Core Viewpoint - Citizens Financial Services (CZFS) has been upgraded to a Zacks Rank 1 (Strong Buy), indicating a positive outlook on its earnings estimates, which is a significant factor influencing stock prices [1][4]. Earnings Estimates and Revisions - The Zacks Consensus Estimate for Citizens Financial Services is projected at $6.90 per share for the fiscal year ending December 2025, showing no year-over-year change [9]. - Over the past three months, analysts have raised their earnings estimates for Citizens Financial Services by 5.5% [9]. Zacks Rating System - The Zacks rating system is based solely on a company's changing earnings picture, which is tracked through the Zacks Consensus Estimate [2]. - The system classifies stocks into five groups, with Zacks Rank 1 stocks historically generating an average annual return of +25% since 1988 [8]. - Only the top 5% of Zacks-covered stocks receive a "Strong Buy" rating, indicating superior earnings estimate revisions [10][11]. Market Implications - The upgrade to Zacks Rank 1 suggests that Citizens Financial Services is positioned for potential price increases due to improved earnings outlook [4][11]. - Rising earnings estimates are correlated with stock price movements, as institutional investors adjust their valuations based on these estimates [5][6].

Group 1: Motorcar Parts of America, Inc. (MPAA) - The company specializes in heavy-duty truck, industrial, marine, and agricultural application replacement parts [1] - It has a Zacks Rank of 1 and a 5.7% increase in the Zacks Consensus Estimate for current year earnings over the last 60 days [1] - The price-to-earnings ratio (P/E) is 6.71, significantly lower than the industry average of 14.70, and it possesses a Value Score of A [2] Group 2: OppFi Inc. (OPFI) - OppFi operates as a tech-enabled digital finance platform [2] - It also holds a Zacks Rank of 1 with a 15.5% increase in the Zacks Consensus Estimate for current year earnings over the last 60 days [2] - The P/E ratio is 7.58, compared to the industry average of 17.90, and it has a Value Score of A [2] Group 3: Citizens Financial Services, Inc. (CZFS) - The company is a bank holding company for First Citizens Community Bank [3] - It carries a Zacks Rank of 1 and has seen a 5.5% increase in the Zacks Consensus Estimate for current year earnings over the last 60 days [3] - The P/E ratio stands at 7.75, lower than the industry average of 10.10, and it possesses a Value Score of B [3]

Part I FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Citizens Financial Services, Inc. as of June 30, 2025, including balance sheet, income, comprehensive income, equity, and cash flow statements, with detailed notes [Consolidated Balance Sheet](index=3&type=section&id=Consolidated%20Balance%20Sheet) Total assets decreased to $2.97 billion from $3.03 billion at year-end 2024, driven by reduced net loans, while stockholders' equity increased to $313.7 million Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$2,967,274** | **$3,025,724** | | Cash and cash equivalents | $49,484 | $42,202 | | Available-for-sale securities | $431,649 | $425,912 | | Loans (net of allowance) | $2,219,646 | $2,291,543 | | **Total Liabilities** | **$2,653,621** | **$2,725,990** | | Total deposits | $2,292,662 | $2,382,028 | | Borrowed funds | $313,219 | $297,721 | | **Total Stockholders' Equity** | **$313,653** | **$299,734** | [Consolidated Statement of Income](index=4&type=section&id=Consolidated%20Statement%20of%20Income) Net income for the six months ended June 30, 2025, increased to $16.1 million from $12.3 million, with diluted EPS rising to $3.35 Statement of Income Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $23,648 | $21,300 | $46,650 | $42,258 | | Provision for credit losses | $750 | $2,002 | $1,375 | $2,787 | | **Net Income** | **$8,463** | **$5,275** | **$16,084** | **$12,299** | | **Net Income - Diluted (per share)** | **$1.76** | **$1.10** | **$3.35** | **$2.56** | [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Detailed disclosures cover accounting policies, investment and loan portfolios, allowance for credit losses, goodwill, fair value, and segment reporting - The loan portfolio is diversified, with commercial real estate representing the largest segment at **$1.15 billion** as of June 30, 2025[34](index=34&type=chunk) Allowance for Credit Losses Activity - Six Months Ended June 30, 2025 (in thousands) | Description | Amount | | :--- | :--- | | Balance at December 31, 2024 | $22,375 | | Net loans charged-off | ($727) | | Provision for credit losses | $1,375 | | **Balance at June 30, 2025** | **$23,023** | - As of June 30, 2025, total non-performing loans were **$24.9 million**, a decrease from **$26.0 million** at year-end 2024[44](index=44&type=chunk) - The company operates as a single reportable segment: Community Banking All operations are domestic[95](index=95&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=35&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance and condition, highlighting a 30.8% increase in net income for the first six months of 2025, driven by higher net interest income and lower credit loss provision [Results of Operations](index=38&type=section&id=Results%20of%20Operations) Net income for the first six months of 2025 increased to $16.1 million ($3.35 per share) from $12.3 million ($2.56 per share) in the prior year, primarily due to higher net interest income and lower credit loss provision Key Performance Metrics - Six Months Ended June 30 | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net Income (in thousands) | $16,084 | $12,299 | | Basic EPS | $3.35 | $2.56 | | Annualized Return on Assets | 1.07% | 0.83% | | Annualized Return on Equity | 10.44% | 8.67% | - Net interest income for the first six months of 2025 increased by **10.4%** to **$46.7 million**, compared to the same period in 2024[121](index=121&type=chunk) - The provision for credit losses decreased to **$1.375 million** for the first half of 2025, down from **$2.787 million** in the first half of 2024, primarily due to improved performance of certain commercial loans acquired from HVBC[144](index=144&type=chunk) [Financial Condition](index=47&type=section&id=Financial%20Condition) Total assets decreased by $58.5 million to $2.97 billion at June 30, 2025, mainly due to a $71.5 million decrease in total loans, while stockholders' equity grew by $13.9 million to $313.7 million - Total loans decreased by **$71.5 million (3.1%)** since year-end 2024, largely due to the seasonal nature of the student loan portfolio[165](index=165&type=chunk)[166](index=166&type=chunk) - The allowance for credit losses to total loans increased to **0.99%** at June 30, 2025, from **0.94%** at December 31, 2024[173](index=173&type=chunk) - Deposits decreased by **$89.4 million**, driven by outflows from state and political organizations and a **$33.1 million** reduction in brokered deposits[189](index=189&type=chunk) - The Bank's leverage ratio under the Community Bank Leverage Ratio (CBLR) framework was **9.22%** as of June 30, 2025, meeting the **9.0%** requirement to be considered 'well-capitalized'[196](index=196&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=59&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk, with a simulation model indicating a 100 basis point rate increase would decrease one-year net interest income by 2.89%, while a decrease would increase it by 2.43% Interest Rate Shock Analysis on Net Interest Income (as of June 30, 2025) | Change in Rates (bps) | % Change In Prospective Net Interest Income | | :--- | :--- | | +400 | (11.52)% | | +300 | (8.97)% | | +200 | (6.10)% | | +100 | (2.89)% | | **Base** | **-** | | -100 | 2.43% | | -200 | 4.06% | | -300 | 5.60% | | -400 | 10.26% | [Item 4. Controls and Procedures](index=60&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting during the quarter - The principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures were effective as of the end of the reporting period[210](index=210&type=chunk) - No material changes were made to the Company's internal control over financial reporting during the quarter ended June 30, 2025[211](index=211&type=chunk) Part II OTHER INFORMATION [Item 1. Legal Proceedings](index=61&type=section&id=Item%201.%20Legal%20Proceedings) The company reports no pending or threatened litigation that would have a material adverse effect on its consolidated financial position - Management is not aware of any pending or threatened litigation that would materially and adversely affect the company's financial position[212](index=212&type=chunk) [Item 1A. Risk Factors](index=61&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - The risk factors of the Company have not changed materially from those reported in the 2024 Annual Report on Form 10-K[213](index=213&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=61&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) During the second quarter of 2025, the company repurchased 821 shares at an average price of $60.25 per share, with 144,418 shares remaining available under the current authorization Issuer Purchases of Equity Securities (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2025 | - | $0.00 | | May 2025 | - | $0.00 | | June 2025 | 821 | $60.25 | | **Total** | **821** | **$58.15** | [Other Items (3, 4, 5, 6)](index=61&type=section&id=Other%20Items%20(3%2C%204%2C%205%2C%206)) This section confirms no defaults upon senior securities, no mine safety disclosures, and no Rule 10b5-1 trading plan adoptions or terminations by directors or executive officers during the quarter, along with a list of exhibits - Items 3 (Defaults Upon Senior Securities) and 4 (Mine Safety Disclosure) are not applicable[216](index=216&type=chunk)[218](index=218&type=chunk) - No directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements during the quarter[219](index=219&type=chunk)

Group 1: Stock Recommendations - Quad Graphics (QUAD) has seen a 7.9% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days and offers print and multichannel solutions [1] - Citizens Financial Services (CZFS) has experienced a 5.5% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days and has a dividend yield of 3.7%, above the industry average of 2.7% [2] - Farmers & Merchants Bancorp (FMAO) has reported a 6.6% increase in the Zacks Consensus Estimate for its current year earnings over the last 60 days and has a dividend yield of 3.6%, also above the industry average of 2.7% [3] Group 2: Industry Insights - The average dividend yield for the industry is notably low at 0.0% for print and related solutions, while the banking sector shows an average of 2.7% [2][3]

Citizens Financial Services (CZFS -0.94%), a regional community bank operating across Pennsylvania, New York, Delaware, and New Jersey, reported strong financial results for the second quarter of fiscal 2025. The earnings release, published on July 30, 2025, delivered headline news with GAAP earnings per share of $1.76, beating analyst expectations of $1.60 (GAAP). Net income (GAAP) reached $8.5 million, a 60.4% rise from the prior year, amid improving net interest margins and tighter expense control. Despi ...

Core Viewpoint - Citizens Financial Services (CZFS) reported quarterly earnings of $1.76 per share, exceeding the Zacks Consensus Estimate of $1.62 per share, and showing an increase from $1.3 per share a year ago, representing an earnings surprise of +8.64% [1][2] Financial Performance - The company posted revenues of $27.31 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.54%, compared to $24.64 million in the same quarter last year [2] - Over the last four quarters, CZFS has exceeded consensus EPS estimates four times and topped consensus revenue estimates two times [2] Stock Performance and Outlook - Citizens Financial Services shares have declined approximately 14% since the beginning of the year, while the S&P 500 has gained 8.3% [3] - The current consensus EPS estimate for the upcoming quarter is $1.62 on revenues of $28.7 million, and for the current fiscal year, it is $6.54 on revenues of $111.5 million [7] Industry Context - The Zacks Industry Rank for Banks - Northeast is currently in the top 10% of over 250 Zacks industries, indicating a favorable outlook for the sector [8]

Six Months Ended June 30, 2025 Compared to 2024 MANSFIELD, Pa., July 30, 2025 /PRNewswire/ -- Citizens Financial Services, Inc (Nasdaq: CZFS), parent company of First Citizens Community Bank (the "Bank"), released today its unaudited consolidated financial results for the three and six months ended June 30, 2025. Highlights Three Months Ended June 30, 2025 Compared to 2024 On June 3, 2025, the Board of Directors declared a cash dividend of $0.495 per share, which was paid on June 27, 2025 to shareholders of ...

Contact: LEEANN GEPHART, CHIEF BANKING OFFICER First Citizens Community Bank 570-545-6005 15 S. Main Street 570-662-8512 (fax) Mansfield, PA 16933 citizens financial services, inc. reports unaudited second quarter 2025 financial results MANSFIELD, PENNSYLVANIA— July 30, 2025 – Citizens Financial Services, Inc (Nasdaq: CZFS), parent company of First Citizens Community Bank (the "Bank"), released today its unaudited consolidated financial results for the three and six months ended June 30, 2025. Highlights • ...

Part I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=2&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)%3A) This section presents the company's unaudited consolidated financial statements and accompanying explanatory notes [Consolidated Balance Sheet](index=3&type=section&id=Consolidated%20Balance%20Sheet%20as%20of%20March%2031%2C%202025%20and%20December%2031%2C%202024) The balance sheet shows a slight decrease in total assets and liabilities, with an increase in stockholders' equity **Consolidated Balance Sheet Highlights (in thousands):** | Item | March 31, 2025 | December 31, 2024 | Change | % Change | | :-------------------------------- | :------------- | :---------------- | :----- | :------- | | Total Assets | $3,016,338 | $3,025,724 | $(9,386) | (0.31)% | | Total Deposits | $2,364,854 | $2,382,028 | $(17,174) | (0.72)% | | Total Liabilities | $2,708,042 | $2,725,990 | $(17,948) | (0.66)% | | Total Stockholders' Equity | $308,296 | $299,734 | $8,562 | 2.86% | | Loans (net of allowance for credit losses) | $2,293,582 | $2,291,543 | $2,039 | 0.09% | | Available-for-sale securities | $430,701 | $425,912 | $4,789 | 1.12% | | Cash and cash equivalents | $36,786 | $42,202 | $(5,416) | (12.83)% | [Consolidated Statement of Income](index=4&type=section&id=Consolidated%20Statement%20of%20Income%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202025%20and%202024) The income statement reflects higher net interest income and net income compared to the prior year period **Consolidated Statement of Income Highlights (Three Months Ended March 31, in thousands, except per share data):** | Item | 2025 | 2024 | Change | % Change | | :-------------------------------- | :----- | :----- | :----- | :------- | | Total Interest Income | $39,014 | $37,933 | $1,081 | 2.85% | | Total Interest Expense | $16,012 | $16,975 | $(963) | (5.67)% | | Net Interest Income | $23,002 | $20,958 | $2,044 | 9.75% | | Provision for credit losses | $625 | $785 | $(160) | (20.38)% | | Total Non-Interest Income | $3,427 | $4,971 | $(1,544) | (31.06)% | | Total Non-Interest Expenses | $16,428 | $16,643 | $(215) | (1.29)% | | Net Income | $7,621 | $7,024 | $597 | 8.50% | | Net Income - Basic Per Share | $1.60 | $1.48 | $0.12 | 8.11% | | Cash Dividends Paid Per Share | $0.495 | $0.485 | $0.01 | 2.06% | [Consolidated Statement of Comprehensive Income](index=5&type=section&id=Consolidated%20Statement%20of%20Comprehensive%20Income%20for%20the%20Three%20Months%20ended%20March%2031%2C%202025%20and%202024) Comprehensive income increased significantly due to unrealized gains on available-for-sale securities **Consolidated Statement of Comprehensive Income Highlights (Three Months Ended March 31, in thousands):** | Item | 2025 | 2024 | Change | % Change | | :------------------------------------------ | :----- | :----- | :----- | :------- | | Net income | $7,621 | $7,024 | $597 | 8.50% | | Other comprehensive income (loss), net of tax | $3,282 | $(1,709) | $4,991 | (291.93)% | | Comprehensive income | $10,903 | $5,315 | $5,588 | 105.13% | - The significant increase in comprehensive income was primarily driven by **unrealized gains on available-for-sale securities in 2025** ($4,939 thousand) compared to unrealized losses in 2024 ($(2,319) thousand), net of tax effects[11](index=11&type=chunk) [Consolidated Statement of Changes in Stockholders' Equity](index=6&type=section&id=Consolidated%20Statement%20of%20Changes%20in%20Stockholders'%20Equity%20for%20the%20Three%20Months%20ended%20March%2031%2C%202025%20and%202024) Stockholders' equity grew due to net income and a reduction in accumulated other comprehensive loss **Consolidated Statement of Changes in Stockholders' Equity Highlights (Three Months Ended March 31, in thousands):** | Item | Balance, March 31, 2025 | Balance, March 31, 2024 | Change | | :-------------------------------- | :---------------------- | :---------------------- | :----- | | Common Stock | $5,208 | $5,161 | $47 | | Additional Paid-in Capital | $145,010 | $143,227 | $1,783 | | Retained Earnings | $194,709 | $177,693 | $17,016 | | Accumulated Other Comprehensive Loss | $(20,239) | $(26,620) | $6,381 | | Treasury Stock | $(16,392) | $(16,787) | $395 | | Total Stockholders' Equity | $308,296 | $282,674 | $25,622 | - Total stockholders' equity **increased by $25.6 million** from March 31, 2024, primarily due to net income and a reduction in accumulated other comprehensive loss[12](index=12&type=chunk) [Consolidated Statement of Cash Flows](index=7&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows%20for%20the%20Three%20Months%20ended%20March%2031%2C%202025%20and%202024) Cash flows show decreased operating cash, a shift in investing activities, and reduced financing outflows **Consolidated Statement of Cash Flows Highlights (Three Months Ended March 31, in thousands):** | Cash Flow Activity | 2025 | 2024 | Change | | :-------------------------------- | :----- | :----- | :----- | | Net cash provided by operating activities | $10,945 | $13,456 | $(2,511) | | Net cash (used in) provided by investing activities | $(728) | $23,111 | $(23,839) | | Net cash used in financing activities | $(15,633) | $(59,766) | $44,133 | | Net decrease in cash and cash equivalents | $(5,416) | $(23,199) | $17,783 | | Cash and cash equivalents at end of period | $36,786 | $29,619 | $7,167 | - Net cash used in investing activities significantly decreased in 2025 compared to 2024, primarily due to the absence of proceeds from the sale of the Braavo division assets ($7,185 thousand in 2024) and lower net decrease in loans in 2025[14](index=14&type=chunk) - Net cash used in financing activities decreased substantially, mainly due to a **net increase in short-term borrowed funds in 2025** ($3,938 thousand) compared to a significant decrease in 2024 ($(33,816) thousand), and lower net decrease in deposits[14](index=14&type=chunk) [Notes to Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations for the line items in the consolidated financial statements [Note 1 – Basis of Presentation](index=8&type=section&id=Note%201%20%E2%80%93%20Basis%20of%20Presentation) The financial statements are prepared in accordance with U.S. GAAP and SEC regulations - The consolidated financial statements are prepared in conformity with **U.S. GAAP and SEC rules**, including normal recurring adjustments for interim periods[17](index=17&type=chunk)[18](index=18&type=chunk) - The Company is Citizens Financial Services, Inc, with its wholly-owned subsidiary First Citizens Community Bank and First Citizens Insurance Agency, Inc[19](index=19&type=chunk) [Note 2 – Revenue Recognition](index=8&type=section&id=Note%202%20%E2%80%93%20Revenue%20Recognition) This note details the company's policies for recognizing revenue from various sources - Primary revenue sources from interest and dividend income on loans and investments, along with noninterest revenue from various sources, are **outside the scope of ASC 606**[20](index=20&type=chunk) - Noninterest income within ASC 606 includes service charges, trust fees, gains/losses on sale of other real estate owned, and brokerage/insurance fees, recognized based on the timing of service delivery[20](index=20&type=chunk)[23](index=23&type=chunk) **Disaggregation of Revenue from Contracts with Customers (Three Months Ended March 31, in thousands):** | Revenue Stream | 2025 | 2024 | Change | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Total Service Charges | $1,291 | $1,372 | $(81) | (5.90)% | | Trust | $224 | $244 | $(20) | (8.20)% | | Brokerage and insurance | $683 | $665 | $18 | 2.71% | | Other | $241 | $132 | $109 | 82.58% | | **Total** | **$2,439** | **$2,413** | **$26** | **1.08%** | [Note 3 – Earnings per Share](index=10&type=section&id=Note%203%20%E2%80%93%20Earnings%20per%20Share) This note provides the calculation for basic and diluted earnings per share **Earnings Per Share (Three Months Ended March 31):** | Metric | 2025 | 2024 | Change | % Change | | :------------------------------------------------ | :----- | :----- | :----- | :------- | | Net income applicable to common stock (in thousands) | $7,621 | $7,024 | $597 | 8.50% | | Weighted average common shares outstanding (basic) | 4,750,538 | 4,748,442 | 2,096 | 0.04% | | Earnings per share - basic | $1.60 | $1.48 | $0.12 | 8.11% | | Weighted average common shares outstanding (diluted) | 4,751,943 | 4,748,442 | 3,501 | 0.07% | | Earnings per share - diluted | $1.60 | $1.48 | $0.12 | 8.11% | - For the three months ended March 31, 2025 and 2024, 2,276 and 4,553 shares, respectively, related to the restricted stock plan were **excluded from diluted EPS calculations** as they were anti-dilutive[25](index=25&type=chunk) [Note 4 – Investments](index=10&type=section&id=Note%204%20%E2%80%93%20Investments) This note details the composition and fair value of the company's investment securities portfolio **Available-for-Sale Securities (in thousands):** | Category | March 31, 2025 Fair Value | December 31, 2024 Fair Value | Change | % Change | | :------------------------------------------ | :------------------------ | :------------------------- | :----- | :------- | | U.S. agency securities | $54,367 | $53,487 | $880 | 1.65% | | U.S. treasury securities | $112,415 | $120,502 | $(8,087) | (6.71)% | | Obligations of state and political subdivisions | $94,339 | $94,902 | $(563) | (0.59)% | | Corporate obligations | $10,772 | $10,438 | $334 | 3.20% | | Mortgage-backed securities in government sponsored entities | $158,808 | $146,583 | $12,225 | 8.34% | | Total available-for-sale securities | $430,701 | $425,912 | $4,789 | 1.12% | **Gross Unrealized Losses on Investments (in thousands):** | Category | March 31, 2025 Gross Unrealized Losses | December 31, 2024 Gross Unrealized Losses | Change | | :------------------------------------------ | :------------------------------------- | :------------------------------------- | :----- | | U.S. agency securities | $(4,252) | $(5,113) | $861 | | U.S. treasury securities | $(4,525) | $(5,724) | $1,199 | | Obligations of state and political subdivisions | $(8,459) | $(8,239) | $(220) | | Corporate obligations | $(734) | $(1,065) | $331 | | Mortgage-backed securities in government sponsored entities | $(11,656) | $(14,029) | $2,373 | | Total securities | $(29,626) | $(34,170) | $4,544 | - As of March 31, 2025, the Company owned **292 securities with fair value less than cost basis**[27](index=27&type=chunk) - **No allowance for credit losses** was recorded for available-for-sale securities as the Company does not intend to sell these securities before recovery of amortized cost[29](index=29&type=chunk)[30](index=30&type=chunk) [Note 5 – Loans](index=12&type=section&id=Note%205%20%E2%80%93%20Loans) This note provides a breakdown of the loan portfolio and activity in the allowance for credit losses **Loan Portfolio Composition (in thousands):** | Loan Type | March 31, 2025 | December 31, 2024 | Change | % Change | | :-------------------------------- | :------------- | :---------------- | :----- | :------- | | Real estate loans: Residential | $350,221 | $351,398 | $(1,177) | (0.33)% | | Real estate loans: Commercial | $1,117,240 | $1,121,435 | $(4,195) | (0.37)% | | Real estate loans: Agricultural | $329,985 | $327,722 | $2,263 | 0.69% | | Real estate loans: Construction | $168,896 | $164,326 | $4,570 | 2.78% | | Consumer | $129,943 | $133,207 | $(3,264) | (2.45)% | | Other commercial loans | $137,529 | $131,310 | $6,219 | 4.74% | | Other agricultural loans | $28,488 | $29,662 | $(1,174) | (3.96)% | | State and political subdivision loans | $53,361 | $54,182 | $(821) | (1.51)% | | Total Loans | $2,315,663 | $2,313,242 | $2,421 | 0.10% | | Allowance for credit losses - loans | $22,081 | $21,699 | $382 | 1.76% | **Allowance for Credit Losses Activity (Three Months Ended March 31, in thousands):** | Item | 2025 | 2024 | Change | | :------------------------------------------ | :----- | :----- | :----- | | Balance at December 31 | $21,699 | $21,153 | $546 | | Net loans charged-off | $(156) | $(667) | $511 | | Provision for credit losses | $538 | $1,112 | $(574) | | Balance at March 31 | $22,081 | $21,598 | $483 | **Non-Performing Loans (in thousands):** | Loan Type | March 31, 2025 | December 31, 2024 | Change | % Change | | :-------------------------------- | :------------- | :---------------- | :----- | :------- | | Nonaccrual Loans | $23,545 | $25,701 | $(2,156) | (8.39)% | | Accrual loans - 90 days or more past due | $1,393 | $276 | $1,117 | 404.71% | | Total Non-Performing Loans | $24,938 | $25,977 | $(1,039) | (4.00)% | - The provision for credit losses for Q1 2025 **decreased by $574 thousand** compared to Q1 2024, primarily due to a decrease in specific reserves for non-performing loans and an annual update of loss driver analysis[37](index=37&type=chunk)[38](index=38&type=chunk)[121](index=121&type=chunk)[145](index=145&type=chunk) [Note 6 – Goodwill and Other Intangible Assets](index=23&type=section&id=Note%206%20%E2%80%93%20Goodwill%20and%20Other%20Intangible%20Assets) This note outlines the carrying values and future amortization of goodwill and other intangible assets **Intangible Assets (in thousands):** | Item | March 31, 2025 Net Carrying Value | December 31, 2024 Net Carrying Value | Change | | :-------------------------- | :-------------------------------- | :----------------------------------- | :----- | | MSRs | $703 | $761 | $(58) | | Core deposit intangibles | $2,004 | $2,131 | $(127) | | Total amortized intangible assets | $2,707 | $2,892 | $(185) | | Goodwill | $85,758 | $85,758 | $0 | **Estimated Future Amortization Expense for Amortized Intangible Assets (in thousands):** | Period | MSRs | Core Deposit Intangibles | Total | | :-------------------------- | :--- | :----------------------- | :---- | | Remaining 2025 | $181 | $351 | $532 | | 2026 | $196 | $395 | $591 | | 2027 | $140 | $339 | $479 | | 2028 | $94 | $284 | $378 | | 2029 | $56 | $230 | $286 | | Thereafter | $36 | $405 | $441 | | Total | $703 | $2,004 | $2,707 | [Note 7 – Employee Benefit Plans](index=24&type=section&id=Note%207%20%E2%80%93%20Employee%20Benefit%20Plans) This note describes the company's pension, 401(k), and restricted stock plans - The Bank sponsors a **noncontributory defined benefit pension plan** for employees hired before January 1, 2007, while newer employees are eligible for a discretionary 401(k) plan contribution[66](index=66&type=chunk)[67](index=67&type=chunk) **Net Periodic Benefit Cost of Pension Plan (Three Months Ended March 31, in thousands):** | Component | 2025 | 2024 | Affected Line Item | | :-------------------------- | :--- | :--- | :-------------------------------- | | Service cost | $83 | $81 | Salary and Employee Benefits | | Interest cost | $113 | $105 | Other Expenses | | Expected return on plan assets | $(201) | $(200) | Other Expenses | | Net amortization and deferral | $0 | $2 | Other Expenses | | Net periodic benefit cost | $(5) | $(12) | | - The Company maintains a Restricted Stock Plan with **104,212 shares available** as of March 31, 2025, and expects to recognize **$579,000 in unrecognized compensation cost** over the next three years[70](index=70&type=chunk)[71](index=71&type=chunk) [Note 8 – Accumulated Other Comprehensive Loss](index=25&type=section&id=Note%208%20%E2%80%93%20Accumulated%20Other%20Comprehensive%20Loss) This note details the changes and components of accumulated other comprehensive loss **Changes in Accumulated Other Comprehensive Loss (Three Months Ended March 31, in thousands):** | Component | Balance, Dec 31, 2024 | Net Current Period OCI (Loss) | Balance, Mar 31, 2025 | | :------------------------------------------ | :-------------------- | :---------------------------- | :-------------------- | | Unrealized gain (loss) on available for sale securities | $(26,564) | $3,901 | $(22,663) | | Defined Benefit Pension Items | $(304) | $0 | $(304) | | Unrealized loss on interest rate swap | $3,347 | $(619) | $2,728 | | Total | $(23,521) | $3,282 | $(20,239) | - Accumulated other comprehensive loss **decreased by $3,282 thousand** in Q1 2025, primarily driven by a $3,901 thousand net unrealized gain on available-for-sale securities[72](index=72&type=chunk) **Significant Amounts Reclassified Out of Accumulated Other Comprehensive Loss (Three Months Ended March 31, in thousands):** | Item | 2025 | 2024 | Affected Line Item | | :------------------------------------------ | :--- | :--- | :-------------------------------- | | Unrealized gain (loss) on interest rate swap | $424 | $504 | Interest expense (net of tax) | [Note 9 – Fair Value Measurements](index=26&type=section&id=Note%209%20%E2%80%93%20Fair%20Value%20Measurements) This note explains the hierarchy and methods used for fair value measurements of assets and liabilities - The Company uses a **three-level hierarchy** for fair value measurements: Level I (quoted prices), Level II (observable inputs), and Level III (unobservable inputs)[77](index=77&type=chunk) **Assets and Liabilities Measured at Fair Value on a Recurring Basis (March 31, 2025, in thousands):** | Item | Level I | Level II | Level III | Total | | :------------------------------------------ | :------ | :------- | :-------- | :------ | | Equity securities | $1,737 | $- | $- | $1,737 | | Available for sale securities | $- | $418,286 | $- | $418,286 | | Loans held for sale | $- | $6,054 | $- | $6,054 | | Derivative instruments – assets | $- | $8,648 | $472 | $9,120 | | Derivative instruments - liabilities | $- | $(5,196) | $- | $(5,196) | **Assets Measured at Fair Value on a Nonrecurring Basis (March 31, 2025, in thousands):** | Item | Level I | Level II | Level III | Total | | :-------------------------- | :------ | :------- | :-------- | :------ | | Collateral-dependent loans | $- | $- | $2,916 | $2,916 | | Other real estate owned | $- | $- | $2,544 | $2,544 | - For **Level 3 measurements**, significant unobservable inputs for collateral-dependent loans include discounts for time since appraisal, selling costs, and holding period[86](index=86&type=chunk) [Note 10 – Segment Reporting](index=30&type=section&id=Note%2010%20%E2%80%93%20Segment%20Reporting) The company operates as a single reportable segment, Community Banking - The Company operates primarily in one reportable segment: **Community Banking**, with performance evaluated based on consolidated net income[89](index=89&type=chunk)[91](index=91&type=chunk) **Community Banking Segment Performance (Three Months Ended March 31, in thousands):** | Item | 2025 | 2024 | Change | | :-------------------------------- | :----- | :----- | :----- | | Total Consolidated Revenues | $42,441 | $42,904 | $(463) | | Segment net interest income and non-interest income | $26,429 | $25,929 | $500 | | Segment net income/consolidated net income | $7,621 | $7,024 | $597 | [Note 11 – Recent Accounting Pronouncements](index=31&type=section&id=Note%2011%20%E2%80%93%20Recent%20Accounting%20Pronouncements) This note discusses the potential impact of recently issued accounting standards - **ASU 2024-03** requires new disclosures for certain costs and expenses, effective for fiscal years beginning after December 15, 2026[92](index=92&type=chunk)[94](index=94&type=chunk) - **ASU 2024-04** clarifies accounting for induced conversions of convertible debt and is not expected to have a significant impact on the Company's financial statements[93](index=93&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management provides an analysis of the company's financial condition and results of operations for the quarter [Forward-Looking Statements](index=32&type=section&id=Forward-Looking%20Statements) This section outlines potential risks and uncertainties that could affect future results - The report contains forward-looking statements subject to risks and uncertainties, including changes in interest rates, economic conditions, and regulatory changes[95](index=95&type=chunk) [Introduction](index=33&type=section&id=Introduction) This section provides an overview of the company's business operations and geographic footprint - The Company engages in general banking across Pennsylvania, southern New York, and Delaware, with recent expansion into southeast Pennsylvania and New Jersey[98](index=98&type=chunk) - The Company operates **48 banking facilities**, including 38 bank branches, with a central office in Mansfield, Pennsylvania[98](index=98&type=chunk) [Risk Management](index=33&type=section&id=Risk%20Management) This section details the company's approach to managing key risks like credit, liquidity, and interest rates - The Company is exposed to various risks including **interest rate, credit, liquidity, reputational, and regulatory/compliance risk**, which are managed through established policies[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk)[103](index=103&type=chunk)[104](index=104&type=chunk) [Competition](index=34&type=section&id=Competition) The company operates in a highly competitive market with various types of financial institutions - The banking industry in the Company's service areas is **highly competitive**, facing a wide range of financial institutions including banks, credit unions, and Fintech entities[105](index=105&type=chunk) - Competition has increased in north central Pennsylvania and is more intense in larger population centers[105](index=105&type=chunk) [Trust and Investment Services; Oil and Gas Lease Services](index=34&type=section&id=Trust%20and%20Investment%20Services%3B%20Oil%20and%20Gas%20Lease%20Services) This section describes the company's trust, investment, and oil and gas lease services - The Investment and Trust Services Division offers trust administration, investment management, and estate planning, with **assets under management of $178.0 million** at March 31, 2025[106](index=106&type=chunk) - Investment Representatives offer brokerage services and financial planning, with customer-owned assets increasing to **$397.2 million** at March 31, 2025[107](index=107&type=chunk) [Results of Operations](index=35&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of the company's operating results for the quarter [Overview of the Income Statement](index=35&type=section&id=Overview%20of%20the%20Income%20Statement) This section presents key performance metrics derived from the income statement **Key Income Statement Metrics (Three Months Ended March 31):** | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Net Income (in thousands) | $7,621 | $7,024 | $597 | 8.50% | | Basic Earnings Per Share | $1.60 | $1.48 | $0.12 | 8.11% | | Annualized Return on Assets | 1.00% | 0.94% | 0.06% | 6.38% | | Annualized Return on Equity | 10.00% | 9.95% | 0.05% | 0.50% | [Net Interest Income](index=35&type=section&id=Net%20Interest%20Income) Net interest income and margin increased due to favorable rate changes and volume growth **Net Interest Income (Three Months Ended March 31, in thousands):** | Metric | 2025 | 2024 | Change | % Change | | :------------------------------------------ | :----- | :----- | :----- | :------- | | Net Interest Income | $23,002 | $20,958 | $2,044 | 9.75% | | Provision for credit losses | $625 | $785 | $(160) | (20.38)% | | Net Interest Income After Provision for Credit Losses | $22,377 | $20,173 | $2,204 | 10.93% | **Tax-Equivalent Net Interest Income and Margin (Three Months Ended March 31, in thousands):** | Metric | 2025 | 2024 | Change | | :------------------------------------------ | :----- | :----- | :----- | | Net interest income (tax equivalent basis) | $23,250 | $21,208 | $2,042 | | Net interest spread | 2.77% | 2.49% | 0.28% | | Net interest income as a percentage of average interest-earning assets | 3.30% | 3.05% | 0.25% | | Average interest-earning assets | $2,859,596 | $2,800,880 | $58,716 | | Average interest-bearing liabilities | $2,322,696 | $2,281,493 | $41,203 | | Average rate earned on interest-earning assets | 5.57% | 5.48% | 0.09% | | Average rate paid on interest-bearing liabilities | 2.80% | 2.99% | (0.19)% | - The increase in tax-equivalent net interest income was driven by a **$348 thousand increase due to volume** and a **$1,694 thousand increase due to rate changes**[115](index=115&type=chunk)[116](index=116&type=chunk) - Total loan interest income increased by $417 thousand, while investment income increased by $762 thousand due to a **56 basis point increase in yield** on investment securities[117](index=117&type=chunk)[118](index=118&type=chunk) [Provision for Credit Losses](index=39&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses decreased due to lower specific reserves for non-performing loans **Provision for Credit Losses (Three Months Ended March 31, in thousands):** | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Provision for credit losses | $625 | $785 | $(160) | (20.38)% | - The decrease in the provision for credit losses was primarily due to a **decrease in specific reserves for non-performing loans** in 2025 compared to 2024[121](index=121&type=chunk) [Non-interest Income](index=39&type=section&id=Non-interest%20Income) Non-interest income declined primarily due to the absence of a one-time gain from a prior-year sale **Non-Interest Income (Three Months Ended March 31, in thousands):** | Item | 2025 | 2024 | Change | % Change | | :-------------------------------- | :----- | :----- | :----- | :------- | | Service charges | $1,291 | $1,372 | $(81) | (5.9)% | | Trust | $224 | $244 | $(20) | (8.2)% | | Brokerage and insurance | $683 | $665 | $18 | 2.7% | | Gains on loans sold | $272 | $417 | $(145) | (34.8)% | | Equity security (losses) gains, net | $(11) | $55 | $(66) | (120.0)% | | Gain on sale of Braavo division | $- | $1,102 | $(1,102) | (100.0)% | | Earnings on bank owned life insurance | $346 | $668 | $(322) | (48.2)% | | Other | $622 | $448 | $174 | 38.8% | | **Total** | **$3,427** | **$4,971** | **$(1,544)** | **(31.1)%** | - The significant decrease in non-interest income was primarily due to the **absence of a $1.1 million gain** from the sale of the Braavo division in Q1 2024[122](index=122&type=chunk)[123](index=123&type=chunk) [Non-interest Expense](index=40&type=section&id=Non-interest%20Expense) Non-interest expense decreased slightly due to lower professional fees and FDIC insurance costs **Non-Interest Expenses (Three Months Ended March 31, in thousands):** | Item | 2025 | 2024 | Change | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Salaries and employee benefits | $10,289 | $10,290 | $(1) | (0.0)% | | Occupancy | $1,356 | $1,324 | $32 | 2.4% | | Furniture and equipment | $265 | $236 | $29 | 12.3% | | Professional fees | $517 | $703 | $(186) | (26.5)% | | FDIC insurance | $450 | $525 | $(75) | (14.3)% | | Pennsylvania shares tax | $319 | $310 | $9 | 2.9% | | Amortization of intangibles | $127 | $149 | $(22) | (14.8)% | | Software expenses | $432 | $514 | $(82) | (16.0)% | | ORE expenses (recovery) | $119 | $(13) | $132 | (1015.4)% | | Other | $2,554 | $2,605 | $(51) | (2.0)% | | **Total** | **$16,428** | **$16,643** | **$(215)** | **(1.3)%** | - Non-interest expenses **decreased by $215 thousand**, primarily due to lower professional fees and a decrease in FDIC insurance[125](index=125&type=chunk)[126](index=126&type=chunk) [Provision for Income Taxes](index=40&type=section&id=Provision%20for%20Income%20Taxes) The income tax provision increased due to higher pre-tax income, resulting in a higher effective tax rate **Provision for Income Taxes (Three Months Ended March 31, in thousands):** | Metric | 2025 | 2024 | Change | % Change | | :-------------------------- | :----- | :----- | :----- | :------- | | Provision for income taxes | $1,755 | $1,477 | $278 | 18.82% | | Effective tax rate | 18.7% | 17.4% | 1.3% | 7.47% | - The increase in income tax provision is mainly due to an **$875 thousand increase in income before taxes**[127](index=127&type=chunk) - The Company anticipates recognizing **$7.6 million in tax credits** over the next 11 years from low-income housing projects[128](index=128&type=chunk) [Financial Condition](index=40&type=section&id=Financial%20Condition) This section analyzes the major components of the company's balance sheet [Cash and Cash Equivalents](index=41&type=section&id=Cash%20and%20Cash%20Equivalents) Cash and cash equivalents decreased due to a reduction in cash held at the Federal Reserve **Cash and Cash Equivalents (in thousands):** | Metric | March 31, 2025 | December 31, 2024 | Change | % Change | | :-------------------------- | :------------- | :---------------- | :----- | :------- | | Cash and cash equivalents | $36,786 | $42,202 | $(5,416) | (12.83)% | - The decrease in cash and cash equivalents was due to a **decrease in cash held at the Federal Reserve**[130](index=130&type=chunk) [Investments](index=41&type=section&id=Investments) The investment portfolio grew slightly, with a focus on mitigating interest rate risk **Investment Portfolio Composition (in thousands):** | Category | March 31, 2025 Amount | March 31, 2025 % | December 31, 2024 Amount | December 31, 2024 % | Change Amount | Change % | | :------------------------------------------ | :-------------------- | :--------------- | :----------------------- | :------------------ | :------------ | :------- | | Debt securities: U. S. Agency securities | $54,367 | 12.6% | $53,487 | 12.5% | $880 | 1.6% | | Debt securities: U. S. Treasury notes | $112,415 | 26.0% | $120,502 | 28.2% | $(8,087) | (6.7)% | | Debt securities: Obligations of state & political subdivisions | $94,339 | 21.8% | $94,902 | 22.2% | $(563) | (0.6)% | | Debt securities: Corporate obligations | $10,772 | 2.5% | $10,438 | 2.4% | $334 | 3.2% | | Debt securities: Mortgage-backed securities in government sponsored entities | $158,808 | 36.7% | $146,583 | 34.3% | $12,225 | 8.3% | | Equity securities | $1,737 | 0.4% | $1,747 | 0.4% | $(10) | (0.6)% | | **Total** | **$432,438** | **100.0%** | **$427,659** | **100.0%** | **$4,779** | **1.1%** | - The investment portfolio **increased by $4.8 million (1.1%)**, primarily due to purchases of mortgage-backed securities[131](index=131&type=chunk) - The investment strategy for 2025 focuses on utilizing cashflows to repurchase investments and timing purchases to mitigate interest rate risk[132](index=132&type=chunk) [Loans Held for Sale](index=42&type=section&id=Loans%20Held%20for%20Sale) The balance of loans held for sale decreased, reflecting seasonal slowness in the residential mortgage market **Loans Held for Sale (in thousands):** | Metric | March 31, 2025 | December 31, 2024 | Change | % Change | | :-------------------------- | :------------- | :---------------- | :----- | :------- | | Loans held for sale | $6,054 | $9,607 | $(3,553) | (36.98)% | - Loans held for sale **decreased by $3.6 million**, as the first quarter typically experiences slower residential home sales[135](index=135&type=chunk) [Loans](index=42&type=section&id=Loans) The total loan portfolio saw modest growth, with shifts among different loan categories **Loan Portfolio Composition (in thousands):** | Loan Type | March 31, 2025 Amount | March 31, 2025 % | December 31, 2024 Amount | December 31, 2024 % | Change Amount | Change % | | :-------------------------------- | :-------------------- | :--------------- | :----------------------- | :------------------ | :------------ | :------- | | Real estate: Residential | $350,221 | 15.1% | $351,398 | 15.2% | $(1,177) | (0.3)% | | Real estate: Commercial | $1,117,240 | 48.3% | $1,121,435 | 48.5% | $(4,195) | (0.4)% | | Real estate: Agricultural | $329,985 | 14.3% | $327,722 | 14.2% | $2,263 | 0.7% | | Real estate: Construction | $168,896 | 7.3% | $164,326 | 7.1% | $4,570 | 2.8% | | Consumer | $129,943 | 5.6% | $133,207 | 5.8% | $(3,264) | (2.5)% | | Other commercial loans | $137,529 | 5.9% | $131,310 | 5.7% | $6,219 | 4.7% | | Other agricultural loans | $28,488 | 1.2% | $29,662 | 1.3% | $(1,174) | (4.0)% | | State & political subdivision loans | $53,361 | 2.3% | $54,182 | 2.2% | $(821) | (1.5)% | | **Total loans** | **$2,315,663** | **100.0%** | **$2,313,242** | **100.0%** | **$2,421** | **0.1%** | - Total loans **increased by $2.4 million (0.1%)**, with growth in construction and other commercial loans offsetting decreases in other categories[136](index=136&type=chunk) - Non-owner-occupied commercial real estate loans represented **306.5% of consolidated risk-based capital**, exceeding supervisory criteria for concentration risk[139](index=139&type=chunk) [Allowance for Credit Losses - Loans](index=46&type=section&id=Allowance%20for%20Credit%20Losses%20-%20Loans) The allowance for credit losses increased slightly, while non-performing assets decreased **Allowance for Credit Losses - Loans (in thousands):** | Metric | March 31, 2025 | December 31, 2024 | Change | % Change | | :-------------------------- | :------------- | :---------------- | :----- | :------- | | Allowance for credit losses - loans | $22,081 | $21,699 | $382 | 1.76% | | Allowance for credit losses as % of total loans | 0.95% | 0.94% | 0.01% | 1.06% | | Net charge-offs (annualized) as % of average loans | 0.03% | 0.11% | (0.08)% | (72.73)% | **Non-Performing Assets (in thousands):** | Item | March 31, 2025 | December 31, 2024 | Change | % Change | | :-------------------------- | :------------- | :---------------- | :----- | :------- | | Non-accruing loans | $23,545 | $25,701 | $(2,156) | (8.39)% | | Accrual loans - 90 days or more past due | $1,393 | $276 | $1,117 | 404.71% | | Total non-performing loans | $24,938 | $25,977 | $(1,039) | (4.00)% | | Foreclosed assets held for sale | $2,544 | $2,635 | $(91) | (3.45)% | | Total non-performing assets | $27,482 | $28,612 | $(1,130) | (3.95)% | - **Non-performing loans decreased by $1.0 million** in Q1 2025 due to changes in the status of several large relationships[154](index=154&type=chunk) [Bank Owned Life Insurance](index=49&type=section&id=Bank%20Owned%20Life%20Insurance) The value of bank-owned life insurance increased, though related income was lower than the prior year **Bank Owned Life Insurance (in thousands):** | Metric | March 31, 2025 | December 31, 2024 | Change | % Change | | :-------------------------- | :------------- | :---------------- | :----- | :------- | | Cash surrender value | $50,578 | $50,341 | $237 | 0.47% | | Non-interest income from BOLI (3 months ended Mar 31) | $346 | $668 | $(322) | (48.20)% | - The decrease in non-interest income from BOLI is due to **death benefits of $326,000 received in Q1 2024**[157](index=157&type=chunk)[158](index=158&type=chunk) [Premises and Equipment](index=49&type=section&id=Premises%20and%20Equipment) The net book value of premises and equipment increased due to recent equipment purchases **Premises and Equipment (in thousands):** | Metric | March 31, 2025 | December 31, 2024 | Change | % Change | | :-------------------------- | :------------- | :---------------- | :----- | :------- | | Premises and equipment | $21,627 | $21,395 | $232 | 1.08% | - Premises and equipment **increased by $232,000** due to equipment purchases[159](index=159&type=chunk) [Other assets](index=49&type=section&id=Other%20assets) Other assets decreased, mainly driven by a reduction in regulatory stock **Other Assets (in thousands):** | Metric | March 31, 2025 | December 31, 2024 | Change | % Change | | :-------------------------- | :------------- | :---------------- | :----- | :------- | | Other assets | $48,514 | $54,631 | $(6,117) | (11.20)% | - Other assets **decreased by $6.1 million**, primarily due to a decrease in regulatory stock and receipt of payment related to a loan participation[160](index=160&type=chunk) [Deposits](index=49&type=section&id=Deposits) Total deposits decreased as customers moved funds to higher-yielding alternatives **Deposit Composition (in thousands):** | Deposit Type | March 31, 2025 Amount | March 31, 2025 % | December 31, 2024 Amount | December 31, 2024 % | Change Amount | Change % | | :-------------------------------- | :-------------------- | :--------------- | :----------------------- | :------------------ | :------------ | :------- | | Non-interest-bearing deposits | $505,826 | 21.4% | $532,776 | 22.4% | $(26,950) | (5.1)% | | Interest bearing demand deposits | $18,745 | 0.8% | $18,004 | 0.8% | $741 | 4.1% | | NOW accounts | $593,851 | 5.1% | $581,673 | 24.4% | $12,178 | 2.1% | | Savings deposits | $291,355 | 12.3% | $292,918 | 12.3% | $(1,563) | (0.5)% | | Money market deposit accounts | $468,624 | 19.8% | $434,856 | 18.3% | $33,768 | 7.8% | | Certificates of deposit | $486,453 | 20.6% | $521,801 | 21.8% | $(35,348) | (6.8)% | | **Total** | **$2,364,854** | **100.0%** | **$2,382,028** | **100.0%** | **$(17,174)** | **(0.7)%** | - Total deposits **decreased by $17.2 million**, driven by decreases in state and political organization deposits and brokered deposits[162](index=162&type=chunk) - Balances exceeding FDIC insurance limits were **$1.13 billion (47.3% of total deposits)**, with a significant portion covered by Intrafi or collateralized[162](index=162&type=chunk) [Borrowed Funds](index=50&type=section&id=Borrowed%20Funds) Borrowed funds increased to support asset growth and offset a seasonal deposit decrease **Borrowed Funds (in thousands):** | Metric | March 31, 2025 | December 31, 2024 | Change | % Change | | :-------------------------- | :------------- | :---------------- | :----- | :------- | | Borrowed funds | $302,027 | $297,721 | $4,306 | 1.45% | - Borrowed funds **increased by $4.3 million** due to increased loans and investments and a seasonal decrease in deposits[163](index=163&type=chunk)[164](index=164&type=chunk) [Stockholders' Equity](index=50&type=section&id=Stockholders'%20Equity) Stockholders' equity increased, driven by net income and a reduction in comprehensive loss **Stockholders' Equity (in thousands):** | Metric | March 31, 2025 | December 31, 2024 | Change | % Change | | :-------------------------- | :------------- | :---------------- | :----- | :------- | | Total stockholders' equity | $308,296 | $299,734 | $8,562 | 2.86% | | Accumulated other comprehensive loss | $(20,239) | $(23,521) | $3,282 | (13.95)% | | Net income (3 months ended Mar 31) | $7,621 | $7,024 | $597 | 8.50% | | Cash dividends paid per share (3 months ended Mar 31) | $0.495 | $0.485 | $0.01 | 2.06% | | Cash dividend payout ratio (3 months ended Mar 31) | 30.9% | N/A | N/A | N/A | - Total stockholders' equity **increased by $8.6 million**, driven by net income and a $3.3 million decrease in accumulated other comprehensive loss[167](index=167&type=chunk)[168](index=168&type=chunk) - The Bank's leverage ratio under the Community Bank Leverage Ratio (CBLR) framework was **9.06%**, meeting the 'well-capitalized' requirement[170](index=170&type=chunk) [Off-Balance Sheet Activities](index=52&type=section&id=Off-Balance%20Sheet%20Activities) The company's off-balance sheet commitments decreased during the quarter **Off-Balance Sheet Financial Instruments (in thousands):** | Item | March 31, 2025 | December 31, 2024 | Change | % Change | | :-------------------------- | :------------- | :---------------- | :----- | :------- | | Commitments to extend credit | $424,062 | $432,123 | $(8,061) | (1.87)% | | Standby letters of credit | $9,674 | $9,799 | $(125) | (1.28)% | | Total contractual off-balance sheet risk | $433,736 | $441,922 | $(8,186) | (1.85)% | | Allowance for Credit Losses - Off-Balance Sheet credit Exposure | $763 | $676 | $87 | 12.87% | - The Company also offers limited non-contractual overdraft protection, totaling **$12.94 million** at March 31, 2025[171](index=171&type=chunk) [Liquidity](index=52&type=section&id=Liquidity) The company maintains sufficient liquidity through diverse funding sources and borrowing capacity - Liquidity is managed through various funding sources including core deposits, FHLB financing, federal funds lines, and brokered certificates of deposit[172](index=172&type=chunk)[173](index=173&type=chunk) - At March 31, 2025, the Bank had a **maximum borrowing capacity of approximately $1.06 billion** at the FHLB[175](index=175&type=chunk) - Citizens Financial Services, Inc (unconsolidated) had **liquid assets of approximately $4.0 million** at March 31, 2025[177](index=177&type=chunk) [Interest Rate and Market Risk Management](index=53&type=section&id=Interest%20Rate%20and%20Market%20Risk%20Management) The company actively manages interest rate risk using simulation models and balance sheet strategies - The Company manages interest rate sensitivity to balance income growth and market value risk using various interest-sensitive assets and liabilities[178](index=178&type=chunk)[180](index=180&type=chunk) - A computer simulation model is used for rate shock analysis; a **+400 basis point shock projects a 14.66% decrease** in prospective one-year net interest income[182](index=182&type=chunk)[183](index=183&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The Company's primary market risk exposure is interest rate risk, which is managed by management and a committee of the Board of Directors - The Company's primary market risk is **interest rate risk**; it is not exposed to foreign currency, commodity price, or trading risk[184](index=184&type=chunk) - Equity risk is not significant, as equity securities represent only **0.06% of total assets** at March 31, 2025[179](index=179&type=chunk) [Item 4. Controls and Procedures](index=54&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Company's disclosure controls and reports no material changes to internal control over financial reporting [Disclosure Controls and Procedures](index=54&type=section&id=Disclosure%20Controls%20and%20Procedures) Management confirms the effectiveness of disclosure controls and procedures as of the quarter-end - Management concluded that the Company's **disclosure controls and procedures were effective** as of March 31, 2025[185](index=185&type=chunk) [Changes to Internal Control over Financial Reporting](index=54&type=section&id=Changes%20to%20Internal%20Control%20over%20Financial%20Reporting) No material changes were made to internal controls over financial reporting during the quarter - There were **no changes in the Company's internal control over financial reporting** during the quarter ended March 31, 2025, that materially affected internal controls[186](index=186&type=chunk) Part II. OTHER INFORMATION [Item 1. Legal Proceedings](index=55&type=section&id=Item%201.%20Legal%20Proceedings) Management is unaware of any pending or threatened litigation that would materially adversely affect the Company's consolidated financial position - Management is not aware of any pending or threatened litigation that would have a **material adverse effect** on the Company's consolidated financial position[187](index=187&type=chunk) [Item 1A. Risk Factors](index=55&type=section&id=Item%201A.%20Risk%20Factors) The Company's risk factors have not materially changed from those reported in its 2024 Annual Report on Form 10-K - As of March 31, 2025, the Company's risk factors have **not materially changed** from those reported in its 2024 Annual Report on Form 10-K[188](index=188&type=chunk) [Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=55&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The Company repurchased 947 shares of common stock during the quarter, with 145,239 shares remaining available for repurchase **Issuer Purchases of Equity Securities (Three Months Ended March 31, 2025):** | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans | Maximum Number of Shares that May Yet Be Purchased Under the Plans | | :---------------- | :----------------------------- | :--------------------------- | :------------------------------------------------------- | :----------------------------------------------------------------- | | 1/1/25 to 1/31/25 | 1 | $59.19 | 1 | 146,185 | | 2/1/25 to 2/28/25 | - | $0.00 | - | 146,185 | | 3/1/25 to 3/31/25 | 946 | $58.15 | 946 | 145,239 | | **Total** | **947** | **$58.15** | **947** | **145,239** | - The Board of Directors authorized the repurchase of up to an additional **150,000 shares**, not exceeding $15.0 million[189](index=189&type=chunk) [Item 3. Defaults Upon Senior Securities](index=55&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the Company for the reporting period - This item is **not applicable**[190](index=190&type=chunk) [Item 4. Mine Safety Disclosures](index=55&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the Company for the reporting period - This item is **not applicable**[191](index=191&type=chunk) [Item 5. Other Information](index=56&type=section&id=Item%205.%20Other%20Information) No directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangements during the quarter - During the three months ended March 31, 2025, **none of the Company's directors or executive officers** adopted or terminated any Rule 10b5-1 trading arrangements[193](index=193&type=chunk) [Item 6. Exhibits](index=56&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the report, including corporate governance documents and certifications - The report includes exhibits such as Articles of Incorporation, Bylaws, CEO and CFO Certifications, and XBRL formatted financial statements[194](index=194&type=chunk) [Signatures](index=57&type=section&id=Signatures) The report is duly signed on behalf of the Company by its President and CEO and its CFO on May 8, 2025 - The report was signed by Randall E. Black, President and Chief Executive Officer, and Stephen J. Guillaume, Chief Financial Officer, on **May 8, 2025**[200](index=200&type=chunk)

Company Overview - Citizens Financial Services (CZFS) is headquartered in Mansfield and operates in the Finance sector [3] - The stock has experienced a price decline of -10.76% since the beginning of the year [3] Dividend Information - CZFS currently pays a dividend of $0.5 per share, resulting in a dividend yield of 3.5%, which is higher than the Banks - Northeast industry's yield of 2.87% and the S&P 500's yield of 1.6% [3] - The annualized dividend of $1.98 has increased by 1% from the previous year, with an average annual increase of 2.52% over the last 5 years [4] - The current payout ratio for CZFS is 32%, indicating that 32% of its trailing 12-month earnings per share (EPS) is distributed as dividends [4] Earnings Growth - CZFS is projected to see earnings growth this fiscal year, with the Zacks Consensus Estimate for 2025 at $6.54 per share, reflecting a year-over-year growth rate of 8.82% [5] Investment Appeal - The company is viewed as an attractive dividend investment, with benefits such as improved stock investing profits, reduced overall portfolio risk, and tax advantages [6] - CZFS is ranked 2 (Buy) by Zacks, indicating it is considered a compelling investment opportunity [7]