10-Q 1 ef20029699_10q.htm 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024
Or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from_____________________ to ___________________

Commission file number 0-13222

CITIZENS FINANCIAL SERVICES, INC.
(Exact name of registrant as specified in its charter)

PENNSYLVANIA
 
23-2265045
(State or other jurisdiction of incorporation or organization)
 
(I.R.S. Employer Identification No.)

15 South Main Street
Mansfield, Pennsylvania 16933
(Address of principal executive offices)(Zip Code)

Registrant’s telephone number, including area code: (570) 662‑2121

N/A
(Former Name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, Par value $1.0 per share
  
CZFS
  
The Nasdaq Stock Market, LLC
Title of Each Class
  
Trading
Symbol (s)
Name of Each Exchange
on Which Registered

Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer     ☐
Accelerated filer     ☐
   
Non-accelerated filer     ☒
Smaller reporting company     ☒
   
Emerging growth company     ☐
  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No  ☒

The number of outstanding shares of the Registrant’s Common Stock, as of August 1, 2024, was 4,759,931.

Citizens Financial Services, Inc.
Form 10-Q

INDEX

   
PAGE
Part I
FINANCIAL INFORMATION
  
Item 1.
Financial Statements (unaudited):
  
 
1
 
2
  3
  4
  5
 
6-33
Item 2.
34-58
Item 3.
58
Item 4.
58-59
     
Part II
OTHER INFORMATION
  
Item 1.
 59
Item 1A.
 59
Item 2.
 59
Item 3.
 59
Item 4.
 60
Item 5.
 60
Item 6.
60
  61

CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)

(in thousands except share data)
  
June 30,
2024
    
December 31,
2023
  
ASSETS:
            
Cash and due from banks:
            
Noninterest-bearing
  
$
22,023
    
$
37,733
  
Interest-bearing
    
16,410
      
15,085
  
Total cash and cash equivalents
    
38,433
      
52,818
  
Interest bearing time deposits with other banks
    
3,820
      
4,070
  
Equity securities
    
1,570
      
1,938
  
Available-for-sale securities
    
402,661
      
417,601
  
Loans held for sale
    
14,227
      
9,379
  
                 
Loans (net of allowance for credit losses: 2024 $22,797 and 2023, $21,153)
    
2,232,919
      
2,227,683
  
 
                
Premises and equipment
    
20,899
      
21,384
  
Accrued interest receivable
    
10,782
      
11,043
  
Goodwill
    
85,758
      
85,758
  
Bank owned life insurance
    
49,746
      
49,897
  
Other intangibles
    
3,244
      
3,650
  
Fair value of derivative instruments
    13,111       13,687  
Deferred tax asset
     17,185       17,339  
Other assets
    
53,176
      
59,074
  
                 
TOTAL ASSETS
  
$
2,947,531
    
$
2,975,321
  
 
                
LIABILITIES:
                
Deposits:
                
Noninterest-bearing
  
$
501,991
    
$
523,784
  
Interest-bearing
    
1,771,104
      
1,797,697
  
Total deposits
    
2,273,095
      
2,321,481
  
Borrowed funds
    
334,829
      
322,036
  
Accrued interest payable
    
5,482
      
4,298
  
Fair value of derivative instruments - liability
     7,319       7,922  
Other liabilities
    
40,336
      
39,918
  
TOTAL LIABILITIES
    
2,661,061
      
2,695,655
  
STOCKHOLDERS’ EQUITY:
                
Preferred Stock                
$1.00 par value; authorized 3,000,000 shares at June 30, 2024 and December 31, 2023; none issued in 2024 or 2023
    
-
      
-
  
Common stock                
$1.00 par value; authorized 25,000,000 shares at June 30, 2024 and December 31, 2023; issued 5,207,343 at June 30, 2024 and 5,160,754 at December 31, 2023
    
5,207
      
5,161
  
Additional paid-in capital
    
144,985
      
143,233
  
Retained earnings
    
178,588
      
172,975
  
Accumulated other comprehensive loss
    
(25,932
)
    
(24,911
)
Treasury stock, at cost: 447,857 shares at June 30, 2024 and 453,760 shares at December 31, 2023
    
(16,378
)
    
(16,792
)
TOTAL STOCKHOLDERS’ EQUITY
    
286,470
      
279,666
  
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  
$
2,947,531
     $ 2,975,321  

The accompanying notes are an integral part of these unaudited consolidated financial statements.

1
CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF INCOME (LOSS)
(UNAUDITED)

 
Three Months Ended
June 30,
    
Six Months Ended
June 30,
  
(in thousands, except share and per share data)
  
2024
    
2023
    
2024
    
2023
  
INTEREST INCOME:
                        
Interest and fees on loans
  
$
35,067
    
$
24,117
    
$
70,200
    
$
46,666
  
Interest-bearing deposits with banks
    
262
      
127
      
505
      
198
  
Investment securities:
                                
Taxable
    
1,663
      
1,683
      
3,287
      
3,239
  
Nontaxable
    
520
      
572
      
1,052
      
1,189
  
Dividends
    
390
      
311
      
791
      
625
  
TOTAL INTEREST INCOME
    
37,902
      
26,810
      
75,835
      
51,917
  
INTEREST EXPENSE:
                                
Deposits
    
12,655
      
5,480
      
24,976
      
9,419
  
Borrowed funds
    
3,947
      
3,409
      
8,601
      
6,497
  
TOTAL INTEREST EXPENSE
    
16,602
      
8,889
      
33,577
      
15,916
  
NET INTEREST INCOME
    
21,300
      
17,921
      
42,258
      
36,001
  
Provision for credit losses
    
2,002
      
262
      
2,787
      
262
  
Provision for credit losses - acquisition day 1 non-PCD
     -       4,591       -       4,591  
NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES
    
19,298
      
13,068
      
39,471
      
31,148
  
NON-INTEREST INCOME:
                                
Service charges
    
1,385
      
1,293
      
2,757
      
2,504
  
Trust
    
201
      
181
      
445
      
411
  
Brokerage and insurance
    
563
      
442
      
1,228
      
956
  
Gains on loans sold
    
479
      
169
      
896
      
214
  
Equity security losses, net
    
(87
)
    
(74
)
    
(32
)
    
(292
)
Available for sale security losses, net     -       (51 )     -       (51 )
Gain on sale of Braavo division
    
-
      
-
      
1,102
      
-
  
Earnings on bank owned life insurance
    
328
      
234
      
996
      
452
  
Other
    
467
      
86
      
915
      
260
  
TOTAL NON-INTEREST INCOME
    
3,336
      
2,280
      
8,307
      
4,454
  
NON-INTEREST EXPENSES:
                                
Salaries and employee benefits
    
9,617
      
7,916
      
19,907
      
15,593
  
Occupancy
    
1,266
      
814
      
2,590
      
1,649
  
Furniture and equipment
    
295
      
162
      
531
      
313
  
Professional fees
    
698
      
387
      
1,401
      
768
  
FDIC insurance
    
509
      
325
      
1,034
      
625
  
Pennsylvania shares tax
    
330
      
298
      
640
      
596
  
Amortization of intangibles
    
147
      
31
      
296
      
62
  
Merger and acquisition
     -       8,402       -
       8,646
  
Software expenses
    
494
      
372
      
1,008
      
723
  
ORE expenses (recoveries)
    
175
      
(11
)
    
162
      
15
  
Other
    
2,715
      
1,984
      
5,320
      
3,468
  
TOTAL NON-INTEREST EXPENSES
    
16,246
      
20,680
      
32,889
      
32,458
  
Income (loss) before provision (benefit) for income taxes
    
6,388
      
(5,332
)
    
14,889
      
3,144
  
Provision (benefit) for income taxes
    
1,113
      
(1,188
)
    
2,590
      
421
  
NET INCOME (LOSS)
  
$
5,275
    
$
(4,144
)
  
$
12,299
    
$
2,723
  
                                 
PER COMMON SHARE DATA:
                                
Net Income (Loss) - Basic
  
$
1.11
    
$
(1.00
)
  
$
2.59
    
$
0.66
  
Net Income (Loss) - Diluted
  
$
1.11
    
$
(1.00
)
  
$
2.59
    
$
0.66
  
Cash Dividends Paid
  
$
0.485
    
$
0.475
    
$
0.970
    
$
0.949
  
                                 
Number of shares used in computation - basic
    
4,748,927
      
4,159,966
      
4,748,523
      
4,106,005
  
Number of shares used in computation - diluted
    
4,753,697
      
4,159,966
      
4,753,918
      
4,106,005
  

The accompanying notes are an integral part of these unaudited consolidated financial statements.

2
CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

   
Three Months Ended
June 30,
    
Six Months Ended,
June 30,
  
(in thousands)
  
2024
    
2023
    
2024
    
2023
  
Net income (loss)
  
$
5,275
    
$
(4,144
)
  
$
12,299
    
$
2,723
  
Other comprehensive income (loss):
                                
Change in unrealized gains (losses) on available for sale securities
    
1,154
      
(5,995
)
    
(1,166
)
    
2,982
  
Income tax effect
    
(243
)
    
1,259
      
246
      
(626
)
Change in unrecognized pension cost
    
14
      
7
      
16
      
14
  
Income tax effect
    
(3
)
    
(2
)
    
(3
)
    
(3
)
Change in unrealized (loss) gain on interest rate swaps
    
(296
)
    
600
      
(144
)
    
(310
)
Income tax effect
    
62
      
(126
)
    
30
      
65
  
Less:  Reclassification adjustment for investment security gains included in net income
     -       51       -       51  
Income tax effect
     -       (12 )     -       (12 )
Other comprehensive income (loss), net of tax
    
688
      
(4,218
)
    
(1,021
)
    
2,161
  
Comprehensive income (loss)
  
$
5,963
    
$
(8,362
)
  
$
11,278
    
$
4,884
  

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3
CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)

 
  
Common Stock
    
Additional
Paid-in
     Retained    
Accumulated
Other
Comprehensive
     Treasury        
(in thousands, except share data)
  
Shares
    
Amount
    
Capital
    
Earnings
    
Income (Loss)
    
Stock
    
Total
  
                                           
Balance, March 31, 2024
    
5,160,754
     $
5,161
     $
143,227
     $
177,693
     $
(26,620
)
   $
(16,787
)
   $
282,674
  
                                                         
Comprehensive income:
                                                        
Net income
                            
5,275
                      
5,275
  
Net other comprehensive income
   
     
     
     
     
688
      
     
688
  
Stock dividend     46,589       46       2,001       (2,047 )    
     
      -  
Purchase of treasury stock (881 shares)
    
     
     
     
     
      (36 )     (36 )
Restricted stock, executive and Board of Director awards (6,786 shares)
    
     
      (408 )    
     
      445       37  
Restricted stock vesting
    
     
      165      
     
     
      165  
Cash dividends, $0.485 per share
    
     
     
     
(2,333
)
    
     
     
(2,333
)
Balance, June 30, 2024
    
5,207,343
    
$
5,207
    
$
144,985
    
$
178,588
    
$
(25,932
)
  
$
(16,378
)
  
$
286,470
  
                                                         
Balance, December 31, 2023
    
5,160,754
    
$
5,161
    
$
143,233
    
$
172,975
    
$
(24,911
)
  
$
(16,792
)
  
$
279,666
  
 
                                                        
Comprehensive income:
                                                        
Net income
                            
12,299
                      
12,299
  
Net other comprehensive loss
                                    
(1,021
)
            
(1,021
)
Stock dividend     46,589       46       2,001       (2,047 )                     -  
Purchase of treasury stock (1,776 shares)                                             (81 )     (81 )
Restricted stock, executive and Board of Director awards (7,668 shares)
                    
(417
)
                    
495
       78  
Restricted stock vesting
                    
168
                              
168
  
Cash dividends, $0.970 per share
                            
(4,639
)
                    
(4,639
)
Balance, June 30, 2024
    
5,207,343
    
$
5,207
    
$
144,985
    
$
178,588
    
$
(25,932
)
  
$
(16,378
)
  
$
286,470
  
                                                         
Balance, March 31, 2023
    
4,427,687
      
4,428
      
80,926
      
171,629
      
(26,762
)
    
(16,983
)
    
213,238
  
                                                         
Comprehensive loss:
                                                        
Net loss
                            
(4,144
)
                    
(4,144
)
Net other comprehensive loss
                                    
(4,218
)
            
(4,218
)
Stock dividend     39,209       39       2,982       (3,021 )                     -  
Issuance of Common stock     693,858       694       59,443                               60,137  
Restricted stock, executive and Board of Director awards (2,652 shares)
                    
(145
)
                    
180
      
35
  
Restricted stock vesting
                     145                      
      145  
Cash dividends, $0.475 per share
                            
(1,965
)
                    
(1,965
)
Balance, June 30, 2023
    
5,160,754
    
$
5,161
    
$
143,351
    
$
162,499
    
$
(30,980
)
  
$
(16,803
)
  
$
263,228
  
                                                         
Balance, December 31, 2022
    
4,427,687
    
$
4,428
    
$
80,911
    
$
164,922
    
$
(33,141
)
  
$
(16,973
)
  
$
200,147
  
                                                         
Comprehensive income: