CITIZENS FINANCIAL SERVICES, INC. REPORTS UNAUDITED FULL YEAR AND FOURTH QUARTER 2021 FINANCIAL RESULTS

About this update from Citizens Financial Services, Inc.

MANSFIELD, Penn. , Jan. 28, 2022 /PRNewswire/ -- 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, 2021 . Highlights Net income was $29.1 million for 2021, which is 16.0% higher than 2020's net income. The effective tax rate for 2021 was 17.6% compared to 17.3% in 2020. Net income was $6.9 million for the three months ended December 31, 2021 , which is 3.9% less than the net income for 2020's comparable period. The effective tax rate for the three months ended December 31, 2021 was 18.3% compared to 17.8% in the comparable period in 2020. Net interest income before the provision for loan losses was $66.1 million for the year ended December 31, 2021 , an increase of $3.9 million , or 6.3%, over 2020. Non-performing assets decreased $4.3 million during 2021 and totaled $8,842,000 as of December 31, 2021 . As a percent of loans, non-performing assets decreased from 0.93% at December 31, 2020 to 0.61% at December 31, 2021 . Return on average equity for the three months (annualized) and the year ended December 31, 2021 was 13.11% and 14.26% compared to 15.20% and 14.21% for the three months (annualized) and the year ended December 31, 2020 , respectively. Return on average tangible equity (non-GAAP) for the three months (annualized) and the year ended December 31, 2021 was 15.53% and 17.01% compared to 18.37% and 17.16% for the three months (annualized) and the year ended December 31, 2020 , respectively. (1) Return on average assets for the three months (annualized) and the year ended December 31, 2021 was 1.34% and 1.45% compared to 1.55% and 1.46% for the three months (annualized) and the year ended December 31, 2020 , respectively. Covid 19 pandemic response and loan profile During 2021, the Company participated in the Paycheck Protection Program (PPP) for loans provided under the auspices of the Small Business Administration (SBA). As of December 31, 2021 , 64 loans with a balance of $6.8 million remain outstanding under this program. During 2021, we originated 388 loans with aggregate balances of $24.3 million . As of December 31, 2021 , 6 loans that were originated under this program in 2020 remain outstanding and have a balance of $806,000 . The loans earn interest at 1% per annum and the processing fee paid by the SBA will be accreted into income over the life of the loans. The SBA has issued guidance for forgiveness with a streamlined approach for loans of $150,000 or less. Of the PPP loans outstanding, 46 loans, or 71.9% of the remaining PPP loans, had an original balance less than $150,000 . The outstanding balance for these 46 loans as of December 31, 2021 was approximately $1.5 million . Under our COVID loan modification program, during 2021 we provided relief to 19 customers with outstanding balances of $26.7 million , which includes residential, commercial and agricultural customers. As of December 31, 2021 , all loans had returned to their original terms that were modified under this program. The Company tracks industry concentrations to identify risks that could lead to additional credit risk exposure. As a result of the Covid 19 pandemic, the Company has determined that hotels/motels, restaurants, and amusement/theme parks represent a higher level of credit risk. At December 31, 2021 , the Company had limited loan concentrations to these industries as follows: Hotels/Motels - $82.4 million or 5.7% of outstanding loans Restaurants - $17.7 million or 1.2% of outstanding loans Amusement/Theme parks - $8.9 million , or 0.6% of outstanding loans 2021 Compared to 2020 For 2021, net income totaled $29,118,000 which compares to net income of $25,103,000 for 2020, an increase of $4,015,000 or 16.0%. Basic earnings per share of $7.38 for 2021 compares to $6.53 for last year. Return on equity for 2021 and 2020 was 14.26% and 14.21%, while return on assets was 1.45% and 1.46%, respectively. Net interest income before the provision for loan loss for 2021 totaled $66,112,000 compared to $62,191,000 for 2020, resulting in an increase of $3,921,000 , or 6.3%. Average interest earning assets increased $287.8 million for 2021 compared to 2020, primarily due to the assets acquired as part of the MidCoast acquisition in the second quarter of 2020 being outstanding for the entire period of 2021 and organic growth primarily in the Delaware region. Average loans increased $133.4 million while average investment securities increased $88.5 million . The yield on interest earning assets decreased 53 basis points to 3.89%, while the cost of interest-bearing liabilities decreased 15 basis points to 0.49%. The yield on interest earning assets in 2020 benefitted approximately $820,000 from the pay-off of two purchase credit impaired loans acquired as part of The First National Bank of Fredericksburg acquisition in 2015. The decrease in the cost of interest-bearing liabilities was due to the Federal Reserve rate cuts made in response to the COVID-19 pandemic in the first quarter of 2020. The tax effected net interest margin for 2021 was 3.52% compared to 3.92% for last year. The provision for loan losses for 2021 was $1,550,000 compared to $2,400,000 for 2020, a decrease of $850,000 . The decrease in the provision is due to less organic loan growth in 2021 compared to 2020 and improved credit metrics for the Bank in 2021. Total non-interest income was $12,305,000 for 2021, which is $883,000 more than the non-interest income of $11,422,000 for 2020. The primary drivers were the earnings on bank owned life insurance, which increased $1,133,000 as the result of the passing of two former employees, an increase in equity security gains of $380,000 as a result of market performance and an increase in service charge income of $534,000 as a result of waiving fees in 2020 in response to the pandemic. Other income decreased $576,000 in 2021 compared to 2020 due to a decrease in fee income on derivative transactions for customers. The gain on loans sold decreased $885,000 due to decrease in the number of loans sold in 2021 compared to 2020 due to fewer customers refinancing loans. Total non-interest expenses for 2021 totaled $41,550,000 compared to $40,847,000 for the same period last year, which is an increase of $703,000 . The primary driver of the increase was salary and benefit costs and occupancy costs, which increased compared to 2020 due to the additional headcount and branches acquired as part of the MidCoast acquisition. The provision for income taxes increased $936,000 when comparing 2021 to 2020 as a result of an increase in income before income tax of $4,951,000 . The effective tax rate was 17.6% and 17.3% for 2021 and 2020, respectively. It should be noted the earnings on bank owned life insurance are exempt from federal income tax. Fourth Quarter of 2021 Compared to the Fourth Quarter of 2020 For the three months ended December 31, 2021 , net income totaled $6,944,000 which compares to net income of $7,227,000 for the comparable period of 2020, a decrease of $283,000 or 3.9%. Basic earnings per share of $1.76 for the three months ended December 31, 2021 compares to $1.83 for the 2020 comparable period. Annualized return on equity for the three months ended December 31, 2021 and 2020 was 13.11% and 15.20%, while annualized return on assets was 1.34% and 1.55%, respectively. Net interest income before the provision for loan losses for the three months ended December 31, 2021 totaled $16,869,000 compared to $16,545,000 for the three months ended December 31, 2020 , resulting in an increase of $324,000 . Average interest earning assets increased $214.5 million for the three months ended December 31, 2021 compared to the same period last year as a result of the interest bearing cash, investments and organic loan growth funded by deposit growth. Average loans increased $59.8 million while average investment securities increased $107.3 million and average interest bearing cash holdings increased $49.9 million . The tax effected net interest margin for the three months ended December 31, 2021 was 3.44% compared to 3.82% for the same period last year, which was impacted by the decrease in the average yield on interest earning assets of 47 basis points to 3.77%. No provision for loan losses was recorded in the fourth quarter of 2021 due to improved credit metrics in the fourth quarter and limited loan activity in the fourth quarter. The provision for the fourth quarter of 2020 was $900,000 due to $39.4 million of net organic growth during that quarter. The provision for 2020 was also impacted more heavily by the COVID-19 pandemic. Total non-interest income was $2,512,000 for the three months ended December 31, 2021 , which is $1,452,000 less than the comparable period last year. The primary drivers were a decrease in the gains on loans sold of $712,000 due to a decrease in the amount of loans sold compared to the fourth quarter of 2020 and a decrease in other income of $728,000 due to fee income on derivative transactions for customers. Total non-interest expenses for the three months ended December 31, 2021 totaled $10,883,000 compared to $10,821,000 for the same period last year, which is an increase of $62,000 , or 0.6%. The primary driver of the increase was other expenses, which increased $432,000 , which was driven by a partial settlement of the Company's pension plan in the fourth quarter due to lump sum distributions to former employees of the Company. The provision for income taxes decreased $7,000 when comparing the three months ended December 31, 2021 to the same period in 2020 as a result of a decrease in income before income tax of $290,000 . The effective tax rate was 18.3% and 17.8% for the three months ended December 31, 2021 and 2020, respectively. Balance Sheet and Other Information: At December 31, 2021 , total assets were $2.14 billion compared to $1.89 billion at December 31, 2020 . The loan to deposit ratio as of December 31, 2021 was 78.51% compared to 88.45% as of December 31, 2020 . Available for sale securities of $412.4 million at December 31, 2021 increased $117.2 million from December 31, 2020 . The yield on the investment portfolio decreased from 2.55% to 1.96% on a tax equivalent basis due to securities purchased at a discount that were called in the first quarter of 2020 and purchases made in a lower rate environment in the second half of 2020 and all of 2021. Net loans as of December 31, 2021 totaled $1.42 billion and increased $34.8 million from December 31, 2020 as a result of organic growth in the Delaware market offset by PPP loan forgiveness. The allowance for loan losses totaled $17,304,000 at December 31, 2021 which is an increase of $1,489,000 from December 31, 2020 . The increase is due to recording a provision for loan losses of $1,550,000 and recoveries of $153,000 , offset by charge-offs of $214,000 . The allowance as a percent of total loans was 1.20% as of December 31, 2021 and 1.13% as of December 31, 2020 . Deposits increased $247.3 million from December 31, 2020 , to $1.84 billion at December 31, 2021 , primarily due to customers holding more cash due to the pandemic and government stimulus funds provided to customers. Brokered CD's decreased $23.8 million . Non-interest-bearing deposits increased $54.3 million due to additional cash holdings by customers. Borrowed funds decreased $14.9 million from December 31, 2020 to $74.0 million at December 31, 2021 . The Company paid off $26.8 million of long term borrowings during the year, which were offset by a $2.1 million increase in repurchase agreements and the issuance of $10.0 million of subordinated debt in the second quarter of 2021. Stockholders' equity totaled $212.5 million at December 31, 2021 , compared to $194.3 million at December 31, 2020 , an increase of $18.2 million . The increase was attributable to net income for 2021 totaling $29.1 million , offset by cash dividends totaling $7.4 million and net treasury stock activity of $934,000 . As a result of changes in interest rates impacting the fair value of investment securities, derivative instruments and the Company's pension plan, accumulated other comprehensive income, decreased $2.7 million from December 31, 2020 . Dividend Declared On December 6, 2021 , the Board of Directors declared a cash dividend of $0.470 per share, which was paid on December 30, 2021 to shareholders of record at the close of business on December 16, 2021 . This quarterly cash dividend is an increase of 3.10% over the regular cash dividend of $0.456 per share declared one year ago, as adjusted for the 1% stock dividend declared in June 2021 . Citizens Financial Services, Inc. has nearly 1,900 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, duration and impact of the COVID-19 pandemic; 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 GAAP and non-GAAP financial measures at the end of the press release CITIZENS FINANCIAL SERVICES, INC. CONSOLIDATED FINANCIAL HIGHLIGHTS (UNAUDITED) (Dollars in thousands, except share and per share data) As of or For The As of or For The Three Months Ended Year Ended December 31 , December 31 , 2021 2020 2021 2020 Income and Performance Ratios Net Income $ 6,944 $ 7,227 $ 29,118 $ 25,103 Return on average assets (annualized) 1.34% 1.55% 1.45% 1.46% Return on average equity (annualized) 13.11% 15.20% 14.26% 14.21% Return on average tangible equity (annualized) (a) 15.53% 18.37% 17.01% 17.16% Net interest margin (tax equivalent)(a) 3.44% 3.82% 3.52% 3.92% Earnings per share - basic (b) $ 1.76 $ 1.83 $ 7.38 $ 6.53 Earnings per share - diluted (b) $ 1.76 $ 1.83 $ 7.38 $ 6.53 Cash dividends paid per share (b) $ 0.470 $ 0.456 $ 1.861 $ 1.900 Number of shares used in computation - basic (b) 3,943,334 3,951,217 3,945,299 3,844,241 Number of shares used in computation - diluted (b) 3,943,387 3,951,225 3,945,299 3,846,082 Asset quality Allowance for loan and lease losses $ 17,304 $ 15,815 Non-performing assets $ 8,842 $ 13,093 Allowance for loan and lease losses/total loans 1.20% 1.13% Non-performing assets to total loans 0.61% 0.93% Annualized net charge-offs to total loans 0.01% 0.07% 0.00% 0.03% Equity Book value per share (b) $ 53.91 $ 48.40 Tangible Book value per share (a) (b) $ 45.54 $ 40.05 Market Value (Last reported trade of month) $ 60.70 $ 60.00 Common shares outstanding 3,944,420 3,921,408 Other Average Full Time Equivalent Employees 295.2 294.8 290.8 280.7 Loan to Deposit Ratio 78.51% 88.45% Trust assets under management $ 154,840 $ 150,348 Brokerage assets under management $ 282,058 $ 241,003 Balance Sheet Highlights December 31 , December 31 , 2021 2020 Assets $ 2,143,863 $ 1,891,674 Investment securities 414,672 297,120 Loans (net of unearned income) 1,441,533 1,405,281 Allowance for loan losses 17,304 15,815 Deposits 1,836,151 1,588,858 Stockholders' Equity 212,492 194,259 (a) See reconcilation of GAAP and 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) 2021 2020 ASSETS: Cash and due from banks: Noninterest-bearing $ 14,051 $ 16,374 Interest-bearing 158,782 52,333 Total cash and cash equivalents 172,833 68,707 Interest bearing time deposits with other banks 11,026 13,758 Equity securities 2,270 1,931 Available-for-sale securities 412,402 295,189 Loans held for sale 4,554 14,640 Loans (net of allowance for loan losses: $17,304 at December 31, 2021 and $15,815 at December 31, 2020 ) 1,424,229 1,389,466 Premises and equipment 17,016 16,948 Accrued interest receivable 5,235 5,998 Goodwill 31,376 31,376 Bank owned life insurance 38,503 32,589 Other intangibles 1,627 1,668 Other assets 22,792 19,404 TOTAL ASSETS $ 2,143,863 $ 1,891,674 LIABILITIES: Deposits: Noninterest-bearing $ 358,073 $ 303,762 Interest-bearing 1,478,078 1,285,096 Total deposits 1,836,151 1,588,858 Borrowed funds 73,977 88,838 Accrued interest payable 711 1,017 Other liabilities 20,532 18,702 TOTAL LIABILITIES 1,931,371 1,697,415 STOCKHOLDERS' EQUITY: Preferred Stock $1.00 par value; authorized 3,000,000 shares; none issued in 2021 or 2020 - - Common stock $1.00 par value; authorized 25,000,000 shares at December 31, 2021 and December 31, 2020 : issued 4,388,901 shares at December 31, 2021 and 4,350,342 shares at December 31, 2020 4,389 4,350 Additional paid-in capital 78,395 75,908 Retained earnings 146,010 126,627 Accumulated other comprehensive (loss) income (155) 2,587 Treasury stock, at cost: 444,481 shares at December 31, 2021 and 428,492 shares at December 31, 2020 (16,147) (15,213) TOTAL STOCKHOLDERS' EQUITY 212,492 194,259 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,143,863 $ 1,891,674 CITIZENS FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) Three Months Ended Year Ended December 31 , December 31 , (in thousands, except share and per share data) 2021 2020 2021 2020 INTEREST INCOME: Interest and fees on loans $ 16,802 $ 16,775 $ 66,371 $ 63,538 Interest-bearing deposits with banks 112 103 447 401 Investment securities: Taxable 955 878 3,820 4,090 Nontaxable 549 532 2,201 1,869 Dividends 87 123 378 398 TOTAL INTEREST INCOME 18,505 18,411 73,217 70,296 INTEREST EXPENSE: Deposits 1,292 1,572 5,837 6,851 Borrowed funds 344 294 1,268 1,254 TOTAL INTEREST EXPENSE 1,636 1,866 7,105 8,105 NET INTEREST INCOME 16,869 16,545 66,112 62,191 Provision for loan losses - 900 1,550 2,400 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 16,869 15,645 64,562 59,791 NON-INTEREST INCOME: Service charges 1,276 1,114 4,755 4,221 Trust 191 261 865 803 Brokerage and insurance 435 356 1,625 1,297 Gains on loans sold 174 886 1,283 2,168 Equity security gains (losses), net 51 235 339 (41) Available for sale security gains, net - 3 212 305 Earnings on bank owned life insurance 185 181 1,828 695 Other 200 928 1,398 1,974 TOTAL NON-INTEREST INCOME 2,512 3,964 12,305 11,422 NON-INTEREST EXPENSES: Salaries and employee benefits 6,590 6,779 25,902 24,190 Occupancy 744 666 2,966 2,557 Furniture and equipment 112 170 519 757 Professional fees 373 337 1,526 1,517 FDIC insurance expense 135 135 522 476 Pennsylvania shares tax 24 59 880 868 Amortization of intangibles 46 54 192 216 Merger and acquisition - - - 2,179 Software expenses 318 338 1,321 1,155 ORE expenses 56 230 439 451 Other 2,485 2,053 7,283 6,481 TOTAL NON-INTEREST EXPENSES 10,883 10,821 41,550 40,847 Income before provision for income taxes 8,498 8,788 35,317 30,366 Provision for income taxes 1,554 1,561 6,199 5,263 NET INCOME $ 6,944 $ 7,227 $ 29,118 $ 25,103 PER COMMON SHARE DATA: Net Income - Basic $ 1.76 $ 1.83 $ 7.38 $ 6.53 Net Income - Diluted $ 1.76 $ 1.83 $ 7.38 $ 6.53 Cash Dividends Paid $ 0.470 $ 0.456 $ 1.861 $ 1.900 Number of shares used in computation - basic 3,943,334 3,951,217 3,945,299 3,844,241 Number of shares used in computation - diluted 3,943,387 3,951,225 3,945,299 3,846,082 CITIZENS FINANCIAL SERVICES, INC. QUARTERLY CONDENSED, CONSOLIDATED INCOME STATEMENT INFORMATION (UNAUDITED) (in thousands, except per share data) Three Months Ended, Dec 31 , Sept 30 , June 30 , March 31 , Dec 31 , 2021 2021 2021 2021 2020 Interest income $ 18,505 $ 18,342 $ 18,075 $ 18,295 $ 18,411 Interest expense 1,636 1,752 1,863 1,854 1,866 Net interest income 16,869 16,590 16,212 16,441 16,545 Provision for loan losses - 400 500 650 900 Net interest income after provision for loan losses 16,869 16,190 15,712 15,791 15,645 Non-interest income 2,461 2,618 2,677 3,998 3,726 Investment securities gains, net 51 234 29 237 238 Non-interest expenses 10,883 10,400 10,320 9,947 10,821 Income before provision for income taxes 8,498 8,642 8,098 10,079 8,788 Provision for income taxes 1,554 1,578 1,451 1,616 1,561 Net income $ 6,944 $ 7,064 $ 6,647 $ 8,463 $ 7,227 Earnings Per Share Basic $ 1.76 $ 1.79 $ 1.69 $ 2.14 $ 1.83 Earnings Per Share Diluted $ 1.76 $ 1.79 $ 1.69 $ 2.14 $ 1.83 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 , 2021 2020 Average Average Average Average Balance (1) Interest Rate Balance (1) Interest Rate (dollars in thousands) $ $ % $ $ % ASSETS Interest-bearing deposits at banks 107,948 38 0.14 58,054 14 0.09 Interest bearing time deposits at banks 11,266 74 2.57 13,758 89 2.57 Investment securities 400,922 1,737 1.73 293,649 1,673 2.28 Loans: (2)(3)(4) Residential mortgage loans 202,357 2,402 4.71 204,095 2,711 5.28 Construction loans 67,907 690 4.03 28,214 336 4.74 Commercial Loans 758,133 9,301 4.87 692,745 8,805 5.06 Agricultural Loans 345,420 3,757 4.32 356,317 3,927 4.38 Loans to state & political subdivisions 46,307 367 3.14 76,421 749 3.90 Other loans 27,720 357 5.11 30,246 390 5.13 Loans, net of discount (2)(3)(4) 1,447,844 16,874 4.62 1,388,038 16,918 4.85 Total interest-earning assets 1,967,980 18,723 3.77 1,753,499 18,694 4.24 Cash and due from banks 6,421 7,021 Bank premises and equipment 17,142 17,686 Other assets 73,929 91,806 Total non-interest earning assets 97,492 116,513 Total assets 2,065,472 1,870,012 LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities: NOW accounts 476,634 301 0.25 412,472 198 0.19 Savings accounts 305,962 74 0.10 252,019 90 0.14 Money market accounts 285,952 182 0.25 229,433 202 0.35 Certificates of deposit 332,880 735 0.87 382,188 1,082 1.13 Total interest-bearing deposits 1,401,428 1,292 0.37 1,276,112 1,572 0.49 Other borrowed funds 76,970 344 1.78 96,565 294 1.21 Total interest-bearing liabilities 1,478,398 1,636 0.44 1,372,677 1,866 0.54 Demand deposits 360,645 289,632 Other liabilities 14,519 17,472 Total non-interest-bearing liabilities 375,164 307,104 Stockholders' equity 211,910 190,231 Total liabilities & stockholders' equity 2,065,472 1,870,012 Net interest income 17,087 16,828 Net interest spread (5) 3.34% 3.70% Net interest income as a percentage of average interest-earning assets 3.44% 3.82% Ratio of interest-earning assets to interest-bearing liabilities 133% 128% (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 2021 and 2020. See reconciliation of GAAP and 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 , 2021 2020 Average Average Average Average Balance (1) Interest Rate Balance (1) Interest Rate (dollars in thousands) $ $ % $ $ % ASSETS Short-term investments: Interest-bearing deposits at banks 108,872 124 0.11 41,330 37 0.09 Total short-term investments 108,872 124 0.11 41,330 37 0.09 Interest bearing time deposits at banks 12,527 323 2.57 14,139 364 2.57 Investment securities: Taxable 252,470 4,198 1.66 188,241 4,488 2.38 Tax-exempt (3) 104,379 2,786 2.67 80,131 2,366 2.95 Investment securities 356,849 6,984 1.96 268,372 6,854 2.55 Loans: (2)(3)(4) Residential mortgage loans 203,062 9,867 4.86 210,696 11,161 5.30 Construction loans 56,315 2,292 4.07 26,343 1,288 4.89 Commercial Loans 739,000 36,215 4.90 590,469 31,087 5.26 Agricultural Loans 349,951 15,079 4.31 357,201 16,022 4.49 Loans to state & political subdivisions 52,804 1,871 3.54 86,143 3,458 4.01 Other loans 24,125 1,385 5.74 20,986 1,185 5.65 Loans, net of discount (2)(3)(4) 1,425,257 66,709 4.68 1,291,838 64,201 4.97 Total interest-earning assets 1,903,505 74,140 3.89 1,615,679 71,456 4.42 Cash and due from banks 6,525 7,487 Bank premises and equipment 17,194 17,286 Other assets 75,410 79,305 Total non-interest earning assets 99,129 104,078 Total assets 2,002,634 1,719,757 LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities: NOW accounts 457,189 1,387 0.30 383,931 1,102 0.29 Savings accounts 290,376 322 0.11 241,429 476 0.20 Money market accounts 257,937 684 0.27 205,142 1,012 0.49 Certificates of deposit 351,265 3,444 0.98 345,397 4,261 1.23 Total interest-bearing deposits 1,356,767 5,837 0.43 1,175,899 6,851 0.58 Other borrowed funds 84,621 1,268 1.50 93,237 1,254 1.34 Total interest-bearing liabilities 1,441,388 7,105 0.49 1,269,136 8,105 0.64 Demand deposits 341,604 257,285 Other liabilities 15,420 16,662 Total non-interest-bearing liabilities 357,024 273,947 Stockholders' equity 204,222 176,674 Total liabilities & stockholders' equity 2,002,634 1,719,757 Net interest income 67,035 63,351 Net interest spread (5) 3.40% 3.78% Net interest income as a percentage of average interest-earning assets 3.52% 3.92% Ratio of interest-earning assets to interest-bearing liabilities 132% 127% (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 2021 and 2020. See reconciliation of GAAP and 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 , 2021 2021 2021 2021 2020 Real estate: Residential $ 201,097 $ 204,853 $ 202,171 $ 203,273 $ 201,911 Commercial 687,338 657,485 641,633 605,547 596,255 Agricultural 312,011 312,442 310,274 315,313 315,158 Construction 55,036 68,408 63,065 42,651 35,404 Consumer 25,858 31,042 8,684 26,181 30,277 Other commercial loans 74,585 92,188 104,349 109,168 114,169 Other agricultural loans 39,852 28,562 33,720 41,378 48,779 State & political subdivision loans 45,756 47,928 51,213 60,890 63,328 Total loans 1,441,533 1,442,908 1,415,109 1,404,401 1,405,281 Less: allowance for loan losses 17,304 17,334 16,931 16,560 15,815 Net loans $ 1,424,229 $ 1,425,574 $ 1,398,178 $ 1,387,841 $ 1,389,466 Past due and non-performing assets Total Loans past due 30-89 days and still accruing $ 967 $ 1,482 $ 1,495 $ 2,383 $ 4,120 Non-accrual loans $ 7,616 $ 8,858 $ 9,082 $ 10,680 $ 10,732 Loans past due 90 days or more and accruing 46 83 49 478 525 Non-performing loans $ 7,662 $ 8,941 $ 9,131 $ 11,158 $ 11,257 OREO 1,180 1,277 1,811 1,720 1,836 Total Non-performing assets $ 8,842 $ 10,218 $ 10,942 $ 12,878 $ 13,093 3 Months 3 Months 3 Months 3 Months 3 Months Ended Ended Ended Ended Ended Analysis of the Allowance for loan Losses December 31 , September 30 , June 30 , March 31 , December 31 , (In Thousands) 2021 2021 2021 2021 2020 Balance, beginning of period $ 17,334 $ 16,931 $ 16,560 $ 15,815 $ 15,169 Charge-offs (65) (7) (138) (4) (276) Recoveries 35 10 9 99 22 Net (charge-offs) recoveries (30) 3 (129) 95 (254) Provision for loan losses - 400 500 650 900 Balance, end of period $ 17,304 $ 17,334 $ 16,931 $ 16,560 $ 15,815 CITIZENS FINANCIAL SERVICES, INC. Reconciliation of GAAP and Non-GAAP Financial Measures (UNAUDITED) (Dollars in thousands, except share and per share data) As of December 31 , 2021 2020 Tangible Equity Stockholders Equity - GAAP $ 212,492 $ 194,259 Accumulated other comprehensive loss (income) 155 (2,587) Intangible Assets (33,003) (33,044) Tangible Equity - Non-GAAP 179,644 158,628 Shares outstanding adjusted for June 2021 stock Dividend 3,944,420 3,960,409 Tangible Book value per share - non-GAAP $ 45.54 $ 40.05 As of December 31 , 2021 2020 Tangible Equity per share Stockholders Equity per share - GAAP $ 53.87 $ 49.05 Adjustments for accumulated other comprehensive loss ( income) 0.04 (0.65) Book value per share - GAAP 53.91 48.40 Adjustments for intangible assets (8.37) (8.35) Tangible Book value per share - Non-GAAP $ 45.54 $ 40.05 For the Three Months Ended For the Year Ended December 31 , December 31 , 2021 2020 2021 2020 Return on Average Tangible Equity Average Stockholders Equity - GAAP $ 210,801 $ 193,117 $ 205,449 $ 178,789 Average Accumulated Other Comprehensive loss ( income) 1,109 (2,886) (1,227) (2,115) Average Intangible Assets (33,009) (32,843) (33,018) (30,376) Average Tangible Equity - Non-GAAP 178,901 157,388 171,204 146,298 Net Income $ 6,944 7,227 $ 29,118 $ 25,103 Annualized Return on Average Tangible Equity - Non-GAAP 15.53% 18.37% 17.01% 17.16% For the Three Months Ended For the Year Ended December 31 , December 31 , Reconciliation of net interest income on fully taxable equivalent basis 2021 2020 2021 2020 Total interest income $ 18,505 $ 18,411 $ 73,217 $ 70,296 Total interest expense 1,636 1,866 7,105 8,105 Net interest income 16,869 16,545 66,112 62,191 Tax equivalent adjustment 218 283 923 1,160 Net interest income (fully taxable equivalent) $ 17,087 $ 16,828 $ 67,035 $ 63,351 View original content: https://www.prnewswire.com/news-releases/citizens-financial-services-inc-reports-unaudited-full-year-and-fourth-quarter-2021-financial-results-301470940.html SOURCE Citizens Financial Services, Inc.

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