EXHIBIT 99.1
PRESS RELEASE
April 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 $1.5 million, or basic and
diluted earnings per share of $0.41 and $0.40, respectively, for the three
months ended March 31, 2004. This compares to net earnings of $1.8 million, or
basic and diluted earnings per share of $0.46 and $0.45, respectively, for the
three months ended March 31, 2003. Net earnings totaled $4.5 million for each of
the nine months ended March 31, 2004 and 2003. Basic and diluted earnings per
share were $1.23 and $1.19, respectively, for the nine months ended March 31,
2004; and, $1.15 and $1.12, respectively, for the nine months ended March 31,
2003.
The Company announced a quarterly dividend of $0.09 per share, the same as the
previous quarter.
Discussion of Operating Results for the Three Months Ended March 31, 2004
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Net interest income before provision for loan losses totaled $4.5 million and
$4.6 million, respectively, for the three months ended March 31, 2004 and 2003.
The Company's net interest margin was 3.26% for each of the three months ended
March 31, 2004 and 2003.
Provision for loan loss expense totaled $450,000 and $200,000, respectively, for
the three months ended March 31, 2004 and 2003.
Noninterest income decreased by $168,000, or 5.7%, to $2.8 million for the three
months ended March 31, 2004 from $2.9 million for the three months ended March
31, 2003. The decrease in noninterest income was partly due to decreases in
service charges on loans. Service charges on loans decreased by $285,000 for the
three months ended March 31, 2004 when compared to the three months ended March
31, 2003. The decrease in service charges on loans was primarily due to a
decrease in prepayment penalty revenue in the quarter ended March 31, 2004 as
compared to such revenue for the quarter ended March 31, 2003. Commercial
mortgage prepayment activity was higher in the prior year period as commercial
borrowers sought to lower their cost of financing in a historically low market
interest rate environment. As the low market interest rate environment extended
into the current fiscal year, less prepayment activity occurred. Also
contributing to the decrease in noninterest income was the fact that no gain on
sale of securities was recorded for the three months ended March 31, 2004, while
a gain on sale of securities
totaling $221,000 was recorded for the three months ended March 31, 2003.
Partially offsetting the decreases in noninterest income was an increase in gain
on sale of loans. Gain on sale of loans increased by $383,000, or 71.7%, to
$917,000 for the three months ended March 31, 2004 from $534,000 for the three
months ended March 31, 2003. The increase in gain on sale of loans was due to
the sale of $37.1 million of fixed-rate residential mortgages with 15-year terms
during the three months ended March 31, 2004 in order to mitigate future
interest rate risk in a potential rising market interest rate environment. The
net gain on the sale of these loans totaled $791,000. The gain generated by this
sale was partly offset by lower gains from the origination and sale of current
mortgage production during the three months ended March 31, 2004. Gains from the
Company's ongoing origination and concurrent sale of fixed rate mortgages to
investors decreased by $243,000 for the three months ended March 31, 2004 when
compared to the three months ended March 31, 2003. This was due to a slowdown in
mortgage refinancing activity after an extended period of historically low
market interest rates. Real estate-related income generated by the Company's
subsidiaries also decreased by $90,000 for the three months ended March 31, 2004
as compared to the three months ended March 31, 2003 as a result of the slowdown
in mortgage activity in the current fiscal year. Gain on sale of real estate
held for development totaled $60,000 for the three months ended March 31, 2004
while no gain on sale of real estate held for development was recorded for the
three months ended March 31, 2003.
Largely offsetting the decrease in noninterest income was a decrease in
noninterest expense. Noninterest expense decreased by $150,000, or 3.2%, to $4.6
million for the three months ended March 31, 2004 from $4.7 million for the
three months ended March 31, 2003. The decrease in noninterest expense was
largely due to a $74,000 decrease in losses on other real estate owned
properties and a $52,000 decrease in per account expenses related to certain
retail transaction accounts.
Income before taxes decreased by $388,000, or 14.6%, to $2.3 million for the
three months ended March 31, 2004 from $2.7 million for the three months ended
March 31, 2003. Taxes on income totaled $751,000, or an effective tax rate of
33.2%, for the three months ended March 31, 2004 and $870,000, or an effective
tax rate of 32.8%, for the three months ended March 31, 2003.
Discussion of Operating Results for the Nine Months Ended March 31, 2004
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Net interest income before provision for loan losses decreased by $836,000, or
5.8%, to $13.7 million for the nine months ended March 31, 2004 from $14.5
million for the nine months ended March 31, 2003. The Company's net interest
margin compressed by 10 basis points to 3.27% for the nine months ended March
31, 2004 from 3.37% for the nine months ended March 31, 2003 as market interest
rates remained at historically low levels.
Provision for loan loss expense decreased by $355,000, or 24.8%, to $1.1 million
for the nine months ended March 31, 2004 from $1.4 million for the nine months
ended March 31, 2003. Non-performing loans totaled $4.8 million, or 1.1% of
total loans, at March 31, 2004 and $4.6 million, or 1.2% of total loans, at
March 31, 2003.
Noninterest income decreased by $321,000, or 4.3%, to $7.2 million for the nine
months ended March 31, 2004 from $7.5 million for the nine months ended March
31, 2003. The decrease in noninterest income was largely due to a net loss on
sale of securities that totaled $65,000 for the nine months ended March 31, 2004
as compared to a gain of $259,000 on the sale of securities
for the nine months ended March 31, 2003. Service charges on loans receivable
decreased by $303,000 for the nine months ended March 31, 2004 when compared to
the nine months ended March 31, 2003. The decrease in service charges on loans
was primarily due to a decrease in prepayment penalty revenue for the nine
months ended March 31, 2004 as compared to such revenue for the nine months
ended March 31, 2003. Partially offsetting these decreases in noninterest income
was an increase in service charges on deposit accounts that totaled $237,000 for
the nine months ended March 31, 2004 as compared to the nine months ended March
31, 2003. The increase in 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. Also offsetting the decreases
in noninterest income was an increase in gain on sale of loans. Gain on sale of
loans increased by $213,000, or 17.9%, to $1.4 million for the nine months ended
March 31, 2004 from $1.2 million for the nine months ended March 31, 2003. The
increase in gain on sale of loans was due to the sale of $37.1 million of
fixed-rate residential mortgage loans to a government sponsored agency during
the three months ended March 31, 2004. The net gain on the sale of these loans
totaled $791,000. The gain generated by this sale was partly offset by lower
gains from the origination and sale of current mortgage production during the
nine months ended March 31, 2004. Gains from the Company's ongoing origination
and concurrent sale of fixed rate mortgages to investors decreased by $412,000
for the nine months ended March 31, 2004 when compared to the nine months ended
March 31, 2003. This was due to a slowdown in mortgage refinancing activity
after the extended low market interest rate environment in the current fiscal
year period. Real estate-related income from the Company's subsidiaries also
decreased by $125,000 for the nine months ended March 31, 2004 as compared to
the nine months ended March 31, 2003 as a result of the slowdown in mortgage
activity in the current fiscal year.
Largely 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 $709,000, or 5.1%, to $13.1 million for the
nine months ended March 31, 2004 from $13.8 million for the nine months ended
March 31, 2003. The decrease in noninterest expense was partly due to a decrease
in expense for the amortization of mortgage servicing assets. Such amortization
expense totaled $270,000 for the nine months ended March 31, 2003, while no
expense was recorded for the nine months ended March 31, 2004 since these assets
had been fully amortized. Other noninterest expense also decreased due to a
decrease of $72,000 in recruiting expense and a decrease of $117,000 in per
account service fee expense for certain retail transaction accounts.
Additionally, losses on other real estate owned properties and repossessed
assets decreased by $125,000 for the nine months ended March 31, 2004 as
compared to the nine months ended March 31, 2003. Income before taxes decreased
by $94,000, or 1.4%, to $6.7 million for the nine months ended March 31, 2004
from $6.8 million for the nine months ended March 31, 2003. Taxes on income
totaled $2.2 million, or an effective tax rate of 33.1%, for the nine months
ended March 31, 2004 and $2.3 million, or an effective tax rate of 33.4% for the
nine months ended March 31, 2003.
Other Information
-----------------
Assets totaled $633.3 million and $634.9 million, respectively, at March 31,
2004 and 2003. Book value per share increased to $19.11 at March 31, 2004 from
$18.03 at March 31, 2003. Stockholders' equity to total assets was 11.42% and
11.20%, respectively, at March 31, 2004 and 2003. The Company had 3,785,272
shares outstanding at March 31, 2004.
On April 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 May 28, 2004 to stockholders of record on May 14, 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)
March 31, June 30, March 31,
2004 2003 2003
ASSETS (Unaudited) (Unaudited)
- ------
Cash and cash equivalents 62,287 34,287 35,558
Securities available-for-sale 59,691 78,526 94,617
Securities held-to-maturity 25,580 44,505 50,217
Loans receivable, net 425,568 415,267 398,558
Office property and equipment, net 13,404 13,166 13,309
Federal Home Loan Bank stock, at cost 6,230 5,707 5,707
Accrued interest receivable 2,528 2,488 2,672
Goodwill 18,524 18,524 18,524
Other assets 19,439 15,409 15,693
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Total assets $ 633,251 $ 627,879 $ 634,855
========= ========= =========
LIABILITIES
- -----------
Deposits 442,142 448,944 452,468
Advances from FHLB and other borrowings 113,249 102,387 103,895
Advance payments by borrowers for taxes and insurance 489 1,459 597
Accrued interest payable 1,652 1,795 2,513
Accrued expenses and other liabilities 3,394 3,633 4,300
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Total liabilities 560,926 558,218 563,773
STOCKHOLDERS' EQUITY
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Common stock, $.01 par value 49 49 49
Additional paid-in capital 37,004 36,537 36,459
Retained earnings, substantially restricted 51,416 47,901 47,099
Treasury stock, at cost - 1,148,990, 1,088,466 and
948,966 shares, respectively, at March 31, 2004,
June 30, 2003 and March 31, 2003 (15,450) (14,265) (11,793)
Accumulated other comprehensive income 420 710 594
Unearned ESOP (1,081) (1,186) (1,221)
Unearned RRP (33) (85) (105)
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Total stockholders' equity 72,325 69,661 71,082
--------- --------- ---------
Total liabilities and stockholders' equity $ 633,251 $ 627,879 $ 634,855
========= ========= =========
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Nine months ended
March 31, March 31,
-------------------- --------------------
2004 2003 2004 2003
------- ------- ------- -------
(Dollars in thousands) (Unaudited)
Total interest income $ 7,629 $ 8,440 $23,355 $27,072
Total interest expense 3,106 3,797 9,688 12,569
------- ------- ------- -------
Net interest income before provision 4,523 4,643 13,667 14,503
Less: provision for loan losses 450 200 1,075 1,430
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Net interest income after provision 4,073 4,443 12,592 13,073
Noninterest income 2,759 2,927 7,158 7,479
Noninterest expense 4,568 4,718 13,074 13,782
------- ------- ------- -------
Income before taxes 2,264 2,652 6,676 6,770
Taxes on income 751 870 2,211 2,263
------- ------- ------- -------
Reported net earnings $ 1,513 $ 1,782 $ 4,465 $ 4,507
======= ======= ======= =======
FIRST FEDERAL BANKSHARES, INC and SUBSIDIARIES
FINANCIAL HIGHLIGHTS
At or for the three months At or for the nine months
ended March 31, ended March 31,
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Financial condition data: 2004 2003 2004 2003
- ------------------------- ------------------ ----------------- ----------------- -----------------
(Dollars in thousands, except per share amounts) (Unaudited)
Average interest-earning assets $ 559,562 $ 562,725 $ 560,334 $ 567,316
Average interest-bearing liabilities 513,884 533,232 521,842 538,093
Average interest-earning assets to
average interest-bearing liabilities 108.89% 105.53% 107.38% 105.43%
Non-performing loans $ 4,818 $ 4,640
Non-performing loans to total loans 1.12% 1.16%
Non-performing assets 5,535 5,120
Non-performing assets to total assets 0.88% 0.73%
Allowance for loan losses 4,948 4,580
Allowance for loan losses to total loans 1.15% 1.14%
Shareholders' equity to assets 11.42% 11.20%
Selected operating data: (1)
- ----------------------------
Return on average assets 0.96% 1.13% 0.94% 0.94%
Return on average equity (2) 8.49% 9.96% 8.44% 8.41%
Net interest rate spread 3.10% 3.15% 3.12% 3.25%
Net interest margin (3) 3.26% 3.26% 3.27% 3.37%
Efficiency ratio (4) 63.30% 64.42% 62.83% 63.55%
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(1) Annualized except for efficiency ratio.
(2) Net income divided by average equity capital excluding average unrealized gains on available-for-sale securities.
(3) Tax-equivalent yield on interest-earning assets less interest cost on total deposits and borrowings.
(4) Noninterest expense, excluding minority interest, 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 $ 0.41 $ 0.46 $ 1.23 $ 1.15
Diluted $ 0.40 $ 0.45 $ 1.19 $ 1.12
Book value per share $ 19.11 $ 18.03 $ 19.11 $ 18.03
Market price per share:
High for the period $ 25.10 $ 15.75 $ 25.24 $ 15.75
Low for the period $ 20.70 $ 14.62 $ 17.55 $ 11.76
Close at end of period $ 20.70 $ 15.28 $ 20.70 $ 15.28
Cash dividends declared per share $ 0.09 $ 0.08 $ 0.27 $ 0.24
Weighted-average common shares outstanding:
Basic 3,654,457 3,837,324 3,643,980 3,931,839
Diluted 3,760,046 3,929,413 3,756,170 4,019,180