CFS Bancorp, Inc. (NASDAQ: CITZ), the parent of Citizens Financial
Bank, today reported net income of $490,000, or $.05 per diluted
share, for the first quarter of 2012, compared to net income of
$472,000, or $.04 per diluted share, for the first quarter of 2011.
Financial results for the quarter include:
- Core deposits increased to $627.2 million, which is 62.4% of
total deposits, compared to $597.4 million, or 61.1% of total
deposits at December 31, 2011;
- Net interest margin was 3.43% in the first quarter of 2012
compared to 3.38% in the fourth quarter of 2011 and 3.55% in the
first quarter of 2011;
- Net charge-offs for the first quarter of 2012 totaled $1.7
million, a decrease from $17.3 million for the fourth quarter of
2011 and an increase from $987,000 for the first quarter of
2011;
- Non-performing assets increased slightly to $65.7 million
compared to $64.7 million at December 31, 2011 primarily due to one
commercial and multifamily real estate relationship being
transferred to non-accrual status; and
- The Bank's total risk-based capital ratio increased to 13.23%
from 12.65% at December 31, 2011 and 13.22% at March 31, 2011, and
the Tier 1 core capital ratio decreased to 8.11% at March 31, 2012
compared to 8.26% at December 31, 2011 and 8.94% at March 31,
2011.
Chief Executive Officer's Comments
"We implemented several cost reduction initiatives during the
first quarter to improve our efficiency and profitability," said
Daryl D. Pomranke, Chief Executive Officer. "With the Voluntary
Early Retirement Offering (VERO), the closing of our Bolingbrook
and Orland Park, Illinois, branches, and the outsourcing of certain
support functions, we have been able to reduce our full-time
equivalent employees (FTEs) to 273 at March 31, 2012 from 303 at
December 31, 2011 and 322 at December 31, 2010. We anticipate an
additional decrease in FTEs to 262 by June 30, 2012 through normal
attrition and when the remainder of the VERO employees begin their
retirement. Although these initiatives resulted in us recording
severance and early retirement expense of $876,000, these actions
will generate future annual savings of $1.1 million in compensation
and employee benefits expense and approximately $115,000 in lower
other non-interest expenses."
"We are very pleased with our 5.0% core deposit growth from
December 31, 2011, which includes a 9.2% increase in non-interest
bearing deposits," added Pomranke. "The implementation of our High
Performance Checking program increased the number of new deposit
accounts, many of which were opened by a younger demographic than
we have seen in recent years. We anticipate further success with
this program including additional future cross-selling
opportunities."
"Reducing non-performing assets remains our top priority and our
asset management team is working diligently to bring resolution to
some of these assets either through the restructuring of certain
non-performing loans at a loan balance the borrowers can support
based upon their current cash flows or through a sale of other real
estate owned properties. During the first quarter, the level of
charge-offs and write-downs on other real estate owned properties
decreased substantially from the previous quarter even though
certain non-performing asset balances were written down as a result
of the receipt of updated appraisals with decreased property
values. We expect further improvement in our credit quality
indicators as we progress through 2012."
Progress on Strategic Growth and
Diversification Plan
We continue to focus our efforts on reducing the level of
non-performing loans, seeking to either restructure specific
non-performing credits or foreclose, obtain title, and transfer the
loan to other real estate owned where management can take control
of and liquidate the underlying collateral. Our ratio of
non-performing loans to total loans increased slightly to 6.55% at
March 31, 2012 from 6.41% at December 31, 2011, primarily as a
result of a $2.1 million increase in non-accruing commercial and
multifamily real estate loans during the quarter combined with a
decrease in total loans outstanding of $4.3 million. The ratio of
non-performing assets to total assets was stable at 5.61% at March
31, 2012 compared to 5.63% at December 31, 2011. See the Asset
Quality table in this press release for more detailed
information.
We remain focused on reducing non-interest expense. Through the
previously announced VERO, the March 31, 2012 branch closings in
Orland Park and Bolingbrook, Illinois, and the outsourcing of
certain support activities, the number of FTE employees decreased
to 273 at March 31, 2012 from 303 at December 31, 2011 and 320 at
March 31, 2011. The number of FTE employees is projected to further
decrease to 262 at June 30, 2012 when all employees electing the
VERO have retired, as well as through normal attrition. During the
first quarter of 2012, we recorded $876,000 of severance and early
retirement expense in conjunction with the VERO and branch
closings, which will result in estimated annual savings in
compensation and employee benefits expense, net of planned
replacements, of approximately $900,000.
Non-interest expense for the first quarter of 2012 decreased to
$10.2 million from $10.9 million for the fourth quarter of 2011 and
increased slightly from $10.0 million for the first quarter of
2011. Excluding the severance and retirement compensation expense
for first quarter of 2012 relating to the VERO and the retirement
compensation expense recognized in the fourth quarter of 2011
related to the retirement of our former Chairman and CEO,
non-interest expense for the first quarter decreased to $9.3
million compared to $9.5 million for the fourth quarter of 2011 and
$10.0 million for the first quarter of 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 54.5% of the commercial loan portfolio at March 31, 2012,
compared to 53.0% at December 31, 2011 and 51.0% at March 31, 2011.
Our focus on deepening client relationships continues to emphasize
core deposit growth. Total core deposits as a percentage of total
deposits increased to 62.4% at March 31, 2012 from 61.1% at
December 31, 2011 and 58.8% at March 31, 2011. The increase was
primarily related to clients transferring maturing certificates of
deposit to money market accounts given the current low interest
rate environment combined with an increase in municipal deposits.
In addition, the Bank's new High Performance Checking (HPC) deposit
acquisition marketing program implemented during the first quarter
of 2012 further enhanced growth in core deposits while attracting a
younger demographic with 66% of the new retail accounts in the
20-49 age group, which we believe will provide additional good
cross-sell opportunities. During the first ten weeks of the
program, the Bank opened 1,959 new core deposit accounts compared
to 987 accounts opened in the same period a year ago, with 50% of
the accounts being new relationships.
Pre-tax, Pre-Provision Earnings, As
Adjusted(1)
Pre-tax, pre-provision earnings, as adjusted, increased $1.2
million, or 80.7%, to $2.8 million for the first quarter of 2012
from $1.5 million for the first quarter of 2011 primarily due to
increases in gains on sales of loans held for sale of $135,000 and
income from bank-owned life insurance of $334,000 due to the death
of an insured combined with decreases in compensation and employee
benefits expense of $526,000, FDIC insurance premiums and
regulatory assessments of $465,000, and professional fees of
$135,000. Partially offsetting these favorable variances was a
$217,000 increase in marketing expense due to the HPC product
promotion the first quarter of 2012. The pre-tax, pre-provision
earnings, as adjusted, for the first quarter of 2012 compared to
the fourth quarter of 2011 was stable at $2.8 million.
(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
------------ ------------ ------------
March 31, December 31, March 31,
2012 2011 2011
------------ ------------ ------------
(Dollars in thousands)
Net interest margin 3.43% 3.38% 3.55%
Interest rate spread 3.36 3.29 3.45
Net interest income $ 8,923 $ 8,966 $ 8,857
Average assets:
Yield on interest-earning assets 4.08% 4.04% 4.41%
Yield on loans receivable 4.76 4.72 4.91
Yield on investment securities 3.25 3.12 3.42
Average interest-earning assets $ 1,045,778 $ 1,053,452 $ 1,012,431
Average liabilities:
Cost of interest-bearing
liabilities .72% .75% .96%
Cost of interest-bearing
deposits .63 .66 .88
Cost of borrowed funds 2.20 2.10 2.63
Average interest-bearing
liabilities $ 941,803 $ 931,800 $ 909,640
Net interest margin increased five basis points to 3.43% for the
first quarter of 2012 from 3.38% for the fourth quarter of 2011 and
decreased twelve basis points from 3.55% for the first quarter of
2011. Net interest income was relatively stable at $8.9 million for
the first quarter of 2012 compared to $9.0 million for the fourth
quarter of 2011 and $8.9 million for the first quarter of 2011. The
net interest margin, while up from the prior quarter, continues to
be pressured by the higher levels of liquidity due to strong core
deposit growth, modest loan demand, and elevated level of
non-performing assets. The increase in yields on investment
securities during the first quarter of 2012 was primarily related
to purchases of higher yielding floating-rate securities as well as
higher accretion income due to an increase in prepayments. The
level of non-performing loans continues to negatively affect the
yield on loans receivable. Net interest margin was positively
affected by a three basis point decrease in the cost of
interest-bearing liabilities from the fourth quarter of 2011 and a
24 basis point decrease compared to the first quarter of 2011.
Interest income totaled $10.6 million for the first quarter of
2012 which was relatively stable compared to $10.7 million for the
fourth quarter of 2011 and decreased 3.7% from $11.0 million for
the first quarter of 2011. The fluctuation from the first quarter
of 2011 is primarily related to the reinvestment of proceeds from
sales and maturities of investment securities in lower yielding
investments 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 and
modest loan demand.
Interest expense decreased 4.6% to $1.7 million for the first
quarter of 2012 compared to $1.8 million for the fourth quarter of
2011 and 21.8% from $2.2 million for the first quarter of 2011. Our
continuing success in growing low-cost core deposits and continued
disciplined pricing on new and renewing certificates of deposit at
lower interest rates contributed to the decrease in interest
expense during the first quarter of 2012.
Non-Interest Income and Non-Interest
Expense
Non-interest income increased $290,000, or 11.4%, to $2.8
million for the first quarter of 2012 compared to the fourth
quarter of 2011 primarily due to an increase of $153,000 related to
gains on sales of investment securities and a $360,000 increase in
income from bank-owned life insurance due to the death of an
insured. These increases were partially offset by a $136,000
decrease in service charges and other fees due to lower client
activity and seasonal factors combined with a $110,000 increase in
losses on sales of other real estate owned. Excluding the net gains
and losses on sales of investment securities and other real estate
owned, non-interest income increased $247,000 compared to the
fourth quarter of 2011 primarily due to the increase in income from
bank-owned life insurance partially offset by the decrease in
service charges and other fees.
Non-interest income increased $373,000, or 15.2%, from $2.5
million for the first quarter of 2011 primarily due to a $135,000
increase in gains on the sale of loans held for sale related to our
expanded residential loan origination and mortgage banking
activities and a $334,000 increase in income from bank-owned life
insurance primarily due to the death of an insured. These increases
were partially offset by a $101,000 decrease in gains recorded on
the sale of investment securities and a $42,000 increase in losses
on sales of other real estate owned. Excluding net gains and losses
on sales of investment securities and other real estate owned,
non-interest income increased $516,000 compared to the first
quarter of 2011 primarily due to the increases in gains on sales of
loans, bank-owned life insurance income, and card-based fees.
Non-interest expense for the first quarter of 2012 decreased
$686,000, or 6.3%, to $10.2 million compared to $10.9 million for
the fourth quarter of 2011 and increased 2.4% from $10.0 million
for the first quarter of 2011. We recorded severance and retirement
compensation expense of $876,000 during the first quarter of 2012
related to the VERO, branch closings, and the outsourcing of
certain activities, and $1.4 million during the fourth quarter of
2011 related to the retirement of our former Chairman of the Board
and Chief Executive Officer. Excluding the severance and retirement
compensation expenses, non-interest expense for the first quarter
of 2012 decreased $187,000 from the fourth quarter of 2011 and
$636,000 from the first quarter of 2011.
Non-interest expense during the first quarter of 2012 compared
to the fourth quarter of 2011 was also impacted by lower
professional fees of $101,000 and net other real estate owned
related expenses of $288,000. These decreases were partially offset
by an increase in compensation and employee benefits totaling
$394,000 primarily due to the absence of the reversal of incentive
accruals during the fourth quarter of 2011 as a result of the
Company not meeting its 2011 performance target, partially offset
by increased mortgage loan deferred origination costs and lower
pension and restricted stock expense. In addition, marketing
expense increased $160,000 during the first quarter of 2012 over
the fourth quarter of 2011 due to the HPC product launch.
Non-interest expense during the first quarter of 2012 compared
to the first quarter of 2011 was impacted by decreased compensation
and employee benefits of $526,000 primarily related to lower
incentive compensation, lower medical premiums, and a reduction of
47, or 14.7%, FTE employees from March 31, 2011. In addition, FDIC
insurance premiums and regulatory assessments decreased $165,000
and professional fees decreased $135,000 due to lower legal
expenses. These decreases were partially offset by increased
marketing expenses of $217,000 due to costs associated with the HPC
product launch.
Income Tax Expense
During the current quarter, we recorded an income tax benefit of
$166,000 primarily related to the lower pre-tax income and the tax
sheltering impact of the increased income from bank-owned life
insurance. In addition, we increased the deferred tax valuation
allowance by $166,000 resulting in no income tax benefit for the
first quarter. The deferred tax asset valuation allowance totaled
$6.5 million at March 31, 2012. Although realization of the current
net deferred tax assets of $16.6 million is not assured, management
believes it is more likely than not that all of the recorded
deferred tax assets will be realized. The amount of the deferred
tax asset considered realizable, however, could be reduced in the
near term if estimates of future taxable income during tax loss
carryforward periods are reduced.
Asset Quality
March 31, December 31, March 31,
2012 2011 2011
------------ ------------ ------------
(Dollars in thousands)
Non-performing loans (NPLs) $ 46,275 $ 45,587 $ 59,661
Other real estate owned 19,429 19,091 23,567
------------ ------------ ------------
Non-performing assets (NPAs) $ 65,704 $ 64,678 $ 83,228
============ ============ ============
Allowance for loan losses (ALL) $ 11,768 $ 12,424 $ 17,095
Provision for loan losses for the
quarter ended 1,050 12,542 903
Loans charged off:
Current period net charge-offs $ 988 $ 9,364 $ 987
Previously established specific
reserves 718 7,940 -
------------ ------------ ------------
Net charge-offs for the quarter
ended $ 1,706 $ 17,304 $ 987
============ ============ ============
NPLs / total loans 6.55% 6.41% 8.24%
NPAs / total assets 5.61 5.63 7.27
ALL / total loans 1.66 1.75 2.36
ALL / NPLs 25.43 27.25 28.65
Total non-performing loans increased modestly to $46.3 million
at March 31, 2012 from $45.6 million at December 31, 2011 primarily
due to the transfer of one commercial and multifamily real estate
lending relationship totaling $2.2 million to non-accrual status.
The ratio of non-performing loans to total loans increased to 6.55%
during the quarter compared to 6.41% at December 31, 2011 primarily
due to an increase in non-performing loans combined with a decrease
in total loans.
The provision for loan losses decreased to $1.1 million for the
first quarter of 2012 compared to $12.5 million for the fourth
quarter of 2011 and increased from $903,000 for the first quarter
of 2011. The lower provision on a sequential quarter basis was
primarily due to significantly lower loan charge-offs.
The ratio of the allowance for loan losses to total loans
decreased to 1.66% at March 31, 2012 compared to 1.75% at December
31, 2011 primarily due to the net charge-offs, including a $718,000
charge-off of a previously established specific reserve. 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 $13.7
million recorded through March 31, 2012 on $27.2 million (net of
charge-offs) of non-performing collateral dependent loans. At March
31, 2012, the ratio of the allowance for loan losses to
non-performing loans, excluding the $27.2 million of non-performing
collateral dependent loans with partial charge-offs, was 61.6%.
During the first quarter, the Bank transferred its Bolingbrook
banking center to other real estate owned. We also sold seven other
real estate owned properties aggregating $722,000 during the first
quarter of 2012 and recognized a net loss of $47,000 on these
sales. We continue to explore ways to reduce our overall exposure
in our non-performing assets through various alternatives,
including the potential sale of certain of these assets. We
currently have contracts for the sale of five separate other real
estate owned properties which will reduce non-performing assets by
$1.0 million 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.
3/31/2012 12/31/2011 3/31/2011
---------- ---------- ----------
(Dollars in thousands)
Assets:
Total assets $1,170,542 $1,148,950 $1,144,041
Interest-bearing deposits 89,718 59,090 38,757
Investment securities 239,247 234,381 239,012
Loans receivable, net of unearned fees 706,938 711,226 724,223
Liabilities and Equity:
Total liabilities $1,067,207 $1,045,702 $1,030,277
Deposits 1,004,441 977,424 980,517
Borrowed funds 51,935 54,200 40,658
Shareholders' equity 103,335 103,248 113,764
Loans Receivable
3/31/2012 12/31/2011 3/31/2011
----------------- ----------------- -----------------
% of % of % of
Amount Total Amount Total Amount Total
-------- ------- -------- ------- -------- -------
(Dollars in thousands)
Commercial loans:
Commercial and
industrial $ 86,807 12.3% $ 85,160 12.0% $ 68,381 9.4%
Commercial real
estate - owner
occupied 95,110 13.5 93,833 13.2 102,053 14.1
Commercial real
estate - non-
owner occupied 185,070 26.2 188,293 26.5 191,443 26.4
Commercial real
estate -
multifamily 75,864 10.7 71,876 10.1 74,552 10.3
Commercial
construction and
land development 22,691 3.2 22,045 3.1 21,130 2.9
Commercial
participations 7,089 1.0 12,053 1.7 22,419 3.1
-------- ------- -------- ------- -------- -------
Total commercial
loans 472,631 66.9 473,260 66.6 479,978 66.2
Retail loans:
One-to-four family
residential 179,980 25.5 181,698 25.6 183,623 25.4
Home equity lines
of credit 50,496 7.1 52,873 7.4 55,649 7.7
Retail
construction and
land development 1,282 .2 1,022 .1 3,328 .5
Other 2,942 .4 2,771 .4 2,192 .3
-------- ------- -------- ------- -------- -------
Total retail
loans 234,700 33.2 238,364 33.5 244,792 33.9
-------- ------- -------- ------- -------- -------
Total loans
receivable 707,331 100.1 711,624 100.1 724,770 100.1
Net deferred
loan fees (393) (.1) (398) (.1) (547) (.1)
-------- ------- -------- ------- -------- -------
Total loans
receivable,
net of
unearned fees $706,938 100.0% $711,226 100.0% $724,223 100.0%
======== ======= ======== ======= ======== =======
Loan fundings during the three months ended March 31, 2012
totaled $32.7 million, stable compared to the three months ended
December 31, 2011. Loan fundings during the first quarter of 2012
were offset by loan payoffs and amortization of $25.4 million,
mortgage loan sales of $9.2 million, and transfers to other real
estate owned totaling $586,000.
Through the execution of our Strategic Growth and
Diversification Plan and our focus on lending to small- to
medium-sized businesses, we continue to diversify our loan
portfolio and reduce loans not meeting our current defined risk
tolerance. Our targeted growth segments within the loan portfolio,
including commercial and industrial and owner occupied and
multifamily commercial real estate loans, increased to 54.5% of the
commercial loan portfolio at March 31, 2012 compared to 53.0% at
December 31, 2011. Commercial participations decreased $5.0
million, or 41.2%, to $7.1 million compared to $12.1 million at
December 31, 2011 primarily due to the payoff of a performing
commercial participation loan during the first quarter of 2012.
During the first quarter of 2012, we sold $9.2 million of
conforming one-to-four family fixed-rate mortgage loans into the
secondary market and recorded a gain on sale of $167,000. We hired
four additional seasoned mortgage loan originators in the last year
to expand mortgage loan originations to generate additional income
from our mortgage banking activities.
Deposits
3/31/2012 12/31/2011 3/31/2011
---------------- -------------- --------------
% of % of % of
Amount Total Amount Total Amount Total
---------- ----- -------- ----- -------- -----
(Dollars in thousands)
Checking accounts:
Non-interest bearing $ 105,177 10.5% $ 96,321 9.9% $101,126 10.3%
Interest-bearing 179,366 17.8 175,150 17.9 158,473 16.2
Money market accounts 202,668 20.2 192,593 19.7 189,034 19.3
Savings accounts 140,025 13.9 133,292 13.6 127,902 13.0
---------- ----- -------- ----- -------- -----
Core deposits 627,236 62.4 597,356 61.1 576,535 58.8
Certificates of deposit
accounts 377,205 37.6 380,068 38.9 403,982 41.2
---------- ----- -------- ----- -------- -----
Total deposits $1,004,441 100.0% $977,424 100.0% $980,517 100.0%
========== ===== ======== ===== ======== =====
We strive to grow deposits through many channels including
enhancing our brand recognition within our communities, offering
attractive deposit products, bringing in new client relationships
by meeting all of their banking needs, and holding our experienced
sales team accountable for growing deposits and relationships.
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 core deposits and related fee income as well
as to provide additional cross-selling opportunities. The $29.9
million increase in core deposits during the first quarter of 2012
is primarily related to clients moving maturing certificates of
deposit into money market accounts due to the current low interest
rate environment, increased municipal deposits, and the impact of
the new HPC program which generated approximately $3.0 million in
new core deposit growth during the quarter.
Borrowed Funds
3/31/2012 12/31/2011 3/31/2011
---------- ---------- ----------
(Dollars in thousands)
Short-term variable-rate repurchase
agreements $ 12,123 $ 14,334 $ 15,510
FHLB advances 39,812 39,866 25,148
---------- ---------- ----------
Total borrowed funds $ 51,935 $ 54,200 $ 40,658
========== ========== ==========
Borrowed funds decreased during the first quarter of 2012
primarily due to decreased borrowings from repurchase agreements,
which will fluctuate depending on the client's liquidity
levels.
Shareholders' Equity
Shareholders' equity at March 31, 2012 was relatively stable at
$103.3 million compared to $103.2 million at December 31, 2011. The
increase in shareholders' equity during the first quarter of 2012
was primarily related to net income of $490,000 for the quarter,
partially offset by a $299,000 increase in accumulated other
comprehensive loss and dividends declared of $109,000.
At March 31, 2012, the Company's tangible common equity was
$103.3 million, or 8.83% of assets, compared to $103.2 million, or
8.99% of assets at December 31, 2011. At March 31, 2012, the Bank's
Tier 1 core capital ratio was 8.11% and the total risk-based
capital ratio was 13.23%, both of which exceeded "minimum" and
"well capitalized" regulatory capital requirements.
Company Profile
CFS Bancorp, Inc. is the parent of Citizens Financial Bank, a
$1.2 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. 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, 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 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 (Loss) (Unaudited)
(Dollars in thousands, except per share data)
Three Months Ended
----------------------------------------
March 31, December 31, March 31,
2012 2011 2011
------------ ------------ ------------
Interest income:
Loans receivable $ 8,386 $ 8,625 $ 8,811
Investment securities 2,130 2,015 2,045
Other interest-earning assets 93 94 157
------------ ------------ ------------
Total interest income 10,609 10,734 11,013
Interest expense:
Deposits 1,390 1,464 1,894
Borrowed funds 296 304 262
------------ ------------ ------------
Total interest expense 1,686 1,768 2,156
------------ ------------ ------------
Net interest income 8,923 8,966 8,857
Provision for loan losses 1,050 12,542 903
------------ ------------ ------------
Net interest income (expense)
after provision for loan losses 7,873 (3,576) 7,954
Non-interest income:
Service charges and other fees 1,018 1,154 1,076
Card-based fees 533 520 475
Commission income 57 36 45
Net gain (loss) on sale of:
Investment securities 418 265 519
Loans held for sale 167 188 32
Other real estate owned (47) 63 (5)
Income from bank-owned life
insurance 540 180 206
Other income 138 128 103
------------ ------------ ------------
Total non-interest income 2,824 2,534 2,451
Non-interest expense:
Compensation and employee
benefits 4,713 4,319 5,239
Net occupancy expense 708 677 765
FDIC insurance premiums and
regulatory assessments 488 483 653
Professional fees 253 354 388
Furniture and equipment expense 457 449 463
Data processing 438 433 442
Marketing 404 244 187
Other real estate owned related
expense, net 618 906 592
Loan collection expense 118 244 120
Severance and retirement
compensation expense 876 1,375 --
Other general and administrative
expenses 1,134 1,409 1,118
------------ ------------ ------------
Total non-interest expense 10,207 10,893 9,967
------------ ------------ ------------
Income (loss) before income tax
expense (benefit) 490 (11,935) 438
Income tax (benefit) expense -- 638 (34)
------------ ------------ ------------
Net income (loss) $ 490 $ (12,573) $ 472
============ ============ ============
Basic earnings (loss) per share $ .05 $ (1.17) $ .04
Diluted earnings (loss) per share .05 (1.17) .04
Weighted-average common and common
share equivalents outstanding:
Basic 10,697,892 10,699,996 10,650,743
Diluted 10,746,398 10,742,480 10,706,677
CFS BANCORP, INC.
Consolidated Statements of Condition (Unaudited)
(Dollars in thousands)
March 31, December 31, March 31,
2012 2011 2011
------------ ------------ ------------
ASSETS
Cash and amounts due from
depository institutions $ 23,429 $ 32,982 $ 19,211
Interest-bearing deposits 89,718 59,090 38,757
------------ ------------ ------------
Cash and cash equivalents 113,147 92,072 57,968
Investment securities available-
for-sale, at fair value 239,247 234,381 239,012
Investment securities held-to-
maturity, at cost 15,911 16,371 16,764
Investment in Federal Home Loan
Bank stock, at cost 6,188 6,188 10,282
Loans receivable, net of unearned
fees 706,938 711,226 724,223
Allowance for loan losses (11,768) (12,424) (17,095)
------------ ------------ ------------
Net loans 695,170 698,802 707,128
Loans held for sale 1,198 1,124 --
Investment in bank-owned life
insurance 36,273 36,275 35,669
Accrued interest receivable 2,841 3,011 3,265
Other real estate owned 19,429 19,091 23,567
Office properties and equipment 16,466 17,539 18,514
Net deferred tax assets 16,621 16,273 17,146
Prepaid expenses and other assets 8,051 7,823 14,726
------------ ------------ ------------
Total assets $ 1,170,542 $ 1,148,950 $ 1,144,041
============ ============ ============
LIABILITIES AND SHAREHOLDERS'
EQUITY
Deposits $ 1,004,441 $ 977,424 $ 980,517
Borrowed funds 51,935 54,200 40,658
Advance payments by borrowers for
taxes and insurance 4,550 4,275 4,785
Other liabilities 6,281 9,803 4,317
------------ ------------ ------------
Total liabilities 1,067,207 1,045,702 1,030,277
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;
10,877,788, 10,874,668, and
10,869,236 shares outstanding 234 234 234
Additional paid-in capital 186,995 187,030 186,929
Retained earnings 73,066 72,683 83,957
Treasury stock, at cost;
12,545,518, 12,548,638, and
12,554,070 shares (154,735) (154,773) (154,877)
Accumulated other comprehensive
loss, net of tax (2,225) (1,926) (2,479)
------------ ------------ ------------
Total shareholders' equity 103,335 103,248 113,764
------------ ------------ ------------
Total liabilities and
shareholders' equity $ 1,170,542 $ 1,148,950 $ 1,144,041
============ ============ ============
CFS BANCORP, INC.
Selected Financial Data (Unaudited)
(Dollars in thousands, except per share data)
March 31, December 31, March 31,
2012 2011 2011
------------ ------------ ------------
Book value per share $ 9.50 $ 9.49 $ 10.47
Tangible book value per share 9.50 9.49 10.47
Shareholders' equity to total
assets 8.83% 8.99% 9.94%
Tier 1 core capital ratio (Bank
only) 8.11 8.26 8.94
Total risk-based capital ratio
(Bank only) 13.23 12.65 13.22
Common shares outstanding 10,877,788 10,874,668 10,869,236
Employees (FTE) 273 303 320
Number of full service banking
centers 20 22 22
Three Months Ended
-----------------------------------------
March 31, December 31, March 31,
2012 2011 2011
------------ ------------ ------------
Average Balance Data:
Total assets $ 1,159,197 $ 1,161,928 $ 1,130,077
Loans receivable, net of
unearned fees 708,713 724,562 727,422
Investment securities 258,882 253,061 239,070
Interest-earning assets 1,045,778 1,053,452 1,012,431
Deposits 990,288 979,320 965,380
Interest-bearing deposits 888,643 875,221 869,784
Non-interest bearing deposits 101,645 104,099 95,596
Interest-bearing liabilities 941,803 931,800 909,640
Shareholders' equity 104,285 114,793 113,390
Performance Ratios (annualized):
Return on average assets .17% (4.29)% .17%
Return on average equity 1.89 (43.45) 1.69
Average yield on interest-
earning assets 4.08 4.04 4.41
Average cost of interest-
bearing liabilities .72 .75 .96
Interest rate spread 3.36 3.29 3.45
Net interest margin 3.43 3.38 3.55
Non-interest expense to average
assets 3.54 3.72 3.58
Efficiency ratio (1) 90.10 96.96 92.38
Cash dividends declared per share $ .01 $ .01 $ .01
Market price per share of common
stock for the period ended:
Close $ 5.70 $ 4.31 $ 5.58
High 6.29 4.89 5.80
Low 4.33 4.12 5.25
---------------------------------
(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
----------------------------------------
March 31, December 31, March 31,
2012 2011 2011
------------ ------------ ------------
Income (loss) before income taxes
(benefit) $ 490 $ (11,935) $ 438
Provision for loan losses 1,050 12,542 903
------------ ------------ ------------
Pre-tax, pre-provision earnings 1,540 607 1,341
Add back (subtract):
Net gain on sale of investment
securities (418) (265) (519)
Net (gain) loss on sale of other
real estate owned 47 (63) 5
Other real estate owned related
expense, net 618 906 592
Loan collection expense 118 244 120
Severance and retirement
compensation expense 876 1,375 --
------------ ------------ ------------
Pre-tax, pre-provision earnings,
as adjusted $ 2,781 $ 2,804 $ 1,539
============ ============ ============
Pre-tax, pre-provision earnings,
as adjusted, to average assets
(annualized) .96% .96% .55%
============ ============ ============
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
Cfs Bancorp, Inc. (MM) (NASDAQ:CITZ)
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