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, 2012 QUARTERLY REPORT
Dear Shareholder:
I am proud to report another quarter of outstanding financial results. Net income for the second quarter was $5.7 million and $11.3 million year-to-date. Return on Average Assets (ROAA) is 1.72% for 2012, slightly higher than the 1.71% for the first six months of 2011. Return on Average Equity (ROAE) of 13.12% for 2012 is modestly lower than the 15.43% for the first half of 2011. Both metrics place Citizens & Northern in the top tier of our peer group.
The past quarter saw the balance sheet grow marginally with increases to loans and deposits while borrowed funds declined. Nonperforming Assets to Total Assets is very low at .72%. Capital remains strong and is well in excess of the regulatory defined “Well Capitalized” metrics.
Dividends paid in the first six months of 2012 of 38 cents per share represent a 40.7% increase over dividends paid the first six months of 2011. The market value of our stock (CZNC) closed the quarter at $19.05 per share, an increase of 26.4% over the past year.
The Federal Reserve Bank’s desire to keep interest rates low will continue to apply pressure to our net interest margin. Coupled with revenue reductions and expense increases associated with Dodd-Frank it will require management to maintain its excellent efficiency ratio and to grow interest income and non-interest income.
I am confident the Board of Directors, management and employees are up to the challenge of continuing to enhance shareholder value. We solicit your continued support and welcome your questions and comments.
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 |
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) | | | | | | | | | | |
| | | 2ND | | | 1ST | | | 2ND | | | 6 MONTHS ENDED | |
| | | QUARTER | | | QUARTER | | | QUARTER | | | JUNE | |
| | | 2012 | | | 2012 | | | 2011 | | | 2012 | | | 2011 | |
| | | | (Current) | | | | (Prior Qtr) | | | | (Prior Yr) | | | | (Current) | | | | (Prior Yr) | |
| Interest and Dividend Income | | $ | 14,529 | | | $ | 14,776 | | | $ | 15,443 | | | $ | 29,305 | | | $ | 30,741 | |
| Interest Expense | | | 2,401 | | | | 2,502 | | | | 3,628 | | | | 4,903 | | | | 7,644 | |
| Net Interest Income | | | 12,128 | | | | 12,274 | | | | 11,815 | | | | 24,402 | | | | 23,097 | |
| Provision (Credit) for Loan Losses | | | 367 | | | | (182 | ) | | | 31 | | | | 185 | | | | (161 | ) |
| Net Interest Income After Provision (Credit) for Loan Losses | | | 11,761 | | | | 12,456 | | | | 11,784 | | | | 24,217 | | | | 23,258 | |
| Other Income | | | 4,095 | | | | 3,759 | | | | 3,673 | | | | 7,854 | | | | 6,228 | |
| Net Gains (Losses) on Available-for-sale Securities | | | 203 | | | | (2 | ) | | | 163 | | | | 201 | | | | 2,002 | |
| Noninterest Expenses | | | 8,280 | | | | 8,517 | | | | 7,794 | | | | 16,797 | | | | 16,057 | |
| Income Before Income Tax Provision | | | 7,779 | | | | 7,696 | | | | 7,826 | | | | 15,475 | | | | 15,431 | |
| Income Tax Provision | | | 2,094 | | | | 2,109 | | | | 2,129 | | | | 4,203 | | | | 4,193 | |
| Net Income | | $ | 5,685 | | | $ | 5,587 | | | $ | 5,697 | | | $ | 11,272 | | | $ | 11,238 | |
| | | | | | | | | | | | | | | | | | | | | |
| PER COMMON SHARE DATA: | | | | | | | | | | | | | | | | | | | | |
| Net Income – Basic | | $ | 0.46 | | | $ | 0.46 | | | $ | 0.47 | | | $ | 0.92 | | | $ | 0.92 | |
| Net Income – Diluted | | $ | 0.46 | | | $ | 0.46 | | | $ | 0.47 | | | $ | 0.92 | | | $ | 0.92 | |
| Dividend Per Share | | $ | 0.20 | | | $ | 0.18 | | | $ | 0.14 | | | $ | 0.38 | | | $ | 0.27 | |
| Number Shares Used in Computation - Basic | | | 12,225,808 | | | | 12,206,870 | | | | 12,177,110 | | | | 12,216,339 | | | | 12,176,027 | |
| Number Shares Used in Computation - Diluted | | | 12,242,833 | | | | 12,245,752 | | | | 12,180,199 | | | | 12,243,303 | | | | 12,179,153 | |
| CONDENSED, CONSOLIDATED BALANCE SHEET DATA | | | | | | | | | |
| (In Thousands, Except Per Share Data) (Unaudited) | | | | | | | | | |
| | | JUNE 30, | | | MAR. 31, | | | JUNE 30, | |
| | | 2012 | | | 2012 | | | 2011 | |
| ASSETS | | | | | | | | | |
| Cash & Due from Banks | | $ | 69,158 | | | $ | 56,498 | | | $ | 49,392 | |
| Available-for-sale Securities | | | 478,368 | | | | 486,664 | | | | 464,214 | |
| Loans Held for Sale | | | 3,190 | | | | 2,223 | | | | 167 | |
| Loans, Net | | | 696,777 | | | | 690,218 | | | | 705,667 | |
| Intangible Assets | | | 12,117 | | | | 12,135 | | | | 12,211 | |
| Other Assets | | | 67,917 | | | | 69,026 | | | | 77,999 | |
| TOTAL ASSETS | | $ | 1,327,527 | | | $ | 1,316,764 | | | $ | 1,309,650 | |
| | | | | | | | | | | | | |
| LIABILITIES | | | | | | | | | | | | |
| Deposits | | $ | 1,029,456 | | | $ | 1,016,801 | | | $ | 995,361 | |
| Repo Sweep Accounts | | | 4,242 | | | | 4,030 | | | | 20,343 | |
| Total Deposits and Repo Sweeps | | | 1,033,698 | | | | 1,020,831 | | | | 1,015,704 | |
| Borrowed Funds | | | 110,038 | | | | 115,202 | | | | 133,182 | |
| Other Liabilities | | | 7,729 | | | | 9,117 | | | | 7,071 | |
| TOTAL LIABILITIES | | | 1,151,465 | | | | 1,145,150 | | | | 1,155,957 | |
| | | | | | | | | | | | | |
| SHAREHOLDERS' EQUITY | | | | | | | | | | | | |
| Common Shareholders' Equity, Excluding Accumulated | | | | | | | | | | | | |
| Other Comprehensive Income (Loss) | | | 165,008 | | | | 161,240 | | | | 148,707 | |
| Accumulated Other Comprehensive Income (Loss): | | | | | | | | | | | | |
| Net Unrealized Gains/Losses on | | | | | | | | | | | | |
| Available-for-sale Securities | | | 11,519 | | | | 10,852 | | | | 5,299 | |
| Defined Benefit Plans | | | (465 | ) | | | (478 | ) | | | (313 | ) |
| TOTAL SHAREHOLDERS' EQUITY | | | 176,062 | | | | 171,614 | | | | 153,693 | |
| TOTAL LIABILITIES & SHAREHOLDERS' EQUITY | | $ | 1,327,527 | | | $ | 1,316,764 | | | $ | 1,309,650 | |
| CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS | | | | | | |
| (In Thousands, Except Per Share Data) (Unaudited) | | | | | | |
| | | 6 MONTHS ENDED | | | % | |
| | | JUNE 30, | | | INCREASE | |
| | | 2012 | | | 2011 | | | (DECREASE) | |
| EARNINGS PERFORMANCE | | | | | | | | | | | | |
| Net Income | | $ | 11,272 | | | $ | 11,238 | | | | 0.30 | % |
| Return on Average Assets | | | 1.72 | % | | | 1.71 | % | | | 0.58 | % |
| Return on Average Equity | | | 13.12 | % | | | 15.43 | % | | | -14.97 | % |
| | | | | | | | | | | | | |
| BALANCE SHEET HIGHLIGHTS | | | | | | | | | | | | |
| Total Assets | | $ | 1,327,527 | | | $ | 1,309,650 | | | | 1.37 | % |
| Available-for-Sale Securities | | | 478,368 | | | | 464,214 | | | | 3.05 | % |
| Loans (Net) | | | 696,777 | | | | 705,667 | | | | -1.26 | % |
| Allowance for Loan Losses | | | 7,657 | | | | 8,269 | | | | -7.40 | % |
| Deposits and Repo Sweep Accounts | | | 1,033,698 | | | | 1,015,704 | | | | 1.77 | % |
| | | | | | | | | | | | | |
| Trust Assets Under Management | | | 669,538 | | | | 634,821 | | | | 5.47 | % |
| | | | | | | | | | | | | |
| SHAREHOLDERS' VALUE | | | | | | | | | | | | |
| (PER COMMON SHARE) | | | | | | | | | | | | |
| Net Income - Basic | | $ | 0.92 | | | $ | 0.92 | | | | 0.00 | % |
| Net Income - Diluted | | $ | 0.92 | | | $ | 0.92 | | | | 0.00 | % |
| Dividends | | $ | 0.38 | | | $ | 0.27 | | | | 40.74 | % |
| Common Book Value | | $ | 14.39 | | | $ | 12.65 | | | | 13.75 | % |
| Tangible Common Book Value | | $ | 13.40 | | | $ | 11.64 | | | | 15.12 | % |
| Market Value (Last Trade) | | $ | 19.05 | | | $ | 15.07 | | | | 26.41 | % |
| Market Value / Common Book Value | | | 132.38 | % | | | 119.13 | % | | | 11.12 | % |
| Market Value / Tangible Common Book Value | | | 142.16 | % | | | 129.47 | % | | | 9.81 | % |
| Price Earnings Multiple | | | 10.35 | | | | 8.19 | | | | 26.37 | % |
| Dividend Yield | | | 3.99 | % | | | 3.58 | % | | | 11.45 | % |
| | | | | | | | | | | | | |
| SAFETY AND SOUNDNESS | | | | | | | | | | | | |
| Tangible Common Equity / Tangible Assets | | | 12.46 | % | | | 10.90 | % | | | 14.31 | % |
| Nonperforming Assets / Total Assets | | | 0.72 | % | | | 0.75 | % | | | -4.00 | % |
| Allowance for Loan Losses / Total Loans | | | 1.09 | % | | | 1.16 | % | | | -6.03 | % |
| Total Risk Based Capital Ratio (a) | | | 22.56 | % | | | 19.40 | % | | | 16.29 | % |
| Tier 1 Risk Based Capital Ratio (a) | | | 21.33 | % | | | 18.15 | % | | | 17.52 | % |
| Leverage Ratio (a) | | | 11.76 | % | | | 10.14 | % | | | 15.98 | % |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| AVERAGE BALANCES | | | | | | | | | | | | |
| Average Assets | | $ | 1,307,146 | | | $ | 1,313,482 | | | | -0.48 | % |
| Average Equity | | | 171,775 | | | | 145,620 | | | | 17.96 | % |
| | | | | | | | | | | | | |
| (a) Capital ratios for the most recent period are estimated. | | | | | | | | |
