Citizens Holding Company (the “Company”) (NASDAQ:CIZN) announced
today results of operations for the three and nine months ended
September 30, 2023.
(in thousands, except share and per share data)
Net income for the three months ended September 30, 2023 was
$1,207, or $0.22 per share-basic and diluted, a linked-quarter
increase of $907, or 302.33% from net income of $300, or $0.05 per
share-basic and diluted, for the three months ended June 30, 2023.
Net income also decreased ($1,373), or (53.22)% from net income of
$2,580, or $0.46 per share-basic and diluted for the same quarter
in 2022.
Net income for the nine months ended September 30, 2023 was
$2,647, or $0.47 per share-basic and diluted, a decrease of
($4,510), or (63.02%) from net income of $7,157, or $1.28 per
share-basic and diluted for the same period in 2022.
Third Quarter Highlights
- Total revenues, or interest and non-interest income, for the
three months ended September 30, 2023 totaled $16,008, an increase
of $2,586, or 19.27% from the prior quarter. The increase in total
revenue is primarily attributed to an increase of $1,660, or 14.88%
in interest income attributed to rising interest rates.
- Yields on earning assets increased 37 basis point (“bps”) to
408 bps for the three months ended September 30, 2023 compared to
371 bps for the three months ended June 30, 2023 and increased 85
bps compared to 323 bps for the three months ended September 30,
2022.
- Loans held for investment (“LHFI”) increased $12,504, or 2.18%,
to $587,238 at September 30, 2023, compared to $574,734 at June 30,
2023. With the Company’s strong on-balance sheet liquidity, the
Company is in an opportune position, relative to the banking
industry, to continue to fund loan demand.
- Credit quality continues to remain solid with total
non-performing assets (“NPA”) to loans at 68 bps at September 30,
2023 compared to 77 bps at September 30, 2022. Total non-performing
assets decreased ($172), or (4.13%), to $3,993 at September 30,
2023, compared to $4,165 at June 30, 2023, and decreased ($436), or
(9.84%), compared to $4,429 at September 30, 2022.
- Allowance for credit losses (“ACL”) to loans was 1.09% at
September 30, 2023 compared to 1.11% in the prior quarter and 0.88%
the same period a year ago.
Chief Executive Officer (“CEO”) Commentary
Stacy Brantley, President and Chief Executive Officer of the
Company, stated, “The Citizens Bank of Philadelphia (the ‘Bank’),
the wholly-owned subsidiary of the Company, experienced further
margin compression during the quarter with the net interest margin
(‘NIM’) decreasing 5 bps to 2.49% as of September 30, 2023 from
2.54% as of June 30, 2023 and 30 bps from 2.79% as of September 30,
2022. We expect deposit costs to rise slightly over the remainder
of the year. However, loan yields increased 19 bps over the period
ended June 30, 2023. We expect loan production and the renewal of
the loan book to push loan yields higher and place upward pressure
on the net interest margin.
“We executed a swap of $66,600 of our securities book from fixed
to floating with the primary goal of protecting capital and hedging
against rising rates. We kept these swaps in the three-year range
during which we foresee rates at elevated levels.
“Deposit growth was strong for the three months ended September
30, 2023 with total deposits up $91,626 or 8.31% over the period
ended June 30, 2023 and up $59,762 or 5.27% over the period ended
September 30, 2022. Credit quality remains solid with NPAs down
(4.13%) over June 30, 2023 and (9.84%), respectively, over the same
period in 2022.
“Management will continue to weigh opportunities to reposition
the balance sheet, improve liquidity, and hedge against rising
rates in the short term.”
Financial Condition and Results of Operations
Loans and Deposits
Total loans outstanding, net of unearned income, as of September
30, 2023 totaled $587,238 compared to $574,734 at June 30, 2023 and
$578,665 as of September 30, 2022.
Total deposits as of September 30, 2023 were $1,194,698 compared
to $1,103,072 at June 30, 2023 and $1,134,936 as of September 30,
2022. With the pressure throughout the banking system in regards to
deposits, the Company has not experienced material outflows in
deposits.
Net Interest Income
Net interest income for the three months ended September 30,
2023 was $7,432, an increase of $18, or 0.24%, compared to $7,414
for the three months ended June 30, 2023, and a decrease of
($1,617), or (17.87%), compared to $9,049 for the three months
ended September 30, 2022. The NIM was 2.40% for the three months
ended September 30, 2023 compared to 2.55% for the three months
ended June 30, 2023 and 2.90% for the same period in 2022.
The linked-quarter increase in net interest income is primarily
a result of the increase in loan interest income of $974, or
12.94%, compared to the three months ended June 30, 2023. The
decrease for the same period ended September 30, 2022 is due to an
increase in funding cost of $4,314 or 402.05%. This increase in
funding costs is partially offset by an increase in total interest
income of $2,697, or 26.64%, when compared to the same period in
2022.
Net interest income for the nine months ended September 30, 2023
decreased ($3,575), or (13.70%) to $22,524 from $26,099 for the
same period in 2022. The year-to-date NIM was 2.49% as of September
30, 2023 compared to 2.54% at June 30, 2023 and 2.79% for the same
period in 2022.
Net interest income for the nine months ended September 30, 2023
decreased compared to the prior year due to interest expense
increasing $9,849, or 373.48%. This decrease is the direct result
of interest rates causing increased deposit competition. This was
partially offset as loans and investment securities repriced also.
Total interest income increased by $6,274, or 21.83% compared to
the same period in 2022. Management expects continued pressure on
NIM given the current interest rate environment.
Credit Quality
The Company’s NPAs decreased by ($172), or (4.13%), to $3,993 at
September 30, 2023 compared to $4,165 at June 30, 2023, and
decreased ($436), or (9.84%), compared to $4,429 at September 30,
2022. The primary cause of the decrease year-over-year was due to
the sale of several other real estate owned (“OREO”) properties in
2023.
Net recoveries were $112 and $175 for the quarter and the nine
months ended September 30, 2023, respectively. Year-to-date net
(recoveries) charge-offs to average net loans were (0.03%) at
September 30, 2023 compared to (0.08%) at September 30, 2022.
The provision for credit losses (“PCL”) for the three months
ended September 30, 2023 was $97 compared to $459 for the linked
quarter and ($53) compared to September 30, 2022. The PCL was
primarily driven by qualitative factor adjustments due to declining
commercial real estate (“CRE”) valuations on the national scale.
The Company has not observed material deterioration in local CRE
valuations. The ACL to LHFI was 1.09% and 0.88% at September 30,
2023 and 2022, respectively, and 1.11% at June 30, 2023,
representing a level management considers commensurate with the
risk in the loan portfolio.
Liquidity and Capital
Given the events within the banking industry over the past few
months, investment securities portfolios, interest rate risk,
liquidity and capital have become much more of a focus for the
Company’s management team and Board, regulators and investors. As a
result of this, the Company is providing additional information on
our liquidity and capital position as of September 30, 2023 to
disclose the more traditional and stable nature of the Company’s
banking model.
The Company currently has limited reliance on the wholesale
funding market. The Company had $-0- in overnight Federal Funds
borrowings at September 30, 2023 as compared to $4,000 at June 30,
2023 and $-0- at September 30, 2022. The Company currently has
capacity to borrow $190,000 from the Federal Home Loan Bank of
Dallas (“FHLB”), approximately $150,000 to $200,000 in brokered
deposit availability and $50,000 in availability with our
correspondent Fed Funds lines. Additionally, management has applied
and been approved to utilize the Bank Term Funding Program of the
FRB or the Company could provide additional collateral to the FHLB
to increase the capacity there, should those avenues be needed.
The Company and the Bank, remain in a strong capital position
and well-capitalized. A comparison of the various regulatory ratios
for the Company and the Bank are noted below:
September 30, 2023
June 30, 2023
September 30, 2022
Citizens Holding Company
Tier 1 leverage ratio
7.83
%
8.17
%
7.84
%
Common Equity tier 1 capital ratio
7.83
%
8.17
%
7.84
%
Tier 1 risk-based capital ratio
13.17
%
13.50
%
13.10
%
Total risk-based capital ratio
13.97
%
14.28
%
13.72
%
The Citizens Bank
Tier 1 leverage ratio
9.08
%
9.48
%
9.11
%
Common Equity tier 1 capital ratio
9.08
%
9.48
%
9.11
%
Tier 1 risk-based capital ratio
15.16
%
15.53
%
15.22
%
Total risk-based capital ratio
15.95
%
16.30
%
15.84
%
Noninterest Income
Noninterest income increased for the three months ended
September 30, 2023, by $926, or 40.92% compared to the three months
ended June 30, 2023, and increased by $312 or 10.85% compared to
the same period in 2022.
The increase quarter-over-quarter is primarily due to other
noninterest income increasing $788, or 261.79%, primarily driven by
a large increase in recoveries during the quarter.
Noninterest Expense
Noninterest expense increased for the three months ended
September 30, 2023 by $74, or 0.82%, compared to the three months
ended June 30, 2023 and increased by $134, or 1.50%, compared to
the same period in 2022.
The year-over-year and linked quarter increases are primarily
being driven by two one-time events, including a gain on the sale
of three loans of $488 and the gain on the sale of an ORE parcel of
$100.
Dividends
The Company paid aggregate cash dividends in the amount of
$3,143 or $0.56 per share, during the nine-month period ended
September 30, 2023 compared to $4,033, or $0.72 per share, for the
same period in 2022.
At $0.16 per share, the Company’s current quarterly dividend
yield is approximately 6% which reflects the Company’s continued
commitment to returning shareholder value.
Citizens Holding Company
Financial Highlights (amounts in thousands, except share and per
share data)
For the Three Months Ended
For the Nine Months Ended
September 30,
June 30,
September 30,
September 30,
September 30,
2023
2023
2022
2023
2022
INTEREST INCOME
Loans, including fees
$8,503
$7,529
$6,855
$23,356
$19,891
Investment securities
3,275
3,334
3,187
9,978
8,715
Other interest
1,041
296
80
1,676
130
12,819
11,159
10,122
35,010
28,736
INTEREST EXPENSE
Deposits
3,481
2,450
496
7,751
1,580
Other borrowed funds
1,906
1,294
577
4,735
1,057
5,387
3,745
1,073
12,486
2,637
NET INTEREST INCOME
7,432
7,414
9,049
22,524
26,099
PROVISION FOR (REVERSAL OF) CREDIT
LOSSES
97
459
(53
)
562
96
NET INTEREST INCOME AFTER PCL
7,335
6,955
9,102
21,962
26,003
NONINTEREST INCOME
Service charges on deposit accounts
994
890
1,019
2,798
2,931
Other service charges and fees
1,106
1,072
1,111
3,214
3,230
Other noninterest income
1,089
301
747
1,802
2,012
3,189
2,263
2,877
7,814
8,173
NONINTEREST EXPENSE
Salaries and employee benefits
4,656
4,710
4,506
14,060
13,357
Occupancy expense
1,935
1,856
1,968
5,636
5,454
Other noninterest expense
2,479
2,431
2,462
7,110
6,858
9,070
8,996
8,936
26,806
25,669
NET INCOME BEFORE TAXES
1,454
222
3,043
2,970
8,507
INCOME TAX EXPENSE
247
(78
)
463
323
1,350
NET INCOME
$1,207
$300
$2,580
$2,647
$7,157
Earnings per share - basic
$0.22
$0.05
$0.46
$0.47
$1.28
Earnings per share - diluted
$0.22
$0.05
$0.46
$0.47
$1.28
Dividends paid
$0.16
$0.16
$0.24
$0.56
$0.72
Average shares outstanding - basic
5,603,570
5,601,213
5,595,320
5,600,082
5,591,771
Average shares outstanding - diluted
5,603,570
5,601,213
5,595,320
5,600,090
5,591,771
For the Period Ended,
September 30,
June 30,
September 30,
2023
2023
2022
Period End Balance Sheet Data:
Total assets
$ 1,414,010
$ 1,289,339
$ 1,328,478
Total earning assets
1,295,965
1,165,419
1,213,892
Loans, net of unearned income
587,238
574,734
578,665
Allowance for credit losses
6,390
6,397
5,068
Securities held-to maturity, at amortized
cost
392,133
396,931
411,859
Securities available for sale, at fair
value
183,535
196,866
198,547
Total deposits
1,194,698
1,103,072
1,134,936
Securities sold under agreement to
repurchase
151,089
109,526
129,919
Short-term borrowings
-
4,000
-
Long-term debt
18,000
18,000
18,000
Shareholders' equity
34,345
40,142
32,637
Book value per share
6.13
7.17
5.83
Period End Average Balance Sheet Data:
Total assets
1,334,768
1,320,107
1,348,574
Total earning assets
1,217,244
1,196,971
1,247,117
Loans, net of unearned income
577,198
574,005
584,450
Securities held-to-maturity, at amortized
cost
399,849
402,341
45,478
Securities available for sale, at fair
value
197,485
199,737
591,678
Total deposits
1,125,960
1,114,384
1,126,703
Securities sold under agreement to
repurchase
133,089
129,521
103,616
Short-term borrowings
3,698
4,442
9,107
Long-term debt
18,000
18,000
18,000
Shareholders' equity
39,623
39,659
78,710
Period End Non-performing Assets:
Non-accrual loans
3,009
2,996
3,087
Loans 90+ days past due and accruing
10
160
14
Other real estate owned
974
1,009
1,328
As of
September 30,
June 30,
September 30,
2023
2023
2022
Year to Date Credit Performance
Ratios:
Non-performing assets to loans
0.68
%
0.72
%
0.77
%
ACL to loans
1.09
%
1.11
%
0.88
%
ACL to non-performing loans
211.65
%
202.70
%
163.43
%
Net (recoveries)/charge-offs to average
net loans
-0.03
%
-0.01
%
-0.08
%
Year to Date Performance Ratios:
Return on average assets(1)
0.26
%
0.22
%
0.71
%
Return on average equity(1)
8.91
%
7.26
%
12.12
%
Year to Date Net Interest
Margin (tax equivalent)(1)
2.49
%
2.54
%
2.79
%
(1) Annualized
Citizens Holding Company is a one-bank holding company and the
parent company of the Bank, both headquartered in Philadelphia,
Mississippi. The Bank currently has twenty-seven banking locations
in fourteen counties throughout the state of Mississippi. In
addition to full service commercial banking, the Company offers
mortgage loans, title insurance services through third party
partnerships and a full range of Internet banking services
including online banking, bill pay and cash management services for
businesses. Internet services are available at the Bank web site,
www.thecitizensbankphila.com. Citizens Holding Company stock is
listed on the NASDAQ Global Market and is traded under the symbol
CIZN. The Company's transfer agent is American Stock Transfer &
Trust Company. Investor relations information may be obtained at
the corporate website,
https://www.thecitizensbankphila.com/investor-relations.
This press release includes “forward-looking statements” within
the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. All statements
other than statements of historical facts included in this release
regarding the Company’s financial position, results of operations,
business strategies, plans, objectives and expectations for future
operations, are forward looking statements. The Company can give no
assurances that the assumptions upon which such forward-looking
statements are based will prove to have been correct.
Forward-looking statements speak only as of the date they are made.
The Company does not undertake a duty to update forward-looking
statements to reflect circumstances or events that occur after the
date the forward-looking statements are made. Such forward-looking
statements are subject to certain risks, uncertainties and
assumptions. The risks and uncertainties that may affect the
operation, performance, development and results of the Company’s
and the Bank’s business include, but are not limited to, the
following: (a) the risk of adverse changes in business conditions
in the banking industry generally and in the specific markets in
which the Company operates; (b) our ability to mitigate our risk
exposures; (c) changes in the legislative and regulatory
environment that negatively impact the Company and Bank through
increased operating expenses; (d) increased competition from other
financial institutions; (e) the impact of technological advances;
(f) expectations about the movement of interest rates, including
actions that may be taken by the Federal Reserve Board in response
to changing economic conditions; (g) changes in asset quality and
loan demand; (h) expectations about overall economic strength and
the performance of the economics in the Company’s market area; and
(i) other risks detailed from time to time in the Company’s filings
with the Securities and Exchange Commission. Should one or more of
these risks materialize or should any such underlying assumptions
prove to be significantly different, actual results may vary
significantly from those anticipated, estimated, projected or
expected.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20231027779650/en/
Citizens Holding Company, Philadelphia Phillip R. Branch,
601/656-4692 Phillip.branch@thecitizensbank.bank
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