EX-99.1 3 d57179_ex99-1.txt EARNINGS PRESS RELEASE EXHIBIT 99.1 EARNINGS PRESS RELEASE OF CITIZENS SOUTH BANKING CORPORATION CITIZENS SOUTH BANKING CORPORATION ANNOUNCES EARNINGS FOR THE QUARTER ENDED SEPTEMBER 30, 2003 GASTONIA, NC, October 20, 2003 --- Citizens South Banking Corporation (Nasdaq: CSBC), the holding company for Citizens South Bank, announced earnings for the quarter ended September 30, 2003, of $94,000, or $0.01 per share. Earnings for the same quarter in 2002 were $1.2 million, or $0.13 per share. Net income for the nine months ended September 30, 2003, was $2.4 million, or $0.28 per share, as compared to $3.3 million, or $0.37 per share, for the nine months ended September 30, 2002. Third quarter earnings decreased from 2002 to 2003 primarily due to a $1.3 million pre-tax prepayment penalty associated with the restructuring of $15.0 million in borrowed funds. This action was taken by the Company in an effort to capitalize on historically low interest rates, lower the Company's cost of funds, and improve the Company's net interest margin. This restructuring reduced the average interest rate paid on these borrowed funds from 5.8% to 1.8%, resulting in an immediate reduction in interest expense of $150,000 per quarter for the first year. The reduction in interest expense is expected to amount to approximately $1.7 million over the next five years. Net interest income decreased by $617,000, or 17.0%, from the quarter ended September 30, 2002, to the comparable period in 2003. Historically low interest rates have spurred an unprecedented level of loan refinancing as well as decreases in interest rates on variable rate loans and yields on investments, resulting in a $948,000, or 15.4%, decrease in interest income. The decrease in interest income was partially offset by a $331,000, or 13.1%, decrease in interest expense, primarily due to lower interest rates paid on deposits. Quarterly noninterest income increased by $93,000, or 8.7%, due in part to a $58,000 increase in loan fee income resulting from increased mortgage banking activity and a $97,000 increase in gain on sale of assets. During the comparable quarters, noninterest expense, excluding the prepayment penalty on borrowed funds, increased by $93,000, or 3.4%. This change was largely attributable to a $166,000 increase in compensation resulting mainly from the increased staffing associated with the opening of the Bank's tenth full-service office, located in Mooresville, North Carolina. Also, professional fees increased $61,000 due in part to measures taken by the Company to ensure compliance with the Sarbanes-Oxley Act. These increases in noninterest expense were partly offset by a $109,000 decrease in the amortization of the core deposit intangible during the third quarter of 2003. The provision for income taxes decreased by $745,000, due to the $1.9 million reduction in pretax earnings. The Company's asset quality remains strong despite the continued weakness in the local and national economies. The Company's ratio of nonperforming assets to total assets was 0.26% as of September 30, 2003, compared to 0.38% as of September 30, 2002, and the ratio of nonperforming loans to total loans was 0.37% as of September 30, 2003, compared to 0.22% as of September 30, 2002. Continued weakness in the local and national economies may result in some increase of nonperforming loans in the future; however management is optimistic that the Company's asset quality ratios will continue to outperform its industry peers. President and Chief Executive Officer Kim S. Price commented, "Our transformation from traditional thrift to community bank has been hastened by the mass of residential mortgage repayments resulting from historically low interest rates. While we have been pleased with our commercial loan growth, the pace of residential prepayments has negatively impacted our "net" loan growth. We remain convinced that the changing mix of our asset portfolio, while painful to margins in this interest rate environment, will serve shareholders well in the long term and that loan growth will resume at more historical levels as residential prepayment speeds normalize." President Price continued, "In addition to implementing measures to improve the net interest margin, we have been actively managing our excess capital through share repurchases. The Company has recently completed the repurchase of 343,027 shares (or 3.8% of total outstanding shares) and the Board of Directors has now authorized the repurchase of an additional 879,900 shares (approximately 10% of total outstanding shares) of Company stock." Citizens South Bank was founded in 1904 and has ten offices in three North Carolina counties - Gaston, Rowan, and Iredell, including eight cities - three in Gastonia and one each in Dallas, Mount Holly, Stanley, Salisbury, Rockwell, Statesville, and Mooresville. 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, including general economic conditions, changes in interest rates, regulatory considerations, and competition. 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, 2002, 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) # # # Citizens South Banking Corporation Selected Financial Information (dollars in thousands, except per share data)
---------------------------------------------------------------------------------- Quarter ended Quarter ended Year ended September 30, September 30, Quarter ended Quarter ended December 31, 2003 2002 June 30, 2003 March 31, 2003 2002 ---------------------------------------------------------------------------------- (unaudited) (unaudited) (unaudited) (unaudited) Income Statement Data: Interest income .............................. $ 5,206 $ 6,154 $ 5,645 $ 5,903 $ 24,716 Interest expense ............................. 2,202 2,533 2,286 2,328 10,195 ----------- ----------- ----------- ----------- ----------- Net interest income .......................... 3,004 3,621 3,359 3,575 14,521 Provision for loan losses .................... 15 70 15 15 225 ----------- ----------- ----------- ----------- ----------- Net int. income after provision for loan losses ..................................... 2,989 3,551 3,344 3,560 14,296 Noninterest income ........................... 1,159 1,066 1,358 1,084 4,121 Noninterest expense .......................... 2,859 2,766 3,131 2,763 11,316 Prepayment penalty on FHLB advances .......... 1,289 0 0 0 65 ----------- ----------- ----------- ----------- ----------- Income before income taxes ................... 0 1,851 1,571 1,881 7,036 Income tax expense ........................... (94) 651 447 674 2,528 ----------- ----------- ----------- ----------- ----------- Net income ................................... $ 94 $ 1,200 $ 1,124 $ 1,207 $ 4,508 Per Share Data (1): Basic net income ............................. $ 0.01 $ 0.14 $ 0.13 $ 0.14 $ 0.51 Diluted net income ........................... 0.01 0.13 0.13 0.14 0.51 Cash dividends declared ...................... 0.06 0.04 0.06 0.06 0.16 Period-end book value ........................ 10.42 10.58 10.67 10.68 10.64 Financial Ratios: Return on average stockholders' equity ....... 0.40% 10.72% 4.72% 5.00% 7.61% Return on average assets ..................... 0.08 1.05 0.90 0.97 0.98 Efficiency ratio ............................. 100.29 59.15 66.96 59.26 61.11 Net interest margin .......................... 2.43 3.17 2.69 2.88 3.17 Average equity to average assets ............. 19.11 9.78 19.10 19.41 12.93 Asset Quality Data: Allowance for loan losses .................... $ 3,007 $ 2,965 $ 3,002 $ 3,000 $ 2,995 Nonperforming loans .......................... 1,102 710 802 570 516 Nonperforming assets ......................... 1,270 2,008 948 810 1,823 Allowance for loan losses to total loans ..... 1.01% 0.93% 0.98% 0.98% 0.97% Nonperforming loans to total loans ........... 0.38 0.22 0.26 0.19 0.17 Nonperforming assets to total assets ......... 0.26 0.39 0.19 0.16 0.37 Average Balances: Total assets ................................ $ 493,732 $ 457,555 $ 498,901 $ 496,746 $ 458,316 Loans receivable, net ....................... 294,980 321,049 305,750 299,722 320,505 Interest-earning assets ..................... 448,698 413,170 454,675 453,110 416,748 Deposits .................................... 337,595 336,882 342,817 338,799 337,422 Interest-bearing liabilities ................ 377,824 388,127 383,355 374,869 381,664 Stockholders' equity ........................ 94,408 44,761 95,268 96,648 59,243 Common shares outstanding, basic (1) ........ 8,596,575 8,790,445 8,660,195 8,757,664 8,767,982 Common shares outstanding, diluted (1) ...... 8,752,979 8,945,186 8,808,915 8,920,531 8,870,054 At Period End: Total assets ................................ $ 489,341 $ 509,797 $ 501,217 $ 501,216 $ 492,567 Loans receivable, net ....................... 288,699 310,912 298,757 299,291 299,906 Interest-earning assets ..................... 441,996 432,478 454,746 457,433 456,611 Deposits .................................... 339,619 341,697 345,014 343,865 340,862 Interest-bearing liabilities ................ 379,967 442,668 384,239 383,287 377,234 Stockholders' equity ........................ 91,667 95,871 95,253 96,795 96,383 Other Data: Amortization of core deposit intangible ...... $ 91 $ 122 $ 106 $ 126 $ 963 Net gain / (loss) on sale of assets .......... 23 11 42 4 105 ----------------------------------------------------------------------------------
Footnotes: (1) All share and per share data have been restated to reflect the 2.1408 conversion ratio of existing shares of common stock used in the second-step stock offering that was completed on September 30, 2002. Common shares outstanding exclude unallocated shares held by the ESOP. Citizens South Banking Corporation Consolidated Statements of Financial Condition (dollars in thousands)
September 30, December 31, 2003 2002 ------------- ------------ (unaudited) ASSETS Cash and due from banks .................................................................. $ 5,697 $ 7,607 Interest-earning bank balances ........................................................... 13,830 39,392 --------- --------- Cash and cash equivalents ............................................................. 19,527 46,999 Investment securities available-for-sale, at fair value .................................. 52,869 39,594 Mortgage-backed securities available-for-sale, at fair value ............................. 85,406 70,409 Loans receivable, net unearned income .................................................... 291,706 302,901 Allowance for loan losses ................................................................ (3,007) (2,995) --------- --------- Loans, net ............................................................................ 288,699 299,906 Real estate acquired through foreclosure, net ............................................ 169 1,307 Accrued interest receivable .............................................................. 1,783 1,913 Premises and equipment, net .............................................................. 13,772 8,807 Federal Home Loan Bank stock, at cost .................................................... 2,575 2,639 Cash value of life insurance policies .................................................... 10,202 6,834 Core deposit intangible .................................................................. 1,161 1,484 Goodwill ................................................................................. 6,670 6,670 Other assets ............................................................................. 6,508 6,005 --------- --------- Total assets .......................................................................... $ 489,341 $ 492,567 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Noninterest-bearing demand accounts ...................................................... $ 11,056 $ 11,203 Checking accounts ........................................................................ 29,661 25,773 Money market deposit accounts ............................................................ 47,364 35,811 Savings accounts ......................................................................... 38,035 43,670 Time deposits ............................................................................ 213,503 224,405 --------- --------- Total deposits ........................................................................ 339,619 340,862 Borrowed money ........................................................................... 51,455 47,575 Advances from borrowers for property taxes and insurance ................................. 711 440 Accrued interest payable ................................................................. 161 382 Other liabilities ........................................................................ 5,728 6,925 --------- --------- Total liabilities ..................................................................... 397,674 396,184 --------- --------- Stockholders' Equity: Common stock issued and outstanding, $0.01 par value, 20,000,000 shares authorized, 8,799,055 issued and outstanding September 30, 2003, 9,062,727 issued and outstanding December 31, 2002 .................................... 88 91 Additional paid-in-capital ............................................................... 68,327 68,176 Unallocated common stock held by Employee Stock Ownership Plan ........................... (2,024) (2,162) Retained earnings, substantially restricted .............................................. 29,549 28,739 Accumulated unrealized gain on securities available-for-sale, net of tax ................. 399 1,539 Treasury stock of 263,672 shares, at cost ................................................ (4,672) 0 --------- --------- Total stockholders' equity ............................................................ 91,667 96,383 --------- --------- Total liabilities and stockholders' equity ............................................... $ 489,341 $ 492,567 ========= =========
Citizens South Banking Corporation Consolidated Statements of Operations (unaudited) (dollars in thousands, except per share data)
Three Months Nine Months Ended September 30, Ended September 30, ------------------- ------------------- 2003 2002 2003 2002 ---- ---- ---- ---- Interest income Loans ....................................................... $ 4,077 $ 5,302 $ 12,910 $ 16,316 Investment securities ....................................... 311 386 1,000 1,064 Interest-bearing deposits ................................... 57 130 219 345 Mortgage-backed and related securities ...................... 761 336 2,625 921 ----------- ----------- ----------- ----------- Total interest income ..................................... 5,206 6,154 16,754 18,646 Interest Expense Deposits .................................................... 1,603 1,958 5,037 6,077 Borrowed funds .............................................. 599 575 1,779 1,672 ----------- ----------- ----------- ----------- Total interest expense ...................................... 2,202 2,533 6,816 7,749 Net interest income ......................................... 3,004 3,621 9,938 10,897 Provision for loan losses ................................... 15 70 45 205 ----------- ----------- ----------- ----------- Net interest income after provision for loan losses ....... 2,989 3,551 9,893 10,692 Noninterest Income Fee income on deposit accounts .............................. 614 598 1,791 1,691 Fee income on mtg. banking and other lending activities ..... 241 183 754 498 Dividends on FHLB stock ..................................... 21 45 79 144 Gain on sale of assets ...................................... 108 11 168 119 Fair value adjustment on deferred comp. investments ......... (8) (12) 178 (62) Other noninterest income .................................... 183 241 631 598 ----------- ----------- ----------- ----------- Total noninterest income .................................. 1,159 1,066 3,601 2,988 Noninterest Expense Compensation and benefits ................................... 1,511 1,345 4,498 4,042 Fair value adjustment on deferred compensation .............. (8) (12) 179 (62) Occupancy and equipment expense ............................. 349 353 993 1,063 Professional services ....................................... 113 52 444 230 Amortization of intangible assets ........................... 91 200 323 808 Loss on sale of assets ...................................... 85 0 99 17 Prepayment penalty on FHLB advances ......................... 1,289 0 1,289 65 Other noninterest expenses .................................. 718 828 2,217 2,347 ----------- ----------- ----------- ----------- Total noninterest expense ................................. 4,148 2,766 10,042 8,510 Income before income taxes .................................. 0 1,851 3,452 5,170 Provision for income taxes .................................. (94) 651 1,028 1,847 ----------- ----------- ----------- ----------- Net income .................................................. $ 94 $ 1,200 $ 2,424 $ 3,323 =========== =========== =========== =========== Basic earnings per share .................................... $ 0.01 $ 0.14 $ 0.28 $ 0.38 Diluted earnings per share .................................. $ 0.01 $ 0.13 $ 0.28 $ 0.37 Basic average common shares outstanding ..................... 8,596,575 8,790,445 8,670,591 8,779,548 Diluted average common shares outstanding ................... 8,752,979 8,945,186 8,810,380 8,863,041