Citizens Financial Services, Inc., parent company of First Citizens Community Bank (the "Bank"), released its unaudited consolidated financial results for the three and six months ended June 30, 2026, reporting broad-based improvement in profitability metrics driven by higher net interest income and a lower provision for credit losses.

Second Quarter 2026 Income Performance

For the three months ended June 30, 2026, net income totaled $10,187,000, an increase of $1,724,000, or 20.4%, compared to net income of $8,463,000 for the comparable period of 2025. Basic and diluted earnings per share of $2.12 for the second quarter of 2026 compared to $1.76 for the 2025 comparable period. The following table summarizes key income and performance ratios for both the quarterly and six-month periods:

Net interest income before the provision for credit losses for the three months ended June 30, 2026 totaled $25,694,000, compared to $23,648,000 for the three months ended June 30, 2025, an increase of $2,046,000, or 8.7%. Average interest-earning assets increased $64.8 million for the three months ended June 30, 2026 compared to the same period last year, primarily due to increases in the average balance of outstanding commercial loans. Average loans increased $55.1 million, while average investment securities increased $9.1 million. The yield on interest-earning assets decreased six basis points to 5.60%, while the cost of interest-bearing liabilities decreased 32 basis points to 2.41%.

Six-Month Performance: January–June 2026

For the six months ended June 30, 2026, net income totaled $20,563,000, compared to $16,084,000 for the first six months of 2025, an increase of $4,479,000. The improvement in performance was due to an increase in the net interest margin from 3.36% to 3.69% and a decrease in the provision for credit losses. Net interest income before the provision for credit losses for the six months ended June 30, 2026 totaled $51,807,000, compared to $46,650,000 for the six months ended June 30, 2025, an increase of $5,157,000, or 11.1%.

Average interest-earning assets increased $44.4 million for the six months ended June 30, 2026 compared to the same period last year, primarily due to an increase in average loans. Average loans increased $43.2 million while average investment securities increased $3.4 million. The yield on interest-earning assets increased 8 basis points to 5.66%, while the cost of interest-bearing liabilities decreased 31 basis points to 2.44%. The effective tax rate was 17.9% for the six months ended June 30, 2026, compared to 19.1% in the comparable period in 2025, with the decrease attributable to an increase in non-taxable investment income and bank owned life insurance (BOLI) income.

Non-Interest Income and Expenses

Total non-interest income was $7,704,000 for the six months ended June 30, 2026, which is $612,000 more than the non-interest income of $7,092,000 for the same period last year. The primary driver of the increase was an increase in earnings on BOLI of $656,000, as the result of purchasing $22,000,000 of additional insurance in the first quarter of 2026. Total non-interest expenses for the six months ended June 30, 2026 totaled $33,468,000 compared to $32,475,000 for the same period last year, an increase of $993,000. Salary and benefit costs increased $283,000 due to merit increases and an increase in full-time equivalent employees (FTEs) of 8.3 employees.

Provision for Credit Losses

The provision for credit losses for the three and six months ended June 30, 2026 was $500,000 and $1,000,000, respectively, compared to $750,000 and $1,375,000 for the three and six months ended June 30, 2025, respectively. The provision for 2026 was driven by the updated loss driver analysis, the economic impact of the Iran conflict on diesel and fertilizer prices, and an increase in specific reserves for non-performing loans.

Balance Sheet and Asset Quality

At June 30, 2026, total assets were $3.19 billion compared to $3.06 billion at December 31, 2025 and $2.97 billion at June 30, 2025. The loan-to-deposit ratio as of June 30, 2026 was 100.02% compared to 98.89% as of December 31, 2025 and 97.78% as of June 30, 2025.

Loans grew $151.8 million, or 6.8%, since June 30, 2025. Loan growth since December 31, 2025, excluding the student loan portfolio, was $92.1 million, or 8.2% on an annualized basis. Available for sale securities of $491.3 million at June 30, 2026 increased $46.6 million from December 31, 2025 and $59.7 million from June 30, 2025. The yield on the investment portfolio increased from 2.89% for the six months ended June 30, 2025 to 3.48% for the six months ended June 30, 2026 on a tax equivalent basis.

Non-performing assets increased $14,176,000 since December 31, 2025 and totaled $43,365,000 as of June 30, 2026, which is $15,989,000 higher than the balance as of June 30, 2025. The increase from December 31, 2025 is primarily due to six commercial real estate loan relationships and one construction real estate loan relationship, totaling approximately $12.2 million, being placed on non-accrual status during the first half of 2026. As a percent of loans, non-performing assets totaled 1.81%, 1.24%, and 1.22% as of June 30, 2026, December 31, 2025, and June 30, 2025, respectively. Specific reserves for these assets remained at $2,432,000 at June 30, 2026, compared to $1,912,758 at December 31, 2025 and $1,476,000 at June 30, 2025.

Stockholders' equity totaled $352.8 million at June 30, 2026, compared to $338.1 million at December 31, 2025, an increase of $14.8 million. Excluding accumulated other comprehensive loss (AOCL), stockholders' equity increased $15.8 million and totaled $366.2 million at June 30, 2026 (non-GAAP). Deposits increased $17.6 million from December 31, 2025, to $2.39 billion at June 30, 2026. Borrowed funds totaled $394.0 million as of June 30, 2026, a $84.6 million increase from December 31, 2025, to fund investment and loan growth since year-end.

Dividend Declared

On June 2, 2026, the Board of Directors declared a cash dividend of $0.51 per share, which was paid on June 26, 2026 to shareholders of record at the close of business on June 12, 2026. This quarterly cash dividend represents an increase of 4.0% over the quarterly cash dividend of $0.49 per share declared one year ago. Citizens Financial Services, Inc. has nearly 1,790 shareholders, the majority of whom reside in markets where its offices are located.