EX-99.1 2 fourthqtrpressrelease.htm FOURTH QUARTER 2019 PRESS RELEASE

Contact:  Kathleen Campbell, Marketing Director                                                                                                                                                    First Citizens Community Bank
570-662-0422                                                                                                                                       15 S. Main Street
570-662-8512 (fax)                                                                                                                                     Mansfield, PA 16933


citizens financial services, inc. reports unaudited full year and fourth quarter 2019 financial results

MANSFIELD, PENNSYLVANIA— January 23, 2020– Citizens Financial Services, Inc. (OTC Pink: CZFS), parent company of First Citizens Community Bank, released today its unaudited consolidated financial results for the three months and year ended December 31, 2019.

Highlights

•
Citizens Financial Services, Inc. and MidCoast Community Bancorp, Inc. continue to prepare for the merger that is expected to close in the second quarter of 2020.

•
Net income was $19.5 million for 2019, which is 8.1% higher than 2018’s net income. The effective tax rate for 2019 was 16.4% compared to 15.9% for 2018 and was impacted by a reduction in tax-exempt income and non-deductible merger and acquisition-related expenses.

•
Net income was $5.0 million for the three months ended December 31, 2019, which is 11.7% higher than the net income for 2018’s comparable period. The effective tax rate for the three months ended December 31, 2019 was 16.6% compared to 15.8% in the comparable period in 2018.

•
Net interest income before the provision for loan losses was $49.9 million for the year ended December 31, 2019, which was an increase of $2.8 million, or 5.8%, compared to 2018.

•
Net loan growth totaled $32.7 million in 2019, or 3.1%, while deposit growth was $26.0 million, or 2.2%.

•
Return on average equity for the three months (annualized) and the year ended December 31, 2019 was 13.05% and 13.00%, respectively, compared to 12.65% and 13.00% for the three months (annualized) and the year ended December 31, 2018, respectively.

•
Return on average tangible equity for the three months (annualized) and the year ended December 31, 2019 was 15.52% and 15.58%, respectively, compared to 15.33% and 15.87% for the three months (annualized) and the year ended December 31, 2018, respectively. (1)

•
Return on average assets for the three months (annualized) and the year ended December 31, 2019 was 1.37% and 1.34%, respectively, compared to 1.27% and 1.29% for the three months (annualized) and the year ended December 31, 2018, respectively.

2019 Compared to 2018

•
For 2019, net income totaled $19,490,000 compared to net income of $18,034,000 for 2018, an increase of $1,456,000 or 8.1%.  Basic earnings per share of $5.54 for 2019 compares to $5.09 for 2018.  Return on equity for the years ended December 31, 2019 and 2018 was 13.00%, while return on assets was 1.34% and 1.29%, respectively.

•
Net interest income before the provision for loan loss for 2019 totaled $49,940,000 compared to $47,184,000 for 2018, resulting in an increase of $2,756,000, or 5.8%. Average interest earning assets increased $52.0 million in 2019 compared to last year.  Average loans increased $58.3 million while average investment securities decreased $9.4 million. The yield on interest earning assets increased 21 basis points to 4.59%, while the cost of interest-bearing liabilities increased 20 basis points to 1.09%. The increase in the cost of interest-bearing liabilities was due to the rise in the federal funds rate during 2018, which exceeded the reductions made in 2019. The tax effected net interest margin for 2019 was 3.72% compared to 3.66% for 2018.


•
The provision for loan losses for 2019 was $1,675,000 compared to $1,925,000 for 2018, a decrease of $250,000.  The decreased provision primarily reflects the lower level of loan growth experienced during 2019 compared to 2018.

•
Total non-interest income was $8,386,000 for 2019, which is $651,000 more than non-interest income of $7,735,000 for 2018. The increase was driven by revenue increases in our wealth management division, which includes trust fees and brokerage and insurance commissions, as well as gains on our equity security portfolio and loans sold.

•
Total non-interest expenses for 2019 totaled $33,341,000 compared to $31,557,000 for the same period last year, which is an increase of $1,784,000, or 5.7%. Salaries and benefits increased $1,362,000 primarily due to merit increases, employee commissions, health insurance costs, profit sharing and deferred compensation costs.  Other expenses increased $460,000, which was primarily due to an increase in costs associated with operational charge-offs and fraud prevention. Merger and acquisition costs increased $466,000 as a result of the pending merger with MidCoast Community Bancorp, Inc. OREO expenses increased due to an increase in the number of OREO properties currently held by the Bank. Professional fees decreased as a result of settling a lawsuit in the first quarter of 2019 that resulted in significant expenses in 2018. FDIC insurance decreased due to receiving a credit from the FDIC in the third and fourth quarters.

•
The provision for income taxes increased $417,000 when comparing 2019 to 2018 as a result of an increase in income before income tax of $1,873,000. The effective tax rate for 2019 was impacted by certain expenses being non-deductible for tax purposes.

Fourth Quarter of 2019 Compared to the Fourth Quarter of 2018

•
For the three months ended December 31, 2019, net income totaled $5,043,000 which compares to net income of $4,515,000 for the comparable period in 2018, an increase of $528,000 or 11.7%. Basic earnings per share of $1.43 for three months ended December 31, 2019 compares to $1.28 for the 2018 comparable period. Annualized return on equity for the three months ended December 31, 2019 and 2018 was 13.05% and 12.65%, respectively, while annualized return on assets was 1.37% and 1.27%, respectively.

•
Net interest income before the provision for loan loss for the three months ended December 31, 2019 totaled $12,790,000 compared to $12,243,000 for the three months ended December 31, 2018, resulting in an increase of $547,000, or 4.5%. Average interest earning assets increased $53.9 million for the three months ended December 31, 2019 compared to the same period last year.  Average loans increased $44.0 million while average investment securities increased $10.1 million.  The tax effected net interest margin for the three months ended December 31, 2019 was 3.74% compared to 3.73% for the same period last year.

•
The provision for loan losses for the three months ended December 31, 2019 was $525,000 compared to $625,000 for the comparable period in 2018, a decrease of $100,000.  The decreased provision primarily reflects the lower net loan growth experienced during the fourth quarter of 2019 compared to the same period in 2018.


•
Total non-interest income was $2,149,000 for the three months ended December 31, 2019, which is $172,000 more than the comparable period last year. The increase was driven by revenue increases in our wealth management division, which includes trust fees and brokerage and insurance commissions, as well as gains on our equity security portfolio and on loans sold.

•
Total non-interest expenses for the three months ended December 31, 2019 totaled $8,368,000 compared to $8,235,000 for the same period last year, which is an increase of $133,000, or 1.6%.  Salaries and benefits increased $484,000 primarily due to merit increases, employee commissions, health insurance costs, profit sharing and deferred compensation costs. Merger and acquisition costs increased as a result of the pending merger with MidCoast Community Bancorp, Inc. Professional fees decreased as a result of settling a lawsuit in the first quarter of 2019 that resulted in significant expenses in 2018. FDIC insurance decreased due to receiving a credit from the FDIC in the fourth quarter of 2019.

•
The provision for income taxes increased $158,000 when comparing the three months ended December 31, 2019 to the same period in 2018.  The effective tax rate for the three months ended December 31, 2019 and 2018 was 16.6% and 15.8%, respectively.

Balance Sheet and Other Information:

•
At December 31, 2019, total assets were $1.47 billion, compared to $1.43 billion at December 31, 2018. The loan to deposit ratio as of December 31, 2019 was 92.11% compared to 91.29% as of December 31, 2018.

•
Available for sale securities of $240.7 million at December 31, 2019 decreased $304,000 from December 31, 2018. Interest bearing time deposits with other banks decreased $1.2 million to $14.3 million at December 31, 2019.

•
Net loans as of December 31, 2019 totaled $1.10 billion and increased $32.7 million from December 31, 2018. Net loan growth for 2019 was 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 continued the trend from 2018.

•
The allowance for loan losses totaled $13,845,000 at December 31, 2019 which is an increase of $961,000 from December 31, 2018.  The increase is due to recording a provision for loan losses of $1,625,000 and recoveries of $43,000, offset by charge-offs of $757,000.  Net charge-offs as a percent of total loans for 2019 and 2018 was .06% and .02%, respectively.  The allowance as a percent of total loans was 1.24% as of December 31, 2019 compared to 1.19% as of December 31, 2018. For the year, non-performing assets increased $1.0 million.

•
Deposits increased $26.0 million from December 31, 2018, to $1.21 billion at December 31, 2019 as a result of growth in our south central Pennsylvania market. Borrowed funds decreased $6.1 million from December 31, 2018 to $85.1 million at December 31, 2019 as a result of the growth in deposits and equity.


•
Stockholders’ equity totaled $154.8 million at December 31, 2019, compared to $139.2 million at December 31, 2018, an increase of $15,545,000.  The increase was attributable to net income of $19.5 million for 2019, offset by cash dividends of $6.3 million and net treasury stock activity of $845,000.  As a result of changes in interest rates impacting the fair value of investment securities, the unrealized loss on available for sale investment securities, net of tax, increased $3.3 million from December 31, 2018.

Dividend Declared

On December 3, 2019, the Board of Directors declared a cash dividend of $0.450 per share, which was paid on December 27, 2019 to shareholders of record at the close of business on December 13, 2019. The quarterly cash dividend is an increase of 3.3% over the regular cash dividend of $0.436 per share declared one year ago, as adjusted for the 1% stock dividend declared in June 2019.

Citizens Financial Services, Inc. has nearly 1,700 shareholders, the majority of whom reside in markets where its 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 to 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
    
Year Ended
  
   
December 31,
    
December 31,
  
   
2019
    
2018
    
2019
    
2018
  
Income and Performance Ratios
                        
Net Income
  
$
5,043
    
$
4,515
    
$
19,490
    
$
18,034
  
Return on average assets (annualized)
    
1.37
%
    
1.27
%
    
1.34
%
    
1.29
%
Return on average equity (annualized)
    
13.05
%
    
12.65
%
    
13.00
%
    
13.00
%
Return on average tangible equity (annualized) (a)
    
15.52
%
    
15.33
%
    
15.58
%
    
15.87
%
Net interest margin (tax equivalent)(a)
    
3.74
%
    
3.73
%
    
3.72
%
    
3.66
%
Earnings per share - basic (b)
  
$
1.43
    
$
1.28
    
$
5.54
    
$
5.09
  
Earnings per share - diluted (b)
  
$
1.43
    
$
1.28
    
$
5.53
    
$
5.09
  
Cash dividends paid per share (b)
  
$
0.450
    
$
0.436
    
$
1.781
    
$
1.725
  
                                 
                                 
Asset quality
                                
Allowance for loan and lease losses
  
$
13,845
    
$
12,884
    
$
13,845
    
$
12,884
  
Non-performing assets
  
$
15,427
    
$
14,393
    
$
15,427
    
$
14,393
  
Allowance for loan and lease losses/total loans
    
1.24
%
    
1.19
%
    
1.24
%
    
1.19
%
Non-performing assets to total loans
    
1.38
%
    
1.33
%
    
1.38
%
    
1.33
%
Annualized net charge-offs to total loans
    
0.13
%
    
0.05
%
    
0.06
%
    
0.02
%
                                 
                                 
Equity
                                
Book value per share (b)
  
$
44.08
    
$
40.45
    
$
44.08
    
$
40.45
  
Tangible Book value per share (a) (b)
  
$
37.09
    
$
33.41
    
$
37.09
    
$
33.41
  
Market Value (Last reported trade of month)
  
$
61.50
    
$
55.55
    
$
61.50
    
$
55.55
  
Common shares outstanding
    
3,525,061
      
3,504,596
      
3,525,061
      
3,504,596
  
Number of shares used in computation - basic (b)
    
3,515,962
      
3,532,858
      
3,520,832
      
3,539,674
  
Number of shares used in computation - diluted (b)
    
3,516,076
      
3,533,021
      
3,522,928
      
3,541,662
  
                                 
                                 
Other
                                
Total Risk Based Capital Ratio
    
14.04
%
    
13.42
%
    
14.04
%
    
13.42
%
Tier 1 Risk Based Capital Ratio
    
12.79
%
    
12.18
%
    
12.79
%
    
12.18
%
Common Equity Tier 1 Risk Based Capital Ratio
    
12.11
%
    
11.47
%
    
12.11
%
    
11.47
%
Leverage Ratio
    
9.77
%
    
9.15
%
    
9.77
%
    
9.15
%
Average Full Time Equivalent Employees
    
255.6
      
258.7
      
259.2
      
261.3
  
Loan to Deposit Ratio
    
92.11
%
    
91.29
%
    
92.11
%
    
91.29
%
Trust assets under management
  
$
134,298
    
$
117,587
    
$
134,298
    
$
117,587
  
Brokerage assets under management
  
$
215,383
    
$
178,546
    
$
215,383
    
$
178,546
  
                                 
                                 
Balance Sheet Highlights
  
December 31,
    
December 31,
    
         
     
2019
      
2018
    

         
                   

         
Assets
  
$
1,466,339
    
$
1,430,712
    

         
Investment securities
    
241,407
      
241,526
    

         
Loans (net of unearned income)
    
1,115,569
      
1,081,883
    

         
Allowance for loan losses
    
13,845
      
12,884
    

         
Deposits
    
1,211,118
      
1,185,156
    

         
Stockholders' Equity
    
154,774
      
139,229
    

         
                                 
                                 
(a) See reconcilation of Non-GAAP measures at the end of the press release
                          
(b) Prior period amounts were adjusted to reflect stock dividends.
                          



CITIZENS FINANCIAL SERVICES, INC.
            
CONSOLIDATED BALANCE SHEET
            
(UNAUDITED)
            
             
   
December 31,
    
December 31,
  
(in thousands except share data)
  
2019
    
2018
  
ASSETS:
            
Cash and due from banks:
            
  Noninterest-bearing
  
$
17,727
    
$
15,327
  
  Interest-bearing
    
793
      
1,470
  
Total cash and cash equivalents
    
18,520
      
16,797
  
                 
Interest bearing time deposits with other banks
    
14,256
      
15,498
  
                 
Equity securities
    
701
      
516
  
                 
Available-for-sale securities
    
240,706
      
241,010
  
                 
Loans held for sale
    
815
      
1,127
  
                 
Loans (net of allowance for loan losses: $13,845 at December 31, 2019 and
                
    $12,884 at December 31, 2018)
    
1,101,724
      
1,068,999
  
                 
Premises and equipment
    
15,933
      
16,273
  
Accrued interest receivable
    
4,555
      
4,452
  
Goodwill
    
23,296
      
23,296
  
Bank owned life insurance
    
28,128
      
27,505
  
Other intangibles
    
1,346
      
1,623
  
Other assets
    
16,359
      
13,616
  
                 
TOTAL ASSETS
  
$
1,466,339
    
$
1,430,712
  
                 
LIABILITIES:
                
Deposits:
                
  Noninterest-bearing
  
$
203,793
    
$
179,971
  
  Interest-bearing
    
1,007,325
      
1,005,185
  
Total deposits
    
1,211,118
      
1,185,156
  
Borrowed funds
    
85,117
      
91,194
  
Accrued interest payable
    
1,088
      
1,076
  
Other liabilities
    
14,242
      
14,057
  
TOTAL LIABILITIES
    
1,311,565
      
1,291,483
  
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 December 31, 2019 and December 31, 2018:
          
  issued 3,938,668 at December 31 2019 and 3,904,212 at December 31, 2018
    
3,939
      
3,904
  
Additional paid-in capital
    
55,089
      
53,099
  
Retained earnings
    
110,800
      
99,727
  
Accumulated other comprehensive loss
    
(629
)
    
(3,921
)
Treasury stock, at cost:  413,607 at December 31, 2019 and 399,616 shares
                
  at December 31, 2018
    
(14,425
)
    
(13,580
)
TOTAL STOCKHOLDERS' EQUITY
    
154,774
      
139,229
  
TOTAL LIABILITIES AND
                
   STOCKHOLDERS' EQUITY
  
$
1,466,339
    
$
1,430,712
  


CITIZENS FINANCIAL SERVICES, INC.
                        
CONSOLIDATED STATEMENT OF INCOME
                    
(UNAUDITED)
                        
   
Three Months Ended
    
Year Ended
  
   
December 31,
    
December 31,
  
(in thousands, except per share data)
  
2019
    
2018
    
2019
    
2018
  
INTEREST INCOME:
                        
Interest and fees on loans
  
$
13,906
    
$
13,470
    
$
54,911
    
$
50,458
  
Interest-bearing deposits with banks
    
96
      
101
      
407
      
319
  
Investment securities:
                                
    Taxable
    
1,076
      
1,107
      
4,673
      
3,790
  
    Nontaxable
    
383
      
318
      
1,492
      
1,744
  
    Dividends
    
126
      
92
      
497
      
447
  
TOTAL INTEREST INCOME
    
15,587
      
15,088
      
61,980
      
56,758
  
INTEREST EXPENSE:
                                
Deposits
    
2,192
      
2,215
      
9,219
      
6,910
  
Borrowed funds
    
605
      
630
      
2,821
      
2,664
  
TOTAL INTEREST EXPENSE
    
2,797
      
2,845
      
12,040
      
9,574
  
NET INTEREST INCOME
    
12,790
      
12,243
      
49,940
      
47,184
  
Provision for loan losses
    
525
      
625
      
1,675
      
1,925
  
NET INTEREST INCOME AFTER
                                
    PROVISION FOR LOAN LOSSES
    
12,265
      
11,618
      
48,265
      
45,259
  
NON-INTEREST INCOME:
                                
Service charges
    
1,189
      
1,212
      
4,687
      
4,667
  
Trust
    
161
      
157
      
750
      
705
  
Brokerage and insurance
    
298
      
219
      
1,141
      
790
  
Gains on loans sold
    
134
      
80
      
473
      
382
  
Equity security gains (losses), net
    
50
      
(9
)
    
120
      
-
  
Available for sale security gains (losses), net
    
16
      
(11
)
    
24
      
(19
)
Earnings on bank owned life insurance
    
160
      
155
      
623
      
622
  
Other
    
141
      
174
      
568
      
588
  
TOTAL NON-INTEREST INCOME
    
2,149
      
1,977
      
8,386
      
7,735
  
NON-INTEREST EXPENSES:
                                
Salaries and employee benefits
    
5,327
      
4,843
      
20,456
      
19,094
  
Occupancy
    
535
      
520
      
2,174
      
2,126
  
Furniture and equipment
    
173
      
142
      
674
      
536
  
Professional fees
    
322
      
652
      
1,423
      
1,925
  
FDIC insurance expense (credit)
    
(121
)
    
90
      
75
      
417
  
Pennsylvania shares tax (credit)
    
(17
)
    
(15
)
    
808
      
835
  
Amortization of intangibles
    
61
      
72
      
259
      
296
  
Merger and acquisition
    
191
      
-
      
466
      
-
  
ORE expenses
    
68
      
66
      
376
      
158
  
Other
    
1,829
      
1,865
      
6,630
      
6,170
  
TOTAL NON-INTEREST EXPENSES
    
8,368
      
8,235
      
33,341
      
31,557
  
Income before provision for income taxes
    
6,046
      
5,360
      
23,310
      
21,437
  
Provision for income taxes
    
1,003
      
845
      
3,820
      
3,403
  
NET INCOME
  
$
5,043
    
$
4,515
    
$
19,490
    
$
18,034
  
                                 
PER COMMON SHARE DATA:
                                
Net Income - Basic
  
$
1.43
    
$
1.28
    
$
5.54
    
$
5.09
  
Net Income - Diluted
  
$
1.43
    
$
1.28
    
$
5.53
    
$
5.09
  
Cash Dividends Paid
  
$
0.450
    
$
0.436
    
$
1.781
    
$
1.725
  
                                 
Number of shares used in computation - basic
    
3,515,962
      
3,532,858
      
3,520,832
      
3,539,674
  
Number of shares used in computation - diluted
    
3,516,076
      
3,533,021
      
3,522,928
      
3,541,662
  

CITIZENS FINANCIAL SERVICES, INC.
                              
QUARTERLY CONDENSED, CONSOLIDATED INCOME STATEMENT INFORMATION
                          
(UNAUDITED)
                              
(in thousands, except share data)
        
Three Months Ended,
              
   
Dec 31,
    
Sept 30,
    
June 30,
    
March 31,
    
Dec 31,
  
   
2019
    
2019
    
2019
    
2019
    
2018
  
Interest income
  
$
15,587
    
$
15,874
    
$
15,502
    
$
15,017
    
$
15,088
  
Interest expense
    
2,797
      
2,975
      
3,166
      
3,102
      
2,845
  
Net interest income
    
12,790
      
12,899
      
12,336
      
11,915
      
12,243
  
Provision for loan losses
    
525
      
400
      
350
      
400
      
625
  
Net interest income after provision for loan losses
    
12,265
      
12,499
      
11,986
      
11,515
      
11,618
  
Non-interest income
    
2,083
      
2,140
      
1,997
      
2,022
      
1,997
  
Investment securities gains (losses), net
    
66
      
37
      
30
      
11
      
(20
)
Non-interest expenses
    
8,368
      
8,414
      
8,237
      
8,322
      
8,235
  
Income before provision for income taxes
    
6,046
      
6,262
      
5,776
      
5,226
      
5,360
  
Provision for income taxes
    
1,003
      
1,066
      
930
      
821
      
845
  
Net income
  
$
5,043
    
$
5,196
    
$
4,846
    
$
4,405
    
$
4,515
  
Earnings Per Share Basic
  
$
1.43
    
$
1.48
    
$
1.38
    
$
1.24
    
$
1.28
  
Earnings Per Share Diluted
  
$
1.43
    
$
1.48
    
$
1.38
    
$
1.24
    
$
1.28
  


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 December 31,
                    
   
2019
                
2018
              
   
Average
          
Average
    
Average
          
Average
  
   
Balance (1)
    
Interest
    
Rate
    
Balance (1)
    
Interest
    
Rate
  
(dollars in thousands)
  
$
      $      

%
    
$
      $      

%
  
ASSETS
                                            
Interest-bearing deposits at banks
    
9,876
      
4
      
0.16
      
9,294
      
6
      
0.26
  
Interest bearing time deposits at banks
    
14,256
      
92
      
2.59
      
14,997
      
95
      
2.50
  
Investment securities
    
247,416
      
1,687
      
2.73
      
237,342
      
1,602
      
2.70
  
Loans: (2)(3)(4)
                                                
  Residential mortgage loans
    
217,007
      
2,889
      
5.28
      
215,418
      
2,859
      
5.29
  
  Construction loans
    
14,659
      
188
      
5.09
      
32,393
      
406
      
4.97
  
  Commercial Loans
    
416,867
      
5,676
      
5.40
      
389,705
      
5,338
      
5.43
  
  Agricultural Loans
    
363,339
      
4,222
      
4.61
      
323,191
      
3,826
      
4.70
  
  Loans to state & political subdivisions
    
95,107
      
936
      
3.90
      
102,409
      
1,066
      
4.13
  
  Other loans
    
9,704
      
179
      
7.32
      
9,610
      
184
      
7.61
  
  Loans, net of discount (2)(3)(4)
    
1,116,683
      
14,090
      
5.01
      
1,072,726
      
13,679
      
5.06
  
Total interest-earning assets
    
1,388,231
      
15,873
      
4.54
      
1,334,359
      
15,382
      
4.57
  
Cash and due from banks
    
5,945
                      
6,751
                  
Bank premises and equipment
    
15,936
                      
16,253
                  
Other assets
    
57,448
                      
69,318
                  
Total non-interest earning assets
    
79,329
                      
92,322
                  
Total assets
    
1,467,560
                      
1,426,681
                  
LIABILITIES AND STOCKHOLDERS' EQUITY
                                                
Interest-bearing liabilities:
                                                
  NOW accounts
    
334,345
      
526
      
0.62
      
327,144
      
515
      
0.62
  
  Savings accounts
    
222,342
      
206
      
0.37
      
201,903
      
137
      
0.27
  
  Money market accounts
    
169,114
      
458
      
1.07
      
171,149
      
527
      
1.22
  
  Certificates of deposit
    
263,679
      
1,002
      
1.51
      
298,395
      
1,036
      
1.38
  
Total interest-bearing deposits
    
989,480
      
2,192
      
0.88
      
998,591
      
2,215
      
0.88
  
Other borrowed funds
    
109,236
      
605
      
2.20
      
93,440
      
630
      
2.67
  
Total interest-bearing liabilities
    
1,098,716
      
2,797
      
1.01
      
1,092,031
      
2,845
      
1.03
  
Demand deposits
    
199,365
                      
178,479
                  
Other liabilities
    
14,832
                      
13,410
                  
Total non-interest-bearing liabilities
    
214,197
                      
191,889
                  
Stockholders' equity
    
154,647
                      
142,761
                  
Total liabilities & stockholders' equity
    
1,467,560
                      
1,426,681
                  
Net interest income
            
13,076
                      
12,537
          
Net interest spread (5)
                    
3.53
%
                    
3.54
%
Net interest income as a percentage
                                                
  of average interest-earning assets
                    
3.74
%
                    
3.73
%
Ratio of interest-earning assets
                                                
  to interest-bearing liabilities
                    
126
%
                    
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. See reconciliation of non-gaap measures at the end
          
       of the press release
                                                
(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)
                                    
   
Year Ended December 31,
            
   
2019
                
2018
              
   
Average
          
Average
    
Average
          
Average
  
   
Balance (1)
    
Interest
    
Rate
    
Balance (1)
    
Interest
    
Rate
  
(dollars in thousands)
  
$
     $
     

%
    
$
      $      

%
  
ASSETS
                                            
Interest-bearing deposits at banks
    
9,693
      
23
      
0.24
      
8,929
      
20
      
0.22
  
Interest bearing time deposits at banks
    
15,085
      
384
      
2.55
      
12,734
      
299
      
2.35
  
Investment securities
    
247,334
      
7,059
      
2.85
      
256,719
      
6,445
      
2.51
  
Loans: (2)(3)(4)
                                                
  Residential mortgage loans
    
215,749
      
11,473
      
5.32
      
214,458
      
11,205
      
5.22
  
  Construction loans
    
19,085
      
984
      
5.16
      
25,698
      
1,235
      
4.80
  
  Commercial Loans
    
415,681
      
22,741
      
5.47
      
388,037
      
20,611
      
5.31
  
  Agricultural Loans
    
344,586
      
15,879
      
4.61
      
305,003
      
13,638
      
4.47
  
  Loans to state & political subdivisions
    
97,780
      
3,845
      
3.93
      
101,496
      
3,759
      
3.70
  
  Other loans
    
9,684
      
740
      
7.64
      
9,558
      
737
      
7.71
  
  Loans, net of discount (2)(3)(4)
    
1,102,565
      
55,662
      
5.05
      
1,044,250
      
51,185
      
4.90
  
Total interest-earning assets
    
1,374,677
      
63,128
      
4.59
      
1,322,632
      
57,949
      
4.38
  
Cash and due from banks
    
6,168
                      
6,807
                  
Bank premises and equipment
    
16,074
                      
16,338
                  
Other assets
    
57,038
                      
54,722
                  
Total non-interest earning assets
    
79,280
                      
77,867
                  
Total assets
    
1,453,957
                      
1,400,499
                  
LIABILITIES AND STOCKHOLDERS' EQUITY
                                                
Interest-bearing liabilities:
                                                
  NOW accounts
    
331,906
      
2,282
      
0.69
      
326,040
      
1,642
      
0.50
  
  Savings accounts
    
218,240
      
814
      
0.37
      
192,727
      
323
      
0.17
  
  Money market accounts
    
164,872
      
1,978
      
1.20
      
164,916
      
1,618
      
0.98
  
  Certificates of deposit
    
277,946
      
4,145
      
1.49
      
276,213
      
3,327
      
1.20
  
Total interest-bearing deposits
    
992,964
      
9,219
      
0.93
      
959,896
      
6,910
      
0.72
  
Other borrowed funds
    
109,041
      
2,821
      
2.59
      
117,912
      
2,664
      
2.26
  
Total interest-bearing liabilities
    
1,102,005
      
12,040
      
1.09
      
1,077,808
      
9,574
      
0.89
  
Demand deposits
    
187,991
                      
171,353
                  
Other liabilities
    
14,074
                      
12,647
                  
Total non-interest-bearing liabilities
    
202,065
                      
184,000
                  
Stockholders' equity
    
149,887
                      
138,691
                  
Total liabilities & stockholders' equity
    
1,453,957
                      
1,400,499
                  
Net interest income
            
51,088
                      
48,375
          
Net interest spread (5)
                    
3.50
%
                    
3.49
%
Net interest income as a percentage
                                                
  of average interest-earning assets
                    
3.72
%
                    
3.66
%
Ratio of interest-earning assets
                                                
  to interest-bearing liabilities
                    
125
%
                    
123
%
                                                 
(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. See reconciliation of non-gaap measures at the end
  
       of the press release
                                                
(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)
                              
   
December 31,
    
September 30,
    
June 30,
    
March 31,
    
December 31,
  
   
2019
    
2019
    
2019
    
2019
    
2018
  
Real estate:
                              
  Residential
  
$
217,088
    
$
215,717
    
$
213,014
    
$
214,635
    
$
215,305
  
  Commercial
    
342,023
      
349,269
      
347,430
      
334,371
      
319,265
  
  Agricultural
    
311,464
      
305,948
      
294,332
      
295,547
      
284,520
  
  Construction
    
15,519
      
11,448
      
20,950
      
18,611
      
33,913
  
Consumer
    
9,947
      
9,709
      
9,854
      
9,773
      
9,858
  
Other commercial loans
    
69,970
      
76,785
      
76,179
      
74,323
      
74,118
  
Other agricultural loans
    
55,112
      
50,334
      
41,689
      
43,245
      
42,186
  
State & political subdivision loans
    
94,446
      
95,824
      
96,174
      
100,412
      
102,718
  
Total loans
    
1,115,569
      
1,115,034
      
1,099,622
      
1,090,917
      
1,081,883
  
Less: allowance for loan losses
    
13,845
      
13,679
      
13,304
      
13,084
      
12,884
  
Net loans
  
$
1,101,724
    
$
1,101,355
    
$
1,086,318
    
$
1,077,833
    
$
1,068,999
  
                                         
Past due and non-performing assets
                                        
                                         
Total Loans past due 30-89 days and still accruing
  
$
2,711
    
$
2,672
    
$
2,599
    
$
4,470
    
$
3,308
  
                                         
Non-accrual loans
  
$
11,536
    
$
13,223
    
$
12,534
    
$
11,700
    
$
13,724
  
Loans past due 90 days or more and accruing
    
487
      
103
      
175
      
64
      
68
  
Non-performing loans
  
$
12,023
    
$
13,326
    
$
12,709
    
$
11,764
    
$
13,792
  
OREO
    
3,404
      
3,497
      
3,853
      
4,295
      
601
  
Total Non-performing assets
  
$
15,427
    
$
16,823
    
$
16,562
    
$
16,059
    
$
14,393
  
                                         
                                         
                                         
   
3 Months
    
3 Months
    
3 Months
    
3 Months
    
3 Months
  
   
Ended
    
Ended
    
Ended
    
Ended
    
Ended
  
Analysis of the Allowance for loan Losses
  
September 30,
    
September 30,
    
June 30,
    
March 31,
    
December 31,
  
(In Thousands)
    
2019
      
2019
      
2019
      
2018
      
2018
  
Balance, beginning of period
  
$
13,679
    
$
13,304
    
$
13,084
    
$
12,884
    
$
12,383
  
Charge-offs
    
(370
)
    
(34
)
    
(139
)
    
(214
)
    
(140
)
Recoveries
    
11
      
9
      
9
      
14
      
16
  
Net (charge-offs) recoveries
    
(359
)
    
(25
)
    
(130
)
    
(200
)
    
(124
)
Provision for loan losses
    
525
      
400
      
350
      
400
      
625
  
Balance, end of period
  
$
13,845
    
$
13,679
    
$
13,304
    
$
13,084
    
$
12,884
  


CITIZENS FINANCIAL SERVICES, INC.
            
Reconciliation of GAAP and Non-GAAP Financial Measures
            
(UNAUDITED)
            
(Dollars in thousands, except per share data)
            
             
   
As of
  
   
December 31,
  
   
2019
    
2018
  
Tangible Equity
            
Stockholders Equity - GAAP
  
$
154,774
    
$
139,229
  
Accumulated other comprehensive loss
    
629
      
3,921
  
Intangible Assets
    
(24,642
)
    
(24,919
)
Non-GAAP Tangible Equity
    
130,761
      
118,231
  
Shares outstanding adjusted for June 2019 stock Dividend
    
3,525,061
      
3,539,052
  
Tangible Book value per share (a)
  
$
37.09
    
$
33.41
  
                 
   
As of
  
   
December 31,
  
     
2019
      
2018
  
Tangible Equity per share
                
Stockholders Equity - GAAP
  
$
43.91
    
$
39.34
  
Adjustments for accumulated other comprehensive loss
    
0.17
      
1.11
  
Book value per share
    
44.08
      
40.45
  
Adjustments for intangible assets
    
(6.99
)
    
(7.04
)
Tangible Book value per share
  
$
37.09
    
$
33.41
  
                 


   
For the Three Months Ended
    
For the Year Ended
  
   
December 31,
    
December 31,
  
   
2019
    
2018
    
2019
    
2018
  
Return on Average Tangible Equity
                        
Average Stockholders Equity - GAAP
  
$
154,317
    
$
136,765
    
$
148,189
    
$
133,451
  
Average Accumulated Other Comprehensive Loss
    
(330
)
    
(5,996
)
    
(1,697
)
    
(5,240
)
Average Intangible Assets
    
24,653
      
24,950
      
24,757
      
25,062
  
Average Non-GAAP Tangible Equity
    
129,994
      
117,811
      
125,129
      
113,629
  
Net Income
  
$
5,043
    
$
4,515
    
$
19,490
    
$
18,034
  
Annualized Return on Average Tangible Equity
    
15.52
%
    
15.33
%
    
15.58
%
    
15.87
%
                                 
                                 
   
For the Three Months Ended
    
For the Year Ended
  
   
December 31,
    
December 31,
  
Reconciliation of net interest income on fully taxable equivalent basis
    
2019
      
2018
      
2019
      
2018
  
Total interest income
  
$
15,587
    
$
15,088
    
$
61,980
    
$
56,758
  
Total interest expense
    
2,797
      
2,845
      
12,040
      
9,574
  
Net interest income
    
12,790
      
12,243
      
49,940
      
47,184
  
Tax equivalent adjustment
    
286
      
294
      
1,148
      
1,191
  
Net interest income (fully taxable equivalent)
  
$
13,076
    
$
12,537
    
$
51,088
    
$
48,375
  
                                 
                                 
                                 
(a) Prior period amounts were adjusted to reflect stock dividends.