SOURCE: CFS Bancorp, Inc.

July 31, 2008 16:00 ET

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

MUNSTER, IN--(Marketwire - 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 '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.


                                                         Change from
                           Three Months Ended           June 30, 2007
                     --------------------------------  to June 30, 2008
                      June 30,   March 31,  June 30,  -------------------
                       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 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 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,  December 31,
                                                      2008        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
                                                  -----------  -----------


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.
                          Highlights (Unaudited)
              (Dollars in thousands, except per share data)


EARNINGS HIGHLIGHTS AND
 PERFORMANCE RATIOS (1)                     Three Months Ended
                               -------------------------------------------
                               June 30, 2008  March 31, 2008 June 30, 2007
                               -------------  -------------- --------------
Net income/(loss)              $     (2,295)  $       1,779  $       2,281
Basic earnings/(loss) per
 share                                (0.22)           0.17           0.22
Diluted earnings/(loss) per
 share                                (0.22)           0.17           0.21
Cash dividends declared per
 share                                 0.12            0.12           0.12
Return on average assets              (0.80)%          0.62%          0.74%
Return on average equity              (7.08)           5.41           7.05
Average yield on
 interest-earning assets               5.64            6.12           6.44
Average cost on
 interest-bearing liabilities          2.69            3.28           3.88
Interest rate spread                   2.95            2.84           2.56
Net interest margin                    3.26            3.21           3.01
Average equity to average
 assets (2)                           11.29           11.38          10.56
Average interest-earning
 assets to average
 interest-bearing
 liabilities (2)                     113.17          112.68         113.01
Non-interest expense to
 average assets                        2.68            2.78           2.63
Efficiency ratio (3)                  72.17           72.53          71.21
Market price per share of
 common stock for the period
 ended:                Closing $      11.79   $       14.37  $       14.55
                          High        14.93           14.70          15.12
                           Low        11.42           13.33          14.53

STATEMENT OF CONDITION
 HIGHLIGHTS                                      June 30,       March 31,
 (at period end)                                   2008           2008
                                             -------------- --------------
Total assets                                  $   1,102,773  $   1,194,076
Loans receivable, net of
 unearned fees                                      726,858        765,476
Total deposits                                      848,439        879,543
Total stockholders' equity                          124,776        131,791
Book value per common share                           11.70          12.34
Non-performing loans                                 34,670         30,259
Non-performing assets                                35,742         31,297
Allowance for losses on loans                        10,403          8,347
Non-performing loans to total
 loans                                                 4.77%          3.95%
Non-performing assets to total
 assets                                                3.24           2.62
Allowance for losses on loans
 to non-performing loans                              30.01          27.59
Allowance for losses on loans
 to total loans                                        1.43           1.09

Employees (FTE)                                         307            297
Branches and offices                                     22             22


                                            Three Months Ended
                               -------------------------------------------
AVERAGE BALANCE DATA           June 30, 2008  March 31, 2008  June 30, 2007
                               -------------  -------------- --------------
Total assets                   $  1,154,656   $   1,161,900  $   1,230,115
Loans receivable, net of
 unearned fees                      743,097         786,877        808,331
Total interest-earning assets     1,071,384       1,072,273      1,151,726
Total liabilities                 1,024,238       1,029,654      1,100,252
Total deposits                      863,865         858,460        894,184
Interest-bearing deposits           802,249         796,435        829,467
Non-interest bearing deposits        61,616          62,025         64,717
Total interest-bearing
 liabilities                        946,712         951,602      1,019,112
Stockholders' equity                130,418         132,246        129,863



EARNINGS HIGHLIGHTS AND
 PERFORMANCE RATIOS (1)              Six Months Ended
                               ----------------------------
                               June 30, 2008  June 30, 2007
                               -------------  --------------
Net income/(loss)              $       (516)  $       3,594
Basic earnings/(loss) per
 share                                (0.05)           0.34
Diluted earnings/(loss) per
 share                                (0.05)           0.33
Cash dividends declared per
 share                                 0.24            0.24
Return on average assets              (0.09)%          0.58%
Return on average equity              (0.79)           5.55
Average yield on
 interest-earning assets               5.88            6.43
Average cost on
 interest-bearing liabilities          2.98            3.89
Interest rate spread                   2.90            2.54
Net interest margin                    3.24            2.97
Average equity to average
 assets (2)                           11.34           10.50
Average interest-earning
 assets
 to average interest-bearing
  liabilities (2)                    112.92          112.66
Non-interest expense to
 average assets                        2.73            2.81
Efficiency ratio (3)                  72.35           77.17
Market price per share of
 common stock
 for the period ended: Closing $      11.79   $       14.55
                          High        14.93           15.12
                           Low        11.42           14.48

STATEMENT OF CONDITION
 HIGHLIGHTS                     December 31,     June 30,
 (at period end)                    2007           2007
                               -------------  --------------
Total assets                   $  1,150,278   $   1,202,892
Loans receivable, net of
 unearned fees                      793,136         808,132
Total deposits                      863,272         887,814
Total stockholders' equity          130,414         128,290
Book value per common share           12.18           11.83
Non-performing loans                 29,600          29,172
Non-performing assets                30,762          29,804
Allowance for losses on loans         8,026          10,624
Non-performing loans to total
 loans                                 3.73 %          3.61%
Non-performing assets to total
 assets                                2.67            2.48
Allowance for losses on loans
 to non-performing loans              27.11           36.42
Allowance for losses on loans
 to total loans                        1.01            1.31

Employees (FTE)                         303             322
Branches and offices                     22              22


                                      Six Months Ended
                               ----------------------------
AVERAGE BALANCE DATA           June 30, 2008   June 30, 2007
                               -------------  --------------
Total assets                   $  1,158,015   $   1,243,160
Loans receivable, net of
 unearned fees                      764,986         801,132
Total interest-earning assets     1,071,827       1,165,475
Total liabilities                 1,026,683       1,112,681
Total deposits                      861,163         899,572
Interest-bearing deposits           799,343         837,458
Non-interest bearing deposits        61,820          62,114
Total interest-bearing
 liabilities                        949,158       1,034,549
Stockholders' equity                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.
              Consolidated Statements of Income (Unaudited)
              (Dollars in thousands, except per share data)


                                                      For the Six Months
                    For the Three Months Ended              Ended
                ----------------------------------  ----------------------
                 June 30,   March 31,    June 30,    June 30,    June 30,
                   2008        2008        2007        2008        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.
             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.
                 Efficiency Ratio Calculations (Unaudited)
                          (Dollars in thousands)


                                            Three Months Ended
                                 -----------------------------------------
                                    June 30,     March 31,     June 30,
                                      2008         2008          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,      June 30,
                                                   2008          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%

Contact Information

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