EX-99.1 2 exhibit99-1_073108.htm EXHIBIT 99.1 073108 exhibit99-1_073108.htm
 
                                                                                                                THOMAS F. PRISBY, CHAIRMAN
CFS Bancorp, Inc.
 707 Ridge Road  Munster, Indiana 46321



July 31, 2008
FOR IMMEDIATE RELEASE

CONTACT:    Thomas F. Prisby, Chairman of the Board and Chief Executive Officer
219-836-2960

CFS Bancorp, Inc. Announces Financial Results for the Second Quarter 2008

MUNSTER, IN – July 31, 2008 – CFS Bancorp, Inc. (NASDAQ: CITZ) (the Company), the parent of Citizens Financial Bank (the Bank), today reported a net loss of $2.3 million for the second quarter of 2008, or $(0.22) per share, as a result of a $7.2 million provision for losses on loans and a $582,000 other-than-temporary impairment charge related to FNMA (Fannie Mae) and FHLMC (Freddie Mac) preferred stock which combined reduced net income by $4.9 million and reduced diluted earnings per share by $0.46.  Net income for the second quarter of 2007 totaled $2.3 million with diluted earnings per share of $0.21.  For the six months ended June 30, 2008, the Company’s net loss was $516,000 resulting in a loss per share of $0.05 compared to net income of $3.6 million and diluted earnings per share of $0.33 for the 2007 period.
 
 The Company’s second quarter of 2008 highlights included the following:

·  
risk-based capital ratio improved to 14.48% from 14.06%;
·  
ratio of allowance for losses on loans to total loans increased to 1.43% from 1.09%;
·  
net interest margin benefited from lower interest rates and expanded to 3.26% from 3.21%;
·  
provision for the allowance for losses on loans increased to $7.2 million in response to deteriorating collateral values underlying non-performing loans; and
·  
impairments on other-than-temporarily impaired securities totaled $582,000 related to investments in Fannie Mae and Freddie Mac preferred stock.

Chairman’s Comments

“We are pleased that our capital and liquidity remain strong, demand for commercial and industrial loans is continuing to increase and our branching expansion continues at a measured pace; however, our quarterly results are reflective of the extraordinary market conditions created by the lack of activity in housing and residential land development,” said Thomas F. Prisby, Chairman and CEO.  “Like our peers, we are facing an increase in non-performing loans and provisions for losses on loans resulting from deteriorating real estate valuations.  We have undertaken a review of our non-performing construction and land development loan portfolio which resulted in partial charge-offs of specific collateral dependent loans due to lower collateral values.  While we believe our allowance for losses on loans and impairment write-downs are adequate at this time, there can be no assurance that market conditions will not further deteriorate requiring us to make additional loss provisions.  While some in the industry are raising capital to support the deteriorating credit conditions in their loan portfolios, our capital position remains strong as our total risk-based and Tier 1 capital ratios were 14.48% and 10.32%, respectively, which are well above the regulatory minimum requirements of 10% and 5% to be deemed
CFS Bancorp, Inc. ­– Page 2 of 10
 
 “well-capitalized.”  We anticipate that our strong capital ratios will allow us to continue to pay dividends in the future at the current dividend level.”
 
Mr. Prisby continued, “During the second quarter, we added eight new Business Bankers led by recently hired Executive Vice President – Business Banking, Dale Clapp, to accelerate the diversification of our loan portfolio and to increase our business deposits.  This group has 154 years of combined banking experience in our existing markets and will focus on building our market presence within the Business Banking segment.  Since joining our team, our commercial and industrial loan pipeline has increased to $21.3 million at June 30, 2008.  We look forward to future growth throughout 2008 in business loans and deposits as a result of the new additions.”

Net Interest Income

The net interest margin increased 5 basis points to 3.26% for the second quarter of 2008 compared to 3.21% for the first quarter of 2008 and increased 25 basis points compared to 3.01% for the second quarter of 2007.  The Company’s net interest income increased to $8.7 million for the second quarter of 2008 compared to $8.6 million for the first quarter of 2008 and $8.6 million for the second quarter of 2007.  The increase was primarily a result of a decrease in the Company’s cost of funds.
 
Interest income decreased to $15.0 million for the second quarter of 2008 compared to $16.3 million for the first quarter of 2008 and $18.5 million for the second quarter of 2007.  Interest income during the second quarter of 2008 was negatively impacted by the increase in non-performing loans and the downward repricing of our adjustable rate loans.  The decrease from the first quarter of 2008 was primarily related to a decrease of 48 basis points in the weighted-average yield earned on interest-earning assets.  The decrease from the second quarter of 2007 was a combination of a 7.0% decrease in the average balance of interest-earning assets and a decrease of 80 basis points in the weighted-average yield earned on interest-earning assets resulting from lower interest rates.
 
Interest expense decreased 18.2% to $6.3 million for the second quarter of 2008 from $7.7 million for the first quarter of 2008 and 35.7% from $9.8 million for the second quarter of 2007.  The decrease from the first quarter of 2008 was primarily related to a 59 basis point decrease in the Company’s weighted-average cost of interest-bearing liabilities.  The Company’s deposits and short-term borrowings were positively impacted by decreases in interest rates during 2008.  The decrease from the second quarter of 2007 was the result of a 7.1% decrease in the average balances of interest-bearing liabilities and a 119 basis point decrease in the Company’s weighted-average cost of interest-bearing liabilities resulting from lower interest rates and decreases in the amortization of the deferred premium on the early extinguishment of Federal Home Loan Bank (FHLB) debt.
 
The Company’s cost of borrowings decreased to 4.88% for the second quarter of 2008 compared to 5.25% for the first quarter of 2008 and 6.73% for the second quarter of 2007.  The decreases were primarily the result of decreases in the amortization of the deferred premium on the early extinguishment of FHLB debt which is included in total interest expense on borrowings, and the lower average balances of FHLB debt.  The premium amortization adversely impacted the Company’s net interest margin by 17 basis points, 20 basis points and 44 basis points, respectively, for the second quarter of 2008, the first quarter of 2008 and the second quarter of 2007.  The Company’s interest expense on borrowings is detailed in the tables below for the periods indicated.
CFS Bancorp, Inc. ­– Page 3 of 10
 
         
Change from
  
   
Three Months Ended
    
June 30, 2007
  
 
June 30,
    
March 31,
    
June 30,
    
to June 30, 2008
  
   
2008
    
2008
    
2007
    
 $
       %  
   
(Dollars in thousands)
  
Interest expense on short-term borrowings
at contractual rates                                                 
   $  124     $ 114     $ 197     $  (73 )     (37.1 )%
Interest expense on FHLB borrowings at
contractual rates                                                 
       1,208         1,420       1,754       (546 )     (31.1 )
Amortization of deferred premium
     449       527       1,276       (827 )     (64.8 )
Total interest expense on borrowings
   $ 1,781     $ 2,061     $ 3,227     $ (1,446 )     (44.8 )

The interest expense related to the premium amortization on the early extinguishment of debt continues to have a smaller impact on the Company’s weighted-average cost of interest-bearing liabilities and is expected to be $270,000, $206,000, $72,000 and $61,000 before taxes in the quarters ending September 30, and December 31, 2008 and March 31, and June 30, 2009, respectively.

Non-Interest Income and Non-Interest Expense
 
The Company’s non-interest income for the first quarter of 2008 decreased to $2.0 million from $2.5 million for the first quarter of 2008 and $2.7 million for the second quarter of 2007.  The decrease during the second quarter of 2008 was primarily the result of a $582,000 other-than-temporary impairment charge on investments in Fannie Mae and Freddie Mac preferred stock.  At June 30, 2008, the Company’s book value in these securities after the impairment charge was $3.7 million.
 
    Non-interest expense for the second quarter of 2008 decreased to $7.7 million compared to $8.0 million for the first quarter of 2008 and $8.1 million for the second quarter of 2007.  Compensation and employee benefits expense for the second quarter included a $283,000 decrease in expense related to the Company’s deferred compensation plans resulting from a decrease in the Company’s stock price at June 30, 2008 compared to prior periods.  In addition, the Company’s office and premises expense decreased $125,000 from the first quarter of 2008 as a result of the reduced office and premises maintenance including snow removal.  Non-interest expense decreased from the second quarter of 2007 primarily as a result of a decrease in compensation and employee benefits expense including a $226,000 decrease in deferred compensation as discussed above.  In addition, professional fees during the second quarter of 2008 decreased by $178,000 as a result of the absence of consulting fees incurred during the second quarter of 2007 related to the Company’s customer-centric relationship management program and legal fees associated with the Company’s modification of its benefit plans during 2007.
 
The Company’s efficiency ratio for the second quarter of 2008 was 72.2% compared to 72.5% for the first quarter of 2008 and 71.2% for the second quarter of 2007.  The Company’s core efficiency ratios were 65.8%, 69.7% and 64.0% for the same periods.  The Company’s core efficiency ratio for the second quarter of 2008 was positively impacted by lower non-interest expense.  This positive impact was partially offset by the adjustment of lower amortization of the deferred premium on the early extinguishment of debt when compared to the prior periods.  The efficiency ratio and the core efficiency ratio calculations are presented in the last table of this press release.

      Management has historically used an efficiency ratio that is a non-GAAP financial measure of operating expense control and operating efficiency.  The efficiency ratio is typically defined as the ratio of non-interest expense to the sum of non-interest income and net interest income.  Many financial
CFS Bancorp, Inc. ­– Page 4 of 10
 
institutions, in calculating the efficiency ratio, adjust non-interest income (as calculated under GAAP) to exclude certain component elements, such as gains or losses on sales of securities and assets.  Management follows this practice to calculate our core efficiency ratio and utilizes this non-GAAP measure in its analysis of the Company’s performance.  The core efficiency ratio is different from the GAAP-based efficiency ratio.  The GAAP-based measure is calculated using non-interest expense, net interest income and non-interest income as presented on the consolidated statements of income.
 
   The Company’s core efficiency ratio is calculated as non-interest expense divided by the sum of net interest income, excluding the deferred premium amortization related to the early extinguishment of debt, and non-interest income, adjusted for gains or losses on the sale of securities and other assets.  Management believes that the core efficiency ratio enhances investors’ understanding of the Company’s business and performance.  The measure is also believed to be useful in understanding the Company’s performance trends and to facilitate comparisons with the performance of others in the financial services industry.  Management further believes the presentation of the core efficiency ratio provides useful supplemental information, a clearer understanding of the Company’s financial performance, and better reflects the Company’s core operating activities.
 
The risks associated with utilizing operating measures (such as the efficiency ratio) are that various persons might disagree as to the appropriateness of items included or excluded in these measures and that other companies might calculate these measures differently.  Management of the Company compensates for these limitations by providing detailed reconciliations between GAAP information and its core efficiency ratio within the last table of this press release; however, these disclosures should not be considered as an alternative to GAAP.
 
Asset Quality

The Company’s provision for losses on loans increased to $7.2 million for the second quarter of 2008 compared to $742,000 for the first quarter of 2008 and $126,000 for the second quarter of 2007.  The increased provision for the second quarter reflects deteriorating market conditions and lack of activity in housing and land development.  Net charge-offs for the second quarter of 2008 totaled $5.1 million which included partial charge-offs of $2.7 million related to three construction and land development loans that previously totaled $13.1 million in the aggregate and $2.4 million on a multi-tenant commercial real estate loan that previously totaled $3.1 million.
 
The Company’s non-performing assets totaled $35.7 million at June 30, 2008, $30.8 million at December 31, 2007 and $29.8 million at June 30, 2007.  Non-performing assets increased during the six months ended June 30, 2008 primarily due to the transfer to non-accrual status of three impaired construction and land development loans totaling $9.9 million in the aggregate.  This increase was partially offset by the aforementioned charge-offs.  At June 30, 2008, the Company’s non-performing construction and land development loans represented 68.1% of its total non-performing loans.  The ratio of total non-performing assets to total assets was 3.24%, 2.67% and 2.48%, respectively at June 30, 2008, December 31, 2007 and June 30, 2007.
 
The Company’s allowance for losses on loans was $10.4 million at June 30, 2008, $8.0 million at December 31, 2007 and $10.6 million at June 30, 2007.  The allowance for losses on loans to total loans increased to 1.43% at June 30, 2008 from 1.01% and 1.31%, respectively, at December 31, 2007 and June 30, 2007.  The decrease in the allowance from June 30, 2007 related to the charge-off of $4.0 million of impairment reserves related to $12.8 million of loans sold during the fourth quarter 2007
CFS Bancorp, Inc. ­– Page 5 of 10
 
which was partially offset by the increase in the provision during the second quarter of 2008 as previously discussed.  The Company maintains the allowance for losses on loans at a level that management believes is sufficient to absorb credit losses inherent in the loan portfolio.  The allowance for losses on loans represents management’s estimate of inherent losses existing in the loan portfolio that are both probable and reasonable to estimate at each balance sheet date and is based on its review of available and relevant information.  Management believes that at June 30, 2008 the allowance for losses on loans was adequate based on its recent review of specific loans, historical loss experience, levels of delinquencies, economic conditions and the review of other available and relevant information.

Balance Sheet
 
At June 30, 2008, the Company’s total assets were $1.10 billion compared to $1.15 billion at December 31, 2007.
 
The Company’s loans receivable decreased 8.3% to $726.9 million at June 30, 2008 from $793.1 million at December 31, 2007.  During the second quarter of 2008, the Company had total loan fundings of $50.0 million which were offset by $88.1 million of loan repayments and sales.  Of the total loan repayments, over $47.4 million were paydowns of 13 large commercial real estate loans and $15.6 million were paydowns of two loans to local municipalities.  The Company continues to shift its focus from large dollar loans collateralized by commercial real estate and commercial real estate participations to commercial and industrial loans which are secured by business assets.  In addition, the Company also reduced loans receivable through $5.6 million of charge-offs for the six months ended June 30, 2008.
 
Securities available-for-sale totaled $262.0 million at June 30, 2008 compared to $224.6 million at December 31, 2007.  During the first quarter of 2008, the Company took advantage of a steepening yield curve and market imbalances by borrowing $30.0 million and investing the funds in higher yielding securities.
 
Deposits decreased to $848.4 million at June 30, 2008 from $863.3 million at December 31, 2007.  The decrease was primarily a result of a $24.9 million decrease in certificates of deposit due to the managed run-off of single-service high-rate certificates.  Partially offsetting this decrease was an increase of $19.8 million in money market deposits which was primarily related to an increase in retail money market accounts.
 
The Company’s borrowed money decreased to $113.1 million at June 30, 2008 from $135.5 million at December 31, 2007.  During the second quarter of 2008, the Company repaid $40.0 million of maturing FHLB borrowings utilizing its excess liquidity from loan repayments.  The Company’s borrowed money consisted of the following as of the dates indicated:

 
   
June 30, 
2008
    
December 31,
2007
  
   
(Dollars in thousands)
  
Short-term variable-rate borrowings and repurchase
agreements
   $ 25,785     $ 24,014  
Gross FHLB borrowings
     87,995     113,072  
Unamortized deferred premium
     (651 )     (1,627 )
Total borrowed money
   $ 113,129     $ 135,459  

CFS Bancorp, Inc. ­– Page 6 of 10
 
      Stockholders’ equity at June 30, 2008 was $124.8 million compared to $130.4 million at December 31, 2007.  The decrease during the six months ended June 30, 2008 was primarily due to:

·  
repurchases of shares of the Company’s common stock during 2008 totaling $3.0 million;
·  
cash dividends declared during 2008 totaling $2.5 million;
·  
a decrease in accumulated other comprehensive income of $803,000; and
·  
a net loss of $516,000.

During the six months ended June 30, 2008, the Company repurchased 208,113 shares of its common stock at an average price of $14.40 per share, of which 81,388 were purchased pursuant to the repurchase plan approved in March 2008.  At June 30, 2008, the Company had 448,612 shares remaining to be repurchased under this plan.  Since its initial public offering, the Company has repurchased an aggregate of 14,054,160 shares of its common stock at an average price of $12.23 per share.
 
The regulatory capital ratios of the Bank continued to exceed all regulatory requirements.  At June 30, 2008, the Bank remained “well-capitalized” under the Office of Thrift Supervision’s regulatory capital guidelines with a total capital to risk-weighted assets equal to 14.48% compared to 13.93% at December 31, 2007.
 
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 that provides business and personal banking services and currently operates 22 offices throughout adjoining markets in Chicago’s Southland and Northwest Indiana. The Company maintains a website at www.citz.com.

#   #   #

This press release contains certain forward-looking statements and information relating to the Company that is based on the beliefs of management as well as assumptions made by and information currently available to management.  These forward-looking statements include but are not limited to statements regarding interest rate environment, credit environment, earnings and per share data, dividends, efficiency ratio levels, loan and deposit growth, diversifying the loan portfolio, non-performing asset levels, interest on loans, asset yields and cost of funds, net interest income, net interest margin, effect of the prime lending rate, non-interest income, non-interest expense and the expected effect of amortization of deferred premium on the FHLB debt.  In addition, the words “anticipate,” “believe,” “estimate,” “expect,” “indicate,” “intend,” “should,” and similar expressions, or the negative thereof, as they relate to the Company or the Company’s management, are intended to identify forward-looking statements.  Such statements reflect the current views of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions.  One or more of these risks may vary materially from those described herein as anticipated, believed, estimated, expected or intended.  The Company does not intend to update these forward-looking statements.

#   #   #
 
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA FOLLOW
CFS Bancorp, Inc. ­– Page 7 of 10
 
CFS BANCORP, INC.
Highlights (Unaudited)
(Dollars in thousands, except per share data)
                                 
 
  
Three Months Ended
    
Six Months Ended
  
 EARNINGS HIGHLIGHTS AND PERFORMANCE RATIOS (1)  
June 30, 2008
    
March 31, 2008
    
June 30, 2007
    
June 30, 2008
    
June 30, 2007
  
Net income/(loss)
     $ (2,295 )   $ 1,779     $ 2,281     $ (516 )   $ 3,594  
Basic earnings/(loss) per share
       (0.22 )     0.17       0.22       (0.05 )     0.34  
Diluted earnings/(loss) per share
       (0.22 )     0.17       0.21       (0.05 )     0.33  
Cash dividends declared per share
       0.12       0.12       0.12       0.24       0.24  
Return on average assets
       (0.80 )%     0.62 %     0.74 %     (0.09 )%     0.58 %
Return on average equity
       (7.08 )     5.41       7.05       (0.79 )     5.55  
Average yield on interest-earning assets
     5.64       6.12       6.44       5.88       6.43  
Average cost on interest-bearing liabilities
     2.69       3.28       3.88       2.98       3.89  
Interest rate spread
       2.95       2.84       2.56       2.90       2.54  
Net interest margin
       3.26       3.21       3.01       3.24       2.97  
Average equity to average assets (2)
       11.29       11.38       10.56       11.34       10.50  
Average interest-earning assets
                                          
to average interest-bearing liabilities (2)
       113.17       112.68       113.01       112.92       112.66  
Non-interest expense to average assets
       2.68       2.78       2.63       2.73       2.81  
Efficiency ratio (3)
       72.17       72.53       71.21       72.35       77.17  
Market price per share of common stock
                                        
for the period ended:
Closing
   $ 11.79     $ 14.37     $ 14.55     $ 11.79     $ 14.55  
 
High
     14.93       14.70       15.12       14.93       15.12  
 
Low
     11.42       13.33       14.53       11.42       14.48  
                                           
STATEMENT OF CONDITION HIGHLIGHTS
    
June 30,
    
March 31,
    
 December 31,
 
      
June 30,
  (at period end)            
  2008 
      
2008 
      
2007 
      
2007 
  
Total assets
             $ 1,102,773     $ 1,194,076     $ 1,150,278     $ 1,202,892  
Loans receivable, net of unearned fees
               726,858       765,476       793,136       808,132  
Total deposits
               848,439       879,543       863,272       887,814  
Total stockholders' equity
               124,776       131,791       130,414       128,290  
Book value per common share
               11.70       12.34       12.18       11.83  
Non-performing loans
               34,670       30,259       29,600       29,172  
Non-performing assets
               35,742       31,297       30,762       29,804  
Allowance for losses on loans
               10,403       8,347       8,026       10,624  
Non-performing loans to total loans
               4.77 %     3.95 %     3.73 %     3.61 %
Non-performing assets to total assets
               3.24       2.62       2.67       2.48  
Allowance for losses on loans to non-performing loans
       30.01       27.59       27.11       36.42  
Allowance for losses on loans to total loans
             1.43       1.09       1.01       1.31  
                                           
Employees (FTE)
               307       297       303       322  
Branches and offices
               22       22       22       22  
                                           
     
Three Months Ended
    
Six Months Ended
  
AVERAGE BALANCE DATA
    
June 30, 2008
    
March 31, 2008
    
June 30, 2007
    
June 30, 2008
    
June 30, 2007
  
Total assets
     $ 1,154,656     $ 1,161,900     $ 1,230,115     $ 1,158,015     $ 1,243,160  
Loans receivable, net of unearned fees
     743,097       786,877       808,331       764,986       801,132  
Total interest-earning assets
       1,071,384       1,072,273       1,151,726       1,071,827       1,165,475  
Total liabilities
       1,024,238       1,029,654       1,100,252       1,026,683       1,112,681  
Total deposits
       863,865       858,460       894,184       861,163       899,572  
Interest-bearing deposits
       802,249       796,435       829,467       799,343       837,458  
Non-interest bearing deposits
       61,616       62,025       64,717       61,820       62,114  
Total interest-bearing liabilities
       946,712       951,602       1,019,112       949,158       1,034,549  
Stockholders' equity
       130,418       132,246       129,863       131,332       130,479  
(1) Ratios are annualized where appropriate.
                                  
(2) Ratios calculated on average balances for the periods presented.
                                  
(3) See calculations in the last table of this press release.
                                  
 
CFS Bancorp, Inc. ­– Page 8 of 10

CFS BANCORP, INC.
  
Consolidated Statements of Income (Unaudited)
  
(Dollars in thousands, except per share data)
  
                                       
   For the Three Months Ended        For the Six Months Ended
 
June 30, 2008
      
 March 31, 2008
  
   
  
 June 30, 2007
  
   
  
 June 30, 2008
  
  June 30, 2007
Interest income:
                                      
Loans
  $
          11,296
      $
              12,788
      $
          14,404
      $
          24,084
      $
          28,456
  
Securities
  
              3,172
      
                  3,079
      
              3,475
      
              6,251
      
              6,998
  
Other
  
                 564
      
                     447
      
                 605
      
              1,011
      
              1,681
  
Total interest income
  
            15,032
      
                16,314
      
            18,484
      
            31,346
      
            37,135
  
                                       
Interest expense:
                                      
Deposits
  
              4,554
      
                  5,688
      
              6,619
      
            10,242
      
            13,313
  
Borrowings
  
              1,781
      
                  2,061
      
              3,227
      
              3,842
      
              6,660
  
Total interest expense
  
              6,335
      
                  7,749
      
              9,846
      
            14,084
      
            19,973
  
Net interest income
  
              8,697
      
                  8,565
      
              8,638
      
            17,262
      
            17,162
  
Provision for losses on loans
  
              7,172
      
                     742
      
                 126
      
              7,914
      
                 313
  
Net interest income after provision for losses on loans
              1,525
      
                  7,823
      
              8,512
      
              9,348
      
            16,849
  
                                       
Non-interest income:
                                      
Service charges and other fees
  
              1,465
      
                  1,439
      
              1,670
      
              2,904
      
              3,239
  
Card-based fees
  
                 415
      
                     380
      
                 380
      
                 795
      
                 722
  
Commission income
  
                 135
      
                       58
      
                   36
      
                 193
      
                   67
  
Security gains (losses), net
  
               (582
 )    
                       69
      
                   (1
 )     
               (513
 )     
                   10
  
Other assets gains (losses), net
  
                   (3
 )     
                          -
      
                   (1
 )     
                   (3
 )    
                   10
  
Income from bank-owned life insurance
  
                 371
      
                     409
      
                 403
      
                 780
      
                 808
  
Other income
  
                 149
      
                     172
      
                 206
      
                 321
      
                 446
  
Total non-interest income
  
              1,950
      
                  2,527
      
              2,693
      
              4,477
      
              5,302
  
                                       
Non-interest expense:
                                      
Compensation and employee benefits
  
              4,179
      
                  4,336
      
              4,407
      
              8,515
      
              9,662
  
Net occupancy expense
  
                 708
      
                     833
      
                 694
      
              1,541
      
              1,447
  
Furniture and equipment expense
  
                 543
      
                     551
      
                 566
      
              1,094
      
              1,100
  
Data processing
  
                 484
      
                     458
      
                 566
      
                 942
      
              1,129
  
Professional fees
  
                 212
      
                     274
      
                 390
      
                 486
      
                 960
  
Marketing
  
                 178
      
                     208
      
                 190
      
                 386
      
                 401
  
Other general and administrative expenses
  
              1,380
      
                  1,385
      
              1,256
      
              2,765
      
              2,637
  
Total non-interest expense
  
              7,684
      
                  8,045
      
              8,069
      
            15,729
      
            17,336
  
                                       
Income/(loss) before income taxes
  
            (4,209
 )     
                  2,305
      
              3,136
      
            (1,904
 )     
              4,815
  
Income tax expense/(benefit)
  
            (1,914
 )     
                     526
      
                 855
      
            (1,388
 )     
              1,221
  
                                       
Net income/(loss)
  $
          (2,295
 )     $
                1,779
      $
            2,281
      $
             (516
 )     $
            3,594
  
                                       
Per share data:
                                      
Basic earnings/(loss) per share
  $
            (0.22
 )     $
                  0.17
      $
              0.22
      $
            (0.05
 )     $
              0.34
  
Diluted earnings/(loss) per share
  $
            (0.22
 )     $
                  0.17
      $
              0.21
      $
            (0.05
 )     $
              0.33
  
Cash dividends declared per share
  $
             0.12 
     $
                 0.12
      $
              0.12
      $
              0.24 
     $
              0.24
  
                                       
Weighted-average shares outstanding
  
     10,290,965
      
         10,387,292
      
     10,591,194
      
     10,339,129
      
     10,658,477
  
Weighted-average diluted shares outstanding
  
     10,553,634
      
         10,658,026
      
     10,903,740
      
     10,605,830
      
     10,969,991
  
 
 
CFS Bancorp, Inc. ­– Page 9 of 10
 
CFS BANCORP, INC.
  
Consolidated Statements of Condition (Unaudited)
  
(Dollars in thousands)
  
                               
 
June 30,
    
March 31,
    
December 31,
    
June 30,
 
2008
    
2008
    
2007
    
2007
ASSETS
                              
Cash and amounts due from depository institutions
  $
           15,824
      $
           17,314
      $
           25,825
      $
    19,614
  
Interest-bearing deposits
  
               4,527
      
             55,078
      
               9,744
      
            8,617
  
Federal funds sold
  
                  492
      
             14,922
      
               3,340
      
               8,796
  
Cash and cash equivalents
  
             20,843
      
             87,314
      
             38,909
      
             37,027
  
                               
Securities available-for-sale, at fair value
  
           261,985
      
           247,380
      
           224,594
      
           270,404
  
Securities held-to-maturity, at cost
  
               3,500
      
               3,940
      
               3,940
      
 –
  
Investment in Federal Home Loan Bank stock, at cost
  
             23,944
      
             23,944
      
             23,944
      
             23,944
  
                               
Loans receivable, net of unearned fees
  
           726,858
      
           765,476
      
           793,136
      
           808,132
  
Allowance for losses on loans
  
           (10,403
 )     
             (8,347
 )     
             (8,026
 )     
           (10,624
 ) 
Net loans
  
           716,455
      
           757,129
      
           785,110
      
           797,508
  
                               
Interest receivable
  
               4,660
      
               5,035
      
               5,505
      
               7,106
  
Other real estate owned
  
               1,072
      
               1,038
      
               1,162
      
                  632
  
Office properties and equipment
  
             19,822
      
             19,760
      
             19,326
      
             19,008
  
Investment in bank-owned life insurance
  
             36,090
      
             36,884
      
             36,475
      
             35,652
  
Prepaid expenses and other assets
  
             14,402
      
             11,652
      
             11,313
      
             11,611
  
Total assets
  $
      1,102,773
      $
      1,194,076
      $
      1,150,278
      $
      1,202,892
  
                               
LIABILITIES AND STOCKHOLDERS' EQUITY
                              
Deposits
  $
         848,439
      $
         879,543
      $
         863,272
      $
         887,814
  
Borrowed money
  
           113,129
      
           163,295
      
           135,459
      
           170,952
  
Advance payments by borrowers for taxes and insurance
  
               5,763
      
               4,335
      
               3,341
      
               6,619
  
Other liabilities
  
             10,666
      
             15,112
      
             17,792
      
               9,217
  
Total liabilities
  
           977,997
      
        1,062,285
      
        1,019,864
      
        1,074,602
  
                               
Stockholders' 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; 10,668,489, 10,679,611, 10,705,510 and
                              
10,845,740 shares outstanding
  
                  234
      
                  234
      
                  234
      
                  234
  
Additional paid-in capital
  
           190,093
      
           191,242
      
           191,162
      
           191,054
  
Retained earnings
  
             93,994
      
             97,547
      
             97,029
      
             95,616
  
Treasury stock, at cost; 12,625,785, 12,609,251, 12,583,856 and
                              
12,450,364 shares
  
         (155,843
 )     
         (155,357
 )     
         (154,895
 )     
         (152,752
 ) 
Treasury stock, Rabbi Trust, at cost; 129,032, 134,444, 133,940 and
                            
    127,202 shares
  
             (1,705
 )    
             (1,773
 )     
             (1,766
 )     
             (1,672
 ) 
Unallocated common stock held by Employee Stock Ownership Plan
             (2,970
 )     
             (3,048
 )     
             (3,126
 )     
             (3,282
 ) 
Accumulated other comprehensive income/(loss), net of tax
  
                  973
      
               2,946
      
               1,776
      
                (908
 ) 
Total stockholders' equity
  
           124,776
      
           131,791
      
           130,414
      
           128,290
  
                               
Total liabilities and stockholders' equity
  $
      1,102,773
      $
      1,194,076
      $
      1,150,278
      $
 $    1,202,892
  
 
CFS Bancorp, Inc. ­– Page 10 of 10
 
CFS BANCORP, INC.
  
Efficieny Ratio Calculations (Unaudited)
  
(Dollars in thousands)
  
                   
   
Three Months Ended
  
   
June 30, 2008
    
March 31, 2008
    
June 30, 2007
  
                   
Efficiency Ratio:
                  
Non-interest expense
   $ 7,684     $ 8,045     $ 8,069  
                         
                         
Net interest income plus non-interest income
   $ 10,647     $ 11,092     $ 11,331  
                         
Efficiency ratio
     72.17 %     72.53 %     71.21 %
                         
Core Efficiency Ratio:
                        
Non-interest expense
   $ 7,684     $ 8,045     $ 8,069  
                         
                         
Net interest income plus non-interest income
   $ 10,647     $ 11,092     $ 11,331  
                         
Adjustments:
                        
Net realized (gains)/losses on sales of securities available-
                        
for-sale
     582       (69 )     1  
Net realized losses on sales of assets
     3       –       1  
Amortization of deferred premium
     449       527       1,276  
                         
Net interest income plus non-interest income - as adjusted
   $ 11,681     $ 11,550     $ 12,609  
                         
Core efficiency ratio
     65.78 %     69.65 %     63.99 %
                         
                         
           
Six Months Ended
  
           
June 30, 2008
    
June 30, 2007
  
                         
Efficiency Ratio:
                        
Non-interest expense
           $ 15,729     $ 17,336  
                         
                         
Net interest income plus non-interest income
           $ 21,739     $ 22,464  
                         
Efficiency ratio
             72.35 %     77.17 %
                         
Core Efficiency Ratio:
                        
Non-interest expense
           $ 15,729     $ 17,336  
                         
                         
Net interest income plus non-interest income
           $ 21,739     $ 22,464  
                         
Adjustments:
                        
Net realized (gains)/losses on sales of securities available-
                        
for-sale
             513       (10 )
Net realized (gains)/losses on sales of assets
             3       (10 )
Amortization of deferred premium
             976       2,627  
                         
Net interest income plus non-interest income - as adjusted
           $ 23,231     $ 25,071  
                         
Core efficiency ratio
             67.71 %     69.15 %