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
June 30, 2008
QUARTERLY REPORT
Dear Shareholder:
Your company continues to improve its bottom line performance despite the current turmoil in the US and world economies. Net income for the first six months of 2008 is up 56.33%, or $2.5 million over the same period last year. Annualized return on average assets increased to 1.07% and annualized return on average equity increased to 10.16%. The net income enhancements from the acquisition of Citizens Bancorp and its subsidiary Citizens Trust Company, along with a more favorable rate curve, improved other income from deposit account fees and trust services, and the additional contributions from the earnings-enhancement/expense-reduction initiative we implemented in the second half of 2007 have all contributed significantly to the net income improvement.
Management is currently working with a nationally known and an American Bankers Association endorsed “best practices” financial consulting company to further improve future performance. We are very excited about the opportunities for increased revenue and decreased expenses that will result from the implementation of the identified best practices. We will be able to report more in future communications on the positive effects of the changes we will be making.
When the Russell 2000 index was reconstituted on June 27th, CZNC was added. We were first added to the Russell 2000 in June 2006 and then dropped from the index in June 2007. Membership in the index is determined solely on market capitalization. Our addition to the index in 2006 and the subsequent exit in 2007 seemed to result in significant price volatility. Since 2007, the index managers have adopted procedures that are designed to mitigate the price volatility that company stocks experience when being added to or dropped from the index. Despite that, our stock price seemed to be adversely affected by our addition to the index. We cannot determine a specific reason for the price drop. Currently it is widely known that financial stock prices are being affected by the negative news emanating from that market sector. We believe the market should positively receive our financial condition and performance.
Thanks for your continued support.
Craig G. Litchfield
Chairman, President, & CEO
Chairman, President, & CEO
CITIZENS & NORTHERN CORPORATION
BOARD OF DIRECTORS
BOARD OF DIRECTORS
Craig G. Litchfield Chairman of the Board
Dennis F. Beardslee | Raymond R. Mattie | |||
R. Robert DeCamp | Edward H. Owlett, III | |||
Jan E. Fisher | Leonard Simpson | |||
R. Bruce Haner | James E. Towner | |||
Susan E. Hartley | Ann M. Tyler | |||
Leo F. Lambert | Charles H. Updegraff, Jr. | |||
Edward L. Learn |
DIRECTOR EMERITUS
Karl W. Kroeck
CITIZENS & NORTHERN BANK
OFFICES
OFFICES
428 S. Main Street,ATHENS, PA 18810 | 570-888-2291 | |
10 N Main Street,COUDERSPORT,PA 16915 | 814-274-9150 | |
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 | |
135 East Fourth Street,EMPORIUM, PA 15834 | 814-486-1112 | |
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 | |
100 Maple Street,PORT ALLEGANY,PA 16743 | 814-642-2571 | |
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 | ||
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)
(In Thousands, Except Per Share Data) (Unaudited)
2ND | 1ST | 2ND | 6 MONTHS ENDED | |||||||||||||||||
QUARTER | QUARTER | QUARTER | JUNE | |||||||||||||||||
2008 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||
(Current) | (Prior Qtr) | (Prior Yr) | (Current) | (Prior Yr) | ||||||||||||||||
Interest and Dividend Income | $ | 18,373 | $ | 18,700 | $ | 17,692 | $ | 37,073 | $ | 33,935 | ||||||||||
Interest Expense | 7,724 | 8,656 | 8,679 | 16,380 | 16,679 | |||||||||||||||
Interest Margin | 10,649 | 10,044 | 9,013 | 20,693 | 17,256 | |||||||||||||||
Provision for Loan Losses | (376 | ) | 904 | — | 528 | 229 | ||||||||||||||
Interest Margin After Provision for Loan Losses | 11,025 | 9,140 | 9,013 | 20,165 | 17,027 | |||||||||||||||
Other Income | 3,155 | 3,487 | 2,644 | 6,642 | 4,732 | |||||||||||||||
Net Losses on Available-for-sale Securities | (867 | ) | (110 | ) | (1,172 | ) | (977 | ) | (11 | ) | ||||||||||
Other Expenses | 8,257 | 8,464 | 8,189 | 16,721 | 16,436 | |||||||||||||||
Income Before Income Tax Provision | 5,056 | 4,053 | 2,296 | 9,109 | 5,312 | |||||||||||||||
Income Tax Provision | 1,303 | 937 | 360 | 2,240 | 918 | |||||||||||||||
NET INCOME | $ | 3,753 | $ | 3,116 | $ | 1,936 | $ | 6,869 | $ | 4,394 | ||||||||||
PER SHARE DATA: | ||||||||||||||||||||
Net Income — Basic | $ | 0.42 | $ | 0.35 | $ | 0.22 | $ | 0.77 | $ | 0.51 | ||||||||||
Net Income — Diluted | $ | 0.42 | $ | 0.35 | $ | 0.22 | $ | 0.76 | $ | 0.51 | ||||||||||
Dividend Per Share | $ | 0.24 | $ | 0.24 | $ | 0.24 | $ | 0.48 | $ | 0.48 | ||||||||||
Number Shares Used in Computation — Basic | 8,963,552 | 8,974,407 | 8,785,690 | 8,968,999 | 8,582,047 | |||||||||||||||
Number Shares Used in Computation — Diluted | 8,977,540 | 8,991,327 | 8,798,719 | 8,984,398 | 8,597,530 |
CONSOLIDATED BALANCE SHEET
(In Thousands, Except Per Share Data) (Unaudited)
(In Thousands, Except Per Share Data) (Unaudited)
JUNE 30, | MARCH 31, | JUNE 30, | ||||||||||
2008 | 2008 | 2007 | ||||||||||
ASSETS | ||||||||||||
Cash & Due from Banks | $ | 26,202 | $ | 37,479 | $ | 42,814 | ||||||
Trading Securities | 1,770 | 5,350 | 2,514 | |||||||||
Available-for-Sale Securities | 422,590 | 423,235 | 344,283 | |||||||||
Loans, Net | 741,378 | 720,928 | 747,114 | |||||||||
Intangible Assets | 13,116 | 13,272 | 13,758 | |||||||||
Other Assets | 82,004 | 80,033 | 74,500 | |||||||||
TOTAL ASSETS | $ | 1,287,060 | $ | 1,280,297 | $ | 1,224,983 | ||||||
LIABILITIES | ||||||||||||
Deposits | $ | 848,393 | $ | 842,884 | $ | 871,141 | ||||||
Repo Sweep Accounts | 33,959 | 36,894 | 30,004 | |||||||||
Total Deposits and Repo Sweeps | 882,352 | 879,778 | 901,145 | |||||||||
Borrowed Funds | 265,060 | 260,074 | 172,704 | |||||||||
Other Liabilities | 9,174 | 8,731 | 9,641 | |||||||||
TOTAL LIABILITIES | 1,156,586 | 1,148,583 | 1,083,490 | |||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||
Shareholders’ Equity, Excluding Accumulated Other Comprehensive Income/Loss | 146,664 | 145,125 | 143,297 | |||||||||
Accumulated Other Comprehensive Income/ Loss: | ||||||||||||
Net Unrealized Gains/Losses on Available-for-sale Securities | (15,796 | ) | (13,012 | ) | (636 | ) | ||||||
Defined Benefit Plans Adjustment, Net | (394 | ) | (399 | ) | (1,168 | ) | ||||||
TOTAL SHAREHOLDERS’ EQUITY | 130,474 | 131,714 | 141,493 | |||||||||
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY | $ | 1,287,060 | $ | 1,280,297 | $ | 1,224,983 | ||||||
CONSOLIDATED FINANCIAL HIGHLIGHTS
(In Thousands, Except Per Share Data) (Unaudited)
(In Thousands, Except Per Share Data) (Unaudited)
6 MONTHS ENDED | % | |||||||||||
JUNE | INCREASE | |||||||||||
2008 | 2007 | (DECREASE) | ||||||||||
EARNINGS PERFORMANCE | ||||||||||||
Net Income | $ | 6,869 | $ | 4,394 | 56.33 | % | ||||||
Return on Average Assets | 1.07 | % | 0.76 | % | 40.79 | % | ||||||
Return on Average Equity | 10.16 | % | 6.49 | % | 56.55 | % | ||||||
BALANCE SHEET HIGHLIGHTS | ||||||||||||
Total Assets | $ | 1,287,060 | $ | 1,224,983 | 5.07 | % | ||||||
Available-for-sale Securities | 422,590 | 344,283 | 22.74 | % | ||||||||
Loans (Net) | 741,378 | 747,114 | -0.77 | % | ||||||||
Allowance for Loan Losses | 8,446 | 8,922 | -5.34 | % | ||||||||
Deposits and Repo Sweep Accounts | 882,352 | 901,145 | -2.09 | % | ||||||||
Trust Assets Under Management | 624,041 | 666,425 | -6.36 | % | ||||||||
SHAREHOLDERS’ VALUE (PER SHARE) (*) | ||||||||||||
Net Income — Basic | $ | 0.77 | $ | 0.51 | 50.98 | % | ||||||
Net Income — Diluted | 0.76 | 0.51 | 49.02 | % | ||||||||
Dividends | 0.48 | 0.48 | 0.00 | % | ||||||||
Book Value | 14.57 | 15.73 | -7.37 | % | ||||||||
Tangible Book Value | 13.11 | 14.20 | -7.68 | % | ||||||||
Market Value (Last Trade) | 16.56 | 19.56 | -15.34 | % | ||||||||
Market Value / Book Value | 113.66 | % | 124.35 | % | -8.60 | % | ||||||
Market Value / Tangible Book Value | 126.32 | % | 137.75 | % | -8.30 | % | ||||||
Price Earnings Multiple | 10.75 | x | 19.18 | x | -43.95 | % | ||||||
Dividend Yield | 5.80 | % | 4.91 | % | 18.13 | % | ||||||
SAFETY AND SOUNDNESS | ||||||||||||
Tangible Equity / Tangible Assets | 9.21 | % | 10.55 | % | -12.70 | % | ||||||
Nonperforming Assets / | ||||||||||||
Total Assets | 0.45 | % | 0.56 | % | -19.64 | % | ||||||
Allowance for | ||||||||||||
Loan Losses / | ||||||||||||
Total Loans | 1.13 | % | 1.18 | % | -4.24 | % | ||||||
Risk Based Capital Ratio | 16.36 | % | 16.80 | % | -2.62 | % | ||||||
AVERAGE BALANCES | ||||||||||||
Average Assets | 1,281,100 | 1,154,053 | 11.01 | % | ||||||||
Average Equity | 135,162 | 135,311 | -0.11 | % |
(*) | 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. |