Citizens Financial Services (CZFS) 8-K Citizens Financial Services, Inc. Reports Second Quarter 2006 Earnings

Exhibit 99.1

Contact:	Kathleen Campbell, Marketing Director	First Citizens National Bank
	570-662-0422	15 S. Main Street
	570-662-8512 (fax)	Mansfield, PA 16933

Citizens Financial Services, Inc. Reports Second Quarter 2006 Earnings

MANSFIELD, PENNSYLVANIA— July 19, 2006 - Citizens Financial Services, Incorporated (OTC BB: CZFS), parent company of First Citizens National Bank, has released its unaudited financial performance for the second quarter of 2006.

Net income for the three months ended June 30, 2006 was $1,486,000, which compares to $1,313,000 for the same period last year. This represents an increase of 13.2%. On a year to date basis, net income was $2,762,000 compared with $2,580,000 last year, an increase of 7.1%. Earnings per share for the year are $.98 compared with $.90 for the first six months of 2005, representing an increase of 8.9%.

Return on equity for the six months ended June 30, 2006 and 2005 was 12.75% and 12.52%, respectively. For the three months ended June 30, 2006, return on equity was 13.55% compared with 12.63% for the same period in 2005. Income before taxes has increased from $3,283,000 for the first six months in 2005 to $3,420,000 in 2006, an increase of $137,000. Excluding the provision for loan losses, income before taxes increased $257,000, representing a 7.8% increase. Due to tax planning strategies using tax-exempt investments and loans, the provision for income taxes decreased from $703,000 last year to $658,000 this year, a savings of $45,000.

CEO and President Randall E. Black stated, “The interest rate environment continues to be less than favorable for our bank as well as others that are dealing with the same challenges. The sustained flat yield curve continues to put pressure on our interest rate margin as the Federal Reserve has maintained its policy of monetary tightening by increasing short-term interest rates. However, we have been able to produce positive financial performance through cost control and managing our effective tax rate, while expanding our franchise into Wellsville, New York.”

Since June of last year, total assets have increased $43.8 million, or 8.6%. At the end of June, total assets were $550.9 million compared to $507.1 million last June. Net loans have increased $30.1 million since last June, an increase of 8.2%. Deposits have increased $15.5 million and borrowed funds have increased $27.9 million to fund the overall growth in assets.

Stockholders’ Equity, excluding accumulated other comprehensive income, has increased $2.3 million, or 5.5% since last June. There have been 34,247 shares of treasury stock repurchased during 2006 since the Board of Directors approved a stock repurchase plan on January 17, 2006. Book value per share at June 30, 2006 was $15.60 compared with $14.76 last year, an increase of 5.7%. In June, a cash dividend of $.215 per share was declared and will be paid to shareholders on July 28, 2006 to record holders as of July 14, 2006. This represents an increase of 4.9%. Additionally, a 1% stock dividend will be distributed July 28, 2006 to shareholders of record as of July 14th.

Mr. Black noted that “construction is well under way on our new branch in Wellsville, New York. We expect a completion date during the fourth quarter of this year and continue to be optimistic about our potential to grow our bank in New York.”

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.

CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
	June 30			December 31			June 30
(in thousands except share data)	2006			2005			2005
ASSETS:
Cash and due from banks:
Noninterest-bearing	$	10,925		$	8,498		$	8,607
Interest-bearing		6			111			101
Total cash and cash equivalents		10,931			8,609			8,708
Available-for-sale securities		101,864			102,602			91,947
Loans (net of allowance for loan losses: 2006, $3,623; December 31, 2005		397,765			379,139			367,684
$3,664; and June 30, 2005 $3,692)
Premises and equipment		12,199			12,305			12,493
Accrued interest receivable		2,109			2,164			1,895
Goodwill		8,605			8,605			8,605
Core deposit intangible		503			684			973
Bank owned life insurance		7,889			7,743			7,598
Other assets		9,113			7,390			7,244
TOTAL ASSETS	$	550,978		$	529,241		$	507,147
LIABILITIES:
Deposits:
Noninterest-bearing	$	50,289		$	50,600		$	46,764
Interest-bearing		387,620			379,199			375,668
Total deposits		437,909			429,799			422,432
Borrowed funds		67,116			52,674			39,199
Accrued interest payable		1,739			1,862			1,599
Commitment to purchase investments		-			752			-
Other liabilities		2,690			2,593			2,716
TOTAL LIABILITIES		509,454			487,680			465,946
STOCKHOLDERS' EQUITY:
Common Stock
$1.00 par value; authorized 10,000,000 shares; issued 2,965,257 shares in
2006 and at December 31, 2005 and 2,937,519 shares at June 30. 2005		2,965			2,965			2,938
Additional paid-in capital		11,359			11,359			10,804
Retained earnings		32,809			31,251			30,324
TOTAL		47,133			45,575			44,066
Accumulated other comprehensive loss		(2,357	)		(1,540	)		(391	)
Less: Treasury Stock, at cost 152,962 shares for 2006, 118,715 shares at
December 31, 2005 and 97,262 shares at June 30, 2005		(3,252	)		(2,474	)		(2,474	)
TOTAL STOCKHOLDERS' EQUITY		41,524			41,561			41,201
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	550,978		$	529,241		$	507,147

CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
	Three Months Ended					Six Months Ended
	June 30,					June 30,
(in thousands, except per share data)	2006		2005			2006			2005
INTEREST INCOME:
Interest and fees on loans	$	6,894	$	6,105		$	13,413		$	12,024
Investment securities:
Taxable		879		749			1,698			1,541
Nontaxable		221		124			447			242
Dividends		82		55			149			106
TOTAL INTEREST INCOME		8,076		7,033			15,707			13,913
INTEREST EXPENSE:
Deposits		2,722		2,256			5,323			4,425
Borrowed funds		876		379			1,539			757
TOTAL INTEREST EXPENSE		3,598		2,635			6,862			5,182
NET INTEREST INCOME		4,478		4,398			8,845			8,731
Provision for loan losses		60		-			120			-
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		4,418		4,398			8,725			8,731
NON-INTEREST INCOME:
Service charges		809		746			1,515			1,419
Trust		108		86	��		237			208
Brokerage		39		55			97			93
Insurance		20		61			56			144
Investment securities gains (losses), net		5		-			(1	)		-
Earnings on bank owned life insurance		74		75			146			149
Other		136		112			273			224
TOTAL NON-INTEREST INCOME		1,191		1,135			2,323			2,237
NON-INTEREST EXPENSES:
Salaries and employee benefits		1,987		1,974			4,023			3,895
Occupancy		276		282			584			585
Furniture and equipment		144		160			296			335
Professional fees		106		131			246			275
Amortization		36		144			180			289
Other		1,188		1,171			2,299			2,306
TOTAL NON-INTEREST EXPENSES		3,737		3,862			7,628			7,685
Income before provision for income taxes		1,872		1,671			3,420			3,283
Provision for income taxes		386		358			658			703
NET INCOME	$	1,486	$	1,313		$	2,762		$	2,580
Earnings Per Share	$	0.53	$	0.46		$	0.98		$	0.90
Cash Dividends Per Share	$	0.215	$	0.205		$	0.425		$	0.405
Weighted average number of shares outstanding		2,819,620		2,865,637			2,829,915			2,866,810

FINANCIAL HIGHLIGHTS	��
(UNAUDITED -IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)
		2006			2005
Six Months Ended June 30
Net Income		$	2,762		$	2,580
Comprehensive Income			1,945			2,025
Per common share data:
Earnings per share		$	0.98		$	0.90
Cash dividends per share		$	0.425		$	0.405
Performance Ratios:
Return on average assets (annualized)			1.02	%		1.02	%
Return on average equity (annualized)			12.75	%		12.52	%
Three Months Ended June 30
Net Income		$	1,486		$	1,313
Per common share data:
Earnings per share		$	0.53		$	0.46
Cash dividends per share		$	0.215		$	0.205
Performance Ratios:
Return on average assets (annualized)			1.09	%		1.04	%
Return on average equity (annualized)			13.55	%		12.63	%
At June 30
Assets		$	550,978		$	507,147
Investment securities:
Available for sale			101,864			91,947
Loans (net of unearned income)			401,388			371,376
Allowance for loan losses			3,623			3,692
Deposits			437,909			422,432
Stockholders' Equity			41,524			41,201
Non-performing assets			2,954			2,806
Average Leverage Ratio			7.86	%		7.94	%
Per common share data:
Book value		$	15.60		$	14.76
Market value (average of bid/ask price)		$	22.30		$	21.35
Market price to book value ratio			142.92	%		144.69	%

	Cash Dividends
Common Stock Information:	Bid		Ask		Paid
Quarter Ended:
June 30, 2006	$	21.60	$	23.00	$	0.215
March 31, 2006	$	21.35	$	23.25	$	0.210
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