Citizens Holding Company Reports Earnings

Citizens Holding Company (the "Company") (OTCQX:CIZN) announced today results of operations for the three and twelve months ended December 31, 2024.

(in thousands, except share and per share data)

Net income for the three months ended December 31, 2024 was $1,318, or $0.23 per share-basic and diluted, a linked-quarter increase of $1,000, or 314.47%, from net income of $318, or $0.06, per share-basic and diluted, for the three months ended September 30, 2024. Net income also increased $2,112, or 265.99%, from net income of ($794), or ($0.14), per share-basic and diluted for the same quarter in 2023.

Net income for the twelve months ended December 31, 2024 was $5,491, or $0.98 per share-basic and diluted, an increase of $3,637, or 196.19%, from net income of $1,854, or $0.33, per share-basic and diluted, for the same period in 2023.

Fourth Quarter Highlights

• Total loans held for investment (LHFI), as of December 31, 2024 totaled $766,129, an increase of $54,585, or 7.67%, compared to September 30, 2024, and an increase of 124,101 or 19.33%, compared to December 31, 2024.
• Net interest margin increased 42 basis points ("bps") to 277 bps for the three months ended December 31, 2024 from 235 bps for the three months ended December 31, 2023.
• Total revenues, or interest and non-interest income, for the twelve months ended December 31, 2024 totaled $78,483, an increase of $20,451, or 35.24%, from the same period in 2023. The increase in total revenue is primarily attributed to an increase of $17,165, or 34.83%, in interest income attributed primarily to loan growth.
• Book value ("BV") and tangible book value ("TBV") at September 30, 2024 increased $0.94, or 12.42%, and $0.96, or 18.42%, respectively from September 30, 2024, and decreased ($0.46), or (5.16%) and ($0.45), or (6.79%), respectively from December 31, 2023.

Chief Executive Officer ("CEO") Commentary

Stacy Brantley, President and Chief Executive Officer, stated, "We are excited to finish 2024 with significant progress in execution of our strategic plan. Investment in lending talent helped produce net new loan growth of 19.67% throughout 2024 which was instrumental in offsetting rising costs of funds and driving net interest margin expansion of 42 bps for the year. We expect these trends to continue as we enter 2025 with a solid pipeline of new loan prospects."

"While growing deposits proved to be challenging in 2024, we enter 2025 with a dedicated focus on deposit gathering and expansion of treasury sales initiatives. Tight management of certificate of deposit rates and decreases to the overnight rate by the Federal Reserve helped drive cost of funds down in the fourth quarter as the cost of funds improved by 22 bps to 2.72% as of December 31, 2024. Asset quality metrics remain solid and well within management's established targets."

"As we look ahead to 2025, we remain confident in our strategic plan and our ability to execute and drive value for our shareholders through increased profitability. We will continue to invest in talent and technology to improve efficiency, drive growth, and manage risk."

Financial Condition and Results of Operations

Loans and Deposits

Total gross LHFI as of December 31, 2024 was $766,129 compared to $711,544 at September 30, 2024 and $640,945 as of December 31, 2023.

Total deposits as of December 31, 2024 were $1,071,352 compared to $1,092,738 at September 30, 2024 and $1,170,077 as of December 31, 2023. The decrease in deposits is due to the utilization of the reciprocal deposit network in which the company shifted approximately $80,000 in deposits off-balance sheet.

Net Interest Income

Net interest income for the three months ended December 31, 2024 was $9,276, an increase of $519, or 5.93%, compared to $8,757 for the three months ended September 30, 2024, and an increase of $1,922, or 26.14%, compared to $7,354 for the three months ended December 31, 2023. The net interest margin ("NIM") was 2.77% for the three months ended December 31, 2024 compared to 2.52% for the three months ended September 30, 2024 and 2.35% for the same period in 2023. The Company experienced NIM acceleration for the three months ended December 31, 2024 compared to the linked quarter. This was driven primarily by the growth in loans and a decrease in cost of funds during the quarter.

The linked-quarter increase in net interest income is primarily a result of the decrease in interest expense of ($735), or (8.68%), partially offset by an decrease in interest income of ($216), or (1.25%), compared to the three months ended September 30, 2024. The increase from the same period ended December 31, 2023 is due to an increase in interest income of $2,733, or 19.15%. This increase in interest income is partially offset by an increase in total interest expense of $811, or 11.72%, when compared to the same period in 2023. This increase is the direct result of increased loan production partially offset by continued deposit competition.

Net interest income for the twelve months ended December 31, 2024 increased $4,745, or 15.88%, to $34,623 from $29,878 for the same period in 2023. The year-to-date NIM was 2.57% as of December 31, 2024 compared to 2.50% at September 30, 2024 and 2.45% for the same period in 2023.

Net interest income for the twelve months ended December 31, 2024 increased compared to the prior year due to interest income increasing $17,165, or 34.83%. This increase is primarily the result of the large increase in loans along with repricing of loans and investment securities.

Credit Quality

The Company's non-performing assets ("NPAs") decreased by ($329), or (6.41%), to $4,801 at December 31, 2024 compared to $5,130 at September 30, 2024, and increased $975, or 25.48%, compared to $3,826 at December 31, 2023. The primary cause of the increase year-over-year was due to the increase in non-accrual loans of $1,187, or 46.08%. The increase in non-accrual loans during the year is primarily related to one relationship in the amount of $1,254.

Net losses (recoveries) were $163 for the twelve months ended December 31, 2024. Year-to-date net losses (recoveries) to average loans were 0.02% at December 31, 2024 compared to (0.03%) at December 31, 2023.

The provision for credit losses ("PCL") for the three months ended December 31, 2024 was $343 compared to $-0- for the linked quarter and $107 for the same period a year ago. The PCL was primarily driven by loan growth, offset by quantitative adjustments related to the current economic outlook, GDP, and 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 0.91% and 1.02% at December 31, 2024 and 2023, respectively, and 0.96% at September 30, 2024, 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 continue to be 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 December 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 December 31, 2024, September 30, 2024, and December 31, 2023. The Company currently has capacity to borrow $273,680 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.

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:

Noninterest Income

Noninterest income increased for the three months ended December 31, 2024, by $1,204, or 90.73%, compared to the three months ended September 30, 2024, and increased by $1,613, or 175.71%, compared to the same period in 2023.

The increase quarter-over-quarter is primarily due to net losses on sales of securities of ($988) during the prior three months ended, September 30, 2024.

Noninterest income increased for the twelve months ended December 31, 2024, by $3,286, or 37.56%, compared to the same period in 2023.

The increase year-over-year is primarily driven by a sale-leaseback transaction in the first quarter of 2024 resulting in a gain of $4,535. However, the increase in noninterest income was partially offset by net losses on sales of securities of ($2,563) during 2024.

Noninterest Expense

Noninterest expense decreased for the three months ended December 31, 2024 by ($13), or (0.13%), compared to the three months ended September 30, 2024 and increased by $467, or 4.99%, compared to the same period in 2023.

Noninterest expense increased for the twelve months ended December 31, 2024 by $2,736, or 7.56%, compared to the same period in 2023.

The increase year-over-year is primarily due to 2 factors, (1) an increase in salaries and employee benefits as a result of strategic production hires in key markets and (2) an increase in occupancy expense of $850, or 10.85%, driven by increasing technology costs and an increase in rent due to the aforementioned sale-leaseback transaction.

Dividends

The Company paid aggregate cash dividends in the amount of $3,607, or $0.64 per share for the twelve-month period ended December 31, 2024 compared to $4,042, or $0.72 per share, for the same period in 2023.

At $0.16 per share, the Company's current quarterly dividend yield is approximately 6.5%, which reflects the Company's continued commitment to returning shareholder value.

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 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 OTCQX Best 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.

Cautionary Note Regarding Forward-Looking Statements

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.

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Citizens Holding Company, Philadelphia

Phillip R. Branch, 601/519-4016

[email protected]