Mail Stop 4561
August 11, 2005
By U.S. Mail and facsimile to (219) 836 0265
Charles V. Cole
Executive Vice President and Chief Financial Officer
CFS Bancorp, Inc.
707 Ridge Road
Munster, IN 46321
Re: CFS Bancorp, Inc.
Form 10-K for the Fiscal Year Ended December 31, 2004
Forms 10-Q for the Quarters Ended March 31, 2005 and June 30, 2005
File No. 000-24611
Dear Mr. Cole:
We have reviewed your filings and have the following
comments.
We have limited our review to only your financial statements and
related disclosures and do not intend to expand our review to
other
portions of your documents. Where indicated, we think you should
revise your document in response to these comments. If you
disagree,
we will consider your explanation as to why our comment is
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. In some of our comments, we may
ask
you to provide us with information so we may better understand
your
disclosure. After reviewing this information, we may raise
additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or any other aspect
of
our review. Feel free to call us at the telephone numbers listed
at
the end of this letter.
Form 10-K for the fiscal year ended December 31, 2004
Results of Operations
Interest Expense, page 25
1. We note your disclosure on page 21 that you anticipate the
restructuring of FHLB borrowings will have a positive overall
effect
in future periods by, among other things, improving your interest
rate risk profile. Please tell us and in future filings disclose
the
following:
* The predominant factors that influenced your decision to
restructure the debt in the fourth quarter of 2004;
* How you balance incurring significant prepayment penalties to
restructure debt with your desire to manage your interest rate
risk
profile;
* Describe the "other things" you are referring to when you
disclose
the anticipated positive overall effect in future periods;
* Quantify your estimate of the expected reduction of interest
expense in future periods as a result of the restructuring; and
* Describe the impact on your interest rate risk profile.
Non-Interest Expense, page 26
2. We note your disclosure that you wrote-down the carrying value
of
your viatical receivables by $421,000 in 2004. Please tell how
you
account for and determine the carrying and fair values of viatical
receivables. Describe the changes in circumstances or other
factors
that indicated the receivables were impaired during 2004 and how
you
determined the amount of the impairment.
Financial Statements
Consolidated Statements of Cash Flows, page 51
3. We note your disclosure on page 29 that you sold $9.1 million
of
commercial real estate participations in 2004. Please tell us how
the purchase or origination and the proceeds are reported in your
statements of cash flows and your basis for the presentation.
Note 7 - Borrowed Money, page 65
4. Please provide us with your comprehensive analysis of how you
determined that the debt restructuring in the fourth quarter of
2004
was not considered a substantial modification of terms of the
existing debt agreement under EITF 96-19. Tell us the principal
amount and terms for each advance that was replaced and for each
new
advance as part of the $325 million debt restructuring.
5. Please tell us and in future filings disclose how you
determined
to expense $9.8 million of the prepayment penalties in 2004.
Explain
how you determined anticipated additional interest expense related
to
the amortization of the remaining deferred prepayment penalties
for
future periods.
Form 10-Q for the Quarterly Period Ended March 31, 2005
Changes in Financial Condition
Securities, page 18
6. We note your disclosure of a $240,000 impairment in a Freddie
Mac
fixed-rate perpetual preferred stock. Please tell us and in
future
filings disclose how you determined the amount of the impairment
and
the changes in circumstances and other factors considered for
recognizing the impairment in the first quarter of 2005. Refer to
Item 303(b) of Regulation S-K.
7. In light of the significant increase in gross unrealized losses
your Government Sponsored Entity (GSE) securities please provide
us
with the break-down between securities with continuous unrealized
loss position for less than 12 months and 12 months or more as of
March 31, 2005 and June 30, 2005.
Form 10-Q for the Quarterly Period Ended June 30, 2005
Changes in Financial Condition
Non-performing Assets, page 24
8. We note your disclosure on page 25 that you recorded an
additional
impairment of $1.1 million during the quarter ended June 30, 2005
on
two of your non-performing loans. Please tell us and in future
filings disclose the nature of the loans. Describe the changes in
circumstances and other factors since your year-end that led to
your
recognition of the additional impairment during the quarter.
Refer
to Item 303(b) of Regulation S-K.
* * * * *
Please respond to these comments within 10 business days or
tell us when you will provide us with a response. Please file
your
response on EDGAR. Detailed cover letters greatly facilitate our
review. Please understand that we may have additional comments
after
reviewing your amendment and responses to our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Matthew Komar (Staff Accountant) at (202)
551-
3781 or me at (202) 551-3449 if you have questions regarding
comments on the financial statements and related matters.
Sincerely,
Joyce Sweeney
Accounting Branch Chief
Charles V. Cole
CFS Bancorp, Inc.
August 11, 2005
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