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CF

CITIZENS FINANCIAL SERVICES INC (CZFS)·Q3 2025 Earnings Summary

Executive Summary

  • CZFS delivered a stronger quarter: EPS of $2.09 rose 32.7% YoY and 18.8% QoQ, driven by tax‑equivalent NIM expansion to 3.60% and higher net interest income; the bank also recognized $473K of additional interest income from pay‑offs of previously non‑performing relationships .
  • Asset quality inflected positively: non‑performing assets fell to $22.99M (0.98% of loans) from $27.38M in Q2 and $24.05M a year ago, aided by pay‑offs and returning credits to accrual status .
  • Funding stabilized: deposits increased to $2.41B vs $2.29B in Q2, while brokered CDs continued to decline; loan‑to‑deposit improved to 96.86% (vs. 97.78% in Q2) amid persistent competitive pressure for deposits .
  • Estimates context: CZFS posted a clear EPS beat versus S&P Global consensus (Actual $2.09 vs $1.76; 1 estimate) on better NIM and controlled expenses; revenue consensus was not available (S&P) [Values retrieved from S&P Global]*.

What Went Well and What Went Wrong

What Went Well

  • Net interest margin and NII strength: NIM (tax‑equivalent) rose to 3.60% (vs. 3.47% in Q2; 3.09% LY) as asset yields improved and funding costs fell; NII rose to $25.14M (up 17.9% YoY) .
  • Credit improvement: NPAs declined $5.6M since year‑end and $4.4M QoQ to $22.99M (0.98% of loans), helped by three relationships returning to accrual and three large pay‑offs (“recognized additional interest income of $473,000”) .
  • Operating leverage: Total non‑interest expenses were flat YoY (+0.7%) despite healthcare and benefit pressures, supporting stronger pre‑tax income growth .

What Went Wrong

  • Provision normalized upward YoY: provision was $0.5M in Q3 2025 vs a $(0.2)M release LY, reflecting macro factor updates (a YoY headwind to pre‑tax earnings) .
  • Deposit competition remains elevated: management continues to flag “competitive pressure for deposits remains high,” even as period‑end deposits improved .
  • Mixed balance dynamics: average loans decreased YoY by ~$12.1M while average investment securities increased ~$35.0M, shifting earning asset mix and highlighting still‑muted core loan growth in the quarter .

Financial Results

Core P&L and Ratios

MetricQ3 2024Q2 2025Q3 2025
Net Interest Income ($M)21.32 23.65 25.14
Provision for Credit Losses ($M)(0.20) 0.75 0.50
Net Interest Income After Provision ($M)21.52 22.90 24.64
Non‑interest Income ($M)3.76 3.67 3.85
Diluted EPS ($)1.57 1.76 2.09
NIM (Tax‑Equivalent, %)3.09% 3.47% 3.60%
ROA (Annualized, %)1.01% 1.13% 1.33%
ROE (Annualized, %)10.31% 10.88% 12.52%

Notes: In S&P Global convention, “Revenue” is often defined as Net Interest Income After Provision + Non‑interest Income; for Q3 2025 this equals $28.49M (24.64 + 3.85) .

KPIs and Balance Sheet

KPIQ3 2024Q2 2025Q3 2025
Deposits ($M)2,450.1 2,292.7 2,411.2
Loans (Gross, net of unearned) ($M)2,331.0 2,241.8 2,335.4
Loan‑to‑Deposit Ratio (%)95.14% 97.78% 96.86%
Non‑performing Assets ($M)24.05 27.38 22.99
NPA / Total Loans (%)1.03% 1.22% 0.98%
ACL – Loans / Total Loans (%)0.93% 0.99% 0.96%
Book Value/Share ($)62.13 65.25 68.16
Tangible Book/Share ($)43.65 46.88 49.83
Dividend per Share ($)0.485 0.490 0.500

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per shareQ3 2025$0.495 (Q2 2025) $0.50 (declared Sep 2; paid Sep 26) Raised
Revenue2025Not providedNot providedMaintained (no guidance)
NIM, OpEx, Credit Costs, Tax Rate2025Not providedNot providedMaintained (no guidance)

Management did not provide formal quantitative guidance beyond the dividend declaration .

Earnings Call Themes & Trends

No earnings call transcript was available in the source set for Q3 2025; themes below reflect management’s quarterly disclosures across the last three quarters.

TopicPrevious Mentions (Q1 2025, Q2 2025)Current Period (Q3 2025)Trend
Net Interest MarginQ1: 3.30%; asset yields up; funding costs down modestly . Q2: 3.47%; yields +8 bps; cost of interest‑bearing liabilities −27 bps .3.60%; yields +16 bps YoY; cost of interest‑bearing liabilities −39 bps YoY .Improving
Asset Quality / NPAsQ1: NPAs 27.48M; strategy to remediate or refinance acquired credits . Q2: NPAs 27.38M; elevated vs LY but specific reserves down YoY .NPAs down to 22.99M; three relationships to accrual; three pay‑offs; two new non‑accruals .Improving
Deposits & FundingQ1: Deposits −$17.2M since YE; brokered CDs −$14.6M; competition high . Q2: Deposits −$89.4M since YE; brokered CDs −$33.1M .Deposits +$29.2M vs YE; brokered CDs −$33.1M vs YE; competition remains high .Stabilizing, pressure persists
Loan Growth / MixQ1: Loans flat vs YE; +$75.5M YoY on student loans . Q2: Net loans down seasonally (student loans paydown) .Net loans +$21.4M vs YE; average loans down YoY; avg securities up .Mixed
Tax RateQ1: 18.7% (higher vs LY) . Q2: 18.8% .19.1% .Slightly higher
Investment PortfolioQ1: Yield 2.85% TE; reinvest at higher rates . Q2: Yield 2.89% TE .Yield 2.98% TE; AFS up to $451.4M .Gradual uplift

Management Commentary

  • “Net interest income before the provision for credit losses for the three months ended September 30, 2025 totaled $25,140,000… The tax effected net interest margin for the three months ended September 30, 2025 was 3.60%… The yield on interest earning assets increased 16 basis points to 5.74%, while the cost of interest‑bearing liabilities decreased 39 basis points to 2.67%.”
  • “Non‑performing assets decreased $5,618,000… totaled $22,994,000… the Bank recognized additional interest income of $473,000 from the pay‑offs of three relationships… three large relationships [were] placed back on accrual status… offset by placing two large relationships on non‑accrual status.”
  • “Competitive pressure for deposits remains high,” even as deposits increased to $2.41 billion and brokered CDs declined .
  • Provision “was driven by the change in economic factors during the quarter,” contrasting with a release in the prior‑year quarter .

Q&A Highlights

  • No Q3 2025 earnings call transcript was available in the document set; no Q&A disclosures to summarize [ListDocuments showed none].

Estimates Context

MetricPeriodS&P Global ConsensusActualSurprise
EPS (Primary)Q3 2025$1.76 (1 est.)*$2.09 +$0.33; +19% — bold beat
RevenueQ3 2025N/A*$28.49M (NII after provision + non‑interest income) N/A

Values with asterisks are retrieved from S&P Global.

Interpretation: The EPS outperformance reflects stronger NIM and NII, modest non‑interest income growth, and controlled expenses, partially offset by a normalized provision (vs a release LY) .

Key Takeaways for Investors

  • NIM reacceleration is the core driver: 3.60% this quarter with scope for further uplift as securities reinvest at higher yields; watch the path of funding costs vs asset repricing .
  • Credit normalization trending favorable: NPAs fell to sub‑1% of loans (0.98%); additional interest from pay‑offs aided NII—monitor sustainability of pay‑off/return‑to‑accrual cadence .
  • Funding is stabilizing but competitive: deposit growth resumed in Q3 and brokered CDs declined, but management still cites intense competition; pricing discipline remains critical for sustaining margin gains .
  • Expense control providing leverage: flat YoY OpEx (+0.7%) supported pre‑tax growth; healthcare/benefit inflation is a watch item .
  • EPS beat vs S&P consensus underscores estimate reset risk: expect upward revisions to near‑term EPS trajectories; revenue consensus was unavailable (thin coverage) [Values retrieved from S&P Global]*.
  • Seasonal loan dynamics (student loans) affected Q2 balances; Q3 showed modest loan growth vs YE—mix shift toward investments bears watching for NIM sustainability .
  • Dividend trend modestly upward (to $0.50): signals confidence; payout sits against improving ROA/ROE and rising tangible book value .

Additional data detail and cross‑references:

  • Consolidated income statement details, including NII, provision, non‑interest income, and EPS .
  • Ratio and performance metrics (NIM, ROA, ROE) and per‑share data in financial highlights .
  • Balance sheet and asset quality breakdowns (NPAs, ACL, loans/deposits) .
  • Prior quarters (Q1/Q2 2025) trend context and drivers .