Citizens Bancshares: Regional Bank Gets A Huge Capital Boost

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The banal value of Citizens Bancshares Corp. (OTCPK:CZBS), which had lingered wrong a constrictive scope of $7-$14 for a decade, has yet demonstrated its potential, breaking done its first guidance of $14 and soaring to an unprecedented high of $37 wrong a specified 9 months. In addition, nan slope received a important boost to its aspirations, pinch a $5 cardinal grant from Morgan Stanley (MS) successful 2020 and a $5 cardinal investment from TD Bank (TD) successful speech for preferred shares successful 2022. These resources will facilitate nan bank's description into Texas, Tennessee, and North Carolina. With much than $264 cardinal successful rate and rate equivalents arsenic of 2021, nan slope is poised to put these resources to summation its profitability - particularly successful nan existent situation of rising liking rates. Ultimately, this will return nan stock value higher successful nan adjacent 2 to 3 years.

Stock Price Chart for 10 Years

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About nan Company

CBZS operates arsenic nan holding institution for Citizens Trust Bank, a financial institution that goes backmost 100 years. It was established to foster economical stableness and business growth, peculiarly successful making homeownership accessible to number groups, pinch an accent connected African Americans. After 100 years, nan institution looks fresh to dispersed its wings and alert beyond its location metropolis of Atlanta to make nan American dream imaginable for minorities and more. Despite its humble beingness footprint, pinch only 7 branches predominantly successful Atlanta, Citizens Bancshares has a important integer presence. It serves customers successful 48 states, wherever 70% of each customer interactions return spot via online and mobile banking platforms.

Industry Analysis

The commercialized banking manufacture has felt nan double-edged beard of rising liking rates. While banks tin walk connected these rates to customers and frankincense debar affecting their profitability, nan downside is simply a reduced maturation complaint of caller loans. At nan section level, CZBS has nary awesome peers - it has a different target marketplace than nan large players, while different mini players are usually in installments unions. However, erstwhile it comes to performance, CZBS is simply a worthy rival to century-old location banks for illustration Chesapeake Financial Shares (OTCQX:CPKF), First National Corporation (FXNC), and United Bancorp (UBCP). CZBS boasts nan highest returns complete aggregate periods - one, two, five, and 10 years - compared to its peers. With eager maturation plans successful nan pipeline, nan inclination of CZBS outshining nan title mightiness good continue.

High Liquidity and Regular Dividends

In nan past 2 years, location has been a important summation successful some interest-bearing and non-interest-bearing deposits, amplifying nan bank's capacity to widen loans. This surplus superior has been deployed arsenic interest-bearing deposits pinch different financial institutions, which is included successful nan bank's rate and rate equivalents. This has resulted successful an upward surge successful nan bank's Tier 1 superior ratio, which has risen from a coagulated 17% astatine nan adjacent of 2020 to an awesome 24% successful 2021, a captious measurement of a bank's financial spot that has been adopted arsenic portion of nan Basel III accord. The only drawback to this script was nan reduced work charges, which declined by 50% betwixt 2019 and 2021 - from $3.5 cardinal to $1.6 cardinal - owed to nan higher balances maintained by customers.

Furthermore, complete nan past decade, nan slope has consistently demonstrated a precocious grade of plus quality, pinch an mean proviso for losses of little than 1% and non-performing assets of only 0.27% arsenic of 2021. After 2021, nan bank's book worth per stock was $27.04, which is expected to summation pinch nan bank's profits and assets. This, successful turn, has resulted successful a humble price/book ratio of 1.33, suggesting that nan bank's shares mightiness beryllium undervalued. To headdress disconnected these awesome results, nan slope has a long-standing contented of paying dividends. It has maintained a accordant payout for nan past 22 years, pinch an mean payout maturation complaint of much than 13.2% and a compounded maturation complaint of 6.7%. This inclination is expected to proceed arsenic loans and margins scope caller heights.

Dividend History since 2001

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Decrease successful Net Loans, but Not a Big Concern

Despite nan plethora of opportunities for nan bank, a matter of interest has arisen successful nan shape of a diminution successful nett loans successful 2021. This could raise questions regarding nan operational efficacy of nan bank, fixed nan precocious request for in installments arsenic nan system began to retrieve successful 2021. However, this mightiness beryllium remedied shortly, arsenic nan slope intends to widen $200 cardinal successful residential mortgages by 2024.

Risks and Caveats

Citizen Bancshares boasts a sturdy financial instauration marked by a coveted superior adequacy ratio, yet immoderate factors mightiness inhibit its banal value from reaching greater heights. A superior facet is its listing connected a insignificant banal exchange, which inhibits predominant and effortless trading, resulting successful debased waste and acquisition volumes and trouble buying and trading - peculiarly during value downturns. Transactions connected these registered but unrecognized exchanges necessitate a broker, incurring comparatively precocious commissions. Another point that mightiness hamper Citizen Bancshares' imaginable is its nett income margin, which falls somewhat beneath its manufacture peers. They typically support margins of astir 25%, compared to Citizen Bancshares' 19% margin.


In evaluating nan worthy of Citizens Bancshares, I had 2 options: guidelines it connected nan P/E ratio aliases nan dividend discount exemplary (DDM). I elected to employment nan second for 2 reasons: nan absence of existent net per stock (EPS) accusation and nan bank's demonstrated consistency successful paying dividends, which is expected to persist. Additionally, CZBS precocious declared a dividend of $0.75 per share. To find nan intrinsic worth of nan stock via DDM, I precocious nan pursuing assumptions:

  1. Based connected nan humanities inclination of CZBS's dividend growth, which has consistently exceeded 6.7% and has ever been supra that for astir of nan years, I expect a perpetual maturation complaint of 6.5%.

  2. Utilizing nan superior plus pricing exemplary (CAPM), I presume a costs of equity of 8.1% pinch a risk-free complaint of 3.7%, an equity consequence premium of 8.8%, and a levered beta of 0.5.



Dividend (Latest)


Cost of Equity


Perpetual Growth Rate


Intrinsic Value


At nan clip this article was written, shares were trading astir $36, which I see undervalued based connected my valuation.


Stock Tracking Opinion

As nan financial scenery shifts and evolves, analysts and investors should announcement location banks specified arsenic CZBS more. Currently, their niche worth proposition and constricted visibility are causing them to beryllium relegated to nan sidelines. Despite nan challenges posed by its position arsenic an over-the-counter traded banal wherever you request to bargain and waste done a broker, I will see CZBS successful my finance portfolio owed to its prospective capacity to make important worth done accordant dividend payments.

Investment Opinion

Based connected nan description plans mixed pinch financial stableness and worth creation, my existent sentiment connected CZBS is that it's a buy.

Editor's Note: This article discusses 1 aliases much securities that do not waste and acquisition connected a awesome U.S. exchange. Please beryllium alert of nan risks associated pinch these stocks.

This article was written by

Arpit Sathavara floor plan picture

I americium presently an Investment Research Intern astatine Sungarden Investment Publishing and pursuing an MS successful Finance from nan Stevens Institute of Technology. With an acquisition of much than 3 and half years successful nan section of Finance & Audit, I person developed a knack and liking successful Qualitative and Quantitative Analyses of Companies to publication beyond nan numbers and find untold stories of those companies.Closely associated pinch writer Modern Income Investor.

Disclosure: I/we person nary stock, action aliases akin derivative position successful immoderate of nan companies mentioned, and nary plans to initiate immoderate specified positions wrong nan adjacent 72 hours. I wrote this article myself, and it expresses my ain opinions. I americium not receiving compensation for it (other than from Seeking Alpha). I person nary business narration pinch immoderate institution whose banal is mentioned successful this article.

Editor: Naga

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