MANSFIELD, Pa., Oct. 28 /PRNewswire-FirstCall/ -- Citizens Financial Services, Incorporated (BULLETIN BOARD: CZFS) , parent company of First Citizens National Bank, has released its unaudited financial performance for the third quarter of 2008.
CEO and President Randall E. Black stated, "The financial turmoil facing our national economy and the world is unprecedented and represents by far, according to some sources, the most significant financial crisis since the Great Depression. Being a strong and solid local community bank has shielded us from the vast majority of the credit crisis that has impacted the world economy. Even though the current economic crisis affected our financial performance during the third quarter as we recorded charges against income resulting from investments in Freddie Mac preferred stock and a corporate bond of Lehman Brothers, I want to assure you that your company continues to be strong, as can be seen by our core earnings, high capital ratios and commitment to our communities during these uncharted times."
For the three months ended September 30, 2008, net interest income was $5,858,000 compared with $4,825,000 last year, which represents an increase of $1,033,000 or 21.4%. On a year to date basis, net interest income for the nine months ended September 30, 2008 was $16,976,000 compared with $13,773,000 a year ago. This is an increase of $3,203,000, or 23.3%, and is reflective of our strong core bank earnings. Our net interest margin, tax effected, on interest earning assets has improved from 3.76% for the first nine months of 2007 to 4.41% for this year.
Total assets at September 30, 2008 totaled $620.7 million, an increase of $36.6 million from September 30, 2007. Our investment portfolio increased from $117.8 million to $128.2 million, while our net loan portfolio grew $9.6 million to $424.9 million at September 30, 2008. Total deposits have increased significantly, from $464.7 million at September 30, 2007 to $515.0 million as of September 30, 2008 representing an increase of $50.3 million or 10.8%.
As indicated previously, the issues facing our economy have had an impact on our third quarter financial results, just as those issues have impacted many if not all financial institutions throughout the country. In September, as a result of the national economic crisis, we were required to record a $4.1 million other than temporary impairment charge related to our investments in Freddie Mac preferred stock and a Lehman Brothers corporate bond. The after- tax impact for 2008 earnings will be approximately $2.5 million, or $.88 per share. As a result of the Government bailout bill being signed into law on October 3, 2008, the provision in the new bill will allow the Freddie Mac preferred stock to be treated as an ordinary loss, allowing a tax benefit of approximately $1,000,000. However, since the bailout bill was not signed until after September 30, accounting rules do not allow us to recognize the $1,000,000 tax benefit until the fourth quarter. The result of this timing difference of approximately $1,000,000 of net income between the third quarter and fourth quarter is an additional $.35 of earnings per share in the fourth quarter before any operating earnings. Excluding the impairment charge and assuming normal tax rates for the quarter, year to date net income would have been, approximately $6.9 million compared with $4.9 million recorded for the nine months ended September 30, 2007. This is an increase of $2.0 million, or 40.8%.
For the nine months ended September 30, 2008, net income totaled $3,415,000 and earnings per share were $1.20, compared to $4,894,000 of net income and $1.71 earnings per share for the nine months ended September 30, 2007. Return on equity for the comparable periods was 8.93% and 14.08%, while return on assets was .76% and 1.13%, for the respective time periods.
Citizens Financial Services, Inc. remains well capitalized, with an equity-to-assets ratio of 7.6%, versus 8.0% as of September 30, 2007. Book value per share at September 30, 2008 was $17.59 compared with $16.89 last September. In October, a cash dividend of $.24 per share was declared and will be paid on October 31, 2008 to shareholders of record, as of October 17, 2008.
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 16 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) September December 31 September (in thousands except share data) 2008 2007 2007 ASSETS: Cash and due from banks: Noninterest-bearing $26,070 $10,374 $10,468 Interest-bearing 22 15 13 Total cash and cash equivalents 26,092 10,389 10,481 Available-for-sale securities 128,227 120,802 117,787 Loans (net of allowance for loan losses: 2008, $4,287 December 31, 2007, $4,197; and September 30, 2007, $4,112) 424,857 419,182 415,328 Premises and equipment 12,024 12,538 12,627 Accrued interest receivable 2,776 2,522 2,784 Goodwill 8,605 8,605 8,605 Bank owned life insurance 8,639 8,378 8,293 Other assets 9,504 8,613 8,217 TOTAL ASSETS $620,724 $591,029 $584,122 LIABILITIES: Deposits: Noninterest-bearing $59,300 $50,944 $53,867 Interest-bearing 455,652 405,084 410,869 Total deposits 514,952 456,028 464,736 Borrowed funds 52,625 80,348 66,593 Accrued interest payable 2,048 2,199 2,029 Other liabilities 3,625 3,926 4,296 TOTAL LIABILITIES 573,250 542,501 537,654 STOCKHOLDERS' EQUITY: Common stock $1.00 par value; authorized 10,000,000 shares; issued 3,048,290 shares in 2008; 3,020,538 shares at December 31, 2007 and September 30, 2007 3,048 3,020 3,021 Additional paid-in capital 12,979 12,439 12,446 Retained earnings 38,370 37,590 36,399 Accumulated other comprehensive loss (2,631) (348) (1,426) Treasury stock, at cost: 199,575 shares for 2008; 194,883 shares at December 31, 2007; and 185,433 shares at September 30, 2007 (4,292) (4,173) (3,972) TOTAL STOCKHOLDERS' EQUITY 47,474 48,528 46,468 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $620,724 $591,029 $584,122 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) 2008 2007 2008 2007 INTEREST INCOME: Interest and fees on loans $7,793 $7,715 $23,102 $22,611 Interest-bearing deposits with banks 28 4 34 4 Investment securities: Taxable 1,142 1,130 3,391 3,201 Nontaxable 359 242 1,048 691 Dividends 23 88 164 257 TOTAL INTEREST INCOME 9,345 9,179 27,739 26,764 INTEREST EXPENSE: Deposits 2,837 3,366 8,508 10,106 Borrowed funds 545 928 2,030 2,660 TOTAL INTEREST EXPENSE 3,382 4,294 10,538 12,766 NET INTEREST INCOME 5,963 4,885 17,201 13,998 Provision for loan losses 105 60 225 225 NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 5,858 4,825 16,976 13,773 NON-INTEREST INCOME (LOSS): Service charges 944 809 2,591 2,369 Trust 148 123 451 387 Brokerage and insurance 58 37 176 86 Investment securities gains (losses), net (4,089) 24 (4,089) 24 Gain on sales of foreclosed properties 25 - 25 396 Earnings on bank owned life insurance 90 84 261 246 Other 100 101 388 388 TOTAL NON-INTEREST INCOME (LOSS) (2,724) 1,178 (197) 3,896 NON-INTEREST EXPENSES: Salaries and employee benefits 2,196 2,130 6,510 6,256 Occupancy 271 268 866 877 Furniture and equipment 107 137 368 405 Professional fees 156 149 485 469 Other 1,302 1,104 3,656 3,514 TOTAL NON-INTEREST EXPENSES 4,032 3,788 11,885 11,521 Income (loss) before provision for income taxes (898) 2,215 4,894 6,148 Provision for income taxes 154 461 1,479 1,254 NET INCOME (LOSS) $(1,052) $1,754 $3,415 $4,894 Earnings Per Share $(0.37) $0.61 $1.20 $1.71 Cash Dividends Paid Per Share $0.235 $0.225 $0.700 $0.670 Weighted average number of shares outstanding 2,849,546 2,863,298 2,851,889 2,869,867 Financial Highlights (Unaudited - dollars in thousands except per share and ratio data) Three Months Ended Nine Months Ended September 30, 2008 September 30, 2008 2008 2007 2008 2007 Performance Ratios and Share Data: Return on average assets (annualized) -0.69% 1.20% 0.76% 1.13% Return on average equity (annualized) -8.01% 14.85% 8.93% 14.08% Net interest margin (tax equivalent) 4.48% 3.85% 4.41% 3.76% Cash dividends paid per share $0.235 $0.225 $0.700 $0.670 Earnings per share $(0.37) $0.61 $1.20 $1.71 Weighted average shares outstanding 2,849,546 2,863,298 2,851,889 2,869,867 Balance Sheet Highlights September December September (dollars in thousands): 30, 2008 31, 2007 30, 2007 Assets $620,724 $591,029 $584,122 Investment securities: Available for sale 128,227 120,802 117,787 Loans (net of unearned income) 429,145 423,379 419,440 Allowance for loan losses 4,288 4,197 4,112 Deposits 514,952 456,028 464,736 Stockholders' Equity 47,474 48,528 46,468 Non-performing assets 3,937 2,393 2,527 Non-performing assets to total loans 0.92% 0.57% 0.60% Average Leverage Ratio 8.10% 8.20% 8.05% Common shares outstanding 2,848,715 2,825,655 2,835,104 Book value per share $17.59 $17.30 $16.89
