SOUTH HILL, Va., July 24 /PRNewswire-FirstCall/ -- Citizens Community Bank (OTC Bulletin Board: CZYB) today reported second quarter results for the three-month period ended June 30, 2009. Quarterly net income to common shareholders was $15,902, an increase of 88.5% or $7,468 over second quarter 2008. Basic and diluted earnings per share equaled $.01 for three months ended June 30, 2009 and 2008. Return on average assets increased 2 basis points to .04%, while return on average equity increased to .30% from .19% over the comparable period. For the first six months of 2009, net income totaled $66,483 compared to $161,030 for the first half of 2008. Both basic and diluted earnings per share equaled $.05 per share for 2009, down from $.12 per share for the first six months of 2008. Year to date, return on average assets was .08% versus .22% for 2008, while return on average equity declined to .62% from 1.78% over the same period.

"We are pleased with the progress made to improve our core earnings during the second quarter of this year. Our increases in both interest income and noninterest income are directly related to our solid loan growth and expansions of valuable products and services," says President and CEO Tom Manson.

"In spite of an economy which continues to struggle and an elevated level of non-performing assets, we are marching forward. It's also important to recognize the importance of our quarterly income growth in the face of a significant increase in FDIC assessment during the second quarter."

As of June 30, 2009, totaled assets amounted to $173.5 million, up $19.1 million or 12.4% from December 31, 2008. Solid growth was experienced in both loans and deposits. Total loans increased $4.1 million or 3.3%, while deposits increased $11.0 million or 8.3% for the first half of 2009. By increasing the Bank's securities holdings during the first quarter of 2009, investment securities were up $11.4 million or 79.5% for the year with most of this funded by Federal Home Loan Bank advances.

Net interest income totaled $1,376,914 for the second quarter of 2009, an increase of $196,876 or 16.7% from the same period in 2008. The strong increase reflected the growth experienced in the loan portfolio as well as the investment strategy deployed early in 2009. The Bank also benefited from a reduction in funding cost. For the six months ended June 30, 2009, earning assets averaged $157.9 million, an increase of $21.5 million from one year ago. Year-to-date, the net interest margin contracted 11 basis points to 3.43%. For the three months ended June 30, 2009, the net interest margin equaled 3.45%, down 10 basis points from second quarter 2008. The tightening of the net interest margin in both comparative periods reflects the addition of lower-yielding assets along with it taking longer for the deposit base to reprice in the low-rate environment.

Noninterest income equaled $186,058, an increase of $25,962 or 16.2% compared to the second quarter of 2008. For the six-month period ended June 30, 2009, noninterest revenue was up 12.2% or $39,175 over the first half of 2008. The Bank benefited from additional fee income from its ATMs, brokered secondary mortgages and service charges on deposit accounts.

For the second quarter of 2009, noninterest expenses totaled $1,360,012, an increase of $123,902 or 10.0% over the second quarter of 2008. The substantial increase was predominately due to a one-time special FDIC assessment, which on a pre-tax basis was approximately $76,000. On May 22, 2009, the FDIC announced a special assessment on insured institutions as part of its efforts to rebuild the Deposit Insurance Fund and to help maintain public confidence in the banking system. The special assessment is five basis points of each FDIC-insured depository institution's assets minus Tier 1 capital as of June 30, 2009. Along with this one-time expense, the Bank's quarterly FDIC assessment rate increased substantially as well. Combined, FDIC insurance costs increased $106,500 over the second quarter of 2008. Excluding this, noninterest expense was up a modest 1.4% or $17,402 for the second quarter of 2009. Noninterest expense totaled $2,620,921 for the first half of 2009, up $278,404 or 11.9% over the first six months of 2008. When excluding the $76,000 special one-time FDIC assessment, operating costs increased $202,404 or 8.6% over the first six months of 2008. The increase resulted from having 2009 fully reflect the impact of the new branch in Roanoke Rapids, North Carolina, along with overall growth in the Bank and its products and services.

Provision for loan losses totaled $137,200 for the three months ended June 30, 2009, an increase of $20,900 over the second quarter of 2008. The increased provision expenses were driven by higher loan growth and nonperforming assets for the comparable periods. Net charge-offs to average loans equaled .16% for the first six months of 2009 compared to .17% one year ago. For the six-month period ended June 30, 2009, provision expenses amounted to $258,510, up $101,010 over the first half of 2008.

The higher provisions resulted in a loan loss reserve ratio of 1.28%, up 13 basis points from one year ago and 8 basis points from December 31, 2008. At June 30, 2009, nonperforming assets totaled $4,536,634, an increase of $2,461,666 from year end 2008 and $3,525,099 from June 30, 2008. Within the nonperforming assets category, the Bank had $3,206,318 in non accrual loans and held eleven other real estate owned properties totaling $1,330,316. Nonperforming loans to period end loans equaled 2.44% at June 30, 2009 compared to .72% one year ago and 1.63% at December 31, 2008.

Citizens Community Bank is a Virginia state chartered bank headquartered in South Hill, Va. Opened in December 1999, it operates five branches, three in south central Virginia and two in northern North Carolina. For more information and additional financial data, please visit www.ccbsite.com.

This press release contains "forward-looking statements" that concern future events which are subject to risks and uncertainties. Any such statements are based on certain assumptions and analyses by the Bank and other factors it believes are appropriate in the circumstances. The Bank's actual results, events and developments may differ materially from those contemplated by any forward-looking statement.

SOURCE Citizens Community Bank