GASTONIA, N.C., Oct. 16 /PRNewswire-FirstCall/ -- Citizens South Banking Corporation , the holding company for Citizens South Bank, announced net income for the quarter ended September 30, 2006, of $1.4 million, or $0.18 per diluted share, compared to $964,000, or $0.14 per diluted share, for the quarter ended September 30, 2005. This represents a $474,000, or 49.1%, increase in net income for the third quarter of 2006 when compared to the third quarter of 2005.
"It is gratifying to see our team's efforts result in record earnings per share for the Company," Kim S. Price, President and CEO, stated in making the announcement. "We have executed a number of initiatives that are enhancing our Company's ability to deliver improved customer service, quality balance sheet growth, and operating efficiencies. These results are particularly notable considering the difficult yield curve and the increasingly competitive environment in which we operate."
Diluted earnings per share increased by $0.04, or 28.6%, for the same periods. Net operating income, which excludes net gains on sales of assets, amounted to $1.4 million, or $0.18 per diluted share, for the quarter ended September 30, 2006, compared to $953,000, or $0.14 per diluted share, for the quarter ended September 30, 2005.
Net interest income increased by $1.5 million, or 40.3%, during the third quarter of 2006, compared to the third quarter of 2005. This increase was primarily the result of the acquisition of Trinity Bank, continued loan growth, and a change in the asset mix. Total loans increased by $44.9 million, or 12.6% annualized, to $518.2 million during the nine months ended September 30, 2006. This increase in loans was primarily funded by growth in deposits and maturing investment securities.
Credit quality compares favorably with industry peers. Nonperforming assets totaled $2.1 million, or 0.29% of total assets, at September 30, 2006, compared to $2.2 million, or 0.42% of total assets, at the end of the third quarter of 2005.
During the first three quarters of 2006, the Company's total deposits increased by $31.5 million, or 8.1% annualized, to $549.0 million as of September 30, 2006. Deposit gathering continues to be a major focus for the Company.
Noninterest income increased by $548,000, or 50.0%, to $1.6 million for the quarter ended September 30, 2006, compared to $1.1 million for the quarter ended September 30, 2005. This increase was partially attributable to the expanded customer base developed and acquired through the Trinity Bank acquisition, which resulted in higher fee income from loan and deposit products. A restructuring of our mortgage banking and financial services divisions also contributed to growing fee revenue.
Noninterest expense increased by $1.1 million, or 33.7%, to $4.4 million for the third quarter of 2006. These increased expenses are largely associated with the staffing and operations of three additional full-service offices resulting from the acquisition of Trinity Bank, the opening of a new full-service office in Belmont, North Carolina, and the opening of a new loan production office in Rock Hill, South Carolina.
Headquartered in Gastonia, North Carolina, Citizens South Bank was founded in 1904. Deposits are FDIC insured. At September 30, 2006, the Bank had approximately $726 million in assets with 14 full-service offices in the Charlotte Region, including Gaston, Iredell, Rowan, and Union counties in North Carolina; and two loan production offices in Mecklenburg County, 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 National Market under the ticker symbol "CSBC". The Company maintains a website at http://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 1934 Securities Exchange Act 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, our ability to successfully integrate Trinity Bank, the continuation of current revenue and expense trends, 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, 2005, describe some of these factors.
Citizens South Banking Corporation
Selected Financial Information
(dollars in thousands, except per share data)
Nine Nine
Quarter Quarter Months Months
ended ended ended ended
September September September September
30, 30, 30, 30,
2006 2005 2006 2005
Reconciliation of GAAP to
non-GAAP Measures:
Net income, as reported (GAAP) $1,438 $964 $3,972 $2,767
Non-operating items:
(Gain)/ loss on sale of assets, net (8) (19) 40 (82)
Merger and integration related
expense 0 0 57 0
Related income taxes (39%) 3 8 (38) 32
Net Operating Income $1,433 $953 $4,031 $2,717
Per Share Data:
Average common shares
outstanding, basic 8,019,286 6,968,691 8,042,271 7,007,014
Basic net income - GAAP $0.18 $0.14 $0.49 $0.40
Basic net income - Operating 0.18 0.14 0.50 0.39
Average common shares
outstanding, diluted 8,095,750 7,061,656 8,119,781 7,097,439
Diluted net income - GAAP $0.18 $0.14 $0.49 $0.39
Diluted net income - Operating 0.18 0.14 0.50 0.38
Cash dividends declared $0.075 $0.07 $0.225 $0.21
Period-end book value 10.46 9.77 10.46 9.77
Financial Ratios (annualized):
Return on average stockholders'
equity - GAAP 6.70% 5.40% 6.26% 5.22%
Return on avg. stockholders'
equity - Operating 6.67 5.33 6.35 5.12
Return on average assets - GAAP 0.79% 0.75% 0.75% 0.72%
Return on average assets - Operating 0.79 0.74 0.76 0.71
Efficiency ratio - GAAP 64.10% 68.30% 66.27% 69.28%
Net interest margin 3.27% 3.26% 3.36% 3.26%
Average equity to average assets 11.81 13.81 11.92 13.89
Asset Quality Data:
Allowance for loan losses $ 5,560 $3,369 $ 5,560 $3,369
Nonperforming loans 1,925 1,503 1,925 1,503
Nonperforming assets 2,070 2,158 2,070 2,158
Net charge-offs 154 42 409 70
Allowance for loan losses to
total loans 1.07% 0.98% 1.07% 0.98%
Nonperforming loans to total loans 0.37 0.44 0.37 0.44
Nonperforming assets to total assets 0.29 0.42 0.29 0.42
Average Balances:
Total assets $721,204 $513,347 $711,344 $510,733
Loans receivable, net of
unearned income 503,491 330,718 487,860 324,471
Interest-earning assets 628,548 450,923 616,516 450,847
Deposits 540,201 371,448 528,988 371,053
Interest-bearing liabilities 588,402 410,882 582,538 410,339
Stockholders' equity 85,178 70,880 84,813 70,940
At Period End:
Total assets $725,908 $518,942 $725,908 $518,942
Loans receivable, net 512,652 341,406 512,652 341,406
Interest-earning assets 639,054 463,304 639,054 463,304
Intangible assets 31,842 7,310 31,842 7,310
Deposits 548,999 373,230 548,999 373,230
Interest-bearing liabilities 593,183 419,555 593,183 419,555
Stockholders' equity 85,776 70,527 85,776 70,527
Citizens South Banking Corporation
Consolidated Statements of Financial Condition
(dollars in thousands)
September 30, December 31,
2006 2005
(unaudited)
ASSETS
Cash and due from banks $10,227 $8,863
Interest-earning bank balances 16,135 17,790
Cash and cash equivalents 26,362 26,653
Investment securities available-for-sale,
at fair value 47,858 53,429
Mortgage-backed securities available-for-sale,
at fair value 58,774 70,236
Loans receivable, net unearned income 518,212 473,336
Allowance for loan losses (5,560) (5,104)
Loans receivable, net 512,652 468,232
Real estate acquired through foreclosure, net 145 1,157
Premises and equipment, net 18,977 19,819
Accrued interest receivable 3,154 2,539
Federal Home Loan Bank stock, at cost 3,649 4,084
Intangible assets 31,842 32,424
Bank owned life insurance 15,365 14,828
Other assets 7,130 7,693
Total assets $725,908 $701,094
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Demand deposit accounts $89,015 $85,489
Money market deposit accounts 110,111 104,421
Savings accounts 17,591 23,654
Time deposits 332,282 303,980
Total deposits 548,999 517,544
Borrowed money 82,346 91,342
Deferred compensation 5,589 5,849
Other liabilities 3,198 2,101
Total liabilities 640,132 616,836
Stockholders' Equity:
Common stock issued and outstanding, $0.01
par value, 20,000,000 shares authorized,
9,062,727 issued at September 30, 2006, and
December 31, 2005, and 8,199,683 shares
outstanding at September 30, 2006, and
8,291,544 shares outstanding at
December 31, 2005 91 91
Additional paid-in-capital 68,486 68,468
Unallocated common stock held by Employee
Stock Ownership Plan (1,476) (1,613)
Unearned compensation related to Recognition
and Retention Plan (1,209) (1,419)
Retained earnings, substantially restricted 32,156 30,311
Accumulated unrealized loss on securities
available-for-sale, net of tax (1,333) (1,567)
Treasury stock of 863,044 shares at September
30, 2006, and 771,183 shares
at December 31, 2005 (10,939) (10,013)
Total stockholders' equity 85,776 84,258
Total liabilities and stockholders' equity $725,908 $701,094
Citizens South Banking Corporation
Consolidated Statements of Operations (unaudited)
(in thousands, except per share data)
Three Months Nine Months
Ended September 30, Ended September 30,
2006 2005 2006 2005
Interest income
Loans $9,804 $5,368 $27,501 $14,960
Investment securities 467 387 1,458 1,157
Interest-bearing deposits 210 107 487 261
Mortgage-backed and related
securities 644 621 2,027 2,034
Total interest income 11,125 6,483 31,473 18,412
Interest Expense
Deposits 4,858 2,220 12,802 5,862
Borrowed funds 1,065 554 3,156 1,547
Total interest expense 5,923 2,774 15,958 7,409
Net interest income 5,202 3,709 15,515 11,003
Provision for loan losses 300 140 865 410
Net interest income after
provision for loan losses 4,902 3,569 14,650 10,593
Noninterest Income
Fee income on deposit accounts 742 634 2,157 1,789
Fee income on mortgage banking
and lending activities 359 159 864 400
Dividends on FHLB stock 58 30 169 109
Increase in cash value of
bank-owned life insurance 166 150 580 458
Fair value adjustment on deferred
compensation assets 101 26 143 57
Net gain / (loss) on sale of assets 8 19 (40) 82
Other noninterest income 209 77 553 299
Total noninterest income 1,643 1,095 4,426 3,194
Noninterest Expense
Compensation and benefits 2,281 1,705 6,861 5,111
Fair value adjustment on deferred
compensation obligation 101 26 143 57
Occupancy and equipment expense 610 486 1,990 1,466
Professional services 116 132 420 443
Amortization of intangible assets 186 78 558 249
Merger and integration related
expenses 0 0 57 0
Other noninterest expenses 1,094 855 3,186 2,510
Total noninterest expense 4,388 3,282 13,215 9,836
Income before income taxes 2,157 1,382 5,861 3,951
Provision for income taxes 719 418 1,889 1,184
Net income $1,438 $964 $3,972 $2,767
Basic earnings per share $0.18 $0.14 $0.49 $0.40
Diluted earnings per share $0.18 $0.14 $0.49 $0.39
Basic average common shares
outstanding 8,019,286 6,968,691 8,042,271 7,007,014
Diluted average common shares
outstanding 8,095,750 7,061,656 8,119,781 7,097,439
