Lanny’s Recent Stock Purchase – CZNC

It’s been a wild month in the stock market, with purchases being made by us Diplomats earlier on, I was able to scoop some capital to deploy.  This time, however, I wanted to use my work experience to my advantage – I audit financial institutions or lack of better words – banks.  I have been watching a bank for some time now and I felt like right now, the time was right – let’s see who I purchased on the 28th…

The Purchase

Well, since I am an auditor in the financial institutions (FI) realm, auditing banks that are from a smaller $100M total asset size up to approximately $2.3B in asset size clientele (we measure the size of bank via assets and not necessarily revenue or income), as you probably see from my journey page.  The clients between the $500M to $1.5B are in a spot to either be acquired or to do some sort of acquiring – as the FI industry is in consolidation mode, as banks are learning how difficult it is to grow organically, i.e. – originate new loans to new borrowers.  Therefore, they are left to either be acquired or to acquire another bank to grow the total asset size and capture the interest income in that method.  Further, I have had 4 clients be acquired from me in the last 18 months… with 3 of them being public in the $800M to $1.23B range – and that is the spot that I’m looking at…  Additionally, I primarily audit in Ohio & Pennsylvania, so that was my focus and I had to steer away anything that sounded like they could be a client of ours.  Also — you definitely won’t be finding these stocks in article such as our upcoming February dividend increases, that’s for sure!

Citizens & Northern Stock Purchase


Citizens & Northern (CZNC) is a $1.2B bank in total asset size and has great fundamentals when looking at their balance sheet from their most recent earnings release.

  1. Impaired loans have tremendously decreased from last year.
  2. Provision diminished even further, with only recorded of just about $476K vs $2M in the prior year (this is the expense recorded to build up an allowance for loan losses, a bank’s biggest estimate)
  3. They continue to repurchase shares and are authorized to repurchase back 5% of total shares outstanding, I definitely get excited for share buy back plans.
  4. They still have $36M in cash with borrowed funds declining $20M from prior year (advances taken at extremely low interest rates)
  5. Return on Assets (ROA) is at 1.38% which is unheard of amongst financial institutions.  My best client probably returns 1.06-1.08% ROA and any client/bank that is returning over 1% ROA is very strong, as most banks I see somewhere around 65-85 basis points.
  6. Dividend yield is currently at $1.04 per share and I purchased them at $19.96 or a yield of 5.21%, which is greater than the yield in my portfolio.
  7. Earnings per share for the year ended was at $1.38 which provides a P/E of 14.46 (not the cheapest by any means) and a payout of 75%, a little high for my liking

Why did I make this Stock Purchase?

It’s funny, I asked myself that before I purchased it.  I believe it is this – they’ve had a few years of dividend growth and they provided a strong dividend yield, backed by extremely high capital amounts (regulatory capital is through the roof with CZNC).  Now, I don’t purchase stocks to simply hold and wait until their stock price pops – no, that isn’t what this is.  This is my first action event of understanding the knowledge and understanding of what I’ve been doing for 4 years.  Banks are being acquired, at a heft pace – my office alone has seen 4 of their clients become acquired in the last 3 months.  Premiums on the clients have been astronomical as well in them.  Therefore, my plan was a two pronged approach – to buy a local community bank that provides a decent dividend yield and will grow it moderately as the yield is much higher than others.  Additionally, this bank will be paying me to wait for what they do next – to acquire a bank or become acquired – and that is something that I am excited about with the work that I do – so I am sort of intertwining the two = FI Knowledge + Dividend Investing.  I’m very excited for what is to come with Citizens & Northern going forward!  They are based in a small town in Pennsylvania – which I am used to small towns there, such as Clarion, Clearfield, Warren, Emlenton, to name a few.  I have a strong feeling that if this bank cannot grow organically, they have two choices – to acquire a bank around $300M to $600M in asset size – OR – to be acquired at a premium of 175-200% over book value of the entity (my last client was acquired for almost 200%!).  I’m pumped!

Stock Purchase Conclusion

Though this is vastly different than my normal investment into stellar, blue chip, you know the name company – the purchase of 35 shares of CZNC added $36.40 to my annual/projected dividend income total for the year and with fees – total capital deployed was a small $705 investment (not even 0.50% of my portfolio haha).

What are your thoughts with the purchase?  Make moves during Wednesday’s downturn?  Let me know and we appreciate the comments!  Talk soon.


22 thoughts on “Lanny’s Recent Stock Purchase – CZNC

  1. Interesting buy, I haven’t even heard about this company until you mentioned in this post. Seems like a good buy considering the small capital invested.

    • Tawcan,

      Thank you! I audit banks typically in this size and they are interesting. This one spits out great net income for their asset size at a phenomenal level, as well as pays a solid dividend. If you ever want to talk banks – definitely let me know, that’s where my industry expertise is high. Thanks again Tawcan!


      • This is a great article. I have been primarily buying large cap companies because I haven’t found any good valued smaller companies. CZNC and NWFL seem like excellent plays with great balance sheets and income while you wait. The only banking equites I hold are WFC and BEN (they have almost $8/share in cash on their balance sheet!). I am tempted to pull the trigger on CZNC in my Roth soon. I would love to talking banking with you sometime since that is your area of expertise.

  2. Wise decision with investing in what you know and the patterns that you see around you. I bring up two shoulda coulda woulda’s… First, AAPL. Even though my family is not rich, I was adamant about 10 years ago or whenever about getting an IPOD and every kid I knew had one, then came Ipad then Iphone or vice versa but either way, that was a pattern I should have recognized. I vowed to not make that mistake again, hence my recent investment in UA. I noticed the pattern of every kid wearing that gear and I myself have 2 or 3 items… Sports wear is a huge market and they seem to be gaining more and more market share so I thought I’d buy.

    Long story short, nice purchase!

    • ADD,

      I like the story and not long at all! I remember, I was obsessed with apple products about 5-6 years ago and actually was sitting in my computer business lab in college, ready to make my first investment purchase – it was going to be Apple and they were in the high $70’s… Let’s say I rescinded and went a “safe” route. I am okay with the decision made, because of what investor I have become – but we we will always have those stories. For me now – it’s taking the over thinking out of a decision, making those decisions easier and also adding in where my expertise in an industry lies. Excited about it!

      Thanks again ADD!


  3. Interesting choice! I’ve never heard of it either, but it looks interesting. I am happy with my current bank holdings, but if I have to sell one, I will take a look at this more in detail. I like the financial sector overall right now, so I don’t doubt it’s a good value.

    • DD,

      Thank you! It is a very small bank in comparison to the one’s that we traditionally invest in. These are the sized banks I typically audit, therefore, a few in the region have been on my radar and I don’t know why I haven’t been using my business/bank market knowledge to do more of these. We’ll see what comes down the pipeline within the next 12-18 months! Appreciate the stop by developer!


  4. Interesting choice…I’ve also not heard of Citizens & Northern (CZNC) until this post. Sounds like you are very familiar with this bank and ones similar to it. That is nice because you can draw an easy comparison and conclude if it is a good value of not. I’ll have to keep an eye on it now that I am aware there may be some value here. 🙂 Thanks for sharing your purchase.

    By the way, hope you don’t mind, I’ve added your purchase to our Collection of Recent Buys. AFFJ

    • AFFJ,

      Thank you for coming by! I’ll keep you updated with what happens with the bank obviously. The FI market is in extreme consolidation right now, where bigger banks, typically above $1-$1.5Billion in asset size are acquiring banks with similar or less in size. They are paying huge premiums on top of it as well. Very interesting market place.

      And WOW.. I am humbled, thank YOU SO MUCH for adding mine to your recent purchases, it truly means a lot, honored to be on the list.

      Thanks again AFFJ, talk soon!


  5. Thank you for bringing this purchase to us! I’ve also been interested in financials so it was an interesting read for me! Looks like a good investment too. Based on your experience, any idea what has the better impact on growth between acquire or being acquired?

    • DivGuy,

      Thanks for coming by! That’s great you’ve been interested as well — if you’re looking for the “pop” – getting acquired does that for – as with banks, you typically see companies paying for 150-175%+ their book value (Equity dividend by shares outstanding). One of my clients was just acquired for 197% of book value and the share price at it’s lowest point in 2014 was around $9 and it was acquired for over $18. This method I’m using is getting paid a nice dividend for a high performing bank and I see the trends of an acquisition looming (due to the low growth/decline in loans and a big security portfolio).

      We shall see! Thanks again and let me know if you have any ?;s


    • Martin,

      Thank you for checking them out. Quite interesting as they primarily hold securities and I see their balance sheet primed up for an acquisition target, but also like their dividend yield – getting paid to wait on movement, not a bad thing in my eyes, especially because I do think it is a great bank.

      Thanks again Martin, talk soon!


  6. Started this strategy last year. I’ve been on the acquire side six times (very little upside), acquired once – close to 90% gain plus dividends while I wait. In fact I’m on both sides of the WSBC/ESBF action. The hardest part of this type plan is getting enough potential players without tipping your portfolio out of balance.

    • Charlie,

      I agree – it’s a fun strategy depending on what side you’re on, but a side that if you understand it, can make a very large amount of sense. It’s about time I took it a layer deeper with the intelligence and experience that I have been able to grab over the 4 years and do something about it.

      Time will tell Charlie!


  7. I stumbled onto this site while doing some research on CZNC. Great analysis. I’m employing a similar strategy – buying under-followed community and small regional banks selling at/near BV with a good yield and reasonable payout ratio. You’ve mentioned most of the reasons above (industry consolidation, etc.), but I also believe this area (and banking in general) should hold up fairly well if/when rates start to rise (which I see as one of the biggest risks to the overall market over the next several quarters). So they also add some diversification in the current environment (more so than bonds in my opinion).

    Some of other banks I own or am considering include FNLC, KFFB, CIZN, NWBI, UBCP, and PBCT. Would love to see your analysis on any of these if they’re on your radar given your amazing background in this area.

    Best of luck!


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