Citizens Financial Services (CZFS) 8-K Citizens Financial Services, Inc. Reports Fourth Quarter 2005 Earnings

Exhibit 99.1

Citizens Financial Services, Inc. Reports Fourth Quarter 2005 Earnings

MANSFIELD, PENNSYLVANIA— January 25, 2006 - Citizens Financial Services, Incorporated (OTC BB: CZFS), parent company of First Citizens National Bank, has released its unaudited financial performance for the fourth quarter of 2005.

Net income for the three months and twelve months ended December 31, 2005 was $1,376,000 and $5,274,000, respectively. This compares to the three months and twelve months ended December 31, 2004 of $885,000 and $5,267,000, respectively. Our tax adjusted net interest margin for 2005 was 3.79% compared with 3.87% for 2004.

Earnings per share were $1.85 through December 2005 compared with $1.84 in 2004, a slight increase of .5%. Return on equity (ROE) was 12.63% while return on assets (ROA) was 1.04% for 2005, compared to ROE of 13.40% and ROA of 1.09% for 2004.

Since December of last year, total assets have increased $30.1 million, or 6.03%. As of December 31, 2005 total assets were $529.5 million compared with $499.3 million a year ago. The investment portfolio as of the end of December stood at $102.6 million, an increase of $6.9 million from last year’s balance. In doing so, our yield on our investment portfolio has increased from 4.05% in 2004 to 4.20% for 2005. Total loans have increased $23.1 million, representing a 6.4% increase. This increase is attributable to our continued emphasis on adding high quality commercial loans as well as residential mortgages. To fund this asset growth, deposits and borrowed funds have increased $10.7 million and $17.7 million, respectively.

Stockholders’ Equity, excluding accumulated other comprehensive income, has increased $2.5 million, or 6.09% since last year. In December, a cash dividend of $.21 per share was declared and will be paid to shareholders on January 27, 2006 to record holders as of January 13, 2006. Total dividends per share paid in 2005 totaled $.82 per share, which compares to $.78 per share last year. This represents an increase of 5.1% and a dividend yield of 4% as of December 31, 2005. Book value per share at December 31, 2005 was $15.29 compared with $14.30 last year, a 6.92% increase.

CEO and President Randall E. Black stated, “Operating results for the quarter and year reflect the flattened yield curve and margin compression that has persisted during all of 2005. This has resulted in compressed margins for our bank as well as many banks throughout the country. Despite this less than favorable interest rate environment, we have increased our net interest margin by $268,000 over last year’s level, or 1.5%. Additionally on November 17, we received regulatory approval to acquire the Hannibal branch of the Fulton Savings Bank. The closing took place on December 17 and the office was relocated to Wellsville, New York. For the three months ended December 31, 2005, operating results were impacted by the branch acquisition. Approximately $220,000 of expenses were incurred during the quarter to consummate the transaction. Excluding these costs, net income would have been approximately $1.5 million for the quarter. Operating cash earnings per share, which is net income before amortization of intangible assets and merger and acquisition costs net of tax, was $2.02 for 2005 compared with $1.97 for 2004, a 2.5% increase.”

Citizens Financial Services, Inc., has over 1,500 shareholders, the majority of whom reside in Potter, Tioga, and Bradford Counties, Pennsylvania and Allegany County, New York, where their 16 offices are located.

Note: This press release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Actual results and trends could differ materially from those set forth in such statements due to various factors. These factors include operating, legal and regulatory risks; changing economic and competitive conditions and other risks and uncertainties.

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CONTACT:	Kathleen Campbell	FIRST CITIZENS NATIONAL BANK
	570-662-0422	15 S. MAIN STREET
	570-662-8512 (FAX)	MANSFIELD, PA 16933

CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
	December 31			December 31
(in thousands)	2005			2004
ASSETS:
Cash and due from banks:
Noninterest-bearing	$	8,498		$	9,162
Interest-bearing		111			177
Total cash and cash equivalents		8,609			9,339
Available-for-sale securities		102,602			95,747
Loans (net of allowance for loan losses:
2005, $3,664; 2004, $3,919		379,139			355,774
Premises and equipment		12,305			11,833
Accrued interest receivable		2,164			1,736
Goodwill		8,605			8,605
Core deposit intangible		684			1,262
Bank owned life insurance		7,743			7,449
Other assets		7,624			7,602
TOTAL ASSETS	$	529,475		$	499,347
LIABILITIES:
Deposits:
Noninterest-bearing	$	50,600		$	46,866
Interest-bearing		379,199			372,208
Total deposits		429,799			419,074
Borrowed funds		52,674			34,975
Accrued interest payable		1,862			1,870
Commitment to purchase investment securities		752			-
Other liabilities		2,593			2,639
TOTAL LIABILITIES		487,680			458,558
STOCKHOLDERS' EQUITY:
Common Stock
$1.00 par value; authorized 10,000,000 shares;
issued 2,965,257 and 2,937,519 shares
in 2005 and 2004, respectively		2,965			2,938
Additional paid-in capital		11,359			10,804
Retained earnings		31,251			28,894
TOTAL		45,575			42,636
Accumulated other comprehensive (loss) income		(1,306	)		164
Less: Treasury Stock, at cost
118,715 and 97,262 shares for 2005 and 2004, respectively		(2,474	)		(2,011	)
TOTAL STOCKHOLDERS' EQUITY		41,795			40,789
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	529,475		$	499,347

CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
	Three Months Ended					Twelve Months Ended
(in thousands, except per share data)	December 31					December 31
	2005		2004			2005		2004
INTEREST INCOME:
Interest and fees on loans	$	6,525	$	5,953		$	24,911	$	22,600
Interest-bearing deposits with banks		-		1			3		10
Investment securities:
Taxable		739		823			2,979		3,413
Nontaxable		202		78			596		301
Dividends		54		72			210		282
TOTAL INTEREST INCOME		7,520		6,927			28,699		26,606
INTEREST EXPENSE:
Deposits		2,532		2,202			9,373		8,283
Borrowed funds		487		268			1,627		952
TOTAL INTEREST EXPENSE		3,019		2,470			11,000		9,235
NET INTEREST INCOME		4,501		4,457			17,699		17,371
Provision for loan losses		30		-			60		-
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		4,471		4,457			17,639		17,371
NON-INTEREST INCOME:
Service charges		762		752			2,965		3,017
Trust		106		102			474		434
Brokerage		45		33			183		185
Insurance		55		25			260		175
Gains on loans sold		24		17			70		54
Investment securities losses, net		-		(726	)		-		(235	)
Earnings on bank owned life insurance		74		74			294		307
Other		162		92			442		355
TOTAL NON-INTEREST INCOME		1,228		369			4,688		4,292
NON-INTEREST EXPENSES:
Salaries and employee benefits		1,757		1,958			7,645		7,636
Occupancy		295		260			1,142		1,072
Furniture and equipment		167		179			658		695
Professional fees		128		187			536		630
Amortization of intangibles		145		144			578		506
Other		1,397		1,068			4,828		4,383
TOTAL NON-INTEREST EXPENSES		3,889		3,796			15,387		14,922
Income before provision for income taxes		1,810		1,030			6,940		6,741
Provision for income taxes		434		145			1,666		1,474
NET INCOME	$	1,376	$	885		$	5,274	$	5,267
Earnings Per Share	$	0.48	$	0.31		$	1.85	$	1.84
Cash Dividends Per Share	$	0.21	$	0.20		$	0.82	$	0.78
Weighted average number of shares outstanding		2,846,542		2,867,995			2,856,593		2,868,131

Financial Highlights
(Unaudited - in thousands, except per share and ratio data)
	2005			2004
Twelve Months Ended December 31
Net Income	$	5,274		$	5,267
Comprehensive Income		3,804			4,475
Per common share data:
Earnings per share	$	1.85		$	1.84
Cash dividends per share	$	0.82		$	0.78
Performance Ratios:
Return on average assets		1.04	%		1.09	%
Return on average equity		12.63	%		13.40	%
Three Months Ended December 31
Net Income	$	1,376		$	885
Per common share data:
Earnings per share	$	0.48		$	0.31
Cash dividends per share	$	0.21		$	0.20
Performance Ratios:
Return on average assets (annualized)		1.06	%		0.71	%
Return on average equity (annualized)		12.92	%		8.70	%
At December 31
Assets	$	529,475		$	499,347
Investment securities:
Available for sale		102,602			95,747
Loans (net of unearned income)		382,803			359,693
Allowance for loan losses		3,664			3,919
Deposits		429,799			419,074
Stockholders' Equity		41,795			40,789
Non-performing assets		2,854			2,932
Average Leverage Ratio		8.04	%		7.84	%
Per common share data:
Book value	$	15.29		$	14.30
Market value (average of bid/ask price)	$	20.90		$	23.83
Market price to book value ratio		136.68	%		166.57	%

	Cash Dividends
Common Stock Information:	Bid		Ask		Paid
Quarter Ended:
December 31, 2005	$	20.80	$	21.00	$	0.210
September 30, 2005	$	20.10	$	20.50	$	0.205
June 30, 2005	$	21.00	$	21.70	$	0.205
March 31, 2005	$	23.50	$	24.25	$	0.200
December 31, 2004	$	23.65	$	24.00	$	0.200
September 30, 2004	$	21.50	$	22.15	$	0.195
June 30, 2004	$	22.20	$	22.75	$	0.195
March 31, 2004	$	25.00	$	25.25	$	0.190