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"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:

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 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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Contacts

Citizens Holding Company, Philadelphia
Phillip R. Branch, 601/519-4016
Phillip.branch@thecitizensbank.bank