Exhibit 99.1
[CFS BANCORP, INC. LETTERHEAD]
October 23,2003
FOR IMMEDIATE RELEASE
CONTACT: Thomas F. Prisby, Chairman of the Board and Chief Executive Officer
219-836-5500
CFS Bancorp, Inc. Announces Third Quarter Results
MUNSTER, IN - October 23, 2003 - CFS Bancorp, Inc. (NASDAQ: CITZ)
(the "Company"), the parent holding company Citizens Financial Services, FSB
(the "Bank"), today reported third quarter net income of $967,000 or $0.08 per
diluted share. Year to date net income for 2003 totaled $2.3 million or $0.20
per diluted share. This compares to net income of $1.8 million or $0.15 per
diluted share for the third quarter of 2002 and net income of $5.4 million or
$0.43 per diluted share for the nine months ended September 30, 2002.
Net interest income for the third quarter of 2003 was $6.7 million
compared to $8.8 million reported for the third quarter of 2002. Net interest
income for the first nine months of 2003 was $19.9 million compared to $25.9
million for the same period in 2002. During the third quarter of 2002, the
Company opened two new offices. These offices, opened in early July 2002,
offered an above-market rate 90-day certificate. This offer was available for
a 60-day period and resulted in approximately $80.0 million in new deposits.
This promotion had an effect on both interest income and interest expense and
in the short term reduced interest rate spreads and margins.
Interest income for the third quarter of 2003 was $17.0 million compared
to $22.0 million for the third quarter of Interest income for the first nine
months of 2003 was $53.3 million compared to $66.2 million for the first nine
months of 2002. The primary reason for the decreases in the 2003 periods was
the significant decline in the average yields earned on interest-earning assets
in 2003 as compared to 2002 reflecting the effect of the low-rate interest
environment existing throughout 2003. Increases in average balances of total
loans outstanding during the 2003 periods as compared to the 2002 periods
partially offset the decline in average yields. Decreases in the average
balances of securities and other interest-earning assets added to the decline
in interest income in both the three and nine months ended September 30, 2003
when compared to the same periods in 2002.
Interest expense for the three months ended September 30, 2003 was $10.3
million compared to $13.3 million for the same period in 2002. Interest
expense for the nine months ended September 30, 2003 was $33.4 million compared
to $40.3 million for the nine months ended September 30, 2002. The decrease
in interest expense for the three and nine months ended September 30, 2003
when compared to the 2002 periods was primarily the result of a decrease in the
average cost of deposits. Also during these same periods the average balance
of borrowed money decreased. The average balance of deposits decreased when
comparing the three months ended September 30, 2003 to the three months ended
September 30, 2002, reflecting a partial reduction in the deposits obtained in
the previously mentioned special promotion in the third quarter of 2002.
Average balances of deposits increased modestly when comparing the nine months
ended September 30, 2003 to the nine months ended September 30, 2002.
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CFS Bancorp, Inc. - Page 2 of 6
The Company's provisions for loan losses for the three months ended
September 30, 2003 and 2002 were relatively stable, amounting to $502,000 and
$500,000, respectively, while the provisions for the nine months ended
September 30, 2003 and 2002 were $1.5 million and $1.1 million, respectively.
In light of the Company's emphasis on increasing its commercial real estate
and business lending and the increased estimate of the amount of known and
inherent losses in the loan portfolio, the Company continues to increase its
allowance.
Non-interest income for the three months ended September 30, 2003 was
$3.0 million compared to $2.6 million for the three months ended September 30,
2002 and amounted to $7.9 million for nine months ended September 30, 2003
compared to $7.4 million for the same period in 2002. The improvement in
non-interest income was primarily the result of increased fees on deposit
accounts in both periods, which were partially offset by reductions in both
insurance and investment commissions due to the sale of the Company's insurance
agency assets in December 2002 and the outsourcing of the sale of investment
products in August 2002. Non-interest income in the three and nine months
ended September 30, 2003 included net gains on sale securities in the Company's
available-for-sale investment portfolio of $326,000 and $325,000, respectively,
compared to $10,000 and $281,000 for the three and nine months ended September
30, 2002.
Non-interest expense was $7.8 million for the three months ended September
30, 2003 compared to $8.3 million for the three months ended September 30, 2002.
Non-interest expense was $23.1 million for the first nine months of 2003
compared to $24.6 million for the same period in 2002. For both the three and
nine months ended September 30, 2003,compared to the same periods in 2002,
decreases resulted primarily from decreases in compensation and employee
benefits due to reductions in overhead and compensation expense as a result of
the Company's outsourcing of the sale of investment products and the sale of
the insurance agency's assets, previously described.
Income tax expense for the three months ended September 30, 2003 was
$315,000 or 24.5 percent of income before income taxes compared to $755,000 or
29.4 percent of income before income taxes for the three months ended September
30, 2002. For the nine months ended September 30, 2003, income tax expense was
$886,000 or 27.6 percent of income before income taxes compared to $2.3 million
or 29.8 percent for the same period in 2002. The Company estimates that its
effective rate for the remainder of 2003 will be approximately 25.0 percent.
Chairman and CFO Thomas F. Prisby stated, "There are several positive
items to mention as we enter the fourth quarter of 2003. Mortgage refinancing
activity has dropped significantly from record highs. As a result, prepayments
have started to decline and should continue to do so in the fourth quarter of
2003. With these slower prepayments we expect premium amortization on
investments in the fourth quarter to be reduced markedly from the first three
quarters of 2003. On the liability side, some of our higher costing borrowings
were repaid at the end of the quarter. Taken together, we expect improvements
in net interest income in future periods.
"In addition, CFS continues to make strides in operational improvements,
controlling operating expenses and increasing non-interest income. Also, in the
third quarter we opened a new office in Naperville and completed a branch
purchase in Bolingbrook thereby increasing our footprint in the Illinois
market. We believe these actions coupled with our improving outlook for net
interest income will lead to enhanced earnings and increased shareholder
value."
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CFS Bancorp, Inc. - Page 3 of 6
CFS Bancorp, Inc. is the parent of Citizens Financial Services, FSB, a
$1.5 billion asset federal savings bank. Citizens Financial Services provides
community banking services and operates 22 offices throughout adjoining markets
in Chicago's Southland and Northwest Indiana.
This press release contains certain forward-looking statements and
information relating to the Company that are based on the beliefs of management
as well as assumptions made by and information currently available to
management. These forward-looking statements include but are not limited to
statements regarding the net earnings effects of various tax strategies, the
pace of prepayments, costs of funds, net interest margins and income levels,
anticipated future opportunities for use of liquidity, continued improvement of
fee income initiatives, restructuring of the loan portfolio and fixed-income
portfolio (including increases in commercial loan balances and reductions in
residential loan balances), increased emphasis on business banking and
commercial lending, the current low interest rate environment, loan loss
reserves, operational expense reduction and improvement programs, the
establishment of branch offices, and outsourcing of the investment services
function. In addition, the words "anticipate," "believe," "estimate,"
"expect," "indicate," "intend," "should," and similar expressions, or the
negative thereof, as they relate to the Company or the Company's management,
are intended to identify forward-looking statements. Such statements reflect
the current views of the Company with respect to future events and are subject
to certain risks, uncertainties and assumptions. One or more of these risks
may vary materially from those described herein as anticipated, believed,
estimated, expected or intended. The Company does not intend to update these
forward-looking statements.
# # #
SELECTED CONSOLIDATED FINANCIAL DATA FOLLOWS.
CFS Bancorp, Inc. - Page 4 of 6
CFS BANCORP, INC.
Consolidated Statements of Financial Condition
(Dollars in thousands)
September 30, 2003 December 31, 2002
__________________ _________________
(Unaudited)
ASSETS
Cash and amounts due from depository institutions $15,718 $30,312
Interest-bearing deposits 69,842 105,479
Federal funds sold 38,696 74,350
--------- ---------
Cash and cash equivalents 124,256 210,141
Investment securities available-for-sale 67,272 39,064
Mortgage-backed securities available-for-sale 199,079 296,638
Mortgage-backed securities held-to-maturity
(fair value 2003 - $20,803; 2002 -$21,977) 19,267 21,402
Loans receivable, net 978,926 930,348
Investment in Federal Home Loan Bank stock, at cost 26,438 25,780
Office properties and equipment 13,813 13,835
Accrued interest receivable 5,380 6,597
Real estate owned 355 893
Investment in Bank-owned life insurance 31,583 31,009
Prepaid expenses and other assets 12,207 9,055
--------- ---------
Total assets $1,478,576 $1,584,762
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 881,356 $ 954,222
Borrowed money 418,533 449,431
Advance payments by borrowers for taxes and insurance 5,045 4,410
Other liabilities 19,616 16,037
--------- ---------
Total liabilities 1,324,550 1,424,100
--------- ---------
Stockholders' Equity:
Preferred stock, $.01 par value:
Authorized shares - 15,000,000
Issued and outstanding shares - 0
at September 30, 2003 and December 31, 2002
Common stock, $.01 par value:
Authorized shares - 85,000,000
Issued shares - 23,423,306
at September 30, 2003 and December 31, 2002
Outstanding shares - 12,152,346 and 12,674,597
at September 30, 2003 and December 31, 2002, respectively 234 234
Additional paid-in capital 189,555 189,786
Retained earnings, substantially restricted 106,287 107,598
Treasury stock, at cost: 11,270,960 and 10,748,709 shares
at September 30, 2003 and December 31, 2002, respectively (133,294) (125,650)
Unearned common stock acquired by ESOP (8,356) (8,356)
Unearned common stock acquired by RRP (1,525) (2,827)
Accumulated other comprehensive income (loss), net of tax 1,125 (123)
--------- ---------
Total stockholders' equity 154,026 160,662
--------- ---------
Total liabilities and stockholders' equity $1,478,576 $1,584,762
========= =========
CFS Bancorp, Inc. - Page 5 of 6
CFS BANCORP, INC.
Consolidated Statements of Income
(Dollars in thousands, except per share)
(Unaudited)
For Three Months Ended For Nine Months Ended
September 30, September 30,
_______________________ ______________________
2003 2002 2003 2002
________ _________ _________ _________
Interest income:
Loans $14,649 $15,820 $44,863 $47,156
Mortgage-related securities 1,295 4,691 4,727 14,053
Other investment securities 392 406 1,294 1,262
Other 654 1,130 2,392 3,682
--- ----- ----- -----
Total interest income 16,990 22,047 53,276 66,153
Interest expense:
Deposits 3,603 6,387 13,367 19,699
Borrowings 6,730 6,904 20,002 20,583
----- ----- ------ ------
Total interest expense 10,333 13,291 33,369 40,282
------ ------ ------ ------
Net interest income before
provision for losses on loans 6,657 8,756 19,907 25,871
Provision for losses on loans 502 500 1,489 1,050
Net interest income after --- --- ----- -----
provision for losses on loans 6,155 8,256 18,418 24,821
Non-interest income:
Loan fees 446 327 1,259 1,022
Fees on deposit accounts 1,409 1,230 3,818 2,677
Insurance commissions -- 294 -- 958
Investment commissions 202 192 520 732
Gain on sale of available-for-sale
investment securities - net of losses on
available-for-sale securities
and on impaired equity securities 326 10 325 281
Gain on sale of office properties -- -- 24 --
Income from Bank-owned life insurance 363 394 1,092 1,134
Other income 223 192 829 575
--- --- --- ---
Total non-interest income 2,969 2,639 7,867 7,379
Non-interest expense:
Compensation and employee benefits 4,697 5,055 13,563 15,145
Net occupancy expense 561 650 1,761 1,861
Furniture and equipment expense 462 502 1,419 1,440
Federal deposit insurance premiums 26 40 119 126
Data processing 439 397 1,333 1,333
Marketing 261 216 687 627
Other general and administrative expenses 1,396 1,464 4,198 4,030
----- ----- ----- -----
Total non-interest expense 7,842 8,324 23,080 24,562
----- ----- ------ ------
Income before income taxes 1,282 2,571 3,205 7,638
Income tax expense 315 755 886 2,275
--- --- --- -----
Net income $967 $1,816 $2,319 $5,363
==== ====== ====== ======
Per share data:
Basic earnings per share $0.09 $0.15 $0.21 $0.44
Diluted earnings per share 0.08 0.15 0.20 0.43
Cash dividends declared per share 0.11 0.10 0.33 0.30
Weighted average shares outstanding 11,251,705 11,950,795 11,285,488 12,091,355
Weighted average diluted shares outstanding 11,658,617 12,428,830 11,705,965 12,589,649
CFS Bancorp, Inc. - Page 6 of 6
CFS BANCORP, INC.
Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
(Unaudited)
<CAPTION)
At At
September 30, 2003 December 31, 2002
__________________ _________________
SELECTED FINANCIAL CONDITION DATA
Common shares outstanding 12,152,346 12,674,597
Stockholders' equity per outstanding share $12.67 $12.68
Stockholders' equity to total assets 10.42 % 10.14 %
Capital ratios (Bank only):
Tangible capital 8.95 8.42
Core capital 8.95 8.42
Risk-based capital 12.80 13.97
Non-performing loans $14,536 $15,325
Non-performing assets 14,891 16,218
Allowance for losses on loans 9,863 8,674
Non-performing loans to total loans 1.47 % 1.63 %
Non-performing assets to total assets 1.01 1.02
Allowance for losses on loans to non-performing loans 67.85 56.60
Allowance for losses on loans to total loans 1.00 0.92
Three Months Ended Nine Months Ended
September 30, September 30,
___________________ __________________
2003 2002 2003 2002
____ ____ ____ ____
SELECTED OPERATIONS DATA
Average balance data:
Total assets $1,536,917 $1,614,289 $1,571,725 $1,596,264
Loans receivable 979,428 933,659 961,261 911,579
Interest-earning assets 1,461,192 1,537,700 1,494,758 1,515,902
Deposits 883,099 918,273 912,481 901,707
Interest-bearing liabilities 1,331,182 1,377,189 1,361,433 1,362,937
Stockholders' equity 154,320 167,894 155,664 169,026
Ratios (annualized):
Return on average assets 0.25 % 0.45 % 0.20 % 0.45 %
Return on average equity 2.51 4.33 1.99 4.23
Average yield on interest-earning assets 4.65 5.74 4.75 5.82
Average cost on interest-bearing liabilities 3.10 3.86 3.27 3.94
Interest rate spread 1.55 1.88 1.48 1.88
Net interest margin 1.82 2.28 1.78 2.28
Average interest-earning assets
to average interest-bearing liabilities 109.77 111.65 109.79 111.22
Non-interest expense to average assets 2.04 2.06 1.96 2.05
Efficiency ratio 84.32 73.11 84.16 74.50