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
THIRD QUARTER RESULTS
Media, PA August 1, 2003 - Donald S. Guthrie, Chairman and
Chief Executive Officer of First Keystone Financial, Inc. (Nasdaq:
FKFS) reported today earnings for the third quarter ended June 30,
2003 of $665,000, or $0.33 per diluted share, a 10.5% decrease,
compared to $743,000, or $0.36 per diluted share, for the same
period last year. For the nine months ended June 30, 2003, the
Company reported net income of $2.1 million, or $1.05 per diluted
share as compared to $2.1 million, or $1.02 per diluted share for
the comparable period in 2002.
For the three and nine months ended June 30, 2003, net
interest income decreased $613,000, or 16.8%, and $83,000, or 0.8%,
respectively. Interest income decreased $933,000, or 12.4%, for
the quarter ended June 30, 2003 primarily due to a 118 basis point
decrease in the average yield earned on interest-earning assets
partially offset by a $35.6 million increase in the average balance
of such assets. Interest expense also decreased $320,000, or 8.2%,
for the quarter ended June 30, 2003 as compared to the third
quarter of fiscal 2002 primarily due to a 51 basis point decrease
in rates paid on interest-bearing liabilities partially offset by a
$34.3 million increase in the average balance of such liabilities.
The Company's interest rate spread decreased to 2.26% for the
three months ended June 30, 2003 from 2.93% for the same period
last year and the net interest margin decreased to 2.44% for the
third quarter of fiscal 2003 from 3.15% for the same quarter in the
prior year. The interest rate compression being experienced by the
Company is a result of the accelerated rate of repayments and
prepayments of loans and mortgage-related securities due to the
current low interest rate environment requiring the Company to
reinvest the resulting proceeds at current lower rates without a
proportional decrease in the rates paid on deposits and borrowings.
Management anticipates that the Company's net interest margin will
continue to contract in the coming months due to the continued loan
repayments and the weakness in the economy.
On a linked quarter basis, net interest income decreased
$362,000 in the third quarter of fiscal 2003 compared to the
second quarter of fiscal 2003. In addition, the net interest
margin decreased 37 basis points from 2.81% for the three
months ended March 31, 2003. During the third quarter of
fiscal 2003 as compared to the second, the Company experienced
a 46 basis point decrease in the yield earned on average
interest-earning assets which was partially offset by a 10
basis point decline in the rates paid on interest-bearing
liabilities. The compression in the net interest margin was
primarily the result of reinvesting at current low interest
rates the high cash flows resulting from the increased level of
prepayments of loans, mortgage-related securities and the calls
on investment securities resulting from the low interest rate
environment.
"Despite the short-term challenges in preserving the
Bank's interest rate spread in this low interest rate
environment, management remains focused on implementing its
business plan which includes the opening of new branches in
strategic geographic locations," stated Guthrie. "We are
pleased to report that the Bank has received township approvals
to build two new free-standing branches. One is located in the
heart of the Bank's marketplace in Aston Township, Delaware
County and the other is the expansion from a storefront
location in an existing shopping center in southern Chester
County. Both are scheduled to open in fiscal 2004," Guthrie
said.
For the quarter ended June 30, 2003, non-interest income
increased $542,000, or 118.9%, from the same period last year.
Non-interest income increased $789,000, or 57.8%, for the nine
months ended June 30, 2003 by comparison to the same period
last year. The increase was primarily the result of an
increase in the gain on sales of investment securities and to a
lesser degree, loans. Due to the current mortgage refinance
market, the Company continues to sell newly originated 30 year
fixed-rate single-family residential loans in the secondary
market. The increase was also due to the increase in cash
surrender value of certain insurance policies held by the Bank
to fund retirement benefit plans due to the overall improvement
in the U.S. equity market.
Non-interest expense for the quarter ended June 30, 2003
decreased $33,000, or 1.1%, from the same period last year
primarily due to decreases of $55,000, or 25.3%, in professional
fees, $49,000, or 39.8%, in advertising, $24,000, or 77.4%, in real
estate operations and $69,000, or 11.7%, in other non-interest
expenses offset by a $186,000, or 14.9%, increase in salaries and
employee benefits due to certain retirement benefits.
The Company's total assets increased by $35.6 million, or
6.9%, at June 30, 2003 from fiscal year-end 2002. The asset growth
was primarily attributable to a $44.9 million, or 52.4%, increase
in mortgage-related securities available for sale to $130.6 million
at June 30, 2003 partially offset by an $8.4 million, or 10.5%,
decrease in investment securities available for sale. Such growth
was funded through deposit growth and, to a lesser extent, the use
of Federal Home Loan Bank advances. Total deposits increased $22.9
million, or 6.9%, to $353.7 million at June 30, 2003 from $330.8
million at September 30, 2002. Borrowings increased by $13.0
million, or 10.3%, from September 30, 2002 to fund the remaining
balance sheet growth.
Total non-performing assets were $4.0 million at June 30, 2003
as compared to $3.6 million at March 31, 2003 and $5.4 million at
September 30, 2002. The increase during the quarter was due to an
increase in non-performing residential and commercial loans. The
Company's ratio of non-performing assets to total assets was 0.73% at
June 30, 2003, 0.67% at March 31, 2003 and 1.04% at September 30, 2002.
Statements in this release which are not historical facts are
forward-looking statements as 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 publicly release the result of any
revisions which may be made to any forward-looking statements to
reflect the occurrence of anticipated or unanticipated events or
circumstances 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 Nine Months Ended
June 30, June 30,
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2003 2002 2003 2002
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<s> <c> <c> <c> <c>
Net interest income $3,038 $3,651 $9,948 $10,031
Provision for loan losses 195 135 585 405
Non-interest income 998 456 2,153 1,364
Non-interest expense 3,023 3,056 8,857 8,478
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Income before taxes 818 916 2,659 2,512
Income tax expense 153 173 520 431
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Net income $665 $743 $2,139 $2,081
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Basic earnings per share $0.35 $0.39 $1.12 $1.08
Diluted earnings per share 0.33 0.36 1.05 1.02
Dividends per share 0.10 0.09 0.30 0.27
Number of shares outstanding at end of period 1,992,782 2,013,631 1,992,782 2,013,631
Weighted average basic shares outstanding 1,899,265 1,924,740 1,906,099 1,920,563
Weighted average diluted shares outstanding 2,046,598 2,061,988 2,033,216 2,036,515
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SELECTED FINANCIAL CONDITION DATA
(In thousands except per share data)
(Unaudited)
June 30, September 30,
2003 2002
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Total assets $554,147 $518,346
Loans receivable, net 290,156 288,776
Investment securities and mortgage-
related securities available for sale 202,776 166,298
Cash and cash equivalents 22,087 24,623
Deposits 353,695 330,765
Borrowings 139,262 126,237
Loan loss allowance 2,869 2,358
Company-obligated mandatorily redeemable
preferred securities 20,852 20,880
Total stockholders' equity 33,474 32,795
Book value per share $16.80 $16.33
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OTHER SELECTED DATA
(Unaudited)
At or for the At or for the
Three Months Ended Nine Months Ended
June 30, June 30,
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2003 2002 2003 2002
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Return on average assets (1) 0.49% 0.59% 0.54% 0.55%
Return on average equity (1) 8.05% 9.82% 8.68% 9.02%
Interest rate spread (1) (2) 2.26% 2.93% 2.56% 2.69%
Net interest margin (1) (2) 2.44% 3.15% 2.74% 2.92%
Interest-earning assets/interest-
bearing liabilities 106.49% 106.71% 106.38% 106.39%
Operating expenses to average
assets (1) 2.23% 2.39% 2.23% 2.25%
Ratio of non-performing assets to
total assets at end of period 0.73% 0.80% 0.73% 0.80%
Ratio of loan loss allowance to
non-performing assets at end
of period 71.28% 53.62% 71.28% 53.62%
(1) Annualized.
(2) Adjusted for the effects of tax-free investments.