statement. (b) Security Ownership of Management Information required by this item is incorporated herein by reference to the section captioned “StockOwnership” in the Company’s 2026 Proxy Statement. (c) Changes in ControlManagement of the Company knows of no arrangements, including any pledge by any person or securities of the Company, the operation ofwhich may at a subsequent date result in a change in control of the registrant. 116
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Index (d) Equity Compensation Plan InformationThe following table sets forth information as of December 31, 2025 about Company common stock that may be issued under the Company’s2016 Restricted Stock Plan. The plan was approved by the Company’s stockholders. Plan Category Number ofsecurities to beissued upon theexercise ofoutstandingoptions, warrantsand rights Weighted-averageexercise price ofoutstandingoptions, warrantsand rights Number of securitiesremaining availablefor future issuanceunder equitycompensation plans(excluding securitiesreflected in the firstcolumn) Equity compensation plans approved by security holders n/a n/a 99,781 Equity compensation plans not approved by security holders n/a n/a n/a Total n/a n/a 99,781 ITEM 13 – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE Certain Relationships and Related Transactions For information regarding certain relationships and related transactions, the section captioned “Other Information Relating to Directors and ExecutiveOfficers - Transactions with Related Persons” in the Company’s 2026 Proxy Statement is incorporated by reference. Director Independence For information regarding director independence, the section captioned “Corporate Governance – Director Independence” in the Company’s 2026 ProxyStatement is incorporated by reference. ITEM 14 – PRINCIPAL ACCOUNTANT FEES AND SERVICES For information regarding the principal accountant fees and expenses the section captioned “Audit – Related Matters” in the Company’s 2026 ProxyStatement is incorporated by reference. 117
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Index PART IV ITEM 15 – EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) The following documents are filed as a part of this report: 1. The following financial statements are incorporated by reference in Item 8: Report of Independent Registered Public Accounting Firm (PCAOB ID 74)Consolidated Balance Sheet as of December 31, 2025 and 2024Consolidated Statement of Income for the Years Ended December 31, 2025, 2024 and 2023Consolidated Statement of Comprehensive Income for the Years Ended December 31, 2025, 2024 and 2023Consolidated Statement of Changes in Stockholders’ Equity for the Years Ended December 31, 2025, 2024 and 2023Consolidated Statement of Cash Flows for the Years Ended December 31, 2025, 2024 and 2023Notes to Consolidated Financial Statements 2. All financial statement schedules are omitted because the required information is either not applicable, not required or is shown in the respective financialstatement or in the notes thereto, which are incorporated by reference at subsection(a)(1) of this item. 3. The following Exhibits are filed herewith, or incorporated by reference as a part of this report 3.1 Restated Articles of Incorporation of Citizens Financial Services, Inc.(1) 3.2 Articles of Amendment of Restated Articles of Incorporation of Citizens Financial Services, Inc. (2) 3.3 Bylaws of Citizens Financial Services, Inc.(3) 3.4 Amendment No. 1 to Amended and restated Bylaws of Citizens Financial Services, Inc. (4) 4.1 Form of Common Stock Certificate of Citizens Financial Services, Inc (5) 4.2 Form of Subordinated Note – Citizens Financial Services, Inc. (6) 4.3 Form of Subordinated Note – HV Bancorp, Inc. (7) 10.1 *Amended and Restated Executive Employment Agreement between Citizens Financial Services, Inc., First Citizens CommunityBank and Randall E. Black(8) 10.2 *Citizens Financial Services, Inc. Directors’ Deferred Compensation Plan(9) 10.3 *Citizens Financial Services, Inc. Directors’ Life Insurance Program(10) 10.4 *Supplemental Executive Retirement Plan(11) 10.5 *Second Amendment to First Citizens Community Bank Supplemental Executive Retirement Plan(12) 10.6 *Change in Control Agreement, between First Citizens Community Bank, Citizens Financial Services, Inc. (as guarantor) andJeffrey R, White 10.7 *First Citizens Community Bank Annual Incentive Plan (13) 10.8 *Amended and Restated First Citizens Community Bank Annual Incentive Plan(14) 10.9 *First Citizens Community Bank Endorsement Split-Dollar Life Insurance Plan (15) 10.10 Citizens Financial Services, Inc. 2016 Equity Incentive Plan (16) 10.11 *Change in Control Agreement, between First Citizens Community Bank, Citizens Financial Services, Inc. (as guarantor) andJeffrey L. Wilson (17) 10.12 *Change in Control Agreement, between First Citizens Community Bank, Citizens Financial Services, Inc. (as guarantor) andDavid Z. Richards, Jr. (18) 10.13 *First Citizens Community Bank Executive Deferred Compensation Plan (19) 10.14 *Amended and Restated First Citizens Community Bank Executive Deferred Compensation Plan (20) 10.15 *First Citizens Community Bank Long Term Incentive Plan (21) 10.16 *Change in Control Agreement, between First Citizens Community Bank, Citizens Financial Services, Inc. (as guarantor) andStephen J. Guillaume(22) 10.17 2023 Employee Stock Purchase Plan(23) 19 Insider Trading Policy
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Index 21 List of Subsidiaries 23 Consent of S.R. Snodgrass, P.C., Independent Registered Public Accountants 31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer 31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer 32.1 Section 1350 Certification of Chief Executive Officer 32.2 Section 1350 Certification of Chief Financial Officer 97 Citizens Financial Services, Inc. Clawback Policy 101 The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, formatted inXBRL (Extensible Business Reporting Language): (i) The Consolidated Balance Sheet, (ii) the Consolidated Statement of Income,(iii) the Consolidated Statement of Comprehensive Income, (iv) the Consolidated Statement of Changes in Stockholders’ Equity,(v) the Consolidated Statement of Cash Flows and (vi) related notes. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) *Management contract or compensatory plan, contract or arrangement (1) Incorporated by reference to Exhibit 3.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, as filed withthe Commission on August 9, 2018. (2) Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, as filed with the Commission on April 26, 2021. (3) Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, as filed with the Commission on December 17,2020. (4) Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K, as filed with the Commission on November 23,2022 (5) Incorporated by reference to Exhibit 4 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, as filedwith the Commission on March 9, 2023. (6) Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the Commission on April 16, 2021. (7) Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K of HV Bancorp, Inc. as filed with the Commissionon June 01, 2021. (8) Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, as filedwith the Commission on August 9, 2012. (9) Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, as filed withthe Commission on August 8, 2019. (10) Incorporated by reference to Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004, asfiled with the Commission on March 15, 2005. (11) Incorporated by reference to Exhibit 10.6 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012, asfiled with the Commission on March 7, 2013. (12) Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, asfiled with the Commission on November 4, 2021. 119
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Index (13) Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013, as filed withthe Commission on August 8, 2013. (14) Incorporated by reference to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, asfiled with the Commission on November 7, 2024 (15) Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K, as filed with the Commission on January 7, 2015. (16) Incorporated by reference to Exhibit A to the Company’s definitive proxy statements for the 2016 Annual Meeting of Shareholders, as filedwith the Commission on March 10, 2016. (17) Incorporated by reference to Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, asfiled with the Commission on March 6, 2025. (18) Incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K, as filed with the Commission on January 3, 2025. (19) Incorporated by reference to Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018, asfiled with the Commission on March 7, 2019. (20) Incorporated by reference to Exhibit 10.15 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021, asfiled with the Commission on March 10, 2022 (21) Incorporated by reference to Exhibit 10.13 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2019, asfiled with the Commission on March 12, 2020. (22) Incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K, as filed with the Commission on January 3, 2025. (23) Incorporated by reference to Exhibit 10.1 to the Company’s Form S-8, as filed with the Commission on October 22, 2024. ITEM 16 – FORM 10-K SUMMARY Not Applicable. 120
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Index SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized. Citizens Financial Services, Inc. (Registrant)/s/ Randall E. BlackBy: Randall E. BlackChief Executive Officer and President(Principal Executive Officer)Date: March 12, 2026 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant andin the capacities and on the dates indicated. Signature and Capacity Date /s/ Randall E. Black March 12, 2026Randall E. Black, Chief Executive Officer, President and Director (Principal Executive Officer) /s/ Stephen J. Guillaume March 12, 2026Stephen J. Guillaume, Chief Financial Officer (Principal Financial & Accounting Officer) /s/ Robert W. Chappell March 12, 2026Robert W. Chappell, Director /s/ R. Joseph Landy March 12, 2026R. Joseph Landy, Director /s/ Roger C. Graham, Jr. March 12, 2026Roger C. Graham, Director /s/ Rinaldo A. DePaola March 12, 2026Rinaldo A. DePaola, Director /s/ Thomas E. Freeman March 12, 2026Thomas E. Freeman, Director /s/ Christopher W. Kunes March 12, 2026Christopher W. Kunes /s/ David Z, Richards, Jr. March 12, 2026David Z. Richards, Jr., Director /s/ Mickey L. Jones. March 12, 2026Mickey L. Jones, Director /s/ Janie M Hifiger March 12, 2026Janie M Hilfiger, Director /s/ Terry B, Osborne March 12, 2026Terry B. Osborne, Director /s/ John P, Painter II March 12, 2026/s/ John P, Painter II, Director /s/ Joseph B. Bower Jr March 12, 2026Joseph B. Bower Jr, Director 121
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Exhibit 10.6 CHANGE IN CONTROL SEVERANCE AGREEMENT This CHANGE IN CONTROL SEVERANCE AGREEMENT (this “Agreement”) is hereby entered into as of December 18, 2025 (the “Effective Date”), by and between FIRST CITIZENS COMMUNITY BANK (the “Bank”), CITIZENS FINANCIAL SERVICES, INC. (the “Company”), the holding company of the Bank, as guarantor, and Jeffrey R. White (“Executive”). WHEREAS, the Board of Directors of the Bank has determined that it is in the best interests of the Bank and the Company (i) to recognize the importance of Executive to the Bank’s operations, and (ii) in the event of a Change in Control (as defined in Section 4), to encourage Executive’s full attention and dedication to the Company and the Bank and to protect Executive’s position with the Bank for the period provided for in this Agreement; and WHEREAS, Executive, the Bank, and the Company desire to enter into an agreement setting forth the terms and conditions of payments due to Executive in the event of a Change in Control and the related rights and obligations of each of the parties. NOW, THEREFORE, in consideration of the mutual promises, covenants, representations and warranties herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed as follows: 1. Term of Agreement. This Agreement shall commence on the Effective Date and shall terminate upon the earlier to occur of: (i) the date of Executive’s termination of employment (the “Termination Date”) with the Company or the Bank for any reason other than a Qualifying Termination (as defined in Section 4) whether prior to or following the consummation of a Change in Control, and (ii) the expiration of the Post-CIC Period (as defined in Section 4) with respect to the first Change in Control to occur after the Effective Date; provided, however, that if Executive incurs a Qualifying Termination during such Post-CIC Period, this Agreement shall continue in full force and effect until such time as all obligations of the Company and the Bank hereunder have been fulfilled and all benefits required hereunder have been paid or provided to Executive. 2. Accrued Compensation. If Executive’s employment is terminated for any reason during the term of this Agreement, the Bank shall pay or provide to Executive (or Executive’s beneficiary or estate, as applicable), the Accrued Compensation. For purposes of this Agreement, “Accrued Compensation” shall mean all amounts that have accrued to the benefit of Executive through his or her termination of employment but have not been paid including: (i) base salary, (ii) reimbursement for reasonable and necessary expenses incurred by Executive on behalf of the Company, the Bank or any of its subsidiaries or affiliates during the period ending on the Termination Date, and (iii) vacation and sick leave pay (to the extent provided by Bank policy or applicable law), with all amounts owed to Executive under each of (i), (ii), and (iii) payable in a single lump sum cash payment no later than the Bank’s first regularly scheduled payroll date after the Termination Date (unless required to be paid earlier by applicable law), and (iv) any amounts that are vested benefits or that Executive is otherwise entitled to receive under any plan, policy, practice, or program of, or any other contract or agreement with, the Company or the Bank at or subsequent to the Termination Date, payable in accordance with such plan, policy, practice, or program, contract, or agreement. 1
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3. Change in Control Severance Benefits. (a) During the period of time from the date of execution of an agreement to effect a Change in Control and up until the day immediately prior to the Date of the Change in Control (the “Pre-CIC Period”) and from the Date of the Change in Control through the date that is two (2) years after the Date of the Change in Control (the “Post-CIC Period”), if Executive experiences a Qualifying Termination, then subject to the terms of this Agreement and Executive’s continued compliance with Sections 7, 8 and 9, in addition to the Accrued Compensation, but in lieu of any other severance or payments or benefits Executive may be entitled to under any agreement or arrangement: (i) The Bank shall pay to Executive a lump sum cash payment in an amount equal to (A) 1x, multiplied by (B) the sum of Executive’s Base Salary and Average Bonus. (ii) The Bank shall pay to Executive a lump sum cash payment in an amount equal to Executive’s Pro Rata Bonus. (iii) In addition, for a period of 18 months following the Termination Date, or until Executive secures substantially similar benefits through other employment, whichever shall first occur, Executive shall receive a continuation of health care insurance under the same terms and conditions Executive received such coverage prior to the Termination Date, or if the Company or the Bank cannot provide such benefits under the terms of the plans or contracts, the Company or the Bank shall pay to Executive, in monthly installments during such periods, a dollar amount equal to the cost to Executive of obtaining such benefits (or substantially similar benefits), not to exceed 125% of the cost to the Company or the Bank of obtaining such benefits (or substantially similar benefits). (iv) All outstanding, unvested equity or equity-based incentive awards with respect to the equity securities of the Company or any successor in connection with such Change in Control (including, without limitation, stock options, restricted stock, and restricted stock units) held by Executive (A) that are subject solely to time-based vesting requirements as of the Termination Date will vest in full as of the later of the date of the Qualifying Termination or as of immediately prior to the consummation of the Change in Control and (B) that are subject to performance-based vesting requirements, will vest in accordance with the award agreement governing such award. (b) The Company’s or Bank’s obligation to pay or provide Executive the payments and benefits set forth in Section 3(a) (collectively, the “Severance Benefits”) shall be subject to, contingent upon, and in consideration of Executive’s execution and non- revocation of a general waiver and release of claims in a form satisfactory to the Company and the Bank (the “Release”) within sixty (60) days following the Termination Date (the “Release Consideration Period”), which Release shall, for the avoidance of doubt, include reaffirmation of the continuing obligations set forth in Sections 7, 8 and 9 below. Accordingly, the amounts provided for, if any, (i) in Sections 3(a)(i) and 3(a)(ii) shall be paid to Executive in a single lump sum cash payment on the first regularly scheduled payroll date following the effective date of the Release, provided that (A) if the Release Consideration Period crosses two calendar years, such payment shall be made no earlier than the second calendar year if necessary to comply with Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”) and (B) such payment shall be made no later than March 15th of the calendar year that follows the calendar year that includes the Termination Date, and (ii) in Section 3(a)(iii) shall commence as the first regularly scheduled payroll date following the effective date of the Release, with reimbursement as of such date for costs that otherwise would have been covered by Section 3(a)(iii) had such benefits commenced as of the Termination Date. 2
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(c) The Company’s or Bank’s obligation to pay or provide the Severance Benefits shall not be affected by any set- off, counterclaim, recoupment, defense, or other claim, right, or action which the Company may have against Executive or others, except that Executive shall not be entitled to any Severance Benefits if Executive violates any of the restricted covenants set forth in Sections 7, 8 and 9, and the Company and/or the Bank shall be entitled to recoup any Severance Benefits already paid to Executive in the event of Executive’s violation of the restricted covenants in Sections 7, 8 and 9. In no event shall Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to Executive under any of the provisions of this Agreement, and except as set forth in Section 3(a)(iii), such amounts shall not be reduced whether or not Executive obtains other employment. 4. Definitions. (a) “Average Bonus” means the average of the annual cash incentive bonuses paid to Executive with respect to the three (3) consecutive calendar years immediately prior to the calendar year in which the Termination Date occurs. For purposes of calculating Average Bonus, (i) if Executive has been employed by the Bank for less than three (3) full calendar years, Executive’s Average Bonus shall be based on the number of full calendar years in which Executive was an employee of the Bank, (ii) if Executive has been employed by the Bank for less than a full calendar year, Executive’s Average Bonus shall be Executive’s target annual cash incentive bonus opportunity for such calendar year, and (iii) if the Termination Date is following the end of a calendar year but prior to payment of the annual cash incentive bonus for such calendar year, the annual cash incentive bonus deemed paid for such year shall be Executive’s target annual cash incentive bonus opportunity for such calendar year. (b) “Base Salary” means (i) Executive’s then-current annual base salary, or (ii) for a Qualifying Termination during the Post-CIC Period, the higher of Executive’s then-current annual base salary and Executive’s annual base salary as of immediately prior to the Date of the Change in Control. For purposes of calculating Base Salary, if Executive’s Qualifying Termination is for Good Reason as a result of a material reduction in his or her base salary, Base Salary shall be the annual base salary in effect as of immediately prior to such reduction. (c) “Cause” means: (i) the willful failure by Executive to substantially perform his or her duties (other than a failure resulting from Executive’s incapacity because of physical or mental illness); (ii) the willful engaging by Executive in misconduct injurious to the Company or the Bank; (iii) the willful dishonesty or gross negligence of Executive in the performance of Executive’s duties; (iv) the breach of Executive’s fiduciary duty involving personal profit to the Company or the Bank; (v) the material violation of any law, rule or regulation governing banks or bank officers or any final cease and desist order issued by a bank regulatory authority; (vi) conduct on the part of Executive which brings public discredit to the Company or the Bank; (vii) unlawful discrimination by Executive, including, harassment against the Company’s or the Bank’s employees, customers, business associates, contractors, or visitors; (viii) theft or abuse by Executive of the Company’s or the Bank’s property or the property of the Company’s or the Bank’s customers, employees, contractors, vendors, or business associates; (ix) willful failure of Executive to follow the good faith lawful instructions of the board of directors of the Company or the Bank with respect to its operations; (x) the direction or recommendation of a state or federal bank regulatory authority to remove Executive’s position with the Company and/or the Bank; (xi) any final removal or prohibition order to which Executive is subject by a federal banking agency pursuant to Sections 8(e) and 8(g) of the Federal Deposit Insurance Act; (xii) Executive’s conviction of or plea of guilty or nolo contendere to a felony, crime of falsehood, or a crime involving moral turpitude, or the actual incarceration of Executive; (xiii) any act of fraud or misappropriation; (xiv) willful insubordination in the course of Executive’s employment with the Company or the Bank; (xv) willful misrepresentation of a material fact, or omission of information necessary to make the information supplied not materially misleading, in an application or other information provided by Executive to the Company or the Bank or any representative of the Company or the Bank in connection with Executive’s employment with the Company or the Bank; (xvi) the existence of any material conflict between the interests of the Company or the Bank and Executive, that Executive is aware of, that is not disclosed in writing by Executive to the Company or the Bank and approved in writing by the board of directors of the Company or the Bank; (xvii) Executive takes action that is clearly contrary to the best interest of the Company or the Bank; or (xviii) Executive’s material violation of any written agreement with the Company or Bank or any material violation of any Company or Bank written policy or code of conduct. 3
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In the case of a failure to comply or breach as described in subsections (i), (ii), (iii), (v), (vi), (ix), (xii), (xvi), (xvii), or (xviii) above during the Post-CIC Period, if such failure to comply or breach is capable of being cured (as determined by the Company or the Bank, in their sole discretion), Executive shall be given thirty (30) days from the date Executive is notified in writing of such failure or breach in which to cure such failure or breach before the Company or the Bank may terminate Executive’s employment for Cause. (d) “Change in Control” shall have the meaning ascribed in the Company’s 2016 Equity Incentive Plan, as amended from time to time, or any successor plan. (e) “Date of the Change in Control” shall mean the date on which the consummation of a Change in Control occurs. (f) “Good Reason” means, without Executive’s express prior written consent, the occurrence of any of the following events: (i) a material diminution in Executive’s authority, duties, or responsibilities (excluding any change in Executive’s title) with the Company or the Bank as in effect immediately prior to the Change in Control (including, without limitation, a material adverse change in Executive’s reporting relationship after the Change in Control, as a result of the Company’s stock ceasing to be publicly traded, of the Company’s becoming a subsidiary of another entity, or otherwise); (ii) a material diminution in Executive’s annual base salary or target bonus opportunity; (iii) a material diminution in the budget over which Executive retains authority; (iv) any requirement that Executive be based more than fifty (50) miles from the location where Executive is based as of immediately prior to the Change in Control (excluding reasonable business travel to the extent substantially consistent with Executive’s authority, duties, or responsibilities with the Company or Bank prior to the Change in Control); (v) the failure of the Company or Bank to obtain the assumption agreement from any successor as contemplated in Section 11 or any other material breach of this Agreement (or other material agreement between the Company or Bank and Executive); provided, however, that Good Reason shall not exist unless (A) Executive provides written notice to the Company or Bank within sixty (60) days following the initial occurrence of any of the events described in clauses (i)-(v); (B) the Company or Bank fails to cure the event or circumstances within thirty (30) days after receipt of such notice (the “Good Reason cure period”); and (C) if not cured, Executive’s termination of employment is effective within thirty (30) days following the end of the Good Reason cure period. 4
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(g) “Pro Rata Bonus” means (i) the annual cash incentive bonus that was paid to Executive with respect to the calendar year prior to the calendar year in which the Termination Date occurs (provided, if Executive has been employed by the Bank for less than a full calendar year or if the Termination Date is following the end of a calendar year but prior to payment of the annual cash incentive bonus for such calendar year, the annual cash incentive bonus deemed paid shall be Executive’s target annual cash incentive bonus opportunity), multiplied by (ii) a fraction, the numerator of which is the number of days from the first day of the performance period applicable to such annual cash incentive bonus to and including the Termination Date, and the denominator of which is the total number of days in such performance period. (h) “Qualifying Termination” means: (i) during the Pre-CIC Period, a termination of Executive’s employment by the Company or the Bank without Cause and (ii) during the Post-CIC Period, a termination of Executive’s employment (A) by the Company or the Bank without Cause or (B) by Executive for Good Reason. In no event shall a Qualifying Termination include a termination of Executive’s employment (1) by the Company or the Bank for Cause, (2) by Executive for any reason other than Good Reason, or (3) on account of retirement, death or disability. 5. Source of Payments. The Bank shall make all payments provided for under this Agreement. The Company, however, unconditionally guarantees all amounts and benefits due to Executive, and if the Bank does not timely pay or provide such amounts and benefits, the Company shall pay or provide such amounts and benefits. 6. Withholding. The Company or the Bank shall have the authority and right to withhold an amount sufficient to satisfy federal, state and local taxes or other deductions required by applicable law to be withheld with respect to any payments or benefits under this Agreement. 7. Restrictive Covenants. (a) Generally. Executive understands and agrees that Executive will occupy a position of trust and confidence with respect to the Company’s business affairs and the business affairs of the Bank and each of their respective affiliates (the “Affiliates”), and Executive will be privy to non-public information relating to the Company, the Bank and the Affiliates, including Confidential Information, as defined herein. In consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Executive agrees to comply with the restrictive covenants set forth in this Agreement and any other agreement with the Company, the Bank or the Affiliates, which such covenants are additional and not alternative to the restrictive covenants herein, and are not superseded by this Agreement. Without limiting the foregoing obligations, Executive agrees to the following subsections of this Section 7 and the other restrictive covenants in this Agreement. The restrictive covenants set forth in this Section 7 apply during Executive’s employment with the Company, the Bank and/or the Affiliates, and during the Non-Solicitation Restricted Period or the Non-Competition Restricted Period (as applicable). The “Non-Competition Restricted Period” shall mean the period beginning on the Effective Date and ending twelve (12) months following the Termination Date (regardless of the reason for Executive’s termination). The “Non-Solicitation Restricted Period” shall mean the period beginning on the Effective Date and ending eighteen (18) months following the Termination Date (regardless of the reason for Executive’s termination). If Executive violates the terms of any of the restrictions set forth in this Section 7, the Non-Solicitation Restricted Period or Non-Competition Restricted Period (as applicable) shall automatically be extended by the period Executive was in violation. 5
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(b) Non-Competition. During the Non-Competition Restricted Period, Executive shall not, without prior written approval of the Company or the Bank, directly or indirectly engage in, have any equity interest in, manage, operate, control, work for, provide services to, be employed by, advise, assist, or take similar action in connection with, any person, firm, corporation, partnership, business, other entity, or business enterprise (whether as director, officer, employee, agent, representative, partner, security holder, consultant, advisor, or otherwise, including advising industry groups or organizations that contain competitors or potential competitors), in any county in the United States in which a branch or office of the Company or the Bank is located or within a seventy-five (75) mile radius of any branch or office of the Company or the Bank, that engages, in a manner and to an extent materially competitive with the Company, or the Bank, in any aspect of the Company’s or the Bank’s business as conducted during the two (2) year period immediately prior to the Termination Date (each, a “Competing Business”), where Executive’s action or involvement relates to the activities and services Executive provided during Executive’s employment with the Company, the Bank and/or the Affiliates, or involves Executive’s knowledge of Confidential Information; provided that the foregoing shall not limit Executive from making passive investments of less than five percent (5%) of the outstanding equity securities in any entity listed for trading on a national stock exchange or quoted on any recognized automatic quotation system, so long as Executive is not a controlling person of, or a member of a group that controls, such entity. For purposes of this Agreement, it is understood and agreed that the Company’s business currently includes banking and financial services, including bank holding companies, and a business that engages in similar activities is a Competing Business. The Company, the Bank and Executive understand and acknowledge that the scope and nature of the Company’s and the Bank’s business, products, and services may change over time, and the scope of this provision will change to cover any changes in the Company’s and the Bank’s business, products, or services during Executive’s employment. (c) Non-Solicitation of Customers, Vendors, Suppliers, and Investors. During the Non-Solicitation Restricted Period, Executive shall not, without prior approval of the Company or the Bank, on behalf of Executive or any other individual or entity, directly or indirectly solicit or encourage any person or entity who is a customer, client, vendor, supplier, or investor of the Company, the Bank or the Affiliates (or that the Company, the Bank or the Affiliates were pursuing as a potential customer, client, vendor, supplier, or investor within the twelve (12) months prior to Executive’s action) and with whom Executive, in connection with Executive’s employment with the Company or the Bank, had contact or about whom Executive gained Confidential Information to: (i) terminate, reduce, or alter in a manner adverse to the Company, the Bank or the Affiliates any existing business arrangement with the Company, the Bank, or the Affiliates; (ii) transfer existing business from the Company, the Bank or the Affiliates to any other person; (iii) obtain from a person or entity other than the Company, the Bank or the Affiliates the same or similar services or products as provided by the Company, the Bank or the Affiliates; or (iv) invest in or purchase a Competing Business. (d) Non-Solicitation of Employees, Consultants, and Advisors. During the Non-Solicitation Restricted Period, Executive shall not, without prior approval of the Company or the Bank, on behalf of Executive or any other individual or entity, directly or indirectly solicit or encourage any individual who is employed by the Company, the Bank or the Affiliates or engaged by the Company, the Bank or the Affiliates as a consultant or advisor or similar role (or who was so employed or engaged within twelve (12) months prior to Executive’s action) to: (i) terminate or refrain from continuing such employment or engagement; (ii) become employed by or enter into a consultancy or similar relationship with any individual or entity other than the Company, the Bank or the Affiliates; or (iii) take any other action that Executive would be prohibited from taking, provided that the foregoing shall not prohibit general solicitations which are not targeted at the Company, the Bank or the Affiliates or any employee/consultant or group of employees/consultants thereof. 6
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8. Non-Disclosure of Proprietary Information. (a) Except as required in the faithful performance of Executive’s duties as an Executive of the Company, the Bank or the Affiliates, or except as provided below, Executive shall, in perpetuity, maintain in confidence and shall not directly, indirectly, or otherwise use, disseminate, disclose or publish, or use for Executive’s benefit or the benefit of any person, firm, corporation or other entity other than the Company, the Bank, or the Affiliates, any confidential or proprietary information of or relating to the Company, the Bank or the Affiliates, including, without limitation, all information not generally known to the public, in spoken, printed, electronic or any other form or medium, relating directly or indirectly to: business processes, practices, methods, policies, plans, publications, documents, research, operations, services, strategies, techniques, agreements, contracts, terms of agreements, transactions, potential transactions, negotiations, pending negotiations, know-how, trade secrets, computer programs, computer software, applications, operating systems, software design, web design, work-in-process, databases, manuals, records, articles, systems, material, sources of material, supplier information, vendor information, financial information, results, accounting information, accounting records, legal information, marketing information, advertising information, pricing information, credit information, design information, payroll information, staffing information, personnel information, employee lists, supplier lists, vendor lists, developments, reports, internal controls, security procedures, graphics, drawings, sketches, market studies, sales information, revenue, costs, formulae, notes, communications, algorithms, product plans, designs, styles, models, ideas, audiovisual programs, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, customer lists, client information, client lists, manufacturing information, factory lists, distributor lists, and buyer lists of the Company, the Bank or the Affiliates (“Confidential Information”), or deliver to any person, firm, corporation, or other entity any document, record, notebook, computer program, or similar repository of or containing any such Confidential Information. Confidential Information also includes confidential information of third parties to which the Company, the Bank, or the Affiliates have confidentiality obligations and use restrictions. The parties hereby stipulate and agree that, as between them, the foregoing matters are important, material and affect the successful conduct of the businesses of the Company, the Bank and/or the Affiliates (and any successor or assignee of the Company, the Bank and/or the Affiliates). Executive acknowledges that all Confidential Information is specialized, unique in nature, and of great value to the Company, the Bank and/or the Affiliates and that such Confidential Information gives the Company, the Bank and/or the Affiliates a competitive advantage. Executive agrees that Executive obtains no title to any Confidential Information, and that as between Executive on the one hand, and the Company, the Bank, and the Affiliates on the other, Confidential Information is property of the Company, the Bank and the Affiliates. Upon termination of Executive’s employment for any reason, or at the Company’s or the Bank’s request, Executive will promptly deliver to the Company and/or the Bank any and all (a) Confidential Information and (b) physical property of the Company, the Bank or the Affiliates that Executive received in connection with Executive’s employment, including, without limitation, credit cards, passes, door and file keys, and computer hardware and software existing in tangible form. After returning all Confidential Information pursuant to the foregoing sentence, Executive shall destroy all electronic copies of such information and, if required by the Company or the Bank, certify such destruction to the Company or the Bank in writing. Notwithstanding the foregoing, Executive may retain documents solely relating to Executive’s personal compensation and benefits. 7
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(b) Executive agrees and covenants (i) to comply with all security policies and procedures of the Company, the Bank or the Affiliates as in force from time to time, including without limitation those regarding computer equipment, telephone systems, voicemail systems, facilities access, monitoring, key cards, access codes, intranet, internet, social media and instant messaging systems, computer systems, e-mail systems, computer networks, document storage systems, software, data security, encryption, firewalls, passwords and any and all other Company, Bank and Affiliate facilities, resources and communication technologies (collectively, the “Facilities and Information Technology and Access Resources”); (ii) not to access or use any Facilities and Information Technology and Access Resources (except as authorized by the Company and/or the Bank); and (iii) not to access or use any Facilities and Information Technology and Access Resources in any manner after Executive’s employment with the Company and/or the Bank terminates for any reason. Executive agrees to notify the Company and/or the Bank promptly in the event that Executive learns of any violation of the foregoing by others, or of any other misappropriation or unauthorized access, use, reproduction or reverse engineering of, or tampering with any Facilities and Information Technology and Access Resources or other Company, Bank or Affiliate property or materials by others. (c) Notwithstanding anything in this Agreement, Executive may (i) disclose Confidential Information that Executive is specifically required by court order, subpoena, or law to disclose, but agrees to provide to the Company, the Bank and/or the Affiliates immediate written notice of any legal process or request to disclose and the nature of the process/request, and to disclose only that portion of Confidential Information that is legally required to be disclosed; (ii) report possible violations of law to a government agency or entity or self-regulatory organization or cooperate with such agency or entity or organization; or (iii) make whistleblower or other disclosures that are protected under whistleblower provisions of federal or state law. (d) Executive understands that Executive will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (i) is made (1) in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney; and (2) solely for the purpose of reporting or investigating a suspected violation of law; or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Additionally, an individual suing an employer for retaliation based on the reporting of a suspected violation of law may disclose a trade secret to his or her attorney and use the trade secret information in the court proceeding, so long as any document containing the trade secret is filed under seal and the individual does not disclose the trade secret except pursuant to court order. 9. Ownership and Assignment of Property. (a) Assignment of Works. As between the Company and the Bank on the one hand, and Executive on the other, Executive agrees that all right, title, and interest in and to any and all Confidential Information, copyrightable material, notes, records, data, specifications, drawings, designs, logos, inventions, improvements, developments, discoveries, whether or not patentable, ideas and trade secrets conceived, discovered, authored, invented, developed or reduced to practice by Executive, solely or in collaboration with others, in connection with Executive’s employment by the Company or the Bank or services provided to the Company or the Bank, including that (i) relate to or would be beneficial to the Company’s or the Bank’s businesses, products, or services, or (iii) were developed within the scope of or during the performance of Executive’s work for the Company or the Bank, or (iii) with the use of the Company’s or the Bank’s equipment, supplies, facilities, or Confidential Information, and any copyrights, patents, trade secrets, mask work rights, or other intellectual or proprietary property rights relating to or derived from the foregoing, except as provided in Section 9(f) (collectively, “Works”), are the sole property of the Company, the Bank and the Affiliates. Executive agrees to promptly make full written disclosure to the Company and the Bank of any and all Works, and Executive hereby irrevocably and unconditionally assign fully to the Company and the Bank all of Executive’s right, title, and interest in and to Works, and Executive agrees to execute and deliver to the Company and the Bank specific assignments and take any action that the Company or the Bank deems necessary pursuant to Section 9(d) to enable the Company and the Bank to secure patents, register copyrights, or otherwise secure its proprietary rights in any Works. Executive agrees that this assignment includes a present conveyance to the Company and the Bank of ownership of Works that are not yet in existence. Executive further acknowledges that all original works of authorship that are made by Executive (solely or jointly with others) within the scope of and during the period of Executive’s employment with or services provided to the Company or the Bank and that are protectable by copyright are “works made for hire,” as that term is defined in the United States Copyright Act. Executive understands and agrees that the decision whether or not to commercialize or market any Works is within the Company’s and the Bank’s sole discretion and for the Company’s and the Bank’s sole benefit, and that no royalty or other consideration will be due to Executive as a result of the Company’s or the Bank’s efforts to commercialize or market any such Works. 8
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(b) Pre-Existing Materials. Executive will inform the Company or the Bank in writing before incorporating any inventions, discoveries, ideas, original works of authorship, developments, improvements, trade secrets and other proprietary information or intellectual property rights owned by Executive or in which Executive has an interest prior to, or separate from, Executive’s employment, including, without limitation, any such inventions that are not assignable under the law of a state where Executive works (“Prior Works”) into any Work or otherwise utilizing any such Prior Work in the course of Executive’s employment with the Company or the Bank, and Executive hereby grants the Company and the Bank a nonexclusive, fully paid-up, royalty-free, perpetual, irrevocable, transferable worldwide license (with the right to grant and authorize one or more tiers of sublicenses) to make, have made, use, import, offer for sale, sell, reproduce, distribute, modify, adapt, prepare derivative works of, display, perform, and otherwise exploit such Prior Works, without restriction, including, without limitation, as part of or in connection with such Work, and to practice any method related thereto. Executive will not incorporate any inventions, discoveries, ideas, original works of authorship, developments, improvements, trade secrets and other proprietary information or intellectual property rights owned by any third party into any Work without the Company’s or the Bank’s prior written permission. Executive has attached hereto on Exhibit A a list describing all Prior Works or, if no such list is attached, Executive represents and warrants that there are no such Prior Works. Furthermore, Executive represents and warrants that if any Prior Works are included on Exhibit A, they will not materially affect Executive’s ability to perform all obligations under this Agreement. (c) Moral Rights. Any assignment to the Company or the Bank of Works includes all rights of attribution, paternity, integrity, modification, disclosure and withdrawal, and any other rights throughout the world that may be known as or referred to as “moral rights,” “artist’s rights,” “droit moral,” or the like (collectively, “Moral Rights”). To the extent that Moral Rights cannot be assigned under applicable law, Executive hereby waives and agrees not to enforce any and all Moral Rights, including, without limitation, any limitation on subsequent modification, to the extent permitted under applicable law. (d) Further Assurances. Executive agrees to assist the Company and the Bank, or their designees, in every proper way to secure the Company’s and the Bank’s rights in the Works in any and all countries, including the disclosure to the Company and the Bank of all pertinent information and data with respect thereto, the execution of all applications, specifications, oaths, assignments, and all other instruments that the Company shall deem proper or necessary in order to apply for, register, obtain, maintain, defend, and enforce such rights, and in order to deliver, assign and convey to the Company and the Bank, their successors, assigns, and nominees the sole and exclusive rights, title, and interest in and to all Works, and, at the Company’s and the Bank’s expense, testifying in a suit or other proceeding relating to such Works. Executive further agrees that his or her obligations under this Section 9(d) shall continue after the termination of this Agreement. (e) Attorney-in-Fact. Executive agrees that, if the Company or the Bank are unable because of Executive’s unavailability, mental or physical incapacity, or for any other reason to secure Executive’s signature with respect to any Works, including, without limitation, for the purpose of applying for or pursuing any application for any United States or foreign patents or mask work or copyright registrations covering the Works assigned to the Company, then Executive hereby irrevocably designates and appoints the Company and the Bank and their duly authorized officers and agents as Executive’s agent and attorney-in-fact, to act for and on Executive’s behalf to execute and file any papers and oaths, and to do all other lawfully permitted acts with respect to such Works to further the prosecution and issuance of patents, copyright, and mask work registrations with the same legal force and effect as if executed by Executive. This power of attorney shall be deemed coupled with an interest and shall be irrevocable. 9
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(f) Exception to Assignments. Executive understands that Executive is not obligated to assign any Work that is not assignable under the law of a state where Executive works. Executive will advise the Company promptly in writing of any Works that Executive believes are not assignable under the law of a state where Executive works. 10. Effect on Prior Agreements and Existing Benefit Plans. This Agreement contains the entire understanding between the parties hereto and supersedes any prior agreement between the Bank, the Company, and Executive regarding the subject matter of this Agreement, except that this Agreement shall not affect or operate to reduce any benefit or compensation inuring to Executive of a kind elsewhere provided. Nothing in this Agreement shall confer upon Executive the right to continue in the employ of the Bank or the Company or shall impose on the Bank or the Company any obligation to employ or retain Executive in its employ for any period. 11. No Attachment. (a) Except as required by applicable law, no right to receive payments under this Agreement shall be subject to anticipation, commutation, alienation, sale, assignment, encumbrance, charge, pledge, or hypothecation or to execution, attachment, levy or similar process or assignment by operation of law, and any attempt, voluntary or involuntary, to affect any such action shall be null, void and of no effect. (b) This Agreement shall be binding upon, and inure to the benefit of, Executive, the Bank, the Company and their respective successors and assigns. Additionally, the Bank and the Company shall require any successor or assignee, whether direct or indirect, by purchase, merger, consolidation or otherwise, to all or substantially all of the business or assets of the Bank or the Company, expressly and unconditionally to assume and agree to perform the Bank’s and the Company’s obligations under this Agreement, in the same manner and to the same extent that the Bank and the Company would be required to perform if no such succession or assignment had taken place 12. Modification and Waiver. (a) This Agreement may not be modified or amended except by an instrument in writing signed by the parties hereto. (b) No term or condition of this Agreement shall be deemed to have been waived, nor shall there be any estoppel against the enforcement of any provision of this Agreement, except by written instrument of the party charged with such waiver or estoppel. No such written waiver shall be deemed a continuing waiver unless specifically stated therein, and each such waiver shall operate only as to the specific term or condition waived and shall not constitute a waiver of such term or condition for the future or as to any act other than that specifically waived. 13. Severability. If, for any reason, any provision of this Agreement, or any part of any provision, is held invalid, such invalidity shall not affect any other provision of this Agreement or any part of such provision not held so invalid, and each such other provision and part thereof shall to the full extent consistent with the applicable law, continue in full force and effect. 10
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14. Headings for Reference Only. The headings of sections and paragraphs are included in this Agreement solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. In addition, references to the masculine in this Agreement shall apply to both the masculine and the feminine. 15. Governing Law. Except to the extent preempted by federal law, the validity, interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the Commonwealth of Pennsylvania, without regard to principles of conflicts of law of that state. 16. Arbitration. The Company, the Bank and Executive recognize that in the event a dispute should arise between them concerning the interpretation or implementation of this Agreement, lengthy and expensive litigation will not afford a practical resolution of the issues within a reasonable period of time. Therefore, each party agrees that, to the fullest extent permitted by law, all disputes, disagreements and questions of interpretation concerning this Agreement are to be submitted for resolution, in Williamsport, Pennsylvania, to the American Arbitration Association (the “Association”) in accordance with the Association’s Employment Arbitration Rules and Mediation Procedures or other applicable rules then in effect (“Rules”). The Company, the Bank or Executive may initiate an arbitration proceeding at any time by giving notice to the other in accordance with the Rules. The Company, the Bank and Executive may, as a matter or right, mutually agree on the appointment of a particular arbitrator from the Association’s pool. The arbitrator shall not be bound by the rules of evidence and procedure of the courts of the Commonwealth of Pennsylvania but shall be bound by the substantive law applicable to this Agreement. The arbitration proceeding and all filing, testimony, documents, and information, relating to or presented during the evaluation proceeding, shall be disclosed exclusively for the purpose of facilitating the arbitration process and for no other purpose and shall be deemed to be information subject to the confidentiality provisions of this Agreement. The decision of the arbitrator, absent fraud, duress, incompetence or gross and obvious error of fact, shall be final and binding upon the parties and shall be enforceable in courts of proper jurisdiction. Following written notice of a request for arbitration, the Company, the Bank and Executive shall be entitled to an injunction restraining all further proceedings in any pending or subsequently filed litigation concerning this Agreement, except as otherwise provided herein. While each Party shall be required to split any Association costs and incur their own legal fees (to the fullest extent permissible by applicable law), the Arbitrator or the Court (whichever is applicable) may, in its discretion, award the prevailing party in a dispute reasonable counsel fees not to exceed $25,000. 11
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17. Section 280G. Notwithstanding any provision of this Agreement to the contrary, in the event it shall be determined that, in connection with a Change in Control, any payment, benefit, or acceleration of vesting to or for the benefit of Executive (whether pursuant to the terms of this Agreement or otherwise) (“Potential Parachute Payments”) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended, including any regulations adopted thereunder or any similar tax payable under any U.S. federal, state, local, foreign or other applicable law (“Excise Taxes”), then the Potential Parachute Payments shall be reduced to an amount that is one dollar less than the largest amount that would not give rise to such excise tax (the “Reduced Amount”) if and only if such Reduced Amount would be greater than the net after-tax proceeds (taking into account both the Excise Taxes and any interest or penalties payable by Executive with respect thereto) of the unreduced Potential Parachute Payments payable to Executive. If any Potential Parachute Payments are required to be reduced pursuant to this section, such reduction shall be made in accordance with Section 409A and the following: (i) the Potential Parachute Payments which do not constitute nonqualified deferred compensation subject to Section 409A shall be reduced first; and (ii) all other Potential Parachute Payments shall then be reduced as follows: (A) cash payments shall be reduced before non-cash payments; and (B) payments to be made on a later payment date shall be reduced before payments to be made on an earlier payment date. 18. Section 409A. This Agreement is intended either to be exempt from or to comply with the requirements of Section 409A and shall be interpreted and construed consistently with such intent. Without limiting the foregoing, all payments and benefits provided under this Agreement are intended to be exempt from Section 409A to the maximum extent possible, under either the separation pay exemption pursuant to Treasury Regulation Section 1.409A-1(b)(9)(iii) or as short-term deferrals pursuant to Treasury Regulation Section 1.409A-1(b)(4), and for this purpose, each payment shall constitute a “separately identified” amount within the meaning of Treasury Regulation Section 1.409A-2(b) (2). In the event the terms of this Agreement would subject Executive to taxes or penalties under Section 409A (“409A Penalties”), the Company, Bank and Executive shall cooperate diligently to amend the terms of the Agreement to avoid such 409A Penalties, to the extent possible; provided that in no event shall the Company, Bank or any of its subsidiaries or affiliates, or any of their respective directors, officers, employees, designees, or agents be responsible for any 409A Penalties (or any related taxes, interest, penalties, costs, or damages) imposed on Executive that arise in connection with any amounts payable under this Agreement. Notwithstanding any other provision in this Agreement, to the extent any payments hereunder constitutes nonqualified deferred compensation, within the meaning of Section 409A, then if Executive is a “specified employee,” as defined in Section 409A, as of the termination of employment, then to the extent any amount payable under this Agreement is payable upon Executive’s separation from service, within the meaning of Section 409A, and under the terms of this Agreement would be payable prior to the six (6)-month anniversary of Executive’s termination of employment, such payment, without interest, shall be delayed until the earlier of (A) the date immediately following the six (6)-month anniversary of the termination of employment or (B) the date of Executive’s death. 19. Survival of Provisions. Executive’s obligations contained in Sections 7, 8 and 9 shall survive the termination or expiration of Executive’s employment with the Company or the Bank and, as applicable, shall be fully enforceable thereafter in accordance with the terms of this Agreement. If it is determined by a court, arbitrator or other adjudicator of competent jurisdiction that any restriction in Sections 7, 8 and 9, is excessive with respect to geographic area, duration, or scope or is otherwise unreasonable or unenforceable, it is the intention of the parties that such restriction may be modified or amended by the court, arbitrator, or adjudicator to render it enforceable to the maximum extent permitted by applicable law. In the event that modification is not possible, then Executive and the Company and/or the Bank agree that, because each of Executive’s obligations in Sections 7, 8 and 9 is a separate and independent covenant, any unenforceable obligation shall be severed and all remaining obligations shall be enforced. 12
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20. Miscellaneous. In the event any of the foregoing provisions of this Section 20 are in conflict with the terms of this Agreement, this Section 20 shall prevail. Any payments made to Executive pursuant to this Agreement, or otherwise, are subject to and conditioned upon their compliance with 12 U.S.C. §1828(k) and FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments. [Signature page follows] 13
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date first set forth above. FIRST CITIZENS COMMUNITY BANK ATTEST: By:/s/ Randall E. Black Name:Randall E. Black /s/ Gina Marie Boor Title: CEO & President By: Name:Gina Marie Boor Title: Corporate Secretary CITIZENS FINANCIAL SERVICES, INC. (Guarantor) ATTEST: By:/s/ Randall E. Black Name:Randall E. Black Title: CEO & President /s/ Gina Marie Boor By: Name:Gina Marie Boor Title: Corporate Secretary EXECUTIVE ATTEST: By:/s/ Jeffrey R White Name:Jeffrey Robert White /s/ Gina Marie Boor Title: Executive Vice President and Chief Operating Officer By: Name:Gina Marie Boor Title: Corporate Secretary
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Exhibit 19 Line of Business: President / CEO Required Approval Level: Board of Directors Last Approval Date: December 17, 2024 Last Revision Date: November 2025 Insider Trading and Material Non-Public Information Policy
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Table of Contents Effective Date 3 Purpose 3 Introduction – General Policy and Guidelines 4 Risk and Responsibility 4 Consequences of Violating Insider Trading Proscriptions and this Policy 5 Summary of Policies and Procedures 5 Policy Prohibiting the Misuse of Material Non-Public Information 7 Restrictions. 7 Procedures for and Restrictions on Trading in Securities 7 Trading Restrictions With Respect to Securities. 7 Section 16(a) of the 1934 ACT – Ownership Reporting Requirements 9 Initial Reports 10 Reports of Change in Status of Equity Securities Owned 10 Annual Reports 10 SEC Penalties for Violations of Reporting Requirements of Section 16(a) 10 Section 16(c) of the 1934 ACT – Short Selling 11 Rules 144 and 145 of the 1933 ACT – Sales of Stock by Affiliates 11 Rule 144 11 Rule 145 12 Violations 12 Miscellaneous Provisions of the 1933 ACT and the 1934 ACT 12 Gifts 13 Distributions and Tender Offers 13 General 13 Distributions 13 Purchases During a Tender Offer 14 Conclusion 14 Appendix A 15 Appendix B 16 Appendix C 17 Appendix D 18 Appendix E 20 Appendix F 21 Appendix G 22 GLOSSARY 22 Insider Trading and Material Non-Public Information Policy11/2025 2
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Effective Date This policy was adopted by the Board of Directors on August 6, 2002 and is applicable to all directors, director emeritus, officers and employees of Citizens Financial Services, inc. and/or its subsidiaries. This policy was authored by legal counsel and is reviewed annually by the Board of Directors. This policy was reviewed and reapproved November 2025. Purpose The purpose of an insider trading policy is to ensure compliance with securities laws by preventing individuals with access to non-public material information from trading on it, and to protect the company's reputation and integrity. By establishing clear rules and procedures, this policy aims to maintain fair and transparent markets by ensuring all investors have equal access to information and to prevent fraudulent and illegal trading activity. Key purposes of an insider trading policy • Ensure legal compliance: This policy is designed to make sure directors, director emeritus, officers, and employees comply with federal and state securities laws that prohibit trading on material, non-public information. • Maintain fair markets: They help level the playing field by ensuring that no one has an unfair advantage due to their position or access to information that could affect stock prices. • Protect company reputation: By preventing the appearance or occurrence of insider trading. This policy helps to safeguard the company's reputation and integrity in the eyes of the public, investors, and regulators. • Provide clear guidelines: They offer specific procedures for trading company stock and other securities, sometimes including prohibitions on trading during certain periods, requirements for pre-approved trading plans (like 10b5-1 plans), or pre-approval from the general counsel. • Prevent "tipping": This policy explicitly prohibits individuals from communicating ("tipping") material non-public information to others who may use it to trade, holding both the tipper and the tippee liable. • Protect company assets: The policy helps protect valuable company assets, such as trade secrets and financial records, which are central to the information insiders possess. • Manage risk: This policy helps minimize the company's risk of legal penalties and negative public perception that can result from insider trading by personnel. Insider Trading and Material Non-Public Information Policy11/2025 3
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Introduction – General Policy and Guidelines In the course of their employment with Citizens Financial Services, Inc. and/or its subsidiaries (collectively, the "Company") our directors, director emeritus, officers and employees may come into possession of confidential and highly sensitive information concerning the Company, our customers or other corporations with which we may have contractual relationships or may be negotiating transactions. This information has a potential for affecting the market price of our securities. Under some circumstances, federal securities laws impose potentially onerous civil and criminal penalties on persons who, in connection with a purchase or sale of securities, improperly obtain or use material non ‑ public information about the issuance of or market for the Company’s securities. In addition, directors, director emeritus, officers and employees of the Company may have occasion to inadvertently violate other provisions of the federal securities laws during the course of their employment. The Company is intensely aware of the need to maintain extremely high standards of honesty, integrity and fair dealing to assure the public's trust in the performance and maintenance of an impartial trading price for the Company's securities in the marketplace. "Insider Trading," the trading of securities based on material non-public information, is not only unfair, but erodes investor confidence in the marketplace for the Company's securities. The preservation of trust in the Company and preservation of the Company's reputation requires observance of certain standards by the Company's directors, director emeritus, officers, employees, and persons holding 10% or more of the Company's equity securities ("10% Holders"). Therefore, the Company has adopted this Policy and is implementing these procedures to avoid even the appearance of improper conduct. The Company’s directors, director emeritus, officers, employees, 10% Holders and other representatives must avoid possible misconduct and avoid any situation in which material non-public information could be misappropriated by anyone to gain an unfair advantage in trading of the Company's securities. In all situations, including those where the law is unclear or in conflict, directors, director emeritus, officers, employees and 10% Holders are expected to refrain from any discussion with respect to any information that might be construed as material non-public information. An intentional violation of the provisions of this Policy may result in termination of employment and, if applicable, in a request to resign from the Board of Directors. Intentional violations of the provisions of this Policy by a "Quasi-insider" or "Temporary Insider" will be addressed by the Board of Directors of the Company on a case-by-case basis. Quasi ‑ insiders and Temporary Insiders must execute a Covenant of Non ‑ Disclosure, attached as Appendix E to this Policy. In addition to the discussion of insider trading matters, this Policy sets forth, in general terms, certain reporting requirements and liabilities imposed on directors, specified officers and 10% Holders of the Company’s securities under Section 16 of the Securities Exchange Act of 1934, as amended (the “1934 Act”). Risk and Responsibility Buying or selling securities while in possession of "material non ‑ public information" or improperly disclosing this information are commonly known as "insider trading" or "tipping," respectively, and may constitute fraud in violation of the federal and state securities laws and other legal and regulatory requirements. In recent years, the Securities and Exchange Commission (“SEC”) and the U.S. Attorney’s Office have vigorously pursued violations of insider trading laws. Prosecutions have ranged from high profile individuals to proofreaders and from word processors in law offices to directors and officers of public corporations. Brokers and dealers have also been prosecuted. If we do not take active steps to adopt preventive policies and procedures covering securities trades by our personnel, the consequences could be severe. Insider Trading and Material Non-Public Information Policy11/2025 4
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Numerous provisions in the Securities Act of 1933 (the "1933 Act") and the Securities Exchange Act of 1934, and the rules and regulations thereunder, can apply to purchases and sales of our stock. Please note that violations of the securities laws may give rise to violations of various federal banking statutes and penalties. We expect each person covered by this Policy to be familiar with its contents, to keep it in an appropriate place for easy reference, and to comply fully with its policies and procedures. We cannot over-emphasize the importance of this Policy. If you have any questions regarding the meaning or application of any provision of this Policy, please contact our President/CEO. In addition, all breaches of this Policy must be reported immediately to our President/CEO. Each person covered by this Policy must execute the Acknowledgment and Agreement of Compliance, attached as Appendix A. We also require that any person covered by this Policy confer with our President/CEO before effecting any trade in our stock. Consequences of Violating Insider Trading Proscriptions and this Policy The consequences of insider trading violations can be staggering for the individual violator and for the Company. Both civil and criminal penalties can be imposed by the SEC. Violations of the anti ‑ fraud provisions of the federal securities laws may also constitute "violations of law" sufficient to trigger a number of federal banking laws that could result in the imposition of penalties. Sanctions imposed by the Company, including dismissal for cause, could result from failing to comply with these policies or procedures. We may also take disciplinary action against those employees who have knowledge of a violation of this Policy but fail to report the violation and/or against those who withhold relevant and material information concerning a violation of this Policy. Any of the consequences described above, even an SEC investigation that does not result in prosecution, can tarnish reputations and damage careers. Summary of Policies and Procedures This Policy reflects, in part, statutory requirements and imposes the following procedures: A. Directors, director emeritus, officers and employees must not 1. Buy or sell our securities while in possession of material non ‑ public information; 2. Recommend or suggest that anyone else buy, sell or retain our securities while in possession of material non ‑ public information; or 3. "Tip" or otherwise disclose material non ‑ public information about the Company. This includes non ‑ public information relating to results of operations, the identity of possible merger or acquisition targets, disagreements or disputes among directors and the pendency of legal or potential legal proceedings. B. Trading in the Company’s securities is prohibited during certain "black ‑ out periods" for all directors, director emeritus, officers and employees. C. Directors, director emeritus, officers and employees must obtain clearance from the President/CEO immediately prior to (i) trading securities of the Company in any "Personal" or "Related" securities accounts and (ii) engaging in any bona fide gifts of securities of the Company1. Directors and officers must receive prior approval from the President/CEO before implementing, amending or terminating a Rule 10b5-1 Plan (as such term is defined below).2 1 Note to Company: Under Rule 16a-3 under the Exchange Act, beginning February 27, 2023, gifts must be reported on Form 4 within two business days (compared to being eligible for deferred, year-end reporting on Form 5 under the previous rules). This may indicate a new appetite by the staff to police gifts made while in possession of MNPI, where the donor knew that the donee would sell the gifted securities prior to disclosure of the MNPI (immediate sales are the policy of many non-profits receiving securities as gifts). As marked below, we suggest requiring pre-clearance of gifts to help protect Section 16 persons by ensuring that they get the company the necessary information in order to file required Forms 4 on time. If adopted, this change should be communicated to officers and directors to ensure that they follow the pre-clearance policy for gifts. 2 Note to Company: Suggest requiring pre-clearance of director and officer Rule 10b5-1 Plans to facilitate the Company’s ability to maintain information necessary for quarterly Rule 10b5-1 disclosure obligations. These reporting obligations go into effect on or after October 1, 2023 for smaller reporting companies. Insider Trading and Material Non-Public Information Policy11/2025 5
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D. Directors and specified officers must comply with the provisions of Section 16 of the 1934 Act, including, but not limited to, the provisions relating to: 1. "Short ‑ swing" profits; 2. Short sales; and 3. Reporting requirements. E. Directors and specified officers who are "affiliates" of the Company must comply with the provisions of Rules 144 and 145 of the 1934 Act, relating to restrictions on the sale of the Company’s securities. F. Any person or group (including individuals, institutions, or insiders) who beneficially owns more than 5% of the Company’s stock must comply with the beneficial ownership reporting requirements of Section 13 of the Securities Exchange Act of 1934. G. Directors, director emeritus, officers and employees must comply with all other provisions of the federal securities laws to the extent applicable to them. H. Bona fide gifts of our securities (including transfers of the Company’s securities made to trusts for estate planning purposes) are not subject to this Policy, unless the person making the gift has reason to believe that the recipient intends to sell the Company’s securities while the person making the gift is aware of material non-public information. 3 3 Note to Company: See footnote 1 above regarding changes to reporting of gifts. Insider Trading and Material Non-Public Information Policy11/2025 6
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Policy Prohibiting the Misuse of Material Non-Public Information Restrictions. The following restrictions apply in connection with trading while in possession of material non ‑ public information: 1. Directors, director emeritus, officers and employees of the Company must not buy or sell the Company’s securities, or securities of any other company (including specifically a merger target), while in possession of material non ‑ public information obtained in the course of employment with the Company or otherwise. 2. Directors, director emeritus, officers and employees of the Company must not recommend or suggest that anyone else (including family or household members or friends or a broker or dealer) buy, sell or retain the Company’s securities or securities of any other company while in possession of material non ‑ public information obtained in the course of employment with the Company or otherwise. 3. Directors, director emeritus, officers and employees of the Company must not disclose ("tip") material non ‑ public information obtained through employment with the Company or otherwise, including proprietary information about the Company or information that could affect the Company’s securities, as well as information about customers or merger or acquisition targets of the Company, to anyone inside or outside the Company, except when disclosure to other Company employees and representatives of the Company is necessary to enable the employees or representatives to carry out their duties properly and effectively (in which case the person disclosing this information should make it clear that the information is confidential). Directors, director emeritus, officers and employees of the Company must be particularly careful in connection with communications with brokers and/or dealers or others involved directly or indirectly with the investment or securities industries and, in general, should avoid communications to these persons involving the Company. Procedures for and Restrictions on Trading in Securities Trading Restrictions With Respect to Securities. 1. "Black Out Periods" during which Trading in our Securities is Prohibited. All directors, director emeritus, officers and employees are prohibited from purchasing or selling securities for a Personal Account or Related Account during four periods of the year, beginning on the earlier of the date of the last Board meeting before the end of the fiscal quarter or the last day of the fiscal quarter and ending two business days after the Company’s public release of the results of operations for the fiscal quarter (or for the full year in respect of the fourth fiscal quarter). The President/Chief Executive Officer may grant exceptions to this prohibition, upon request, where the person making the request is not in possession of material non ‑ public information, if the grant of an exception would not be in contravention of the purposes of this Policy and the applicant’s personal circumstances warrant the grant of the exception. This rule applies to all purchases and sales of our securities whether held directly or held in street name accounts with brokers or banks. Writing of put or call options with respect to common stock is not recommended. See Section VII(A)(5)). Insider Trading and Material Non-Public Information Policy11/2025 7
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2. Pre ‑ Clearance of Transactions In Securities. Directors, director emeritus, officers and employees, in addition to observing the black ‑ out periods, may not purchase or sell securities for their own Personal and Related Accounts at any time during the year, if the individual has knowledge of material non ‑ public information concerning the Company or its subsidiaries. To avoid inadvertent violations of this Policy and/or applicable law, each transaction (including gifts) involving securities4 must be cleared in advance of the purchase or sale (or gift) with the President/CEO and the individual must provide the President/CEO with an executed Certification of Non-Disclosure of Material Non-Public Information, attached as Exhibit B to this Policy and an executed Request for Clearance to Trade, attached as Appendix F to this Policy. Clearance of a transaction pursuant to this section is valid for no more than the [five business day]5 period immediately following receipt of such clearance. Trades pursuant to an approved Rule 10b5-1 Plan (as defined below) do not require pre-clearance. Directors and officers must provide the President/CEO with an executed Request for Clearance to Trade, attached as Appendix F to this Policy and receive prior approval from the President/CEO before implementing, amending or terminating a Rule 10b5-1 Plan. B. Rule 10b5-1 Plans and Similar Trading Plans. Rule 10b5-1 under the 1934 Act (“Rule 10b5-1”) provides a defense from insider trading liability. To be eligible for this defense, a person subject to this Policy must enter into a Rule 10b5-1 plan for transactions in Company securities that meet certain conditions specified in Rule 10b5-1 (each, a “Rule 10b5-1 Plan”) and such person must act in good faith with respect to the operation of a Rule 10b5-1 Plan. If the Rule 10b5-1 Plan and the operation thereof meets the requirements or Rule 10b5-1, the Company’s securities may be purchased or sold without regard to certain insider trading restrictions. To comply with this Policy, a Rule 10b5-1 Plan must be approved by the President/CEO and meet the requirements of Rule 10b5-1. In general, a Rule 10b5- 1 Plan must be entered into at a time when the person entering into the plan is not aware of any material non-public information or otherwise at a time when trading is restricted under this Policy. Once the Rule 10b5-1 Plan is adopted, the person must not exercise any influence over the amount of securities to be traded, the price at which they are to be traded or the date of the trade. The Rule 10b5-1 Plan must be written and (i) either specify the amount, pricing and timing of transactions in advance or (ii) delegate discretion on these matters to an independent third party. A Rule 10b5-1 Plan must comply with and be operated in accordance with the conditions of Rule 10b5-1, including the following: • trades under the Rule 10b5-1 Plan may not commence until expiration of the “cooling-off period” set forth in Rule 10b5- 1;6 4 Note to Company: See footnote 1 above regarding changes to reporting of gifts. 5 Note to Company: Pre-clearance periods are typically two to five business or trading days. We have suggested the upper end of that spectrum here, but please advise based on your desired practice. 6 Note to Company: For directors and officers, the cooling-off period currently set forth in Rule 10b5-1 is generally the later of (i) 90 days after execution of the plan or (ii) two business days following the filing of the Form 10-K or Form 10-Q for the reporting period in which the plan was executed. (See Rule 10b5-1(c)(1)(ii)(B)(1).) For all other insiders the cooling-off period is 30 days after execution of the plan (See Rule 10b5-1(c)(1)(ii)(B)(2)). Insider Trading and Material Non-Public Information Policy11/2025 8
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• the Rule 10b5-1 Plan must include representations that (i) the person is not aware of any material non-public information about the Company or its securities7 and (ii) the person is adopting, or in certain cases, amending, the Rule 10b5-1 Plan in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b-5;8 • no person may have more than one Rule 10b5-1 Plan outstanding at any given time, unless otherwise permitted by the limited exceptions of Rule 10b5-1 (such as plans relating to “sell to cover” arrangements intended to satisfy tax withholding obligations upon the vesting of equity awards); and9 • no person may have more than one single-trade Rule 10b5-1 Plan (a plan designed to effect the open-market purchase or sale of the total amount of securities covered by the plan in a single transaction) within any consecutive 12-month period, unless otherwise permitted by the limited exceptions of Rule 10b5-1.10 Directors and officers must have any new or amended Rule 10b5-1 Plan or any decision to terminate a Rule 10b5-1 Plan pre- approved by the President/CEO in accordance with the section titled “Pre ‑ Clearance of Transactions In Securities” above.11 Section 16(a) of the 1934 ACT – Ownership Reporting Requirements For purposes of Section 16(a), the term "officer" means the following: • President; • Principal financial officer; • Principal accounting officer; • Any vice president in charge of a principal business unit, division or function (e.g., sales, administration or finance); • Any person identified by the Board of Directors as subject to Section 16 of the 1934 Act; and • Any other person who performs significant policy ‑ making functions for the Company, which may include any director, officer or employee of a subsidiary. 7 Note to Company: Requirement tracks Rule 10b5-1(c)(1)(ii)(C)(1). 8 Note to Company: Requirement tracks Rule 10b5-1(c)(1)(ii)(C)(2). 9 Note to Company: Requirement tracks Rule 10b5-1(c)(1)(ii)(D). 10 Note to Company: Requirement tracks Rule 10b5-1(c)(1)(ii)(E). 11 Note to Company: Does the Company have a separate set of specific guidelines for the adoption of Rule 10b5-1 plans? If so, we suggest adding the appropriate reference to those guidelines here. Insider Trading and Material Non-Public Information Policy11/2025 9
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The term "officer" is not necessarily limited to those persons with an appropriate title, but can include any other employee of the Company or any of its subsidiaries who performs an important executive function. An individual who is a director, officer or an employee of a subsidiary and not of the Company is not required to comply with the reporting requirements of Section 16(a) of the 1934 Act, unless the individual performs a significant policy ‑ making function for the Company. Note that the term "director" may include a director emeritus, and honorary director. Initial Reports Specified officers and directors and 10% shareholders of the Company ("Insiders") must complete and file Form 3, indicating the number of shares of equity securities owned either directly or beneficially. The report must be filed with the SEC, the National Association of Securities Dealers and the Company. The President/CEO, or his designee, will make Form 3 (Initial Statement of Beneficial Ownership of Securities) available for all persons who assume insider status and assist in the completion, review, execution and filing of the form with the appropriate regulatory agencies. The SEC holds the reporting person responsible for timely filing of the form. Reports of Change in Status of Equity Securities Owned Insiders must file a Form 4 indicating any changes in their beneficial ownership of equity securities within 2 days after the transaction in which a change in ownership occurs. At the request of the Insider, the President/CEO, or his designee, will assist in the preparation, review and filing of the form with the appropriate regulatory agencies. Questions should be directed to the President/CEO, or his designee, or counsel to the Insider. Annual Reports • Insiders must file Form 5 to disclose transactions exempt from prior reporting, if these transactions were not reported earlier on Form 4. Insiders must also file Form 5 to disclose any transaction that should have been reported previously but was not. Form 5 must be filed before February 15 each year. At the request of the Insider, the President/CEO will assist in the preparation, review and filing of the form with the appropriate regulatory agencies. Questions should be directed to the President/CEO or counsel to the Insider. • No Form 5 need be filed if the Insider acknowledges in writing that there are no transactions to report. In this case, the Insider should file an executed Affirmative Statement, attached as Appendix C to this Policy, with the President/CEO, or his designee, prior to February 10th of each calendar year. SEC Penalties for Violations of Reporting Requirements of Section 16(a) The SEC may impose a number of penalties for violations of these reporting requirements. They include: • Cease ‑ and ‑ Desist Orders, • Civil Monetary Penalties, • Injunctions and Orders, and • Contempt. In addition to the remedies cited above, there are several collateral consequences that may result from Section 16(a) violations. The failure of an Insider to file a Section 16(a) report on a timely basis must be disclosed in the Company’s annual proxy statement and Annual Report on Form 10 ‑ K, pursuant to Item 405 of Regulation S ‑ K. This type of disclosure is embarrassing to both Insider and Company. Insider Trading and Material Non-Public Information Policy11/2025 10
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Several courts have held that the two ‑ year statute of limitations for bringing suit under Section 16(b) is tolled for any period of time in which the Insider has not filed a report of a short ‑ swing transaction under Section 16(a). The Remedies Act also permits some securities law violators to be barred or suspended from serving as officers or directors of public companies. Willful violations of the reporting requirements of Section 16(a) can result in criminal proceedings pursuant to Section 32(a) of the 1934 Act. Violations of Section 16(a) may also constitute violations of various banking laws resulting in the possibility of additional fines and penalties. Section 16(c) of the 1934 ACT – Short Selling Insiders cannot "sell short" or "sell short against the box" any Company equity security. • "Selling short" occurs when you sell a security you do not own. Selling short typically takes place when there is an expectation that the price of the shares will go down. • "Selling short against the box" occurs when you have sufficient shares to cover any sales but, nevertheless, choose to borrow the shares delivered at settlement. The effect of "selling short against the box" on the market price of stock will be the same as a short sale. • This rule applies to all sales, whether of shares held directly or shares held in street name accounts through a broker or dealer. Rules 144 and 145 of the 1933 ACT – Sales of Stock by Affiliates Rule 144 All sales of the Company’s securities by "affiliates" of the Company, including sales by a spouse or a relative living in the same home as the affiliate, must be made in compliance with Rule 144. Under Rule 144 an "affiliate" is a person who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the Company. Whether or not a person or entity is an "affiliate" is a question of fact, dependent on all of the facts and circumstances. Directors, executive officers of the Company and 10% shareholders of the Company’s securities fall within the definition of "affiliate." A director or executive officer only of a subsidiary of the Company, absent unusual circumstances, should not be subject to Rule 144. Rule 144 provides the following restrictions on sales of stock by affiliates: • Limitations on the Volume of Sales. The shares sold within any three-month period cannot exceed the greater of: o 1% of the Company’s total outstanding shares, or o the average weekly trading volume during the four calendar weeks preceding the sale. Insider Trading and Material Non-Public Information Policy11/2025 11
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• Current Public Information. There must be current public information available about the Company. (This requirement should pose no obstacle, provided the Company is current in the filing of its periodic reports, e.g., 10 ‑ Qs under the 1934 Act.) • Manner of Sale. All sales must be made through a broker or directly with a market maker. • Form 144. A person selling in reliance on Rule 144 will, under most circumstances, be required to file with the SEC a notice of sale on Form 144, if the aggregate shares sold during any three ‑ month period exceed 500 shares or $10,000 aggregate sales price. If required, the Form 144 must be filed at the time of placing the order to sell. • Subject Securities. This rule applies to all shares of the Company’s securities held by affiliates, whether acquired in the market, privately, or from the Company pursuant to a benefit plan. • Restricted Stock. If securities are acquired from the Company or from an affiliate in a transaction not registered with the SEC (a so ‑ called "private placement"), the shares are deemed "restricted securities" and must, in addition to the requirements of subparagraphs 1 through 4 of this paragraph A, be held for at least one year before they can be sold as described above. Rule 145 In the event the Company is acquired, affiliates of the Company are subject to restrictions with respect to any securities of the acquiring entity received in the transaction similar to those imposed by Rule 144 for a specified period of time after the transaction. In addition, affiliates of a business acquired by the Company who receive the Company’s securities in the acquisition transaction, may only sell those securities pursuant to the terms of Rule 145. Violations Violations of Rules 144 and 145 may trigger violations of various provisions of the 1933 Act, which, among other things, may give a purchaser the right to rescind his purchase of common stock and/or sue for damages. Miscellaneous Provisions of the 1933 ACT and the 1934 ACT The statutes and regulations discussed above are the federal securities laws which most often directly affect directors and officers of the Company. There are, however, other provisions of the 1933 Act and of the 1934 Act regarding misleading representations and registration statements and other corporate documents such as Forms 8 ‑ K, 10 ‑ K and 10 ‑ Q and proxy statements that might also become the basis for a claim against the Company’s directors and officers. • Section 11 of the 1933 Act. • Section 18 of the 1934 Act. • Section 14(a) of the 1934 Act. • Sections 15 of the 1933 Act and 20(a) of the 1934 Act. Insider Trading and Material Non-Public Information Policy11/2025 12
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Gifts Bona fide gifts of securities (including transfers of the Company’s securities made to trusts for estate planning purposes) are not transactions subject to this Policy, unless the person making the gift has reason to believe that the recipient intends to sell the Company’s securities while the person making the gift is aware of material non-public information, provided that directors, director emeritus, officers and employees must still pre-clear any such transaction in the manner described above under the heading “Pre ‑ Clearance of Transactions In Securities.”12 Distributions and Tender Offers General The SEC has also adopted a number of rules that restrict the purchase of the Company’s common stock during distributions and tender offers. Distributions To prevent the manipulation of stock prices during a public offering, the SEC restricts purchases during distributions. To ensure the integrity of the market as a pricing mechanism, Rule 10b ‑ 6 of the 1934 Act prohibits executive officers, directors, and certain affiliates of the Company from purchasing shares for certain periods preceding and during a "distribution." A "distribution" includes: • An offering of a substantial amount of the Company’s common stock. An offering is distinguished from ordinary trading transactions by the magnitude of the sales and the presence of special selling efforts and methods. The sale of as little as 1% of outstanding stock has been treated as a distribution. The rule does not apply, however, to offerings of nonconvertible debt securities and preferred stock, provided that they have been rated investment grade by at least one nationally recognized statistical rating organization. • A merger or an exchange offer. o A merger involving the issuance of stock of the acquiring company is considered a distribution of that stock. A merger in which the Company will issue the Company’s common stock as consideration will, therefore, prohibit purchase of the Company’s common stock by affiliates of the Company during specified periods. o In a merger, shareholders of the acquired company will exchange their shares for stock of the Company. As a result, the SEC treats the shares of the acquired company as shares convertible into the Company’s common stock. The restriction on purchases during the pendency of a merger, therefore, applies to shares of both the Company and the acquired company. • Shelf Offerings. o Shares registered in a shelf registration statement may be sold anytime during a two ‑ year period. The SEC considers any sale of registered securities (i.e., a "take ‑ down" from the shelf) during the two ‑ year period to be a distribution. 12 Note to Company: See footnote 1 regarding Form 4 reporting updates related to gifts and suggested gift pre-clearance procedures. Insider Trading and Material Non-Public Information Policy11/2025 13
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• "Cooling Off" Period. Generally, executive officers, directors and certain affiliates of the Company must cease purchasing shares two business days before commencement of any distribution of the Company’s common stock. The prohibition on purchases continues until the distribution is completed. For a merger, however, purchases need not stop for the entire merger period. Instead the SEC prohibits purchases for two business days before proxy solicitation materials are mailed, with the restriction continuing until abandonment of the merger or approval by shareholders of the target company. In addition, purchases must cease at least two business days prior to any valuation period or election period (e.g., a cash ‑ stock election period) and cannot recommence until the valuation or election period terminates. In a "shelf" offering, purchases must cease at least two business days prior to the sale of the registered securities covered by the shelf registration statement and cannot recommence until the distribution is completed. Purchases During a Tender Offer The securities laws also impose restrictions on purchases during a tender offer. If the Company makes a tender offer for another company, the Company’s officers and directors cannot purchase shares in the company subject to the offer as long as the offer is in effect. If the Company makes a tender offer for its own shares, officers and directors of the Company cannot buy common stock until the offer has terminated. The restriction applies from the time a tender offer is announced through completion or abandonment of the offer. The restrictions do not apply to options issued under a stock option plan, the Employee Stock Purchase Plan or the DRIP. Conclusion The federal securities laws and the regulations of the SEC impose numerous restrictions on the time and manner of purchases and sales of the Company securities. These restrictions are often complex. No Insider shall effect any transaction in the Company’s securities unless: • the President/CEO, or his designee, has been informed of the transaction and the Insider has delivered an executed Certification of Non-Disclosure of Material Non-Public Information, attached as Appendix B and an executed Request for Clearance to Trade, attached as Appendix F to this Policy, to the President/CEO, or his designee, or • the Insider has a valid, executed Rule 10b5-1 Plan under which securities are to be purchased or sold. Insider Trading and Material Non-Public Information Policy11/2025 14
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Appendix A ACKNOWLEDGMENT I, the undersigned, hereby acknowledge that I have received a copy of the Citizens Financial Services, Inc. Insider Trading and Material Non ‑ Public Information Policy and its subsidiaries and affiliates (the "Policy"). I further certify that I have reviewed the Policy, and that I understand its provisions and what they require of me as an Insider, as defined in the Policy, of August 6, 2002. I understand that an intentional violation of this Policy may result in the termination of my employment as an Officer or Employee of this institution or a request to resign from the Board of Directors. Date Signature of Director, Officer or Employee AGREEMENT OF COMPLIANCE I hereby certify that I understand what is required of me by the provisions of the Citizens Financial Services, Inc. Insider Trading and Material Non ‑ Public Information Policy (the "Policy") and that by the setting of my hand to this instrument, I agree to comply in good faith with the provisions and the spirit of the aforementioned Policy. Date Signature of Director, Officer or Employee Insider Trading and Material Non-Public Information Policy11/2025 15
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Appendix B CERTIFICATION OF NON-DISCLOSURE OF MATERIAL NON-PUBLIC INFORMATION I hereby certify that, to the best of my knowledge, information and belief, I do not possess material non-public information for purposes of the Citizens Financial Services, Inc Insider Trading and Material Non ‑ Public Information Policy and in connection with a securities trade in Citizens Financial Services, Inc. securities which shall be effected on or about _________________________. Date: Signature of Person Making Certification Print Name President/CEO Insider Trading and Material Non-Public Information Policy11/2025 16
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Appendix C AFFIRMATIVE STATEMENT RE: COMPLIANCE WITH REPORTING REQUIREMENTS OF SECTION 16 I hereby certify that, to the best of my knowledge, information and belief, for the year ending December 31, _______, I have reported to, and filed with, the Securities and Exchange Commission, all of my transactions in the common stock of Citizens Financial Services, Inc. required to be reported under the rules and regulations promulgated under Section 16 of the Securities Exchange Act of 1934, as amended. I further certify that I am not required to file an Annual Report on Form 5 with the Securities and Exchange Commission for the year ending December 31, _______. Date: Signature of Person Making Certification Print Name President/CEO Date Received Insider Trading and Material Non-Public Information Policy11/2025 17
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Appendix D CHECKLIST FOR SHORT-SWING PROFITS Note: ANY combination of PURCHASE AND SALE or SALE AND PURCHASE of Citizens Financial Services, Inc. securities within 6 months of each other results in a violation of Section 16(b) of the Securities Exchange Act of 1934 and, pursuant to Section 16(b), "profit" will be recovered by the Company. The highest priced sale will be matched with the lowest price purchase. SALES If you (an officer, director or 10% shareholder or any immediate family member ) intend to sell or transfer Citizens Financial Services, Inc. securities, answer the following questions: 1. Have you or your family members purchased or otherwise acquired Citizens Financial Services, Inc. securities within the past six months? ____ Yes ____ No If yes, and the acquisition was effected by a family member, then is the family member's stock deemed to be beneficially owned by you? ____ Yes ____ No 2. Have there been any option grants within the past six months? ____ Yes ____ No If Yes, was the grant exempt pursuant to Section 16 of the Securities Exchange Act of 1934 and the rules thereunder? ____ Yes ____ No 3. Do you anticipate any purchases (or option grants) within the next six months (e.g., expiration of an option)? ____ Yes ____ No 4. Have you notified the President/CEO of the pending transaction and completed a Form 4, if required? ____ Yes ____ No 5. If you are an "affiliate," as the term is defined under the Federal securities laws, have you completed a Form 144 and notified the broker to sell pursuant to Rule 144? ____ Yes ____ No Insider Trading and Material Non-Public Information Policy11/2025 18
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APPENDIX D cont’d PURCHASES AND OPTION GRANTS If you (an officer, director or 10% shareholder or any immediate family member) intend to purchase Citizens Financial Services, Inc. securities or may receive an option grant, answer the following questions: 1. Have you (or family members) sold or transferred any securities of Citizens Financial Services, Inc. within the past six months? ____ Yes ____ No If yes, and the disposition was effected by a family member, then is the family member's stock deemed to be beneficially owned by you? ____ Yes ____ No 2. Do you anticipate any sales or other dispositions within the next six months (e.g. tax-related or year-end transactions)? ____ Yes ____ No 3. Have you notified the President/CEO of the pending transaction and completed a Form 4, if required? ____ Yes ____ No 4. What is the proposed manner of purchase or acquisition? ____ Broker ____ Private Note: Before proceeding with a purchase or sale, consider whether you are aware of material non-public information which could affect the price of the stock. Date: The information set forth herein is true and correct to the best of the undersigned's knowledge, information and belief. Signature of Insider Print Name of Person Signing This Checklist (SSN or TIN of Insider) Signature of President/CEO Insider Trading and Material Non-Public Information Policy11/2025 19
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Appendix E COVENANT OF NON-DISCLOSURE BY A QUASI-INSIDER OR TEMPORARY INSIDER I acknowledge the establishment of the Citizens Financial Services, Inc. Insider Trading and Material Non ‑ Public Information Policy (the "Policy"). I acknowledge further that I may be considered a Quasi-insider or Temporary Insider for purposes of the Policy because of the likelihood that I may gain access to material non-public information concerning the Company and/or subsidiaries or affiliates of the Company as a result of my engagement with the Company and/or one or more of its subsidiaries or affiliates. I covenant that I will not divulge, disclose or "tip" any material non-public information concerning the Company or subsidiaries or affiliates of the Company to any person for any reason whatsoever, except persons with whom I am employed and who may have access to this information in the normal course of their duties. I covenant further that I will in good faith make every attempt to limit access to such information at my place of employment. I acknowledge that as a Quasi-insider or Temporary Insider I will not buy or sell stock of Citizens Financial Services, Inc. or other entity while in possession of material, non-public information regarding the Company or such other entity, and that such a trade may be a violation of federal and state securities laws. Date Signature of Covenantor Print Name of Person President/CEO Print Person's Employer or Trade Name Insider Trading and Material Non-Public Information Policy11/2025 20
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Appendix F REQUEST FOR CLEARANCE TO TRADE13 Name: Title: I hereby request clearance to execute the following transaction relating to the securities of Citizens Financial Services, Inc. Type of Transaction: ☐ I wish to purchase. Number and type of securities to be purchased: ________________ ☐ I wish to sell. Number and type of securities to be sold: ________________ ☐ I wish to gift. Number and type of securities to be gifted: ________________ ☐ I wish to enter into, amend or terminate the attached Rule 10b5-1 Plan. [Please attach draft plan.] ☐ Other transaction: _____________________________________________________________________________________ [I hereby certify that, to the best of my knowledge, information and belief, I do not possess material non-public information concerning Citizens Financial Services, Inc. at the time of submitting this request, and I agree that should I become aware of any material non-public information concerning Citizens Financial Services, Inc. before completing the approved transaction, I will not complete the transaction. ]14 I understand that once approved, this authorization is valid on the date of approval and for [five-business days] thereafter. I further understand that the approval will lapse if I become in possession of, or, in the judgment of the President/CEO, I am likely to be in possession of material non-public information, or otherwise on the earliest of (i) expiration of the [five-business day] period of this approval, or (ii) the day on which a black-out period commences, whichever is the first to occur. Date Signature Approved by: President/CEO Date 13 Note to Company: We have suggested a re-formulated pre-clearance form so that anyone wishing to make a trade specifies the type of transaction and receives approval for it, rather than simply attesting they do not possess MNPI. 14 Note to Company: Consider whether to consolidate the MNPI certification, currently included in Appendix B, with this new pre- clearance certification, as applicable. Insider Trading and Material Non-Public Information Policy11/2025 21
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Appendix G GLOSSARY The following definitions apply to the policies and procedures detailed herein: A. "Beneficial Owner." A beneficial owner of a security is any person who, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares a direct or indirect pecuniary interest in the relevant class of equity securities, subject to the following: 1. The term "pecuniary interest" in any class of equity securities means opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the subject securities. 2. The term "indirect pecuniary interest" in any class of equity securities includes, but is not limited to: a. Securities held by members of a person’s immediate family sharing the same household; provided, however, that the presumption of beneficial ownership may be rebutted; b. A general partner’s proportionate interest in the portfolio securities held by a general or limited partnership. The general partner’s proportionate interest, as evidenced by the partnership in effect at the time of the transaction and the partnership’s most recent financial statements is the greater of: i. The general partner’s share of the partnership’s profits, including profits attributed to any limited partnership interest held by the general partner and any other interests in profits that arise from the purchase and sale of the partnership’s portfolio securities; or ii. The general partner’s share of the partnership capital account, including the share attributable to any limited partnership interest held by the general partner. c. A performance ‑ related fee, other than an asset ‑ based fee, received by any broker, dealer, bank, insurance company, investment company, investment advisor, investment manager, trustee or person or entity performing a similar function; provided, however, that no pecuniary interest shall be present where: i. The performance ‑ related fee, regardless of when payable, is calculated based on net capital gains and/or net capital appreciation generated from the portfolio or from the fiduciaries overall performance over a period of one year or more; and ii. Equity securities of the issuer do not account for more than 10% of the market value of the portfolio. A right to a nonperformance ‑ related fee alone is not a pecuniary interest in the securities. Insider Trading and Material Non-Public Information Policy11/2025 22
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d. A person’s right to dividends that are separated or separable from the underlying securities. Otherwise, a right to dividends alone does not represent a pecuniary interest in the securities; e. A person’s interest in securities held by a trust; and f. A person’s right to acquire equity securities through the exercise or conversion of any derivative security, whether or not presently exercisable. 3. A shareholder is not deemed to have a pecuniary interest in portfolio securities held by a corporation or similar entity in which the person owns securities, if the shareholder is not a controlling shareholder of the entity and does not have or share investment control over the entity’s portfolio. B. "Blackout Period. " Is a specific timeframe during which individuals, institutions, or insiders with access to material, non-public information are prohibited from trading a company's stock. C. "Insider." For purposes of this Policy, Insider means: 1. The Company's Directors, including Advisory, Emeritus and Honorary Directors, to the extent they have access to inside information, and the Company’s senior executive officers; 2. A subsidiary bank’s Directors, President and Chief Executive Officer, and Senior Vice President, Cashier, Secretary, President/CEO, Auditor, and certain Vice Presidents (which shall include any officers of the subsidiary banks who may have access to material inside information about the Company), as designated at least annually by resolution of the Company’s Board of Directors; 3. Other employees of the Company who may have access to material inside information about the Company; or 4. 10% Holders (persons holding ten percent (10%) or more of the Company’s outstanding securities). D. "Inside Information." For purposes of this Policy, Inside Information means information that emanates from within the Company, and is intended for a corporate purpose, such as data concerning corporate or subsidiary operations, finances or expansion and acquisition plans. This information may relate to the Company or to one or more third party entities. Knowledge of a potential takeover is an obvious form of Inside Information. This term includes all material non-public information which affects the Company or the market for our securities. E. "Quasi-insider." A person, such as an attorney, accountant, consultant, investment banker and any other person temporarily employed by the Company or its subsidiaries who gains access to material non-public information is a Quasi ‑ insider. F. "Temporary Insider." A person who gains access to material non-public information, even if he or she has no relationship with the Company is a Temporary Insider. G. "Ten Percent Beneficial Owners." Beneficial ownership, as defined by Section 13(d) of the 1934 Act, is used to determine when a person owns more than 10% of a class of equity securities for Section 16 purposes, with some modifications. The Section 13(d) definition of beneficial ownership is used to determine when status as a 10% holder is reached. Once insider status is attained, the reporting and short-swing provisions of Section 16 apply only to securities in which the insider has a reportable interest, as defined under Section 16. Insider Trading and Material Non-Public Information Policy11/2025 23
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H. "Equity Securities." An equity security is defined broadly and includes any stock or derivative securities including stock options, warrants, convertible securities, stock appreciation rights, or similar rights with an exercise or conversion privilege at a price related to, or similar securities (including "put" and "call" options) with a value derived from, the value of the Company’s stock. I. "Material Information." Information is "material" if it is likely to affect the market price of a specific security and there is a substantial likelihood that a reasonable investor would attach importance to it in deciding whether to buy, sell or hold the security. Information may be material even if it relates to speculative or contingent events. Whether the information is obtained or generated from inside or outside the Company is not relevant. Depending on the circumstances, examples could include: • information about contemplated mergers or acquisitions tender offers or exchange offers; • proposed recapitalization; • pending material litigation; • Company and various customer business and capital expenditure plans; • proposed divestitures; • sales or purchases of assets; • plans for issuance or redemption of securities; • forthcoming research reports; • changes in dividend policy; • earnings or earnings estimates or changes in previously released earnings or earnings estimates; • changes in management; • financial liquidity problems; • other information about customers, suppliers, improprieties within a company; and • government investigations, inquiries and/or enforcement actions. J. "Non ‑ public Information." Information is nonpublic until it has been widely disclosed to the general public. Unless information has been publicly disclosed (by means of a press release carried over a major news service, in a major news publication, in a public filing made with the SEC, or in materials sent to shareholders) and the market has had sufficient time to absorb and react to the information, we presume that the information is nonpublic. Officers, directors, director emeritus, and other insiders should wait some period of time after a major disclosure before trading. As a general rule, we avoid trading for two full days following a major news announcement. If circumstances (e.g., a complex transaction) indicate that a longer period for public dissemination may be necessary, avoid trading until a longer time period has passed. Our President/CEO is available to advise you. Insider Trading and Material Non-Public Information Policy11/2025 24
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Information concerning the Company obtained in the course of your employment is non ‑ public. The fact that rumors may be circulating, even if they are widespread, does not mean that the information is public and does not relieve you from the obligation to treat the information as non ‑ public. In addition, any non ‑ public information about any of the Company’s subsidiaries which could affect the market price of our stock (information about current or projected earnings, competitive position, proposed products and confidential plans and activities), is also material non ‑ public information. In the regular course of business, you may receive material non ‑ public information not only about our Company but also about our customers. This information would be important to persons buying or selling the securities of these customers. Information regarding customers should also be regarded as non ‑ public information, in accordance with this Policy, both as a legal matter and consistent with our obligation to maintain the privacy of customer information. This Policy cannot possibly list all types of information which could be considered material non ‑ public information. Materiality often depends upon the totality of the circumstances. Accordingly, the Policy does not specifically draw a line between legal and illegal practice under the laws governing the misuse of material non ‑ public information, which is one of the most complex areas of law. Please ask the advise of counsel or consult with our President/CEO. K. "Personal and Related Accounts." A Personal Account is any securities account held by you or any account in which you have a direct or indirect beneficial interest and ability to influence transactions (e.g., joint accounts, co ‑ trustee accounts, partnerships, investment clubs, etc.) A Related Account means any securities account of the director’s, officer’s or employee’s: 1. Spouse; 2. Minor children; 3. Other household members; and 4. Any other account subject to a director’s, officer’s or employee’s discretion or control (e.g., custodial and trust accounts, etc.). The definition of both Personal and Related Accounts includes Pension Plan Accounts, IRAs, 401(k) plans, Keogh accounts, money market accounts or similar accounts in which self ‑ directed securities transactions may be effected. Excluded from the definition of Personal and Related Accounts are discretionary accounts (i.e., accounts over which the broker has absolute trading discretion). Discretionary accounts are only accounts in which the broker has been given advance authority to effect trades on behalf of the customer without prior consultation with or approval by the customer. Obviously, the customer would not be in a position to know that a trade has been effected until it is complete. If a broker consults with the customer for advice or approval before effecting the trade, the account is not truly discretionary and the procedures detailed below will apply to the Personal and the Related Account. Insider Trading and Material Non-Public Information Policy11/2025 25
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EXHIBIT 21 SUBSIDIARIES OF REGISTRANT First Citizens Community Bank of Mansfield, Pennsylvania is the Company’s sole subsidiary. The Bank's sole subsidiary is First Citizens Insurance Agency, Inc. of Mansfield, Pennsylvania.
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Exhibit 23 CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM We consent to the incorporation by reference in Registration Statements File No. 333-282771 and File No. 333-211662 on Form S-8, and File No. 333-187451 on Form S-3/D of Citizens Financial Services, Inc. of our report dated March 12, 2026, relating to our audit of the consolidated financial statements and internal control over financial reporting, which appears in the Annual Report to Stockholders, which is incorporated in this Annual Report on Form 10-K of Citizens Financial Services, Inc. for the year ended December 31, 2025. /s/S.R. Snodgrass, P.C. Cranberry Township, Pennsylvania March 12, 2026 PITTSBURGH, PA PHILADELPHIA, PA WHEELING, WV STEUBENVILLE, OH2009 Mackenzie Way • Suite 340 161 Washington Street • Suite 200 980 National Road 511 N. Fourth StreetCranberry Township, PA 16066 Conshohocken, PA 19428 Wheeling, WV 26003 Steubenville, OH 43952(724) 934-0344 (610) 278-9800 (304) 233-5030 (304) 233-5030 S.R. Snodgrass, P.C. d/b/a S.R. Snodgrass, A.C. in West Virginia
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Exhibit 31.1 Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer I, Randall E. Black, certify that: 1. I have reviewed this Form 10-K of Citizens Financial Services, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: March 12, 2026 /s/ Randall E. Black By: Randall E. Black Chief Executive Officer and President (Principal Executive Officer)
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Exhibit 31.2 Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer I, Stephen J. Guillaume, certify that: 1. I have reviewed this Form 10-K of Citizens Financial Services, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 12, 2026 /s/ Stephen J, Guillaume By: Stephen J. Guillaume Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)
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EXHIBIT 32.1 Certification Pursuant To 18 U.S.C. Section 1350 As Added By Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report of Citizens Financial Services, Inc. (the “Company”) on Form 10-K (the “Report”) for the year ended December 31, 2025, as filed with the Securities and Exchange Commission, I, Randall E. Black, Chief Executive Officer and President, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report. /s/ Randall E. Black By: Randall E. Black Randall E. Black Chief Executive Officer and President Date: March 12, 2026
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EXHIBIT 32.2 Certification Pursuant To 18 U.S.C. Section 1350 As Added By Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Annual Report of Citizens Financial Services, Inc. (the "Company") on Form 10-K (the "Report") for the year ended December 31, 2025, as filed with the Securities and Exchange Commission, I, Stephen J, Guillaume, Chief Financial Officer, of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. The Report fully complies with the requirements of section 13(a) or 15 (d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company as of the dates and for the periods expressed in the Report. /s/ Stephen J. Guillaume By: Stephen J. Guillaume Stephen J. Guillaume Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) Date: March 12, 2026
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Exhibit 97 Line of Business: CEO / President Required Approval Level: Board of Directors Last Approval Date: January 21, 2025 Last Revision Date: N/A Incentive Compensation Recovery Policy (Clawback Policy)
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Table of Contents Policy Statement 3 Exceptions 3 Definitions 4 Administration 5 No Indemnification or Advancement of Legal Fees 5 Non-Exclusive Remedy; Successors 6 Amendment 6 Effective Date 6 Clawback Policy1/2025 2
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Policy Statement The Compensation/Human Resource Committee of the Company is adopting this Incentive Compensation Recovery Policy (this “Policy”) to provide for the recovery of certain Incentive Compensation in the event of an Accounting Restatement. In the event that the Company is required to prepare an Accounting Restatement, except as otherwise set forth in this Policy, the Company shall recover, reasonably promptly, the Excess Incentive Compensation received by any Covered Executive during the Recoupment Period. This Policy applies to all Incentive Compensation received during the Recoupment Period by a person (a) after beginning service as a Covered Executive, (b) who served as a Covered Executive at any time during the performance period for that Incentive Compensation and (c) while the Company has a class of securities listed on the Nasdaq Stock Market LLC (“Nasdaq”) or another national securities exchange or association. This Policy may therefore apply to a Covered Executive even after that person that is no longer a Company employee or a Covered Executive at the time of recovery. Incentive Compensation is deemed “received” for purposes of this Policy in the fiscal period during which the financial reporting measure specified in the Incentive Compensation award is attained, even if the payment or issuance of such Incentive Compensation occurs after the end of that period. For example, if the performance target for an award is based on total stockholder return for the year ended December 31, 2023, the award will be deemed to have been received in 2023 even if paid in 2024. Exceptions The Company is not required to recover Excess Incentive Compensation pursuant to this Policy to the extent the Compensation/Human Resource Committee (the “Committee”) makes a determination that recovery would be impracticable for one of the following reasons (and the applicable procedural requirements are met): • after making a reasonable and documented attempt to recover the Excess Incentive Compensation, which documentation will be provided to Nasdaq to the extent required, the Committee determines that the direct expenses that would be paid to a third party to assist in enforcing this Policy would exceed the amount to be recovered; • based on a legal opinion of counsel acceptable to the Nasdaq, the Committee determines that recovery would violate a home country law adopted prior to November 28, 2022; or A-2 \\4154-2265-9146 v4 • the Committee determines that recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder. Clawback Policy1/2025 3
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Definitions “Accounting Restatement” means an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the securities laws, including any required accounting restatement to correct an error in previously issued financial statements that is material to the previously issued financial statements, or that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period. For the avoidance of doubt, a restatement resulting solely from the retrospective application of a change in generally accepted accounting principles is not an Accounting Restatement. “Covered Executive” means the Company’s Chief Executive Officer, President, Chief Financial Officer, principal accounting officer (or if there is no such accounting officer, the controller), any vice-president of the Company in charge of a principal business unit, division, or function, any other officer who performs a policy-making function for the Company, any other person who performs similar policymaking functions for the Company, and any other employee who may from time to time be deemed subject to this Policy by the Committee. “Excess Incentive Compensation” means the amount of Incentive Compensation received during the Recoupment Period by any Covered Executive that exceeds the amount of Incentive Compensation that otherwise would have been received by such Covered Executive if the determination of the Incentive Compensation to be received had been determined based on restated amounts in the Accounting Restatement and without regard to any taxes paid. “Incentive Compensation” means any compensation (including cash and equity compensation) that is granted, earned, or vested based wholly or in part upon the attainment of a financial reporting measure. For purposes of this definition, a “financial reporting measure” is • any measure that is determined and presented in accordance with the accounting principles used in preparing the Company’s financial statements and any measure derived wholly or in part from such measures, or • the Company’s stock price and/or total shareholder return. A financial reporting measure need not be presented within the financial statements or included in a filing with the commission. Incentive Compensation subject to this Policy may be provided by the Company or subsidiaries or affiliates of the Company. “Recoupment Period” means the three completed fiscal years preceding the Trigger Date, and any transition period (that results from a change in the Company’s fiscal year) of less than nine months within or immediately following those three completed fiscal years, provided that any transition period of nine months or more shall count as a full fiscal year. “Trigger Date” means the earlier to occur of: • the date the Board of Directors, the Audit and Examination Committee (or such other Committee of the Board as may be authorized to make such a conclusion), or the officer or officers of the Company authorized to take such action if action by the Board of Directors is not required concludes, or reasonably should have concluded, that the Company is A-3 \\4154-2265-9146 v4 required to prepare an Accounting Restatement; or Clawback Policy1/2025 4
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• the date a court, regulator, or other legally authorized body directs the Company to prepare an Accounting Restatement; in the case of both (a) and (b) regardless of if or when restated financial statements are filed. Administration This Policy is intended to comply with Nasdaq Listing Rule 5608, Section 10D of the Securities Exchange Act of 1934, as amended (the “Act”), and Rule 10D-1(b)(1) as promulgated under the Act, and shall be interpreted in a manner consistent with those requirements. The Committee has full authority to interpret and administer this Policy. The Committee’s determinations under this Policy shall be final and binding on all persons, need not be uniform with respect to each individual covered by the Policy, and shall be given the maximum deference permitted by law. The Committee has the authority to determine the appropriate means of recovering Excess Incentive Compensation based on the particular facts and circumstances, which could include, but is not limited to, seeking direct reimbursement, forfeiture of awards, offsets against other payments, and forfeiture of deferred compensation (subject to compliance with Section 409A of the Internal Revenue Code). Subject to any limitations under applicable law, the Committee may authorize any officer or employee of the Company to take actions necessary or appropriate to carry out the purpose and intent of this Policy, provided that no such authorization shall relate to any recovery under this Policy that involves such officer or employee. If the Committee cannot determine the amount of excess Incentive Compensation received by a Covered Executive directly from the information in the Accounting Restatement, such as in the case of Incentive Compensation tied to stock price or total stockholder return, then it shall make its determination based on its reasonable estimate of the effect of the Accounting Restatement and shall maintain documentation of such determination, including for purposes of providing such documentation to Nasdaq. Except where an action is required by Nasdaq Listing Rule 5608, Section 10D of the Act or Rule 10D1(b)(1) promulgated under the Act to be determined in a different matter, the Board may act to have the independent directors of the Board administer this Policy in place of the Committee. No Indemnification or Advancement of Legal Fees Notwithstanding the terms of any indemnification agreement, insurance policy, contractual arrangement, the governing documents of the Company or other document or arrangement, the Company shall not indemnify any Covered Executive against, provide advancement of expenses for or pay the premiums for any insurance policy to cover, any amounts recovered under this Policy or any expenses that a Covered Executive incurs in opposing Company efforts to recoup amounts pursuant to the Policy. Clawback Policy1/2025 5
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Non-Exclusive Remedy; Successors Recovery of Incentive Compensation pursuant to this Policy shall not in any way limit or affect the rights of the Company to pursue disciplinary, legal, or other action or pursue any other remedies A-4 \\4154-2265-9146 v4 available to it. This Policy shall be in addition to, and is not intended to limit, any rights of the Company to recover Incentive Compensation from Covered Executives under any legal remedy available to the Company and applicable laws and regulations, including but not limited to the Sarbanes-Oxley Act of 2002, as amended, or pursuant to the terms of any other Company policy, employment agreement, equity award agreement, or similar agreement with a Covered Executive. This Policy shall be binding and enforceable against all Covered Executives and their successors, beneficiaries, heirs, executors, administrators, or other legal representatives. Amendment This Policy may be amended from time to time by the Committee or the Board of Directors of the Company. Effective Date This Policy shall apply to any Incentive Compensation received on or after November 8, 2023. Clawback Policy1/2025 6