Today, Citizens Bancorp (the "Company") (OTCBB:CZNB), the holding company of Citizens Bank of Northern California (the "Bank"), announced financial results for the three and nine months ended September 30, 2008. Net income totaled $176,000 or $0.09 per diluted share for the quarter ended September 30, 2008, a decrease of 79% compared to $827,000, or $0.42 per diluted share for the same period in 2007. For the nine month period ended September 30, 2008, net income was $889,000, or $0.46 per diluted share. This represents a 57% decrease over the same period in 2007 when net income was $2,076,000, or $1.06 per diluted share. Earnings per share for 2007 have been adjusted to reflect the 5% stock dividend in June 2008.
Total assets for the Company as of September 30, 2008 were $366.2 million, an increase of $52 million, or 17% from $314.2 million as of September 30, 2007. Total loans for the Company as of September 30, 2008 were $321.1 million, an increase of $26.6 million, or 9% compared to $294.5 million as of September 30, 2007. Over the same period, deposits grew $49.3 million, or 19%, to $309.7 million at September 30, 2008 compared to $260.3 million at September 30, 2007.
The decrease in net income in the third quarter of 2008 compared to the third quarter of 2007 was attributed primarily to an increase in the provision for loan losses. During the three months ended September 30, 2008 the Company recorded a provision for loan losses of $1,400,000 compared to no provision being recorded during the same period in the prior year. During the nine months ended September 30, 2008, the Company recorded a provision for loan losses of $3.0 million compared to $270,000 during the same period in the prior year. President/Chief Executive Officer, Judy Hess said, "The Bank mitigates risk by being proactive in identifying those problem credits related to the current economy. Consistent with previous periods we have prudently reserved for potential loan losses and remain adequately reserved to absorb expected and inherent losses in our portfolio." Net charge-offs during the three and nine month periods ending September 30, 2008 were $557,000 and $2.6 million, respectively. There were $11,000 in charge-offs in the three and nine month period ending September 30, 2007.
Hess continued, "While the foreclosure of real estate loan collateral continued in recent months, the Company is positioned favorably to allow the time necessary to transact these properties at prices which management believes are in the best interest of shareholders."
Net interest income was $3.97 million for the three month period ended September 30, 2008, an increase of $343,000, or 9% as compared to $3.63 million for the same period in 2007. The Company's net interest margin dropped 8 basis points from 4.86% during the three month period ended September 30, 2007 to 4.78% during the three month period ended September 30, 2008. Average earning assets for the three months ended September 30, 2008 grew by $34.8 million to $330.7 million compared to $295.9 million for the same period in 2007. Net interest income was $11.53 million for the nine month period ended September 30, 2008, an increase of $876,000, or 8% as compared to $10.65 million for the same period in 2007. The Company's net interest margin dropped 37 basis points from 5.13% during the nine month period ended September 30, 2007 to 4.76% during the nine month period ended September 30, 2008. Average earning assets for the three months ended September 30, 2008 grew by $46.0 million to $323.6 million compared to $277.6 million for the same period in 2007. Hess said "Earnings have been somewhat impacted by recent drops in the prime lending rates, however this interest rate risk in the Bank has been partially mitigated by interest rate floors on loans and new loan volume."
Non-performing assets, which include non-performing loans, other real estate owned, and loans delinquent 90 days or more totaled $10.2 million and $10.5 million as of September 30, 2008 and June 30, 2008, respectively, which was up from $9.5 million as of December 31, 2007.
Non-interest income remained relatively static during the three and nine month period ending September 30, 2008 when compared with the same periods in 2007. The slight changes in non-interest income were the result of lower mortgage broker fees, partially offset by increased earnings from service charges due to an increase in the number of customer deposit accounts and additional customer usage.
Non-interest expense of $2.82 million for the three months ended September 30, 2008 represented an increase of $82,000 when compared with the three months ended September 30, 2007. Non-interest expense for the nine months ended September 30, 2008 of $8.76 million increased by $291,000 when compared to the $8.47 million incurred during the 2007 period. Salaries & benefits decreased by $517,000 during the nine months ended September 30, 2008 as compared to the same period in 2007 as a result of a decrease in the number of full-time equivalent employees partially due to attrition and partially due to decreased levels of construction lending. Legal and professional fees, as well as other costs associated with holding other real estate owned increased by $410,000 during the nine months ended September 30, 2008 as compared to the same period in 2007. Other expenses increased $398,000 during the same period. "We are committed to maximizing shareholder value by continuing to implement our cost saving strategic initiatives while navigating these complex economic times," stated Hess.
Founded in February 1995, Citizens Bank, headquartered in Nevada City, became a wholly owned subsidiary of the Company in 2003. In addition to the new Auburn branch in Placer County, the Bank has six other branches in communities throughout Nevada County, including Nevada City, Grass Valley, Penn Valley, Lake of the Pines, and Truckee. The opening of the Auburn branch represents the Bank's first physical entry into neighboring Placer County. The Bank offers community banking services, including a wide variety of deposit products, commercial, residential and consumer loans, and other traditional banking products and services, designed to meet the needs of small and middle market businesses and individuals.
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 Bancorp Selected Financial Highlights | ||||||||||||
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(In thousands, except per share data) (Unaudited) |  | 3 months ended 9/30/08 |  | 3 months ended 9/30/07 |  | Change % |  | 9 months ended 9/30/08 |  | 9 months ended 9/30/07 |  | Change % |
Net interest income |  | $3,970 |  | $3,627 |  | 9% |  | $11,527 |  | $10,651 |  | 8% |
Provision for loan losses | 1,400 | 0 | 3,000 | 270 | 1,111% | |||||||
Total non-interest income | 545 | 523 | 4% | 1,722 | 1,635 | 5% | ||||||
Total non-interest expense | 2,819 | 2,737 | 3% | 8,758 | 8,467 | 3% | ||||||
Net income | $176 | $827 | (79%) | $889 | $2,076 | (57%) | ||||||
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Weighted average shares outstanding: (1) | ||||||||||||
Basic | 1,916 | 1,912 | 1,915 | 1,912 | ||||||||
Diluted | 1,924 | 1,958 | 1,927 | 1,962 | ||||||||
Earnings per share: (1) | ||||||||||||
Basic | $0.09 | $0.43 | $0.46 | $1.09 | ||||||||
Diluted | $0.09 | $0.42 | $0.46 | $1.06 | ||||||||
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RATIOS & OTHER INFORMATION: | ||||||||||||
Annualized return on average assets | 0.20% | 1.04% | 0.34% | 0.94% | ||||||||
Annualized return on average equity | 3.14% | 15.60% | 5.37% | 13.87% | ||||||||
Net interest margin | 4.78% | 4.86% | 4.76% | 5.13% | ||||||||
Average earning assets | $330,742 | $295,940 | $323,614 | $277,658 | ||||||||
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Loan to deposit ratio | 103.71% | 113.12% | 103.71% | 113.12% | ||||||||
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Efficiency ratio | 62.43% | 65.94% | 66.10% | 68.91% | ||||||||
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Net charge-offs as % of total loans | 0.18% | 0.00% | 0.81% | 0.00% | ||||||||
Allowance for loan losses as % of total loans | 1.36% | 1.23% | 1.36% | 1.23% | ||||||||
Non-performing loans as % of avg. total loans | 1.33% | 0.70% | 1.51% | 0.27% | ||||||||
Non-performing assets as % of avg. total assets | 2.80% | 0.65% | 2.58% | 0.65% | ||||||||
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 |  | As of 9/30/08 |  | As of 9/30/07 |  | Change % | ||||||
Shareholders' equity | $22,441 | $21,034 | 7% | |||||||||
Shares outstanding (end of period) (1) | 1,916 | 1,913 | ||||||||||
Book and tangible book value per share (1) | $11.52 | $10.90 | ||||||||||
Tier 1 leverage capital ratio | 8.31% | 9.02% | ||||||||||
Tangible equity/tangible assets | 6.13% | 6.69% | ||||||||||
Total risk based capital ratio | 11.96% | 11.78% | ||||||||||
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Number of full service banking offices | 7 | 7 | ||||||||||
Number of full-time equivalent employees | 83 | 93 | ||||||||||
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(1) Share and per share information has been retroactively adjusted for 5% stock dividend in June 2008. |
CITIZENS BANCORP UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CONDITION At September 30, 2008 and 2007 and December 31, 2007 | ||||||
(In thousands) | ||||||
 | September 30, 2008 |  | December 31, 2007 |  | September 30, 2007 | |
Assets |  |  | ||||
Cash and due from banks | $8,660 | $9,035 | $7,534 | |||
Federal funds sold |  | 15,830 |  | 2,350 |  | 0 |
Total cash and cash equivalents | 24,490 | 11,385 | 7,534 | |||
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Interest-bearing deposits in other banks | 627 | 213 | 175 | |||
Investment securities | 1,150 | 1,296 | 1,291 | |||
Loans | 321,137 | 305,135 | 294,473 | |||
Allowance for loan losses |  | (4,368) |  | (3,919) |  | (3,632) |
Net loans | 316,769 | 301,216 | 290,841 | |||
Premises and equipment, net | 2,212 | 2,577 | 2,632 | |||
Cash surrender value of bank-owned life insurance | 5,855 | 5,700 | 5,649 | |||
Other real estate owned | 6,004 | 0 | 0 | |||
Interest receivable and other assets |  | 9,049 |  | 6,046 |  | 6,102 |
Total Assets |  | $366,156 |  | $328,433 |  | $314,224 |
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Liabilities and Shareholders' Equity |  |  |  |  |  |  |
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Liabilities | ||||||
Deposits | ||||||
Non-interest bearing | $69,488 | $67,201 | $70,825 | |||
Interest bearing |  | 240,169 |  | 207,053 |  | 189,489 |
Total deposits | 309,657 | 274,254 | 260,314 | |||
Federal funds purchased and Federal Home Loan Bank Borrowings | 15,000 | 13,500 | 14,100 | |||
Junior subordinated debentures | 15,465 | 15,465 | 15,465 | |||
Interest payable and other liabilities |  | 3,593 |  | 3,642 |  | 3,311 |
Total Liabilities |  | 343,715 |  | 306,861 |  | 293,190 |
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Shareholders' Equity | ||||||
Common, stock, no par value | 14,354 | 12,956 | 12,929 | |||
Retained earnings | 8,086 | 8,618 | 8,110 | |||
Accumulated other comprehensive income (loss), net |  | 1 |  | (2) |  | (5) |
Total Shareholders' Equity |  | 22,441 |  | 21,572 |  | 21,034 |
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Total Liabilities and Shareholders' Equity |  | $366,156 |  | $328,433 |  | $314,224 |
CITIZENS BANCORP UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS For the nine months and three months ended September 30, 2008 and 2007 | ||||||||
(In thousands, except share data) | ||||||||
 |  | Three months ended 9/30/08 |  | Three months ended 9/30/07 |  | Nine months ended 9/30/08 |  | Nine months ended 9/30/07 |
Interest Income |  |  |  |  |  |  |  |  |
Interest and fees on loans |  | $5,495 |  | $5,810 |  | $16,596 |  | $16,612 |
Interest on investment securities |  | 9 |  | 12 |  | 31 |  | 44 |
Interest on federal funds sold |  | 36 |  | 12 |  | 96 |  | 42 |
Interest on deposits in banks |  | 2 |  | 2 |  | 4 |  | 6 |
Total Interest Income |  | 5,542 |  | 5,836 |  | 16,727 |  | 16,704 |
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Interest Expense |  |  |  |  |  |  |  |  |
Interest on interest-bearing deposits |  | 1,282 |  | 1,726 |  | 4,155 |  | 4,942 |
Interest on short-term borrowings |  | 91 |  | 143 |  | 386 |  | 221 |
Interest on junior subordinated debentures |  | 199 |  | 340 |  | 659 |  | 890 |
Total Interest Expense |  | 1,572 |  | 2,209 |  | 5,200 |  | 6,053 |
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Net Interest Income |  | 3,970 |  | 3,627 |  | 11,527 |  | 10,651 |
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Provision for loan losses |  | 1,400 |  | 0 |  | 3,000 |  | 270 |
Net Interest Income After Provision for Loan Losses |  | 2,570 |  | 3,627 |  | 8,527 |  | 10,381 |
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Non-Interest Income |  |  |  |  |  |  |  |  |
Service charges on deposit accounts |  | 264 |  | 218 |  | 731 |  | 624 |
Mortgage brokerage fees |  | 61 |  | 161 |  | 405 |  | 594 |
Other income |  | 220 |  | 144 |  | 586 |  | 417 |
Total Non-Interest Income |  | 545 |  | 523 |  | 1,722 |  | 1,635 |
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Non-Interest Expense |  |  |  |  |  |  |  |  |
Salaries and employee benefits |  | 1,170 |  | 1,442 |  | 4,069 |  | 4,586 |
Occupancy and equipment |  | 464 |  | 459 |  | 1,381 |  | 1,354 |
Other expense |  | 1,185 |  | 835 |  | 3,308 |  | 2,527 |
Total Non-Interest Expense |  | 2,819 |  | 2,736 |  | 8,758 |  | 8,467 |
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Income before provision for income tax |  | 296 |  | 1,414 |  | 1,491 |  | 3,549 |
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Provision for income taxes |  | 120 |  | 587 |  | 602 |  | 1,473 |
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Net Income |  | $176 |  | $827 |  | $889 |  | $2,076 |
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Net income per common share (1) |  |  |  |  |  |  |  |  |
Basic |  | $0.09 |  | $0.43 |  | $0.46 |  | $1.09 |
Diluted |  | $0.09 |  | $0.42 |  | $0.46 |  | $1.06 |
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(1) Restated for the 5% stock dividend in June 2008. |