Exhibit 99.1
[First Keystone Financial, Inc. letterhead]
FOR IMMEDIATE RELEASE
_____________________
CONTACT: THOMAS M. KELLY, PRESIDENT
(610) 565-6210
FIRST KEYSTONE FINANCIAL ANNOUNCES
THIRD QUARTER RESULTS
Media, PA July 30, 2004 - First Keystone Financial,
Inc. (Nasdaq: FKFS) reported today net income for the
quarter ended June 30, 2004 of $627,000, or $0.32 per
diluted share, compared to $665,000, or $0.33 per diluted
share, for the same period last year. Net income for the
nine months ended June 30, 2004 was $2.0 million, or
$1.02 per diluted share, as compared to $2.1 million, or
$1.05 per diluted share, for the same period in 2003.
The Company's net interest income increased
$297,000, or 11.3%, for the three months ended June 30,
2004 as compared to the same period in fiscal 2003. The
increase in net interest income reflected the continued
more rapid decrease in the weighted average cost of
interest-bearing liabilities as compared to the decrease
in the weighted average yield on interest-earning assets.
Interest expense decreased $407,000, or 10.2%, for the
quarter ended June 30, 2004 as compared to the third
quarter of fiscal 2003 primarily due to a 44 basis point
decrease in the weighted average rate paid on interest-
bearing liabilities partially offset by a $22.1 million
increase to $526.0 million in the average balance of such
liabilities. Interest income decreased, to a lesser
degree, declining $110,000, or 1.7%, for the quarter
ended June 30, 2004 compared to the same period in the
prior year primarily due to a 25 basis point decrease in
the average yield earned on interest-earning assets
partially offset by a $16.1 million increase to $529.7
million in the average balance of such assets. As a
result, the interest rate margin on a tax equivalent
basis increased to 2.27% for the quarter ended June 30,
2004 as compared to 2.12% for the third quarter of fiscal
2003.
On a linked quarter basis, net interest income
increased $146,000 in the third quarter of fiscal 2004
compared to the second quarter of fiscal 2004. In
addition, the net interest margin on a tax equivalent
basis increased 11 basis points from 2.16% for the three
months ended March 31, 2004 (or 11 basis points from
2.09% on a non-tax equivalent basis). During the third
quarter of fiscal 2004, as compared to the second quarter
of the same year, the Company experienced a 5 basis point
increase in the yield earned on average interest-earning
assets combined with an 8 basis point decline in the
rates paid on interest-bearing liabilities. The increase
in the net interest margin was primarily due to an
increase in yield in the investment portfolio combined
with a decrease in the cost of deposits resulting from
the low interest rate environment.
The provision for loan losses decreased $120,000, or
61.5%, to $75,000 for the three months ended June 30,
2004 and $360,000, or 61.5%, to $225,000 for the nine
months ended June 30, 2004 compared to the same periods
in the prior year. The decrease in the provision was
primarily due to a $927,000 decrease in non-performing
assets from June 30, 2003 resulting from a commercial
real estate loan being written down to its market value
and transferred to real estate owned. Total non-
performing assets increased to $3.1 million at June 30,
2004 from $2.9 million at March 31, 2004. The Company's
ratio of non-performing assets to total assets was 0.55%
at June 30, 2004 compared to 0.51% at March 31, 2004 and
0.73% at June 30, 2003.
For the quarter ended June 30, 2004, non-interest income
decreased $433,000 to $575,000 as compared to the same period
last year. For the three months ended June 30, 2004, the
decrease was primarily the result of a $202,000 decrease in
the gain on sales of investment securities and a $191,000
decrease in cash surrender value of certain insurance
policies held by the Bank. With the slowdown in the refinance
market, the gain on sales of loans held for sale decreased
$144,000 compared to the same period last year. Non-interest
income increased $1.6 million to $3.8 million for the nine
months ended June 30, 2004 in comparison to the same period
last year.
Non-interest expense for the quarter ended June 30, 2004
increased $24,000, or 0.92% from the same period last year
primarily due to increases of $33,000, or 20.4%, in
professional fees, $18,000, or 24.3%, in advertising and
$50,000, or 9.6%, in other non-interest expenses offset by a
$79,000 decrease in compensation and employee benefit
expenses. Non-interest expense for the nine months ended
June 30, 2004 increased $2.0 million, or 26.6%, by comparison
to the same period in the prior year primarily due to an
increase in compensation and employee benefit expense. The
increase in compensation and employee benefit expenses was
due to an additional $598,000 expense relating to the funding
of a non-qualified supplemental retirement plan for certain
executive officers as well as to the prepayment of the
outstanding loan balance on the original loan to the
Company's employee stock ownership plan ("ESOP") which
resulted in $452,000 of expenses. To a lesser degree, the
increase in compensation and benefit expense was due to
additional personnel and merit increases. In addition, the
increase in non-interest expense was also due to increases of
$152,000 and $150,000 in professional fees and real estate
operations, respectively.
The Company's total assets increased to $565.0 million
at June 30, 2004, a $5.4 million increase from $559.6 million
at September 30, 2003. Investments and mortgage-related
securities held to maturity increased to $42.3 million from
$9.8 million at September 30, 2003 mainly due to the
Company's strategy to reinvest the cash flows from the
securities available for sale portfolio into the securities
held to maturity portfolio in order to minimize the effect of
price volatility to the Company's financial statements
resulting from available for sale securities. As a result,
the available for sale portfolio decreased by $31.5 million
to $170.9 million at June 30, 2004. Loans receivable
increased to $297.6 million from $286.4 million at September
30, 2003 resulting from 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. Total deposits decreased $12.7 million,
or 3.5%, to $349.9 million at June 30, 2004 from $362.6
million at September 30, 2003. The Company increased by
$21.5 million, or 15.8%, the amount of its borrowings from
September 30, 2003. Borrowings were considered an appropriate
source of funds to offset the decrease in deposits and to
fund asset growth. Stockholders' equity decreased $4.2
million due to an unrealized loss on available for sale
securities of $2.9 million, the cost of repurchasing 51,092
shares of its common stock as well as purchasing 86,658
shares for the ESOP combined with dividend payments totaling
$631,000, partially offset by net income of $2.0 million.
First Keystone Bank, the Company's wholly owned
subsidiary, serves its customers from seven full-service
offices located 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 levels of non-interest income and expenses as well as
other factors discussed in documents filed by the Company
with the Securities and Exchange Commission from time to
time. 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 Nine Months Ended
June 30, June 30,
-------------------------------------------
2004 2003 2004 2003
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Net interest income (1) $2,919 $2,622 $8,588 $8,684
Provision for loan losses 75 195 225 585
Non-interest income 575 1,008 3,808 2,184
Non-interest expense (1) 2,646 2,622 9,674 7,639
-------------------------------------------
Income before taxes 773 813 2,497 2,644
Income tax expense 146 148 501 505
Net income $ 627 $ 665 $1,996 $2,139
===========================================
Basic earnings per share $ 0.34 $ 0.35 $ 1.09 $ 1.12
Diluted earnings per share 0.32 0.33 1.02 1.05
Dividends per share 0.11 0.10 0.33 0.30
Number of shares outstanding at end of period 1,926,384 1,985,847 1,926,384 1,985,847
Weighted average basic shares outstanding 1,835,609 1,899,265 1,831,822 1,906,099
Weighted average diluted shares outstanding 1,956,155 2,046,598 1,953,103 2,033,216
_____________________________________________________________________________________________
FIRST KEYSTONE FINANCIAL, INC.
SELECTED FINANCIAL DATA
(In thousands except per share data)
(Unaudited)
June 30, September 30,
2004 2003
------------------------------
Total assets $564,953 $559,612
Loans receivable, net 297,600 286,421
Investment and mortgage-related securities available for sale 170,867 202,356
Investment and mortgage-related securities held to maturity 42,261 9,802
Cash and cash equivalents 18,042 21,190
Deposits 349,864 362,605
Borrowings 157,784 136,272
Junior subordinated debt (2) 21,566 21,593
Loan loss allowance 2,129 1,986
Total stockholders' equity 28,180 32,388
Book value per share $14.63 $16.82
____________________________________________________________________________________________
FIRST KEYSTONE FINANCIAL, INC.
OTHER SELECTED DATA
(Unaudited)
At or for the At or for the
Three Months Nine Months
Ended Ended
June 30, June 30,
------------------------------------
2004 2003 2004 2003
------------------------------------
Return on average assets (3) 0.44% 0.49% 0.48% 0.54%
Return on average equity (3) 8.06% 8.05% 8.42% 8.68%
Interest rate spread (1)(2)(3)(4) 2.25% 2.06% 2.23% 2.35%
Net interest margin (1)(2)(3)(4) 2.27% 2.12% 2.25% 2.40%
Ratio of interest-earning assets to
interest-bearing liabilities(2)(4) 100.70% 101.93% 100.72% 101.69%
Ratio of operating expenses to
average assets (1)(2)(3) 1.88% 1.93% 2.31% 1.93%
Ratio of non-performing assets to
total assets at end of period (2) 0.55% 0.73% 0.55% 0.73%
Ratio of allowance for loan loss to
non-performing loans at end of period 116.49% 76.92% 116.49% 76.92%
(1) 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.
(2) 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.
(3) Annualized.
(4) 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 2.18% and 1.98% for the
quarter ended June 30, 2004 and 2003, respectively,
while the net interest margin would be 2.20% and 2.04%
for the quarter ended June 30, 2004 and 2003,
respectively. Without the adjustment for taxes, the
interest rate spread would be 2.16% and 2.27% for the
nine months ended June 30, 2004 and 2003 respectively,
while the net interest margin would be 3.27% and 3.48%
for the nine months ended June 30, 2004 and 2003,
respectively.