EX-99.3 4 tm19204451_ex99-3.htm EXHIBIT 99.3

 

EXHIBIT 99.3 – Supplemental, Unaudited Financial Information

 

 

 

CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS

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

 

   AS OF OR FOR THE     
   NINE MONTHS ENDED   % 
   SEPTEMBER 30,   INCREASE 
   2019   2018   (DECREASE) 
EARNINGS PERFORMANCE               
Net Income  $14,046   $16,332    -14.00%
Return on Average Assets (Annualized)   1.25%   1.71%   -26.90%
Return on Average Equity (Annualized)   8.33%   11.64%   -28.44%
                
BALANCE SHEET HIGHLIGHTS               
Total Assets  $1,642,587   $1,285,439    27.78%
Available-for-Sale Debt Securities   363,467    358,706    1.33%
Loans (Net)   1,130,143    813,717    38.89%
Allowance for Loan Losses   9,257    8,815    5.01%
Deposits and Repo Sweep Accounts   1,298,649    1,049,368    23.76%
                
OFF-BALANCE SHEET               
Outstanding Balance of Mortgage Loans Sold with Servicing Retained  $177,561   $171,516    3.52%
Trust Assets Under Management   959,215    952,824    0.67%
                
SHAREHOLDERS' VALUE (PER COMMON SHARE)               
Net Income - Basic  $1.06   $1.33    -20.30%
Net Income - Diluted  $1.06   $1.33    -20.30%
Dividends – Quarterly  $0.81   $0.81    0.00%
Dividends – Special  $0.10   $0.00      
Common Book Value  $17.73   $15.45    14.76%
Tangible Common Book Value (a)  $15.54   $14.48    7.32%
Market Value (Last Trade)  $26.28   $26.15    0.50%
Market Value / Common Book Value   148.22%   169.26%   -12.43%
Market Value / Tangible Common Book Value   169.11%   180.59%   -6.36%
Price Earnings Multiple (Annualized)   18.59    14.75    26.03%
Dividend Yield (Annualized, Excluding Special Dividend)   4.11%   4.13%   -0.48%
Common Shares Outstanding, End of Period   13,703,022    12,297,274    11.43%

 

 1 

 

 

CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS (Continued)

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

 

   AS OF OR FOR THE     
   NINE MONTHS ENDED   % 
   SEPTEMBER 30,   INCREASE 
   2019   2018   (DECREASE) 
SAFETY AND SOUNDNESS               
Tangible Common Equity / Tangible Assets (a)   13.21%   13.98%   -5.51%
Nonperforming Assets / Total Assets   0.86%   1.30%   -33.85%
Allowance for Loan Losses / Total Loans   0.81%   1.07%   -24.30%
Total Risk Based Capital Ratio (b)   20.43%   23.88%   -13.48%
Tier 1 Risk Based Capital Ratio (b)   18.94%   22.76%   -15.55%
Common Equity Tier 1 Risk Based Capital Ratio (b)   18.94%   22.76%   -15.55%
Leverage Ratio (b)   13.11%   14.50%   -9.38%
                
AVERAGE BALANCES               
Average Assets  $1,503,262   $1,272,867    18.10%
Average Equity  $224,874   $187,056    20.22%
                
EFFICIENCY RATIO (c)               
Net Interest Income on a Fully Taxable-Equivalent               
Basis (c)  $41,009   $34,692    18.21%
Noninterest Income   14,218    13,557    4.88%
Total (1)  $55,227   $48,249    14.46%
Noninterest Expense Excluding Merger Expenses (2)  $33,604   $29,212    15.03%
Efficiency Ratio = (2)/(1)   60.85%   60.54%   0.51%

 

(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  $1,642,587   $1,285,439 
Less: Intangible Assets, Primarily Goodwill   (29,939)   (11,951)
Tangible Assets  $1,612,648   $1,273,488 
Total Shareholders' Equity  $242,939   $189,987 
Less: Intangible Assets, Primarily Goodwill   (29,939)   (11,951)
Tangible Common Equity (3)  $213,000   $178,036 
           
Common Shares Outstanding, End of Period (4)   13,703,022    12,297,274 
Tangible Common Book Value per Share = (3)/(4)  $15.54   $14.48 

 

(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 2019 expenses of $3.818 million related to the acquisition of Monument Bancorp, Inc. which closed on April 1, 2019.  These expenses include costs associated with termination of data processing contracts, conversion of Monument's customer accounting data into the Corporation's core system, severance and similar expenses, professional fees and other expenses.

 

 2 

 

 

QUARTERLY CONDENSED, CONSOLIDATED

INCOME STATEMENT INFORMATION

(Dollars In Thousands, Except Per Share Data)

(Unaudited)

 

   For the Three Months Ended:                 
   Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,   March 31, 
   2019   2019   2019   2018   2018   2018   2018 
Interest income  $17,277   $17,139   $13,065   $13,304   $12,800   $12,334   $11,890 
Interest expense   3,000    2,934    1,350    1,312    1,241    1,079    993 
Net interest income   14,277    14,205    11,715    11,992    11,559    11,255    10,897 
Provision (credit) for loan losses   1,158    (4)   (957)   252    60    (20)   292 
Net interest income after provision (credit) for loan losses   13,119    14,209    12,672    11,740    11,499    11,275    10,605 
Noninterest income   4,963    4,849    4,406    5,040    4,462    4,689    4,406 
Net gains (losses) on securities   13    7    0    (4)   569    1,468    0 
Merger-related expenses   206    3,301    311    127    200    0    0 
Other noninterest expense   11,486    11,422    10,696    9,947    9,633    9,684    9,895 
Income before income tax provision   6,403    4,342    6,071    6,702    6,697    7,748    5,116 
Income tax provision   1,096    693    981    1,021    1,111    1,377    741 
Net income  $5,307   $3,649   $5,090   $5,681   $5,586   $6,371   $4,375 
Net income attributable to common shares  $5,281   $3,630   $5,063   $5,654   $5,558   $6,339   $4,352 
Basic earnings per common share  $0.39   $0.27   $0.41   $0.46   $0.45   $0.52   $0.36 
Diluted earnings per common share  $0.39   $0.27   $0.41   $0.46   $0.45   $0.52   $0.36 

 

QUARTERLY CONDENSED, CONSOLIDATED

BALANCE SHEET INFORMATION

(In Thousands) (Unaudited)  

 

   As of:                         
   Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,   March 31, 
   2019   2019   2019   2018   2018   2018   2018 
ASSETS                            
Cash & Due from Banks  $51,443   $39,505   $44,002   $37,487   $38,341   $51,475   $36,860 
Available-for-Sale Debt Securities   363,467    363,465    357,646    363,273    358,706    348,044    341,133 
Loans Held for Sale   2,033    1,131    0    213    551    177    225 
Loans, Net   1,130,143    1,108,483    817,136    818,254    813,717    809,816    808,300 
Intangible Assets   29,939    30,013    11,949    11,951    11,951    11,952    11,953 
Other Assets   65,562    67,088    59,267    59,715    62,173    62,543    59,645 
TOTAL ASSETS  $1,642,587   $1,609,685   $1,290,000   $1,290,893   $1,285,439   $1,284,007   $1,258,116 
                                    
LIABILITIES                                   
Deposits  $1,294,882   $1,284,143   $1,039,911   $1,033,772   $1,043,947   $1,040,899   $1,018,081 
Repo Sweep Accounts   3,767    3,192    5,132    5,853    5,421    5,169    5,482 
Total Deposits and Repo Sweeps   1,298,649    1,287,335    1,045,043    1,039,625    1,049,368    1,046,068    1,023,563 
Borrowed Funds   75,714    62,574    32,844    42,915    35,985    39,054    39,122 
Subordinated Debt   7,000    7,000    0    0    0    0    0 
Other Liabilities   18,285    13,060    9,986    10,985    10,099    9,706    9,049 
TOTAL LIABILITIES   1,399,648    1,369,969    1,087,873    1,093,525    1,095,452    1,094,828    1,071,734 
                                    
SHAREHOLDERS' EQUITY                                   
Common Shareholders' Equity, Excluding                                   
Accumulated Other Comprehensive Income (Loss)   238,479    236,284    202,768    201,538    198,355    195,518    191,920 
Accumulated Other Comprehensive Income (Loss):                                   
Net Unrealized Gains (Losses) on Available-for-sale Securities   4,173    3,138    (941)   (4,307)   (8,502)   (6,476)   (5,679)
Defined Benefit Plans Adjustment, Net   287    294    300    137    134    137    141 
TOTAL SHAREHOLDERS' EQUITY   242,939    239,716    202,127    197,368    189,987    189,179    186,382 
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY  $1,642,587   $1,609,685   $1,290,000   $1,290,893   $1,285,439   $1,284,007   $1,258,116 

 

 3 

 

 

AVAILABLE-FOR-SALE DEBT SECURITIES

(In Thousands)

 

   September 30, 2019   June 30, 2019   December 31, 2018 
   Amortized   Fair   Amortized   Fair   Amortized   Fair 
   Cost   Value   Cost   Value   Cost   Value 
Obligations of U.S. Government agencies  $16,379   $17,096   $16,918   $17,570   $12,331   $12,500 
Obligations of states and political subdivisions:                              
Tax-exempt   71,317    73,281    73,897    75,499    84,204    83,952 
Taxable   31,907    33,086    30,591    31,509    27,618    27,699 
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:                              
Residential pass-through securities   62,051    62,245    55,098    55,141    54,827    53,445 
Residential collateralized mortgage obligations   127,950    127,815    139,513    139,484    148,964    145,912 
Commercial mortgage-backed securities   48,581    49,944    43,476    44,262    40,781    39,765 
Total Available-for-Sale Debt Securities  $358,185   $363,467   $359,493   $363,465   $368,725   $363,273 

 

Summary of Loans by Type

(Excludes Loans Held for Sale)

(In Thousands)

 

   Sept. 30,   June 30,   Dec. 31,   Sept. 30, 
   2019   2019   2018   2018 
Residential mortgage:                    
Residential mortgage loans - first liens  $487,425   $484,479   $372,339   $366,516 
Residential mortgage loans - junior liens   29,056    28,880    25,450    25,748 
Home equity lines of credit   35,492    35,224    34,319    34,283 
1-4 Family residential construction   32,699    27,994    24,698    27,661 
Total residential mortgage   584,672    576,577    456,806    454,208 
Commercial:                    
Commercial loans secured by real estate   297,519    279,267    162,611    159,212 
Commercial and industrial   115,213    115,264    91,856    91,472 
Political subdivisions   46,466    52,308    53,263    53,294 
Commercial construction and land   22,386    21,197    11,962    12,278 
Loans secured by farmland   7,103    7,251    7,146    7,208 
Multi-family (5 or more) residential   27,633    26,749    7,180    7,670 
Agricultural loans   5,145    5,234    5,659    5,670 
Other commercial loans   12,828    13,037    13,950    14,140 
Total commercial   534,293    520,307    353,627    350,944 
Consumer   20,435    19,799    17,130    17,380 
Total   1,139,400    1,116,683    827,563    822,532 
Less: allowance for loan losses   (9,257)   (8,200)   (9,309)   (8,815)
Loans, net  $1,130,143   $1,108,483   $818,254   $813,717 

 

Loans Held for Sale

(In Thousands)

 

   Sept. 30,   June 30,   Dec. 31,   Sept. 30, 
   2019   2019   2018   2018 
Residential mortgage loans originated and serviced - outstanding balance  $179,594   $174,041   $171,955   $172,067 
Less: outstanding balance of loans sold   (177,561)   (172,910)   (171,742)   (171,516)
Loans held for sale, net  $2,033   $1,131   $213   $551 

 

 4 

 

 

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, 
   2019   2019   2019   2018 
Balance, beginning of period  $8,200   $8,256   $9,309   $8,856 
Charge-offs   (116)   (68)   (295)   (418)
Recoveries   15    16    46    45 
Net charge-offs   (101)   (52)   (249)   (373)
Provision (credit) for loan losses   1,158    (4)   197    332 
Balance, end of period  $9,257   $8,200   $9,257   $8,815 

 

PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS

AND TROUBLED DEBT RESTRUCTURINGS (TDRs)

(Dollars In Thousands)

 

   Sept. 30,   June 30,   Dec 31,   Sept. 30, 
   2019   2019   2018   2018 
Impaired loans with a valuation allowance  $3,027   $1,785   $4,851   $3,623 
Impaired loans without a valuation allowance   2,916    4,479    4,923    4,455 
Total impaired loans  $5,943   $6,264   $9,774   $8,078 
                     
Total loans past due 30-89 days and still accruing  $5,230   $4,407   $7,142   $4,455 
                     
Nonperforming assets:                    
Total nonaccrual loans  $9,020   $9,289   $13,113   $10,911 
Total loans past due 90 days or more and still accruing   2,395    2,631    2,906    3,124 
Total nonperforming loans   11,415    11,920    16,019    14,035 
Foreclosed assets held for sale (real estate)   2,762    3,305    1,703    2,678 
Total nonperforming assets  $14,177   $15,225   $17,722   $16,713 
                     
Loans subject to troubled debt restructurings (TDRs):                    
Performing  $924   $972   $655   $698 
Nonperforming   1,744    489    2,884    2,925 
Total TDRs  $2,668   $1,461   $3,539   $3,623 
                     
Total nonperforming loans as a % of loans   1.00%   1.07%   1.94%   1.71%
Total nonperforming assets as a % of assets   0.86%   0.95%   1.37%   1.30%
Allowance for loan losses as a % of total loans (1)   0.81%   0.73%   1.12%   1.07%
Allowance for loan losses as a % of nonperforming loans   81.10%   68.79%   58.11%   62.81%

 

(1)Effective April 1, 2019, C&N recorded loans purchased from Monument at fair value. Loans identified as having a deterioration in credit quality were valued at $441,000 at April 1, 2019 and September 30, 2019. The remainder of the portfolio was determined to be the performing component of the portfolio, valued at $258,854,000 at April 1, 2019. The calculation of fair value included a discount for credit losses of $1,914,000, reflecting an estimate of the present value of credit losses based on market expectations. None of the performing loans purchased were found to be impaired in the second or third quarters 2019; accordingly, there was no allowance for loan losses on loans purchased from Monument at June 30, 2019 or September 30, 2019.

 

 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 
   9/30/2019   Return/   6/30/2019   Return/   9/30/2018   Return/ 
   Average   Cost of   Average   Cost of   Average   Cost of 
   Balance   Funds %   Balance   Funds %   Balance   Funds % 
EARNING ASSETS                              
Interest-bearing due from banks  $26,539    2.38%  $22,398    2.67%  $34,540    1.99%
Available-for-sale debt securities, at amortized cost:                              
Taxable   285,114    2.41%   289,041    2.53%   269,054    2.39%
Tax-exempt   69,472    3.34%   73,928    3.60%   93,475    3.63%
Total available-for-sale debt securities   354,586    2.59%   362,969    2.75%   362,529    2.71%
Loans receivable:                              
Taxable   1,062,578    5.38%   1,035,672    5.46%   744,793    5.20%
Tax-exempt   67,741    3.74%   69,571    3.78%   75,639    3.70%
Total loans receivable   1,130,319    5.28%   1,105,243    5.35%   820,432    5.06%
Other earning assets   1,515    2.88%   1,423    3.10%   1,124    2.82%
Total Earning Assets   1,512,959    4.60%   1,492,033    4.68%   1,218,625    4.27%
Cash   22,341         20,325         18,697      
Unrealized gain/loss on securities   4,915         (101)        (8,641)     
Allowance for loan losses   (8,322)        (8,378)        (8,984)     
Bank premises and equipment   16,103         16,214         15,023      
Intangible assets   29,986         30,040         11,953      
Other assets   48,276         49,935         44,675      
Total Assets  $1,626,258        $1,600,068        $1,291,348      
                               
INTEREST-BEARING LIABILITIES                              
Interest-bearing deposits:                              
Interest checking  $232,549    0.62%  $218,731    0.58%  $223,105    0.49%
Money market   200,873    0.52%   199,092    0.51%   185,267    0.33%
Savings   170,583    0.15%   173,922    0.17%   153,514    0.10%
Time deposits   385,538    1.82%   383,361    1.80%   233,620    0.95%
Total interest-bearing deposits   989,543    0.99%   975,106    0.97%   795,506    0.52%
Borrowed funds:                              
Short-term   25,823    2.24%   37,279    2.45%   13,062    1.18%
Long-term   48,953    2.24%   35,167    2.60%   30,375    2.21%
Subordinated debt   6,998    6.58%   7,000    6.59%   0    0.00%
Total borrowed funds   81,774    2.62%   79,446    2.88%   43,437    1.90%
Total Interest-bearing Liabilities   1,071,317    1.11%   1,054,552    1.12%   838,943    0.59%
Demand deposits   300,183         294,112         252,093      
Other liabilities   13,584         15,454         11,147      
Total Liabilities   1,385,084         1,364,118         1,102,183      
Stockholders' equity, excluding accumulated other comprehensive income/loss   237,000         235,733         195,854      
Accumulated other comprehensive income/loss   4,174         217         (6,689)     
Total Shareholders' Equity   241,174         235,950         189,165      
Total Liabilities and Shareholders' Equity  $1,626,258        $1,600,068        $1,291,348      
Interest Rate Spread        3.49%        3.56%        3.68%
Net Interest Income/Earning Assets        3.81%        3.89%        3.87%
                               
Total Deposits (Interest-bearing and Demand)  $1,289,726        $1,269,218        $1,047,599      

 

(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)

 

   9 Months       9 Months     
   Ended   Rate of   Ended   Rate of 
   9/30/2019   Return/   9/30/2018   Return/ 
   Average   Cost of   Average   Cost of 
   Balance   Funds %   Balance   Funds % 
EARNING ASSETS                    
Interest-bearing due from banks  $23,104    2.45%  $23,727    1.80%
Available-for-sale debt securities, at amortized cost:                    
Taxable   285,332    2.53%   255,638    2.28%
Tax-exempt   74,469    3.58%   99,782    3.55%
Total available-for-sale debt securities   359,801    2.75%   355,420    2.64%
Loans receivable:                    
Taxable   950,948    5.41%   744,461    5.12%
Tax-exempt   69,944    3.83%   76,497    3.69%
Total loans receivable   1,020,892    5.30%   820,958    4.99%
Other earning assets   1,344    3.08%   1,158    2.89%
Total Earning Assets   1,405,141    4.60%   1,201,263    4.23%
Cash   19,880         17,867      
Unrealized gain/loss on securities   97         (7,482)     
Allowance for loan losses   (8,676)        (9,049)     
Bank premises and equipment   15,615         15,298      
Intangible assets   24,058         11,953      
Other assets   47,147         43,017      
Total Assets  $1,503,262        $1,272,867      
                     
INTEREST-BEARING LIABILITIES                    
Interest-bearing deposits:                    
Interest checking  $216,851    0.56%  $217,935    0.41%
Money market   192,366    0.48%   181,972    0.27%
Savings   167,116    0.14%   151,946    0.10%
Time deposits   332,651    1.65%   227,419    0.87%
Total interest-bearing deposits   908,984    0.86%   779,272    0.45%
Borrowed funds:                    
Short-term   26,382    2.30%   29,515    1.45%
Long-term   39,655    2.44%   21,931    2.15%
Subordinated debt   4,692    6.58%   0    0.00%
Total borrowed funds   70,729    2.66%   51,446    1.75%
Total Interest-bearing Liabilities   979,713    0.99%   830,718    0.53%
Demand deposits   285,339         245,463      
Other liabilities   13,336         9,630      
Total Liabilities   1,278,388         1,085,811      
Stockholders' equity, excluding accumulated other comprehensive income/loss   224,519         192,807      
Accumulated other comprehensive income/loss   355         (5,751)     
Total Shareholders' Equity   224,874         187,056      
Total Liabilities and Shareholders' Equity  $1,503,262        $1,272,867      
Interest Rate Spread        3.61%        3.70%
Net Interest Income/Earning Assets        3.90%        3.86%
                     
Total Deposits (Interest-bearing and Demand)  $1,194,323        $1,024,735      

 

(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% in 2018.
(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.

 

 7 

 

 

COMPARISON OF NONINTEREST INCOME

(In Thousands)

 

   Three Months Ended   Nine Months Ended 
   Sept. 30,   June 30,   Sept. 30,   Sept. 30,   Sept. 30, 
   2019   2019   2018   2019   2018 
Trust and financial management revenue  $1,479   $1,583   $1,427   $4,422   $4,375 
Brokerage revenue   333    361    235    1,001    718 
Insurance commissions, fees and premiums   71    48    15    149    72 
Service charges on deposit accounts   1,436    1,277    1,331    3,963    3,837 
Service charges and fees   91    89    95    259    263 
Interchange revenue from debit card transactions   722    699    660    2,064    1,880 
Net gains from sales of loans   310    221    164    618    514 
Loan servicing fees, net   (54)   35    74    9    263 
Increase in cash surrender value of life insurance   105    99    100    296    295 
Other noninterest income   470    437    361    1,437    1,340 
Total noninterest income, excluding realized gains (losses) on securities, net  $4,963   $4,849   $4,462   $14,218   $13,557 

 

COMPARISON OF NONINTEREST EXPENSE

(In Thousands)

 

   Three Months Ended   Nine Months Ended 
   Sept. 30,   June 30,   Sept. 30,   Sept. 30,   Sept. 30, 
   2019   2019   2018   2019   2018 
Salaries and wages  $5,480   $5,276   $4,263   $15,249   $12,580 
Pensions and other employee benefits   1,449    1,225    1,237    4,292    4,047 
Occupancy expense, net   654    665    648    1,976    1,898 
Furniture and equipment expense   333    333    317    967    901 
Data processing expenses   802    962    667    2,567    2,002 
Automated teller machine and interchange expense   297    277    347    763    988 
Pennsylvania shares tax   341    347    326    1,035    998 
Professional fees   242    331    205    795    860 
Telecommunications   197    176    177    537    567 
Directors' fees   162    141    197    486    549 
Other noninterest expense   1,529    1,689    1,249    4,937    3,822 
Total noninterest expense, excluding merger-related expenses   11,486    11,422    9,633    33,604    29,212 
Merger-related expenses   206    3,301    200    3,818    200 
Total noninterest expense  $11,692   $14,723   $9,833   $37,422   $29,412 

 

 8