Exhibit 99.1
FIRST 22 West State Street
KEYSTONE Media, PA 19063
FINANCIAL, INC. 610-565-6210
FOR IMMEDIATE RELEASE
FIRST KEYSTONE FINANCIAL ANNOUNCES
FIRST QUARTER RESULTS
Media, PA February 14, 2007 - First Keystone Financial, Inc., the
holding company for First Keystone Bank (the "Bank"), announced today net
income for the quarter ended December 31, 2006 of $88,000, or $0.04 per diluted
share, compared to $445,000, or $0.23 per diluted share, for the same period
last year.
"The first quarter of fiscal 2007 has been quite challenging. The
additional expenses incurred in order to comply with the supervisory agreements
compounded by the protracted flat yield curve have continued to impact our
earnings. However, we are committed to addressing the OTS' concerns as quickly
as possible," stated President and Chief Executive Officer Thomas M. Kelly.
"We will remain focused on the Company's strategy to be released from the
supervisory agreements as soon as possible while implementing promotions to
increase transaction accounts and scrutinizing expenses" continued Kelly.
"To date, the Company has experienced several positives:
* Strengthening its capital position by completing an equity
offering in December 2006 which resulted in net proceeds of $5.8
million; and
* The sale in January 2007 of a $2.4 million non-performing asset."
Net interest income for the three months ended December 31, 2006
decreased $318,000, or 11.4%, to $2.5 million as compared to the same period
in 2005. The decrease in net interest income was primarily the result of a
$941,000, or 25.0%, increase in interest expense for the quarter ended December
31, 2006 due to a 71 basis point increase in the weighted average rate paid
on interest-bearing liabilities. However, the increase in interest expense
was partially offset by a $623,000, or 9.5%, increase in interest income for
the quarter ended December 31, 2006 as compared to the first quarter of fiscal
2006 primarily due to a $9.0 million increase in the average balance of
interest-earning assets combined with an increase of 40 basis points in its
weighted yield earned on its interest-earning assets. The Company's net
interest margin, on a tax-equivalent basis, decreased by 32 basis points in
the first quarter of fiscal 2006 to 2.10%, as compared to 2.42% for the first
quarter of fiscal 2005.
On a linked quarter basis, net interest income decreased $166,000, or 6.3%.
During the first quarter of fiscal 2007 as compared to the fourth quarter of
fiscal 2006, the Company experienced a 16 basis point increase in the average
rate paid on average interest-bearing liabilities. The net interest margin,
on a tax-equivalent basis, decreased 13 basis points, due to the Company's
cost of funds continuing to reprice at higher rates while our yield earned on
interest-earning assets remained at the same level.
At December 31, 2006, non-performing assets increased $1.2 million to
$3.9 million, or 0.7%, of total assets, from $2.8 million at September 30, 2006.
The increase in non-performing assets was primarily the result of a $554,000
increase in nonaccrual commercial business loans combined with a $702,000
increase in commercial loans that are 90 days past due and still accruing.
The Company is aggressively pursuing exit strategies for these loans. The
coverage ratio, which is the ratio of the allowance for loan losses to non-
performing loans, was 242.0% and 1,215.6% at December 31, 2006 and September
30, 2006, respectively.
Subsequent to quarter-end, the Company is pleased to report the sale of
its only piece of real estate owned consisting of a commercial real estate
property. The property, a restaurant located in Chesapeake City, Maryland,
was sold for $2.7 million which will result in a pre-tax gain on the sale of
$61,000 for the quarter ending March 31, 2007. Using non-performing assets
as of December 31, 2006, the sale would reduce the Company's ratio of non-
performing assets to total assets to 0.27% compared to 0.75% at December 31,
2006.
Non-interest expense increased $144,000, or 4.8%, during the three months
ended December 31, 2006 compared to the same period in 2005. The increase was
primarily due to increases of $69,000 and $48,000 in professional fees and
real estate owned expenses, respectively. The increase in professional fees
was related to ongoing efforts to comply with the supervisory agreement. The
increase in real estate owned expenses related to the maintenance of the
commercial real estate located in Chesapeake City, Maryland referenced above.
In addition, the Company incurred increases of $26,000 and $18,000 in federal
deposit insurance premiums and data processing expenses, respectively.
Total assets of the Company decreased by $2.7 million from $523.0 million
at September 30, 2006 to $520.3 million at December 31, 2006. Cash and cash
equivalents increased by $8.1 million to $20.9 million at December 31, 2006
from $12.8 million at September 30, 2006 primarily due to cash flows generated
by repayments in the loan portfolio and, to a lesser extent, the mortgage-
related securities portfolio. Loans receivable decreased by $6.2 million
from $323.2 million at September 30, 2006 to $317.0 million at December 31,
2006 primarily as a result of the Company experiencing repayments within the
commercial real estate loan portfolio. Deposits decreased $2.0 million, or
0.6%, from $358.8 million at September 30, 2006 to $356.8 million at December
31, 2006. The decrease in deposits resulted from a $2.6 million, or 1.5%,
decrease in core deposits (which consist of passbook, money market, NOW and
non-interest bearing accounts) partially offset by a $549,000, or 0.3%,
increase in certificates of deposit. The decline in core deposits reflected
the effects of competition as local competitors offered higher rates on these
products. In addition, borrowings decreased $6.7 million, or 6.3%, from $107.2
million at September 30, 2006 as a result of excess cash flows reducing
overnight borrowings.
Stockholders' equity increased $5.7 million to $34.3 million primarily
due to the Company's completion of the private equity offering raising net
proceeds of approximately $5.8 million. The Company issued 400,000 shares of
common stock from treasury resulting in a reduction in treasury stock by $6.2
million.
First Keystone Bank, the Company's wholly owned subsidiary, serves its
customers from eight full-service offices 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.
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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
December 31,
---------------------
2006 2005
---------------------
Net interest income $2,462 $2,780
Provision for loan losses 75 45
Non-interest income 747 775
Non-interest expense 3,137 2,993
---------------------
(Loss) income before taxes (3) 517
Income tax (benefit) expense (91) 72
---------------------
Net income $ 88 $ 445
=====================
Basic earnings per share $ 0.04 $ 0.24
Diluted earnings per share 0.04 0.23
Dividends per share -- 0.11
Number of shares outstanding at end of period 2,427,928 2,023,874
Weighted average basic shares outstanding 1,992,453 1,888,344
Weighted average diluted shares outstanding 2,011,731 1,915,801
FIRST KEYSTONE FINANCIAL, INC.
SELECTED FINANCIAL DATA
(In thousands except per share data)
(Unaudited)
<Table>
December 31, September 30,
2006 2006
----------------------------
<s> <c> <c>
Total assets $520,290 $522,960
Loans receivable, net 316,999 323,220
Investment and mortgage-related securities available for sale 101,985 103,416
Investment and mortgage-related securities held to maturity 39,806 41,612
Cash and cash equivalents 20,933 12,787
Deposits 356,771 358,816
Borrowings 100,526 107,241
Junior subordinated debt 21,474 21,483
Loan loss allowance 3,455 3,367
Total stockholders' equity 34,324 28,659
Book value per share $14.14 $14.13
</Table>
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FIRST KEYSTONE FINANCIAL, INC.
OTHER SELECTED DATA
(Unaudited)
<Table>
At or for the
Three Months Ended
December 31,
------------------
2006 2005
------------------
<s> <c> <c>
Return on average assets (1) 0.07% 0.35%
Return on average equity (1) 1.22% 6.37%
Interest rate spread (1) (2) 2.11% 2.42%
Net interest margin (1) (2) 2.10% 2.42%
Ratio of interest-earning assets to interest-bearing liabilities(2) 99.60% 99.82%
Ratio of operating expenses to average assets (1) 2.41% 2.35%
Ratio of non-performing assets to total assets at end of period 0.75% 0.97%
Ratio of allowance for loan losses to gross loans receivable 1.08% 1.14%
Ratio of loan loss allowance to non-performing loans at end of period 241.95% 68.79%
</Table>
(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 2.05% and 2.35% for the quarter ended December 31,
2006 and 2005, respectively, while the net interest margin
would be 2.04% and 2.35% for the quarter ended December 31,
2006 and 2005, respectively.
CONTACT: Thomas M. Kelly, President
Rose M. DiMarco, Chief Financial Officer
(610) 565-6210
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