FIRST KEYSTONE CORP Swings to Profit, Boosted by Net Interest Income

TL;DR

**FKYS is back in the black with a massive profit swing, signaling a strong recovery and potential upside for investors.**

AI Summary

FIRST KEYSTONE CORP reported a significant increase in net income for the three months ended June 30, 2025, reaching $2.914 million, up from $1.380 million in the prior year, representing a 111.16% increase. For the six months ended June 30, 2025, the company posted a net income of $3.967 million, a substantial turnaround from a net loss of $16.997 million in the same period of 2024. This improvement was largely driven by a positive net interest income of $9.505 million for the quarter and $18.275 million for the six months, coupled with a release of provision for credit losses of $237 thousand for the quarter. Total assets increased to $1.437 billion as of June 30, 2025, from $1.428 billion at December 31, 2024. Loans held for investment grew to $959.666 million from $947.714 million, while debt securities available-for-sale decreased to $368.341 million from $390.288 million. Total deposits increased to $1.057 billion from $1.045 billion, and stockholders' equity rose to $107.547 million from $106.782 million. The company also saw a significant increase in cash and cash equivalents, from $17.254 million at the beginning of the year to $39.053 million by June 30, 2025.

Why It Matters

This strong performance, particularly the swing from a significant loss to profit, signals improved operational efficiency and potentially a more favorable interest rate environment for FIRST KEYSTONE CORP. For investors, the 111.16% increase in quarterly net income and the positive year-to-date net income are strong indicators of financial health and could lead to increased investor confidence and stock performance. Employees benefit from a more stable and profitable company, while customers may see continued investment in services. In a competitive banking landscape, this turnaround positions FIRST KEYSTONE CORP more favorably against regional peers, demonstrating its ability to generate earnings and manage credit risk effectively.

Risk Assessment

Risk Level: medium — While net income improved significantly, the company still holds substantial unrealized losses on its debt securities available-for-sale, totaling $(29.084) million as of June 30, 2025. This represents a potential vulnerability if interest rates continue to rise or if the company needs to sell these securities. Additionally, the allowance for credit losses increased slightly to $(7.762) million from $(7.672) million, indicating ongoing, albeit managed, credit risk.

Analyst Insight

Investors should consider this filing a positive signal, given the strong return to profitability and growth in net interest income. However, they should monitor the unrealized losses on debt securities and the overall interest rate environment. A deeper dive into the loan portfolio's quality and potential future credit loss provisions would be prudent before making significant investment decisions.

Financial Highlights

debt To Equity

1.23

revenue

$18,275,000

operating Margin

N/A

total Assets

$1,437,389,000

total Debt

$235,551,000

net Income

$2,914,000

eps

$0.64

gross Margin

N/A

cash Position

$39,053,000

revenue Growth

+11.00%

Revenue Breakdown

Key Numbers

• $2.914M — Net Income (Q2 2025) (Increased 111.16% from $1.380M in Q2 2024)
• $3.967M — Net Income (H1 2025) (Turnaround from a net loss of $(16.997)M in H1 2024)
• $18.275M — Net Interest Income (H1 2025) (Increased from $15.476M in H1 2024)
• $959.666M — Loans Held for Investment (Increased from $947.714M at Dec 31, 2024)
• $368.341M — Debt Securities Available-for-Sale (Decreased from $390.288M at Dec 31, 2024)
• $1.057B — Total Deposits (Increased from $1.045B at Dec 31, 2024)
• $39.053M — Cash and Cash Equivalents (Increased from $17.254M at Dec 31, 2024)
• $(29.084)M — Gross Unrealized Losses on Debt Securities (As of June 30, 2025, indicating market value below amortized cost)
• $0.64 — Basic EPS (H1 2025) (Significant improvement from $(2.77) in H1 2024)
• $0.56 — Dividends per share (H1 2025) (Consistent with H1 2024)

Key Players & Entities

• FIRST KEYSTONE CORP (company) — Registrant
• First Keystone Community Bank (company) — Wholly owned subsidiary
• Sallie Mae Bank (company) — Issuer of securities held by FKYS
• Velocity Commercial Capital (company) — Issuer of securities held by FKYS
• Nelnet Student Loan Trust (company) — Issuer of securities held by FKYS
• FASB (regulator) — Financial Accounting Standards Board
• SEC (regulator) — Securities and Exchange Commission
• $2.914 million (dollar_amount) — Net income for Q2 2025
• $3.967 million (dollar_amount) — Net income for H1 2025
• $1.437 billion (dollar_amount) — Total assets as of June 30, 2025

FAQ

Risk Factors

• Unrealized Losses on Debt Securities [medium — financial]: As of June 30, 2025, the company reported gross unrealized losses of $29.084 million on debt securities available-for-sale. This indicates that the market value of these securities is below their amortized cost, potentially impacting future earnings or capital if these securities need to be sold.
• Credit Risk on Loans [medium — financial]: The company holds $959.666 million in loans held for investment. While the allowance for credit losses was $7.762 million as of June 30, 2025, any significant deterioration in borrower creditworthiness could lead to increased loan losses and negatively affect profitability.
• Interest Rate Sensitivity [medium — market]: As a financial institution, the company's net interest income is sensitive to changes in interest rates. Fluctuations in market interest rates can impact the yield on its assets (loans and securities) and the cost of its liabilities (deposits and borrowings).
• Cybersecurity and Data Breaches [high — operational]: Like all financial institutions, First Keystone Corp is exposed to risks associated with cybersecurity threats and potential data breaches. A successful cyberattack could lead to financial losses, reputational damage, and regulatory penalties.
• Regulatory Compliance [high — regulatory]: The banking industry is heavily regulated. Changes in regulations or failure to comply with existing regulations could result in fines, sanctions, or restrictions on operations, impacting financial performance and strategic flexibility.

Industry Context

First Keystone Corp operates within the community banking sector, characterized by a focus on local markets and relationship-based lending. The industry is currently navigating a complex environment with fluctuating interest rates impacting net interest margins and investment portfolio valuations. Competition remains robust from larger banks, credit unions, and fintech companies, necessitating a strong focus on customer service and efficient operations.

Regulatory Implications

As a regulated financial institution, First Keystone Corp must adhere to stringent capital requirements, lending standards, and consumer protection laws. Upcoming regulatory changes, such as those related to cybersecurity and climate risk disclosures, may require additional compliance efforts and investments. The company's strong capital position and improved profitability provide a solid foundation for meeting these evolving regulatory demands.

What Investors Should Do

1. Monitor Net Interest Margin Trends
2. Assess Unrealized Security Losses
3. Evaluate Loan Portfolio Quality
4. Observe Cash Flow Generation

Key Dates

• 2025-06-30: Quarterly Financial Statement Date — Reporting period for the 10-Q, showing significant net income growth and asset increase.
• 2025-06-30: End of Six-Month Period — Marks the end of the period with a substantial turnaround from a net loss in the prior year to a net income of $3.967 million.
• 2024-12-31: Prior Year-End Balance Sheet Date — Provides a comparison point for asset and liability changes, showing modest growth in total assets and deposits.
• 2024-06-30: Prior Year Comparable Period — Key comparison for net income ($1.380M in Q2 2024 vs $2.914M in Q2 2025) and year-to-date results (net loss of $16.997M in H1 2024 vs net income of $3.967M in H1 2025).

Glossary

Net Interest Income

The difference between the interest income generated by a financial institution and the interest it pays out to its lenders and depositors. (A primary driver of profitability for banks; First Keystone Corp reported strong net interest income of $9.505 million for the quarter and $18.275 million for the six months.)

Provision for Credit Losses

An expense set aside by a financial institution to cover potential loan defaults and uncollectible debts. (A decrease in this provision, or a release of it, directly boosts net income. First Keystone Corp had a release of $237 thousand for the quarter.)

Debt Securities Available-for-Sale

Investments in debt instruments (like bonds) that are not held to maturity and can be sold before maturity if needed, with unrealized gains and losses reported in other comprehensive income. (The company's holdings decreased to $368.341 million, and it reported significant unrealized losses on these securities.)

Accumulated Other Comprehensive Loss

A component of equity that includes unrealized gains and losses on certain investments (like available-for-sale securities) and other items not included in net income. (The company has an accumulated other comprehensive loss of $25.350 million, largely influenced by unrealized losses on its debt securities.)

Loans Held for Investment

Loans that a financial institution intends to hold until maturity, generating interest income over their term. (These represent the core lending business of the bank, increasing to $959.666 million.)

Allowance for Credit Losses

A contra-asset account that reduces the carrying amount of loans to their estimated net realizable value. (The balance was $(7.762) million as of June 30, 2025, reflecting management's estimate of potential loan losses.)

Year-Over-Year Comparison

First Keystone Corp has demonstrated a remarkable financial turnaround compared to the prior year. For the six months ended June 30, 2025, the company achieved a net income of $3.967 million, a significant improvement from a net loss of $16.997 million in the same period of 2024. This turnaround is primarily driven by a robust increase in net interest income, which rose to $18.275 million from $15.476 million year-over-year, and a release of provision for credit losses. Total assets saw modest growth, while cash and cash equivalents more than doubled, indicating improved liquidity. However, the company also faces challenges, including significant unrealized losses on its debt securities available-for-sale portfolio.

Key Financial Figures

• $2 — e latest practical date: Common Stock, $2 Par Value, 6,218,781 shares as of Augus

Filing Documents

• fkys-20250630x10q.htm (10-Q) — 4798KB
• fkys-20250630xex31d1.htm (EX-31.1) — 10KB
• fkys-20250630xex31d2.htm (EX-31.2) — 10KB
• fkys-20250630xex32d1.htm (EX-32.1) — 7KB
• fkys-20250630xex32d2.htm (EX-32.2) — 7KB
• 0000737875-25-000031.txt ( ) — 22136KB
• fkys-20250630.xsd (EX-101.SCH) — 76KB
• fkys-20250630_cal.xml (EX-101.CAL) — 108KB
• fkys-20250630_def.xml (EX-101.DEF) — 367KB
• fkys-20250630_lab.xml (EX-101.LAB) — 575KB
• fkys-20250630_pre.xml (EX-101.PRE) — 550KB
• fkys-20250630x10q_htm.xml (XML) — 6863KB

- FINANCIAL INFORMATION

PART I - FINANCIAL INFORMATION

Financial Statements

Item 1. Financial Statements FIRST KEYSTONE CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS (Unaudited) (Dollars in thousands, except share and per share data) June 30, December 31, 2025 2024 ASSETS Cash and due from banks $ 10,813 $ 9,933 Interest-bearing deposits in other banks 28,240 7,321 Total cash and cash equivalents 39,053 17,254 Debt securities available-for-sale, at fair value 368,341 390,288 Marketable equity securities, at fair value 1,606 1,587 Restricted investment in bank stocks, at cost 8,944 8,984 Loans held for investment 959,666 947,714 Loans held for sale 104 737 Allowance for credit losses ( 7,762 ) ( 7,672 ) Net loans 952,008 940,779 Premises and equipment, net 19,943 20,272 Operating lease right-of-use assets 1,380 1,400 Accrued interest receivable 4,954 4,993 Cash surrender value of bank owned life insurance 26,017 26,679 Investments in low-income housing partnerships 4,743 5,152 Deferred income taxes 7,434 7,725 Other assets 2,966 3,470 TOTAL ASSETS $ 1,437,389 $ 1,428,583 LIABILITIES Deposits: Non-interest bearing $ 202,977 $ 203,583 Interest bearing 854,301 842,297 Total deposits 1,057,278 1,045,880 Short-term borrowings 129,551 134,426 Long-term borrowings 106,000 106,000 Subordinated debentures 25,000 25,000 Operating lease liabilities 1,908 1,920 Accrued interest payable 2,319 2,152 Other liabilities 7,786 6,423 TOTAL LIABILITIES 1,329,842 1,321,801 STOCKHOLDERS' EQUITY Preferred stock, par value $ 2.00 per share; authorized 1,000,000 shares as of June 30, 2025 and December 31, 2024; issued 0 as of June 30, 2025 and December 31, 2024 — — Common stock, par value $ 2.00 per share; authorized 20,000,000 shares as of June 30, 2025 and December 31, 2024; issued 6,450,392 as of June 30, 2025 and 6,450,392 as of December 31, 2024; outstanding 6,218,781 as of June

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 1 BASIS OF PRESENTATION, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND SUBSEQUENT EVENTS The consolidated financial statements include the accounts of First Keystone Corporation (the "Corporation") and its wholly owned subsidiary First Keystone Community Bank (the "Bank") (collectively the "Company"). All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for fair presentation have been included. Operating results for the three and six months ended June 30, 2025, are not necessarily indicative of the results for the year ending December 31, 2025. For further information, refer to the consolidated financial statements and notes thereto included in First Keystone Corporation's Annual Report on Form 10-K for the year ended December 31, 2024. Subsequent Events The Company has evaluated events and transactions occurring subsequent to the consolidated balance sheet date of June 30, 2025 for items that should potentially be recognized or disclosed in these consolidated financial statements. The evaluation was conducted through the date these consolidated financial statements were issued. NOTE 2 RECENT ACCOUNTING STANDARDS UPDATES ("ASU") Adopted ASUs: There were no ASUs adopted during the first half of 2025. Pending ASUs: In December of 2023, the Financial Accounting Standards Board ("FASB") issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures . ASU 2023-09 was issued to improve the transparency of income

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