Citizens Financial Services, Inc. Reports unaudited Fourth quarter and annual 2016 Earnings

MANSFIELD, PENNSYLVANIA— January 27, 2017 – Citizens Financial Services, Inc. (OTC BB: CZFS), parent company of First Citizens Community Bank, released today its unaudited financial results for the three months and year ended December 31, 2016.

Net income totaled $12.6 million for the year ended December 31, 2016, which compares to net income of $11.6 million last year.  Results for 2015 were impacted by the acquisition of the First National Bank of Fredericksburg (FNB) and related merger and acquisition costs of $1.1 million on a pre-tax basis.  For the year ended December 31, 2016, the provision for loan loss totaled $1,520,000, which compares to $480,000 for the prior year and is primarily attributable to overall loan growth.  Basic earnings per share of $3.78 for the year ended December 31, 2016 compares to $3.79 per share for last year.  Annualized return on equity for the year ended December 31, 2016 and 2015 was 10.24% and 11.20%, while return on assets was 1.06% and 1.22%, respectively.

For the three months ended December 31, 2016, net income totaled $3.2 million which compares to net income of $2.5 million for the fourth quarter of 2015, an increase of $711,000.  Fourth quarter 2015 results were impacted by FNB merger related costs of $698,000 on a pre-tax basis.  The provision for loan loss for the quarter ended December 31, 2016 was $750,000, which compares to $120,000 for the same quarter last year.  Basic earnings per share of $.95 for the fourth quarter of 2016 compares to $.79 per share for the fourth quarter last year.  Annualized return on equity for the three months ended December 31, 2016 and 2015 was 10.12% and 9.12%, while annualized return on assets was 1.05% and .99%, respectively.

Net interest income before the provision for loan loss increased from $30.8 million for the year ended December 31, 2015 to $38.0 million for 2016, an increase of $7,131,000 or 23.1%.  This increase is attributable to loan growth, both from the FNB acquisition and significant organic growth during 2016, particularly in the second half of the year.  The net interest margin has decreased from 3.76% last year to 3.68% for 2016 primarily due to competitive pressures.

CEO and President Randall E. Black stated, "2016 was a very exciting time for our Company.  We were busy integrating the December 2015 acquisition of FNB into First Citizen's culture.  We experienced significant growth as evidenced by the addition of several lending teams, the opening of a loan production office in Winfield, Pennsylvania, and the opening of a new branch location in Mount Joy, Pennsylvania.  Growth and expansion have been a key focus for us.  As a result of this focus the company has begun to achieve this initiative, particularly in loan growth, as total loans have increased over $104.0 million, or 15%.  In the fourth quarter alone, loans increased $48.3 million."

At December 31, 2016, total assets were $1.22 billion which compares to $1.16 billion at December 31, 2015.  Available for sale securities of $314.0 million at December 31, 2016 decreased $45.7 million from December 31, 2015 to fund growth in the loan portfolio.  Net loans have increased $102.8 million compared to the end of last year.  Loan growth has been funded through the decrease in the investment portfolio, a $17.5 million increase in deposits, and an increase in borrowed funds of $38.0 million.

Stockholders' equity totaled $123.3 million at December 31, 2016, which compares to $119.8 million at December 31, 2015, an increase of $3.5 million.  Net income for the year ended December 31, 2016 totaling $12.6 million was offset by cash dividends of $5.5 million and net treasury share purchases of $2.4 million.  As a result of changes in interest rates impacting the fair value of investment securities, accumulated other comprehensive income attributable to the unrealized gain on available for sale investment securities decreased $1.2 million from the end of 2015.  A cash dividend for the fourth quarter of 2016 of $.42 per share was paid on December 30, 2016 to shareholders of record on December 16, 2016, and represents an increase of 2.4% over the regular cash dividend paid a year ago.

Citizens Financial Services, Inc. has nearly 1,700 shareholders, the majority of whom reside in markets where offices are located.

Note: This press release may contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.  These statements are not historical facts; rather, they are statements based on the Company's current expectations regarding its business strategies and their intended results and its future performance.  Forward-looking statements are preceded by terms such as "expects," "believes," "anticipates," "intends" and similar expressions.  Forward-looking statements are not guarantees of future performance.  Numerous risks and uncertainties could cause or contribute to the Company's actual results, performance and achievements to be materially different from those expressed or implied by the forward-looking statements. Factors that may cause or contribute to these differences include, without limitation, changes in general economic conditions, including changes in market interest rates and changes in monetary and fiscal policies of the federal government; legislative and regulatory changes; and other factors disclosed periodically in the Company's filings with the Securities and Exchange Commission.  Because of the risks and uncertainties inherent in forward-looking statements, readers are cautioned not to place undue reliance on them, whether included in this press release or made elsewhere periodically by the Company or on its behalf.  The Company assumes no obligation to update any forward-looking statements except as may be required by applicable law or regulation.

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