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, 2012 | QUARTERLY REPORT | |
Dear Shareholder:
I am proud to report net income of $5,587,000 for the first quarter of 2012 which is a $46,000 increase over the first quarter of 2011. On the surface the net income increase appears minimal; however 2011 net income was positively impacted by $1,839,000 of securities gains which was partially offset by a $948,000 impairment charge resulting in $891,000 additional pre-tax income. Return on Average Assets (ROAA) for the quarter was 1.72% with Return on Average Equity (ROAE) of 13.15%. These results place C&N in the elite class of its peer group.
As reported in previous quarters, total assets remain relatively unchanged as we continue to de-leverage the balance sheet due to low investment yield opportunities. Since late 2009, C&N has originated a significant amount of residential mortgages for sale to third parties while maintaining the servicing rights. The balance of residential mortgage loans originated for sale was $64,569,000 at March 31, 2012, an increase of $29,076,000 over one year earlier. The originations and servicing rights have produced a significant amount of non-interest income while not incurring the interest rate risk. Non-performing assets to total assets remain relatively modest at .70% which is very good by industry standards.
Assets under management by C&N’s Trust and Financial Management Group amounted to $678,693,000 at the end of the quarter, up 6.8% from a year earlier. The Group generated revenue of $929,000 during the first quarter which represents 24.7% of our Other Income.
The economy and regulatory environment continue to provide challenges for the Board of Directors and management. C&N has a dedicated group of employees to work through these challenges in pursuit of superior financial results.
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 | | |
DIRECTOR EMERITUS
R. Robert DeCamp
CITIZENS & NORTHERN BANK
1-877-838-2517
OFFICES
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 TrailLIBERTY, 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
Route 6,WYSOX, PA 18854
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 | |
| | | 2012 | | | | 2011 | | | | 2011 | |
| | | (Current) | | | | (Prior Qtr) | | | | (Prior Yr) | |
| Interest and Dividend Income | | $ | 14,776 | | | $ | 15,198 | | | $ | 15,298 | |
| Interest Expense | | | 2,502 | | | | 2,804 | | | | 4,016 | |
| Net Interest Income | | | 12,274 | | | | 12,394 | | | | 11,282 | |
| (Credit) Provision for Loan Losses | | | (182 | ) | | | (87 | ) | | | (192 | ) |
| Net Interest Income After (Credit) Provision for Loan Losses | | | 12,456 | | | | 12,481 | | | | 11,474 | |
| Other Income | | | 3,759 | | | | 3,711 | | | | 2,555 | |
| Net (Losses) Gains on Available-for-sale Securities | | | (2 | ) | | | 188 | | | | 1,839 | |
| Noninterest Expenses | | | 8,517 | | | | 7,948 | | | | 8,263 | |
| Income Before Income Tax Provision | | | 7,696 | | | | 8,432 | | | | 7,605 | |
| Income Tax Provision | | | 2,109 | | | | 2,291 | | | | 2,064 | |
| Net Income | | $ | 5,587 | | | $ | 6,141 | | | $ | 5,541 | |
| PER COMMON SHARE DATA: | | | | | | | | | | | | |
| Net Income – Basic | | $ | 0.46 | | | $ | 0.51 | | | $ | 0.46 | |
| Net Income – Diluted | | $ | 0.46 | | | $ | 0.51 | | | $ | 0.45 | |
| Dividend Per Share | | $ | 0.18 | | | $ | 0.16 | | | $ | 0.13 | |
| Number Shares Used in Computation - Basic | | | 12,206,870 | | | | 12,145,666 | | | | 12,174,935 | |
| Number Shares Used in Computation - Diluted | | | 12,245,752 | | | | 12,154,971 | | | | 12,178,099 | |
CONDENSED, CONSOLIDATED BALANCE SHEET DATA
(In Thousands, Except Per Share Data) (Unaudited)
| | MAR. 31, | | | DEC. 31, | | | MAR. 31, | |
| | 2012 | | | 2011 | | | 2011 | |
| ASSETS | | | | | | | | | | | | |
| Cash & Due from Banks | | $ | 56,498 | | | $ | 60,575 | | | $ | 59,278 | |
| Available-for-sale Securities | | | 486,664 | | | | 481,685 | | | | 452,974 | |
| Loans Held for Sale | | | 2,223 | | | | 939 | | | | 135 | |
| Loans, Net | | | 690,218 | | | | 700,610 | | | | 710,113 | |
| Intangible Assets | | | 12,135 | | | | 12,154 | | | | 12,239 | |
| Other Assets | | | 69,026 | | | | 67,772 | | | | 81,470 | |
| TOTAL ASSETS | | $ | 1,316,764 | | | $ | 1,323,735 | | | $ | 1,316,209 | |
| | | | | | | | | | | | | |
| LIABILITIES | | | | | | | | | | | | |
| Deposits | | $ | 1,016,801 | | | $ | 1,018,206 | | | $ | 1,010,001 | |
| Repo Sweep Accounts | | | 4,030 | | | | 4,950 | | | | 16,068 | |
| Total Deposits and Repo Sweeps | | | 1,020,831 | | | | 1,023,156 | | | | 1,026,069 | |
| Borrowed Funds | | | 115,202 | | | | 125,363 | | | | 138,340 | |
| Other Liabilities | | | 9,117 | | | | 7,831 | | | | 5,747 | |
| TOTAL LIABILITIES | | | 1,145,150 | | | | 1,156,350 | | | | 1,170,156 | |
| | | | | | | | | | | | | |
| SHAREHOLDERS' EQUITY | | | | | | | | | | | | |
| Common Shareholders' Equity, Excluding Accumulated Other Comprehensive Income (Loss) | | | 161,240 | | | | 157,225 | | | | 144,895 | |
| Accumulated Other Comprehensive Income (Loss): | | | | | | | | | | | | |
| Net Unrealized Gains/Losses on Available-for-sale Securities | | | 10,852 | | | | 10,791 | | | | 1,478 | |
| Defined Benefit Plans | | | (478 | ) | | | (631 | ) | | | (320 | ) |
| TOTAL SHAREHOLDERS' EQUITY | | | 171,614 | | | | 167,385 | | | | 146,053 | |
| TOTAL LIABILITIES & SHAREHOLDERS' EQUITY | | $ | 1,316,764 | | | $ | 1,323,735 | | | $ | 1,316,209 | |
CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS
(In Thousands, Except Per Share Data) (Unaudited)
| | | 3 MONTHS ENDED | | | % | |
| | | MARCH 31, | | | INCREASE | |
| | | 2012 | | | 2011 | | | (DECREASE) | |
| EARNINGS PERFORMANCE | | | | | | | | | | | | |
| Net Income | | $ | 5,587 | | | $ | 5,541 | | | | 0.83 | % |
| Return on Average Assets | | | 1.72 | % | | | 1.69 | % | | | 1.78 | % |
| Return on Average Equity | | | 13.15 | % | | | 15.67 | % | | | -16.08 | % |
| | | | | | | | | | | | | |
| BALANCE SHEET HIGHLIGHTS | | | | | | | | | | | | |
| Total Assets | | $ | 1,316,764 | | | $ | 1,316,209 | | | | 0.04 | % |
| Available-for-Sale Securities | | | 486,664 | | | | 452,974 | | | | 7.44 | % |
| Loans (Net) | | | 690,218 | | | | 710,113 | | | | -2.80 | % |
| Allowance for Loan Losses | | | 7,370 | | | | 8,846 | | | | -16.69 | % |
| Deposits and Repo Sweep Accounts | | | 1,020,831 | | | | 1,026,069 | | | | -0.51 | % |
| | | | | | | | | | | | | |
| Trust Assets Under Management | | | 678,693 | | | | 635,497 | | | | 6.80 | % |
| | | | | | | | | | | | | |
| SHAREHOLDERS' VALUE (PER COMMON SHARE) | | | | | | | | | | | | |
| Net Income - Basic | | $ | 0.46 | | | $ | 0.46 | | | | 0.00 | % |
| Net Income - Diluted | | $ | 0.46 | | | $ | 0.45 | | | | 2.22 | % |
| Dividends | | $ | 0.18 | | | $ | 0.13 | | | | 38.46 | % |
| Common Book Value | | $ | 14.05 | | | $ | 11.99 | | | | 17.18 | % |
| | | | | | | | | | | | | |
| Tangible Common Book Value | | $ | 13.06 | | | $ | 10.99 | | | | 18.84 | % |
| Market Value (Last Trade) | | $ | 20.00 | | | $ | 16.81 | | | | 18.98 | % |
| Market Value / Common Book Value | | | 142.35 | % | | | 140.20 | % | | | 1.53 | % |
| Market Value / Tangible Common Book Value | | | 153.14 | % | | | 152.96 | % | | | 0.12 | % |
| Price Earnings Multiple | | | 10.87 | | | | 9.14 | | | | 18.93 | % |
| Dividend Yield | | | 3.60 | % | | | 3.09 | % | | | 16.50 | % |
| | | | | | | | | | | | | |
| SAFETY AND SOUNDNESS | | | | | | | | | | | | |
| Tangible Common Equity / Tangible Assets | | | 12.22 | % | | | 10.26 | % | | | 19.10 | % |
| Nonperforming Assets / Total Assets | | | 0.70 | % | | | 0.88 | % | | | -20.45 | % |
| Allowance for Loan Losses / Total Loans | | | 1.06 | % | | | 1.23 | % | | | -13.82 | % |
| Total Risk Based Capital Ratio (a) | | | 21.88 | % | | | 18.49 | % | | | 18.32 | % |
| Tier 1 Risk Based Capital Ratio (a) | | | 20.67 | % | | | 17.17 | % | | | 20.40 | % |
| Leverage Ratio (a) | | | 11.45 | % | | | 9.72 | % | | | 17.80 | % |
| | | | | | | | | | | | | |
| AVERAGE BALANCES | | | | | | | | | | | | |
| Average Assets | | $ | 1,302,682 | | | $ | 1,312,560 | | | | -0.75 | % |
| Average Equity | | | 169,897 | | | | 141,415 | | | | 20.14 | % |
| | | | | | | | | | | | | |
| (a) Capital ratios are estimated. | | | | | | | | | | | | |
