Citizens South Banking Corporation Announces Fourth Quarter 2011 Financial Results


GASTONIA, N.C., Jan. 23, 2012 (GLOBE NEWSWIRE) -- Citizens South Banking Corporation (Nasdaq:CSBC), the holding company for Citizens South Bank (the "Bank"), released its unaudited results of operations and other financial information for the three-month and twelve-month periods ended December 31, 2011. Highlights from the fourth quarter of 2011 are as follows:

  • Net loss available to shareholders totaled $2.3 million, or $0.20 per diluted share, for the quarter ended December 31, 2011. For the year ended December 31, 2011, the Company reported a net loss available to shareholders of $1.3 million, or $0.11 per diluted share.
  • Excluding dividends and accretion of discount on preferred stock, the Company had a net loss of $1.5 million, or $0.13 per diluted share, for the fourth quarter of 2011, and net income of $241,000, or $0.02 per diluted share, for the 12 months ending December 31, 2011.
  • In the fourth quarter of 2011, the Company repurchased all outstanding warrants related to preferred stock issued by the U.S. Treasury Department under the Troubled Asset Relief Program ("TARP"). The TARP preferred stock has been fully repaid. The expense related to repurchasing these warrants amounted to $584,000.
  • The Company's net interest margin of 3.84% for the fourth quarter of 2011 increased by eight basis points on a linked quarter basis and by 59 basis points compared to the fourth quarter of 2010.
  • The Company's pre-tax, pre-credit earnings of $3.5 million for the fourth quarter of 2011 were $660,000 higher than the Company's pre-tax, pre-credit earnings in the fourth quarter of 2010 and flat on a linked quarter basis.
  • Non-covered classified loans decreased by $6.6 million, or 18.8%, on a linked quarter basis to $28.7 million. Non-covered classified assets, which includes both classified loans and other real estate owned, decreased by $5.9 million, or 13.6%, on a linked quarter basis to $37.7 million, or 36.5% of tier 1 capital.
  • Nonperforming non-covered assets decreased by $986,000, or 3.4%, on a linked quarter basis to 2.57% of total assets at December 31, 2011, compared to 2.61% of total assets at September 30, 2011.
  • Non-covered past due loans 30 to 89 days delinquent and still accruing interest totaled $4.9 million, or 0.86% of total non-covered loans, at December 31, 2011. This represents the fourth consecutive quarter that past due non-covered accruing loans have been less than 1.0% of total non-covered loans.
  • The Company's non-time core deposits grew by $2.7 million, or 2.3% annualized, during the fourth quarter of 2011 to $463.2 million at December 31, 2011.

President Kim S. Price stated, "While we are disappointed with the loss in the fourth quarter, we believe that the steps we are taking ultimately strengthen our balance sheet and position the Company for an accelerated pace toward normalized earnings. Financial metrics in almost every category including nonperforming assets, classified assets, net interest margin and loan demand are all trending positive. While the process of recovery has been littered with stops and starts, we currently have the clearest vision for normality than we have had in sometime."

Fourth Quarter Financial Results:

Asset Quality

During the fourth quarter of 2011 the Company conducted an extensive internal loan review and recognized net loan charge-offs of $5.9 million. These charge-offs resulted from re-valuations on some properties and also from resolutions of problem assets where a portion of the loan was charged-off. The net result of these charge-offs was an overall reduction in nonperforming non-covered assets from 2.61% of total assets at September 30, 2011, to 2.57% of total assets at December 31, 2011. In addition, our classified assets, which totaled $43.6 million at September 30, 2011, declined to $37.7 million at December 31, 2011.  This marks the second consecutive quarter of decline in nonperforming non-covered loans and the fourth consecutive quarter of decline in classified assets.

In conjunction with our internal loan portfolio review, we undertook a forward looking evaluation of our portfolio. As a result of that review and our declining levels of non-covered nonperforming assets and classified assets, we released $1.2 million of our accumulated loan loss reserves, leaving our level of loan loss reserves at 2.04% of total non-covered loans at December 31, 2011.

Loans and Core Deposits

We are experiencing some positive trends in local economic conditions and loan demand continues to improve gradually. While total non-covered loans decreased by $7.9 million on a linked quarter basis, or 5.5% annualized, this decrease was largely due to two large loan repayments and the elevated level of loan charge-offs during the quarter. Despite this decrease in outstandings, the Company originated $36.0 million in loans during the fourth quarter of 2011 and the Company's $33.5 million loan pipeline remains strong. Management continues to focus on increasing business loans to the professional market, owner-occupied commercial real estate loans, and residential and personal loans. Our realigned lending team continues to be more effective in developing quality business relationships and we are on target with our Small Business Lending Fund initiative which has reduced our preferred stock dividend rate from 5.0% to 3.3%. We expect to continue to expand our small business lending in 2012 which will result in further reductions in our dividend rate. 

The Company continues to experience strong non-time core deposit growth. From December 31, 2010 to December 31, 2011, non-time core deposits increased by $61.2 million, or 15.2%, to $463.2 million. A portion of this growth was due to the $21.9 million in non-time core deposits that were assumed in the New Horizons Bank acquisition. On a linked-quarter basis, non-time core deposits increased by $2.7 million, or 2.3% annualized. This growth in non-time core deposits was largely attributable to a continued focus on deposit gathering as part of our relationship banking model.

Capital Position

The Company's capital position continues to be a source of strength and provides a competitive advantage during these uncertain economic times. At December 31, 2011, the Bank's total risk-based, Tier 1 risk-based, and Tier 1 leverage capital ratios were 15.9%, 14.7%, and 9.5%, respectively, compared to 16.8%, 15.6%, and 9.7% respectively, at December 31, 2010. The Bank exceeded the regulatory minimum capital ratios to be considered well-capitalized by 159.4%, 244.8%, and 189.8% for total risk-based capital, Tier 1 risk-based capital, and Tier 1 leverage capital, respectively, at December 31, 2011.  

Increasing Net Interest Income and Net Interest Margin

The Company's net interest income for the fourth quarter of 2011 increased by $1.1 million, or 15.1%, as compared to the fourth quarter of 2010. The primary reason for this growth was a 59 basis point increase in the Company's net interest margin from 3.25% for the three months ended December 31, 2010, to 3.84% for the three months ended December 31, 2011. The improvement in the net interest margin was due to a 50 basis point decrease in the Company's cost of funds and a 13 basis point increase in the Company's yield on assets. On a linked quarter basis, the Company's net interest margin increased by eight basis points. Given the Company's high level of liquidity, coupled with strong core deposit growth, we have been able to repay maturing time deposits or reprice these time deposits at lower market rates at maturity. In addition, we recently renegotiated $15.0 million of Federal Home Loan Bank advances resulting in a 197 basis point reduction in these funding sources, and extended these maturities for an additional 2.7 years. This restructuring should reduce our interest expense by approximately $300,000 annually beginning in the first quarter of 2012.

Noninterest Income and Expense

Noninterest income decreased by $289,000 to $2.0 million for the quarter ended December 31, 2011, as compared to the quarter ended December 31, 2010.  Excluding the effects of gains from acquisitions and losses on sale of other assets, noninterest income decreased by $148,000, or 6.8%, for the fourth quarter of 2011 compared to the fourth quarter of 2010. This decrease was primarily due to an $83,000 reduction in mortgage banking income and a $72,000 reduction in other noninterest income.

Noninterest expense increased by $861,000 during the fourth quarter of 2011 compared to the fourth quarter of 2010.  Excluding valuation adjustments and other expenses on other real estate owned, acquisition and integration expenses, and impairment of securities, noninterest expense increased by $480,000, or 7.0%, during the respective fourth quarter periods. This increase was partially due to higher compensation and other costs related to the Bank's acquisition of New Horizons Bank in April 2011. 

About Citizens South Banking Corporation and Citizens South Bank         

Citizens South Bank was founded in 1904 and is headquartered in Gastonia, North Carolina. Deposits are FDIC insured up to applicable regulatory limits. At December 31, 2011, the Company had $1.1 billion in assets with 21 full-service offices in the Charlotte and North Georgia regions, including Gaston, Iredell, Rowan, Mecklenburg, and Union counties in North Carolina, York County in South Carolina, and Towns, Union, Fannin, and Gilmer counties in Georgia. 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 Global Market under the ticker symbol "CSBC." The Company maintains a website at 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 filings with the SEC.  

The Citizens South Banking Corporation logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=7099

Non-GAAP Financial Measures

This press release contains non-GAAP financial measures and should be read along with the accompanying tables which provide a reconciliation of non-GAAP measures to GAAP measures.  Management believes that these non-GAAP measures provide a greater understanding of ongoing operations and enhance comparability of results with prior periods.  Non-GAAP measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under accounting principles generally accepted in the United States ("GAAP"), and investors should consider the company's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the company.   Non-GAAP measures have limitations as analytical tools, and investors should not consider them in isolation, or as a substitute for analysis of the Company's results or financial condition as reported under GAAP.

Cautionary Statement Regarding 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, the continuation of current revenue and expense trends, significant changes in interest rates, 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, 2010, describe some of these factors. 

Quarterly Financial Highlights (unaudited) At and For the Quarters Ended  
  2011 2010  
  December 31 September 30 June 30 March 31 December 31  
(Dollars in thousands, except share and per share data)            
             
Summary of Operations:            
Interest income - taxable equivalent  $ 11,089  $ 11,308  $ 11,488  $ 10,457  $ 11,055  
Interest expense  2,304  2,554  2,826  2,855  3,411  
 Net interest income - taxable equivalent  8,785  8,754  8,662  7,602  7,644  
Less: Taxable-equivalent adjustment  65  62  69  70  70  
 Net interest income  8,720  8,692  8,593  7,532  7,574  
Provision for loan losses  4,635  1,350  1,700  3,000  5,000  
Net interest income after loan loss provision  4,085  7,342  6,893  4,532  2,574  
Noninterest income  1,985  1,990  5,886  1,478  2,274  
Noninterest expense  8,779  8,931  9,270  7,672  7,918  
 Net income (loss) before income taxes  (2,709)  401  3,509  (1,662)  (3,070)  
Income tax expense (benefit)  (1,172)  28  1,213  (771)  (1,331)  
 Net income (loss)  (1,537)  373  2,296  (891)  (1,739)  
Dividends and accretion of discount on preferred stock  767  247  256  256  256  
 Net income (loss) available to common shareholders  $ (2,304)  $ 126  $ 2,040  $ (1,147)  $ (1,995)  
             
Per Common Share Data:            
Net income (loss):            
 Basic  $ (0.20)  $ 0.01  $ 0.18  $ (0.10)  $ (0.18)  
 Diluted  (0.20)  0.01  0.18  (0.10)  (0.18)  
Weighted average shares outstanding:            
 Basic 11,470,599 11,462,107 11,455,642 11,491,734 11,173,174  
 Diluted 11,470,599 11,462,107 11,455,642 11,491,734 11,173,174  
End of period shares outstanding 11,506,324 11,506,324 11,506,324 11,508,750 11,508,750  
Cash dividends declared  $ 0.01  $ 0.01  $ 0.01  $ 0.01  $ 0.01  
Book value   6.27  6.44  6.44  6.22  6.32  
Tangible book value  6.13  6.31  6.29  6.09  6.17  
             
Selected Financial Performance Ratios (annualized):            
Return on average assets (0.85)% 0.05% 0.73% (0.44)% (0.74)%  
Return on average common equity (12.45)% 0.68% 11.00% (6.39)% (10.68)%  
Noninterest income to average total assets  0.73% 0.72% 2.12% 0.56% 0.85%  
Noninterest expense to average total assets 3.24% 3.23% 3.34% 2.91% 2.95%  
             
Operating Earnings (Non-GAAP):            
Net income (loss) available to common shareholders   $ (2,304)  $ 126  $ 2,040  $ (1,147)  $ (1,995)  
(Gain) loss on acquisition, net of tax  (15)  29  (2,695)  155  (90)  
Gain on sale of investments, net of tax  --  (67)  --  --  --  
Other-than-temporary impairment on securities, net of tax  --  --  --  --  365  
Acquisition and integration expenses, net of tax  22  86  345  27  26  
Accretion of unamortized discount on preferred stock  584  --  --  --  --  
 Net operating income (loss)   $ (1,713)  $ 174  $ (310)  $ (965)  $ (1,694)  
             
Operating net income (loss) per common share:            
 Basic  $ (0.15)  $ 0.02  $ (0.03)  $ (0.08)  $ (0.15)  
 Diluted  (0.15)  0.02  (0.03)  (0.08)  (0.15)  
             
Pre-tax, pre-credit earnings (1)   $ 3,545  $ 3,545  $ 3,902  $ 2,638  $ 2,885  
             
Operating return on average assets (0.63)% 0.06% (0.11)% (0.37)% (0.63)%  
Operating return on average common equity (7.29)% 0.73% (1.30)% (4.13)% (7.15)%  
Operating efficiency ratio (2) 69.52% 67.52% 65.92% 69.97% 70.49%  
             
             
(1) Calculated using net interest income plus noninterest income less noninterest expense adjusted for the following items: 1) gains or losses from acquisition or sale of investments or
sale of other assets; 2) other-than-temporary impairment on securities; 3) amortization of intangible assets; 4) other real estate owned valuation adjustments and expenses; and 5)
acquisition and integration expenses. 
(2) Calculated by dividing noninterest expense by net interest income plus noninterest income excluding the following items: 1) gains or losses from acquisition or sale of investments;
2) other-than-temporary impairment on securities; 3) other real estate owned valuation adjustments and expenses; and 4) acquisition and integration expenses. 
     
     
     
Quarterly Financial Highlights (unaudited) At and For the Quarters Ended  
  2011 2010  
  December 31 September 30 June 30 March 31 December 31  
(Dollars in thousands, except per share data)            
             
Credit Quality Information and Ratios:            
Allowance for loan losses - beginning of period  $ 12,956  $ 12,742  $ 12,006  $ 11,924  $ 10,752  
Add: Provision for loan losses  4,635  1,350  1,700  3,000  5,000  
Less: Net charge-offs  5,878  1,136  964  2,918  3,828  
Allowance for loan losses - end of period  $ 11,713  $ 12,956  $ 12,742  $ 12,006  $ 11,924  
             
Assets not covered by FDIC loss-share agreements:            
Past due loans (30-89 days) accruing  $ 4,933  $ 4,479  $ 5,687  $ 5,692  $ 13,787  
Past due loans (30-89 days) to total non-covered loans 0.86% 0.77% 0.99% 0.97% 2.34%  
             
Nonperforming non-covered loans:            
 One-to-four family residential  $ 2,407  $ 1,556  $ 1,406  $ 2,373  $ 1,864  
 Construction  --  --  --  72  14  
 Acquisition and development  6,474  6,459  5,155  4,675  2,560  
 Commercial land  2,631  3,176  3,167  4,653  4,360  
 Other commercial real estate  4,173  6,602  10,306  9,636  4,800  
 Commercial business  168  306  201  309  287  
 Consumer  2,958  2,426  2,440  2,639  2,529  
Total nonperforming non-covered loans  18,811  20,525  22,675  24,357  16,414  
Other nonperforming non-covered assets  8,936  8,208  10,723  8,463  7,650  
Total nonperforming non-covered assets  $ 27,747  $ 28,733  $ 33,398  $ 32,820  $ 24,064  
             
Allowance for loan losses to total non-covered loans 2.04% 2.23% 2.22% 2.05% 2.02%  
Net charge-offs to average non-covered loans (annualized) 4.07% 0.79% 0.66% 2.00% 2.59%  
Nonperforming non-covered loans to non-covered loans 3.28% 3.53% 3.95% 4.15% 2.79%  
Nonperforming non-covered assets to total assets 2.57% 2.61% 2.99% 3.15% 2.26%  
Nonperforming non-covered assets to total non-covered loans and other real estate owned 4.76% 4.87% 5.72% 5.51% 4.03%  
             
Assets covered by FDIC loss-share agreements:            
Past due loans (30-89 days) accruing  (3)  $ 5,372  $ 6,430  $ 12,987  $ 7,006  $ 5,767  
Past due loans (30-89 days) to total covered loans 3.36% 3.81% 7.34% 5.09% 3.91%  
             
Total covered nonperforming loans  (4)  $ 44,056  $ 37,074  $ 35,830  $ 24,791  $ 25,541  
Other covered nonperforming assets   8,746  12,765  14,127  8,225  7,108  
Total covered nonperforming assets  $ 52,802  $ 49,839  $ 49,957  $ 33,016  $ 32,649  
             
Classified Assets (5)            
Non-covered classified loans  $ 28,727  $ 35,357  $ 41,515  $ 42,915  $ 44,532  
OREO and other nonperforming assets  8,936  8,208  10,723  8,463  7,650  
Total classified assets  $ 37,663  $ 43,565  $ 52,238  $ 51,378  $ 52,182  
             
Tier 1 capital  $ 103,069  $ 104,487  $ 105,088  $ 102,628  $ 103,233  
             
Total classified assets to Tier 1 capital 36.54% 41.69% 49.71% 50.06% 50.55%  
             
(3) The contractual balance of past due loans covered by FDIC loss-share agreements totaled $7.0 million, $7.7 million $13.7 million, $8.2 million and $7.0 at December 31, 2010,
March 31, 2011, June 30, 2011, September 30, 2011, and December 31, 2011, respectively.
(4) The contractual balance of nonperforming loans covered by FDIC loss-share agreements totaled $31.2 million, $28.7 million, $39.3 million, $48.8 million and $55.4 million at
December 31, 2010, March 31, 2011, June 30, 2011, September 30, 2011, and December 31, 2011, respectively.
(5) Excludes loans and OREO covered by FDIC loss-share agreements.
   
   
   
Quarterly Financial Highlights (unaudited) At and For the Quarters Ended
  2011 2010
  December 31 September 30 June 30 March 31 December 31
(Dollars in thousands, except per share data)          
           
Net Interest Margin (annualized):          
Yield on earning assets 4.81% 4.84% 4.95% 4.62% 4.68%
Cost of funds 1.01% 1.11% 1.23% 1.32% 1.51%
Net interest rate spread 3.80% 3.73% 3.72% 3.30% 3.17%
Net interest margin (taxable equivalent) 3.84% 3.76% 3.78% 3.42% 3.25%
           
Selected End of Period Balances:          
Loans covered by FDIC loss-share agreements  $ 159,688  $ 168,940  $ 177,047  $ 137,758  $ 147,576
Loans not covered by FDIC loss-share agreements  574,100  582,065  573,603  586,897  588,934
Total loans, net  733,788  751,005  750,650  724,655  736,510
Investment securities  147,899  132,443  156,328  154,006  111,586
Total interest-earning assets  895,003  913,910  927,463  887,706  914,455
Total assets  1,080,460  1,098,974  1,117,993  1,041,444  1,064,487
Noninterest-bearing deposits  87,740  87,413  82,305  78,342  70,056
Interest-bearing deposits  788,316  801,167  822,273  754,461  780,400
Total deposits  876,056  888,580  904,578  832,803  850,456
Total borrowings and other debt  103,939  105,778  108,011  107,646  110,678
Shareholders' equity  92,659  94,782  94,771  92,276  93,443
           
Selected Quarterly Average Balances:          
Loans covered by FDIC loss-share agreements  $ 164,314  $ 173,755  $ 170,580  $ 142,353  $ 154,998
Loans not covered by FDIC loss-share agreements  578,083  576,846  583,294  583,993  592,056
Average loans, net  742,397  750,601  753,874  726,346  747,054
Investment securities  140,846  146,017  157,513  135,645  100,691
Average interest-earning assets  906,064  920,932  918,118  902,141  928,756
Average total assets  1,084,313  1,107,687  1,110,740  1,053,747  1,075,338
Noninterest-bearing deposits  87,770  84,001  81,617  72,235  69,675
Interest-bearing deposits  789,233  810,469  814,736  769,152  783,510
Average total deposits  877,003  894,470  896,353  841,387  853,185
Average borrowings and other debt  105,872  106,696  107,872  109,385  111,271
Shareholders' equity  94,028  94,711  95,116  93,533  94,761
           
Capital Ratios:          
Total equity to total assets 8.58% 8.62% 8.48% 8.86% 8.78%
Tangible common equity to tangible assets 6.56% 6.61% 6.49% 6.73% 6.69%
Total Risk-Based Capital (Bank only) 15.94% 17.32% 17.29% 16.70% 16.80%
Tier 1 Risk-Based Capital (Bank only) 14.69% 16.06% 16.03% 15.44% 15.54%
Tier 1 Leverage Capital (Bank only) 9.49% 9.53% 9.42% 9.89% 9.74%
     
     
     
CITIZENS SOUTH BANKING CORPORATION    
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION  (unaudited)    
         
         
  December 31 Amount Percent
  2011 2010 Change Change
(Dollars in thousands)        
         
ASSETS        
Cash and cash equivalents  88,344  120,899  (32,555) -26.93%
Investment securities available for sale, at fair value  95,763  74,308  21,455 28.87%
Investment securities held to maturity, at amortized cost  52,136  37,278  14,858 39.86%
Federal Home Loan Bank stock, at cost  5,067  5,715  (648) -11.34%
Presold loans in process of settlement  2,146  4,034  (1,888) -46.80%
Loans:        
 Covered by FDIC loss-share agreements   159,688  147,576  12,112 8.21%
 Not covered by FDIC loss-share agreements  574,100  588,934  (14,834) -2.52%
 Allowance for loan losses  (11,713)  (11,924)  211 -1.77%
 Loans, net  722,075  724,586  (2,511) -0.35%
Other real estate owned   17,682  14,652  3,030 20.68%
Premises and equipment, net  25,888  23,785  2,103 8.84%
FDIC loss share receivable  38,931  24,848  14,083 56.68%
Accrued interest receivable  2,773  3,001  (228) -7.60%
Bank-owned life insurance  18,978  18,230  748 4.10%
Intangible assets  1,373  1,690  (317) -18.76%
Other assets  9,304  11,461  (2,157) -18.82%
 Total assets  $ 1,080,460  $ 1,064,487  $ 15,973 1.50%
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Deposits:        
 Noninterest-bearing demand deposits  $ 87,740  $ 70,056  $ 17,684 25.24%
 Interest-bearing demand and savings  375,497  331,956  43,541 13.12%
 Time deposits  412,819  448,444  (35,625) -7.94%
Total deposits  876,056  850,456  25,600 3.01%
Securities sold under repurchase agreements  9,787  9,432  355 3.76%
Borrowed money  78,688  85,782  (7,094) -8.27%
Subordinated debt  15,464  15,464  -- 0.00%
Other liabilities  7,806  9,910  (2,104) -21.23%
 Total liabilities  987,801  971,044  16,757 1.73%
Shareholders' Equity        
Preferred stock  20,500  20,672  (172) -0.83%
Common stock  124  124  -- 0.00%
Additional paid-in-capital  63,888  63,000  888 1.41%
Retained earnings, substantially restricted  7,854  9,663  (1,809) -18.72%
Accumulated other comprehensive income (loss)  293  (16)  309 -1931.25%
 Total shareholders' equity  92,659  93,443  (784) -0.84%
 Total liabilities and shareholders' equity  $ 1,080,460  $ 1,064,487  $ 15,973 1.50%
 
 
 
CITIZENS SOUTH BANKING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
  Three Months Ended    
  December 31 Amount Percent
  2011 2010 Change Change
(Dollars in thousands)        
Interest Income:        
Interest and fees on loans  $ 10,135  $ 10,297  $ (162) -1.57%
Investment securities:        
Taxable interest income  743  543  200 36.83%
Tax-exempt interest income  95  67  28 41.79%
Other interest income  51  78  (27) -34.62%
Total interest income  11,024  10,985  39 0.36%
Interest Expense:        
Deposits  1,445  2,391  (946) -39.57%
Repurchase agreements  10  23  (13) -56.52%
Borrowed money  739  790  (51) -6.46%
Subordinated debt  110  207  (97) -46.86%
Total interest expense  2,304  3,411  (1,107) -32.45%
         
Net interest income  8,720  7,574  1,146 15.13%
Provision for loan losses  4,635  5,000  (365) -7.30%
Net interest income after provision for loan losses  4,085  2,574  1,511 58.70%
Noninterest Income:        
Service charges on deposit accounts  1,066  1,039  27 2.60%
Mortgage banking income  414  497  (83) -16.70%
Commissions on sales of financial products  61  67  (6) -8.96%
Income from bank-owned life insurance  191  205  (14) -6.83%
Gain from acquisition  25  148  (123) -83.11%
Loss on sale of other assets  (57)  (39)  (18) 46.15%
Other income  285  357  (72) -20.17%
Total noninterest income  1,985  2,274  (289) -12.71%
Noninterest Expense:        
Compensation and benefits  3,810  3,529  281 7.96%
Occupancy and equipment   854  848  6 0.71%
Data processing and other technology  248  261  (13) -4.98%
Professional services  264  252  12 4.76%
Advertising and business development  81  101  (20) -19.80%
Loan collection and other expenses  534  276  258 93.48%
Deposit insurance  419  356  63 17.70%
Other real estate owned valuation adjustments  1,027  295  732 248.14%
Other real estate owned expenses  396  308  88 28.57%
Amortization of intangible assets  126  144  (18) -12.50%
Impairment of investment securities  --  435  (435) -100.00%
Acquisition and integration expenses  38  42  (4) -9.52%
Other expenses  982  1,071  (89) -8.31%
Total noninterest expense  8,779  7,918  861 10.87%
         
Net loss before income tax benefit  (2,709)  (3,070)  361 -11.76%
Income tax benefit  (1,172)  (1,331)  159 -11.95%
Net loss  (1,537)  (1,739)  202 -11.62%
Dividends and accretion of discount on preferred stock  767  256  511 199.61%
         
Net loss allocable to common shareholders  $ (2,304)  $ (1,995)  $ (309) 15.49%
         
Net loss per common share - basic  $ (0.20)  $ (0.18)  $ (0.02) 12.49%
Net loss per common share - diluted (0.20) (0.18) (0.02) 12.49%
 
 
 
CITIZENS SOUTH BANKING CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
      12 months ended    
      December 31  Amount Percent
      2011 2010 Change Change
(Dollars in thousands)        
Interest Income:        
Interest and fees on loans  $ 40,158  $ 40,540  $ (382) -0.94%
Investment securities:        
Taxable interest income  3,412  2,517  895 35.56%
Tax-exempt interest income  304  544  (240) -44.12%
Other interest income  202  314  (112) -35.67%
Total interest income  44,076  43,915  161 0.37%
Interest Expense:        
Deposits  7,128  10,262  (3,134) -30.54%
Repurchase agreements  60  107  (47) -43.93%
Borrowed money  3,022  3,395  (373) -10.99%
Subordinated debt  328  914  (586) -64.11%
Total interest expense  10,538  14,678  (4,140) -28.21%
             
Net interest income  33,538  29,237  4,301 14.71%
Provision for loan losses  10,685  14,050  (3,365) -23.95%
Net interest income after provision for loan losses  22,853  15,187  7,666 50.48%
Noninterest Income:        
Service charges on deposit accounts  4,154  3,932  222 5.65%
Mortgage banking income  1,255  1,525  (270) -17.70%
Commissions on sales of financial products  267  426  (159) -37.32%
Income from bank-owned life insurance  777  832  (55) -6.61%
Gain from acquisition  4,140  19,679  (15,539) -78.96%
Gain on sale of investments, available for sale  111  349  (238) -68.19%
Loss on sale of other assets  (342)  (490)  148 -30.20%
Other income  979  883  96 10.87%
Total noninterest income  11,341  27,136  (15,795) -58.21%
Noninterest Expense:        
Compensation and benefits  15,000  13,598  1,402 10.31%
Occupancy and equipment   3,421  3,302  119 3.60%
Data processing and other technology  1,063  702  361 51.42%
Professional services  1,003  981  22 2.24%
Advertising and business development  320  333  (13) -3.90%
Loan collection and other expenses  1,361  447  914 204.47%
Deposit insurance  1,535  1,326  209 15.76%
Other real estate owned valuation adjustments  4,319  1,382  2,937 212.52%
Other real estate owned expenses  1,302  993  309 31.12%
Amortization of intangible assets  538  517  21 4.06%
Impairment of investment securities  --  435  (435) -100.00%
Acquisition and integration expenses  792  1,064  (272) -25.56%
Other expenses  4,001  4,255  (254) -5.97%
Total noninterest expense  34,655  29,335  5,320 18.14%
             
Net income (loss) before income tax expense (benefit)  (461)  12,988  (13,449) -103.55%
Income tax expense (benefit)  (702)  4,349  (5,051) -116.14%
Net income  241  8,639  (8,398) -97.21%
Dividends and accretion of discount on preferred stock  1,526  1,025  501 48.88%
             
Net income (loss) available (allocable) to common shareholders  $ (1,285)  $ 7,614  $ (8,899) -116.88%
             
Net loss per common share - basic  $ (0.11)  $ 0.78  $ (0.89) -114.35%
Net loss per common share - diluted  (0.11)  0.78 (0.89) -114.35%


            

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