CFS Bancorp, Inc. (NASDAQ: CITZ), the parent of Citizens Financial
Bank, today reported net income of $1.6 million, or $.14 per
diluted share, for the fourth quarter of 2012, compared to a net
loss of $(12.6) million, or $(1.17) per share, for the fourth
quarter of 2011. The Company's net income for the year ended
December 31, 2012 was $4.7 million, or $.43 per diluted share,
compared to a net loss of $(10.5) million, or $(.98) per share, for
the year ended December 31, 2011.
Financial results for the quarter include:
- Non-performing loans decreased $9.6 million, or 26.3%, to $26.9
million at December 31, 2012 from $36.6 million at September 30,
2012 and $18.7 million, or 40.9%, from $45.6 million at December
31, 2011;
- Non-performing assets decreased $3.7 million, or 6.9%, to $50.3
million at December 31, 2012 from $54.0 million at September 30,
2012 and $14.4 million, or 22.3%, from $64.7 million at December
31, 2011;
- Net charge-offs for the fourth quarter of 2012 totaled $1.0
million, a modest increase from $863,000 for the third quarter of
2012 and a significant decrease from $17.3 million for the fourth
quarter of 2011;
- Core deposits increased to 65.1% of total deposits compared to
63.3% and 61.1% of total deposits at September 30, 2012 and
December 31, 2011, respectively;
- Net interest margin decreased to 3.38% during the fourth
quarter of 2012 from 3.47% in the third quarter of 2012 and was
stable with 3.38% for the fourth quarter of 2011;
- The Company's shareholders' equity to total assets ratio
increased to 9.83% at December 31, 2012 compared to 9.66% at
September 30, 2012 and 8.99% at December 31, 2011; and
- The Bank's Tier 1 core capital ratio was 8.81% at December 31,
2012, which was relatively stable with 8.85% at September 30, 2012
and an increase from 8.26% at December 31, 2011; the Bank's total
risk-based capital ratio increased to 14.06% from 13.82% at
September 30, 2012 and 12.65% at December 31, 2011.
Chief Executive Officer's Comments
"We are extremely pleased with our positive results in 2012, our
fourth consecutive profitable quarter, continued reduction of our
non-performing loans and assets, and improved capital ratios," said
Daryl D. Pomranke, Chief Executive Officer. "The reduction of
non-performing loans through repayments and transfers to other real
estate owned are a result of our focus to improve asset quality.
The transfers to other real estate owned during the quarter moved
these assets into the final stage of resolution, giving us the
ability to sell the collateral. During the fourth quarter, we
transferred 14 properties totaling $7.5 million to other real
estate owned and sold 11 properties totaling $1.2 million realizing
$376,000 in net gains on the sales. We expect to make additional
progress in reducing non-performing assets in 2013."
"We continued to execute our consistent strategic objectives
during 2012. Overall non-performing assets are down from 2011,
targeted loan growth segments and core deposits continued to
increase, and non-interest expense decreased over 10% from 2011 as
a result of lower credit related costs and various cost reduction
initiatives implemented during the year. As a result, our pre-tax,
pre-provision earnings, as adjusted, increased 29.6% to $12.3
million for 2012 compared to $9.5 million during 2011. As we move
into 2013, we will continue to focus on opportunities for
additional strategic improvements," added Pomranke.
"We are also once again proud and honored to be named by the
Chicago Tribune as one of Chicago's Top 100 Workplaces in 2012,"
continued Pomranke. "It is truly an honor to receive this
distinguished award for the third year in a row. The receipt of
this award is indicative of the culture of our great organization
that empowers our employees, values their contributions, and
confirms the level of satisfaction and engagement experienced by
all of our employees. We sincerely thank our employees for their
continued dedication, loyalty, and commitment to High
Performance."
Update on Strategic Growth and Diversification
Plan
Our ratio of non-performing loans to total loans decreased to
3.89% at December 31, 2012 from 5.19% at September 30, 2012 and
6.41% at December 31, 2011. The decrease was primarily due to
repayments totaling $5.2 million of commercial real estate owner
occupied and non-owner occupied loans. In addition, $6.3 million of
commercial real estate loans and $882,000 of commercial
construction and land development loans were transferred to other
real estate owned. The ratio of non-performing assets to total
assets decreased to 4.42% at December 31, 2012 compared to 4.83% at
September 30, 2012 and 5.63% at December 31, 2011. See the Asset
Quality table in this press release for more detailed
information.
We also remain focused on reducing non-interest expense.
Non-interest expense for the fourth quarter of 2012 was $9.1
million compared to $9.0 million for the third quarter of 2012 and
$10.9 million for the fourth quarter of 2011. The $1.8 million
decrease from the fourth quarter of 2011 is due to a $1.4 million
decrease in severance and early retirement expense related to the
2011 retirement of our former Chief Executive Officer, a $325,000
decrease in credit related costs, and $229,000 of lower writedowns
of future branch sites. These decreases were partially offset by
increased marketing expenses related to our High Performance
Checking (HPC) product and higher medical costs. As a result of our
Voluntary Early Retirement Program and the closing of two banking
centers earlier in the year, our number of FTE employees decreased
to 261 at December 31, 2012 from 303 at December 31, 2011. See the
"Non-Interest Income and Non-Interest Expense" section in this
press release for more detailed information.
We continue to target specific segments in our loan portfolio
for growth, including commercial and industrial, owner occupied
commercial real estate, and multifamily, which, in the aggregate,
comprised 59.2% of the commercial loan portfolio at December 31,
2012, compared to 56.5% at September 30, 2012 and 53.0% at December
31, 2011. Our focus on deepening client relationships continues to
emphasize core deposits. Total core deposits at December 31, 2012
increased by $26.7 million from September 30, 2012 and represent
65.1% of total deposits at December 31, 2012 compared to 63.3% at
September 30, 2012 and 61.1% at December 31, 2011, primarily due to
an increase in non-interest bearing accounts and the continued
shrinkage in certificates of deposit in this low interest rate
environment.
Pre-tax, Pre-Provision Earnings, As
Adjusted(1)
Pre-tax, pre-provision earnings, as adjusted, decreased to $2.9
million for the fourth quarter of 2012 from $3.5 million for the
third quarter of 2012 and increased compared to $2.8 million for
the fourth quarter of 2011. The decrease from the third quarter of
2012 was primarily due to a $287,000 increase in medical expenses
and a $234,000 increase in professional fees.
The pre-tax, pre-provision earnings, as adjusted, for the year
ended December 31, 2012 increased $2.8 million, or 29.6%, to $12.3
million compared to $9.5 million for 2011. The increase was due to
increases in gains on sales of loans held for sale of $741,000 and
income from bank-owned life insurance of $268,000 as a result of
the deaths of two insured during 2012 combined with decreases of
$1.7 million of compensation and employee benefits, $346,000 of
professional fees, $334,000 of writedowns on future branch sites,
and $194,000 of FDIC insurance premiums and regulatory assessments.
These favorable variances were partially offset by a $448,000
increase in marketing expenses and a $493,000 decrease in net
interest income.
1 A schedule reconciling earnings in accordance with U.S.
generally accepted accounting principles (GAAP) to the non-GAAP
measurement of pre-tax, pre-provision earnings, as adjusted, is
provided on the last page of the attached tables.
Net Interest Income and Net Interest
Margin
Three Months Ended
-----------------------------------------
December 31, September 30, December 31,
2012 2012 2011
------------ ------------- ------------
(Dollars in thousands)
Net interest margin 3.38% 3.47% 3.38%
Interest rate spread 3.31 3.41 3.29
Net interest income $ 8,642 $ 8,849 $ 8,966
Average assets:
Yield on interest-earning assets 3.88% 4.02% 4.04%
Yield on loans receivable 4.61 4.60 4.72
Yield on investment securities 2.90 3.21 3.12
Average interest-earning assets $ 1,018,360 $ 1,014,769 $ 1,053,452
Average liabilities:
Cost of interest-bearing
liabilities .57% .61% .75%
Cost of interest-bearing
deposits .47 .51 .66
Cost of borrowed funds 2.25 2.29 2.10
Average interest-bearing
liabilities $ 902,746 $ 909,841 $ 931,800
The net interest margin decreased nine basis points to 3.38% for
the fourth quarter of 2012 compared to 3.47% for the third quarter
of 2012 and was stable compared to the fourth quarter of 2011. Net
interest income decreased to $8.6 million for the fourth quarter of
2012 compared to $8.8 million for the third quarter of 2012 and
$9.0 million for the fourth quarter of 2011. The net interest
margin was negatively impacted by loans comprising a smaller
proportion of interest-earning assets and the Bank having a higher
level of liquidity. Management believes that higher levels of
liquidity, modest loan demand, reduced but still elevated level of
non-performing assets, the continued low interest rate environment,
and significant narrowing of spreads available on new investment
security purchases will continue to create pressure on our net
interest margin for the foreseeable future. The fourth quarter 2012
decrease in yields on investment securities compared to the third
quarter of 2012 was primarily related to prepayments and maturities
of higher-yielding investment securities with the proceeds
reinvested at lower rates. The level of non-performing loans
continues to negatively affect the yield on loans receivable. Also,
the net interest margin was positively affected during the fourth
quarter of 2012 by a four basis point decrease in the cost of
interest-bearing liabilities from the third quarter of 2012 and an
18 basis point decrease compared to the fourth quarter of 2011.
Interest income totaled $9.9 million for the fourth quarter of
2012, a decrease of 3.0% from $10.2 million for the third quarter
of 2012 and 7.4% from $10.7 million for the fourth quarter of 2011.
The decreases are primarily related to the reinvestment of proceeds
from sales and maturities of investment securities in lower
yielding investments, lower loan balances, and maintaining higher
levels of short-term liquid investments due to the lack of suitable
higher yielding investment alternatives in the current low interest
rate environment combined with modest loan demand.
Interest expense decreased 7.0% to $1.3 million for the fourth
quarter of 2012 compared to $1.4 million for the third quarter of
2012 and 26.4% from $1.8 million for the fourth quarter of 2011.
Our continuing success in increasing the proportion of low-cost
core deposits to total deposits and continued disciplined pricing
on new and renewing certificates of deposit contributed to the
decrease in interest expense during the fourth quarter of 2012.
Non-Interest Income and Non-Interest
Expense
Non-interest income increased $478,000, or 15.8%, to $3.5
million for the fourth quarter of 2012 compared to the third
quarter of 2012 primarily due to a $398,000 increase in gains on
sales of investment securities, a $76,000 increase in income from
bank-owned life insurance, and a $58,000 increase in net gains on
the sale of loans held for sale. These increases were partially
offset by a $49,000 decrease in net gains on sales of other real
estate owned.
Non-interest income increased $976,000, or 38.5%, from $2.5
million for the fourth quarter of 2011 primarily due to a $327,000
increase in net gains on the sale of investment securities, a
$313,000 increase in net gains on the sale of other real estate
owned, and a $197,000 increase in net gains on the sale of loans
held for sale due to our expanded residential loan origination and
mortgage banking activities.
Non-interest expense for the fourth quarter of 2012 increased
$113,000, or 1.3%, to $9.1 million compared to $9.0 million for the
third quarter of 2012. The fourth quarter of 2012 included
increases of $133,000 in compensation and employee benefits as a
result of a $287,000 increase in medical insurance expense,
$234,000 in professional fees, and $153,000 in loan collection
expense. These increases were partially offset by a $572,000
decrease in other real estate owned expense due to $696,000 of
lower net realizable value writedowns.
Non-interest expense during the fourth quarter of 2012 decreased
$1.8 million, or 16.6%, to $9.1 million from $10.9 million for the
fourth quarter of 2011 due to the absence of $1.4 million of early
retirement expense related to the former Chief Executive Officer's
2011 early retirement combined with a decrease of $404,000 of other
real estate owned expense and $296,000 of other general and
administrative expenses. These decreases were partially offset by a
$109,000 increase in marketing expenses and a $79,000 increase in
loan collection expense.
Income Tax Expense
During the fourth quarter of 2012, we recorded income tax
expense of $658,000, equal to an effective tax rate of 29.6%,
compared to $493,000, or an effective tax rate of 28.1%, for the
third quarter of 2012. During the fourth quarter of 2011, the
Company recorded income tax expense of $638,000, which included
$6.3 million of a valuation allowance related to a portion of its
deferred tax assets.
Asset Quality
December 31, September 30, December 31,
2012 2012 2011
------------ ------------- ------------
(Dollars in thousands)
Non-performing loans (NPLs) $ 26,933 $ 36,567 $ 45,587
Other real estate owned 23,347 17,447 19,091
------------ ------------- ------------
Non-performing assets (NPAs) $ 50,280 $ 54,014 $ 64,678
============ ============= ============
Allowance for loan losses (ALL) $ 12,185 $ 12,359 $ 12,424
Provision for loan losses for the
quarter ended 850 1,160 12,542
Loan charge-offs (recoveries):
Gross loan charge-offs $ 1,082 $ 1,261 $ 17,355
Recoveries (58) (398) (51)
------------ ------------- ------------
Net charge-offs for the quarter
ended $ 1,024 $ 863 $ 17,304
============ ============= ============
NPLs / total loans 3.89% 5.19% 6.41%
NPAs / total assets 4.42 4.83 5.63
ALL / total loans 1.76 1.76 1.75
ALL / NPLs 45.24 33.80 27.25
Total non-performing loans decreased $9.6 million, or 26.3%, to
$26.9 million at December 31, 2012 from $36.6 million at September
30, 2012 and 40.9% from $45.6 million at December 31, 2011. The
decrease in the fourth quarter of 2012 is primarily due to loan
repayments of $5.2 million of commercial real estate owner occupied
and non-owner occupied loans, transfers to other real estate owned
totaling $6.2 million of commercial real estate non-owner occupied
and $882,000 of commercial construction and land development loans,
and gross loan charge-offs of $1.08 million. Partially offsetting
these decreases, commercial and retail loans transferred to
non-accrual status during the quarter totaled $3.1 million and $1.1
million, respectively. Of the total non-accrual loans at December
31, 2012, $6.7 million, or 24.7%, are current and performing in
accordance with their loan agreements. The ratio of non-performing
loans to total loans decreased to 3.89% at December 31, 2012 from
5.19% and 6.41% at September 30, 2012 and December 31, 2011,
respectively.
The provision for loan losses decreased to $850,000 for the
fourth quarter of 2012 compared to $1.16 million for the third
quarter of 2012 and $12.5 million for the fourth quarter of 2011.
The significant decrease from the fourth quarter of 2011 was
related to the significantly lower level of charge-offs during the
current quarter compared to the fourth quarter of 2011, improved
asset quality indicators, and a smaller loan portfolio.
The ratio of the allowance for loan losses to total loans was
stable at 1.76% at December 31, 2012 and September 30, 2012,
compared to 1.75% at December 31, 2011. When it is determined that
a non-performing collateral-dependent loan has a collateral
shortfall, management immediately charges-off the collateral
shortfall. As a result, we are not required to maintain an
allowance for loan losses on these loans as the loan balance has
already been written down to its net realizable value (fair value
less estimated costs to sell the collateral). As such, the ratio of
the allowance for loan losses to total loans and the ratio of the
allowance for loan losses to non-performing loans has continued to
be negatively affected by cumulative partial charge-offs of $11.0
million recorded through December 31, 2012 on $13.1 million (net of
charge-offs) of non-performing collateral dependent loans. At
December 31, 2012, the ratio of the allowance for loan losses to
non-performing loans excluding the $13.1 million of non-performing
collateral dependent loans with partial charge-offs decreased to
88.2% compared to 105.3% at September 30, 2012 due to a lower
amount of non-performing collateral dependent loans with partial
charge-offs.
During the fourth quarter of 2012, we transferred five
commercial real estate and three retail loan relationships totaling
$7.5 million to other real estate owned and sold 11 other real
estate owned properties aggregating $1.2 million resulting in net
gains on the sales of $376,000. We continue to explore ways to
reduce our overall exposure in our non-performing assets through
various alternatives, including using A/B-Note structures and the
potential sale of certain of these assets. We currently have
contracts for the sale of certain other real estate owned
properties which will reduce non-performing assets by $1.6 million
once completed with no anticipated loss on sale, presuming the
transactions close as scheduled and pursuant to the contract
terms.
Statement of Condition Highlights
The table below provides a summary of the more significant items
in our statement of condition as of the dates indicated.
December 31, September 30, December 31,
2012 2012 2011
------------ ------------- ------------
(Dollars in thousands)
Assets:
Total assets $ 1,138,109 $ 1,118,681 $ 1,148,950
Interest-bearing deposits 114,122 76,972 59,090
Investment securities 218,748 215,988 250,752
Loans receivable, net of unearned
fees 692,267 703,907 711,226
Liabilities and Equity:
Total liabilities $ 1,026,287 $ 1,010,622 $ 1,045,702
Deposits 965,791 951,061 977,424
Borrowed funds 50,562 50,018 54,200
Shareholders' equity 111,822 108,059 103,248
Loans Receivable
December 31, September 30, December 31,
2012 2012 2011
--------------- --------------- ---------------
% of % of % of
Amount Total Amount Total Amount Total
-------- ----- -------- ----- -------- -----
(Dollars in thousands)
Commercial loans:
Commercial and
industrial $102,628 14.8% $ 93,794 13.3% $ 85,160 12.0%
Commercial real estate
- owner occupied 98,046 14.2 96,991 13.8 93,833 13.2
Commercial real estate
- non-owner occupied 164,392 23.7 178,621 25.4 188,293 26.5
Commercial real estate
- multifamily 75,228 10.9 76,549 10.9 71,876 10.1
Commercial construction
and land development 20,228 2.9 21,935 3.1 22,045 3.1
Commercial
participations 5,311 .8 5,671 .8 12,053 1.7
-------- ----- -------- ----- -------- -----
Total commercial
loans 465,833 67.3 473,561 67.3 473,260 66.6
Retail loans:
One-to-four family
residential 175,943 25.4 178,280 25.2 181,698 25.6
Home equity lines of
credit 46,477 6.7 47,605 6.8 52,873 7.4
Retail construction and
land development 1,176 .2 1,778 .3 1,022 .1
Other 3,305 .5 3,238 .5 2,771 .4
-------- ----- -------- ----- -------- -----
Total retail loans 226,901 32.8 230,901 32.8 238,364 33.5
-------- ----- -------- ----- -------- -----
Total loans
receivable 692,734 100.1 704,462 100.1 711,624 100.1
Net deferred loan
fees (467) (.1) (555) (.1) (398) (.1)
-------- ----- -------- ----- -------- -----
Total loans
receivable, net
of unearned fees $692,267 100.0% $703,907 100.0% $711,226 100.0%
======== ===== ======== ===== ======== =====
Total loans receivable decreased $11.6 million at December 31,
2012 from September 30, 2012 and $19.0 million from December 31,
2011. The fourth quarter decrease was primarily due to repayments
totaling $32.2 million, sales of one-to-four family loans totaling
$15.2 million, transfers to other real estate owned totaling $7.5
million, and gross charge-offs of $1.08 million. Partially
offsetting these decreases, loan fundings during the fourth quarter
of 2012 totaled $43.5 million, a 16.7% increase from $37.3 million
for the third quarter of 2012 and a 33.1% increase from $32.7
million for the fourth quarter of 2011.
At December 31, 2012, our total commercial loans outstanding
that were originated prior to January 1, 2008 (Pre-1/1/08)
decreased to $152.4 million, or 32.7% of total commercial loans
outstanding, compared to $172.3 million, or 36.4%, at September 30,
2012 and $202.6 million, or 42.8%, at December 31, 2011. The
Pre-1/1/08 portfolio has had a significantly higher percentage of
non-performing loans and has accounted for 92.9% of all commercial
loan charge-offs in the last five years. Please refer to our Annual
Report on Form 10-K for the year ended December 31, 2011 and
Quarterly Report on Form 10-Q for the quarter ended September 30,
2012 for more detailed discussions of our Pre-1/1/08 commercial
portfolio.
During the fourth quarter of 2012, we sold $15.2 million of
conforming one-to-four family fixed-rate mortgage loans into the
secondary market and recorded a gain on sale of $385,000 compared
to loan sales and gains on sale of $17.5 million and $327,000,
respectively, in the third quarter of 2012 and $10.3 million and
$188,000, respectively, in the fourth quarter of 2011.
Deposits
December 31, September 30, December 31,
2012 2012 2011
-------------- -------------- --------------
% of % of % of
Amount Total Amount Total Amount Total
-------- ----- -------- ----- -------- -----
(Dollars in thousands)
Checking accounts:
Non-interest bearing $107,670 11.1% $ 98,723 10.4% $ 96,321 9.9%
Interest-bearing 185,388 19.2 177,458 18.6 175,150 17.9
Money market accounts 182,001 18.9 179,400 18.9 192,593 19.7
Savings accounts 153,799 15.9 146,617 15.4 133,292 13.6
-------- ----- -------- ----- -------- -----
Core deposits 628,858 65.1 602,198 63.3 597,356 61.1
Certificates of deposit
accounts 336,933 34.9 348,863 36.7 380,068 38.9
-------- ----- -------- ----- -------- -----
Total deposits $965,791 100.0% $951,061 100.0% $977,424 100.0%
======== ===== ======== ===== ======== =====
During the first quarter of 2012, we implemented our HPC deposit
acquisition marketing program that targets both retail and business
clients. The program is designed to attract a younger demographic
and enhance growth in the number of checking accounts, core
deposits, and related fee income as well as to provide additional
cross-selling opportunities. In addition, core deposits during 2012
benefited from clients moving maturing certificates of deposit into
money market and savings accounts due to the current low interest
rate environment. During 2012, we also reviewed the pricing and
cross-sell potential and decided to exit four of our larger
single-service deposit relationships resulting in a decrease of
$42.0 million in core deposits since December 31, 2011. This
decision enabled us to decrease our level of liquidity and improve
our Tier 1 core capital ratios.
Borrowed Funds
December 31, September 30, December 31,
2012 2012 2011
------------ ------------- ------------
(Dollars in thousands)
Short-term variable-rate repurchase
agreements $ 11,053 $ 10,430 $ 14,334
FHLB advances 39,509 39,588 39,866
------------ ------------- ------------
Total borrowed funds $ 50,562 $ 50,018 $ 54,200
============ ============= ============
Borrowed funds increased slightly during the fourth quarter of
2012 compared to the third quarter of 2012 and decreased compared
to the fourth quarter of 2011 primarily due to levels of borrowings
from repurchase agreements, which will fluctuate depending on our
client's liquidity needs.
Shareholders' Equity
Shareholders' equity at December 31, 2012 increased to $111.8
million, or 9.83% of assets, from $108.1 million, or 9.66% of
assets, at September 30, 2012 and $103.2 million, or 8.99% of
assets, at December 31, 2011. The increase was primarily due to net
income of $1.6 million for the quarter and an increase in
accumulated other comprehensive income, net of tax, of $2.3 million
during the quarter.
At December 31, 2012, the Bank's Tier 1 core capital ratio was
relatively stable at 8.81% compared to 8.85% at September 30, 2012
and significantly increased from 8.26% at December 31, 2011. The
Bank's total risk-based capital ratio increased to 14.06% from
13.82% at September 30, 2012 and 12.65% at December 31, 2011. Both
the Tier 1 and the total risk-based capital ratios exceeded
"minimum" and "well capitalized" regulatory capital requirements at
December 31, 2012, September 30, 2012, and December 31, 2011.
Company Profile
CFS Bancorp, Inc. is the parent of Citizens Financial Bank, a
$1.1 billion asset federal savings bank. Citizens Financial Bank is
an independent bank focusing its people, products, and services on
helping individuals, businesses, and communities to be successful.
We have 20 full-service banking centers throughout adjoining
markets in Chicago's Southwest suburbs and Northwest Indiana.
Citizens Financial Bank has been recognized by the Chicago Tribune
as one of Chicago's Top 100 Workplaces for the third year in a row
for 2012. Our website can be found at www.citz.com.
Forward-Looking Information
This press release contains certain forward-looking statements
and information relating to us that is based on our beliefs as well
as assumptions made by and information currently available to us.
These forward-looking statements include but are not limited to
statements regarding our ability to successfully execute our
strategy and Strategic Growth and Diversification Plan, the level
and sufficiency of the Bank's current regulatory capital and equity
ratios, our ability to continue to diversify the loan portfolio,
efforts at deepening client relationships, increasing levels of
core deposits, lowering non-performing asset levels, managing and
reducing credit-related costs, increasing revenue growth and levels
of earning assets, the effects of general economic and competitive
conditions nationally and within our core market area, the ability
to sell other real estate owned properties and mortgage loans held
for sale, the sufficiency of the levels of provision for and the
allowance for loan losses, amounts of charge-offs, levels of loan
and deposit growth, interest on loans, asset yields and cost of
funds, net interest income, net interest margin, non-interest
income, non-interest expense, the interest rate environment, and
other risk factors identified in the filings we make with the
Securities and Exchange Commission. In addition, the words
"anticipate," "believe," "estimate," "expect," "indicate,"
"intend," "should," and similar expressions, or the negative
thereof, as well as statements that include future events, tense,
or dates, or that are not historical or current facts, as they
relate to us, our business, prospects, or our management, are
intended to identify forward-looking statements. Such statements
reflect our current views with respect to future events and are
subject to certain risks, uncertainties, assumptions, and changes
in circumstances. Forward-looking statements are not guarantees of
future performance or outcomes, and actual results or events may
differ materially from those included in these statements. We do
not intend to update these forward-looking statements unless
required to under the federal securities laws.
CFS BANCORP, INC.
Consolidated Statements of Income (Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended Year Ended
----------------------------------- -----------------------
December September December December December
31, 30, 31, 31, 31,
2012 2012 2011 2012 2011
----------- ----------- ----------- ----------- -----------
Interest income:
Loans
receivable $ 8,183 $ 8,237 $ 8,625 $ 33,049 $ 35,315
Investment
securities 1,650 1,923 2,015 7,889 7,894
Other interest-
earning assets 110 88 94 394 495
----------- ----------- ----------- ----------- -----------
Total interest
income 9,943 10,248 10,734 41,332 43,704
Interest
expense:
Deposits 1,008 1,102 1,464 4,794 6,736
Borrowed funds 293 297 304 1,180 1,117
----------- ----------- ----------- ----------- -----------
Total interest
expense 1,301 1,399 1,768 5,974 7,853
----------- ----------- ----------- ----------- -----------
Net interest
income 8,642 8,849 8,966 35,358 35,851
Provision for
loan losses 850 1,160 12,542 4,210 17,114
----------- ----------- ----------- ----------- -----------
Net interest
income (loss)
after provision
for loan losses 7,792 7,689 (3,576) 31,148 18,737
Non-interest
income:
Deposit related
fees 1,646 1,662 1,570 6,355 6,278
Net gain on
sale of:
Investment
securities 592 194 265 1,509 1,715
Loans held for
sale 385 327 188 1,071 330
Other real
estate owned 376 425 63 840 2,562
Income from
bank-owned
life insurance 227 151 180 1,080 812
Other income 284 273 268 1,154 1,154
----------- ----------- ----------- ----------- -----------
Total non-
interest
income 3,510 3,032 2,534 12,009 12,851
Non-interest
expense:
Compensation
and employee
benefits 4,315 4,182 4,319 17,677 19,423
Net occupancy
expense 672 697 677 2,756 2,818
FDIC insurance
premiums and
regulatory
assessments 474 475 483 1,927 2,121
Data processing 483 462 433 1,828 1,740
Furniture and
equipment
expense 436 417 449 1,778 1,802
Marketing 353 283 244 1,362 914
Professional
fees 411 177 354 1,039 1,385
Other real
estate owned
related
expense, net 502 1,074 906 2,510 4,123
Loan collection
expense 323 170 244 730 714
Severance and
retirement
compensation
expense -- -- 1,375 876 1,375
Other general
and
administrative
expenses 1,113 1,032 1,409 4,317 4,702
----------- ----------- ----------- ----------- -----------
Total non-
interest
expense 9,082 8,969 10,893 36,800 41,117
----------- ----------- ----------- ----------- -----------
Income (loss)
before income
tax expense 2,220 1,752 (11,935) 6,357 (9,529)
Income tax
expense 658 493 638 1,692 945
----------- ----------- ----------- ----------- -----------
Net income
(loss) $ 1,562 $ 1,259 $ (12,573)$ 4,665 $ (10,474)
=========== =========== =========== =========== ===========
Basic earnings
(loss) per
share $ .15 $ .12 $ (1.17)$ .43 $ (.98)
Diluted earnings
(loss) per
share .14 .12 (1.17) .43 (.98)
Weighted-average
common and
common share
equivalents
outstanding:
Basic 10,754,739 10,747,974 10,699,996 10,737,804 10,684,133
Diluted 10,819,679 10,806,861 10,742,480 10,794,974 10,740,602
CFS BANCORP, INC.
Consolidated Statements of Condition (Unaudited)
(Dollars in thousands)
December 31, September 30, December 31,
2012 2012 2011
------------ ------------- ------------
ASSETS
Cash and amounts due from
depository institutions $ 20,577 $ 31,611 $ 32,982
Interest-bearing deposits 114,122 76,972 59,090
------------ ------------- ------------
Cash and cash equivalents 134,699 108,583 92,072
Investment securities available-
for-sale, at fair value 203,290 202,498 234,381
Investment securities held-to-
maturity, at cost 15,458 13,490 16,371
Investment in Federal Home Loan
Bank stock, at cost 6,188 6,188 6,188
Loans receivable, net of unearned
fees 692,267 703,907 711,226
Allowance for loan losses (12,185) (12,359) (12,424)
------------ ------------- ------------
Net loans 680,082 691,548 698,802
Loans held for sale 1,509 2,199 1,124
Bank-owned life insurance 36,604 36,586 36,275
Accrued interest receivable 2,528 2,697 3,011
Other real estate owned 23,347 17,447 19,091
Office properties and equipment 15,768 16,121 17,539
Net deferred tax assets 11,302 13,801 16,273
Prepaid expenses and other assets 7,334 7,523 7,823
------------ ------------- ------------
Total assets $ 1,138,109 $ 1,118,681 $ 1,148,950
============ ============= ============
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits $ 965,791 $ 951,061 $ 977,424
Borrowed funds 50,562 50,018 54,200
Advance payments by borrowers for
taxes and insurance 4,734 4,075 4,275
Other liabilities 5,200 5,468 9,803
------------ ------------- ------------
Total liabilities 1,026,287 1,010,622 1,045,702
Shareholders' 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;
10,874,687, 10,876,151, and
10,874,668 shares outstanding 234 234 234
Additional paid-in capital 187,260 187,254 187,030
Retained earnings 76,914 75,461 72,683
Treasury stock, at cost;
12,548,619, 12,547,155, and
12,548,638 shares (154,698) (154,695) (154,773)
Accumulated other comprehensive
income (loss), net of tax 2,112 (195) (1,926)
------------ ------------- ------------
Total shareholders' equity 111,822 108,059 103,248
------------ ------------- ------------
Total liabilities and
shareholders' equity $ 1,138,109 $ 1,118,681 $ 1,148,950
============ ============= ============
CFS BANCORP, INC
Selected Financial Data (Unaudited)
(Dollars in thousands, except per share data)
December 31, September 30, December 31,
2012 2012 2011
------------ ------------- ------------
Book value per share $ 10.28 $ 9.94 $ 9.49
Shareholders' equity to total
assets 9.83% 9.66% 8.99%
Tier 1 core capital ratio (Bank
only) 8.81 8.85 8.26
Total risk-based capital ratio
(Bank only) 14.06 13.82 12.65
Common shares outstanding 10,874,687 10,876,151 10,874,668
Employees (FTE) 261 259 303
Number of full service banking
centers 20 20 22
Three Months Ended Year Ended
-------------------------------- ---------------------
December September December December December
31, 30, 31, 31, 31,
2012 2012 2011 2012 2011
---------- ---------- ---------- ---------- ----------
Average Balance
Data:
Total assets $1,126,087 $1,123,777 $1,161,928 $1,142,561 $1,146,118
Loans
receivable, net
of unearned
fees 706,066 712,663 724,562 708,218 728,811
Investment
securities 222,972 234,395 253,061 242,162 249,953
Interest-earning
assets 1,018,360 1,014,769 1,053,452 1,032,646 1,032,346
Deposits 956,561 956,939 979,320 974,884 973,641
Interest-bearing
deposits 851,829 859,051 875,221 872,491 873,494
Non-interest
bearing
deposits 104,732 97,888 104,099 102,393 100,147
Interest-bearing
liabilities 902,746 909,841 931,800 923,851 919,886
Shareholders'
equity 108,795 106,145 114,793 105,769 115,096
Performance Ratios
(annualized):
Return on
average assets .55% .45% (4.29)% .41% (.91)%
Return on
average equity 5.71 4.72 (43.45) 4.41 (9.10)
Average yield on
interest-
earning assets 3.88 4.02 4.04 4.00 4.23
Average cost of
interest-
bearing
liabilities .57 .61 .75 .65 .85
Interest rate
spread 3.31 3.41 3.29 3.35 3.38
Net interest
margin 3.38 3.47 3.38 3.42 3.47
Non-interest
expense to
average assets 3.21 3.18 3.72 3.22 3.59
Efficiency ratio
(1) 78.56 76.74 96.96 80.25 87.51
Cash dividends
declared per
share $ .01 $ .02 $ .01 $ .04 $ .04
Market price per
share of common
stock for the
period ended:
Close $ 6.27 $ 5.46 $ 4.31 $ 6.27 $ 4.31
High 6.41 5.75 4.89 6.41 5.90
Low 5.54 4.42 4.12 4.30 4.12
------------------
(1) The efficiency ratio is calculated by dividing non-interest expense by
the sum of net interest income and non-interest income, excluding net
gain on sales of investment securities.
CFS BANCORP, INC.
Reconciliation of Income Before Income Taxes to Pre-Tax, Pre-Provision
Earnings, as adjusted
(Unaudited)
(Dollars in thousands)
Three Months Ended
-------------------------------------------
December 31, September 30, December 31,
2012 2012 2011
------------- ------------- -------------
Income (loss) before income
taxes $ 2,220 $ 1,752 $ (11,935)
Provision for loan losses 850 1,160 12,542
------------- ------------- -------------
Pre-tax, pre-provision earnings 3,070 2,912 607
Add back (subtract):
Net gain on sale of
investment securities (592) (194) (265)
Net gain on sale of other
real estate owned (376) (425) (63)
Other real estate owned
related expense, net 502 1,074 906
Loan collection expense 323 170 244
Severance and retirement
compensation expense -- -- 1,375
------------- ------------- -------------
Pre-tax, pre-provision
earnings, as adjusted $ 2,927 $ 3,537 $ 2,804
============= ============= =============
Pre-tax, pre-provision
earnings, as adjusted, to
average assets (annualized) 1.03% 1.25% .96%
============= ============= =============
Year Ended
----------------------------
December 31, December 31,
2012 2011
------------- -------------
Income (loss) before income taxes $ 6,357 $ (9,529)
Provision for loan losses 4,210 17,114
------------- -------------
Pre-tax, pre-provision earnings 10,567 7,585
Add back (subtract):
Net gain on sale of investment securities (1,509) (1,715)
Net gain on sale of other real estate owned (840) (2,562)
Other real estate owned related expense,
net 2,510 4,123
Loan collection expense 730 714
Severance and retirement compensation
expense 876 1,375
------------- -------------
Pre-tax, pre-provision earnings, as adjusted $ 12,334 $ 9,520
============= =============
Pre-tax, pre-provision earnings, as adjusted,
to average assets 1.08% .83%
============= =============
Our accounting and reporting policies conform to U.S. generally
accepted accounting principles (GAAP) and general practice within
the banking industry. We use certain non-GAAP financial measures to
evaluate our financial performance and have provided the non-GAAP
financial measures of pre-tax, pre-provision earnings, as adjusted,
and pre-tax, pre-provision earnings, as adjusted, to average
assets. In these non-GAAP financial measures, the provision for
loan losses, other real estate owned related income and expense,
loan collection expense, and certain other items, such as gains and
losses on sales of investment securities and other real estate
owned and severance and retirement compensation expenses, are
excluded. We believe that these measures are useful because they
provide a more comparable basis for evaluating financial
performance excluding certain credit-related costs and other
non-recurring items period to period and allows management and
others to assess our ability to generate pre-tax earnings to cover
our provision for loan losses and other credit-related costs.
Although these non-GAAP financial measures are intended to enhance
investors' understanding of our business performance, these
operating measures should not be considered as an alternative to
GAAP.
CONTACT: Daryl D. Pomranke President and Chief Executive Officer
219-513-5150 Jerry A. Weberling Executive Vice President and CFO
219-513-5103
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