Form 8-K CITIZENS FINANCIAL SERVI For: Jan 21

citizens financial services, inc. reports unaudited full year and fourth quarter 2021 financial results

MANSFIELD, PENNSYLVANIA— January 21, 2022 – 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, 2021.

Highlights

•	Net income was $29.1 million for 2021, which is 16.0% higher than 2020’s net income. The effective tax rate for 2021 was 17.6% compared to 17.3% in 2020.

•	Net income was $6.9 million for the three months ended December 31, 2021, which is 3.9% less than the net income for 2020’s comparable period. The effective tax rate for the three months ended December 31, 2021 was 18.3% compared to 17.8% in the comparable period in 2020.

•	Net interest income before the provision for loan losses was $66.1 million for the year ended December 31, 2021, an increase of $3.9 million, or 6.3%, over 2020.

•	Non-performing assets decreased $4.3 million during 2021 and totaled $8,842,000 as of December 31, 2021. As a percent of loans, non-performing assets decreased from 0.93% at December 31, 2020 to 0.61% at December 31, 2021.

•	Return on average equity for the three months (annualized) and the year ended December 31, 2021 was 13.11% and 14.26% compared to 15.20% and 14.21% for the three months (annualized) and the year ended December 31, 2020, respectively.

•	Return on average tangible equity (non-GAAP) for the three months (annualized) and the year ended December 31, 2021 was 15.53% and 17.01% compared to 18.37% and 17.16% for the three months (annualized) and the year ended December 31, 2020, respectively. (1)

•	Return on average assets for the three months (annualized) and the year ended December 31, 2021 was 1.34% and 1.45% compared to 1.55% and 1.46% for the three months (annualized) and the year ended December 31, 2020, respectively.

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 December 31, 2021, 64 loans with a balance of $6.8 million remain outstanding under this program. During 2021, we originated 388 loans with aggregate balances of $24.3 million. As of December 31, 2021, 6 loans that were originated under this program in 2020 remain outstanding and have a balance of $806,000. 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, 46 loans, or 71.9% of the remaining PPP loans, had an original balance less than $150,000. The outstanding balance for these 46 loans as of December 31, 2021 was approximately $1.5 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 December 31, 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 risk 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 December 31, 2021, the Company had limited loan concentrations to these industries as follows:

o	Hotels/Motels - $82.4 million or 5.7% of outstanding loans

o	Restaurants - $17.7 million or 1.2% of outstanding loans

o	Amusement/Theme parks - $8.9 million, or 0.6% of outstanding loans

2021 Compared to 2020

•

For 2021, net income totaled $29,118,000 which compares to net income of $25,103,000 for 2020, an increase of $4,015,000 or 16.0%.  Basic earnings per share of $7.38 for 2021 compares to $6.53 for last year.  Return on equity for 2021 and 2020 was 14.26% and 14.21%, while  return on assets was 1.45% and 1.46%, respectively.

•

Net interest income before the provision for loan loss for 2021 totaled $66,112,000 compared to $62,191,000 for 2020, resulting in an increase of $3,921,000, or 6.3%.  Average interest earning assets increased $287.8 million for 2021 compared to 2020, 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 $133.4 million while average investment securities increased $88.5 million. The yield on interest earning assets decreased 53 basis points to 3.89%, while the cost of interest-bearing liabilities decreased 15 basis points to 0.49%. The yield on interest earning assets in 2020 benefitted approximately $820,000 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 2021 was 3.52% compared to 3.92% for last year.

•	The provision for loan losses for 2021 was $1,550,000 compared to $2,400,000 for 2020, a decrease of $850,000.  The decrease in the provision is due to less organic loan growth in 2021 compared to 2020 and improved credit metrics for the Bank in 2021.

•

Total non-interest income was $12,305,000 for 2021, which is $883,000 more than the non-interest income of $11,422,000 for 2020. The primary drivers were the earnings on bank owned life insurance, which increased $1,133,000 as the result of the passing of two former employees, an increase in equity security gains of $380,000 as a result of market performance and an increase in service charge income of $534,000 as a result of waiving fees in 2020 in response to the pandemic. Other income decreased $576,000 in 2021 compared to 2020 due to a decrease in  fee income on derivative transactions for customers. The gain on loans sold decreased $885,000 due to decrease in the number of loans sold in 2021 compared to 2020 due to fewer customers refinancing loans.

•

Total non-interest expenses for 2021 totaled $41,550,000 compared to $40,847,000 for the same period last year, which is an increase of $703,000. The primary driver of the increase was salary and benefit costs and occupancy costs, which increased compared to 2020 due to the additional headcount and branches acquired as part of the MidCoast acquisition.

•

The provision for income taxes increased $936,000 when comparing 2021 to 2020 as a result of an increase in income before income tax of $4,951,000. The effective tax rate was 17.6% and 17.3% for 2021 and 2020, respectively. It should be noted the earnings on bank owned life insurance are exempt from federal income tax.

Fourth Quarter of 2021 Compared to the Fourth Quarter of 2020

•

For the three months ended December 31, 2021, net income totaled $6,944,000 which compares to net income of $7,227,000 for the comparable period of 2020, a decrease of $283,000 or 3.9%.  Basic earnings per share of $1.76 for the three months ended December 31, 2021 compares to $1.83 for the 2020 comparable period. Annualized return on equity for the three months ended December 31, 2021 and 2020 was 13.11% and 15.20%, while annualized return on assets was 1.34% and 1.55%, respectively.

•

Net interest income before the provision for loan losses for the three months ended December 31, 2021 totaled $16,869,000 compared to $16,545,000 for the three months ended December 31, 2020, resulting in an increase of $324,000. Average interest earning assets increased $214.5 million for the three months ended December 31, 2021 compared to the same period last year as a result of the interest bearing cash, investments and  organic loan growth funded by deposit growth.  Average loans increased $59.8 million while average investment securities increased $107.3 million and average interest bearing cash holdings increased $49.9 million. The tax effected net interest margin for the three months ended December 31, 2021 was 3.44% compared to 3.82% for the same period last year, which was impacted by the decrease in the average yield on interest earning assets of 47 basis points to 3.77%.

•

No provision for loan losses  was recorded in the fourth quarter of 2021 due to improved credit metrics in the fourth quarter and limited loan activity in the fourth quarter. The provision for the fourth quarter of 2020 was $900,000 due to $39.4 million of net organic growth during that quarter. The provision for 2020 was also impacted more heavily by the COVID-19 pandemic.

•

Total non-interest income was $2,512,000 for the three months ended December 31, 2021, which is $1,452,000 less than the comparable period last year.  The primary drivers were a decrease in the gains on loans sold of $712,000 due to a decrease in the amount of loans sold compared to the fourth quarter of 2020 and a decrease in other income of $728,000 due to fee income on derivative transactions for customers.

•

Total non-interest expenses for the three months ended December 31, 2021 totaled $10,883,000 compared to $10,821,000 for the same period last year, which is an increase of $62,000, or 0.6%. The primary driver of the increase was other expenses, which increased $432,000, which was driven by a partial settlement of the Company’s pension plan in the fourth quarter due to lump sum distributions to former employees of the Company.

•

The provision for income taxes decreased $7,000 when comparing the three months ended December 31, 2021 to the same period in 2020 as a result of a decrease in income before income tax of $290,000.  The effective tax rate was 18.3% and 17.8% for the three months ended December 31, 2021 and 2020, respectively.

Balance Sheet and Other Information:

•	At December 31, 2021, total assets were $2.14 billion compared to $1.89 billion at December 31, 2020. The loan to deposit ratio as of December 31, 2021 was 78.51% compared to 88.45% as of December 31, 2020.

•

Available for sale securities of $412.4 million at December 31, 2021 increased $117.2 million from December 31, 2020. The yield on the investment portfolio decreased from 2.55% to 1.96% 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 December 31, 2021 totaled $1.42 billion and increased $34.8 million from December 31, 2020 as a result of organic growth in the Delaware market offset by PPP loan forgiveness.

•

The allowance for loan losses totaled $17,304,000 at December 31, 2021 which is an increase of $1,489,000 from December 31, 2020.  The increase is due to recording a provision for loan losses of $1,550,000 and recoveries of $153,000, offset by charge-offs of $214,000. The allowance as a percent of total loans was 1.20% as of December 31, 2021 and 1.13% as of December 31, 2020.

•

Deposits increased $247.3 million from December 31, 2020, to $1.84 billion at December 31, 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 $54.3 million due to additional cash holdings by customers.

•

Borrowed funds decreased $14.9 million from December 31, 2020 to $74.0 million at December 31, 2021. The Company paid off $26.8 million of long term borrowings during the year, which were offset by a $2.1 million increase in repurchase agreements and the issuance of $10.0 million of subordinated debt in the second quarter of 2021.

•

Stockholders’ equity totaled $212.5 million at December 31, 2021, compared to $194.3 million at December 31, 2020, an increase of $18.2 million. The increase was attributable to net income for 2021 totaling $29.1 million, offset by cash dividends totaling $7.4 million and net treasury stock activity of $934,000.  As a result of changes in interest rates impacting the fair value of investment securities, derivative instruments and the Company’s pension plan, accumulated other comprehensive income, decreased $2.7 million from December 31, 2020.

Dividend Declared

On December 6, 2021, the Board of Directors declared a cash dividend of $0.470 per share, which was paid on December 30, 2021 to shareholders of record at the close of business on December 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, duration and impact of the COVID-19 pandemic; 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.

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								Year Ended
		December 31,								December 31,
		2021				2020				2021				2020
Income and Performance Ratios
Net Income		$	6,944			$	7,227			$	29,118			$	25,103
Return on average assets (annualized)			1.34	%			1.55	%			1.45	%			1.46	%
Return on average equity (annualized)			13.11	%			15.20	%			14.26	%			14.21	%
Return on average tangible equity (annualized) (a)			15.53	%			18.37	%			17.01	%			17.16	%
Net interest margin (tax equivalent)(a)			3.44	%			3.82	%			3.52	%			3.92	%
Earnings per share - basic (b)		$	1.76			$	1.83			$	7.38			$	6.53
Earnings per share - diluted (b)		$	1.76			$	1.83			$	7.38			$	6.53
Cash dividends paid per share (b)		$	0.470			$	0.456			$	1.861			$	1.900
Number of shares used in computation - basic (b)			3,943,334				3,951,217				3,945,299				3,844,241
Number of shares used in computation - diluted (b)			3,943,387				3,951,225				3,945,299				3,846,082
Asset quality
Allowance for loan and lease losses		$	17,304			$	15,815
Non-performing assets		$	8,842			$	13,093
Allowance for loan and lease losses/total loans			1.20	%			1.13	%
Non-performing assets to total loans			0.61	%			0.93	%
Annualized net  charge-offs to total loans			0.01	%			0.07	%			0.00	%			0.03	%
Equity
Book value per share (b)		$	53.91			$	48.40
Tangible Book value per share (a) (b)		$	45.54			$	40.05
Market Value (Last reported trade of month)		$	60.70			$	60.00
Common shares outstanding			3,944,420				3,921,408
Other
Average Full Time Equivalent Employees			295.2				294.8				290.8				280.7
Loan to Deposit Ratio			78.51	%			88.45	%
Trust assets under management		$	154,840			$	150,348
Brokerage assets under management		$	282,058			$	241,003
Balance Sheet Highlights		December 31,				December 31,
			2021				2020
Assets		$	2,143,863			$	1,891,674
Investment securities			414,672				297,120
Loans (net of unearned income)			1,441,533				1,405,281
Allowance for loan losses			17,304				15,815
Deposits			1,836,151				1,588,858
Stockholders' Equity			212,492				194,259
(a) See reconcilation of GAAP and Non-GAAP measures at the end of the press release
(b) Prior period amounts were adjusted to reflect stock dividends.

CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
		December 31,				December 31,
(in thousands except share data)		2021				2020
ASSETS:
Cash and due from banks:
Noninterest-bearing		$	14,051			$	16,374
Interest-bearing			158,782				52,333
Total cash and cash equivalents			172,833				68,707
Interest bearing time deposits with other banks			11,026				13,758
Equity securities			2,270				1,931
Available-for-sale securities			412,402				295,189
Loans held for sale			4,554				14,640
Loans (net of allowance for loan losses: $17,304 at December 31, 2021 and
$15,815 at December 31, 2020)			1,424,229				1,389,466
Premises and equipment			17,016				16,948
Accrued interest receivable			5,235				5,998
Goodwill			31,376				31,376
Bank owned life insurance			38,503				32,589
Other intangibles			1,627				1,668
Other assets			22,792				19,404
TOTAL ASSETS		$	2,143,863			$	1,891,674
LIABILITIES:
Deposits:
Noninterest-bearing		$	358,073			$	303,762
Interest-bearing			1,478,078				1,285,096
Total deposits			1,836,151				1,588,858
Borrowed funds			73,977				88,838
Accrued interest payable			711				1,017
Other liabilities			20,532				18,702
TOTAL LIABILITIES			1,931,371				1,697,415
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 December 31, 2021 and December 31, 2020:
issued 4,388,901 shares at December 31, 2021 and 4,350,342 shares at December 31, 2020			4,389				4,350
Additional paid-in capital			78,395				75,908
Retained earnings			146,010				126,627
Accumulated other comprehensive (loss) income			(155	)			2,587
Treasury stock, at cost:  444,481 shares at December 31, 2021 and 428,492 shares
at December 31, 2020			(16,147	)			(15,213	)
TOTAL STOCKHOLDERS' EQUITY			212,492				194,259
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY		$	2,143,863			$	1,891,674

CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
		Three Months Ended								Year Ended
		December 31,								December 31,
(in thousands, except share and per share data)		2021				2020				2021				2020
INTEREST INCOME:
Interest and fees on loans		$	16,802			$	16,775			$	66,371			$	63,538
Interest-bearing deposits with banks			112				103				447				401
Investment securities:
Taxable			955				878				3,820				4,090
Nontaxable			549				532				2,201				1,869
Dividends			87				123				378				398
TOTAL INTEREST INCOME			18,505				18,411				73,217				70,296
INTEREST EXPENSE:
Deposits			1,292				1,572				5,837				6,851
Borrowed funds			344				294				1,268				1,254
TOTAL INTEREST EXPENSE			1,636				1,866				7,105				8,105
NET INTEREST INCOME			16,869				16,545				66,112				62,191
Provision for loan losses			-				900				1,550				2,400
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES			16,869				15,645				64,562				59,791
NON-INTEREST INCOME:
Service charges			1,276				1,114				4,755				4,221
Trust			191				261				865				803
Brokerage and insurance			435				356				1,625				1,297
Gains on loans sold			174				886				1,283				2,168
Equity security gains (losses), net			51				235				339				(41	)
Available for sale security gains, net			-				3				212				305
Earnings on bank owned life insurance			185				181				1,828				695
Other			200				928				1,398				1,974
TOTAL NON-INTEREST INCOME			2,512				3,964				12,305				11,422
NON-INTEREST EXPENSES:
Salaries and employee benefits			6,590				6,779				25,902				24,190
Occupancy			744				666				2,966				2,557
Furniture and equipment			112				170				519				757
Professional fees			373				337				1,526				1,517
FDIC insurance expense			135				135				522				476
Pennsylvania shares tax			24				59				880				868
Amortization of intangibles			46				54				192				216
Merger and acquisition			-				-				-				2,179
Software expenses			318				338				1,321				1,155
ORE expenses			56				230				439				451
Other			2,485				2,053				7,283				6,481
TOTAL NON-INTEREST EXPENSES			10,883				10,821				41,550				40,847
Income before provision for income taxes			8,498				8,788				35,317				30,366
Provision for income taxes			1,554				1,561				6,199				5,263
NET INCOME		$	6,944			$	7,227			$	29,118			$	25,103
PER COMMON SHARE DATA:
Net Income - Basic		$	1.76			$	1.83			$	7.38			$	6.53
Net Income - Diluted		$	1.76			$	1.83			$	7.38			$	6.53
Cash Dividends Paid		$	0.470			$	0.456			$	1.861			$	1.900
Number of shares used in computation - basic			3,943,334				3,951,217				3,945,299				3,844,241
Number of shares used in computation - diluted			3,943,387				3,951,225				3,945,299				3,846,082

CITIZENS FINANCIAL SERVICES, INC.
QUARTERLY CONDENSED, CONSOLIDATED INCOME STATEMENT INFORMATION
(UNAUDITED)
(in thousands, except per share data)						Three Months Ended,
		Dec 31,				Sept 30,				June 30,				March 31,				Dec 31,
		2021				2021				2021				2021				2020
Interest income		$	18,505			$	18,342			$	18,075			$	18,295			$	18,411
Interest expense			1,636				1,752				1,863				1,854				1,866
Net interest income			16,869				16,590				16,212				16,441				16,545
Provision for loan losses			-				400				500				650				900
Net interest income after provision for loan losses			16,869				16,190				15,712				15,791				15,645
Non-interest income			2,461				2,618				2,677				3,998				3,726
Investment securities gains, net			51				234				29				237				238
Non-interest expenses			10,883				10,400				10,320				9,947				10,821
Income before provision for income taxes			8,498				8,642				8,098				10,079				8,788
Provision for income taxes			1,554				1,578				1,451				1,616				1,561
Net income		$	6,944			$	7,064			$	6,647			$	8,463			$	7,227
Earnings Per Share Basic		$	1.76			$	1.79			$	1.69			$	2.14			$	1.83
Earnings Per Share Diluted		$	1.76			$	1.79			$	1.69			$	2.14			$	1.83

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,
		2021												2020
		Average								Average				Average								Average
		Balance (1)				Interest				Rate				Balance (1)				Interest				Rate
(dollars in thousands)			$			$					%				$			$					%
ASSETS
Interest-bearing deposits at banks			107,948				38				0.14				58,054				14				0.09
Interest bearing time deposits at banks			11,266				74				2.57				13,758				89				2.57
Investment securities			400,922				1,737				1.73				293,649				1,673				2.28
Loans: (2)(3)(4)
Residential mortgage loans			202,357				2,402				4.71				204,095				2,711				5.28
Construction loans			67,907				690				4.03				28,214				336				4.74
Commercial Loans			758,133				9,301				4.87				692,745				8,805				5.06
Agricultural Loans			345,420				3,757				4.32				356,317				3,927				4.38
Loans to state & political subdivisions			46,307				367				3.14				76,421				749				3.90
Other loans			27,720				357				5.11				30,246				390				5.13
Loans, net of discount (2)(3)(4)			1,447,844				16,874				4.62				1,388,038				16,918				4.85
Total interest-earning assets			1,967,980				18,723				3.77				1,753,499				18,694				4.24
Cash and due from banks			6,421												7,021
Bank premises and equipment			17,142												17,686
Other assets			73,929												91,806
Total non-interest earning assets			97,492												116,513
Total assets			2,065,472												1,870,012
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts			476,634				301				0.25				412,472				198				0.19
Savings accounts			305,962				74				0.10				252,019				90				0.14
Money market accounts			285,952				182				0.25				229,433				202				0.35
Certificates of deposit			332,880				735				0.87				382,188				1,082				1.13
Total interest-bearing deposits			1,401,428				1,292				0.37				1,276,112				1,572				0.49
Other borrowed funds			76,970				344				1.78				96,565				294				1.21
Total interest-bearing liabilities			1,478,398				1,636				0.44				1,372,677				1,866				0.54
Demand deposits			360,645												289,632
Other liabilities			14,519												17,472
Total non-interest-bearing liabilities			375,164												307,104
Stockholders' equity			211,910												190,231
Total liabilities & stockholders' equity			2,065,472												1,870,012
Net interest income							17,087												16,828
Net interest spread (5)											3.34	%											3.70	%
Net interest income as a percentage
of average interest-earning assets											3.44	%											3.82	%
Ratio of interest-earning assets
to interest-bearing liabilities											133	%											128	%
(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)
		Year Ended December 31,
		2021												2020
		Average								Average				Average								Average
		Balance (1)				Interest				Rate				Balance (1)				Interest				Rate
(dollars in thousands)			$			$					%				$			$					%
ASSETS
Short-term investments:
Interest-bearing deposits at banks			108,872				124				0.11				41,330				37				0.09
Total short-term investments			108,872				124				0.11				41,330				37				0.09
Interest bearing time deposits at banks			12,527				323				2.57				14,139				364				2.57
Investment securities:
Taxable			252,470				4,198				1.66				188,241				4,488				2.38
Tax-exempt (3)			104,379				2,786				2.67				80,131				2,366				2.95
Investment securities			356,849				6,984				1.96				268,372				6,854				2.55
Loans: (2)(3)(4)
Residential mortgage loans			203,062				9,867				4.86				210,696				11,161				5.30
Construction loans			56,315				2,292				4.07				26,343				1,288				4.89
Commercial Loans			739,000				36,215				4.90				590,469				31,087				5.26
Agricultural Loans			349,951				15,079				4.31				357,201				16,022				4.49
Loans to state & political subdivisions			52,804				1,871				3.54				86,143				3,458				4.01
Other loans			24,125				1,385				5.74				20,986				1,185				5.65
Loans, net of discount (2)(3)(4)			1,425,257				66,709				4.68				1,291,838				64,201				4.97
Total interest-earning assets			1,903,505				74,140				3.89				1,615,679				71,456				4.42
Cash and due from banks			6,525												7,487
Bank premises and equipment			17,194												17,286
Other assets			75,410												79,305
Total non-interest earning assets			99,129												104,078
Total assets			2,002,634												1,719,757
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts			457,189				1,387				0.30				383,931				1,102				0.29
Savings accounts			290,376				322				0.11				241,429				476				0.20
Money market accounts			257,937				684				0.27				205,142				1,012				0.49
Certificates of deposit			351,265				3,444				0.98				345,397				4,261				1.23
Total interest-bearing deposits			1,356,767				5,837				0.43				1,175,899				6,851				0.58
Other borrowed funds			84,621				1,268				1.50				93,237				1,254				1.34
Total interest-bearing liabilities			1,441,388				7,105				0.49				1,269,136				8,105				0.64
Demand deposits			341,604												257,285
Other liabilities			15,420												16,662
Total non-interest-bearing liabilities			357,024												273,947
Stockholders' equity			204,222												176,674
Total liabilities & stockholders' equity			2,002,634												1,719,757
Net interest income							67,035												63,351
Net interest spread (5)											3.40	%											3.78	%
Net interest income as a percentage
of average interest-earning assets											3.52	%											3.92	%
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)
		December 31,				September 30,				June 30,				March 31,				December 31,
		2021				2021				2021				2021				2020
Real estate:
Residential		$	201,097			$	204,853			$	202,171			$	203,273			$	201,911
Commercial			687,338				657,485				641,633				605,547				596,255
Agricultural			312,011				312,442				310,274				315,313				315,158
Construction			55,036				68,408				63,065				42,651				35,404
Consumer			25,858				31,042				8,684				26,181				30,277
Other commercial loans			74,585				92,188				104,349				109,168				114,169
Other agricultural loans			39,852				28,562				33,720				41,378				48,779
State & political subdivision loans			45,756				47,928				51,213				60,890				63,328
Total loans			1,441,533				1,442,908				1,415,109				1,404,401				1,405,281
Less: allowance for loan losses			17,304				17,334				16,931				16,560				15,815
Net loans		$	1,424,229			$	1,425,574			$	1,398,178			$	1,387,841			$	1,389,466
Past due and non-performing assets
Total Loans past due 30-89 days and still accruing		$	967			$	1,482			$	1,495			$	2,383			$	4,120
Non-accrual loans		$	7,616			$	8,858			$	9,082			$	10,680			$	10,732
Loans past due 90 days or more and accruing			46				83				49				478				525
Non-performing loans		$	7,662			$	8,941			$	9,131			$	11,158			$	11,257
OREO			1,180				1,277				1,811				1,720				1,836
Total Non-performing assets		$	8,842			$	10,218			$	10,942			$	12,878			$	13,093
		3 Months				3 Months				3 Months				3 Months				3 Months
		Ended				Ended				Ended				Ended				Ended
Analysis of the Allowance for loan Losses		December 31,				September 30,				June 30,				March 31,				December 31,
(In Thousands)			2021				2021				2021				2021				2020
Balance, beginning of period		$	17,334			$	16,931			$	16,560			$	15,815			$	15,169
Charge-offs			(65	)			(7	)			(138	)			(4	)			(276	)
Recoveries			35				10				9				99				22
Net (charge-offs) recoveries			(30	)			3				(129	)			95				(254	)
Provision for loan losses			-				400				500				650				900
Balance, end of period		$	17,304			$	17,334			$	16,931			$	16,560			$	15,815