Exhibit 99.1
[CFS Bancorp, Inc Letterhead]
April 26, 2005
FOR IMMEDIATE RELEASE
CONTACT: Thomas F. Prisby, Chairman of the Board and Chief Executive Officer
219-836-5500
CFS Bancorp, Inc. Announces First Quarter 2005 Financial Results
MUNSTER, IN - April 26, 2005 - CFS Bancorp, Inc. (NASDAQ: CITZ) (the
Company) today reported net income for the first quarter of 2005 of $266,000
as compared to $1.2 million reported for the first quarter of 2004. Diluted
earnings per share were $0.02 for the first quarter of 2005 compared to
diluted earnings per share of $0.11 for the comparable prior year period. The
Company's net income for the first quarter of 2005 was adversely affected by
a pre-tax charge of $4.7 million ($2.9 million net of tax or $0.24 per diluted
share) to interest expense related to amortization of the deferred premium on
early extinguishment of debt relating to the Company's restructuring during
the fourth quarter of 2004 of Federal Home Loan Bank (FHLB) borrowings. This
pre-tax charge was partially offset by a $3.4 million ($2.1 million net of tax
or $0.17 per diluted share) decrease in interest expense as a result of the
Company's lower contractual interest rates on the restructured borrowings for
the first quarter of 2005 as compared to the first quarter of 2004.
The Company's net interest income before provision for losses on loans
was $6.1 million for the first quarter of 2005, a decrease of $1.3 million
from the first quarter of 2004. The Company's net interest margin was 2.00%
for the first quarter of 2005 compared to 1.99% for the first quarter of 2004.
Both net interest income and net interest margin were negatively impacted by
the $4.7 million amortization of premium on early extinguishment of debt which
was included in interest expense as an additional cost of the Company's
borrowings. The average unamortized deferred premium is classified as an
offset to the Company's average borrowings outstanding and totaled $28.1
million for the first quarter of 2005. The effect of the deferred premium and
the related quarterly amortization was to reduce the Company's net interest
margin by 156 basis points for the first quarter of 2005. Partially
offsetting the effects of the deferred premium was a 79 basis point increase
in the yield on earning assets combined with a 14 basis point decrease in the
cost of deposits during the first three months of 2005 compared to the first
quarter of 2004.
Chairman's Comments
"We are excited by the improving trends in our core operations. We are
seeing positive results from our efforts to reposition both sides of the
balance sheet to take advantage of the higher current interest rates," said
Thomas F. Prisby, Chairman and CEO. "We continue to focus on adding short-term
and adjustable-rate assets and growing core deposits while reducing our
concentration of higher cost certificates of deposit. As a result, we expect
our net interest margin, excluding the FHLB deferred premium amortization, to
continue to trend upwards."
CFS Bancorp, Inc. - Page 2 of 8
Net Interest Income
Net interest income for the first quarter of 2005 was $6.1 million. Net
interest margin was 2.00% for the first quarter 2005 and remained stable as
compared to the first quarter of 2004. The Company's interest income was
adversely affected by a 17.5% decrease in average interest-earning assets
during the quarter ended March 31, 2005 as compared to the first quarter of
2004. The weighted average yield on the Company's interest-earning assets
improved to 5.51% for the first quarter 2005 and represented a 79 basis point
increase from the comparable 2004 period. The decrease in the average balance
of interest-earning assets was primarily the result of the use of low yielding
interest-earning assets to reduce the total amount of the Company's borrowings.
The increase in the average yield primarily was the result of the upward
repricing of adjustable-rate loans reflecting higher market rates of interest
coupled with the use of the low yielding interest-earning assets.
The increase in the Company's interest expense for the first quarter of
2005 from the comparable 2004 period was primarily a result of the $4.7
million premium amortization expense related to the early extinguishment of
debt which is recorded as a charge to interest expense. The non-cash
amortization was partially offset by a $3.4 million decrease in interest
expense related to the Company's lower contractual interest rates on its
restructured FHLB borrowings coupled with an $831,000 decrease in interest
expense on deposits. The weighted average cost of deposits decreased to 1.53%
for the first quarter of 2005 as compared to 1.67% for the first quarter of
2004. The average balance of interest-bearing liabilities decreased 19.1% as
a result of the lower average balances on certificates of deposit combined
with the reduction in the average balance of borrowings resulting from the
repayment in 2004 of $75.0 million of FHLB borrowings together with the
average balance of the unamortized deferred premium. The average cost of
interest-bearing liabilities increased 94 basis points for the quarter ended
March 31, 2005 when compared to the first quarter of 2004. The increase in
the weighted average cost of interest-bearing liabilities was primarily a
result of the premium amortization expense recognized during the first
quarter of 2005. The interest expense related to the deferred premium
amortization is expected to be $4.0 million, $2.9 million and $2.8 million
before taxes in the quarters ended June 30, 2005, September 30, 2005 and
December 31, 2005, respectively.
Non-Interest Income
The Company's first quarter of 2005 non-interest income was $2.5 million,
a decrease of $651,000 from the first quarter of 2004. The decrease was
mainly a result of a $240,000 "other-than-temporary" impairment realized on
the Company's $1.5 million investment in Freddie Mac fixed-rate preferred
stock. In addition, non-interest income decreased as a result of the
Company's net realized losses of $65,000 incurred on the sales of securities
during the first quarter of 2005 compared to net realized gains of $321,000
for the first quarter of 2004. Partially offsetting these decreases was an
increase in service charges and other fees of $36,000 for the first quarter of
2005 as compared to the first quarter of 2004. The Company also realized a
$63,000 gain on the sales of two properties held as other real estate owned
during the first quarter of 2005.
Non-Interest Expense
Non-interest expense for the first quarter of 2005 was $8.3 million, a
decrease of $273,000 from $8.5 million for the comparable period in 2004. The
decrease was primarily a result of decreased benefit expenses of $314,000
during the first quarter of 2005 associated with the vesting of stock issued
under the Company's Recognition and Retention Plan (RRP). The Company's
marketing expense also
CFS Bancorp, Inc. - Page 3 of 8
decreased $98,000 during the first quarter of 2005 as compared to the
comparable 2004 period due to a decrease in the use of newspaper advertising
and direct mail campaigns. The above mentioned decreases were partially
offset by increases in net occupancy expense related to the Company's new
offices which opened during the second and third quarter of 2004 and data
processing charges related to the increased usage of electronic banking
services that the Company offers to its customers.
Income Taxes
The Company's income tax benefit for the first quarter of 2005 was
$246,000 compared to the income tax benefit of $21,000 for the comparable
period in 2004. The increased tax benefit was a result of the lower pre-tax
earnings, the effects of permanent tax differences primarily related to the
Company's investment in Bank-owned life insurance and the application of
available tax credits. The permanent tax differences and available tax
credits are expected to continue to have a favorable impact on income tax
expense throughout 2005.
Asset Quality
The Company's provision for losses on loans was $255,000 for the first
quarter of 2005, a decrease of $484,000 from the comparable 2004 period.
During the first quarter of 2004, the Company increased its provision due to
a non-performing commercial real estate loan secured by a motel. During the
second quarter of 2004, this loan was transferred to other real estate owned
and sold.
As of March 31, 2005, the Company had nine impaired loans totaling $25.3
million with an impairment allocation related to these loans of $6.2 million.
Seven of the impaired loans are commercial real estate loans, of which four
are secured by hotels and total $20.8 million with aggregate impairment
allocations of $4.1 million. The other three impaired commercial real estate
loans are secured by a golf course and total $3.4 million with an impairment
allocation of $1.4 million. The two remaining impaired loans are commercial
loans, of which one is secured by business assets and the other by improved
land. These two loans total $1.1 million with an aggregate impairment
allocation of $694,000.
The Company's non-performing assets totaled $27.1 million as of March
31, 2005 compared to $28.2 million as of December 31, 2004. The ratio of
non-performing assets to total assets was 2.08% at March 31, 2005, an
improvement from 2.14% at December 31, 2004. The improvement in the ratio
resulted from a $1.8 million decrease in non-performing retail loans, most
notably in non-performing single-family residential loans, which was partially
offset by a $405,000 increase in non-performing commercial loans and a
$265,000 increase in other real estate owned.
The Company's allowance for losses on loans was $13.4 million at March
31, 2005 and at December 31, 2004. The ratio of the allowance for losses on
loans to total loans was 1.37% and 1.35% at March 31, 2005 and December 31,
2004, respectively. The Company maintains the allowance for losses on loans
at a level that management believes is sufficient to absorb credit losses
inherent in the loan portfolio. The allowance for losses on loans represents
the Company's estimate of inherent losses existing in the loan portfolio which
are both probable and reasonable to estimate at each balance sheet date and is
based on its review of available and relevant information. The Company
believes that, as of March 31, 2005, the allowance for losses on loans was
adequate.
CFS Bancorp, Inc. - Page 4 of 8
Balance Sheet
As of March 31, 2005, the Company's net loans receivable totaled $978.2
million as compared to $988.1 million at December 31, 2004. The Company
originated over $40.0 million in new loans and lines of credit during the
first quarter of 2005 which was more than offset by loan repayments and
transfers to other real estate owned. As of March 31, 2005, the Company had
commitments to originate commercial and retail loans and lines of credit
totaling $34.0 million.
Securities available-for-sale totaled $214.7 million at March 31, 2005, a
$12.5 million increase from December 31, 2004, resulting from $42.8 million in
purchases which were partially offset by sales, maturities and paydowns during
the quarter.
Total deposits were $843.1 million at March 31, 2005, down $20.1 million
from $863.2 million at December 31, 2004. The decrease was largely caused by
a reduction of $20.4 million in certificates of deposit which was slightly
offset by an increase in core deposits of $313,000. The decrease in
certificates of deposit was primarily due to the managed runoff of above
market rate certificates as they reached maturity. The Company continues to
focus on increasing its low cost core deposits through continued promotional
efforts and incentive programs. Average core deposits for the first quarter
of 2005 increased 1.3% and 3.3% compared to the fourth quarter and the first
quarter of 2004, respectively.
The Company's borrowed money totaled $291.3 million as of March 31, 2005
compared to $286.6 million at December 31, 2004. The Company's borrowed money
as of March 31, 2005 consisted of $316.7 million of FHLB borrowings, partially
offset by the $25.4 million of deferred premium related to the early
extinguishment of FHLB debt. At December 31, 2004, the Company's FHLB
borrowings totaled $316.8 million and were partially offset by $30.2 million
of deferred premium.
Stockholders' equity at March 31, 2005 was $146.1 million as compared to
$147.9 million at December 31, 2004. The decrease in the first quarter of
2005 was primarily due to:
* a $904,000 increase in unrealized losses on available-for-sale
securities, net of tax;
* cash dividends declared during 2005 totaling $1.4 million; and
* repurchases of the Company's common stock during 2005 totaling
$283,000.
Partially offsetting the above described decreases in stockholders' equity,
the Company also realized during 2005:
* net income of $266,000;
* $422,000 related to shares committed to be released under the
Company's Employee Stock Ownership Plan; and
* proceeds from stock option exercises totaling $52,000.
During the first quarter of 2005, the Company repurchased 20,000 shares
of its common stock at an average price of $14.17 per share pursuant to the
share repurchase program announced in March 2003. Since its initial public
offering, the Company has repurchased an aggregate of 11,612,616 shares of its
common stock at an average price of $11.75 per share. As of March 31, 2005,
the Company has 1,160,156 of shares remaining to be repurchased under its
current share repurchase program.
CFS Bancorp, Inc. - Page 5 of 8
As of March 31, 2005, stockholders' equity per common share was $11.81,
as compared to $11.94 at December 31, 2004. The regulatory capital ratios of
Citizens Financial Services, FSB (the Bank), the Company's wholly-owned
subsidiary, continued to be in excess of regulatory requirements. As of March
31, 2005, the Bank was deemed to be "well-capitalized" under the Office of
Thrift Supervision regulatory capital guidelines.
CFS Bancorp, Inc. is the parent of Citizens Financial Services, FSB, a
$1.3 billion asset federal savings bank. Citizens Financial Services provides
community banking services and currently operates 23 offices throughout
adjoining markets in Chicago's Southland and Northwest Indiana. The Company
maintains a website at www.cfsbancorp.com.
# # #
This press release contains certain forward-looking statements and information
relating to the Company that is 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 interest rate environment, asset yields and cost of funds, net interest
income, loan volume, net interest margin, loan loss reserves and impairment
reserves, income levels, expected effect of amortization of deferred premium
on the FHLB borrowings, repositioning of the balance sheet, growth of core
deposits, earning trends and impact of tax credits and permanent tax
differences. 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 AND OTHER DATA FOLLOWS.
CFS Bancorp, Inc. - Page 6 of 8
CFS BANCORP, INC.
Highlights (Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended
--------------------------------
EARNINGS HIGHLIGHTS AND PERFORMANCE RATIOS (1) March 31, 2005 March 31, 2004
- ----------------------------------------------- -------------- --------------
<s> <c> <c>
Net income $ 266 $ 1,244
Basic earnings per share 0.02 0.11
Diluted earnings per share 0.02 0.11
Cash dividends declared per share 0.12 0.11
Return on average assets 0.08 % 0.32 %
Return on average equity 0.73 3.19
Average yield on interest-earning assets 5.51 4.72
Average cost on interest-bearing liabilities 3.96 3.02
Interest rate spread 1.55 1.70
Net interest margin 2.00 1.99
Non-interest expense to average assets 2.57 2.20
Efficiency ratio (2) 94.10 83.86
Market price per share of common stock
for the period ended: Closing $ 13.76 $ 14.74
High 14.37 15.16
Low 13.67 14.57
STATEMENT OF CONDITION HIGHLIGHTS AND
PERFORMANCE RATIOS March 31, 2005 December 31, 2004
- ----------------------------------------------- -------------- ------------------
Total assets $1,298,397 $1,314,714
Loans receivable, net of unearned fees 978,179 988,085
Total deposits 843,085 863,178
Total stockholders' equity 146,092 147,911
Book value per common share 11.81 11.94
Non-performing loans 26,261 27,675
Non-performing assets 27,051 28,200
Allowance for losses on loans 13,435 13,353
Non-performing loans to total loans 2.68 % 2.80 %
Non-performing assets to total assets 2.08 2.14
Allowance for losses on loans
to non-performing loans 51.16 48.25
Allowance for losses on loans to total loans 1.37 1.35
Average equity to average assets (3) 11.31 10.45
Average interest-earning assets
to average interest-bearing liabilities (3) 112.81 112.34
Employees (FTE) 337 327
Branches and offices 23 24
Three Months Ended
--------------------------------
AVERAGE BALANCE DATA March 31, 2005 March 31, 2004
- ----------------------------------------------- -------------- --------------
Total assets $1,301,291 $1,558,530
Loans receivable, net of unearned fees 983,286 985,101
Total interest-earning assets 1,226,650 1,487,029
Total liabilities 1,154,055 1,401,652
Total deposits 846,801 965,685
Interest-bearing deposits 798,263 926,138
Total interest-bearing liabilities 1,087,345 1,344,601
Stockholders' equity 147,236 156,878
- ------------------------------------
(1) Ratios are annualized where appropriate.
(2) Calculated as non-interest expense divided by the sum of net interest
income and non-interest income, adjusted for gains or losses on sales
of securities and assets and impairment of securities. Management
believes this calculation is consistent with the calculation used by
many other financial institutions.
(3) Ratios calculated on average balances for the three month periods
presented.
CFS Bancorp, Inc. - Page 7 of 8
CFS BANCORP, INC.
Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)
For the Three Months Ended
March 31,
----------------------------
2005 2004
Interest income: ----------- --------------
<s> <c> <c>
Loans $ 14,573 $ 14,116
Securities 1,721 2,670
Federal Home Loan Bank dividends 302 330
Other 67 346
----------- --------------
Total interest income 16,663 17,462
Interest expense:
Deposits 3,005 3,836
Borrowings 7,604 6,263
----------- --------------
Total interest expense 10,609 10,099
----------- --------------
Net interest income before provision for losses on loans 6,054 7,363
Provision for losses on loans 255 739
----------- --------------
Net interest income after provision for losses on loans 5,799 6,624
Non-interest income:
Service charges and other fees 1,713 1,677
Commission income 165 152
Net realized gains (losses) on sales of securities (65) 321
Impairment on available-for-sale securities (240) -
Net gain (loss) on sale of assets 62 (1)
Income from Bank-owned life insurance 362 358
Other income 484 625
----------- --------------
Total non-interest income 2,481 3,132
Non-interest expense:
Compensation and employee benefits 4,593 4,859
Net occupancy expense 723 643
Professional fees 355 391
Data processing 680 655
Furniture and equipment expense 443 462
Marketing 197 295
Other general and administrative expenses 1,269 1,228
------------ --------------
Total non-interest expense 8,260 8,533
------------ --------------
Income before income taxes 20 1,223
Income tax benefit (246) (21)
------------ --------------
Net income $ 266 $ 1,244
============ ==============
Per share data:
Basic earnings per share $ 0.02 $ 0.11
Diluted earnings per share $ 0.02 $ 0.11
Cash dividends declared per share $ 0.12 $ 0.11
Weighted-average shares outstanding 11,786,828 11,400,544
Weighted-average diluted shares outstanding 12,051,942 11,805,671
CFS Bancorp, Inc. - Page 8 of 8
CFS BANCORP, INC.
Consolidated Statements of Financial Condition (Unaudited)
(Dollars in thousands)
March 31, December 31,
2005 2004
----------- ------------
<s> <c> <c>
ASSETS
Cash and amounts due from depository institutions $ 16,215 $ 16,878
Interest-bearing deposits 304 11,217
Federal funds sold 1,429 9,999
---------- ----------
Cash and cash equivalents 17,948 38,094
Securities, available-for-sale 214,692 202,219
Investment in Federal Home Loan Bank stock, at cost 27,960 27,665
Loans receivable, net of unearned fees 978,179 988,085
Allowance for losses on loans (13,435) (13,353)
---------- ----------
Net loans 964,744 974,732
Accrued interest receivable 6,089 5,456
Other real estate owned 790 525
Office properties and equipment 15,251 15,511
Investment in Bank-owned life insurance 33,724 33,362
Prepaid expenses and other assets 17,199 17,150
---------- ----------
Total assets $1,298,397 $1,314,714
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 843,085 $ 863,178
Borrowed money 291,302 286,611
Advance payments by borrowers for taxes and insurance 9,308 8,177
Other liabilities 8,610 8,837
---------- ---------
Total liabilities 1,152,305 1,166,803
Stockholders' Equity:
Preferred stock, $0.01 par value; 15,000,000 shares authorized -- --
Common stock, $0.01 par value; 85,000,000 shares authorized;
23,423,306 shares issued as of March 31, 2005 and December 31, 2004;
12,370,572 and 12,385,322 shares outstanding as of March 31, 2005 and
December 31, 2004, respectively 234 234
Additional paid-in capital 190,109 189,991
Retained earnings, substantially restricted 93,792 94,904
Treasury stock, at cost; 11,052,734 and 11,037,984 shares
as of March 31, 2005 and December 31, 2004 (130,909) (130,689)
Unallocated common stock held by ESOP (5,660) (5,959)
Unearned common stock acquired by RRP (148) (148)
Accumulated other comprehensive loss, net of tax (1,326) (422)
---------- ----------
Total stockholders' equity 146,092 147,911
---------- ----------
Total liabilities and stockholders' equity $1,298,397 $1,314,714
========== ==========