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 | | |
| | Member | |
| | | FEDERAL DEPOSIT INSURANCE CORP |
| December 31, 2009 | QUARTERLY REPORT | |
Dear Shareholder:
I am pleased to report net income of $4.2 million for the fourth quarter of 2009, or 95% higher than the fourth quarter of 2008. Net income for 2009 is a net loss of $40.8 million compared to 2008 net income of $10.1 million. As previously reported, 2009 net income was adversely effected by other-than-temporary impairment (OTTI) charges on available-for-sale securities.
Earnings per share were 42 cents for the fourth quarter and the Board of Directors has declared an 8 cents per share cash dividend for shareholders of record on February 1, 2010 and payable February 12, 2010.
While many financial institutions have failed to raise capital in a tough equity market, Citizens & Northern Corporation completed a successful common stock offering during the fourth quarter that raised $21.4 million net of fees.
Craig G. Litchfield, chairman, president and chief executive officer retired December 31, 2009 after 37 years of loyal and dedicated service to Citizens & Northern Bank. We wish Craig the best as he enters retirement.
It is the support from each of you and the dedication of our employees that caused us to grow deposits and realize solid core earnings during the past year. For this we are very grateful and assure you that Citizens & Northern Corporation will leave this recessionary economic cycle as the financial institution you have been proud of and loyal to for generations.
I am encouraged by our fourth quarter results and solicit your support as we strive to enhance shareholder value.
Charles H. Updegraff, Jr.
President and
Chief Executive Officer
CITIZENS & NORTHERN CORPORATION
BOARD OF DIRECTORS
Craig G. Litchfield Chairman of the Board
| Dennis F. Beardslee | Raymond R. Mattie |
| Jan E. Fisher | Edward H. Owlett, III |
| R. Bruce Haner | Leonard Simpson |
| Susan E. Hartley | James E. Towner |
| Leo F. Lambert | Ann M. Tyler |
| Edward L. Learn | Charles H. Updegraff, Jr. |
| R. Robert DeCamp | Karl W. Kroeck |
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 |
514 Main Street, LAPORTE, PA 18626 | | 570-946-4011 |
4534 Williamson Trail 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 |
10 N Main Street, Coudersport, PA 16915 | 800-921-9150 |
135 East Fourth Street, Emporium, PA 15834 | 814-486-1112 |
| ACCOUNT SERVICES - 90-92 Main St., Wellsboro, PA 16901 | |
| BANKCARD SERVICES - 10 Nichols St., Wellsboro PA 16901 | 800-577-8001 |
ELECTRONIC BANKING – 10 Nichols St., Wellsboro, PA 16901 | 800-577-9397 |
C&N FINANCIAL SERVICES CORPORATION – 90-92 Main Street, Wellsboro, PA www.cnfinancialservices.com | 866-ASK-CNFS |
3 Main Street, CANISTEO, NY 14823 | 607-698-4295 |
6250 County Route 64, HORNELL, NY 14843 | 607-324-4081 |
| www.fsbcanisteo.com | |
| CONDENSED, CONSOLIDATED EARNINGS INFORMATION | | | | | | | | | | | | | | | |
| (In Thousands, Except Per Share Data) (Unaudited) | | | | | | | | | | | | | | | |
| | | 4TH | | | 3RD | | | 4TH | | | YEAR ENDED | |
| | | QUARTER | | | QUARTER | | | QUARTER | | | DECEMBER | |
| | | 2009 | | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| | | (Current) | | | (Prior Qtr) | | | (Prior Yr) | | | (Current) | | | (Prior Yr) | |
| Interest and Dividend Income | | $ | 16,256 | | | $ | 16,808 | | | $ | 18,589 | | | $ | 67,976 | | | $ | 74,237 | |
| Interest Expense | | | 5,670 | | | | 6,016 | | | | 7,195 | | | | 24,456 | | | | 31,049 | |
| Interest Margin | | | 10,586 | | | | 10,792 | | | | 11,394 | | | | 43,520 | | | | 43,188 | |
| Provision for Loan Losses | | | 126 | | | | 634 | | | | 240 | | | | 680 | | | | 909 | |
| Interest Margin After Provision for Loan Losses | | | 10,460 | | | | 10,158 | | | | 11,154 | | | | 42,840 | | | | 42,279 | |
| Other Income | | | 3,566 | | | | 3,282 | | | | 3,179 | | | | 12,669 | | | | 12,883 | |
| Net Losses on Available-for-sale Securities | | | (318 | ) | | | (47,848 | ) | | | (3,878 | ) | | | (83,840 | ) | | | (9,338 | ) |
| Other Expenses | | | 7,586 | | | | 8,277 | | | | 7,989 | | | | 33,659 | | | | 33,446 | |
| Income (Loss) Before Income Tax Provision (Credit) | | | 6,122 | | | | (42,685 | ) | | | 2,466 | | | | (61,990 | ) | | | 12,378 | |
| Income Tax Provision (Credit) | | | 1,507 | | | | (14,491 | ) | | | 288 | | | | (22,655 | ) | | | 2,319 | |
| Net Income (Loss) | | | 4,615 | | | | (28,194 | ) | | | 2,178 | | | | (39,335 | ) | | | 10,059 | |
| U.S. Treasury Preferred Dividends | | | 373 | | | | 373 | | | | - | | | | 1,428 | | | | - | |
| | | | | | | | | | | | | | | | | | | | | |
| Net Income (Loss) Available to Common Shareholders | | $ | 4,242 | | | $ | (28,567 | ) | | $ | 2,178 | | | $ | (40,763 | ) | | $ | 10,059 | |
| | | | | | | | | | | | | | | | | | | | | |
| Adjustments to Calculate Core Earnings (a): | | | | | | | | | | | | | | | | | | | | |
| Net Income (Loss) | | $ | 4,615 | | | $ | (28,194 | ) | | $ | 2,178 | | | $ | (39,335 | ) | | $ | 10,059 | |
| Add: OTTI Losses | | | 956 | | | | 47,947 | | | | 3,921 | | | | 85,363 | | | | 10,088 | |
| Less: Realized gains on assets previously written down | | | (947 | ) | | | (70 | ) | | | (31 | ) | | | (1,308 | ) | | | (31 | ) |
| Less: Income Tax (b) | | | (516 | ) | | | (15,392 | ) | | | (1,323 | ) | | | (28,206 | ) | | | (3,419 | ) |
| Core Earnings (a) | | $ | 4,108 | | | $ | 4,291 | | | $ | 4,745 | | | $ | 16,514 | | | $ | 16,697 | |
| Core Earnings Available to Common Shareholders (a) | | $ | 3,735 | | | $ | 3,918 | | | $ | 4,745 | | | $ | 15,086 | | | $ | 16,697 | |
| | | | | | | | | | | | | | | | | | | | | |
| PER COMMON SHARE DATA: | | | | | | | | | | | | | | | | | | | | |
| Net Income (Loss) - Basic | | $ | 0.42 | | | $ | (3.17 | ) | | $ | 0.24 | | | $ | (4.40 | ) | | $ | 1.12 | |
| Net Income (Loss) - Diluted | | $ | 0.42 | | | $ | (3.17 | ) | | $ | 0.24 | | | $ | (4.40 | ) | | $ | 1.12 | |
| Dividend Per Share | | $ | 0.00 | | | $ | 0.24 | | | $ | 0.24 | | | $ | 0.72 | | | $ | 0.96 | |
| Number Shares Used in Computation - Basic | | | 10,141,903 | | | | 9,005,850 | | | | 8,951,596 | | | | 9,271,869 | | | | 8,961,805 | |
| Number Shares Used in Computation - Diluted | | | 10,141,903 | | | | 9,005,850 | | | | 8,977,432 | | | | 9,271,869 | | | | 8,983,300 | |
| Number Shares Used in Computation - Diluted - for | | | | | | | | | | | | | | | | | | | | |
| Ratios Based on Core Earnings (a) | | | 10,141,903 | | | | 9,023,370 | | | | 8,977,432 | | | | 9,272,489 | | | | 8,983,300 | |
| CONDENSED, CONSOLIDATED BALANCE SHEET DATA | | | | | | | | | |
| (In Thousands, Except Per Share Data) (Unaudited) | | | | | | | | | |
| | | DEC. 31, | | | SEPT. 30, | | | DEC. 31, | |
| | | 2009 | | | 2009 | | | 2008 | |
| ASSETS | | | | | | | | | |
| Cash & Due from Banks | | $ | 92,065 | | | $ | 47,967 | | | $ | 24,028 | |
| Trading Securities | | | 1,045 | | | | - | | | | 2,306 | |
| Available-for-sale Securities | | | 396,288 | | | | 399,112 | | | | 419,688 | |
| Loans, Net | | | 713,338 | | | | 720,291 | | | | 735,687 | |
| Intangible Assets | | | 12,444 | | | | 12,525 | | | | 12,840 | |
| Other Assets | | | 106,985 | | | | 103,483 | | | | 87,088 | |
| TOTAL ASSETS | | $ | 1,322,165 | | | $ | 1,283,378 | | | $ | 1,281,637 | |
| | | | | | | | | | | | | |
| LIABILITIES | | | | | | | | | | | | |
| Deposits | | $ | 926,789 | | | $ | 896,866 | | | $ | 864,057 | |
| Repo Sweep Accounts | | | 34,229 | | | | 34,236 | | | | 38,047 | |
| Total Deposits and Repo Sweeps | | | 961,018 | | | | 931,102 | | | | 902,104 | |
| Borrowed Funds | | | 201,242 | | | | 215,268 | | | | 247,426 | |
| Other Liabilities | | | 7,495 | | | | 10,955 | | | | 10,081 | |
| TOTAL LIABILITIES | | | 1,169,755 | | | | 1,157,325 | | | | 1,159,611 | |
| | | | | | | | | | | | | |
| SHAREHOLDERS' EQUITY | | | | | | | | | | | | |
| Preferred Stock | | | 25,749 | | | | 25,706 | | | | - | |
| Common Shareholders' Equity, Excluding Accumulated | | | | | | | | | | �� | | |
| Other Comprehensive Income (Loss) | | | 127,552 | | | | 100,290 | | | | 145,240 | |
| Accumulated Other Comprehensive Income (Loss): | | | | | | | | | | | | |
| Net Unrealized Gains/Losses on | | | | | | | | | | | | |
| Available-for-sale Securities | | | (522 | ) | | | 403 | | | | (23,120 | ) |
| Defined Benefit Plans | | | (369 | ) | | | (346 | ) | | | (94 | ) |
| TOTAL SHAREHOLDERS' EQUITY | | | 152,410 | | | | 126,053 | | | | 122,026 | |
| TOTAL LIABILITIES & SHAREHOLDERS' EQUITY | | $ | 1,322,165 | | | $ | 1,283,378 | | | $ | 1,281,637 | |
| CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS | | | | | | | |
| (In Thousands, Except Per Share Data) (Unaudited) | | | | | | | |
| | | YEAR ENDED | | | % | |
| | | DECEMBER 31, | | | INCREASE | |
| | | 2009 | | | 2008 | | | (DECREASE) | |
| EARNINGS PERFORMANCE | | | | | | | | | |
| Net (Loss) Income | | $ | (39,335 | ) | | $ | 10,059 | | | | -491.04 | % |
| Return on Average Assets | | | -3.02 | % | | | 0.79 | % | | | -482.28 | % |
| Return on Average Equity | | | -27.36 | % | | | 7.69 | % | | | -455.79 | % |
| Core Earnings (a) | | $ | 16,514 | | | $ | 16,697 | | | | -1.10 | % |
| Core Earnings/Average Assets (a) | | | 1.27 | % | | | 1.30 | % | | | -2.31 | % |
| Core Earnings/Average Equity (a) | | | 11.49 | % | | | 12.77 | % | | | -10.02 | % |
| BALANCE SHEET HIGHLIGHTS | | | | | | | | | | | | |
| Total Assets | | $ | 1,322,165 | | | $ | 1,281,637 | | | | 3.16 | % |
| Available-for-Sale Securities | | | 396,288 | | | | 419,688 | | | | -5.58 | % |
| Loans (Net) | | | 713,338 | | | | 735,687 | | | | -3.04 | % |
| Allowance for Loan Losses | | | 8,265 | | | | 7,857 | | | | 5.19 | % |
| Deposits and Repo Sweep Accounts | | | 961,018 | | | | 902,104 | | | | 6.53 | % |
| Trust Assets Under Management | | | 605,062 | | | | 550,496 | | | | 9.91 | % |
| SHAREHOLDERS' VALUE | | | | | | | | | | | | |
| (PER COMMON SHARE) | | | | | | | | | | | | |
| Net Income - Basic | | $ | (4.40 | ) | | $ | 1.12 | | | | -492.86 | % |
| Net Income - Diluted | | $ | (4.40 | ) | | $ | 1.12 | | | | -492.86 | % |
| Core Earnings - Basic (a) | | $ | 1.63 | | | $ | 1.86 | | | | -12.37 | % |
| Core Earnings - Diluted (a) | | $ | 1.63 | | | $ | 1.86 | | | | -12.37 | % |
| Dividends | | $ | 0.72 | | | $ | 0.96 | | | | -25.00 | % |
| Common Book Value | | $ | 10.46 | | | $ | 13.66 | | | | -23.43 | % |
| Tangible Common Book Value | | $ | 9.43 | | | $ | 12.22 | | | | -22.83 | % |
| Market Value (Last Trade) | | $ | 9.54 | | | $ | 19.75 | | | | -51.70 | % |
| Market Value / Common Book Value | | | 91.20 | % | | | 144.58 | % | | | -36.92 | % |
| Market Value / Tangible Common Book Value | | | 101.17 | % | | | 161.62 | % | | | -37.40 | % |
| Price Earnings Multiple | | NM | | | | 17.63 | | | NM | |
| Dividend Yield | | | 7.55 | % | | | 4.86 | % | | | 55.35 | % |
| SAFETY AND SOUNDNESS | | | | | | | | | | | | |
| Tangible Common Equity / Tangible Assets | | | 8.72 | % | | | 8.61 | % | | | 1.28 | % |
| Nonperforming Assets / Total Assets | | | 0.76 | % | | | 0.69 | % | | | 10.65 | % |
| Allowance for Loan Losses / Total Loans | | | 1.15 | % | | | 1.06 | % | | | 8.49 | % |
| Risk Based Capital Ratio | | | 17.46 | % | | | 14.84 | % | | | 17.65 | % |
| AVERAGE BALANCES | | | | | | | | | | | | |
| Average Assets | | $ | 1,300,552 | | | $ | 1,280,924 | | | | 1.53 | % |
| Average Equity | | | 143,747 | | | | 130,790 | | | | 9.91 | % |
NM - Not meaningful
(a) Core Earnings is an earnings performance measurement which management has defined to exclude other-than-temporary impairment (OTTI) losses on available-for-sale securities and realized gains on securities for which OTTI has previously been recognized. Core Earnings is a performance measurement that is not based on U.S. generally accepted accounting principles (GAAP). Management believes Core Earnings information is meaningful for evaluating the Corporation's operating performance, because it excludes some of the impact of market volatility as it relates to investments in pooled trust-preferred securities and other securities. The disclosure of Core Earnings should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies. This table includes a reconciliation of Core Earnings to net (loss) income, the most directly comparable GAAP financial measure.
(b) Income tax has been allocated to non-core gains and losses at 34%, adjusted for a valuation allowance on deferred tax assets associated with losses from securities classified as capital assets for federal income tax reporting purposes. A valuation allowance of $886,000 was recorded in the third quarter 2009, and was reduced to $373,000 in the fourth quarter 2009.
