EX-99.2 3 l13425aexv99w2.txt EX-99.2 QUARTERLY REPORT EXHIBIT 99.2 (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 Chartered 1864 FEDERAL DEPOSIT INSURANCE CORP MARCH 31, 2005 QUARTERLY REPORT Dear Shareholder: This year will be challenging in many respects. As the Federal Reserve continues its "measured" increases in the Fed Funds Rate, we will be experiencing more rapid repricing of our deposits and borrowings which support our earning assets that reprice more slowly. This will reduce our interest spread and our interest margin. Fortunately, we have increased our loan portfolio by nearly 12.7% since last year and that volume has had a positive effect upon the interest margin for the first quarter. Other expenses have increased since last year by $900 thousand; due in part to increased costs related to the new core processing system and the personnel and fixed overhead expenses related to our expansion into the Williamsport and Lycoming County market. By July 1st, we will open our 20th office in Jersey Shore and we expect to begin the construction of the 21st office in Old Lycoming Township by the third quarter of this year. We have already begun hiring personnel for those new locations to enable appropriate time for training. We believe these investments should result in gaining significant market share and should result in long-term revenue enhancements for your company. In addition to the growth in loans, deposits and repo sweep accounts have increased 5.15%. Our available-for-sale investments have shrunk by 11.75% to fund loan growth and because the spreads available for leveraging are not attractive enough. Our Trust and Financial Management Group has been growing Trust Assets Under Management, up over $42 million or 11.90%, through development of new relationships and by virtue of positive investment results. There has been considerable trading volume in our stock since we listed on the NASDAQ Small Cap market. We expect that listing will enhance the marketability of your holdings and allow the price to more accurately reflect the true value of your investment. We have filed the regulatory applications for the acquisition of the Canisteo Valley Corporation, the holding company for First State Bank of Canisteo. We expect to close the transaction by the 3rd quarter of this year. Both we and the good people at First State Bank are excited about joining forces to offer C&N style community banking to the southern tier New York State market. 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 F. David Pennypacker Lawrence F. Mase 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 18810570-888-2291 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 2 E. Mountain Ave., SO. WILLIAMSPORT, PA 17702 570-601-3016 41 Main Street, TIOGA, PA 16946 570-835-5236 428 Main Street, TOWANDA, PA18848570-265-6171 Court House Square, TROY, PA 16947 570-297-2159 90-92 Main Street, WELLSBORO, PA 16901 570-724-3411 130 Court Street, WILLIAMSPORT, PA 17701 570-320-0100 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 503 N. Elmira Street, Sayre, PA 18840 888-760-8192 3461 Rte 405 Highway, Muncy, PA 17756 570-546-6666 130 Court Street, Williamsport, PA 17701 570-601-6000 ACCOUNT SERVICES - 90-92 Main St, Wellsboro, PA 16901 800-726-2265 BANKCARD SERVICES - 11822 Route 6, Wellsboro PA 16901 800-676-6639 FUNDS MANAGEMENT - 90-92 Main St., Wellsboro, PA 16901 800-577-9397 www.fmt@cnbankpa.com 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 2005 2004 (CURRENT) (PRIOR YR) ------------ ------------ Interest and Dividend Income $ 14,693 $ 14,015 Interest Expense 5,957 5,703 ------------ ------------ Interest Margin 8,736 8,312 Provision for Loan Losses 375 350 ------------ ------------ Interest Margin After Provision for Loan Losses 8,361 7,962 Other Income 1,703 1,625 Realized Gains on Securities, Net 1,066 964 Other Expenses 7,128 6,228 ------------ ------------ Income Before Income Tax Provision 4,002 4,323 Income Tax Provision 707 617 ------------ ------------ NET INCOME $ 3,295 $ 3,706 ============ ============ PER SHARE DATA (**): Net Income - Basic $ 0.40 $ 0.45 Net Income - Diluted $ 0.40 $ 0.45 Dividend Per Share $ 0.23 $ 0.22 Number Shares Used in Computation - Basic 8,193,240 8,193,182 Number Shares Used in Computation - Diluted 8,264,288 8,249,283
CONSOLIDATED BALANCE SHEET (In Thousands, Except Per Share Data) (Unaudited)
MARCH 31, MARCH 31, 2005 2004 ------------ ------------ ASSETS Cash & Due from Banks $ 13,285 $ 14,149 Available-for-Sale Securities 465,074 526,985 Loans, Net 592,118 525,561 Other Assets 59,184 54,432 ------------ ------------ TOTAL ASSETS $ 1,129,661 $ 1,121,127 ============ ============ LIABILITIES Deposits $ 684,619 $ 650,920 Repo Sweep Accounts 21,167 20,282 ------------ ------------ Total Deposits and Repo Sweeps 705,786 671,202 Borrowed Funds 286,394 284,784 Other Liabilities 8,656 34,899 ------------ ------------ TOTAL LIABILITIES 1,000,836 990,885 ------------ ------------ SHAREHOLDERS' EQUITY Shareholders' Equity, Excluding Net Unrealized Gains/Losses on Available-for sale Securities 122,875 115,630 Net Unrealized Gains/Losses on Available- for-sale Securities (*) 5,950 14,612 ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 128,825 130,242 ------------ ------------ TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 1,129,661 $ 1,121,127 ============ ============
CONSOLIDATED FINANCIAL HIGHLIGHTS (In Thousands, Except Per Share Data) (Unaudited)
3 MONTHS ENDED % MARCH INCREASE 2005 2004 (DECREASE) ---- ---- ---------- EARNINGS PERFORMANCE Net Income $ 3,295 $ 3,706 -11.09% Return on Average Assets 1.17% 1.38% -15.22% Return on Average Assets, Excluding Unrealized Gains/Losses on Available-for-Sale Securities (***) 1.18% 1.40% -15.71% Return on Average Equity 9.87% 11.45% -13.80% Return on Average Equity, Excluding Unrealized Gains/Losses on Available-for-Sale Securities (***) 10.70% 12.88% -16.93% BALANCE SHEET HIGHLIGHTS Total Assets $ 1,129,661 $ 1,121,127 0.76% Available-for-Sale Securities 465,074 526,985 -11.75% Loans (Net) 592,118 525,561 12.66% Allowance for Loan Losses 6,925 6,370 8.71% Deposits and Repo Sweep Accounts 705,786 671,202 5.15% Trust Assets Under Management 395,843 353,762 11.90% SHAREHOLDERS' VALUE (PER SHARE) (**) Net Income - Basic $ 0.40 $ 0.45 -11.11% Net Income - Diluted $ 0.40 $ 0.45 -11.11% Dividends $ 0.23 $ 0.22 4.55% Book Value $ 15.69 $ 15.88 -1.20% Book Value, Excluding Unrealized Gains/Losses on Available-for- sale Securities (***) $ 14.97 $ 14.10 6.17% Market Value (Last Trade) $ 28.51 $ 24.80 14.96% Market Value / Book Value 181.71% 156.17% 16.35% Market Value / Book Value, Excluding Unrealized Gains/Losses on Available-for-Sale Securities (***) 190.45% 175.89% 8.28% Price Earnings Multiple 17.82 13.78 29.32% Dividend Yield 3.23% 3.55% -9.01% SAFETY AND SOUNDNESS Shareholders' Equity / Average Assets, Excluding Unrealized Gains/Losses on Available-for-Sale Securities (***) 11.01% 10.95% 0.55% Nonperforming Assets / Total Assets 0.77% 0.12% 541.67% Allowance for Loan Losses / Total Loans 1.16% 1.20% -3.33% Risk Based Capital Ratio 18.73% 20.00% -6.35% AVERAGE BALANCES Average Assets $ 1,131,167 $ 1,077,361 4.99% Average Assets, Excluding Unrealized Gains/Losses on Available-for-sale Securities 1,115,540 1,055,668 5.67% Average Equity 133,494 129,440 3.13% Average Equity, Excluding Unrealized Gains/Losses on Available-for-sale Securities 123,180 115,123 7.00%
(*) 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 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.