Citizens South Banking Corp. Reports Operating Results (10-K)
Citizens South Banking Corp. has a market cap of $54.6 million; its shares were traded at around $4.7439 with and P/S ratio of 0.8. The dividend yield of Citizens South Banking Corp. stocks is 0.8%. Citizens South Banking Corp. had an annual average earning growth of 16.5% over the past 10 years.
Highlight of Business Operations:In March 2010, the Bank entered into a purchase and assumption agreement with the Federal Deposit Insurance Corporation (“FDIC”), as receiver for Bank of Hiawassee, to acquire substantially all of the assets and assume substantially all of the liabilities of Bank of Hiawassee (the “acquisition”). The Bank of Hiawassee was a Georgia state-chartered bank headquartered in Hiawassee, Georgia, and operated five full-service offices in the North Georgia area. This acquisition extended the Bank s geographic footprint outside of the Charlotte metropolitan area, providing geographic diversification for future loan and deposit growth. The acquired loans, also referred to as “covered loans,” are covered by two loss-share agreements between the FDIC and the Bank, which afford the Bank significant protection against future loan losses. Under these loss-share agreements, the FDIC will cover 80% of net loan losses up to $102 million and 95% of net loan losses that exceed $102 million. The term of the loss-share agreements is ten years for losses and recoveries on residential real estate loans, five years for losses on all other loans and eight years for recoveries on all other loans. The Bank recorded an estimated receivable from the FDIC in the amount of $36.3 million, which represents the discounted value of the FDIC s estimated portion of the expected future loan losses. New loans made after the acquisition date are not covered by the FDIC loss-share agreements.
The Dodd-Frank Act also broadens the base for FDIC deposit insurance assessments. Assessments will now be based on the average consolidated total assets less tangible equity capital of a financial institution, rather than deposits. The Dodd-Frank Act also permanently increases the maximum amount of deposit insurance for banks, savings institutions and credit unions to $250,000 per depositor, retroactive to January 1, 2009, and noninterest bearing transaction accounts have unlimited deposit insurance through December 31, 2012. The legislation also increases the required minimum reserve ratio for the Deposit Insurance Fund, from 1.15% to 1.35% of insured deposits, and directs the FDIC to offset the effects of increased assessments on depository institutions with less than $10 billion in assets.
Capital Adequacy. The various federal bank regulators, including the OTS, have adopted risk-based capital requirements for assessing bank capital adequacy. These standards define what qualifies as capital and establish minimum capital standards in relation to assets and off-balance sheet exposures, as adjusted for credit risks. These regulations require banks to meet three minimum capital standards: a 1.5% tangible capital ratio, a 4% leverage ratio and an 8% risk-based capital ratio. For capital adequacy purposes, a bank is placed in one of the following five categories based on the bank s capital: 1) well capitalized (at least 5% leverage capital, 6% Tier 1 risk-based capital and 10% total risk-based capital); 2) adequately capitalized (at least 4% leverage capital, 4% Tier 1 risk-based capital and 8% total risk-based capital); 3) undercapitalized (at least 3% leverage capital, 4% Tier 1 risk-based capital or less than 8% total risk-based capital,); 4) significantly undercapitalized (at least 3% leverage capital, 3% Tier 1 risk-based capital or less than 6% total risk-based capital,); and 5) critically undercapitalized (less than 2% tangible capital). At December 31, 2010 and 2009, Citizens South Bank met the criteria for being considered “well-capitalized” for all three regulatory capital standards as shown in the following table:
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