Citizens Financial Services, Inc. Reports Unaudited Third Quarter 2021 Financial Results

About this update from Citizens Financial Services, Inc.

MANSFIELD, Pa. , Oct. 26, 2021 /PRNewswire/ -- Citizens Financial Services, Inc. (OTC Pink: CZFS), parent company of First Citizens Community Bank , released today its unaudited consolidated financial results for the three and nine months ended September 30, 2021 . Highlights Net income was $22.2 million for the nine months ended September 30, 2021 , which is 24.0% higher than the net income for 2020's comparable period. The effective tax rate for the nine months ended September 30, 2021 was 17.3% compared to 17.2% in the comparable period in 2020. Net income was $7.1 million for the three months ended September 30, 2021 , which is 11.8% less than the net income for 2020's comparable period. The effective tax rate for the three months ended September 30, 2021 was 18.3% compared to 18.0% in the comparable period in 2020. Net interest income before the provision for loan losses was $49.2 million for the nine months ended September 30, 2021 , an increase of $3.6 million , or 7.9%, over the same period a year ago. Non-performing assets decreased $2.9 million from year end and $5.4 million since September 30, 2020 and totaled $10,218,000 as of September 30, 2021 . As a percent of loans, non-performing assets totaled 0.71%, 0.93% and 1.14% as of September 30, 2021 , December 31, 2020 and September 30, 2020 . Return on average equity for the three and nine months (annualized) ended September 30, 2021 was 13.65% and 14.66% compared to 17.36% and 13.85% for the three and nine months (annualized) ended September 30, 2020 . Return on average tangible equity for the three and nine months (annualized) ended September 30, 2021 was 16.25% and 17.53% compared to 21.11% and 16.72% for the three and nine months (annualized) ended September 30, 2020 (non-GAAP). (1) Return on average assets for the three and nine months (annualized) ended September 30, 2021 was 1.40% and 1.49% compared to 1.75% and 1.43% for the three and nine months (annualized) ended September 30, 2020 . Covid 19 pandemic response and loan profile During 2021, the Company participated in the Paycheck Protection Program (PPP) for loans provided under the auspices of the Small Business Administration (SBA). As of September 30, 2021 , 267 loans with a balance of $20.8 million remain outstanding under this program. From January 1, 2021 to September 30, 2021 , we issued 388 loans with aggregate balances of $24.3 million . As of September 30, 2021 , 26 loans that were issued under this program in 2020 remain outstanding and have a balance of $2.9 million . The loans earn interest at 1% per annum and the processing fee paid by the SBA will be accreted into income over the life of the loans. The SBA has issued guidance for forgiveness with a streamlined approach for loans of $150,000 or less. Of the PPP loans outstanding, 226 loans, or 84.6% of the remaining PPP loans, had an original balance less than $150,000 . The outstanding balance for these 226 loans as of September 30, 2021 was approximately $7.1 million . Under our COVID loan modification program, during 2021 we provided relief to 19 customers with outstanding balances of $26.7 million , which includes residential, commercial and agricultural customers. As of September 30, 2021 , all loans had returned to their original terms that were modified under this program. The Company tracks industry concentrations to identify risks that could lead to additional credit exposure. As a result of the Covid 19 pandemic, the Company has determined that Hotels/Motels, restaurants, and amusement/theme parks represent a higher level of credit risk. At September 30, 2021 , the Company had limited loan concentrations to these industries as follows: Hotels/Motels - $73.3 million or 5.1% of outstanding loans Restaurants - $25.3 million or 1.8% of outstanding loans Amusement/Theme parks - $9.4 million , or 0.7% of outstanding loans Nine Months Ended September 30, 2021 Compared to 2020 For the nine months ended September 30, 2021 , net income totaled $22,174,000 which compares to net income of $17,876,000 for the first nine months of 2020, an increase of $4,298,000 or 24.0%. Basic earnings per share of $5.62 for the first nine months of 2021 compares to $4.69 for the first nine months last year. Annualized return on equity for the nine months ended September 30, 2021 and 2020 was 14.66% and 13.85%, while annualized return on assets was 1.49% and 1.43%, respectively. Net interest income before the provision for loan loss for the nine months ended September 30, 2021 totaled $49,243,000 compared to $45,646,000 for the nine months ended September 30, 2020 , resulting in an increase of $3,597,000 , or 7.9%. Average interest earning assets increased $312.6 million for the nine months ended September 30, 2021 compared to the same period last year, primarily due to the assets acquired as part of the MidCoast acquisition in the second quarter of 2020 being outstanding for the entire period of 2021 and organic growth primarily in the Delaware region. Average loans increased $158.1 million while average investment securities increased $82.1 million . The yield on interest earning assets decreased 55 basis points to 3.94%, while the cost of interest-bearing liabilities decreased 17 basis points to 0.51%. The yield on interest earning assets in 2020 benefitted approximately $820,000 , or 5 basis points from the pay-off of two purchase credit impaired loans acquired as part of The First National Bank of Fredericksburg acquisition in 2015. The decrease in the cost of interest-bearing liabilities was due to the Federal Reserve rate cuts made in response to the COVID-19 pandemic in the first quarter of 2020. The tax effected net interest margin for the nine months ended September 30, 2021 was 3.55% compared to 3.96% for the same period last year. The provision for loan losses for the nine months ended September 30, 2021 was $1,550,000 compared to $1,500,000 for the nine months ended September 30, 2020 , an increase of $50,000 . The increase in the provision is attributable to loans maturing that were acquired as part of the MidCoast acquisition, which were refinanced with the Company and are subject to the Company's allowance calculation. Total non-interest income was $9,793,000 for the nine months ended September 30, 2021 , which is $2,335,000 more than the non-interest income of $7,458,000 for the same period last year. The primary drivers were the earnings of bank owned life insurance, which increased $1,129,000 as the result of the passing of two former employees, an increase in equity security gains of $564,000 as a result of market performance and an increase in service charge income of $372,000 as a result of waiving fees in 2020 in response to the pandemic. Total non-interest expenses for the nine months ended September 30, 2021 totaled $30,667,000 compared to $30,026,000 for the same period last year, which is an increase of $641,000 . The primary driver of the increase was salary and benefit costs and occupancy costs, which increased compared to the same period in 2020 due to the additional headcount and branches acquired as part of the MidCoast acquisition. The provision for income taxes increased $943,000 when comparing the nine months ended September 30, 2021 to the same period in 2020 as a result of an increase in income before income tax of $5,241,000 . The effective tax rate was 17.3% and 17.2% for the nine months ended September 30, 2021 and 2020, respectively. It should be noted the earnings on bank owned life insurance are exempt from federal income tax. Third Quarter of 2021 Compared to the Third Quarter of 2020 For the three months ended September 30, 2021 , net income totaled $7,064,000 which compares to net income of $8,007,000 for the comparable period of 2020, a decrease of $943,000 or 11.9%. Basic earnings per share of $1.79 for the three months ended September 30, 2021 compares to $2.02 for the 2020 comparable period. Annualized return on equity for the three months ended September 30, 2021 and 2020 was 13.65% and 17.36%, while annualized return on assets was 1.40% and 1.75%, respectively. Net interest income before the provision for loan losses for the three months ended September 30, 2021 totaled $16,590,000 compared to $16,470,000 for the three months ended September 30, 2020 , resulting in an increase of $120,000 . Average interest earning assets increased $202.9 million for the three months ended September 30, 2021 compared to the same period last year as a result of the organic loan and deposit growth. Average loans increased $66.3 million while average investment securities increased $95.1 million and average interest bearing cash holdings increased $43.4 million . The tax effected net interest margin for the three months ended September 30, 2021 was 3.47% compared to 3.88% for the same period last year, which was impacted by the decrease in the average yield on interest earning assets of 49 basis points to 3.83%. The provision for loan losses for the three months ended September 30, 2021 was $400,000 , a $150,000 decrease to the comparable period in 2020. The decrease in the provision is attributable to the impact the COVID-19 pandemic had on the local and national economy in the third quarter of 2020. Total non-interest income was $2,852,000 for the three months ended September 30, 2021 , which is $686,000 less than the comparable period last year. The primary drivers were a decrease in the gains on loans sold of $560,000 due to a decrease in the amount of loans sold compared to the third quarter of 2020 and a decrease in other income of $330,000 due to fee income on derivative transactions for customers. Total non-interest expenses for the three months ended September 30, 2021 totaled $10,400,000 compared to $9,692,000 for the same period last year, which is an increase of $708,000 , or 7.3%. The primary driver of the increase was salary and benefit costs, which increased compared to the same period in 2020 due to the additional headcount in the Delaware region. Other expenses increased $318,000 due to computer, data and appraisal expenses. The provision for income taxes decreased $181,000 when comparing the three months ended September 30, 2021 to the same period in 2020 as a result of a decrease in income before income tax of $1,124,000 . The effective tax rate was 18.3% and 18.0% for the three months ended September 30, 2021 and 2020, respectively. Balance Sheet and Other Information: At September 30, 2021 , total assets were $2.05 billion compared to $1.89 billion at December 31, 2020 and $1.86 billion at September 30, 2020 . The loan to deposit ratio as of September 30, 2021 was 82.88% compared to 88.45% as of December 31, 2020 and 87.96% as of September 30, 2020 . Available for sale securities of $397.0 million at September 30, 2021 increased $101.9 million from December 31, 2020 and $109.2 million from September 30, 2020 . The yield on the investment portfolio decreased from 2.66% to 2.05% on a tax equivalent basis due to securities purchased at a discount that were called in the first quarter of 2020 and purchases made in a lower rate environment in the second half of 2020 and all of 2021. Net loans as of September 30, 2021 totaled $1.43 billion and increased $36.1 million from December 31, 2020 as a result of organic growth in the Delaware market offset by PPP forgiveness. The allowance for loan losses totaled $17,334,000 at September 30, 2021 which is an increase of $1,519,000 from December 31, 2020 . The increase is due to recording a provision for loan losses of $1,550,000 and recoveries of $118,000 , offset by charge-offs of $149,000 . The allowance as a percent of total loans was 1.20% as of September 30, 2021 and 1.13% as of December 31, 2020 . Deposits increased $152.1 million from December 31, 2020 , to $1.74 billion at September 30, 2021 , primarily due to customers holding more cash due to the pandemic and government stimulus funds provided to customers. Brokered CD's decreased $23.8 million . Non-interest-bearing deposits increased $53.3 million due to the PPP program and additional cash holdings by customers. Stockholders' equity totaled $209.0 million at September 30, 2021 , compared to $194.3 million at December 31, 2020 , an increase of $14.7 million . The increase was attributable to net income for the nine months ended September 30, 2021 totaling $22.2 million , offset by cash dividends totaling $5.5 million and net treasury stock activity of $468,000 . As a result of changes in interest rates impacting the fair value of investment securities and derivative instruments, accumulated other comprehensive income, decreased $1.6 million from December 31, 2020 . Dividend Declared On September 7, 2021 , the Board of Directors declared a cash dividend of $0.470 per share, which was paid on September 30, 2021 to shareholders of record at the close of business on September 16, 2021 . This quarterly cash dividend is an increase of 3.10% over the regular cash dividend of $0.456 per share declared one year ago, as adjusted for the 1% stock dividend declared in June 2021 . Citizens Financial Services, Inc. has nearly 1,900 shareholders, the majority of whom reside in markets where its offices are located. Note: This press release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are not historical facts; rather, they are statements based on the Company's current expectations regarding its business strategies and their intended results and its future performance. Forward-looking statements are preceded by terms such as "expects," "believes," "anticipates," "intends" and similar expressions. Forward-looking statements are not guarantees of future performance. Numerous risks and uncertainties could cause or contribute to the Company's actual results, performance and achievements to be materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to these differences include, without limitation, 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 share and per share data) As of or For The As of or For The Three Months Ended Nine Months Ended September 30 , September 30 , 2021 2020 2021 2020 Income and Performance Ratios Net Income $ 7,064 $ 8,007 $ 22,174 $ 17,876 Return on average assets (annualized) 1.40% 1.75% 1.49% 1.43% Return on average equity (annualized) 13.65% 17.36% 14.66% 13.85% Return on average tangible equity (annualized) (a) 16.25% 21.11% 17.53% 16.72% Net interest margin (tax equivalent)(a) 3.47% 3.88% 3.55% 3.96% Earnings per share - basic (b) $ 1.79 $ 2.02 $ 5.62 $ 4.69 Earnings per share - diluted (b) $ 1.79 $ 2.02 $ 5.62 $ 4.69 Cash dividends paid per share (b) $ 0.470 $ 0.456 $ 1.391 $ 1.445 Number of shares used in computation - basic (b) 3,949,508 3,956,997 3,945,962 3,808,264 Number of shares used in computation - diluted (b) 3,949,603 3,956,997 3,945,969 3,810,289 Asset quality Allowance for loan and lease losses $ 17,334 $ 15,169 Non-performing assets $ 10,218 $ 15,631 Allowance for loan and lease losses/total loans 1.20% 1.11% Non-performing assets to total loans 0.71% 1.14% Annualized net charge-offs (recoveries) to total loans 0.00% 0.06% 0.00% 0.02% Equity Book value per share (b) $ 52.63 $ 47.02 Tangible Book value per share (a) (b) $ 44.27 $ 38.71 Market Value (Last reported trade of month) $ 62.50 $ 44.00 Common shares outstanding 3,952,081 3,921,408 Other Average Full Time Equivalent Employees 297.2 289.6 Loan to Deposit Ratio 82.88% 87.96% Trust assets under management $ 148,360 $ 137,127 Brokerage assets under management $ 273,488 $ 227,134 Balance Sheet Highlights September 30 , December 31 , September 30 , 2021 2020 2020 Assets $ 2,047,203 $ 1,891,674 $ 1,858,344 Investment securities 399,262 297,120 289,534 Loans (net of unearned income) 1,442,908 1,405,281 1,365,879 Allowance for loan losses 17,334 15,815 15,169 Deposits 1,740,969 1,588,858 1,552,753 Stockholders' Equity 208,967 194,259 189,051 (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) September 30 , December 31 , September 30 , (in thousands except share data) 2021 2020 2020 ASSETS: Cash and due from banks: Noninterest-bearing $ 17,466 $ 16,374 $ 15,922 Interest-bearing 84,505 52,333 59,387 Total cash and cash equivalents 101,971 68,707 75,309 Interest bearing time deposits with other banks 11,274 13,758 13,758 Equity securities 2,219 1,931 1,696 Available-for-sale securities 397,043 295,189 287,838 Loans held for sale 3,199 14,640 19,320 Loans (net of allowance for loan losses: $17,334 at September 30, 2021 ; $15,815 at December 31, 2020 and $15,169 at September 30, 2020 ) 1,425,574 1,389,466 1,350,710 Premises and equipment 17,201 16,948 17,720 Accrued interest receivable 5,231 5,998 6,164 Goodwill 31,376 31,376 31,376 Bank owned life insurance 30,518 32,589 32,408 Other intangibles 1,677 1,668 1,538 Other assets 19,920 19,404 20,507 TOTAL ASSETS $ 2,047,203 $ 1,891,674 $ 1,858,344 LIABILITIES: Deposits: Noninterest-bearing $ 357,078 $ 303,762 $ 276,286 Interest-bearing 1,383,891 1,285,096 1,276,467 Total deposits 1,740,969 1,588,858 1,552,753 Borrowed funds 78,200 88,838 99,602 Accrued interest payable 823 1,017 1,006 Other liabilities 18,244 18,702 15,932 TOTAL LIABILITIES 1,838,236 1,697,415 1,669,293 STOCKHOLDERS' EQUITY: Preferred Stock $1.00 par value; authorized 3,000,000 shares; none issued in 2021 or 2020 - - - Common stock $1.00 par value; authorized 25,000,000 shares at September 30, 2021 , December 31, 2020 and September 30, 2020 : issued 4,388,901 at September 30, 2021 and 4,350,342 at December 31, 2020 and September 30, 2020 4,389 4,350 4,350 Additional paid-in capital 78,370 75,908 75,867 Retained earnings 140,920 126,627 121,203 Accumulated other comprehensive income 969 2,587 2,865 Treasury stock, at cost: 436,820 at September 30, 2021 and 428,492 shares at December 31, 2020 and 428,934 shares at September 30, 2020 (15,681) (15,213) (15,234) TOTAL STOCKHOLDERS' EQUITY 208,967 194,259 189,051 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,047,203 $ 1,891,674 $ 1,858,344 CITIZENS FINANCIAL SERVICES, INC. CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) Three Months Ended Nine Months Ended September 30 , September 30 , (in thousands, except share and per share data) 2021 2020 2021 2020 INTEREST INCOME: Interest and fees on loans $ 16,505 $ 16,718 $ 49,569 $ 46,763 Interest-bearing deposits with banks 118 106 335 298 Investment securities: Taxable 1,074 979 2,865 3,212 Nontaxable 561 485 1,652 1,337 Dividends 84 98 291 275 TOTAL INTEREST INCOME 18,342 18,386 54,712 51,885 INTEREST EXPENSE: Deposits 1,422 1,635 4,545 5,279 Borrowed funds 330 281 924 960 TOTAL INTEREST EXPENSE 1,752 1,916 5,469 6,239 NET INTEREST INCOME 16,590 16,470 49,243 45,646 Provision for loan losses 400 550 1,550 1,500 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 16,190 15,920 47,693 44,146 NON-INTEREST INCOME: Service charges 1,210 1,112 3,479 3,107 Trust 182 199 674 542 Brokerage and insurance 408 352 1,190 941 Gains on loans sold 295 855 1,109 1,282 Equity security gains (losses), net 72 (33) 288 (276) Available for sale security gains, net 162 185 212 302 Earnings on bank owned life insurance 165 180 1,643 514 Other 358 688 1,198 1,046 TOTAL NON-INTEREST INCOME 2,852 3,538 9,793 7,458 NON-INTEREST EXPENSES: Salaries and employee benefits 6,568 6,102 19,312 17,411 Occupancy 728 714 2,222 1,891 Furniture and equipment 123 267 407 587 Professional fees 310 417 1,153 1,180 FDIC insurance expense 129 135 387 341 Pennsylvania shares tax 339 275 856 809 Amortization of intangibles 48 57 146 162 Merger and acquisition - - - 2,179 Software expenses 336 324 1,003 817 ORE expenses 130 30 383 221 Other 1,689 1,371 4,798 4,428 TOTAL NON-INTEREST EXPENSES 10,400 9,692 30,667 30,026 Income before provision for income taxes 8,642 9,766 26,819 21,578 Provision for income taxes 1,578 1,759 4,645 3,702 NET INCOME $ 7,064 $ 8,007 $ 22,174 $ 17,876 PER COMMON SHARE DATA: Net Income - Basic $ 1.79 $ 2.02 $ 5.62 $ 4.69 Net Income - Diluted $ 1.79 $ 2.02 $ 5.62 $ 4.69 Cash Dividends Paid $ 0.470 $ 0.456 $ 1.391 $ 1.445 Number of shares used in computation - basic 3,949,508 3,956,997 3,945,962 3,808,264 Number of shares used in computation - diluted 3,949,603 3,956,997 3,945,969 3,810,289 CITIZENS FINANCIAL SERVICES, INC. QUARTERLY CONDENSED, CONSOLIDATED INCOME STATEMENT INFORMATION (UNAUDITED) (in thousands, except per share data) Three Months Ended, Sept 30 , June 30 , March 31 , Dec 31 , Sept 30 , 2021 2021 2021 2020 2020 Interest income $ 18,342 $ 18,075 $ 18,295 $ 18,411 $ 18,386 Interest expense 1,752 1,863 1,854 1,866 1,916 Net interest income 16,590 16,212 16,441 16,545 16,470 Provision for loan losses 400 500 650 900 550 Net interest income after provision for loan losses 16,190 15,712 15,791 15,645 15,920 Non-interest income 2,618 2,677 3,998 3,726 3,386 Investment securities gains (losses), net 234 29 237 238 152 Non-interest expenses 10,400 10,320 9,947 10,821 9,692 Income before provision for income taxes 8,642 8,098 10,079 8,788 9,766 Provision for income taxes 1,578 1,451 1,616 1,561 1,759 Net income $ 7,064 $ 6,647 $ 8,463 $ 7,227 $ 8,007 Earnings Per Share Basic $ 1.79 $ 1.69 $ 2.14 $ 1.83 $ 2.02 Earnings Per Share Diluted $ 1.79 $ 1.69 $ 2.14 $ 1.83 $ 2.02 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 September 30 , 2021 2020 Average Balance (1) Interest Average Rate Average Balance (1) Interest Average Rate (dollars in thousands) $ $ % $ $ % ASSETS Short-term investments: Interest-bearing deposits at banks 111,392 40 0.14 67,954 14 0.08 Total short-term investments 111,392 40 0.14 67,954 14 0.08 Interest bearing time deposits at banks 12,129 78 2.55 14,143 92 2.59 Investment securities: Taxable 264,740 1,158 1.75 192,641 1,077 2.24 Tax-exempt (3) 107,125 709 2.65 84,097 614 2.92 Investment securities 371,865 1,867 2.01 276,738 1,691 2.45 Loans: (2)(3)(4) Residential mortgage loans 203,426 2,417 4.71 209,161 2,807 5.34 Construction loans 67,780 671 3.93 29,087 356 4.87 Commercial Loans 745,313 8,976 4.78 652,380 8,472 5.17 Agricultural Loans 344,365 3,728 4.29 356,164 3,971 4.44 Loans to state & political subdivisions 49,673 437 3.49 83,671 872 4.15 Other loans 16,678 347 8.25 30,460 401 5.24 Loans, net of discount (2)(3)(4) 1,427,235 16,576 4.61 1,360,923 16,879 4.93 Total interest-earning assets 1,922,621 18,561 3.83 1,719,758 18,676 4.32 Cash and due from banks 6,542 7,350 Bank premises and equipment 17,259 17,802 Other assets 71,329 90,238 Total non-interest earning assets 95,130 115,390 Total assets 2,017,751 1,835,148 LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities: NOW accounts 466,981 383 0.33 406,635 211 0.21 Savings accounts 297,470 74 0.10 247,414 96 0.15 Money market accounts 258,872 163 0.25 218,682 215 0.39 Certificates of deposit 336,782 802 0.94 382,551 1,113 1.16 Total interest-bearing deposits 1,360,105 1,422 0.41 1,255,282 1,635 0.52 Other borrowed funds 80,275 330 1.63 98,350 281 1.14 Total interest-bearing liabilities 1,440,380 1,752 0.48 1,353,632 1,916 0.56 Demand deposits 358,716 280,457 Other liabilities 11,683 16,611 Total non-interest-bearing liabilities 370,399 297,068 Stockholders' equity 206,972 184,448 Total liabilities & stockholders' equity 2,017,751 1,835,148 Net interest income 16,809 16,760 Net interest spread (5) 3.35% 3.76% Net interest income as a percentage of average interest-earning assets 3.47% 3.88% Ratio of interest-earning assets to interest-bearing liabilities 133% 127% (1) Averages are based on daily averages. (2) Includes loan origination and commitment fees. (3) Tax exempt interest revenue is shown on a tax equivalent basis for proper comparison using a statutory federal income tax rate of 21% for 2021 and 2020. See reconciliation of GAAP and non-gaap measures at the end of the press release (4) Income on non-accrual loans is accounted for on a cash basis, and the loan balances are included in interest-earning assets. (5) Interest rate spread represents the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities. CITIZENS FINANCIAL SERVICES, INC. CONSOLIDATED AVERAGE BALANCES, INTEREST, YIELDS AND RATES, AND NET INTEREST MARGIN ON A FULLY TAX-EQUIVALENT BASIS (UNAUDITED) Nine Months Ended September 30 , 2021 2020 Average Balance (1) Interest Average Rate Average Balance (1) Interest Average Rate (dollars in thousands) $ $ % $ $ % ASSETS Short-term investments: Interest-bearing deposits at banks 109,272 86 0.11 35,580 23 0.09 Total short-term investments 109,272 86 0.11 35,580 23 0.09 Interest bearing time deposits at banks 12,952 249 2.57 14,266 275 2.57 Investment securities: Taxable 238,438 3,156 1.76 185,220 3,487 2.51 Tax-exempt (3) 103,559 2,091 2.69 74,664 1,693 3.02 Investment securities 341,997 5,247 2.05 259,884 5,180 2.66 Loans: (2)(3)(4) Residential mortgage loans 203,300 7,464 4.91 212,912 8,450 5.30 Construction loans 52,409 1,602 4.09 25,715 952 4.95 Commercial Loans 732,554 26,914 4.91 556,133 22,282 5.35 Agricultural Loans 351,478 11,322 4.31 357,498 12,096 4.52 Loans to state & political subdivisions 54,994 1,505 3.66 89,407 2,709 4.05 Other loans 22,912 1,028 6.00 17,878 794 5.93 Loans, net of discount (2)(3)(4) 1,417,647 49,835 4.70 1,259,543 47,283 5.01 Total interest-earning assets 1,881,868 55,417 3.94 1,569,273 52,761 4.49 Cash and due from banks 6,560 7,643 Bank premises and equipment 17,212 17,152 Other assets 75,818 75,238 Total non-interest earning assets 99,590 100,033 Total assets 1,981,458 1,669,306 LIABILITIES AND STOCKHOLDERS' EQUITY Interest-bearing liabilities: NOW accounts 450,636 1,086 0.32 374,347 904 0.32 Savings accounts 285,124 249 0.12 237,873 387 0.22 Money market accounts 248,495 502 0.27 196,985 810 0.55 Certificates of deposit 357,460 2,708 1.01 333,044 3,178 1.27 Total interest-bearing deposits 1,341,715 4,545 0.45 1,142,249 5,279 0.62 Other borrowed funds 87,200 924 1.42 92,120 960 1.39 Total interest-bearing liabilities 1,428,915 5,469 0.51 1,234,369 6,239 0.68 Demand deposits 335,188 246,424 Other liabilities 15,724 16,390 Total non-interest-bearing liabilities 350,912 262,814 Stockholders' equity 201,631 172,123 Total liabilities & stockholders' equity 1,981,458 1,669,306 Net interest income 49,948 46,522 Net interest spread (5) 3.43% 3.81% Net interest income as a percentage of average interest-earning assets 3.55% 3.96% Ratio of interest-earning assets to interest-bearing liabilities 132% 127% (1) Averages are based on daily averages. (2) Includes loan origination and commitment fees. (3) Tax exempt interest revenue is shown on a tax equivalent basis for proper comparison using a statutory federal income tax rate of 21% for 2021 and 2020. See reconciliation of GAAP and non-gaap measures at the end of the press release (4) Income on non-accrual loans is accounted for on a cash basis, and the loan balances are included in interest-earning assets. (5) Interest rate spread represents the difference between the average rate earned on interest-earning assets and the average rate paid on interest-bearing liabilities. CITIZENS FINANCIAL SERVICES, INC. CONSOLIDATED SUMMARY OF LOANS BY TYPE; NON-PERFORMING ASSETS; and ALLOWANCE FOR LOAN LOSSES (UNAUDITED) (Excludes Loans Held for Sale) (In Thousands) September 30 , June 30 , March 31 , December 31 , September 30 , 2021 2021 2021 2020 2020 Real estate: Residential $ 204,853 $ 202,171 $ 203,273 $ 201,911 $ 208,084 Commercial 657,485 641,633 605,547 596,255 535,456 Agricultural 312,442 310,274 315,313 315,158 310,702 Construction 68,408 63,065 42,651 35,404 28,656 Consumer 31,042 8,684 26,181 30,277 30,625 Other commercial loans 92,188 104,349 109,168 114,169 129,731 Other agricultural loans 28,562 33,720 41,378 48,779 40,790 State & political subdivision loans 47,928 51,213 60,890 63,328 81,835 Total loans 1,442,908 1,415,109 1,404,401 1,405,281 1,365,879 Less: allowance for loan losses 17,334 16,931 16,560 15,815 15,169 Net loans $ 1,425,574 $ 1,398,178 $ 1,387,841 $ 1,389,466 $ 1,350,710 Past due and non-performing assets Total Loans past due 30-89 days and still accruing $ 1,482 $ 1,495 $ 2,383 $ 4,120 $ 3,449 Non-accrual loans $ 8,858 $ 9,082 $ 10,680 $ 10,732 $ 11,711 Loans past due 90 days or more and accruing 83 49 478 525 1,194 Non-performing loans $ 8,941 $ 9,131 $ 11,158 $ 11,257 $ 12,905 OREO 1,277 1,811 1,720 1,836 2,726 Total Non-performing assets $ 10,218 $ 10,942 $ 12,878 $ 13,093 $ 15,631 3 Months 3 Months 3 Months 3 Months 3 Months Ended Ended Ended Ended Ended Analysis of the Allowance for loan Losses September 30 , June 30 , March 31 , December 31 , September 30 , (In Thousands) 2021 2021 2021 2020 2020 Balance, beginning of period $ 16,931 $ 16,560 $ 15,815 $ 15,169 $ 14,827 Charge-offs (7) (138) (4) (276) (237) Recoveries 10 9 99 22 29 Net (charge-offs) recoveries 3 (129) 95 (254) (208) Provision for loan losses 400 500 650 900 550 Balance, end of period $ 17,334 $ 16,931 $ 16,560 $ 15,815 $ 15,169 CITIZENS FINANCIAL SERVICES, INC. Reconciliation of GAAP and Non-GAAP Financial Measures (UNAUDITED) (Dollars in thousands, except share and per share data) As of September 30 2021 2020 Tangible Equity Stockholders Equity - GAAP $ 208,967 $ 189,051 Accumulated other comprehensive income (969) (2,865) Intangible Assets (33,053) (32,914) Tangible Equity - Non-GAAP 174,945 153,272 Shares outstanding adjusted for June 2021 stock Dividend 3,952,081 3,959,967 Tangible Book value per share $ 44.27 $ 38.71 As of September 30 2021 2020 Tangible Equity per share Stockholders Equity per share - GAAP $ 52.88 $ 47.74 Adjustments for accumulated other comprehensive income (0.25) (0.72) Book value per share 52.63 47.02 Adjustments for intangible assets (8.36) (8.31) Tangible Book value per share - Non-GAAP $ 44.27 $ 38.71 For the Three Months Ended For the Nine Months Ended September 30 September 30 2021 2020 2021 2020 Return on Average Tangible Equity Average Stockholders Equity - GAAP $ 209,181 $ 187,486 $ 203,645 $ 173,979 Average Accumulated Other Comprehensive income (2,209) (3,038) (2,014) (1,856) Average Intangible Assets (33,038) (32,730) (33,021) (29,548) Average Tangible Equity - Non-GAAP 173,934 151,718 168,610 142,575 Net Income $ 7,064 8,007 $ 22,174 $ 17,876 Annualized Return on Average Tangible Equity 16.25% 21.11% 17.53% 16.72% For the Three Months Ended For the Nine Months Ended September 30 September 30 Reconciliation of net interest income on fully taxable equivalent basis 2021 2020 2021 2020 Total interest income $ 18,342 $ 18,386 $ 54,712 $ 51,885 Total interest expense 1,752 1,916 5,469 6,239 Net interest income 16,590 16,470 49,243 45,646 Tax equivalent adjustment 219 290 705 876 Net interest income (fully taxable equivalent) $ 16,809 $ 16,760 $ 49,948 $ 46,522 View original content: https://www.prnewswire.com/news-releases/citizens-financial-services-inc-reports-unaudited-third-quarter-2021-financial-results-301408583.html SOURCE Citizens Financial Services, Inc.

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