Citizens Financial Services Lifts Third-Quarter Profit

The Tip Desk · November 10, 2026 · 4 min read

Net income rose to $11.9 million, or $2.48 a share, as net interest income reached $27.3 million and the tax-equivalent margin held at 3.60%.

Citizens Financial Services, Inc. (CZFS), parent of First Citizens Community Bank, reported net income of $11.9 million for the three months ended September 30, 2026, up $1.9 million, or 19.2%, from $10.0 million a year earlier. Basic earnings were $2.48 a share. Annualized return on equity was 13.39% and return on assets 1.45%.

The increase was due to an increase in net interest income after the provision for credit losses of $2.6 million. Net interest income before the provision was $27.3 million, up $2.1 million, or 8.4%, from $25.1 million a year earlier, on higher loan and investment interest income from organic growth. The tax-equivalent net interest margin was 3.60%, unchanged from a year earlier, as the yield on interest-earning assets fell 5 basis points to 5.69% and the cost of interest-bearing liabilities fell 10 basis points to 2.57%.

Average loans rose $210.6 million and average investment securities $52.5 million versus a year earlier, lifting average interest-earning assets $261.4 million, primarily commercial loans. Loans grew $152.8 million, or 6.8%, since September 30, 2025. Since December 31, 2025, growth was $116.4 million, or 6.8% annualized, with net loans of $2.36 billion at September 30, 2026 versus $2.25 billion at year-end 2025, driven by commercial real estate and agricultural real estate.

There was no provision for credit losses in the third quarter, versus $500,000 a year earlier. For the nine months ended September 30, 2026, the provision was $1.0 million versus $1.875 million. Loan recoveries and charge-offs were $192,000 and $300,000 in the nine months. The company said the 2026 provision was driven by the updated loss-driver analysis, offset by the economic impact of the Iran conflict and the increase in non-accrual commercial real estate loans.

Non-performing assets totaled $51.5 million at September 30, 2026, up $22.4 million from December 31, 2025 and $28.6 million from September 30, 2025, and 2.16% of loans versus 1.29% at year-end 2025 and 1.03% a year earlier. The increase from year-end was primarily due to ten commercial real estate loan relationships and one construction real estate loan relationship, totaling approximately $21.4 million, being placed on non-accrual status during the first nine months of 2026 as a result of becoming more than 90 days past due. Specific reserves for those assets were $2.15 million. The allowance for credit losses on loans was $23.8 million, 1.00% of loans, up $980,000 from December 31, 2025, on loan growth, the Iran conflict and higher specific reserves on non-performers.

Non-interest income was $4.3 million, up $454,000 from a year earlier, led by $302,000 more BOLI earnings and $224,000 more equity-security gains. Non-interest expenses were $17.0 million, up $940,000, or 5.8%, with higher salaries (13.7 more FTEs) and other real estate owned expenses of $422,000 versus $6,000. The effective tax rate was 18.0% versus 19.4% a year earlier, due to more non-taxable investment income and BOLI income.

Deposits were $2.51 billion at September 30, 2026, up $132.4 million from December 31, 2025, with the loan-to-deposit ratio at 95.15% versus 95.55% at year-end 2025. Brokered CDs fell $20.0 million since year-end. Borrowed funds were $512.5 million, up $203.0 million from December 31, 2025, to fund student loans held for sale and investment growth; student loans held for sale were $245.3 million. Total assets were $3.41 billion.

The board declared a $0.51 quarterly cash dividend on September 1, 2026, a 2.0% increase from $0.50 a year earlier. Stockholders’ equity was $351.3 million. The bank’s continued strategy for certain acquired loans is to either improve the credit metrics of the non-performing loans or sell the underlying collateral or have the customers refinance the loans with another institution.