Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - CITIZENS & NORTHERN CORP | v341276_8k.htm |
| EX-99.3 - EXHIBIT 99.3 - CITIZENS & NORTHERN CORP | v341276_ex99-3.htm |
| EX-99.1 - EXHIBIT 99.1 - CITIZENS & NORTHERN CORP | v341276_ex99-1.htm |
EXHIBIT 99.2
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, 2013
QUARTERLY REPORT
Dear Shareholder:
As expected, the first quarter of 2013 proved to be very challenging. We anticipated a reduction in net interest income as cash flows received from maturing investment securities and loan payments were reinvested at substantially lower rates. As a result, first quarter net income of $4,706,000 represents a decline of 15.77% over the corresponding period of 2012. However, Return on Average Assets (ROAA) was an excellent 1.50% and Return on Average Equity (ROAE) was a respectable 10.31%. Non-interest income excluding security gains remained strong with a 5.14% increase over the corresponding period of 2012. Non-interest expenses excluding loss on prepayment of borrowings rose a modest 1.66% over the corresponding period of 2012.
The Balance Sheet remained relatively flat with modest decreases to loans and deposits. The decrease in loans is mainly the result of selling a majority of the originated residential mortgages to the secondary mortgage market to reduce interest rate risk. The outstanding balance of residential mortgages that were sold in the secondary mortgage market while maintaining the servicing rights increased $11,757,000 during the quarter, and we generated a net gain from sale of loans of $545,000. The majority of the deposit decrease is from time deposits that we consciously did not bid up due to the lack of prudent investment alternatives offering a commensurate return for the assumed interest rate and credit risk. We continued to reduce long-term borrowings (repurchase agreements) by pre-paying $7,000,000 of debt while incurring a pre-payment penalty of $1,023,000. The pre-payment penalty was offset by harvesting $1,159,000 of security gains which were primarily the result of the sale of a previously written off trust-preferred security and the sale of bank stocks. This pre-payment of debt will slightly improve our net interest margin going forward.
The bank is committed to growing appropriately priced loans and deposits. We are currently investing considerable resources in training our employees on techniques to deepen and broaden relationships with existing and prospective customers. We have refused to compromise credit quality or take extension risk in pursuit of short-term profits. While I am disappointed in reporting earnings that are less than the corresponding period of 2012, I am pleased that the ROAA is still strong and that management is working diligently to enhance shareholder value without assuming undue credit and/or interest rate risk.
I solicit your continued support and welcome your questions and comments.
Charles H. Updegraff, Jr.
Chairman, President & CEO
CITIZENS & NORTHERN CORPORATION
BOARD OF DIRECTORS
Charles H. Updegraff, Jr. - Chairman
| Dennis F. Beardslee | Raymond R. Mattie | ||
| Jan E. Fisher | Edward H. Owlett, III | ||
| R. Bruce Haner | Leonard Simpson | ||
| Susan E. Hartley | James E. Towner | ||
| Leo F. Lambert | Ann M. Tyler |
CITIZENS & NORTHERN BANK
1-877-838-2517
OFFICES
428 S. Main Street, ATHENS, PA 18810
3 Main Street, CANISTEO, NY 14823
10 N Main Street, COUDERSPORT, PA 16915
111 Main Street, DUSHORE, PA 18614
563 Main Street, EAST SMITHFIELD, PA 18817
104 Main Street, ELKLAND, PA 16920
135 East Fourth Street, EMPORIUM, PA 15834
6250 County Route 64, HORNELL, NY 14843
230-232 Railroad Street, JERSEY SHORE, PA 17740
102 E. Main Street, KNOXVILLE, PA 16928
514 Main Street, LAPORTE, PA 18626
4534 Williamson Trail LIBERTY, PA 16930
1085 S. Main Street, MANSFIELD, PA 16933
612 James Monroe Avenue, MONROETON, PA 18832
3461 Rte.405 Highway, MUNCY, PA 17756
100 Maple Street, PORT ALLEGANY, PA 16743
24 Thompson Street, RALSTON, PA 17763
1827 Elmira Street, SAYRE, PA 18840
2 E. Mountain Ave., SO. WILLIAMSPORT, PA 17702
41 Main Street, TIOGA, PA 16946
428 Main Street, TOWANDA, PA18848
Court House Square, TROY, PA 16947
90-92 Main Street, WELLSBORO, PA 16901
130 Court Street, WILLIAMSPORT, PA 17701
1510 Dewey Ave., WILLIAMSPORT, PA 17702
Route 6, WYSOX, PA 18854
TRUST & FINANCIAL MANAGEMENT GROUP
3 Main Street, Canisteo, NY 14823 607-698-4295
10 N Main Street, Coudersport, PA 16915 800-921-9150
1827 Elmira Street, Sayre, PA 18840 888-760-8192
428 Main Street, Towanda, PA 18848 888-987-8784
90-92 Main Street, Wellsboro, PA 16901 888-487-8784
130 Court Street, Williamsport, PA 17701 866-732-7213
ACCOUNT SERVICES - 90-92 Main St., Wellsboro, PA 16901
BANKCARD SERVICES - 90-92 Main St., Wellsboro PA 16901 800-577-8001
ELECTRONIC BANKING – 10 Nichols St., Wellsboro, PA 16901 877-838-2517
| www.cnbankpa.com |
C&N FINANCIAL SERVICES CORPORATION – 90-92 Main Street, Wellsboro, PA 866-ASK-CNFS
| www.cnfinancialservices.com |
| CONDENSED, CONSOLIDATED EARNINGS INFORMATION | |||
| (In Thousands, Except Per Share Data) (Unaudited) | |||
| 1ST | 4TH | 1ST | |
| QUARTER | QUARTER | QUARTER | |
| 2013 | 2012 | 2012 | |
| (Current) | (Prior Qtr) | (Prior Yr) | |
| Interest and Dividend Income | $12,647 | $13,491 | $14,776 |
| Interest Expense | 1,600 | 1,900 | 2,502 |
| Net Interest Income | 11,047 | 11,591 | 12,274 |
| Provision (Credit) for Loan Losses | 183 | (133) | (182) |
| Net Interest Income After Provision (Credit) for Loan Losses | 10,864 | 11,724 | 12,456 |
| Other Income | 3,843 | 4,327 | 3,655 |
| Net Gains on Available-for-sale Securities | 1,159 | 51 | (2) |
| Loss on Prepayment of Borrowings | 1,023 | 0 | 0 |
| Other Noninterest Expenses | 8,553 | 7,954 | 8,413 |
| Income Before Income Tax Provision | 6,290 | 8,148 | 7,696 |
| Income Tax Provision | 1,584 | 2,209 | 2,109 |
| Net Income | $4,706 | $5,939 | $5,587 |
| PER COMMON SHARE DATA: | |||
| Net Income – Basic | $0.38 | $0.48 | $0.46 |
| Net Income – Diluted | $0.38 | $0.48 | $0.46 |
| Dividend Per Share | $0.25 | $0.24 | $0.18 |
| Number Shares Used in Computation - Basic | 12,321,014 | 12,265,100 | 12,206,870 |
| Number Shares Used in Computation - Diluted | 12,349,264 | 12,283,702 | 12,245,752 |
| CONDENSED, CONSOLIDATED BALANCE SHEET DATA | |||
| (In Thousands, Except Per Share Data) (Unaudited) | |||
| MARCH 31, | DEC. 31, | MARCH 31, | |
| 2013 | 2012 | 2012 | |
| ASSETS | |||
| Cash & Due from Banks | $45,069 | $59,836 | $56,498 |
| Available-for-sale Securities | 459,855 | 472,577 | 486,664 |
| Loans Held for Sale | 799 | 2,545 | 2,223 |
| Loans, Net | 659,628 | 677,053 | 690,218 |
| Intangible Assets | 12,067 | 12,080 | 12,135 |
| Other Assets | 62,903 | 62,816 | 69,026 |
| TOTAL ASSETS | $1,240,321 | $1,286,907 | $1,316,764 |
| LIABILITIES | |||
| Deposits | 967,974 | 1,006,106 | 1,016,801 |
| Repo Sweep Accounts | 4,637 | 5,567 | 4,030 |
| Total Deposits and Repo Sweeps | 972,611 | 1,011,673 | 1,020,831 |
| Borrowed Funds | 76,661 | 83,812 | 115,202 |
| Other Liabilities | 7,841 | 8,636 | 9,117 |
| TOTAL LIABILITIES | 1,057,113 | 1,104,121 | 1,145,150 |
| SHAREHOLDERS' EQUITY | |||
| Common Shareholders' Equity, Excluding Accumulated | |||
| Other Comprehensive Income (Loss) | 174,137 | 171,783 | 161,240 |
| Accumulated Other Comprehensive Income (Loss): | |||
| Net Unrealized Gains/Losses on | |||
| Available-for-sale Securities | 9,223 | 11,568 | 10,852 |
| Defined Benefit Plans | (152) | (565) | (478) |
| TOTAL SHAREHOLDERS' EQUITY | 183,208 | 182,786 | 171,614 |
| TOTAL LIABILITIES & SHAREHOLDERS' EQUITY | $1,240,321 | $1,286,907 | $1,316,764 |
| CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS | |||
| (In Thousands, Except Per Share Data) (Unaudited) | |||
| 3 MONTHS ENDED | % | ||
| MARCH 31, | INCREASE | ||
| 2013 | 2012 | (DECREASE) | |
| EARNINGS PERFORMANCE | |||
| Net Income | $4,706 | $5,587 | -15.77% |
| Return on Average Assets | 1.50% | 1.72% | -12.79% |
| Return on Average Equity | 10.31% | 13.15% | -21.60% |
| BALANCE SHEET HIGHLIGHTS | |||
| Total Assets | $1,240,321 | $1,316,764 | -5.81% |
| Available-for-Sale Securities | 459,855 | 486,664 | -5.51% |
| Loans (Net) | 659,628 | 690,218 | -4.43% |
| Allowance for Loan Losses | 7,118 | 7,370 | -3.42% |
| Deposits and Repo Sweep Accounts | 972,611 | 1,020,831 | -4.72% |
| OFF-BALANCE SHEET | |||
| Outstanding Balance of Mortgage Loans Sold | |||
| with Servicing Retained | 114,134 | 62,346 | 83.07% |
| Trust Assets Under Management | 737,298 | 678,693 | 8.63% |
| SHAREHOLDERS' VALUE | |||
| (PER COMMON SHARE) | |||
| Net Income - Basic | $0.38 | $0.46 | -17.39% |
| Net Income - Diluted | $0.38 | $0.46 | -17.39% |
| Dividends | $0.25 | $0.18 | 38.89% |
| Common Book Value | $14.86 | $14.05 | 5.77% |
| Tangible Common Book Value | $13.88 | $13.06 | 6.28% |
| Market Value (Last Trade) | $19.50 | $20.00 | -2.50% |
| Market Value / Common Book Value | 131.22% | 142.35% | -7.81% |
| Market Value / Tangible Common Book Value | 140.49% | 153.14% | -8.26% |
| Price Earnings Multiple | 12.83 | 10.87 | 18.03% |
| Dividend Yield | 5.13% | 3.60% | 42.50% |
| Common Shares Outstanding, End of Period | 12,331,654 | 12,215,750 | 0.95% |
| SAFETY AND SOUNDNESS | |||
| Tangible Common Equity / Tangible Assets | 13.93% | 12.22% | 13.99% |
| Nonperforming Assets / Total Assets | 0.83% | 0.70% | 18.57% |
| Allowance for Loan Losses / Total Loans | 1.07% | 1.06% | 0.94% |
| Total Risk Based Capital Ratio (a) | 25.02% | 22.01% | 13.68% |
| Tier 1 Risk Based Capital Ratio (a) | 23.81% | 20.80% | 14.47% |
| Leverage Ratio (a) | 13.04% | 11.50% | 13.39% |
| AVERAGE BALANCES | |||
| Average Assets | $1,251,679 | $1,302,682 | -3.92% |
| Average Equity | $182,605 | $169,897 | 7.48% |
| (a) Capital ratios for the most recent period are estimated. | |||