CITIZENS & NORTHERN CORP - FORM 8-K - EX-99.3 - EXHIBIT 99.3 - October 19, 2017

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EX-99.2 - EXHIBIT 99.2 - CITIZENS & NORTHERN CORPtv477331_ex99-2.htm
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8-K - FORM 8-K - CITIZENS & NORTHERN CORPtv477331_8k.htm

 

EXHIBIT 99.3 – Supplemental, Unaudited Financial Information

 

 

CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS

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

 

   AS OF OR FOR THE     
   9 MONTHS ENDED   % 
   SEPTEMBER 30,   INCREASE 
   2017   2016   (DECREASE) 
EARNINGS PERFORMANCE               
Net Income  $11,491   $11,531    -0.35%
Return on Average Assets   1.23%   1.25%   -1.60%
Return on Average Equity   8.13%   8.16%   -0.37%
BALANCE SHEET HIGHLIGHTS               
Total Assets  $1,259,921   $1,245,333    1.17%
Available-for-Sale Securities   365,086    409,800    -10.91%
Loans (Net)   792,112    733,917    7.93%
Allowance for Loan Losses   8,900    8,421    5.69%
Deposits and Repo Sweep Accounts   1,026,364    998,200    2.82%
OFF-BALANCE SHEET               
Outstanding Balance of Mortgage Loans Sold with Servicing Retained   169,581    157,845    7.44%
Trust Assets Under Management   924,907    867,852    6.57%
SHAREHOLDERS' VALUE (PER COMMON SHARE)               
Net Income - Basic  $0.94   $0.95    -1.05%
Net Income - Diluted  $0.94   $0.95    -1.05%
Dividends  $0.78   $0.78    0.00%
Common Book Value  $15.66   $15.77    -0.70%
Tangible Common Book Value  $14.68   $14.78    -0.68%
Market Value (Last Trade)  $24.56   $21.97    11.79%
Market Value / Common Book Value   156.83%   139.32%   12.57%
Market Value / Tangible Common Book Value   167.30%   148.65%   12.55%
Price Earnings Multiple (Annualized)   19.60    17.34    13.03%
Dividend Yield (Annualized)   4.23%   4.73%   -10.57%
Common Shares Outstanding, End of Period   12,197,527    12,087,223    0.91%
SAFETY AND SOUNDNESS               
Tangible Common Equity / Tangible Assets   14.35%   14.48%   -0.90%
Nonperforming Assets / Total Assets   1.35%   1.79%   -24.58%
Allowance for Loan Losses / Total Loans   1.11%   1.13%   -1.77%
Total Risk Based Capital Ratio (a)   23.50%   23.56%   -0.25%
Leverage Ratio (a)   14.41%   14.17%   1.69%
                
(a) Capital ratios for the most recent period are estimated.               
AVERAGE BALANCES               
Average Assets  $1,243,448   $1,226,733    1.36%
Average Equity  $188,448   $188,424    0.01%
EFFICIENCY RATIO               
Net Interest Income on a Fully Taxable-Equivalent               
Basis  $33,240   $32,297    2.92%
Noninterest Revenue   12,036    11,480    4.84%
Total (1)  $45,276   $43,777    3.42%
Noninterest Expenses (2)  $27,566   $26,186    5.27%
Efficiency ratio = (2)/(1)   60.88%   59.82%   1.78%

  

 1 

 

 

QUARTERLY CONDENSED, CONSOLIDATED INCOME STATEMENT INFORMATION          

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

 

   For the Three Months Ended:                 
   Sept. 30,   June 30,   Mar. 31,   Dec. 31,   Sept. 30,   June 30,   Mar. 31, 
   2017   2017   2017   2016   2016   2016   2016 
Interest income  $11,626   $11,340   $11,112   $11,106   $11,131   $10,924   $10,937 
Interest expense   985    978    953    920    944    925    904 
Net interest income   10,641    10,362    10,159    10,186    10,187    9,999    10,033 
Provision (credit) for loan losses   322    4    452    (3)   538    318    368 
Net interest income after provision (credit) for loan losses   10,319    10,358    9,707    10,189    9,649    9,681    9,665 
Noninterest revenue   4,066    4,106    3,864    4,031    3,884    3,906    3,690 
Net gains on available-for-sale securities   5    107    145    69    584    122    383 
Noninterest expenses   9,192    9,076    9,298    8,558    8,579    8,535    9,072 
Income before income tax provision   5,198    5,495    4,418    5,731    5,538    5,174    4,666 
Income tax provision   1,262    1,374    984    1,500    1,451    1,303    1,093 
Net income  $3,936   $4,121   $3,434   $4,231   $4,087   $3,871   $3,573 
Net income attributable to common shares  $3,916   $4,100   $3,416   $4,209   $4,065   $3,850   $3,553 
Basic earnings per common share  $0.32   $0.34   $0.28   $0.35   $0.34   $0.32   $0.29 
Diluted earnings per common share  $0.32   $0.34   $0.28   $0.35   $0.34   $0.32   $0.29 

 

QUARTERLY CONDENSED, CONSOLIDATED BALANCE SHEET INFORMATION

(In Thousands) (Unaudited)

 

   As of:                 
   Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30, 
   2017   2017   2017   2016   2016 
ASSETS                         
Cash & Due from Banks  $32,850   $34,643   $32,543   $32,109   $34,070 
Available-for-Sale Securities   365,086    364,753    376,919    395,077    409,800 
Loans Held for Sale   437    1,708    163    142    621 
Loans, Net   792,112    771,057    753,277    743,362    733,917 
Intangible Assets   11,956    11,957    11,958    11,959    11,963 
Other Assets   57,480    59,283    59,064    59,643    54,962 
TOTAL ASSETS  $1,259,921   $1,243,401   $1,233,924   $1,242,292   $1,245,333 
                          
LIABILITIES                         
Deposits  $1,021,625   $997,262   $980,251   $983,843   $991,880 
Repo Sweep Accounts   4,739    4,875    6,244    5,175    6,320 
Total Deposits and Repo Sweeps   1,026,364    1,002,137    986,495    989,018    998,200 
Borrowed Funds   34,256    42,321    52,888    59,454    46,808 
Other Liabilities   8,288    9,084    7,191    7,812    9,722 
TOTAL LIABILITIES   1,068,908    1,053,542    1,046,574    1,056,284    1,054,730 
                          
SHAREHOLDERS' EQUITY                         
Common Shareholders' Equity, Excluding Accumulated Other Comprehensive Income/ Loss   190,639    189,339    187,825    186,906    185,173 
Accumulated Other Comprehensive Income/ Loss:                         
Net Unrealized Gains/Losses on Available-for-sale Securities   227    369    (630)   (949)   5,388 
Defined Benefit Plans Adjustment, Net   147    151    155    51    42 
TOTAL SHAREHOLDERS' EQUITY   191,013    189,859    187,350    186,008    190,603 
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY  $1,259,921   $1,243,401   $1,233,924   $1,242,292   $1,245,333 

 

 

 2 

 

 

 

AVAILABLE-FOR-SALE SECURITIES  September 30, 2017   June 30, 2017   December 31, 2016 
(In Thousands)  Amortized   Fair   Amortized   Fair   Amortized   Fair 
   Cost   Value   Cost   Value   Cost   Value 
Obligations of U.S. Government agencies  $8,028   $7,946   $9,678   $9,591   $9,671   $9,541 
Obligations of states and political subdivisions:                              
Tax-exempt   108,521    110,557    114,095    116,338    118,140    119,037 
Taxable   27,538    27,816    28,162    28,452    30,073    30,297 
                               
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored  agencies:                              
Residential pass-through securities   55,247    54,917    47,767    47,405    58,922    58,404 
Residential collateralized mortgage obligations   130,375    129,243    129,372    128,248    147,915    146,608 
Commercial mortgage-backed securities   34,028    33,629    34,112    33,742    30,817    30,219 
Total debt securities   363,737    364,108    363,186    363,776    395,538    394,106 
Marketable equity securities   1,000    978    1,000    977    1,000    971 
Total  $364,737   $365,086   $364,186   $364,753   $396,538   $395,077 

 

Summary of Loans by Type

(Excludes Loans Held for Sale)

(In Thousands)

 

   Sept. 30,   June 30,   Dec. 31,   Sept. 30, 
   2017   2017   2016   2016 
Residential mortgage:                    
Residential mortgage loans - first liens  $355,285   $342,603   $334,102   $325,533 
Residential mortgage loans - junior liens   24,694    24,150    23,706    22,794 
Home equity lines of credit   36,534    37,159    38,057    38,623 
1-4 Family residential construction   25,286    26,067    24,908    23,310 
Total residential mortgage   441,799    429,979    420,773    410,260 
Commercial:                    
Commercial loans secured by real estate   158,520    155,158    150,468    149,938 
Commercial and industrial   83,243    82,815    83,854    86,969 
Political subdivisions   54,730    51,495    38,068    38,653 
Commercial construction and land   13,937    15,201    14,287    12,809 
Loans secured by farmland   7,744    7,432    7,294    6,900 
Multi-family (5 or more) residential   7,566    7,497    7,896    8,133 
Agricultural loans   6,137    4,454    3,998    4,313 
Other commercial loans   12,383    11,038    11,475    11,557 
Total commercial   344,260    335,090    317,340    319,272 
Consumer   14,953    14,623    13,722    12,806 
Total   801,012    779,692    751,835    742,338 
Less: allowance for loan losses   (8,900)   (8,635)   (8,473)   (8,421)
Loans, net  $792,112   $771,057   $743,362   $733,917 

 

Loans Held for Sale

(In Thousands)

 

   Sept. 30,   June 30,   Dec. 31,   Sept. 30, 
   2017   2017   2016   2016 
Residential mortgage loans originated and serviced - outstanding balance  $170,018   $167,497   $163,438   $158,466 
Less: outstanding balance of loans sold   (169,581)   (165,789)   (163,296)   (157,845)
Loans held for sale, net  $437   $1,708   $142   $621 

 

 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, 
   2017   2017   2017   2016 
Balance, beginning of period  $8,635   $8,744   $8,473   $7,889 
Charge-offs   (67)   (135)   (402)   (737)
Recoveries   10    22    51    45 
Net charge-offs   (57)   (113)   (351)   (692)
Provision for loan losses   322    4    778    1,224 
Balance, end of period  $8,900   $8,635   $8,900   $8,421 

 

PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS

AND TROUBLED DEBT RESTRUCTURINGS (TDRs)

(Dollars In Thousands)

 

   Sept. 30,   June 30,   Dec 31,   Sept. 30, 
   2017   2017   2016   2016 
Impaired loans with a valuation allowance  $3,581   $3,293   $3,372   $3,621 
Impaired loans without a valuation allowance   5,388    5,418    7,488    7,514 
Total impaired loans  $8,969   $8,711   $10,860   $11,135 
                     
Total loans past due 30-89 days and still accruing  $5,978   $3,749   $7,735   $4,040 
                     
Nonperforming assets:                    
 Total nonaccrual loans  $12,400   $11,504   $8,736   $12,481 
 Total loans past due 90 days or more and still accruing   2,979    2,680    6,838    7,539 
 Total nonperforming loans   15,379    14,184    15,574    20,020 
 Foreclosed assets held for sale (real estate)   1,650    2,023    2,180    2,321 
Total nonperforming assets  $17,029   $16,207   $17,754   $22,341 
                     
Loans subject to troubled debt restructurings (TDRs):                    
 Performing  $658   $729   $5,803   $946 
 Nonperforming   3,075    3,059    2,874    5,032 
Total TDRs  $3,733   $3,788   $8,677   $5,978 
                     
Total nonperforming loans as a % of loans   1.92%   1.82%   2.07%   2.70%
Total nonperforming assets as a % of assets   1.35%   1.30%   1.43%   1.79%
Allowance for loan losses as a % of total loans   1.11%   1.11%   1.13%   1.13%
Allowance for loan losses as a % of nonperforming loans   57.87%   60.88%   54.40%   42.06%

 

 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 
   9/30/2017   Return/   6/30/2017   Return/   9/30/2016   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  $251,774    2.11%  $255,806    2.13%  $291,847    1.98%
Tax-exempt   111,721    4.27%   114,993    4.41%   112,679    4.51%
Total available-for-sale securities   363,495    2.78%   370,799    2.83%   404,526    2.69%
Interest-bearing due from banks   21,260    1.25%   14,873    1.11%   17,138    0.67%
Loans held for sale   781    5.08%   499    4.82%   556    5.01%
Loans receivable:                              
Taxable   717,012    4.92%   702,933    4.91%   671,408    4.95%
Tax-exempt   71,334    4.51%   68,439    4.48%   61,608    4.50%
Total loans receivable   788,346    4.88%   771,372    4.87%   733,016    4.91%
Total Earning Assets   1,173,882    4.16%   1,157,543    4.17%   1,155,236    4.07%
Cash   18,325         17,276         17,523      
Unrealized gain/loss on securities   1,449         689         9,654      
Allowance for loan losses   (8,769)        (8,901)        (8,050)     
Bank premises and equipment   15,431         15,714         15,379      
Intangible assets   11,958         11,957         11,966      
Other assets   40,944         41,322         38,225      
Total Assets  $1,253,220        $1,235,600        $1,239,933      
                               
INTEREST-BEARING LIABILITIES                              
Interest-bearing deposits:                              
Interest checking  $219,633    0.25%  $203,256    0.21%  $200,789    0.15%
Money market   194,947    0.19%   190,703    0.19%   205,158    0.17%
Savings   145,025    0.10%   142,978    0.10%   133,269    0.10%
Certificates of deposit   119,351    0.85%   116,450    0.82%   123,475    0.77%
Individual Retirement Accounts   96,934    0.45%   98,004    0.43%   103,259    0.42%
Other time deposits   1,472    0.27%   1,107    0.00%   1,523    0.26%
Total interest-bearing deposits   777,362    0.33%   752,498    0.31%   767,473    0.28%
Borrowed funds:                              
Short-term   7,139    0.44%   21,205    0.85%   18,655    0.64%
Long-term   36,469    3.67%   38,353    3.74%   38,571    3.76%
Total borrowed funds   43,608    3.14%   59,558    2.71%   57,226    2.75%
Total Interest-bearing Liabilities   820,970    0.48%   812,056    0.48%   824,699    0.46%
Demand deposits   232,839         227,488         215,880      
Other liabilities   8,801         7,573         9,057      
Total Liabilities   1,062,610         1,047,117         1,049,636      
Shareholders' equity, excluding other comprehensive income/loss   189,520         187,882         183,966      
Accumulated other comprehensive income/loss   1,090         601         6,331      
Total Shareholders' Equity   190,610         188,483         190,297      
Total Liabilities and Shareholders' Equity  $1,253,220        $1,235,600        $1,239,933      
Interest Rate Spread        3.68%        3.69%        3.61%
Net Interest Income/Earning Assets        3.83%        3.83%        3.74%
                               
Total Deposits (Interest-bearing  and Demand)  $1,010,201        $979,986        $983,353      

 

 

(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.

(3) Rates of return on earning assets and costs of funds have been presented on an annualized basis.

 

 5 

 

 

Analysis of Average Daily Balances and Rates

(Dollars in Thousands)

 

   9 Months       9 Months     
   Ended   Rate of   Ended   Rate of 
   9/30/2017   Return/   9/30/2016   Return/ 
   Average   Cost of   Average   Cost of 
   Balance   Funds %   Balance   Funds % 
EARNING ASSETS                    
Available-for-sale securities,  at amortized cost:                    
Taxable  $259,539    2.12%  $298,421    2.03%
Tax-exempt   114,759    4.37%   108,926    4.83%
Total available-for-sale securities   374,298    2.81%   407,347    2.78%
Interest-bearing due from banks   17,042    1.10%   20,566    0.58%
Loans held for sale   496    5.39%   516    5.44%
Loans receivable:                    
Taxable   706,065    4.90%   654,256    4.98%
Tax-exempt   67,073    4.51%   61,319    4.51%
Total loans receivable   773,138    4.87%   715,575    4.94%
Total Earning Assets   1,164,974    4.15%   1,144,004    4.09%
Cash   17,213         16,548      
Unrealized gain/loss on securities   402         8,154      
Allowance for loan losses   (8,755)        (7,913)     
Bank premises and equipment   15,618         15,409      
Intangible assets   11,958         11,968      
Other assets   42,038         38,563      
Total Assets  $1,243,448        $1,226,733      
                     
INTEREST-BEARING LIABILITIES                    
Interest-bearing deposits:                    
Interest checking  $208,071    0.21%  $197,628    0.14%
Money market   192,265    0.18%   199,211    0.17%
Savings   142,292    0.10%   131,880    0.10%
Certificates of deposit   116,500    0.82%   118,256    0.75%
Individual Retirement Accounts   97,981    0.44%   104,280    0.42%
Other time deposits   1,126    0.12%   1,157    0.12%
Total interest-bearing deposits   758,235    0.31%   752,412    0.28%
Borrowed funds:                    
Short-term   23,118    0.75%   25,828    0.69%
Long-term   37,740    3.72%   38,648    3.77%
Total borrowed funds   60,858    2.59%   64,476    2.53%
Total Interest-bearing Liabilities   819,093    0.48%   816,888    0.45%
Demand deposits   227,726         213,172      
Other liabilities   8,181         8,249      
Total Liabilities   1,055,000         1,038,309      
Shareholders' equity, excluding other comprehensive income/loss   188,041         183,078      
Accumulated other comprehensive income/loss   407         5,346      
Total Shareholders' Equity   188,448         188,424      
Total Liabilities and Shareholders' Equity  $1,243,448        $1,226,733      
Interest Rate Spread        3.67%        3.64%
Net Interest Income/Earning Assets        3.81%        3.77%
                     
Total Deposits (Interest-bearing  and Demand)  $985,961        $965,584      

 

(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.

(3) Rates of return on earning assets and costs of funds have been presented on an annualized basis.

 

 6 

 

 

COMPARISON OF NONINTEREST REVENUE

(In Thousands)

 

   Three Months Ended   Nine Months Ended 
   Sept. 30,   June 30,   Sept. 30,   Sept. 30,   Sept. 30, 
   2017   2017   2016   2017   2016 
Service charges on deposit accounts  $1,168   $1,094   $1,221   $3,346   $3,523 
Service charges and fees   115    104    118    316    335 
Trust and financial management revenue   1,292    1,497    1,172    3,969    3,567 
Brokerage revenue   187    208    216    551    569 
Insurance commissions, fees and premiums   26    31    26    98    74 
Interchange revenue from debit card transactions   561    568    481    1,649    1,431 
Net gains from sales of loans   297    188    236    651    699 
Loan servicing fees, net   35    55    28    162    39 
Increase in cash surrender value of life insurance   97    94    97    281    286 
Other operating income   288    267    289    1,013    957 
Total other operating income, before realized gains on available-for-sale securities, net  $4,066   $4,106   $3,884   $12,036   $11,480 

 

COMPARISON OF NONINTEREST EXPENSES

(In Thousands)

 

   Three Months Ended   Nine Months Ended 
   Sept. 30,   June 30,   Sept. 30,   Sept. 30,   Sept. 30, 
   2017   2017   2016   2017   2016 
Salaries and wages  $3,985   $3,972   $3,901   $11,825   $11,701 
Pensions and other employee benefits   1,216    1,144    1,060    3,890    3,499 
Occupancy expense, net   580    600    601    1,758    1,770 
Furniture and equipment expense   471    448    435    1,372    1,301 
FDIC Assessments   93    96    151    283    448 
Pennsylvania shares tax   336    336    287    1,008    932 
Professional fees   269    254    245    750    816 
Automated teller machine and interchange expense   346    305    291    945    807 
Software subscriptions   299    291    237    870    729 
Other operating expense   1,597    1,630    1,371    4,865    4,183 
Total noninterest expense  $9,192   $9,076   $8,579   $27,566   $26,186 

 

 7 

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