EXHIBIT 99.1
PRESS RELEASE
April 25, 2006
For Immediate Release
For Further Information Contact: Michael W. Dosland
President and Chief Executive Officer
First Federal Bankshares, Inc.
329 Pierce Street, P.O. Box 897
Sioux City, IA 51102
712.277.0222
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 $766,000, or basic and
diluted earnings per share of $0.23 each, for the three months ended March 31,
2006 compared to net earnings of $898,000, or basic and diluted earnings per
share of $0.25, for the three months ended March 31, 2005. For the nine months
ended March 31, 2006 net earnings totaled $2.6 million, or basic and diluted
earnings per share of $0.76 and $0.75, respectively. This compares to $4.0
million, or basic and diluted earnings per share of $1.13 and $1.11,
respectively, for the same period last year. During the nine months ended March
31, 2005 a gain of $1.4 million, net of tax effect, or basic and diluted
earnings per share of $0.38, from the sale of two bank branch offices favorably
impacted the Company's net earnings. Excluding the branch office sale in the
prior-year period, net earnings for the nine months ended March 31, 2005 would
have been $2.7 million, or basic and diluted earnings per share of $0.75 and
$0.73, respectively.
Discussion of Operating Results for the Three Months ended March 31, 2006
-------------------------------------------------------------------------
Net interest income before provision for loan losses totaled $4.4 million for
each of the three months ended March 31, 2006 and 2005. The average balance of
interest-earning assets increased by $16.1 million, or 3.1%, for the three
months ended March 31, 2006 as compared to the three months ended March 31,
2005. The increase in the average balance of interest-earning assets in the
current-year period was primarily due to an increase of $28.2 million in the
average balance of loans that was partially offset by a $16.7 million decrease
in the average balance of investment securities. The average balance of
interest-bearing liabilities increased by $14.7 million, or 3.2%, for the three
months ended March 31, 2006 as compared to the same period of the prior year.
The increase in the average balance of interest-bearing liabilities in the
current-year period was due to an increase of $23.7 million in the average
balance of deposits that was partially offset by a $9.0 million decrease in the
average balance of borrowings. The yield on interest-earning assets increased by
52 basis points to 6.27% for the three months ended March 31, 2006 from 5.75%
for the three months ended March 31, 2005 as continued rate increases were
implemented by the Federal Reserve Board. The cost of interest-bearing
liabilities increased more rapidly than yields on earning assets. The cost of
interest-bearing liabilities increased by 74 basis points to 3.31% for the three
months ended March 31, 2006 from 2.57% for the three months ended March 31,
2005. As a result, the interest rate spread decreased by 22 basis points to
2.96% for the three months ended March 31, 2006 from 3.18% for the three months
ended March 31, 2005.
Provision for loan loss expense increased to $320,000 for the three months ended
March 31, 2006 from $130,000 for the three months ended March 31, 2005.
Non-performing loans increased to $4.6 million, or 0.99% of total loans, at
March 31, 2006 from $2.8 million, or 0.63% of total loans at March 31, 2005
primarily due to the loans of two commercial borrowers that were placed on
nonaccrual status subsequent to March 31, 2005.
Noninterest income decreased by $173,000, or 10.9%, to $1.4 million for the
three months ended March 31, 2006 from $1.6 million for the three months ended
March 31, 2005. Service charges on deposit accounts decreased by $96,000, or
12.1%, and gain on sale of loans deceased by $31,000, or 25.0%, for the three
months ended March 31, 2006 as compared to the three months ended March 31,
2005. The decrease in service charges on deposit accounts was primarily due to a
decrease in transaction accounts subject to such service charges that resulted
partly from the bank branch office sales in September 2004 as discussed in a
subsequent paragraph. The decrease in gain on sale of loans resulted primarily
from lower origination volumes in the current-year period as loans sold to
investors decreased by $848,000 to $6.2 million for the three months ended March
31, 2006 from $7.1 million for the three months ended March 31, 2005.
Noninterest expense decreased by $116,000, or 2.5%, to $4.5 million for the
three months ended March 31, 2006 from $4.6 million for the three months ended
March 31, 2005. Compensation and benefits expense decreased by $83,000, or 3.1%,
as the number of full-time-equivalent employees decreased to 188 at March 31,
2006 from 207 at March 31, 2005. In addition, advertising expense decreased by
$40,000, or 29.6%, to $95,000 for the three months ended March 31, 2006 from
$136,000 for the three months ended March 31, 2005.
Income before income taxes decreased by $275,000, or 21.2%, to $1.0 million for
the three months ended March 31, 2006 from $1.3 million for the three months
ended March 31, 2005. Income tax expense totaled $255,000, or an effective tax
rate of 25.0%, and $397,000, or an effective tax rate of 30.7%, for the three
months ended March 31, 2006 and 2005, respectively. The effective tax rate
decreased for the current-year period primarily because tax-exempt income
comprised a larger percentage of pre-tax income for the three months ended March
31, 2006 than for the three months ended March 31, 2005. The increase in
tax-exempt income was due to an increase in the balance of tax-exempt loans and
the resulting increase in tax-exempt interest income during the current-year
period.
Discussion of Operating Results for the Nine Months ended March 31, 2006
------------------------------------------------------------------------
Net interest income before provision for loan losses decreased by $135,000, or
1.0%, to $12.9 million for the nine months ended March 31, 2006 from $13.0
million for the nine months ended March 31, 2005. The decrease in net interest
income was primarily due to a decrease in the interest rate spread as the cost
of interest-bearing liabilities increased more rapidly than the yield on
interest-earning assets. The cost of interest-bearing deposits increased by 86
basis points to 2.75% for the nine months ended March 31, 2006 from 1.89% for
the nine months ended March 31, 2005 primarily due to increases in market
interest rates as the Federal Reserve continued its string of rate increases.
The yield on interest-earning assets increased by 51 basis points to 6.04% for
the nine months ended March 31, 2006 from 5.53% for the nine months ended March
31, 2005. Increases in the average balance of interest earning assets partially
offset the decrease in net interest income due to interest rate spread. The
average balance of interest-earning assets increased by $4.2 million, or 0.1%,
for the nine months ended March 31, 2006 as compared to the nine months ended
March 31, 2005. The increase in the average balance of interest-earning assets
in the current-year period was primarily due to an increase of $24.3 million in
the average balance of loans that was largely offset by a $23.4 million decrease
in the average balance of investment securities. This change in the mix of
interest-earning assets contributed to the increase in the yield on
interest-
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earning assets since loans generally carry higher yields than investment
securities. The average balance of interest-bearing liabilities decreased by
$1.8 million for the nine months ended March 31, 2006 as compared to the same
period of the prior year. The decrease in the average balance of
interest-bearing liabilities in the current-year period was due to a decrease of
$6.5 million in the average balance of borrowings that was largely offset by a
$4.7 million increase in the average balance of deposits.
Provision for loan loss expense increased by $75,000, or 7.5%, to $1.1 million
for the nine months ended March 31, 2006 from $1.0 million for the nine months
ended March 31, 2005. Non-performing loans increased to $4.6 million, or 0.99%
of total loans, at March 31, 2006 from $2.8 million, or 0.63% of total loans at
March 31, 2005 primarily due to the loans of two commercial borrowers that were
placed on nonaccrual status subsequent to March 31, 2005.
Noninterest income decreased by $2.8 million, or 36.8%, to $4.7 million for the
nine months ended March 31, 2006 from $7.5 million for the nine months ended
March 31, 2005. The decrease in noninterest income was primarily due to a
prior-year pre-tax gain of $2.2 million on the sale of two northwest Iowa branch
offices that was completed in September 2004. Service charges on deposit
accounts decreased by $406,000, or 14.9%, for the nine months ended March 31,
2006 as compared to the nine months ended March 31, 2005 due to a decrease in
transaction accounts subject to such service charges that resulted partly from
the branch office sale in 2004.
Noninterest expense decreased by $516,000, or 3.8%, to $13.0 million for the
nine months ended March 31, 2006 from $13.5 million for the nine months ended
March 31, 2005. Compensation and benefits expense decreased by $301,000, or
3.8%, for the nine months ended March 31, 2006 as compared to the nine months
ended March 31, 2005 due to the decrease in the number of full-time-equivalent
employees as mentioned in the three-month discussion. Other noninterest expense
for the prior-year period ended March 31, 2005 was higher due to a loss on real
estate owned totaling $94,000 and a charge of $68,000 for a credit life
insurance settlement. In addition, fees to a third-party vendor for support
services related to retail deposit account programs decreased by approximately
$70,000 for the nine months ended March 31, 2006 as the contract expired in
November 2004 and was not renewed.
Income before income taxes decreased by $2.5 million, or 40.8%, to $3.6 million
for the nine months ended March 31, 2006 from $6.0 million for the nine months
ended March 31, 2005 primarily due to the decrease in noninterest income between
the two periods as a result of the bank branch office sales previously mentioned
in the discussion of noninterest income. Income tax expense totaled $966,000, or
an effective tax rate of 27.2%, and $2.0 million, or an effective tax rate of
32.7%, for the nine months ended March 31, 2006 and 2005, respectively. The
effective tax rate decreased for the current-year period primarily because
tax-exempt income comprised a larger percentage of pre-tax income for the nine
months ended March 31, 2006 than for the nine months ended March 31, 2005. The
increase in tax-exempt income was due to an increase in the balance of
tax-exempt loans and the resulting increase in tax-exempt interest income during
the current year period.
Dividend
--------
On April 20, 2006, 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 May 31, 2006 to stockholders of record on May 17, 2006.
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Other Information
-----------------
Assets totaled $600.7 million and $578.6 million, respectively, at March 31,
2006 and 2005. Book value per share increased to $20.12 at March 31, 2006 from
$19.80 at March 31, 2005. Stockholders' equity to total assets was 11.31% and
12.40%, respectively, at March 31, 2006 and 2005. The Company had 3,375,609
shares outstanding at March 31, 2006.
The Company's common stock is traded on the NASDAQ National Market under the
symbol FFSX. The Company is headquartered in Sioux City, Iowa. The Bank operates
eight offices in northwest Iowa, an office in South Sioux City, Nebraska, and
six 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.
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FIRST FEDERAL BANKSHARES, INC. and SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
March 31, June 30, March 31,
2006 2005 2005
--------- --------- ---------
ASSETS (Dollars in thousands)
- ------
Cash and cash equivalents $ 29,688 $ 31,336 $ 13,860
Securities available-for-sale 39,514 49,978 52,477
Securities held-to-maturity 14,408 18,197 18,528
Loans receivable, net 462,932 433,634 432,996
Office property and equipment, net 12,566 13,109 13,155
Federal Home Loan Bank stock, at cost 5,384 5,762 5,762
Accrued interest receivable 2,723 2,293 2,459
Goodwill 18,417 18,417 18,417
Other assets 15,096 14,087 20,983
--------- --------- ---------
Total assets $ 600,728 $ 586,813 $ 578,637
========= ========= =========
LIABILITIES
- -----------
Deposits $ 431,009 $ 407,563 $ 398,638
Advances from FHLB and other borrowings 97,361 104,564 104,095
Advance payments by borrowers for taxes and insurance 402 953 295
Accrued interest payable 1,902 1,312 1,269
Accrued expenses and other liabilities 2,129 2,126 2,585
--------- --------- ---------
Total liabilities 532,803 516,518 506,882
STOCKHOLDERS' EQUITY
- --------------------
Common stock, $.01 par value 50 50 50
Additional paid-in capital 38,195 37,761 37,720
Retained earnings, substantially restricted 56,600 55,029 55,209
Treasury stock, at cost - 1,632,266, 1,428,826 and
1,352,826 shares, respectively, at March 31, 2006,
June 30, 2005 and March 31, 2005 (25,921) (21,748) (20,165)
Accumulated other comprehensive income (177) 159 (19)
Unearned ESOP (818) (914) (947)
Unearned RRP (4) (42) (93)
--------- --------- ---------
Total stockholders' equity 67,925 70,295 71,755
--------- --------- ---------
Total liabilities and stockholders' equity $ 600,728 $ 586,813 $ 578,637
========= ========= =========
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three months ende Nine months ended
March 31, March 31,
-------------------------------------
2006 2005 2006 2005
------- ------- ------- -------
(Dollars in thousands)
-------------------------------------
Total interest income $ 8,264 $ 7,331 $23,858 $21,638
Total interest expense 3,892 2,931 10,956 8,601
------- ------- ------- -------
Net interest income 4,372 4,400 12,902 13,037
Less: provision for loan losses 320 130 1,070 995
------- ------- ------- -------
Net interest income after provision 4,052 4,270 11,832 12,042
Noninterest income 1,423 1,595 4,733 7,489
Noninterest expense 4,454 4,570 13,010 13,526
------- ------- ------- -------
Income before income taxes 1,021 1,295 3,555 6,005
Taxes on income 255 397 966 1,964
------- ------- ------- -------
Net income $ 766 $ 898 $ 2,589 $ 4,041
======= ======= ======= =======
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FIRST FEDERAL BANKSHARES, INC and SUBSIDIARIES
FINANCIAL HIGHLIGHTS (unaudited)
At or for the three months At or for the nine months
March 31, ended March 31,
-------------------------- --------------------------
Financial condition data: 2006 2005 2006 2005
- ------------------------- ----------- ----------- ----------- -----------
(Dollars in thousands, except per share amounts)
Average interest-earning assets $ 537,889 $ 521,778 $ 530,480 $ 526,261
Average interest-bearing liabilities $ 476,433 $ 461,750 $ 467,141 $ 468,941
Average interest-earning assets to
average interest-bearing liabilities 112.90% 113.00% 113.56% 112.22%
Non-performing loans $ 4,618 $ 2,777 $ 4,618 $ 2,777
Non-performing loans to total loans 0.99% 0.63% 0.99% 0.63%
Non-performing assets $ 4,859 $ 2,997 $ 4,859 $ 2,997
Non-performing assets to total assets 0.81% 0.52% 0.81% 0.52%
Allowance for loan losses $ 5,530 $ 4,927 $ 5,530 $ 4,927
Allowance for loan losses to total loans 1.18% 1.13% 1.18% 1.13%
Shareholders' equity to assets 11.31% 12.40% 11.31% 12.40%
Selected operating data: (1)
Return on average assets 0.53% 0.64% 0.59% 0.92%
Return on average equity (2) 4.51% 5.12% 4.89% 7.49%
Net interest rate spread 2.96% 3.18% 2.92% 3.09%
Net yield on average interest-earning
assets (3) 3.29% 3.42% 3.29% 3.35%
Efficiency ratio (4) 76.89% 76.39% 74.76% 73.18%
- -----------------------------------------------
(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, less gain (loss) on sale of
fixed assets.
Per share data:
Earnings per share:
Basic $ 0.23 $ 0.25 $ 0.76 $ 1.13
Diluted $ 0.23 $ 0.25 $ 0.75 $ 1.11
Book value per share $ 20.12 $ 19.80 $ 20.12 $ 19.80
Market price per share:
High for the period $ 22.90 $ 23.69 $ 22.90 $ 24.00
Low for the period $ 19.11 $ 21.40 $ 17.30 $ 20.00
Close at end of period $ 22.60 $ 21.83 $ 22.60 $ 21.83
Cash dividends declared per share $ 0.10 $ 0.10 $ 0.30 $ 0.30
Weighted-average common shares outstanding:
Basic 3,311,516 3,526,364 3,389,694 3,567,590
Diluted 3,359,715 3,589,999 3,440,973 3,641,615
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