FIRST KEYSTONE CORP Swings to Profit, Net Income Up 86% on Strong Interest Gains

TL;DR

**FKYS is back in the black, crushing last year's loss with strong interest income and lower credit provisions – time to buy!**

AI Summary

FIRST KEYSTONE CORP reported a significant increase in net income for the three and nine months ended September 30, 2025. Net income for the three months rose to $2.808 million, up 86.3% from $1.507 million in the prior year. For the nine months, net income dramatically improved to $6.775 million, a substantial recovery from a net loss of $15.490 million in the same period of 2024. This turnaround was largely driven by a 16.5% increase in net interest income to $9.504 million for the quarter and a 17.5% increase to $27.779 million for the nine months, alongside a significant reduction in the provision for credit losses by 64.5% to $255 thousand for the quarter and a 48.5% reduction to $769 thousand for the nine months. Total assets increased by 10.8% to $1.582 billion from $1.429 billion at December 31, 2024, primarily due to a surge in interest-bearing deposits in other banks to $134.239 million from $7.321 million. Total deposits also grew by 14.0% to $1.192 billion from $1.046 billion. The company's accumulated other comprehensive loss improved to $(22.178) million from $(25.630) million at year-end 2024, reflecting unrealized net holding gains on debt securities available-for-sale.

Why It Matters

This strong performance by FIRST KEYSTONE CORP signals a robust recovery and improved operational efficiency, which is crucial for investors seeking stability and growth in regional banking. The significant increase in net interest income and reduction in credit loss provisions suggest effective asset management and a healthier loan portfolio, potentially leading to higher dividends or share buybacks. For employees, this financial health could mean job security and potential for growth. Customers may benefit from a more stable and competitive banking environment. In the broader market, this positive trend for a smaller reporting company could indicate resilience in the regional banking sector amidst fluctuating economic conditions, potentially attracting more investment into similar institutions.

Risk Assessment

Risk Level: medium — While net income improved significantly, the company's debt securities available-for-sale still show substantial gross unrealized losses of $(25.290) million at September 30, 2025, despite an improvement from $(31.791) million at December 31, 2024. This indicates ongoing interest rate sensitivity and potential for further valuation adjustments. Additionally, a significant portion of these securities, $258.895 million, are pledged, limiting liquidity and flexibility.

Analyst Insight

Investors should consider FKYS's improved profitability and reduced credit risk as a positive signal, but remain cautious about the unrealized losses in its debt securities portfolio. A deeper dive into the composition and duration of these securities is warranted. Monitor future interest rate movements and their impact on the fair value of these assets.

Financial Highlights

debt To Equity

1.31

revenue

$27,779M

operating Margin

N/A

total Assets

$1.582B

total Debt

$238.856M

net Income

$6.775M

eps

N/A

gross Margin

N/A

cash Position

$147.255M

revenue Growth

+17.5%

Revenue Breakdown

Key Numbers

• $2.808M — Net Income (Q3 2025) (Increased 86.3% from $1.507M in Q3 2024)
• $6.775M — Net Income (YTD Q3 2025) (Improved from a net loss of $15.490M in YTD Q3 2024)
• $9.504M — Net Interest Income (Q3 2025) (Increased 16.5% from $8.154M in Q3 2024)
• $27.779M — Net Interest Income (YTD Q3 2025) (Increased 17.5% from $23.630M in YTD Q3 2024)
• $255K — Provision for Credit Losses (Q3 2025) (Decreased 64.5% from $718K in Q3 2024)
• $769K — Provision for Credit Losses (YTD Q3 2025) (Decreased 48.5% from $1.492M in YTD Q3 2024)
• $1.582B — Total Assets (Sep 30, 2025) (Increased 10.8% from $1.429B at Dec 31, 2024)
• $1.192B — Total Deposits (Sep 30, 2025) (Increased 14.0% from $1.046B at Dec 31, 2024)
• $(22.178)M — Accumulated Other Comprehensive Loss (Sep 30, 2025) (Improved from $(25.630)M at Dec 31, 2024)
• $134.239M — Interest-bearing deposits in other banks (Sep 30, 2025) (Significantly increased from $7.321M at Dec 31, 2024)

Key Players & Entities

• FIRST KEYSTONE CORP (company) — Registrant
• First Keystone Community Bank (company) — Wholly owned subsidiary of FIRST KEYSTONE CORP
• Sallie Mae Bank (company) — Issuer of securities held by FIRST KEYSTONE CORP
• Velocity Commercial Capital (company) — Issuer of securities held by FIRST KEYSTONE CORP
• Nelnet Student Loan Trust (company) — Issuer of securities held by FIRST KEYSTONE CORP
• $2.808 million (dollar_amount) — Net income for the three months ended September 30, 2025
• $6.775 million (dollar_amount) — Net income for the nine months ended September 30, 2025
• $1.582 billion (dollar_amount) — Total assets as of September 30, 2025
• $1.192 billion (dollar_amount) — Total deposits as of September 30, 2025
• $25.290 million (dollar_amount) — Gross unrealized losses on debt securities available-for-sale as of September 30, 2025

FAQ

Risk Factors

• Interest Rate Sensitivity [medium — financial]: The company's profitability is sensitive to changes in interest rates. Fluctuations in market interest rates can impact net interest income and the fair value of investment securities. For example, while net interest income increased, the interest income on taxable securities decreased.
• Credit Risk [medium — financial]: The company holds loans and has an allowance for credit losses. While the provision for credit losses has significantly decreased, indicating improved credit quality or reduced expected losses, the net loan portfolio remains substantial at $949,733K.
• Market Value Fluctuations of Securities [low — market]: The company holds significant amounts in debt securities available-for-sale ($407,770K) and marketable equity securities ($1,715K). Changes in market conditions can affect the fair value of these investments, impacting accumulated other comprehensive loss.
• Dependence on Deposits [medium — operational]: Total deposits grew to $1,192,494K, a 14.0% increase. However, the company's operations are reliant on maintaining and growing its deposit base, which can be influenced by competition and economic conditions.

Industry Context

First Keystone Corp operates within the community banking sector, characterized by a focus on local markets and customer relationships. The industry is competitive, with increasing pressure from larger financial institutions and fintech companies. Trends include digital transformation, evolving customer expectations for seamless online services, and a dynamic interest rate environment impacting net interest margins.

Regulatory Implications

As a financial institution, First Keystone Corp is subject to stringent regulatory oversight from bodies like the FDIC and state banking authorities. Compliance with capital requirements, lending regulations, and consumer protection laws is critical. Changes in regulatory policy, such as those related to capital adequacy or cybersecurity, can impact operations and profitability.

What Investors Should Do

1. Monitor Net Interest Margin Trends
2. Analyze Credit Loss Provision Trends
3. Evaluate Asset Growth Drivers

Key Dates

• 2025-09-30: End of Q3 2025 — Reporting period for the 10-Q, showing significant net income improvement and asset growth.
• 2024-12-31: End of Fiscal Year 2024 — Baseline for year-over-year comparisons of assets and liabilities.
• 2025-01-01: Adoption of ASU 2023-09 — Company adopted new accounting standards for income tax disclosures, which did not materially affect financial statements.

Glossary

Provision for Credit Losses

An expense set aside by a financial institution to cover potential losses from loans that may not be repaid. (A significant reduction in this provision contributed to the improved net income for the period.)

Accumulated Other Comprehensive Loss

A component of equity that includes unrealized gains and losses on certain investments and other items not included in net income. (The improvement in this account indicates positive unrealized gains on debt securities available-for-sale.)

Debt securities available-for-sale

Investments in debt instruments that are not classified as held-to-maturity or trading securities, and are reported at fair value. (These represent a significant portion of the company's assets and their fair value impacts other comprehensive income.)

Net Interest Income

The difference between interest income generated by a financial institution and the interest it pays out on liabilities. (This is a primary driver of profitability for banks, and it showed strong growth for FKYS.)

Interest-bearing deposits in other banks

Funds that the company has deposited in other financial institutions, which earn interest. (A substantial increase in this account suggests a strategic deployment of excess liquidity or a change in cash management strategy.)

Year-Over-Year Comparison

Compared to the prior year's nine-month period, First Keystone Corp has demonstrated a remarkable turnaround, moving from a significant net loss of $15.490 million to a net income of $6.775 million. This improvement is primarily driven by a robust 17.5% increase in net interest income to $27.779 million and a substantial reduction in the provision for credit losses by 48.5%. Total assets have grown by 10.8% to $1.582 billion, supported by a significant increase in deposits. The accumulated other comprehensive loss has also improved, indicating a healthier unrealized gain position on securities.

Key Financial Figures

• $2 — e latest practical date: Common Stock, $2 Par Value, 6,246,157 shares as of Novem

Filing Documents

• fkys-20250930x10q.htm (10-Q) — 4862KB
• fkys-20250930xex31d1.htm (EX-31.1) — 10KB
• fkys-20250930xex31d2.htm (EX-31.2) — 10KB
• fkys-20250930xex32d1.htm (EX-32.1) — 7KB
• fkys-20250930xex32d2.htm (EX-32.2) — 7KB
• 0000737875-25-000044.txt ( ) — 22705KB
• fkys-20250930.xsd (EX-101.SCH) — 75KB
• fkys-20250930_cal.xml (EX-101.CAL) — 108KB
• fkys-20250930_def.xml (EX-101.DEF) — 375KB
• fkys-20250930_lab.xml (EX-101.LAB) — 576KB
• fkys-20250930_pre.xml (EX-101.PRE) — 556KB
• fkys-20250930x10q_htm.xml (XML) — 6981KB

- 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) September 30, December 31, 2025 2024 ASSETS Cash and due from banks $ 13,016 $ 9,933 Interest-bearing deposits in other banks 134,239 7,321 Total cash and cash equivalents 147,255 17,254 Debt securities available-for-sale, at fair value 407,770 390,288 Marketable equity securities, at fair value 1,715 1,587 Restricted investment in bank stocks, at cost 8,944 8,984 Loans held for investment 957,630 947,714 Loans held for sale 103 737 Allowance for credit losses ( 8,000 ) ( 7,672 ) Net loans 949,733 940,779 Premises and equipment, net 19,693 20,272 Operating lease right-of-use assets 1,353 1,400 Accrued interest receivable 5,075 4,993 Cash surrender value of bank owned life insurance 26,189 26,679 Investments in low-income housing partnerships 4,538 5,152 Deferred income taxes 6,545 7,725 Other assets 3,567 3,470 TOTAL ASSETS $ 1,582,377 $ 1,428,583 LIABILITIES Deposits: Non-interest bearing $ 215,166 $ 203,583 Interest bearing 977,328 842,297 Total deposits 1,192,494 1,045,880 Short-term borrowings 132,856 134,426 Long-term borrowings 106,000 106,000 Subordinated debentures 25,000 25,000 Operating lease liabilities 1,885 1,920 Accrued interest payable 3,175 2,152 Other liabilities 8,715 6,423 TOTAL LIABILITIES 1,470,125 1,321,801 STOCKHOLDERS' EQUITY Preferred stock, par value $ 2.00 per share; authorized 1,000,000 shares as of September 30, 2025 and December 31, 2024; issued 0 as of September 30, 2025 and December 31, 2024 — — Common stock, par value $ 2.00 per share; authorized 20,000,000 shares as of September 30, 2025 and December 31, 2024; issued 6,477,768 as of September 30, 2025 and 6,450,392 as of December 31, 2024; outst

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 nine months ended September 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 September 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: In January of 2025, the Company adopted ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosure. ASU 2023-09 was issued to improve the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the rat

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