SOURCE: CFS Bancorp, Inc.

January 25, 2007 16:00 ET

CFS Bancorp, Inc. Announces Fourth Quarter and Year End 2006 Financial Results

MUNSTER, IN -- (MARKET WIRE) -- January 25, 2007 -- CFS Bancorp, Inc. (NASDAQ: CITZ) (the Company), the parent of Citizens Financial Bank (the Bank), today reported net income of $1.6 million for the fourth quarter of 2006 compared to $780,000 for the third quarter of 2006 and $1.9 million for the fourth quarter of 2005. Diluted earnings per share were $0.15 for the fourth quarter of 2006 compared to $0.07 per diluted share for the third quarter of 2006 and $0.16 per diluted share for the fourth quarter of 2005.

For the year ended December 31, 2006, the Company's net income was $5.3 million, an increase of $323,000 or 6.4% from 2005. Diluted earnings per share increased to $0.47 for the year ended December 31, 2006 from $0.42 for 2005. The net interest margin for the year ended December 31, 2006 was 2.73%, up from 2.48% for the 2005 period.

Chairman's Comments

"The 2006 results reflect our efforts to grow the balance sheet. Our regional banking strategy and focus on building deposit relationships resulted in a 9.5% increase in total deposits. We funded over $285.0 million in loans during 2006, however, the increased fundings were offset by a significant number of repayments of high-balance commercial loans," said Thomas F. Prisby, Chairman and CEO.

Mr. Prisby continued, "We look to continue our growth focus in 2007. We begin the new year with six additional experienced lenders since the start of 2006 and plan to add more lenders during 2007. In addition, we expect to build on the momentum created in 2006 in expanding our deposit base focusing on low-cost core business and retail deposits."

Net Interest Income

The Company's net interest margin was 2.58% for the fourth quarter of 2006 compared to 2.59% for the third quarter of 2006 and 2.91% for the fourth quarter of 2005. The Company's net interest income was $8.1 million for the fourth quarter of 2006 compared to $7.9 million for the third quarter of 2006 and $8.7 million for the fourth quarter of 2005.

Interest income increased to $19.7 million for the fourth quarter of 2006 from $18.9 million for the third quarter of 2006 and $18.3 million for the fourth quarter of 2005. The increase in interest income was primarily due to increases in rates earned on interest-earning assets coupled with an increase in the average balances of interest-earning assets.

Interest expense totaled $11.6 million for the fourth quarter of 2006 compared to $11.1 million for the third quarter of 2006 and $9.6 million for the fourth quarter of 2005. Interest expense was impacted during the fourth quarter of 2006 by increased market rates paid on money market and certificate of deposit accounts which were partially offset by decreased borrowing costs.

The Company's cost of borrowings decreased to 7.08% for the fourth quarter of 2006 from 7.47% for the third quarter of 2006 and 8.04% for the fourth quarter of 2005. The decrease from the third quarter of 2006 and the fourth quarter of 2005 was primarily the result of a decrease in the average balance of the Company's Federal Home Loan Bank (FHLB) debt, a decrease in the unamortized deferred premium on the early extinguishment of debt related to the FHLB restructuring completed in 2004 and a decrease in the amortization of the deferred premium that is included in the Company's total interest expense on borrowings. The premium amortization totaled $2.0 million, $2.5 million and $2.8 million, respectively, during the fourth quarter of 2006, the third quarter of 2006 and the fourth quarter of 2005. The premium amortization adversely impacted the Company's net interest margin by 65 basis points, 82 basis points and 94 basis points, respectively, for the fourth quarter of 2006, the third quarter of 2006 and the fourth quarter of 2005. The Company's interest expense on borrowings is detailed in the tables below for the periods indicated.

                           Three Months Ended             Change from
                     -------------------------------- December 31, 2005 to
                     December   September  December    December 31, 2006
                        31,        30,        31,     -------------------
                       2006       2006       2005         $          %
                     ---------- ---------- ---------- ---------  --------
                                     (Dollars in thousands)
Interest expense on
 short-term borrowings
 at contractual
 rates               $      478 $      294 $        2 $     476        NM
Interest expense on
 FHLB borrowings at
  contractual rates       2,273      2,541      2,775      (502)    (18.1)%
Amortization of
 deferred premium         2,036      2,465      2,800      (764)    (27.3)
                     ---------- ---------- ---------- ---------
Total interest
 expense on
 borrowings          $    4,787 $    5,300 $    5,577 $    (790)    (14.2)
                     ========== ========== ========== =========


                                       Year Ended
                                   -------------------
                                      December 31,
                                     2006     2005       $change  %change
                                   -------- ---------- ---------- -------
                                           (Dollars in thousands)
Interest expense on short-term
 borrowings at contractual rates   $    902 $       35 $      867      NM
Interest expense on FHLB
 borrowings at contractual rates      9,955     11,501     (1,546)  (13.4)%
Amortization of deferred premium      9,624     14,381     (4,757)  (33.1)
                                   -------- ---------- ---------- -------
Total interest expense on
 borrowings                        $ 20,481 $   25,917 $   (5,436)  (21.0)
                                   ======== ========== ========== =======

The interest expense related to the premium amortization on the early extinguishment of debt is expected to be $1.4 million, $1.3 million, $1.1 million and $851,000 before taxes in the quarters ending March 31, June 30, September 30 and December 31, 2007, respectively.

Non-Interest Income

The Company's non-interest income for the fourth quarter of 2006 was $3.0 million compared to $2.3 million for the third quarter of 2006 and $2.7 million for the fourth quarter of 2005. The increases in the Company's non-interest income were primarily a result of changes in the Company's realized gains and losses on the sales of assets. During the fourth quarter of 2006, the Company realized gains on the sales of other real estate owned assets totaling $297,000, whereas during the third quarter of 2006, the Company realized a loss on the sale of one other real estate owned property of $1.3 million and an $877,000 gain on the sale of the Company's investment in trust preferred securities. The Company incurred a $125,000 loss on sales of securities available-for-sale during the fourth quarter of 2005.

Non-Interest Expense

Non-interest expense for the fourth quarter of 2006 was $9.3 million compared to $8.9 million for the third quarter of 2006 and $8.6 million for the fourth quarter of 2005. The increase during the fourth quarter of 2006 from the third quarter of 2006 was primarily related to increased pension expense of $490,000. The increase in non-interest expense from the fourth quarter of 2005 was primarily the result of increased compensation and employee benefits expense as a result of bringing its item processing in-house and staffing for growth coupled with increased pension expense of $430,000. In addition, furniture and equipment expense increased from the fourth quarter of 2005 due to new signage and expenses related to bringing item processing in-house during 2006.

The Company's efficiency ratio for the fourth quarter of 2006 was 83.7% compared to 88.2% for the third quarter of 2006 and 76.1% for the fourth quarter of 2005. The Company's core efficiency ratio was 72.4% for the fourth quarter of 2006 compared to 68.4% for the third quarter of 2006 and 60.5% for the fourth quarter of 2005. The efficiency ratio and core efficiency ratio during 2006 were impacted by the increases in non-interest expense discussed above. 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 before the provision for losses on loans. 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 its 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 before the provision for losses on loans and non-interest income as presented on the consolidated statements of income.

The Company's core efficiency ratio is calculated as non-interest expense, excluding any prepayment penalties incurred as a result of the early extinguishment of debt, divided by the sum of net interest income before the provision for losses on loans, 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 and other-than-temporary impairments. 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.

Income Taxes

The Company's income tax benefit for the fourth quarter of 2006 was $161,000 compared to income tax expense of $1,000 for the third quarter of 2006 and $591,000 for the fourth quarter of 2005. The decrease in income tax expense for the fourth quarter of 2006 was mainly a result of the recognition of a $445,000 tax benefit relating to certain tax positions taken on prior year tax returns that had not been recognized for financial reporting purposes. During the fourth quarter of 2006, management determined that the tax liabilities established for these tax uncertainties were no longer required. Permanent tax differences, primarily related to the Company's investment in bank-owned life insurance, and the application of available tax credits continue to have a favorable impact on income tax expense.

Asset Quality

The Company's provision for losses on loans was $338,000 for the fourth quarter of 2006 compared to $413,000 for the third quarter of 2006 and $268,000 for the comparable 2005 period due to required additions to the Company's allowance for losses on loans as determined by its quarterly analysis of the adequacy of the allowance for losses on loans. The Company's realized net recoveries through the allowance for losses on loans for the fourth quarter of 2006 were $155,000 compared to net charge-offs of $1.4 million for the third quarter of 2006 and $1.0 million for the fourth quarter of 2005.

The Company's non-performing assets totaled $27.8 million at December 31, 2006, $22.4 million at September 30, 2006 and $21.6 million at December 31, 2005. The increase in non-performing assets for the fourth quarter of 2006 was primarily related to the transfer to non-accrual status during the quarter of one construction and land development loan and one commercial real estate loan totaling $5.7 million in the aggregate.

The Company's allowance for losses on loans was $11.2 million at December 31, 2006, $10.7 million at September 30, 2006 and $12.9 million at December 31, 2005 with the ratio of the allowance for losses on loans to total loans being 1.39%, 1.28% and 1.41%, respectively. 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 the Company'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. The Company believes that at December 31, 2006, the allowance for losses on loans was adequate.

Balance Sheet

At December 31, 2006, the Company's total assets were $1.25 billion compared to $1.29 billion at September 30, 2006 and $1.24 billion at December 31, 2005.

The Company's loans receivable totaled $802.4 million at December 31, 2006 compared to $833.0 million at September 30, 2006 and $917.4 million at December 31, 2005. Loans receivable were adversely impacted during 2006 by a significant number of repayments of high-balance commercial loans. The factors that contributed to these repayments include the borrower's sale of the underlying real estate collateral to take advantage of recent increases in real estate values, the Company's focus on strengthening its credit quality by allowing certain lending relationships to be refinanced elsewhere, and the availability of lower interest rates for borrowers through conduit financing arrangements. To address the impact of the higher than anticipated repayments, the Company increased its commercial lending staff during the course of 2006 by six lenders. Although the Company increased total loan fundings during 2006 by 16.9% to $286.4 million from total fundings in 2005, the fundings were offset by $332.2 million of commercial loan repayments.

Securities available-for-sale were $298.9 million at December 31, 2006 compared to $322.8 million at September 30, 2006 and $218.6 million at December 31, 2005. During the fourth quarter of 2006, the Company utilized a portion of the proceeds from its maturing securities to payoff maturing FHLB debt totaling $77.0 million. The increase in securities from the fourth quarter of 2005 was primarily due to the investment of excess liquidity.

Total deposits increased to $907.1 million at December 31, 2006 from $870.8 million at September 30, 2006 and $828.6 million at December 31, 2005. The increase in total deposits during the quarter and year ended December 31, 2006 was a result of the Company's aggressive sales focus which included building relationships with local municipalities, centers of influence and customers of recently acquired local financial institutions. For the quarter and year ended December 31, 2006, the Company increased money market accounts by $38.9 million and $60.5 million, respectively. The Company's certificate of deposit accounts were relatively stable at December 31, 2006 compared to September 30, 2006 and increased $53.5 million from December 31, 2005. These increases were partially offset by decreases in other core deposit accounts.

The Company's borrowed money decreased to $202.3 million at December 31, 2006 from $275.1 million at September 30, 2006 and $257.3 million at December 31, 2005. The decrease was a result of the Company's focus on growing deposits to reduce its reliance on wholesale funding which provided for funding costs below wholesale rates. The Company's borrowed money consisted of the following as of the dates indicated:

                                   December 31, September 30, December 31,
                                        2006         2006          2005
                                   -----------  -----------   -----------
                                           (Dollars in thousands)
Short-term variable-rate borrowings
  and repurchase agreements        $    23,117  $    20,876   $       555
Gross FHLB borrowings                  185,325      262,378       272,562
Unamortized deferred premium            (6,167)      (8,203)      (15,791)
                                   -----------  -----------   -----------
Total borrowings                   $   202,275  $   275,051   $   257,326
                                   ===========  ===========   ===========
Stockholders' equity at December 31, 2006 was $131.8 million compared to $142.4 million at December 31, 2005. The decrease during 2006 was primarily due to:

--  repurchases of shares of the Company's common stock during 2006
    totaling $15.7 million, and
--  cash dividends declared during 2006 totaling $5.3 million.
    
The following increases in stockholders' equity during 2006 partially offset the aforementioned decreases:

--  net income of $5.3 million;
--  decreased accumulated other comprehensive losses of $1.2 million;
--  shares committed to be released under the Company's Employee Stock
    Ownership Plan totaling $1.8 million; and
--  proceeds from stock option exercises totaling $3.3 million.
    
During 2006, the Company repurchased 1,067,699 shares of its common stock at an average price of $14.73 per share pursuant to the share repurchase program announced in March 2003, which was completed in June 2006, and the new share repurchase program announced in June 2006 for an additional 600,000 shares. At December 31, 2006, the Company had 188,283 shares remaining to be repurchased under the 2006 share repurchase program. Since its initial public offering, the Company has repurchased an aggregate of 13,184,489 shares of its common stock at an average price of $12.07 per share.

The regulatory capital ratios of the Bank continued to exceed all regulatory requirements. At December 31, 2006, the Bank remained "well-capitalized" under the Office of Thrift Supervision's regulatory capital guidelines.

CFS Bancorp, Inc. is the parent of Citizens Financial Bank, a $1.3 billion asset federal savings bank. Citizens Financial Bank is an independent bank that provides community banking services and currently operates 21 offices throughout adjoining markets in Chicago's Southland and Northwest Indiana. The Company maintains a website at www.cfsbancorp.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 loan and deposit growth, growth in commercial lenders, development of loan and deposit banking relationships, business and banking strategies, asset yields and cost of funds, net interest income, loan and deposit levels, net interest margin, allowance for losses on loans, income levels, levels of non-performing assets, expected effect of amortization of deferred premium on the FHLB debt, and the impact of tax credits and permanent tax differences. 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            Year Ended
                   -----------------------------  ------------------------
                   December September  December    December     December
                      31,       30,       31,          31,          31,
                     2006      2006      2005         2006         2005
                   -------- --------- ----------  -----------  -----------
Net income         $ 1,630  $     780 $    1,852  $     5,340  $     5,017
Basic earnings per
 share                0.15       0.07       0.16         0.48         0.43
Diluted earnings
 per share            0.15       0.07       0.16         0.47         0.42
Cash dividends
 declared per
 share                0.12       0.12       0.12         0.48         0.48
Return on average
 assets               0.49%      0.24%      0.59%        0.42%        0.39%
Return on average
 equity               4.91       2.33       5.12         3.96         3.45
Average yield on
 interest-earning
 assets               6.29       6.24       6.12         6.26         5.76
Average cost on
 interest-bearing
 liabilities          4.15       4.11       3.67         4.00         3.73
Interest rate
 spread               2.14       2.13       2.45         2.26         2.03
Net interest
 margin               2.58       2.59       2.91         2.73         2.48
Average equity to
 average assets
 (2)                  9.96      10.36      11.43        10.54        11.38
Average
 interest-earning
 assets to average
 interest-bearing
 liabilities (2)    111.75     112.62     114.41       113.03       113.44
Non-interest
 expense to
 average assets       2.78       2.77       2.73         2.83         2.62
Efficiency ratio
 (3)                 83.70      88.20      76.13        83.27        81.16
Market price per
 share of common
 stock for the
 period ended:
          Closing  $  14.65 $   14.79 $    14.30  $     14.65  $     14.30
             High     14.90     15.04      14.34        15.04        14.37
              Low     14.21     14.58      13.15        14.10        13.02



STATEMENT OF CONDITION
 HIGHLIGHTS                         December 31, September 30, December 31,
(at period end)                         2006          2006         2005
                                     -----------  -----------  -----------
Total assets                         $ 1,254,390  $ 1,292,491  $ 1,242,888
Loans receivable, net of unearned
 fees                                    802,383      833,010      917,405
Total deposits                           907,095      870,830      828,635
Total stockholders' equity               131,806      131,310      142,367
Book value per common share                11.84        11.76        11.86
Non-performing loans                      27,517       21,779       21,041
Non-performing assets                     27,838       22,358       21,581
Allowance for losses on loans             11,184       10,692       12,939
Non-performing loans to total loans         3.43%        2.61%        2.29%
Non-performing assets to total assets       2.22         1.73         1.74
Allowance for losses on loans to
 non-performing loans                      40.64        49.09        61.49
Allowance for losses on loans to
 total loans                                1.39         1.28         1.41

Employees (FTE)                              360          349          347
Branches and offices                          21           21           22


                        Three Months Ended                Year Ended
                ----------------------------------- -----------------------
                 December   September    December    December    December
AVERAGE BALANCE     31,         30,         31,         31,         31,
 DATA              2006        2006        2005        2006        2005
                ----------- ----------- ----------- ----------- -----------
Total assets    $ 1,322,382 $ 1,279,627 $ 1,255,116 $ 1,280,594 $ 1,279,364
Loans receivable,
 net of unearned
 fees               825,762     836,357     929,633     854,268     960,486
Total interest-
 earning assets   1,244,914   1,201,990   1,183,476   1,206,161   1,205,203
Total liabilities 1,190,644   1,147,045   1,111,621   1,145,657   1,133,748
Total deposits      909,263     850,976     822,529     860,935     831,396
Interest-bearing
 deposits           849,424     789,803     763,087     799,585     777,551
Non-interest bearing
 deposits            59,839      61,173      59,442      61,350      53,845
Total interest-
 bearing
 liabilities      1,113,999   1,067,344   1,034,395   1,067,149   1,062,450
Stockholders'
 equity             131,738     132,582     143,495     134,937     145,616

(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 Three Months Ended
                                     ----------------------------------
                                      December    September     December
                                      31, 2006     30, 2006     31, 2005
                                    -----------  -----------  -----------
Interest income:
 Loans                              $    14,825  $    14,798  $    15,984
 Securities                               3,590        3,482        2,040
 Other                                    1,308          625          227
                                    -----------  -----------  -----------
  Total interest income                  19,723       18,905       18,251
Interest expense:
 Deposits                                 6,854        5,752        3,980
 Borrowings                               4,787        5,300        5,577
                                    -----------  -----------  -----------
  Total interest expense                 11,641       11,052        9,557
                                    -----------  -----------  -----------
Net interest income                       8,082        7,853        8,694
Provision for losses on loans               338          413          268
                                    -----------  -----------  -----------
Net interest income after provision
 for losses on loans                      7,744        7,440        8,426

Non-interest income:
 Service charges and other fees           1,697        1,730        1,789
 Commission income                           48           32           95
 Net realized gains (losses) on
  sales of securities                         -          877         (125)
 Impairment on available-for-sale
  securities                                  -            -            -
 Net realized gains (losses) on
  sales of assets                           297       (1,339)         (15)
 Income from bank-owned life
  insurance                                 403          401          391
 Other income                               562          568          530
                                    -----------  -----------  -----------
  Total non-interest income               3,007        2,269        2,665

Non-interest expense:
 Compensation and employee benefits       5,598        5,092        4,847
 Net occupancy expense                      610          609          624
 Data processing                            494          559          691
 Furniture and equipment expense            497          548          294
 Professional fees                          431          319          470
 Marketing                                  301          442          346
 Other general and administrative
  expenses                                1,351        1,359        1,376
                                    -----------  -----------  -----------
  Total non-interest expense              9,282        8,928        8,648

                                    -----------  -----------  -----------
Income before income taxes                1,469          781        2,443
Income tax expense                         (161)           1          591
                                    -----------  -----------  -----------

Net income                          $     1,630  $       780  $     1,852
                                    ===========  ===========  ===========

Per share data:
 Basic earnings per share           $      0.15  $      0.07  $      0.16
 Diluted earnings per share         $      0.15  $      0.07  $      0.16
 Cash dividends declared per share  $      0.12  $      0.12  $      0.12

Weighted-average shares outstanding  10,782,843   10,899,013   11,597,263
Weighted-average diluted shares
 outstanding                         11,103,826   11,248,382   11,821,167


                                            Year Ended
                                     ------------------------
                                     December 31, December 31,
                                         2006          2005
                                     -----------  -----------
Interest income:
 Loans                               $    59,852  $    60,880
 Securities                               12,713        7,388
 Other                                     2,982        1,196
                                     -----------  -----------
  Total interest income                   75,547       69,464
Interest expense:
 Deposits                                 22,163       13,686
 Borrowings                               20,481       25,917
                                      ----------  -----------
  Total interest expense                  42,644       39,603
                                      ----------  -----------
Net interest income                       32,903       29,861
Provision for losses on loans              1,309        1,580
                                      ----------  -----------
Net interest income after provision
 for losses on loans                      31,594       28,281

Non-interest income:
 Service charges and other fees            6,739        7,381
 Commission income                           197          523
 Net realized gains (losses) on
  sales of securities                        750         (238)
 Impairment on available-for-sale
  securities                                   -         (240)
 Net realized gains (losses) on
  sales of assets                           (994)         354
 Income from bank-owned life
  insurance                                1,592        1,529
 Other income                              2,258        2,088
                                      ----------  -----------
  Total non-interest income               10,542       11,397

Non-interest expense:
 Compensation and employee benefits       21,017       18,598
 Net occupancy expense                     2,533        2,679
 Data processing                           2,404        2,689
 Furniture and equipment expense           2,013        1,582
 Professional fees                         1,514        1,698
 Marketing                                 1,332          986
 Other general and administrative
  expenses                                 5,365        5,253
                                      ----------  -----------
  Total non-interest expense              36,178       33,485

                                      ----------  -----------
Income before income taxes                 5,958        6,193
Income tax expense                           618        1,176
                                      ----------  -----------

Net income                           $     5,340  $     5,017
                                     ===========  ===========

Per share data:
 Basic earnings per share            $      0.48  $      0.43
 Diluted earnings per share          $      0.47  $      0.42
 Cash dividends declared per share   $      0.48  $      0.48

Weighted-average shares outstanding   11,045,857   11,728,073
Weighted-average diluted shares
 outstanding                          11,393,863   11,965,014



                          CFS BANCORP, INC.
             Consolidated Statements of Condition (Unaudited)
                          (Dollars in thousands)

                               December 31,   September 30,  December 31,
                                   2006           2006           2005
                               -------------  -------------  -------------
ASSETS
Cash and amounts due from
 depository institutions       $      33,194  $      16,399  $      17,600
Interest-bearing deposits             20,607         15,853          1,785
Federal funds sold                    13,366         18,102          4,792
                               -------------  -------------  -------------
 Cash and cash equivalents            67,167         50,354         24,177

Securities, available-for-sale       298,925        322,770        218,550
Investment in Federal Home
 Loan Bank stock, at cost             23,944         25,455         28,252
Loans receivable, net of
 unearned fees                       802,383        833,010        917,405
 Allowance for losses on loans       (11,184)       (10,692)       (12,939)
                               -------------  -------------  -------------
  Net loans                          791,199        822,318        904,466

Accrued interest receivable            7,523          7,922          6,142
Other real estate owned                  321            579            540
Office properties and
 equipment                            17,797         16,454         15,017
Investment in bank-owned life
 insurance                            35,876         35,474         34,889
Prepaid expenses and other
 assets                               11,638         11,165         10,855
                               -------------  -------------  -------------
   Total assets                $   1,254,390  $   1,292,491  $   1,242,888
                               =============  =============  =============

LIABILITIES AND STOCKHOLDERS'
 EQUITY
Deposits                       $     907,095  $     870,830  $     828,635
Borrowed money                       202,275        275,051        257,326
Advance payments by borrowers
 for taxes and insurance               4,194          4,393          6,641
Other liabilities                      9,020         10,907          7,919
                               -------------  -------------  -------------
 Total liabilities                 1,122,584      1,161,181      1,100,521

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; 11,134,331,
  11,169,423, and 12,005,431
  shares outstanding                     234            234            234
 Additional paid-in capital          190,825        190,692        190,402
 Retained earnings                    94,344         94,009         94,379
 Treasury stock, at cost;
  12,288,975, 12,253,883 and
  11,417,875 shares                 (149,735)      (149,137)      (136,229)
 Unallocated common stock held
  by Employee Stock Ownership
  Plan                                (3,564)        (3,864)        (4,762)
 Unearned common stock
  acquired by Recognition and
  Retention Plan                           -              -           (111)
 Accumulated other
  comprehensive loss, net of
  tax                                   (298)          (624)        (1,546)
                               -------------  -------------  -------------
  Total stockholders' equity         131,806        131,310        142,367

                               -------------  -------------  -------------
   Total liabilities and
    stockholders' equity       $   1,254,390  $   1,292,491  $   1,242,888
                               =============  =============  =============



                             CFS BANCORP, INC.
                 Efficieny Ratio Calculations (Unaudited)
                          (Dollars in thousands)

                                           Three Months Ended
                               -------------------------------------------
                               December 31,   September 30,  December 31,
                                   2006           2006           2005
                               -------------  -------------  -------------
Efficiency Ratio:
Non-interest expense           $       9,282  $       8,928  $       8,648
                               =============  =============  =============
Net interest income plus
 non-interest income           $      11,089  $      10,122  $      11,359
                               =============  =============  =============
Efficiency ratio                       83.70%         88.20%         76.13%

Core Efficiency Ratio:
Non-interest expense           $       9,282  $       8,928  $       8,648
                               =============  =============  =============
Net interest income plus
 non-interest income           $      11,089  $      10,122  $      11,359

Adjustments:
 Net realized (gains) losses
  on sales of securities
  available-for-sale                       -           (877)           125
 Net realized (gains) losses
  on sales of assets                    (297)         1,339             15
 Amortization of deferred
  premium on the early
  extinguishment of debt               2,036          2,465          2,800
                               -------------  -------------  -------------
  Net interest income plus
   non-interest income - as
   adjusted                    $      12,828  $      13,049  $      14,299
                               =============  =============  =============
Core efficiency ratio                  72.36%         68.42%         60.48%


                                                       Year Ended
                                              ----------------------------
                                               December 31,   December 31,
                                                   2006           2005
                                              -------------  -------------
Efficiency Ratio:
Non-interest expense                          $      36,178  $      33,485
                                              =============  =============
Net interest income plus
 non-interest income                          $      43,445  $      41,258
                                              =============  =============
Efficiency ratio                                      83.27%         81.16%

Core Efficiency Ratio:
Non-interest expense                          $      36,178  $      33,485
                                              =============  =============
Net interest income plus
 non-interest income                          $      43,445  $      41,258

Adjustments:
 Net realized (gains) losses
  on sales of securities
  available-for-sale                                   (750)           238
 Impairment of securities
  available-for-sale                                      -            240
 Net realized (gains) losses
  on sales of assets                                    994           (354)
 Amortization of deferred
  premium on the early
  extinguishment of debt                              9,624         14,381
                                              -------------  -------------
  Net interest income plus
   non-interest income - as
   adjusted                                   $      53,313  $      55,763
                                              =============  =============
Core efficiency ratio                                 67.86%         60.05%

Contact Information

  • CONTACT:
    Thomas F. Prisby
    Chairman of the Board and Chief Executive Officer
    219-836-5500