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 |
| March 31, 2008 | | QUARTERLY REPORT | | |
Dear Shareholder:
We are pleased to report the results for the first quarter of 2008. Net income per share is up 20.69% over the same period last year and comparable to the results for the fourth quarter of 2007. The revenue enhancements and cost reduction strategies combined with the additional earning capacity derived from the Citizens Trust Company merger are paying off.
With some improvement in the yield curve and the added earning assets from the merger, net interest income increased by $1.8 million, or 21.8%. Two notable noninterest income increases occurred in the Trust and Financial Management Group (TFMG) income, up 28.6%, and service charges and fees on deposit accounts, up 96.3%. We, also, recognized a gain of $533,000 from redemption of Visa stock. The deterioration of two commercial loans required a $904 thousand provision for loan losses. Nevertheless, our nonperforming assets to total assets decreased to 0.59%.
Other expenses increased only 2.63%. Most of the increase is due to higher occupancy expense and an increase in the Pennsylvania Shares Tax due to the merger. Salary and wages and employee benefit expenses increased only 1.3% due mainly to a nearly 10% reduction in our work force.
The TFMG’s assets under management increased 20.45% resulting from the addition of Citizens Trust Company assets under management, market value appreciation and new business. The TFMG has developed and is implementing marketing strategies to attract new retirement planning, estate planning and trust business.We would love to talk to you about your needs in any or all of these areas.
Our IT and MIS personnel are helping reduce our operating costs through rapid implementation of remote branch and customer capture, conversions of branch communications from expensive frame relay to Internet VPN, continued support and enhancement of our core operating systems and the development of a new deposit product that we will introduce by the end of June.
We expect to report additional positive results throughout 2008. Thank you for your continued support.
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)
| | | | | | | | | | | | | |
| | | 1ST | | 4TH | | 1ST |
| | | QUARTER | | QUARTER | | QUARTER |
| | | 2008 | | 2007 | | 2007 |
| | | (Current) | | (Prior Qtr) | | (Prior Yr) |
| Interest and Dividend Income | | $ | 18,700 | | | $ | 18,228 | | | $ | 16,243 | |
| Interest Expense | | | 8,656 | | | | 8,679 | | | | 8,000 | |
| |
| Interest Margin | | | 10,044 | | | | 9,549 | | | | 8,243 | |
| Provision for Loan Losses | | | 904 | | | | 300 | | | | 229 | |
| |
| Interest Margin After Provision for Loan Losses | | | 9,140 | | | | 9,249 | | | | 8,014 | |
| Other Income | | | 3,487 | | | | 2,831 | | | | 2,088 | |
| Net (Losses) Gains on Available-for-sale Securities | | | (110 | ) | | | 206 | | | | 1,161 | |
| Other Expenses | | | 8,464 | | | | 8,156 | | | | 8,247 | |
| |
| Income Before Income Tax Provision | | | 4,053 | | | | 4,130 | | | | 3,016 | |
| Income Tax Provision | | | 937 | | | | 948 | | | | 558 | |
| |
| | | | | | | | | | | | | |
NET INCOME | | $ | 3,116 | | | $ | 3,182 | | | $ | 2,458 | |
| |
| | | | | | | | | | | | | |
PER SHARE DATA (*): | | | | | | | | | | | | |
| Net Income — Basic | | $ | 0.35 | | | $ | 0.35 | | | $ | 0.29 | |
| Net Income — Diluted | | $ | 0.35 | | | $ | 0.35 | | | $ | 0.29 | |
| Dividend Per Share | | $ | 0.24 | | | $ | 0.24 | | | $ | 0.24 | |
| Number Shares Used in Computation — Basic | | | 8,974,407 | | | | 8,979,035 | | | | 8,376,139 | |
| Number Shares Used in Computation — Diluted | | | 8,991,327 | | | | 8,986,248 | | | | 8,394,165 | |
CONSOLIDATED BALANCE SHEET
(In Thousands, Except Per Share Data) (Unaudited)
| | | | | | | | | | | | | |
| | | MARCH 31, | | DEC. 31, | | MARCH 31, |
| | | 2008 | | 2007 | | 2007 |
ASSETS | | | | | | | | | | | | |
| Cash & Due from Banks | | $ | 37,479 | | | $ | 31,661 | | | $ | 23,548 | |
| Trading Securities | | | 5,350 | | | | 2,980 | | | | 1,528 | |
| Available-for-sale Securities | | | 423,235 | | | | 432,755 | | | | 342,780 | |
| Loans, Net | | | 720,928 | | | | 727,082 | | | | 687,661 | |
| Intangible Assets | | | 13,272 | | | | 13,410 | | | | 3,124 | |
| Other Assets | | | 80,033 | | | | 75,858 | | | | 62,318 | |
| |
TOTAL ASSETS | | $ | 1,280,297 | | | $ | 1,283,746 | | | $ | 1,120,959 | |
| |
| | | | | | | | | | | | | |
LIABILITIES | | | | | | | | | | | | |
| Deposits | | $ | 842,884 | | | $ | 838,503 | | | $ | 770,158 | |
| Repo Sweep Accounts | | | 36,894 | | | | 35,678 | | | | 27,367 | |
| |
| Total Deposits and Repo Sweeps | | | 879,778 | | | | 874,181 | | | | 797,525 | |
| Borrowed Funds | | | 260,074 | | | | 264,454 | | | | 182,902 | |
| Other Liabilities | | | 8,731 | | | | 7,330 | | | | 10,767 | |
| |
TOTAL LIABILITIES | | | 1,148,583 | | | | 1,145,965 | | | | 991,194 | |
| |
| | | | | | | | | | | | | |
SHAREHOLDERS’ EQUITY | | | | | | | | | | | | |
| Shareholders’ Equity, Excluding Accumulated Other Comprehensive/Loss | | | 145,125 | | | | 144,838 | | | | 129,500 | |
| Accumulated Other Comprehensive Income/ Loss: | | | | | | | | | | | | |
| Net Unrealized Gains/Losses on Available- for-sale Securities | | | (13,012 | ) | | | (6,654 | ) | | | 1,440 | |
| Defined Benefit Plans | | | (399 | ) | | | (403 | ) | | | (1,175 | ) |
| |
TOTAL SHAREHOLDERS’ EQUITY | | | 131,714 | | | | 137,781 | | | | 129,765 | |
| |
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY | | $ | 1,280,297 | | | $ | 1,283,746 | | | $ | 1,120,959 | |
| |
CONSOLIDATED FINANCIAL HIGHLIGHTS
(In Thousands, Except Per Share Data) (Unaudited)
| | | | | | | | | | | | | |
| | | 3 MONTHS ENDED | | % |
| | | MARCH | | INCREASE |
| | | 2008 | | 2007 | | (DECREASE) |
EARNINGS PERFORMANCE | | | | | | | | | | | | |
| Net Income | | $ | 3,116 | | | $ | 2,458 | | | | 26.77 | % |
| Return on Average Assets | | | 0.98 | % | | | 0.88 | % | | | 11.36 | % |
| Return on Average Equity | | | 9.13 | % | | | 7.50 | % | | | 21.73 | % |
| | | | | | | | | | | | | |
BALANCE SHEET HIGHLIGHTS | | | | | | | | | | | | |
| Total Assets | | $ | 1,280,297 | | | $ | 1,120,959 | | | | 14.21 | % |
| Available-for-Sale Securities | | | 423,235 | | | | 342,780 | | | | 23.47 | % |
| Loans (Net) | | | 720,928 | | | | 687,661 | | | | 4.84 | % |
| Allowance for Loan Losses | | | 8,948 | | | | 8,338 | | | | 7.32 | % |
| Deposits and Repo Sweep Accounts | | | 879,778 | | | | 797,525 | | | | 10.31 | % |
| | | | | | | | | | | | | |
| Trust Assets Under Management | | | 634,489 | | | | 526,747 | | | | 20.45 | % |
| | | | | | | | | | | | | |
SHAREHOLDERS’ VALUE (PER SHARE) (*) | | | | | | | | | | | | |
| Net Income — Basic | | $ | 0.35 | | | $ | 0.29 | | | | 20.69 | % |
| Net Income — Diluted | | $ | 0.35 | | | $ | 0.29 | | | | 20.69 | % |
| Dividends | | $ | 0.24 | | | $ | 0.24 | | | | 0.00 | % |
| Book Value | | $ | 14.70 | | | $ | 15.51 | | | | -5.22 | % |
| Tangible Book Value | | $ | 13.22 | | | $ | 15.14 | | | | -12.68 | % |
| Market Value (Last Trade) | | $ | 19.83 | | | $ | 20.60 | | | | -3.74 | % |
| Market Value / Book Value | | | 134.90 | % | | | 132.82 | % | | | 1.57 | % |
| Market Value / Tangible Book Value | | | 150.00 | % | | | 136.06 | % | | | 10.24 | % |
| Price Earnings Multiple | | | 14.16 | | | | 17.76 | | | | -20.27 | % |
| Dividend Yield | | | 4.84 | % | | | 4.66 | % | | | 3.86 | % |
| | | | | | | | | | | | | |
SAFETY AND SOUNDNESS | | | | | | | | | | | | |
| Tangible Equity / Tangible Assets | | | 9.35 | % | | | 11.33 | % | | | -17.48 | % |
| Nonperforming Assets / Total Assets | | | 0.59 | % | | | 0.72 | % | | | -18.06 | % |
| Allowance for Loan Losses / Total Loans | | | 1.23 | % | | | 1.20 | % | | | 2.50 | % |
| Risk Based Capital Ratio | | | 16.63 | % | | | 17.44 | % | | | -4.64 | % |
| | | | | | | | | | | | | |
AVERAGE BALANCES | | | | | | | | | | | | |
| Average Assets | | $ | 1,277,224 | | | $ | 1,116,027 | | | | 14.44 | % |
| Average Equity | | | 136,566 | | | | 131,108 | | | | 4.16 | % |
| | |
| (*) | | 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 2008 and 2007. |
