Citizens & Northern Corp · NASDAQ:CZNC
Citizens & Northern — Sandler O'Neill + Partners 2019 Philly Bank Bonanza
39 slides from Citizens & Northern's conference presentation, Jun 12, 2019
Slide 1: Sandler O'Neill + Partners 2019 Philly Bank Bonanza
Sandler O’Neill + Partners, L.P. 2019 Philly Bank Bonanza June 13, 2019
Slide 2: Forward-looking statements
This presentation contains statements which, to the extent that they are not recitations of historical fact may constitute fo rwa rd - looking statements for purposes of the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as amended. Such forward - looking statements may
Slide 3: Table of Contents
Table of Contents 3 • Who We Are ……………………………………… ..... 4 - 12 • Current Strategic Focus ………………………… ... 13 - 14 • Selected Financial Data ………………………… ... 15 - 29 • Investment Considerations ……………………… .. 30 - 31 • Contact Information ……………………………… ........ 32 • Supplemental Schedule ………………………… ... 33 -
Slide 4: Who We Are
• Bank holding company with assets of approximately $1.3 billion at March 31, 2019 and approximately $1.6 billion subsequent to closing on the acquisition of Monument Bancorp, Inc. on April 1, 2019. • Headquarters in Wellsboro, PA. • Banking services are provided by our subsidiary, Citizens & Northe
Slide 5: Summary Statistics March 31, 2019
5 Summary Statistics March 31, 2019 Total Assets $1.290 Billion Net Loans $817.1 Million Total Deposits $1.040 Billion Tangible Common Equity 1 $190.2 Million Tang. Common Equity / Tang. Assets 1 14.88% Tier 1 Leverage Ratio 15.01% Total Risk Based Capital 24.60% NPAs 2 / Assets 1.02% LTM Return on
Slide 6: Acquisition of Monument Bancorp, Inc.
• Agreement and Plan of Merger signed and announced in September 2018 • Transaction closed April 1, 2019 • Total purchase transaction valued at approximately $42.7 million, including 80% of consideration in CZNC common stock/20% cash • Former Monument shareholders own 9.4% of CZNC common stock post
Slide 7: Acquisition of Monument Bancorp, Inc. (cont'd)
Upon consummation of the merger, Monument securities portfolio sold with no realized gain or loss. Proceeds used mainly to pay off subordinated debt of $5.4 million and other borrowings. 7 Acquisition of Monument Bancorp, Inc. (cont’d) Monument Bancorp, Inc. unaudited, consolidated financial data as
Slide 8: Acquisition of Monument Bancorp, Inc.
• As of June 13, 2019, fair value calculations of Monument assets acquired and liabilities assumed are in progress. • Subject to purchase accounting adjustments, tangible book value dilution at closing is approximately 2%, consistent with prior modeling assumptions. • Merger - related expenses in 20
Slide 9: Current Footprint & Adjacent Counties
9 Current Footprint & Adjacent Counties County of Operation Adjacent County
Slide 10: ew YORK
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Slide 11: Strong Deposit Market Share in Legacy Markets
11 Strong Deposit Market Share in Legacy Markets County % of CZNC Deposits Market Rank Market Share (%) Number of Branches Total County Deposits ($ Millions) Bradford, PA 36.22% 1 33.21% 7 $1,144 Tioga, PA 27.24% 2 37.60% 6 760 Lycoming, PA 15.90% 7 7.00% 6 2,381 Sullivan, PA 7.79% 1 56.59% 2 144 Po
Slide 12: Experienced Management Team
12 Experienced Management Team Name Position Years of Banking Experience Years with Citizens & Northern J. Bradley Scovill President and CEO 28 4 Mark Hughes Chief Financial Officer 19 19 Shelley D'Haene Senior Operations Officer 20 20 Stan Dunsmore Chief Credit Officer 35 12 Harold (Hal) Hoose Chie
Slide 13: Current Strategic Focus
13 Current Strategic Focus • Alignment to Drive Growth • Integration of former Monument staff and systems and evaluation of opportunities to expand service offerings in the Southeast PA market • Lending and other business development opportunities in York, PA • Branding refresh to support expansion
Slide 14: Current Strategic Focus (cont'd)
• Strategic Investments o Development of employees o Sales and Relationship management system o Mobile and online solutions o Facilities renovations in targeted locations to accommodate newer technology solutions that many customers desire • Capital Deployment o Current dividend yield of 4.06% based
Slide 15: 1st Quarter 2019 Highlights
15 1 st Quarter 2019 Highlights Earnings Performance (Unaudited) As of or for the three months ended March 31 % Increase/ (Decrease) 2019 2018 Net Income $5,090 $4,375 16.34% Diluted Earnings per Share $0.41 $0.36 13.89% Return on Average Assets (Annualized) 1.59% 1.39% 14.39% Return on Average Equi
Slide 16: 1st Quarter 2019 and 2018 Comparisons
• Increase in EPS of $0.05, or 13.9% • Increase in net income of $715,000, or 16.3% • 1st Quarter 2019 results included a credit for loan losses (reduction in expense) of $957,000 as compared to a provision of $292,000 in the 1st Quarter 2018. The credit in the 1st Quarter 2019 included the effects
Slide 17: 1st Quarter 2019 and 2018 Comparisons (cont'd)
17 1 st Quarter 2019 and 2018 Comparisons (cont’d) • Total noninterest income of $4,406,000 was flat with 1 st Quarter 2018 total o Increases in brokerage revenue and interchange from debit and credit card transactions o Decreases in gains from sales of residential mortgages, fair value of loan serv
Slide 18: Loan Portfolio Diversification and Yield
Commercial 42.5% Consumer 2.1% Residential 55.4% 18 Loan Portfolio Diversification and Yield LOAN PORTFOLIO – as of 3/31/19 Dollars in thousands Amount % of Total Residential mortgage loans - first liens $374,764 45.4% Residential mortgage loans - junior liens 25,538 3.1% Home equity lines of credit
Slide 19: Deposit Composition and Cost of Funds
19 Deposit Composition and Cost of Funds Deposits - as of March 31, 2019 (Amounts in thousands) Amount % of Total Noninterest - bearing demand $274,759 26.4% Interest c hecking 200,876 19.3% Savings and money market 334,774 32.2% Time deposits of less than $250,000 198,183 19.1% Time deposits of $25
Slide 20: Wealth Management Division
20 Wealth Management Division • Largest locally - based wealth management department in legacy market with integrated broker/dealer and insurance sales • Team comprised of over 30 professionals • $924m in Trust assets under management at 3/31/19 • Trust, brokerage and insurance revenues totaled $1.7
Slide 21: Diversified Noninterest Income
Three Months Ended March 31, 2019 21 Diversified Noninterest Income Noninterest Income 29% Net Interest Income (Tax Equivalent) 71% Service Charges, Interchange & Other Fees 43% Trust, Brokerage & Insurance Revenue 38% Other Non Interest Income 19% Noninterest Income Source: Company records – Three
Slide 22: Very Strong Capital Position
Monument acquisition and opening of lending office in York provide immediate opportunities to leverage capital. High capital positions us to continue pursuing opportunities for growth – organically and by entry into new markets via acquisition or other means. 22 Very Strong Capital Position 14.9% 15
Slide 23: Consistently High Earnings Performance
8.72% 8.37% 7.11% 8.16% 11.72% 11.02% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 2015 2016 2017 2017 Excl Securities Gains and Tax Charge¹ 2018 2018 Excl Securities Gains and Merger- Related Expenses¹ 23 Consistently High Earnings Performance $1.35 $1.30 $1.10 $1.26 $1.79 $1.68 $0.00 $0.20 $
Slide 24: Peer Group Comparison: Return on Average Assets
24 Peer Group Comparison 0.95% 0.88% 0.74% 1.12% 1.02% 1.32% 1.28% 1.08% 1.72% 1.59% 0.00% 0.50% 1.00% 1.50% 2.00% 2.50% 3.00% 2015 2016 2017 2018 2019 Years Ended December 31, Q1 Return on Average Assets Proxy Peer Group CZNC (1) Proxy Peer Group: Based on the Company’s Proxy Statement dated March
Slide 25: Peer Group Comparison: Return on Average Equity
25 Peer Group Comparison (1) Proxy Peer Group: Based on the Company’s Proxy Statement dated March 8, 2019 (2) Source: S&P Global Market Intelligence 8.72% 8.37% 7.11% 11.72% 10.33% 9.16% 8.60% 7.40% 10.63% 9.13% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.00% 2015 2016 2017 2018 2019 Years Ended
Slide 26: Peer Group Comparison: Net Interest Income
26 Peer Group Comparison 3.44% 3.51% 3.58% 3.68% 3.76% 3.33% 3.32% 3.36% 3.41% 3.35% 3.10% 3.20% 3.30% 3.40% 3.50% 3.60% 3.70% 3.80% 2015 2016 2017 2018 2019 Years Ended December 31, Q1 Net Interest Income (Tax Equivalent) as % of Average Assets CZNC Proxy Peer Group (1) Proxy Peer Group: Based on t
Slide 27: Peer Group Comparison: Interest Expense
27 Peer Group Comparison 0.26% 0.28% 0.32% 0.48% 0.56% 0.42% 0.46% 0.50% 0.72% 0.98% 0.00% 0.20% 0.40% 0.60% 0.80% 1.00% 1.20% 2015 2016 2017 2018 2019 Years Ended December 31, Q1 Interest Expense as % of Interest - bearing Deposits CZNC Proxy Peer Group (1) Proxy Peer Group: Based on the Company’s
Slide 28: Noninterest Revenue & Expense Data Peer Group Comparison
Noninterest Revenue & Expense Data 28 Peer Group Comparison 1.23% 1.26% 1.29% 1.42% 1.37% 0.83% 0.80% 0.77% 0.76% 0.71% 0.40% 0.60% 0.80% 1.00% 1.20% 1.40% 1.60% 2015 2016 2017 2018 2019 Years Ended December 31, Q1 Noninterest Income as % of Average Assets CZNC Proxy Peer Group 2.86% 2.83% 2.96% 3.0
Slide 29: Loan Growth & Credit Quality Peer Group Comparison
Loan Growth & Credit Quality 29 Peer Group Comparison (1) Proxy Peer Group: Based on the Company’s Proxy Statement Dated March 8, 2019 (2) Source: S&P Global Market Intelligence 11.88% 6.63% 8.62% 1.34% - 0.55% 10.38% 12.14% 10.25% 10.69% 2.95% -2.00% 0.00% 2.00% 4.00% 6.00% 8.00% 10.00% 12.00% 14.0
Slide 30: Investment Considerations
30 Investment Considerations • Leading deposit market share among community banks in North Central Pennsylvania • Well - established core deposit franchise • Consistently high earnings performance with diverse revenue sources • Disciplined credit culture and risk management profile • Very strong cap
Slide 31: Investment Considerations (cont'd)
31 Investment Considerations (cont’d) • Well - established wealth management team • Quarterly dividends declared of $0.27 per share in each of the first 2 quarters of 2019, resulting in an annualized yield of 4.06% based on market data as of 6/3/2019. 1 (Yield excludes effects of $0.10 special divid
Slide 32: Contact Information
32 Contact Information President and CEO Brad Scovill BradleyS@cnbankpa.com 570 - 723 - 2102 Treasurer and CFO Mark Hughes MarkH@cnbankpa.com 570 - 724 - 8533 Online www.cnbankpa.com www.cntrustpa.com
Slide 33: Reconcilements and Non-U.S. GAAP Information
Reconcilements and Non - U.S. GAAP Information 33 Supplemental Schedule This presentation contains financial information determined by methods other than accounting principles generally accepted in th e United States (“U.S. GAAP”). The Company’s management believes that these non - U.S. GAAP measure
Slide 34: Supplemental Schedule: LTM Return on Average Assets
34 Supplemental Schedule (cont’d) LTM Return on Average Assets (Dollars in thousands) 2nd Q 2018 3rd Q 2018 4th Q 2018 1st Q 2019 LTM Average assets $1,269,179 $1,291,348 $1,285,852 $1,279,650 $1,281,507 (Average) Net income $6,371 $5,586 $5,681 $5,090 $22,728 ROAA - Annualized 2.01% 1.73% 1.77% 1.5
Slide 35: Supplemental Schedule: LTM EPS
35 Supplemental Schedule (cont’d) * Total noninterest income amounts exclude gains and losses on securities. LTM EPS (In thousands, except share and per share amounts) 2nd Q 2018 3rd Q 2018 4th Q 2018 1st Q 2019 LTM EPS - Diluted $0.52 $0.45 $0.46 $0.41 $1.84 LTM EPS - Excluding Net Gains on Securit
Slide 36: Supplemental Schedule: 2018 ROAA and ROAE
36 Supplemental Schedule (cont’d) 2018 Return on Average Assets (Amounts in thousands) Average assets $1,276,140 Net income $22,013 ROAA 1.72% 2018 Return on Average Assets - Excluding Net Gains on Securities and Net Merger - Related Expenses Average assets $1,276,140 Net income, as reported $22,013
Slide 37: Supplemental Schedule: 2018 EPS
37 Supplemental Schedule (cont’d) 2018 EPS (In thousands, except share and per share amounts) EPS - Diluted $1.79 2018 EPS - Excluding Net Gains on Securities and Net Merger - Related Expenses Net income, as reported $22,013 Net (gains) losses on securities, net of income tax at 21% (1,606) Add merg
Slide 38: Supplemental Schedule: 2017 ROAA and ROAE
38 Supplemental Schedule (cont’d) 2017 Return on Average Assets (Amounts in thousands) Average assets $1,247,759 Net income $13,434 ROAA 1.08% 2017 Return on Average Assets - Excluding Net Gains on Securities and Additional Tax Charge Average assets $1,247,759 Net income, as reported $13,434 Less ga
Slide 39: Supplemental Schedule: 2017 EPS
39 Supplemental Schedule (cont’d) 2017 EPS (In thousands, except share and per share amounts) EPS - Diluted $1.10 2017 EPS - Excluding Net Gains on Securities and Additional Tax Charge Net income, as reported $13,434 Less gains on securities, net of income tax at 35% (167) Add income tax provision r
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