EXHIBIT 99.1
PRESS RELEASE
July 27, 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 $1.2 million, or basic and
diluted earnings per share of $0.32 and $0.31, respectively, for the three
months ended June 30, 2004. This compares to net earnings of $1.1 million, or
basic and diluted earnings per share of $0.30 and $0.29, respectively, for the
three months ended June 30, 2003. Net earnings totaled $5.6 million for each of
the twelve months ended June 30, 2004 and 2003. Basic and diluted earnings per
share were $1.54 and $1.50, respectively, for the twelve months ended June 30,
2004 and $1.44 and $1.41, respectively, for the twelve months ended June 30,
2003.
The Company announced a quarterly dividend of $0.10 per share, an increase of
$0.01 over the previous quarter.
Discussion of Operating Results for the Three Months Ended June 30, 2004
------------------------------------------------------------------------
Net interest income before provision for loan losses totaled $4.2 million and
$4.5 million, respectively, for the three months ended June 30, 2004 and 2003.
The Company's net interest margin decreased by 30 basis points to 3.02% for the
three months ended June 30, 2004 from 3.32% for the three months ended June 30,
2003. The decrease in the net interest margin was largely due to the sale of
$37.1 million of fixed-rate residential loans with 15-year terms during the
immediately preceding quarter that ended March 31, 2004. The Company sold the
loans in order to mitigate interest rate risk in a potential rising market
interest rate environment. The loans sold had an average yield of 4.92% while
the proceeds of the sale were received and invested in a historically low market
interest rate environment thus negatively impacting the Company's net interest
margin in the short term. The Company expects to re-deploy the loan sale
proceeds into higher-yielding loans within the next nine months.
Provision for loan loss expense totaled $150,000 and $300,000, respectively, for
the three months ended June 30, 2004 and 2003. The Company's total classified
assets decreased by $1.7 million, or 18.3%, to $7.4 million at June 30, 2004
from $9.0 million at June 30, 2003.
Noninterest income decreased by $111,000, or 4.8%, to $2.2 million for the three
months ended June 30, 2004 from $2.3 million for the three months ended June 30,
2003. The decrease in noninterest income was partly due to a decrease in gain on
sale of loans as mortgage origination and refinancing activity slowed after an
extended period of historically low market interest rates. Gain on sale of loans
decreased by $146,000, or 41.5%, to $206,000 for the three months ended June 30,
2004 from $352,000 for the three months ended June 30, 2003. The slowdown in
mortgage activity also impacted the Company's income from other real
estate-related activities such as abstracting and escrow services. Income from
real estate-related activities decreased by $111,000, or 29.5%, to $266,000 for
the three months ended June 30, 2004 from $377,000 for the three months ended
June 30, 2003. Partially offsetting the decreases in noninterest income was a
gain on sale of real estate held for development that totaled $90,000 for the
three months ended June 30, 2004. No gain on sale of real estate held for
development was recorded for the three months ended June 30, 2003.
More than offsetting the decrease in noninterest income was a decrease in
noninterest expense. Noninterest expense decreased by $360,000, or 7.4%, to $4.5
million for the three months ended June 30, 2004 from $4.9 million for the three
months ended June 30, 2003. During the three months ended June 30, 2004 the
Company reduced expense for contributions and various professional services by
$150,000 when compared to the three months ended June 30, 2003. In addition, a
$49,000 decrease in per account expenses related to certain retail transaction
accounts and a $30,000 decrease in loan origination expense resulting from
decreases in loan production volumes for the three months ended June 30, 2004 as
compared to the three months ended June 30, 2003 contributed to the decrease in
noninterest expense.
Income before taxes increased by $100,000, or 6.1%, to $1.7 million for the
three months ended June 30, 2004 from $1.6 million for the three months ended
June 30, 2003. Taxes on income totaled $577,000, or an effective tax rate of
33.4%, for the three months ended June 30, 2004 and $531,000, or an effective
tax rate of 32.6%, for the three months ended June 30, 2003.
Discussion of Operating Results for the Twelve Months Ended June 30, 2004
-------------------------------------------------------------------------
Net interest income before provision for loan losses decreased by $1.1 million,
or 6.0%, to $17.9 million for the twelve months ended June 30, 2004 from $19.0
million for the twelve months ended June 30, 2003. The Company's net interest
margin compressed by 18 basis points to 3.21% for the twelve months ended June
30, 2004 from 3.39% for the twelve months ended June 30, 2003 as market interest
rates remained at historically low levels. In addition, the net interest margin
was negatively impacted by the sale of $37.1 million in fixed-rate residential
loans in March 2004.
Provision for loan loss expense decreased by $505,000, or 29.2%, to $1.2 million
for the twelve months ended June 30, 2004 from $1.7 million for the twelve
months ended June 30, 2003. Non-performing loans totaled $4.3 million, or 1.0%
of total loans, at June 30, 2004 and $4.7 million, or 1.1% of total loans, at
June 30, 2003. Net charge-offs decreased by $175,000 to $1.5 million for the
twelve months ended June 30, 2004 from $1.7 million for the twelve months ended
June 30, 2003.
Noninterest income decreased by $433,000, or 4.4%, to $9.4 million for the
twelve months ended June 30, 2004 from $9.8 million for the twelve months ended
June 30, 2003. The decrease in noninterest income was largely due to a net loss
on sale of securities that totaled
$65,000 for the twelve months ended June 30, 2004 as compared to a gain of
$309,000 on the sale of securities for the twelve months ended June 30, 2003.
Service charges on loans receivable decreased by $270,000 for the twelve months
ended June 30, 2004 when compared to the twelve months ended June 30, 2003. The
decrease in service charges on loans was primarily due to a decrease of $244,000
in prepayment penalty revenue for the twelve months ended June 30, 2004 as
compared to such revenue for the twelve months ended June 30, 2003. Partially
offsetting these decreases in noninterest income was a $229,000 increase in
service charges on deposit accounts for the twelve months ended June 30, 2004 as
compared to the twelve months ended June 30, 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 partially offsetting the decreases in noninterest income
was an increase in gain on sale of loans. Gain on sale of loans increased by
$67,000, or 4.3%, to $1.6 million for the twelve months ended June 30, 2004 from
$1.5 million for the twelve months ended June 30, 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 largely offset by lower gains from the
origination and sale of current mortgage production during the twelve months
ended June 30, 2004. Gains from the Company's ongoing origination and concurrent
sale of fixed rate mortgages to investors decreased by $724,000 for the twelve
months ended June 30, 2004 when compared to the twelve months ended June 30,
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
$236,000 for the twelve months ended June 30, 2004 as compared to the twelve
months ended June 30, 2003 as a result of the slowdown in mortgage activity in
the current fiscal year.
A decrease in noninterest expense more than offset the decreases in net interest
income after provision for losses on loans and noninterest income. Noninterest
expense decreased by $1.1 million, or 5.7%, to $17.6 million for the twelve
months ended June 30, 2004 from $18.7 million for the twelve months ended June
30, 2003. The decrease in noninterest expense was partly due to a decrease in
expense for the amortization of mortgage servicing assets which had been fully
amortized in fiscal 2003. In March 2004 a $268,000 mortgage servicing asset was
recorded in conjunction with the sale of $37.1 million in residential loans.
Such amortization expense totaled $8,000 and $332,000, respectively, for the
twelve months ended June 30, 2004 and 2003. Other noninterest expense also
decreased due to a decrease of $124,000 in recruiting expense, a decrease of
$165,000 in per account service fee expense for certain retail transaction
accounts and a $79,000 decrease in loan origination expense resulting from
decreases in loan production volumes for fiscal 2004 as compared to fiscal 2003.
During fiscal 2004, the Company reduced expense for contributions and various
professional services by $296,000 when compared to fiscal 2003. Additionally,
losses on other real estate owned properties and repossessed assets decreased by
$105,000 for the twelve months ended June 30, 2004 as compared to the twelve
months ended June 30, 2003.
Income before taxes totaled $8.4 million for each of the twelve months ended
June 30, 2004 and 2003. Taxes on income totaled $2.8 million, or an effective
tax rate of 33.2%, for the twelve months ended June 30, 2004 and $2.8 million,
or an effective tax rate of 33.3% for the twelve months ended June 30, 2003.
Other Information
-----------------
Assets totaled $615.5 million and $627.9 million, respectively, at June 30, 2004
and 2003. Book value per share increased to $19.10 at June 30, 2004 from $18.29
at June 30, 2003. Stockholders' equity to total assets was 11.61% and 11.09%,
respectively, at June 30, 2004 and 2003. The Company had 3,740,272 shares
outstanding at June 30, 2004.
On July 22, 2004, the Company's Board of Directors declared a quarterly dividend
of $0.10 per share, an increase of $0.01 over that distributed last quarter. The
dividend is payable on August 31, 2004 to stockholders of record on August 17,
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
June 30, June 30,
2004 2003
---------- ---------
(Dollars in thousands)
----------------------
ASSETS (Unaudited)
- ------ -----------
Cash and cash equivalents 18,858 34,287
Securities available-for-sale 84,693 78,526
Securities held-to-maturity 23,186 44,505
Loans receivable, net 431,857 415,267
Office property and equipment, net 13,277 13,166
Federal Home Loan Bank stock, at cost 6,096 5,707
Accrued interest receivable 2,230 2,488
Goodwill 18,524 18,524
Other assets 16,801 15,409
--------- ---------
Total assets $ 615,522 $ 627,879
========= =========
LIABILITIES
Deposits 429,209 448,944
Advances from FHLB and other borrowings 109,886 102,387
Advance payments by borrowers for taxes and insurance 1,119 1,459
Accrued interest payable 1,207 1,795
Accrued expenses and other liabilities 2,643 3,633
--------- ---------
Total liabilities 544,064 558,218
STOCKHOLDERS' EQUITY
Common stock, $.01 par value 49 49
Additional paid-in capital 37,086 36,537
Retained earnings, substantially restricted 52,242 47,901
Treasury stock, at cost - 1,198,990 and 1,088,466 shares
at June 30, 2004 and June 30, 2003, respectively (16,519) (14,265)
Accumulated other comprehensive income (330) 710
Unearned ESOP (1,045) (1,186)
Unearned RRP (25) (85)
--------- ---------
Total stockholders' equity 71,458 69,661
--------- ---------
Total liabilities and stockholders' equity $ 615,522 $ 627,879
========= =========
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three months ended Twelve months ended
June 30, June 30,
--------------------- ------------------
2004 2003 2004 2003
--------------------- ------------------
(Dollars in thousands)
-----------------------------------------
(Unaudited) (Unaudited)
Total interest income $ 7,171 $ 8,045 $30,526 $35,117
Total interest expense 2,978 3,553 12,666 16,122
------- ------- ------- -------
Net interest income before provision 4,193 4,492 17,860 18,995
Less: provision for loan losses 150 300 1,225 1,730
------- ------- ------- -------
Net interest income after provision 4,043 4,192 16,635 17,265
Noninterest income 2,206 2,317 9,364 9,796
Noninterest expense 4,519 4,880 17,593 18,662
------- ------- ------- -------
Income before taxes 1,730 1,629 8,406 8,399
Taxes on income 577 531 2,788 2,794
------- ------- ------- -------
Reported net earnings $ 1,153 $ 1,098 $ 5,618 $ 5,605
======= ======= ======= =======
FIRST FEDERAL BANKSHARES, INC and SUBSIDIARIES
FINANCIAL HIGHLIGHTS
At or for the three months At or for the twelve months
ended June 30, ended June 30,
------------ --------------- --------------- -------------------
2004 2003 2004 2003
------------ --------------- ------ -------- -------------------
(Unaudited) (Dollars in thousands, except per share amounts)
----------------------------------------------------------------
Financial condition data:
- -------------------------
Average interest-earning assets $ 557,529 $ 550,514 $ 559,643 $ 563,126
Average interest-bearing liabilities 507,977 528,247 518,396 535,242
Average interest-earning assets to
average interest-bearing liabilities 109.75% 104.22% 107.96% 105.21%
Non-performing loans $ 4,322 $4,688
Non-performing loans to total loans 0.99% 1.13%
Non-performing assets 5,016 5,100
Non-performing assets to total assets 0.81% 0.81%
Allowance for loan losses 4,316 4,615
Allowance for loan losses to total loans 0.99% 1.10%
Shareholders' equity to assets 11.61% 11.09%
Selected operating data: (1)
- ----------------------------
Return on average assets 0.74% 0.70% 0.89% 0.88%
Return on average equity (2) 6.43% 6.27% 7.93% 7.91%
Net interest rate spread 2.86% 3.16% 3.06% 3.22%
Net interest margin (3) 3.02% 3.32% 3.21% 3.39%
Efficiency ratio (4) 70.74% 61.74% 64.68% 65.49%
- -------------------------------------------
(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 $ 0.32 $ 0.30 $ 1.54 $ 1.44
Diluted $ 0.31 $ 0.29 $ 1.50 $ 1.41
Book value per share $ 19.10 $ 18.29 $ 19.10 $ 18.29
Market price per share:
High for the period $ 24.00 $ 19.40 $ 25.24 $ 19.40
Low for the period $ 20.60 $ 15.40 $ 17.55 $ 11.76
Close at end of period $ 22.63 $ 17.64 $ 22.63 $ 17.64
Cash dividends declared per share $ 0.09 $ 0.08 $ 0.36 $ 0.32
Weighted-average common shares outstanding:
Basic 3,639,953 3,722,185 3,642,977 3,879,569
Diluted 3,737,540 3,827,474 3,756,049 3,971,396