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
| September 30, 2014 | QUARTERLY REPORT |
Dear Shareholder:
Since 2000, it has been my privilege to serve C&N and our shareholders as Chief Financial Officer, and on August 12, 2014, the Board appointed me Interim President and CEO. It is truly an honor to serve you in this role. I would also like to express my deep gratitude for the help and support I have received from so many of our employees who have worked hard to make sure our transition is as smooth as possible.
Third quarter 2014 earnings of $0.34 per share were very consistent with results for the first two quarters of the year. For the first nine months of 2014, earnings per share of $1.02 is down 12.1% from 2013, reflecting margin compression resulting from declining yields on loans and securities and a reduction in the average total amount of loans outstanding. Results for 2014 have also been impacted by a reduction in gains from sales of residential mortgage loans, consistent with the reduction in volume of mortgage originations attributable to less refinancing activity as well as other factors that has been the trend in most of the country. Third quarter 2014 results included realized gains on securities of $760,000, which approximately offset the total cost of severance expenses incurred during the period. On an encouraging note, average loans outstanding was $4.3 million higher in the third quarter 2014 than in the second quarter, and the balance of total loans outstanding at September 30 was up $8.8 million as compared to the balance at June 30.
In July 2014, we announced a common stock repurchase plan for the repurchase of up to 622,500 shares, or 5% of the total shares outstanding on July 16, 2014. Through September 30, 2014, 129,000 shares had been repurchased for a total cost of $2,464,000, at an average price of $19.10 per share. Our ability to repurchase shares results from our very strong capital position. Dividends of $0.78 per share have been paid through the first three quarters of the year, representing an annualized return of 5.47% based on the quarter-end closing stock price of $19.00.
Please do not hesitate to contact me if you have questions or concerns.
Mark A. Hughes
Interim President and CEO
CITIZENS & NORTHERN CORPORATION
BOARD OF DIRECTORS
| Dennis F. Beardslee | Raymond R. Mattie | ||
| Jan E. Fisher | Edward H. Owlett, III | ||
| R. Bruce Haner | Leonard Simpson | ||
| Susan E. Hartley | James E. Towner | ||
| Mark A. Hughes | Ann M. Tyler | ||
| Leo F. Lambert |
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 |
| DEPOSIT OPERATIONS - 90-92 Main St., Wellsboro, PA 16901 | |
| BANKCARD SERVICES - 90-92 Main St., Wellsboro PA 16901 | 800-577-8001 |
| ELECTRONIC BANKING – 90-92 Main 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)
| 3RD | 2ND | 3RD | 9 MONTHS ENDED | |||||||||||||||||
| QUARTER | QUARTER | QUARTER | SEPT. 30, | |||||||||||||||||
| 2014 | 2014 | 2013 | 2014 | 2013 | ||||||||||||||||
| (Current) | (Prior Qtr) | (Prior Yr) | (Current) | (Prior Yr) | ||||||||||||||||
| Interest and Dividend Income | $ | 11,572 | $ | 11,563 | $ | 12,027 | $ | 34,541 | $ | 37,029 | ||||||||||
| Interest Expense | 1,287 | 1,290 | 1,396 | 3,865 | 4,411 | |||||||||||||||
| Net Interest Income | 10,285 | 10,273 | 10,631 | 30,676 | 32,618 | |||||||||||||||
| Provision for Loan Losses | 218 | 446 | 239 | 353 | 488 | |||||||||||||||
| Net Interest Income After Provision for Loan Losses | 10,067 | 9,827 | 10,392 | 30,323 | 32,130 | |||||||||||||||
| Other Income | 3,887 | 3,980 | 4,293 | 11,618 | 12,327 | |||||||||||||||
| Net Gains on Available-for-sale Securities | 760 | 103 | 193 | 894 | 1,452 | |||||||||||||||
| Loss on Prepayment of Borrowings | 0 | 0 | 0 | 0 | 1,023 | |||||||||||||||
| Other Noninterest Expenses | 9,036 | 8,347 | 8,610 | 25,907 | 25,683 | |||||||||||||||
| Income Before Income Tax Provision | 5,678 | 5,563 | 6,268 | 16,928 | 19,203 | |||||||||||||||
| Income Tax Provision | 1,411 | 1,400 | 1,579 | 4,210 | 4,834 | |||||||||||||||
| Net Income | $ | 4,267 | $ | 4,163 | $ | 4,689 | $ | 12,718 | $ | 14,369 | ||||||||||
| PER COMMON SHARE DATA: | ||||||||||||||||||||
| Net Income – Basic | $ | 0.34 | $ | 0.33 | $ | 0.38 | $ | 1.02 | $ | 1.16 | ||||||||||
| Net Income – Diluted | $ | 0.34 | $ | 0.33 | $ | 0.38 | $ | 1.02 | $ | 1.16 | ||||||||||
| Dividend Per Share | $ | 0.26 | $ | 0.26 | $ | 0.25 | $ | 0.78 | $ | 0.75 | ||||||||||
| Number Shares Used in Computation – Basic | 12,399,482 | 12,441,679 | 12,363,887 | 12,419,538 | 12,342,706 | |||||||||||||||
| Number Shares Used in Computation – Diluted | 12,420,000 | 12,459,384 | 12,396,902 | 12,440,917 | 12,371,927 | |||||||||||||||
CONDENSED, CONSOLIDATED BALANCE SHEET DATA
(In Thousands, Except Per Share Data) (Unaudited)
| SEPT. 30, | JUNE 30, | SEPT. 30, | ||||||||||
| 2014 | 2014 | 2013 | ||||||||||
| ASSETS | ||||||||||||
| Cash & Due from Banks | $ | 55,439 | $ | 59,948 | $ | 43,247 | ||||||
| Available-for-sale Securities | 508,253 | 512,748 | 475,650 | |||||||||
| Loans Held for Sale | 418 | 0 | 801 | |||||||||
| Loans, Net | 621,960 | 614,347 | 641,345 | |||||||||
| Intangible Assets | 12,003 | 12,012 | 12,042 | |||||||||
| Other Assets | 58,460 | 57,150 | 59,867 | |||||||||
| TOTAL ASSETS | $ | 1,256,533 | $ | 1,256,205 | $ | 1,232,952 | ||||||
| LIABILITIES | ||||||||||||
| Deposits | $ | 981,529 | $ | 979,239 | $ | 963,465 | ||||||
| Repo Sweep Accounts | 6,765 | 4,637 | 4,833 | |||||||||
| Total Deposits and Repo Sweeps | 988,294 | 983,876 | 968,298 | |||||||||
| Borrowed Funds | 73,131 | 73,201 | 73,405 | |||||||||
| Other Liabilities | 8,234 | 9,955 | 10,043 | |||||||||
| TOTAL LIABILITIES | 1,069,659 | 1,067,032 | 1,051,746 | |||||||||
| SHAREHOLDERS' EQUITY | ||||||||||||
| Common Shareholders' Equity, Excluding Accumulated Other Comprehensive Income (Loss) | 182,837 | 183,757 | 178,838 | |||||||||
| Accumulated Other Comprehensive Income (Loss): | ||||||||||||
| Net Unrealized Gains/Losses on | ||||||||||||
| Available-for-sale Securities | 3,940 | 5,316 | 2,520 | |||||||||
| Defined Benefit Plans | 97 | 100 | (152 | ) | ||||||||
| TOTAL SHAREHOLDERS' EQUITY | 186,874 | 189,173 | 181,206 | |||||||||
| TOTAL LIABILITIES & SHAREHOLDERS' EQUITY | $ | 1,256,533 | $ | 1,256,205 | $ | 1,232,952 | ||||||
CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS
(In Thousands, Except Per Share Data) (Unaudited)
| 9 MONTHS ENDED | % | |||||||||||
| SEPT. 30, | INCREASE | |||||||||||
| 2014 | 2013 | (DECREASE) | ||||||||||
| EARNINGS PERFORMANCE | ||||||||||||
| Net Income | $ | 12,718 | $ | 14,369 | -11.49 | % | ||||||
| Return on Average Assets | 1.37 | % | 1.55 | % | -11.61 | % | ||||||
| Return on Average Equity | 9.18 | % | 10.57 | % | -13.15 | % | ||||||
| BALANCE SHEET HIGHLIGHTS | ||||||||||||
| Total Assets | $ | 1,256,533 | $ | 1,232,952 | 1.91 | % | ||||||
| Available-for-Sale Securities | 508,253 | 475,650 | 6.85 | % | ||||||||
| Loans (Net) | 621,960 | 641,345 | -3.02 | % | ||||||||
| Allowance for Loan Losses | 7,449 | 7,130 | 4.47 | % | ||||||||
| Deposits and Repo Sweep Accounts | 988,294 | 968,298 | 2.07 | % | ||||||||
| OFF-BALANCE SHEET | ||||||||||||
| Outstanding Balance of Mortgage Loans Sold with Servicing Retained | 150,695 | 138,074 | 9.14 | % | ||||||||
| Trust Assets Under Management | 812,376 | 760,964 | 6.76 | % | ||||||||
| SHAREHOLDERS' VALUE | ||||||||||||
| (PER COMMON SHARE) | ||||||||||||
| Net Income - Basic | $ | 1.02 | $ | 1.16 | -12.07 | % | ||||||
| Net Income - Diluted | $ | 1.02 | $ | 1.16 | -12.07 | % | ||||||
| Dividends | $ | 0.78 | $ | 0.75 | 4.00 | % | ||||||
| Common Book Value | $ | 15.14 | $ | 14.65 | 3.34 | % | ||||||
| Tangible Common Book Value | $ | 14.17 | $ | 13.67 | 3.66 | % | ||||||
| Market Value (Last Trade) | $ | 19.00 | $ | 19.94 | -4.71 | % | ||||||
| Market Value / Common Book Value | 125.50 | % | 136.11 | % | -7.80 | % | ||||||
| Market Value / Tangible Common Book Value | 134.09 | % | 145.87 | % | -8.08 | % | ||||||
| Price Earnings Multiple | 13.97 | 12.89 | 8.38 | % | ||||||||
| Dividend Yield | 5.47 | % | 5.02 | % | 8.96 | % | ||||||
| Common Shares Outstanding, End of Period | 12,339,120 | 12,372,133 | -0.27 | % | ||||||||
| SAFETY AND SOUNDNESS | ||||||||||||
| Tangible Common Equity / Tangible Assets | 14.05 | % | 13.86 | % | 1.37 | % | ||||||
| Nonperforming Assets / Total Assets | 1.45 | % | 0.83 | % | 74.70 | % | ||||||
| Allowance for Loan Losses / Total Loans | 1.18 | % | 1.10 | % | 7.27 | % | ||||||
| Total Risk Based Capital Ratio (a) | 27.39 | % | 26.17 | % | 4.66 | % | ||||||
| Tier 1 Risk Based Capital Ratio (a) | 26.06 | % | 24.90 | % | 4.66 | % | ||||||
| Leverage Ratio (a) | 13.80 | % | 13.71 | % | 0.66 | % | ||||||
| AVERAGE BALANCES | ||||||||||||
| Average Assets | $ | 1,236,883 | $ | 1,238,213 | -0.11 | % | ||||||
| Average Equity | $ | 184,699 | $ | 181,293 | 1.88 | % | ||||||
(a) Capital ratios for the most recent period are estimated.