EX-99.3 4 tm203570d1_ex99-3.htm EXHIBIT 99.3

 

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     
   YEARS ENDED   % 
   DECEMBER 31,   INCREASE 
   2019   2018   (DECREASE) 
EARNINGS PERFORMANCE               
Net Income  $19,504   $22,013    -11.40%
Return on Average Assets (Annualized)   1.27%   1.72%   -26.16%
Return on Average Equity (Annualized)   8.50%   11.72%   -27.47%
                
BALANCE SHEET HIGHLIGHTS               
Total Assets  $1,654,145   $1,290,893    28.14%
Available-for-Sale Debt Securities   346,723    363,273    -4.56%
Loans (Net)   1,172,386    818,254    43.28%
Allowance for Loan Losses   9,836    9,309    5.66%
Deposits and Repo Sweep Accounts   1,254,588    1,039,625    20.68%
                
OFF-BALANCE SHEET               
Outstanding Balance of Mortgage Loans Sold with Servicing Retained   $ 178,446     $ 171,750       3.90 %
Trust Assets Under Management   1,007,113    862,517    16.76%
                
SHAREHOLDERS' VALUE (PER COMMON SHARE)               
Net Income - Basic  $1.46   $1.79    -18.44%
Net Income - Diluted  $1.46   $1.79    -18.44%
Dividends - Quarterly  $1.08   $1.08    0.00%
Dividends - Special  $0.10   $0.00      
Common Book Value  $17.84   $16.02    11.36%
Tangible Common Book Value (a)  $15.68   $15.05    4.19%
Market Value (Last Trade)  $28.25   $26.43    6.89%
Market Value/Common Book Value   158.35%   164.98%   -4.02%
Market Value/Tangible Common Book Value   180.17%   175.61%   2.60%
Price Earnings Multiple (Annualized)   19.35    14.77    31.01%
Dividend Yield (Annualized, Excluding Special Dividend)   3.82%   4.09%   -6.60%
Common Shares Outstanding, End of Period   13,703,022    12,319,330    11.23%

 

14

 

 

CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS (Continued)

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

 

   AS OF OR FOR THE     
   YEARS ENDED   % 
   DECEMBER 31,   INCREASE 
   2019   2018   (DECREASE) 
SAFETY AND SOUNDNESS               
Tangible Common Equity / Tangible Assets (a)   13.22%   14.50%   -8.83%
Nonperforming Assets / Total Assets   0.80%   1.37%   -41.61%
Allowance for Loan Losses / Total Loans   0.83%   1.12%   -25.89%
Total Risk Based Capital Ratio (b)   20.58%   24.42%   -15.72%
Tier 1 Risk Based Capital Ratio (b)   19.08%   23.24%   -17.90%
Common Equity Tier 1 Risk Based Capital Ratio (b)   19.08%   23.24%   -17.90%
Leverage Ratio (b)   13.10%   14.78%   -11.37%
                
AVERAGE BALANCES               
Average Assets  $1,540,469   $1,276,140    20.71%
Average Equity  $229,446   $187,895    22.11%
                
EFFICIENCY RATIO (c)               
Net Interest Income on a Fully Taxable-Equivalent               
Basis (c)  $55,532   $47,004    18.14%
Noninterest Income   19,284    18,597    3.69%
Total (1)  $74,816   $65,601    14.05%
Noninterest Expense Excluding Merger Expenses (2)  $45,438   $39,158    16.04%
Efficiency Ratio = (2)/(1)   60.73%   59.69%   1.74%

 

(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  $1,654,145   $1,290,893         
Less: Intangible Assets, Primarily Goodwill   (29,635)   (11,951)        
Tangible Assets  $1,624,510   $1,278,942         
Total Shareholders' Equity  $244,452   $197,368         
Less: Intangible Assets, Primarily Goodwill   (29,635)   (11,951)        
Tangible Common Equity (3)  $214,817   $185,417         
                   
Common Shares Outstanding, End of Period (4)   13,703,022    12,319,330         
Tangible Common Book Value per Share = (3)/(4)  $15.68   $15.05         

 

(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 included expenses related to the acquisition of Monument Bancorp, Inc. which closed on April 1, 2019.  Also excluded were expenses associated with analysis of the acquisition of Covenant Bancorp, Inc., which is expected to close in the third quarter 2020.

 

15

 

 

QUARTERLY CONDENSED, CONSOLIDATED

INCOME STATEMENT INFORMATION

(Dollars In Thousands, Except Per Share Data)

(Unaudited)

 

   For the Three Months Ended: 
   Dec. 31,   Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,   March 31, 
   2019   2019   2019   2019   2018   2018   2018   2018 
Interest income  $17,290   $17,277   $17,139   $13,065   $13,304   $12,800   $12,334   $11,890 
Interest expense   2,999    3,000    2,934    1,350    1,312    1,241    1,079    993 
Net interest income   14,291    14,277    14,205    11,715    11,992    11,559    11,255    10,897 
Provision (credit) for loan losses   652    1,158    (4)   (957)   252    60    (20)   292 
Net interest income after provision (credit) for loan losses     13,639       13,119       14,209       12,672       11,740       11,499       11,275       10,605  
Noninterest income   5,066    4,963    4,849    4,406    5,040    4,462    4,689    4,406 
Net gains (losses) on securities   3    13    7    0    (4)   569    1,468    0 
Merger-related expenses   281    206    3,301    311    127    200    0    0 
Other noninterest expenses   11,834    11,486    11,422    10,696    9,947    9,633    9,684    9,895 
Income before income tax provision   6,593    6,403    4,342    6,071    6,702    6,697    7,748    5,116 
Income tax provision   1,135    1,096    693    981    1,021    1,111    1,377    741 
Net income  $5,458   $5,307   $3,649   $5,090   $5,681   $5,586   $6,371   $4,375 
Net income attributable to common shares  $5,431   $5,281   $3,630   $5,063   $5,654   $5,558   $6,339   $4,352 
Basic earnings per common share  $0.40   $0.39   $0.27   $0.41   $0.46   $0.45   $0.52   $0.36 
Diluted earnings per common share  $0.40   $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: 
   Dec. 31,   Sept. 30,   June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,   March 31, 
   2019   2019   2019   2019   2018   2018   2018   2018 
ASSETS                                        
Cash & Due from Banks  $35,202   $51,443   $39,505   $44,002   $37,487   $38,341   $51,475   $36,860 
Available-for-Sale Debt Securities   346,723    363,467    363,465    357,646    363,273    358,706    348,044    341,133 
Loans Held for Sale   767    2,033    1,131    0    213    551    177    225 
Loans, Net   1,172,386    1,130,143    1,108,483    817,136    818,254    813,717    809,816    808,300 
Intangible Assets   29,635    29,939    30,013    11,949    11,951    11,951    11,952    11,953 
Other Assets   69,432    65,562    67,088    59,267    59,715    62,173    62,543    59,645 
TOTAL ASSETS  $1,654,145   $1,642,587   $1,609,685   $1,290,000   $1,290,893   $1,285,439   $1,284,007   $1,258,116 
                                         
LIABILITIES                                        
Deposits  $1,252,660   $1,294,882   $1,284,143   $1,039,911   $1,033,772   $1,043,947   $1,040,899   $1,018,081 
Repo Sweep Accounts   1,928    3,767    3,192    5,132    5,853    5,421    5,169    5,482 
Total Deposits and Repo Sweeps   1,254,588    1,298,649    1,287,335    1,045,043    1,039,625    1,049,368    1,046,068    1,023,563 
Borrowed Funds   136,419    75,714    62,574    32,844    42,915    35,985    39,054    39,122 
Subordinated Debt   6,500    7,000    7,000    0    0    0    0    0 
Other Liabilities   12,186    18,285    13,060    9,986    10,985    10,099    9,706    9,049 
TOTAL LIABILITIES   1,409,693    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)   240,761    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   3,511    4,173    3,138    (941)   (4,307)   (8,502)   (6,476)   (5,679)
Defined Benefit Plans Adjustment, Net   180    287    294    300    137    134    137    141 
TOTAL SHAREHOLDERS' EQUITY   244,452    242,939    239,716    202,127    197,368    189,987    189,179    186,382 
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY  $1,654,145   $1,642,587   $1,609,685   $1,290,000   $1,290,893   $1,285,439   $1,284,007   $1,258,116 

 

16

 

 

AVAILABLE-FOR-SALE DEBT SECURITIES   December 31, 2019     September 30, 2019     December 31, 2018  
(In Thousands)   Amortized     Fair     Amortized     Fair     Amortized     Fair  
    Cost     Value     Cost     Value     Cost     Value  
Obligations of U.S. Government agencies   $ 16,380     $ 17,000     $ 16,379     $ 17,096     $ 12,331     $ 12,500  
Obligations of states and political subdivisions:                                                
Tax-exempt     68,787       70,760       71,317       73,281       84,204       83,952  
Taxable     35,446       36,303       31,907       33,086       27,618       27,699  
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:                                              
Residential pass-through securities     58,875       59,210       62,051       62,245       54,827       53,445  
Residential collateralized mortgage obligations     115,025       114,723       127,950       127,815       148,964       145,912  
Commercial mortgage-backed securities     47,765       48,727       48,581       49,944       40,781       39,765  
Total Available-for-Sale Debt Securities   $ 342,278     $ 346,723     $ 358,185     $ 363,467     $ 368,725     $ 363,273  

 

Summary of Loans by Type            
(Excludes Loans Held for Sale)            
(In Thousands)  Dec. 31,   Sept. 30,   Dec. 31, 
   2019   2019   2018 
Residential mortgage:               
Residential mortgage loans - first liens  $510,641   $487,425   $372,339 
Residential mortgage loans - junior liens   27,503    29,056    25,450 
Home equity lines of credit   33,638    35,492    34,319 
1-4 Family residential construction   14,798    32,699    24,698 
Total residential mortgage   586,580    584,672    456,806 
Commercial:               
Commercial loans secured by real estate   301,227    297,519    162,611 
Commercial and industrial   126,374    115,213    91,856 
Political subdivisions   53,570    46,466    53,263 
Commercial construction and land   33,555    22,386    11,962 
Loans secured by farmland   12,251    7,103    7,146 
Multi-family (5 or more) residential   31,070    27,633    7,180 
Agricultural loans   4,319    5,145    5,659 
Other commercial loans   16,535    12,828    13,950 
Total commercial   578,901    534,293    353,627 
Consumer   16,741    20,435    17,130 
Total   1,182,222    1,139,400    827,563 
Less: allowance for loan losses   (9,836)   (9,257)   (9,309)
Loans, net  $1,172,386   $1,130,143   $818,254 

 

Loans Held for Sale            
(In Thousands)  Dec. 31,   Sept. 30,   Dec. 31, 
   2019   2019   2018 
Residential mortgage loans originated and serviced - outstanding balance  $179,213   $179,594   $171,955 
Less: outstanding balance of loans sold   (178,446)   (177,561)   (171,742)
Loans held for sale, net  $767   $2,033   $213 

 

17

 

 

ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES                
(In Thousands)                
   3 Months   3 Months   Year   Year 
   Ended   Ended   Ended   Ended 
   Dec. 31,   Sept. 30,   Dec. 31,   Dec. 31, 
   2019   2019   2019   2018 
Balance, beginning of period  $9,257   $8,200   $9,309   $8,856 
Charge-offs   (84)   (116)   (379)   (497)
Recoveries   11    15    57    366 
Net (charge-offs)   (73)   (101)   (322)   (131)
Provision for loan losses   652    1,158    849    584 
Balance, end of period  $9,836   $9,257   $9,836   $9,309 

 

PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS AND TROUBLED DEBT RESTRUCTURINGS (TDRs)                
(Dollars In Thousands)                
   Dec 31,   Sept. 30,   Dec 31,     
   2019   2019   2018     
Impaired loans with a valuation allowance  $3,375   $3,027   $4,851      
Impaired loans without a valuation allowance   2,111    2,916    4,923      
Total impaired loans  $5,486   $5,943   $9,774      
                     
Total loans past due 30-89 days and still accruing  $8,889   $5,230   $7,142      
                     
Nonperforming assets:                   
Total nonaccrual loans  $9,218   $9,020   $13,113      
Total loans past due 90 days or more and still accruing   1,207    2,395    2,906      
Total nonperforming loans   10,425    11,415    16,019     
Foreclosed assets held for sale (real estate)   2,886    2,762    1,703      
Total nonperforming assets  $13,311   $14,177   $17,722      
                     
Loans subject to troubled debt restructurings (TDRs):                    
Performing  $889   $924   $655      
Nonperforming   1,737    1,744    2,884      
Total TDRs  $2,626   $2,668   $3,539      
                     
Total nonperforming loans as a % of loans   0.88%   1.00%   1.94%     
Total nonperforming assets as a % of assets   0.80%   0.86%   1.37%     
Allowance for loan losses as a % of total loans (1)   0.83%   0.81%   1.12%     
Allowance for loan losses as a % of nonperforming loans   94.35%   81.10%   58.11%     

 

(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 December 31, 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 remainder of 2019; accordingly, there was no allowance for loan losses on loans purchased from Monument as reflected in the table above at December 31, 2019 or September 30, 2019.

 

18

 

 

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 
   12/31/2019   Return/   9/30/2019   Return/   12/31/2018   Return/ 
   Average   Cost of   Average   Cost of   Average   Cost of 
   Balance   Funds %   Balance   Funds %   Balance   Funds % 
EARNING ASSETS                              
Interest-bearing due from banks  $17,577    2.03%  $26,539    2.38%  $16,082    2.37%
Available-for-sale debt securities,at amortized cost:                              
Taxable   280,333    2.29%   285,114    2.41%   282,708    2.56%
Tax-exempt   69,482    3.01%   69,472    3.34%   91,371    3.68%
Total available-for-sale debt securities   349,815    2.43%   354,586    2.59%   374,079    2.83%
Loans receivable:                              
Taxable   1,100,170    5.28%   1,062,578    5.38%   751,793    5.35%
Tax-exempt   66,195    3.81%   67,741    3.74%   74,672    3.78%
Total loans receivable   1,166,365    5.20%   1,130,319    5.28%   826,465    5.21%
Other earning assets   1,721    3.23%   1,515    2.88%   1,166    3.74%
Total Earning Assets   1,535,478    4.53%   1,512,959    4.60%   1,217,792    4.44%
Cash   19,983         22,341         17,101      
Unrealized gain/loss on securities   5,056         4,915         (10,898)     
Allowance for loan losses   (9,469)        (8,322)        (8,986)     
Bank premises and equipment   16,801         16,103         14,735      
Intangible assets   29,902         29,986         11,949      
Other assets   53,124         48,276         44,159      
Total Assets  $1,650,875        $1,626,258        $1,285,852      
                               
INTEREST-BEARING LIABILITIES                              
Interest-bearing deposits:                              
Interest checking  $221,052    0.44%  $232,549    0.62%  $216,757    0.51%
Money market   202,217    0.52%   200,873    0.52%   177,461    0.40%
Savings   169,342    0.16%   170,583    0.15%   155,687    0.10%
Time deposits   379,446    1.81%   385,538    1.82%   225,995    0.99%
Total interest-bearing deposits   972,057    0.94%   989,543    0.99%   775,900    0.54%
Borrowed funds:                              
Short-term   54,705    2.03%   25,823    2.24%   12,499    1.46%
Long-term   56,564    2.03%   48,953    2.24%   34,936    2.33%
Subordinated debt   7,000    6.57%   6,998    6.58%   0    0.00%
Total borrowed funds   118,269    2.30%   81,774    2.62%   47,435    2.10%
Total Interest-bearing Liabilities   1,090,326    1.09%   1,071,317    1.11%   823,335    0.63%
Demand deposits   299,090         300,183         261,118      
Other liabilities   18,446         13,584         11,015      
Total Liabilities   1,407,862         1,385,084         1,095,468      
Stockholders' equity, excluding accumulated other comprehensive income/loss   238,738         237,000         198,861      
Accumulated other comprehensive income/loss   4,275         4,174         (8,477)     
Total Shareholders' Equity   243,013         241,174         190,384      
Total Liabilities and Shareholders' Equity  $1,650,875        $1,626,258        $1,285,852      
Interest Rate Spread        3.44%        3.49%        3.81%
Net Interest Income/Earning Assets        3.75%        3.81%        4.01%
                              
Total Deposits (Interest-bearing and Demand)  $1,271,147        $1,289,726        $1,037,018      

 

(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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Analysis of Average Daily Balances and Rates            
(Dollars in Thousands)                
   Year       Year     
   Ended   Rate of   Ended   Rate of 
   12/31/2019   Return/   12/31/2018   Return/ 
   Average   Cost of   Average   Cost of 
   Balance   Funds %   Balance   Funds % 
EARNING ASSETS                    
Interest-bearing due from banks  $21,711    2.37%  $21,800    1.90%
Available-for-sale debt securities, at amortized cost:                    
Taxable   284,072    2.47%   262,461    2.36%
Tax-exempt   73,212    3.45%   97,662    3.58%
Total available-for-sale debt securities   357,284    2.67%   360,123    2.69%
Loans receivable:                    
Taxable   988,560    5.37%   746,309    5.18%
Tax-exempt   68,999    3.82%   76,037    3.71%
Total loans receivable   1,057,559    5.27%   822,346    5.05%
Other earning assets   1,439    3.13%   1,160    3.10%
Total Earning Assets   1,437,993    4.58%   1,205,429    4.28%
Cash   19,906         17,674      
Unrealized gain/loss on securities   1,347         (8,343)     
Allowance for loan losses   (8,876)        (9,033)     
Bank premises and equipment   15,914         15,156      
Intangible assets   25,531         11,952      
Other assets   48,654         43,305      
Total Assets  $1,540,469        $1,276,140      
                     
INTEREST-BEARING LIABILITIES                    
Interest-bearing deposits:                    
Interest checking  $217,910    0.53%  $217,638    0.44%
Money market   194,849    0.49%   180,835    0.30%
Savings   167,677    0.15%   152,889    0.10%
Time deposits   344,446    1.69%   227,060    0.90%
Total interest-bearing deposits   924,882    0.89%   778,422    0.48%
Borrowed funds:                    
Short-term   33,521    2.19%   25,226    1.45%
Long-term   43,917    2.31%   25,209    2.21%
Subordinated debt   5,274    6.58%   0    0.00%
Total borrowed funds   82,712    2.53%   50,435    1.83%
Total Interest-bearing Liabilities   1,007,594    1.02%   828,857    0.56%
Demand deposits   288,805         249,409      
Other liabilities   14,624         9,979      
Total Liabilities   1,311,023         1,088,245      
Stockholders' equity, excluding accumulated other comprehensive income/loss   228,103         194,333      
Accumulated other comprehensive income/loss   1,343         (6,438)     
Total Shareholders' Equity   229,446         187,895      
Total Liabilities and Shareholders' Equity  $1,540,469        $1,276,140      
Interest Rate Spread        3.56%        3.72%
Net Interest Income/Earning Assets        3.86%        3.90%
                     
Total Deposits (Interest-bearing and Demand)  $1,213,687        $1,027,831      

 

(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 21%.

(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   Years Ended 
   Dec. 31,   Sept. 30,   Dec. 31,   Dec. 31,   Dec. 31, 
   2019   2019   2018   2019   2018 
Trust and financial management revenue  $1,684   $1,479   $1,463   $6,106   $5,838 
Brokerage revenue   265    333    300    1,266    1,018 
Insurance commissions, fees and premiums   18    71    33    167    105 
Service charges on deposit accounts   1,395    1,436    1,334    5,358    5,171 
Service charges and fees   73    91    80    332    343 
Interchange revenue from debit card transactions   690    722    666    2,754    2,546 
Net gains from sales of loans   306    310    168    924    682 
Loan servicing fees, net   91    (54)   84    100    347 
Increase in cash surrender value of life insurance   106    105    99    402    394 
Other noninterest income   438    470    813    1,875    2,153 
Total noninterest income, excluding realized gains (losses) on securities, net  $5,066   $4,963   $5,040   $19,284   $18,597 

 

COMPARISON OF NONINTEREST EXPENSE                    
(In Thousands)  Three Months Ended   Years Ended 
   Dec. 31,   Sept. 30,   Dec. 31,   Dec. 31,   Dec. 31, 
   2019   2019   2018   2019   2018 
Salaries and wages  $5,395   $5,480   $4,611   $20,644   $17,191 
Pensions and other employee benefits   1,545    1,449    1,212    5,837    5,259 
Occupancy expense, net   653    654    599    2,629    2,497 
Furniture and equipment expense   322    333    295    1,289    1,196 
Data processing expenses   836    802    748    3,403    2,750 
Automated teller machine and interchange expense   340    297    316    1,103    1,304 
Pennsylvania shares tax   345    341    320    1,380    1,318 
Professional fees   274    242    116    1,069    976 
Telecommunications   207    197    181    744    748 
Directors' fees   187    162    157    673    706 
Other noninterest expense   1,730    1,529    1,391    6,667    5,213 
Total noninterest expense, excluding merger-related expenses   11,834    11,486    9,946    45,438    39,158 
Merger-related expenses   281    206    128    4,099    328 
Total noninterest expense  $12,115   $11,692   $10,074   $49,537   $39,486 

 

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