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 Third Quarter 2008 Earnings
MANSFIELD, PENNSYLVANIA— October 28, 2008 – Citizens Financial Services, Incorporated (OTC BB: CZFS), parent company of First Citizens National Bank, has released its unaudited financial performance for the third quarter of 2008.
CEO and President Randall E. Black stated, “ The financial turmoil facing our national economy and the world is unprecedented and represents by far, according to some sources, the most significant financial crisis since the Great Depression. Being a strong and solid local community bank has shielded us from the vast majority of the credit crisis that has impacted the world economy. Even though the current economic crisis affected our financial performance during the third quarter as we recorded charges against income resulting from investments in Freddie Mac preferred stock and a corporate bond of Lehman Brothers, I want to assure you that your company continues to be strong, as can be seen by our core earnings, high capital ratios and commitment to our communities during these uncharted times.”
For the three months ended September 30, 2008, net interest income was $5,858,000 compared with $4,825,000 last year, which represents an increase of $1,033,000 or 21.4%. On a year to date basis, net interest income for the nine months ended September 30, 2008 was $16,976,000 compared with $13,773,000 a year ago. This is an increase of $3,203,000, or 23.3%, and is reflective of our strong core bank earnings. Our net interest margin, tax effected, on interest earning assets has improved from 3.76% for the first nine months of 2007 to 4.41% for this year.
Total assets at September 30, 2008 totaled $620.7 million, an increase of $36.6 million from September 30, 2007. Our investment portfolio increased from $117.8 million to $128.2 million, while our net loan portfolio grew $9.6 million to $424.9 million at September 30, 2008. Total deposits have increased significantly, from $464.7 million at September 30, 2007 to $515.0 million as of September 30, 2008 representing an increase of $50.3 million or 10.8%.
As indicated previously, the issues facing our economy have had an impact on our third quarter financial results, just as those issues have impacted many if not all financial institutions throughout the country. In September, as a result of the national economic crisis, we were required to record a $4.1 million other than temporary impairment charge related to our investments in Freddie Mac preferred stock and a Lehman Brothers corporate bond. The after-tax impact for 2008 earnings will be approximately $2.5 million, or $.88 per share. As a result of the Government bailout bill being signed into law on October 3, 2008, the provision in the new bill will allow the Freddie Mac preferred stock to be treated as an ordinary loss, allowing a tax benefit of approximately $1,000,000. However, since the bailout bill was not signed until after September 30, accounting rules do not allow us to recognize the $1,000,000 tax benefit until the fourth quarter. The result of this timing difference of approximately $1,000,000 of net income between the third quarter and fourth quarter is an additional $.35 of earnings per share in the fourth quarter before any operating earnings. Excluding the impairment charge and assuming normal tax rates for the quarter, year to date net income would have been, approximately $6.9 million compared with $4.9 million recorded for the nine months ended September 30, 2007. This is an increase of $2.0 million, or 40.8%.
For the nine months ended September 30, 2008, net income totaled $3,415,000 and earnings per share were $1.20, compared to $4,894,000 of net income and $1.71 earnings per share for the nine months ended September 30, 2007. Return on equity for the comparable periods was 8.93% and 14.08%, while return on assets was .76% and 1.13%, for the respective time periods.
Citizens Financial Services, Inc. remains well capitalized, with an equity-to-assets ratio of 7.6%, versus 8.0% as of September 30, 2007. Book value per share at September 30, 2008 was $17.59 compared with $16.89 last September. In October, a cash dividend of $.24 per share was declared and will be paid on October 31, 2008 to shareholders of record, as of October 17, 2008.
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) | | | |
| | | | |
| | September | December 31 | September |
| (in thousands except share data) | 2008 | 2007 | 2007 |
| ASSETS: | | | |
| Cash and due from banks: | | | |
| Noninterest-bearing | $ 26,070 | $ 10,374 | $ 10,468 |
| Interest-bearing | 22 | 15 | 13 |
| Total cash and cash equivalents | 26,092 | 10,389 | 10,481 |
| | | | |
| Available-for-sale securities | 128,227 | 120,802 | 117,787 |
| | | | |
| Loans (net of allowance for loan losses: 2008, $4,287 | | | |
| December 31, 2007, $4,197; and September 30, 2007, $4,112) | 424,857 | 419,182 | 415,328 |
| | | | |
| Premises and equipment | 12,024 | 12,538 | 12,627 |
| Accrued interest receivable | 2,776 | 2,522 | 2,784 |
| Goodwill | 8,605 | 8,605 | 8,605 |
| Bank owned life insurance | 8,639 | 8,378 | 8,293 |
| Other assets | 9,504 | 8,613 | 8,217 |
| | | | |
| TOTAL ASSETS | $ 620,724 | $ 591,029 | $ 584,122 |
| | | | |
| LIABILITIES: | | | |
| Deposits: | | | |
| Noninterest-bearing | $ 59,300 | $ 50,944 | $ 53,867 |
| Interest-bearing | 455,652 | 405,084 | 410,869 |
| Total deposits | 514,952 | 456,028 | 464,736 |
| Borrowed funds | 52,625 | 80,348 | 66,593 |
| Accrued interest payable | 2,048 | 2,199 | 2,029 |
| Other liabilities | 3,625 | 3,926 | 4,296 |
| TOTAL LIABILITIES | 573,250 | 542,501 | 537,654 |
| STOCKHOLDERS' EQUITY: | | | |
| Common stock | | | |
| $1.00 par value; authorized 10,000,000 shares; issued 3,048,290 shares in | | | |
| 2008; 3,020,538 shares at December 31, 2007 and September 30, 2007 | 3,048 | 3,020 | 3,021 |
| Additional paid-in capital | 12,979 | 12,439 | 12,446 |
| Retained earnings | 38,370 | 37,590 | 36,399 |
| Accumulated other comprehensive loss | (2,631) | (348) | (1,426) |
| Treasury stock, at cost: 199,575 shares for 2008; 194,883 shares at December 31, 2007; | | | |
| and 185,433 shares at September 30, 2007 | (4,292) | (4,173) | (3,972) |
| TOTAL STOCKHOLDERS' EQUITY | 47,474 | 48,528 | 46,468 |
| TOTAL LIABILITIES AND | | | |
| STOCKHOLDERS' EQUITY | $ 620,724 | $ 591,029 | $ 584,122 |
| CITIZENS FINANCIAL SERVICES, INC. | | | | |
| CONSOLIDATED STATEMENT OF INCOME | | | | |
| (UNAUDITED) | | | | |
| | Three Months Ended | Nine Months Ended |
| | September 30, | September 30, |
| (in thousands, except per share data) | 2008 | 2007 | 2008 | 2007 |
| INTEREST INCOME: | | | | |
| Interest and fees on loans | $ 7,793 | $ 7,715 | $ 23,102 | $ 22,611 |
| Interest-bearing deposits with banks | 28 | 4 | 34 | 4 |
| Investment securities: | | | | |
| Taxable | 1,142 | 1,130 | 3,391 | 3,201 |
| Nontaxable | 359 | 242 | 1,048 | 691 |
| Dividends | 23 | 88 | 164 | 257 |
| TOTAL INTEREST INCOME | 9,345 | 9,179 | 27,739 | 26,764 |
| INTEREST EXPENSE: | | | | |
| Deposits | 2,837 | 3,366 | 8,508 | 10,106 |
| Borrowed funds | 545 | 928 | 2,030 | 2,660 |
| TOTAL INTEREST EXPENSE | 3,382 | 4,294 | 10,538 | 12,766 |
| NET INTEREST INCOME | 5,963 | 4,885 | 17,201 | 13,998 |
| Provision for loan losses | 105 | 60 | 225 | 225 |
| NET INTEREST INCOME AFTER | | | | |
| PROVISION FOR LOAN LOSSES | 5,858 | 4,825 | 16,976 | 13,773 |
| NON-INTEREST INCOME (LOSS): | | | | |
| Service charges | 944 | 809 | 2,591 | 2,369 |
| Trust | 148 | 123 | 451 | 387 |
| Brokerage and insurance | 58 | 37 | 176 | 86 |
| Investment securities gains (losses), net | (4,089) | 24 | (4,089) | 24 |
| Gain on sales of foreclosed properties | 25 | - | 25 | 396 |
| Earnings on bank owned life insurance | 90 | 84 | 261 | 246 |
| Other | 100 | 101 | 388 | 388 |
| TOTAL NON-INTEREST INCOME (LOSS) | (2,724) | 1,178 | (197) | 3,896 |
| NON-INTEREST EXPENSES: | | | | |
| Salaries and employee benefits | 2,196 | 2,130 | 6,510 | 6,256 |
| Occupancy | 271 | 268 | 866 | 877 |
| Furniture and equipment | 107 | 137 | 368 | 405 |
| Professional fees | 156 | 149 | 485 | 469 |
| Other | 1,302 | 1,104 | 3,656 | 3,514 |
| TOTAL NON-INTEREST EXPENSES | 4,032 | 3,788 | 11,885 | 11,521 |
| Income (loss) before provision for income taxes | (898) | 2,215 | 4,894 | 6,148 |
| Provision for income taxes | 154 | 461 | 1,479 | 1,254 |
| NET INCOME (LOSS) | $ (1,052) | $ 1,754 | $ 3,415 | $ 4,894 |
| | | | | |
| Earnings Per Share | $ (0.37) | $ 0.61 | $ 1.20 | $ 1.71 |
| Cash Dividends Paid Per Share | $ 0.235 | $ 0.225 | $ 0.700 | $ 0.670 |
| | | | | |
| Weighted average number of shares outstanding | 2,849,546 | 2,863,298 | 2,851,889 | 2,869,867 |
| Financial Highlights | | | | | | | |
| (Unaudited - dollars in thousands except per share and ratio data) | | | | | | |
| | | | | | | | |
| | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | September 30, 2008 | | September 30, 2008 |
| | 2008 | | 2007 | | 2008 | | 2007 |
| Performance Ratios and Share Data: | | | | | | | |
| Return on average assets (annualized) | -0.69% | | 1.20% | | 0.76% | | 1.13% |
| Return on average equity (annualized) | -8.01% | | 14.85% | | 8.93% | | 14.08% |
| Net interest margin (tax equivalent) | 4.48% | | 3.85% | | 4.41% | | 3.76% |
| Cash dividends paid per share | $ 0.235 | | $ 0.225 | | $ 0.700 | | $ 0.670 |
| Earnings per share | $ (0.37) | | $ 0.61 | | $ 1.20 | | $ 1.71 |
| Weighted average shares outstanding | 2,849,546 | | 2,863,298 | | 2,851,889 | | 2,869,867 |
| Balance Sheet Highlights (dollars in thousands): | September 30, 2008 | December 31, 2007 | September 30, 2007 |
| | | | |
| Assets | $ 620,724 | $ 591,029 | $ 584,122 |
| Investment securities: | | | |
| Available for sale | 128,227 | 120,802 | 117,787 |
| Loans (net of unearned income) | 429,145 | 423,379 | 419,440 |
| Allowance for loan losses | 4,288 | 4,197 | 4,112 |
| Deposits | 514,952 | 456,028 | 464,736 |
| Stockholders' Equity | 47,474 | 48,528 | 46,468 |
| Non-performing assets | 3,937 | 2,393 | 2,527 |
| Non-performing assets to total loans | 0.92% | 0.57% | 0.60% |
| Average Leverage Ratio | 8.10% | 8.20% | 8.05% |
| Common shares outstanding | 2,848,715 | 2,825,655 | 2,835,104 |
| Book value per share | $ 17.59 | $ 17.30 | $ 16.89 |
