Exhibit 99.1
[Letterhead of First Keystone Financial, Inc.]
FOR IMMEDIATE RELEASE
_____________________
FIRST KEYSTONE FINANCIAL ANNOUNCES
SECOND QUARTER RESULTS
Media, PA May 5, 2005 - Thomas M. Kelly, President
and Chief Executive Officer of First Keystone Financial,
Inc. (Nasdaq: FKFS) reported today net income for the
quarter ended March 31, 2005 of $638,000, or $0.34 per
diluted share, compared to $627,000, or $0.32 per diluted
share, for the same period last year. Net income for the
six months ended March 31, 2005 was $1.2 million, or $0.63
per diluted share, as compared to $1.4 million, or $0.70
per diluted share, for the same period in 2004.
For the three and six months ended March 31, 2005,
net interest income increased $188,000, or 6.8%, and
$112,000, or 1.5%, respectively, as compared to the same
periods in 2004. Interest income increased $340,000, or
5.3%, for the quarter ended March 31, 2005 compared to the
same period in the prior year primarily due to a 22 basis
point increase in the average yield earned on interest-
earning assets. However, interest expense also increased
$152,000, or 4.1%, for the quarter ended March 31, 2005 as
compared to the second quarter of fiscal 2004 primarily
due to a 7 basis point increase in the average rate paid
on interest-bearing liabilities combined with a $7.0
million increase in the average balance of such
liabilities. Net interest income increased as a result of
the weighted average yield earned on interest-earning
assets, primarily investment securities, repricing to a
greater degree than the cost of interest-bearing
liabilities. The Company's interest rate margin on a tax-
equivalent basis increased to 2.29% for the quarter ended
March 31, 2005 as compared to 2.16% for the same period
last year. (See footnote to the table).
On a linked quarter basis, net interest income
increased $141,000 in the second quarter of fiscal 2005
compared to the first quarter of fiscal 2005. In
addition, the net interest margin on a tax-equivalent
basis increased 13 basis points to 2.29% from 2.16% for
the three months ended
December 31, 2004. (See footnote to the table). During
the second quarter of fiscal 2005 as compared to the
first, the Company experienced a 15 basis point increase
in the yield earned on average interest-earning assets
which was partially offset by a 3 basis point increase in
the rates paid on interest-bearing liabilities. The net
interest margin on a tax-equivalent basis included the
effects of a special dividend which amounted to 12 basis
points.
"In this competitive marketplace, we are pleased that
core deposits have grown by over $7.0 million from year-
end. Our commitment to gain marketshare through a team
approach of hiring seasoned business development officers
and commercial lenders, whose primary focus is to satisfy
the customer, will positively impact our net interest
margin," said Mr. Kelly.
For the quarter ended March 31, 2005, non-interest
income decreased $1.1 million to $1.1 million from the
same period last year. Non-interest income decreased $1.3
million to $2.0 million for the six months ended March 31,
2005 in comparison to the same period last year. For the
three months ended March 31, 2005, the decrease was
primarily the result of gains experienced in the 2004
period related to the gain on sale of equity securities of
a company that was acquired. In addition, the decrease
was due to the inclusion in the 2004 period of certain non-
recurring real estate fees.
Non-interest expense for the quarter ended March 31,
2005 decreased $890,000 from the same period last year
primarily due to an $1.2 million decrease in employee
benefit expenses. In the prior year's second quarter, the
Company recognized certain expenses in connection with a
non-qualified supplemental retirement plan and the
prepayment of a loan to the ESOP which accelerated expense
recognition. However, for the second quarter of fiscal
2005, salary expense increased $300,000 by comparison to
the same period in 2004 due to additional personnel, merit
increases and retirement benefits. The decrease in non-
interest expense was partially offset by increases of
$63,000 and $31,000 in occupancy expenses and professional
fees, respectively. Non-interest expense for the six
months ended March 31, 2005 decreased $778,000, or 11.1%,
by comparison to the same period in the prior year for the
reasons described above.
The Company's total assets increased to $576.0
million at March 31, 2005, a $4.1 million increase from
$571.9 million at September 30, 2004. Investment and
mortgage-related securities held to maturity increased to
$56.4 million from $42.7 million at September 30, 2004
mainly due to the Company's strategy to reinvest the
proceeds and cash flows from the securities' portfolio
into the held to maturity portfolio in order to minimize
the effect of price volatility to the Company's balance
sheet. Loans receivable increased slightly to $305.6
million from $304.2 million at September 30, 2004. Total
deposits increased $10.2 million, or 3.0%, to $355.1
million at March 31, 2005 from $344.9 million at September
30, 2004. Core deposits increased $7.3 million, or 4.1%,
as a result of the Company's commitment to focus on
business development and aggressively pursue these
relationships. The level of the Company's borrowings
decreased $7.5 million, or 4.4%, from September 30, 2004
to March 31, 2005. Stockholders' equity decreased
$549,000 to $29.1 million resulting from the Company's
comprehensive income decreasing $1.6 million combined with
dividend payments totaling $397,000 partially offset by
net income of $1.2 million for the six months ended March
31, 2005.
Total non-performing assets totaled $5.6 million at
March 31, 2005 as compared to $3.3 million at September
30, 2004. The Company's ratio of non-performing assets to
total assets was 0.98% at March 31, 2005 compared to 0.51%
at September 30, 2004. The increase in non-performing
assets was primarily due to a $3.8 million commercial real
estate loan placed on a non-accrual status partially
offset by a $1.3 million commercial and construction loans
returning to current status and a $304,000 decrease in
real estate owned.
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 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 Six Months Ended
March 31, March 31,
____________________________________________
2005 2004 2005 2004
____________________________________________
Net interest income $2,961 $2,773 $5,781 $5,669
Provision for loan losses 45 75 90 150
Non-interest income 1,101 2,169 2,000 3,233
Non-interest expense 3,204 4,094 6,250 7,028
--------------------------------------------
Income before taxes 813 773 1,441 1,724
Income tax expense 175 146 280 355
--------------------------------------------
Net income $ 638 $ 627 $1,161 $1,369
============================================
Basic earnings per share $ 0.35 $ 0.34 $ 0.64 $ 0.75
Diluted earnings per share 0.34 0.32 0.63 0.70
Dividends per share 0.11 0.11 0.22 0.22
Number of shares outstanding at end of period 2,002,132 1,924,871 2,002,132 1,924,871
Weighted average basic shares outstanding 1,824,419 1,826,967 1,804,703 1,832,759
Weighted average diluted shares outstanding 1,873,905 1,951,360 1,853,511 1,955,761
____________________________________________________________________________________________
FIRST KEYSTONE FINANCIAL, INC.
SELECTED FINANCIAL DATA
(In thousands except per share data)
(Unaudited)
March 31, September 30,
2005 2004
_______________________
Total assets $576,026 $571,919
Loans receivable, net 305,647 304,248
Investment and mortgage-related securities available for sale 155,072 161,235
Investment and mortgage-related securities held to maturity 56,431 42,650
Cash and cash equivalents 20,393 17,975
Deposits 355,128 344,880
Borrowings 163,692 171,149
Junior subordinated debt 21,538 21,557
Loan loss allowance 2,079 2,039
Total stockholders' equity 29,149 29,698
Book value per share $14.71 $15.41
_______________________________________________________________________________________
FIRST KEYSTONE FINANCIAL, INC.
OTHER SELECTED DATA
(Unaudited)
At or for the At or for the
Three Months Ended Six Months Ended
March 31, March 31,
____________________________________
2005 2004 2005 2004
____________________________________
Return on average assets (1) 0.45% 0.44% 0.41% 0.49%
Return on average equity (1) 8.51% 7.81% 7.79% 8.59%
Interest rate spread (1) (2) 2.27% 2.12% 2.21% 2.18%
Net interest margin (1) (2) 2.29% 2.16% 2.22% 2.22%
Interest-earning assets/interest-bearing liabilities(2) 100.60% 101.41% 100.49% 101.36%
Operating expenses to average assets (1) 2.27% 2.91% 2.20% 2.51%
Ratio of non-performing assets to total assets at
end of period 0.98% 0.51% 0.98% 0.51%
Ratio of loan loss allowance to non-performing loans
at end of period 43.79% 133.85% 43.79% 133.85%
(1) Annualized.
(2) 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 2.21% and 2.05% for the
quarter ended March 31, 2005 and 2004, respectively,
while the net interest margin would be 2.22% and 2.09%
for the quarter ended March 31, 2005 and 2004,
respectively. Without the adjustment for taxes, the
interest rate spread would be 2.15% and 2.11% for the
six months ended March 31, 2005 and 2004,
respectively, while the net interest margin would be
2.16% and 2.15% for the six months ended March 31,
2005 and 2004, respectively. In addition, with
respect to December 31, 2004, without the adjustment
for taxes, the interest rate margin would be 2.10%.
CONTACT: Thomas M. Kelly, President and Chief Executive Officer
Rose M. DiMarco, Chief Financial Officer
(610) 565-6210