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[PEOPLES LTD. LETTERHEAD]
Dear Valued Shareholder:
In a few days, you will receive our proxy materials and an invitation to
our special meeting. I encourage you to vote your shares and look forward to
seeing you at our meeting. As we prepare for the special meeting, the board of
directors and management teams of Peoples Ltd. and Citizens & Northern continue
to be very excited about our merger. We believe that this transaction benefits
shareholders and customers by providing expanded products and services while
retaining local service from the same friendly staff. Both organizations have
been diligently working to develop sound integration plans to create an
efficient, larger, local, and community-focused financial institution. By
gaining operating efficiencies and combining the "best practices" of both
organizations, while continuing our strong commitment to our local communities,
this merger will create new opportunities for our shareholders, customers and
employees. The enthusiasm and support for this transaction continues to gain
momentum in both organizations.
As anticipated, shareholder interest regarding our merger announcement has
been strong. Some of you have asked specific questions related to the details of
the transaction, as well as the impact on the community. Although we are
concerned about all of our constituency groups, our primary obligation is to our
shareholders. To provide ongoing communication to you, our valued shareholders,
we want to share the questions we received along with our answers to those
questions. Our goal is to keep our shareholders informed. We hope that the
attached information will accomplish this goal. Please feel free to call me at
(570) 746-1011 if you have any questions. Your board of directors and I
encourage your affirmative vote on all matters listed on the proxy you will
receive. I look forward to seeing you at our shareholder information meeting, to
be held at the Wyalusing Valley Jr./Sr. High School on November 9, 2000 and on
November 17, 2000 at our special meeting. Thank you for your continued support.
Very truly yours,
/s/ Donald E. Abrey
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Donald E. Abrey
President and Chief Executive Officer
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Filed by Citizens & Northern Corporation
pursuant to Rule 425 under the
Securities Act of 1933 and deemed
filed pursuant to Rule 14a-12 of the
Securities Act of 1934
Subject Company: Citizens & Northern Corporation
Commission File No.: 333-45224
First used on October 13, 2000
This filing contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements include, but
are not limited to, statements about the benefits of the merger between Peoples
Ltd. (Peoples) and Citizens & Northern Corporation (C&N), including future
financial and operating results, C&N's plans, objectives, expectations and
intentions and other statements that are not historical facts. Such statements
are based upon the current beliefs and expectations of Peoples' and C&N's
management and are subject to significant risk and uncertainties. Actual results
may differ from those set forth in the forward-looking statements.
The following factors, among others, could cause actual results to differ
from those set forth in the forward-looking statements: expected cost savings
from the merger cannot be fully realized; deposit attrition, customer loss or
revenue loss following the merger is greater than expected; competitive pressure
in the banking industry increases significantly; costs or difficulties related
to the integration of Peoples' and C&N's businesses are greater than expected;
changes occur in the interest rate environment that reduce margins; and general
economic conditions, either nationally or in the area in which the affiliated
companies will be doing business, are less favorable than expected. Additional
factors that could cause Peoples' and C&N's results to differ materially from
those described in the forward-looking statements can be found in C&N's 1999
Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q, filed
with the Securities and Exchange Commission and available at the Securities and
Exchange Commission's internet site (HTTP://WWW.SEC.GOV). These reports will
also be included with the proxy materials that will be mailed to you shortly.
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FREQUENTLY ASKED QUESTIONS REGARDING THE PROPOSED ACQUISITION
OF PEOPLES LTD. BY CITIZENS & NORTHERN CORPORATION
WHY ARE PEOPLES AND CITIZENS & NORTHERN PROPOSING TO MERGE?
WE BELIEVE THAT THE MERGER OF PEOPLES WITH CITIZENS & NORTHERN WILL BENEFIT
YOU AS A PEOPLES SHAREHOLDER. THE MERGER SHOULD PROVIDE ENHANCED LIQUIDITY,
ACCESS TO ADDITIONAL CAPITAL AND THE ABILITY TO OFFER A WIDER ARRAY OF BANKING
AND FINANCIAL PRODUCTS AND SERVICES, WHILE STILL MAINTAINING OUR LOCAL BANKING
LOCATIONS. We also expect the merger will strengthen our competitive position,
allow us to make larger loans, generate cost savings and enhance acquisition and
other business opportunities. The combined organization will be able to conduct
its banking business through its current and expanded banking centers located in
Bradford, Tioga, Sullivan and Lycoming counties. THIS TRANSACTION IS NOT SIMPLY
ABOUT GETTING BIGGER; IT IS ABOUT HOW WE CAN DO MORE FOR OUR CUSTOMERS AND
INCREASE SHAREHOLDER VALUE.
WHAT IS THE BACKGROUND OF THE TRANSACTION?
The Peoples board of directors has, for several years and as part of its
long-range planning practices, periodically reviewed and evaluated the various
strategic options and alternatives available to maximize both the economic
benefits for Peoples and its shareholders and the services available for
customers. During this review process, Peoples considered:
- acquisition of other community-based financial institutions;
- acquisition of other financial service providers, such as insurance
companies, insurance agencies, brokerage firms and financial planning
groups; and
- affiliation with or in combination with other like-minded
similar-sized institutions.
AFTER CONCLUDING THIS PROCESS, THE BOARD OF DIRECTORS DETERMINED THAT IT
WAS IN THE BEST INTERESTS OF THE SHAREHOLDERS AND THE CONSTITUENCIES SERVED BY
PEOPLES TO CONSIDER AN AFFILIATION WITH ANOTHER, LIKE-MINDED COMMUNITY-FOCUSED
FINANCIAL INSTITUTION. In June 1999, the board of directors engaged Ryan, Beck &
Co., to evaluate Peoples' financial position and to assist the board of
directors in further assessing its strategic options.
During the second half of 1999, the board considered several alignment
opportunities. In January 2000, the board of directors authorized Ryan, Beck to
engage in preliminary discussions with a number of financial institutions
regarding a potential affiliation or combination to form a stronger
community-focused institution headquartered in northeast Pennsylvania.
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WHY DID PEOPLES CHOOSE TO MERGE WITH CITIZENS & NORTHERN CORPORATION?
Of the three bids received by Peoples, the C&N proposal contained financial
terms that were superior to those of the other bidders. The combination of
Peoples and C&N positions us for profitable growth and expanded services to our
customers in the local communities we serve. Through further discussions with
Ryan, Beck and C&N, the parties negotiated the terms of the offer. THE BOARD
DISCUSSED THE ADVANTAGES AND DISADVANTAGES OF THE PROPOSAL, AS WELL AS THE
BENEFITS OF THE PROPOSAL TO THE RELEVANT CONSTITUENCIES, INCLUDING PEOPLES'
SHAREHOLDERS, PEOPLES' CUSTOMERS, THE COMMUNITIES SERVED BY PEOPLES AND PEOPLES'
EMPLOYEES. WE ANTICIPATE THE GROWTH AND MOMENTUM OF THE COMBINED COMPANIES TO BE
EXCEPTIONAL.
WE SEE TREMENDOUS POTENTIAL IN THE CITIZENS & NORTHERN MERGER AND ARE
ALREADY HARD AT WORK TO ENSURE ITS SUCCESS. BOTH ORGANIZATIONS ARE FOCUSED ON
ENSURING A SMOOTH INTEGRATION AND MAKING THE COMBINED COMPANY THE BEST OF BOTH
PEOPLES AND C&N. WE BELIEVE THAT COMBINING OUR STRENGTHS IS A STRATEGY FOR
SUCCESS AND ASSURING LEADERSHIP. We believe that the merger will enable us to
profitably offer services in markets where we do not currently have a presence.
We believe this extension will not only allow us to offer additional products
and services and to enhance loan production, but will also provide significant
opportunities to increase earnings from traditional and non-traditional sources.
THIS SHOULD ALLOW FOR CONTINUED INCREASES IN EARNINGS AND DIVIDENDS, WHICH WILL
ENHANCE LONG-TERM SHAREHOLDER RETURNS.
WHAT FACTORS DID PEOPLES' BOARD OF DIRECTORS CONSIDER IN MAKING ITS DECISION?
Peoples' board of directors believes the merger is fair to, and in the best
interests of, Peoples and its shareholders. The board of directors considered
the following to be the principal elements that will enhance the transaction's
benefit to Peoples' shareholders and other constituencies, including its
customers, community and employees:
- Peoples' current condition and historical operating results, and its
prospective results of operations if Peoples were to remain
independent;
- the economic, business and competitive climate for banking and
financial institutions in the northeastern Pennsylvania area, and the
challenges that Peoples faces as an independent bank in a highly
competitive market;
- the business, operations, earnings and prospects of C&N, the enhanced
opportunity for efficiencies, particularly from the integration of
operations and support functions, and growth that the merger would
make possible;
- THE OPINION OF RYAN, BECK THAT THE EXCHANGE RATIO ESTABLISHED FOR THE
MERGER IS FAIR TO PEOPLES' SHAREHOLDERS FROM A FINANCIAL POINT OF
VIEW;
- THE ADDITIONAL COMPETITIVE PRODUCTS AND SERVICES, SUCH AS TRUST
POWERS, THAT PEOPLES DOES NOT CURRENTLY PROVIDE AND WHICH PEOPLES
SHAREHOLDERS AND CUSTOMERS COULD GAIN AS A RESULT OF THE MERGER;
- the experience of C&N's senior management team;
- the benefits of a tax-free exchange to Peoples' shareholders;
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- THE LIQUIDITY AND MARKETABILITY OF C&N'S STOCK;
- C&N'S COMMUNITY SUPPORT, AS EVIDENCED BY ITS FINANCIAL PARTICIPATION
IN CULTURAL EVENTS AND ACTIVITIES;
- C&N'S COMMITMENT TO AND TREATMENT OF ITS EMPLOYEES AND THOSE OF
PEOPLES' WHO WILL JOIN THE COMBINED COMPANIES; AND
- THE LIKELIHOOD OF INCREASED DIVIDENDS TO PEOPLES' SHAREHOLDERS.
WHAT ASPECTS OF C&N ARE PARTICULARLY RELEVANT TO THE COMBINED COMPANIES?
C&N will provide additional competitive banking products and services,
which will be available to Peoples' customers, such as:
- increased legal lending limit,
- interactive Internet banking,
- a full-service trust division that provides financial fiduciary
services, and
- a variety of insurance products, including credit, life, accident and
health insurance.
Further, C&N offers a dividend reinvestment plan in which Peoples
shareholders will be eligible to participate.
WHAT ARE THE DETAILS OF THE TRANSACTION?
Citizens & Northern Corporation and Peoples Ltd. signed a definitive merger
agreement providing for C&N to acquire Peoples. The merger will be accounted for
as a "pooling of interests" transaction and, assuming receipt of all required
approvals, is expected to close late in 2000. At closing, C&N will issue shares
of C&N common stock to you in exchange for your Peoples shares of common stock
and Peoples will be merged with and into C&N. Immediately thereafter, assuming
receipt of all necessary regulatory approvals, Peoples State Bank of Wyalusing,
Pa. will merge with and into Citizens & Northern Bank, a wholly-owned banking
subsidiary of C&N.
WHAT IS A "POOLING OF INTERESTS" TRANSACTION AND WHAT IS ITS RELEVANCE TO THIS
MERGER?
Peoples and C&N intend to account for the transaction as a "pooling of
interests" for financial reporting purposes. This means that we will treat the
companies as if they had always been combined for accounting and financial
reporting purposes. Under this accounting method, the assets and liabilities of
Peoples will be carried forward to C&N at their historical recorded amounts.
Results of operations of C&N will include the results of both companies for the
entire fiscal year in which the merger occurs. The reported balance sheet
amounts and results of operations of the separate corporations for prior periods
will be combined, reclassified and conformed, as appropriate, to reflect the
combined financial position and results of operations for C&N.
"Pooling of interests" accounting treatment is currently available for
business combinations until December 31, 2000, unless extended. Elimination
of pooling of interests accounting may have the effect of reducing prices for
future mergers and acquisitions because acquiring companies would be required
to record amortization of goodwill as an expense.
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WHAT WILL PEOPLES SHAREHOLDERS RECEIVE FOR THEIR SHARES OF COMMON STOCK?
Peoples' shareholders will receive 2.5 shares of C&N's common stock for
each share of Peoples common stock owned. C&N will not issue any fractional
shares. You will receive a cash payment for any fractional shares, based on the
average bid and ask price of C&N shares of common stock over the 20 day trading
period immediately preceding the fifth trading day prior to the effective date
of the merger.
Peoples' shareholders will become shareholders of a financial services
organization with $820 million in assets that will be able to serve its
customers through its combined network of 23 banking centers located in the
Pennsylvania counties of Bradford, Tioga, Sullivan and Lycoming.
Peoples common stock is not listed or traded on a recognized securities
exchange or Nasdaq. C&N will list the shares of C&N common stock to be issued in
the merger on the OTC Bulletin Board under the trading symbol "CZNC", thereby
providing the opportunity for increased marketability of stock holdings.
WHAT WILL BE THE FINANCIAL IMPACT OF THE ACQUISITION ON C&N?
WE EXPECT THAT THE ACQUISITION WILL PROVIDE ECONOMIES OF SCALE, EXPANDED
PRODUCT OFFERINGS, EXPANDED OPPORTUNITIES FOR CROSS-SELLING, COST SAVINGS
OPPORTUNITIES AND ENHANCED OPPORTUNITIES FOR GROWTH. Further, we expect the
recognition of various financial benefits to accompany the merger, including our
belief that the merger will be accretive to C&N's projected earnings per share
in the first full year of post-merger operations, that the combined projected
organization will be well capitalized and have strong asset quality and that the
combined organization may have a higher potential for earnings and book value
multiples expansion.
WHAT IF I HAVE QUESTIONS?
If you have questions, please call Donald E. Abrey, President and Chief
Executive Officer of Peoples Ltd., at (570) 746-1011.
C&N has filed a registration statement on SEC Form S-4 in connection with
the merger and Peoples expects to mail a proxy statement/prospectus to its
shareholders containing information about the merger. Shareholders are urged to
read the registration statement and the proxy statement/prospectus carefully
when they are available. The registration statement and the proxy
statement/prospectus contain important information about C&N, Peoples, the
merger and related matters. Shareholders and investors will be able to obtain
free copies of these documents through the web site maintained by the U.S.
Securities and Exchange Commission at http://www.sec.gov. In addition to the
registration statement and the proxy statement/prospectus, C&N files annual,
quarterly and special reports, proxy statements and other information with the
SEC. You may read and copy any reports, statements and other information filed
by C&N at the SEC public reference rooms at 450 Fifth Street, N.W., Washington,
D.C. 20549 or at the SEC's
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other public reference rooms in New York, New York and Chicago, Illinois. Please
call the SEC at 1-800-SEC-0330 for further information on public reference
rooms. C&N's filings with the SEC also are available to the public from
commercial document-retrieval services and at the web site maintained by the
SEC.
Peoples, its directors, executive officers and certain members of
management and employees will be soliciting proxies from Peoples' shareholders
in favor of the adoption of the merger agreement. A description of any interests
that Peoples' and C&N's directors and executive officers have in the merger will
be available in the proxy statement/prospectus.
We appreciate your support and look forward to serving you in the future.
