CFS Bancorp, Inc. 707 Ridge Road, Munster, Indiana 46321 |
January 31, 2008
FOR IMMEDIATE RELEASE
CONTACT: Thomas F. Prisby, Chairman of the Board and Chief Executive Officer
219-836-5500
CFS Bancorp, Inc. Announces Improved Fourth Quarter and Year End 2007 Financial Results
MUNSTER, IN – January 31, 2008 – CFS Bancorp, Inc. (NASDAQ: CITZ) (the Company), the parent of Citizens Financial Bank (the Bank), today reported a 25% increase in its net income to $2.0 million for the fourth quarter of 2007 from $1.6 million for the fourth quarter of 2006. Diluted earnings per share increased 27% to $0.19 for the fourth quarter of 2007 from $0.15 per diluted share for the fourth quarter of 2006.
For the year ended December 31, 2007, the Company’s net income increased 41% to $7.5 million from $5.3 million for the 2006 period. Diluted earnings per share increased 47% to $0.69 for the year ended December 31, 2007 from $0.47 for the 2006 period. The Company’s net interest margin for the year ended December 31, 2007 increased to 3.02% from 2.73% and its efficiency ratio improved to 73.3% compared to 83.3% from the year ended December 31, 2006. In addition, the Company decreased its number of full time equivalent employees by 16% to 303 from 360 at December 31, 2006.
Fourth quarter 2007 financial highlights include:
| · | net interest margin was 3.06%, |
| · | efficiency ratio improved to 68.8%, |
| · | sold $12.8 million of non-performing and potential problem loans, |
| · | repaid $37.0 million of maturing Federal Home Loan Bank debt, and |
| · | repurchased 130,465 shares of common stock. |
Chairman’s Comments
“Although the past year was a challenging one for our industry, we had a very successful year. In all areas of bank management, assets, liabilities, revenue and expense, we continue to do well the little things that are necessary for continual improvement. The successes of our efforts are reflected in the attached summarized financial data. While others in our industry experienced significant margin compression, our net interest margin expanded 29 basis points,” said Thomas F. Prisby, Chairman and CEO. “During 2007, we aggressively assessed our cost structure and were able to reduce total non-interest expense by $2.7 million from the 2006 levels. We expect our lower overhead structure to have a positive impact on our efficiency ratio in 2008.”
Mr. Prisby continued, “We anticipate that 2008 will be another challenging year for our industry with respect to margin compression and asset quality concerns. The current economic conditions bring additional uncertainty related to credit quality especially in the housing and speculative real estate
CFS Bancorp, Inc. - Page 2 of 11
markets. We experienced success in reducing some of our legacy non-performing assets in 2007 and will continue to explore ways to further reduce these balances in 2008.”
Net Interest Income
The net interest margin was stable at 3.06% for the fourth quarter of 2007 compared to 3.07% for the third quarter of 2007 and increased 48 basis points compared to 2.58% for the fourth quarter of 2006. The Company’s net interest income decreased 1.8% to $8.4 million for the fourth quarter of 2007 compared to $8.5 million for the third quarter of 2007 and increased 3.9% from $8.1 million for the fourth quarter of 2006.
Interest income was $17.2 million for the fourth quarter of 2007 compared to $17.9 million for the third quarter of 2007 and $19.7 million for the fourth quarter of 2006. The decrease from the third quarter of 2007 was primarily related to a 1.7% decrease in the average balance of interest-earning assets combined with a 12 basis point decrease in the weighted-average yield earned on interest-earning assets. Interest income decreased from the 2006 period due to a 12.6% decrease in the average balances of interest-earning assets combined with a 32 basis point decrease in the weighted-average yield on loans receivable as interest income for the fourth quarter of 2007 was negatively impacted by decreases in the prime lending rate which decreased from 7.75% to 7.25% during the fourth quarter of 2007.
Interest expense decreased 5.1% to $8.8 million for the fourth quarter of 2007 from $9.3 million for the third quarter of 2007 and 24.0% from $11.6 million for the fourth quarter of 2006. The decrease from the third quarter of 2007 was primarily related to a 1.8% decrease in the average balances of interest-bearing liabilities and a 36 basis point decrease in the Company’s borrowing costs. The decrease from the fourth quarter of 2006 was the result of a 14.3% decrease in the average balances of interest-bearing liabilities and an 85 basis point decrease in the Company’s borrowing costs. The Company reduced its borrowed money by $66.8 million during 2007. As a result of a relatively flat yield curve which persisted throughout 2007, the Company was unable to refinance its maturing debt and reinvest the proceeds in assets earning higher rates while remaining within its investment risk parameters.
The Company’s cost of borrowings decreased to 6.23% for the fourth quarter of 2007 compared to 6.59% for the third quarter of 2007 and 7.08% for the fourth quarter of 2006. The decreases were primarily the result of lower average balances of the Company’s Federal Home Loan Bank (FHLB) debt and decreases in the amortization of the deferred premium on FHLB debt that is included in the Company’s total interest expense on borrowings. The premium amortization adversely impacted the Company’s net interest margin by 31 basis points, 38 basis points and 65 basis points, respectively, for the fourth quarter of 2007, the third quarter of 2007 and the fourth quarter of 2006. The Company’s interest expense on borrowings is detailed in the tables below for the periods indicated.
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| | | | | | | | | | | | Change from | |
| | | Three Months Ended | | | December 31, 2006 | |
| | | December 31, | | | September 30, | | | December 31, | | | to December 31, 2007 | |
| | | 2007 | | | 2007 | | | 2006 | | | $ | | | | % | |
| | | (Dollars in thousands) | |
Interest expense on short-term borrowings at contractual rates | | $ | 156 | | | $ | 200 | | | $ | 478 | | | $ | (322 | ) | | | (67.40 | )% |
Interest expense on FHLB borrowings at contractual rates | | | 1,445 | | | | 1,538 | | | | 2,273 | | | | (828 | ) | | | (36.4 | ) |
| Amortization of deferred premium | | | 851 | | | | 1,062 | | | | 2,036 | | | | (1,185 | ) | | | (58.2 | ) |
| Total interest expense on borrowings | | $ | 2,452 | | | $ | 2,800 | | | $ | 4,787 | | | $ | (2,335 | ) | | | (48.8 | ) |
| | | Fiscal Year Ended | | | | |
| | | December 31, | | | | | | | |
| | | 2007 | | | 2006 | | | $ change | | | % change | |
| | | (Dollars in thousands) | |
Interest expense on short-term borrowings at contractual rates | | $ | 811 | | | $ | 902 | | | $ | (91 | ) | | | (10.1 | )% |
Interest expense on FHLB borrowings at contractual rates | | | 6,561 | | | | 9,955 | | | | (3,394 | ) | | | (34.1 | ) |
Amortization of deferred premium | | | 4,540 | | | | 9,624 | | | | (5,084 | ) | | | (52.8 | ) |
Total interest expense on borrowings | | $ | 11,912 | | | $ | 20,481 | | | $ | (8,569 | ) | | | (41.8 | ) |
The interest expense related to the premium amortization on the early extinguishment of debt is expected to be $527,000, $449,000, $270,000 and $206,000 before taxes in the quarters ending March 31, June 30, September 30, and December 31, 2008, respectively.
Non-Interest Income and Non-Interest Expense
The Company’s non-interest income for the fourth quarter of 2007 increased to $3.4 million from $2.8 million for the third quarter of 2007 and $3.0 million for the fourth quarter of 2006. The increase from the third quarter of 2007 was almost exclusively a result of an increase of $534,000 in net gains from the sales of securities and other assets. The increase from the fourth quarter of 2006 was primarily the result of increases in service charges and other fees of $73,000 and card-based fees of $52,000 combined with an increase of $239,000 in net gains from the sale of securities and other assets.
Non-interest expense for the fourth quarter of 2007 was relatively stable at $8.1 million compared to the third quarter of 2007 and decreased $1.2 million from $9.3 million for the fourth quarter of 2006. The decrease from the 2006 period was primarily related to decreased compensation and employee benefits expense.
Compensation and employee benefits expense for the fourth quarter of 2007 was $4.4 million, representing a modest increase from $4.3 million from the third quarter of 2007. The increase was primarily due to separation expenses totaling $345,000 related to the separation of two senior officers as previously disclosed in separate regulatory filings and the consolidation of retail lending operations. In addition, the Company’s cost for health care benefits increased by $100,000. These increases were partially offset by a decrease in incentive compensation expense of $367,000. The Company’s compensation and employee benefits for the fourth quarter of 2007 decreased $1.1 million from $5.5 million for the fourth quarter of 2006. The decrease was primarily a result of the Company’s first quarter 2007 review and reduction of staffing levels and its first quarter 2007 Employee Stock
CFS Bancorp, Inc. - Page 4 of 11
Ownership Program (ESOP) loan modification. In addition, the Company’s pension expense decreased $720,000 from the fourth quarter of 2006.
The Company’s efficiency ratio for the fourth quarter of 2007 was 68.8% compared to 70.4% for the third quarter of 2007 and 83.7% for the fourth quarter of 2006. The efficiency ratio improved as a result of lower non-interest expenses and higher net interest income. The Company’s core efficiency ratios were 67.0%, 64.5% and 72.4%, respectively. The Company’s core efficiency ratio was positively impacted by lower non-interest expenses and adversely impacted by lower net interest income after adjusting for the amortization of the deferred premium on the early extinguishment of debt. The efficiency ratio and the core efficiency ratio calculations are presented in the last table of this press release.
Management has historically used an efficiency ratio that is a non-GAAP financial measure of operating expense control and operating efficiency. The efficiency ratio is typically defined as the ratio of non-interest expense to the sum of non-interest income and net interest income. Many financial institutions, in calculating the efficiency ratio, adjust non-interest income (as calculated under GAAP) to exclude certain component elements, such as gains or losses on sales of securities and assets. Management follows this practice to calculate its core efficiency ratio and utilizes this non-GAAP measure in its analysis of the Company’s performance. The core efficiency ratio is different from the GAAP-based efficiency ratio. The GAAP-based measure is calculated using non-interest expense, net interest income and non-interest income as presented on the consolidated statements of income.
The Company’s core efficiency ratio is calculated as non-interest expense divided by the sum of net interest income, excluding the deferred premium amortization related to the early extinguishment of debt, and non-interest income, adjusted for gains or losses on the sale of securities and other assets. Management believes that the core efficiency ratio enhances investors’ understanding of the Company’s business and performance. The measure is also believed to be useful in understanding the Company’s performance trends and to facilitate comparisons with the performance of others in the financial services industry. Management further believes the presentation of the core efficiency ratio provides useful supplemental information, a clearer understanding of the Company’s financial performance, and better reflects the Company’s core operating activities.
The risks associated with utilizing operating measures (such as the efficiency ratio) are that various persons might disagree as to the appropriateness of items included or excluded in these measures and that other companies might calculate these measures differently. Management of the Company compensates for these limitations by providing detailed reconciliations between GAAP information and its core efficiency ratio within the last table of this press release; however, these disclosures should not be considered as an alternative to GAAP.
Asset Quality
The Company’s provision for losses on loans was $1.1 million for the fourth quarter of 2007 compared to $884,000 for the third quarter of 2007 and $338,000 for the comparable 2006 period. The increase in the provision during the fourth quarter was primarily the result of $4.2 million in net charge-offs realized when the Company sold $12.8 million of loans with previously identified impairment reserves totaling $4.0 million. In addition, the Company also identified as impaired a $7.5 million land development loan which required an impairment reserve totaling $827,000.
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The Company’s non-performing assets totaled $30.8 million at December 31, 2007, $33.8 million at September 30, 2007 and $27.8 million at December 31, 2006. Non-performing assets decreased during the fourth quarter of 2007 primarily due to the aforementioned loan sales which included $9.1 million of non-performing loans. Partially offsetting the decrease was the addition of the above mentioned land development loan. The ratio of total non-performing assets to total assets was 2.67%, 2.89% and 2.22%, respectively at December 31, 2007, September 30, 2007 and December 31, 2006. The ratios were impacted by the changes in non-performing assets combined with decreases in total assets of $19.0 million and $104.1 million, respectively, from the prior periods.
The Company’s allowance for losses on loans was $8.0 million at December 31, 2007, $11.3 million at September 30, 2007 and $11.2 million at December 31, 2006 with the allowance for losses on loans to total loans ratios of 1.01%, 1.37% and 1.39%, respectively. The Company maintains the allowance for losses on loans at a level that management believes is sufficient to absorb credit losses inherent in the loan portfolio. The allowance for losses on loans represents the Company’s estimate of inherent losses existing in the loan portfolio that are both probable and reasonable to estimate at each balance sheet date and is based on its review of available and relevant information. The Company believes that at December 31, 2007 the allowance for losses on loans was adequate.
Balance Sheet
At December 31, 2007, the Company’s total assets were $1.15 billion compared to $1.25 billion at December 31, 2006.
The Company’s loans receivable decreased 1.2% to $793.1 million at December 31, 2007 from $802.4 million at December 31, 2006. During 2007, the Company had total loan fundings and purchases of $352.7 million which were offset by $355.3 million of loan repayments and sales, including the $12.8 million previously mentioned. The amount of loan repayments and sales during 2007 decreased from the higher level of repayments and sales totaling $449.1 million experienced during 2006.
Securities available-for-sale were $224.6 million at December 31, 2007 compared to $298.9 million at December 31, 2006. The decrease in securities was primarily due to using proceeds received from sales and maturities to repay $72.0 million of maturing FHLB borrowings. During the 4th quarter, the Company continued to reposition its securities portfolio to improve interest-rate risk, take advantage of market imbalances and reinvest in higher yielding securities.
Deposits totaled $863.3 million at December 31, 2007 compared to $907.1 million at December 31, 2006. The Company’s non-interest bearing core deposits increased $3.8 million from December 31, 2006 to $62.3 million as a result of the Company’s focus on increasing business deposits. This increase was more than offset by a decrease in money market accounts totaling $10.7 million, a decrease in savings deposits totaling $21.4 million and a decrease in certificates of deposit totaling $22.0 million due to the managed run-off of single-service high-rate promotional certificates. The Company remains disciplined in its deposit pricing while focusing on deepening customer relationships.
The Company’s borrowed money decreased to $135.5 million at December 31, 2007 from $202.3 million at December 31, 2006. The Company’s borrowed money consisted of the following as of the dates indicated:
CFS Bancorp, Inc. - Page 6 of 11
| | | December 31, 2007 | | | December 31, 2006 | |
| | | (Dollars in thousands) | |
Short-term variable-rate borrowings and repurchase agreements | | $ | 24,014 | | | $ | 23,117 | |
| Gross FHLB borrowings | | | 113,072 | | | | 185,325 | |
| Unamortized deferred premium | | | (1,627 | ) | | | (6,167 | ) |
| Total borrowed money | | $ | 135,459 | | | $ | 202,275 | |
Stockholders’ equity at December 31, 2007 was $130.4 million compared to $131.8 million at December 31, 2006. The decrease during 2007 was primarily due to:
| · | repurchases of shares of the Company’s common stock during 2007 totaling $9.8 million; and |
| · | cash dividends declared during 2007 totaling $5.1 million. |
The following increases in stockholders’ equity during 2007 partially offset the aforementioned decreases:
| · | net income of $7.5 million; |
| · | proceeds from stock option exercises totaling $2.8 million; and |
| · | an increase in accumulated other comprehensive income of $2.1 million. |
During the fourth quarter of 2007, the Company repurchased 130,465 shares of its common stock at an average price of $14.67 per share pursuant to the repurchase plan approved in February 2007. At December 31, 2007, the Company had 126,725 shares remaining to be repurchased under this plan. Since its initial public offering, the Company has repurchased an aggregate of 13,846,047 shares of its common stock at an average price of $12.20 per share.
The regulatory capital ratios of the Bank continued to exceed all regulatory requirements. At December 31, 2007, the Bank remained “well-capitalized” under the Office of Thrift Supervision’s regulatory capital guidelines.
CFS Bancorp, Inc. is the parent of Citizens Financial Bank, a $1.2 billion asset federal savings bank. Citizens Financial Bank is an independent bank that provides community banking services and currently operates 22 offices throughout adjoining markets in Chicago’s Southland and Northwest Indiana. The Company maintains a website at www.cfsbancorp.com.
# # #
This press release contains certain forward-looking statements and information relating to the Company that is based on the beliefs of management as well as assumptions made by and information currently available to management. These forward-looking statements include but are not limited to statements regarding cost control, earnings and efficiency ratio levels, loan and deposit growth, growth in commercial lenders, interest on loans, business and banking strategies, planned office locations, asset yields and cost of funds, net interest income, net interest margin, expected effect of amortization of deferred premium on the FHLB debt,and the impact of tax credits and permanent tax differences. In addition, the words “anticipate,” “believe,” “estimate,” “expect,” “indicate,” “intend,” “should,” and
CFS Bancorp, Inc. - Page 7 of 11
similar expressions, or the negative thereof, as they relate to the Company or the Company’s management, are intended to identify forward-looking statements. Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions. One or more of these risks may vary materially from those described herein as anticipated, believed, estimated, expected or intended. The Company does not intend to update these forward-looking statements.
# # #
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA FOLLOW
CFS Bancorp, Inc. - Page 8 of 11| CFS BANCORP, INC. | |
| Highlights (Unaudited) | |
| (Dollars in thousands, except per share data) | |
| | | | | | | | | | | | | | | | | |
| | | Three Months Ended | | Year Ended |
EARNINGS HIGHLIGHTS AND PERFORMANCE RATIOS (1) | | December 31, 2007 | | September 30, 2007 | | | December 31, 2006 | | December 31, 2007 | | December 31, 2006 |
| Net income | | | $ | 2,035 | | | $ | 1,896 | | | $ | 1,630 | | | $ | 7,525 | | | $ | 5,340 | |
| Basic earnings per share | | | | 0.20 | | | | 0.18 | | | | 0.15 | | | | 0.71 | | | | 0.48 | |
| Diluted earnings per share | | | | 0.19 | | | | 0.18 | | | | 0.15 | | | | 0.69 | | | | 0.47 | |
| Cash dividends declared per share | | | | 0.12 | | | | 0.12 | | | | 0.12 | | | | 0.48 | | | | 0.48 | |
| Return on average assets | | | | 0.69 | % | | | 0.64 | % | | | 0.49 | % | | | 0.62 | % | | | 0.42 | % |
| Return on average equity | | | | 6.18 | | | | 5.84 | | | | 4.91 | | | | 5.78 | | | | 3.96 | |
| Average yield on interest-earning assets | | | | 6.29 | | | | 6.41 | | | | 6.29 | | | | 6.39 | | | | 6.26 | |
| Average cost on interest-bearing liabilities | | | | 3.68 | | | | 3.80 | | | | 4.15 | | | | 3.82 | | | | 4.00 | |
| Interest rate spread | | | | 2.61 | | | | 2.61 | | | | 2.14 | | | | 2.57 | | | | 2.26 | |
| Net interest margin | | | | 3.06 | | | | 3.07 | | | | 2.58 | | | | 3.02 | | | | 2.73 | |
| Average equity to average assets (2) | | | | 11.14 | | | | 10.88 | | | | 9.96 | | | | 10.75 | | | | 10.54 | |
| Average interest-earning assets | | | | | | | | | | | | | | | | | | | | | |
| to average interest-bearing liabilities (2) | | | | 113.98 | | | | 113.87 | | | | 111.75 | | | | 113.27 | | | | 113.03 | |
| Non-interest expense to average assets | | | | 2.74 | | | | 2.69 | | | | 2.78 | | | | 2.76 | | | | 2.83 | |
| Efficiency ratio (3) | | | | 68.83 | | | | 70.44 | | | | 83.70 | | | | 73.34 | | | | 83.27 | |
| Market price per share of common stock | | | | | | | | | | | | | | | | | | | | | |
| for the period ended: | Closing | | $ | 14.69 | | | $ | 14.10 | | | $ | 14.65 | | | $ | 14.69 | | | $ | 14.65 | |
| | High | | | 14.89 | | | | 14.65 | | | | 14.90 | | | | 15.12 | | | | 15.04 | |
| | Low | | | 14.09 | | | | 13.93 | | | | 14.21 | | | | 13.93 | | | | 14.10 | |
| | | | | | | | | | | | | | | | | | | | | | |
STATEMENT OF CONDITION HIGHLIGHTS (at period end) | | | December 31, 2007 | | September 30, 2007 | | December 31, 2006 |
| Total assets | | | | | | | | | | | $ | 1,150,278 | | | $ | 1,169,300 | | | $ | 1,254,390 | |
| Loans receivable, net of unearned fees | | | | | | | | | | | | 793,136 | | | | 820,832 | | | | 802,383 | |
| Total deposits | | | | | | | | | | | | 863,272 | | | | 859,856 | | | | 907,095 | |
| Total stockholders' equity | | | | | | | | | | | | 130,414 | | | | 129,602 | | | | 131,806 | |
| Book value per common share | | | | | | | | | | | | 12.18 | | | | 12.05 | | | | 11.84 | |
| Non-performing loans | | | | | | | | | | | | 29,600 | | | | 32,684 | | | | 27,517 | |
| Non-performing assets | | | | | | | | | | | | 30,762 | | | | 33,824 | | | | 27,838 | |
| Allowance for losses on loans | | | | | | | | | | | | 8,026 | | | | 11,277 | | | | 11,184 | |
| Non-performing loans to total loans | | | | | | | | | | | | 3.73 | % | | | 3.98 | % | | | 3.43 | % |
| Non-performing assets to total assets | | | | | | | | | | | | 2.67 | | | | 2.89 | | | | 2.22 | |
| Allowance for losses on loans to non-performing loans | | | | | | | | 27.11 | | | | 34.50 | | | | 40.64 | |
| Allowance for losses on loans to total loans | | | | | | | | | | | 1.01 | | | | 1.37 | | | | 1.39 | |
| | | | | | | | | | | | | | | | | | | | | | |
| Employees (FTE) | | | | | | | | | | | | 303 | | | | 316 | | | | 360 | |
| Branches and offices | | | | | | | | | | | | 22 | | | | 22 | | | | 21 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended | | Year Ended |
| AVERAGE BALANCE DATA | | | December 31, 2007 | | September 30, 2007 | | | December 31, 2006 | | December 31, 2007 | | December 31, 2006 |
| Total assets | | | $ | 1,171,519 | | | $ | 1,184,548 | | | $ | 1,322,382 | | | $ | 1,210,327 | | | $ | 1,280,594 | |
| Loans receivable, net of unearned fees | | | | 808,982 | | | | 815,081 | | | | 825,762 | | | | 806,626 | | | | 854,268 | |
| Total interest-earning assets | | | | 1,087,772 | | | | 1,106,235 | | | | 1,244,914 | | | | 1,130,957 | | | | 1,206,161 | |
| Total liabilities | | | | 1,040,956 | | | | 1,055,680 | | | | 1,190,644 | | | | 1,080,229 | | | | 1,145,657 | |
| Total deposits | | | | 867,115 | | | | 871,276 | | | | 909,263 | | | | 884,259 | | | | 860,935 | |
| Interest-bearing deposits | | | | 800,200 | | | | 805,233 | | | | 849,424 | | | | 819,944 | | | | 799,585 | |
| Non-interest bearing deposits | | | | 66,915 | | | | 66,043 | | | | 59,839 | | | | 64,315 | | | | 61,350 | |
| Total borrowings | | | | 154,115 | | | | 166,292 | | | | 264,575 | | | | 178,495 | | | | 267,564 | |
| Total interest-bearing liabilities | | | | 954,315 | | | | 971,525 | | | | 1,113,999 | | | | 998,439 | | | | 1,067,149 | |
| Stockholders' equity | | | | 130,563 | | | | 128,868 | | | | 131,738 | | | | 130,098 | | | | 134,937 | |
(1) Ratios are annualized where appropriate. | | | | | | | | | | | | | | | | | | | | |
| (2) Ratios calculated on average balances for the periods presented. | | | | | | | | | | | | | | | | | |
| (3) See calculations in the last table of this press release. | | | | | | | | | | | | | | | | | |
CFS Bancorp, Inc. - Page 9 of 11| CFS BANCORP, INC. | |
| Consolidated Statements of Income (Unaudited) | |
| (Dollars in thousands, except per share data) | |
| | | | | | | | | | | | | | | | |
| | | For the Three Months Ended | | | Year Ended | |
| | | December 31, 2007 | | | September 30, 2007 | | | December 31, 2006 | | | December 31, 2007 | | | December 31, 2006 | |
| Interest income: | | | | | | | | | | | | | | | |
| Loans | | $ | 13,860 | | | $ | 14,362 | | | $ | 14,825 | | | $ | 56,678 | | | $ | 59,852 | |
| Securities | | | 2,650 | | | | 3,036 | | | | 3,590 | | | | 12,684 | | | | 12,713 | |
| Other | | | 730 | | | | 468 | | | | 1,308 | | | | 2,879 | | | | 2,982 | |
| Total interest income | | | 17,240 | | | | 17,866 | | | | 19,723 | | | | 72,241 | | | | 75,547 | |
| | | | | | | | | | | | | | | | | | | | | |
| Interest expense: | | | | | | | | | | | | | | | | | | | | |
| Deposits | | | 6,393 | | | | 6,516 | | | | 6,854 | | | | 26,222 | | | | 22,163 | |
| Borrowed money | | | 2,452 | | | | 2,800 | | | | 4,787 | | | | 11,912 | | | | 20,481 | |
| Total interest expense | | | 8,845 | | | | 9,316 | | | | 11,641 | | | | 38,134 | | | | 42,644 | |
| Net interest income | | | 8,395 | | | | 8,550 | | | | 8,082 | | | | 34,107 | | | | 32,903 | |
| Provision for losses on loans | | | 1,131 | | | | 884 | | | | 338 | | | | 2,328 | | | | 1,309 | |
| Net interest income after provision for losses on loans | | | 7,264 | | | | 7,666 | | | | 7,744 | | | | 31,779 | | | | 31,594 | |
| | | | | | | | | | | | | | | | | | | | | |
| Non-interest income: | | | | | | | | | | | | | | | | | | | | |
| Service charges and other fees | | | 1,770 | | | | 1,786 | | | | 1,697 | | | | 6,795 | | | | 6,739 | |
| Card-based fees | | | 385 | | | | 382 | | | | 333 | | | | 1,489 | | | | 1,313 | |
| Commission income | | | 40 | | | | 40 | | | | 48 | | | | 147 | | | | 197 | |
| Security gains (losses), net | | | 527 | | | | (1 | ) | | | - | | | | 536 | | | | 750 | |
| Other asset gains (losses), net | | | 9 | | | | 3 | | | | 297 | | | | 22 | | | | (994 | ) |
| Income from bank-owned life insurance | | | 422 | | | | 404 | | | | 403 | | | | 1,634 | | | | 1,592 | |
| Other income | | | 218 | | | | 228 | | | | 229 | | | | 892 | | | | 945 | |
| Total non-interest income | | | 3,371 | | | | 2,842 | | | | 3,007 | | | | 11,515 | | | | 10,542 | |
| | | | | | | | | | | | | | | | | | | | | |
| Non-interest expense: | | | | | | | | | | | | | | | | | | | | |
| Compensation and employee benefits | | | 4,401 | | | | 4,343 | | | | 5,544 | | | | 18,406 | | | | 20,790 | |
| Net occupancy expense | | | 634 | | | | 766 | | | | 610 | | | | 2,847 | | | | 2,533 | |
| Data processing | | | 500 | | | | 540 | | | | 494 | | | | 2,169 | | | | 2,404 | |
| Furniture and equipment expense | | | 584 | | | | 557 | | | | 497 | | | | 2,241 | | | | 2,013 | |
| Professional fees | | | 340 | | | | 240 | | | | 431 | | | | 1,540 | | | | 1,514 | |
| Marketing | | | 227 | | | | 214 | | | | 301 | | | | 842 | | | | 1,332 | |
| Other general and administrative expenses | | | 1,412 | | | | 1,365 | | | | 1,405 | | | | 5,414 | | | | 5,592 | |
| Total non-interest expense | | | 8,098 | | | | 8,025 | | | | 9,282 | | | | 33,459 | | | | 36,178 | |
| | | | | | | | | | | | | | | | | | | | | |
| Income before income taxes | | | 2,537 | | | | 2,483 | | | | 1,469 | | | | 9,835 | | | | 5,958 | |
| Income tax expense | | | 502 | | | | 587 | | | | (161 | ) | | | 2,310 | | | | 618 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net income | | $ | 2,035 | | | $ | 1,896 | | | $ | 1,630 | | | $ | 7,525 | | | $ | 5,340 | |
| | | | | | | | | | | | | | | | | | | | | |
| Per share data: | | | | | | | | | | | | | | | | | | | | |
| Basic earnings per share | | $ | 0.20 | | | $ | 0.18 | | | $ | 0.15 | | | $ | 0.71 | | | $ | 0.48 | |
| Diluted earnings per share | | $ | 0.19 | | | $ | 0.18 | | | $ | 0.15 | | | $ | 0.69 | | | $ | 0.47 | |
| Cash dividends declared per share | | $ | 0.12 | | | $ | 0.12 | | | $ | 0.12 | | | $ | 0.48 | | | $ | 0.48 | |
| | | | | | | | | | | | | | | | | | | | | |
| Weighted-average shares outstanding | | | 10,417,351 | | | | 10,460,716 | | | | 10,782,843 | | | | 10,547,853 | | | | 11,045,857 | |
| Weighted-average diluted shares outstanding | | | 10,694,202 | | | | 10,741,093 | | | | 11,103,826 | | | | 10,842,782 | | | | 11,393,863 | |
CFS Bancorp, Inc. - Page 10 of 11| CFS BANCORP, INC. | |
| Consolidated Statements of Condition (Unaudited) | |
| (Dollars in thousands) | |
| | | | | | | | | | |
| | | December 31, 2007 | | | September 30, 2007 | | | December 31, 2006 | |
| | | | | | | | | | |
| ASSETS | | | | | | | | | |
| Cash and amounts due from depository institutions | | $ | 25,825 | | | $ | 15,934 | | | $ | 33,194 | |
| Interest-bearing deposits | | | 9,744 | | | | 9,772 | | | | 20,607 | |
| Federal funds sold | | | 3,340 | | | | 2,942 | | | | 13,366 | |
| Cash and cash equivalents | | | 38,909 | | | | 28,648 | | | | 67,167 | |
| | | | | | | | | | | | | |
| Securities available-for-sale, at fair value | | | 224,594 | | | | 232,580 | | | | 298,925 | |
| Securities held-to-maturity, at cost | | | 3,940 | | | | - | | | | - | |
| Investment in Federal Home Loan Bank stock, at cost | | | 23,944 | | | | 23,944 | | | | 23,944 | |
| | | | | | | | | | | | | |
| Loans receivable, net of unearned fees | | | 793,136 | | | | 820,832 | | | | 802,383 | |
| Allowance for losses on loans | | | (8,026 | ) | | | (11,277 | ) | | | (11,184 | ) |
| Net loans | | | 785,110 | | | | 809,555 | | | | 791,199 | |
| | | | | | | | | | | | | |
| Interest receivable | | | 5,505 | | | | 6,654 | | | | 7,523 | |
| Other real estate owned | | | 1,162 | | | | 1,140 | | | | 321 | |
| Office properties and equipment | | | 19,326 | | | | 19,177 | | | | 17,797 | |
| Investment in bank-owned life insurance | | | 36,475 | | | | 36,052 | | | | 35,876 | |
| Prepaid expenses and other assets | | | 11,313 | | | | 11,550 | | | | 11,638 | |
| Total assets | | $ | 1,150,278 | | | $ | 1,169,300 | | | $ | 1,254,390 | |
| | | | | | | | | | | | | |
| LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | | | | | | | | |
| Deposits | | $ | 863,272 | | | $ | 859,856 | | | $ | 907,095 | |
| Borrowed money | | | 135,459 | | | | 161,208 | | | | 202,275 | |
| Advance payments by borrowers for taxes and insurance | | | 3,341 | | | | 7,639 | | | | 4,194 | |
| Other liabilities | | | 17,792 | | | | 10,995 | | | | 9,020 | |
| Total liabilities | | | 1,019,864 | | | | 1,039,698 | | | | 1,122,584 | |
| | | | | | | | | | | | | |
| Stockholders' Equity: | | | | | | | | | | | | |
| Preferred stock, $0.01 par value; 15,000,000 shares authorized | | | – | | | | – | | | | – | |
| Common stock, $0.01 par value; 85,000,000 shares authorized; | | | | | | | | | | | | |
| 23,423,306 shares issued; 10,705,510, 10,756,189, and | | | | | | | | | | | | |
| 11,134,331 shares outstanding | | | 234 | | | | 234 | | | | 234 | |
| Additional paid-in capital | | | 191,162 | | | | 191,086 | | | | 190,825 | |
| Retained earnings | | | 97,029 | | | | 96,250 | | | | 94,344 | |
| Treasury stock, at cost; 12,583,856, 12,542,341 and | | | | | | | | | | | | |
| 12,164,754 shares | | | (154,895 | ) | | | (154,074 | ) | | | (148,108 | ) |
| Treasury stock held in Rabbi Trust, at cost; 133,940, 124,776 and | | | | | | | | | | | | |
| 124,221 shares | | | (1,766 | ) | | | (1,636 | ) | | | (1,627 | ) |
| Unallocated common stock held by Employee Stock Ownership Plan | | | (3,126 | ) | | | (3,204 | ) | | | (3,564 | ) |
| Accumulated other comprehensive income (loss), net of tax | | | 1,776 | | | | 946 | | | | (298 | ) |
| Total stockholders' equity | | | 130,414 | | | | 129,602 | | | | 131,806 | |
| | | | | | | | | | | | | |
| Total liabilities and stockholders' equity | | $ | 1,150,278 | | | $ | 1,169,300 | | | $ | 1,254,390 | |
CFS Bancorp, Inc. - Page 11 of 11
| CFS BANCORP, INC. | |
| Efficieny Ratio Calculations (Unaudited) | |
| (Dollars in thousands) | |
| | | | |
| | | Three Months Ended | |
| | | | December 31, 2007 | | | | September 30, 2007 | | | | December 31, 2006 | |
| | | | | | | | | | |
| Efficiency Ratio: | | | | | | | | | |
| Non-interest expense | | $ | 8,098 | | | $ | 8,025 | | | $ | 9,282 | |
| | | | | | | | | | | | | |
| Net interest income plus non-interest income | | $ | 11,766 | | | $ | 11,392 | | | $ | 11,089 | |
| | | | | | | | | | | | | |
| Efficiency ratio | | | 68.83 | % | | | 70.44 | % | | | 83.70 | % |
| | | | | | | | | | | | | |
| Core Efficiency Ratio: | | | | | | | | | | | | |
| Non-interest expense | | $ | 8,098 | | | $ | 8,025 | | | $ | 9,282 | |
| | | | | | | | | | | | | |
| Net interest income plus non-interest income | | $ | 11,766 | | | $ | 11,392 | | | $ | 11,089 | |
| | | | | | | | | | | | | |
| Adjustments: | | | | | | | | | | | | |
| Net realized (gains) losses on sales of securities available-for-sale | | | (527 | ) | | | 1 | | | | - | |
| Net realized gains on sales of assets | | | (9 | ) | | | (3 | ) | | | (297 | ) |
| Amortization of deferred premium on the early | | | | | | | | | | | | |
| extinguishment of debt | | | 851 | | | | 1,062 | | | | 2,036 | |
| Net interest income plus non-interest income - as adjusted | | $ | 12,081 | | | $ | 12,452 | | | $ | 12,828 | |
| | | | | | | | | | | | | |
| Core efficiency ratio | | | 67.03 | % | | | 64.45 | % | | | 72.36 | % |
| | | | | | | | | | | | | |
| | | | | | | Year Ended | |
| | | | | | | | December 31, 2007 | | | | December 31, 2006 | |
| | | | | | | | | | | | | |
| Efficiency Ratio: | | | | | | | | | | | | |
| Non-interest expense | | | | | | $ | 33,459 | | | $ | 36,178 | |
| | | | | | | | | | | | | |
| Net interest income plus non-interest income | | | | | | $ | 45,622 | | | $ | 43,445 | |
| | | | | | | | | | | | | |
| Efficiency ratio | | | | | | | 73.34 | % | | | 83.27 | % |
| | | | | | | | | | | | | |
| Core Efficiency Ratio: | | | | | | | | | | | | |
| Non-interest expense | | | | | | $ | 33,459 | | | $ | 36,178 | |
| | | | | | | | | | | | | |
| Net interest income plus non-interest income | | | | | | $ | 45,622 | | | $ | 43,445 | |
| | | | | | | | | | | | | |
| Adjustments: | | | | | | | | | | | | |
| Net realized gains on sales of securities available-for-sale | | | | | | | (536 | ) | | | (750 | ) |
| Net realized (gains) losses on sales of assets | | | | | | | (22 | ) | | | 994 | |
| Amortization of deferred premium on the early | | | | | | | | | | | | |
| extinguishment of debt | | | | | | | 4,540 | | | | 9,624 | |
| Net interest income plus non-interest income - as adjusted | | | | | | $ | 49,604 | | | $ | 53,313 | |
| | | | | | | | | | | | | |
| Core efficiency ratio | | | | | | | 67.45 | % | | | 67.86 | % |
