EX-99.1 9 l17962aexv99w1.txt EX-99.1 Exhibit 99.1 (GRAPHIC) BRADFORD COUNTY Annual Highlights Athens 2005: A Year of Growth East Smithfield Monroeton (CITIZENS & NORTHERN CORPORATION LOGO) Sayre Towanda Troy Wysox LYCOMING COUNTY: Jersey Shore Muncy Old Lycoming Ralston South Williamsport Williamsport STEUBEN COUNTY: Canisteo Hornell SULLIVAN COUNTY: Dushore Laporte TIOGA COUNTY: Elkland Knoxville Liberty Mansfield Tioga Wellsboro Member FDIC www.cnbankpa.com Stock Symbol: CZNC Professionals dedicated to meeting your lifetime financial needs, with a personal touch. (PHOTO OF CRAIG G. LITCHFIELD) FROM CRAIG G. LITCHFIELD CHAIRMAN, PRESIDENT AND CEO A MESSAGE TO OUR SHAREHOLDERS THE YEAR IN REVIEW For Citizens & Northern, 2005 was a year of development, adaptation and positioning for the future. In August of 2005, following the 2004 openings of two full service community offices in Williamsport and South Williamsport, we opened our 20th office in Jersey Shore, Pennsylvania. The ground breaking for our 21st office was held in October 2005 with a very warm welcome extended by the township supervisors and residents of Old Lycoming Township. We are delighted to be joining the Old Lycoming community and expect to play a role in the financial successes the residents and businesses will achieve in the coming years. The projected opening date for the Old Lycoming office is March 1st and the excitement of our staff and the community is palpable. Not only have we built two very attractive offices in 2005 that are assets to their respective communities, we have been fortunate in attracting experienced bankers who are residents of the Jersey Shore and Old Lycoming communities and who, with their well-trained staffs, will be delivering the C&N customer-focused service to their friends and neighbors. Of course, it was with equal excitement, that we entered New York State with the acquisition of the Canisteo Valley Corporation and its sole subsidiary, First State Bank, with offices in Canisteo and South Hornell, New York. Over the coming year, we will be working with the First State Bank management and staff to align their systems, services and customer-focus with that of C&N. With the help of the First State Bank team, we will learn about their region's style of banking. Together both institutions can better serve the current and future customers in the First State Bank market area. We believe the investments we have made in the new offices in Lycoming County and the entry into New York State by virtue of the acquisition of First State Bank will result in more opportunity for revenue growth. These initiatives are perfectly aligned with our mission to serve our clients with the best financial services, our communities with support of their socio-economic futures, our shareholders with long-term value creation and our employees with career growth and advancement. 2005 was a year of adaptation to our new core processing system. While the switch to the new system occurred in mid-October 2004, there was a great deal of learning and adjustment for months following the conversion. Our people did what it took to assure that our customers did not suffer from the changes. While the transition to the new system was trying, it was gratifying to see the C&N team work together to get the job done. During 2005, we experienced other significant events. In mid-January, we listed our stock on the NASDAQ Small Cap national market. That market is now called the NASDAQ Capital Market Securities. The purpose of the listing was to enhance the marketability and liquidity of our stock. We believe those goals were achieved. Of course, initially, we did see a great deal of volatility due, apparently, to the addition of our shares to the Russell 2000 index in late June. As we have grown, the need for more office space became increasingly evident. Thus, in July of 2005, we began building a new 15,000 square foot administration building that will be occupied by March 1st, 2006. The building is located two blocks from our Wellsboro Main Street office. The building will house our corporate staff and Human Resources, Branch Delivery, Lending, Cash Management and Accounting personnel. Commercial Lending, Broker/Dealer and Trust and Financial Management personnel will occupy the space that will be vacated in the Main Street building. 2005 was the year of the hurricane with one of the most devastating storms hitting the Gulf Coast. After the Hurricane Katrina disaster, we organized a disaster recovery fund raising initiative that garnered $50,000 for the American Red Cross. Thanks go out to our employees, clients and communities for their benevolence and commitment to helping their fellow citizens. From the financial perspective, the interest rate environment has been increasingly difficult for community banking. In an effort to assure that inflation is contained, the Federal Reserve has continued raising the Fed Funds rate. There have been fourteen 1/4 percentage point increases since June 2004 with eight increases in 2005 and more recently another bump on January 31st, 2006. As of this writing, the Fed Funds rate stands at 4.50%. In the same time span June 2004 to January (Cont.Page 2) 2005 ANNUAL HIGHLIGHTS | PAGE 1 SHAREHOLDERS' MESSAGE (Continued) Dividends were increased 4.49% over 2004. The share price at the end of the year of $25.63 was down 5% compared to $27 at year-end 2004. RETIREMENTS During 2005, three of our long-term team members retired: JEFF OSGOOD - Human Resources, 27 years; DIANE ELVIDGE -East Smithfield, 21 years and NANCY ALLYN - Wysox, 40 years. They all served us well and we wish them long, healthy and fulfilling retirements. During 2005, two directors emeriti retired from our board: J.ROBERT BOWER and LARRY F. MASE. J. ROBERT BOWER was elected to the board in 1967 when the bank's total assets were $21.4 million. We thank him for his 38 years of loyal service to Citizens & Northern and, also, wish him a long, healthy and fulfilling future. LARRY MASE began service to Citizens & Northern Bank in 1970 as an Advisory Board member at our Liberty Office. In 1970, the bank's assets totaled about $31 million. Larry was elected to the board of directors in 1990. We thank Larry for his 35 years of loyal service and wish him a long, healthy and fulfilling future. CONCLUSION It has been an honor and privilege to work with the hardworking C&N Team personnel. Their commitment, loyalty and dedication to serving the financial needs and expectations of our clients will continue to grow our share of the market and our revenue opportunities in the future. It is our vision that we will be recognized by the communities and clients we serve as the foremost source of advice, counsel and solutions for their changing financial needs. (GRAPHIC) CORPORATE OVERVIEW Citizens & Northern Corporation is a bank holding company with assets exceeding $1.1 billion and is headquartered in Wellsboro, PA. Banking services are provided by its subsidiary, Citizens & Northern Bank, from 20 banking offices in Bradford, Lycoming, Sullivan and Tioga Counties in Pennsylvania. Investment and insurance products are offered through Citizens & Northern Bank's subsidiary, C&N Financial Services Corporation. Citizens & Northern Corporation stock trades on NASDAQ Capital Market Securities under the symbol CZNC. (FIRST STATE BANK LOGO) OFFICERS: Patrick F. Donnelly, President Gail Davis, Vice President Mary M. Bergh, Assistant Vice President Ray A. Mazzella, Assistant Treasurer Sheila J. Leach, Assistant Secretary Carolyn R. Wallace, Branch Manager, Hornell Canisteo Valley Corporation has assets of $44.5 million and delivers services to its customers through its two First State Bank offices in Canisteo and South Hornell, NY. CANISTEO VALLEY CORPORATION DIRECTORS are: Patrick F. Donnelly, Chairman Craig G. Litchfield Karl W. Kroeck Carl E. Chase William O. Hatch Harold L. Miller Brian C. Schu CANISTEO VALLEY CORPORATION OFFICERS are: Patrick F. Donnelly, President & CEO William F. Moran, Assistant Secretary Thomas Rudy, Assistant Secretary Philip Prough, Assistant Secretary 2005 ANNUAL HIGHLIGHTS | PAGE 3 SHAREHOLDERS' MESSAGE (Continued) (From Page 1) 2006, the 10-year Treasury bond rate dropped from around 5.25% to about 4.50%. Our cost of funds, for deposits and borrowings, is closely correlated with short-term interest rates like Fed Funds and our lending rates are closely correlated with the 10-year rates. The federal interest yield curve is flat with less than 15 basis points separating the Fed Funds rate from the 30-year Treasury Rate; and only 2 basis points separating the Fed Funds rate from the 10-year treasury rate. Deposits and borrowings reprice quickly, on average in less than one-year, while earning assets, loans and our fixed rate investments and loans reprice on average over a 4 to 7 year period. We and other banks will be experiencing compression in our net interest income until the Federal Reserve ceases increasing Fed Funds, or long-term rates increase; and the yield curve returns to a more historically common upward slope with a 1 to 2 percentage point spread between the short-term and long-term yields. FINANCIAL HIGHLIGHTS To better understand the 2005 financial information, it is necessary to break out the Canisteo Valley Corporation (CVC) information, which is consolidated to include First State Bank. The acquisition was accounted for using purchase accounting, thus the Citizens & Northern Corporation (CNC) 2005 balance sheet includes CVC, while the 2004 balance sheet information does not. Additionally, only CVC's income and expenses from the date of the acquisition (September 1, 2005) are included in the CNC income statement. CVC ended the year with total assets of $44.5 million. CVC's net loans totaled $21.5 million and available not for sale securities totaled $9.2 million. CVC's year-end deposits totaled $37 million. Total assets for Citizens & Northern Corporation grew about $40 million or 3.56%. Total assets for Citizens & Northern Bank (CNB) actually decreased by $4.5 million from the end of 2004 to the end of 2005. CNB's security portfolio decreased by $56.8 million and loans, net of the allowance for loan losses, increased by $50.6 million. Deposits, including repo sweeps, for CNB grew by $51.1 million, or 7.32%. CNB premises and equipment increased by nearly $4.5 million, due to our Lycoming County growth initiative and the new administrative office building. Overall, CNC's net asset growth for the year resulted from the acquisition of CVC. The shrinking of the CNB investment portfolio was due to the lack of availability of investment quality securities with yields that provide enough of a spread to the funding costs. This is a result of the flat yield curve. As securities matured or as cash flows from our mortgage-backed holdings were received, we channeled the money to pay down long-term borrowings and to fund new loans, which do offer a reasonable opportunity for spread. For CNB, interest and fees on loans increased by $4 million due to an 8.84% increase in loans. Total interest and dividend income, including the loan income, increased by a lesser amount, $2.4 million, due to a decrease in income from the investment portfolio. Due to loan growth and some problem loans, we increased the total 2005 provision for loan losses by $626 thousand to $2 million. Thus net interest income after provision for loan losses dropped about $1.15 million. We elected to sell the credit card portfolio and continue to issue cards as an agent bank, because the increased cost of fraud prevention was not acceptable on a cost-benefit basis given the size of our portfolio. With the new program, our customers will have more benefits and features available on their CNB branded cards than in the past. We will also be selling the small First State Bank portfolio during 2006. We are continuing our merchant card services and our ATM Card and Visa Check Card issuance. Net security gains decreased $1 million in 2005. In the fourth quarter 2005, we sold some relatively low-yielding securities that had been purchased in 2003 and 2004, in an effort to provide opportunities to improve our net interest margin in 2006 and future years. Other expenses grew substantially, nearly $3 million or $11.4%, from 2004, due mostly to the investment in infrastructure, overhead expenses and salaries related to our Lycoming County growth initiative. As most organizations our size, we have had to incur substantial increases in the costs created by compliance with the Sarbanes Oxley Act of 2002 (SOX) and SEC 404 compliance. Our independent auditor fees have nearly doubled and we have added more internal auditing, accounting and compliance staff to handle the additional workload created by SOX and 404. It is my opinion that although it may be true that the new requirements of SOX and the SEC, which were stimulated by Enron, Tyco and World Com fiascoes, provide additional assurance to shareholders that financial reporting and risk identification and management are incrementally better, the negligible improvement does not justify the expense. After all, fraud was illegal before SOX. The burden of complying with the new rules will be a drag on the efficiencies of all small companies that must comply. As a result of the decrease in the interest margin net of the provision for loan loss, some increase in other income and the increase in other expenses, our net income decreased 12.6% for the year. Return on average assets dropped to 1.13% and the return on average equity dropped to 9.8%. The tangible equity to tangible assets remains strong at 10.75%. Non-performing assets to total assets dropped by over 20% to 0.55% and the allowance for loan losses to total assets increased to 1.28%. (Cont. Page 3) PAGE 2 | 2005 ANNUAL HIGHLIGHTS (GRAPHIC) FIVE-YEAR PERFORMANCE (PERFORMANCE GRAPH)
Net Income (in millions) ------------------------------------- 2005 2004 2003 2002 2001 ----- ----- ----- ----- ----- $13.0 $14.9 $16.3 $15.0 $12.1
(PERFORMANCE GRAPH)
Total Shareholders Equity (In millions) ------------------------------------------ 2005 2004 2003 2002 2001 ------ ------ ------ ------ ------ $132.0 $131.6 $125.3 $115.8 $100.2
(PERFORMANCE GRAPH)
Total Assets (In millions) ---------------------------------------- 2005 2004 2003 2002 2001 ------ ------ ------ ------ ---- $1,163 $1,123 $1,067 $1,019 $867
(PERFORMANCE GRAPH)
Deposits (In millions) -------------------------------- 2005 2004 2003 2002 2001 ---- ---- ---- ---- ---- $757 $677 $658 $640 $576
(PERFORMANCE GRAPH)
Net Loans (In millions) -------------------------------- 2005 2004 2003 2002 2001 ---- ---- ---- ---- ---- $645 $573 $519 $445 $374
(PERFORMANCE GRAPH)
Cash Dividends Declared ------------------------------------- 2005 2004 2003 2002 2001 ----- ----- ----- ----- ----- $0.93 $0.89 $0.85 $0.77 $0.71
* Cash dividends per share for 2001-2002 adjusted for the effects of a 3-for-2 stock split issued in April, 2003. In addition to cash dividends, a 1% stock dividend has been declared for each year. PAGE 4 | 2005 ANNUAL HIGHLIGHTS (GRAPHIC) STOCKHOLDER INQUIRIES A copy of the Corporation's Annual Report Form 10-K for the year ended December 31, 2005, 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 through C&N's website at www.cnbankpa.com and 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. (GRAPHIC) INVESTOR INFORMATION The Annual Meeting of Shareholders will be held in the Arcadia Theater, Wellsboro, PA, at 2:00 p.m. Tuesday, April 18th, 2006. General shareholder inquiries should be sent to: CITIZENS & NORTHERN CORPORATION 90-92 Main Street, PO 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 Independent Auditors are PARENTE RANDOLPH, LLC 400 Market Street, Williamsport, PA 17701 (GRAPHIC) CONTACT US Our service departments may be contacted directly: FUNDS MANAGEMENT: 90-92 Main St., Wellsboro, PA 16901 - 1-800-577-9397 ACCOUNT SERVICES: 90-92 Main St., Wellsboro, PA 16901 - 1-800-726-2265 BANKCARD SERVICES: RR#7, WELLSBORO, PA 16901 - 1-800-676-6639 INTERNET BANKING: 90-92 Main St., Wellsboro, PA 16901 - 570-724-0266 www.cnbankpa.com C&N FINANCIAL SERVICES CORP: 64 Main St., Wellsboro, PA 16901 - 1-866-ASK-CNFS www.cnfinancialservices.com TRUST & FINANCIAL MANAGEMENT GROUP: 90-92 Main St., Wellsboro, PA - 1-800-487-8784 1827 Elmira St., Sayre, PA 18840 - 1-888-760-8192 428 Main St., Towanda, PA 18848 - 1-888-987-8784 130 Court St. ,Williamsport, PA 17701 - 1-866-732-7213 2005 ANNUAL HIGHLIGHTS | PAGE 5 (GRAPHIC) QUARTERLY SHARE DATA Trades of the Corporation's stock are executed through various brokers who maintain a market in the Corporation's stock. The Corporation's stock is listed on NASDAQ Capital Market Securities with the trading symbol CZNC. The following table sets forth the approximate high and low sales prices of the common stock during 2005 and 2004: 2005
Dividend Declared High Low Per Quarter ------ ------ ----------------- First Quarter $32.25 $26.50 0.23 Second Quarter $33.85 $25.80 0.23 Third Quarter $37.51 $25.22 0.23 Fourth Quarter $29.46 $24.49 0.24
Plus a 1% stock dividend 2004
Dividend Declared High Low Per Quarter ------ ------ ----------------- First Quarter $27.00 $25.00 $0.22 Second Quarter $25.50 $24.45 $0.22 Third Quarter $25.90 $24.20 $0.22 Fourth Quarter $27.00 $24.80 $0.23
Plus a 1% stock dividend PAGE 6 | 2005 ANNUAL HIGHLIGHTS (GRAPHIC) COMMON STOCK AND PER SHARE DATA
2005 2004 2003 2002 2001 ----------- ----------- ----------- ----------- ----------- Net income per share - basic $ 1.57 $ 1.80 $ 1.97 $ 1.81 $ 1.46 Net income per share - diluted $ 1.55 $ 1.79 $ 1.96 $ 1.81 $ 1.45 Cash dividends declared per share $ 0.93 $ 0.89 $ 0.85 $ 0.77 $ 0.71 Stock dividend 1% 1% 1% 1% 1% ----------- ----------- ----------- ----------- ----------- Stockholders' equity per share (a) $ 15.89 $ 15.92 $ 15.18 $ 14.04 $ 12.14 =========== =========== =========== =========== =========== Stockholders' equity per share, excluding accumulated other comprehensive income (loss) (a) $ 15.33 $ 14.65 $ 13.72 $ 12.57 $ 11.50 Weighted average shares outstanding- basic 8,292,141 8,267,321 8,252,358 8,251,861 8,266,563 Weighted average shares outstanding- diluted 8,350,926 8,315,847 8,301,073 8,273,749 8,288,451 Number of shares outstanding at year-end 8,220,791 8,102,646 8,014,625 5,285,606 5,234,800 ----------- ----------- ----------- ----------- ----------- Number of shares authorized 20,000,000 20,000,000 10,000,000 10,000,000 10,000,000 =========== =========== =========== =========== ===========
(a) for purposes of this computation, the number of outstanding shares has been increased for the effects of a 3-for-2 stock split issued in April 2003, and for 1% stock dividends issued in January following each year-end. 2005 ANNUAL HIGHLIGHTS | PAGE 7 (GRAPHIC) PROFIT FIVE-YEAR SUMMARY OF OPERATIONS (In Thousands) INCOME STATEMENT
2005 2004 2003 2002 2001 ---------- ---------- ---------- ---------- -------- Interest Income $ 61,108 $ 57,922 $ 55,223 $ 57,285 $ 54,661 ---------- ---------- ---------- ---------- -------- Interest Expense $ 25,687 $ 22,606 $ 23,537 $ 26,315 $ 28,356 ========== ========== ========== ========== ======== Interest Margin $ 35,421 $ 35,316 $ 31,686 $ 30,970 $ 26,305 ---------- ---------- ---------- ---------- -------- Provision for Loan Losses $ 2,026 $ 1,400 $ 1,100 $ 940 $ 600 ========== ========== ========== ========== ======== Interest margin after provision for loan losses $ 33,395 $ 33,916 $ 30,586 $ 30,030 $ 25,705 Other Income $ 7,636 $ 6,922 $ 6,595 $ 6,624 $ 6,120 Securities Gains $ 1,802 $ 2,877 $ 4,799 $ 2,888 $ 1,920 Gain from sale of credit card loans $ 1,906 ---------- ---------- ---------- ---------- -------- Other Expenses $ 28,962 $ 26,001 $ 22,114 $ 20,849 $ 18,671 ========== ========== ========== ========== ======== Income before income tax provision $ 15,777 $ 17,714 $ 19,866 $ 18,693 $ 15,074 ---------- ---------- ---------- ---------- -------- Income tax provision $ 2,793 $ 2,851 $ 3,609 $ 3,734 $ 3,022 ========== ========== ========== ========== ======== Net Income $ 12,984 $ 14,863 $ 16,257 $ 14,959 $ 12,052 ========== ========== ========== ========== ======== BALANCE SHEET AT YEAR END Total Securities (1) $ 433,244 $ 479,626 $ 484,825 $ 513,597 $437,398 Gross loans, excluding unearned discount $ 653,299 $ 579,613 $ 524,897 $ 451,145 $379,228 Total Assets $1,162,954 $1,123,002 $1,066,901 $1,018,768 $866,999 Total Deposits $ 757,065 $ 676,545 $ 658,065 $ 640,304 $576,274 Stockholders' Equity, excluding accumulated other comprehensive income (3) $ 127,270 $ 121,050 $ 113,306 $ 103,691 $ 94,903 ---------- ---------- ---------- ---------- -------- Total stockholders' equity $ 131,968 $ 131,585 $ 125,343 $ 115,837 $100,187 ========== ========== ========== ========== ========
PAGE 8 | 2005 ANNUAL HIGHL IGHTS (GRAPHIC) FIVE-YEAR SUMMARY OF OPERATIONS (In Thousands) AVERAGE BALANCE SHEET
2005 2004 2003 2002 2001 ---------- ---------- ---------- -------- -------- Total securities, at amortized cost (1) $ 446,845 $ 485,183 $ 474,406 $470,764 $412,654 Gross loans, excluding unearned discount $ 618,344 $ 551,352 $ 485,150 $410,670 $346,353 Earning assets $1,065,189 $1,036,535 $ 959,556 $881,434 $759,007 Total assets $1,144,619 $1,114,041 $1,034,720 $943,001 $805,229 Total assets excluding unrealized gains/losses (3) $1,133,422 $1,097,859 $1,014,424 $930,539 $798,590 Total deposits $ 702,404 $ 669,307 $ 651,026 $613,392 $544,579 Stockholders' equity, excluding accumulated other comprehensive income (3) $ 125,076 $ 117,695 $ 108,876 $ 99,361 $ 91,703 ---------- ---------- ---------- -------- -------- Stockholders' equity $ 132,465 $ 128,374 $ 122,271 $107,595 $ 96,021 ========== ========== ========== ======== ======== FINANCIAL RATIOS Return on stockholders' equity, excluding accumulated other comprehensive income (2), (3) 10.38% 12.63% 14.93% 15.06% 13.14% Return on stockholders' equity (2) 9.80% 11.58% 13.30% 13.90% 12.55% Return on assets (2) 1.13% 1.33% 1.57% 1.59% 1.50% Stockholders' equity to assets, excluding accumulated other comprehensive income (2), (3) 11.04% 10.72% 10.73% 10.68% 11.48% Stockholders' equity to assets (2) 11.57% 11.52% 11.82% 11.41% 11.92% Stockholders' equity to loans (2) 21.42% 23.28% 25.20% 26.20% 27.72% Net income to: Total interest income 21.25% 25.66% 29.44% 26.11% 22.05% Interest margin 36.66% 42.09% 51.31% 48.30% 45.82% ---------- ---------- ---------- -------- -------- Dividends as a % of net income 58.85% 48.54% 41.96% 41.17% 46.08% ========== ========== ========== ======== ========
(1) Includes available-for-sale and held-to-maturity securities, and interest-bearing cash and due from banks. (2) Financial ratios calculated based on average balance sheet data. (3) Generally accepted accounting principles ("GAAP") require that available-for-sale securities be reported at fair value, with unrealized gains and losses excluded from earnings and reported separately through stock holders' equity, net of tax. Management believes there is an inherent mismatch between the income statement and balance sheet related to unrealized gains/losses that may create a material inconsistency in earnings-based ratios. Further, the amount of unrealized gains/losses may vary widely from period-to-period, depending on the financial markets as a whole and nterest rate movements. Therefore, management has provided these "non-GAAP" amounts and ratios because we believe they provide meaningful information for evaluating the Corporation's financial position and results of operations. 2005 ANNUAL HIGHLIGHTS | PAGE 9 (GRAPHIC) QUARTERLY FINANCIAL DATA The following table presents summarized quarterly financial data for 2005 (unaudited) (In thousands, except per share data). 2005 QUARTER ENDED
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 -------- ------- -------- ------- Interest income $14,693 $14,908 $15,571 $15,936 ------- ------- ------- ------- Interest expense $ 5,957 $ 6,155 $ 6,426 $ 7,149 ======= ======= ======= ======= Interest margin $ 8,736 $ 8,753 $ 9,145 $ 8,787 ------- ------- ------- ------- Provision for loan losses $ 375 $ 375 $ 375 $ 901 ======= ======= ======= ======= Interest margin after provision for loan losses $ 8,361 $ 8,378 $ 8,770 $ 7,886 Other income $ 1,703 $ 1,889 $ 2,149 $ 1,895 Gain from sale of credit card loans $ 1,906 Securities gains (losses) $ 1,066 $ 929 $ 393 $ (586) ------- ------- ------- ------- Other expenses $ 7,128 $ 7,173 $ 7,303 $ 7,358 ======= ======= ======= ======= Income before income tax provision $ 4,002 $ 4,023 $ 4,009 $ 3,743 ------- ------- ------- ------- Income tax provision $ 707 $ 725 $ 722 $ 639 ======= ======= ======= ======= Net income $ 3,295 $ 3,298 $ 3,287 $ 3,104 ======= ======= ======= ======= Net income per share - basic $ 0.40 $ 0.40 $ 0.40 $ 0.37 ======= ======= ======= ======= Net income per share - diluted $ 0.39 $ 0.39 $ 0.39 $ 0.37 ======= ======= ======= =======
PAGE 10 | 2005 ANNUAL HIGHLIGHTS (GRAPHIC) QUARTERLY FINANCIAL DATA The following table presents summarized quarterly financial data for 2004 (unaudited) (In thousands, except per share data). 2004 QUARTER ENDED
MARCH 31 JUNE 30 SEPT. 30 DEC. 31 -------- ------- -------- ------- Interest income $14,015 $14,343 $14,573 $14,991 ------- ------- ------- ------- Interest expense $ 5,703 $ 5,493 $ 5,665 $ 5,745 ======= ======= ======= ======= Interest margin $ 8,312 $ 8,850 $ 8,908 $ 9,246 ------- ------- ------- ------- Provision for loan losses $ 350 $ 350 $ 350 $ 350 ======= ======= ======= ======= Interest margin after provision for loan losses $ 7,962 $ 8,500 $ 8,558 $ 8,896 Other income $ 1,625 $ 1,855 $ 1,627 $ 1,815 Securities gains $ 964 $ 321 $ 459 $ 1,133 ------- ------- ------- ------- Other expenses $ 6,228 $ 6,289 $ 6,738 $ 6,746 ======= ======= ======= ======= Income before income tax provision $ 4,323 $ 4,387 $ 3,906 $ 5,098 ------- ------- ------- ------- Income tax provision $ 617 $ 698 $ 501 $ 1,035 ======= ======= ======= ======= Net income $ 3,706 $ 3,689 $ 3,405 $ 4,063 ======= ======= ======= ======= Net income per share - basic $ 0.45 $ 0.45 $ 0.41 $ 0.49 ======= ======= ======= ======= Net income per share - diluted $ 0.44 $ 0.44 $ 0.41 $ 0.49 ======= ======= ======= =======
2005 ANNUAL HIGHLIGHTS | PAGE 11 (GRAPHIC) TRUST AND FINANCIAL MANAGEMENT GROUP (IN THOUSANDS)
2005 2004 2003 2002 2001 -------- -------- -------- -------- -------- Assets $418,259 $383,062 $329,493 $285,221 $303,868 Revenue $ 2,088 $ 2,105 $ 1,733 $ 1,755 $ 1,576
The composition of trust assets under management and accounts as of December 31, 2005 and 2004 are shown in the following table: (IN THOUSANDS)
INVESTMENTS 2005 2004 ----------- -------- -------- Mutual Funds $142,597 $129,299 Bonds $122,243 $107,954 Stocks $115,077 $118,334 Savings and Money Market Funds $ 34,261 $ 24,826 Real Estate $ 2,305 $ 1,199 Mortgages $ 1,111 $ 443 Miscellaneous $ 665 $ 1,007 -------- -------- Total $418,259 $383,062 ======== ========
ACCOUNTS 2005 2004 -------- -------- -------- Pension/Profit Sharing $173,676 $162,129 Investment Management $123,335 $120,237 Trusts $ 75,998 $ 84,043 Custody $ 39,219 $ 12,459 Guardianships $ 1,139 $ 1,177 Estates $ 4,892 $ 3,017 -------- -------- Total $418,259 $383,062 ======== ========
PAGE 12 | 2005 ANNUAL HIGHLIGHTS (GRAPHIC) OUR OFFICERS 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 CANISTEO VALLEY CORPORATION BOARD OF DIRECTORS: Carl E. Chase Patrick F. Donnelly William O. Hatch Karl W. Kroeck Craig G. Litchfield Harold Miller Brian C. Schu CITIZENS & NORTHERN BANK ADVISORY BOARD MEMBERS Athens and Sayre: Virginia L. Reap Kathy L. Griffis Warren J. Croft Max P. Gannon, Jr. R. Bruce Haner Susan E. Hartley George D. Howell Wayne E. Lowery David Rosenbloom Mary Theresa Sullivan 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 James G. Wilcox Elkland Lynette Burrous Mary C. Heitzenrater Mark R. Howe John C. Kenyon Edward L. Learn Jersey Shore (eff. 1/2006) Debra R. Martin Melanie McLane Knoxville Amy Wherley Brian Bicksler L. Grant Gehman Karl W. Kroeck William W. Roosa Laporte Linda M. Etzel David L. Baumunk Robin A. Fiester William B. Saxe Leonard Simpson Liberty Ann L. Yuscavage Lyle R. Brion Gary L. Dinnison James H. Route, Jr. Ray E. Wheeland Mansfield Diane K. Wilson Clifford L. Cross, Jr. David Kurzejewski Larry Mansfield Muncy Dawn Myers James R. Fetter, Jr. Kenneth F. Fry Thomas D. Hess Roger D. Jarrett Old Lycoming Stacy Elliott John M. Confer Karen Maseto Terry Waldman Ralston Courtney Baker William W. Brooks, III Stephen L. Davis Richard T. Demitras Tioga Brett Kennedy C. Frederick LaVancher Leisa L. LaVancher Dirk D'Haene Towanda/Monroeton Valerie W. Kinney James A. Bowen W. John Greenland Jeffrey A. Smith James E. Towner Deborah Weisbrod Troy Mark C. Griffis Dennis F. Beardslee Roy W. Cummings, Jr. J. Robert Garrison Gregory W. Powers Evan S. Williams, Jr. Wellsboro Todd Coolidge Donald R. Abplanalp Robert F. Cox, Jr. R. Robert DeCamp Craig Eccher Jan E. Fisher Scott Lewis Edward H. Owlett, III F. David Pennypacker Williamsport/South Williamsport Keith Boatman James Bower, Jr. Daniel Mathers Raymond Mattie Ann M. Tyler Steven Uzupis Wysox Debra S. Kithcart Lucille P. Donovan Robert L. Fulmer Gary Hennip Mark W. Smith Walter E. Warburton, Jr. 2005 ANNUAL HIGHLIGHTS | PAGE 13 CITIZENS & NORTHERN BANK OFFICERS
NAME TITLE BRANCH ---- ----- ------ Craig G. Litchfield Chairman, President, Chief Executive Officer Wellsboro Dawn A. Besse Executive Vice President and Director of Sales, Service and Employee Development Wellsboro Harold F. Hoose, III Executive Vice President and Director of Lending Wellsboro Mark A. Hughes Executive Vice President and Chief Financial Officer Wellsboro Thomas L. Rudy, Jr. Executive Vice President and Director of Branch Delivery Wellsboro Deborah E. Scott Executive Vice President and Senior Trust Officer Wellsboro Larry D. Alderson Vice President and Trust Officer Sayre Thomas L. Briggs Vice President - Facilities Management Wellsboro William A. Burget Vice President - Regional Loan Specialist and Business Development Officer Williamsport Carl M. Chambers Vice President and Western Region Commercial Team Leader Wellsboro Rick J. Cisco Vice President and Senior Systems Analyst Wellsboro Shelley L. D'Haene Vice President and Internet Banking Coordinator Wellsboro Kevin J. Dougherty Vice President - Commercial Loan Officer Sayre Terry R. Depew Vice President Athens Helen W. Ferris Vice President and Branch Manager Dushore Marisa A. Flynn Vice President/Loan Administrator Williamsport Mark C. Griffis Vice President Troy Mark A. Huffman Vice President and Trust Officer Williamsport Karen L. Keck Vice President and Director of Deposit Services Wellsboro Scott A. Keck Vice President and Retail Lending Coordinator Wellsboro Valerie W. Kinney Vice President and Branch Manager Towanda Debra S. Kithcart Vice President and Branch Manager Wysox George E. Kunkel Vice President and Senior Financial Analyst Wellsboro James P. Lazorka Vice President and Regional Executive Williamsport Rhonda J. Litchfield Vice President and Trust Investment Officer Wellsboro Daniel Manetta Vice President and Director of Education Williamsport Glenda R. Marzo Vice President and Auditor Wellsboro Kim L. Miller Vice President and Regional Loan Specialist Wellsboro James E. Parks Vice President and Regional Executive Towanda Roberta C. Plank Vice President and Regional Executive Wellsboro John M. Reber Vice President and Director of Risk Management Wellsboro James H. Shelmire Vice President and Senior Systems Analyst Wellsboro Bruce Smithgall Vice President/Commercial Services Williamsport Joseph A. Snell Comptroller Towanda Nancy L. Tubbs Vice President, Compliance Officer and IRA Administrator Wellsboro Kevin Weinhoffer Vice President Williamsport Richard L. Wilkinson Vice President Wellsboro Ann L. Yuscavage Vice President and Branch Manager Liberty Kathleen M. Osgood Corporate Secretary Wellsboro Jeffery E. Aeppli Assistant Vice President Wysox Darci Baird Assistant Vice President - Senior Financial Consultant Sayre Courtney J. Baker Assistant Vice President and Branch Manager Ralston Keith A. Boatman Assistant Vice President and Branch Manager Williamsport Peter J. Boergermann Assistant Vice President - Senior Network Engineer Wellsboro Christopher E. Bolt Assistant Vice President - Senior Systems Analyst Wellsboro Rosalie L. Bordas Assistant Vice President - Account Services Manager Wellsboro Alison S. Broughton Assistant Vice President and Mortgage Specialist Wellsboro Lori Brown Trust Officer Towanda Peggy A. Brown Assistant Vice President and Branch Manager East Smithfield Lynette M. Burrous Assistant Vice President and Branch Manager Elkland James D. Butters Assistant Vice President/Director of Financial Services Support Wellsboro
PAGE 14 | 2005 ANNUAL HIGHLIGHTS CITIZENS & NORTHERN BANK OFFICERS
NAME TITLE BRANCH ---- ----- ------ Keith C. Cavanaugh Assistant Vice President - Commercial Loan Wellsboro Michael Charles Assistant Vice President - Trust Wellsboro Todd Coolidge Assistant Vice President and Branch Manager Wellsboro Raechelle N. Curry Assistant Vice President Dushore Stacy Y. Elliott Assistant Vice President and Branch Manager Old Lycoming Linda M. Etzel Assistant Vice President and Branch Manager Laporte Linda L. Gordner Assistant Vice President Muncy George M. Greeley Assistant Vice President Wellsboro Joan L. Grenell Assistant Vice President Towanda Kathy L. Griffis Assistant Vice President and Branch Manager Sayre William Holmes Assistant Vice President Troy Brett Kennedy Assistant Vice President and Branch Manager Tioga Debra R. Martin Assistant Vice President and Branch Manager Jersey Shore Steven J. Moore Assistant Vice President/Workout and Recovery Officer Williamsport Dawn L. Myers Assistant Vice President and Branch Manager Muncy Philip A. Prough Assistant Vice President/Director of Financial Services Wellsboro Linda Prough-Shuey Assistant Vice President - Human Resources Wellsboro Eileen K. Ranck Assistant Vice President and BankCard Manager Wellsboro Virginia L. Reap Assistant Vice President and Branch Manager Athens Christopher J. Rell Assistant Vice President/Appraiser Williamsport David C. Schucker Assistant Vice President Troy Stacey A. Sickler Assistant Vice President - Mortgage Specialist Sayre Brian J. Tevlin Assistant Vice President and Trust Officer Wellsboro Tracy E. Watkins Assistant Vice President - Human Resources Wellsboro Amy B. Wherley Assistant Vice President and Branch Manager Knoxville Brenda B. Whiteley Assistant Vice President Dushore Diane K. Wilson Assistant Vice President and Branch Manager Mansfield Mary J. Wood Trust Officer Wellsboro Sandra G. Andrews Assistant Cashier Wellsboro Margaret J. Black Assistant Cashier Laporte Joan M. Blackwell Assistant Cashier Liberty Claudia Brown Assistant Cashier and Operations Manager Wellsboro Justin L. Cevette Assistant Cashier Elkland Marcella J. Chaykosky Assistant Cashier Sayre Charlene R. Clark Assistant Cashier and Operations Manager/MIS Wellsboro William O. Cook BankCard Sales Manager Wellsboro Dorine M. Crisman Assistant Cashier Wysox Jessica L. Dickey Assistant Cashier - BankCard Services Wellsboro Stacy R. Dreilbelbis Assistant Cashier - Trust Opertions Manager Wellsboro Mark W. Elsbree Assistant Cashier Sayre Yvonne M. Gill Assistant Cashier - Advertising and PR Manager Wellsboro Teri L. Hackett Assistant Cashier and Funds Management Officer Wellsboro Rosalie Hall Assistant Cashier and Branch Operations Manager Troy Kelly Isaacson Assistant Cashier Mansfield Marla Mcllvain Assistant Trust Officer Wellsboro Sandra J. McNeal Assistant Cashier East Smithfield Sandra A. Parulas Teller and CSR Specialist Wellsboro David Poust Assistant Cashier - Retail and Commercial Lender Williamsport Joan Rohe Assistant Cashier and Staff Accountant Towanda Amir Sabanovic Assistant Cashier Sayre Chad R. Smith Assistant Cashier Towanda Wendy Smith Assistant Cashier - Accounts Services Assistant Manager Wellsboro Adrienne Snyder Assistant Cashier and Assistant Auditor Wellsboro Robert J. Sullivan Assistant Cashier - Mortgage Specialist Williamsport Debbie Topf Assistant Cashier - Loan Operations Specialist Wellsboro
2005 ANNUAL HIGHLIGHTS | PAGE 15 (GRAPHIC) CITIZENS & NORTHERN CORPORATION AND CITIZENS & NORTHERN BANK BOARD OF DIRECTORS (PHOTO) Our 2005 Board of Directors, from left: Dennis F. Beardslee, Leonard Simpson, Jan E. Fisher, James E. Towner, Karl W. Kroeck, Leo F. Lambert, Susan E. Hartley, R. Bruce Haner, Edward L. Learn, Craig G. Litchfield, R. Robert DeCamp, and Edward H. Owlett, III. Absent from photo: Ann M. Tyler. BOARD OF DIRECTORS: Dennis F. Beardslee Owner, Terrace Lanes Bowling Center R. Robert DeCamp President, Patterson Lumber Co., Inc. Jan E. Fisher Executive Director for Healthcare Services, Laurel Health System R. Bruce Haner Auto buyer for new car dealers Susan E. Hartley Attorney at Law Karl W. Kroeck Farmer Leo F. Lambert President and General Manager, Fitzpatrick & Lambert, Inc. Edward L. Learn Former owner, Learn Hardware and Building Supply Craig G. Litchfield Chairman of the Board, President and Chief Executive Officer Edward H. Owlett, III President and CEO, Putnam Company Leonard Simpson Attorney at Law James E. Towner Publisher, Daily and Sunday Review Ann M. Tyler Certified Public Accountant, Ann M. Tyler CPA, PC DIRECTOR EMERITUS F. David Pennypacker Retired, formerly Certified Public Accountant, Pennypacker & Gooch, PC
PAGE 16 | 2005 ANNUAL HIGHLIGHTS (GRAPHIC) KNOWN MARKET MAKERS Known Market Makers who handle Citizens & Northern Corporation stock transactions follow: ARCHIPELAGO TRADING SERVICES, INC. 100 South Wacker Drive, Suite 1800, Chicago, IL 60606 BOENNING & SCATTERGOOD, INC. 4 Tower Bridge, Suite 300, 200 Barr Harbor Drive, West Conshocken, PA 19428 COMMERCE CAPITAL MARKETS, INC. 90 Fifth Avenue, New York, NY 10011 FERRIS, BAKER, WATTS, INC. 100 Light Street - Eighth Floor, Baltimore, MD 21202 HILL THOMPSON MAGID, L.P. 15 Exchange Place, Suite 800, Jersey City, NJ 07302 JANNEY MONTGOMERY SCOTT, LLC 1801 Market Street, Tenth Floor, Philadelphia, PA 19103 KNIGHT EQUITY MARKETS, L.P. Newport Tower, 525 Washington Boulevard, Jersey City, NJ 07310 MONROE SECURITIES, INC. 343 West Erie, Suite 410, Chicago, IL 60610 PERSHING TRADING COMPANY, L.P. 1 Pershing Plaza, Jersey City, NJ 07399 RBC CAPITAL MARKETS CORPORATION 60 South Street, PO Box 1160, Minneapolis, MN 55402 RYAN BECK & CO., INC. 18 Columbia Turnpike, Florham Park, NJ 07932 SANDLER O'NEILL & PARTNERS, L.P. 919 Third Avenue, Sixth Floor, New York, NY 10022 SCHWAB SOUNDVIEW CAPITAL MARKETS 111 Pavonia Avenue, East Jersey City, NJ 07310 (GRAPHIC) OUR VISION: The C&N Professionals will be recognized by the communities and clients we serve as the foremost source of advice, counsel and solutions for their changing financial needs. 2005 ANNUAL HIGHLIGHTS (GRAPHIC) OUR OFFICES Citizens & Northern Bank ATHENS: 428 South Main St ., Athens, PA 18810 570-888-2291 DUSHORE: 111 West Main St., Dushore, PA 18614 570-928-8124 EAST SMITHFIELD: Main St., East Smithfield, PA 18817 570-596-3131 ELKLAND: Main St., Elkland, PA 16920 814-258-5111 JERSEY SHORE: 230 Railroad St., Jersey Shore, PA 17740 570-398-4555 KNOXVILLE: 102 E. Main St., Knoxville, PA 16928 714-326-4151 LAPORTE: Main St., Laporte, PA 18626 570-946-4011 LIBERTY: Main St., Liberty, PA 16930 570-324-2331 MANSFIELD: 1085 Main St., Mansfield, PA 16933 570-662-1111 MONROETON: RR2, Monroeton, PA 18832 570-265-2157 MUNCY: 3461 Route 405 Hwy., Muncy, PA 17756 570-546-6666 OLD LYCOMING 1510 Dewey Ave., Williamsport, PA 17702 570-323-9305 RALSTON: Thompson St., Ralston, PA 17763 570-995-5421 SAYRE: 1827 Elmira St., Sayre, PA 18840 570-888-2220 SOUTH WILLIAMSPORT: 2 E. Mountain Ave., Williamsport, PA 17702 570-601-3016 TIOGA: Main St., Tioga, PA 16946 570-835-5236 TOWANDA: 428 Main St., Towanda, PA 18848 570-265-6171 TROY: Court House Square, Troy, PA 16947 570-297-2158 WELLSBORO: 90-92 Main St., Wells boro, PA 16901 570-724-3411 WILLIAMSPORT: 130 Court St., Williamsport, PA 17701 570-320-0100 WYSOX: Route 6, Wysox , PA 18854 570-265-9148 First State Bank CANISTEO: 3 Main St., Canis teo, NY 14823 607-698-4295 HORNELL: 6250 County Rte. 64, Hornell, NY 14843 607-324-4081 2005 ANNUAL HIGHLIGHTS