Citizens & Northern (CZNC) 8-K C&N Announces Fourth Quarter 2007 Unaudited Financial Results

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

Chartered 1864

FEDERAL DEPOSIT INSURANCE CORP

QUARTERLY REPORT

December 31, 2007

Dear Shareholder:

     As we reflect on the past year, we are excited about new programs, initiatives for product and earnings enhancement and customer service delivery planned for 2008. Although we were not direct participants in the subprime mortgage disaster, we have experienced some indirect effects through the downgrading of some of the insurers of municipal bonds we hold in our portfolio and the market’s general down grading of credits on corporate bonds even when the underlying companies are strong. Those effects are reflected in the $8.4 million drop in the net unrealized losses on available-for-sale securities from the end of last year. We and our advisors believe these issues to be temporary and should not present lasting effects to our balance sheet.

     We ended the year with an increase in quarterly net income and improved loan quality. During 2007, we completed the Citizens Trust Company merger; and implemented computer conversions for both Citizens Trust and First State Bank. Over the last 4 months of 2007, we had a reduction in force of nearly 10% without degrading our service delivery. We have also implemented several cost saving and revenue enhancement initiatives that should result in significant bottom line improvement for coming years.

     During the past year, we upgraded our Internet Banking product, began offering Remote Deposit Capture for our commercial clients saving them time and money, converted all of our offices to remote capture thus reducing the need for two daily courier runs, converted to full Check 21 compliance and began the conversion from expensive frame relay lines to broadband VPN communications for our branch network.

     We are certainly not pleased with our annual Return on Average Assets and Return on Average Equity given our historical performance. However, as evidenced by our improved earnings in the 4th quarter of 2007, we have set in place processes to begin bringing our performance numbers back to the high performance levels we have experienced in the past. We believe the long-range prospects for your company to be bright. We have the talented and committed people to make it happen.

Craig G. Litchfield
Chairman, President & CEO

CITIZENS & NORTHERN CORPORATION
BOARD OF DIRECTORS

Craig G. Litchfield            Chairman of the Board

Dennis F. Beardslee	Edward L. Learn
R. Robert DeCamp	Raymond R. Mattie
Jan E. Fisher	Edward H. Owlett, III
R. Bruce Haner	Leonard Simpson
Susan E. Hartley	James E. Towner
Karl W. Kroeck	Ann M. Tyler
Leo F. Lambert	Charles H. Updegraff Jr.

CITIZENS & NORTHERN BANK
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
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

CITIZENS TRUST COMPANY
a Division of Citizens & Northern Bank
OFFICES

10 N Main Street,COUDERSPORT,PA 16915	814-274-9150
135 East Fourth Street,EMPORIUM, PA 15834	814-486-1112
100 Maple Street,PORT ALLEGANY,PA 16743	814-642-2571
www.citizenstrustcompany.com

FIRST STATE BANK
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)

		4TH		3RD			4TH		YEAR ENDED
		QUARTER		QUARTER			QUARTER		DECEMBER
		2007		2007			2006		2007		2006
		(Current)		(Prior Qtr)			(Prior Yr)		(Current)		(Prior Yr)
Interest and Dividend Income		$	18,228	$	18,058		$	16,463	$	70,221	$	64,462
Interest Expense			8,679		8,551			8,097		33,909		30,774
Interest Margin			9,549		9,507			8,366		36,312		33,688
Provision for Loan Losses			300		—			181		529		672
Interest Margin After Provision for Loan Losses	��		9,249		9,507			8,185		35,783		33,016
Other Income			2,831		2,877			2,385		10,440		8,310
Gains/Losses on Available-for-Sale Securities, Net			206		(68	)		796		127		5,046
Other Expenses			8,156		8,691			8,155		33,283		31,614
Income Before Income Tax Provision			4,130		3,625			3,211		13,067		14,758
Income Tax Provision			948		777			517		2,643		2,772
NET INCOME		$	3,182	$	2,848		$	2,694	$	10,424	$	11,986
PER SHARE DATA (*):
Net Income — Basic		$	0.35	$	0.32		$	0.32	$	1.19	$	1.42
Net Income — Diluted		$	0.35	$	0.32		$	0.32	$	1.19	$	1.42
Dividend Per Share		$	0.24	$	0.24		$	0.24	$	0.96	$	0.96
Number Shares Used in Computation — Basic			8,979,035		8,986,822			8,374,349		8,784,134		8,422,495
Number Shares Used in Computation — Diluted			8,986,248		8,994,805			8,394,570		8,795,366		8,448,169

CONSOLIDATED BALANCE SHEET
(In Thousands, Except Per Share Data) (Unaudited)

	DEC. 31,			SEPT. 30			DEC. 31,
	2007			2007			2006
ASSETS
Cash & Due from Banks	$	31,661		$	21,853		$	27,159
Trading Securities		2,980			2,515			—
Available-for-Sale Securities		432,755			344,310			356,665
Loans, Net		727,082			737,408			679,300
Intangible Assets		13,410			13,606			3,145
Other Assets		75,858			75,339			61,099
TOTAL ASSETS	$	1,283,746		$	1,195,031		$	1,127,368
LIABILITIES
Deposits	$	838,503		$	827,389		$	760,349
Repo Sweep Accounts		35,678			39,829			29,258
Total Deposits and Repo Sweeps		874,181			867,218			789,607
Borrowed Funds		264,454			177,467			199,182
Other Liabilities		7,330			9,963			8,691
TOTAL LIABILITIES		1,145,965			1,054,648			997,480
SHAREHOLDERS’ EQUITY
Shareholders’ Equity, Excluding Accumulated Other Comprehensive Income/Loss		144,838			143,674			129,275
Accumulated Other Comprehensive Income/ Loss:
Net Unrealized Gains/Losses on Available-for-Sale Securities		(6,654	)		(2,130	)		1,794
Defined Benefit Plans Adjustment, Net		(403	)		(1,161	)		(1,181	)
TOTAL SHAREHOLDERS’ EQUITY		137,781			140,383			129,888
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY	$	1,283,746		$	1,195,031		$	1,127,368

CONSOLIDATED FINANCIAL HIGHLIGHTS
(In Thousands, Except Per Share Data) (Unaudited)

	YEAR ENDED						%
	DECEMBER						INCREASE
	2007			2006			(DECREASE)
EARNINGS PERFORMANCE
Net Income	$	10,424		$	11,986			-13.03	%
Return on Average Assets		0.88	%		1.06	%		-16.98	%
Return on Average Equity		7.52	%		9.14	%		-17.72	%
BALANCE SHEET HIGHLIGHTS
Total Assets	$	1,283,746		$	1,127,368			13.87	%
Available-for-Sale Securities		432,755			356,665			21.33	%
Loans (Net)		727,082			679,300			7.03	%
Allowance for Loan Losses		8,859			8,201			8.02	%
Deposits and Repo Sweep Accounts		874,181			789,607			10.71	%
Trust Assets Under Management		659,193			517,775			27.31	%
SHAREHOLDERS’ VALUE (PER SHARE) (*)
Net Income — Basic	$	1.19		$	1.42			-16.20	%
Net Income — Diluted	$	1.19		$	1.42			-16.20	%
Dividends	$	0.96		$	0.96			0.00	%
Book Value	$	15.34		$	15.51			-1.10	%
Tangible Book Value	$	13.85		$	15.13			-8.46	%
Market Value (Last Trade)	$	17.63		$	22.00			-19.86	%
Market Value / Book Value		114.93	%		141.84	%		-18.98	%
Market Value / Tangible Book Value		127.29	%		145.41	%		-12.46	%
Price Earnings Multiple		14.82			15.49			-4.33	%
Dividend Yield		5.45	%		4.36	%		25.00	%
SAFETY AND SOUNDNESS
Tangible Equity / Tangible Assets		9.79	%		11.27	%		-13.13	%
Nonperforming Assets / Total Assets		0.41	%		0.75	%		-45.33	%
Allowance for Loan Losses / Total Loans		1.20	%		1.19	%		0.84	%
Risk Based Capital Ratio		16.48	%		17.97	%		-8.29	%
AVERAGE BALANCES
Average Assets	$	1,179,198		$	1,134,689			3.92	%
Average Equity		138,664			131,082			5.78	%

(*) For purposes of per share calculations, the number of outstanding shares has been retroactively adjusted for the effects of 1% stock dividends issued in January 2008 and 2007.