BANK

Building and sign bank (done in 3d)

Citizens Holding Company (the “Company”) (NASDAQ:CIZN) announced today results of operations for the three and nine months ended Sept. 30.

(in thousands, except share and per share data)

Net income for the three months ended September 30, 2021 was $1,880, or $0.34 per share-basic and diluted, a decrease of $203, or (9.75%) from net income of $2,083, or $0.37 per share-basic and diluted for the same quarter in 2020.

Net income for the nine months ended September 30, 2021 was $5,684, or $1.02 per share-basic and diluted, an increase of $979, or 20.81% from net income of $4,705, or $0.84 per share-basic and diluted for the same period in 2020.

THIRD QUARTER HIGHLIGHTS

Total revenues, or interest and non-interest income, for the three months ended September 30, 2021 totaled $13,056, an increase of $251 or 1.96%, compared to the three months ended June 30, 2021, and a decrease of $160, or (1.21%), compared to the same quarter in 2020. Total revenue increased year-over-year by $269, or 0.71% to $38,172 from $37,903. The increase in revenue primarily reflects the gains from the sale of investments to lower the Company’s prepayment risk within the mortgage-backed securities portfolio.

Total non-performing assets decreased $1,780, or (20.11%), to $7,071 at September 30, 2021, compared to $8,851 at June 30, 2021, and decreased $7,000, or (49.75%), compared to $14,071 at September 30, 2020.

Overall cost of funds continues to decrease as management remains focused on repricing interest-bearing deposits. Cost of funds for the quarter was 50 basis points (“bps”) down 17 bps from the same quarter in 2020. The cost of funds for the nine months ended September 30, 2021 was 51 bps, a decrease of 30 bps compared to the same period in 2020. Year-over-year interest expense is down $1,846, or (31.97%) as a result of management’s repricing and/or reducing higher cost interest-bearing deposits.

NET INTEREST INCOME

Net interest income for the three months ended Sept. 30, was $8,602, an increase of $108, or 1.27% compared to $8,494 for the three months ended June 30, 2021, and a decrease of $304, or (3.41%), compared to $8,906 for the three months ended September 30, 2020. The net interest margin (“NIM”) was 2.74% for the current quarter, an increase of 17 bps from the linked quarter NIM of 2.57%. Year-over-year the NIM decreased 7 bps from 2.81%.

Net interest income for the nine months ended September 30, 2021 increased $88, or 0.36% to $24,729 from $24,641 for the same period in 2020. The year-to-date NIM was 2.53% as of September 30, 2021 compared to 2.45% at June 30, 2021 and 2.76% for the same period in 2020.

The linked quarter increase in NIM is a result of management strategically reallocating the securities portfolio into securities that are less likely to prepay, such as higher yielding municipal investments. As low interest rates continued to decrease the yield on loans and the securities portfolio coupled with negative loan growth; the lower costs on interest-bearing deposits offsets the margin compression.

CREDIT QUALITY

The provision for loan losses for the three months ended September 30, 2021 was $968. The provision was primarily driven by one relationship. The provision was partially offset by the decline in qualitative reserves along with the decline in loan balance for the quarter. While the overall economy continues to improve, as evidence by the steady decline in the unemployment rate, the recovery has slowed due to the surge of the COVID-19 Delta variant in the third quarter.

As stated in the highlights, the Company’s non-performing assets decreased by $1,780, or (20.11%), to $7,071 at September 30, 2021 compared to $8,851 at June 30, 2021 and decreased $7,000 or (49.75%), from $14,071 at September 30, 2020. The decrease reflects the foreclosure and charge-off of one non-accrual impaired loan that was already adequately reserved for in the allowance in the second quarter of 2021. This addition to other real estate owned (“OREO”) was subsequently offset with the sale of $1,459 of OREO properties during the three months ended September 30, 2021.

Net charge-offs total $1 in the third quarter. Year-to-date net charge-offs totaled $704, or 0.11% of average loans at September 30, 2021 compared to 0.07% at September 30, 2020.

NON-INTEREST INCOME

Non-interest income increased for the three months ended September 30, 2021, by $305, or 10.20% compared to the three months ended June 30, 2021 and increased by $657 or 24.91% compared to the same period in 2020.

Non-interest income increased by $2,027, or 27.07%, for the nine months ended September 30, 2021 when compared to the same period in 2020.

The increase in non-interest income year-over-year was primarily due to the following factors:

Increase in mortgage loan origination income due to a prolong environment of low long-term mortgage rates and increased home sales. Mortgage loan origination income increased $129, or 14.49% for the nine months ended September 30, 2021 compared to the same period in 2020;

Increase in gains from the sale of investment securities to lower the Company’s prepayment risk within the Company’s mortgage-backed securities portfolio. Income from security sales increased $675, or 96.02% for the nine months ended September 30, 2021 compared to the same period in 2020;

Interchange fees, which is included in Other Service Charges and Fees in the Financial Highlights below, increased $488 or 21.07%, at September 30, 2021 compared to the same period in 2020.

NON-INTEREST EXPENSE

Non-interest expense decreased for the three months ended September 30, 2021 by $241, or (2.68%) compared to the three months ended June 30, 2021 and increased by $88 or 1.02% compared to the same period in 2020.

Non-interest expense increased by $1,127, or 4.50%, for the nine months ended September 30, 2021 when compared to the same period in 2020.

The increase in non-interest expense is mainly attributable to an increase in regulatory related expenses, the write-down of other real estate owned, and the continued investment in customer facing and internal technology.

DIVIDENDS

The Company paid aggregate cash dividends in the amount of $4,027, or $0.72 per share, during the nine-month period ended September 30, 2021 compared to $4,022, or $0.72 per share, for the same period in 2020.

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