EX-99.2 4 l00205aexv99w2.txt EX-99.2 FIRST QUARTER REPORT EXHIBIT 99.2 [LOGO] CITIZENS & NORTHERN CORPORATION 90-92 Main Street, P.O. Box 58 Wellsboro, PA 16901 Phone: (570) 724-3411 Fax: (570) 723-8097 E-Mail: cnemail@cnbankpa.com Web Page: http://www.cnbankpa.com Stock Symbol: CZNC.OB Chartered 1864 FEDERAL DEPOSIT INSURANCE CORP QUARTERLY REPORT MARCH 31, 2003 -------------- Dear Shareholder: Another successful quarter of operations for your company has drawn to a close. Interest rates remain at forty-year lows and we will face continued challenges to maintain growth in our future interest margin. Nevertheless, through our strategy of growing our earning assets, especially loans, we are generating good returns for our shareholders. Compared on a year-over-year basis, Total Assets have increased by over 11% to $1.024 billion. Growth in loans represents the major part of that growth. Loans (net of Loan Loss Reserve) increased by nearly 19.5%, or over $75 million. Available for Sale Securities increased by 3.4% or about $16 million. On the Liability side of the Balance Sheet, Deposit and Repo Sweep growth of 9.2%, or $56.2 million supported over 60% of the growth in earning assets. Our Shareholders' Equity to Average Assets Ratio of nearly 10.7% remains very strong. We are planning a new branch office for the Williamsport area. The planning is in the initial stages, but we should be able to report more in the second quarter's letter. Our Trust and Financial Management Department continues to build and add relationships during this difficult time in the equity markets. Despite growth in the number of Trust relationships, depressed equity values caused total Trust Assets Under Management to fall 9% compared to one year ago. We are confident that by delivering exceptional relationship-focused service, the department will again begin to grow significantly. Our C&N Financial Services subsidiary is providing opportunities for us to meet our customers' needs for life, disability and long-term care insurance, as well as mutual funds, 529 Plans, and IRA's. The board of directors approved a 3 for 2 stock split and an increase in the quarterly dividend for the first quarter. The declared dividend will be paid on an after-split basis. The dividend is 5% greater than that paid for the fourth quarter 2002 and is 12.5% greater than the first quarter of last year. The market price of your C&N stock has increased over 15% since the end of the first quarter of 2002. It is a pleasure to work with the dedicated and talented people of C&N. On their behalf, I thank you for your continued support of our efforts to provide our clients with advice, solutions and service to achieve and assure their financial success. Craig G. Litchfield Chairman, President & CEO CITIZENS & NORTHERN CORPORATION BOARD OF DIRECTORS Craig G. Litchfield Chairman of the Board ------------------------------------------- Dennis F. Beardslee Leo F. Lambert R. Robert DeCamp Edward L. Learn Jan E. Fisher Edward H. Owlett, III R. Bruce Haner Leonard Simpson Susan E. Hartley James E. Towner Karl W. Kroeck Ann M. Tyler DIRECTORS EMERITI J. Robert Bower Robert J. Murphy Adelbert E. Eldridge F. David Pennypacker Lawrence F. Mase Donald E. Treat OFFICERS Craig G. Litchfield Chairman, President and Chief Executive Officer Mark A. Hughes Treasurer Kathleen M. Osgood Corporate Secretary CITIZENS & NORTHERN BANK OFFICES 428 S. Main Street, ATHENS, PA 18810 570-888-2291 111 Main Street, DUSHORE, PA 18614 570-928-8124 Main Street, EAST SMITHFIELD, PA 18817 570-596-3131 104 Main Street, ELKLAND, PA 16920 814-258-5111 102 E. Main Street, KNOXVILLE, PA 16928 814-326-4151 Main Street, LAPORTE, PA 18626 570-946-4011 Main Street, LIBERTY, PA 16930 570-324-2331 1085 S. Main Street, MANSFIELD, PA 16933 570-662-1111 Route 220, MONROETON, PA 18832 570-265-2157 3461 Rte.405 Highway, MUNCY, PA 17756 570-546-6666 Thompson Street, RALSTON, PA 17763 570-995-5421 503 N. Elmira Street, SAYRE, PA 18840 570-888-2220 41 Main Street, TIOGA, PA 16946 570-835-5236 428 Main Street, TOWANDA, PA18848 570-265-6171 Court House Square, TROY, PA 16947 570-297-2159 90-92 Main Street, WELLSBORO, PA 16901 570-724-3411 Route 6, WYSOX, PA 18854 570-265-9148 TRUST & FINANCIAL MANAGEMENT GROUP 90-92 Main Street, Wellsboro, PA 16901 800-487-8784 428 Main Street, Towanda, PA 18848 888-987-8784 428 S. Main St., Athens, PA 18810 888-760-8192 3461 Rte 405 Highway, Muncy, PA 17756 570-546-6666 ACCOUNT SERVICES 90-92 Main St, Wellsboro, PA 16901 800-726-2265 BANKCARD SERVICES RR 7, Wellsboro PA 16901 800-676-6639 INTERNET BANKING 90-92 Main St., Wellsboro, PA 16901 570-724-0266 www.cnbankpa.com C&N FINANCIAL SERVICES CORPORATION 68 Main Street, Wellsboro, PA 866-ASK-CNFS www.cnfinancialservices.com CONSOLIDATED STATEMENT OF INCOME (In Thousands, Except Per Share Data) (Unaudited)
3 MONTHS ENDED MARCH 2003 2002 (CURRENT) (PRIOR YR) Interest and Dividend Income $ 13,930 $ 13,642 Interest Expense 6,243 6,316 ---------------------------------------------------------------------------------------------- Interest Margin 7,687 7,326 Provision for Loan Losses 350 180 ---------------------------------------------------------------------------------------------- Interest Margin After Provision for Loan Losses 7,337 7,146 Other Income 1,540 1,687 Realized Gains on Securities, Net 1,721 1,226 Other Expenses 5,532 5,106 ---------------------------------------------------------------------------------------------- Income Before Income Tax Provision 5,066 4,953 Income Tax Provision 994 1,115 ---------------------------------------------------------------------------------------------- NET INCOME $ 4,072 $ 3,838 ============================================================================================== PER SHARE DATA (**): Net Income - Basic $0.51 $0.48 Net Income - Diluted $0.51 $0.48 Dividend Per Share $0.21 $0.1867 Number Shares Used in Computation - Basic 8,007,627 8,015,238 Number Shares Used in Computation - Diluted 8,036,342 8,028,722
CONSOLIDATED BALANCE SHEET (In Thousands, Except Per Share Data) (Unaudited)
MARCH 31, MARCH 31, 2003 2002 ------------ ---------- ASSETS Cash & Due from Banks $ 21,573 $ 13,003 Available-for-Sale Securities 495,028 478,851 Loans, Net 460,425 385,422 Other Assets 47,661 45,649 --------------------------------------------------------------------------------------------- TOTAL ASSETS $ 1,024,687 $ 922,925 ============================================================================================= LIABILITIES Deposits $ 648,357 $ 591,973 Repo Sweep Accounts 16,113 16,318 --------------------------------------------------------------------------------------------- Total Deposits and Repo Sweeps 664,470 608,291 Borrowed Funds 227,708 207,298 Other Liabilities 13,464 7,100 --------------------------------------------------------------------------------------------- TOTAL LIABILITIES 905,642 822,689 --------------------------------------------------------------------------------------------- SHAREHOLDERS' EQUITY Shareholders' Equity, Excluding Net Unrealized Gains/Losses on Available-for sale Securities 105,942 97,251 Net Unrealized Gains/Losses on Available- for-sale Securities (*) 13,103 2,985 --------------------------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY 119,045 100,236 --------------------------------------------------------------------------------------------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 1,024,687 $ 922,925 =============================================================================================
CONSOLIDATED FINANCIAL HIGHLIGHTS (In Thousands, Except Per Share Data) (Unaudited)
3 MONTHS ENDED % MARCH INCREASE 2003 2002 (DECREASE) ----------- -------- --------- EARNINGS PERFORMANCE Net Income $ 4,072 $ 3,838 6.10% Return on Average Assets 1.62% 1.74% -6.90% Return on Average Assets, Excluding Unrealized Gains/Losses on Available-for-Sale Securities (***) 1.64% 1.75% -6.29% Return on Average Equity 13.83% 15.09% -8.35% Return on Average Equity, Excluding Unrealized Gains/Losses on Available-for-Sale Securities (***) 15.50% 16.06% -3.49% BALANCE SHEET HIGHLIGHTS Total Assets $1,024,687 $ 922,925 11.03% Available-for-Sale Securities 495,028 478,851 3.38% Loans (Net) 460,425 385,422 19.46% Allowance for Loan Losses 5,693 5,337 6.67% Trust Assets Under Management 278,548 306,212 -9.03% SHAREHOLDERS' VALUE (PER SHARE) (**) Net Income - Basic $ 0.51 $ 0.48 6.25% Net Income - Diluted $ 0.51 $ 0.48 6.25% Dividends $ 0.21 $ 0.1867 12.48% Book Value $ 14.87 $ 12.51 18.86% Book Value, Excluding Unrealized Gains/Losses on Available-for- sale Securities (***) $ 13.24 $ 12.13 9.15% Market Value (Last Trade) $ 21.27 $ 18.48 15.10% Market Value / Book Value 143.04% 147.72% -3.17% Market Value / Book Value, Excluding Unrealized Gains/Losses on Available-for-Sale Securities (***) 160.65% 152.35% 5.45% Price Earnings Multiple 10.43 9.63 8.31% Dividend Yield 3.95% 4.04% -2.23% SAFETY AND SOUNDNESS Shareholders' Equity / Average Assets, Excluding Unrealized Gains/Losses on Available-for-Sale Securities (***) 10.65% 11.11% -4.14% Nonperforming Assets / Total Assets 0.14% 0.10% 40.00% Allowance for Loan Losses / Total Loans 1.22% 1.37% -10.95% Risk Based Capital Ratio 20.27% 22.61% -10.35%
CONSOLIDATED FINANCIAL HIGHLIGHTS (In Thousands, Except Per Share Data) (UNAUDITED) (CONTINUED)
3 MONTHS ENDED % MARCH INCREASE 2003 2002 (DECREASE) ---- ---- ---------- AVERAGE BALANCES Average Assets $ 1,007,409 $ 881,850 14.24% Average Assets, Excluding Unrealized Gains/Losses on Available-for-sale Securities 994,662 875,721 13.58% Average Equity 117,802 101,746 15.78% Average Equity, Excluding Unrealized Gains/Losses on Available-for-sale Securities 105,055 95,617 9.87%
(*) Net unrealized gains/losses on available-for-sale securities are presented as "Accumulated Other Comprehensive Income" in the annual and quarterly financial statements filed with the Securities and Exchange Commission. (**) For purposes of per share calculations, the market value and number of outstanding shares have been retroactively adjusted for the effects of the 3-for-2 stock split issued in April 2003, and for 1% stock dividends issued in January of each year presented. (***)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 shareholders' 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 the calculation of earnings-based ratios. Further, the amount of unrealized gains or losses may vary widely from period-to-period, depending on the financial markets as a whole and interest rate movements. Therefore, management has provided these "non-GAAP" ratios because we believe they provide meaningful information for evaluating the Corporation's financial position and results of operations.