CZNB Citizens Bancorp (CE)

Today, Citizens Bancorp (the “Company”) (OTCBB:CZNB), the holding company of Citizens Bank of Northern California (the “Bank”), announced operating results for the three month period ended December 31, 2009 of $1.7 million, an increase of $334,000, or 24%, compared to $1.4 million for the three month period ended December 31, 2008, primarily due to the Company’s sound net interest margin. Operating results for the twelve month period ended December 31, 2009 were $5.5 million, a decrease of $744,000, or 12%, compared to $6.3 million for the same period in 2008. These declines were due primarily to increased FDIC insurance and assessment costs. The operating results referred to above are a pre-tax (non-GAAP) measurement of net interest income, non-interest income exclusive of the provision for loan losses, gains from sales of loans and securities, and non-interest expense exclusive of costs associated with real estate owned.

The total pre-tax loss for the three month period ended December 31, 2009 of $4.2 million was a $15.6 million, or 79%, improvement compared to the pre-tax net loss of $19.8 million for the same period in 2008. The total pre-tax loss for the twelve month period ended December 31, 2009 of $6.6 million was an $11.7 million, or 64%, improvement compared to the pre-tax loss of $18.3 million for the same period in 2008. The primary contributor to improving the Company’s pre-tax loss for the year ended December 31, 2009 was a reduction in the provision for loan losses to $11.1 million, a change of $12.8 million from the $23.9 million recorded during the year ended December 31, 2008. The level of loan loss provisioning recorded during 2009 and 2008 is consistent with the continued deterioration in the region’s real estate markets and management’s proactive approach in addressing the related risks.

A non-cash tax adjustment for a valuation allowance on the deferred tax asset of $9.3 million also affected the Company’s results for the three and twelve month periods ended December 31, 2009. The net loss for the three month period ended December 31, 2009 was $11.8 million, compared to $11.5 million for the same period in 2008, an increase of $231 thousand, or 2.0%. The loss per share for the three months ended December 31, 2009 and 2008 was $6.09 and $6.02, respectively.

After recording the tax adjustment of $9.3 million and increased impairment charges related to real estate owned (REO) of $3.3 million, the net loss for the twelve month period ended December 31, 2009 was $13.5 million, or $7.01 per share, compared to $10.7 million, or $5.56 per share, for the same period in 2008. During the period, these factors were offset by a decrease in the provision for loan losses of $12.8 million and a gain on sale of loans of $2.8 million. President/CEO Gary D. Gall stated, “The Company’s level of earning assets remains stable and is improving, which has allowed the Bank to generate a strong net interest margin. That, combined with improvements in the level of non-performing assets, has brightened the prospect for future operating results.”

The following chart compares the fourth quarter and year-to-date results in 2009, to results for 2008:

 

(Dollars in thousands)

 

3 monthsended12/31/09

 

3 monthsended12/31/08

 

12 monthsended12/31/09

 

12 monthsended12/31/08

Net interest income   $4,180   $3,573   $15,122   $15,100 Non-interest income   577   522   2,294   2,140 Non-interest expense   3,028   2,700   11,882   10,962 Operating results before gain on sale, provision for loss, REO expenses, & tax  

1,729

 

1,395

 

5,534

 

6,278

Gain on sale of loans   2,818   -   2,818   - Provision for loan loss   7,215   20,900   11,115   23,900 REO write-down & other REO expenses, net   1,563   299  

3,809

  691 Net loss before tax   (4,231)   (19,804)   (6,572)   (18,313) Valuation allowance on deferred tax asset   9,293   -   9,293   - Income tax benefit   (1,779)   (8,264)   (2,725)   (7,662) Net loss   (11,745)   ($11,540)   ($13,140)   ($10,651)

Dividends and discount accretion on preferred stock

 

(26)

 

-

 

(328)

 

-

Net loss applicable to common shareholders   ($11,771)   ($11,540)   ($13,468)   ($10,651) Net loss per diluted common share   ($6.09)   ($6.02)   ($7.01)   ($5.56)        

Total assets for the Company as of December 31, 2009 were $371.1 million, an increase of $7.8 million, or 2%, from $363.3 million as of December 31, 2008. Total loans for the Company as of December 31, 2009 were $304.7 million, a decrease of $7.6 million, or 2%, from $312.4 million as of December 31, 2008. Over the same period, deposits grew $2.9 million, or 1%, to $302.6 million at December 31, 2009, compared to $299.8 million at December 31, 2008. The deposit growth reflects the growth of deposits in the Bank’s core markets of $32 million, offset by brokered deposit maturities of $29.1 million.

Non-performing assets decreased to $29.5 million at December 31, 2009 compared to $34.0 million at December 31, 2008. During the three and twelve month period ended December 31, 2009, the Company recorded a provision to the loan loss reserve of $7.2 million and $11.1 million, respectively, compared to $20.9 million and $23.9 million for the three and twelve month period ended December 31, 2008. The allowance for loan losses increased to 4.72% of total loans at December 31, 2009, compared to 3.97% at December 30, 2008. The allowance for loan losses as a percent of non-accrual loans totaled 57.8% and 44.5% at December 31, 2009 and 2008, respectively. Gall said, “Our Board of Directors and Management have maintained a diligent and aggressive stance in regards to asset quality. The Company provided $7.2 million in loan loss provisions during the quarter reflecting our continuing proactive stance in identifying and recognizing potentially impaired credits. We are continuing our efforts in resolving past due loans and disposing of foreclosed properties.”

Net interest income was $4.2 million for the three month period ended December 31, 2009, an increase of $607 thousand, or 17%, as compared to $3.6 million for the same period in 2008. The Company’s net interest margin increased from 4.19% in the three month period ended December 31, 2008 to 5.00% in the three month period ended December 31, 2009. Net interest income was $15.1 million for each of the twelve month periods ended December 31, 2009 and 2008. The Company’s net interest margin narrowed from 4.61% in the twelve month period ended December 31, 2008 to 4.51% in the twelve month period ended December 31, 2009. The compression of the net interest margin was primarily a result of increases in interest bearing deposit balances and decreases in average loan balances. As of December 31, 2009, the Company’s loan to deposit ratio was 100.7% compared with 104.2% at December 31, 2008. In addition, forgone interest on non-accrual and restructured loans, which was partially mitigated by improved cost of funds also contributed to a decline in net interest margin during the period. Forgone interest on non-accrual and restructured loans adversely impacted the net interest margin by 0.40% and 0.64% for the three and twelve month periods ended December 31, 2009, respectively, compared to 0.66% and 0.31% for the three and twelve month period ended December 31, 2008, respectively. The cost of funds decreased 94 basis points from 1.96% for the three month period ended December 31, 2008 to 1.02% for the same period in 2009 and decreased 86 basis points from 2.10% for the twelve month period ended December 31, 2008 to 1.24% for the same period in 2009. Average earning assets for the three months ended December 31, 2009 decreased by $7.5 million, or 2%, to $331.5 million compared to $339.0 million for the same period in 2008. For the twelve months ended December 31, 2009, average earning assets grew by $7.9 million, or 2%, to $335.4 million from $327.5 million for the same period in 2008. Gall stated, “Our excellent net interest margin has been fueled by our continued growth of Core deposits, which will be a catalyst for future earnings.”

During the twelve month period ended December 31, 2009, the increase in non-interest expense of $4.0 million over the same period in 2008, was primarily the result of an increased write-down in the carrying value of REO of $3.3 million, an increase in FDIC insurance premiums of $879 thousand and an increase in professional fees of $491 thousand, offset by a net decrease in other expenses of $219 thousand. The growth of those non-interest expense items was partially offset by lower personnel and occupancy costs of $346 thousand and $92 thousand, respectively.

In August 2009, in order to preserve capital, the Company began deferring TARP dividend payments. To further augment capital, the Company successfully completed a private placement during December 2009, selling $1.57 million in common stock. In order to strengthen the balance sheet of the Bank and prepare for the future repayment of TARP, preparations are now underway for a shareholder rights offering between April and June, 2010, to raise a minimum of $6 million in new capital.

This release may contain certain forward-looking statements that are based on management’s current expectations regarding economic, legislative, and regulatory issues that may impact the Company’s earnings in future periods. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words “believe”, “expect”, “intend”, “estimate” or words of similar meaning, or future or conditional verbs such as “will”, “would”, “should”, “could” or “may”. Factors that could cause future results to vary materially from current management expectations include, but are not limited to, general economic conditions, changes in interest rates, deposit flows, real estate values, and competition; changes in accounting principles, policies or guidelines; changes in legislation or regulation; and other economic, competitive, governmental, regulatory and technological factors affecting the Bank’s operations, pricing, products and services. These and other important factors are detailed in various Federal Deposit Insurance Corporation filings made periodically by the Bank, copies of which are available from the Bank without charge. The Company or the Bank undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.

Citizens Bank of Northern California (the “Bank”) was founded in February 1995, and is headquartered in Nevada City, California. The Bank became a wholly owned subsidiary of the Company in 2003. The Bank has six branches serving communities throughout Nevada County, including locations in Nevada City, Grass Valley, Penn Valley, Lake of the Pines, and Truckee. In addition to its Nevada County branches, the Bank services the needs of its Placer County customers with a branch located in Auburn. The Bank offers consumer loans and other traditional banking products and services, designed to meet the needs of small and middle market businesses and individuals.

  Citizens Bancorp

Selected Financial Highlights

For the three and twelve month periods ended December 31, 2009 and 2008

 

(In thousands, except share and per share data)

(Unaudited)

 

3 monthsended12/31/09

 

3 monthsended12/31/08

 

Change%

 

12monthsended12/31/09

 

12monthsended12/31/08

 

Change%

Net interest income   $4,180   $3,573   16.99%   $15,122   $15,100   0.15% Provision for loan losses 7,215 20,900 -65.48% 11,115 23,900 -53.49% Total non-interest income 3,395 522 550.38% 5,112 2,140 138.88% Total non-interest expense 4,591 2,999 53.08% 15,691 11,653 34.65% Income tax expense (benefit) 7,514   (8,264) 190.92% 6,568   (7,662) 185.72% Net loss ($11,745) ($11,540) -1.78% ($13,140) ($10,651) -23.37% Dividends and discount accretion on preferred stock (26)     (328)     Net loss applicable to common shareholders ($11,771) ($11,540) ($13,468) ($10,651)   Weighted average shares outstanding:

Basic

1,933,116 1,915,981 1,920,300 1,915,117 Diluted 1,933,116 1,915,981 1,920,300 1,915,117 Loss per share: Basic ($6.09) ($6.02) ($7.01) ($5.56) Diluted ($6.09) ($6.02) ($7.01) ($5.56)     RATIOS & OTHER INFORMATION:

Annualized return on average assets

-12.29%

-12.70%

-3.58%

-3.04%

Annualized return on average equity -319.19% -258.09% -72.71% -50.82% Net interest margin 5.00% 4.19% 4.51% 4.61% Efficiency ratio 60.61% 73.24% 77.55% 67.60% Net charge-offs as % of average total loans 2.40% 4.06% 2.94% 4.87% Non-performing assets as % of total average assets

Non-performing loans as a % of total average loans

Allowance for loan losses to total loans

7.79%

8.19%

4.72%

9.44%

8.79%

3.97%

7.84%

8.02%

4.72%

9.71%

8.80%

3.97%

Average earning assets $331,493 $339,029 $335,353 $327,468       12/31/09   12/31/08   Change % Shareholders’ equity $9,505 $21,296 - 55.4% Shares outstanding (end of period) 2,310,090 1,915,981 Book value per common share $4.11 $11.11 Tangible book value per common share

Tangible equity/tangible assets

($0.42)

2.6%

$5.70

5.9%

  Tier 1 leverage capital ratio 3.3% 5.5% Total risk based capital ratio 9.2% 10.2%   Number of full service banking offices 7 7 Number of full-time equivalent employees 84 85      

CITIZENS BANCORPUNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CONDITION

 

(In thousands)

   

December 31,2009

 

December 31,2008

Assets   Cash and due from banks $6,414 $7,050 Federal funds sold   -   25,260 Total cash and cash equivalents 6,414 32,310   Interest-bearing deposits in other banks 55,521 519 Investment securities 1,561 1,161 Loans 304,739 312,374 Allowance for loan losses   (14,387)   (12,406) Net loans 290,352 299,968 Premises and equipment, net 1,547 2,073 Cash surrender value of bank-owned life insurance 6,116 5,907 Other real estate owned 4,650 6,195 Interest receivable and other assets   4,897   15,141 Total Assets   $371,058   $363,274  

Liabilities and Shareholders’ Equity

  Liabilities Deposits Non-interest bearing $76,123 $65,218 Interest bearing   226,508   234,540 Total deposits 302,631 299,758 Federal funds purchased and Federal Home Loan Bank borrowings 40,000 23,000 Junior subordinated debentures 15,465 15,465 Interest payable and other liabilities   3,457   3,755 Total Liabilities   361,553   341,978   Shareholders’ Equity Preferred stock

Common stock, no par value

10,473

15,946

10,369

14,374

Accumulated deficit (16,922) (3,454) Accumulated other comprehensive income, net   8   7 Total Shareholders’ Equity   9,505   21,296           Total Liabilities and Shareholders’ Equity   $371,058   $363,274      

CITIZENS BANCORPUNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

 

(In thousands, except per share data)  

Threemonthsended12/31/09

 

Threemonthsended12/31/08

 

Twelvemonthsended12/31/09

 

Twelvemonthsended12/31/08

Interest Income       Interest and fees on loans $5,014 $5,204 $19,215 $21,801 Interest on investment securities 7 9 40 40 Interest on federal funds sold - 29 8 125 Interest on deposits in banks   15   1   27   5 Total Interest Income   5,036   5,243   19,290   21,971   Interest Expense Interest on interest-bearing deposits 621 1,294 3,226 5,450 Interest on borrowings 138 107 473 493 Interest on junior subordinated debentures   97   269   469   928 Total Interest Expense   856   1,670   4,168   6,871   Net Interest Income 4,180 3,573 15,122 15,100   Provision for loan losses   7,215   20,900   11,115   23,900 Net Interest Income (Loss) After Provision for Loan Losses  

(3,035)

 

(17,327)

 

4,007

 

(8,800)

  Non-Interest Income Service charges on deposit accounts 346 344 1,360 1,251 Broker fee income 174 86 689 491 Other income   2,875   92   3,063   398 Total Non-Interest Income   3,395   522   5,112   2,140   Non-Interest Expense Salaries and employee benefits 1,391 1,202 4,925 5,271 Occupancy and equipment 442 482 1,771 1,863 Other expense   2,758   1,315   8,995   4,519 Total Non-Interest Expense   4,591   2,999   15,691   11,653  

Loss Before Provision for (Benefit from) Income Tax

(4,231)

(19,804)

(6,572)

(18,313)

  Provision for (benefit from) income taxes   7,514   (8,264)   6,568   (7,662) Net Loss   ($11,745)   ($11,540)   ($13,140)   ($10,651) Dividends and discount accretion on preferred stock   (26)   -   (328)   - Net Loss Applicable to Common Shareholders   ($11,771)   ($11,540)   ($13,468)   ($10,651)   Net loss per common share Basic ($6.09) ($6.02) ($7.01) ($5.56) Diluted ($6.09) ($6.02) ($7.01) ($5.56)