Group 1 - Citizens Financial Services, Inc. (NASDAQ: CZFS) is a regional bank in Pennsylvania operating as First Citizens Community Bank, with a focus on uplisting [1] - The investment group European Small Cap Ideas specializes in high-quality small-cap investment opportunities in Europe, emphasizing capital gains and dividend income [1] - The group offers two model portfolios: the European Small Cap Ideas portfolio and the European REIT Portfolio, along with weekly updates and educational content [1]

Group 1 - Citizens Financial Services, Inc. (NASDAQ: CZFS) is a regional bank in Pennsylvania operating as First Citizens Community Bank, with a focus on uplisting opportunities [1] - The investment group European Small Cap Ideas specializes in high-quality small-cap investment opportunities in Europe, emphasizing capital gains and dividend income [1] - The group offers two model portfolios: the European Small Cap Ideas portfolio and the European REIT Portfolio, along with weekly updates and educational content [1]

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]

Core Viewpoint - Citizens Financial Services reported strong financial results for Q2 2025, with GAAP earnings per share of $1.76, exceeding analyst expectations of $1.60, and net income reaching $8.5 million, a 60.4% increase from the previous year, driven by improved net interest margins and expense control, although challenges remain with higher non-performing assets and deposit outflows [1][5][6]. Financial Performance - GAAP EPS for Q2 2025 was $1.76, a 60.0% increase from $1.10 in Q2 2024 [2] - Net income for Q2 2025 was $8.5 million, up from $5.3 million in Q2 2024, marking a 60.4% year-over-year increase [2] - Net interest income rose to $23.6 million, a 10.8% increase from $21.3 million in Q2 2024 [2] - Return on average equity (annualized) improved to 10.88%, up 3.48 percentage points from 7.40% in the previous year [2] - Non-performing assets increased to $27.4 million, a 52.8% rise from $17.9 million in Q2 2024 [2] Business Overview - Citizens Financial Services is a community-focused bank offering a variety of services including deposit, lending, trust, and brokerage services, with a strong presence in agriculture, manufacturing, and natural resources [3] - The bank's core operations include originating residential and commercial real estate loans and agricultural financing [3] Strategic Focus - Recent strategic efforts have included increasing lending to underserved markets, investing in higher-yielding securities, and enhancing operational efficiency [4] - Key success factors involve growth in net interest income and effective management of credit quality [4] Performance Drivers - The increase in net income for the first half of 2025 was attributed to stronger net interest income, benefiting from rising yields on assets and lower costs of interest-bearing liabilities [5] - The net interest margin widened from 3.15% to 3.47% for the three months ended June 30, 2025, due to a favorable funding mix [5] Credit Metrics - The provision for credit losses decreased to $750,000 from $2.0 million the previous year, reducing the drag on earnings [6] - Non-performing assets as a percentage of loans rose from 0.79% to 1.22% year-over-year, primarily due to acquired loans from the HVB acquisition [6] - A significant commercial real estate loan in central Pennsylvania contributed to increased past due balances, indicating potential credit concentration risk [6] Deposit Base and Funding - Deposits decreased by $89.4 million from December 31, 2024, to June 30, 2025, totaling $2.29 billion [7] - The loan-to-deposit ratio was 97.78% as of June 30, 2025, with borrowed funds rising to $313.2 million [7] Non-Interest Income and Expenses - Non-interest income increased by $329,000 compared to the same period in 2024, driven by gains in selling loans and higher returns from equity securities [8] - Non-interest expenses dropped by $99,000, attributed to a decline in professional and software fees following the divestiture of the Braavo division [9] - The quarterly dividend was raised by 2.1% year-over-year to $0.495 per share [9] Future Outlook - Management did not provide explicit forward financial guidance but emphasized a focus on improving credit quality in acquired commercial real estate loans and careful management of the investment portfolio [10]

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]

Core Insights - Citizens Financial Services, Inc. reported a significant increase in net income for the first half of 2025, totaling $16.1 million, which is a 30.8% increase compared to the same period in 2024 [5][11] - The company experienced growth in net interest income, driven by an increase in investment income and a decrease in interest expense [5][11] - The effective tax rate increased slightly to 18.7% for the first half of 2025 from 17.4% in the same period of 2024 [5] Financial Performance - For the six months ended June 30, 2025, net income was $16.1 million, up from $12.3 million in 2024, with basic earnings per share rising to $3.35 from $2.56 [5][10] - The annualized return on equity improved to 10.44% for the first half of 2025, compared to 8.67% in 2024 [5][10] - Net interest income before the provision for credit losses for the first half of 2025 was $46.7 million, a 10.4% increase from $42.3 million in 2024 [5][10] Asset Quality - Non-performing assets decreased by $1.2 million since December 31, 2024, totaling $27.4 million as of June 30, 2025, although this is an increase of $9.5 million compared to June 30, 2024 [5][11] - The allowance for credit losses on loans was $22.1 million, representing 0.99% of total loans as of June 30, 2025 [11][12] - The provision for credit losses for the first half of 2025 was $1.375 million, down from $2.787 million in the same period of 2024 [5][11] Balance Sheet Highlights - Total assets as of June 30, 2025, were $2.97 billion, a decrease from $3.03 billion at the end of 2024 [11][12] - Deposits decreased by $89.4 million to $2.29 billion as of June 30, 2025, reflecting competitive pressures [11][12] - Stockholders' equity increased to $313.7 million as of June 30, 2025, up from $299.7 million at the end of 2024 [11][12] Dividend Information - The Board of Directors declared a cash dividend of $0.495 per share, which is a 2.1% increase from the previous year's dividend of $0.480 per share [7]

[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 |