Citizens Holding(US:CIZN)2023-08-14 20:33Capital Adequacy - Total shareholders' equity increased to $40,141 at June 30, 2023, compared to $39,025 at December 31, 2022, due to a change in AOCI from decreased medium-term interest rates [215]. - The Tier 1 leverage ratio for the Company was 8.17% at June 30, 2023, compared to 7.96% at December 31, 2022, indicating improved capital adequacy [217]. - The Company and Bank are considered well capitalized as of June 30, 2023, meeting all capital adequacy requirements under Basel III [219]. - The total risk-based capital ratio for the Company was 14.28% at June 30, 2023, compared to 13.83% at December 31, 2022, reflecting a stronger capital position [217]. - The minimum capital requirements under Basel III include a common equity Tier 1 capital ratio of at least 4.5% and a total risk-based capital ratio of at least 8% [243]. Liquidity - The liquidity ratio was 13.39% at June 30, 2023, down from 14.58% at December 31, 2022, attributed to a decrease in interest-bearing cash and cash equivalents [212]. - The Company had $190,612 of unused and available line of credit with the FHLB as of June 30, 2023, an increase from $160,488 at December 31, 2022, due to more loans being eligible for the collateral pool [213]. - Management believes it has sufficient liquidity options available for short-term funding needs [215]. - The Company maintains an asset and liability management program to manage net interest margins and liquidity effectively [212]. Interest Income and Expenses - Net interest income for the three months ended June 30, 2023, was $7,414 million, a decrease from $8,763 million in the same period of 2022, reflecting a decline of 15.4% [220]. - The company reported an increase in interest expense to $3,744 million for the three months ended June 30, 2023, compared to $797 million in the same period of 2022, reflecting a rise of 369.4% [220]. - The cost of funds increased to 147 bps for the three months ended June 30, 2023, compared to 33 bps for the same period in 2022 [248]. - The net interest margin for the three months ended June 30, 2023, was 2.55%, down from 2.78% in the same period of 2022, indicating a contraction in profitability [224]. - The annualized net interest margin decreased to 2.55% for the three months ended June 30, 2023, down from 2.78% in the same period of 2022 [248]. - The net interest margin is expected to contract further in Q3 2023 before leveling off for the remainder of the year [264]. Credit Losses - Provision for credit losses (PCL) increased to $417 million for the three months ended June 30, 2023, compared to $56 million in the same period of 2022, indicating a significant rise in credit risk [220]. - The provision for credit losses (PCL) for the three months ended June 30, 2023 was $417, influenced by inflationary risk concerns [270]. - The Company's Allowance for Credit Losses (ACL) increased by 21.52% to $6,397 in 2023 from $5,264 in 2022 [255]. - The net loan losses recovered to the ACL totaled $11 for the three months ended June 30, 2023, a decrease of $203 from $214 in the same period of 2022 [271]. - The ACL to gross loans ratio improved to 1.11% in 2023 from 0.90% in 2022 [255]. Income and Expenses - Net income for the three months ended June 30, 2023, was $300 million, down from $2,541 million in the same period of 2022, representing a decline of 88.2% [220]. - Other income for the three months ended June 30, 2023 was $2,261, a decrease of $502, or (18.17%), from $2,763 in the same period of 2022 [273]. - Aggregate non-interest expenses for the three months ended June 30, 2023 were $9,037, an increase of $605, or 7.18%, compared to $8,432 for the same period in 2022 [273]. - Salaries and benefits increased $298, or 6.75%, to $4,710 for the three months ended June 30, 2023 compared to the same period in 2022 [273]. - The Company's efficiency ratio for the three months ended June 30, 2023 was 92.64%, compared to 71.83% for the same period in 2022 [277]. Asset and Deposit Trends - Total assets as of June 30, 2023, were $1,329,981 million, a slight decrease from $1,334,523 million as of June 30, 2022, a decline of 0.3% [224]. - Customer deposits decreased from $1,126,402 at December 31, 2022, to $1,103,072 at June 30, 2023 [238]. - Total deposits for the three months ended June 30, 2023, were $823,756 million, slightly down from $827,513 million in the same period of 2022, a decrease of 0.9% [224]. - Total assets decreased by $34,664, or (2.62%), to $1,289,339 at June 30, 2023 from $1,324,003 at December 31, 2022 [286]. - Total deposits decreased by $23,330, or (2.07%), to $1,103,072 at June 30, 2023 from $1,126,402 at December 31, 2022 [286]. Securities and Investments - The total value of securities held-to-maturity was $92.885 billion, slightly up from $92.840 billion at December 31, 2022 [294]. - The amortized cost of available-for-sale securities was $236.544 billion, with an estimated fair value of $196.866 billion as of June 30, 2023 [301]. - The company reported a total of $363.175 billion in residential and commercial mortgage-backed securities, with total unrealized losses of $33.756 billion [297]. - The company had no securities classified as nonaccrual as of June 30, 2023 [293]. - As of June 30, 2023, the company had no securities held-to-maturity that were past due 30 days or more [293]. Risk Management - The company uses an interest rate risk simulation model to evaluate the sensitivity of net interest income, with a projected decrease of 14.0% in net interest income under a +400 basis points scenario [106]. - The economic value of equity at risk decreased by 30.5% under a +300 basis points scenario as of June 30, 2023 [106]. - The company emphasizes the origination of shorter duration and variable rate loans to mitigate exposure to interest rate increases [107]. - The company plans to review its assumption of expected credit loss being zero for certain securities quarterly [292]. - The company does not typically enter into derivative contracts for managing interest rate risk but may consider it if necessary [100].