EX-99.1 3 pr.txt PRESS RELEASE EXHIBIT 99.1 FIRST 22 West State Street KEYSTONE Media, PA 19063 FINANCIAL, INC. 610-565-6210 FOR IMMEDIATE RELEASE --------------------- CONTACT: THOMAS M. KELLY, PRESIDENT (610) 565-6210 FIRST KEYSTONE FINANCIAL ANNOUNCES FIRST QUARTER RESULTS Media, PA January 31, 2003 -- First Keystone Financial, Inc. (Nasdaq: FKFS), the parent holding company of First Keystone Federal Savings Bank, announced today a 19.6% percent increase in quarterly earnings for the Company. Net income for the quarter ended December 31, 2002 was $781,000, or $.39 per share, compared to $653,000, or $.32 per share, for the same period last year. Operating results for the first quarter of fiscal 2003 reflected a $391,000, or 12.5%, increase in net interest income compared to the same period in fiscal 2002. The increase was the result of the Company's interest-bearing liabilities continuing to reprice downward to a greater degree than its interest-earning assets. Interest expense for the quarter ended December 31, 2002 decreased $931,000 compared to the quarter ended December 31, 2001 due to a 94 basis point decrease in the weighted average rate paid on interest-bearing liabilities, partially offset by a $13.8 million increase in the average balance of such liabilities. The decline in interest expense was offset, in part, by a decline in interest income for the quarter ended December 31, 2002 of $540,000 compared to the quarter ended December 31, 2001 due to a decrease in the average yield earned of 67 basis points, partially offset by a $16.3 million increase in the average balance of interest-earning assets. The Company's interest rate spread increased to 2.79% for the three months ended December 31, 2002 from 2.51% for the same period last year and the net interest margin increased to 2.98% for the first quarter of fiscal 2003 from 2.74% for the same period last year. On a linked quarter basis, however, net interest income decreased $53,000 in the first quarter of fiscal 2003 compared to the fourth quarter of fiscal 2002. Net interest margin decreased seven basis points from 3.05% for the three months ended September 30, 2002. During the quarter, the Company experienced a 22 basis point decrease in the yield earned on average interest-earning assets which was partially offset by a 16 basis point decline in the rates paid on interest-bearing liabilities. The slight compression in the net interest margin was primarily the result of the effects of having to reinvest at current low interest rates the high cash flows resulting from the continued high level of loan refinancings and prepayments of mortgage-related securities. The Company, based on the current rate environment, expects the compression in the net interest margin to continue. "The challenge today is managing this low rate, steep yield curve to minimize interest rate risk while protecting the Company's net interest margin when interest rates eventually rise," stated First Keystone Financial Chairman, Donald S. Guthrie. "Going forward, the Company will also remain focused on increasing its market share through targeted marketing and the expansion of the Bank's branch network," Guthrie added. Total non-performing assets decreased to $4.1 million at December 31, 2002 from $5.4 million at September 30, 2002 due to the return to performing status of a $1.3 million commercial real estate loan. The Company's ratio of non-performing assets to total assets was 0.77% at December 31, 2002 compared to 1.04% at September 30, 2002. For the quarter ended December 31, 2002, non-interest income increased $156,000, or 34.1%, from the same period last year. The increase was primarily the result of a $124,000 increase in gains on the sale of loans as the Company continues to sell 30 year fixed- rate single-family residential loans in the secondary market. Non-interest expenses for the quarter ended December 31, 2002 increased $255,000, or 9.6%, from same period last year primarily due to compensation and employee benefit expenses and other non- interest expenses. The increase in compensation and employee benefit expenses was due to the hiring of additional personnel, higher costs of employee benefit plans and general compensation increases. Other non-interest expense increased $144,000, or 32.0%, primarily due to expenses primarily relating to the workout of three non-performing commercial real estate loans aggregating $2.4 million. The Company's total assets increased to $527.4 million at December 31, 2002 from $518.3 million at September 30, 2002. The asset growth was primarily attributable to an increase in cash and cash equivalents, loans receivable, and mortgage-related securities. Such growth was funded primarily through deposit growth. Total deposits increased $7.6 million, or 2.3%, to $338.4 million at December 31, 2002 from $330.8 million at September 30, 2002. Core deposits increased $8.2 million, or 5.3%, as a result of the Company's emphasis on commercial business accounts and related non- interest bearing checking accounts as well as continued increases in money market demand accounts, due in part to the continued uncertain investment climate in the equities market. Certain information in this release may constitute forward- looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those estimated. Persons are cautioned that such forward-looking statements are not guarantees of future performance and are subject to various factors, which could cause actual results to differ materially from those estimated. These factors include, but are not limited to, changes in general economic and market conditions and the development of an interest rate environment that adversely affects the interest rate spread or other income from the Company's and the Bank's investments and operations. The Company does not undertake and specifically disclaims any obligation to these forward-looking statements to reflect events or circumstances which occur after the date of such statements. First Keystone Federal Savings Bank, the Company's wholly owned subsidiary, serves its customers from seven full-service offices in Delaware and Chester Counties. FIRST KEYSTONE FINANCIAL, INC. SELECTED OPERATIONS DATA (In thousands except per share data) (Unaudited) Three Months Ended December 31, ------------------ 2002 2001 ------------------ Net interest income $3,510 $3,119 Provision for loan losses 195 135 Non-interest income 614 458 Non-interest expense 2,924 2,669 ------------------ Income before income taxes 1,005 773 Income tax expense 224 120 ------------------ Net income $ 781 $ 653 ================== Basic earnings per share $ 0.41 $ 0.34 Diluted earnings per share 0.39 0.32 Dividends per share 0.10 0.09 Number of shares outstanding at end of period 2,011,541 2,040,515 Weighted average basic shares outstanding 1,906,521 1,909,276 Weighted average diluted shares outstanding 2,017,733 2,014,497 ______________________________________________________________________ SELECTED FINANCIAL DATA (In thousands except per share data) (Unaudited) December 31, September 30, 2002 2002 ----------------------------- Total assets $527,364 $518,346 Loans receivable, net 291,452 288,776 Investment securities and mortgage-related securities 168,744 166,298 Cash and cash equivalents 30,121 24,623 Deposits 338,374 330,765 Borrowings 126,279 126,237 Loan loss allowance 2,530 2,358 Company-obligated mandatorily redeemable preferred securities 20,870 20,880 Total stockholders' equity 32,750 32,795 Book value per share $16.28 $16.33 ______________________________________________________________________ OTHER SELECTED DATA (Unaudited) At or for the Three Months Ended December 31, -------------------- 2002 2001 -------------------- Return on average assets (1) 0.60% 0.53% Return on average equity (1) 9.59% 8.37% Interest rate spread (1) (2) 2.79% 2.51% Net interest margin (1) (2) 2.98% 2.74% Interest-earning assets/interest- bearing liabilities 106.20% 105.82% Operating expenses to average assets (1) 2.26% 2.15% Ratio of non-performing assets to total assets at end of period 0.77% 0.54% Ratio of loan loss allowance to non- performing assets at end of period 62.47% 84.63% (1) Annualized. (2) Adjusted for the effects of tax-free investments.