SOURCE: CFS Bancorp, Inc.

CFS Bancorp, Inc.

February 01, 2011 07:00 ET

CFS Bancorp, Inc. Announces Net Income for the Fourth Quarter of 2010

MUNSTER, IN--(Marketwire - February 1, 2011) - CFS Bancorp, Inc. (the Company), (NASDAQ: CITZ), the parent of Citizens Financial Bank (the Bank), today reported net income of $918,000, or $.09 per diluted share, for the fourth quarter of 2010, compared to net income of $2.0 million, or $.19 per share, for the fourth quarter of 2009, which included $1.4 million of bank-owned life insurance income due to the death of an insured.

For the year ended December 31, 2010, the Company reported net income of $3.5 million, or $.32 per diluted share, compared to a net loss of $(543,000), or $(.05) per share, for the year ended December 31, 2009.

Financial results for the quarter and year include:

-- Total deposits grew $16.0 million, or 1.7%, since September 30, 2010 and
   $96.1 million, or 11.3%, since December 31, 2009, of which core deposits
   grew $15.2 million and $54.8 million, respectively;
-- Purchased participation loans decreased to $23.6 million from $26.5
   million at September 30, 2010 and $52.4 million at December 31, 2009;
-- Non-performing assets decreased $3.5 million to $76.8 million from $80.3
   million at September 30, 2010 and increased $8.6 million from $68.3
   million at December 31, 2009;
-- Net interest margin declined to 3.49% in the fourth quarter from 3.54%
   in the third quarter of 2010 and 3.84% in the fourth quarter of 2009;
-- Non-interest expense declined 1.7% compared to the third quarter of 2010
   and 4.0% compared to the fourth quarter of 2009; and
-- The Bank's risk-based capital ratio improved to 13.32% compared to
   13.21% at September 30, 2010 and 12.35% at December 31, 2009.

Chairman's Comments

"The fourth quarter of 2010 finished the year on a positive trend. Our earnings for the quarter represent the fifth consecutive quarter of positive earnings while growing deposits, addressing credit quality concerns, and maintaining cost discipline," said Thomas F. Prisby, Chairman and CEO. "Credit quality remains our primary focus. In the fourth quarter, our level of non-performing loans and non-performing assets decreased from the third quarter of 2010. We expect to make additional progress on further reducing our non-performing assets in the first quarter of 2011."

"In addition, we continue to pursue avenues to enhance future growth and profitability. Our business and retail banking teams are generating strong deposit growth and our loan portfolio growth during the fourth quarter of 2010 was encouraging," continued Prisby. "We experienced higher commercial loan originations, increased commercial line usage, and an increase in retail mortgage loans, all of which bodes well as we enter the new year."

Progress on Strategic Growth and Diversification Plan

The Company's Strategic Growth and Diversification Plan is built around four core objectives: decreasing non-performing loans; ensuring costs are appropriate given the Company's targeted future asset base; growing while diversifying by targeting small and mid-sized business owners for relationship-based banking opportunities; and expanding and deepening the Company's relationships with its clients.

The Company continues to focus its efforts on reducing the level of non-performing loans, seeking to either restructure specific non-performing credits or foreclose, obtain title, and transfer the loan to other real estate owned (OREO) where we can take control of and liquidate the underlying collateral. The Company's ratio of non-performing loans to total loans decreased to 7.44% compared to 7.74% at December 31, 2009 as a result of loan repayments and transfers to OREO, which were partially offset by new non-accrual loans.

The Company remains strongly focused on its cost structure. Non-interest expense for the fourth quarter of 2010 compared to the third quarter of 2010 decreased $162,000, or 1.7%, and $386,000, or 4.0%, compared to the fourth quarter of 2009. Non-interest expense for the year ended December 31, 2010 compared to 2009 decreased $1.5 million, or 3.8%.

The Company has succeeded in increasing targeted growth segments in its loan portfolio, including commercial and industrial, commercial real estate - owner occupied, and multifamily, to comprise 50.7% of the commercial loan portfolio at December 31, 2010, up from 45.8%, 39.1%, and 35.6% at December 31, 2009, 2008, and 2007, respectively. The Company's focus on deepening relationships has emphasized core deposit and relationship-oriented time deposit growth which has resulted in a $96.1 million, or an 11.3%, increase in deposits since December 31, 2009.

Pre-tax, Pre-Provision Earnings from Core Operations (1)

The Company's pre-tax, pre-provision earnings from core operations totaled $2.2 million for the fourth quarter of 2010 compared to $2.3 million for the third quarter of 2010 and $5.3 million for the fourth quarter of 2009. For the year ended December 31, 2010, pre-tax, pre-provision earnings from core operations totaled $10.2 million compared to $13.3 million for the year ended December 31, 2009.

The current low interest rate environment, smaller loan portfolio, and increase in non-accrual loans reduced the Company's net interest income during 2010. Lower service charges and other fees due to recent regulatory changes also impacted earnings during 2010. In addition, income from bank-owned life insurance decreased from the 2009 period when the Company recognized income totaling $1.4 million due to the death of an insured.

During 2010, the Company realized increases in FDIC insurance premiums and OTS assessments, professional fees related to the 2010 annual meeting proxy contest, and severance and early retirement expenses, which were partially offset by lower net occupancy, furniture and equipment, and marketing expenses.

(1) A schedule reconciling earnings in accordance with U.S. generally accepted accounting principles (GAAP) to the non-GAAP measurement of pre-tax, pre-provision earnings from core operations is provided on the last page of the attached tables.

Net Interest Income and Net Interest Margin

                                                 Three Months Ended
                                          --------------------------------
                                           12/31/10    9/30/10   12/31/09
                                          ----------  --------  ----------
                                               (Dollars in thousands)
Net interest margin                             3.49%     3.54%       3.84%
Interest rate spread                            3.38      3.42        3.66
Net interest income                       $    8,943  $  8,886  $    9,687
Average assets:
Yield on interest-earning assets                4.45%     4.56%       4.97%
  Yield on loans receivable                     5.01      4.90        5.14
  Yield on investment securities                3.64      3.93        4.64
Average interest-earning assets           $1,015,374  $997,279  $1,000,821
Average liabilities:
Cost of interest-bearing liabilities            1.07%     1.14%       1.30%
  Cost of interest-bearing deposits              .95      1.02        1.12
  Cost of borrowed funds                        2.63      2.45        2.58
Average interest-bearing liabilities      $  910,765  $899,682  $  868,022

The net interest margin decreased five basis points to 3.49% for the fourth quarter of 2010 from 3.54% for the third quarter of 2010 and 35 basis points from 3.84% for the fourth quarter of 2009. Net interest income increased for the fourth quarter of 2010 compared to the third quarter of 2010 and decreased compared to the fourth quarter of 2009. The net interest margin was negatively impacted during the fourth quarter of 2010 by lower yields on investment securities as well as the Bank having higher levels of liquidity due to strong deposit growth and modest loan demand, resulting in a smaller loan portfolio. The yield on investment securities declined due to reinvesting maturing investment securities in lower yielding investments as market interest rates remained low. In addition, the yield on loans receivable decreased from the fourth quarter of 2009 due to several large loan payoffs and a reduction in interest income related to new non-accrual loans during 2010. The decrease in earning asset yields was partially offset by a seven basis point decrease in the cost of interest-bearing deposits from the third quarter of 2010 and a 17 basis point decrease from the fourth quarter of 2009.

Interest income was stable at $11.4 million for the fourth quarter of 2010 compared to $11.5 million for the third quarter of 2010 and decreased 9.0% from $12.5 million for the fourth quarter of 2009. This decrease is primarily due to the size of the Bank's average loan portfolio, which was 4.4% smaller in the fourth quarter of 2010 compared to the fourth quarter of 2009. In addition, the Bank is currently holding higher levels of short-term liquid investments due to the lack of higher yielding suitable investment alternatives in the current interest rate environment.

Interest expense decreased 4.9% to $2.5 million for the fourth quarter of 2010 compared to $2.6 million for the third quarter of 2010 and 13.7% from $2.8 million for the fourth quarter of 2009. Interest expense benefited from a 12.2% and a 4.8% increase, respectively, in the average balance of non-interest-bearing deposit accounts from the third quarter of 2010 and the fourth quarter of 2009. In addition, the Company's continued disciplined pricing on new deposits, repricing of renewals of existing certificates of deposit at lower interest rates, and a 42.9% reduction in the average balances of Federal Home Loan Bank (FHLB) borrowed funds contributed to the decrease in interest expense compared to the fourth quarter of 2009.

Non-Interest Income and Non-Interest Expense

Non-interest income increased $180,000, or 8.5%, from the third quarter of 2010 due to net gains on the sale of investment securities of $233,000 and $160,000 on the sale of $5.6 million of single family mortgage loans receivable. These gains were partially offset by net losses of $168,000 on the sale of a $2.4 million commercial construction and land development OREO property and lower income from bank-owned life insurance.

Non-interest income decreased $1.5 million, or 39.2%, from the fourth quarter of 2009 primarily due to a $1.4 million decrease in bank-owned life insurance income and reduced service charges and other fees as a result of recent regulatory changes affecting deposit account overdraft activity and clients conscientiously reducing their usage of overdraft services. These decreases were partially offset by the net gain on sale of mortgage loans during the current quarter.

Non-interest expense for the fourth quarter of 2010 decreased 1.7% to $9.3 million compared to $9.4 million for the third quarter of 2010 primarily due to decreases in OREO related expense totaling $343,000 as the Bank recorded income from OREO properties and lower valuation adjustments on certain commercial properties obtained through foreclosure. Partially offsetting this decrease was a $172,000 increase in other non-interest expense primarily due to a $150,000 payment made to PL Capital, LLC, one of the Company's shareholders, in connection with a two year standstill agreement dated November 18, 2010 between the Company and PL Capital.

Non-interest expense for the fourth quarter of 2010 decreased 4.0% to $9.3 million compared to $9.7 million for the fourth quarter of 2009 primarily due to reduced OREO related expenses totaling $1.1 million as a result of the establishment of higher valuation allowances during the fourth quarter of 2009 combined with increased income from OREO properties during the current quarter. The decrease in non-interest expense was partially offset by the absence in the fourth quarter of 2010 of the 2009 reduction in pension expense of $537,000 resulting from the 2009 receipt of the plan's annual funding requirements. In addition, incentive accruals increased $168,000 as a result of the Company's performance in 2010 in relation to its targeted goals, and compensation expense increased $99,000 due to a higher level of full-time equivalent employees. Partially offsetting the increase in compensation and employee benefits costs was a decrease of $222,000 for medical costs due to lower claims expense compared to the fourth quarter of 2009.

Income Tax Expense

Income tax expense totaled $232,000 in the current quarter, equal to an effective tax rate of 20.2%, which is an increase of $230,000 from the fourth quarter of 2009 primarily due to the higher bank-owned life insurance income in 2009.

Asset Quality

                                              12/31/10   9/30/10  12/31/09
                                              --------  --------  --------
                                                 (Dollars in thousands)
Non-performing loans (NPL)                    $ 54,492  $ 56,098  $ 59,009
Other real estate owned                         22,324    24,211     9,242
                                              --------  --------  --------
Non-performing assets (NPA)                   $ 76,816  $ 80,309  $ 68,251
                                              ========  ========  ========
NPL / total loans                                 7.44%     7.75%     7.74%
NPA / total assets                                6.85      7.17      6.31
Allowance for loan losses (ALL)               $ 17,179  $ 17,485  $ 19,461
ALL / total loans                                 2.34%     2.41%     2.55%
ALL / NPL                                        31.53     31.17     32.98
Provision for loan losses for the quarter
 ended                                        $    825  $    525  $  1,821
Net charge-offs for the quarter ended            1,131       648     3,158

Total non-performing loans decreased 2.9% to $54.5 million at December 31, 2010 compared to $56.1 million at September 30, 2010. The ratio of non-performing loans to total loans decreased to 7.44% during the quarter compared to September 30, 2010 primarily due to the $1.6 million decrease in non-performing loans combined with an increase in total loans. Total non-performing loans decreased during the fourth quarter of 2010 due to the transfer to accruing status of two non-owner occupied commercial real estate loans totaling $1.1 million, the repayment of two related impaired non-owner occupied commercial real estate loans totaling $552,000 due to the sale of the properties, and charge-offs of non-accrual loans totaling $1.1 million. In addition, one non-accrual commercial purchased participation with a carrying value of $354,000 and one owner occupied commercial real estate loan with a carrying value of $171,000 were transferred to OREO during the fourth quarter of 2010. Offsetting these decreases during the quarter were the transfer to non-accrual status of one non-owner occupied commercial real estate loan totaling $1.8 million, one owner occupied commercial real estate loan totaling $598,000, and nine residential real estate loans and HELOCs totaling $646,000.

In addition, at December 31, 2010, the Bank had $9.0 million of loan modifications meeting the definition of a troubled debt restructuring that were performing in accordance with their modified terms and accruing interest. These loan modifications included short-term extensions of maturity, interest only payments, or payment modifications to better match the timing of cash flows due under the modified terms with the cash flows from the borrowers' operations.

Net charge-offs during the current quarter included $476,000 related to a non-owner occupied commercial real estate loan, $299,000 related to two commercial and industrial loans, and $160,000 related to a purchased commercial construction and land development participation. In addition, $121,000 was charged-off related to a purchased commercial construction and land development participation that was transferred to OREO during the quarter at its net realizable value of $354,000.

The increase in the provision for loan losses in the current quarter compared to the third quarter of 2010 was due to the increase in the level of charge-offs during the fourth quarter of 2010. The decrease in the provision for loan losses in the current quarter compared to the prior year quarter was primarily due to charge-offs in the fourth quarter of 2009 of $3.2 million, of which $1.3 million had been previously established as specific impairment reserves.

The ratio of allowance for loan losses to total loans decreased to 2.34% at December 31, 2010 compared to 2.41% at September 30, 2010 as a result of a 1.2% increase in total loans during the fourth quarter of 2010. When management determines a non-performing collateral dependent loan has a collateral shortfall, management will immediately charge off the collateral shortfall. As a result, the Company is not required to maintain an allowance for loan losses on these loans as the loan balance has already been written down to its net realizable value (fair value less estimated costs to sell the collateral). As such, the ratio of the allowance for loan losses to total loans and the ratio of the allowance for loan losses to non-performing loans have been affected by cumulative partial charge-offs of $7.7 million recorded through December 31, 2010 on $11.7 million of collateral dependent non-performing loans and specific impairment reserves totaling $8.4 million identified for $26.3 million of non-collateral dependent non-performing loans at December 31, 2010.

Balance Sheet and Capital

                                         12/31/10     9/30/10    12/31/09
                                        ----------- ----------- -----------
                                              (Dollars in thousands)
Assets:
Total assets                            $ 1,121,676 $ 1,119,479 $ 1,081,515
Loans receivable, net of unearned fees      732,584     724,137     762,386
Investment securities                       214,302     222,548     193,781

Liabilities and Equity:
Total liabilities                         1,008,748   1,005,599     971,142
Deposits                                    945,884     929,856     849,758
Borrowed funds                               53,550      64,199     111,808
Shareholders' equity                        112,928     113,880     110,373

Loans Receivable

                               12/31/10         9/30/10        12/31/09
                            --------------  --------------  --------------
                                     % of            % of            % of
                            Amount   Total  Amount   Total  Amount   Total
                            -------- -----  -------- -----  -------- -----
                                        (Dollars in thousands)
Commercial loans:
 Commercial and industrial  $ 75,177  10.3% $ 71,167   9.8% $ 78,327  10.3%
 Commercial real estate -
  owner occupied              99,437  13.6    98,357  13.6    99,559  13.1
 Commercial real estate -
  non-owner occupied         191,856  26.2   190,642  26.3   195,906  25.7
 Commercial real estate -
  multifamily                 72,154   9.8    70,318   9.7    57,918   7.6
 Commercial construction and
  land development            24,316   3.3    26,865   3.7    31,154   4.1
 Commercial participations    23,594   3.2    26,488   3.7    52,365   6.8
                            -------- -----  -------- -----  -------- -----
  Total commercial loans     486,534  66.4   483,837  66.8   515,229  67.6

Retail loans:
 One-to-four family
  residential                184,545  25.2   178,769  24.7   185,293  24.3
 Home equity lines of credit  56,212   7.7    55,840   7.7    56,911   7.5
 Retail construction and
  land development             3,171    .4     4,085    .6     3,401    .4
 Other                         2,122    .3     1,606    .2     1,552    .2
                            -------- -----  -------- -----  -------- -----
  Total retail loans         246,050  33.6   240,300  33.2   247,157  32.4
                            -------- -----  -------- -----  -------- -----

Total loans receivable, net
 of unearned fees           $732,584 100.0% $724,137 100.0% $762,386 100.0%
                            ======== =====  ======== =====  ======== =====

Total loan fundings during the year ended December 31, 2010 were $76.8 million, which were offset by loan payoffs and repayments of $73.7 million, total loan sales of $9.3 million, transfers to OREO of $17.4 million, and gross charge-offs of $6.4 million including $2.3 million that had been previously identified as a specific impairment reserve.

Through the execution of our Strategic Growth and Diversification Plan, we continue to diversify our loan portfolio and reduce loans not meeting our current defined risk tolerance. The Company has increased its targeted growth segments of the loan portfolio, including commercial and industrial, commercial real estate - owner occupied, and multifamily, to comprise 50.7% of the commercial loan portfolio at December 31, 2010. During 2010, these targeted growth segments were impacted by loan payoffs including four commercial and industrial payoffs totaling $7.2 million, two commercial real estate - owner occupied loan payoffs totaling $5.1 million, and two commercial real estate - multifamily loan payoffs totaling $5.0 million.

Participations purchased decreased 10.9% compared to September 30, 2010 and 54.9% compared to December 31, 2009. The decrease in commercial participations since December 31, 2009 was due to three loan payoffs totaling $7.4 million, a $1.5 million sale of a portion of one of the Bank's participations purchased, transfers to OREO totaling $14.2 million, and gross charge-offs totaling $3.4 million. In addition, commercial construction and land development and non-owner occupied commercial real estate loans decreased by $10.9 million, or 4.8%, since December 31, 2009. The decrease was primarily due to four loan payoffs totaling $5.9 million, transfers to OREO totaling $2.1 million, and gross charge-offs totaling $798,000. In addition, the Bank also sold a $3.6 million commercial construction and land development loan at par to a third party to reduce its exposure in this loan category.

During the fourth quarter of 2010, the Bank sold $5.6 million of conforming one-to-four family mortgage loans held-for-sale that were originated during the year. The Bank retained servicing and recorded a gain on sale of $160,000 during the fourth quarter of 2010.

Deposits

                                                 12/31/10  9/30/10 12/31/09
                                                 -------- -------- --------
                                                   (Dollars in thousands)
Core deposits:
  Non-interest-bearing checking                  $ 90,220 $ 94,927 $ 89,261
  Interest-bearing checking                       132,893  123,381  106,013
  Money market accounts                           158,259  144,610  136,411
  Savings accounts                                121,504  121,732  113,865
                                                 -------- -------- --------
    Subtotal core deposits                        502,876  484,650  445,550
Certificates of deposit                           402,302  399,350  354,401
                                                 -------- -------- --------
      Subtotal non-municipal deposits             905,178  884,000  799,951
                                                 -------- -------- --------
Municipal core deposits                            36,457   39,493   38,993
Municipal certificates of deposit                   4,249    6,363   10,814
                                                 -------- -------- --------
      Subtotal municipal deposits                  40,706   45,856   49,807
                                                 -------- -------- --------
Total deposits                                   $945,884 $929,856 $849,758
                                                 ======== ======== ========

The Company has continued its success in growing deposits through many channels including enhancing its brand recognition within its communities, offering attractive deposit products, bringing in new client relationships by meeting all of their banking needs, and holding its experienced sales team accountable for growing deposits and relationships. During 2010, the Company increased its core deposits by $54.8 million, which included an increase of $20.6 million in interest-bearing checking deposits primarily related to a new deposit relationship with a trust company. Increasing core deposits is reflective of our success in deepening our client relationships, one of our core Strategic Plan objectives. The $41.3 million increase in certificates of deposit from December 31, 2009 is primarily related to a successful relationship-based marketing effort for these products.

While the Company maintains strong relationships with its municipal clients, and municipal deposits continue to comprise an important funding source, the current recession's impact on municipalities and other government-related entities has resulted in lower municipal deposit levels.

Borrowed Funds

                                               12/31/10  9/30/10   12/31/09
                                              --------- --------- ---------
                                                 (Dollars in thousands)
Short-term variable-rate borrowed funds
 and repurchase agreements                    $  13,352 $  13,931 $  24,299
FHLB borrowed funds                              40,198    50,268    87,509
                                              --------- --------- ---------
Total borrowed funds                          $  53,550 $  64,199 $ 111,808
                                              ========= ========= =========

Borrowed funds continue to decrease as the Company continues to strengthen its balance sheet funding position and enhance its liquidity position through a stronger focus on deposit gathering and repaying maturing FHLB advances.

Shareholders' Equity

Shareholders' equity at December 31, 2010 was $112.9 million compared to $110.4 million at December 31, 2009. The increase was primarily due to $3.5 million of net income for the year, and vesting of restricted stock awards of $163,000, offset by an increase in the unrealized loss on investment securities available-for-sale, net of tax, of $636,000, and cash dividends declared of $436,000.

At December 31, 2010, the Company's tangible common equity was $112.9 million, or 10.07% of tangible assets compared to $110.4 million, or 10.21% of tangible assets at December 31, 2009. At December 31, 2010, the Bank's tangible, core, and risk-based capital ratios exceeded "minimum" and "well capitalized" regulatory capital requirements.

Results for the Year Ended December 31, 2010

Diluted earnings per share totaled $.32 for the year ended December 31, 2010 compared to a net loss per share of $(.05) in 2009. For the year ended December 31, 2010, net income increased to $3.5 million compared to a net loss of $(543,000) in 2009.

Net interest income was $36.6 million for the year ended December 31, 2010 and $37.6 million in 2009. The net interest margin was 3.68% in 2010 compared to 3.72% for the prior year and was negatively impacted by lower yields on loans and investment securities and having a smaller loan portfolio and higher levels of liquidity. The decrease in yields on interest earning assets was partially offset by a decrease in the cost of deposits and other borrowed funds as the Company effectively managed rates paid on deposit accounts and reduced the average balance of its FHLB borrowings.

The provision for loan losses for the year ended December 31, 2010 was $3.9 million compared to $12.6 million in 2009. The large decrease in the provision for loan losses in the current year was due to the lower level of charge-offs and specific impairment reserves established compared to the prior year. Other factors included the shrinkage in the total loan portfolio, decrease in the level of non-performing loans, and change in the loan portfolio mix as the higher risk participations purchased and commercial construction and land development loans continued to decrease as a percentage of the commercial loan portfolio.

Non-interest income totaled $9.2 million for the year ended December 31, 2010 compared to $11.5 million in 2009. Higher card-based fees and a net gain on the sale of loans receivable was more than offset by lower income from bank-owned life insurance, service charges and other fees, and net gains on the sale of investment securities and other assets. Income from bank-owned life insurance decreased $1.3 million, primarily due to the inclusion in 2009 of $1.4 million of income due to the death of an insured. Service charges and other fees were impacted by lower retail overdraft activity and credit enhancement fee income related to non-owner occupied commercial real estate lending as the Company is not actively pursuing this product. Other income was down in 2010 primarily due to income recorded during 2009 related to certain viatical investments.

Non-interest expense decreased 3.8% to $37.8 million for the year ended December 31, 2010 from $39.3 million for 2009. The Company's continuing cost control initiatives resulted in decreases in almost all operating expense categories, including reductions of 6.3% in net occupancy expense, 7.3% in furniture and equipment expense, and 6.1% in marketing costs. In addition, credit related costs decreased $1.9 million in 2010 due to fewer OREO valuation reserves, income from OREO properties, and lower collection expense as properties were transferred to OREO. The absence in 2010 of the prior year FDIC special insurance premium assessment recognized in 2009 also reduced non-interest expense by $495,000. These expense reductions were partially offset by increases of $406,000 for FDIC insurance premiums and OTS assessments, $376,000 for professional fees related to the 2010 annual meeting proxy contest, $508,000 for severance and early retirement expense, and $150,000 related to the standstill agreement entered into with PL Capital, LLC, as previously mentioned.

Income tax expense totaled $707,000 during the year ended December 31, 2010 which equals an effective tax rate of 17.0%, compared to an income tax benefit of $(2.3) million, or a tax benefit rate of 80.6%, reported for the 2009 period which was due to higher pretax income and lower bank-owned life insurance income.

Company Profile

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 focusing its people, products, and services on helping individuals, businesses, and communities be successful. The Bank has 22 full-service banking centers throughout adjoining markets in Chicago's Southwest suburbs and Northwest Indiana. The Company's website can be found at www.citz.com.

Forward-Looking Information

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 successful execution of the Company's strategy and its Strategic Growth and Diversification Plan, current regulatory capital and equity ratios, diversification of the loan portfolio, deepening client relationships, levels of core deposits, non-performing asset levels, credit-related costs, revenue growth and levels of earning assets, general economic and competitive conditions nationally and within its core market area, cost savings initiatives, levels of provision for the allowance for loan losses and charge-offs, loan and deposit growth, interest on loans, asset yields and cost of funds, net interest income, net interest margin, non-interest income, non-interest expense, interest rate environment, and other risk factors identified in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2009, as amended, and other filings with the Securities and Exchange Commission. In addition, the words "anticipate," "believe," "estimate," "expect," "indicate," "intend," "should," and similar expressions, or the negative thereof, as well as statements that include future events, tense, or dates, or are not historical or current facts, 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, assumptions, and changes in circumstances. Forward-looking statements are not guarantees of future performance or outcomes, and actual results or events may differ materially from those included in these statements. The Company does not intend to update these forward-looking statements unless required to under the federal securities laws.

          SELECTED CONSOLIDATED FINANCIALS AND OTHER DATA FOLLOW


                            CFS BANCORP, INC.
           Consolidated Statements of Income (Loss) (Unaudited)
              (Dollars in thousands, except per share data)

                         Three Months Ended               Year Ended
                  --------------------------------- ----------------------
                   December   September   December   December    December
                   31, 2010    30, 2010   31, 2009   31, 2010    31, 2009
                  ----------  ---------- ---------- ----------  ----------
Interest income:
 Loans            $    9,197  $    9,199 $    9,877 $   37,700  $   39,277
 Investment
  securities           2,053       2,176      2,529      8,605      11,334
 Other interest-
  earning assets         146          90        122        483         697
                  ----------  ---------- ---------- ----------  ----------
  Total interest
   income             11,396      11,465     12,528     46,788      51,308

Interest expense:
 Deposits              2,032       2,143      2,171      8,374      10,447
 Borrowed funds          421         436        670      1,813       3,268
                  ----------  ---------- ---------- ----------  ----------
  Total interest
   expense             2,453       2,579      2,841     10,187      13,715
                  ----------  ---------- ---------- ----------  ----------
Net interest
 income                8,943       8,886      9,687     36,601      37,593
Provision for
 loan losses             825         525      1,821      3,877      12,588
                  ----------  ---------- ---------- ----------  ----------
Net interest
 income after
 provision for
 loan losses           8,118       8,361      7,866     32,724      25,005

Non-interest
 income:
 Service charges
  and other fees       1,284       1,290      1,552      5,114       5,706
 Card-based fees         469         475        415      1,867       1,664
 Commission
  income                  28          40         49        168         246
 Net gain on sale
  of investment
  securities             233           -         51        689       1,092
 Net gain (loss)
  on sale of
  other assets          (168)          2         12       (154)         (9)
 Income from
  bank-owned life
  insurance              191         217      1,631        893       2,183
 Net gain on sale
  of loans
  receivable             160           -          -        160           -
 Other income            110         103         84        481         588
                  ----------  ---------- ---------- ----------  ----------
  Total
   non-interest
   income              2,307       2,127      3,794      9,218      11,470

Non-interest
 expense:
 Compensation and
  employee
  benefits             4,777       4,709      4,103     18,705      18,861
 Net occupancy
  expense                735         691        612      2,832       3,022
 FDIC insurance
  premiums and
  OTS assessments        660         623        605      2,551       2,145
 Professional
  fees                   433         512        473      2,283       1,907
 Furniture and
  equipment
  expense                426         488        548      1,973       2,129
 Data processing         438         443        424      1,754       1,670
 Marketing               262         189        261        781         832
 OREO related
  expense                127         470      1,222      1,483       2,976
 Loan collection
  expense                160         156        259        638       1,077
 Severance and
  early
  retirement
  costs                   17          88         37        545          37
 FDIC special
  insurance
  premium
  assessment               -           -          -          -         495
 Other                 1,240       1,068      1,117      4,230       4,129
                  ----------  ---------- ---------- ----------  ----------
  Total
   non-interest
   expense             9,275       9,437      9,661     37,775      39,280
                  ----------  ---------- ---------- ----------  ----------

Income (loss)
 before income
 taxes                 1,150       1,051      1,999      4,167      (2,805)
Income tax
 expense
 (benefit)               232         188          2        707      (2,262)
                  ----------  ---------- ---------- ----------  ----------

Net income (loss) $      918  $      863 $    1,997 $    3,460  $     (543)
                  ==========  ========== ========== ==========  ==========

Basic earnings
 (loss) per share $      .09  $      .08 $      .19 $      .33  $     (.05)
Diluted earnings
 (loss) per share $      .09  $      .08 $      .19 $      .32  $     (.05)

Weighted-average
 common and
 common share
 equivalents
  outstanding:
  Basic           10,662,792  10,657,719 10,606,698 10,635,939  10,574,623
  Diluted         10,719,886  10,707,163 10,697,410 10,705,814  10,680,085




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

                                         December   September    December
                                         31, 2010    30, 2010    31, 2009
                                        ----------  ----------  ----------
ASSETS
Cash and amounts due from depository
 institutions                           $   24,624  $   23,098  $   24,041
Interest-bearing deposits                   37,130      29,120         387
                                        ----------  ----------  ----------
 Cash and cash equivalents                  61,754      52,218      24,428

Investment securities
 available-for-sale, at fair value         197,101     210,717     188,781
Investment securities held-to-maturity,
 at cost                                    17,201      11,831       5,000
Investment in Federal Home Loan Bank
 stock, at cost                             20,282      23,944      23,944
Loans receivable, net of unearned fees     732,584     724,137     762,386
 Allowance for loan losses                 (17,179)    (17,485)    (19,461)
                                        ----------  ----------  ----------
  Net loans                                715,405     706,652     742,925

Mortgage loans held-for-sale, at fair
 value                                           -       4,425           -
Accrued interest receivable                  3,162       3,315       3,469
Other real estate owned                     22,324      24,211       9,242
Office properties and equipment             20,464      20,611      20,382
Investment in bank-owned life insurance     35,463      35,273      34,575
Net deferred tax assets                     17,883      17,130      18,036
Prepaid expenses and other assets           10,637       9,152      10,733
                                        ----------  ----------  ----------
   Total assets                         $1,121,676  $1,119,479  $1,081,515
                                        ==========  ==========  ==========

LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits                                $  945,884  $  929,856  $  849,758
Borrowed funds                              53,550      64,199     111,808
Advance payments by borrowers for taxes
 and insurance                               4,618       5,952       4,322
Other liabilities                            4,696       5,592       5,254
                                        ----------  ----------  ----------
 Total liabilities                       1,008,748   1,005,599     971,142

Shareholders' 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; 10,850,040,
   10,851,724, and 10,771,061
  shares outstanding                           234         234         234
 Additional paid-in capital                187,164     187,075     188,930
 Retained earnings                          83,592      82,783      80,564
 Treasury stock, at cost; 12,573,266,
  12,571,582, and 12,652,245 shares       (155,112)   (155,022)   (157,041)
 Accumulated other comprehensive loss,
  net of tax                                (2,950)     (1,190)     (2,314)
                                        ----------  ----------  ----------
  Total shareholders' equity               112,928     113,880     110,373
                                        ----------  ----------  ----------

   Total liabilities and shareholders'
    equity                              $1,121,676  $1,119,479  $1,081,515
                                        ==========  ==========  ==========





                            CFS BANCORP, INC.
                    Selected Financial Data (Unaudited)
              (Dollars in thousands, except per share data)

                                    December 31, September 30, December 31,
                                        2010          2010         2009
                                     -----------  -----------  -----------
Book value per share                 $     10.41  $     10.49  $     10.25
Tangible book value per share              10.41        10.49        10.25
Shareholders' equity to total assets       10.07%       10.17%       10.21%
Tangible capital ratio (Bank only)          9.07         8.91         8.88
Core capital ratio (Bank only)              9.07         8.91         8.88
Risk-based capital ratio (Bank only)       13.32        13.21        12.35
Common shares outstanding             10,850,040   10,851,724   10,771,061
Employees (FTE)                              322          315          312
Number of full service banking
 centers                                      22           22           22




                     Three Months Ended                  Year Ended
           -------------------------------------  -----------------------
          December 31, September 30, December 31, December 31, December 31,
               2010         2010         2009         2010         2009
           -----------  -----------  -----------  -----------  ----------
Average
 Balance
 Data:
 Total
  assets   $ 1,135,865  $ 1,111,642  $ 1,087,068  $ 1,105,333  $1,097,511
 Loans
  receivable,
  net of
  unearned
  fees         728,849      744,316      762,021      747,768     753,726
 Investment
  securities   220,489      216,393      213,300      208,450     227,999
 Interest-
  earning
  assets     1,015,374      997,279    1,000,821      995,864   1,010,519
 Deposits      946,431      917,642      860,374      905,935     842,568
 Interest-
  bearing
  deposits     848,079      829,988      766,491      813,799     769,600
 Non-interest
  bearing
  deposits      98,352       87,654       93,883       92,136      72,968
 Interest-
  bearing
  liabilities  910,765      899,682      868,022      889,444     897,016
 Shareholders'
  equity       114,203      113,145      109,993      112,601     112,358
Performance
 Ratios
 (annualized):
 Return on
  average
  assets           .32%         .31%         .73%         .31%       (.05)%
 Return on
  average
  equity          3.19         3.03         7.20         3.07        (.48)
 Average
  yield on
  interest-
  earning
  assets          4.45         4.56         4.97         4.70        5.08
 Average
  cost of
  interest-
  bearing
  liabilities     1.07         1.14         1.30         1.15        1.53
 Interest
  rate spread     3.38         3.42         3.67         3.55        3.55
 Net interest
  margin          3.49         3.54         3.84         3.68        3.72
 Non-interest
  expense to
  average
  assets          3.24         3.37         3.53         3.42        3.58
 Efficiency
  ratio (1)      82.92        85.71        72.00        83.42       81.87

Cash dividends
 declared
 per share         .01          .01          .01          .04         .04
Market price
 per share of
 common stock
 for the period
 ended:
   Closing $      5.23  $      4.56  $      3.23  $      5.23  $     3.23
    High          5.48         4.92         4.73         6.24        4.80
    Low           4.60         4.18         3.23         3.02        1.75
(1)  The efficiency ratio is calculated by dividing non-interest expense by
the sum of net interest income and non-interest income, excluding net gain
on sales of investment securities and other assets.




                            CFS BANCORP, INC.
      Reconciliation of Income (Loss) Before Income Taxes to Pre-Tax,
                Pre-Provision Earnings from Core Operations
                                (Unaudited)
                          (Dollars in thousands)

                                                   Three Months Ended
                                             -----------------------------
                                             December  September  December
                                             31, 2010   30, 2010  31, 2009
                                             --------  ---------  --------
Income before income taxes                   $  1,150  $   1,051  $  1,999
Provision for loan losses                         825        525     1,821
                                             --------  ---------  --------
Pre-tax, pre-provision earnings                 1,975      1,576     3,820

Add back (subtract):
 Net gain on sale of investment securities       (233)         -       (51)
 Net (gain) loss on sale of other assets          168         (2)      (12)
 OREO related expense                             127        470     1,222
 Loan collection expense                          160        156       259
 Severance and early retirement expense            17         88        37
                                             --------  ---------  --------
Pre-tax, pre-provision earnings from core
 operations                                  $  2,214  $   2,288  $  5,275
                                             ========  =========  ========
Pre-tax, pre-provision earnings from core
 operations to average assets                     .77%       .82%     1.93%
                                             ========  =========  ========


                                                            Year Ended
                                                       -------------------
                                                        December  December
                                                        31, 2010  31, 2009
                                                       ---------  --------
Income (loss) before income taxes (benefit)            $   4,167  $ (2,805)
Provision for loan losses                                  3,877    12,588
                                                       ---------  --------
Pre-tax, pre-provision earnings                            8,044     9,783

Add back (subtract):
 Net gain on sale of investment securities                  (689)   (1,092)
 Net loss on sale of other assets                            154         9
 OREO related expense                                      1,483     2,976
 Loan collection expense                                     638     1,077
 Severance and early retirement expense                      545        37
 FDIC special insurance premium assessment                     -       495
                                                       ---------  --------
Pre-tax, pre-provision earnings from core
 operations                                            $  10,175  $ 13,285
                                                       =========  ========
Pre-tax, pre-provision earnings from core
 operations to average assets                                .92%     1.21%
                                                       =========  ======== 

The Company's accounting and reporting policies conform to U.S. generally accepted accounting principles (GAAP) and general practice within the banking industry. Management uses certain non-GAAP financial measures to evaluate the Company's financial performance and has provided the non-GAAP financial measures of pre-tax, pre-provision earnings from core operations and pre-tax, pre-provision earnings from core operations to average assets. In these non-GAAP financial measures, the provision for loan losses, OREO related expense, loan collection expense, and certain other items, such as gains and losses on sales of investment securities and other assets, severance and early retirement expense, and FDIC special insurance premium assessment are excluded from the determination of core operating results. Management believes that these measures are useful because they provide a more comparable basis for evaluating financial performance from core operations period to period and allows us and others to assess the Company's ability to generate earnings to cover credit costs. Although these non-GAAP financial measures are intended to enhance investors understanding of the Company's business performance, these should not be considered as an alternative to GAAP.