EX-99.1 2 thirdquarter08pressrelease.htm PRESS RELEASE THIRD QUARTER 2008 thirdquarter08pressrelease.htm
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