SOUTH HILL, Va., Oct. 24 /PRNewswire-FirstCall/ -- Citizens Community Bank (OTC: CZYB) today reported third quarter results for the three month period ended September 30, 2008. Quarterly net income was $56,162, a decrease of 48.3% or $52,421, over third quarter 2007. Earnings per share, both basic and diluted, equaled $.04 compared to $.08 for the three months ended September 30, 2008. For the third quarter of 2008, return on average assets decreased 14 basis points to .15%, while return on average equity declined to 1.24% from 2.48% over the comparable period. For the first three quarters of 2008, net income totaled $217,191 compared to $333,738 for the nine months ended 2007. Year-to-date both basic and diluted earnings per share equaled $.16 per share, a decline of $.07 from the prior period. For the nine month period, return on average assets equaled .20% versus .32% for 2007, while return on average equity declined to 1.60% from 2.58% over the same period.

The bank's balance sheet continued to be strong with total assets of $149.8 million, up $1.0 million from year end 2007, but down 2.2% from September 30, 2007. Without further leveraging existing capital, the balance sheet continued to strengthen with net loans increasing $6.9 million or 6% from year end 2007 and $6.4 million from September 30, 2007. In fact, the bank experienced net loan growth of $3.8 million over the second quarter of 2008 demonstrating its commitment and ability to lend to the community. Total deposits ended the period at $130.0 million, up $2.8 million from second quarter 2008, but down $4.0 million from one year ago. At the end of the third quarter of 2008, the bank had accomplished its goal of repositioning the balance sheet and looks forward to future asset and deposit growth.

"We are pleased with the overall performance for the quarter and year-to-date as we continue to expand our franchise during unprecedented times within the financial industry," says President Tom Manson. "During the second quarter of 2008, we opened our fifth branch, which is now our second branch facility in northern North Carolina. This region is poised for future growth and development, and we are pleased to assist the community in accomplishing its goals. At the time when some financial institutions are halting loan growth, the Bank continued to prudently lend to its communities. We were able to accomplish this by having a strong financial position, which includes capital in excess of well-capitalized standards as well as the liquidity to fund our growth.

"We are a local bank, with local relationships, that focuses on traditional bank services and providing the greatest long term value to our shareholders," adds Manson. "We were never involved in the toxic mortgages or mystifying credit derivative products and, fortunately, we did not hold any equity or preferred positions with the primary mortgage agencies. Although we have prudently avoided this activity, the impact of this is negatively affecting "Main Street." Our economy is clearly showing recessionary symptoms and this is naturally placing pressure on credit quality for most institutions, not to mention the squeeze on net interest margins. As a result of the economic weakness, we have experienced an increase in nonperforming assets; however, our levels remain in line with our peers. As usual, we will continue to manage and monitor our asset quality and net interest margin closely."

Net interest income totaled $1,249,656 for the third quarter of 2008, an increase of $35,038 or 2.9% over the same period in 2007. The increase resulted from an improved balance sheet mix and reduced funding costs. This offset lower yields on earning assets which lead to net interest margin expansion. For the three months ended September 30, 2008, the net interest margin increased 13 basis points to 3.63% over third quarter 2007.

For the first nine months of 2008, net interest income increased $122,547 or 3.5% to $3,621,617 over the comparable period in 2007. Even with significant rate reductions by the Federal Open Market Committee, the bank was able to maintain a stable net interest margin. The net interest margin contracted a meager 2 basis points to 3.54% over the comparable periods. The bank's ability to sustain the net interest margin was attributed to an improved asset and deposit mix, a well-structured investment portfolio and an increasing loan-to-deposit ratio during this period. For the nine months ended September 30, 2008, the loan-to-deposit ratio averaged 92.9% versus 86.9% for the same period in 2007.

Noninterest income equaled $178,455, an increase of $31,102 or 21.1% compared to the third quarter of 2007. For the nine month period ended September 30, 2008, noninterest revenue was up 15.2% or $65,824 over the first three quarters of 2007. The Bank continued to benefit from higher ATM fees and service charges on deposit accounts along with added income from the purchase of additional bank-owned life insurance.

Noninterest expenses totaled $1,239,496, an increase of $155,487 or 14.3% from the third quarter of 2007. The increase resulted from overall growth in the business combined with opening the Bank's fifth branch during April of 2008, thus 2007 results exclude the cost of the new branch. For the nine months ended September 30, 2008, the Bank's noninterest expense amounted to $3,582,015, an increase of 14.2% or $446,285 over the first three quarters of 2007. The increase directly reflects the Bank's investment into personnel, new branch facilities, along with enhanced deposit products and delivery channels. The bank is also committed to providing a safe and sound environment through its audit and compliance programs.

Provision for loan losses totaled $130,400 for the three months ended September 30, 2008, an increase of $14,009 over the third quarter of 2007. The increased provision expenses were driven by higher loan charge-offs for the comparable periods. For the third quarter of 2008, net charge-offs stood at $47,954 versus $10,732 for the three months ended September 30, 2007. For the nine month period ended September 30, 2008, provision expenses amounted to $287,900, a decrease of $9,491 from the first three quarters of 2007. Year-to-date, net charge offs stood at $146,883 compared to $71,475 through September 30, 2007. Despite the increased charge-offs, the bank continued to provide additional reserve allocations.

As of September 30, 2008, the allowance for loan losses totaled $1,458,754 and represented 1.18% of outstanding loans compared to 1.13% for September 30, 2007 and December 31, 2007. Nonperforming assets totaled $1,376,052, an increase of $1,134,619 from September 30, 2007 and an increase of $800,031 from year end 2007. Nonperforming loans to period end loans equaled 1.12% at September 30, 2008 compared to .21% the same period in 2007 and .50% at December 31, 2007.

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 http://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