EX-99.1 2 cs5419ex991.htm EXHIBIT 99.1

Exhibit 99.1

FOR IMMEDIATE RELEASE

For more information:

 

Gary F. Hoskins, CFO

 

 

(704) 884-2263

 

 

gary.hoskins@citizenssouth.com

CITIZENS SOUTH BANKING CORPORATION ANNOUNCES A
15.4% INCREASE IN FIRST QUARTER EARNINGS PER SHARE

GASTONIA, NC, April 17, 2006 --- Citizens South Banking Corporation (Nasdaq: CSBC), the holding company for Citizens South Bank, announced earnings for the quarter ended March 31, 2006, of $1.2 million, or $0.15 per diluted share, compared to $902,000, or $0.13 per diluted share, for the quarter ended March 31, 2005.   This represents a 15.4% increase in earnings per diluted share when compared to the first quarter of 2005.  Also, operating income, which excludes net gains on sales of assets and merger-related expenses, amounted to $1.3 million, or $0.15 per diluted share, for the quarter ended March 31, 2006, compared to $861,000, or $0.12 per diluted share, for the quarter ended March 31, 2005.  This represents an increase in operating income of $0.03 per diluted share, or 25.0%, for the comparable quarters.

Net interest income increased by $1.5 million, or 40.5%, during the first quarter of 2006 compared to the first quarter of 2005.  This increase was primarily the result of the acquisition of Trinity Bank, loan growth, a change in the asset mix, and margin expansion.  Total loans increased by $18.4 million, or 15.6% annualized, to $491.8 million during the first quarter of 2006.  This increase in loans was partially funded by maturing investment securities, and fueled an expansion of our net interest margin, which increased by 16 basis points to 3.39% during the first quarter of 2006.   

 The Company’s credit quality continues to compare favorably with industry peers.  Nonperforming assets totaled $2.8 million, or 0.41% of total assets, at March 31, 2006, compared to $3.7 million, or 0.53% of total assets, at the end of 2005.  Management remains focused on maintaining the high level of loan quality as the Company pursues additional loan growth.

During the first quarter of 2006, the Company’s core deposits, which include demand deposit accounts, money market deposit accounts, and savings accounts, increased by $5.5 million, or 10.4% annualized, to $219.1 million at March 31, 2006.  Total deposits increased by $5.1 million during the same period, reflecting our strategy of replacing time deposits with lower-costing core deposits.

 Noninterest income increased by $429,000, or 43.6%, to $1.4 million for the quarter ended March 31, 2006, compared to $1.0 million for the quarter ended March 31, 2005.  This increase was largely attributable to the expanded customer base developed and acquired during the year.  

Noninterest expense increased by $1.4 million, or 42.9%, to $4.6 million for the first quarter of 2006.  These increased expenses are largely associated with the staffing and operations of three additional full-service offices and an additional loan production office.  The Company completed the integration of the back-office functions of the recently acquired Trinity Bank, including the core processing and items processing systems, during the first quarter 2006.  The financial benefits of the consolidation of these back-office operations are expected to be more fully realized in the second quarter of 2006. 

Kim S. Price, President and CEO, commented, “The work of our team in integrating Trinity Bank and executing our Performance Enhancement Plan make it especially gratifying to report this quarter’s earnings.  Revenue growth fueled by loan and deposit growth, enhanced by a changing balance sheet mix, drove margin improvement in the face of a difficult yield curve.  Our team is finding increasing success in providing community banking services in a vibrant market.”

Citizens South Bank, headquartered in Gastonia, North Carolina, was founded in 1904.  At March 31, 2006, the Bank had approximately $702 million in assets, operated 14 full-service offices located in four North Carolina counties - Gaston, Rowan, Iredell, and Union - and operated two loan production offices in Mecklenburg County, North Carolina and York County, South Carolina.


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. 

(Tables Follow)

# # #


Citizens South Banking Corporation
Selected Financial Information
(dollars in thousands, except per share data)

 

 

Quarter ended March 31, 2006

 

Quarter ended March 31, 2005

 

Year ended December 31, 2005

 

Year ended December 31, 2004

 

 

 

 

 

 

 

Reconciliation of GAAP to non-GAAP Measures:

 

$

1,188

 

$

902

 

$

3,273

 

$

2,955

 

Net income, as reported (GAAP)

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-operating items:

 

 

 

 

 

 

 

 

 

 

 

 

 

(Gain)/ loss on sale of assets, net

 

 

57

 

 

(67

)

 

(62

)

 

(674

)

Merger and integration related expense

 

 

57

 

 

0

 

 

384

 

 

0

 

Impairment of GSE preferred stock

 

 

0

 

 

0

 

 

0

 

 

983

 

Related income taxes (39%)

 

 

(45

)

 

26

 

 

(126

)

 

(120

)

 

 

 

 

 

 

Net Operating Income

 

$

1,257

 

$

861

 

$

3,469

 

$

3,144

 

Per Share Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Average common shares outstanding, basic

 

 

8,056,574

 

 

7,084,471

 

 

7,207,368

 

 

7,611,022

 

Basic net income - GAAP

 

$

0.15

 

$

0.13

 

$

0.45

 

$

0.39

 

Basic net income - Operating

 

 

0.16

 

 

0.12

 

 

0.48

 

 

0.41

 

Average common shares outstanding, diluted

 

 

8,138,451

 

 

7,203,885

 

 

7,298,219

 

 

7,712,591

 

Diluted net income - GAAP

 

$

0.15

 

$

0.13

 

$

0.45

 

$

0.38

 

Diluted net income - Operating

 

 

0.15

 

 

0.12

 

 

0.48

 

 

0.41

 

Cash dividends declared

 

$

0.075

 

$

0.07

 

$

0.28

 

$

0.26

 

Period-end book value

 

 

10.21

 

 

9.59

 

 

10.16

 

 

9.74

 

Financial Ratios (annualized):

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average stockholders’ equity - GAAP

 

 

5.70

%

 

5.04

%

 

4.40

%

 

3.78

%

Return on average stockholders’ equity - Operating

 

 

6.03

 

 

4.81

 

 

4.67

 

 

4.02

 

Return on average assets - GAAP

 

 

0.69

%

 

0.71

%

 

0.60

%

 

0.59

%

Return on average assets - Operating

 

 

0.73

 

 

0.68

 

 

0.64

 

 

0.63

 

Efficiency ratio - GAAP

 

 

69.88

%

 

69.45

%

 

71.99

%

 

75.75

%

Efficiency ratio - Operating

 

 

68.40

 

 

70.05

 

 

70.29

 

 

73.03

 

Net interest margin

 

 

3.39

%

 

3.24

%

 

3.23

%

 

2.98

%

Average equity to average assets

 

 

12.05

 

 

14.08

 

 

13.69

 

 

15.64

 

Asset Quality Data:

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses

 

$

5,263

 

$

3,184

 

$

5,104

 

$

3,029

 

Nonperforming loans

 

 

1,539

 

 

1,419

 

 

2,551

 

 

946

 

Nonperforming assets

 

 

2,844

 

 

1,842

 

 

3,708

 

 

1,752

 

Net charge-offs (recoveries)

 

 

126

 

 

(5

)

 

398

 

 

270

 

Allowance for loan losses to total loans

 

 

1.07

%

 

0.97

%

 

1.08

%

 

0.95

%

Nonperforming loans to total loans

 

 

0.31

 

 

0.43

 

 

0.55

 

 

0.30

 

Nonperforming assets to total assets

 

 

0.41

 

 

0.36

 

 

0.53

 

 

0.34

 

Average Balances:

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

701,429

 

$

508,280

 

$

543,311

 

$

499,937

 

Loans receivable, net of unearned income

 

 

483,136

 

 

317,901

 

 

347,720

 

 

294,953

 

Interest-earning assets

 

 

607,101

 

 

448,416

 

 

477,819

 

 

442,809

 

Deposits

 

 

518,712

 

 

369,744

 

 

395,327

 

 

361,893

 

Interest-bearing liabilities

 

 

575,349

 

 

407,487

 

 

438,308

 

 

398,778

 

Stockholders’ equity

 

 

84,506

 

 

71,571

 

 

74,361

 

 

78,192

 

At Period End:

 

 

 

 

 

 

 

 

 

 

 

 

 

Total assets

 

$

702,131

 

$

511,088

 

$

701,094

 

$

508,961

 

Loans receivable, net

 

 

491,761

 

 

324,599

 

 

473,336

 

 

314,127

 

Interest-earning assets

 

 

618,812

 

 

457,469

 

 

612,238

 

 

455,577

 

Deposits

 

 

522,650

 

 

372,104

 

 

517,543

 

 

374,744

 

Interest-bearing liabilities

 

 

579,505

 

 

415,562

 

 

585,095

 

 

410,782

 

Stockholders’ equity

 

 

84,530

 

 

69,510

 

 

84,258

 

 

72,394

 


Citizens South Banking Corporation
Consolidated Statements of Financial Condition
(dollars in thousands)

 

 

March  31,
2006

 

December 31,
2005

 

 

 

 

 

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

 

Cash and due from banks

 

$

9,418

 

$

8,863

 

Interest-earning bank balances

 

 

4,500

 

 

17,790

 

 

 

 

 

Cash and cash equivalents

 

 

13,918

 

 

26,653

 

Investment securities available-for-sale, at fair value

 

 

52,919

 

 

53,429

 

Mortgage-backed securities available-for-sale, at fair value

 

 

66,402

 

 

70,236

 

Loans receivable, net unearned income

 

 

491,761

 

 

473,336

 

Allowance for loan losses

 

 

(5,263

)

 

(5,104

)

 

 

 

 

Loans receivable, net

 

 

486,498

 

 

468,232

 

Real estate acquired through foreclosure, net

 

 

1,305

 

 

1,157

 

Premises and equipment, net

 

 

19,539

 

 

19,819

 

Accrued interest receivable

 

 

2,590

 

 

2,539

 

Federal Home Loan Bank stock, at cost

 

 

4,099

 

 

4,084

 

Intangible assets

 

 

32,214

 

 

32,424

 

Bank owned life insurance

 

 

15,055

 

 

14,828

 

Other assets

 

 

7,592

 

 

7,693

 

 

 

 

 

Total assets

 

$

702,131

 

$

701,094

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Demand deposit accounts

 

$

87,293

 

$

85,489

 

Money market deposit accounts

 

 

109,737

 

 

104,421

 

Savings accounts

 

 

22,021

 

 

23,654

 

Time deposits

 

 

303,599

 

 

303,980

 

 

 

 

 

Total deposits

 

 

522,650

 

 

517,544

 

Borrowed money

 

 

88,057

 

 

91,342

 

Deferred compensation

 

 

5,369

 

 

5,849

 

Other liabilities

 

 

1,525

 

 

2,101

 

 

 

 

 

Total liabilities

 

 

617,601

 

 

616,836

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

Common stock issued and outstanding, $0.01 par value, 20,000,000 shares authorized, 9,062,727 issued at March 31, 2006 and December 31, 2005and 8,278,523 shares outstanding at March 31, 2006 and 8,291,544 shares outstanding at December 31, 2005

 

 

91

 

 

91

 

Additional paid-in-capital

 

 

68,474

 

 

68,468

 

Unallocated common stock held by Employee Stock Ownership Plan

 

 

(1,567

)

 

(1,613

)

Unearned compensation related to Recognition and Retention Plan

 

 

(1,349

)

 

(1,419

)

Retained earnings, substantially restricted

 

 

30,745

 

 

30,311

 

Accumulated unrealized gain on securities available-for-sale, net of tax

 

 

(1,693

)

 

(1,567

)

Treasury stock of 784,204 shares at March 31, 2006, and 711,183 shares at December 31, 2005

 

 

(10,171

)

 

(10,013

)

 

 

 

 

Total stockholders’ equity

 

 

84,530

 

 

84,258

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

702,131

 

$

701,094

 

 

 

 

 


Citizens South Banking Corporation
Consolidated Statements of Operations (unaudited)
(in thousands, except per share data)

 

 

Three Months
Ended March 31,

 

 

 

 

 

 

2006

 

2005

 

 

 

 

 

Interest income

 

 

 

 

 

 

 

Loans

 

$

8,505

 

$

4,632

 

Investment securities

 

 

492

 

 

396

 

Interest-bearing deposits

 

 

152

 

 

35

 

Mortgage-backed and related securities

 

 

716

 

 

737

 

 

 

 

 

Total interest income

 

 

9,865

 

 

5,800

 

Interest Expense

 

 

 

 

 

 

 

Deposits

 

 

3,729

 

 

1,696

 

Borrowed funds

 

 

1,037

 

 

475

 

 

 

 

 

Total interest expense

 

 

4,766

 

 

2,171

 

 

 

 

 

Net interest income

 

 

5,099

 

 

3,629

 

Provision for loan losses

 

 

285

 

 

150

 

 

 

 

 

Net interest income after provision for loan losses

 

 

4,814

 

 

3,479

 

Noninterest Income

 

 

 

 

 

 

 

Fee income on deposit accounts

 

 

678

 

 

544

 

Fee income on mortgage banking and lending activities

 

 

249

 

 

113

 

Dividends on FHLB stock

 

 

55

 

 

37

 

Increase in cash value of bank-owned life insurance

 

 

247

 

 

161

 

Fair value adjustment on deferred compensation assets

 

 

63

 

 

(47

)

Net gain / (loss) on sale of assets

 

 

(57

)

 

67

 

Other noninterest income

 

 

179

 

 

110

 

 

 

 

 

Total noninterest income

 

 

1,414

 

 

985

 

Noninterest Expense

 

 

 

 

 

 

 

Compensation and benefits

 

 

2,379

 

 

1,666

 

Fair value adjustment on deferred compensation obligation

 

 

63

 

 

(47

)

Occupancy and equipment expense

 

 

713

 

 

485

 

Professional services

 

 

170

 

 

151

 

Amortization of intangible assets

 

 

186

 

 

87

 

Merger and integration related expenses

 

 

57

 

 

0

 

Other noninterest expenses

 

 

977

 

 

843

 

 

 

 

 

Total noninterest expense

 

 

4,545

 

 

3,185

 

Income before income taxes

 

 

1,683

 

 

1,279

 

Provision for income taxes

 

 

495

 

 

377

 

 

 

 

 

Net income

 

$

1,188

 

$

902

 

 

 

 

 

Basic earnings per share

 

$

0.15

 

$

0.13

 

Diluted earnings per share

 

$

0.15

 

$

0.13

 

Basic average common shares outstanding

 

 

8,056,574

 

 

7,084,471

 

Diluted average common shares outstanding

 

 

8,138,277

 

 

7,202,704