Citizens Financial Services : Reports Unaudited Full Year and Fourth Quarter 2019 Financial Results

CONTACT: KATHLEEN CAMPBELL, MARKETING DIRECTOR	FIRST CITIZENS COMMUNITY BANK
570-662-0422	15 S. MAIN STREET
570-662-8512 (FAX)	MANSFIELD, PA 16933

CITIZENS FINANCIAL SERVICES, INC. REPORTS UNAUDITED FULL YEAR AND FOURTH QUARTER 2019 FINANCIAL RESULTS

MANSFIELD, PENNSYLVANIA- January 23, 2020- Citizens Financial Services, Inc. (OTC Pink: CZFS), parent company of First Citizens Community Bank, released today its unaudited consolidated financial results for the three months and year ended December 31, 2019.

Highlights

• Citizens Financial Services, Inc. and MidCoast Community Bancorp, Inc. continue to prepare for the merger that is expected to close in the second quarter of 2020.
• Net income was $19.5 million for 2019, which is 8.1% higher than 2018's net income. The effective tax rate for 2019 was 16.4% compared to 15.9% for 2018 and was impacted by a reduction in tax-exempt income and non-deductible merger and acquisition-related expenses.
• Net income was $5.0 million for the three months ended December 31, 2019, which is 11.7% higher than the net income for 2018's comparable period. The effective tax rate for the three months ended December 31, 2019 was 16.6% compared to 15.8% in the comparable period in 2018.
• Net interest income before the provision for loan losses was $49.9 million for the year ended December 31, 2019, which was an increase of $2.8 million, or 5.8%, compared to 2018.
• Net loan growth totaled $32.7 million in 2019, or 3.1%, while deposit growth was $26.0 million, or 2.2%.
• Return on average equity for the three months (annualized) and the year ended December 31, 2019 was 13.05% and 13.00%, respectively, compared to 12.65% and 13.00% for the three months (annualized) and the year ended December 31, 2018, respectively.
• Return on average tangible equity for the three months (annualized) and the year ended December 31, 2019 was 15.52% and 15.58%, respectively, compared to 15.33% and 15.87% for the three months (annualized) and the year ended December 31, 2018, respectively. (1)
• Return on average assets for the three months (annualized) and the year ended December 31, 2019 was 1.37% and 1.34%, respectively, compared to 1.27% and 1.29% for the three months (annualized) and the year ended December 31, 2018, respectively.

2019 Compared to 2018

• For 2019, net income totaled $19,490,000 compared to net income of $18,034,000 for 2018, an increase of $1,456,000 or 8.1%. Basic earnings per share of $5.54 for 2019 compares to $5.09 for 2018. Return on equity for the years ended December 31, 2019 and 2018 was 13.00%, while return on assets was 1.34% and 1.29%, respectively.
• Net interest income before the provision for loan loss for 2019 totaled $49,940,000 compared to $47,184,000 for 2018, resulting in an increase of $2,756,000, or 5.8%. Average interest earning assets increased $52.0 million in 2019 compared to last year. Average loans increased $58.3

million while average investment securities decreased $9.4 million. The yield on interest earning assets increased 21 basis points to 4.59%, while the cost of interest-bearing liabilities increased 20 basis points to 1.09%. The increase in the cost of interest-bearing liabilities was due to the rise in the federal funds rate during 2018, which exceeded the reductions made in 2019. The tax effected net interest margin for 2019 was 3.72% compared to 3.66% for 2018.

• The provision for loan losses for 2019 was $1,675,000 compared to $1,925,000 for 2018, a decrease of $250,000. The decreased provision primarily reflects the lower level of loan growth experienced during 2019 compared to 2018.
• Total non-interest income was $8,386,000 for 2019, which is $651,000 more than non-interest income of $7,735,000 for 2018. The increase was driven by revenue increases in our wealth management division, which includes trust fees and brokerage and insurance commissions, as well as gains on our equity security portfolio and loans sold.
• Total non-interest expenses for 2019 totaled $33,341,000 compared to $31,557,000 for the same period last year, which is an increase of $1,784,000, or 5.7%. Salaries and benefits increased $1,362,000 primarily due to merit increases, employee commissions, health insurance costs, profit sharing and deferred compensation costs. Other expenses increased $460,000, which was primarily due to an increase in costs associated with operational charge-offs and fraud prevention. Merger and acquisition costs increased $466,000 as a result of the pending merger with MidCoast Community Bancorp, Inc. OREO expenses increased due to an increase in the number of OREO properties currently held by the Bank. Professional fees decreased as a result of settling a lawsuit in the first quarter of 2019 that resulted in significant expenses in 2018. FDIC insurance decreased due to receiving a credit from the FDIC in the third and fourth quarters.
• The provision for income taxes increased $417,000 when comparing 2019 to 2018 as a result of an increase in income before income tax of $1,873,000. The effective tax rate for 2019 was impacted by certain expenses being non-deductible for tax purposes.

Fourth Quarter of 2019 Compared to the Fourth Quarter of 2018

• For the three months ended December 31, 2019, net income totaled $5,043,000 which compares to net income of $4,515,000 for the comparable period in 2018, an increase of $528,000 or 11.7%. Basic earnings per share of $1.43 for three months ended December 31, 2019 compares to $1.28 for the 2018 comparable period. Annualized return on equity for the three months ended December 31, 2019 and 2018 was 13.05% and 12.65%, respectively, while annualized return on assets was 1.37% and 1.27%, respectively.
• Net interest income before the provision for loan loss for the three months ended December 31, 2019 totaled $12,790,000 compared to $12,243,000 for the three months ended December 31, 2018, resulting in an increase of $547,000, or 4.5%. Average interest earning assets increased $53.9 million for the three months ended December 31, 2019 compared to the same period last year. Average loans increased $44.0 million while average investment securities increased $10.1 million. The tax effected net interest margin for the three months ended December 31, 2019 was 3.74% compared to 3.73% for the same period last year.
• The provision for loan losses for the three months ended December 31, 2019 was $525,000 compared to $625,000 for the comparable period in 2018, a decrease of $100,000. The

decreased provision primarily reflects the lower net loan growth experienced during the fourth quarter of 2019 compared to the same period in 2018.

• Total non-interest income was $2,149,000 for the three months ended December 31, 2019, which is $172,000 more than the comparable period last year. The increase was driven by revenue increases in our wealth management division, which includes trust fees and brokerage and insurance commissions, as well as gains on our equity security portfolio and on loans sold.
• Total non-interest expenses for the three months ended December 31, 2019 totaled $8,368,000 compared to $8,235,000 for the same period last year, which is an increase of $133,000, or 1.6%. Salaries and benefits increased $484,000 primarily due to merit increases, employee commissions, health insurance costs, profit sharing and deferred compensation costs. Merger and acquisition costs increased as a result of the pending merger with MidCoast Community Bancorp, Inc. Professional fees decreased as a result of settling a lawsuit in the first quarter of 2019 that resulted in significant expenses in 2018. FDIC insurance decreased due to receiving a credit from the FDIC in the fourth quarter of 2019.
• The provision for income taxes increased $158,000 when comparing the three months ended December 31, 2019 to the same period in 2018. The effective tax rate for the three months ended December 31, 2019 and 2018 was 16.6% and 15.8%, respectively.

Balance Sheet and Other Information:

• At December 31, 2019, total assets were $1.47 billion, compared to $1.43 billion at December 31, 2018. The loan to deposit ratio as of December 31, 2019 was 92.11% compared to 91.29% as of December 31, 2018.
• Available for sale securities of $240.7 million at December 31, 2019 decreased $304,000 from December 31, 2018. Interest bearing time deposits with other banks decreased $1.2 million to $14.3 million at December 31, 2019.
• Net loans as of December 31, 2019 totaled $1.10 billion and increased $32.7 million from December 31, 2018. Net loan growth for 2019 was negatively impacted by transfers to other real estate owned as the result of a settlement with a customer in bankruptcy and several large loan payoffs. The growth in 2019 was in commercial and agricultural relationships, which continued the trend from 2018.
• The allowance for loan losses totaled $13,845,000 at December 31, 2019 which is an increase of $961,000 from December 31, 2018. The increase is due to recording a provision for loan losses of $1,625,000 and recoveries of $43,000, offset by charge-offs of $757,000. Net charge-offs as a percent of total loans for 2019 and 2018 was .06% and .02%, respectively. The allowance as a percent of total loans was 1.24% as of December 31, 2019 compared to 1.19% as of December 31, 2018. For the year, non-performing assets increased $1.0 million.
• Deposits increased $26.0 million from December 31, 2018, to $1.21 billion at December 31, 2019 as a result of growth in our south central Pennsylvania market. Borrowed funds decreased $6.1 million from December 31, 2018 to $85.1 million at December 31, 2019 as a result of the growth in deposits and equity.

• Stockholders' equity totaled $154.8 million at December 31, 2019, compared to $139.2 million at December 31, 2018, an increase of $15,545,000. The increase was attributable to net income of $19.5 million for 2019, offset by cash dividends of $6.3 million and net treasury stock activity of $845,000. As a result of changes in interest rates impacting the fair value of investment securities, the unrealized loss on available for sale investment securities, net of tax, increased $3.3 million from December 31, 2018.

Dividend Declared

On December 3, 2019, the Board of Directors declared a cash dividend of $0.450 per share, which was paid on December 27, 2019 to shareholders of record at the close of business on December 13, 2019. The quarterly cash dividend is an increase of 3.3% over the regular cash dividend of $0.436 per share declared one year ago, as adjusted for the 1% stock dividend declared in June 2019.

Citizens Financial Services, Inc. has nearly 1,700 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 non-Gaap measures to Gaap measures at the end of the press
   release

CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(UNAUDITED)
(Dollars in thousands, except per share data)		As of or For The		As of or For The
		Three Months Ended		Year Ended
		December 31,			December 31,
Income and Performance Ratios		2019		2018		2019		2018
$	5,043			$	19,490
Net Income	$	4,515	$	18,034
Return on average assets (annualized)		1.37%		1.27%		1.34%		1.29%
Return on average equity (annualized)		13.05%		12.65%		13.00%		13.00%
Return on average tangible equity (annualized) (a)		15.52%		15.33%		15.58%		15.87%
Net interest margin (tax equivalent)(a)		3.74%		3.73%		3.72%		3.66%
Earnings per share - basic (b)	$	1.43	$	1.28	$	5.54	$	5.09
Earnings per share - diluted (b)	$	1.43	$	1.28	$	5.53	$	5.09
Cash dividends paid per share (b)	$	0.450	$	0.436	$	1.781	$	1.725
Asset quality	$	13,845			$	13,845
Allowance for loan and lease losses	$	12,884	$	12,884
Non-performing assets	$	15,427	$	14,393	$	15,427	$	14,393
Allowance for loan and lease losses/total loans		1.24%		1.19%		1.24%		1.19%
Non-performing assets to total loans		1.38%		1.33%		1.38%		1.33%
Annualized net charge-offs to total loans		0.13%		0.05%		0.06%		0.02%
Equity	$	44.08			$	44.08
Book value per share (b)	$	40.45	$	40.45
Tangible Book value per share (a) (b)	$	37.09	$	33.41	$	37.09	$	33.41
Market Value (Last reported trade of month)	$	61.50	$	55.55	$	61.50	$	55.55
Common shares outstanding		3,525,061		3,504,596		3,525,061		3,504,596
Number of shares used in computation - basic (b)		3,515,962		3,532,858		3,520,832		3,539,674
Number of shares used in computation - diluted (b)		3,516,076		3,533,021		3,522,928		3,541,662
Other		14.04%				14.04%
Total Risk Based Capital Ratio			13.42%			13.42%
Tier 1 Risk Based Capital Ratio		12.79%		12.18%		12.79%		12.18%
Common Equity Tier 1 Risk Based Capital Ratio		12.11%		11.47%		12.11%		11.47%
Leverage Ratio		9.77%		9.15%		9.77%		9.15%
Average Full Time Equivalent Employees		255.6		258.7		259.2		261.3
Loan to Deposit Ratio		92.11%		91.29%		92.11%		91.29%
Trust assets under management	$	134,298	$	117,587	$	134,298	$	117,587
Brokerage assets under management	$	215,383	$	178,546	$	215,383	$	178,546
Balance Sheet Highlights	December 31,	December 31,
		2019		2018
Assets	$	1,466,339	$	1,430,712
Investment securities		241,407		241,526
Loans (net of unearned income)		1,115,569		1,081,883
Allowance for loan losses		13,845		12,884
Deposits		1,211,118		1,185,156
Stockholders' Equity		154,774		139,229

1. See reconcilation of Non-GAAP measures at the end of the press release
2. Prior period amounts were adjusted to reflect stock dividends.

CITIZENS FINANCIAL SERVICES, INC. CONSOLIDATED BALANCE SHEET (UNAUDITED)

	December 31,	December 31,
(in thousands except share data)		2019		2018
ASSETS:
Cash and due from banks:
Noninterest-bearing	$	17,727	$	15,327
Interest-bearing		793		1,470
Total cash and cash equivalents		18,520		16,797
Interest bearing time deposits with other banks		14,256		15,498
Equity securities		701		516
Available-for-sale securities		240,706		241,010
Loans held for sale		815		1,127
Loans (net of allowance for loan losses: $13,845 at December 31, 2019 and
$12,884 at December 31, 2018)		1,101,724		1,068,999
Premises and equipment		15,933		16,273
Accrued interest receivable		4,555		4,452
Goodwill		23,296		23,296
Bank owned life insurance		28,128		27,505
Other intangibles		1,346		1,623
Other assets		16,359		13,616
TOTAL ASSETS	$	1,466,339	$	1,430,712
LIABILITIES:
Deposits:
Noninterest-bearing	$	203,793	$	179,971
Interest-bearing		1,007,325		1,005,185
Total deposits		1,211,118		1,185,156
Borrowed funds		85,117		91,194
Accrued interest payable		1,088		1,076
Other liabilities		14,242		14,057
TOTAL LIABILITIES		1,311,565		1,291,483
STOCKHOLDERS' EQUITY:
Preferred Stock $1.00 par value; authorized
3,000,000 shares; none issued in 2019 or 2018		-		-
Common stock
$1.00 par value; authorized 25,000,000 shares at December 31, 2019 and December 31, 2018:
issued 3,938,668 at December 31 2019 and 3,904,212 at December 31, 2018		3,939		3,904
Additional paid-in capital		55,089		53,099
Retained earnings		110,800		99,727
Accumulated other comprehensive loss		(629)		(3,921)
Treasury stock, at cost: 413,607 at December 31, 2019 and 399,616 shares
at December 31, 2018		(14,425)		(13,580)
TOTAL STOCKHOLDERS' EQUITY		154,774		139,229
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	1,466,339	$	1,430,712

CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
		Three Months Ended		Year	Ended
		December 31,		December 31,
(in thousands, except per share data)		2019		2018		2019		2018
INTEREST INCOME:
Interest and fees on loans	$	13,906	$	13,470	$	54,911	$	50,458
Interest-bearing deposits with banks		96		101		407		319
Investment securities:
Taxable		1,076		1,107		4,673		3,790
Nontaxable		383		318		1,492		1,744
Dividends		126		92		497		447
TOTAL INTEREST INCOME		15,587		15,088		61,980		56,758
INTEREST EXPENSE:
Deposits		2,192		2,215		9,219		6,910
Borrowed funds		605		630		2,821		2,664
TOTAL INTEREST EXPENSE		2,797		2,845		12,040		9,574
NET INTEREST INCOME		12,790		12,243		49,940		47,184
Provision for loan losses		525		625		1,675		1,925
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		12,265		11,618		48,265		45,259
NON-INTEREST INCOME:
Service charges		1,189		1,212		4,687		4,667
Trust		161		157		750		705
Brokerage and insurance		298		219		1,141		790
Gains on loans sold		134		80		473		382
Equity security gains (losses), net		50		(9)		120		-
Available for sale security gains (losses), net		16		(11)		24		(19)
Earnings on bank owned life insurance		160		155		623		622
Other		141		174		568		588
TOTAL NON-INTEREST INCOME		2,149		1,977		8,386		7,735
NON-INTEREST EXPENSES:
Salaries and employee benefits		5,327		4,843		20,456		19,094
Occupancy		535		520		2,174		2,126
Furniture and equipment		173		142		674		536
Professional fees		322		652		1,423		1,925
FDIC insurance expense (credit)		(121)		90		75		417
Pennsylvania shares tax (credit)		(17)		(15)		808		835
Amortization of intangibles		61		72		259		296
Merger and acquisition		191		-		466		-
ORE expenses		68		66		376		158
Other		1,829		1,865		6,630		6,170
TOTAL NON-INTEREST EXPENSES		8,368		8,235		33,341		31,557
Income before provision for income taxes		6,046		5,360		23,310		21,437
Provision for income taxes		1,003		845		3,820		3,403
NET INCOME	$	5,043	$	4,515	$	19,490	$	18,034
PER COMMON SHARE DATA:
Net Income - Basic	$	1.43	$	1.28	$	5.54	$	5.09
Net Income - Diluted	$	1.43	$	1.28	$	5.53	$	5.09
Cash Dividends Paid	$	0.450	$	0.436	$	1.781	$	1.725
Number of shares used in computation - basic	3,515,962		3,532,858	3,520,832		3,539,674
Number of shares used in computation - diluted	3,516,076		3,533,021	3,522,928		3,541,662

CITIZENS FINANCIAL SERVICES, INC.
QUARTERLY CONDENSED, CONSOLIDATED INCOME STATEMENT INFORMATION
(UNAUDITED)				Three Months Ended,
(in thousands, except share data)		Dec 31,
			Sept 30,		June 30,		March 31,		Dec 31,
		2019		2019		2019		2019		2018
Interest income	$	15,587	$	15,874	$	15,502	$	15,017	$	15,088
Interest expense		2,797		2,975		3,166		3,102		2,845
Net interest income		12,790		12,899		12,336		11,915		12,243
Provision for loan losses		525		400		350		400		625
Net interest income after provision for loan losses		12,265		12,499		11,986		11,515		11,618
Non-interest income		2,083		2,140		1,997		2,022		1,997
Investment securities gains (losses), net		66		37		30		11		(20)
Non-interest expenses		8,368		8,414		8,237		8,322		8,235
Income before provision for income taxes		6,046		6,262		5,776		5,226		5,360
Provision for income taxes		1,003		1,066		930		821		845
Net income	$	5,043	$	5,196	$	4,846	$	4,405	$	4,515
Earnings Per Share Basic	$	1.43	$	1.48	$	1.38	$	1.24	$	1.28
Earnings Per Share Diluted	$	1.43	$	1.48	$	1.38	$	1.24	$	1.28

CITIZENS FINANCIAL SERVICES, INC.

CONSOLIDATED AVERAGE BALANCES, INTEREST, YIELDS AND RATES, AND NET INTEREST MARGIN ON A FULLY TAX-EQUIVALENT BASIS (UNAUDITED)

		Three Months Ended December 31,
		2019			2018
	Average		Average	Average		Average
	Balance (1)	Interest	Rate	Balance (1)	Interest	Rate
(dollars in thousands)	$	$	%	$	$	%
ASSETS
Interest-bearing deposits at banks	9,876	4	0.16	9,294	6	0.26
Interest bearing time deposits at banks	14,256	92	2.59	14,997	95	2.50
Investment securities	247,416	1,687	2.73	237,342	1,602	2.70
Loans: (2)(3)(4)
Residential mortgage loans	217,007	2,889	5.28	215,418	2,859	5.29
Construction loans	14,659	188	5.09	32,393	406	4.97
Commercial Loans	416,867	5,676	5.40	389,705	5,338	5.43
Agricultural Loans	363,339	4,222	4.61	323,191	3,826	4.70
Loans to state & political subdivisions	95,107	936	3.90	102,409	1,066	4.13
Other loans	9,704	179	7.32	9,610	184	7.61
Loans, net of discount (2)(3)(4)	1,116,683	14,090	5.01	1,072,726	13,679	5.06
Total interest-earning assets	1,388,231	15,873	4.54	1,334,359	15,382	4.57
Cash and due from banks	5,945			6,751
Bank premises and equipment	15,936			16,253
Other assets	57,448			69,318
Total non-interest earning assets	79,329			92,322
Total assets	1,467,560			1,426,681
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts	334,345	526	0.62	327,144	515	0.62
Savings accounts	222,342	206	0.37	201,903	137	0.27
Money market accounts	169,114	458	1.07	171,149	527	1.22
Certificates of deposit	263,679	1,002	1.51	298,395	1,036	1.38
Total interest-bearing deposits	989,480	2,192	0.88	998,591	2,215	0.88
Other borrowed funds	109,236	605	2.20	93,440	630	2.67
Total interest-bearing liabilities	1,098,716	2,797	1.01	1,092,031	2,845	1.03
Demand deposits	199,365			178,479
Other liabilities	14,832			13,410
Total non-interest-bearing liabilities	214,197			191,889
Stockholders' equity	154,647			142,761
Total liabilities & stockholders' equity	1,467,560			1,426,681
Net interest income		13,076			12,537
Net interest spread (5)			3.53%			3.54%
Net interest income as a percentage
of average interest-earning assets			3.74%			3.73%
Ratio of interest-earning assets
to interest-bearing liabilities			126%			122%

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 2019 and 2018. See reconciliation of non-gaap measures at the end of the press release

1. Income on non-accrual loans is accounted for on a cash basis, and the loan balances are included in interest-earning assets.
2. 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)

		2019	Year Ended December 31,	2018
	Average		Average	Average		Average
	Balance (1)	Interest	Rate	Balance (1)	Interest	Rate
(dollars in thousands)	$	$	%	$	$	%
ASSETS
Interest-bearing deposits at banks	9,693	23	0.24	8,929	20	0.22
Interest bearing time deposits at banks	15,085	384	2.55	12,734	299	2.35
Investment securities	247,334	7,059	2.85	256,719	6,445	2.51
Loans: (2)(3)(4)
Residential mortgage loans	215,749	11,473	5.32	214,458	11,205	5.22
Construction loans	19,085	984	5.16	25,698	1,235	4.80
Commercial Loans	415,681	22,741	5.47	388,037	20,611	5.31
Agricultural Loans	344,586	15,879	4.61	305,003	13,638	4.47
Loans to state & political subdivisions	97,780	3,845	3.93	101,496	3,759	3.70
Other loans	9,684	740	7.64	9,558	737	7.71
Loans, net of discount (2)(3)(4)	1,102,565	55,662	5.05	1,044,250	51,185	4.90
Total interest-earning assets	1,374,677	63,128	4.59	1,322,632	57,949	4.38
Cash and due from banks	6,168			6,807
Bank premises and equipment	16,074			16,338
Other assets	57,038			54,722
Total non-interest earning assets	79,280			77,867
Total assets	1,453,957			1,400,499
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts	331,906	2,282	0.69	326,040	1,642	0.50
Savings accounts	218,240	814	0.37	192,727	323	0.17
Money market accounts	164,872	1,978	1.20	164,916	1,618	0.98
Certificates of deposit	277,946	4,145	1.49	276,213	3,327	1.20
Total interest-bearing deposits	992,964	9,219	0.93	959,896	6,910	0.72
Other borrowed funds	109,041	2,821	2.59	117,912	2,664	2.26
Total interest-bearing liabilities	1,102,005	12,040	1.09	1,077,808	9,574	0.89
Demand deposits	187,991			171,353
Other liabilities	14,074			12,647
Total non-interest-bearing liabilities	202,065			184,000
Stockholders' equity	149,887			138,691
Total liabilities & stockholders' equity	1,453,957			1,400,499
Net interest income		51,088			48,375
Net interest spread (5)			3.50%			3.49%
Net interest income as a percentage
of average interest-earning assets			3.72%			3.66%
Ratio of interest-earning assets
to interest-bearing liabilities			125%			123%

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 2019 and 2018. See reconciliation of non-gaap measures at the end of the press release

1. Income on non-accrual loans is accounted for on a cash basis, and the loan balances are included in interest-earning assets.
2. Interest rate spread represents the difference between the average rate earned on interest-earning assets

and the average rate paid on interest-bearing liabilities.

CITIZENS FINANCIAL SERVICES, INC.

CONSOLIDATED SUMMARY OF LOANS BY TYPE; NON-PERFORMING ASSETS; and ALLOWANCE FOR LOAN LOSSES (UNAUDITED)

(Excludes Loans Held for Sale) (In Thousands)

	December 31,	September 30,		June 30,		March 31,	December 31,
		2019		2019		2019		2019		2018
Real estate:
Residential	$	217,088	$	215,717	$	213,014	$	214,635	$	215,305
Commercial		342,023		349,269		347,430		334,371		319,265
Agricultural		311,464		305,948		294,332		295,547		284,520
Construction		15,519		11,448		20,950		18,611		33,913
Consumer		9,947		9,709		9,854		9,773		9,858
Other commercial loans		69,970		76,785		76,179		74,323		74,118
Other agricultural loans		55,112		50,334		41,689		43,245		42,186
State & political subdivision loans		94,446		95,824		96,174		100,412		102,718
Total loans		1,115,569		1,115,034		1,099,622		1,090,917		1,081,883
Less: allowance for loan losses		13,845		13,679		13,304		13,084		12,884
Net loans	$	1,101,724	$	1,101,355	$	1,086,318	$	1,077,833	$	1,068,999
Past due and non-performing assets
Total Loans past due 30-89 days and still accruing	$	2,711	$	2,672	$	2,599	$	4,470	$	3,308
Non-accrual loans	$	11,536	$	13,223	$	12,534	$	11,700	$	13,724
Loans past due 90 days or more and accruing		487		103		175		64		68
Non-performing loans	$	12,023	$	13,326	$	12,709	$	11,764	$	13,792
OREO		3,404		3,497		3,853		4,295		601
Total Non-performing assets	$	15,427	$	16,823	$	16,562	$	16,059	$	14,393
		3 Months		3 Months		3 Months		3 Months		3 Months
Analysis of the Allowance for loan Losses		Ended		Ended		Ended		Ended		Ended
September 30,	September 30,		June 30,		March 31,	December 31,
(In Thousands)		2019		2019		2019		2018		2018
Balance, beginning of period	$	13,679	$	13,304	$	13,084	$	12,884	$	12,383
Charge-offs		(370)		(34)		(139)		(214)		(140)
Recoveries		11		9		9		14		16
Net (charge-offs) recoveries		(359)		(25)		(130)		(200)		(124)
Provision for loan losses		525		400		350		400		625
Balance, end of period	$	13,845	$	13,679	$	13,304	$	13,084	$	12,884

CITIZENS FINANCIAL SERVICES, INC.

Reconciliation of GAAP and Non-GAAP Financial Measures

(UNAUDITED)

(Dollars in thousands, except per share data)

		As of
		December 31,
Tangible Equity		2019		2018
$	154,774
Stockholders Equity - GAAP	$	139,229
Accumulated other comprehensive loss		629		3,921
Intangible Assets		(24,642)		(24,919)
Non-GAAP Tangible Equity		130,761		118,231
Shares outstanding adjusted for June 2019 stock Dividend		3,525,061		3,539,052
Tangible Book value per share (a)	$	37.09	$	33.41
		As of
		December 31,
Tangible Equity per share		2019		2018
$	43.91
Stockholders Equity - GAAP	$	39.34
Adjustments for accumulated other comprehensive loss		0.17		1.11
Book value per share		44.08		40.45
Adjustments for intangible assets		(6.99)		(7.04)
Tangible Book value per share	$	37.09	$	33.41
		For the Three Months Ended		For the Year Ended
		December 31,		December 31,
Return on Average Tangible Equity		2019		2018		2019		2018
$	154,317			$	148,189
Average Stockholders Equity - GAAP	$	136,765	$	133,451
Average Accumulated Other Comprehensive Loss		(330)		(5,996)		(1,697)		(5,240)
Average Intangible Assets		24,653		24,950		24,757		25,062
Average Non-GAAP Tangible Equity		129,994		117,811		125,129		113,629
Net Income	$	5,043	$	4,515	$	19,490	$	18,034
Annualized Return on Average Tangible Equity		15.52%		15.33%		15.58%		15.87%
		For the Three Months Ended		For the Year Ended
Reconciliation of net interest income on fully taxable equivalent basis		December 31,		December 31,
	2019		2018		2019		2018
Total interest income	$	15,587	$	15,088	$	61,980	$	56,758
Total interest expense		2,797		2,845		12,040		9,574
Net interest income		12,790		12,243		49,940		47,184
Tax equivalent adjustment		286		294		1,148		1,191
Net interest income (fully taxable equivalent)	$	13,076	$	12,537	$	51,088	$	48,375

(a) Prior period amounts were adjusted to reflect stock dividends.