EX-99.2 4 v208317_ex99-2.htm
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, 2010
QUARTERLY REPORT

Dear Shareholder:

I am pleased to report net income of $4,884,000 for the fourth quarter of 2010 which is a $642,000 increase over the fourth quarter of 2009, or 15.1%.  Year-to-date earnings for 2010 were a record $17,581,000 which represents a $58,344,000 increase over the prior year.  Redemption of the outstanding preferred stock during the third quarter positively affected fourth quarter net income by $373,000.  Return on average assets was 1.44% and return on average equity was 12.69% for the year which places Citizens & Northern near the top of its peer group.
 
Total assets remained relatively unchanged over the past quarter and year.  A deleveraging of the balance sheet over the past year has resulted in the reduction of borrowed funds by $52,747,000.  Historically low investment yields precipitated the decision to deleverage the balance sheet.  Management increased the provision for loan losses by $530,000 over the prior quarter but asset quality remains strong with nonperforming assets being .92% of total assets.
 
We are encouraged by the continued rise in our stock price which closed the year at $14.86 per share, an increase of 55.77% over the prior year-end.
 
As we close a very successful 2010, I solicit your continued support as we strive to enhance shareholder value.  2011 will present many challenges but with the dedicated effort of our employees and Board of Directors I am confident that we will succeed.
 

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
Edward L. Learn
 

DIRECTORS EMERITI
R. Robert DeCamp
Karl W. Kroeck

CITIZENS & NORTHERN BANK
OFFICES
428 S. Main Street, ATHENS, PA 18810
570-888-2291
3 Main Street, CANISTEO, NY 14823
607-698-4295
10 N Main Street, COUDERSPORT, PA 16915
814-274-9150
111 Main Street, DUSHORE, PA 18614
570-928-8124
563 Main Street, EAST SMITHFIELD, PA 18817
570-596-3131
104 Main Street, ELKLAND, PA  16920
814-258-5111
135 East Fourth Street, EMPORIUM, PA 15834
814-486-1112
6250 County Route 64, HORNELL, NY 14843
607-324-4081
230-232 Railroad Street, JERSEY SHORE, PA 17740
570-398-4555
102 E. Main Street, KNOXVILLE, PA 16928
814-326-4151
514 Main Street, LAPORTE, PA 18626
570-946-4011
4534 Williamson Trail LIBERTY, PA 16930
570-324-2331
1085 S. Main Street, MANSFIELD, PA 16933
570-662-1111
612 James Monroe Avenue, MONROETON, PA 18832
570-265-2157
3461 Rte.405 Highway, MUNCY, PA 17756
570-546-6666
100 Maple Street, PORT ALLEGANY, PA 16743
814-642-2571
24 Thompson Street, RALSTON, PA 17763
570-995-5421
1827 Elmira Street, SAYRE, PA 18840
570-888-2220
2 E. Mountain Ave., SO. WILLIAMSPORT, PA  17702
570-601-3016
41 Main Street, TIOGA, PA 16946
570-835-5236
428 Main Street, TOWANDA, PA18848
570-265-6171
Court House Square, TROY, PA 16947
570-297-2159
90-92 Main Street, WELLSBORO, PA 16901
570-724-3411
130 Court Street, WILLIAMSPORT, PA 17701
570-320-0100
1510 Dewey Ave., WILLIAMSPORT, PA 17702
570-323-9305
Route 6, WYSOX, PA 18854
570-265-9148
   
TRUST & FINANCIAL MANAGEMENT GROUP
3 Main Street, Canisteo, NY 14823
607-698-4295
10 N Main Street, Coudersport, PA 16915
800-921-9150
135 East Fourth Street, Emporium, PA 15834 
814-274-1929
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
 YEAR ENDED
 
QUARTER
QUARTER
QUARTER
DECEMBER 31,
 
2010
2010
2009
2010
2009
 
(Current)
(Prior Qtr)
(Prior Yr)
(Current)
(Prior Yr)
Interest and Dividend Income
 $         15,500
 $          15,495
 $         16,256
 $         62,114
 $         67,976
Interest Expense
              4,310
              4,639
              5,670
            19,245
            24,456
Net Interest Income
            11,190
            10,856
            10,586
            42,869
            43,520
Provision for Loan Losses
                719
                 189
                 126
              1,191
                 680
Net Interest Income After Provision for Loan Losses
            10,471
            10,667
            10,460
            41,678
            42,840
Other Income (a)
              3,480
              3,575
              3,663
            13,917
            13,021
Net Gains (Losses) on Available-for-sale Securities
                  64
                 388
                (318)
                 829
           (83,840)
Other Expenses (a)
              7,720
              8,095
              7,682
            31,569
            34,011
Income (Loss) Before Income Tax Provision (Credit)
              6,295
              6,535
              6,123
            24,855
           (61,990)
Income Tax Provision (Credit)
              1,411
              1,671
              1,508
              5,800
           (22,655)
Net Income (Loss)
              4,884
              4,864
              4,615
            19,055
           (39,335)
U.S. Treasury Preferred Dividends
                     -
                 729
                 373
              1,474
              1,428
           
Net Income (Loss) Available to Common Shareholders
 $           4,884
 $           4,135
 $           4,242
 $         17,581
 $        (40,763)
           
Adjustments to Calculate Core Earnings (b):
         
Net Income (Loss)
 $           4,884
 $           4,864
 $           4,615
 $         19,055
 $        (39,335)
Add: OTTI Losses
                   -
                   -
                 956
                 433
            85,363
Less: Realized gains on assets previously written down
                 (38)
                (334)
                (947)
                (707)
             (1,308)
Add/Less: Income Tax (c)
               (135)
                 114
                (516)
                (280)
           (28,206)
Core Earnings (b)
 $           4,711
 $           4,644
 $           4,108
 $         18,501
 $         16,514
Core Earnings Available to Common Shareholders (b)
 $           4,711
 $           3,915
 $           3,735
 $         17,027
 $         15,086
           
PER COMMON SHARE DATA:
         
Net Income (Loss) - Basic
$0.40
$0.34
$0.42
$1.45
($4.40)
Net Income (Loss) - Diluted
$0.40
$0.34
$0.42
$1.45
($4.40)
Dividend Per Share
$0.12
$0.10
$0.00
$0.39
$0.72
Number Shares Used in Computation - Basic
12,148,541
12,136,516
10,141,903
12,131,039
9,271,869
Number Shares Used in Computation - Diluted
12,148,772
12,136,516
10,141,903
12,131,039
9,271,869
Number Shares Used in Computation - Diluted - for
         
  Ratios Based on Core Earnings (b)
12,148,772
12,136,516
10,141,903
12,131,039
9,272,489
 

 
CONDENSED, CONSOLIDATED BALANCE SHEET DATA
(In Thousands, Except Per Share Data)    (Unaudited)
 
DEC. 31,
SEPT. 30,
DEC. 31,
 
2010
2010
2009
ASSETS
     
Cash & Due from Banks
 $         46,301
 $          53,225
 $         92,065
Available-for-sale Securities
          443,956
           433,392
          396,288
Loans Held for Sale (a)
              5,247
                 561
                 592
Loans, Net (a)
          721,304
           717,526
          712,746
Intangible Assets
            12,268
            12,312
            12,444
Other Assets
            87,512
            91,092
          107,660
TOTAL ASSETS
 $     1,316,588
 $     1,308,108
 $     1,321,795
       
LIABILITIES
     
Deposits
 $     1,004,348
 $        983,516
 $        926,789
Repo Sweep Accounts
            18,413
            18,402
            34,229
     Total Deposits and Repo Sweeps
       1,022,761
        1,001,918
          961,018
Borrowed Funds
          148,495
           158,654
          201,242
Other Liabilities
              6,388
              6,454
              7,125
TOTAL LIABILITIES
       1,177,644
        1,167,026
        1,169,385
       
SHAREHOLDERS' EQUITY
     
Preferred Stock
                   -
                   -
            25,749
Common Shareholders' Equity, Excluding Accumulated
     
  Other Comprehensive Income (Loss)
          140,545
           136,920
          127,552
Accumulated Other Comprehensive Income (Loss):
     
  Net Unrealized Gains/Losses on
     
    Available-for-sale Securities
             (1,351)
              4,394
                (522)
  Defined Benefit Plans
               (250)
                (232)
                (369)
TOTAL SHAREHOLDERS' EQUITY
          138,944
           141,082
          152,410
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY
 $     1,316,588
 $     1,308,108
 $     1,321,795

 
 

 

CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS
(In Thousands, Except Per Share Data)       (Unaudited)
 
 YEAR ENDED
%
 
DECEMBER 31,
INCREASE
 
2010
2009
(DECREASE)
EARNINGS PERFORMANCE
     
Net Income (Loss)
 $           19,055
 $        (39,335)
NM
Return on Average Assets
1.44%
-3.03%
NM
Return on Average Equity
12.69%
-27.74%
NM
Core Earnings (b)
 $           18,501
 $         16,514
12.03%
Core Earnings/Average Assets (b)
1.40%
1.27%
10.24%
Core Earnings/Average Equity (b)
12.32%
11.65%
5.75%
       
BALANCE SHEET HIGHLIGHTS
     
Total Assets
 $       1,316,588
 $     1,321,795
-0.39%
Available-for-Sale Securities
            443,956
          396,288
12.03%
Loans (Net)
            721,304
          712,746
1.20%
Allowance for Loan Losses
                9,107
              8,265
10.19%
Deposits and Repo Sweep Accounts
          1,022,761
          961,018
6.42%
       
Trust Assets Under Management
            608,843
          605,062
0.62%
       
SHAREHOLDERS' VALUE
     
    (PER COMMON SHARE)
     
Net Income - Basic
$1.45
($4.40)
NM
Net Income - Diluted
$1.45
($4.40)
NM
Core Earnings - Basic (b)
$1.40
$1.63
-14.11%
Core Earnings - Diluted (b)
$1.40
$1.63
-14.11%
Dividends
$0.39
$0.72
-45.83%
Common Book Value
$11.43
$10.46
9.27%
Tangible Common Book Value
$10.42
$9.43
10.50%
Market Value (Last Trade)
$14.86
$9.54
55.77%
Market Value /  Common Book Value
130.01%
91.20%
42.55%
Market Value /  Tangible Common Book Value
142.61%
101.17%
40.97%
Price Earnings Multiple
10.25
NM
NM
Dividend Yield
2.62%
7.55%
-65.30%
       
SAFETY AND SOUNDNESS
     
Tangible Common Equity / Tangible Assets
9.71%
8.72%
11.35%
Nonperforming Assets / Total Assets
0.92%
0.76%
21.65%
Allowance for Loan Losses / Total Loans
1.25%
1.15%
8.70%
Total Risk Based Capital Ratio (d)
17.08%
17.89%
-4.52%
Tier 1 Risk Based Capital Ratio (d)
15.78%
16.70%
-5.48%
Leverage Ratio (d)
9.17%
9.86%
-6.99%
       
AVERAGE BALANCES
     
Average Assets
$1,326,145
$1,296,086
2.32%
Average Equity
            150,133
          141,787
5.89%
 


NM - Not meaningful.

(a) Certain information that was previously reported has been reclassified for consistency with the current presentation.

(b) Core Earnings is an earnings performance measurement which management has defined to exclude other-than-temporary impairment (OTTI) losses on available-for-sale securities and realized gains on securities for which OTTI has previously been recognized.  Core Earnings is a performance measurement that is not based on U.S. generally accepted accounting principles (GAAP).  Management believes Core Earnings information is meaningful for evaluating the Corporation's operating performance, because it excludes some of the impact of market volatility as it relates to investments in pooled trust-preferred securities and other securities.  The disclosure of Core Earnings should not be viewed as a substitute for results determined in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.  This table includes a reconciliation of Core Earnings to net (loss) income, the most directly comparable GAAP financial measure.

(c) Income tax has been allocated to non-core gains and losses at 34%, adjusted for a valuation allowance on deferred tax assets associated with losses from securities classified as capital assets for federal income tax reporting purposes.  A valuation allowance of $886,000 was recorded in the third quarter 2009, was reduced to $373,000 in the fourth quarter 2009, further reduced to $148,000 in the 2nd quarter 2010 and reduced to $0 in the fourth quarter 2010.

(d) Capital ratios as of December 31, 2010 are estimated.