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, 2013 | QUARTERLY REPORT |
Dear Shareholder:
Citizens & Northern Bank completed 2013 with net income of $18,594,000, a Return on Average Assets (ROAA) of 1.50% and Return on Average Equity of (ROAE) of 10.25%. While the financial results for the past year are lower than the prior year they remain near the top of our peer group. Fourth quarter 2013 net income of $4,225,000 was significantly impacted by establishing an allowance of $1,552,000 on loans to one commercial customer. As reported previously, margin compression continues to challenge our industry as have regulatory changes that affect non-interest income. We continue to aggressively control non-interest expense while pursuing opportunities for additional top-line revenue.
The balance sheet continued to remain relatively flat as the low interest rate environment provided few opportunities to expand the balance sheet without taking undue risk. Trust Assets Under Management (TAUM) increased 12.46% over the past year and the Trust and Financial Management Group revenue grew 4.8%.
Our stock (CZNC) closed the year at $20.63, up 9.15% over the prior year. Dividends were increased to $1.00 per share which represents an increase of 19.05% over the prior year.
Your Board of Directors, officers and employees continue our mission to deliver superior customer service while enhancing shareholder value. As shareholders, we respectfully request 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. 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) | ||||||||||||||||||||
| 4TH | 3RD | 4TH | YEARS ENDED | |||||||||||||||||
| QUARTER | QUARTER | QUARTER | DECEMBER 31, | |||||||||||||||||
| 2013 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
| (Current) | (Prior Qtr) | (Prior Yr) | (Current) | (Prior Yr) | ||||||||||||||||
| Interest and Dividend Income | $ | 11,885 | $ | 12,027 | $ | 13,491 | $ | 48,914 | $ | 56,632 | ||||||||||
| Interest Expense | 1,354 | 1,396 | 1,900 | 5,765 | 9,031 | |||||||||||||||
| Net Interest Income | 10,531 | 10,631 | 11,591 | 43,149 | 47,601 | |||||||||||||||
| Provision (Credit) for Loan Losses | 1,559 | 239 | (133 | ) | 2,047 | 288 | ||||||||||||||
| Net Interest Income After Provision (Credit) for Loan Losses | 8,972 | 10,392 | 11,724 | 41,102 | 47,313 | |||||||||||||||
| Other Income | 4,124 | 4,293 | 4,327 | 16,451 | 16,383 | |||||||||||||||
| Net Gains on Available-for-sale Securities | 266 | 193 | 51 | 1,718 | 2,682 | |||||||||||||||
| Loss on Prepayment of Borrowings | 0 | 0 | 0 | 1,023 | 2,333 | |||||||||||||||
| Other Noninterest Expenses | 7,788 | 8,610 | 7,954 | 33,471 | 32,914 | |||||||||||||||
| Income Before Income Tax Provision | 5,574 | 6,268 | 8,148 | 24,777 | 31,131 | |||||||||||||||
| Income Tax Provision | 1,349 | 1,579 | 2,209 | 6,183 | 8,426 | |||||||||||||||
| Net Income | $ | 4,225 | $ | 4,689 | $ | 5,939 | $ | 18,594 | $ | 22,705 | ||||||||||
| PER COMMON SHARE DATA: | ||||||||||||||||||||
| Net Income - Basic | $ | 0.34 | $ | 0.38 | $ | 0.48 | $ | 1.51 | $ | 1.86 | ||||||||||
| Net Income - Diluted | $ | 0.34 | $ | 0.38 | $ | 0.48 | $ | 1.50 | $ | 1.85 | ||||||||||
| Dividend Per Share | $ | 0.25 | $ | 0.25 | $ | 0.24 | $ | 1.00 | $ | 0.84 | ||||||||||
| Number Shares Used in Computation - Basic | 12,381,093 | 12,363,887 | 12,265,100 | 12,352,383 | 12,235,748 | |||||||||||||||
| Number Shares Used in Computation - Diluted | 12,415,745 | 12,396,902 | 12,283,702 | 12,382,790 | 12,260,208 | |||||||||||||||
| CONDENSED, CONSOLIDATED BALANCE SHEET DATA | ||||||||||||
| (In Thousands, Except Per Share Data) (Unaudited) | ||||||||||||
| DEC. 31, | SEPT. 30, | DEC. 31, | ||||||||||
| 2013 | 2013 | 2012 | ||||||||||
| ASSETS | ||||||||||||
| Cash & Due from Banks | $ | 44,619 | $ | 43,247 | $ | 59,836 | ||||||
| Available-for-sale Securities | 482,658 | 475,650 | 472,577 | |||||||||
| Loans Held for Sale | 54 | 801 | 2,545 | |||||||||
| Loans, Net | 635,640 | 641,345 | 677,053 | |||||||||
| Intangible Assets | 12,029 | 12,042 | 12,080 | |||||||||
| Other Assets | 62,695 | 59,867 | 62,816 | |||||||||
| TOTAL ASSETS | $ | 1,237,695 | $ | 1,232,952 | $ | 1,286,907 | ||||||
| LIABILITIES | ||||||||||||
| Deposits | $ | 954,516 | $ | 963,465 | $ | 1,006,106 | ||||||
| Repo Sweep Accounts | 3,385 | 4,833 | 5,567 | |||||||||
| Total Deposits and Repo Sweeps | 957,901 | 968,298 | 1,011,673 | |||||||||
| Borrowed Funds | 93,338 | 73,405 | 83,812 | |||||||||
| Other Liabilities | 6,984 | 10,043 | 8,636 | |||||||||
| TOTAL LIABILITIES | 1,058,223 | 1,051,746 | 1,104,121 | |||||||||
| SHAREHOLDERS' EQUITY | ||||||||||||
| Common Shareholders' Equity, Excluding Accumulated | ||||||||||||
| Other Comprehensive Income (Loss) | 180,465 | 178,838 | 171,783 | |||||||||
| Accumulated Other Comprehensive Income (Loss): | ||||||||||||
| Net Unrealized Gains/Losses on | ||||||||||||
| Available-for-sale Securities | (1,004 | ) | 2,520 | 11,568 | ||||||||
| Defined Benefit Plans | 11 | (152 | ) | (565 | ) | |||||||
| TOTAL SHAREHOLDERS' EQUITY | 179,472 | 181,206 | 182,786 | |||||||||
| TOTAL LIABILITIES & SHAREHOLDERS' EQUITY | $ | 1,237,695 | $ | 1,232,952 | $ | 1,286,907 | ||||||
| CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS | ||||||||||||
| (In Thousands, Except Per Share Data) (Unaudited) | ||||||||||||
| YEARS ENDED | % | |||||||||||
| DECEMBER 31, | INCREASE | |||||||||||
| 2013 | 2012 | (DECREASE) | ||||||||||
| EARNINGS PERFORMANCE | ||||||||||||
| Net Income | $ | 18,594 | $ | 22,705 | -18.11 | % | ||||||
| Return on Average Assets | 1.50 | % | 1.74 | % | -13.79 | % | ||||||
| Return on Average Equity | 10.25 | % | 12.91 | % | -20.60 | % | ||||||
| BALANCE SHEET HIGHLIGHTS | ||||||||||||
| Total Assets | $ | 1,237,695 | $ | 1,286,907 | -3.82 | % | ||||||
| Available-for-Sale Securities | 482,658 | 472,577 | 2.13 | % | ||||||||
| Loans (Net) | 635,640 | 677,053 | -6.12 | % | ||||||||
| Allowance for Loan Losses | 8,663 | 6,857 | 26.34 | % | ||||||||
| Deposits and Repo Sweep Accounts | 957,901 | 1,011,673 | -5.32 | % | ||||||||
| OFF-BALANCE SHEET | ||||||||||||
| Outstanding Balance of Mortgage Loans Sold | ||||||||||||
| with Servicing Retained | 145,954 | 100,631 | 45.04 | % | ||||||||
| Trust Assets Under Management | 796,115 | 707,912 | 12.46 | % | ||||||||
| SHAREHOLDERS' VALUE | ||||||||||||
| (PER COMMON SHARE) | ||||||||||||
| Net Income - Basic | $ | 1.51 | $ | 1.86 | -18.82 | % | ||||||
| Net Income - Diluted | $ | 1.50 | $ | 1.85 | -18.92 | % | ||||||
| Dividends | $ | 1.00 | $ | 0.84 | 19.05 | % | ||||||
| Common Book Value | $ | 14.49 | $ | 14.89 | -2.69 | % | ||||||
| Tangible Common Book Value | $ | 13.51 | $ | 13.91 | -2.88 | % | ||||||
| Market Value (Last Trade) | $ | 20.63 | $ | 18.90 | 9.15 | % | ||||||
| Market Value / Common Book Value | 142.37 | % | 126.93 | % | 12.17 | % | ||||||
| Market Value / Tangible Common Book Value | 152.70 | % | 135.87 | % | 12.39 | % | ||||||
| Price Earnings Multiple | 13.66 | 10.16 | 34.45 | % | ||||||||
| Dividend Yield | 4.85 | % | 4.44 | % | 9.23 | % | ||||||
| Common Shares Outstanding, End of Period | 12,390,063 | 12,274,035 | 0.95 | % | ||||||||
| SAFETY AND SOUNDNESS | ||||||||||||
| Tangible Common Equity / Tangible Assets | 13.66 | % | 13.39 | % | 2.02 | % | ||||||
| Nonperforming Assets / Total Assets | 1.53 | % | 0.82 | % | 86.59 | % | ||||||
| Allowance for Loan Losses / Total Loans | 1.34 | % | 1.00 | % | 34.00 | % | ||||||
| Total Risk Based Capital Ratio (a) | 26.59 | % | 24.01 | % | 10.75 | % | ||||||
| Tier 1 Risk Based Capital Ratio (a) | 25.10 | % | 22.86 | % | 9.80 | % | ||||||
| Leverage Ratio (a) | 13.79 | % | 12.53 | % | 10.06 | % | ||||||
| AVERAGE BALANCES | ||||||||||||
| Average Assets | $ | 1,237,096 | $ | 1,305,163 | -5.22 | % | ||||||
| Average Equity | $ | 181,412 | $ | 175,822 | 3.18 | % | ||||||
| (a) Capital ratios for the most recent period are estimated. |