CITIZENS & NORTHERN CORP - FORM 8-K - EX-99.3 - EXHIBIT 99.3 - July 17, 2015

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EX-99.1 - EXHIBIT 99.1 - CITIZENS & NORTHERN CORPv415720_ex99-1.htm
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8-K - 8-K CURRENT REPORT - CITIZENS & NORTHERN CORPv415720_8k.htm

 

EXHIBIT 99.3 – Supplemental, Unaudited Financial Information

 

 

CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS

(In Thousands, Except Per Share Data)       (Unaudited)

 

   6 MONTHS ENDED   % 
   JUNE 30,   INCREASE 
   2015   2014   (DECREASE) 
EARNINGS PERFORMANCE               
Net Income  $8,172   $8,451    -3.30%
Return on Average Assets   1.31%   1.38%   -5.07%
Return on Average Equity   8.66%   9.16%   -5.46%
                
BALANCE SHEET HIGHLIGHTS               
Total Assets  $1,255,722   $1,256,205    -0.04%
Available-for-Sale Securities   497,111    512,748    -3.05%
Loans (Net)   656,518    614,347    6.86%
Allowance for Loan Losses   7,300    7,267    0.45%
Deposits and Repo Sweep Accounts   983,255    983,876    -0.06%
                
OFF-BALANCE SHEET               
Outstanding Balance of Mortgage Loans Sold with Servicing Retained   151,132    150,725    0.27%
Trust Assets Under Management   833,762    824,279    1.15%
                
SHAREHOLDERS' VALUE (PER COMMON SHARE)               
Net Income - Basic  $0.67   $0.68    -1.47%
Net Income - Diluted  $0.67   $0.68    -1.47%
Dividends  $0.52   $0.52    0.00%
Common Book Value  $15.33   $15.19    0.92%
Tangible Common Book Value  $14.35   $14.23    0.84%
Market Value (Last Trade)  $20.55   $19.49    5.44%
Market Value /  Common Book Value   134.05%   128.31%   4.47%
Market Value /  Tangible Common Book Value   143.21%   136.96%   4.56%
Price Earnings Multiple (Annualized)   15.34    14.33    7.05%
Dividend Yield (Annualized)   5.06%   5.34%   -5.24%
Common Shares Outstanding, End of Period   12,196,830    12,450,005    -2.03%
                
SAFETY AND SOUNDNESS               
Tangible Common Equity / Tangible Assets   14.07%   14.24%   -1.19%
Nonperforming Assets / Total Assets   1.26%   1.44%   -12.50%
Allowance for Loan Losses / Total Loans   1.10%   1.17%   -5.98%
Total Risk Based Capital Ratio (a)   24.42%   27.82%   -12.22%
Tier 1 Risk Based Capital Ratio (a)   23.28%   26.48%   -12.08%
Common Equity Tier 1 Risk Based Capital Ratio (a)   23.28%          
Leverage Ratio (a)   13.82%   14.07%   -1.78%
                
AVERAGE BALANCES               
Average Assets  $1,248,904   $1,228,111    1.69%
Average Equity  $188,621   $184,470    2.25%

 

(a) Capital ratios for the most recent period are estimated. The Common Equity Tier 1 Risk Based Capital Ratio became applicable to the Corporation in the first quarter 2015.

 

1
 

 

QUARTERLY CONDENSED, CONSOLIDATED INCOME STATEMENT INFORMATION

(In Thousands) (Unaudited)  For the Three Months Ended:             
   June 30,   Mar. 31,   Dec. 31,   Sept. 30,   June 30,   Mar. 31, 
   2015   2015   2014   2014   2014   2014 
Interest income  $11,186   $11,163   $11,468   $11,572   $11,563   $11,406 
Interest expense   1,176    1,213    1,257    1,287    1,290    1,288 
Net interest income   10,010    9,950    10,211    10,285    10,273    10,118 
Provision (credit) for loan losses   221    3    123    218    446    (311)
Net interest income after provision (credit) for loan losses   9,789    9,947    10,088    10,067    9,827    10,429 
Other income   3,962    3,487    3,802    3,887    3,980    3,751 
Net gains on available-for-sale securities   932    74    210    760    103    31 
Loss on prepayment of borrowings   910    0    0    0    0    0 
Other expenses   7,964    8,464    8,250    9,036    8,347    8,524 
Income before income tax provision   5,809    5,044    5,850    5,678    5,563    5,687 
Income tax provision   1,452    1,229    1,482    1,411    1,400    1,399 
Net income  $4,357   $3,815   $4,368   $4,267   $4,163   $4,288 
Net income per share – basic  $0.36   $0.31   $0.35   $0.34   $0.33   $0.35 
Net income per share – diluted  $0.36   $0.31   $0.35   $0.34   $0.33   $0.34 

 

CONDENSED, CONSOLIDATED BALANCE SHEET INFORMATION        
(In Thousands) (Unaudited)  As of:             
   June 30,   Mar. 31,   Dec. 31,   June 30, 
   2015   2015   2014   2014 
ASSETS                    
Cash & Due from Banks  $35,405   $36,430   $36,047   $59,948 
Available-for-Sale Securities   497,111    527,814    516,807    512,748 
Loans Held for Sale   192    214    0    0 
Loans, Net   656,518    621,211    623,209    614,347 
Intangible Assets   11,983    11,989    11,994    12,012 
Other Assets   54,513    54,300    53,906    57,150 
TOTAL ASSETS  $1,255,722   $1,251,958   $1,241,963   $1,256,205 
                     
LIABILITIES                    
Deposits  $978,449   $976,634   $967,989   $979,239 
Repo Sweep Accounts   4,806    5,840    5,537    4,637 
Total Deposits and Repo Sweeps   983,255    982,474    973,526    983,876 
Borrowed Funds   77,916    72,988    73,060    73,201 
Other Liabilities   7,578    7,393    7,015    9,955 
TOTAL LIABILITIES   1,068,749    1,062,855    1,053,601    1,067,032 
                     
SHAREHOLDERS' EQUITY                    
Common Shareholders' Equity, Excluding Accumulated Other Comprehensive Income/ Loss   182,887    181,437    183,002    183,757 
Accumulated Other Comprehensive Income/ Loss:                    
Net Unrealized Gains/Losses on Available-for-sale Securities   4,077    7,654    5,281    5,316 
Defined Benefit Plans Adjustment, Net   9    12    79    100 
TOTAL SHAREHOLDERS' EQUITY   186,973    189,103    188,362    189,173 
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY  $1,255,722   $1,251,958   $1,241,963   $1,256,205 

 

2
 

 

AVAILABLE-FOR-SALE SECURITIES  June 30, 2015   March 31, 2015   December 31, 2014 
(In Thousands)  Amortized   Fair   Amortized   Fair   Amortized   Fair 
   Cost   Value   Cost   Value   Cost   Value 
                         
Obligations of U.S. Government agencies  $27,189   $26,871   $27,205   $27,025   $27,221   $26,676 
Obligations of states and political subdivisions:                              
Tax-exempt   115,908    119,749    117,378    122,502    120,086    124,839 
Taxable   34,872    35,135    36,861    37,417    33,637    33,878 
Mortgage-backed securities   76,323    76,790    90,130    92,088    82,479    83,903 
Collateralized mortgage obligations, Issued by U.S. Government agencies   231,148    230,794    238,794    240,077    239,620    238,823 
Other collateralized debt obligations   34    34    34    34    34    34 
Total debt securities   485,474    489,373    510,402    519,143    503,077    508,153 
Marketable equity securities   5,365    7,738    5,636    8,671    5,605    8,654 
Total  $490,839   $497,111   $516,038   $527,814   $508,682   $516,807 

 

Summary of Loans by Type                
(Excludes Loans Held for Sale)                
(In Thousands)  June 30,   March 31,   Dec. 31,   June 30,  
   2015   2015   2014   2014 
Residential mortgage:                    
Residential mortgage loans - first liens  $294,978   $291,612   $291,882   $291,690 
Residential mortgage loans - junior liens   21,502    20,896    21,166    22,401 
Home equity lines of credit   39,140    37,049    36,629    34,633 
1-4 Family residential construction   19,651    16,217    16,739    13,948 
Total residential mortgage   375,271    365,774    366,416    362,672 
Commercial:                    
Commercial loans secured by real estate   135,063    140,851    145,878    145,934 
Commercial and industrial   61,427    51,563    50,157    46,778 
Political subdivisions   40,908    19,479    17,534    11,617 
Commercial construction and land   7,826    7,249    6,938    8,550 
Loans secured by farmland   7,565    7,789    7,916    8,380 
Multi-family (5 or more) residential   8,561    8,673    8,917    10,548 
Agricultural loans   4,287    3,158    3,221    3,116 
Other commercial loans   12,809    13,187    13,334    13,816 
Total commercial   278,446    251,949    253,895    248,739 
Consumer   10,101    10,622    10,234    10,203 
Total   663,818    628,345    630,545    621,614 
Less: allowance for loan losses   (7,300)   (7,134)   (7,336)   (7,267)
Loans, net  $656,518   $621,211   $623,209   $614,347 

 

Loans Held for Sale                
(In Thousands)  June 30,    March 31,   Dec. 31,   June 30, 
   2015   2015   2014   2014 
Residential mortgage loans originated and serviced - outstanding balance  $151,324   $151,486   $152,505   $150,725 
Less: outstanding balance of loans sold   (151,132)   (151,272)   (152,505)   (150,725)
Loans held for sale, net  $192   $214   $0   $0 

 

3
 

 

ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES

(In Thousands)

   3 Months   3 Months   6 Months   6 Months 
   Ended   Ended   Ended   Ended 
   June 30,   Mar. 31,   June 30,   June 30, 
   2015    2015    2015    2014  
Balance, beginning of period  $7,134   $7,336   $7,336   $8,663 
Charge-offs   (77)   (222)   (299)   (1,820)
Recoveries   22    17    39    289 
Net charge-offs   (55)   (205)   (260)   (1,531)
Provision for loan losses   221    3    224    135 
Balance, end of period  $7,300   $7,134   $7,300   $7,267 

 

PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS

AND TROUBLED DEBT RESTRUCTURINGS (TDRs)

(In Thousands)

   June 30,   Mar. 31,   Dec 31,   June 30, 
   2015    2015    2014    2014  
Impaired loans with a valuation allowance  $3,880   $4,312   $3,241   $3,804 
Impaired loans without a valuation allowance   7,764    8,851    9,075    10,258 
Total impaired loans  $11,644   $13,163   $12,316   $14,062 
                     
Total loans past due 30-89 days and still accruing  $3,803   $5,722   $7,121   $4,837 
                     
Nonperforming assets:                    
Total nonaccrual loans  $12,060   $11,944   $12,610   $13,598 
Total loans past due 90 days or more and still accruing   2,529    3,086    2,843    3,050 
Total nonperforming loans   14,589    15,030    15,453    16,648 
Foreclosed assets held for sale (real estate)   1,223    1,583    1,189    1,419 
Total nonperforming assets  $15,812   $16,613   $16,642   $18,067 
                     
Loans subject to troubled debt restructurings (TDRs):                    
Performing  $1,119   $1,872   $1,807   $2,069 
Nonperforming   5,216    5,252    5,388    6,038 
Total TDRs  $6,335   $7,124   $7,195   $8,107 
                     
Total nonperforming loans as a % of loans   2.20%   2.39%   2.45%   2.68%
Total nonperforming assets as a % of assets   1.26%   1.33%   1.34%   1.44%
Allowance for loan losses as a % of total loans   1.10%   1.14%   1.16%   1.17%
Allowance for loan losses as a % of nonperforming loans   50.04%   47.47%   47.47%   43.65%

 

4
 

 

Analysis of Average Daily Balances and Rates

(Dollars in Thousands)

   3 Months       3 Months       3 Months     
   Ended   Rate of   Ended   Rate of   Ended   Rate of 
   6/30/2015   Return/   3/31/2015   Return/   6/30/2014   Return/ 
   Average   Cost of   Average   Cost of   Average   Cost of 
   Balance   Funds %   Balance   Funds %   Balance   Funds % 
EARNING ASSETS                              
Available-for-sale securities, at amortized cost:                              
Taxable  $389,705    2.06%  $388,104    2.15%  $372,666    2.18%
Tax-exempt   116,421    5.33%   117,674    5.35%   123,568    5.35%
Total available-for-sale securities   506,126    2.81%   505,778    2.90%   496,234    2.97%
Interest-bearing due from banks   21,970    0.46%   26,994    0.39%   33,106    0.39%
Loans held for sale   145    8.30%   89    9.11%   282    7.11%
Loans receivable:                              
Taxable   592,188    5.25%   582,498    5.37%   585,593    5.54%
Tax-exempt   49,026    4.88%   41,925    5.15%   36,422    5.62%
Total loans receivable   641,214    5.22%   624,423    5.35%   622,015    5.54%
Total Earning Assets   1,169,455    4.09%   1,157,284    4.16%   1,151,637    4.29%
Cash   17,072         16,127         17,484      
Unrealized gain/loss on securities   10,260         10,626         6,539      
Allowance for loan losses   (7,226)        (7,391)        (8,402)     
Bank premises and equipment   16,095         16,252         16,889      
Intangible Asset - Core Deposit Intangible   44         50         75      
Intangible Asset - Goodwill   11,942         11,942         11,942      
Other assets   38,065         37,135         40,965      
Total Assets  $1,255,707        $1,242,025        $1,237,129      
                               
INTEREST-BEARING LIABILITIES                              
Interest-bearing deposits:                              
Interest checking  $199,373    0.11%  $191,705    0.12%  $179,018    0.12%
Money market   196,537    0.15%   194,834    0.15%   198,753    0.15%
Savings   128,879    0.10%   127,853    0.10%   121,741    0.10%
Certificates of deposit   122,634    0.67%   122,007    0.71%   138,250    0.81%
Individual Retirement Accounts   111,765    0.41%   113,806    0.40%   120,987    0.39%
Other time deposits   1,125    0.00%   803    0.00%   1,138    0.00%
Total interest-bearing deposits   760,313    0.25%   751,008    0.26%   759,887    0.29%
Borrowed funds:                              
Short-term   9,185    0.22%   6,017    0.07%   4,766    0.08%
Long-term   69,211    4.01%   73,020    4.03%   73,232    4.03%
Total borrowed funds   78,396    3.57%   79,037    3.73%   77,998    3.79%
Total Interest-bearing Liabilities   838,709    0.56%   830,045    0.59%   837,885    0.62%
Demand deposits   220,839         215,019         204,664      
Other liabilities   7,756         8,120         7,971      
Total Liabilities   1,067,304         1,053,184         1,050,520      
Stockholders' equity, excluding other comprehensive income/loss   181,683         181,944         182,258      
Other comprehensive income/loss   6,720         6,897         4,351      
Total Stockholders' Equity   188,403         188,841         186,609      
Total Liabilities and Stockholders' Equity  $1,255,707        $1,242,025        $1,237,129      
Interest Rate Spread        3.53%        3.57%        3.67%
Net Interest Income/Earning Assets        3.69%        3.74%        3.84%
                               
Total Deposits (Interest-bearing and Demand)  $981,152        $966,027        $964,551      

 

(1) Rates of return on tax-exempt securities and loans are presented on a fully taxable-equivalent basis, using the Corporation’s marginal federal income tax rate of 35%.

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

 

5
 

 

Analysis of Average Daily Balances and Rates

(Dollars in Thousands)

   6 Months       6 Months     
   Ended   Rate of   Ended   Rate of 
   6/30/2015   Return/   6/30/2014   Return/ 
   Average   Cost of   Average   Cost of 
   Balance   Funds %   Balance   Funds % 
EARNING ASSETS                    
Available-for-sale securities, at amortized cost:                    
Taxable  $388,909    2.11%  $359,239    2.20%
Tax-exempt   117,044    5.34%   124,792    5.40%
Total available-for-sale securities   505,953    2.85%   484,031    3.03%
Interest-bearing due from banks   24,468    0.42%   31,611    0.40%
Loans held for sale   117    8.62%   201    8.03%
Loans receivable:                    
Taxable   587,370    5.31%   590,526    5.49%
Tax-exempt   45,495    5.00%   38,033    5.72%
Total loans receivable   632,865    5.29%   628,559    5.51%
Total Earning Assets   1,163,403    4.13%   1,144,402    4.32%
Cash   16,602         16,895      
Unrealized gain/loss on securities   10,442         4,656      
Allowance for loan losses   (7,308)        (8,590)     
Bank premises and equipment   16,173         17,085      
Intangible Asset - Core Deposit Intangible   47         79      
Intangible Asset - Goodwill   11,942         11,942      
Other assets   37,603         41,642      
Total Assets  $1,248,904        $1,228,111      
                     
INTEREST-BEARING LIABILITIES                    
Interest-bearing deposits:                    
Interest checking  $195,560    0.11%  $179,316    0.12%
Money market   195,690    0.15%   197,183    0.14%
Savings   128,369    0.10%   120,144    0.10%
Certificates of deposit   122,322    0.69%   136,551    0.84%
Individual Retirement Accounts   112,780    0.41%   121,684    0.38%
Other time deposits   965    0.00%   976    0.00%
Total interest-bearing deposits   755,686    0.26%   755,854    0.30%
Borrowed funds:                    
Short-term   7,610    0.16%   7,393    0.16%
Long-term   71,105    4.02%   73,266    4.03%
Total borrowed funds   78,715    3.65%   80,659    3.68%
Total Interest-bearing Liabilities   834,401    0.58%   836,513    0.62%
Demand deposits   217,945         199,064      
Other liabilities   7,937         8,064      
Total Liabilities   1,060,283         1,043,641      
Stockholders' equity, excluding other comprehensive income/loss   181,813         181,354      
Other comprehensive income/loss   6,808         3,116      
Total Stockholders' Equity   188,621         184,470      
Total Liabilities and Stockholders' Equity  $1,248,904        $1,228,111      
Interest Rate Spread        3.55%        3.70%
Net Interest Income/Earning Assets        3.71%        3.86%
                     
Total Deposits (Interest-bearing and Demand)  $973,631        $954,918      

 

(1) Rates of return on tax-exempt securities and loans are presented on a fully taxable-equivalent basis, using the Corporation’s marginal federal income tax rate of 35%.

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

 

6
 

 

COMPARISON OF NONINTEREST INCOME                      
(In Thousands)  Three Months Ended   Six Months Ended 
   June 30,   Mar. 31,   June 30,   June 30,   June 30, 
   2015   2015   2014   2015   2014 
Service charges on deposit accounts  $1,305   $1,022   $1,314   $2,327   $2,537 
Service charges and fees   123    113    134    236    261 
Trust and financial management revenue   1,241    1,114    1,138    2,355    2,185 
Brokerage revenue   206    219    242    425    469 
Insurance commissions, fees and premiums   23    40    27    63    59 
Interchange revenue from debit card transactions   500    474    517    974    970 
Net gains from sales of loans   183    147    265    330    416 
(Decrease) increase in fair value of servicing rights   (33)   (117)   (53)   (150)   52 
Increase in cash surrender value of life insurance   102    97    91    199    179 
Net loss from premises and equipment   0    0    (1)   0    (1)
Other operating income   312    378    306    690    604 
Total other operating income, before realized gains on available-for-sale securities, net  $3,962   $3,487   $3,980   $7,449   $7,731 

 

COMPARISON OF NONINTEREST EXPENSE                     
(In Thousands)  Three Months Ended   Six Months Ended 
   June 30,   Mar. 31,   June 30,   June 30,   June 30, 
   2015   2015   2014   2015   2014 
Salaries and wages  $3,603   $3,487   $3,646   $7,090   $7,211 
Pensions and other employee benefits   935    1,385    1,153    2,320    2,472 
Occupancy expense, net   640    722    641    1,362    1,356 
Furniture and equipment expense   467    454    466    921    938 
FDIC Assessments   148    151    146    299    293 
Pennsylvania shares tax   317    249    337    566    678 
Professional fees   113    122    144    235    292 
Automated teller machine and interchange expense   255    246    218    501    429 
Software subscriptions   211    197    201    408    391 
Other operating expense   1,275    1,451    1,395    2,726    2,811 
Total noninterest expense, before loss on prepayment of borrowings   7,964    8,464    8,347    16,428    16,871 
Loss on prepayment of borrowings   910    0    0    910    0 
Total noninterest expense  $8,874   $8,464   $8,347   $17,338   $16,871 

 

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