EX-99.3 4 tv525358_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     
   SIX MONTHS ENDED   % 
   JUNE 30,   INCREASE 
   2019   2018   (DECREASE) 
EARNINGS PERFORMANCE               
Net Income  $8,739   $10,746    -18.68%
Return on Average Assets (Annualized)   1.21%   1.70%   -28.82%
Return on Average Equity (Annualized)   8.07%   11.56%   -30.19%
                
BALANCE SHEET HIGHLIGHTS               
Total Assets  $1,609,685   $1,284,007    25.36%
Available-for-Sale Debt Securities   363,465    348,044    4.43%
Loans (Net)   1,108,483    809,816    36.88%
Allowance for Loan Losses   8,200    8,831    -7.15%
Deposits and Repo Sweep Accounts   1,287,335    1,046,068    23.06%
                
OFF-BALANCE SHEET               
Outstanding Balance of Mortgage Loans Sold with Servicing Retained  $172,910   $171,543    0.80%
Trust Assets Under Management   948,998    927,089    2.36%
                
SHAREHOLDERS' VALUE (PER COMMON SHARE)               
Net Income - Basic  $0.67   $0.88    -23.86%
Net Income - Diluted  $0.67   $0.87    -22.99%
Dividends – Quarterly  $0.54   $0.54    0.00%
Dividends – Special  $0.10   $0.00      
Common Book Value  $17.51   $15.40    13.70%
Tangible Common Book Value (a)  $15.32   $14.43    6.17%
Market Value (Last Trade)  $26.33   $25.86    1.82%
Market Value / Common Book Value   150.37%   167.92%   -10.45%
Market Value / Tangible Common Book Value   171.87%   179.21%   -4.10%
Price Earnings Multiple (Annualized)   19.65    14.69    33.76%
Dividend Yield (Annualized, Excluding Special Dividend)   4.10%   4.18%   -1.91%
Common Shares Outstanding, End of Period   13,687,999    12,280,538    11.46%

 

1 

 

 

CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS (Continued)

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

 

   AS OF OR FOR THE     
   SIX MONTHS ENDED   % 
   JUNE 30,   INCREASE 
   2019   2018   (DECREASE) 
SAFETY AND SOUNDNESS               
Tangible Common Equity / Tangible Assets (a)   13.28%   13.93%   -4.67%
Nonperforming Assets / Total Assets   0.91%   1.35%   -32.59%
Allowance for Loan Losses / Total Loans   0.73%   1.08%   -32.41%
Total Risk Based Capital Ratio (b)   20.66%   23.82%   -13.27%
Tier 1 Risk Based Capital Ratio (b)   19.22%   22.70%   -15.33%
Common Equity Tier 1 Risk Based Capital Ratio (b)   19.22%   22.70%   -15.33%
Leverage Ratio (b)   13.14%   14.52%   -9.50%
                
AVERAGE BALANCES               
Average Assets  $1,440,745   $1,263,473    14.03%
Average Equity  $216,589   $185,984    16.46%
                
EFFICIENCY RATIO (c)               
Net Interest Income on a Fully Taxable-Equivalent               
Basis (c)  $26,486   $22,812    16.11%
Noninterest Income   9,255    9,095    1.76%
Total (1)  $35,741   $31,907    12.02%
Noninterest Expense Excluding Merger Expenses (2)  $22,118   $19,579    12.89%
Efficiency Ratio = (2)/(1)   61.88%   61.36%   0.85%

 

(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  $1,609,685   $1,284,007         
Less: Intangible Assets, Primarily Goodwill   (30,013)   (11,952)        
Tangible Assets  $1,579,672   $1,272,055         
Total Shareholders' Equity  $239,716   $189,179         
Less: Intangible Assets, Primarily Goodwill   (30,013)   (11,952)        
Tangible Common Equity (3)  $209,703   $177,227         
                   
Common Shares Outstanding, End of Period (4)   13,687,999    12,280,538         
Tangible Common Book Value per Share = (3)/(4)  $15.32   $14.43         

 

(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 $3.612 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:             
   June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,   March 31, 
   2019   2019   2018   2018   2018   2018 
Interest income  $17,139   $13,065   $13,304   $12,800   $12,334   $11,890 
Interest expense   2,934    1,350    1,312    1,241    1,079    993 
Net interest income   14,205    11,715    11,992    11,559    11,255    10,897 
(Credit) provision for loan losses   (4)   (957)   252    60    (20)   292 
Net interest income after (credit) provision for loan losses   14,209    12,672    11,740    11,499    11,275    10,605 
Noninterest income   4,849    4,406    5,040    4,462    4,689    4,406 
Net gains (losses) on securities   7    0    (4)   569    1,468    0 
Merger-related expenses   3,301    311    127    200    0    0 
Other noninterest expenses   11,422    10,696    9,947    9,633    9,684    9,895 
Income before income tax provision   4,342    6,071    6,702    6,697    7,748    5,116 
Income tax provision   693    981    1,021    1,111    1,377    741 
Net income  $3,649   $5,090   $5,681   $5,586   $6,371   $4,375 
Net income attributable to common shares  $3,630   $5,063   $5,654   $5,558   $6,339   $4,352 
Basic earnings per common share  $0.27   $0.41   $0.46   $0.45   $0.52   $0.36 
Diluted earnings per common share  $0.27   $0.41   $0.46   $0.45   $0.52   $0.36 

 

QUARTERLY CONDENSED, CONSOLIDATED

BALANCE SHEET INFORMATION

(In Thousands) (Unaudited)

   As of:                     
   June 30,   March 31,   Dec. 31,   Sept. 30,   June 30,   March 31, 
   2019   2019   2018   2018   2018   2018 
ASSETS                              
Cash & Due from Banks  $39,505   $44,002   $37,487   $38,341   $51,475   $36,860 
Available-for-Sale Debt Securities   363,465    357,646    363,273    358,706    348,044    341,133 
Loans Held for Sale   1,131    0    213    551    177    225 
Loans, Net   1,108,483    817,136    818,254    813,717    809,816    808,300 
Intangible Assets   30,013    11,949    11,951    11,951    11,952    11,953 
Other Assets   67,088    59,267    59,715    62,173    62,543    59,645 
TOTAL ASSETS  $1,609,685   $1,290,000   $1,290,893   $1,285,439   $1,284,007   $1,258,116 
                               
LIABILITIES                              
Deposits  $1,284,143   $1,039,911   $1,033,772   $1,043,947   $1,040,899   $1,018,081 
Repo Sweep Accounts   3,192    5,132    5,853    5,421    5,169    5,482 
Total Deposits and Repo Sweeps   1,287,335    1,045,043    1,039,625    1,049,368    1,046,068    1,023,563 
Borrowed Funds   62,574    32,844    42,915    35,985    39,054    39,122 
Subordinated Debt   7,000    0    0    0    0    0 
Other Liabilities   13,060    9,986    10,985    10,099    9,706    9,049 
TOTAL LIABILITIES   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)   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   3,138    (941)   (4,307)   (8,502)   (6,476)   (5,679)
Defined Benefit Plans Adjustment, Net   294    300    137    134    137    141 
TOTAL SHAREHOLDERS' EQUITY   239,716    202,127    197,368    189,987    189,179    186,382 
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY  $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)

   June 30, 2019   March 31, 2019   December 31, 2018 
   Amortized   Fair   Amortized   Fair   Amortized   Fair 
   Cost   Value   Cost   Value   Cost   Value 
Obligations of U.S. Government agencies  $16,918   $17,570   $11,916   $12,265   $12,331   $12,500 
Obligations of states and political subdivisions:                              
Tax-exempt   73,897    75,499    75,910    76,902    84,204    83,952 
Taxable   30,591    31,509    30,059    30,435    27,618    27,699 
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:                              
Residential pass-through securities   55,098    55,141    57,727    57,049    54,827    53,445 
Residential collateralized mortgage obligations   139,513    139,484    142,642    140,722    148,964    145,912 
Commercial mortgage-backed securities   43,476    44,262    40,583    40,273    40,781    39,765 
Total Available-for-Sale Debt Securities  $359,493   $363,465   $358,837   $357,646   $368,725   $363,273 

 

Summary of Loans by Type

(Excludes Loans Held for Sale)

(In Thousands)

   June 30,   March 31,   Dec. 31,   June 30,                 
   2019   2019   2018   2018                 
Residential mortgage:                                    
Residential mortgage loans - first liens  $484,479   $374,764   $372,339   $361,592                 
Residential mortgage loans - junior liens   28,880    25,538    25,450    26,594                 
Home equity lines of credit   35,224    32,847    34,319    34,852                 
1-4 Family residential construction   27,994    24,437    24,698    26,722                 
Total residential mortgage   576,577    457,586    456,806    449,760                 
Commercial:                                    
Commercial loans secured by real estate   279,267    160,177    162,611    159,392                 
Commercial and industrial   115,264    92,842    91,856    88,499                 
Political subdivisions   52,308    52,142    53,263    56,690                 
Commercial construction and land   21,197    12,701    11,962    13,066                 
Loans secured by farmland   7,251    6,938    7,146    7,397                 
Multi-family (5 or more) residential   26,749    7,031    7,180    7,860                 
Agricultural loans   5,234    5,471    5,659    5,622                 
Other commercial loans   13,037    13,467    13,950    14,455                 
Total commercial   520,307    350,769    353,627    352,981                 
Consumer   19,799    17,037    17,130    15,906                 
Total   1,116,683    825,392    827,563    818,647                 
Less: allowance for loan losses   (8,200)   (8,256)   (9,309)   (8,831)                
Loans, net  $1,108,483   $817,136   $818,254   $809,816                 

 

Loans Held for Sale

(In Thousands)

   June 30,   March 31,   Dec. 31,   June 30,                 
   2019   2019   2018   2018                 
Residential mortgage loans originated and serviced - outstanding balance  $174,041   $170,676   $171,955   $171,720                 
Less: outstanding balance of loans sold   (172,910)   (170,676)   (171,742)   (171,543)                
Loans held for sale, net  $1,131   $0   $213   $177                 

 

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, 
   2019   2019   2019   2018 
Balance, beginning of period  $8,256   $9,309   $9,309   $8,856 
Charge-offs   (68)   (111)   (179)   (326)
Recoveries   16    15    31    29 
Net charge-offs   (52)   (96)   (148)   (297)
(Credit) provision for loan losses   (4)   (957)   (961)   272 
Balance, end of period  $8,200   $8,256   $8,200   $8,831 

 

PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS

AND TROUBLED DEBT RESTRUCTURINGS (TDRs)

(Dollars In Thousands) 

   June 30,   March 31,   Dec 31,   June 30, 
   2019   2019   2018   2018 
Impaired loans with a valuation allowance  $1,785   $2,769   $4,851   $3,652 
Impaired loans without a valuation allowance   4,479    3,728    4,923    4,346 
Total impaired loans  $6,264   $6,497   $9,774   $7,998 
                     
Total loans past due 30-89 days and still accruing  $4,407   $7,123   $7,142   $3,921 
                     
Nonperforming assets:                    
Total nonaccrual loans  $9,289   $9,441   $13,113   $11,230 
Total loans past due 90 days or more and still accruing   2,631    1,902    2,906    3,195 
Total nonperforming loans   11,920    11,343    16,019    14,425 
Foreclosed assets held for sale (real estate)   3,305    1,875    1,703    2,897 
Total nonperforming assets  $15,225   $13,218   $17,722   $17,322 
                     
Loans subject to troubled debt restructurings (TDRs):                    
Performing  $2,050   $776   $655   $753 
Nonperforming   1,299    774    2,884    2,951 
Total TDRs  $3,349   $1,550   $3,539   $3,704 
                     
Total nonperforming loans as a % of loans   1.07%   1.37%   1.94%   1.76%
Total nonperforming assets as a % of assets   0.95%   1.02%   1.37%   1.35%
Allowance for loan losses as a % of total loans (1)   0.73%   1.00%   1.12%   1.08%
Allowance for loan losses as a % of nonperforming loans   68.79%   72.78%   58.11%   61.22%

 

(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 June 30, 2019. The remainder of the portfolio was determined to be the performing component of the portfolio, valued at $258,884,000 at April 1, 2019. The calculation of fair value included a discount for credit losses of $1,907,000, 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 quarter 2019; accordingly, there was no allowance for loan losses on loans purchased from Monument at June 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 
   6/30/2019   Return/   3/31/2019   Return/   6/30/2018   Return/ 
   Average   Cost of   Average   Cost of   Average   Cost of 
   Balance   Funds %   Balance   Funds %   Balance   Funds % 
EARNING ASSETS                              
Interest-bearing due from banks  $22,398    2.67%  $20,306    2.32%  $22,286    1.73%
Available-for-sale debt securities, at amortized cost:                              
Taxable   289,041    2.53%   281,805    2.64%   247,809    2.24%
Tax-exempt   73,928    3.60%   80,124    3.79%   102,801    3.50%
Total available-for-sale debt securities   362,969    2.75%   361,929    2.89%   350,610    2.61%
Loans receivable:                              
Taxable   1,035,672    5.46%   751,172    5.37%   747,889    5.14%
Tax-exempt   69,571    3.78%   72,574    3.97%   77,616    3.65%
Total loans receivable   1,105,243    5.35%   823,746    5.25%   825,505    5.00%
Other earning assets   1,423    3.10%   1,089    3.35%   1,219    3.29%
Total Earning Assets   1,492,033    4.68%   1,207,070    4.49%   1,199,620    4.23%
Cash   20,325         16,914         18,010      
Unrealized gain/loss on securities   (101)        (4,628)        (8,242)     
Allowance for loan losses   (8,378)        (9,339)        (9,161)     
Bank premises and equipment   16,214         14,511         15,425      
Intangible assets   30,040         11,950         11,952      
Other assets   49,935         43,172         41,575      
Total Assets  $1,600,068        $1,279,650        $1,269,179      
                               
INTEREST-BEARING LIABILITIES                              
Interest-bearing deposits:                              
Interest checking  $218,731    0.58%  $198,903    0.46%  $217,607    0.39%
Money market   199,092    0.51%   176,869    0.41%   180,667    0.27%
Savings   173,922    0.17%   156,691    0.10%   152,663    0.10%
Time deposits   383,361    1.80%   227,315    1.09%   229,420    0.88%
Total interest-bearing deposits   975,106    0.97%   759,778    0.56%   780,357    0.45%
Borrowed funds:                              
Short-term   37,279    2.45%   15,935    2.01%   23,610    1.39%
Long-term   35,167    2.60%   34,688    2.55%   22,174    2.13%
Subordinated debt   7,000    6.59%   0    0.00%   0    0.00%
Total borrowed funds   79,446    2.88%   50,623    2.38%   45,784    1.75%
Total Interest-bearing Liabilities   1,054,552    1.12%   810,401    0.68%   826,141    0.52%
Demand deposits   294,112         261,295         248,182      
Other liabilities   15,454         10,941         8,848      
Total Liabilities   1,364,118         1,082,637         1,083,171      
Stockholders' equity, excluding accumulated other comprehensive income/loss   235,733         200,422         192,375      
Accumulated other comprehensive income/loss   217         (3,409)        (6,367)     
Total Shareholders' Equity   235,950         197,013         186,008      
Total Liabilities and Shareholders' Equity  $1,600,068        $1,279,650        $1,269,179      
Interest Rate Spread        3.56%        3.81%        3.71%
Net Interest Income/Earning Assets        3.89%        4.04%        3.87%
                               
Total Deposits (Interest-bearing and Demand)  $1,269,218        $1,021,073        $1,028,539      

 

(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) 

   6 Months       6 Months     
   Ended   Rate of   Ended   Rate of 
   6/30/2019   Return/   6/30/2018   Return/ 
   Average   Cost of   Average   Cost of 
   Balance   Funds %   Balance   Funds % 
EARNING ASSETS                    
Interest-bearing due from banks  $21,358    2.50%  $18,231    1.61%
Available-for-sale debt securities, at amortized cost:                    
Taxable   285,443    2.59%   248,819    2.22%
Tax-exempt   77,009    3.70%   102,988    3.51%
Total available-for-sale debt securities   362,452    2.82%   351,807    2.60%
Loans receivable:                    
Taxable   894,208    5.42%   744,292    5.09%
Tax-exempt   71,064    3.88%   76,933    3.69%
Total loans receivable   965,272    5.31%   821,225    4.96%
Other earning assets   1,257    3.21%   1,175    2.92%
Total Earning Assets   1,350,339    4.59%   1,192,438    4.21%
Cash   18,629         17,445      
Unrealized gain/loss on securities   (2,352)        (6,893)     
Allowance for loan losses   (8,856)        (9,082)     
Bank premises and equipment   15,367         15,438      
Intangible assets   21,045         11,953      
Other assets   46,573         42,174      
Total Assets  $1,440,745        $1,263,473      
                     
INTEREST-BEARING LIABILITIES                    
Interest-bearing deposits:                    
Interest checking  $208,872    0.53%  $215,307    0.37%
Money market   188,042    0.46%   180,297    0.24%
Savings   165,354    0.14%   151,149    0.10%
Time deposits   305,769    1.53%   224,267    0.83%
Total interest-bearing deposits   868,037    0.79%   771,020    0.42%
Borrowed funds:                    
Short-term   26,666    2.32%   37,878    1.50%
Long-term   34,929    2.57%   17,639    2.09%
Subordinated debt   3,520    6.59%   0    0.00%
Total borrowed funds   65,115    2.69%   55,517    1.69%
Total Interest-bearing Liabilities   933,152    0.93%   826,537    0.51%
Demand deposits   277,794         242,093      
Other liabilities   13,210         8,859      
Total Liabilities   1,224,156         1,077,489      
Stockholders' equity, excluding accumulated other comprehensive income/loss   218,175         191,258      
Accumulated other comprehensive income/loss   (1,586)        (5,274)     
Total Shareholders' Equity   216,589         185,984      
Total Liabilities and Shareholders' Equity  $1,440,745        $1,263,473      
Interest Rate Spread        3.66%        3.70%
Net Interest Income/Earning Assets        3.96%        3.86%
                     
Total Deposits (Interest-bearing and Demand)  $1,145,831        $1,013,113      

 

(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.  

 

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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, 
   2019   2019   2018   2019   2018 
Trust and financial management revenue  $1,583   $1,360   $1,526   $2,943   $2,948 
Brokerage revenue   361    307    271    668    483 
Insurance commissions, fees and premiums   48    30    13    78    57 
Service charges on deposit accounts   1,277    1,250    1,302    2,527    2,506 
Service charges and fees   89    79    82    168    168 
Interchange revenue from debit card transactions   699    643    641    1,342    1,220 
Net gains from sales of loans   221    87    166    308    350 
Loan servicing fees, net   35    28    61    63    189 
Increase in cash surrender value of life insurance   99    92    98    191    195 
Other noninterest income   437    530    529    967    979 
Total noninterest income, excluding realized gains (losses) on securities, net  $4,849   $4,406   $4,689   $9,255   $9,095 

 

COMPARISON OF NONINTEREST EXPENSE

(In Thousands) 

   Three Months Ended   Six Months Ended 
   June 30,   March 31,   June 30,   June 30,   June 30, 
   2019   2019   2018   2019   2018 
Salaries and wages  $5,276   $4,493   $4,193   $9,769   $8,317 
Pensions and other employee benefits   1,225    1,618    1,200    2,843    2,810 
Occupancy expense, net   665    657    613    1,322    1,250 
Furniture and equipment expense   333    301    313    634    584 
Data processing expenses   962    803    694    1,765    1,335 
Automated teller machine and interchange expense   277    189    319    466    641 
Pennsylvania shares tax   347    347    336    694    672 
Professional fees   331    222    279    553    555 
Telecommunications   176    164    157    340    390 
Directors' fees   141    183    168    324    352 
Other noninterest expense   1,689    1,719    1,412    3,408    2,673 
Total noninterest expense, excluding merger-related expenses   11,422    10,696    9,684    22,118    19,579 
Merger-related expenses   3,301    311    0    3,612    0 
Total noninterest expense  $14,723   $11,007   $9,684   $25,730   $19,579 

 

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