Executive Summary

Q1 2025 delivered solid profitability with net income of $7.6M and diluted EPS of $1.60, supported by a 9.8% YoY increase in net interest income and 25 bps expansion in tax-equivalent NIM to 3.30% .
EPS exceeded Wall Street consensus by roughly 8% (actual $1.60 vs. $1.48 consensus mean), driven by higher investment income and lower borrowing costs; non-interest income declined due to lapping the Braavo gain and BOLI benefits in 2024 *.
Credit quality remains a watch item: non-performing assets (NPAs) are elevated vs. prior year due to HVB-acquired credits but improved sequentially, with specific reserves down and two large relationships returning to accrual status .
Deposits fell $17.2M QoQ amid persistent competitive pressures; brokered CDs declined $14.6M QoQ, while equity rose $8.6M QoQ helped by AOCL improvement, potentially reducing capital-mark volatility .
Dividend raised to $0.495/share (+2.1% YoY), signaling confidence in earnings durability despite credit normalization and deposit pricing competition .

What Went Well and What Went Wrong

What Went Well

Net interest income rose 9.8% YoY, with investment portfolio yield higher and borrowing costs lower; tax-equivalent NIM reached 3.30% (“The yield on interest earning assets increased eight basis points to 5.57%, while the cost of interest bearing liabilities decreased nine basis points to 2.80%”) .
Sequential improvement in NPAs: “The decrease since December reflects two large relationships being placed back on accrual status due to making consistent payments for at least six months” .
Balance sheet resilience: equity climbed QoQ and AOCL improved $3.3M, helped by rate-driven securities and swaps valuation tailwinds .

What Went Wrong

Non-interest income declined $1.54M YoY, primarily from lapping the Braavo sale and prior-period BOLI death benefits; loan sale gains were lower given the rate backdrop .
Deposits declined $17.2M QoQ as “competitive pressure for deposits remains high”; deposit cost pressures remain an ongoing headwind to spread/NIM optimization .
NPAs remain elevated vs. last year (1.19% of loans vs. 0.70% in Q1 2024) tied to HVB-acquired credits, despite sequential improvement and reduced specific reserves .

Financial Results

Metric	Q3 2024	Q4 2024	Q1 2025
Interest Income ($USD Millions)	$38.689	$39.793	$39.014
Interest Expense ($USD Millions)	$17.365	$16.920	$16.012
Net Interest Income ($USD Millions)	$21.324	$22.873	$23.002
Provision for Credit Losses ($USD Millions)	$(0.200)	$0.000	$0.625
Total Non-Interest Income ($USD Millions)	$3.755	$3.339	$3.427
Total Non-Interest Expenses ($USD Millions)	$16.029	$16.668	$16.428
Income Before Taxes ($USD Millions)	$9.250	$9.544	$9.376
Provision for Income Taxes ($USD Millions)	$1.714	$1.561	$1.755
Net Income ($USD Millions)	$7.536	$7.983	$7.621
EPS – Basic ($)	$1.59	$1.68	$1.60
EPS – Diluted ($)	$1.59	$1.68	$1.60
NIM (Tax-Equivalent) (%)	3.09%	3.26%	3.30%
ROA (annualized) (%)	1.00%	1.06%	1.00%
ROE (annualized) (%)	9.53%	10.63%	10.00%

Note: The “Quarterly Condensed” table shows non-interest income excluding investment securities gains/losses; adding the investment securities line reconciles to Total Non-Interest Income (e.g., Q1 2025: $3.438 + $(0.011) = $3.427) .

Balance Sheet KPIs

Metric	Sep 30, 2024	Dec 31, 2024	Mar 31, 2025
Total Assets ($USD Billions)	$3.026	$3.026	$3.016
Loans (Gross, $USD Billions)	$2.331	$2.313	$2.316
Deposits ($USD Billions)	$2.450	$2.382	$2.365
Stockholders’ Equity ($USD Millions)	$298.654	$299.734	$308.296
Borrowed Funds ($USD Millions)	$231.732	$297.721	$302.027
Loan-to-Deposit Ratio (%)	95.14%	97.11%	97.92%
Non-Performing Assets ($USD Millions)	$24.045	$28.612	$27.482
NPA / Total Loans (%)	1.03%	1.24%	1.19%
Allowance for Credit Losses ($USD Millions)	$21.695	$21.699	$22.081
ACL / Total Loans (%)	0.93%	0.94%	0.95%

Loan Mix (by Type)

Loan Category ($USD Millions)	Mar 31, 2024	Dec 31, 2024	Mar 31, 2025
Residential Real Estate	$357.779	$351.398	$350.221
Commercial Real Estate	$1,115.900	$1,121.435	$1,117.240
Agricultural	$318.413	$327.722	$329.985
Construction	$184.506	$164.326	$168.896
Consumer	$53.101	$133.207	$129.943
Other Commercial	$129.438	$131.310	$137.529
Other Agricultural	$24.345	$29.662	$28.488
State & Political Subdivision	$56.177	$54.182	$53.361
Total Loans	$2,239.659	$2,313.242	$2,315.663

Additional KPIs

KPI	Q3 2024	Q4 2024	Q1 2025
Yield on Interest-Earning Assets (%)	5.58%	5.65%	5.57%
Cost of Interest-Bearing Liabilities (%)	3.06%	2.94%	2.80%
Net Interest Spread (%)	2.52%	2.71%	2.77%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Dividend per Share	Q1 2025	$0.490 (Q4 2024 dividend)	$0.495 (declared March 4, 2025; paid Mar 28, 2025)	Raised
Revenue	Q1 2025	Not provided	Not provided	Maintained (no formal guidance)
NIM, Margins, OpEx, OI&E, Tax Rate	Q1 2025	Not provided	Not provided	Maintained (no formal guidance)

Management did not issue quantitative forward guidance for revenues/margins/OpEx; commentary emphasized deposit competition, investment reinvestment, and credit normalization .

Earnings Call Themes & Trends

Earnings call transcript was not available in the document set; themes below reflect management’s press releases.

Topic	Previous Mentions (Q3 2024)	Previous Mentions (Q4 2024)	Current Period (Q1 2025)	Trend
Deposit competition	“Competitive pressure for deposits continues…” with seasonal municipal balances; brokered deposits increased to $141.6M	Continues; deposits +$60.5M YoY; estimated $1.16B uninsured, Intrafi/secured balances detailed	“Competitive pressure for deposits remains high”; deposits −$17.2M QoQ; brokered CDs −$14.6M QoQ	Challenging but improving mix (brokered down)
Investment portfolio yield	2.36% tax-equivalent; reinvestment at higher rates	2.44% tax-equivalent; purchases offset maturities	2.85% tax-equivalent; “Investment activity… replacing securities as they mature”	Improving yield
Non-performing assets	$24.0M; driven by HVB-acquired credits	$28.6M; eight large commercial relationships on non-accrual	$27.5M; sequential decrease; two large relationships back to accrual; specific reserves down	Elevated but stabilizing
Student loan growth	Loans +$81.6M YTD; student loans primary driver	Net loans +$63.9M YoY primarily student loans	Loans +$75.5M YoY due to student loans	Continued growth
Tax rate	18.5% (Q3)	16.4% (Q4)	18.7% (Q1)	Variable (mix effects: BOLI, credits)
HVB/Braavo impacts	Braavo sale gain, legal fees; ASC 326 provision dynamics	Braavo-related provision explainers; disposal complete	Lapping of Braavo/BOLI inflates prior non-interest income; clean base in 2025	Normalizing

Management Commentary

“The yield on interest earning assets increased eight basis points to 5.57%, while the cost of interest bearing liabilities decreased nine basis points to 2.80%” .
“Investment activity for 2025 has focused on replacing securities as they mature” .
“Competitive pressure for deposits remains high. Brokered CD’s have decreased $14.6 million since December 31, 2024, accounting for most of the change since year end” .
“The decrease since December reflects two large relationships being placed back on accrual status due to making consistent payments for at least six months” .
“The provision for the first quarter of 2025 of $625,000 was driven by the annual update of loss drivers… compared to $785,000 for the first quarter of 2024” .

Q&A Highlights

No Q1 2025 earnings call transcript was available in the document set; no Q&A details to report [functions.ListDocuments returned none for earnings-call-transcript].

Estimates Context

Metric	Q1 2025 Consensus	Q1 2025 Actual	Surprise
Primary EPS Consensus Mean	$1.48*	$1.60	Bold beat (+8%)*
Primary EPS – # of Estimates	1*	—	—
Revenue Consensus Mean	N/A*	$25.804M*	N/A*

Values retrieved from S&P Global.*
Note: EPS beat underpinned by higher NII (+$2.04M YoY), stronger investment income, and lower borrowing expense; partially offset by lower non-interest income due to lapping Braavo/BOLI items .

Key Takeaways for Investors

NIM expansion and NII growth are the quarter’s key positives; reinvestment at higher yields and lower borrowing costs support spread resilience even as deposit pricing remains competitive .
Credit normalization is progressing: NPAs remain above prior-year levels due to HVB-acquired credits but improved sequentially with reduced specific reserves and relationships returning to accrual status—watch for further workouts in 2025 .
Non-interest income headwinds reflect tough comps against one-off Braavo and BOLI in 2024; base should be cleaner going forward, making core trends more transparent .
Deposit mix appears to be improving (brokered down QoQ), but absolute deposits fell; maintaining funding discipline while protecting NIM remains central to the 2025 playbook .
Capital trajectory is favorable: equity up $8.6M QoQ and AOCL improved $3.3M, buffering tangible book and ROE metrics against rate volatility .
Dividend uptick (+2.1% YoY to $0.495) signals confidence in earnings durability and capital flexibility despite credit and deposit competition dynamics .
Near-term trading: EPS beat and NIM improvement are supportive; monitor subsequent credit updates and deposit trends. Medium-term: thesis hinges on continued NIM resilience, stable credit outcomes on HVB-acquired loans, and sustaining core fee income in a higher-for-longer rate environment .

CITIZENS FINANCIAL SERVICES INC (CZFS)·Q1 2025 Earnings Summary