EX-99.2 5 l99087aexv99w2.txt EXHIBIT 99.2 Exhibit 99.2 [C&N VOLUNTEERS LOGO] enhancing the lives of our neighbors in the communities we serve. [PICTURES] 49 corridor enterprise zone alparon community park american cancer society american heart association athens chamber of commerce athens rotary athens township police pension austinburg methodist church B.O.O.M. big brothers-big sisters of bradford county big brothers-big sisters of wellsboro bradford county historical society bradford county industrial development authority bradford county pool league bradford/sullivan american red cross bradford/sullivan county eye bank bradford/sullivan county outstanding young women butler hill baptist church calvary baptist church calvary tabernacle assembly of god church camptown little league canton borough canton lions club canton park cemetery central bradford county chamber of commerce central bradford county united way cogan house tv co-op cooks pond association corey creek golf club cub scouts cowanesque valley rod & gun club dexter baptist church ducks unlimited dushore fire company dushore midget league dushore music club eagles mere ambulance association eldredsville firemen's relief association eldredsville volunteer fire company elkland area chamber of commerce elkland area community library elkland jubilee elkland little league endless mountain church league endless mountain firemen's relief association first presbyterian church forksville area sportsmen association forksville volunteer fire company forksville united methodist church franklin township 2002 ANNUAL HIGHLIGHTS [LOGO] CITIZENS & NORTHERN CORPORATION galeton little league girl scouts usa glenwood cemetery good christian radio broadcasting grand canyon airport authority grandparents against illiteracy in schools greater hughesville business association greater mansfield area chamber of commerce greater valley assembly of god greater valley chamber of commerce green free library grover church of christ growth resources of wellsboro guthrie health services habitat for humanity - williamsport chapter herrickville volunteer fire company herrickville wesleyan church holiday veterans memorial holiday christian & missionary alliance church hope lutheran church horance b. packer foundation independent bible church of wellsboro international managers council jack russell terrier association just us kids parent care club kids club knoxville cemetery association knoxville ladies vfw knoxville players knoxville united methodist church lackawanna college advisory board lake makoma association lambs creek sportsmen's club laporte woman's club laporte little theatre laporte sesquicentennial committee laporte volunteer fire company laurel festival laurel health services laurel health system laurel wellness center liberty blockhouse festival liberty booster club liberty community 4-h club liberty high school alumni liberty salvation army liberty visioning committee liberty volunteer fire company little league lycoming college lycoming county chapter american red cross lycoming hospice lycoming united way mansfield band booster club mansfield instructional ball league mansfield international student organization mansfield kiwanis club mansfield p.e.o. woman's organization [PICTURE] "To me, the amount of time I spent volunteering for various organizations is just a natural extension of my desire to serve people. When most people think about a financial institution's employees,they think that we are in the business of finance. That is only partially true. I believe that mostly we're in the "people" business - that is to say the business of serving people. Larry Alderson AVP, Trust Officer [PICTURE] "I was privileged to grow up in a small town with caring parents and five siblings. We learned early to give and take. Reaching out brought joy back. Actually, all I can say is giving of yourself increases the joy in your life. Volunteering is gaining happiness and helping people. It is impossible to give more than you receive back in joy. Mary Rose Sacks AVP, Knoxville Branch Manager [PICTURE] "I strongly believe if you volunteer your time to a local civic,non-profit or youth organization, that ANYONE can make a difference in helping better the quality of life in your community. Dave Schucker AVP, Loan Officer,Troy [LOGO] CITIZENS & NORTHERN CORPORATION [PICTURE] "Everyone needs to take a turn in helping the communities that they live in. It's not a burden, but a privilege. Terry Depew VP, Regional Manager Athens Office [PICTURE] "Organizations need volunteers and the more volunteers the lighter the load. It is very satisfying to help out. Diane Elvidge AC, Teller East Smithfield A MESSAGE TO OUR SHAREHOLDERS... We certainly live at a challenging time. Terrorism, the prospect of war in Iraq, never-ending unrest in the Middle East, and North Korea's possession of nuclear weapons present dangers and threats to life in the democratic free world. Investors' and shareholders' faith in corporate America has been severely damaged by accounting and corporate governance scandals. A recent recession, a slow recovery, fears of deflation, mortgage and short-term interest rates at 40-year lows, and an unprecedented three consecutive years of decline in the U.S. equity market only add to the uncertainties and challenges. While rural north central Pennsylvania seems removed from these more global political and economic issues, we are nonetheless affected. Low interest rates have benefited borrowers, who have refinanced existing loans and mortgages at a record pace over the past two years. Unfortunately, depositors have seen the rates offered on their accounts drop as precipitously. Planning and saving for retirement or college education is more of a challenge now that more realistic investment returns must be used to project future values. Wealth creation and preservation are both a challenge. VALUES Through it all Citizens & Northern has continued to deliver value and stability to shareholders, communities, clients and employees. We define ourselves by our shared values, vision and mission. We believe that these key and fundamental values provide the foundation of what we are and what we want to be: - Client-Focus - We understand the needs, values and aspirations of our customers; create quality products to address those needs; and provide professional, consistent and prompt service and advice. - Excellence - We must strive to be the best at everything we do. - Integrity - Honesty and adherence to the highest ethical standards is non-negotiable. - Teamwork - We must work as a unified and dedicated team of specialists to deliver on our promises to clients. - Respect - We trust the capabilities, character and judgment of our colleagues. - Responsibility and Accountability - Each employee of C&N takes ownership of the opportunities and challenges we identify and encounter daily. 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. I believe in the people of C&N. Our people have brought us to where we are and will take us to even higher levels of service, profitability and quality for all of our constituencies. [PICTURE] Craig G. Litchfield President, CEO "We define ourselves by our shared values, vision and mission." 2002 FINANCIAL HIGHLIGHTS The continued low rate environment was, for a second consecutive year, very beneficial to our interest margin and our ability to grow our earning assets - loans and securities. The combination of a 4.8% increase in interest and dividend income and a 7.2% decrease in interest expense produced an increase in interest margin of nearly 18%. Other Income increased by over 8% and realized net gains on securities increased 50% due to significant price improvements in bank stocks held in our portfolios. Other Expenses, a major component of which is employee wages and benefits, increased by 11.7% as we continue to build and enhance our delivery system. Net Income increased by over 24% to nearly $15 million. This is the highest net income in history for your company. Total dividends paid increased by 9.4% over the previous year. Additionally, for the 28th consecutive year a 1% stock dividend was declared. Available-for-Sale securities increased to over $512 million, or 18%. Loans (net of Allowance for Loan Losses) increased $71.4 million or 19%. Deposits and Repo Sweep balances grew by nearly $64.5 million, or 10.8%. Borrowings increased by 41.3% to support our securities and loan growth. Total Assets increased by 17.5% to just over one billion dollars. Loan quality as measured by Nonperforming Assets to Total Assets (0.12%) and Net Charge-Offs to Total Loans (0.1%) remains strong. The book value of one share of our stock (excluding adjustment for unrealized gains and losses on Available-for-Sale securities) increased by 9.3% to $19.62. The Shareholder Equity to (Continued Page 2) CITIZENS & NORTHERN CORPORATION PAGE 1 [PICTURE] "Volunteering is an investment in both myself and the organizations I serve. Support from my employer helps me improve my quality of life as well as those I choose to donate time to. Shawn Schreck VP, Compliance and Security Officer Wellsboro Office [PICTURE] "I've always enjoyed sports and working with kids, so coaching was a natural fit for me. Hopefully, they've learned baseball skills as well as some life lessons along the way I've learned a lot from them as well. Bob Miller Courier, Wellsboro A MESSAGE TO OUR SHAREHOLDERS...(CONT.) (From Page 1) Average Assets ratio is a strong 11% and regulatory Risk-Based Capital Ratio stands equally strong 20.1%. As of year-end our was trading at $31.00, which is an 18.6% from the end of 2001. The dividend yield stock for 2002 was 3.74%. Trust Assets Under Management shrunk 6.1% due mostly to the continued weakness equity markets. Nevertheless, our Trust Financial Management staff has continued to increase the number of client relationships. Additionally, during 2002 we introduced a Daily Valuation 401(k) product that telephone and Internet access to account information. During 2003, we will provide and Asset Management clients who so desire secure Internet access to their accounts. In January of 2002, renovations and remodeling of the Bower Building in Wellsboro were completed. The building now serves as the base for our broker/dealer and insurance subsidiary, C&N Financial Services; and is the home of C&N University, our employee training and education program. Our Tioga Office was expanded and remodeled to include a two lane covered drive-in facility and a walk-in vault. Additionally, our Athens Office lobby and teller area received a much delayed and needed remodeling. Our plans call for more investment in our existing infrastructure in the form of renovation and remodeling to meet the growth in customer relationships and to deal with general wear and tear. Looking into the future, we anticipate another year of good financial performance in 2003. However, we believe that it will be difficult to duplicate the earnings growth that we have seen in 2001 and 2002. With interest rates at historic lows, there is not much farther for them to fall. Most economists are predicting a rising interest rate environment as the U. S. economy recovers from the brief recession and when the uncertainty of war with Iraq is resolved. Our interest margin will be affected as higher yielding loans mature or are refinanced and as higher yielding investments mature or are called. We began seeing some reduction in the margin in the fourth quarter of 2002. If interest rates do begin to rise, we will experience some additional stress on the interest margin because our liabilities (deposits and borrowings) reprice faster than our assets (loans and investment securities). We continue to look for opportunities to increase our non-interest revenues to make us less reliant upon interest rates. "Our plans call for more investment in our existing infrastructure . . . to meet the growth in customer relationships." PRODUCTS AND SERVICES In 2002, we introduced the Index Powered CD(SM) IRA giving our IRA customers another investment alternative. Like any other deposit the Index Powered CD(SM) IRA is protected by FDIC insurance and provides investors with a return that is tied to the performance of the Standard & Poor's 500((C)) Index. The FDIC and C&N guarantee the investor's principal, subject to FDIC insurance limitations and assuming the CD is held to maturity. Therefore, if the Index drops, investors will get at least their principal back. Thus the Index Powered CD(SM) IRA has the potential to outperform traditional savings products. If the Index Powered CD(SM) IRA is withdrawn prior to maturity, the investor could lose some principal. Through our Insurance and Broker/Dealer subsidiary, C&N Financial Services, we began offering Section 529 Plans to help our customers save for their children's and grandchildren's college educations. These plans are state sponsored, qualified-tuition saving programs. 529's provide tax-free growth of earnings for qualified withdrawals. 529's utilize a wide array of mutual funds for their investments and have very attractive benefits for those saving for college. They include, but are not limited to, control of the account, higher contribution limits, no age restrictions, no income restrictions and multiple investment choices. Individuals and Employers can set up these programs. In 2002, we introduced the Sammy Saver(TM) Ju$t for Kid$ program. Sammy Saver is a life-size beetle-like mascot that has visited area schools to deliver education to young people related to saving, budgeting and responsible borrowing. We have created special Sammy Saver savings accounts as part of the program. Sammy will be appearing in local parades and in advertising of products for children like 529 Plans and Educational Savings Accounts. With children's financial illiteracy at an all-time high in our country, we believe the Sammy Saver program will make a difference for the children in our market. (Continued Page 3) CITIZENS & NORTHERN CORPORATION PAGE 2 [PICTURE] "Growing up, I remembered mostly the volunteers who molded me through sports and Scouting. Returning this to young adults through sports, Scouting, church and community development is a rich reward to me personally. Larry Pick, AVP, Mortgage Specialist Muncy Office [PICTURE] "The organizations that I volunteer for are church related programs for children. I enjoy working with the children because they have a zest for life, are honest and are open to hear the Gospel message. I am always refreshed after spending time with them. Sue Hunsberger Loan Processor Wellsboro Office A MESSAGE TO OUR SHAREHOLDERS...(CONT.) (From Page 2) THE FUTURE C&N's management and board of directors will strive to build an organization that will continue its quest to be the premier, locally-based financial institution in its market. Maximizing long-term shareholder value, delivering quality, high-value, relationship-based client service, supporting and strengthening the socio-economic systems in our communities and being the employer of choice are our enduring objectives. Finally, at our February 2003 directors meeting, the board reluctantly accepted Dave Pennypacker's request to retire from his position as director and as chair of the Executive Committee. Dave's request was driven by both medical and personal reasons. Dave joined the board of directors in 1993 and immediately earned the admiration and respect of his fellow directors. Dave's CPA background, his knowledge of business and his sound judgment have greatly enhanced our corporate governance processes considerably over the past 10 years. Dave has agreed to accept a role as Director Emeritus and will continue to serve as a Wellsboro Advisory and Tioga County Regional Board member. Dave has been a mentor and friend to us all. We thank him for his contributions and commitment to C&N. TIOGA OFFICE HAS A BRAND NEW LOOK! The major project for Citizens & Northern Bank this year was the renovation of the Tioga Branch office. The transformation included expanding the facility from two to four offices and installing a new, full size vault. A second drive-up lane was added, along with a new customer service office. The major construction project was unveiled for the public during an open house celebration in January. The week-long event culminated with a ribbon cutting, refreshments and drawings for prizes. The renovation project at Tioga is another indication of C&N's commitment to making all of its offices as user-friendly as possible, according to Craig G. Litchfield, chairman, president and CEO. [PICTURE] Tioga Mayor Curtis Osterhoudt congratulates Craig G. Litchfield on the Tioga renovations. SAMMY MAKES A BIG IMPACT! Sammy Saver, C&N Bank's favorite "spokesbug" and mascot, has proven a big hit with people of all ages. This year Sammy embarked on summer and holiday tours, traveling throughout C&N country. Sammy promotes C&N's highly successful "Ju$t For Kid$" savings program, which is open to children age 12 and under. Another successful aspect of the Sammy Saver program has been school visitations. This fall, the C&N Bank Marketing Department sent letters to local schools advising teachers that Sammy, armed with a full curriculum to teach children the value of saving money, was available to visit classrooms. A number of local schools have participated in the Sammy Saver program. Programs are available for young people of all age levels. [PICTURE] Children from a nearby day care center visit with Sammy at the Ralston Branch office. CITIZENS & NORTHERN CORPORATION PAGE 3 [PICTURE] "I believe it's up to each of us to give back to our community as those before us gave. Jeff Aeppli AVP, Loan Officer Wysox Office [PICTURE] "I feel volunteerism is vital to the well-being of my community. I have chosen to be an active member of several organizations in order to serve my community in many ways. Linda Etzel AC, Branch Manager Laporte Office FIVE-YEAR PERFORMANCE Net Income (In Millions) [GRAPH] 1998 1999 2000 2001 2002 $11.1 $11.5 $8.5 $12.1 $15.0 Total Assets (In Millions) [GRAPH] 1998 1999 2000 2001 2002 $646 $706 $719 $867 $1,019 Total Stockholders' Equity ((In Millions) [GRAPH] 1998 1999 2000 2001 2002 $90.6 $76.6 $89.0 $100.2 $115.8 Deposits (In Millions) [GRAPH] 1998 1999 2000 2001 2002 $477 $500 $529 $576 $640 Net Loans (In Millions) [GRAPH] 1998 1999 2000 2001 2002 $286 $306 $323 $374 $445 Cash Dividends Declared [GRAPH] 1998 1999 2000 2001 2002 $0.82 $0.90 $0.98 $1.06 $1.16 (Per share,historical basis*) *Plus 1 stock dividend each year CITIZENS & NORTHERN CORPORATION PAGE 4 [PICTURE] " I began working with young people when my own children were small and continue to do so, believing that they are, indeed, our future. Bonnie Bennett AC/CSR, Dushore [PICTURE] " I work and live in my community and if it takes volunteer work to make it a better community, I'm here to help in any way I can. Pat Church Teller, Elkland 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 2002 and 2001: 2002 2001 ----------------------------------------- ----------------------------------------- High Low Dividend Declared High Low Dividend Declared per Quarter per Quarter First Quarter $28.50 $24.50 $0.28 $22.00 $20.00 $0.26 Second Quarter 30.00 27.70 0.28 21.75 20.41 0.26 Third Quarter 32.00 29.30 0.30 23.45 21.00 0.26 Fourth Quarter 33.00 30.15 0.30 26.50 23.10 0.28 plus 1% stock plus 1% stock dividend dividend
COMMON STOCK AND PER SHARE DATA
2002 2001 2000 1999 1998 --------- --------- --------- --------- --------- Net income per share - basic ....................... $2.80 $2.25 $1.58 $2.14 $2.06 Net income per share - diluted ..................... $2.79 $2.25 $1.58 $2.14 $2.06 Cash dividends declared per share .................. $1.16 $1.04 $0.95 $0.87 $0.78 Cash dividends declared per share - historical basis $1.16 $1.06 $0.98 $0.90 $0.82 Stock dividend ..................................... 1% 1% 1% 1% 1% Stockholders' equity per share (a) ................. $21.70 $18.76 $16.58 $14.29 $16.89 Stockholders' equity per share, excluding accumulated other comprehensive income (loss) (a) .. $19.42 $17.77 $16.57 $15.94 $14.67 Weighted average shares outstanding - basic ........ 5,339,449 5,348,963 5,363,232 5,362,861 5,367,497 Weighted average shares outstanding - diluted ...... 5,354,041 5,350,452 5,364,386 5,368,325 5,377,392 Number of shares outstanding at year end ........... 5,285,606 5,234,800 5,207,244 5,153,729 5,102,028
(a) For purposes of this computation, the number of shares outstanding has been increased for the effects of 1% stock dividends issued in January following each year-end. KNOWN "MARKET MAKERS" WHO HANDLE CITIZENS & NORTHERN CORPORATION STOCK TRANSACTIONS ARE: BAIRD PATRICK & CO. 20 Exchange Place New York, NY 10005 (212)-493-6619 F.J. MORRISSEY & CO., INC. BOENNING & SCATTERGOOD, INC. 4 Tower Bridge - Suite 300 200 Barr Harbor Drive West Conshohocken,PA 19428 (800)-842-8928 FERRIS, BAKER WATTS, INC. 6 Bird Cage Walk Holidaysburg, PA 16648 (800)-343-5149 MONROE SECURITIES, INC 47 State Street Rochester, NY 14614 (800)-766-5560 RBC DAIN RAUSCHER 3 Times Square, 24th Floor New York, NY 10036 (866)-835-1422 RYAN, BECK & COMPANY 3 Parkway Philadelphia, PA 19102 (800)-342-2325 SANDLER O'NEILL & PARTNERS, LP 919 Third Avenue, 6th Floor 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 15, 2003. 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 CITIZENS & NORTHERN CORPORATION PAGE 5 FIVE YEAR SUMMARY OF OPERATIONS
(In thousands) 2002 2001 2000 1999 1998 -------------- ---- ---- ---- ---- ---- INCOME STATEMENT Interest income ................................. $57,285 $54,661 $51,643 $48,036 $45,183 Interest expense ................................ 26,315 28,356 30,145 24,571 22,693 -------------------------------------------------------------------------------------------------------------- Interest margin ................................. 30,970 26,305 21,498 23,465 22,490 Provision for loan losses ....................... 940 600 676 760 763 -------------------------------------------------------------------------------------------------------------- Interest margin after provision for loan losses . 30,030 25,705 20,822 22,705 21,727 Other income .................................... 6,624 6,120 5,002 6,823 6,359 Securities gains ................................ 2,888 1,920 1,377 3,043 3,001 Other expenses .................................. 20,849 18,671 16,906 17,732 16,483 -------------------------------------------------------------------------------------------------------------- Income before income tax provision .............. 18,693 15,074 10,295 14,839 14,604 Income tax provision ............................ 3,734 3,022 1,819 3,354 3,527 -------------------------------------------------------------------------------------------------------------- Net income ...................................... $14,959 $12,052 $8,476 $11,485 $11,077 ============================================================================================================== BALANCE SHEET AT YEAR END Total securities (1) ............................ $513,597 $437,398 $343,596 $356,287 $327,309 Gross loans, excluding unearned discount ........ 451,145 379,228 328,305 310,892 291,003 Total assets .................................... 1,018,768 866,999 719,335 705,898 646,298 Total deposits .................................. 640,304 576,274 528,967 500,474 476,518 Stockholders' equity, excluding accumulated other comprehensive income ..................... 103,691 94,903 88,887 85,507 78,645 Total stockholders' equity ...................... 115,837 100,187 88,969 76,623 90,567 AVERAGE BALANCE SHEET Total securities, at amortized cost (1) ......... 470,764 412,654 371,360 349,133 300,692 Gross loans, excluding unearned discount ........ 410,670 346,353 318,382 301,584 285,275 Earning assets .................................. 881,434 759,007 689,743 650,717 585,966 Total assets .................................... 943,001 805,229 704,221 680,864 626,102 Total assets excluding unrealized gains or losses 930,539 798,590 717,052 672,999 606,163 Total deposits .................................. 613,392 544,579 503,848 483,858 448,601 Stockholders' equity, excluding accumulated other comprehensive income ..................... 99,361 91,703 87,258 81,767 74,810 Stockholders' equity ............................ 107,595 96,021 78,792 87,143 87,997 FINANCIAL RATIOS Return on stockholders' equity, excluding accumulated other comprehensive income (2) ..... 15.06% 13.14% 9.71% 14.05% 14.81% Return on stockholders' equity (2) .............. 13.90% 12.55% 10.76% 13.18% 12.59% Return on assets (2) ............................ 1.59% 1.50% 1.20% 1.69% 1.77% Stockholders' equity to assets, excluding accumulated other comprehensive income (2) ..... 10.68% 11.48% 12.17% 12.15% 12.34% Stockholders' equity to assets (2) .............. 11.41% 11.92% 11.19% 12.80% 14.05% Stockholders' equity to loans (2) ............... 26.20% 27.72% 24.75% 28.90% 30.85% Net income to: Total interest income .......................... 26.11% 22.05% 16.41% 23.91% 24.52% Interest margin ................................ 48.30% 45.82% 39.43% 48.95% 49.25% Dividends as a % of net income .................. 41.17% 46.08% 60.19% 40.39% 37.81%
(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 CITIZENS & NORTHERN CORPORATION PAGE 6 QUARTERLY FINANCIAL DATA (UNAUDITED) The following table presents summarized quarterly financial data for 2002 and 2001.
(IN THOUSANDS,EXCEPT PER SHARE DATA) 2002 QUARTER ENDED MARCH 31, JUNE 30, SEPT.30, DEC.31 Interest income ............................... $13,642 $14,523 $14,675 $14,445 Interest expense .............................. 6,316 6,745 6,675 6,579 --------------------------------------------------------------------------------------- Interest margin ............................... 7,326 7,778 8,000 7,866 Provision for loan losses ..................... 180 180 280 300 --------------------------------------------------------------------------------------- Interest margin after provision for loan losses 7,146 7,598 7,720 7,566 Other income .................................. 1,687 1,681 1,642 1,614 Securities gains .............................. 1,226 781 489 392 Other expenses ................................ 5,106 5,248 5,310 5,185 --------------------------------------------------------------------------------------- Income before income tax provision ............ 4,953 4,812 4,541 4,387 Income tax provision .......................... 1,115 992 831 796 --------------------------------------------------------------------------------------- Net income .................................... $3,838 $3,820 $3,710 $3,591 --------------------------------------------------------------------------------------- Net income per share - basic .................. $0.72 $0.72 $0.70 $0.67 --------------------------------------------------------------------------------------- Net income per share - diluted ................ $0.72 $0.71 $0.69 $0.67 ---------------------------------------------------------------------------------------
(IN THOUSANDS,EXCEPT PER SHARE DATA) 2001 QUARTER ENDED MARCH 31, JUNE 30, SEPT.30, DEC.31 Interest income ............................... $13,093 $13,830 $13,962 $13,776 Interest expense .............................. 7,492 7,278 7,037 6,549 --------------------------------------------------------------------------------------- Interest margin ............................... 5,601 6,552 6,925 7,227 Provision for loan losses ..................... 150 150 150 150 --------------------------------------------------------------------------------------- Interest margin after provision for loan losses 5,451 6,402 6,775 7,077 Other income .................................. 1,434 1,516 1,600 1,570 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 .................. $0.42 $0.60 $0.64 $0.60 --------------------------------------------------------------------------------------- Net income per share - diluted ................ $0.42 $0.60 $0.64 $0.60 ---------------------------------------------------------------------------------------
2002 annual highlights CITIZENS & NORTHERN CORPORATION PAGE 7 TRUST AND FINANCIAL MANAGEMENT GROUP
(IN THOUSANDS) 2002 2001 2000 1999 1998 ---- ---- ---- ---- ---- Assets ........................... $ 285,221 $303,868 $ 327,063 $ 320,385 $ 283,262 Revenue ......................... $ 1,755 $ 1,576 $ 1,613 $ 1,456 $ 1,288
The composition of trust assets under management and accounts as of December 31, 2002 and 2001 are shown in the following table: (IN THOUSANDS) INVESTMENTS
2002 2001 ---- ---- Bonds ............................ $ 100,053 $ 98,098 Stocks .......................... 83,620 93,487 Mutual funds ..................... 77,573 83,618 Savings and Money Market funds .. 21,394 27,005 Real estate ..................... 1,457 721 Mortgages ........................ 508 643 Miscellaneous ................... 616 296 --------- -------- Total ........................... $ 285,221 $303,868 ========= ======== Pension/profit sharing .......... $ 103,986 $114,776 Investment management ........... 85,120 86,024 Trusts ........................... 79,753 85,228 Custody ......................... 12,919 14,858 Guardianships ................... 1,310 1,557 Estates ......................... 2,133 1,425 --------- -------- Total ........................... $ 285,221 $303,868 ========= ========
[CITIZENS & NORTHER BANK LOGO] TRUST AND FINANCIAL MANAGEMENT GROUP STOCKHOLDER INQUIRIES A copy of the Corporation's Annual Report on Form 10-K for the year ended December 31, 2002, 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. CITIZENS & NORTHERN CORPORATION PAGE 8 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 [PICTURE] "Opportunities to volunteer in our communities are endless - as is the need for volunteers. There is no better way to contribute to the organizations we support than with our time. Valerie Kinney AVP, Branch Manager Towanda Office [PICTURE] "Giving back to your community is something I feel is important. A community can only grow when its people share an interest and care about each other. It's very rewarding to be a part of this experience. Joan Blackwell AC, Loan Officer Liberty Office ADVISORY BOARD MEMBERS ATHENS AND 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 David Rosenbloom Mary Theresa Sullivan DUSHORE ------- Helen W. Ferris Ronald A. Gutosky Leo F. Lambert Dennis K. McCarty Kerry A. Meehan Julie Gavitt Shaffer 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 Robin A. Fiester 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 Clifford Cross, Jr. David Kurzejewski John F. Wise, Jr. MUNCY ----- Dawn Myers Kenneth F. Fry Roger D. Jarrett Daniel Mathers Ann M. 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 AND MONROETON ----------- Valerie W. Kinney James A. Brown 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 --------- Richard L. Wilkinson 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 CORPORATION PAGE 9 CITIZENS & NORTHERN BANK OFFICERS [PICTURE] "Volunteering with worthwhile children's organizations gives me a chance to share wonderful moments with several children in the community, and the time spent working with my own children is very precious to me. Lisa Cook Teller, Tioga [PICTURE] "The richest people in the world are not necessarily the people with wealth, but the people who give freely of themselves. No matter how much time you devote to volunteerism, you get back so much more. Will Holmes AVP, Branch Manager Ralston Office 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, Sales, Service and Employee Development 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 Michelle M. Karas Vice President and Marketing Coordinator Scott A. Keck Vice President and Bank Operations Coordinator and Chief Privacy Officer 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 Karen L. Keck Assistant Vice President, Account Services Daniel Manetta Corporate Education Director Jeffrey B. Osgood, SPHR Human Resource Director Joseph A. Snell Assistant Controller Nancy L. Tubbs Assistant Vice President and IRA Administrator Kevin Weinhoffer Assistant Vice President Sandra G. Andrews Assistant Cashier Rosalie L. Bordas Assistant Cashier, Account Services Teresa L. Mitchell Assistant Cashier and Funds Management Officer Sandra A. Parulas Training Officer Linda M. Prough-Shuey Assistant Cashier Joan E. Rohe Assistant Cashier and Staff Accountant TRUST & FINANCIAL MANAGEMENT GROUP ---------------------------------- Thomas L. Briggs Executive Vice President and Senior Trust Officer Deborah E. Scott, CFP Executive Vice President and Senior Trust Officer Linda L. Kriner Vice President and Trust Officer Renee D. Laychur, CFP Vice President and Trust Officer Rhonda J. Litchfield Vice President and Trust Investment Officer Larry D. Alderson, CFP Assistant Vice President and Trust Officer Michael G. Charles Assistant Vice President and Tax Officer Keith T. Safford Employee Benefit Officer Mary J. Wood Trust Officer Lori Brown Assistant 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 and Security Officer Glenda R. Marzo Assistant Vice President and Assistant Auditor BANKCARD SERVICES ----------------- Keith C. Cavanaugh Assistant Vice President, BankCard Sales Manager 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 Vice President, Broker/Dealer Division OFFICES ------- ATHENS ------ 428 South Main St. Athens, PA 18810 570.888.2291 Virginia L. Reap Assistant Vice President, Branch Manager Terry R. Depew Vice President, Regional Manager Amir Sabanovic Assistant Cashier, Loan Officer Kathy L. Griffis Assistant Cashier DUSHORE ------- 111 Main St. Dushore, PA 18614 570.928.8124 Helen W. Ferris Vice President, Branch Manager and Regional Manager 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, Branch Manager 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, Branch Manager Lynette Burrous Assistant Cashier CITIZENS & NORTHERN CORPORATION PAGE 10 CITIZENS & NORTHERN BANK OFFICERS [PICTURE] "Volunteerism has been and will continue to be an essential ingredient in maintaining the quality of life for our nation. As individuals, God has blessed each of us with different talents, abilities and interests. I believe it is both a responsibility and a joy to give those talents and abilities to make our communities a better place to live and work in. Brian Canfield Senior Executive VP Branch Administrator KNOXVILLE --------- 102 East Main St. Knoxville, PA 16928 814.326.4151 Mary Rose Sacks Assistant Vice President, Branch Manager Leonard Mitchell, III Assistant Cashier LAPORTE ------- Main Street Laporte, PA 18626 570.946.4011 Linda M. Etzel Assistant Cashier, Branch Manager Margaret J. Black Assistant Cashier LIBERTY ------- Main Street Liberty, PA 16930 570.324.2331 Ann L. Yuscavage Vice President, Branch Manager Joan M. Blackwell Assistant Cashier MANSFIELD --------- 1085 South Main St. Mansfield, PA 16933 570.662.1111 Robin K. Carleton Vice President, Branch Manager Diane K. Wilson Assistant Cashier MONROETON --------- Route 220 Monroeton, PA 18832 570.265.2157 Valerie Kinney Assistant Vice President, Branch Manager MUNCY ----- 3461 Route 405 Highway Muncy, PA 17756 570.546.6666 Dawn L. Myers Assistant Cashier, Branch Manager Larry N. Pick Assistant Vice President and Mortgage Specialist Linda L. Gordner Assistant Cashier RALSTON ------- Thompson Street Ralston, PA 17763 570.995.5421 William C. Holmes Assistant Vice President, Branch Manager SAYRE ----- 503 North Elmira St. Sayre, PA 18840 570.888.2220 Brenda L. May Assistant Vice President, Branch Manager Stacey A. Sickler Assistant Vice President and 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, Branch Manager Deborah K. Beck Assistant Cashier TOWANDA ------- 428 Main St. Towanda, PA 18848 570.265.6171 Valerie W. Kinney Assistant Vice President, Branch Manager James E. Parks Vice President, Regional Manager Chad R. Smith Assistant Cashier TROY ---- Courthouse Square Troy, PA 16947 570.297.2159 Rosalie H. Hall Assistant Cashier, Branch Operations Mgr. Mark C. Griffis Vice President, Regional Manager David S. Schucker Assistant Vice President WELLSBORO --------- 90-92 Main Street Wellsboro, PA 16901 570.724.3411 Richard L. Wilkinson Vice President, Regional Manager Kim L. Miller Vice President Senior Loan Officer George M. Greeley Assistant Cashier Brett W. Kennedy Assistant Cashier WYSOX ----- Route 6 Wysox, PA 18854 570.265.9148 Debra S. Kithcart Assistant Vice President, Branch Manager Jeffery E. Aeppli Assistant Vice President CITIZENS & NORTHERN CORPORATION AND CITIZENS & NORTHERN BANK Dennis F. Beardslee Owner, Terrace Lanes Bowling Center R. Robert DeCamp President, Patterson Lumber, 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 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 of Putnam Company Leonard Simpson Attorney at Law James E. Towner Publisher of "The Daily and Sunday Review" Ann M. Tyler Certified Public Accountant, Ann M. Tyler CPA, PC DIRECTORS EMERITI ----------------- J. Robert Bower Pharmacist Adelbert E. Eldridge Retired Regional Director of Susquehanna Region of Pennsylvania Electric Co. Lawrence F. Mase Retired, formerly President of Mase's, Inc. Robert J. Murphy Retired, formerly attorney in the law firm of Davis, Murphy, Niemiec & Smith Donald E. Treat Retired, formerly owner of Treat Hardware CITIZENS & NORTHERN CORPORATION PAGE 11 [PICTURE] "I have been involved in Jack Russell Terrier Rescue for over 6 years. Being a breeder, I feel it is a breeder's duty to help a dog in need. It has become a disposable world, and animals suffer for it. In Rescue we try to find the "right" new home for a dog and most of the time with great results and happy endings. Lindalee Sweitzer Branch Supervisor Monroeton Office "I feel that volunteering is an important part of being a member of my community and working with others to make a difference. Renee Laychur Vice President and Trust Officer Muncy Officer 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 ---------------------------------- 64 Main Street, Wellsboro, PA 16901 1-866-ASK-CNFS www.cnfinancialservices.com INTERNET BANKING ---------------- 90-92 Main Street, Wellsboro, PA 16920 570-724-0266 www.cnbankpa.com SNAPSHOTS FROM THE YEAR JUST PAST... [PICTURE] CITIZENS & NORTHERN CORPORATION PAGE 12 [PICTURE] "Community involvement is a meaningful part of life at C&N. Getting to know people in the community is important, helping others is important and helping others makes you feel good about yourself. Tom Rudy President, C&NFS [PICTURE] "By being actively involved in one's community, a business person is able to stay in touch with the everyday needs of the people with whom he works and serves. Bringing the personal perspective in alignment with professional objectives is not only what I enjoy, it's also C&N's mission..."Professionals dedicated to meeting your lifetime financial needs, with a personal touch." Rob Carleton VP, Mansfield Branch Manager [PICTURE] "My goal is not only to help the community I live in, but hopefully pass on the spirit of community service to my four children so they can better serve their future communities. Mark Elsbree Loan Officer, Sayre mansfield university business & industry campaign mansfield university foundation mansfield university board of trustees mansfield wrestling booster club march creek fellowship baptist church masonic fraternity lodge mennonite bible fellowship middlebury baptist church montgomery area crop walk montgomery community development muncy valley area volunteer ambulance company muncy valley area volunteer fire company neighborhood housing management nessmuk chapter national wild turkey federation new albany vfw north central pa estate planners council north rome christian school north towanda fire rescue northern tier recreation association northern tier region pa bowhunters festival parkhurst presbyterian church pba legislative committee pike township powell united methodist church redeemer united church of christ roosevelt trail league rotary international saint francis picnic saint paul's episcopal church saint paul's united church of christ saint peter's united church of christ salem church sayre church of the redeemer sayre little league sayre rotary shepherd of the hills lutheran church smithfield township volunteer fire department southern tier cocker spaniel club southside alliance church springfield baptist church st. basil's catholic church standing stone vesper church sullivan county action Inc. sullivan county fair sullivan county food pantry sullivan county high school athletic booster club sullivan county scholarship association sullivan terrace board tioga central railroad tioga county 4-h tioga county chapter of american red cross tioga county christian academy tioga county partnership for community health tioga county community leadership program tioga county development corporation tioga county fair association [CITIZENS & NORTHERN CORPORATION LOGO] tioga county partnership for community health towanda junior football towanda junior wrestling club towanda lions club towanda little league towanda main street towanda memorial hospital towanda rifle & pistol club towanda rotary club towanda ymca trinity lutheran church & school troy area school sports troy community swimming pool troy fair troy lions club troy little league troy community soccer league tyoga country club tyoga county car club united church of nelson united methodist church of wellsboro united way of wellsboro valley alliance church valley ambulance association valley christian & missionary alliance church of ansonia valley economic development association valley grange valley kiwanis valley leadership program valley youth soccer wellsboro area youth soccer wellsboro chamber of commerce wellsboro fire & ambulance association wellsboro gridders club western bradford development corporation williamson alumni association williamson girls basketball booster club williamson girls volleyball booster club winfall united methodist church wyalusing valley hoopsters club wysox ambulance wysox chamber of commerce wysox fire company wysox presbyterian church xi gamma sigma ymca of bradford county [PICTURE] Last year, C&N Bank employees contributed more than 20,400 hours of their time and talent to charitable organizations in the communities served by the 17-branches of Citizens & Northern Bank. I can think of no better way to salute that effort than by highlighting their achievements in our annual review. I am proud of the over 300 employees that work for Citizens & Northern Bank, and prouder still of their involvement in their local communities. Craig G. Litchfield Chairman, President & Chief Executive Officer [PICTURE] [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-OB www.cnbankpa.com