CITIZENS & NORTHERN CORP - FORM 8-K - EX-99.3

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EX-99.2 - EX-99.2 - CITIZENS & NORTHERN CORP	cznc-20201022xex99d2.htm
EX-99.1 - EX-99.1 - CITIZENS & NORTHERN CORP	cznc-20201022xex99d1.htm
8-K - 8-K - CITIZENS & NORTHERN CORP	cznc-20201022x8k.htm

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
	2020			2019			(DECREASE)
EARNINGS PERFORMANCE
Net Income	$	12,452		$	14,046		(11.35)	%
Return on Average Assets (Annualized)		0.87	%		1.25	%	(30.40)	%
Return on Average Equity (Annualized)		6.26	%		8.33	%	(24.85)	%

BALANCE SHEET HIGHLIGHTS
Total Assets	$	2,352,793		$	1,642,587		43.24	%
Available-for-Sale Debt Securities		340,545			363,467		(6.31)	%
Loans (Net)		1,680,617			1,130,143		48.71	%
Allowance for Loan Losses		10,753			9,257		16.16	%
Deposits and Repo Sweep Accounts		1,873,827			1,298,649		44.29	%

OFF-BALANCE SHEET
Outstanding Balance of Mortgage Loans Sold with Servicing Retained	$	254,462		$	177,561		43.31	%
Trust Assets Under Management		1,012,986			959,215		5.61	%

SHAREHOLDERS' VALUE (PER COMMON SHARE)
Net Income - Basic	$	0.86		$	1.06		(18.87)	%
Net Income - Diluted	$	0.86		$	1.06		(18.87)	%
Dividends - Quarterly	$	0.81		$	0.81		0.00	%
Dividends - Special	$	0.00		$	0.10		(100.00)	%
Common Book Value	$	18.65		$	17.73		5.19	%
Tangible Common Book Value (a)	$	15.09		$	15.54		(2.90)	%
Market Value (Last Trade)	$	16.24		$	26.28		(38.20)	%
Market Value / Common Book Value		87.08	%		148.22	%	(41.25)	%
Market Value / Tangible Common Book Value		107.62	%		169.11	%	(36.36)	%
Price Earnings Multiple (Annualized)		14.16			18.59		(23.83)	%
Dividend Yield (Annualized, Excluding Special Dividend)		6.65	%		4.11	%	61.80	%
Common Shares Outstanding, End of Period		15,890,353			13,703,022		15.96	%

CONDENSED, CONSOLIDATED FINANCIAL HIGHLIGHTS (Continued)

(Dollars In Thousands, Except Per Share Data)

(Unaudited)


	AS OF OR FOR THE
	NINE MONTHS ENDED						%
	September 30,						INCREASE
	2020			2019			(DECREASE)
SAFETY AND SOUNDNESS
Tangible Common Equity / Tangible Assets (a)		10.44	%		13.21	%	(20.97)	%
Nonperforming Assets / Total Assets		1.17	%		0.86	%	36.05	%
Allowance for Loan Losses / Total Loans		0.64	%		0.81	%	(20.99)	%
Total Risk Based Capital Ratio (b)		17.04	%		20.43	%	(16.59)	%
Tier 1 Risk Based Capital Ratio (b)		15.20	%		18.94	%	(19.75)	%
Common Equity Tier 1 Risk Based Capital Ratio (b)		15.20	%		18.94	%	(19.75)	%
Leverage Ratio (b)		9.94	%		13.11	%	(24.18)	%

AVERAGE BALANCES
Average Assets	$	1,909,844		$	1,503,262		27.05	%
Average Equity	$	265,276		$	224,874		17.97	%

EFFICIENCY RATIO (c)
Net Interest Income on a Fully Taxable-Equivalent
Basis (c)	$	48,524		$	41,009		18.33	%
Noninterest Income		17,779			14,218		25.05	%
Total (1)	$	66,303		$	55,227		20.06	%
Noninterest Expense Excluding Merger Expenses (2)	$	39,834		$	33,604		18.54	%
Efficiency Ratio = (2)/(1)		60.08	%		60.85	%	(1.27)	%

(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	$	2,352,793	$	1,642,587
Less: Intangible Assets, Primarily Goodwill		(56,585)		(29,939)
Tangible Assets	$	2,296,208	$	1,612,648
Total Shareholders' Equity	$	296,316	$	242,939
Less: Intangible Assets, Primarily Goodwill		(56,585)		(29,939)
Tangible Common Equity (3)	$	239,731	$	213,000

Common Shares Outstanding, End of Period (4)		15,890,353		13,703,022
Tangible Common Book Value per Share = (3)/(4)	$	15.09	$	15.54

(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 include expenses related to the acquisition of Covenant Financial, Inc., which closed July 1, 2020. Also excluded are expenses related to the acquisition of Monument Bancorp, Inc. , which closed April 1, 2019.

QUARTERLY CONDENSED, CONSOLIDATED

INCOME STATEMENT INFORMATION

(Dollars In Thousands, Except Per Share Data)

(Unaudited)


	For the Three Months Ended :
	September 30,		June 30,		March 31,		December 31,		September 30,		June 30,		March 31,
	2020		2020		2020		2019		2019		2019		2019
Interest income	$	21,751	$	16,513	$	17,037	$	17,290	$	17,277	$	17,139	$	13,065
Interest expense		2,469		2,267		2,755		2,999		3,000		2,934		1,350
Net interest income		19,282		14,246		14,282		14,291		14,277		14,205		11,715
Provision (credit) for loan losses		1,941		(176)		1,528		652		1,158		(4)		(957)
Net interest income after (credit) provision for loan losses		17,341		14,422		12,754		13,639		13,119		14,209		12,672
Noninterest income		6,970		5,528		5,281		5,066		4,963		4,849		4,406
Net gains on securities		25		0		0		3		13		7		0
Merger-related expenses		6,402		983		141		281		206		3,301		311
Other noninterest expenses		14,648		12,274		12,912		11,834		11,486		11,422		10,696
Income before income tax provision		3,286		6,693		4,982		6,593		6,403		4,342		6,071
Income tax provision		438		1,255		816		1,135		1,096		693		981
Net income	$	2,848	$	5,438	$	4,166	$	5,458	$	5,307	$	3,649	$	5,090
Net income attributable to common shares	$	2,830	$	5,405	$	4,146	$	5,431	$	5,281	$	3,630	$	5,063
Basic earnings per common share	$	0.18	$	0.39	$	0.30	$	0.40	$	0.39	$	0.27	$	0.41
Diluted earnings per common share	$	0.18	$	0.39	$	0.30	$	0.40	$	0.39	$	0.27	$	0.41

QUARTERLY CONDENSED, CONSOLIDATED

BALANCE SHEET INFORMATION

(In Thousands) (Unaudited)


	As of:
	September 30,		June 30,		March 31,		December 31,		September 30,		June 30,		March 31,
	2020		2020		2020		2019		2019		2019		2019
ASSETS
Cash & Due from Banks	$	174,478	$	77,642	$	32,678	$	35,202	$	51,443	$	39,505	$	44,002
Available-for-Sale Debt Securities		340,545		332,188		342,416		346,723		363,467		363,465		357,646
Loans Held for Sale		1,200		1,258		579		767		2,033		1,131		0
Loans, Net		1,680,617		1,230,387		1,156,143		1,172,386		1,130,143		1,108,483		817,136
Bank-Owned Life Insurance		29,942		18,843		18,745		18,641		18,535		18,430		18,331
Bank Premises and Equipment, net		21,504		18,332		18,023		17,170		16,038		16,114		14,663
Intangible Assets		56,585		29,511		29,573		29,635		29,939		30,013		11,949
Other Assets		47,922		37,305		31,288		33,621		30,989		32,544		26,273
TOTAL ASSETS	$	2,352,793	$	1,745,466	$	1,629,445	$	1,654,145	$	1,642,587	$	1,609,685	$	1,290,000

LIABILITIES
Deposits	$	1,871,514	$	1,381,178	$	1,249,912	$	1,252,660	$	1,294,882	$	1,284,143	$	1,039,911
Repo Sweep Accounts		2,313		2,204		2,407		1,928		3,767		3,192		5,132
Total Deposits and Repo Sweeps		1,873,827		1,383,382		1,252,319		1,254,588		1,298,649		1,287,335		1,045,043
Borrowed Funds		141,344		85,104		108,144		136,419		75,714		62,574		32,844
Subordinated Debt		16,572		6,500		6,500		6,500		7,000		7,000		0
Other Liabilities		24,734		14,689		11,254		12,186		18,285		13,060		9,986
TOTAL LIABILITIES		2,056,477		1,489,675		1,378,217		1,409,693		1,399,648		1,369,969		1,087,873

SHAREHOLDERS' EQUITY
Common Shareholders' Equity, Excluding
Accumulated Other Comprehensive Income (Loss)		284,707		244,080		241,754		240,761		238,479		236,284		202,768
Accumulated Other Comprehensive Income (Loss):
Net Unrealized Gains (Losses) on Available-for-sale Securities		11,376		11,472		9,230		3,511		4,173		3,138		(941)
Defined Benefit Plans Adjustment, Net		233		239		244		180		287		294		300
TOTAL SHAREHOLDERS' EQUITY		296,316		255,791		251,228		244,452		242,939		239,716		202,127
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY	$	2,352,793	$	1,745,466	$	1,629,445	$	1,654,145	$	1,642,587	$	1,609,685	$	1,290,000

AVAILABLE-FOR-SALE DEBT SECURITIES

(In Thousands)


	September 30, 2020				June 30, 2020				December 31, 2019
	Amortized		Fair		Amortized		Fair		Amortized		Fair
	Cost		Value		Cost		Value		Cost		Value

Obligations of the U.S. Treasury	$	12,228	$	12,226	$	0	$	0	$	0	$	0
Obligations of U.S. Government agencies		15,348		16,355		10,706		11,673		16,380		17,000
Obligations of states and political subdivisions:
Tax-exempt		104,821		109,668		86,897		91,643		68,787		70,760
Taxable		42,079		44,195		38,022		39,784		35,446		36,303
Mortgage-backed securities issued or guaranteed by U.S. Government agencies or sponsored agencies:
Residential pass-through securities		44,697		46,211		49,852		51,520		58,875		59,210
Residential collateralized mortgage obligations		67,635		69,337		87,527		89,435		115,025		114,723
Commercial mortgage-backed securities		39,337		42,553		44,664		48,133		47,765		48,727
Total Available-for-Sale Debt Securities	$	326,145	$	340,545	$	317,668	$	332,188	$	342,278	$	346,723

Summary of Loans by Type

(Excludes Loans Held for Sale)

(In Thousands)


	September 30,		June 30,		December 31,		September 30,
	2020		2020		2019		2019
Residential mortgage:
Residential mortgage loans - first liens	$	541,827	$	493,214	$	510,641	$	487,425
Residential mortgage loans - junior liens		27,907		25,632		27,503		29,056
Home equity lines of credit		40,143		31,826		33,638		35,492
1-4 Family residential construction		29,146		15,621		14,798		32,699
Total residential mortgage		639,023		566,293		586,580		584,672
Commercial:
Commercial loans secured by real estate		530,874		293,304		301,227		297,519
Commercial and industrial		156,169		120,202		126,374		115,213
Small Business Administration - Paycheck
Protection Program		163,050		97,103		0		0
Political subdivisions		47,883		43,134		53,570		46,466
Commercial construction and land		41,906		40,348		33,555		22,386
Loans secured by farmland		11,913		11,433		12,251		7,103
Multi-family (5 or more) residential		62,330		32,699		31,070		27,633
Agricultural loans		3,561		3,874		4,319		5,145
Other commercial loans		17,385		16,579		16,535		12,828
Total commercial		1,035,071		658,676		578,901		534,293
Consumer		17,276		16,444		16,741		20,435
Total		1,691,370		1,241,413		1,182,222		1,139,400
Less: allowance for loan losses		(10,753)		(11,026)		(9,836)		(9,257)
Loans, net	$	1,680,617	$	1,230,387	$	1,172,386	$	1,130,143

Loans Held for Sale

(In Thousands)


	September 30,		June 30,		December 31,		September 30,
	2020		2020		2019		2019
Residential mortgage loans originated and serviced - outstanding balance	$	255,662	$	212,036	$	179,213	$	179,594
Less: outstanding balance of loans sold		(254,462)		(210,778)		(178,446)		(177,561)
Loans held for sale, net	$	1,200	$	1,258	$	767	$	2,033

ANALYSIS OF THE ALLOWANCE FOR LOAN LOSSES

(In Thousands)


	3 Months		3 Months		9 Months		9 Months
	Ended		Ended		Ended		Ended
	September 30,		June 30,		September 30,		September 30,
	2020		2020		2020		2019
Balance, beginning of period	$	11,026	$	11,330	$	9,836	$	9,309
Charge-offs		(2,249)		(146)		(2,443)		(295)
Recoveries		35		18		67		46
Net (charge-offs)		(2,214)		(128)		(2,376)		(249)
(Credit) provision for loan losses		1,941		(176)		3,293		197
Balance, end of period	$	10,753	$	11,026	$	10,753	$	9,257

PAST DUE AND IMPAIRED LOANS, NONPERFORMING ASSETS

AND TROUBLED DEBT RESTRUCTURINGS (TDRs)

(Dollars In Thousands)


	September 30,			June 30,			December 31,			September 30,
	2020			2020			2019			2020
Impaired loans with a valuation allowance	$	8,085		$	12,189		$	3,375		$	3,027
Impaired loans without a valuation allowance		3,080			1,786			1,670			2,475
Purchased credit impaired loans		7,447			305			441			441
Total impaired loans	$	18,612		$	14,280		$	5,486		$	5,943

Total loans past due 30-89 days and still accruing	$	3,499		$	5,124		$	8,889		$	5,230

Nonperforming assets:
Purchased credit impaired loans	$	7,447		$	305		$	441		$	441
Other nonaccrual loans		15,349			18,458			8,777			8,579
Total nonaccrual loans		22,796			18,763			9,218			9,020
Total loans past due 90 days or more and still accruing		2,308			2,812			1,207			2,395
Total nonperforming loans		25,104			21,575			10,425			11,415
Foreclosed assets held for sale (real estate)		2,369			1,593			2,886			2,762
Total nonperforming assets	$	27,473		$	23,168		$	13,311		$	14,177

Loans subject to troubled debt restructurings (TDRs):
Performing	$	258		$	265		$	889		$	924
Nonperforming		7,779			790			1,737			1,744
Total TDRs	$	8,037		$	1,055		$	2,626		$	2,668

Total nonperforming loans as a % of loans		1.48	%		1.74	%		0.88	%		1.00	%
Total nonperforming assets as a % of assets		1.17	%		1.33	%		0.80	%		0.86	%
Allowance for loan losses as a % of total loans		0.64	%		0.89	%		0.83	%		0.81	%
Allowance for loan losses as a % of nonperforming loans		42.83	%		51.11	%		94.35	%		81.10	%

SUMMARY OF SELECTED FAIR VALUE ADJUSTMENTS RELATED TO ACQUISITION OF

COVENANT FINANCIAL, INC


(In Thousands)					Borrowed		Subordinated
	Loans		Deposits		Funds		Debt
Amortized cost at acquisition	$	472,012	$	479,846	$	62,700	$	10,000
Fair value adjustments
Market rates		2,909		1,950		1,275		91
Credit adjustment on non-impaired loans		(7,219)
Credit adjustment on impaired loans		(2,910)
Fair value at acquisition	$	464,792	$	481,796	$	63,975	$	10,091
Increase (decrease) in interest income recognized in third
quarter 2020 from fair market value adjustments related to:
Market rates	$	(612)
Credit adjustment on non-impaired loans		847
Total	$	235
(Decrease) in interest expense recognized in third quarter 2020
from fair value adjustments related to market rates			$	(535)	$	(213)	$	(19)

ADJUSTMENTS TO GROSS AMORTIZED COST OF LOANS – TOTAL INCLUDING ACQUISITIONS OF

COVENANT FINANCIAL, INC. AND MONUMENT BANCORP, INC.


(In Thousands)
	Three Months Ended				Nine months ended
	September 30,		September 30,		September 30,		September 30,
	2020		2019		2020		2019
Market Rate Adjustment
Adjustments to gross amortized cost of loans at beginning of period	$	(1,103)	$	(1,658)	$	(1,415)	$	0
Market rate adjustment recorded in acquisition		2,909		0		2,909		(1,807)
Accretion recognized in interest income		(452)		110		(140)		259
Adjustments to gross amortized cost of loans at end of period	$	1,354	$	(1,548)	$	1,354	$	(1,548)
Credit Adjustment on Non-impaired Loans
Adjustments to gross amortized cost of loans at beginning of period	$	(878)	$	(1,653)	$	(1,216)	$	0
Credit adjustment recorded in acquisition		(7,219)		0		(7,219)		(1,914)
Accretion recognized in interest income		970		260		1,308		521
Adjustments to gross amortized cost of loans at end of period	$	(7,127)	$	(1,393)	$	(7,127)	$	(1,393)

PURCHASED CREDIT IMPAIRED (PCI) LOANS – TOTAL INCLUDING PCI LOANS ACQUIRED FROM

COVENANT FINANCIAL, INC. AND MONUMENT BANCORP, INC.


(In Thousands)
	September 30,		December 31,
	2020		2019
Outstanding balance	$	10,453	$	759
Carrying amount		7,447		441

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
	9/30/2020		Return/		6/30/2020		Return/		9/30/2019		Return/
	Average		Cost of		Average		Cost of		Average		Cost of
	Balance		Funds %		Balance		Funds %		Balance		Funds %
EARNING ASSETS
Interest-bearing due from banks	$	147,543	0.19	%	$	37,799	0.44	%	$	26,539	2.38	%
Available-for-sale debt securities, at amortized cost:
Taxable		227,483	2.59	%		244,019	2.27	%		285,114	2.41	%
Tax-exempt		94,058	2.95	%		82,050	3.09	%		69,472	3.34	%
Total available-for-sale debt securities		321,541	2.70	%		326,069	2.48	%		354,586	2.59	%
Loans receivable:
Taxable		1,480,247	4.91	%		1,094,432	4.99	%		1,062,578	5.38	%
Paycheck Protection Program (Taxable)		162,234	2.18	%		77,832	3
Tax-exempt		63,111	3.57	%		59,177	3.75	%		67,741	3.74	%
Total loans receivable		1,705,592	4.60	%		1,231,441	4.79	%		1,130,319	5.28	%
Other earning assets		3,361	3.55	%		2,206	3.65	%		1,515	2.88	%
Total Earning Assets		2,178,037	4.02	%		1,597,515	4.22	%		1,512,959	4.60	%
Cash		33,291				18,960				22,341
Unrealized gain/loss on securities		15,277				12,574				4,915
Allowance for loan losses		(11,473)				(11,471)				(8,322)
Bank-owned life insurance		30,078				18,779				18,468
Bank premises and equipment		21,763				18,230				16,103
Intangible assets		57,008				29,543				29,986
Other assets		48,451				30,723				29,808
Total Assets	$	2,372,432			$	1,714,853			$	1,626,258

INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking	$	382,997	0.28	%	$	260,177	0.31	%	$	232,549	0.62	%
Money market		386,848	0.38	%		215,441	0.43	%		200,873	0.52	%
Savings		201,401	0.11	%		183,933	0.12	%		170,583	0.15	%
Time deposits		449,964	0.96	%		343,257	1.52	%		385,538	1.82	%
Total interest-bearing deposits		1,421,210	0.50	%		1,002,808	0.72	%		989,543	0.99	%
Borrowed funds:
Short-term		44,660	0.65	%		19,844	1.30	%		25,823	2.24	%
Long-term		102,857	1.40	%		72,917	1.73	%		48,953	2.24	%
Subordinated debt		16,540	5.94	%		6,500	6.56	%		6,998	6.58	%
Total borrowed funds		164,057	1.65	%		99,261	1.96	%		81,774	2.62	%
Total Interest-bearing Liabilities		1,585,267	0.62	%		1,102,069	0.83	%		1,071,317	1.11	%
Demand deposits		463,333				346,285				300,183
Other liabilities		26,367				15,891				13,584
Total Liabilities		2,074,967				1,464,245				1,385,084
Stockholders' equity, excluding accumulated other comprehensive income/loss		285,158				240,434				237,000
Accumulated other comprehensive income/loss		12,307				10,174				4,174
Total Shareholders' Equity		297,465				250,608				241,174
Total Liabilities and Shareholders' Equity	$	2,372,432			$	1,714,853			$	1,626,258
Interest Rate Spread			3.40	%			3.39	%			3.49	%
Net Interest Income/Earning Assets			3.57	%			3.65	%			3.81	%

Total Deposits (Interest-bearing and Demand)	$	1,884,543			$	1,349,093			$	1,289,726

(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.

Analysis of Average Daily Balances and Rates

(Dollars in Thousands)


	9 Months				9 Months
	Ended		Rate of		Ended		Rate of
	9/30/2020		Return/		9/30/2019		Return/
	Average		Cost of		Average		Cost of
	Balance		Funds %		Balance		Funds%
EARNING ASSETS
Interest-bearing due from banks	$	68,537	0.37	%	$	23,104	2.45	%
Available-for-sale debt securities, at amortized cost:
Taxable		245,487	2.42	%		285,332	2.53	%
Tax-exempt		82,030	3.05	%		74,469	3.58	%
Total available-for-sale debt securities		327,517	2.58	%		359,801	2.75	%
Loans receivable:
Taxable		1,228,521	5.04	%		950,948	5.41	%
Paycheck Protection Program (Taxable)		80,322	2.38	%		0
Tax-exempt		60,893	3.71	%		69,944	3.83	%
Total loans receivable		1,369,736	4.82	%		1,020,892	5.30	%
Other earning assets		2,346	3.47	%		1,344	3.08	%
Total Earning Assets		1,768,136	4.23	%		1,405,141	4.60	%
Cash		23,467				19,880
Unrealized gain/loss on securities		12,021				97
Allowance for loan losses		(10,988)				(8,676)
Bank-owned life insurance		22,539				18,533
Bank premises and equipment		19,251				15,615
Intangible assets		38,786				24,058
Other assets		36,632				28,614
Total Assets	$	1,909,844			$	1,503,262

INTEREST-BEARING LIABILITIES
Interest-bearing deposits:
Interest checking	$	290,420	0.33	%	$	216,851	0.56	%
Money market		268,095	0.43	%		192,366	0.48	%
Savings		184,829	0.13	%		167,116	0.14	%
Time deposits		391,827	1.35	%		332,651	1.65	%
Total interest-bearing deposits		1,135,171	0.67	%		908,984	0.86	%
Borrowed funds:
Short-term		36,492	1.23	%		26,382	2.30	%
Long-term		80,030	1.62	%		39,655	2.44	%
Subordinated debt		9,871	6.22	%		4,692	6.58	%
Total borrowed funds		126,393	1.87	%		70,729	2.66	%
Total Interest-bearing Liabilities		1,261,564	0.79	%		979,713	0.99	%
Demand deposits		364,200				285,339
Other liabilities		18,804				13,336
Total Liabilities		1,644,568				1,278,388
Stockholders' equity, excluding accumulated other comprehensive income/loss		255,545				224,519
Accumulated other comprehensive income/loss		9,731				355
Total Shareholders' Equity		265,276				224,874
Total Liabilities and Shareholders' Equity	$	1,909,844			$	1,503,262
Interest Rate Spread			3.44	%			3.61	%
Net Interest Income/Earning Assets			3.67	%			3.90	%
Total Deposits (Interest-bearing and Demand)	$	1,499,371			$	1,194,323

(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.

COMPARISON OF NONINTEREST INCOME

(In Thousands)


	Three Months Ended						Nine Months Ended
	September 30,		June 30,		September 30,		September 30,		September 30,
	2020		2020		2019		2020		2019
Trust and financial management revenue	$	1,595	$	1,565	$	1,479	$	4,639	$	4,422
Brokerage revenue		351		343		333		1,027		1,001
Insurance commissions, fees and premiums		41		52		71		126		149
Service charges on deposit accounts		1,045		831		1,436		3,126		3,963
Service charges and fees		83		84		91		230		259
Interchange revenue from debit card transactions		828		718		722		2,277		2,064
Net gains from sales of loans		2,052		1,564		310		3,931		618
Loan servicing fees, net		(87)		(158)		(54)		(259)		9
Increase in cash surrender value of life insurance		159		98		105		361		296
Other noninterest income		903		431		470		2,321		1,437
Total noninterest income, excluding realized gains on securities, net	$	6,970	$	5,528	$	4,963	$	17,779	$	14,218

COMPARISON OF NONINTEREST EXPENSE

(In Thousands)


	Three Months Ended						Nine Months Ended
	September 30,		June 30,		September 30,		September 30,		September 30,
	2020		2020		2019		2020		2019
Salaries and wages	$	6,833	$	5,364	$	5,480	$	17,537	$	15,249
Pensions and other employee benefits		1,870		1,619		1,449		5,527		4,292
Occupancy expense, net		806		664		654		2,215		1,976
Furniture and equipment expense		383		311		333		1,052		967
Data processing expenses		1,251		1,040		802		3,309		2,567
Automated teller machine and interchange expense		340		275		297		912		763
Pennsylvania shares tax		422		423		341		1,267		1,035
Professional fees		422		464		242		1,265		795
Telecommunications		231		213		197		650		537
Directors' fees		175		178		162		523		486
Other noninterest expense		1,915		1,723		1,529		5,577		4,937
Total noninterest expense, excluding merger-related expenses		14,648		12,274		11,486		39,834		33,604
Merger-related expenses		6,402		983		206		7,526		3,818
Total noninterest expense	$	21,050	$	13,257	$	11,692	$	47,360	$	37,422

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