CITIZENS FINANCIAL SERVICES INC - FORM 8-K - EX-99.1 - PRESS RELEASE ANNOUNCING THIRD QUARTER 2015 EARNINGS - October 28, 2015

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8-K - THIRD QUARTER 2015 8-K - CITIZENS FINANCIAL SERVICES INCthirdquarter2015.htm

 
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 Third Quarter 2015 Earnings

MANSFIELD, PENNSYLVANIA— October 28, 2015 – Citizens Financial Services, Inc. (OTC BB: CZFS), parent company of First Citizens Community Bank, has released its unaudited financial performance for the three and nine months ended September 30, 2015.

For the nine months ended September 30, 2015, net income totaled $9,166,000 which compares to net income of $9,909,000 for the comparable 2014 period.  This represents a decrease of $743,000, or 7.5%. Earnings per share of $3.04 for the first nine months of 2015 compares to $3.26 for the first nine months of 2014.  Annualized return on equity for the nine months ended September 30, 2015 and 2014 was 11.93% and 13.64%, while return on assets was 1.31% and 1.46%, respectively.  Included in 2015 results are $405,000 of costs associated with The First National Bank of Fredericksburg (FNB) merger and $686,000 of foreclosed property expenses.

For the three months ended September 30, 2015 net income totaled $2,857,000 which compares to net income of $3,368,000 for the third quarter of 2014, which is a decrease of $511,000. Earnings per share of $.95 for the third quarter of 2015 compares to $1.11 for the third quarter last year.  Annualized return on equity for the three months ended September 30, 2015 and 2014 was 11.00% and 13.59%, while return on assets was 1.21% and 1.48%, respectively.  Third quarter results are impacted by $282,000 of FNB merger related costs and $328,000 of foreclosed property expenses.

CEO and President Randall E. Black stated, “Our financial performance for the quarter was solid, although it reflects the ongoing yield curve challenges that we and other financial institutions are forced to deal with.  Our performance was also impacted by FNB merger related costs, which were expected, and other expenses related to foreclosed properties.  We also have incurred additional costs in 2015 related to our expansion into the Lock Haven market in the first quarter, which aligns with our strategic plan.  Despite this, our financial results remain strong and continue to compare favorably to peers”.

Net interest income before the provision for loan loss has increased from $22,736,000 for the nine months ended September 30, 2014 to $22,793,000 for 2015.  For the nine months ended September 30, 2015, interest income decreased $76,000, which has been offset by a decrease in interest expense of $133,000.  With the existing yield curve and the ongoing interest rate environment, the margin has decreased from 3.85% last year to 3.78% for 2015.  This has resulted in continued pressure on the tax-effected yield on interest earning assets, which has decreased from 4.43% last year to 4.32% this year.  The cost of interest bearing liabilities has also declined, from .71% last year to .66% in 2015.  Offsetting the declining margin, the Company has been successful in increasing interest earning assets, particularly loans.  For 2015, average loans have increased by $29.6 million compared to the first nine months of 2014.    The provision for loan losses decreased $120,000 for the nine month comparable periods.

At September 30, 2015, total assets were $954.0 million, up from total assets of $913.0 million as of September 30, 2014 and up $29.0 million from total assets of $925.0 million at December 31, 2014.  Compared to December 31, 2014, available for sale investments have decreased $5.5 million, mostly due to unattractive yields in the market.  However, net loans have increased $28.7 million, or 5.2%, compared to the end of last year.  Included within this loan growth is $11.2 million that has come from the continued success in growing loans in the Mill Hall / Lock Haven market. Asset quality remains strong, and improving, with non-performing assets to total loans at 1.44% as of September 30, 2015 compared to 1.67% at December 31, 2014 and September 30, 2014.  Annualized net charge-offs as a percent of average loans remains very low at .03%.

 
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Stockholders’ equity totaled $103.9 million at September 30, 2015, which compares to $100.5 million at December 31, 2014 and $99.2 million at September 30, 2014.  For 2015, net income of $9.2 million was offset by cash dividends of $4.0 million and net treasury share purchases and re-issues of $2.0 million.  A regular cash dividend of $.41 per share was paid on September 25, 2015 to shareholders of record on September 18, 2015.  This regular quarterly cash dividend is an increase of 2.5% over the regular dividend declared a year ago.  Additionally, due to the continued outstanding financial performance, the Board of Directors declared a one-time special cash dividend of $.10 per share which was also paid on September 25, 2015 to shareholders of record on September 18, 2015.

“Our strong financial performance has permitted us to continue paying an attractive cash dividend and reflects the Board of Directors' desire to provide total shareholder return to our shareholder base. Additionally, our Management Team plus numerous teams of dedicated employees have been extremely busy during the third quarter working on the acquisition of FNB and our expansion into the Lebanon Valley Region of Pennsylvania.  Teams from both First Citizens and FNB have worked diligently on the merger and we anticipate a successful closing and conversion in the fourth quarter of 2015.  As work progresses on the merger, we remain optimistic about the tremendous growth opportunities this new market provides, added Mr. Black”.

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.


 
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CITIZENS FINANCIAL SERVICES, INC.
      
CONSOLIDATED BALANCE SHEET
      
(UNAUDITED)
      
       
 
September 30
December 31
September 30
(in thousands except share data)
2015
2014
2014
ASSETS:
      
Cash and due from banks:
      
  Noninterest-bearing
 $              9,437
 $         10,091
 $             10,889
  Interest-bearing
                    877
              1,332
                     434
Total cash and cash equivalents
               10,314
            11,423
                11,323
       
Interest bearing time deposits with other banks
                 6,460
              5,960
                  5,712
       
Available-for-sale securities
            300,630
          306,146
              308,283
       
Loans held for sale
                 1,248
                  497
                     753
 
      
Loans (net of allowance for loan losses: $7,045 at September 30, 2015;
    
    $6,815 at December 31, 2014 and $6,816 at September 30, 2014)
            575,964
          547,290
              536,939
 
      
Premises and equipment
               12,544
            12,357
                11,773
Accrued interest receivable
                 3,566
              3,644
                  3,689
Goodwill
               10,256
            10,256
                10,256
Bank owned life insurance
               20,773
            20,309
                15,045
Other assets
               12,222
              7,166
                  9,272
 
 
 
 
TOTAL ASSETS
 $         953,977
 $       925,048
 $           913,045
 
 
 
 
LIABILITIES:
      
Deposits:
      
  Noninterest-bearing
 $         106,957
 $         95,526
 $             94,049
  Interest-bearing
            690,891
          678,407
              673,993
Total deposits
            797,848
          773,933
              768,042
Borrowed funds
               44,657
            41,799
                37,729
Accrued interest payable
                    693
                  756
                     753
Other liabilities
                 6,875
              8,032
                  7,361
TOTAL LIABILITIES
            850,073
          824,520
              813,885
STOCKHOLDERS' EQUITY:
      
Preferred Stock $1.00 par value; authorized
      
  3,000,000 shares; none issued in 2015 or 2014
      
Common stock
      
  $1.00 par value; authorized 15,000,000 shares at September 30, 2015, December 31, 2014 and
  September 30, 2014; issued 3,335,236 shares at September 30, 2015, December 31, 2014 and
  September 30, 2014
                 3,335
              3,335
                  3,335
Additional paid-in capital
               25,131
            25,150
                25,140
Retained earnings
               84,698
            79,512
                77,252
Accumulated other comprehensive income (loss)
                    842
                  767
                  1,513
Treasury stock, at cost:  334,165 shares at September 30, 2015; 296,280 shares at
  
  December 31, 2014 and 293,332 shares at September 30, 2014
            (10,102)
             (8,236)
                (8,080)
TOTAL STOCKHOLDERS' EQUITY
            103,904
          100,528
                99,160
TOTAL LIABILITIES AND
      
   STOCKHOLDERS' EQUITY
 $         953,977
 $       925,048
 $           913,045

 
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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)
2015
2014
2015
2014
INTEREST INCOME:
        
Interest and fees on loans
 $       7,248
 $      7,094
 $     21,416
 $    21,200
Interest-bearing deposits with banks
                33
               25
              103
               51
Investment securities:
        
    Taxable
              798
             805
           2,317
         2,542
    Nontaxable
              749
             844
           2,398
         2,526
    Dividends
                35
               40
              168
             159
TOTAL INTEREST INCOME
           8,863
         8,808
        26,402
       26,478
INTEREST EXPENSE:
        
Deposits
           1,044
         1,092
           3,088
         3,291
Borrowed funds
              174
             142
              521
             451
TOTAL INTEREST EXPENSE
           1,218
         1,234
           3,609
         3,742
NET INTEREST INCOME
           7,645
         7,574
        22,793
       22,736
Provision for loan losses
              120
             150
              360
             480
NET INTEREST INCOME AFTER
        
    PROVISION FOR LOAN LOSSES
           7,525
         7,424
        22,433
       22,256
NON-INTEREST INCOME:
        
Service charges
           1,054
         1,098
           3,058
         3,239
Trust
              149
             151
              523
             528
Brokerage and insurance
              181
             141
              563
             398
Gains on loans sold
                85
               40
              183
             110
Investment securities gains, net
              129
             242
              430
             488
Earnings on bank owned life insurance
              158
             124
              464
             366
Other
              109
             128
              327
             337
TOTAL NON-INTEREST INCOME
           1,865
         1,924
           5,548
         5,466
NON-INTEREST EXPENSES:
        
Salaries and employee benefits
           3,069
         2,790
           9,118
         8,600
Occupancy
              347
             313
           1,064
             967
Furniture and equipment
              108
               86
              323
             280
Professional fees
              202
             207
              614
             649
FDIC insurance
              116
             116
              348
             345
Pennsylvania shares tax
              201
             101
              602
             485
Merger and acquisition
              282
             187
              405
             237
ORE expenses
              328
             106
              686
             243
Other
           1,199
         1,161
           3,455
         3,352
TOTAL NON-INTEREST EXPENSES
           5,852
         5,067
        16,615
       15,158
Income before provision for income taxes
           3,538
         4,281
        11,366
       12,564
Provision for income taxes
              681
             913
           2,200
         2,655
NET INCOME
 $       2,857
 $      3,368
 $       9,166
 $      9,909
 
        
PER COMMON SHARE DATA:
        
Net Income - Basic
 $          0.95
 $        1.11
 $          3.04
 $        3.26
Net Income - Diluted
 $          0.95
 $        1.11
 $          3.03
 $        3.26
Cash Dividends Paid
 $       0.510
 $      1.000
 $       1.320
 $      1.772
         
Number of shares used in computation - basic
   3,011,687
  3,035,214
   3,019,202
  3,038,973
Number of shares used in computation - diluted
   3,013,151
  3,036,700
   3,020,670
  3,040,400

 
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Financial Highlights
        
         
 
Three Months Ended
  
Nine Months Ended
  
 
September 30,
  
September 30,
  
 
2015
2014
2015
2014
Performance Ratios and Share Data:
        
    Return on average assets (annualized)
1.21%
1.48%
1.31%
1.46%
    Return on average equity (annualized)
11.00%
13.59%
11.93%
13.64%
    Net interest margin (tax equivalent)
3.73%
3.84%
3.78%
3.85%
    Cash dividends paid per share
 $                        0.510
 $                       1.000
 $                     1.320
 $            1.772
    Earnings per share - basic
 $                         0.95
 $                         1.11
 $                       3.04
 $              3.26
    Earnings per share - diluted
 $                         0.95
 $                         1.11
 $                       3.03
 $              3.26
Number of shares used in computation - basic
                    3,011,687
                   3,035,214
                 3,019,202
        3,038,973
Number of shares used in computation - diluted
                    3,013,151
                   3,036,700
                 3,020,670
        3,040,400
 
 

Balance Sheet Highlights (dollars in thousands):
September 30, 2015
December 31, 2014
September 30, 2014
       
Assets
 $                   953,977
 $                   925,048
 $                 913,045
Investment securities:
      
    Available for sale
300,630
306,146
308,283
Loans (net of unearned income)
583,009
554,105
543,755
Allowance for loan losses
7,045
6,815
6,816
Deposits
797,848
773,933
768,042
Stockholders' Equity
103,904
100,528
99,160
Non-performing assets
8,416
9,227
9,078
Non-performing assets to total loans
1.44%
1.67%
1.67%
Annualized net charge-offs to total loans
0.03%
0.16%
0.19%
Average Leverage Ratio
10.99%
10.99%
10.78%
Common shares outstanding
                    3,001,071
3,038,956
                 3,041,904
Book value per share
 $                       34.34
 $                       32.83
 $                     32.10

 
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