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EXHIBIT 99.1
FIRST FEDERAL BANCSHARES, INC.
FOR IMMEDIATE RELEASE
OCTOBER 24, 2003
Contact:
James J. Stebor, President and CEO
Phone: (309) 776-3225
FIRST FEDERAL BANCSHARES, INC. ANNOUNCES
3RD QUARTER EARNINGS
Colchester, Illinois - October 24, 2003 - (NASDAQ - FFBI) - First Federal
Bancshares, Inc., the holding company for First Federal Bank, announced net
income of $925,000, or $.52 per share, for the quarter ended September 30, 2003
compared to $497,000, or $.30 per share, for the quarter ended September 30,
2002. Diluted earnings per share were $.48 per share and $.29 per share for both
periods, respectively. The increase in net income is primarily a result of an
increase in net interest income and noninterest income, offset by increases in
noninterest expense and the income tax provision. Net income was $2.3 million,
or $1.27 per share, for the nine months ended September 30, 2003, compared to
$1.5 million, or $.83 per share, for the nine months ended September 30, 2002.
The Company's subsidiary, First Federal Bank, completed the sale of its Mt.
Sterling, Illinois branch office to Beardstown Savings s.b. on September 26,
2003. The sale included the assumption of approximately $6.2 million in
deposits.
Net interest income for the quarter ended September 30, 2003 totaled $2.4
million compared to $1.7 million for the prior year quarter. The increase in net
interest income was primarily a result of an increase in the net interest spread
and the net interest margin to 2.73% and 3.02%, respectively, for the quarter
ended September 30, 2003 from 2.42% and 2.89% for the same period in 2002 and an
increase in the volume of interest-earning assets and interest-bearing
liabilities as a result of the Company's acquisition of PFSB Bancorp, Inc. in
the last quarter of 2002. The increase in the spread and the margin was due
largely to the decrease in the cost of funds exceeding the decrease in the yield
of interest-earning assets as interest-earning assets and interest-bearing
liabilities repriced downward in reaction to the continued decreasing interest
rate environment. The average yield on interest-earning assets decreased to
4.93% for the quarter ended September 30, 2003 from 5.40% for the same quarter
in 2002, while the average yield on interest-bearing liabilities decreased to
2.20% for the quarter ended September 30, 2003 from 2.98% for the same period in
2002. The ratio of average interest-earning assets to average interest-bearing
liabilities decreased to 115.06% from 118.84% for the three-month periods,
respectively.
Noninterest income increased to $809,000 for the quarter ended September 30,
2003 compared to $97,000 for the same period in 2002. The increase was a result
of a
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$223,000 increase in net gains on the sale of securities and a $428,000 gain on
the sale of the Mt. Sterling, Illinois branch office. The remainder of the
increase in noninterest income was attributed to an increase of $18,000 in
service charge income, an increase of $16,000 in other fee income, both due to
the increase in deposit accounts acquired and the related fee income as a result
of the PFSB acquisition, and an increase in other income of $27,000. The
decrease in deposits resulting from the sale of the Mt. Sterling, Illinois
branch office on September 26, 2003 did not have an impact on fee income during
this quarter.
Noninterest expense increased to $1.6 million for the quarter ended September
30, 2003 from $1.0 million in the prior year's same quarter. The increase was
primarily a result of increased compensation and benefits expense of $399,000
associated with an increase in the number of employees due to the PFSB
acquisition and an increase in employee benefits expense including health
insurance premiums and retirement funds. Occupancy and equipment expense, data
processing expense, advertising expense, and professional fees also experienced
increases during the period, primarily due to the acquisition, and were
partially offset by a decrease in other noninterest expenses.
Total assets were $312.4 million at September 30, 2003 compared to $316.4
million at December 31, 2002. The decrease in total assets was primarily due to
the sale of the Mt. Sterling, Illinois branch office. Cash and cash equivalents
decreased $24.2 million resulting from the timing of called and purchased
securities, and loans decreased $17.3 million, primarily as a result of
portfolio loans refinancing into the Federal Home Loan Bank Mortgage Partnership
Finance fixed-rate program and also to other competitors due to the low interest
rate environment.
During the first quarter of 2003, in accordance with FAS 115, the Company
reevaluated the classification of the securities portfolio. As a result of the
acquisition of PFSB, changes in the structure of the balance sheet, and for
asset/liability management purposes, management revised the Company policy to
classify all securities as available- for-sale. Effective January 31, 2003, the
Company reclassified all of its securities held-to-maturity to securities
available-for-sale. The securities that were reclassified had a book value of
$24.2 million and a fair value of $24.5 million as of that date. The
reclassification of these securities resulted in a decrease in securities
held-to-maturity of $24.5 million from December 31, 2002 to September 30, 2003.
Purchases accounted for the remaining $32.1 million increase in
available-for-sale securities during the same period.
Stockholders' equity decreased to $40.6 million at September 30, 2003 from $47.0
million at December 31, 2002. The decrease was primarily a result of the
repurchase of treasury stock totaling $7.3 million and a decrease in the fair
value of securities available-for-sale, net of tax, of $1.8 million, offset by
net income of $2.3 million.
During the quarter ended December 31, 2001, the Company recorded an impairment
loss of $596,000 related to certificates of deposit purchased through a broker
who was charged by the SEC with securities fraud in relationship to these
certificates of deposit. The Company received a check in the amount of $355,000
during April 2003 as an initial
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distribution of receivership assets. This distribution represented 59.6% of the
allowed claim. During September 2003, the Company received a letter indicating
that a second distribution of receivership of assets is in progress. The Company
expects to recover an additional $97,000 through this second distribution.
First Federal Bancshares, Inc. is headquartered in Colchester, Illinois with
four additional full-service west-central Illinois branches located in Quincy
(2), Macomb, and Bushnell, and three additional full-service northeastern
Missouri branches located in Palmyra, Canton, and Kahoka. Financial highlights
of the Company are attached.
Statements contained in this news release that are not historical facts may
constitute forward-looking statements (within the meaning of Section 21E of the
Securities Exchange Act of 1934, as amended), which involve significant risks
and uncertainties. The Company intends such forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements contained
in the Private Securities Litigation Reform Act of 1995, and is including this
statement for purposes of invoking these safe harbor provisions. The Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain. Factors which could have a material adverse effect on the
operations and future prospects of the Company and the subsidiaries include, but
are not limited to, changes in interest rates, general economic conditions,
legislative/regulatory changes, monetary and fiscal policies of the U.S.
Government, including the U.S. treasury and the Federal Reserve Board, the
quality or composition of the Company's loan or investment portfolios, demand
for loan products, deposit flows, competition, demand for financial services in
the Company's market area, the possible short-term dilutive effect of potential
acquisitions and accounting principles, policies and guidelines. These risks and
uncertainties should be considered in evaluating forward looking statements and
undue reliance should not be placed on such statements.
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FIRST FEDERAL BANCSHARES, INC.
SELECTED FINANCIAL INFORMATION
SEPTEMBER 30, DECEMBER 31,
2003 2002
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(In thousands)
SELECTED FINANCIAL CONDITION DATA
Total assets $ 312,363 $ 316,400
Cash and cash equivalents 18,612 42,827
Loans receivable, net 133,000 150,269
Securities 148,111 116,033
Deposits 262,887 263,834
Advances from Federal Home Loan Bank 8,000 4,000
Stockholders' equity 40,575 47,031
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2003 2002 2003 2002
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(In thousands)
SELECTED OPERATIONS DATA
Total interest income $ 3,886 $ 3,183 $ 11,686 $ 9,699
Total interest expense 1,507 1,479 5,068 4,505
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Net interest income 2,379 1,704 6,618 5,194
Provision for loan losses 60 - 60 7
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Net interest income after provision
for loan losses 2,319 1,704 6,558 5,187
Noninterest income 809 97 1,737 306
Noninterest expense 1,589 1,011 4,484 3,089
----------- ----------- ---------- -----------
Income before taxes 1,539 790 3,811 2,404
Income tax provision 614 293 1,481 905
----------- ----------- ---------- -----------
Net income $ 925 $ 497 $ 2,330 $ 1,499
=========== =========== ========== ===========
Earnings per share
Basic $ .52 .30 1.27 .83
Diluted .48 .29 1.21 .82
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
SELECTED FINANCIAL RATIOS (1) 2003 2002 2003 2002
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Return on average assets 1.14 % .82 % .97 % .83 %
Return on average equity 8.22 4.89 6.68 4.67
Average equity to average assets 13.88 16.86 14.48 17.70
Interest rate spread during the period 2.73 2.42 2.52 2.41
Net interest margin 3.02 2.89 2.83 2.92
General and administrative expenses
to average assets 1.96 1.67 1.86 1.70
Efficiency ratio (2) 49.84 56.14 53.67 56.16
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AS OF AS OF
SEPTEMBER 30, 2003 SEPTEMBER 30, 2002
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Non-performing assets to total assets .57 % .41%
Book value per share (3) $ 23.56 $ 24.51
Number of shares outstanding 1,722,273 1,664,320
(1) ALL APPLICABLE QUARTERLY RATIOS REFLECT ANNUALIZED FIGURES.
(2) Represents noninterest expense divided by net interest income plus
noninterest income.
(3) Represents total equity divided by actual number of shares outstanding which
is exclusive of treasury stock and unearned ESOP shares.
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Contact:
First Federal Bancshares, Inc.
James J. Stebor, 309-776-3225