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EXHIBIT 99.1
July 31, 2008
Dear Stockholder:
Enclosed is our 46th consecutive dividend of $0.06 per share payable July 31,
2008, to stockholders of record on July 16, 2008.
Consolidated net-after-tax earnings (un-audited) for the quarter ending June 30
represented a loss of $326,772, or $0.26 per share as compared to income of
$404,590, or $0.29 per share for the same period last year. During the 2nd
quarter the bank made a provision for loan loss in the amount of $800,000 which
was responsible for the loss in income. While we have yet to experience any
losses in our loan portfolio and do not anticipate any at this time, the
continuation of troubles in the real estate markets dictates that we prepare
ourselves for unexpected changes. Combining the unsettled real estate market
with the general downturn in the economy, it seemed prudent for the bank to take
the provision to protect against any potential future loss and to provide for a
level of protection for future earnings.
Community Bank has had a solid history of maintaining our credit quality and we
have confidence that this trend will continue. However, since we are unable to
predict how long the downturn may last nor can we predict the impact it may have
on the economy, we feel that it is prudent to take a conservative approach. As
long as the quality of our portfolio remains constant, we do not anticipate the
need for any large additions to our provision in the near future. The loss in
the 2nd quarter translates to a loss of $245,894 or $0.20 per share for the
first 6 months of 2008 as compared to profit of $0.94 per share a year earlier.
On a positive note, the bank's net interest income (NII) has begun to show signs
of improvement as our efforts to improve profitability begin to take hold. NII
of $2,100,313 for the quarter exceeded last quarter's results by $61,578, or
3.0%. As the main source of the bank's earnings, this is a very positive result.
We anticipate that this trend will continue and that earnings during the second
half of 2008 will continue to show improvement as well. The dramatic decline in
interest rates over the last several months has had a significant impact on our
income, particularly our income from loans. For the period ending June 30 we
have realized $7,968,807 in interest income which is $537,773, or 6.32% less
than last year. The stabilization of interest rates should halt this decline and
add stability to the bank's margin.
Despite the troubles in the real estate market, our mortgage department
continues to be a success. Through June 30 we have originated approximately $15
million in mortgages which have generated $315,459 in income. This total exceeds
last year's income through the 2nd quarter by $108,755, or 52.6%. We are
particularly pleased with this result considering the current market conditions
and are very optimistic that mortgage lending will continue to be a major
contributor to future earnings once the market turns.
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Stockholder Letter
July 31, 2008
Page Two
Our North Wheaton facility continues to exceed our expectations. As of June 30
we have gathered $13.3 million in deposits. We are particularly pleased with the
location and the results to date. While the majority of new business is coming
from the Wheaton market, 23% of new clients are from Carol Stream and an
additional 13% are coming from the Winfield market. The addition of the new
facility has effectively allowed us to expand our market presence.
We have heard from several shareholders expressing concern over the recent
decline in our stock value. There are several factors in play which influence
this process. Foremost is the fact that shares of CFS are thinly traded which
makes it difficult to sell shares quickly. In the event of the settling of an
estate for example, most brokers are not willing to offer the market price due
to their concern over their ability to resell the shares. A large part of this
concern is a reflection on the general market views on bank stocks in general.
Your investment in CFS has always been a long term investment. The fact that we
are a publicly traded company exposes us to fluctuations in our stock price.
Despite this, we are confident in the value of our shares.
We enjoyed seeing many of you at our recent Annual Shareholders meeting held at
our Glen Ellyn Facility. For those of you unable to attend, during the course of
the meeting all directors were elected to serve for an additional year and the
CPA firm of BKD was re-appointed as our independent accountants. During the
course of the meeting President Hamer provided an update on 2007 results as well
as a look forward. A copy of his comments is enclosed with this letter.
As always, your comments are appreciated.
ON BEHALF OF
THE BOARD OF DIRECTORS
/s/ Scott W. Hamer /s/ Donald H. Fischer
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Scott W. Hamer, President & CEO Donald H. Fischer, Chairman
This document contains "forward-looking statements" as that term is defined in
the Private Securities Litigation Reform Act of 1995. These statements involve
risks and uncertainties, which may cause results to differ materially from those
set forth in the statements. The forward-looking statements may include
statements regarding business strategies, intended results and future
performance. Forward-looking statements are preceded by such terms as "expects,"
"believes," "anticipates," "intends," and similar expressions. No
forward-looking statement can be guaranteed, and actual results may differ
materially from those projected.