Citizens Community Bank Reports 2011 Third Quarter and Year-to-Date Results --Strategic operational moves bolster earnings and establish touchpoints for continued progress--

SOUTH HILL, Va., Oct. 31, 2011 /PRNewswire/ -- Citizens Community Bank (OTC: CZYB) today reported third quarter results for the quarter ended September 30, 2011. The results for the third quarter of 2011 reflect various one-time events such as the redemption of preferred stock issued to the Treasury under the TARP Capital Purchase Program and simultaneous receipt of preferred stock issued through the bank's participation in the Treasury's Small Business Lending Program along with the bank implementing its new data processing system.

For the third quarter of 2011, net income available to common shareholders equaled $61,811, an increase of $23,563 or 61.6% over the third quarter of 2010. The results include a one-time charge of $74,333 which was the remaining amortizing of the preferred stock warrant issued to Treasury under the TARP program. Basic and diluted earnings per share to common shareholders equaled $0.04 for the third quarter of 2011 compared to $0.03 for the third quarter of 2010. Net income before taxes and dividends and amortization on preferred stock equaled $290,989 for the third quarter of 2011, up $179,366 over the third quarter of 2010.

For the nine months ended September 30, 2011, net income available to common shareholders totaled $193,265, down $16,798 or 8.0% from the first three quarters of 2010. Year-to-date, basic and diluted earnings per share to common shareholders equaled $0.13 for 2011 compared to $0.14 for the same period in 2010. For the nine months ended September 30, 2011, net income before taxes and dividends and amortization on preferred stock equaled $604,277, an increase of $121,325 or 25.1% over the first three quarters of 2010.

At September 30, 2011 total assets were $165.7 million, an increase of $1.2 million or 0.8% from December 31, 2010. Gross loans amounted to $127.9 million, a decline of $1.6 million or 1.2% from year end 2010. The investment portfolio declined $3.9 million or 21.9% from December 31, 2010 due to securities sales during the second quarter of 2011 and securities paydowns and maturities. Total deposits equaled $138.7 million, an increase of $3.0 or 2.2% since December 31, 2010.

"We successfully accomplished two very important strategic objectives during this quarter, starting with the redemption of all the Treasury Department's investment in our bank through its TARP program," says President and CEO Thomas C. Manson. "Even though the transaction produced a negative drag on earnings during this period, we are buoyed by the anticipated savings expected by the replacement of these funds with funding received through the new SBLF program."

"In addition, we completed our core operating system conversion to Fiserv during the month of July. This new core system will afford us many efficiencies in the coming months and also allow us to expand our product offerings, especially in the commercial arena, which is key to increasing our market share within our footprint. It goes without saying that we are pleased by the increase in earnings of $179,366 over the same period in 2010 and are hopeful this trend will continue. Regardless, we continue to steadfastly monitor asset quality and maintain very strong capital and ALLL ratios," added Manson.

For the third quarter of 2011, net interest income totaled $1,591,574, a decrease of $59,564 or 3.6% from the third quarter of 2010. The decline resulted from a lower volume of earning assets and lower yields on both the loan and securities portfolios. For the three months ended September 30, 2011, average earning assets declined $9.4 million or 5.9% from the third quarter of 2010. Of this amount, there was a $2.0 million reduction in average outstanding loans and a $7.3 million decline in the securities portfolio over the comparable quarters. For the third quarter of 2011, the net interest margin was 4.26%, up 15 basis points over the third quarter of 2010.

For the first nine months of 2011, net interest income totaled $4,799,729, down $203,821 or 4.1% from the same period in 2010. The decline in net interest income resulted from a lower volume of earning assets over the comparable period, despite an increase in the net interest margin. For the nine months ended September 30, 2011, the net interest margin was 4.32%, up 10 basis points over the first three quarters of 2010.

Noninterest income totaled $192,535 for the third quarter of 2011 compared to $243,292 for the third quarter of 2010. The decline resulted from a reduction in deposit service charge income and fee income from secondary mortgage originations. For the nine months ended September 30, 2011, noninterest income equaled $796,015, up $102,350 or 14.8% over the first nine months of 2010. Adjusted noninterest income equaled $634,186, down $56,929 or 8.2% from the first nine months of 2010, when excluding $167,492 of net gains on securities, $5,663 of losses on the sale of other assets for the first three quarters of 2011 and $2,550 of gains on the sale of other assets in 2010. The decline resulted from a sharp decrease in secondary mortgage revenue and a modest decline in fee revenue from deposit service charges over the comparable period.

Noninterest expense equaled $1,433,120, an increase of $41,313 or 3.0% over the third quarter of 2010 due primarily to valuation writedowns on other real estate owned along with a spike in professional and legal fees specific to the third quarter of 2011. For the third quarter of 2011, valuation writedowns on other real estate owned totaled $50,000. There were no valuation writedowns recorded during 2010. During the third quarter of 2011, the bank incurred additional one-time expenses for professional and legal services associated with its core data processing conversion as well as legal costs for redemption of preferred stock issued to the Treasury under the TARP Capital Purchase Program and simultaneous receipt of preferred stock issued through the bank's participation in the Treasury's Small Business Lending Program. As a result, for the third quarter of 2011 legal and professional expenses were up $64,482 over the third quarter of 2010. Salaries and benefits, equaled $613,599, up $16,636 or 2.8%, while data processing costs declined $50,983 compared to the third quarter of 2010.

For the nine months ended September 30, 2011, noninterest expense totaled $4,524,006 an increase of $306,467 or 7.3% over the first three quarters of 2010. The rise in overhead expenses for 2011 resulted from a $162,204 increase in losses on the sale of other real estate owned, $50,000 of valuation writedowns on other real estate owned, as well as additional legal and professional costs associated with the core data processing conversion and the aforementioned Treasury programs.

For the three months ended September 30, 2011, provision for loan losses totaled $60,000 compared to $391,000 for the third quarter of 2010. For the third quarter of 2011, net loan charge-offs equaled $28,571 or 0.09% of average loans on an annualized basis compared to $294,018 or 0.90% of loans for the third quarter of 2010 and 0.64% for full year 2010. Nonperforming loans equaled $4,876,731 or 4.40% of outstanding loans compared to $3,971,102 or 3.43% on September 30, 2010 and $4,166,913 or 3.22% at year end 2010. Of the $4,876,731 in nonperforming loans, $2,739,399 are troubled debt restructured loans that were not accruing interest as these loans were either in nonaccrual status prior to the restructuring or deemed nonaccrual after the troubled debt classification. At September 30, 2011, there were $751,076 of troubled debt restructurings that were accruing interest and included in nonperforming loan category. All of these loans were complying with their modified terms. There were no loans 90 days past due and still accruing interest on September 30, 2011.

As of September 30, 2011, the bank held $2,579,558 of other real estate owned compared with $2,687,237 at year end 2010 and $1,106,923 one year ago. In aggregate, nonperforming assets equaled $8,207,365 or 4.95% of total assets, up from $5,844,453 or 3.43% on September 30, 2010. The allowance for loan losses equaled 2.08% of loans as of September 30, 2011 compared to 2.08% on December 31, 2010 and 1.85% on September 30, 2010.

Citizens Community Bank is a Virginia state chartered bank headquartered in South Hill, Va. Opened in December 1999, it operates four branches, three in south central Virginia and one in northern North Carolina. For more information and additional financial data, please visit www.ccbsite.com.

This press release contains "forward-looking statements" that concern future events which are subject to risks and uncertainties. Any such statements are based on certain assumptions and analyses by the Bank and other factors it believes are appropriate in the circumstances. The Bank's actual results, events and developments may differ materially from those contemplated by any forward-looking statement.

Citizens Community Bank

Financial Highlights




















(Unaudited)









(Actual dollars, except per share data)


Three months ended Sept 30,




Nine months ended Sept 30,


Selected Operating Data:


2011


2010


2011


2010










Net interest income


$   1,591,574


$    1,651,138


$   4,799,729


$    5,003,550

Provision for loan losses


60,000


391,000


467,461


996,724

Noninterest income


192,535


242,322


796,015


691,803

Noninterest expense


1,433,120


1,390,837


4,524,006


4,215,677

Income before income tax


290,989


111,623


604,277


482,952

Income tax expense


86,691


25,000


171,775


127,764

Net income


$      204,298


$         86,623


$      432,502


$       355,188

Less: Preferred dividends


$      142,487


$         48,375


$      239,237


$       145,125

Net income available to common








shareholders


$        61,811


$         38,248


$      193,265


$       210,063










Income per share available to








common shareholders: (1)









Basic


$0.04


$0.03


$0.13


$0.14

Diluted


$0.04


$0.03


$0.13


$0.14










Average shares outstanding, basic

1,500,948


1,500,948


1,500,948


1,500,948

Average shares outstanding, diluted

1,500,948


1,500,948


1,500,948


1,500,948










Note: (1) All per share amounts have been adjusted to reflect a 10% stock dividend paid by the Bank in July 2011.



Citizens Community Bank

Financial Highlights



















(Actual dollars, except per share data)

September 30,


December 31,





Balance Sheet Data:


2011


2010














Total assets


$   165,753,456


$    164,514,388





Loans, net


125,241,309


126,762,672





Deposits


138,690,497


135,640,302





Borrowings


4,000,000


7,000,000





Preferred stock


4,000,000


3,060,667





Stockholders' equity


22,641,043


21,601,688





Book value per share (1) (2)


$              12.42


$               12.35





Total shares outstanding (2)


1,500,948


1,500,948

















Three months ended September 30,




Nine months ended September 30,


Selected Data:


2011


2010


2011


2010

Allowance for loan loss


$       2,664,252


$        2,433,860


n/a


n/a

Nonperforming assets


8,207,365


5,844,453


n/a


n/a

Nonperforming loans


5,627,807


4,737,530


n/a


n/a

Other real estate owned


2,579,558


1,106,923


n/a


n/a

Net charge-offs


28,571


294,018




681,579

Return on average assets


0.15%


0.09%





Return on average common equity

1.31%


0.80%





Net interest margin


4.26%


4.11%




4.22%

Overhead efficiency


80.33%


73.47%
















September 30,


September 30,


December 31,



Asset Quality Ratios:


2011


2010


2010



Allowance for loan loss to total loans

2.08%


1.85%


2.08%



Nonperforming loans to total loans

4.40%


3.61%


3.22%



Nonperforming assets to total assets

4.95%


3.43%


4.17%



Net charge-offs to average loans (3)

0.27%


0.90%


0.64%












Note: (1) Book value excludes $4,000,000 and $3,060,667 of preferred stock for 2011 and 2010, respectively.

         (2) All per share amounts have been adjusted to reflect a 10% stock dividend paid by the Bank in July 2011.

         (3) Annualized rates for the quarter ended September 30, 2011 and 2010, respectively.



SOURCE Citizens Community Bank



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