<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (D)
FOR THE QUARTER ENDED: MARCH 31, 1997
COMMISSION FILE NUMBER: 0-16084
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 April 1, 1997 5,168,354 COMMON SHARES WERE OUTSTANDING
<PAGE>
CITIZENS AND NORTHERN CORPORATION--FORM 10-Q
<TABLE>
<CAPTION>
INDEX PAGE
- --------------------------------------------------------------------- --------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Statements of Condition--March 31, 1997 3
and December 31, 1996
Consolidated Statements of Income--Three Months Ended 4
March 31, 1997, 1996
Consolidated Statements of Cash Flows--Three Months 5
Ended March 31, 1997, 1996
Notes to Consolidated Financial Statements 6
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7--19
PART II. OTHER INFORMATION 20
Items 1,2,3,4, and 5 have been omitted as they are not applicable
to the registrant.
ITEM 6. Exhibits and Reports on FORM 8-K
(a) Exhibits
(b) Reports on FORM 8-K
Signature Page 21
</TABLE>
2
<PAGE>
CITIZENS AND NORTHERN CORPORATION--FORM 10--Q
Part I--Financial Information
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
UNAUDITED AUDITED
MARCH 31, DECEMBER 31,
(IN THOUSANDS) 1997 1996
- -------------------------------------------------------- ----------------- -----------------
<S> <C> <C>
ASSETS
Cash & Due From Banks................................... 15,058 14,320
Interest-Bearing Deposits............................... 730 655
Available-for-Sale Securities:
US Treasury Securities................................. 2,470 2,475
Securities of Other US Government Agencies............. 30,531 36,341
Mortgage Backed Securities............................. 178,306 183,483
Obligations of States and Municipal Subdivisions....... 59,708 55,943
Other Securities....................................... 27,892 29,611
Total Available-for-Sale Securities................... 298,907 307,853
Held-to-Maturity Securities:
US Treasury Securities................................. 598 699
Mortgage Backed Securities............................. 729 770
Securities of Other US Government Agencies............ 200 100
Total Held-to-Maturity Securities.................... 1,527 1,569
Federal Funds Sold
Loans:
Loans to Political Subdivisions........................ 6,240 6,555
Other Loans............................................ 274,554 272,084
Total Loans........................................... 280,794 278,639
Less--Allowance for Possible Loan Losses.............. (4,801) (4,776)
Unearned Income................................... (39) (42)
Loans, Net.......................................... 275,954 273,821
Bank Premises and Equipment............................. 6,492 6,609
Other Real Estate....................................... 421 583
Accrued Interest on Bonds and Loans..................... 4,292 4,404
Other Assets............................................ 2,298 378
TOTAL ASSETS............................................ 605,679 610,192
LIABILITIES
Deposits:
Demand............................................... 44,212 47,320
Interest Checking.................................... 39,238 38,916
Money Market......................................... 102,926 100,523
Savings.............................................. 46,731 46,175
Other Time........................................... 199,388 197,377
Total Deposits..................................... 432,495 430,311
Dividends Payable...................................... 911 902
Borrowed Funds......................................... 50,598 59,600
Federal Funds Purchased................................ 2,000
Securities Sold Under Agreement to Repurchase.......... 44,650 44,650
Other Liabilities...................................... 4,353 3,136
TOTAL LIABILITIES...................................... 535,007 538,599
SHAREHOLDERS' EQUITY
Common Stock, Par Value $1.00 per Share
Authorized 10,000,000; Issued 5,168,354 and
5,117,182 in 1997 and 1996, respectively............ 5,168 5,117
Stock Dividend Distributable........................... 1,305
Paid in Capital........................................ 13,794 12,539
Retained Earnings...................................... 49,713 47,862
Total.................................................. 68,675 66,823
Unrealized Gains on Available-for-Sale
Securities........................................... 2,994 5,767
Less: Treasury Stock at Cost
105,901 shares at March 31, 1997..................... (997)
104,850 shares at December 31, 1996.................. (997)
TOTAL SHAREHOLDERS' EQUITY............................. 70,672 71,593
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY.............. 605,679 610,192
Contingent Liabilities Under Unused
Letters of Credit.................................... 4,866 5,106
</TABLE>
3
<PAGE>
CITIZENS AND NORTHERN CORPORATION--FORM 10-Q
Part I--Financial Information (continued)
Item 1. Financial Statements (continued)
CONSOLIDATED STATEMENT OF INCOME
(Dollars in Thousands Except Share Data)
<TABLE>
<CAPTION>
3 MONTHS ENDED FISCAL YEAR TO DATE
MARCH 31, 3 MONTHS ENDED MARCH 31,
--------------- ---------------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
INTEREST INCOME....................... (Current) (Prior Year) (Current) (Prior Year)
Interest and Fees on Loans............ 6,999 6,723 6,999 6,723
Interest on Balances with Depository
Institutions........................ 9 7 9 7
Interest on Loans to Political
Subdivisions........................ 94 106 94 106
Interest on Federal Funds Sold........ 56 35 56 35
Income from Available-for-Sale and
Held-to-Maturity Securities:
Taxable............................. 3,635 3,994 3,635 3,994
Tax Exempt.......................... 859 680 859 680
Dividends........................... 207 180 207 180
Total Interest and Dividend Income... 11,859 11,725 11,859 11,725
INTEREST EXPENSE
Interest on Deposits................. 4,419 4,398 4,419 4,398
Interest on Other Borrowings......... 1,318 1,388 1,318 1,388
Total Interest Expense............... 5,737 5,786 5,737 5,786
Interest Margin...................... 6,122 5,939 6,122 5,939
Provision for Possible Loan Losses... 181 175 181 175
Interest Margin After Provision for
Possible Loan Losses................ 5,941 5,764 5,941 5,764
OTHER INCOME
Service Charges on Deposit Accounts.. 266 270 266 270
Service Charges and Fees............. 59 63 59 63
Trust Department Income.............. 261 205 261 205
Insurance Commissions, Fees and
Premiums........................... 109 119 109 119
Other Operating Income............... 44 18 44 18
Total Other Income Before Realized
Gains on Securities, Net............ 739 675 739 675
Realized Gains on Securities, (Net).. 787 97 787 97
Total Other Income................... 1,526 772 1,526 772
OTHER EXPENSES
Salaries and Wages................... 1,496 1,449 1,496 1,449
Pensions and Other Employee Benefits. 469 465 469 465
Occupancy Expense, Net............... 172 178 172 178
Furniture and Equipment Expense...... 162 188 162 188
Other Operating Expense.............. 1,504 1,325 1,504 1,325
Total Other Expenses................. 3,803 3,605 3,803 3,605
Income Before Income Tax Provision... 3,664 2,931 3,664 2,931
Income Tax Provision................. 901 752 901 752
NET INCOME............................ 2,763 2,179 2,763 2,179
PER SHARE DATA:
Net Income............................ 0.55 0.43 0.55 0.43
Dividend Per Share.................... 0.18 0.17 0.18 0.17
Number Shares Used in Computation..... 5,062,453 5,062,453 5,062,453 5,062,453
Number Shares Issued.................. 5,168,354 5,117,182 5,168,354 5,117,182
Number Shares Authorized.............. 10,000,000 10,000,000 10,000,000 10,000,000
Dividends Actually Paid............... 0.18 0.17 0.18 0.17
</TABLE>
4
<PAGE>
CITIZENS AND NORTHERN CORPORATION--FORM 10-Q
Part I--Financial Information (continued)
Item 1. Financial Statements (continued)
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
PERIODS ENDED
MARCH 31,
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES: 1997 1996
Net Income............................................ 2,763 2,179
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities
Provision for Possible Loan Losses................... 181 175
Realized (Gain), on Available-for-Sale and
Held-to-Maturity Securities, Net.................... (787) (97)
Provision for Depreciation........................... 164 191
Accretion and Amortization........................... 153 243
Deferred Income Tax.................................. (61) (18)
(Increase) in Accrued Interest
Receivable and Other Assets......................... (914) (363)
Increase (Decrease) in Accrued Interest Payable and
Other Liabilities................................... 2,655 2,112
Net Cash Provided by Operating Activities............. 4,154 4,422
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from the Maturity of Held-to-Maturity
Securities........................................... 142 34
Purchase of Held-to-Maturity Securities............... (100) (100)
Proceeds from Sales of Available-for-Sale
Securities........................................... 13,811 144
Proceeds from Maturities of Available-for-Sale
Securities........................................... 12,474 10,494
Purchase of Available-for-Sale Securities............. (21,740) (31,451)
Net Increase in Loans................................. (2,314) (218)
Purchase of Premises and Equipment.................... (47) (34)
Sale of Other Real Estate............................. 162
Purchase of Foreclosed Assets......................... (331)
Net Cash Used in Investing Activities................. 2,388 (21,462)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net Increase in Deposits.............................. 2,184 3,639
Increase (Decrease) in Short Term Borrowings.......... 2,000 (15,200)
Proceeds from (Repayment of) Long Term Borrowings..... (9,002) 34,000
Dividends Declared.................................... (911) (852)
Net Cash Provided by Financing Activities.......... (5,729) 21,587
INCREASE IN CASH AND CASH EQUIVALENTS.................. 813 4,547
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR........... 14,975 13,590
CASH AND CASH EQUIVALENTS, END OF YEAR................. 15,788 18,137
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Interest Paid......................................... 6,660 4,324
Income Taxes Paid..................................... 73 1,063
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<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, 1996, 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.
Results reported for the three-month period ended March 31, 1997 may not be
indicative of the results for the year ended December 31, 1997.
This document has not been reviewed or confirmed for accuracy or relevance
by the Federal Deposit Insurance Corporation.
6
<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 quarter ended March 31, 1997 of
$2,763,000, or $.55 per common share. This compares to $2,179,000, or $.43 per
share, for the quarter ended March 31, 1996 and $.44 per share for the fourth
quarter of 1996.
Income for the three months ended March 31, 1997 increased 26.8 percent
when compared to the same three- month period in 1996. The increase was the
result of realized gains on the sale of certain equity investments. The gross
realized gains amounted to $787,000; this compares to realized gains reported
March 31, 1996 of $97,000 and $24,000 for the fourth quarter of 1996.
The directors and management of the Corporation expect that 1997 will
produce results comparable to those reported for 1996. This assumption is
based on the current interest rate environment and could change if the FOMC
decides to raise rates again in 1997.
NET INTEREST MARGIN
Quarters Ended March 31, 1997/1996
The net spread between the rate of return on earning assets and the cost of
interest-bearing liabilities remained virtually unchanged; it was 3.53 percent
for the quarter ended March 31, 1996 and 3.54 percent for the quarter ended
March 31, 1997. The net spread for the year ended December 31, 1996 was 3.49
percent. The gross rate of return on earning assets for the quarters ended March
31, 1997, March 31, 1996 and the year ended December 31, 1996 were 8.34 percent,
8.33 percent and 8.29 percent, respectively. The average cost of
interest-bearing liabilities for the quarters ended March 31, 1997, March 31,
1996 and the year ended December 31, 1996 were 4.80 percent, 4.80 percent and
4.80 percent, respectively. Interest rates have increased slightly since March
31, 1997 as the FOMC increased the Federal Funds rate by 25 basis points at its
April 1997 meeting. The corporation is already seeing the cost of funds increase
on its deposit base and borrowings that must be refunded.
The average rate of return on the portfolio of available-for-sale
investments remained unchanged during the periods being compared. However, the
average balance for the quarter ended March 31, 1997 has declined about
$10,000,000 when compared to the outstanding balance at March 31, 1996 and
December 31, 1996. The decrease is caused by payments on mortgage-backed
securities being used to fund loan demand. The payment stream on the
mortgage-backed instruments amounts to $1,800,000 to $2,100,000 per month.
Average gross loans for the periods ended March 31, 1997, December 31, 1996
and March 31, 1996 totaled $279,430,000, $271,616,000 and $263,960,000,
respectively. The composition of the portfolio has remained unchanged with loans
secured by real estate posting the largest increase. Other loan categories
remained unchanged with the exception of consumer loans which declined slightly.
The average rate of return on the loan portfolio has increased from 9.84 percent
for the period ended March 31, 1996 to 10.29 percent for the quarter ended March
31, 1997. The rate of return on the loan portfolio for the year ended December
31, 1996 was 10.31 percent.
On the liability side of the balance sheet average total deposits have
remained nearly unchanged. Average deposits for the quarters ended March, 31,
1997, March 31, 1996 and the year ended December 31, 1996 were respectively,
$428,308,000, $429,036,000 and $427,559,000. The Corporation still maintains a
strong base of Money Market accounts and average balances have increased nearly
$7,000,000 since the period ended March 31, 1996. Other deposit categories have
remained flat or declined slightly. The corporation has had a difficult time
attracting deposits due to the flow of funds into mutual funds and the
competition in our market area from credit unions.
Average borrowed funds for the quarter ended March 31, 1997 have decreased
$2,205,000 when compared to the quarter ended March 31, 1996 and just over
$4,500,000 when compared to the year ended December 31, 1996. The decline will
more than likely continue into 1997 as the yield curve remains relatively flat.
Funding opportunities with spreads large enough to make the risk worthwhile are
scarce.
Management is expecting interest rates to increase another 25 basis points
in the first half of 1997 and level off for the remainder of the year.
Tables I and II are provided to reflect average balances and rates paid
for the quarters ended March 31, 1997, March 31, 1996 and the year ended
December 31, 1996, respectively.
7
<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>
Rate Rate Rate
TABLE I--ANALYSIS OF AVERAGE DAILY BALANCES AND RATES Period Earned/ Period Earned/ Period Earned
(In Thousands) Ended Paid Ended Paid Ended Paid
3/31/97 % 12/31/96 % 3/31/96 %
<S> <C> <C> <C> <C> <C> <C>
Available-for-Sale Securities:
U S Treasury Securities 2,505 5.18 2,506 5.11 2,508 5.17
Securities of Other US Government Agencies and
Corporations 31,808 6.99 30,514 6.96 16,599 6.87
Mortgage Backed Securities 181,750 6.73 197,581 6.64 208,718 6.61
Obligations of States and Political Subdivisions 56,170 6.20 49,700 6.06 43,900 6.28
Stock 15,313 5.48 16,342 5.34 16,689 4.37
Other Securities 3,340 2.06 6,905 6.84 12,945 7.93
Total Available-for-Sale Securities 290,886 6.52 303,548 6.50 301,359 6.50
Held-to-Maturity Securities:
U S Treasury Securities 599 6.77 698 6.02 667 6.08
Securities of Other U S Government Agencies and Corporations 133 6.10 50 8.00
Mortgage Backed Securities 745 7.62 829 7.12 1,072 6.43
Obligations of States and Political Subdivisions
Stock
Other Securities
Total Held-to-Maturity Securities 1,477 7.14 1,577 6.66 1,739 6.30
Interest -bearing Due from Banks 548 6.66 455 8.13 881 3.22
Federal Funds Sold 4,273 5.32 1,100 5.45 2,740 5.18
Loans:
Real Estate Loans 220,166 9.04 210,289 9.17 203,401 9.48
Consumer 32,672 19.96 35,305 18.13 35,368 17.36
Agricultural 2,770 9.96 2,750 10.11 2,654 10.24
Commercial/Industrial 16,875 9.61 16,207 9.73 15,505 9.89
Other 520 7.80 237 10.55 215 7.55
Political Subdivisions 6,198 6.15 6,629 6.40 6,660 6.45
Leases 229 5.31 201 7.96 157 10.33
Total Loans 279,430 10.29 271,618 10.31 263,960 9.84
Total Earning Assets 576,614 8.34 578,298 8.29 570,679 8.33
Cash 11,918 11,502 12,454
Securities Valuation Reserve 8,667 5,924 9,092
Allowance for Possible Loan Losses (4,769) (4,726) (4,681)
Other Assets 6,492 6,617 3,809
Bank Premises & Equipment 6,555 6,793 7,241
Total Assets 605,477 604,408 598,594
INTEREST-BEARING LIABILITIES
Interest Checking 38,341 2.45 40,558 2.46 40,729 2.44
Money Market 104,125 4.56 100,618 4.53 97,145 4.48
Savings 46,297 2.48 46,751 2.50 46,479 2.50
Certificate of Deposit 117,522 5.46 117,596 5.47 119,814 5.66
Individual Retirement Accounts 78,927 5.86 79,076 5.77 81,901 5.50
Other Time Deposits 1,947 2.71 1,937 2.99 2,113 2.30
Federal Funds Purchased 467 6.08 967 5.69 1,403 6.07
Other Borrowed Funds 96,613 5.50 101,121 5.56 98,818 5.61
Total Interest-bearing Liabilities 484,239 4.80 488,624 4.80 488,402 4.80
Demand Deposits 41,139 42,500 39,378
Other Liabilities 8,769 6,794 3,291
TOTAL LIABILITIES 534,157 537,918 531,071
Stockholders' Equity 65,599 62,797 60,532
Securities Valuation Reserve 5,721 3,693 6,991
Total Liabilities and Stockholders' Equity 605,477 604,408 598,594
Interest Rate Spread 3.54 3.49 3.53
</TABLE>
8
<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 II--Analysis of the Effect of Volume and Rate Changes in Interest
Income and Interest Expense
<TABLE>
<CAPTION>
QUARTERS ENDED MARCH 31, 1997/1996
-----------------------------------------
<S> <C> <C> <C>
CHANGE IN CHANGE IN TOTAL
(IN THOUSANDS) VOLUME RATE CHANGE
- --------------------------------------------------------------------------------- ------------- ------------- -----------
EARNING ASSETS
Available-for-Sale Securities:
U S Treasury Securities
Securities of Other U S Government Agencies and Corporations..................... 262 5 267
Mortgage Backed Securities....................................................... (448) 61 (387)
Obligations of States and Political Subdivisions................................. 188 (9) 179
Stock............................................................................ (13) 40 27
Other Securities................................................................. (118) (118) (236)
Total Available-for-Sale Securities............................................ (129) (21) (150)
Held-to-Maturity Securities:
U S Treasury Securities
Securities of Other U S Government Agencies and Corporations..................... 2 2
Mortgage Backed Securities....................................................... (8) 5 (3)
Obligations of States and Political Subdivisions
Stock
Other Securities
Total Held-to-Maturity Securities.............................................. (6) 5 (1)
Interest -bearing Due from Banks................................................... 2 2
Federal Funds Sold................................................................. 21 21
Loans:
Real Estate Loans................................................................ 350 (198) 152
Consumer......................................................................... (97) 191 94
Agricultural..................................................................... 3 (2) 1
Commercial/Industrial............................................................ 32 (10) 22
Other............................................................................ 6 6
Political Subdivisions........................................................... (7) (5) (12)
Leases........................................................................... 17 (18) (1)
Total Loans.................................................................... 304 (42) 262
Total Interest Income.............................................................. 190 (56) 134
INTEREST-BEARING LIABILITIES
Interest Checking.................................................................. (14) 1 (13)
Money Market....................................................................... 78 20 98
Savings............................................................................ (1) (3) (4)
Certificates of Deposit............................................................ (32) (58) (90)
Individual Retirement Accounts..................................................... (37) 66 29
Other Time Deposits................................................................ (1) 2 1
Federal Funds Purchased............................................................ (14) (14)
Other Borrowed Funds............................................................... (30) (26) (56)
Total Interest Expense............................................................. (51) 2 (49)
NET INTEREST INCOME................................................................ 241 (58) 183
</TABLE>
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.
9
<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 quarterly assessment process is conducted by a loan quality committee
which consists of the President, Chief Financial Officer, Executive Vice
Presidents in charge of loans and branch administration and the Auditor. The
committee reviews the "Watch List", a collection of loans that have had a
history of delinquency, past due reports, nonperforming loans and historical
information related to charge-offs and recoveries by loan categories.
The committee then allocates the reserve balance across the various loan
categories to determine the unallocated portion. The committee uses two
methods of allocation. The first calculates a ratio of average losses by type
to the average outstanding balance by type. The ratio is then applied to the
current outstanding balance of the various loan categories to determine the
portion of the reserve to be allocated. The second method extracts loans by a
quality rating system. The loans are categorized as "Substandard", "Doubtful"
and "Loss". Regulatory guidelines of 15 percent of substandard, 50 percent of
doubtful and 100 percent of loss are applied to establish reserve allocations.
The Corporation also employs and relies heavily on an independent loan
appraiser. However, his work is only performed annually and on loans of $175,000
or higher.
Other factors used to evaluate the reserve level are loan growth, economic
conditions of the market area and peer group comparisons.
Tables III through VI present current and historical information related to
the Allowance for Possible Loan Losses.
TABLE III--RECONCILIATION OF THE RESERVE FOR POSSIBLE LOAN LOSSES
<TABLE>
<CAPTION>
ESTIMATE ACTUAL ACTUAL ACTUAL ACTUAL
DEC 31, 1997 MAR 31, 1997 DEC 31, 1996 DEC 31, 1995 DEC 31, 1994
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Beginning Balance January 1,............... 4,775,960 4,775,960 4,579,210 4,228,741 3,816,982
Provision Charged to Earnings.............. 723,500 180,876 700,500 736,500 737,496
Year-to-Date Recoveries.................... 196,167 27,863 167,926 187,473 194,312
Year-to-Date Charge-offs................... (495,627) (183,384) (671,676) (573,504) (520,049)
Ending Balance............................. 5,200,000 4,801,315 4,775,960 4,579,210 4,228,741
</TABLE>
10
<PAGE>
CITIZENS AND NORTHERN CORPORATION--FORM 10--Q
Part 1--Financial Information ( continued )
TEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS ( CONTINUED )
TABLE IV--LOAN LOSS HISTORY AND OTHER STATISTICS
<TABLE>
<CAPTION>
(IN THOUSANDS) 1997 EST 1996 1995 1994 1993 1992 1991 AVE.
- ----------------------------------------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Loans *.............................. 293,542 278,597 264,182 258,472 238,755 225,475 199,072 244,092
Net Charge offs.......................... 299 504 387 326 247 518 3,142 854
Allowance for Possible Loan Losses
Balance................................ 5,200 4,776 4,579 4,229 3,817 3,356 2,548 3,884
Provision for Loan Losses Charged to
Earnings............................... 724 701 737 737 708 1,326 3,151 1,230
Earnings (Budget)........................ 8,676 9,255 7,866 7,494 8,127 7,290 5,643 7,613
Earnings Coverage of Net Charge offs..... 19.4x 18.4x 20.3x 23.0x 32.9x 14.1x 1.8x 18x
Allowance Coverage of Net Charge offs.... 11.6x 9.5x 11.8x 13.0x 15.5x 6.5x 0.8x 10x
Loans Ninety Days or More Past Due and
Still Accruing......................... 2,900 2,994 2,915 2,743 2,899 2,532 3,810 2,982
Net Charge offs as a Percent of the
Provision.............................. 61.9% 69.9% 52.5% 44.2% 34.9% 39.1% 99.7% 56.7%
Year-End Nonperforming Loans............. 1,000 864 279 624 843 1,351 417 730
Allowance as a Percentage of Gross Loans:
*......................................
Bank (1)................................. 1.77% 1.71% 1.73% 1.64% 1.60% 1.49% 1.28% 1.58%
Peer Group (2)........................... 1.48% 1.50% 1.61% 1.65% 1.82% 1.42% 1.44% 1.57%
</TABLE>
*Gross Loans less Unearned Discount
(1) At March 31, 1997
(2) At December 31, 1996
Averages are based on the years 1991 through 1996
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)
Table V--Allocation of the Allowance for Possible Loan Losses based on
Historical Data
(In Thousands)
<TABLE>
<CAPTION>
LOAN CLASSIFICATION 1997 EST 1996 1995 1994 1993 1992 1991 AVERAGE
- ------------------------------- ----------- --------- --------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Commercial, Ag., Mun.& Other... 20,000 29,832 26,318 22,649 26,376 22,712 23,541 25,238
Real Estate--Construction...... 1,250 1,166 1,284 2,593 2,224 993 982 1,540
Real Estate--Mortgage.......... 229,042 213,957 200,066 193,095 170,532 162,434 136,716 179,467
Credit Card & Related Plans.... 10,000 8,902 9,934 9,896 9,212 9,991 6,694 9,105
All Other Loans to
Individuals.................. 33,000 24,518 26,417 30,094 30,282 29,182 31,762 28,709
Lease Financing................ 250 222 163 145 154 162 129 163
Total Loans.................... 293,542 278,597 264,182 258,472 238,780 225,474 199,824 244,222
Letter of Credit Commitments... 5,000 5,106 2,633 4,415 5,046 4,670 N/A 4,191
All Other Commitments
Consumer....................... 28,000 28,049 24,811 24,202 23,323 22,174 N/A 23,628
Mortgage....................... 6,000 5,802 7,276 9,566 9,466 9,117 N/A 8,856
Commercial..................... 11,000 10,825 10,201 9,901 9,790 5,670 N/A 8,891
<CAPTION>
LOAN CLASSIFICATION
- -------------------------------
<S> <C> <C> <C>
Commercial, Ag., Mun.& Other... 0.02006 X 29,832= 598
Real Estate--Construction...... 0.00000 X 1,166=
Real Estate--Mortgage.......... 0.00027 X 213,957= 59
Credit Card & Related Plans.... 0.01369 X 8,902= 122
All Other Loans to
Individuals.................. 0.00605 X 24,518= 148
Lease Financing................ 0.00000 X 222= 0
Total Loans....................
Letter of Credit Commitments... 0.00000 X 5,106= 0
All Other Commitments
Consumer....................... 0.00605 X 28,049= 170
Mortgage....................... 0.00027 X 5,802= 2
Commercial..................... 0.02006 X 10,825= 217
Reserve Allocation 1,360
Fasb 114 Allocation 209
Unallocated Portion 3,631
Reserve Balance 5,200
</TABLE>
The reserve allocation is determined by using the six-year average net
charge-offs divided by the six-year average loan balance by type
Table VI--Allocation of The Allowance for Possible Loan Losses Based on
Regulatory Standards
<TABLE>
<S> <C>
FDIC Reserve Allocation................................... Mar 31, 1997
Substandard @ 15 %........................................ 999,008
Doubtful @ 50 %........................................... 36,000
Loss @ 100%............................................... 174,348
------------
Required Reserve.......................................... 1,209,356
Unallocated............................................... 3,591,959
------------
Reserve Balance........................................... 4,801,315
------------
------------
</TABLE>
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)
TABLE VII--MAJOR CATEGORIES OF NONINTEREST INCOME
<TABLE>
<CAPTION>
PERIODS ENDED
MARCH 31,
--------------------------------------------
$ %
1997 1996 CHANGE CHANGE
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Service Charges on Deposit Accounts........................................... 266 270 (4) (1.48)
Service Charges and Fees...................................................... 59 63 (4) (6.35)
Trust Department Income....................................................... 261 205 56 27.32
Insurance Commissions, Fees and Premiums...................................... 109 119 (10) (8.40)
Other Operating Income........................................................ 44 18 26 144.44
Total Other Income, Excluding Realized Securities Gains....................... 739 675 64 9.48
Realized Gains on Securities, Net............................................. 787 97 690 711.34
Total Other Income............................................................ 2,265 1,447 818 56.53
</TABLE>
Total Other Income increased 9 percent when comparing the quarter ended
March 31, 1997 to the same quarter in 1996 and slightly over 1 percent when
compared to the quarter ended December 31, 1996.
Other operating income consists of service charges on deposit accounts,
other service charges and fees, trust department income, insurance
commissions and fees, and other operating income.
Service Charges on Deposit Accounts is made up of fees generated by the use
of the deposit accounts and overdraft charges. There was not a significant
change when comparing the quarter ended March 31, 1997 and the previous quarter
to the quarter ended March 31, 1996.
Other Service Charges and Fees is comprised of debit card fees, credit
card annual fees, fees for issuing official checks, noncustomer check cashing
fees and other miscellaneous fees. A comparison of the current quarter, the
previous quarter and the quarter ended March 31, 1996 reveals a negligible
amount of change.
Trust Department Income is the second largest contributor of noninterest
income, excluding realized securities gains. Income generated by the Trust
Department for the quarter ended March 31, 1997, December 31, 1996 and March 31,
1996, respectively, amounted to $261,000, $237,000 and $205,000. The increases
posted during the periods being compared is due to the increase in trust assets
under management. The increase can be attributed to new accounts and the
increase in the market values of investments.
Insurance Commissions, Fees and Premiums generated by Bucktail Life
Insurance Company for March 31, 1997, December 31, 1996 and March 31, 1996 were
$109,000, $153,000 and $119,000, respectively. Premiums generated in the fourth
quarter slightly exceeded the first quarter 1997 as they included four months of
Life Premiums due to a posting error. Also, life premiums experienced a decline
from an average of $17,000 per month during 1996 to $10,000 per month during the
current quarter. The insurance company writes life and accident and health
insurance on the bank's consumer loan portfolio.
Other Operating Income for the quarters ended March 31, 1997, December 31,
1996 and March 31, 1996 amounted to $44,000, $13,000 and $18,000, respectively.
The increase in fees during the first quarter of 1997 was caused by the posting
of income totaling $18,000 associated with the Supplemental Employee Retirement
Plan. The income had previously been posted directly to the investment account.
Realized Securities Gains and Losses amounted to $787,000 during the
first quarter of 1997. The recognized gains were primarily from the sale of
bank stocks which management and the Board of Directors felt had become
overpriced in relation to the book value and some had been driven up in price
because of merger speculation. It was deemed appropriate to lock in the
appreciated value. The Corporation also sold two thirds of it Student Loan
portfolio due to disappointing returns on that asset; a premium amounting to
$28,000 was realized. Also, during the first quarter of 1996 and the fourth
quarter of 1996 one issue of bank stock was sold from the portfolio because
it had become overpriced. Gains amounted to $97,000 during the first quarter
of 1996 and $24,000 in the fourth quarter.
13
<PAGE>
The following table compares the various categories of other expense for the
periods ended March 31, 1997 and March 31, 1996.
TABLE VIII--MAJOR CATEGORIES OF NONINTEREST EXPENSE
<TABLE>
<CAPTION>
PERIODS ENDED
MARCH 31,
--------------------------------------------
$ %
1997 1996 CHANGE CHANGE
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Salaries and Wages............................................................ 1,496 1,449 47 3.24
Pensions and Other Employee Benefits.......................................... 469 465 4 0.86
Occupancy Expense, Net........................................................ 172 178 (6) (3.37)
Furniture and Equipment Expense............................................... 162 188 (26) (13.83)
Other Operating Expense....................................................... 1,504 1,325 179 13.51
Total Other Expense........................................................... 3,803 3,605 198 5.49
</TABLE>
Other noninterest expense consists of Salaries and Wages, Pension and Other
Benefit Expense, Furniture and Equipment Expense and Other Operating Expense.
Salaries and Wages increased just over three percent when comparing the
quarters ended March 31, 1997 and March 31, 1996 and one percent when compared
to the quarter ended December 31, 1996. This can be attributed to merit raises
and an increase in full time equivalent employees from 198 at March 31, 1996 to
202 at December 31, 1996 and 205 at March 31, 1997.
Pensions and Other Employee Benefits were nearly equal for the quarters
ended March 31, 1997 and March 31, 1996, at $469,000 and $465,000, respectively.
When compared to December 31, 1996, however, they reflect an increase of 14.6
percent and 13.7 percent, respectively. This is caused by adjustments made to
budgeted amounts in the fourth quarter when actual expense amounts are known for
401(k) contributions.
Occupancy Expense did not change materially during the three quarterly
periods being compared.
Furniture and Equipment Expense amounted to $162,000, $180,000 and $188,000,
respectively, for the quarters ended March 31, 1997, December 31, 1996 and March
31, 1996. The decline reflected in the first quarter of 1997 when compared to
the other periods was due to a decrease in depreciation expense as the main
frame computer was fully depreciated in the last quarter of 1996.
Other Operating Expense increased 13.51 percent during the first quarter
of 1997 when compared to the same period a year ago. The increase can be
attributed to two expense categories and a loss amounting to $53,000 on the
sale of other real estate that sold for less than the booked market value.
The expense categories that increased significantly were credit card
processing costs and advertising expense; they increased $62,890 and $79,699,
respectively. There was a negligible change when comparing the last quarter
of 1996 to the quarter ended March 31, 1997.
14
<PAGE>
STATEMENT OF CONDITION
Average total assets of the Corporation for the quarter ended March 31, 1997
increased slightly at 1.1 percent over the quarter ended March 31, 1996. When
compared to the year ended December 31, 1996 the increase was less than 1
percent.
The asset side of the balance sheet saw a decline in the average
investment portfolio as the amortization of the mortgage-backed investments
was used to fund loan growth. The municipal bond portfolio has increased from
an average balance of $43,900,000 during the first quarter of 1996 to
$56,170,000 for the quarter ended March 31, 1997. The increase is due to the
favorable after tax returns available on tax free investments. The respective
average balance in the loan portfolio was $279,430,000, $271,618,000 and
$263,960,000 for the quarters ended March 31, 1997, December 31, 1996 and
March 31, 1996. The loan growth was centered around real estate secured loans
as other loan categories showed little or no change. Consumer loans did
decline slightly as just over $2,000,000 in students loans were sold.
The liability side of the balance sheet has also remained relatively
constant during the past fifteen months. Average total deposits have remained
nearly unchanged. Interest Checking, Individual Retirement Accounts and
Certificates of Deposit did decline slightly during 1996, however, the decline
was made up by the strength of the Money Market Accounts which continue to
exhibit growth. Total average borrowed funds also changed very little during the
quarters being compared. The primary source of borrowed funds was repurchase
agreements placed with the Federal Home Loan Bank of Pittsburgh and other
brokers. Terms of the Repurchase Agreements range from one to five years. Other
borrowed funds were in the form of term loans with the Federal Home Loan Bank of
Pittsburgh which are secured by a blanket security agreement.
Interest rate swings have caused wide fluctuations in the market value of
the Available-for-Sale securities, causing large adjustments to the capital
account. The net adjustments to capital for March 31, 1997, December 31, 1996
and March 31, 1996 were $2,994,000, ($5,767,000) and ($4,239,000), respectively.
Interest rates have begun to increase slightly during the first quarter of 1997
and it is expected that the trend will continue into the second quarter of 1997
before stabilizing for the remainder of 1997.
The Corporation's capital remains well in excess of regulatory guidelines
and will be discussed later in Management's Discussion and Analysis.
LIQUIDITY AND INTEREST RATE SENSITIVITY
The Corporation's ability to absorb short term deposit fluctuations or
unusually heavy loan demand, should they occur, are met by using a flexline of
credit available through the Federal Home Loan Bank of Pittsburgh, repurchase
agreements or payments derived from amortizing investments. The flexline of
credit provides the Corporation with a credit line which approximates 10 percent
of the Corporation's borrowing capacity, or about $28.5 million. Repurchase
agreements are secured with mortgage-backed instruments. The maturities of the
repurchase agreements generally range from one to two years. The Corporation
also has credit lines with correspondent banks totaling approximately
$15,000,000 and amortizing payments received on the investment portfolio amount
to about $2,000,000 each month.
The Corporation uses a computer model to measure the theoretical effect of
interest rate swings on the market value and the net interest margin using a
rate shock. The model shocks interest 300 basis points upward and downward. The
Asset and Liability Policy set by the Board of Directors imposes limits on the
change in net interest income and market value of portfolio equity at a 200
basis point increase in interest rates. Net interest income may not decline more
than 20 percent and the change in market value of portfolio equity may not
decline more than 25 percent. The Board of Directors feels that the parameters
are reasonable based on the capital strength of the Corporation.
15
<PAGE>
TABLE IX--RATE SENSITIVE ASSETS AND RATE SENSITIVE LIABILITIES
<TABLE>
<CAPTION>
UNDER ONE TO FIVE FIVE TO TEN OVER TEN NON-
ONE YEAR YEARS YEARS YEARS INTEREST TOTAL
---------- ----------- ----------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Interest-bearing Deposits........................... 730 730
Available-for-Sale Securities:
U S Treasury Securities......................... 2,470 2,470
U S Agency Securities........................... 25,708 4,823 30,531
Mortgage Backed Securities...................... 533 26,348 14,575 136,850 178,306
Municipals...................................... 1,526 8,180 4,104 45,898 59,708
Other Bonds..................................... 2,015 550 1,350 3,915
Stocks.......................................... 23,977 23,977
Total Available-for-Sale Securities................. 2,059 39,013 44,937 212,898 298,907
Held-to-Maturity Securities:
U S Treasury Securities......................... 598 598
U S Agency Securities........................... 100 100 200
Mortgage Backed Securities...................... 28 278 423 729
Total Held-to-Maturity Securities................... 598 128 378 423 1,527
Loans and Lease Financing:
Real Estate-Construction........................ 1,184 1,184
Real Estate-Mortgage............................ 84,007 47,390 44,002 40,117 215,516
Consumer........................................ 11,445 22,229 1,420 1,578 36,672
Agricultural.................................... 1,286 1,265 97 88 2,736
Commercial...................................... 12,170 3,564 676 1,137 17,547
Other........................................... 219 26 389 634
Political Subdivisions.......................... 1,569 2,441 1,454 776 6,240
Leases.......................................... 9 9 18 229 265
Total Loans......................................... 111,889 76,924 47,667 44,314 280,794
Less: Unearned Discount............................. (39) (39)
Allowance for Loan Losses..................... (4,801) (4,801)
Net Loans and Leases................................ 111,889 76,924 47,667 44,314 (4,840) 275,954
Federal Funds Sold.................................. 0
Cash and Due From Banks............................. 15,058 15,058
Other Assets........................................ 4,292 9,211 13,503
Total Assets........................................ 119,568 116,065 92,982 257,635 19,429 605,679
LIABILITIES AND EQUITY
Interest-bearing Deposits:
Money Market.................................... 102,926 102,926
NOW and SNOW.................................... 39,238 39,238
Christmas/Fund Clubs............................ 1,616 1,616
CD's............................................ 79,364 38,398 41 0 117,803
Reg/Key Savings................................. 46,731 46,731
GPS............................................. 714 714
IRA's........................................... 79,255 79,255
Total Interest-bearing Deposits..................... 303,113 38,398 41 46,731 388,283
Demand Deposits..................................... 44,212 44,212
Federal Funds Purchased............................. 2,000 2,000
Repurchase Agreements............................... 19,650 25,000 44,650
Borrowed Funds:
Variable
Fixed........................................... 35,000 15,000 598 50,598
Total Borrowed Funds................................ 35,000 15,000 598 50,598
Other Liabilities................................... 911 4,353 5,264
Stockholders' Equity................................ 70,672 70,672
Total Liabilities and Equity........................ 360,674 78,398 41 47,329 119,237 605,679
Interest Rate Sensitivity Gap....................... (241,106) 37,667 92,941 210,306 (99,808) 0
</TABLE>
16
<PAGE>
Table X--Rate Shock Analysis and the Theoretical Effect on Equity Market
Values for the Period Ended March 31, 1997 (In Thousands)
<TABLE>
<CAPTION>
-3.00 -2.00 -1.00 FLAT 1.00 2.00 3.00
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
BOOK VALUE................................... 605,679 605,679 605,679 605,679 605,679 605,679 605,679
MARKET VALUE................................. 664,664 646,500 629,888 613,043 599,839 589,220 579,258
CHANGE....................................... 58,985 40,821 24,209 7,364 (5,840) (16,459) (26,421)
LIABILITIES
BOOK VALUE................................... 535,007 535,007 535,007 535,007 535,007 535,007 535,007
MARKET VALUE................................. 548,399 543,447 538,629 533,425 529,373 524,928 520,600
CHANGE....................................... (13,392) (8,440) (3,622) 1,582 5,634 10,079 14,407
EQUITY
BEGINNING BALANCE............................ 62,976 62,976 62,976 62,976 62,976 62,976 62,976
ASSET CHANGE................................. 58,985 40,821 24,209 7,364 (5,840) (16,459) (26,421)
LIABILITY CHANGE............................. (13,392) (8,440) (3,622) 1,582 5,634 10,079 14,407
MARKET VALUE................................. 108,569 95,357 83,563 71,922 62,770 56,596 50,962
</TABLE>
Table XI--Current Exposure to Hypothetical Change in Interest Rates for the
Period Ended March 31, 1997
<TABLE>
<CAPTION>
NET INTEREST INCOME MV OF PORTFOLIO EQUITY
CHANGE IN RATES PROJECTED PROJECTED
BASIS POINTS CHANGE CHANGE
- --------------------------------------------------- --------------------- -----------------------
<S> <C> <C>
300............................................... -4.1 -28.9
200............................................... -3.5 -21.2
100............................................... -3.2 -12.7
0............................................... 0.0 0.0
- -100............................................... 5.3 16.1
- -200............................................... 10.2 32.3
- -300............................................... 14.5 50.6
</TABLE>
17
<PAGE>
CAPITAL
Total capital of the Corporation, excluding unrealized gains on
Available-for-Sale Securities, at March 31, 1997, December 31, 1996 and March
31, 1996 amounted to $67,678,000, $65,826,000 and $61,351,000, respectively, and
as is shown in the following table is well in excess of regulatory guidelines.
TABLE XII--CAPITAL RATIOS
(In Thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, MARCH 31,
1997 1996 1996
----------- ------------ -----------
<S> <C> <C> <C>
Leverage Ratio (Equity/Total Liabilities).................................. 12.6% 12.2% 11.3%
TIER I Total Stockholders' Equity........................................... 67,678 65,826 61,351
TIER II Allowance for Possible Loan Losses(1)............................... 3,953 3,957 0
Total Qualifying Capital............................................... 71,631 69,783 61,351
Risk Adjusted Assets--Balance Sheet......................................... 303,107 303,147 301,646
Risk Adjusted Assets--Off Balance Sheet..................................... 12,464 13,172 12,328
Total Risk Adjusted Assets.................................................. 315,571 316,319 313,974
Ratios
TIER I Capital to Risk Weighted Assets................................. 21.45% 20.81% 17.11%
Minimum Required March 31, 1997........................................ 4.00%
Minimum Required December 31, 1996..................................... 4.00%
Minimum Required March 31, 1996........................................ 4.00%
Total Capital to Risk Weighted Assets.................................. 22.70% 22.06% 19.54%
Minimum Required March 31, 1997........................................ 8.00%
Minimum Required December 31, 1996..................................... 8.00%
Minimum Required March 31, 1996........................................ 8.00%
</TABLE>
- ------------------------
(1) Allowable addition may not exceed 1.25 percent of Risk Adjusted Assets.
18
<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 material
lawsuits.
It is the opinion of the counsel of Citizens and Northern Corporation that
minor lawsuits which are pending will not have a significant or materially
detrimental affect on the capital of the Corporation or in any way affect the
results of operations.
ITEM 5. OTHER EVENTS
a. None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits filed as part of this report--None
b. No reports on Form 8-K were filed during the period ended March 31, 1997
19
<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 May 14, 1997 /S/ CRAIG G. LITCHFIELD
----------- ----------------------
Craig G. Litchfield
President and Chief Executive Officer
Date May 14, 1997 /S/ JAMES W. SEIPLER
----------- ----------------------
James W. Seipler
Treasurer
(Chief Financial Officer)
20
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 9
<CIK> 0000810958
<NAME> CITIZENS & NORTHERN CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 15,058
<INT-BEARING-DEPOSITS> 730
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 298,907
<INVESTMENTS-CARRYING> 1,527
<INVESTMENTS-MARKET> 1,525
<LOANS> 280,794
<ALLOWANCE> 4,801
<TOTAL-ASSETS> 605,679
<DEPOSITS> 432,495
<SHORT-TERM> 46,650
<LIABILITIES-OTHER> 5,264
<LONG-TERM> 50,598
0
0
<COMMON> 5,168
<OTHER-SE> 65,504
<TOTAL-LIABILITIES-AND-EQUITY> 605,679
<INTEREST-LOAN> 7,093
<INTEREST-INVEST> 4,701
<INTEREST-OTHER> 65
<INTEREST-TOTAL> 11,859
<INTEREST-DEPOSIT> 4,419
<INTEREST-EXPENSE> 5,737
<INTEREST-INCOME-NET> 6,122
<LOAN-LOSSES> 181
<SECURITIES-GAINS> 787
<EXPENSE-OTHER> 3,803
<INCOME-PRETAX> 3,664
<INCOME-PRE-EXTRAORDINARY> 3,664
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,763
<EPS-PRIMARY> .55
<EPS-DILUTED> .55
<YIELD-ACTUAL> 8.34
<LOANS-NON> 1,001
<LOANS-PAST> 2,829
<LOANS-TROUBLED> 186
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 4,776
<CHARGE-OFFS> 183
<RECOVERIES> 27
<ALLOWANCE-CLOSE> 4,801
<ALLOWANCE-DOMESTIC> 1,209
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 3,592
</TABLE>
