CONTACT: Kathleen Campbell
Senior Vice President, Marketing
15 S. Main Street
Mansfield, PA 16933
570-662-0422
570-662-8512 (fax)
January 23, 2003
FIRST CITIZENS REPORTS RECORD YEAR-END EARNINGS
MANSFIELD, PENNSYLVANIA - For Citizens Financial Services, Inc. (OTC BB: CZFS), the holding company for First Citizens National Bank, the year 2002 was another year of strong performance. Net income for the fourth quarter 2002 was $1.4 million, a 33% increase over the comparable quarter in 2001. Total assets, total loans and total deposits for the year 2002 all increased. Total assets grew $11.5 million to $432.7 million while total loans increased by $26.7 million to reach $298.4 million and total deposits of $373.1 million represented an increase of $2.6 million.
Net income for the year was $5.6 million as compared to $3.8 million in 2001, a 48.9% increase. Three factors were responsible for the outstanding earnings growth. One factor is the transitioning of investment securities into higher yielding loans. Secondly, as interest rates have declined to historic low levels, our cost of funds (total interest expense) has declined accordingly. Net interest income has therefore increased $2.3 million. And, thirdly, non-interest income, excluding realized securities gains, has increased $1.2 million; primarily the result of a checking account acquisition strategy put in place in the fourth quarter of 2001 and our entrance into the brokerage and insurance product lines.
Another key factor affecting the increase in earnings is due to a new accounting rule (FASB # 147) which became effective this year and impacts all banks that acquired branch offices through acquisition (as we did in October 2000 with the Sovereign offices in Bradford County). Accounting rules previously required that goodwill (defined as the excess of the purchase price over the fair value of net assets acquired through business combinations accounted for as purchases) be expensed over the estimated useful life of the assets. The new accounting rule changes the accounting for goodwill from an amortization approach to an impairment-only approach. The rule change means that the $512 thousand expensed for goodwill amortization in 2001 compares with no goodwill amortization expense in 2002.
Cash dividends declared in the fourth quarter 2002 were $.175 (a $.70 annualized rate) versus $.165 (a $.66 annualized rate) in the comparable quarter of 2001, a 6.1% increase. In addition, the common stock price has improved approximately 51% over the past year and 76% over the past two years. Cash dividends per share were $.68 during 2002 - a 6.25% increase over 2001.
President Richard E. Wilber stated, "These significant financial results are due to a lot of hard work by a dedicated group of employees and directors. I applaud their efforts - they should be very proud."
Note: This press release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Actual results and trends could differ materially from those set forth in such statements due to various factors. These factors include operating legal and regulatory risks; changing economic and competitive conditions and other risks and uncertainties.
| CITIZENS FINANCIAL SERVICES, INC. | ||
| CONSOLIDATED BALANCE SHEET | ||
| (UNAUDITED) | ||
| (in thousands) | ||
| ASSETS: | ||
| Cash and due from banks: | ||
| Noninterest-bearing | $ 11,173 | $ 11,413 |
| Interest-bearing | 421 | 67 |
| Total cash and cash equivalents | 11,594 | 11,480 |
| Available-for-sale securities | 100,725 | 113,604 |
| Loans (net of allowance for loan losses 2002, $3,621,000; | ||
| 2001, $3,250,000) | 294,836 | 268,464 |
| Premises and equipment | 11,245 | 11,768 |
| Accrued interest receivable | 1,976 | 1,986 |
| Goodwill | 6,905 | 6,905 |
| Core deposit intangible | 1,413 | 1,870 |
| Other assets | 3,964 | 5,033 |
| TOTAL ASSETS | $ 432,658 | $ 421,110 |
| LIABILITIES: | ||
| Deposits: | ||
| Noninterest-bearing | $ 40,143 | $ 37,361 |
| Interest-bearing | 332,908 | 333,113 |
| Total deposits | 373,051 | 370,474 |
| Borrowed funds | 17,027 | 13,311 |
| Accrued interest payable | 2,077 | 2,285 |
| Other liabilities | 2,097 | 1,651 |
| TOTAL LIABILITIES | 394,252 | 387,721 |
| STOCKHOLDERS' EQUITY: | ||
| Common Stock | ||
| $1.00 par value; authorized 10,000,000 shares; | ||
| issued 2,882,070 shares in 2002 and 2,854,582 | ||
| in 2001, respectively | 2,882 | 2,855 |
| Additional paid-in capital | 9,473 | 9,017 |
| Retained earnings | 24,447 | 21,253 |
| TOTAL | 36,802 | 33,125 |
| Accumulated other comprehensive income | 2,553 | 1,213 |
| Less: Treasury Stock, at cost | ||
| 55,162 shares in 2002 and 2001 | (949) | (949) |
| TOTAL STOCKHOLDERS' EQUITY | 38,406 | 33,389 |
| TOTAL LIABILITIES AND | ||
| STOCKHOLDERS' EQUITY | $ 432,658 | $ 421,110 |
| CITIZENS FINANCIAL SERVICES, INC. | ||||
| CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) | ||||
| (in thousands, except per share data) | ||||
| INTEREST INCOME: | ||||
| Interest and fees on loans | $ 5,530 | $ 5,483 | $ 21,600 | $ 22,163 |
| Interest-bearing deposits with banks | 7 | 31 | 65 | 547 |
| Investment securities: | ||||
| Taxable | 1,027 | 1,373 | 4,711 | 4,969 |
| Nontaxable | 139 | 211 | 634 | 853 |
| Dividends | 88 | 108 | 367 | 493 |
| TOTAL INTEREST INCOME | 6,791 | 7,206 | 27,377 | 29,025 |
| INTEREST EXPENSE: | ||||
| Deposits | 2,389 | 3,025 | 10,012 | 13,839 |
| Borrowed funds | 102 | 92 | 392 | 467 |
| TOTAL INTEREST EXPENSE | 2,491 | 3,117 | 10,404 | 14,306 |
| NET INTEREST INCOME | 4,300 | 4,089 | 16,973 | 14,719 |
| Provision for loan losses | 135 | 75 | 435 | 445 |
| NET INTEREST INCOME AFTER | ||||
| PROVISION FOR LOAN LOSSES | 4,165 | 4,014 | 16,538 | 14,274 |
| NON-INTEREST INCOME: | ||||
| Service charges | 795 | 776 | 3,130 | 2,527 |
| Trust | 132 | 142 | 562 | 578 |
| Other | 333 | 153 | 1,100 | 527 |
| Realized securities gains, net | - | 136 | 254 | 657 |
| TOTAL NON-INTEREST INCOME | 1,260 | 1,207 | 5,046 | 4,289 |
| NON-INTEREST EXPENSES: | ||||
| Salaries and employee benefits | 1,693 | 1,868 | 7,120 | 6,597 |
| Occupancy | 253 | 269 | 998 | 992 |
| Furniture and equipment | 193 | 251 | 881 | 966 |
| Professional fees | 238 | 138 | 667 | 494 |
| Amortization | 109 | 254 | 457 | 1,015 |
| Other | 1,112 | 1,136 | 4,103 | 3,977 |
| TOTAL NON-INTEREST EXPENSES | 3,598 | 3,916 | 14,226 | 14,041 |
| Income before provision for income taxes | 1,827 | 1,305 | 7,358 | 4,522 |
| Provision for income taxes | 438 | 261 | 1,763 | 765 |
| NET INCOME | $ 1,389 | $ 1,044 | $ 5,595 | $ 3,757 |
| OPERATING CASH EARNINGS** | $ 1,460 | $ 1,212 | $ 5,897 | $ 4,427 |
| Earnings Per Share | $ 0.49 | $ 0.37 | $ 1.98 | $ 1.33 |
| Operating Cash Earnings Per Share** | $ 0.52 | $ 0.43 | $ 2.09 | $ 1.57 |
| Cash Dividend Declared | $ 0.175 | $ 0.165 | $ 0.680 | $ 0.640 |
| **Operating cash earnings are net income before amortization of intangible assets and merger and acquisition costs, net of tax. | ||||
| Financial Highlights (In thousands, except per share and ratio data.) | ||
| (Unaudited) | ||
| Twelve Months Ended December 31 | ||
| Net income | $ 5,595 | $ 3,757 |
| Comprehensive income | 6,935 | 4,626 |
| Per common share data: | ||
| Earnings per share | 1.98 | 1.33 |
| Cash dividends declared | 0.68 | 0.64 |
| Performance ratios: | ||
| Return on average assets | 1.30% | 0.90% |
| Return on average equity | 16.53% | 12.10% |
| Three Months Ended December 31 | ||
| Net income | $ 1,389 | $ 1,044 |
| Per common share data: | ||
| Earnings per share | 0.49 | 0.37 |
| Cash dividends declared | 0.175 | 0.165 |
| Performance ratios: | ||
| Return on average assets | 1.28% | 0.99% |
| Return on average equity | 15.77% | 13.11% |
| At December 31 | ||
| Assets | $ 432,658 | $ 421,110 |
| Investment securities: | ||
| Available-for-sale | 100,725 | 113,604 |
| Loans (net of unearned income) | 298,457 | 271,714 |
| Allowance for loan losses | 3,621 | 3,250 |
| Deposits | 373,051 | 370,474 |
| Stockholders' Equity | 38,406 | 33,389 |
| Non-performing assets | 3,293 | 2,650 |
| Average leverage ratio | 6.48% | 5.68% |
| Per common share data: | ||
| Book value | $ 13.59 | $ 11.93 |
| Market value (average of bid/ask price) | 21.23 | 14.03 |
| Market price to book value ratio | 156.22% | 117.56% |
