Exhibit 99.1
FIRST 22 West State Street
KEYSTONE Media, PA 19063
FINANCIAL, INC. 610-565-6210
FOR IMMEDIATE RELEASE
_____________________
FIRST KEYSTONE FINANCIAL ANNOUNCES
THIRD QUARTER RESULTS
Media, PA August 15, 2005 - (Nasdaq: FKFS) The
Company reported today a net loss for the quarter ended June 30,
2005 of $(613,000), or $(0.32) per diluted share, compared to net
income of $627,000, or $0.32 per diluted share, for the same
period last year. Net income for the nine months ended June 30,
2005 was $548,000, or $0.30 per diluted share, as compared to
$2.0 million, or $1.02 per diluted share, for the same period in
2004. The loss incurred in the third quarter of fiscal 2005
reflected a significantly larger than normal loan loss provision.
As a result of the review of the Company's loan portfolio, the
Company increased the loan loss provision by $1.6 million for the
quarter ended June 30, 2005. The increased provision was due to
the establishment of a reserve for a large commercial real estate
loan as well as increased general reserves deemed necessary due
to various factors including changes in non-performing loans and
the changing nature of the commercial and multi-family real
estate and commercial business loan portfolios.
"Although we are disappointed in how the increased loan loss
provisions impacted our results of operations, the Company's
focus will be to continue to generate lower cost core deposits to
fund higher yielding, shorter term assets. In accordance with
this strategy, our commercial and home equity loans showed solid
growth along with increases in our lower cost core deposits,"
said Thomas M. Kelly, President and Chief Executive Officer of
First Keystone Financial, Inc.
For the three months ended June 30, 2005, net interest
income decreased slightly by $94,000, or 3.2%, while net interest
income for the nine months ended June 30, 2005 increased $18,000,
or 0.2%, as compared to the same periods in 2004. Interest
income increased $283,000, or 4.4%, for the quarter ended June
30, 2005 compared to the same period in the prior year primarily
due to a 14 basis point increase in the average yield earned on
interest-earning assets. However, such increase was offset by a
$377,000, or 10.5%, increase in interest expense for the quarter
ended June 30, 2005 as compared to the third quarter of fiscal
2004 primarily due to a 25 basis point increase in the average
rate paid on interest-bearing liabilities combined with a $6.6
million increase in the average balance of such liabilities. As
a result, net interest income decreased as the rate of repricing
of interest-bearing liabilities outpaced the upward adjustments
on interest-earning assets. The Company's interest rate margin on
a tax-equivalent basis decreased to 2.17% for the quarter ended
June 30, 2005 as compared to 2.27% for the same period last year.
(See footnote to the table below).
On a linked quarter basis, net interest income decreased
$136,000 in the third quarter of fiscal 2005 compared to the
second quarter of fiscal 2005. The net interest margin on a tax-
equivalent basis decreased 12 basis points to 2.17% from 2.29%
for the three months ended March 31, 2005. (See footnote to the
table below). During the third quarter of fiscal 2005 as
compared to the second, the Company experienced a 10 basis point
increase in the rates paid on interest-bearing liabilities which
was partially offset by a 3 basis point increase in the yield
earned on average interest-earning assets. The net interest
margin for the three months ended March 31, 2005 included the
effects of a special dividend which amounted to 12 basis points.
For the quarter ended June 30, 2005, non-interest income
increased $108,000 to $683,000 from the same period last year.
The increase was primarily the result of a $92,000 increase in
service charges and other fees due to continued emphasis on
additional fee-based deposit services.
Non-interest expense for the quarter ended June 30, 2005
increased $300,000, or 11.3%, from the same period last year
primarily due to increases of $108,000, or 36.3%, $65,000, or
33.3%, and $52,000, or 12.6% in occupancy and equipment,
professional fees, and other non-interest expense, respectively.
The increase in occupancy and equipment was related to branch
expansion in the first quarter of fiscal 2005 combined with
increases in costs relating to rent, maintenance and taxes.
Professional fees increased due to the additional auditing and
legal fees resulting from additional regulatory requirements. The
increase in other non-interest expense was due to the
implementation of a training program designed to emphasize the
Company's commitment to maximizing customer service as well as
increased general administrative expenses.
The Company's total assets increased to $573.6 million at
June 30, 2005 from $571.9 million at September 30, 2004.
Investment and mortgage-related securities held to maturity
increased to $54.0 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 available for sale securities
portfolio into the held to maturity portfolio in order to
minimize the effect of price volatility to the Company's equity.
Although loans receivable decreased slightly to $303.6 million at
June 30, 2005 from $304.2 million at September 30, 2004, the
composition of the loan portfolio continued to shift to more
interest-sensitive assets. Commercial and multi-family real
estate, construction, home equity and commercial business loans
accounted for 51.7% of the total loan portfolio at June 30, 2005
as compared to 48.7% at September 30, 2004. Total deposits
increased $13.5 million, or 3.9%, to $358.4 million at June 30,
2005 from $344.9 million at September 30, 2004. Core deposits
increased $11.4 million, or 6.3%, as a result of the Company's
commitment to focus on business development and aggressively
pursue those relationships. The level of the Company's
borrowings decreased $15.6 million, or 9.1%, from September 30,
2004 to June 30, 2005 as the Company used deposit increases to
repay borrowings. Stockholders' equity decreased $265,000 to
$29.4 million resulting from the Company's comprehensive income
decreasing $768,000 combined with dividend payments totaling
$604,000 partially offset by net income of $548,000 for the nine
months ended June 30, 2005.
Total non-performing assets totaled $5.7 million at June 30,
2005 as compared to $3.3 million at September 30, 2004. The
Company's ratio of non-performing assets to total assets was 1.0%
at June 30, 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 being placed on a non-accrual
status partially offset by a $1.3 million commercial and
construction loans returning to current status and a $309,000
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 Nine Months Ended
June 30, June 30,
______________________________________________
2005 2004 2005 2004
______________________________________________
Net interest income $2,825 $2,919 $8,606 $8,588
Provision for loan losses 1,645 75 1,735 225
Non-interest income 683 575 2,683 3,808
Non-interest expense 2,946 2,646 9,196 9,674
______________________________________________
(Loss) income before taxes (1,083) 773 358 2,497
Income tax (benefit) expense (470) 146 (190) 501
______________________________________________
Net (loss) income $ (613) $ 627 $ 548 $1,996
==============================================
Basic (loss) earnings per share $(0.33) $ 0.34 $ 0.30 $ 1.09
Diluted (loss) earnings per share (0.32) 0.32 0.30 1.02
Dividends per share 0.11 0.11 0.33 0.33
Number of shares outstanding at end of period 2,022,378 1,926,384 2,022,378 1,926,384
Weighted average basic shares outstanding 1,874,143 1,835,609 1,827,849 1,831,822
Weighted average diluted shares outstanding 1,912,779 1,956,155 1,846,321 1,953,103
_____________________________________________________________________________________________
FIRST KEYSTONE FINANCIAL, INC.
SELECTED FINANCIAL DATA
(In thousands except per share data)
(Unaudited)
June 30, September 30,
2005 2004
_____________________________
Total assets $573,581 $571,919
Loans receivable, net 303,558 304,248
Investment and mortgage-related securities available for sale 160,751 161,235
Investment and mortgage-related securities held to maturity 53,953 42,650
Cash and cash equivalents 17,198 17,975
Deposits 358,360 344,880
Borrowings 155,505 171,149
Junior subordinated debt 21,529 21,557
Loan loss allowance 3,471 2,039
Total stockholders' equity 29,433 29,698
Book value per share $14.55 $15.41
____________________________________________________________________________________________
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,
______________________________________
2005 2004 2005 2004
______________________________________
Return on average assets (1) (0.43)% 0.44% 0.13% 0.48%
Return on average equity (1) (8.26)% 8.06% 2.45% 8.42%
Interest rate spread (1)(2) 2.14% 2.25% 2.19% 2.23%
Net interest margin (1)(2) 2.17% 2.27% 2.21% 2.25%
Interest-earning assets/interest-bearing liabilities(2) 100.90% 100.70% 100.62% 100.72%
Operating expenses to average assets (1) 2.07% 1.88% 2.16% 2.31%
Ratio of non-performing assets to total assets at
end of period 1.00% 0.55% 1.00% 0.55%
Ratio of allowance for loan losses to gross loans
receivable 1.13% 0.71% 1.13% 0.71%
Ratio of loan loss allowance to non-performing loans
at end of period 72.38% 116.49% 72.38% 116.49%
(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
investments. Without the adjustment for taxes, the
interest rate spread was 2.08% and 2.18% for the
quarter ended June 30, 2005 and 2004, respectively,
while the net interest margin would be 2.10% and
2.20% for the quarter ended June 30, 2005 and 2004,
respectively. Without the adjustment for taxes, the
interest rate spread was 2.12% and 2.16% for the nine
months ended June 30, 2005 and 2004, respectively,
while the net interest margin would be 2.14% and
2.18% for the nine months ended June 30, 2005 and
2004, respectively. In addition, with respect to
March 31, 2005, without the adjustment for taxes, the
interest rate margin was 2.22%.
CONTACT: Thomas M. Kelly, President and Chief Executive Officer
Rose M. DiMarco, Chief Financial Officer
(610) 565-6210