Nevada City-based Citizens Bank, our community’s “hometown” bank, is still trying to raise needed capital to meet a financial goal required by federal regulators back on July 2010, according to a Feb. 11 public regulatory filing I found on the SEC’s online database. The filing is here.
Citizens concedes it must come into compliance “as quickly as possible.”
Citizens has not issued any press releases since its last earnings announcement on Oct. 27, though the latest SEC filing — which includes updated some financial information though December 2010 — fulfills all regulatory requirements. I would expect an earnings press release any day now.
Citizens’ plan is to offer up to 10 million units at a price of $3 per unit and warrants (or rights) to buy additional shares — stating a new timeframe of June 30. The proceeds will be “needed in order for us to return to ‘well capitalized’ status under the bank regulatory guidelines to which we are subject,” the filing (an amended S-1 document) said.
Citizens’ stock recently has been trading at about $1.60 per share. Citizens previously had said it would seek to raise new capital “beginning” in the fourth quarter of last year, so the clock keeps ticking.
“Our capital has been significantly reduced as a result of the losses in 2008 and 2009 and a $5.8 million loss for 2010,” according to the filing with the Securities and Exchange Commission. “We must now recapitalize the Company and the Bank. We entered into an agreement with our regulators to raise the Bank’s leverage capital ratio to 9% by the middle of July 2010. Although we have not met this deadline, we are continuing our efforts to raise the capital needed to reach the capital ratio required in the agreement.
“As of December 31, 2010, we needed to achieve a combination of new equity capital and earnings of approximately $12.0 million in order to satisfy the capital requirement.”
The filing goes on to warn: “If we do not achieve all these goals, we will not be able to satisfy the capital requirement of the consent order which would have a material adverse effect on the Company and the Bank and the value of your investment and our ability to continue as a going concern.
“These effects could include additional regulatory enforcement actions including the imposition of civil monetary penalties against the Company, the Bank or both, the termination of insurance of the Bank’s deposits by the FDIC or the closing of the Bank with the imposition of a conservator or receiver.”
According to the filing:
•Shareholders’ equity at Dec. 31, 2010, decreased to $3.7 million from $5.1 million at Sept 2010 “primarily due to a net loss of $1.4 million for the three months ended Dec. 31.”
•The primary contributor to the company’s loss for the three months ended Dec. 31 was a $2.35 million addition to the allowance for credit losses.
•”Non-performing assets, which include nonaccrual loans, loans past due 90 days and still accruing, and other real estate owned totaled $45.1 million as of December 31, 2010. Reducing the level of non-performing assets will take a significant effort and will continue through 2011 and beyond.”
•”The Company’s recurring losses have resulted in significant deterioration to shareholders’ equity and regulatory capital. These recurring losses raise concern about the Company’s ability to continue as a going concern.
“Management is actively pursuing new ventures to increase revenues. In addition, the Company is currently seeking additional sources of capital, including the Offering. The Company is dependent upon its ability to secure sufficient equity and there are no assurances that the Company will be successful.”
•”In the first quarter of 2011, the Company is closing its mortgage broker services and the related broker fee income is not expected to continue; however, salaries and other related expenses will also decrease by a similar amount as a result of this closure.”
Citizens listed strengths that included a “well-seasoned” management team and core operating strengths, including a strong net interest margin and a “very loyal” customer base.
On Feb. 8th, 1995, Citizens said it opened its doors with one branch, twelve employees, and a mission to make a real difference in this community. “About 100 local citizens took money out of their personal savings, pooled those resources, and gave of their time, expertise and determination because they believed in the advantages that a real community bank could provide,” according to its history.
A caution to readers: Like you, I’m rooting for Citizens Bank. Please be sensitive about the comments you post here.