Accelerate: We Believe Growth
Over the past year, a great deal has occurred. The war in Ukraine and the economic sanctions imposed on Russia have had a substantial influence on the global economy which has also impacted local economies. The outcomes are visible with the highest inflation rate in four decades which has compelled the Federal Reserve to aggressively raise interest rates by 4.25 percentage points higher than they were at this time last year.
The war has also exacerbated supply chain issues forcing delays in housing, construction, and manufacturing. Most recently, the banking industry experienced another level of uncertainty around the strength and stability of the banking system with the failure of Silicon Valley Bank (SVB) and Signature Bank. The intervention of the United States Treasury and regulatory agencies provided some level of comfort. Yet, management felt it important that we engage our clients through electronic communications, our website and social media and most importantly, through personal customer interactions to provide reassurance that the Bank is well-capitalized and well positioned for success and sustainability. We are pleased with our client’s response and trust in us.
In spite of these events, The Company had an outstanding year. Citizens Trust Bank remains strong and is strategically positioned to serve its clients and community for generations to come. Furthermore, Citizens Trust Bank has accomplished significant milestones and celebrated notable achievements over the past year. At our core, we understand that banking relationships are more than transactions; they are the building blocks of community and connectivity. The theme, “Accelerate: We Believe in Growth,” encapsulates our unwavering commitment to grow our business so that we can support the growth of our client’s businesses and create customized, holistic financial solutions that cater to their unique needs in every stage of life. Citizens Trust Bank, with over a century of experience and currently serving clients in 48 states, takes pride in its strong legacy.
Providing financial backing to businesses, supporting the American dream and building wealth for families remains our primary mission. 2022 Financial Highlights 2022 was another historic and exceptional year for Citizens Trust Bank, with the Company generating record revenue for four of the last five years.
We earned total revenue in 2022 of $30.9 million and net income of $9.4 million, with a return on tangible common equity (ROTCE) of 19%, reflecting strong underlying performance. We also increased our common dividend to $0.75 per share, paid all dividends to our preferred shareholders and continued to maintain a strong balance sheet. Further, we continue to make solid investments in products, people and technology while exercising a strong credit discipline. During 2022, we achieved the following milestones that continue to validate our strategy:
- Record Earning: Experienced a 132% increase in net income to $9.4 million in 2022 compared to $4.1 million in 2021.
- Record EPS: Earnings per share (EPS) increased to $4.64 in 2022, a 136% increase over last year.
- Record growth in loans: We experienced strong diversified growth in gross loans. During 2022, gross loans exceeded a historical record set in 2021 by $56 million, or 20%, highlighted by 86% of loans originated to minorities and small-medium sized businesses.
- Record growth in total assets: As of December 31, 2022, Total assets increased $138 million, or 21%, compared to 2021.
- Record common stock dividend: Increased common stock dividends to a record $0.75 per share while maintaining sufficient capital to ensure our long-term financial strength. The annual common stock dividend payout for 2023 was $1.5 million, or $0.75 per share compared to $0.50 per share in 2022.
- Record Capital: Representing strength and sustainability, at December 31, 2022, both the Company and the bank were classified as well-capitalized based on regulatory guidelines, with total capital of 48% and 20%, respectively.
- The Company received a $95.7 million capital investment from the U.S. Department of Treasury ECIP Program designed to support our lending to financially underserved borrowers and communities. In addition, the company also received a $5 million capital investment from TD Community Development Corporation. These investments are already having a significant impact on the bank and our ability to enhance the impact within our current communities and expand into similar communities in other markets.
- Pursuing Growth: We have expanded our market area to include a commercial lending presence in North Atlanta, GA and Nashville, TN with a strategy to expand to other markets within Tennessee, Texas and North Carolina by 2025.
- Net interest income increased $7.7 million, or 48%, in 2022, reflecting growth of $135 million in earning assets, and higher yields earned as we effectively managed our interest rate position as the Federal Reserve aggressively increased rates.
- Noninterest income increased $1.9 million, or 41%, resulting from applying and being awarded a grant through the CDFI fund for our response in addressing the economic challenges created by the COVID-19 pandemic, particularly in underserved communities.
- Noninterest expense increased $2.4 million, or 15%, driven by hiring additional teammates, wage inflation and other operating expenses associated with the Bank’s marketing and planned expansion. We believe these key performance indicators show how, with each passing year, we become a more competitive and dynamic financial institution.
As we set our sights on 2023, even though the rise in rates substantially improved the Company’s net interest margin during 2022, we anticipate the rising rate environment could have a notable impact on the bank’s cost of funds and may affect the robust loan demand we have experienced. We are cognizant of the fluid environment in which we operate but remain committed to refining our strategy to ensure that our Company is well-positioned for future success. We understand that we cannot afford to become complacent with past achievements; rather, we must continually scrutinize and adapt our business model to deliver optimal value to our shareholders. Our board of directors is instrumental in this effort, as they bring a wealth of experience, expertise, and diverse perspectives to review and approve our plans. With their guidance, we are confident that Citizens Trust Bank will continue to flourish and thrive in the years ahead.
Growing the Communities We Serve
Citizens Trust Bank has been a pillar of the community for over a 100 years, and we remain steadfast in our dedication to delivering exceptional service and tailored innovative financial solutions that address the evolving needs of our clients. Our legacy is founded on the principles of economic equality and well-being, and we are dedicated to fulfilling a broader mission of empowering individuals and future generations to achieve financial success. Our true path to prosperity lies in collaborative engagement with our clients, neighbors, and community leaders to eliminate obstacles that hinder the achievement of financial objectives.
At Citizens Trust Bank, we recognize the importance of building strong relationships within our communities, as it is only through collective action that we can create a brighter future for all. By working together and leveraging our collective strengths, we can overcome challenges and empower individuals to achieve their financial aspirations.
We continue to engage and empower our communities by:
- Extending more than $300 million in loans to community businesses over the last three years and growing.
- Promoting and addressing quality, affordable housing, as we are on track to extend $200 million in new residential loans in the next three years. 6 We have expanded our footprint impacting more minority communities by providing access to capital for small businesses, housing, and other developments. 2022_CB_AnnualReport.indd 6 4/14/23 2:21 PM
- Offering Down Payment Assistance (DPA) from our current partners, additionally, this year we are excited to introduce a new grant program for DPA from Citizens Trust Bank.
- Providing financial wellness education resources through our Financial Independence Training (FIT) program. Since its inception, the program has reached more than 15,000 middle and high school students and is now available to 22 area community schools. We are committed to expanding this invaluable program into new markets in 2023 and beyond.
- Continuing to be good stewards of the Emergency Capital Investment Program (ECIP). We have expanded our footprint impacting more minority communities by providing access to capital for small businesses, housing, and other developments.
- Expanding our Minority Supplier Program which provides needed capital to minority vendors to fulfill their contractual obligations to major corporations, allowing them to thrive and reach their full potential. Further, we continue to build on our communitybased approach to financial wellness by expanding our partnership with Operation HOPE.
The partnership enhances our reach in providing education, insights, and tools that will empower the community to build better lives. Providing access to HOPE Inside, brings in-person and virtual one-on-one financial coaching and solutions inside CTB’s financial centers, starting with our Panola branch in Stonecrest, Georgia.
It is our firm belief that when our community does well, we all do well. When we help someone afford a home, invest for their future, get an education or just open that first checking account and when our bankers help businesses get a jump start on their next big expansion, positive things happen for our communities and our bank. That’s how we measure success. Relationships That Grow with Us As a community bank, we understand our responsibility to promote economic growth and enhance the well-being of our clients and the community we call home. We believe that it is our duty to facilitate commerce and support organizations that share our vision for a better future. Our business model and decisions that drive strategy are built on our commitment to community, as well as embracing strategic partnerships. Our partnerships have played an instrumental role in the Bank’s growth and success, and we remain committed to working alongside our partners to foster a thriving business community and enrich the quality of life for all residents.
An important part of our strategy includes pursuing partnerships with and investments from mainstream and Fortune 500 Companies. These partnerships are mission aligned and committed to addressing economic equality, wealth accumulation and overall financial success for all communities. Forging these partnerships has made us stronger together. In 2022, we added several new relationships to our growing list of partners. The partnerships support our continued growth and impact much of which is detailed above, notably our lending to small and minority businesses that create jobs and are a catalyst to thriving communities. For example, through a launch of the CTB vendor diversity initiative, we are engaged with a Fortune
- Providing financial wellness education resources 500 Company to expand its minority participation with small and medium-sized businesses (SMB) in their U.S. based supplier network. We have successfully supported several businesses with access to capital to engage as a supplier. Further, we are engaged with a mainstream financial institution to provide a similar initiative with Walmart.
This initiative is powered by a digital platform that connects Walmart’s 10,000 SMB’s with a diverse group of more than 70 lenders that provide qualifying businesses with loans of up to $10 million. By fostering these relationships, it strengthens our ability to engage a wider range of businesses. It encourages diversity and inclusion inside supply chains and offers opportunities to more minority SMB to participate with support and access to capital. We believe that promoting inclusion and advocating for economic equality is crucial, and these partnerships give Citizens Trust Bank a greater platform to accelerate growth within our communities.
A Culture of Innovation
As we strive to be a leader and example of an inclusive and diverse organization that represents and serves our clients and communities, we continue to develop tools and resources to make our client’s engagement with us easier and to attract and retain high-performing teammates. We are:
- Enhancing the customer experience and product delivery channels. For example, we are actively engaging a fintech to help streamline the loan decisioning process on certain loan types, while at the same time integrating fraud prevention and risk mitigating software into the auto-decisioning product we deploy. 8 We are enhancing the customer experience and product delivery channels.
- Continuing to build out our digital marketing platforms to bolster awareness of the bank, increase wallet share and deepen relationships with our clients.
- Deploying marketing strategies around the talent acquisition and hiring process to attract new talent through social media communities. We also regularly research the market to understand labor trends to be more competitive in the pursuit of attracting the best talent, while at the same time, continuously evaluating our culture to ensure we are a great place to work.
- Deploying a unique and fresh approach to engaging in new markets utilizing technology and reimagined, more efficient space for client engagement. The Power of Growth We are proud of the substantial growth we have experienced over the past several years almost doubling in size organically. Though there continues to be uncertainty in the environment, we are committed to, cautiously yet optimistically, press forward and pursue all opportunities that will facilitate our growth. Our culture is one that looks ahead and welcomes change, with a focus on serving niche markets where we can add value and utilize technology to deliver seamless and efficient service.
While these have always been fundamental components of our business model, we believe that in this shifting landscape, Citizens Trust Bank is poised to be a relevant, mission-driven and innovative community bank of the future. As we move forward, we remain committed to executing on our priorities to achieve remarkable and long-lasting financial performance.
We firmly believe that by staying true to our mission, values and priorities, we can continue to create value for our clients, stakeholders and the communities we serve. We thank our teammates and board of directors for their unwavering commitment to the success of our Company and we thank you our fellow shareholders for your continued support.