Citizens First Corporation Announces Second Quarter 2017 Results and Completion of Preferred Stock Redemption

BOWLING GREEN, Ky., July 20, 2017 /PRNewswire/ -- Citizens First Corporation (NASDAQ: CZFC) today reported results for the second quarter ending June 30, 2017, which include the following:

For the quarter ended June 30, 2017, the Company reported net income of $1.11 million, or $0.43 per diluted common share. This represents an increase of $34,000 from $1.07 million, or $0.42 per diluted common share, for the quarter ended June 30, 2016. For the six months ended June 30, 2017, net income totaled $2.02 million, or $0.79 per diluted common share. This represents an increase of $36,000, or $0.01 per diluted common share, from the net income of $1.98 million in the first six months of the previous year.

As of June 30, 2017, the Company completed the redemption of the 6.5% Cumulative Preferred Stock, which provided an additional $7.1 million in common equity. Outstanding common shares of the Company increased 25% as a result of the preferred shareholders' option to convert preferred shares into common shares. The Company's tangible common equity ratio increased from 6.83% at December 31, 2016 to 8.75% at June 30, 2017. "In addition to improving our tangible common equity, the conversion of the preferred shares will reduce annual preferred dividend expense by $476,000," said Todd Kanipe, President and CEO.

Income Statement Second Quarter 2017 Compared to Second Quarter 2016

Net interest income decreased $45,000, or 1.2%, as the yield on loans decreased and the cost of funds increased from the second quarter of the prior year. The Company's net interest margin was 3.69% for the quarter ended June 30, 2017, compared to 3.92% for the quarter ended June 30, 2016, a decrease of 23 basis points. The Company's net interest margin decreased primarily due to a decline in the yield on loans and an increase in the cost of interest-bearing liabilities.

There was no provision for loan losses in the second quarter of the current year compared to an ($85,000) (credit) provision for loan losses in the second quarter of the prior year.

Non-interest income increased $7,000, or 0.8%, from the prior year primarily due to an increase in lease income of $31,000 and other service charges and fees of $29,000, offset by a decrease in gains on sale of securities of $55,000.

Non-interest expense decreased $177,000, or 5.2%, from the prior year primarily due to a decrease in other expenses of $78,000, a reduction in occupancy expenses of $46,000, and a decrease in personnel expense of $21,000.

Income Statement Current Year Compared to Prior Year

Net interest income decreased $128,000, or 1.6%, as the yield on loans decreased and the cost of funds increased from the prior year. The Company's net interest margin was 3.68% for the six months ended June 30, 2017, and 3.93% for the six months ended June 30, 2016, a decrease of 25 basis points. The Company's net interest margin decreased due to a decrease in the yield on average earning assets coupled with an increase in the cost of average interest-bearing liabilities.

Non-interest income decreased $40,000, or 2.2%, primarily due to a reduction in gains on the sale of securities of $83,000 and a decrease in service charges on deposit accounts of $59,000, offset by an increase in other service charges and fees of $45,000 and lease income of $38,000.

Non-interest expense decreased $340,000, or 5.0%, primarily due to reductions in all categories of expenses, including $71,000 in personnel expenses and $68,000 in occupancy expenses. "We have been successful in lowering operating expenses which has contributed to the improvement of the overall profitability of the Company," Kanipe added.

Credit Quality

Non-performing assets totaled $2.9 million, or 0.63% of total assets, at June 30, 2017 compared to $23,000, or 0.01% of total assets at December 31, 2016, an increase of $2.9 million. Two agricultural-related credits were moved to non-accrual status during the first quarter of 2017.

The allowance for loan losses at June 30, 2017 was $4.9 million, or 1.36% of total loans, compared to $4.9 million, or 1.35% of total loans as of December 31, 2016. We consider 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 our loan portfolio.

Balance Sheet

Total assets at June 30, 2017 were $462.4 million compared to $455.4 million at December 31, 2016. Total assets increased $6.9 million, or 1.5%, from December 31, 2016 to June 30, 2017 due to a growth in loans and interest-bearing deposits in other financial institutions, partially offset by a decline in available-for-sale securities.

Loans increased $1.1 million, or 0.3%, from December 31, 2016 to June 30, 2017. "Higher than anticipated payoffs and softer loan demand resulted in flat average loan balances in the second quarter of 2017," Kanipe noted. Deposits increased $426,000, or 0.1%, from December 31, 2016 to June 30, 2017. Borrowings from the Federal Home Loan Bank increased $5.0 million, or 14.3%, from December 31, 2016 to June 30, 2017.

Stockholders' equity increased to $44.3 million at June 30, 2017 from $42.4 million at December 31, 2016. The book value per common share and tangible book value per common share ratios were $17.55 and $15.87, respectively, at June 30, 2017 compared to $17.54 and $15.40, respectively, at December 31, 2016.

Redemption and Conversion of Cumulative Preferred Stock

On May 15, 2017, the Board of Directors of the Company authorized the redemption of all 229 outstanding shares of the Company's Cumulative Convertible Preferred Stock ("Preferred Shares") as of June 30, 2017 (the "Redemption Date") at the redemption price of $31,992 per share (the Stated Value of the Preferred Shares), plus accrued and unpaid dividends. The Preferred Shares were convertible at the option of the holder, until the day prior to the Redemption Date, into a number of shares of common stock determined by dividing the Stated Value of the Preferred Shares ($31,992) by $14.06, the conversion price.

From May 15, 2017 to the Redemption Date, the Company issued an aggregate of 507,325 shares of common stock upon conversion of 223 Preferred Shares. Six preferred shares with an aggregate redemption price of $191,952 were redeemed. As a result of the conversion of Preferred Shares, the outstanding shares of the Company's common stock have increased from 2,019,052 to 2,526,377 as of June 30, 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 Share Data and ratios)
	June 30,		December 31,		December 31,
	2017		2016		2015
Assets
Cash and due from financial institutions	$	6,769	$	8,542	$	8,865
Federal funds sold		—		—		6,390
Interest-bearing deposits in other financial institutions		24,351		11,018		2,728
Available-for-sale securities		48,560		53,547		60,200
Loans held for sale		—		264		—
Loans		360,470		359,391		330,782
Allowance for loan losses		(4,898)		(4,854)		(4,916)
Premises and equipment, net		9,212		9,390		9,998
Bank owned life insurance (BOLI)		8,439		8,351		8,174
Federal Home Loan Bank (FHLB) stock, at cost		2,053		2,025		2,025
Accrued interest receivable		1,435		1,622		1,680
Deferred income taxes		1,210		1,464		1,328
Goodwill and other intangible assets		4,256		4,291		4,362
Other real estate owned		—		—		100
Other assets		499		371		465
Total Assets	$	462,356	$	455,422	$	432,181
Liabilities
Deposits
Noninterest bearing	$	50,404	$	52,322	$	48,522
Savings, NOW and money market		175,400		173,620		168,335
Time		145,061		144,497		153,531
Total deposits		370,865		370,439		370,388
FHLB advances and other borrowings		40,000		35,000		15,000
Subordinated debentures		5,000		5,000		5,000
Accrued interest payable		229		220		213
Other liabilities		1,923		2,399		2,056
Total Liabilities		418,017		413,058		392,657
Stockholders' Equity
6.5% Cumulative convertible preferred stock		—		7,261		7,659
Common stock		33,050		25,920		25,406
Retained earnings		11,321		9,706		6,304
Accumulated other comprehensive income (loss)		(32)		(523)		155
Total stockholders' equity		44,339		42,364		39,524
Total liabilities and stockholders' equity	$	462,356	$	455,422	$	432,181

Consolidated Financial Highlights (Unaudited) Consolidated Statement of Income

		Three months ended
		(In Thousands, Except Per Share Data and ratios)
		June 30,		March 31,		December 31,		September 30,		June 30,
		2017		2017		2016		2016		2016
Interest and dividend income		$	4,593	$	4,457	$	4,572	$	4,557	$	4,536
Interest expense			726		677		652		639		624
	Net interest income		3,867		3,780		3,920		3,918		3,912

Provision (credit) for loan losses			—		30		—		—		(85)

Non-interest income
Service charges on deposit accounts			327		278		371		361		339
Other service charges and fees			301		264		245		262		272
Gain on sale of mortgage loans			88		68		97		110		91
Non-deposit brokerage fees			91		87		85		83		75
Lease income			80		52		52		61		49
BOLI income			45		43		44		45		44
Gain on sale of securities			—		23		—		20		55
	Total non-interest income		932		815		894		942		925

Non-interest expenses:
Personnel expense			1,655		1,734		1,741		1,674		1,676
Net occupancy expense			446		461		471		481		492
Advertising and public relations			77		71		75		86		98
Professional fees			171		130		50		98		137
Data processing services			251		253		256		262		263
Franchise shares and deposit tax			132		132		132		132		132
FDIC insurance			49		49		47		58		59
Other real estate owned expenses			—		—		1		(8)		23
Other			432		461		457		452		510
	Total non-interest expenses		3,213		3,291		3,230		3,235		3,390

Income before income taxes			1,586		1,274		1,584		1,625		1,532
Income taxes			478		367		481		490		458
	Net income		1,108		907		1,103		1,135		1,074
Dividends on preferred stock			119		119		124		124		123
Net income available for common stockholders		$	989	$	788	$	979	$	1,011	$	951
	Basic earnings per common share	$	0.47	$	0.39	$	0.49	$	0.50	$	0.48
	Diluted earnings per common share	$	0.43	$	0.36	$	0.43	$	0.45	$	0.42

Consolidated Financial Highlights (Unaudited) Key Operating Statistics

	Three months ended
	(In Thousands, Except Per Share Data and ratios)
	June 30,			March 31,			December 31,			September 30,			June 30,
	2017			2017			2016			2016			2016
Average:
Assets	$	454,524		$	452,265		$	444,168		$	442,042		$	439,081
Earning Assets		427,675			424,349			417,161			414,569			409,722
Loans		363,733			363,824			347,046			344,733			338,456
Interest-bearing deposits		319,883			314,939			310,336			304,473			311,084
Deposits		368,743			364,227			360,816			354,953			360,209
Borrowed funds		39,769			43,078			38,429			42,490			35,868
Equity		44,047			42,827			42,652			42,002			40,912
Common equity		38,240			35,718			35,391			34,741			33,651

Return on average assets		0.98	%		0.81	%		0.99	%		1.02	%		0.98	%
Return on average equity		10.09	%		8.59	%		10.29	%		10.75	%		10.56	%

Efficiency ratio		66.10	%		70.96	%		66.20	%		65.86	%		69.74	%
Non-interest income to average assets		0.82	%		0.73	%		0.80	%		0.85	%		0.85	%
Non-interest expenses to average assets		2.84	%		2.95	%		2.89	%		2.91	%		3.11	%
Net overhead to average assets		2.01	%		2.22	%		2.09	%		2.06	%		2.26	%
Yield on loans		4.69	%		4.60	%		4.86	%		4.86	%		4.95	%
Yield on investment securities (TE)		2.85	%		2.87	%		2.58	%		2.66	%		2.77	%
Yield on average earning assets (TE)		4.37	%		4.32	%		4.42	%		4.44	%		4.53	%
Cost of average interest bearing liabilities		0.81	%		0.77	%		0.74	%		0.73	%		0.72	%
Net interest margin (TE)		3.69	%		3.68	%		3.80	%		3.83	%		3.92	%
Number of FTE employees		95			94			95			94			96

Asset Quality Indicators:
Non-performing loans to total loans		0.80	%		0.83	%		0.01	%		0.05	%		0.06	%
Non-performing assets to total assets		0.63	%		0.65	%		0.01	%		0.04	%		0.06	%
Allowance for loan losses to total loans		1.36	%		1.34	%		1.35	%		1.45	%		1.43	%
YTD net charge-offs (recoveries) to average loans, annualized		(0.01)	%		(0.02)	%		(0.01)	%		(0.05)	%		(0.07)	%
YTD net charge-offs (recoveries)		(13)			(22)			(23)			(130)			(119)

Consolidated Financial Highlights (Unaudited) Consolidated Statement of Income

		Six Months Ended
		June 30,		June 30,
		2017		2016
Interest and dividend income		$	9,050	$	9,012
Interest expense			1,403		1,237
	Net interest income		7,647		7,775

Provision (credit) for loan losses			30		(85)

Non-interest income
Service charges on deposit accounts			605		664
Other service charges and fees			565		520
Gain on sale of mortgage loans			156		168
Non-deposit brokerage fees			178		147
Lease income			132		94
BOLI income			88		88
Gain on sale of securities			23		106
	Total non-interest income		1,747		1,787

Non-interest expenses:
Personnel expense			3,389		3,460
Net occupancy expense			907		975
Advertising and public relations			148		159
Professional fees			301		317
Data processing services			504		519
Franchise shares and deposit tax			264		264
FDIC insurance			98		118
Other real estate owned expenses			—		24
Other			893		1,008
	Total non-interest expenses		6,504		6,844

Income before income taxes			2,860		2,803
Income taxes			845		824
	Net income		2,015		1,979
Dividends on preferred stock			238		247
Net income available for common stockholders		$	1,777	$	1,732
	Basic earnings per common share	$	0.86	$	0.87
	Diluted earnings per common share	$	0.79	$	0.78

Consolidated Financial Highlights (Unaudited) Key Operating Statistics

	Six Months Ended
	(In Thousands, Except Per
	Share Data and ratios)
	June 30,			June 30,
	2017			2016
Average:
Assets	$	453,401		$	436,112
Earning Assets		426,021			406,181
Loans		363,778			335,728
Interest-bearing deposits		317,425			315,724
Deposits		366,498			363,803
Borrowed funds		41,415			29,631
Equity		43,441			40,534
Common equity		36,987			33,241

Return on average assets		0.90	%		0.91	%
Return on average equity		9.35	%		9.82	%

Efficiency ratio		68.47	%		70.63	%
Non-interest income to average assets		0.78	%		0.74	%
Non-interest expenses to average assets		2.89	%		3.07	%
Net overhead to average assets		2.12	%		2.33	%
Yield on loans		4.65	%		4.95	%
Yield on investment securities (TE)		2.86	%		2.77	%
Yield on average earning assets (TE)		4.34	%		4.54	%
Cost of average interest bearing liabilities		0.79	%		0.72	%
Net interest margin (TE)		3.68	%		3.93	%
Number of FTE employees		95			96

Consolidated Financial Highlights (Unaudited)


	(In Thousands, Except Share Data and ratios)
	June 30,			December 31,			December 31,
Consolidated Capital Ratios	2017			2016			2015

Total shareholders' equity to total assets ratio		9.59	%		9.30	%		9.15	%
Tangible equity ratio (1)		8.75	%		8.44	%		8.22	%
Tangible common equity ratio (1)		8.75	%		6.83	%		6.43	%
Book value per common share	$	17.55		$	17.54		$	16.18
Tangible book value per common share (1)	$	15.87		$	15.40		$	13.97
End of period common share closing price	$	22.14		$	18.00		$	13.74



(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 Share Data and ratios)
	June 30,			December 31,			December 31,
Regulation G Non-GAAP Reconciliation:	2017			2016			2015

Total shareholders' equity (a)	$	44,339		$	42,364		$	39,524
Less:
Preferred stock		—			(7,261)			(7,659)
Common equity (b)		44,339			35,103			31,865
Goodwill		(4,097)			(4,097)			(4,097)
Intangible assets		(159)			(194)			(265)
Tangible common equity (c)		40,083			30,812			27,503
Add:
Preferred stock		—			7,261			7,659
Tangible equity (d)		40,083			38,073			35,162

Total assets (e)		462,356			455,422			432,181
Less:
Goodwill		(4,097)			(4,097)			(4,097)
Intangible assets		(159)			(194)			(265)
Tangible assets (f)	$	458,100		$	451,131		$	427,819
Shares outstanding (in thousands) (g)		2,526			2,001			1,969

Book value per common share (b/g)	$	17.55		$	17.54		$	16.18
Tangible book value per common share (c/g)	$	15.87		$	15.40		$	13.97
Equity to assets ratio (a/e)		9.59	%		9.30	%		9.15	%
Tangible equity ratio (d/f)		8.75	%		8.44	%		8.22	%
Common equity ratio (b/e)		9.59	%		7.71	%		7.37	%
Tangible common equity ratio (c/f)		8.75	%		6.83	%		6.43	%

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SOURCE Citizens First Corporation

Citizens First Corp. (MM) (NASDAQ:CZFC)
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