10-Q 1 0001.txt QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Nine-month period ended September 30, 2000 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ___________ Commission file number: 0-16084 CITIZENS & NORTHERN CORPORATION (Exact name of Registrant as specified in its charter) Pennsylvania 23-2451943 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 90-92 Main Street Wellsboro, PA 16901 (Address of principal executive offices) (Zip code) 570-724-3411 (Registrant's telephone number including area code) Not applicable (Former name, former address, and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ____ No ____ (APPLICABLE ONLY TO CORPORATE REGISTRANTS) Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Title Outstanding Common Stock ($1.00 par value) 5,205,492 Shares Outstanding November 13, 2000 1 CITIZENS & NORTHERN CORPORATION Index Part I. Financial Information Item 1. Financial Statements Consolidated Balance Sheet - September 30, 2000 and December 31, 1999 Page 3 Consolidated Statement of Income - Three Months and Nine Months Ended September 30, 2000 and September 30, 1999 Page 4 Consolidated Statement of Cash Flows - Nine Months Ended September 30, 2000 and September 30, 1999 Page 5 Notes to Consolidated Financial Statements Pages 6 and 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Pages 8 through 17 Item 3. Information About Market Risk Pages 17 and 18 Part II. Other Information Page 19 Signatures Page 20 2 CITIZENS & NORTHERN CORPORATION - FORM 10 - Q Part I - Financial Information Item 1. Financial Statements CONSOLIDATED BALANCE SHEET (In Thousands)
September 30, December 31, 2000 1999 (Unaudited) (Note) ------------- ------------ ASSETS Cash and due from banks: Noninterest-bearing $ 10,276 $ 15,337 Interest-bearing 888 2,726 ------------------------------- Total cash and cash equivalents 11,164 18,063 ------------------------------- Available-for-sale securities 350,698 358,929 Held-to-maturity securities 2,026 1,880 Loans, net 319,164 305,761 Bank premises and equipment 9,091 7,992 Accrued interest receivable 5,319 5,066 Other assets 6,589 8,207 ------------------------------- TOTAL ASSETS $ 704,051 $ 705,898 =============================== LIABILITIES Deposits: Noninterest-bearing $ 63,536 $ 67,200 Interest-bearing 438,747 433,274 ------------------------------- Total deposits 502,283 500,474 ------------------------------- Dividends payable 1,249 1,237 Short - term borrowings 97,288 89,036 Long - term borrowings 15,610 35,025 Accrued interest and other liabilities 6,166 3,503 ------------------------------- TOTAL LIABILITIES 622,596 629,275 ------------------------------- SHAREHOLDERS' EQUITY Common stock, par value $ 1.00 per share; Authorized 10,000,000; issued 5,324,962 And 5,272,239 in 2000 and 1999, respectively 5,325 5,272 Stock dividend distributable - 1,437 Paid in capital 18,741 17,355 Retained earnings 65,333 62,886 ------------------------------- Total 89,399 86,950 ------------------------------- Accumulated other comprehensive loss (6,504) (8,884) Less: Treasury stock at cost 119,470 shares at September 30, 2000 (1,440) 118,510 shares at December 31,1999 (1,443) ------------------------------- TOTAL SHAREHOLDERS' EQUITY 81,455 76,623 ------------------------------- TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 704,051 $ 705,898 ===============================
The accompanying notes are an integral part of these consolidated financial statements. Note: The balance sheet at December 31, 1999 has been derived from the audited financial statements at that date but does not include all the information and notes required by generally accepted accounting principles for complete financial statements. 3 CITIZENS & NORTHERN CORPORATION - FORM 10 - Q Part I - Financial Information (Continued) Item 1. Financial Statements (Continued) CONSOLIDATED STATEMENT OF INCOME (In Thousands) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, --------------------------- ----------------------------- 2000 1999 2000 1999 ---------- ----------- --------- ------------ (Current) (Prior Year) (Current) (Prior Year) INTEREST INCOME) Interest and fees on loans $ 6,859 $ 6,479 $ 20,053 $ 19,157 Interest on balances with depository institutions 39 7 95 21 Interest on loans to political subdivisions 162 153 481 373 Interest on federal funds sold 22 2 35 39 Income from available-for-sale and held-to-maturity securities: Taxable 4,571 4,390 13,859 11,794 Tax-exempt 1,082 1,180 3,313 3,441 Dividends 390 325 1,095 877 ---------------------------------------------------------------------------------------------------------------------------- Total interest and dividend income 13,125 12,536 38,931 35,702 ---------------------------------------------------------------------------------------------------------------------------- INTEREST EXPENSE Interest on deposits 5,903 4,811 16,984 13,950 Interest on short-term borrowings 1,692 805 4,462 1,386 Interest on long-term borrowings 195 804 885 2,389 ---------------------------------------------------------------------------------------------------------------------------- Total interest expense 7,790 6,420 22,331 17,725 ---------------------------------------------------------------------------------------------------------------------------- Interest margin 5,335 6,116 16,600 17,977 Provision for loan losses 150 120 526 570 ---------------------------------------------------------------------------------------------------------------------------- Interest margin after provision for loan losses 5,185 5,996 16,074 17,407 ---------------------------------------------------------------------------------------------------------------------------- OTHER INCOME Service charges on deposit accounts 291 277 846 827 Service charges and fees 56 69 175 186 Trust department income 387 325 1,212 1,096 Insurance commissions, fees and premiums 93 72 267 318 Fees related to credit card operation 123 903 737 2,348 Other operating income 13 11 134 71 ---------------------------------------------------------------------------------------------------------------------------- Total other income before realized gains on 963 1,657 3,371 4,846 securities, net Realized gains on securities, net 230 789 567 1,847 ---------------------------------------------------------------------------------------------------------------------------- Total other income 1,193 2,446 3,938 6,693 ---------------------------------------------------------------------------------------------------------------------------- OTHER EXPENSES Salaries and wages 1,907 1,748 5,584 5,015 Pensions and other employee benefits 474 443 1,410 1,351 Occupancy expense, net 214 225 673 679 Furniture and equipment expense 316 316 873 784 Expenses related to credit card operation 52 742 336 2,038 Pennsylvania Shares Tax 188 180 568 542 Other operating expense 1,020 910 3,052 2,809 ---------------------------------------------------------------------------------------------------------------------------- Total other expenses 4,171 4,564 12,496 13,218 ---------------------------------------------------------------------------------------------------------------------------- Income before income tax provision 2,207 3,878 7,516 10,882 Income tax provision 374 954 1,321 2,494 ---------------------------------------------------------------------------------------------------------------------------- NET INCOME $ 1,833 $ 2,924 $ 6,195 $ 8,388 ================================================================= PER SHARE DATA: Net Income - Basic $ 0.35 $ 0.56 $ 1.19 $ 1.61 Net Income - Diluted $ 0.35 $ 0.56 $ 1.19 $ 1.61 ----------------------------------------------------------------- Dividends Per Share $ 0.24 $ 0.22 $ 0.72 $ 0.65 ----------------------------------------------------------------- Number Shares Used in Computation - Basic 5,205,492 5,205,202 5,205,433 5,205,097 Number Shares Used in Computation - Diluted 5,206,777 5,210,729 5,207,017 5,211,202
The accompanying notes are an integral part of these consolidated financial statements. 4 CITIZENS & NORTHERN CORPORATION - FORM 10 - Q Part I - Financial Information (Continued) Item 1. Financial Statements (Continued) CONSOLIDATED STATEMENT OF CASH FLOWS (In Thousands) (Unaudited)
Nine Months Ended -------------------------------- September 30, September 30, 2000 1999 ------------- ------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 6,195 $ 8,388 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses 526 570 Realized gain on securities, net (567) (1,847) Realized (gain) loss on sale of foreclosed assets (57) 9 Provision for depreciation 815 715 Accretion and amortization, net (1,843) (1,314) Deferred income tax (89) (72) Decrease (increase) in accrued interest Receivable and other assets 825 (4,779) Increase in accrued interest payable and other liabilities 2,663 7,773 ---------------------------------------------------------------------------------------------------------------------- Net Cash Provided by Operating Activities 8,468 9,443 ---------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturity of held-to-maturity securities 44 351 Purchase of held-to-maturity securities (196) (354) Proceeds from sales of available-for-sale securities 15,407 22,446 Proceeds from maturities of available-for-sale securities 10,003 29,627 Purchase of available-for-sale securities (11,155) (110,448) Net increase in loans (14,276) (20,756) Purchase of premises and equipment (1,914) (1,227) Proceeds from sale of foreclosed assets 502 249 Purchase of investment in limited partnership (697) - ---------------------------------------------------------------------------------------------------------------------- Net Cash Used in Investing Activities (2,282) (80,112) ---------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in deposits 1,809 10,284 Net increase in short-term borrowings 8,252 63,214 Repayments of long-term borrowings (19,415) (14) Proceeds from sale of treasury stock 5 16 Dividends paid (3,736) (3,401) --------------------------------------------------------------------------------------------------------------------- Net Cash Provided by (Used in) Financing Activities (13,085) 70,099 --------------------------------------------------------------------------------------------------------------------- DECREASE IN CASH AND CASH EQUIVALENTS (6,899) (570) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 18,063 16,128 --------------------------------------------------------------------------------------------------------------------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 11,164 $ 15,558 ===================================================================================================================== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Interest Paid $ 18,903 $ 13,868 ===================================================================================================================== Income Taxes Paid $1,259 $2,156 =====================================================================================================================
The accompanying notes are an integral part of these consolidated financial statements. 5 CITIZENS & NORTHERN CORPORATION - FORM 10 - Q Part I - Financial Information (Continued) Item 1. Notes to Consolidated Financial Statements Notes to Consolidated Financial Statements 1. BASIS OF INTERIM PRESENTATION The financial information included herein, with the exception of the Consolidated Balance Sheet dated December 31, 1999, is unaudited; however, such information reflects all adjustments (consisting solely of normal recurring adjustments) that are, in the opinion of management, necessary to a fair presentation of the financial position, results of operations and cash flows for the interim periods. Certain 1999 amounts have been reclassified to conform to the 2000 presentation. Results reported for the nine-month period ended September 30, 2000 may not be indicative of the results for the year ending December 31, 2000. This document has not been reviewed or confirmed for accuracy or relevance by the Federal Deposit Insurance Corporation or any other regulatory agency. 2. PER SHARE DATA Net income per share is based on the weighted-average number of shares of common stock outstanding. The number of shares used in calculating net income and cash dividends per share reflects the retroactive effect of stock dividends for all periods presented. The following data show the amounts used in computing net income per share and the weighted average number of shares of dilutive stock options. The dilutive effect of stock options is computed as the weighted-average common shares available from the exercise of all dilutive stock options, less the number of shares that could be repurchased with the proceeds of stock option exercises based on the average share price of the Corporation's common stock during the period.
Weighted- Average Earnings Net Common Per Income Shares Share ---------- ---------- -------- Nine-month period ended September 30, 2000 Earnings per share - basic $6,195,000 5,205,433 $1.19 Dilutive effect of stock options 1,584 ------------------------------------------------------------------------------------------------------------- Earnings per share - diluted $6,195,000 5,207,017 $1.19 ============================================================================================================= Nine-month period ended September 30, 1999 Earnings per share - basic $8,388,000 5,205,097 $1.61 Dilutive effect of stock options 6,105 ------------------------------------------------------------------------------------------------------------- Earnings per share - diluted $8,388,000 5,211,202 $1.61 ============================================================================================================== Quarter ended September 30, 2000 Earnings per share - basic $1,833,000 5,205,492 $0.35 Dilutive effect of stock options 1,285 ------------------------------------------------------------------------------------------------------------- Earnings per share - diluted $1,833,000 5,206,777 $0.35 ============================================================================================================= Quarter ended September 30, 1999 Earnings per share - basic $2,924,000 5,205,202 $0.56 Dilutive effect of stock options 5,527 ------------------------------------------------------------------------------------------------------------- Earnings per share - diluted $2,924,000 5,210,729 $0.56 =============================================================================================================
6 3. COMPREHENSIVE INCOME Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported as a separate component of the equity section of the balance sheet, such items, along with net income, are components of comprehensive income. Comprehensive income is calculated as follows: (In Thousands)
Three Months Ended Year to Date ------------------------------- ----------------------------- September 30, September 30, September 30, September 30, 2000 1999 2000 1999 ------------- ------------- ------------- ------------- (Current) (Prior Year) (Current) (Prior Year) Net Income $ 1,833 $ 2,924 $ 6,195 $ 8,388 Other Comprehensive Income : Unrealized holding gains (losses) on available-for-sale securities Gains (losses) arising during the period 5,378 (6,826) 4,173 (19,361) Reclassification adjustment (230) (789) (567) (1,847) ------------------------------------------------------------- Other comprehensive income (loss) before income tax 5,148 (7,615) 3,606 (21,208) Income tax related to other comprehensive income (1,750) 2,589 (1,226) 7,211 ------------------------------------------------------------- Other comprehensive income (loss) 3,398 (5,026) 2,380 (13,997) ------------------------------------------------------------- Comprehensive Income (Loss) $ 5,231 ($2,102) $ 8,575 ($5,609) =============================================================
4. PENDING MERGER On June 22, 2000, Citizens & Northern Corporation and Peoples Ltd., the holding company of Peoples State Bank of Wyalusing, jointly announced that a definitive merger agreement was entered into between the two companies. The merger agreement provides for approximately 990,640 shares of Citizens & Northern Corporation common stock to be issued in exchange for the outstanding shares of Peoples Ltd. The transaction is expected to be accounted for as a pooling-of-interests and is expected to be a tax-free exchange for Peoples Ltd. shareholders. The transaction is subject to the approvals of Peoples Ltd. shareholders and various bank regulatory agencies. 7 CITIZENS & NORTHERN CORPORATION - FORM 10 - Q Part I - Financial Information (Continued) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This report contains certain forward-looking statements. Citizens & Northern Corporation and its wholly-owned subsidiaries (collectively, the Corporation) intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Reform Act of 1995, and is including this statement for purposes of these safe harbor provisions. Forward-looking statements, which are based on certain assumptions and describe future plans, business objectives and future expectations of the Corporation, are generally identifiable by the use of words such as, "believe", "expect", "intend", "anticipate", "estimate", "project", and similar expressions. The Corporation's ability to predict results or the actual effect of future plans or occurrences is inherently uncertain. Factors which could have a material adverse effect on the operations and future prospects of the Corporation include, but are not limited to, changes in : interest rates, general economic conditions, legislative/regulatory changes, monetary and fiscal policies of the U. S. government, including policies of the U. S. Treasury and the Federal Reserve Board, the quality or composition of the loan or investment portfolios, demand for loan products, deposit flows, competition, demand for financial services in the Corporation's market area, our implementation of new technologies, our ability to develop and maintain secure and reliable electronic systems and accounting principles, policies and guidelines. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. EARNINGS OVERVIEW Net income for the nine months ended September 30, 2000 amounted to $6,195,000, or $1.19 per share (on a basic and diluted basis). For the first nine months of 1999, net income was $8,388,000, or $1.61 per share. Net income for the third quarter 2000 was $1,833,000, or $.35 per share, and $2,924,000, or $.56 per share, for the third quarter 1999. The major reasons for the decrease in net income were (1) lower realized gains from sales of securities, (2) a lower net interest margin and (3) higher operating expenses, excluding credit card operations. Realized securities gains were lower because there were fewer opportunities to sell bank stocks at optimal prices in 2000. Also, interest costs on deposits and borrowed funds increased due to increases in short-term market interest rates, and personnel and technology costs increased due to efforts to expand future noninterest revenue opportunities. REFERENCES TO 2000 AND 1999 Unless otherwise noted, all references to "2000" in the following discussion of operating results are intended to mean the nine months ended September 30, 2000, and similarly, references to "1999" are intended to mean the first nine months of 1999. Operating results for the third quarter 2000, including comparisons to third quarter 1999, are generally consistent with the results and comparisons discussed in Management's Discussion and Analysis for the nine months ended September 30, 2000 and 1999. NET INTEREST MARGIN The net interest margin is the difference between interest income earned and interest expense incurred. The interest rate spread is the difference, stated as a percentage, between the average rate earned on all interest-earning assets and the average rate incurred on all interest-bearing liabilities. The net interest margin as reflected in the income statement, and the net interest spread as reflected in Table I of Management's Discussion and Analysis, have not been adjusted for federal income taxes. 8 CITIZENS & NORTHERN CORPORATION - FORM 10 - Q Part I - Financial Information (Continued) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) The net interest margin for 2000 decreased $1,377,000, or 7.7%, compared to 1999. The Corporation is "liability sensitive," which means that rates on its interest-bearing liabilities - deposits and borrowed funds - change more rapidly than rates on its interest-earning assets. The Corporation earns a positive "spread" by investing in long-term assets, such as residential mortgages and other loans secured by real estate and long-term debt securities. In 2000, short-term rates have risen significantly, and accordingly, the Corporation has raised most of its deposit rates and has borrowed funds at higher rates than in 1999. Overall, the Corporation's average rate incurred on interest-bearing liabilities increased from 4.50% in 1999 to 5.26% in 2000, and the interest rate spread shrunk from 2.98% to 2.27% for the corresponding time periods. Average balances and rates are presented in Table I. Issues related to management of interest rate risk, including the net interest margin, are discussed in the "Market Risk" section of Form 10-Q. Average assets increased to $703,769,000 in 2000 compared to $672,104,000 in 1999. Asset growth was funded primarily by increases in average borrowed funds of $22,478,000 and interest-bearing deposits of $18,107,000. As depicted in Table I, the most significant increases in interest-earning assets were in available-for-sale securities, which increased $33,149,000 and loans, which increased $17,963,000, or 6%. The largest categories of loan growth were loans secured by real estate and tax-exempt loans to political subdivisions. The largest category of average deposit growth was money market accounts, which increased 11.6%. The increase in the average balance of borrowed funds consisted primarily of borrowings from the Federal Home Loan Bank and customer repurchase agreements. Borrowings from the Federal Home Loan Bank were used to fund purchases of certain U.S. Government Agency investments. Table II presents an analysis of the effect of volume and rate changes on the net interest margin. 9 CITIZENS & NORTHERN CORPORATION - FORM 10 - Q Part I - Financial Information (Continued) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) TABLE I - ANALYSIS OF AVERAGE BALANCES AND RATES (In Thousands)
Rate of Rate of Rate of Return/ Return/ Return/ Nine Cost Cost Nine Cost Months of Year of Months of Ended Funds Ended Funds Ended Funds 09/30/00 % 12/31/99 % 09/30/99 % ---------- ----- --------- ----- -------- ----- EARNING ASSETS Available-for-Sale Securities: U. S. Treasury Securities $ 2,512 6.17 $ 2,510 5.90 $ 2,509 6.02 Securities of Other U.S. Government Agencies and 132,730 7.07 101,205 6.92 92,727 6.88 Corporations Mortgage Backed Securities 103,690 6.81 117,902 6.61 119,309 6.58 Obligations of States and Political Subdivisions 81,351 5.51 80,970 5.58 80,952 5.68 Stock 25,791 5.67 22,288 5.42 22,459 5.22 Other Securities 23,343 7.39 20,948 6.47 18,312 6.87 ----------------------------------------------------------------------------------------------------------------------------------- Total Available-for-Sale Securities 369,417 6.57 345,823 6.37 336,268 6.37 ----------------------------------------------------------------------------------------------------------------------------------- Held-to-Maturity Securities: U. S. Treasury Securities 669 5.39 615 5.53 614 5.66 Securities of Other U. S. Government Agencies and 1,031 6.61 895 6.48 877 6.56 Corporations Mortgage Backed Securities 290 7.37 368 7.34 384 7.31 ----------------------------------------------------------------------------------------------------------------------------------- Total Held-to-Maturity Securities 1,990 6.31 1,878 6.34 1,875 6.42 ----------------------------------------------------------------------------------------------------------------------------------- Interest -bearing Due from Banks 2,214 5.79 566 5.30 643 4.37 Federal Funds Sold 758 6.17 866 4.85 1,074 4.73 Loans: Real Estate Loans 252,211 8.59 240,951 8.56 238,707 8.59 Consumer 27,739 11.05 28,982 10.94 29,006 11.08 Agricultural 1,964 9.66 1,961 9.89 1,957 9.97 Commercial/Industrial 21,150 8.39 19,271 8.25 19,076 8.52 Other 877 7.92 714 7.70 698 7.66 Political Subdivisions 11,981 5.36 9,499 5.70 8,509 5.86 Leases 194 11.71 206 6.31 200 8.69 ------------------------------------------------------------------------------------------------------------------------------------ Total Loans 316,116 8.68 301,584 8.68 298,153 8.76 ------------------------------------------------------------------------------------------------------------------------------------ Total Earning Assets 690,495 7.53 650,717 7.44 638,013 7.48 ------------------------------------------------------------------------------------------------------------------------------------ Cash 10,636 14,028 14,034 Unrealized Gain/Loss on Securities (13,818) 7,865 11,753 Allowance for Loan Losses (5,197) (5,083) (5,043) Bank Premises and Equipment 8,500 7,828 7,767 Other Assets 13,153 5,509 5,580 ------------------------------------------------------------------------------------------------------------------------------------ Total Assets $ 703,769 $ 680,864 $672,104 ==================================================================================================================================== INTEREST-BEARING LIABILITIES Interest-bearing Deposits: Interest Checking $ 35,952 2.84 $ 37,248 2.27 $ 37,053 2.20 Money Market 144,000 5.30 131,741 4.34 129,009 4.23 Savings 46,055 2.49 46,643 2.48 46,751 2.48 Certificates of Deposit 143,491 5.55 139,916 5.24 139,123 5.24 Individual Retirement Accounts 76,714 6.37 75,882 5.21 76,272 5.10 Other Time Deposits 1,971 2.17 1,641 2.68 1,868 2.43 ------------------------------------------------------------------------------------------------------------------------------------ Total Interest-bearing Deposits 448,183 5.06 433,071 4.40 430,076 4.33 ------------------------------------------------------------------------------------------------------------------------------------ Borrowed Funds: Federal Funds Purchased 6,273 6.35 6,085 4.91 6,405 5.01 Other Borrowed Funds 112,621 5.99 97,585 5.35 90,011 5.25 ------------------------------------------------------------------------------------------------------------------------------------ Total Borrowed Funds 118,894 6.01 103,670 5.32 96,416 5.23 ------------------------------------------------------------------------------------------------------------------------------------ Total Interest-bearing Liabilities 567,077 5.26 536,741 4.58 526,492 4.50 ------------------------------------------------------------------------------------------------------------------------------------ Demand Deposits 51,746 50,787 50,754 Other Liabilities 6,311 6,193 6,752 ------------------------------------------------------------------------------------------------------------------------------------ Total Liabilities 625,134 593,721 583,998 ------------------------------------------------------------------------------------------------------------------------------------ Stockholders' Equity, Excluding Other Comprehensive 87,613 81,767 80,361 Income/Loss Other Comprehensive Income/Loss (8,978) 5,376 7,745 ------------------------------------------------------------------------------------------------------------------------------------ Total Stockholders' Equity 78,635 87,143 88,106 ------------------------------------------------------------------------------------------------------------------------------------ Total Liabilities and Stockholders' Equity $ 703,769 $ 680,864 $672,104 ==================================================================================================================================== Interest Rate Spread 2.27 2.86 2.98 ====================================================================================================================================
10 CITIZENS & NORTHERN CORPORATION - FORM 10 - Q Part I - Financial Information (Continued) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) TABLE II - ANALYSIS OF THE EFFECT OF VOLUME AND RATE CHANGES ON INTEREST INCOME AND INTEREST EXPENSE
Nine-month Periods Ended September 30, 2000/1999 -------------------------------------- (In Thousands) Change in Change in Total Volume Rate Change --------- --------- -------- EARNING ASSETS Available-for-Sale Securities: U. S. Treasury Securities $ - $ 3 $ 3 Securities of Other U.S. Government Agencies and Corporations 2,115 140 2,255 Mortgage Backed Securities (791) 203 (588) Obligations of States and Political Subdivisions 17 (105) (88) Stock 137 81 218 Other Securities 274 76 350 ---------------------------------------------------------------------------------------------------------- Total Available-for-Sale Securities 1,752 398 2,150 ---------------------------------------------------------------------------------------------------------- Held-to-Maturity Securities U. S. Treasury Securities 2 (1) 1 Securities of Other U.S. Government Agencies and Corporations 8 - 8 Mortgage Backed Securities (5) 1 (4) ---------------------------------------------------------------------------------------------------------- Total Held-to-Maturity Securities 5 - 5 ---------------------------------------------------------------------------------------------------------- Interest -bearing Due from Banks 65 9 74 Federal Funds Sold (13) 9 (4) Loans: Real Estate Loans 869 11 880 Consumer (105) (4) (109) Agricultural 1 (5) (4) Commercial/Industrial 130 (17) 113 Other 11 1 12 Political Subdivisions 141 (33) 108 Leases - 4 4 ---------------------------------------------------------------------------------------------------------- Total Loans 1,047 (43) 1,004 ---------------------------------------------------------------------------------------------------------- Total Interest Income 2,856 373 3,229 ---------------------------------------------------------------------------------------------------------- INTEREST - BEARING LIABILITIES Interest Checking (18) 172 154 Money Market 512 1,123 1,635 Savings (13) 4 (9) Certificates of Deposit 174 332 506 Individual Retirement Accounts 17 733 750 Other Time Deposits 2 (4) (2) Federal Funds Purchased (5) 62 57 Other Borrowed Funds 969 546 1,515 ---------------------------------------------------------------------------------------------------------- Total Interest Expense 1,638 2,968 4,606 ---------------------------------------------------------------------------------------------------------- NET INTEREST MARGIN $ 1,218 $ (2,595) $ (1,377) ============================================================================================================
The change in interest due to both volume and rates has been allocated to volume and rate changes in proportion to the relationship of the absolute dollar amount of the change in each. 11 CITIZENS & NORTHERN CORPORATION - FORM 10 - Q Part I - Financial Information (Continued) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) TABLE III - COMPARISON OF NONINTEREST INCOME
Nine Months Ended ---------------------- (In Thousands) Sept. 30, Sept. 30, 2000 1999 --------- --------- Service Charges on Deposit Accounts $ 846 $ 827 Service Charges and Fees 175 186 Trust Department Income 1,212 1,096 Insurance Commissions, Fees and Premiums 267 318 Fees Related to Credit Card Operation 737 2,348 Other Operating Income 134 71 ------------------------------------------------------------------------------------------------------- Total Other Operating Income before Realized Gains on Securities, Net 3,371 4,846 Realized Gains on Securities, Net 567 1,847 ------------------------------------------------------------------------------------------------------- Total Other Income $ 3,938 $ 6,693 =======================================================================================================
Other operating income before realized gains on securities decreased 30.4% in 2000 compared to 1999. The main reason for the decrease was a sharp decline in fees related to the credit card operation. Credit card fees decreased due to the sale of the merchant processing program in late 1999 and the loss of two large agent banks due to mergers. As shown in Table IV, the reduction in these fees was accompanied by a reduction in related expenses. The net effect of the reductions in fees and expenses was an increase in pre-tax income of $91,000 between years. Trust department income increased 10.6% because trust assets under management have increased substantially. Trust assets under management at September 30, 2000 amounted to $330 million compared to $300 million at September 30, 1999. The growth in trust assets under management and income reflects management's emphasis on offering an expanding range of financial services. In 2000, realized gains on securities, net, totaled $567,000 compared to $1,847,000 in 1999. In 1999, a significant portion of the securities gains resulted from sales or exchanges of bank stocks. In the first nine months of 2000, there were fewer opportunities for sales of bank stocks at prices deemed by management to be optimal. As described in Table X, the fair value of bank stocks held as of September 30, 2000 exceeded cost by $5,470,000, and in October 2000, sales of securities resulted in realized gains (pre-tax) of $630,000. TABLE IV - COMPARISON OF NONINTEREST EXPENSE
Nine Months Ended ---------------------- Sept. 30, Sept. 30, (In Thousands) 2000 1999 --------- --------- Salaries and Wages $ 5,584 $ 5,015 Pensions and Other Employee Benefits 1,410 1,351 Occupancy Expense, Net 673 679 Furniture and Equipment Expense 873 784 Expenses Related to Credit Card Operation 336 2,038 Pennsylvania Shares Tax 568 542 Other Operating Expense 3,052 2,809 ------------------------------------------------------------------------------------------------------- Total Other Expense $12,496 $13,218 =======================================================================================================
12 CITIZENS & NORTHERN CORPORATION - FORM 10 - Q Part I - Financial Information (Continued) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) Total noninterest expense decreased 5.5% in 2000 compared to 1999. The decrease was caused mainly by a decline in costs related to credit card processing. Credit card expenses decreased because of the termination of the merchant processing program, which resulted in elimination of interchange fees and other costs. Salaries and wages increased 11.3% in 2000 compared to 1999. The increase is the result of annual merit raises of approximately 4.5 percent and an increase in number of employees. New employees were added in several areas, including internet banking, trust and financial services and management information systems, as well as the Muncy, PA, branch, which opened in October 2000. The number of full-time equivalent employees increased from 213 at September 30, 1999 to 228 at September 30, 2000. Furniture and equipment expense increased 11.4% for 2000 compared to 1999. The increase is due to higher depreciation expense, mainly related to the internet banking system and a new credit card facility. Other operating expense increased 8.7% between the comparable periods. Professional fees related to the pending merger with Peoples Ltd. of $151,000 were incurred in 2000. Telephone expense increased $100,000, primarily because of costs associated with data connections among branches. Schools and educational seminars expense increased $66,000, and supply costs increased $58,000. Also, other operating expense includes costs related to the start-up of C&N Financial Services Corporation. This subsidiary, a licensed insurance agency, was formed in January 2000 to provide a variety of insurance products to individuals and businesses. C&N Financial Services Corporation generated its first revenues in July 2000, and has recorded a loss of $50,000 through September 30, 2000. COMPREHENSIVE INCOME (LOSS) As presented in Note 3 to the consolidated financial statements, comprehensive income increased substantially in 2000 compared to 1999. Comprehensive income includes traditional net income from the income statement, adjusted by the change in net unrealized gains or losses on available-for-sale securities. The amount of unrealized gains or losses on available-for-sale securities may vary widely from period-to-period, depending on the impact of changing interest rates on the fair values of long-term bonds and other securities. In the second half of 1999, changes in interest rates caused the fair value of the Corporation's securities to fall, while in 2000, total fair value increased relative to historical cost (although the fair value of available-for-sale securities, in the aggregate, remained lower than cost at September 30, 2000). BALANCE SHEET: SEPTEMBER 30, 2000 / DECEMBER 31, 1999 Total assets changed very little from December 31, 1999 to September 30, 2000. Overall, because of the "inverted yield curve" (short-term interest rates as high as, or higher than, long-term rates) throughout much of 2000, there were limited opportunities to invest borrowed funds at a profit. Accordingly, the Corporation reduced its total borrowed funds balances from $124,061,000 at December 31, 1999 to $112,898,000 at September 30, 2000, and reduced available-for-sale securities (at cost) from $372,391,000 to $360,552,000. Loans, net, increased $13,403,000, or 4.4%, at September 30, 2000, compared to December 31, 1999. Loan growth was funded primarily from earnings, an increase in deposits of $1,809,000 and decreases in other types of assets. Within the available-for-sale portfolio, the Corporation increased its concentration in U.S. Government agency securities, and reduced its concentration in mortgage-backed securities through ongoing repayments of principal, because of changes in market yields. The excess of cost over fair value of the portfolio recovered somewhat over the period, as decreases in long-term interest rates created increases in the fair values of long-term debt securities. The composition of the available-for-sale securities portfolio is presented in Table V. 13 CITIZENS & NORTHERN CORPORATION - FORM 10 - Q Part I - Financial Information (Continued) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) TABLE V - AVAILABLE-FOR-SALE SECURITIES (In Thousands)
September 30, 2000 December 31, 1999 ----------------------- ----------------------- Fair Fair Cost Value Cost Value --------- --------- --------- --------- Obligations of the U.S. Treasury $ 2,510 $ 2,508 $ 2,514 $ 2,498 Obligations of other U.S. Government agencies 134,031 124,501 128,494 116,691 Obligations of states and political subdivisions 81,689 79,524 81,219 76,748 Other securities 22,332 20,691 22,829 21,707 Mortgage-backed securities 94,872 92,886 111,605 107,816 -------------------------------------------------------------------------------------------------------------- Total debt securities 335,434 320,110 346,661 325,460 Equity securities 25,118 30,588 25,730 33,469 -------------------------------------------------------------------------------------------------------------- Total $ 360,552 $ 350,698 $ 372,391 $ 358,929 ==============================================================================================================
The increase in loans at September 30, 2000, consisted mainly of new loans secured by real estate. The composition of loans, net, is shown in Table VI. TABLE VI- LOANS (In Thousands)
Sept. 30, % of Dec. 31, % of 2000 Total 1999 Total -------- ------ --------- ------ Real estate $260,226 80.2% $ 248,253 79.9% Consumer 27,947 8.6% 29,140 9.3% Commercial 20,989 6.5% 18,050 5.8% Political subdivisions 11,997 3.7% 12,332 4.0% Other 3,311 1.0% 3,117 1.0% ------------------------------------------------------------------------------------------- Total 324,470 100.0% 310,892 100.0% ====== ====== Less: allowance for loan losses (5,306) (5,131) --------------------------------------------------- --------- Loans, net $319,164 $ 305,761 =================================================== =========
Bank premises and equipment increased substantially from December 31, 1999 to September 30, 2000. Total purchases of capital items for 2000 amounted to $1,914,000. There were several major capital programs either completed or in progress during this time frame. Total costs of land, building and equipment related to the new Muncy branch amounted to $685,000 as of September 30, 2000. To provide room for expansion, the Corporation purchased properties near the Wellsboro headquarters facility at a cost of $286,000, and moved the credit card operations to another property in Wellsboro at a cost of $219,000. Also, facility renovation and equipment purchases for the addition of C&N Financial Services Corporation and other trust department projects totaled $200,000. Other assets decreased from December 31, 1999, mainly because the net deferred tax asset related to the unrealized loss in available-for-sale securities was reduced from $4,577,000 to $3,350,000. Accrued interest and other liabilities increased primarily because the September 30, 2000 balance includes $3,590,000 of accrued interest on Individual Retirement Accounts, while at December 31, 1999, all of the corresponding interest was "paid" (credited to the applicable deposit accounts). 14 CITIZENS & NORTHERN CORPORATION - FORM 10 - Q Part I - Financial Information (Continued) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) ALLOWANCE FOR LOAN LOSSES The allowance for loan losses is an allowance established by management and the Board of Directors, which they believe will absorb existing loan losses, based on management's assessment of the quality and volume of the loan portfolio. The assessment is performed on an ongoing basis and reviewed by the Board of Directors quarterly. The quarterly review process is performed by a loan quality committee consisting of the President, Chief Financial Officer, Executive Vice-Presidents in charge of loans and branch administration and monitored by the Corporation's Internal Auditors. The committee reviews all of the known risk elements in the portfolio; namely, the "Watch List" (a collection of loans with a history of delinquency or other problems known to management), past due reports, nonperforming loans and historical information related to charge-offs and recoveries by loan category. Also, in evaluating the allowance for loan losses at September 30, 2000, the loan quality committee considered information contained in the most recent loan review report prepared by an independent consulting firm. This report was received in August 2000, and was based on loan balances and other data as of May 22, 2000. The allowance for loan losses is evaluated based on an assessment of the losses inherent in the loan portfolio. This assessment results in an allowance consisting of two components, allocated and unallocated. The allocated portion of the allowance reflects expected losses resulting from the analysis of individual loans, and is developed through specific credit allocations for individual loans and historical experience for each loan category. The specific credit allocations are based on a regular analysis of all loans and commitments on the Corporation's "Watch List". Also, the historical loan loss element is determined based on a ratio of net charge-offs to average loan balances over a five-year period for each significant type of loan. The unallocated portion of the allowance is determined based on management's assessment of general economic conditions as well as specific economic factors in the Corporation's market area. This determination inherently involves a higher degree of uncertainty and considers current risk factors that may not have manifested themselves in the historical loss factors used to determine the allocated component of the allowance and it recognizes that knowledge of the portfolio may be incomplete. The unallocated portion of the allowance has increased from $1,020,000 at December 31, 1999 to $1,962,000 at September 30, 2000. The increase is attributable to an improvement in the quality of the commercial portion of the portfolio. The following tables present current and historical information on the loan portfolio and the allowance for loan losses. 15 CITIZENS & NORTHERN CORPORATION - FORM 10 - Q Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) TABLE VII - ALLOWANCE FOR LOAN LOSSES RECONCILIATION
Nine Months Ended Years Ended ----------- -------------------------------------------------------------- Sept. 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, 5 -Year ------------------------------------------------------------------------------------------------------------------------ (In Thousands) 2000 1999 1998 1997 1996 1995 Average ------------------------------------------------------------------------------------------------------------------------ Balance at Beginning of Year $5,131 $4,820 $4,913 $4,776 $4,579 $4,229 Charge-offs Real Estate Loans 186 81 257 246 157 38 156 Installment Loans 75 138 144 230 240 236 198 Credit Cards and Related Plans 167 192 264 305 201 184 229 Commercial and Other Loans 7 219 301 3 74 116 143 ---------------------------------------------------------------------------------------------------------------------- Total Charge-offs 435 630 966 784 672 574 726 Recoveries Real Estate Loans 18 81 12 21 22 - 27 Installment Loans 21 60 43 64 53 60 56 Credit Card and Related Plans 23 30 40 30 38 41 36 Commercial and Other Loans 22 10 15 9 55 86 35 ---------------------------------------------------------------------------------------------------------------------- Total Recoveries 84 181 110 124 168 187 154 Net Charge-offs 351 449 856 660 504 387 572 Additions Charged to Operations 526 760 763 797 701 737 752 ---------------------------------------------------------------------------------------------------------------------- Balance at End of Period $5,306 $5,131 $4,820 $4,913 $4,776 $4,579 ======================================================================================================================
TABLE VIII - ALLOWANCE FOR LOAN LOSSES ALLOCATION
Sept. 30, Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31, (In Thousands) 2000 1999 1998 1997 1996 1995 -------- -------- -------- -------- -------- -------- Mortgage $ 704 $ 834 $ 97 $ 350 $ 58 $ 38 Consumer 435 437 702 375 303 286 Commercial 1,279 2,081 650 625 630 604 Impaired Loans 785 609 290 274 113 228 All Other Commitments 141 150 202 343 369 374 Unallocated 1,962 1,020 2,879 2,946 3,303 3,049 ------------------------------------------------------------------------------------------------------- Total Allowance $5,306 $5,131 $4,820 $4,913 $4,776 $4,579 =======================================================================================================
LIQUIDITY AND CASH FLOWS Liquidity is the ability to raise cash quickly and at a reasonable cost. An adequate liquidity position permits the Corporation to pay creditors, compensate for unforeseen deposit fluctuations and fund unexpected loan demand. The Corporation maintains overnight borrowing facilities with several correspondent banks that provide a source of day-to-day liquidity. Borrowings on such facilities are known as federal funds purchased. Also, when there is excess cash, the Corporation enters into overnight investing transactions with other financial institutions. These types of overnight investments are known as federal funds sold. The major sources of funding for lending and investing activities are operating income, deposit growth, Federal Home Loan Bank advances, repayment of loans and cash flows generated from the investment portfolio. Excess funds from deposit growth are used primarily for loan growth. As reflected in the consolidated statement of cash flows, the Corporation has reduced its net borrowings in 2000, and the volume of security purchases and sales is lower than in 1999. These changes are reflective of management decisions based on rising short-term interest rates in 2000. 16 CITIZENS & NORTHERN CORPORATION - FORM 10 - Q Part I - Financial Information (Continued) Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (Continued) CAPITAL ADEQUACY The Corporation (on a consolidated basis) and Citizens & Northern Bank are subject to regulatory capital (equity) requirements administered by the federal banking agencies. For purposes of these requirements, capital is divided into two tiers. Tier one capital consists of total shareholders' equity, excluding other comprehensive income (loss). Total capital consists of tier one capital, plus the allowance for possible loan losses (limited to 1.25 percent of risk-weighted assets) and 45 percent of unrealized gains on equity securities. Risk weightings are assigned to assets held and to off-balance sheet commitments such as loan commitments, unused lines of lines of credit and letters of credit, to determine risk-based capital ratios. The following table presents consolidated capital ratios: TABLE IX - CAPITAL RATIOS
Citizens & Northern Corporation Regulatory Standards Sept. 30, Dec. 31, Well Minimum 2000 1999 Capitalized Standard -------------------------------------------------------------------------------------------------------- Tier 1 capital to average total assets 12.5% 14.5% 5.0% 4.0% Tier 1 capital to risk-weighted assets 22.0% 21.4% 6.0% 4.0% Total capital to risk-weighted assets 23.8% 23.6% 10.0% 8.0%
Management expects the Corporation and the Bank to maintain capital levels that exceed the regulatory standards for well-capitalized institutions for the next 12 months and for the foreseeable future. Planned capital expenditures during the next 12 months are not expected to have a detrimental effect on capital ratios or results of operations. INFLATION The Federal Reserve's policies and actions regarding interest rates are affected very significantly by their efforts to control inflation. There is a concern in the financial markets that recent increases in oil-related energy prices may lead to increases in the prices of other goods and services. If this were to occur, the Federal Reserve would be expected to take actions that would increase interest rates. However, most recent economic reports have not shown evidence of significant inflation in sectors other than energy. Accordingly, management does not expect inflation to have a significant impact on the Corporation's results of operations for the remainder of 2000. MARKET RISK The Corporation's two major categories of market risk are interest rate risk and risks related to investments in equity securities. INTEREST RATE RISK The Corporation uses a sophisticated computer simulation model to calculate the potential effect of interest rate risk on earnings and the fair value of financial instruments. Each month, the Corporation uses the simulation model to run "base most likely" and "what if" scenarios, including "interest rate shock" calculations of the effect on earnings and fair values of an immediate 100, 200 and 300 basis point increase or decrease in rates. The Asset/Liability Committee (ALCO) reviews reports based on these calculations, and makes recommendations to the Board of Directors for portfolio restructuring, if deemed appropriate. The Corporation's Board of Directors has established parameters for acceptable levels of interest rate risk. Because of the Corporation's liability sensitivity, the major concern is the impact of rising rates, and the thresholds have been established based on the potential impact of a 200 basis point increase. The acceptable limit for fluctuation in net interest margin has been set at negative 20% from the base most likely amount for the next 12 months, and the acceptable fluctuation in fair value of financial instruments has been set at negative 30% of current fair value. 17 CITIZENS & NORTHERN CORPORATION - FORM 10 - Q Part I - Financial Information (Continued) Item 3. Interest Rate Risk and Market Risk (Continued) Throughout 2000, the Corporation's interest rate risk positions have been outside these established thresholds. As of September 30, 2000, management calculated that a 200 basis point increase (shock) would lower the net interest margin 22% from the base most likely amount and would lower the fair value of financial instruments 33% from the base most likely amount. Management has considered various alternatives that would bring the interest rate risk thresholds within policy guidelines, including sales and purchases of certain investment securities and hedging transactions, but has concluded that the best course of action was to wait and see if favorable changes in market interest rates occur. A key to this approach has been lack of opportunities to purchase investment securities (of comparable credit risk) with better yields than the securities currently held in the portfolio. Management and ALCO will continue to monitor the Corporation's interest rate risk status and consider possible actions, with the goal of maximizing long-term profitability. EQUITY SECURITIES RISK The Corporation's equity securities portfolio consists of restricted stock, primarily of the Federal Home Loan Bank of Pittsburgh ("FHLB") and investments in stock of banks and bank holding companies located mainly in Pennsylvania. FHLB stock can only be sold back to the FHLB or to another member institution at par value. Accordingly, the Corporation's investment in FHLB stock is carried at cost, which equals par value, and is evaluated for impairment. Factors that might cause FHLB stock to become impaired are primarily regulatory in nature and are related to potential problems in the residential lending market; for example, the FHLB may be required to make dividend or other payments to the Financing Corporation, the Resolution Funding Corporation, or other entities, in amounts that could exceed the FHLB's total equity. Investments in bank stocks are subject to the risk factors that affect the banking industry in general, including competition from nonbank entities, credit risk, interest rate risk and other factors, which could result in a decline in market prices. Also, losses could occur in individual stocks held by the Corporation because of specific circumstances related to each bank. Further, since the stocks held are bank and bank holding companies concentrated in Pennsylvania, these investments could decline in market value if there is a downturn in the Commonwealth's economy. Equity securities held as of September 30, 2000 and December 31, 1999 are presented in Table X. TABLE X - EQUITY SECURITIES
Hypothetical Hypothetical 10 % 20 % Decline Decline in in (In Thousands) Fair Fair Fair Cost Value Value Value ------- ------- ------------ ------------ At September 30, 2000 Banks and Bank Holding Companies $17,870 $23,340 $(2,334) $(4,668) Federal Home Loan Bank and Other Restricted Securities 7,248 7,248 (725) (1,450) ------------------------------------------------------------------------------------------------------------------ Total $25,118 $30,588 $(3,059) $(6,118) ================================================================================================================== At December 31, 1999 Banks and Bank Holding Companies $18,482 $26,221 $(2,622) $(5,244) Federal Home Loan Bank and Other Restricted Securities 7,248 7,248 (725) (1,450) ------------------------------------------------------------------------------------------------------------------ Total $25,730 $33,469 $(3,347) $(6,694) ==================================================================================================================
18 CITIZENS & NORTHERN CORPORATION - FORM 10 - Q Part II - Other Information Item 1. Legal Proceedings There are currently no pending lawsuits against Citizens & Northern Corporation and no lawsuits were terminated during the third quarter of 2000. Item 2. Changes in Securities No disclosure required Item 3. Defaults Upon Senior Securities No disclosure required Item 4. Submission of Matters to a Vote of Security Holders No disclosure required Item 5. Other Information None Item 6. Exhibits and Reports on Form 8 - K a. Exhibits 27. Financial Data Schedule b. There were no reports on Form 8 - K filed during the third quarter 2000. 19 CITIZENS & NORTHERN CORPORATION - FORM 10 - Q Signature Page SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CITIZENS & NORTHERN CORPORATION NOVEMBER 13, 2000 By: /S/ CRAIG G. LITCHFIELD ----------------- ----------------------- Date President and Chief Executive Officer NOVEMBER 13, 2000 By: /S/ JAMES W. SEIPLER ----------------- -------------------- Date Executive Vice President and Treasurer 20