8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of report (Date of earliest event reported): October 23, 2020

CITIZENS FINANCIAL SERVICES, INC.

(Exact Name of Registrant as Specified in Charter)

Pennsylvania	000-13222	23-2265045
(State or Other Jurisdiction<br><br> <br>of Incorporation)	(Commission<br><br> <br>File Number)	(I.R.S. Employer<br><br> <br>Identification No.)

15 South Main Street

Mansfield, Pennsylvania 16933

(Address of Principal Executive Offices, and Zip Code)

(570) 662-2121

(Registrant’s Telephone Number, Including Area Code)

Not applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

◻	Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
◻	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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◻	Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
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	◻	Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Securities registered pursuant to Section 12(b) of the Act: None
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities<br> Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).<br><br> <br>Emerging growth company ☐<br><br> <br>If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition<br> period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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Item 2.02.                          Results of Operations and Financial Condition.

Randall E. Black, Chief Executive Officer, recently announced the unaudited consolidated financial results for Citizens Financial Services, Inc. and susbisidaries for the third quarter 2020.

On October 23, 2020, Citizens Financial Services, Inc. issued a press release titled “Citizens Financial Services, Inc. Reports Unaudited Third Quarter 2020 Financial Results”, attached as Exhibit 99.1 to the Current Report on Form 8-K and incorporated herein by reference.  The information furnished under Item 2.02 of the Current Report on an 8-K shall not be deemed “filed” for any purpose.

Item 9.01.      Financial Statements and Exhibits.



(d)  Exhibits


Exhibit No.	Description of Exhibit
99.1	Press release issued by Citizens Financial Services, Inc. on October 23, 2020, titled “Citizens Financial Services, Inc. Reported Unaudited Third Quarter<br> 2020 Financial Results”.



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	CITIZENS FINANCIAL SERVICES
Date:  October 23, 2020	By:	/s/ Stephen J. Guillaume
		Stephen J. Guillaume
		Chief Financial Officer
Contact:  Kathleen Campbell, Marketing Director	First Citizens Community Bank
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570-662-0422	15 S. Main Street
570-662-8512 (fax)	Mansfield, PA 16933

citizens financial services, inc. reports unaudited third quarter 2020 financial results

MANSFIELD, PENNSYLVANIA— October 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 and nine months ended September 30, 2020.

Highlights

•	The acquisition of MidCoast Community Bancorp, Inc. in the first half of 2020 contributed significant growth to net interest income in the<br> third quarter of 2020.
•	We received regulatory approval and anticipate opening a full service branch in Kennett Square, Pennsylvania in the fourth quarter of 2020<br> to further serve customers acquired as part of the MidCoast acquisition.
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•	Net income for the first nine months of 2020 was $17.9 million, which is 23.7% higher than 2019’s net income through September 30, 2019.<br> The effective tax rate for the first nine months of 2020 was 17.2% compared to 16.3% in the comparable period in 2019.
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•	Net income was $8.0 million for the three months ended September 30, 2020, which is 54.1% higher than the net income for 2019’s comparable<br> period. The effective tax rate for the three months ended September 30, 2020 was 18.0% compared to 17.0% in the comparable period in 2019.
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•	Net interest income before the provision for loan losses was $45.6 million for the nine months ended September 30, 2020, an increase of<br> $8.5 million, or 22.9%, over the same period a year ago.
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•	Non-performing assets and past due loans as a percentage of loans have decreased during 2020. Non-performing assets total 1.14% at<br> September 30, 2020.
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•	Return on average equity for the three and nine months (annualized) ended September 30, 2020 was 17.36% and 13.85% compared to 13.74% and<br> 12.99% for the three and nine months (annualized) ended September 30, 2019.
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•	Return on average tangible equity for the three and nine months (annualized) ended September 30, 2020 was 21.11% and 16.72% compared to<br> 16.42% and 15.60% for the three and nine months (annualized) ended September 30, 2019. (1)
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•	Return on average assets for the three and nine months (annualized) ended September 30, 2020 was 1.75% and 1.43% compared to 1.43% and<br> 1.33% for the three and nine months (annualized) ended September 30, 2019.
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Covid 19 pandemic response and loan profile

•

The Company participated in the Paycheck Protection Program (PPP) for loans provided under the auspices of the Small Business<br> Administration (SBA). As of September 30, 2020, the Company had outstanding $53.9 million and 591 loans that were issued through the program. The loans earn<br> interest at 1% and will generate fee income of approximately $2.1 million over the life of the loans. Beginning in the fourth quarter, a portion of these loans will be forgiven by the SBA depending on the customers usage of the proceeds.<br> The SBA has issued guidance for forgiveness with a streamlined approach for loans less than $50,000. Of the PPP loans issues, 343 loans, or 58.0% of the total PPP loans, had an original balance less than $50,000. The outstanding balance for<br> these 343 loans as of September 30, 2020 was approximately $7.1 million.

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•	Under our loan modification program, we provided relief to customers with outstanding balances of $205.1 million on 534 loans , which<br> includes residential and commercial customers. There are currently, 12 loans outstanding with a balance of $20.2 million that are under modified terms, with $6.6 million returning to original terms in October, with the remaining balance<br> being modified through the end of the year.
•	The Company tracks industry concentrations to identify risks that could lead to additional credit exposure. As a result of the Covid 19<br> pandemic, the Company has determined that Hotels/Motels,  restaurants and amusement/theme parks represent a higher level of credit risk. At September 30, 2020, the Company has limited loan concentrations to these industries as follows:
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o	Hotels/Motels - $41.4 million or 3.0% of outstanding loans
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o	Restaurants - $27.7 million or 2.0% of outstanding loans
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o	Amusement/Theme parks - $13.8 million, or 1.0% of outstanding loans
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•	Agricultural lending continues to be an area of emphasis with the Bank. As of September 30, 2020, agricultural lending comprises 26.1% of<br> total loans. Agriculture was significantly impacted in the early part of the pandemic as dairy farmers were forced to dump milk, and milk futures remain extremely volatile. Other producers experienced difficulties in getting livestock to<br> market and reduced proceeds from sales as well as difficulty in obtaining supplies. A return to stay at home orders and school closures could significantly impact this portion of our loan portfolio.
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Nine Months Ended September 30, 2020 Compared to 2019

•	For the nine months ended September 30, 2020, net income totaled $17,876,000 which compares to net income of $14,447,000 for the first nine<br> months of 2019, an increase of $3,429,000 or 23.7%.  Basic earnings per share of $4.74 for the first nine months of 2020 compares to $4.06 for the first nine months last year.  Annualized return on equity for the nine months ended September<br> 30, 2020 and 2019 was 13.85% and 12.99%, while annualized return on assets was 1.43% and 1.33%, respectively. If merger and acquisition costs are excluded, the annualized return on average equity and average assets would be 15.22% and<br> 1.57%, respectively for the 2020 period (non-GAAP).
•	Net interest income before the provision for loan loss for the nine months ended September 30, 2020 totaled $45,646,000 compared to<br> $37,150,000 for the nine months ended September 30, 2019, resulting in an increase of $8,496,000, or 22.9%.  Average interest earning assets increased $199.2 million for the nine months ended September 30, 2020 compared to the same period<br> last year, primarily due to the MidCoast acquisition. Average loans increased $161.7 million while average investment securities increased $12.6 million. The yield on interest earning assets decreased 12 basis point to 4.49%, while the cost<br> of interest-bearing liabilities decreased 44 basis points to 0.68%. The yield on interest earning assets benefitted approximately $820,000 from pay-offs of a purchase credit impaired loans acquired as part of The First National Bank of<br> Fredericksburg acquisition in 2015.  The decrease in the cost of interest-bearing liabilities was due to the Federal Reserve moves in response to the COVID-19 pandemic. The tax effected net interest margin for the nine months ended<br> September 30, 2020 was 3.96% compared to 3.71% for the same period last year.
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•	The provision for loan losses for the nine months ended September 30, 2020 was $1,500,000 compared to $1,150,000 for the nine months ended<br> September 30, 2019, an increase of $350,000.  The provision was higher in 2020 than 2019 primarily due to the economic environment as a result of the COVID-19 pandemic and the higher levels of unemployment, which offsets the fact that<br> loans, excluding the acquisition and PPP loans guaranteed by the SBA, decreased during 2020.
•	Total non-interest income was $7,458,000 for the nine months ended September 30, 2020, which is $1,221,000 more than the non-interest<br> income of $6,237,000 for the same period last year. The primary drivers were an increase of $943,000 in the gain on loans sold, as a result of the  number of loans sold in 2020 compared to 2019 due to the low interest environment and an<br> increase in other income of $619,000 due to fee income on derivative transactions for customers.  We experienced a $344,000 decrease in the value of equity securities during the first nine months of 2020, compared to an increase of $70,000<br> in the comparable 2019 period and a decrease in service charges of $391,000 as a result of our COVID-19 response and reduced customer spending as a result of mandatory stay at home orders. Gains of the sale of available for sale securities<br> totaled $370,000 in 2020 compared to $8,000 in 2019.
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•	Total non-interest expenses for the nine months ended September 30, 2020 totaled $30,026,000 compared to $24,973,000 for the same period<br> last year, which is an increase of $5,053,000, or 20.2%. The primary driver of the increase is the merger and acquisition costs of completing the MidCoast acquisition that total $2,179,000 and the additional salary costs associated with the<br> acquisition.
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•	The provision for income taxes increased $885,000 when comparing the nine months ended September 30, 2020 to the same period in 2019 as a<br> result of an increase in income before income tax of $4,314,000. The  effective tax rate was 17.2% and 16.3% for the first nine months of 2020 and 2019, respectively, compared to the statutory rate of 21%.
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Three Months Ended September 30, 2020 Compared to September 30, 2019

•	For the three months ended September 30, 2020, net income totaled $8,007,000 which compares to net income of $5,196,000 for the comparable<br> period of 2019, an increase of $2,811,000 or 54.10%.  Basic earnings per share of $2.04 for the three months ended September 30, 2020 compares to $1.46 for the 2019 comparable period. Annualized return on equity for the three months ended<br> September 30, 2020 and 2019 was 17.36% and 13.74%, while annualized return on assets was 1.75% and 1.43%, respectively.
•	Net interest income before the provision for loan loss for the three months ended September 30, 2020 totaled $16,470,000 compared to<br> $12,899,000 for the three months ended September 30, 2019, resulting in an increase of $3,571,000, or 27.7%. Average interest earning assets increased $348.8 million for the three months ended September 30, 2020 compared to the same period<br> last year as a result of the acquisition.  Average loans increased $256.7 million while average investment securities increased $35.2 million. The tax effected net interest margin for the three months ended September 30, 2020 was 3.88%<br> compared to 3.82% for the same period last year, which was impacted by the decrease in the average cost on interest bearing liabilities of 52 basis points, to 0.56%. The tax effected net interest margin benefitted approximately $220,000<br> from pay-off of a purchase credit impaired loan acquired as part of The First National Bank of Fredericksburg acquisition in 2015.
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•	The provision for loan losses for the three months ended June 30, 2020 was $550,000, a $150,000 increase to the comparable period in 2019.<br> Organic growth during the third quarter totaled $2.2 million. The provision for 2020 was based on the impact the pandemic is having on local and national economies.
•	Total non-interest income was $3,538,000 for the three months ended September 30, 2020, which is $1,361,000 more than for the comparable<br> period last year.  The primary drivers were the gains on the sale of available securities of $245,000, the increase in gains of loans sold of $679,000 and in increase in other income of $544,000 due to fee income on derivative transactions<br> for customers. As a result of the pandemic, service charges decreased $113,000 for the three months ended September 30, 2020 when compared to the 2019 period.
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•	Total non-interest expenses for the three months ended September 30, 2020 totaled $9,692,000 compared to $8,414,000 for the same period<br> last year, which is an increase of $1,278,000, or 15.2%. The increase was due to the additional salary and benefit costs of employees added as a result of the MidCoast acquisition and occupancy expenses associated with the new branches<br> acquired as of the merger.
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•	The provision for income taxes increased $693,000 when comparing the three months ended September 30, 2020 to the same period in 2019 as a<br> result of an increase in income before income tax of $3,504,000.  The effective tax rate was 18.0% and 17.0% for the three months ended September 30, 2020 and 2019, respectively.
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Balance Sheet and Other Information:

•	At September 30, 2020, total assets were $1.86 billion, compared to $1.47 billion at December 31, 2019 and $1.48 billion at September 30,<br> 2019.
•	Available for sale securities of $287.8 million at September 30, 2020 increased $47.1 million from December 31, 2019 and $40.8 million from<br> September 30, 2019. The yield on the investment portfolio decreased from 2.90% to 2.66% on a tax equivalent basis due to a number of securities purchased at a discount that were called in the third quarter of 2019.
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•	Net loans as of September 30, 2020 totaled $1.35 billion and increased $249.0 million from December 31, 2019 as a result of the acquisition<br> and PPP program. Excluding the acquisition and the PPP program, loans would have decreased $27.2 million during 2020. The decrease in organic loans was driven by early pay-offs and limited opportunities in the first half of 2020.
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•	The allowance for loan losses totaled $15,169,000 at September 30, 2020 which is an increase of $1,324,000 from December 31, 2019.  The<br> increase is due to recording a provision for loan losses of $1,500,000 and recoveries of $80,000, offset by charge-offs of $256,000. The allowance as a percent of total loans was 1.11% as of September 30, 2020 and 1.24% as of December 31,<br> 2019. Loans acquired in an acquisition are marked to fair value and excluded from the allowance, unless there has been a downgrade in the loan since acquisition. Non-performing assets increased in total $204,000 since December 31, 2019 to<br> $15.6 million. As a percent of loans, non-performing assets decreased from 1.38% to 1.14% of total loans.
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•	Deposits increased $341.6 million from December 31, 2019, to $1.55 billion at September 30, 2020, primarily due to the acquisition, which<br> increased deposits $208.8 million and customers holding more cash due to the pandemic. Brokered CD’s increased $8.8 million.  Non-interest-bearing deposits increased $72.5 million due to the acquisition and PPP program.
•	Stockholders’ equity totaled $189.1 million at September 30, 2020, compared to $154.8 million at December 31, 2019, an increase of $34.3<br> million. The increase was attributable to issuing 373,356 shares with a value of $19.2 million as part of the acquisition and net income for the nine months ended September 30, 2020 totaling $17.9 million, offset by net cash dividends for<br> 2020 totaling $4.7 million and net treasury stock activity of $808,000.  As a result of changes in interest rates impacting the fair value of investment securities, the unrealized gain on available for sale investment securities, net of<br> tax, improved $3.7 million from December 31, 2019.
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Dividend Declared

On September 1, 2020, the Board of Directors declared a cash dividend of $0.46 per share, which was paid on September 25, 2020 to shareholders of record at the close of business on September 11, 2020. The quarterly cash dividend is an increase of 3.3% over the regular cash dividend of $0.445 per share declared one year ago, as adjusted for the 1% stock dividend declared in June 2020.

Citizens Financial Services, Inc. has nearly 1,900 shareholders, the majority of whom reside in markets where its offices are located.

Note: This press release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.  These statements are not historical facts; rather, they are statements based on the Company's current expectations regarding its business strategies and their intended results and its future performance.  Forward-looking statements are preceded by terms such as "expects," "believes," "anticipates," "intends" and similar expressions.  Forward-looking statements are not guarantees of future performance.  Numerous risks and uncertainties could cause or contribute to the Company's actual results, performance and achievements to be materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to these differences include, without limitation, changes in general economic conditions, including changes in market interest rates and changes in monetary and fiscal policies of the federal government; legislative and regulatory changes; and other factors disclosed periodically in the Company's filings with the Securities and Exchange Commission.  Because of the risks and uncertainties inherent in forward-looking statements, readers are cautioned not to place undue reliance on them, whether included in this press release or made elsewhere periodically by the Company or on its behalf.  The Company assumes no obligation to update any forward-looking statements except as may be required by applicable law or regulation.

(1)	See reconciliation of non-gaap measures at the end of the press release

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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						Nine Months Ended
	September 30,						September 30,
	2020			2019			2020			2019
Income and Performance Ratios
Net Income	$	8,007		$	5,196		$	17,876		$	14,447
Return on average assets (annualized)		1.75	%		1.43	%		1.43	%		1.33	%
Return on average equity (annualized)		17.36	%		13.74	%		13.85	%		12.99	%
Return on average tangible equity (annualized) (a)		21.11	%		16.42	%		16.72	%		15.60	%
Net interest margin (tax equivalent)(a)		3.88	%		3.82	%		3.96	%		3.71	%
Earnings per share - basic (b)	$	2.04		$	1.46		$	4.74		$	4.06
Earnings per share - diluted (b)	$	2.04		$	1.46		$	4.74		$	4.05
Cash dividends paid per share (b)	$	0.460		$	0.445		$	1.460		$	1.317
Number of shares used in computation - basic (b)		3,918,438			3,553,996			3,769,705			3,560,695
Number of shares used in computation - diluted (b)		3,918,438			3,553,996			3,771,730			3,562,975
Asset quality
Allowance for loan and lease losses	$	15,169		$	13,679
Non-performing assets	$	15,631		$	16,823
Allowance for loan and lease losses/total loans		1.11	%		1.23	%
Non-performing assets to total loans		1.14	%		1.51	%
Annualized net (recoveries) charge-offs to total loans		0.06	%		0.01	%		0.02	%		0.04	%
Equity
Book value per share (b)	$	47.48		$	42.64
Tangible Book value per share (a) (b)	$	39.09		$	35.71
Market Value (Last reported trade of month)	$	44.00		$	58.40
Common shares outstanding		3,921,408			3,525,315
Other
Average Full Time Equivalent Employees		289.6			257.5
Loan to Deposit Ratio		87.96	%		92.97	%
Trust assets under management	$	137,127		$	130,383
Brokerage assets under management	$	227,134		$	208,969
Balance Sheet Highlights	September 30,			December 31,			September 30,
		2020			2019			2019
Assets	$	1,858,344		$	1,466,339		$	1,475,005
Investment securities		289,534			241,407			247,677
Loans (net of unearned income)		1,365,879			1,115,569			1,115,034
Allowance for loan losses		15,169			13,845			13,679
Deposits		1,552,753			1,211,118			1,199,304
Stockholders' Equity		189,051			154,774			151,678
(a) See reconcilation of Non-GAAP measures at the end of the press<br> release
(b) Prior period amounts were adjusted to reflect stock dividends.

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CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
			December 31,			September 30,
(in thousands except share data)			2019			2019
ASSETS:
Cash and due from banks:
Noninterest-bearing	15,922		$	17,727		$	19,005
Interest-bearing	59,387			793			1,081
Total cash and cash equivalents	75,309			18,520			20,086
Interest bearing time deposits with other banks	13,758			14,256			14,256
Equity securities	1,696			701			650
Available-for-sale securities	287,838			240,706			247,027
Loans held for sale	19,320			815			1,430
Loans (net of allowance for loan losses: 15,169 at September 30, 2020;
13,845 at December 31, 2019 and 13,679 at September 30, 2019)	1,350,710			1,101,724			1,101,355
Premises and equipment	17,720			15,933			15,881
Accrued interest receivable	6,164			4,555			4,476
Goodwill	31,376			23,296			23,296
Bank owned life insurance	32,408			28,128			27,968
Other intangibles	1,538			1,346			1,400
Other assets	20,507			16,359			17,180
TOTAL ASSETS	1,858,344		$	1,466,339		$	1,475,005
LIABILITIES:
Deposits:
Noninterest-bearing	276,286		$	203,793		$	199,046
Interest-bearing	1,276,467			1,007,325			1,000,258
Total deposits	1,552,753			1,211,118			1,199,304
Borrowed funds	99,602			85,117			109,840
Accrued interest payable	1,006			1,088			1,052
Other liabilities	15,932			14,242			13,131
TOTAL LIABILITIES	1,669,293			1,311,565			1,323,327
STOCKHOLDERS' EQUITY:
Preferred Stock 1.00 par value; authorized
3,000,000 shares; none issued in 2020 or 2019	-			-			-
Common stock
1.00 par value; authorized 25,000,000 shares at September 30, 2020, December 31, 2019 and
September 30, 2019: issued 3,976,986 at September 30, 2020 and 3,938,668 at December 31, 2019
and September 30, 2019	4,350			3,939			3,939
Additional paid-in capital	75,867			55,089			55,096
Retained earnings	121,203			110,800			107,342
Accumulated other comprehensive income (loss)	2,865			(629	)		(289	)
Treasury stock, at cost:  428,934 at September 30, 2020 and 413,607 shares
at December 31, 2019 and 413,353 shares at September 30,  2019	(15,234	)		(14,425	)		(14,410	)
TOTAL STOCKHOLDERS' EQUITY	189,051			154,774			151,678
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	1,858,344		$	1,466,339		$	1,475,005

All values are in US Dollars.

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CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(in thousands, except per share data)	2020			2019			2020			2019
INTEREST INCOME:
Interest and fees on loans	$	16,718		$	13,915		$	46,763		$	41,005
Interest-bearing deposits with banks		106			103			298			311
Investment securities:
Taxable		979			1,361			3,212			3,597
Nontaxable		485			378			1,337			1,109
Dividends		98			117			275			371
TOTAL INTEREST INCOME		18,386			15,874			51,885			46,393
INTEREST EXPENSE:
Deposits		1,635			2,315			5,279			7,027
Borrowed funds		281			660			960			2,216
TOTAL INTEREST EXPENSE		1,916			2,975			6,239			9,243
NET INTEREST INCOME		16,470			12,899			45,646			37,150
Provision for loan losses		550			400			1,500			1,150
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		15,920			12,499			44,146			36,000
NON-INTEREST INCOME:
Service charges		1,112			1,225			3,107			3,498
Trust		199			148			542			589
Brokerage and insurance		352			289			941			843
Gains on loans sold		855			176			1,282			339
Equity security gains (losses), net		(33	)		29			(276	)		70
Available for sale security gains (losses), net		185			8			302			8
Earnings on bank owned life insurance		180			158			514			463
Other		688			144			1,046			427
TOTAL NON-INTEREST INCOME		3,538			2,177			7,458			6,237
NON-INTEREST EXPENSES:
Salaries and employee benefits		6,102			5,096			17,411			15,129
Occupancy		714			530			1,891			1,639
Furniture and equipment		267			165			587			501
Professional fees		417			343			1,180			1,101
FDIC insurance expense		135			(20	)		341			196
Pennsylvania shares tax		275			275			809			825
Amortization of intangibles		57			66			162			198
Merger and acquisition		-			275			2,179			275
Software expenses		324			244			817			699
ORE expenses		30			92			221			308
Other		1,371			1,348			4,428			4,102
TOTAL NON-INTEREST EXPENSES		9,692			8,414			30,026			24,973
Income before provision for income taxes		9,766			6,262			21,578			17,264
Provision for income taxes		1,759			1,066			3,702			2,817
NET INCOME	$	8,007		$	5,196		$	17,876		$	14,447
PER COMMON SHARE DATA:
Net Income - Basic	$	2.04		$	1.46		$	4.74		$	4.06
Net Income - Diluted	$	2.04		$	1.46		$	4.74		$	4.05
Cash Dividends Paid	$	0.460		$	0.445		$	1.460		$	1.317
Number of shares used in computation - basic		3,918,438			3,553,996			3,769,705			3,560,695
Number of shares used in computation - diluted		3,918,438			3,553,996			3,771,730			3,562,975

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CITIZENS FINANCIAL SERVICES, INC.
QUARTERLY CONDENSED, CONSOLIDATED INCOME STATEMENT INFORMATION
(UNAUDITED)
(in thousands, except share data)			Three Months Ended,
	Sept 30,		June 30,		March 31,			Dec 31,		Sept 30,
	2020		2020		2020			2019		2019
Interest income	$	18,386	$	18,160	$	15,339		$	15,587	$	15,874
Interest expense		1,916		1,874		2,449			2,797		2,975
Net interest income		16,470		16,286		12,890			12,790		12,899
Provision for loan losses		550		550		400			525		400
Net interest income after provision for loan losses		15,920		15,736		12,490			12,265		12,499
Non-interest income		3,386		1,941		2,105			2,083		2,140
Investment securities gains (losses), net		152		128		(254	)		66		37
Non-interest expenses		9,692		11,413		8,921			8,368		8,414
Income before provision for income taxes		9,766		6,392		5,420			6,046		6,262
Provision for income taxes		1,759		1,054		889			1,003		1,066
Net income	$	8,007	$	5,338	$	4,531		$	5,043	$	5,196
Earnings Per Share Basic	$	2.04	$	1.27	$	1.42		$	1.46	$	1.46
Earnings Per Share Diluted	$	2.04	$	1.27	$	1.42		$	1.46	$	1.46

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CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED AVERAGE BALANCES, INTEREST, YIELDS AND RATES, AND NET INTEREST MARGIN ON A FULLY TAX-EQUIVALENT BASIS
(UNAUDITED)
	Three Months Ended September 30,
	2020						2019
	Average			Average			Average			Average
	Balance (1)	Interest		Rate			Balance (1)	Interest		Rate
(dollars in thousands)				$	%					$	%
ASSETS
Short-term investments:
Interest-bearing deposits at banks			14		0.08				6		0.24
Total short-term investments			14		0.08				6		0.24
Interest bearing time deposits at banks			92		2.59				97		2.55
Investment securities:
Taxable			1,077		2.24				1,478		3.25
Tax-exempt (3)			614		2.92				477		3.22
Investment securities			1,691		2.45				1,955		3.24
Loans: (2)(3)(4)
Residential mortgage loans			2,807		5.34				2,892		5.32
Construction loans			356		4.87				176		5.31
Commercial Loans			8,472		5.17				5,863		5.48
Agricultural Loans			3,971		4.44				4,018		4.62
Loans to state & political subdivisions			872		4.15				958		3.95
Other loans			401		5.24				196		8.13
Loans, net of discount (2)(3)(4)			16,879		4.93				14,103		5.07
Total interest-earning assets			18,676		4.32				16,161		4.68
Cash and due from banks
Bank premises and equipment
Other assets
Total non-interest earning assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts			211		0.21				590		0.70
Savings accounts			96		0.15				218		0.39
Money market accounts			215		0.39				505		1.20
Certificates of deposit			1,113		1.16				1,002		1.49
Total interest-bearing deposits			1,635		0.52				2,315		0.93
Other borrowed funds			281		1.14				660		2.56
Total interest-bearing liabilities			1,916		0.56				2,975		1.08
Demand deposits
Other liabilities
Total non-interest-bearing liabilities
Stockholders' equity
Total liabilities & stockholders' equity
Net interest income			16,760						13,186
Net interest spread (5)					3.76	%					3.60	%
Net interest income as a percentage
of average interest-earning assets					3.88	%					3.82	%
Ratio of interest-earning assets
to interest-bearing liabilities					127	%					125	%
(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 2020 and 2019. See reconciliation of 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.

All values are in US Dollars.

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CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED AVERAGE BALANCES, INTEREST, YIELDS AND RATES, AND NET INTEREST MARGIN ON A FULLY TAX-EQUIVALENT BASIS
(UNAUDITED)
	Nine Months Ended September 30,
	2020						2019
	Average			Average			Average			Average
	Balance (1)	Interest		Rate			Balance (1)	Interest		Rate
(dollars in thousands)				$	%					$	%
ASSETS
Short-term investments:
Interest-bearing deposits at banks			23		0.09				19		0.27
Total short-term investments			23		0.09				19		0.27
Interest bearing time deposits at banks			275		2.57				292		2.54
Investment securities:
Taxable			3,487		2.51				3,968		2.80
Tax-exempt (3)			1,693		3.02				1,404		3.22
Investment securities			5,180		2.66				5,372		2.90
Loans: (2)(3)(4)
Residential mortgage loans			8,450		5.30				8,584		5.33
Construction loans			952		4.95				796		5.17
Commercial Loans			22,282		5.35				17,064		5.49
Agricultural Loans			12,096		4.52				11,657		4.61
Loans to state & political subdivisions			2,709		4.05				2,910		3.94
Other loans			794		5.93				562		7.76
Loans, net of discount (2)(3)(4)			47,283		5.01				41,573		5.06
Total interest-earning assets			52,761		4.49				47,256		4.61
Cash and due from banks
Bank premises and equipment
Other assets
Total non-interest earning assets
Total assets
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts			904		0.32				1,756		0.71
Savings accounts			387		0.22				608		0.37
Money market accounts			810		0.55				1,520		1.24
Certificates of deposit			3,178		1.27				3,143		1.49
Total interest-bearing deposits			5,279		0.62				7,027		0.95
Other borrowed funds			960		1.39				2,216		2.72
Total interest-bearing liabilities			6,239		0.68				9,243		1.12
Demand deposits
Other liabilities
Total non-interest-bearing liabilities
Stockholders' equity
Total liabilities & stockholders' equity
Net interest income			46,522						38,013
Net interest spread (5)					3.81	%					3.49	%
Net interest income as a percentage
of average interest-earning assets					3.96	%					3.71	%
Ratio of interest-earning assets
to interest-bearing liabilities					127	%					124	%
(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
(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.

All values are in US Dollars.

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CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED SUMMARY OF LOANS BY TYPE; NON-PERFORMING ASSETS; and ALLOWANCE FOR LOAN LOSSES
(UNAUDITED)
(Excludes Loans Held for Sale)
(In Thousands)
	September 30,			June 30,			March 31,			December 31,			September 30,
	2020			2020			2020			2019			2019
Real estate:
Residential	$	208,084		$	210,789		$	216,179		$	217,088		$	215,717
Commercial		535,456			513,598			338,490			342,023			349,269
Agricultural		310,702			313,136			300,606			311,464			305,948
Construction		28,656			31,744			17,926			15,519			11,448
Consumer		30,625			30,973			9,533			9,947			9,709
Other commercial loans		129,731			132,503			71,038			69,970			76,785
Other agricultural loans		40,790			44,912			46,170			55,112			50,334
State & political subdivision loans		81,835			85,978			93,778			94,446			95,824
Total loans		1,365,879			1,363,633			1,093,720			1,115,569			1,115,034
Less: allowance for loan losses		15,169			14,827			14,247			13,845			13,679
Net loans	$	1,350,710		$	1,348,806		$	1,079,473		$	1,101,724		$	1,101,355
Past due and non-performing assets
Total Loans past due 30-89 days and still accruing	$	3,449		$	4,986		$	3,159		$	2,711		$	2,672
Non-accrual loans	$	11,711		$	10,693		$	11,302		$	11,536		$	13,223
Loans past due 90 days or more and accruing		1,194			654			164			487			103
Non-performing loans	$	12,905		$	11,347		$	11,466		$	12,023		$	13,326
OREO		2,726			2,853			3,056			3,404			3,497
Total Non-performing assets	$	15,631		$	14,200		$	14,522		$	15,427		$	16,823
	3 Months			3 Months			3 Months			3 Months			3 Months
	Ended			Ended			Ended			Ended			Ended
Analysis of the Allowance for loan Losses	September 30,			June 30,			March 31,			December 31,			September 30,
(In Thousands)		2020			2020			2020			2019			2019
Balance, beginning of period	$	14,827		$	14,247		$	13,845		$	13,679		$	13,304
Charge-offs		(237	)		(10	)		(9	)		(370	)		(34	)
Recoveries		29			40			11			11			9
Net (charge-offs) recoveries		(208	)		30			2			(359	)		(25	)
Provision for loan losses		550			550			400			525			400
Balance, end of period	$	15,169		$	14,827		$	14,247		$	13,845		$	13,679

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CITIZENS FINANCIAL SERVICES, INC.
Reconciliation of GAAP and Non-GAAP Financial Measures
(UNAUDITED)
(Dollars in thousands, except per share data)
	As of
	September 30
	2020			2019
Tangible Equity
Stockholders Equity - GAAP	$	189,051		$	151,678
Accumulated other comprehensive (gain) loss		(2,865	)		289
Intangible Assets		(32,914	)		(24,696	)
Tangible Equity - Non-GAAP		153,272			127,271
Shares outstanding adjusted for June 2019 stock Dividend		3,921,408			3,563,633
Tangible Book value per share (a)	$	39.09		$	35.71
	As of
	September 30
		2020			2019
Tangible Equity per share
Stockholders Equity per share - GAAP	$	48.21		$	42.56
Adjustments for accumulated other comprehensive loss		(0.73	)		0.08
Book value per share		47.48			42.64
Adjustments for intangible assets		(8.39	)		(6.93	)
Tangible Book value per share - Non-GAAP	$	39.09		$	35.71
	For the Three Months Ended						For the Nine Months Ended
	September 30						September 30
		2020			2019			2020			2019
Return on Average Tangible Equity
Average Stockholders Equity - GAAP	$	187,486		$	151,054		$	173,979		$	146,124
Average Accumulated Other Comprehensive Loss		3,038			(215	)		1,856			(2,158	)
Average Intangible Assets		32,730			24,710			29,548			24,792
Average Tangible Equity - Non-GAAP		151,718			126,559			142,575			123,490
Net Income	$	8,007		$	5,196		$	17,876		$	14,447
Annualized Return on Average Tangible Equity		21.11	%		16.42	%		16.72	%		15.60	%
	For the Three Months September 30, 2020			For the Nne Months September 30, 2020
Return on Average Assets and Equity Excluding Merger and Acquisition Costs
Net Income	$	8,007		$	17,876
After Tax merger and acquisition costs		-			1,766
Net Income excluding merger and acquisition costs	$	8,007		$	19,642
Average Assets		1,835,148			1,669,306
Annualized Return on Average stockholders equity, excluding Merger and Acquisition costs		1.75	%		1.57	%
Average Stockholders Equity - GAAP	$	184,448		$	172,123
Annualized Return on Average stockholders equity, excluding Merger and Acquisition costs		17.36	%		15.22	%
	For the Three Months Ended						For the Nine Months Ended
	September 30						September 30
Reconciliation of net interest income on fully taxable equivalent basis		2020			2019			2020			2019
Total interest income	$	18,386		$	15,874		$	51,885		$	46,393
Total interest expense		1,916			2,975			6,239			9,243
Net interest income		16,470			12,899			45,646			37,150
Tax equivalent adjustment		290			287			876			863
Net interest income (fully taxable equivalent)	$	16,760		$	13,186		$	46,522		$	38,013