Citizens & Northern Corp (CZNC, Financial) filed Quarterly Report for the period ended 2009-09-30.
Citizens & Northern Corporation is a one-bank holding company whose principal subsidiary is Citizens & Northern Bank. The Corporation's principal office is located in WellsboroPennsylvania. The Corporation's other wholly-owned subsidiaries are Citizens & Northern InvestmentCorporation and Bucktail Life Insurance Company. Citizens & Northern Investment Corporation was formed in 1999 to engage in investmentactivities. Bucktail provides credit life and accident and health insurance on behalf of the Bank. Citizens & Northern Corp has a market cap of $108.74 million; its shares were traded at around $12.09 with a P/E ratio of 10.79 and P/S ratio of 1.4. The dividend yield of Citizens & Northern Corp stocks is 7.94%. Citizens & Northern Corp had an annual average earning growth of 3% over the past 10 years.
Core Earnings is an earnings performance measurement which the Corporation s management has defined to exclude the effects of OTTI losses on available-for-sale securities and realized gains on securities for which OTTI has previously been recognized. Core Earnings is a performance measurement that is not based on U.S. generally accepted accounting principles. Management believes Core Earnings information is meaningful for evaluating the Corporation s operating performance, because it excludes some of the impact of market volatility as it relates to investments in pooled trust-preferred securities and other securities. More information concerning Core Earnings, including a reconciliation to the Corporation s earnings results based on U.S. generally accepted accounting principles, is provided in the following section of Management s Discussion and Analysis. The Corporation s results for the first nine months of 2009 included positive Core Earnings available to common shareholders of $11,351,000 ($1.26 per diluted share), reduced by after-tax OTTI charges on available-for-sale securities (net of subsequent gains from selling some of the securities) of $56,356,000. For the first nine months of 2008, the Corporation had Core Earnings of $11,951,000 ($1.33 per diluted share). Third quarter 2009 results included Core Earnings of $3,918,000 ($0.43 per diluted share), offset by after-tax OTTI charges on available-for-sale securities (net of subsequent gains from selling some of the securities) of $32,485,000. In the third quarter of 2008, Core Earnings was $4,145,000 ($0.46 per diluted share).
Pre-tax OTTI charges in the first nine months of 2009 totaled $84,407,000, including $47,947,000 in the third quarter 2009. A summary of pre-tax OTTI charges for the 3-month and 9-month periods ended September 30, 2009 and 2008 is as follows:
Pooled trust-preferred securities are very long-term (usually 30-year maturity) instruments with characteristics of both debt and equity, mainly issued by banks. The Corporation s investments in pooled trust-preferred securities are each made up of companies with geographic and size diversification. Almost all of the Corporation s pooled trust-preferred securities are composed of debt issued by banking companies, with lesser amounts issued by insurance companies and real estate investment trusts. Management evaluates the pooled trust-preferred securities for OTTI by estimating the cash flows expected to be received from each security, taking into account estimated levels of deferrals and defaults by the underlying issuers. In determining cash flows, management assumes all issuers currently deferring or in default would make no future payments, and assigns estimated future default levels for the remaining issuers in each security based on financial strength ratings assigned by a national ratings service. At September 30, 2009, management made significant changes in assumptions regarding future deferrals and defaults in comparison to assumptions used in the previous four quarters analyses. These changes had the effect of increasing estimated future defaults, which resulted in lower levels of future cash flows expected to be received, as compared to estimated future cash flows to be received based on the assumptions used in previous quarters. The Corporation s process for evaluating pooled trust-preferred securities for OTTI is described in more detail in Note 6 to the unaudited, consolidated financial statements. After the impact of the impairment charges, the Corporation s cost basis in pooled trust-preferred securities at September 30, 2009 totaled $13.3 million, including senior tranche assets of $11.7 million and mezzanine tranche assets of $1.6 million. The estimated fair value at September 30, 2009 of pooled trust-preferred securities was $9.1 million.
As described in more detail in Notes 2 and 6 to the unaudited, consolidated financial statements, the Corporation adopted new accounting principles in the first quarter 2009, which resulted in the impairment of debt securities being separated into (a) the amount of the total impairment related to credit loss, which is recognized in the income statement, and (b) the amount of the total impairment related to all other factors, which is recognized in other comprehensive income. For the nine-month period ended September 30, 2009, the effect of the new principles was to increase impairment losses recognized in earnings by $2,773,000, and decrease the income tax provision by $943,000, resulting in a decrease in net income (higher net loss) of $1,830,000, or $0.20 per average common share. For the three-month period ended September 30, 2009, the effect of adopting the new principles was to increase impairment losses recognized in earnings by $9,268,000, and reduce the income tax provision by $3,151,000, resulting in a reduction in net income (larger net loss) of $6,117,000, or $0.68 per average common share.
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Citizens & Northern Corporation is a one-bank holding company whose principal subsidiary is Citizens & Northern Bank. The Corporation's principal office is located in WellsboroPennsylvania. The Corporation's other wholly-owned subsidiaries are Citizens & Northern InvestmentCorporation and Bucktail Life Insurance Company. Citizens & Northern Investment Corporation was formed in 1999 to engage in investmentactivities. Bucktail provides credit life and accident and health insurance on behalf of the Bank. Citizens & Northern Corp has a market cap of $108.74 million; its shares were traded at around $12.09 with a P/E ratio of 10.79 and P/S ratio of 1.4. The dividend yield of Citizens & Northern Corp stocks is 7.94%. Citizens & Northern Corp had an annual average earning growth of 3% over the past 10 years.
Highlight of Business Operations:
The Corporation reported a net loss available to common shareholders of $45,005,000, or $5.01 per share, in the first nine months of 2009, primarily attributable to other-than-temporary impairment (OTTI) charges on available-for-sale securities of $56,356,000. For the first nine months of 2008, the Corporation reported net income of $7,881,000, or $0.88 per diluted share. For the third quarter 2009, the net loss available to common shareholders was $28,567,000, or $3.17 per share. In the third quarter 2008, net income available to common shareholders was $1,012,000, or $0.11 per share.Core Earnings is an earnings performance measurement which the Corporation s management has defined to exclude the effects of OTTI losses on available-for-sale securities and realized gains on securities for which OTTI has previously been recognized. Core Earnings is a performance measurement that is not based on U.S. generally accepted accounting principles. Management believes Core Earnings information is meaningful for evaluating the Corporation s operating performance, because it excludes some of the impact of market volatility as it relates to investments in pooled trust-preferred securities and other securities. More information concerning Core Earnings, including a reconciliation to the Corporation s earnings results based on U.S. generally accepted accounting principles, is provided in the following section of Management s Discussion and Analysis. The Corporation s results for the first nine months of 2009 included positive Core Earnings available to common shareholders of $11,351,000 ($1.26 per diluted share), reduced by after-tax OTTI charges on available-for-sale securities (net of subsequent gains from selling some of the securities) of $56,356,000. For the first nine months of 2008, the Corporation had Core Earnings of $11,951,000 ($1.33 per diluted share). Third quarter 2009 results included Core Earnings of $3,918,000 ($0.43 per diluted share), offset by after-tax OTTI charges on available-for-sale securities (net of subsequent gains from selling some of the securities) of $32,485,000. In the third quarter of 2008, Core Earnings was $4,145,000 ($0.46 per diluted share).
Pre-tax OTTI charges in the first nine months of 2009 totaled $84,407,000, including $47,947,000 in the third quarter 2009. A summary of pre-tax OTTI charges for the 3-month and 9-month periods ended September 30, 2009 and 2008 is as follows:
Pooled trust-preferred securities are very long-term (usually 30-year maturity) instruments with characteristics of both debt and equity, mainly issued by banks. The Corporation s investments in pooled trust-preferred securities are each made up of companies with geographic and size diversification. Almost all of the Corporation s pooled trust-preferred securities are composed of debt issued by banking companies, with lesser amounts issued by insurance companies and real estate investment trusts. Management evaluates the pooled trust-preferred securities for OTTI by estimating the cash flows expected to be received from each security, taking into account estimated levels of deferrals and defaults by the underlying issuers. In determining cash flows, management assumes all issuers currently deferring or in default would make no future payments, and assigns estimated future default levels for the remaining issuers in each security based on financial strength ratings assigned by a national ratings service. At September 30, 2009, management made significant changes in assumptions regarding future deferrals and defaults in comparison to assumptions used in the previous four quarters analyses. These changes had the effect of increasing estimated future defaults, which resulted in lower levels of future cash flows expected to be received, as compared to estimated future cash flows to be received based on the assumptions used in previous quarters. The Corporation s process for evaluating pooled trust-preferred securities for OTTI is described in more detail in Note 6 to the unaudited, consolidated financial statements. After the impact of the impairment charges, the Corporation s cost basis in pooled trust-preferred securities at September 30, 2009 totaled $13.3 million, including senior tranche assets of $11.7 million and mezzanine tranche assets of $1.6 million. The estimated fair value at September 30, 2009 of pooled trust-preferred securities was $9.1 million.
As described in more detail in Notes 2 and 6 to the unaudited, consolidated financial statements, the Corporation adopted new accounting principles in the first quarter 2009, which resulted in the impairment of debt securities being separated into (a) the amount of the total impairment related to credit loss, which is recognized in the income statement, and (b) the amount of the total impairment related to all other factors, which is recognized in other comprehensive income. For the nine-month period ended September 30, 2009, the effect of the new principles was to increase impairment losses recognized in earnings by $2,773,000, and decrease the income tax provision by $943,000, resulting in a decrease in net income (higher net loss) of $1,830,000, or $0.20 per average common share. For the three-month period ended September 30, 2009, the effect of adopting the new principles was to increase impairment losses recognized in earnings by $9,268,000, and reduce the income tax provision by $3,151,000, resulting in a reduction in net income (larger net loss) of $6,117,000, or $0.68 per average common share.
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