EXHIBIT 99.1
FIRST 22 West State Street
KEYSTONE Media, PA 19063
FINANCIAL, INC. 610-565-6210
FOR IMMEDIATE RELEASE
FIRST KEYSTONE FINANCIAL ANNOUNCES
FOURTH QUARTER AND YEAR END RESULTS
Media, PA November 10, 2004 - First Keystone Financial, Inc. (Nasdaq:
FKFS) reported today net income for the quarter ended September 30, 2004 of
$207,000, or $0.11 per diluted share, compared to $600,000, or $0.29 per
diluted share, for the same period last year. Net income for the fiscal year
ended September 30, 2004 was $2.2 million, or $1.14 per diluted share, as
compared to $2.7 million, or $1.35 per diluted share, for fiscal 2003.
Reducing the Company's quarterly and annual results was a $709,000 after
tax, non-cash charge resulting from a determination that a $5.0 million
investment available for sale in Federal Home Loan Mortgage Corporation
("FHLMC") floating rate perpetual preferred stock was impaired due to its
decline in value and a determination that it is not expected to recover in the
near future. Although the FHLMC preferred stock is rated AA- and is fully
performing, the market value of the stock has decreased due to the decline in
interest rates since the dividend paid on the preferred stock is set every two
years based upon the two-year constant maturity treasury index.
The Company's net interest income increased $318,000, or 12.6%, for the
three months ended September 30, 2004 as compared to the same period in fiscal
2003. The increase in net interest income reflected the decline in the
average rate paid on interest-bearing liabilities combined with the increased
average balance of the loan portfolio. Interest income increased $156,000, or
2.4%, for the quarter ended September 30, 2004 compared to the same period in
the prior year primarily due to a $19.1 million increase to $538.5 million in
the average balance of interest-earning assets due to the growth of the loan
portfolio partially offset by a 7 basis point decrease in the average yield
earned on interest-earning assets. Interest expense decreased $162,000, or
4.2%, for the quarter ended September 30, 2004 as compared to the fourth
quarter of fiscal 2003 primarily due to a 24 basis point decrease in the
weighted average rate paid on interest-bearing liabilities partially offset by
a $20.6 million increase to $535.3 million in the average balance of such
liabilities. As a result, the interest rate margin on a tax equivalent basis
increased to 2.17% for the quarter ended September 30, 2004 as compared to
2.02% for the fourth quarter of fiscal 2003.
"To spearhead part of the Company's strategic plan to continue to grow
the loan portfolio in areas other than single-family residential loans, a
director of lending with expertise in consumer and commercial lending was
hired in fiscal 2004. We are pleased with the progress made in implementing
the strategic plan as our construction and consumer equity loan portfolios
experienced increases of $9.1 million and $10.2 million, respectively, in
their balances compared to the end of fiscal 2003," said Donald S. Guthrie,
Chairman and Chief Executive Officer. Net loans increased 6.22% to $304.2
million compared to $286.4 million from the prior year.
The provision for loan losses decreased $55,000, or 42.3%, to $75,000 for
the three months ended September 30, 2004 and $415,000, or 58.0%, to $300,000
for the fiscal year ended September 30, 2004 compared to the same periods in
the prior year. The decrease in the provision was primarily due to an
$840,000 decrease in the amount of net loan charge-offs compared to the prior
year. Total non-performing assets increased to $3.3 million at September 30,
2004 from $3.0 million at September 30, 2003. The Company's ratio of
non-performing assets to total assets was 0.57% at September 30, 2004 compared
to 0.53% at September 30, 2003.
For the quarter ended September 30, 2004, non-interest income decreased
$1.0 million to $91,000 as compared to the fourth quarter of fiscal 2003. The
decrease was primarily the result of a $1.1 million pre-tax ($709,000
after-tax) other-than-temporary impairment of a perpetual preferred security
as discussed above combined with a modest decline in the cash surrender value
of certain insurance policies held by the Bank. Offsetting such declines was
a $176,000 gain on the sale of investment and mortgage-related securities
combined with a $172,000, or 68.5%, increase in service charges and other
fees. "We are encouraged with our increases in non-interest income due to the
new products and additional services we are offering to our customers," said
Thomas M. Kelly, President and Chief Operating Officer. For the fiscal year
ended September 30, 2004, non-interest income increased $613,000 to $3.9
million by comparison to fiscal 2003. The increase for fiscal 2004 was
primarily the result of a $314,000 net gain on sales of available for sale
securities and $550,000 recognized in connection with a repayment of a
commercial real estate loan partially offset by a $356,000 decrease in gains
on sale of loans.
Non-interest expense for the quarter ended September 30, 2004 increased
$57,000 to $2.8 million from the same period last year primarily due to an
increase of $159,000, or 44.4%, in other non-interest expense, $37,000, or
24.3%, in professional fees and $25,000, or 20.2%, in advertising expense
offset, in part, by a $195,000, or 12.7%, decrease in compensation and
employee benefit expenses. Non-interest expense for the year ended September
30, 2004 increased $2.1 million, or 20.2%, by comparison to fiscal 2003
primarily due to a $1.4 million increase in compensation and employee benefit
expense. The increase in compensation and employee benefit expense was
primarily due to an additional $598,000 expense relating to the funding of a
non-qualified supplemental retirement plan for certain executive officers and
a $334,000, or 64.7%, increase in the employee stock ownership plan ("ESOP")
expense related to the appreciation of the Company's stock value as well as
the prepayment of the outstanding loan balance on the original loan. In
addition, approximately $460,000 of the increase in compensation and benefit
expense was due to the hiring of additional personnel, merit increases and
medical costs. In addition, the increase in non-interest expense for fiscal
2004 was due to increases of $148,000, $188,000 and $204,000 in real estate
operations, professional fees and other non-interest expenses, respectively.
The Company's total assets increased to $571.9 million at September 30,
2004, a $12.3 million increase from $559.6 million at September 30, 2003.
Total deposits decreased $17.7 million, or 4.9%, to $344.9 million at
September 30, 2004 from $362.6 million at September 30, 2003. The Company
increased by $34.9 million, or 25.6%, 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 $2.7 million due to an unrealized loss on available for sale
securities of $1.3 million, the cost of repurchasing 51,092 shares of its
common stock as well as purchasing 96,208 shares for the ESOP combined with
dividend payments totaling $843,000, partially offset by net income of $2.2
million.
First Keystone Bank, the Company's wholly owned subsidiary, serves its
customers from eight 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.
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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 Year Ended
September 30, September 30,
---------------------------------------------
2004 2003 2004 2003
---------------------------------------------
<s> <c> <c> <c> <c>
Net interest income(1) $2,843 $2,525 $11,431 $11,200
Provision for loan losses 75 130 300 715
Non-interest income 91 1,102 3,899 3,286
Non-interest expense(1) 2,827 2,770 12,501 10,400
---------------------------------------------
Income before taxes 32 727 2,529 3,371
Income tax expense (benefit) (175) 127 326 632
---------------------------------------------
Net income $ 207 $ 600 $ 2,203 $ 2,739
=============================================
Basic earnings per share $ 0.12 $ 0.32 $ 1.21 $ 1.44
Diluted earnings per share 0.11 0.29 1.14 1.35
Dividends per share 0.11 0.10 0.44 0.40
Number of shares outstanding at end of period 1,927,744 1,925,337 1,927,744 1,925,337
Weighted average basic shares outstanding 1,791,032 1,889,132 1,821,569 1,901,682
Weighted average diluted shares outstanding 1,898,019 2,035,757 1,939,044 2,028,992
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FIRST KEYSTONE FINANCIAL, INC.
SELECTED FINANCIAL DATA
(In thousands except per share data)
(Unaudited)
September 30, September 30,
2004 2003
----------------------------
<s> <c> <c>
Total assets $571,919 $559,612
Loans receivable, net 304,248 286,421
Investment and mortgage-related securities available for sale 161,235 202,356
Investment and mortgage-related securities held to maturity 42,650 9,802
Cash and cash equivalents 17,975 21,190
Deposits 344,880 362,605
Borrowings 171,149 136,272
Junior subordinated debt(2) 21,557 21,593
Loan loss allowance 2,039 1,986
Total stockholders' equity 29,698 32,388
Book value per share $15.41 $16.82
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FIRST KEYSTONE FINANCIAL, INC.
OTHER SELECTED DATA
(Unaudited)
At or for the At or for the
Three Months Ended Year Ended
September 30, September 30,
---------------------------------------
2004 2003 2004 2003
---------------------------------------
<s> <c> <c> <c> <c>
Return on average assets(3) 0.15% 0.44% 0.39% 0.51%
Return on average equity(3) 2.88% 7.49% 7.13% 8.39%
Interest rate spread(1)(2)(3)(4) 2.16% 1.99% 2.21% 2.26%
Net interest margin(1)(2)(3)(4) 2.17% 2.02% 2.23% 2.30%
Ratio of interest-earning assets to interest-bearing
liabilities(2)(4) 100.60% 100.91% 100.69% 101.44%
Ratio of operating expenses to average assets(1)(2)(3) 1.99% 2.01% 2.23% 1.95%
Ratio of non-performing assets to total assets at
end of period(2) 0.57% 0.53% 0.57% 0.53%
Ratio of allowance for loan loss to non-performing loans
at end of period 100.29% 127.63% 100.29% 127.63%
(1) Due to the adoption of FIN 46, 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 which
were 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 2.10%
and 1.92% for the quarter ended September 30, 2004 and 2003, respectively,
while the net interest margin would be 2.11% and 1.94% for the quarter
ended September 30, 2004 and 2003, respectively. Without the adjustment
for taxes, the interest rate spread would be 2.86% and 2.90% for the year
ended September 30, 2004 and 2003 respectively, while the net interest
margin would be 2.88% and 2.96% for the year ended September 30, 2004
and 2003, respectively.
CONTACT: Thomas M. Kelly, President
Rose M. DiMarco, Chief Financial Officer
(610) 565-6210
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