[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) [Financial Performance Overview](index=1&type=section&id=Financial%20Performance%20Overview) Citizens Financial Services, Inc. reported significant increases in net income and improved profitability ratios for both Q2 and H1 2025, driven by increased net interest income and reduced credit loss provisions | Metric | Q2 2025 | Q2 2024 | Change (QoQ) | H1 2025 | H1 2024 | Change (YoY) | | :-------------------------------- | :------ | :------ | :----------- | :------ | :------ | :----------- | | Net Income | $8.5M | $5.3M | +$3.2M | $16.1M | $12.3M | +$3.8M (30.8%) | | Net Interest Income (pre-PCL) | N/A | N/A | N/A | $46.7M | $42.3M | +$4.4M (10.4%) | | Provision for Credit Losses | $0.75M | $2.0M | -$1.25M | $1.375M | $2.787M | -$1.412M | | Effective Tax Rate | 18.8% | 17.4% | +1.4 pp | 18.7% | 17.4% | +1.3 pp | | Ratio (Annualized) | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :----------------------------- | :------ | :------ | :------ | :------ | | Return on Average Equity | 10.88% | 7.40% | 10.44% | 8.67% | | Return on Average Tangible Equity (non-GAAP) | 15.19% | 10.76% | 14.65% | 12.64% | | Return on Average Assets | 1.13% | 0.72% | 1.07% | 0.83% | [Asset Quality and Ratios](index=2&type=section&id=Asset%20Quality%20and%20Ratios) Non-performing assets decreased from year-end 2024 but rose significantly year-over-year due to HVB acquisition loans | Asset Quality Metric | June 30, 2025 | Dec 31, 2024 | June 30, 2024 | Change (vs Dec 31, 2024) | Change (vs June 30, 2024) | | :----------------------------- | :------------ | :----------- | :------------ | :----------------------- | :------------------------ | | Non-performing assets | $27.376M | $28.612M | $17.924M | -$1.236M | +$9.452M | | Non-performing assets as % of loans | 1.22% | 1.24% | 0.79% | -0.02 pp | +0.43 pp | | Specific reserves for non-performing assets | $1.477M | N/A | $2.405M | N/A | -$0.928M | - The increase in non-performing assets from June 30, 2024, is attributed to loans acquired as part of the HVB acquisition[3](index=3&type=chunk) - The bank's strategy for these loans includes improving credit metrics, refinancing, or selling collateral[3](index=3&type=chunk) [Detailed Financial Review](index=2&type=section&id=Detailed%20Financial%20Review) [Six Months Ended June 30, 2025 vs. 2024](index=2&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%202024) H1 2025 showed strong financial improvement driven by increased net interest income and reduced credit loss provisions [Net Income and EPS (Six Months)](index=2&type=section&id=Net%20Income%20and%20EPS%20Six%20Months) H1 2025 net income increased substantially, boosting EPS and returns on equity and assets due to improved margins and lower credit provisions | Metric | H1 2025 | H1 2024 | Change | | :----------------------- | :------ | :------ | :------- | | Net Income | $16.084M | $12.299M | +$3.785M | | Basic EPS | $3.35 | $2.56 | +$0.79 | | Annualized ROE | 10.44% | 8.67% | +1.77 pp | | Annualized ROA | 1.07% | 0.83% | +0.24 pp | [Net Interest Income (Six Months)](index=2&type=section&id=Net%20Interest%20Income%20Six%20Months) Net interest income before credit losses rose 10.4% due to asset growth and an improved net interest margin | Metric | H1 2025 | H1 2024 | Change | | :-------------------------------- | :------ | :------ | :------- | | Net Interest Income (pre-PCL) | $46.650M | $42.258M | +$4.392M (10.4%) | | Average Interest Earning Assets | +$49.5M | N/A | N/A | | Yield on Interest Earning Assets | 5.58% | 5.52% | +6 bps | | Cost of Interest-Bearing Liabilities | 2.75% | 2.99% | -24 bps | | Tax Effected Net Interest Margin | 3.36% | 3.09% | +27 bps | [Provision for Credit Losses (Six Months)](index=2&type=section&id=Provision%20for%20Credit%20Losses%20Six%20Months) The provision for credit losses significantly decreased in H1 2025, contrasting with the prior year's impact from Braavo loans | Metric | H1 2025 | H1 2024 | Change | | :------------------------ | :------ | :------ | :------- | | Provision for Credit Losses | $1.375M | $2.787M | -$1.412M | - The **2024 provision** was significantly impacted by loans not sold as part of the Braavo division sale and an increase in past due/classified loans, while the **2025 provision** was due to an increase in past due loans and the annual update of loss drivers[2](index=2&type=chunk)[4](index=4&type=chunk) [Non-Interest Income and Expenses (Six Months)](index=2&type=section&id=Non-Interest%20Income%20and%20Expenses%20Six%20Months) Non-interest income decreased due to the absence of the Braavo sale gain, while expenses slightly fell despite higher salaries | Metric | H1 2025 | H1 2024 | Change | | :-------------------------- | :------ | :------ | :------- | | Total Non-Interest Income | $7.092M | $8.307M | -$1.215M | | Total Non-Interest Expenses | $32.575M | $32.889M | -$0.314M | | Salary and Benefit Costs | $20.265M | $19.907M | +$0.358M | | Professional Fees & Software Costs | $1.927M | $2.409M | -$0.482M | - The decrease in non-interest income was primarily due to the **gain on the sale of Braavo assets** and earnings on bank-owned life insurance in 2024[4](index=4&type=chunk)[6](index=6&type=chunk) - The decrease in non-interest expenses was due to the **sale of the Braavo division in 2024**, offsetting increased healthcare and post-employment benefits[4](index=4&type=chunk)[6](index=6&type=chunk) [Income Tax Provision (Six Months)](index=3&type=section&id=Income%20Tax%20Provision%20Six%20Months) The provision for income taxes increased in H1 2025, correlating with the significant rise in income before tax | Metric | H1 2025 | H1 2024 | Change | | :------------------------ | :------ | :------ | :------- | | Provision for Income Taxes | $3.708M | $2.590M | +$1.118M | | Income Before Income Tax | $19.792M | $14.889M | +$4.903M | [Three Months Ended June 30, 2025 vs. 2024](index=3&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%202024) Q2 2025 showed robust financial growth with net income up over 60%, driven by increased net interest income and lower credit provisions [Net Income and EPS (Three Months)](index=3&type=section&id=Net%20Income%20and%20EPS%20Three%20Months) Q2 2025 net income surged by 60.4%, resulting in higher basic EPS and improved annualized returns on equity and assets | Metric | Q2 2025 | Q2 2024 | Change | | :----------------------- | :------ | :------ | :------- | | Net Income | $8.463M | $5.275M | +$3.188M (60.4%) | | Basic EPS | $1.76 | $1.10 | +$0.66 | | Annualized ROE | 10.88% | 7.40% | +3.48 pp | | Annualized ROA | 1.13% | 0.72% | +0.41 pp | [Net Interest Income (Three Months)](index=3&type=section&id=Net%20Interest%20Income%20Three%20Months) Net interest income before credit losses increased 11.0% in Q2 2025, driven by asset growth and an expanded net interest margin | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------------------- | :------ | :------ | :------- | | Net Interest Income (pre-PCL) | $23.648M | $21.300M | +$2.348M (11.0%) | | Average Interest Earning Assets | +$47.0M | N/A | N/A | | Yield on Interest Earning Assets | 5.66% | 5.58% | +8 bps | | Cost of Interest-Bearing Liabilities | 2.73% | 3.00% | -27 bps | | Tax Effected Net Interest Margin | 3.47% | 3.15% | +32 bps | [Provision for Credit Losses (Three Months)](index=3&type=section&id=Provision%20for%20Credit%20Losses%20Three%20Months) Q2 2025 provision for credit losses was significantly lower than prior year, primarily due to an increase in past due commercial loans | Metric | Q2 2025 | Q2 2024 | Change | | :------------------------ | :------ | :------ | :------- | | Provision for Credit Losses | $0.750M | $2.002M | -$1.252M | - The **Q2 2025 provision** was driven by an increase in past due commercial loans, specifically one commercial real estate relationship totaling **$14.4 million**[6](index=6&type=chunk) - The **Q2 2024 provision** was impacted by Braavo loans and an increase in past due/classified loans[6](index=6&type=chunk) [Non-Interest Income and Expenses (Three Months)](index=3&type=section&id=Non-Interest%20Income%20and%20Expenses%20Three%20Months) Total non-interest income increased in Q2 2025 due to higher gains on loans and equity securities, while expenses slightly decreased | Metric | Q2 2025 | Q2 2024 | Change | | :-------------------------- | :------ | :------ | :------- | | Total Non-Interest Income | $3.665M | $3.336M | +$0.329M | | Gains on Loans Sold | $0.739M | $0.479M | +$0.260M | | Equity Security Gains (net) | $0.033M | -$0.087M | +$0.120M | | Total Non-Interest Expenses | $16.147M | $16.246M | -$0.099M (-0.6%) | | Salary and Employee Benefits | Increased | N/A | N/A | | ORE Expenses | Decreased | N/A | N/A | [Income Tax Provision (Three Months)](index=4&type=section&id=Income%20Tax%20Provision%20Three%20Months) The provision for income taxes increased in Q2 2025, reflecting higher income before taxes and a slightly elevated effective tax rate | Metric | Q2 2025 | Q2 2024 | Change | | :------------------------ | :------ | :------ | :------- | | Provision for Income Taxes | $1.953M | $1.113M | +$0.840M | | Income Before Income Taxes | $10.416M | $6.388M | +$4.028M | | Effective Tax Rate | 18.8% | 17.4% | +1.4 pp | [Balance Sheet and Other Information](index=4&type=section&id=Balance%20Sheet%20and%20Other%20Information) [Assets Overview](index=4&type=section&id=Assets%20Overview) Total assets remained stable year-over-year but slightly decreased from year-end 2024, with net loans declining due to seasonal paydowns | Metric | June 30, 2025 | Dec 31, 2024 | June 30, 2024 | Change (vs Dec 31, 2024) | Change (vs June 30, 2024) | | :-------------------------- | :------------ | :----------- | :------------ | :----------------------- | :------------------------ | | Total Assets | $2.97B | $3.03B | $2.95B | -$0.06B | +$0.02B | | Available for Sale Securities | $431.6M | $425.9M | $402.6M | +$5.7M | +$29.0M | | Yield on Investment Portfolio | 2.89% | 2.32% | N/A | +0.57 pp | N/A | | Net Loans | $2.22B | $2.29B | $2.23B | -$71.9M | -$10.0M | - The decrease in net loans is attributed to the **seasonality of the student loan portfolio**, which typically grows in the second half of the year and pays down in the first half[8](index=8&type=chunk) [Liabilities and Equity](index=4&type=section&id=Liabilities%20and%20Equity) Deposits decreased from year-end 2024 due to competitive pressures, while stockholders' equity grew, benefiting from reduced AOCL | Metric | June 30, 2025 | Dec 31, 2024 | June 30, 2024 | Change (vs Dec 31, 2024) | Change (vs June 30, 2024) | | :-------------------- | :------------ | :----------- | :------------ | :----------------------- | :------------------------ | | Deposits | $2.29B | $2.38B | $2.27B | -$89.4M | +$22.0M | | Brokered CDs | Decreased $33.1M | N/A | N/A | N/A | N/A | | Borrowed Funds | $313.2M | $297.7M | $334.8M | +$15.5M | -$21.6M | | Stockholders' Equity | $313.7M | $299.7M | $286.5M | +$13.9M | +$27.2M | | Stockholders' Equity (Excluding AOCL, non-GAAP) | $334.7M | N/A | N/A | +$11.4M | N/A | | Accumulated Other Comprehensive Loss (AOCL) | -$21.026M | -$23.521M | -$25.932M | +$2.5M | +$4.9M | - The decrease in deposits was influenced by competitive pressure and a **$68.3 million decrease** from a school district utilizing funds[8](index=8&type=chunk) [Loan Portfolio and Credit Quality](index=4&type=section&id=Loan%20Portfolio%20and%20Credit%20Quality) Allowance for credit losses on loans increased from year-end 2024 due to past due loans and forecast adjustments | Metric | June 30, 2025 | Dec 31, 2024 | June 30, 2024 | Change (vs Dec 31, 2024) | | :-------------------------------- | :------------ | :----------- | :------------ | :----------------------- | | Allowance for Credit Losses - Loans | $22.109M | $21.699M | $22.797M | +$0.410M | | Provision for Credit Losses on Loans (H1 2025) | $1.137M | N/A | N/A | N/A | | Loan Recoveries (H1 2025) | $0.054M | N/A | N/A | N/A | | Charge-offs (H1 2025) | $0.781M | N/A | N/A | N/A | | Allowance for Credit Losses as % of Total Loans | 0.99% | 0.94% | 1.01% | +0.05 pp | [Dividend Declaration](index=5&type=section&id=Dividend%20Declaration) The Board of Directors declared a quarterly cash dividend of **$0.495 per share**, a **2.1% increase** year-over-year | Metric | Value | | :-------------------- | :---- | | Cash Dividend per Share | $0.495 | | Increase over prior year | 2.1% | - The dividend was paid on **June 27, 2025**, to shareholders of record on **June 13, 2025**[9](index=9&type=chunk) [Forward-Looking Statements](index=5&type=section&id=Forward-Looking%20Statements) This section cautions that forward-looking statements are subject to risks and uncertainties, and the company disclaims any obligation to update them - Forward-looking statements are not historical facts but are based on current expectations regarding business strategies and future performance[11](index=11&type=chunk) - Numerous risks and uncertainties, including changes in economic conditions, interest rates, and regulatory changes, could cause actual results to differ from those expressed or implied[11](index=11&type=chunk) - Readers are cautioned not to place undue reliance on forward-looking statements, and the company assumes no obligation to update them unless required by law[11](index=11&type=chunk) [Detailed Financial Statements and Reconciliations](index=6&type=section&id=Detailed%20Financial%20Statements%20and%20Reconciliations) [Consolidated Financial Highlights](index=6&type=section&id=CONSOLIDATED%20FINANCIAL%20HIGHLIGHTS) This table summarizes key income, performance, asset quality, and equity metrics for Q2 and H1 2025 and comparable periods | | As of or For The | | | | As of or For The | | | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | | Three Months Ended June 30, | | | | Six Months Ended June 30, | | | | | 2025 | | 2024 | | 2025 | | 2024 | | | **Income and Performance Ratios** | | | | | | | | | | Net Income (in thousands) | $8,463 | | $5,275 | | $16,084 | | $12,299 | | | Return on average assets (annualized) | 1.13% | | 0.72% | | 1.07% | | 0.83% | | | Return on average equity (annualized) | 10.88% | | 7.40% | | 10.44% | | 8.67% | | | Return on average tangible equity (annualized) (a) | 15.19% | | 10.76% | | 14.65% | | 12.64% | | | Net interest margin (tax equivalent) (a) | 3.47% | | 3.15% | | 3.36% | | 3.09% | | | Earnings per share - basic (b) | $1.76 | | $1.10 | | $3.35 | | $2.56 | | | Cash dividends paid per share (b) | $0.490 | | $0.480 | | $0.980 | | $0.961 | | | **Asset quality** | | | | | | | | | | Allowance for credit losses - loans (in thousands) | $22,109 | | $22,797 | | | | | | | Non-performing assets (in thousands) | $27,376 | | $17,924 | | | | | | | Allowance for credit losses - loans to total loans | 0.99% | | 1.01% | | | | | | | Non-performing assets to total loans | 1.22% | | 0.79% | | | | | | | Annualized net charge-offs to total loans | 0.10% | | 0.12% | | 0.06% | | 0.12% | | | **Equity** | | | | | | | | | | Book value per share (b) | $65.25 | | $59.60 | | | | | | | Tangible Book value per share (a) (b) | $46.88 | | $41.08 | | | | | | | Common shares outstanding | 4,807,000 | | 4,759,486 | | | | | | | **Balance Sheet Highlights** | June 30, | | December 31, | | June 30, | | | | | | 2025 | | 2024 | | 2024 | | | | | Assets (in thousands) | $2,967,274 | | $3,025,724 | | $2,947,531 | | | | | Investment securities (in thousands) | 433,417 | | 427,659 | | 404,231 | | | | | Loans (net of unearned income) (in thousands) | 2,241,755 | | 2,313,242 | | 2,255,716 | | | | | Deposits (in thousands) | 2,292,662 | | 2,382,028 | | 2,273,095 | | | | | Stockholders' Equity (in thousands) | 313,653 | | 299,734 | | 286,470 | | | | [Consolidated Balance Sheet](index=7&type=section&id=CONSOLIDATED%20BALANCE%20SHEET) This table presents the consolidated balance sheet for Citizens Financial Services, Inc. as of June 30, 2025, and prior periods | (in thousands except share data) | June 30, 2025 | December 31, 2024 | June 30, 2024 | | :-------------------------------- | :------------ | :---------------- | :------------ | | **ASSETS:** | | | | | Total cash and cash equivalents | $49,484 | $42,202 | $38,433 | | Available-for-sale securities | 431,649 | 425,912 | 402,661 | | Loans (net of allowance for credit losses) | 2,219,646 | 2,291,543 | 2,232,919 | | TOTAL ASSETS | $2,967,274 | $3,025,724 | $2,947,531 | | **LIABILITIES:** | | | | | Total deposits | $2,292,662 | $2,382,028 | $2,273,095 | | Borrowed funds | 313,219 | 297,721 | 334,829 | | TOTAL LIABILITIES | 2,653,621 | 2,725,990 | 2,661,061 | | **STOCKHOLDERS' EQUITY:** | | | | | TOTAL STOCKHOLDERS' EQUITY | 313,653 | 299,734 | 286,470 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $2,967,274 | $3,025,724 | $2,947,531 | [Consolidated Statement of Income](index=8&type=section&id=CONSOLIDATED%20STATEMENT%20OF%20INCOME) This table details the consolidated statement of income for Q2 and H1 2025 and 2024, including interest, non-interest, and net income | (in thousands, except share and per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | TOTAL INTEREST INCOME | $38,749 | $37,902 | $77,763 | $75,835 | | TOTAL INTEREST EXPENSE | 15,101 | 16,602 | 31,113 | 33,577 | | NET INTEREST INCOME | 23,648 | 21,300 | 46,650 | 42,258 | | Provision for credit losses | 750 | 2,002 | 1,375 | 2,787 | | NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES | 22,898 | 19,298 | 45,275 | 39,471 | | TOTAL NON-INTEREST INCOME | 3,665 | 3,336 | 7,092 | 8,307 | | TOTAL NON-INTEREST EXPENSES | 16,147 | 16,246 | 32,575 | 32,889 | | Income before provision for income taxes | 10,416 | 6,388 | 19,792 | 14,889 | | Provision for income tax expense | 1,953 | 1,113 | 3,708 | 2,590 | | NET INCOME | $8,463 | $5,275 | $16,084 | $12,299 | | PER COMMON SHARE DATA: | | | | | | Net Income - Basic | $1.76 | $1.10 | $3.35 | $2.56 | | Cash Dividends Paid | $0.490 | $0.480 | $0.980 | $0.961 | [Quarterly Condensed Income Statement](index=9&type=section&id=QUARTERLY%20CONDENSED%2C%20CONSOLIDATED%20INCOME%20STATEMENT%20INFORMATION) This table provides a quarterly breakdown of key income statement items for the past five quarters ending June 30, 2025 | (in thousands, except per share data) | June 30, 2025 | March 31, 2025 | Dec 31, 2024 | Sept 30, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :----------- | :------------ | :------------ | | Interest income | $38,749 | $39,014 | $39,793 | $38,689 | $37,902 | | Interest expense | 15,101 | 16,012 | 16,920 | 17,365 | 16,602 | | Net interest income | 23,648 | 23,002 | 22,873 | 21,324 | 21,300 | | Provision (release) for credit losses | 750 | 625 | - | (200) | 2,002 | | Net interest income after provision (release) for credit losses | 22,898 | 22,377 | 22,873 | 21,524 | 19,298 | | Non-interest income | 3,632 | 3,438 | 3,321 | 3,596 | 3,423 | | Non-interest expenses | 16,147 | 16,428 | 16,668 | 16,029 | 16,246 | | Income before provision for income taxes | 10,416 | 9,376 | 9,544 | 9,250 | 6,388 | | Provision for income tax expense | 1,953 | 1,755 | 1,561 | 1,714 | 1,113 | | Net income | $8,463 | $7,621 | $7,983 | $7,536 | $5,275 | | Earnings Per Share - Basic | $1.76 | $1.59 | $1.66 | $1.57 | $1.10 | [Net Interest Margin Analysis (Three Months)](index=10&type=section&id=CONSOLIDATED%20AVERAGE%20BALANCES%2C%20INTEREST%2C%20YIELDS%20AND%20RATES%2C%20AND%20NET%20INTEREST%20MARGIN%20ON%20A%20FULLY%20TAX-EQUIVALENT%20BASIS%20Three%20Months) This table details average balances, interest, yields, and rates for Q2 2025 and 2024, providing net interest margin insights | (dollars in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | | Average Balance | Interest | Rate | Average Balance | Interest | Rate | | **ASSETS** | | | | | | | | Total interest-earning assets | $2,795,139 | $39,005 | 5.66% | $2,748,110 | $38,147 | 5.58% | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | | | | | Total interest-bearing liabilities | $2,246,016 | $15,101 | 2.73% | $2,229,143 | $16,602 | 3.00% | | Net interest income (tax equivalent) | | $23,904 | | | $21,545 | | | Net interest spread | | | 2.93% | | | 2.58% | | Net interest income as a percentage of average interest-earning assets | | | 3.47% | | | 3.15% | [Net Interest Margin Analysis (Six Months)](index=11&type=section&id=CONSOLIDATED%20AVERAGE%20BALANCES%2C%20INTEREST%2C%20YIELDS%20AND%20RATES%2C%20AND%20NET%20INTEREST%20MARGIN%20ON%20A%20FULLY%20TAX-EQUIVALENT%20BASIS%20Six%20Months) This table details average balances, interest, yields, and rates for H1 2025 and 2024, illustrating net interest spread and margin trends | (dollars in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | | | Average Balance | Interest | Rate | Average Balance | Interest | Rate | | **ASSETS** | | | | | | | | Total interest-earning assets | $2,829,412 | $78,267 | 5.58% | $2,779,883 | $76,330 | 5.52% | | **LIABILITIES AND STOCKHOLDERS' EQUITY** | | | | | | | | Total interest-bearing liabilities | $2,284,144 | $31,113 | 2.75% | $2,255,317 | $33,577 | 2.99% | | Net interest income (tax equivalent) | | $47,154 | | | $42,753 | | | Net interest spread | | | 2.83% | | | 2.53% | | Net interest income as a percentage of average interest-earning assets | | | 3.36% | | | 3.09% | [Loan Portfolio and Asset Quality Summary](index=12&type=section&id=CONSOLIDATED%20SUMMARY%20OF%20LOANS%20BY%20TYPE%3B%20NON-PERFORMING%20ASSETS%3B%20and%20ALLOWANCE%20FOR%20CREDIT%20LOSSES) This table details the loan portfolio by type, non-performing assets, and allowance for credit losses over several quarters | (In Thousands) | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | :------------------------------------ | :------------ | :------------- | :---------------- | :----------------- | :------------ | | **Real estate:** | | | | | | | Residential | $341,671 | $350,221 | $351,398 | $353,254 | $354,588 | | Commercial | 1,151,585 | 1,117,240 | 1,121,435 | 1,110,548 | 1,110,269 | | Agricultural | 331,995 | 329,985 | 327,722 | 331,734 | 327,057 | | Construction | 138,307 | 168,896 | 164,326 | 178,706 | 180,157 | | Consumer | 46,933 | 129,943 | 133,207 | 143,064 | 70,542 | | Other commercial loans | 150,171 | 137,529 | 131,310 | 134,285 | 130,851 | | Other agricultural loans | 28,366 | 28,488 | 29,662 | 24,537 | 26,247 | | State & political subdivision loans | 52,727 | 53,361 | 54,182 | 54,874 | 56,005 | | **Total loans** | $2,241,755 | $2,315,663 | $2,313,242 | $2,331,002 | $2,255,716 | | Less: allowance for credit losses - loans | 22,109 | 22,081 | 21,699 | 21,695 | 22,797 | | **Net loans** | $2,219,646 | $2,293,582 | $2,291,543 | $2,309,307 | $2,232,919 | | **Past due and non-performing assets** | | | | | | | Non-accrual loans | $24,595 | $23,545 | $25,701 | $20,858 | $14,949 | | Non-performing loans | $24,942 | $24,938 | $25,977 | $21,559 | $15,234 | | Other real estate owned | 2,434 | 2,544 | 2,635 | 2,486 | 2,690 | | **Total Non-performing assets** | $27,376 | $27,482 | $28,612 | $24,045 | $17,924 | | **Analysis of the Allowance for Credit Losses - Loans** | June 30, 2025 | March 31, 2025 | December 31, 2024 | September 30, 2024 | June 30, 2024 | | Balance, beginning of period | $22,081 | $21,699 | $21,695 | $22,797 | $21,598 | | Net charge-offs | (571) | (156) | (86) | (1,202) | (675) | | Provision for credit losses - loans | 599 | 538 | 90 | 100 | 1,874 | | Balance, end of period | $22,109 | $22,081 | $21,699 | $21,695 | $22,797 | [GAAP to Non-GAAP Reconciliation](index=13&type=section&id=Reconciliation%20of%20GAAP%20and%20Non-GAAP%20Financial%20Measures) This section reconciles GAAP and non-GAAP financial measures, including tangible equity and returns, for three and six-month periods | | As of June 30, 2025 | As of June 30, 2024 | | :-------------------------------- | :------------------ | :------------------ | | **Tangible Equity (in thousands)** | | | | Stockholders Equity - GAAP | $313,653 | $286,470 | | Intangible Assets | (88,288) | (89,002) | | Tangible Equity - Non-GAAP | 225,365 | 197,468 | | Tangible Book value per share - Non-GAAP | $46.88 | $41.08 | | **Return on Average Tangible Equity** | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | | Average Tangible Equity - Non-GAAP (in thousands) | 222,851 | 196,065 | | Annualized Return on Average Tangible Equity Non-GAAP | 15.19% | 10.76% | | | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | Average Tangible Equity - Non-GAAP (in thousands) | 219,599 | 194,614 | | Annualized Return on Average Tangible Equity Non-GAAP | 14.65% | 12.64% | | **Net Income excluding sale of Braavo assets, net of legal fees and provision associated with Braavo loans remaining after sale - Non-GAAP (in thousands)** | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | | Net Income - GAAP | $8,463 | $5,275 | | After tax provision associated with Braavo loans remaining after sale | - | 898 | | Net Income excluding one time items - Non-GAAP | $8,463 | $6,173 | | Basic and Diluted earnings per share, Excluding sale of Braavo assets, net of legal fees, provision associated with Braavo loans remaining after sale, net of tax - Non-GAAP | $1.76 | $1.29 | | | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | Net Income - GAAP | $16,084 | $12,299 | | After tax gain on sale of Braavo, net of legal fees | - | (712) | | After tax provision associated with Braavo loans remaining after sale | - | 1,427 | | Net Income excluding one time items - Non-GAAP | $16,084 | $13,014 | | Basic and Diluted earnings per share, Excluding sale of Braavo assets, net of legal fees, provision associated with Braavo loans remaining after sale, net of tax - Non-GAAP | $3.35 | $2.71 | | **Reconciliation of net interest income on fully taxable equivalent basis (in thousands)** | For the Three Months Ended June 30, 2025 | For the Three Months Ended June 30, 2024 | | Net interest income | $23,648 | $21,300 | | Tax equivalent adjustment | 256 | 245 | | Net interest income (fully taxable equivalent) - Non-GAAP | $23,904 | $21,545 | | | For the Six Months Ended June 30, 2025 | For the Six Months Ended June 30, 2024 | | Net interest income | $46,650 | $42,258 | | Tax equivalent adjustment | 504 | 495 | | Net interest income (fully taxable equivalent) - Non-GAAP | $47,154 | $42,753 |

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]

Core Viewpoint - Citizens Financial Services reported quarterly earnings of $1.60 per share, exceeding the Zacks Consensus Estimate of $1.49 per share, and showing an increase from $1.49 per share a year ago, representing an earnings surprise of 7.38% [1][2] Earnings Performance - The company has surpassed consensus EPS estimates three times over the last four quarters [2] - For the quarter ended March 2025, Citizens Financial Services posted revenues of $26.43 million, which missed the Zacks Consensus Estimate by 1.02%, but increased from $25.93 million year-over-year [2] Stock Performance - Citizens Financial Services shares have declined approximately 13.2% since the beginning of the year, compared to a decline of 5.5% for the S&P 500 [3] Future Outlook - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the next quarter is $1.56 on revenues of $27.2 million, and for the current fiscal year, it is $6.40 on revenues of $112.7 million [7] Industry Context - The Banks - Northeast industry, to which Citizens Financial Services belongs, is currently ranked in the top 25% of over 250 Zacks industries, indicating a favorable outlook compared to lower-ranked industries [8]

Contact: LEEANN GEPHART, CHIEF BANKING OFFICER First Citizens Community Bank 15 S. Main Street Mansfield, PA 16933 570-545-6005 570-662-8512 (fax) Note: This press release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are not historical facts; rather, they are statements based on the Company's current expectations regarding its business strategies and their intended results and its future performance. Forward-looking statements ar ...

All investors love getting big returns from their portfolio, whether it's through stocks, bonds, ETFs, or other types of securities. But when you're an income investor, your primary focus is generating consistent cash flow from each of your liquid investments.While cash flow can come from bond interest or interest from other types of investments, income investors hone in on dividends. A dividend is that coveted distribution of a company's earnings paid out to shareholders, and investors often view it by its ...

Company Overview - Citizens Financial Services (CZFS) is headquartered in Mansfield and has experienced a price change of -8.92% this year [3] - The bank currently pays a dividend of $0.5 per share, resulting in a dividend yield of 3.43%, which is higher than the Banks - Northeast industry's yield of 2.74% and the S&P 500's yield of 1.59% [3] Dividend Analysis - The current annualized dividend of CZFS is $1.98, reflecting a 1% increase from the previous year [4] - Over the last 5 years, CZFS has increased its dividend 3 times year-over-year, with an average annual increase of 1.50% [4] - The current payout ratio for CZFS is 32%, indicating that it paid out 32% of its trailing 12-month EPS as dividends [4] Earnings Growth - The Zacks Consensus Estimate for CZFS's earnings per share for 2025 is $6.40, representing a year-over-year growth rate of 6.49% [5] Investment Opportunity - CZFS is considered a compelling investment opportunity due to its attractive dividend and a strong Zacks Rank of 2 (Buy) [7]

Company Overview - Citizens Financial Services (CZFS) is headquartered in Mansfield and has experienced a price change of -10.17% this year [3] - The bank currently pays a dividend of $0.5 per share, resulting in a dividend yield of 3.48%, which is higher than the Banks - Northeast industry's yield of 2.76% and the S&P 500's yield of 1.61% [3] Dividend Analysis - The current annualized dividend of CZFS is $1.98, reflecting a 1% increase from the previous year [4] - Over the last 5 years, CZFS has increased its dividend 4 times year-over-year, with an average annual increase of 1.50% [4] - The current payout ratio for CZFS is 32%, indicating that the company paid out 32% of its trailing 12-month earnings per share as dividends [4] Earnings Growth - The Zacks Consensus Estimate for CZFS's earnings in 2025 is $6.40 per share, which represents a year-over-year earnings growth rate of 6.49% [5] Investment Considerations - High-yielding stocks, like CZFS, can be attractive for income investors, especially those seeking dividends [6][7] - CZFS is noted as a compelling investment opportunity due to its attractive dividend and a strong Zacks Rank of 2 (Buy) [7]

Acquisition and Market Expansion - Citizens Financial Services, Inc. completed the acquisition of HV Bancorp, Inc. on June 16, 2023, enhancing its market presence[11] - The Company acquired HV Bancorp, Inc. and its subsidiary, Huntingdon Valley Bank, on June 16, 2023, expanding its market presence[11] - The Bank operates 38 full-service offices and has expanded into new markets, including a limited production office in Georgetown, Delaware, opened in 2024[14] - The Bank operates 38 full-service offices and has opened a limited production office in Georgetown, Delaware, enhancing its geographic reach[14] Employee Diversity and Development - As of December 31, 2024, the Company had a total of 410 employees, with approximately 70% being women, indicating a strong commitment to diversity[18] - As of December 31, 2024, the Company had 410 employees, with approximately 70% being women, indicating a diverse workforce[18] - The Company emphasizes employee development, with 19% of staff having been with the organization for over 15 years, showcasing strong employee retention[19] - The Company emphasizes employee development and retention, with 19% of staff having been with the Company for over fifteen years[19] Regulatory Compliance and Capital Standards - The Company maintains a common equity Tier 1 capital ratio of at least 4.5%, in compliance with federal regulations[28] - Federal regulations require the Company to meet minimum capital standards effective January 1, 2015, aligning with Basel Committee recommendations[27] - The capital standards require a minimum common equity Tier 1 capital ratio of 4.5%, Tier 1 capital ratio of 6.0%, and total capital ratio of 8.0% to risk-weighted assets[28] - The Bank's leverage ratio was 8.99%, which is below the "well-capitalized" threshold under the community bank leverage ratio framework[33] - An institution is deemed "well capitalized" if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, and a leverage ratio of 5.0% or greater[34] - The Bank must file a capital restoration plan with the FRB within 45 days if deemed "undercapitalized" or worse[35] - The Company is subject to extensive regulation by the Pennsylvania Department of Banking and the Federal Reserve System, ensuring compliance and operational integrity[21] - The Company is subject to extensive regulation by the Federal Reserve System and the Pennsylvania Department of Banking, impacting its operational framework[21] Community Engagement and Credit Needs - The Bank's most recent Community Reinvestment Act rating was "Satisfactory," reflecting its commitment to meeting community credit needs[26] - The Bank's market areas include diverse economies, such as manufacturing and retail trade, which are crucial for its growth strategy[15] Competitive Landscape - The Bank's competitive landscape includes local community banks and larger regional banks, necessitating strategic pricing and service differentiation[17] - The Company is engaged in a competitive banking environment, facing pressures from local community banks and larger regional banks[17] Dividend Policies and Financial Regulations - The Bank could have declared approximately $29.9 million in dividends during 2024 without prior regulatory approval, plus net profits earned to the date of declaration[40] - The Dodd-Frank Act mandates that no institution may pay a dividend if it is in default of its assessments[44] - The FRB's policies require that dividends should be paid only out of current earnings and if the prospective rate of earnings retention appears consistent with the organization's capital needs[58] - The Dodd-Frank Act increased the minimum target Deposit Insurance Fund (DIF) ratio from 1.15% to 1.35% of estimated insured deposits[45] - Under the Dodd-Frank Act, deposit insurance per account owner is set at $250,000 for all types of accounts[44] - The Bank is required to maintain average daily reserves equal to 3% on aggregate transaction accounts of up to $644.0 million, plus 10% on the remainder[48] - The Federal Deposit Insurance Act holds depository institutions liable for losses related to defaults, which could apply if the company had a separate depository institution[59] Economic Influences - The Company’s operations are influenced by the Federal Reserve's monetary policies, which affect interest rates and overall economic growth[62] - The FRB's monetary policies significantly influence the banking industry's earnings and growth, affecting interest rates on loans and deposits[62] - The company cannot predict changes in interest rates, deposit levels, or loan demand due to the dynamic economic conditions and regulatory actions[63]

分组1 - Citizens Financial Services reported quarterly earnings of $1.68 per share, exceeding the Zacks Consensus Estimate of $1.54 per share, and showing an increase from $1.60 per share a year ago, resulting in an earnings surprise of 9.09% [1] - The company posted revenues of $26.21 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 0.05%, and an increase from $25.34 million year-over-year [2] - Over the last four quarters, Citizens Financial Services has surpassed consensus EPS estimates two times and topped consensus revenue estimates two times [2] 分组2 - The stock has underperformed the market, losing about 4.4% since the beginning of the year compared to the S&P 500's gain of 2.7% [3] - The current consensus EPS estimate for the coming quarter is $1.42 on revenues of $26.4 million, and for the current fiscal year, it is $6.25 on revenues of $111.8 million [7] - The Zacks Industry Rank for Banks - Northeast is currently in the top 6% of over 250 Zacks industries, indicating a favorable outlook for the industry [8]