|
cover page | ||
| ||
inside cover | ||
| ||
|
| ||
CONSOLIDATED FINANCIAL HIGHLIGHTS |
|
(dollars in thousands, except per share data) |
2003 |
2002 |
|||||
BALANCE SHEET |
|
|
|||||
|
|
|
|||||
Assets |
$ |
463,878 |
$ |
432,658 |
|||
Deposits |
385,691 |
373,051 |
|||||
Net Loans |
314,037 |
294,836 |
|||||
Investments |
106,587 |
100,725 |
|||||
Stockholders' Equity |
38,529 |
38,406 |
|||||
|
|
|
|||||
STATEMENT OF INCOME |
|
|
|||||
|
|
|
|||||
Interest Income |
25,615 |
27,377 |
|||||
Interest Expense |
8,826 |
10,404 |
|||||
Net Interest Income |
16,789 |
16,973 |
|||||
Net Income |
4,879 |
5,595 |
|||||
|
|
|
|||||
PER SHARE DATA |
|
|
|||||
|
|
|
|||||
Net Income |
1.72 |
1.96 |
|||||
Cash Dividends |
0.74 |
0.68 |
|||||
|
|
|
|||||
TRUST DEPARTMENT |
|
|
|||||
|
|
|
|||||
Trust Assets Managed |
70,384 |
65,171 |
CITIZENS FINANCIAL SERVICES, INC. | 2 | 2003 ANNUAL REPORT |
| ||
MESSAGE TO SHAREHOLDERS |
|
To Our Shareholders, Customers and Friends,
The year 2003 was one in which significant changes occurred at Citizens Financial Services, Inc. After serving 22 years as President, Richard E. Wilber announced his retirement. He presided over years of growth and prosperity, and the excellent condition of the Company is testament to his leadership. As Interim President I am pleased to report that the Company is continuing to prosper, this in great part due to the able staff Dick had in place at the time of his retirement.
A change in leadership can often lead to other changes, such as the loss of key management team members or even something more significant such as a change in ownership. In our case, however, neither occurred. The Board of Directors immediately decided that Citizens Financial Services, Inc. will remain independent. To date, key individuals remain on-board and committed to the success of the Company. We believe our reputation as a quality financial services provider in the three counties we serve will provide a solid foundation for continued growth. The search for the next President is well underway. Needless to say, the process is moving forward carefully and deliberately to ensure we select an individual who is well suited to effectively lead a growing, rural community bank. The shareholders and public will be notified soon after the appointment is made. | |
| |
These are interesting and unusual economic times. The long period of low interest rates is having considerable impact on the performance of the First Citizens National Bank (the "Bank"), the wholly owned subsidiary of Citizens Financial Services, Inc. In such an environment, the lower rates paid on deposit accounts result in reduced interest expense to the Bank. For the same reason, loan demand increases, especially home mortgages. In fact, in 2003, the Bank originated a record number of loans making us again the number one mortgage lender in the Northern Tier. However, lower interest rates also fuel refinancing which leads to less than expected interest income. These issues challenge banks to effectively manage their net interest income margin in order to continue to experience positive growth in net interest income. I am pleased to report that we succeeded in this challenge by maintaining a net interest margin above peers for the second consecutive year. The low interest rate environment inevitably challenges the Banks management of its investment portfolio. During 2003 we continued to experience significant cash flow from our mortgage backed securities monthly principal repayments, the proceeds of which were used to support our continued loan growth. Thus it is not surprising the income from the portfolio was less than in 2002. |
CITIZENS FINANCIAL SERVICES, INC. | 3 | 2003 ANNUAL REPORT |
| ||
MESSAGE TO SHAREHOLDERS |
|
Sincerely, |
John M. Thomas |
Interim President |
CITIZENS FINANCIAL SERVICES, INC. | 4 | 2003 ANNUAL REPORT |
| ||
CONSOLIDATED BALANCE SHEET |
|
|
December 31, | ||||||
(in thousands) |
2003 |
2002 | |||||
ASSETS: |
|
| |||||
Cash and due from banks: |
|
| |||||
Noninterest-bearing |
$ |
9,624 |
$ |
11,173 |
|||
Interest-bearing |
327 |
421 |
|||||
|
|
|
|||||
Total cash and cash equivalents |
9,951 |
11,594 |
|||||
Available-for-sale securities |
106,587 |
100,725 |
|||||
Loans (net of allowance for loan losses |
|
|
|||||
2003, $3,620; 2002, $3,621) |
314,037 |
294,836 |
|||||
Premises and equipment |
10,645 |
11,245 |
|||||
Accrued interest receivable |
1,703 |
1,976 |
|||||
Goodwill |
6,905 |
6,905 |
|||||
Core deposit intangible |
978 |
1,413 |
|||||
Bank owned life insurance |
7,142 |
- |
|||||
Other assets |
5,930 |
3,964 |
|||||
|
|
|
|||||
TOTAL ASSETS |
$ |
463,878 |
$ |
432,658 |
|||
|
|
|
|||||
LIABILITIES: |
|
|
|||||
Deposits: |
|
|
|||||
Noninterest-bearing |
$ |
46,820 |
$ |
40,143 |
|||
Interest-bearing |
338,871 |
332,908 |
|||||
|
|
|
|||||
Total deposits |
385,691 |
373,051 |
|||||
Borrowed funds |
27,796 |
17,027 |
|||||
Notes payable |
7,500 |
- |
|||||
Accrued interest payable |
1,888 |
2,077 |
|||||
Other liabilities |
2,474 |
2,097 |
|||||
|
|
|
|||||
TOTAL LIABILITIES |
425,349 |
394,252 |
|||||
|
|
|
|||||
STOCKHOLDERS' EQUITY: |
|
|
|||||
Common Stock |
|
|
|||||
$1.00 par value; authorized 10,000,000 shares; |
|
|
|||||
issued 2,909,849 and 2,882,070 |
|
|
|||||
shares in 2003 and 2002, respectively |
2,910 |
2,882 |
|||||
Additional paid-in capital |
10,213 |
9,473 |
|||||
Retained earnings |
26,455 |
24,447 |
|||||
|
|
|
|||||
TOTAL |
39,578 |
36,802 |
|||||
Accumulated other comprehensive income |
956 |
2,553 |
|||||
Less: Treasury stock, at cost |
|
|
|||||
96,962 and 55,162 shares for 2003 and 2002, respectively |
(2,005 |
) |
(949 |
) | |||
TOTAL STOCKHOLDERS' EQUITY |
38,529 |
38,406 |
|||||
|
|
|
|||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
$ |
463,878 |
$ |
432,658 |
|||
|
|
|
|||||
See accompanying notes to consolidated financial statements. |
|
|
CITIZENS FINANCIAL SERVICES, INC. | 5 | 2003 ANNUAL REPORT |
| ||
CONSOLIDATED STATEMENT OF INCOME |
|
|
Year Ended December 31, | |||||||||
(in thousands, except per share data) |
2003 |
2002 |
2001 |
|||||||
|
|
|
|
|||||||
INTEREST INCOME: |
|
|
|
|||||||
Interest and fees on loans |
$ |
21,593 |
$ |
21,600 |
$ |
22,163 |
||||
Interest-bearing deposits with banks |
29 |
65 |
547 |
|||||||
Investment securities: |
|
|
|
|||||||
Taxable |
3,222 |
4,711 |
4,969 |
|||||||
Nontaxable |
457 |
634 |
853 |
|||||||
Dividends |
314 |
367 |
493 |
|||||||
|
|
|
|
|||||||
TOTAL INTEREST INCOME |
25,615 |
27,377 |
29,025 |
|||||||
|
|
|
|
|||||||
INTEREST EXPENSE: |
|
|
|
|||||||
Deposits |
8,501 |
10,012 |
13,839 |
|||||||
Borrowed funds |
325 |
392 |
467 |
|||||||
|
|
|
|
|||||||
TOTAL INTEREST EXPENSE |
8,826 |
10,404 |
14,306 |
|||||||
|
|
|
|
|||||||
NET INTEREST INCOME |
16,789 |
16,973 |
14,719 |
|||||||
Provision for loan losses |
435 |
435 |
445 |
|||||||
|
|
|
|
|||||||
NET INTEREST INCOME AFTER PROVISION FOR |
|
|
|
|||||||
LOAN LOSSES |
16,354 |
16,538 |
14,274 |
|||||||
|
|
|
|
|||||||
NON-INTEREST INCOME: |
|
|
|
|||||||
Service charges |
3,018 |
3,130 |
2,527 |
|||||||
Trust |
622 |
562 |
578 |
|||||||
Gains on loans sold |
349 |
185 |
31 |
|||||||
Realized securities gains, net |
553 |
254 |
657 |
|||||||
Other |
770 |
915 |
496 |
|||||||
TOTAL NON-INTEREST INCOME |
5,312 |
5,046 |
4,289 |
|||||||
|
|
|
|
|||||||
NON-INTEREST EXPENSES: |
|
|
|
|||||||
Salaries and employee benefits |
8,304 |
7,120 |
6,597 |
|||||||
Occupancy |
1,025 |
998 |
992 |
|||||||
Furniture and equipment |
713 |
881 |
966 |
|||||||
Professional fees |
694 |
667 |
494 |
|||||||
Amortization of intangibles |
435 |
457 |
1,015 |
|||||||
Other |
4,330 |
4,103 |
3,977 |
|||||||
|
|
|
|
|||||||
TOTAL NON-INTEREST EXPENSES |
15,501 |
14,226 |
14,041 |
|||||||
|
|
|
|
|||||||
Income before provision for income taxes |
6,165 |
7,358 |
4,522 |
|||||||
Provision for income taxes |
1,286 |
1,763 |
765 |
|||||||
|
|
|
|
|||||||
NET INCOME |
$ |
4,879 |
$ |
5,595 |
$ |
3,757 |
||||
|
|
|
|
|||||||
NET INCOME - EARNINGS PER SHARE |
$ |
1.72 |
$ |
1.96 |
$ |
1.32 |
||||
|
|
|
|
|||||||
CASH DIVIDENDS PER SHARE |
$ |
0.74 |
$ |
0.68 |
$ |
0.64 |
||||
|
|
|
|
|||||||
See accompanying notes to consolidated financial statements. |
|
|
|
CITIZENS FINANCIAL SERVICES, INC. | 6 | 2003 ANNUAL REPORT |
| ||
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY |
|
|
|
|
|
|
Accumulated |
|
| |
|
|
|
Additional |
|
Other |
|
| |
|
Common Stock |
|
Paid-in |
Retained |
Comprehensive |
Treasury |
| |
(in thousands, except share data) |
Shares |
Amount |
Capital |
Earnings |
Income(Loss) |
Stock |
Total | |
|
|
|
|
|
|
| ||
Balance, December 31, 2000 |
2,827,409 |
$ 2,827 |
$ 8,670 |
$ 19,657 |
$ 344 |
$ (949) |
$ 30,549 | |
|
|
|
|
|
|
|
| |
Comprehensive income: |
|
|
|
|
|
|
| |
Net income |
|
|
|
3,757 |
|
|
3,757 | |
Change in net unrealized gain on securities |
|
|
|
|
|
|
| |
available-for-sale, net of taxes of $448 |
|
|
|
|
869 |
|
869 | |
| ||||||||
Total comprehensive income |
|
|
|
|
|
|
4,626 | |
Stock dividend |
27,173 |
28 |
347 |
(375) |
|
|
||
Cash dividends, $.64 per share |
|
|
|
(1,786) |
|
|
(1,786) | |
|
|
|
|
|
|
|
| |
Balance, December 31, 2001 |
2,854,582 |
2,855 |
9,017 |
21,253 |
1,213 |
(949) |
33,389 | |
|
|
|
|
|
|
|
| |
Comprehensive income: |
|
|
|
|
|
|
| |
Net income |
|
|
|
5,595 |
|
|
5,595 | |
Change in net unrealized gain on securities |
|
|
|
|
|
|
| |
available-for-sale, net of taxes of $690 |
|
|
|
|
1,340 |
|
1,340 | |
| ||||||||
Total comprehensive income |
|
|
|
|
|
|
6,935 | |
Stock dividend |
27,488 |
27 |
456 |
(483) |
|
|
||
Cash dividends, $.68 per share |
|
|
|
(1,918) |
|
|
(1,918) | |
|
|
|
|
|
|
|
| |
Balance, December 31, 2002 |
2,882,070 |
2,882 |
9,473 |
24,447 |
2,553 |
(949) |
38,406 | |
|
|
|
|
|
|
|
| |
Comprehensive income: |
|
|
|
|
|
|
| |
Net income |
|
|
|
4,879 |
|
|
4,879 | |
Change in net unrealized loss on securities |
|
|
|
|
|
|
| |
available-for-sale, net of tax benefit of $823 |
|
|
|
|
(1,597) |
|
(1,597) | |
| ||||||||
Total comprehensive income |
|
|
|
|
|
|
3,282 | |
Stock dividend |
27,779 |
28 |
740 |
(768) |
|
|
| |
Purchase of treasury stock (41,800 shares) |
|
|
|
|
|
(1,056) |
(1,056) | |
Cash dividends, $.74 per share |
|
|
|
(2,103) |
|
|
(2,103) | |
|
|
|
|
|
|
|
| |
Balance, December 31, 2003 |
2,909,849 |
$ 2,910 |
$ 10,213 |
$ 26,455 |
$ 956 |
$ (2,005) |
$ 38,529 | |
|
|
|
|
|
|
|
|
|
2003 |
2002 |
2001 | |||||||
|
|
|
| |||||||
Components of comprehensive income (loss): |
|
|
| |||||||
Change in net unrealized gain (loss) on investment |
|
|
| |||||||
securities available-for-sale |
$ |
(1,232 |
) |
$ |
1,508 |
$ |
1,303 |
|||
Realized gains included in net income, net |
|
|
|
|||||||
of taxes of $188, $86 and $223 |
(365 |
) |
(168 |
) |
(434 |
) | ||||
|
|
|
|
|||||||
Total |
$ |
(1,597 |
) |
$ |
1,340 |
$ |
869 |
|||
|
|
|
|
|||||||
See accompanying notes to consolidated financial statements. |
|
|
|
CITIZENS FINANCIAL SERVICES, INC. | 7 | 2003 ANNUAL REPORT |
| ||
CONSOLIDATED STATEMENT OF CASH FLOWS |
|
|
Year Ended December 31, | |||||||||
|
|
|
| |||||||
(in thousands) |
2003 |
2002 |
2001 | |||||||
|
|
|
| |||||||
Cash Flows from Operating Activities: |
|
|
| |||||||
Net income |
$ |
4,879 |
$ |
5,595 |
$ |
3,757 |
||||
Adjustments to reconcile net income to net |
|
|
|
|||||||
cash provided by operating activities: |
|
|
|
|||||||
Provision for loan losses |
435 |
435 |
445 |
|||||||
Depreciation and amortization |
1,358 |
1,447 |
1,968 |
|||||||
Amortization and accretion on investment securities |
1,129 |
690 |
199 |
|||||||
Deferred income taxes |
(141 |
) |
116 |
(279 |
) | |||||
Realized gains on securities |
(553 |
) |
(254 |
) |
(657 |
) | ||||
Increase in cash value of bank owned life insurance |
(142 |
) |
- |
- |
||||||
Realized gains on loans sold |
(349 |
) |
(185 |
) |
(31 |
) | ||||
Originations of loans held for sale |
(22,435 |
) |
(11,857 |
) |
(3,839 |
) | ||||
Proceeds from sales of loans held for sale |
23,749 |
13,119 |
2,103 |
|||||||
Loss (gain) on sales or disposals of premises and equipment |
- |
(30 |
) |
36 |
||||||
Decrease in accrued interest receivable |
273 |
10 |
332 |
|||||||
Increase in other assets and intangibles |
(216 |
) |
(429 |
) |
(615 |
) | ||||
Decrease in accrued interest payable |
(189 |
) |
(208 |
) |
(335 |
) | ||||
Increase (decrease) in other liabilities |
831 |
(8 |
) |
478 |
||||||
|
|
|
|
|||||||
Net cash provided by operating activities |
8,629 |
8,441 |
3,562 |
|||||||
|
|
|
|
|||||||
Cash Flows from Investing Activities: |
|
|
|
|||||||
Available-for-sale securities: |
|
|
|
|||||||
Proceeds from sale of securities |
12,108 |
13,927 |
35,529 |
|||||||
Proceeds from maturity of securities |
49,343 |
34,090 |
13,841 |
|||||||
Purchase of securities |
(71,320 |
) |
(32,899 |
) |
(63,216 |
) | ||||
Net increase in loans |
(20,819 |
) |
(28,045 |
) |
(7,218 |
) | ||||
Purchase of bank owned life insurance |
(7,000 |
) |
- |
- |
||||||
Acquisition of premises and equipment |
(490 |
) |
(473 |
) |
(2,086 |
) | ||||
Proceeds from sale of premises and equipment |
- |
275 |
16 |
|||||||
Proceeds from sale of foreclosed assets held for sale |
155 |
422 |
425 |
|||||||
|
|
|
|
|||||||
Net cash used in investing activities |
(38,023 |
) |
(12,703 |
) |
(22,709 |
) | ||||
|
|
|
|
|||||||
Cash Flows from Financing Activities: |
|
|
|
|||||||
Net increase in deposits |
12,641 |
2,577 |
2,688 |
|||||||
Proceeds from long-term borrowings |
10,702 |
1,268 |
1,993 |
|||||||
Repayments of long-term borrowings |
(2,569 |
) |
(949 |
) |
(1,720 |
) | ||||
Net increase in short-term borrowed funds |
2,636 |
3,398 |
1,834 |
|||||||
Proceeds from notes payable |
7,500 |
- |
- |
|||||||
Dividends paid |
(2,103 |
) |
(1,918 |
) |
(1,786 |
) | ||||
Acquisition of treasury stock |
(1,056 |
) |
- |
- |
||||||
|
|
|
|
|||||||
Net cash provided by financing activities |
27,751 |
4,376 |
3,009 |
|||||||
|
|
|
|
|||||||
|
|
|
|
|||||||
Net increase (decrease) in cash and cash equivalents |
(1,643 |
) |
114 |
(16,138 |
) | |||||
|
|
|
|
|||||||
Cash and Cash Equivalents at Beginning of Year |
11,594 |
11,480 |
27,618 |
|||||||
|
|
|
|
|||||||
Cash and Cash Equivalents at End of Year |
$ |
9,951 |
$ |
11,594 |
$ |
11,480 |
||||
Supplemental Disclosures of Cash Flow Information: |
|
|
|
|||||||
|
|
|
|
|||||||
Interest paid |
$ |
9,015 |
$ |
10,612 |
$ |
14,641 |
||||
|
|
|
|
|||||||
Income taxes paid |
$ |
1,265 |
$ |
1,755 |
$ |
915 |
||||
|
|
|
|
|||||||
Noncash activities: |
|
|
|
|||||||
Real estate acquired in settlement of loans |
$ |
218 |
$ |
162 |
$ |
284 |
||||
|
|
|
|
|||||||
See accompanying notes to consolidated financial statements. |
|
|
|
CITIZENS FINACIAL SERVICES, INC. | 8 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
|
CITIZENS FINANCIAL SERVICES, INC. | 9 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
CITIZENS FINANCIAL SERVICES, INC. | 10 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
CITIZENS FINANCIAL SERVICES, INC. | 11 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
CITIZENS FINANCIAL SERVICES, INC. | 12 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
CITIZENS FINANCIAL SERVICES, INC. | 13 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
CITIZENS FINANCIAL SERVICES, INC. | 14 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
|
|
Gross |
Gross |
| |||||||||
|
|
Unrealized |
Unrealized |
Estimated | |||||||||
|
Amortized |
Holding |
Holding |
Fair | |||||||||
December 31, 2003 |
Cost |
Gains |
Losses |
Value | |||||||||
|
|
|
|
| |||||||||
Available-for-sale securities: |
|
|
|
|
|||||||||
U.S. Agency securities |
$ |
1,005 |
$ |
28 |
$ |
- |
$ |
1,033 |
|||||
Obligations of state and |
|
|
|
|
|||||||||
political subdivisions |
8,011 |
292 |
- |
8,303 |
|||||||||
Corporate obligations |
13,656 |
1,018 |
- |
14,674 |
|||||||||
Mortgage-backed securities |
78,080 |
671 |
(375 |
) |
78,376 |
||||||||
Equity securities |
4,387 |
35 |
(221 |
) |
4,201 |
||||||||
|
|
|
|
|
|||||||||
Total available-for-sale |
$ |
105,139 |
$ |
2,044 |
$ |
(596 |
) |
$ |
106,587 |
||||
|
|
|
|
|
|
|
Gross |
Gross |
| |||||||||
|
|
Unrealized |
Unrealized |
Estimated | |||||||||
|
Amortized |
Holding |
Holding |
Fair | |||||||||
December 31, 2002 |
Cost |
Gains |
Losses |
Value | |||||||||
|
|
|
|
| |||||||||
Available-for-sale securities: |
|
|
|
| |||||||||
U.S. Agency securities |
$ |
1,008 |
$ |
44 |
$ |
- |
$ |
1,052 |
|||||
Obligations of state and |
|
|
|
|
|||||||||
political subdivisions |
12,424 |
307 |
- |
12,731 |
|||||||||
Corporate obligations |
19,845 |
1,311 |
- |
21,156 |
|||||||||
Mortgage-backed securities |
58,913 |
1,888 |
- |
60,801 |
|||||||||
Equity securities |
4,667 |
318 |
- |
4,985 |
|||||||||
|
|
|
|
|
|||||||||
Total available-for-sale |
$ |
96,857 |
$ |
3,868 |
$ |
- |
$ |
100,725 |
|||||
|
|
|
|
|
|
Less than Twelve Months |
Twelve Months or Greater |
Total | ||||||||||||||||
|
|
|
|
|
| ||||||||||||||
|
Approx |
Gross |
Approx |
Gross |
Approx |
Gross | |||||||||||||
|
|
Market |
Unrealized |
Market |
Unrealized |
Market |
Unrealized | ||||||||||||
|
|
Value |
Losses |
Value |
Losses |
Value |
Losses | ||||||||||||
|
|
|
|
|
| ||||||||||||||
Mortgage-backed securities |
$ |
47,391 |
$ |
375 |
$ |
- |
$ |
- |
$ |
47,391 |
$ |
375 |
|||||||
Equity securities |
4,166 |
221 |
- |
- |
4,166 |
221 |
|||||||||||||
|
|
|
|
|
|
|
|||||||||||||
Total |
$ |
51,557 |
$ |
596 |
$ |
- |
$ |
- |
$ |
51,557 |
$ |
596 |
|||||||
CITIZENS FINANCIAL SERVICES, INC. | 15 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
|
2003 |
2002 |
2001 | |||||||
|
|
|
|
|||||||
Gross gains |
$ |
553 |
$ |
287 |
$ |
817 |
||||
Gross losses |
- |
33 |
160 |
|||||||
|
|
|
|
|||||||
Net gains (losses) |
$ |
553 |
$ |
254 |
$ |
657 |
||||
|
|
|
|
|
Amortized |
Estimated | |||||
|
Cost |
Fair Value | |||||
|
|
| |||||
Available-for-sale securities: |
|
|
|||||
Due in one year or less |
$ |
2 |
$ |
2 |
|||
Due after one year through five years |
14,725 |
15,494 |
|||||
Due after five years through ten years |
63,790 |
64,126 |
|||||
Due after ten years |
22,235 |
22,764 |
|||||
|
|
|
|||||
Total |
$ |
100,752 |
$ |
102,386 |
|||
|
|
|
CITIZENS FINANCIAL SERVICES, INC. | 16 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
|
December 31, | ||||||
|
2003 |
2002 | |||||
|
|
| |||||
Real estate loans: |
|
| |||||
Residential |
$ |
180,333 |
$ |
175,323 |
|||
Commercial |
57,370 |
47,210 |
|||||
Agricultural |
7,594 |
9,844 |
|||||
Construction |
5,784 |
5,009 |
|||||
Loans to individuals for household, |
|
|
|||||
family and other purchases |
13,145 |
13,915 |
|||||
Commercial and other loans |
16,219 |
18,564 |
|||||
State and political subdivision loans |
37,212 |
28,592 |
|||||
|
|
|
|||||
|
317,657 |
298,457 |
|||||
Less allowance for loan losses |
3,620 |
3,621 |
|||||
|
|
|
|||||
Loans, net |
$ |
314,037 |
$ |
294,836 |
|||
|
|
|
|
2003 |
2002 |
2001 | |||||||
|
|
|
| |||||||
Impaired loans without related allowance for loan losses |
$ |
1,197 |
$ |
- |
$ |
- |
||||
Impaired loans with related allowance for loan losses |
729 |
1,916 |
1,077 |
|||||||
Related allowance for loan losses |
35 |
327 |
325 |
|||||||
Average recorded balance of impaired loans |
1,772 |
1,967 |
1,078 |
|||||||
Interest income recognized on impaired loans |
35 |
- |
26 |
|
Years Ended December 31, | |||||||||
|
|
2003 |
2002 |
2001 | ||||||
|
|
|
| |||||||
Balance, beginning of year |
$ |
3,621 |
$ |
3,250 |
$ |
2,777 |
||||
Provision charged to income |
435 |
435 |
445 |
|||||||
Recoveries on loans previously |
|
|
|
|||||||
charged against the allowance |
116 |
115 |
175 |
|||||||
|
|
|
|
|||||||
|
4,172 |
3,800 |
3,397 |
|||||||
Loans charged against the allowance |
(552 |
) |
(179 |
) |
(147 |
) | ||||
|
|
|
|
|||||||
Balance, end of year |
$ |
3,620 |
$ |
3,621 |
$ |
3,250 |
||||
|
|
|
|
CITIZENS FINANCIAL SERVICES, INC. | 17 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
|
December 31, 2003 | |||||||||
|
Past Due |
Past Due |
| |||||||
|
30 - 89 days |
90 days or more |
Nonaccrual | |||||||
|
|
|
| |||||||
Real estate loans |
$ |
1,420 |
$ |
170 |
$ |
2,491 |
||||
Installment loans |
167 |
12 |
13 |
|||||||
Credit cards and related loans |
27 |
- |
- |
|||||||
Commercial and all other loans |
38 |
3 |
- |
|||||||
|
|
|
|
|||||||
Total |
$ |
1,652 |
$ |
185 |
$ |
2,504 |
||||
|
|
|
|
|||||||
|
December 31, 2002 | |||||||||
Past Due |
|
|
Past Due |
|
|
|
| |||
|
|
|
30 - 89 days |
|
|
90 days or more |
|
|
Nonaccrual |
|
|
|
|
|
|||||||
Real estate loans |
$ |
1,744 |
$ |
- |
$ |
2,980 |
||||
Installment loans |
307 |
29 |
- |
|||||||
Credit cards and related loans |
36 |
3 |
- |
|||||||
Commercial and all other loans |
145 |
7 |
- |
|||||||
|
|
|
|
|||||||
Total |
$ |
2,232 |
$ |
39 |
$ |
2,980 |
||||
|
|
|
|
|
December 31, | ||||||
|
2003 |
2002 | |||||
|
|
| |||||
Land |
$ |
1,867 |
$ |
1,867 |
|||
Buildings |
9,723 |
9,681 |
|||||
Furniture, fixtures and equipment |
6,598 |
6,476 |
|||||
Construction in process |
32 |
21 |
|||||
|
|
|
|||||
|
18,220 |
18,045 |
|||||
Less accumulated depreciation |
7,575 |
6,800 |
|||||
|
|
|
|||||
Premises and equipment, net |
$ |
10,645 |
$ |
11,245 |
|||
|
|
|
CITIZENS FINANCIAL SERVICES, INC. | 18 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
|
2004 |
|
$ 79,182 |
|
2005 |
|
44,453 |
|
2006 |
|
30,384 |
|
2007 |
|
29,691 |
|
2008 |
|
15,356 |
|
Thereafter |
|
2,493 |
|
Total certificates of deposit |
|
$ 201,559 |
|
Securities |
|
|
|
|
| |||||||||||||
|
Sold Under |
|
|
|
Capital |
Total | |||||||||||||
|
Agreements to |
TT&L |
FHLB |
Term |
Lease |
Borrowed | |||||||||||||
(dollars in thousands) |
Repurchase(a) |
Borrowings(b) |
Advances(c) |
Loans(d) |
Obligations |
Funds | |||||||||||||
|
|
|
|
|
|
| |||||||||||||
2003 |
|
|
|
|
|
| |||||||||||||
Balance at December 31 |
$ |
8,495 |
$ |
2,203 |
$ |
1,160 |
$ |
15,938 |
$ |
- |
$ |
27,796 |
|||||||
Highest balance at any month-end |
14,460 |
4,602 |
8,670 |
15,938 |
- |
43,670 |
|||||||||||||
Average balance |
10,019 |
461 |
2,322 |
1,167 |
- |
13,969 |
|||||||||||||
Weighted average interest rate: |
|
|
|
|
|
|
|||||||||||||
Paid during the year |
2.44 |
% |
2.08 |
% |
1.29 |
% |
2.46 |
% |
0.00 |
% |
2.24 |
% | |||||||
As of year-end |
2.50 |
% |
0.94 |
% |
1.03 |
% |
2.05 |
% |
0.00 |
% |
2.05 |
% | |||||||
|
|
|
|
|
|
|
|||||||||||||
2002 |
|
|
|
|
|
|
|||||||||||||
Balance at December 31 |
$ |
7,647 |
$ |
- |
$ |
7,380 |
$ |
2,000 |
$ |
- |
$ |
17,027 |
|||||||
Highest balance at any month-end |
14,897 |
- |
7,380 |
2,000 |
20 |
24,297 |
|||||||||||||
Average balance |
11,096 |
- |
1,208 |
2,000 |
6 |
14,310 |
|||||||||||||
Weighted average interest rate: |
|
|
|
|
|
|
|||||||||||||
Paid during the year |
2.69 |
% |
- |
1.59 |
% |
3.64 |
% |
4.93 |
% |
2.73 |
% | ||||||||
As of year-end |
2.94 |
% |
- |
1.31 |
% |
3.13 |
% |
0.00 |
% |
2.25 |
% | ||||||||
|
|
|
|
|
|
|
|||||||||||||
2001 |
|
|
|
|
|
|
|||||||||||||
Balance at December 31 |
$ |
8,322 |
$ |
- |
$ |
2,965 |
$ |
2,000 |
$ |
24 |
$ |
13,311 |
|||||||
Highest balance at any month-end |
10,758 |
- |
2,965 |
2,000 |
67 |
15,790 |
|||||||||||||
Average balance |
8,752 |
- |
47 |
2,000 |
49 |
10,848 |
|||||||||||||
Weighted average interest rate: |
|
|
|
|
|
|
|||||||||||||
Paid during the year |
4.31 |
% |
- |
2.00 |
% |
5.94 |
% |
4.93 |
% |
4.60 |
% | ||||||||
As of year-end |
3.20 |
% |
- |
1.88 |
% |
3.61 |
% |
4.90 |
% |
2.97 |
% | ||||||||
|
|
|
|
|
|
|
CITIZENS FINANCIAL SERVICES, INC. | 19 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
|
|
December 31, |
December 31, | |||||||
Interest Rate |
Maturity |
2003 |
2002 | |||||||
|
|
|
| |||||||
Variable: |
|
|
| |||||||
(e) |
August 31, 2004 |
$ 938 |
$ 2,000 | |||||||
Fixed: |
|
|
| |||||||
1.28% |
January 20, 2004 |
5,000 |
| |||||||
1.81% |
June 17, 2005 |
3,000 |
| |||||||
2.45% |
June 19, 2006 |
4,000 |
| |||||||
2.76% |
December 18, 2006 |
3,000 |
| |||||||
|
|
|
| |||||||
Total term loans |
|
$ |
15,938 |
$ |
2,000 |
|||||
|
|
|
|
2004 |
$ |
15,445 |
||
2005 |
420 |
|||
2006 |
11,215 |
|||
2007 |
716 |
|||
2008 |
7,500 |
|||
|
|
|||
Total borrowed funds |
$ |
35,296 |
||
|
|
CITIZENS FINANCIAL SERVICES, INC. | 20 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
|
Pension Benefits | ||||||
|
|
| |||||
|
2003 |
2002 | |||||
Change in benefit obligation |
|
|
|||||
Benefit obligation at beginning of year |
$ |
3,926 |
$ |
3,342 |
|||
Service cost |
340 |
269 |
|||||
Interest cost |
267 |
229 |
|||||
Amendments |
222 |
74 |
|||||
Assumption change |
117 |
96 |
|||||
Benefits paid |
(87 |
) |
(84 |
) | |||
|
|
|
|||||
Benefit obligation at end of year |
4,785 |
3,926 |
|||||
|
|
|
|||||
Change in plan assets |
|
|
|||||
Fair value of plan assets at beginning of year |
3,117 |
3,181 |
|||||
Actual return on plan assets |
530 |
(371 |
) | ||||
Employer contribution |
454 |
391 |
|||||
Benefits paid |
(87 |
) |
(84 |
) | |||
|
|
|
|||||
Fair value of plan assets at end of year |
4,014 |
3,117 |
|||||
|
|
||||||
Funded status |
(771 |
) |
(809 |
) | |||
Transition adjustment |
(25 |
) |
(39 |
) | |||
Unrecognized prior service cost (benefit) |
23 |
21 |
|||||
Unrecognized net gain from past experience |
|
|
|||||
different from that assumed |
1,007 |
1,010 |
|||||
|
|
|
|||||
Prepaid benefit cost |
$ |
234 |
$ |
183 |
|||
|
|
|
|
Pension Benefits | ||||||
|
|
| |||||
|
2003 |
2002 | |||||
Service cost |
$ |
340 |
$ |
269 |
|||
Interest cost |
267 |
229 |
|||||
Return on plan assets |
(530 |
) |
371 |
||||
Net amortization and deferral |
325 |
(646 |
) | ||||
|
|
|
|||||
Net periodic benefit cost |
$ |
402 |
$ |
223 |
|||
|
|
|
CITIZENS FINANCIAL SERVICES, INC. | 21 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
|
|
|
|
|
|
|
Pension Benefits | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
Discount rate |
|
|
|
|
|
6.25 |
% |
6.50 |
% | |
Rate of compensation increase |
|
|
|
|
|
3.25 |
|
3.50 |
|
|
|
|
|
|
|
|
Pension Benefits | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2003 |
|
2002 |
|
Discount rate |
|
|
|
|
|
6.25 |
% |
6.50 |
% | |
Expected long-term return on plan assets |
|
|
|
|
|
8.00 |
|
8.00 |
| |
Rate of compensation increase |
|
|
|
|
|
3.25 |
|
3.50 |
|
|
|
|
|
|
|
|
Plan Assets | |||
|
|
|
|
|
|
|
at December 31 | |||
|
|
|
|
|
|
|
2003 |
|
2002 |
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
|
|
|
|
|
67.4 |
% |
55.2 |
% | |
Debt securities |
|
|
|
|
|
30.3 |
|
29.0 |
| |
Other |
|
|
|
|
|
2.3 |
|
15.8 |
| |
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
100.0 |
% |
100.0 |
% |
CITIZENS FINANCIAL SERVICES, INC. | 22 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
|
Years Ended December 31, | |||||||||
|
2003 |
2002 |
2001 | |||||||
|
|
|
| |||||||
Currently payable |
$ |
1,427 |
$ |
1,647 |
$ |
1,044 |
||||
Deferred liability (benefit) |
(141 |
) |
116 |
(279 |
) | |||||
|
|
|
|
|||||||
Provision for income taxes |
$ |
1,286 |
$ |
1,763 |
$ |
765 |
||||
|
|
|
|
|
2003 |
2002 | |||||
|
|
| |||||
Deferred tax assets: |
|
| |||||
Allowance for loan losses |
$ |
1,038 |
$ |
1,038 |
|||
Deferred compensation |
546 |
243 |
|||||
Goodwill and core deposit intangibles |
19 |
108 |
|||||
Merger & acquisition costs |
24 |
34 |
|||||
Foreclosed assets held for sale |
3 |
- |
|||||
|
|
|
|||||
Total |
1,630 |
1,423 |
|||||
|
|
|
|||||
|
|
|
|||||
Deferred tax liabilities: |
|
|
|||||
Unrealized gains on available-for-sale securities |
(492 |
) |
(1,315 |
) | |||
Depreciation and amortization |
(301 |
) |
(259 |
) | |||
Bond accretion |
(81 |
) |
(126 |
) | |||
Pension expense |
(80 |
) |
(62 |
) | |||
Loan fees and costs |
(77 |
) |
(69 |
) | |||
Mortgage servicing rights |
(88 |
) |
(45 |
) | |||
|
|
|
|||||
Total |
(1,119 |
) |
(1,876 |
) | |||
|
|
|
|||||
Deferred tax asset (liability), net |
$ |
511 |
$ |
(453 |
) | ||
|
|
|
CITIZENS FINANCIAL SERVICES, INC. | 23 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
|
Years Ended December 31, | |||||||||
|
2003 |
2002 |
2001 | |||||||
|
|
|
| |||||||
Provision at statutory rates on |
|
|
| |||||||
pre-tax income |
$ |
2,096 |
$ |
2,502 |
$ |
1,537 |
||||
Effect of tax-exempt income |
(710 |
) |
(693 |
) |
(764 |
) | ||||
Tax credits |
(130 |
) |
(130 |
) |
(113 |
) | ||||
Bank owned life insurance |
(48 |
) |
- |
- |
||||||
Nondeductible interest |
62 |
67 |
97 |
|||||||
State income taxes |
- |
9 |
- |
|||||||
Other items |
16 |
8 |
8 |
|||||||
|
|
|
|
|||||||
Provision for income taxes |
$ |
1,286 |
$ |
1,763 |
$ |
765 |
||||
Statutory tax rates |
34 |
% |
34 |
% |
34 |
% | ||||
Effective tax rates |
20.9 |
% |
24.0 |
% |
16.9 |
% |
|
Years Ended December 31, | |||||||||
|
2003 |
2002 |
2001 | |||||||
|
|
|
| |||||||
Balance, beginning of year |
$ |
3,678 |
$ |
3,972 |
$ |
2,814 |
||||
New loans |
1,243 |
847 |
2,341 |
|||||||
Repayments |
(1,576 |
) |
(1,141 |
) |
(1,183 |
) | ||||
|
|
|
|
|||||||
Balance, end of year |
$ |
3,345 |
$ |
3,678 |
$ |
3,972 |
||||
|
|
|
|
CITIZENS FINANCIAL SERVICES, INC. | 24 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
|
2003 |
2002 | |||||||||||
|
Amount |
Ratio |
Amount |
Ratio | |||||||||
Total capital (to risk weighted assets) |
|
|
|
| |||||||||
|
|
|
|
| |||||||||
Company |
$ |
40,655 |
14.07 |
% |
$ |
31,036 |
11.52 |
% | |||||
For capital adequacy purposes |
23,115 |
8.00 |
% |
21,552 |
8.00 |
% | |||||||
To be well capitalized |
28,894 |
10.00 |
% |
26,939 |
10.00 |
% | |||||||
|
|
|
|
|
|||||||||
Tier I capital (to risk weighted assets) |
|
|
|
|
|||||||||
|
|
|
|
|
|||||||||
|
|
|
|
|
|||||||||
Company |
$ |
37,042 |
12.82 |
% |
$ |
27,522 |
10.22 |
% | |||||
For capital adequacy purposes |
11,557 |
4.00 |
% |
10,776 |
4.00 |
% | |||||||
To be well capitalized |
17,336 |
6.00 |
% |
16,164 |
6.00 |
% | |||||||
|
|
|
|
|
|||||||||
Tier I capital (to average assets) |
|
|
|
|
|||||||||
|
|
|
|
|
|||||||||
|
|
|
|
|
|||||||||
Company |
$ |
37,042 |
8.50 |
% |
$ |
27,522 |
6.48 |
% | |||||
For capital adequacy purposes |
17,437 |
4.00 |
% |
16,978 |
4.00 |
% | |||||||
To be well capitalized |
21,796 |
5.00 |
% |
21,223 |
5.00 |
% |
CITIZENS FINANCIAL SERVICES, INC. | 25 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
2003 |
2002 | ||||||
|
|
|
|||||
Commitments to extend credit | $ | 41,094 | $ | 33,946 | |||
Standby letters of credit | 1,404 | 1,143 |
December 31, 2003 | |||||||
|
|
| |||||
|
Carrying |
Estimated | |||||
|
Amount |
Fair Value | |||||
|
|
| |||||
Financial assets: |
|
| |||||
Cash and due from banks |
$ |
9,951 |
$ |
9,951 |
|||
Available-for-sale securities |
106,587 |
106,587 |
|||||
Net loans |
314,037 |
322,813 |
|||||
Bank owned life insurance |
7,142 |
7,142 |
|||||
Regulatory stock |
2,540 |
2,540 |
|||||
Accrued interest receivable |
1,703 |
1,703 |
|||||
|
|
|
|||||
Financial liabilities: |
|
|
|||||
Deposits |
$ |
385,691 |
$ |
391,282 |
|||
Borrowed funds |
27,796 |
27,998 |
|||||
Notes payable |
7,500 |
7,500 |
|||||
Accrued interest payable |
1,888 |
1,888 |
|||||
|
|
|
CITIZENS FINANCIAL SERVICES, INC. | 26 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
December 31, 2002 | |||||||
|
|
| |||||
|
Carrying |
Estimated | |||||
|
Amount |
Fair Value | |||||
|
|
| |||||
Financial assets: |
|
| |||||
Cash and due from banks |
$ |
11,594 |
$ |
11,594 |
|||
Available-for-sale securities |
100,725 |
100,725 |
|||||
Net loans |
294,836 |
297,913 |
|||||
Regulatory stock |
1,529 |
1,529 |
|||||
Accrued interest receivable |
1,976 |
1,976 |
|||||
|
|
|
|||||
Financial liabilities: |
|
|
|||||
Deposits |
$ |
373,051 |
$ |
375,007 |
|||
Borrowed funds |
17,028 |
17,080 |
|||||
Accrued interest payable |
2,077 |
2,077 |
|||||
|
|
|
CITIZENS FINANCIAL SERVICES, INC. | 27 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
|
December 31, | |||||||||
|
2003 |
2002 |
2001 | |||||||
|
|
|
| |||||||
Gross carrying amount |
$ |
7,685 |
$ |
7,685 |
$ |
7,685 |
||||
Less accumulated amortization |
780 |
780 |
780 |
|||||||
|
|
|
|
|||||||
Net carrying amount |
$ |
6,905 |
$ |
6,905 |
$ |
6,905 |
||||
|
|
|
|
CITIZENS FINANCIAL SERVICES, INC. | 28 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
|
For the Year Ended | |||||||||
|
December 31, | |||||||||
|
2003 |
2002 |
2001 | |||||||
|
|
|
| |||||||
Goodwill amortization |
$ |
- |
$ |
- |
$ |
512 |
||||
Net Income |
4,879 |
5,595 |
3,757 |
|||||||
Addback: Goodwill amortization (net of tax) |
- |
- |
338 |
|||||||
|
|
|
|
|||||||
Adjusted net income |
$ |
4,879 |
$ |
5,595 |
$ |
4,095 |
||||
|
|
|
|
|||||||
Basic earnings per share: |
|
|
|
|||||||
Net income |
$ |
1.72 |
$ |
1.96 |
$ |
1.32 |
||||
Goodwill amortization |
- |
- |
0.12 |
|||||||
|
|
|
|
|||||||
Adjusted basic earnings per share |
$ |
1.72 |
$ |
1.96 |
$ |
1.44 |
||||
|
|
|
|
|
December 31, | |||||||||
|
2003 |
2002 |
2001 | |||||||
|
|
|
| |||||||
Gross carrying amount |
$ |
2,763 |
$ |
2,763 |
$ |
2,763 |
||||
Less accumulated amortization |
1,785 |
1,350 |
893 |
|||||||
|
|
|
|
|||||||
Net carrying amount |
$ |
978 |
$ |
1,413 |
$ |
1,870 |
||||
|
|
|
|
|
Core deposit |
|
intangibles |
|
|
For the year ended December 31, 2004 |
$ 435 |
For the year ended December 31, 2005 |
435 |
For the year ended December 31, 2006 |
108 |
For the year ended December 31, 2007 |
- |
For the year ended December 31, 2008 |
- |
CITIZENS FINANCIAL SERVICES, INC. | 29 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
|
December 31, | ||||||
(in thousands) |
2003 |
2002 | |||||
|
|
| |||||
Assets: |
|
| |||||
Cash |
$ |
7,680 |
$ |
68 |
|||
Investment in subsidiary, |
|
|
|||||
First Citizens National Bank |
39,241 |
39,978 |
|||||
Available-for-sale securities |
- |
416 |
|||||
Other assets |
306 |
13 |
|||||
|
|
|
|||||
Total assets |
$ |
47,227 |
$ |
40,475 |
|||
|
|
|
|||||
Liabilities: |
|
|
|||||
Other liabilities |
$ |
260 |
$ |
23 |
|||
Deferred tax liability |
- |
46 |
|||||
Notes payable |
7,500 |
- |
|||||
Borrowed funds |
938 |
2,000 |
|||||
|
|
|
|||||
Total liabilities |
$ |
8,698 |
$ |
2,069 |
|||
Stockholders' equity |
38,529 |
38,406 |
|||||
|
|
|
|||||
Total liabilities and stockholders' equity |
$ |
47,227 |
$ |
40,475 |
|||
|
|
|
|
Year Ended December 31, | |||||||||
(in thousands) |
2003 |
2002 |
2001 | |||||||
|
|
|
| |||||||
Dividends from: |
|
|
| |||||||
Bank subsidiary |
$ |
4,142 |
$ |
1,478 |
$ |
481 |
||||
Available-for-sale securities |
3 |
19 |
44 |
|||||||
Interest-bearing deposits with banks |
- |
2 |
22 |
|||||||
|
|
|
|
|||||||
Total income |
4,145 |
1,499 |
547 |
|||||||
Realized securities gains, net |
150 |
178 |
189 |
|||||||
Expenses |
186 |
213 |
264 |
|||||||
|
|
|
|
|||||||
Income before equity |
|
|
|
|||||||
in undistributed earnings |
|
|
|
|||||||
of subsidiary |
4,109 |
1,464 |
472 |
|||||||
Equity in undistributed |
|
|
|
|||||||
earnings - First Citizens National Bank |
770 |
4,131 |
3,285 |
|||||||
|
|
|
|
|||||||
Net income |
$ |
4,879 |
$ |
5,595 |
$ |
3,757 |
||||
|
|
|
|
CITIZENS FINANCIAL SERVICES, INC. | 30 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
|
Year Ended December 31, | |||||||||
(in thousands) |
2003 |
2002 |
2001 | |||||||
|
|
|
| |||||||
Cash flows from operating activities: |
|
|
| |||||||
Net income |
$ |
4,879 |
$ |
5,595 |
$ |
3,757 |
||||
Adjustments to reconcile net income to net |
|
|
|
|||||||
cash provided by operating activities: |
|
|
|
|||||||
Equity in undistributed earnings of subsidiaries |
(770 |
) |
(4,131 |
) |
(3,285 |
) | ||||
Deferred income taxes |
- |
- |
3 |
|||||||
Realized gains on securities |
(150 |
) |
(178 |
) |
(189 |
) | ||||
Decrease (increase) in other assets |
(293 |
) |
11 |
35 |
||||||
Increase (decrease) in other liabilities |
238 |
1 |
(4 |
) | ||||||
|
|
|
|
|||||||
Net cash provided by operating activities |
3,904 |
1,298 |
317 |
|||||||
|
|
|
|
|||||||
Cash flows from investing activities: |
|
|
|
|||||||
Purchase of available-for-sale securities |
- |
- |
(418 |
) | ||||||
Proceeds from the sale of available-for-sale securities |
429 |
621 |
2,283 |
|||||||
Additional contribution in subsidiaries |
- |
- |
(500 |
) | ||||||
|
|
|
|
|||||||
Net cash provided by investing activities |
429 |
621 |
1,365 |
|||||||
|
|
|
|
|||||||
Cash flows from financing activities: |
|
|
|
|||||||
Cash dividends paid |
(2,103 |
) |
(1,918 |
) |
(1,786 |
) | ||||
Advances of borrowed funds |
1,055 |
- |
- |
|||||||
Repayments of borrowed funds |
(2,117 |
) |
- |
- |
||||||
Acquisition of treasury stock |
(1,056 |
) |
- |
- |
||||||
Proceeds from notes payable |
7,500 |
- |
- |
|||||||
|
|
|
|
|||||||
Net cash provided by (used in) financing activities |
3,279 |
(1,918 |
) |
(1,786 |
) | |||||
|
|
|
|
|||||||
|
|
|
|
|||||||
Net increase (decrease) in cash |
7,612 |
1 |
(104 |
) | ||||||
|
|
|
|
|||||||
Cash at beginning of year |
68 |
67 |
171 |
|||||||
|
|
|
|
|||||||
Cash at end of year |
$ |
7,680 |
$ |
68 |
$ |
67 |
||||
|
|
|
|
CITIZENS FINANCIAL SERVICES, INC. | 31 | 2003 ANNUAL REPORT |
| ||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) |
|
(dollar amounts in thousands) |
Three Months Ended | ||||||||||||
2003 |
Mar 31 |
Jun 30 |
Sep 30 |
Dec 31 | |||||||||
|
|
|
|
| |||||||||
Interest income |
$ |
6,520 |
$ |
6,401 |
$ |
6,329 |
$ |
6,365 |
|||||
Interest expense |
2,313 |
2,264 |
2,149 |
2,100 |
|||||||||
|
|
|
|
|
|||||||||
Net interest income |
4,207 |
4,137 |
4,180 |
4,265 |
|||||||||
Provision for loan losses |
135 |
120 |
120 |
60 |
|||||||||
Non-interest income |
1,095 |
1,270 |
1,212 |
1,182 |
|||||||||
Realized securities gains, net |
259 |
141 |
114 |
39 |
|||||||||
Non-interest expenses |
3,631 |
3,631 |
4,490 |
3,749 |
|||||||||
|
|
|
|
|
|||||||||
Income before provision for income taxes |
1,795 |
1,797 |
896 |
1,677 |
|||||||||
Provision for income taxes |
430 |
415 |
90 |
351 |
|||||||||
|
|
|
|
|
|||||||||
Net income |
$ |
1,365 |
$ |
1,382 |
$ |
806 |
$ |
1,326 |
|||||
|
|
|
|
|
|||||||||
Earnings Per Share |
$ |
0.48 |
$ |
0.48 |
$ |
0.28 |
$ |
0.47 |
|||||
|
|
|
|
|
|
Three Months Ended | ||||||||||||
2002 |
Mar 31 |
Jun 30 |
Sep 30 |
Dec 31 | |||||||||
|
|
|
|
| |||||||||
Interest income |
$ |
6,867 |
$ |
6,825 |
$ |
6,894 |
$ |
6,791 |
|||||
Interest expense |
2,723 |
2,632 |
2,558 |
2,491 |
|||||||||
|
|
|
|
|
|||||||||
Net interest income |
4,144 |
4,193 |
4,336 |
4,300 |
|||||||||
Provision for loan losses |
120 |
90 |
90 |
135 |
|||||||||
Non-interest income |
1,201 |
1,154 |
1,177 |
1,260 |
|||||||||
Realized securities gains, net |
30 |
186 |
38 |
- |
|||||||||
Non-interest expenses |
3,467 |
3,590 |
3,571 |
3,598 |
|||||||||
|
|
|
|
|
|||||||||
Income before provision for income taxes |
1,788 |
1,853 |
1,890 |
1,827 |
|||||||||
Provision for income taxes |
428 |
438 |
459 |
438 |
|||||||||
|
|
|
|
|
|||||||||
Net income |
$ |
1,360 |
$ |
1,415 |
$ |
1,431 |
$ |
1,389 |
|||||
|
|
|
|
|
|||||||||
Earnings Per Share |
$ |
0.48 |
$ |
0.50 |
$ |
0.50 |
$ |
0.49 |
|||||
|
|
|
|
|
CITIZENS FINANCIAL SERVICES, INC. | 32 | 2003 ANNUAL REPORT |
| ||
REPORT OF INDEPENDENT AUDITORS |
|
CITIZENS FINANCIAL SERVICES, INC. | 33 | 2003 ANNUAL REPORT |
| ||
SELECTED FINANCIAL DATA |
|
(dollar amounts in thousands) |
2003 |
2002 |
2001 |
2000 |
1999 | |||||||||||
|
|
|
|
|
| |||||||||||
Interest income |
$ |
25,615 |
$ |
27,377 |
$ |
29,025 |
$ |
26,226 |
$ |
23,546 |
||||||
Interest expense |
8,826 |
10,404 |
14,306 |
14,238 |
12,066 |
|||||||||||
|
|
|
|
|
|
|||||||||||
Net interest income |
16,789 |
16,973 |
14,719 |
11,988 |
11,480 |
|||||||||||
Provision for loan losses |
435 |
435 |
445 |
610 |
475 |
|||||||||||
|
|
|
|
|
|
|||||||||||
Net interest income after provision |
|
|
|
|
|
|||||||||||
for loan losses |
16,354 |
16,538 |
14,274 |
11,378 |
11,005 |
|||||||||||
Non-interest income |
4,759 |
4,792 |
3,632 |
2,670 |
2,345 |
|||||||||||
Realized securities gains (losses), net |
553 |
254 |
657 |
(9 |
) |
279 |
||||||||||
Non-interest expenses |
15,501 |
14,226 |
14,041 |
10,187 |
9,033 |
|||||||||||
|
|
|
|
|
|
|||||||||||
Income before provision for income taxes and |
|
|
|
|
|
|||||||||||
extraordinary item |
6,165 |
7,358 |
4,522 |
3,852 |
4,596 |
|||||||||||
Provision for income taxes |
1,286 |
1,763 |
765 |
644 |
1,043 |
|||||||||||
|
|
|
|
|
|
|||||||||||
Net income |
$ |
4,879 |
$ |
5,595 |
$ |
3,757 |
$ |
3,208 |
$ |
3,553 |
||||||
|
|
|
|
|
|
|||||||||||
Per share data: |
|
|
|
|
|
|||||||||||
Net income (1) |
$ |
1.72 |
$ |
1.96 |
$ |
1.32 |
$ |
1.12 |
$ |
1.22 |
||||||
Cash dividends (1) |
0.740 |
0.680 |
0.640 |
0.600 |
0.560 |
|||||||||||
Book value (1) |
13.70 |
13.45 |
11.70 |
10.69 |
9.33 |
|||||||||||
|
|
|
|
|
|
|||||||||||
Total investments |
$ |
106,587 |
$ |
100,725 |
$ |
113,604 |
$ |
97,984 |
$ |
90,031 |
||||||
Loans, net (2) |
314,037 |
294,836 |
268,464 |
260,209 |
229,159 |
|||||||||||
Total assets (2) |
463,878 |
432,658 |
421,110 |
413,332 |
340,779 |
|||||||||||
Total deposits (2) |
385,691 |
373,051 |
370,474 |
367,785 |
284,318 |
|||||||||||
Stockholders' equity |
38,529 |
38,406 |
33,389 |
30,549 |
27,082 |
(1) Amounts were adjusted to reflect stock dividends |
|
|
(2) Amounts in 2000 reflect the acquisition of branches in the fourth quarter of 2000 |
|
|
CITIZENS FINANCIAL SERVICES, INC. | 34 | 2003 ANNUAL REPORT |
| ||
SELECTED FINANCIAL DATA (CONTINUED) |
|
|
Dividends |
|
|
Dividends | |||||||||||||||
|
2003 |
declared |
2002 |
declared | |||||||||||||||
|
High |
Low |
per share |
High |
Low |
per share | |||||||||||||
|
|
|
|
|
|
| |||||||||||||
First quarter |
$ |
22.47 |
$ |
20.30 |
$ |
0.180 |
$ |
16.75 |
$ |
13.50 |
$ |
0.165 |
|||||||
Second quarter |
28.02 |
22.52 |
0.185 |
17.50 |
16.80 |
0.170 |
|||||||||||||
Third quarter |
27.40 |
26.98 |
0.185 |
19.35 |
17.00 |
0.170 |
|||||||||||||
Fourth quarter |
24.75 |
22.50 |
0.190 |
21.80 |
19.35 |
0.175 |
|
2003 |
2002 | |||||
|
|
| |||||
INVESTMENTS: |
|
| |||||
Bonds |
$ |
11,806 |
$ |
13,153 |
|||
Stock |
22,384 |
20,783 |
|||||
Savings and Money Market Funds |
10,837 |
11,168 |
|||||
Mutual Funds |
22,831 |
18,257 |
|||||
Mortgages |
868 |
936 |
|||||
Real Estate |
994 |
816 |
|||||
Miscellaneous |
193 |
29 |
|||||
Cash |
471 |
29 |
|||||
TOTAL |
$ |
70,384 |
$ |
65,171 |
|||
|
|
|
|||||
ACCOUNTS: |
|
|
|||||
Estates |
$ |
2,377 |
$ |
1,016 |
|||
Trusts |
22,908 |
25,134 |
|||||
Guardianships |
106 |
184 |
|||||
Employee Benefits |
22,088 |
19,490 |
|||||
Investment Management |
18,000 |
13,377 |
|||||
Custodial |
4,905 |
5,970 |
|||||
TOTAL |
$ |
70,384 |
$ |
65,171 |
|||
|
|
|
CITIZENS FINANCIAL SERVICES, INC. | 35 | 2003 ANNUAL REPORT |
| ||
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|
CITIZENS FINANCIAL SERVICES, INC. | 36 | 2003 ANNUAL REPORT |
| ||
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|
|
2003 |
Increase |
% |
2002 |
Increase |
% |
2001 | |
|
Balance |
(Decrease) |
Change |
Balance |
(Decrease) |
Change |
Balance | |
|
|
|
|
|
|
|
| |
Total assets |
$ 463.9 |
$ 31.2 |
7.2 |
$ 432.7 |
$ 11.6 |
2.8 |
$ 421.1 | |
Total loans, net |
314.0 |
19.2 |
6.4 |
294.8 |
26.3 |
9.8 |
268.5 | |
Total investments |
106.6 |
5.9 |
5.9 |
100.7 |
(12.9) |
(11.4) |
113.6 | |
Total deposits |
385.7 |
12.6 |
3.4 |
373.1 |
2.6 |
0.7 |
370.5 | |
Total stockholders' equity |
38.5 |
0.1 |
0.3 |
38.4 |
5.0 |
15.0 |
33.4 |
CITIZENS FINANCIAL SERVICES, INC. | 37 | 2003 ANNUAL REPORT |
| ||
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|
Estimated Fair Market Value at December 31, | |||||||||||||||||||||||||||||||
|
2003 |
% of |
2002 |
% of |
2001 |
% of |
2000 |
% of |
1999 |
% of | |||||||||||||||||||||
|
Amount |
Total |
Amount |
Total |
Amount |
Total |
Amount |
Total |
Amount |
Total | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Available-for-sale: |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
U. S. Treasury securities |
$ - |
- |
$ - |
- |
$ - |
- |
$ 8,655 |
8.8 |
$ 13,628 |
15.1 | |||||||||||||||||||||
U. S. Agency securities |
1,033 |
1.0 |
1,052 |
1.0 |
- |
- |
1,531 |
1.6 |
- |
- | |||||||||||||||||||||
Obligations of state & political |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
subdivisions |
8,303 |
7.8 |
12,731 |
12.6 |
18,543 |
16.3 |
20,592 |
21.0 |
19,469 |
21.6 | |||||||||||||||||||||
Corporate obligations |
14,674 |
13.8 |
21,156 |
21.0 |
12,200 |
10.7 |
19,710 |
20.1 |
18,629 |
20.7 | |||||||||||||||||||||
Mortgage-backed securities |
78,376 |
73.5 |
60,801 |
60.4 |
77,211 |
68.0 |
38,473 |
39.3 |
34,045 |
37.8 | |||||||||||||||||||||
Other equity securities |
4,201 |
3.9 |
4,985 |
4.9 |
5,650 |
5.0 |
9,023 |
9.2 |
4,260 |
4.7 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total |
$ 106,587 |
100.0 |
$ 100,725 |
100.0 |
$ 113,604 |
100.0 |
$ 97,984 |
100.0 |
$ 90,031 |
100.0 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Within |
|
One- |
|
Five- |
|
After |
|
Amortized |
| |
|
One |
Yield |
Five |
Yield |
Ten |
Yield |
Ten |
Yield |
Cost |
Yield | |
|
Year |
(%) |
Years |
(%) |
Years |
(%) |
Years |
(%) |
Total |
(%) | |
|
|
|
|
|
|
|
|
|
|
| |
Available-for-sale securities: |
|
|
|
|
|
|
|
|
|
| |
U.S. Agency securities |
$ - |
|
$ 1,005 |
4.0 |
$ - |
|
$ - |
|
$ 1,005 |
4.0 | |
Obligations of state & political |
|||||||||||
subdivisions |
4,035 |
6.4 |
3,547 |
7.0 |
429 |
6.4 |
- |
- |
8,011 |
6.7 | |
Corporate obligations |
- |
- |
11,705 |
5.5 |
1,951 |
7.2 |
- |
- |
13,656 |
5.8 | |
Mortgage-backed securities |
1,703 |
5.3 |
70,308 |
4.3 |
6,069 |
3.9 |
- |
- |
78,080 |
4.3 | |
Equity securities |
- |
- |
4,387 |
5.9 |
- |
- |
- |
- |
4,387 |
5.9 | |
|
|
|
|
|
|
|
|
|
|
| |
Total available-for-sale |
$ 5,738 |
6.1 |
$ 90,952 |
4.6 |
$ 8,449 |
4.8 |
$ - |
- |
$ 105,139 |
4.7 | |
|
|
|
|
|
|
|
|
|
|
|
CITIZENS FINANCIAL SERVICES, INC. | 38 | 2003 ANNUAL REPORT |
| ||
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|
CITIZENS FINANCIAL SERVICES, INC. | 39 | 2003 ANNUAL REPORT |
| ||
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
|
Five Year Breakdown of Loans by Type | |||||||||||||||||||||||||||||||
December 31, | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
|
2003 |
2002 |
2001 |
2000 |
1999 | ||||||||||||||||||||||||||
|
Amount |
% |
Amount |
% |
Amount |
% |
Amount |
% |
Amount |
% | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Real estate: |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Residential |
$ 180,333 |
56.8 |
$ 175,323 |
58.7 |
$ 160,439 |
59.0 |
$ 151,782 |
57.7 |
$ 139,518 |
60.3 | |||||||||||||||||||||
Commercial |
57,370 |
18.1 |
47,210 |
15.8 |
43,174 |
15.9 |
40,044 |
15.2 |
32,159 |
13.9 | |||||||||||||||||||||
Agricultural |
7,594 |
2.4 |
9,844 |
3.3 |
12,169 |
4.5 |
12,075 |
4.6 |
9,392 |
4.1 | |||||||||||||||||||||
Construction |
5,784 |
1.8 |
5,009 |
1.7 |
3,219 |
1.2 |
3,112 |
1.2 |
4,359 |
1.9 | |||||||||||||||||||||
Loans to individuals |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
for household, |
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
family and other purchases |
13,145 |
4.1 |
13,915 |
4.7 |
14,694 |
5.4 |
15,020 |
5.7 |
15,540 |
6.7 | |||||||||||||||||||||
Commercial and other loans |
16,219 |
5.1 |
18,564 |
6.2 |
15,099 |
5.6 |
17,509 |
6.7 |
12,313 |
5.3 | |||||||||||||||||||||
State & political subdivision loans |
37,212 |
11.7 |
28,592 |
9.6 |
22,920 |
8.4 |
23,444 |
8.9 |
18,148 |
7.8 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total loans |
317,657 |
100.0 |
298,457 |
100.0 |
271,714 |
100.0 |
262,986 |
100.0 |
231,429 |
100.0 | |||||||||||||||||||||
Less allowance for loan losses |
3,620 |
|
3,621 |
|
3,250 |
|
2,777 |
|
2,270 |
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Net loans |
$ 314,037 |
|
$ 294,836 |
|
$ 268,464 |
|
$ 260,209 |
|
$ 229,159 |
| |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
2003/2002 |
|
2002/2001 |
| |||||||||
|
Change |
|
Change |
| |||||||||
|
Amount |
% |
Amount |
% | |||||||||
|
|
|
|
| |||||||||
Real estate: |
|
|
|
| |||||||||
Residential |
$ |
5,010 |
2.9 |
$ |
14,884 |
9.3 |
|||||||
Commercial |
10,160 |
21.5 |
4,036 |
9.3 |
|||||||||
Agricultural |
(2,250 |
) |
(22.9 |
) |
(2,325 |
) |
(19.1 |
) | |||||
Construction |
775 |
15.5 |
1,790 |
55.6 |
|||||||||
Loans to individuals |
|
|
|
|
|||||||||
for household, |
|
|
|
|
|||||||||
family and other purchases |
(770 |
) |
(5.5 |
) |
(779 |
) |
(5.3 |
) | |||||
Commercial and other loans |
(2,345 |
) |
(12.6 |
) |
3,465 |
22.9 |
|||||||
State & political subdivision loans |
8,620 |
30.1 |
5,672 |
24.7 |
|||||||||
Total loans |
$ |
19,200 |
6.4 |