CITIZENS FINANCIAL SERVICES INCCZFS
CITIZENS FINANCIAL SERVICES INC Income Taxes Disclosure
12. INCOME TAXES
The provision for income taxes consists of the following (in thousands):
|
Year Ended December 31,
|
||||||||||||
|
2025
|
2024
|
2023
|
||||||||||
|
Currently payable
|
$
|
7,869 |
$
|
4,294 |
$
|
3,169 |
||||||
|
Deferred
|
797 |
1,771 |
595 |
|||||||||
|
Provision for income taxes
|
$
|
8,666 |
$
|
6,065 |
$
|
3,764 |
||||||
The following temporary differences gave rise to the net deferred tax asset and liabilities at December 31, 2025 and 2024, respectively (in thousands):
|
2025
|
2024
|
|||||||
|
Deferred tax assets:
|
||||||||
|
Allowance for credit losses
|
$
|
5,439 |
$
|
5,449 |
||||
|
Deferred compensation
|
704 |
648 |
||||||
|
Allowance for losses on available-for-sale securities
|
112 |
130 |
||||||
|
Interest on non-accrual loans
|
1,886 |
1,588 |
||||||
|
Incentive plan accruals
|
684 |
682 |
||||||
|
Other real estate owned
|
16 |
16 |
||||||
|
Unrealized losses on available-for-sale securities
|
3,733 |
7,061 |
||||||
|
Low income housing tax credits
|
- |
15 |
||||||
|
NOL carry forward
|
898 |
1,458 |
||||||
|
Non-PCD loan interest rate
|
3,575 |
4,200 |
||||||
|
Right of use asset
|
2,263 |
2,120 |
||||||
|
Accrued vacation
|
301 |
308 |
||||||
|
Other
|
429 |
334 |
||||||
|
Total
|
$
|
20,040 |
$
|
24,009 |
||||
|
Deferred tax liabilities:
|
||||||||
|
Premises and equipment
|
$
|
(926 |
)
|
$
|
(745 |
)
|
||
|
Investment securities accretion
|
(652 |
)
|
(611 |
)
|
||||
|
Loan fees and costs
|
(1,056 |
)
|
(933 |
)
|
||||
|
Goodwill and core deposit intangibles
|
(2,736 |
)
|
(2,804 |
)
|
||||
|
Pension and other retirement obligation
|
(119 |
)
|
(152 |
)
|
||||
|
Low income housing tax credits
|
(17 |
)
|
- |
|||||
|
Mortgage servicing rights
|
(120 |
)
|
(160 |
)
|
||||
|
Unrealized gains on equity securities
|
(21 |
)
|
(3 |
)
|
||||
|
Unrealized gains on interest rate swap
|
(522 |
)
|
(890 |
)
|
||||
|
Borrowings fair value adjustment
|
(59 |
)
|
(254 |
)
|
||||
|
Right of use asset
|
(2,226 |
)
|
(2,093 |
)
|
||||
|
Other
|
(146 |
)
|
(165 |
)
|
||||
|
Total
|
(8,600 |
)
|
(8,810 |
)
|
||||
|
Deferred tax (liability) asset, net
|
$
|
11,440 |
$
|
15,199 |
||||
No valuation allowance was established at December 31, 2025 and 2024, due to the certain tax strategies and anticipated future taxable income as evidenced by the Company’s expected earnings potential.
The total provision for income taxes is different from that computed at the statutory rates due to the following items (dollars in thousands):
|
Year Ended December 31,
|
||||||||||||||||||||||||
|
2025
|
2024
|
2023
|
||||||||||||||||||||||
|
Provision at statutory rates on pre-tax income
|
$
|
9,500 |
21.0 |
%
|
$
|
7,115 |
21.0 |
%
|
$
|
4,531 |
21.0 |
%
|
||||||||||||
| Effect of tax-exempt income |
(934 | ) |
-2.1 | % |
(854 | ) |
-2.5 | % |
(895 | ) |
-4.1 | % |
||||||||||||
|
State and local income taxes, net of federal income tax benefit (a)
|
150 |
0.3 |
%
|
172 |
0.5 |
%
|
62 |
0.3 |
%
|
|||||||||||||||
|
Low income housing tax credits
|
(820 |
)
|
-1.8 |
%
|
(688 |
)
|
-2.1 |
%
|
(585 |
)
|
-2.8 |
%
|
||||||||||||
|
Low income housing expense
|
755 |
1.7 |
%
|
339 |
1.0 |
%
|
399 |
1.8 |
%
|
|||||||||||||||
|
Bank owned life insurance
|
(301 |
)
|
-0.7 |
%
|
(354 |
)
|
-1.0 |
%
|
(263 |
)
|
-1.2 |
%
|
||||||||||||
|
Nondeductible interest
|
290 |
0.7 |
%
|
308 |
0.9 |
%
|
251 |
1.2 |
%
|
|||||||||||||||
|
Nondeductible merger and acquisition expenses
|
- |
0.0 |
%
|
- |
0.0 |
%
|
247 |
1.1 |
%
|
|||||||||||||||
|
Other items
|
26 |
0.1 |
%
|
27 |
0.1 |
%
|
17 |
0.1 |
%
|
|||||||||||||||
|
Provision for income taxes
|
$
|
8,666 |
19.2 |
%
|
$
|
6,065 |
17.9 |
%
|
$
|
3,764 |
17.4 |
%
|
||||||||||||
| (a) | Taxes in make up the majority of the effect of the state and local tax category. |
Income taxes paid for 2025, 2024 and 2023 were $6,590,000, $2,826,000 and $5,130,000, respectively. The following table provides a breakdown of the payments by taxing entity as well as the 5% threshold used to determine whether further disaggregation of information is required (dollars in thousands):
|
Taxes Paid
|
2025
|
2024
|
2023
|
|||||||||
|
U.S. Federal Taxes
|
$
|
6,500 |
$
|
2,500 |
$
|
5,100 |
||||||
|
State and Local Taxes
|
||||||||||||
|
New Jersey
|
35 |
320 |
- |
|||||||||
|
New York
|
55 |
6 |
30 |
|||||||||
|
Total income taxes paid
|
$
|
6,590 |
$
|
2,826 |
$
|
5,130 |
||||||
|
Threshold %
|
5 |
%
|
5 |
%
|
5 |
%
|
||||||
|
Threshold amount
|
$
|
330 |
$
|
141 |
$
|
257 |
||||||
The Company prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Benefits from tax positions should be recognized in the financial statements only when it is more likely than not that the tax position will be sustained upon examination by the appropriate taxing authority that would have full knowledge of all relevant information. A tax position that meets the more-likely-than-not recognition threshold is measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not recognition threshold should be derecognized in the first subsequent financial reporting period in which that threshold is no longer met. There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. With limited exception, the Company’s federal and state income tax returns for taxable years through 2021 have been closed for purposes of examination by the federal and state taxing authorities.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Mar 6, 2025 | |
| 2023 | Mar 7, 2024 | |
| 2022 | Mar 9, 2023 | |
| 2021 | Mar 10, 2022 | |
| 2020 | Mar 11, 2021 | |
| 2019 | Mar 12, 2020 | |
| 2018 | Mar 7, 2019 | |
| 2017 | Mar 8, 2018 | |
| 2016 | Mar 9, 2017 | |
| 2015 | Mar 10, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.