UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________
FORM 11-K
(Mark One):
[X] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________ to ___________
Commission file number: 0-24611
A. Full title of the plan and address of the plan, if different from that of
the issuer named below:
Citizens Financial Services, FSB Employees' Savings & Profit Sharing Plan
and Trust
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
CFS Bancorp, Inc.
707 Ridge Road
Munster, Indiana 46371
REQUIRED INFORMATION
Financial Statements. The following financial statements and schedule
are filed as part of this annual report for the Citizens Financial Services,
FSB Employees' Savings & Profit Sharing Plan and Trust (the "Plan"):
Page No.
--------
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . 1
Financial Statements
Statements of Net Assets Available for Benefits. . . . . . . . . . 2
Statements of Changes in Net Assets Available for Benefits . . . . 3
Notes to Financial Statements. . . . . . . . . . . . . . . . . . . 4
Supplemental Schedule
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) . . 8
2
[LETTERHEAD OF ERNST & YOUNG LLP]
Report of Independent Auditors
Plan Administrators
Citizens Financial Services, FSB Employees'
Savings & Profit Sharing Plan and Trust
We have audited the accompanying statements of net assets available for
benefits of Citizens Financial Services, FSB Employees' Savings & Profit
Sharing Plan and Trust (the Plan) as of December 31, 2002 and 2001, and the
related statements of changes in net assets available for benefits for the
years then ended. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatements. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan at
December 31, 2002 and 2001, and the changes in its net assets available for
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States.
Our audits were performed for the purpose of forming an opinion on the
financial statements taken as a whole. The accompanying supplemental schedule
of assets (held at end of year) as of December 31, 2002, is presented for
purposes of additional analysis and is not a required part of the financial
statements but is supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. This supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in our audits of the financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the financial statements taken as a whole.
/s/ ERNST & YOUNG LLP
June 4, 2003
1
Citizens Financial Services, FSB
Employees' Savings & Profit Sharing Plan and Trust
Statements of Net Assets Available for Benefits
December 31
2002 2001
----------------------------
Assets
Investments, at fair value:
CFS Bancorp, Inc. common stock $4,591,630 $4,768,735
Collective investment funds 3,977,353 4,091,383
Short-term investment fund 136,016 117,240
Participant loans 263,633 260,519
----------------------------
Total investments 8,968,632 9,237,877
Receivables:
Employer's contribution 13,115 12,754
Participants' contributions 38,129 34,879
Dividends 32,109 29,908
Other 55,721 5,138
----------------------------
Total receivables 139,074 82,679
----------------------------
Total assets 9,107,706 9,320,556
Liabilities
Accounts payable 42,158 3,974
----------------------------
Net assets available for benefits $9,065,548 $9,316,582
============================
See notes to financial statements.
2
Citizens Financial Services, FSB
Employees' Savings & Profit Sharing Plan and Trust
Statements of Changes in Net Assets Available for Benefits
Year ended December 31
2002 2001
------------------------
Additions
Contributions:
Participants $ 783,522 $ 706,124
Employer 260,707 250,799
------------------------
Total contributions 1,044,229 956,923
Investment income (loss):
Dividend and interest income 158,885 149,665
Net realized and unrealized (depreciation)
appreciation in fair value of investments (550,735) 1,082,392
------------------------
Total investment income (loss) (391,850) 1,232,057
------------------------
Total additions 652,379 2,188,980
Deductions
Distributions to participants 783,912 1,234,649
Administrative expenses 48,308 44,954
------------------------
Total deductions 832,220 1,279,603
------------------------
Net (deductions) additions before assets
transferred (179,841) 909,377
Assets transferred out, net (71,193) (2,907)
------------------------
Net (decrease) increase in assets available
for benefits (251,034) 906,470
Net assets available for benefits at beginning
of year 9,316,582 8,410,112
------------------------
Net assets available for benefits at end of year $9,065,548 $9,316,582
========================
See notes to financial statements.
3
Citizens Financial Services, FSB
Employees' Savings & Profit Sharing Plan and Trust
Notes to Financial Statements
December 31, 2002 and 2001
1. Description of the Plan
The following description of the Citizens Financial Services, FSB Employees'
Savings & Profit Sharing Plan and Trust (the Plan) is provided for general
information purposes only. Participants should refer to the Plan document for
more complete information.
General
The Plan, adopted by Citizens Financial Services, FSB (the Bank) on April 30,
1998, and effective on May 1, 1998, is a single employer defined-contribution
plan. Effective March 1, 2000, the Suburban Federal Savings 401(k) Plan was
merged into the Plan. Eligible participants of Suburban Federal Savings, FSB
became participants in the Plan and were granted credit for certain prior
service under the terms of the Plan for purposes of eligibility and vesting.
The Plan allows all employees of the Bank and its subsidiaries to participate
after meeting certain age and service requirements. To be eligible to
participate in the Plan, an employee must have attained the age of 21 and
completed 1,000 hours of service during a 12 consecutive month period. The
Plan is subject to certain provisions of the Employee Retirement Income
Security Act of 1974 (ERISA) and is intended to qualify as a salary reduction
plan under Section 401(k) of the Internal Revenue Code, as amended by the Tax
Reform Act of 1986 (the Code).
Contributions
The Bank contributes and allocates to each participant's account the amount
withheld from each participant's compensation (employee contributions)
pursuant to his or her elective deferral agreement and within a range
specified by the Plan. The Bank matches 50% of each participant's
contributions to the Plan up to the first 6% of each participant's
contributions. The Employer may make discretionary contributions to the Plan.
Upon enrollment, participants may direct their contributions, and related
matching contributions, in any of the Plan's investment options.
4
Citizens Financial Services, FSB
Employees' Savings & Profit Sharing Plan and Trust
Notes to Financial Statements (continued)
1. Description of the Plan (continued)
Participant Accounts
Each participant's account is credited with the participant's contribution,
the Bank's matching contribution, and an allocation of Plan earnings and is
charged with an allocation of administrative expenses. Plan earnings from each
investment fund option are allocated to participants based on their
proportionate share of total assets in that investment fund option.
Vesting
Participants immediately vest in both their employee contributions and the
Bank's matching contributions and any related earnings thereon.
Payment of Benefits
Payment of benefits to a participant who terminates employment or becomes
disabled may be made in a lump sum, in annual installments over a specified
period, or rolled into another qualified plan. A participant also may elect to
defer distribution of his or her account until attaining age 70 1/2.
Payment of benefits to the beneficiary of a deceased participant may also be
made in the form of a lump-sum payment, annual installments over a specified
period, or rolled into another qualified plan.
Participant Loans
Under the Plan, participants may borrow up to one-half of their account
balance in any amount between $1,000 and $50,000. The rate of interest for the
term of the loan will be established as of the loan date, and shall be a
reasonable rate of interest generally comparable to the rates of interest then
in effect at a major banking institution. The repayment period is between 1
and 15 years for loans used exclusively for the purchase of a primary
residence or 1 and 5 years for all other loans, at the participant's option.
Repayments are made through payroll deductions. When a loan is made, the
amount borrowed is transferred from the participant's deposit account to the
participant's loan account. An origination fee of $50.00, plus an annual
administrative fee of $40.00 is deducted from the participant's account at the
time the loan is originated. Subsequent annual administrative fees will be
deducted from the participant's account each year on or about the anniversary
of the loan origination. Loan repayments, including interest, are immediately
invested in the participant's deposit account.
5
Citizens Financial Services, FSB
Employees' Savings & Profit Sharing Plan and Trust
Notes to Financial Statements (continued)
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the plan administrator to make estimates that
affect amounts reported in the financial statements and accompanying notes.
Actual results may differ from those estimates.
Investment Valuation and Income Recognition
The Plan's investments are stated at fair value. Collective investment funds
are valued at quoted market prices, which represent the net asset value of
shares held by the Plan at year-end. The common stock is valued at its quoted
market price. Participant notes receivable are valued at cost, which
approximates fair value.
Purchases and sales of investments are recorded on a trade-date basis.
Interest income is recorded on the accrual basis. Dividends are recorded on
the declaration date.
Payment of Benefits
Benefits are recorded when paid.
3. Investments
In conjunction with the Bank's conversion from a mutual to a stock form of
ownership, the Plan utilized existing funds to purchase common stock of CFS
Bancorp, Inc., the Bank's Holding Company (the Company). At the date of
conversion, the Plan purchased 307,232 shares of stock at $10.00 per share for
participants indicating a desire to purchase stock in the Company. Additional
employee and Bank contributions and cash dividends are utilized to purchase
additional shares on a regular basis.
At December 31, 2002 and 2001, the Plan was the beneficial owner of 321,093
shares and 332,316 shares of Company common stock, respectively. The fair
value of this stock at December 31, 2002 and 2001, was $14.30 per share and
$14.35 per share, respectively.
6
Citizens Financial Services, FSB
Employees' Savings & Profit Sharing Plan and Trust
Notes to Financial Statements (continued)
3. Investments (continued)
During 2002 and 2001, the Plan's investments (including investments purchased,
sold as well as held during the year) appreciated (depreciated) in fair value
as determined by quoted market prices as follows:
Year ended December 31
2002 2001
----------------------------
CFS Bancorp, Inc. common stock $ (28,126) $1,267,789
Collective investment funds (522,610) (185,397)
----------------------------
$ (550,736) $1,082,392
============================
The fair value of individual investments that represent 5% or more of the
Plan's net assets is as follows:
2002 2001
----------------------------
CFS Bancorp, Inc. common stock $ 4,591,630 $4,768,735
Pentegra S&P 500 Stock Fund 1,190,989 1,297,436
Pentegra S&P Midcap Stock Fund 869,433 936,503
Pentegra Stable Value Fund 822,408 773,074
4. Plan Termination
Although it has not expressed any intent to do so, the Bank has the right
under the Plan to discontinue its contribution at any time and to terminate
the Plan, subject to the provisions of ERISA.
5. Income Tax Status
The Plan has received a determination letter from the Internal Revenue Service
(IRS) dated September 22, 1999, stating that the Plan is qualified under
Section 401 (a) of the Code, and, therefore, the related trust is exempt from
taxation. The Plan was amended subsequent to the IRS determination letter.
Once qualified, the Plan is required to operate in conformity with the Code to
maintain its qualification. The Plan administrator believes the Plan is being
operated in compliance with the applicable requirements of the Code, and,
therefore, believes that the Plan, as amended, is qualified and the related
trust is tax-exempt.
7
SUPPLEMENTAL SCHEDULE
EIN 13-3381592
Plan #002
Citizens Financial Services, FSB
Employees' Savings & Profit Sharing Plan and Trust
Schedule H, Line 4i - Schedule of Assets
(Held at End of Year)
December 31, 2002
Identity of Issue, Borrower, Current
or Similar Party Description Value
- -------------------------------------------------------------------------------
CFS Bancorp, Inc. common stock* 321,093 Shares $4,591,630
Pentegra Income Plus Asset Allocation Fund 3,393 Shares 43,763
Pentegra Growth & Income Asset
Allocation Fund 15,329 Shares 180,429
Pentegra Growth Asset Allocation Fund 10,265 Shares 105,529
Pentegra International Stock Fund 8,358 Shares 107,233
Pentegra S&P Midcap Stock Fund 54,544 Shares 869,433
Pentegra S&P 500 Stock Fund 99,748 Shares 1,190,989
Pentegra Government Bond Fund 9,699 Shares 166,816
Pentegra Stable Value Fund 58,576 Shares 822,408
Pentegra Money Market Fund 112,399 Shares 112,399
Pentegra 500 Value Stock Fund 8,150 Shares 65,034
Pentegra 500 Growth Stock Fund 17,578 Shares 114,959
Pentegra Russell 2000 Stock Fund 21,306 Shares 198,361
Collective Short Term Investment Fund 136,016 Shares 136,016
Participant loans 263,633
-----------
$8,968,632
===========
*Denotes party in interest.
8
SIGNATURES
The Plan. Pursuant to the requirements of the Securities Exchange Act of
1934, the trustees for the Plan have duly caused this annual report to be
signed by the undersigned hereunto duly authorized.
CITIZENS FINANCIAL SERVICES,
FSB EMPLOYEES' SAVINGS &
PROFIT SHARING PLAN AND TRUST
June 26, 2003 By: /s/ Thomas F. Prisby
-----------------------------------
Thomas F. Prisby
Plan Administrator
3
INDEX TO EXHIBITS
Number Description
------ --------------------------------------------
23 Consent of Independent Auditors
99 Statement Pursuant to 18 U.S.C. Section 1350
as Required by Section 906 of the Sarbanes-
Oxley Act of 2002