EXHIBIT 99.2
90-92 Main Street, P.O. Box 58
Wellsboro, PA 16901
Phone: (570) 724-3411 Fax: (570) 723-8097
E-Mail:cnemail@cnbankpa.com Web Page:http://www.cnbankpa.com
Stock Symbol: CZNC
Wellsboro, PA 16901
Phone: (570) 724-3411 Fax: (570) 723-8097
E-Mail:cnemail@cnbankpa.com Web Page:http://www.cnbankpa.com
Stock Symbol: CZNC
Chartered 1864 | FEDERAL DEPOSIT INSURANCE CORP |
September 30, 2006 | QUARTERLY REPORT |
Dear Shareholder:
Fortunately, the increases in the Fed Funds rate have not continued through the third quarter. This is good news for your company, which has had its costs of funds increase substantially over the past two years. The interest rate curve continues to be flat or slightly inverted providing little opportunity to leverage our capital position with additions to our fixed income securities portfolio.
The operating results for the third quarter are a combination continued successes and diminishing interest rate spread and margin. Since 2005, net loans have grown 4.81% and we have reduced available-for-sale securities by nearly 18%. The loan increase is mostly responsible for the 6.25% ($2.8 million] increase in interest and dividend income. Deposits have not increased significantly and we have reduced borrowings by $54 million. Yet interest expense increased 22.3% [$4.1 million]. The result is a 4.9% [$1.3 million] reduction in the interest margin. We have been able to reduce our provision for loan losses due to the reconciliation of some larger problem credits and improved credit quality. Other income is growing and we were able to supplement operating income with some gains from our equity portfolios.
The Trust and Financial Management Group have increased assets-under-management by 22% to nearly a half a billion dollars. Increased income from that department is responsible for a significant portion of the increase in other income.
First State Bank celebrated a reopening of the expanded South Hornell office on October 4th. The branch was expanded to house a fulltime consumer lender. We believe this move will help grow both loans and deposits for First State.
Craig G. Litchfield Chairman, President & CEO | ||||
CITIZENS & NORTHERN CORPORATION
BOARD OF DIRECTORS
BOARD OF DIRECTORS
Craig G. Litchfield Chairman of the Board
Dennis F. Beardslee | Leo F. Lambert | |
R. Robert DeCamp | Edward L. Learn | |
Jan E. Fisher | Edward H. Owlett, III | |
R. Bruce Haner | Leonard Simpson | |
Susan E. Hartley | James E. Towner | |
Karl W. Kroeck | Ann M. Tyler |
CITIZENS & NORTHERN BANK
OFFICES
OFFICES
428 S. Main Street,ATHENS, PA 18810 | 570-888-2291 | |
111 Main Street,DUSHORE, PA 18614 | 570-928-8124 | |
Main Street,EAST SMITHFIELD, PA 18817 | 570-596-3131 | |
104 Main Street,ELKLAND, PA 16920 | 814-258-5111 | |
230-232 Railroad Street, JERSEY SHORE, PA 17740 | 570-398-4555 | |
102 E. Main Street,KNOXVILLE, PA 16928 | 814-326-4151 | |
Main Street,LAPORTE, PA 18626 | 570-946-4011 | |
Main Street,LIBERTY, PA 16930 | 570-324-2331 | |
1085 S. Main Street,MANSFIELD, PA 16933 | 570-662-1111 | |
RR 2 Box 3036,MONROETON, PA 18832 | 570-265-2157 | |
3461 Rte.405 Highway,MUNCY, PA 17756 | 570-546-6666 | |
Thompson Street,RALSTON, PA 17763 | 570-995-5421 | |
1827 Elmira Street,SAYRE, PA 18840 | 570-888-2220 | |
2 E. Mountain Ave.,SO. WILLIAMSPORT, PA 17702 | 570-601-3016 | |
41 Main Street,TIOGA, PA 16946 | 570-835-5236 | |
428 Main Street,TOWANDA, PA18848 | 570-265-6171 | |
Court House Square,TROY, PA 16947 | 570-297-2159 | |
90-92 Main Street,WELLSBORO, PA 16901 | 570-724-3411 | |
130 Court Street,WILLIAMSPORT, PA 17701 | 570-320-0100 | |
1510 Dewey Ave.,WILLIAMSPORT, PA 17702 | 570-323-9305 | |
Route 6,WYSOX, PA 18854 | 570-265-9148 |
TRUST & FINANCIAL MANAGEMENT GROUP
90-92 Main Street,Wellsboro, PA 16901 | 800-487-8784 | |
428 Main Street,Towanda, PA 18848 | 888-987-8784 | |
503 N. Elmira Street,Sayre, PA 18840 | 888-760-8192 | |
3461 Rte 405 Highway,Muncy, PA 17756 | 570-546-6666 | |
130 Court Street,Williamsport,PA 17701 | 570-601-6000 | |
ACCOUNT SERVICES- 90-92 Main St., Wellsboro, PA 16901 | 800-726-2265 | |
BANKCARD SERVICES- 10 Nichols St., Wellsboro PA 16901 | 800-676-6639 | |
CASH MANAGEMENT / INTERNET BANKING— 10 Nichols St., Wellsboro, PA 16901 | 570-724-0266 | |
www.cnbankpa.com | ||
FUNDS MANAGEMENT— 10 Nichols St., Wellsboro, PA 16901 | 800-577-9397 | |
www.fmt@cnbankpa.com | ||
C&N FINANCIAL SERVICES CORPORATION— 90-92 Main Street, Wellsboro, PA | 866-ASK-CNFS | |
www.cnfinancialservices.com |
CANISTEO VALLEY CORPORATION
3 Main Street, Canisteo, NY 14823 | 607-698-4295 |
FIRST STATE BANK
OFFICES
OFFICES
3 Main Street,CANISTEO, NY14823 | 607-698-4295 | |
6250 County Route 64,HORNELL, NY14843 | 607-324-4081 | |
www.fsbcanisteo.com |
CONSOLIDATED STATEMENT OF INCOME
(In Thousands, Except Per Share Data) (Unaudited)
(In Thousands, Except Per Share Data) (Unaudited)
3 MONTHS ENDED | 9 MONTHS ENDED | |||||||||||||||
SEPT | SEPT | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
(Current) | (Prior Yr) | (Current) | (Prior Yr) | |||||||||||||
Interest and Dividend Income | $ | 16,152 | $ | 15,571 | $ | 47,999 | $ | 45,172 | ||||||||
Interest Expense | 7,833 | 6,426 | 22,677 | 18,538 | ||||||||||||
Interest Margin | 8,319 | 9,145 | 25,322 | 26,634 | ||||||||||||
Provision for Loan Losses | 191 | 375 | 491 | 1,125 | ||||||||||||
Interest Margin After Provision for Loan Losses | 8,128 | 8,770 | 24,831 | 25,509 | ||||||||||||
Other Income | 2,184 | 2,149 | 5,910 | 5,741 | ||||||||||||
Realized Gains on Securities, Net | 1,602 | 393 | 4,250 | 2,388 | ||||||||||||
Other Expenses | 7,640 | 7,303 | 23,459 | 21,604 | ||||||||||||
Income Before Income Tax Provision | 4,274 | 4,009 | 11,532 | 12,034 | ||||||||||||
Income Tax Provision | 1,016 | 722 | 2,255 | 2,154 | ||||||||||||
NET INCOME | $ | 3,258 | $ | 3,287 | $ | 9,277 | $ | 9,880 | ||||||||
PER SHARE DATA (**): | ||||||||||||||||
Net Income — Basic | $ | 0.40 | $ | 0.40 | $ | 1.12 | $ | 1.19 | ||||||||
Net Income — Diluted | $ | 0.39 | $ | 0.39 | $ | 1.12 | $ | 1.18 | ||||||||
Dividend Per Share | $ | 0.24 | $ | 0.23 | $ | 0.72 | $ | 0.69 | ||||||||
Number Shares Used in Computation — Basic | 8,240,036 | 8,297,519 | 8,272,449 | 8,288,502 | ||||||||||||
Number Shares Used in Computation — Diluted | 8,261,940 | 8,365,924 | 8,299,886 | 8,353,004 |
CONSOLIDATED BALANCE SHEET
(In Thousands, Except Per Share Data) (Unaudited)
(In Thousands, Except Per Share Data) (Unaudited)
SEPT. 30, | SEPT. 30, | |||||||
2006 | 2005 | |||||||
ASSETS | ||||||||
Cash & Due from Banks | $ | 21,373 | $ | 31,833 | ||||
Available-for-Sale Securities | 368,481 | 449,059 | ||||||
Loans, Net | 668,348 | 637,646 | ||||||
Intangible Assets | 3,287 | 3,470 | ||||||
Other Assets | 63,798 | 61,591 | ||||||
TOTAL ASSETS | $ | 1,125,287 | $ | 1,183,599 | ||||
LIABILITIES | ||||||||
Deposits | $ | 756,372 | $ | 753,008 | ||||
Repo Sweep Accounts | 27,629 | 29,805 | ||||||
Total Deposits and Repo Sweeps | 784,001 | 782,813 | ||||||
Borrowed Funds | 204,320 | 258,499 | ||||||
Other Liabilities | 7,235 | 10,819 | ||||||
TOTAL LIABILITIES | 995,556 | 1,052,131 | ||||||
SHAREHOLDERS’ EQUITY | ||||||||
Shareholders’ Equity, Excluding Net Unrealized Gains/Losses on Available-for sale Securities | 128,431 | 125,958 | ||||||
Net Unrealized Gains/Losses on Available- for-sale Securities (*) | 1,300 | 5,510 | ||||||
TOTAL SHAREHOLDERS’ EQUITY | 129,731 | 131,468 | ||||||
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY | $ | 1,125,287 | $ | 1,183,599 | ||||
CONSOLIDATED FINANCIAL HIGHLIGHTS
(In Thousands, Except Per Share Data)
(Unaudited)
(In Thousands, Except Per Share Data)
(Unaudited)
9 MONTHS ENDED | % | |||||||||||
SEPT. | INCREASE | |||||||||||
2006 | 2005 | (DECREASE) | ||||||||||
EARNINGS PERFORMANCE | ||||||||||||
Net Income | $ | 9,277 | $ | 9,880 | -6.10 | % | ||||||
Return on Average Assets | 1.09 | % | 1.16 | % | -6.03 | % | ||||||
Return on Average Assets, Excluding Unrealized Gains/Losses on Available-for-Sale Securities (***) | 1.09 | % | 1.17 | % | -6.84 | % | ||||||
Return on Average Equity | 9.49 | % | 9.95 | % | -4.62 | % | ||||||
Return on Average Equity, Excluding Unrealized Gains/Losses on Available-for-Sale Securities (***) | 9.66 | % | 10.62 | % | -9.04 | % | ||||||
BALANCE SHEET HIGHLIGHTS | ||||||||||||
Total Assets | $ | 1,125,287 | $ | 1,183,599 | -4.93 | % | ||||||
Available-for-Sale Securities | 368,481 | 449,059 | -17.94 | % | ||||||||
Loans (Net) | 668,348 | 637,646 | 4.81 | % | ||||||||
Allowance for Loan Losses | 8,095 | 7,643 | 5.91 | % | ||||||||
Deposits and Repo Sweep Accounts | 784,001 | 782,813 | 0.15 | % | ||||||||
Trust Assets Under Management | 494,234 | 404,899 | 22.06 | % | ||||||||
SHAREHOLDERS’ VALUE (PER SHARE) (**) | ||||||||||||
Net Income — Basic | $ | 1.12 | $ | 1.19 | -5.88 | % | ||||||
Net Income — Diluted | $ | 1.12 | $ | 1.18 | -5.08 | % | ||||||
Dividends | $ | 0.72 | $ | 0.69 | 4.35 | % | ||||||
Book Value | $ | 15.80 | $ | 15.83 | -0.19 | % | ||||||
Book Value, Excluding Unrealized Gains/Losses on Available-for- sale Securities (***) | $ | 15.65 | $ | 15.17 | 3.16 | % | ||||||
Market Value (Last Trade) | $ | 22.43 | $ | 26.70 | -15.99 | % | ||||||
Market Value / Book Value | 141.96 | % | 168.67 | % | -15.84 | % | ||||||
Market Value / Book Value, Excluding Unrealized Gains/Losses on Available-for-Sale Securities (***) | 143.32 | % | 176.01 | % | -18.57 | % | ||||||
Price Earnings Multiple | 15.02 | 16.83 | -10.75 | % | ||||||||
Dividend Yield | 4.28 | % | 3.45 | % | 24.06 | % | ||||||
SAFETY AND SOUNDNESS | ||||||||||||
Tangible Equity / Tangible Assets, Excluding Unrealized Gains/Losses on Available-for-Sale Securities (***) | 11.17 | % | 10.45 | % | 6.89 | % | ||||||
Nonperforming Assets / Total Assets | 0.77 | % | 0.63 | % | 22.22 | % | ||||||
Allowance for Loan Losses / Total Loans | 1.20 | % | 1.18 | % | 1.69 | % | ||||||
Risk Based Capital Ratio | 18.22 | % | 17.44 | % | 4.47 | % | ||||||
AVERAGE BALANCES | ||||||||||||
Average Assets | $ | 1,137,968 | $ | 1,136,432 | 0.14 | % | ||||||
Average Assets, Excluding Unrealized Gains/Losses on Available-for-sale Securities | 1,134,580 | 1,123,609 | 0.98 | % | ||||||||
Average Equity | 130,279 | 132,356 | -1.57 | % | ||||||||
Average Equity, Excluding Unrealized Gains/Losses on Available-for-sale Securities | 128,035 | 124,090 | 3.18 | % |
(*) | Net unrealized gains/losses on available-for-sale securities are presented as “Accumulated Other Comprehensive Income” in the annual and quarterly financial statements filed with the Securities and Exchange Commission. | ||
(**) | For purposes of per share calculations, the market value and number of outstanding shares have been retroactively adjusted for the effects of 1% stock dividends issued in January of each year presented. | ||
(***) | Generally accepted accounting principles (“GAAP”) require that available-for-sale securities be reported at fair value, with unrealized gains and losses excluded from earnings and reported separately through shareholders’ equity, net of tax. Management believes there is an inherent mismatch between the income statement and balance sheet related to unrealized gains/losses that may create a material inconsistency in the calculation of earnings-based ratios. Further, the amount of unrealized gains or losses may vary widely from period-to-period, depending on the financial markets as a whole and interest rate movements. Therefore, management has provided these “non-GAAP” ratios because we believe they provide meaningful information for evaluating the Corporation’s financial position and results of operations. |