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, 2011 QUARTERLY REPORT
Dear Shareholder:
I am pleased to report net income of $5.5 million for the first quarter of 2011 which is a $1.1 million increase over the first quarter of 2010, or 24.85%. Return on average assets was 1.69% and return on average equity was 15.67% for the quarter. The basic drivers for the earnings improvement were an increase of $1.2 million in net interest income after provision for loan losses and a $1.8 million increase in net gains on available-for-sale securities. These increases more than offset the reduction of $1.0 million of other income and a modest increase of $.3 million of noninterest expenses.
Our strong earnings over the last six quarters have positively impacted the market price of our stock. The stock price closed the quarter at $16.81 per share which represents an increase of 33.94% over the first quarter of 2010.
Total assets are relatively unchanged from year-end and down $31.0 million year over year as a result of a planned deleveraging of the balance sheet in the amount of $63.0 million due to low investment yields. Non-performing assets to total assets rose slightly to .88% but by industry standards is very good. Our capital ratios remain strong and are well in excess of regulatory requirements.
We are encouraged by our strong first quarter results, particularly in light of the weak national economy and the continued uncertainty relative to the implementation of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Management continues to analyze the provisions of the legislation that pertain to C&N and is developing strategies that will attempt to minimize its negative impact on our bottom line.
We solicit your continued support as the Board of Directors, management and employees strive to enhance shareholder value.
Charles H. Updegraff, Jr.
Chairman, President, & CEO
CITIZENS & NORTHERN CORPORATION
BOARD OF DIRECTORS
Charles H. Updegraff, Jr. - Chairman
| 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 | |
DIRECTORS EMERITI
| R. Robert DeCamp | Karl W. Kroeck |
CITIZENS & NORTHERN BANK
428 S. Main Street, ATHENS, PA 18810
3 Main Street, CANISTEO, NY 14823
10 N Main Street, COUDERSPORT, PA 16915
111 Main Street, DUSHORE, PA 18614
563 Main Street, EAST SMITHFIELD, PA 18817
104 Main Street, ELKLAND, PA 16920
135 East Fourth Street, EMPORIUM, PA 15834
6250 County Route 64, HORNELL, NY 14843
230-232 Railroad Street, JERSEY SHORE, PA 17740
102 E. Main Street, KNOXVILLE, PA 16928
514 Main Street, LAPORTE, PA 18626
4534 Williamson Trail LIBERTY, PA 16930
1085 S. Main Street, MANSFIELD, PA 16933
612 James Monroe Avenue, MONROETON, PA 18832
3461 Rte.405 Highway, MUNCY, PA 17756
100 Maple Street, PORT ALLEGANY, PA 16743
24 Thompson Street, RALSTON, PA 17763
1827 Elmira Street, SAYRE, PA 18840
2 E. Mountain Ave., SO. WILLIAMSPORT, PA 17702
41 Main Street, TIOGA, PA 16946
428 Main Street, TOWANDA, PA18848
Court House Square, TROY, PA 16947
90-92 Main Street, WELLSBORO, PA 16901
130 Court Street, WILLIAMSPORT, PA 17701
1510 Dewey Ave., WILLIAMSPORT, PA 17702
TRUST & FINANCIAL MANAGEMENT GROUP
3 Main Street, Canisteo, NY 14823 | 607-698-4295 |
10 N Main Street, Coudersport, PA 16915 | 800-921-9150 |
1827 Elmira Street, Sayre, PA 18840 | 888-760-8192 |
428 Main Street, Towanda, PA 18848 | 888-987-8784 |
90-92 Main Street, Wellsboro, PA 16901 | 888-487-8784 |
130 Court Street, Williamsport, PA 17701 | 866-732-7213 |
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 | |
| CONDENSED, CONSOLIDATED EARNINGS INFORMATION | | | |
| (In Thousands, Except Per Share Data) (Unaudited) | | | |
| | | 1ST | | | 4TH | | | 1ST | |
| | | QUARTER | | | QUARTER | | | QUARTER | |
| | | 2011 | | | 2010 | | | 2010 | |
| | | (Current) | | | (Prior Qtr) | | | (Prior Yr) | |
| Interest and Dividend Income | | $ | 15,298 | | | $ | 15,500 | | | $ | 15,733 | |
| Interest Expense | | | 4,016 | | | | 4,310 | | | | 5,260 | |
| Net Interest Income | | | 11,282 | | | | 11,190 | | | | 10,473 | |
| (Credit) Provision for Loan Losses | | | (192 | ) | | | 719 | | | | 207 | |
| Net Interest Income After (Credit) Provision for Loan Losses | | | 11,474 | | | | 10,471 | | | | 10,266 | |
| Other Income | | | 2,555 | | | | 3,480 | | | | 3,548 | |
| Net Gains on Available-for-sale Securities | | | 1,839 | | | | 64 | | | | 58 | |
| Noninterest Expenses | | | 8,263 | | | | 7,720 | | | | 7,997 | |
| Income Before Income Tax Provision | | | 7,605 | | | | 6,295 | | | | 5,875 | |
| Income Tax Provision | | | 2,064 | | | | 1,411 | | | | 1,437 | |
| Net Income | | | 5,541 | | | | 4,884 | | | | 4,438 | |
| U.S. Treasury Preferred Dividends | | | - | | | | - | | | | 373 | |
| | | | | | | | | | | | | |
| Net Income Available to Common Shareholders | | $ | 5,541 | | | $ | 4,884 | | | $ | 4,065 | |
| | | | | | | | | | | | | |
| PER COMMON SHARE DATA: | | | | | | | | | | | | |
| Net Income – Basic | | $ | 0.46 | | | $ | 0.40 | | | $ | 0.34 | |
| Net Income – Diluted | | $ | 0.45 | | | $ | 0.40 | | | $ | 0.34 | |
| Dividend Per Share | | $ | 0.13 | | | $ | 0.12 | | | $ | 0.08 | |
| Number Shares Used in Computation – Basic | | | 12,174,935 | | | | 12,148,541 | | | | 12,113,584 | |
| Number Shares Used in Computation – Diluted | | | 12,178,099 | | | | 12,148,772 | | | | 12,113,584 | |
| CONDENSED, CONSOLIDATED BALANCE SHEET DATA | | | | | | | | | |
| (In Thousands, Except Per Share Data) (Unaudited) | | | | | | | | | |
| | | MARCH 31, | | | DEC. 31, | | | MARCH 31, | |
| | | 2011 | | | 2010 | | | 2010 | |
| ASSETS | | | | | | | | | |
| Cash & Due from Banks | | $ | 59,278 | | | $ | 46,301 | | | $ | 77,174 | |
| Available-for-sale Securities | | | 452,974 | | | | 443,956 | | | | 436,297 | |
| Loans Held for Sale | | | 135 | | | | 5,247 | | | | 546 | |
| Loans, Net | | | 710,113 | | | | 721,304 | | | | 711,450 | |
| Intangible Assets | | | 12,239 | | | | 12,268 | | | | 12,400 | |
| Other Assets | | | 81,470 | | | | 87,512 | | | | 109,444 | |
| TOTAL ASSETS | | $ | 1,316,209 | | | $ | 1,316,588 | | | $ | 1,347,311 | |
| | | | | | | | | | | | | |
| LIABILITIES | | | | | | | | | | | | |
| Deposits | | $ | 1,010,001 | | | $ | 1,004,348 | | | $ | 952,471 | |
| Repo Sweep Accounts | | | 16,068 | | | | 18,413 | | | | 31,444 | |
| Total Deposits and Repo Sweeps | | | 1,026,069 | | | | 1,022,761 | | | | 983,915 | |
| Borrowed Funds | | | 138,340 | | | | 148,495 | | | | 201,031 | |
| Other Liabilities | | | 5,747 | | | | 6,388 | | | | 6,881 | |
| TOTAL LIABILITIES | | | 1,170,156 | | | | 1,177,644 | | | | 1,191,827 | |
| | | | | | | | | | | | | |
| SHAREHOLDERS' EQUITY | | | | | | | | | | | | |
| Preferred Stock | | | - | | | | - | | | | 25,791 | |
| Common Shareholders' Equity, Excluding Accumulated | | | | | | | | | | | | |
| Other Comprehensive Income (Loss) | | | 144,895 | | | | 140,545 | | | | 130,661 | |
| Accumulated Other Comprehensive Income (Loss): | | | | | | | | | | | | |
| Net Unrealized Gains/Losses on | | | | | | | | | | | | |
| Available-for-sale Securities | | | 1,478 | | | | (1,351 | ) | | | (718 | ) |
| Defined Benefit Plans | | | (320 | ) | | | (250 | ) | | | (250 | ) |
| TOTAL SHAREHOLDERS' EQUITY | | | 146,053 | | | | 138,944 | | | | 155,484 | |
| TOTAL LIABILITIES & SHAREHOLDERS' EQUITY | | $ | 1,316,209 | | | $ | 1,316,588 | | | $ | 1,347,311 | |
| CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS | | | | | | | |
| (In Thousands, Except Per Share Data) (Unaudited) | | | | | | | |
| | | 3 MONTHS ENDED | | | % | |
| | | MARCH 31, | | | INCREASE | |
| | | 2011 | | | 2010 | | | (DECREASE) | |
| EARNINGS PERFORMANCE | | | | | | | | | |
| Net Income | | $ | 5,541 | | | $ | 4,438 | | | | 24.85 | % |
| Return on Average Assets | | | 1.69% | | | | 1.34% | | | | 26.12 | % |
| Return on Average Equity | | | 15.67% | | | | 11.50% | | | | 36.26 | % |
| | | | | | | | | | | | | |
| BALANCE SHEET HIGHLIGHTS | | | | | | | | | | | | |
| Total Assets | | $ | 1,316,209 | | | $ | 1,347,311 | | | | -2.31 | % |
| Available-for-Sale Securities | | | 452,974 | | | | 436,297 | | | | 3.82 | % |
| Loans (Net) | | | 710,113 | | | | 711,450 | | | | -0.19 | % |
| Allowance for Loan Losses | | | 8,846 | | | | 8,417 | | | | 5.10 | % |
| Deposits and Repo Sweep Accounts | | | 1,026,069 | | | | 983,915 | | | | 4.28 | % |
| | | | | | | | | | | | | |
| Trust Assets Under Management | | | 635,497 | | | | 598,793 | | | | 6.13 | % |
| | | | | | | | | | | | | |
| SHAREHOLDERS' VALUE | | | | | | | | | | | | |
| (PER COMMON SHARE) | | | | | | | | | | | | |
| Net Income - Basic | | $ | 0.46 | | | $ | 0.34 | | | | 35.29 | % |
| Net Income - Diluted | | $ | 0.45 | | | $ | 0.34 | | | | 32.35 | % |
| Dividends | | $ | 0.13 | | | $ | 0.08 | | | | 62.50 | % |
| Common Book Value | | $ | 11.99 | | | $ | 10.70 | | | | 12.06 | % |
| Tangible Common Book Value | | $ | 10.99 | | | $ | 9.68 | | | | 13.53 | % |
| Market Value (Last Trade) | | $ | 16.81 | | | $ | 12.55 | | | | 33.94 | % |
| Market Value / Common Book Value | | | 140.20% | | | | 117.29% | | | | 19.53 | % |
| Market Value / Tangible Common Book Value | | | 152.96% | | | | 129.65% | | | | 17.98 | % |
| Price Earnings Multiple | | | 9.34 | | | | 9.23 | | | | 1.19 | % |
| Dividend Yield | | | 3.09% | | | | 2.55% | | | | 21.18 | % |
| | | | | | | | | | | | | |
| SAFETY AND SOUNDNESS | | | | | | | | | | | | |
| Tangible Common Equity / Tangible Assets | | | 10.26% | | | | 8.79% | | | | 16.72 | % |
| Nonperforming Assets / Total Assets | | | 0.88% | | | | 0.72% | | | | 21.54 | % |
| Allowance for Loan Losses / Total Loans | | | 1.23% | | | | 1.17% | | | | 5.13 | % |
| Total Risk Based Capital Ratio (a) | | | 18.44% | | | | 18.36% | | | | 0.44 | % |
| Tier 1 Risk Based Capital Ratio (a) | | | 17.13% | | | | 17.16% | | | | -0.19 | % |
| Leverage Ratio (a) | | | 9.73% | | | | 9.88% | | | | -1.51 | % |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| AVERAGE BALANCES | | | | | | | | | | | | |
| Average Assets | | $ | 1,312,560 | | | $ | 1,326,393 | | | | -1.04 | % |
| Average Equity | | | 141,415 | | | | 154,374 | | | | -8.39 | % |
| | | | | | | | | | | | | |
| NM - Not meaningful. | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| (a) Capital ratios are estimated. | | | | | | | | | | | | |
