CFS Bancorp, Inc. (NASDAQ: CITZ), the parent of Citizens Financial
Bank, today reported net income of $1.3 million, or $.12 per
diluted share, for the third quarter of 2012, an increase from net
income of $394,000, or $.04 per diluted share, for the third
quarter of 2011. The Company's net income for the nine months ended
September 30, 2012 was $3.1 million, or $.29 per diluted share, an
increase from net income of $2.1 million, or $.20 per diluted
share, for the nine months ended September 30, 2011.
Financial results for the quarter include:
- Non-performing assets decreased $17.1 million, or 24.0%, to
$54.0 million at September 30, 2012 from $71.1 million at June 30,
2012;
- Net charge-offs for the third quarter of 2012 totaled $863,000,
stable with $856,000 for the second quarter of 2012 and a decrease
from $2.5 million for the third quarter of 2011;
- Loans receivable decreased $9.7 million to $703.9 million from
June 30, 2012 primarily due to decreases in commercial real estate
owner occupied and non-owner occupied loans, including $5.8 million
of transfers to other real estate owned, which were partially
offset by an increase in commercial and industrial loans;
- Core deposits increased to 63.3% of total deposits compared to
62.5% and 60.5% of total deposits at June 30, 2012 and September
30, 2011, respectively;
- Net interest margin increased to 3.47% during the third quarter
of 2012 from 3.42% in the second quarter of 2012 and 3.39% in the
third quarter of 2011;
- The Company's common shareholders' equity to total assets ratio
increased to 9.66% at September 30, 2012 compared to 9.24% at June
30, 2012 and 8.99% at December 31, 2011; and
- The Bank's Tier 1 core capital ratio increased to 8.85% at
September 30, 2012 compared to 8.56% at June 30, 2012 and 8.26% at
December 31, 2011, and the total risk-based capital ratio increased
to 13.82% from 13.35% at June 30, 2012 and 12.65% at December 31,
2011.
Chief Executive Officer's Comments
"I am pleased to report a significant 24% reduction in our level
of non-performing assets as well as another quarter of
profitability. Our diligent problem asset resolution efforts are
producing the results we have anticipated," said Daryl D. Pomranke,
Chief Executive Officer. "Our decision to continue resolving
individual credits by working with our clients, utilizing A/B-Note
structures as appropriate, and pursuing individual sales of other
real estate owned, while taking longer to complete, has, we
believe, produced better outcomes than pursuing a bulk sale
strategy. We expect to make additional progress in reducing
non-performing assets through the remainder of 2012 and into
2013."
"The execution of our strategies to reduce non-performing
assets, diversify revenue sources, and reduce non-interest expense
is yielding more positive outcomes. As a result, our third quarter
and year-to-date pre-tax, pre-provision earnings, as adjusted,
reflect solid increases over comparable prior periods. We continue
to look to our strategies for opportunities for additional
improvements," added Pomranke.
Update on Strategic Growth and Diversification
Plan
We continue to focus on reducing the level of non-performing
loans. Our ratio of non-performing loans to total loans decreased
to 5.19% at September 30, 2012 from 7.27% at June 30, 2012,
primarily due to transfers back to accrual status of $9.8 million
of commercial real estate loans that were restructured and
performing for at least six months, a $1.7 million paydown of a
non-performing commercial participation loan, and $5.6 million of
commercial real estate loans transferred to other real estate
owned. The ratio of non-performing assets to total assets decreased
to 4.83% at September 30, 2012 compared to 6.28% at June 30, 2012.
See the Asset Quality table in this press release for more detailed
information.
We also remain focused on reducing non-interest expense. Despite
an increase during the third quarter of 2012 to $9.0 million from
$8.5 million for the second quarter of 2012, non-interest expense
decreased from $9.2 million for the third quarter of 2011.
Excluding credit related costs totaling $1.2 million, non-interest
expense decreased to $7.7 million for the third quarter of 2012
from $8.1 million for the second quarter of 2012 and $8.5 million
from the third quarter of 2011. These decreases were related to a
significant decrease in compensation and employee benefit expense
due to the previously announced VERO, the March 31, 2012 branch
closings in Orland Park and Bolingbrook, Illinois, the outsourcing
of certain support activities, and lower professional fees. The
number of FTE employees has decreased to 259 at September 30, 2012
from 311 at September 30, 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 56.5% of the commercial loan portfolio at September 30,
2012, compared to 55.6% at June 30, 2012 and 52.2% at September 30,
2011. Our focus on deepening client relationships continues to
emphasize core deposits. Total core deposits, which declined $2.3
million in the third quarter of 2012, increased as a percentage of
total deposits to 63.3% at September 30, 2012 from 62.5% at June
30, 2012 and 60.5% at September 30, 2011 primarily due to 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, increased
$847,000, or 31.5%, to $3.5 million for the third quarter of 2012
compared to $2.7 million for the third quarter of 2011. These
increases were primarily due to a $261,000 increase in gains on
sales of loans held for sale along with a $636,000 decrease in
compensation and employee benefits expense.
The pre-tax, pre-provision earnings, as adjusted, for the nine
months ended September 30, 2012 increased $2.7 million, or 40.1%,
to $9.4 million compared to $6.7 million for the 2011 period
primarily due to increases in gains on sales of loans held for
sale, income from bank-owned life insurance as a result of the
death of an insured in the first quarter of 2012, and decreases in
compensation and employee benefits, professional fees, and FDIC
insurance premiums and regulatory assessments. These favorable
variances were partially offset by an increase in marketing
expenses and a slight 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
-------------------------------------------
September 30, June 30, September 30,
2012 2012 2011
------------- ------------- -------------
(Dollars in thousands)
Net interest margin 3.47% 3.42% 3.39%
Interest rate spread 3.41 3.35 3.30
Net interest income $ 8,849 $ 8,944 $ 8,859
Average assets:
Yield on interest-earning
assets 4.02% 4.03% 4.12%
Yield on loans receivable 4.60 4.70 4.82
Yield on investment
securities 3.21 3.42 2.93
Average interest-earning assets $ 1,014,769 $ 1,052,039 $ 1,036,064
Average liabilities:
Cost of interest-bearing
liabilities .61% .68% .82%
Cost of interest-bearing
deposits .51 .58 .73
Cost of borrowed funds 2.29 2.30 2.28
Average interest-bearing
liabilities $ 909,841 $ 941,398 $ 922,049
The net interest margin increased five basis points to 3.47% for
the third quarter of 2012 compared to 3.42% for the second quarter
of 2012 and eight basis points from 3.39% for the third quarter of
2011. Net interest income was stable at $8.8 million for the third
quarter of 2012 compared to $8.9 million for the second quarter of
2012 and the third quarter of 2011. The net interest margin
benefited from loans comprising a larger proportion of
interest-earning assets and decreases in non-performing assets and
the cost of interest-bearing liabilities during the quarter. Higher
levels of liquidity, modest loan demand, reduced but still elevated
level of non-performing assets, the continued low interest rate
environment, and narrowing of spreads on new investment security
purchases will create pressure on the net interest margin for the
foreseeable future. The third quarter 2012 decrease in yields on
investment securities compared to the second quarter of 2012 was
primarily related to prepayments and maturities of higher-yielding
investment securities in the current lower interest rate
environment with the proceeds reinvested at lower rates. The level
of non-performing loans continues to negatively affect the yield on
loans receivable. The net interest margin was positively affected
by a seven basis point decrease in the cost of interest-bearing
liabilities from the second quarter of 2012 and a 21 basis point
decrease compared to the third quarter of 2011.
Interest income totaled $10.2 million for the third quarter of
2012, a decrease of 2.7% from $10.5 million for the second quarter
of 2012 and 4.7% from $10.8 million for the third quarter of 2011.
The decreases are 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 combined with modest loan demand.
Interest expense decreased 11.9% to $1.4 million for the third
quarter of 2012 compared to $1.6 million for the second quarter of
2012 and 26.2% from $1.9 million for the third 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 third quarter of 2012.
Non-Interest Income and Non-Interest
Expense
Non-interest income increased $389,000, or 14.7%, to $3.0
million for the third quarter of 2012 compared to the second
quarter of 2012 primarily due to a $339,000 increase in gains on
sales of other real estate owned, a $127,000 increase in gains on
the sale of loans held for sale, and an $84,000 increase in deposit
related fees. These increases were partially offset by a $111,000
decrease in gains on sales of investment securities.
Non-interest income decreased $278,000, or 8.4%, from $3.3
million for the third quarter of 2011 primarily due to a $564,000
decrease in gains on the sale of investment securities and a
$65,000 decrease in income from bank-owned life insurance due to
lower portfolio yields. These decreases were partially offset by
increases of $261,000 in gains on the sale of loans held for sale
related to our expanded residential loan origination and mortgage
banking activities and $159,000 in gains on the sale of other real
estate owned. Excluding net gains and losses on sales of investment
securities and other real estate owned, non-interest income
increased $127,000 compared to the third quarter of 2011 primarily
due to the increases in gains on the sale of loans held for sale
partially offset by a decrease in income from bank-owned life
insurance.
Non-interest expense for the third quarter of 2012 increased
$427,000, or 5.0%, to $9.0 million compared to $8.5 million for the
second quarter of 2012 primarily due to an increase of $758,000 of
other real estate owned expense as a result of $1.0 million of net
realizable value write-downs on seven properties. Excluding these
credit related costs and loan collection expense, non-interest
expense for the third quarter of 2012 decreased $382,000, or 4.7%,
from the second quarter of 2012. This decrease is a result of a
$285,000, or 6.4%, decrease in compensation and employee benefits
due to slightly fewer FTEs during the quarter combined with a
decrease in medical insurance expense.
Non-interest expense during the third quarter of 2012 decreased
$217,000, or 2.4%, to $9.0 million from $9.2 million for the third
quarter of 2011 due to lower compensation and employee benefits
expense of $636,000 and professional fees of $132,000. These
decreases were partially offset by a $460,000 increase in other
real estate owned expense as a result of net realizable value
write-downs, a $70,000 increase in marketing expenses, and a
$53,000 increase in loan collection expense. Excluding credit
related costs, non-interest expense for the third quarter of 2012
decreased $730,000, or 8.6%, from the third quarter of 2011.
Income Tax Expense
During the third quarter of 2012, we recorded income tax expense
of $493,000, equal to an effective tax rate of 28.1%, compared to
$541,000, or an effective tax rate of 28.5%, for the second quarter
of 2012. During the third quarter of 2011, we recorded an income
tax benefit of $84,000 due to the tax sheltering effect of the
income from bank-owned life insurance and other tax credits.
Asset Quality
September 30, June 30, September 30,
2012 2012 2011
------------- ------------- -------------
(Dollars in thousands)
Non-performing loans (NPLs) $ 36,567 $ 51,850 $ 59,335
Other real estate owned 17,447 19,223 17,195
------------- ------------- -------------
Non-performing assets (NPAs) $ 54,014 $ 71,073 $ 76,530
============= ============= =============
Allowance for loan losses (ALL) $ 12,359 $ 12,062 $ 17,186
Provision for loan losses for
the quarter ended 1,160 1,150 2,673
Loan charge-offs (recoveries):
Loan charge-offs $ 1,261 $ 892 $ 2,556
Recoveries (398) (36) (30)
------------- ------------- -------------
Net charge-offs for the quarter
ended $ 863 $ 856 $ 2,526
============= ============= =============
NPLs / total loans 5.19% 7.27% 8.18%
NPAs / total assets 4.83 6.28 6.55
ALL / total loans 1.76 1.69 2.37
ALL / NPLs 33.80 23.26 28.96
Total non-performing loans decreased $15.3 million, or 29.5%, to
$36.6 million at September 30, 2012 from $51.9 million at June 30,
2012. The decrease is primarily due to the transfer back to accrual
status of two commercial real estate non-owner occupied and one
commercial real estate owner occupied A-Note troubled debt
restructurings totaling $9.8 million, a $1.7 million paydown of a
non-accrual commercial participation loan, two commercial real
estate loans transferred to other real estate owned totaling $5.6
million, and gross loan charge-offs totaling $1.0 million.
Partially offsetting these decreases, commercial loans transferred
to non-accrual status during the quarter totaled $3.1 million and
retail loans transferred totaled $1.2 million. Of the total
non-accrual loans at September 30, 2012, $3.9 million, or 10.5%,
are current and performing in accordance with their loan
agreements. The ratio of non-performing loans to total loans
decreased to 5.19% at September 30, 2012 from 7.27% and 8.18%,
respectively, at June 30, 2012 and September 30, 2011.
The provision for loan losses was stable at $1.16 million for
the third quarter of 2012 compared to $1.15 million for the second
quarter of 2012 and decreased significantly from $2.67 million for
the third quarter of 2011.
The ratio of the allowance for loan losses to total loans
increased to 1.76% at September 30, 2012 compared to 1.69% at June
30, 2012 primarily due to a slight increase in the allowance for
loan losses and a decrease in total loans. 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 $12.3
million recorded through September 30, 2012 on $24.8 million (net
of charge-offs) of non-performing collateral dependent loans. At
September 30, 2012, the ratio of the allowance for loan losses to
non-performing loans, excluding the $24.8 million of non-performing
collateral dependent loans with partial charge-offs, improved to
105.3% from 62.8% at June 30, 2012.
During the third quarter of 2012, we transferred three loan
relationships to other real estate owned totaling $5.8 million and
sold 15 other real estate owned properties aggregating $6.5 million
resulting in net gain on sale of $425,000. 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 $1.2 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.
9/30/2012 6/30/2012 9/30/2011
---------- ---------- ----------
(Dollars in thousands)
Assets:
Total assets $1,118,681 $1,132,094 $1,168,481
Interest-bearing deposits 76,972 51,687 84,344
Investment securities 215,988 240,590 232,804
Loans receivable, net of unearned fees 703,907 713,596 725,467
Liabilities and Equity:
Total liabilities $1,010,622 $1,027,497 $1,053,726
Deposits 951,061 967,154 986,441
Borrowed funds 50,018 51,306 56,115
Shareholders' equity 108,059 104,597 114,755
Loans Receivable
9/30/2012 6/30/2012 9/30/2011
--------------- --------------- ---------------
% of % of % of
Amount Total Amount Total Amount Total
-------- ----- -------- ----- -------- -----
(Dollars in thousands)
Commercial loans:
Commercial and
industrial $ 93,794 13.3% $ 89,479 12.6% $ 83,569 11.5%
Commercial real estate
- owner occupied 96,991 13.8 102,149 14.3 100,244 13.8
Commercial real estate
- non-owner occupied 178,621 25.4 184,284 25.8 193,267 26.7
Commercial real estate
- multifamily 76,549 10.9 76,647 10.7 70,129 9.7
Commercial construction
and land development 21,935 3.1 23,353 3.3 22,635 3.1
Commercial
participations 5,671 .8 6,453 .9 16,739 2.3
-------- ----- -------- ----- -------- -----
Total commercial
loans 473,561 67.3 482,365 67.6 486,583 67.1
Retail loans:
One-to-four family
residential 178,280 25.2 177,830 24.9 181,025 25.0
Home equity lines of
credit 47,605 6.8 49,476 6.9 53,953 7.4
Retail construction and
land development 1,778 .3 1,518 .2 1,299 .2
Other 3,238 .5 2,724 .5 3,007 .4
-------- ----- -------- ----- -------- -----
Total retail loans 230,901 32.8 231,548 32.5 239,284 33.0
-------- ----- -------- ----- -------- -----
Total loans
receivable 704,462 100.1 713,913 100.1 725,867 100.1
Net deferred loan
fees (555) (.1) (317) (.1) (400) (.1)
-------- ----- -------- ----- -------- -----
Total loans
receivable, net
of unearned fees $703,907 100.0% $713,596 100.0% $725,467 100.0%
======== ===== ======== ===== ======== =====
Total loans receivable decreased $9.7 million at September 30,
2012 from June 30, 2012 primarily due to repayments totaling $21.1
million, sales of one-to-four family loans totaling $17.5 million,
transfers to other real estate owned totaling $5.8 million, and
gross charge-offs of $1.3 million. Partially offsetting these
decreases, loan fundings during the three months ended September
30, 2012 totaled $37.3 million, a 19.2% increase from $31.3 million
for the three months ended June 30, 2012.
At September 30, 2012, our total commercial loans outstanding
that were originated prior to January 1, 2008 (Pre-1/1/08)
decreased to $172.3 million, or 36.4% of total commercial loans
outstanding compared to $187.9 million, or 38.9%, at June 30, 2012
and $202.6 million, or 42.8%, at December 31, 2011. Please refer to
our Annual Report on Form 10-K for the year ended December 31, 2011
for a more detailed discussion of our Pre-1/1/08 commercial
portfolio.
During the third quarter of 2012, we sold $17.5 million of
conforming one-to-four family fixed-rate mortgage loans into the
secondary market and recorded a gain on sale of $327,000 compared
to loan sales and gains on sale of $3.2 million and $66,000,
respectively, in the third quarter of 2011.
Deposits
9/30/2012 6/30/2012 9/30/2011
-------------- -------------- --------------
% of % of % of
Amount Total Amount Total Amount Total
-------- ----- -------- ----- -------- -----
(Dollars in thousands)
Checking accounts:
Non-interest bearing $ 98,723 10.4% $ 97,435 10.1% $106,476 10.8%
Interest-bearing 177,458 18.6 179,842 18.5 172,007 17.4
Money market accounts 179,400 18.9 182,522 18.9 185,906 18.9
Savings accounts 146,617 15.4 144,705 15.0 132,378 13.4
-------- ----- -------- ----- -------- -----
Core deposits 602,198 63.3 604,504 62.5 596,767 60.5
Certificates of deposit
accounts 348,863 36.7 362,650 37.5 389,674 39.5
-------- ----- -------- ----- -------- -----
Total deposits $951,061 100.0% $967,154 100.0% $986,441 100.0%
======== ===== ======== ===== ======== =====
During the first quarter of 2012, we implemented our High
Performance Checking (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. 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.
Borrowed Funds
9/30/2012 6/30/2012 9/30/2011
---------- ---------- ----------
(Dollars in thousands)
Short-term variable-rate repurchase
agreements $ 10,430 $ 11,540 $ 16,175
FHLB advances 39,588 39,766 39,940
---------- ---------- ----------
Total borrowed funds $ 50,018 $ 51,306 $ 56,115
========== ========== ==========
Borrowed funds decreased slightly during the third quarter of
2012 primarily due to decreased borrowings from repurchase
agreements, which will fluctuate depending on our client's
liquidity levels.
Shareholders' Equity
Shareholders' equity at September 30, 2012 increased to $108.1
million, or 9.66% of assets, from $104.6 million, or 9.24% of
assets, at June 30, 2012. The increase was primarily due to net
income of $1.3 million for the quarter and a decrease in
accumulated other comprehensive loss, net of tax, of $2.4 million
during the quarter. Shareholders' equity also increased from $103.2
million, or 8.99% of assets, at December 31, 2011 due to net income
of $3.1 million and a decrease in accumulated other comprehensive
loss, net of tax, of $1.7 million for the nine months ended
September 30, 2012.
At September 30, 2012, the Bank's Tier 1 core capital ratio
increased to 8.85% from 8.56% at June 30, 2012 and the total
risk-based capital ratio increased to 13.82% from 13.35% at June
30, 2012. Both the Tier 1 core capital ratio and the total
risk-based capital ratio exceeded "minimum" and "well capitalized"
regulatory capital requirements at September 30, 2012 and June 30,
2012.
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. 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, 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 Nine Months Ended
----------------------------------- -----------------------
September September September September
30, June 30, 30, 30, 30,
2012 2012 2011 2012 2011
----------- ----------- ----------- ----------- -----------
Interest income:
Loans
receivable $ 8,237 $ 8,243 $ 8,881 $ 24,866 $ 26,708
Investment
securities 1,923 2,186 1,794 6,239 5,879
Other interest-
earning assets 88 103 80 284 401
----------- ----------- ----------- ----------- -----------
Total interest
income 10,248 10,532 10,755 31,389 32,988
Interest
expense:
Deposits 1,102 1,294 1,602 3,786 5,272
Borrowed funds 297 294 294 887 813
----------- ----------- ----------- ----------- -----------
Total interest
expense 1,399 1,588 1,896 4,673 6,085
----------- ----------- ----------- ----------- -----------
Net interest
income 8,849 8,944 8,859 26,716 26,903
Provision for
loan losses 1,160 1,150 2,673 3,360 4,572
----------- ----------- ----------- ----------- -----------
Net interest
income after
provision for
loan losses 7,689 7,794 6,186 23,356 22,331
Non-interest
income:
Deposit related
fees 1,662 1,578 1,675 4,709 4,708
Commission
income 55 75 100 187 223
Net gain on
sale of:
Investment
securities 194 305 758 917 1,450
Loans held for
sale 327 200 66 686 124
Other real
estate owned 425 86 266 464 2,499
Income from
bank-owned
life insurance 151 162 216 853 632
Other income 218 237 229 683 663
----------- ----------- ----------- ----------- -----------
Total non-
interest
income 3,032 2,643 3,310 8,499 10,299
Non-interest
expense:
Compensation
and employee
benefits 4,182 4,467 4,818 13,362 15,104
Net occupancy
expense 697 679 706 2,084 2,141
FDIC insurance
premiums and
regulatory
assessments 475 490 481 1,453 1,638
Data processing 462 445 424 1,345 1,307
Furniture and
equipment
expense 417 468 436 1,342 1,353
Marketing 283 322 213 1,009 670
Professional
fees 177 198 309 628 1,031
Other real
estate owned
related
expense, net 1,074 316 614 2,008 3,217
Loan collection
expense 170 119 117 407 470
Severance and
retirement
compensation
expense -- -- -- 876 --
Other general
and
administrative
expenses 1,032 1,038 1,068 3,204 3,293
----------- ----------- ----------- ----------- -----------
Total non-
interest
expense 8,969 8,542 9,186 27,718 30,224
----------- ----------- ----------- ----------- -----------
Income before
income tax
expense
(benefit) 1,752 1,895 310 4,137 2,406
Income tax
expense
(benefit) 493 541 (84) 1,034 307
----------- ----------- ----------- ----------- -----------
Net income $ 1,259 $ 1,354 $ 394 $ 3,103 $ 2,099
=========== =========== =========== =========== ===========
Basic earnings
per share $ .12 $ .13 $ .04 $ .29 $ .20
Diluted earnings
per share .12 .13 .04 .29 .20
Weighted-average
common and
common share
equivalents
outstanding:
Basic 10,747,974 10,750,313 10,693,724 10,732,118 10,678,788
Diluted 10,806,861 10,806,555 10,753,386 10,786,679 10,739,969
CFS BANCORP, INC.
Consolidated Statements of Condition (Unaudited)
(Dollars in thousands)
September 30, June 30, December 31, September 30,
2012 2012 2011 2011
------------- ---------- ------------ -------------
ASSETS
Cash and amounts due
from depository
institutions $ 31,611 $ 33,846 $ 32,982 $ 33,421
Interest-bearing
deposits 76,972 51,687 59,090 84,344
------------- ---------- ------------ -------------
Cash and cash
equivalents 108,583 85,533 92,072 117,765
Investment securities
available-for-sale, at
fair value 202,498 226,625 234,381 218,417
Investment securities
held-to-maturity, at
cost 13,490 13,965 16,371 14,387
Investment in Federal
Home Loan Bank stock,
at cost 6,188 6,188 6,188 8,638
Loans receivable, net
of unearned fees 703,907 713,596 711,226 725,467
Allowance for loan
losses (12,359) (12,062) (12,424) (17,186)
------------- ---------- ------------ -------------
Net loans 691,548 701,534 698,802 708,281
Loans held for sale 2,199 610 1,124 839
Investment in bank-
owned life insurance 36,586 36,435 36,275 36,095
Accrued interest
receivable 2,697 2,801 3,011 2,908
Other real estate owned 17,447 19,223 19,091 17,195
Office properties and
equipment 16,121 16,225 17,539 18,053
Net deferred tax assets 13,801 16,281 16,273 17,708
Prepaid expenses and
other assets 7,523 6,674 7,823 8,195
------------- ---------- ------------ -------------
Total assets $ 1,118,681 $1,132,094 $ 1,148,950 $ 1,168,481
============= ========== ============ =============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Deposits $ 951,061 $ 967,154 $ 977,424 $ 986,441
Borrowed funds 50,018 51,306 54,200 56,115
Advance payments by
borrowers for taxes
and insurance 4,075 4,243 4,275 5,868
Other liabilities 5,468 4,794 9,803 5,302
------------- ---------- ------------ -------------
Total liabilities 1,010,622 1,027,497 1,045,702 1,053,726
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; 10,876,151,
10,867,357,
10,874,668, and
10,877,015 shares
outstanding 234 234 234 234
Additional paid-in
capital 187,254 187,379 187,030 187,023
Retained earnings 75,461 74,420 72,683 85,365
Treasury stock, at
cost; 12,547,155,
12,555,949,
12,548,638, and
12,546,291 shares (154,695) (154,824) (154,773) (154,766)
Accumulated other
comprehensive loss,
net of tax (195) (2,612) (1,926) (3,101)
------------- ---------- ------------ -------------
Total shareholders'
equity 108,059 104,597 103,248 114,755
------------- ---------- ------------ -------------
Total liabilities
and
shareholders'
equity $ 1,118,681 $1,132,094 $ 1,148,950 $ 1,168,481
============= ========== ============ =============
CFS BANCORP, INC.
Selected Financial Data (Unaudited)
(Dollars in thousands, except per share data)
September 30, June 30, December 31, September 30,
2012 2012 2011 2011
------------- ----------- ------------ -------------
Book value per
share $ 9.94 $ 9.62 $ 9.49 $ 10.55
Shareholders'
equity to total
assets 9.66% 9.24% 8.99% 9.82%
Tier 1 core capital
ratio (Bank only) 8.85 8.56 8.26 8.87
Total risk-based
capital ratio
(Bank only) 13.82 13.35 12.65 13.57
Common shares
outstanding 10,876,151 10,867,357 10,874,668 10,877,015
Employees (FTE) 259 261 303 311
Number of full
service banking
centers 20 20 22 22
Three Months Ended Nine Months Ended
-------------------------------- ---------------------
September September September September
30, June 30, 30, 30, 30,
2012 2012 2011 2012 2011
---------- ---------- ---------- ---------- ----------
Average Balance Data:
Total assets $1,123,777 $1,162,099 $1,150,149 $1,148,290 $1,140,791
Loans receivable,
net of unearned
fees 712,663 705,410 730,524 708,942 730,242
Investment
securities 234,395 252,698 239,655 248,606 248,905
Interest-earning
assets 1,014,769 1,052,039 1,036,064 1,037,445 1,025,231
Deposits 956,939 996,741 972,486 981,232 971,727
Interest-bearing
deposits 859,051 890,814 871,637 879,427 872,912
Non-interest
bearing deposits 97,888 105,927 100,849 101,805 98,815
Interest-bearing
liabilities 909,841 941,398 922,049 930,935 915,870
Shareholders'
equity 106,145 103,827 116,408 104,755 115,199
Performance Ratios
(annualized):
Return on average
assets .45% .47% .14% .36% .25%
Return on average
equity 4.72 5.25 1.34 3.96 2.44
Average yield on
interest-earning
assets 4.02 4.03 4.12 4.04 4.30
Average cost of
interest-bearing
liabilities .61 .68 .82 .67 .89
Interest rate
spread 3.41 3.35 3.30 3.37 3.41
Net interest margin 3.47 3.42 3.39 3.44 3.51
Non-interest
expense to average
assets 3.18 2.96 3.17 3.22 3.54
Efficiency ratio
(1) 76.74 75.71 80.50 80.82 84.54
Cash dividends
declared per share $ .02 $ -- $ .01 $ .03 $ .03
Market price per
share of common
stock for the period
ended:
Close $ 5.46 $ 4.98 $ 4.34 $ 5.46 $ 4.34
High 5.75 5.96 5.70 6.29 5.90
Low 4.42 4.30 4.34 4.30 4.34
---------------------
(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
-----------------------------------------
September 30, June 30, September 30,
2012 2012 2011
------------- ----------- -------------
Income before income taxes $ 1,752 $ 1,895 $ 310
Provision for loan losses 1,160 1,150 2,673
------------- ----------- -------------
Pre-tax, pre-provision earnings 2,912 3,045 2,983
Add back (subtract):
Net gain on sale of investment
securities (194) (305) (758)
Net gain on sale of other real
estate owned (425) (86) (266)
Other real estate owned related
expense, net 1,074 316 614
Loan collection expense 170 119 117
------------- ----------- -------------
Pre-tax, pre-provision earnings,
as adjusted $ 3,537 $ 3,089 $ 2,690
============= =========== =============
Pre-tax, pre-provision earnings,
as adjusted, to average assets
(annualized) 1.25% 1.07% .93%
============= =========== =============
Nine Months Ended
----------------------------
September 30, September 30,
2012 2011
------------- -------------
Income before income taxes $ 4,137 $ 2,406
Provision for loan losses 3,360 4,572
------------- -------------
Pre-tax, pre-provision earnings 7,497 6,978
Add back (subtract):
Net gain on sale of investment securities (917) (1,450)
Net gain on sale of other real estate owned (464) (2,499)
Other real estate owned related expense, net 2,008 3,217
Loan collection expense 407 470
Severance and retirement compensation
expense 876 --
------------- -------------
Pre-tax, pre-provision earnings, as adjusted $ 9,407 $ 6,716
============= =============
Pre-tax, pre-provision earnings, as adjusted,
to average assets (annualized) 1.09% .79%
============= =============
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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