CITIZENS FINANCIAL SERVICES, INC. REPORTS UNAUDITED SECOND QUARTER 2022 FINANCIAL RESULTS

About this update from Citizens Financial Services, Inc.

MANSFIELD, Pa. , July 21, 2022 /PRNewswire/ -- Citizens Financial Services, Inc. (Nasdaq: CZFS), parent company of First Citizens Community Bank , released today its unaudited consolidated financial results for the three and six months ended June 30, 2022 . Highlights During the second quarter, the Company uplisted to the Nasdaq capital market. Net loan growth for the quarter was $116.7 million and for the year was $153.6 million or 21.6% on an annualized basis. Net income was $13.6 million for the six months ended June 30, 2022 , which is 9.7% less than the net income for 2021's comparable period. 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 the six months ended June 30, 2022 was 17.8% compared to 16.9% in the comparable period in 2021, with the increase being due to life insurance proceeds being exempt from taxable income. Net income was $6.9 million for the three months ended June 30, 2022 , which is 3.8% higher than the net income for 2021's comparable period. The effective tax rate for the three months ended June 30, 2022 was 17.7% compared to 17.9% in the comparable period in 2021. Net interest income before the provision for loan losses was $34.0 million for the six months ended June 30, 2022 , an increase of $1.3 million , or 4.1%, over the same period a year ago. Amortization associated with PPP loans was $902,000 less in 2022 than 2021. Non-performing assets decreased $2,580,000 since June 30, 2021 and totaled $8,362,000 as of June 30, 2022 , which is $480,000 less than the balance at December 31, 2021 . As a percent of loans, non-performing assets totaled 0.52%, 0.61% and 0.77% as of June 30, 2022 , December 31, 2021 and June 30, 2021 . Return on average equity for the three and six months (annualized) ended June 30, 2022 was 12.49% and 12.48% compared to 13.19% and 15.19% for the three and six months (annualized) ended June 30, 2021 . Return on average tangible equity for the three and six months (annualized) ended June 30, 2022 was 14.68% and 14.69% compared to 15.77% and 18.22% for the three and six months (annualized) ended June 30, 2021 (non-GAAP). (1) Return on average assets for the three and six months (annualized) ended June 30, 2022 was 1.25% for both periods compared to 1.32% and 1.54% for the three and six months (annualized) ended June 30, 2021 . If the life insurance proceeds on a former employees are excluded, the return on average equity and average assets would be 14.03% and 1.42%, respectively, for six months (annualized) ended June 30, 2021 (non-GAAP). (1) Six Months Ended June 30, 2022 Compared to 2021 For the six months ended June 30, 2022 , net income totaled $13,641,000 which compares to net income of $15,110,000 for the first six months of 2021, a decrease of $1,469,000 or 9.7%. Basic earnings per share of $3.43 for the first six months of 2022 compares to $3.79 for the first six months last year. Annualized return on equity for the six months ended June 30, 2022 and 2021 was 12.48% and 15.19%, while annualized return on assets was 1.25% and 1.54%, respectively, with ratios in 2021 benefitting from life insurance proceeds on two former employees. If the activity associated with the passing of the former employees in 2021 are excluded, basic earnings per share in 2021 would have been $3.42 compared to $3.43 for the first six months of 2022 (non-GAAP) (1). Net interest income before the provision for loan loss for the six months ended June 30, 2022 totaled $33,991,000 compared to $32,653,000 for the six months ended June 30, 2021 , resulting in an increase of $1,338,000 , or 4.1%. Amortization on PPP loans decreased $902,000 during 2022 compared to 2021. Average interest earning assets increased $211.3 million for the six months ended June 30, 2022 compared to the same period last year, as a result of growth in investments and organic loan growth funded by deposit growth and borrowings. Average loans increased $79.8 million while average investment securities increased $151.0 million . The yield on interest earning assets decreased 32 basis points to 3.67%, while the cost of interest-bearing liabilities decreased 12 basis points to 0.41%. The decrease in amortization on PPP loans accounts for 9 bps of the decrease in margin and the yield on interest earning assets. A large component of the remaining decrease is due to the percentage of interest earning assets in investments in 2022 that were purchased during a lower interest rate environment. The provision for loan losses for the six months ended June 30, 2022 was $700,000 , a $450,000 decrease to the comparable period in 2021. The decrease in the provision is attributable to the improved credit metrics of the loan portfolio in comparison to June 30, 2021 and less impact from the COVID-19 pandemic on the economy, both of which helped offset the impact of the organic loan growth experienced. Total non-interest income was $4,735,000 for the six months ended June 30, 2022 , which is $2,206,000 less than the non-interest income of $6,941,000 for the same period last year. The primary drivers were the earnings of bank owned life insurance, which decreased $1,059,000 as the result of the passing of two former employees in 2021, gains on loans sold which decreased $668,000 due to a decrease in refinancing activity with the rise in rates that occurred in the first half of 2022, a loss on equity securities of $395,000 as a result of market performance when comparing 2022 to 2021. Other income decreased $478,000 due to fee income on derivative transactions for customers recorded in 2021. There were no corresponding fees in 2022. Total non-interest expenses for the six months ended June 30, 2022 totaled $21,431,000 compared to $20,267,000 for the same period last year, which is an increase of $1,164,000 . Salary and benefit costs increased $1,287,000 due to an addition 12.4 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 $500,000 is due to gains on the sale of ORE properties that totaled $491,000 , compared to minimal gains in 2021. The provision for income taxes decreased $113,000 when comparing the six months ended June 30, 2022 to the same period in 2021 as a result of a decrease in income before income tax of $1,582,000 . The effective tax rate was 17.8% and 16.9% for the six months ended June 30, 2022 and 2021, respectively. It should be noted the earnings on bank owned life insurance are exempt from Federal income tax and accounts for the difference in tax rates between 2021 and 2022. Second Quarter of 2022 Compared to the Second Quarter of 2021 For the three months ended June 30, 2022 , net income totaled $6,901,000 which compares to net income of $6,647,000 for the comparable period of 2021, an increase of $254,000 or 3.8%. Basic earnings per share of $1.74 for the three months ended June 30, 2022 compares to $1.67 for the 2021 comparable period. Annualized return on equity for the three months ended June 30, 2022 and 2021 was 12.49% and 13.19%, while annualized return on assets was 1.25% and 1.32%, respectively. Net interest income before the provision for loan losses for the three months ended June 30, 2022 totaled $17,729,000 compared to $16,212,000 for the three months ended June 30, 2021 , resulting in an increase of $1,517,000 . Average interest earning assets increased $192.1 million for the three months ended June 30, 2022 compared to the same period last year as a result of the organic loan and deposit growth. Average loans increased $107.9 million while average investment securities increased $148.7 million and average interest bearing cash holdings decreased $61.4 million . The tax effected net interest margin for the three months ended June 30, 2022 was 3.43% compared to 3.46% for the same period last year. The margin was impacted by the decrease in the average yield on interest earning assets of 10 basis points to 3.75% of which 5 basis points was due to $227,000 of decreased amortization on PPP loans. The provision for loan losses for the three months ended June 30, 2022 was $450,000 , a $50,000 decrease to the comparable period in 2021. The decrease in the provision is attributable to the solid credit metrics of the loan portfolio and less impact from the COVID-19 pandemic on the economy. Total non-interest income was $2,304,000 for the three months ended June 30, 2022 , which is $402,000 less than the comparable period last year. The primary drivers were gains on loans sold which decreased $270,000 due to a decrease in refinancing activity with the rise in rates that occurred in 2022, and a loss on equity securities of $163,000 as a result of market performance when comparing 2022 to 2021. Other income decreased $273,000 due to fee income on derivative transactions for customers recorded in 2021. There were no corresponding fees in 2022. Service charges increased $161,000 for the three months ended June 30, 2022 compared to the same period in 2021. Total non-interest expenses for the three months ended June 30, 2022 totaled $11,200,000 compared to $10,320,000 for the same period last year, which is an increase of $880,000 , or 8.5%. Salary and benefit costs increased $637,000 due to an addition 17.4 FTEs and merit increases for 2022. The provision for income taxes increased $31,000 when comparing the three months ended June 30, 2022 to the same period in 2021 as a result of an increase in income before income tax of $285,000 . The effective tax rate was 17.7% and 17.9% for the three months ended June 30, 2022 and 2021, respectively. Balance Sheet and Other Information: At June 30, 2022 , total assets were $2.21 billion compared to $2.14 billion at December 31, 2021 and $2.00 billion at June 30, 2021 . The loan to deposit ratio as of June 30, 2022 was 84.92% compared to 78.51% as of December 31, 2021 and 84.11% as of June 30, 2021 . Available for sale securities of $462.9 million at June 30, 2022 increased $50.5 million from December 31, 2021 and $93.9 million from June 30, 2021 . The yield on the investment portfolio decreased from 2.07% to 1.77% 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 the first half of 2022 have been at higher rates than those made in 2020 and 2021. Net loans as of June 30, 2022 totaled $1.58 billion and increased $153.6 million from December 31, 2021 , which is 21.6% on an annualized basis. In comparison to June 30, 2021 , net loans have grown $179.6 million , or 12.8%, and, if PPP loans are excluded, loans increased $202.8 million or 14.8%. The allowance for loan losses totaled $17,570,000 at June 30, 2022 which is an increase of $266,000 from December 31, 2021 . The increase is due to recording a provision for loan losses of $700,000 and recoveries of $17,000 , offset by charge-offs of $451,000 . The allowance as a percent of total loans was 1.10% as of June 30, 2022 and 1.20% as of December 31, 2021 . Deposits increased $42.6 million from December 31, 2021 , to $1.88 billion at June 30, 2022 , primarily due to customers holding more cash and new customer relationships in the Delaware market. Borrowings increased $36.6 million from December 31, 2021 to $110.5 million at June 30, 2022 to fund organic loan growth. Stockholders' equity totaled $195.0 million at June 30, 2022 , compared to $212.5 million at December 31, 2021 , a decrease of $17.5 million . Excluding accumulated other comprehensive loss (AOCI), stockholders equity increased $8.9 million and totals $221.6 million . The increase in stockholders equity, excluding AOCI, was attributable to net income for the six months ended June 30, 2022 totaling $13.6 million , offset by cash dividends for the first two quarters of 2022 totaling $3.8 million and net treasury stock activity of $897,000 . As a result of increases in market interest rates impacting the fair value of investment securities, the unrealized loss on available for sale investment securities, net of tax, increased $29.2 million from December 31, 2021 . Dividend Declared On May 31, 2022 , the Board of Directors declared a cash dividend of $0.475 per share, which was paid on June 24, 2022 to shareholders of record at the close of business on June 10, 2022 . This quarterly cash dividend is an increase of 3.20% over the regular cash dividend of $0.456 per share declared one year ago, as adjusted for the 1% stock dividend declared in June 2022 . The Board declared a 1% stock dividend, payable on June 24, 2022 to shareholders of record at the close of business on June 10, 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 Six Months Ended June 30 , June 30 , 2022 2021 2022 2021 Income and Performance Ratios Net Income $ 6,901 $ 6,647 $ 13,641 $ 15,110 Return on average assets (annualized) 1.25 % 1.32 % 1.25 % 1.54 % Return on average equity (annualized) 12.49 % 13.19 % 12.48 % 15.19 % Return on average tangible equity (annualized) (a) 14.68 % 15.77 % 14.69 % 18.22 % Net interest margin (tax equivalent)(a) 3.43 % 3.46 % 3.35 % 3.59 % Earnings per share - basic (b) $ 1.74 $ 1.67 $ 3.43 $ 3.79 Earnings per share - diluted (b) $ 1.74 $ 1.67 $ 3.43 $ 3.79 Cash dividends paid per share (b) $ 0.470 $ 0.456 $ 0.941 $ 0.912 Number of shares used in computation - basic (b) 3,973,402 3,983,274 3,969,621 3,984,970 Number of shares used in computation - diluted (b) 3,973,417 3,983,346 3,969,725 3,985,005 Asset quality Allowance for loan and lease losses $ 17,570 $ 16,931 Non-performing assets $ 8,362 $ 10,942 Allowance for loan and lease losses/total loans 1.10 % 1.20 % Non-performing assets to total loans 0.52 % 0.77 % Annualized net charge-offs to total loans 0.11 % 0.04 % 0.06 % 0.00 % Equity Book value per share (b) $ 55.81 $ 50.82 Tangible Book value per share (a) (b) $ 47.55 $ 42.53 Market Value (Last reported trade of month) $ 70.00 $ 63.00 Common shares outstanding 3,970,153 3,951,573 Other Average Full Time Equivalent Employees 312.8 295.4 308.8 296.4 Loan to Deposit Ratio 84.92 % 84.11 % Trust assets under management $ 143,015 $ 155,394 Brokerage assets under management $ 269,744 $ 262,158 Balance Sheet Highlights June 30 , December 31 , June 30 , 2022 2021 2021 Assets $ 2,212,862 $ 2,143,863 $ 2,003,300 Investment securities 465,192 414,672 371,150 Loans (net of unearned income) 1,595,376 1,441,533 1,415,109 Allowance for loan losses 17,570 17,304 16,931 Deposits 1,878,711 1,836,151 1,682,387 Stockholders' Equity 195,032 212,492 204,419 (a) See reconciliation 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) June 30 , December 31 , June 30 , (in thousands except share data) 2022 2021 2021 ASSETS: Cash and due from banks: Noninterest-bearing $ 18,306 $ 14,051 $ 17,403 Interest-bearing 2,366 158,782 90,791 Total cash and cash equivalents 20,672 172,833 108,194 Interest bearing time deposits with other banks 8,048 11,026 12,266 Equity securities 2,309 2,270 2,148 Available-for-sale securities 462,883 412,402 369,002 Loans held for sale 1,205 4,554 5,282 Loans (net of allowance for loan losses: $17,570 at June 30, 2022 ; $17,304 at December 31, 2021 and $16,931 at June 30, 2021 ) 1,577,806 1,424,229 1,398,178 Premises and equipment 17,476 17,016 17,243 Accrued interest receivable 5,874 5,235 5,564 Goodwill 31,376 31,376 31,376 Bank owned life insurance 38,922 38,503 30,353 Other intangibles 1,449 1,627 1,705 Fair value of derivative instruments 14,639 4,011 2,934 Other assets 30,203 18,781 19,055 TOTAL ASSETS $ 2,212,862 $ 2,143,863 $ 2,003,300 LIABILITIES: Deposits: Noninterest-bearing $ 382,155 $ 358,073 $ 339,414 Interest-bearing 1,496,556 1,478,078 1,342,973 Total deposits 1,878,711 1,836,151 1,682,387 Borrowed funds 110,540 73,977 97,830 Accrued interest payable 566 711 789 Other liabilities 28,013 20,532 17,875 TOTAL LIABILITIES 2,017,830 1,931,371 1,798,881 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 June 30, 2022 , December 31, 2021 and June 30, 2021 : issued 4,427,687 at June 30, 2022 and 4,388,901 at December 31, 2021 and June 30, 2021 4,428 4,389 4,389 Additional paid-in capital 80,892 78,395 78,412 Retained earnings 153,315 146,010 135,714 Accumulated other comprehensive (loss) income (26,559) (155) 1,610 Treasury stock, at cost: 457,534 at June 30, 2022 and 444,481 shares at December 31, 2021 and 437,328 shares at June 30, 2021 (17,044) (16,147) (15,706) TOTAL STOCKHOLDERS' EQUITY 195,032 212,492 204,419 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,212,862 $ 2,143,863 $ 2,003,300 CITIZENS FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) Three Months Ended Six Months Ended June 30 , June 30 , (in thousands, except per share data) 2022 2021 2022 2021 INTEREST INCOME: Interest and fees on loans $ 17,120 $ 16,370 $ 33,040 $ 33,064 Interest-bearing deposits with banks 156 111 272 217 Investment securities: Taxable 1,424 941 2,536 1,791 Nontaxable 617 547 1,200 1,091 Dividends 90 106 174 207 TOTAL INTEREST INCOME 19,407 18,075 37,222 36,370 INTEREST EXPENSE: Deposits 1,356 1,525 2,631 3,123 Borrowed funds 322 338 600 594 TOTAL INTEREST EXPENSE 1,678 1,863 3,231 3,717 NET INTEREST INCOME 17,729 16,212 33,991 32,653 Provision for loan losses 450 500 700 1,150 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 17,279 15,712 33,291 31,503 NON-INTEREST INCOME: Service charges 1,324 1,163 2,572 2,269 Trust 184 185 433 492 Brokerage and insurance 501 406 982 782 Gains on loans sold 41 311 146 814 Equity security (losses) gains, net (134) 29 (179) 216 Available for sale security gains, net - - - 50 Earnings on bank owned life insurance 212 163 419 1,478 Other 176 449 362 840 TOTAL NON-INTEREST INCOME 2,304 2,706 4,735 6,941 NON-INTEREST EXPENSES: Salaries and employee benefits 7,118 6,481 14,031 12,744 Occupancy 754 711 1,548 1,494 Furniture and equipment 165 141 294 284 Professional fees 394 395 733 843 FDIC insurance expense 145 129 280 258 Pennsylvania shares tax 339 178 678 517 Amortization of intangibles 40 49 80 98 Software expenses 358 354 699 667 ORE expenses (income) 120 167 (247) 253 Other 1,767 1,715 3,335 3,109 TOTAL NON-INTEREST EXPENSES 11,200 10,320 21,431 20,267 Income before provision for income taxes 8,383 8,098 16,595 18,177 Provision for income taxes 1,482 1,451 2,954 3,067 NET INCOME $ 6,901 $ 6,647 $ 13,641 $ 15,110 PER COMMON SHARE DATA: Net Income - Basic $ 1.74 $ 1.67 $ 3.43 $ 3.79 Net Income - Diluted $ 1.74 $ 1.67 $ 3.43 $ 3.79 Cash Dividends Paid $ 0.470 $ 0.456 $ 0.941 $ 0.912 Number of shares used in computation - basic 3,973,402 3,983,274 3,969,621 3,984,970 Number of shares used in computation - diluted 3,973,417 3,983,346 3,969,725 3,985,005 CITIZENS FINANCIAL SERVICES, INC. QUARTERLY CONDENSED, CONSOLIDATED INCOME STATEMENT INFORMATION (UNAUDITED) (in thousands, except share data) Three Months Ended, June 30 , March 31 , Dec 31 , Sept 30 , June 30 , 2022 2022 2021 2021 2021 Interest income $ 19,407 $ 17,815 $ 18,505 $ 18,342 $ 18,075 Interest expense 1,678 1,553 1,636 1,752 1,863 Net interest income 17,729 16,262 16,869 16,590 16,212 Provision for loan losses 450 250 - 400 500 Net interest income after provision for loan losses 17,279 16,012 16,869 16,190 15,712 Non-interest income 2,438 2,476 2,461 2,618 2,677 Investment securities (losses) gains, net (134) (45) 51 234 29 Non-interest expenses 11,200 10,231 10,883 10,400 10,320 Income before provision for income taxes 8,383 8,212 8,498 8,642 8,098 Provision for income taxes 1,482 1,472 1,554 1,578 1,451 Net income $ 6,901 $ 6,740 $ 6,944 $ 7,064 $ 6,647 Earnings Per Share Basic $ 1.74 $ 1.69 $ 1.74 $ 1.77 $ 1.67 Earnings Per Share Diluted $ 1.74 $ 1.69 $ 1.74 $ 1.77 $ 1.67 CITIZENS FINANCIAL SERVICES, INC. CONSOLIDATED AVERAGE BALANCES, INTEREST, YIELDS AND RATES, AND NET INTEREST MARGIN ON A FULLY TAX-EQUIVALENT BASIS (UNAUDITED) Three Months Ended June 30 , 2022 2021 Average Average Average Average Balance (1) Interest Rate Balance (1) Interest Rate (dollars in thousands) $ $ % $ $ % ASSETS Interest-bearing deposits at banks 59,943 91 0.61 121,319 28 0.09 Interest bearing time deposits at banks 9,827 65 2.65 13,016 83 2.59 Investment securities: Taxable 379,060 1,514 1.60 249,444 1,047 1.68 Tax-exempt (3) 122,167 782 2.56 103,055 693 2.69 Investment securities 501,227 2,296 1.83 352,499 1,740 1.97 Loans: (2)(3)(4) Residential mortgage loans 203,338 2,381 4.70 202,537 2,494 4.94 Construction loans 69,689 721 4.15 50,807 521 4.11 Commercial Loans 818,517 9,494 4.65 738,136 8,875 4.82 Agricultural Loans 346,199 3,706 4.29 351,660 3,763 4.29 Loans to state & political subdivisions 57,933 457 3.16 52,934 470 3.56 Other loans 33,907 446 5.28 25,567 335 5.26 Loans, net of discount (2)(3)(4) 1,529,583 17,205 4.51 1,421,641 16,458 4.64 Total interest-earning assets 2,100,580 19,657 3.75 1,908,475 18,309 3.85 Cash and due from banks 6,805 6,757 Bank premises and equipment 17,179 17,371 Other assets 83,164 75,575 Total non-interest earning assets 107,148 99,703 Total assets 2,207,728 2,008,178 LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities: NOW accounts 530,596 398 0.30 462,299 383 0.33 Savings accounts 325,649 80 0.10 289,328 85 0.12 Money market accounts 348,718 300 0.35 247,606 164 0.27 Certificates of deposit 306,213 578 0.76 355,292 893 1.01 Total interest-bearing deposits 1,511,176 1,356 0.36 1,354,525 1,525 0.45 Other borrowed funds 78,948 322 1.64 95,166 338 1.42 Total interest-bearing liabilities 1,590,124 1,678 0.42 1,449,691 1,863 0.52 Demand deposits 375,542 339,896 Other liabilities 21,134 16,977 Total non-interest-bearing liabilities 396,676 356,873 Stockholders' equity 220,928 201,614 Total liabilities & stockholders' equity 2,207,728 2,008,178 Net interest income 17,979 16,446 Net interest spread (5) 3.33 % 3.33 % Net interest income as a percentage of average interest-earning assets 3.43 % 3.46 % Ratio of interest-earning assets to interest-bearing liabilities 132 % 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 AVERAGE BALANCES, INTEREST, YIELDS AND RATES, AND NET INTEREST MARGIN ON A FULLY TAX-EQUIVALENT BASIS (UNAUDITED) Six Months Ended June 30 , 2022 2021 Average Average Average Average Balance (1) Interest Rate Balance (1) Interest Rate (dollars in thousands) $ $ % $ $ % ASSETS Short-term investments: Interest-bearing deposits at banks 91,687 137 0.30 108,196 46 0.09 Interest bearing time deposits at banks 10,389 135 2.62 13,371 171 2.58 Investment securities: Taxable 359,189 2,710 1.51 225,103 1,998 1.78 Tax-exempt (3) 118,613 1,519 2.56 101,746 1,381 2.71 Investment securities 477,802 4,229 1.77 326,849 3,379 2.07 Loans: (2)(3)(4) Residential mortgage loans 202,095 4,712 4.70 203,235 5,047 5.01 Construction loans 65,626 1,327 4.08 44,595 931 4.21 Commercial Loans 793,313 18,076 4.59 726,077 17,938 4.98 Agricultural Loans 348,479 7,455 4.31 355,094 7,593 4.31 Loans to state & political subdivisions 52,489 824 3.17 57,698 1,068 3.73 Other loans 30,568 796 5.25 26,083 682 5.27 Loans, net of discount (2)(3)(4) 1,492,570 33,190 4.48 1,412,782 33,259 4.75 Total interest-earning assets 2,072,448 37,691 3.67 1,861,198 36,855 3.99 Cash and due from banks 6,600 6,569 Bank premises and equipment 17,078 17,188 Other assets 81,077 78,055 Total non-interest earning assets 104,755 101,812 Total assets 2,177,203 1,963,010 LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities: NOW accounts 516,129 717 0.28 442,328 703 0.32 Savings accounts 321,436 154 0.10 278,848 175 0.13 Money market accounts 347,403 523 0.30 243,221 339 0.28 Certificates of deposit 314,494 1,237 0.79 367,971 1,906 1.04 Total interest-bearing deposits 1,499,462 2,631 0.35 1,332,368 3,123 0.47 Other borrowed funds 73,651 600 1.64 90,721 594 1.32 Total interest-bearing liabilities 1,573,113 3,231 0.41 1,423,089 3,717 0.53 Demand deposits 366,046 323,229 Other liabilities 19,360 17,775 Total non-interest-bearing liabilities 385,406 341,004 Stockholders' equity 218,684 198,917 Total liabilities & stockholders' equity 2,177,203 1,963,010 Net interest income 34,460 33,138 Net interest spread (5) 3.26 % 3.46 % Net interest income as a percentage of average interest-earning assets 3.35 % 3.59 % Ratio of interest-earning assets to interest-bearing liabilities 132 % 131 % (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) June 30 , March 31 , December 31 , September 30 , June 30 , 2022 2022 2021 2021 2021 Real estate: Residential $ 203,323 $ 201,567 $ 201,097 $ 204,853 $ 202,171 Commercial 798,528 724,876 687,338 657,485 641,633 Agricultural 313,700 305,517 312,011 312,442 310,274 Construction 71,414 66,738 55,036 68,408 63,065 Consumer 50,319 21,460 25,858 31,042 8,684 Other commercial loans 65,772 69,051 74,585 92,188 104,349 Other agricultural loans 32,870 39,904 39,852 28,562 33,720 State & political subdivision loans 59,450 49,582 45,756 47,928 51,213 Total loans 1,595,376 1,478,695 1,441,533 1,442,908 1,415,109 Less: allowance for loan losses 17,570 17,556 17,304 17,334 16,931 Net loans $ 1,577,806 $ 1,461,139 $ 1,424,229 $ 1,425,574 $ 1,398,178 Past due and non-performing assets Total Loans past due 30-89 days and still accruing $ 2,070 $ 2,096 $ 967 $ 1,482 $ 1,495 Non-accrual loans $ 7,251 $ 7,810 $ 7,616 $ 8,858 $ 9,082 Loans past due 90 days or more and accruing 139 12 46 83 49 Non-performing loans $ 7,390 $ 7,822 $ 7,662 $ 8,941 $ 9,131 OREO 972 1,131 1,180 1,277 1,811 Total Non-performing assets $ 8,362 $ 8,953 $ 8,842 $ 10,218 $ 10,942 Three Months Ended March 31 , Analysis of the Allowance for loan Losses June 30 , March 31 , December 31 , September 30 , June 30 , (In Thousands) 2022 2022 2021 2021 2021 Balance, beginning of period $ 17,556 $ 17,304 $ 17,334 $ 16,931 $ 16,560 Charge-offs (446) (5) (65) (7) (138) Recoveries 10 7 35 10 9 Net (charge-offs) recoveries (436) 2 (30) 3 (129) Provision for loan losses 450 250 - 400 500 Balance, end of period $ 17,570 $ 17,556 $ 17,304 $ 17,334 $ 16,931 CITIZENS FINANCIAL SERVICES, INC. Reconciliation of GAAP and Non-GAAP Financial Measures (UNAUDITED) (Dollars in thousands, except per share data) As of June 30 2022 2021 Tangible Equity Stockholders Equity - GAAP $ 195,032 $ 204,419 Accumulated other comprehensive (income) loss 26,559 (1,610) Intangible Assets (32,825) (33,081) Tangible Equity - Non-GAAP 188,766 169,728 Shares outstanding adjusted for June 2021 stock Dividend 3,970,153 3,990,359 Tangible Book value per share - Non-GAAP $ 47.55 $ 42.53 As of June 30 2022 2021 Tangible Equity per share Stockholders Equity per share - GAAP $ 49.12 $ 51.23 Adjustments for accumulated other comprehensive loss (income) 6.69 (0.41) Book value per share 55.81 50.82 Adjustments for intangible assets (8.26) (8.29) Tangible Book value per share - Non-GAAP $ 47.55 $ 42.53 For the Three Months Ended For the Six Months Ended June 30 June 30 2022 2021 2022 2021 Return on Average Tangible Equity Average Stockholders Equity - GAAP $ 199,864 $ 203,023 $ 206,155 $ 200,832 Average Accumulated Other Comprehensive Loss (Income) 21,064 (1,409) 12,529 (1,915) Average Intangible Assets (32,876) (33,027) (32,916) (33,012) Average Tangible Equity - Non-GAAP 188,052 168,587 185,768 165,905 Net Income $ 6,901 $ 6,647 $ 13,641 $ 15,110 Annualized Return on Average Tangible Equity 14.68 % 15.77 % 14.69 % 18.22 % For the Three Months Ended For the Six Months Ended June 30 June 30 2022 2021 2022 2021 Return on Average Assets and Equity Excluding BOLI Death Benefits Net Income $ 6,901 $ 6,647 $ 13,641 $ 15,110 BOLI death benefits - - - (1,155) Net Income excluding merger and acquisition costs $ 6,901 $ 6,647 $ 13,641 $ 13,955 Average Assets 2,207,728 2,008,178 2,177,203 1,963,010 Annualized Return on Average stockholders equity, excluding BOLI Death Benefits 1.25 % 1.32 % 1.25 % 1.42 % Average Stockholders Equity - GAAP $ 220,928 $ 201,614 $ 218,684 $ 198,917 Annualized Return on Average stockholders equity, excluding BOLI Death Benefits 12.49 % 13.19 % 12.48 % 14.03 % Earnings per share, excluding death activity of former employees Net Income $ 6,901 $ 6,647 $ 13,641 $ 15,110 BOLI death benefits - - - (1,155) After Tax deferred compensation reversal for former employee - - - (316) Net income excluding one time items $ 6,901 $ 6,647 $ 13,641 $ 13,639 Number of shares used in computation - basic 3,973,402 3,983,274 3,969,621 3,984,970 Earnings per share, excluding death activity of former employees non-GAAP 1.74 1.67 3.43 3.42 For the Three Months Ended For the Six Months Ended June 30 June 30 Reconciliation of net interest income on fully taxable equivalent basis 2022 2021 2022 2021 Total interest income $ 19,407 $ 18,075 $ 37,222 $ 36,370 Total interest expense 1,678 1,863 3,231 3,717 Net interest income 17,729 16,212 33,991 32,653 Tax equivalent adjustment 250 234 469 485 Net interest income (fully taxable equivalent) $ 17,979 $ 16,446 $ 34,460 $ 33,138 View original content: https://www.prnewswire.com/news-releases/citizens-financial-services-inc-reports-unaudited-second-quarter-2022-financial-results-301591469.html SOURCE Citizens Financial Services, Inc.

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