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CF

CITIZENS FINANCIAL SERVICES INC (CZFS)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 EPS was $1.76, up 60% YoY; consensus EPS was $1.60, a beat of $0.16 per share (one estimate). The beat was driven by higher net interest income and a lower provision for credit losses.*
  • Net interest margin expanded 32 bps YoY to 3.47% and 17 bps QoQ, reflecting higher yields on interest-earning assets and lower cost of interest-bearing liabilities, a key profitability tailwind.
  • Credit quality improved sequentially: non-performing assets fell $1.236M since year-end and specific reserves declined YoY, while provision dropped sharply vs. Q2 2024; management continues to remediate acquired HVB credits.
  • Balance sheet mix shifted: deposits fell $89.4M YTD amid high competition, brokered CDs declined $33.1M, and borrowings increased $15.5M to fund investment growth; loan-to-deposit ratio was 97.78%.
  • Dividend increased YoY to $0.495 per share (paid June 27, 2025), providing a stable capital return cadence.

What Went Well and What Went Wrong

What Went Well

  • Net interest income rose 11% YoY and 2.8% QoQ, with NIM up to 3.47% on stronger investment yields and lower funding costs. “Investment activity for 2025 has focused on replacing securities as they mature.”
  • Provision normalized: $0.75M in Q2 vs. $2.00M in Q2 2024, as Braavo-related impacts rolled off and past-due trends improved vs. last year.
  • Non-interest income increased YoY (+$0.329M) driven by higher gains on loan sales and equity securities, supporting fee diversification.

What Went Wrong

  • Deposits declined $89.4M YTD amid elevated pricing competition; one large municipal relationship seasonally reduced balances ($68.3M) impacting funding mix.
  • Loans decreased $71.9M since year-end on student loan seasonality, dampening average earning asset growth in the first half.
  • Non-performing assets remain elevated vs. prior year given acquired HVB exposures (NPA/loans 1.22% vs. 0.79% YoY), though specific reserves are lower YoY.

Financial Results

MetricQ2 2024Q1 2025Q2 2025
Net Income ($USD Millions)$5.275 $7.621 $8.463
Diluted EPS ($USD)$1.10 $1.60 $1.76
Net Interest Income ($USD Millions)$21.300 $23.002 $23.648
Provision for Credit Losses ($USD Millions)$2.002 $0.625 $0.750
Non-interest Income ($USD Millions)$3.336 $3.427 $3.665
Non-interest Expenses ($USD Millions)$16.246 $16.428 $16.147
Net Interest Margin (tax-equiv, %)3.15% 3.30% 3.47%
ROA (annualized, %)0.72% 1.00% 1.13%
ROE (annualized, %)7.40% 10.00% 10.88%

Segment/Portfolio Breakdown (Loans by Type)

Loan Type ($USD Thousands)Mar 31, 2025Jun 30, 2025
Residential Real Estate$350,221 $341,671
Commercial Real Estate$1,117,240 $1,151,585
Agricultural Real Estate$329,985 $331,995
Construction$168,896 $138,307
Consumer$129,943 $46,933
Other Commercial$137,529 $150,171
Other Agricultural$28,488 $28,366
State & Political Subdivision$53,361 $52,727
Total Loans$2,315,663 $2,241,755

KPIs and Balance Sheet

MetricJun 30, 2024Dec 31, 2024Jun 30, 2025
Total Assets ($USD Thousands)$2,947,531 $3,025,724 $2,967,274
Net Loans ($USD Thousands)$2,232,919 $2,291,543 $2,219,646
Deposits ($USD Thousands)$2,273,095 $2,382,028 $2,292,662
Loan-to-Deposit Ratio (%)99.24% 97.11% 97.78%
Non-performing Assets ($USD Thousands)$17,924 $28,612 $27,376
NPA to Total Loans (%)0.79% 1.24% 1.22%
ACL – Loans ($USD Thousands)$22,797 $21,699 $22,109
ACL to Total Loans (%)1.01% 0.94% 0.99%
Book Value per Share ($)$59.60 $62.97 $65.25
Tangible Book Value per Share ($)$41.08 $44.35 $46.88
Stockholders’ Equity ($USD Thousands)$286,470 $299,734 $313,653

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per Share ($)Q2 2025 declared$0.480 (Q2 2024) $0.495 Raised YoY
Formal Financial Guidance (Revenue/Margins/Tax)FY/Q3 2025Not issuedNot issuedMaintained “no formal guidance” posture

Earnings Call Themes & Trends

No Q2 2025 earnings call transcript was available for CZFS; themes below reflect narrative across Q4 2024, Q1 2025, and Q2 2025 press materials.

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
Credit Quality (NPA/ACL)NPA rose in 2024 due to acquired HVB relationships; specific reserves applied to several relationships; ACL 0.94%. NPA decreased vs. Dec 2024; NPA/loans 1.22%; specific reserves down YoY. Stabilizing/Improving sequentially
Net Interest MarginQ4 2024 NIM 3.26%; Q1 2025 NIM 3.30% on higher asset yields, lower funding costs. NIM 3.47% with further yield improvement and lower liability costs. Improving
Deposit CompetitionHigh competition persisted; funding costs elevated; brokered CDs reduced in Q1. Competitive pressure remains high; deposits down $89.4M YTD; brokered CDs down $33.1M. Persistent headwind
Student Loan SeasonalityDrove loan balances in H2 2024; Q1 2025 loans flat vs. year-end. First-half paydowns reduced net loans; expected growth in second half. Seasonal headwind → expected H2 rebound
HVB Acquisition Impacts2024 provisioning tied to remaining Braavo loans and acquired credits; disposition completed in Q1 2024. Residual impact moderating; provision normalized; remediation ongoing. Normalizing

Management Commentary

  • Strategy on acquired non-performing loans: “Improve the credit metrics…or have the customers refinance the loans…or sell the underlying collateral,” with two large relationships returned to accrual after six months of payments.
  • Balance sheet positioning: “Investment activity for 2025 has focused on replacing securities as they mature,” lifting portfolio yield to 2.89% (tax-equivalent).
  • Funding environment: “Competitive pressure for deposits remains high,” influencing deposit balances and brokered CD reductions.
  • Tax and profitability: Effective tax rate was 18.8% in Q2, with ROA 1.13% and ROE 10.88%, underscoring stronger profitability.

Q&A Highlights

CZFS did not provide a publicly available Q2 2025 earnings call transcript; no Q&A details to report. [ListDocuments: none for earnings-call-transcript]

Estimates Context

  • Q2 2025 EPS: Actual $1.76 vs. consensus $1.60 (beat of $0.16; 1 estimate).*
  • Revenue consensus was not available; company reports net interest income and non-interest income separately.
MetricQ2 2025 Estimate*Q2 2025 ActualSurprise
Primary EPS ($)1.60*1.76 +0.16*

*Values retrieved from S&P Global.

Key Takeaways for Investors

  • Earnings quality improved: higher NIM and normalized credit costs drove EPS over consensus, with room for further margin tailwinds if funding costs stabilize.
  • Credit risk from acquired HVB loans is being actively remediated; sequential NPA decline and lower specific reserves suggest improving loss content.
  • Near-term funding remains a swing factor: deposit competition pressured balances, but brokered CD reductions and asset mix management support spread discipline.
  • Expect second-half loan growth from student loan seasonality, which should lift average earning assets and support NII trajectory.
  • Capital remains solid with tangible book value per share up to $46.88 and equity growth from retained earnings; dividend cadence maintained and slightly higher YoY.
  • Tactical focus: watch past-due commercial exposures (noted $14.4M relationship) and deposit pricing dynamics as key drivers of next quarter’s NIM and provision.
  • Actionable: Position for continued margin recovery and normalized provisioning; monitor updates on deposit trends and credit remediation in upcoming quarterly disclosures.