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Citizens Financial Services, Inc. Reports Fourth Quarter 2013 Earnings

MANSFIELD, Pa., Jan. 24, 2014 /PRNewswire/ -- Citizens Financial Services, Inc. (OTC BB: CZFS), parent company of First Citizens Community Bank, has released its unaudited financial performance for the year ended December 31, 2013.

For the twelve months ended December 31, 2013, net income totaled $13,375,000 which compares to $14,215,000 last year. This represents a decrease of $840,000, or 5.9%. Earnings per share of $4.42 decreased 4.9% from $4.65 per share last year. Annualized return on equity for the comparable periods was 14.89% and 17.48%, while return on assets was 1.51% and 1.62%, respectively. CEO and President Randall E. Black stated, "While not at last year's record level, results for 2013 represent very strong financial performance, are the second highest level of earnings in the history of our organization, and will continue to place us near the top of our peers. Margin compression and increasing regulatory burdens are the primary factors in lower earnings. Despite this, the results support our ongoing efforts to remain a strong, well-capitalized, local community bank committed to serving our communities and customers, as well as providing exceptional shareholder return and value. In the forthcoming year, we will continue to focus on investments in technology and human resources, and new products that will provide greater benefits and service for our customers."

For the three months ended December 31, 2013, net income totaled $3,296,000 which compares to net income of $3,549,000 for the fourth quarter of 2012. This represents a decrease of $253,000, or 7.1%. Earnings per share of $1.09 for the fourth quarter compares to $1.17 last year. Annualized return on equity for the comparable periods was 14.21% and 16.74%, while return on assets was 1.47% and 1.62%, respectively.

Net interest income, before the provision for loan losses, decreased from $30,426,000 for the twelve months ended December 31, 2012 to $29,919,000 for 2013.  The decrease of $507,000, or 1.7%, is reflective of declining margins.  "As the prolonged low interest rate cycle persists, our cash flows continue to be re-invested at lower yields.  We anticipate our strong loan demand towards the end of 2013 will help offset additional margin compression as we utilize future cash flows from our investment portfolio to fund our lending needs.  On a tax equivalent basis, our net interest margin has declined 12 basis points from 3.99% last year to 3.87% this year.  The tax equivalent yields on interest earning assets decreased from 4.91% for 2012 to 4.62% this year.  This has been offset somewhat by reducing our cost of funds, including non-interest bearing deposits, from .97% last year to .80% this year," added Mr. Black. 

At December 31, 2013, total assets were $914.9 million, which was an increase of $32.5 million from total assets of $882.4 million at December 31, 2012.  The investment portfolio and time deposits with other banks increased $9.5 million from year-end 2012.  Net loans of $533.5 million as of the end of December have increased $37.8 million, or 7.6%, compared to December 31, 2012.  Much of the success in loan growth is attributed to expansion into Luzerne and Lackawanna counties via loan production offices.  Even with our growth, asset quality remains strong.  As of December 31, 2013, non-performing assets totaled $10.2 million and represented 1.88% of loans.  This compares to 1.83% as of December 31, 2012.  For 2013, the provision for loan loss was $405,000 which is slightly less than the $420,000 provision recorded last year.  The annualized net charge-offs as a percent of average loans remains very low at .02%.

Stockholders' equity totaled $92.1 million at December 31, 2013, which compares to $89.5 million at December 31, 2012. Excluding accumulated other comprehensive income; stockholders' equity increased $8.4 million since the end of 2012. Net income of $13.4 million was offset by net treasury stock activity of $1.3 million and cash dividends of $3.7 million.  Additionally, the unrealized gain on available for sale investment securities has decreased $6.9 million from last year due to the increase in long-term interest rates which has resulted in a decrease in the fair value of investment securities.  A cash dividend of $.385 per share was paid on December 27, 2013 to shareholders of record on December 19, 2013.  The dividends for the year will total $1.22 per share adjusted for the stock dividend paid earlier this year, which continues to represent an attractive dividend yield.  In addition to the cash and stock dividend issued in 2013, the Board of Directors of Citizens Financial Services accelerated the 2013 first quarter dividend of $.38 per share into the fourth quarter of 2012 due to the significant issues in Washington regarding the very complex fiscal cliff tax issues at that time. 

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.

CITIZENS FINANCIAL SERVICES, INC.



CONSOLIDATED BALANCE SHEET



(UNAUDITED)







December 31

December 31

(in thousands except share data)

2013

2012

ASSETS:



Cash and due from banks:



  Noninterest-bearing

$              8,899

$         12,307

  Interest-bearing

1,184

14,026

Total cash and cash equivalents

10,083

26,333




Interest bearing time deposits with other banks

2,480

-




Available-for-sale securities

317,301

310,252




Loans held for sale

278

1,458




Loans (net of allowance for loan losses: $7,098 at December 31, 2013 and $6,784 at December 31, 2012)



533,514

495,679




Premises and equipment

11,105

11,521

Accrued interest receivable

3,728

3,816

Goodwill

10,256

10,256

Bank owned life insurance

14,679

14,177

Other assets

11,510

8,935




TOTAL ASSETS

$         914,934

$       882,427




LIABILITIES:



Deposits:



  Noninterest-bearing

$           85,585

$         89,494

  Interest-bearing

662,731

647,602

Total deposits

748,316

737,096

Borrowed funds

66,932

46,126

Accrued interest payable

895

1,143

Other liabilities

6,735

8,587

TOTAL LIABILITIES

822,878

792,952

STOCKHOLDERS' EQUITY:



Preferred Stock $1.00 par value; authorized



  3,000,000 shares at December 31, 2013 and December 31, 2012; 



    none issued in 2013 or 2012

-

-

Common stock



  $1.00 par value; authorized 15,000,000 shares at December 31, 2013 and December 30, 2012; issued 3,305,517 shares at December 31, 2013 and 3,161,324 at December 31, 2012





3,306

3,161

Additional paid-in capital

23,562

16,468

Retained earnings

74,325

71,813

Accumulated other comprehensive income (loss)

(1,225)

4,631

Treasury stock, at cost:  290,468 shares at December 31, 2013 and 262,921 shares at December 31, 2012



(7,912)

(6,598)

TOTAL STOCKHOLDERS' EQUITY

92,056

89,475

TOTAL LIABILITIES AND



   STOCKHOLDERS' EQUITY

$         914,934

$       882,427

 

CITIZENS FINANCIAL SERVICES, INC.





CONSOLIDATED STATEMENT OF INCOME





(UNAUDITED)






Three Months Ended

Twelve Months Ended


December 31

December 31

(in thousands, except per share data)

2013

2012

2013

2012

INTEREST INCOME:





Interest and fees on loans

$       7,183

$      7,418

$     28,982

$    29,770

Interest-bearing deposits with banks

13

10

40

21

Investment securities:





    Taxable

917

1,002

3,721

4,521

    Nontaxable

842

909

3,405

3,702

    Dividends

25

22

86

71

TOTAL INTEREST INCOME

8,980

9,361

36,234

38,085

INTEREST EXPENSE:





Deposits

1,213

1,406

5,107

6,113

Borrowed funds

257

367

1,208

1,546

TOTAL INTEREST EXPENSE

1,470

1,773

6,315

7,659

NET INTEREST INCOME

7,510

7,588

29,919

30,426

Provision for loan losses

90

105

405

420

NET INTEREST INCOME AFTER





    PROVISION FOR LOAN LOSSES

7,420

7,483

29,514

30,006

NON-INTEREST INCOME:





Service charges

1,096

1,129

4,299

4,475

Trust

155

172

694

644

Brokerage and insurance

111

87

444

392

Gains on loans sold

207

472

443

759

Investment securities gains, net

56

43

441

604

Earnings on bank owned life insurance

125

129

502

507

Other

118

114

446

456

TOTAL NON-INTEREST INCOME

1,868

2,146

7,269

7,837

NON-INTEREST EXPENSES:





Salaries and employee benefits

2,936

2,892

11,392

11,018

Occupancy 

315

337

1,271

1,265

Furniture and equipment

120

96

492

411

Professional fees

177

190

781

891

FDIC insurance

113

115

450

468

Pennsylvania shares tax

92

161

640

602

Other

1,329

1,154

4,630

4,642

TOTAL NON-INTEREST EXPENSES

5,082

4,945

19,656

19,297

Income before provision for income taxes

4,206

4,684

17,127

18,546

Provision for income taxes

910

1,135

3,752

4,331

NET INCOME

$       3,296

$      3,549

$     13,375

$    14,215






PER COMMON SHARE DATA:





Net Income - Basic

$         1.09

$        1.17

$         4.42

$        4.65

Net Income - Diluted

$         1.09

$        1.17

$         4.42

$        4.65

Cash Dividends Paid 

$       0.385

$      0.654

$       1.222

$      1.505






Number of shares used in computation - basic

3,012,003

3,044,991

3,025,315

3,056,078

Number of shares used in computation - diluted

3,012,228

3,045,435

3,026,485

3,057,720

 

Financial Highlights











Three Months Ended

Twelve Months Ended


December 31,

December 31,


2013

2012

2013

2012

Performance Ratios and Share Data:





    Return on average assets (annualized)

1.47%

1.62%

1.51%

1.62%

    Return on average equity (annualized)

14.21%

16.74%

14.89%

17.48%

    Net interest margin (tax equivalent)

3.78%

3.96%

3.87%

3.99%

    Cash dividends paid per share 

$            0.385

$            0.654

$          1.222

$         1.505

    Earnings per share - basic

$              1.09

$              1.17

$            4.42

$           4.65

    Earnings per share - diluted

$              1.09

$              1.17

$            4.42

$           4.65

Number of shares used in computation - basic

3,012,003

3,044,991

3,025,315

3,056,078

Number of shares used in computation - diluted

3,012,228

3,045,435

3,026,485

3,057,720


























Balance Sheet Highlights (dollars in thousands):

December 31, 2013

December 31, 2012








Assets

$          914,934

$         882,427



Investment securities:





    Available for sale

317,301

310,352



Loans (net of unearned income)

540,612

502,463



Allowance for loan losses

7,098

6,784



Deposits

748,316

737,096



Stockholders' Equity

92,056

89,475



Non-performing assets

10,154

9,189



Non-performing assets to total loans

1.88%

1.83%



Annualized net charge-offs to total loans

0.02%

0.02%



Average Leverage Ratio

10.52%

9.70%



Common shares outstanding

3,015,049

2,898,403



Book value per share

$             30.94

$             27.89



SOURCE Citizens Financial Services, Inc.

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