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, 2014 | QUARTERLY REPORT | |
Dear Shareholder:
The year 2014 has been challenging in many respects, but I am pleased to report we ended on a positive note, with fourth quarter diluted earnings per share of $0.35 or an increase of $0.01 over the third quarter amount. Diluted earnings per share for the year of $1.38 were 8.0% lower than in 2013, as one of the major challenges in 2014 has been generating revenue at levels comparable to the past few years while continuing to maintain appropriate levels of credit and interest rate risk. Net interest income for 2014 was $2.3 million lower than in 2013, as a result of margin compression from declining yields on loans and securities and a reduction in the average total amount of loans outstanding. Noninterest revenue was also lower in 2014, mainly due to a reduction of $1.2 million in gains from sales of residential mortgage loans, reflecting a reduction in volume of mortgage originations in our market. Positive developments in the fourth quarter 2014 included modest loan growth and a reduction in the ratio of nonperforming assets to total assets to 1.34% from 1.45% at September 30, 2014 and 1.53% at December 31, 2013.
In the fourth quarter, we continued to repurchase shares of common stock under the plan initiated in July 2014 for the repurchase of up to 622,500 shares, or 5% of the total shares outstanding on July 16, 2014. Through December 31, 2014, 208,300 shares had been repurchased for a total cost of $4,002,000, at an average price of $19.21 per share. Dividends were $1.04 per share in 2014, up from $1.00 in 2013 and representing an annualized return of 5.03% based on the year-end closing stock price of $20.67. Our ability to repurchase shares and to pay dividends results from our very strong capital position.
Two of our executive officers, Dawn Besse and George Raup, have retired effective at the beginning of 2015. Dawn served as our Chief Credit Officer, and George was our Chief Information Officer. Both Dawn and George enjoyed long, successful banking careers, and have been significant contributors to the C&N team. Their duties have been assumed by experienced individuals who are well-prepared for their new responsibilities. Stan Dunsmore, with almost thirty years’ experience as a Commercial Lender, is our new Chief Credit Officer. Shelley D’Haene has assumed George’s prior duties, and her title has changed to Senior Operations Officer in recognition of her broadened responsibilities.
I am grateful for the opportunity to serve as Interim President, and especially thankful for the extra effort and assistance provided by our officers and employees during this transition period. Please do not hesitate to contact me if you have questions or concerns.
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| | |
| 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)
| | | 4TH | | | 3RD | | | 4TH | | | YEARS ENDED | |
| | | QUARTER | | | QUARTER | | | QUARTER | | | DECEMBER 31, | |
| | | 2014 | | | 2014 | | | 2013 | | | 2014 | | | 2013 | |
| | | (Current) | | | (Prior Qtr) | | | (Prior Yr) | | | (Current) | | | (Prior Yr) | |
| Interest and Dividend Income | | $ | 11,468 | | | $ | 11,572 | | | $ | 11,885 | | | $ | 46,009 | | | $ | 48,914 | |
| Interest Expense | | | 1,257 | | | | 1,287 | | | | 1,354 | | | | 5,122 | | | | 5,765 | |
| Net Interest Income | | | 10,211 | | | | 10,285 | | | | 10,531 | | | | 40,887 | | | | 43,149 | |
| Provision for Loan Losses | | | 123 | | | | 218 | | | | 1,559 | | | | 476 | | | | 2,047 | |
| Net Interest Income After Provision for Loan Losses | | | 10,088 | | | | 10,067 | | | | 8,972 | | | | 40,411 | | | | 41,102 | |
| Other Income | | | 3,802 | | | | 3,887 | | | | 4,124 | | | | 15,420 | | | | 16,451 | |
| Net Gains on Available-for-sale Securities | | | 210 | | | | 760 | | | | 266 | | | | 1,104 | | | | 1,718 | |
| Loss on Prepayment of Borrowings | | | 0 | | | | 0 | | | | 0 | | | | 0 | | | | 1,023 | |
| Other Noninterest Expenses | | | 8,250 | | | | 9,036 | | | | 7,788 | | | | 34,157 | | | | 33,471 | |
| Income Before Income Tax Provision | | | 5,850 | | | | 5,678 | | | | 5,574 | | | | 22,778 | | | | 24,777 | |
| Income Tax Provision | | | 1,482 | | | | 1,411 | | | | 1,349 | | | | 5,692 | | | | 6,183 | |
| Net Income | | $ | 4,368 | | | $ | 4,267 | | | $ | 4,225 | | | $ | 17,086 | | | $ | 18,594 | |
| | | | | | | | | | | | | | | | | | | | | |
| PER COMMON SHARE DATA: | | | | | | | | | | | | | | | | | | | | |
| Net Income - Basic | | $ | 0.36 | | | $ | 0.34 | | | $ | 0.34 | | | $ | 1.38 | | | $ | 1.51 | |
| Net Income - Diluted | | $ | 0.35 | | | $ | 0.34 | | | $ | 0.34 | | | $ | 1.38 | | | $ | 1.50 | |
| Dividend Per Share | | $ | 0.26 | | | $ | 0.26 | | | $ | 0.25 | | | $ | 1.04 | | | $ | 1.00 | |
| Number Shares Used in Computation - Basic | | | 12,302,646 | | | | 12,399,482 | | | | 12,381,093 | | | | 12,390,067 | | | | 12,352,383 | |
| Number Shares Used in Computation - Diluted | | | 12,325,409 | | | | 12,420,000 | | | | 12,415,745 | | | | 12,412,050 | | | | 12,382,790 | |
CONDENSED, CONSOLIDATED BALANCE SHEET DATA
(In Thousands, Except Per Share Data) (Unaudited)
| | | DEC. 31, | | | SEPT. 30, | | | DEC. 31, | |
| | | 2014 | | | 2014 | | | 2013 | |
| ASSETS | | | | | | | | | | | | |
| Cash & Due from Banks | | $ | 36,047 | | | $ | 55,439 | | | $ | 44,619 | |
| Available-for-sale Securities | | | 516,807 | | | | 508,253 | | | | 482,658 | |
| Loans Held for Sale | | | 0 | | | | 418 | | | | 54 | |
| Loans, Net | | | 623,209 | | | | 621,960 | | | | 635,640 | |
| Intangible Assets | | | 11,994 | | | | 12,003 | | | | 12,029 | |
| Other Assets | | | 53,906 | | | | 58,460 | | | | 62,695 | |
| TOTAL ASSETS | | $ | 1,241,963 | | | $ | 1,256,533 | | | $ | 1,237,695 | |
| | | | | | | | | | | | | |
| LIABILITIES | | | | | | | | | | | | |
| Deposits | | $ | 967,989 | | | $ | 981,529 | | | $ | 954,516 | |
| Repo Sweep Accounts | | | 5,537 | | | | 6,765 | | | | 3,385 | |
| Total Deposits and Repo Sweeps | | | 973,526 | | | | 988,294 | | | | 957,901 | |
| Borrowed Funds | | | 73,060 | | | | 73,131 | | | | 93,338 | |
| Other Liabilities | | | 7,015 | | | | 8,234 | | | | 6,984 | |
| TOTAL LIABILITIES | | | 1,053,601 | | | | 1,069,659 | | | | 1,058,223 | |
| | | | | | | | | | | | | |
| SHAREHOLDERS' EQUITY | | | | | | | | | | | | |
| Common Shareholders' Equity, Excluding Accumulated | | | | | | | | | | | | |
| Other Comprehensive Income (Loss) | | | 183,002 | | | | 182,837 | | | | 180,465 | |
| Accumulated Other Comprehensive Income (Loss): | | | | | | | | | | | | |
| Net Unrealized Gains/Losses on | | | | | | | | | | | | |
| Available-for-sale Securities | | | 5,281 | | | | 3,940 | | | | (1,004 | ) |
| Defined Benefit Plans | | | 79 | | | | 97 | | | | 11 | |
| TOTAL SHAREHOLDERS' EQUITY | | | 188,362 | | | | 186,874 | | | | 179,472 | |
| TOTAL LIABILITIES & SHAREHOLDERS' EQUITY | | $ | 1,241,963 | | | $ | 1,256,533 | | | $ | 1,237,695 | |
CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS
(In Thousands, Except Per Share Data) (Unaudited)
| | | YEARS ENDED | | | % | |
| | | DECEMBER 31, | | | INCREASE | |
| | | 2014 | | | 2013 | | | (DECREASE) | |
| EARNINGS PERFORMANCE | | | | | | | | | | | | |
| Net Income | | $ | 17,086 | | | $ | 18,594 | | | | -8.11 | % |
| Return on Average Assets | | | 1.38 | % | | | 1.50 | % | | | -8.00 | % |
| Return on Average Equity | | | 9.21 | % | | | 10.25 | % | | | -10.15 | % |
| | | | | | | | | | | | | |
| BALANCE SHEET HIGHLIGHTS | | | | | | | | | | | | |
| Total Assets | | $ | 1,241,963 | | | $ | 1,237,695 | | | | 0.34 | % |
| Available-for-Sale Securities | | | 516,807 | | | | 482,658 | | | | 7.08 | % |
| Loans (Net) | | | 623,209 | | | | 635,640 | | | | -1.96 | % |
| Allowance for Loan Losses | | | 7,336 | | | | 8,663 | | | | -15.32 | % |
| Deposits and Repo Sweep Accounts | | | 973,526 | | | | 957,901 | | | | 1.63 | % |
| | | | | | | | | | | | | |
| OFF-BALANCE SHEET | | | | | | | | | | | | |
| Outstanding Balance of Mortgage Loans Sold with Servicing Retained | | | 152,505 | | | | 145,954 | | | | 4.49 | % |
| Trust Assets Under Management | | | 825,918 | | | | 796,115 | | | | 3.74 | % |
| | | | | | | | | | | | | |
| SHAREHOLDERS' VALUE | | | | | | | | | | | | |
| (PER COMMON SHARE) | | | | | | | | | | | | |
| Net Income - Basic | | $ | 1.38 | | | $ | 1.51 | | | | -8.61 | % |
| Net Income - Diluted | | $ | 1.38 | | | $ | 1.50 | | | | -8.00 | % |
| Dividends | | $ | 1.04 | | | $ | 1.00 | | | | 4.00 | % |
| Common Book Value | | $ | 15.34 | | | $ | 14.49 | | | | 5.87 | % |
| Tangible Common Book Value | | $ | 14.36 | | | $ | 13.51 | | | | 6.29 | % |
| Market Value (Last Trade) | | $ | 20.67 | | | $ | 20.63 | | | | 0.19 | % |
| Market Value / Common Book Value | | | 134.75 | % | | | 142.37 | % | | | -5.35 | % |
| Market Value / Tangible Common Book Value | | | 143.94 | % | | | 152.70 | % | | | -5.74 | % |
| Price Earnings Multiple | | | 14.98 | | | | 13.66 | | | | 9.66 | % |
| Dividend Yield | | | 5.03 | % | | | 4.85 | % | | | 3.71 | % |
| Common Shares Outstanding, End of Period | | | 12,279,980 | | | | 12,390,063 | | | | -0.89 | % |
| | | | | | | | | | | | | |
| SAFETY AND SOUNDNESS | | | | | | | | | | | | |
| Tangible Common Equity / Tangible Assets | | | 14.34 | % | | | 13.66 | % | | | 4.98 | % |
| Nonperforming Assets / Total Assets | | | 1.34 | % | | | 1.53 | % | | | -12.42 | % |
| Allowance for Loan Losses / Total Loans | | | 1.16 | % | | | 1.34 | % | | | -13.43 | % |
| Total Risk Based Capital Ratio (a) | | | 27.48 | % | | | 26.60 | % | | | 3.31 | % |
| Tier 1 Risk Based Capital Ratio (a) | | | 26.14 | % | | | 25.15 | % | | | 3.94 | % |
| Leverage Ratio (a) | | | 13.88 | % | | | 13.78 | % | | | 0.73 | % |
| | | | | | | | | | | | | |
| AVERAGE BALANCES | | | | | | | | | | | | |
| Average Assets | | $ | 1,239,897 | | | $ | 1,237,096 | | | | 0.23 | % |
| Average Equity | | $ | 185,469 | | | $ | 181,412 | | | | 2.24 | % |
(a) Capital ratios for the most recent period are estimated.
