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

EXHIBIT 99.3 – Supplemental, Unaudited Financial Information

 

CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS

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

	9 MONTHS ENDED						%
	SEPTEMBER 30,						INCREASE
	2015			2014			(DECREASE)
EARNINGS PERFORMANCE
Net Income	$	12,406		$	12,718			-2.45	%
Return on Average Assets		1.32	%		1.37	%		-3.65	%
Return on Average Equity		8.78	%		9.18	%		-4.36	%
BALANCE SHEET HIGHLIGHTS
Total Assets	$	1,232,531		$	1,256,533			-1.91	%
Available-for-Sale Securities		461,713			508,253			-9.16	%
Loans (Net)		672,449			621,960			8.12	%
Allowance for Loan Losses		7,416			7,449			-0.44	%
Deposits and Repo Sweep Accounts		966,856			988,294			-2.17	%
OFF-BALANCE SHEET
Outstanding Balance of Mortgage Loans Sold with Servicing Retained		152,275			150,695			1.05	%
Trust Assets Under Management		790,215			812,376			-2.73	%
SHAREHOLDERS' VALUE (PER COMMON SHARE)
Net Income - Basic	$	1.02		$	1.02			0.00	%
Net Income - Diluted	$	1.01		$	1.02			-0.98	%
Dividends	$	0.78		$	0.78			0.00	%
Common Book Value	$	15.60		$	15.14			3.04	%
Tangible Common Book Value	$	14.62		$	14.17			3.18	%
Market Value (Last Trade)	$	19.52		$	19.00			2.74	%
Market Value / Common Book Value		125.13	%		125.50	%		-0.29	%
Market Value / Tangible Common Book Value		133.52	%		134.09	%		-0.43	%
Price Earnings Multiple (Annualized)		14.35			13.97			2.72	%
Dividend Yield (Annualized)		5.33	%		5.47	%		-2.56	%
Common Shares Outstanding, End of Period		12,187,033			12,339,120			-1.23	%
SAFETY AND SOUNDNESS
Tangible Common Equity / Tangible Assets		14.59	%		14.05	%		3.84	%
Nonperforming Assets / Total Assets		1.28	%		1.45	%		-11.72	%
Allowance for Loan Losses / Total Loans		1.09	%		1.18	%		-7.63	%
Total Risk Based Capital Ratio (a)		24.63	%		27.42	%		-10.18	%
Tier 1 Risk Based Capital Ratio (a)		23.47	%		26.09	%		-10.04	%
Common Equity Tier 1 Risk Based Capital Ratio (a)		23.47	%
Leverage Ratio (a)		13.95	%	��	13.78	%		1.23	%
AVERAGE BALANCES
Average Assets	$	1,249,156		$	1,236,883			0.99	%
Average Equity	$	188,305		$	184,699			1.95	%

(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.

1

QUARTERLY CONDENSED, CONSOLIDATED INCOME STATEMENT INFORMATION

(In Thousands) (Unaudited)	For the Three Months Ended:
	Sept. 30,		June 30,		Mar. 31,		Dec. 31,		Sept. 30,		June 30,		Mar. 31,
	2015		2015		2015		2014		2014		2014		2014
Interest income	$	11,134	$	11,186	$	11,163	$	11,468	$	11,572	$	11,563	$	11,406
Interest expense		1,126		1,176		1,213		1,257		1,287		1,290		1,288
Net interest income		10,008		10,010		9,950		10,211		10,285		10,273		10,118
Provision (credit) for loan losses		302		221		3		123		218		446		(311	)
Net interest income after provision (credit) for loan losses		9,706		9,789		9,947		10,088		10,067		9,827		10,429
Other income		3,961		3,962		3,487		3,802		3,887		3,980		3,751
Net gains on available-for-sale securities		79		932		74		210		760		103		31
Loss on prepayment of borrowings		0		910		0		0		0		0		0
Other expenses		8,117		7,964		8,464		8,250		9,036		8,347		8,524
Income before income tax provision		5,629		5,809		5,044		5,850		5,678		5,563		5,687
Income tax provision		1,395		1,452		1,229		1,482		1,411		1,400		1,399
Net income	$	4,234	$	4,357	$	3,815	$	4,368	$	4,267	$	4,163	$	4,288
Net income per share – basic	$	0.35	$	0.36	$	0.31	$	0.35	$	0.34	$	0.33	$	0.35
Net income per share – diluted	$	0.35	$	0.36	$	0.31	$	0.35	$	0.34	$	0.33	$	0.34

QUARTERLY CONDENSED, CONSOLIDATED BALANCE SHEET INFORMATION

(In Thousands) (Unaudited)	As of:
	Sept. 30,		June 30,		Dec. 31,		Sept. 30,
	2015		2015		2014		2014
ASSETS
Cash & Due from Banks	$	32,221	$	35,405	$	36,047	$	55,439
Available-for-Sale Securities		461,713		497,111		516,807		508,253
Loans Held for Sale		76		192		0		418
Loans, Net		672,449		656,518		623,209		621,960
Intangible Assets		11,978		11,983		11,994		12,003
Other Assets		54,094		54,513		53,906		58,460
TOTAL ASSETS	$	1,232,531	$	1,255,722	$	1,241,963	$	1,256,533
LIABILITIES
Deposits	$	961,112	$	978,449	$	967,989	$	981,529
Repo Sweep Accounts		5,744		4,806		5,537		6,765
Total Deposits and Repo Sweeps		966,856		983,255		973,526		988,294
Borrowed Funds		67,342		77,916		73,060		73,131
Other Liabilities		8,233		7,578		7,015		8,234
TOTAL LIABILITIES		1,042,431		1,068,749		1,053,601		1,069,659
SHAREHOLDERS' EQUITY
Common Shareholders' Equity, Excluding Accumulated Other Comprehensive Income/ Loss		183,978		182,887		183,002		182,837
Accumulated Other Comprehensive Income/ Loss:
Net Unrealized Gains/Losses on Available-for-sale Securities		6,116		4,077		5,281		3,940
Defined Benefit Plans Adjustment, Net		6		9		79		97
TOTAL SHAREHOLDERS' EQUITY		190,100		186,973		188,362		186,874
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY	$	1,232,531	$	1,255,722	$	1,241,963	$	1,256,533

2

AVAILABLE-FOR-SALE SECURITIES	September 30, 2015				June 30, 2015				December 31, 2014
(In Thousands)	Amortized		Fair		Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value		Cost		Value
Obligations of U.S. Government agencies	$	15,664	$	15,621	$	27,189	$	26,871	$	27,221	$	26,676
Obligations of states and political subdivisions:
Tax-exempt		108,115		112,396		115,908		119,749		120,086		124,839
Taxable		34,464		35,124		34,872		35,135		33,637		33,878
Mortgage-backed securities		71,681		72,697		76,323		76,790		82,479		83,903
Collateralized mortgage obligations, Issued by U.S. Government agencies		216,981		218,052		231,148		230,794		239,620		238,823
Other collateralized debt obligations		34		34		34		34		34		34
Total debt securities		446,939		453,924		485,474		489,373		503,077		508,153
Marketable equity securities		5,365		7,789		5,365		7,738		5,605		8,654
Total	$	452,304	$	461,713	$	490,839	$	497,111	$	508,682	$	516,807

Summary of Loans by Type
(Excludes Loans Held for Sale)
(In Thousands)	Sept. 30,			June 30,			Dec. 31,			Sept. 30,
	2015			2015			2014			2014
Residential mortgage:
Residential mortgage loans - first liens	$	298,096		$	294,978		$	291,882		$	290,943
Residential mortgage loans - junior liens		20,601			21,502			21,166			21,843
Home equity lines of credit		39,572			39,140			36,629			35,975
1-4 Family residential construction		23,633			19,651			16,739			16,895
Total residential mortgage		381,902			375,271			366,416			365,656
Commercial:
Commercial loans secured by real estate		135,760			135,063			145,878			144,410
Commercial and industrial		72,011			61,427			50,157			50,615
Political subdivisions		40,186			40,908			17,534			14,823
Commercial construction and land		6,852			7,826			6,938			9,069
Loans secured by farmland		7,521			7,565			7,916			8,542
Multi-family (5 or more) residential		8,194			8,561			8,917			9,092
Agricultural loans		4,588			4,287			3,221			3,284
Other commercial loans		12,691			12,809			13,334			13,620
Total commercial		287,803			278,446			253,895			253,455
Consumer		10,160			10,101			10,234			10,298
Total		679,865			663,818			630,545			629,409
Less: allowance for loan losses		(7,416	)		(7,300	)		(7,336	)		(7,449	)
Loans, net	$	672,449		$	656,518		$	623,209		$	621,960

Loans Held for Sale
(In Thousands)	Sept. 30,			June 30,			Dec. 31,			Sept. 30,
	2015			2015			2014			2014
Residential mortgage loans originated and serviced - outstanding balance	$	152,351		$	151,324		$	152,505		$	151,113
Less: outstanding balance of loans sold		(152,275	)		(151,132	)		(152,505	)		(150,695	)
Loans held for sale, net	$	76		$	192		$	0		$	418

3

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,
	2015			2015			2015			2014
Balance, beginning of period	$	7,300		$	7,134		$	7,336		$	8,663
Charge-offs		(197	)		(77	)		(496	)		(1,881	)
Recoveries		11			22			50			314
Net charge-offs		(186	)		(55	)		(446	)		(1,567	)
Provision for loan losses		302			221			526			353
Balance, end of period	$	7,416		$	7,300		$	7,416		$	7,449

PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS

AND TROUBLED DEBT RESTRUCTURINGS (TDRs)

(In Thousands)

	Sept. 30,			June 30,			Dec 31,			Sept. 30,
	2015			2015			2014			2014
Impaired loans with a valuation allowance	$	1,963		$	3,880		$	3,241		$	4,059
Impaired loans without a valuation allowance		7,812			7,764			9,075			10,035
Total impaired loans	$	9,775		$	11,644		$	12,316		$	14,094
Total loans past due 30-89 days and still accruing	$	4,780		$	3,803		$	7,121		$	5,458
Nonperforming assets:
Total nonaccrual loans	$	11,632		$	12,060		$	12,610		$	13,722
Total loans past due 90 days or more and still accruing		2,833			2,529			2,843			2,602
Total nonperforming loans		14,465			14,589			15,453			16,324
Foreclosed assets held for sale (real estate)		1,363			1,223			1,189			1,888
Total nonperforming assets	$	15,828		$	15,812		$	16,642		$	18,212
Loans subject to troubled debt restructurings (TDRs):
Performing	$	1,043		$	1,119		$	1,807		$	1,834
Nonperforming		5,182			5,216			5,388			6,172
Total TDRs	$	6,225		$	6,335		$	7,195		$	8,006
Total nonperforming loans as a % of loans		2.13	%		2.20	%		2.45	%		2.59	%
Total nonperforming assets as a % of assets		1.28	%		1.26	%		1.34	%		1.45	%
Allowance for loan losses as a % of total loans		1.09	%		1.10	%		1.16	%		1.18	%
Allowance for loan losses as a % of nonperforming loans		51.27	%		50.04	%		47.47	%		45.63	%

4

Analysis of Average Daily Balances and Annualized Rates

(Dollars in Thousands)

	3 Months			Annualized			3 Months			Annualized			3 Months			Annualized
	Ended			Rate of			Ended			Rate of			Ended			Rate of
	9/30/2015			Return/			6/30/2015			Return/			9/30/2014			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	$	361,481			2.02	%	$	389,705			2.06	%	$	381,833			2.16	%
Tax-exempt		111,735			5.14	%		116,421			5.33	%		123,949			5.22	%
Total available-for-sale securities		473,216			2.75	%		506,126			2.81	%		505,782			2.91	%
Interest-bearing due from banks		19,774			0.46	%		21,970			0.46	%		35,133			0.37	%
Loans held for sale		245			8.10	%		145			8.30	%		263			7.54	%
Loans receivable:
Taxable		610,516			5.10	%		592,188			5.25	%		587,799			5.43	%
Tax-exempt		63,219			4.50	%		49,026			4.88	%		38,537			5.48	%
Total loans receivable		673,735			5.05	%		641,214			5.22	%		626,336			5.43	%
Total Earning Assets		1,166,970			4.04	%		1,169,455			4.09	%		1,167,514			4.19	%
Cash		16,961						17,072						17,361
Unrealized gain/loss on securities		7,015						10,260						7,810
Allowance for loan losses		(7,376	)					(7,226	)					(7,332	)
Bank premises and equipment		15,808						16,095						16,581
Intangible Asset - Core Deposit Intangible		38						44						64
Intangible Asset - Goodwill		11,942						11,942						11,942
Other assets		38,294						38,065						40,201
Total Assets	$	1,249,652					$	1,255,707					$	1,254,141
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking	$	197,189			0.11	%	$	199,373			0.11	%	$	186,034			0.12	%
Money market		202,106			0.15	%		196,537			0.15	%		202,536			0.14	%
Savings		128,939			0.10	%		128,879			0.10	%		123,447			0.10	%
Certificates of deposit		125,886			0.66	%		122,634			0.67	%		137,136			0.76	%
Individual Retirement Accounts		109,661			0.41	%		111,765			0.41	%		120,079			0.40	%
Other time deposits		1,514			0.26	%		1,125			0.00	%		1,525			0.00	%
Total interest-bearing deposits		765,295			0.25	%		760,313			0.25	%		770,757			0.28	%
Borrowed funds:
Short-term		12,972			0.28	%		9,185			0.22	%		5,325			0.07	%
Long-term		62,876			3.98	%		69,211			4.01	%		73,162			4.03	%
Total borrowed funds		75,848			3.34	%		78,396			3.57	%		78,487			3.76	%
Total Interest-bearing Liabilities		841,143			0.53	%		838,709			0.56	%		849,244			0.60	%
Demand deposits		212,022						220,839						208,773
Other liabilities		8,803						7,756						10,975
Total Liabilities		1,061,968						1,067,304						1,068,992
Stockholders' equity, excluding other comprehensive income/loss		183,116						181,683						180,042
Other comprehensive income/loss		4,568						6,720						5,107
Total Stockholders' Equity		187,684						188,403						185,149
Total Liabilities and Stockholders' Equity	$	1,249,652					$	1,255,707					$	1,254,141
Interest Rate Spread					3.51	%					3.53	%					3.59	%
Net Interest Income/Earning Assets					3.66	%					3.69	%					3.75	%
Total Deposits (Interest-bearing and Demand)	$	977,317					$	981,152					$	979,530

(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 35%.

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

5

Analysis of Average Daily Balances and Annualized Rates

(Dollars in Thousands)

	9 Months			Annualized			9 Months			Annualized
	Ended			Rate of			Ended			Rate of
	9/30/2015			Return/			9/30/2014			Return/
	Average			Cost of			Average			Cost of
	Balance			Funds %			Balance			Funds %
EARNING ASSETS
Available-for-sale securities, at amortized cost:
Taxable	$	379,666			2.08	%	$	366,853			2.18	%
Tax-exempt		115,255			5.27	%		124,508			5.34	%
Total available-for-sale securities		494,921			2.82	%		491,361			2.98	%
Interest-bearing due from banks		22,886			0.43	%		32,798			0.39	%
Loans held for sale		160			8.36	%		222			7.83	%
Loans receivable:
Taxable		595,170			5.24	%		589,607			5.47	%
Tax-exempt		51,468			4.80	%		38,203			5.64	%
Total loans receivable		646,638			5.20	%		627,810			5.48	%
Total Earning Assets		1,164,605			4.10	%		1,152,191			4.27	%
Cash		16,723						17,052
Unrealized gain/loss on securities		9,287						5,719
Allowance for loan losses		(7,331	)					(8,166	)
Bank premises and equipment		16,050						16,915
Intangible Asset - Core Deposit Intangible		44						74
Intangible Asset - Goodwill		11,942						11,942
Other assets		37,836						41,156
Total Assets	$	1,249,156					$	1,236,883
INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking	$	196,109			0.11	%	$	181,580			0.12	%
Money market		197,852			0.15	%		198,987			0.14	%
Savings		128,561			0.10	%		121,257			0.10	%
Certificates of deposit		123,523			0.68	%		136,748			0.81	%
Individual Retirement Accounts		111,729			0.41	%		121,143			0.39	%
Other time deposits		1,150			0.12	%		1,161			0.00	%
Total interest-bearing deposits		758,924			0.26	%		760,876			0.29	%
Borrowed funds:
Short-term		9,417			0.21	%		6,696			0.14	%
Long-term		68,332			4.01	%		73,231			4.03	%
Total borrowed funds		77,749			3.55	%		79,927			3.71	%
Total Interest-bearing Liabilities		836,673			0.56	%		840,803			0.61	%
Demand deposits		215,949						202,336
Other liabilities		8,229						9,045
Total Liabilities		1,060,851						1,052,184
Stockholders' equity, excluding other comprehensive income/loss		182,252						180,912
Other comprehensive income/loss		6,053						3,787
Total Stockholders' Equity		188,305						184,699
Total Liabilities and Stockholders' Equity	$	1,249,156					$	1,236,883
Interest Rate Spread					3.54	%					3.66	%
Net Interest Income/Earning Assets					3.69	%					3.82	%
Total Deposits (Interest-bearing and Demand)	$	974,873					$	963,212

(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 35%.

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

6

COMPARISON OF NONINTEREST INCOME
(In Thousands)	Three Months Ended									Nine Months Ended
	Sept. 30,			June 30,			Sept. 30,			Sept. 30,			Sept. 30,
	2015			2015			2014			2015			2014
Service charges on deposit accounts	$	1,302		$	1,305		$	1,275		$	3,629		$	3,812
Service charges and fees		137			123			144			373			405
Trust and financial management revenue		1,123			1,241			1,140			3,478			3,325
Brokerage revenue		215			206			213			640			682
Insurance commissions, fees and premiums		24			23			44			87			103
Interchange revenue from debit card transactions		482			500			504			1,456			1,474
Net gains from sales of loans		243			183			141			573			557
Increase (decrease) in fair value of servicing rights		13			(33	)		(17	)		(137	)		35
Increase in cash surrender value of life insurance		95			102			99			294			278
Net (loss) gain from premises and equipment		(1	)		0			9			(1	)		8
Other operating income		328			312			335			1,018			939
Total other operating income, before realized gains on available-for-sale securities, net	$	3,961		$	3,962		$	3,887		$	11,410		$	11,618

COMPARISON OF NONINTEREST EXPENSE
(In Thousands)	Three Months Ended						Nine Months Ended
	Sept. 30,		June 30,		Sept. 30,		Sept. 30,		Sept. 30,
	2015		2015		2014		2015		2014
Salaries and wages	$	3,744	$	3,603	$	4,348	$	10,834	$	11,559
Pensions and other employee benefits		1,016		935		1,091		3,336		3,563
Occupancy expense, net		623		640		646		1,985		2,002
Furniture and equipment expense		477		467		461		1,398		1,399
FDIC Assessments		155		148		151		454		444
Pennsylvania shares tax		311		317		336		877		1,014
Professional fees		128		113		135		363		427
Automated teller machine and interchange expense		234		255		239		735		668
Software subscriptions		209		211		184		617		575
Other operating expense		1,220		1,275		1,445		3,946		4,256
Total noninterest expense, before loss on prepayment of borrowings		8,117		7,964		9,036		24,545		25,907
Loss on prepayment of borrowings		0		910		0		910		0
Total noninterest expense	$	8,117	$	8,874	$	9,036	$	25,455	$	25,907

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