<PAGE>

                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

(Mark One)

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the nine-month period ended September 30, 2002

                                       OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934

For the transition period from ________ to ___________

Commission file number: 0-16084

                         CITIZENS & NORTHERN CORPORATION
             (Exact name of Registrant as specified in its charter)

Pennsylvania                                                 23-2451943
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

90-92 Main Street
Wellsboro, Pa. 16901
(Address of principal executive offices)  (Zip code)

                                  570-724-3411
               (Registrant's telephone number including area code)

                                 Not applicable
   (Former name, former address, and former fiscal year, if changed since last
                                     report)

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /

              APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

         Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes /X/ No / /

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)

         Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.

Title                                          Outstanding
Common Stock ($1.00 par value)    5,285,122 Shares Outstanding November 12, 2002

                                      1
<PAGE>
                 CITIZENS & NORTHERN CORPORATION
                              INDEX

<TABLE>
<S>                                                          <C>
Part I.  Financial Information

Item 1.  Financial Statements

Consolidated Balance Sheet - September 30, 2002 and
December 31, 2001                                            Page  3

Consolidated Statement of Income - Three Months
and Nine Months Ended September 30, 2002 and 2001            Page  4

Consolidated Statement of Cash Flows - Nine Months
Ended September 30, 2002 and 2001                            Page  5

Notes to Consolidated Financial Statements                   Pages 6 through 8

Item 2.  Management's Discussion and Analysis of
Financial Condition and Results of Operations                Pages 8 through 20

Item 3.  Information About Market Risk                       Pages 20 through 23

Item 4.  Controls and Procedures                             Page 23

Part II. Other Information                                   Page 24

Signatures                                                   Page 25

Certifications                                               Pages 26 and 27

Exhibit 99.1 Certification Pursuant to 18 U.S.C.
  Section 1350 as Adopted Pursuant to Section 906 of
  the Sarbanes-Oxley Act of 2002                             Page 28
</TABLE>

                                      2
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

ITEM 1. FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET                                             SEPTEMBER 30,    DECEMBER 31,
(IN THOUSANDS EXCEPT SHARE DATA)                                           2002             2001
                                                                        (UNAUDITED)        (NOTE)
<S>                                                                    <C>              <C>
ASSETS
Cash and due from banks:
     Noninterest-bearing                                                 $   17,293       $  14,055
     Interest-bearing                                                           696           1,981
---------------------------------------------------------------------------------------------------
          Total cash and cash equivalents                                    17,989          16,036
Available-for-sale securities                                               497,161         433,969
Held-to-maturity securities                                                     823           1,448
Loans, net                                                                  425,315         373,963
Bank-owned life insurance                                                    16,553          15,905
Accrued interest receivable                                                   5,806           4,871
Bank premises and equipment, net                                             10,254           9,967
Foreclosed assets held for sale                                                 164             179
Other assets                                                                 10,747          10,661
---------------------------------------------------------------------------------------------------
TOTAL ASSETS                                                             $  984,812       $ 866,999
===================================================================================================

LIABILITIES
Deposits:
     Noninterest-bearing                                                 $   66,710       $  63,858
     Interest-bearing                                                       569,769         512,416
---------------------------------------------------------------------------------------------------
          Total deposits                                                    636,479         576,274
Dividends payable                                                             1,586           1,466
Short-term borrowings                                                        38,683          58,064
Long-term borrowings                                                        180,720         125,584
Accrued interest and other liabilities                                       12,546           5,424
---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES                                                           870,014         766,812
---------------------------------------------------------------------------------------------------

STOCKHOLDERS' EQUITY
Common stock, par value $1.00 per share; authorized 10,000,000
     shares; issued 5,431,021 in 2002 and 5,378,212 in 2001                   5,432           5,378
Stock dividend distributable                                                      -           1,369
Paid-in capital                                                              21,149          19,758
Retained earnings                                                            77,182          70,352
---------------------------------------------------------------------------------------------------
     Total                                                                  103,763          96,857
Accumulated other comprehensive income                                       13,181           5,284
Unamortized stock compensation                                                  (71)            (17)
Treasury stock, at cost:
     145,999 shares at September 30, 2002                                    (2,075)
     143,412 shares at December 31, 2001                                                     (1,937)
---------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY                                                  114,798         100,187
---------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                               $  984,812       $ 866,999
===================================================================================================
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

Note: The balance sheet at December 31, 2001 has been derived from the audited
financial statements at that date but does not include all the information and
notes required by generally accepted accounting principles for complete
financial statements.

                                      3
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

CONSOLIDATED STATEMENT OF INCOME

<TABLE>
<CAPTION>
                                                                      3 MONTHS ENDED                  FISCAL YEAR TO DATE
(IN THOUSANDS, EXCEPT PER SHARE DATA)             (UNAUDITED)   SEPTEMBER 30,   SEPTEMBER 30,    9 MONTHS ENDED    SEPTEMBER 30,
                                                                   2002            2001               2002            2001
INTEREST INCOME                                                  (CURRENT)     (PRIOR YEAR)         (CURRENT)     (PRIOR YEAR)
<S>                                                             <C>            <C>               <C>              <C>
   Interest and fees on loans                                   $    7,864      $    7,315          $   22,663      $   21,227
   Interest on balances with depository institutions                     5              12                  18              42
   Interest on loans to political subdivisions                         143             186                 435             534
   Interest on federal funds sold                                       16              33                  30             159
   Income from available-for-sale and
      held-to-maturity securities:
      Taxable                                                        4,810           4,971              14,598          14,980
      Tax-exempt                                                     1,523           1,172               4,291           3,132
      Dividends                                                        314             273                 805             811
------------------------------------------------------------------------------------------------------------------------------
   Total interest and dividend income                               14,675          13,962              42,840          40,885
------------------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE
   Interest on deposits                                              4,383           4,982              13,008          15,933
   Interest on short-term borrowings                                   221             887                 735           3,367
   Interest on long-term borrowings                                  2,071           1,168               5,993           2,507
------------------------------------------------------------------------------------------------------------------------------
   Total interest expense                                            6,675           7,037              19,736          21,807
------------------------------------------------------------------------------------------------------------------------------
   Interest margin                                                   8,000           6,925              23,104          19,078
   Provision for loan losses                                           280             150                 640             450
------------------------------------------------------------------------------------------------------------------------------
   Interest margin after provision for loan losses                   7,720           6,775              22,464          18,628
------------------------------------------------------------------------------------------------------------------------------

OTHER INCOME
   Service charges on deposit accounts                                 453             365               1,260             991
   Service charges and fees                                             61              62                 194             189
   Trust and financial management income                               413             375               1,358           1,189
   Insurance commissions, fees and premiums                            108             190                 448             443
   Increase in cash surrender value of life insurance                  213             230                 648             681
   Fees related to credit card operation                               168             132                 450             408
   Other operating income                                              226             246                 652             649
------------------------------------------------------------------------------------------------------------------------------
   Total other income before realized gains on securities, net       1,642           1,600               5,010           4,550
   Realized gains on securities, net                                   489             520               2,496           1,717
------------------------------------------------------------------------------------------------------------------------------
   Total other income                                                2,131           2,120               7,506           6,267
------------------------------------------------------------------------------------------------------------------------------
OTHER EXPENSES
   Salaries and wages                                                2,467           2,108               7,056           6,178
   Pensions and other employee benefits                                716             520               1,975           1,623
   Occupancy expense, net                                              229             247                 815             756
   Furniture and equipment expense                                     358             332               1,199           1,030
   Expenses related to credit card operation                            78              67                 214             205
   Pennsylvania shares tax                                             184             198                 550             592
   Other operating expense                                           1,278           1,103               3,855           3,369
------------------------------------------------------------------------------------------------------------------------------
   Total other expenses                                              5,310           4,575              15,664          13,753
------------------------------------------------------------------------------------------------------------------------------
   Income before income tax provision                                4,541           4,320              14,306          11,142
   Income tax provision                                                831             914               2,938           2,282
------------------------------------------------------------------------------------------------------------------------------
NET INCOME                                                      $    3,710      $    3,406          $   11,368      $    8,860
==============================================================================================================================

PER SHARE DATA:
Net income - basic                                              $     0.70      $     0.64          $     2.15      $     1.67
Net income - diluted                                            $     0.70      $     0.64          $     2.14      $     1.67
------------------------------------------------------------------------------------------------------------------------------
Dividend per share                                              $     0.30      $     0.26          $     0.86      $    $0.78
------------------------------------------------------------------------------------------------------------------------------
Number shares used in computation - basic                        5,284,582       5,287,147           5,287,034       5,298,985
Number shares used in computation - diluted                      5,301,740       5,287,991           5,300,728       5,299,393
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      4
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS) (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                           9 MONTHS ENDED
                                                                                    SEPTEMBER 30,    SEPTEMBER 30,
                                                                                        2002             2001
<S>                                                                                 <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                                                        $     11,368      $     8,860
  Adjustments to reconcile net income to net cash provided by
    operating activities:
    Provision for loan losses                                                                640              450
    Realized gains on securities, net                                                     (2,496)          (1,717)
    Gain on sale of foreclosed assets, net                                                   (26)             (69)
    Depreciation expense                                                                   1,054              933
    Accretion and amortization, net                                                         (508)          (1,584)
    Increase in cash surrender value of life insurance                                      (648)            (681)
    Amortization of restricted stock                                                          62               17
    Increase in accrued interest receivable and other assets                                (956)          (1,008)
    Increase in accrued interest payable and other liabilities                             3,148            3,871
-----------------------------------------------------------------------------------------------------------------
       Net Cash Provided by Operating Activities                                          11,638            9,072
-----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from maturity of held-to-maturity securities                                      616              916
  Purchase of held-to-maturity securities                                                      -             (626)
  Proceeds from sales of available-for-sale securities                                    25,650            9,094
  Proceeds from maturities of available-for-sale securities                              110,099           95,310
  Purchase of available-for-sale securities                                             (183,963)        (153,610)
  Purchase of restricted stock                                                              (125)            (481)
  Net increase in loans                                                                  (52,428)         (36,712)
  Purchase of premises and equipment                                                      (1,341)          (1,280)
  Proceeds from sale of foreclosed assets                                                    477              434
-----------------------------------------------------------------------------------------------------------------
       Net Cash Used in Investing Activities                                            (101,015)         (86,955)
-----------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net increase in deposits                                                                60,205           15,830
  Net decrease in short-term borrowings                                                  (19,381)         (20,780)
  Proceeds from long-term borrowings                                                      75,153          105,000
  Repayments of long-term borrowings                                                     (20,017)             (15)
  Purchase of treasury stock                                                                (238)            (521)
  Sale of treasury stock                                                                      60                -
  Dividends paid                                                                          (4,452)          (4,081)
-----------------------------------------------------------------------------------------------------------------
       Net Cash Provided by Financing Activities                                          91,330           95,433
-----------------------------------------------------------------------------------------------------------------
INCREASE IN CASH AND CASH EQUIVALENTS                                                      1,953           17,550
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR                                              16,036           13,824
-----------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                            $     17,989      $    31,374
=================================================================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
  Assets acquired through foreclosure of real estate loans                          $        436      $       388
  Interest paid                                                                     $     16,422      $    18,585
  Income taxes paid                                                                 $      3,599      $     2,028
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

                                      5
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM  10 - Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF INTERIM PRESENTATION

The financial information included herein, with the exception of the
consolidated balance sheet dated December 31, 2001, is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
adjustments) that are, in the opinion of management, necessary for a fair
presentation of the financial position, results of operations and cash flows
for the interim periods.

Results reported for the three-month and nine-month periods ended September 30,
2002 might not be indicative of the results for the year ending December 31,
2002.

Certain 2001 amounts have been reclassified to conform to the 2002 presentation.

This document has not been reviewed or confirmed for accuracy or relevance by
the Federal Deposit Insurance Corporation or any other regulatory agency.

2. PER SHARE DATA

Net income per share is based on the weighted-average number of shares of
common stock outstanding. The number of shares used in calculating net income
and cash dividends per share reflect the retroactive effect of stock dividends
for all periods presented. The following data show the amounts used in
computing net income per share and the weighted average number of shares of
dilutive stock options. The dilutive effect of stock options is computed as the
weighted-average common shares available from the exercise of all dilutive
stock options, less the number of shares that could be repurchased with the
proceeds of stock option exercises based on the average share price of the
Corporation's common stock during the period.

<TABLE>
<CAPTION>
                                                                              WEIGHTED-
                                                                               AVERAGE          EARNINGS
                                                              NET              COMMON             PER
                                                             INCOME            SHARES             SHARE
<S>                                                        <C>                <C>               <C>
9 MONTHS ENDED SEPTEMBER 30, 2002
Earnings per share - basic                                 $11,368,000        5,287,034           $2.15
Dilutive effect of stock options                                                 13,694
-------------------------------------------------------------------------------------------------------
Earnings per share - diluted                               $11,368,000        5,300,728           $2.14
=======================================================================================================

9 MONTHS ENDED SEPTEMBER 30, 2001
Earnings per share - basic                                 $ 8,860,000        5,298,985           $1.67
Dilutive effect of stock options                                                    408
-------------------------------------------------------------------------------------------------------
Earnings per share - diluted                               $ 8,860,000        5,299,393           $1.67
=======================================================================================================

QUARTER ENDED SEPTEMBER 30, 2002
Earnings per share - basic                                 $ 3,710,000        5,284,582           $0.70
Dilutive effect of stock options                                                 17,158
-------------------------------------------------------------------------------------------------------
Earnings per share - diluted                               $ 3,710,000        5,301,740           $0.70
=======================================================================================================

QUARTER ENDED SEPTEMBER 30, 2001
Earnings per share - basic                                 $ 3,406,000        5,287,147           $0.64
Dilutive effect of stock options                                                    844
-------------------------------------------------------------------------------------------------------
Earnings per share - diluted                               $ 3,406,000        5,287,991           $0.64
=======================================================================================================
</TABLE>

                                      6
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM  10 - Q

3. COMPREHENSIVE INCOME

Accounting principles generally require that recognized revenue, expenses,
gains and losses be included in net income. Although certain changes in assets
and liabilities, such as unrealized gains and losses on available-for-sale
securities, are reported as a separate component of the equity section of the
balance sheet, such items, along with net income, are components of
comprehensive income.

Comprehensive income is calculated as follows:

<TABLE>
<CAPTION>
                                                                           3 MONTHS ENDED                   9 MONTHS ENDED
                                                                    SEPTEMBER 30,  SEPTEMBER 30,     SEPTEMBER 30,   SEPTEMBER 30,
(IN THOUSANDS)                                                          2002           2001              2002            2001
<S>                                                                 <C>            <C>               <C>             <C>

Net income                                                             $ 3,710        $ 3,406           $11,368         $ 8,860
Other comprehensive income:
  Unrealized holding gains on available-for-sale securities:
    Gains arising during the period                                      6,387          6,891            14,461          13,643
    Reclassification adjustment for realized gains                        (489)          (520)           (2,496)         (1,717)
-------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income before income tax                             5,898          6,371            11,965          11,926
Income tax related to other comprehensive income                        (2,005)        (2,166)           (4,068)         (4,055)
-------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income                                               3,893          4,205             7,897           7,871
-------------------------------------------------------------------------------------------------------------------------------

Comprehensive income                                                   $ 7,603        $ 7,611           $19,265         $16,731
===============================================================================================================================
</TABLE>

4. DERIVATIVE FINANCIAL INSTRUMENTS

In June 2001, the Corporation began to utilize derivative financial instruments
related to a certificate of deposit product called the "Index Powered
Certificate of Deposit" (IPCD). IPCDs have a term of 5 years, with interest
paid at maturity based on 90% of the appreciation (as defined) in the S&P 500
index. There is no guaranteed interest payable to a depositor of an IPCD -
however, assuming an IPCD is held to maturity, a depositor is guaranteed the
return of his or her principal, at a minimum.

Statement of Financial Accounting Standards No. 133 requires the Corporation to
separate the amount received from each IPCD issued into 2 components: (1) an
embedded derivative, and (2) the principal amount of each deposit. Embedded
derivatives are derived from the Corporation's obligation to pay each IPCD
depositor a return based on appreciation in the S&P 500 index. Embedded
derivatives are carried at fair value, and are included in other liabilities in
the consolidated balance sheet. Changes in fair value of the embedded
derivative are included in other expense in the consolidated income statement.
The difference between the contractual amount of each IPCD issued, and the
amount of the embedded derivative, is recorded as the initial deposit (included
in interest-bearing deposits in the consolidated balance sheet). Interest
expense is added to principal ratably over the term of each IPCD at an
effective interest rate that will increase the principal balance to equal the
contractual IPCD amount at maturity.

In connection with IPCD transactions, the Corporation has entered into Equity
Indexed Call Option (Swap) contracts with the Federal Home Loan Bank of
Pittsburgh (FHLB-Pittsburgh). Under the terms of the Swap contracts, the
Corporation must pay FHLB-Pittsburgh quarterly amounts calculated based on the
contractual amount of IPCDs issued times a negotiated rate. In return,
FHLB-Pittsburgh is obligated to pay the Corporation, at the time of maturity of
the IPCDs, an amount equal to 90% of the appreciation (as defined) in the S&P
500 index. If the S&P 500 index does not appreciate over the term of the
related IPCDs, the FHLB-Pittsburgh would make no payment to the Corporation.
The effect of the Swap contracts is to limit the Corporation's cost of IPCD
funds to the market rate of interest paid to FHLB-Pittsburgh. (In addition, the
Corporation pays a fee of 0.75% to a consulting firm at inception of each
deposit. This fee is amortized to interest expense over the term of the IPCDs.)
Swap liabilities are carried at fair value, and included in other liabilities
in the consolidated balance sheet. Changes in fair value of swap liabilities
are included in other expense in the consolidated income statement.

                                      7
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

Amounts recorded related to IPCDs are as follows (in thousands):

<TABLE>
<CAPTION>
                                                           SEPTEMBER 30,      DECEMBER 31,
                                                               2002               2001
<S>                                                        <C>                <C>
Contractual amount of IPCDs (equal
  to notional amount of Swap contracts)                       $2,911             $1,410

Carrying value of IPCDs                                        2,449              1,154

Carrying value of embedded derivative liabilities                119                233

Carrying value of Swap contract liabilities                      349                 31
</TABLE>

<TABLE>
<CAPTION>
                                                             3 MONTHS ENDED                     9 MONTHS ENDED
                                                       SEPTEMBER 30,     SEPTEMBER 30,    SEPTEMBER 30,      SEPTEMBER 30,
(IN THOUSANDS)                                             2002              2001              2002              2001
<S>                                                    <C>               <C>              <C>                <C>
Interest expense                                           $24              $ 6                 61                 7

Other expense                                               (4)              10                  1                10
</TABLE>

CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

PART I - FINANCIAL INFORMATION (CONTINUED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS

Certain statements in this section and elsewhere in Form 10-Q are
forward-looking statements. Citizens & Northern Corporation and its
wholly-owned subsidiaries (collectively, the Corporation) intend such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995. Forward-looking statements, which are based on certain assumptions and
describe future plans, business objectives and expectations, are generally
identifiable by the use of words such as, "believe", "expect", "intend",
"anticipate", "estimate", "project", and similar expressions. The Corporation's
ability to predict results or the actual effect of future plans or occurrences
is inherently uncertain. Factors which could have a material adverse effect on
the operations and future prospects of the Corporation include, but are not
limited to, the following:

-        changes in monetary and fiscal policies of the U.S. Treasury and
         the Federal Reserve Board, particularly related to changes in
         interest rates

-        changes in general economic conditions

-        legislative or regulatory changes

-        downturn in demand for loan, deposit and other financial services
         in the Corporation's market area

-        increased competition from other banks and non-bank providers of
         financial services

-        technological changes and increased technology-related costs

-        changes in accounting principles.

These risks and uncertainties should be considered in evaluating
forward-looking statements and undue reliance should not be placed on such
statements.

REFERENCES TO 2002 AND 2001

Unless otherwise noted, all references to "2002" in the following discussion of
operating results are intended to mean the nine months ended September 30,
2002, and similarly, references to "2001" are intended to mean the nine months
ended September 30, 2001.

                                      8
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

EARNINGS OVERVIEW

Net income for 2002 was $11,368,000, or $2.15 per share - basic and $2.14 per
share - diluted. This represents an increase of 28.1% in net income per share -
diluted over 2001. Return on average assets, excluding unrealized gains and
losses on securities, increased 10.0%, to 1.65% in 2002 compared to 1.50% in
2001. Including the effects of unrealized gains and losses on securities,
return on average assets increased to 1.64% in 2002 from 1.50% in 2001. Return
on average equity, excluding unrealized gains and losses on securities, rose
18.6%, to 15.47% in 2002 from 13.04% in 2001. Including unrealized gains and
losses on securities, return on average equity increased 14.5%, to 14.43% in
2002 from 12.60% in 2001.

The most significant income statement changes between 2002 and 2001 were as
follows:

       -    The interest margin increased significantly ($4,026,000,
            or 21.1%), to $23,104,000 in 2002 from $19,078,000 in 2001. The
            Corporation has experienced significant growth in deposits and
            loans, and has identified opportunities to borrow funds and invest
            the proceeds in securities at positive spreads. Also, average
            interest rates on deposits and borrowed funds have been lower in
            2002, as the Corporation's average rates were more fully impacted
            by the Federal Reserve Board's lowering of the federal funds target
            rate several times throughout 2001. Changes in the net interest
            margin are discussed in more detail later in Management's
            Discussion and Analysis.

       -    Net realized gains on securities were $2,496,000 in 2002, compared
            to $1,717,000 in 2001. In both years, the gains were mainly from
            sales of bank stocks. These sales resulted from circumstances
            specific to each underlying company, and the proceeds have been
            reinvested in other bank stocks. Total gains from sales of bank
            stocks amounted to $1,789,000 in 2002 and $1,837,000 in 2001. In
            addition to bank stocks, the Corporation also realized gains and
            losses from sales and calls of other securities. The main reasons
            for the increase in net realized gains in 2002 over 2001 were that
            gains from sales and calls of municipal bonds increased to $461,000
            in 2002 from $56,000 in 2001, and the Corporation sold a corporate
            bond for a loss of $354,000 in 2001.

       -    Other (noninterest) expenses increased $1,911,000, or 13.9%, in 2002
            compared to 2001. The increase reflects increases in payroll costs,
            depreciation and maintenance agreements associated with computer
            hardware and software. These types of costs have increased as a
            result of the need to add personnel and supplement existing systems
            to keep up with expansion of services and growth in lending activity
            over the last few years.

       -    The income tax provision increased to $2,938,000 in 2002 from
            $2,282,000 in 2001, because pre-tax income is higher.

THIRD QUARTER 2002

Net income for the third quarter 2002 was $3,710,000, or 8.9% higher than net
income for the third quarter 2001 of $3,406,000. The major changes between
periods are described as follows:

       -    The interest margin increased $1,075,000 for the third quarter 2002
            compared to the third quarter 2001, while noninterest expenses
            increased $735,000 between the periods. The major reasons for these
            changes are the same as described in the comparison of the nine
            months ended September 30, 2002 and 2001 operating results above.

       -    The provision for loan losses increased $130,000, to $280,000 for
            the third quarter 2002 compared to $150,000 for the third quarter
            2001. The increase in loan loss expense resulted mainly from higher
            allowances calculated on "Watch List" loans (mainly commercial and
            residential mortgage loans). Accounting for loan losses is described
            in more detail in the "Provision and Allowance for Loan Losses"
            section of Management's Discussion and Analysis.

       -    The income tax provision fell to $831,000 (18.3% of pre-tax income)
            for the third quarter from $914,000 (20.5% of pre-tax income) for
            the third quarter 2001. The lower tax rate for the third quarter
            2002 resulted mainly from tax deductions arising from contributions
            of appreciated securities, and from a higher level of investments in
            tax-exempt securities (municipal bonds).

                                      9
<PAGE>
CITIZENS &  NORTHERN CORPORATION - FORM 10 - Q

Net income for the third quarter 2002 is slightly less than the $3,820,000
reported in the second quarter 2002 and $3,838,000 reported in the first
quarter 2002. As you can see in Table I, the interest margin increased
$222,000 in the thir d quarter over the second quarter, and $452,000 in the
second quarter over the first quarter. However, net securities gains were
$292,000 lower in the third quarter than the second quarter, and $445,000 lower
in the second quarter than in the first quarter.

TABLE I - QUARTERLY FINANCIAL DATA
(IN THOUSANDS) (UNAUDITED)

<TABLE>
<CAPTION>
                                              SEPT. 30,    JUNE 30,    MAR. 31,    DEC. 31,     SEPT. 30,    JUNE 30,     MAR. 31,
                                                2002         2002       2002         2001         2001         2001         2001
<S>                                           <C>          <C>         <C>         <C>          <C>          <C>          <C>
Interest income                               $14,675      $14,523     $13,642      $13,776      $13,962      $13,830     $13,093
Interest expense                                6,675        6,745       6,316        6,549        7,037        7,278       7,492
---------------------------------------------------------------------------------------------------------------------------------
Interest margin                                 8,000        7,778       7,326        7,227        6,925        6,552       5,601
Provision for loan losses                         280          180         180          150          150          150         150
---------------------------------------------------------------------------------------------------------------------------------
Interest margin after provision for loan
  losses                                        7,720        7,598       7,146        7,077        6,775        6,402       5,451
Other income                                    1,642        1,681       1,687        1,570        1,600        1,516       1,434
Securities gains                                  489          781       1,226          203          520          742         455
Other expenses                                  5,310        5,248       5,106        4,918        4,575        4,580       4,598
---------------------------------------------------------------------------------------------------------------------------------
Income before income tax provision              4,541        4,812       4,953        3,932        4,320        4,080       2,742
Income tax provision                              831          992       1,115          740          914          891         477
---------------------------------------------------------------------------------------------------------------------------------
Net income                                    $ 3,710      $ 3,820     $ 3,838      $ 3,192      $ 3,406      $ 3,189     $ 2,265
=================================================================================================================================
Net income per share - basic                  $  0.70      $  0.72     $  0.73      $  0.60      $  0.64      $  0.60     $  0.43
=================================================================================================================================
Net income per share - diluted                $  0.70      $  0.72     $  0.72      $  0.60      $  0.64      $  0.60     $  0.43
=================================================================================================================================
</TABLE>

The number of shares used in calculating net income per share for each quarter
of 2001 reflects the retroactive effect of a 1% stock dividend declared in
December 2001 and issued in January 2002.

PROSPECTS FOR THE 4TH QUARTER 2002

Management believes prospects for the fourth quarter of 2002 continue to be
very good. Net loans are up 18.5% as of September 30, 2002 compared to one
year earlier. The Corporation's major concentration continues to be real
estate secured loans, with significant growth over the last 12 months in both
residential and commercial loans outstanding.

Deposits and customer repurchase agreements have also grown substantially (up
16.1% as of September 30, 2002 compared to one year earlier), and there
continues to be significant customer demand in recent months. The largest
categories of deposit growth in recent months have been CDs, money market
accounts and IRAs. It appears that investors have moved funds out of, or are
not investing new dollars in, the U.S. stock market. Although the
Corporation's rates paid on deposits have fallen over the last several months,
rates have remained relatively high compared with rates paid by many bank and
non-bank competitors. Also, the Corporation has developed some new, innovative
CD products over the last 18 months. In June 2001, the Corporation began to
offer Index Powered CDs, which are described in more detail in Note 4 to the
consolidated financial statements. Effective in May 2002, the Corporation
began to offer "Roll-up" CDs. Roll-up CDs allow the investor to increase the
interest rate, to the Corporation's current CD rate for the same term, once
during a 3-year, 4-year or 5-year term, subject to limitations. This roll-up
feature permits the investor an opportunity to receive a higher rate of
return, if rates increase, without risk of reduction in rate over the term of
the CD.

On November 6, 2002, the Federal Reserve lowered its Federal funds target rate
by 50 basis points, to 1.25%. In response to this change, most U.S. financial
institutions (including Citizens & Northern Bank) have lowered their prime
rates on commercial loans. Also, management expects to decrease rates on some
other loan and deposit products. At this historically low level of interest
rates, management expects a great deal of refinancing activity to continue,
resulting in mortgage-backed securities and mortgage loans continuing to repay
at rapid rates. Overall (net), the recent action of the Fed is not expected to
have a major impact on the Corporation's operating results for the fourth
quarter 2002.

                                      10
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

The other major variable that could affect 2002 earnings is securities gains and
losses. The Corporation had net realized gains of approximately $300,000 in the
month of October 2002. However, management makes decisions regarding the sales
of securities based on a variety of factors, with an overall goal of maximizing
portfolio return over a long-term horizon. Therefore, it is impossible to
predict, with any degree of precision, the amounts of securities gains and
losses that may be realized over the remainder of 2002.

CRITICAL ACCOUNTING POLICIES

The presentation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect many of the reported amounts and disclosures. Actual results could differ
from these estimates.

A material estimate that is particularly susceptible to significant change is
the determination of the allowance for loan losses. Management believes that the
allowance for loan losses is adequate and reasonable. The Corporation's
methodology for determining the allowance for loan losses is described in a
separate section later in Management's Discussion and Analysis. Given the very
subjective nature of identifying and valuing loan losses, it is likely that
well-informed individuals could make materially different assumptions, and
could, therefore, calculate a materially different allowance value. While
management uses available information to recognize losses on loans, changes in
economic conditions may necessitate revisions in future years. In addition,
various regulatory agencies, as an integral part of their examination process,
periodically review the Corporation's allowance for loan losses. Such agencies
may require the Corporation to recognize adjustments to the allowance based on
their judgments of information available to them at the time of their
examination. Further, a task force of the American Institute of Certified Public
Accountants is working on detailed implementation guidance for calculating the
allowance for loan losses. Implementation of that detailed implementation
guidance could result in an adjustment to the allowance; however, based on the
latest targeted effective date, that guidance would not affect the Corporation
until 2004.

Another material estimate is the calculation of fair values of the Corporation's
debt securities. The Corporation receives estimated fair values of debt
securities from an independent valuation service, or from brokers. In developing
these fair values, the valuation service and the brokers use estimates of cash
flows, based on historical performance of similar instruments in similar
interest rate environments. Based on experience, management is aware that
estimated fair values of debt securities tend to vary among brokers and other
valuation services. Accordingly, when selling debt securities, management
typically obtains price quotes from more than one source. The large majority of
the Corporation's securities are classified as available-for-sale. Accordingly,
these securities are carried at fair value on the consolidated balance sheet,
with unrealized gains and losses excluded from earnings and reported separately
through accumulated other comprehensive income (included in stockholders'
equity).

NET INTEREST MARGIN

The Corporation's primary source of operating income is represented by the net
interest margin. The net interest margin is equal to the difference between the
amounts of interest income and interest expense. Tables II, III and IV include
information regarding the Corporation's net interest margin for 2002 and 2001.
In each of these tables, the amounts of interest income earned on tax-exempt
securities and loans have been adjusted to a fully taxable-equivalent basis.
Accordingly, the net interest margin amounts reflected in these tables exceed
the amounts presented in the consolidated financial statements. The discussion
that follows is based on amounts in the Tables.

The net interest margin, on a tax-equivalent basis, was $25,820,000 in 2002, an
increase of $4,568,000, or 22.1%, over 2001. As reflected in Table IV, the
increase in net interest margin was caused by a combination of growth in volume
and lower average interest rates. Increased interest income from higher volumes
of earning assets exceeded increases in interest expense attributable to higher
volumes of interest-bearing liabilities by $2,896,000 in 2002. Table IV also
shows that interest rate changes had the effect of increasing net interest
income $1,672,000 in 2002 over 2001. As presented in Table III, the "Interest
Rate Spread" (excess of average rate of return on interest-bearing assets over
average cost of funds on interest-bearing liabilities) widened to 3.43% for the
first 9 months of 2002. The Interest Rate Spread was 3.17% for the year ended
December 31, 2001, and 3.08% for the first 9 months of 2001.

                                      11
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

INTEREST INCOME AND EARNING ASSETS

Interest income increased 5.9% to $45,016,000 in 2002 from $42,519,000 in 2001.
Income from available-for-sale securities increased $1,381,000, or 6.8%, and
interest from loans increased $1,301,000 or 5.9%. Overall, the increase in
interest income resulted from higher volumes of securities and loans, which more
than offset the effect of lower interest rates.

As indicated in Table III, average available-for-sale securities in 2002
amounted to $462,103,000, an increase of 18.3% over the first 9 months of 2001.
In total, available-for-sale securities grew because management was able to
identify opportunities to borrow funds and invest the proceeds in securities at
a positive spread. These opportunities were available because of the "steep
yield curve" (longer-term interest rates much higher than shorter-term rates)
that existed throughout most of 2001 and the first 9 months of 2002. The average
rate of return on available-for-sale securities was 6.26% for 2002, considerably
lower than the 6.93% level in the first half of 2001.

Table III also shows that the composition of the available-for-sale securities
portfolio has changed significantly. The average balance of U.S. Government
agency securities fell to 17% of the average balance of the total portfolio in
2002 from 32% in the first 9 months of 2001. In contrast, the average balance of
mortgage-backed securities increased to 46% of the total portfolio in 2002 from
35% in the first 9 months of 2001. In the third and fourth quarters of 2001, as
a result of declining interest rates, substantial amounts of U.S. Government
agency securities were called. The Corporation reinvested much of the proceeds
in mortgage-backed securities. Also, much of the leveraged security purchases
described above consisted of mortgage-backed securities. The portfolio's
increased weighting in mortgage-backed securities is designed to provide
increased cash flow, in the form of monthly principal and interest payments.
This increased level of cash inflows will be available to be reinvested at
higher rates when interest rates rise.

Obligations of state and political subdivisions (municipal bonds) also were a
larger portion of the portfolio in 2002 than in 2001. The average balance of
municipal bonds grew to $109,556,000, or 24% of the portfolio, in 2002 from
$74,849,000, or 19% of the portfolio, in the first 9 months of 2001. On a
taxable equivalent basis, municipal bonds are the highest yielding category of
available-for-sale security. The Corporation determines the levels of its
municipal bond holdings based on income tax planning and other considerations.

Other securities consist of corporate obligations, mainly "Trust Preferred
Securities" issued by financial institutions. Trust Preferred Securities are
long-term obligations (usually 20-40 year maturities, often callable at the
issuer's option after 5-10 years) which bear interest at fixed or variable
rates. The average balance of other securities increased to $38,481,000 in 2002
from $28,714,000 for the first 9 months of 2001, primarily as a result of
purchases of Trust Preferred Securities.

The average balance of gross loans increased 18.2% in 2002 over the first 9
months of 2001, to $401,302,000 from $339,484,000. The largest area of growth
was real estate secured loans, with substantial increases in both residential
and commercial mortgages. Among the factors that helped create the growth in
loans was the opening of the Muncy, PA office in October 2000. The Corporation
also increased its lending staff in Bradford and Tioga (PA) Counties during the
second half of 2001. The average rate of return on loans fell to 7.76% in 2002
from 8.66% in the first 9 months of 2001, due to lower market rates. The
Corporation experienced a great deal of refinancing and rate modification
activity in 2001, which has impacted loan yields in 2002, and probably will
continue to impact returns for the next few years.

INTEREST EXPENSE AND INTEREST-BEARING LIABILITIES

Interest expense fell $2,071,000, or 9.5%, to $19,736,000 in 2002 from
$21,807,000 in 2001. Overall, the impact of lower interest rates more than
offset higher volumes of interest-bearing liabilities in 2002 compared to 2001.
In Table IV, you can see the impact of lower interest rates on the Corporation's
major categories of interest-bearing deposits - principally, CDs, money market
accounts and savings accounts. Table IV also shows that interest expense from
other borrowed funds increased in 2002 by $968,000 over 2001. This increase was
attributable to higher average balances, related to borrowings used to purchase
available-for-sale securities, as discussed earlier.

As you can calculate from Table III, total average deposits (interest-bearing
and noninterest-bearing) increased to $604,677,000 in 2002 from $539,796,000 in
the first 9 months of 2001. This represents an increase of 12.1%. Of the
increase in average deposits, the largest growth categories were CDs (growth in
average balance of $26,036,000, or 15.6%), money market accounts ($16,914,000,
or 11.1%), IRAs ($10,096,000, or 12.7%) and demand deposits ($7,206,000, or
13.0%). Table III also reflects the downward trend in interest rates incurred on
liabilities, as the overall cost of funds on interest-bearing liabilities fell
to 3.50% for 2002, from 4.40% for the year ended December 31, 2001 and 4.61% for
the first 9 months of 2001.

                                      12
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

TABLE II -  ANALYSIS OF INTEREST INCOME AND EXPENSE

<TABLE>
<CAPTION>
                                                                          NINE MONTHS ENDED
                                                                             SEPTEMBER 30,    INCREASE/
(IN THOUSANDS)                                                              2002     2001     (DECREASE)
<S>                                                                       <C>       <C>       <C>
INTEREST INCOME
Available-for-sale securities:
     U.S. Treasury securities                                             $    75   $   113    $   (38)
     Securities of other U.S. Government agencies
       and corporations                                                     3,696     6,453     (2,757)
     Mortgage-backed securities                                             8,768     6,654      2,114
     Obligations of states and political subdivisions                       6,266     4,529      1,737
     Equity securities                                                        805       811         (6)
     Other securities                                                       2,014     1,683        331
------------------------------------------------------------------------------------------------------
          Total available-for-sale securities                              21,624    20,243      1,381
------------------------------------------------------------------------------------------------------
Held-to-maturity securities:
     U.S. Treasury securities                                                  23        30         (7)
     Securities of other U.S. Government agencies
       and corporations                                                        16        34        (18)
     Mortgage-backed securities                                                 6        13         (7)
------------------------------------------------------------------------------------------------------
          Total held-to-maturity securities                                    45        77        (32)
------------------------------------------------------------------------------------------------------
Interest-bearing due from banks                                                18        42        (24)
Federal funds sold                                                             30       159       (129)
Loans:
     Real estate loans                                                     18,830    17,327      1,503
     Consumer                                                               2,186     2,291       (105)
     Agricultural                                                             148       143          5
     Commercial/industrial                                                  1,440     1,401         39
     Other                                                                     50        53         (3)
     Political subdivisions                                                   636       771       (135)
     Leases                                                                     9        12         (3)
------------------------------------------------------------------------------------------------------
          Total loans                                                      23,299    21,998      1,301
------------------------------------------------------------------------------------------------------
Total Interest Income                                                      45,016    42,519      2,497
------------------------------------------------------------------------------------------------------

INTEREST EXPENSE
Interest checking                                                             330       529       (199)
Money market                                                                3,008     4,368     (1,360)
Savings                                                                       380       785       (405)
Certificates of deposit                                                     5,933     7,157     (1,224)
Individual Retirement Accounts                                              3,331     3,064        267
Other time deposits                                                            26        30         (4)
Federal funds purchased                                                        33       147       (114)
Other borrowed funds                                                        6,695     5,727        968
------------------------------------------------------------------------------------------------------
Total Interest Expense                                                     19,736    21,807     (2,071)
------------------------------------------------------------------------------------------------------

Net Interest Income                                                       $25,280   $20,712    $ 4,568
======================================================================================================
</TABLE>

Note: Interest income from tax-exempt securities and loans has been adjusted to
a fully tax-equivalent basis, using the Corporation's marginal federal income
tax rate of 34%.

                                      13
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

TABLE III - ANALYSIS OF AVERAGE DAILY BALANCES AND RATES

<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)                                     9 MONTHS               YEAR               9 MONTHS
                                                             ENDED    RATE OF     ENDED    RATE OF     ENDED    RATE OF
                                                           9/30/2002  RETURN/  12/31/2001  RETURN/   9/30/2001  RETURN/
                                                            AVERAGE   COST OF    AVERAGE   COST OF    AVERAGE   COST OF
                                                            BALANCE   FUNDS %    BALANCE   FUNDS %    BALANCE   FUNDS %
<S>                                                        <C>        <C>      <C>         <C>       <C>        <C>
EARNING ASSETS
Available-for-sale securities, at amortized cost:
     U.S. Treasury securities                              $  1,659    6.04%    $  2,506     6.03%   $  2,507    6.03%
     Securities of other U.S. Government agencies and
       corporations                                          77,348    6.39%     113,186     6.82%    125,822    6.86%
     Mortgage-backed securities                             213,752    5.48%     150,838     6.29%    137,353    6.48%
     Obligations of states and political subdivisions       109,556    7.65%      78,741     7.89%     74,849    8.09%
     Equity securities                                       21,307    5.05%      21,062     5.18%     21,343    5.08%
     Other securities                                        38,481    7.00%      29,577     7.59%     28,714    7.84%
----------------------------------------------------------------------------------------------------------------------
          Total available-for-sale securities               462,103    6.26%     395,910     6.80%    390,588    6.93%
----------------------------------------------------------------------------------------------------------------------
Held-to-maturity securities:
     U.S. Treasury securities                                   566    5.43%         742     5.39%        742    5.41%
     Securities of other U.S. Government agencies and
     corporations                                               342    6.25%         680     6.32%        713    6.38%
     Mortgage-backed securities                                 142    5.65%         205     7.80%        217    8.01%
----------------------------------------------------------------------------------------------------------------------
          Total held-to-maturity securities                   1,050    5.73%       1,627     6.08%      1,672    6.16%
----------------------------------------------------------------------------------------------------------------------
Interest-bearing due from banks                               1,513    1.59%       2,659     3.08%      1,997    2.81%
Federal funds sold                                            2,455    1.63%       5,064     3.63%      5,224    4.07%
Loans:
     Real estate loans                                      329,870    7.63%     279,828     8.37%    273,584    8.47%
     Consumer                                                29,286    9.98%      28,062    10.89%     27,790   11.02%
     Agricultural                                             2,520    7.85%       2,070     9.18%      2,043    9.36%
     Commercial/industrial                                   27,765    6.93%      22,212     8.24%     21,991    8.52%
     Other                                                      982    6.81%         892     7.62%        906    7.82%
     Political subdivisions                                  10,751    7.91%      13,108     7.96%     12,981    7.94%
     Leases                                                     128    9.40%         181     9.39%        189    9.20%
----------------------------------------------------------------------------------------------------------------------
          Total loans                                       401,302    7.76%     346,353     8.56%    339,484    8.66%
----------------------------------------------------------------------------------------------------------------------
          Total Earning Assets                              868,423    6.93%     751,613     7.57%    738,965    7.69%
Cash                                                         13,531               11,871               11,735
Unrealized gain/loss on securities                           10,703                6,639                4,707
Allowance for loan losses                                    (5,386)              (5,370)              (5,384)
Bank premises and equipment                                  10,218                9,602                9,508
Other assets                                                 31,591               30,874               30,947
----------------------------------------------------------------------------------------------------------------------
Total Assets                                               $929,080             $805,229             $790,478
======================================================================================================================

INTEREST-BEARING LIABILITIES
Interest checking                                          $  37,934   1.16%    $ 37,192     1.75%   $ 36,626    1.93%
Money market                                                 169,615   2.37%     153,738     3.49%    152,701    3.82%
Savings                                                       49,735   1.02%      46,750     2.16%     46,284    2.27%
Certificates of deposit                                      193,322   4.10%     169,275     5.48%    167,286    5.72%
Individual Retirement Accounts                                89,344   4.98%      79,482     5.12%     79,248    5.17%
Other time deposits                                            2,112   1.65%       1,916     1.83%      2,242    1.79%
Federal funds purchased                                        2,255   1.96%       4,012     4.01%      4,560    4.31%
Other borrowed funds                                         208,785   4.29%     151,615     5.13%    143,775    5.33%
----------------------------------------------------------------------------------------------------------------------
          Total Interest-bearing Liabilities                 753,102   3.50%     643,980     4.40%    632,722    4.61%

Demand deposits                                               62,615              56,226               55,409
Other liabilities                                              8,055               9,002                8,349
----------------------------------------------------------------------------------------------------------------------
Total Liabilities                                            823,772             709,208              696,480
----------------------------------------------------------------------------------------------------------------------
Stockholders' equity, excluding other comprehensive
     income/loss                                              98,239              91,703               90,833
Other comprehensive income/loss                                7,069               4,318                3,165
----------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity                                   105,308              96,021               93,998
----------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity                 $ 929,080            $805,229             $790,478
======================================================================================================================
Interest Rate Spread                                                   3.43%                 3.17%              3.08%
Net Interest Income/Earning Assets                                     3.89%                 3.80%              3.75%
</TABLE>

(1)      Rates of return on tax-exempt securities and loans are presented on a
         fully taxable-equivalent basis.

(2)      Nonaccrual loans have been included with loans for the purpose of
         analyzing net interest earnings.

                                      14
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

TABLE IV -  ANALYSIS OF VOLUME AND RATE CHANGES

<TABLE>
<CAPTION>
(IN THOUSANDS)                                                      NINE MONTHS ENDED 9/30/02 VS. 9/30/01
                                                                   CHANGE IN         CHANGE IN      TOTAL
                                                                    VOLUME              RATE       CHANGE
<S>                                                                <C>               <C>          <C>
EARNING ASSETS
Available-for-sale securities:
     U.S. Treasury securities                                      $    (38)         $      -     $    (38)
     Securities of other U.S. Government agencies
       and corporations                                              (2,342)             (415)      (2,757)
     Mortgage-backed securities                                       3,257            (1,143)       2,114
     Obligations of states and political subdivisions                 1,997              (260)       1,737
     Equity securities                                                   (1)               (5)          (6)
     Other securities                                                   526              (195)         331
----------------------------------------------------------------------------------------------------------
          Total available-for-sale securities                         3,399            (2,018)       1,381
----------------------------------------------------------------------------------------------------------
Held-to-maturity securities:
     U.S. Treasury securities                                            (7)                -           (7)
     Securities of other U.S. Government agencies
       and corporations                                                 (17)               (1)         (18)
     Mortgage-backed securities                                          (3)               (4)          (7)
----------------------------------------------------------------------------------------------------------
          Total held-to-maturity securities                             (27)               (5)         (32)
----------------------------------------------------------------------------------------------------------
Interest-bearing due from banks                                          (9)              (15)         (24)
Federal funds sold                                                      (61)              (68)        (129)
Loans:
     Real estate loans                                                3,326            (1,823)       1,503
     Consumer                                                           119              (224)        (105)
     Agricultural                                                        30               (25)           5
     Commercial/industrial                                              328              (289)          39
     Other                                                                4                (7)          (3)
     Political subdivisions                                            (132)               (3)        (135)
     Leases                                                              (3)                -           (3)
----------------------------------------------------------------------------------------------------------
          Total loans                                                 3,672            (2,371)       1,301
----------------------------------------------------------------------------------------------------------
Total Interest Income                                                 6,974            (4,477)       2,497
----------------------------------------------------------------------------------------------------------

INTEREST-BEARING LIABILITIES
Interest checking                                                        18              (217)        (199)
Money market                                                            442            (1,802)      (1,360)
Savings                                                                  55              (460)        (405)
Certificates of deposit                                               1,002            (2,226)      (1,224)
Individual Retirement Accounts                                          379              (112)         267
Other time deposits                                                      (2)               (2)          (4)
Federal funds purchased                                                 (55)              (59)        (114)
Other borrowed funds                                                  2,239            (1,271)         968
----------------------------------------------------------------------------------------------------------
Total Interest Expense                                                4,078            (6,149)      (2,071)
----------------------------------------------------------------------------------------------------------

Net Interest Income                                                $  2,896          $  1,672     $  4,568
==========================================================================================================
</TABLE>

(1) Changes in income on tax-exempt securities and loans are presented on a
fully taxable-equivalent basis, using the Corporation's marginal federal income
tax rate of 34%.

(2) 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.

                                      15
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

TABLE IV - COMPARISON OF NONINTEREST INCOME

<TABLE>
<CAPTION>
(IN THOUSANDS)                                                          9 MONTHS ENDED
                                                               SEPTEMBER 30,       SEPTEMBER 30,
                                                                   2002                2001
<S>                                                            <C>                 <C>
Service charges on deposit accounts                               $1,260              $  991
Service charges and fees                                             194                 189
Trust and financial management revenue                             1,358               1,189
Insurance commissions, fees and premiums                             448                 443
Increase in cash surrender value of life insurance                   648                 681
Fees related to credit card operation                                450                 408
Other operating income                                               652                 649
------------------------------------------------------------------------------------------------
Total other operating income, before realized
gains on securities, net                                           5,010               4,550
Realized gains on securities, net                                  2,496               1,717
------------------------------------------------------------------------------------------------
Total Other Income                                                $7,506              $6,267
================================================================================================
</TABLE>

Total noninterest income increased $1,239,000, or 19.8%, in 2002 compared to
2001. The increase in net realized security gains is discussed in the "Earnings
Overview" section of Management's Discussion and Analysis. Other items of
significance are as follows:

-      Service charges on deposit accounts increased $269,000, or 27.1%. This
       increase resulted from growth in deposits, as well as fee increases
       implemented in the second half of 2001 on certain types of services.

-      Trust and financial management revenue increased $169,000, or 14.2%.
       This increase resulted from fee increases implemented in the latter
       part of 2001, and from receipt of certain fees for services provided
       prior to 2002. Trust revenue is recorded on a cash basis, which does
       not vary materially from the accrual basis.

TABLE V - COMPARISON OF NONINTEREST EXPENSE

<TABLE>
<CAPTION>
(IN THOUSANDS)
                                                                       9 MONTHS ENDED
                                                             SEPTEMBER 30,       SEPTEMBER 30,
                                                                 2002                2001
<S>                                                          <C>                 <C>
Salaries and wages                                              $ 7,056             $ 6,178
Pensions and other employee benefits                              1,975               1,623
Occupancy expense, net                                              815                 756
Furniture and equipment expense                                   1,199               1,030
Expenses related to credit card operation                           214                 205
Pennsylvania shares tax                                             550                 592
Other operating expense                                           3,855               3,369
----------------------------------------------------------------------------------------------
Total Other Expense                                             $15,664             $13,753
==============================================================================================
</TABLE>

Salaries and wages increased $878,000, or 14.2%, in 2002 compared to 2001. The
increase is the result of annual merit raises ranging from 2%-5%, an increase in
the number of employees and an increase in incentive bonus expense. Increases in
staff during the last half of 2001 and first 9 months of 2002 included the
addition of new positions in branch and commercial lending, branch
administration, compliance and marketing. The incentive bonus plan provides for
compensation to be paid to certain key officers early in the following year,
with the payment amounts based on a combination of personal and corporate
performance in the current year. The estimate of such expense for 2002 increased
$275,000 over 2001.

                                      16
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

Pensions and other employee benefits increased $352,000, or 21.7%, in 2002 over
2001. A portion of this increase is directly related to the increase in salaries
and wages. Also, pension expense from the Corporation's defined benefit pension
plan increased $181,000 in 2002 over 2001. Although the defined benefit pension
plan remains adequately funded, a decline in the market value of plan assets was
the main cause of the increase in expense in 2002.

Furniture and equipment expense increased $169,000, or 16.4%, in 2002 compared
to 2001. The largest increase within this category was in depreciation expense,
which increased $94,000. There were several substantial capital expenditures
over the last half of 2001 and first 9 months of 2002 that produced higher
depreciation expense in 2002. The most significant items were new proof of
deposit software, a new phone system and ongoing purchases of PCs and software
required to maintain and upgrade the computer network. Repairs and maintenance
expense increased $43,000, primarily from maintenance contracts associated with
computer hardware and software.

Other expense increased $486,000, or 14.4%, in 2002 over 2001. This category
includes many different types of expenses. Some of the overall increase in this
category was caused by increases in number of transactions processed and number
of employees. The most significant individual change within this category was an
increase of $89,000 in expenses from Bucktail Life Insurance Company, which
resulted mainly from a larger amount of life insurance claims incurred. Other
increases in other expenses included: (1) marketing research and training
materials of $48,000, to $99,000, (2) restricted stock amortization of $45,000,
to $62,000, (3) attorney and other professional fees of $40,000, to $305,000,
(4) office supplies of $35,000, to $343,000, (5) fees to the Federal Reserve and
other financial institutions of $27,000, to $77,000, and (6) public relations
expense of $25,000, to $177,000.

FINANCIAL CONDITION

Significant changes in the average balances of the Corporation's earning assets
and interest-bearing liabilities are described in the "Net Interest Margin"
section of Management's Discussion and Analysis. There are no significant
changes in the Corporation's consolidated balance sheet as of September 30, 2002
compared to December 31, 2001, other than the items addressed in that
discussion. Table VII provides a summary of investment securities held at
September 30, 2002 and December 31, 2001. The allowance for loan losses and
stockholders' equity are discussed in separate sections of Management's
Discussion and Analysis.

TABLE VII - INVESTMENT SECURITIES

<TABLE>
<CAPTION>
(IN THOUSANDS)
                                                        SEPTEMBER 30, 2002        DECEMBER 31, 2001
                                                       AMORTIZED       FAIR      AMORTIZED     FAIR
                                                          COST         VALUE        COST       VALUE
<S>                                                    <C>           <C>         <C>          <C>
AVAILABLE-FOR-SALE SECURITIES:
Obligations of the U.S. Treasury                        $      -     $      -    $  2,503     $  2,557
Obligations of other U.S. Government agencies             71,312       72,224      75,295       75,172
Obligations of states and political subdivisions         121,694      126,765      95,835       95,261
Other securities                                          50,045       51,135      34,315       34,532
Mortgage-backed securities                               211,742      217,447     198,269      198,975
------------------------------------------------------------------------------------------------------
Total debt securities                                    454,793      467,571     406,217      406,497
Marketable equity securities                              22,395       29,590      19,745       27,472
------------------------------------------------------------------------------------------------------
Total                                                   $477,188     $497,161    $425,962     $433,969
======================================================================================================
HELD-TO-MATURITY SECURITIES:
Obligations of the U.S. Treasury                        $    422     $    462    $    726     $    735
Obligations of other U.S. Government agencies                297          323         547          561
Mortgage-backed securities                                   104          109         175          181
------------------------------------------------------------------------------------------------------
Total                                                   $    823     $    894    $  1,448     $  1,477
======================================================================================================
</TABLE>

                                      17
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

PROVISION AND ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses includes two components, allocated and
unallocated. The allocated component of the allowance for loan losses reflects
probable losses resulting from the analysis of individual loans, specific
allowances for loans in certain industries and historical loss experience for
each loan category. The historical loan loss experience element is determined
based on the ratio of net charge-offs to average loan balances over a five-year
period, for each significant type of loan. The charge-off ratio is then applied
to the current outstanding loan balance for each type of loan (net of other
loans that are individually evaluated).

The unallocated portion of the allowance is determined based on management's
assessment of general economic conditions as well as specific economic factors
in the market area. This determination inherently involves a higher degree of
uncertainty and considers current risk factors that may not have yet manifested
themselves in the Bank's historical loss factors used to determine the allocated
component of the allowance, and it recognizes that knowledge of the portfolio
credit risk may be incomplete.

The allowance for loan losses was $5,495,000 at September 30, 2002, an increase
of $230,000 over the balance of $5,265,000 at December 31, 2001. As noted in
Table IX, the unallocated portion of the allowance for loan losses was
$1,798,000 at September 30, 2002, down from $2,187,000 at December 31, 2001. The
unallocated allowance balance as of September 30, 2002 was very consistent with
the unallocated allowance balance of $1,790,000 at June 30, 2002 (not shown in
the table). The unallocated allowance balance reflects management's concern
related to possible adverse changes in the local economy.

The decline in unallocated allowance since last year-end is offset by increases
in allocated allowances on commercial loans and consumer mortgages. The increase
in allocated allowance balances reflects management's evaluation of impairment
arising from several commercial loan relationships, as well as growth in
mortgage loans (resulting in larger allowance amounts calculated based on
average historical net charge-offs). Management believes it has been
conservative, but reasonable, in its commercial loan impairment calculations.
However, the actual losses realized, if any, from these relationships could
differ materially from the allowances calculated as of September 30, 2002.

Despite the increase in allocated allowances, overall delinquency data has not
changed significantly in 2002. Total 90 day or more past due loans, plus
nonaccrual loans, amounted to $3,030,000 as of September 30, 2002, compared to
$3,117,000 at December 31, 2001.

The provision for loan losses increased to $640,000 in 2002 from $450,000 in
2001. The amount of the provision in each period is determined based on the
amount required to maintain an appropriate allowance in light of the factors
described above. In 2002, the higher provision for loan losses resulted, in
part, from the increase in allocated allowance balances.

Tables VIII, IX and X present an analysis of the allowance for loan losses, the
allocation of the allowance and a five-year summary of loans by type.

                                      18
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

TABLE VIII- ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES

<TABLE>
<CAPTION>
(IN THOUSANDS)                          9 MONTHS    9 MONTHS
                                          ENDED       ENDED
                                        SEPT. 30,   SEPT. 30,    YEARS ENDED DECEMBER 31,
                                          2002        2001          2001        2000         1999        1998        1997
<S>                                     <C>         <C>            <C>         <C>          <C>         <C>         <C>
Balance, beginning of year               $5,265      $5,291        $5,291      $5,131       $4,820      $4,913      $4,776
--------------------------------------------------------------------------------------------------------------------------
Charge-offs:
  Real estate loans                         102         144           144         272           81         257         246
  Installment loans                         100         109           138          77          138         144         230
  Credit cards and related plans            156         150           200         214          192         264         305
  Commercial and other loans                123         129           231          53          219         301           3
--------------------------------------------------------------------------------------------------------------------------
Total charge-offs                           481         532           713         616          630         966         784
--------------------------------------------------------------------------------------------------------------------------
Recoveries:
  Real estate loans                          17           5             6          26           81          12          21
  Installment loans                          26          21            27          23           60          43          64
  Credit cards and related plans             14          17            20          28           30          40          30
  Commercial and other loans                 14          33            34          23           10          15           9
--------------------------------------------------------------------------------------------------------------------------
Total recoveries                             71          76            87         100          181         110         124
--------------------------------------------------------------------------------------------------------------------------
Net charge-offs                             410         456           626         516          449         856         660
Provision for loan losses                   640         450           600         676          760         763         797
--------------------------------------------------------------------------------------------------------------------------
Balance, end of year                     $5,495      $5,285        $5,265      $5,291       $5,131      $4,820      $4,913
==========================================================================================================================
</TABLE>

TABLE IX - ALLOCATION OF THE ALLOWANCE FOR LOAN LOSSES BY TYPE

<TABLE>
<CAPTION>
(IN THOUSANDS)
                                        AT SEPT. 30,      AT DECEMBER 31:
                                            2002         2001         2000          1999        1998         1997
<S>                                     <C>             <C>          <C>           <C>         <C>          <C>
Commercial                                 $2,217       $1,837       $1,612        $2,081      $  650       $  625
Consumer mortgage                             956          674          952           834          97          350
Impaired loans                                110           73          273           609         290          274
Consumer                                      414          494          471           437         702          375
All other commitments                           -            -            -           150         202          343
Unallocated                                 1,798        2,187        1,983         1,020       2,879        2,946
------------------------------------------------------------------------------------------------------------------
Total Allowance                            $5,495       $5,265       $5,291        $5,131      $4,820       $4,913
==================================================================================================================
</TABLE>

TABLE X - SUMMARY OF LOANS BY TYPE

<TABLE>
<CAPTION>
(IN THOUSANDS)
                                         SEPT. 30,    DEC. 31,     DEC. 31,     DEC. 31,     DEC. 31,     DEC. 31,
                                           2002         2001         2000         1999         1998         1997
<S>                                      <C>          <C>          <C>          <C>          <C>          <C>
Real estate - construction               $  1,541     $  1,814     $    452     $    649     $  1,004     $    406
Real estate - mortgage                    353,472      306,264      263,325      247,604      230,815      219,952
Consumer                                   31,059       29,284       28,141       29,140       30,924       33,094
Agricultural                                2,639        2,344        1,983        1,899        1,930        2,424
Commercial                                 28,786       24,696       20,776       18,050       17,630       17,176
Other                                       1,984        1,195          948        1,025        1,062        6,260
Political subdivisions                     11,220       13,479       12,462       12,332        7,449        5,895
Lease receivables                             109          152          218          222          218          256
------------------------------------------------------------------------------------------------------------------
Total                                     430,810      379,228      328,305      310,921      291,032      285,463

Less: unearned discount                         -            -            -          (29)         (29)         (37)
------------------------------------------------------------------------------------------------------------------
                                          430,810      379,228      328,305      310,892      291,003      285,426
Less: allowance for loan losses            (5,495)      (5,265)      (5,291)      (5,131)      (4,820)      (4,913)
------------------------------------------------------------------------------------------------------------------
Loans, net                               $425,315     $373,963     $323,014     $305,761     $286,183     $280,513
==================================================================================================================
</TABLE>

                                      19
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

LIQUIDITY

Liquidity is the ability to quickly raise cash at a reasonable cost. An adequate
liquidity position permits the Corporation to pay creditors, compensate for
unforeseen deposit fluctuations and fund unexpected loan demand. The Corporation
maintains overnight borrowing facilities with several correspondent banks that
provide a source of day-to-day liquidity. Also, the Corporation maintains
borrowing facilities with the Federal Home Loan Bank of Pittsburgh, secured by
mortgage loans and mortgage-backed securities. At September 30, 2002, the
Corporation had unused borrowing availability with correspondent banks and the
Federal Home Loan Bank of Pittsburgh totaling approximately $183,091,000.
Additionally, the Corporation uses repurchase agreements placed with brokers to
borrow short-term funds secured by investment assets, and uses "RepoSweep"
arrangements to borrow funds from commercial banking customers on an overnight
basis.

STOCKHOLDERS' EQUITY AND CAPITAL ADEQUACY

The Corporation and the Bank are subject to various regulatory capital
requirements administered by the federal banking agencies. For many years, the
Corporation and the Bank have maintained strong capital positions. The following
table presents consolidated capital ratios at September 30, 2002:

TABLE XI - CAPITAL RATIOS

<TABLE>
<CAPTION>
                                                           9/30/2002
                                                           CITIZENS & REGULATORY STANDARDS:
                                                            NORTHERN
                                                          CORPORATION        WELL        MINIMUM
                                                           (ACTUAL)       CAPITALIZED    STANDARD
-------------------------------------------------------------------------------------------------
<S>                                                       <C>             <C>            <C>
Total capital to risk-weighted assets                        20.95%           10%           8%
Tier 1 capital to risk-weighted assets                       19.29%            6%           4%
Tier 1 capital to average total assets                       10.55%            5%           4%
</TABLE>

Management expects the Corporation and the Bank to maintain capital levels that
exceed the regulatory standards for well-capitalized institutions for the next
12 months and for the foreseeable future. Planned capital expenditures during
the next 12 months are not expected to have a detrimental effect on capital
ratios or results of operations.

INFLATION

Over the last several years, direct inflationary pressures on the Corporation's
payroll-related and other noninterest costs have been modest. However, the
Corporation is significantly affected by the Federal Reserve Board's efforts to
control inflation through changes in interest rates. Management monitors the
impact of economic trends, including any indicators of inflationary pressure, in
managing interest rate and other financial risks.

PART I - FINANCIAL INFORMATION  (CONTINUED)

ITEM 3.  INTEREST RATE RISK AND MARKET RISK

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

MARKET RISK

The Corporation's two major categories of market risk, interest rate and equity
securities risk, are discussed in the following sections.

INTEREST RATE RISK

Business risk arising from changes in interest rates is a significant factor in
operating a bank. The Corporation's assets are predominantly long-term, fixed
rate loans and debt securities. Funding for these assets comes principally from
short-term deposits and borrowed funds. Accordingly, there is an inherent risk
of lower future earnings or decline in fair value of the Corporation's financial
instruments when interest rates change.

                                      20
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

The Bank uses a simulation model to calculate the potential effects of interest
rate fluctuations on net interest income and the market value of portfolio
equity. Only assets and liabilities of the Bank are included in management's
monthly simulation model calculations. Since the Bank makes up more than 90% of
the Corporation's total assets and liabilities, and because the Bank is the
source of the most volatile interest rate risk, management does not consider it
necessary to run the model for the remaining entities within the consolidated
group. For purposes of these calculations, the market value of portfolio equity
includes the fair values of financial instruments, such as securities, loans,
deposits and borrowed funds, and the book values of nonfinancial assets and
liabilities, such as premises and equipment and accrued interest. The model
measures and projects potential changes in net interest income, and calculates
the discounted present value of anticipated cash flows of financial instruments,
assuming an immediate increase or decrease in interest rates. Management
ordinarily runs a variety of scenarios within a range of plus or minus 50-300
basis points of current rates.

In the 3rd quarter 2002, the Bank changed to a different simulation (software)
model, and also changed some of the key methodologies and assumptions. These
changes were made in an effort to improve the accuracy and relevance of the
Bank's interest rate risk measurements. The more significant changes are as
follows:

       -    The new model permits more precise measurements, in that the
            estimated impact of interest rate changes is calculated for each
            individual investment security and for each individual loan and
            deposit instrument. In contrast, the old model required management
            to make assumptions regarding contractual cash flows for fairly
            broad categories of investment securities, loans and deposits.

       -    Using the new model, the average principal repayment term for
            callable investment securities has been substantially lengthened.
            This change has increased the calculated impact of interest rate
            changes on the present value of investment securities.

       -    Prior to the model change, management assumed no difference between
            book value and fair value of nonmaturity deposits and borrowings,
            such as money market accounts, NOW accounts, savings, customer
            repurchase agreements and checking accounts. Using the new model,
            management has estimated the "run-off" of nonmaturity deposits and
            borrowings, and has calculated the fair value of these liabilities
            using market interest rates consistent with the estimated terms.
            The effect of this change was to increase the market value of
            portfolio equity in all interest rate scenarios.

       -    Also related to nonmaturity deposits and borrowings, management has
            changed its assumptions regarding the impact of rate changes on
            interest expense. In the past, management estimated the impact of
            a rate change based on 100% of the "shock" amount - e.g., the rate
            paid on savings accounts would be assumed to increase from 1% to
            3% in a "+200 basis point" calculation. Using the new model,
            management has limited the estimated impact of rate changes on
            interest expense. For example, in a +200 basis point calculation,
            the rate paid on savings accounts would be assumed to increase 50%
            of 200 basis points, or 1%, resulting in an increase in rate from
            1% to 2%. The effect of this change was to decrease the impact of
            rate changes on net interest income in all interest rate scenarios.

       -    In the past, the Bank's interest rate shock calculations compared
            "Base Most Likely" values to amounts calculated assuming an
            immediate increase or decrease in rates. In developing the Base
            Most Likely calculations, management made assumptions regarding
            growth in loans and deposits, and other balance sheet changes.
            Also, management used an interest rate forecast to estimate
            changes in interest rates on a monthly basis throughout the period
            of net interest income calculations. Using the new model,
            management's baseline calculation assumes a "flat" balance sheet,
            and uses current interest rates with no forecasted changes in
            rates. Management believes this change in methodology provides a
            measurement of interest rate risk that is more consistent with the
            majority of the financial institutions industry.

                                      21
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

The Bank's Board of Directors has established policy guidelines for acceptable
levels of interest rate risk, based on an immediate increase or decrease in
interest rates of 200 basis points. The policy limit for fluctuation in net
interest income is minus 20% from the base most likely one-year scenario. The
policy limit for market value variance is minus 30% from the base most likely
one-year scenario. The most sensitive scenario presented in Table XII below is
the "+200 basis points" scenario. As Table XII shows, as of September 30, 2002,
the result of the Bank's net interest income calculation is well within the
policy threshold. However, if interest rates were to immediately increase 200
basis points, the Bank's calculations based on the model show that the market
value of portfolio equity would decrease 36.5%, which exceeds the policy
threshold. Over the next several months, management will evaluate whether to
make any changes to asset or liability holdings in an effort to reduce exposure
to decline in market value in a rising interest rate environment.

The table that follows was prepared using the simulation models described above.
The models make estimates, at each level of interest rate change, regarding cash
flows from principal repayments on loans and mortgage-backed securities and call
activity on other investment securities. Actual results could vary significantly
from these estimates, which could result in significant differences in the
calculations of projected changes in net interest margin and market value of
portfolio equity. Also, the models do not make estimates related to changes in
the composition of the deposit portfolio that could occur due to rate
competition and the table does not necessarily reflect changes that management
would make to realign the portfolio as a result of changes in interest rates.

TABLE XII - THE EFFECT OF HYPOTHETICAL CHANGES IN INTEREST RATES

<TABLE>
<CAPTION>
                                                                   PERIOD ENDING SEPTEMBER 30, 2003
(IN THOUSANDS)
SEPTEMBER 30, 2002 DATA
                                                      CURRENT      PLUS 200                 MINUS 200
                                                     INTEREST       BASIS                     BASIS
                                                       RATES        POINTS                    POINTS
                                                     SCENARIO       AMOUNT      % CHANGE      AMOUNT      % CHANGE
<S>                                                  <C>           <C>          <C>         <C>           <C>
Interest income                                      $  56,284     $  60,575                 $  50,013
Interest expense                                        25,057        30,151                    19,875
----------------------------------------------------------------------------                 ---------
Net Interest Income                                  $  31,227     $  30,424      -2.6%      $  30,138      -3.5%
==================================================================================================================

Market Value of Portfolio Equity at Sept. 30, 2002   $ 114,221     $  72,508      -36.5%     $ 132,782      16.3%
==================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                   PERIOD ENDING DECEMBER 31, 2002
(IN THOUSANDS)
DECEMBER 31, 2001 DATA
                                                         MOST        PLUS 200                 MINUS 200
                                                        LIKELY        BASIS                     BASIS
                                                       FORECAST       POINTS                    POINTS
                                                        AMOUNT        AMOUNT      % CHANGE      AMOUNT      % CHANGE
<S>                                                    <C>          <C>           <C>         <C>           <C>
Interest income                                        $ 56,943     $  60,192                 $  52,767
Interest expense                                         26,652        35,633                    17,827
-----------------------------------------------------------------------------                 ---------
Net Interest Income                                    $ 30,291     $  24,559      -18.9%     $  34,940       15.3%
====================================================================================================================

Market Value of Portfolio Equity at Dec. 31, 2002      $ 97,585     $  69,980      -28.3%     $ 118,667       21.6%
====================================================================================================================
</TABLE>

                                      22
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

EQUITY SECURITIES RISK

The Corporation's equity securities portfolio consists primarily of investments
in stock of banks and bank holding companies located mainly in Pennsylvania. The
Corporation also owns some other stocks and mutual funds.

Investments in bank stocks are subject to the risk factors that affect the
banking industry in general, including competition from nonbank entities, credit
risk, interest rate risk and other factors, which could result in a decline in
market prices. Also, losses could occur in individual stocks held by the
Corporation because of specific circumstances related to each bank. Further,
because of the concentration of bank and bank holding companies located in
Pennsylvania, these investments could decline in market value if there is a
downturn in the state's economy.

Equity securities held as of September 30, 2002 and December 31, 2001 are
presented in Table XIII.

TABLE XIII - EQUITY SECURITIES

<TABLE>
<CAPTION>
(IN THOUSANDS)                                                      HYPOTHETICAL    HYPOTHETICAL
                                                                         10%             20%
                                                                     DECLINE IN      DECLINE IN
                                                           FAIR        MARKET          MARKET
AT SEPTEMBER 30, 2002                           COST       VALUE       VALUE           VALUE
<S>                                            <C>         <C>      <C>             <C>
Banks and bank holding companies               $20,480     $28,137    $(2,814)       $(5,627)
Other equity securities                          1,915       1,453       (145)          (291)
--------------------------------------------------------------------------------------------
     Total                                     $22,395     $29,590    $(2,959)       $(5,918)
============================================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                                    HYPOTHETICAL    HYPOTHETICAL
                                                                         10%             20%
                                                                     DECLINE IN      DECLINE IN
                                                           FAIR        MARKET          MARKET
AT DECEMBER 31, 2001                            COST       VALUE       VALUE           VALUE
<S>                                            <C>         <C>      <C>             <C>
Banks and bank holding companies               $18,922     $26,636    $(2,664)       $(5,327)
Other equity securities                            823         836        (84)          (167)
--------------------------------------------------------------------------------------------
     Total                                     $19,745     $27,472    $(2,748)       $(5,494)
============================================================================================
</TABLE>

PART I - FINANCIAL INFORMATION  (CONTINUED)

ITEM 4. CONTROLS AND PROCEDURES

Within 90 days prior to the filing date of this report, the Corporation's Chief
Executive Officer and Chief Financial Officer carried out an evaluation of the
design and effectiveness of the Corporation's disclosure controls and procedures
pursuant to Rule 13a-14 of the Securities Exchange Act of 1934. Based upon that
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that the Corporation's disclosure controls and procedures are effective to
ensure that information required to be disclosed in reports the Corporation
files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms.

There have been no significant changes in the Corporation's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of the Chief Executive Officer's and Chief Financial Officer's most
recent evaluation.

                                      23
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

PART II - OTHER INFORMATION

Item  1.  Legal Proceedings

          Neither the Corporation nor any of its subsidiaries is a party to any
          material pending legal proceedings.

Item  2.  Not Applicable

Item  3.  Not Applicable

Item  4.  Not Applicable

Item  5.  Other Information

         a.  None

Item  6.  Exhibits and Reports on Form 8 - K

         a.  Exhibits:

<TABLE>
<CAPTION>
                                                               Page
                                                               ----
<S>                                                            <C>
99.1 Certification Pursuant to U.S.C. Section 1350 as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002                                                     28
</TABLE>

         b. On July 11, 2002, a Current Report on Form 8-K was filed to report
         the Corporation's consolidated earnings results for the second quarter
         2002.

                                      24
<PAGE>
CITIZENS AND NORTHERN CORPORATION  -  FORM 10 - Q

Signature Page

                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                         CITIZENS & NORTHERN CORPORATION

November 13, 2002            By: Craig G. Litchfield /s/
-----------------                -----------------------
Date                             Chairman, President and Chief Executive Officer

November 13, 2002            By: Mark A. Hughes /s/
-----------------                ------------------
Date                             Treasurer and Chief Financial Officer

                                      25
<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

                                 CERTIFICATIONS

I, Craig G. Litchfield, Chairman, Chief Executive Officer and President, certify
that:

         1.  I have reviewed this quarterly report on Form 10-Q of Citizens &
             Northern Corporation;

         2.  Based on my knowledge, this quarterly report does not contain any
             untrue statement of a material fact or omit to state a material
             fact necessary to make the statements made, in light of the
             circumstances under which such statements were made, not misleading
             with respect to the period covered by this quarterly report;

         3.  Based on my knowledge, the financial statements, and other
             financial information included in this quarterly
             report, fairly present in all material respects the financial
             condition, results of operations and cash flows of the registrant
             as of, and for, the periods presented in this quarterly report;

         4.  The registrant's other certifying officers and I are responsible
             for establishing and maintaining disclosure controls and
             procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
             for the registrant and we have:

                  a)  designed such disclosure controls and procedures to ensure
                      that material information relating to the registrant,
                      including its consolidated subsidiaries, is made known to
                      us by others within those entities, particularly during
                      the period in which this quarterly report is being
                      prepared;

                  b)  evaluated the effectiveness of the registrant's disclosure
                      controls and procedures as of a date within 90 days prior
                      to the filing date of this quarterly report (the
                      "Evaluation Date"); and

                  c)  presented in this quarterly report our conclusions about
                      the effectiveness of the disclosure controls and
                      procedures based on our evaluation as of the Evaluation
                      Date;

         5.  The registrant's other certifying officers and I have disclosed,
             based on our most recent evaluation, to the registrant's
             auditors and the audit committee of registrant's board of
             directors (or persons performing the equivalent function):

                  a)  all significant deficiencies in the design or operation of
                      internal controls which could adversely affect the
                      registrant's ability to record, process, summarize and
                      report financial data and have identified for the
                      registrant's auditors any material weaknesses in internal
                      controls; and

                  b)  any fraud, whether or not material, that involves
                      management or other employees who have a significant role
                      in the registrant's internal controls; and

         6.  The registrant's other certifying officers and I have indicated
             in this quarterly report whether or not there were significant
             changes in internal controls or in other factors that could
             significantly affect internal controls subsequent to the date of
             our most recent evaluation, including any corrective actions with
             regard to significant deficiencies and material weaknesses.

November 13, 2002            By: Craig G. Litchfield /s/
-----------------                -----------------------
Date                             Chairman, President and Chief Executive Officer

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<PAGE>
CITIZENS & NORTHERN CORPORATION - FORM 10 - Q

I, Mark A. Hughes, Treasurer and Chief Financial Officer, certify that:

         1.  I have reviewed this quarterly report on Form 10-Q of Citizens &
             Northern Corporation;

         2.  Based on my knowledge, this quarterly report does not contain any
             untrue statement of a material fact or omit to state a material
             fact necessary to make the statements made, in light of the
             circumstances under which such statements were made, not
             misleading with respect to the period covered by this quarterly
             report;

         3.  Based on my knowledge, the financial statements, and other
             financial information included in this quarterly report, fairly
             present in all material respects the financial condition, results
             of operations and cash flows of the registrant as of, and for,
             the periods presented in this quarterly report;

         4.  The registrant's other certifying officers and I are responsible
             for establishing and maintaining disclosure controls and
             procedures (as defined in Exchange Act Rules 13a-14 and 15d-14)
             for the registrant and we have:

                  a)  designed such disclosure controls and procedures to ensure
                      that material information relating to the registrant,
                      including its consolidated subsidiaries, is made known
                      to us by others within those entities, particularly
                      during the period in which this quarterly report is
                      being prepared;

                  b)  evaluated the effectiveness of the registrant's disclosure
                      controls and procedures as of a date within 90 days
                      prior to the filing date of this quarterly report (the
                      "Evaluation Date"); and

                  c)  presented in this quarterly report our conclusions about
                      the effectiveness of the disclosure controls and
                      procedures based on our evaluation as of the Evaluation
                      Date;

         5.  The registrant's other certifying officers and I have disclosed,
             based on our most recent evaluation, to the registrant's auditors
             and the audit committee of registrant's board of directors (or
             persons performing the equivalent function):

                  a)  all significant deficiencies in the design or operation of
                      internal controls which could adversely affect the
                      registrant's ability to record, process, summarize and
                      report financial data and have identified for the
                      registrant's auditors any material weaknesses in
                      internal controls; and

                  b)  any fraud, whether or not material, that involves
                      management or other employees who have a significant role
                      in the registrant's internal controls; and

         6.  The registrant's other certifying officers and I have indicated in
             this quarterly report whether or not there were significant
             changes in internal controls or in other factors that could
             significantly affect internal controls subsequent to the date of
             our most recent evaluation, including any corrective actions with
             regard to significant deficiencies and material weaknesses.

November 13, 2002                          By: Mark A. Hughes /s/
-----------------                              ------------------
Date                                       Treasurer and Chief Financial Officer

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