EXHIBIT 99.1
PRESS RELEASE
January 25, 2005
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, INC. ANNOUNCES EARNINGS AND
DECLARES DIVIDEND
Sioux City, Iowa. First Federal Bankshares, Inc. (the "Company") (Nasdaq
National Market - "FFSX") reported net earnings of $986,000, or basic and
diluted earnings per share of $0.28 and $0.27, respectively, for the three
months ended December 31, 2004. The Company reported net earnings of $1.4
million, or basic and diluted earnings per share of $0.39 and $0.38,
respectively, for the three months ended December 31, 2003. Net earnings totaled
$3.1 million and $3.0 million, respectively, for the six months ended December
31, 2004 and 2003. Basic and diluted earnings per share were $0.87 and $0.85,
respectively, for the six months ended December 31, 2004 and $0.81 and $0.79,
respectively, for the six months ended December 31, 2003.
Discussion of Operating Results for the Three Months Ended December 31, 2004
----------------------------------------------------------------------------
Net interest income before provision for loan losses decreased by $276,000, or
6.1%, to $4.3 million for the three months ended December 31, 2004 from $4.5
million for the three months ended December 31, 2003. The decrease in net
interest income was largely due to a decrease in the average balance of
interest-earning assets. The average balance of interest-earning assets
decreased by $47.0 million, or 8.4%, to $510.9 million for the three months
ended December 31, 2004 from $557.9 million for the three months ended December
31, 2003. The decrease in average interest-earning assets and a corresponding
decrease in average interest-bearing deposit balances resulted largely from the
Company's sale of two branch offices in September 2004 in which the purchaser
assumed deposit liabilities of $27.1 million and acquired loans totaling $17.0
million. The net yield on average interest-earning assets improved by seven
basis points to 3.39% for the three months ended December 31, 2004 from 3.32%
for the three months ended December 31, 2003, due in part to the lower level of
average interest-earning assets which is the denominator of that yield
measurement.
Provision for loan loss expense totaled $105,000 and $100,000, respectively, for
the three months ended December 31, 2004 and 2003. Non-performing assets
decreased by $5.0 million to $4.9 million, or 0.86% of total assets, at December
31, 2004 from $9.9 million, or 1.57% of total assets, at December 31, 2003. The
decrease in non-performing assets was largely due to the sale and subsequent
payoff of two troubled commercial real-estate properties with loan balances
totaling $3.5 million. In addition, a local commercial and industrial borrower
with a loan balance of $1.0 million experienced improved financial results and
is currently performing. Allowance for loan losses as a percent of total loans
was 1.14% and 1.05%, respectively, at December 31, 2004 and 2003.
Noninterest income decreased by $189,000, or 9.2%, to $1.9 million for the three
months ended December 31, 2004 from $2.1 million for the three months ended
December 31, 2003. The decrease in noninterest income was primarily due to
decreases in service charge income and income from real estate-related
activities. Service charges on deposit accounts decreased by $78,000, or 7.8%,
for the three months ended December 31, 2004 as compared to the three months
ended December 31, 2003 largely due to a reduction in the number of transaction
accounts subject to such service charges. Approximately 2,500 transaction
accounts were sold in the September 2004 sale of two branch offices. Service
charges on loans decreased by $33,000, or 20.0%, to $134,000 for the three
months ended December 31, 2004 from $167,000 for the three months ended December
31, 2003 due to a slowdown in mortgage originations and refinances after an
extended period of historically low interest rates. The slowdown in mortgage
activity also impacted the Company's income from real estate-related activities
such as abstracting and escrow services. Income from real estate-related
activities decreased by $170,000, or 51.9%, to $157,000 for the three months
ended December 31, 2004 from $327,000 for the three months ended December 31,
2003. Partially offsetting the decreases in service charge and real
estate-related income was a $30,000 gain on sale of real estate held for
development for the three months ended December 31, 2004. No gains on the sale
of real estate held for development were recorded for the three months ended
December 31, 2003. In addition, no losses on the sale of securities were
recorded for the three months ended December 31, 2004 as compared to a loss of
$33,000 for the three months ended December 31, 2003.
Noninterest expense increased by $201,000, or 4.6%, to $4.6 million for the
three months ended December 31, 2004 from $4.4 million for the three months
ended December 31, 2003. The increase in noninterest expense was partly due to
an increase of $80,000, or 3.1%, in compensation and benefits expense to $2.7
million for the three months ended December 31, 2004 from $2.6 million for the
three months ended December 31, 2003. The increase in compensation and benefits
expense was largely due to annual salary increases and to an increase in group
insurance premium expense.
Income before income taxes decreased by $671,000, or 32.2%, to $1.4 million for
the three months ended December 31, 2004 from $2.1 million for the three months
ended December 31, 2003. Income taxes totaled $430,000, or an effective tax rate
of 30.4%, for the three months ended December 31, 2004 and $673,000, or an
effective tax rate of 32.2%, for the three months ended December 31, 2003. The
effective tax rate decreased for the three months ended December 31, 2004
largely because tax-exempt income comprised a larger percentage of pre-tax
income for that period than for the three months ended December 31, 2003.
2
Discussion of Operating Results for the Six Months Ended December 31, 2004
--------------------------------------------------------------------------
Net interest income before provision for loan losses decreased by $506,000, or
5.5%, to $8.6 million for the six months ended December 31, 2004 from $9.1
million for the six months ended December 31, 2003. The decrease in net interest
income was largely due to a decrease in the average balance of interest-earning
assets. The average balance of interest-earning assets decreased by $29.7
million, or 5.3%, to $528.5 million for the six months ended December 31, 2004
from $558.2 million for the six months ended December 31, 2003. The decrease in
average interest-earning assets and a corresponding decrease in average
interest-bearing deposit balances resulted largely from the sale of two branch
offices in September 2004. The net yield on average interest-earning assets was
3.32% for both the six months ended December 31, 2004 and 2003.
Provision for loan loss expense increased by $240,000, or 38.4%, to $865,000 for
the six months ended December 31, 2004 from $625,000 for the six months ended
December 31, 2003. The increase in provision expense was primarily due to the
identification of weaknesses in the credits of three commercial borrowers for
which the analysis suggests collateral deficiencies.
Noninterest income increased by $1.5 million, or 34.0%, to $5.9 million for the
six months ended December 31, 2004 from $4.4 million for the six months ended
December 31, 2003. The increase in noninterest income was primarily due to a
pre-tax gain of $2.2 million on the sale of two northwest Iowa branch offices to
a local financial institution that was completed on September 20, 2004. The
purchaser assumed deposit liabilities of $27.1 million and acquired loans
totaling $17.0 million in addition to the buildings and certain equipment.
Partly offsetting the gain on the sale of branch deposit liabilities were
decreases in other types of noninterest income. Service charge income on deposit
accounts decreased by $127,000 for the three months ended December 31, 2004 as
compared to the three months ended December 31, 2003 largely due to a reduction
in the number of transaction accounts subject to such service charges. Mortgage
loan originations decreased by $32.6 million, or 57.0%, to $24.6 million for the
six months ended December 31, 2004 from $57.2 million for the six months ended
December 31, 2003. Additionally, mortgage refinances as a percent of
originations decreased to 33.7% for the six months ended December 31, 2004 from
61.8% for the six months ended December 31, 2003. Gain on sale of loans and
services charges on loans decreased by $64,000 and $58,000, respectively, for
the six months ended December 31, 2004 as compared to the six months ended
December 31, 2003 due to the slowdown in mortgage originations and refinances.
This 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 $346,000, or 50.2%, to $343,000
for the six months ended December 31, 2004 from $689,000 for the six months
ended December 31, 2003. In addition, the Company recorded a loss on sale of
securities of $121,000 for the six months ended December 31, 2004 compared to a
loss on sale of securities of $65,000 for the six months ended December 31,
2003. Securities' sales in September 2004 provided cash for the transfer of the
deposit liabilities of the branch offices sold during the quarter ended
September 30, 2004.
Noninterest expense increased by $451,000, or 5.3%, to $9.0 million for the six
months ended December 31, 2004 from $8.5 million for the six months ended
December 31, 2003. The increase in noninterest expense was primarily due to an
increase of $301,000, or 6.2%, in compensation and benefits expenses to $5.2
million for the six months ended December 31, 2004 from $4.9 million for the six
months ended December 31, 2003. The increase in compensation
3
and benefits expense was partly due to an increase in the Company's pension plan
funding requirements and in the cost of the employer portion of group insurance
premiums. In addition, the slowdown in mortgage origination activity in the
current-year period resulted in a decrease of $224,000 in contra-expense for
payroll-related direct origination costs for the six months ended December 31,
2004 as compared to the six months ended December 31, 2003.
Income before income taxes increased by $297,000, or 6.7%, to $4.7 million for
the six months ended December 31, 2004 from $4.4 million for the six months
ended December 31, 2003. Income taxes totaled $1.6 million, or an effective tax
rate of 33.3%, for the six months ended December 31, 2004 and $1.5 million, or
an effective tax rate of 33.1%, for the six months ended December 31, 2003.
Dividend
--------
On January 20, 2005, the Company's Board of Directors declared a quarterly
dividend of $0.10 per share, the same as that distributed last quarter. The
dividend is payable on February 28, 2005 to stockholders of record on February
14, 2005.
Other Information
-----------------
Assets totaled $572.6 million and $634.6 million, respectively, at December 31,
2004 and 2003. Book value per share increased to $19.69 at December 31, 2004
from $18.76 at December 31, 2003. Stockholders' equity to total assets was
12.56% and 11.15%, respectively, at December 31, 2004 and 2003. The Company had
3,652,041 shares outstanding at December 31, 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 eight 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.
4
FIRST FEDERAL BANKSHARES, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
December 31, June 30, December 31,
2004 2004 2003
------------ --------- ------------
ASSETS (Dollars in thousands)
- ------
Cash and cash equivalents 10,262 18,858 24,497
Securities available-for-sale 54,851 84,693 62,046
Securities held-to-maturity 19,385 23,186 27,045
Loans receivable, net 427,732 431,857 459,681
Office property and equipment, net 12,898 13,277 13,576
Federal Home Loan Bank stock, at cost 5,957 6,096 6,402
Accrued interest receivable 2,232 2,230 2,533
Goodwill 18,417 18,524 18,524
Other assets 20,877 16,801 20,341
--------- --------- ---------
Total assets $ 572,611 $ 615,522 $ 634,645
========= ========= =========
LIABILITIES
Deposits 388,058 429,209 440,223
Advances from FHLB and other borrowings 106,892 109,886 118,150
Advance payments by borrowers for taxes and insurance 913 1,119 1,295
Accrued interest payable 939 1,207 1,346
Accrued expenses and other liabilities 3,909 2,643 2,896
--------- --------- ---------
Total liabilities 500,711 544,064 563,910
STOCKHOLDERS' EQUITY
Common stock, $.01 par value 50 49 49
Additional paid-in capital 37,581 37,086 36,819
Retained earnings, substantially restricted 54,663 52,242 50,233
Treasury stock, at cost - 1,317,188, 1,198,990 and
1,148,990 shares, respectively, at December 31, 2004,
June 30, 2004 and December 31, 2003 (19,398) (16,519) (15,450)
Accumulated other comprehensive income 141 (330) 240
Unearned ESOP (980) (1,045) (1,115)
Unearned RRP (157) (25) (41)
--------- --------- ---------
Total stockholders' equity 71,900 71,458 70,735
--------- --------- ---------
Total liabilities and stockholders' equity $ 572,611 $ 615,522 $ 634,645
========= ========= =========
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three months ended Six months ended
December 31, December 31,
-------------------------- ---------------------------
2004 2003 2004 2003
------- ------- ------- -------
(Dollars in thousands)
----------------------------------------------------------------
Total interest income $ 7,044 $ 7,764 $14,307 $15,726
Total interest expense 2,783 3,227 5,669 6,582
------- ------- ------- -------
Net interest income 4,261 4,537 8,638 9,144
Less: provision for loan losses 105 100 865 625
------- ------- ------- -------
Net interest income after provision 4,156 4,437 7,773 8,519
Noninterest income 1,862 2,051 5,893 4,398
Noninterest expense 4,602 4,401 8,956 8,505
------- ------- ------- -------
Income before income taxes 1,416 2,087 4,710 4,412
Taxes on income 430 673 1,567 1,460
------- ------- ------- -------
Net income $ 986 $ 1,414 $ 3,143 $ 2,952
======= ======= ======= =======
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: 2004 2003 2004 2003
- ------------------------- ------------- ---------------- ---------------- ----------------
(Dollars in thousands, except per share amounts)
----------------------------------------------------------------------
Average interest-earning assets $510,883 $ 557,901 $ 528,472 $ 558,171
Average interest-bearing liabilities 453,730 517,480 472,396 525,763
Average interest-earning assets to
average interest-bearing liabilities 112.60% 107.81% 111.87% 106.16%
Non-performing loans $3,975 $9,313 $3,975 $9,313
Non-performing loans to total loans 0.92% 2.00% 0.92% 2.00%
Non-performing assets $4,913 $ 9,941 $4,913 $9,941
Non-performing assets to total assets 0.86% 1.57% 0.86% 1.57%
Allowance for loan losses $4,925 $ 4,863 $4,925 $4,863
Allowance for loan losses to total loans 1.14% 1.05% 1.14% 1.05%
Shareholders' equity to assets 12.56% 11.15% 12.56% 11.15%
Selected operating data: (1)
- ----------------------------
Return on average assets 0.69% 0.90% 1.06% 0.93%
Return on average equity (2) 5.43% 7.99% 8.67% 8.39%
Net interest rate spread 3.09% 3.12% 3.04% 3.18%
Net yield on average interest-earning
assets (3) 3.39% 3.30% 3.32% 3.32%
Efficiency ratio (4) 75.26% 66.82% 71.62% 62.57%
- -----------------------------------------------
(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, tax-effected, divided by average interest-earning
assets.
(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, fixed assets and branches.
Per share data:
- ---------------
Earnings per share:
Basic $ 0.28 $ 0.39 $ 0.87 $ 0.81
Diluted $ 0.27 $ 0.38 $ 0.85 $ 0.79
Book value per share $ 19.69 $ 18.76 $ 19.69 $ 18.76
Market price per share:
High for the period $ 24.00 $ 25.24 $ 24.00 $ 25.24
Low for the period $ 22.39 $ 21.57 $ 20.00 $ 17.55
Close at end of period $ 22.80 $ 24.66 $ 22.80 $ 24.66
Cash dividends declared per share $ 0.10 $ 0.09 $ 0.10 $ 0.17
Weighted-average common shares outstanding:
Basic 3,567,109 3,637,478 3,610,183 3,638,798
Diluted 3,640,751 3,753,547 3,690,135 3,754,289