Citizens Financial Services (CZFS) 8-K Citizens Financial Services, Inc. Reports Second Quarter 2007 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 2007 Earnings

MANSFIELD, PENNSYLVANIA— July 24, 2007 – 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 2007.

Net income for the three months ended June 30, 2007 was $1,760,000 which compares to $1,486,000 for the second quarter last year.  This is an increase of $274,000, or 18.4%.   On a year to date basis net income through June 30 was $3,140,000 compared with $2,762,000 last year representing an increase of $378,000, or 13.7%.  Earnings per share for the six months ended June 30, 2007 and 2006 were $1.11 and $.97 per share, respectively.

During the quarter, a pre-tax gain of $381,000 was recognized from the sale of other real estate held.  Offsetting this gain, a pre-tax loss of $100,000 was recognized due to the write-down to fair market value of one of the Bank’s properties.  The combined impact, after tax, increased earnings during the second quarter by approximately $186,000.

Return on equity for the comparable periods were 13.68% and 12.75%, respectively.  Net interest income before the provision for loan losses totaled $9,113,000, an increase of $268,000 compared to the first six months a year ago.  Non-interest expenses have increased $105,000.   Excluding the $100,000 write-down, expenses increased only $5,000.

CEO and President Randall E. Black stated, “Our industry continues to toil in an unprecedented, difficult yield environment.  The curve has remained slightly inverted throughout the first six months of 2007, with very few signs of recovery through the end of the year.  While this continues to dampen our net interest margin, it has forced us to become a better and more efficient organization.  Our cost savings efforts and more streamlined operations have resulted in improved financial performance that will benefit us going forward.  The marginal increase in costs has contributed to our overall financial performance and is reflective of our overall cost savings efforts.”

Since June of last year, total assets have increased $30.3 million, or 5.5%.  At the end of June, total assets were $581.3 million compared to $551.0 million last June.  Net loans have increased $13.2 million since last June, an increase of 3.3%.  Total deposits have increased $30.0 million while borrowed funds have decreased $4.7 million.

Stockholders’ equity, excluding accumulated other comprehensive income, has increased $3.0 million, or 6.9% since last June.  Book value per share at June 30, 2007 was $16.67 compared with $15.60 last year, an increase of 6.9%.  In July, a cash dividend of $.22 ½ per share was declared and will be paid to shareholders on July 27, 2007 to record holders as of July 13, 2007, which represents an increase of 4.7% over 2006’s July’s dividend.  Additionally, a 1% stock dividend was declared in July and will be distributed July 13, 2007, as well.

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)	2007			2006			2006
ASSETS:
Cash and due from banks:
Noninterest-bearing	$	10,873		$	10,007		$	10,925
Interest-bearing		12			8			6
Total cash and cash equivalents		10,885			10,015			10,931
Available-for-sale securities		118,614			109,743			101,864
Loans (net of allowance for loan losses:
2007, $4,107; $3,876 at December 31, 2006 and $3,623 at June 30, 2006)		410,967			410,897			397,765
Premises and equipment		12,660			12,892			12,199
Accrued interest receivable		2,383			2,458			2,109
Goodwill		8,605			8,605			8,605
Bank owned life insurance		8,209			8,047			7,889
Other assets		8,958			9,511			9,616
TOTAL ASSETS	$	581,281		$	572,168		$	550,978
LIABILITIES:
Deposits:
Noninterest-bearing	$	50,753		$	48,509		$	50,289
Interest-bearing		417,189			398,006			387,620
Total deposits		467,942			446,515			437,909
Borrowed funds		62,382			75,775			67,116
Accrued interest payable		2,086			2,287			1,739
Other liabilities		4,531			4,091			2,690
TOTAL LIABILITIES		536,941			528,668			509,454
STOCKHOLDERS' EQUITY:
Common stock
$1.00 par value; authorized 10,000,000 shares; issued 2,992,896 shares
in 2007 and at December 31, 2006 and 2,965,257 shares at June 30, 2006		2,993			2,993			2,965
Additional paid-in capital		11,935			11,933			11,359
Retained earnings		35,892			34,007			32,809
Accumulated other comprehensive loss		(2,551	)		(1,737	)		(2,357	)
Unearned restricted stock:  3,074 shares for 2007 and 0 shares for 2006		(72	)		-			-
Treasury stock, at cost:  180,140 shares for 2007, and 172,954 shares
at December 31, 2006 and 152,962 shares at June 30, 2006		(3,857	)		(3,696	)		(3,252	)
TOTAL STOCKHOLDERS' EQUITY		44,340			43,500			41,524
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	581,281		$	572,168		$	550,978

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)	2007		2006		2007		2006
INTEREST INCOME:
Interest and fees on loans	$	7,539	$	6,894	$	14,896	$	13,413
Investment securities:
Taxable		1,057		879		2,071		1,698
Nontaxable		225		221		449		447
Dividends		78		82		169		149
TOTAL INTEREST INCOME		8,899		8,076		17,585		15,707
INTEREST EXPENSE:
Deposits		3,430		2,722		6,740		5,323
Borrowed funds		806		876		1,732		1,539
TOTAL INTEREST EXPENSE		4,236		3,598		8,472		6,862
NET INTEREST INCOME		4,663		4,478		9,113		8,845
Provision for loan losses		45		60		165		120
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		4,618		4,418		8,948		8,725
NON-INTEREST INCOME:
Service charges		812		809		1,560		1,515
Trust		127		108		264		237
Brokerage		31		59		49		153
Investment securities gains (losses), net		-		5		-		(1	)
Gains on loans sold		46		7		64		13
Gains on sales of foreclosed properties		373		34		396		47
Earnings on bank owned life insurance		82		74		162		146
Other		120		95		223		213
TOTAL NON-INTEREST INCOME		1,591		1,191		2,718		2,323
NON-INTEREST EXPENSES:
Salaries and employee benefits		2,033		1,987		4,126		4,023
Occupancy		308		276		609		584
Furniture and equipment		140		144		268		296
Professional fees		155		106		320		246
Amortization		36		36		72		180
Other		1,284		1,188		2,338		2,299
TOTAL NON-INTEREST EXPENSES		3,956		3,737		7,733		7,628
Income before provision for income taxes		2,253		1,872		3,933		3,420
Provision for income taxes		493		386		793		658
NET INCOME	$	1,760	$	1,486	$	3,140	$	2,762
Earnings Per Share	$	0.63	$	0.52	$	1.11	$	0.97
Cash Dividends Paid Per Share	$	0.225	$	0.215	$	0.445	$	0.425
Weighted average number of shares outstanding		2,815,873		2,847,259		2,817,813		2,857,554

FINANCIAL HIGHLIGHTS
(UNAUDITED - IN THOUSANDS, EXCEPT PER SHARE AND RATIO DATA)
	2007			2006
Six Months Ended June 30
Net Income	$	3,140		$	2,762
Comprehensive Income		2,326			1,945
Per common share data:
Earnings per share	$	1.11		$	0.97
Cash dividends paid per share	$	0.445		$	0.425
Performance Ratios:
Return on average assets (annualized)		1.10	%		1.02	%
Return on average equity (annualized)		13.68	%		12.75	%
Three Months Ended June 30
Net Income	$	1,760		$	1,486
Per common share data:
Earnings per share	$	0.63		$	0.52
Cash dividends paid per share	$	0.225		$	0.215
Performance Ratios:
Return on average assets (annualized)		1.23	%		1.09	%
Return on average equity (annualized)		15.24	%		13.55	%
At June 30
Assets	$	581,281		$	550,978
Investment securities:
Available for sale		118,614			101,864
Loans (net of unearned income)		415,074			401,388
Allowance for loan losses		4,107			3,623
Deposits		467,942			437,909
Stockholders' Equity		44,340			41,524
Non-performing assets		2,754			2,954
Average Leverage Ratio		8.05	%		7.86	%
Per common share data:
Book value	$	16.67		$	15.60
Market value (average of bid/ask price)	$	21.85		$	22.30
Market price to book value ratio		131.07	%		142.92	%

			Cash Dividends
Common Stock Information:	Bid	Ask	Paid
Quarter Ended:
June 30, 2007	$21.20	$22.50	$0.225
March 31, 2007	$22.55	$23.00	$0.220
December 31, 2006	$22.00	$23.50	$0.220
September 30, 2006	$22.00	$23.00	$0.215
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