CITIZENS FINANCIAL SERVICES, INC. REPORTS UNAUDITED FULL YEAR AND FOURTH QUARTER 2022 FINANCIAL RESULTS

About this update from Citizens Financial Services, Inc.

MANSFIELD, Pa. , Jan. 30, 2023 /PRNewswire/ -- Citizens Financial Services, Inc. (Nasdaq: CZFS), parent company of First Citizens Community Bank , released today its unaudited consolidated financial results for the three months and year ended December 31, 2022 . Highlights Two new branches were opened in November of 2022 in Ephrata, Pennsylvania and Greenville, Delaware and we look forward to serving our customers in these new markets. We have also received approval to open a new branch in Williamsport, Pennsylvania , which is expected in the second quarter of 2023. Citizens Financial Services, Inc. continues to work on plans to integrate HV Bancorp, Inc.("HVB") into the Company, with the transaction expected to close in the second quarter of 2023. Net income was $29.1 million for 2022, which is 0.2% lower than 2021's net income. The decrease was due to life insurance proceeds received in the first quarter of 2021 due to the passing of two former employees and decreased gains on loans sold due to the rise in mortgage rates in 2022. The effective tax rate for 2022 was 18.1% compared to 17.6% in 2021, with the increase being due to life insurance proceeds being exempt from taxable income. Net income was $7.9 million for the three months ended December 31, 2022 , which is 13.4% higher than the net income for 2021's comparable period. The effective tax rate for the three months ended December 31, 2022 was 18.8% compared to 18.3% in the comparable period in 2021 due to certain merger expenses not being tax deductible. Net loan growth for the year was $282.2 million or 19.8%. Non-performing assets decreased $1,354,000 since December 31, 2021 and totaled $7,488,000 as of December 31, 2022 . As a percent of loans, non-performing assets totaled 0.43% and 0.61% as of December 31, 2022 and December 31, 2021 , respectively. Return on average equity for the three months (annualized) and the year ended December 31, 2022 was 13.58% and 12.98% compared to 13.11% and 14.26% for the three months (annualized) and the year ended December 31, 2021 , respectively. Return on average tangible equity (non-GAAP) for the three months (annualized) and the year ended December 31, 2022 was 15.80% and 15.20% compared to 15.53% and 17.01% for the three months (annualized) and the year ended December 31, 2021 , respectively. (1) Return on average assets for the three months (annualized) and the year ended December 31, 2022 was 1.34% and 1.29% compared to 1.34% and 1.45% for the three months (annualized) and the year ended December 31, 2021 , respectively. If the life insurance proceeds on former employees are excluded, the return on average equity and average assets would have been 13.69% and 1.40%, respectively, for 2021 (non-GAAP). (1) 2022 Compared to 2021 For 2022, net income totaled $29,060,000 which compares to net income of $29,118,000 for 2021, a decrease of $58,000 or 0.2%. Basic earnings per share of $7.32 for 2022 compares to $7.31 for 2021. Return on equity for 2022 and 2021 was 12.98% and 14.26%, while return on assets was 1.29% and 1.45%, respectively. If the life insurance proceeds associated with the passing of the former employees in 2021 are excluded, basic earnings per share in 2021 would have been $7.02 compared to $7.32 for 2022, while return on equity would have been 13.69% and return on assets 1.40% (non-GAAP) (1). The remaining changes in the ratios from 2021 to 2022 is due to growth that occurred in both assets and equity in 2022 compared to 2021. Net interest income before the provision for loan loss for 2022 totaled $72,134,000 compared to $66,112,000 for 2021, resulting in an increase of $6,022,000 , or 9.1%. Amortization on PPP loans decreased $2,061,000 during 2022 compared to 2021. Average interest earning assets increased $244.4 million for 2022 compared to 2021, as a result of growth in investment securities and organic loan growth funded by borrowings. Average loans increased $168.6 million , while average investment securities increased $136.2 million . Net interest margin for 2022 was 3.41%, which is 11 basis points less than 2021. The yield on interest earning assets increased 4 basis points to 3.93%, while the cost of interest-bearing liabilities increased 20 basis points driven by increases in the fourth quarter of 2022. The majority of the decrease in margin is attributable to the decrease in amortization on PPP loans of $2.1 million , which accounts for 11 basis points of change in margin. The provision for loan losses for 2022 was $1,683,000 , a $133,000 increase from 2021. The increase in the provision is attributable to the loan growth experienced in 2022 compared to 2021 offset by improved credit metrics of the loan portfolio and less impact from the COVID-19 pandemic on the economy. Total non-interest income was $9,738,000 for 2022, which is $2,567,000 less than the non-interest income of $12,305,000 for last year. The primary drivers were the earnings of bank owned life insurance, which decreased $976,000 as the result of the passing of two former employees in 2021, gains on loans sold which decreased $1,025,000 due to a decrease in refinancing activity with the rise in market interest rates that occurred during 2022, a loss on equity securities of $247,000 , compared to a gain of $339,000 in 2021, as a result of market performance when comparing 2022 to 2021. Other income decreased $553,000 due to fee income on derivative transactions for customers recorded in 2021. Total non-interest expenses for 2022 totaled $44,694,000 compared to $41,550,000 for 2021, which is an increase of $3,144,000 . Salary and benefit costs increased $1,935,000 due to an additional 14.7 full time equivalent employees (FTEs) and merit increases for 2022. Additionally, salary and benefit costs for 2021 benefitted from a $400,000 reduction in deferred compensation due to the passing of a former executive in the first quarter of 2021. The decrease in ORE expenses of $422,000 is due to gains on the sale of ORE properties that totaled $427,000 , compared to a minimal loss in 2021. The increase in professional fees is driven by $250,000 of merger related expenses due to the HVB merger that is expected to close in 2023. Other expenses increased due charge-offs associated with fraudulent account activity, marketing expenses and the Delaware franchise tax. The provision for income taxes increased $236,000 when comparing 2022 to 2021 as a result of a death proceeds being excluded from taxable income and certain merger related expenses not being tax deductible. The effective tax rate was 18.1% and 17.5% for 2022 and 2021, respectively. Fourth Quarter of 2022 Compared to the Fourth Quarter of 2021 For the three months ended December 31, 2022 , net income totaled $7,875,000 which compares to net income of $6,944,000 for the comparable period of 2021, an increase of $931,000 or 13.4%. Basic earnings per share of $1.99 for the three months ended December 31, 2022 compares to $1.74 for the 2021 comparable period. Annualized return on equity for the three months ended December 31, 2022 and 2021 was 13.58% and 13.11%, while annualized return on assets was 1.34% for both periods. Net interest income before the provision for loan losses for the three months ended December 31, 2022 totaled $19,297,000 compared to $16,869,000 for the three months ended December 31, 2021 , resulting in an increase of $2,428,000 . Average interest earning assets increased $275.7 million for the three months ended December 31, 2022 compared to the same period last year as a result of the organic loan growth. Average loans increased $270.8 million while average investment securities increased $104.6 million and average interest bearing cash holdings decreased $94.5 million . The tax effected net interest margin for the three months ended December 31, 2022 was 3.46% compared to 3.44% for the same period last year. The provision for loan losses for the three months ended December 31, 2022 was $258,000 compared to no provision for loan losses for the comparable period in 2021. The increase in the provision is attributable to the organic commercial loan growth experienced in the fourth quarter of 2022 compared to organic loan growth in 2021's fourth quarter. Total non-interest income was $2,311,000 for the three months ended December 31, 2022 , which is $201,000 less than the comparable period last year. The primary drivers were gains on loans sold which decreased $157,000 due to a decrease in refinancing activity with the rise in market interest rates that occurred in 2022, and a loss on equity securities of $49,000 , compared to a gain of $51,000 in the comparable period in 2021, as a result of market performance when comparing 2022 to 2021. Total non-interest expenses for the three months ended December 31, 2022 totaled $11,649,000 compared to $10,883,000 for the same period last year, which is an increase of $766,000 , or 7.0%. Salary and benefit costs increased $283,000 due to an addition of 20.8 FTEs and merit increases for 2022. The increase in professional fees is driver by $100,000 of merger related expenses due to the HVB merger that is expected to close in 2023. The increase in FDIC insurance expense is due to asset growth experienced by the Bank in the third and fourth quarters resulting in a higher assessment. The provision for income taxes increased $272,000 when comparing the three months ended December 31, 2022 to the same period in 2021 as a result of an increase in income before income tax of $1,203,000 . The effective tax rate was 18.8% and 18.3% for the three months ended December 31, 2022 and 2021, respectively. Balance Sheet and Other Information: At December 31, 2022 , total assets were $2.33 billion compared to $2.14 billion at December 31, 2021 . The loan to deposit ratio as of December 31, 2022 was 93.54% compared to 78.51% as of December 31, 2021 . Available for sale securities of $439.5 million at December 31, 2022 increased $27.1 million from December 31, 2021 . The yield on the investment portfolio decreased from 1.96% for 2021 to 1.90% for 2022 on a tax equivalent basis due to the amount of securities purchased in 2020 and 2021, which was a low rate environment due to the pandemic. Purchases made in 2022 have been at higher rates than those made in 2020 and 2021 and have increased investment yields. Investment yields for the fourth quarter of 2022 were 2.08% compared to 1.73% for the fourth quarter of 2021. Net loans as of December 31, 2022 totaled $1.71 billion and increased $282.2 million from December 31, 2021 , which is 19.8% and was primarily driven by growth in the Delaware market. The allowance for loan losses totaled $18,552,000 at December 31, 2022 which is an increase of $1,248,000 from December 31, 2021 . The increase is due to recording a provision for loan losses of $1,683,000 and recoveries of $37,000 , offset by charge-offs of $472,000 , which were primarily due to one loan relationship. The allowance as a percent of total loans was 1.08% as of December 31, 2022 and 1.20% as of December 31, 2021 . Deposits increased $8.1 million from December 31, 2021 , to $1.84 billion at December 31, 2022 , primarily due brokered deposits issued in the fourth quarter of 2022. Competitive pressure for deposits increased significantly in the fourth quarter of 2022. Borrowings increased $183.3 million from December 31, 2021 to $257.3 million at December 31, 2022 to fund organic loan growth. Stockholders' equity totaled $200.1 million at December 31, 2022 , compared to $212.5 million at December 31, 2021 , a decrease of $12.3 million . Excluding accumulated other comprehensive loss (AOCI), stockholders equity increased $20.6 million to $233.3 million (non-GAAP). (1) The increase in stockholders equity, excluding AOCI, was attributable to net income for 2022 totaling $29.1 million , offset by cash dividends for 2022 totaling $7.6 million and net treasury stock activity of $826,000 . As a result of increases in market interest rates decreasing the fair value of investment securities, the unrealized loss on available for sale investment securities, net of tax, increased $37.8 million from December 31, 2021 . Dividend Declared On December 6, 2022 , the Board of Directors declared a cash dividend of $0.480 per share, which was paid on December 30, 2022 to shareholders of record at the close of business on December 16, 2022 . This quarterly cash dividend is an increase of 3.13% over the regular cash dividend of $0.465 per share declared one year ago, as adjusted for the 1% stock dividend declared in June 2022 . 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, 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 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 , 2022 2021 2022 2021 Income and Performance Ratios Net Income $ 7,875 $ 6,944 $ 29,060 $ 29,118 Return on average assets (annualized) 1.34 % 1.34 % 1.29 % 1.45 % Return on average equity (annualized) 13.58 % 13.11 % 12.98 % 14.26 % Return on average tangible equity (annualized) (a) 15.80 % 15.53 % 15.20 % 17.01 % Net interest margin (tax equivalent)(a) 3.46 % 3.44 % 3.41 % 3.52 % Earnings per share - basic (b) $ 1.99 $ 1.74 $ 7.32 $ 7.31 Earnings per share - diluted (b) $ 1.99 $ 1.74 $ 7.32 $ 7.31 Cash dividends paid per share (b) $ 0.480 $ 0.465 $ 1.901 $ 1.843 Number of shares used in computation - basic (b) 3,965,980 3,982,120 3,969,722 3,984,085 Number of shares used in computation - diluted (b) 3,966,095 3,982,173 3,969,722 3,984,085 Asset quality Allowance for loan and lease losses $ 18,552 $ 17,304 Non-performing assets $ 7,488 $ 8,842 Allowance for loan and lease losses/total loans 1.08 % 1.20 % Non-performing assets to total loans 0.43 % 0.61 % Annualized net charge-offs to total loans 0.00 % 0.01 % 0.03 % 0.00 % Equity Book value per share (b) $ 58.74 $ 53.39 Tangible Book value per share (a) (b) $ 50.52 $ 45.10 Market Value (Last reported trade of month) $ 76.72 $ 60.70 Common shares outstanding 3,971,209 3,944,420 Other Average Full Time Equivalent Employees 310.0 290.8 309.9 295.2 Loan to Deposit Ratio 93.54 % 78.51 % Trust assets under management $ 150,005 $ 154,840 Brokerage assets under management $ 283,548 $ 282,058 Balance Sheet Highlights December 31 , December 31 , 2022 2021 Assets $ 2,333,393 $ 2,143,863 Investment securities 441,714 414,672 Loans (net of unearned income) 1,724,999 1,441,533 - Allowance for loan losses 18,552 17,304 Deposits 1,844,208 1,836,151 Stockholders' Equity 200,147 212,492 (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) 2022 2021 ASSETS: Cash and due from banks: Noninterest-bearing $ 24,814 $ 14,051 Interest-bearing 1,397 158,782 Total cash and cash equivalents 26,211 172,833 Interest bearing time deposits with other banks 6,055 11,026 Equity securities 2,208 2,270 Available-for-sale securities 439,506 412,402 Loans held for sale 725 4,554 Loans (net of allowance for loan losses: $18,552 at December 31, 2022 and $17,304 at December 31, 2021 ) 1,706,447 1,424,229 Premises and equipment 17,619 17,016 Accrued interest receivable 7,332 5,235 Goodwill 31,376 31,376 Bank owned life insurance 39,355 38,503 Other intangibles 1,272 1,627 Fair value of derivative instruments 16,599 4,011 Deferred tax asset 12,886 4,082 Other assets 25,802 14,699 TOTAL ASSETS $ 2,333,393 $ 2,143,863 LIABILITIES: Deposits: Noninterest-bearing $ 396,260 $ 358,073 Interest-bearing 1,447,948 1,478,078 Total deposits 1,844,208 1,836,151 Borrowed funds 257,278 73,977 Accrued interest payable 1,232 711 Fair value of derivative instruments 9,726 2,101 Other liabilities 20,802 18,431 TOTAL LIABILITIES 2,133,246 1,931,371 STOCKHOLDERS' EQUITY: Preferred Stock $1.00 par value; authorized 3,000,000 shares; none issued in 2022 or 2021 - - Common stock $1.00 par value; authorized 25,000,000 shares at December 31, 2022 and December 31, 2021 : issued 4,427,687 at December 31, 2022 and 4,388,901 at December 31, 2021 4,428 4,389 Additional paid-in capital 80,911 78,395 Retained earnings 164,922 146,010 Accumulated other comprehensive loss (33,141) (155) Treasury stock, at cost: 456,478 at December 31, 2022 and 444,481 shares at December 31, 2021 (16,973) (16,147) TOTAL STOCKHOLDERS' EQUITY 200,147 212,492 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,333,393 $ 2,143,863 CITIZENS FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) Three Months Ended Year Ended December 31 , December 31 , (in thousands, except per share data) 2022 2021 2022 2021 INTEREST INCOME: Interest and fees on loans $ 21,829 $ 16,802 $ 74,265 $ 66,371 Interest-bearing deposits with banks 67 112 400 447 Investment securities: Taxable 1,565 955 5,615 3,820 Nontaxable 624 549 2,454 2,201 Dividends 267 87 623 378 TOTAL INTEREST INCOME 24,352 18,505 83,357 73,217 INTEREST EXPENSE: Deposits 2,847 1,292 7,316 5,837 Borrowed funds 2,208 344 3,907 1,268 TOTAL INTEREST EXPENSE 5,055 1,636 11,223 7,105 NET INTEREST INCOME 19,297 16,869 72,134 66,112 Provision for loan losses 258 - 1,683 1,550 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 19,039 16,869 70,451 64,562 NON-INTEREST INCOME: Service charges 1,265 1,276 5,346 4,755 Trust 183 191 803 865 Brokerage and insurance 467 435 1,895 1,625 Gains on loans sold 17 174 258 1,283 Equity security (losses) gains, net (49) 51 (247) 339 Available for sale security (losses) gains, net (8) - (14) 212 Earnings on bank owned life insurance 217 185 852 1,828 Other 219 200 845 1,398 TOTAL NON-INTEREST INCOME 2,311 2,512 9,738 12,305 NON-INTEREST EXPENSES: Salaries and employee benefits 6,873 6,590 27,837 25,902 Occupancy 811 744 3,138 2,966 Furniture and equipment 149 112 565 519 Professional fees 570 373 1,891 1,526 FDIC insurance expense 236 135 676 522 Pennsylvania shares (refund) tax (110) 24 907 880 Amortization of intangibles 36 46 156 192 Software expenses 377 318 1,446 1,321 ORE expenses 142 56 17 439 Other 2,565 2,485 8,061 7,283 TOTAL NON-INTEREST EXPENSES 11,649 10,883 44,694 41,550 Income before provision for income taxes 9,701 8,498 35,495 35,317 Provision for income taxes 1,826 1,554 6,435 6,199 NET INCOME $ 7,875 $ 6,944 $ 29,060 $ 29,118 PER COMMON SHARE DATA: Net Income - Basic $ 1.99 $ 1.74 $ 7.32 $ 7.31 Net Income - Diluted $ 1.99 $ 1.74 $ 7.32 $ 7.31 Cash Dividends Paid $ 0.480 $ 0.465 $ 1.901 $ 1.843 Number of shares used in computation - basic 3,965,980 3,982,120 3,969,722 3,984,085 Number of shares used in computation - diluted 3,966,095 3,982,173 3,969,722 3,984,085 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 , 2022 2022 2022 2022 2021 Interest income $ 24,352 $ 21,783 $ 19,407 $ 17,815 $ 18,505 Interest expense 5,055 2,937 1,678 1,553 1,636 Net interest income 19,297 18,846 17,729 16,262 16,869 Provision for loan losses 258 725 450 250 - Net interest income after provision for loan losses 19,039 18,121 17,279 16,012 16,869 Non-interest income 2,368 2,717 2,438 2,476 2,461 Investment securities (losses) gains, net (57) (25) (134) (45) 51 Non-interest expenses 11,649 11,614 11,200 10,231 10,883 Income before provision for income taxes 9,701 9,199 8,383 8,212 8,498 Provision for income taxes 1,826 1,655 1,482 1,472 1,554 Net income $ 7,875 $ 7,544 $ 6,901 $ 6,740 $ 6,944 Earnings Per Share Basic $ 1.99 $ 1.90 $ 1.74 $ 1.69 $ 1.74 Earnings Per Share Diluted $ 1.99 $ 1.90 $ 1.74 $ 1.69 $ 1.74 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 , 2022 2021 Average Average Average Average Balance (1) Interest Rate Balance (1) Interest Rate (dollars in thousands) $ $ % $ $ % ASSETS Interest-bearing deposits at banks 13,464 21 0.62 107,948 38 0.14 Interest bearing time deposits at banks 6,055 46 3.01 11,266 74 2.57 Investment securities: Taxable 383,496 1,832 1.91 294,109 1,042 1.42 Tax-exempt (3) 122,031 791 2.59 106,813 695 2.60 Investment securities 505,527 2,623 2.08 400,922 1,737 1.73 Loans: (2)(3)(4) Residential mortgage loans 207,644 2,584 4.94 202,357 2,402 4.71 Construction loans 84,424 1,085 5.10 67,907 690 4.03 Commercial Loans 929,394 12,347 5.27 758,133 9,301 4.87 Agricultural Loans 346,378 4,045 4.63 345,420 3,757 4.32 Loans to state & political subdivisions 59,470 536 3.58 46,307 367 3.14 Other loans 91,307 1,333 5.79 27,720 357 5.11 Loans, net of discount (2)(3)(4) 1,718,617 21,930 5.06 1,447,844 16,874 4.62 Total interest-earning assets 2,243,663 24,620 4.35 1,967,980 18,723 3.77 Cash and due from banks 6,873 6,421 Bank premises and equipment 17,547 17,142 Other assets 84,166 73,929 Total non-interest earning assets 108,586 97,492 Total assets 2,352,249 2,065,472 LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities: NOW accounts 520,932 1,033 0.79 476,634 301 0.25 Savings accounts 324,746 161 0.20 305,962 74 0.10 Money market accounts 331,023 967 1.16 285,952 182 0.25 Certificates of deposit 279,025 686 0.98 332,880 735 0.87 Total interest-bearing deposits 1,455,726 2,847 0.78 1,401,428 1,292 0.37 Other borrowed funds 259,690 2,208 3.37 76,970 344 1.78 Total interest-bearing liabilities 1,715,416 5,055 1.17 1,478,398 1,636 0.44 Demand deposits 386,216 360,645 Other liabilities 18,595 14,519 Total non-interest-bearing liabilities 404,811 375,164 Stockholders' equity 232,022 211,910 Total liabilities & stockholders' equity 2,352,249 2,065,472 Net interest income 19,565 17,087 Net interest spread (5) 3.18 % 3.33 % Net interest income as a percentage of average interest-earning assets 3.46 % 3.44 % Ratio of interest-earning assets to interest-bearing liabilities 131 % 133 % (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 2022 and 2021. 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 , 2022 2021 Average Average Average Average Balance (1) Interest Rate Balance (1) Interest Rate (dollars in thousands) $ $ % $ $ % ASSETS Interest-bearing deposits at banks 52,655 171 0.32 108,872 124 0.11 Interest bearing time deposits at banks 8,352 229 2.75 12,527 323 2.57 Investment securities: Taxable 372,430 6,238 1.68 252,470 4,198 1.66 Tax-exempt (3) 120,592 3,106 2.58 104,379 2,786 2.67 Investment securities 493,022 9,344 1.90 356,849 6,984 1.96 Loans: (2)(3)(4) Residential mortgage loans 204,063 9,712 4.76 203,062 9,867 4.86 Construction loans 73,214 3,298 4.50 56,315 2,292 4.07 Commercial Loans 854,460 41,155 4.82 739,000 36,215 4.90 Agricultural Loans 347,420 15,387 4.43 349,951 15,079 4.31 Loans to state & political subdivisions 56,004 1,863 3.33 52,804 1,871 3.54 Other loans 58,715 3,201 5.45 24,125 1,385 5.74 Loans, net of discount (2)(3)(4) 1,593,876 74,616 4.68 1,425,257 66,709 4.68 Total interest-earning assets 2,147,905 84,360 3.93 1,903,505 74,140 3.89 Cash and due from banks 6,708 6,525 Bank premises and equipment 17,287 17,194 Other assets 84,066 75,410 Total non-interest earning assets 108,061 99,129 Total assets 2,255,966 2,002,634 LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities: NOW accounts 520,895 2,425 0.47 457,189 1,387 0.30 Savings accounts 323,939 421 0.13 290,376 322 0.11 Money market accounts 343,288 2,004 0.58 257,937 684 0.27 Certificates of deposit 299,110 2,466 0.82 351,265 3,444 0.98 Total interest-bearing deposits 1,487,232 7,316 0.49 1,356,767 5,837 0.43 Other borrowed funds 149,661 3,907 2.61 84,621 1,268 1.50 Total interest-bearing liabilities 1,636,893 11,223 0.69 1,441,388 7,105 0.49 Demand deposits 374,675 341,604 Other liabilities 20,443 15,420 Total non-interest-bearing liabilities 395,118 357,024 Stockholders' equity 223,955 204,222 Total liabilities & stockholders' equity 2,255,966 2,002,634 Net interest income 73,137 67,035 Net interest spread (5) 3.24 % 3.40 % Net interest income as a percentage of average interest-earning assets 3.41 % 3.52 % Ratio of interest-earning assets to interest-bearing liabilities 131 % 132 % (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 2022 and 2021. 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 , 2022 2022 2022 2022 2021 Real estate: Residential $ 210,213 $ 203,673 $ 203,323 $ 201,567 $ 201,097 Commercial 876,569 857,314 798,528 724,876 687,338 Agricultural 313,614 317,761 313,700 305,517 312,011 Construction 80,691 79,154 71,414 66,738 55,036 Consumer 86,650 124,375 50,319 21,460 25,858 Other commercial loans 63,222 66,241 65,772 69,051 74,585 Other agricultural loans 34,832 29,509 32,870 39,904 39,852 State & political subdivision loans 59,208 59,926 59,450 49,582 45,756 Total loans 1,724,999 1,737,953 1,595,376 1,478,695 1,441,533 Less: allowance for loan losses 18,552 18,291 17,570 17,556 17,304 Net loans $ 1,706,447 $ 1,719,662 $ 1,577,806 $ 1,461,139 $ 1,424,229 Past due and non-performing assets Total Loans past due 30-89 days and still accruing $ 3,317 $ 2,616 $ 2,070 $ 2,096 $ 967 Non-accrual loans $ 6,938 $ 7,118 $ 7,251 $ 7,810 $ 7,616 Loans past due 90 days or more and accruing 7 93 139 12 46 Non-performing loans $ 6,945 $ 7,211 $ 7,390 $ 7,822 $ 7,662 OREO 543 877 972 1,131 1,180 Total Non-performing assets $ 7,488 $ 8,088 $ 8,362 $ 8,953 $ 8,842 Three Months Ended Analysis of the Allowance for loan Losses December 31 , September 30 , June 30 , March 31 , December 31 , (In Thousands) 2022 2022 2022 2022 2021 Balance, beginning of period $ 18,291 $ 17,570 $ 17,556 $ 17,304 $ 17,334 Charge-offs (7) (14) (446) (5) (65) Recoveries 10 10 10 7 35 Net recoveries (charge-offs) 3 (4) (436) 2 (30) Provision for loan losses 258 725 450 250 - Balance, end of period $ 18,552 $ 18,291 $ 17,570 $ 17,556 $ 17,304 CITIZENS FINANCIAL SERVICES, INC. Reconciliation of GAAP and Non-GAAP Financial Measures (UNAUDITED) (Dollars in thousands, except per share data) As of December 31 , 2022 2021 Tangible Equity Stockholders Equity - GAAP $ 200,147 $ 212,492 Accumulated other comprehensive loss 33,141 155 Intangible Assets (32,648) (33,003) Tangible Equity - Non-GAAP 200,640 179,644 Shares outstanding adjusted for June 2022 stock Dividend 3,971,209 3,983,206 Tangible Book value per share - Non-GAAP $ 50.52 $ 45.10 As of December 31 , 2022 2021 Tangible Equity per share Stockholders Equity per share - GAAP $ 50.40 $ 53.35 Adjustments for accumulated other comprehensive loss 8.34 0.04 Book value per share 58.74 53.39 Adjustments for intangible assets (8.22) (8.29) Tangible Book value per share - Non-GAAP $ 50.52 $ 45.10 For the Three Months Ended For the Year Ended December 31 , December 31 , 2022 2021 2022 2021 Return on Average Tangible Equity Average Stockholders Equity - GAAP $ 193,950 $ 210,801 $ 201,523 $ 205,449 Average Accumulated Other Comprehensive Loss (Income) 38,072 1,109 22,432 (1,227) Average Intangible Assets (32,704) (33,009) (32,828) (33,018) Average Tangible Equity - Non-GAAP 199,318 178,901 191,127 171,204 Net Income $ 7,875 $ 6,944 $ 29,060 $ 29,118 Annualized Return on Average Tangible Equity 15.80 % 15.53 % 15.20 % 17.01 % For the Three Months Ended For the Year Ended December 31 , December 31 , 2022 2021 2022 2021 Return on Average Assets and Equity Excluding BOLI Death Benefits Net Income $ 7,875 $ 6,944 $ 29,060 $ 29,118 BOLI death benefits - - - (1,155) Net Income excluding BOLI death benefits $ 7,875 $ 6,944 $ 29,060 $ 27,963 Average Assets 2,352,249 2,065,472 2,255,966 2,002,634 Annualized Return on Average stockholders equity, excluding BOLI Death Benefits 1.34 % 1.34 % 1.29 % 1.40 % Average Stockholders Equity $ 232,022 $ 211,910 $ 223,955 $ 204,222 Annualized Return on Average stockholders equity, excluding BOLI Death Benefits 13.58 % 13.11 % 12.98 % 13.69 % Earnings per share, excluding death activity of former employees Net Income $ 7,875 $ 7,064 $ 29,060 $ 29,118 BOLI death benefits - - - (1,155) Net income excluding one time items $ 7,875 $ 7,064 $ 29,060 $ 27,963 Number of shares used in computation - basic adjusted for June 2022 stock Dividend 3,965,980 3,982,120 3,969,722 3,984,085 Earnings per share, excluding death activity of former employees non-GAAP 1.99 1.77 7.32 7.02 For the Three Months Ended For the Year Ended December 31 , December 31 , Reconciliation of net interest income on fully taxable equivalent basis 2022 2021 2022 2021 Total interest income $ 24,352 $ 18,505 $ 83,357 $ 73,217 Total interest expense 5,055 1,636 11,223 7,105 Net interest income 19,297 16,869 72,134 66,112 Tax equivalent adjustment 268 218 1,003 923 Net interest income (fully taxable equivalent) $ 19,565 $ 17,087 $ 73,137 $ 67,035 View original content: https://www.prnewswire.com/news-releases/citizens-financial-services-inc-reports-unaudited-full-year-and--fourth-quarter-2022-financial-results-301734013.html SOURCE Citizens Financial Services, Inc.

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