Small Cap Bank Earning 14% ROE at 0.94x BV
$75MM for a $600MM asset bank with 15% capital
Disclosures: None
Note: This first look is not exhaustive. This is my first time looking at the company. This post is designed to share my findings, both positive and negative.
The overarching goal is to learn about a new company and put it on both our radar screens.
Last week, I shared my findings on Crazy Woman Creek Bancorp, a $15 million market cap bank earning 12% ROE.
This week features another bank:
1.80% return on assets
14% return on equity
Capital of 12.9% (7.75x leverage)
Available for 0.94x tangible book value
Actively repurchasing shares
The bank is Citizens Bancorp of Virginia, Inc., a single-bank holding company doing business as Citizens Bank and Trust Company.
The bank was founded in 1873 and claims to be the second-oldest independent bank in Virginia.
Headquartered in Blackstone, Virginia, CVBT does business through twelve branches and a loan production office.
Asset Size
While not as small as CRZY, CZBT is still tiny by any bank standards at $578 million in assets. Assets have grown at 5.27% CAGR over the last 9 years but are essentially flatlined over the past five.
Profitability Profile
CZBT puts up solid ROA and ROE numbers. The strong ROA allows the bank to operate with under 8x leverage and still generate a low-teens ROE.
Charge-Offs
The bank excels here, too. Its charge-offs have barely registered over the past decade. Though to be sure, its peer group banks in the $1B to $10B category have had it pretty good themselves.
Digging Deeper
Loans
CZBT maintains a conservatively financed balance sheet. As of the end of 2025 it was just 57% loaned up.
Real estate loans comprised 93% of total loans, with 1-4 family residential at 53% of total loans. CRE adds 20%, and C&I was about 5% of the loan book.
All in all, CZBT looks like it maintains a fairly typical community bank loan portfolio, diversified across asset classes.
Of note, the bank had about $6.2mm (2% of loans) in Reg O loans as of December 31.
Investment Portfolio
The bank’s investment portfolio (all AFS) was worth $213 million at yearend, or 37% of assets. CZBT was hit with rate-driven unrealized losses in its investment portfolio, specifically agency MBS’s. The carnage can still be seen today at 8% of T1 capital.
Here’s the detail from last year’s audit:
Deposits
As of 12/31/25, NIB deposits were 23% of total deposits, a nice but fairly typical level.
CZBT’s total cost of deposits is its advantage over peers, a situation that both attracts me and worries me.
Its funding costs were just 81 basis points compared to peers at nearly a percentage point higher. But what happens if it can’t sustain this advantage?
Management / Ownership
The bank boasts on its website that just 8 presidents have led the bank since its founding in 1873.
The bank is currently led by President and CEO, C. Taylor Quicke, a CZBT “lifer”, though he’s in his late 30s. Quicke graduated with a bachelor’s degree from Virginia Tech in 2011 and began working for the bank. He subsequently graduated from the Virginia Bankers School of Management. He was promoted to President in 2022 and then assumed the CEO spot from a 20-year veteran in 2023.
I could not find any recent information on ownership as SEC files stop in 2012.
The bank disclosed $304,000 in directors’ fees in 2024.
Other
CZBT has a defined benefit plan. It appears to be adequately funded, though with an assume 7% return with a 50/50 asset mix. Nonetheless, the absolute size of the benefit is less than a year’s worth of earnings, so I’m not overly worried about it.
Valuation / Conclusion
Like Crazy Woman Creek Bancorp last week, Citizens Bancorp put me through a bit of a roller coaster. The earnings profile and market cap got my heart going a bit.
CZBT appears to be well run and to have a good track record in the credit department. I also like that the bank has been buying back shares at what appears to be a very attractive valuation.
What worries me is its funding advantage. I don’t know how sustainable it is. History would seem to validate it, as the bank’s funding costs have been considerably below its peer group over the past four years, even after rates began to tick up.
At 0.95x book value, CZBT looks undervalued. If its funding costs remain as-is, it should earn a low-teens ROE with very low leverage.
In a worst-case scenario, the bank would see its funding costs rise to market levels. Should that occur, its ROA might drop 100 bps to 0.77% (using 2025 figures). Assuming the bank keeps its leverage conservative, at 8x, that’s an ROE of 6.2%. Not a disaster but not exactly inspiring.
I like enough of what I see to put CZBT on the Watchlist. I want to learn more about management, ownership, and see if any light can be shed on its advantageous deposit base.
What do you think? Hit reply or leave a comment below.
Stay Rational!
Adam
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