Citizens Holding Company Reports Earnings

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04/18/2024 - 09:00 AM

PHILADELPHIA, Miss.--(BUSINESS WIRE)-- Citizens Holding Company (the “Company”) (OTCQX:CIZN) announced today results of operations for the three months ended March 31, 2024.

(in thousands, except share and per share data)

Net income for the three months ended March 31, 2024 was $2,868, or $0.51 per share-basic and diluted, a linked-quarter increase of $3,662, or 461.21%, from a net loss of ($794), or ($0.14), per share-basic and diluted, for the three months ended December 31, 2023. Net income also increased $1,728, or 151.58%, from net income of $1,140, or $0.20, per share-basic and diluted for the same quarter in 2023.

Fourth Quarter Highlights

Total revenues, or interest and non-interest income, for the three months ended March 31, 2024 totaled $21,213, an increase of $6,020, or 39.62%, from the prior quarter. The increase in total revenue is primarily attributed to an increase of $4,920, or 535.36%, in non-interest income attributed to a one-time gain on a sale-leaseback transaction of $4,535.
Yields on earning assets increased 19 basis point (“bps”) to 461 bps for the three months ended March 31, 2024 compared to 442 bps for the three months ended December 31, 2023 and increased 101 bps compared to 360 bps for the three months ended March 31, 2023.
Loans held for investment (“LHFI”) increased $25,388, or 3.95%, to $667,416 at March 31, 2023, compared to $642,028 at December 31, 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 54 bps at March 31, 2024 compared to 60 bps at December 31, 2023. Total non-performing assets decreased ($264), or (6.91%), to $3,562 at March 31, 2024, compared to $3,826 at December 31, 2023, and decreased ($615), or (14.73%), compared to $4,177 at March 31, 2023.
Allowance for credit losses (“ACL”) to loans was 1.00% at March 31, 2023 compared to 1.02% in the prior quarter and 1.06% 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, continued to execute its strategic balance sheet realignment completing two key transactions during the quarter. The bank sold three branches in a sale leaseback transaction generating a pre-tax gain of $4,535. Additionally, the bank realized a pre-tax loss of $1,574 on the sale of bonds reinvesting the proceeds in higher yielding assets. These transactions are targeted at improving net interest income on a go-forward basis and at buffering the bank’s balance sheet in this volatile rate environment.”

“The Company’s realized solid loan growth of $25,271 in the quarter representing a 3.98% increase in LHFI over the prior quarter end and a 17.73% increase over the prior year quarter ended March 31, 2023. Credit metrics remain strong with past dues and non-performers at historically low levels. Total deposits increased 3.46% over the prior quarter-end and 8.49% over the quarter ended March 31, 2023. While deposit growth was solid, the shift from non-interest bearing to interest bearing deposits as clients more actively manage their funds creates headwinds to margin expansion.”

“The Company’s net interest margin expanded slightly during the quarter, up 5 bps over the prior quarter ended December 31, 2023. “We are encouraged by margin expansion, although slight, in the first quarter. We anticipate continued margin expansion in the subsequent quarter as our strategic transactions become fully baked in and loan growth realized late in the first quarter more fully impacts quarterly earnings.”

“We will continue to evaluate our balance sheet and look for strategic opportunities to improve performance. Our strong on-balance sheet liquidity has us well positioned for growth as we seek to increase long-term value for our shareholders.”

Financial Condition and Results of Operations

Loans and Deposits

Total loans outstanding, net of unearned income, as of March 31, 2024 totaled $667,416 compared to $642,028 at December 31, 2023 and $567,240 as of March 31, 2023.

Total deposits as of March 31, 2024 were $1,210,600 compared to $1,170,077 at December 31, 2023 and $1,115,826 as of March 31, 2023. With the pressure throughout the banking system in regards to deposits, the Company has not experienced material outflows in deposits, but continues to see a shift from noninterest bearing deposits to interest bearing deposits.

Net Interest Income

Net interest income for the three months ended March 31, 2024 was $7,790, an increase of 436, or 5.93%, compared to $7,354 for the three months ended December 31, 2023, and an increase of $112, or 1.46%, compared to $7,678 for the three months ended March 31, 2023. The net interest margin (“NIM”) was 2.40% for the three months ended March 31, 2024 compared to 2.35% for the three months ended December 31, 2023 and 2.56% for the same period in 2023. Management expects continued pressure on NIM given the current interest rate environment, however, the Company saw an uptick in NIM for the three months ended March 31, 2024.

The linked-quarter increase in net interest income is primarily a result of the increase in interest income of $1,100, or 7.71%, partially offset by an increase in interest expense of $664, or 9.60%, compared to the three months ended December 31, 2023. The increase from the same period ended March 31, 2023 is due to an increase in interest income of $4,342, or 39.36%. This increase in interest income is partially offset by an increase in total interest expense of $4,230, or 126.11%, when compared to the same period in 2023. This increase is the direct result of increased loan production partially offset by increased deposit competition primarily caused by higher short-term rates.

Credit Quality

The Company’s NPAs decreased by ($264), or (6.91%), to $3,562 at March 31, 2024 compared to $3,826 at December 31, 2023, and decreased ($615), or (14.73%), compared to $4,177 at March 31, 2023. The primary cause of the decrease year-over-year was due the decrease in non-accrual loans of ($665), or (22.22%).

Net recoveries were $2 for the three months ended March 31, 2024. Year-to-date net recoveries to average loans were 0.00% at March 31, 2024 compared to (0.01%) at March 31, 2023.

The provision for credit losses (“PCL”) for the three months ended March 31, 2024 was $192 compared to $107 for the linked quarter and $6 for the same period a year ago. The PCL was primarily driven by loan growth partially offset by favorable qualitative factor adjustments due to better than expected GDP growth and strong unemployment. Additionally, the Company has not observed material deterioration in local CRE valuations that some of the larger central business districts have experienced. The ACL to LHFI was 1.00% and 1.06% at March 31, 2024 and 2023, respectively, and 1.02% at December 31, 2023, representing a level management considers commensurate with the risk in the loan portfolio.

Liquidity and Capital

Given the events within the banking industry during 2023, 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 March 31, 2024 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 March 31, 2024, December 31, 2023, and $1,725 at March 31, 2023. The Company currently has capacity to borrow $197,000 from the Federal Home Loan Bank of Dallas (“FHLB”), approximately $150,000 in brokered deposit availability and $50,000 in availability with our correspondent Fed Funds lines. Additionally, the Company could provide additional collateral to the FHLB to increase the capacity there, should that avenue 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:

	March 31, 2024		December 31, 2023		March 31, 2023
Citizens Holding Company
Tier 1 leverage ratio	7.31	%	7.43	%	8.01	%
Common Equity tier 1 capital ratio	7.31	%	7.43	%	8.01	%
Tier 1 risk-based capital ratio	11.87	%	11.95	%	13.70	%
Total risk-based capital ratio	12.65	%	12.70	%	14.46	%
The Citizens Bank
Tier 1 leverage ratio	8.37	%	8.64	%	9.29	%
Common Equity tier 1 capital ratio	8.37	%	8.64	%	9.29	%
Tier 1 risk-based capital ratio	13.48	%	13.78	%	15.75	%
Total risk-based capital ratio	14.25	%	14.52	%	16.50	%

Noninterest Income

Noninterest income increased for the three months ended March 31, 2024, by $4,920, or 535.36%, compared to the three months ended December 31, 2023, and increased by $3,476, or 147.10%, compared to the same period in 2023.

The increase quarter-over-quarter is primarily due to other noninterest income increasing $4,600, or 676.47%, primarily driven by a one-time gain on the sale-leaseback transaction of three locations of $4,535 in the current quarter.

Noninterest Expense

Noninterest expense increased for the three months ended March 31, 2024 by $327, or 3.49%, compared to the three months ended December 31, 2023 and increased by $943, or 10.79%, compared to the same period in 2023.

The increase year-over-year is primarily due to an increase in occupancy expense of $480, or 26.02%.

Dividends

The Company paid aggregate cash dividends in the amount of $901, or $0.16 per share, during the three-month period ended March 31, 2024 compared to $1,346, or $0.24 per share, for the same period in 2023.

At $0.16 per share, the Company’s current quarterly dividend yield is approximately 8% 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
	March 31,			December 31,			March 31,
	2024			2023			2023
INTEREST INCOME
Loans, including fees	$	10,264		$	9,422		$	7,323
Investment securities		3,045			3,163			3,370
Other interest		2,065			1,689			339
		15,374			14,274			11,032

INTEREST EXPENSE
Deposits		5,261			4,503			1,820
Other borrowed funds		2,323			2,417			1,534
		7,584			6,920			3,354

NET INTEREST INCOME		7,790			7,354			7,678

PCL		192			107			6


NET INTEREST INCOME AFTER PCL		7,598			7,247			7,672

NONINTEREST INCOME
Service charges on deposit accounts		957			990			914
Other service charges and fees		1,176			1,234			1,037
Net (losses) gains on sales of securities		(1,574	)		(1,986	)		-
Other noninterest income		5,280			680			412
		5,839			919			2,363

NONINTEREST EXPENSE
Salaries and employee benefits		4,885			4,522			4,695
Occupancy expense		2,325			2,199			1,845
Other noninterest expense		2,474			2,635			2,201
		9,684			9,357			8,741

NET INCOME BEFORE TAXES		3,753			(1,190	)		1,294

INCOME TAX EXPENSE (BENEFIT)		885			(397	)		154

NET INCOME (LOSS)	$	2,868		$	(794	)	$	1,140

Earnings (Loss) per share - basic	$	0.51		$	(0.14	)	$	0.20

Earnings (Loss) per share - diluted	$	0.51		$	(0.14	)	$	0.20

Dividends paid	$	0.16		$	0.16		$	0.24

Average shares outstanding - basic		5,603,570			5,603,570			5,595,320

Average shares outstanding - diluted		5,603,570			5,603,570			5,595,320