EXHIBIT 99.1
| Contact: Kathleen Campbell, Marketing Director | | First Citizens Community Bank |
| 570-662-0422 | | 15 S. Main Street |
| 570-662-8512 (fax) | | Mansfield, PA 16933 |
Citizens Financial Services, Inc. Reports Increase in Third Quarter 2012 Earnings
MANSFIELD, PENNSYLVANIA— October 23, 2012 – Citizens Financial Services, Incorporated (OTC BB: CZFS), parent company of First Citizens Community Bank, has released its unaudited financial performance for the nine months and three months ended September 30, 2012.
For the nine months ended September 30, 2012, net income totaled $10,666,000 which compared to $9,355,000 for the same period last year. This represents an increase of $1,311,000, or 14%. Earnings per share of $3.66 increased 15.1% from $3.18 per share last year. Annualized return on equity for the comparable periods was 17.74% and 17.65%, while return on assets was 1.62% and 1.49%, respectively.
For the three months ended September 30, 2012, net income totaled $3,464,000 which compares to $3,378,000 for the same period last year. This represents an increase of $86,000, or 2.5%. Earnings per share of $1.19 increased 3.5% from $1.15 per share last year.
Net interest income, before the provision for loan losses, increased from $21,219,000 for the nine months ended September 30, 2011 to $22,838,000 this year, an increase of $1,619,000, or 7.6%. On a tax equivalent basis, the net interest margin on interest earning assets increased from 3.94% last year to 3.99% this year. CEO and President Randall E. Black stated, “As the low interest rate environment continues, yields on interest earning assets decreased from 5.19% last year to 4.94% this year. Specifically, yields on investments have decreased 36 basis points primarily due to our strategy to invest in shorter term investments. Maintaining our margin is directly related to our ability to decrease our cost of funds, which has decreased from 1.45% last year to 1.12% this year”.
As of September 30, 2012, total assets were $876.2 million, which was a decrease of $2.4 million from December 31, 2011. Cash and cash equivalents decreased $19.7 million from the end of the year. The decrease in cash and cash equivalents was used to fund an increase of $3.2 million in the investment portfolio, as it totaled $322.0 million at September 30, 2012 compared to the December 31, 2011 balance of $318.8 million. Additionally, net loans increased $11.5 million to a total of $492.5 million at September 30, 2012 from the end of December. Since September 30, 2011, net loans have increased $20.2 million, or 4.3%. Most of the loan growth was related to commercial and agricultural loans. “The low interest rate environment has resulted in unprecedented low, fixed residential mortgage rates. Rather than significantly increasing our interest rate risk when interest rates do begin to increase, we have chosen to service and sell most of the residential loans that we have originated on the secondary market. Through September we have originated $21.6 million of residential mortgages which have been sold compared with $7.5 million last year”, commented Mr. Black.
As of September 30, 2012, non-performing assets totaled $9.2 million and represented 1.83% as a percent of loans. This compares to 2.11% as of December 31, 2011 and 2.22% as of September 30, 2011. The continued improvement in credit quality has resulted in a decrease in the provision for loan losses throughout 2012. For the first nine months of 2012, the provision totaled $315,000 compared to $525,000 recorded last year. Through September, annualized net charge-offs as a percent of average loans remains very low at .02%.
Stockholders’ equity totaled $90.0 million at September 30, 2012, which was an increase of $8.5 million, or 10.4%, from December 31, 2011 and an increase of $11.1 million or 14.1% from September 30, 2011. The capital level continues to result in First Citizens Community Bank being well capitalized based upon regulatory guidelines. On October 9, 2012 a cash dividend of $.305 per share was declared to shareholders of record as of October 19, 2012. The dividend will be paid on October 26 and represents an increase of 13.0% over the October 2011 cash dividend of $.27 per share.
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 18 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 30 | December 31 | September 30 |
| (in thousands except share data) | 2012 | 2011 | 2011 |
| ASSETS: | | | |
| Cash and due from banks: | | | |
| Noninterest-bearing | $ 10,086 | $ 9,960 | $ 10,761 |
| Interest-bearing | 624 | 20,472 | 24,050 |
| Total cash and cash equivalents | 10,710 | 30,432 | 34,811 |
| | | | |
| Available-for-sale securities | 322,039 | 318,823 | 303,239 |
| | | | |
| Loans (net of allowance for loan losses: $6,734 at September 30, 2012; | | | |
| $6,487 at December 31, 2011 and $6,323 at September 30, 2011) | 492,492 | 481,022 | 472,289 |
| | | | |
| Premises and equipment | 11,419 | 11,702 | 11,819 |
| Accrued interest receivable | 3,961 | 3,621 | 3,980 |
| Goodwill | 10,256 | 10,256 | 10,256 |
| Bank owned life insurance | 14,047 | 13,669 | 13,542 |
| Other assets | 11,293 | 9,042 | 9,252 |
| | | | |
| TOTAL ASSETS | $ 876,217 | $ 878,567 | $ 859,188 |
| | | | |
| LIABILITIES: | | | |
| Deposits: | | | |
| Noninterest-bearing | $ 84,767 | $ 85,605 | $ 80,557 |
| Interest-bearing | 644,440 | 648,388 | 638,988 |
| Total deposits | 729,207 | 733,993 | 719,545 |
| Borrowed funds | 47,956 | 53,882 | 52,845 |
| Accrued interest payable | 1,213 | 1,512 | 1,539 |
| Other liabilities | 7,865 | 7,712 | 6,397 |
| TOTAL LIABILITIES | 786,241 | 797,099 | 780,326 |
| STOCKHOLDERS' EQUITY: | | | |
| Preferred Stock $1.00 par value; authorized | | | |
| 3,000,000 shares at September30, 2012, December 31, 2011 and September 30, 2011; | | | |
| none issued in 2012 or 2011 | - | - | - |
| Common stock | | | |
| $1.00 par value; authorized 15,000,000 shares at September 30, 2012, December 31, 2011 and | |
| September30, 2011; issued 3,164,324 shares at September 30, 2012; 3,132,866 at | | |
| December 31, 2011 and Septemer 30, 2011 | 3,161 | 3,133 | 3,133 |
| Additional paid-in capital | 16,474 | 15,313 | 15,320 |
| Retained earnings | 70,255 | 63,337 | 60,936 |
| Accumulated other comprehensive income | 5,990 | 4,949 | 4,533 |
| Treasury stock, at cost: 247,134 shares at September 30, 2012; 230,203 shares at | | | |
| December 31, 2011 and 224,902 shares at September 30, 2011 | (5,904) | (5,264) | (5,060) |
| TOTAL STOCKHOLDERS' EQUITY | 89,976 | 81,468 | 78,862 |
| TOTAL LIABILITIES AND | | | |
| STOCKHOLDERS' EQUITY | $ 876,217 | $ 878,567 | $ 859,188 |
| 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) | 2012 | 2011 | 2012 | 2011 |
| INTEREST INCOME: | | | | |
| Interest and fees on loans | $ 7,448 | $ 7,555 | $ 22,352 | $ 22,413 |
| Interest-bearing deposits with banks | 5 | 22 | 11 | 64 |
| Investment securities: | | | | |
| Taxable | 1,085 | 1,095 | 3,519 | 3,443 |
| Nontaxable | 919 | 931 | 2,793 | 2,688 |
| Dividends | 17 | 10 | 49 | 39 |
| TOTAL INTEREST INCOME | 9,474 | 9,613 | 28,724 | 28,647 |
| INTEREST EXPENSE: | | | | |
| Deposits | 1,486 | 1,969 | 4,707 | 6,103 |
| Borrowed funds | 373 | 437 | 1,179 | 1,325 |
| TOTAL INTEREST EXPENSE | 1,859 | 2,406 | 5,886 | 7,428 |
| NET INTEREST INCOME | 7,615 | 7,207 | 22,838 | 21,219 |
| Provision for loan losses | 105 | 150 | 315 | 525 |
| NET INTEREST INCOME AFTER | | | | |
| PROVISION FOR LOAN LOSSES | 7,510 | 7,057 | 22,523 | 20,694 |
| NON-INTEREST INCOME: | | | | |
| Service charges | 1,139 | 1,185 | 3,346 | 3,258 |
| Trust | 148 | 163 | 472 | 466 |
| Brokerage and insurance | 80 | 79 | 305 | 297 |
| Gains on loans sold | 102 | 36 | 287 | 111 |
| Investment securities gains, net | 240 | 117 | 561 | 351 |
| Earnings on bank owned life insurance | 128 | 126 | 378 | 371 |
| Other | 109 | 122 | 342 | 323 |
| TOTAL NON-INTEREST INCOME | 1,946 | 1,828 | 5,691 | 5,177 |
| NON-INTEREST EXPENSES: | | | | |
| Salaries and employee benefits | 2,705 | 2,527 | 8,126 | 7,560 |
| Occupancy | 304 | 295 | 928 | 1,014 |
| Furniture and equipment | 113 | �� 115 | 315 | 338 |
| Professional fees | 209 | 197 | 701 | 526 |
| FDIC insurance | 115 | 47 | 353 | 547 |
| Pennsylvania shares tax | 115 | 146 | 441 | 439 |
| Other | 1,398 | 1,171 | 3,488 | 3,496 |
| TOTAL NON-INTEREST EXPENSES | 4,959 | 4,498 | 14,352 | 13,920 |
| Income before provision for income taxes | 4,497 | 4,387 | 13,862 | 11,951 |
| Provision for income taxes | 1,033 | 1,009 | 3,196 | 2,596 |
| NET INCOME | $ 3,464 | $ 3,378 | $ 10,666 | $ 9,355 |
| | | | | |
| PER COMMON SHARE DATA: | | | | |
| Net Income - Basic | $ 1.19 | $ 1.15 | $ 3.66 | $ 3.18 |
| Net Income - Diluted | $ 1.19 | $ 1.15 | $ 3.66 | $ 3.18 |
| Cash Dividends Paid | $ 0.300 | $ 0.265 | $ 0.895 | $ 0.790 |
| | | | | |
| Number of shares used in computation - basic | 2,908,435 | 2,945,616 | 2,915,615 | 2,945,197 |
| Number of shares used in computation - diluted | 2,910,501 | 2,945,616 | 2,917,377 | 2,945,197 |
| Financial Highlights | | | | |
| | | | | |
| | Three Months Ended | | Nine Months Ended | |
| | September 30, | | September 30, | |
| | 2012 | 2011 | 2012 | 2011 |
| Performance Ratios and Share Data: | | | | |
| Return on average assets (annualized) | 1.58% | 1.57% | 1.62% | 1.49% |
| Return on average equity (annualized) | 16.78% | 18.48% | 17.74% | 17.65% |
| Net interest margin (tax equivalent) | 3.99% | 3.90% | 3.99% | 3.94% |
| Cash dividends paid per share | $ 0.300 | $ 0.265 | $ 0.895 | $ 0.790 |
| Earnings per share - basic | $ 1.19 | $ 1.15 | $ 3.66 | $ 3.18 |
| Earnings per share - diluted | $ 1.19 | $ 1.15 | $ 3.66 | $ 3.18 |
| Number of shares used in computation - basic | 2,908,435 | 2,945,616 | 2,915,615 | 2,945,197 |
| Number of shares used in computation - diluted | 2,910,501 | 2,945,616 | 2,917,377 | 2,945,197 |
| Balance Sheet Highlights (dollars in thousands): | September 30, 2012 | December 31, 2011 | September 30, 2011 |
| | | | |
| Assets | $ 876,217 | $ 878,567 | $859,188 |
| Investment securities: | | | |
| Available for sale | 322,039 | 318,823 | 303,239 |
| Loans (net of unearned income) | 499,226 | 487,509 | 478,612 |
| Allowance for loan losses | 6,734 | 6,487 | 6,323 |
| Deposits | 729,207 | 733,993 | 719,545 |
| Stockholders' Equity | 89,976 | 81,468 | 78,862 |
| Non-performing assets | 9,157 | 10,300 | 10,635 |
| Non-performing assets to total loans | 1.83% | 2.11% | 2.22% |
| Annualized net charge-offs to total loans | 0.02% | 0.02% | 0.03% |
| Average Leverage Ratio | 9.62% | 8.83% | 8.66% |
| Common shares outstanding | 2,907,490 | 2,902,663 | 2,908,657 |
| Book value per share | $ 28.82 | $ 26.36 | $25.55 |
