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PRESS RELEASE
FIRST FEDERAL BANCSHARES, INC. ANNOUNCES
2ND QUARTER EARNINGS
Colchester, Illinois - August 12, 2005 - (NASDAQ - FFBI) - First Federal
Bancshares, Inc., the holding company for First Federal Bank, announced net
income of $289,000 or $.26 per share for the quarter ended June 30, 2005
compared to $248,000 or $.16 per share for the quarter ended June 30, 2004.
Diluted earnings per share were $.24 and $.15 per share for both periods,
respectively. The increase in net income is primarily a result of an increase in
noninterest income associated with net gains on sale of securities, increases in
loan origination and servicing fees and other fee income, and a decrease in the
provision for income taxes, offset by decreased net interest income and
increased provision for loan losses. Net income for the six months ended June
30, 2005 was $574,000 or $.50 per share, compared to $816,000 or $.51 per share
for the six months ended June 30, 2004. The decrease in net income was primarily
a result of a decrease in net interest income and noninterest income, and an
increase in the provision for loan losses, offset by a decrease in the provision
for income taxes.
Net interest income for the quarter ended June 30, 2005 totaled $1.9 million
compared to $2.1 million for the prior year quarter. The slight decrease in net
interest income was primarily a result of the tender offer completed on May 28,
2004, which decreased interest-earning assets approximately $11. 6 million, and
the trust preferred offering completed on March 25, 2004, which increased
interest-bearing liabilities approximately $7.2 million. Decreases occurred in
the net interest spread and the net interest margin from 2.52% and 2.69%,
respectively, for the quarter ended June 30, 2004 to 2.26% and 2.40%,
respectively, for the quarter ended June 30, 2005. The decrease in the spread
and margin was due to the decrease in volume of interest-earning assets and the
increase in volume and rate of interest-bearing liabilities due to subordinated
debt issued in connection with the trust preferred securities offering and the
increase in the cost of funds exceeding the increase in the yield on
interest-earning assets as interest-bearing liabilities repriced upward more
quickly than interest-earning assets in reaction to the increasing short-term
interest rate environment. In addition, the ratio of interest-earning assets to
interest-bearing liabilities decreased from 108.97% for the quarter ended June
30, 2004 to 105.92% for the quarter ended June 30, 2005.
The provision for loan losses was $115,000 for the quarter ended June 30, 2005
compared to zero for the same period in 2004 due to increased loan volume in 1-4
family mortgages from $89.0 million to $101.2 million for the quarter ended June
30, 2005. Management considered the allowance for loan losses to be adequate
during both periods.
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Noninterest income was $476,000 for the three-month period ended June 30, 2005
compared to $186,000 for the prior year quarter. The increase was a result of a
$221,000 increase in net gains on the sale of securities, an increase of $14,000
in loan origination and servicing fees, and an increase of $58,000 in other fee
income due to the implementation of an overdraft privilege program.
Noninterest expense was $1.8 million for both quarters ended June 30, 2005 and
June 30, 2004. Compensation and benefits expense decreased $36,000 compared to
the same quarter in 2004. This decrease was offset by an $8,000 increase in
occupancy and equipment expense, a $22,000 increase in data processing expense
and slight increases in advertising and other noninterest expenses.
The Company's income tax expense decreased $80,000 to $155,000 for the quarter
ended June 30, 2005 compared to $235,000 during the same period in 2004 as a
result of decreased income and a decrease in the effective tax rate. The
decrease in the effective tax rate is primarily due to the filing of a
consolidated tax return during the current period, thereby allowing the Company
to utilize and record the tax benefits not recorded in the prior comparative
period.
Total assets were $329.4 million at June 30, 2005 compared to $312.5 million at
December 31, 2004. During the six months ended June 30, 2005, cash and cash
equivalents decreased $3.0 million to $11.4 million and securities
available-for-sale decreased $7.5 million to $146.1 million. Loans receivable
increased $26.9 million primarily as a result of the purchase of single-family
5/1 hybrid ARM whole loans with 30-year maturities, totaling approximately $17.8
million, purchased at a premium of approximately $171,000, with a net weighted
average coupon of 5.05%. These purchases are part of the Company's strategy to
increase income through an increase in interest-earning assets, in particular
loans receivable.
Shareholders' equity at June 30, 2005 was $22.5 million compared to $24.1
million at December 31, 2004, a decrease of $1.6 million. The decrease in equity
primarily reflects the repurchase of 75,050 shares totaling approximately $1.9
million, and a decrease in the fair value of securities available-for-sale, net
of tax of $457,000 offset by net income of $574,000.
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
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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
(UNAUDITED)
JUNE 30, DECEMBER 31,
2005 2004
---- ----
(In thousands)
SELECTED FINANCIAL CONDITION DATA
Total assets $ 329,446 $ 312,487
Cash and cash equivalents 11,366 14,387
Loans receivable, net 163,179 136,331
Securities available for sale 146,070 153,622
Deposits 283,711 273,711
Federal Home Loan Bank advances 14,450 6,450
Subordinated debt 7,217 7,217
Shareholders' equity 22,479 24,124
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2005 2004 2005 2004
---- ---- ---- -----
(In thousands, except per share data)
SELECTED OPERATIONS DATA
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Total interest income $ 3,812 $ 3,612 $ 7,492 $ 7,201
Total interest expense 1,920 1,504 3,671 2,950
----------- ----------- ---------- -----------
Net interest income 1,892 2,108 3,821 4,251
Provision for loan losses 115 - 115 -
----------- ----------- ---------- -----------
Net interest income after provision
for loan losses 1,777 2,108 3,706 4,251
Noninterest income 476 186 704 756
Noninterest expense 1,809 1,811 3,517 3,538
----------- ----------- ---------- -----------
Income before taxes 444 483 893 1,469
Provision for income taxes 155 235 319 653
----------- ----------- ---------- -----------
Net income $ 289 $ 248 $ 574 $ 816
=========== =========== ========== ===========
Earnings per share
Basic $ .26 .16 .50 .51
Diluted .24 .15 .47 .48
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
SELECTED FINANCIAL RATIOS (1) 2005 2004 2005 2004
- ----------------------------- ---- ---- ---- ----
Return on average assets .36 % .31 % .36 % .50 %
Return on average equity 5.19 3.02 4.97 4.46
Average equity to average assets 6.87 10.23 7.22 11.30
Interest rate spread during the period 2.26 2.52 2.30 2.48
Net interest margin 2.40 2.69 2.45 2.69
General and administrative expenses
to average assets 2.23 2.25 2.20 2.18
Efficiency ratio (2) 84.41 79.08 81.87 76.53
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AS OF AS OF
JUNE 30, 2005 JUNE 30, 2004
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Non-performing assets to total assets .44% .56%
Book value per share (3) $ 19.55 $ 17.97
Number of shares outstanding for book value
computation 1,150,039 1,197,761
(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.
Contact:
James J. Stebor
President and CEO
Phone: (309) 776-3225