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
| September 30, 2011 | QUARTERLY REPORT | |
Dear Shareholder:
I am pleased to report net income of $6.0 million for the third quarter of 2011 which is a $1.9 million increase over the third quarter of 2010, or an increase of 46.34%. 2011 year-to-date earnings of $17.2 million are an increase of $4.5 million over the first nine months of 2010, or an increase of 35.43%. Our return on average assets (ROA) of 1.75% and return on average equity (ROE) of 15.37% for the first nine months of 2011 makes Citizens & Northern Corporation one of the top performers in its peer group.
We continue to improve our net interest margin and efficiency ratio, but another major driver of our strong earnings performance has been minimal credit losses as evidenced by a $.2 million credit provision for allowance for loan losses during the first nine months of 2011. Despite a weak economy our non-performing assets to total assets ratio remains remarkably low at .80%.
During the third quarter we sold our banking facility located at 130 Court Street, Williamsport, PA resulting in a gain of $.3 million. We have entered into a leasing arrangement allowing us to utilize a portion of the facility as we continue to provide retail, trust and commercial banking services at the location. The sale of the building will result in significant operating cost savings in the future. Also during the quarter our Athens, PA banking facility was severely damaged by the flood which struck the area on September 8, 2011. Thankfully, with insurance coverage, we expect any impairment loss on the property to be minimal. The facility remains closed but we are servicing our customers at our Sayre, PA office which is located 1.6 miles from the Athens office.
While we continue to face economic and regulatory headwinds, management and the Board of Directors is committed to work diligently 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 | | |
DIRECTOR EMERITUS
R. Robert DeCamp
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)
| | | 3RD | | | 2ND | | | 3RD | | | 9 MONTHS ENDED | |
| | | QUARTER | | | QUARTER | | | QUARTER | | | SEPTEMBER 30, | |
| | | 2011 | | | 2011 | | | 2010 | | | 2011 | | | 2010 | |
| | | (Current) | | | (Prior Qtr) | | | (Prior Yr) | | | (Current) | | | (Prior Yr) | |
| Interest and Dividend Income | | $ | 15,317 | | | $ | 15,443 | | | $ | 15,495 | | | $ | 46,058 | | | $ | 46,614 | |
| Interest Expense | | | 3,108 | | | | 3,628 | | | | 4,639 | | | | 10,752 | | | | 14,935 | |
| Net Interest Income | | | 12,209 | | | | 11,815 | | | | 10,856 | | | | 35,306 | | | | 31,679 | |
| (Credit) Provision for Loan Losses | | | (37 | ) | | | 31 | | | | 189 | | | | (198 | ) | | | 472 | |
| Net Interest Income After (Credit) Provision for Loan Losses | | | 12,246 | | | | 11,784 | | | | 10,667 | | | | 35,504 | | | | 31,207 | |
| Other Income | | | 3,999 | | | | 3,673 | | | | 3,562 | | | | 10,227 | | | | 10,370 | |
| Net Gains on Available-for-sale Securities | | | 26 | | | | 163 | | | | 388 | | | | 2,028 | | | | 765 | |
| Noninterest Expenses | | | 8,052 | | | | 7,794 | | | | 8,082 | | | | 24,109 | | | | 23,782 | |
| Income Before Income Tax Provision | | | 8,219 | | | | 7,826 | | | | 6,535 | | | | 23,650 | | | | 18,560 | |
| Income Tax Provision | | | 2,230 | | | | 2,129 | | | | 1,671 | | | | 6,423 | | | | 4,389 | |
| Net Income | | | 5,989 | | | | 5,697 | | | | 4,864 | | | | 17,227 | | | | 14,171 | |
| U.S. Treasury Preferred Dividends | | | - | | | | - | | | | 729 | | | | - | | | | 1,474 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net Income Available to Common Shareholders | | $ | 5,989 | | | $ | 5,697 | | | $ | 4,135 | | | $ | 17,227 | | | $ | 12,697 | |
| | | | | | | | | | | | | | | | | | | | | |
| PER COMMON SHARE DATA: | | | | | | | | | | | | | | | | | | | | |
| Net Income – Basic | | $ | 0.49 | | | $ | 0.47 | | | $ | 0.34 | | | $ | 1.42 | | | $ | 1.05 | |
| Net Income – Diluted | | $ | 0.49 | | | $ | 0.47 | | | $ | 0.34 | | | $ | 1.42 | | | $ | 1.05 | |
| Dividend Per Share | | $ | 0.15 | | | $ | 0.14 | | | $ | 0.10 | | | $ | 0.42 | | | $ | 0.27 | |
| Number Shares Used in Computation - Basic | | | 12,150,910 | | | | 12,177,110 | | | | 12,136,516 | | | | 12,167,563 | | | | 12,125,142 | |
| Number Shares Used in Computation - Diluted | | | 12,153,861 | | | | 12,180,199 | | | | 12,136,516 | | | | 12,170,611 | | | | 12,125,142 | |
CONDENSED, CONSOLIDATED BALANCE SHEET DATA
(In Thousands, Except Per Share Data) (Unaudited)
| | | SEPT. 30, | | | JUNE 30, | | | SEPT. 30, | |
| | | 2011 | | | 2011 | | | 2010 | |
| ASSETS | | | | | | | | | |
| Cash & Due from Banks | | $ | 55,754 | | | $ | 49,392 | | | $ | 53,225 | |
| Available-for-sale Securities | | | 472,113 | | | | 464,214 | | | | 433,392 | |
| Loans Held for Sale | | | 1,218 | | | | 167 | | | | 561 | |
| Loans, Net | | | 697,702 | | | | 705,667 | | | | 717,526 | |
| Intangible Assets | | | 12,182 | | | | 12,211 | | | | 12,312 | |
| Other Assets | | | 73,085 | | | | 77,999 | | | | 91,092 | |
| TOTAL ASSETS | | $ | 1,312,054 | | | $ | 1,309,650 | | | $ | 1,308,108 | |
| | | | | | | | | | | | | |
| LIABILITIES | | | | | | | | | | | | |
| Deposits | | $ | 995,730 | | | $ | 995,361 | | | $ | 983,516 | |
| Repo Sweep Accounts | | | 19,234 | | | | 20,343 | | | | 18,402 | |
| Total Deposits and Repo Sweeps | | | 1,014,964 | | | | 1,015,704 | | | | 1,001,918 | |
| Borrowed Funds | | | 128,024 | | | | 133,182 | | | | 158,654 | |
| Other Liabilities | | | 7,856 | | | | 7,071 | | | | 6,454 | |
| TOTAL LIABILITIES | | | 1,150,844 | | | | 1,155,957 | | | | 1,167,026 | |
| | | | | | | | | | | | | |
| SHAREHOLDERS' EQUITY | | | | | | | | | | | | |
| Preferred Stock | | | - | | | | - | | | | - | |
| Common Shareholders' Equity, Excluding Accumulated | | | | | | | | | | | | |
| Other Comprehensive Income (Loss) | | | 152,726 | | | | 148,707 | | | | 136,920 | |
| Accumulated Other Comprehensive Income (Loss): | | | | | | | | | | | | |
| Net Unrealized Gains/Losses on | | | | | | | | | | | | |
| Available-for-sale Securities | | | 8,787 | | | | 5,299 | | | | 4,393 | |
| Defined Benefit Plans | | | (303 | ) | | | (313 | ) | | | (231 | ) |
| TOTAL SHAREHOLDERS' EQUITY | | | 161,210 | | | | 153,693 | | | | 141,082 | |
| TOTAL LIABILITIES & SHAREHOLDERS' EQUITY | | $ | 1,312,054 | | | $ | 1,309,650 | | | $ | 1,308,108 | |
CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS
(In Thousands, Except Per Share Data) (Unaudited)
| | | 9 MONTHS ENDED | | | % | |
| | | SEPTEMBER 30, | | | INCREASE | |
| | | 2011 | | | 2010 | | | (DECREASE) | |
| EARNINGS PERFORMANCE | | | | | | | | | |
| Net Income | | $ | 17,227 | | | $ | 14,171 | | | | 21.57 | % |
| Return on Average Assets | | | 1.75 | % | | | 1.42 | % | | | 23.24 | % |
| Return on Average Equity | | | 15.37 | % | | | 12.35 | % | | | 24.45 | % |
| | | | | | | | | | | | | |
| BALANCE SHEET HIGHLIGHTS | | | | | | | | | | | | |
| Total Assets | | $ | 1,312,054 | | | $ | 1,308,108 | | | | 0.30 | % |
| Available-for-Sale Securities | | | 472,113 | | | | 433,392 | | | | 8.93 | % |
| Loans (Net) | | | 697,702 | | | | 717,526 | | | | -2.76 | % |
| Allowance for Loan Losses | | | 8,177 | | | | 8,602 | | | | -4.94 | % |
| Deposits and Repo Sweep Accounts | | | 1,014,964 | | | | 1,001,918 | | | | 1.30 | % |
| | | | | | | | | | | | | |
| Trust Assets Under Management | | | 593,034 | | | | 591,267 | | | | 0.30 | % |
| | | | | | | | | | | | | |
| SHAREHOLDERS' VALUE | | | | | | | | | | | | |
| (PER COMMON SHARE) | | | | | | | | | | | | |
| Net Income - Basic | | $ | 1.42 | | | $ | 1.05 | | | | 35.24 | % |
| Net Income - Diluted | | $ | 1.42 | | | $ | 1.05 | | | | 35.24 | % |
| Dividends | | $ | 0.42 | | | $ | 0.27 | | | | 55.56 | % |
| Common Book Value | | $ | 13.28 | | | $ | 11.62 | | | | 14.29 | % |
| Tangible Common Book Value | | $ | 12.28 | | | $ | 10.60 | | | | 15.85 | % |
| Market Value (Last Trade) | | $ | 14.86 | | | $ | 13.00 | | | | 14.31 | % |
| Market Value / Common Book Value | | | 111.90 | % | | | 111.88 | % | | | 0.02 | % |
| Market Value / Tangible Common Book Value | | | 121.01 | % | | | 122.64 | % | | | -1.33 | % |
| Price Earnings Multiple | | | 7.85 | | | | 9.29 | | | | -15.50 | % |
| Dividend Yield | | | 3.77 | % | | | 2.77 | % | | | 36.10 | % |
| | | | | | | | | | | | | |
| SAFETY AND SOUNDNESS | | | | | | | | | | | | |
| Tangible Common Equity / Tangible Assets | | | 11.46 | % | | | 9.94 | % | | | 15.29 | % |
| Nonperforming Assets / Total Assets | | | 0.80 | % | | | 0.82 | % | | | -2.44 | % |
| Allowance for Loan Losses / Total Loans | | | 1.16 | % | | | 1.18 | % | | | -1.69 | % |
| Total Risk Based Capital Ratio (a) | | | 20.13 | % | | | 16.77 | % | | | 20.04 | % |
| Tier 1 Risk Based Capital Ratio (a) | | | 18.90 | % | | | 15.55 | % | | | 21.54 | % |
| Leverage Ratio (a) | | | 10.50 | % | | | 8.90 | % | | | 17.98 | % |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| AVERAGE BALANCES | | | | | | | | | | | | |
| Average Assets | | $ | 1,312,736 | | | $ | 1,330,449 | | | | -1.33 | % |
| Average Equity | | | 149,397 | | | | 153,055 | | | | -2.39 | % |
(a) Capital ratios are estimated.
