CITIZENS & NORTHERN CORP - FORM 8-K - EX-99.3 - EXHIBIT 99.3 - October 13, 2015

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8-K - FORM 8-K - CITIZENS & NORTHERN CORPv422026_8k.htm
EX-99.2 - EXHIBIT 99.2 - CITIZENS & NORTHERN CORPv422026_ex99-2.htm
EX-99.1 - EXHIBIT 99.1 - CITIZENS & NORTHERN CORPv422026_ex99-1.htm

 

EXHIBIT 99.3 – Supplemental, Unaudited Financial Information

 

 

 

CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS

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

 

    9 MONTHS ENDED    % 
   SEPTEMBER 30,   INCREASE 
   2015   2014   (DECREASE) 
EARNINGS PERFORMANCE               
Net Income  $12,406   $12,718    -2.45%
Return on Average Assets   1.32%   1.37%   -3.65%
Return on Average Equity   8.78%   9.18%   -4.36%
                
BALANCE SHEET HIGHLIGHTS               
Total Assets  $1,232,531   $1,256,533    -1.91%
Available-for-Sale Securities   461,713    508,253    -9.16%
Loans (Net)   672,449    621,960    8.12%
Allowance for Loan Losses   7,416    7,449    -0.44%
Deposits and Repo Sweep Accounts   966,856    988,294    -2.17%
                
OFF-BALANCE SHEET               
Outstanding Balance of Mortgage Loans Sold with Servicing Retained   152,275    150,695    1.05%
Trust Assets Under Management   790,215    812,376    -2.73%
                
SHAREHOLDERS' VALUE (PER COMMON SHARE)               
Net Income - Basic  $1.02   $1.02    0.00%
Net Income - Diluted  $1.01   $1.02    -0.98%
Dividends  $0.78   $0.78    0.00%
Common Book Value  $15.60   $15.14    3.04%
Tangible Common Book Value  $14.62   $14.17    3.18%
Market Value (Last Trade)  $19.52   $19.00    2.74%
Market Value / Common Book Value   125.13%   125.50%   -0.29%
Market Value / Tangible Common Book Value   133.52%   134.09%   -0.43%
Price Earnings Multiple (Annualized)   14.35    13.97    2.72%
Dividend Yield (Annualized)   5.33%   5.47%   -2.56%
Common Shares Outstanding, End of Period   12,187,033    12,339,120    -1.23%
                
SAFETY AND SOUNDNESS               
Tangible Common Equity / Tangible Assets   14.59%   14.05%   3.84%
Nonperforming Assets / Total Assets   1.28%   1.45%   -11.72%
Allowance for Loan Losses / Total Loans   1.09%   1.18%   -7.63%
Total Risk Based Capital Ratio (a)   24.63%   27.42%   -10.18%
Tier 1 Risk Based Capital Ratio (a)   23.47%   26.09%   -10.04%
Common Equity Tier 1 Risk Based Capital Ratio (a)   23.47%          
Leverage Ratio (a)   13.95%   13.78%   1.23%
                
AVERAGE BALANCES               
Average Assets  $1,249,156   $1,236,883    0.99%
Average Equity  $188,305   $184,699    1.95%

 

(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:                 
   Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,   June 30,   Mar. 31, 
   2015   2015   2015   2014   2014   2014   2014 
Interest income  $11,134   $11,186   $11,163   $11,468   $11,572   $11,563   $11,406 
Interest expense   1,126    1,176    1,213    1,257    1,287    1,290    1,288 
Net interest income   10,008    10,010    9,950    10,211    10,285    10,273    10,118 
Provision (credit) for loan losses   302    221    3    123    218    446    (311)
Net interest income after provision (credit) for loan losses   9,706    9,789    9,947    10,088    10,067    9,827    10,429 
Other income   3,961    3,962    3,487    3,802    3,887    3,980    3,751 
Net gains on available-for-sale securities   79    932    74    210    760    103    31 
Loss on prepayment of borrowings   0    910    0    0    0    0    0 
Other expenses   8,117    7,964    8,464    8,250    9,036    8,347    8,524 
Income before income tax provision   5,629    5,809    5,044    5,850    5,678    5,563    5,687 
Income tax provision   1,395    1,452    1,229    1,482    1,411    1,400    1,399 
Net income  $4,234   $4,357   $3,815   $4,368   $4,267   $4,163   $4,288 
Net income per share – basic  $0.35   $0.36   $0.31   $0.35   $0.34   $0.33   $0.35 
Net income per share – diluted  $0.35   $0.36   $0.31   $0.35   $0.34   $0.33   $0.34 

 

QUARTERLY CONDENSED, CONSOLIDATED BALANCE SHEET INFORMATION

(In Thousands) (Unaudited)  As of:             
   Sept. 30,   June 30,   Dec. 31,   Sept. 30, 
   2015   2015   2014   2014 
ASSETS                    
Cash & Due from Banks  $32,221   $35,405   $36,047   $55,439 
Available-for-Sale Securities   461,713    497,111    516,807    508,253 
Loans Held for Sale   76    192    0    418 
Loans, Net   672,449    656,518    623,209    621,960 
Intangible Assets   11,978    11,983    11,994    12,003 
Other Assets   54,094    54,513    53,906    58,460 
TOTAL ASSETS  $1,232,531   $1,255,722   $1,241,963   $1,256,533 
                     
LIABILITIES                    
Deposits  $961,112   $978,449   $967,989   $981,529 
Repo Sweep Accounts   5,744    4,806    5,537    6,765 
Total Deposits and Repo Sweeps   966,856    983,255    973,526    988,294 
Borrowed Funds   67,342    77,916    73,060    73,131 
Other Liabilities   8,233    7,578    7,015    8,234 
TOTAL LIABILITIES   1,042,431    1,068,749    1,053,601    1,069,659 
                     
SHAREHOLDERS' EQUITY                    
Common Shareholders' Equity, Excluding Accumulated Other Comprehensive Income/ Loss   183,978    182,887    183,002    182,837 
Accumulated Other Comprehensive Income/ Loss:                    
Net Unrealized Gains/Losses on Available-for-sale Securities   6,116    4,077    5,281    3,940 
Defined Benefit Plans Adjustment, Net   6    9    79    97 
TOTAL SHAREHOLDERS' EQUITY   190,100    186,973    188,362    186,874 
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY  $1,232,531   $1,255,722   $1,241,963   $1,256,533 

 

 2 

 

 

AVAILABLE-FOR-SALE SECURITIES  September 30, 2015   June 30, 2015   December 31, 2014 
(In Thousands)  Amortized   Fair   Amortized   Fair   Amortized   Fair 
   Cost   Value   Cost   Value   Cost   Value 
                         
Obligations of U.S. Government agencies  $15,664   $15,621   $27,189   $26,871   $27,221   $26,676 
Obligations of states and political subdivisions:                              
Tax-exempt   108,115    112,396    115,908    119,749    120,086    124,839 
Taxable   34,464    35,124    34,872    35,135    33,637    33,878 
Mortgage-backed securities   71,681    72,697    76,323    76,790    82,479    83,903 
Collateralized mortgage obligations, Issued by U.S. Government agencies   216,981    218,052    231,148    230,794    239,620    238,823 
Other collateralized debt obligations   34    34    34    34    34    34 
Total debt securities   446,939    453,924    485,474    489,373    503,077    508,153 
Marketable equity securities   5,365    7,789    5,365    7,738    5,605    8,654 
Total  $452,304   $461,713   $490,839   $497,111   $508,682   $516,807 

 

Summary of Loans by Type                
(Excludes Loans Held for Sale)                
(In Thousands)  Sept. 30,   June 30,   Dec. 31,   Sept. 30,  
   2015   2015   2014   2014 
Residential mortgage:                
Residential mortgage loans - first liens  $298,096   $294,978   $291,882   $290,943 
Residential mortgage loans - junior liens   20,601    21,502    21,166    21,843 
Home equity lines of credit   39,572    39,140    36,629    35,975 
1-4 Family residential construction   23,633    19,651    16,739    16,895 
Total residential mortgage   381,902    375,271    366,416    365,656 
Commercial:                    
Commercial loans secured by real estate   135,760    135,063    145,878    144,410 
Commercial and industrial   72,011    61,427    50,157    50,615 
Political subdivisions   40,186    40,908    17,534    14,823 
Commercial construction and land   6,852    7,826    6,938    9,069 
Loans secured by farmland   7,521    7,565    7,916    8,542 
Multi-family (5 or more) residential   8,194    8,561    8,917    9,092 
Agricultural loans   4,588    4,287    3,221    3,284 
Other commercial loans   12,691    12,809    13,334    13,620 
Total commercial   287,803    278,446    253,895    253,455 
Consumer   10,160    10,101    10,234    10,298 
Total   679,865    663,818    630,545    629,409 
Less: allowance for loan losses   (7,416)   (7,300)   (7,336)   (7,449)
Loans, net  $672,449   $656,518   $623,209   $621,960 

 

Loans Held for Sale                
(In Thousands)  Sept. 30,    June 30,    Dec. 31,   Sept. 30, 
   2015   2015   2014   2014 
Residential mortgage loans originated and serviced - outstanding balance  $152,351   $151,324   $152,505   $151,113 
Less: outstanding balance of loans sold   (152,275)   (151,132)   (152,505)   (150,695)
Loans held for sale, net  $76   $192   $0   $418 

 

 3 

 

 

ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES

(In Thousands)

   3 Months   3 Months   9 Months   9 Months 
   Ended   Ended   Ended   Ended 
   Sept. 30,   June 30,   Sept. 30,   Sept. 30, 
   2015    2015    2015    2014  
Balance, beginning of period  $7,300   $7,134   $7,336   $8,663 
Charge-offs   (197)   (77)   (496)   (1,881)
Recoveries   11    22    50    314 
Net charge-offs   (186)   (55)   (446)   (1,567)
Provision for loan losses   302    221    526    353 
Balance, end of period  $7,416   $7,300   $7,416   $7,449 

 

PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS

AND TROUBLED DEBT RESTRUCTURINGS (TDRs)

(In Thousands)

   Sept. 30,   June 30,   Dec 31,   Sept. 30, 
   2015    2015    2014    2014  
Impaired loans with a valuation allowance  $1,963   $3,880   $3,241   $4,059 
Impaired loans without a valuation allowance   7,812    7,764    9,075    10,035 
Total impaired loans  $9,775   $11,644   $12,316   $14,094 
                     
Total loans past due 30-89 days and still accruing  $4,780   $3,803   $7,121   $5,458 
                     
Nonperforming assets:                    
Total nonaccrual loans  $11,632   $12,060   $12,610   $13,722 
Total loans past due 90 days or more and still accruing   2,833    2,529    2,843    2,602 
Total nonperforming loans   14,465    14,589    15,453    16,324 
Foreclosed assets held for sale (real estate)   1,363    1,223    1,189    1,888 
Total nonperforming assets  $15,828   $15,812   $16,642   $18,212 
                     
Loans subject to troubled debt restructurings (TDRs):                    
Performing  $1,043   $1,119   $1,807   $1,834 
Nonperforming   5,182    5,216    5,388    6,172 
Total TDRs  $6,225   $6,335   $7,195   $8,006 
                     
Total nonperforming loans as a % of loans   2.13%   2.20%   2.45%   2.59%
Total nonperforming assets as a % of assets   1.28%   1.26%   1.34%   1.45%
Allowance for loan losses as a % of total loans   1.09%   1.10%   1.16%   1.18%
Allowance for loan losses as a % of nonperforming loans   51.27%   50.04%   47.47%   45.63%

 

 4 

 

 

Analysis of Average Daily Balances and Annualized Rates

(Dollars in Thousands)

   3 Months   Annualized   3 Months   Annualized   3 Months   Annualized 
   Ended   Rate of   Ended   Rate of   Ended   Rate of 
   9/30/2015   Return/   6/30/2015   Return/   9/30/2014   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  $361,481    2.02%  $389,705    2.06%  $381,833    2.16%
Tax-exempt   111,735    5.14%   116,421    5.33%   123,949    5.22%
Total available-for-sale securities   473,216    2.75%   506,126    2.81%   505,782    2.91%
Interest-bearing due from banks   19,774    0.46%   21,970    0.46%   35,133    0.37%
Loans held for sale   245    8.10%   145    8.30%   263    7.54%
Loans receivable:                              
Taxable   610,516    5.10%   592,188    5.25%   587,799    5.43%
Tax-exempt   63,219    4.50%   49,026    4.88%   38,537    5.48%
Total loans receivable   673,735    5.05%   641,214    5.22%   626,336    5.43%
Total Earning Assets   1,166,970    4.04%   1,169,455    4.09%   1,167,514    4.19%
Cash   16,961         17,072         17,361      
Unrealized gain/loss on securities   7,015         10,260         7,810      
Allowance for loan losses   (7,376)        (7,226)        (7,332)     
Bank premises and equipment   15,808         16,095         16,581      
Intangible Asset - Core Deposit Intangible   38         44         64      
Intangible Asset - Goodwill   11,942         11,942         11,942      
Other assets   38,294         38,065         40,201      
Total Assets  $1,249,652        $1,255,707        $1,254,141      
                               
INTEREST-BEARING LIABILITIES                              
Interest-bearing deposits:                              
Interest checking  $197,189    0.11%  $199,373    0.11%  $186,034    0.12%
Money market   202,106    0.15%   196,537    0.15%   202,536    0.14%
Savings   128,939    0.10%   128,879    0.10%   123,447    0.10%
Certificates of deposit   125,886    0.66%   122,634    0.67%   137,136    0.76%
Individual Retirement Accounts   109,661    0.41%   111,765    0.41%   120,079    0.40%
Other time deposits   1,514    0.26%   1,125    0.00%   1,525    0.00%
Total interest-bearing deposits   765,295    0.25%   760,313    0.25%   770,757    0.28%
Borrowed funds:                              
Short-term   12,972    0.28%   9,185    0.22%   5,325    0.07%
Long-term   62,876    3.98%   69,211    4.01%   73,162    4.03%
Total borrowed funds   75,848    3.34%   78,396    3.57%   78,487    3.76%
Total Interest-bearing Liabilities   841,143    0.53%   838,709    0.56%   849,244    0.60%
Demand deposits   212,022         220,839         208,773      
Other liabilities   8,803         7,756         10,975      
Total Liabilities   1,061,968         1,067,304         1,068,992      
Stockholders' equity, excluding other comprehensive income/loss   183,116         181,683         180,042      
Other comprehensive income/loss   4,568         6,720         5,107      
Total Stockholders' Equity   187,684         188,403         185,149      
Total Liabilities and Stockholders' Equity  $1,249,652        $1,255,707        $1,254,141      
Interest Rate Spread        3.51%        3.53%        3.59%
Net Interest Income/Earning Assets        3.66%        3.69%        3.75%
                               
Total Deposits (Interest-bearing and Demand)  $977,317        $981,152        $979,530      

 

(1) Annualized 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 Annualized Rates

(Dollars in Thousands)

   9 Months   Annualized   9 Months   Annualized 
   Ended   Rate of   Ended   Rate of 
   9/30/2015   Return/   9/30/2014   Return/ 
   Average   Cost of   Average   Cost of 
   Balance   Funds %   Balance   Funds % 
EARNING ASSETS                    
Available-for-sale securities, at amortized cost:                    
Taxable  $379,666    2.08%  $366,853    2.18%
Tax-exempt   115,255    5.27%   124,508    5.34%
Total available-for-sale securities   494,921    2.82%   491,361    2.98%
Interest-bearing due from banks   22,886    0.43%   32,798    0.39%
Loans held for sale   160    8.36%   222    7.83%
Loans receivable:                    
Taxable   595,170    5.24%   589,607    5.47%
Tax-exempt   51,468    4.80%   38,203    5.64%
Total loans receivable   646,638    5.20%   627,810    5.48%
Total Earning Assets   1,164,605    4.10%   1,152,191    4.27%
Cash   16,723         17,052      
Unrealized gain/loss on securities   9,287         5,719      
Allowance for loan losses   (7,331)        (8,166)     
Bank premises and equipment   16,050         16,915      
Intangible Asset - Core Deposit Intangible   44         74      
Intangible Asset - Goodwill   11,942         11,942      
Other assets   37,836         41,156      
Total Assets  $1,249,156        $1,236,883      
                     
INTEREST-BEARING LIABILITIES                    
Interest-bearing deposits:                    
Interest checking  $196,109    0.11%  $181,580    0.12%
Money market   197,852    0.15%   198,987    0.14%
Savings   128,561    0.10%   121,257    0.10%
Certificates of deposit   123,523    0.68%   136,748    0.81%
Individual Retirement Accounts   111,729    0.41%   121,143    0.39%
Other time deposits   1,150    0.12%   1,161    0.00%
Total interest-bearing deposits   758,924    0.26%   760,876    0.29%
Borrowed funds:                    
Short-term   9,417    0.21%   6,696    0.14%
Long-term   68,332    4.01%   73,231    4.03%
Total borrowed funds   77,749    3.55%   79,927    3.71%
Total Interest-bearing Liabilities   836,673    0.56%   840,803    0.61%
Demand deposits   215,949         202,336      
Other liabilities   8,229         9,045      
Total Liabilities   1,060,851         1,052,184      
Stockholders' equity, excluding other comprehensive income/loss   182,252         180,912      
Other comprehensive income/loss   6,053         3,787      
Total Stockholders' Equity   188,305         184,699      
Total Liabilities and Stockholders' Equity  $1,249,156        $1,236,883      
Interest Rate Spread        3.54%        3.66%
Net Interest Income/Earning Assets        3.69%        3.82%
                     
Total Deposits (Interest-bearing and Demand)  $974,873        $963,212      

 

(1) Annualized 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.

 

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COMPARISON OF NONINTEREST INCOME                    
(In Thousands)  Three Months Ended   Nine Months Ended 
   Sept. 30,   June 30,   Sept. 30,   Sept. 30,   Sept. 30, 
   2015   2015   2014   2015   2014 
Service charges on deposit accounts  $1,302   $1,305   $1,275   $3,629   $3,812 
Service charges and fees   137    123    144    373    405 
Trust and financial management revenue   1,123    1,241    1,140    3,478    3,325 
Brokerage revenue   215    206    213    640    682 
Insurance commissions, fees and premiums   24    23    44    87    103 
Interchange revenue from debit card transactions   482    500    504    1,456    1,474 
Net gains from sales of loans   243    183    141    573    557 
Increase (decrease) in fair value of servicing rights   13    (33)   (17)   (137)   35 
Increase in cash surrender value of life insurance   95    102    99    294    278 
Net (loss) gain from premises and equipment   (1)   0    9    (1)   8 
Other operating income   328    312    335    1,018    939 
Total other operating income, before realized gains on available-for-sale securities, net  $3,961   $3,962   $3,887   $11,410   $11,618 

 

COMPARISON OF NONINTEREST EXPENSE                    
(In Thousands)  Three Months Ended   Nine Months Ended 
   Sept. 30,   June 30,   Sept. 30,   Sept. 30,   Sept. 30, 
   2015   2015   2014   2015   2014 
Salaries and wages  $3,744   $3,603   $4,348   $10,834   $11,559 
Pensions and other employee benefits   1,016    935    1,091    3,336    3,563 
Occupancy expense, net   623    640    646    1,985    2,002 
Furniture and equipment expense   477    467    461    1,398    1,399 
FDIC Assessments   155    148    151    454    444 
Pennsylvania shares tax   311    317    336    877    1,014 
Professional fees   128    113    135    363    427 
Automated teller machine and interchange expense   234    255    239    735    668 
Software subscriptions   209    211    184    617    575 
Other operating expense   1,220    1,275    1,445    3,946    4,256 
Total noninterest expense, before loss on prepayment of borrowings   8,117    7,964    9,036    24,545    25,907 
Loss on prepayment of borrowings   0    910    0    910    0 
Total noninterest expense  $8,117   $8,874   $9,036   $25,455   $25,907 

 

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