CITIZENS FINANCIAL SERVICES, INC. REPORTS UNAUDITED SECOND QUARTER 2024 FINANCIAL RESULT

About this update from Citizens Financial Services, Inc.

MANSFIELD, Pa. , July 30, 2024 /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, 2024 . Highlights The acquisition of HV Bancorp, Inc. ("HVB,") completed one year ago, has bolstered the Company's balance sheet growth and expanded its geographic reach into demographically attractive markets. The acquisition has resulted in positive increases to non-interest income driven by gains on loans sold and the gain on the sale of certain assets acquired through HVB's online lending platform known as Braavo. The Company executed the sale of HVB's Braavo division during the first quarter of 2024 and has been exiting the remaining lending relationships not included in the sale. The Company has experienced a modest increase in charge-offs on loans that were originated and sourced by HVB's Braavo division as it exits this business line. Net income for the first six months of 2024 was $12.3 million , which was $9.6 million , or 351.7% more than 2023's net income through June 30, 2023 due to the one-time merger and acquisition costs and the provision for credit losses on non-purchase credit deteriorated loans (the "NPC Provision") recorded in the second quarter of 2023. The effective tax rate for the first six months of 2024 was 17.4% compared to 13.4% in the comparable period in 2023. Net income was $5.3 million for the three months ended June 30, 2024 , which was $9.4 million more than the net loss for 2023's comparable period due to the one-time merger and acquisition costs and the NPC Provision recorded in the second quarter of 2023. The effective tax rate for the three months ended June 30, 2024 was 17.4% compared to 22.3% in the comparable period in 2023. Net interest income before the provision for credit losses was $42.3 million for the six months ended June 30, 2024 , an increase of $6.3 million , or 17.4%, over the same period a year ago. The provision for credit losses for the three and six months ended June 30, 2024 was $2.0 million and $2.8 million , respectively. The provision was significantly impacted by loans that were not sold as part of the Braavo sale that occurred in the first quarter of 2024. The vast majority of the Braavo loans that were retained after the sale were originated by HVB subsequent to the Company's initial loan due diligence procedures and were current from then until the acquisition close. The provision for the three and six months ended June 30, 2024 , directly attributable to these loans was $1,137,000 and $1,806,000 , respectively. As of June 30, 2024 , the Company has approximately $700,000 of Braavo loans that are performing. Return on average equity for the three and six months (annualized) ended June 30, 2024 was 6.73% and 7.91% compared to (6.62%) and 2.22% for the three and six months (annualized) ended June 30, 2023 . If the provision for the credit losses attributable to the Braavo loans and the gain on the sale of Braavo are excluded, the return on average equity for the three and six months (annualized) ended June 30, 2024 would have been 7.88% and 8.37%, respectively (1). Return on average tangible equity for the three and six months (annualized) ended June 30, 2024 was 10.76% and 12.64% compared to (9.19%) and 3.06% for the three and six months (annualized) ended June 30, 2023 . If the provision for the credit losses attributable to the Braavo loans and the gain on the sale of Braavo are excluded, the return on average tangible equity for the three and six months (annualized) ended June 30, 2024 would have been 12.59% and 13.37%. (1) Return on average assets for the three and six months (annualized) ended June 30, 2024 was 0.71% and 0.82% compared to (0.68%) and 0.23% for the three and six months (annualized) ended June 30, 2023 . If the provision for the credit losses attributable to the Braavo loans and the gain on the sale of Braavo are excluded, the return on average assets for the three and six months (annualized) ended June 30, 2024 would have been 0.83% and 0.87% (1). Six Months Ended June 30, 2024 Compared to 2023 For the six months ended June 30, 2024 , net income totaled $12,299,000 which compares to net income of $2,723,000 for the first six months of 2023, an increase of $9,576,000 . Basic earnings per share of $2.59 for the first six months of 2024 compared to $0.66 for the first six months last year. Annualized return on equity for the six months ended June 30, 2024 and 2023 was 7.91% and 2.22%, while annualized return on assets was 0.82% and 0.23%, respectively. The increase in performance when comparing 2024 to 2023 was due to the one time costs associated with the merger and the NPC Provision recorded in 2023. Net interest income before the provision for credit loss for the six months ended June 30, 2024 totaled $42,258,000 compared to $36,001,000 for the six months ended June 30, 2023 , resulting in an increase of $6,257,000 , or 17.4%. Average interest earning assets increased $500.7 million for the six months ended June 30, 2024 compared to the same period last year, primarily due to the HVB acquisition. Average loans increased $525.0 million while average investment securities decreased $35.9 million . The yield on interest earning assets increased 88 basis points to 5.52%, while the cost of interest-bearing liabilities increased 116 basis points to 2.99% due to the rise in market interest rates and competitive pressure. The tax effected net interest margin for the six months ended June 30, 2024 was 3.09% compared to 3.23% for the same period last year. The provision for credit losses for the six months ended June 30, 2024 was $2,787,000 compared to $4,853,000 for the six months ended June 30, 2023 , a decrease of $2,066,000 . The provision for 2024 was impacted by the Braavo loans as previously mentioned and an increase in past due and classified loans during the second quarter of 2024. As a result of the HVB acquisition during 2023, the Company recorded a $4.6 million provision for credit losses for loans acquired that did not have any credit deterioration at the time of purchase. Excluding the impact of the acquisition from 2023, the provision would have increased $2,525,000 when comparing the six month period of 2024 to 2023 with the increase being attributable to the Braavo loans and the increase in past due and substandard loans in 2024. Total non-interest income was $8,307,000 for the six months ended June 30, 2024 , which is $3,853,000 more than the non-interest income of $4,454,000 for the same period last year. The primary drivers were the gain on the sale of assets associated with Braavo and activity due to the HVB acquisition. As a result of the acquisition, service charges, gains on loans sold, earnings on bank owned life insurance and other income all increased. Earnings on bank owned life insurance also increased due to the passing of a former employee in the first quarter of 2024. During the first half of 2024, the Company experienced a smaller unrealized loss on its equity investment portfolio compared to 2023. Total non-interest expenses for the six months ended June 30, 2024 totaled $32,889,000 compared to $32,458,000 for the same period last year, which is an increase of $431,000 . Salary and benefit costs increased $4,314,000 due to an additional 74.2 FTEs as a result of the acquisition, merit increases for 2024, as well as an increase in health insurance costs of $712,000 . The increases in occupancy, furniture and fixtures, software expenses and amortization expenses was due to the acquisition and additional branches as part of it. FDIC insurance expense increased $409,000 due to the Company's increased size and the Bank's lower leverage capital ratio. Professional fees increased due to increased legal expenses, of which $201,000 was related to the sale of certain Braavo assets. Other expenses increased primarily due to the acquisition, with increases experienced in subscriptions, marketing and advertising, postage, printing, data communication expenses and FHLB letter of credit fees. Independent of the acquisition, other expenses increased due to insurance reimbursement received in 2023 to cover amounts previously charged-off through expense. Merger and acquisitions costs for the merger with HVB totaled $8,646,000 in 2023 and included professional and consulting fees, printing, travel, contract termination payments and severance-related expenses. The provision for income taxes increased $2,169,000 when comparing the six months ended June 30, 2024 to the same period in 2023 as a result of an increase in income before income tax of $11,745,000 . Three Months Ended June 30, 2024 Compared to June 30, 2023 For the three months ended June 30, 2024 , net income totaled $5,275,000 which compares to net loss of $4,144,000 for the comparable period of 2023, an increase of $9,419,000 . Basic earnings (loss) per share of $1.11 for the three months ended June 30, 2024 compares to ( $1.00 ) for the 2023 comparable period. Annualized return on equity for the three months ended June 30, 2024 and 2023 was 6.73% and (6.62%), while annualized return on assets was 0.71% and (0.68%), respectively. Net interest income before the provision for credit loss for the three months ended June 30, 2024 totaled $21,300,000 compared to $17,921,000 for the three months ended June 30, 2023 , resulting in an increase of $3,379,000 , or 18.9%. Average interest earning assets increased $444.8 million for the three months ended June 30, 2024 compared to the same period last year as a result of the HVB acquisition. Average loans increased $488.1 million while average investment securities decreased $41.3 million . The average cost on interest bearing liabilities increased 100 basis points to 3.00%. The tax effected net interest margin for the three months ended June 30, 2024 was 3.15% compared to 3.17% for the same period last year. The provision for credit losses for the three months ended June 30, 2024 was $2,002,000 compared to $4,853,000 for the three months ended June 30, 2023 , a decrease of $2,851,000 . The provision for 2024 was impacted by the Braavo loans as previously mentioned and an increase in past due and classified loans during the second quarter of 2024. As a result of the HVB acquisition during 2023, the Company recorded a $4.6 million provision for credit losses for loans acquired that did not have any credit deterioration at the time of purchase. Excluding the impact of the acquisition from 2023, the provision would have increased $1,740,000 when comparing the second quarter of 2024 to the second quarter of 2023 with the increase being attributable to the Braavo loans and the increase in past due and substandard loans in 2024. Total non-interest income was $3,336,000 for the three months ended June 30, 2024 , which is $1,056,000 more than the comparable period last year. As a result of the acquisition, service charges, gains on loans sold, earnings on bank owned life insurance and other income all increased. Total non-interest expenses for the three months ended June 30, 2024 totaled $16,246,000 compared to $20,680,000 for the same period last year, which is a decrease of $4,434,000 . Salary and benefit costs increased $1,701,000 due to an additional 67.5 FTEs as a result of the acquisition and merit increases for 2024. The increases in occupancy, furniture and fixtures, software expenses and amortization expenses was due to the acquisition and additional branches as part of it. FDIC insurance expense increased $184,000 due to the Company's increased size and the Bank's lower leverage capital ratio. Other expenses increased primarily due to the acquisition, with increases experienced in subscriptions, marketing and advertising, postage, printing, data communication expenses and FHLB letter of credit fees. Merger and acquisitions costs for the merger with HVB totaled $8,402,000 in the second quarter of 2023. The provision for income taxes increased $2,301,000 when comparing the three months ended June 30, 2024 to the same period in 2023 as a result of an increase in income before income tax of $11,720,000 . Balance Sheet and Other Information: At June 30, 2024 , total assets were $2.95 billion , compared to $2.98 billion at December 31, 2023 and $2.89 billion at June 30, 2023 . The loan to deposit ratio as of June 30, 2024 was 99.24% compared to 96.87% as of December 31, 2023 and 95.44% as of June 30, 2023 . Available for sale securities of $402.7 million at June 30, 2024 decreased $14.9 million from December 31, 2023 and $31.7 million from June 30, 2023 . The yield on the investment portfolio increased from 2.14% to 2.32% on a tax equivalent basis due to securities purchased during a higher rate environment and lower yielding securities maturing. Investment activity has been limited in the first half of 2024. Net loans as of June 30, 2024 totaled $2.23 billion an increase of $5.2 million from December 31, 2023 , due to an increase in student loans outstanding. Loans would have increased an additional $6.1 million , if not for the Braavo disposition. In comparison to June 30, 2023 , loans have grown $91.7 million with increases experienced in multiple portfolio sectors. The allowance for credit losses - loans totaled $22,797,000 at June 30, 2024 which is an increase of $1,199,000 from December 31, 2023 . The increase is due to change in expected prepayment speeds, an increase in past due and substandard loans and specific reserves on non-performing loans. The provision for credit losses on loans was $2,986,000 for the first half of 2024. Loan recoveries and charge-offs were $14,000 and $1,356,000 , respectively, for the six months ended June 30, 2024 with the majority of the charge-offs associated with loans acquired as part of the HVB acquisition that were originated after the Company performed its initial loan due diligence procedures and which were current from then until the acquisition close. The allowance as a percent of total loans was 1.01% as of June 30, 2024 and 0.94% as of December 31, 2023 . Non-performing assets totaled $17.9 million as of June 30, 2024 , an increase of $4.3 million since December 31, 2023 . The increase was driven by the Braavo relationships and one large commercial relationship, which was placed on non-accrual status during the second quarter of 2024. Loans past due 30-89 days totaled $20.7 million , an increase of $10.2 million from December 31, 2023 . The increase was driven by loans acquired as part of the HVB acquisition that matured during the second quarter and are in the process of being underwritten and extended in accordance with Company policies. Deposits decreased $48.4 million from December 31, 2023 , to $2.27 billion at June 30, 2024 . With the rise in interest rates, competitive pressure for deposits continues to be at the forefront. Additionally, we have numerous state and political organizations with seasonal funding timelines, which results in a decrease in balances in the first half of the year. At June 30, 2024 , the Bank estimates that balances held by customers in excess of the FDIC insurance limit ( $250,000 per insured account) totaled $1.04 billion , or 45.7% of the Bank's total deposits. Included in this balance are balances held through Intrafi, which provides customers with additional FDIC insurance, as well as deposits collateralized by securities (almost exclusively municipal deposits). The total of these items was $498.0 million , or 21.9% of the Bank's total deposits, as of June 30, 2024 . Stockholders' equity totaled $286.5 million at June 30, 2024 , compared to $279.7 million at December 31, 2023 , an increase of $6.8 million . Excluding accumulated other comprehensive loss (AOCI), stockholders equity increased $7.8 million and totals $312.4 million . The increase in stockholders equity, excluding AOCI, was attributable to net income for the six months ended June 30, 2024 totaling $12.3 million , offset by cash dividends for the half of 2024 totaling $4.6 million , net treasury and restricted stock activity of $165,000 . As a result of changes in market interest rates impacting the fair value of investment securities and swaps, AOCI decreased $1.0 million from December 31, 2023 . Dividend Declared On June 4, 2024 , the Board of Directors declared a cash dividend of $0.49 per share, which was paid on June 28, 2024 to shareholders of record at the close of business on June 14, 2024 . The quarterly cash dividend is an increase of 2.1% over the regular cash dividend of $0.475 per share declared one year ago, as adjusted for the 1% stock dividend declared in June 2024 , payable on June 28, 2024 to shareholders of record at the close of business on June 14, 2024 . 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 , 2024 2023 2024 2023 Income and Performance Ratios Net Income (Loss) $ 5,275 $ (4,144) $ 12,299 $ 2,723 Return on average assets (annualized) 0.71 % (0.68 %) 0.82 % 0.23 % Return on average equity (annualized) 6.73 % (6.62 %) 7.91 % 2.22 % Return on average tangible equity (annualized) (a) 10.76 % (9.19 %) 12.64 % 3.06 % Net interest margin (tax equivalent)(a) 3.15 % 3.17 % 3.09 % 3.23 % Earnings (loss) per share - basic (b) $ 1.11 $ (1.00) $ 2.59 $ 0.66 Earnings (loss) per share - diluted (b) $ 1.11 $ (1.00) $ 2.59 $ 0.66 Cash dividends paid per share (b) $ 0.485 $ 0.475 $ 0.970 $ 0.949 Number of shares used in computation - basic (b) 4,748,927 4,159,966 4,748,523 4,106,005 Number of shares used in computation - diluted (b) 4,753,697 4,159,966 4,753,918 4,106,005 Asset quality Allowance for credit losses - loans $ 22,797 $ 21,652 Non-performing assets $ 17,924 $ 13,638 Allowance for credit losses - loans to total loans 1.01 % 1.00 % Non-performing assets to total loans 0.79 % 0.63 % Annualized net charge-offs to total loans 0.12 % 0.00 % 0.12 % 0.00 % Equity Book value per share (b) $ 60.19 $ 55.38 Tangible Book value per share (a) (b) $ 41.49 $ 36.69 Market Value (Last reported trade of month) $ 44.94 $ 74.47 Common shares outstanding 4,759,486 4,706,768 Other Average Full Time Equivalent Employees 389.7 322.2 391.9 317.7 Loan to Deposit Ratio 99.24 % 95.44 % Trust assets under management $ 174,703 $ 169,956 Brokerage assets under management $ 368,379 $ 307,336 Balance Sheet Highlights June 30 , December 31 , June 30 , 2024 2023 2023 Assets $ 2,947,531 $ 2,975,321 $ 2,891,808 Investment securities 404,231 419,539 436,164 Loans (net of unearned income) 2,255,716 2,239,659 2,162,842 Allowance for credit losses - loans 22,797 21,598 21,652 Deposits 2,273,095 2,321,481 2,266,100 Stockholders' Equity 286,470 279,666 263,228 (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) 2024 2023 2023 ASSETS: Cash and due from banks: Noninterest-bearing $ 22,023 $ 37,733 $ 28,740 Interest-bearing 16,410 15,085 15,969 Total cash and cash equivalents 38,433 52,818 44,709 Interest bearing time deposits with other banks 3,820 4,070 4,814 Equity securities 1,570 1,938 1,849 Available-for-sale securities 402,661 417,601 434,315 Loans held for sale 14,227 9,379 14,940 Loans (net of allowance for credit losses - loans: $22,797 at June 30, 2024 ; $21,153 at December 31, 2023 and $21,652 at June 30, 2023 ) 2,232,919 2,227,683 2,141,190 Premises and equipment 20,899 21,384 21,382 Accrued interest receivable 10,782 11,043 9,283 Goodwill 85,758 85,758 84,758 Bank owned life insurance 49,746 49,897 50,194 Other intangibles 3,244 3,650 4,071 Fair value of derivative instruments - asset 13,111 13,687 16,395 Deferred tax asset 17,185 17,339 20,108 Other assets 53,176 59,074 43,800 TOTAL ASSETS $ 2,947,531 $ 2,975,321 $ 2,891,808 LIABILITIES: Deposits: Noninterest-bearing $ 501,991 $ 523,784 $ 553,097 Interest-bearing 1,771,104 1,797,697 1,713,003 Total deposits 2,273,095 2,321,481 2,266,100 Borrowed funds 334,829 322,036 318,200 Accrued interest payable 5,482 4,298 2,256 Fair value of derivative instruments - liability 7,319 7,922 9,303 Other liabilities 40,336 39,918 32,721 TOTAL LIABILITIES 2,661,061 2,695,655 2,628,580 STOCKHOLDERS' EQUITY: Preferred Stock $1.00 par value; authorized 3,000,000 shares; none issued in 2024 or 2023 - - - Common stock $1.00 par value; authorized 25,000,000 shares at June 30, 2024 , December 31, 2023 and June 30, 2023 : issued 5,207,343 at June 30, 2024 and 5,160,754 at December 31, 2023 and June 30, 2023 5,207 5,161 5,161 Additional paid-in capital 144,985 143,233 143,351 Retained earnings 178,588 172,975 162,499 Accumulated other comprehensive loss (25,932) (24,911) (30,980) Treasury stock, at cost: 447,857 at June 30, 2024 and 453,760 shares at December 31, 2023 and 456,986 shares at June 30, 2023 (16,378) (16,792) (16,803) TOTAL STOCKHOLDERS' EQUITY 286,470 279,666 263,228 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,947,531 $ 2,975,321 $ 2,891,808 CITIZENS FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENT OF INCOME (LOSS) (UNAUDITED) Three Months Ended Six Months Ended June 30 , June 30 , (in thousands, except share and per share data) 2024 2023 2024 2023 INTEREST INCOME: Interest and fees on loans $ 35,067 $ 24,117 $ 70,200 $ 46,666 Interest-bearing deposits with banks 262 127 505 198 Investment securities: Taxable 1,663 1,683 3,287 3,239 Nontaxable 520 572 1,052 1,189 Dividends 390 311 791 625 TOTAL INTEREST INCOME 37,902 26,810 75,835 51,917 INTEREST EXPENSE: Deposits 12,655 5,480 24,976 9,419 Borrowed funds 3,947 3,409 8,601 6,497 TOTAL INTEREST EXPENSE 16,602 8,889 33,577 15,916 NET INTEREST INCOME 21,300 17,921 42,258 36,001 Provision for credit losses 2,002 262 2,787 262 Provision for credit losses - acquisition day 1 non-PCD - 4,591 - 4,591 NET INTEREST INCOME AFTER PROVISION FOR CREDIT LOSSES 19,298 13,068 39,471 31,148 NON-INTEREST INCOME: Service charges 1,385 1,293 2,757 2,504 Trust 201 181 445 411 Brokerage and insurance 563 442 1,228 956 Gains on loans sold 479 169 896 214 Equity security losses, net (87) (74) (32) (292) Available for sale security losses, net - (51) - (51) Earnings on bank owned life insurance 328 234 996 452 Gain on sale of Braavo division - - 1,102 - Other 467 86 915 260 TOTAL NON-INTEREST INCOME 3,336 2,280 8,307 4,454 NON-INTEREST EXPENSES: Salaries and employee benefits 9,617 7,916 19,907 15,593 Occupancy 1,266 814 2,590 1,649 Furniture and equipment 295 162 531 313 Professional fees 698 387 1,401 768 FDIC insurance expense 509 325 1,034 625 Pennsylvania shares tax 330 298 640 596 Amortization of intangibles 147 31 296 62 Software expenses 494 372 1,008 723 ORE expenses (income) 175 (11) 162 15 Merger and acquisition expenses - 8,402 - 8,646 Other 2,715 1,984 5,320 3,468 TOTAL NON-INTEREST EXPENSES 16,246 20,680 32,889 32,458 Income (loss) before provision (benefit) for income taxes 6,388 (5,332) 14,889 3,144 Provision (benefit) for income tax expense 1,113 (1,188) 2,590 421 NET INCOME (LOSS) $ 5,275 $ (4,144) $ 12,299 $ 2,723 PER COMMON SHARE DATA: Net Income (loss) - Basic $ 1.11 $ (1.00) $ 2.59 $ 0.66 Net Income (loss) - Diluted $ 1.11 $ (1.00) $ 2.59 $ 0.66 Cash Dividends Paid $ 0.485 $ 0.475 $ 0.970 $ 0.949 Number of shares used in computation - basic 4,748,927 4,159,966 4,748,523 4,106,005 Number of shares used in computation - diluted 4,753,697 4,159,966 4,753,918 4,106,005 CITIZENS FINANCIAL SERVICES, INC. QUARTERLY CONDENSED, CONSOLIDATED INCOME (LOSS) STATEMENT INFORMATION (UNAUDITED) (in thousands, except per share data) Three Months Ended, June 30 , March 31 , Dec 31 , Sept 30 , June 30 , 2024 2024 2023 2023 2023 Interest income $ 37,902 $ 37,933 $ 38,512 $ 36,689 $ 26,810 Interest expense 16,602 16,975 16,657 14,285 8,889 Net interest income 21,300 20,958 21,855 22,404 17,921 Provision for credit losses 2,002 785 200 475 262 Provision for credit losses - acquisition day 1 non-PCD - - - - 4,591 Net interest income after provision for credit losses 19,298 20,173 21,655 21,929 13,068 Non-interest income 3,423 4,916 3,410 3,593 2,405 Investment securities (losses) gains, net (87) 55 79 69 (125) Non-interest expenses 16,246 16,643 15,920 16,444 20,680 Income (loss) before provision for income taxes 6,388 8,501 9,224 9,147 (5,332) Provision for income tax expense (benefit) 1,113 1,477 1,684 1,599 (1,188) Net income (loss) $ 5,275 $ 7,024 $ 7,540 $ 7,548 $ (4,144) Earnings (Loss) Per Share Basic $ 1.11 $ 1.48 $ 1.59 $ 1.59 $ (1.00) Earnings (Loss) Per Share Diluted $ 1.11 $ 1.48 $ 1.59 $ 1.59 $ (1.00) 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 , 2024 2023 Average Average Average Average Balance (1) Interest Rate Balance (1) Interest Rate (dollars in thousands) $ $ % $ $ % ASSETS Interest-bearing deposits at banks 18,353 232 5.11 18,193 82 1.79 Interest bearing time deposits at banks 3,820 30 3.16 6,000 45 2.99 Investment securities: Taxable 355,321 2,053 2.31 388,327 1,994 2.05 Tax-exempt (3) 105,379 658 2.50 113,674 725 2.55 Investment securities 460,700 2,711 2.35 502,001 2,719 2.17 Loans: (2)(3)(4) Residential mortgage loans 358,448 5,232 5.87 236,167 3,168 5.39 Construction loans 184,103 3,367 7.36 90,635 1,353 5.99 Commercial Loans 1,251,484 20,154 6.48 983,666 13,772 5.62 Agricultural Loans 346,107 4,482 5.21 345,467 4,221 4.90 Loans to state & political subdivisions 56,290 556 3.97 60,395 582 3.87 Other loans 68,805 1,383 8.08 60,770 1,136 7.50 Loans, net of discount (2)(3)(4) 2,265,237 35,174 6.25 1,777,100 24,232 5.47 Total interest-earning assets 2,748,110 38,147 5.58 2,303,294 27,078 4.72 Cash and due from banks 9,199 8,386 Bank premises and equipment 21,053 18,960 Other assets 195,528 102,155 Total non-interest earning assets 225,780 129,501 Total assets 2,973,890 2,432,795 LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities: NOW accounts 766,142 4,776 2.51 545,527 2,067 1.52 Savings accounts 299,318 391 0.53 314,745 265 0.34 Money market accounts 381,377 2,972 3.13 330,453 1,847 2.24 Certificates of deposit 457,570 4,516 3.97 283,694 1,301 1.84 Total interest-bearing deposits 1,904,407 12,655 2.67 1,474,419 5,480 1.49 Other borrowed funds 324,736 3,947 4.89 307,523 3,409 4.45 Total interest-bearing liabilities 2,229,143 16,602 3.00 1,781,942 8,889 2.00 Demand deposits 382,312 397,084 Other liabilities 49,051 3,379 Total non-interest-bearing liabilities 431,363 400,463 Stockholders' equity 313,384 250,390 Total liabilities & stockholders' equity 2,973,890 2,432,795 Net interest income 21,545 18,189 Net interest spread (5) 2.58 % 2.71 % Net interest income as a percentage of average interest-earning assets 3.15 % 3.17 % Ratio of interest-earning assets to interest-bearing liabilities 123 % 129 % (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 2024 and 2023. 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 , 2024 2023 Average Average Average Average Balance (1) Interest Rate Balance (1) Interest Rate (dollars in thousands) $ $ % $ $ % ASSETS Interest-bearing deposits at banks 30,119 445 2.97 16,395 108 1.33 Interest bearing time deposits at banks 3,937 60 3.06 6,028 90 3.00 Investment securities: Taxable 359,142 4,078 2.27 384,453 3,864 2.01 Tax-exempt (3) 106,438 1,332 2.50 117,025 1,505 2.57 Investment securities 465,580 5,410 2.32 501,478 5,369 2.14 Loans: (2)(3)(4) Residential mortgage loans 358,472 10,291 5.77 224,059 5,872 5.28 Construction loans 187,001 6,858 7.38 88,048 2,492 5.71 Commercial Loans 1,243,546 39,674 6.42 959,221 26,097 5.49 Agricultural Loans 345,287 8,887 5.18 344,882 8,474 4.95 Loans to state & political subdivisions 56,469 1,106 3.94 59,860 1,125 3.79 Other loans 89,472 3,599 8.09 79,199 2,828 7.20 Loans, net of discount (2)(3)(4) 2,280,247 70,415 6.21 1,755,269 46,888 5.39 Total interest-earning assets 2,779,883 76,330 5.52 2,279,170 52,455 4.64 Cash and due from banks 9,511 7,716 Bank premises and equipment 21,171 18,292 Other assets 181,792 96,542 Total non-interest earning assets 212,474 122,550 Total assets 2,992,357 2,401,720 LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities: NOW accounts 783,055 9,999 2.57 527,960 3,584 1.37 Savings accounts 300,704 778 0.52 317,063 471 0.30 Money market accounts 381,209 5,765 3.04 325,841 3,121 1.93 Certificates of deposit 439,995 8,434 3.86 281,482 2,243 1.61 Total interest-bearing deposits 1,904,963 24,976 2.64 1,452,346 9,419 1.31 Other borrowed funds 350,354 8,601 4.94 303,344 6,497 4.32 Total interest-bearing liabilities 2,255,317 33,577 2.99 1,755,690 15,916 1.83 Demand deposits 376,632 386,104 Other liabilities 49,266 15,157 Total non-interest-bearing liabilities 425,898 401,261 Stockholders' equity 311,142 244,769 Total liabilities & stockholders' equity 2,992,357 2,401,720 Net interest income 42,753 36,539 Net interest spread (5) 2.53 % 2.81 % Net interest income as a percentage of average interest-earning assets 3.09 % 3.23 % Ratio of interest-earning assets to interest-bearing liabilities 123 % 130 % (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 2024 and 2023. 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 CREDIT LOSSES (UNAUDITED) (Excludes Loans Held for Sale) (In Thousands) June 30 , March 31 , December 31 , September 30 , June 30 , 2024 2024 2023 2023 2023 Real estate: Residential $ 354,588 $ 357,779 $ 359,990 $ 356,381 $ 358,025 Commercial 1,110,269 1,115,900 1,092,887 1,081,123 1,080,513 Agricultural 327,057 318,413 314,802 314,164 312,302 Construction 180,157 184,506 195,826 175,320 156,927 Consumer 70,542 53,101 61,316 115,753 42,701 Other commercial loans 130,851 129,438 136,168 120,347 120,288 Other agricultural loans 26,247 24,345 30,673 26,648 30,615 State & political subdivision loans 56,005 56,177 57,174 56,660 61,471 Total loans 2,255,716 2,239,659 2,248,836 2,246,396 2,162,842 Less: allowance for credit losses - loans 22,797 21,598 21,153 21,455 21,652 Net loans $ 2,232,919 $ 2,218,061 $ 2,227,683 $ 2,224,941 $ 2,141,190 Past due and non-performing assets Total Loans past due 30-89 days and still accruing $ 20,652 $ 6,311 $ 10,457 $ 5,960 $ 4,828 Non-accrual loans $ 14,949 $ 14,693 $ 12,187 $ 13,139 $ 13,073 Loans past due 90 days or more and accruing 285 820 516 8 139 Non-performing loans $ 15,234 $ 15,513 $ 12,703 $ 13,147 $ 13,212 OREO 2,690 200 474 474 426 Total Non-performing assets $ 17,924 $ 15,713 $ 13,177 $ 13,621 $ 13,638 Three Months Ended Analysis of the Allowance for Credit Losses - Loans June 30 , March 31 , December 31 , September 30 , June 30 , (In Thousands) 2024 2024 2023 2023 2023 Balance, beginning of period $ 21,598 $ 21,153 $ 21,455 $ 21,652 $ 15,250 Impact of Adopting ASC 326 - - - - - Charge-offs (682) (674) (510) (808) (4) Recoveries 7 7 8 10 26 Net (charge-offs) recoveries (675) (667) (502) (798) 22 PCD allowance for credit loss at acquisition - - - - 1,689 Provision for credit losses - loans 1,874 1,112 200 601 100 Provision for credit losses - acquisition day 1 non-PCD - - - - 4,591 Balance, end of period $ 22,797 $ 21,598 $ 21,153 $ 21,455 $ 21,652 CITIZENS FINANCIAL SERVICES, INC. Reconciliation of GAAP and Non-GAAP Financial Measures (UNAUDITED) (Dollars in thousands, except per share data) As of June 30 , 2024 2023 Tangible Equity Stockholders Equity - GAAP $ 286,470 $ 263,228 Accumulated other comprehensive loss Intangible Assets (89,002) (88,829) Tangible Equity - Non-GAAP 197,468 174,399 Shares outstanding adjusted for June 2024 stock Dividend 4,759,486 4,753,357 Tangible Book value per share - Non-GAAP $ 41.49 $ 36.69 As of June 30 2024 2023 Tangible Equity per share Stockholders Equity per share - GAAP $ 60.19 $ 55.38 Adjustment for intangible assets (18.70) (18.69) Tangible Book value per share - Non-GAAP $ 41.49 $ 36.69 For the Three Months Ended For the Six Months Ended June 30 June 30 2024 2023 2024 2023 Return on Average Tangible Equity Average Stockholders Equity - GAAP $ 285,184 $ 221,557 $ 283,834 $ 214,753 Average Intangible Assets (89,119) (41,189) (89,220) (36,922) Average Tangible Equity - Non-GAAP 196,065 180,368 194,614 177,831 Net Income (Loss) - GAAP $ 5,275 $ (4,144) $ 12,299 $ 2,723 Annualized Return on Average Tangible Equity Non-GAAP 10.76 % -9.19 % 12.64 % 3.06 % For the Three Months Ended For the Six Months Ended June 30 June 30 2024 2023 2024 2023 Return on Average Assets and Equity Excluding sale of Braavo assets, net of legal fees, provision associated with Braavo loans remaining after sale and merger and acquisition costs Net Income (Loss) - GAAP $ 5,275 $ (4,144) $ 12,299 $ 2,723 After tax gain on sale of Braavo, net of legal fees - - (712) - After tax provision associated with Braavo loans remaining after sale 898 - 1,427 - After tax provision for credit losses - acquisition day 1 non-PCD - 3,627 - 3,627 After Tax merger and acquisition costs - 6,793 - 7,017 Net Income excluding merger and acquisition costs - Non-GAAP $ 6,173 $ 6,276 $ 13,014 $ 13,367 Average Assets 2,973,890 2,432,795 2,992,357 2,401,720 Annualized Return on Average assets, Excluding sale of Braavo assets, net of legal fees, provision associated with Braavo loans remaining after sale, net of tax and merger and acquisition costs - Non-GAAP 0.83 % 1.03 % 0.87 % 1.11 % Average Stockholders Equity - GAAP $ 313,384 $ 250,390 $ 311,142 $ 244,769 Annualized Return on Average stockholders equity, Excluding sale of Braavo assets, netof legal fees, provision associated with Braavo loans remaining after sale, net of tax andmerger and acquisition costs - Non-GAAP 7.88 % 10.03 % 8.37 % 10.92 % Average Tangible Equity - Non-GAAP 196,065 180,368 194,614 177,831 Annualized Return on Average Tangible Equity Excluding sale of Braavo assets, net oflegal fees, provision associated with Braavo loans remaining after sale, net of tax, and merger and acquisition costs - Non-GAAP 12.59 % 13.92 % 13.37 % 15.03 % For the Three Months Ended For the Six Months Ended June 30 June 30 2024 2023 2024 2023 Earnings per share, Excluding sale of Braavo assets, net of legal fees and merger and acquisition costs Net Income (Loss) - GAAP $ 5,275 $ (4,144) $ 12,299 $ 2,723 After tax gain on sale of Braavo, net of legal fees - - (712) - After tax provision associated with Braavo loans remaining after sale 898 - 1,427 - After tax provision for credit losses - acquisition day 1 non-PCD - 3,627 - 3,627 After Tax merger and acquisition costs - 6,793 - 7,017 Net income excluding one time items - Non-GAAP $ 6,173 $ 6,276 $ 13,014 $ 13,367 Number of shares used in computation - basic 4,753,697 4,159,966 4,753,918 4,106,005 Basic and Diluted earnings per share, Excluding sale of Braavo assets, net of legal fees,provision associated with Braavo loans remaining after sale, net of tax, and mergerand acquisition costs - Non-GAAP $ 1.30 $ 1.51 $ 2.74 $ 3.26 For the Three Months Ended For the Six Months Ended June 30 June 30 Reconciliation of net interest income on fully taxable equivalent basis 2024 2023 2024 2023 Total interest income $ 37,902 $ 26,810 $ 127,118 $ 37,222 Total interest expense 16,602 8,889 46,858 3,231 Net interest income 21,300 17,921 80,260 33,991 Tax equivalent adjustment 245 268 1,055 469 Net interest income (fully taxable equivalent) - Non-GAAP $ 21,545 $ 18,189 $ 81,315 $ 34,460 View original content: https://www.prnewswire.com/news-releases/citizens-financial-services-inc-reports-unaudited-second-quarter-2024-financial-result-302209998.html SOURCE CITIZENS FINANCIAL SERVICES, INC.

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