Citizens & Northern Corp · NASDAQ:CZNC
Citizens & Northern — Piper Sandler East Coast Financial Services Conference 2022
47 slides from Citizens & Northern's conference presentation, Nov 8, 2022
Slide 1: Piper Sandler East Coast Financial Services Conference
Piper Sandler & Co. East Coast Financial Services Conference November 9, 2022
Slide 2: Caution Regarding Forward Looking Statements
CAUTION REGARDING FORWARD LOOKING STATEMENTS This presentation contains forward - looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that relate to future events or the future performance of the Company .. Forward - looking statements are not guarantees of
Slide 3: Overview
3 Overview 158 - year - old institution with a strong market position Experienced management team with a proven track record of M&A Consistently strong profitability with diversified revenue streams Balanced loan portfolio with sound asset quality Stable, low - cost core deposit franchise 1 2 3 4 5
Slide 4: 158-year-old institution with a strong market position
158 - year - old institution with a strong market position 4
Slide 5: Citizens & Northern Corporation overview
• Citizens & Northern Corporation (“C&N”) is a bank holding company with assets of approximately $2.4 billion at September 30, 2022. It was founded in 1987 and has been listed on the NASDAQ since 2005. C&N’s principal subsidiary is Citizens & Northern Bank (“C&N Bank”). • Headquartered in Wellsboro,
Slide 6: Current Branch Footprint
CZNC (29) CZNC LPO (1) County of Operation Adjacent County Elk Tioga York Potter Steuben Berks Bradford Lycoming Clinton Warren Allegany Clearfield McKean Luzerne Cattaraugus Bucks Lancaster Tioga Chester Ontario Adams Yates Burlington Dauphin Livingston Susquehanna Sullivan Union Tompkins Lehigh Cu
Slide 7: Market Demographic Information
(1) Source: census.gov/quickfacts (2) Median household income (in 2020 dollars), 2016 - 2020 7 Market Demographic Information Northern Tier 15% Southeastern PA 46% Southcentral PA 39% Northern Tier Southeastern PA Southcentral PA Demographic Data Region Population Estimate, July 1, 2021 (1) % of Tot
Slide 8: Experienced management team with a proven track record of M&A
Experienced management team with a proven track record of M&A 8
Slide 9: Experienced Management Team
9 Experienced Management Team Name Position Years of Banking Experience Years with Citizens & Northern J. Bradley Scovill President and CEO 31 7 Mark Hughes Chief Financial Officer 22 22 Matthew Bower 1 Chief Wealth Management Officer 32 0 Alexander Balagour Chief Information Officer 9 1 Shelley D’H
Slide 10: Current Strategic Focus
10 Current Strategic Focus Source: Company Documents • Target business segments we know and understand • Significant progress establishing relationship model in newer markets • Blending digital with personal/physical access Relationship Banking Model • Beginning to harvest results of recent investme
Slide 11: Digital transformation: cloud, data and applications
• Cloud Migration • Bank data centers will be 100% migrated to Amazon Web Services, Inc. (AWS) by the end of the year, thus reducing operational risk and adding agility • Actively seeking best in class Software as a Service (SaaS) solutions like Salesforce to accelerate business process transformati
Slide 12: Consistently strong profitability with diversified revenue streams
Consistently strong profitability with diversified revenue streams 12
Slide 13: Summary Statistics
13 Summary Statistics At September 30, 2022 Total Assets $2,400 Million Net Loans $1,674 Million Total Deposits $2,040 Million Tangible Common Equity 1 $183.3 Million Tang. Common Equity / Tang. Assets 1 7.82% Tier 1 Ratio 13.48% Total Risk Based Capital 15.80% Allowance for Loan Losses / Total Loan
Slide 14: Q3 Financial Highlights
14 Q3 Financial Highlights Source: Company Documents; Financial data as of September 30, 2022 CONDENSED, CONSOLIDATED EARNINGS INFORMATION (Dollars In Thousands, Except Per Share Data) (Unaudited) 3RD 3RD QUARTER QUARTER 2022 2021 (Current) (Prior Year) $ Incr. (Decr.) % Incr. (Decr.) Interest and D
Slide 15: Nine Months Ended September 30, 2022 Financial Highlights
15 Nine Months Ended September 30, 2022 Financial Highlights Source: Company Documents; Financial data as of September 30, 2022 CONDENSED, CONSOLIDATED EARNINGS INFORMATION (Dollars In Thousands, Except Per Share Data) (Unaudited) NINE MONTHS ENDED September 30, 2022 2021 (Current) (Prior Year) $ In
Slide 16: Strong Historical Profitability
16 Strong Historical Profitability Net Income ($M) Efficiency Ratio (%) ROAA (%) Net Interest Margin (%) 1) Annualized 2) Reference GAAP to Non GAAP reconciliation pages in appendix Source: S&P Global Market Intelligence GAAP Non - GAAP Adjusted 2 GAAP Non - GAAP Adjusted 2 $22.0 $19.5 $19.2 $30.6 $
Slide 17: Net Interest Margin Trend
17 Net Interest Margin Trend Net Interest Margin (%) Source: Company Documents
Slide 18: Average Loan Yield and Deposit Cost
18 Average Loan Yield and Deposit Cost 1) Purchase accounting - related adjustments are excluded from the calculation of average loan yield and deposit cost. 2) PPP loans are excluded from the calculation of average loan yield 3) Noninterest - bearing and interest - bearing deposits are included in
Slide 19: Deposit Betas
19 Deposit Betas 1) Purchase accounting - related adjustments are excluded from the calculation of average deposit cost. 2) Deposit betas are cumulative for the current cycle; Federal Funds Target rates are end - of - period values
Slide 20: Diversified Revenue: Meaningful Contribution of Fee Income
20 Diversified Revenue: Meaningful Contribution of Fee Income 1) Financial Data shown on an annualized basis 2) Annualized returns on tax - exempt securities and loans are presented on a fully taxable - equivalent basis using a 21% marginal inc ome tax rate. Source: Company Documents 2018Y 2019Y 202
Slide 21: Targeted Balance Sheet Growth
21 Targeted Balance Sheet Growth Total Assets ($M) Total Deposits ($M) Total Loans and Leases ($M) Total Equity ($M) CAGR¹: 18.0% CAGR¹: 19.9% Actual (Ex. PPP) PPP Loans 1) CAGR calculated from 2018Y to 2022Q3 2) Reference GAAP to Non GAAP reconciliation pages in appendix Source: S&P Global Market I
Slide 22: Balanced loan portfolio with sound asset quality
Balanced loan portfolio with sound asset quality 22
Slide 23: Diversified Lending Strategy & Portfolio Composition
• Diversified strategy across lending products and geographies • Relationship based lending strategy with strong credit culture • MRQ yield on loans of 4.91%, or 4.78% excluding PPP and purchase accounting related income 23 Diversified Lending Strategy & Portfolio Composition 2022Q3 Gross Loans: $1,
Slide 24: Consistent and Well Covered Asset Quality Metrics
24 Consistent and Well Covered Asset Quality Metrics 1) Reference GAAP to Non - GAAP reconciliation pages in appendix 2) Net charge - offs in YTD 2022Q3 have been annualized for purposes of this ratio. Source: S&P Global Market Intelligence and company documents NPAs / Assets (%) Loan Loss Reserve /
Slide 25: Stable, low-cost core deposit franchise
Stable, low - cost core deposit franchise 25
Slide 26: Strong Core Deposit Base
26 Strong Core Deposit Base Source: Company Documents; Financial data as of September 30, 2022 • Total deposits excluding time and brokered of $1.74B, which represents 85.2% of total deposits • 0.27% cost of total deposits in nine months ended September 30, 2022 • Noninterest - bearing deposits were
Slide 27: Strong Presence in Legacy Markets
Source: FDIC Summary of Deposits; data as of June 30, 2022 27 Strong Presence in Legacy Markets Support Our Continued Expansion into Newer, Higher Growth Markets Northern Tier 75% Southeastern PA 24% Southcentral PA 1% Northern Tier Southeastern PA Southcentral PA Total Deposits ($000) As of June 30
Slide 28: Strong capital position to support growth strategy and dividends
Strong capital position to support growth strategy and dividends 28
Slide 29: Holding Company Capital Ratios
29 Holding Company Capital Ratios TCE / TA (%) Tier 1 Capital Ratio (%) Leverage Ratio (%) Total RBC Ratio (%) Source: Company Documents 14.5 13.2 11.2 10.8 7.8 2018Y 2019Y 2020Y 2021Y 2022Q3 14.8 13.1 10.3 10.5 10.0 2018Y 2019Y 2020Y 2021Y 2022Q3 23.2 19.2 15.6 15.2 13.5 2018Y 2019Y 2020Y 2021Y 202
Slide 30: Bank Level Capital Ratios
30 Bank Level Capital Ratios Tier 1 Capital Ratio (%) Leverage Ratio (%) Total RBC Ratio (%) Source: Company Documents 20.6 17.8 15.2 15.1 13.8 2018Y 2019Y 2020Y 2021Y 2022Q3 13.2 12.2 10.1 10.5 10.3 2018Y 2019Y 2020Y 2021Y 2022Q3 21.8 18.8 16.0 16.0 14.7 2018Y 2019Y 2020Y 2021Y 2022Q3
Slide 31: Thank You
Thank You 31
Slide 32: Appendix
Appendix 32
Slide 33: Executive biographies
• J .. Bradley Scovill - Mr .. Scovill has served as President and Chief Executive Officer of the Corporation and Citizens & Northern Bank (the “Bank”) since March 2 , 2015 .. Prior to joining the Corporation and Bank, Mr .. Scovill most recently served as President and Chief Operating Officer of Ki
Slide 34: Executive biographies (continued)
• Shelley D’Haene - Executive Vice President, Chief Digital Channels and Payments Officer of the Bank since February 2021 ; formerly Executive Vice President, Senior Operations Officer since January 2015 ; and Executive Vice President and Director of Alternative Delivery Channels of the Bank since J
Slide 35: Executive biographies (continued)
• Blair Rush - Executive Vice President and Southeast Region President of the Bank since February 2021 ; formerly Southeast Region President of the Bank since July 2020 with the acquisition of Covenant Bank .. Prior to his employment with C&N, Mr .. Rush most recently served as President & Chief Ope
Slide 36: Consolidated Historical Balance Sheet
36 Consolidated Historical Balance Sheet Source: Company Documents At Year Ended At Quarter Ended 2019Y 2020Y 2021Y 2022Q1 2022Q2 2022Q3 Assets ($000) Total Cash and Cash Due from Banks 35,202 101,857 104,948 114,346 69,187 64,044 Available for Sale Debt Securities 346,723 349,332 517,679 532,913 52
Slide 37: Consolidated Historical Income Statement
37 Consolidated Historical Income Statement Source: Company Documents For the Year Ended, Nine Months Ended 2019Y 2020Y 2021Y September 30, 2022 Net Interest Income 54,488 67,565 77,939 60,836 Provision for Loan Losses 849 3,913 3,661 4,993 Trust Revenue 6,106 6,321 7,234 5,245 Brokerage and Insuran
Slide 38: Net Interest Margin Trend Details
38 Net Interest Margin Trend Details Source: Company Documents Net Interest Margin Trends (Dollars in Thousands) 3 Months 3 Months 3 Months 3 Months Ended Rate of Ended Rate of Ended Rate of Ended Rate of 12/31/2021 12/31/2021 Return/ 3/31/2022 3/31/2022 Return/ 6/30/2022 6/30/2022 Return/ 9/30/2022
Slide 39: Average Loan Yield and Deposit Cost Details
39 Average Loan Yield and Deposit Cost Details Source: Company Documents Average Loan Yield and Deposit Cost Reconciliation of US GAAP to Non-GAAP Presentation (Dollars in Thousands) 3 Months 3 Months 3 Months 3 Months Ended Rate of Ended Rate of Ended Rate of Ended Rate of 12/31/2021 12/31/2021 Ret
Slide 40: Deposit Beta Details
40 Deposit Beta Details Source: Company Documents Deposit Beta Analysis Reconciliation of US GAAP to Non-GAAP Presentation (Dollars in Thousands) 3 Months 3 Months 3 Months 3 Months Ended Rate of Ended Rate of Ended Rate of Ended Rate of 12/31/2021 12/31/2021 Return/ 3/31/2022 3/31/2022 Return/ 6/30
Slide 41: Investment Portfolio Characteristics
Investment Portfolio Characteristics as of September 30, 2022 41 Securities Portfolio 1) Municipal portfolio credit quality information is summarized based on amortized cost values. Ratings are assigned to each security based on the lowest enhanced or underlying rating from Moody’s, S&P or Fitch. So
Slide 42: Securities Portfolio, continued
42 Securities Portfolio, continued The composition of the available - for - sale debt securities portfolio at September 30, 2022, December 31, 2021 and December 31, 2020 is as follows: The unrealized decrease in fair value of the portfolio in the first nine months of 2022 and in 2021 resulted from a
Slide 43: Asset-sensitive Interest Rate Risk Profile
43 Asset - sensitive Interest Rate Risk Profile Citizens & Northern uses a simulation model to calculate the potential effects of interest rate fluctuations on net interest income and the economic value of portfolio equity .. The projected results include the impact of estimates, at each level of in
Slide 44: Reconciliation of GAAP to Non-GAAP Measure
44 Reconciliation of GAAP to Non - GAAP Measure (1) Income tax has been allocated based on a marginal income tax rate of 21%. The effect on the income tax provision is adjusted fo r the estimated nondeductible portion of merger expenses. (2) Annualized returns on tax - exempt securities and loans ar
Slide 45: Reconciliation of GAAP to Non-GAAP Measure
45 Reconciliation of GAAP to Non - GAAP Measure Source: Company documents; Financial data as of September 30, 2022 December 31, September 30, ($000s) 2018 2019 2020 2021 2022 Nonperforming Assets: Purchased Credit Impaired Loans $0 $441 $6,841 $6,558 $3,783 Other Nonaccrual Loans 13,113 8,777 14,575
Slide 46: Reconciliation of GAAP to Non-GAAP Measure
46 Reconciliation of GAAP to Non - GAAP Measure Source: Company documents; Financial data as of September 30, 2022 December 31, ($000s) 2018 2019 2020 2021 3/31/2022 6/30/2022 9/30/2022 Total Gross Loans $827,563 $1,182,222 $1,644,209 $1,564,849 $1,538,190 $1,657,604 $1,690,246 Less: Paycheck Protec
Slide 47: Reconciliation of GAAP to Non-GAAP Measure
47 Reconciliation of GAAP to Non - GAAP Measure Source: Company documents; Financial data as of September 30, 2022 Holding Company Tangible Common Equity ($000) 12/31/2018 12/31/2019 12/31/2020 12/31/2021 3/31/2022 6/30/2022 9/30/2022 Stockholders' Equity (GAAP) $197,368 $244,452 $299,756 $301,405 $
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