EXHIBIT 99.1
PRESS RELEASE
January 20, 2004
For Immediate Release
For Further Information Contact: Barry Backhaus
President and Chief Executive Officer
First Federal Bankshares, Inc.
329 Pierce Street, P.O. Box 897
Sioux City, IA 51102
712.277.0200
FIRST FEDERAL BANKSHARES ANNOUNCES EARNINGS AND DECLARES
DIVIDEND
Sioux City, Iowa. First Federal Bankshares, Inc. (the "Company") (Nasdaq
National Market - "FFSX") reported net earnings of $1.4 million, or diluted
earnings per share of $0.38, for the three months ended December 31, 2003. This
compares to net earnings of $1.5 million, or diluted earnings per share of
$0.38, for the quarter ended December 31, 2002. Net earnings increased by
$228,000, or 8.4%, to $2.9 million, or diluted earnings per share of $0.79, for
the six months ended December 31, 2003 from $2.7 million, or diluted earnings
per share of $0.67, for the six months ended December 31, 2002.
The Company announced a quarterly dividend of $0.09 per share, the same as the
previous quarter.
Net interest income before provision for loan losses totaled $4.5 million and
$5.0 million, respectively, for the three months ended December 31, 2003 and
2002. Interest income decreased by $1.4 million, or 15.1%, while interest
expense decreased by $1.0 million, or 22.8% as the Company's interest-earning
assets repriced more quickly than its interest-bearing liabilities in the
continued historically low market interest rate environment. The Company's net
yield on average interest-earning assets decreased by 27 basis points to 3.26%
for the three months ended December 31, 2003 from 3.53% for the three months
ended December 31, 2002. The average yield on interest-earning assets decreased
by 93 basis points to 5.57% for the three months ended December 31, 2003 from
6.50% for the three months ended December 31, 2002 as market interest rates
remained at historically low levels. The decrease in the average yield on
interest-earning assets was partly offset by a decrease of 63 basis points in
the average cost of interest-bearing liabilities to 2.49% for the three months
ended December 31, 2003 from 3.12% for the three months ended December 31, 2002.
Provision for loan loss expense totaled $100,000 and $400,000, respectively, for
the three months ended December 31, 2003 and 2002.
Noninterest income decreased by $414,000, or 16.8%, to $2.1 million for the
quarter ended December 31, 2003 from $2.5 million for the quarter ended December
31, 2002. The decrease in noninterest income was largely due to decreases in
fees and service charges and in gain on sale of loans held for sale. Fees and
service charge income decreased by $119,000, or 8.7%, to $1.3 million for the
three months ended December 31, 2003, from $1.4 million for the three months
ended December 31, 2002. In addition, gain on sale of loans held for sale
decreased by $79,000, or 47.6%, to $88,000 for the three months ended December
31, 2003 from $167,000 for the three months ended December 31, 2002. The
decreases in fees and service charge income and gain on sale of loans resulted
from slowing mortgage origination activity after an extended period of low
market interest rates. Real estate-related income generated by the Company's
subsidiaries was also affected by the slowdown in mortgage activity. Income from
real estate-related activities decreased by $69,000, or 17.3%, to $327,000 for
the three months ended December 31, 2003 from $396,000 for the three months
ended December 31, 2002. In addition, gain on sale of real estate owned and held
for development and gain on sale of securities decreased by a total of $115,000
for the three months ended December 31, 2003 as compared to the three months
ended December 31, 2002.
Partly offsetting the decrease in noninterest income was a decrease in
noninterest expense. Noninterest expense decreased by $288,000, or 6.1%, to $4.4
million for the three months ended December 31, 2003 from $4.7 million for the
three months ended December 31, 2002. The decrease in noninterest expense was
partly due to a decrease in amortization expense for mortgage servicing assets.
Such amortization expense totaled $90,000 for the three months ended December
31, 2002, while no expense was recorded for the three months ended December 31,
2003 since these assets had been fully amortized. Advertising expense decreased
by $59,000, or 40.2%, to $88,000 for the three months ended December 31, 2003
from $147,000 for the three months ended December 31, 2002. Also contributing to
the decrease in noninterest expense was a decrease in direct expenses related to
mortgage production as volume declined during the three months ended December
31, 2003. Staff recruiting expenses and losses on the sale of repossessed
vehicles also decreased for the three months ended December 31, 2003 as compared
to the three months ended December 31, 2002.
Income before taxes decreased by $253,000, or 10.8%, to $2.1 million for the
three months ended December 31, 2003 from $2.3 million for the three months
ended December 31, 2002. Taxes on income totaled $673,000, or an effective tax
rate of 32.2%, for the three months ended December 31, 2003 and $803,000, or an
effective tax rate of 34.3%, for the three months ended December 31, 2002. The
effective tax rate decreased for the three months ended December 31, 2003
largely because tax-exempt income comprised a larger percentage of pre-tax
income for the three months ended December 31, 2003 than for the three months
ended December 31, 2002.
Net interest income before provision for loan losses decreased by $716,000, or
7.3%, to $9.1 million for the six months ended December 31, 2003 from $9.8
million for the six months ended December 31, 2002. The Company's net yield on
interest-earning assets decreased by 18 basis points to 3.28% for the six months
ended December 31, 2003 from 3.46% for the six months ended December 31, 2002.
The average yield on interest-earning assets decreased by 91 basis points to
5.63% for the six months ended December 31, 2003 from 6.54% for the six months
ended December 31, 2002 as market interest rates remained at historically low
levels. Partially offsetting the decrease in the average yield on
interest-earning assets was a decrease of 75 basis points in the average cost of
interest-bearing liabilities to 2.50% for the six months ended December 31, 2003
from 3.25% for the six months ended December 31, 2002.
Provision for loan loss expense decreased to $625,000 for the six months ended
December 31, 2003 from $1.2 million for the six months ended December 31, 2002.
Non-performing loans increased to $9.3 million, or 2.0% of total loans, at
December 31, 2003 from $5.2 million, or 1.3% of total loans, at December 31,
2002. The increase in non-performing loans was primarily
the result of 3 commercial borrowers for which delinquency exceeded 90 days at
December 31, 2003. Because these accounts had already been identified as
"classified" assets, there was no additional impact on the required level of
reserves or on the provision for loan losses. In prior periods, these 3 accounts
were not more than 90 days delinquent nor accounted for on a non-accrual basis;
therefore, the balances were not included in the non-performing loan total.
Management believes that these accounts are well-secured and in the process of
collection.
Noninterest income decreased by $153,000, or 3.4%, to $4.4 million for the six
months ended December 31, 2003 from $4.6 million for the six months ended
December 31, 2002. The decrease in noninterest income was largely due to a net
loss on sale of securities that totaled $65,000 for the six months ended
December 31, 2003. In comparison, the Company recorded a gain of $38,000 on the
sale of securities for the six months ended December 31, 2002. In addition, gain
on sale of loans and gain on sale of real estate owned and held for development
decreased by $70,000 and $67,000, respectively, for the six months ended
December 31, 2003 as compared to the six months ended December 31, 2002.
Partially offsetting these decreases in noninterest income was an increase in
fees and service charges that totaled $102,000 for the six months ended December
31, 2003 as compared to the six months ended December 31, 2002. The increase in
fees and service charges was primarily due to an increase in overdraft
activities on retail accounts and the resulting service fees assessed. In
addition, the restructuring of the Company's checking and savings accounts
included a more favorable service charge schedule.
More than offsetting the decreases in net interest income after provision for
losses on loans and noninterest income was a decrease in noninterest expense.
Noninterest expense decreased by $559,000, or 6.2%, to $8.5 million for the six
months ended December 31, 2003 from $9.1 million for the six months ended
December 31, 2002. The decrease in noninterest expense was partly due to a
decrease in expense for the amortization of mortgage servicing assets. Such
amortization expense totaled $180,000 for the six months ended December 31,
2002, while no expense was recorded for the six months ended December 31, 2003
since these assets had been fully amortized. Other noninterest expense also
decreased due to a decrease of $94,000 in recruiting expense and a decrease of
$65,000 in per account service fee expense for retail transaction accounts.
Additionally, loss on disposal of repossessed assets decreased by $66,000 for
the six months ended December 31, 2003 as compared to the six months ended
December 31, 2002.
Income before taxes increased by $295,000, or 7.2%, to $4.4 million for the six
months ended December 31, 2003 from $4.1 million for the six months ended
December 31, 2002. Taxes on income totaled $1.5 million, or an effective tax
rate of 33.1%, for the six months ended December 31, 2003 and $1.4 million, or
an effective tax rate of 33.8% for the six months ended December 31, 2002.
Assets totaled $634.6 million and $640.5 million, respectively, at December 31,
2003 and 2002. Book value per share increased to $18.76 at December 31, 2003
from $17.63 at December 31, 2002. Stockholders' equity to total assets was
11.15% and 11.11%, respectively, at December 31, 2003 and 2002. During the three
months ended December 31, 2003 the Company repurchased 10,000 shares of its
common stock at a cost of $224,000 under a repurchase program announced in
August 2003. The program authorizes an additional repurchase of up to 367,000
shares. The Company had 3,770,267 shares outstanding at December 31, 2003.
On January 15, 2004, the Company's Board of Directors declared a quarterly
dividend of $0.09 per share, the same as distributed last quarter. The dividend
is payable on February 27, 2004 to stockholders of record on February 13, 2004.
The Company's common stock is traded on the NASDAQ National Market under the
symbol FFSX. The Company is headquartered in Sioux City, Iowa. First Federal
Bank, the Company's bank subsidiary, operates ten offices in northwest Iowa, an
office in South Sioux City, Nebraska, and five offices in central Iowa.
Except for the historical information contained in this press release, the
matters discussed may be deemed to be forward-looking statements, within the
meaning of the Private Securities Litigation Reform Act of 1995, that involve
risks and uncertainties, including changes in economic conditions in the
Company's market area, changes in policies by regulatory agencies, fluctuations
in interest rates, demand for loans in the Company's market area, competition,
and other risks detailed from time to time in the Company's SEC reports. Actual
strategies and results in future periods may differ materially from those
currently expected. These forward-looking statements represent the Company's
judgment as of the date of this release. The Company disclaims, however, any
intent or obligation to update these forward-looking statements.
FIRST FEDERAL BANKSHARES, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
December 31, June 30, December 31,
2003 2003 2002
------------------ ----------------- ------------------
ASSETS (Unaudited) (Unaudited)
- ------
Cash and cash equivalents 24,497 34,287 33,105
Securities available-for-sale 62,046 78,526 77,907
Securities held-to-maturity 27,045 44,505 55,461
Loans receivable, net 459,681 415,267 418,180
Office property and equipment, net 13,576 13,166 13,455
Federal Home Loan Bank stock, at cost 6,402 5,707 5,707
Accrued interest receivable 2,533 2,488 2,688
Goodwill 18,524 18,524 18,524
Other assets 20,341 15,409 15,501
------------------ ----------------- ------------------
Total assets $634,645 $627,879 $640,528
================== ================= ==================
LIABILITIES
- -----------
Deposits 440,223 448,944 451,505
Advances from FHLB and other borrowings 118,150 102,387 111,512
Advance payments by borrowers for taxes and insurance 1,295 1,459 1,185
Accrued interest payable 1,346 1,795 2,167
Accrued expenses and other liabilities 2,896 3,633 3,013
------------------ ----------------- ------------------
Total liabilities 563,910 558,218 569,382
STOCKHOLDERS' EQUITY
- --------------------
Common stock, $.01 par value 49 49 49
Additional paid-in capital 36,819 36,537 36,412
Retained earnings, substantially restricted 50,233 47,901 45,626
Treasury stock, at cost - 1,148,990, 1,088,466 and
852,966 shares, respectively, at December 31, 2003,
June 30, 2003 and December 31, 2002 (15,450) (14,265) (10,280)
Accumulated other comprehensive income 240 710 719
Unearned ESOP (1,115) (1,186) (1,257)
Unearned RRP (41) (85) (123)
------------------ ----------------- ------------------
Total stockholders' equity 70,735 69,661 71,146
------------------ ----------------- ------------------
Total liabilities and stockholders' equity $634,645 $627,879 $640,528
================== ================= ==================
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended Six months ended
December 31, December 31,
------------------------------------- ------------------------------------
2003 2002 2003 2002
------------------ ------------------ ----------------- ------------------
(Dollars in thousands) (Dollars in thousands)
Total interest income $7,764 $9,145 $15,726 $18,632
Total interest expense 3,227 4,181 6,582 8,772
------------------ ------------------ ----------------- ------------------
Net interest income before provision 4,537 4,964 9,144 9,860
Less: provision for loan losses 100 400 625 1,230
------------------ ------------------ ----------------- ------------------
Net interest income after provision 4,437 4,564 8,519 8,630
Noninterest income 2,051 2,465 4,398 4,552
Noninterest expense (4,401) (4,689) (8,505) (9,064)
------------------ ------------------ ----------------- ------------------
Income before taxes 2,087 2,340 4,412 4,118
Taxes on income 673 803 1,460 1,393
------------------ ------------------ ----------------- ------------------
Reported net earnings $1,414 $1,537 $2,952 $2,725
================== ================== ================= ==================
FIRST FEDERAL BANKSHARES, INC and SUBSIDIARIES
FINANCIAL HIGHLIGHTS
(Unaudited)
At or for the three months At or for the six months
ended December 31, ended December 31,
---------------------------------------------------------------------------
Financial condition data: 2003 2002 2003 2002
- -------------------------
------------------ ---------------- ---------------- ----------------
(Dollars in thousands, except per share amounts)
Average interest-earning assets $ 557,901 $ 562,369 $ 558,171 $ 569,566
Average interest-bearing liabilities 517,480 535,911 525,763 539,688
Average interest-earning assets to
average interest-bearing liabilities 107.81% 104.94% 106.16% 105.54%
Non-performing loans $ 9,313 $ 5,231
Non-performing loans to total loans 2.00% 1.25%
Non-performing assets 9,941 5,840
Non-performing assets to total assets 1.57% 0.91%
Allowance for loan losses 4,863 4,660
Allowance for loan losses to total loans 1.05% 1.10%
Shareholders' equity to assets 11.15% 11.11%
Selected operating data: (1)
- ----------------------------
Return on average assets 0.90% 0.97% 0.93% 0.85%
Return on average equity (2) 7.99% 8.54% 8.39% 7.58%
Net interest rate spread 3.08% 3.38% 3.13% 3.29%
Net yield on interest-earning assets (3) 3.26% 3.53% 3.28% 3.46%
Efficiency ratio (4) 66.82% 63.60% 62.57% 63.19%
- --------------------------------------------
(1) Annualized except for efficiency ratio.
(2) Net income divided by average equity capital excluding average unrealized
gains on available-for-sale securities. (3) Net interest income divided by
average interest-earning assets. (4) Noninterest expense divided by net
interest income before provision for loan losses plus noninterest income,
less gain (loss) on sale of other real estate owned, less gain
(loss) on sale of investments, less gain (loss) on sale of fixed
assets.
Per share data:
- ---------------
Earnings per share:
Basic $ 0.39 $ 0.39 $ 0.81 $ 0.68
Diluted $ 0.38 $ 0.38 $ 0.79 $ 0.67
Book value per share $ 18.76 $ 17.63 $ 18.76 $ 17.63
Market price per share:
High for the period $ 25.24 $ 15.15 $ 25.24 $ 15.15
Low for the period $ 21.57 $ 13.25 $ 17.55 $ 11.76
Close at end of period $ 24.66 $ 14.50 $ 24.66 $ 14.50
Cash dividends declared per share $ 0.09 $ 0.08 $ 0.17 $ 0.16
Weighted-average common shares outstanding:
Basic 3,637,478 3,946,926 3,638,798 3,978,070
Diluted 3,753,547 4,029,308 3,754,289 4,063,038
noninterest expense 4,401 4,689 8,505 9,064
goodwill amortization
NII before provision 4,537 4,965 9,144 9,860
noninterest income 2,051 2,465 4,398 4,552
gain (loss) OREO 0 19 (19) 30
gain (loss) investments (33) 38 (65) 38
gain (loss) fixed assets 34 1 33 1
------------------ ------------------ ----------------- ------------------
efficiency ratio (*) 66.82% 63.60% 62.57% 63.19%
Tangible book value per share $ 0.00 $ 0.00