<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
FOR THE NINE MONTH PERIOD ENDED: SEPTEMBER 30, 1995
COMMISSION FILE NUMBER: 0-6084
CITIZENS AND NORTHERN CORPORATION
STATE OF INCORPORATION: PENNSYLVANIA
I.R.S. EMPLOYER IDENTIFICATION NUMBER: 23-2451943
REGISTRANT'S TELEPHONE NUMBER (INCLUDING AREA CODE) : 717-724-3411
ADDRESS OF PRINCIPAL EXECUTIVE OFFICE: THOMPSON STREET
RALSTON, PA 17763
MAILING ADDRESS OF EXECUTIVE OFFICE: 90-92 MAIN STREET
WELLSBORO, PA. 16901
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 report), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No
-- --
As of November 1, 1995 5,066,516 COMMON SHARES WERE OUTSTANDING
1
<PAGE>
CITIZENS AND NORTHERN CORPORATION - FORM 10-Q
Part I - Financial Information
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
September 30, December 31
(In Thousands) 1995 1994
(Unaudited) (Audited)
<S> <C> <C>
ASSETS
Cash & Due From Banks 11,670 11,572
Interest-Bearing Deposits 1,151 835
Total Cash and Cash Equivalents 12,821 12,407
Available-for-Sale Securities 301,489 260,624
Held-to-Maturity Securities 1,268 1,196
Federal Funds Sold 2,500
Loans, Net 258,027 254,243
Bank Premises and Equipment 6,613 6,920
Foreclosed Assets Held for Sale 831 644
Accrued Interest on Bonds and Loans 4,059 3,861
Other Assets 831 6,583
TOTAL ASSETS 588,439 546,478
LIABILITIES
Deposits:
Noninterest-Bearing 40,791 42,855
Interest-Bearing 384,551 356,408
Total Deposits 425,342 399,263
Dividends Payable 794 786
Borrowed Funds 94,650 98,500
Accrued Interest and Other Liabilities 6,482 1,133
TOTAL LIABILITIES 527,268 499,682
STOCKHOLDERS' EQUITY
Common Stock, Par Value $ 1.00 per Share 5,067 5,016
Authorized 10,000,000; Issued 5,066,516
and 5,016,352 in 1995 and 1994, respectively
Stock Dividend Distributable 1,016
Paid in Capital 11,575 10,610
Retained Earnings 42,823 39,743
Total 59,465 56,385
Unrealized Holding Loss on Available-for-Sale Securities 2,706 (8,589)
Less: Treasury Stock at Cost
104,060 shares at September 30, 1995 (1,000) -
103,030** shares at December 31, 1994 (1,000)
TOTAL STOCKHOLDERS' EQUITY 61,171 46,796
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY 588,439 546,478
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
** Common stock adjusted to reflect 100% stock dividend issued October 1994
2
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10-Q
Part I - Financial Information (continued)
Item 1. Financial Statements (continued)
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
(Dollars in Thousands except Per Share Data)
Fiscal Year to Date 3 Months Ending
9 Months Ending September 30, September 30,
1995 1994 1995 1994
(Current) (Prior Year) (Current) (Prior Year)
<S> <C> <C> <C> <C>
INTEREST INCOME
Interest and Fees on Loans 19,338 17,163 6,739 5,957
Interest on Balances with Depository Institutions 38 51 15 10
Interest on Loans to Political Subdivisions 315 228 107 84
Interest on Federal Funds Sold 64 13 5
Income from Available-for-Sale and
Held-to-Maturity Securities:
Taxable 11,259 11,246 3,939 3,897
Tax Exempt 1,992 1,995 693 652
Dividends 519 478 165 167
Total Interest and Dividend Income 33,525 31,174 11,658 10,772
INTEREST EXPENSE
Interest on Deposits 14,186 11,272 4,772 3,978
Interest on Other Borrowings 4,308 3,668 1,492 1,379
Total Interest Expense 18,494 14,940 6,264 5,357
Interest Margin 15,031 16,234 5,394 5,415
Provision for Possible Loan Losses 552 553 184 184
Interest Margin After Provision for Possible Loan Losses 14,479 15,681 5,210 5,231
OTHER INCOME
Service Charges on Deposit Accounts 842 793 286 273
Service Charges and Fees 204 216 73 72
Trust Department Income 562 392 178 122
Insurance Commissions, Fees and Premiums 477 444 164 169
Other Operating Income 37 322 8 15
Realized Gains on Available-for-Sale and
Held-to-Maturity Securities, Net 1,229 722 378 27
Total Other Income 3,351 2,889 1,087 678
OTHER EXPENSES
Salaries and Wages 4,096 3,731 1,368 1,247
Pensions and Other Employee Benefits 1,260 1,296 382 390
Occupancy Expense, Net 524 511 168 159
Furniture and Equipment Expense 486 403 176 144
Other Operating Expense 4,331 4,216 1,294 1,406
Total Other Expenses 10,697 10,157 3,388 3,346
Income Before Income Tax Provision 7,133 8,413 2,909 2,563
Income Tax Provision 1,671 2,098 840 585
NET INCOME 5,462 6,315 2,069 1,978
PER SHARE DATA:
NET INCOME 1.10 1.27 0.42 0.40
NUMBER SHARES USED IN COMPUTATION 4,962,456 4,962,456 4,962,456 4,962,456
NUMBER SHARES ISSUED 5,066,516 5,016,352 5,066,516 5,016,352
NUMBER SHARES AUTHORIZED 10,000,000 10,000,000 10,000,000 10,000,000
DIVIDEND PER SHARE 0.48 0.455 0.16 0.155
</TABLE>
3
<PAGE>
CITIZENS AND NORTHERN CORPORATION - FORM 10-Q
Part I - Financial Information (continued)
Item 1. Financial Statements (continued)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
(In Thousands) Periods Ending September 30,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income 5,462 6,315
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating Activities
Provision for Possible Loan Losses 552 553
Realized Gain on the Sale of Available-for-Sale Securities (1,229) (722)
Gain on the Sale of Premises and Equipment (7)
Gain on the Sale of Other Assets (266)
Provision for Depreciation 550 443
Accretion and Amortization 583 293
Deferred Income Tax (18) (22)
(Increase) in Accrued Interest
Receivable and Other Assets (265) (2,380)
Increase in Accrued Interest Payable and
Other Liabilities 5,375 6,190
Net Cash Provided by Operating Activities 11,010 10,397
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the Maturity of Held-to-Maturity Securities 126 150
Purchase of Held-to-Maturity Securities (198) (320)
Proceeds from Sales of Available-for-Sale Securities 4,822 37,624
Proceeds from Maturities of Available-for-Sale Securities 25,884 39,283
Purchase of Available-for-Sale Securities (53,811) (79,417)
Net (Increase) Decrease in Loans (4,336) (13,617)
Proceeds from the Sale of Premises and Equipment 7
Proceeds from the Sale of Other Assets 266
Purchase of Premises and Equipment (243) (1,976)
Sale of Other Real Estate 241 266
Purchase of Other Real Estate (428) (618)
Net Cash Used in Investing Activities (27,943) (18,352)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase in Deposits 26,079 3,668
Increase in Short Term Borrowings 27,150 7,693
Repayment of Long Term Borrowings (33,500) (1,500)
Dividends Declared (2,382) (2,236)
Net Cash Provided by Financing Activities 17,347 7,625
INCREASE IN CASH AND CASH EQUIVALENTS 414 (330)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 12,407 13,122
CASH AND CASH EQUIVALENTS, END OF PERIOD 12,821 12,792
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest Paid 14,030 10,777
Income Taxes Paid 1,606 2,255
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
CITIZENS AND NORTHERN CORPORATION - FORM 10-Q
Part I - Financial Information (continued)
Item 1. Financial Statements (continued)
Notes to Consolidated Financial Statements
1. The financial information included herein, with the exception of the
Consolidated Balance Sheet dated December 31, 1994 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 changes in
financial position for the interim periods.
During the first quarter of 1995 the Corporation implemented SFAS No. 114
"Accounting by Creditors for Impairment of a Loan". The pronouncement requires
that impaired loans that are within the scope of this statement be measured
based on the present value of expected future cash flows discounted at the
loan's effective interest rate or at the loan's observable market price or the
fair value of collateral if the loan is collateral dependent. The implementation
of this standard will not have a material impact on the 1995 Corporate balance
sheet.
At the regular annual meeting of the Corporation, the shareholders approved
a Stock Incentive Plan. The shares of stock that may be issued under the Stock
Incentive Plan shall not exceed in the aggregate 60,000 shares
( subject to proportional adjustment to reflect increases or decreases resulting
from stock splits, stock dividends and recapitalizations ) of the Corporation's
common stock, par value $1.00 per share. Such stock utilized by the Stock
Incentive Plan may be authorized and unissued capital stock of the Corporation
or it may be such capital stock issued and subsequently reacquired by the
Corporation as treasury stock.
Certain 1994 information has been restated to reflect a 2 for 1 stock split
in the form of a stock dividend on October 14, 1994.
This document has not been reviewed or confirmed for accuracy or relevance
by the Federal Deposit Insurance Corporation.
5
<PAGE>
CITIZENS AND NORTHERN CORPORATION - FORM 10-Q
Part I - Financial Information (continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
EARNINGS OVERVIEW
The Corporation reported net income for the nine month period ending
September 30, 1995 of $5,462,000 or $ 1.10 per common share; this compares to
$6,315,000 or $1.27 per share for the same period ending September 30, 1994.
The decline in net income reflects the increase in interest rates that
occurred during 1994 as the Federal Reserve increased interest rates to control
inflation. The net spread between earning assets and interest-bearing
liabilities for the periods ending September 30, 1995, December 31, 1994, and
September 30, 1994 was 2.96, 3.39, and 3.55 percent respectively.
The directors and management of the Corporation expect that 1995 will
be a profitable year, though profits are not expected to reach levels attained
during 1994 and 1993.
NET INTEREST MARGIN
1995 / 1994
The net spread between the rate of return on earning assets and the
cost of interest-bearing liabilities dropped from 3.55 percent for the nine
month period ending September 30, 1994 to 2.96 percent for the nine month period
ending September 30, 1995. The net spread for the year ending December 31, 1994
was 3.39 percent. The gross rate of return on earning assets for the periods
ending September 30, 1995, December 31, 1994, and September 30, 1994 was 8.26
percent, 7.91 percent, and 7.84 percent respectively. The total cost of interest
bearing liabilities for the periods ending September 30, 1994, December 31, 1994
and September 30, 1994 was 5.30 percent, 4.52 percent and 4.36 percent
respectively.
The return on the investment portfolio has changed only slightly when
compared to 1994, at September 30 1994 and December 31 1994 the return was 6.35
percent and the nine month period ending September 30, 1995 the return was 6.44.
The return on the loan portfolio has improved significantly since the periods
ending September 30, 1994 and December 31, 1994. At September 30, 1994 and
December 31, 1994 the return on loans was 9.66 percent and 9.72 percent
respectively. The return on the portfolio for the nine months ending September
30, 1995 was 10.31 percent.
Late in the second quarter and into third quarter of 1995 the cost of
interest-bearing liabilities has begun to show signs of easing as short term
rates have fallen slightly. This has helped to strengthen earnings in the third
quarter as nearly half of the Corporation's liabilities are tied to short term
interest rates. The Cost of Money Market accounts and Interest Checking averaged
5.01 and 4.35 percent for the nine months ending September 30, 1995, this
compares to a nine month cost in 1994 of 3.54 and 3.04 percent respectively.
Effective November 1, 1995 Interest Checking accounts will earn only 50 percent
of the Money Market rate, the previous rate was 79 percent. The Money Market
rate is based on the 91 day Treasury bill auction rate.
The rate paid on Individual Retirement Accounts has also posted a
significantly decline. The rate is based off of the two year Treasury Note
auction which dropped nearly 83 basis points during the second quarter of 1995.
The average cost of Individual Retirement accounts during the first nine months
of 1994 was 6.91 percent, the average rate paid on those funds during the third
quarter of 1995 was 6.10 percent. The average rate paid on Certificates of
Deposit is significantly higher for the nine months ending September 30, 1995
when compared to the nine months ending September 30, 1994 and the year ending
December 31, 1994. For the nine month period in 1995 the average rate was 5.42
percent, this compares to 4.43 and 4.36 percent at December 31, 1994 and
September 30, 1994 respectively.
The cost of borrowed funds also increased when compared to the nine
months ending September 30, 1994 and the year ending December 31, 1994. The
average cost of borrowed funds was 4.95, 5.17 and 6.08 percent respectively.
It appears that interest rates have leveled off and management is
expecting a slight decline in rates that should improve the net interest margin
during the remainder of 1995.
Tables II and III will provide the reader with information regarding
average balance and rate information for the periods being compared.
6
<PAGE>
CITIZENS AND NORTHERN CORPORATION - FORM 10-Q
Part 1 - Financial Information (continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
TABLE I
ANALYSIS OF THE EFFECT OF VOLUME AND RATE CHANGE
IN INTEREST INCOME AND INTEREST EXPENSE
<TABLE>
<CAPTION>
Nine Months Ending
September 30, 1995/1994
(In Thousands) Change in Change in Total
Volume Rate Change
<S> <C> <C> <C>
EARNING ASSETS
Available-for-Sale Securities:
U. S. Treasury Securities
Securities of Other U.S. Government Agencies and Corporations 73 8 81
Mortgage Backed Securities (470) 366 (104)
Obligations of States and Political Subdivisions 57 (60) (3)
Stock 23 18 41
Other Securities 171 (137) 34
Total Available-for-Sale Securities (146) 195 49
Held-to-Maturity Securities
U.S. Treasury Securities 8 3 11
Securities of Other U.S. Government Agencies and Corporations
Mortgage Backed Securities (10) 1 (9)
Obligations of States and Political Subdivisions
Stock
Other Securities
Total Held-to-Maturity Securities (2) 4 2
Interest -bearing Due from Banks (6) (6) (12)
Federal Funds Sold 35 16 51
Loans:
Real Estate Loans 917 745 1,662
Consumer 105 240 345
Agricultural 4 19 23
Commercial/Industrial (17) 159 142
Other (3) 2 (1)
Political Subdivisions 65 23 88
Leases 1 1 2
Total Loans 1,072 1,189 2,261
Total Interest Income 953 1,398 2,351
INTEREST BEARING LIABILITIES
Interest Checking 29 410 439
Money Market 376 954 1,330
Savings (98) (2) (100)
Certificates of Deposit (12) 875 863
Individual Retirement Accounts 427 (60) 367
Other Time Deposits (3) 6 3
Federal Funds Purchased (210) 143 (67)
Other Borrowed Funds (80) 799 719
Total Interest Expense 429 3,125 3,554
NET INTEREST INCOME 524 (1,727) (1,203)
</TABLE>
7
<PAGE>
CITIZENS AND NORTHERN CORPORATION - FORM 10-Q
Part 1 - Financial Information (continued)
Item 2. Management's Discussion and Analysis of Financial
and Results of Operations (continued)
TABLE II - ANALYSIS OF AVERAGE BALANCES AND RATES
(In Thousands)
<TABLE>
<CAPTION>
Rate of Rate of Rate of
Return/ Return/ Return/
Cost of Cost of Cost of
Funds Funds Funds
EARNING ASSETS 9/30/95 % 12/31/94 % 9/30/94 %
<S> <C> <C> <C> <C> <C> <C>
Available-for-Sale Securities:
U. S. Treasury Securities 2,510 5.13 2,512 5.10 2,513 5.11
Securities of Other U.S. Government Agencies and Corporations 10,157 6.42 9,761 6.32 8,634 6.30
Mortgage Backed Securities 208,461 6.59 219,627 6.40 218,169 6.36
Obligations of States and Political Subdivisions 41,756 6.38 40,464 6.56 40,580 6.57
Stock 13,327 5.21 13,010 5.12 12,747 5.01
Other Securities 8,049 5.38 4,011 9.35 4,696 8.26
Total Available-for-Sale Securities 284,260 6.44 289,385 6.39 287,339 6.35
Held-to-Maturity Securities
U. S. Treasury Securities 299 6.65 50 6.00 100 4.01
Securities of Other U. S. Government Agencies and Corporations
Mortgage Backed Securities 1,032 7.60 1,185 7.34 1,214 7.49
Obligations of States and Political Subdivisions
Stock
Other Securities
Total Held-to-Maturity Securities 1,331 7.38 1,235 7.29 1,314 7.22
Interest -bearing Due from Banks 1,089 4.64 1,114 5.92 1,247 5.47
Federal Funds Sold 1,406 6.04 346 3.76 462 3.76
Loans:
Real Estate Loans 196,579 9.16 185,535 8.61 182,650 8.58
Consumer 36,296 17.27 35,073 16.53 35,452 16.26
Agricultural 3,050 10.44 3,028 9.78 2,997 9.59
Commercial/Industrial 13,686 10.10 13,843 8.81 13,958 8.55
Other 223 7.94 272 6.99 287 6.99
Political Subdivisions 6,458 6.53 5,244 6.01 5,097 5.98
Leases 163 8.79 152 8.55 150 7.97
Total Loans 256,455 10.31 243,147 9.72 240,591 9.66
Less Unearned Discount (1)
Net Loans & Leases 256,455 10.31 243,147 9.72 240,590 9.66
Total Earning Assets 544,541 8.26 535,227 7.91 530,952 7.91
Cash 11,773 13,775 13,443
Securities Valuation Reserve (5,280) (851) 850
Allowance for Possible Loan Losses (4,442) (4,064) (4,021)
Other Assets 6,387 4,382 8,960
Bank Premises & Equipment 6,775 6,199 5,820
Total Assets 559,754 554,668 556,004
INTEREST-BEARING LIABILITIES
Interest Checking 41,994 4.35 41,061 3.31 40,698 3.04
Money Market 90,410 5.01 79,050 3.84 77,901 3.54
Savings 49,015 2.48 53,853 2.50 54,263 2.49
Certificates of Deposit 110,244 5.42 109,174 4.43 110,622 4.36
Individual Retirement Accounts 78,503 6.80 70,537 6.92 70,120 6.91
Other Time Deposits 2,638 2.58 2,555 2.39 2,796 2.30
Federal Funds Purchased 5,505 6.41 11,565 4.31 11,313 3.91
Other Borrowed Funds 88,044 6.16 92,614 5.17 90,210 4.95
Total Interest-bearing Liabilities 466,353 5.30 460,409 4.52 457,923 4.36
Demand Deposits 39,399 39,282 38,887
Other Liabilities 3,842 2,877 6,282
TOTAL LIABILITIES 509,594 502,568 503,092
Stockholders' Equity 53,645 52,629 52,351
Securities Valuation Reserve (3,485) (529) 561
Total Liabilities and Stockholders'
Equity 559,754 554,668 556,004
Interest Rate Spread 2.96 3.39 3.55
</TABLE>
8
<PAGE>
CITIZENS AND NORTHERN CORPORATION - FORM 10-Q
Part 1 - Financial Information (continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
ALLOWANCE FOR POSSIBLE LOAN LOSSES
The Allowance for Possible Loan Losses is a reserve established by
management which it believes will be adequate to absorb future loan losses based
on management's assessment of the quality of the total loan portfolio. The
assessment is performed on an ongoing basis and reviewed by the Board of
Directors quarterly.
The assessment evaluates portfolio quality and includes a historical review
of charge-offs using a six year average. Portfolio quality is determined by
regulatory and independent loan reviews. The Corporation employs an independent
loan review specialist who reviews loans of a certain size criteria as set by
the Board of Directors. The review includes but is not limited to documentation,
financial statements, tax returns, and a cash flow analysis of each loan.
The Department of Banking completed an examination in late May 1995 and
classified $3,430,000 as substandard or loss. This is a marked reduction since
the FDIC examination completed in August 1994. All loans listed as loss by the
State examiners have been charged off or will be by year end 1995.
Probably the most important tool used by management to determine portfolio
quality is the "Watch List". The "Watch List" is a collection of loans that are
now or have been substandard for a variety of reasons. The list is distributed
to Branch Managers monthly for their review and update before going to the Board
of Directors. The list also contains all nonperforming loans that for purposes
of SFAS No. 114 are segregated for reserve purposes and valued at their
observable collateral value.
Other factors used to evaluate the reserve level are loan growth, economic
conditions of the market area and peer group comparisons.
Tables IV and V present a six year history of the Allowance for Possible
Loan Losses and projection for the current year. Table V projects estimated
losses using the last six years as a base. Years having abnormally large or low
charge-offs are eliminated to present a realistic estimation. Table III provides
reserve activity for the year-to-date, the most probable at year end, and a
worst case scenario which uses a historical average including years which had
larger than normal losses.
TABLE III
RESERVE FOR LOAN LOSSES
RECONCILEMENT
(In Thousands)
<TABLE>
<CAPTION>
Actual Actual Probable Worst Case
Sept. 30, 1995 Dec. 31, 1994 Dec. 31, 1995 Dec. 31, 1995
<S> <C> <C> <C> <C>
Beginning Balance January 1, 4,229 3,817 4,229 4,229
Provision Charged to Earnings 552 738 737 737
Recoveries 159 194 166 166
Charge-offs (397) (520) (525) (928)
Ending Balance 4,543 4,229 4,607 4,204
</TABLE>
9
<PAGE>
CITIZENS AND 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>
<CAPTION>
TABLE IV
LOAN LOSS HISTORY
(In Thousands)
1995 Est 1994 1993 1992 1991 1990 1989 Average
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Loans* 277,670 258,472 238,755 225,475 199,072 190,544 159,715 221,386
Net Charge Offs 359 326 247 518 3,142 115 222 704
Allowance for Possible Loan Losses Balance 4,607 4,229 3,817 3,356 2,548 2,539 2,284 3,340
Provision for Loan Losses Charged to Earnings 737 737 708 1,326 3,151 326 275 1,037
Earnings 7,065 7,494 8,127 7,290 5,643 5,342 4,268 6,461
Earnings Coverage of Net Charge Offs 19.7 x 23.0 x 32.9 x 14.1 x 1.8 x 46.5 x 19.2 x 12.1 x
Allowance Coverage of Net Charge Offs 12.8 x 13.0 x 15.5 x 6.5 x 0.8 x 22.1 x 10.3 x 6.2 x
Accruing Loans Contractually Past Due Ninety
Days or More 2,723 2,743 2,899 2,532 3,810 2,425 1,684 2,688.0
Net Charge Offs as a Percentage of the Provision
Charged to Earnings 48.7 % 44.2 % 34.9 % 39.1 % 99.7 % 35.3 % 80.7 % 29.4
Year-End Nonperforming Loans 650 624 843 1,351 417 309 264 636.9
Allowance as a Percentage of Net Loans*:
Bank (1) 1.73 % 1.64 % 1.60 % 1.49 % 1.28 % 1.33 % 1.43 % 1.51 %
Peer Group (2) 1.62 % 1.65 % 1.82 % 1.42 % 1.44 % 1.34 % 1.32 % 1.52 %
</TABLE>
* Gross loans less unearned discount
(1) At September 30, 1995
(2) At June 30, 1995
10
<PAGE>
CITIZENS AND 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>
<CAPTION>
TABLE V
ALLOCATION OF RESERVE FOR POSSIBLE LOAN LOSSES
At September 30, 1995
(In Thousands)
1995 Est. 1994 1993 1992 1991 1990 Average Loss Ratio Reserve
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial and Agricultural 23,500 22,649 26,376 22,712 23,541 21,120 23,316 1.9508 458
Real Estate -- Construction 2,500 2,593 2,224 993 982 1,249 1,757
Real Estate -- Mortgage 210,000 193,095 170,532 162,434 136,716 121,987 165,794 0.0156 33
Credit Cards and Related Plans 9,750 9,896 9,212 9,991 6,694 5,738 8,547 0.9728 95
All Other Loans to Individuals 31,750 30,094 30,282 29,182 31,762 35,605 31,446 0.4466 142
Lease Financing 170 145 154 162 129 164 154
Total 277,670 258,472 238,780 225,474 199,824 185,863 231,014
Letter of Credit Commitments 4,500 4,415 5,046 4,670 N/A N/A 4,658 1.9606 88
Other Commitments:
Consumer 25,000 24,202 23,323 22,174 N/A N/A 23,675 0.45112 113
Mortgage 9,600 9,566 9,466 9,117 N/A N/A 9,437 0.01603 2
Commercial 10,000 9,901 9,790 5,670 N/A N/A 8,840 1.96061 196
FASB No. 114 Nonperforming Loans 181 N/A N/A N/A N/A N/A 181 181
Total Reserve Allocation 1,307
The reserve allocation factor is determined by using a six year average of net Unallocated Portion 3,166
charge offs divided by the six year average loan balance by type. Total Reserve Balance 4,473
</TABLE>
11
<PAGE>
CITIZENS AND 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)
OTHER INCOME
The following table compares the major categories of other income for the
periods ending September 30, 1995 and September 30, 1994 and the amount and
percentage of change by category.
<TABLE>
<CAPTION>
Periods Ending
September 30, $ %
1995 1994 Change Change
<S> <C> <C> <C> <C>
Service Charges on Deposit Accounts 842 793 49 6.18
Service Charges and Fees 204 216 (12) (5.56)
Trust Department Income 562 392 170 43.37
Insurance Commissions, Fees and Premiums 477 444 33 7.43
Other Operating Income 37 322 (285) (88.51)
Realized Gains on Available-for-Sale, Net 1,229 722 507 70.22
Total Other Income 3,351 2,889 462 15.99
</TABLE>
Other income increased 15.99 percent during the nine period ending
September 30, 1995 when compared to the same period last year.
Service charges on deposit accounts increased $49,000 or just over 6
percent when comparing the two periods. The increase consists of $17,000 in
account and statement fees due to increased usage and an increase in the number
of accounts over last year; there was also an increase of $32,000 in overdraft
charges between the two periods.
Other service charges and fees declined $12,000 or 5.6 percent during the
first nine months of 1995 when compared to the same period in 1994. The 1994
total included a large rebate from the bank's check supplier and interest on a
large tax refund for the years 1991 and 1992; the rebate and the tax refund
interest amounted to $15,000.
Trust Department fees increased 43.3 percent or $170,000 over the same
period in 1994. The increase can be attributed to several factors. Interest
rates and market values were up significantly during the first nine months of
1995 when compared to the same period last year, both of which contributed to
larger account fees. An increase in the fee schedule was implemented January 1,
1995 and has thus increased fee income. Also, an ongoing effort to sell employee
benefit plans is beginning to generate additional fee income. There were also
fees generated from the settlement of several large estates during the first
nine months of 1995.
Other operating income decreased $285,000 during the six month period
ending September 30, 1995 when compared to the same period in 1994. Other income
totals for the nine months ending September 30, 1994 contained the realized gain
on the sale of an investment which had been classified as an other asset, the
gain amounted to $265,000. Also included in other income were the earnings on
the same asset and the gain on the sale of data processing equipment for the
period which amounted to $15,000 and $7,000 respectively.
Realized gains on the sale of Available-for-Sale investments amounted to
$1,229,000 for the first nine months of 1995 and $722,000 during the same period
in 1994. A portion of the gain resulted from the sale of several equity
securities which were sold to comply with FDIC policy. The policy requires banks
to either sell or transfer to their holding company all equity investments not
traded on a recognized securities exchange. The policy gives banks until mid
1996 to accomplish the sale or transfer. The other equity securities sold were
involved in the recent round of bank mergers and management felt that they had
become overpriced and it would be prudent to book the gain.
12
<PAGE>
CITIZENS AND 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)
OTHER EXPENSE
The following table compares the various categories of other expense for the
periods ending September 30, 1995 and September 30, 1994
<TABLE>
<CAPTION>
TABLE VII
MAJOR CATEGORIES OF OTHER EXPENSE
(In Thousands)
Periods Ending
September 30, $ %
1995 1994 Change Change
<S> <C> <C> <C> <C>
Salaries and Wages 4,096 3,731 365 9.78
Pensions and Other Employee Benefits 1,260 1,296 (36) (2.78)
Occupancy Expense, Net 524 511 13 2.54
Furniture and Equipment Expense 486 403 83 20.60
Other Operating Expense 4,331 4,216 115 2.73
Total Other Expense 10,697 10,157 540 5.32
</TABLE>
Salaries and wages increased over 9 percent. The increase can be
attributed to an increase in the number of full time equivalent employees and
merit raises. The number of full time equivalent employees was 199 at September
30, 1995 and 195 at September 30, 1994. Merit raises effective January 1, 1995
were in the 5 to 6 percent range.
Pensions and Other Employee Benefits declined by $36,000 or 3 percent when
compared to the same period last year. The decrease was due to the retirement of
two executive officers who received severance payments for accumulated benefits.
Furniture and Fixtures Expense reflected a variance of just over 20 percent
between the comparable periods. The primary cause for the increase was the
purchase of a check imaging system which became operational in August of 1994.
The cost of the system was approximately $900,000 and was instrumental in
increasing depreciation expense $83,000 over the periods being compared.
Other Expense increased $115,000 over the same period in 1994; this
increase includes $113,000 of additional processing costs for the Corporation's
credit card and ATM programs. Also the loss on disposition of other real estate
increased $40,000 over last year. The Corporation, however, did benefit from the
recent reduction in FDIC premiums, this expense is $198,000 less than the
comparable period last year.
13
<PAGE>
CITIZENS AND NORTHERN CORPORATION - FORM 10-Q
Part 1 - Financial Information (continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
STATEMENT OF CONDITION
Average earning assets of the Corporation for the nine month period ending
September 30, 1995 increased 1.7 and 2.7 percent when compared to the periods
ending December 31, 1994, and September 30, 1994. The asset structure of the
balance sheet changed very little, average Available-for-Sale Securities
declined slightly, down about 2 percent when compared to the average balance
sheet ending December 31, 1994 and down just over 1 percent when compared to
average balances for the nine months ending September 30, 1994. Average loans
during the nine months ending September 30, 1995 did begin to experience growth
increasing 6.6 percent over the same period in 1994 and 5.4 percent over the
twelve month period ending December 31, 1994. The loan growth was centered
around real estate secured loans.
On the liability side of the balance sheet average total deposits have
increased 2.2 and 2.3 percent respectively for the periods ending December 31,
1994 and September 30, 1994. The deposit increase was used to fund the loan
growth. Deposit categories experiencing the heaviest growth were Money Market
accounts and Individual Retirement accounts. Growth in other areas was
relatively flat except Passbook and Statement savings which declined slightly
when compared to the previous periods.
Interest rate swings have caused wide fluctuations in the market value of
the Available-for-Sale securities, creating large adjustments to the capital
account. The net adjustment to capital at September 30, 1995, December 31, 1994
and September 30, 1994 respectively was $2,706,000 and ($8,589,000), and
($4,010,000) . All adjustments reflect a tax effect of 34 percent.
The reader should refer to Table II and Table VIII on pages 8 and 14.
Table II reflects average balances for the periods ending September 30, 1995,
December 31, 1994, and September 30, 1994. Table VIII reflects the estimated
market values of assets and liabilities at September 30, 1995.
14
<PAGE>
CITIZENS AND NORTHERN CORPORATION - FORM 10-Q
Part 1 - Financial Information (continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
TABLE VIII
ESTIMATED MARKET VALUES
(In Thousands)
<TABLE>
<CAPTION>
Carrying Fair
Value Value Difference
<S> <C> <C> <C>
ASSETS
Loans:
Gross Loans 262,570 259,011 (3,559)
Less: Loan Loss Reserve (4,543) (4,543)
Net Loans 258,027 254,468 (3,559)
Held-to-Maturity Securities
U.S. Government Securities 1,268 1,335 67
Total Held-to-Maturity Securities 1,268 1,335 67
LIABILITIES
Deposits:
Money Market 94,566 94,566
Interest Checking 42,025 42,025
Club Accounts 2,537 2,537
Certificates of Deposit 119,164 119,503 339
Golden Passbook 889 889
Regular/Key Savings 46,380 46,380
Individual Retirement Accounts 78,990 79,642 652
Total Interest Bearing Deposits 384,551 385,542 991
Borrowings:
Fixed Rate Borrowings 10,000 10,050 50
Variable Rate Borrowings 10,000 10,000
Total Borrowings 20,000 20,050 50
Federal Funds Purchased
Repurchase Agreements 74,650 74,650
</TABLE>
15
<PAGE>
CITIZENS AND 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)
LIQUIDITY AND INTEREST RATE SENSITIVITY
The Corporation's ability to absorb short-term deposit fluctuations or
unusually heavy loan demand, should either occur, is met by using a FLEXLINE of
credit available through the Federal Home Loan Bank of Pittsburgh or by
repurchase agreements. The FLEXLINE of credit provides the Corporation with a
credit line which approximates 10 percent of total assets or about $50 million
dollars. Repurchase agreements are secured with mortgage-backed instruments. The
maturities of the repurchase agreements generally range from 30 days to 3 years.
At September 30, 1995 the Corporation had $74,650,000 in short-term
borrowings (maturing within one year) and $20,000,000 in borrowings that mature
in 2 to 3 years. The majority of the borrowed funds are repurchase agreements
secured with mortgage backed investments. This short-term borrowing creates a
large negative gap which narrows the net interest spread and lowers the net
interest margin during periods of rising interest rates.
Beginning in the first quarter of 1994 and continuing into the second
quarter of 1995 actions of the Federal Reserve Open Market Committee caused
interest rates to increase approximately 200 basis points. This increase caused
the Corporation's net interest margin to decline from 3.70 percent for the year
ending December 31, 1993 to 3.39 for the year ending December 31, 1994. The net
interest margin for the current nine month period has declined to 2.96 percent.
Interest rates stabilized during the second quarter of 1995 and declined
slightly in the third quarter of 1995, this has caused the net interest margin
to increase slightly and improve earnings during the third and fourth quarter of
1995.
The Corporation uses a computer model to measure its interest rate risk
using a rate shock. The model shocks interest 400 basis points upward and
downward. The reader should refer to table XII which provides the estimated
percentage change in net interest income under the various rate shock scenarios.
The Corporation's Asset Liability Policy provides for a 20 percent change
in net interest income at a 200 basis point increase in interest rates. At
September 30 1995, the change at 200 basis points was 21.4 percent, however,
management felt that the change was insignificant for remedial action and that
the short term trend was favorable.
16
<PAGE>
CITIZENS AND 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>
<CAPTION>
TABLE IX
RATE SENSITIVE ASSETS AND RATE SENSITIVE LIABILITIES
September 30, 1995
(In Thousands)
Greater Greater Greater Greater
than than than than
3 Mos. 3-6 6-12 1-3 3-5
ASSETS or Less Mos. Mos. Years Years
<S> <C> <C> <C> <C> <C>
Interest-Bearing Deposits 1,051 100
"Available-for-Sale" Securities
U.S.Treasury Securities 2,457
U.S.Agency Securities 12,051
Mortgage Backed Securities 209,362
Municipals 43,304
Other Bonds 15,144
Stocks 19,171
Total "Available-for-Sale" Securities 301,489
"Held-to-Maturity" Securities:
U.S.Treasury Securities 299
Mortgage Backed Securities
Total "Held-to-Maturity" Securities: 299
Loans and Lease Financing:
Real Estate-Construction 940
Real Estate-Mortgage 41,470 17,469 29,875 24,924 22,542
Consumer 16,013 2,885 4,506 10,294 2,528
Agricultural 749 267 472 1,066 432
Commercial 9,470 380 927 2,020 824
Other 210 31 52 31 2
Political Subdivisions 782 171 351 1,275 1,188
Leases 9 9 18 72 72
Total Loans 69,643 21,212 36,201 39,682 27,588
Less: Unearned Discount
Allowance for Loan Losses
Net Loans and Leases 69,643 21,212 36,201 39,682 27,588
Federal Funds sold 2,500
Cash and Due From Banks
Other Assets 4,059
Total Assets 378,742 21,212 36,301 39,682 27,887
LIABILITIES AND EQUITY
Interest-Bearing Deposits:
Money Market 94,566
NOW and SNOW 42,025
Christmas/Fund Clubs 1,786 96
CD's 23,276 25,133 30,563 15,033 25,717
Reg/Key Savings
GPS
IRA's
Total Interest-Bearing Deposits 159,867 26,919 30,659 15,033 25,717
Demand Deposits
Repurchase Agreements 54,650 20,000
Federal Funds Purchased
Borrowed Funds:
Variable 10,000
Fixed 10,000
Total Borrowed Funds 10,000 10,000
Other Liabilities 794
Stockholders' Equity
Total Liabilities and Equity 225,311 26,919 40,659 35,033 25,717
Interest Rate Sensitivity Gap 153,431 (5,707) (4,358) 4,649 2,170
<CAPTION>
Greater Greater Greater
than than than
5-10 10-20 20 Non-
ASSETS Years Years Years Interest Total
<S> <C> <C> <C> <C> <C>
Interest-Bearing Deposits 1,151
"Available-for-Sale" Securities
U.S.Treasury Securities 2,457
U.S.Agency Securities 12,051
Mortgage Backed Securities 209,362
Municipals 43,304
Other Bonds 15,144
Stocks 19,171
Total "Available-for-Sale" Securities 301,489
"Held-to-Maturity" Securities:
U.S.Treasury Securities 299
Mortgage Backed Securities 49 734 186 969
Total "Held-to-Maturity" Securities: 49 734 186 1,268
Loans and Lease Financing:
Real Estate-Construction 940
Real Estate-Mortgage 42,729 21,710 4 200,723
Consumer 556 63 7 36,852
Agricultural 70 24 3,080
Commercial 207 13,828
Other 326
Political Subdivisions 1,391 1,498 13 6,669
Leases 2 182
Total Loans 44,955 23,295 24 262,600
Less: Unearned Discount (30) (30)
Allowance for Loan Losses (4,543) (4,543)
Net Loans and Leases 44,955 23,295 24 (4,573) 258,027
Federal Funds sold 2,500
Cash and Due From Banks 11,670 11,670
Other Assets 8,275 12,334
Total Assets 45,004 24,029 210 15,372 588,439
LIABILITIES AND EQUITY
Interest-Bearing Deposits:
Money Market 94,566
NOW and SNOW 42,025
Christmas/Fund Clubs 1,882
CD's 57 119,779
Reg/Key Savings 46,434 46,434
GPS 885 885
IRA's 78,980 78,980
Total Interest-Bearing Deposits 57 126,299 384,551
Demand Deposits 40,791 40,791
Repurchase Agreements 74,650
Federal Funds Purchased 0
Borrowed Funds:
Variable 10,000
Fixed 10,000
Total Borrowed Funds 20,000
Other Liabilities 6,482 7,276
Stockholders' Equity 61,171 61,171
Total Liabilities and Equity 57 126,299 108,444 588,439
Interest Rate Sensitivity Gap 44,947 24,029 (126,089) (93,072)
</TABLE>
17
<PAGE>
CITIZENS AND 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
Tier I capital of the Corporation excluding unrealized gains on Available-
for-Sale investments totaled $59,465,000, $56,385,000, and $55,992,000 at
September 30, 1995, December 31, 1994, and September 30, 1994 respectively. The
ratio of tier I capital to assets at the close of those periods was 10.11
percent, 10.31 percent, and 9.86 percent respectively.
The Corporation's risk based capital ratio, which measures the amount of
risk assets to total capital , was 18.36 percent, 18.36 percent, and 19.75
percent for the periods ending September 30, 1995, December 31, 1994, and
September 30, 1994 respectively. The ratios exclude the Available-for Sale
market value adjustment as mandated by SFAS No. 115.
Dividends paid to shareholders for the respective nine month periods ending
September 30, 1995 and September 30, 1994 amounted to $.48 and $.455. The
dividend amounted to 43.6 percent and 35.8 percent of net income respectively.
Management is aware of the possible detrimental effect that a large
negative gap can have on the capital of the Corporation during prolonged periods
of rising interest rates. Exposure to changes in the economic value of the
Corporation's capital due to increases in interest rates is monitored on a
monthly basis by the Board of Directors and senior management. Table XI provides
a theoretical measurement of the effect on capital if interest rates suddenly
shifted up or down 100, 200, 300, or 400 basis points.
Management's Asset and Liability policy provides for a maximum decline in
theoretical market value of 25 percent at a 200 basis point increase in interest
rates. At September 30, 1995 the decline amounted to 28 percent, however
management feels that this is only a temporary decline and no action was taken.
The net after tax adjustment to the Corporation's capital as a result of
SFAS No. 115 was $2,706,000, ($8,589,000) and ($4,010,000) at September 30,
1995, December 31, 1994 and September 30, 1994 respectively.
There are no planned capital expenditures that will have a material effect
on the capital ratios of the Corporation or the results of operations.
18
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10-Q
Part 1 - Financial Information (continued)
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
<TABLE>
<CAPTION>
TABLE X
RATE SHOCK ANALYSIS
COMPARISON OF EXECUTIVE SUMMARIES
FOR THE PERIOD ENDING September 30, 1995
(In Thousands)
-4.00 -3.00 -2.00 -1.00 FLAT 1.00 2.00 3.00 4.00
INCOME STATEMENT
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest Income
Loans 22,856 23,751 24,646 25,541 26,436 27,191 27,984 28,781 29,610
Investments 18,903 18,996 19,089 19,182 19,275 19,367 19,460 19,553 19,646
Total Interest Income 41,759 42,747 43,735 44,723 45,711 46,558 47,444 48,334 49,256
Interest Expense
Deposits 7,281 10,107 12,934 15,761 18,588 20,995 23,343 25,744 27,256
Borrowings 695 802 909 1,016 1,123 1,218 1,274 1,346 1,404
Federal Funds Purchased 1,318 2,097 2,894 3,710 4,544 5,391 6,251 7,129 7,993
Total Interest Expense 9,294 13,006 16,737 20,487 24,255 27,604 30,868 34,219 36,653
Net Interest Income 32,465 29,741 26,998 24,236 21,456 18,954 16,576 14,115 12,603
Memo:
Net Interest Income
Tax Equivalent 34,028 31,284 28,522 25,741 22,941 20,425 18,030 15,553 14,034
Provision for Loan Losses 737 737 737 737 737 737 737 737 737
Net Income After Provision 31,728 29,004 26,261 23,499 20,719 18,217 15,839 13,378 11,866
Other Operating Income 2,050 2,050 2,050 2,050 2,050 2,050 2,050 2,050 2,050
Other Operating Expense 13,137 13,137 13,137 13,137 13,137 13,137 13,137 13,137 13,137
Income Before Income Tax 20,641 17,917 15,174 12,412 9,632 7,130 4,752 2,291 779
Income Tax 5,987 5,073 4,153 3,227 2,295 1,455 656 (170) (679)
Net Income 14,654 12,844 11,021 9,185 7,337 5,675 4,096 2,461 1,458
Projected Dividends 3,300 3,300 3,300 3,300 3,300 3,300 3,300 3,300 3,300
</TABLE>
19
<PAGE>
CITIZENS AND 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>
<CAPTION>
TABLE XI
RATE SHOCK ANALYSIS
COMPARISON OF EQUITY MARKET VALUES
FOR THE PERIOD ENDING SEPTEMBER 30, 1995
(In Thousands)
-4.00 -3.00 -2.00 -1.00 FLAT 1.00 2.00 3.00 4.00
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Book Value 581,053 581,053 581,053 581,053 581,053 581,053 581,053 581,053 581,053
Market Value 702,229 670,162 641,077 614,612 590,456 575,736 558,955 543,756 528,642
Change 121,176 89,109 60,024 33,559 9,403 (5,317) (22,098) (37,297) (52,411)
Liabilities:
Book Value 525,324 525,324 525,324 525,324 525,324 525,324 525,324 525,324 525,324
Market Value 572,064 559,426 547,637 536,632 526,355 519,272 512,982 506,707 500,667
Change (46,740) (34,102) (22,313) (11,308) (1,031) 6,052 12,342 18,617 24,657
Equity
Beginning Balance 55,729 55,729 55,729 55,729 55,729 55,729 55,729 55,729 55,729
Asset Change 121,176 89,109 60,024 33,559 9,403 (5,317) (22,098) (37,297) (52,411)
Liability Change (46,740) (34,102) (22,313) (11,308) (1,031) 6,052 12,342 18,617 24,657
Market Value 130,165 110,736 93,440 77,980 64,101 56,464 45,973 37,049 27,975
Duration
Assets 5.036 4.805 4.590 4.390 4.204 4.071 3.932 3.806 3.684
Liabilities 2.882 2.791 2.704 2.620 2.539 2.487 2.441 2.394 2.348
Equity 14.504 14.980 15.645 16.571 17.873 18.635 20.560 23.108 27.594
</TABLE>
20
<PAGE>
CITIZENS AND 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 XII
CURRENT EXPOSURE TO HYPOTHETICAL CHANGES IN INTEREST RATES
FOR THE PERIOD ENDING SEPTEMBER 30, 1995
PERCENTAGE CHANGE IN:
Change in Net Interest Income MV of Portfolio Equ
Interest Rates Projected Projected
(Basis Points) Change Change
400 -38.8 -56.4
300 -32.2 -42.2
200 -21.4 -28.3
100 -11.0 -11.9
0 0.0 0.0
-100 12.2 21.7
-200 24.3 45.8
-300 36.4 -72.8
-400 48.3 103.1
21
<PAGE>
CITIZENS AND NORTHERN CORPORATION - FORM 10-Q
Part II - Other Information
Item 1. Legal Proceedings
Citizens and Northern Corporation is not a litigant in any pending
lawsuits.
It is the opinion of the counsel of Citizens and Northern Corporation
that minor lawsuits that are pending will not have a significant or materially
detrimental effect on the capital of the Corporation or in any way affect the
results of operations.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits filed as part of this report are listed below:
Exhibit 1 -- Quarterly Report to Shareholders for period ending
September 30, 1995
b. No reports on Form 8-K were filed during the period ending
September 30, 1995
22
<PAGE>
CITIZENS AND NORTHERN CORPORATION - FORM 10-Q
SIGNATURE PAGE
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.
Date November 9, 1995 WILLIAM K FRANCIS /S/
-----------------------
William K. Francis
President and Chief Executive Officer
Date November 9, 1995 JAMES W SEIPLER /S/
----------------------
James W. Seipler
Treasurer
(Chief Financial Officer)
23
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<CIK> 0000810958
<NAME> CITIZENS & NORTHERN CORP
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 11,670
<INT-BEARING-DEPOSITS> 384,551
<FED-FUNDS-SOLD> 2,500
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 301,489
<INVESTMENTS-CARRYING> 1,268
<INVESTMENTS-MARKET> 1,271
<LOANS> 262,600
<ALLOWANCE> 4,543
<TOTAL-ASSETS> 588,439
<DEPOSITS> 425,342
<SHORT-TERM> 0
<LIABILITIES-OTHER> 7,276
<LONG-TERM> 0
<COMMON> 5,067
0
0
<OTHER-SE> 56,104
<TOTAL-LIABILITIES-AND-EQUITY> 588,439
<INTEREST-LOAN> 19,338
<INTEREST-INVEST> 13,770
<INTEREST-OTHER> 19,755
<INTEREST-TOTAL> 33,525
<INTEREST-DEPOSIT> 14,186
<INTEREST-EXPENSE> 18,494
<INTEREST-INCOME-NET> 15,031
<LOAN-LOSSES> 552
<SECURITIES-GAINS> 1,229
<EXPENSE-OTHER> 10,697
<INCOME-PRETAX> 7,133
<INCOME-PRE-EXTRAORDINARY> 7,133
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,462
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.10
<YIELD-ACTUAL> 0
<LOANS-NON> 421
<LOANS-PAST> 2,724
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,229
<CHARGE-OFFS> 397
<RECOVERIES> 159
<ALLOWANCE-CLOSE> 4,543
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
