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Previous: STERLING FINANCIAL CORP /PA/, 8-K/A, 2000-09-26 |
Next: STERLING FINANCIAL CORP /PA/, 8-K/A, EX-99.4, 2000-09-26 |
<PAGE> 1
EXHIBIT 99.3
HANOVER BANCORP, INC. AND ITS WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands of dollars, except per share data)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
2000 1999
---- ----
<S> <C> <C>
ASSETS
Cash and due from banks $ 20,498 $ 20,251
Federal funds sold 7,965 -
---------- ----------
Cash and cash equivalents 28,463 20,251
Interest bearing deposits with other banks 5 367
Short-term investments 123 29
Investment securities:
Available-for-sale 186,011 169,388
Held-to-maturity (market value - $1,666 and $1,673, respectively) 1,639 1,670
---------- ----------
187,650 171,058
Loans:
Commercial, financial and agricultural 47,474 46,750
Real estate-construction 7,373 5,714
Real estate-commercial mortgage 52,679 48,663
Real estate-residential mortgage 130,907 130,151
Consumer 66,426 67,697
---------- ----------
304,859 298,975
Less: Allowance for loan losses (3,860) (3,701)
---------- ----------
Net loans 300,999 295,274
Premises and equipment 6,883 6,984
Accrued interest receivable 3,926 3,466
Other assets 7,635 6,495
---------- ----------
TOTAL ASSETS $ 535,684 $ 503,924
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Non-interest bearing $ 39,207 $ 37,072
Interest bearing 385,350 359,437
---------- ----------
424,557 396,509
Borrowed Funds:
Short-term 10,768 21,266
Long-term 61,926 49,055
---------- ----------
72,694 70,321
Accrued interest payable 3,899 2,386
Other liabilities 1,056 1,494
Dividends payable 466 466
---------- ----------
TOTAL LIABILITIES 502,672 471,176
Shareholders' Equity
Preferred stock, $2.50 par value; authorized, 2,000,000 shares;
no shares issued or outstanding - -
Common Stock, $.83 par value; authorized, 9,000,000 shares;
issued and outstanding: 2000-3,884,189 shares;
1999-3,883,272 shares 3,224 3,223
Surplus 18,283 18,271
Accumulated other comprehensive income (6,147) (5,019)
Retained earnings 17,652 16,273
---------- ----------
TOTAL SHAREHOLDERS' EQUITY 33,012 32,748
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 535,684 $ 503,924
========== ==========
</TABLE>
See accompanying notes.
<PAGE> 2
HANOVER BANCORP, INC. AND ITS WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands of dollars, except per share data)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
2000 1999
---- ----
<S> <C> <C>
INTEREST INCOME
Interest and fees on loans $ 12,538 $ 11,888
Interest on federal funds sold 192 358
Interest on short-term investments 5 67
Interest on investment securities:
Taxable 4,137 3,037
Tax-exempt 1,489 1,054
-------- --------
5,626 4,091
-------- --------
TOTAL INTEREST INCOME 18,361 16,404
INTEREST EXPENSE
Interest on deposits 8,314 6,862
Interest on borrowed funds 1,867 1,657
-------- --------
TOTAL INTEREST EXPENSE 10,181 8,519
-------- --------
NET INTEREST INCOME 8,180 7,885
PROVISION FOR LOAN LOSSES 190 390
-------- --------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 7,990 7,495
NET SECURITIES GAINS 222 161
OTHER INCOME
Trust and investment services income 606 576
Service charges on deposit accounts 804 786
Other operating income 519 613
-------- --------
TOTAL OTHER INCOME 1,929 1,975
OTHER EXPENSE
Salaries 3,169 2,793
Employee benefits 656 605
Occupancy expense 528 464
Equipment expense 640 603
Marketing and advertising 219 223
Professional and service fees 592 711
Other operating expense 1,540 1,412
-------- --------
TOTAL OTHER EXPENSE 7,344 6,811
-------- --------
INCOME BEFORE INCOME TAXES 2,797 2,820
INCOME TAXES 485 612
-------- --------
NET INCOME $ 2,312 $ 2,208
======== ========
PER SHARE DATA
Net income - basic and diluted $ 0.60 $ 0.56
Cash dividends declared 0.24 0.22
</TABLE>
See accompanying notes.
<PAGE> 3
HANOVER BANCORP, INC. AND ITS WHOLLY-OWNED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six months ended
June 30,
2000 1999
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,312 $ 2,208
Adjustments to reconcile net income to net
cash provided by operating activities:
Provision for loan losses 190 390
Provision for depreciation and amortization 573 543
Securities gains (222) (161)
Increase in net deferred tax assets - 147
Increase in interest receivable (460) (233)
Increase in interest payable 1,513 1,180
Increase in other assets (559) (554)
Increase in other liabilities (234) (408)
Increase (decrease) in accrued taxes (204) 335
Loans originated for sale (3,179) (7,159)
Proceeds from sale of loans originated for sale 3,090 8,442
--------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 2,820 4,730
INVESTING ACTIVITIES
Net increase in loans (5,826) (7,675)
Proceeds from sale of loans - -
Proceeds from sale of available-for-sale investment securities 12,296 27,369
Proceeds from maturities of investment securities 3,730 9,775
Purchases of investment securities (34,105) (45,772)
Proceeds from maturities of short-term investments 268 8,000
Purchases of short-term investments - (7,963)
Purchases of premises and equipment (472) (501)
--------- ---------
NET CASH USED IN
INVESTING ACTIVITIES (24,109) (16,767)
FINANCING ACTIVITIES
Net increase in demand deposits, NOW accounts,
money market accounts, and savings accounts 7,551 16,959
Net increase in certificates of deposit and other time deposits 20,497 19,053
Net increase (decrease) in borrowed funds 2,373 (3,027)
Cash dividends paid (932) (866)
Cash paid in lieu of fractional shares - -
Proceeds from issuance of common stock 12 56
Repurchase and retirement of common stock - (432)
--------- ---------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 29,501 31,743
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 8,212 19,706
Cash and cash equivalents at beginning of year 20,251 26,174
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 28,463 $ 45,880
========= =========
</TABLE>
See accompanying notes.
<PAGE> 4
HANOVER BANCORP, INC. AND ITS WHOLLY OWNED SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments, which are of a normal recurring
nature necessary to present fairly Hanover Bancorp, Inc.'s financial position as
of June 30, 2000, and December 31, 1999, the results of its operations and cash
flows for the six months ended June 30, 2000 and 1999.
(2) The information contained in this report is unaudited and is subject to
year-end adjustment and audit.
(3) These statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the corporation's Annual
Report on Form 10-K/A for the year ended December 31, 1999.
(4) Net income (basic and diluted) and cash dividends per share are based on the
weighted average number of shares outstanding which were 3,884,137 during the
six months ended June 30, 2000 and 3,939,344 during the six months ended June
30, 1999. The effective dilutive securities for these periods are immaterial.
(5) The results of operations for the six months ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2000.
(6) The allowance for loan losses is maintained at a level believed adequate by
management to absorb estimated credit losses within the overall loan portfolio.
Management's methodology in evaluating the adequacy of the allowance considers
the overall growth in the portfolio, ongoing analysis of individual credits,
adverse situations that could affect a borrower's ability to repay, prior and
current loss experience, and economic conditions and trends. The allowance for
loan losses is charged when management determines the prospects for recovering
the principal have significantly diminished. Subsequent recoveries, if any, are
credited to the allowance. Loans identified as impaired are charged-off when
management has concluded, after ongoing evaluation of the impaired loans, that
repayment is unlikely. Installment loans that are 90 to 120 days past due are
charged-off, unless current scheduled payments are being received. Real estate
loans are written down to fair value upon the earlier of management's
determination that the underlying collateral value has declined, foreclosure
proceedings, a receipt of a deed in lieu of foreclosure or an in-substance
foreclosure involving actual possession of the collateral.
(7) Comprehensive income and its components for the six months ended June 30,
are as follows:
<TABLE>
<CAPTION>
Six months ended
2000 1999
<S> <C> <C>
Net income $ 2,312 $ 2,208
Adjustment to net unrealized gains on
securities available-for-sale, net of
tax effects and reclassification adjustment
for gains included in net income (1,128) (3,826)
Comprehensive income (loss) $ 1,184 $ (1,618)
</TABLE>
Accumulated other comprehensive income consists of the net unrealized gain on
securities available-for-sale, net of tax effects.
(8) In March 2000, the Financial Accounting Standards Board issued FASB
Interpretation No. 44, Accounting for Certain Transactions involving Stock
Compensation, and Interpretation of APB No. 25. The Interpretation provides
clarification on stock option repricings, modifications to extend the term,
modifications to accelerate vesting, and other matters. Hanover has adopted the
<PAGE> 5
provisions prospectively as of July 1, 2000 with no impact on earnings or
shareholders' equity.
(9) On July 27, 2000, Hanover announced the consummation of the merger with
Sterling Financial Corporation, headquartered in Lancaster, Pennsylvania.
Shareholders of Sterling and Hanover approved the merger on June 13 and June 14,
2000, respectively. Shareholders of Hanover Bancorp, Inc. will receive .93
shares of common stock of Sterling for each share of Hanover common stock. A
total of 3,611,923 shares of common stock will be issued by sterling in
connection with the transaction. This transaction will be accounted for under
the pooling-of-interests method.
The following table provides a summary of consolidated operating results and
financial condition on a proforma basis (including intercompany eliminations) as
of and for the six months ended June 30, 2000 (in thousands):
<TABLE>
<CAPTION>
Sterling
Sterling Hanover (Proforma)
-------- ------- ----------
<S> <C> <C> <C>
Net interest income $ 19,277 $ 8,292 $ 27,569
Net income 7,352 2,312 9,664
Total assets 1,111,958 535,636 1,640,982
Total stockholders' equity 93,498 33,012 126,503
</TABLE>
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