SOURCE: CFS Bancorp, Inc.

October 26, 2006 16:00 ET

CFS Bancorp, Inc. Announces Third Quarter 2006 Financial Results

MUNSTER, IN -- (MARKET WIRE) -- October 26, 2006 -- CFS Bancorp, Inc. (NASDAQ: CITZ) (the Company), the parent of Citizens Financial Bank (the Bank), today reported net income of $780,000 for the third quarter of 2006 compared to $1.6 million for the second quarter of 2006 and $1.9 million for the third quarter of 2005. Diluted earnings per share were $0.07 for the third quarter of 2006 compared to $0.14 per diluted share for the second quarter of 2006 and $0.16 per diluted share for the third quarter of 2005.

For the nine months ended September 30, 2006, net income was $3.7 million, an increase of $545,000 or 17.2% from the nine months ended September 30, 2005. Diluted earnings per share increased to $0.32 for the nine months ended September 30, 2006 from $0.26 for the nine months ended September 30, 2005. Net interest margin for the nine months ended September 30, 2006 was 2.78%, up from 2.33% for the same period in 2005.

During the third quarter of 2006, the Company's net income was negatively impacted by a pre-tax loss of $1.3 million ($827,000 net of tax or $0.07 per diluted share) on the sale of an other real estate owned asset. Also during the third quarter, the Company sold its investment in certain trust preferred securities which had been the subject of a previous impairment charge. The sale resulted in a pre-tax gain of $877,000 ($539,000 net of tax or $0.05 per diluted share).

Chairman's Comments

"Our third quarter earnings were impacted by the loss on the sale as we removed another non-performing asset from our balance sheet and eliminated the associated operational costs," said Thomas F. Prisby, Chairman and CEO.

Mr. Prisby continued, "In addition, we are pleased with our recent deposit growth and the impact of our regional banking strategy. As we continue to focus on growth, we have seen increases in non-interest expense and expect further increases in the short-term as we look to add lenders, increase credit support staff, make significant enhancements to our retail sales infrastructure and incentive programs, and further develop the Citizens brand. To support our longer-term growth initiatives, we are also evaluating several potential sites for future branch expansion within or contiguous to our existing markets. Our community banking strategy has shown very positive results from office facility upgrades and our recent marketing campaigns."

Net Interest Income

The Company's net interest margin was 2.59% for the third quarter of 2006 compared to 2.93% for the second quarter of 2006 and 2.63% for the third quarter of 2005. The Company's net interest income was $7.9 million for the third quarter of 2006 compared to $8.7 million for the second quarter of 2006 and $7.9 million for the third quarter of 2005. The decrease in both net interest margin and net interest income reflected the combined impact of higher funding costs, an inverted yield curve, and competitive pricing pressures for loans and deposits. The Company's weighted average cost of deposits increased to 2.89% for the third quarter of 2006 from 2.56% for the second quarter of 2006 and 1.82% for the third quarter of 2005.

The Company's cost of borrowings decreased to 7.47% for the third quarter of 2006 from 7.76% for the second quarter of 2006 and 7.90% for the third quarter of 2005. The decrease from the second quarter of 2006 and the third quarter of 2005 was primarily the result of a decrease in the average balance of the unamortized deferred premium on the early extinguishment of debt related to the Company's Federal Home Loan Bank (FHLB) debt restructuring completed in 2004 coupled with 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 $2.5 million, $2.6 million, and $2.9 million, respectively, during the third quarter of 2006, the second quarter of 2006 and the third quarter of 2005. The premium amortization adversely impacted the Company's net interest margin by 82 basis points, 86 basis points and 96 basis points, respectively, for the third quarter of 2006, the second quarter of 2006 and the third quarter of 2005. The Company's interest expense on borrowings is detailed in the tables below for the periods indicated.


                                                            Change from
                               Three Months Ended          Sept 30, 2005
                          -----------------------------   to Sept 30, 2006
                          Sept 30,  Jun 30,  Sept 30,     ---------------
                            2006      2006      2005        $         %
                          --------- --------- --------- --------  -------
                                       (Dollars in thousands)
Interest expense on
 short-term borrowings at
 contractual rates        $     294 $      92 $      20 $    274       NM
Interest expense on FHLB
 borrowings at
 contractual rates            2,541     2,574     2,916     (375)   (12.9)%
Amortization of deferred
 premium                      2,465     2,555     2,865     (400)   (14.0)
                          --------- --------- --------- --------
Total interest expense on
 borrowings               $   5,300 $   5,221 $   5,801 $   (501)    (8.6)
                          ========= ========= ========= ========


                                 Nine Months Ended
                               ---------------------
                                   September 30,
                                 2006       2005     $ change   % change
                               ---------- ---------- ---------  --------
                                         (Dollars in thousands)
Interest expense on short-term
 borrowings at contractual
 rates                         $      424 $       34 $     390        NM
Interest expense on FHLB
 borrowings at contractual
 rates                              7,683      8,725    (1,042)    (11.9)%
Amortization of deferred
 premium                            7,587     11,581    (3,994)    (34.5)
                               ---------- ---------- ---------
Total interest expense on
 borrowings                    $   15,694 $   20,340 $  (4,646)    (22.8)
                               ========== ========== =========
The interest expense related to the premium amortization on the early extinguishment of debt is expected to be $2.0 million, $1.4 million, $1.3 million and $1.1 million before taxes in the quarters ending December 31, 2006, March 31, 2007, June 30, 2007 and September 30, 2007, respectively.

Non-Interest Income

The Company's non-interest income for the third quarter of 2006 was $2.3 million compared to $2.8 million for the second quarter of 2006 and $3.3 million for the third quarter of 2005. The decrease in the Company's non-interest income for the third quarter of 2006 was primarily the result of a $1.3 million loss on the sale of an other real estate owned asset as previously mentioned. In addition, commission income from the Company's third-party service provider for the sale of non-deposit investment products decreased to $32,000 during the third quarter of 2006 from $55,000 for the second quarter of 2006 and $159,000 for the third quarter of 2005 as rates offered on certificate of deposit accounts have become more competitive relative to the yields available on non-deposit products. Partially offsetting these decreases in non-interest income was an $877,000 gain realized on the sale of the Company's investment in trust preferred securities.

Non-Interest Expense

Non-interest expense for the third quarter of 2006 was $8.9 million compared to $9.2 million for the second quarter of 2006 and $8.2 million for the third quarter of 2005. The decrease during the third quarter of 2006 from the second quarter of 2006 was primarily related to decreased costs associated with the Bank's self-insured healthcare plan. In addition, data processing expenses decreased as a result of the Company completing its conversion to bring item processing in-house. The increase in non-interest expense from the third 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. The Company also continues to support its growth initiatives through expanded advertising which increased the Company's marketing expense.

The Company's efficiency ratio for the third quarter of 2006 was 88.2% compared to 79.9% for the second quarter of 2006 and 72.8% for the third quarter of 2005. The Company's core efficiency ratio was 68.4% for the third quarter of 2006 compared to 65.7% for the second quarter of 2006 and 59.1% for the third quarter of 2005. The efficiency ratio and core efficiency ratio during 2006 were impacted by the Company's 2006 investment in its growth strategies and the resulting increase in non-interest expense. 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 expense for the third quarter of 2006 was $1,000 compared to $526,000 for the second quarter of 2006 and $632,000 for the third quarter of 2005. The decrease in income tax expense for the third quarter of 2006 was mainly a result of decreased pre-tax earnings during the period compared to the prior periods. 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 $413,000 for the third quarter of 2006 compared to $173,000 for the second quarter of 2006 and $545,000 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 net charge-offs through the allowance for losses on loans for the third quarter of 2006 were $1.4 million compared to $1.8 million for the second quarter of 2006 and $726,000 for the third quarter of 2005. The net charge-offs during the third quarter of 2006 were primarily related to a $2.4 million impaired commercial real estate participation loan secured by property that previously housed a nursing home. The Company received a $1.2 million principal payment from the guarantor on the loan during the third quarter and subsequently transferred the loan to other real estate owned at its net realizable value resulting in a charge-off through the allowance for losses on loans.

The following table identifies the Company's impaired loans at the dates indicated.

                               September 30,    June 30,     December 31,
                                   2006           2006           2005
                               -------------- -------------- --------------
                                         (Dollars in thousands)
Total impaired loans           $       12,936 $       16,402 $       22,156
Aggregate impairment reserve            4,571          5,369          5,824
Number of impaired loans                    7              8              8
On a quarterly basis, management updates each impairment analysis utilizing current information. During the third quarter of 2006, the Company's impaired loans decreased by the previously mentioned commercial real estate participation loan. In addition, one other impaired commercial real estate loan with an outstanding balance of $1.8 million and an impairment reserve of $265,000 was partially repaid during the quarter resulting in an $80,000 charge-off through the allowance for losses on loans. The decrease in the impaired loans was partially offset when the Company added one additional impaired construction and land development participation loan to its impaired loans during the third quarter of 2006.

The Company's non-performing assets totaled $22.4 million at September 30, 2006, $24.5 million at June 30, 2006 and $21.6 million at December 31, 2005. The decrease in non-performing assets for the third quarter of 2006 was primarily related to the previously discussed sale of an other real estate owned asset as well as the partial payoff and subsequent charge-off to net realizable value of one impaired commercial real estate participation loan that was transferred to other real estate owned. The decrease was partially offset by the transfer of two construction and land development loans to non-accrual status during the third quarter of 2006.

The Company's allowance for losses on loans was $10.7 million at September 30, 2006, $11.7 million at June 30, 2006 and $12.9 million at December 31, 2005. The ratio of the allowance for losses on loans to total loans was 1.28%, 1.39% and 1.41% at September 30, 2006, June 30, 2006, and December 31, 2005, 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 September 30, 2006, the allowance for losses on loans was adequate.

Balance Sheet

At September 30, 2006, the Company's total assets increased to $1.29 billion from $1.28 billion at June 30, 2006 and $1.24 billion at December 31, 2005.

The Company's loans receivable totaled $833.0 million at September 30, 2006 compared to $842.8 million at June 30, 2006 and $917.4 million at December 31, 2005. Loan fundings of $77.1 million and total loan purchases of $13.8 million for the third quarter of 2006 were more than offset by repayments and loans sold. At September 30, 2006, the Company had commitments to originate commercial and retail loans and lines of credit totaling $90.9 million and commitments to fund unused construction loans and lines of credit totaling $157.0 million.

Securities available-for-sale were $322.8 million at September 30, 2006, an increase of $22.1 million and $104.2 million, respectively, from June 30, 2006 and December 31, 2005 primarily due to the investment of excess cash.

Total deposits increased to $870.8 million at September 30, 2006 from $838.5 million at June 30, 2006 and $828.6 million at December 31, 2005. The increase in total deposits during the three and nine months ended September 30, 2006 was a result of the Company's regional banking strategy. This strategy focuses on growth through building new relationships and strengthening existing ones. For the three and nine months ended September 30, 2006, the Company increased money market accounts by $17.1 million and $21.6 million, respectively, and increased certificate of deposit accounts by $31.8 million and $54.4 million, respectively. These increases were partially offset by decreases in other core deposit accounts.

The Company's borrowed money totaled $275.1 million at September 30, 2006 compared to $281.0 million at June 30, 2006 and $257.3 million at December 31, 2005. The Company's borrowed money consisted of the following as of the dates indicated:

                               September 30,    June 30,     December 31,
                                   2006           2006           2005
                               -------------- -------------- --------------
                                         (Dollars in thousands)
Short-term variable-rate
 borrowings and repurchase
 agreements                    $       20,876 $       29,139 $          555
Net FHLB borrowings                   254,175        251,827        256,771
                               -------------- -------------- --------------
Total borrowings               $      275,051 $      280,966 $      257,326
                               ============== ============== ==============
The Company's FHLB borrowings are net of the unamortized premium related to the early extinguishment of FHLB debt totaling $8.2 million, $10.7 million and $15.8 million as of September 30, 2006, June 30, 2006 and December 31, 2005, respectively.

Stockholders' equity at September 30, 2006 was $133.0 million compared to $142.4 million at December 31, 2005. The decrease during the nine months ended September 30, 2006 was primarily due to:

--  repurchases of shares of the Company's common stock during 2006
    totaling $14.7 million, and
--  cash dividends declared during 2006 totaling $4.0 million.
    
The following increases in stockholders' equity during the first nine months of 2006 partially offset the aforementioned decreases:
--  net income of $3.7 million;
--  decreased accumulated other comprehensive losses of $922,000;
--  shares committed to be released under the Company's Employee Stock
    Ownership Plan totaling $1.3 million; and
--  proceeds from stock option exercises totaling $2.9 million.
    
During the nine months ended September 30, 2006, the Company repurchased 997,381 shares of its common stock with an average price of $14.74 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 September 30, 2006, the Company had 258,601 shares remaining to be repurchased under its new share repurchase program. Since its initial public offering, the Company has repurchased an aggregate of 13,114,171 shares of its common stock at an average price of $12.06 per share.

The regulatory capital ratios of the Bank continued to exceed all regulatory requirements. At September 30, 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, development of loan and deposit banking relationships, growth in lending and credit support staff, business and banking strategies, changes in retail sales infrastructure and incentive programs, asset yields and cost of funds, net interest income, loan and deposit levels, net interest margin, allowance for losses on loans and impairment allocations, 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.

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


                               Three Months Ended       Nine Months Ended
                          ----------------------------  ------------------
EARNINGS HIGHLIGHTS AND   Sept. 30,  June 30, Sept. 30, Sept. 30, Sept. 30,
 PERFORMANCE RATIOS (1)     2006      2006      2005      2006      2005
                           --------  --------  --------  --------  --------
Net income                $    780  $  1,621  $  1,887  $  3,710  $  3,165
Basic earnings per share      0.07      0.14      0.16      0.33      0.27
Diluted earnings per
 share                        0.07      0.14      0.16      0.32      0.26
Cash dividends declared
 per share                    0.12      0.12      0.12      0.36      0.36
Return on average assets      0.24%     0.51%     0.59%     0.39%     0.33%
Return on average equity      2.31      4.74      5.16      3.60      2.89
Average yield on
 interest-earning assets      6.24      6.37      5.73      6.26      5.65
Average cost on
 interest-bearing
 liabilities                  4.11      3.90      3.51      3.94      3.75
Interest rate spread          2.13      2.47      2.22      2.32      1.90
Net interest margin           2.59      2.93      2.63      2.78      2.33
Average equity to average
 assets (2)                  10.49     10.83     11.45     10.87     11.37
Average interest-earning
 assets to average
 interest-bearing
 liabilities (2)            112.62    113.56    113.53    113.48    113.12
Non-interest expense to
 average assets               2.77      2.93      2.57      2.84      2.58
Efficiency ratio (3)         88.20     79.93     72.79     83.13     83.07
Market price per share of
 common stock for the
 period ended:  Closing   $  14.79  $  14.84  $  13.40  $  14.79  $  13.40
                  High       15.04     14.90     13.90     15.04     14.37
                  Low        14.58     14.10     13.25     14.10     13.02


STATEMENT OF CONDITION
 HIGHLIGHTS              Sept. 30,     June 30,     Dec. 31,     Sept. 30,
 (at period end)            2006         2006        2005          2005
                        -----------  -----------  -----------  -----------
Total assets            $ 1,292,380  $ 1,281,831  $ 1,242,888  $ 1,260,189
Loans receivable, net
 of unearned fees           833,010      842,830      917,405      943,761
Total deposits              870,830      838,516      828,635      824,991
Total stockholders'
 equity                     133,022      133,689      142,367      143,715
Book value per common
 share                        11.78        11.62        11.86        11.84
Non-performing loans         21,779       18,833       21,041       28,702
Non-performing assets        22,358       24,450       21,581       29,329
Allowance for losses on
 loans                       10,692       11,690       12,939       13,711
Non-performing loans to
 total loans                   2.61%        2.23%        2.29%        3.04%
Non-performing assets
 to total assets               1.73         1.91         1.74         2.33
Allowance for losses on
 loans to
 non-performing loans         49.09        62.07        61.49        47.77
Allowance for losses on
 loans to total loans          1.28         1.39         1.41         1.45

Employees (FTE)                 349          348          347          336
Branches and offices             21           21           22           22


                                                Three Months Ended
                                        -----------------------------------
                                        Sept. 30,    June 30,    Sept. 30,
AVERAGE BALANCE DATA                       2006        2006        2005
                                        ----------- ----------- -----------
Total assets                            $ 1,279,412 $ 1,266,106 $ 1,267,517
Loans receivable, net of unearned fees      836,357     861,407     957,232
Total interest-earning assets             1,201,990   1,193,321   1,192,406
Total liabilities                         1,145,182   1,129,034   1,122,344
Total deposits                              850,976     848,088     818,511
Interest-bearing deposits                   789,803     784,731     763,009
Non-interest bearing deposits                61,173      63,357      55,502
Total interest-bearing liabilities        1,067,344   1,050,851   1,050,278
Stockholders' equity                        134,230     137,072     145,173


                                          Nine Months Ended
                                        -----------------------
                                         Sept. 30,   Sept. 30,
AVERAGE BALANCE DATA                       2006        2005
                                        ----------- -----------
Total assets                            $ 1,266,294 $ 1,287,535
Loans receivable, net of unearned fees      863,874     970,883
Total interest-earning assets             1,193,102   1,212,526
Total liabilities                         1,128,647   1,141,203
Total deposits                              844,648     834,384
Interest-bearing deposits                   782,789     782,425
Non-interest bearing deposits                61,859      51,959
Total interest-bearing liabilities        1,051,362   1,071,903
Stockholders' equity                        137,647     146,332


(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
                                        ----------------------------------
                                        Sept. 30,    June 30,   Sept. 30,
                                           2006        2006        2005
                                        ----------  ----------- ----------
Interest income:
 Loans                                  $   14,798  $    15,326 $   15,165
 Securities                                  3,482        3,150      1,776
 Other                                         625          486        267
                                        ----------  ----------- ----------
  Total interest income                     18,905       18,962     17,208
Interest expense:
 Deposits                                    5,752        5,009      3,494
 Borrowings                                  5,300        5,221      5,801
                                        ----------  ----------- ----------
  Total interest expense                    11,052       10,230      9,295
                                        ----------  ----------- ----------
Net interest income                          7,853        8,732      7,913
Provision for losses on loans                  413          173        545
                                        ----------  ----------- ----------
Net interest income after provision for
 losses on loans                             7,440        8,559      7,368
Non-interest income:
 Service charges and other fees              1,730        1,710      1,956
 Commission income                              32           55        159
 Net realized gains (losses) on sales
  of securities                                877            -        (25)
 Impairment on available-for-sale
  securities                                     -            -          -
 Net realized gains (losses) on sales
  of assets                                 (1,339)          47        287
 Income from bank-owned life insurance         401          396        409
 Other income                                  568          621        563
                                        ----------  ----------- ----------
  Total non-interest income                  2,269        2,829      3,349
Non-interest expense:
 Compensation and employee benefits          5,092        5,260      4,625
 Net occupancy expense                         609          652        628
 Data processing                               559          678        646
 Furniture and equipment expense               548          541        433
 Professional fees                             319          413        413
 Marketing                                     442          391        245
 Other general and administrative
  expenses                                   1,359        1,306      1,208
                                        ----------  ----------- ----------
  Total non-interest expense                 8,928        9,241      8,198
                                        ----------  ----------- ----------
Income before income taxes                     781        2,147      2,519
Income tax expense                               1          526        632
                                        ----------  ----------- ----------
Net income                              $      780  $     1,621 $    1,887
                                        ==========  =========== ==========
Per share data:
 Basic earnings per share               $     0.07  $      0.14 $     0.16
 Diluted earnings per share             $     0.07  $      0.14 $     0.16
 Cash dividends declared per share      $     0.12  $      0.12 $     0.12
Weighted-average shares outstanding     11,023,626   11,252,865 11,718,907
Weighted-average diluted shares
 outstanding                            11,248,382   11,482,560 11,943,913



                                          For the Nine Months
                                                Ended
                                        ----------------------
                                        Sept. 30,   Sept. 30,
                                           2006        2005
                                        ----------  ----------
Interest income:
 Loans                                  $   45,027  $   44,896
 Securities                                  9,123       5,348
 Other                                       1,674         969
                                        ----------  ----------
  Total interest income                     55,824      51,213
Interest expense:
 Deposits                                   15,309       9,706
 Borrowings                                 15,694      20,340
                                        ----------  ----------
  Total interest expense                    31,003      30,046
                                        ----------  ----------
Net interest income                         24,821      21,167
Provision for losses on loans                  971       1,312
                                        ----------  ----------
Net interest income after provision for
 losses on loans                            23,850      19,855
Non-interest income:
 Service charges and other fees              5,042       5,592
 Commission income                             149         428
 Net realized gains (losses) on sales
  of securities                                750        (113)
 Impairment on available-for-sale
  securities                                     -        (240)
 Net realized gains (losses) on sales
  of assets                                 (1,291)        369
 Income from bank-owned life insurance       1,189       1,138
 Other income                                1,696       1,558
                                        ----------  ----------
  Total non-interest income                  7,535       8,732
Non-interest expense:
 Compensation and employee benefits         15,419      13,751
 Net occupancy expense                       1,923       2,055
 Data processing                             1,910       1,998
 Furniture and equipment expense             1,516       1,288
 Professional fees                           1,083       1,228
 Marketing                                   1,031         640
 Other general and administrative
  expenses                                   4,014       3,877
                                        ----------  ----------
  Total non-interest expense                26,896      24,837
                                        ----------  ----------
Income before income taxes                   4,489       3,750
Income tax expense                             779         585
                                        ----------  ----------
Net income                              $    3,710  $    3,165
                                        ==========  ==========
Per share data:
 Basic earnings per share               $     0.33  $     0.27
 Diluted earnings per share             $     0.32  $     0.26
 Cash dividends declared per share      $     0.36  $     0.36
Weighted-average shares outstanding     11,258,651  11,778,729
Weighted-average diluted shares
 outstanding                            11,491,604  12,015,243


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

                         Sept. 30,     June 30,     Dec. 30,    Sept. 30,
                           2006          2006         2005         2005
                        -----------  -----------  -----------  -----------
ASSETS
Cash and amounts due
 from depository
 institutions           $    16,399  $    30,200  $    17,600  $    21,078
Interest-bearing
 deposits                    15,853        1,760        1,785        2,730
Federal funds sold           18,102       14,285        4,792       11,277
                        -----------  -----------  -----------  -----------
 Cash and cash
  equivalents                50,354       46,245       24,177       35,085

Securities,
 available-for-sale         322,770      300,651      218,550      196,062
Investment in Federal
 Home Loan Bank stock,
 at cost                     25,455       28,252       28,252       28,252
Loans receivable, net
 of unearned fees           833,010      842,830      917,405      943,761
 Allowance for losses
  on loans                  (10,692)     (11,690)     (12,939)     (13,711)
                        -----------  -----------  -----------  -----------
  Net loans                 822,318      831,140      904,466      930,050
Accrued interest
 receivable                   7,922        6,678        6,142        5,439
Other real estate owned         579        5,617          540          627
Office properties and
 equipment                   16,454       15,552       15,017       15,094
Investment in
 bank-owned life
 insurance                   35,474       35,676       34,889       34,497
Prepaid expenses and
 other assets                11,054       12,020       10,855       15,083
                        -----------  -----------  -----------  -----------
   Total assets         $ 1,292,380  $ 1,281,831  $ 1,242,888  $ 1,260,189
                        ===========  ===========  ===========  ===========
LIABILITIES AND
 STOCKHOLDERS' EQUITY
Deposits                $   870,830  $   838,516  $   828,635  $   824,991
Borrowed money              275,051      280,966      257,326      274,020
Advance payments by
 borrowers for taxes
 and insurance                4,393        6,187        6,641        8,539
Other liabilities             9,084       22,473        7,919        8,924
                        -----------  -----------  -----------  -----------
 Total liabilities        1,159,358    1,148,142    1,100,521    1,116,474
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; 11,293,170,
  11,502,776,
  12,005,431 and
  12,135,465 shares
  outstanding                   234          234          234          234
 Additional paid-in
  capital                   190,692      190,522      190,402      190,215
 Retained earnings           94,101       94,615       94,379       93,899
 Treasury stock, at
  cost; 12,130,136,
  11,920,530,
  11,417,875 and
  11,287,841 shares        (147,517)    (144,159)    (136,229)    (134,218)
 Unallocated common
  stock held by
  Employee Stock
  Ownership Plan             (3,864)      (4,163)      (4,762)      (5,061)
 Unearned common stock
  acquired by
  Recognition and
  Retention Plan                  -            -         (111)        (111)
 Accumulated other
  comprehensive loss,
  net of tax                   (624)      (3,360)      (1,546)      (1,243)
                        -----------  -----------  -----------  -----------
  Total stockholders'
   equity                   133,022      133,689      142,367      143,715
                        -----------  -----------  -----------  -----------
   Total liabilities
    and stockholders'
    equity              $ 1,292,380  $ 1,281,831  $ 1,242,888  $ 1,260,189
                        ===========  ===========  ===========  ===========


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

                                            Three Months Ended
                                 ----------------------------------------
                                 September 30,   June 30,    September 30,
                                    2006           2006          2005
                                 ------------  ------------  ------------
Efficiency Ratio:
Non-interest expense             $      8,928  $      9,241  $      8,198
                                 ============  ============  ============
Net interest income plus
 non-interest income             $     10,122  $     11,561  $     11,262
                                 ============  ============  ============
Efficiency ratio                        88.20%        79.93%        72.79%

Core Efficiency Ratio:
Non-interest expense             $      8,928  $      9,241  $      8,198
                                 ============  ============  ============
Net interest income plus
 non-interest income             $     10,122  $     11,561  $     11,262
Adjustments:
 Net realized (gains) losses on
  sales of securities
  available-for-sale                     (877)            -            25
 Net realized (gains) losses on
  sales of assets                       1,339           (47)         (287)
 Amortization of deferred
  premium on the early
  extinguishment of debt                2,465         2,555         2,865
                                 ------------  ------------  ------------
  Net interest income plus
   non-interest income - as
   adjusted                      $     13,049  $     14,069  $     13,865
                                 ============  ============  ============
Core efficiency ratio                   68.42%        65.68%        59.13%


                                                    Nine Months Ended
                                               --------------------------
                                               September 30, September 30,
                                                   2006          2005
                                               ------------  ------------
Efficiency Ratio:
Non-interest expense                           $     26,896  $     24,837
                                               ============  ============
Net interest income plus
 non-interest income                           $     32,356  $     29,899
                                               ============  ============
Efficiency ratio                                      83.13%        83.07%

Core Efficiency Ratio:
Non-interest expense                           $     26,896  $     24,837
                                               ============  ============
Net interest income plus
 non-interest income                           $     32,356  $     29,899
Adjustments:
 Net realized (gains) losses on
  sales of securities available-for-sale               (750)          113
 Impairment of securities  available-for-sale             -           240
 Net realized (gains) losses on sales of
  assets                                              1,291          (369)
 Amortization of deferred premium on the early
  extinguishment of debt                              7,587        11,581
                                               ------------  ------------
  Net interest income plus non-interest
   income - as adjusted                        $     40,484  $     41,464
                                               ============  ============
Core efficiency ratio                                 66.44%        59.90%

Contact Information

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