Citizens & Northern 8K Results of Operations and Financial Condition | CZNC 17 Jul 15

EXHIBIT 99.3 – Supplemental, Unaudited Financial Information

CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS

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

	6 MONTHS ENDED						%
	JUNE 30,						INCREASE
	2015			2014			(DECREASE)
EARNINGS PERFORMANCE
Net Income	$	8,172		$	8,451			-3.30	%
Return on Average Assets		1.31	%		1.38	%		-5.07	%
Return on Average Equity		8.66	%		9.16	%		-5.46	%

BALANCE SHEET HIGHLIGHTS
Total Assets	$	1,255,722		$	1,256,205			-0.04	%
Available-for-Sale Securities		497,111			512,748			-3.05	%
Loans (Net)		656,518			614,347			6.86	%
Allowance for Loan Losses		7,300			7,267			0.45	%
Deposits and Repo Sweep Accounts		983,255			983,876			-0.06	%

OFF-BALANCE SHEET
Outstanding Balance of Mortgage Loans Sold with Servicing Retained		151,132			150,725			0.27	%
Trust Assets Under Management		833,762			824,279			1.15	%

SHAREHOLDERS' VALUE (PER COMMON SHARE)
Net Income - Basic	$	0.67		$	0.68			-1.47	%
Net Income - Diluted	$	0.67		$	0.68			-1.47	%
Dividends	$	0.52		$	0.52			0.00	%
Common Book Value	$	15.33		$	15.19			0.92	%
Tangible Common Book Value	$	14.35		$	14.23			0.84	%
Market Value (Last Trade)	$	20.55		$	19.49			5.44	%
Market Value / Common Book Value		134.05	%		128.31	%		4.47	%
Market Value / Tangible Common Book Value		143.21	%		136.96	%		4.56	%
Price Earnings Multiple (Annualized)		15.34			14.33			7.05	%
Dividend Yield (Annualized)		5.06	%		5.34	%		-5.24	%
Common Shares Outstanding, End of Period		12,196,830			12,450,005			-2.03	%

SAFETY AND SOUNDNESS
Tangible Common Equity / Tangible Assets		14.07	%		14.24	%		-1.19	%
Nonperforming Assets / Total Assets		1.26	%		1.44	%		-12.50	%
Allowance for Loan Losses / Total Loans		1.10	%		1.17	%		-5.98	%
Total Risk Based Capital Ratio (a)		24.42	%		27.82	%		-12.22	%
Tier 1 Risk Based Capital Ratio (a)		23.28	%		26.48	%		-12.08	%
Common Equity Tier 1 Risk Based Capital Ratio (a)		23.28	%
Leverage Ratio (a)		13.82	%		14.07	%		-1.78	%

AVERAGE BALANCES
Average Assets	$	1,248,904		$	1,228,111			1.69	%
Average Equity	$	188,621		$	184,470			2.25	%

(a) Capital ratios for the most recent period are estimated. The Common Equity Tier 1 Risk Based Capital Ratio became applicable to the Corporation in the first quarter 2015.

QUARTERLY CONDENSED, CONSOLIDATED INCOME STATEMENT INFORMATION

(In Thousands) (Unaudited)	For the Three Months Ended:
	June 30,		Mar. 31,		Dec. 31,		Sept. 30,		June 30,		Mar. 31,
	2015		2015		2014		2014		2014		2014
Interest income	$	11,186	$	11,163	$	11,468	$	11,572	$	11,563	$	11,406
Interest expense		1,176		1,213		1,257		1,287		1,290		1,288
Net interest income		10,010		9,950		10,211		10,285		10,273		10,118
Provision (credit) for loan losses		221		3		123		218		446		(311	)
Net interest income after provision (credit) for loan losses		9,789		9,947		10,088		10,067		9,827		10,429
Other income		3,962		3,487		3,802		3,887		3,980		3,751
Net gains on available-for-sale securities		932		74		210		760		103		31
Loss on prepayment of borrowings		910		0		0		0		0		0
Other expenses		7,964		8,464		8,250		9,036		8,347		8,524
Income before income tax provision		5,809		5,044		5,850		5,678		5,563		5,687
Income tax provision		1,452		1,229		1,482		1,411		1,400		1,399
Net income	$	4,357	$	3,815	$	4,368	$	4,267	$	4,163	$	4,288
Net income per share – basic	$	0.36	$	0.31	$	0.35	$	0.34	$	0.33	$	0.35
Net income per share – diluted	$	0.36	$	0.31	$	0.35	$	0.34	$	0.33	$	0.34

CONDENSED, CONSOLIDATED BALANCE SHEET INFORMATION
(In Thousands) (Unaudited)	As of:
	June 30,		Mar. 31,		Dec. 31,		June 30,
	2015		2015		2014		2014
ASSETS
Cash & Due from Banks	$	35,405	$	36,430	$	36,047	$	59,948
Available-for-Sale Securities		497,111		527,814		516,807		512,748
Loans Held for Sale		192		214		0		0
Loans, Net		656,518		621,211		623,209		614,347
Intangible Assets		11,983		11,989		11,994		12,012
Other Assets		54,513		54,300		53,906		57,150
TOTAL ASSETS	$	1,255,722	$	1,251,958	$	1,241,963	$	1,256,205

LIABILITIES
Deposits	$	978,449	$	976,634	$	967,989	$	979,239
Repo Sweep Accounts		4,806		5,840		5,537		4,637
Total Deposits and Repo Sweeps		983,255		982,474		973,526		983,876
Borrowed Funds		77,916		72,988		73,060		73,201
Other Liabilities		7,578		7,393		7,015		9,955
TOTAL LIABILITIES		1,068,749		1,062,855		1,053,601		1,067,032

SHAREHOLDERS' EQUITY
Common Shareholders' Equity, Excluding Accumulated Other Comprehensive Income/ Loss		182,887		181,437		183,002		183,757
Accumulated Other Comprehensive Income/ Loss:
Net Unrealized Gains/Losses on Available-for-sale Securities		4,077		7,654		5,281		5,316
Defined Benefit Plans Adjustment, Net		9		12		79		100
TOTAL SHAREHOLDERS' EQUITY		186,973		189,103		188,362		189,173
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY	$	1,255,722	$	1,251,958	$	1,241,963	$	1,256,205

AVAILABLE-FOR-SALE SECURITIES	June 30, 2015				March 31, 2015				December 31, 2014
(In Thousands)	Amortized		Fair		Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value		Cost		Value

Obligations of U.S. Government agencies	$	27,189	$	26,871	$	27,205	$	27,025	$	27,221	$	26,676
Obligations of states and political subdivisions:
Tax-exempt		115,908		119,749		117,378		122,502		120,086		124,839
Taxable		34,872		35,135		36,861		37,417		33,637		33,878
Mortgage-backed securities		76,323		76,790		90,130		92,088		82,479		83,903
Collateralized mortgage obligations, Issued by U.S. Government agencies		231,148		230,794		238,794		240,077		239,620		238,823
Other collateralized debt obligations		34		34		34		34		34		34
Total debt securities		485,474		489,373		510,402		519,143		503,077		508,153
Marketable equity securities		5,365		7,738		5,636		8,671		5,605		8,654
Total	$	490,839	$	497,111	$	516,038	$	527,814	$	508,682	$	516,807

Summary of Loans by Type
(Excludes Loans Held for Sale)
(In Thousands)	June 30,			March 31,			Dec. 31,			June 30,
	2015			2015			2014			2014
Residential mortgage:
Residential mortgage loans - first liens	$	294,978		$	291,612		$	291,882		$	291,690
Residential mortgage loans - junior liens		21,502			20,896			21,166			22,401
Home equity lines of credit		39,140			37,049			36,629			34,633
1-4 Family residential construction		19,651			16,217			16,739			13,948
Total residential mortgage		375,271			365,774			366,416			362,672
Commercial:
Commercial loans secured by real estate		135,063			140,851			145,878			145,934
Commercial and industrial		61,427			51,563			50,157			46,778
Political subdivisions		40,908			19,479			17,534			11,617
Commercial construction and land		7,826			7,249			6,938			8,550
Loans secured by farmland		7,565			7,789			7,916			8,380
Multi-family (5 or more) residential		8,561			8,673			8,917			10,548
Agricultural loans		4,287			3,158			3,221			3,116
Other commercial loans		12,809			13,187			13,334			13,816
Total commercial		278,446			251,949			253,895			248,739
Consumer		10,101			10,622			10,234			10,203
Total		663,818			628,345			630,545			621,614
Less: allowance for loan losses		(7,300	)		(7,134	)		(7,336	)		(7,267	)
Loans, net	$	656,518		$	621,211		$	623,209		$	614,347

Loans Held for Sale
(In Thousands)	June 30,			March 31,			Dec. 31,			June 30,
	2015			2015			2014			2014
Residential mortgage loans originated and serviced - outstanding balance	$	151,324		$	151,486		$	152,505		$	150,725
Less: outstanding balance of loans sold		(151,132	)		(151,272	)		(152,505	)		(150,725	)
Loans held for sale, net	$	192		$	214		$	0		$	0

ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES

(In Thousands)

	3 Months			3 Months			6 Months			6 Months
	Ended			Ended			Ended			Ended
	June 30,			Mar. 31,			June 30,			June 30,
	2015			2015			2015			2014
Balance, beginning of period	$	7,134		$	7,336		$	7,336		$	8,663
Charge-offs		(77	)		(222	)		(299	)		(1,820	)
Recoveries		22			17			39			289
Net charge-offs		(55	)		(205	)		(260	)		(1,531	)
Provision for loan losses		221			3			224			135
Balance, end of period	$	7,300		$	7,134		$	7,300		$	7,267

PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS

AND TROUBLED DEBT RESTRUCTURINGS (TDRs)

(In Thousands)

	June 30,			Mar. 31,			Dec 31,			June 30,
	2015			2015			2014			2014
Impaired loans with a valuation allowance	$	3,880		$	4,312		$	3,241		$	3,804
Impaired loans without a valuation allowance		7,764			8,851			9,075			10,258
Total impaired loans	$	11,644		$	13,163		$	12,316		$	14,062

Total loans past due 30-89 days and still accruing	$	3,803		$	5,722		$	7,121		$	4,837

Nonperforming assets:
Total nonaccrual loans	$	12,060		$	11,944		$	12,610		$	13,598
Total loans past due 90 days or more and still accruing		2,529			3,086			2,843			3,050
Total nonperforming loans		14,589			15,030			15,453			16,648
Foreclosed assets held for sale (real estate)		1,223			1,583			1,189			1,419
Total nonperforming assets	$	15,812		$	16,613		$	16,642		$	18,067

Loans subject to troubled debt restructurings (TDRs):
Performing	$	1,119		$	1,872		$	1,807		$	2,069
Nonperforming		5,216			5,252			5,388			6,038
Total TDRs	$	6,335		$	7,124		$	7,195		$	8,107

Total nonperforming loans as a % of loans		2.20	%		2.39	%		2.45	%		2.68	%
Total nonperforming assets as a % of assets		1.26	%		1.33	%		1.34	%		1.44	%
Allowance for loan losses as a % of total loans		1.10	%		1.14	%		1.16	%		1.17	%
Allowance for loan losses as a % of nonperforming loans		50.04	%		47.47	%		47.47	%		43.65	%

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
	6/30/2015			Return/			3/31/2015			Return/			6/30/2014			Return/
	Average			Cost of			Average			Cost of			Average			Cost of
	Balance			Funds %			Balance			Funds %			Balance			Funds %
EARNING ASSETS
Available-for-sale securities, at amortized cost:
Taxable	$	389,705			2.06	%	$	388,104			2.15	%	$	372,666			2.18	%
Tax-exempt		116,421			5.33	%		117,674			5.35	%		123,568			5.35	%
Total available-for-sale securities		506,126			2.81	%		505,778			2.90	%		496,234			2.97	%
Interest-bearing due from banks		21,970			0.46	%		26,994			0.39	%		33,106			0.39	%
Loans held for sale		145			8.30	%		89			9.11	%		282			7.11	%
Loans receivable:
Taxable		592,188			5.25	%		582,498			5.37	%		585,593			5.54	%
Tax-exempt		49,026			4.88	%		41,925			5.15	%		36,422			5.62	%
Total loans receivable		641,214			5.22	%		624,423			5.35	%		622,015			5.54	%
Total Earning Assets		1,169,455			4.09	%		1,157,284			4.16	%		1,151,637			4.29	%
Cash		17,072						16,127						17,484
Unrealized gain/loss on securities		10,260						10,626						6,539
Allowance for loan losses		(7,226	)					(7,391	)					(8,402	)
Bank premises and equipment		16,095						16,252						16,889
Intangible Asset - Core Deposit Intangible		44						50						75
Intangible Asset - Goodwill		11,942						11,942						11,942
Other assets		38,065						37,135						40,965
Total Assets	$	1,255,707					$	1,242,025					$	1,237,129

INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking	$	199,373			0.11	%	$	191,705			0.12	%	$	179,018			0.12	%
Money market		196,537			0.15	%		194,834			0.15	%		198,753			0.15	%
Savings		128,879			0.10	%		127,853			0.10	%		121,741			0.10	%
Certificates of deposit		122,634			0.67	%		122,007			0.71	%		138,250			0.81	%
Individual Retirement Accounts		111,765			0.41	%		113,806			0.40	%		120,987			0.39	%
Other time deposits		1,125			0.00	%		803			0.00	%		1,138			0.00	%
Total interest-bearing deposits		760,313			0.25	%		751,008			0.26	%		759,887			0.29	%
Borrowed funds:
Short-term		9,185			0.22	%		6,017			0.07	%		4,766			0.08	%
Long-term		69,211			4.01	%		73,020			4.03	%		73,232			4.03	%
Total borrowed funds		78,396			3.57	%		79,037			3.73	%		77,998			3.79	%
Total Interest-bearing Liabilities		838,709			0.56	%		830,045			0.59	%		837,885			0.62	%
Demand deposits		220,839						215,019						204,664
Other liabilities		7,756						8,120						7,971
Total Liabilities		1,067,304						1,053,184						1,050,520
Stockholders' equity, excluding other comprehensive income/loss		181,683						181,944						182,258
Other comprehensive income/loss		6,720						6,897						4,351
Total Stockholders' Equity		188,403						188,841						186,609
Total Liabilities and Stockholders' Equity	$	1,255,707					$	1,242,025					$	1,237,129
Interest Rate Spread					3.53	%					3.57	%					3.67	%
Net Interest Income/Earning Assets					3.69	%					3.74	%					3.84	%

Total Deposits (Interest-bearing and Demand)	$	981,152					$	966,027					$	964,551

(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 35%.

(2) Nonaccrual loans have been included with loans for the purpose of analyzing net interest earnings.

Analysis of Average Daily Balances and Rates

(Dollars in Thousands)

	6 Months						6 Months
	Ended			Rate of			Ended			Rate of
	6/30/2015			Return/			6/30/2014			Return/
	Average			Cost of			Average			Cost of
	Balance			Funds %			Balance			Funds %
EARNING ASSETS
Available-for-sale securities, at amortized cost:
Taxable	$	388,909			2.11	%	$	359,239			2.20	%
Tax-exempt		117,044			5.34	%		124,792			5.40	%
Total available-for-sale securities		505,953			2.85	%		484,031			3.03	%
Interest-bearing due from banks		24,468			0.42	%		31,611			0.40	%
Loans held for sale		117			8.62	%		201			8.03	%
Loans receivable:
Taxable		587,370			5.31	%		590,526			5.49	%
Tax-exempt		45,495			5.00	%		38,033			5.72	%
Total loans receivable		632,865			5.29	%		628,559			5.51	%
Total Earning Assets		1,163,403			4.13	%		1,144,402			4.32	%
Cash		16,602						16,895
Unrealized gain/loss on securities		10,442						4,656
Allowance for loan losses		(7,308	)					(8,590	)
Bank premises and equipment		16,173						17,085
Intangible Asset - Core Deposit Intangible		47						79
Intangible Asset - Goodwill		11,942						11,942
Other assets		37,603						41,642
Total Assets	$	1,248,904					$	1,228,111

INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking	$	195,560			0.11	%	$	179,316			0.12	%
Money market		195,690			0.15	%		197,183			0.14	%
Savings		128,369			0.10	%		120,144			0.10	%
Certificates of deposit		122,322			0.69	%		136,551			0.84	%
Individual Retirement Accounts		112,780			0.41	%		121,684			0.38	%
Other time deposits		965			0.00	%		976			0.00	%
Total interest-bearing deposits		755,686			0.26	%		755,854			0.30	%
Borrowed funds:
Short-term		7,610			0.16	%		7,393			0.16	%
Long-term		71,105			4.02	%		73,266			4.03	%
Total borrowed funds		78,715			3.65	%		80,659			3.68	%
Total Interest-bearing Liabilities		834,401			0.58	%		836,513			0.62	%
Demand deposits		217,945						199,064
Other liabilities		7,937						8,064
Total Liabilities		1,060,283						1,043,641
Stockholders' equity, excluding other comprehensive income/loss		181,813						181,354
Other comprehensive income/loss		6,808						3,116
Total Stockholders' Equity		188,621						184,470
Total Liabilities and Stockholders' Equity	$	1,248,904					$	1,228,111
Interest Rate Spread					3.55	%					3.70	%
Net Interest Income/Earning Assets					3.71	%					3.86	%

Total Deposits (Interest-bearing and Demand)	$	973,631					$	954,918

(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 35%.

(2) Nonaccrual loans have been included with loans for the purpose of analyzing net interest earnings.

COMPARISON OF NONINTEREST INCOME
(In Thousands)	Three Months Ended									Six Months Ended
	June 30,			Mar. 31,			June 30,			June 30,			June 30,
	2015			2015			2014			2015			2014
Service charges on deposit accounts	$	1,305		$	1,022		$	1,314		$	2,327		$	2,537
Service charges and fees		123			113			134			236			261
Trust and financial management revenue		1,241			1,114			1,138			2,355			2,185
Brokerage revenue		206			219			242			425			469
Insurance commissions, fees and premiums		23			40			27			63			59
Interchange revenue from debit card transactions		500			474			517			974			970
Net gains from sales of loans		183			147			265			330			416
(Decrease) increase in fair value of servicing rights		(33	)		(117	)		(53	)		(150	)		52
Increase in cash surrender value of life insurance		102			97			91			199			179
Net loss from premises and equipment		0			0			(1	)		0			(1	)
Other operating income		312			378			306			690			604
Total other operating income, before realized gains on available-for-sale securities, net	$	3,962		$	3,487		$	3,980		$	7,449		$	7,731

COMPARISON OF NONINTEREST EXPENSE
(In Thousands)	Three Months Ended						Six Months Ended
	June 30,		Mar. 31,		June 30,		June 30,		June 30,
	2015		2015		2014		2015		2014
Salaries and wages	$	3,603	$	3,487	$	3,646	$	7,090	$	7,211
Pensions and other employee benefits		935		1,385		1,153		2,320		2,472
Occupancy expense, net		640		722		641		1,362		1,356
Furniture and equipment expense		467		454		466		921		938
FDIC Assessments		148		151		146		299		293
Pennsylvania shares tax		317		249		337		566		678
Professional fees		113		122		144		235		292
Automated teller machine and interchange expense		255		246		218		501		429
Software subscriptions		211		197		201		408		391
Other operating expense		1,275		1,451		1,395		2,726		2,811
Total noninterest expense, before loss on prepayment of borrowings		7,964		8,464		8,347		16,428		16,871
Loss on prepayment of borrowings		910		0		0		910		0
Total noninterest expense	$	8,874	$	8,464	$	8,347	$	17,338	$	16,871

Citizens & Northern (CZNC) 8-KResults of Operations and Financial Condition