EXHIBIT 99 (a)
CITIZENS SOUTH BANKING CORPORATION ANNOUNCES
EARNINGS FOR THE QUARTER ENDED JUNE 30, 2004
GASTONIA, NC, July 19, 2004 --- Citizens South Banking Corporation (Nasdaq:
CSBC), the holding company for Citizens South Bank, announced earnings for the
quarter ended June 30, 2004, of $948,000, or $0.12 per diluted share, compared
to $1,124,000, or $0.13 per diluted share, for the quarter ended June 30, 2003.
The reduction in earnings from our second quarter earnings of 2003 was primarily
the result of a lower level of net interest income resulting, in part, from a
historically low prime interest rate during the first half of 2004 and from a
lower level of outstanding residential mortgage loans. Both of these factors
have had a negative impact on the Company's net interest margin. The Company
experienced strong growth in its commercial and consumer loan portfolios.
Commercial mortgage, business, and consumer loans increased by $31.4 million, or
18.2%, from June 30, 2003, to June 30, 2004. In addition, our level of
nonperforming assets and nonperforming loans remained well below industry peers
at 0.20% of total assets and 0.31% of total loans, respectively at the end of
the second quarter of 2004.
Deposit growth continued to be strong during the second quarter of 2004, with
the strongest growth in core (non-time) deposit accounts, which increased by
$16.4 million, or 13.2%, year over year. Total deposits increased by $25.7
million, or 7.4%, from $345.0 million on June 30, 2003, to $370.7 million on
June 30, 2004.
Noninterest expense decreased 6.3% from $3.1 million to $2.9 million. This
decrease was largely the result of decreased expenses associated with the fair
value adjustment on our deferred compensation plans, professional services, and
advertising. Noninterest income during the comparable quarters decreased 9.1%
from $1.3 million to $1.2 million, primarily as a result of a $102,000 decrease
in revenues from lending and mortgage banking activities and a $193,000
reduction in the fair value adjustment on our deferred compensation plans which
corresponded to a $193,000 reduction in compensation expense. The Company also
realized $180,000 in gains from the sales of investments during the second
quarter of 2004. These gains partly offset an $81,000 expense relating to the
vesting of stock issued to a director who retired during the quarter.
Kim S. Price, President and CEO, commented, "We are pleased that we continue to
experience growth in our core franchise as demonstrated by positive commercial
loan and deposit growth, as well as continued high asset quality ratios. We
believe that the recent increase in the prime lending rate will provide some
benefit to our net interest margin and curb residential mortgage prepayments,
both of which are positive developments for our Company."
Citizens South Bank, headquartered in Gastonia, North Carolina, was founded in
1904 and is celebrating its 100th anniversary. The Bank had approximately $500
million in assets at June 30, 2004, and operates ten full-service offices
located in three North Carolina counties - Gaston, Rowan, and Iredell.
This news release contains certain forward-looking statements, which are subject
to risks and uncertainties. A number of factors could cause actual conditions,
events or results to differ significantly from those described in the
forward-looking statements. 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, 2003, describe some of these factors.
Forward-looking statements speak only as of the date they are made and the
Company does not undertake to update 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.
(Tables Follow)
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Citizens South Banking Corporation
Selected Financial Information
(dollars in thousands, except per share data)
----------------------------------------------------------------------------
Quarter ended Quarter ended Year ended Year ended
June 30, 2004 June 30, 2003 December 31, 2003 December 31, 2002
----------------------------------------------------------------------------
Income Statement Data:
Interest income .................................... $ 4,995 $ 5,645 $ 21,969 $ 24,716
Interest expense ................................... 1,911 2,286 8,732 10,195
---------- ---------- ---------- ----------
Net interest income ................................ 3,084 3,359 13,237 14,521
Provision for loan losses .......................... 30 15 60 225
---------- ---------- ---------- ----------
Net int. income after provision for loan
losses ........................................... 3,054 3,344 13,177 14,296
Noninterest income ................................. 1,165 1,282 5,561 4,121
Noninterest expense ................................ 2,862 3,055 13,891 11,381
---------- ---------- ---------- ----------
Income before income taxes ......................... 1,357 1,571 4,847 7,036
Income tax expense ................................. 409 447 1,456 2,528
---------- ---------- ---------- ----------
Net income ......................................... $ 948 $ 1,124 $ 3,391 $ 4,508
Per Share Data:
Basic net income ................................... $ 0.12 $ 0.13 $ 0.39 $ 0.51
Diluted net income ................................. 0.12 0.13 0.39 0.51
Cash dividends declared ............................ 0.065 0.06 0.24 0.16
Period-end book value .............................. 9.54 10.67 10.11 10.64
Financial Ratios:
Return on average stockholders' equity ............. 4.72% 4.72% 3.61% 7.61%
Return on average assets ........................... 0.76 0.90 0.68 0.98
Efficiency ratio ................................... 70.34 66.96 78.16 61.11
Net interest margin ................................ 2.47 2.69 2.67 3.17
Average equity to average assets ................... 16.13 19.10 18.96 12.93
Asset Quality Data:
Allowance for loan losses .......................... $ 2,902 $ 3,002 $ 2,969 $ 2,995
Nonperforming loans ................................ 928 802 529 516
Nonperforming assets ............................... 1,007 948 674 1,823
Allowance for loan losses to total loans ........... 0.97% 0.98% 0.97% 0.97%
Nonperforming loans to total loans ................. 0.31 0.26 0.18 0.17
Nonperforming assets to total assets ............... 0.20 0.19 0.14 0.37
Average Balances:
Total assets ...................................... $ 498,562 $ 498,901 $ 495,198 $ 458,316
Loans receivable, net of unearned income .......... 293,802 304,980 297,517 320,505
Interest-earning assets ........................... 445,970 454,675 450,826 416,748
Deposits .......................................... 362,858 342,817 328,722 337,422
Interest-bearing liabilities ...................... 395,593 383,355 379,960 381,664
Stockholders' equity .............................. 80,401 95,268 93,873 59,243
Common shares outstanding, basic .................. 7,780,751 8,660,195 8,623,838 8,767,982
Common shares outstanding, diluted ................ 7,891,635 8,808,915 8,762,545 8,870,054
At Period End:
Total assets ...................................... $ 500,586 $ 501,217 $ 495,751 $ 492,873
Loans receivable, net unearned income ............. 300,247 301,759 297,995 302,900
Interest-earning assets ........................... 447,457 454,746 448,401 456,611
Deposits .......................................... 370,700 345,014 342,446 340,862
Interest-bearing liabilities ...................... 401,867 384,239 388,434 377,234
Stockholders' equity .............................. 71,727 95,253 87,669 96,383
Other Data:
Amortization of intangible assets .................. $ 104 $ 126 $ 404 $ 963
Net gain / (loss) on sale of assets ................ 180 42 1,022 105
Vesting expense for recognition and
retention plan ................................... 81 0 975 0
Citizens South Banking Corporation
Consolidated Statements of Financial Condition
(dollars in thousands)
June 30, December 31,
2004 2003
--------- ------------
(unaudited)
ASSETS
Cash and due from banks ................................................................ $ 6,455 $ 5,374
Interest-earning bank balances ......................................................... 19,675 2,840
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Cash and cash equivalents ........................................................... 26,130 8,214
Investment securities available-for-sale, at fair value ................................ 54,646 56,233
Mortgage-backed securities available-for-sale, at fair value ........................... 73,524 89,168
Loans receivable, net unearned income .................................................. 300,247 297,995
Allowance for loan losses .............................................................. (2,902) (2,969)
Real estate acquired through foreclosure, net .......................................... 79 145
Accrued interest receivable ............................................................ 1,557 1,943
Premises and equipment, net ............................................................ 17,390 14,939
Federal Home Loan Bank stock, at cost .................................................. 2,550 2,915
Bank owned life insurance .............................................................. 12,639 12,317
Intangible assets ...................................................................... 7,763 7,985
Other assets ........................................................................... 6,963 6,866
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Total assets ........................................................................ $ 500,586 $ 495,751
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LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposit accounts ................................................................ $ 48,027 $ 43,686
Money market deposit accounts .......................................................... 60,112 48,189
Savings accounts ....................................................................... 32,420 36,754
Time deposits .......................................................................... 230,141 213,817
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Total deposits ...................................................................... 370,700 342,446
Borrowed money ......................................................................... 51,772 58,981
Deferred compensation .................................................................. 5,651 6,165
Other liabilities ...................................................................... 736 490
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Total liabilities ................................................................... 428,859 408,082
Stockholders' Equity:
Common stock issued and outstanding, $0.01 par value, 20,000,000 shares
authorized, 9,062,727 issued and outstanding in 2004 and 2003 ....................... 91 91
Additional paid-in-capital ............................................................. 68,280 68,280
Unallocated common stock held by Employee Stock Ownership Plan ......................... (1,887) (1,979)
Unearned compensation related to Recognition and Retention Plan ........................ (1,712) (1,979)
Retained earnings, substantially restricted ............................................ 29,679 28,824
Accumulated unrealized gain on securities available-for-sale, net of tax ............... (1,955) (40)
Treasury stock of 1,540,683 shares at June 30, 2004, and 392,414
shares at December 31, 2003 ......................................................... (20,769) (5,528)
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Total stockholders' equity ............................................................. 71,727 87,669
--------- ---------
Total liabilities and stockholders' equity ............................................. $ 500,586 $ 495,751
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Citizens South Banking Corporation
Consolidated Statements of Operations (unaudited)
(in thousands, except per share data)
Three Months Six Months
Ended June 30, Ended June 30,
-------------- --------------
2004 2003 2004 2003
---- ---- ---- ----
Interest income
Loans ........................................................ $ 3,836 $ 4,364 $ 7,722 $ 8,833
Investment securities ........................................ 472 272 957 689
Interest-bearing deposits .................................... 46 73 66 162
Mortgage-backed and related securities ....................... 641 936 1,419 1,864
----------- ---------- ---------- ----------
Total interest income ...................................... 4,995 5,645 10,164 11,548
Interest Expense
Deposits ..................................................... 1,461 1,693 2,887 3,434
Borrowed funds ............................................... 450 593 895 1,180
----------- ---------- ---------- ----------
Total interest expense ....................................... 1,911 2,286 3,782 4,614
----------- ---------- ---------- ----------
Net interest income .......................................... 3,084 3,359 6,382 6,934
Provision for loan losses .................................... 30 15 60 30
----------- ---------- ---------- ----------
Net interest income after provision for loan losses ........ 3,054 3,344 6,322 6,904
Noninterest Income
Fee income on deposit accounts ............................... 553 525 1,183 1,008
Fee income on mortgage banking and lending activities ........ 185 287 279 553
Dividends on FHLB stock ...................................... 22 27 46 58
Gain on sale of assets ....................................... 180 45 470 60
Fair value adjustment on deferred compensation assets ........ (37) 156 35 187
Other noninterest income ..................................... 262 242 498 447
----------- ---------- ---------- ----------
Total noninterest income ................................... 1,165 1,282 2,511 2,313
Noninterest Expense
Compensation and benefits .................................... 1,539 1,498 3,008 2,986
Vesting expense for Recognition and Retention Plan ........... 81 0 355 0
Fair value adjustment on deferred compensation assets ........ (37) 156 35 187
Occupancy and equipment expense .............................. 400 318 782 643
Professional services ........................................ 125 211 236 332
Amortization of intangible assets ............................ 104 126 221 272
Loss on sale of assets ....................................... 0 3 0 13
Other noninterest expenses ................................... 650 743 1,456 1,331
----------- ---------- ---------- ----------
Total noninterest expense .................................. 2,862 3,055 6,093 5,764
Income before income taxes ................................... 1,357 1,571 2,740 3,453
Provision for income taxes ................................... 409 447 831 1,122
----------- ---------- ---------- ----------
Net income ................................................... $ 948 $ 1,124 $ 1,909 $ 2,331
=========== ========== ========== ==========
Basic earnings per share ..................................... $ 0.12 $ 0.13 $ 0.24 $ 0.27
Diluted earnings per share ................................... $ 0.12 $ 0.13 $ 0.24 $ 0.26
Basic average common shares outstanding ...................... 7,780,751 8,660,195 8,024,668 8,708,740
Diluted average common shares outstanding .................... 7,891,635 8,808,915 8,117,736 8,804,222
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