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, 2008 QUARTERLY REPORT
Dear Shareholder:
Net income for the first nine months of 2008 was $7,881,000, or $0.88 per diluted share, an increase of 6.0% over the first nine months of 2007. Pre-tax losses from available-for-sale securities totaled $5,460,000 for the nine month period. The security losses included the effects of impairment charges on pooled trust-preferred securities totaling $4,289,000 and bank stocks totaling $1,878,000. Excluding the after-tax impact of losses on available-for-sale securities, net income per diluted share for the nine months was $1.28, or 54.2% higher than the same period last year.
Pooled trust-preferred securities are long-term instruments, mainly issued by banks, with 30 or more companies included in each pool. The impairment charges on the trust-preferreds resulted from management’s assessment that it is unlikely that all previously anticipated principal and interest will be received on some of the securities. Thus the cost basis of the affected securities was written down to their estimated fair values as of the end of the third quarter.
Excluding the security losses, we have experienced a solid increase in our interest margin after provision for loan losses (+17.3%), and in our other income (+27.5%), which includes a $533,000 gain from redemption of Visa shares, resulting from Visa’s initial public offering. Other expenses have increased only 1.3%. The merger with Citizens Trust Company has contributed significantly to the revenue improvements. Staffing reductions due to our recent reorganization have helped us maintain salaries and benefits relatively even with 2007, when Citizens Trust’s employees were not included for the first four months of the year.
Despite the securities losses that are due, in large part, to the current national and international economic chaos, your company’s earnings power and capital ratios remain strong.
The recent structural reorganization, revenue enhancements and expense containments and reductions we have put into place should position us to weather the current economic storm.
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 | |||
1827 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
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)
3RD | 2ND | 3RD | 9 MONTHS ENDED | |||||||||||||||||
QUARTER | QUARTER | QUARTER | SEPT. | |||||||||||||||||
2008 | 2008 | 2007 | 2008 | 2007 | ||||||||||||||||
(Current) | (Prior Qtr) | (Prior Yr) | (Current) | (Prior Yr) | ||||||||||||||||
Interest and Dividend Income | $ | 18,575 | $ | 18,373 | $ | 18,058 | $ | 55,648 | $ | 51,993 | ||||||||||
Interest Expense | 7,474 | 7,724 | 8,551 | 23,854 | 25,230 | |||||||||||||||
Interest Margin | 11,101 | 10,649 | 9,507 | 31,794 | 26,763 | |||||||||||||||
Provision (Credit) for Loan Losses | 141 | (376 | ) | — | 669 | 229 | ||||||||||||||
Interest Margin After Provision for Loan Losses | 10,960 | 11,025 | 9,507 | 31,125 | 26,534 | |||||||||||||||
Other Income | 3,062 | 3,155 | 2,877 | 9,704 | 7,609 | |||||||||||||||
Net (Losses) on Available-for-sale Securities | (4,483 | ) | (867 | ) | (68 | ) | (5,460 | ) | (79 | ) | ||||||||||
Other Expenses | 8,736 | 8,257 | 8,691 | 25,457 | 25,127 | |||||||||||||||
Income Before Income Tax (Credit) Provision | 803 | 5,056 | 3,625 | 9,912 | 8,937 | |||||||||||||||
Income Tax (Credit) Provision | (209 | ) | 1,303 | 777 | 2,031 | 1,695 | ||||||||||||||
NET INCOME | $ | 1,012 | $ | 3,753 | $ | 2,848 | $ | 7,881 | $ | 7,242 | ||||||||||
PER SHARE DATA: | ||||||||||||||||||||
Net Income — Basic | $ | 0.11 | $ | 0.42 | $ | 0.32 | $ | 0.88 | $ | 0.83 | ||||||||||
Net Income — Diluted | $ | 0.11 | $ | 0.42 | $ | 0.32 | $ | 0.88 | $ | 0.83 | ||||||||||
Dividend Per Share | $ | 0.24 | $ | 0.24 | $ | 0.24 | $ | 0.72 | $ | 0.72 | ||||||||||
Number Shares Used in Computation — Basic | 8,957,774 | 8,963,552 | 8,986,822 | 8,965,230 | 8,743,490 | |||||||||||||||
Number Shares Used in Computation — Diluted | 8,986,253 | 8,977,540 | 8,994,805 | 8,985,211 | 8,756,013 |
CONSOLIDATED BALANCE SHEET
(In Thousands, Except Per Share Data) (Unaudited)
(In Thousands, Except Per Share Data) (Unaudited)
SEPT. 30, | JUNE 30, | SEPT. 30, | ||||||||||
2008 | 2008 | 2007 | ||||||||||
ASSETS | ||||||||||||
Cash & Due from Banks | $ | 23,160 | $ | 26,202 | $ | 21,853 | ||||||
Trading Securities | 1,630 | 1,770 | 2,515 | |||||||||
Available-for-Sale Securities | 417,761 | 422,589 | 344,310 | |||||||||
Loans, Net | 748,909 | 741,377 | 737,408 | |||||||||
Intangible Assets | 12,978 | 13,116 | 13,606 | |||||||||
Other Assets | 84,459 | 82,007 | 75,339 | |||||||||
TOTAL ASSETS | $ | 1,288,897 | $ | 1,287,061 | $ | 1,195,031 | ||||||
LIABILITIES | ||||||||||||
Deposits | $ | 856,576 | $ | 848,393 | $ | 827,389 | ||||||
Repo Sweep Accounts | 40,150 | 33,959 | 39,829 | |||||||||
Total Deposits and Repo Sweeps | 896,726 | 882,352 | 867,218 | |||||||||
Borrowed Funds | 261,895 | 265,060 | 177,467 | |||||||||
Other Liabilities | 8,202 | 9,175 | 9,963 | |||||||||
TOTAL LIABILITIES | 1,166,823 | 1,156,587 | 1,054,648 | |||||||||
SHAREHOLDERS’ EQUITY | ||||||||||||
Shareholders’ Equity, Excluding Accumulated Other Comprehensive Income/Loss | 145,336 | 146,664 | 143,674 | |||||||||
Accumulated Other Comprehensive Income/ Loss: | ||||||||||||
Net Unrealized Gains/Losses on Available-for-sale Securities | (23,149 | ) | (15,796 | ) | (2,130 | ) | ||||||
Defined Benefit Plans Adjustment, Net | (113 | ) | (394 | ) | (1,161 | ) | ||||||
TOTAL SHAREHOLDERS’ EQUITY | 122,074 | 130,474 | 140,383 | |||||||||
TOTAL LIABILITIES & SHAREHOLDERS’ EQUITY | $ | 1,288,897 | $ | 1,287,061 | $ | 1,195,031 | ||||||
CONSOLIDATED FINANCIAL HIGHLIGHTS
(In Thousands, Except Per Share Data) (Unaudited)
(In Thousands, Except Per Share Data) (Unaudited)
9 MONTHS ENDED | % | |||||||||||
SEPT. | INCREASE | |||||||||||
2008 | 2007 | (DECREASE) | ||||||||||
EARNINGS PERFORMANCE | ||||||||||||
Net Income | $ | 7,881 | $ | 7,242 | 8.82 | % | ||||||
Return on Average Assets | 0.82 | % | 0.83 | % | -1.20 | % | ||||||
Return on Average Equity | 7.97 | % | 7.02 | % | 13.53 | % | ||||||
BALANCE SHEET HIGHLIGHTS | ||||||||||||
Total Assets | $ | 1,288,897 | $ | 1,195,031 | 7.85 | % | ||||||
Available-for-sale Securities | 417,761 | 344,310 | 21.33 | % | ||||||||
Loans (Net) | 748,909 | 737,408 | 1.56 | % | ||||||||
Allowance for Loan Losses | 8,498 | 8,709 | -2.42 | % | ||||||||
Deposits and Repo Sweep Accounts | 896,726 | 867,218 | 3.40 | % | ||||||||
Trust Assets Under Management | 602,072 | 682,428 | -11.78 | % | ||||||||
SHAREHOLDERS’ VALUE (PER SHARE)(*) | ||||||||||||
Net Income — Basic | $ | 0.88 | $ | 0.83 | 6.02 | % | ||||||
Net Income — Diluted | 0.88 | 0.83 | 6.02 | % | ||||||||
Dividends | 0.72 | 0.72 | 0.00 | % | ||||||||
Book Value | 13.65 | 15.63 | -12.67 | % | ||||||||
Tangible Book Value | 12.20 | 14.12 | -13.60 | % | ||||||||
Market Value (Last Trade) | 21.55 | 18.37 | 17.31 | % | ||||||||
Market Value / Book Value | 157.88 | % | 117.53 | % | 34.33 | % | ||||||
Market Value / Tangible Book Value | 176.64 | % | 130.10 | % | 35.77 | % | ||||||
Price Earnings Multiple | 18.37 | x | 16.60 | x | 10.66 | % | ||||||
Dividend Yield | 4.45 | % | 5.23 | % | -14.91 | % | ||||||
SAFETY AND SOUNDNESS | ||||||||||||
Tangible Equity / Tangible Assets | 8.55 | % | 10.73 | % | -20.32 | % | ||||||
Nonperforming Assets / Total Assets | 0.73 | % | 0.58 | % | 26.12 | % | ||||||
Allowance for Loan Losses / Total Loans | 1.12 | % | 1.17 | % | -4.27 | % | ||||||
Risk Based Capital Ratio | 16.39 | % | 16.87 | % | -2.85 | % | ||||||
AVERAGE BALANCES | ||||||||||||
Average Assets | 1,285,959 | 1,167,740 | 10.12 | % | ||||||||
Average Equity | 131,853 | 137,507 | -4.11 | % |
(*) | 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. |