EX-99.1 2 secondqtr19pressrelease.htm

CONTACT:  KATHLEEN CAMPBELL, MARKETING DIRECTOR
570-662-0422
570-662-8512 (FAX)
FIRST CITIZENS COMMUNITY BANK
15 S MAIN STREET
MANSFIELD, PA 16933


citizens financial services, inc. reports unaudited second quarter 2019 financial results

MANSFIELD, PENNSYLVANIA— July 23, 2019 – Citizens Financial Services, Inc. (OTC Pink: CZFS), parent company of First Citizens Community Bank, released today its unaudited consolidated financial results for the three and six months ended June 30, 2019.

Highlights

·
Net income for the first six months of 2019 was $9.3 million, which is 3.5% higher than 2018’s net  income through June 30, 2018. The effective tax rate for the first six months of 2019 was 15.9% compared to 15.4% in the comparable period in 2018.

·
Net income was $4.8 million for the three months ended June 30, 2019, which is 3.3% higher than the net income for 2018’s comparable period. The effective tax rate for the three months ended June 30, 2019 was 16.1% compared to 15.7% in the comparable period in 2018.

·
Net interest income before the provision for loan losses of $24.3 million for the six months ended June 30, 2019 was an increase of $1.1 million, or 4.7%, over the same period a year ago.

·
Net loan growth totaled $17.3 million in the first half of 2019, or 3.2% annualized.

·
Return on average equity for the three and six months (annualized) ended June 30, 2019 was 13.09% and 12.61% compared to 13.68% and 13.15% for the three and six months (annualized) ended June 30, 2018.

·
Return on average tangible equity for the three and six months (annualized) ended June 30, 2019 was 15.72% and 15.17% compared to 16.74% and 16.14% for the three and six months (annualized) ended June 30, 2018. (1)

·
Return on average assets for the three and six months (annualized) ended June 30, 2019 was 1.34% and 1.28% compared to 1.34% and 1.29% for the three and six months (annualized) ended June 30, 2018.

Six Months Ended June 30, 2019 Compared to 2018

·
For the six months ended June 30, 2019, net income totaled $9,251,000 which compares to net income of $8,938,000 for the first six months of 2018, an increase of $313,000 or 3.5%.  Basic earnings per share of $2.62 for the first six months of 2019 compares to $2.52 for the first six months last year.  Annualized return on equity for the six months ended June 30, 2019 and 2018 was 12.61% and 13.15%, while annualized return on assets was 1.28% and 1.29%, respectively.

·
Net interest income before the provision for loan loss for the six months ended June 30, 2019 totaled $24,251,000 compared to $23,171,000 for the six months ended June 30, 2018, resulting in an increase of $1,080,000, or 4.7%.    Average interest earning assets increased $62.9 million for the six months ended June 30, 2019 compared to the same period last year.  Average loans increased $66.8 million while average investment securities decreased $9.2 million. The yield on interest earning assets increased 21 basis points to 4.58%, while the cost of interest-bearing liabilities increased 34 basis points to 1.14%. The increase in the cost of interest-bearing liabilities  was due to the rise in the federal funds rate during 2018. The tax effected net interest margin for the six months ended June 30, 2019 was 3.66% compared to 3.67% for the same period last year.

·
The provision for loan losses for the six months ended June 30, 2019 was $750,000 compared to $825,000 for the six months ended June 30, 2018, a decrease of $75,000.  The decrease provision primarily reflects the lower level of loan growth experienced during 2019 compared to 2018.

·
Total non-interest income was $4,060,000 for the six months ended June 30, 2019, which is $312,000 more than the non-interest income of $3,748,000 for the same period last year. The increase was driven by revenue increases in our wealth management division, which includes trust fees and brokerage and insurance commissions.

·
Total non-interest expenses for the six months ended June 30, 2019 totaled $16,559,000 compared to $15,534,000 for the same period last year, which is an increase of $1,025,000, or 6.6%.  Salaries and benefits increased $461,000 primarily due to merit increases, employee commissions, health insurance costs and profit sharing.  Other expenses increased $426,000, which was primarily due to an increase in costs as a result of the decision to terminate a pension plan acquired as part the First National Bank of Fredericksburg acquisition in 2015.

·
The provision for income taxes increased $129,000 when comparing the six months ended June 30, 2019 to the same period in 2018 as a result of an increase in income before income tax of $442,000.

Three Months Ended June 30, 2019 Compared to 2018

·
For the three months ended June 30, 2019, net income totaled $4,846,000 which compares to net income of $4,691,000 for the comparable period in 2018, an increase of $155,000 or 3.3%.  Basic earnings per share of $1.38 for three months ended June 30, 2019 compares to $1.32 for the 2018 comparable period. Annualized return on equity for the three months ended June 30, 2019 and 2018 was 13.09% and 13.68%, respectively, while annualized return on assets was 1.34% for both periods.

·
Net interest income before the provision for loan loss for the three months ended June 30, 2019 totaled $12,336,000 compared to $11,751,000 for the three months ended June 30, 2018, resulting in an increase of $585,000, or 5.0%. Average interest earning assets increased $48.9 million for the three months ended June 30, 2019 compared to the same period last year.  Average loans increased $60.7 million while average investment securities decreased $16.3 million. The yield on interest earning assets increased 27 basis points to 4.67%, while the cost of interest-bearing liabilities increased 30 basis points to 1.15%. The increase in the cost of interest-bearing liabilities was due to the rise in the federal funds rate during 2018.  The tax effected net interest margin for the three months ended June 30, 2019 was 3.74% compared to 3.70% for the same period last year and increased 12 basis points from the first quarter’s net interest margin of 3.62%.

·
The provision for loan losses for the three months ended June 30, 2019 was $350,000 compared to $325,000 for comparable period in 2018, an increase of $25,000.

·
Total non-interest income was $2,027,000 for the three months June 30, 2019, which is $185,000 more than the comparable period last year.  The increase in revenues was driven by increases in our wealth management division, which includes trust fees and brokerage and insurance commissions.

·
Total non-interest expenses for the three months ended June 30, 2019 totaled $8,237,000 compared to $7,702,000 for the same period last year, which is an increase of $535,000, or 7.0%.  Salaries and benefits increased $267,000 primarily due to employee commissions, health insurance costs and profit sharing. Other expenses increased $235,000, which was primarily due to an increase in costs as a result of the decision to terminate a pension plan acquired as part the First National Bank of Fredericksburg acquisition in 2015.

·
The provision for income taxes increased $55,000 when comparing the three months ended June 30, 2019 to the same period in 2018.  The effective tax rate for the three months ended June 30, 2019 was 16.1% compared to 15.7% in the comparable period in 2018.

Balance Sheet and Other Information:

·
At June 30, 2019, total assets were $1.45 billion, compared to $1.43 billion at December 31, 2018 and $1.40 billion at June 30, 2018.

·
Available for sale securities of $236.7 million at June 30, 2019 decreased $4.3 million from December 31, 2018 and $13.3 million from June 30, 2018. The resulting funds were utilized to fund growth in the loan portfolio.

·
Net loans as of June 30, 2019 totaled $1.09 billion and increased $17.3 million from December 31, 2018 and $58.1 million from June 30, 2018. Net loan growth for the second quarter was $8.5 million. Net loan growth for 2019 has been negatively impacted by transfers to other real estate owned as the result of a settlement with a customer in bankruptcy and several large loan payoffs. The growth in 2019 was in commercial and agricultural relationships, which continues the trend from 2018.

·
The allowance for loan losses totaled $13,304,000 at June 30, 2019 which is an increase of $420,000 from December 31, 2018.  The increase is due to recording a provision for loan losses of $750,000 and recoveries of $23,000, offset by charge-offs of $353,000.  Annualized net charge-offs as a percent of total loans through June 30, 2019 was .06%.  The allowance as a percent of total loans was 1.21% as of June 30, 2019 compared to 1.19% as of December 31, 2018.

·
Deposits decreased $1.5 million from December 31, 2018, to $1.18 billion at June 30, 2019, primarily due to timing differences and a municipal customer withdrawing funds to start a large construction project. Borrowed funds increased $9.8 million from December 31, 2018 to $101.0 million at June 30, 2019. Non-interest-bearing deposits increased $3.9 million at June 30, 2019.

·
Stockholders’ equity totaled $148.0 million at June 30, 2019, compared to $139.2 million at December 31, 2018, an increase of $8,792,000.  The increase was attributable to net income for the six months ended June 30, 2019 totaling $9.3 million, offset by cash dividends of $3.1 million.  As a result of changes in interest rates impacting the fair value of investment securities, the unrealized gain on available for sale investment securities, net of tax, increased $3.5 million from December 31, 2018.

Dividend Declared

On June 4, 2019, the Board of Directors declared a cash dividend of $0.445 per share, which was paid on June 28, 2019 to shareholders of record at the close of business on June 14, 2019. The quarterly cash dividend is an increase of 3.3% over the quarterly cash dividend of $0.431 per share declared one year ago, as adjusted for the 1% stock dividend declared in June 2018. The Board also declared a 1% stock dividend, payable on June 28, 2019 to shareholders of record at the close of business on June 14, 2019.

Citizens Financial Services, Inc. has nearly 1,700 shareholders, the majority of whom reside in markets where First Citizens Community Bank’s offices are located.

Note: This press release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.  These statements are not historical facts; rather, they are statements based on the Company's current expectations regarding its business strategies and their intended results and its future performance.  Forward-looking statements are preceded by terms such as "expects," "believes," "anticipates," "intends" and similar expressions.  Forward-looking statements are not guarantees of future performance.  Numerous risks and uncertainties could cause or contribute to the Company's actual results, performance and achievements to be materially different from those expressed
or implied by the forward-looking statements. Factors that may cause or contribute to these differences include, without limitation, changes in general economic conditions, including changes in market interest rates and changes in monetary and fiscal policies of the federal government; legislative and regulatory changes; and other factors disclosed periodically in the Company's filings with the Securities and Exchange Commission.  Because of the risks and uncertainties inherent in forward-looking statements, readers are cautioned not to place undue reliance on them, whether included in this press release or made elsewhere periodically by the Company or on its behalf.  The Company assumes no obligation to update any forward-looking statements except as may be required by applicable law or regulation.


(1)
See reconciliation of non-gaap measures at the end of the press release


CITIZENS FINANCIAL SERVICES, INC.
                        
CONSOLIDATED FINANCIAL HIGHLIGHTS
                        
(UNAUDITED)
                        
(Dollars in thousands, except per share data)
                        
   
As of or For The
    
As of or For The
  
   
Three Months Ended
    
Six Months Ended
  
   
June 30,
    
June 30,
  
   
2019
    
2018
    
2019
    
2018
  
Income and Performance Ratios
                        
Net Income
  
$
4,846
    
$
4,691
    
$
9,251
    
$
8,938
  
Return on average assets (annualized)
    
1.34
%
    
1.34
%
    
1.28
%
    
1.29
%
Return on average equity (annualized)
    
13.09
%
    
13.68
%
    
12.61
%
    
13.15
%
Return on average tangible equity (annualized) (b)
    
15.72
%
    
16.74
%
    
15.17
%
    
16.14
%
Net interest margin (tax equivalent)
    
3.74
%
    
3.70
%
    
3.66
%
    
3.67
%
Earnings per share - basic (c)
  
$
1.38
    
$
1.32
    
$
2.62
    
$
2.52
  
Earnings per share - diluted (c)
  
$
1.38
    
$
1.32
    
$
2.62
    
$
2.52
  
Number of shares used in computation - basic (c)
    
3,523,135
      
3,541,703
      
3,525,788
      
3,544,343
  
Number of shares used in computation - diluted (c)
    
3,524,517
      
3,543,170
      
3,526,483
      
3,544,974
  
Cash dividends paid per share
  
$
0.441
    
$
0.427
    
$
0.881
    
$
0.853
  
Annualized net charge-offs to total loans
    
0.05
%
    
(0.01
%)
    
0.06
%
    
0.02
%
                                 
   
June 30,
    
June 30,
                  
     
2019
      
2018
                  
Asset quality
                                
Allowance for loan and lease losses
  
$
13,304
    
$
11,941
                  
Non-performing assets
  
$
16,562
    
$
12,448
                  
Allowance for loan and lease losses/total loans
    
1.21
%
    
1.15
%
                
Non-performing assets to total loans
    
1.51
%
    
1.20
%
                
                                 
                                 
                                 
Equity
                                
Book value per share (c)
  
$
42.08
    
$
38.80
                  
Tangible Book value per share (b) (c)
  
$
35.06
    
$
31.74
                  
Market Value (Last reported trade of month)
  
$
60.50
    
$
63.00
                  
Common shares outstanding
    
3,525,320
      
3,512,653
                  
                                 
                                 
                                 
                                 
Other
                                
Total Risk Based Capital Ratio (a)
    
13.73
%
    
13.23
%
                
Tier 1 Risk Based Capital Ratio (a)
    
12.48
%
    
12.04
%
                
Common Equity Tier 1 Risk Based Capital Ratio (a)
    
11.78
%
    
11.30
%
                
Leverage Ratio
    
9.37
%
    
8.94
%
                
Average Full Time Equivalent Employees
    
261.8
      
262.9
                  
Loan to Deposit Ratio
    
92.90
%
    
92.99
%
                

Balance Sheet Highlights
  
June 30,
    
December 31
    
June 30,
  
   
2019
    
2018
    
2018
  
                   
Assets
  
$
1,447,170
    
$
1,430,712
    
$
1,397,594
  
Investment securities
    
237,297
      
241,526
      
250,220
  
Loans (net of unearned income)
    
1,099,622
      
1,081,883
      
1,040,200
  
Allowance for loan losses
    
13,304
      
12,884
      
11,941
  
Deposits
    
1,183,658
      
1,185,156
      
1,118,592
  
Stockholders' Equity
    
148,021
      
139,229
      
132,281
  
                         
(a) Presented as projected for June 30, 2019 and actual for the remaining period
          
(b) See reconcilation of Non-GAAP measures at the end of the press release
                  
(c) Prior period amounts were adjusted to reflect stock dividends.
                  


CITIZENS FINANCIAL SERVICES, INC.
                  
CONSOLIDATED BALANCE SHEET
                  
(UNAUDITED)
                  
                   
   
June 30,
    
December 31,
    
June 30,
  
(in thousands except share data)
  
2019
    
2018
    
2018
  
ASSETS:
                  
Cash and due from banks:
                  
  Noninterest-bearing
  
$
15,552
    
$
15,327
    
$
14,521
  
  Interest-bearing
    
917
      
1,470
      
1,092
  
Total cash and cash equivalents
    
16,469
      
16,797
      
15,613
  
                         
Interest bearing time deposits with other banks
    
15,498
      
15,498
      
13,762
  
                         
Equity securities
    
557
      
516
      
195
  
                         
Available-for-sale securities
    
236,740
      
241,010
      
250,025
  
                         
Loans held for sale
    
778
      
1,127
      
1,931
  
                         
Loans (net of allowance for loan losses: $13,304 at June 30, 2019;
                        
    $12,884 at December 31, 2018 and $11,941 at June 30, 2018)
    
1,086,318
      
1,068,999
      
1,028,259
  
                         
Premises and equipment
    
16,024
      
16,273
      
16,289
  
Accrued interest receivable
    
4,612
      
4,452
      
4,285
  
Goodwill
    
23,296
      
23,296
      
23,296
  
Bank owned life insurance
    
27,810
      
27,505
      
27,189
  
Other intangibles
    
1,460
      
1,623
      
1,756
  
Other assets
    
17,608
      
13,616
      
14,994
  
                         
TOTAL ASSETS
  
$
1,447,170
    
$
1,430,712
    
$
1,397,594
  
                         
LIABILITIES:
                        
Deposits:
                        
  Noninterest-bearing
  
$
183,903
    
$
179,971
    
$
169,014
  
  Interest-bearing
    
999,755
      
1,005,185
      
949,578
  
Total deposits
    
1,183,658
      
1,185,156
      
1,118,592
  
Borrowed funds
    
100,984
      
91,194
      
133,652
  
Accrued interest payable
    
1,048
      
1,076
      
903
  
Other liabilities
    
13,459
      
14,057
      
12,166
  
TOTAL LIABILITIES
    
1,299,149
      
1,291,483
      
1,265,313
  
STOCKHOLDERS' EQUITY:
                        
Preferred Stock $1.00 par value; authorized
                        
  3,000,000 shares; none issued in 2019 or 2018
    
-
      
-
      
-
  
Common stock
                        
$1.00 par value; authorized 25,000,000 shares at June 30, 2019, December 31, 2018 and
                  
  June 30, 2018: issued 3,938,673 at June 30 2019 and 3,904,212 at December 31, 2018
                        
  and June 30, 2018
    
3,939
      
3,904
      
3,904
  
Additional paid-in capital
    
55,096
      
53,099
      
53,098
  
Retained earnings
    
103,733
      
99,727
      
93,717
  
Accumulated other comprehensive loss
    
(337
)
    
(3,921
)
    
(5,357
)
Treasury stock, at cost:  413,353 at June 30, 2019; 399,616 shares
                        
  at December 31, 2018 and 391,559 shares at June 30, 2018
    
(14,410
)
    
(13,580
)
    
(13,081
)
TOTAL STOCKHOLDERS' EQUITY
    
148,021
      
139,229
      
132,281
  
TOTAL LIABILITIES AND
                        
   STOCKHOLDERS' EQUITY
  
$
1,447,170
    
$
1,430,712
    
$
1,397,594
  



CITIZENS FINANCIAL SERVICES, INC.
                        
CONSOLIDATED STATEMENT OF INCOME
                        
(UNAUDITED)
                        
   
Three Months Ended
    
Six Months Ended
  
   
June 30,
    
June 30,
  
(in thousands, except per share data)
  
2019
    
2018
    
2019
    
2018
  
INTEREST INCOME:
                        
Interest and fees on loans
  
$
13,776
    
$
12,461
    
$
27,090
    
$
24,322
  
Interest-bearing deposits with banks
    
104
      
66
      
208
      
124
  
Investment securities:
                                
    Taxable
    
1,128
      
916
      
2,236
      
1,716
  
    Nontaxable
    
374
      
474
      
731
      
1,001
  
    Dividends
    
120
      
111
      
254
      
248
  
TOTAL INTEREST INCOME
    
15,502
      
14,028
      
30,519
      
27,411
  
INTEREST EXPENSE:
                                
Deposits
    
2,398
      
1,585
      
4,712
      
2,901
  
Borrowed funds
    
768
      
692
      
1,556
      
1,339
  
TOTAL INTEREST EXPENSE
    
3,166
      
2,277
      
6,268
      
4,240
  
NET INTEREST INCOME
    
12,336
      
11,751
      
24,251
      
23,171
  
Provision for loan losses
    
350
      
325
      
750
      
825
  
NET INTEREST INCOME AFTER
                                
    PROVISION FOR LOAN LOSSES
    
11,986
      
11,426
      
23,501
      
22,346
  
NON-INTEREST INCOME:
                                
Service charges
    
1,174
      
1,170
      
2,273
      
2,274
  
Trust
    
209
      
150
      
441
      
401
  
Brokerage and insurance
    
261
      
168
      
554
      
349
  
Gains on loans sold
    
64
      
60
      
163
      
132
  
Equity security gains, net
    
30
      
7
      
41
      
13
  
Earnings on bank owned life insurance
    
154
      
154
      
305
      
306
  
Other
    
135
      
133
      
283
      
273
  
TOTAL NON-INTEREST INCOME
    
2,027
      
1,842
      
4,060
      
3,748
  
NON-INTEREST EXPENSES:
                                
Salaries and employee benefits
    
5,004
      
4,737
      
10,033
      
9,572
  
Occupancy
    
517
      
514
      
1,109
      
1,106
  
Furniture and equipment
    
181
      
122
      
336
      
264
  
Professional fees
    
316
      
367
      
758
      
766
  
FDIC insurance
    
105
      
107
      
216
      
207
  
Pennsylvania shares tax
    
275
      
300
      
550
      
600
  
Amortization of intangibles
    
66
      
74
      
132
      
150
  
ORE expenses
    
109
      
52
      
216
      
86
  
Other
    
1,664
      
1,429
      
3,209
      
2,783
  
TOTAL NON-INTEREST EXPENSES
    
8,237
      
7,702
      
16,559
      
15,534
  
Income before provision for income taxes
    
5,776
      
5,566
      
11,002
      
10,560
  
Provision for income taxes
    
930
      
875
      
1,751
      
1,622
  
NET INCOME
  
$
4,846
    
$
4,691
    
$
9,251
    
$
8,938
  
                                 
PER COMMON SHARE DATA:
                                
Net Income - Basic
  
$
1.38
    
$
1.32
    
$
2.62
    
$
2.52
  
Net Income - Diluted
  
$
1.38
    
$
1.32
    
$
2.62
    
$
2.52
  
Cash Dividends Paid
  
$
0.441
    
$
0.427
    
$
0.881
    
$
0.853
  
                                 
Number of shares used in computation - basic
    
3,523,135
      
3,541,703
      
3,525,788
      
3,544,343
  
Number of shares used in computation - diluted
    
3,524,517
      
3,543,170
      
3,526,483
      
3,544,974
  


CITIZENS FINANCIAL SERVICES, INC.
                              
QUARTERLY CONDENSED, CONSOLIDATED INCOME STATEMENT INFORMATION
                          
(UNAUDITED)
                              
(in thousands, except share data)
        
Three Months Ended,
              
   
June 30,
    
March 31,
    
Dec 31
    
Sept 30
    
June 30,
  
   
2019
    
2019
    
2018
    
2018
    
2018
  
Interest income
  
$
15,502
    
$
15,017
    
$
15,088
    
$
14,259
    
$
14,028
  
Interest expense
    
3,166
      
3,102
      
2,845
      
2,489
      
2,277
  
Net interest income
    
12,336
      
11,915
      
12,243
      
11,770
      
11,751
  
Provision for loan losses
    
350
      
400
      
625
      
475
      
325
  
Net interest income after provision for loan losses
    
11,986
      
11,515
      
11,618
      
11,295
      
11,426
  
Non-interest income
    
1,997
      
2,022
      
1,997
      
2,022
      
1,835
  
Investment securities gains (losses), net
    
30
      
11
      
(20
)
    
(12
)
    
7
  
Non-interest expenses
    
8,237
      
8,322
      
8,235
      
7,788
      
7,702
  
Income before provision for income taxes
    
5,776
      
5,226
      
5,360
      
5,517
      
5,566
  
Provision for income taxes
    
930
      
821
      
845
      
936
      
875
  
Net income
  
$
4,846
    
$
4,405
    
$
4,515
    
$
4,581
    
$
4,691
  
Earnings Per Share Basic
  
$
1.38
    
$
1.24
    
$
1.28
    
$
1.30
    
$
1.32
  
Earnings Per Share Diluted
  
$
1.38
    
$
1.24
    
$
1.28
    
$
1.30
    
$
1.32
  


CITIZENS FINANCIAL SERVICES, INC.
                                    
CONSOLIDATED AVERAGE BALANCES, INTEREST, YIELDS AND RATES, AND NET INTEREST MARGIN ON A FULLY TAX-EQUIVALENT BASIS
  
(UNAUDITED)
                                    
   
Three Months Ended June 30,
        
   
2019
                
2018
              
   
Average
          
Average
    
Average
          
Average
  
   
Balance (1)
    
Interest
    
Rate
    
Balance (1)
    
Interest
    
Rate
  
(dollars in thousands)
  
$
            
$
%
    
$
            
$
%
  
ASSETS
                                            
Interest-bearing deposits at banks
    
9,316
      
6
      
0.26
      
9,112
      
4
      
0.18
  
Interest bearing time deposits at banks
    
15,498
      
98
      
2.54
      
11,191
      
62
      
2.19
  
Investment securities
    
232,907
      
1,722
      
2.96
      
249,206
      
1,628
      
2.61
  
Loans: (2)(3)(4)
                                                
  Residential mortgage loans
    
214,557
      
2,867
      
5.36
      
214,932
      
2,814
      
5.25
  
  Construction loans
    
20,308
      
262
      
5.17
      
23,349
      
273
      
4.69
  
  Commercial Loans
    
419,175
      
5,805
      
5.55
      
391,935
      
5,197
      
5.32
  
  Agricultural Loans
    
335,266
      
3,875
      
4.64
      
298,266
      
3,286
      
4.42
  
  Loans to state & political subdivisions
    
98,979
      
972
      
3.94
      
99,301
      
873
      
3.53
  
  Other loans
    
9,705
      
184
      
7.60
      
9,494
      
184
      
7.82
  
  Loans, net of discount (2)(3)(4)
    
1,097,990
      
13,965
      
5.10
      
1,037,277
      
12,627
      
4.88
  
Total interest-earning assets
    
1,355,711
      
15,791
      
4.67
      
1,306,786
      
14,321
      
4.40
  
Cash and due from banks
    
6,052
                      
6,529
                  
Bank premises and equipment
    
16,133
                      
16,356
                  
Other assets
    
73,702
                      
65,473
                  
Total non-interest earning assets
    
95,887
                      
88,358
                  
Total assets
    
1,451,598
                      
1,395,144
                  
LIABILITIES AND STOCKHOLDERS' EQUITY
                                                
Interest-bearing liabilities:
                                                
  NOW accounts
    
329,539
      
589
      
0.72
      
330,550
      
404
      
0.49
  
  Savings accounts
    
217,537
      
206
      
0.38
      
189,457
      
51
      
0.11
  
  Money market accounts
    
161,611
      
509
      
1.26
      
160,719
      
365
      
0.91
  
  Certificates of deposit
    
288,788
      
1,094
      
1.52
      
268,526
      
765
      
1.14
  
Total interest-bearing deposits
    
997,475
      
2,398
      
0.96
      
949,252
      
1,585
      
0.67
  
Other borrowed funds
    
110,598
      
768
      
2.79
      
125,815
      
692
      
2.21
  
Total interest-bearing liabilities
    
1,108,073
      
3,166
      
1.15
      
1,075,067
      
2,277
      
0.85
  
Demand deposits
    
181,277
                      
170,287
                  
Other liabilities
    
14,127
                      
12,617
                  
Total non-interest-bearing liabilities
    
195,404
                      
182,904
                  
Stockholders' equity
    
148,121
                      
137,173
                  
Total liabilities & stockholders' equity
    
1,451,598
                      
1,395,144
                  
Net interest income
            
12,625
                      
12,044
          
Net interest spread (5)
                    
3.52
%
                    
3.55
%
Net interest income as a percentage
                                                
  of average interest-earning assets
                    
3.74
%
                    
3.70
%
Ratio of interest-earning assets
                                                
  to interest-bearing liabilities
                    
122
%
                    
122
%
                                                 
(1) Averages are based on daily averages.
                                                
(2) Includes loan origination and commitment fees.
                                                
(3) Tax exempt interest revenue is shown on a tax equivalent basis for proper comparison using
                          
a statutory federal income tax rate of 21% for 2019 and 2018.
                                          
(4) Income on non-accrual loans is accounted for on a cash basis, and the loan balances are included in interest-earning assets.
  
(5) Interest rate spread represents the difference between the average rate earned on interest-earning assets
          
      and the average rate paid on interest-bearing liabilities.
                                                


CITIZENS FINANCIAL SERVICES, INC.
                                    
CONSOLIDATED AVERAGE BALANCES, INTEREST, YIELDS AND RATES, AND NET INTEREST MARGIN ON A FULLY TAX-EQUIVALENT BASIS
  
(UNAUDITED)
                                    
   
Six Months Ended June 30,
        
   
2019
                
2018
              
   
Average
          
Average
    
Average
          
Average
  
   
Balance (1)
    
Interest
    
Rate
    
Balance (1)
    
Interest
    
Rate
  
(dollars in thousands)
  
$
            
$
%
    
$
            
$
%
  
ASSETS
                                            
Interest-bearing deposits at banks
    
9,165
      
13
      
0.29
      
8,609
      
9
      
0.21
  
Interest bearing time deposits at banks
    
15,498
      
195
      
2.54
      
10,753
      
115
      
2.16
  
Investment securities
    
250,219
      
3,416
      
2.73
      
259,425
      
3,232
      
2.49
  
Loans: (2)(3)(4)
                                                
  Residential mortgage loans
    
215,110
      
5,692
      
5.34
      
214,766
      
5,538
      
5.20
  
  Construction loans
    
24,351
      
620
      
5.13
      
20,523
      
474
      
4.66
  
  Commercial Loans
    
410,532
      
11,201
      
5.50
      
390,068
      
10,175
      
5.26
  
  Agricultural Loans
    
334,895
      
7,639
      
4.60
      
291,030
      
6,324
      
4.38
  
  Loans to state & political subdivisions
    
99,945
      
1,951
      
3.94
      
101,891
      
1,788
      
3.54
  
  Other loans
    
9,737
      
368
      
7.62
      
9,500
      
368
      
7.81
  
  Loans, net of discount (2)(3)(4)
    
1,094,570
      
27,471
      
5.06
      
1,027,778
      
24,667
      
4.84
  
Total interest-earning assets
    
1,369,452
      
31,095
      
4.58
      
1,306,565
      
28,023
      
4.33
  
Cash and due from banks
    
6,395
                      
6,717
                  
Bank premises and equipment
    
16,198
                      
16,418
                  
Other assets
    
56,135
                      
54,590
                  
Total non-interest earning assets
    
78,728
                      
77,725
                  
Total assets
    
1,448,180
                      
1,384,290
                  
LIABILITIES AND STOCKHOLDERS' EQUITY
                                                
Interest-bearing liabilities:
                                                
  NOW accounts
    
328,951
      
1,167
      
0.72
      
328,256
      
733
      
0.45
  
  Savings accounts
    
214,361
      
390
      
0.37
      
187,361
      
101
      
0.11
  
  Money market accounts
    
161,518
      
1,014
      
1.27
      
153,345
      
610
      
0.80
  
  Certificates of deposit
    
291,074
      
2,141
      
1.48
      
267,407
      
1,457
      
1.10
  
Total interest-bearing deposits
    
995,904
      
4,712
      
0.95
      
936,369
      
2,901
      
0.62
  
Other borrowed funds
    
112,204
      
1,556
      
2.79
      
132,179
      
1,339
      
2.04
  
Total interest-bearing liabilities
    
1,108,108
      
6,268
      
1.14
      
1,068,548
      
4,240
      
0.80
  
Demand deposits
    
179,144
                      
167,255
                  
Other liabilities
    
14,164
                      
12,577
                  
Total non-interest-bearing liabilities
    
193,308
                      
179,832
                  
Stockholders' equity
    
146,764
                      
135,910
                  
Total liabilities & stockholders' equity
    
1,448,180
                      
1,384,290
                  
Net interest income
            
24,827
                      
23,783
          
Net interest spread (5)
                    
3.44
%
                    
3.53
%
Net interest income as a percentage
                                                
  of average interest-earning assets
                    
3.66
%
                    
3.67
%
Ratio of interest-earning assets
                                                
  to interest-bearing liabilities
                    
124
%
                    
122
%
                                                 
(1) Averages are based on daily averages.
                                                
(2) Includes loan origination and commitment fees.
                                                
(3) Tax exempt interest revenue is shown on a tax equivalent basis for proper comparison using
                          
a statutory federal income tax rate of 21% for 2019 and 2018.
                                          
(4) Income on non-accrual loans is accounted for on a cash basis, and the loan balances are included in interest-earning assets.
  
(5) Interest rate spread represents the difference between the average rate earned on interest-earning assets
                  
      and the average rate paid on interest-bearing liabilities.
                                                


CITIZENS FINANCIAL SERVICES, INC.
                              
CONSOLIDATED SUMMARY OF LOANS BY TYPE; NON-PERFORMING ASSETS; and ALLOWANCE FOR LOAN LOSSES
  
(UNAUDITED)
                              
(Excludes Loans Held for Sale)
                              
(In Thousands)
                              
   
June 30,
    
March 31,
    
December 31,
    
September 30,
    
June 30,
  
   
2019
    
2019
    
2018
    
2018
    
2018
  
Real estate:
                              
  Residential
  
$
213,014
    
$
214,635
    
$
215,305
    
$
213,255
    
$
213,242
  
  Commercial
    
347,430
      
334,371
      
319,265
      
312,982
      
309,571
  
  Agricultural
    
294,332
      
295,547
      
284,520
      
280,569
      
262,691
  
  Construction
    
20,950
      
18,611
      
33,913
      
30,262
      
27,901
  
Consumer
    
9,854
      
9,773
      
9,858
      
9,702
      
9,740
  
Other commercial loans
    
76,179
      
74,323
      
74,118
      
72,219
      
75,002
  
Other agricultural loans
    
41,689
      
43,245
      
42,186
      
39,917
      
42,131
  
State & political subdivision loans
    
96,174
      
100,412
      
102,718
      
101,425
      
99,922
  
Total loans
    
1,099,622
      
1,090,917
      
1,081,883
      
1,060,331
      
1,040,200
  
Less: allowance for loan losses
    
13,304
      
13,084
      
12,884
      
12,383
      
11,941
  
Net loans
  
$
1,086,318
    
$
1,077,833
    
$
1,068,999
    
$
1,047,948
    
$
1,028,259
  
                                         
Past due and non-performing assets
                                        
                                         
Total Loans past due 30-89 days and still accruing
  
$
2,599
    
$
4,470
    
$
3,308
    
$
3,127
    
$
5,143
  
                                         
Non-accrual loans
  
$
12,534
    
$
11,700
    
$
13,724
    
$
14,530
    
$
10,931
  
Loans past due 90 days or more and accruing
    
175
      
64
      
68
      
302
      
1,046
  
Non-performing loans
  
$
12,709
    
$
11,764
    
$
13,792
    
$
14,832
    
$
11,977
  
OREO
    
3,853
      
4,295
      
601
      
628
      
471
  
Total Non-performing assets
  
$
16,562
    
$
16,059
    
$
14,393
    
$
15,460
    
$
12,448
  
                                         
                                         
                                         
   
3 Months
    
3 Months
    
3 Months
    
3 Months
    
3 Months
  
   
Ended
    
Ended
    
Ended
    
Ended
    
Ended
  
Analysis of the Allowance for loan Losses
  
June 30,
    
March 31,
    
December 31,
    
September 30,
    
June 30,
  
(In Thousands)
    
2019
      
2018
      
2018
      
2018
      
2018
  
Balance, beginning of period
  
$
13,084
    
$
12,884
    
$
12,383
    
$
11,941
    
$
11,587
  
Charge-offs
    
(139
)
    
(214
)
    
(140
)
    
(48
)
    
(61
)
Recoveries
    
9
      
14
      
16
      
15
      
90
  
Net (charge-offs) recoveries
    
(130
)
    
(200
)
    
(124
)
    
(33
)
    
29
  
Provision for loan losses
    
350
      
400
      
625
      
475
      
325
  
Balance, end of period
  
$
13,304
    
$
13,084
    
$
12,884
    
$
12,383
    
$
11,941
  


CITIZENS FINANCIAL SERVICES, INC.
                        
Reconciliation of GAAP and Non-GAAP Financial Measures
                    
(Dollars in thousands, except per share data)
                        
                         
   
As of
              
   
June 30,
              
   
2019
    
2018
              
Tangible Equity
                        
Stockholders Equity - GAAP
  
$
148,021
    
$
132,281
              
Accumulated other comprehensive loss
    
(337
)
    
(5,357
)
            
Intangible Assets
    
24,756
      
25,052
              
Non-GAAP Tangible Equity
    
123,602
      
112,586
              
Shares outstanding adjusted for June 2018 stock Dividend
    
3,525,320
      
3,547,114
              
Tangible Book value per share (a)
  
$
35.06
    
$
31.74
              
                             
   
As of
              
   
June 30,
              
     
2019
      
2018
              
Tangible Equity per share
                            
Stockholders Equity - GAAP
  
$
41.98
    
$
37.29
              
Adjustments for accumulated other comprehensive loss
    
(0.10
)
    
(1.51
)
            
Book value per share
    
42.08
      
38.80
              
Adjustments for intangible assets
    
7.02
      
7.06
              
Tangible Book value per share
  
$
35.06
    
$
31.74
              
                             
                             
   
For the Three Months Ended
    
For the Six Months Ended
  
   
June 30,
    
June 30,
  
     
2019
      
2018
      
2019
      
2018
  
Return on Average Tangible Equity
                                
Average Stockholders Equity - GAAP
  
$
145,637
    
$
131,752
    
$
143,619
    
$
131,126
  
Average Accumulated Other Comprehensive Loss
    
(2,484
)
    
(5,421
)
    
(3,146
)
    
(4,784
)
Average Intangible Assets
    
24,796
      
25,101
      
24,834
      
25,143
  
Average Non-GAAP Tangible Equity
    
123,325
      
112,072
      
121,931
      
110,767
  
Net Income
  
$
4,846
    
$
4,691
    
$
9,251
    
$
8,938
  
Annualized Return on Average Tangible Equity
    
15.72
%
    
16.74
%
    
15.17
%
    
16.14
%
                                 
                                 
   
Three Months Ended
    
For the Six Months Ended
  
   
June 30,
    
June 30,
  
Reconciliation of net interest income on fully taxable equivalent basis
    
2019
      
2018
      
2019
      
2018
  
Total interest income
  
$
15,502
    
$
14,028
    
$
30,519
    
$
27,411
  
Total interest expense
    
3,166
      
2,277
      
6,268
      
4,240
  
Net interest income
    
12,336
      
11,751
      
24,251
      
23,171
  
Tax equivalent adjustment
    
289
      
293
      
576
      
612
  
Net interest income (fully taxable equivalent)
  
$
12,625
    
$
12,044
    
$
24,827
    
$
23,783
  
                                 
                                 
                                 
(a) Prior period amounts were adjusted to reflect stock dividends.