Exhibit 99.1
[CFS Bancorp, Inc. Letterhead]
January 29, 2004
FOR IMMEDIATE RELEASE
CONTACT: Thomas F. Prisby, Chairman of the Board and Chief Executive Officer
219-836-5500
CFS Bancorp, Inc. Announces Fourth Quarter and Year-End Results
MUNSTER, IN - January 29, 2004 - CFS Bancorp, Inc. (NASDAQ: CITZ) (the
"Company") today reported fourth quarter net income of $1.2 million or $0.10
per diluted share. Net income for the year ended December 31, 2003 totaled
$3.5 million or $0.30 per diluted share. This compares to net income of $1.8
million or $0.15 per diluted share for the fourth quarter of 2002 and net
income of $7.2 million or $0.58 per diluted share for the year ended December
31, 2002.
Results of Operations
Net interest income for the fourth quarter of 2003 was $7.7 million
compared to $7.6 million reported for the fourth quarter of 2002. Net
interest income for the year ended December 31, 2003 was $27.6 million
compared to $33.5 million for 2002. The increase in net interest income
during the fourth quarter of 2003 from the comparable 2002 period was caused
primarily by a decrease in the average costs of interest-bearing liabilities
which was partially offset by decreases in both the average yields and average
balances of interest-earning assets. The decrease in net interest income for
the year ended December 31, 2003 was a result of the lower interest rate
environment and the lower average balances of interest-earning assets for the
year ended December 31, 2003 compared to 2002.
Interest income for the fourth quarter of 2003 was $18.0 million
compared to $20.4 million for the fourth quarter of 2002. Interest income for
the year ended December 31, 2003 was $71.3 million compared to $86.6 million
for 2002. Changes in interest income resulted from a decrease in the average
yield on interest-earning assets of 40 basis points and 90 basis points,
respectively, and a decrease in total average interest-earning assets of 4.7%
and 2.2%, respectively, for the quarter and year ended December 31, 2003
compared to the same periods in 2002. The average yield on the Company's
interest-earning assets decreased as a result of the unprecedented refinancing
activity over the past two years which caused significant rate reductions
within the loan portfolio and accelerated amortization of premiums on its
mortgage-backed securities portfolio. Given the current low interest rate
environment, the Company has reinvested these funds predominantly in
relatively low yielding assets with estimated average durations of two years
or less as well as overnight funds with the expectation that they will be
readily available for investment in higher yielding assets when the interest
rate cycle turns upward.
Interest expense for the three months ended December 31, 2003 was $10.3
million compared to $12.8 million for the same period in 2002. Interest
expense was $43.7 million and $53.1 million for the years ended December 31,
2003 and 2002, respectively. The decrease in interest expense for the three
and twelve month periods ended December 31, 2003 when compared to the 2002
periods was the result of lower costs of interest-bearing liabilities during
2003 as interest rates remained at record lows throughout the year and lower
average balances on interest-bearing liabilities throughout the year.
-More-
CFS Bancorp, Inc. - Page 2 of 7
The Company's provision for loan losses for the three months ended
December 31, 2003 and 2002 was $837,000 and $906,000, respectively, while the
provision for year ended December 31, 2003 and 2002 was $2.3 million and $2.0
million, respectively. The Company maintains its allowance for loan losses at
a level that management believes will be adequate to cover inherent losses on
existing loans based on internal evaluations of collectibility, prior loss
experience, value of underlying collateral and other factors including the
composition and concentrations within the loan portfolio and level and trends
of classified assets and nonperforming assets.
Non-interest income was relatively stable at $3.9 million for the three
months ended December 31, 2003 and December 31, 2002 and amounted to $11.8
million for the year ended December 31, 2003 compared to $11.3 million for the
same period in 2002. The increase in non-interest income for 2003 was the
result of additional gains on securities sales and increased fees on deposits.
During 2003, the Company sold approximately $46.7 million of securities which
resulted in net gains of $1.5 million and $1.8 million for the quarter and
year ended December 31, 2003, respectively, compared to $18,000 and $299,000
for the same 2002 periods. Increased fees on deposits of $48,000 and $1.2
million, respectively, were mainly realized from the Company's overdraft
checking product for both the quarter and year ended December 31, 2003. These
increases in gains on securities sales and fees on deposit accounts in 2003
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 expense was $9.8 million for the three months ended
December 31, 2003 compared to $8.1 million for the three months ended December
31, 2002. Non-interest expense was $32.9 million for the year ended December
31, 2003 compared to $32.7 million for the same prior year period. During the
fourth quarter of 2003, compensation and employee benefits increased by $1.4
million over the same period in 2002 as the Company contributed over $1.3
million to its defined benefit pension plan in December 2003. As with many
pension plans, the Company's plan was adversely affected by three years of
declining investment returns and record low interest rates which caused the
level of funded benefits to drop significantly. The Company made this
voluntary contribution in the fourth quarter of 2003 to keep the plan
appropriately funded.
The Company's income tax benefit for the three months ended December 31,
2003 was $285,000 or 30.5% of pre-tax income compared to income tax expense of
$696,000 or 27.4% of pre-tax income for the three months ended December 31,
2002. For the year ended December 31, 2003, income tax expense was $601,000
or 14.5% of pre-tax income compared to $3.0 million or 29.2% for the same
period in 2002. The significant decrease in income tax expense was a result
of lower pre-tax income, the application of available tax credits and the
effects of permanent tax differences on the lower pre-tax earnings. The
Company estimates that its effective rate for 2004 should return to previous
levels.
Statement of Financial Condition at December 31, 2003
The Company's total assets were $1.57 billion at December 31, 2003, a
decrease of $15.3 million from total assets of $1.59 billion at December 31,
2002. Decreases of $31.9 million in cash and cash equivalents, $111.7 million
in mortgage-backed securities available-for-sale, and $21.4 million in
mortgage-backed securities held-to-maturity were partially offset by increases
of $103.8 million in investment securities available-for-sale, $43.0 million
in net loans and $3.6 million in prepaid expenses and other assets. The
decrease in total assets was mainly caused by the repayment of $30.9 million
in borrowings from the Federal Home Loan Bank ("FHLB"). Total securities
decreased in 2003 as sales of
-More-
CFS Bancorp, Inc. - Page 3 of 7
securities and prepayments of higher yielding mortgage-backed securities were
re-invested through the Company's lending activities. Also during the fourth
quarter of 2003, the Company reviewed its held-to-maturity portfolio of
mortgage-backed securities and sold over $15.3 million of such securities
resulting in a gross gain of $1.4 million. Market conditions were deemed
optimal for selling these securities and also allowed the Company to reinvest
the proceeds into structures with anticipated higher total returns. In
conjunction with the sale of these securities in the fourth quarter, the
Company reclassified the remaining held-to-maturity securities to available-
for-sale as a reflection of its intent to hold all investments as available-
for-sale. The transfer of these securities to available-for-sale resulted in
$61,000 of additional unrealized gains.
The allowance for losses on loans increased to 1.06% of total loans at
December 31, 2003 from 0.92% at December 31, 2002. The increase reflects the
Company's shift toward growing the commercial real estate portfolio and the
estimated current known and inherent risks in the portfolios. Total non-
performing loans increased $7.4 million to $22.7 million at December 31, 2003
compared to December 31, 2002 as three commercial real estate loans with
aggregate carrying values of $8.9 million were transferred to non-accrual
status in the fourth quarter of 2003 and were partially offset by decreases in
single-family residential non-accrual loans. The Company believes that these
three loans are fully collateralized and its risk of loss, if any, is minimal.
Total liabilities decreased to $1.41 billion at December 31, 2003 from
$1.42 billion at December 31, 2002. Total deposits at December 31, 2003
increased by $21.5 million or 2.3% since December 31, 2002. This increase was
mainly the result of third and fourth quarter promotions for above-market-rate
180 day certificates which were offered to increase market share and build
customer relationships. As of December 31, 2003, the Company had
approximately $134.1 million outstanding in certificates of deposit with an
average cost of 2.82% from these promotions which will re-price during the
first two quarters of 2004. The Company expects to continue such promotions
during 2004 in new locations in its efforts to build market share and add new
customer relationships. Borrowed money decreased by $30.9 million to $418.5
million at December 31, 2003 as a portion of the loans payable to the FHLB
matured.
Stockholders' equity totaled $156.0 million, reflecting a decrease of
$4.7 million compared to December 31, 2002. The decrease was the result of
$9.3 million of common stock repurchases and $4.9 million in dividend payments
which were partially offset by net income, option exercises of $1.3 million
and an increase of $1.0 million in the unrealized gains on securities
available-for-sale. There were 12,200,015 shares of common stock outstanding
at December 31, 2003, compared to 12,674,597 shares of common stock
outstanding at December 31, 2002. Stockholder's equity per share of common
stock increased to $12.78 at December 31, 2003 from $12.68 at December 31,
2002. The capital ratios of Citizens Financial Services, FSB, the Company's
wholly-owned subsidiary, continued to be in excess of regulatory requirements.
Chairman and CEO Thomas F. Prisby stated, "The core operations remain on
a positive track. Although the fixed high cost of borrowed money continues to
distort all key ratios, we are concentrating on strategies to improve asset
composition by adding to our portfolio of higher yielding commercial loans."
Prisby also stated, "We believe the commercial lending function has been
strengthened significantly with the hiring of quality originators, strong
support personnel, and an experienced loan management staff. Our commercial
portfolio is up over 30% from last year. In addition, our non-interest income
continued to increase in 2003 as fees on deposit accounts and loan fees were
up over 22% from 2002."
-More-
CFS Bancorp, Inc. - Page 4 of 7
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 currently 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 tax rates, prepayments, costs of funds, net
interest margins and income levels, anticipated future opportunities for use
of liquidity, 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 interest rate environment, loan loss
reserves, the effect of various savings promotions, 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.
-More-
CFS Bancorp, Inc. - Page 5 of 7
CFS BANCORP, INC.
Consolidated Statements of Financial Condition
(Dollars in thousands)
December 31,
____________________________
2003 2002
_______________ ___________
(Unaudited)
ASSETS
Cash and amounts due from depository institutions $ 18,675 $ 30,312
Interest-bearing deposits 142,139 105,479
Federal funds sold 17,399 74,350
--------- ---------
Cash and cash equivalents 178,213 210,141
Investment securities available-for-sale 142,890 39,064
Mortgage-backed securities available-for-sale 184,899 296,638
Mortgage-backed securities held-to-maturity
(fair value 2002 - $21,977) -- 21,402
Loans receivable, net of allowance for losses on loans
of $10,453 and $8,674, respectively 971,541 930,348
Investment in Federal Home Loan Bank stock, at cost 26,766 25,780
Office properties and equipment 13,738 13,835
Accrued interest receivable 6,623 6,597
Real estate owned 206 893
Investment in Bank-owned life insurance 31,926 31,009
Prepaid expenses and other assets 12,626 9,055
--------- ---------
Total assets $1,569,428 $1,584,762
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 975,755 $ 954,222
Borrowed money 418,490 449,431
Advance payments by borrowers for taxes and insurance 5,595 4,410
Other liabilities 13,635 16,037
--------- ---------
Total liabilities 1,413,475 1,424,100
--------- ---------
Stockholders' Equity:
Preferred stock, $.01 par value:
Authorized shares - 15,000,000
Issued and outstanding shares - 0
at December 31, 2003 and 2002 -- --
Common stock, $.01 par value:
Authorized shares - 85,000,000
Issued shares - 23,423,306
at December 31, 2003 and 2002
Outstanding shares - 12,200,015 and 12,674,597
at December 31, 2003 and 2002, respectively 234 234
Additional paid-in capital 189,429 189,786
Retained earnings, substantially restricted 106,804 107,598
Treasury stock, at cost: 11,223,291 and 10,748,709 shares
at December 31, 2003 and 2002, respectively (132,741) (125,650)
Unearned common stock acquired by ESOP (7,158) (8,356)
Unearned common stock acquired by RRP (1,523) (2,827)
Accumulated other comprehensive income (loss), net of tax 908 (123)
--------- ---------
Total stockholders' equity 155,953 160,662
--------- ---------
Total liabilities and stockholders' equity $1,569,428 $1,584,762
========= =========
CFS Bancorp, Inc. - Page 6 of 7
CFS BANCORP, INC.
Consolidated Statements of Income
(Dollars in thousands, except per share data)
(Unaudited)
For Three Months Ended For Twelve Months Ended
December 31, December 31,
---------------------- -----------------------
2003 2002 2003 2002
--------- -------- --------- ---------
<s> <c> <c> <c> <c>
Interest income:
Loans $ 14,606 $ 15,563 $ 59,469 $ 62,719
Mortgage-related securities 2,109 3,438 6,836 17,491
Other investment securities 729 458 2,023 1,720
Other 552 949 2,944 4,631
--------- -------- --------- ---------
Total interest income 17,996 20,408 71,272 86,561
Interest expense:
Deposits 3,909 6,018 17,276 25,717
Borrowings 6,400 6,768 26,402 27,351
--------- -------- --------- ---------
Total interest expense 10,309 12,786 43,678 53,068
--------- -------- --------- ---------
Net interest income before
provision for losses on loans 7,687 7,622 27,594 33,493
Provision for losses on loans 837 906 2,326 1,956
--------- -------- --------- ---------
Net interest income after
provision for losses on loans 6,850 6,716 25,268 31,537
Non-interest income:
Loan fees 171 371 1,430 1,393
Fees on deposit accounts 1,483 1,435 5,301 4,112
Insurance commissions -- 252 -- 1,210
Investment commissions 131 38 651 770
Gain on sale of available-for-sale
investment securities - net of losses on
available-for-sale securities
and on impaired equity securities 1,455 18 1,780 299
Gain on sale of office properties 4 -- 28 --
Gain on sale of insurance agency -- 1,084 -- 1,084
Income from Bank-owned life insurance 345 390 1,437 1,524
Other income 301 346 1,130 921
--------- -------- --------- ---------
Total non-interest income 3,890 3,934 11,757 11,313
Non-interest expense:
Compensation and employee benefits 6,369 4,925 19,932 20,070
Net occupancy expense 450 501 2,211 2,362
Data processing 471 410 1,804 1,743
Furniture and equipment expense 357 485 1,776 1,925
Professional Fees 453 346 1,833 1,374
Marketing 458 277 1,145 904
Other general and administrative expens 1,248 1,168 4,185 4,296
--------- -------- --------- ---------
Total non-interest expense 9,806 8,112 32,886 32,674
--------- -------- --------- ---------
Income before income taxes 934 2,538 4,139 10,176
Income tax (benefit) expense (285) 696 601 2,971
--------- -------- --------- ---------
Net income $ 1,219 $ 1,842 $ 3,538 $ 7,205
========= ======== ========= =========
Per share data:
Basic earnings per share 0.11 0.16 0.31 0.60
Diluted earnings per share 0.10 0.15 0.30 0.58
Cash dividends declared per share 0.11 0.10 0.11 0.40
Weighted average shares outstanding 11,300,550 11,728,289 11,289,254 12,000,589
Weighted average diluted shares outstanding 11,692,643 12,199,647 11,702,635 12,492,149
CFS Bancorp, Inc. - Page 7 of 7
CFS BANCORP, INC.
Selected Consolidated Financial Data
(Dollars in thousands, except per share data)
(Unaudited)
At At
SELECTED FINANCIAL CONDITION DATA December 31, 2003 December 31, 2002
----------------- -----------------
<s> <c> <c>
Common shares outstanding 12,200,015 12,674,597
Stockholders' equity per outstanding share $12.78 $12.68
Stockholders' equity to total assets 9.94% 10.14%
Capital ratios (Bank only):
Tangible capital 8.46 8.42
Core capital 8.46 8.42
Risk-based capital 13.04 13.97
Non-performing loans $22,720 $15,325
Non-performing assets 22,926 16,218
Allowance for losses on loans 10,453 8,674
Non-performing loans to total loans 2.31% 1.63%
Non-performing assets to total assets 1.46 1.02
Allowance for losses on loans to non-performing loans 46.01 56.60
Allowance for losses on loans to total loans 1.06 0.92
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------- ----------------------
SELECTED OPERATIONS DATA 2003 2002 2003 2002
--------- ---------- --------- ---------
<s> <c> <c> <c) <c>
Average balance data:
Total assets $1,547,539 $1,615,497 $1,565,633 $1,601,112
Loans receivable 988,911 931,313 968,231 916,553
Interest-earning assets 1,462,490 1,534,372 1,486,635 1,520,484
Total liabilities 1,392,935 1,451,902 1,410,236 1,433,455
Total deposits 947,359 972,302 938,998 948,754
Interest-bearing deposits 906,435 934,608 901,337 911,391
Interest-bearing liabilities 1,324,931 1,386,449 1,342,612 1,370,255
Stockholders' equity 154,604 163,595 155,397 167,657
Ratios (quarterly data annualized):
Return on average assets 0.32% 0.46% 0.23% 0.45%
Return on average equity 3.15 4.50 2.28 4.30
Average yield on interest-earning assets 4.92 5.32 4.79 5.69
Average cost on interest-bearing liabilities 3.11 3.69 3.25 3.87
Interest rate spread 1.81 1.63 1.54 1.82
Net interest margin 2.10 1.99 1.86 2.20
Average interest-earning assets to
average interest-bearing liabilities 110.38 110.67 110.73 110.96
Non-interest expense to average assets 2.53 2.01 2.10 2.04
Efficiency ratio 96.92 77.60 87.60 75.25