Citizens & Northern Corp · NASDAQ:CZNC
Citizens & Northern — Piper Sandler 2023 Philly Bank Bonanza
41 slides from Citizens & Northern's conference presentation, Jun 15, 2023
Slide 1: Piper Sandler 2023 Philly Bank Bonanza
Piper Sandler & Co. Piper Sandler & Co. 2023 Philly Bank Bonanza June 15, 2023
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 perfor
Slide 3: Overview
3 Overview 159-year-old institution with a strong risk profile and 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
Slide 4: Citizens & Northern Corporation overview
• Citizens & Northern Corporation (“C&N”) is a bank holding company with assets of approximately $2.4 billion at March 31, 2023. 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, PA,
Slide 5: 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 6: Experienced Management Team
6 Experienced Management Team Name Position Years of Banking Experience Years with Citizens & Northern J. Bradley Scovill President and CEO 32 8 Mark Hughes Chief Financial Officer 23 23 Matthew Bower Chief Wealth Management Officer 33 1 Alexander Balagour Chief Information Officer 10 2 Stan Dunsmor
Slide 7: Current Strategic Focus
7 Current Strategic Focus •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 investments •Continue to implement prod
Slide 8: Summary Statistics March 31, 2023
8 Summary Statistics March 31, 2023 Total Assets $2,430 Million Net Loans $1,727 Million Total Deposits $1,916 Million Total Loans / Total Deposits 91.08% Uninsured and Uncollateralized Deposits / Total Deposits 21.9% Tangible Common Equity1 $200.3 Million Tang. Common Equity / Tang. Assets1 8.43% T
Slide 9: Strong Historical Profitability
9 Strong Historical Profitability Net Income ($M) Efficiency Ratio (%) ROAA (%) Net Interest Margin (%) 1) Annualized 2) Reference GAAP to Non GAAP reconciliation pages in appendix Non-GAAP GAAP Adjusted2 Non-GAAP GAAP Adjusted2 $19.5 $19.2 $30.6 $26.6 $25.0 $22.8 $26.5 2019Y 2020Y 2021Y 2022Y 2023Q
Slide 10: Net Interest Margin Trend
10 Net Interest Margin Trend Net Interest Margin (%) 3.86% 3.62% 3.69% 3.89% 3.71% 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1
Slide 11: Average Loan Yield and Deposit Cost
11 Average Loan Yield and Deposit Cost 1) Noninterest-bearing and interest-bearing deposits are included in the calculation of average deposit cost. 5.01% 4.67% 4.91% 5.30% 5.44% 0.19% 0.23% 0.39% 0.51% 0.68% 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 0.10% 0.20% 0.30% 0.40% 0.50% 0.60% 0.70% 0.80% 0.9
Slide 12: CZNC Funding Betas
12 CZNC Funding Betas 1) Deposit betas are cumulative for the current cycle; Federal Funds Target rates are end-of-period values 0.25% 0.50% 1.75% 3.25% 4.50% 5.00% 0% 5% 10% 11% 15% 3% 7% 8% 11% 0% 9% 9% 16% 2021 Q4 2022 Q1 2022 Q2 2022 Q3 2022 Q4 2023 Q1 0% 5% 10% 15% 20% 25% 0.00% 1.00% 2.00% 3.0
Slide 13: Diversified Revenue: Meaningful Contribution of Fee Income
13 Diversified Revenue: Meaningful Contribution of Fee Income 1) Annualized returns on tax-exempt securities and loans are presented on a fully taxable-equivalent basis using a 21% marginal income tax rate. Reference GAAP to non-GAAP reconciliation in the Appendix. 2) Noninterest income is annualize
Slide 14: Targeted Balance Sheet Growth
14 Targeted Balance Sheet Growth Total Assets ($M) Total Deposits ($M) Total Loans and Leases ($M) Total Equity ($M) CAGR¹: 12.6% 1) CAGR calculated from 2019Y to 2023Q1 94% 90% 80% CAGR¹: 12.7% CAGR¹: 14.0% 83% CAGR¹: 1.4% $1,654 $2,239 $2,328 $2,454 $2,430 2019Y 2020Y 2021Y 2022Y 2023Q1 $1,182 $1,
Slide 15: Diversified Lending Strategy & Portfolio Composition
• Diversified strategy across lending products and geographies • Relationship based lending strategy with strong credit culture • MRQ fully taxable-equivalent yield on loans of 5.44% 15 Diversified Lending Strategy & Portfolio Composition 2023Q1 Gross Loans: $1,745M 2023Q1 Commercial Loans: $1,289M
Slide 16: Consistent and Well Covered Asset Quality Metrics
16 Consistent and Well Covered Asset Quality Metrics 1) Reference nonperforming assets detail page in appendix 2) In 2023Q1, the credit for credit losses was $312,000. Accordingly, the ratio of the provision to net charge-offs was not meaningful and is shown as 0x in the table. NPAs / Assets (%) All
Slide 17: Strong Core Deposit Base
17 Strong Core Deposit Base • Total deposits excluding time and brokered of $1.58B, which represents 82.6% of total deposits • 0.68% cost of total deposits in three months ended March 31, 2023 • Noninterest-bearing deposits were $545M, and represent 28.4% of total deposits 2023Q1 Total Deposits: $1,
Slide 18: Holding Company Capital Ratios
18 Holding Company Capital Ratios TCE / TA (%) Tier 1 Capital Ratio (%) Leverage Ratio (%) Total RBC Ratio (%) 13.2 11.2 10.8 8.1 8.4 2019Y 2020Y 2021Y 2022Y 2023Q1 13.1 10.3 10.5 10.1 10.0 2019Y 2020Y 2021Y 2022Y 2023Q1 19.2 15.6 15.2 13.4 13.8 2019Y 2020Y 2021Y 2022Y 2023Q1 20.7 17.5 18.2 15.7 16.
Slide 19: Bank Level Capital Ratios
19 Bank Level Capital Ratios Tier 1 Capital Ratio (%) Leverage Ratio (%) Total RBC Ratio (%) 17.8 15.2 15.1 13.7 14.2 2019Y 2020Y 2021Y 2022Y 2023Q1 12.2 10.1 10.5 10.4 10.3 2019Y 2020Y 2021Y 2022Y 2023Q1 18.8 16.0 16.0 14.7 15.3 2019Y 2020Y 2021Y 2022Y 2023Q1
Slide 20: Thank You
Thank You 20
Slide 21: Appendix
Appendix 21
Slide 22: Management 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 Kish Bancor
Slide 23: Management biographies (continued)
• Stan Dunsmore - Mr. Dunsmore has served as Executive Vice President and Chief Credit Officer of the Bank since January 2015. Previously, Mr. Dunsmore served as Vice President and Commercial Loan Sales Officer of the Bank since May 2007. Prior to the May 2007 acquisition of Citizens Trust Company b
Slide 24: Management 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 Operatin
Slide 25: Strong Presence in Legacy Markets
Source: FDIC Summary of Deposits; data as of June 30, 2022 25 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 26: Digital transformation: applications, data and analytics
• Business Applications & Integrations (via Application Programming Interfaces, or APIs) • Converted to a modern Credit Card platform, greatly improving customer experience, creating new revenue opportunities • Salesforce Financial Services Cloud (FSC) continues to drive workflow efficiency in bank
Slide 27: Consolidated Balance Sheet Data
27 Consolidated Balance Sheet Data At March 31, 2019 2020 2021 2022 2023 Assets ($000) Cash and Due from Banks 35,202 101,857 104,948 55,048 52,212 Available-for-sale Debt Securities 346,723 349,332 517,679 498,033 472,814 Total Cash & Securities 381,925 451,189 622,627 553,081 525,026 Gross Loans H
Slide 28: Consolidated Income Statement Data
28 Consolidated Income Statement Data For the Year Ended December 31, 3 Months Ended 2019 2020 2021 2022 March 31, 2023 Net Interest Income 54,488 67,565 77,939 83,128 20,781 Provision (Credit) for Credit Losses 849 3,913 3,661 7,255 (352) Trust Revenue 6,106 6,321 7,234 6,994 1,777 Brokerage and In
Slide 29: Net Interest Margin Trend Details
29 Net Interest Margin Trend Details Net Interest Margin Trends (Dollars in Thousands) 3 Months 3 Months 3 Months 3 Months 3 Months Ended Rate of Ended Rate of Ended Rate of Ended Rate of Ended Rate of 3/31/2022 3/31/2022 Return/ 6/30/2022 6/30/2022 Return/ 9/30/2022 9/30/2022 Return/ 12/31/2022 12/
Slide 30: Average Loan Yield and Deposit Cost Details
30 Average Loan Yield and Deposit Cost Details Average Loan Yield and Deposit Cost (Dollars in Thousands) 3 Months 3 Months 3 Months 3 Months 3 Months Ended Rate of Ended Rate of Ended Rate of Ended Rate of Ended Rate of 3/31/2022 3/31/2022 Return/ 6/30/2022 6/30/2022 Return/ 9/30/2022 9/30/2022 Ret
Slide 31: Deposit Beta Details
31 Deposit Beta Details Funding Beta Analysis (Dollars in Thousands) 3 Months 3 Months 3 Months 3 Months 3 Months Ended Rate of Ended Rate of Ended Rate of Ended Rate of Ended Rate of 3/31/2022 3/31/2022 Return/ 6/30/2022 6/30/2022 Return/ 9/30/2022 9/30/2022 Return/ 12/31/2022 12/31/2022 Return/ 3/
Slide 32: Investment Portfolio Characteristics
Investment Portfolio Characteristics as of March 31, 2023 32 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. • Book
Slide 33: Securities Portfolio, continued
33 Securities Portfolio, continued The composition of the available-for-sale debt securities portfolio at March 31, 2023, December 31, 2022 and December 31, 2021 is as follows: (Dollars In Thousands) March 31, 2023 December 31, 2022 December 31, 2021 Amortized Fair Amortized Fair Amortized Fair Cost
Slide 34: Interest Rate Risk Profile
34 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 interest rate change,
Slide 35: Liquidity Information
35 Liquidity Information (Dollars In Thousands) Available Credit Facilities Outstanding Available Total Credit March 31, Dec. 31, March 31, Dec. 31, March 31, Dec. 31, 2023 2022 2023 2022 2023 2022 Federal Home Loan Bank of Pittsburgh $201,357 $150,099 $655,577 $689,279 $856,934 $839,378 Federal Res
Slide 36: Nonperforming Assets Detail
36 Nonperforming Assets Detail At March 31, ($000s) 2019 2020 2021 2022 2023 Nonperforming Assets: Purchased Credit Impaired Loans $441 $6,841 $6,558 $1,027 $0 Other Nonaccrual Loans 8,777 14,575 12,441 22,058 12,876 Total Nonaccrual Loans 9,218 21,416 18,999 23,085 12,876 Total Loans Past due 90 da
Slide 37: Impact of CECL Adoption - January 1, 2023
37 Impact of CECL Adoption - January 1, 2023 As Reported Under Pre-ASC 326 Impact of ASC 326 Adoption ASC 326 (In Thousands) January 1, 2023 December 31, 2022 Adoption Loans receivable $ 1,740,846 $ 1,740,040 $ 806 Allowance for credit losses on loans 18,719 16,615 2,104 Allowance for credit losses
Slide 38: Nonowner Occupied CRE Loan Summary
38 Nonowner Occupied CRE Loan Summary – March 31, 2023 % of (Dollars in Thousands) 3/31/2023 Nonowner % of Loan Type Balance Occupied CRE Total Loans Industrial 100,128 21.9% 5.7% Office (1) 95,524 20.9% 5.5% Retail 87,594 19.1% 5.0% Mixed Use 61,525 13.4% 3.5% Hotels 58,059 12.7% 3.3% Other 54,984
Slide 39: Reconciliation of GAAP to Non-GAAP Measure
39 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 for the estimated nondeductible portion of merger expenses. Note: ROAA, ROAE and ROATCE shown on an annualized basis Three Mo
Slide 40: Reconciliation of GAAP to Non-GAAP Measure
40 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 for the estimated nondeductible portion of merger expenses. (2) Annualized returns on tax-exempt securities and loans are pre
Slide 41: Reconciliation of GAAP to Non-GAAP Measure
41 Reconciliation of GAAP to Non-GAAP Measure Holding Company Tangible Common Equity ($000) 12/31/2019 12/31/2020 12/31/2021 12/31/2022 3/31/2023 Stockholders' Equity (GAAP) $244,452 $299,756 $301,405 $249,325 $255,568 Less: Intangible Assets 29,635 56,356 55,821 55,382 55,280 Tangible Common Equity
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