SOUTH HILL, Va., Aug. 1 /PRNewswire-FirstCall/ -- Citizens Community Bank (OTC: CZYB) today reported second quarter results for the three-month period ended June 30, 2008. Quarterly net income was $8,434, a decrease of 92.4% or $102,610, over second quarter 2007. Earnings per share, both basic and diluted, equaled $.01 compared to $.08 for the three months ended June 30, 2007. Return on average assets decreased 30 basis points to .02%, while return on average equity declined to .19% from 2.58% over the comparable period. For the first six months of 2008, net income totaled $161,029 compared to $255,155 for the first half of 2007. Both basic and diluted earnings per share equaled $.12 per share for 2008 a decline of $.05 per share from the first six months of 2007. For the six month period, return on average assets equaled .22% versus .33% for 2007, while return on average equity declined to 1.79% from 2.64% over the same period.

As of June 30, 2008, totaled assets stood at $146.9 million, up $3.5 million from the same period in 2007 and down $1.9 million for the six month period in 2008. Total loans increased $11.8 million or 11.1% since June 30, 2007 and increased $2.6 million since year end 2007. Deposits increased $1.2 million from the same six month period in 2007, but were down $2.1 million since December 31, 2007, as the Bank continued to reposition the balance sheet.

"The second quarter of 2008 proved to be a difficult environment for many financial institutions; however, our performance was mostly in line with anticipated results for the period," stated Tom Manson, president and CEO. "Our expansion into Roanoke Rapids, North Carolina, continued with the opening of our fifth branch in April, 2008. This location marks our second branch opened in North Carolina within the past 18 months. As a result, this has and will place additional pressure on interim earnings, but will create a stronger and more valuable franchise. Complementing expansion plans, the Bank continues to implement various financial and service-related strategies designed to have a long-term, positive impact for our shareholders and customers."

"Although elevated from the past, our nonperforming assets are in line with our peers, and we continue to manage credit quality closely during this sluggish economic period. With recent turmoil in the financial markets questioning banks' capital positions, we remain well-capitalized and maintain a strong balance sheet," added Manson.

Net interest income totaled $1,237,033 for the second quarter of 2008, an increase of $37,385 or 3.1% from the same period in 2007. The growth in net interest income reflected growth in the loan portfolio as well as an improved rate of return on the investment portfolio combined with a significant reduction in interest expense. Over the comparable three month period, the net interest margin tightened a meager 1 basis point to 3.68%. For the six months ended June 30, 2008, net interest income increased $94,162 or 3.9% to $2,487,015 from the same period in 2007 as the Bank improved the balance sheet mix and grew loans. For the six month comparative period ended June 30, 2008, the net interest margin declined 9 basis points to 3.67%.

Noninterest income equaled $160,096, an increase of $9,499 or 6.3% compared to the second quarter of 2007. For the six month period ended June 30, 2008, noninterest revenue, up 12.1% or $34,723 over the first half 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. For the first six months of 2008, mortgage fee income was down $11,352 or 34.8% from the first six months of 2007.

For the second quarter of 2008, noninterest expenses totaled $1,293,105, an increase of $166,180 or 14.7% from the second quarter of 2007. The increase resulted from overall growth in the business combined with opening the Bank's fifth branch during April of 2008. For the six months ended June 30, 2008, the Bank's noninterest expense amounted to $2,457,573, an increase of 13.8% or $297,452 over the first six months of 2007. The increase directly reflects the Bank's investment into new branch facilities, the costs associated with supporting the Bank's and loan and deposit growth, along the accompanying regulatory costs, such as the Sarbanes-Oxley Act of 2002 ("SOX").

Provision for loan losses totaled $116,300 for the three months ended June 30, 2008, an increase of $59,900 over the second quarter of 2007. The increased provision expenses were driven by higher loan charge-offs for the comparable periods. For the second quarter of 2008, net charge-offs stood at $78,288 versus $20,795 for the three months ended June 30, 2007. For the six month period ended June 30, 2008, provision expenses amounted to $157,500, a decrease of $23,500 from the first half of 2007. The decreased provision expense was attributed to lower loan growth during the first six months of 2008 compared to 2007, while the evaluated level of provision expense was due to increased charge-offs and a higher loan loss reserve ratio.

As of June 30, 2008, the allowance for loan losses totaled $1,376,308 and represented 1.15% of outstanding loans compared to 1.13% for June 30, 2007 and December 31, 2007. Non-performing assets totaled $1,011,535, an increase of $998,955 from June 30, 2007 and an increase of $435,514 from year end 2007. Within the nonperforming assets category, the Bank held $856,535 in non accrual loans and $155,000 of other real estate owned. Nonperforming loans to period end loans equaled .72% at June 30, 2008 compared to .01% 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