CITIZENS & NORTHERN CORP - FORM 8-K - EX-99.3 - EXHIBIT 99.3 - July 16, 2020

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EXHIBIT 99.3 – Supplemental, Unaudited Financial Information

C&N_Corporation

 

 

CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS        
(Dollars In Thousands, Except Per Share Data)       (Unaudited)        
   AS OF OR FOR THE     
   SIX MONTHS ENDED   % 
   JUNE 30,   INCREASE 
   2020   2019   (DECREASE) 
EARNINGS PERFORMANCE               
Net Income  $9,604   $8,739    9.90%
Return on Average Assets (Annualized)   1.15%   1.21%   -4.96%
Return on Average Equity (Annualized)   7.71%   8.07%   -4.46%
                
BALANCE SHEET HIGHLIGHTS               
Total Assets  $1,745,466   $1,609,685    8.44%
Available-for-Sale Debt Securities   332,188    363,465    -8.61%
Loans (Net)   1,230,387    1,108,483    11.00%
Allowance for Loan Losses   11,026    8,200    34.46%
Deposits and Repo Sweep Accounts   1,383,382    1,287,335    7.46%
                
OFF-BALANCE SHEET               
Outstanding Balance of Mortgage Loans Sold with Servicing Retained  $210,778   $172,910    21.90%
Trust Assets Under Management   984,853    948,998    3.78%
                
SHAREHOLDERS' VALUE (PER COMMON SHARE)               
Net Income - Basic  $0.70   $0.67    4.48%
Net Income - Diluted  $0.70   $0.67    4.48%
Dividends - Quarterly  $0.54   $0.54    0.00%
Dividends - Special  $0.00   $0.10    -100.00%
Common Book Value  $18.53   $17.51    5.83%
Tangible Common Book Value (a)  $16.39   $15.32    6.98%
Market Value (Last Trade)  $20.65   $26.33    -21.57%
Market Value /  Common Book Value   111.44%   150.37%   -25.89%
Market Value /  Tangible Common Book Value   125.99%   171.87%   -26.69%
Price Earnings Multiple (Annualized)   14.75    19.65    -24.94%
Dividend Yield (Annualized, Excluding Special Dividend)   5.23%   4.10%   27.56%
Common Shares Outstanding, End of Period   13,807,157    13,687,999    0.87%

  

   

 

  

CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS (Continued)    
(Dollars In Thousands, Except Per Share Data)       (Unaudited)        
   AS OF OR FOR THE     
   SIX MONTHS ENDED   % 
   JUNE 30,   INCREASE 
   2020   2019   (DECREASE) 
SAFETY AND SOUNDNESS               
Tangible Common Equity / Tangible Assets (a)   13.19%   13.28%   -0.68%
Nonperforming Assets / Total Assets   1.33%   0.95%   40.00%
Allowance for Loan Losses / Total Loans   0.89%   0.73%   21.92%
Total Risk Based Capital Ratio (b)   21.32%   20.97%   1.67%
Tier 1 Risk Based Capital Ratio (b)   19.69%   19.51%   0.92%
Common Equity Tier 1 Risk Based Capital Ratio (b)   19.69%   19.51%   0.92%
Leverage Ratio (b)   12.82%   13.13%   -2.36%
                
AVERAGE BALANCES               
Average Assets  $1,676,009   $1,440,745    16.33%
Average Equity  $249,005   $216,589    14.97%
                
EFFICIENCY RATIO (c)               
Net Interest Income on a Fully Taxable-Equivalent               
Basis (c)  $28,989   $26,485    9.45%
Noninterest Income   10,809    9,255    16.79%
Total (1)  $39,798   $35,740    11.35%
Noninterest Expense Excluding Merger Expenses (2)  $25,186   $22,118    13.87%
Efficiency Ratio = (2)/(1)   63.28%   61.89%   2.25%

 

(a)Tangible book value per common share and tangible common equity as a percentage of tangible assets are non-U.S. GAAP ratios.  Management believes this non-GAAP information is helpful in evaluating the strength of the Corporation's capital and in providing an alternative, conservative valuation of the Corporation's net worth.  The ratios shown above are based on the following calculations of tangible assets and tangible common equity:

        

Total Assets  $1,745,466   $1,609,685 
Less: Intangible Assets, Primarily Goodwill   (29,511)   (30,013)
Tangible Assets  $1,715,955   $1,579,672 
Total Shareholders' Equity  $255,791   $239,716 
Less: Intangible Assets, Primarily Goodwill   (29,511)   (30,013)
Tangible Common Equity (3)  $226,280   $209,703 
           
Common Shares Outstanding, End of Period (4)   13,807,157    13,687,999 
Tangible Common Book Value per Share = (3)/(4)  $16.39   $15.32 

 

(b)Capital ratios for the most recent period are estimated.

 

(c)The efficiency ratio is a non-GAAP ratio that is calculated as shown above.  For purposes of calculating the efficiency ratio, net interest income on a fully taxable-equivalent basis includes amounts of interest income on tax-exempt securities and loans that have been increased to a fully taxable-equivalent basis, using the Corporation's marginal federal income tax rate of 21%. In the calculation above, management excluded merger-related expenses.  These expenses include expenses related to the acquisition of Covenant Financial, Inc., which closed July 1, 2020. Also excluded are expenses related to the acquisition of Monument Bancorp, Inc. , which closed April 1, 2019.  

    

 2 

 

  

QUARTERLY CONDENSED, CONSOLIDATED                        
INCOME STATEMENT INFORMATION                        
(Dollars In Thousands, Except Per Share Data)  For the Three Months Ended:             
(Unaudited)  June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,   March 31, 
   2020   2020   2019   2019   2019   2019 
Interest income  $16,513   $17,037   $17,290   $17,277   $17,139   $13,065 
Interest expense   2,267    2,755    2,999    3,000    2,934    1,350 
Net interest income   14,246    14,282    14,291    14,277    14,205    11,715 
(Credit) provision for loan losses   (176)   1,528    652    1,158    (4)   (957)
Net interest income after (credit) provision for loan losses   14,422    12,754    13,639    13,119    14,209    12,672 
Noninterest income   5,528    5,281    5,066    4,963    4,849    4,406 
Net gains on securities   0    0    3    13    7    0 
Merger-related expenses   983    141    281    206    3,301    311 
Other noninterest expenses   12,274    12,912    11,834    11,486    11,422    10,696 
Income before income tax provision   6,693    4,982    6,593    6,403    4,342    6,071 
Income tax provision   1,255    816    1,135    1,096    693    981 
Net income  $5,438   $4,166   $5,458   $5,307   $3,649   $5,090 
Net income attributable to common shares  $5,405   $4,146   $5,431   $5,281   $3,630   $5,063 
Basic earnings per common share  $0.39   $0.30   $0.40   $0.39   $0.27   $0.41 
Diluted earnings per common share  $0.39   $0.30   $0.40   $0.39   $0.27   $0.41 

 

QUARTERLY CONDENSED, CONSOLIDATED                        
BALANCE SHEET INFORMATION                        
(In Thousands) (Unaudited)  As of:                     
   June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,   March 31, 
   2020   2020   2019   2019   2019   2019 
ASSETS                              
Cash & Due from Banks  $77,642   $32,678   $35,202   $51,443   $39,505   $44,002 
Available-for-Sale Debt Securities   332,188    342,416    346,723    363,467    363,465    357,646 
Loans Held for Sale   1,258    579    767    2,033    1,131    0 
Loans, Net   1,230,387    1,156,143    1,172,386    1,130,143    1,108,483    817,136 
Intangible Assets   29,511    29,573    29,635    29,939    30,013    11,949 
Other Assets   74,480    68,056    69,432    65,562    67,088    59,267 
TOTAL ASSETS  $1,745,466   $1,629,445   $1,654,145   $1,642,587   $1,609,685   $1,290,000 
                               
LIABILITIES                              
Deposits  $1,381,178   $1,249,912   $1,252,660   $1,294,882   $1,284,143   $1,039,911 
Repo Sweep Accounts   2,204    2,407    1,928    3,767    3,192    5,132 
     Total Deposits and Repo Sweeps   1,383,382    1,252,319    1,254,588    1,298,649    1,287,335    1,045,043 
Borrowed Funds   85,104    108,144    136,419    75,714    62,574    32,844 
Subordinated Debt   6,500    6,500    6,500    7,000    7,000    0 
Other Liabilities   14,689    11,254    12,186    18,285    13,060    9,986 
TOTAL LIABILITIES   1,489,675    1,378,217    1,409,693    1,399,648    1,369,969    1,087,873 
                               
SHAREHOLDERS' EQUITY                              
Common Shareholders' Equity, Excluding                              
  Accumulated Other Comprehensive Income (Loss)   244,080    241,754    240,761    238,479    236,284    202,768 
Accumulated Other Comprehensive Income (Loss):                              
  Net Unrealized Gains (Losses) on Available-for-sale Securities   11,472    9,230    3,511    4,173    3,138    (941)
  Defined Benefit Plans Adjustment, Net   239    244    180    287    294    300 
TOTAL SHAREHOLDERS' EQUITY   255,791    251,228    244,452    242,939    239,716    202,127 
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY  $1,745,466   $1,629,445   $1,654,145   $1,642,587   $1,609,685   $1,290,000 

  

 3 

 

  

AVAILABLE-FOR-SALE DEBT SECURITIES  June 30, 2020   March 31, 2020   December 31, 2019 
(In Thousands)  Amortized   Fair   Amortized   Fair   Amortized   Fair 
   Cost   Value   Cost   Value   Cost   Value 
                         
Obligations of U.S. Government agencies  $10,706   $11,673   $15,704   $16,408   $16,380   $17,000 
Obligations of states and political subdivisions:                              
     Tax-exempt   86,897    91,643    78,126    81,072    68,787    70,760 
     Taxable   38,022    39,784    35,764    37,074    35,446    36,303 
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:                              
     Residential pass-through securities   49,852    51,520    54,280    55,752    58,875    59,210 
     Residential collateralized mortgage obligations   87,527    89,435    101,130    103,556    115,025    114,723 
     Commercial mortgage-backed securities   44,664    48,133    45,727    48,554    47,765    48,727 
Total Available-for-Sale Debt Securities  $317,668   $332,188   $330,731   $342,416   $342,278   $346,723 

 

Summary of Loans by Type                
(Excludes Loans Held for Sale)                
(In Thousands)  June 30,   March 31,   Dec. 31,   June 30, 
   2020   2020   2019   2019 
Residential mortgage:                    
  Residential mortgage loans - first liens  $493,214   $508,387   $510,641   $484,479 
  Residential mortgage loans - junior liens   25,632    27,028    27,503    28,880 
  Home equity lines of credit   31,826    32,090    33,638    35,224 
  1-4 Family residential construction   15,621    14,121    14,798    27,994 
Total residential mortgage   566,293    581,626    586,580    576,577 
Commercial:                    
  Commercial loans secured by real estate   293,304    295,860    301,227    279,267 
  Commercial and industrial   120,202    132,308    126,374    115,264 
  Small Business Administration - Paycheck                    
    Protection Program   97,103    0    0    0 
  Political subdivisions   43,134    43,613    53,570    52,308 
  Commercial construction and land   40,348    33,340    33,555    21,197 
  Loans secured by farmland   11,433    11,524    12,251    7,251 
  Multi-family (5 or more) residential   32,699    32,370    31,070    26,749 
  Agricultural loans   3,874    3,886    4,319    5,234 
  Other commercial loans   16,579    16,430    16,535    13,037 
Total commercial   658,676    569,331    578,901    520,307 
Consumer   16,444    16,516    16,741    19,799 
Total   1,241,413    1,167,473    1,182,222    1,116,683 
Less: allowance for loan losses   (11,026)   (11,330)   (9,836)   (8,200)
Loans, net  $1,230,387   $1,156,143   $1,172,386   $1,108,483 

 

Loans Held for Sale                
(In Thousands)  June 30,   March 31,   Dec. 31,   June 30, 
   2020   2020   2019   2019 
Residential mortgage loans originated and serviced - outstanding balance  $212,036   $182,989   $179,213   $174,041 
Less: outstanding balance of loans sold   (210,778)   (182,410)   (178,446)   (172,910)
Loans held for sale, net  $1,258   $579   $767   $1,131 

   

 4 

 

 

ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES

(In Thousands)        

 

   3 Months   3 Months   6 Months   6 Months 
   Ended   Ended   Ended   Ended 
   June 30,   March 31,   June 30,   June 30, 
   2020   2020   2020   2019 
Balance, beginning of period  $11,330   $9,836   $9,836   $9,309 
Charge-offs   (146)   (48)   (194)   (179)
Recoveries   18    14    32    31 
Net (charge-offs)   (128)   (34)   (162)   (148)
(Credit) provision for loan losses   (176)   1,528    1,352    (961)
Balance, end of period  $11,026   $11,330   $11,026   $8,200 

 

PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS

AND TROUBLED DEBT RESTRUCTURINGS (TDRs)

(Dollars In Thousands)        

 

   June 30,   March 31,   Dec 31,   June 30, 
   2020   2020   2019   2019 
Impaired loans with a valuation allowance  $12,189   $6,709   $3,375   $1,785 
Impaired loans without a valuation allowance   2,091    1,581    2,111    4,479 
Total impaired loans  $14,280   $8,290   $5,486   $6,264 
                     
Total loans past due 30-89 days and still accruing  $5,124   $8,372   $8,889   $4,407 
                     
Nonperforming assets:                    
  Total nonaccrual loans  $18,763   $12,309   $9,218   $9,289 
  Total loans past due 90 days or more and still accruing   2,812    2,093    1,207    2,631 
  Total nonperforming loans   21,575    14,402    10,425    11,920 
  Foreclosed assets held for sale (real estate)   1,593    1,685    2,886    3,305 
Total nonperforming assets  $23,168   $16,087   $13,311   $15,225 
                     
Loans subject to troubled debt restructurings (TDRs):                    
  Performing  $265   $372   $889   $972 
  Nonperforming   790    1,730    1,737    489 
Total TDRs  $1,055   $2,102   $2,626   $1,461 
                     
Total nonperforming loans as a % of loans   1.74%   1.23%   0.88%   1.07%
Total nonperforming assets as a % of assets   1.33%   0.99%   0.80%   0.95%
Allowance for loan losses as a % of total loans   0.89%   0.97%   0.83%   0.73%
Allowance for loan losses as a % of nonperforming loans   51.11%   78.67%   94.35%   68.79%

  

 5 

 

 

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 
   6/30/2020   Return/   3/31/2020   Return/   6/30/2019   Return/ 
   Average   Cost of   Average   Cost of   Average   Cost of 
   Balance   Funds %   Balance   Funds %   Balance   Funds % 
EARNING ASSETS                              
Interest-bearing due from banks  $37,799    0.44%  $19,401    1.68%  $22,398    2.67%
Available-for-sale debt securities,                              
     at amortized cost:                              
     Taxable   244,019    2.27%   265,157    2.41%   289,041    2.53%
     Tax-exempt   82,050    3.09%   69,850    3.14%   73,928    3.60%
          Total available-for-sale debt securities   326,069    2.48%   335,007    2.56%   362,969    2.75%
Loans receivable:                              
     Taxable   1,094,432    4.99%   1,108,118    5.25%   1,035,672    5.46%
     Paycheck Protection Program (Taxable)   77,832    2.79%   0         0      
     Tax-exempt   59,177    3.75%   60,367    3.83%   69,571    3.78%
          Total loans receivable   1,231,441    4.79%   1,168,485    5.18%   1,105,243    5.35%
Other earning assets   2,206    3.65%   1,460    3.03%   1,423    3.10%
          Total Earning Assets   1,597,515    4.22%   1,524,353    4.55%   1,492,033    4.68%
Cash   18,960         18,042         20,325      
Unrealized gain/loss on securities   12,574         8,176         (101)     
Allowance for loan losses   (11,471)        (10,015)        (8,378)     
Bank premises and equipment   18,230         17,732         16,214      
Intangible assets   29,543         29,607         30,040      
Other assets   49,502         49,270         49,935      
Total Assets  $1,714,853        $1,637,165        $1,600,068      
                               
INTEREST-BEARING LIABILITIES                              
Interest-bearing deposits:                              
     Interest checking  $260,177    0.31%  $227,069    0.43%  $218,731    0.58%
     Money market   215,441    0.43%   200,691    0.53%   199,092    0.51%
     Savings   183,933    0.12%   168,971    0.15%   173,922    0.17%
     Time deposits   343,257    1.52%   381,621    1.67%   383,361    1.80%
          Total interest-bearing deposits   1,002,808    0.72%   978,352    0.89%   975,106    0.97%
Borrowed funds:                              
     Short-term   19,844    1.30%   44,882    1.77%   37,279    2.45%
     Long-term   72,917    1.73%   64,065    1.85%   35,167    2.60%
     Subordinated debt   6,500    6.56%   6,500    6.62%   7,000    6.59%
          Total borrowed funds   99,261    1.96%   115,447    2.09%   79,446    2.88%
          Total Interest-bearing Liabilities   1,102,069    0.83%   1,093,799    1.01%   1,054,552    1.12%
Demand deposits   346,285         281,893         294,112      
Other liabilities   15,891         14,071         15,454      
Total Liabilities   1,464,245         1,389,763         1,364,118      
 Stockholders' equity, excluding accumulated other comprehensive income/loss   240,434         240,718         235,733      
Accumulated other comprehensive income/loss   10,174         6,684         217      
Total Shareholders' Equity   250,608         247,402         235,950      
Total Liabilities and Shareholders' Equity  $1,714,853        $1,637,165        $1,600,068      
Interest Rate Spread        3.39%        3.54%        3.56%
Net Interest Income/Earning Assets        3.65%        3.83%        3.89%
                               
 Total Deposits (Interest-bearing and Demand)  $1,349,093        $1,260,245        $1,269,218      

 

(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 21%.
(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 

 

 

Analysis of Average Daily Balances and Rates            
(Dollars in Thousands)                
   6 Months       6 Months     
   Ended   Rate of   Ended   Rate of 
   6/30/2020   Return/   6/30/2019   Return/ 
   Average   Cost of   Average   Cost of 
   Balance   Funds %   Balance   Funds % 
EARNING ASSETS                    
Interest-bearing due from banks  $28,600    0.86%  $21,358    2.50%
Available-for-sale debt securities,                    
     at amortized cost:                    
     Taxable   254,588    2.34%   285,443    2.59%
     Tax-exempt   75,950    3.11%   77,009    3.70%
          Total available-for-sale debt securities   330,538    2.52%   362,452    2.82%
Loans receivable:                    
     Taxable   1,101,275    5.12%   894,208    5.42%
     Paycheck Protection Program (Taxable)   38,916    2.79%   0      
     Tax-exempt   59,772    3.79%   71,064    3.88%
          Total loans receivable   1,199,963    4.98%   965,272    5.31%
Other earning assets   1,833    3.40%   1,257    3.21%
          Total Earning Assets   1,560,934    4.38%   1,350,339    4.59%
Cash   18,501         18,629      
Unrealized gain/loss on securities   10,375         (2,352)     
Allowance for loan losses   (10,743)        (8,856)     
Bank premises and equipment   17,981         15,367      
Intangible assets   29,575         21,045      
Other assets   49,386         46,573      
Total Assets  $1,676,009        $1,440,745      
                     
INTEREST-BEARING LIABILITIES                    
Interest-bearing deposits:                    
     Interest checking  $243,623    0.37%  $208,872    0.53%
     Money market   208,066    0.48%   188,042    0.46%
     Savings   176,452    0.13%   165,354    0.14%
     Time deposits   362,439    1.60%   305,769    1.53%
          Total interest-bearing deposits   990,580    0.80%   868,037    0.79%
Borrowed funds:                    
     Short-term   32,363    1.63%   26,666    2.32%
     Long-term   68,491    1.79%   34,929    2.57%
     Subordinated debt   6,500    6.59%   3,520    6.59%
          Total borrowed funds   107,354    2.03%   65,115    2.69%
          Total Interest-bearing Liabilities   1,097,934    0.92%   933,152    0.93%
Demand deposits   314,089         277,794      
Other liabilities   14,981         13,210      
Total Liabilities   1,427,004         1,224,156      
Stockholders' equity, excluding accumulated other comprehensive income/loss   240,576         218,175      
Accumulated other comprehensive income/loss   8,429         (1,586)     
Total Shareholders' Equity   249,005         216,589      
Total Liabilities and Shareholders' Equity  $1,676,009        $1,440,745      
Interest Rate Spread        3.46%        3.66%
Net Interest Income/Earning Assets        3.73%        3.96%
                     
Total Deposits (Interest-bearing and Demand)  $1,304,669        $1,145,831      

 

(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 21%.
(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.

  

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COMPARISON OF NONINTEREST INCOME                    
(In Thousands)  Three Months Ended   Six Months Ended 
   June 30,   March 31,   June 30,   June 30,   June 30, 
   2020   2020   2019   2020   2019 
Trust and financial management revenue  $1,565   $1,479   $1,583   $3,044   $2,943 
Brokerage revenue   343    333    361    676    668 
Insurance commissions, fees and premiums   52    33    48    85    78 
Service charges on deposit accounts   831    1,250    1,277    2,081    2,527 
Service charges and fees   84    63    89    147    168 
Interchange revenue from debit card transactions   718    731    699    1,449    1,342 
Net gains from sales of loans   1,564    315    221    1,879    308 
Loan servicing fees, net   (158)   (14)   35    (172)   63 
Increase in cash surrender value of life insurance   98    104    99    202    191 
Other noninterest income   431    987    437    1,418    967 
Total noninterest income, excluding realized gains on securities, net  $5,528   $5,281   $4,849   $10,809   $9,255 
                          

 

COMPARISON OF NONINTEREST EXPENSE                    
(In Thousands)  Three Months Ended   Six Months Ended 
   June 30,   March 31,   June 30,   June 30,   June 30, 
   2020   2020   2019   2020   2019 
 Salaries and wages  $5,364   $5,340   $5,276   $10,704   $9,769 
 Pensions and other employee benefits   1,619    2,038    1,225    3,657    2,843 
 Occupancy expense, net   664    745    665    1,409    1,322 
 Furniture and equipment expense   311    358    333    669    634 
 Data processing expenses   1,040    1,018    962    2,058    1,765 
 Automated teller machine and interchange expense   275    297    277    572    466 
 Pennsylvania shares tax   423    422    347    845    694 
 Professional fees   464    379    331    843    553 
 Telecommunications   213    206    176    419    340 
 Directors' fees   178    170    141    348    324 
 Other noninterest expense   1,723    1,939    1,689    3,662    3,408 
 Total noninterest expense, excluding merger-related expenses   12,274    12,912    11,422    25,186    22,118 
 Merger-related expenses   983    141    3,301    1,124    3,612 
 Total noninterest expense  $13,257   $13,053   $14,723   $26,310   $25,730 

  

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