Citizens First Corporation Announces Third Quarter 2018 Results

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Oct 18, 2018, 12:31 ET

BOWLING GREEN, Ky., Oct. 18, 2018 /PRNewswire/ -- Citizens First Corporation (NASDAQ: CZFC) today reported results for the third quarter ended September 30, 2018 which include the following:

For the quarter ended September 30, 2018 the Company reported net income of $1.20 million, or $0.47 per diluted common share (EPS). This represents a 6.8% increase or $76,000 from the $1.12 million, or $0.44 per diluted common share, for the quarter ended September 30, 2017. For the nine months ended September 30, 2018, net income totaled $3.66 million, or $1.44 per diluted common share. This represents an increase of $519,000, a 16.5% increase, or $0.21 per diluted common share, from the net income of $3.14 million in the first nine months of the previous year. "While profitability improved over 2017, margin pressure and softening loan demand continue to present challenges for us," said Todd Kanipe, President and CEO. "Market competition for deposits has intensified. As a result, cost of funding has outpaced improvements in loan yields," Kanipe added.

Income Statement Third Quarter 2018 Compared to Third Quarter 2017

Net interest income increased $49,000, or 1.3%, for the third quarter of the current year compared to the third quarter of the prior year. The Company's net interest margin was 3.43% for the quarter ended September 30, 2018, compared to 3.68% for the quarter ended September 30, 2017, a decrease of 25 basis points. The Company's net interest margin decreased primarily due to an increase in the cost of interest-bearing liabilities which exceeded the increase in the yield on earning assets.

There was a $30,000 provision for loan losses in the third quarter of the current year compared to a $30,000 credit for loan losses in the third quarter of the prior year.

Non-interest income decreased $13,000, or 1.4%, from the prior year primarily due to a decrease in service charges on deposit accounts of $26,000 and a decrease in gains on sale of securities of $25,000, offset by an increase in non-deposit brokerage fees of $20,000 and gain on sale of mortgage loans of $16,000.

Non-interest expenses increased $79,000, or 2.5%, from the prior year primarily due to an increase in personnel expense of $57,000, and an increase in other expense of $55,000.

Income tax expenses decreased $179,000, or 36.5% due to a marginal rate of 21% in 2018 compared to a rate of 34% in 2017.

Income Statement Current Year Compared to Prior Year

Net interest income increased $400,000, or 3.5%, from the prior year. The Company's net interest margin was 3.55% for the nine months ended September 30, 2018, and 3.68% for the nine months ended September 30, 2017, a decrease of 13 basis points. The Company's net interest margin decreased due to an increase in the cost of average interest-bearing liabilities.

There was a $90,000 provision for loan losses in the current year compared to no provision in the previous year.

Non-interest income decreased $16,000, or 0.6%, primarily due to a decrease in service charges on deposit accounts of $24,000, a reduction in gains on sale of mortgage loans of $21,000 and gains on the sale of securities of $48,000, offset by an increase in other service charges and fees of $37,000 and non-deposit brokerage fees of $42,000.

Non-interest expense increased $225,000, or 2.3%, primarily due to an increase of $287,000 in personnel expenses and $82,000 increase in other expenses offset by a decrease of $111,000 in data processing services.

Income tax expenses decreased $450,000, or 33.7% due to a marginal rate of 21% in 2018 compared to a rate of 34% in 2017.

Credit Quality

Non-performing assets totaled $2.0 million, or 0.43% of total assets, at September 30, 2018 compared to $1.3 million, or 0.29% of total assets at December 31, 2017, an increase of approximately $670,000. The increase is primarily attributable to one credit secured by real estate which was moved to non-accrual status during the first quarter of 2018.

The allowance for loan losses at September 30, 2018 was $4.8 million, or 1.29% of total loans, compared to $4.7 million, or 1.26% of total loans as of December 31, 2017. The Company considers the size, volume and credit quality of the loan portfolio as well as recent economic and other external influences to record the allowance for loan losses and provision for loan losses that is directionally consistent with the Company's loan portfolio.

Balance Sheet

Total assets at September 30, 2018 were $473.7 million, compared to $465.4 million at December 31, 2017. Loans decreased $3.6 million, or 1%, from December 31, 2017 to September 30, 2018. Deposits increased $10.3 million, or 2.8%, from December 31, 2017 to September 30, 2018. Borrowings from the Federal Home Loan Bank decreased $5.0 million, or 12.5%, from December 31, 2017 to September 30, 2018.

Stockholders' equity increased to $48.6 million at September 30, 2018 from $45.8 million at December 31, 2017. The book value per common share and tangible book value per common share ratios were $19.14 and $17.50, respectively, at September 30, 2018 compared to $18.14 and $16.47, respectively, at December 31, 2017.

About Citizens First Corporation

Citizens First Corporation is a bank holding company headquartered in Bowling Green, Kentucky and established in 1999. The Company has branch offices located in Barren, Hart, Simpson and Warren Counties in Kentucky, and a loan production office in Williamson County, Tennessee. Additional information concerning our products and services is available at www.citizensfirstbank.com.

Forward-Looking Statements

Statements in this press release relating to Citizens First Corporation's plans, objectives, expectations or future performance are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are based upon the Company's current expectations, but are subject to certain risks and uncertainties that may cause actual results to differ materially. Among the risks and uncertainties that could cause actual results to differ materially are current and future economic and business conditions; possible changes in trade, monetary, and fiscal policies, as well as legislative and regulatory changes; changes in the interest rate environment and our ability to effectively manage interest rate risk and other market risk, credit risk and operational risk; changes in the quality or composition of our loan or investment portfolios; increases in our nonperforming assets, or our inability to recover or absorb losses created by such nonperforming assets; and other factors described in the reports filed by the Company with the Securities and Exchange Commission could also impact current expectations.

Consolidated Financial Highlights (Unaudited)
Consolidated Statement of Condition


	(In Thousands, Except Per Share Data and ratios)
	September 30,		December 31,		December 31,
	2018		2017		2016
Assets
Cash and due from financial institutions	$	7,523	$	6,444	$	8,542
Interest-bearing deposits in other financial institutions		28,113		13,532		11,018
Available-for-sale securities		45,450		48,616		53,547
Loans held for sale		—		427		264
Loans		370,689		374,239		359,391
Allowance for loan losses		(4,776)		(4,724)		(4,854)
Premises and equipment, net		8,930		9,140		9,390
Bank owned life insurance (BOLI)		8,660		8,528		8,351
Federal Home Loan Bank (FHLB) stock, at cost		2,065		2,053		2,025
Accrued interest receivable		1,596		1,681		1,622
Deferred income taxes		766		670		1,464
Goodwill and other intangible assets		4,168		4,221		4,291
Other assets		490		555		371
Total Assets	$	473,674	$	465,382	$	455,422
Liabilities
Deposits
Noninterest bearing	$	51,679	$	53,259	$	52,322
Savings, NOW and money market		188,200		175,087		173,620
Time		142,754		143,968		144,497
Total deposits		382,633		372,314		370,439
FHLB advances and other borrowings		35,000		40,000		35,000
Subordinated debentures		5,000		5,000		5,000
Accrued interest payable		360		285		220
Other liabilities		2,092		1,949		2,399
Total Liabilities		425,085		419,548		413,058
Stockholders' Equity
6.5% Cumulative convertible preferred stock		—		—		7,261
Common stock		33,232		33,138		25,920
Retained earnings		16,380		13,142		9,706
Accumulated other comprehensive (loss)		(1,023)		(446)		(523)
Total stockholders' equity		48,589		45,834		42,364
Total liabilities and stockholders' equity	$	473,674	$	465,382	$	455,422

Consolidated Financial Highlights (Unaudited)
Consolidated Statement of Income


	Three months ended
	(In Thousands, Except Per Share Data and ratios)
	September 30,		June 30,		March 31,		December 31,		September 30,
	2018		2018		2018		2017		2017
Interest and dividend income	$	5,094	$	5,162	$	4,860	$	4,905	$	4,640
Interest expense		1,182		1,064		960		858		777
Net interest income		3,912		4,098		3,900		4,047		3,863

Provision (credit) for loan losses		30		30		30		(150)		(30)

Non-interest income
Service charges on deposit accounts		291		309		298		315		317
Other service charges and fees		319		319		281		288		317
Gain on sale of mortgage loans		95		69		50		82		79
Non-deposit brokerage fees		110		101		99		97		90
Lease income		52		79		52		52		53
BOLI income		45		44		43		45		44
Gain on sale of securities		—		—		—		—		25
Total non-interest income		912		921		823		879		925

Non-interest expenses:
Personnel expense		1,730		1,773		1,846		1,740		1,673
Net occupancy expense		457		432		453		448		449
Advertising and public relations		102		85		81		78		111
Professional fees		156		172		164		86		160
Data processing services		208		205		194		192		214
Franchise shares and deposit tax		120		120		120		88		132
FDIC insurance		42		43		42		47		52
Other		470		461		459		433		415
Total non-interest expenses		3,285		3,291		3,359		3,112		3,206

Income before income taxes		1,509		1,698		1,334		1,964		1,612
Income taxes		311		324		250		1,012		490
Net income		1,198		1,374		1,084		952		1,122
Dividends on preferred stock		—		—		—		—		—
Net income available for common stockholders	$	1,198	$	1,374	$	1,084	$	952	$	1,122
Basic earnings per common share	$	0.47	$	0.54	$	0.43	$	0.38	$	0.44
Diluted earnings per common share	$	0.47	$	0.54	$	0.43	$	0.37	$	0.44

Consolidated Financial Highlights (Unaudited)
Key Operating Statistics


	Three months ended
	(In Thousands, Except Per Share Data and ratios)
	September 30,			June 30,			March 31,			December 31,			September 30,
	2018			2018			2018			2017			2017
Average:
Assets	$	482,506		$	478,836		$	476,063		$	462,966		$	449,770
Earning Assets		454,914			451,315			448,853			435,458			422,258
Loans		377,140			389,614			384,184			370,173			362,343
Interest-bearing deposits		333,043			328,932			322,627			317,196			312,668
Deposits		388,124			383,144			375,617			369,643			364,798
Borrowed funds		43,685			46,758			52,167			45,000			37,696
Equity		48,242			47,006			46,023			45,907			44,916
Common equity		48,242			47,006			46,023			45,907			44,916

Return on average assets		0.99	%		1.15	%		0.92	%		0.82	%		0.99	%
Return on average equity		9.85	%		11.97	%		9.55	%		8.23	%		9.91	%

Efficiency ratio		67.74	%		65.23	%		70.72	%		62.46	%		66.51	%
Non-interest income to average assets		0.75	%		0.77	%		0.70	%		0.75	%		0.82	%
Non-interest expenses to average assets		2.70	%		2.76	%		2.86	%		2.67	%		2.83	%
Net overhead to average assets		1.95	%		1.99	%		2.16	%		1.91	%		2.01	%
Yield on loans		4.89	%		4.94	%		4.75	%		4.88	%		4.73	%
Yield on investment securities (TE)		2.51	%		2.61	%		2.56	%		2.77	%		2.68	%
Yield on average earning assets (TE)		4.46	%		4.61	%		4.42	%		4.52	%		4.41	%
Cost of average interest bearing liabilities		1.24	%		1.14	%		1.04	%		0.94	%		0.88	%
Net interest margin (TE)		3.43	%		3.67	%		3.55	%		3.74	%		3.68	%
Number of FTE employees		98			99			96			98			97

Asset Quality Indicators:
Non-performing loans to total loans		0.54	%		0.54	%		0.54	%		0.36	%		0.73	%
Non-performing assets to total assets		0.43	%		0.43	%		0.43	%		0.29	%		0.58	%
Allowance for loan losses to total loans		1.29	%		1.24	%		1.21	%		1.26	%		1.34	%
YTD net charge-offs (recoveries) to average loans, annualized		0.01	%		0.02	%		0.06	%		(0.01)	%		—	%
YTD net charge-offs (recoveries)		38			34			61			(20)			2

Consolidated Financial Highlights (Unaudited)
Consolidated Statement of Income


	Nine Months Ended
		(In Thousands, Except Per Share Data and ratios)
	September 30,		September 30,
	2018		2017
Interest and dividend income	$	15,116	$	13,690
Interest expense		3,206		2,180
Net interest income		11,910		11,510

Provision for loan losses		90		—

Non-interest income
Service charges on deposit accounts		898		922
Other service charges and fees		919		882
Gain on sale of mortgage loans		214		235
Non-deposit brokerage fees		310		268
Lease income		183		185
BOLI income		132		132
Gain on sale of securities		—		48
Total non-interest income		2,656		2,672

Non-interest expenses:
Personnel expense		5,349		5,062
Net occupancy expense		1,342		1,356
Advertising and public relations		268		259
Professional fees		492		461
Data processing services		607		718
Franchise shares and deposit tax		360		396
FDIC insurance		127		150
Other		1,390		1,308
Total non-interest expenses		9,935		9,710

Income before income taxes		4,541		4,472
Income taxes		885		1,335
Net income		3,656		3,137
Dividends on preferred stock		—		238
Net income available for common stockholders	$	3,656	$	2,899
Basic earnings per common share	$	1.44	$	1.30
Diluted earnings per common share	$	1.44	$	1.23

Consolidated Financial Highlights (Unaudited)
Key Operating Statistics


	Nine Months Ended
	(In Thousands, Except Per
	Share Data and ratios)
	September 30,			September 30,
	2018			2017
Average:
Assets	$	479,158		$	452,177
Earning Assets		451,715			424,753
Loans		383,620			363,294
Interest-bearing deposits		328,239			315,821
Deposits		382,341			365,925
Borrowed funds		47,505			40,161
Equity		47,098			43,938
Common equity		47,098			39,659

Return on average assets		1.02	%		0.93	%
Return on average equity		10.38	%		9.55	%

Efficiency ratio		67.84	%		67.81	%
Non-interest income to average assets		0.74	%		0.79	%
Non-interest expenses to average assets		2.77	%		2.87	%
Net overhead to average assets		2.03	%		2.08	%
Yield on loans		4.86	%		4.67	%
Yield on investment securities (TE)		2.56	%		2.80	%
Yield on average earning assets (TE)		4.50	%		4.37	%
Cost of average interest bearing liabilities		1.14	%		0.82	%
Net interest margin (TE)		3.55	%		3.68	%
Number of FTE employees		98			97

Consolidated Financial Highlights (Unaudited)


	(In Thousands, Except Per Share Data and ratios)
	September 30,			December 31,			December 31,
Consolidated Capital Ratios	2018			2017			2016

Total shareholders' equity to total assets ratio		10.26	%		9.85	%		9.30	%
Tangible equity ratio (1)		9.46	%		9.02	%		8.44	%
Tangible common equity ratio (1)		9.46	%		9.02	%		6.83	%
Book value per common share	$	19.14		$	18.14		$	17.54
Tangible book value per common share (1)	$	17.50		$	16.47		$	15.40
End of period common share closing price	$	26.25		$	24.00		$	18.00

(1) The tangible equity ratio, tangible common equity ratio and tangible book value per common share, while not required by accounting principles generally accepted in the United States of America (GAAP), are considered critical metrics with which to analyze banks. The ratio and per share amount have been included to facilitate a greater understanding of the Company's capital structure and financial condition. See the Regulation G Non-GAAP Reconciliation table for reconciliation of this ratio and per share amount to GAAP.


	(In Thousands, Except Per Share Data and ratios)
	September 30,			December 31,			December 31,
Regulation G Non-GAAP Reconciliation:	2018			2017			2016

Total shareholders' equity (a)	$	48,589		$	45,834		$	42,364
Less:
Preferred stock		—			—			(7,261)
Common equity (b)		48,589			45,834			35,103
Goodwill		(4,097)			(4,097)			(4,097)
Intangible assets		(71)			(124)			(194)
Tangible common equity (c)		44,421			41,613			30,812
Add:
Preferred stock		—			—			7,261
Tangible equity (d)		44,421			41,613			38,073

Total assets (e)		473,674			465,382			455,422
Less:
Goodwill		(4,097)			(4,097)			(4,097)
Intangible assets		(71)			(124)			(194)
Tangible assets (f)	$	469,506		$	461,161		$	451,131
Shares outstanding (in thousands) (g)		2,538			2,526			2,001

Book value per common share (b/g)	$	19.14		$	18.14		$	17.54
Tangible book value per common share (c/g)	$	17.50		$	16.47		$	15.40
Equity to assets ratio (a/e)		10.26	%		9.85	%		9.30	%
Tangible equity ratio (d/f)		9.46	%		9.02	%		8.44	%
Common equity ratio (b/e)		10.26	%		9.85	%		7.71	%
Tangible common equity ratio (c/f)		9.46	%		9.02	%		6.83	%

SOURCE Citizens First Corporation

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