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 before provision for loss, real estate owned (“REO”) expenses, & taxes for the three month period ended March 31, 2010 of $1.0 million. The operating results referred to above are a pre-tax (non-GAAP) measurement of net interest income, non-interest income exclusive of gains from sales of loans and securities, and non-interest expense exclusive of costs associated with REO and provision for loan losses.

Total net income for the three month period ended March 31, 2010 was $337 thousand compared to a net loss of $1.6 million for the same period in 2009. The primary contributors to improving the Company’s earnings for the three months ended March 31, 2010 was a reduction in the provision for loan losses and in the costs and impairment charges associated with REO. Provision for loan losses for the three month period ended March 31, 2010 was $600 thousand, a reduction of $1.4 million compared to the $2.0 million recorded during the same period in 2009. Costs and impairment charges associated with REO were $77 thousand for the three month period ended March 31, 2010, compared to $1.6 million during the same period in 2009. Earnings per diluted share for the three months ended March 31, 2010 were $0.15, compared to a loss per share for the three months ended March 31, 2009 of $0.84.

President/CEO Gary D. Gall stated, “I am pleased to announce the positive results of the first quarter which were driven by improvements to our net interest margin and the hard work of our staff, who remained focused on the execution of our 2010 strategic plan.” He continued, “In addition to returning our operations to profitability, our 2010 strategic plan includes raising new capital through a shareholder rights offering which is expected to start in late April.”

The following chart compares the first quarter results in 2010 to results for 2009:

 

 

(Dollars in thousands)

 

3 monthsended3/31/10

 

3 monthsended3/31/09

Net interest income   $3,577     $3,524   Non-interest income   579     522   Non-interest expense   3,116     2,938   Operating results before provision for loss, REO expenses, & tax   1,040     1,108   Provision for loan loss   600     2,000   REO write-down & other REO expenses, net   77     1,633   Net income (loss) before tax   363     (2,525 ) Income tax benefit   -     (1,020 ) Net income (loss)   363     ($1,505 ) Dividends and discount accretion on preferred stock   (26 )   (108 ) Net income (loss) applicable to common shareholders   $337     ($1,613 ) Net income (loss) per diluted common share   $0.15     ($0.84 )    

Consistent with the Company’s plan to reduce assets and improve its capital ratios by reducing borrowings and brokered deposits, total assets for the Company as of March 31, 2010 were $338.4 million, a decrease of $32.1 million, or 9%, from $370.4 million as of March 31, 2009. Total loans for the Company as of March 31, 2010 were $296.6 million, a decrease of $18.6 million, or 9%, from $315.3 million as of March 31, 2009. Over the same period, deposits decreased $19.9 million, or 7%, to $283.6 million at March 31, 2010, compared to $303.5 million at March 31, 2009. The decrease in deposits primarily reflects brokered deposit maturities of $18.3 million.

Non-performing assets increased to $37.9 million at March 31, 2010, compared to $32.1 million at March 31, 2009. During the three month period ended March 31, 2010, the Company recorded a provision to the loan loss reserve of $600 thousand compared to $2.0 million for the three month period ended March 31, 2009. The allowance for loan losses was 4.57% of total loans at March 31, 2010, compared to 4.38% at March 31, 2009. The allowance for loan losses as a percent of non-accrual loans totaled 43.5% and 57.2% at March 31, 2010 and March 31, 2009, respectively. Gall said, “Non-performing assets continue to reflect our local, as well as national economic conditions. We have strengthened our underwriting process and are making a strong effort to improve asset quality.”

Net interest income was $3.6 million for the three month period ended March 31, 2010, an increase of $53 thousand, or 2%, as compared to $3.5 million for the same period in 2009. The Company’s net interest margin increased from 4.30% in the three month period ended March 31, 2009 to 4.54% in the three month period ended March 31, 2010, primarily as a result of a decrease in rates paid on and balances of deposits and borrowings, which was partially offset by decreases in interest rates on and balances of loans. As of March 31, 2010, the Company’s loan to deposit ratio was 104.6% compared with 103.9% at March 31, 2009. Forgone interest on non-accrual and restructured loans, negatively affected the net interest margin during the period. Forgone interest on non-accrual and restructured loans adversely impacted the net interest margin by 0.93% for the three a month period ended March 31, 2010, compared to 0.66% for the three month period ended March 31, 2009. The cost of funds decreased 73 basis points from 1.57% for the three month period ended March 31, 2009 to 0.84% for the same period in 2010. Average earning assets for the three months ended March 31, 2010 decreased by $12.8 million, or 4%, to $319.8 million compared to $332.6 million for the same period in 2009. Gall stated, “Our net interest margin remains strong despite our level of non-performing assets. As we work to strengthen our balance sheet and reduce non-performing assets, we should begin to see an even greater improvement in our net interest margin in future periods.”

During the three month period ended March 31, 2010, the decrease in non-interest expense of $1.4 million over the same period in 2009, was primarily the result of lower expenses related to REO. In the three month period ended March 31, 2009, the Bank recorded a loss on the sale or write-down of REO of $1.5 million. There was no loss on the sale or write-down of REO during the same period in 2010.

The Bank’s Tier 1 leverage capital ratio improved from 6.1% to 6.8% from December 31, 2009 to March 31, 2010. In order to strengthen the balance sheet of the Bank and attain a 9% Tier 1 capital ratio level, preparations are underway for a shareholder rights offering in which we seek to raise new capital between late April and July of 2010. In August 2009, in order to preserve capital, the Company began deferring TARP dividend payments.

 

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 month periods ended March 31, 2010 and 2009

 

(In thousands, except share and per share data)

(Unaudited)

 

3 monthsended3/31/10

 

3 monthsended3/31/09

 

Change%

 

Net interest income   $3,577   $3,524   1.50 % Provision for loan losses 600 2,000 -70.00 % Total non-interest income 579 522 10.92 % Total non-interest expense 3,193 4,571 -30.15 % Income tax benefit -     (1,020 ) 100.00 % Net income (loss) 363 (1,505 ) 124.12 % Dividends and discount accretion on preferred stock (26 )   (108 ) 75.93 % Net income (loss) applicable to common shareholders $337 ($1,613 ) 120.89 %   Weighted average shares outstanding: Basic 2,310,090 1,915,981 Diluted 2,310,090 1,915,981 Income (loss) per share: Basic $0.15 ($0.84 ) Diluted $0.15 ($0.84 )     RATIOS & OTHER INFORMATION:  

Annualized return on average assets

0.38

%

-1.78

%

Annualized return on average equity 14.09 % -31.90 % Net interest margin 4.54 % 4.30 % Efficiency ratio 76.84 % 112.96 % Net charge-offs as % of average total loans 0.47 % 0.19 %

Non-performing assets as % of total average assets

10.66

%

8.74

%

Non-performing loans as a % of total average loans

10.36

%

7.69

%

Allowance for loan losses to total loans

4.57

%

4.38

%

Average earning assets $319,808 $332,588       3/31/10     12/31/09   Shareholders’ equity $9,875 $9,505 Shares outstanding (end of period) 2,310,090 2,310,090 Book value per common share $4.27 $4.11

Tangible book value per common share

($0.27

)

($0.42

)

Tangible equity/tangible assets

-0.2

%

-0.3

%

 

BANCORP CAPITAL RATIOS

Tier 1 leverage capital ratio 3.7 % 3.3 % Total risk based capital ratio 9.6 % 9.2 %  

BANK CAPITAL RATIOS

Tier 1 leverage capital ratio

6.8

%

6.1

%

Total risk based capital ratio 9.3 % 8.9 %  

Number of full service banking offices

7

7

Number of full-time equivalent employees 82 84    

CITIZENS BANCORP

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CONDITION

 

(In thousands)

   

March 31,2010

 

December 31,2009

 

March 31,2009

Assets     Cash and due from banks $5,277 $6,414 $27,188 Interest-bearing deposits due from banks 29,933 55,421 310 Federal funds sold   -     -     7,285   Total cash and cash equivalents 35,210 61,835 34,783   Time deposits in other banks 650 100 100 Investment securities 2,192 1,561 2,185 Loans 296,623 304,739 315,252 Allowance for loan losses   (13,561 )   (14,387 )   (13,810 ) Net loans 283,062 290,352 301,442 Premises and equipment, net 1,425 1,547 1,938 Cash surrender value of bank-owned life insurance 6,070 6,116 5,959 Other real estate owned 4,553 4,650 7,929 Interest receivable and other assets   5,214     4,897     16,112   Total Assets   $338,376     $371,058     $370,448    

Liabilities and Shareholders’ Equity

              Liabilities Deposits Noninterest-bearing $75,675 $76,123 $66,131 Interest-bearing   207,916     226,508     237,338   Total deposits 283,591 302,631 303,469 Federal Home Loan Bank borrowings 26,000 40,000 28,000 Junior subordinated debentures 15,465 15,465 15,465 Interest payable and other liabilities   3,445     3,457     3,805   Total Liabilities   328,501     361,553     350,739     Shareholders’ Equity

Preferred stock

10,499

10,473

10,395

Common stock, no par value

15,943

15,946

14,378

Accumulated deficit (16,585 ) (16,922 ) (5,066 ) Accumulated other comprehensive income, net   18     8     2   Total Shareholders’ Equity   9,875     9,505     19,709                 Total Liabilities and Shareholders’ Equity   $338,376     $371,058     $370,448      

CITIZENS BANCORP

UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

  (In thousands, except per share data)  

Three monthsended 3/31/10

   

Three monthsended 3/31/09

  Interest Income   Interest and fees on loans $4,216 $4,790 Interest on investment securities 15 13 Interest on Federal funds sold - 5 Interest on deposits in banks   11     -   Total Interest Income   4,242     4,808     Interest Expense Interest on deposits 456 1,043 Interest on borrowings 116 106 Interest on junior subordinated debentures   93     135   Total Interest Expense   665     1,284     Net Interest Income 3,577 3,524   Provision for loan losses   600     2,000   Net Interest Income After Provision for Loan Losses   2,977     1,524     Non-Interest Income Service charges on deposit accounts 341 285 Broker fee income 80 123 Other income   158     114   Total Non-Interest Income   579     522     Non-Interest Expense Salaries and employee benefits 1,489 1,332 Occupancy and equipment 451 443 Loss on sale/writedown of other real estate owned - 1,538 Other expenses   1,253     1,258   Total Non-Interest Expense   3,193     4,571   Income (Loss) Before Benefit from Income Tax 363 (2,525 ) Benefit from income taxes   -     (1,020 ) Net Income (Loss)   $363     ($1,505 ) Dividends and discount accretion on preferred stock   (26 )   (108 ) Net Income (Loss) Applicable to Common Shareholders   $337     ($1,613 ) Net income (loss) per common share Basic $0.15 ($0.84 ) Diluted $0.15 ($0.84 )