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 first quarter 2019 financial results

MANSFIELD, PENNSYLVANIA— April 25, 2019 – Citizens Financial Services, Inc. (OTC Pink: CZFS), parent company of First Citizens Community Bank, released today its unaudited consolidated financial results for the three months ended March 31, 2019.

Highlights

·	Net income was $4.4 million for the three months ended March 31, 2019, which is 3.7% higher than the net income for 2018’s comparable period. The effective tax rate for the first three months of 2019 was 15.7% compared to 15.0% in the comparable period in 2018.

·	Net interest income before the provision for loan losses was $11.9 million for the three months ended March 31, 2019, an increase of $495,000, or 4.3%, over the same period a year ago.

·	Net loan growth totaled $8.8 million in the first quarter of 2019, or 3.3% annualized.

·	Return on average equity for the three months (annualized) ended March 31, 2019 was 12.12% compared to 12.62% for the three months (annualized) ended March 31, 2018.

·	Return on average tangible equity for the three months (annualized) ended March 31, 2019 was 14.62% compared to 15.52% for the three months (annualized) ended March 31, 2018. (1)

·	Return on average assets for the three months (annualized) ended March 31, 2019 was 1.22% compared to 1.24% for the three months (annualized) ended March 31, 2018.

Three Months Ended March 31, 2019 Compared to March 31, 2018

For the three months ended March 31, 2019, net income totaled $4,405,000 which compares to net income of $4,247,000 for the first three months of 2018, an increase of $158,000 or 3.7%. Basic earnings per share of $1.26 for first three months of 2019 compares to $1.21 for the 2018 comparable period. Annualized return on equity for the three months ended March 31, 2019 and 2018 was 12.12% and 12.62%, while annualized return on assets was 1.22% and 1.24%, respectively.

Net interest income before the provision for loan loss for the three months ended March 31, 2019 totaled $11,915,000 compared to $11,420,000 for the three months ended March 31, 2018, resulting in an increase of $495,000, or 4.3%. Average interest earning assets increased $72.4 million for the three months ended March 31, 2019 compared to the same period last year. Average loans increased $72.9 million while average investment securities decreased $6.4 million. The tax effected net interest margin for the three months ended March 31, 2019 was 3.62% compared to 3.68% for the same period last year, which was impacted by the increase in the average cost on interest bearing liabilities of 39 bps, to 1.14%.

The provision for loan losses for the three months ended March 31, 2019 was $400,000 compared to $500,000 for the comparable period in 2018, a decrease of $100,000. The decrease in the provision primarily reflects the lower loan growth experienced during the first three months of 2019 compared to 2018.

·	Total non-interest income was $2,033,000 for the three months ended March 31, 2019, which is $127,000 more than for the comparable period last year. The primary driver was an increase in brokerage and insurance commissions of $112,000.

Total non-interest expenses for the three months ended March 31, 2019 totaled $8,322,000 compared to $7,832,000 for the same period last year, which is an increase of $490,000, or 6.3%. Salaries and benefits increased $194,000 primarily due to an increase in benefits costs. Other expenses increased $191,000, which was primarily due to an increase in costs as a result of the decision to terminate a pension plan acquired as part the First National Bank of Fredericksburg acquisition in 2015.

·	The provision for income taxes increased $74,000 when comparing the three months ended March 31, 2019 to the same period in 2018 as a result of an increase in income before income tax of $232,000.

Balance Sheet and Other Information:

·	At March 31, 2019, total assets were $1.45 billion, compared to $1.43 billion at December 31, 2018 and $1.38 billion at March 31, 2018.

·	Available for sale securities of $244.4 million at March 31, 2018 increased $3.4 million from December 31, 2018 and decreased $6.9 million from March 31, 2018. The yield on the investment portfolio increased from 2.48% to 2.69% on a tax equivalent basis.

Net loans as of March 31, 2019 totaled $1.08 billion and increased $8.8 million from December 31, 2018 and $57.7 million from March 31, 2018. Net loan growth was negatively impacted by over $4.0 million of large loan pay-offs and transfers to other real estate owned as the result of a settlement with a customer in bankruptcy. The growth in 2019 was in commercial and agricultural relationships, which continues the trend from 2018.

The allowance for loan losses totaled $13,084,000 at March 31, 2019 which is an increase of $200,000 from December 31, 2018. The increase is due to recording a provision for loan losses of $400,000 and recoveries of $14,000, offset by charge-offs of $214,000, which were primarily related to one relationship, which was settled as part of a bankruptcy proceeding. Annualized net charge-offs as a percent of total loans through March 31, 2019 was .07%. The allowance as a percent of total loans was 1.20% as of March 31, 2019 and 1.19% as of December 31, 2018.

Deposits decreased $3.5 million from December 31, 2018, to $1.18 billion at March 31, 2019, primarily due to timing differences and a municipal customer in our State College office starting a large construction project. Borrowed funds increased $17.1 million from December 31, 2018 to $108.3 million at March 31, 2019. Non-interest-bearing deposits increase $5.0 million at March 31, 2019.

Stockholders’ equity totaled $142.8 million at March 31, 2019, compared to $139.2 million at December 31, 2018, an increase of $3.6 million. The increase was attributable to net income for the three months ended March 31, 2019 totaling $4.4 million, offset by cash dividends for the first quarter totaling $1.6 million and net treasury stock activity of $330,000. 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, improved $1.1 million from December 31, 2018.

Dividend Declared

On March 5, 2019, the Board of Directors declared a cash dividend of $0.445 per share, which was paid on March 29, 2019 to shareholders of record at the close of business on March 15, 2019. The quarterly cash dividend is an increase of 3.2% over the regular cash dividend of $0.431 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.

(1)	See reconciliation of non-gaap measures at the end of the press release

CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(UNAUDITED)
(Dollars in thousands, except per share data)
	As of or For The
	Three Months Ended
	March 31
	2019			2018
Income and Performance Ratios
Net Income	$	4,405		$	4,247
Return on average assets (annualized)		1.22	%		1.24	%
Return on average equity (annualized)		12.12	%		12.62	%
Return on average tangible equity (annualized) (b)		14.62	%		15.52	%
Net interest margin (tax equivalent)		3.62	%		3.68	%
Earnings per share - basic (c)	$	1.26		$	1.21
Earnings per share - diluted (c)	$	1.26		$	1.21
Cash dividends paid per share	$	0.445		$	0.431


Asset quality
Allowance for loan and lease losses	$	13,084		$	11,587
Non-performing assets	$	16,059		$	12,814
Allowance for loan and lease losses/total loans		1.20	%		1.12	%
Non-performing assets to total loans		1.47	%		1.24	%
Annualized net charge-offs to total loans		0.07	%		0.04	%


Equity
Book value per share (c)	$	41.63		$	38.35
Tangible Book value per share (b) (c)	$	34.53		$	31.19
Market Value (Last reported trade of month)	$	64.00		$	62.65
Common shares outstanding		3,498,834			3,481,762
Number of shares used in computation - basic (c)		3,494,010			3,512,552
Number of shares used in computation - diluted (c)		3,494,010			3,512,915


Other
Total Risk Based Capital Ratio (a)		13.59	%		13.09	%
Tier 1 Risk Based Capital Ratio (a)		12.34	%		11.92	%
Common Equity Tier 1 Risk Based Capital Ratio (a)		11.63	%		11.17	%
Leverage Ratio		9.22	%		8.87	%
Average Full Time Equivalent Employees		261.8			261.9
Loan to Deposit Ratio		92.32	%		92.52	%

Balance Sheet Highlights	March 31,		December 31		March 31,
	2019		2018		2018

Assets	$	1,448,054	$	1,430,712	$	1,382,483
Investment securities		244,964		241,526		251,528
Loans (net of unearned income)		1,090,917		1,081,883		1,031,738
Allowance for loan losses		13,084		12,884		11,587
Deposits		1,181,654		1,185,156		1,115,153
Stockholders' Equity		142,845		139,229		129,850

(a) Presented as projected for March 31, 2019 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)

	March 31			December 31			March 31
(in thousands except share data)	2019			2018			2018
ASSETS:
Cash and due from banks:
Noninterest-bearing	$	16,384		$	15,327		$	10,141
Interest-bearing		1,450			1,470			2,334
Total cash and cash equivalents		17,834			16,797			12,475

Interest bearing time deposits with other banks		15,498			15,498			10,532

Equity securities		527			516			188

Available-for-sale securities		244,437			241,010			251,340

Loans held for sale		182			1,127			233

Loans (net of allowance for loan losses: $13,084 at March 31, 2019;
$12,884 at December 31, 2018 and $11,587 at March 31, 2018)		1,077,833			1,068,999			1,020,151

Premises and equipment		16,177			16,273			16,378
Accrued interest receivable		4,769			4,452			4,283
Goodwill		23,296			23,296			23,296
Bank owned life insurance		27,656			27,505			27,035
Other intangibles		1,547			1,623			1,856
Other assets		18,298			13,616			14,716

TOTAL ASSETS	$	1,448,054		$	1,430,712		$	1,382,483

LIABILITIES:
Deposits:
Noninterest-bearing	$	184,988		$	179,971		$	173,124
Interest-bearing		996,666			1,005,185			942,029
Total deposits		1,181,654			1,185,156			1,115,153
Borrowed funds		108,263			91,194			124,121
Accrued interest payable		1,092			1,076			867
Other liabilities		14,200			14,057			12,492
TOTAL LIABILITIES		1,305,209			1,291,483			1,252,633
STOCKHOLDERS' EQUITY:
Preferred Stock $1.00 par value; authorized
3,000,000 shares; none issued in 2019 or 2018		-			-			-
Common stock
$1.00 par value; authorized 25,000,000 shares at March 31, 2019 and December 31, 2018
and 15,000,000 at March 31, 2018: issued 3,904,212 at March 31, 2019 and
December 31, 2018 and 3,869,939 at March 31, 2018		3,904			3,904			3,870
Additional paid-in capital		53,102			53,099			51,113
Retained earnings		102,574			99,727			92,713
Accumulated other comprehensive loss		(2,825	)		(3,921	)		(4,977	)
Treasury stock, at cost: 405,378 at March 31, 2019; 399,616 shares
at December 31, 2018 and 388,177 shares at March 31, 2018		(13,910	)		(13,580	)		(12,869	)
TOTAL STOCKHOLDERS' EQUITY		142,845			139,229			129,850
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY	$	1,448,054		$	1,430,712		$	1,382,483

CITIZENS FINANCIAL SERVICES, INC.
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
	Three Months Ended
	March 31,
(in thousands, except per share data)	2019		2018
INTEREST INCOME:
Interest and fees on loans	$	13,314	$	11,861
Interest-bearing deposits with banks		104		58
Investment securities:
Taxable		1,108		800
Nontaxable		357		527
Dividends		134		137
TOTAL INTEREST INCOME		15,017		13,383
INTEREST EXPENSE:
Deposits		2,314		1,316
Borrowed funds		788		647
TOTAL INTEREST EXPENSE		3,102		1,963
NET INTEREST INCOME		11,915		11,420
Provision for loan losses		400		500
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES		11,515		10,920
NON-INTEREST INCOME:
Service charges		1,099		1,104
Trust		232		251
Brokerage and insurance		293		181
Gains on loans sold		99		72
Equity security gains (losses), net		11		6
Earnings on bank owned life insurance		151		152
Other		148		140
TOTAL NON-INTEREST INCOME		2,033		1,906
NON-INTEREST EXPENSES:
Salaries and employee benefits		5,029		4,835
Occupancy		592		592
Furniture and equipment		155		142
Professional fees		442		399
FDIC insurance		111		100
Pennsylvania shares tax		275		300
Amortization of intangibles		66		76
ORE expenses		107		34
Other		1,545		1,354
TOTAL NON-INTEREST EXPENSES		8,322		7,832
Income before provision for income taxes		5,226		4,994
Provision for income taxes		821		747
NET INCOME	$	4,405	$	4,247

PER COMMON SHARE DATA:
Net Income - Basic	$	1.26	$	1.21
Net Income - Diluted	$	1.26	$	1.21
Cash Dividends Paid	$	0.445	$	0.431

Number of shares used in computation - basic		3,494,010		3,512,552
Number of shares used in computation - diluted		3,494,010		3,512,915

CITIZENS FINANCIAL SERVICES, INC.
QUARTERLY CONDENSED, CONSOLIDATED INCOME STATEMENT INFORMATION
(UNAUDITED)
(in thousands, except share data)			Three Months Ended,
	March 31,		Dec 31			Sept 30			June 30,		March 31,
	2019		2018			2018			2018		2018
Interest income	$	15,017	$	15,088		$	14,259		$	14,028	$	13,383
Interest expense		3,102		2,845			2,489			2,277		1,963
Net interest income		11,915		12,243			11,770			11,751		11,420
Provision for loan losses		400		625			475			325		500
Net interest income after provision for loan losses		11,515		11,618			11,295			11,426		10,920
Non-interest income		2,022		1,997			2,022			1,835		1,900
Investment securities gains (losses), net		11		(20	)		(12	)		7		6
Non-interest expenses		8,322		8,235			7,788			7,702		7,832
Income before provision for income taxes		5,226		5,360			5,517			5,566		4,994
Provision for income taxes		821		845			936			875		747
Net income	$	4,405	$	4,515		$	4,581		$	4,691	$	4,247
Earnings Per Share Basic	$	1.26	$	1.29		$	1.31		$	1.34	$	1.21
Earnings Per Share Diluted	$	1.26	$	1.29		$	1.31		$	1.34	$	1.21

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 March 31,
	2019							2018
	Average				Average			Average				Average
	Balance (1)		Interest		Rate			Balance (1)		Interest		Rate
(dollars in thousands)		$	$			%			$	$			%
ASSETS
Interest-bearing deposits at banks		8,759		7		0.32			8,100		5		0.25
Interest bearing time deposits at banks		15,498		97		2.54			10,311		53		2.11
Investment securities		252,053		1,693		2.69			258,443		1,604		2.48
Loans: (2)(3)(4)
Residential mortgage loans		215,670		2,825		5.31			214,598		2,724		5.15
Construction loans		28,439		357		5.09			17,665		201		4.62
Commercial Loans		401,813		5,423		5.47			388,200		4,978		5.20
Agricultural Loans		334,520		3,739		4.53			283,714		3,037		4.34
Loans to state & political subdivisions		100,922		978		3.93			104,511		916		3.55
Other loans		9,768		184		7.64			9,507		183		7.79
Loans, net of discount (2)(3)(4)		1,091,132		13,506		5.02			1,018,195		12,039		4.79
Total interest-earning assets		1,367,442		15,303		4.54			1,295,049		13,701		4.29
Cash and due from banks		6,741							6,908
Bank premises and equipment		16,263							16,481
Other assets		54,278							54,878
Total non-interest earning assets		77,282							78,267
Total assets		1,444,724							1,373,316
LIABILITIES AND STOCKHOLDERS' EQUITY
Interest-bearing liabilities:
NOW accounts		328,357		578		0.71			325,937		330		0.41
Savings accounts		211,149		184		0.35			185,242		50		0.11
Money market accounts		161,424		505		1.27			145,890		245		0.68
Certificates of deposit		293,385		1,047		1.45			266,275		691		1.05
Total interest-bearing deposits		994,315		2,314		0.94			923,344		1,316		0.58
Other borrowed funds		113,829		788		2.81			138,613		647		1.89
Total interest-bearing liabilities		1,108,144		3,102		1.14			1,061,957		1,963		0.75
Demand deposits		176,989							164,189
Other liabilities		14,199							12,537
Total non-interest-bearing liabilities		191,188							176,726
Stockholders' equity		145,392							134,633
Total liabilities & stockholders' equity		1,444,724							1,373,316
Net interest income				12,201							11,738
Net interest spread (5)						3.40	%						3.54	%
Net interest income as a percentage
of average interest-earning assets						3.62	%						3.68	%
Ratio of interest-earning assets
to interest-bearing liabilities						123	%						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.

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)
	March 31,			December 31,			September 30,			June 30,			March 31,
	2019			2018			2018			2018			2018
Real estate:
Residential	$	214,635		$	215,305		$	213,255		$	213,242		$	215,349
Commercial		334,371			319,265			312,982			309,571			320,381
Agricultural		295,547			284,520			280,569			262,691			248,710
Construction		18,611			33,913			30,262			27,901			22,239
Consumer		9,773			9,858			9,702			9,740			9,672
Other commercial loans		74,323			74,118			72,219			75,002			74,930
Other agricultural loans		43,245			42,186			39,917			42,131			40,396
State & political subdivision loans		100,412			102,718			101,425			99,922			100,061
Total loans		1,090,917			1,081,883			1,060,331			1,040,200			1,031,738
Less allowance for loan losses		13,084			12,884			12,383			11,941			11,587
Net loans	$	1,077,833		$	1,068,999		$	1,047,948		$	1,028,259		$	1,020,151

Past due and non-performing assets

Total Loans past due 30-89 days and still accruing	$	4,470		$	3,308		$	3,127		$	5,143		$	5,660

Non-accrual loans	$	11,700		$	13,724		$	14,530		$	10,931		$	11,433
Loans past due 90 days or more and accruing		64			68			302			1,046			429
Non-performing loans	$	11,764		$	13,792		$	14,832		$	11,977		$	11,862
OREO		4,295			601			628			471			952
Total Non-performing assets	$	16,059		$	14,393		$	15,460		$	12,448		$	12,814



	3 Months			3 Months			3 Months			3 Months			3 Months
	Ended			Ended			Ended			Ended			Ended
Analysis of the Allowance for loan Losses	December 31,			December 31,			September 30,			June 30,			March 31,
(In Thousands)		2018			2018			2018			2018			2018
Balance, beginning of period	$	12,884		$	12,383		$	11,941		$	11,587		$	11,190
Charge-offs		(214	)		(140	)		(48	)		(61	)		(116	)
Recoveries		14			16			15			90			13
Net (charge-offs) recoveries		(200	)		(124	)		(33	)		29			(103	)
Provision for loan losses		400			625			475			325			500
Balance, end of period	$	13,084		$	12,884		$	12,383		$	11,941		$	11,587

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

	As of
	March 31,
	2019			2018
Tangible Equity
Stockholders Equity - GAAP	$	142,845		$	129,850
Accumulated other comprehensive loss		(2,825	)		(4,977	)
Intangible Assets		24,843			25,152
Non-GAAP Tangible Equity		120,827			109,675
Shares outstanding adjusted for June 2018 stock Dividend		3,498,834			3,516,034
Tangible Book value per share	$	34.53		$	31.19

	As of
	March 31,
		2019			2018
Tangible Equity per share
Stockholders Equity - GAAP	$	40.83		$	36.93
Adjustments for accumulated other comprehensive loss		(0.80	)		(1.42	)
Book value per share		41.63			38.35
Adjustments for intangible assets		7.10			7.16
Tangible Book value per share	$	34.53		$	31.19


	As of
	March 31,
		2019			2018
Returin on Average Tangible Equity
Average Stockholders Equity - GAAP	$	141,578		$	130,493
Average Accumulated Other Comprehensive Loss		(3,814	)		(4,140	)
Average Intangible Assets		24,872			25,198
Average Non-GAAP Tangible Equity		120,520			109,435
Net Income	$	4,405		$	4,247
Annualized Return on Average Tangible Equity		14.62	%		15.52	%


	Three Months Ended
	March 31,
Reconciliation of net interest income on fully taxable equivalent basis		2019			2018
Total interest income	$	15,017		$	13,383
Total interest expense		3,102			1,963
Net interest income		11,915			11,420
Tax equivalent adjustment		286			318
Net interest income (fully taxable equivalent)	$	12,201		$	11,738