UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 11-K
(Mark One):
| ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2008
OR
| TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ______________ to ___________
Commission file number: 0-24611
| A. | Full title of the plan and address of the plan, if different from that of the issuer named below: |
Citizens Financial Bank
401(k) Retirement Plan
| B. | Name of issuer of the securities held pursuant to the plan and the address of its principal executive office: |
CFS Bancorp, Inc.
707 Ridge Road
Munster, Indiana 46321
Citizens Financial Bank
401(k) Retirement Plan
EIN 35-0227439 PN 002
Accountants’ Report and Financial Statements
December 31, 2008 and 2007
401(k) Retirement Plan |
December 31, 2008 and 2007 |
Contents
| Financial Statements |
| Supplemental Schedule |
Plan Administrator
Citizens Financial Bank
401(k) Retirement Plan
Munster, Indiana
We have audited the accompanying statements of net assets available for benefits of Citizens Financial Bank 401(k) Retirement Plan (the “Plan”) (formerly Citizens Financial Services, FSB Employees’ Savings & Profit Sharing Plan and Trust) as of December 31, 2008 and 2007, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of Citizens Financial Bank 401(k) Retirement Plan as of December 31, 2008 and 2007, and the changes in its net assets available for benefits for the years then ended in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 4, in 2008 the Plan changed its method of accounting for fair value measurements in accordance with Statement of Financial Accounting Standards No. 157.
Our audit of the Plan’s financial statements as of and for the year ended December 31, 2008, was made for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule is presented for the purpose of additional analysis and is not a required part of the basic financial statements, but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.
/ s / BKD, LLP
Merrillville, Indiana
June 24, 2009
Federal Employer Identification Number: 44-0160260
401(k) Retirement Plan | ||||||||
Statements of Net Assets Available for Benefits December 31, 2008 and 2007 | ||||||||
| 2008 | 2007 | |||||||
| Assets | ||||||||
Investments, at fair value: | ||||||||
| CFS Bancorp, Inc. common stock | $ | 687,831 | $ | 2,767,560 | ||||
| Registered investment funds | 7,518,430 | 9,498,439 | ||||||
| Participant loans | 159,739 | 257,613 | ||||||
| Total investments | 8,366,000 | 12,523,612 | ||||||
| Receivables | ||||||||
| Employee contributions receivable | 44,411 | 32,069 | ||||||
| Employer contributions receivable | 17,654 | 255,239 | ||||||
| Dividends | 7,055 | 22,685 | ||||||
| Total receivables | 69,120 | 309,993 | ||||||
| Net Assets Available for Benefits | $ | 8,435,120 | $ | 12,833,605 | ||||
401(k) Retirement Plan | ||||||||
Statements of Changes in Net Assets Available for Benefits Years Ended December 31, 2008 and 2007 | ||||||||
| 2008 | 2007 | |||||||
| Investment income (loss) | ||||||||
| Net (depreciation) appreciation in fair value of investments | $ | (4,736,527 | ) | $ | 249,541 | |||
| Interest and dividend income | 311,598 | 334,798 | ||||||
| Other income | 5,084 | ― | ||||||
| Net investment income (loss) | (4,419,845 | ) | 584,339 | |||||
| Contributions | ||||||||
| Employee | 911,088 | 876,700 | ||||||
| Employer | 388,447 | 255,239 | ||||||
| Rollovers | 127,380 | 72,963 | ||||||
| Transfer from ESOP (Note 1) | 172,545 | 652,322 | ||||||
| 1,599,460 | 1,857,224 | |||||||
| Total additions | (2,820,385 | ) | 2,441,563 | |||||
| Deductions | ||||||||
| Benefits paid to participants | 1,573,050 | 3,034,940 | ||||||
| Administrative expenses | 5,050 | 83,887 | ||||||
| Total deductions | 1,578,100 | 3,118,827 | ||||||
| Net Decrease in Assets Available for Benefits | (4,398,485 | ) | (677,264 | ) | ||||
| Net Assets Available for Benefits, Beginning of Year | 12,833,605 | 13,510,869 | ||||||
| Net Assets Available for Benefits, End of Year | $ | 8,435,120 | $ | 12,833,605 | ||||
401(k) Retirement Plan
Notes to Financial Statements
December 31, 2008 and 2007
| Note 1: | Description of Plan |
The following description of Citizens Financial Bank 401(k) Retirement Plan (the “Plan”) (formerly Citizens Financial Services, FSB Employees’ Savings & Profit Sharing Plan and Trust) provides only general information. Participants should refer to the Plan Document and Summary Plan Description for a more complete description of the Plan’s provisions. These documents are available from the Plan administrator.
General
The Plan, adopted by Citizens Financial Bank (the “Bank”) on April 30, 1998, and effective on May 1, 1998, is a single employer defined-contribution plan. Effective March 1, 2000, the Suburban Federal Savings 401(k) Plan was merged into the Plan. Eligible participants of Suburban Federal Savings, FSB became participants in the Plan and were granted credit for certain prior service under the terms of the Plan for purposes of eligibility and vesting. The Plan allows all employees of the Bank and its subsidiaries to participate after meeting certain age and service requirements. To be eligible to participate in the Plan, an employee must have attained the age of 21 and completed 250 hours of service during a consecutive three-month period. A participant is eligible to receive profit sharing contributions after completing one year of service.
Effective January 1, 2007, the Bank amended the Plan to allow the Employer Common Stock Fund as an investment selection. Both employee and employer contributions along with investment fund transfers may be made to the Employer Common Stock Fund. The Bank also amended the Plan to make a designated supplemental contribution as a matching contribution of 50% of each participant’s pre-tax deferral on the first 6% of each participant’s compensation to the Plan rather than to the CFS Bancorp, Inc. Employee Stock Ownership Plan (“ESOP”). To be eligible for this matching contribution, an employee must be a participant in the Plan, be actively employed on the last day of the plan year (December 31), and have satisfied twelve consecutive months of service. During the first quarter of 2007, the prior matching contributions made in the ESOP were transferred into an “Employer Matching Contribution Account” under the Plan in order for the ESOP to remain a “stand alone” plan. The matching contribution transferred totaled $652,322.
Participants in the Bank’s ESOP who have attained the age of 55 and have completed ten years of participation in the ESOP may elect to diversify part of their CFS Bancorp, Inc. (“Company”) stock held in the ESOP. An eligible participant may elect at the beginning of each of six plan years to diversify a portion of the stock held in their ESOP. The first five years allow for diversification of 25% of the total number of shares of Company stock that have been allocated to a participant less the number of shares of Company stock previously diversified under this procedure. For the sixth year, a participant may elect to diversify up to a total of 50% of the number of shares of Company stock allocated in their ESOP account less the number of shares of Company stock previously diversified. Diversified portions are transferred to the Plan if the participant is still employed by the Company or one of its participating subsidiaries. If the participant has terminated employment, the diversified amount may be directly distributed or
rolled over to another eligible retirement plan. The diversification amount totaled $172,545 for the year ended December 31, 2008.
The Plan is subject to certain provisions of the Employee Retirement Income Security Act of 1974 (“ERISA”) and is intended to qualify as a salary reduction plan under Section 401(k) of the Internal Revenue Code, as amended by the Tax Reform Act of 1986 (the “Code”). During November 2007, The Vanguard Fiduciary Trust Company began serving as the Plan trustee. Prior to this change, The Bank of New York served as Plan trustee.
Effective January 1, 2008, the Plan adopted The Vanguard Fiduciary Trust Company Prototype Basic Plan Document and was amended to a Safe Harbor plan. The amendment allows for automatic enrollment with an initial deferral of 3%, Roth elective deferrals, automatic deferral escalation of 1% annually up to 10%, and automatic investment in a default fund which is currently set to an age appropriate target retirement fund. In addition, the Bank’s matching contribution changed to a Safe Harbor formula. In conjunction with the adoption of the Safe Harbor plan, on January 1, 2008, the Plan’s name changed to Citizens Financial Bank 401(k) Retirement Plan from Citizens Financial Services, FSB Employees’ Savings & Profit Sharing Plan and Trust.
Contributions
The Bank contributes and allocates to each participant’s account the amount withheld from each participant’s compensation (employee contributions) pursuant to his or her elective deferral agreement. Effective January 1, 2008, participants are eligible to defer up to 100% (or up to the current IRS limit for contributions) of their eligible compensation and the Bank will match 100% of the first 1% of employee deferrals and 50% of the next 5% of deferrals. Prior to 2008, participants could defer 1% to 12% of their eligible compensation and the Bank contributed an annual supplemental matching contribution at the lesser of 50% of pre-tax deferral or 3% of eligible compensation. Upon enrollment, participants may direct their contributions, and related matching contributions, in any of the Plan’s investment options.
Participant Accounts
Each participant’s account is credited with the participant’s contributions, the Bank’s matching contributions, and an allocation of Plan earnings/losses. Plan earnings/losses from each investment fund option are allocated to participants based on their proportionate share of total assets in that investment fund option.
Vesting
Participants immediately vest in their employee contributions and actual earnings thereon. Effective January 1, 2008, the Bank’s matching and discretionary contributions will vest after two years of employment. Bank contributions made prior to 2008 vested immediately.
Payment of Benefits
Payment of benefits to a participant who terminates employment, or to a beneficiary, may be made in a lump sum or annual installments over a specified period. A participant may elect to defer distribution of his or her account if the dollar value of the account is over a specific threshold until attaining age 70½.
Participant Loans
Under the Plan, participants may borrow up to one-half of their account balance in any amount between $1,000 and $50,000. The interest rate for the loan term will be established as of the loan date and is currently the Prime Rate plus 1%. The repayment period is between one and fifteen years for loans used exclusively for the purchase of a primary residence or one and five years for all other loans, at the participant’s option. Repayments are made through payroll deductions. When a loan is made, the amount borrowed is transferred from the participant’s deposit account to the participant’s loan account. An origination fee plus an annual administrative fee is deducted from the participant’s account. Subsequent annual administrative fees will be deducted from the participant’s account on or about the anniversary of the loan origination. Loan repayments, including interest, are immediately invested in the participant’s deposit account.
| Note 2: | Summary of Significant Accounting Policies |
Basis of Accounting
The accompanying financial statements are prepared on the accrual method of accounting.
Valuation of Investments and Income Recognition
The Plan’s investments are stated at fair value. Investments in mutual funds are credited with actual earnings on the underlying investments and are valued at the net asset value of shares as determined by quoted market prices. The common stock is valued at the closing price reported on the active market on which it is traded. Participant loans are valued at cost, which approximates fair value.
Purchases and sales of investments are recorded on a trade-date basis. Interest income is recorded on the accrual basis. Dividends are recorded on the declaration date.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Plan Administrator to make significant estimates and assumptions that affect the reported amounts of net assets available for benefits and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of additions to and deductions from net assets available for benefits during the reporting period. Actual results could differ from those estimates.
Plan Tax Status
The Plan operates under a non-standardized adoption agreement in connection with a prototype retirement plan and trust/custodial document sponsored by Vanguard Fiduciary Trust Company. This prototype plan document has been filed with the appropriate agency. The Plan has not obtained or requested a determination letter since receiving one on December 2, 2003 for the Plan administered through the Bank of New York. However, the Plan Administrator believes that the Plan and related trust are currently designed and being operated in compliance with the applicable requirements of the Internal Revenue Code.
Payment of Benefits
Benefits are recorded when paid.
| Note 3: | Investments |
In conjunction with the Bank’s conversion from a mutual to a stock form of ownership, the participants in the Plan utilized existing funds to purchase common stock of CFS Bancorp, Inc., the Bank’s holding company. At the date of conversion, the Plan purchased 307,232 shares of stock at $10.00 per share for participants choosing to purchase stock in the Company.
At December 31, 2008 and 2007, the Plan was the beneficial owner of 176,367 and 189,041 shares, respectively, of Company common stock. The fair value of this stock at December 31, 2008 and 2007 was $3.90 and $14.64 per share, respectively.
During 2008 and 2007, the Plan’s investments (including investments purchased, sold as well as held during the year) (depreciated) appreciated in fair value as determined by quoted market prices as follows:
| 2008 | 2007 | |||||||
| (Depreciation) Appreciation at Fair Value as Determined by Quoted Market Price | ||||||||
| CFS Bancorp, Inc. common stock | $ | (1,866,817 | ) | $ | 7,954 | |||
| Registered investment funds | (2,869,711 | ) | 241,587 | |||||
| $ | (4,736,528 | ) | $ | 249,541 | ||||
The fair value of individual investments that represent 5% or more of the Plan’s assets is as follows:
| 2008 | 2007 | |||||||
| Investments at Fair Value as Determined by Quoted Market Price | ||||||||
| Vanguard Target Retirement 2020 Fund | $ | 1,451,331 | $ | 1,876,824 | ||||
| Vanguard Target Retirement 2025 Fund | 1,143,298 | 1,507,638 | ||||||
| Vanguard Target Retirement 2010 Fund | 833,439 | 1,152,515 | ||||||
| Vanguard Target Retirement 2015 Fund | 771,741 | 1,198,413 | ||||||
| Vanguard Target Retirement 2005 Fund | 757,384 | 922,597 | ||||||
| CFS Bancorp, Inc. common stock | 687,831 | 2,767,560 | ||||||
| Vanguard Target Retirement 2030 Fund | 676,988 | 1,176,225 | ||||||
| Vanguard Target Retirement 2035 Fund | 654,662 | 979,560 | ||||||
| Note 4: | Fair Value Measurements |
Effective January 1, 2008, the Plan adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements (“FAS 157”). FAS No. 157 defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS No. 157 has been applied prospectively as of the beginning of the year.
FAS No. 157 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FAS No. 157 also establishes a fair value hierarchy which requires a plan to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets for identical assets or liabilities
Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities
The following is a description of the valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying statements of net assets available for benefits, as well as the general classification of such assets pursuant to the valuation hierarchy.
Investments
Where quoted market prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. Level 1 securities include common stock and registered
investment funds (mutual funds). If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. The Plan does not hold any Level 2 securities. In certain cases where Level 1 and Level 2 inputs are not available, securities are classified within Level 3 of the hierarchy, which includes participant loans.
The following table presents the fair value measurements of assets recognized in the accompanying statements of net assets available for benefits measured at fair value on a recurring basis and the level within the FAS No. 157 fair value hierarchy in which the fair value measurements fall at December 31, 2008:
| Fair Value Measurements Using | ||||||||||||||||
| Quoted Prices | ||||||||||||||||
| in Active | Significant | |||||||||||||||
| Markets for | Other | Significant | ||||||||||||||
| Identical | Observable | Unobservable | ||||||||||||||
| Fair | Assets | Inputs | Inputs | |||||||||||||
| Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
| Registered investment funds | $ | 7,518,430 | $ | 7,518,430 | $ | ― | $ | ― | ||||||||
| Common stock | 687,831 | 687,831 | ― | ― | ||||||||||||
| Participant loans | 159,739 | ― | ― | 159,739 | ||||||||||||
| Total assets at fair value | $ | 8,366,000 | $ | 8,206,261 | $ | ― | $ | 159,739 | ||||||||
The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying statements of net assets available for benefits using significant unobservable (Level 3) inputs:
Participant loans | ||||
| Balance, January 1, 2008 | $ | 257,613 | ||
| Loan proceeds less repayments, etc. | (97,874 | ) | ||
| Balance, December 31, 2008 | $ | 159,739 | ||
| Note 5: | Plan Termination |
Although it has not expressed any intent to do so, the Bank has the right under the Plan to discontinue its contributions at any time and to terminate the Plan, subject to the provisions of ERISA.
| Note 6: | Party-In-Interest Transactions |
The Plan invests in shares of mutual funds managed by an affiliate of The Vanguard Fiduciary Trust Company which began serving as trustee of the Plan in November 2007. Previously, The Bank of New York managed the investment funds and served as trustee of the Plan. Fees paid by the Plan for investment management services totaled $4,394 and $83,887, respectively, for the years ended December 31, 2008 and 2007.
The Plan invests in shares of CFS Bancorp, Inc. stock, which is the holding company of Citizens Financial Bank.
The Plan incurs expenses related to general administration and record keeping. The Plan sponsor pays these expenses and certain accounting and auditing fees relating to the Plan.
| Note 7: | Differences Between Financial Statements and Form 5500 Information |
The following is a reconciliation of net assets available for benefits per the financial statements to the Annual Return/Report of Employee Benefit Plan (Form 5500) at December 31, 2008 and 2007:
| 2008 | 2007 | |||||||
| Net assets available for benefits per the financial statements | $ | 8,435,120 | $ | 12,833,605 | ||||
| Less: Employee contributions receivable | (44,411 | ) | (32,037 | ) | ||||
| Less: Employer contributions receivable | (17,654 | ) | ― | |||||
| Less: Dividends receivable | (7,055 | ) | (22,685 | ) | ||||
| Net assets available for benefits per Form 5500 | $ | 8,366,000 | $ | 12,778,883 | ||||
| Note 8: | Risks and Uncertainties |
The Plan invests in various investment securities which carry interest rate, market and credit risks that can result in changes in the investments’ fair value. The financial statements have been prepared using the values and information currently available to the Plan. Due to the level of risks associated with certain investment securities and given the current economic environment, it is at least reasonably possible that changes in the values of investment securities can occur in the near term and that these changes could materially affect the participants’ account balances and the amounts reported in the statements of net assets available for benefits.
Supplemental Schedule
401(k) Retirement Plan EIN 35-0227439 PN 002 Schedule H, Line 4i - Schedule of Assets (Held at End of Year) December 31, 2008 | |||||
(a) (b) Identity of Issuer, Borrower, Lessor, or Similar Party | (c) Description of Investment Including Maturity Date, Rate of Interest, Collateral, Par or Maturity Value | (e) Current Value | |||
| Employer Common Stock | |||||
| *CFS Bancorp, Inc. | 176,367 Shares | $ | 687,831 | ||
| Registered Investment Funds | |||||
| *Vanguard Target Retirement 2020 Fund | 87,588 Units | 1,451,331 | |||
| *Vanguard Target Retirement 2025 Fund | 123,333 Units | 1,143,298 | |||
| *Vanguard Target Retirement 2010 Fund | 47,328 Units | 833,439 | |||
| *Vanguard Target Retirement 2015 Fund | 80,811 Units | 771,741 | |||
| *Vanguard Target Retirement 2005 Fund | 78,161 Units | 757,384 | |||
| *Vanguard Target Retirement 2030 Fund | 43,564 Units | 676,988 | |||
| *Vanguard Target Retirement 2035 Fund | 70,774 Units | 654,662 | |||
| *Vanguard Prime Money Market Fund | 368,780 Units | 368,780 | |||
| *Vanguard Target Retirement 2040 Fund | 17,767 Units | 268,821 | |||
| *Vanguard Target Retirement 2045 Fund | 15,733 Units | 150,561 | |||
| *Vanguard Total Bond Market Index Fund | 14,567 Shares | 148,294 | |||
| *Vanguard Total International Stock Index Fund | 5,344 Units | 57,666 | |||
| *Vanguard Growth Index Fund | 2,554 Shares | 51,828 | |||
| *Vanguard Balanced Index Fund | 2,453 Shares | 40,697 | |||
| *Vanguard 500 Index Fund | 365 Shares | 30,314 | |||
| *Vanguard Target Retirement 2050 Fund | 1,794 Units | 27,232 | |||
| *Vanguard Target Retirement Income | 1,968 Units | 18,733 | |||
| *Vanguard Small-Cap Growth Index Fund | 1,324 Units | 15,756 | |||
| *Vanguard Value Index Fund | 878 Shares | 14,118 | |||
| *Vanguard Mid-Cap Growth Fund | 1,226 Units | 13,616 | |||
| *Vanguard Mid-Cap Value Index Fund | 606 Shares | 7,828 | |||
| *Vanguard Small-Cap Index Fund | 229 Shares | 4,675 | |||
| *Vanguard High-Yield Corporate Fund | 1,024 Shares | 4,375 | |||
| *Vanguard Mid-Cap Index Fund | 367 Shares | 4,328 | |||
| *Vanguard Small-Cap Value Index Fund | 192 Units | 1,965 | |||
| 7,518,430 | |||||
*Participant Loans | 5.00% to 9.25% | 159,739 | |||
| $ | 8,366,000 | ||||
*Party in interest
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of 1934, the administration for the Plan has duly caused this annual report to be signed by the undersigned hereunto duly authorized.
| CITIZENS FINANCIAL BANK | |
| 401(k) RETIREMENT FUND | |
| June 25, 2009 | By: /s/ Daryl D. Pomranke |
| Daryl D. Pomranke | |
| Plan Administrator |
INDEX TO EXHIBITS
| Number | Description | |
| 23.1 | Consent of Independent Registered Public Accounting Firm |