EXHIBIT 99.1
FIRST 22 West State Street
KEYSTONE Media, PA 19063
FINANCIAL, INC. 610-565-6210
FOR IMMEDIATE RELEASE
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CONTACT: THOMAS M. KELLY, PRESIDENT
(610) 565-6210
FIRST KEYSTONE FINANCIAL ANNOUNCES
FIRST QUARTER RESULTS
Media, PA January 31, 2003 -- First Keystone Financial, Inc.
(Nasdaq: FKFS), the parent holding company of First Keystone Federal
Savings Bank, announced today a 19.6% percent increase in quarterly
earnings for the Company. Net income for the quarter ended December
31, 2002 was $781,000, or $.39 per share, compared to $653,000, or
$.32 per share, for the same period last year.
Operating results for the first quarter of fiscal 2003
reflected a $391,000, or 12.5%, increase in net interest income
compared to the same period in fiscal 2002. The increase was the
result of the Company's interest-bearing liabilities continuing to
reprice downward to a greater degree than its interest-earning
assets. Interest expense for the quarter ended December 31, 2002
decreased $931,000 compared to the quarter ended December 31, 2001
due to a 94 basis point decrease in the weighted average rate paid
on interest-bearing liabilities, partially offset by a $13.8
million increase in the average balance of such liabilities. The
decline in interest expense was offset, in part, by a decline in
interest income for the quarter ended December 31, 2002 of
$540,000 compared to the quarter ended December 31, 2001 due to a
decrease in the average yield earned of 67 basis points, partially
offset by a $16.3 million increase in the average balance of
interest-earning assets.
The Company's interest rate spread increased to 2.79% for the
three months ended December 31, 2002 from 2.51% for the same period
last year and the net interest margin increased to 2.98% for the first
quarter of fiscal 2003 from 2.74% for the same period last year.
On a linked quarter basis, however, net interest income
decreased $53,000 in the first quarter of fiscal 2003 compared to
the fourth quarter of fiscal 2002. Net interest margin decreased
seven basis points from 3.05% for the three months ended September
30, 2002. During the quarter, the Company experienced a 22 basis
point decrease in the yield earned on average interest-earning
assets which was partially offset by a 16 basis point decline in the
rates paid on interest-bearing liabilities. The slight compression
in the net interest margin was primarily the result of the effects
of having to reinvest at current low interest rates the high cash
flows resulting from the continued high level of loan refinancings
and prepayments of mortgage-related securities. The Company, based
on the current rate environment, expects the compression in the net
interest margin to continue.
"The challenge today is managing this low rate, steep yield curve to
minimize interest rate risk while protecting the Company's net
interest margin when interest rates eventually rise," stated First
Keystone Financial Chairman, Donald S. Guthrie. "Going forward, the
Company will also remain focused on increasing its market share
through targeted marketing and the expansion of the Bank's branch
network," Guthrie added.
Total non-performing assets decreased to $4.1 million at
December 31, 2002 from $5.4 million at September 30, 2002 due to the
return to performing status of a $1.3 million commercial real estate loan.
The Company's ratio of non-performing assets to total assets was
0.77% at December 31, 2002 compared to 1.04% at September 30, 2002.
For the quarter ended December 31, 2002, non-interest income
increased $156,000, or 34.1%, from the same period last year. The
increase was primarily the result of a $124,000 increase in gains on
the sale of loans as the Company continues to sell 30 year fixed-
rate single-family residential loans in the secondary market.
Non-interest expenses for the quarter ended December 31, 2002
increased $255,000, or 9.6%, from same period last year primarily
due to compensation and employee benefit expenses and other non-
interest expenses. The increase in compensation and employee
benefit expenses was due to the hiring of additional personnel,
higher costs of employee benefit plans and general compensation
increases. Other non-interest expense increased $144,000, or 32.0%,
primarily due to expenses primarily relating to the workout of three
non-performing commercial real estate loans aggregating $2.4
million.
The Company's total assets increased to $527.4 million at
December 31, 2002 from $518.3 million at September 30, 2002. The
asset growth was primarily attributable to an increase in cash and
cash equivalents, loans receivable, and mortgage-related securities.
Such growth was funded primarily through deposit growth. Total
deposits increased $7.6 million, or 2.3%, to $338.4 million at
December 31, 2002 from $330.8 million at September 30, 2002. Core
deposits increased $8.2 million, or 5.3%, as a result of the
Company's emphasis on commercial business accounts and related non-
interest bearing checking accounts as well as continued increases in
money market demand accounts, due in part to the continued uncertain
investment climate in the equities market.
Certain information in this release may constitute forward-
looking statements as that term is defined in the Private
Securities Litigation Reform Act of 1995. Such forward-looking
statements are subject to risks and uncertainties that could cause
actual results to differ materially from those estimated. Persons
are cautioned that such forward-looking statements are not
guarantees of future performance and are subject to various
factors, which could cause actual results to differ materially from
those estimated. These factors include, but are not limited to,
changes in general economic and market conditions and the
development of an interest rate environment that adversely affects
the interest rate spread or other income from the Company's and the
Bank's investments and operations. The Company does not undertake
and specifically disclaims any obligation to these forward-looking
statements to reflect events or circumstances which occur after the
date of such statements.
First Keystone Federal Savings Bank, the Company's wholly
owned subsidiary, serves its customers from seven full-service
offices in Delaware and Chester Counties.
FIRST KEYSTONE FINANCIAL, INC.
SELECTED OPERATIONS DATA
(In thousands except per share data)
(Unaudited)
Three Months Ended
December 31,
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2002 2001
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Net interest income $3,510 $3,119
Provision for loan losses 195 135
Non-interest income 614 458
Non-interest expense 2,924 2,669
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Income before income taxes 1,005 773
Income tax expense 224 120
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Net income $ 781 $ 653
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Basic earnings per share $ 0.41 $ 0.34
Diluted earnings per share 0.39 0.32
Dividends per share 0.10 0.09
Number of shares outstanding at end of period 2,011,541 2,040,515
Weighted average basic shares outstanding 1,906,521 1,909,276
Weighted average diluted shares outstanding 2,017,733 2,014,497
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SELECTED FINANCIAL DATA
(In thousands except per share data)
(Unaudited)
December 31, September 30,
2002 2002
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Total assets $527,364 $518,346
Loans receivable, net 291,452 288,776
Investment securities and
mortgage-related securities 168,744 166,298
Cash and cash equivalents 30,121 24,623
Deposits 338,374 330,765
Borrowings 126,279 126,237
Loan loss allowance 2,530 2,358
Company-obligated mandatorily redeemable
preferred securities 20,870 20,880
Total stockholders' equity 32,750 32,795
Book value per share $16.28 $16.33
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OTHER SELECTED DATA
(Unaudited)
At or for the
Three Months Ended
December 31,
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2002 2001
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Return on average assets (1) 0.60% 0.53%
Return on average equity (1) 9.59% 8.37%
Interest rate spread (1) (2) 2.79% 2.51%
Net interest margin (1) (2) 2.98% 2.74%
Interest-earning assets/interest-
bearing liabilities 106.20% 105.82%
Operating expenses to average assets (1) 2.26% 2.15%
Ratio of non-performing assets to
total assets at end of period 0.77% 0.54%
Ratio of loan loss allowance to non-
performing assets at end of period 62.47% 84.63%
(1) Annualized.
(2) Adjusted for the effects of tax-free investments.