Citizens South Banking Corporation Announces Fourth Quarter Results
GASTONIA, N.C., Jan. 25 /PRNewswire-FirstCall/ — Citizens South Banking Corporation (Nasdaq: CSBC), the parent company for Citizens South Bank, announced financial results for the fourth quarter of 2009. The Company reported a net loss to common stockholders of $30.5 million, or $4.11 per diluted share, for the quarter ended December 31, 2009. This loss was largely due to a $29.6 million goodwill impairment charge which was a non-cash, non-recurring accounting adjustment that did not affect the Company's cash flow, liquidity position, or regulatory capital ratios. Kim S. Price, President and CEO, stated, "This goodwill was created as a result of the Company's prior bank acquisitions which helped to expand our Company's footprint throughout the Charlotte Region. However, due to the prolonged economic downturn, most bank stocks, including our own, have been trading at historically low levels, resulting in lower bank valuations at the end of 2009. As a result, after performing our annual goodwill impairment test, we determined that our goodwill was impaired. This impairment is a non-cash, non-operating charge that will have no effect on the Company's regulatory capital ratios or our ability to continue to serve our customers and our communities in the same manner that we have over the past 105 years."
Excluding the goodwill impairment, the Company reported a net loss of $898,000, or $0.12 per diluted share, for the quarter ended December 31, 2009, compared to net income of $427,000, or $0.06 per diluted share, for the quarter ended December 31, 2008. The decline in earnings was primarily due to an increase in the provision for loan losses, which totaled $4.2 million for the fourth quarter of 2009 and $1.5 million for the quarter ended December 31, 2008. President Price stated, "Given the continued weakness of real estate markets and the overall economy, we set aside an elevated provision for loan losses against our loan portfolio. Our core earnings engine remains strong and continues to be bolstered by an expanding net interest margin. While we are encouraged by recent signs of an improving housing market and slightly improving employment rates in our region, we think continued cautious optimism is warranted."
For the year ended December 31, 2009, the Company reported a loss of $31.0 million, or $4.19 per diluted share, compared to net income of $3.1 million, or $0.42 per diluted share, for the year ended December 31, 2008. Excluding the goodwill impairment, the Company reported a net loss of $1.4 million for the year ended December 31, 2009.
Fourth Quarter 2009 Financial Highlights:
Credit Quality
Weakness in our local real estate market has resulted in levels of delinquent loans and credit quality ratios above the Company's historical averages. President Price commented, "While our levels of nonperforming assets have increased, they remain manageable and continue to compare very favorably with industry peers. The Charlotte Region is beginning to show signs of stabilization as evidenced by the increase in housing prices for each of the past three months. Housing sales levels and housing starts are showing new signs of promise and unemployment levels seem to have stabilized. " During the fourth quarter of 2009, nonperforming assets, which include loans that are 90 days or more delinquent or in nonaccrual status and other real estate owned, increased by $2.9 million to $17.1 million, or 2.15% of total assets at December 31, 2009, as compared to $14.1 million, or 1.72% of total assets, at September 30, 2009. Most of this increase during the fourth quarter was attributable to one $2.3 million performing loan that had matured, but had not been renewed at year-end due to legal issues. The loan has since been renewed and all legal issues have been resolved.
The Company's quarterly provision for loan losses increased to $4.2 million for the fourth quarter of 2009 from $4.0 million for the third quarter of 2009. Net charge-offs for the fourth quarter totaled $4.5 million, or 2.93% of average loans, compared to $4.0 million, or 2.04% of average loans, for the third quarter of 2009. The Company had previously established specific reserves for $756,000 of the fourth quarter charge-offs through increased loan loss provisions in prior quarters. At December 31, 2009, the Company's allowance for loan losses totaled $9.2 million, or 1.51% of total loans, as compared to $9.5 million, or 1.54% of total loans at September 30, 2009.
Loan Portfolio
Efforts to reduce exposures in the residential construction and land acquisition and development loan portfolio resulted in a decrease in outstanding loans of $16.5 million during the twelve months ended December 31, 2009. During 2009, speculative residential construction loans decreased by $23.6 million, or 68.4%, to $10.9 million and commercial land and residential acquisition and development loans decreased by $17.9 million, or 19.1%, to $75.9 million. Management expects that these efforts will continue and that loan demand in general will remain soft throughout 2010. However, the Company expects to extract market share gains in selective loan categories as a result of market disruptions stemming from several recently completed and announced bank mergers in the Charlotte market.
Deposit Portfolio
Total deposits increased by $27.9 million, or 4.8%, during 2009 to $609.3 million at December 31, 2009. This growth was primarily driven by demand deposit accounts which increased by $36.7 million, or 29.9%, to $159.4 million at December 31, 2009. The strong growth in demand deposits was attributable to a keen focus on deposit gathering by our team members, enhanced treasury management services, and increased market share due to mergers of competitors.
Capital
The Company's capital position continues to be a source of strength during these uncertain economic times. The Bank continues to exceed all regulatory capital measures and is considered "well-capitalized" for regulatory purposes. This is the highest capital designation established by the Bank's regulatory authorities. The Bank's total risk-based capital ratio was 14.07% at December 31, 2009, compared to 14.68% at September 30, 2009. In addition, the Company has a tangible common equity ratio of 6.47%. Mr. Price commented, "Capital has been a strength of this Bank since our founding in 1904. This strength continues and has provided our Company with a cushion to be able to absorb these elevated levels of loan losses during recessionary periods throughout the Company's history, including the Great Depression."
Net Interest Margin
The Company's net interest margin improved to 3.12% for the fourth quarter of 2009, as compared to 3.03% for the third quarter of 2009. This nine-basis point increase in the linked-quarter net interest margin was largely due to a 21-basis point decrease in the Company's cost of funds. This represents the third consecutive quarter in which the Company has experienced margin expansion. The Company has been focused on increasing core demand deposit accounts which has contributed to this decrease in cost of funds. Also, higher-costing time deposits that matured during the fourth quarter repriced at lower rates and contributed to the lower cost of funds. In addition, during the fourth quarter of 2009, the Company restructured $29.5 million in FHLB advances, resulting in a lower effective interest rate and an extended duration. The initial cost of this restructuring was approximately $44,000, but the savings are projected to be approximately $275,000 annually, beginning in the first quarter of 2010.
Noninterest Income
Noninterest income for the fourth quarter of 2009 increased $1.2 million as compared to the fourth quarter of 2008. The Company realized an $897,000 net gain on the sale of assets during the fourth quarter of 2009 as compared to a net loss of $110,000 during the fourth quarter of 2008. In addition, the Company recorded a $48,000 increase in mortgage banking income and a $54,000 increase in service charges on deposits.
Noninterest Expense
Noninterest expense increased by $30.4 million during the comparable fourth quarter periods. This increase was primarily due to the $29.6 million goodwill impairment during the fourth quarter of 2009. In addition, there were increases related to a $192,000 increase in the Company's FDIC deposit insurance expense, a $124,000 increase in professional fees, a $163,000 valuation adjustment on other real estate owned and a $207,000 impairment of securities. The increase in the FDIC deposit insurance was the result of higher premiums charged by the FDIC throughout the banking system. Professional fees were higher due to $141,000 in fees for preparing and filing regulatory documents in conjunction with a stock offering, which was withdrawn due to unfavorable market conditions. Also, the Company paid $44,000 for restructuring a portion of its FHLB advances. Increases in other noninterest expense were largely due to increases in legal costs associated with collection, maintenance, and servicing of problem assets, loan collection costs and expenses related to owning an increased number of foreclosed properties. The impairment was taken on a pooled trust preferred security which now has an immaterial remaining balance.
About Citizens South Banking Corporation
Citizens South Bank was founded in 1904 and is headquartered in Gastonia, North Carolina. Deposits are FDIC insured up to applicable regulatory limits. At December 31, 2009, the Company had $791.5 million in assets with 16 full-service offices in the Charlotte region, including Gaston, Iredell, Rowan, Mecklenburg, and Union counties in North Carolina, and York County, South Carolina. Citizens South Bank is an Equal Housing Lender and Member, FDIC. The Bank is a wholly-owned subsidiary of Citizens South Banking Corporation, and shares of the common stock of the Company trade on the NASDAQ Global Market under the ticker symbol "CSBC". The Company maintains a website at www.citizenssouth.com that includes information on the Company, along with a list of products and services, branch locations, current financial information, and links to the Company's filings with the SEC.
Forward-looking Statements
This news release contains certain forward-looking statements which include, but are not limited to, statements of our earnings expectations, statements regarding our operating strategy, and estimates of our future costs and benefits. These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Forward-looking statements speak only as of the date they are made and the Company is under no duty to update these forward-looking statements to reflect circumstances or events that occur after the date of the forward-looking statements or to reflect the occurrence of unanticipated events. A number of factors could cause actual conditions, events or results to differ significantly from those described in the forward-looking statements. Factors that could cause such a difference include, but are not limited to, changes in general economic conditions – either locally or nationally, competition among depository and financial institutions, the continuation of current revenue and expense trends, significant changes in interest rates, unforeseen changes in the Company's markets, and legal, regulatory, or accounting changes. The Company's reports filed from time to time with the Securities and Exchange Commission, including the Company's Form 10-K for the year ended December 31, 2008, describe some of these factors.
Quarterly Financial Highlights (Unaudited)
| | | 2009 | | | 2008 | |
| | | At and for the quarters ended | | | | |
| | | | | | | | | | | | | | | | |
| | | December 31 | | | September 30 | | | June 30 | | | March 31 | | | December 31 | |
(Dollars in Thousands, Except per Share Data) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Summary of Operations: | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Interest income – taxable equivalent | | $ | 9,317 | | | $ | 9,620 | | | $ | 9,820 | | | $ | 9,829 | | | $ | 10,481 | |
| Interest expense | | | 3,531 | | | | 3,947 | | | | 4,346 | | | | 4,702 | | | | 5,172 | |
| Net interest income – taxable equivalent | | | 5,786 | | | | 5,673 | | | | 5,474 | | | | 5,127 | | | | 5,309 | |
| Less: Taxable equivalent adjustment | | | 106 | | | | 139 | | | | 142 | | | | 144 | | | | 134 | |
| Net interest income | | | 5,680 | | | | 5,534 | | | | 5,332 | | | | 4,983 | | | | 5,175 | |
| Provision for loan losses | | | 4,155 | | | | 3,975 | | | | 1,950 | | | | 900 | | | | 1,460 | |
| Net interest income after provision for loan losses | | | 1,525 | | | | 1,559 | | | | 3,382 | | | | 4,083 | | | | 3,715 | |
| Noninterest income | | | 2,451 | | | | 2,501 | | | | 2,016 | | | | 1,249 | | | | 1,254 | |
| Noninterest expense | | | 34,867 | | | | 5,229 | | | | 5,239 | | | | 4,937 | | | | 4,496 | |
| Income (loss) before income taxes | | | (30,891 | | | | (1,169 | ) | | | 159 | | | | 395 | | | | 473 | |
| Income tax (benefit) expense | | | (611 | ) | | | (672 | ) | | | (155 | ) | | | (61 | ) | | | (8 | ) |
| Net income (loss) | | | (30,280 | ) | | | (497 | ) | | | 314 | | | | 456 | | | | 481 | |
| Preferred stock dividend and discount on preferred stock | | | 259 | | | | 262 | | | | 259 | | | | 253 | | | | 54 | |
| Net income (loss) available to common stockholders | | $ | (30,539 | ) | | $ | (759 | ) | | $ | 55 | | | $ | 203 | | | $ | 427 | |
| | | | | | | | | | | | | | | | | | | | | |
| Per Common Share Data: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Net income: | | | | | | | | | | | | | | | | | | | | |
| Basic | | $ | (4.11 | ) | | $ | (0.10 | ) | | $ | 0.01 | | | $ | 0.03 | | | $ | 0.06 | |
| Diluted | | | (4.11 | ) | | | (0.10 | ) | | | 0.01 | | | | 0.03 | | | | 0.06 | |
| | | | | | | | | | | | | | | | | | | | | |
| Weighted average shares outstanding: | | | | | | | | | | | | | | | | | | | | |
| Basic | | | 7,426,992 | | | | 7,419,206 | | | | 7,404,218 | | | | 7,392,742 | | | | 7,361,434 | |
| Diluted | | | 7,426,992 | | | | 7,419,206 | | | | 7,404,218 | | | | 7,392,742 | | | | 7,379,466 | |
| | | | | | | | | | | | | | | | | | | | | |
| End of period shares outstanding | | | 7,526,854 | | | | 7,526,854 | | | | 7,526,854 | | | | 7,515,957 | | | | 7,515,957 | |
| | | | | | | | | | | | | | | | | | | | | |
| Cash dividends declared | | $ | 0.04 | | | $ | 0.04 | | | $ | 0.04 | | | $ | .04 | | | $ | 0.085 | |
| | | | | | | | | | | | | | | | | | | | | |
| Book value | | | 6.87 | | | | 11.08 | | | | 11.11 | | | | 11.19 | | | | 11.21 | |
| Tangible book value | | | 6.80 | | | | 7.06 | | | | 7.07 | | | | 7.14 | | | | 7.15 | |
| | | | | | | | | | | | | | | | | | | | | |
| End of Period Balances: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 791,532 | | | $ | 820,608 | | | $ | 836,283 | | | $ | 851,390 | | | $ | 817,213 | |
| Loans, net of deferred fees | | | 610,201 | | | | 616,793 | | | | 629,962 | | | | 635,008 | | | | 626,688 | |
| Investment securities | | | 83,370 | | | | 90,174 | | | | 97,452 | | | | 114,933 | | | | 109,180 | |
| Interest-earning assets | | | 725,835 | | | | 734,938 | | | | 751,733 | | | | 765,747 | | | | 733,448 | |
| Deposits | | | 609,345 | | | | 601,614 | | | | 616,233 | | | | 628,571 | | | | 581,488 | |
| Stockholders' equity | | | 72,322 | | | | 103,990 | | | | 104,158 | | | | 104,663 | | | | 104,720 | |
| | | | | | | | | | | | | | | | | | | | | |
| Quarterly Average Balances: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Total assets | | $ | 823,608 | | | $ | 831,268 | | | $ | 841,169 | | | $ | 829,319 | | | $ | 820,166 | |
| Loans, net of deferred fees | | | 610,568 | | | | 624,112 | | | | 635,645 | | | | 626,722 | | | | 627,888 | |
| Investment securities | | | 87,061 | | | | 94,674 | | | | 107,140 | | | | 110,502 | | | | 108,146 | |
| Interest-earning assets | | | 736,134 | | | | 741,974 | | | | 751,381 | | | | 740,404 | | | | 733,858 | |
| Deposits | | | 605,608 | | | | 609,243 | | | | 616,926 | | | | 593,166 | | | | 579,967 | |
| Stockholders' equity | | | 103,313 | | | | 103,913 | | | | 104,813 | | | | 104,884 | | | | 88,498 | |
| | | | | | | | | | | | | | | | | | | | | |
| Financial Performance Ratios: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
Return on average assets (annualized) | | | (14.71 | )% | | | (0.36 | )% | | | 0.03 | % | | | 0.10 | % | | | 0.21 | % |
Return on average common equity (annualized) | | | (146.44 | ) | | | (3.61 | ) | | | 0.26 | | | | 0.98 | | | | 1.92 | |
Return on tangible common equity (annualized) | | | (9.92 | ) | | | (6.77 | ) | | | 1.48 | | | | 2.88 | | | | 3.39 | |
Noninterest income to average total assets (annualized) | | | 1.19 | | | | 1.20 | | | | 0.96 | | | | 0.60 | | | | 0.61 | |
Noninterest expense to average total assets (1) (annualized) | | | 2.54 | | | | 2.52 | | | | 2.49 | | | | 2.39 | | | | 2.19 | |
| Efficiency ratio (1) | | | 64.27 | | | | 65.08 | | | | 71.29 | | | | 79.22 | | | | 69.94 | |
Quarterly Financial Highlights - continued (Unaudited)
| | | 2009 | | | 2008 | |
| | | At and for the quarters ended | | | | |
| | | | | | | | | | | | | | | | |
| | | December 31 | | | September 30 | | | June 30 | | | March 31 | | | December 31 | |
(Dollars in Thousands, Except per Share Data) | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
Net Interest Margin (annualized): | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | |
| Yield on earning assets | | | 4.98 | % | | | 5.13 | % | | | 5.26 | % | | | 5.38 | % | | | 5.67 | % |
| Cost of funds | | | 2.09 | | | | 2.30 | | | | 2.54 | | | | 2.90 | | | | 3.02 | |
| Net interest spread | | | 2.89 | | | | 2.83 | | | | 2.72 | | | | 2.48 | | | | 2.65 | |
| Net interest margin (2) | | | 3.12 | | | | 3.03 | | | | 2.92 | | | | 2.81 | | | | 2.84 | |
| | | | | | | | | | | | | | | | | | | | | |
| Credit Quality Information and Ratios: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Past due loans (30+ days or more) | | $ | 21,879 | | | $ | 20,670 | | | $ | 19,458 | | | $ | 17,105 | | | $ | 11,913 | |
| Past due loans to total loans | | | 3.59 | % | | | 3.35 | % | | | 3.09 | % | | | 2.69 | % | | | 1.90 | % |
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses – beginning of period | | | 9,499 | | | | 8,685 | | | | 8,730 | | | | 8,026 | | | | 7,027 | |
| Add: Provision for loan losses | | | 4,155 | | | | 3,975 | | | | 1,950 | | | | 900 | | | | 1,460 | |
| Less: Net charge-offs | | | 4,465 | | | | 3,161 | | | | 1,995 | | | | 196 | | | | 461 | |
| Allowance for loan losses – end of period | | | 9,189 | | | | 9,499 | | | | 8,685 | | | | 8,730 | | | | 8,026 | |
| | | | | | | | | | | | | | | | | | | | | |
| Allowance for loan losses to total loans | | | 1.51 | % | | | 1.54 | % | | | 1.38 | % | | | 1.37 | % | | | 1.28 | % |
Net charge-offs to average loans (annualized) | | | 2.93 | | | | 2.04 | | | | 1.28 | | | | 0.12 | | | | 0.28 | |
| Nonperforming loans to total loans | | | 1.96 | | | | 1.73 | | | | 1.64 | | | | 0.98 | | | | 0.48 | |
| Nonperforming assets to total assets | | | 2.15 | | | | 1.72 | | | | 1.49 | | | | 0.93 | | | | 0.69 | |
| Nonperforming assets to total loans and OREO | | | 2.77 | | | | 2.28 | | | | 1.97 | | | | 1.25 | | | | 0.90 | |
| | | | | | | | | | | | | | | | | | | | | |
| Nonperforming Assets: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Nonperforming loans (90+ days delinquent or on nonaccrual status): | | | | | | | | | | | | | | | | | | | | |
| Residential | | $ | 898 | | | $ | 345 | | | $ | 432 | | | $ | 700 | | | $ | 198 | |
| Construction | | | 1,048 | | | | 1,554 | | | | 1,335 | | | | 1,609 | | | | 693 | |
| Acquisition and development | | | 3,419 | | | | 3,510 | | | | 379 | | | | 379 | | | | 379 | |
| Commercial land | | | 3,640 | | | | 1,884 | | | | 1,813 | | | | 653 | | | | 311 | |
| Other commercial real estate | | | 1,841 | | | | 2,197 | | | | 5,307 | | | | 1,481 | | | | 748 | |
| Commercial business | | | - | | | | - | | | | 94 | | | | 20 | | | | 5 | |
| Consumer | | | 1,144 | | | | 1,208 | | | | 1,000 | | | | 1,425 | | | | 698 | |
| Total nonperforming loans | | | 11,990 | | | | 10,698 | | | | 10,360 | | | | 6,267 | | | | 3,032 | |
| Other real estate owned (OREO) | | | 5,067 | | | | 3,444 | | | | 2,111 | | | | 1,672 | | | | 2,601 | |
| Nonperforming assets | | | 17,057 | | | | 14,142 | | | | 12,471 | | | | 7,939 | | | | 5,633 | |
| | | | | | | | | | | | | | | | | | | | | |
| Capital Ratios: | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | |
| Tangible common equity ratio | | | 6.47 | % | | | 6.72 | % | | | 6.61 | % | | | 6.54 | % | | | 6.82 | % |
| Total risk-based capital (Bank only) | | | 14.07 | | | | 14.68 | | | | 14.31 | | | | 13.94 | | | | 13.07 | |
| Tier 1 risk-based capital (Bank only) | | | 12.98 | | | | 13.53 | | | | 13.27 | | | | 12.85 | | | | 12.01 | |
| Tier 1 total capital (Bank only) | | | 10.44 | | | | 10.70 | | | | 10.35 | | | | 10.09 | | | | 10.40 | |
(1) Calculated excluding the $29.6 million impairment of goodwill
(2) Net interest margin is calculated on a fully tax equivalent basis
Condensed Consolidated Statements of Financial Condition
| | | December 31, 2009 | | | December 31, 2008 | |
| (Dollars in thousands except per share data) | | (unaudited) | | | | |
| | | | | | | |
| ASSETS | | | | | | |
| | | | | | | |
| Cash and due from banks | | $ | 8,925 | | | $ | 9,444 | |
| Interest-earning bank balances | | | 44,255 | | | | 613 | |
| Cash and cash equivalents | | | 53,180 | | | | 10,057 | |
| Investment securities available-for-sale, at fair value | | | 50,990 | | | | 109,180 | |
| Investment securities held to maturity, at amortized cost | | | 32,380 | | | | - | |
| Loans receivable, net of deferred fees | | | 610,201 | | | | 626,688 | |
| Allowance for loan losses | | | (9,189 | ) | | | (8,026 | ) |
| Loans, net | | | 601,012 | | | | 618,662 | |
| Other real estate owned | | | 5,067 | | | | 2,601 | |
| Premises and equipment, net | | | 15,436 | | | | 16,834 | |
| Accrued interest receivable | | | 2,430 | | | | 2,609 | |
| Federal Home Loan Bank stock, at cost | | | 4,149 | | | | 4,793 | |
| Bank owned life insurance | | | 17,522 | | | | 16,813 | |
| Intangible assets | | | 570 | | | | 30,525 | |
| Other assets | | | 8,796 | | | | 5,139 | |
| | | | | | | | | |
| Total assets | | $ | 791,532 | | | $ | 817,213 | |
| | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | |
| | | | | | | | | |
| Liabilities | | | | | | | | |
| Deposits: | | | | | | | | |
| Demand deposit accounts | | $ | 159,394 | | | $ | 122,731 | |
| Money market deposit accounts | | | 118,687 | | | | 103,271 | |
| Savings accounts | | | 10,584 | | | | 10,708 | |
| Time deposits | | | 320,680 | | | | 344,778 | |
| Total deposits | | | 609,345 | | | | 581,488 | |
| Borrowed money | | | 106,599 | | | | 124,365 | |
| Other liabilities | | | 3,266 | | | | 6,640 | |
| Total liabilities | | | 719,210 | | | | 712,493 | |
| | | | | | | | | |
| Stockholders' Equity | | | | | | | | |
| Preferred stock, $0.01 par value, 1,000,000 shares authorized, 20,500 shares issued and outstanding at December 31, 2009 and December 31, 2008 | | | 20,589 | | | | 20,507 | |
| Common stock, $0.01 par value, 20,000,000 shares authorized, 9,062,727 shares issued at December 31, 2009 and December 31, 2008; 7,526,854 shares outstanding at December 31, 2009 and 7,515,957 shares outstanding at December 31, 2008 | | | 48,619 | | | | 48,099 | |
| Retained earnings, substantially restricted | | | 3,411 | | | | 36,089 | |
| Accumulated other comprehensive income | | | (297 | ) | | | 25 | |
| Total stockholders' equity | | | 72,322 | | | | 104,720 | |
| | | | | | | | | |
| Total liabilities and stockholders' equity | | $ | 791,532 | | | $ | 817,213 | |
Condensed Consolidated Statements of Operations (Unaudited)
| | | Three Months | | | Twelve Months | |
| | | Ended December 31, | | | Ended December 31, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
(Dollars in thousands except per share data) | | | | | | | | | | | | |
| | | | | | | | | | | | | |
| Interest Income | | | | | | | | | | | | |
| Loans and loan fees | | $ | 8,257 | | | $ | 9,069 | | | $ | 33,432 | | | $ | 37,229 | |
| Investment securities | | | 901 | | | | 1,270 | | | | 4,517 | | | | 5,221 | |
| Interest-bearing deposits | | | 53 | | | | 8 | | | | 107 | | | | 157 | |
| Total interest income | | | 9,211 | | | | 10,347 | | | | 38,056 | | | | 42,607 | |
| | | | | | | | | | | | | | | | | |
| Interest Expense | | | | | | | | | | | | | | | | |
| Deposits | | | 2,404 | | | | 3,836 | | | | 11,918 | | | | 17,232 | |
| Borrowed funds | | | 1,127 | | | | 1,336 | | | | 4,608 | | | | 5,119 | |
| Total interest expense | | | 3,531 | | | | 5,172 | | | | 16,526 | | | | 22,351 | |
| | | | | | | | | | | | | | | | | |
| Net interest income | | | 5,680 | | | | 5,175 | | | | 21,530 | | | | 20,256 | |
| Provision for loan losses | | | 4,155 | | | | 1,460 | | | | 10,980 | | | | 3,275 | |
| Net interest income after provision for loan losses | | | 1,525 | | | | 3,715 | | | | 10,550 | | | | 16,981 | |
| | | | | | | | | | | | | | | | | |
| Noninterest Income | | | | | | | | | | | | | | | | |
| Service charges on deposit accounts | | | 829 | | | | 775 | | | | 3,256 | | | | 3,031 | |
| Mortgage banking income | | | 227 | | | | 179 | | | | 1,202 | | | | 829 | |
| Other loan fees | | | 70 | | | | 87 | | | | 245 | | | | 384 | |
| Dividends on FHLB stock | | | 5 | | | | 12 | | | | 5 | | | | 180 | |
| Increase in cash value of bank-owned life insurance | | | 200 | | | | 195 | | | | 770 | | | | 766 | |
| Net gain (loss) on sale of assets | | | 897 | | | | (110 | ) | | | 1,913 | | | | 164 | |
| Other noninterest income | | | 223 | | | | 116 | | | | 826 | | | | 665 | |
| Total noninterest income | | | 2,451 | | | | 1,254 | | | | 8,217 | | | | 6,019 | |
| | | | | | | | | | | | | | | | | |
| Noninterest Expense | | | | | | | | | | | | | | | | |
| Compensation and benefits | | | 2,229 | | | | 2,364 | | | | 9,818 | | | | 9,964 | |
| Occupancy and equipment expense | | | 613 | | | | 647 | | | | 2,570 | | | | 2,660 | |
| Professional fees | | | 352 | | | | 228 | | | | 1,059 | | | | 867 | |
| Amortization of intangible assets | | | 71 | | | | 110 | | | | 314 | | | | 512 | |
| FDIC deposit insurance | | | 251 | | | | 59 | | | | 1,076 | | | | 117 | |
| Valuation adjustment on other real estate owned | | | 163 | | | | - | | | | 338 | | | | - | |
| Restructuring expenses | | | - | | | | - | | | | - | | | | 220 | |
| Impairment of securities | | | 207 | | | | - | | | | 754 | | | | 468 | |
| Impairment of goodwill | | | 29,641 | | | | - | | | | 29,641 | | | | - | |
| Other noninterest expense | | | 1,340 | | | | 1,088 | | | | 4,702 | | | | 4,418 | |
| Total noninterest expense | | | 34,867 | | | | 4,496 | | | | 50,272 | | | | 19,226 | |
| | | | | | | | | | | | | | | | | |
| Net income (loss) before income taxes | | | (30,891 | ) | | | 473 | | | | (31,505 | ) | | | 3,774 | |
| Income tax expense (benefit) | | | (611 | ) | | | (8 | ) | | | (1,499 | ) | | | 639 | |
| | | | | | | | | | | | | | | | | |
| Net income (loss) | | | (30,280 | ) | | | 481 | | | | (30,006 | ) | | | 3,135 | |
| Preferred stock dividend and discount on preferred stock | | | 259 | | | | 54 | | | | 1,034 | | | | 54 | |
| | | | | | | | | | | | | | | | | |
| Net income (loss) available to common stockholders | | $ | (30,539 | ) | | $ | 427 | | | $ | (31,040 | ) | | $ | 3,081 | |
| | | | | | | | | | | | | | | | | |
| Net income (loss) per common share: | | | | | | | | | | | | | | | | |
| Basic | | $ | (4.11 | ) | | $ | 0.06 | | | $ | (4.19 | ) | | $ | 0.42 | |
| Diluted | | $ | (4.11 | ) | | $ | 0.06 | | | $ | (4.19 | ) | | $ | 0.42 | |
| | | | | | | | | | | | | | | | | |
| Weighted average common shares outstanding: | | | | | | | | | | | | | | | | |
| Basic | | | 7,426,992 | | | | 7,361,434 | | | | 7,410,692 | | | | 7,374,051 | |
| Diluted | | | 7,426,992 | | | | 7,379,466 | | | | 7,410,692 | | | | 7,404,087 | |
CONTACT: Gary F. Hoskins, CFO, +1-704-884-2263, gary.hoskins@citizenssouth.com
