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CITIZENS HOLDING CO /MS/ (CIZN)·Q2 2023 Earnings Summary

Executive Summary

  • Q2 2023 EPS was $0.05 as net income fell to $0.30M, down 73.7% q/q and 88.2% y/y, driven by net interest margin compression from sharply higher funding costs and a higher provision for credit losses .
  • Total revenues were $13.42M, up 0.2% q/q on higher loan interest income, but noninterest income declined 4.3% q/q; NIM slipped to 2.55% (from 2.56% in Q1 and 2.78% a year ago) as deposit and borrowing costs rose materially .
  • The dividend was reduced to $0.16 per share for Q2 (from $0.24 in prior quarters) to preserve capital amid a challenging rate and deposit-competition environment; management emphasized strong core deposits with minimal uninsured exposure and stable credit quality .
  • S&P Global Wall Street consensus EPS and revenue estimates for Q2 2023 were unavailable via our data access; as a result, we cannot classify a beat/miss versus Street this quarter (S&P Global data unavailable).

What Went Well and What Went Wrong

What Went Well

  • Deposit retention and credit quality remained solid; CEO highlighted “strong core deposit base with minimal uninsured deposits,” NPAs down 16.2% y/y, and past due loans down 67.1% y/y .
  • Loan yields benefited from rising rates; yields on earning assets rose 11 bps q/q and 69 bps y/y, and interest income on loans increased 2.8% q/q .
  • Capital ratios stayed well-capitalized; holding company Tier 1 risk-based at 13.50% and total risk-based at 14.28% as of June 30, 2023; bank-level ratios were even stronger .

What Went Wrong

  • Net interest margin compressed further to 2.55% as funding costs surged to 147 bps in Q2 (vs. 136 bps in Q1 and 33 bps a year ago), materially squeezing spread income .
  • Provision for credit losses jumped to $459K from $6K in Q1, driven by qualitative adjustments tied to national CRE valuation declines (management noted no material local deterioration) .
  • Noninterest expense rose 2.9% q/q and 6.7% y/y on technology investments and vendor cost inflation; noninterest income fell 4.3% q/q and 18.1% y/y, including lower mortgage-related activity .

Financial Results

Income Statement Summary (Amounts in $USD Millions, EPS in $)

MetricQ2 2022Q1 2023Q2 2023
Total Interest Income$9.56 $11.03 $11.16
Total Noninterest Income$2.76 $2.36 $2.26
Net Interest Income$8.76 $7.68 $7.41
Provision for Credit Losses$0.06 $0.01 $0.46
Net Income$2.54 $1.14 $0.30
Diluted EPS$0.45 $0.20 $0.05
Net Interest Margin (%)2.78% 2.56% 2.55%

Revenue and Expense Breakdown (Amounts in $USD Millions)

MetricQ2 2022Q1 2023Q2 2023
Interest Income – Loans$6.64 $7.32 $7.53
Interest Income – Investment Securities$2.88 $3.37 $3.33
Interest Income – Other$0.04 $0.34 $0.30
Interest Expense – Deposits$0.53 $1.82 $2.45
Interest Expense – Other Borrowed Funds$0.27 $1.20 $1.29
Noninterest Expense – Salaries & Benefits$4.41 $4.70 $4.71
Noninterest Expense – Occupancy$1.71 $1.85 $1.86
Other Noninterest Expense$2.31 $2.20 $2.43

Balance Sheet and Credit KPIs (Period End; Amounts in $USD Millions unless noted)

MetricQ2 2022Q1 2023Q2 2023
Total Assets$1,299.08 $1,289.47 $1,289.34
Total Earning Assets$1,182.13 $1,174.58 $1,165.42
Loans (Net of Unearned)$589.54 $567.24 $574.73
Total Deposits$1,117.99 $1,115.83 $1,103.07
Shareholders’ Equity$25.93 $41.12 $40.14
Book Value per Share ($)$4.64 $7.35 $7.17
NPA to Loans (%)0.84% 0.74% 0.72%
ACL to Loans (%)0.86% 1.06% 1.11%
ACL to NPL (%)138.47% 200.70% 202.70%

Additional Operating KPIs

MetricQ2 2022Q1 2023Q2 2023
Yields on Earning Assets (bps)302 360 371
Funding Costs (bps)33 136 147
Return on Avg Assets (YTD, annualized)0.68% 0.34% 0.22%
Return on Avg Equity (YTD, annualized)11.52% 11.49% 7.26%
Dividends per Share (Quarter)$0.24 $0.24 $0.16

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Dividend per shareQ2 2023$0.24 (recent quarters) $0.16 Lowered
Net Interest MarginFY 2023 trajectory—Management expects continued pressure on NIM given rate environment Narrative: Pressured
Deposit costsFY 2023 trajectory—“Expect deposit costs to continue to rise over the remainder of the year” Narrative: Rising
Loan yieldsFY 2023 trajectory—Anticipate loan yields to rise from new originations and renewals Narrative: Improving
Liquidity capacityAs of Q2 2023—FHLB capacity ~$190M; brokered deposits ~$150–$200M; Fed funds lines ~$50M; approved for BTFP Informational

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2022 and Q1 2023)Current Period (Q2 2023)Trend
NIM and Funding CostsDeposit competition increased; NIM 2.87% in Q4 2022; management expected cost of funds to rise . Q1 2023 NIM fell to 2.56% on higher deposit and borrowing costs .NIM 2.55%; funding costs 147 bps; continued pressure expected .Deteriorating
Liquidity & CapitalBook value improved in Q4 from rate moves but AOCI remained large; capital ratios adequate . Q1 book value rose; equity strengthened .Detailed liquidity capacity disclosed; well-capitalized status reiterated .Stable/Proactive
Credit Quality / CREQ4 NPAs down; net recoveries . Q1 NPAs down 2.4% q/q .PCL increased on national CRE valuation concerns; NPAs down slightly q/q .Watchlist (qualitative risk)
Technology & EfficiencyQ4 expense management focus . Q1 tight labor market lifted salaries/benefits .Investments in technology to drive efficiency; rising vendor costs .Increasing spend for efficiency
Dividends$0.24/share maintained in Q4 . Q1 paid $0.24 .Reduced to $0.16; ~5% yield noted .Lower payout
DepositsQ4 competition intensified . Q1 deposits stable around $1.116B .Minimal uninsured deposits; deposits down 1.33% y/y .Stable core, slight decline

Note: A Q2 2023 earnings call transcript was not furnished in our document set; management commentary is sourced from the Q2 press release .

Management Commentary

  • CEO Stacy Brantley: “Rapidly rising interest rates and intense competition for deposits has resulted in an increased cost of funds and tightening net interest margin… we expect deposit costs to continue to rise… [and] anticipate loan yields will rise through the combination of new loan production and renewal of the loan portfolio.” He emphasized deposit retention, minimal uninsured deposits, and improved past due loans and NPAs y/y .
  • CFO Phillip Branch: “A key contributor to the decline in net income… was net interest margin compression caused by increased funding costs. The Company’s funding costs… were 147 bps… compared to 33 bps… The funding costs for the three months ended March 31, 2023 was 136 bps.”
  • Management highlighted internal restructuring of loan production and credit administration, and investments in technology to drive efficiency and customer experience improvements .

Q&A Highlights

  • N/A — no Q2 2023 earnings call transcript was furnished; key themes and clarifications are drawn from the Q2 press release and financial highlights .

Estimates Context

  • S&P Global Wall Street consensus EPS and revenue estimates for Q2 2023 were unavailable via our data access at this time; therefore, a beat/miss assessment versus Street is not provided (S&P Global data unavailable).

Key Takeaways for Investors

  • Margin compression remains the primary headwind: NIM dipped to 2.55% as funding costs rose to 147 bps; expect further near-term pressure until deposit pricing stabilizes and loan yields reprice higher .
  • Credit remains resilient locally despite higher qualitative provisioning tied to national CRE valuation trends; NPAs improved modestly q/q and ACL/loans rose to 1.11% .
  • Liquidity optionality is robust, with sizable FHLB, brokered deposit, and fed funds line capacity and approval to use BTFP, supporting flexibility under tighter industry conditions .
  • Dividend reset to $0.16 signals prudence in capital allocation amid spread pressure; yield remains competitive but payout is lower than recent history .
  • Efficiency investments and restructuring may lift operating leverage over time but near-term opex is elevated due to technology and vendor costs; monitor expense trajectory and benefits realization .
  • Deposit base quality (minimal uninsured) and stable retention are positives against industry-wide deposit competition; watch y/y deposit drift and funding mix .
  • Without Street estimate context, focus on internal trajectory: watch NIM trend, funding cost peak, loan yield repricing, and provisioning cadence as the main near-term stock catalysts .