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 unaudited third quarter 2018 financial results

MANSFIELD, PENNSYLVANIA— October 23, 2018 – Citizens Financial Services, Inc. (OTC Pink: CZFS), parent company of First Citizens Community Bank, released today its unaudited consolidated financial results for the three and nine months ended September 30, 2018.

Highlights

Net income for the first nine months of 2018 was $13.5 million, which is 29.7% higher than net income for the first nine months of 2017. The Tax Cuts and Jobs Act, enacted on December 22, 2017, positively impacted 2018's financial results by lowering the federal corporate income tax rate from 35% to 21% effective January 1, 2018. The effective tax rate for the first nine months of 2018 was 15.9% compared to 22.9% in the comparable period in 2017.

·	Net income was $4.6 million for the three months ended September 30, 2018, which is 25.5% higher than the net income for 2017's comparable period. The effective tax rate for the three months ended September 30, 2018 was 17.0% compared to 23.8% in the comparable period in 2017.

·	Net interest income before the provision for loan losses of $34.9 million for the nine months ended September 30, 2018, which was an increase of $3.9 million, or 12.6%, over the same period a year ago.

·	Net loan growth totaled $58.6 million in the first nine months of 2018, or 7.9% annualized. Growth for 2018, has been impacted by the pay-off of approximately $15.0 million of participation loans, the proceeds of which have been utilized to fund organic growth.

·	Return on average equity for the three and nine months (annualized) ended September 30, 2018 was 13.08% and 13.13% compared to 11.16% and 10.81% for the three and nine months (annualized) ended September 30, 2017.

·	Return on average tangible equity for the three and nine months (annualized) ended September 30, 2018 was 15.92% and 16.06% compared to 13.53% and 13.17% for the three and nine months (annualized) ended September 30, 2017. (See reconciliation of Non-GAAP measures at the end of the press release.)

·	Return on average assets for the three and nine months (annualized) ended September 30, 2018 was 1.30% and 1.30% compared to 1.15% and 1.12% for the three and nine months (annualized) ended September 30, 2017.

Nine Months Ended September 30, 2018 Compared to 2017

For the nine months ended September 30, 2018, net income totaled $13,519,000 which compares to net income of $10,421,000 for the first nine months of 2017, an increase of $3,098,000 or 29.7%. Basic earnings per share of $3.85 for the first nine months of 2018 compares to $2.96 for the first nine months last year. Annualized return on equity for the nine months ended September 30, 2018 and 2017 was 13.13% and 10.81%, while annualized return on assets was 1.30% and 1.12%, respectively.

Net interest income before the provision for loan loss for the nine months ended September 30, 2018 totaled $34,941,000 compared to $31,018,000 for the nine months ended September 30, 2017, resulting in an increase of $3,923,000, or 12.6%. Average interest earning assets increased $148.8 million for the nine months ended September 30, 2018 compared to the same period last year. Average loans increased $170.4 million while average investment securities decreased $25.7 million. The tax effected net interest margin for the nine months ended September 30, 2018 was 3.65% compared to 3.78% for the same period last year. A significant portion of the margin decrease from 2017 to 2018 is attributable to the change in the corporate tax rate from 35% to 21%.

·	The provision for loan losses for the nine months ended September 30, 2018 was $1,300,000 compared to $1,740,000 for the nine months ended September 30, 2017, a decrease of $440,000. The decreased provision primarily reflects the lower level of loan growth experienced during 2018 compared to 2017.

Total non-interest income was $5,758,000 for the nine months ended September 30, 2018, which is $86,000 less than the non-interest income of $5,844,000 for the same period last year. Decreases in security gains and gains on loans sold were offset by increases in service charge income and brokerage and insurance commissions.

Total non-interest expenses for the nine months ended September 30, 2018 totaled $23,322,000 compared to $21,604,000 for the same period last year, which is an increase of $1,718,000, or 8.0%. Salaries and benefits increased $1,221,000 primarily due to merit increases and branch and loan production office expansion in our central and south central market areas. Occupancy expenses increased as a result of branch expansions. The tax effected efficiency ratio for 2018 was 54.84% compared to 54.92% for the comparable 2017 period and was impacted by the change in the corporate tax rate from 35% to 21%.

The provision for income taxes decreased $539,000 when comparing the nine months ended September 30, 2018 to the same period in 2017. The decrease is attributable to the Tax Cuts and Jobs Act, which lowered the statutory tax rate from 35% to 21%, partially offset by an increase in pre-tax income. The effective tax rate for the first nine months of 2018 was 15.9% compared to 22.9% in the comparable period in 2017.

Three Months Ended September 30, 2018 Compared to 2017

For the three months ended September 30, 2018, net income totaled $4,581,000 which compares to net income of $3,650,000 for the comparable period in 2017, an increase of $931,000 or 25.5%. Basic earnings per share of $1.31 for three months ended September 30, 2018 compares to $1.04 for the 2017 comparable period. Annualized return on equity for the three months ended September 30, 2018 and 2017 was 13.08% and 11.16%, while annualized return on assets was 1.30% and 1.15%, respectively.

Net interest income before the provision for loan loss for the three months ended September 30, 2018 totaled $11,770,000 compared to $10,617,000 for the three months ended September 30, 2017, resulting in an increase of $1,153,000, or 10.9%. Average interest earning assets increased $135.4 million for the three months ended September 30, 2018 compared to the same period last year. Average loans increased $151.1 million while average investment securities decreased $21.8 million. The tax effected net interest margin for the three months ended September 30, 2018 was 3.64% compared to 3.79% for the same period last year, which was impacted by the change in tax rates between periods.

·	The provision for loan losses for the three months ended September 30, 2018 was $475,000 compared to $500,000 for comparable period in 2017, a decrease of $25,000. The decreased provision primarily reflects the lower net loan growth experienced during the comparable three months of 2018 to 2017.

·	Total non-interest income was $2,010,000 for the three months September 30, 2018, which is $89,000 more than the comparable period last year. The Company experienced increases in service charges, brokerage and insurance commissions and gains on loans sold were offset be a decrease in Trust fees.

Total non-interest expenses for the three months ended September 30, 2018 totaled $7,788,000 compared to $7,247,000 for the same period last year, which is an increase of $541,000, or 7.5%. Salaries and benefits increased $392,000 primarily due to the increased costs associated with merit increases and branch and loan production office expansion.

·	The provision for income taxes decreased $205,000 when comparing the three months ended September 30, 2018 to the same period in 2017. The effective tax rate for the three months ended September 30, 2018 was 17.0% compared to 23.8% in the comparable period in 2017.

Balance Sheet and Other Information:

·	At September 30, 2018, total assets were $1.41 billion, compared to $1.36 billion at December 31, 2017 and $1.27 billion at September 30, 2017.

·	Available for sale securities of $240.4 million at September 30, 2018 decreased $14.4 million from December 31, 2017 and $23.2 million from September 30, 2017. The decrease was utilized to fund loan growth.

Net loans as of September 30, 2018 totaled $1.05 billion and increased $58.6 million from December 31, 2017 and $151.2 million from September 30, 2017. Net loan growth for the third quarter was $19.7 million. Loan originations remained strong in the third quarter. The growth in 2018 was in commercial and agricultural relationships, which continues the trend from 2017.

The allowance for loan losses totaled $12,383,000 at September 30, 2018 which is an increase of $1,193,000 from December 31, 2017. The increase is due to recording a provision for loan losses of $1,300,000 and recoveries of $118,000, offset by charge-offs of $225,000. Annualized net charge-offs as a percent of total loans through September 30, 2018 was .01%. The allowance as a percent of total loans was 1.17% as of September 30, 2018 compared to 1.12% as of December 31, 2017. During the third quarter, non-performing assets increased $3.0 million primarily due to placing two large agricultural customers on non-accrual status. For the year, non-performing assets have increased $3.6 million.

Deposits increased $69.9 million from December 31, 2017, to $1.17 billion at September 30, 2018. We issued $20.0 million in brokered certificates of deposit in the third quarter of 2018, which facilitated a portion of the deposit growth. The remaining growth was primarily attributable to increases in municipal deposits. Borrowed funds decreased $28.6 million from December 31, 2017 to $86.1 million at September 30, 2018 as a result of the growth in deposits.

Stockholders' equity totaled $134.4 million at September 30, 2018, compared to $129.0 million at December 31, 2017, an increase of $5,389,000. The increase was attributable to net income for the nine months ended September 30, 2018 totaling $13.5 million, offset by cash dividends of $4.6 million. As a result of changes in interest rates impacting the fair value of investment securities, the unrealized loss on available for sale investment securities, net of tax, increased $2.8 million from December 31, 2017.

Dividend Declared

On September 4, 2018, the Board of Directors declared a cash dividend of $0.440 per share, which was paid on September 28, 2018 to shareholders of record at the close of business on September 14, 2018. The quarterly cash dividend is an increase of 3.3% over the regular cash dividend of $0.426 per share declared one year ago, as adjusted for the 1% stock dividend declared in June 2018.

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

CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(UNAUDITED)
(Dollars in thousands, except per share data)
	As of or For The						As of or For The
	Three Months Ended						Nine Months Ended
	September 30						September 30
	2018			2017			2018			2017
Income and Performance Ratios
Net Income	$	4,581		$	3,650		$	13,519		$	10,421
Return on average assets (annualized)		1.30	%		1.15	%		1.30	%		1.12	%
Return on average equity (annualized)		13.08	%		11.16	%		13.13	%		10.81	%
Return on average tangible equity (annualized) (b)		15.92	%		13.53	%		16.06	%		13.17	%
Net interest margin (tax equivalent)		3.64	%		3.79	%		3.65	%		3.78	%
Earnings per share - basic (c)	$	1.31		$	1.04		$	3.85		$	2.96
Earnings per share - diluted (c)	$	1.31		$	1.04		$	3.85		$	2.96
Cash dividends paid per share	$	0.440		$	0.426		$	1.302		$	1.228


Asset quality
Allowance for loan and lease losses	$	12,383		$	10,447		$	12,383		$	10,447
Non-performing assets	$	15,460		$	13,564		$	15,460		$	13,564
Allowance for loan and lease losses/total loans		1.17	%		1.15	%		1.17	%		1.15	%
Non-performing assets to total loans		1.46	%		1.50	%		1.46	%		1.50	%
Annualized net charge-offs to total loans		0.01	%		0.01	%		0.01	%		0.03	%


Equity
Book value per share (c)	$	40.03		$	37.16		$	40.03		$	37.16
Tangible Book value per share (b) (c)	$	32.91		$	30.65		$	32.91		$	30.65
Market Value (Last trade of month)	$	62.55		$	57.00		$	62.55		$	57.00
Common shares outstanding		3,509,142			3,491,511			3,509,142			3,491,511
Number of shares used in computation - basic (c)		3,502,859			3,517,208			3,507,515			3,515,032
Number of shares used in computation - diluted (c)		3,503,020			3,519,493			3,509,676			3,516,906


Other
Total Risk Based Capital Ratio (a)		13.40	%		14.41	%		13.40	%		14.41	%
Tier 1 Risk Based Capital Ratio (a)		12.18	%		13.23	%		12.18	%		13.23	%
Common Equity Tier 1 Risk Based Capital Ratio (a)		11.45	%		12.34	%		11.45	%		12.34	%
Leverage Ratio		9.09	%		9.57	%		9.09	%		9.57	%
Average Full Time Equivalent Employees		260.9			251.8			262.2			253.2
Loan to Deposit Ratio		90.25	%		86.22	%		90.25	%		86.22	%

Balance Sheet Highlights	September 30,		December 31		September 30,
	2018		2017		2017

Assets	$	1,407,880	$	1,361,886	$	1,269,787
Equity and available for sale securities		240,717		254,782		263,588
Loans (net of unearned income)		1,060,331		1,000,525		907,162
Allowance for loan losses		12,383		11,190		10,447
Deposits		1,174,843		1,104,943		1,052,105
Stockholders' Equity		134,400		129,011		129,882

(a) Presented as projected for September 30, 2018 and actual for the remaining period
(b) See reconcilation of Non-GAAP measures at the end of the press release
(c) Prior period amounts were adjusted to reflect stock dividends.

CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)

	September 30,			December 31			September 30,
(in thousands except share data)	2018			2017			2017
ASSETS:
Cash and due from banks:
Noninterest-bearing	$	15,496		$	16,347		$	12,887
Interest-bearing		1,004			2,170			928
Total cash and cash equivalents		16,500			18,517			13,815

Interest bearing time deposits with other banks		14,754			10,283			10,031

Equity securities		291			-			-

Available-for-sale securities		240,426			254,782			263,588

Loans held for sale		960			1,439			1,431

Loans (net of allowance for loan losses: $12,383 at September 30, 2018;
$11,190 at December 31, 2017 and $10,447 at September 30, 2017)		1,047,948			989,335			896,715

Premises and equipment		16,189			16,523			16,624
Accrued interest receivable		4,480			4,196			3,786
Goodwill		23,296			23,296			21,089
Bank owned life insurance		27,350			26,883			26,722
Other intangibles		1,703			1,953			1,872
Other assets		13,983			14,679			14,114

TOTAL ASSETS	$	1,407,880		$	1,361,886		$	1,269,787

LIABILITIES:
Deposits:
Noninterest-bearing	$	173,379		$	171,840		$	154,142
Interest-bearing		1,001,464			933,103			897,963
Total deposits		1,174,843			1,104,943			1,052,105
Borrowed funds		86,097			114,664			73,628
Accrued interest payable		979			897			731
Other liabilities		11,561			12,371			13,441
TOTAL LIABILITIES		1,273,480			1,232,875			1,139,905
STOCKHOLDERS' EQUITY:
Preferred Stock $1.00 par value; authorized
3,000,000 shares; none issued in 2018 or 2017		-			-			-
Common stock
$1.00 par value; authorized 25,000,000 shares at September 30, 2018; 15,000,000 at
December 31, 2017 and September 30, 2017: issued 3,904,212 at September 30, 2018 and 3,869,939
at December 31, 2017 and September 30, 2017		3,904			3,870			3,870
Additional paid-in capital		53,122			51,108			51,091
Retained earnings		96,754			89,982			88,318
Accumulated other comprehensive loss		(6,081	)		(3,398	)		(1,128	)
Treasury stock, at cost: 395,070 at September 30, 2018; 383,065 shares at December 31, 2017
and 378,428 shares at September 30, 2017		(13,299	)		(12,551	)		(12,269	)
TOTAL STOCKHOLDERS' EQUITY		134,400			129,011			129,882
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	1,407,880		$	1,361,886		$	1,269,787

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)	2018			2017		2018			2017
INTEREST INCOME:
Interest and fees on loans	$	12,666		$	10,659	$	36,988		$	30,680
Interest-bearing deposits with banks		94			49		218			129
Investment securities:
Taxable		967			762		2,683			2,341
Nontaxable		425			588		1,426			1,857
Dividends		107			62		355			191
TOTAL INTEREST INCOME		14,259			12,120		41,670			35,198
INTEREST EXPENSE:
Deposits		1,794			1,210		4,695			3,398
Borrowed funds		695			293		2,034			782
TOTAL INTEREST EXPENSE		2,489			1,503		6,729			4,180
NET INTEREST INCOME		11,770			10,617		34,941			31,018
Provision for loan losses		475			500		1,300			1,740
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		11,295			10,117		33,641			29,278
NON-INTEREST INCOME:
Service charges		1,181			1,145		3,455			3,323
Trust		147			187		548			596
Brokerage and insurance		222			154		571			459
Gains on loans sold		170			134		302			383
Equity security gains (losses), net		(4	)		-		9			-
Available for sale security gains (losses), net		(8	)		9		(8	)		204
Earnings on bank owned life insurance		161			166		467			499
Other		141			126		414			380
TOTAL NON-INTEREST INCOME		2,010			1,921		5,758			5,844
NON-INTEREST EXPENSES:
Salaries and employee benefits		4,679			4,287		14,251			13,030
Occupancy		500			475		1,606			1,479
Furniture and equipment		130			159		394			444
Professional fees		267			286		824			854
FDIC insurance		120			95		327			295
Pennsylvania shares tax		250			243		850			767
Amortization of intangibles		74			74		224			223
ORE expenses		246			171		541			343
Other		1,522			1,457		4,305			4,169
TOTAL NON-INTEREST EXPENSES		7,788			7,247		23,322			21,604
Income before provision for income taxes		5,517			4,791		16,077			13,518
Provision for income taxes		936			1,141		2,558			3,097
NET INCOME	$	4,581		$	3,650	$	13,519		$	10,421

PER COMMON SHARE DATA:
Net Income - Basic	$	1.31		$	1.04	$	3.85		$	2.96
Net Income - Diluted	$	1.31		$	1.04	$	3.85		$	2.96
Cash Dividends Paid	$	0.440		$	0.426	$	1.302		$	1.228

Number of shares used in computation - basic		3,502,859			3,517,208		3,507,515			3,515,032
Number of shares used in computation - diluted		3,503,020			3,519,493		3,509,676			3,516,906

CITIZENS FINANCIAL SERVICES, INC.
QUARTERLY CONDENSED, CONSOLIDATED INCOME STATEMENT INFORMATION
(UNAUDITED)
(in thousands, except share data)				Three Months Ended,
	Sept 30			June 30,		March 31,		Dec 31		Sept 30
	2018			2018		2018		2017		2017
Interest income	$	14,259		$	14,028	$	13,383	$	12,895	$	12,120
Interest expense		2,489			2,277		1,963		1,659		1,503
Net interest income		11,770			11,751		11,420		11,236		10,617
Provision for loan losses		475			325		500		800		500
Net interest income after provision for loan losses		11,295			11,426		10,920		10,436		10,117
Non-interest income		2,022			1,835		1,900		1,981		1,912
Investment securities gains (losses), net		(12	)		7		6		831		9
Non-interest expenses		7,788			7,702		7,832		7,710		7,247
Income before provision for income taxes		5,517			5,566		4,994		5,538		4,791
Provision for income taxes		936			875		747		2,934		1,141
Net income	$	4,581		$	4,691	$	4,247	$	2,604	$	3,650
Earnings Per Share Basic	$	1.31		$	1.34	$	1.21	$	0.74	$	1.04
Earnings Per Share Diluted	$	1.31		$	1.34	$	1.21	$	0.74	$	1.04

CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED AVERAGE BALANCES, INTEREST, YIELDS AND RATES, AND NET INTEREST MARGIN ON A FULLY TAX-EQUIVALENT BASIS
(UNAUDITED)
	Three Months Ended September 30,
	2018							2017
	Average				Average			Average				Average
	Balance (1)		Interest		Rate			Balance (1)		Interest		Rate
(dollars in thousands)	$		$		%			$		$		%
ASSETS
Interest-bearing deposits at banks		9,195		5		0.22			8,552		3		0.16
Interest bearing time deposits at banks		14,369		89		2.47			8,953		47		2.07
Investment securities		241,404		1,612		2.67			263,168		1,715		2.61
Loans: (2) (3) (4)
Residential mortgage loans		212,891		2,808		5.23			205,548		2,677		5.17
Construction loans		29,184		355		4.82			26,028		278		4.23
Commercial Loans		382,417		5,098		5.29			327,345		4,296		5.21
Agricultural Loans		314,307		3,489		4.40			230,048		2,501		4.31
Loans to state & political subdivisions		99,807		906		3.60			97,771		1,029		4.18
Other loans		9,618		185		7.65			10,420		205		7.83
Loans, net of discount (2)(3)(4)		1,048,224		12,841		4.86			897,160		10,986		4.86
Total interest-earning assets		1,313,192		14,547		4.39			1,177,833		12,751		4.30
Cash and due from banks		7,039							6,739
Bank premises and equipment		16,266							16,722
Other assets		69,708							64,851
Total non-interest earning assets		93,013							88,312
Total assets		1,406,205							1,266,145
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts		320,574		394		0.49			327,391		295		0.36
Savings accounts		194,110		84		0.17			180,891		49		0.11
Money market accounts		181,449		480		1.05			134,610		178		0.53
Certificates of deposit		271,355		836		1.22			263,065		688		1.04
Total interest-bearing deposits		967,488		1,794		0.74			905,957		1,210		0.53
Other borrowed funds		114,314		695		2.41			61,215		293		1.90
Total interest-bearing liabilities		1,081,802		2,489		0.91			967,172		1,503		0.62
Demand deposits		172,288							153,747
Other liabilities		12,022							14,388
Total non-interest-bearing liabilities		184,310							168,135
Stockholders' equity		140,093							130,838
Total liabilities & stockholders' equity		1,406,205							1,266,145
Net interest income				12,058							11,248
Net interest spread (5)						3.48	%						3.68	%
Net interest income as a percentage
of average interest-earning assets						3.64	%						3.79	%
Ratio of interest-earning assets
to interest-bearing liabilities						121	%						122	%

(1) Averages are based on daily averages.
(2) Includes loan origination and commitment fees.
(3) Tax exempt interest revenue is shown on a tax equivalent basis for proper comparison using
a statutory federal income tax rate of 21% for 2018 and 34% for 2017.
(4) Income on non-accrual loans is accounted for on a cash basis, and the loan balances are included in interest-earning assets.
(5) Interest rate spread represents the difference between the average rate earned on interest-earning assets
and the average rate paid on interest-bearing liabilities.

	Three Months Ended
	September 30,
Reconciliation of net interest income on fully taxable equivalent basis	2018		2017
Total interest income	$	14,259	$	12,120
Total interest expense		2,489		1,503
Net interest income		11,770		10,617
Tax equivalent adjustment		288		631
Net interest income (fully taxable equivalent)	$	12,058	$	11,248

CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED AVERAGE BALANCES, INTEREST, YIELDS AND RATES, AND NET INTEREST MARGIN ON A FULLY TAX-EQUIVALENT BASIS
(UNAUDITED)
	Nine Months Ended September 30,
	2018								2017
	Average					Average			Average					Average
	Balance (1)			Interest		Rate			Balance (1)			Interest		Rate
(dollars in thousands)	$		$			%			$		$			%
ASSETS
Interest-bearing deposits at banks		8,806			14		0.21			8,919			12		0.18
Interest bearing time deposits at banks		11,972			204		2.28			7,740			117		2.03
Investment securities		258,195			4,843		2.50			283,847			5,345		2.51
Loans: (2) (3) (4)
Residential mortgage loans		214,134			8,347		5.21			205,860			7,967		5.17
Construction loans		23,441			829		4.73			26,804			851		4.25
Commercial Loans		387,482			15,273		5.27			323,801			12,688		5.24
Agricultural Loans		298,875			9,812		4.39			200,287			6,467		4.32
Loans to state & political subdivisions		101,189			2,693		3.56			97,139			3,055		4.21
Other loans		9,540			553		7.75			10,403			621		7.98
Loans, net of discount (2)(3)(4)		1,034,661			37,507		4.85			864,294			31,649		4.90
Total interest-earning assets		1,313,634			42,568		4.33			1,164,800			37,123		4.26
Cash and due from banks		6,826								6,650
Bank premises and equipment		16,367								16,871
Other assets		54,849								55,874
Total non-interest earning assets		78,042								79,395
Total assets		1,391,676								1,244,195
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts		325,667			1,127		0.46			322,084			829		0.34
Savings accounts		189,635			185		0.13			178,806			141		0.11
Money market accounts		162,816			1,091		0.90			126,874			469		0.49
Certificates of deposit		268,737			2,292		1.14			262,321			1,959		1.00
Total interest-bearing deposits		946,855			4,695		0.66			890,085			3,398		0.51
Other borrowed funds		126,158			2,034		2.16			58,651			782		1.78
Total interest-bearing liabilities		1,073,013			6,729		0.84			948,736			4,180		0.59
Demand deposits		168,951								152,188
Other liabilities		12,392								14,686
Total non-interest-bearing liabilities		181,343								166,874
Stockholders' equity		137,320								128,585
Total liabilities & stockholders' equity		1,391,676								1,244,195
Net interest income					35,839								32,943
Net interest spread (5)							3.49	%							3.67	%
Net interest income as a percentage
of average interest-earning assets							3.65	%							3.78	%
Ratio of interest-earning assets
to interest-bearing liabilities							122	%							123	%

(1) Averages are based on daily averages.
(2) Includes loan origination and commitment fees.
(3) Tax exempt interest revenue is shown on a tax equivalent basis for proper comparison using
a statutory federal income tax rate of 21% for 2018 and 34% for 2017.
(4) Income on non-accrual loans is accounted for on a cash basis, and the loan balances are included in interest-earning assets.
(5) Interest rate spread represents the difference between the average rate earned on interest-earning assets
and the average rate paid on interest-bearing liabilities.

	Nine Months Ended
	September 30,
Reconciliation of net interest income on fully taxable equivalent basis	2018		2017
Total interest income	$	41,670	$	35,198
Total interest expense		6,729		4,180
Net interest income		34,941		31,018
Tax equivalent adjustment		898		1,925
Net interest income (fully taxable equivalent)	$	35,839	$	32,943

CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED SUMMARY OF LOANS BY TYPE; NON-PERFORMING ASSETS; and ALLOWANCE FOR LOAN LOSSES
(UNAUDITED)
(Excludes Loans Held for Sale)
(In Thousands)
	September 30,			June 30,			March 31,			December 31,			September 30,
	2018			2018			2018			2017			2017
Real estate:
Residential	$	213,255		$	213,242		$	215,349		$	214,479		$	206,389
Commercial		312,982			309,571			320,381			308,084			273,624
Agricultural		280,569			262,691			248,710			239,957			207,052
Construction		30,262			27,901			22,239			13,502			17,074
Consumer		9,702			9,740			9,672			9,944			10,784
Other commercial loans		72,219			75,002			74,930			72,013			56,222
Other agricultural loans		39,917			42,131			40,396			37,809			34,066
State & political subdivision loans		101,425			99,922			100,061			104,737			101,951
Total loans		1,060,331			1,040,200			1,031,738			1,000,525			907,162
Less allowance for loan losses		12,383			11,941			11,587			11,190			10,447
Net loans	$	1,047,948		$	1,028,259		$	1,020,151		$	989,335		$	896,715

Past due and non-performing assets

Total Loans past due 30-89 days and still accruing	$	3,127		$	5,143		$	5,660		$	3,489		$	3,360

Non-accrual loans	$	14,530		$	10,931		$	11,433		$	10,171		$	11,821
Loans past due 90 days or more and accruing		302			1,046			429			555			173
Non-performing loans	$	14,832		$	11,977		$	11,862		$	10,726		$	11,994
OREO		628			471			952			1,119			1,570
Total Non-performing assets	$	15,460		$	12,448		$	12,814		$	11,845		$	13,564



	3 Months			3 Months			3 Months			3 Months			3 Months
	Ended			Ended			Ended			Ended			Ended
Analysis of the Allowance for loan Losses	September 30,			June 30,			March 31,			December 31,			September 30,
(In Thousands)		2018			2018			2018			2017			2017
Balance, beginning of period	$	11,941		$	11,587		$	11,190		$	10,447		$	9,979
Charge-offs		(48	)		(61	)		(116	)		(73	)		(56	)
Recoveries		15			90			13			16			24
Net (charge-offs) recoveries		(33	)		29			(103	)		(57	)		(32	)
Provision for loan losses		475			325			500			800			500
Balance, end of period	$	12,383		$	11,941		$	11,587		$	11,190		$	10,447

CITIZENS FINANCIAL SERVICES, INC.
Reconciliation of GAAP and Non-GAAP Financial Measures
(Dollars in thousands, except per share data)

	As of
	September 30,
	2018			2017

Stockholders Equity - GAAP	$	134,400		$	129,882
Accumulated other comprehensive loss		(6,081	)		(1,128	)
Intangible Assets		24,999			22,961
Non-GAAP Tangible Equity		115,482			108,049
Shares outstanding adjusted for June 2018 stock Dividend		3,509,142			3,525,783
Tangible Book value per share	$	32.91		$	30.65



	As of
	September 30,
		2018			2017
Tangible Equity per share
Stockholders Equity - GAAP	$	38.30		$	36.84
Adjustments for accumulated other comprehensive loss		(1.73	)		(0.32	)
Book value per share		40.03			37.16
Adjustments for intangible assets		7.12			6.51
Tangible Book value per share	$	32.91		$	30.65