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, 2014 QUARTERLY REPORT
Dear Shareholder:
Net income of $4,288,000 during the first quarter of 2014 remained strong as evidenced by a Return on Average Assets (ROAA) 1.41%. First quarter 2014 net income was 8.88% less than the first quarter of 2013, but 1.49% higher than the fourth quarter of 2013. Our first quarter 2014 earnings include the benefit of a credit for loan losses of $311,000 resulting from a reduction in estimated allowances required on impaired loans as well as lower total loans outstanding, but also include the negative effect of lower gains from sales of mortgage loans (down $164,000 from the fourth quarter 2013 and $353,000 from the first quarter 2013). The lower volume of mortgage loans sold in the first quarter resulted from challenging market conditions, including higher long-term interest rates and difficult winter weather throughout our market area. Earnings continue to be challenged by margin compression, regulatory pressure on non-interest income and increased compliance costs as a result of the Dodd-Frank legislation.
Over the past year the balance sheet remained relatively flat as the continued low interest rate environment and weak loan demand provided few opportunities to expand the balance sheet without taking undue risk. Net loans have declined $42,153,000 over the past year; however the outstanding balance of mortgage loans sold with servicing retained increased $33,257,000. Total deposits and repo sweep accounts decreased by $6,048,000 or 0.62% over the last twelve months. Trust Assets Under Management (TAUM) grew to $797,833,000 or 8.21% over the past year. The growth was a combination of market appreciation and new business development.
All of our capital ratios remain above the regulatory defined “well capitalized” levels. Our strong earnings performance and capital position has allowed us to steadily increase the dividend over the past several years. During the first quarter we paid a dividend of 26 cents per share which represents a 4.00% increase over the first quarter of 2013. Our challenge remains finding suitable investments to leverage our excess capital.
As shareholders, we continue to solicit your support and stand willing to answer any concern you may have.
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 |
| 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 |
| | 2014 | 2013 | 2013 |
| | (Current) | (Prior Qtr) | (Prior Yr) |
| Interest and Dividend Income | $11,406 | $11,885 | $12,647 |
| Interest Expense | 1,288 | 1,354 | 1,600 |
| Net Interest Income | 10,118 | 10,531 | 11,047 |
| (Credit) Provision for Loan Losses | (311) | 1,559 | 183 |
| Net Interest Income After Provision (Credit) for Loan Losses | 10,429 | 8,972 | 10,864 |
| Other Income | 3,751 | 4,124 | 3,843 |
| Net Gains on Available-for-sale Securities | 31 | 266 | 1,159 |
| Loss on Prepayment of Borrowings | 0 | 0 | 1,023 |
| Other Noninterest Expenses | 8,524 | 7,788 | 8,553 |
| Income Before Income Tax Provision | 5,687 | 5,574 | 6,290 |
| Income Tax Provision | 1,399 | 1,349 | 1,584 |
| Net Income | $4,288 | $4,225 | $4,706 |
| | | | |
| PER COMMON SHARE DATA: | | | |
| Net Income – Basic | $0.35 | $0.34 | $0.38 |
| Net Income – Diluted | $0.34 | $0.34 | $0.38 |
| Dividend Per Share | $0.26 | $0.25 | $0.25 |
| Number Shares Used in Computation - Basic | 12,417,627 | 12,381,093 | 12,321,014 |
| Number Shares Used in Computation - Diluted | 12,444,797 | 12,415,745 | 12,349,264 |
| | | | |
| CONDENSED, CONSOLIDATED BALANCE SHEET DATA | | | |
| (In Thousands, Except Per Share Data) (Unaudited) | | | |
| | MAR. 31, | DEC. 31, | MAR. 31, |
| | 2014 | 2013 | 2013 |
| ASSETS | | | |
| Cash & Due from Banks | $61,087 | $44,619 | $45,069 |
| Available-for-sale Securities | 484,014 | 482,658 | 459,855 |
| Loans Held for Sale | 133 | 54 | 799 |
| Loans, Net | 617,475 | 635,640 | 659,628 |
| Intangible Assets | 12,020 | 12,029 | 12,067 |
| Other Assets | 60,410 | 62,695 | 62,903 |
| TOTAL ASSETS | $1,235,139 | $1,237,695 | $1,240,321 |
| | | | |
| LIABILITIES | | | |
| Deposits | $961,833 | $954,516 | $967,974 |
| Repo Sweep Accounts | 4,730 | 3,385 | 4,637 |
| Total Deposits and Repo Sweeps | 966,563 | 957,901 | 972,611 |
| Borrowed Funds | 73,270 | 93,338 | 76,661 |
| Other Liabilities | 10,544 | 6,984 | 7,841 |
| TOTAL LIABILITIES | 1,050,377 | 1,058,223 | 1,057,113 |
| | | | |
| SHAREHOLDERS' EQUITY | | | |
| Common Shareholders' Equity, Excluding Accumulated | | | |
| Other Comprehensive Income (Loss) | 182,220 | 180,465 | 174,137 |
| Accumulated Other Comprehensive Income (Loss): | | | |
| Net Unrealized Gains/Losses on | | | |
| Available-for-sale Securities | 2,442 | (1,004) | 9,223 |
| Defined Benefit Plans | 100 | 11 | (152) |
| TOTAL SHAREHOLDERS' EQUITY | 184,762 | 179,472 | 183,208 |
| TOTAL LIABILITIES & SHAREHOLDERS' EQUITY | $1,235,139 | $1,237,695 | $1,240,321 |
| CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS | | |
| (In Thousands, Except Per Share Data) (Unaudited) | | |
| | 3 MONTHS ENDED | % |
| | MARCH 31, | INCREASE |
| | 2014 | 2013 | (DECREASE) |
| EARNINGS PERFORMANCE | | | |
| Net Income | $4,288 | $4,706 | -8.88% |
| Return on Average Assets | 1.41% | 1.50% | -6.00% |
| Return on Average Equity | 9.41% | 10.31% | -8.73% |
| | | | |
| BALANCE SHEET HIGHLIGHTS | | | |
| Total Assets | $1,235,139 | $1,240,321 | -0.42% |
| Available-for-Sale Securities | 484,014 | 459,855 | 5.25% |
| Loans (Net) | 617,475 | 659,628 | -6.39% |
| Allowance for Loan Losses | 8,343 | 7,118 | 17.21% |
| Deposits and Repo Sweep Accounts | 966,563 | 972,611 | -0.62% |
| | | | |
| OFF-BALANCE SHEET | | | |
| Outstanding Balance of Mortgage Loans Sold | | | |
| with Servicing Retained | 147,391 | 114,134 | 29.14% |
| Trust Assets Under Management | 797,833 | 737,298 | 8.21% |
| | | | |
| SHAREHOLDERS' VALUE | | | |
| (PER COMMON SHARE) | | | |
| Net Income - Basic | $0.35 | $0.38 | -7.89% |
| Net Income - Diluted | $0.34 | $0.38 | -10.53% |
| Dividends | $0.26 | $0.25 | 4.00% |
| Common Book Value | $14.87 | $14.86 | 0.07% |
| Tangible Common Book Value | $13.90 | $13.88 | 0.14% |
| Market Value (Last Trade) | $19.71 | $19.50 | 1.08% |
| Market Value / Common Book Value | 132.55% | 131.22% | 1.01% |
| Market Value / Tangible Common Book Value | 141.80% | 140.49% | 0.93% |
| Price Earnings Multiple | 14.08 | 12.83 | 9.74% |
| Dividend Yield | 5.28% | 5.13% | 2.92% |
| Common Shares Outstanding, End of Period | 12,429,000 | 12,331,654 | 0.79% |
| | | | |
| SAFETY AND SOUNDNESS | | | |
| Tangible Common Equity / Tangible Assets | 14.12% | 13.93% | 1.36% |
| Nonperforming Assets / Total Assets | 1.44% | 0.83% | 73.49% |
| Allowance for Loan Losses / Total Loans | 1.33% | 1.07% | 24.30% |
| Total Risk Based Capital Ratio (a) | 27.40% | 25.05% | 9.38% |
| Tier 1 Risk Based Capital Ratio (a) | 25.95% | 23.83% | 8.90% |
| Leverage Ratio (a) | 14.11% | 13.15% | 7.30% |
| | | | |
| | | | |
| AVERAGE BALANCES | | | |
| Average Assets | $1,218,992 | $1,251,679 | -2.61% |
| Average Equity | $182,307 | $182,605 | -0.16% |
| | | | |
| | | | |
| | | | |
| (a) Capital ratios for the most recent period are estimated. | | |
