EX-99.1 4 l93169aex99-1.txt EXHIBIT 99.1 Exhibit 99.1 [THREE PHOTOS OF RURAL SCENES] 2001 ANNUAL REPORT professionals dedicated to meeting your lifetime financial needs, with a personal touch(TM) [CITIZENS & NORTHERN CORPORATION LOGO] ON OUR COVER The photographs on the cover of our annual report were taken by local professional photographer Dick Allyn and were featured on C&N Bank's 2002 calendar. For a look at Mr. Allyn's other work, log onto www.dickallyn.com. [CITIZENS & NORTHERN CORPORATION LOGO] Athens/Dushore/East Smithfield/Elkland/Knoxville/Laporte/Liberty/Mansfield Monroeton/Muncy/Ralston/Sayre/Tioga/Towanda/Troy/Wellsboro/Wysox Member FDIC Stock Symbol CZNC www.cnbankpa.com Page 1 SAVINGS PLANS FOR STUDENTS AND LOOKING AHEAD TO RETIREMENT EDUCATION SAVINGS ACCOUNT offered by Citizens &Northern Bank A new offering this year is our Education Savings Account, an account created for the purpose of paying education expenses for the beneficiary of the account at a qualified education institution. The funds grow tax-free and beginning in January of this year, contribution limits have increased. C&N Bank in January launched a marketing and sales campaign to acquaint customers with regulation changes relating to this valuable savings tool. ESAs carry two investment options - Time Deposit ESA or Mutual Funds*. More information is available by contacting Nancy Tubbs at nancyt@cnbankpa.com IRAs C&N Bank offers both Traditional and Roth IRAs utilizing a variable-rate, FDIC insured product. 529 PLAN* offered by C&N Financial Services Corporation This plan offers important benefits for the donor, while offering the beneficiary the opportunity of a college education. For account owners, 529 Plans feature the benefit of tax-free earnings if withdrawals are used for qualified education expenses. There are no income or age limitations and distributions are controlled by the owner. FOR MORE INFORMATION CALL, TOLL FREE, 1.866.ASK.CNFS. IRAs Citizens &Northern Financial Services Corporation offers non-FDIC insured IRAs, utilizing the various investment options available through mutual funds and annuities.* For more information, contact any C&N branch office. *Note: Some products are not FDIC insured, not a deposit or other obligation of the bank, not guaranteed by the bank and are subject to investment risk, including the possible loss of the principal amount invested and are not insured by any other federal government agency. Securities offered through Hackett Associates,Inc., Member NASD & SIPC, 90-92 Main Street, Wellsboro, PA 16901. [PHOTO OF GIRL] These three savings products have been heavily promoted by C&N Bank in the first quarter of 2002. They offer our customers and prospective customers excellent opportunities to save for their own and their children's future. THE POWER TO SAVE The Index Powered(SM) CD, a new offering in 2001, combines the power of the stock market with the security of the bank. Unlike traditional Certificates of Deposit, which generally provide a fixed rate of return, the Index Powered(SM) CD is tied to the performance of Standard &Poor's 500(R) Index, and therefore has the potential to outperform traditional fixed income investments. Index Powered CD features include: - Interest tied to the performance of the S&P 500(R); - $1,000 minimum deposit; - Return of principal guaranteed by C&N at maturity; - 5 year term; - Annual withdrawal feature*; - FDIC insured up to $100,000; - No management or sales fees. *There are no specific fees or penalties assessed against the depositor as a part of the Annual Withdrawal Feature. However, the annual withdrawal amount may be less than the amount of principal committed. Contact your local office of C&N Bank for more information on how the Index Powered(SM) CD gives you the power to SAVE. DISCLAIMER: FDIC Insurance protects each depositor up to $100,000. S&P 500(R) and "Standard & Poor's 500" are trademarks of The McGraw-Hill Companies, Inc., and have been licensed for use by the Bank. "The Product is not sponsored, endorsed, sold or promoted by Standard & Poor's and Standard & Poor's makes no representation regarding the advisability of investing in the Product." IPCD "Indexed Powered"is a service mark of Risk Analytics, Inc. Any unauthorized use of this name without the express written consent of Risk Analytics, Inc. is prohibited. NEW THIS YEAR Page 2 A MESSAGE TO OUR SHAREHOLDERS... Certainly, the successes of your company during 2001 must be viewed against the grim backdrop of the terrorist attacks of September 11th and the ensuing war on terrorism. Additionally, we remain ever vigilant to the effects of the national and global recessions that began in early 2001, and which were exacerbated by the terrorist-related events in September. While we can all take pleasure that Citizens & Northern achieved record earnings for the year, we must recognize the challenges and opportunities that lie ahead. We continue to focus our personnel development on leadership and sales skills. It is our desire that our focus on client needs and service will be unmatched in our market. Our efforts to broaden our revenue sources continue unabated. We are positive and enthusiastic about the future of Citizens & Northern and the communities we serve. We continue to make substantial positive contributions to our major constituencies. Our belief is founded in the fact that we have assembled and trained a highly competent staff, who look forward to serving our clients' financial needs. Without our people and their commitment to service and excellence, none of our past successes would have been possible. And without them our future success would be impossible. 2001 FINANCIAL HIGHLIGHTS Last year, I reported here that the effects of the rapid increases in interest rates that began in the last quarter of 1999 and continued through all of 2000 had a significant dampening effect upon our interest margin and thus our net income. The eleven reductions in the Fed Funds target rate during 2001, for a total of 4.75%, has had an equally significant positive impact upon our net income for 2001. The Interest Margin increased by 21.7% in 2001 as compared to 2000 for a total of $4.77 million. While deposits and borrowed funds increased by 21.7%, interest expense decreased by 5.9%. Net Income increased by over 42% to over $12 million. The changes in the interest rate environment created opportunities for us to grow the asset base without substantially increasing our interest rate risk exposure profile. Thus, Total Assets increased to nearly $867 million, or a year over year increase of 20.5%. Loans increased by nearly 15.8%, or more than $50 million. We also increased the securities portfolio by 27.5%, or over $95 million. Our Trust and Asset Management Group experienced a decrease in their assets-under-management of about 7%, due primarily to market value declines in equities during the year. Shareholders' equity continues to provide a solid base on which we can grow the company. Shareholders' equity increased to over $100 million from about $89 million during the year. The increase consists of net income after dividends and the increase in net unrealized gains in our investment portfolio. Non-performing assets decreased as a percentage of total assets from 0.22% to 0.12%. Our loan delinquencies continue to remain at historical lows, as we continue to monitor any weaknesses that may appear in our loan portfolio. Dividends declared and paid for 2001 totaled $1.06 per share, which is an increase over 2000 of 8.16%. We also paid a 1% stock dividend for the 29th consecutive year. The market value of a share of our stock increased from $20.00 at the end of 2000 to $26.15 as of the end of 2001, a 30.75% increase. During 2001 and as we begin 2002, we are implementing changes in our deposit and borrowing pricing that should reduce some, but not all, of the negative effects on net interest income we could experience if rapid increases in interest rates were to occur. CONT. PAGE 3 [PHOTO OF CRAIG G. LITCHFIELD] We are positive and enthusiastic about the future of Citizens & Northern and its communities. We believe that we continue to make substantial positive contributions to our major constituencies. STATE OF THE BANK Page 3 A MESSAGE TO OUR SHAREHOLDERS... (Cont.) TRUST AND FINANCIAL MANAGEMENT GROUP In a difficult equity climate, investment results achieved by the clients of our Trust and Financial Management Group were comparable to appropriate benchmarks. Client portfolios benefited from adherence to our disciplined approach, which includes diversification among asset classes, as well as across economic sectors, and continued focus on their long-term investment objectives. Ongoing dialogue between administrators and clients concerning the philosophy of investing for the long-term ensured that clients were prepared to weather the volatility experienced in 2001 and use the opportunity to restructure and enhance portfolios. SALES AND SERVICE CULTURE INITIATIVE During 2001, we launched our sales and service initiative by training all of our people in the basics of extraordinary sales leadership, leading breakthrough service performance, breakthrough service performance and proactive relationship banking. We are all committed to the success of this program, because the results are very consistent with our vision to provide exceptional service for every client. This endeavor will yield long-term benefits for our clients and our organization. PRODUCTS AND SERVICES In March of 2001, Citizens & Northern Financial Services (CNFS) added a broker/dealer affiliation. We offer this service and the related products through an affiliation with Hackett Associates of Reading. In addition to the sale of group and individual life and disability insurance products, long-term care insurance, and fixed annuities, we now offer a full range of mutual funds and variable annuity products. By February 2002, CNFS will have moved its operations to a separate Wellsboro Main Street location to provide better access to our clients and greater visibility of its operation. We were the first bank in our market to begin offering the Index Powered(SM) Certificates of Deposit. The Index Powered(SM) CD combines the power of the stock market and the security of the bank. Unlike traditional certificates of deposit, which generally provide a fixed rate of return, the Index Powered(SM) CD is tied to the performance of the Standard & Poor's 500(R) Index, and therefore has the potential to outperform traditional fixed income investments. Like traditional certificates of deposit, your return of principal is guaranteed by C&N Bank and insured by the FDIC up to $100,000. These are five-year Certificates of Deposit, which are excellent for long-term investment objectives like retirement or college expenses. We will be introducing the Index Powered(SM) Certificate of Deposit IRA and Educational Saving Accounts prior to the end of the first quarter of 2002. We debuted two new business-related products in 2001: the Visa Business Card and Super Business 25 or Super B Checking. The Visa Business Card provides our business clients with a master account and sub-accounts for each authorized employee/user. This helps the business client segregate and track the charges. Our Super B Checking is a low cost business-checking alternative for low volume users. By maintaining a $1,000 collected balance, businesses with qualifying volume can eliminate checking fees. Our Internet Banking service continues to attract new users. We have over 4,400 consumer clients and over 500 business clients using the convenient and secure service. Internet Banking allows clients to view balances, transaction histories, checking statements and check images and permits transfers of funds between accounts and bill payment. Our business clients can direct deposit payroll for their employees and transfer funds between their accounts with Citizens & Northern Bank and other banks. RETIREMENTS Four long-time employees, with a total of 99 years of service with C&N, retired after January 1, 2001. They are Peggy Clark, Trust, 22 years; Joan Johnson, Tioga Branch, 29 years; Dan Clark, Ralston, 41 years and Donna Gorzycki, Knoxville, 7 years. We wish them long and fulfilling retirements. THE CHALLENGES The financial service and banking worlds continue to evolve. This evolutionary change creates both challenges and opportunities for organizations with the skills and the determination to succeed. Citizens & Northern has been, is and will be successful because of our talented people who are committed to serving our communities and our clients. We see continuing opportunities to expand our services and our market share. We know that by listening to our clients and by delivering world-class extraordinary service, our ability to achieve success for all our constituents (customers, communities, shareholders and employees) is assured. POSTSCRIPT In response to the terrorist attacks of September 11th, our clients, employees and directors raised nearly $17,000.00 to which we added our corporate donation of $10,000.00. Those funds were forwarded to assist and comfort the people who lost loved ones in the attacks. Our prayers and thoughts will be with those people who must rebuild their lives and also with the brave and courageous people serving in the U. S. military in the war on terrorism. America will survive this time of infamy because as Americans UNITED WE STAND! STATE OF THE BANK Page 4 FIVE-YEAR PERFORMANCE [NET INCOME BAR GRAPH]
(IN MILLIONS) 1997 $10.1 1998 $11.1 1999 $11.3 2000 $ 8.5 2001 $12.1
[TOTAL ASSETS BAR GRAPH]
(IN MILLIONS) 1997 $515 1998 $646 1999 $708 2000 $719 2001 $887
[TOTAL STOCKHOLDERS' EQUITY BAR GRAPH]
(IN MILLIONS) 1997 $ 65.5 1998 $ 90.6 1999 $ 76.8 2000 $ 89.0 2001 $100.2
[DEPOSITS BAR GRAPH]
(IN MILLIONS) 1997 $442 1998 $477 1999 $500 2000 $522 2001 $576
[NET LOANS BAR GRAPH]
(IN MILLIONS) 1997 $281 1998 $288 1999 $306 2000 $323 2001 $374
[CASH DIVIDENDS DECLARED BAR GRAPH]
(PER SHARE, HISTORICAL BASIS)* 1997 $0.74 1998 $0.82 1999 $0.90 2000 $0.96 2001 $1.06
*Plus 1 stock dividend each year OUR FINANCIALS Page 5 QUARTERLY SHARE DATA Trades of the Corporation's stock are executed through various brokers who maintain a market in the Corporation's stock. Information regarding sales prices of the Corporation's stock is available through the OTC Bulletin Board (www.otcbb.com). The Corporation's stock is not listed or traded on NASDAQ or a national securities exchange. The Corporation's stock symbol is CZNC.OB. The following table sets forth the approximate high and low sales prices of the common stock during 2001 and 2000:
2001 2000 ---- ---- High Low Dividend Declared High Low Dividend Declared per Quarter per Quarter First Quarter $ 22.00 $ 20.00 $ 0.26 $ 29.50 $ 24.75 $ 0.24 Second Quarter 21.75 20.41 0.26 26.25 21.50 0.24 Third Quarter 23.45 21.00 0.26 23.75 22.00 0.24 Fourth Quarter 26.50 23.10 0.28 22.88 19.50 0.26 plus 1% plus 1% stock dividend stock dividend
COMMON STOCK AND PER SHARE DATA
2001 2000 1999 1998 1997 ---- ---- ---- ---- ---- Net income per share - basic $ 2.28 $ 1.60 $ 2.16 $ 2.08 $ 1.90 Net income per share - diluted $ 2.27 $ 1.60 $ 2.16 $ 2.08 $ 1.90 Cash dividends declared per share $ 1.05 $ 0.96 $ 0.87 $ 0.79 $ 0.70 Cash dividends declared per share - historical basis $ 1.06 $ 0.98 $ 0.90 $ 0.82 $ 0.74 Stock dividend 1% 1% 1% 1% 1% Stockholders' equity per share (a) $ 18.95 $ 16.75 $ 14.43 $ 17.06 $ 16.07 Stockholders' equity per share, excluding accumulated other comprehensive income (loss) (a) $ 17.95 $ 16.73 $ 16.10 $ 14.81 $ 13.57 Weighted average shares outstanding - basic 5,296,003 5,310,131 5,309,763 5,314,353 5,320,612 Weighted average shares outstanding - diluted 5,297,723 5,311,274 5,315,173 5,324,150 5,325,560 Number of shares outstanding at year end 5,234,800 5,207,244 5,153,729 5,102,028 5,063,043 Number of shares authorized 10,000,000 10,000,000 10,000,000 10,000,000 10,000,000
(a) For purposes of this computation, the number of shares outstanding has been increased for the effects of the 1% stock dividend issued in January following each year-end. KNOWN "MARKET MAKERS" WHO HANDLE CITIZENS & NORTHERN CORPORATION STOCK TRANSACTIONS ARE: F.J. MORRISSEY & CO., INC. 1700 Market Street, Suite 1420 Philadelphia, PA 19103-3913 (215).563.8500 FERRIS, BAKER WATTS, INC. 6 Bird Cage Walk Holidaysburg, PA 16648 (800).343.5149 RBC DAIN RAUSCHER 3 Times Square, 24th Floor New York, NY 10036 (800).526.6371 RYAN, BECK & COMPANY 3 Parkway Philadelphia, PA 19102 (800).342.2325 SANDLER O'NEILL & PARTNERS, LP 919 Third Avenue New York, NY 10022 (800).635.6851 INDEPENDENT AUDITORS PARENTE RANDOLPH, PC 400 Market Street Williamsport, PA 17701 INVESTOR INFORMATION ANNUAL MEETING OF SHAREHOLDERS The Annual Meeting of Shareholders will be held in the Arcadia Theater, Wellsboro, PA, at 2:00 p.m. Tuesday, April 16, 2002. General shareholder inquiries should be sent to: CITIZENS & NORTHERN CORPORATION 90-92 Main Street, P.O. Box 58 Wellsboro, PA 16901 STOCK TRANSFER AGENT American Stock Transfer & Trust Co. 59 Maiden Lane, Plaza Level New York, NY 10038 (800).278.4353 OUR FINANCIALS Page 6 FIVE-YEAR SUMMARY OF OPERATIONS
(IN THOUSANDS) 2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- INCOME STATEMENT Interest income ................................. $ 55,140 $ 52,155 $ 48,415 $ 45,459 $ 45,642 Interest expense ................................ 28,356 30,145 24,571 22,693 23,312 ================================================================================================================= Interest margin ................................. 26,784 22,010 23,844 22,766 22,330 Provision for loan losses ....................... 600 676 760 763 797 ================================================================================================================= Interest margin after provision for loan losses . 26,184 21,334 23,084 22,003 21,533 Other income .................................... 5,641 4,490 6,444 6,083 5,834 Securities gains ................................ 1,920 1,377 3,043 3,001 1,001 Other expenses .................................. 18,671 16,906 17,732 16,483 15,095 ================================================================================================================= Income before income tax provision .............. 15,074 10,295 14,839 14,604 13,273 Income tax provision ............................ 3,022 1,819 3,354 3,527 3,166 ================================================================================================================= Net income ...................................... $ 12,052 $ 8,476 $ 11,485 $ 11,077 $ 10,107 ================================================================================================================= BALANCE SHEET AT YEAR END Total securities (1) ............................ $445,527 $350,844 $363,535 $331,883 $308,988 Gross loans, excluding unearned discount ........ 379,228 328,305 310,892 291,003 285,426 Total assets .................................... 866,999 719,335 705,898 646,298 615,353 Total deposits .................................. 576,274 528,967 500,474 476,518 442,256 Stockholders' equity, excluding accumulated other comprehensive income .................. 94,903 88,887 85,507 78,645 72,200 Total stockholders' equity ...................... 100,187 88,969 76,623 90,567 85,535 AVERAGE BALANCE SHEET Total securities, at amortized cost (1) ......... 412,654 371,360 349,133 300,692 296,067 Gross loans, excluding unearned discount ........ 346,353 318,382 301,584 285,275 282,580 Earning assets .................................. 759,007 689,743 650,717 585,966 578,647 Total assets .................................... 805,229 704,221 680,864 626,102 608,277 Total assets excluding unrealized gains or losses 798,590 717,052 672,999 606,163 598,370 Total deposits .................................. 544,579 503,848 483,858 448,601 435,190 Stockholders' equity, excluding accumulated other comprehensive income .................. 91,703 87,258 81,767 74,810 69,440 Stockholders' equity ............................ 96,021 78,792 87,143 87,997 76,005 FINANCIAL RATIOS Return on stockholders' equity, excluding accumulated other comprehensive income (2) .. 13.14% 9.71% 14.05% 14.81% 14.56% Return on stockholders' equity (2) .............. 12.55% 10.76% 13.18% 12.59% 13.30% Return on assets (2) ............................ 1.50% 1.20% 1.69% 1.77% 1.66% Stockholders' equity to assets, excluding accumulated other comprehensive income (2) .. 11.48% 12.17% 12.15% 12.34% 11.60% Stockholders' equity to assets (2) .............. 11.92% 11.19% 12.80% 14.05% 12.50% Stockholders' equity to loans (2) ............... 27.72% 24.75% 28.90% 30.85% 26.90% Net income to: Total interest income ....................... 21.86% 16.25% 23.72% 24.37% 22.14% Interest margin ............................. 45.00% 38.51% 48.17% 48.66% 45.26% Dividends as a % of net income .................. 46.08% 60.19% 40.39% 37.81% 37.04%
(1) Includes available-for-sale and held-to-maturity securities, and interest-bearing cash and due from banks (2) Calculated based on average balance sheet data OUR FINANCIALS Page 7 QUARTERLY FINANCIAL DATA (unaudited) The following table presents summarized quarterly financial data for 2001 and 2000.
(IN THOUSANDS, EXCEPT PER SHARE DATA) 2001 QUARTER ENDED MAR. 31, JUNE 30, SEPT. 30, DEC. 31, Interest income ............................... $13,214 $13,947 $14,086 $13,893 Interest expense .............................. 7,492 7,278 7,037 6,549 ============================================================================================ Interest margin ............................... 5,722 6,669 7,049 7,344 Provision for loan losses ..................... 150 150 150 150 ============================================================================================ Interest margin after provision for loan losses 5,572 6,519 6,899 7,194 Other income .................................. 1,313 1,399 1,476 1,453 Securities gains .............................. 455 742 520 203 Other expenses ................................ 4,598 4,580 4,575 4,918 ============================================================================================ Income before income tax provision ............ 2,742 4,080 4,320 3,932 Income tax provision .......................... 477 891 914 740 ============================================================================================ Net income .................................... $ 2,265 $ 3,189 $ 3,406 $ 3,192 ============================================================================================ Net income per share - basic .................. $ 0.43 $ 0.60 $ 0.64 $ 0.60 ============================================================================================ Net income per share - diluted ................ $ 0.43 $ 0.60 $ 0.64 $ 0.60 ============================================================================================
(IN THOUSANDS, EXCEPT PER SHARE DATA) 2000 QUARTER ENDED MAR. 31, JUNE 30, SEPT. 30, DEC. 31, Interest income ............................... $12,857 $12,949 $13,125 $13,224 Interest expense .............................. 7,145 7,396 7,790 7,814 ============================================================================================ Interest margin ............................... 5,712 5,553 5,335 5,410 Provision for loan losses ..................... 226 150 150 150 ============================================================================================ Interest margin after provision for loan losses 5,486 5,403 5,185 5,260 Other income .................................. 1,358 1,050 963 1,119 Securities gains .............................. 15 322 230 810 Other expense ................................. 4,209 4,116 4,171 4,410 ============================================================================================ Income before income tax provision ............ 2,650 2,659 2,207 2,779 Income tax provision .......................... 501 446 374 498 ============================================================================================ Net income .................................... $ 2,149 $ 2,213 $ 1,833 $ 2,281 ============================================================================================ Net income per share - basic .................. $ 0.40 $ 0.42 $ 0.35 $ 0.43 ============================================================================================ Net income per share - diluted ................ $ 0.40 $ 0.42 $ 0.35 $ 0.43 ============================================================================================
OUR FINANCIALS Page 8 TRUST AND FINANCIAL MANAGEMENT GROUP
(IN THOUSANDS) 2001 2000 1999 1998 1997 -------- -------- -------- -------- -------- Assets ....... $303,868 $327,063 $320,385 $283,262 $230,149 Revenue ...... $ 1,576 $ 1,613 $ 1,456 $ 1,288 $ 1,004
The composition of trust assets and liabilities as of December 31, 2001, 2000 and 1999 are shown in the following table: (IN THOUSANDS) INVESTMENTS
2001 2000 1999 -------- -------- -------- Bonds ........................ $ 98,364 $ 95,496 $ 85,615 Stocks ....................... 97,193 98,802 108,279 Mutual funds ................. 79,942 97,320 102,635 Savings and money market funds 26,799 31,291 18,411 Real estate .................. 722 2,304 3,430 Mortgages .................... 640 1,104 1,003 Miscellaneous ................ 208 746 1,012 ================================================================== Total ........................ $303,868 $327,063 $320,385 ==================================================================
ACCOUNTS
2001 2000 1999 -------- -------- -------- Pension/profit sharing ....... $ 94,111 $107,553 $102,893 Trusts ....................... 85,379 85,154 87,828 Investment management ........ 84,648 95,298 88,759 Custody ...................... 36,941 35,521 36,007 Guardianships ................ 1,557 2,042 2,642 Estates ...................... 1,232 1,495 2,256 ================================================================== Total ........................ $303,868 $327,063 $320,385 ==================================================================
STOCKHOLDER INQUIRIES A copy of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2001, as required to be filed with the Securities and Exchange Commission, will be furnished to a stockholder without charge upon written request to the Corporation's Treasurer at the principal office at P.O. Box 58, Wellsboro, PA 16901. The information is also available at the website of the Securities and Exchange Commission at www.sec.gov. This statement has not been reviewed or confirmed for accuracy or relevance by the Federal Deposit Insurance Corporation. OUR FINANCIALS Page 9 CITIZENS & NORTHERN CORPORATION OFFICERS Craig G. Litchfield Chairman of the Board, President and Chief Executive Officer Mark A. Hughes Treasurer Kathleen M. Osgood Corporate Secretary ADVISORY BOARD ATHENS & SAYRE Virginia L. Reap Brenda L. May Warren J. Croft Max P. Gannon, Jr. R. Bruce Haner Susan E. Hartley George D. Howell Wayne E. Lowery Laurance A. Reagan, Jr. David Rosenbloom DUSHORE Helen W. Ferris Ronald A. Gutosky Leo F. Lambert Dennis K. McCarty Kerry A. Meehan EAST SMITHFIELD Peggy A. Brown Roy L. Beardslee Thomas G. Furman Liston D. Pepper Bennett R. Young ELKLAND Roberta C. Heck Mark R. Howe John C. Kenyon Edward L. Learn KNOXVILLE Mary Rose Sacks Gerald L. Bliss L. Grant Gehman Karl W. Kroeck William W. Roosa LAPORTE Linda M. Etzel David L. Baumunk William B. Saxe Leonard Simpson LIBERTY Ann L. Yuscavage Lyle R. Brion Gary L. Dinnison Lawrence F. Mase Ray E. Wheeland MANSFIELD Robin K. Carleton Gary Ray Butters David Kurzejewski John F. Wise, Jr. MUNCY Dawn L. Myers Kenneth F. Fry Roger D. Jarrett Daniel Mathers Ann Tyler RALSTON William C. Holmes George E. Bittner William W. Brooks, III Richard T. Demitras TIOGA Lois C. Wood John E. Brackley C. Frederick LaVancher Leisa L. LaVancher Donald E. Treat TOWANDA & MONROETON Valerie W. Kinney James A. Bowen Adelbert E. Eldridge W. John Greenland Robert J. Murphy Jeffrey A. Smith James E. Towner Deborah J. Weisbrod TROY Mark C. Griffis Dennis F. Beardslee Roy W. Cummings, Jr. J. Robert Garrison Gregory W. Powers Evan S. Williams, Jr. WELLSBORO Jan L. Southworth Donald R. Abplanalp J. Robert Bower Robert F. Cox, Jr. R. Robert DeCamp Craig Eccher Jan E. Fisher Edward H. Owlett III F. David Pennypacker WYSOX Debra S. Kithcart Lucille P. Donovan Robert L. Fulmer Mark W. Smith Walter E. Warburton, Jr. CITIZENS & NORTHERN BANK OFFICERS OPERATIONS Craig G. Litchfield Chairman, President and Chief Executive Officer Brian L. Canfield Senior Executive Vice President and Branch System Administrator Dawn A. Besse Executive Vice President and Sales and Service Coordinator Mark A. Hughes Executive Vice President and Chief Financial Officer Matthew P. Prosseda Executive Vice President and Commercial Loan Coordinator Harold F. Hoose III Vice President Scott A. Keck Vice President and Bank Operations Coordinator Kathleen M. Osgood Corporate Secretary Klas G. Anderson Assistant Vice President Robert E. Bolt Assistant Vice President Carl M. Chambers Assistant Vice President Joan L. Grenell Assistant Vice President Michelle M. Karas Assistant Vice President and Marketing Coordinator Karen L. Keck Assistant Vice President, Account Services Jeffrey B. Osgood Human Resource Director Joseph A. Snell Assistant Controller Kevin Weinhoffer Assistant Vice President Sandra G. Andrews Assistant Cashier Rosalie L. Bordas Assistant Cashier Account Services Nancy L. Tubbs IRA Administrator Sandra A. Parulas Training Officer Linda M. Prough-Shuey Assistant Cashier Joan E. Rohe Staff Accountant TRUST & FINANCIAL OFFICERS AND BOARDS Page 10 CITIZENS & NORTHERN BANK OFFICERS (Continued) TRUST & FINANCIAL MANAGEMENT GROUP Thomas L. Briggs Executive Vice President and Senior Trust Officer Deborah E. Scott Executive Vice President and Senior Trust Officer Linda L. Kriner Vice President and Trust Officer Renee D. Laychur Vice President and Trust Officer Rhonda J. Litchfield Vice President and Trust Investment Officer Larry D. Alderson Assistant Vice President and Trust Officer Michael G. Charles Assistant Vice President and Trust Officer Mary J. Wood Trust Officer James D. Butters Assistant Trust Officer MANAGEMENT INFORMATION SYSTEMS Rick J. Cisco Vice President and Senior Systems Analyst James H. Shelmire Vice President and Senior Systems Analyst AUDIT AND COMPLIANCE Russell H. Bauman Vice President and Auditor Shawn M. Schreck Vice President, Compliance Officer and Security Officer Glenda R. Marzo Assistant Vice President and Assistant Auditor BANKCARD SERVICES Keith C. Cavanaugh Assistant Vice President Eileen K. Ranck Assistant Vice President Bankcard Manager INTERNET BANKING Shelley L. D'Haene Internet Banking Coordinator C&N FINANCIAL SERVICES CORPORATION INSURANCE DIVISION Thomas L. Rudy, Jr. President BROKER/DEALER DIVISION Philip A. Prough Assistant Vice President OFFICES ATHENS 428 SOUTH MAIN ST. ATHENS, PA 18810 570.888.2291 Virginia L. Reap Assistant Cashier Terry R. Depew Vice President Kathy L. Griffis Assistant Cashier James R. Heffner Assistant Cashier DUSHORE 111 W. MAIN ST. DUSHORE, PA 18614 570.928.8124 Helen W. Ferris Assistant Vice President Bonnie L. Bennett Assistant Cashier Raechelle N. Curry Assistant Cashier Brenda B. Whiteley Assistant Cashier EAST SMITHFIELD MAIN STREET EAST SMITHFIELD, PA 18817 570.596.3131 Peggy A. Brown Assistant Vice President Elaine F. Johnston Assistant Vice President Diane B. Elvidge Assistant Cashier Sandra J. McNeal Assistant Cashier ELKLAND 104 MAIN STREET ELKLAND, PA 16920 814.258.5111 Roberta C. Heck Assistant Vice President Leonard Mitchell, III Assistant Cashier KNOXVILLE 102 EAST MAIN ST. KNOXVILLE, PA 16928 814.326.4151 Mary Rose Sacks Assistant Vice President Lynette M. Burrous Assistant Cashier LAPORTE MAIN STREET LAPORTE, PA 18626 570.946.4011 Linda M. Etzel Assistant Cashier Margaret J. Black Assistant Cashier LIBERTY MAIN STREET LIBERTY, PA 16930 570.324.2331 Ann L. Yuscavage Vice President Joan M. Blackwell Assistant Cashier MANSFIELD 1085 SOUTH MAIN ST. MANSFIELD, PA 16933 570.662.1111 Robin K. Carleton Vice President Diane K. Wilson Assistant Cashier MONROETON ROUTE 220 MONROETON, PA 18832 570.265.2157 MUNCY 3461 ROUTE 405 HIGHWAY MUNCY, PA 17756 570.546.6666 Dawn L. Myers Assistant Cashier Randy R. Meckes Vice President Larry N. Pick Assistant Vice President RALSTON THOMPSON STREET RALSTON, PA 17763 570.995.5421 William C. Holmes Assistant Vice President SAYRE 503 NORTH ELMIRA ST. SAYRE, PA 18840 570.888.2220 Brenda L. May Assistant Vice President Stacey A. Sickler Mortgage Specialist Marcella J. Chaykosky Assistant Cashier Mark W. Elsbree Assistant Cashier TIOGA 41 MAIN STREET TIOGA, PA 16946 570.835.5236 Lois C. Wood Assistant Vice President Deborah K. Beck Assistant Cashier TOWANDA 428 MAIN ST. TOWANDA, PA 18848 570.265.6171 James E. Parks Vice President Valerie W. Kinney Assistant Vice President TROY COURTHOUSE SQUARE TROY, PA 16947 570.297.2159 Mark C. Griffis Vice President David S. Schucker Assistant Vice President Rosalie H. Hall Assistant Cashier WELLSBORO 90-92 MAIN STREET WELLSBORO, PA 16901 570.724.3411 Richard L. Wilkinson Vice President Jan L. Southworth Vice President Kim L. Miller Vice President Brett W. Kennedy Assistant Cashier WYSOX ROUTE 6 WYSOX, PA 18854 570.265.9148 Debra S. Kithcart Assistant Vice President Jeffery E. Aeppli Assistant Vice President BANK OFFICERS/OFFICES Page 11 CITIZENS & NORTHERN CORPORATION AND CITIZENS & NORTHERN BANK BOARD OF DIRECTORS Dennis F. Beardslee Owner, Terrace Lanes Bowling Center J. Robert Bower Pharmacist R. Robert DeCamp President, Patterson Lumber Co., Inc. R. Bruce Haner Auto Buyer for New Car Dealers Susan E. Hartley Attorney at Law Karl W. Kroeck Farmer Leo F. Lambert President & General Manager Fitzpatrick & Lambert, Inc. Edward L. Learn Owner of Learn Hardware and Building Supply Craig G. Litchfield Chairman of the Board, President and Chief Executive Officer Lawrence F. Mase Retired, formerly President of Mase's Inc. Edward H. Owlett, III President & CEO of Putnam Company F. David Pennypacker President of Wellsboro Industrial Park, Inc. Leonard Simpson Attorney at Law James E. Towner Publisher of "The Daily and Sunday Review" DIRECTORS EMERITI Adelbert E. Eldridge Retired Regional Director of Susquehanna Region of Pennsylvania Electric Co. William K. Francis Retired, formerly Chairman of the Board Robert J. Murphy Retired, formerly attorney in law firm of Davis, Murphy, Niemiec & Smith Donald E. Treat Retired, formerly owner of Treat Hardware OUR BOARD INTERNET BANKING CONNECTS YOU TO YOUR WORLD Statistics will tell you that more and more people are attracted to businesses which offer the convenience of online services. Through C&NOW(R) Internet Banking, our customers stay connected to their hometown financial institution, even after they move away or simply go on vacation. With our internet banking services, our customers are always just a click away! C&NOW(R) Internet Banking gives our customers immediate access to their account information from the convenience of their home or office computer. Now they can do their banking over the internet, simply & securely! Customers can use Internet Banking to do any of the following: - View account balances - View account history - Search history by check number, amount or date - Export history to personal finance software - View transactions in checkbook format - Transfer funds between accounts - Pay bills - Request stop payments - Re-order checks and change address. Account options include: - BALANCES The Account Balances Menu is the main menu. After logging onto your account, the Account Balances screen automatically appears, showing balances on the accounts with C&N Bank. This screen allows customers access to information about checking, savings, loans, or other bank accounts. - HISTORY The View History Screen allows customers to view previous transactions for selected accounts. They may view a check and/or print copies of checks. - PAY BILLS As an added convenience, C&N offers online bill payment. Customers need only follow the on-screen steps to add payees, enter the amount, date and account from which they are paying. Signing up for Internet Banking is easy. Just call or visit any C&N Bank branch office, visit us online at www.cnbankpa.com or email us at cnemail@cnbankpa.com. [PHOTO OF THREE EARTHS] Internet Banking continues to be an integral part of the future of banking in general and C&N Bank in particular. TIDBITS Page 12 SERVICES YOU CAN "TRUST" The Trust and Financial Management Group of C&N Bank has the experience and track record of someone you would trust with your investments, your future and the future of your family. Among the varied services handled by this group are: ESTATE ADMINISTRATION C&N can serve as the executor of your estate, performing complete administration services to settle your estate in accordance with your wishes. GUARDIANSHIP ADMINISTRATION C&N can serve as the financial guardian, either by will appointment or court appointment, for minors or the incapacitated. ESTATE & RETIREMENT PLANNING This group can develop estate and retirement plans that best meet your needs and objectives. INVESTMENT MANAGEMENT C&N's Trust and Financial Services staff serves individuals, organizations and corporations with comprehensive investment strategies. FINANCIAL CUSTODY SERVICES If you employ investment services from a third party, C&N can provide asset custody, income collection and transaction/asset reporting to complement those services. TAX PREPARATION We offer full income tax preparation as a convenience for clients of our Trust and Financial Services Division. EMPLOYEE BENEFIT PLANS Complete retirement plan services are offered for 401-k, profit sharing, money purchase pension, defined benefit pension plans and all types of IRAs. NOTE Some products are: - Not FDIC Insured - Not a Deposit or Other Obligation of the Bank - Not Guaranteed by the Bank - Subject to Investment Risk, Including the Loss of the Principal Amount Invested - Not Insured by any Federal Government Agency WE'VE MOVED! C&N Financial Services Corporation has packed up and moved to 68 Main Street, the former Huffman's store. The move gives Financial Services a downtown presence, facilitating access for clients and keeping CNFS in the mainstream and minds-eye of prospective customers. The building, which also houses training facilities for C&N Bank, has been extensively remodeled. An open house will be held this month to introduce the new facility and CNFS to the community. We invite everyone to stop in and look over this exciting C&N facility. CONTACT US Our service departments may be contacted directly. BANKCARD SERVICES RR #7, Wellsboro, PA 16901 1.800.676.6639 ACCOUNT SERVICES 90-92 Main Street, Wellsboro, PA 16901 1.800.726.2265 TRUST & FINANCIAL MANAGEMENT GROUP 90-92 Main Street, Wellsboro, PA 16901 1.800.487.8784 428 Main Street, Towanda, PA 18848 1.888.987.8784 428 South Main Street, Athens, PA 18810 1.888.760.8192 3461 Route 405 Highway, Muncy, PA 17756 570.546.6666 C&N FINANCIAL SERVICES CORPORATION 68 Main Street, Wellsboro, PA 16901 1.866.ASK.CNFS www.cnfinancialservices.com INTERNET BANKING 90-92 Main Street, Wellsboro, PA 16901 570.724.0266 www.cnbankpa.com TIDBITS [CITIZENS & NORTHERN CORPORATION LOGO] Athens/Dushore/East Smithfield/Elkland/Knoxville/Laporte/Liberty/Mansfield Monroeton/Muncy/Ralston/Sayre/Tioga/Towanda/Troy/Wellsboro/Wysox Member FDIC Stock Symbol CZNC www.cnbankpa.com [PHOTO OF CRAIG G. LITCHFIELD] [PICTURE] "We must train, coach and empower our employees to best serve our customers. By serving customers, we ultimately build value for our shareholders. Craig G. Litchfield Chairman, President & Chief Executive Officer Complete message to shareholders on Pages 2-3 OUR PEOPLE, OUR STRENGTH [CITIZENS & NORTHERN CORPORATION LOGO] Athens/Dushore/East Smithfield/Elkland/Knoxville/Laporte/Liberty/Mansfield Monroeton/Muncy/Ralston/Sayre/Tioga/Towanda/Troy/Wellsboro/Wysox Member FDIC Stock Symbol CZNC www.cnbankpa.com