Citizens Financial Services, Inc. Reports First Quarter 2016 Earnings

MANSFIELD, Pa., April 27, 2016

For the three months ended March 31, 2016, net income totaled $3,283,000 which compares to net income of $3,120,000 for the first quarter of 2015, an increase of $163,000 or 5.2%.  Basic earnings per share of $.99 for the first quarter of 2016 compares to $1.03 for the first quarter last year.  Annualized return on equity for the three months ended March 31, 2016 and 2015 was 10.81% and 12.38%, while annualized return on assets was 1.11% and 1.36%, respectively.

Net interest income before the provision for loan loss increased from $7,587,000 for the three months ended March 31, 2015 to $9,205,000 for 2016, an increase of $1,618,000, or 21.36%.  For 2016, interest income increased $1,691,000, while interest expense increased $73,000.  Net interest margin decreased from 3.89% last year to 3.64% for 2016, which is a decrease of 25 basis points.  The interest rate environment, competitive pressures and the integration of the acquisition of The First National Bank of Fredericksburg (FNB) have resulted in a 34 basis point decline in the yield on interest earning assets.  The cost of interest bearing liabilities decreased 11 basis points from the first quarter of 2015, mostly attributable to a lower cost of funds acquired from FNB.  The provision for loan losses for the quarter ended March 31, 2016 totaled $135,000, in comparison to $120,000 for the quarter ended March 31, 2015.

CEO and President Randall E. Black stated, "Our quarterly results reflect the first full quarter that includes the acquisition of FNB.  We are just starting to realize the growth opportunities this new market provides.  In addition to our new south central Pennsylvania opportunities, I am extremely excited about the opening of a location in Winfield, Pennsylvania.  Our dedication and expertise in agricultural lending has resulted in the hiring of a seasoned lending team based in Winfield, which will serve the central Pennsylvania agricultural market.  The addition of this team, along with our existing core of experienced agricultural lenders, positions us to be one of the leading agricultural lenders in Pennsylvania.  Both of these markets strongly position our Company for future growth."

At March 31, 2016, total assets were $1.2 billion which was the same at December 31, 2015.  Compared to March 31, 2015, total assets have increased $262.6 million.  Available for sale securities increased $12.2 million from December 31, 2015 as excess cash was invested.  Net loans increased $4.5 million compared to the end of last year.  Since December 31, 2015, deposits have increased $29.8 million.  Contributing to this increase is the resolution of an approved budget by the Commonwealth of Pennsylvania.  The lack of an approved budget as of the end of 2015 temporarily impacted state and political deposit balances, mostly deposits of local school districts.

Asset quality remains strong, with non-performing assets totaling $8.8 million as of March 31, 2016.  Non-performing assets to total loans was 1.25% at March 31, 2016 compared to 1.22% last December and 1.65% as of March 31, 2015.

Stockholders' equity totaled $121.9 million at March 31, 2016, which compares to $119.8 million at December 31, 2015, an increase of $2.1 million.  Net income for the first quarter of 2016 totaling $3.3 million was offset by cash dividends of $1.4 million and net treasury share purchases of $.9 million.  As a result of changes in interest rates impacting the fair value of investment securities, the unrealized gain on available for sale investment securities increased $1.1 million from the end of 2015.  A cash dividend of $.415 per share was paid on March 24, 2016 to shareholders of record on March 18, 2016.