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Citizens Financial Services, Inc. Reports Unaudited First Quarter 2019 Financial Results

MANSFIELD, Pa., May 1, 2019 /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 months ended March 31, 2019.

Highlights

  • Net income was $4.4 million for the three months ended March 31, 2019, which is 3.7% higher than the net income for 2018's comparable period. The effective tax rate for the first three months of 2019 was 15.7% compared to 15.0% in the comparable period in 2018.  
  • Net interest income before the provision for loan losses was $11.9 million for the three months ended March 31, 2019, an increase of $495,000, or 4.3%, over the same period a year ago.
  • Net loan growth totaled $8.8 million in the first quarter of 2019, or 3.3% annualized.
  • Return on average equity for the three months (annualized) ended March 31, 2019 was 12.12% compared to 12.62% for the three months (annualized) ended March 31, 2018.
  • Return on average tangible equity for the three months (annualized) ended March 31, 2019 was 14.62% compared to 15.52% for the three months (annualized) ended March 31, 2018. (1)
  • Return on average assets for the three months (annualized) ended March 31, 2019 was 1.22% compared to 1.24% for the three months (annualized) ended March 31, 2018.

Three Months Ended March 31, 2019 Compared to March 31, 2018

  • For the three months ended March 31, 2019, net income totaled $4,405,000 which compares to net income of $4,247,000 for the first three months of 2018, an increase of $158,000 or 3.7%.  Basic earnings per share of $1.26 for first three months of 2019 compares to $1.21 for the 2018 comparable period. Annualized return on equity for the three months ended March 31, 2019 and 2018 was 12.12% and 12.62%, while annualized return on assets was 1.22% and 1.24%, respectively.
  • Net interest income before the provision for loan loss for the three months ended March 31, 2019 totaled $11,915,000 compared to $11,420,000 for the three months ended March 31, 2018, resulting in an increase of $495,000, or 4.3%. Average interest earning assets increased $72.4 million for the three months ended March 31, 2019 compared to the same period last year.  Average loans increased $72.9 million while average investment securities decreased $6.4 million. The tax effected net interest margin for the three months ended March 31, 2019 was 3.62% compared to 3.68% for the same period last year, which was impacted by the increase in the average cost on interest bearing liabilities of 39 bps, to 1.14%.
  • The provision for loan losses for the three months ended March 31, 2019 was $400,000 compared to $500,000 for the comparable period in 2018, a decrease of $100,000.  The decrease in the provision primarily reflects the lower loan growth experienced during the first three months of 2019 compared to 2018.
  • Total non-interest income was $2,033,000 for the three months ended March 31, 2019, which is $127,000 more than for the comparable period last year.  The primary driver was an increase in brokerage and insurance commissions of $112,000.
  • Total non-interest expenses for the three months ended March 31, 2019 totaled $8,322,000 compared to $7,832,000 for the same period last year, which is an increase of $490,000, or 6.3%.  Salaries and benefits increased $194,000 primarily due to an increase in benefits costs. Other expenses increased $191,000, which was primarily due to an increase in costs as a result of the decision to terminate a pension plan acquired as part the First National Bank of Fredericksburg acquisition in 2015.
  • The provision for income taxes increased $74,000 when comparing the three months ended March 31, 2019 to the same period in 2018 as a result of an increase in income before income tax of $232,000.

Balance Sheet and Other Information:

  • At March 31, 2019, total assets were $1.45 billion, compared to $1.43 billion at December 31, 2018 and $1.38 billion at March 31, 2018.
  • Available for sale securities of $244.4 million at March 31, 2018 increased $3.4 million from December 31, 2018 and decreased $6.9 million from March 31, 2018. The yield on the investment portfolio increased from 2.48% to 2.69% on a tax equivalent basis.
  • Net loans as of March 31, 2019 totaled $1.08 billion and increased $8.8 million from December 31, 2018 and $57.7 million from March 31, 2018. Net loan growth was negatively impacted by over $4.0 million of large loan pay-offs and transfers to other real estate owned as the result of a settlement with a customer in bankruptcy. The growth in 2019 was in commercial and agricultural relationships, which continues the trend from 2018.
  • The allowance for loan losses totaled $13,084,000 at March 31, 2019 which is an increase of $200,000 from December 31, 2018.  The increase is due to recording a provision for loan losses of $400,000 and recoveries of $14,000, offset by charge-offs of $214,000, which were primarily related to one relationship, which was settled as part of a bankruptcy proceeding. Annualized net charge-offs as a percent of total loans through March 31, 2019 was .07%.  The allowance as a percent of total loans was 1.20% as of March 31, 2019 and 1.19% as of December 31, 2018.
  • Deposits decreased $3.5 million from December 31, 2018, to $1.18 billion at March 31, 2019, primarily due to timing differences and a municipal customer in our State College office starting a large construction project. Borrowed funds increased $17.1 million from December 31, 2018 to $108.3 million at March 31, 2019. Non-interest-bearing deposits increase $5.0 million at March 31, 2019.
  • Stockholders' equity totaled $142.8 million at March 31, 2019, compared to $139.2 million at December 31, 2018, an increase of $3.6 million.  The increase was attributable to net income for the three months ended March 31, 2019 totaling $4.4 million, offset by cash dividends for the first quarter totaling $1.6 million and net treasury stock activity of $330,000.  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, improved $1.1 million from December 31, 2018.

Dividend Declared

On March 5, 2019, the Board of Directors declared a cash dividend of $0.445 per share, which was paid on March 29, 2019 to shareholders of record at the close of business on March 15, 2019. The quarterly cash dividend is an increase of 3.2% over the regular cash dividend of $0.431 per share declared one year ago, as adjusted for the 1% stock dividend declared in June 2018.

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 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



Three Months Ended



March 31



2019

2018



Income and Performance Ratios





Net Income 

$              4,405

$          4,247



Return on average assets (annualized)

1.22%

1.24%



Return on average equity (annualized)

12.12%

12.62%



Return on average tangible equity (annualized) (b)

14.62%

15.52%



Net interest margin (tax equivalent)

3.62%

3.68%



Earnings per share - basic (c)

$                1.26

$            1.21



Earnings per share - diluted (c)

$                1.26

$            1.21



Cash dividends paid per share 

$              0.445

$          0.431













Asset quality





Allowance for loan and lease losses

$            13,084

$        11,587



Non-performing assets

$            16,059

$        12,814



Allowance for loan and lease losses/total loans

1.20%

1.12%



Non-performing assets to total loans

1.47%

1.24%



Annualized net charge-offs to total loans

0.07%

0.04%













Equity





Book value per share (c)

$              41.63

$          38.35



Tangible Book value per share (b) (c)

$              34.53

$          31.19



Market Value (Last reported trade of month)

$              64.00

$          62.65



Common shares outstanding

3,498,834

3,481,762



Number of shares used in computation - basic (c)

3,494,010

3,512,552



Number of shares used in computation - diluted (c)

3,494,010

3,512,915













Other





Total Risk Based Capital Ratio (a)

13.59%

13.09%



Tier 1 Risk Based Capital Ratio (a)

12.34%

11.92%



Common Equity Tier 1 Risk Based Capital Ratio (a)

11.63%

11.17%



Leverage Ratio

9.22%

8.87%



Average Full Time Equivalent Employees

261.8

261.9



Loan to Deposit Ratio

92.32%

92.52%













Balance Sheet Highlights 

March 31,

December 31

March 31,



2019

2018

2018







Assets

$      1,448,054

$   1,430,712

$      1,382,483


Investment securities

244,964

241,526

251,528


Loans (net of unearned income)

1,090,917

1,081,883

1,031,738


Allowance for loan losses

13,084

12,884

11,587


Deposits

1,181,654

1,185,156

1,115,153


Stockholders' Equity

142,845

139,229

129,850







(a) Presented as projected for March 31, 2019  and actual for the remaining period



(b) See reconcilation of Non-GAAP measures at the end of the press release




(c) Prior periodamounts were adjusted to reflect stock dividends.




 

 

CITIZENS FINANCIAL SERVICES, INC.




CONSOLIDATED BALANCE SHEET




(UNAUDITED)









March 31

December 31

March 31

(in thousands except share data)

2019

2018

2018

ASSETS:




Cash and due from banks:




  Noninterest-bearing

$           16,384

$         15,327

$             10,141

  Interest-bearing

1,450

1,470

2,334

Total cash and cash equivalents

17,834

16,797

12,475





Interest bearing time deposits with other banks

15,498

15,498

10,532





Equity securities

527

516

188





Available-for-sale securities

244,437

241,010

251,340





Loans held for sale

182

1,127

233





Loans (net of allowance for loan losses: $13,084 at March 31, 2019; 




    $12,884 at December 31, 2018 and $11,587 at March 31, 2018)

1,077,833

1,068,999

1,020,151





Premises and equipment

16,177

16,273

16,378

Accrued interest receivable

4,769

4,452

4,283

Goodwill

23,296

23,296

23,296

Bank owned life insurance

27,656

27,505

27,035

Other intangibles

1,547

1,623

1,856

Other assets

18,298

13,616

14,716





TOTAL ASSETS

$      1,448,054

$    1,430,712

$        1,382,483





LIABILITIES:




Deposits:




  Noninterest-bearing

$         184,988

$       179,971

$           173,124

  Interest-bearing

996,666

1,005,185

942,029

Total deposits

1,181,654

1,185,156

1,115,153

Borrowed funds

108,263

91,194

124,121

Accrued interest payable

1,092

1,076

867

Other liabilities

14,200

14,057

12,492

TOTAL LIABILITIES

1,305,209

1,291,483

1,252,633

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 March 31, 2019 and December 31, 2018      




  and 15,000,000 at March 31, 2018: issued 3,904,212 at March 31, 2019 and 




  December 31, 2018 and 3,869,939 at March 31, 2018

3,904

3,904

3,870

Additional paid-in capital

53,102

53,099

51,113

Retained earnings

102,574

99,727

92,713

Accumulated other comprehensive loss

(2,825)

(3,921)

(4,977)

Treasury stock, at cost:  405,378 at March 31, 2019; 399,616 shares 




  at December 31, 2018 and 388,177 shares at March 31, 2018

(13,910)

(13,580)

(12,869)

TOTAL STOCKHOLDERS' EQUITY

142,845

139,229

129,850

TOTAL LIABILITIES AND




   STOCKHOLDERS' EQUITY

$      1,448,054

$    1,430,712

$        1,382,483

 

 

CITIZENS FINANCIAL SERVICES, INC.



CONSOLIDATED STATEMENT OF INCOME



(UNAUDITED)




Three Months Ended


March 31, 

(in thousands, except per share data)

2019

2018

INTEREST INCOME:



Interest and fees on loans

$     13,314

$    11,861

Interest-bearing deposits with banks

104

58

Investment securities:



    Taxable

1,108

800

    Nontaxable

357

527

    Dividends

134

137

TOTAL INTEREST INCOME

15,017

13,383

INTEREST EXPENSE:



Deposits

2,314

1,316

Borrowed funds

788

647

TOTAL INTEREST EXPENSE

3,102

1,963

NET INTEREST INCOME

11,915

11,420

Provision for loan losses

400

500

NET INTEREST INCOME AFTER



    PROVISION FOR LOAN LOSSES

11,515

10,920

NON-INTEREST INCOME:



Service charges

1,099

1,104

Trust

232

251

Brokerage and insurance

293

181

Gains on loans sold

99

72

Equity security gains (losses), net

11

6

Earnings on bank owned life insurance

151

152

Other

148

140

TOTAL NON-INTEREST INCOME

2,033

1,906

NON-INTEREST EXPENSES:



Salaries and employee benefits

5,029

4,835

Occupancy 

592

592

Furniture and equipment

155

142

Professional fees

442

399

FDIC insurance

111

100

Pennsylvania shares tax

275

300

Amortization of intangibles

66

76

ORE expenses

107

34

Other

1,545

1,354

TOTAL NON-INTEREST EXPENSES

8,322

7,832

Income before provision for income taxes

5,226

4,994

Provision for income taxes

821

747

NET INCOME

$       4,405

$      4,247




PER COMMON SHARE DATA:



Net Income - Basic

$          1.26

$        1.21

Net Income - Diluted

$          1.26

$        1.21

Cash Dividends Paid 

$       0.445

$      0.431




Number of shares used in computation - basic

3,494,010

3,512,552

Number of shares used in computation - diluted

3,494,010

3,512,915

 

 

CITIZENS FINANCIAL SERVICES, INC.






QUARTERLY CONDENSED, CONSOLIDATED INCOME STATEMENT INFORMATION



(UNAUDITED)






(in thousands, except share data)


Three Months Ended,




March 31,

Dec 31

Sept 30

June 30,

March 31,


2019

2018

2018

2018

2018

Interest income

$     15,017

$      15,088

$      14,259

$      14,028

$      13,383

Interest expense

3,102

2,845

2,489

2,277

1,963

Net interest income

11,915

12,243

11,770

11,751

11,420

Provision for loan losses

400

625

475

325

500

Net interest income after provision for loan losses

11,515

11,618

11,295

11,426

10,920

Non-interest income

2,022

1,997

2,022

1,835

1,900

Investment securities gains (losses), net

11

(20)

(12)

7

6

Non-interest expenses

8,322

8,235

7,788

7,702

7,832

Income before provision for income taxes

5,226

5,360

5,517

5,566

4,994

Provision for income taxes

821

845

936

875

747

Net income

$       4,405

$        4,515

$        4,581

$        4,691

$        4,247

Earnings Per Share Basic

$         1.26

$          1.29

$          1.31

$          1.34

$          1.21

Earnings Per Share Diluted

$         1.26

$          1.29

$          1.31

$          1.34

$          1.21

 

 

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 March 31,


2019

2018


Average


Average

Average


Average


Balance (1)

Interest

Rate

Balance (1)

Interest

Rate

(dollars in thousands)

$

$

%

$

$

%

ASSETS







Interest-bearing deposits at banks

8,759

7

0.32

8,100

5

0.25

Interest bearing time deposits at banks

15,498

97

2.54

10,311

53

2.11

Investment securities

252,053

1,693

2.69

258,443

1,604

2.48

Loans: (2)(3)(4)







  Residential mortgage loans

215,670

2,825

5.31

214,598

2,724

5.15

  Construction loans

28,439

357

5.09

17,665

201

4.62

  Commercial Loans

401,813

5,423

5.47

388,200

4,978

5.20

  Agricultural Loans

334,520

3,739

4.53

283,714

3,037

4.34

  Loans to state & political subdivisions

100,922

978

3.93

104,511

916

3.55

  Other loans

9,768

184

7.64

9,507

183

7.79

  Loans, net of discount (2)(3)(4)

1,091,132

13,506

5.02

1,018,195

12,039

4.79

Total interest-earning assets

1,367,442

15,303

4.54

1,295,049

13,701

4.29

Cash and due from banks

6,741



6,908



Bank premises and equipment

16,263



16,481



Other assets

54,278



54,878



Total non-interest earning assets

77,282



78,267



Total assets

1,444,724



1,373,316



LIABILITIES AND STOCKHOLDERS' EQUITY







Interest-bearing liabilities:







  NOW accounts

328,357

578

0.71

325,937

330

0.41

  Savings accounts

211,149

184

0.35

185,242

50

0.11

  Money market accounts

161,424

505

1.27

145,890

245

0.68

  Certificates of deposit

293,385

1,047

1.45

266,275

691

1.05

Total interest-bearing deposits

994,315

2,314

0.94

923,344

1,316

0.58

Other borrowed funds

113,829

788

2.81

138,613

647

1.89

Total interest-bearing liabilities

1,108,144

3,102

1.14

1,061,957

1,963

0.75

Demand deposits

176,989



164,189



Other liabilities

14,199



12,537



Total non-interest-bearing liabilities

191,188



176,726



Stockholders' equity

145,392



134,633



Total liabilities & stockholders' equity

1,444,724



1,373,316



Net interest income


12,201



11,738


Net interest spread (5)



3.40%



3.54%

Net interest income as a percentage







  of average interest-earning assets



3.62%



3.68%

Ratio of interest-earning assets







  to interest-bearing liabilities



123%



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 2018 and 34% for 2017.



(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)







March 31, 

December 31,

September 30,

June 30, 

March 31, 


2019

2018

2018

2018

2018

Real estate:






  Residential

$     214,635

$      215,305

$       213,255

$      213,242

$      215,349

  Commercial

334,371

319,265

312,982

309,571

320,381

  Agricultural

295,547

284,520

280,569

262,691

248,710

  Construction

18,611

33,913

30,262

27,901

22,239

Consumer

9,773

9,858

9,702

9,740

9,672

Other commercial loans

74,323

74,118

72,219

75,002

74,930

Other agricultural loans

43,245

42,186

39,917

42,131

40,396

State & political subdivision loans

100,412

102,718

101,425

99,922

100,061

Total loans

1,090,917

1,081,883

1,060,331

1,040,200

1,031,738

Less allowance for loan losses

13,084

12,884

12,383

11,941

11,587

Net loans

$  1,077,833

$   1,068,999

$   1,047,948

$   1,028,259

$   1,020,151







Past due and non-performing assets












Total Loans past due 30-89 days and still accruing

$          4,470

$          3,308

$           3,127

$          5,143

$          5,660







Non-accrual loans

$       11,700

$        13,724

$         14,530

$        10,931

$        11,433

Loans past due 90 days or more and accruing

64

68

302

1,046

429

Non-performing loans

$       11,764

$        13,792

$         14,832

$        11,977

$        11,862

OREO

4,295

601

628

471

952

Total Non-performing assets

$       16,059

$        14,393

$         15,460

$        12,448

$        12,814




















3 Months 

3 Months 

3 Months 

3 Months 

3 Months 


Ended

Ended

Ended

Ended

Ended

Analysis of the Allowance for loan Losses

December 31,

December 31,

September 30,

June 30,

March 31,

(In Thousands)

2018

2018

2018

2018

2018

Balance, beginning of period

$       12,884

$        12,383

$         11,941

$        11,587

$        11,190

Charge-offs

(214)

(140)

(48)

(61)

(116)

Recoveries

14

16

15

90

13

Net (charge-offs) recoveries

(200)

(124)

(33)

29

(103)

Provision for loan losses

400

625

475

325

500

Balance, end of period

$       13,084

$        12,884

$         12,383

$        11,941

$        11,587







 

 

CITIZENS FINANCIAL SERVICES, INC.



Reconciliation of GAAP and Non-GAAP Financial Measures



(Dollars in thousands, except per share data)







As of 


March 31,


2019

2018

Tangible Equity



Stockholders Equity - GAAP

$      142,845

$           129,850

Accumulated other comprehensive loss

(2,825)

(4,977)

Intangible Assets

24,843

25,152

Non-GAAP Tangible Equity

120,827

109,675

Shares outstanding adjusted for June 2018 stock Dividend

3,498,834

3,516,034

Tangible Book value per share

$           34.53

$               31.19





As of 


March 31,


2019

2018

Tangible Equity per share



Stockholders Equity - GAAP

$           40.83

$               36.93

Adjustments for accumulated other comprehensive loss

(0.80)

(1.42)

Book value per share

41.63

38.35

Adjustments for intangible assets

7.10

7.16

Tangible Book value per share

$           34.53

$               31.19








As of 


March 31,


2019

2018

Returin on Average Tangible Equity



Average Stockholders Equity - GAAP

$      141,578

$           130,493

Average Accumulated Other Comprehensive Loss

(3,814)

(4,140)

Average Intangible Assets

24,872

25,198

Average Non-GAAP Tangible Equity

120,520

109,435

Net Income

$           4,405

$               4,247

Annualized Return on Average Tangible Equity

14.62%

15.52%








Three Months Ended


March 31,

Reconciliation of net interest income on fully taxable equivalent basis

2019

2018

Total interest income

$        15,017

$             13,383

Total interest expense

3,102

1,963

Net interest income

11,915

11,420

Tax equivalent adjustment

286

318

Net interest income (fully taxable equivalent)

$        12,201

$             11,738




 

 


Cision

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