Company Overview
Citizens Financial Services, Inc. (CZFS) is a dynamic financial institution that has navigated the ever-evolving banking landscape with remarkable resilience and strategic vision. Headquartered in Mansfield, Pennsylvania, the company has established itself as a trusted provider of comprehensive banking services, catering to individuals, businesses, and institutions across its expansive network of 48 banking facilities.
History and Growth
The company's history dates back to 1984 when it was incorporated as the holding company for First Citizens Community Bank, a Pennsylvania-chartered bank and trust company. Over the years, CZFS has demonstrated a steadfast commitment to growth, both organically and through strategic acquisitions, solidifying its position as a leading player in the regional banking industry.
In 2015, the company completed the acquisition of The First National Bank of Fredericksburg, further expanding its footprint. The 2017 acquisition of the ST Bank branch in State College, Pennsylvania, and the transformative 2020 merger with MidCoast Community Bancorp, Inc., which added locations in Wilmington and Dover, Delaware, have all contributed to CZFS's remarkable growth trajectory.
The most recent and significant milestone in CZFS's history was the 2023 acquisition of HV Bancorp, Inc. (HVBC) and its wholly-owned subsidiary, Huntingdon Valley Bank. This strategic move expanded the company's presence into the high-growth markets of Montgomery, Bucks, and Philadelphia counties in Pennsylvania, as well as Burlington County, New Jersey. The successful integration of HVBC's operations has strengthened CZFS's position as a regional banking powerhouse, providing greater diversification and enhanced service offerings to its customers.
Financials
As of December 31, 2024, CZFS reported total assets of $3.03 billion, a testament to its steady growth and financial stability. The company's net income for the year stood at $27.82 million, a significant increase from the previous year, while its annual revenue reached $154.32 million. The company's robust financial performance is further evidenced by its quarterly results, with Q4 2024 revenue of $26.21 million and net income of $7.98 million.
The year-over-year increase in revenue can be attributed to the full-year impact of the HV Bancorp, Inc. acquisition completed in June 2023, demonstrating the company's successful integration of acquired assets and ability to drive growth through strategic acquisitions.
Loan Portfolio
One of the key drivers of CZFS's success has been its diversified loan portfolio, which encompasses real estate loans (both residential and commercial), agricultural loans, construction loans, consumer loans, and other commercial loans. As of December 31, 2024, the company's loan portfolio totaled $2.31 billion, with a well-balanced mix of asset classes. The company's focus on maintaining a disciplined underwriting process and proactive risk management has contributed to its strong credit quality, with a nonperforming loans to total loans ratio of just 1.11% as of the same date.
The company's lending activities are primarily focused on commercial real estate, agricultural real estate, construction, and other commercial loans, which comprised 48.5%, 14.2%, 7.1%, and 5.7% of the loan portfolio, respectively, as of December 31, 2024. This diversified approach to lending helps mitigate risk and provides a stable foundation for the company's growth.
Investment Strategy
CZFS's investment strategy has also played a crucial role in its financial performance. The company's investment portfolio, valued at $425.91 million as of December 31, 2024, is primarily comprised of available-for-sale securities, including U.S. agency securities, U.S. Treasuries, and mortgage-backed securities. The company's prudent approach to portfolio diversification and active management of interest rate risk have enabled it to navigate the challenging interest rate environment effectively.
Liquidity and Capital Structure
CZFS maintains a strong liquidity position, with $42.2 million in cash and cash equivalents as of December 31, 2024. The company has access to additional liquidity through a $15 million line of credit with an unaffiliated bank, of which $7.6 million was outstanding at year-end. Furthermore, as a member of the Federal Home Loan Bank of Pittsburgh, CZFS had a maximum borrowing capacity of approximately $1.06 billion, inclusive of any outstanding amounts, providing an additional source of liquidity if needed.
The company's debt-to-equity ratio stood at 0.94 as of December 31, 2024, indicating a balanced capital structure. This financial flexibility enables CZFS to pursue growth opportunities and weather potential economic headwinds.
The company's commitment to serving its communities is evidenced by its involvement in various initiatives, including the administration of the Low-Income Housing Tax Credit (LIHTC) program. CZFS's investments in affordable housing projects have not only provided much-needed support to underserved communities but also contributed to the company's tax optimization strategies.
Business Segments
CZFS operates through two main business segments: Banking and Insurance.
The Banking segment, operated through the company's wholly-owned subsidiary First Citizens Community Bank, is the primary driver of CZFS's financial performance. This segment provides a full range of banking and related services to individual, business, governmental, and institutional customers across the company's market areas in north central, central, south-central, and southeast Pennsylvania, southern New York, and Delaware.
The Bank's lending efforts have historically focused on real estate loans, including residential mortgages, commercial real estate, agricultural real estate, and construction loans. As of December 31, 2024, approximately 85% of the Bank's loan portfolio consisted of real estate loans. The Bank offers a variety of real estate loan products, including fixed-rate and adjustable-rate mortgages, home equity loans and lines of credit, and commercial real estate loans.
The Bank has also developed specialized lending teams and expertise in areas such as agricultural lending and municipal lending to state and local governments. Agricultural loans, including both real estate and non-real estate, comprised 15.5% of the total loan portfolio as of the end of 2024. Municipal loans to state and political subdivisions made up 2.2% of total loans.
Beyond its lending activities, the Bank generates non-interest income from services such as deposit account fees, trust and investment management, brokerage and insurance, and mortgage banking. The trust division offers professional trust administration, investment management, estate planning, and other services, with assets under management of $180.7 million as of December 31, 2024. The brokerage and insurance divisions provide a comprehensive menu of investment and insurance products and services to customers.
The Banking segment has been the primary driver of the company's growth in recent years, with total loans increasing 2.9% to $2.31 billion and total deposits growing 2.6% to $2.38 billion in 2024. Net interest income, the largest component of revenue, grew 7.7% to $87.45 million in 2024, while non-interest income increased 32.7% to $15.40 million. The segment's efficiency ratio, a measure of non-interest expenses as a percentage of revenue, improved from 46.7% in 2023 to 38.7% in 2024.
The Insurance segment, operated through the company's wholly-owned subsidiary First Citizens Insurance Agency, Inc., provides a range of insurance products and services to customers. This includes life, health, property, and casualty insurance offerings, as well as client investment, estate, and retirement planning services. While the Insurance segment represents a smaller portion of the company's overall business, it provides diversification and additional fee-based revenue streams. In 2024, the Insurance segment contributed $2.38 million in non-interest income, an increase of 23.8% compared to the prior year.
Geographic Markets and Expansion
CZFS primarily operates in north central, central, south-central, and southeast Pennsylvania, southern New York, and the Wilmington and Dover, Delaware markets. The company's recent acquisition of HV Bancorp, Inc. has also established a presence in New Jersey, further expanding its geographic footprint and customer base.
Human Capital Resources
As of December 31, 2024, CZFS employed a total of 410 individuals, including 27 part-time and 9 commissioned employees. Approximately 70 of these employees are women, demonstrating the company's commitment to diversity in its workforce. The full-time equivalent of the company's total employees at the end of 2024 was 387, highlighting the company's role as a significant employer in its operating regions.
Future Outlook
Looking ahead, CZFS remains well-positioned for continued growth and success. The company's experienced management team, coupled with its robust risk management framework and diversified business model, positions it to capitalize on emerging opportunities in its expanded market footprint. The successful integration of HVBC's operations has strengthened CZFS's competitive positioning, allowing it to better serve its customers and drive long-term shareholder value.
However, the company is not without its challenges. The highly competitive nature of the banking industry, regulatory changes, and the evolving technological landscape pose ongoing risks that CZFS must continually navigate. Additionally, the potential for economic volatility and changes in interest rates could impact the company's financial performance and asset quality.
Conclusion
In conclusion, CITIZENS FINANCIAL SERVICES, INC. (CZFS) has demonstrated remarkable resilience, strategic vision, and a commitment to growth, both organically and through strategic acquisitions. Its diversified business model, prudent risk management, and strong financial position have enabled the company to navigate the complexities of the banking industry and deliver consistent value to its shareholders. As CZFS continues to build on its success, investors will be closely watching the company's ability to capitalize on emerging opportunities and effectively manage the risks that come with operating in a dynamic and competitive market.