SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2000

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

Commission file number **0-10958**
 
**DROVERS BANCSHARES CORPORATION

(Exact name of registrant as specified in its charter)
**PENNSYLVANIA23-2209390
(State or other jurisdiction of incorporation or organization) (IRS employer ID)
**30 SOUTH GEORGE STREET, YORK, PA17401
(Address of principal executive office)                                (Zip Code)

Registrant's telephone number, including area code  **(717) 843-1586**
 
**NONE

(Former name, address and 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 shorter periods that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

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

Class        /          Outstanding at September 30, 2000**Common Stock               /              5,071,891 Shares**
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**Drovers Bancshares Corporation and Subsidiaries

CONTENTS******PART I  Financial Information  **ITEM 1.Financial Statements   
Consolidated Statements of Condition
4   
September 30, 2000 and December 31, 1999   
Consolidated Statements of Income
5   
Three Months Ended September 30, 2000 and 1999    
Nine Months Ended September 30, 2000 and 1999   
Consolidated Statements of Comprehensive Income
6   
Three Months Ended September 30, 2000 and 1999    
Nine Months Ended September 30, 2000 and 1999   
Consolidated Statements of Cash Flows
7   
Nine Months Ended September 30, 2000 and 1999   
Notes to Consolidated Financial Statements
8 **ITEM 2.Management's Discussion and Analysis of Financial Condition and Results of Operations
12 **ITEM 3.Quantitative and Qualitative Disclosures About Market Risk
19**PART II  Other Information  **ITEM 6.  Exhibits and Reports On Form 8-K   
A.  Listing of Exhibits.   **Exhibit 3(i) - Articles of Incorporation.  (Incorporated by reference to Exhibit 3(i) to the Drovers Bancshares Corporation Form 10-Q for the period ended June 30, 1999).   **Exhibit 3(ii) - By-laws.  (Incorporated by reference to Exhibit 3 (ii) to the Drovers Bancshares Corporation Form 10-Q for the period ended June 30, 1999).   **Exhibit 4 - Instruments Defining the Rights of Security Holders of Long-term debt of Drovers Bancshares Corporation and its subsidiaries are not filed as Exhibits because the amount of debt is less than 10 percent under eachinstrument of the consolidated assets of Drovers Bancshares Corporation.  Drovers Bancshares Corporation undertakes to file these instruments with the Commission on request.   **Exhibit 10(a) - Salary Continuation Plan, dated June 1, 2000, between The Drovers & Mechanics Bank and A. Richard Pugh (incorporated by reference to Exhibit 10(a) of the Drovers Bancshares Corporation Form 10-Q for the periodended June 30, 2000).   **Exhibit 10(b) - Amended and restated Change of Control Agreement, dated June 30, 1999, among Drovers Bancshares Corporation, The Drovers & Mechanics Bank and A. Richard Pugh. (Incorporated by reference to Exhibit 10(b) of theDrovers Bancshares Corporation Form 10-Q for the period ended September 30, 1999).   **Exhibit 10(c) - Form of Change of Control Agreement among Drovers Bancshares Corporation, The Drovers & Mechanics Bank and each of the following Executive Vice Presidents of the Company: Debra A. Goodling, Michael J. Groft,Michael E. Kochenour and Shawn A. Stine (incorporated by reference to Exhibit 10(c) of the Drovers Bancshares Corporation Form 10-K for the year ended December 31, 1998).   **Exhibit 10(d) - The Drovers Bancshares Corporation 1995 Stock Option Plan. (Incorporated by reference to Exhibit 10(d) of the Drovers Bancshares Corporation Form 10-Q for the period ended June 30, 2000).   **Exhibit 10(e) - The Drovers Bancshares Corporation Incentive Stock Option Plan. (incorporated herein by reference to Exhibit 99.1 to the Drovers Bancshares Corporation Registration Statement on Form S-8 as filed with the Securitiesand Exchange Commission on May 24, 1995).   **Exhibit 10(f) - The Drovers Bancshares Corporation 1999 Non-Employee Directors Stock Option Plan.  (incorporated by reference to Exhibit 99.1 to the Drovers Bancshares Corporation Registration on Form S-8 as filed with theSecurities and Exchange Commission on July 8, 1999).   **Exhibit 10(g) - Executive Bonus Agreement, dated September 1, 2000, between The Drovers & Mechanics Bank and A. Richard Pugh (Incorporated by reference to Exhibit 10(a) of the Drovers Bancshares Corporation Form 10-Q for theperiod ended June 30, 2000).   **Exhibit 10(h) - Form of Salary Continuation Agreement among The Drovers & Mechanics Bank and each of the following Executive Vice Presidents of the Company:  Debra A. Goodling, Michael J. Groft, Michael E. Kochenour and ShawnA. Stine (Incorporated by reference to Exhibit 10(a) of the Drovers Bancshares Corporation Form 10-Q for the period ended June 30, 2000).   **Exhibit 10(i) - Form of Executive Bonus Agreement among The Drovers & Mechanics Bank and each of the following Executive Vice Presidents of the Company:  Debra A. Goodling, Michael J. Groft, Michael E. Kochenour and Shawn A.Stine (Incorporated by reference to Exhibit 10(a) of the Drovers Bancshares Corporation Form 10-Q for the period ended June 30, 2000).   **Exhibit 11 - Statements Regarding Computation of Per Share Earnings
8  **Exhibit 27 - Financial Data Schedule   
B.  Drovers Bancshares Corporation did not file any reports on Form 8-K during the period reported. 
SIGNATURES
20
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**Drovers Bancshares Corporation and Subsidiaries

PART I  FINANCIAL INFORMATION

Consolidated Statements of Condition** **SEPT 30,**DEC 31,*(In thousands)**2000**1999**ASSETS  
Cash and due from banks 
 $ 15,526
 $ 20,571
Money market investments 
      505
      767
Investment securities (fair value $212,595 and $213,152)
  212,595
  212,937
Loans (net of unearned income of $2,753 and $3,042) 
  490,671
  460,201
Reserve for loan losses 
    4,303
    3,908
Net loans 
  486,368
  456,293
Bank premises and equipment 
   19,133
   16,790
Other assets 
   21,181
   12,750**TOTAL ASSETS
 $755,308 
 $720,108   **LIABILITIES  
Deposits:  
Noninterest-bearing 
 $ 55,760
 $ 47,986
Interest-bearing 
  487,235
  457,148
Total deposits 
  542,995
  505,134
Federal funds purchased and securities sold under agreements to repurchase 
   50,965
   55,238
Other borrowings 
   92,932
   95,237
Corporation-obligated mandatorily redeemable capital securities of subsidiary trust 
7,500
7,500
Other liabilities 
    7,034
    5,799**TOTAL LIABILITIES 
  701,426
  668,908   **SHAREHOLDERS' EQUITY  
Common stock -- no par, 15,000,000 shares authorized; issued and outstanding-5,071,891 shares in 2000 and 4,805,977 shares in 1999 
44,655
40,852
Retained earnings 
   11,573
   13,478
Accumulated other comprehensive income 
   (2,346)
   (3,130)**TOTAL SHAREHOLDERS' EQUITY 
   53,882
   51,200**TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 
 $755,308
 $720,108
 

See notes to consolidated financial statements.

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**Drovers Bancshares Corporation and Subsidiaries

PART I  FINANCIAL INFORMATION

Consolidated Statements of Income****THREE MONTHS**NINE MONTHS*(In thousands, except per share data)**ENDED SEPT 30,**ENDED SEPT 30,**2000**1999**2000**1999**INTEREST INCOME
Interest and fees on loans 
$10,671
$ 8,892 
 $31,045
 $25,421
Interest on deposits with banks
     68
      8 
     227
      20
Interest and dividends on investment securities 
  3,565
  2,977 
  10,597
   8,185
Total interest income
 14,304
 11,877
  41,869
  33,626**INTEREST EXPENSE
Interest on deposits 
  6,068
  4,624 
  17,075
  13,396
Federal funds purchased and securities sold under agreements to repurchase
826
422
2,273
890
Interest on borrowed funds
  1,628  
  1,165
   4,996
   3,027
Total interest expense 
  8,522
  6,211
  24,344
  17,313
Net interest income 
  5,782
  5,666
  17,525
  16,313
Provision for loan losses 
    401
    213
   4,603
   1,064
Net interest income after provision for loan losses
  5,381
  5,453
  12,922
  15,249**OTHER INCOME

Investment services and trust income 
    386
    362
   1,187
   1,036
Service charges on deposit accounts 
    537
    496
   1,544
   1,417
Securities gains (losses)
     (6)
      0
    (195)
      67
Net gains on loan sales 
    137 
    104 
     327
     653
Other 
    496
    268
   1,266
     781
Total other income 
  1,550
  1,230
   4,129
   3,954**OTHER EXPENSES
Salaries and employee benefits 
  2,425
  2,346
   7,285
   6,711
Occupancy and premises 
    365
    361
   1,109
   1,005
Furniture and equipment 
    410
    354
   1,192
   1,033
Marketing 
    107
    173
     432
     523
Supplies 
    104
    167
     324
     422
Other taxes 
    119
    107
     354
     324
Other
  1,012
    828
   2,820
   2,386
Total other expenses 
  4,542
  4,336
  13,516
  12,404
Income (loss) before income taxes 
  2,389 
  2,347
   3,535
   6,799
Applicable income taxes expense
    374 
    422
      10 
   1,186**NET INCOME 
$ 2,015
$ 1,925
 $ 3,525
 $ 5,613**PER SHARE DATA
Net income 
$  0.40 
$  0.39 
 $  0.70
 $  1.14
Net income, assuming dilution 
$  0.40
$  0.39
 $  0.69
 $  1.13
Dividends 
$  0.13
$  0.12
 $  0.38
 $  0.34
See notes to consolidated financial statements.

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**Drovers Bancshares Corporation and Subsidiaries

PART I  FINANCIAL INFORMATION

Consolidated Statements of Comprehensive Income************************************************************************************************************