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 |
| June 30, 2010 | QUARTERLY REPORT | |
Dear Shareholder:
I am pleased to report net income of $4.5 million for the second quarter of 2010 which is a $13.6 million increase over the second quarter of 2009 and $0.4 million higher than the first quarter of 2010. As we have previously reported, second quarter 2009 net income was adversely effected by $19.8 million other-than-temporary impairment “OTTI” charges on available-for-sale securities. Core earnings for the second quarter of 2010 are 12% higher than the second quarter of 2009. Year-to-date earnings for 2010 of $8.6 million are $25 million higher than the first half of 2009.
Over the past year assets have increased 3.21% while deposits and repo sweeps have grown 8.29%. Net loans have declined slightly over the past year but rose in the second quarter with increased activity as a result of the Marcellus Shale gas exploration in our market. Nonperforming assets to total assets remains at a relatively low level of 0.81%
Our employees and the Board of Directors continue to strive in our mission to return Citizens & Northern Bank to the pinnacle of community banks and to enhance shareholder value. We solicit your continued support, trust and confidence.
Charles H. Updegraff, Jr.
President and
Chief Executive Officer
CITIZENS & NORTHERN CORPORATION
BOARD OF DIRECTORS
| | 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 |
| | 612 James Monroe Avenue, 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 |
| | 24 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 - 90-92 Main St., Wellsboro PA 16901 | 800-577-8001 |
| | ELECTRONIC BANKING – 10 Nichols St., Wellsboro, PA 16901 | 877-838-2517 |
www.cnbankpa.com
| | C&N FINANCIAL SERVICES CORPORATION – 90-92 Main Street, Wellsboro, PA | 866-ASK-CNFS |
www.cnfinancialservices.com
| | 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) | | | | | |
| | 2ND | 1ST | 2ND | 6 MONTHS ENDED |
| | QUARTER | QUARTER | QUARTER | JUNE 30, |
| | 2010 | 2010 | 2009 | 2010 | 2009 |
| | (Current) | (Prior Qtr) | (Prior Yr) | (Current) | (Prior Yr) |
| Interest and Dividend Income | $ 15,386 | $ 15,733 | $ 17,341 | $ 31,119 | $ 34,912 |
| Interest Expense | 5,036 | 5,260 | 6,164 | 10,296 | 12,770 |
| Interest Margin | 10,350 | 10,473 | 11,177 | 20,823 | 22,142 |
| Provision (Credit) for Loan Losses | 76 | 207 | 93 | 283 | (80) |
| Interest Margin After Provision (Credit) for Loan Losses | 10,274 | 10,266 | 11,084 | 20,540 | 22,222 |
| Other Income | 3,186 | 3,445 | 3,054 | 6,631 | 5,820 |
| Net Gains (Losses) on Available-for-sale Securities | 319 | 58 | (18,995) | 377 | (35,674) |
| Other Expenses | 7,629 | 7,894 | 9,158 | 15,523 | 17,796 |
| Income (Loss) Before Income Tax Provision (Credit) | 6,150 | 5,875 | (14,015) | 12,025 | (25,428) |
| Income Tax Provision (Credit) | 1,281 | 1,437 | (5,284) | 2,718 | (9,672) |
| Net Income (Loss) | 4,869 | 4,438 | (8,731) | 9,307 | (15,756) |
| U.S. Treasury Preferred Dividends | 372 | 373 | 373 | 745 | 682 |
| | | | | | |
| Net Income (Loss) Available to Common Shareholders | $ 4,497 | $ 4,065 | $ (9,104) | $ 8,562 | $ (16,438) |
| | | | | | |
| Adjustments to Calculate Core Earnings (a): | | | | | |
| Net Income (Loss) | $ 4,869 | $ 4,438 | $ (8,731) | $ 9,307 | $ (15,756) |
| Add: OTTI Losses | 2 | 431 | 19,780 | 433 | 36,460 |
| Less: Realized gains on assets previously written down | (51) | (284) | (261) | (335) | (291) |
| Add/Less: Income Tax (b) | (208) | (50) | (6,636) | (258) | (12,298) |
| Core Earnings (a) | $ 4,612 | $ 4,535 | $ 4,152 | $ 9,147 | $ 8,115 |
| Core Earnings Available to Common Shareholders (a) | $ 4,240 | $ 4,162 | $ 3,779 | $ 8,402 | $ 7,433 |
| | | | | | |
| PER COMMON SHARE DATA: | | | | | |
| Net Income (Loss) - Basic | $0.37 | $0.34 | ($1.01) | $0.71 | ($1.83) |
| Net Income (Loss) - Diluted | $0.37 | $0.34 | ($1.01) | $0.71 | ($1.83) |
| Dividend Per Share | $0.09 | $0.08 | $0.24 | $0.17 | $0.48 |
| Number Shares Used in Computation - Basic | 12,125,072 | 12,113,584 | 8,973,531 | 12,119,358 | 8,964,850 |
| Number Shares Used in Computation - Diluted | 12,125,072 | 12,113,584 | 8,973,531 | 12,119,358 | 8,964,850 |
| Number Shares Used in Computation - Diluted - for | | | | | |
| Ratios Based on Core Earnings (a) | 12,125,072 | 12,113,584 | 8,987,999 | 12,119,358 | 8,973,687 |
| CONDENSED, CONSOLIDATED BALANCE SHEET DATA | | | |
| (In Thousands, Except Per Share Data) (Unaudited) | | | |
| | JUNE 30, | MARCH 31, | JUNE 30, |
| | 2010 | 2010 | 2009 |
| ASSETS | | | |
| Cash & Due from Banks | $ 83,652 | $ 77,174 | $ 51,279 |
| Trading Securities | - | - | 547 |
| Available-for-sale Securities | 426,246 | 436,297 | 415,791 |
| Loans, Net | 715,363 | 711,996 | 719,347 |
| Intangible Assets | 12,356 | 12,400 | 12,607 |
| Other Assets | 101,082 | 109,444 | 97,438 |
| TOTAL ASSETS | $ 1,338,699 | $ 1,347,311 | $ 1,297,009 |
| | | | |
| LIABILITIES | | | |
| Deposits | $ 968,540 | $ 952,471 | $ 885,944 |
| Repo Sweep Accounts | 28,132 | 31,444 | 34,390 |
| Total Deposits and Repo Sweeps | 996,672 | 983,915 | 920,334 |
| Borrowed Funds | 173,831 | 201,031 | 226,658 |
| Other Liabilities | 6,701 | 6,881 | 13,459 |
| TOTAL LIABILITIES | 1,177,204 | 1,191,827 | 1,160,451 |
| | | | |
| SHAREHOLDERS' EQUITY | | | |
| Preferred Stock | 25,833 | 25,791 | 25,664 |
| Common Shareholders' Equity, Excluding Accumulated | | | |
| Other Comprehensive Income (Loss) | 134,229 | 130,661 | 128,809 |
| Accumulated Other Comprehensive Income (Loss): | | | |
| Net Unrealized Gains/Losses on | | | |
| Available-for-sale Securities | 1,684 | (718) | (17,560) |
| Defined Benefit Plans | (251) | (250) | (355) |
| TOTAL SHAREHOLDERS' EQUITY | 161,495 | 155,484 | 136,558 |
| TOTAL LIABILITIES & SHAREHOLDERS' EQUITY | $ 1,338,699 | $ 1,347,311 | $ 1,297,009 |
| CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS | | |
| (In Thousands, Except Per Share Data) (Unaudited) | | |
| | 6 MONTHS ENDED | % |
| | JUNE 30, | INCREASE |
| | 2010 | 2009 | (DECREASE) |
| EARNINGS PERFORMANCE | | | |
| Net Income (Loss) | $ 9,307 | $ (15,756) | NM |
| Return on Average Assets | 1.39% | -2.43% | NM |
| Return on Average Equity | 11.91% | -21.55% | NM |
| Core Earnings (a) | $ 9,147 | $ 8,115 | 12.72% |
| Core Earnings/Average Assets (a) | 1.37% | 1.25% | 9.60% |
| Core Earnings/Average Equity (a) | 11.70% | 11.10% | 5.41% |
| | | | |
| BALANCE SHEET HIGHLIGHTS | | | |
| Total Assets | $ 1,338,699 | $ 1,297,009 | 3.21% |
| Available-for-Sale Securities | 426,246 | 415,791 | 2.51% |
| Loans (Net) | 715,363 | 719,347 | -0.55% |
| Allowance for Loan Losses | 8,461 | 7,681 | 10.15% |
| Deposits and Repo Sweep Accounts | 996,672 | 920,334 | 8.29% |
| | | | |
| Trust Assets Under Management | 558,344 | 553,058 | 0.96% |
| | | | |
| SHAREHOLDERS' VALUE | | | |
| (PER COMMON SHARE) | | | |
| Net Income - Basic | $0.71 | ($1.83) | NM |
| Net Income - Diluted | $0.71 | ($1.83) | NM |
| Core Earnings - Basic (a) | $0.69 | $0.83 | -16.87% |
| Core Earnings - Diluted (a) | $0.69 | $0.83 | -16.87% |
| Dividends | $0.17 | $0.48 | -64.58% |
| Common Book Value | $11.18 | $12.35 | -9.47% |
| Tangible Common Book Value | $10.17 | $10.95 | -7.12% |
| Market Value (Last Trade) | $10.70 | $20.57 | -47.98% |
| Market Value / Common Book Value | 95.71% | 166.56% | -42.54% |
| Market Value / Tangible Common Book Value | 105.21% | 187.85% | -43.99% |
| Price Earnings Multiple | 7.54 | NM | NM |
| Dividend Yield | 3.18% | 4.67% | -31.91% |
| | | | |
| SAFETY AND SOUNDNESS | | | |
| Tangible Common Equity / Tangible Assets | 9.30% | 7.65% | 21.57% |
| Nonperforming Assets / Total Assets | 0.81% | 0.84% | -3.08% |
| Allowance for Loan Losses / Total Loans | 1.17% | 1.06% | 10.38% |
| Risk Based Capital Ratio | 19.09% | 14.69% | 29.95% |
| | | | |
| AVERAGE BALANCES | | | |
| Average Assets | $1,334,412 | $1,296,535 | 2.92% |
| Average Equity | 156,333 | 146,214 | 6.92% |
| | | | |
| 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, was reduced to $373,000 in the fourth quarter 2009 and was further reduced to |
| $148,000 in the 2nd quarter 2010. | | | |
