Message From The President

Strong Foundation. Stronger Future. Building on our story.

Dear Valued Shareholders,

As we move into 2026, I extend my sincere appreciation for your continued trust and partnership. The Company stands on one of the strongest foundations in its history, defined by disciplined financial performance, strategic clarity, and an unwavering commitment to the communities we were founded to serve. Because of your confidence, we are able to balance purpose with performance and impact with accountability.

While we are pleased with our performance in 2025, we remain equally focused on positioning the Company for sustainable growth in a dynamic and evolving environment. We delivered a record dividend of $1.10 per share, up 10% from the prior year, alongside earnings per share of $4.72 and pre-tax earnings of $13.8 million.

Our profitability remained strong, with a pre-tax return on average assets of 1.76% for the Company and 2.35% for the Bank, while maintaining a disciplined operating profile. Our balance sheet remains a source of strength, supported by a Tier 1 Capital Ratio of 45% and a Total Capital Ratio of 47%, positioning us well above regulatory requirements and many peers.

While asset growth was modest at 0.39%, net loans declined 6.73% year over year, and deposits declined 1.60%, driven primarily by strategic actions and client-specific activity rather than any underlying weakness in the business. Asset quality remains a hallmark of our performance, with nonperforming loans at 0.92% of total assets, underscoring the
health and resilience of our portfolio.

Operating with Discipline in a Changing Environment

While overall performance remained strong, 2025 was not without its challenges. We continued to navigate industry-wide headwinds in a dynamic, evolving environment shaped by shifting monetary policy and ongoing economic uncertainty. Margin compression persisted, driven by three interest rate cuts at the end of 2024, with the full impact realized in 2025, followed by three additional rate cuts late in 2025. Additionally, competition for deposits impacted cost of funding.

These dynamics contributed to an increase in interest expense of approximately $1.8 million and a decline in net interest margin from 4.86% to 4.44%. However, our margin remains strong relative to peers.

Encouragingly, the cost of funds is beginning to stabilize, which can provide a more positive outlook moving forward, absent further shifts in interest rates or broader economic conditions.

Earnings were also affected by a $4.2 million charge-off related to a legacy loan acquired through a broker relationship. Over the past 2 years, our earnings have been impacted by two loans from this broker and is not indicative of our broader portfolio. No additional exposure to this broker remains. Overall, our loan portfolio remains healthy and well-positioned.

Lending trends in 2025 reflected a deliberate and enhanced focus on deep impact lending, aligned with the objectives of the Emergency Capital Investment Program (ECIP) and the Company’s mission. These loans are typically smaller in size and serve customers
who are more sensitive to inflationary pressures, which moderated demand during the current year. While this focus impacted overall loan growth, it directly supports our mission and reinforces our long-standing commitment to serving communities where access to capital is most needed.

The modest decline in deposits was primarily driven by the utilization of funds by a small number of large customers for operational purposes, rather than the loss of customer relationships, reflecting the continued strength and stability of our core deposit base.

From Performance to Purposeful Growth

The strength of our financial performance provides the foundation for executing on our strategic priorities with clarity. As we look ahead, we remain focused on driving long-term value through a balanced approach: strengthening our core business, growing with discipline, deepening our community impact with ECIP, elevating the customer experience, and deploying capital that creates value for both our shareholders and the communities we serve.

Advancing Community Impact and Shareholder Value Through ECIP

A defining element of our strategy continues to be our participation in the U.S. Treasury’s Emergency Capital Investment Program (ECIP). This investment not only reinforces our capital strength, but also serves as a catalyst for expanding lending and economic opportunities in low-and moderate-income communities while generating long-term value for shareholders. We believe we are well positioned to meet ECIP requirements, and are pleased with our performance in community lending, small business financing, and financial inclusion. A majority of our loan portfolio remains dedicated to mission-aligned and community focused lending.

Our focus is intentional: deploy capital that both strengthens communities and drive sustainable financial performance. ECIP is not simply a program, it is a strategic lever that enhances our ability to expand our lending impact, grow responsibly, and create durable shareholder value.

Capital Strength as a Strategic Advantage

Our ability to deliver both impact and performance is anchored in strength. We remain firmly committed to maintaining a strong capital foundation. Well-capitalized levels provide resilience across economic cycles, reinforce regulatory standing, and enable us to serve our customers and communities with confidence. Capital strength remains the cornerstone of every strategic decision we make.

Strengthening Our Core Business and Driving Growth

At the center of our strategy is a clear priority: strengthening and growing our core business by expanding high-quality loans and deepening core deposit relationships. We are executing this strategy with discipline, advancing loan growth that balances community impact and portfolio diversification while maintaining strong credit quality and risk standards. At the same time, we are focused on building a stable and growing deposit base through deeper customer relationships, enhanced engagement, and digital capabilities that improve access, convenience, and service delivery.

Our approach is fundamentally relationship-driven and anchored in sustainable organic growth. We are focused on deepening wallet share with existing customers, expanding product utilization, and strengthening connections across our client base while leveraging digital investments to extend our reach beyond our traditional footprint.

In parallel, we will opportunistically explore merger and acquisition opportunities that align with our strategic priorities and culture. Our approach remains disciplined and patient, focused on transactions that enhance scale, capabilities, market presence, and community impact while meeting our return thresholds and risk standards. Importantly, M&A remains an option, not an obligation, and will be pursued only when it strengthens long-term shareholder value.

Strength in loans and deposits remains foundational, not only for supporting the communities we serve, but also for driving consistent earnings, improving funding stability, and enhancing long-term value.

Investing with Purpose for Long-Term Performance

We will reinvest in the future to strengthen the Company’s long-term competitiveness and position for sustainable growth. These investments will focus on innovation, technology modernization, process optimization, and talent development.

In 2026, we advanced this strategy through the launch of an Enterprise Technology & Innovation (ETI) team, continued automation initiatives, the ongoing implementation of the nCino loan platform software, and broader enterprise modernization efforts, including exploration of artificial intelligence within our operating environment. Together, these initiatives are expected to enhance productivity, improve agility and scalability, strengthen risk management, and elevate customer experience.

Importantly, these investments will enable our bankers to deepen relationships, better serve the evolving needs of our customers and communities, and drive sustainable operating leverage.

Investing in the Future While Honoring Our Mission

As we continue to evolve, our mission remains constant. We are modernizing the Company from the inside out by enhancing digital account opening, strengthening biometric security, advancing fraud prevention, and leveraging data-driven insights to better serve our customers. These investments ensure that customers, regardless of location, can engage with us securely, efficiently, and confidently. In 2026, we are expanding our “Your Story Is Our Story” initiative to more directly connect our financial solutions to measurable community outcomes. This next phase reflects our mission and our growing capacity to make a meaningful difference.

By aligning our lending with investments in education, homeownership, and small business development, we are transforming everyday financial decisions into shared progress. This is how we create impact, not in isolation, but in partnership with the communities we serve

Delivering Consistent Shareholder Returns

We remain committed to delivering consistent and meaningful returns to our shareholders. Our capital strategy includes returning capital through dividends and, when appropriate, share repurchases balanced with reinvestment and growth priorities.
This strategic approach reflects our confidence in the Company’s performance and our commitment to enhancing long-term shareholder value while preserving financial strength and flexibility.

Looking Ahead with Clarity and Confidence

Our priorities for the year ahead are clear: strengthen and grow our core business, advance digital transformation, modernize operations, enhance the customer experience, and maintain best-in-class governance, compliance, and risk management.

To our shareholders, thank you for your continued confi dence in our strategy and stewardship. Your support enables us to invest in the future, deploy capital responsibly, and expand opportunity across the communities we serve.

As we look ahead, one truth remains constant:

When we build together, we rise together.

Our foundation is strong.

Our strategy is clear.

And our future continues to grow stronger.

Sincerely,

Cynthia N. Day
President and CEO
Citizens Bancshares Corporation and Citizens Trust Bank

Ray M. Robinson
Chairman of the Board
Citizens Bancshares Corporation