-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NYA0dc9yGLGBEZtJmbFDGbw6zs3/2NEofvuS06FrBIT99HoGki1q5OObto0k2ftF 1yFVad0eCJ9YrMEh2E+HXA== 0001065407-06-000605.txt : 20061122 0001065407-06-000605.hdr.sgml : 20061122 20061122155759 ACCESSION NUMBER: 0001065407-06-000605 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20061122 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061122 DATE AS OF CHANGE: 20061122 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRST KEYSTONE FINANCIAL INC CENTRAL INDEX KEY: 0000856751 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 232576479 FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-25328 FILM NUMBER: 061236529 BUSINESS ADDRESS: STREET 1: 22 WEST STATE ST CITY: MEDIA STATE: PA ZIP: 19063 BUSINESS PHONE: 610 565-6210 MAIL ADDRESS: STREET 1: 22 WEST STATE ST CITY: MEDIA STATE: PA ZIP: 19063 8-K 1 form8k.txt FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) November 21, 2006 ____________________________ First Keystone Financial, Inc. _____________________________________________________________________________ (Exact name of registrant as specified in its charter) Pennsylvania 000-25328 23-2576479 _____________________________________________________________________________ (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 22 West State Street, Media, Pennsylvania 19063 _____________________________________________________________________________ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (610) 565-6210 __________________________ Not Applicable _____________________________________________________________________________ (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.02 Results of Operations and Financial Condition _____________________________________________ On November 21, 2006, First Keystone Financial, Inc. (the "Company") reported its results of operations for the quarter and year ended September 30, 2006. For additional information, reference is made to the Company's press release dated November 21, 2006, which is included as Exhibit 99.1 hereto and is incorporated herein by reference thereto. The press release attached hereto is being furnished to the SEC and shall not be deemed to be "filed" for any purpose except otherwise provided herein. ITEM 9.01 Financial Statements and Exhibits _________________________________ (a) Not applicable. (b) Not applicable. (c) Not applicable. (d) Exhibits The following exhibits are filed herewith. Exhibit Number Description __________________ ________________________________________________ 99.1 Press release dated November 21, 2006. 2 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. FIRST KEYSTONE FINANCIAL, INC. Date: November 22, 2006 By: /s/Rose M. DiMarco ___________________________ Rose M. DiMarco Chief Financial Officer 3 EX-99.1 2 pr.txt PRESS RELEASE Exhibit 99.1 FIRST 22 West State Street KEYSTONE Media, PA 19063 FINANCIAL, INC. 610-565-6210 FOR IMMEDIATE RELEASE _____________________ FIRST KEYSTONE FINANCIAL ANNOUNCES QUARTER AND YEAR END RESULTS Media, PA November 21, 2006 - (Nasdaq: FKFS) The Company reported today net income for the quarter ended September 30, 2006 of $304,000, or $0.16 per diluted share, compared to net income of $62,000, or $0.03 per diluted share, for the same period last year. Net income for the fiscal year ended September 30, 2006 was $1.0 million, or $0.54 per diluted share, as compared to $610,000, or $0.33 per diluted share, for fiscal 2005. The Company's net income was adversely impacted both for the fourth quarter, and to a lesser extent for the fiscal year, due to the substantially increased provision for possible loan losses established during the fourth quarter. The provision for loan losses for the quarter ended September 30, 2006 amounted to $555,000 as compared to $45,000 for the fourth quarter of fiscal 2005. The Company recently underwent an examination by the Office of Thrift Supervision (the "OTS"), its primary banking regulator. In connection with the examination, the Company reviewed its asset classifications, resulting in a substantial increase in criticized and classified assets from $8.7 million at June 30, 2006 to $19.9 million at September 30, 2006 of which $11.7 million consisted of classified assets primarily related to commercial and multi-family and commercial business loans. The significant increase in the provision for loan losses reflected management's assessment of a number of factors including the implementation of refinements to its rating system, the increased level of classified and criticized assets, continued growth of the commercial and multi-family real estate and commercial business loan portfolio as well as extensive discussions with the OTS examination staff in connection with the examination. As previously announced in February 2006, the Company and its wholly owned subsidiary, First Keystone Bank, entered into supervisory agreements with the OTS which required a number of actions to be taken by the Company or the Bank as well as imposing a number of restrictions on their operations including a growth limitation on the Bank and a prohibition in the payment of dividends by the Company to its shareholders. Although the Company and the Bank were determined to be in full or partial compliance with substantially all of the provisions of the supervisory agreements, the examination did note a number of areas for improvement with respect to the Bank's loan underwriting, credit analysis and asset classification policies and procedures. The Bank is aggressively addressing the areas for improvement in its lending operations to be able to be in full compliance with the terms of the supervisory agreements as soon as possible. "Needless to say, we are disappointed in the level of the provision for loan losses required for the fourth quarter as well as the concerns noted by the OTS. We believed that the significant steps taken by the Company and the Bank in accordance with the terms of the supervisory agreements had addressed the OTS' concerns. However, we are committed to addressing the OTS' remaining concerns as soon as possible," stated President and Chief Executive Officer Thomas M. Kelly. "We will remain focused on reducing the level of our classified and criticized assets and decreasing further the level of non-performing assets," continued Kelly. "To date, the level of non-performing assets has declined and net interest margin has increased from the same period in the prior year. We are confident that the Company and the Bank will be able to achieve compliance with the terms of the agreements in a satisfactory and expeditious manner," added Kelly. 4 For the three months ended September 30, 2006, net interest income decreased by $74,000, or 2.7%, as compared to the same period in 2005. Interest income increased $308,000, or 4.5%, for the quarter ended September 30, 2006 compared to the same period in the prior year primarily due to a 72 basis point increase in the average yield earned on interest-earning assets. However, such increase was offset by a $382,000, or 9.2%, increase in interest expense for the quarter ended September 30, 2006 as compared to the fourth quarter of fiscal 2005 primarily due to a 58 basis point increase in the average rate paid on interest-bearing liabilities. The increase in the Company's net interest margin was primarily due to the combined effects of the impact of the de-leveraging strategy implemented at the end of fiscal 2005. The Company's interest rate margin on a tax-equivalent basis increased to 2.23% for the quarter ended September 30, 2006 as compared to 2.11% for the same period last year. On a linked quarter basis, net interest income decreased $214,000 in the fourth quarter of fiscal 2006 compared to the third quarter of fiscal 2006. The net interest margin on a tax- equivalent basis decreased 17 basis points from 2.40% for the three months ended June 30, 2006. During the fourth quarter of fiscal 2006, as compared to the third, the Company experienced a 28 basis point increase in the rates paid on interest-bearing liabilities which was partially offset by a 12 basis point increase in the yield earned on average interest-earning assets. The compression of the Company's net interest margin was largely due to the repricing of interest-bearing liabilities which outpaced the upward adjustments on interest-earning assets. For the quarter ended September 30, 2006, non-interest income increased $340,000 to $1.3 million from the same period last year. The increase during the quarter was primarily the result of the receipt of death-benefit proceeds of $565,000 from the Company's bank owned life insurance partially offset by the Company experiencing a decrease of $170,000 in gain on sales of assets. During the fourth quarter of fiscal 2005, the Company experienced gains related to the sales made in connection with the de- leveraging strategy implemented in such quarter. Non-interest expense for the quarter ended September 30, 2006 decreased $339,000, or 9.3%, from the same period last year. Non- interest expense was higher in the fourth quarter of fiscal 2005 primarily due to the pre-tax charge of $486,000 incurred as a result of the retirement of FHLB advances as part of the de- leveraging strategy in fiscal 2005. In addition, the Company experienced a decrease of $56,000 in the fourth quarter of fiscal 2006 in the other non-interest expense due to completion of a bank- wide customer service training program during the fourth quarter of fiscal 2005. The Company's total assets increased to $523.0 million at September 30, 2006 from $518.1 million at September 30, 2005. Continuing emphasis on loan originations has led to net growth in the loan portfolio of $21.2 million, or 7.0%, to $323.2 million at September 30, 2006 from September 30, 2005. The majority of the loan growth has occurred in the home equity portfolio, and to a lesser extent, in the commercial business loan portfolio. The investment and mortgage-related securities portfolios were reduced in connection with the Company's continued expansion of its loan portfolio and to assist the Bank in controlling its asset growth as required by the terms of the supervisory agreement. Deposits increased $8.8 million, or 2.5%, from $349.7 million at September 30, 2005 to $358.8 million at September 30, 2006 as a result of a $12.8 million, or 7.4%, increase in certificates of deposit partially offset by $3.7 million, or 2.1%, in core deposits. The level of the Company's borrowings decreased $6.1 million, or 5.4%, to $107.2 million at September 30, 2006 from $113.3 million at September 30, 2005. Stockholders' equity increased $466,000, or 1.7%, due to net income of $1.0 million for the fiscal year ended September 30, 2006 partially offset by a $578,000 decline in comprehensive income combined with dividend payments in the first quarter of fiscal 2006 totaling $209,000. As a result of entering into the supervisory agreement, the Company was required to cease paying dividends after the first quarter of fiscal 2006. For the three months ended September 30, 2006, the provision for loan losses increased $510,000 to $555,000 as compared to the same period in 2005. The increase in the provision for loan losses was required as a result of an increase in the Company's criticized and classified assets at September 30, 2006 as well as the ongoing evaluation of its loan portfolio to bring the overall allowance for loan losses to a level deemed appropriate. The Company focuses on its loan portfolio management and credit review process to address the current risk profile of the portfolio and manage troubled credits. This analysis includes evaluations of concentrations of credit, past loss experience, current economic conditions, the amount and composition of 5 the loan portfolio, the estimated fair value of underlying collateral, loan commitments outstanding, delinquencies and other factors. The Company's coverage ratio, which is the ratio of the allowance for loan losses to non-performing loans, was 1215.61% and 68.79% at September 30, 2006 and September 30, 2005, respectively, while the ratio of the allowance to gross loans receivable was 1.03% and 1.14% at the same dates. Total non-performing assets totaled $2.7 million at September 30, 2006 as compared to $3.2 million at June 30, 2006 and $5.8 million at September 30, 2005. The decrease during the fourth quarter of 2006 was primarily due to a $256,000 decrease in real estate owned and a decrease in non-performing home equity and commercial business loans aggregating $193,000. The Company's ratio of non-performing assets to total assets was 0.52% at September 30, 2006, 0.60% at June 30, 2006 and 1.12% at September 30, 2005. First Keystone Bank, the Company's wholly owned subsidiary, serves its customers from eight full-service offices located in Delaware and Chester Counties. Certain information in this release may constitute forward- looking statements as that term is defined in the Private Securities Litigation Act of 1995. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those estimated due to a number of factors. 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 publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements. This press release contains financial information determined by methods other than in accordance with accounting principles generally accepted in the United States of America ("GAAP") as discussed below. Management of the Company uses these non-GAAP measures in its analysis of the Company's performance. FIRST KEYSTONE FINANCIAL, INC. SELECTED OPERATIONS DATA (In thousands except per share data) (Unaudited) Three Months Ended Year Ended September 30, September 30, ______________________________________________________ 2006 2005 2006 2005 ______________________________________________________ Net interest income $ 2,628 $ 2,702 $ 11,078 $ 11,308 Provision for loan losses 555 45 1,206 1,780 Non-interest income 1,269 929 3,512 3,609 Non-interest expense 3,308 3,647 12,708 12,840 ______________________________________________________ Income (loss) before taxes 34 (61) 676 297 Income tax benefit (270) (123) (359) (313) ______________________________________________________ Net income $ 304 $ 62 $ 1,035 $ 610 ====================================================== Basic earnings per share $ 0.16 $ 0.03 $ 0.55 $ 0.33 Diluted earnings per share 0.16 0.03 0.54 0.33 Dividends per share -- 0.11 0.11 0.44 Number of shares outstanding at end of period 2,027,928 2,023,534 2,027,928 2,023,534 Weighted average basic shares outstanding 1,898,177 1,885,711 1,892,510 1,842,434 Weighted average diluted shares outstanding 1,913,998 1,916,447 1,912,282 1,875,605 ______________________________________________________
6 FIRST KEYSTONE FINANCIAL, INC. SELECTED FINANCIAL DATA (In thousands except per share data) (Unaudited) September 30, September 30, 2006 2005 ________________________________ Total assets $522,960 $518,124 Loans receivable, net 323,220 301,979 Investment and mortgage-related securities available for sale 103,416 104,546 Investment and mortgage-related securities held to maturity 41,612 50,921 Cash and cash equivalents 12,787 16,155 Deposits 358,816 349,694 Borrowings 107,241 113,303 Junior subordinated debt 21,483 21,520 Loan loss allowance 3,367 3,475 Total stockholders' equity 28,659 28,193 Book value per share $14.13 $13.93 ____________________________________________________________________ FIRST KEYSTONE FINANCIAL, INC. OTHER SELECTED DATA (Unaudited) At or for the At or for the Three Months Ended Year Ended September 30, September 30, ________________________________________ 2006 2005 2006 2005 ________________________________________ Return on average assets (1) 0.23% 0.04% 0.20% 0.11% Return on average equity (1) 4.38% 0.86% 3.73% 2.08% Interest rate spread (1) (2) 2.26% 2.12% 2.38% 2.16% Net interest margin (1) (2) 2.23% 2.11% 2.37% 2.18% Interest-earning assets/interest-bearing liabilities(2) 99.25% 99.80% 99.67% 100.52% Operating expenses to average assets (1) 2.53% 2.57% 2.46% 2.26% Ratio of non-performing assets to total assets at end of period 0.52% 1.12% 0.52% 1.12% Ratio of allowance for loan losses to gross loans receivable 1.03% 1.14% 1.03% 1.14% Ratio of loan loss allowance to non-performing loans at end of period 1215.61% 68.79% 1215.6% 68.79% ___________________
(1) Annualized. (2) Adjusted for the effects of tax-free investments. This is a non-GAAP presentation. Management believes that presentation of its interest rate spread and net interest margin on a tax-equivalent basis provides useful information that is essential to a proper understanding of the operating results of the Company's business. These disclosures should not be viewed as a substitute for operating results determined in accordance with GAAP nor are they necessarily comparable to non-GAAP performance measures which may be presented by other companies. In order to provide accurate comparisons of yields and margins for all earning assets, the interest income earned on tax-exempt assets has been increased to make them fully equivalent to other taxable investments. Without the adjustment for taxes, the interest rate spread was 2.20% and 2.05% for the quarters ended September 30, 2006 and 2005, respectively, while the net interest margin was 2.17% and 2.05% for the quarters ended September 30, 2006 and 2005, respectively. Without the adjustment for taxes, the interest rate spread was 2.32% and 2.10% for the twelve months ended September 30, 2006 and 2005, respectively, while the net interest margin was 2.30% and 2.11% for the twelve months ended September 30, 2005 and 2004, respectively. In addition, with respect to June 30, 2006, without the adjustment for taxes, the interest rate margin was 2.34%. CONTACT: Thomas M. Kelly, President and Chief Executive Officer Rose M. DiMarco, Chief Financial Officer (610) 565-6210 7 -----END PRIVACY-ENHANCED MESSAGE-----