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 February 2, 2004 - - First Keystone Financial,
Inc., the holding company for First Keystone Bank (the "Bank"),
announced today net income for the quarter ended December 31, 2003
was $743,000, or $0.37 per diluted share, compared to $781,000, or
$0.39 per diluted share, for the same period last year. Comparing
the first quarter of fiscal 2004 to the fourth quarter of fiscal
2003, net income increased $143,000 from $600,000 while diluted
earnings per share increased from $0.29 to $0.37.
Net interest income for the three months ended December
31, 2003 decreased $185,000, or 6.0%, to $2.9 million as compared to
the same period in 2002. For the quarter ended December 31, 2003,
interest income decreased $581,000, or 8.1%, which was partially
offset by a $396,000, or 9.6%, decrease in interest expense. The
decline in net interest income reflected primarily the effect of the
reduction of the weighted average yield earned on interest-earning
assets which was partially offset by growth in the average balances
of such assets. Although the average balance of interest-bearing
liabilities increased $37.7 million, or 7.9%, the Company
experienced a reduction in interest expense due to a decline in the
weighted average rate paid on such liabilities. As a result of the
compression in the Company's yields when compared to its liability
costs, its interest rate spread and margin decreased to 2.28% and
2.30%, respectively, as compared to 2.57% and 2.62% for the first
quarter of fiscal 2003. The compression in the net interest margin
reflected the effects of having to reinvest at current low interest
rates the high cash flows resulting from the high level of loan
refinancings and prepayments of mortgage-related securities
experienced in fiscal 2003.
However, on a linked quarter basis, the net interest spread and
margin both improved. The interest rate spread increased from
1.99% for the quarter ended September 30, 2003 while the net
interest margin increased 28 basis points from 2.02% for the three
months ended September 30, 2003. The increase in net interest
margin during the quarter was primarily the effect of rates rising
on the long end of the yield curve resulting in significant slowing
of the rate of repayments as well as related decline in the rate of
the premium amortization on the mortgage-related securities
portfolio.
The provision for loan losses decreased $120,000, or 61.5%, to
$75,000 for the three months ended December 31, 2003 compared to the
same period in the prior year. The decrease in the provision was
primarily due to the decrease in non-performing assets between
December 31, 2002 and December 31, 2003. However, total
non-performing assets increased slightly to $3.1 million at December
31, 2003 from $3.0 million at September 30, 2003. The Company's
ratio of non-performing assets to total assets was 0.56% at December
31, 2003 compared to 0.53% at September 30, 2003.
Non-interest income increased $440,000 to $1.1 million for the
three months ended December 31, 2003 from the same period last
year. The increase in the first quarter was primarily due to the
increase in the gain on sales of investment securities and, to a
lesser extent, increases in the cash surrender value of certain
insurance policies held by the Bank to fund retirement benefits and
other income partially offset by a decrease in the gain on sales of
loans.
Non-interest expense increased $423,000, or 16.9%, to $2.9
million for the quarter ended December 31, 2003 as compared to the
same period last year. The increase for the quarter ended December
31, 2003 was primarily due to increases of $374,000, $82,000 and
$19,000 in compensation and employee benefits, real estate
operations and occupancy and equipment, respectively, partially
offset by decreases of $36,000, $22,000 and $9,000 in other non-
interest expenses, advertising and data processing, respectively. A
substantial majority of the increase in compensation and employee
benefits was comprised of increases in pension benefits, employee
stock ownership expenses and medical benefit costs.
The Company's total assets decreased slightly to $556.0 million
at December 31, 2003 from $559.6 million at September 30, 2003.
Mortgage-related securities held to maturity increased to $15.1
million from $3.5 million at September 30, 2003 mainly due to the
Company's strategy to reinvest the cash flows from the loan and
securities portfolio into the held to maturity portfolio in order to
minimize price volatility in the future as rates increase. Loans
receivable increased from $286.4 million to $290.9 million at
September 30, 2003 reflecting the Company's strategy of increasing
its investment in higher yielding assets. The increase in loans
receivable was primarily the result of increases in multi-family,
and commercial real estate loans and home equity loans and lines of
credit partially offset by a decline in single-family residential
loans. Due to the slowdown in refinancing activity experienced in
the first quarter of fiscal 2004 combined with stiff local
competition for deposits, total deposits decreased $15.9 million, or
4.4%, to $346.7 million at December 31, 2003 from $362.6 million at
September 30, 2003. Stockholders' equity also declined as the
Company repurchased 40,200 shares of its common stock combined with
dividend payments totaling $208,000 partially offset by net income
of $743,000.
First Keystone Bank, the Company's wholly owned subsidiary,
serves its customers from seven full-service offices in Delaware and
Chester Counties.
Certain information in this release may constitute forward-
looking statements as that term is defined in the Private Securities
Litigation Act of 1995. Such forward-looking statements are subject
to risks and uncertainties that could cause actual results to differ
materially from those estimated due to a number of factors. 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.
This press release contains financial information determined by
methods other than in accordance with accounting principles
generally accepted in the United States of America ("GAAP") as
discussed below. Management of the Company uses these non-GAAP
measures in its analysis of the Company's performance.
FIRST KEYSTONE FINANCIAL, INC.
SELECTED OPERATIONS DATA
(In thousands except per share data)
(Unaudited)
Three Months Ended
December 31,
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2003 2002
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Net interest income (4) $2,896 $3,081
Provision for loan losses 75 195
Non-interest income 1,064 624
Non-interest expense (4) 2,933 2,510
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Income before income taxes 952 1,000
Income tax expense 209 219
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Net income $ 743 $ 781
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Basic earnings per share $ 0.40 $ 0.41
Diluted earnings per share 0.37 0.39
Dividends per share 0.11 0.10
Number of shares outstanding at end of period 1,890,897 2,011,541
Weighted average basic shares outstanding 1,834,220 1,906,521
Weighted average diluted shares outstanding 1,987,850 2,017,733
FIRST KEYSTONE FINANCIAL, INC.
SELECTED FINANCIAL DATA
(In thousands except per share data)
(Unaudited)
December 31, September 30,
2003 2003
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Total assets $555,974 $559,612
Loans receivable, net 290,874 286,421
Investment securities and mortgage-related securities 193,136 202,356
Cash and cash equivalents 15,599 21,190
Deposits 346,700 362,605
Borrowings 150,108 136,272
Junior subordinated debt (1) 21,584 21,593
Loan loss allowance 2,017 1,986
Total stockholders' equity 31,436 32,388
Book value per share $16.63 $16.82
FIRST KEYSTONE FINANCIAL, INC.
OTHER SELECTED DATA
(Unaudited)
At or for the
Three Months
Ended
December 31,
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2003 2002
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Return on average assets (2) 0.53% 0.60%
Return on average equity (2) 9.39% 9.59%
Interest rate spread (1) (2) (3) (4) 2.28% 2.57%
Net interest margin (1) (2) (3) (4) 2.30% 2.62%
Interest-earning assets/interest-bearing liabilities (1) (3) 100.66% 101.38%
Non-interest expense expenses to average assets (1) (2) (4) 2.10% 1.94%
Ratio of non-performing assets to total
assets at end of period (1) 0.56% 0.77%
Ratio of loan loss allowance to non-performing assets at end
of period 64.32% 62.47%
(1) The Company adopted FIN 46 on December 31, 2003. The adoption resulted in
the deconsolidation of certain trust preferred security trusts previously
consolidated. As such, the Company's trust preferred securities are
presented as debt. Reclassifications have been made to the prior year to
conform with the presentation.
(2) Annualized.
(3) Adjusted for the effects of tax-free investments. This is a non-GAAP
presentation. Management believes that presentation of its interest rate
spread and net interest margin on a tax-equivalent basis provides useful
information that is essential to a proper understanding of the operating
results of the Company's business. These disclosures should not be viewed
as a substitute for operating results determined in accordance with GAAP
nor are they necessarily comparable to non-GAAP performance measures which
may be presented by other companies. In order to provide accurate
comparisons of yields and margins for all earning assets, the interest
income earned on tax-exempt assets has been increased to make them fully
equivalent to other taxable interest income investments. Without the
adjustment for taxes, the interest rate spread would be 2.20% and 2.48%
for the quarter ended December 31, 2003 and 2002, respectively, while the
net interest margin would be 2.22% and 2.53% for the quarter ended
December 31, 2003 and 2002, respectively.
(4) Due to the adoption of FIN 46, the interest on trust preferred securities
is presented as interest expense. Amounts presented as non-interest
expense in the prior year have been reclassified to conform with this
presentation.