Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - CITIZENS & NORTHERN CORP | v349822_8k.htm |
| EX-99.1 - EXHIBIT 99.1 - CITIZENS & NORTHERN CORP | v349822_ex99-1.htm |
| EX-99.3 - EXHIBIT 99.3 - CITIZENS & NORTHERN CORP | v349822_ex99-3.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 |
| June 30, 2013 | QUARTERLY REPORT |
Dear Shareholder:
The economic environment of 2013 continues to be very challenging for the banking industry. Two forces are working simultaneously to create the challenges. First, a prolonged period of historically low interest rates has resulted in cash flows being reinvested at considerably lower yields causing margin compression. Secondly, the implementation of Dodd-Frank legislation has increased compliance costs, reduced overdraft protection income and applied downward pressure on interchange income.
Despite these hurdles, Citizens & Northern produced excellent financial results for the second quarter and first six months of 2013. While not at the same level of our outstanding results for 2012, net income of $4,974,000 for the second quarter of 2013 and $9,680,000 year-to-date produced a Return on Average Assets (ROAA) of 1.56% and Return on Average Equity (ROAE) of 10.57%. These results were accomplished, in our opinion, without compromising credit quality or taking undue extension risk with the investment portfolio.
The balance sheet has shrunk over the past year as investment opportunities providing an appropriate yield have been extremely limited, resulting in our measured approach to deposit pricing and our decision to reduce borrowings. While net loans have decreased approximately $49 million over the past twelve months, mortgage loans sold with servicing retained have increased approximately $56 million. Non-performing assets to total assets remain manageable at 0.80%. Trust assets under management have grown 8.68% over the past year and have been an important contributor to non-interest income.
In the second quarter 2013, we incurred professional fees expense of $315,000 from a consulting project related to debit card operations and electronic funds processing. While expense has been recognized in the most recently completed quarter, management expects the consultants’ services to result in increases in non-interest revenue and reductions in non-interest expense going forward, most significantly from an estimated total reduction in expense of $1.9 million for electronic funds processing over the next 5 ½ years.
The Board, management and employees are committed to managing through the previously mentioned challenges to produce superior financial results that enhance shareholder value. 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) | ||||||||||||||||||||
| 2ND | 1ST | 2ND | 6 MONTHS ENDED | |||||||||||||||||
| QUARTER | QUARTER | QUARTER | JUNE | |||||||||||||||||
| 2013 | 2013 | 2012 | 2013 | 2012 | ||||||||||||||||
| (Current) | (Current) | (Prior Qtr) | (Current) | (Prior Yr) | ||||||||||||||||
| Interest and Dividend Income | $ | 12,355 | $ | 12,647 | $ | 14,529 | $ | 25,002 | $ | 29,305 | ||||||||||
| Interest Expense | 1,415 | 1,600 | 2,401 | 3,015 | 4,903 | |||||||||||||||
| Net Interest Income | 10,940 | 11,047 | 12,128 | 21,987 | 24,402 | |||||||||||||||
| Provision for Loan Losses | 66 | 183 | 367 | 249 | 185 | |||||||||||||||
| Net Interest Income After Provision for Loan Losses | 10,874 | 10,864 | 11,761 | 21,738 | 24,217 | |||||||||||||||
| Other Income | 4,191 | 3,843 | 4,279 | 8,034 | 7,934 | |||||||||||||||
| Net Gains on Available-for-sale Securities | 100 | 1,159 | 203 | 1,259 | 201 | |||||||||||||||
| Loss on Prepayment of Borrowings | 0 | 1,023 | 143 | 1,023 | 143 | |||||||||||||||
| Other Noninterest Expenses | 8,520 | 8,553 | 8,321 | 17,073 | 16,734 | |||||||||||||||
| Income Before Income Tax Provision | 6,645 | 6,290 | 7,779 | 12,935 | 15,475 | |||||||||||||||
| Income Tax Provision | 1,671 | 1,584 | 2,094 | 3,255 | 4,203 | |||||||||||||||
| Net Income | $ | 4,974 | $ | 4,706 | $ | 5,685 | $ | 9,680 | $ | 11,272 | ||||||||||
| PER COMMON SHARE DATA: | ||||||||||||||||||||
| Net Income – Basic | $ | 0.40 | $ | 0.38 | $ | 0.46 | $ | 0.78 | $ | 0.92 | ||||||||||
| Net Income - Diluted | $ | 0.40 | $ | 0.38 | $ | 0.46 | $ | 0.78 | $ | 0.92 | ||||||||||
| Dividend Per Share | $ | 0.25 | $ | 0.25 | $ | 0.20 | $ | 0.50 | $ | 0.38 | ||||||||||
| Number Shares Used in Computation - Basic | 12,342,755 | 12,321,014 | 12,225,808 | 12,331,943 | 12,216,339 | |||||||||||||||
| Number Shares Used in Computation - Diluted | 12,369,311 | 12,349,264 | 12,242,833 | 12,359,284 | 12,243,303 | |||||||||||||||
| CONDENSED, CONSOLIDATED BALANCE SHEET DATA | ||||||||||||
| (In Thousands, Except Per Share Data) (Unaudited) | ||||||||||||
| JUNE 30, | MARCH 31, | JUNE 30, | ||||||||||
| 2013 | 2013 | 2012 | ||||||||||
| ASSETS | ||||||||||||
| Cash & Due from Banks | $ | 35,776 | $ | 45,069 | $ | 69,158 | ||||||
| Available-for-sale Securities | 470,068 | 459,855 | 478,368 | |||||||||
| Loans Held for Sale | 725 | 799 | 3,190 | |||||||||
| Loans, Net | 647,772 | 659,628 | 696,777 | |||||||||
| Intangible Assets | 12,055 | 12,067 | 12,117 | |||||||||
| Other Assets | 61,948 | 62,903 | 67,917 | |||||||||
| TOTAL ASSETS | $ | 1,228,344 | $ | 1,240,321 | $ | 1,327,527 | ||||||
| LIABILITIES | ||||||||||||
| Deposits | $ | 950,769 | $ | 967,974 | $ | 1,029,456 | ||||||
| Repo Sweep Accounts | 4,387 | 4,637 | 4,242 | |||||||||
| Total Deposits and Repo Sweeps | 955,156 | 972,611 | 1,033,698 | |||||||||
| Borrowed Funds | 85,472 | 76,661 | 110,038 | |||||||||
| Other Liabilities | 8,355 | 7,841 | 7,729 | |||||||||
| TOTAL LIABILITIES | 1,048,983 | 1,057,113 | 1,151,465 | |||||||||
| SHAREHOLDERS' EQUITY | ||||||||||||
| Common Shareholders' Equity, Excluding Accumulated | ||||||||||||
| Other Comprehensive Income (Loss) | 176,681 | 174,137 | 165,008 | |||||||||
| Accumulated Other Comprehensive Income (Loss): | ||||||||||||
| Net Unrealized Gains/Losses on | ||||||||||||
| Available-for-sale Securities | 2,832 | 9,223 | 11,519 | |||||||||
| Defined Benefit Plans | (152 | ) | (152 | ) | (465 | ) | ||||||
| TOTAL SHAREHOLDERS' EQUITY | 179,361 | 183,208 | 176,062 | |||||||||
| TOTAL LIABILITIES & SHAREHOLDERS' EQUITY | $ | 1,228,344 | $ | 1,240,321 | $ | 1,327,527 | ||||||
| CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS | ||||||||||||
| (In Thousands, Except Per Share Data) (Unaudited) | ||||||||||||
| 6 MONTHS ENDED | % | |||||||||||
| JUNE 30, | INCREASE | |||||||||||
| 2013 | 2012 | (DECREASE) | ||||||||||
| EARNINGS PERFORMANCE | ||||||||||||
| Net Income | $ | 9,680 | $ | 11,272 | -14.12 | % | ||||||
| Return on Average Assets | 1.56% | 1.72 | -9.30 | % | ||||||||
| Return on Average Equity | 10.57% | 13.12 | -19.44 | % | ||||||||
| BALANCE SHEET HIGHLIGHTS | ||||||||||||
| Total Assets | $ | 1,228,344 | $ | 1,327,527 | -7.47 | % | ||||||
| Available-for-Sale Securities | 470,068 | 478,368 | -1.74 | % | ||||||||
| Loans (Net) | 647,772 | 696,777 | -7.03 | % | ||||||||
| Allowance for Loan Losses | 7,198 | 7,657 | -5.99 | % | ||||||||
| Deposits and Repo Sweep Accounts | 955,156 | 1,033,698 | -7.60 | % | ||||||||
| OFF-BALANCE SHEET | ||||||||||||
| Outstanding Balance of Mortgage Loans Sold | ||||||||||||
| with Servicing Retained | 126,489 | 70,880 | 78.46 | % | ||||||||
| Trust Assets Under Management | 727,647 | 669,538 | 8.68 | % | ||||||||
| SHAREHOLDERS' VALUE | ||||||||||||
| (PER COMMON SHARE) | ||||||||||||
| Net Income - Basic | $ | 0.78 | $ | 0.92 | -15.22 | % | ||||||
| Net Income - Diluted | $ | 0.78 | $ | 0.92 | -15.22 | % | ||||||
| Dividends | $ | 0.50 | $ | 0.38 | 31.58 | % | ||||||
| Common Book Value | $ | 14.52 | $ | 14.39 | 0.90 | % | ||||||
| Tangible Common Book Value | $ | 13.55 | $ | 13.40 | 1.12 | % | ||||||
| Market Value (Last Trade) | $ | 19.32 | $ | 19.05 | 1.42 | % | ||||||
| Market Value / Common Book Value | 133.06% | 132.38% | 0.51 | % | ||||||||
| Market Value / Tangible Common Book Value | 142.58% | 142.16% | 0.29 | % | ||||||||
| Price Earnings Multiple | 12.38 | 10.35 | 19.61 | % | ||||||||
| Dividend Yield | 5.18% | 3.99% | 29.82 | % | ||||||||
| Common Shares Outstanding, End of Period | 12,351,522 | 12,235,317 | 0.95 | % | ||||||||
| SAFETY AND SOUNDNESS | ||||||||||||
| Tangible Common Equity / Tangible Assets | 13.76% | 12.46% | 10.43 | % | ||||||||
| Nonperforming Assets / Total Assets | 0.80% | 0.72% | 11.11 | % | ||||||||
| Allowance for Loan Losses / Total Loans | 1.10% | 1.09% | 0.92 | % | ||||||||
| Total Risk Based Capital Ratio (a) | 25.69% | 22.53% | 14.03 | % | ||||||||
| Tier 1 Risk Based Capital Ratio (a) | 24.43% | 21.29% | 14.75 | % | ||||||||
| Leverage Ratio (a) | 13.52% | 11.79% | 14.67 | % | ||||||||
| AVERAGE BALANCES | ||||||||||||
| Average Assets | $ | 1,243,433 | $ | 1,307,146 | -4.87 | % | ||||||
| Average Equity | $ | 183,111 | $ | 171,775 | 6.60 | % | ||||||
| (a) | Capital ratios for the most recent period are estimated. |