citizens financial services, inc. reports unaudited full year and fourth quarter 2025 financial results

Contact:  LEEANN GEPHART, CHIEF BANKING OFFICER

FIRST CITIZENS COMMUNITY BANK

15 S. MAIN STREET

MANSFIELD, PA 16933

570-545-6005

570-662-8512 (FAX)

MANSFIELD, PENNSYLVANIA— JANUARY 29, 2026 – Citizens Financial Services, Inc (Nasdaq: CZFS), parent company of First Citizens Community Bank (the “Bank”), released today its unaudited consolidated financial results for the three months and year ended December 31, 2025.

Highlights

• Net income was $36,572,000 for 2025, which is $8,754,000, or 31.5%, more than 2024’s net income due to the increase in net interest income after the provision for credit losses of $11,758,000.  The effective tax rate for 2025 was 18.9% compared to 17.4% in 2024.

• Net income was $10,483,000 for the three months ended December 31, 2025, which was $2,500,000 more than the net income for 2024’s comparable period due to an increase in net interest income after the provision for credit losses of $2,838,000. The effective tax rate for the three months ended December 31, 2025 was 19.0% compared to 16.4% in the comparable period in 2024.

• Net interest income before the provision for credit losses was $98,001,000 for 2025, an increase of $11,546,000, or 13.4%, over 2024 and was primarily due to an increase in investment income and a decrease in interest expense.

• The provision for credit losses for the three months and the year ended December 31, 2025 was $500,000 and $2,375,000, respectively, compared to no provision and $2,587,000 for the three months and the  year ended December 31, 2024, respectively. The provision for the 2025 periods was driven by the current economic forecasts and specific reserves for non-accrual loans at December 31, 2025. The provision for 2024 was significantly impacted by loans that were not sold as part of the sale of a division known as Braavo that occurred in the first quarter of 2024. The vast majority of the Braavo loans that were retained after the sale were originated by Huntington Valley Bank in 2023 prior to the acquisition and were current as of the acquisition date in 2023.  The provision for 2024, directly attributable to these loans, was $1,806,000.

• Return on average equity for the three months (annualized) and the year ended December 31, 2025 was 12.53% and 11.51% compared to 10.63% and 9.59% for the three months (annualized) and the year ended December 31, 2024, respectively. If the provision for the credit losses attributable to the Braavo loans and the gain on the sale of Braavo are excluded, the return on average equity for the year ended December 31, 2024 would have been 9.84% (non-GAAP) (1).

• Return on average tangible equity (non-GAAP) for the three months (annualized) and the year ended December 31, 2025 was 17.01% and 15.94% compared to 15.10% and 13.84% for the three months (annualized) and the year ended December 31, 2024, respectively. If the provision for the credit losses attributable to the Braavo loans and the gain on the sale of Braavo are excluded, the return on average tangible equity for the year ended December 31, 2024 would have been 14.19% (annualized) (1).

• Return on average assets for the three months (annualized) and the year ended December 31, 2025 was 1.37% and 1.21% compared to 1.06% and 0.93% for the three months (annualized) and the year ended December 31, 2024, respectively. If the provision for the credit losses attributable to the Braavo loans and the gain on the sale of Braavo are excluded, the return on average assets for the year ended December 31, 2024 would have been 0.96% (non-GAAP). (1).

• Non-performing assets increased $578,000 since December 31, 2024 and totaled $29,190,000 as of December 31, 2025. During the fourth quarter of 2025, the Bank recognized additional interest income of $878,000 from payments associated with two relationships that were previously on non-accrual status, and charged-off interest of $577,000 related to two relationships being placed on non-accrual status in the fourth quarter. As a percent of total loans, non-performing assets totaled 1.24% as of December 31, 2025 and 2024.

2025 Compared to 2024

• For 2025, net income totaled $36,572,000 which compares to net income of $27,818,000 for 2024, an increase of $8,754,000. Basic and diluted earnings per share were $7.62 for 2025 compared to $5.80 and $5.79 per share, respectively, for 2024.  Return on equity for 2025 and 2024 was 11.51% and 9.59%, while return on assets was 1.21% and 0.93%, respectively. The increase in performance when comparing 2025 to 2024 was due to an increase in the net interest margin from 3.13% to 3.50%.

• Net interest income before the provision for credit losses for 2025 totaled $98,001,000 compared to $86,455,000 for 2024, an increase of $11,546,000, or 13.4%.  Average interest earning assets increased $37,517,000 in 2025 compared to 2024, primarily due to an increase in taxable investments and average outstanding student loans. Average loans increased $19,425,000, while average investment securities increased $22,647,000. The yield on interest earning assets increased 10 basis points to 5.66%, while the cost of interest-bearing liabilities decreased 31 basis points to 2.69%. As a result, the tax effected net interest margin increased from 3.13% for 2024 to 3.50% for 2025.

• The provision for credit losses for 2025 was $2,375,000 compared to $2,587,000 for 2024, a decrease of $212,000.  The provision for 2025 was driven by the economic forecasts and the annual update of loss drivers, which includes historical loss data, as well as prepayment and curtailment speeds. Additionally, the provision for 2025 was driven by specific loss reserves on two commercial real estate loans and one other commercial loan placed on non-accrual status in the fourth quarter of 2025. The provision for 2024 was impacted by the Braavo loans as previously mentioned and an increase in past due and classified loans during the second quarter of 2024.

• Total non-interest income was $14,344,000 for 2025, which is $1,057,000 less than the non-interest income of $15,401,000 for 2024. The primary drivers were the gain on the sale of assets associated with Braavo and earnings on bank owned life insurance due to the passing of a former employee in the first quarter of 2024.

• Total non-interest expenses for 2025 totaled $64,882,000 compared to $65,586,000 for 2024, which is a decrease of $704,000. Salary and benefit costs increased $55,000 due to additional healthcare expenses and post-employment benefits. There are 12 fewer FTEs in 2025 compared to 2024. The decrease in professional fees and software costs is due to the sale of the Braavo division in 2024.

• The provision for income taxes increased $2,651,000 when comparing 2025 to 2024 as a result of an increase in income before income tax of $11,405,000. The effective tax rate was 18.9% and 17.4% for 2025 and 2024, respectively.

Three Months Ended December 31, 2025 Compared to 2024

• For the three months ended December 31, 2025, net income totaled $10,483,000 which compares to net income of $7,983,000 for the comparable period of 2024, an increase of $2,500,000 or 31.3%.  Basic earnings per share of $2.19 for the three months ended December 31, 2025 compares to $1.66 for the 2024 comparable period. Annualized return on equity for the three months ended December 31, 2025 and 2024 was 12.53% and 10.63%, while annualized return on assets was 1.37% and 1.06%, respectively.

• Net interest income before the provision for credit losses for the three months ended December 31, 2025 totaled $26,211,000 compared to $22,873,000 for the three months ended December 31, 2024, resulting in an increase of $3,338,000, or 14.6%. Average interest earning assets increased $33,040,000 for the three months ended December 31, 2025 compared to the same period last year, primarily due to increases in the average balance of investments and loans. Average loans increased $16,828,000, while average investment securities increased $17,206,000. The tax effected net interest margin for the three months ended December 31, 2025 was 3.69% compared to 3.26% for the same period last year. The yield on interest earning assets increased 12 basis points to 5.77%, while the cost of interest-bearing liabilities decreased 35 basis points to 2.59%.

• The provision for credit losses for the fourth quarter of 2025 of $500,000 was driven by specific reserves on two commercial real estate loans and one other commercial loan placed on non-accrual status in the fourth quarter of 2025.  There was no provision for credit losses recorded during the three months ended December 31, 2024.

• Total non-interest income was $3,398,000 for the three months ended December 31, 2025, which was $59,000 more than the comparable period last year.  The primary driver of the increase was an increase in derivative income of $75,000.

• Total non-interest expenses for the three months ended December 31, 2025 totaled $16,173,000 compared to $16,668,000 for the same period last year, which is a decrease of $495,000, or 3.0%. Salary and employee benefits decreased due to a decrease in headcount of 11 FTEs, commission expense, profit sharing and vacation costs. The decrease in shares tax expense is due to timing and level of charitable contributions that are included in other expenses that generate tax credits utilized by Bank on its Pennsylvania shares tax return.

• The provision for income taxes increased $892,000 when comparing the three months ended December 31, 2025 to the same period in 2024. This increase was attributable to increase in income before provision for income taxes of $3,392,000.  The effective tax rate was 19.0% and 16.4% for the three months ended December 31, 2025 and 2024, respectively.

Balance Sheet and Other Information:

• At December 31, 2025, total assets were $3.06 billion, compared to $3.03 billion at December 31, 2024. The loan to deposit ratio as of December 31, 2025 was 98.89% compared to 97.11% as of December 31, 2024.

• Available for sale securities of $444.7 million at December 31, 2025 increased $18.8 million from December 31, 2024. The yield on the investment portfolio increased from 2.44% to 3.06% on a tax equivalent basis due to securities purchased during a higher rate environment and lower yielding securities maturing. Investment activity for 2025 has focused on replacing securities as they mature with the exception of the purchase of $20.3 million of municipal securities in the third quarter of 2025.

• Net loans of $2.33 billion  at December 31, 2025 increased of $36.3 million from December 31, 2024, primarily due to an increase in commercial loan activity offset by a decrease in student loans outstanding. The decrease construction loans of $74.9 million is the result of projects in our Delaware market and the southeast Pennsylvania market being completed and the related construction loans either transferring to other portfolios or being paid off.

• The allowance for credit losses - loans totaled $22,806,000 at December 31, 2025 which is an  increase of $1,107,000 from December 31, 2024. The provision for credit losses in 2025 was based on the economic forecasts and changes in expected prepayment speeds, as well as specific reserves for loans placed on non-accrual status in the fourth quarter of 2025. The provision for credit losses on loans was $1,888,000 for 2025 compared to $3,176,000 for 2024. The provision for off-balance sheet items was $487,000 for 2025 compared to a credit of ($589,000) for 2024.  Loan recoveries and charge-offs were $77,000 and $858,000, respectively, for 2025 compared to loan recoveries and charge-offs of $43,000 and $2,673,000, respectively for 2024. For the three months ended December 31, 2025, loan recoveries and charge-offs were $6,000 and $57,000, respectively.  The allowance for credit losses as a percent of total loans was 0.97% as of December 31, 2025 and 0.94% as of December 31, 2024.

• Non-performing assets totaled $29.2 million as of December 31, 2025, an increase of $578,000 since December 31, 2024. The increase was driven by two large commercial relationships being placed on non-accrual status during the fourth quarter of 2025, which offset significant pay-offs of non-accrual loans that occurred in the first three quarters of 2025.

• Deposits decreased $5.0 million from December 31, 2024, to $2.40 billion at December 31, 2025. Competitive pressure for deposits remains high. Brokered CD’s have decreased $33.1 million since December 31, 2024. Additionally, a school district in our southeastern Pennsylvania market saw a decrease in their balance of $58.9 million due to the lack of state budget for parts of 2025. At December 31, 2025, the Bank estimates that deposit balances held by customers in excess of the FDIC insurance limit ($250,000 per insured account) totaled $1.16 billion, or 47.3% of the Bank’s total deposits. Included in this balance are balances held through Intrafi, which provides customers with additional FDIC insurance, as well as deposits collateralized by securities or letters of credit (almost exclusively municipal deposits). The total of these items was $647.7 million, or 27.2% of the Bank’s total deposits, as of December 31, 2025.

• Borrowed funds totaled $309.4 million as of December 31, 2025, a $11.7 million increase from December 31, 2024, due to a decrease in deposits and increases in loans and investments in 2025.

• Stockholders’ equity totaled $338.1 million at December, 2025, compared to $299.7 million at December 31, 2024, an increase of $38.3 million. Excluding accumulated other comprehensive loss (AOCL), stockholders’ equity increased $27.2 million and totals $350.4 million (non-GAAP). The increase in stockholders’ equity was attributable to net income for 2025 totaling $36.6 million, offset by cash dividends for 2025 totaling $9.5 million. As a result of decreases in market interest rates impacting the fair value of investment securities and swaps, stockholders’ equity increased due to a decrease in AOCL of $11.1 million from December 31, 2024.

Dividend Declared

On December 2, 2025, the Board of Directors declared a cash dividend of $0.50 per share, which was paid on December 26, 2025 to shareholders of record at the close of business on December 12, 2025. This quarterly cash dividend is an increase of 3.1% over the quarterly cash dividend of $0.485 per share declared one year ago, as adjusted for the 1% stock dividend declared in June 2025.

Citizens Financial Services, Inc. has nearly 1,800 shareholders, the majority of whom reside in markets where its offices are located.

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 are preceded by terms such as "expects," "believes," "anticipates," "intends" and similar expressions.  Forward-looking statements are not guarantees of future performance.  Numerous risks and uncertainties could cause or contribute to the Company's actual results, performance and achievements to be materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to these differences include, without limitation, changes in general economic conditions, including changes in market interest rates and changes in monetary and fiscal policies of the federal government; legislative and regulatory changes; and other factors disclosed periodically in the Company's filings with the Securities and Exchange Commission.  Because of the risks and uncertainties inherent in forward-looking statements, readers are cautioned not to place undue reliance on them, whether included in this press release or made elsewhere periodically by the Company or on its behalf.  The Company assumes no obligation to update any forward-looking statements except as may be required by applicable law or regulation.

1. See reconciliation of GAAP and non-gaap measures at the end of the press release