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 |
| December 31, 2012 | | QUARTERLY REPORT |
Dear Shareholder:
Citizens & Northern finished 2012 on a strong note with fourth quarter net income of $5,939,000 resulting in net income of $22,705,000 for the year. While the quarterly and annual results are slightly less than the prior year the annual Return on Average Assets (ROAA) remains a robust 1.74% with a strong Return on Average Equity (ROAE) of 12.91%. The keys to our superior earnings performance are the maintenance of a strong net interest margin in a very difficult rate environment, strong non-interest income and an acute focus on overhead expenses.
Total assets remained relatively flat as we continue to de-leverage the balance sheet as the current interest rate environment provides few appropriate opportunities without incurring undue interest rate and/or credit risk. Other highlights for the year are non-performing assets remain manageable at .82% and residential mortgage origination remains brisk with the bank servicing $100,631,000 of mortgages generated which is an increase of $43,994,000 over the prior year. While bank assets were flat, Trust Assets Under Management rose 11.5% finishing the year at $707,912,000.
Our stock (CZNC) closed the year at $18.90, up 2.33% over the prior year. Dividends were increased to $.84 per share which represents an increase of 44.83% over the prior year.
We realize that 2013 will be a very challenging year for the industry as the Federal Reserve Bank continues to keep interest rates low causing margin compression and as more of the rules are finalized to implement Dodd-Frank.
I will more fully report on the past year with my correspondence to the shareholders contained in our Annual Highlights. As shareholders, we solicit your continued support.
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. Lamber | 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) | | | | | |
| | 4TH | 3RD | 4TH | YEARS ENDED |
| | QUARTER | QUARTER | QUARTER | DECEMBER 31, |
| | 2012 | 2012 | 2011 | 2012 | 2011 |
| | (Current) | (Prior Qtr) | (Prior Yr) | (Current) | (Prior Yr) |
| Interest and Dividend Income | $13,491 | $13,836 | $15,198 | $56,632 | $61,256 |
| Interest Expense | 1,900 | 2,228 | 2,804 | 9,031 | 13,556 |
| Net Interest Income | 11,591 | 11,608 | 12,394 | 47,601 | 47,700 |
| (Credit) Provision for Loan Losses | (133) | 236 | (87) | 288 | (285) |
| Net Interest Income After (Credit) Provision for Loan Losses | 11,724 | 11,372 | 12,481 | 47,313 | 47,985 |
| Other Income | 4,360 | 4,103 | 3,711 | 16,317 | 13,938 |
| Net Gains on Available-for-sale Securities | 51 | 2,430 | 188 | 2,682 | 2,216 |
| Loss on Prepayment of Borrowings | 0 | 2,190 | 0 | 2,333 | 0 |
| Other Noninterest Expenses | 7,987 | 8,207 | 7,948 | 32,848 | 32,057 |
| Income Before Income Tax Provision | 8,148 | 7,508 | 8,432 | 31,131 | 32,082 |
| Income Tax Provision | 2,209 | 2,014 | 2,291 | 8,426 | 8,714 |
| Net Income | $5,939 | $5,494 | $6,141 | $22,705 | $23,368 |
| | | | | | |
| PER COMMON SHARE DATA: | | | | | |
| Net Income - Basic | $0.48 | $0.45 | $0.51 | $1.86 | $1.92 |
| Net Income - Diluted | $0.48 | $0.45 | $0.51 | $1.85 | $1.92 |
| Dividend Per Share | $0.24 | $0.22 | $0.16 | $0.84 | $0.58 |
| Number Shares Used in Computation - Basic | 12,265,100 | 12,244,797 | 12,145,666 | 12,235,748 | 12,162,045 |
| Number Shares Used in Computation - Diluted | 12,283,702 | 12,270,685 | 12,154,971 | 12,260,208 | 12,166,768 |
| CONDENSED, CONSOLIDATED BALANCE SHEET DATA | | | |
| (In Thousands, Except Per Share Data) (Unaudited) | | | |
| | DEC. 31, | SEPT. 30, | DEC. 31, |
| | 2012 | 2012 | 2011 |
| ASSETS | | | |
| Cash & Due from Banks | $59,836 | $42,496 | $60,575 |
| Available-for-sale Securities | 472,577 | 487,314 | 481,685 |
| Loans Held for Sale | 2,545 | 3,846 | 939 |
| Loans, Net | 677,053 | 690,357 | 700,610 |
| Intangible Assets | 12,080 | 12,098 | 12,154 |
| Other Assets | 62,816 | 73,898 | 67,772 |
| TOTAL ASSETS | $1,286,907 | $1,310,009 | $1,323,735 |
| | | | |
| LIABILITIES | | | |
| Deposits | 1,006,106 | 1,013,010 | 1,018,206 |
| Repo Sweep Accounts | 5,567 | 4,657 | 4,950 |
| Total Deposits and Repo Sweeps | 1,011,673 | 1,017,667 | 1,023,156 |
| Borrowed Funds | 83,812 | 104,954 | 125,363 |
| Other Liabilities | 8,636 | 7,242 | 7,831 |
| TOTAL LIABILITIES | 1,104,121 | 1,129,863 | 1,156,350 |
| | | | |
| SHAREHOLDERS' EQUITY | | | |
| Common Shareholders' Equity, Excluding Accumulated | | | |
| Other Comprehensive Income (Loss) | 171,783 | 168,320 | 157,225 |
| Accumulated Other Comprehensive Income (Loss): | | | |
| Net Unrealized Gains/Losses on | | | |
| Available-for-sale Securities | 11,568 | 12,278 | 10,791 |
| Defined Benefit Plans | (565) | (452) | (631) |
| TOTAL SHAREHOLDERS' EQUITY | 182,786 | 180,146 | 167,385 |
| TOTAL LIABILITIES & SHAREHOLDERS' EQUITY | $1,286,907 | $1,310,009 | $1,323,735 |
| CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS | | |
| (In Thousands, Except Per Share Data) (Unaudited) | | |
| | YEARS ENDED | % |
| | DECEMBER 31, | INCREASE |
| | 2012 | 2011 | (DECREASE) |
| EARNINGS PERFORMANCE | | | |
| Net Income | $22,705 | $23,368 | -2.84% |
| Return on Average Assets | 1.74% | 1.78% | -2.25% |
| Return on Average Equity | 12.91% | 15.30% | -15.62% |
| | | | |
| BALANCE SHEET HIGHLIGHTS | | | |
| Total Assets | $1,286,907 | $1,323,735 | -2.78% |
| Available-for-Sale Securities | 472,577 | 481,685 | -1.89% |
| Loans (Net) | 677,053 | 700,610 | -3.36% |
| Allowance for Loan Losses | 6,857 | 7,705 | -11.01% |
| Deposits and Repo Sweep Accounts | 1,011,673 | 1,023,156 | -1.12% |
| | | | |
| OFF-BALANCE SHEET | | | |
| Outstanding Balance of Mortgage Loans Sold | | | |
| with Servicing Retained | 100,631 | 56,637 | 77.68% |
| Trust Assets Under Management | 707,912 | 634,782 | 11.52% |
| | | | |
| SHAREHOLDERS' VALUE | | | |
| (PER COMMON SHARE) | | | |
| Net Income - Basic | $1.86 | $1.92 | -3.12% |
| Net Income - Diluted | $1.85 | $1.92 | -3.65% |
| Dividends | $0.84 | $0.58 | 44.83% |
| Common Book Value | $14.89 | $13.77 | 8.13% |
| Tangible Common Book Value | $13.91 | $12.77 | 8.93% |
| Market Value (Last Trade) | $18.90 | $18.47 | 2.33% |
| Market Value / Common Book Value | 126.93% | 134.13% | -5.37% |
| Market Value / Tangible Common Book Value | 135.87% | 144.64% | -6.06% |
| Price Earnings Multiple | 10.16 | 9.62 | 5.61% |
| Dividend Yield | 4.44% | 3.14% | 41.40% |
| | | | |
| SAFETY AND SOUNDNESS | | | |
| Tangible Common Equity / Tangible Assets | 13.39% | 11.84% | 13.09% |
| Nonperforming Assets / Total Assets | 0.82% | 0.73% | 12.33% |
| Allowance for Loan Losses / Total Loans | 1.00% | 1.09% | -8.26% |
| Total Risk Based Capital Ratio (a) | 23.97% | 21.17% | 13.23% |
| Tier 1 Risk Based Capital Ratio (a) | 22.82% | 19.95% | 14.39% |
| Leverage Ratio (a) | 12.53% | 10.93% | 14.64% |
| | | | |
| | | | |
| AVERAGE BALANCES | | | |
| Average Assets | $1,305,163 | $1,313,445 | -0.63% |
| Average Equity | $175,822 | $152,718 | 15.13% |
| | | | |
| (a) Capital ratios for the most recent period are estimated. | | |
