Citizens Financial Services(CZFS) - 2025 Q4 - Annual Report

Employee Statistics - As of December 31, 2025, the company had a total of 405 employees, with a full-time equivalent of 380, and approximately 71% of employees are women[17] - 19% of the current staff have been with the company for fifteen years or more, indicating strong employee retention[18] - The company promotes employee health and wellness through various programs, emphasizing work-life balance[19] Capital and Regulatory Requirements - The company's leverage ratio was 9.54% as of December 31, 2025, exceeding the "well-capitalized" requirement under the community bank leverage ratio framework[30] - Federal regulations require a minimum common equity Tier 1 capital ratio of 4.5%, Tier 1 capital ratio of 6.0%, and total capital ratio of 8.0%[26] - The company has opted out of including Accumulated Other Comprehensive Income (AOCI) in its common equity Tier 1 capital calculations[26] - The company is subject to extensive regulation by the Pennsylvania Department of Banking and Securities and the Federal Reserve System[20] - The Company is exempt from the FRB's consolidated capital adequacy guidelines as its consolidated assets are less than $3.0 billion as of June 30, 2025[50] Dividend Policies and Restrictions - The company could have declared approximately $21.1 million in dividends during 2025 without prior regulatory approval[37] - The FRB's policies require that dividends should be paid only out of current earnings and may restrict the ability to pay dividends if a subsidiary bank becomes undercapitalized[53] - The FRB has the authority to disapprove purchases or redemptions of equity securities if deemed unsafe or unsound, impacting the Company's capital distribution strategies[51] Deposit Insurance and Assessment - The Bank's deposits are insured by the FDIC, with assessment rates based on risk categories determined by supervisory evaluations and capital levels[39] - The FDIC has changed the assessment base for calculating deposit insurance assessments from deposits to total assets, less tangible capital, with adjusted assessment rates ranging from 2.5 to 45 basis points[40] - The Dodd-Frank Act increased the minimum target Deposit Insurance Fund (DIF) ratio from 1.15% to 1.35% of estimated insured deposits, with a long-range fund ratio established at 2%[41] Reserve Requirements - The Bank is required to maintain average daily reserves equal to 3% on aggregate transaction accounts up to $645.8 million, plus 10% on the remainder, with the first $37.8 million exempt[44] - The FRB has reduced all reserve requirements to zero in response to the COVID-19 pandemic, impacting the Bank's operational flexibility[44] Community Commitment - The most recent Community Reinvestment Act rating for the company was "Satisfactory," reflecting its commitment to meet community credit needs[24] Economic Influences - The earnings and growth of the banking industry are influenced by the credit policies of monetary authorities, including the Federal Reserve System, which regulate the national supply of bank credit[57] - The Company cannot predict future insurance assessment rates, which could adversely affect operating expenses and results[42] - The Dodd-Frank Act codified the source of strength policy, requiring bank holding companies to support their subsidiary banks during financial stress[53]