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Losses slowing for Citizens Bank

Losses continued for Citizens Bank in 2009 – but less than the abrupt 2008 decline, and executives expected better times ahead as real estate prices stabilize.

Officials from Citizens Bank of Northern California reported pre-tax losses of $6.6 million for 2009.

“We believe 2010 will be a turnaround year, and we expect to be back into profits,” bank CEO Gary Gall said.



The bank’s pre-tax loss was one-third of the $18.3 million loss of 2008, Gall said. The primary contributor to the improvement was a reduction of the amount the bank put into a fund to cover foreclosures and loan losses.

The bank put back $23.9 million in 2008 to shore up loans that were going bad with the economy and for expected future foreclosures and delinquencies. In 2008, the bank put $11.1 million in the fund.




Net losses for 2009 came to $13.1 million, Gall said, which appeared to be more than the $10.7 million net loss for 2008.

“It looks like our losses went up,” Gall said, but the bank also has $9.2 million in tax refunds on the 2009 books from the federal government that have not come in. There were no such refunds available in 2008, Gall said.

If paid tomorrow, the $9.2 million IOU would drop the 2009 loss to $3.9 million, Gall added.

Despite what Gall called an upward trend, the bank sold $1.5 million in stock in December and will offer another $6 million from April to June to raise more capital.

The money is needed to strengthen the balance sheet and to help keep paying off a $10.4 million loan from the federal government, which the bank received under the TARP, or Troubled Asset Relief Program, in 2008 to stop the flow of red ink.

The bank did not make the last two TARP payments for 2009 and plans to miss four more of the roughly $100,000-per-quarter payments this year under an arrangement with the federal government, Gall said.

The federal government allows banks with TARP loans to miss six payments and does not force recipients to pay in a timely fashion, according to Meg Reilly, a spokeswoman for the Department of the Treasury in Washington, D.C.

If a bank fails to pay the loan in six overall quarters, as Citizens Bank is planning, the Treasury Department has the right to appoint two members to its board of directors, Reilly added.

The stock sales will also help the bank with its recent move of information systems and central operations from the bank in Nevada City to the downtown Grass Valley branch. That will allow the bank to use the freed-up Nevada City space for a new Small Business Administration lending division, Gall said.

“The timing is perfect,” said marketing director Judy Hess. That’s because SBA, a federal program, has loosened its rules for business loan refinancing.

If a loan-holder has made payments for the past 30 months and has “an unreasonable term” such as a balloon payout, they could qualify and cut payments by 10 percent per month, Gall said.

To contact Senior Staff Writer Dave Moller, e-mail dmoller@theunion.com or call (530) 477-4237.


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